Loading...
Fiscal Year 2015 CAFR Comprehensive Annual Financial ReportCITY OF COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR 2015 July 1, 2014 - June 30, 2015 CITY OF KALISPELL ANNUAL FINANCIAL REPORT TABLE OF CONTENTS INTRODUCTORY SECTION Letterof Transmittal............................................................................................................................................ 3-8 Government Finance Officers' Association Certificate of Achievement.......................................................... 9 OrganizationalChart........................................................................................................................................... 10 City Elected and Appointed Officials.................................................................................................................. 11 FINANCIAL SECTION IndependentAuditor's Report.............................................................................................................................12-14 Management's Discussion and Analysis..............................................................................................................15-28 Basic Financial Statements: Government -wide Financial Statements: Statementof Net Position..................................................................................................................... 29 Statementof Activities......................................................................................................................... 30 Governmental Fund Financial Statements: Balance Sheet — Governmental Funds................................................................................................ 31 Reconciliation of the Balance Sheet — Governmental Funds to the Statement of Net Assets......... 32 Statement of Revenues, Expenditures, and Changes in Fund Balances — Governmental Funds... 33 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds to the Statement of Activities...................................................................... 34 Proprietary Fund Financial Statements: Statement of Net Position — Proprietary Funds................................................................................. 35 Statement of Revenues, Expenses, and Changes in Net Position — Proprietary Funds .................. 36 Statement of Cash Flows — Proprietary Funds.................................................................................. 37 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Position — Fiduciary Funds................................................................... 38 Notes to the Financial Statements............................................................................................................39-90 Required Supplementary Information other than Management Discussion and Analysis: Schedule of Funding Progress and Employer Contributions — Other Post -Employment HealthcareBenefits................................................................................................................... 91 Schedule of Proportionate Share of the Net Pension Liability......................................................... 92 Scheduleof Contributions.................................................................................................................... 93 Budgetary Comparison Schedule — General and Major Special Revenue Funds...........................94-97 Supplemental Information: Combining and Individual Governmental Fund Statements and Schedules: Combining Balance Sheet — Nonmajor Governmental Funds.........................................................98-103 Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Nonmajor Governmental Funds....................................................................................................104-110 Budgetary Comparison Schedule — MajorDebt Service Funds.............................................................................................................. III Budgetary Comparison Schedule — Nonmajor Governmental Funds....................................................................................................112-129 Combining and Individual Proprietary Fund Statements: Combining Statement of Net Position — Nonmajor Proprietary Funds ......................................... 130 Combining Statement of Revenues, Expenditures, and Changes in Fund Net Position — Nonmajor ProprietaryFunds.......................................................................................................................... 131 Combining Statement of Cash Flows — Nonmajor Proprietary Funds .......................................... 132 Combining and Individual Agency Fund Statements: Combining Statement of Fiduciary Net Assets - Agency Funds ..................................................... 133 Combining Statement of Changes in Assets and Liabilities - Agency Funds ............................... 134 CITY OF KALISPELL ANNUAL FINANCIAL REPORT TABLE OF CONTENTS STATISTICAL SECTION Financial Trends Net Position by Component................................................................................... Changes in Net Position......................................................................................... Fund Balances of Governmental Funds............................................................... Changes in Fund Balances, Governmental Funds ............................................... Revenue Capacity .............. 135 .............. 136 .............. 137 .............. 138 Market Value of Taxable Property........................................................................................................ 139 Direct and Overlapping Property Tax Rates......................................................................................... 140 Principal Property Tax Payers............................................................................................................... 141 Property Tax Levies and Collections...................................................................................................... 142 Water — Sewer - Sold by Type of Customer........................................................................................... 143 Waterand Sewer Rates........................................................................................................................... 144 Debt Capacity Ratios of Outstanding Debt by Type...................................................................................................... 14.5 Ratios of General Bonded Debt Outstanding........................................................................................ 146 Legal Debt Margin Information............................................................................................................. 147 Pledged Revenue Coverage..................................................................................................................... 148 Demographics and Economics Demographic and Economic Statistics................................................................................................... 149 PrincipalEmployers................................................................................................................................. 150 Operating Section Full-time Equivalent City Government Employees by Function/Program......................................... 151 Capital Assets Statistics by Function/Program..................................................................................... 1.52 REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting based on an Audit of Financial Statements Performed in Accordance with Government AuditingStandards................................................................................................................................. 1.53-1.54 2 INTRODUCTORY SECTION City of Kalispell Post Office Box 1997 - Kalispell, Montana 59903-1997 Telephone (406) 758-7701 Fax - (406) 758-7758 December 29, 2015 To the Honorable Mayor, members of the City Council, and Citizens of the City of Kalispell, Montana: CAFR TRANSMITTAL State law requires that all general-purpose local governments publish within six months of the close of each fiscal year (by December 31) a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP). State law also requires a biannual audit of these statements in accordance with generally accepted auditing standards by a firm of licensed certified public accountants to be completed within 9 months of the close of every other fiscal year (by March 31). It is the belief of the City Council and the Executive staff that an annual audit assures a higher level of financial management and fiscal responsibility. Pursuant to this policy and these requirements, the audited annual financial report for the City of Kalispell, Montana for the fiscal year ended June 30, 2015, is submitted for your review. Management Representation The Finance Office prepared this report. Responsibility for the accuracy and completeness of the presented data, including all disclosures, rests with the City. We believe the data, as presented, is accurate in all material aspects; that it is presented in a manner designed to fairly set forth the financial position and results of operations of the City as measured by the financial activity of its various funds; and that all disclosures necessary to enable the reader to gain an understanding of the City's financial affairs have been included. To provide a reasonable basis for making these representations, management of the City has established and maintained an internal control system designed to ensure that the assets of the City are protected from loss, theft or abuse, and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with accounting principles generally accepted in the United States (US GAAP) and to comply with laws and regulations. The system of internal control is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. Independent Auditor Wipfli LLP, a firm of licensed certified public accountants has audited the financial statements of the City. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2015, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting 3 the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City's financial statements for the fiscal year ended June 30, 2015, are fairly presented in conformity with US GAAP. The independent auditor's report is presented as a component of the financial section of this report. Transmittal Letter GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Kalispell's MD&A immediately precedes the City's basic financial statements within this report. Profile of the City of Kalispell The City of Kalispell, incorporated in 1892, is the county seat of Flathead County located in the western part of the State of Montana. This historically has been one of the top growth areas in the state. The City of Kalispell is empowered to levy a property tax on both real and personal properties located within its boundaries. It also is empowered by state statute to extend its corporate limits by annexation, which occurs periodically when deemed appropriate by the governing council. The City of Kalispell is operated under the council-manager form of government. Policy -making and legislative authority are vested in a governing council consisting of the mayor and eight other members. The governing council is responsible for, among other things, passing ordinances, adopting the budget, appointing boards, and hiring the City Manager. The City Manager is responsible for carrying out the policies and ordinances of the governing council, and for overseeing the day-to-day operations of the City. The council is elected on a non -partisan basis. Council members are elected by district to serve four-year staggered terms, with four council members elected every two years. The mayor is elected at large for a four-year term. All significant operations of the City, as defined by the National Council of Governmental Accounting, Statement 93, have been included in the accompanying financial statements. The City provides a full range of municipal services including police, fire, building, planning and zoning, city court, parks and recreation, streets, community development and general administrative services. The City also operates as Enterprise funds: water, sewer, solid waste, and an airport. In addition, the City presents financial data for two component units on the combined statements. The Downtown Business Improvement District and the Tourism Business Improvement District are both discretely presented governmental type component units. The annual budget serves as the foundation for the City of Kalispell's financial planning and control. All departments of the City of Kalispell are required to submit requests for appropriation to the City Manager. The City Manager uses these requests as the starting point for developing a proposed budget. The City Manager then presents this proposed budget to the 4 council for review. The council is required to hold public hearings on the proposed budget and to adopt a final budget. The appropriated budget is prepared by fund, function, and department. Budgetary control is decentralized to the point that individual department heads are responsible for expending within individual fund budgetary limits. Budget to Actual Comparisons The State municipal budget law stipulates that money, other than payments from agency funds, may not be drawn from the treasury of a municipality except pursuant to an appropriation. Therefore, a legally adopted budget is required for all funds, with the exception of agency funds. The City legally adopts a budget for the required funds. Consistent with past years, the City established the legal spending level at the fund level for the fiscal year 2015 budget. The City Manager and Finance Director may make transfers of appropriations within a fund. Transfers between funds, however, require approval of the City Council. Budget -to -actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund, the street maintenance special revenue fund, the community development miscellaneous fund, and the community development loan revolving fund, the comparison is part of the required supplementary information. Other Postemployment Benefits — Implied Rate Subsidy Liability The City of Kalispell reported the "implied rate subsidy" liability, required under the Governmental Accounting Standards Board (GASB) Statement No. 45, in this financial report and the related financial statements. Although the City reported this liability, and related expenditures, the City does not agree that this represents a legal liability and further believes that the presentation of this activity in the financial statements will eventually be misleading to the users of the statements. In this, the fifth year of implementation, the recorded "rate subsidy" liability is $1,816,949. The City plans to continue funding the employee health insurance plan on a "pay as you go" basis, and does not plan to fund this liability. City management feels it would be fiscally irresponsible to take an amount equal to the actuarially determined liability and place it in an irrevocable trust fund that would never be used and would most likely increase as the City, and the related number of employees serving it, continues to grow. Retirees can leave the plan at anytime and the City would have unwisely used funds collected from its citizens. Insurance rates have been historically set so each plan offered is fiscally sound. Rates can be changed and benefits altered at anytime to ensure the plans remain properly funded. Because the City will not be funding this liability, it will continue to increase, and within a few years, the financial statements will reflect the impact of a very large "implied rate subsidy" liability that does not have legal substance. Management does not feel it has legal substance as nothing in state law or any contractual agreement requires the city to offer the same rates to retirees, spouses and their dependents as other participants. The State of Montana has submitted a request to have GASB reconsider the requirement to report the implied rate subsidy. The City of Kalispell agrees with and supports this request. Pension Liability — GASB Statement 68 The City implemented GASB Statement 68, Accounting and Financial Reporting for Pensions for fiscal year 2015. This statement resulted in a net pension liability of $9,192,076. The City 5 participates in three State of Montana cost -sharing multi -employer pension plans. The State legislature determines the rates all employers and employees pay to participate. Each plan has a different level of unfunded liability. GASB Statement 68 requires the City to record its share of the unfunded liabilities even though we have made all statutorily required contributions. See Note F for a description of the plans the City participates in. Factors Affectine Financial Condition The City of Kalispell has not been immune to the effects of the nation-wide economic downturn. Two of the Flathead Valley's core industries have been hit particularly hard. The logging industry is virtually shut down, which trickles down to closures in related industries. Columbia Falls Aluminum Company, which struggled to continue operations for years, is now closed. The City has, however, started to see an uptick in new construction and home foreclosures have slowed somewhat. Kalispell Regional Medical Center continues to grow and, although they are considered not for profit, their expansion helps the City's economy in many other ways. Montana experienced a population increase between the 2000 and 2010 census of 9.7 percent. Kalispell, however, experienced an increase of 40.1 percent, while Flathead County experienced growth equal to 22.1 percent. The July 1, 2014 estimated population of Kalispell is 21,518 according to the U.S. Census Bureau, an increase of 1,591 from the 2010 census population of 19,927. The unadjusted unemployment rate for the 2014 calendar year for City of Kalispell was 7.8 percent. This compares to 8.9 percent for the 2013 calendar year. A positive adjustment of over 10%. The most current unadjusted unemployment rate available (October 2015) for the City of Kalispell, and Flathead County, is 5.0 percent. In comparison, the State of Montana's current unemployment rate for the same period is 3.7 percent and the U.S. rate is 4.8%. The State of Montana's rate is lowered in a large part by the very low unemployment, under 2% in some counties in far eastern Montana, due to the Bakken oil field boom. The City's unemployment rate has continued to improve from 13.1 percent high in January of 2011. According to the United States Census Bureau, the 2013 per capita money income, the most current information available, for Kalispell was $22,557, in 2013 dollars. This is approximately 11% less than the State of Montana's estimated per capita income ($25,373) in 2013 dollars, and 20% less than the Nation's estimated per capita income of $28,155 in 2013 dollars. Revenue Growth and Reform City revenues can be considered statutorily limited, circumstantial or discretionary. The City has very little control over the growth of restricted and circumstantial revenues. Although the City `controls' the growth or discretionary revenue, it is still subject to typical community pressures for conservative growth. Since November 1986 and the passage of Initiative 105, which limited certain property taxes to the 1986 levels, the ability of the City to raise revenue for basic services is increasingly difficult. Then, the legislature, with S13184, lowered tax rates forcing the City to increase mill levies to maintain the same level of revenue. The City's cash reserves in most funds vary between 10% and 20% of appropriations. State law allows for reserves of 50%. Reserves provide for cash flow between tax revenue receipts to keep the City from having to borrow funds for operations. Cel Additional revenues generated by increased taxable valuation come with the additional costs of an increased service area. The City of Kalispell's Police and Fire Departments, Courts system, Building Department, Public Works and Parks have felt the increased pressure from the influx of people to Flathead County. These pressures impact the budgets of all departments. The Montana constitution and state law require periodic reappraisal of property in the interest of equal taxation (15-7-111, MCA). The State of Montana, through the Department of Revenue (DOR), is responsible for valuing all taxable real and personal property. Every other year, the DOR is required by state law to conduct a reappraisal of residential, commercial, industrial, agricultural and forestland property in the state. The most recent reappraisal cycle began on January 1, 2009 and was completed on July 1, 2014. New reappraisal values were used for property tax purposes in tax year 2015 (fiscal year 2016). Statewide, commercial and residential property values rose 43% and 54% respectively. In Flathead County, reappraisals resulted in property value increases of 41% for commercial property, and 66% for residential property. Maior Initiatives On April 21, 2014, the City Council voted unanimously to annex 40.69 acres located on the east side of Whitefish Stage Road, north of East Oregon Street, and west of East Oregon Lane (formerly McElroy -Wilkins gravel pit). The owner of this property, Flathead County Economic Development Authority, intends to develop a rail -served industrial park that will be the new home of several of the rail -served industrial business that are currently located within the City of Kalispell's Core Area, as well as provide additional rail -served industrial land for other business ventures. The proposed rail -served industrial park and relocation of industrial uses out of the Core Area will facilitate removal of the railroad tracks from the Core Area and encourage commercial investment in the recently expanded Westside Urban Renewal Tax -Increment Finance (TIF) District. In October, 2016, the City of Kalispell was awarded a $10 million Transportation Income Generating Economic Recovery (TIGER) grant from U.S. Department of Transportation to help fund the Glacier Rail Park and Kalispell Core Area Development projects. The emphasis of this grant will be to remove the railroad tracks from the City of Kalispell to assist further development without the tracks being an impediment, and to construct a Rail Park outside of the core area, to accommodate establishments that need or prefer rail service for their business. Awards and Acknowledgments The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Kalispell for its comprehensive annual financial report for the fiscal years ended June 30, 2014. This was the 5' consecutive year that the City of Kalispell had submitted and achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of 7 Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The completion of the Annual Financial Report on a timely basis was made possible by the entire staff of the Finance Department and the cooperation of all City departments. I would also like to give recognition to the mayor, governing council, and the city manager for their consistent support for maintaining the highest standards in the management of the City of Kalispell's finances. Respectfully submitted, Rick Wills Finance Director �J Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Kalispell Montana For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2014 Executive Director/CEO 10 MUNICIPAL JUDGE Lori Adams CITY CLERK Aimee Brunckhorst CITY OF KALISPELL, MONTANA ORGANIZATIONAL CHART CITIZENS OF KALISPELL CITY COUNCIL MAYOR Mark Johnson WARD I WARD II WARD III Kan Gabriel Wayne Saverud Jim Atkinson Sandy Carlson Chad Graham Rod Kuntz CITY MANAGER Doug Russell FINANCE Rick Wills HUMAN PUBLIC WORKS INFORMATION RESOURCES Susie Turner TECHNOLOGY Terry Mitton j I � Enka Billiet 10 WARD IV Tim Kluesner Phil Gui/(rida PLANNING, PARKS & BUILDING & RECREATION COMMUNITY Chad Fincher DEVELOPMENT Tom Jentz PUBLIC SAFETY PUBLIC SAFETY LEGAL FIRE POLICE Charlie Harball Dave Dedman Roger Nasset 0 j CITY OF KALISPELL, MONTANA CITY ELECTED AND APPOINTED OFFICIALS TERM ELECTED OFFICIALS EXPIRES Mayor Mark Johnson 12/2017 Council members: Kari Gabriel Ward I 12/2015 Jim Atkinson Ward HI 12/2017 Sandy Carlson Ward I 12/2017 Rod Kuntz Ward HI 12/2015 Wayne Saverud Ward H 12/2015 Phil Guiffrida Ward IV 12/2015 Chad Graham Ward H 12/2017 Tim Kluesner Ward IV 12/2017 Municipal Court Judge: Lori Adams 12/2017 APPOINTED CITY OFFICIALS City Manager Doug Russell Attorney Charles Harball City Clerk Aimee Brunckhorst Police Chief Roger Nasset Fire Chief Dave Dedman Finance Director Rick Wills Public Works Director Susie Turner Parks Director Chad Fincher Planning Director Tom Jentz Community Development Manager Katharine Thompson Human Resource Director Terry Mitton City Treasurer Deb Diest 11 Wipfli LLP 910 North Last Chance Gulch Helena, MT 59601 406.442.5520 fax 406.443.1017 www.wipfli.com INDEPENDENT AUDITOR'S REPORT City Council Members City of Kalispell, Montana Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, the aggregate remaining fund information, and budgetary comparisons of each major fund of the City of Kalispell, as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the City of Kalispell's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, the aggregate remaining fund information, and budgetary comparisons of each major fund of the City of Kalispell, as of June 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 12 Emphasis of Matter As discussed in Note J to the financial statements, the 2014 financial statements have been restated to correct a misstatement. Our opinions are not modified with respect to this matter. Change in Accounting Principle As discussed in Note 1 to the financial statements, in 2015 the City adopted new accounting guidance. GASB Statement 68, Accounting and Financial Reporting for Pensions — an amendment to GASB Statement No. 27 and GASB Statement 71, Pension Transition for Contributions Made Subsequent to the Measurement Date — an amendment of GASB Statement No. 68. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, Schedule of City's Proportionate Share of Net Pension Liability and Contributions on Pages 92 — 93, schedule of funding progress — other post -employment healthcare benefits on page 91, and budgetary comparison information on pages 94 through 97 and 111 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Kalispell's financial statements. The introductory section, combining and individual nonmajor fund financial statements, budgetary comparisons (other than major funds), and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and budgetary comparisons (other than major funds) are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain other procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and budgetary comparisons (other than major funds) are fairly stated in all material respects in relation to the financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. 13 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 29, 2015 on our consideration of the City of Kalispell's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Kalispell's internal control over financial reporting and compliance. L,... L. Wipfli LLP Helena, Montana December 29, 2015 14 FINANCIAL SECTION MANAGEMENT'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, 2015. 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 $154,934,238 (net position). Of this amount, $7,884,310 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. ➢ Total net position increased by $3,514,813 over the prior fiscal year net position. ➢ As of June 30 the City's governmental funds reported combined ending fund balances of $17,051,948, an increase of $3,726,523 over the prior year. Of this amount, $3,069,305 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 $2,458,542 (10%) during fiscal year 2015. 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 15 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 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 aide 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 assets 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 five major governmental funds; the General Fund (always a major fund), the Street Maintenance (special revenue) Fund, the Community Development Loan Revolving (special revenue) Fund, the Community Development — Miscellaneous (special revenue) Fund, and the Special Improvement District 344 (debt service) Fund. All non -major funds are presented as a group. 16 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. Because the City of Kalispell's internal service funds benefit governmental more so than business - type functions, they have 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, GASB Statement 68 — Accounting and Financial Reporting for Pensions 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 17 information, pension information, and required budgetary comparison schedules on pages 91 97. 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 98 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, 2015, the City of Kalispell's assets exceeded liabilities by $154,934,238. The largest portion of the City's net position ($131,407,596 or 85%) 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. A summary of net position is shown in the following table. Governmental Business -type Activities Activities RESTATED Change RESTATED Change FY15 FY14 Inc(Dec)FY15 FY14 Inc Mec Current and other assets $ 22,579,029 $ 20,059,734 $ 2,519295 $ 17,457,975 $ 16,800,092 $ 657,883 Capital assets 80,019,468 81,349,530 (1,330,062) 74,385,165 73,856,422 528,743 Total assets and deferred outflow of resources 102,598,497 101,409264 1,189233 91,843,140 90,656,514 1,186,626 Long-term debt outstanding $ 17,106,004 $ 15,459,782 $ 1,646222 $ 15,498,880 $ 18,001,002 $ (2,502,122) Otherliabilities 4,683,537 2,048,179 2,635,358 2218,978 504,828 1,714,150 Total liabilities and deferred inflow of resources 21,789,541 17,507,961 4281,580 17,717,858 18,505,830 (787,972) Invested in capital assets, net of debt 71,610,586 71,734,631 (124,045) 59,797,010 58,015,752 1,781258 Restricted 8,581,135 6260,916 2,320219 7,061,197 7,590,734 (529,537) Unrestricted (deficit) 617235 1273,194 (655,959) 7267,075 6,544,198 722,877 Total net position $ 80,808,956 $ 79268,741 $ 1,540215 $ 74,125282 $ 72,150,684 $ 1,974,598 An additional portion of the City's net position ($15,642,332 or 10%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($7,884,310 or 5%) 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 about 3% for fiscal year 2015 in comparison to fiscal year 2014 restated ($154.9 million compared to $151.4 million). 