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Fiscal 2017 Comprehensive Annual Financial ReportCITY OF COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR 2017 July 1, 2016 - June 30, 2017 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..............................................................................................................15-26 Basic Financial Statements: Government -wide Financial Statements: Statementof Net Position..................................................................................................................... 27 Statementof Activities......................................................................................................................... 28 Governmental Fund Financial Statements: Balance Sheet — Governmental Funds................................................................................................ 29 Reconciliation of the Balance Sheet — Governmental Funds to the Statement of Net Assets......... 30 Statement of Revenues, Expenditures, and Changes in Fund Balances — Governmental Funds... 31 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds to the Statement of Activities...................................................................... 32 Proprietary Fund Financial Statements: Statement of Net Position — Proprietary Funds................................................................................. 33 Statement of Revenues, Expenses, and Changes in Net Position — Proprietary Funds .................. 34 Statement of Cash Flows — Proprietary Funds.................................................................................. 35 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Position — Fiduciary Funds................................................................... 36 Notes to the Financial Statements............................................................................................................37-84 Required Supplementary Information other than Management Discussion and Analysis: Schedule of City's Total Liability and Related Ratios — Other Post -Employment HealthcareBenefits.............................................................................................................................. 85 Schedule of City Contributions — Other Post -Employment Healthcare Benefits ............................ 86 Schedule of Proportionate Share of the Net Pension Liability......................................................... 87 Schedule of Contributions —Post-Employment Benefits.................................................................... 88 Budgetary Comparison Schedule — General and Major Special Revenue Funds...........................89-91 Notes to Required Supplementary Information...................................................................... 92-94 Supplemental Information: Combining and Individual Governmental Fund Statements and Schedules: Combining Balance Sheet — Nonmajor Governmental Funds......................................................... 95-100 Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Nonmajor Governmental Funds....................................................................................................101-107 Budgetary Comparison Schedule — MajorDebt Service Funds.............................................................................................................. 108 Budgetary Comparison Schedule — Nonmajor Governmental Funds....................................................................................................109-127 Combining and Individual Proprietary Fund Statements: Combining Statement of Net Position — Nonmajor Proprietary Funds ......................................... 128 Combining Statement of Revenues, Expenditures, and Changes in Fund Net Position — Nonmajor ProprietaryFunds.......................................................................................................................... 129 Combining Statement of Cash Flows — Nonmajor Proprietary Funds .......................................... 130 Combining and Individual Agency Fund Statements: Combining Statement of Fiduciary Net Position - Agency Funds .................................................. 131 Combining Statement of Changes in Assets and Liabilities - Agency Funds ............................... 132 1 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 .............. 133 .............. 134 .............. 135 .............. 136 Market Value of Taxable Property........................................................................................................ 137 Direct and Overlapping Property Tax Rates......................................................................................... 