18 Table 2 - Changes in Net Assets Revenues Program revenues (by mayor source): Charges for services Opemting grants and contributions Capital grants and contributions General revenues (by mayor source): Property taxes for general purposes Video poker apportionment Miscellaneous Interestinvestment 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 Gain (loss) on sale of capital assets Transfers - net Increase (decrease) in net assets Governmental Business -type Activities Activities Change Change FY15 FY14 Inc(Dec)FY15 FY14 Inc(Dec) $ 6,003,479 $ 5,870,315 $ 133,164 $ 9,212,044 $ 8,983,515 $ 228,529 1,838,425 2,636,321 (797,896) 27,721 8,372 19,349 3,232,618 1,519,825 1,712,793 1,098,222 2,137,977 (1,039,755) 7,584,776 8,739,80 (1,155,031) - - - 57,350 60,450 (3,100) - - - 132,571 124,331 8,240 2,101 - 2,101 72,531 48,193 24,338 113,963 83,224 30,739 3,134,703 2,835,264 299,439 - - 364,622 364,563 59 1 - L - - $ 22,421,075 $ 22,199,069 $ 222,006 $ 10,454,051 $ 11,213,088 $ (759,037) $ 5,401,242 $ 5,688,135 $ (286,893) $ 9,575,487 $ 9,269,827 305,660 $ 2,773,097 $ 2,573,627 199,470 $ 2,062,669 $ 2,123,237 (60,568) $ 683,164 $ 1,601,170 (918,006) $ 331,811 $ 357,857 (26,046) 154,715 $ 177,751 $ (23,036) $ 2,542,119 $ 2,625,046 (82,927) $ 5,077,643 $ 5,114,591 (36,948) $ 816,686 $ 812,6�LOj 4,036 $ 20,827,470 $ 21,613,853 $ (786,383) $ 8,591,163 $ 8,730,038 $ (138,875) 1,593,605 585,216 1,008,389 1,862,888 2,483,050 (620,162) 11,610 11,610 46,710 --Iqq 46,710 (65,000) (218,728) 153,728 65,000 218,728 (153,728) $ 1,540,215 $ 366,488 $ 1,173,727 $ 1,974,598 $ 2,701,778 $ (727,180) Governmental Activities. Governmental activities in fiscal year 2015 increased the City's net position by $1,540,215. Specifically, revenues increased about 1%, and expenses decreased 4%. The key elements of the overall net position change were: ➢ Total program revenues increased substantially ($1,048,061 or 11%), while general revenues also decreased ($826,055 or 7%). The major revenue changes from fiscal year 2014 are streets contributed by developers (capital grants and contributions) of almost $2,000,000, a reduction in operating grants and contributions of the community development department of close to $1,000,000, and an over $2,000,000 GASB 34 deferred revenue adjustment reducing property taxes for general purposes by over $1.1 million. ➢ Governmental activities program expenses decreased $786,383. This can be attributed to the community development program and the decrease in operating grants and contributions noted above for the decrease in revenues. The table and charts 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 19 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 FY15 FY14 FY15 FY14 Public Safety 9.6 9.3 6.1 5.8 Public Works 2.8 2.6 (1.1) - Parks and Recreation 2.1 2.1 1.3 1.2 Community Development 0.7 1.6 0.3 - General Government 5.4 5.7 2.8 4.2 Debt Service 0.3 0.4 0.3 0.4 Totals $ 20.9 $ 21.7 $ 9.7 $ 11.6 12000000 10000000 8000000 c Z5 0 6000000 Q �4000000 2000000 Expenses and Program Revenues - Governmental Activities for fiscal year 2015 Oexpenses ■prog rev gen gov't pub safety pub works parks/rec comm dev Activity 20 Revenue by Source - Governmental Activities fiscal year 2015 Other 3% Charges for 27% Property taxes Operating 34 /o grants/contributions 8% -- Capital grants/contributions 14% Business -type activities. Business -type activities increased the City of Kalispell's net position by $1,974,598. The factors leading to this result were: ➢ Revenues of the City's business -type activities decreased $759,037. Capital grants and contributions revenue of business -type activities decreased almost 50% from $2,137,977 to $1,098,222, attributable to a reduction in the amount of capital contributed (both impact fees and developers infrastructure contributions). ➢ Expenses decreased slightly, about 2%, from the prior fiscal year. The following charts help illustrate the information presented above related to business -type activities net assets. 21 7000000 6000000 5000000 4000000 0 Q3000000 2000000 W1111111111111idt Expenses and Program Revenues - Business -type Activities for fiscal year 2015 airport water sewer solid waste Activity Revenues by Source - Business -type Activities for fiscal year 2015 Investmentlother Earnings Capital 2% grants/contribution s Operating 11% s/contributions 0% Charges for services 87% 22 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 2015, the City of Kalispell's governmental funds reported combined ending fund balances of $17,051,948, an increase of $3,726,523 in comparison with the prior fiscal year restated. Of the ending fund balance, $13,749,087 (81%) 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 ($3,204,445); assets are limited by specific voter approved bonds ($612,474); assets are limited by specific special assessments ($1,837,648); assets are limited by state law ($8,000,966); assets are limited by contribution restrictions ($93,554). $3,069,305 or 18% 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 2015 unassigned fund balance of the general fund was $2,946,897, while total fund balance was $3,266,749. The fund balance increased $854,361 during fiscal year 2015. Revenues and other financing sources increased almost $900,000 from fiscal year 2014. This increase in revenues included almost $500,000 in taxes and assessments, primarily because of the collections of some protested taxes being settled, and a nearly $300,000 increase in State entitlement share payment (intergovernmental revenues). Expenditures and other financing uses changed very little; less than 3%. At the end of fiscal year 2015, unassigned fund balance represents 27% of total general fund expenditures, a 6% improvement from fiscal year 2014. The general fund balance of $319,852 is non -spendable and assigned as follows: GENERAL FUND BALANCE - TOTAL NONSPENDABLE Long-term recievables Prepaids TOTAL NONSPENDABLE ASSIGNMENTS Capital Equipment Downtown Parking TOTAL ASSIGNMENTS UNASSIGNED $ 3,266,749 $ 12,900 $181,504 $ 194,404 $101,906 $ 23,542 $ 125,448 $ 2,946,897 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, 2015, the fund balance of this fund was $1,528,640, a $241,522 increase from the prior fiscal year. 23 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, 2015, the fund balance of this fund was $2,002,565, a small increase from fiscal year 2014 restated. For fiscal year 2015, the Community Development Loan Revolving fund made two new loans. The Community Development — Miscellaneous fund is a special revenue fund used to account for various activities of the department. There is a loan housed in the fund and various grants have also been accounted for in this fund. This funds primary income sources are loan repayment money and grant revenue. In fiscal year 2015, this fund was used to account for the transactions resulting in and from the City's purchase of six properties in the Old School Station Technical/Industrial Park. These transactions resulted in a 104% increase in the fund balance. 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 technical/industrial development known as Old School Station. Fund balance at June 30, 2015, for SID 344 was $469,558, an increase of $678,265 from fiscal year 2014. This extraordinary increase in fund balance is the result of the City taking ownership of six properties within the district by bringing the taxes current. 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 of Unrestricted Funds total Change in % Change in Net Position Net Position Net Position Net Position Water $ 3,827,110 13% $ 940,104 3% Sewer 2,639,216 6% 918,125 2% Other 800,749 22% 116,369 3% Total $ 7,267,075 10% $ 1,974,598 3% 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 2015 was $11,319,465. Actual expenditures for the year were $10,995,903, a favorable variance of $323,562. Actual public safety expenditures were $165,562 less than budgeted, due to personal services savings. Actual general government expenditures were $136,508 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 $11,850,264, $514,320 more than the budgeted amount of $11,335,944. Taxes and assessments revenue in excess of the budgeted amount by $557,754, 24 mainly due to the collection of some protested taxes, was offset by deficiencies in other revenue categories. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of 2015, the City of Kalispell has $154,260,382, 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 Business -type Total activities activities 2015 2014 2015 2014 2015 2014 Land $ 2,395,299 $ 2,395,299 $ 1,762,512 $ 1,701,888 $ 4,157,811 $ 4,097,187 Construction in Progress $ 22,155 1,651,143 $ 77,811 $ 1,651,143 99,966 Source of Supply 3,773,176 3,856,681 $ 3,773,176 3,856,681 Pumping Plant 1,848,986 1,961,419 $ 1,848,986 1,961,419 Treatment Plant 19,445,460 20,059,920 $ 19,445,460 20,059,920 Transmission and Distribution 33,512,687 33,903,460 $ 33,512,687 33,903,460 General Plant 1,402,569 1,569,245 $ 1,402,569 1,569,245 Storm Sewer system 10,283,837 9,998,606 $ 10,283,837 9,998,606 Total $79,875,217 $81,266,722 $74,385,165 $73,856,422 $ 154,260,382 $ 155,123,144 Major Governmental funds capital asset events during the fiscal year 2015 included the following: ➢ The police department purchased (3) vehicles, (2) motorcycles, and wireless in car cameras at a cost of $131,245. ➢ The fire department purchased a pickup for $32,504. ➢ Completed purchase and setup of Cityworks software program for the building department at a total cost of $51,274. ➢ The street department purchased a John Deere loader and an asphalt zipper. The cost of these two pieces of equipment was $253,907. ➢ Heart monitors costing $24,887 were purchased for the ambulance department using funding from the American Heart Association. ➢ Paved 5 alleys at a total cost of $24,112. Replaced 1,723', 5.7 blocks, of sidewalks valued at $68,581. ➢ Streets valued at $1,811,225 were donated to the City. ➢ Disposed assets with a cost basis of $248,357. Major Business -type funds capital asset events during the fiscal year 2015 included the following: ➢ Developer's contributed (6) fire hydrants valued at $24,448. ➢ Replaced (3) and installed (5) new fire hydrants at a total cost of $32,504. ➢ 1,687 linear feet of new water main valued at $131,715 was installed and contributed to the City by developers. 25 ➢ The water department installed 233 new meters, including 88 new domestic meters of various sizes. ➢ Completed project replacing water line on 4th Ave EN, total project cost was $637,147. ➢ Water and sewer mains were relocated and upsized to accommodate the Highway 93 Bypass construction. City's fiscal year 2015 cost was $12,169. Montana Department of Transportation contributed the fiscal year 2015 balance of $28,825. ➢ Installed back-up generator for sanitary sewer lift station 911 (Nicklaus Drive). ➢ Developer's contributed 691 linear feet of new sanitary sewer main valued at $26,762. ➢ Installed roof liners on two buildings in the waste water treatment plant complex at a total cost of $44,000. ➢ Replaced digester gas room piping and odor control filter bed bark at the wastewater treatment plant at a total cost of over $140,000. ➢ Installed a storm water main on 9' Street East (Hedges School) at a cost of $294,672. ➢ Completed phase III of the South Meadows storm drain project. ➢ Developer's contributed 294 linear feet of new storm sewer main valued at $22,445. ➢ Storm drain improvements on 4' Avenue EN and Parkway Drive were completed for $79,972. ➢ Refurbished a sidearm solid waste truck for $80,598. ➢ The sewer department has over $1.5 million in construction projects in progress as of June 30, 2015. ➢ Replaced or abandoned water and sewer transmission and distribution assets with a cost basis of approximately $56,000. Additional information on capital assets can be found in the notes of the basic financial statements (Note D. Capital Assets pages 54-56). Debt At the end of fiscal year 2015, the City of Kalispell had total long-term debt outstanding of $23,618,018. Of this amount, $2,805,000 comprises debt backed by the full faith and credit of the government and $1,932,000 represents bonds secured solely by specific revenue sources (i.e., revenue bonds). The remainder consists of $13,759,000 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 $3,074,242 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 $2,047,776 of loans for the purchase of other property and equipment. CITY OF KALISPELL'S OUTSTANDING DEBT Governmental Business -type Total activities activities 2015 2014 2015 2014 2015 2014 General obligation bonds $ 2,805,000 $ 3,255,000 $ 2,805,000 $ 3,255,000 Revenue/Urban Renewal bonds $ 1,257,000 1,410,000 675,000 735,000 $ 1,932,000 $ 2,145,000 SRF loans 13.759.000 14.932.682 $ 13.759.000 $14.932.682 Total $ 9,029,863 $10,235,890 $14,588,155 $15,840,670 $ 23,618,018 $ 26,076,560 26 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 57-62). ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The City's elected and appointed officials considered many factors when setting the fiscal year 2016 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. aource: u.a. lieparunenL of i aoor anu muustry. ➢ The City of Kalispell's unemployment rate (preliminary/unadjusted) stood at 5.0% as of October of 2015, which is a slight improvement from the October 2014 rate of 5.1 percent. 27 This is worse than the State's unemployment rate of 3.7%, and about the same as the Nation's rate of 4.8 percent for the same month and year. ➢ Applications for building permits and other internal indicators of growth, such as impact fee revenues, remained strong in fiscal year 2015. Short-term future forecast are optimistic. ➢ 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. During fiscal year 2015, fund balance in the General Fund increased to $3,266,749. The City of Kalispell has not appropriated any of this amount for spending in the 2016 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 2016: ➢ 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 $200,000. o Both categories of light maintenance assessments were increased. These changes will increase revenue for the light maintenance fund an estimated $134,000. ➢ Business -type: o No changes. 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. 28 GOVERNMENT - WIDE FINANCIAL STATEMENTS ASSETS Cash and investments Taxes and assessments receivable, net Accounts receivable - net Notes and loans receivable Contracts receivable Due from other governments Prepaids Inventories Properties held for sale Other debits Restricted assets: Cash and investments Capital assets (net of accumulated depreciation): Land Construction in Progress Depreciable Total assets DEFERRED OUTFLOWS OF RESOURCES Contractually required contributions related to pensions Total deferred outflows of resources Total assets and deferred outflows of resources LIABILITIES Accounts payable Retainage Accrued payroll Other credits Current portion of long-term liabilities Bonds and notes - not capital Bonds and notes - capital Compensated absences payable Long-term liabilities, due in more than one year Bonds and notes - not capital Bonds and notes - capital Compensated absences Other post employment benefits - health Net pension liability Total liabilities DEFERRED INFLOWS OF RESOURCES Diff. between est. and actual earnings on pension plan inv. Total deferred inflows of resources NET POSITION Net investment in capital assets Restricted for capital projects Restricted for debt service Restricted for special projects Restricted for other purposes Unrestricted Total net position See accompanying Notes to the Financial Statements City of Kalispell, Montana Statement of Net Position June 30, 2015 Component Units Governmental Business -type Downtown Tourism Activities Activities Total BID BID $ 11,760,656 $ 9,413,199 $ 21,173,855 $ 52,518 $ 160,442 3,538,180 28,409 3,566,589 1,683 - 232,572 366,327 598,899 - 2,283,862 - 2,283,862 89,117 53,473 142,590 - 1,3 86,954 176,465 1,5 63,419 10,327 225,030 38,692 263,722 - - 134,667 134,667 1,258,465 - 1,258,465 25,490 - 25,490 935,129 7,061,198 7,996,327 2,395,299 1,762,512 4,157,811 - 1,651,143 1,651,143 - 77,624,169 70,971,510 148,595,679 - 7,375 101,754,923 91,657,595 193,412,518 64,528 167,817 843,574 185,545 1,029,119 - - 843,5 74 185,545 1,029,119 359,636 451,176 810,812 9,665 17,614 27,279 376,618 65,588 442,206 869 - 869 26,148 - 26,148 1,315,038 1,130,963 2,446,001 978,801 192,288 1,171,089 594,831 - 594,831 7,093,844 13,457,192 20,551,036 356,306 93,686 449,992 1,526,237 290,712 1,816,949 7,534,786 1,657,290 9,192,076 5,588 25,315 5,588 25,315 1,616,762 355,609 1,972,371 1,616,762 355,609 1,972,371 71,610,586 59,797,010 131,407,596 - 4,181,876 4,181,876 627,503 1,467,713 2,095,216 7,953,632 1,221,608 9,175,240 - 190,000 190,000 7,375 135,127 29 W O City of Kalispell, Montana Statement of Activities For the Fiscal Year Ended June 30, 2015 Net (Expenses) Revenues and Changes in Net Assets Program Revenues Primary Government Component Units Indirect Operating Capital Business - Expense Charges for Grants and Grants and Governmental type Downtown Tourism Functions/Proszrams Expenses Allocation Services Contributions Contributions Activities Activities Total BID BID Primary government: Governmental activities: General government $ 5,399,935 $ 1,307 $ 684,550 $ 126,037 $ 1,828,580 $ (2,762,075) $ $ (2,762,075) $ $ Public safety 9,373,151 202,336 1,973,898 1,487,677 - (6,113,912) (6,113,912) Public works 2,477,757 295,340 2,463,435 - 1,400,791 1,091,129 1,091,129 Parks and recreation 1,997,793 64,876 728,165 23,850 3,247 (1,307,407) (1,307,407) Community development 666,540 16,624 153,431 200,861 - (328,872) (328,872) Debt service -interest 331,811 (331,811) (331,811) Total governmental activities 20,246,987 580,483 6,003,479 1,838,425 3,232,618 (9,752,948) (9,752,948) Business -type activities: Airport 147,817 6,898 79,091 - - (75,624) (75,624) Water 2,370,071 172,048 3,018,276 8,365 421,623 906,145 906,145 Sewer 4,768,660 308,983 5,141,284 14,237 676,599 754,477 754,477 Solid Waste 714,842 101,844 973,393 5,119 161,826 161,826 Total business -type activities 8,001,390 589,773 9,212,044 27,721 1,098,222 1,746,824 1,746,824 Total primary government $ 28,248,377 $ 1,170,256 $ 15,215,523 $ 1,866,146 $ 4,330,840 $ (9,752,948) $ 1,746,824 $ (8,006,124) Component units: Downtown BID $ 101,808 $ 4,797 $ 80,554 $ - $ - $ (26,051) Tourism BID 558,861 5,000 547,724 - - $ (16,137) Total component units $ 660,669 $ 9,797 $ 628,278 $ - $ $ (26,051) $ (16,137) General Revenues: Property taxes for general purposes $ 7,584,775 $ - $ 7,584,775 $ - $ - Video poker apportionment 57,350 - 57,350 - - Miscellaneous 132,571 2,101 134,672 4,397 - Interest/investment earnings 72,531 113,963 186,494 372 92 State entitlement 3,134,703 - 3,134,703 - - Gas Tax 364,622 - 364,622 - - Gain (loss) on sale of capital assets 11,610 46,710 58,320 - - Transfers - net (65,000) 65,000 - - - Total general revenues, special items and transfers 11,293,162 227,774 11,520,936 4,769 92 Change in net position 1,540,214 1,974,598 3,514,812 (21,282) (16,045) See accompanying Notes to the Financial Statements Net position - beginning 87,828,749 74,042,073 161,870,822 80,222 168,647 Restatements 39,101 39,101 - (10,100) Prior period adjustment - GASB 68 (8,599,108) (1,891,389) (10,490,497) Net position -beginning -restated 79,268,742 72,150,684 151,419,426 80,222 158,547 Net position - end $ 80,808,956 $ 74,125,282 $ 154,934,238 $ 58,940 $ 142,502 GOVERNMENTAL FUND FINANCIAL STATEMENTS MAJOR GOVERNMENTAL FUNDS General Fund — this is the City's primary operating fund and accounts for the financial operations of the City not accounted for in any other fund. Principal sources of revenue are property taxes, state and local shared revenue, charges for services, and fines and forfeitures. Principal expenditures are for public safety. Street Maintenance — Accounts for special assessment revenues levied, received, and expended to keep streets clean, safe, and drive -able. Community Development Loan Revolving Fund — this fund accounts for the lending and repayment of monies loaned to businesses and individuals for approved community development projects. Community Development Loan Miscellaneous Fund — this fund was originally established to account for Urban Development Assistance Grants (UDAG). In fiscal year 2015, this fund, with dollars borrowed from the General fund, purchased six undeveloped properties from Flathead County at the Old School Station Industrial/Technical Park, a City special improvement district. SID 344 Debt Service Fund — this fund accounts for the resources accumulated and payments made for principal and interest on the bonds sold to finance the development of the Old School Station Industrial and Technology Park. CityaKa0spol, Mmtana Balance Sheet Gmesnmental Fnnds June 30,2015 O her Tdal Street CD Lvan Governmental Gmernmental General Fmd Maintenance Revdving CD M SD) 394 Fends Fends ASSETS Cash and investments $ 1,476,433 $ 1,341,676 $ 314,519 $ 626,242 $ 40,558 $ 7,358,939 $ 11,587,367 Taxes and assessments receivable, net 220,187 39,869 - - 2,415,436 862,688 3,538,180 Aceounts receivable - net 1,915 - - - - 230,657 232,572 Notes and loans receivable - - 1,688,M6 36,956 - 558,860 2,283,862 Conhacts receivable 4 ,551 - - - - - 46,551 Due from other funds 6,988 - - - - - 6,988 Due from other governments 517,234 220,747 - - - 648,973 1,386,954 Prepaids 181,504 13,328 - - - 25,824 220,656 Advances to other funds 1,3W,000 - - - - - 1,300,000 Otha&bita 12,%0 215 - - - 12,375 25,490 Rqp iea hddfaale - - - 1,258,465 - - 1,258,465 Reahi&M assets: Cash and ivveatmwta $ $ $ $ $ $ 935,129 $ 935,129 Total assets $ 3,]63,]12 $ 1,615,835 $ 2,002,565 $ 1,921,663 $ 2,884,994 $ 10,633,445 $ 22,822,214 LI ffinIES Aceounta payable $ 48,869 $ 1],11] $ - $ 6 $ - $ 253,817 $ 319,809 Retainage - 9,665 - - - - 9,665 Accmed payroll 227,907 20,544 - - - 118,992 367,443 Due to other funds - - - - - 6,988 6,988 Advances from other funds - - - 1,300,000 - - 1,300,000 Olh-&ta 869 869 Total liabilities $ 2763]]6 $ 47,326 $ $ 133003006 $ $ 3803666 $ 2,004,]]4 Defected ivflowa ofremu- Uvavailablerevenue-& Maceouvta receivable $ - $ - $ - $ - $ - $ 22],312 $ 22],312 Unavailable revenue-& Mfaxes and ascessvamts 220,187 39,869 2,415,436 862,688 3,538, 180 Total def Minflows of rem- $ 220,187 $ 39,869 $ $ $ 2,415,436 $ 1,090,000 $ 3,765,492 FUNDBALANCES Nonaprvdable-votiv aprvdable fen Long-turn-i-blea $ 12,900 $ - $ - $ - $ - $ - $ 12,900 Prepaids 181,504 13,328 - - - 25,824 220,656 Reahi&M Gwad Govemmwt - - - - - 104,057 104,057 Public Safety - - - - - 1,049,062 1,049,062 Public Works - 1,515,312 - - - 496,343 2,011,655 Culture and Recreation - - - - - ]82,505 782,505 Covmwnity Development - - 2,002,565 621,657 - 6'080,525 8,704,747 Debt Service - - - - 469,558 627,503 1,097,061 Umeahi&M Fund Balances: Assign d: Capital Equipmwt 101,906 - - - - - 101:906 Pinking 23,542 - - - - - 23542 Unassigned fund bdance 239463897 (3,040) 2,943,857 Total fund balances $ 3,266,749 $ 1,528,640 $ 2,002,565 $ 621,657 $ 469,558 $ 9,162,]]9 $ 17,051,948 Total liabilities,& M inflows of resources, and fund balances $ 3,]63,]12 $ 1,615,835 $ 2,002,565 $ 1,921,663 $ 2,884,994 $ 10,633,445 $ 22,822,214 Sce accevgranyivg Notes to the Fi.6.1 Statemwta 31 City of Kalispell, Montana Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2015 Total fund balances - governmental funds $ 17,051,948 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 79,875,217 Deferred outflow of resources - related to pensions result from contributions made subsequent to the measurement date that are recognized on the statement of net position. 843,574 An internal service fund is used by management to charge the costs of providing services within the government. The assets and liabilities of the internal service funds are included in governmental activities in the government -wide statement of net position 287,888 Long-term liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. - Bonds and notes (9,029,861) - Compensated absences (1,307,517) - Other post employment benefits (1,526,237) - Net pension liability (7,534,786) - Deferred inflow of resources - related to pensions (1,616,762) Taxes, assessments and accounts receivable will be collected this year, but are not available soon enough to pay for the current periods expenditures and, therefore, are reported as unavailable revenue in the funds. - deferred taxes and assessments 3,538,180 - ambulance 227,312 Total net position - governmental activities $ 80,808,956 See accompanying Notes to the Financial Statements 32 City of Kalispell, Montana Statement of Revenua, EapendiW-, and Changes iv Fund Balances GwernmentalFunds For the Fiscal Year Ended Sane 30, 2015 Other Total Street CD Loan Governmental Goner®®tal G® WFund Maintenance Revolving CD Misc SID 344 Funds Funtls REVENUES Taxes and assessments $ 5,716,754 $ - $ - $ - $ 1,261,667 $ 4,297:211 $ 11,271,616 Licenses and permits 82,297 - - - - 2%748 381,045 Ivtergov--tal 4,02],0]8 - - 29,b14 - 1,350,011 5406:13 Charges for services ]68,614 2,174,473 18,262 2,059 - 1,667,167 4:630575 FivesavdforF'tures 538,234 - - - - - 538,234 Miscellm- 27,898 3,399 - - - 157,318 188,615 Iv�estmevt earvivgs 12,779 6,880 4,274 2,071 46,524 72,528 Total revenues $ 11,173,654 $ 2,184,752 $ 22,536 $ 33,744 $ 1,261,667 $ 7,816,983 $ 22,493,336 EXPENDITURES General govemmevt $ 2,623,226 - $ 2623226 Publicsafety 7,451,258 - - - - 1,664,694 9:115:952 Publicworks 267,736 1,705,055 - - - 699,361 2,672,152 Z" and .-im - - - - - 1,608,497 1,608,49] Community development 55,379 - 2,471 45,281 - 581,887 685,018 Deb[I'm .-pivdpal 70,775 97,165 - - 225,000 937,117 1,330,057 Debt service -interest 5,280 3,298 - - 132,658 190,575 331,811 Capital outlay 152,]]3 253,907 154:070 560,750 Total expenditures $ 10,626,427 $ 2,059,425 $ 2,471 $ 45,281 $ 357,658 $ 5,836,201 $ 18,927,463 E.-(&fi i-cy)ofresevues wer(..der) expenditu $ 547,227 $ 125,327 $ 20,065 $ (11,537) $ 904,009 $ 1,980,782 $ 3,565,873 OTDER FINANCING SOURCES (USES) Issuance of&bt $ - $ 116,195 $ - $ - $ - $ 7,845 $ 124,040 Proceedsf the sale ofg-I capital asset disposition 11,610 - - - - - 11,610 Tr f W 665,000 - - 327,649 8,000 1,200,627 2,201,276 Tr fmout (369,476) (233,744) (1,573,056) (2,176,276) Total other 8vavdvg sources (u ) $ 307,134 $ 116,195 $ - $ 327,649 $ (225,744) $ (364,584) $ 160,650 Net Cbavge iv Fuvd Balances $ 854,361 $ 2413522 $ 203065 $ 3163112 $ 6783265 $ 136163198 $ 3,726,523 Fuvd balances- begivnivg $ 2,409,409 $ 1,287,118 $ 434,414 $ 260,828 $ (208,707) $ 6,786982 $ ]0,970,044 R-temevta 2,979 1,548,086 44,717 759:599 2,355,381 Fuvd balances- begivnivg, restated $ 2,412,388 $ 1,287,118 $ 1,982,500 $ 305,545 $ (208,707) $ 7,546,581 $ 13,325,425 Fuvd balances-evdivg $ 3,266,749 $ 1,528,640 $ 2,002,565 $ 621,657 $ 469,558 $ 9,162,779 $ 17,051,948 See a-pavyivg Notes to the Finavdal Stet-m 33 City of Kalispell, Montana Reconciliation of the Statement of Revenues, Expenditures. and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2015 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds $ 3,726,523 Governmental funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets: - Capital assets purchased 560,750 - Depreciation expense (3,780,836) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds: - Donated capital assets 1,828,580 - Deferred assessments recievable (beginning of year) (5,792,370) - Deferred assessments recievable (end of year) 3,765,492 The change in compensated absences is shown as an expense in the Statement of Activities (34,361) Repayment of debt principal is an expenditures in the governmental funds, but the repayment reduces long- term debt in the Statement of Net Position: - Long-term debt principal payments 1,330,057 Long term debt proceeds provide current financial resources to the governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position: - Proceeds from the sale of long-term debt (124,040) Changes to net pension liability are shown as revenues/expenses on the Statement of Activities 291,134 The increase in other post employment benefits is shown as an expense in the Statement of Activities (250,843) Internal service funds are used by management to chare the costs of certain activities, to individual funds. The net revenue of the internal service funds is reported with the governmental activities of the Government -Wide Statement of Activities 20,128 Change in net position - Statement of Activities $ 1,540,214 See accompanying Notes to the Financial Statements PROPRIETARY FUND FINANCIAL STATEMENTS MAJOR ENTERPRISE FUNDS Water Fund — Accounts for the City's water utility operations, including water impact fees. Sewer Fund — Accounts for the City's sewer and storm water utility operations, including sewer and storm impact fees. INTERNAL SERVICE FUNDS Information Technology Fund — used to account for the goods and services provided by the information technology department to other departments of the City on a cost - reimbursement basis. Central Garage Fund — used to account for the goods and services provided by the central garage to other departments of the City on a cost -reimbursement basis. City of Kalispell, Montana Statement of Net Position Proprietary Foods June 30, 2015 Governmental BusinessTypeActivities-Enterprise Funds Activities Non -major Internal Service Water Sewer Enterprise Totals Funds ASSETS Cash and investments $ 4,605,947 $ 3,686,963 $ 1,120,289 $ 9,413,199 $ 173,289 Taxes and assessments receivable, net - 12,529 15,880 28,409 - Accountsreceivable -net 144,721 220,934 672 366,327 - Contracts receivable 2,497 35,476 15,500 53,473 42,566 Due from otter governments 2,013 86,214 88,238 176,465 - Prepaids 11,660 19,567 7,465 38,692 4,374 Inverdories 134,667 - - 134,667 - Restricted assets: Cash and investments 1,269,107 5,792,091 - 7,061,198 - Capital assets (net of accumulated depreciation): Lard 91,587 311,380 1,359,545 1,762,512 - ConstmctioninProgress 208,357 1,442,786 - 1,651,143 - Depreciable 25,311,313 43,970,459 1,689,738 70,971,510 144,251 Total assets 31,781,869 55,578,399 4,297,327 91,657,595 364,480 DEFERRED OUTFLOWS OF RESOURCES Contractually required contributions related to pensioru 55,990 95,292 34,263 185,545 Total deferred outflows of resources 55,990 95292 34,263 185,545 LIABILITIES Accounts payable 233,330 197,934 19,912 451,176 39,827 Retamage 9,497 8,117 - 17,614 - Accmedpayroll 21,328 33,018 11,242 65,588 9,175 Otter credits 5,740 - - 5,740 - Current portion of long-term liabilities Bonds and notes - capital 193,000 900,000 37,963 1,130,963 - Compensated absences payable 49,785 96,107 46,396 192,288 20,345 Long-term liabilities, due in more than one year Bonds and notes - capital 1,857,000 11,484,000 116,192 13,457,192 - Compensated absences payable 21,601 39,786 32,299 93,686 7,245 Otter post employment benefits - health 181,695 109,017 - 290,712 - Net pension liability 500,102 851,147 306,041 1,657,290 Total liabilities 3,073,078 13,719,126 570,045 17,362,249 76,592 DEFERRED INFLOWS OF RESOURCES Diff. between est. and actual earnings on pension plan inv. 107,308 182,633 65,668 355,609 Total deferred inflows ofresources 107,308 182,633 65,668 355,609 NET POSITION Net investment in capital assets 23,561,257 33,340,625 2,895,128 59,797,010 144,251 Restricted for capital projects 910,706 3,271,170 - 4,181,876 - Restricted for debt service 358,400 1,109,313 - 1,467,713 - Restricted for special projects - 1,221,608 - 1,221,608 - Restricted for other purposes - 190,000 - 190,000 - Unrestricted 3,827,110 2,639,216 800,749 7,267,075 143,637 Total net position $ 28,657,473 $ 41,771,932 $ 3,695,877 $ 74,125,282 $ 287,888 See accompanying Notes to the Financial Statements 35 OPERATING REVENUES Charges for serviees Misce➢aneous revenues Special assessments Total operating revenues OPERATING EXPENSES Personal services Supplies Pmcbased services Building materials Fixed charges Depreciation Total operating expenses Operating income (loss) NONOPERATINGREVENUES (EXPENSES) Intergovernmental revenue Interest revenue Crain (loss) on sale of capital assets D&t service interest expense Total non -operating revenues (expenses) Income (loss) before contributions and transfers Transfers out Capital Grants - Developer/Other Gov't Capital Grants - Impact Fees Capital Contributions - GoVtal Fmds Change in net position Net Position - Beginning