138 Principal Property Tax Payers............................................................................................................... 139 Property Tax Levies and Collections...................................................................................................... 140 Water — Sewer - Sold by Type of Customer........................................................................................... 141 Waterand Sewer Rates........................................................................................................................... 142 Debt Capacity Ratios of Outstanding Debt by Type...................................................................................................... 143 Ratios of General Bonded Debt Outstanding........................................................................................ 144 Legal Debt Margin Information............................................................................................................. 14.5 Direct and Overlapping Governmental Activities Debt........................................................................ 146 Pledged Revenue Coverage..................................................................................................................... 147 Demographics and Economics Demographic and Economic Statistics................................................................................................... 148 PrincipalEmployers................................................................................................................................. 149 Operating Statistics Full-time Equivalent City Government Employees by Function/Program......................................... 150 Operating Indicators by Function.......................................................................................................... 151 Capital Assets Statistics by Function/Program..................................................................................... 152 REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.......................................................................................................... 153-154 ON City of Kalispell Post Office Box 1997 - Kalispell, Montana 59903-1997 Telephone (406) 758-7701 Fax - (406) 758-7758 December 22, 2017 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, 2017, 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, 2017, 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, 2017, 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 council for review. The council is required to hold public hearings on the proposed budget and 4 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 2017 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, and the community development miscellaneous fund, the comparison is part of the required supplementary information. Other Postemplovment Benefits — GASB Statement 75 The City of Kalispell reported the net opeb liability, required under the Governmental Accounting Standards Board (GASB) Statement No. 75, in this financial report and the related financial statements. Although the City reported this liability, related deferred outflows, and related expenses and 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 1st year of GASB 75 implementation, the recorded net opeb liability is $3,985,328. This liability was reported in fiscal year 2016 as net opeb obligation ($2,110,870) under GASB 45 guidance. This very significant (89%) increase is the result of no longer, under GASB 75 guidance, being able to amortize the remaining liability over 30 years. The City is now required to record the entire liability. 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. The financial statements will reflect the impact of this very large net opeb liability. 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. 5 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 at the end of fiscal year 2017 of $11,766,204. The City 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 net pension liability. GASB Statement 68 requires the City to record its share of the net pension liabilities even though we have made all statutorily required contributions. See Note F for a description of the plans the City participates in. Factors Affecting Financial Condition The City has started to see new construction comparable to the first few years of this century and home foreclosures have slowed substantially. 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. Healthcare, in general, has grown over 180% since 1990 and now employees over 6,300 people in Flathead County. Economist are predicting another 21 percent increase in health care employment opportunities locally, over the next 10 years. Although Kalispell is not in close proximity of a major metropolitan center, hundreds of technology and manufacturing companies, from computer equipment to food and beverage to pharmaceuticals, have found the area to be favorable for their operations. Tourism is one of the area's major economic drivers. With Glacier National Park visitations setting annual records, a major ski resort within a few miles, the proximity to Canada, and other shoulder season draws, there is not many days of the year that visitors don't purchase services in Kalispell and the Flathead Valley. 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, 2015 (most current) estimated population of Kalispell is 22,052 according to the U.S. Census Bureau, an increase of 2,125 (11%) from the 2010 census population of 19,927. The unemployment rate for the 2016 calendar year for Flathead County (City of Kalispell is not available separately) was 5.6 percent. This compares to 5.7 percent for the 2015 calendar year, a positive adjustment of just under 2%. The most current unemployment rate (not seasonally adjusted) available (September 2017) for Flathead County is 4.0 percent. In comparison, the State of Montana's September 2017 unemployment rate (not seasonally adjusted) is 3.4 percent and the U.S. rate is 4.1%. The County's unemployment rate has continued to improve from a high of 14 percent in January of 2011. According to the United States Census Bureau, the 2015 per capita annual income, the most current information available, for Flathead County was $24,966. This is approximately 5% less than the State of Montana's estimated per capita income ($26,381), and 14% less than the Nation's estimated per capita income of $28,930. Cel 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. 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. New reappraisal values were used for property tax purposes in tax year 2017 (fiscal year 2018). Statewide, taxable values rose about 8%. In Flathead County, reappraisals resulted a taxable value increase of about 9%. The City of Kalispell also showed an increase of about 8%. The next reappraisal is anticipated to be complete by the end of 2018 for the State legislature to review during the 2019 legislative session. Any changes made will affect the 2019 tax year (fiscal year 2020). 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, 2015, 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 7 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 Acknowledements 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, 2016. This was the 7' 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 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, r Rick Wills Finance Director 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, 2016 *1fre 4 4.% PA0 t. - i; - Executive Director/CEO 6 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 Karl Gabriel Wayne Saverud Jim Atkinson Sandy Carlson Chad Graham Rod Kuntz CITY MANAGER Doug Russell FINANCE Rick Wills HUMAN PUBLIC WORKS I INFORMATION RESOURCES Susie Turner TECHNOLOGY TerryMitton Enka Billiet 10 WARD IV Tim Kluesner Phil Guiflrida PLANNING, PARKS & BUILDING & RECREATION COMMUNITY Chad Fincher DEVELOPMENT PUBLIC SAFETY PUBLIC SAFETY LEGAL FIRE POLICE Charlie Harball Dave Dedman RogerNasset CITY OF KALISPELL, MONTANA CITY ELECTED AND APPOINTED OFFICIALS TERM ELECTED OFFICIALS EXPIRES Mayor Mark Johnson 12/2017 Council members: Kari Gabriel Ward I 12/2019 Jim Atkinson Ward III 12/2017 Sandy Carlson Ward I 12/2017 Rod Kuntz Ward HI 12/2019 Wayne Saverud Ward H 12/2019 Phil Guiffrida Ward IV 12/2019 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 FINANCIAL r � r WIPFL1L.. INDEPENDENT AUDITOR'S REPORT City Council Members City of Kalispell Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Kalispell, Montana (the City), as of and for the year ended June 30, 2017 and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Kalispell, as of June 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof forthe yearthen ended in accordance with accounting principles generally accepted in the United States. 12 Change in Accounting Principle As discussed in Note 1 to the financial statements, in 2017, the City adopted new accounting guidance, GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States require that the management's discussion and analysis on pages 15-26, Schedule of City's Total OPEB Liability, Contributions and Related Ratios for the OPEB plan on pages 85 and 86, Schedule of Proportionate Share of the Net Pension Liability on page 87, Schedule of Contributions on page 88, and Budgetary Comparison Schedules on pages 89-91 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual non -major fund financial statements, budgetary comparisons, and the statistical section, are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual non -major fund financial statements, and budgetary comparisons (other than the 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. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual non -major fund financial statements, and budgetary comparisons (other than the major funds), are fairly stated in all material respects in relation to the financial statements as a whole. The introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. 13 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 22, 2017 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. C(l�p�.' LLP Wpfli LLP Helena, Montana December 22, 2017 14 1 1 1 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, 2017. 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 and deferred outflows of the City of Kalispell exceeded its liabilities and deferred inflows at the close of the most recent fiscal year by $164,414,837 (net position). Of this amount, $15,051,097 (unrestricted net position) may be used to meet the government's ongoing obligations to citizens and creditors. ➢ Total net position increased by $4,813,178 over the prior fiscal year due to increases in utility revenues and building reserves for necessary future large projects in utility funds. ➢ As of June 30 the City's governmental funds reported combined ending fund balances of $21,197,113, an increase of $2,361,324 over the prior year. Of this amount, $3,891,114 (19%) is available for spending at the government's discretion (committed, assigned, and unassigned fund balances). ➢ At fiscal year-end, the total of the committed, assigned, and unassigned components of fund balance for the general fund was $3,891,114, or 34% of total general fund expenditures. ➢ The City's total debt, excluding compensated absences, decreased by $2,252,832 (11%) during fiscal year 2017. 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 deferred outflows of resources, and liabilities and deferred inflows of resources. The difference between these two (assets and deferred outflows of resources minus liabilities and deferred inflows of resources) is reported as net position. Net position can be a useful tool in evaluating 15 the financial health of an entity. A substantial decrease in net position may be a sign of deteriorating financial outlook. The change in net position during the most recent fiscal period is presented by the statement of activities. The statement of activities reports changes in net position at the time the event takes place without regard to the corresponding cash transaction. This results in some revenues and expenses being reported in this statement that will not result in cash flow until a future fiscal period. Some examples of this would be uncollected but earned taxes and earned leave benefits. The government -wide financial statements of the City of Kalispell are segregated to distinguish between functions supported predominantly by taxes and intergovernmental revenues (governmental activities) and those that are intended to recover the majority of their costs through user fees and charges for services (business -type activities). The governmental activities of the City of Kalispell include general government/administration, public safety, public works, parks and recreation, and community 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 position and the governmental fund statement of revenues, expenditures, and changes in fund balance to the government -wide statement of activities. These reconciliations can be useful in contrasting, comparing and understanding the long-term impact (government -wide statements) of near -term decisions (governmental fund statements). The City of Kalispell maintains numerous individual governmental funds. The governmental fund balance sheet and statement of revenues, expenditures, and changes in fund balance present information separately only for funds which are considered major. Major funds are determined by a formula which considers the percentage of total 16 governmental assets, liabilities, revenues, and expenditures contained in each individual fund. The City of Kalispell has four major governmental funds; the General Fund (always a major fund), the Street Maintenance (special revenue) Fund, the Community Development — Miscellaneous (special revenue) Fund, and the Special Improvement District 344 (debt service) Fund. All non -major funds are presented as a group. The City of Kalispell adopts an annual appropriated budget for its funds. A budgetary comparison statement has been provided for the general fund and the major special revenue funds to demonstrate compliance with this budget. ➢ The City of Kalispell maintains two different types of proprietary funds. Enterprise funds and internal service funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. Water, sewer, solid waste, and the airport make up the City of Kalispell's enterprise funds. The City of Kalispell uses two internal service funds to accumulate and allocate its information technology transactions and central garage transactions internally among its various functions. Under the old reporting model internal service funds were reported as proprietary funds because they recovered most of their cost through user fees from other funds. Under the new model these funds are eliminated through an allocation process and categorized as either a governmental or business -type activity. 