of the year Restatements Net Position - Beginning of the year - Restated Net Position - End of the year See accompanying Notes to the Financial Statements City of Kalispell, Montana Statement of Reveoars, Expenses, and Changes in Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2015 Governmental Business -Type Activities - Enterprise Funds Activities Non major Internal Service Water Sewer Enterprise Totals Funds $ 2,845,146 $ 4267,108 $ 1,052,392 $ 8,164,646 $ 884,148 173,130 38,960 2,193 214,283 98 835,216 835,216 3,018276 5,141,284 1,054,585 9214,145 884,246 922,095 1,426276 489,632 2,838,003 379,093 85,632 119,077 85,122 289,831 250,433 293,962 718,548 65,450 1,077,960 179,611 60,580 42,119 - 102,699 - 212,320 489,687 132,916 834,923 28,444 898,931 1,980,782 197,111 3,076,824 27,640 2,473,520 4,776,489 970,231 8 220 240 865,221 544,756 364,795 84,354 993,905 19,025 8,365 14237 5,119 27,721 - 39,049 68,448 6,466 113,963 1,103 (5,090) 5200 46,600 46,710 - (68,599) (301,154) (1,170) (370,923) (26,275) (213,269) 57,015 (182,529) 1,103 518,481 151,526 141,369 811,376 20,128 - - (25,000) (25,000) - 175,504 58,691 - 234,195 - 246,119 617,908 - 864,027 - 90,000 90,000 940,104 918,125 116,369 1,974,598 20,128 28288,112 41,825,182 3,928,779 74,042,073 267,760 (570,743) (971,375) (349,271) (1,891,389) 27,717,369 40,853,807 3,579,508 72,150,684 267,760 $ 28,657,473 $ 41,771,932 $ 3,695,877 $ 74,125282 $ 287,888 36 City of Kalispell, Montana Statement of Cash Flows Proprietary Funds Year Ended June 30, 2015 Governmental Business - Type Activities Activities Non -major Internal Service Water Sewer Enterprise Totals Fund Cash flows from operating activities: Cash received from customers $ 2,818,352 $ 4,243,915 $ 1,073235 $ 8,135,502 $ 885,267 Cash received from assessments - 858,306 - 858,306 - Cash received from miscellaneous sources 173,130 38,960 92 212,182 Cash payments for claims (657,588) (1,388,639) (279,823) (2,326,050) (510,192) Cash payments to employees (903,029) (1,416,752) (484,336) (2,804,117) (371,928) Net cash provided (used) by operating activities 1,430,865 2,335,790 309,168 4,075,823 3,147 Cash flows from capital and related financing activities: Principal paid on bonds, loans and advances (364,000) (884,748) (18,833) (1,267,581) - Interest paid on bonds, loans and advances (68,599) (301,154) (1,170) (370,923) Acquisition and construction of capital assets (716,888) (2,166,086) (80,598) (2,963,572) (89,083) Proceeds from bonds, loans and advances - 15,066 15,066 Impact fees 259,304 621,062 - 880,366 Sale of capital asset - 5,200 31,100 36,300 Net cash provided (used) by capital and related financing activitii (890,183) (2,710,660) (69,501) (3,670,344) (89,083) Cash flows from non -capital financing activities: Transfers between funds (25,000) (25,000) Net cash provided (used) from non -capital financing activities - - (25,000) (25,000) - Cash flows from investing activities: Interest on investments 39,049 68,448 6,466 113,963 1,104 Net cash provided (used) by investing activities 39,049 68,448 6,466 113,963 1,104 Net increase(decrease)in cash and cash equivalents 579,731 (306,422) 221,133 494,442 (84,832) Cash and cash equivalents at beginning Restatements Cash and cash equivalents at end 5,295,322 9,785,475 899,156 15,979,953 258,156 $ 5,875,053 $ 9,479,053 $ 1,120289 $ 16,474,395 $ 173,324 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $ Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation Pension Adj. Other Post Employment Benefits Expense Changes in assets and liabilities: 544,756 $ 364,795 $ 84,354 $ 993,905 $ 898,931 1,980,782 197,111 3,076,824 (10,958) (18,650) (6,706) (36,314) 28,648 19,131 47,779 19,025 27,640 Accounts receivable- net (26,794) (23,193) 76 (49,911) $1,021 Taxes and assessments receivable, net - 17,113 9,736 26,849 - Prepaid expenses 720 (2203) (970) (2,453) 165 Increase Comp Abs (1,519) 7,410 11,139 17,030 4,289 Decrease in due from County 5,977 8,930 14,907 - Accounts payable (5,094) (19208) 3,665 (20,637) (51,704) Accrued payroll 2,175 3,836 1,833 7,844 2,711 Net cash provided (used) by operating activities $ 1,430,865 $ 2,335,790 $ 309,168 $ 4,075,823 $ 3,147 The City received non cash contributions of land and infrastructure as follows: $ 175,504 $ 58,691 $ 234,195 See accompanying notes to the financial statements 37 FIDUCIARY FUND FINANCIAL STATEMENTS AGENCY FUNDS Agency Funds — used to account for assets held by the City as an agent for individuals, private organizations, other governments, and/or other funds. City of Kalispell, Montana Statement of Fiduciary Net Position Fiduciary Funds June 30, 2015 Agency Funds ASSETS Cash and short-term investments $ 524,624 LIABILITIES Due to others $ 524,624 See accompanying Notes to the Financial Statements 38 NOTES TO THE FINANCIAL STATEMENTS CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Kalispell's accompanying financial statements have been prepared in conformity with generally accepted accounting principles (GAAP) as prescribed by the Governmental Accounting Standards Board (GASB), the accepted standard -setting body for establishing governmental accounting and financial reporting principles. The accompanying financial statements present the financial position of the City and the various funds and fund types, the results of operations of the City and the various funds and fund types, and the cash flows of the proprietary funds. The financial statements are presented as of June 30, 2015, and for the year then ended. The more significant accounting policies of the City are described below Recently Implemented Accounting 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. For the fiscal year ended June 30, 2014, the City implemented GASB Statement 65, Items Previously Reported as Assets and Liabilities. This Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. For the fiscal year ended June 30, 2015, the City implemented GASB Statement 68, Accounting and Financial Reporting for Pensions, and GASB Statement 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. This statements purpose is to improve accounting and financial reporting by state and local governments for pensions, and improve information provided by state and local government employers about financial support for pensions provided by other entities. 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. 39 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 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. 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 2nd Avenue East to 2nd 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. 40 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 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. 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 Position 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 41 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 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 Governmcntal 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- 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 Gcncral 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 Street Maintenance Fund (special revenue fund) was established to account for the repairs and other costs incurred in the maintenance of the City's streets. An assessment on the City of Kalispell's tax payers is the main source of revenue for this fund. The Community Development Loan Rcvolving 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 is borrower's interest payments. 42 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 The Community Development Miscellaneous Fund (special revenue fund) was originally established to account for Urban Development Assistance Grants (UDAG). These federal dollars were loaned to businesses and individuals for projects located in economic development zones and approved by the City Community Development department. The main revenue source for this fund is borrower's interest payments. In fiscal year 2015, this fund, with dollars borrowed from the General fund, purchased six undeveloped properties from Flathead County at the Old School Station Industrial/Technical Park, a City special improvement district. Taxes on these properties were five to seven years delinquent, thereby putting the City's SID debt service fund at risk of not making the annual payment. The City intends to resell these properties for development. 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. 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. 43 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 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. The City Manager and Finance Director may make budget appropriation transfers within a fund 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. All material budget amendments and transfers during FY 2015 are described below Governmental Funds The City Council in January accepted two DNRC grants (fund 2600), for a total of $19,000, to fund hazardous tree removals, a tree replacement program, and development of an Emerald Ash Borer response plan. Passed Resolution No. 5699 to move $10,976 of forfeiture monies from the Drug Enforcement Grant fund (2916) to the Law Enforcement Grant fund (2919), and increase the Law Enforcement Grant fund by that amount for the purchase of "In Car" camera systems. Accepted a Homeland Security - Stonegarden Grant (fund 2915), for $125,266, and amended the budget that amount to accommodate the purchase of tactical safety improvements and to strengthen the City's network against cyber-attacks. The City Council accepted a Mission Lifeline Grant from the American Heart Association in the amount of $20,000, and the City Manager amended the Fire Grants fund (2956) by this amount to allow for the purchase of a heart monitor. The City Council passed Resolution No. 5725 which amended the Community Development — Misc. fund (2886) $1,300,000, Old School Station Technology TIF fund (2310) $250,765, and Old School Station Industrial TIF fund (2311) $57,360. Also, the City Manager amended the SID 344 debt service fund (3644) by $234,094. These amendments allowed for the purchase of properties in the Old School Station Industrial/Technology Park, the repayment of funds transferred to help pay prior year debt service, and the transfer of funds to a property owner to offset SID debt. 44 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 The City Council accepted a grant from the National Recreation and Park Association in partnership with the Walmart Foundation in the amount of $26,200. To accommodate the expenditure of these funds the City Manager amended the Parks fund (2215) $6,200. The balance of this grant will be expended in fiscal year 2016. The City Manager amended the 2005 S & C debt service fund (3605) by $1,250. Fiscal year 2015 was the final year of this S & C debt service fund and the amendment accommodated the transfer of remaining funds to the debt service revolving fund. The Airport TIF debt service fund required a $50 City Manager budget amendment to account for the actual cost of fiscal agent fees. 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 receivables/payables (i.e., the current portion of interfund loans) or advances to/from other funds (i.e., the non -current portion of interfund loans). All other outstanding balances between funds are reported as due to/from other funds. Advances between funds are offset by a fund balance reserve account in applicable governmental funds to indicate they are not available for appropriation and are not expendable available financial resources. Tares 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. 45 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 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% is maintained for the Ambulance fund. This allowance account has been adjusted to $196,486 at June 30, 2015. Ambulance accounts receivable $427,143 Times allowance percentage 46% @ June 30, 2015 $196,486 Water/Sewer A reserve for estimated uncollectible accounts receivable of 0.5% of metered sales is maintained for the Water Fund and Sewer Fund. The reserve balances are as follows for June 30, 2015: Water Sewer $ 14,246 $ 21,360 Contracts The following are contracts payable to the City of Kalispell on June 30, 2015. FUND Source Amount General- Major Governmental Municipal Court $ 46,551 Information Technology - Internal Service Charter (formerly Bresnan) 42,566 Water- Major Proprietary Impact Fees 2,497 Sewer- Major Proprietary Impact Fees 35,476 Solid Waste - Nonmajor Proprietary Asset sale 15,500 Total Proprietary 53,473 Total City contracts receivable $ 142,590 3. Inventorics 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. 46 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 The City pays in advance for Health Insurance and Workers' Compensation. This results in a City asset at June 30. On June 30, 2015, the City reported assets for prepaying expenses in the following funds. FUND Purpose Amount General- Major Governmental Workers Compensation $ 94,695 General- Major Governmental Health Insurance 86,809 Parks Health Insurance 11,549 Ambulance Health Insurance 10,647 Building Department Health Insurance 3,628 Street Maintenance- Major Governmental Health Insurance 13,328 Total Governmental 220,656 Information Technology -Internal Service Health Insurance 4,374 Water- Major Proprietary Health Insurance 11,660 Sewer- Major Proprietary Health Insurance 19,567 Solid Waste Health Insurance 7,465 Total Proprietary 38,692 Total City prepaids $ 263,722 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 GAS13, 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. 47 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 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 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 Position, 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 Position. 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 (long-term). 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 position. 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. 48 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 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 the governing body. The City Council has the authority to express assignments in the General fund. In governmental funds other than the general fund, assigned fund balance 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 49 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 NOTE 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Excess of expenditures over appropriations For the year ended June 30, 2015, 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, 2015. The Sidewalk and Curb capital project fund shows a negative fund balance of $3,040 at June 30'. This is due to the timing of construction season and the end of the fiscal year. 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, 2015, are as follows: Cash on hand $ 2,930 Cash in banks: Demand Deposits 15,907,983 Bonds/Warrants 37,242 STIP 1,520 Government Backed Securities 13,797,649 Total $29.747. 224 50 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 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 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) Quality Ratings and Weighted Average Maturity as of June 30, 2015: Credit WAM Amortized Cost Quality in Security Investment Type (in thousands) Rating Days Asset Backed Commercial Paper $ 779,579 A-1 25 Corporate Commercial Paper 101,299 A-1 102 Corporate Variable Rate 571,672 A-1+ 42 Certificates of Deposit Fixed Rate 150,000 A-1 259 Certificates of Deposit Variable Rate 450,000 A-1+ 47 Other Asset Backed 27,821 NR NA U.S. Government Agency Fixed 54,498 A-1+ 236 U.S. Government Agency Variable 239,008 A-1+ 42 Money Market Funds (Unrated) 161,592 NR 1 Money Market Funds (Rated) 3,000 A-1+ 1 Total Investments $ 2,538,469 A-1 52 Securities Lending Collateral Investment Pool $ 5,806 NR 30` `As of June 30, 2015, the Securities Lending Quality Trust liquidity pool had an average duration of 30 days and an average weighted final maturity of 115 days for U.S. dollar collateral. In March 2015, all holdings in the Securities Lending Duration Pool were sold. Audited financial statements for the State of Montana's Board of Investments are available at 2401 Colonial Drive, 3' floor, Helena, MT 59620. 51 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 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, 2015, the City of Kalispell's bank balance was exposed to custodial credit risk as follows: Depository Account Balance Insured $ 250,000 Collateralized -Collateral held by the pledging bank's trust department, but not in the City's name 15,821,580 Total Deposits $16A71.580 Deposit Security Section 7-6-207, MCA, states (1) The local governing body may require security only for that portion of the deposits which is not guaranteed or insured according to law and, as to such unguaranteed or uninsured portion, to the extent of: (a) 50% of such deposits if the institution in which the deposit is made has a net worth of total assets ratio of 6% or more; or (b) 100% if the institution in which the deposit is made has a net worth of total assets ratio of less than 6%. The amount of collateral held for the City of Kalispell deposits at June 30, 2015, 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% 52 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 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, 2015 along with their related interest rates and maturity dates. Investment STIP Federal Farm Banks Federal Farm Banks Federal National Mtg Assn Federal Home Loan Bank Federal Home Loan Mortgage Corp. Federal Home Loan Bank Federal Home Loan Mortgage Corp. Federal Home Loan Mortgage Corp. Federal National Mtg Assn Federal National Mtg Assn Federal Farm Banks Federal National Mtg Assn Wells Fargo Bank S&C Bonds - internal Total Interest Rate Maturity Date Amount 0.13%(varies) varies $ 1,520 0.900% 12/26/17 2,000,000 1.100% 10/23/17 1,000,000 0.900% 10/25/17 1,894,649 1.500% 5/28/20 1,000,000 1.100% 11/17/17 250,000 1.550% 1123/20 1,000,000 1.625% 9/12119 500,000 1.875% 11/12/19 750,000 1.450% 1/30119 1,000,000 0.900% 1117/17 1,405,000 1.030% 3/12/18 1,000,000 1.000% 3127/18 1,750,000 0.950% 2/28/18 248,000 3.00%-6.00% varies 37,242 $13,836,411 B. Interfund Receivables and Payables (Due to/from Other Funds) The composition of interfund balances and due to/from as of June 30, 2015, was as follows: Receivable Fund Payable Fund Amount Purpose General Fund - Major Governmental Stonegarden Grant - Special Revenue Fund $ 1,065 S/T Loan General Fund - Major Governmental Law Enforcement Grants - Special Revenue Fund 3,837 S/T Loan General Fund - Major Governmental CDBG-ED (FVCC) Grant - Special Revenue Fund 2,086 S/T Loan Total - Due To Other Funds (Governmental Funds $ 6,988 C. Transfers The following is an analysis of transfers between funds during Fiscal Year 2015: From Health Health Parks - in - Lieu Old School Tech TIF Old School Tech TIF Old School TIF - Debt Service Old School Industrial TIF Old School Industrial TIF Old School TIF - Debt Service West Side TIF - Special Revenue Airport TIF - Debt Service Solid Waste - Nonmajor Proprietary General - Major Governmental S & C's General - Major Governmental Drug Grant General - Major Governmental To General - Major Governmental Parks Trails CD Misc Old School TIF - Debt Service Old School Tech TIF CD Misc Old School TIF - Debt Service Old School Industrial TIF West Side TIF - Debt Service Airport TIF - Special Revenue Gas Tax Ambulance - Special Revenue SID Revolving Drug Grant Law Enforcement Block Grant Law Enforcement Block Grant TOTAL Amount Purpose $ 665,000 Operations 70,000 Operations 8,181 Match 268,789 Operations 7,500 Operations 180,366 Operations 58,860 Operations 500 Operations 53,378 Operations 32,000 Operations 450,000 Operations 25,000 Operations 310,000 Operations 1,250 Close out 55,976 Match/Operations 10,976 Operations 3,500 Match $ 2,201,276 53 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 D. Capital Assets Capital asset activity for the year ended June 30, 2015 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 2015 governmental funds contributed capital valued at $90,000 to the Sewer (Storm) Fund. Assets Contributed In fiscal year 2015, Governmental Activities report contributed assets from private sources with a value of $1,839,465. Streets valued at $1,811,225 were contributed by developers. The balance ($28,240) are sidewalk improvements paid for by homeowner's directly or by Sidewalk & Curb assessments. In fiscal year 2015, Business -type Activities report contributed assets from private sources with a value of $205,370. The Water fund received contributions from developers in the amount of $156,163. Contributed to the Water fund were six (6) new fire hydrants ($24,448), and sixteen hundred eighty seven linear feet (1687') of water mains ($131,715). The Sewer fund received contributions from developers in the amount of $49,207. Contributed to the Sewer fund were six hundred and ninety one linear feet (691') of sanitary mains ($26,762), and two hundred ninety four linear feet (294') of storm sewer mains ($22,445). In fiscal year 2015, Business -type Activities report contributed assets from other governments with a value of $28,825. The Montana Department of Transportation contributed to the City's cost to relocate a water and sewer main. The MDOT's share of these projects were $19,341 and $9,484, respectively. Gain (Loss) on Sale/Disposal of Capital Assets In fiscal year 2015, Business -type Activities report gain on disposal of assets of $46,710. Residential and commercial meters were replaced with a depreciated value of $5,090, resulting in a loss on disposal of capital assets in the Water fund. The Sewer fund's sale of a fully depreciated 1980 injector truck resulted in a gain of $5200. The Solid Waste fund sold two fully depreciated trucks, a sidearm and a rear -loader, for a gain of $46,600. 54 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS Governmental Activities: Capital assets not being depreciated: Land Construction in Progress Total capital assets not being depreciated Capital assets being depreciated: Buildings Improvements other than buildings Machinery and equipment General Ambulance Parking Infrastructure Total capital assets being depreciated Less accumulated depreciation for: Buildings Improvements other than buildings Machinery and equipment General Ambulance Parking Infrastructure Total accumulated depreciation Total capital assets being depreciated, net City capital assets, net Internal service funds: Information Technology Less accumulated depreciation - Information Technology Central Garage Less accumulated depreciation - Central Garage Internal service funds assets, net DUNE 30, 2015 Balance Balance July 1, 2014 Additions Contributions Deductions June 30, 2015 $ 2,395,299 $ $ $ - $ 2,395,299 22,155 (22,155) - 2,417,454 (22,155) 2,395,299 17,163,639 17,163,639 15,462,924 78,203 28,240 15,569,367 8,137,648 493,817 - (248,357) 8,383,108 398,059 - 398,059 123,794 - 123,794 81,323,959 - 1,811,225 83,135,184 122,610,023 572,020 1,839,465 (248,357) 124,773,151 (7,293,713) (588,508) - (7,882,221) (6,899,519) (595,569) (7,495,088) (4,377,237) (546,503) 248,357 (4,675,383) (369,755) (12,394) - (382,149) (110,796) (4,763) (115,559) (24,709,735) (2,033,098) (26,742,833) (43,760,755) (3,780,835) 248,357 (47,293,233) 78,849,268 (3,208,815) 1,839,465 - 77,479,918 $81,266,722 $ (3,208,815) $ 1,839,465 $ (22,155) $79,875,217 Balance Balance July 1, 2014 Additions Contributions Deductions June 30, 2015 $ 183,850 $ 46,720 $ $ $ 230,570 (155,031) (20,131) (175,162) 230,529 42,364 272,893 (176,541) (7,509) (184,050) $ 82,807 $ 61,444 $ $ $ 144,251 Governmental activities depreciation was charged to functions/programs of the primary government as follows: Governmental Activities: General Government $ 2,492,714 Public Safety 556,238 Public Works 263,695 Parks and Recreation 468,188 Total Governmental Activities $ 3,780,835 55 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 Balance Balance Business -type activities: July 1, 2014 Additions Contributions Deductions June 30, 2015 Capital assets not being depreciated: Land Airport $ 1,347,867 $ - $ - $ - $ 1,347,867 Water 105,958 - - - 105,958 Sewer 221,513 60,624 - - 282,137 Sewer (Storm) 26,550 - - - 26,550 Construction in progress Airport - - - - - Water 5,679 208,208 - (5,530) 208,357 Sewer 72,132 1,388,395 - (17,741) 1,442,786 Sewer (Storm) Total capital assets not being depreciated 1,779,699 1,657,227 - 2( 3,271) 3,413,655 Capital assets being depreciated: Airport 1,962,813 - - - 1,962,813 Water General Plant 1,376,904 - - - 1,376,904 Source of Supply 4,749,611 21,115 - - 4,770,726 Transmision and Distribution 26,893,866 726,881 175,504 (54,509) 27,741,742 Pumping Plant 3,604,237 - - - 3,604,237 Sewer General Plant 1,002,189 - - - 1,002,189 Transmision and Distribution 24,272,020 65,389 36,246 - 24,373,655 Storm Sewer System 14,022,718 610,738 22,445 - 14,655,901 Treatment Plant Equipment 465,667 - - (107,985) 357,682 Treatment Plant 39,141,910 235,988 - - 39,377,898 Solid Waste Buildings 316,731 - - - 316,731 Machinery and equipment 1,701,188 80,598 (307,228) 1,474,558 Total capital assets being depreciated 119,509,854 1,740,709 234,195 (469,722) 121,015,036 Less accumulated depreciation for: Airport (851,075) (96,466) - - (947,541) Water General Plant (1,064,744) (46,565) - - (1,111,309) Source of Supply (892,930) (104,620) - - (997,550) Transmision and Distribution (7,748,457) (633,524) - 49,419 (8,332,562) Pumping Plant (1,642,818) (112,433) - - (1,755,251) Sewer General Plant (856,841) (23,646) - - (880,487) Transmision and Distribution (9,513,969) (756,179) - - (10,270,148) Storm Sewer System (4,024,112) (347,952) - - (4,372,064) Treatment Plant Equipment (444,466) (2,556) - 107,985 (339,037) Treatment Plant (19,081,991) (850,447) - - (19,932,438) Solid Waste Buildings (263,303) (10,063) - - (273,366) Machinery and equipment (1,048,425) (90,576) 307,228 (831,773) Total accumulated depreciation (47,433,131) (3,075,027) 464,632 (50,043,526) Total capital assets being depreciated, net 72,076,723 (1,334,318) 234,195 (5,090) 70,971,510 Business -type activities capital assets, net $ 73,856,422 $ 322,909 $ 234,195 $ (28,361) $ 74,385,165 Business -type activities depreciation was charged to functions/programs of the primary government as follows: Business -type Activities: Airport $ 96,466 Water 897,142 Sewer 1,980,780 Solid Waste 100,639 Total Business -type Activities $ 3,075,027 56 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 E. Long -Term Debt During the year ended June 30, 2015, the following changes occurred in liabilities reported in long-term debt: Balance July 1, 2014 Additions Reductions Balance Due within June 30, 2015 1 year Governmental Activities: G.O. Bonds $ 3,255,000 $ - $ (450,000) $ 2,805,000 $ 455,000 Revenue Bonds 1,410,000 (153,000) 1,257,000 159,000 Assessments 3,392,922 7,844 (326,526) 3,074,240 327,506 Contract Debt/Loans 1,556,990 116,195 (374,642) 1,298,543 373,532 Intermediary Program 620,978 - (25,900) 595,078 26,148 Compensated Absences 1,273,156 1,009,474 (947,523) 1,335,107 958,456 Governmental Activities Sub Total $ 11,509,046 $ 1,133,513 $ (2,277,591) $ 10,364,968 $ 2,299,642 Internal Service Funds: Compensated Absences $ 23,302 $ 21,774 $ (17,486) $ 27,590 $ 20,345 Internal Service Funds Sub Total $ 23,302 $ 21,774 $ (17,486) $ 27,590 $ 20,345 Business -type Activities: Revenue Bonds $ 735,000 $ - $ (60,000) $ 675,000 $ 65,000 SRF 14,932,682 17,318 (1,191,000) 13,759,000 1,028,000 Contract Debt/Loans 172,988 - (18,833) 154,155 37,963 Compensated Absences 268,942 (185,815) 202,847 285,974 192,288 Business -type Activities Sub Total $ 16,109,612 $ (168,497) $ (1,066,986) $ 14,874,129 $ 1,323,251 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, 2015 were as follows: Purpose Pool/Fire Hall Refunding Origination Interest Date Rate Term 6/13/2012 1%-2% 10years Total G.O. Bonds Due Principal Annual Balance Date Amount Payment 30-Jun-15 2022 $4,145,000 varies $2,805,000 $4,145,000 $2,805,000 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-15 SID343 6/12/2001 3.6 %-5.5 % 20 years 2021 1,581,500 varies 315,000 SID344 6/15/2006 3.7 %-5.1 % 20 years 2026 4,520,000 varies 2,495,000 SID345 5/15/2014 3.00 % 15 years 2029 242,000 varies 227,000 2007 S&C 1/3/2008 6.00 % 8 years 2016 15,407 varies 1,926 2008 S&C 1/3/2009 3.50 % 8 years 2017 8,981 varies 2,245 2009 S&C 1/4/2010 3.50 % 8 years 2018 7,629 varies 2,861 2010 S&C 1/6/2011 3.00 % 8 years 2019 942 varies 471 2011 S&C 1/6/2012 325 % 8 years 2020 5,792 varies 3,620 2012 S&C 4/12/2013 325 % 8 years 2021 3,981 varies 2,986 2013 S&C 1/2/2014 325 % 8 years 2022 17,472 varies 15,288 2014 S&C 1/2/2016 325 % 8 years 2023 7,845 varies 7,845 Total Special Assessment Bonds $ 6,411,549 $ 3,074,242 57 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 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 $138,182. 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, 2014 payment date for the Bonds, the City used $367,283 of the $384,576 in the SID 344 bond reserve accounts to fully satisfy the regularly scheduled debt service payment of $367,283. As of June 30, 2015, these reserves have been fully reestablished. The use of the bond reserve monies was necessary because the largest property owner in SID 344 (currently the owner of 5 of the 17 total parcels in SID 344) had not paid 2008/2009/2010/2011/2012/2013 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. In April 2015, the City of Kalispell became owner of six of the eleven unsold properties in Special Improvement District 344 by bringing the taxes current on those six properties. The City used these tax payments to replenish the debt service revolving fund to its required amount of $226,000. These funds also allowed the City to make the fiscal year 2015 and future debt payments without the use of reserve money, and replenish the district bond reserve account. 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 TIF 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 58 Final Bonds Maturity Issued Balance 30-Jun-15 2020 $ 1,445,000 $ 795,000 2037 500,000 462,000 $ 1,945,000 $ 1,257,000 2024 $ 1,840,000 $ 675,000 1,840,000 675,000 $ 3,785,000 $ 1,932,000 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 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. 10% of the sum of the original principal amount $144,500 City's Reserve $144,500 At June 30, 2015, the Airport TIF debt service fund had taxes due from Flathead County in the amount of $138,096. These monies were received on July 17, 2015 and the district bond reserve was fully replenished. 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, 2015, 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 $ 358,400 Total Reserve Requirement $ 358,400 Reserve balance 6/30/15 358 400 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. 59 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 Cash Flow Coverage Water Service Charges $ 2,845,146 `Misc. Revenue 212,179 Total Operating Revenue 3,057,325 Less: Operating Expense (excludes depreciation) 1,574,589 Available for Debt Service $ 1,482,736 —Maximum Debt Service $ 354,800 Estimated Coverage FY15 418% `includes interest revenue "includes all water fund borrowings State Revolving Fund — the City has six (5) 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 2013 Sewer - WWiP Digester Lid 2012 Sewer Refunding 2012 Water Refunding 2012 Water Refunding 2012 Sewer Refunding Sewer Debt Required Information Interest Amount Outstanding Origination Rate Term Borrowed 30-Jun-15 FY13 3.00% 20years $ 1,102,748 $ 1,009,000 FY13 225% 12years 1,009,000 781,000 FY13 225% 15years 1,340,000 1,106,000 FY13 2.00% 8years 404,000 269,000 FY13 225% 15years 12,827,000 10,594,000 Total SRF Loans $ 16,682,748 $13,759,000 Operating Reserve — The city shall keep in the operating reserve account an amount equal to one month's operating expenses. As of June 30, 2014, 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, 2015, as all debt service payments were made as of the end of the fiscal year, leaving no accrued interest or principal balance. 60 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 Reserve Account - The City shall keep in the reserve account an amount equal to the lesser of 10% of the original principal ($1,493,875), the maximum amount of principal and interest required in the current or any subsequent fiscal year ($1,182,693), or 125% of the average debt service payable in any fiscal year ($14,328,642 / 18 years = $796,036). The City is in compliance with the 125% of the average debt service payable in any fiscal year. As of June 30, 2015, the debt service reserve account contains $1,109,313. 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 $ 5,209,732 Impact Fees Pledged for Debt 320,000 Total 5,529,732 Less: Operating Expense (excludes depreciation) 2,795,707 Available for Debt Service $ 2,734,025 -Maximum Debt Service $1,182,693 Estimated Coverage FY15 231 % *includes interest revenue **includes all sewer fund borrowings Loans/Contracted Debt Origination Interest Due Principal Balance Purpose Date Rate Term Date Amount 30-Jun-15 Business -type Activities BOI:Garbage Truck 6/13/2015 varies 5 years 2/15/2019 $ 172,988 $ 154,155 Total loans/contracted debt - Business -type Activities $ 154,155 Governmental Activities BOI:Fire Truck 4/22/2005 varies 10 years 8/15/2015 $ 279,900 $ 16,672 BOI:BucketTruck 12/30/2010 varies 5years 2/15/2016 28,300 5,805 BOI:Mower 3/4/2011 varies 5 years 2/15/2016 71,220 14,731 BOI:Dump Truck 6/15/2012 varies 5 years 2/15/2017 124,865 56,364 BOI:Compactor 12/30/2011 varies 5 years 2/15/2017 45,928 18,786 BOI: Stumper 2/1/2013 varies 5 years 2/15/2018 20,000 12,139 BOI: P/U & Tractor 2/1/2013 varies 5 years 2/15/2018 45,000 27,313 BOI: Dump Trucks (2) 5/24/2013 varies 5 years 2/15/2018 174,698 117,341 BOI:Boom Truck 8/23/2013 varies 5 years 2/15/2018 97,651 65,562 BOI: Dump Trucks (2) 2/28/2014 varies 5 years 2/15/2019 162,696 140,713 Rocky Mtn Bank - Fire Truck 3/7/2008 3.95% 10 years 3/1/2018 575,000 196,175 Capital One Public Funding - 201 1 st Ave E - City Hall 10/25/2007 4.85% 12 years 9/15/2019 1,420,165 626,942 Sub total BOI loans/contracted debt $ 3,045,423 $1,298,543 USDA: Intermediary Relending Program 10/12/2004 1.00% 30 years 10/12/2034 $ 520,000 $ 398,273 Relending Program 11/27/2006 1.00% 30 years 11/27/2036 257,500 196,805 Sub total USDA Intermediary 777,500 595,078 Total loans/contracted debt - Governmental Activities $ 3,822,923 $1,893,621 BOI - Board of Investments Intercap Loan Program 61 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Requirements to amortize debt The annual requirements to amortize all long-term debt outstanding, excluding compensated absences payable, as of June 30, 2015, 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 2016 $ 455,000 $ 47,963 $ 327,506 $ 147,061 $ 373,532 $ 41,837 $ 26,148 $ 5,951 $ 159,000 $ 52,563 $ 1,636,561 2017 465,000 41,138 325,580 132,183 346,625 30,908 26,410 5,689 164,500 45,913 1,583,946 2018 470,000 34,163 324,458 117,037 318,679 19,869 26,674 5,425 175,000 38,948 1,530,253 2019 475,000 27,113 318,504 101,466 183,188 9,548 26,940 5,159 181,000 31,618 1,359,536 2020 485,000 18,800 244,386 85,977 76,519 1,856 27,210 4,889 191,000 23,800 1,159,437 2021-2025 455,000 13,700 1,229,808 251,790 140,186 20,309 92,500 70,220 2,273,513 2026-2030 304,000 16,815 147,337 13,158 111,500 50,220 643,030 2031-2035 154,775 5,643 136,500 26,040 322,958 2036-2040 19,398 290 46,000 2,420 68,108 TOTAL $ 2,805,000 $ 182,877 $3,074,242 $ 852,329 $ 1,298,543 $ 104,018 $ 595,078 $ 66,513 $1,257,000 $ 341,742 $10,577,342 Business -type Activities: SRF REVENUE CONTRACTED FOR FISCAL LOANS BONDS LOANS/DEBT YEAR ENDED PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST TOTAL 2016 $ 1,028,000 $ 310,687 $ 65,000 $ 31,695 $ 37,963 $ 1,927 $ 1,475,272 2017 1,052,000 287,202 65,000 28,835 38,343 1,452 1,472,832 2018 1,076,000 263,183 70,000 25,943 38,728 973 1,474,827 2019 1,101,000 238,615 70,000 22,793 39,121 489 1,472,018 2020 1,125,000 261,477 75,000 19,643 1,481,120 2021-2025 5,687,000 679,705 330,000 41,225 6,737,930 2026-2030 2,483,000 118,440 2,601,440 2031-2035 207,000 11,975 218,975 TOTAL $13,759,000 $2,171,284 $ 675,000 $ 170,134 $ 154,155 $ 4,841 $ 16,934,414 F. Pensions Pension liabilities. pension expense. deferred outflows of resources. deferred inflows of resources related to pensions The City of Kalispell (the Employer) participates in the Public Employees Retirement System (PERS), Municipal Police Officers Retirement System (MPORS), and the Firefighters' Unified Retirement System (FURS), defined benefit pension plans. At June 30, 2015, the City of Kalispell reported a liability of $9,192,076 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2014. Depending on the pension plan, the total pension liability used to calculate the net pension liability was determined by actuarial valuations ranging June 30, 2013 to June 30, 2014. For actuarial valuations performed June 30, 2013, the total pension liability was then rolled -forward using generally accepted actuarial procedures to the measurement date of June 30, 2014. The City of Kalispell's proportion of the net pension liability was based on a projection of the City of Kalispell's long-term share of future payroll covered by the pension plans, relative to the projected future payroll covered by the pension plans of all participating employers, actuarially determined. For the year ended June 30, 2015, the City of Kalispell recognized pension expense of $1,689,688 for its proportionate share 62 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 of pension expense for all pension plans. The City of Kalispell also recognized grant revenue of $1,015,738 for the support provided by the State of Montana for its proportionate share of the pension expense that is associated with the employer. At June 30, 2015, the City of Kalispell reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Changes of assumptions Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between employer contributions and proportionate share of contributions Employer contributions subsequent to the measurement date Total Deferred Outflows Deferred Inflows of of Resources Resources 1,971,725 - 646 1,029,119 $ 1,029,119 $ 1,972,371 $1,029,119 reported as deferred outflows of resources related to pensions resulting from the City of Kalispell's employer contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Yearended: June 30, 2016 $ (493,147) June 30, 2017 (493,147) June 30, 2018 (493,147) June 30, 2019 (493,147) June 30, 2020 Thereafter General information about the Pension Plans Plan Dcscription (PERS) The PERS-Defined Benefit Retirement Plan (DBRP), administered by the Montana Public Employee Retirement Administration (MPERA), is a multiple -employer, cost -sharing plan established July 1, 1945, and governed by Title 19, chapters 2 & 3, Montana Code Annotated (MCA). This plan covers the State, local governments, certain employees of the Montana University System, and school districts. All new members are initially members of the PERS-DBRP and have a 12-month window during which they may choose to remain in the PERS-DBRP or join the PERS-DCRP by filing an irrevocable election. Members may not be members of both the defined contribution and defined benefit retirement plans. All new members from the universities also have a third option to join the university system's Montana University System Retirement Program (MUS-RP). For members that choose to join the PERS-DCRP or the MUS-RP, a percentage of the employer contributions will be used to pay down the liability of the PERS-DBRP. The PERS-DBRP provides retirement, disability, and death benefits to plan members and their beneficiaries. Benefits are established by state law and can only be amended by the Legislature. Benefits are based on eligibility, years of service, and highest average compensation. Member rights are vested after five years of service. 63 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 Summary of Benefits Member's highest average compensation (HAC) Hired prior to July 1, 2011 - highest average compensation during any consecutive 36 months; Hired on or after July 1, 2011 — highest average compensation during any consecutive 60 months; Hired on or after July 1, 2013 — 110% annual cap on compensation considered as part of a member's highest average compensation. Eligibility for benefit Service retirement: Hired prior to July 1, 2011: Age 60, 5 years of membership service; Hired on or after July 1, 2011: Age 65, 5 years of membership service; Early retirement, actuarially reduced: Hired prior to July 1, 2011: Age 50, 5 years of membership service; or Hired on or after July 1, 2011: Age 55, 5 years of membership service. Vesting 5 years of membership service Monthly benefit formula Members hired prior to July 1, 2011: • Less than 25 years of membership service: 1.785% of HAC per year of service credit; • 25 years of membership service or more: 2% of HAC per year of service credit. Members hired on or after July 1, 2011: • Less than 10 years of membership service: 1.5% of HAC per year of service credit; • 10 years or more, but less than 30 years of membership service: 1.785% of HAC per year of service credit; • 30 years or more of membership service: 2% of HAC per year of service credit. Guaranteed Annual Benefit Adjustment (GABA)* • 3% for members hired prior to July 1, 2007 • 1.5% for members hired on or after July 1, 2007 After the member has completed 12 full months of retirement, the member's benefit increases by the applicable percentage (provided below) each January, inclusive of other adjustments to the member's benefit. *At this time, as a result of permanent injunction issued in the AMRPE vs State litigation, the GABA rate in effect is being used in the calculation. Clarification of the GABA rate for members hired on or after July 1, 2013 is pending. Total number of members (employees) covered by benefit terms as of June 30, 2015: 1. Active plan members: 28,237 2. Inactive members entitled to but not yet receiving benefits or a refund: Vested: 2,925 Non -Vested: 8,839 3. Inactive members and beneficiaries currently receiving benefits: Service Retirements: 20,080 Disability Retirements: 176 Survivor Benefits: 425 64 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Overview of Contributions 1. Rates are specified by state law for periodic employer and employee contributions. The State legislature has the authority to establish and amend contribution rates to the plan. 2. Member contributions to the system: a. Plan members are required to contribute 7.90% of member's compensation. Contributions are deducted from each member's salary and remitted by participating employers. b. The 7.90% member contributions is temporary and will be decreased to 6.9% on January 1 following actuary valuation results that show the amortization period has dropped below 25 years and would remain below 25 years following the reduction of both the additional employer and additional member contribution rates. Employer contributions to the system: a. State and University System employers are required to contribute 8.27% of members' compensation. b. Local government entities are required to contribution 8.17% of members' compensation. c. School district employers contributed 7.90% of members' compensation. d. Following the 2013 Legislative Session, PERS-employer contributions were temporarily increased. Effective July 1, 2013, employer contributions increased 1.0%. Beginning July 1, 2014, employer contributions will increase an additional 0.1 % a year over 10 years, through 2024. The employer additional contributions including the 0.27% added in 2007 and 2009, terminates on January 1 following actuary valuation results that show the amortization period of the PERS-DBRP has dropped below 25 years and would remain below 25 years following the reductions of both the additional employer and member contributions rates. Effective July 1, 2013, the additional employer contributions for DCRP and MUS-RP is allocated to the defined benefit plan's Plan Choice Rate unfunded liability. Effective July 1, 2013, employers are required to make contributions on working retirees' compensation. Member contributions for working retirees are not required. Non Employer Contributions a. Special Funding i. The State contributes 0.1% of members' compensation on behalf of local government entities. ii. The State contributes 0.37% of members' compensation on behalf of school district entities. b. Not Special Funding i. The State contributes from the Coal Tax Severance fund Stand -Alone Statements The PERS financial information is reported in the Public Employees' Retirement Board's Comprehensive Annual Financial Report for the fiscal year ended. It is available from the PERB at 100 North Park, PO Box 200131, Helena MT 59620-0131, 406-444-3154. CAFR information including our stand alone financial statements can be found on our web site at http://mpera.mt.gov/annualReports.shtml The latest actuarial valuation and experience study can be found at our website at http://mpera.mt.gov/actuarialValmtions.asy 65 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Actuarial Assumptions The Total Pension Liability as of June 30, 2014, is based on the results of an actuarial valuation date of June 30, 2014.There were several significant assumptions and other inputs used to measure the Total Pension Liability. The actuarial assumptions used in the June 30, 2014 valuation were based on the results of the last actuarial experience study, dated May 2010 for the six year period July 1, 2003 to June 30, 2009. Among those assumptions were the following: • General Wage Growth* 4.00% • *includes Inflation at 3.00% • Merit Increases 0% to 6% • Investment Return 7.75% • Postretirement Benefit Increases: 0 3% for members hired prior to July 1, 2007 0 1.5% for members hired on or after July 1, 2007 After the member has completed 12 full months of retirement, the member's benefit increases by the applicable percentage (provided below) each January, inclusive of other adjustments to the member' benefit. *At this time as a result of permanent injunction issued in the AMRPE vs State litigation, the GABA rate in effect is being used in the calculation. Clarification of the GABA rate for members hired on or after July 1, 2013 is pending. • Mortality assumptions among contributing members, terminated vested members, service retired members and beneficiaries based on RP 2000 Combined Employee and Annuitant Mortality Tables projected to 2015 with scale AA. • Mortality assumptions among Disabled Retirees are based on RP 2000 Combined Employee and Annuitant Mortality Tables with no projections. No future mortality improvement is assumed. Discount Rate The discount rate used to measure the Total Pension Liability was 7.75%. The projection of cash flows used to determine the discount rate assumed that contributions from participating plan members, employers, and non -employer contributing entities will be made based on the Board's funding policy, which establishes the contractually required rates under Montana Code Annotated. The State contributes 0.1% of salaries for local governments and 0.37% for school districts. In addition, the State contributes coal severance tax and interest money from the general fund. The interest is contributed monthly and the severance tax is contributed quarterly. Based on those assumptions, the System's fiduciary net position was projected to be adequate to make all the projected future benefit payments of current plan members through the year 2122. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. No municipal bond rate was incorporated in the discount rate. Target Allocations Long -Term Expected Target Asset Real Asset Class Allocation Rate of Return Cash Equivalents 2.00% -0.25% Domestic Equity 36.00% 4.80% Foreign Equity 18.00% 6.05% Fixed Income 24.00% 1.68% Private Equity 12.00% 8.50% Real Estate 8.00% 4.50% The long-term expected return on pension plan assets is reviewed as part of the regular experience studies prepared for the System. The most recent analysis, performed for the period covering fiscal years 2003 through 2009, is outlined in a report dated May 2010, which is located on the MPERA website. Several factors are considered in evaluating the long-term rate of return assumption including rates of return adopted by similar public sector systems, and by using a building block method in 66 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 which best -estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed by the investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The assumption is intended to be a long term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. Best estimates are presented as the arithmetic real rates of return for each major asset class included in the System's target asset allocation as of June 30, 2014, is summarized in the above table. Sensitivity Analysis 1.0q Decrease 6.75q Current Discount Rate 7.75q 1.0q Increase 8.75q PERS' Net Pension Liability $ 1,982,275,000 $ 1,246,011,000 $ 625,045,000 Employer's proportionate share of the net pension liability $ 8,651,070 1 $ 5,437,857 1 $ 2,727,828 In accordance with GASB 68 regarding the disclosure of the sensitivity of the Net Pension Liability to changes in the discount rate, the above table presents the Net Pension Liability calculated using the discount rate of 7.75%, as well as what the Net Pension Liability would be if it were calculated using a discount rate that is 1.00% lower (6.75%) or 1.00% higher (8.75%) than the current rate. Summary of Significant Accounting Policies The Montana Public Employee Retirement Administration (MPERA) prepares its financial statements using the accrual basis of accounting. For the purposes of measuring the Net Pension Liability, deferred inflows of resources and deferred outflows of resources related to pensions, Pension Expense, information about the fiduciary net position and additions to/deductions from fiduciary net position have been determined on the same accrual basis as they are reported by MPERA. For this purpose, member contributions are recognized in the period in which contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Revenues are recognized in the accounting period they are earned and become measurable. Benefit payments and refunds are recognized in the accounting period when due and payable in accordance with the benefit terms. Expenses are recognized in the period incurred. Investments are reported at fair value. MPERA adheres to all applicable Governmental Accounting Standards Board (GASB) statements. Net Pension Liability In accordance with GASB Statement 68, Accounting and Financial Reporting for Pensions, employers are required to recognize and report certain amounts associated with their participation in the Public Employees' Retirement System (PERS). Statement 68 became effective June 30, 2015 and includes requirements to record and report their proportionate share of the collective Net Pension Liability, Pension Expense, Deferred Inflows and Deferred Outflows of resources associated with pensions. In accordance with Statement 68, PERS has a special funding situation in which the State of Montana is legally responsible for making contributions directly to PERS on behalf of the employers. Due to the existence of this special funding situation, local governments and school districts are required to report the portion of the State of Montana's proportionate share of the collective Net Pension Liability that is associated with the employer. The State of Montana also has a funding situation that is not Special Funding whereby the State General Fund provides contributions from the Coal Severance Tax and interest. All employers are required to report the portion of Coal Tax Severance Tax and interest attributable to the employer. 67 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Net Pension Liability Net Pension Liability Percent of Collective as of 6/30/13 as of 6/30/14 NPL Employer Proportionate Share $ 6,999,661 $ 5,437,857 0.436421% State of Montana Proportionate Share associated with Employer 85,453 66,405 0.554400q Total $ 7,085,114 $ 5,504,262 0.990821q At June 30, 2015, the employer recorded a liability of $5,437,857 for its proportionate share of the Net Pension Liability. The Net Pension Liability was measured as of June 30, 2014, and the Total Pension Liability used to calculate the Net Pension Liability was determined by an actuarial valuation as of July 1, 2014. The employer's proportion of the Net Pension Liability was based on the employer's contributions received by PERS during the measurement period July 1, 2013, through June 30, 2014, relative to the total employer contributions received from all of PERS' participating employers. At June 30, 2014, the employer's proportion was 0.436421%. Changes in actuarial assumptions and methods: There were no changes in assumptions or other inputs that affected the measurement of the Total Pension Liability. Changes in benefit terms: There have been no changes in benefit terms since the previous measurement date. Changes in proportionate share: There were no changes between the measurement date of the collective Net Pension Liability and the employer's reporting date that are expected to have a significant effect on the employer's proportionate share of the collective NPL. Pension Expense Pension Expense as of 6/30/14 Employers Proportionate Share $ 265,322 State of Montana Proportionate Share associated with the Employer 153,760 Total: $ 419,082 At June 30, 2015, the employer recognized a Pension Expense of $419,082 for its proportionate share of the PERS' Pension Expense. The employer also recognized grant revenue of $153,760 for the support provided by the State of Montana for its proportionate share of the Pension Expense that is associated with the employer. Recognition of Beginning Deferred Outflow — GASB 71 At June 30, 2015, the employer recognized a beginning deferred outflow of resources for the employers FY2014 contributions of $421,428. Dcfcrrcd Inflows and Outflows At June 30, 2015, the employer reported its proportionate share of PERS' deferred outflows of resources and deferred inflows of resources related to PERS from the following sources: 68 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 Deferred Outflows of Deferred Inflows of Resources Resources Differences between actual and expected experience $ - $ Changes in assumptions Difference between projected and actual earnings on pension plan investments 1,405,053 Changes in proportion differences between employer contributions and proportionate share of contributions 646 Difference between actual and expected contributions Contributions paid to PERS subsequent to the measurement date- FY 2015 Contributions 450,942 Total: $ 450,942 $ 1,405,699 Amounts reported as deferred outflows of resources related to pensions resulting from the employer's contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the year ended June 30, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in Pension Expense as follows: Year ended June 30: Deferred Outflows of Resources Deferred Inflows of Resources Amount recognized in Pension Expense as an increase or (decrease) to Pension Expense 2016 $ 351,478 $ 351,478 2017 351,478 351,478 2018 351,478 351,478 2019 351,478 351,478 2020 after There Plan Description (MPORS) The Municipal Police Officers' Retirement System (MPORS), administered by the Montana Public Employee Retirement Administration (MPERA), is a multiple -employer, cost -sharing defined benefit plan that was established in 1974 and is governed by Title 19, chapters 2 & 9 of the MCA. This plan covers all municipal police officers employed by first- and second-class cities and other cities that adopt the plan. Benefits are established by state law and can only be amended by the Legislature. The MPORS provides retirement, disability, and death benefits to plan members and their beneficiaries. Benefits are based on eligibility, years of service, and final average compensation. Member rights for death and disability are vested immediately. All other rights are vested after five years of service. Summary of Benefits Member's final average compensation (FAQ Hired prior to July 1, 1977 - average monthly compensation of final year of service. Hired on or after July 1, 1977 - final average compensation (FAC) for last consecutive 36 months. Hired on or after July 1, 2013 — 110% annual cap on compensation considered as a part of a member's final average compensation. Eligibility for benefit 20 years of membership service, regardless of age. Early Retirement Age 50, 5 years of membership service. 69 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Vesting 5 years of membership service. Monthly benefit formula 2.5% of FAC per year of service credit. Guaranteed Annual Benefit Adjustment (GABA) Hired on or after July 1, 1997, or those electing GABA - after the member has completed 12 full months of retirement, the member's benefit increases by a maximum of 3% each January, inclusive of all other adjustments to the member's benefit. Minimum benefit adjustment (non-GABA) If hired before July 1, 1997 and member did not elect GABA - the monthly retirement, disability or survivor's benefit may not be less than `/z the compensation of a newly confirmed officer in the city that the member was last employed. Deferred Retirement Option Plan (DROP) Beginning July 2002, eligible members of MPORS can participate in the DROP by filing a one-time irrevocable election with the Board. The DROP is governed by Title 19, Chapter 9, Part 12, MCA. A member must have completed at least twenty years of membership service to be eligible. They may elect to participate in the DROP for a minimum of one month and a maximum of 60 months and may participate in the DROP only once. A participant remains a member of the MPORS, but will not receive membership service or service credit in the system for the duration of the member's DROP period. During participation in the DROP, all mandatory contributions continue to the retirement system. A monthly benefit is calculated based on salary and years of service to the date of the beginning of the DROP period. The monthly benefit is paid into the member's DROP account until the end of the DROP period. At the end of the DROP period, the participant may receive the balance of the DROP account in a lump -sum payment or in a direct rollover to another eligible plan, as allowed by the IRS. If the participant continues employment after the DROP period ends, they will again accrue membership service and service credit. The DROP account cannot be distributed until employment is formally terminated. Total number of members (employees) covered by benefit terms as of June 30, 2015: 1. Active plan members: 743 2. Inactive members entitled to but not yet receiving benefits or a refund: Vested: 60 Vested: 60 Non -vested: 103 3. Inactive members and beneficiaries currently receiving benefits: Service Retirements: 694 Service Retirements: 694 Disability Retirements: 21 Survivor Benefits: 29 Overview of Contributions 1. Rates are specified by state law for periodic employer and employee contributions The State legislature has the authority to establish and amend contribution rates to the plan. 2. Member contributions to the system: a. Member contribution rates are dependent upon date of hire as a police officer. For fiscal year 2015: i. If employed on or before June 30, 1975, member contributions as a percentage of salary are 5.8%; ii. If employed after June 30, 1975 and prior to July 1, 1979, member contributions as a percentage of salary are 7.0%; iii. If employed after June 30, 1979 and prior to July 1, 1997, member contributions as a percentage of salary are 8.5%; and, 70 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 iv. If employed on or after July 1, 1997 and for members electing GABA, member contributions as a percentage of salary were 9.0%. 3. Employer contributions to the system: a. The employers are required to contribute 14.41% of member's compensation. b. The State contributes 29.37% of member's compensation from the general fund. Stand -Alone Statements The MPORS financial information is reported in the Public Employees' Retirement Board's Comprehensive Annual Financial Report for the fiscal year ended. It is available from the PERB at 100 North Park, PO Box 200131, Helena MT 59620-0131, 406-444-3154. CAFR information including our stand alone financial statements can be found on our web site at http://mpera.mt.gov/annualReports.shtml The latest actuarial valuation and experience study can be found at our website at htti)://Mpera.mt.gov/actuarialValuations.asp Actuarial Assumptions The Total Pension Liability as of June 30, 2014, is based on the results of an actuarial valuation date of June 30, 2014.There were several significant assumptions and other inputs used to measure the Total Pension Liability. The actuarial assumptions used in the June 30, 2014 valuation were based on the results of the last actuarial experience study, dated May 2010 for the six year period July 1, 2003 to June 30, 2009. Among those assumptions were the following: • General Wage Growth* 4.00% • *includes Inflation at 3.00% • Merit Increases 0% to 7.3% • Investment Return 7.75% • Postretirement Benefit Increases: If electing GABA or hired on or after July 1, 1997 3.00% After the member has completed 12 full months of retirement, the member's benefit increases by the applicable percentage each January, inclusive of other adjustments to the member's benefit. Minimum Benefit Adjustment 50% of a newly confirmed officer • Mortality assumptions among contributing members, terminated vested members, service retired members and beneficiaries based on RP 2000 Combined Employee and Annuitant Mortality Tables projected to 2015 with scale AA. • Mortality assumptions among Disabled Retirees are based on RP 2000 Combined Employee and Annuitant Mortality Tables with no projections. No future mortality improvement is assumed. Discount Rate The discount rate used to measure the Total Pension Liability was 7.75%. The projection of cash flows used to determine the discount rate assumed that contributions from participating plan members, employers, and non- employer contributing entities will be made based on the Board's funding policy, which establishes the contractually required rates under Montana Code Annotated. The State contributes 29.37% of salaries pensionable payroll paid by employers. Based on those assumptions, the System's fiduciary net position was projected to be adequate to make all the projected future benefit payments of current plan members through the year 2122. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. No municipal bond rate was incorporated in the discount rate. 71 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 Target Allocations Long -Term Expected Target Asset Real Asset Class Allocation Rate of Return Cash Equivalents 2.00% -0.25% Domestic Equity 36.00% 4.80% Foreign Equity 18.00% 6.05% Fixed Income 24.00% 1.68% Private Equity 12.00% 8.50% Real Estate 8.00% 4.50% The long-term expected return on pension plan assets is reviewed as part of the regular experience studies prepared for the System. The most recent analysis, performed for the period covering fiscal years 2003 through 2009, is outlined in a report dated May 2010, which is located on the MPERA website. Several factors are considered in evaluating the long-term rate of return assumption including rates of return adopted by similar public sector systems, and by using a building block method in which best -estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed by the investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The assumption is intended to be a long term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. Best estimates are presented as the arithmetic real rates of return for each major asset class included in the System's target asset allocation as of June 30, 2014, is summarized in the above table. Sensitivity Analysis 1.0% Decrease 6.75% Current Discount Rate 7.75% 1.0% Increase MPORS' Net Pension Liability $ 226,560,623.00 $ 157,135,903.00 $ 102,022,702.00 Employers proportionate share of the net pension liability $ 3,402,624.33 $ 2,359,961.94 $ 1,532,238.58 In accordance with GASB 68 regarding the disclosure of the sensitivity of the Net Pension Liability to changes in the discount rate, the above table presents the Net Pension Liability calculated using the discount rate of 7.75%, as well as what the Net Pension Liability would be if it were calculated using a discount rate that is 1.00% lower (6.75%) or 1.00% higher (8.75%) than the current rate. Summary of Significant Accounting Policies The Montana Public Employee Retirement Administration (MPERA) prepares its financial statements using the accrual basis of accounting. For the purposes of measuring the Net Pension Liability, deferred inflows of resources and deferred outflows of resources related to pensions, Pension Expense, information about the fiduciary net position and additions to/deductions from fiduciary net position have been determined on the same accrual basis as they are reported by MPERA. For this purpose, member contributions are recognized in the period in which contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Revenues are recognized in the accounting period they are earned and become measurable. Benefit payments and refunds are recognized in the accounting period when due and payable in accordance with the benefit terms. Expenses are recognized in the period incurred. Investments are reported at fair value. MPERA adheres to all applicable Governmental Accounting Standards Board (GASB) statements. 72 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Net Pension Liability In accordance with GASB Statement 68, Accounting and Financial Reporting for Pensions, employers are required to recognize and report certain amounts associated with their participation in the Municipal Police Officers' Retirement System (MPORS). Statement 68 became effective June 30, 2015 and includes requirements to record and report their proportionate share of the collective Net Pension Liability, Pension Expense, Deferred Inflows and Deferred Outflows of resources associated with pensions. In accordance with Statement 68, MPORS has a special funding situation in which the State of Montana is legally responsible for making contributions directly to MPORS on behalf of the employers. Due to the existence of this special funding situation, employers are required to report the portion of the State of Montana's proportionate share of the collective Net Pension Liability that is associated with the employer. Liability Liability Collective as of 6/30/13 as of 6/30/14 NPL Employer Proportionate Share $ 2,688,843 $ 2,359,962 1.501860% State of Montana Proportionate Share associated with Employer $ 5:131,783 $ 4,767,405 3.034631% Total $ 8,120,626 $ 7, 127,367 4.536491 At June 30, 2015, the employer recorded a liability of $2,359,962 for its proportionate share of the Net Pension Liability. The Net Pension Liability was measured as of June 30, 2014, and the Total Pension Liability used to calculate the Net Pension Liability was determined by an actuarial valuation as of July 1, 2014. The employer's proportion of the Net Pension Liability was based on the employer's contributions received by MPORS during the measurement period July 1, 2013, through June 30, 2014, relative to the total employer contributions received from all of MPORS' participating employers. At June 30, 2014, the employer's proportion was 1.501860%. Changes in actuarial assumptions and methods: There were no changes in assumptions or other inputs that affected the measurement of the Total Pension Liability. Changes in benefit terms: There have been no changes in benefit terms since the previous measurement date. Changes in proportionate share: There were no changes between the measurement date of the collective Net Pension Liability and the employer's reporting date that are expected to have a significant effect on the employer's proportionate share of the collective NPL. Pension Expense Pension Expense as of 6/30/14 Employers Proportionate Share $ 253,8 99 State of Montana Proportionate Share associated with the At June 30, 2015, the employer recognized a Pension Expense of $766,656 for its proportionate share of the MPORS' Pension Expense. The employer also recognized grant revenue of $512,807 for the support provided by the State of Montana for its proportionate share of the Pension Expense that is associated with the employer. 73 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Recognition of Beginning Deferred Outflow At June 30, 2015, the employer recognized a beginning deferred outflow of resources for the employers FY2014 contributions of $292,989. Dcfcrrcd Inflows and Outflows At June 30, 2015, the employer reported its proportionate share of MPORS' deferred outflows of resources and deferred inflows of resources related to MPORS from the following sources: Deferred Outflows Deferred Inflows of of Resources Resources Differences between actual and expected experience $ $ Changes in assumptions Difference between projected and actual earnings on pension plan investments 289.741 Changes in proportion differences between employer contributions and proportionate share of contributions Contributions paid to PERS subsequent to the measurement date - FY 2015 Contributions 304234 Total: $ 304:234 $ 289,741 Amounts reported as deferred outflows of resources related to pensions resulting from the employer's contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the year ended June 30, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in Pension Expense as follows: Year ended June 30: Deferred Outflows of Resources Deferred Inflows of Resources Amount recognized in Pension Expense as an increase or (decrease) to Pension Expense 2016 $ 72,435 $ (72,435) 2017 72,435 72,435 2018 72,435 72,435 2019 72,435 72,435 2020 Thereafter Plan Description (FURS) The Firefighters' Unified Retirement System (FURS), administered by the Montana Public Employee Retirement Administration (MPERA), is a multiple -employer, cost -sharing defined benefit plan established in 1981, and governed by Title 19, chapters 2 & 13, MCA. This system provides retirement benefits to firefighters employed by first- and second-class cities, other cities and rural fire district departments that adopt the plan, and to firefighters hired by the Montana Air National Guard on or after October 1, 2001. Benefits are established by state law and can only be amended by the Legislature. The FURS provides retirement, disability, and death benefits to plan members and their beneficiaries. Benefits are based on eligibility, years of service, and either final monthly compensation or final average compensation. Effective July 1, 2005, the benefits are based on highest average compensation and highest average compensation. Member rights for death and disability are vested immediately. All other member rights are vested after five years of service. 74 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 Summary of Benefits Member's compensation Hired prior to July 1, 1981 and not electing GABA - highest monthly compensation (HMC); Hired after June 30, 1981 and those electing GABA — highest average compensation (HAC) during any consecutive 36 months. Hired on or after July 1, 2013 — 110% annual cap on compensation considered as a part of a member's highest average compensation. Eligibility for benefit 20 years of membership service, regardless of age. Early Retirement Age 50, 5 years of membership service. Vesting 5 years of membership service. Monthly benefit formula 1) Members hired prior to July 1, 1981 and not electing GABA are entitled to the greater of: 2.5% of HMC per year of service, OR i) if less than 20 years of service - 2% of HMC for each year of service; ii) if more than 20 years of service - 50% of the member's HMC plus 2% of the member's HMC for each year of service over 20 years Members hired on or after July 1, 1981 and those electing GABA: 2.5% of HAC per year of membership service Guaranteed Annual Benefit Adjustment (GABA) Hired on or after July 1, 1997, or those electing GABA - after the member has completed 12 full months of retirement, the member's benefit increases by a maximum of 3% each January, inclusive of all other adjustments to the member's benefit. Minimum Benefit Adjustment (non-GABA) If hired before July 1, 1997, the monthly retirement, disability or survivor's benefit may not be less than `/z the compensation of a newly confirmed firefighter employed by the city that last employed the member (provided the member has at least 10 years of membership service). If a benefit falls below that minimum, the benefit is increased and paid to the benefit recipient. Total number of members (employees) covered by benefit terms as of June 30, 2015: 1. Active plan members: 627 2. Inactive members entitled to but not yet receiving benefits or a refund: Vested: 21 Vested: 21 Non -vested: 71 3. Inactive members and beneficiaries currently receiving benefits: Service Retirements: 580 Disability Retirements: 9 Survivor Benefits: 20 75 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Overview of Contributions 1. Rates are specified by state law for periodic employer and employee contributions. The State legislature has the authority to establish and amend contribution rates to the plan. 2. Member contributions to the system: a. For members hired prior to July 1, 1997 and not electing GABA, member contributions as a percentage of salary are 9.5%, and b. For members hired on or after July 1, 1997 and members electing GABA, member contributions as a percentage of salary are 10.7%. 3. Employer contributions to the system: a. The employers are required to contribute 14.36% of member's compensation. b. The State contributes 32.61% of member's compensation from the general fund. c. Effective July 1, 2013, employer and state contributions are required to be paid on working retiree compensation. Member contributions are not required for working retirees. Stand -Alone Statements The FURS financial information is reported in the Public Employees' Retirement Board's Comprehensive Annual Financial Report for the fiscal year ended. It is available from the PERB at 100 North Park, PO Box 200131, Helena MT 59620-0131, 406-444-3154. CAFR information including our stand alone financial statements can be found on our web site at htti)://Mpera.mt.gov/annualReports.shtml The latest actuarial valuation and experience study can be found at our website at http://Mpera.mt.gov/actuarialValmtions.asp Actuarial Assumptions The Total Pension Liability as of June 30, 2014, is based on the results of an actuarial valuation date of June 30, 2014.There were several significant assumptions and other inputs used to measure the Total Pension Liability. The actuarial assumptions used in the June 30, 2014 valuation were based on the results of the last actuarial experience study, dated May 2010 for the six year period July 1, 2003 to June 30, 2009. Among those assumptions were the following: • General Wage Growth* 4.00% • *includes Inflation at 3.00% • Merit Increases 0% to 7.3% • Investment Return 7.75% • Postretirement Benefit Increases: If electing GABA or hired on or after July 1, 1997 3.00% After the member has completed 12 full months of retirement, the member's benefit increases by the applicable percentage each January, inclusive of other adjustments to the member's benefit. Minimum Benefit Adjustment 50% of a newly confirmed officer • Mortality assumptions among contributing members, terminated vested members, service retired members and beneficiaries based on RP 2000 Combined Employee and Annuitant Mortality Tables projected to 2015 with scale AA. • Mortality assumptions among Disabled Retirees are based on RP 2000 Combined Employee and Annuitant Mortality Tables with no projections. No future mortality improvement is assumed. 76 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 Discount Rate The discount rate used to measure the Total Pension Liability was 7.75%. The projection of cash flows used to determine the discount rate assumed that contributions from participating plan members, employers, and non- employer contributing entities will be made based on the Board's funding policy, which establishes the contractually required rates under Montana Code Annotated. The State contributes 32.61% of salaries pensionable payroll paid by employers. Based on those assumptions, the System's fiduciary net position was projected to be adequate to make all the projected future benefit payments of current plan members through the year 2122. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. No municipal bond rate was incorporated in the discount rate. Target Allocations Long -Term Expected Target Asset Real Asset Class Allocation Rate of Return Cash Equivalents 2.00% -0.25% Domestic Equity 36.00% 4.80% Foreign Equity 18.00% 6.05% Fixed Income 24.00% 1.68% Private Equity 12.00% 8.50% Real Estate 8.00% 4.50% The long-term expected return on pension plan assets is reviewed as part of the regular experience studies prepared for the System. The most recent analysis, performed for the period covering fiscal years 2003 through 2009, is outlined in a report dated May 2010, which is located on the MPERA website. Several factors are considered in evaluating the long-term rate of return assumption including rates of return adopted by similar public sector systems, and by using a building block method in which best -estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed by the investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The assumption is intended to be a long term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. Best estimates are presented as the arithmetic real rates of return for each major asset class included in the System's target asset allocation as of June 30, 2014, is summarized in the above table. Sensitivity Analysis 1.0% Decrease urrent Discount RatE 1.0% Increase 8.75 FURS' Net Pension Liability $ 156,823,891 $ 97,616,579 $ 49,290,705 Employer's proportionate share of the net pension liability $ 2 239 913 $ 1,394,256 $ 704,018 In accordance with GASB 68 regarding the disclosure of the sensitivity of the Net Pension Liability to changes in the discount rate, the above table presents the Net Pension Liability calculated using the discount rate of 7.75%, as well as what the Net Pension Liability would be if it were calculated using a discount rate that is 1.00% lower (6.75%) or 1.00% higher (8.75%) than the current rate. 77 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Summary of Significant Accounting Policies — 79 The Montana Public Employee Retirement Administration (MPERA) prepares its financial statements using the accrual basis of accounting. For the purposes of measuring the Net Pension Liability, deferred inflows of resources and deferred outflows of resources related to pensions, Pension Expense, information about the fiduciary net position and additions to/deductions from fiduciary net position have been determined on the same accrual basis as they are reported by MPERA. For this purpose, member contributions are recognized in the period in which contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Revenues are recognized in the accounting period they are earned and become measurable. Benefit payments and refunds are recognized in the accounting period when due and payable in accordance with the benefit terms. Expenses are recognized in the period incurred. Investments are reported at fair value. MPERA adheres to all applicable Governmental Accounting Standards Board (GASB) statements. Net Pension Liability In accordance with GASB Statement 68, Accounting and Financial Reporting for Pensions, employers are required to recognize and report certain amounts associated with their participation in the Firefighters' Unified Retirement System (FURS). Statement 68 became effective June 30, 2015 and includes requirements to record and report their proportionate share of the collective Net Pension Liability, Pension Expense, Deferred Inflows and Deferred Outflows of resources associated with pensions. In accordance with Statement 68, FURS has a special funding situation in which the State of Montana is legally responsible for making contributions directly to FURS on behalf of the employers. Due to the existence of this special funding situation, employers are required to report the portion of the State of Montana's proportionate share of the collective Net Pension Liability that is associated with the employer. Net Pension Liability Net Pension Liability Percent of Collective as of 6/30/13 as of 6/30/14 NPL Employer Proportionate Share $ 1,784,565 $ 1,394,256 1.428298% State of Montana Proportionate Share associated with Employer $ 4 025 892 $ 3 145 374 3.222719 k Total $ 5,810,4527 $ 4,539,630 4.651017 k At June 30, 2015, the employer recorded a liability of $1,394,256 for its proportionate share of the Net Pension Liability. The Net Pension Liability was measured as of June 30, 2014, and the Total Pension Liability used to calculate the Net Pension Liability was determined by an actuarial valuation as of July 1, 2014. The employer's proportion of the Net Pension Liability was based on the employer's contributions received by FURS during the measurement period July 1, 2013, through June 30, 2014, relative to the total employer contributions received from all of FURS' participating employers. At June 30, 2014, the employer's proportion was 1.428298%. Changes in actuarial assumptions and methods: There were no changes in assumptions or other inputs that affected the measurement of the Total Pension Liability. Changes in benefit terms: There have been no changes in benefit terms since the previous measurement date. Changes in proportionate share: There were no changes between the measurement date of the collective Net Pension Liability and the employer's reporting date that are expected to have a significant effect on the employer's proportionate share of the collective NPL. 78 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Pension Expense Pension Expense as of 6/30/14 Employer's Proportionate Share $ 154,778 State of Montana Proportionate Share associated with the At June 30, 2015, the employer recognized a Pension Expense of $503,950 for its proportionate share of the FURS' Pension Expense. The employer also recognized grant revenue of $349,172 for the support provided by the State of Montana for its proportionate share of the Pension Expense that is associated with the employer. Recognition of Beginning Deferred Outflow At June 30, 2015, the employer recognized a beginning deferred outflow of resources for the employers FY 2014 contributions of $268,156. Deferred Inflows and Outflows At June 30, 2015, the employer reported its proportionate share of FURS' deferred outflows of resources and deferred inflows of resources related to FURS from the following sources: Deferred Outflows of Deferred Inflows of Resources Resources Differences between actual and expected experience $ - $ Changes in assumptions Difference between projected and actual earnings on pension plan investments 276,931 Changes in proportion differences between employer contributions and proportionate share of contributions Contributions paid to PERS subsequent to the measurement date - FY 2015 Contributions 273,944 Total: $ 273,944 $ 276,931 Amounts reported as deferred outflows of resources related to pensions resulting from the employer's contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the year ended June 30, 2016. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in Pension Expense as follows: Year ended June 30: Deferred Outflows of Resources Deferred Inflows of Resources Amount recognized in Pension Expense as an increase or (decrease) to Pension Expense 2016 $ 69,233 $ 69,233 2017 69,233 69,233 2018 69,233 69,233 2019 69,233 69,233 2020 Thereafter 79 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 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 FY2015, the City of Kalispell has recorded other post employment benefits in the governmental funds. This recording resulted in an expense of $250,843 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 ($28,648), and sewer fund ($19,131). In prior years, the City of Kalispell considered other post employment benefits of the water fund and sewer fund immaterial. 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 $392 and $1,658 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, 2015, the City has 14 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. 80 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 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: Total Annual required contribution/Annual OPEB Cost (Expense) $322,519 Interest on beginning of year net OPEB obligation $65,136 Adjustment to the Annual Required Contribution -$89,033 Annual OPEB Cost $298,622 Contributions made (implicit) $0 Increase in net OPEB obligation $298,622 Net OPEB obligation - beginning of year $1,518,327 Net OPEB obligation - end of year $1,816,949 The June 30, 2015 year-end OPEB obligation is reported in the City's funds as follows: Functions/Programs Expenses Primary Government: Governmental activities: General government $250,843 Total governmental activities 250,843 Business -type activities: Water 28,648 Sewer 19,131 Total business -type activities 47,779 Total primary government $298,622 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. SCHEDULE OF FUNDING PROGRESS Retiree Medical Plan Actuarial Valuation Date Actuarial Value of Assets (b) Actuarial Accrued Liability (AAL) (a) $ 2,145,522 Unfunded AAL (UAAL) (a - b) $2,145,522 Funded Ratio( a / b) 0.0% Covered Payroll (c) UAAL as a Percentage of Covered Payroll (( a - b ) / c ) 6/30/2011 $ $ 8,831,832 24.3% 6/30/2013 $ $ 2,311,036 $ 2,311,036 0.0% $ 10,995,940 21.0% 6/30/2015 $ $ 2,623,748 $ 2,623,748 0.0% $ 10,299,726 25.5% 81 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 Actuarial Methods and Assumptions. As of June 30, 2015 (most current information), the City's actuarially accrued liability (AAL) for benefits was $2,623,748. The AAL by status breakdown is shown below: Active participants: Retirees, Dependents, and Surviving Spouses: Total AAL Normal Cost Impact on Statement of Activities Annual OPEB Cost Impact on Statement of Net Assets Assumed Contributions Percentage of Annual OPEB Cost contributed Net OPEB Obligation at June 30 Fiscal Fiscal Fiscal 2013 2014 2015 $1,616,159 N/A $2,000,936 $ 694,877 N/A $ 622,812 $2,311,036 N/A $2,623,748 $ 191,764 N/A $ 165,159 $ 320,116 $ 314,531 $ 298,622 $ (46,131) $ 61,533 $ -14q 20% 0 $1,265,329 $1,518,327 $1,816,949 Participant Information Active participants: 179 N/A 178 Retirees, Dependents, and Surviving Spouses: 12 N/A 14 Total 191 N/A 192 The following key assumptions were chosen by the City: 1. Discount Rate: 4.29% 2. Healthcare (inflation) Trend Rates: 4% 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. 82 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 H. Amounts Due From/To other Governments On June 30, 2015, the amounts due from other governments consisted of the following: General Fund Amount Debt Service Funds Amount Due from: Due from: Flathead County -Taxes $ 517,234 Flathead County -Taxes $ 196,970 Total Governmental Funds $ 1,386,954 Special Revenue Funds Amount Due from: Flathead County -Taxes $ 520,831 Flathead County Sheriff Dept. $ 3,530 Flathead County -EMS Levy $ 66,998 State of Montana-MDOT $ 3,002 U.S. Department of Justice $ 13,132 U.S. Department of Housing and Urban Dev. $ 5,620 EPA $ 59,637 Sub Total $ 672,750 L Restricted Cash/Investments Enterprise Funds Amount Due from: Flathead County -Taxes $ 176,465 Total Business -type Funds $ 176,465 Total City of Kalispell $ 1,563,419 The following restricted cash/investments were held as of June 30, 2015. 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 (1) Urban Forestry Developers (4) Debt Service Airport TI F Bond Reserve Debt Service SID 343 Bond Reserve Debt Service SID 345 Bond Reserve Debt Service Revolving Fund- SID 344 Bond Reserve Debt Service Revolving Fund- SID 345 Bond Reserve Total governmental activities restricted cashlnvestments Total restricted cashlnvestments 1-Jul-14 Additions Subtractions 30-Jun-15 $ 411,258 $ - $ (52,858) $ 358,400 889,082 239,813 (218,189) 910,706 190,000 - - 190,000 1,109,313 - - 1,109,313 2,184,570 221,370 (759,162) 1,646,778 409,413 279,056 (225,000) 463,469 1,056,838 104,086 - 1,160,924 1,531,873 419,099 (729,364) 1,221,608 7,782,347 1,263,424 (1,984,573) 7,061,198 452,621 56,887 (35,080) 474,428 92,282 4,130 (2,360) 94,052 184,875 - (123,814) 61,061 57,795 - (1,479) 56,316 11,172 - 11,172 17,293 208,707 226,000 12,100 12,100 828,138 269,724 (162,733) 935,129 $ 8,610,485 $ 1,533,148 $ (2,147,306) $ 7,996,327 (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). 83 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 J. Restatements During the 2015 fiscal year, the following adjustments relating to prior years' transactions were made to fund balance or retained earnings accounts. Fund Amount Reason General Fund - Major Gov'tal $ 2,979 Prior period expenditures overstated -from COPS Grant Parks $ (800) Prior period expenditures understated CD Loan Revolving - Major Gov'tal $ (170,905) Prior period revenues overstated - to RD Loan Rev. CD Loan Revolving - Major Gov'tal $ 1,718,991 Correction of error - deferred revenue adjustment CD Misc. - Major Gov'tal $ 44,717 Correction of error - deferred revenue adjustment RD Loan Revolving $ 170,905 Prior period revenues understated - from CD Loan Rev. RD Loan Revolving $ 552,572 Correction of error - deferred revenue adjustment RD Loan Revolving $ 39,901 Prior period revenues understated COPS Grant $ (2,979) Prior period expenditures understated - to General fund Subtotal - Governmental Fund Financials $ 2,355,381 Governmental Funds - Loans rec. adjustment $ (2,316,280) Correction of error - deferred revenue adjustment Governmental Funds - Pension related (GASB 68) $ (8,599,108) Prior period expenses understated (GASB No. 68) Total Statement of Activities - Gov'tal Funds $ (8,560,007) Water Fund - Major Proprietary $ (570,743) Prior period expenses understated (GASB No. 68) Sewer Fund - Major Proprietary $ (971,375) Prior period expenses understated (GASB No. 68) Solid Waste $ (349,271) Prior period expenses understated (GASB No. 68) Total Proprietary funds/Business-type activities $ (1,891,389) Correction of prior period misstatement In 2015, the City identified that several governmental funds loan receivables had been classified as an asset and deferred revenue. The City corrected the error with a prior period adjustment to the following governmental funds: CD Revolving Loan: Increase prior period restricted fund balance by $1,718,991 CD Miscellaneous: Increase prior period restricted fund balance by $44,717 Other Governmental Funds: Increase prior period restricted fund balance by $552,572 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 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. 84 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 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. 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, since then extended, 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. 85 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2015 N. Pending Litigation The following is a list of litigation pending against the City and the amount of damages claimed by the Plaintiff. The City Attorney has made no evaluation as to the outcome of each case. The City has liability insurance that may cover all or part of the damages. Accordingly, no provision has been made in the financial statements for these contingent liabilities. Damages Loss Litigant Requested Potential Status Teagan Carlin unspecified unknown Not filed Brown unspecified unknown Litigation ongoing Burke unspecified unknown Litigation ongoing J. Briggs unspecified unknown Not filed K. Curtis unspecified unknown Litigation ongoing O. Receivables Taxes Receivable The following governmental funds had taxes receivable at June 30, 2015. FUND Source Amount General - Major Governmental Taxes $ 220,187 Westside TIF Taxes 17,327 Parks Taxes 29,304 Old School "Tech" TIF Taxes 11,918 Old School "Ind" TIF Taxes 14,958 Health Levy Taxes 29,383 Light District Taxes 6,310 Street Maintenance - Major Governmental Taxes 39,869 Forestry Taxes 5,109 G.O. Bonds Taxes 20,124 Airport TIF debt service Taxes 38,505 SID 344 - Major Governmental Taxes 2,415,436 SID 345 Taxes 222,630 S & C's Taxes 37,232 SID 343 Taxes 429,888 Total Governmental Funds $ 3,538,180 Accounts Receivable At June 30, 2015, the Ambulance fund had accounts receivable deferred net of $227,312. Total net accounts receivable of the Ambulance fund is $230,657. 