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 four 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 GASB Statement 75 — Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions schedules, GASB Statement 68 — Accounting and Financial Reporting for 17 Pensions schedules, and the general and major special revenue funds budgetary comparison schedules is included in the section for required supplementary information on pages 85 - 94. 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 95 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, 2017, the City of Kalispell's assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $164,414,837. The largest portion of the City's net position ($129,611,786 or 79%) reflects its net investment in capital assets (e.g., land, buildings, machinery and equipment, infrastructure). 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 Change Change FY17 FY16 Inc(Dee) FY17 FY16 Inc(Dee) Current and Other Assets $25,888,993 $23,464,181 $ 2,424,812 $ 25,316,957 $ 21,649,985 $ 3,666,972 Capital Assets 75,028,235 77,098,433 (2,070,198) 72,856,366 73,751,878 (895,512) Total Assets 100,917,228 100,562,614 354,614 98,173,323 95,401,863 2,771,460 Deferred Outflows of Resource 2,796,962 935,995 1,860,967 428,710 145,660 283,050 Long-term Liabilities Outstandi $21,249,971 $18,946,330 $ 2,303,641 $ 15,050,929 $ 15,858,902 $ (807,973) Other Liabilities 975,448 809,737 165,711 477,351 485,310 (7,959) Total Liabilities 22,225,419 19,756,067 2,469,352 15,528,280 16,344,212 (815,932) Deferred Inflow of Resources 136,310 667,128 (530,818) 11,377 207,823 (196,446) Net Position: Net Investment in Capital Asse 69,120,365 70,056,388 (936,023) 60,491,421 60,294,686 196,735 Restricted 9,350,293 9,406,621 (56,328) 10,401,661 9,184,782 1,216,879 Unrestricted (deficit) 2,881,803 1,612,405 1,269,398 12,169,294 9,516,020 2,653,274 Total net position $81,352,461 $81,075,414 $ 277,047 $83,062,376 $ 78,995,488 $ 4,066,888 An additional portion of the City's net position ($19,751,954 or 12%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($15,051,097 or 9%) may be used to meet the City's ongoing obligations to citizens and creditors. At June 30, the City is able to report positive balances in all three categories of net position, both for the City as a whole, as well as for its separate governmental and business -type activities. Net position of the City increased about 3% for fiscal year 2017 in comparison to fiscal year 2016 restated ($164.4 million compared to $159.6 million). 18 Changes in Net Position Governmental Business -type Activities Activities Change Change FY17 FY16 Inc(Dec)FY17 FY16 Inc(Dec) Revenues Program revenues (by major source): Charges for services $ 7,613,019 $ 6,604,026 $ 1,008,993 $ 12,457213 $ 10,139,580 $ 2,317,633 Operating grants and contributions 1,470,485 1,354,890 115,595 32,653 137,048 (104,395) Capital grants and contributions 1,544,350 942,125 602,225 131,626 3,338,669 (3207,043) General revenues (by major source): Property taxes for general purposes 8,848,481 8,357,904 490,577 - - - Video poker apportionment 63,950 61,925 2,025 - - - Miscellaneous 130,740 46,573 84,167 19,631 140,616 (120,985) Interest/investment earnings 159,362 105,557 53,805 227,052 132,339 94,713 State entitlement 3,184,831 3,132,559 52272 - - - Gas Tax 371,303 369,749 1,554 - - - Contributions & donations 5,325 2,550 2,775 - - - Total revenues $ 23,391,846 $ 20,977,858 $ 2,413,988 $ 12,868,175 $ 13,888252 $ (1,020,077) Program expenses General goverrunent $ 5,841,775 $ 5,823,767 $ 18,008 Public safety 10,968,010 9,113,674 1,854,336 Public works 2,660,513 2,581,002 79,511 Parks and recreation 2,184222 2,057,468 126,754 Community development 853,455 928,661 (75,206) Debt service -interest 242,110 286,401 (44,291) Airport $ 155,876 $ 154,091 $ 1,785 Water 2,734,979 2,657,816 77,163 Sewer 4,955,925 5204,622 (248,697) Solid Waste 872,161 880,679 (8,518) Total expenses $ 22,750,085 $ 20,790,973 $ 1,959,112 $ 8,718,941 $ 8,897208 $ (178,267) Excess (deficiency) before special items and transfers $ 641,761 $ 186,885 $ 454,876 $ 4,149234 $ 4,991,044 $ (841,810) Gain (loss) on sale of capital assets 22,183 78,497 (56,314) - (3,091) 3,091 Transfers- net 35,000 35,000 (35,000) (35,000) Increase (decrease) in net position $ 698,944 $ 300,382 $ 398,562 $ 4,114234 $ 4,952,953 $ (838,719) Governmental Activities. Governmental activities in fiscal year 2017 increased the City's net position by $698,944. In fiscal year 2016, governmental activities increased net position by just over $300,000. Specifically, revenues were up over 12%, however, expenses also showed an increase from the prior fiscal period of over 10%. The key elements of the overall net position change were: ➢ Total program revenues increased substantially ($1,726,813 or 20%), while general revenues increased ($687,175 or 6%). Charges for services (program revenues) were up over $1 million from fiscal year 2016. The majority of this increase ($935,681) was public safety related, and 84% of the public safety charges for services increase ($780,416) was building department permits, licenses and fees. A grant from the State of Montana to develop playing fields at the City's youth sports complex ($850,002) more than offset other decreases in the capital grants and contributions revenue for fiscal year 2017. ➢ Governmental activities program expenses increased by more than 10% ($1,959,112). Public safety expenses increased by $1,854,336, or 95% of the total increase. Nearly $1 million of this increase is from the annual GASB 68 pension adjustment. The balance of the public safety expense increase is comprised of a fire/ambulance and police wage and benefit increase, and increased spending in the building department due to an increase in demand. 19 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 chart illustrates the different revenue sources for the City's governmental activities and how much each source contributes. 12000000 10000000 8000000 06000000 E Q -4000000 2000000 Governmental Activities by function (in Millions) Total Cost Net Cost of Services of Services FY17 FY16 FY17 FY16 Public Safety 11.0 9.1 6.2 5.9 Public Works 2.7 2.6 (0.6) (0.8) Parks and Recreation 2.2 2.1 0.6 1.2 Community Development 0.9 0.9 0.7 0.6 General Government 5.8 5.8 5.0 4.7 Debt Service 0.2 0.3 0.2 0.3 Totals $ 22.8 $ 20.8 $ 12.1 $ 11.9 Expenses and Program Revenues - Governmental Activities for fiscal year 2017 gen gov't pub safety pub works parks/rec comm dev Activity Revenue by Source - Governmental Activities fiscal year Other 2017 3% State \ entitlement 14% Charges for services 32% Property taxes Operating 38 �0 grants/contrib utions 6% Capital grants/contrib utions 7% 20 Business -type activities. Business -type activities increased the City of Kalispell's net position by $4,114,234. In fiscal year 2016, business -type activities increased the City's net position by almost $5 million. The factors leading to this decrease of about 17% result were: ➢ Overall, revenues of the City's business -type activities decreased slightly over $1,000,000. Program revenues of the City's business -type activities decreased $993,805. The majority of this decrease can be attributed to the much above normal water consumption in fiscal year 2016. The above normal water consumption because of the dry weather affects both revenue of the water fund and sewer fund. ➢ Expenses decreased slightly from the prior fiscal year. The following charts help illustrate the information presented above related to business -type activities net position. C O4 E Q ,,3 Expenses and Program Revenues - Business -type Activities for fiscal year 2017 000000 ONE 000000 .expense s 000000 000000 000000 000000 000000 0 FTT airport water sewer solid waste Activity Revenues by Source - Business -type Activities for fiscal year 2017 Operating gran 0 Capital grants/contributions 1% �--stment/other amings 2% 21 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 2017, the City of Kalispell's governmental funds reported combined ending fund balances of $21,197,113, an increase of $2,361,324 in comparison with the prior fiscal year restated. Of the ending fund balance, $17,305,999 (82%) 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 ($3,207,706); assets are limited by specific voter approved bonds ($79,294); assets are limited by specific special assessments ($3,395,029); assets are limited by state law ($10,208,301); assets are limited by contribution restrictions ($100,299). $3,891,114 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 2017 unassigned fund balance of the general fund was $3,381,494, while total fund balance was $4,143,327. The fund balance increased $458,972 during fiscal year 2017. Revenues and other financing sources increased only slightly, about 2%, from fiscal year 2016. Expenditures and other financing uses increased about 1%. At the end of fiscal year 2017, unassigned fund balance represents 30% of total general fund expenditures, a 1% improvement from fiscal year 2016. The general fund balance of $761,833 is non -spendable and assigned as follows: GENERAL FUND BALANCE - TOTAL $ 4,143,327 NONSPENDABLE Long-term recievables $ 6,023 Prepaids $ 246,190 TOTAL NONSPENDABLE $ 252,213 ASSIGNMENTS Capital Equipment $181,906 Downtown Parking $ 23,542 Misc. $ 304,172 TOTAL ASSIGNMENTS $ 509,620 UNASSIGNED $ 3,381,494 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, 2017, the fund balance of this fund was $2,255,776, a $308,379 increase from the prior fiscal year. 