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 86 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 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 $36,268 recorded as housing rehab loans receivable as of June 30, 2015, in the Community Development Loan Revolving Fund. Other loans receivable of the Community Development Loan Revolving Fund: Hampstead Partners In August of 2002, the City of Kalispell entered into two (2) notes receivable agreements with 2' Avenue West Partners, L.P. (Hampstead Partners) for property on 2nd Avenue West in Kalispell. The property consists of a 40-unit low-income apartment complex known as 2' 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, 2015, is $62,055, and $316,971, 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 5% to Distinctive Countertops in October 2006. Original Loan amount $ 288,619 June 30, 2015 balance $ 242,708 A 15 year loan at 6% to AGAPE Home Care in May 2009. Original Loan amount $ 42,500 June 30, 2015 balance $ 23,318 A 10 year loan at 3% to Norm's News in January 2013. Original Loan amount $ 50,000 June 30, 2015 balance $ 31,221 87 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 A 10 year loan at 3% to Smith/Red & Black in May 2013. Original Loan amount $ 50,000 June 30, 2015 balance $ 40,753 A 10 year loan at 3% to Wheaton's in April 2014. Original Loan amount $ 41,500 June 30, 2015 balance $ 38,119 A 10 year loan at 3% to Sail MT & Ameriprise in April 2015. Original Loan amount $ 17,000 June 30, 2015 balance $ 16,632 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 $ 165,000 June 30, 2015 balance $ 65,019 A 15 year loan at 6.5% to Distinctive Countertops in July 2006. Original Loan amount $ 175,000 June 30, 2015 balance $ 146,317 A 10 year loan at 7% to Crossroads Realty in June 2007. Original Loan amount $ 150,000 June 30, 2015 balance $ 107,614 A 7 year loan at 7% to Unfinished Furniture Creations in April 2006. Original Loan amount $ 50,000 June 30, 2015 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, 2015 balance $ 26,349 A 10 year loan at 5.29% to Parkman Properties, LLC (The Edge Salon), in February 2012. Original Loan amount $ 77,000 June 30, 2015 balance $ 55,695 88 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 A 10 year loan at 3% to Whipps, LLC in December 2011. Original Loan amount $ 50,000 June 30, 2015 balance $ 33,533 A 10 year loan at 3% to Bill and Jana Goodman in June 2013. Original Loan amount $ 34,660 June 30, 2015 balance $ 25,600 A 15 year loan at 6% to Tree Frog Tavern in July 2013. Original Loan amount $ 50,000 June 30, 2015 balance $ 45,916 A 15 year loan at 6% to Tiebuckers, Inc. in July 2013. Original Loan amount $ 50,000 June 30, 2015 balance $ 45,916 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, 2015 balance $ 36,956 SUMMARY COMMUNITY DEVELOPMENT LOANS RECEIVABLE From CD Loan Revolving - Major Governmental UDAG - Major Governmental To Various Distinctive Countertops AGAPE Home Care Norm's News Smith/Red & Black Wheatons Sail MT & Ameriprise Hampstead Partners* Hampstead Partners - Interest Portion* Big Sky Manor Subtotal Major Fund Amount Purpose $ 36,268 Housing Rehab 242,708 Jobs 23,318 Jobs 31,222 Jobs 40,753 Jobs 38,119 Jobs 16,632 Jobs 880,000 Low Income Housing 379,026 Low Income Housing 36,956 Urban Dev. Assistance 1,725,002 Rural Development Loan Revolving Flathead Health and Fitness 65,019 Small Business Distinctive Countertops 146,317 Small Business Crossroads Realty 107,615 Small Business Unfinished Furniture - Bott/Thomas 6,900 Small Business Glacier Valley Endodontics, Inc 26,349 Small Business Parkman Properties, LLC 55,695 Small Business Whipps, LLC 33,533 Small Business Bill and Jana Goodman 25,600 Small Business Tree Frog Tavern 45,916 Small Business Tiebuckers, Inc. 45,916 Small Business Subtotal Other Governmental Funds 558,860 Total Governmental Funds $ 2,283,862 *Long Term Loans Receivable - Matures 2032 89 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2015 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, 2015, amounted to $2,358,647. Q. Wastewater Treatment Plant agreement with Evergreen The City of Kalispell entered into an Interlocal Agreement with the Evergreen Sewer District #1 for treatment of sewage from the district at the City's plant. The Evergreen district sewer went into operation in July 1994. The City bills Evergreen monthly for debt service at 12% of the principle and interest due for the plant. The City also bills for maintenance and operation and replacement costs per the agreement based on metered flows. Evergreen Sewer District has an equity interest in the replacement account carried on the City's books. The balance of the account as of June 30, 2015 is $1,216,731 of which Evergreen's interest is $296,168. R. Subsequent Events Sanitary Sewer Treatment Agreement In 1990, the City of Kalispell entered into an agreement with the Evergreen Sewer District to convey sewage to the Kalispell Wastewater Treatment Plant. This agreement expired in July of 2015. A new agreement was reviewed and discussed at a City Council work session on July 13, 2015. At a regular meeting of the City Council on July 20, 2015, the new agreement was approved. The new agreement provides for a formula, based on prior fiscal year expenses, where a residence in Evergreen will be paying the same amount for sewer treatment as would a resident in Kalispell. The new agreement also includes a base fee, based on the same formula, to be paid by the Evergreen users. According to the new agreement, the Evergreen Sewer District no longer has an equity interest in the reserve/replacement cash account which will still be funded by the City. Utility Monthly Billing To provide water and sewer customers with improved service, monthly billing was proposed to City Council during the development of the fiscal year 2016 budget. The proposed change from bi-monthly was reviewed with the City Council during the October 12, 2015, work session. On October 19, 2015, the City Council passed Resolution 5740 indicating its intent to implement monthly billing. At a regular meeting of the City Council on November 16, 2015, after a public hearing, Resolution 5742 was passed. With this resolution the City Council determined it was in the best interest of the City of Kalispell and its ratepayers to convert to monthly billing. The City plans to implement monthly billing in January of 2016. Tiger Grant The City of Kalispell was awarded a $10 million Transportation Income Generating Economic Recovery (TIGER) grant from U.S. Department of Transportation for the Glacier Rail Park and Kalispell Core Area Development projects. The emphasis of this grant will be to remove the railroad tracks from the City of Kalispell to assist further development without the tracks being an impediment, and to construct a Rail Park outside of the core area, to accommodate establishments that need or prefer rail service for their business. 90 REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT DISCUSSION AND ANALYSIS CITY OF KALISPELL SCHEDULE OF FUNDING PROGRESS - OTHER POST -EMPLOYMENT HEALTHCARE BENEFITS Fiscal Year Ended June 30, 2015 Actuarial Actuarial UAAL as a Actuarial Value of Accrued Unfunded Percentage of Valuation Assets Liability (AAL) AAL (UAAL) Covered Covered Payroll Date (b) (a) (a-b) Funded Ratio( a/b) Payroll(c) ((a-b)/c) 6/30/2009 $ - $ 3,008,915 $ 3,008,915 0.0% Not Available Not Available 6/30/2011 $ - $ 2,145,522 $ 2,145,522 0.0% $ 8,831,832 24.3% 6/30/2013 $ - $ 2,311,036 $ 2,311,036 0.0% $ 10,995,940 21.0% 6/30/2015 $ - $ 2,623,748 $ 2,623,748 0.0% $ 10,299,726 25.5% See independent auditor's report 91 CITY OF KALISPELL SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY Fiscal Year Ended June 30, 2015 Last 10 Fiscal Years' * The schedules are presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compliled, the schedules present information for those years for which information is available. 2015 PERS MPORS FURS City's proportion of the net pension liability (asset) 0.436421% 1.501860% 1.428298% City's proportionate share of the net pension liabiltiy (asset). $5,437,857 $2,359,962 $1,394,256 City's covered -employee payroll $4,940,282 $2,015,102 $1,855,316 City's proportionate share of the net pension liability (asset) as a percentage of its covered -employee payroll 110.07% 117.11% 75.15% Plan fiduciary net position as a percentage of the total pension liability 79.87% 67.01% 76.71% See independent auditor's report 92 CITY OF KALISPELL SCHEDULE OF CONTRIBUTIONS Fiscal Year Ended June 30, 2015 Last 10 Fiscal Years' * The schedules are presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compliled, the schedules present information for those years for which information is available. 2015 PERS MPORS FURS Contractually required contributions $ 450,942 $ Contributions in relation to the contractually required contribution Contribution deficiency (excess) City covered -employee payroll Contributions as a percentage of covered payroll 450,942 $ 5,538,571 $ 8.14% 304,234 $ 273,944 304,234 273,944 2,315,391 $ 2,039,538 13.14% 13.43% See independent auditor's report 93 City of Kalispell, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2015 General Fund ACTUAL AMOUNTS VARIANCE BUDGETED AMOUNTS (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS) See Note A BUDGET RESOURCES (INFLOWS): Taxes and assessments $ 5,159,000 $ 5,159,000 $ 5,716,754 $ 557,754 Licenses and permits 65,300 65,300 82,297 16,997 Intergovernmental 3,994,039 3,994,039 4,027,078 33,039 Charges for services 795,505 795,505 768,614 (26,891) Fines and forfeitures 605,000 605,000 538,234 (66,766) Miscellaneous 31,100 31,100 27,898 (3,202) Investment earnings 10,000 10,000 12,779 2,779 Amounts available for appropriation $ 10,659,944 $ 10,659,944 $ 11,173,654 $ 513,710 CHARGES TO APPROPRIATIONS (OUTFLOWS); General government $ 2,759,735 $ 2,759,735 $ 2,623,226 $ 136,509 Public safety 7,616,820 7,616,820 7,451,258 165,562 Public works 289,237 289,237 267,736 21,501 Community development 68,693 68,693 55,379 13,314 Debt service - principal 70,775 70,775 70,775 - Debt service -interest 5,504 5,504 5,280 224 Capital outlay 150,202 150,202 152,773 (2,571) Total charges to appropriations $ 10,960,966 $ 10,960,966 $ 10,626,427 $ 334,539 OTHER FINANCING SOURCES (USES) Issuance of debt $ - $ - $ - $ - Proceeds from the sale of general capital asset disposition 11,000 11,000 11,610 610 Transfers in 665,000 665,000 665,000 - Transfers out (358,500) (358,500) (369,476) (10,976) Total other financing sources (uses) $ 317,500 $ 317,500 $ 307,134 $ (10,366) Net change in fund balance $ 854,361 Fund balance - beginning of the year $ 2,409,409 Restatements 2,979 Fund balance - beginning of the year - restated $ 2,412,388 Fund balance - end of the year $ 3,266,749 See independent auditor's report 94 City of Kalispell, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2015 Street Maintenance ACTUAL AMOUNTS VARIANCE BUDGETED AMOUNTS (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS) See Note A BUDGET RESOURCES (INFLOWS): Taxes and assessments $ $ $ $ Licenses and permits Intergovernmental - Chargesforservices 2,109,000 2,109,000 2,174,473 65,473 Fines and forfeitures - - - - Miscellaneous 4,000 4,000 3,399 (601) Investment earnings 6,700 6,700 6,880 180 Q * ;I I r I --- :.: e ')110 inn e 1 110 inn e 1 1 Qn '7a') a FQ na,) CHARGES TO APPROPRIATIONS (OUTFLOWS); General government $ Public safety Public works Community development Debt service - principal Debt service -interest Capital outlay Total charges to appropriations $ OTHER FINANCING SOURCES (USES) Issuance of debt $ Proceeds from the sale of general capital asset dispositic Transfers in Transfers out Total other financing sources (uses) $ Net change in fund balance Fund balance - beginning of the year Restatements Fund balance - beginning of the year - restated Fund balance - end of the year 1,969,816 1,969,816 1,705,055 264,761 115,182 115,182 97,165 18,017 5,846 5,846 3,298 2,548 301,070 301,070 253,907 47,163 2,391,914 $ 2,391,914 $ 2,059,425 $ 332,489 $ - $ 116,195 $ 116,195 $ $ 116,195 $ 116,195 7A 1 Q77 $ 1,287,118 $ 1,287,1I $ 1,528,640 See independent auditor's report 95 City of Kalispell, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2015 CD Loan Revolving ACTUAL AMOUNTS VARIANCE BUDGETED AMOUNTS (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS) See Note A BUDGET RESOURCES (INFLOWS): Taxes and assessments $ $ $ $ Licenses and permits Intergovernmental Charges for services 70,863 70,863 18,262 (52,601) Fines and forfeitures - - - Miscellaneous - - - - Investment earnings 1,750 1,750 4,274 2,524 Amounts available for appropriation $ 72,613 $ 72,613 $ 22,536 $ (50,077) CHARGES TO APPROPRIATIONS (OUTFLOWS); General government $ - $ - $ - $ Public safety Public works - - - - Community development 452,370 452,370 2,471 449,899 Debt service - principal - - - - Debt service -interest Capital outlay - - - Total charges to appropriations $ 452,370 $ 452,370 $ 2,471 $ 449,899 OTHER FINANCING SOURCES (USES) Issuance of debt $ - $ $ - $ - Proceeds from the sale of general capital asset dispositic Transfers in Transfers out Total other financing sources (uses) $ $ $ $ Net change in fund balance $ 20,065 Fund balance - beginning of the year $ 434,414 Restatements 1,548,086 Fund balance - beginning of the year - restated $ 1,982,500 Fund balance - end of the year $ 2,002,565 See independent auditor's report 96 City of Kalispell, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2015 CD Misc ACTUAL AMOUNTS VARIANCE BUDGETED AMOUNTS (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS) See Note A BUDGET RESOURCES (INFLOWS): Taxes and assessments $ $ $ $ Licenses and permits - Intergovernmental 30,000 30,000 29,614 (386) Charges for services 9,820 9,820 2,059 (7,761) Fines and forfeitures - - - Miscellaneous - - - - Investment earnings 800 800 2,071 1,271 Amounts available for appropriation $ 40,620 $ 40,620 $ 33,744 $ (6,876) CHARGES TO APPROPRIATIONS (OUTFLOWS); General government $ - $ - $ - $ Public safety Public works - - - - Community development 261,933 261,933 45,281 216,652 Debt service - principal - - - - Debt service -interest Capital outlay - - - Totalchargesto appropriations $ 261,933 $ 261,933 $ 45,281 $ 216,652 OTHER FINANCING SOURCES (USES) Issuance of debt $ - $ $ - $ - Proceeds from the sale of general capital asset dispositic - - Transfers in 327,649 327,649 Transfers out - - Total other financing sources (uses) $ $ $ 327,649 $ 327,649 Net change in fund balance $ 316,112 Fund balance - beginning of the year $ 260,828 Restatements 44,717 Fund balance - beginning of the year - restated $ 305,545 Fund balance - end of the year $ 621,657 See independent auditor's report 97 SUPPLEMENTAL INFORMATION COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Airport TIF — Accounts for monies received and expended for approved projects in this TIF district. Westside TIF — Accounts for monies received and expended for approved projects in this TIF district. Parks in Lieu — Accounts for monies received by developer's for the purpose of making improvements in specific City parks. Parks — Accounts for the monies received and expended in the operations of the City's Parks Department. Ambulance — Accounts for the monies received and expended in the operations of the City's Ambulance Department. Old School TIF's — Accounts for monies received and expended for approved projects in these TIF districts. Health Levy — Accounts for revenue from the permissive mill levy which provides funding for the fiscal year 2003 health insurance premium rate increase. Building Department — Accounts for all activity of enforcing the building regulations adopted by the City. Impact Fees — Accounts for street and public safety impact fees received and allowed and approved expenditures of each. Light Maintenance — Accounts for special assessment revenues levied, received, and expended for street lighting. Gas Tax — Accounts for revenues from State gasoline taxes apportioned from the State of Montana Department of Highways. Fores — Accounts for special assessment revenues levied, received, and expended to care for almost 7000 trees. MACI Grant — Accounts for grant monies received and City matching monies used to purchase equipment (street sweeper) through the Montana Air & Congestion Initiative. Rural Development Loan Revolving (2) — Accounts for monies received, grant and other, and expended in the process of providing gap financing for business retention, expansion, or start-up. Law Enforcement Grants (Stonegarden, Drug Enforcement, CHRP) — Accounts for multiple grants received by the Police Department and all related revenues and expenditures. Preserve America Grant - Accounts for grant monies received for and expenditures related to efforts to promote the City's historic downtown as a destination. CDBG — ED FVCC Grant — Accounts for pass-thru grant monies received for and expenditures related to expanding the welding/metals fabrication program at Flathead Valley Community College. EPA Brownfields Loan Revolving Grant - Accounts for grant monies received for and expenditures related to environmental assessments. Fire Grants - Accounts for multiple grants received by the Fire Department and all related revenues and expenditures. Hazmat Grant — Accounts for the grant monies received for and expenditures related to respond and remedy hazmat calls of the City Fire Department. Trails Grant - Accounts for grant monies received by the Parks Department and all related revenues and expenditures for the expansion of the urban trail system. DEBT SERVICE FUNDS G.O. Bonds — Accounts for the debt service payments associated with the Woodland Water Park and the Fire Station 952 general obligation bonds. City Hall Debt Service — Accounts for the debt service payments associated with the new City Hall at 201 1st Avenue East. Airport TIF Debt Service - Accounts for the debt service payments associated with the Airport Tax Increment District. Westside TIF Debt Service - Accounts for the debt service payments associated with the Westside Tax Increment District. Debt Service Revolving — Accounts for monies associated with the closing out of debt service funds and covering other debt service fund payment shortages. S & C's - Accounts for the debt service payments associated with Sidewalk & Curb bonds. SID 343 - Accounts for the debt service payments associated with the Special Improvement District #343 bonds. SID 345 - Accounts for the debt service payments associated with the Special Improvement District 9345 bonds. CAPITAL PROJECT FUNDS S & C Construction —Accounts for the monies received for and expenditures related to sidewalk and curb construction. City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2014 OLDSCHOOL AUtPORT TIF WESTSIDE TIF PARKS IN LIEU PARKS AMBULANCE TIF (TECH) ASSETS Cash and investments 964,495 3,995,241 1,272 561,333 92,976 25,431 Taxes and assessments receivable, net - 17,327 - 29,304 - 11,918 Accounts receivable - net - - - - 230,657 - Notes and loans receivable - - - - - - Due from other governments - 89,720 - 87,332 66,998 - Prepaids - - - 11,549 10,647 - Other debits - 4,860 - 5,462 - - Restricted assets: Restricted cash and investments - - - - - - Total assets 964,495 4,107,148 1,272 694,980 401,278 37,349 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable - 80,088 - 47,129 7,558 - Accrued payroll 566 1,165 - 73,321 31,067 - Due to other funds - - - - - - Other credits Total liabilities 566 81,253 - 120,450 38,625 - Deferred inflows of resources Unavailable revenue - deferred accounts receivable - - - - 227,312 - Unavailable revenue - deferred loans - - - - - - Unavailable revenue - deferred taxes and assessments 17,327 29,304 11,918 Total deferred inflows of resources - 17,327 - 29,304 227,312 11,918 Fund Balance: Nonspendable - not in spendable form: Prepaid - - - 11,549 10,647 - Restricted General Government - - - - - - Public Safety - - - - 124,694 - Public Works - - - - - - Culture and Recreation - - 1,272 533,677 - - Community Development 963,929 4,008,568 - - - 25,431 Debt Service - - - - - - Unrestricted fund balance: Unassigned Total fund balance 963,929 4,008,568 1,272 545,226 135,341 25,431 Total liabilities and fund balance 964,495 4,107,148 1,272 694,980 401,279 37,349 See independent auditor's report 98 City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2014 PUBLIC OLD SCHOOL BUILDING SAFETY TIF (END) HEALTH LEVY DEPT. IMPACT FEES LIGHT DIST. GAS TAX ASSETS Cash and investments 12,929 27,382 433,214 7,119 7�.9 „_ 370,567 Taxes and assessments receivable, net 14,958 29,383 - - 6.310 - Accounts receivable - net - - - - - - Notes and loans receivable - - - - - - Due from other governments - 76,675 - - 24,804 - Prepaids - - 3,628 - - - Other debits - - - 869 - - Restricted assets: Restricted cash and investments - - - 474,428 - - Total assets 27,887 133,440 436,842 482,416 107,066 370,567 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable - - 8,440 - 14,748 18,072 Accrued payroll - - 7,378 - 2,313 - Due to other funds - - - - - - Other credits 869 Total liabilities - - 15,818 869 17,061 18,072 Deferred inflows of resources Unavailable revenue - deferred accounts receivable - - - - - - Unavailable revenue - deferred loans - - - - - - Unavailable revenue - deferred taxes and assessments 14,958 29,383 6,310 Total deferred inflows of resources 14,958 29,383 - - 6,310 - Fund Balance: Nonspendable - not in spendable form: Prepaid - - 3,628 - - - Restricted General Government - 104,057 - - - - Public Safety - - 417,396 481,547 - - Public Works - - - - 83,695 352,495 Culture and Recreation - - - - - - Community Development 12,929 - - - - - Debt Service - - - - - - Unrestricted fund balance: Unassigned Total fund balance 12,929 104,057 421,024 481,547 83,695 352,495 Total liabilities and fund balance 27,887 133,440 436,942 492,416 107,066 370,567 See independent auditor's report 99 City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2014 DRUG LAW URBAN RD REVOLVING STONEGARDEN ENFORCEMENT ENFORCEMENT FORESTRY MACIGRANT LOAN(2) GRANT GRANT GRANTS ASSETS Cash and investments 125,225 60,153 406,774 - 4,400 - Taxes and assessments receivable, net 5,109 - - - - - Accounts receivable - net - - - - - - Notes and loans receivable - - 558,860 - - - Due from other governments 21,553 - - 11,905 3,530 4,229 Prepaids - - - - - - Other debits - - - - - 941 Restricted assets: Restricted cash and investments 94,052 - - - - - Total assets 245,939 60,153 965,634 11,905 7,930 5,170 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable 9 - - 10,601 2,462 773 Accrued payroll 2,943 - - 239 - - Due to other funds - - - 1,065 - 3,837 Other credits Total liabilities 2,952 - - 11,905 2,462 4,610 Deferred inflows of resources Unavailable revenue - deferred accounts receivable - - - - - - Unavailable revenue - deferred loans - - - - - - Unavailable revenue - deferred taxes and assessments 5,109 Total deferred inflows of resources 5,109 - - - - - Fund Balance: Nonspendable - not in spendable form: Prepaid - - - - - - Restricted General Government - - - - - - Public Safety - - - - 5,468 560 Public Works - 60,153 - - - - Culture and Recreation 237,878 - - - - Community Development - - 965,634 - - - Debt Service - - - - - - Unrestricted fund balance: Unassigned Total fund balance 237,878 60,153 965,634 - 5,468 560 Total liabilities and fund balance 245,939 60,153 965,634 11,905 7,930 5,170 See independent auditor's report 100 City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2014 CDBG-ED BROWNFIELDS (FVCC) LOAN HAZMAT TRAILS Total Special GRANT REVOLVING FIRE GRANTS GRANT GRANTS Revenue Funds ASSETS Cash and investments - 100,210 2,260 18,444 9,678 7,295,055 Taxes and assessments receivable, net - - - - - 114,309 Accounts receivable - net - - - - - 230,657 Notes and loans receivable - - - - - 558,860 Due from other governments 5,620 59,637 - - - 452,003 Prepaids - - - - - 25,824 Other debits - - - 243 - 12,375 Restricted assets: Restricted cash and investments - - - - - 568,480 Total assets 5,620 159,847 2,260 18,687 9,678 9,257,563 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable - 59,347 - 1,550 - 250,777 Accrued payroll - - - - - 118,992 Due to other funds 2,086 - - - - 6,988 Other credits 869 Total liabilities 2,086 59,347 - 1,550 - 377,626 Deferred inflows of resources Unavailable revenue - deferred accounts receivable - - - - - 227,312 Unavailable revenue - deferred loans - - - - - - Unavailable revenue - deferred taxes and assessments 114,309 Total deferred inflows of resources - - - - - 341,621 Fund Balance: Nonspendable - not in spendable form: Prepaid - - - - - 25,824 Restricted General Government - - - - - 104,057 Public Safety - - 2,260 17,137 - 1,049,062 Public Works - - - - - 496,343 Culture and Recreation - - - - 9,678 782,505 Community Development 3,534 100,500 - - - 6,080,525 Debt Service - - - - - - Unrestricted fund balance: Unassigned Total fund balance 3,534 100,500 2,260 17,137 (9,678) 8,538,316 Total liabilities and fund balance 5,620 159,847 2,260 18,687 9,678 9,257,563 See independent auditor's report 101 City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2014 AIRPORT TIF WESTSIDE TIF City Hall Debt DEBT DEBT SID G.O. BONDS Service SERVICE SERVICE REVOLVING S & CS ASSETS Cash and investments 11,945 330 - 871 45,366 92 Taxes and assessments receivable, not 20,124 - 38,505 - - 37,232 Accounts receivable - net - - - - - - Notes and loans receivable - - - - - - Due from other governments 48,196 - 138,096 - - 671 Prepaids - - - - - - Other debits - - - - - - Restricted assets: Restricted cash and investments - - 61,061 - 238,100 - Total assets 80,265 330 237,662 871 283,466 37,995 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable - - - - - - Accrued payroll - - - - - - Due to other funds - - - - - - Other credits Total liabilities - - - - - - Deferred inflows of resources Unavailable revenue - deferred accounts receivable - - - - - - Unavailable revenue - deferred loans - - - - - - Unavailable revenue - deferred taxes and assessments 20,124 38,505 37,232 Total deferred inflows of resources 20,124 - 38,505 - - 37,232 Fund Balance: Nonspendable - not in spendable form: Prepaid - - - - - - Restricted General Government - - - - - - Public Safety - - - - - - Public Works - - - - - - Culture and Recreation - - - - - - Community Development - - - - - - Debt Service 60,141 330 199,157 871 283,466 763 Unrestricted fund balance: Unassigned Total fund balance 60,141 330 199,157 871 283,466 763 Total liabilities and fund balance 80,265 330 237,662 871 283,466 37,995 See independent auditor's report 102 City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2014 ASSETS Cash and investments Taxes and assessments receivable, net Accounts receivable - net Notes and loans receivable Due from other governments Prepaids Other debits Restricted assets: Restricted cash and investments Total assets LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Accrued payroll Due to other funds Other credits Total liabilities Total Nonmajor Total Debt S & C Governmental SID 343 SID 345 Service Funds CONSTRUCTION Funds - 5,280 63,884 - $ 7,358,939 429,888 222,630 748,379 - 862,688 - - - - 230,657 - - - - 558,860 9,013 994 196,970 - 648,973 - - - - 25,824 - - - - 12,375 56,316 11,172 366,649 - 935,129 495,217 240,076 1,375,882 - $ 10,633,445 3,040 253,817 118,992 6,988 869 $ 380,666 Deferred inflows of resources Unavailable revenue - deferred accounts receivable - - - - 227,312 Unavailable revenue - deferred loans - - - - - Unavailable revenue - deferred taxes and assessments 429,888 222,630 748,379 862,688 Total deferred inflows of resources 429,888 222,630 748,379 - 1,090,000 Fund Balance: Nonspendable - not in spendable form: Prepaid Restricted General Government Public Safety Public Works Culture and Recreation Community Development Debt Service Unrestricted fund balance: Unassigned Total fund balance Total liabilities and fund balance 25,824 - - - - 104,057 - - - - 1,049,062 - - - - 496,343 - - - - 782,505 - - - - 6,080,525 65,329 17,446 627,503 - 627,503 (3,040) (3,040) 65,329 17,446 627,503 (3,040) $ 9,162,779 495,217 240,076 1,375,882 - S 10,633,445 See independent auditor's report 103 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2014 OLDSCHOOL REVENUES AIRPORT TIF WESTSIDE TIF PARKS IN LIEU PARKS AMBULANCE TIF (TECH) Taxes and assessments - 856,942 - 916,451 - 133,381 Licenses and permits - - - - - - Intergovernmental 42,671 243,128 - 10,000 130,590 3,057 Charges for services - - - 512,343 642,543 - Miscellaneous - - - 45,489 3 - Investment earnings 4,659 24,168 65 2,593 - 182 Total revenues 47,330 1,124,138 65 1,486,876 773,136 136,620 EXPENDITURES Public safety - - - - 957,248 - Public works - - - - - - Parks and recreation - - - 1,428,922 - - Community Development 136,439 249,249 - - - 28,476 Debt service - principal - - - 24,850 - - Debt service - interest - - - 621 - - Capital outlay 12,000 Total expenditures 136,439 249,249 1,466,393 957,248 28,476 Excess (deficiency) ofrevenues over expenditures (89,109) 874,889 65 20,483 (184,112) 108,144 OTHER FINANCING SOURCES (USES) Issuance of debt - - - - - - Transfers in 450,000 - - 70,000 310,000 180,366 Transfers (out) (32,000) (8,181) (276,289) Total other financing sources and uses 450,000 (32,000) (8,181) 70,000 310,000 (95,923) Net change in fund balance 360,891 842,889 (8,116) 90,483 125,888 12,221 Fund balances - beginning 603,038 3,165,679 9,388 455,543 9,453 13,210 Restatements (800) Fund balances - beginning restated 603,038 3,165,679 9,388 454,743 9,453 13,210 Fund balances - ending 963,929 4,008,568 1,272 545,226 135,341 25,431 See independent auditor's report 104 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2014 REVENUES Taxes and assessments Licenses and permits Intergovernmental Charges for services Miscellaneous Investment earnings Total revenues EXPENDITURES Public safety Public works Parks and recreation Community Development Debt service - principal Debt service - interest Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES) Issuance of debt Transfers in Transfers (out) Total other financing sources and uses Net change in fund balance Fund balances - beginning Restatements Fund balances - beginning restated Fund balances - ending OLD SCHOOL BUILDING PUBLIC SAFETY TIF (IND) HEALTH LEVY DEPT. IMPACT FEES LIGHT DIST. GAS TAX 18,876 776,618 - - 277,642 - - - 298,748 - - - - 21,384 - - - 364,622 - - 87,403 56,542 - - - - 532 - 7,976 - 34 - 3,166 3,149 374 1,996 18,910 798,002 389,849 59,691 285,992 366,618 - - 369,345 4,501 - - - - - - 287,587 411,613 - - - 30,250 21,430 - - - - 4,829 816 - 29,119 64,453 398,464 39,580 309,833 476,066 18,910 798,002 (8,615) 20,111 (23,841) (109,448) 53,378 - - - - 25,000 (59,360) (735,000) (5,982) (735,000) 25,000 12,928 63,002 (8,615) 20,111 (23,841) (94,448) 1 41,055 429,639 461,436 107,536 436,943 1 41,055 429,639 461,436 107,536 436,943 12,929 104,057 421,024 481,547 83,695 352,495 See independent auditor's report 105 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2014 REVENUES Taxes and assessments Licenses and permits Intergovernmental Charges for services Miscellaneous Investment earnings Total revenues EXPENDITURES Public safety Public works Parks and recreation Community Development Debt service - principal Debt service - interest Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures OTBER FINANCING SOURCES (USES) Issuance of debt Transfers in Transfers (out) Total other financing sources and uses Net change in fund balance Fund balances - beginning Restatements Fund balances - beginning restated Fund balances - ending DRUG URBAN RD REVOLVING STONEGARDEN ENFORCEMENT FORESTRY MACI GRANT LOAN (2) GRANT GRANT CIURP GRANT 13,850 - - 78,260 31,967 - 215,822 - 32,610 - - - 13,391 - - - 2,287 - 1,217 - 779 - - - 244,280 - 33,389 78,260 34,254 - - - - 78,260 95,992 - 161 - - 179,575 - - - - - 10 8,278 - 25,889 - - 227 - 6,210 - - 188,080 161 32,109 78,260 95,992 56,200 (161) 1,280 - (61,738) - - - - - 55,976 - (10,976) 45,000 56,200 (161) 1,280 - (16,738) - 181,678 60,314 200,976 - 22,206 2,979 763,378 (2,979) 181,678 60,314 964,354 22,206 237,878 60,153 965,634 - 5,468 - See independent auditor's report 106 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2014 LAW PRESERVE CDBG-ED BROWNFIELDS ENFORCEMENT AMERICA (FVCC) LOAN HAZMAT REVENUES GRANTS GRANT GRANT REVOLVING FIRE GRANTS GRANT Taxes and assessments - - - - - - Licenses and permits - - - - - - Intergovernmental 90,567 7,251 5,620 158,376 - 44,706 Charges for services 19,404 - - 100,500 - - Miscellaneous 4,209 - - - 27,147 243 Investment earnings - - - - - 167 Total revenues 114,180 7,251 5,620 258,876 27,147 45,116 EXPENDITURES Public safety 120,326 - - - - 39,022 Public works - - - - - - Parks and recreation - - - - - - Community Development - 7,251 2,086 158,376 - - Debt service - principal - - - - - - Debt service - interest - - - - - - Capital outlay 10,976 24,887 Total expenditures 131,302 7,251 2,086 158,376 24,887 39,022 Excess (deficiency) ofrevenues over expenditures (17,122) - 3,534 100,500 2,260 6,094 OTHER FINANCING SOURCES (USES) Issuance of debt - - - - - - Transfers in 14,476 - - - - - Transfers (out) Total other financing sources and uses 14,476 Net change in fund balance (2,646) - 3,534 100,500 2,260 6,094 Fund balances - beginning 3,206 - - - - 11,043 Restatements Fund balances - beginning restated 3,206 11,043 Fund balances - ending 560 - 3,534 100,500 2,260 17,137 See independent auditor's report 107 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2014 REVENUES Taxes and assessments Licenses and permits Intergovernmental Charges for services Miscellaneous Investment earnings Total revenues EXPENDITURES Public safety Public works Parks and recreation Community Development Debt service - principal Debt service - interest Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures TRAILS Total Special City Hall Debt AIRPORT TIF WESTSIDE TIF GRANTS Revenue Funds G.O. BONDS Service DEBT SERVICE DEBT SERVICE - 2,979,810 540,265 - 638,016 - - 298,748 - - - - 3,247 1,249,296 - 100,715 - - - 1,667,167 - - - - - 101,277 - 56,041 - - - 42,549 1,168 - 2,153 - 3,247 6,338,847 541,433 156,756 640,169 - - 1,664,694 - - - - - 699,361 - - - - - 1,608,497 - - - - - 581,887 - - - - - 110,697 450,000 121,894 140,000 13,000 - 12,703 52,812 34,858 40,383 19,117 1,750 143,185 1,750 4,821,024 502,812 156,752 180,383 32,117 1,497 1,517,823 38,621 4 459,786 (32,117) OTHER FINANCING SOURCES (USES) Issuance of debt - - - - - - Transfers in 8,181 1,167,377 - - - 32,000 Transfers (out) (1,121,806) (450,000) Total other financing sources and uses 8,181 45,571 (450,000) 32,000 Net change in fund balance 9,678 1,563,394 38,621 4 9,786 (117) Fund balances - beginning - 6,215,323 21,520 326 189,371 988 Restatements 759,599 Fund balances - beginning restated 6,974,922 21,520 326 189,371 988 Fund balances - ending (9,678) 8,538,316 60,141 330 199,157 871 See independent auditor's report 108 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2014 SID Total Debt Service REVENUES REVOLVING S & CIS SID 343 SID 345 Funds Taxes and assessments - 9,658 100,159 29,307 1,317,405 Licenses and permits - - - - - Intergovernmental - - - - 100,715 Charges for services - - - - - Miscellaneous - - - - 56,041 Investment earnings 654 - - - 3,975 Total revenues 654 9,658 100,159 29,307 1,478,136 EXPENDITURES Public safety - - - - - Public works - - - - - Parks and recreation - - - - - Community Development - - - - - Debt service - principal - 7,526 80,000 14,000 826,420 Debt service - interest - 1,577 22,000 7,125 177,872 Capital outlay Total expenditures 9,103 102,000 21,125 1,004,292 Excess (deficiency) ofrevenues over expenditures 654 555 (1,841) 8,182 473,944 OTTER FINANCING SOURCES (USES) Issuance of debt - - - - - Transfers in 1,250 - - - 33,250 Transfers (out) (1,250) (451,250) Total other financing sources and uses 1,250 (1,250) (418,000) Net change in fund balance 1,904 (695) (1,841) 8,182 55,844 Fund balances - beginning 281,562 1,458 67,170 9,264 571,659 Restatements Fund balances - beginning restated 281,562 1,458 67,170 9,264 571,659 Fund balances - ending 283,466 763 65,329 17,446 627,503 See independent auditor's report 109 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2014 REVENUES Taxes and assessments Licenses and permits Intergovernmental Charges for services Miscellaneous Investment earnings Total revenues EXPENDITURES Public safety Public works Parks and recreation Community Development Debt service - principal Debt service - interest Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures OTTER FINANCING SOURCES (USES) Issuance of debt Transfers in Transfers (out) Total other financing sources and uses Net change in fund balance Fund balances - beginning Restatements Fund balances - beginning restated Fund balances - ending Total Nonmajor S & C Governmental rnivcraiTrrrniv >.....a� 298,748 - 1,350,011 - 1,667,167 157,318 46,524 $ 7,816,983 - 1,664,694 699,361 - 1,608,497 581,887 937,117 - 190,575 10,885 154,070 10,885 $ 5,836,201 (10,885) $ 1,980,782 7,845 $ 7,845 - 1,200,627 (1,573,056) 7,845 $ (364,584) - $ 6,786,982 759,599 - $ 7,546,581 (3,040) $ 9,162,779 See independent auditor's report 110 BUDGETARY COMPARISON SCHEDULE - OTHER MAJOR FUNDS City of Kalispell, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2015 SID344 ACTUAL AMOUNTS VARIANCE BUDGETED AMOUNTS (BUDGETARY WITH FINAI ORIGINAL FINAL BASIS) See Note A BUDGET RESOURCES (INFLOWS): Taxes and assessments $ 308,015 $ 308,015 $ 1,261,667 $ 953,652 Licenses and permits - - - - Intergovernmental Charges for services Fines and forfeitures Miscellaneous Investment earnings - Amounts available for appropriation $ 308,015 $ 308,015 $ 1,261,667 $ 953,652 CHARGES TO APPROPRIATIONS (OUTFLOWS); General government $ Public safety Public works Community development Debt service - principal Debt service - interest Capital outlay Total charges to appropriations OTHER FINANCING SOURCES (USES) 225,000 225,000 225,000 - 132,308 132,308 132,658 (350) $ 357,308 $ 357,308 $ 357,658 $ (350) Issuance of debt $ - $ - $ - $ - Proceeds from the sale of general capital asset disposition - - - Transfers in 32,000 32,000 8,000 (24,000) Transfers out (234,094) (234,094) (233,744) 350 Total other financing sources (uses) $ (202,094) $ (202,094) $ (225,744) $ (23,650) Net change in fund balance $ 678,265 Fund balance - beginning of the year $ (208,707) Restatements Fund balance - beginning of the year - restated $ (208,707) Fund balance - end of the year $ 469,558 See independent auditor's report 111 BUDGETARY COMPARISON SCHEDULE - NONMAJOR FUNDS City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 AIRPORT TIF Westside TIT Positive / Positive / (Segative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 308,345 856,842 548,497 Licenses and permits - - - Intergovernmental 14,832 42,671 27,839 95,000 243,128 148,128 Charges for services - - - - - - Miscellaneous - - - - - - Investment earnings 1,000 4,659 3,659 12,000 24,168 12,168 Total revenues 15,832 47,330 31,498 415,345 1,124,138 708,793 EXPENDITURES Public safety Public works Parks and recreation Community Development 786,066 136,439 649,627 2,553,404 249,249 2,304,155 Debt service - principal - - - - - - Debt service - interest Capital outlay - - - - - - Total expenditures 786,066 136,439 649,627 2,553,404 249,249 2,304,155 Excess (deficiency) of revenues over expenditures (770,234) (89,109) 681,125 (2,138,059) 874,889 3,012,948 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - Transfers in 450,000 450,000 Transfers (out) - - (32,000) (32,000) Total other financing sources and uses 450,000 450,000 (32,000) (32,000) - Net change in fund balance (320,234) 360,891 681,125 (2,170,059) 842,889 3,012,948 Fund balances - beginning Restatements Fund balances - beginning restated Fund balances - ending 603,038 963,929 3,165,679 4,008,568 See independent auditor's report 112 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 Parks in Lieu Parks Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 887,000 916,451 29,451 Licenses and permits - - - Intergovernmental 10,000 10,000 - Charges for services 504,500 512,343 7,843 Miscellaneous 20,000 45,489 25,489 Investment earnings 65 65 1,500 2,593 1,093 Total revenues 65 65 1,423,000 1,486,876 63,876 EXPENDITURES Public safety - - - - - Public works - - - Parks and recreation 1,545,802 1,428,922 116,880 Community Development - - - Debt service - principal 24,850 24,850 - Debt service - interest 882 621 261 Capital outlay 19,000 12,000 7,000 Total expenditures 1,590,534 1,466,393 124,141 Excess (deficiency) of revenues over expenditures 65 65 (167,534) 20,483 188,017 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - Transfers in 70,000 70,000 Transfers (out) (9,388) (8,181) 1,207 - - Total other financing sources and uses (9,388) (8,181) 1,207 70,000 70,000 - Net change in fund balance (9,388) (8,116) 1,272 (97,534) 90,483 188,017 Fund balances - beginning 9,388 455,543 Restatements - (800) Fund balances - beginning restated 9,388 454,743 Fund balances - ending 1,272 545,226 See independent auditor's report 113 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 AMBULANCE OLD SCHOOL TIT (TECH) Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 51,550 133,381 81,831 Licenses and permits - - - - - - Intergovernmental 100,000 130,590 30,590 724 3,057 2,333 Charges for services 605,000 642,543 37,543 - - - Miscellaneous - 3 3 - - - Investment earnings - - - 50 182 132 Total revenues 705,000 773,136 68,136 52,324 136,620 84,296 EXPENDITURES Public safety 1,010,445 957,248 53,197 - - - Public works - - - Parks and recreation - - Community Development 24,000 28,476 (4,476) Debt service - principal - - Debt service - interest Capital outlay - - - - - Total expenditures 1,010,445 957,248 53,197 24,000 28,476 (4,476) Excess (deficiency) of revenues over expenditures (305,445) (184,112) 121,333 28,324 108,144 79,820 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - - Transfers in 310,000 310,000 - 180,366 180,366 Transfers (out) - - (280,765) (276,289) 4,476 Total other financing sources and uses 310,000 310,000 (280,765) (95,923) 184,842 Net change in fund balance 4,555 125,888 121,333 (252,441) 12,221 264,662 Fund balances - beginning 9,453 13,210 Restatements - - Fund balances - beginning restated 9,453 13,210 Fund balances - ending 135,341 25,431 See independent auditor's report 114 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 OLD SCHOOL TIF (IND) Health Levy Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 2,600 18,876 16,276 711,500 776,618 65,118 Licenses and permits - - - - - - Intergovernmental 25,000 21,384 (3,616) Charges for services - - Miscellaneous - - Investment earnings - 34 34 - - - Total revenues 2,600 18,910 16,310 736,500 798,002 61,502 EXPENDITURES Public safety - - - - - - Public works Parks and recreation Community Development Debt service - principal Debt service - interest Capital outlay Total expenditures - - - - - - Excess (deficiency) of revenues over expenditures 2,600 18,910 16,310 736,500 798,002 61,502 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - Transfers in 53,378 53,378 Transfers (out) (59,360) (59,360) - (735,000) (735,000) Total other financing sources and uses (59,360) (5,982) 53,378 (735,000) (735,000) - Net change in fund balance (56,760) 12,928 69,688 1,500 63,002 61,502 Fund balances - beginning 1 41,055 Restatements - - Fund balances - beginning restated 1 41,055 Fund balances - ending 12,929 104,057 See independent auditor's report 115 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 Building Department Impact Fees Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments - - Licenses and permits 317,000 298,748 (18,252) Intergovernmental - - - - - Charges for services 50,100 87,403 37,303 105,000 56,542 (48,458) Miscellaneous - 532 532 - - - Investment earnings 2,000 3,166 1,166 1,775 3,149 1,374 Total revenues 369,100 389,849 20,749 106,775 59,691 (47,084) EXPENDITURES Public safety 434,577 369,345 65,232 5,500 4,501 999 Public works - - - - - - Parks and recreation Community Development - - Debt service - principal 30,250 30,250 - Debt service - interest - - - 4,789 4,829 (40) Capital outlay 35,000 29,119 5,881 450,000 - 450,000 Total expenditures 469,577 398,464 71,113 490,539 39,580 450,959 Excess (deficiency) of revenues over expenditures (100,477) (8,615) 91,862 (383,764) 20,111 403,875 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - Transfers in Transfers (out) Total other financing sources and uses - - - Net change in fund balance (100,477) (8,615) 91,862 (383,764) 20,111 403,875 Fund balances - beginning Restatements Fund balances - beginning restated Fund balances - ending 429,639 421,024 461,436 481,547 See independent auditor's report 116 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 Light Maintenance Positive / (Negative) Budget Actual Variance Gas Tax Positive / (Negative) Budget Actual Variance REVENUES Taxes and assessments 237,000 277,642 40,642 Licenses and permits - - - - - Intergovernmental 360,000 364,622 4,622 Charges for services - - - Miscellaneous - 7,976 7,976 - - - Investment earnings 275 374 99 2,000 1,996 (4) Total revenues 237,275 285,992 48,717 362,000 366,618 4,618 EXPENDITURES Public safety - - - - - - Public works 294,373 287,587 6,786 475,750 411,613 64,137 Parks and recreation - - - - - - Community Development - - Debt service - principal 21,430 21,430 Debt service - interest 816 816 - - - Capital outlay - - - 65,000 64,453 547 Total expenditures 316,619 309,833 6,786 540,750 476,066 64,684 Excess (deficiency) of revenues over expenditures (79,344) (23,841) 55,503 (178,750) (109,448) 69,302 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - Transfers in 25,000 25,000 Transfers (out) - - Total other financing sources and uses - 25,000 25,000 - Net change in fund balance (79,344) (23,841) 55,503 (153,750) (84,448) 69,302 Fund balances - beginning 107,536 436,943 Restatements - - Fund balances - beginning restated 107,536 436,943 Fund balances - ending 83,695 352,495 See independent auditor's report 117 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 URBAN FORESTRY MACI GRANT Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits - - - Intergovernmental 19,750 13,850 (5,900) 273,422 (273,422) Charges for services 207,000 215,822 8,822 - Miscellaneous 600 13,391 12,791 Investment earnings 500 1,217 717 - Total revenues 227,850 244,280 16,430 273,422 (273,422) EXPENDITURES Public safety - - Public works - - - 161 (161) Parks and recreation 294,170 179,575 114,595 - - Community Development - - - Debt service - principal 8,254 8,278 (24) Debt service - interest 227 227 - - - Capital outlay - - - 376,000 - 376,000 Total expenditures 302,651 188,080 114,571 376,000 161 375,839 Excess (deficiency) of revenues over expenditures (74,801) 56,200 131,001 (102,578) (161) 102,417 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - Transfers in 42,264 (42,264) Transfers (out) - Total other financing sources and uses - - 42,264 (42,264) Net change in fund balance (74,801) 56,200 131,001 (60,314) (161) 60,153 Fund balances - beginning 181,678 60,314 Restatements - - Fund balances - beginning restated 181,678 60,314 Fund balances - ending 237,878 60,153 See independent auditor's report 118 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 RD REVOLVING LOAN (2) STONEGARDEN GRANT Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits - - Intergovernmental - - 143,016 78,260 (64,756) Charges for services 85,374 32,610 (52,764) - - Miscellaneous - - - Investment earnings 650 779 129 - - Total revenues 86,024 33,389 (52,635) 143,016 78,260 (64,756) EXPENDITURES Public safety - - 143,016 78,260 64,756 Public works - - - Parks and recreation - - Community Development 125,000 10 124,990 Debt service - principal 25,889 25,889 - Debt service - interest 7,361 6,210 1,151 - Capital outlay - - - - - Total expenditures 158,250 32,109 126,141 143,016 78,260 64,756 Excess (deficiency) of revenues over expenditures (72,226) 1,280 73,506 - - - OTHER FINANCING SOURCES (USES) Issuance ofdebt - - Transfers in Transfers (out) Total other financing sources and uses - - Net change in fund balance (72,226) 1,280 73,506 Fund balances - beginning 200,976 Restatements 763,378 Fund balances - beginning restated 964,354 Fund balances - ending 965,634 See independent auditor's report 119 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 Drug Enforcement Grant Positive / (Negative) Budget Actual Variance LAW ENFORCEMENT GRANTS Positive / (Negative) Budget Actual Variance REVENUES Taxes and assessments Licenses and permits - - - - - Intergovernmental 31,585 31,967 382 168,440 90,567 (77,873) Charges for services - - - 20,000 19,404 (596) Miscellaneous 2,287 2,287 4,209 4,209 Investment earnings - - - - - - Total revenues 31,585 34,254 2,669 188,440 114,180 (74,260) EXPENDITURES Public safety 97,383 95,992 1,391 180,064 120,326 59,738 Public works - - - - - - Parks and recreation Community Development Debt service - principal Debt service - interest - - - Capital outlay - - - 24,976 10,976 14,000 Total expenditures 97,383 95,992 1,391 205,040 131,302 73,738 Excess (deficiency) of revenues over expenditures (65,798) (61,738) 4,060 (16,600) (17,122) (522) OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - - Transfers in 55,976 55,976 14,476 14,476 Transfers (out) (10,976) (10,976) - - Total other financing sources and uses 45,000 45,000 - 14,476 14,476 - Net change in fund balance 4,060 (20,798) (16,738) (2,124) (2,646) (522) Fund balances - beginning 22,206 3,206 Restatements - - Fund balances - beginning restated 22,206 3,206 Fund balances - ending 5,468 560 See independent auditor's report 120 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 Preserve America Grant CDBG - ED FVCC Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits - - - - Intergovernmental 7,251 7,251 101,345 5,620 (95,725) Charges for services - - - - Miscellaneous Investment earnings - - - - Total revenues 7,251 7,251 101,345 5,620 (95,725) EXPENDITURES Public safety - - - - Public works Parks and recreation - - - - - Community Development 7,251 7,251 101,345 2,086 99,259 Debt service - principal - - - - - Debt service - interest Capital outlay - - - - - Total expenditures 7,251 7,251 101,345 2,086 99,259 Excess (deficiency) of revenues over expenditures - - - 3,534 3,534 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - Transfers in Transfers (out) Total other financing sources and uses - - Net change in fund balance 3,534 3,534 Fund balances - beginning - Restatements Fund balances - beginning restated - Fund balances - ending 3,534 See independent auditor's report 121 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 BROWNFIELDS LOAN REVOLVING FIRE GRANTS Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits - - - Intergovernmental 868,590 158,376 (710,214) 13,000 (13,000) Charges for services - 100,500 100,500 - - Miscellaneous - - 26,000 27,147 1,147 Investment earnings - - - - - Total revenues 868,590 258,876 (609,714) 39,000 27,147 (11,853) EXPENDITURES Public safety - - 19,000 - 19,000 Public works - - Parks and recreation - - - Community Development 868,590 158,376 710,214 Debt service - principal - - - Debt service - interest - - Capital outlay - - - 20,000 24,887 (4,887) Total expenditures 868,590 158,376 710,214 39,000 24,887 14,113 Excess (deficiency) of revenues over expenditures - 100,500 100,500 - 2,260 2,260 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - Transfers in Transfers (out) Total other financing sources and uses - - - - Net change in fund balance 100,500 100,500 2,260 2,260 Fund balances - beginning - - Restatements Fund balances - beginning restated - - Fund balances - ending 100,500 2,260 See independent auditor's report 122 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 HAZMAT GRANT TRAILS GRANTS Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits - - - - - Intergovernmental 44,167 44,706 539 112,784 3,247 (109,537) Charges for services - - - - - Miscellaneous - 243 243 Investment earnings 100 167 67 - - Total revenues 44,267 45,116 849 112,784 3,247 (109,537) EXPENDITURES Public safety 55,310 39,022 16,288 - - Public works - - - Parks and recreation Community Development Debt service - principal Debt service - interest - - - Capital outlay - - - 127,920 1,750 126,170 Total expenditures 55,310 39,022 16,288 127,920 1,750 126,170 Excess (deficiency) of revenues over expenditures (11,043) 6,094 17,137 (15,136) 1,497 16,633 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - Transfers in 15,136 8,181 (6,955) Transfers (out) - - Total other financing sources and uses - - 15,136 8,181 (6,955) Net change in fund balance (11,043) 6,094 17,137 - 9,678 9,678 Fund balances - beginning 11,043 - Restatements - Fund balances - beginning restated 11,043 - Fund balances - ending 17,137 9,678 See independent auditor's report 123 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 Total Special Revenue Funds G.O. BONDS Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 2,197,995 2,979,810 781,815 491,500 540,265 48,765 Licenses and permits 317,000 298,748 (18,252) - - - Intergovernmental 2,388,906 1,249,296 (1,139,610) Charges for services 1,576,974 1,667,167 90,193 Miscellaneous 46,600 101,277 54,677 - - - Investment earnings 21,850 42,549 20,699 500 1,168 668 Total revenues 6,549,325 6,338,847 (210,478) 492,000 541,433 49,433 EXPENDITURES Public safety 1,945,295 1,664,694 280,601 Public works 770,123 699,361 70,762 Parks and recreation 1,839,972 1,608,497 231,475 Community Development 4,465,656 581,887 3,883,769 - - Debt service -principal 110,673 110,697 (24) 450,000 450,000 - Debt service - interest 14,075 12,703 1,372 52,863 52,812 51 Capital outlay 1,117,896 143,185 974,711 - - Total expenditures 10,263,690 4,821,024 5,442,666 502,863 502,812 51 Excess (deficiency) of revenues over expenditures (3,714,365) 1,517,823 5,232,188 (10,863) 38,621 49,484 OTHER FINANCING SOURCES (USES) Issuance of debt Transfers in Transfers (out) Total other financing sources and uses Net change in fund balance 982,852 1,167,377 184,525 (1,127,489) (1,121,806) 5,683 (144,637) 45,571 190,208 (3,859,002) 1,563,394 5,422,396 (10,863) 38,621 49,484 Fund balances - beginning 6,215,323 Restatements 759,599 Fund balances - beginning restated 6,974,922 Fund balances - ending 8,538,316 21,520 60,141 See independent auditor's report 124 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 City Hall Debt Service Airport TIF Debt Service Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 645,000 638,016 (6,984) Licenses and permits - - Intergovernmental 100,715 100,715 Charges for services - - - Miscellaneous 56,038 56,041 3 - - - Investment earnings - - - 1,000 2,153 1,153 Total revenues 156,753 156,756 3 646,000 640,169 (5,831) EXPENDITURES Public safety - - - - - Public works Parks and recreation Community Development - - - - Debt service -principal 116,191 121,894 (5,703) 140,000 140,000 Debt service - interest 40,562 34,858 5,704 40,383 40,383 Capital outlay - - - - Total expenditures 156,753 156,752 1 180,383 180,383 Excess (deficiency) of revenues over expenditures - 4 4 465,617 459,786 (5,831) OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - Transfers in Transfers (out) (450,000) (450,000) Total other financing sources and uses (450,000) (450,000) Net change in fund balance 4 4 15,617 9,786 (5,831) Fund balances - beginning 326 189,371 Restatements - - Fund balances - beginning restated 326 189,371 Fund balances - ending 330 199,157 See independent auditor's report 125 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 Westside TIF Debt SID Revolving Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits Intergovernmental Charges for services Miscellaneous - - Investment earnings 1,000 654 (346) Total revenues 1,000 654 (346) EXPENDITURES Public safety - - - Public works Parks and recreation Community Development - - Debt service - principal 13,000 13,000 - Debt service -interest 19,520 19,117 403 Capital outlay - - - Total expenditures 32,520 32,117 403 - - - Excess (deficiency) of revenues over expenditures (32,520) (32,117) 403 1,000 654 (346) OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - - Transfers in 32,000 32,000 224,515 1,250 (223,265) Transfers (out) - - (242,308) - 242,308 Total other financing sources and uses 32,000 32,000 (17,793) 1,250 19,043 Net change in fund balance (520) (117) 403 (16,793) 1,904 18,697 Fund balances - beginning 988 281,562 Restatements - - Fund balances - beginning restated 988 281,562 Fund balances - ending 871 283,466 See independent auditor's report 126 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 S & C's SID 343 Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 9,567 9,658 91 104,587 100,159 (4,428) Licenses and permits - - - - - Intergovernmental Charges for services Miscellaneous Investment earnings - - - - - Total revenues 9,567 9,658 91 104,587 100,159 (4,428) EXPENDITURES Public safety - - - - - Public works Parks and recreation Community Development - - - - Debt service - principal 7,526 7,526 - 80,000 80,000 - Debt service - interest 1,588 1,577 11 24,480 22,000 2,480 Capital outlay - - - - - - Total expenditures 9,114 9,103 11 104,480 102,000 2,480 Excess (deficiency) of revenues over expenditures 453 555 102 107 (1,841) (1,948) OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - Transfers in Transfers (out) (1,250) (1,250) Total other financing sources and uses (1,250) (1,250) - Net change in fund balance (797) (695) 102 107 (1,841) (1,948) Fund balances - beginning 1,458 67,170 Restatements - - Fund balances - beginning restated 1,458 67,170 Fund balances - ending 763 65,329 See independent auditor's report 127 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 SID 345 Total Debt Service Funds Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 21,125 29,307 8,182 1,271,779 1,317,405 45,626 Licenses and permits - - - - - - Intergovernmental 100,715 100,715 Charges for services - - - Miscellaneous 56,038 56,041 3 Investment earnings 2,500 3,975 1,475 Total revenues 21,125 29,307 8,182 1,431,032 1,478,136 47,104 EXPENDITURES Public safety - - - - - - Public works Parks and recreation Community Development - - - - Debt service - principal 14,000 14,000 820,717 826,420 (5,703) Debt service -interest 7,125 7,125 186,521 177,872 8,649 Capital outlay - - - - - Total expenditures 21,125 21,125 1,007,238 1,004,292 2,946 Excess (deficiency) of revenues over expenditures - 8,182 8,182 423,794 473,844 50,050 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - Transfers in 256,515 33,250 (223,265) Transfers (out) (693,558) (451,250) 242,308 Total other financing sources and uses (437,043) (418,000) 19,043 Net change in fund balance 8,182 8,182 (13,249) 55,844 69,093 Fund balances - beginning 9,264 571,659 Restatements - - Fund balances - beginning restated 9,264 571,659 Fund balances - ending 17,446 627,503 See independent auditor's report 128 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2015 S & C Construction Positive / (Negative) Budget Actual Variance REVENUES Taxes and assessments Licenses and permits Intergovernmental Charges for services Miscellaneous Investment earnings Total revenues EXPENDITURES Public safety Public works Parks and recreation Community Development Debt service - principal Debt service - interest - - Capital outlay 25,000 10,885 14,115 Total expenditures 25,000 10,885 14,115 Excess (deficiency) of revenues over expenditures (25,000) (10,885) 14,115 OTHER FINANCING SOURCES (USES) Issuance of debt Transfers in Transfers (out) Total other financing sources and uses Net change in fund balance Fund balances - beginning Restatements Fund balances - beginning restated Fund balances - ending 25,000 7,845 (17,155) 25,000 7,845 (17,155) - (3,040) (3,040) (3,040) See independent auditor's report 129 COMBINING AND INDIVIDUAL FUND STATEMENTS NONMAJOR PROPRIETARY FUNDS AIRPORT ENTERPRISE — Accounts for all monies received and expensed in the operation of the City airport. SOLID WASTE — Accounts for assessments received and expenses incurred in the operation of the City solid waste department. City of Kalispell, Montana Combining Statement of Net Positon Nonmajor Proprietary Funds June 30, 2015 Airport Enterprise ASSETS Cash and investments $ 125,377 $ Taxes and assessments receivable, net - Accounts receivable - net 672 Contracts receivable - Due from other governments Prepaids Solid Waste Totals 994,912 $ 1,120,289 15,880 15,880 - 672 15,500 15,500 88,238 88,238 7,465 7,465 Restricted assets: Capital assets - land 1,359,545 - 1,359,545 Capital assets - depreciable, net 1,003,595 686,143 1,689,738 Total assets $ 2,489,189 $ 1,808,138 $ 4,297,327 DEFERRED OUTFLOWS OF RESOURCES Contractually required contributions related to pensions - 34,263 34,263 Total deferred outflows of resources - 34,263 34,263 LIABILITIES Accounts payable $ 198 $ 19,714 $ 19,912 Accrued payroll - 11,242 11,242 Current portion of long-term liabilities Bonds and notes - capital 37,963 37,963 Compensated absences payable 46,396 46,396 Long-term liabilities, due in more than one year Bonds and notes - capital 116,192 116,192 Compensated absences payable $ $ 32,299 $ 32,299 Net pension liability - 306,041 306,041 Total liabilities $ 198 $ 569,847 $ 570,045 DEFERRED INFLOWS OF RESOURCES Difference btwn est. and actual earnings on pension plan investment - 65,668 65,668 Total deferred inflows of resources 65,668 65,668 NET POSITION Net investment in capital assets $ 2,363,140 $ 531,988 $ 2,895,128 Unrestricted 125,851 674,898 800,749 Total net position $ 2,488,991 $ 1,206,886 $ 3,695,877 See independent auditor's report 130 City of Kalispell, Montana Combining Statement of Revenues, Expenses, and Changes in Fund Net Position Nonmajor Proprietary Funds For the Fiscal Year Ended June 30, 2015 OPERATING REVENUES Charges for services Miscellaneous revenues Total operating revenues OPERATING EXPENSES Personal services Supplies Purchased services Fixed charges Depreciation Total operating expenses Operating income (loss) Airport Enterprise Solid Waste Totals $ 79,091 $ 973,301 $ 1,052,392 2,101 92 2,193 $ 81,192 $ 973,393 $ 1,054,585 $ - $ 489,632 $ 489,632 - 85,122 85,122 44,932 20,518 65,450 13,316 119,600 132,916 96,467 100,644 197,111 $ 154,715 $ 815,516 $ 970,231 $ (73,523) $ 157,877 $ 84,354 NONOPERATING REVENUES (EXPENSES) Intergovernmental revenue Interest revenue Gain (loss) sale of capital asset Debt service interest expense Total non -operating revenues (expenses) $ Income (loss) before contributions and transfers $ Transfers (out) Change in net position Net Position - beginning of the year Restatements Net Position - beginning of the year - restated Net Position - end of the year - 5,119 5,119 902 5,564 6,466 - 46,600 46,600 - (1,170) (1,170) 902 $ 56,113 $ 57,015 (72,621) $ 213,990 $ 141,369 $ - $ (25,000) $ (25,000) $ (72,621) $ 188,990 $ 116,369 $ 2,561,612 $ 1,367,167 $ 3,928,779 - (349,271) (349,271) $ 2,561,612 $ 1,017,896 $ 3,579,508 $ 2,488,991 $ 1,206,886 $ 3,695,877 See independent auditor's report 131 City of Kalispell, Montana Combining Statement of Cash Flows Nonmajor Proprietary Funds Year Ended June 30, 2015 Cash flows from operating activities: Cash received from customers Cash received from miscellaneous sources Cash payments for claims Cash payments to employees Net cash provided (used) by operating activities Cash flows from capital and related financing activities: Principal paid on bonds, loans and advances Interest paid on bonds, loans and advances Acquisition and construction of capital assets Proceeds from the disposal of capital assets Net cash provided (used) by capital and related financing activities Cash flows from non -capital financing activities: Transfers between funds Net cash provided (used) from non -capital financing activities Cash flows from investing activities: Interest on investments Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning Restatement Cash and cash equivalents at end Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation Changes in assets and liabilities: Accounts receivable - net Ppd health insurance Taxes and assessments receivable, net Due from county Comp absences Accounts payable Accrued payroll Pension expens adjustment Net cash provided (used) by operating activities r Solid Waste Enterprise Totals $ 81,268 $ 991,967 $ 1,073,235 - 92 92 (58,242) (221,581) (279,823) - (484,336) (484,336) $ 23,026 $ 286,142 $ 309,168 $ $ (18,833) $ (18,833) (1,170) (1,170) (80,598) (80,598) 31,100 31,100 $ $ (69,501) $ (69,501) $ $ (25,000) $ (25,000) $ $ (25,000) $ (25,000) $ 902 $ 5,564 $ 6,466 $ 902 $ 5,564 $ 6,466 $ 23,928 $ 197,205 $ 221,133 101,449 797,707 899,156 $ 125,377 $ 994,912 $ 1,120,289 $ (73,523) $ 157,877 $ 84,354 96,467 100,644 197,111 76 - 76 - (970) (970) 9,736 9,736 8,930 8,930 - 11,139 11,139 6 3,659 3,665 - 1,833 1,833 - (6,706) (6,706) $ 23,026 $ 286,142 $ 309,168 See independent auditor's report 132 COMBINING AND INDIVIDUAL FUND STATEMENTS AGENCY FUNDS TBID CLEARING — Accounts for monies received for and due to the Tourism Business Improvement District. PAYROLL CLEARING — Accounts for payroll deductions and expenses payable to other agencies and vendors. PERFORMANCE BONDS — Accounts for monies held by the City as a guarantee of performance by developers or vendors. City of Kalispell, Montana Combining Statement of Fiduciary Net Position Agency Funds June 30, 2015 Performance TBID Clearing Payroll Clearing Bonds Totals ASSETS Current assets: Cash and investments 3.425 $ 514,447 $ 6,752 $ 524,624 Total assets 3.425 $ 514,447 $ 6,752 $ 524,624 LIABILITIES Current liabilities: Due to others 3,425 $ 514,447 $ 6,752 $ 524,624 Total liabilities 3,425 $ 514,447 $ 6,752 $ 524,624 See independent auditor's report 133 City of Kalispell, Montana Combining Statement of Changes in Assets and Liabilities Agency Funds For the Fiscal Year Ended June 30, 2015 Payroll Clearing Balance Balance June 30, 2014 Additions Deletions June 30, 2015 ASSETS Current assets: Cash and investments $ 461,057 8,456,793 (8,403,403) $ 514,447 Total assets 461,057 8,456,793 (8,403,403) 514,447 LIABILITIES Current liabilities: Due to others $ 461,057 9,394,886 (9,341,496) $ 514,447 Total liabilities $ 461,057 9,394,886 (9,341,496) $ 514,447 Performance Bonds Balance Balance June 30, 2014 Additions Deletions June 30, 2015 ASSETS Current assets: Cash and investments $ 36,329 33,265 (62,842) $ 6,752 Total assets $ 36,329 33,265 (62,842) $ 6,752 LIABILITIES Current liabilities: Due to others $ 36,329 71,107 (100,684) $ 6,752 Total liabilities $ 36,329 71,107 (100,684) $ 6,752 Tourism Business Improvement District Balance Balance June 30, 2014 Additions Deletions June 30, 2015 ASSETS Cash and investments $ 2,066 549,404 (548,045) $ 3,425 Total assets $ 2,066 549,404 (548,045) $ 3,425 LIABILITIES Due to others $ 2,066 549,404 (548,045) $ 3,425 Total liabilities $ 2,066 549,404 (548,045) $ 3,425 See independent auditor's report 134 STATISTICAL SECTION This part of the City of Kalispell's financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosure and required supplementary information says about the government's overall financial health. Contents Financial Trends These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over time Revenue Capacity These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax. Debt Capacity These schedules present information to help the reader assess the affordability of the government's current level of outstanding debt and the government's ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the City of Kalispell annual financial report for the relevant year. Note: The City of Kalispell implemented GASB Statement 34 in fiscal year 2003, therefore the data for prior years are not shown; schedules presenting government -wide information include information beginning in that year. FINANCIAL TRENDS �O Vl Vl �O O I- - N IC N O M N vi Vl C1 8 01 I- --i O N C, M M n M M N C O IC Vl IC O� 01 " C, l- O N N ,--i O 7 1b M 7 1O O� 01 N r-i O C, I- I- 7 r-i Vi I- 7 6 11 16 11 Ice M 01 N 7 N M m m M O N 1O M- N n m 7 �O C i I- - O l� Vl Vl � O Vl 7 O lr- � �--i 01 O� I- 7 C, 6 11 16 11 169 7 l� 7 vi N N O Vl � 1 I= O M N N M O M 1O N N - l- 01 t` 7 O l� �--i O N M_ N vi --i 0 C, vi 0 7 N O N vi l� 7 vi l� M M Vl N 8 4 O C, n O 7 n C1 N N I- c I- IC IC ,--i C, 7 vi 6 11 16 11 169 N Mi C, 7 IC C, I- N N IC IC vi M O - 7 C, M I- C, Vl M O lO 7 7 vi 1b C1 I` Vl N_ IC C, I` N I- O O M m C, I-C, 7 IC C, O N N --i 0 O �O N 1b I` C1 cn 't 7 N Vi C, - O ID ID I- O N l� C, Vl I` M 6911 16911 169 M I- !� N r - IC IC C, C, - r t M M 7 I- N r n M M 7 N N C1 M C, r-i r M_ 7 r-i C, C, M M IC C, N N O N 01 t M N I- C, N 7 1b 0 7 7 01 0 C - N l- 01 vi l- Vl l� O O M C, N Vl O I- N IC 7 �O 1b N O 1b C, I- M C1 C1 - M IC IC N O 1b N rnN C C, n0 - C1 N 1b - M Ni M l� N N 7 I` M O 01 O O - O O Vl ID N N N M .. 0 r C, IC r M --i IC U v O M M I, 1b r N P. P. :Q w O C, IC � 4 7 yy H `a a U 7 7 01 N Vl r O O C, N C, 01 7 Ni C1 11 n 01 M vi M 7 M I- Vl 01 — �--i C1 CO 7 vi 01 01 O C, O O IC M �-+ O C1 N Vl IC Vl I- n l� O IC Vl Vl N N 1O 1O 1O Vl N --i C, w � w 6A 6y 6y O a Vl 01 Vl C, ID ID O Vl M C, N N C C, 7 I` IC cn 7 O 7 C1 01 O C, vi C1 1O U O C, M O O n 1b 7 N Ob 7 0 N ,--i ` �O ,--i M M N OM1 I` N O C1 N N ID ID vi 7 C, N vi I- 6 11 16 11 16 ' 7 01 - - C` M IC �O I IC N l� I- IC M vi C, I= 7 C, rD N I, � 7 O N I= O O O Vl l� N 't O O IC Vl M vi C1 7 O C1 I� O I` Vl I` 7 I� N O �D I- - 7 ,:- IC N vi � M I- 6 11 16 11 169 N Vl M vi 7 O O O M I� M I- I'i 1b O O 1 1b b vi M l- O O M N lO 7 l- N IC �ii 7 M 01 � 01 - O M O O I- N C, N N 7 0 O - N cn lO vi 7 I- n I` N N C, C, M O IC O Vl 0 7 0 69 69 69 C C O 0 N N N N N 0 O m a) m N N O _ C 70, C _ Q (6 N U :> U > U C N .� U C (6 .. N i 'j C N C C (6 U N N (6 U N y a) O (6 N O U E O N O U N N N O U C 'U 0) i %` C 'U N O O C 'U N (6 C E N d> N N 0) 0 N � E 0 0 C O 0) N 0 C 7 i a) a) C' C Z w D 0) C Z w D Q O Z w D Q j (6 N N E N O O 3 O ` — O C9 1 m a unaudited statistical section 135 CITY OF KALISPELL, MONTANA CHANGES IN NET POSITION Put Ten Fiscal Years 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Expenses Governmental activities: General government 2,688,413 5,851,576 7,230,428 6,778,754 5,149,809 5,310,274 6,995,454 6,709,523 5,688,135 5,401,242 Public Safety 6,875,372 7,684,804 9,W8,419 8,%2,M2 9,015,732 8,729,290 8,536,332 9,293,138 9,M9,827 9,575,487 Public Works 2,196,190 1,979,249 2,326,750 2,327,255 3,201,811 3,306,165 2,844,001 3,074,630 2,573,627 2,773,097 Parks and recreation 1,719,630 1,895,781 2,302,240 2,009,168 1,860,308 1,845,939 1,913,920 1,991,585 2,123,237 2,062,669 Community Development 1,482,210 3,706,504 979,002 1,012,555 1,629,656 2,033,880 1,426,377 3,616,337 1,601,170 683,164 Miscellaneous 1,053 (14,839) Interest 529,263 736,927 701,786 672,386 627,678 580,361 390,770 357,857 331,811 Total governmental activities expenses $ 15,492,131 $ 21,840,002 $ 23,148,625 $ 21,762,380 $ 21,484,994 $ 21,805,909 $ 21,716,084 $ 25,075,984 $ 21,613,853 $ 20,827,470 Business -type activities: Airport 105,429 174,865 202,122 204,842 176,702 214,636 217,616 225,974 177,751 154,715 Water 1,808,613 2,080,954 2,394,777 2,597,419 2,638,011 2,689,293 2,592,628 2,6W,877 2,625,096 2,542,119 Sewer 3,570,618 4,037,350 4,716,788 5,354,062 5,976,393 5,882,868 5,564,219 5,255,654 5,114,591 5,077,643 Ambulance 1,383,918 1,707,121 Solid Waste 615,882 654,839 762,782 772,132 801,909 718,139 749,481 783,967 812,650 816,686 Total business -type activities expenses 7,484,460 8,655,129 8,076,469 8,928,455 9,593,015 9,504,936 9,123,944 8,926,472 8,730,038 8,591,163 Total pnmary government expenses $ 22,976,591 $ 30,495,131 $ 31,225,094 $ 30,690,835 $ 31,078,009 $ 31,310,845 $ 30,840,028 $ 34,002,456 $ 30,343,891 $ 29,418,633 Program Revenues Governmental activities: Charges for services: General government 434,172 432,519 621,250 829,925 951,940 1,039,553 865,223 669,964 628,729 684,550 Public Safety 1,799,378 2,542,711 2,441,274 1,867,539 1,622,104 1,6/8,825 1,753,%9 1,928,011 2,033,870 1,973,898 Public Works 1,499,638 1,650,116 2,269,770 2,W4,731 2,098,848 2,312,530 2,226,027 2,201,616 2,172,122 2,463,435 Parks and recreation 700,576 739,245 754,025 547,874 624,158 592,868 619,634 711,90 752,460 728,165 Community Development 464,300 193,623 507,6W 228,989 136,598 28,161 243,088 170,429 283,134 153,431 Operating grants and contributions 1,793,603 1,782,022 2,108,149 2,074,401 3,768,083 3,588,307 2,554,322 2,688,746 2,636,321 1,838,425 Capital grants and contributions 158,695 5,473,543 6,318,780 6,551,018 2,284,26/ 3,351,562 1,385,939 1,378,649 1,519,825 3,232,618 Total governmental activities program revenues $ 6,850,362 $ 12,813,779 $ 15,020,947 $ 14,704,477 $ 11,485,998 $ 12,591,806 $ 9,648,202 $ 9,749,384 $ 10,026,461 $ 11,074,522 Business -type activities: Charges for services: Airport 48,207 69,297 91,958 72,373 70,04 70,900 76,572 75,813 78,657 79,091 Water 2,927,706 2,343,047 2,722,421 2,562,569 2,624,521 2,296,594 2,430,380 2,740,512 2,985,959 3,018,276 Sewer 4,455,533 3,813,703 4,104,508 4,163,757 4,129,271 4,124,020 4,554,155 4,977,286 4,96/,223 5,141,284 Ambulance 1,365,111 1,463,513 Solid Waste 615,094 623,132 709,514 758,236 767,404 805,613 851,563 900,643 951,676 973,393 Operating grants and contributions 79,501 121,264 10,465 2,416 8,354 8,372 27,721 Capital grants and contributions 2,976,538 10,087,410 9,486,451 1,257,291 1,280,807 888,609 679,690 1,012,027 2.137,977 1,098,222 Total business -type activities program revenues 12,467,690 18,521,366 17,125,317 8,814,226 8,872,697 8,185,736 8,594,776 9,714,635 11,129,864 10,337,987 Total pnmary government program revenues $ 19,318,052 $ 31,335,145 $ 32,146,264 $ 23,518,703 $ 20,358,695 $ 20,777,542 $ 18,242,978 $ 19,464,019 $ 21,156,325 $ 21,412,509 Net (Expense)/Revenue Governmental activities (8,641,769) (9,026,223) (8,127,678) (7,057,903) (9,998,996) (9,214,103) (12,067,881) (15,326,600) (11,587,392) (9,752,948) Business -type activities 4,983,230 9,866,237 9,048,848 (114,229) (720,318) (1,319,200) (529,168) 788,163 2,399,826 1,746,824 Total pnmary government net expense $ (3,658,539) $ 840,014 $ 921,170 $ (7,172,132) $ (10,719,314) $ (10,533,303) $ (12,597,049) $ (14,538,437) $ (9,187,566) $ (8,006,124) General Revenues and Other Changes in Net Position Governmental activities: Taxes Property taxes 10,322,742 5,374,150 5,824,984 6,252,363 6,370,333 7,563,944 7,469,972 8,092,684 8,739,807 7,584,775 Misc. 98,40 106,783 151,062 184,781 189,921 Investment earnings 364,000 496,992 278,957 159,208 106,799 81,041 130,836 71,573 48,193 72,531 Grants and entitlements not restricted 2,353,992 2,301,876 2,221,506 2,223,398 2,608,937 2,316,980 2,W3,949 2,657,356 2,835,264 3,134,703 Gas Tax 318,622 324,774 342,226 354,678 361,349 366,904 361,157 3W,650 364,563 364,622 Gain (loss)sale of capital assets (61,395) 1,210,868 (392) (212,127) 11,610 Transfers (3,060,201) (1,514,159) 415,503 (194,558) (112,574) 27,188 (358,169) (218,728) (65,000) Total governmental activities $ 10,237,760 $ 8,194,501 $ 9,083,176 $ 8,989,647 $ 9,252,468 $ 10,314,764 $ 10,487,758 $ 10,975,156 $ 11,953,880 $ 11,293,162 Business -type activities: Investment earnings 610,799 898,491 832,2% 467,038 228,143 163,907 142,299 102,311 83,224 113,963 Gain (loss) sale of capital assets 459,892 (41,786) - 46,710 Other (312,736) - 2,101 Transfers 3,060,201 1,514,159 (415,503) 194,558 112,574 358,169 218,728 65,000 Total business -type activities $ 4,130,892 $ 2,412,650 $ 416,793 $ 467,038 $ 422,701 $ (36,255) $ 100,513 $ 460,480 $ 301,952 $ 227,774 Total pnmary government $ 14,368,652 $ 10,607,151 $ 9,499,969 $ 9,456,685 $ 9,675,169 $ 10,278,509 $ 10,588,271 $ 11,435,636 $ 12,255,832 $ 11,520,936 Change in Net Position Governmental activities 1,595,991 (831,722) 955,498 1,931,744 (746,528) 1,100,661 (1,580,123) (4,351,444) 366,488 1,540,214 Business -type activities 9,114,122 12,278,887 9,465,641 352,809 (297,617) (1,355,455) (428,655) 1,248,643 2,701,778 1,974,598 Tote l pn m ary government $ 10,710,113 $ 11,447,165 $ 10,421,139 $ 2,284,553 $ (1,044,145) $ (254,794) $ (2,008,778) $ (3,102,801) $ 3,068,266 $ 3,514,812 Unaudited statistical section 136 O o0 CA � l� N O M O O 00 �C M CO O C� CO N V) N CO CO x G W OR N � -6 C C 7 N 7 C � C N O N E C > N N N C cu .0 0 > N O 0) N O a) c co U) o t Z tY D tY D m unaudited statistical section 137 E M V O h M N M N Cl N O� C V O h O co V N N O �O r- co m N o� m n r- n ,-. m r- r- r- o� o� o N m r-� 14� N co r-� 14� r-� v v �O h 1O V �Ili M N O �O N V V� M h O� � V O 1O m Vl h V M M V O N� V V Vl h M M h Vl N �_ M M M M Vl M O m O V O� Vl co O Vl O O O� N N N O N N E o� cv Cn o� v r- r- v o N14� r- v N M r- o M m N � �� C o o� m N N i "" I v co cS co cS r. r. r. r. o� ,— MVl V o o� N o� v o cS v cS cn C cS "— " — N m N oC. c o � � v o� m o� v �n v � � o N � � N N 7 ID U N O O m E ." N N C p Q (o -O N (�/1 U N i6 N N wU QE (D Q W N N w E > .. N X (6 'O O O O N >O w2 -0 U -6 R O O .� .— -O (D m -6 C U N 7 m 0 m (D L � m O N Q in axi LL N N U p Q 0 > X N Qj (6 N WD N (6 Q C Q Q Y L .!? Q C U t C C (D (6 y p U L > O X O 6 O m N O X> 6 O O iY�J �C)LL CF W(7aaaC)OC)0a �F w o Of—f— �'�mF unaudited statistical section 138 0 t` 0 0 N 0 0 0 0 v 0 N O �D N N U C C X o N N 6 -O O- 'Q w U (D O (D U o) Z L ((D U Q Z 0 REVENUE CAPACITY CITY OF KALISPELL, MONTANA MARKET VALUE OF TAXABLE PROPERTY Past Ten Fiscal Years (in thousands of dollars) Fiscal Taxable Year Real Less Total Total Estimated Value as a Ended Taxable Tax Taxable Direct Market Percentage June 30, Value Increment Valuation Tax Rate Value of Market Value 2006 $29,770 $ 1,119 $ 28,651 170.00 $ 893,658 3.21% 2007 $32,494 $ 701 $ 31,793 166.90 $1,035,070 3.07% 2008 $35,810 $ 923 $ 34,887 162.85 $1,148,125 3.04% 2009 $37,850 $ 1,341 $ 36,509 170.23 $1,190,541 3.07% 2010 $39,522 $ 1,540 $ 37,982 169.81 $1,269,511 2.99% 2011 $41,074 $ 1,626 $ 39,448 170.34 $1,360,162 2.90% 2012 $41,785 $ 1,716 $ 40,069 175.93 $1,413,041 2.84% 2013 $40,531 $ 1,515 $ 39,016 185.60 $1,450,786 2.69% 2014 $40,798 $ 1,464 $ 39,334 185.10 $1,506,125 2.61 % 2015 $41,761 $ 2,240 $ 39,521 187.80 $1,587,574 2.49% Source: Flathead County and Montana Department of Revenue Note: Assessed by Montana Department of Revenue every six years Unaudited statistical section 139 CITY OF KALISPELL, MONTANA DIRECT AND OVERLAPPING PROPERTY TAX RATES Past Ten Fiscal Years (rate per $1000 of assessed value) City of Kalispell Overlapping Rates Fiscal General Total Year Obligation Direct Kalispell Ended Basic Health Debt Tax School Flathead State of June 30, Rate Insurance Service Rate District County Montana 2006 137.00 12.50 20.50 170.00 375.51 112.64 46.00 2007 134.90 13.50 18.50 166.90 361.23 115.88 46.00 2008 132.60 14.75 15.50 162.85 351.09 119.96 46.00 2009 138.76 16.22 15.25 170.23 358.27 104.51 46.00 2010 140.11 15.20 14.50 169.81 350.47 113.12 46.00 2011 141.50 14.64 14.20 170.34 341.38 122.77 46.00 2012 145.88 16.55 13.50 175.93 337.15 125.69 46.00 2013 154.60 18.50 12.50 185.60 327.58 125.96 46.00 2014 154.10 18.50 12.50 185.10 335.79 124.94 46.00 2015 156.80 18.50 12.50 187.80 349.48 128.88 46.00 Source: Flathead County Unaudited statistical section 140 CITY OF KALISPELL, MONTANA PRINCIPAL PROPERTY TAX PAYERS Current Year, and Nine Years Ago 2015 Taxable Assessed Taxpayer Value Rank CENTURYLINK INC 2,032,381 1 FLATHEAD ELECTRIC COOPERATIVE INC $ 1,763,130 2 NORTHWESTERN CORP TRANSMISSION & DISTRIBUTIOI 855,986 3 FLATHEAD HOSPITAL DEVELOPMENT COMPANY LLC 505,452 4 INLAND WESTERN KALISPELL MOUNTAIN VIEW LLC 374,458 5 BRESNAN COMMUNICATIONS LLD 371,620 6 WAL-MART ESTATE BUSINESS TRUST 352,534 7 STATE OF MONTANA DNRC 297,053 8 CROWN ENTERPRISES INC 266,937 9 NORTHWEST HEALTHCARE CORP 249,997 10 TARGET CORPORATION HD DEVELOPMENT OF MARYLAND INC KALISPELL GOLDBERG LLC GVD COMMERCIAL PROPERTIES INC ROCKY MTN SUB SPECIALTY ASSOCIATES LLC Total 7,069,548 Total City Taxable Assessed Value $38,953,059 Source: Flathead County 2006 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Assessed Assessed Assessed Value Value Rank Value 5.22% 995,774 1 3.07% 4.53% $ 993,212 2 3.06% 2.20% 596,027 4 1.84% 1.30% 775,231 3 2.39% 0.96% 0.95% 0.91% 0.76% 0.69% 0.64% 264,458 7 0.82% 238,437 8 0.74% 207,012 9 0.64% 502,392 5 1.55% 494,803 6 1.53% 159,622 10 0.49% 18.15% 5,226,968 16.12% Unaudited statistical section 141 CITY OF KALISPELL, MONTANA PROPERTY TAX LEVIES AND COLLECTIONS Past Ten Fiscal Years Fiscal Collected within the Year Taxes Levied Fiscal Year of the Levy Collections Ended for the Percentage in Subsequent June 30, Fiscal Year Amount of Levy Years 2006 4,870,670 4,540,926 93.23% 310,262 2007 5,306,252 5,097,185 96.06% 178,290 2008 5,831,659 5,614,138 96.27% 107,314 2009 6,214,927 5,883,671 94.67% 274,773 2010 6,449,723 6,036,354 93.59% 411,906 2011 6,719,572 6,182,842 92.01% 535,190 2012 7,049,515 6,847,410 97.13% 202,105 2013 7,241,555 7,078,423 97.75% 163,132 2014 7,280,909 6,986,904 95.96% 293,943 2015 7,422,232 7,179,788 96.73% n/a Source: Flathead County City Manager's Recommended Budget Unaudited statistical section 142 Total Collections to Date Percentage Amount of Levy 4,851,187 99.60% 5,275,475 99.42% 5,721,452 98.11% 6,158,444 99.09% 6,448,260 99.98% 6,718,032 99.98% 7,049,515 100.00% 7,241,555 100.00% 7,280,847 100.00% 7,179,788 96.73% CITY OF KALISPELL, MONTANA WATER SOLD BY TYPE OF CUSTOMER Past Ten Fiscal Years (in thousands of gallons) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Type of Customer Residential 494,293 560,565 620,857 565,060 506,020 509,575 545,349 475,419 587,018 625,397 Commercial 504,591 550,512 556,018 527,405 540,942 515,959 495,461 544,564 494,608 516,693 Total 998,884 1,111,077 1,176,875 1,092,465 1,046,962 1,025,534 1,040,810 1,019,983 1,081,626 1,142,090 Total direct rate $ 1.80 $ 1.92 $ 2.05 $ 2.29 $ 2.30 $ 2.06 $ 2.14 $ 2.49 $ 2.55 $ 2.43 per 1000 gallons SEWER SOLD BY TYPE OF CUSTOMER Past Ten Fiscal Years (in thousands of gallons) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Type of Customer Residential 326,351 342,771 361,875 354,477 357,747 332,977 331,165 367,916 365,731 364,397 Commercial 579,002 580,838 544,071 519,402 521,204 449,167 527,307 538,810 482,325 497,854 Total 905,353 923,609 905,946 873,879 878,951 782,144 858,472 906,726 848,056 862,251 Total direct rate $ 3.40 $ 3.57 $ 3.77 $ 4.22 $ 3.79 $ 4.20 $ 4.37 $ 4.61 $ 4.87 $ 4.95 per 1000 gallons Source: City of Kalispell Finance Department Unaudited statistical section 143 Fiscal Year Ended June 30, 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CITY OF KALISPELL, MONTANA WATER AND SEWER RATES Water Bi-Monthly Rate per Base 1000 Rate Gallons in city out of city in city out of city $ 2.85 3.56 $ 1.66 2.08 $ 3.00 3.75 $ 1.83 2.29 $ 3.25 4.06 $ 2.01 2.51 $ 3.55 4.44 $ 2.21 2.76 $ 3.75 4.69 $ 2.43 3.04 $ 3.75 4.69 $ 2.43 3.04 $ 3.75 4.69 $ 2.43 3.04 $ 3.75 4.69 $ 2.43 3.04 $ 3.75 4.69 $ 2.43 3.04 $ 9.38 11.73 $ 2.43 3.04 $ 15.00 18.75 $ 2.43 3.04 $ 15.00 18.75 $ 2.43 3.04 Irrigation (sprinkling) Bi-Monthly Rate per Base 1000 Rate Gallons in city out of city in city out of city $ 2.85 3.56 $ 1.05 1.31 $ 3.00 3.75 $ 1.15 1.44 $ 3.25 4.06 $ 1.27 1.59 $ 3.55 4.44 $ 1.39 1.74 $ 3.75 4.69 $ 1.55 1.94 $ 3.75 4.69 $ 1.55 1.94 $ 3.75 4.69 $ 1.55 1.94 $ 3.75 4.69 $ 1.55 1.94 $ 3.75 4.69 $ 1.55 1.94 $ 9.38 11.73 $ 1.55 1.94 $ 15.00 18.75 $ 1.55 1.94 $ 15.00 18.75 $ 1.55 1.94 Some custormers pay to install a separate irrigation meter and are then billed actual meter readings for their irrigation use. The City also bills customers a "sprinkling" rate based off of an average usage in the "winter months" deduction. Sources: City of Kalispell, Resolutions 4798/4799/5491 Sewer Bi-Monthly Rate per Base 1000 Rate Gallons in city out of ci in city out of city $ 2.85 3.56 $ 3.48 4.35 $ 3.00 3.75 $ 3.62 4.53 $ 3.25 4.06 $ 3.80 4.75 $ 3.55 4.44 $ 3.99 4.99 $ 3.75 4.69 $ 4.19 5.24 $ 3.75 4.69 $ 4.19 5.24 $ 3.75 4.69 $ 4.19 5.24 $ 9.38 11.73 $ 4.19 5.24 $ 15.00 18.75 $ 4.19 5.24 $ 15.00 18.75 $ 4.78 5.98 $ 15.00 18.75 $ 4.78 5.98 $ 16.88 21.10 $ 4.78 5.98 Flathead County Water & Sewer District 91 - Evergreen Monthly Rate per Base 1000 Rate Gallons out oLSLity Trumble Cr* Evergreen* 1.55 1.37 1.36 1.31 1.47 1.63 13.37 6.21 1.85 21.27 6.37 1.76 28.29 6.37 1.48 28.29 6.37 1.67 28.71 6.84 1.74 22.77 6.84 1.78 "Evergreen has its own collections system and only uses the City's sewage treatment plant, which results in a reduced charge. The City bills the district, which in turn bills the users within the district. The district is counted as 1 sewer connection. 'The City of Kalispell entered into an agreement with Flathead County Water & Sewer District #1 - Evergreen to treat the wastewater from the Trumble Creek subdivision. Present build out of this subdivision is less than 30 residences. Future build out could equal 400 residences. Unaudited Statistical Section 144 DEBT CAPACITY CITY OF KALISPELL, MONTANA RATIOS OF OUTSTANDING DEBT BY TYPE Past Ten Fiscal Years Governmental Activities Business -Type Activities Fiscal Year General Special Ended Obligation Notes Revenue Assessment Revenue June 30, Bonds Payable Bonds Bonds Bonds 2006 6,085,000 2,314,448 288,523 5,730,774 9,770,250 2007 5,785,000 2,269,944 222,868 5,389,846 8,703,159 2008 5,475,000 3,303,829 153,073 5,079,534 19,471,713 2009 5,145,000 3,062,562 78,876 4,760,665 22,193,000 2010 4,805,000 2,833,340 1,445,000 4,410,462 19,541,000 2011 4,450,000 2,682,566 1,325,000 4,077,194 18,410,000 2012 4,145,000 2,422,191 1,700,000 3,845,329 17,333,000 2013 3,700,000 2,380,835 1,558,000 3,457,647 15,938,483 2014 3,255,000 2,177,968 1,410,000 3,392,922 15,667,682 2015 2,805,000 1,893,621 1,257,000 3,074,242 14,434,000 Source: City Manager's Recommended Budget City of Kalispell Finance Department Total Notes Primary Payable Government 172,988 154,155 24,199,995 22,370,817 33,483,149 35,240,103 33,034,802 30,944,760 29,445,520 27,034,965 26,076,560 23,618,018 Percentage of Personal Per Income Capita 3.83 % $ 1,313.05 3.30% $ 1,156.89 4.71 % $ 1,648.60 4.82 % $ 1,660.62 4.43 % $ 1,526.56 4.38 % $ 1,552.91 3.80 % $ 1,453.67 3.40 % $ 1,319.62 320% $ 1,243.40 2.83 % $ 1,097.59 Unaudited statistical section 145 CITY OF KALISPELL, MONTANA RATIOS OF GENERAL BONDED DEBT OUTSTANDING Past Ten Fiscal Years General Bonded Debt Outstanding Percentage Fiscal of Actual Year General Special Externally Net Taxable Ended Obligation Assessment Restricted Bonded Value of Per June 30, Bonds Bonds for Repayment Debt Property Capita 2006 6,085,000 5,730,774 541,525 11274,249 39.4% $ 583.04 2007 5,785,000 5,389,846 541,525 10,633,321 33.4% $ 523.55 2008 5,475,000 5,079,534 541,525 10,013,009 28.7% $ 471.84 2009 5,145,000 4,760,665 371,873 9,533,792 26.1% $ 440.56 2010 4,805,000 4,410,462 541,525 8,673,937 22.8% $ 435.29 2011 4,450,000 4,077,194 531,075 7,996,119 20.3% $ 394.75 2012 4,145,000 3,845,329 414292 7,576,037 18.9% $ 369.80 2013 3,700,000 3,457,647 349,694 6,807,953 17.4% $ 332.31 2014 3,255,000 3,392,922 172267 6,475,655 16.5% $ 308.78 2015 2,805,000 3,074242 531,588 5,347,654 13.5% $ 248.52 Source: City Manager's Recommended Budget Montana Department of Revenue Montana Department of Labor and Industry, Quarterly Census of Employment and Wages (QCEW) Program Unaudited statistical section 146 0 O ti 0 N N 0 r N vv � Q = y � O O p N Q N N Q 01 O U U C N N N (6 O' Q O Q N O 0) _ n m n 0 rn J unaudited statistical section 147 CITY OF KALISPELL, MONTANA PLEDGED REVENUE COVERAGE Past Ten Fiscal Years Water/Sewer Revenue Bonds Fiscal Year Utility Less: Ended Service Operating Debt Service June 30, Charges` Expenses" Principal Interest 2006 5,508,970 (3,123,526) (802,966) (280,249) 2007 6,141,024 (3,794,101) (532,655) (222,847) 2008 7,628,374 (4,332,133) (553,795) (203,424) 2009 7,572,970 (4,676,950) (579,197) (182,006) 2010 7,213,024 (4,513,881) (1,087,000) (779,083) 2011 6,810,442 (4,478,406) (1,131,000) (737,866) 2012 7,359,224 (4,143,706) (1,007,000) (647,296) 2013 8,063,596 (4,410,574) (1,387,000) (446,979) 2014 8,289,654 (4,516,282) (1,226,000) (388,108) 2015 8,587,057 (4,370,296) (1,242,000) (369,564) 'includes other revenues pledged for debt service " excludes depreciation Source: City of Kalispell Finance Department Assessment Bonds Special Assessment Debt Service Coverage Collections Principal Interest Coverage 1,302,229 149,008 (68,573) (64,192) 16,243 1,591,421 644,859 (340,929) (277,456) 26,474 2,539,022 607,086 (325,718) (253,172) 28,196 2,134,817 298,968 (327,423) (241,088) (269,543) 833,060 711,971 (357,831) (228,611) 125,529 463,170 505,777 (334,210) (212,843) (41,276) 1,561,222 332,474 (396,662) (185,444) (249,632) 1,819,043 399,180 (391,662) (186,121) (178,603) 2,159,264 197,682 (324,198) (171,133) (297,649) 2,605,197 1,400,791 (326,526) (163,360) 910,905 Unaudited statistical section 148 DEMOGRAPHICS AND ECONOMICS CITY OF KALISPELL, MONTANA DEMOGRAPHIC AND ECONOMIC STATISTICS Past Ten Fiscal Years Fiscal Per Year Capita K-12 Annual Ended Personal Personal Median School Unemployment June 30, Population Income (in thousands) Income Age Enrollment* Rate** 2006 18,422 2,604,434 31,556 36.10 5,063 4.10% 2007 19,337 2,905,427 34,252 35.20 5,086 3.60% 2008 20,310 3,074,726 35,261 34.20 5,290 3.70% 2009 21,221 3,220,970 35,685 33.30 5,425 6.00% 2010 21,640 2,965,360 32,619 34.50 5,450 10.90% 2011 19,927 3,133,897 34,487 34.80 5,545 11.00% 2012 20,256 3,275,434 35,875 34.80 5,707 10.20% 2013 20,487 3,503,436 38,222 34.80 5,985 9.00% 2014 20,972 3,614,032 38,832 34.60 5,992 7.90% 2015 21,518 3,700,289 38,982 37.60 5,992 5.00% `School District 5 "unadjusted annual (calendar) - October unadjusted (2015) Sources: Kalispell Public Schools Audit Report U.S. Census Bureau U.S. Department of Commerce - Bureau of Economic Analysis Montana Department of Labor & Industry Unaudited statistical section 149 CITY OF KALISPELL, MONTANA PRINCIPAL PUBLIC AND PRIVATE INDUSTRY EMPLOYERS 2015 and 2006 class sizes (available) Private Employer Kalispell Regional Medical Center School District #5 L.C. Staffing Flathead County Teletech National Flood Services Applied Materials (Semitool Inc.) Wal-Mart Immanuel Lutheran Home Costco Class 6 - 100 to 249 employees Class 7 - 250 to 499 employees Class 8 - 500 to 999 employees Class 9 - 1000+ employees *Flathead County total employment Rank Estimated #of Employees 2015 Estimated %of Total Employment* 1 2,282 5.87% 2 750 1.93% 3 550 1.42% 4 492 1.27% 5 450 1.16% 6 422 1.09% 7 400 1.03% 8 390 1.00% 9 267 0.69% 10 232 0.60% Sources: Montana Department of Labor & Industry Montana West Economic Development Staff GASB, Statement 44 requires the demographic and economic information should indicate the top ten employers in current year and nine years prior for comparison. The State of Montana, Department of Labor only reports the top 20 private employers in each county and does not rank them or provide the number of employees as they consider it confidential information. Nine year prior information is not available. This information will be updated as available. 2006 Class Size Industry 9 Healthcare 8 Education 7 Other 7 Government 8 Professional & Tech. Finance & Insurance 8 Manufacturing 7 Retail 6 Healthcare 6 Retail Unaudited statistical section 150 OPERATING STATISTICS CITY OF KALISPELL, MONTANA Full -Time Equivalent City Government Employees by Function/Program Past Ten Fiscal Years FY 06 FY 07 FY 08 FY 09 FY10 FY11 FY12 FY13 FY14 FY15 General Government Manager 2.00 2.00 2.00 2.00 1.00 1.00 1.00 1.00 1.00 1.00 Human Resources 1.25 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 City Clerk 1.00 1.00 1.00 1.34 1.34 1.34 1.34 1.24 1.23 1.58 Media Specialist 0.50 0.55 0.55 0.55 Finance 3.80 3.70 3.70 3.70 3.20 3.20 3.20 3.20 3.20 3.20 Attorney 3.00 5.00 5.00 4.66 4.66 4.66 4.66 4.66 4.67 4.67 Court 3.00 3.50 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 City Hall 1.00 1.00 1.00 1.00 1.00 1.40 1.40 1.40 1.40 1.45 Planning & Zoning 6.50 6.50 6.50 6.50 4.75 4.75 4.25 4.25 4.25 4.25 Building 6.50 6.50 7.50 7.50 5.25 3.45 3.95 3.95 3.95 5.20 Information Technology 1.00 1.00 1.00 1.00 1.00 1.00 1.50 2.25 2.25 2.15 Total General Government 29.05 31.70 33.20 33.70 28.25 26.85 27.35 27.45 27.45 29.00 Public Safety Police 44.00 45.00 47.00 48.50 47.50 41.00 42.00 44.00 44.00 44.00 Fire 26.75 27.75 29.60 29.90 24.90 27.30 26.30 27.30 23.30 23.30 Ambulance 7.25 11.25 9.40 9.10 9.10 7.50 7.50 6.50 9.50 9.50 Total Public Safety 78.00 84.00 86.00 87.50 81.50 75.80 75.80 77.80 76.80 76.80 Public Works DPW 2.05 1.90 1.90 0.15 0.15 0.25 0.25 0.25 0.25 0.25 Garage 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Street Maint 11.05 11.00 11.45 12.05 12.30 12.65 12.35 12.25 12.25 12.25 Sign/signal 2.00 2.00 2.00 2.50 2.50 2.50 2.50 2.50 2.00 2.00 Light District 0.10 0.60 0.60 0.80 0.75 0.75 1.25 1.25 Water 13.05 12.95 15.20 15.75 15.95 15.60 15.25 14.90 14.80 14.80 Sewer 6.75 7.40 8.05 8.70 8.40 8.45 7.55 7.00 7.05 7.05 WWTP 7.80 7.40 9.40 9.40 8.40 8.05 7.90 7.55 7.55 7.55 Storm 3.40 4.60 5.35 6.00 6.20 6.40 6.45 6.20 6.20 6.20 Solid Waste 6.60 6.55 7.35 7.55 7.60 7.35 7.25 7.35 7.40 7.40 Total Public Works 55.70 56.80 63.80 65.70 65.10 65.05 63.25 61.75 61.75 61.75 Parks and Recreation Parks and Recreation 9.95 11.40 11.40 11.10 9.20 8.90 8.90 9.45 9.80 9.80 Forestry 2.05 2.55 2.55 2.80 2.80 3.00 3.00 3.20 2.85 L80 Total Parks and Recreation 12.00 13.95 13.95 13.90 12.00 11.90 I L90 12.65 12.65 I L60 Community Development UDAG/Comm. Dev. 2.30 3.50 3.50 2.00 2.00 2.00 2.00 2.00 2.00 L75 Airport Airport 0.75 0.75 0.75 1.00 1.00 0.50 0.50 0.50 0.50 0.00 Total all funds 177.80 190.70 201.20 203.80 189.85 182.10 180.80 182.15 181.15 180.90 Source: City Manager's Recommended Budget Unaudited statistical section 151 CITY OF KALISPELL, MONTANA Capital Asset Statistics by Function/Program Past Ten Fiscal Years FY 06 FY 07 FY 08 FY 09 FY10 FY11 FY12 FY13 FY14 FY15 Police Stations 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Patrol Units (Cars) 10.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 Patrol Units (Motorcycles) 0.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 Fire Stations 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 Fire Trucks 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 Ambulances 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 Streets Streets and Alleys (Miles) 114.00 130.00 133.00 139.00 139.00 139.00 139.00 139.00 139.00 140.00 Sidewalk Replaced (Linear Feet) 1466.00 225.00 1411.00 1060.00 1060.00 776.00 1704.00 1476.00 1510.00 1723.00 New Sidewalks (Linear Feet) 400.00 Water Mains (Miles) 90.00 104.00 116.00 125.00 125.50 126.00 126.00 126.00 128.00 128.00 Wastewater Sanitary Mains (Miles) 106.00 108.00 119.00 130.00 130.50 130.50 130.50 130.50 131.00 131.00 Storm Mains (Miles) 38.00 40.00 47.00 52.00 52.00 52.00 52.00 53.00 53.00 53.50 Lift Stations 29.00 34.00 38.00 39.00 40.00 40.00 40.00 40.00 41.00 41.00 Treated Sewage (Gallons) 1075 mil 1029 mil 1039 mil 980 mil 991 mil 1129 mil 977 mil 955 mil 976 mil 976 mil Solid Waste Collection Vehicles 7.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 Other Vehicles 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 Parks City Parks (Acres) 366.20 420.73 429.74 429.74 429.74 429.74 429.74 429.49 429.49 429.49 Source: City of Kalispell Finance Department City of Kalispell Public Works Department City of Kalispell Parks Department City of Kalispell Police Department Unaudited statistical section 152 INDEPENDENT AUDITOR'S REPORTS Wipfli LLP 910 North Last Chance Gulch Helena, MT 59601 406.442.5520 fax 406.443.1017 www.wipfli.com INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS To the City Council Members City of Kalispell, Montana We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, the aggregate remaining fund information, and budgetary comparisons (for major funds) of the City of Kalispell as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the City of Kalispell's basic financial statements, and have issued our report thereon dated December 29, 2015. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Kalispell's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Kalispell's internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Kalispell's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 153 Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Kalispell's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. G(l� LAP Wipfli LLP Helena, Montana December 29, 2015 154