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. hi fiscal year 2017, the fund balance of this fund decreased $151,257 to $325,095. 22 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, 2017, for SID 344 was $331,315, a decrease of $72,723 from fiscal year 2016. 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 $ 6,493,477 20% $ 1,384,940 4% Sewer 4,727,495 10% 2,676,236 6% Other 948,322 25% 53,058 1% Total $12,169,294 15% $ 4,114,234 5% 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 2017 was $11,864,179. Actual expenditures for the year were $11,573,490, a favorable variance of $290,689. Actual general government expenditures were $167,057 less than budgeted, the result of most general government departments making efforts to hold down expenditures where possible, and unneeded contingencies. Actual revenues of the general fund were $11,128,259, $208,424 less than the budgeted amount of $111,336,683. There were two revenue categories significantly under budget. The fines and forfeitures deficit may be the result of new rulings making it more difficult for the Municipal Court to fine and/or collect. The intergovernmental deficit is the result of $361,000 of transfers to special revenue funds re -categorized as an intergovernmental revenue of the special revenue fund for financial reporting purposes. 23 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At the end of 2017, the City of Kalispell has $147,884,601, 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 Storm Sewer system 10,125,538 9,938,618 10,125,538 9,938,618 Total $ 75,028,235 $ 77,098,433 $ 72,856,366 $ 73,751,878 $ 147,884,601 $ 150,850,311 'assets of the City's internal service funds included in governmental activities Major Governmental funds capital asset events during the fiscal year 2017 included the following: ➢ The police department purchased (5) vehicles at a cost of $143,575. ➢ The fire department purchased a vehicle at a cost of $35,849. ➢ The building department purchased (2) vehicles at a cost of $63,145. ➢ An ambulance was purchased for about $170,000. ➢ The development of new fields started at the City's youth sports complex thru the use of a State grant. This approximately $2 million project will be complete in fiscal year 2018. ➢ The street department purchased equipment costing $258,043. This included two trucks and a snow blower. ➢ The parks department purchased equipment costing $114,661. This included a pickup, a field groomer and a mower. ➢ Paved 6 alleys at a total cost of $38,750. Replaced 794', 2.6 blocks, of sidewalks valued at $49,351. ➢ Disposed assets with a cost basis of $130,870. Major Business -type funds capital asset events during the fiscal year 2017 included the following: ➢ Developer's contributed (6) fire hydrants valued at $28,688. ➢ Replaced (5) fire hydrants at a total cost of $12,797. ➢ 1,411 linear feet of new water main valued at $99,915 was installed and contributed to the City by developers. ➢ The water department installed 264 new meters, including 119 new domestic meters of various sizes. ➢ Completed project replacing sewer main in 2nd Alley WN, total project cost was $662,510. ➢ Completed project replacing sewer main in Peterson School alley, total project cost was $197,756. ➢ Replaced digested sludge line at the waste water treatment plant at a cost of $150,512. 24 ➢ Completed phase 1 of the Sylvan Drive storm water repair project. Phase I cost was over $500,000. ➢ Purchased a pickup for the solid waste department for $45,405. ➢ The sewer department has over $1.5 million in construction projects in progress as of June 30, 2017. ➢ Disposed assets with a cost basis of $374,375. Additional information on capital assets can be found in the notes of the basic financial statements (Note D. Capital Assets pages 49-51). Debt At the end of fiscal year 2017, the City of Kalispell had total long-term debt outstanding of $18,815,334. Of this amount, $1,885,000 comprises debt backed by the full faith and credit of the government and $1,478,500 represents bonds secured solely by specific revenue sources (i.e., revenue bonds). The remainder consists of $11,742,096 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 $2,427,060 of special assessment debt for which the City of Kalispell is liable in the event of default by the property owners subject to the assessment, and $1,282,678 of loans for the purchase of other property and equipment. CITY OF KALISPELL'S OUTSTANDING DEBT Govemmental Business -type Total activities activities 2017 2016 2017 2016 2017 2016 Contract debt/loans 1,204,829 1,401,475 77,849 116,192 1,282,678 1,517,667 Total $ 6,450,389 $ 7,610,974 $ 12,364,945 $ 13,457,192 $ 18,815,334 $ 21,068,166 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 52-56). ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The City's elected and appointed officials considered many factors when adopting the fiscal year 2018 budget for tax rates and fees that will be charged by the business -type activities. Some of these factors include: capital improvements identified in the City's Capital Improvement Program, inflation rates, the City's collective bargaining units, the local economy, and the citizen's ability to pay. For the year, inflation rates continued to increase. The Bureau of Labor Statistics of the U.S. Department Labor reported the Consumer Price Index -Unadjusted for All Items at 2.9 percent for the last calendar year. The index for all items less food and energy rose 2.7 percent for the 12 months ending September. The food index increased 1.9 percent over the span, and the energy index advanced 7.6 percent. Inflation rates have a significant impact on the cost of City projects. 25 Request for Information This financial report is designed to provide a general overview of the City of Kalispell's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Kalispell, Finance Director, P.O. Box 1997, Kalispell, MT 59903-1997. 26 I�' 1 1, �` �. J. :�' City of Kalispell, Montana Statement of Net Position June 30, 2017 Component Units Governmental Business -Type Downtown Tourism ASSETS Cash and investments $ 15,649,807 $ 14,183,066 $ 29,832,873 $ 22,753 $ 193,291 Taxes and assessments receivable, net 3,206,726 52,717 3,259,443 2,147 Accounts receivable - net 252,600 448,907 701,507 Notes and loans receivable 1,978,201 - 1,978,201 Contracts receivable 85,570 242,705 328,275 Due from other governments 1,822,697 143,110 1,965,807 7,074 Prepaids 321,254 160,084 481,338 Inventories - 113,425 113,425 Properties held for sale 1,258,465 - 1,258,465 Other debits 6,784 - 6,784 Restricted assets: Cash and investments 1,306,889 9,972,943 11,279,832 Capital assets (net of accumulated depreciation): Land 2,395,299 1,762,512 4,157,811 Construction in Progress 885,147 1,899,903 2,785,050 Depreciable 71,747,789 69,193,951 140,941,740 Total assets $ 100,917,228 $ 98,173,323 $ 199,090,551 $ 31,974 $ 193,291 DEFERRED OUTFLOWS OF RESOURCES OPEB differences/changes 789,252 140,637 929,889 Contractually required contributions related to pensions 2,007,710 288,073 2,295,783 Total deferred outflows of resources $ 2,796,962 $ 428,710 $ 3,225,672 $ - $ - Total assets and deferred outflows of resources $ 103,714,190 $ 99,602,033 $ 202,316,223 $ 31,974 $ 193,291 LIABILITIES Accounts payable $ 736,004 $ 403,789 $ 1,139,793 $ 2,687 $ 72,219 Retainage 36,699 20,251 56,950 Accrued payroll 199,428 47,571 246,999 Current portion of long-term liabilities Bonds and notes - not capital 26,674 - 26,674 Bonds and notes - capital 1,274,985 1,184,728 2,459,713 Compensated absences payable 1,013,589 201,419 1,215,008 Other credits 3,317 5,740 9,057 Long-term liabilities, due in more than one year Bonds and notes - not capital 515,845 - 515,845 Bonds and notes - capital 4,632,885 11,180,217 15,813,102 Compensated absences 398,023 121,002 519,025 Net OPEB liability 3,382,586 602,743 3,985,329 Net pension liability 10,005,384 1,760,820 11,766,204 Total liabilities $ 22,225,419 $ 15,528,280 $ 37,753,699 $ 2,687 $ 72,219 DEFERRED INFLOWS OF RESOURCES Diff. between est. and actual earnings on pension plan inv. $ 136,310 $ 11,377 $ 147,687 $ $ Total deferred inflows ofresources $ 136,310 $ 11,377 $ 147,687 $ - $ - NET POSITION Net investment in capital assets $ 69,120,365 $ 60,491,421 $ 129,611,786 $ $ Restricted for capital projects 818,266 7,044,258 7,862,524 Restricted for debt service 1,000,298 1,226,947 2,227,245 Restricted for special projects 7,531,729 1,940,456 9,472,185 Restricted for other purposes - 190,000 190,000 Unrestricted 2,881,803 12,169,294 15,051,097 29,287 121,072 Total net position $ 81,352,461 $ 83,062,376 $ 164,414,937 $ 29,287 $ 121,072 See accompanying Notes to the Financial Statements WA 0 5 m m o 0 0o rn rn A Q N rn m n � .-• N� � � � � � o 0o M o00o v v 0 o a'S y o^^moo m rn oo In I EA EA EA V3 V3 V3 EA EA EA EA •a G a v�� o � oNo cn � C4 i a ri �N" 'n o vi cv r" o m y o 2p °y9 v3 v3 v3 v3 v3 v3 v3 � " � `� N � .• � � P P w Et E- •' •' d 9 o « A W d � vi o cv cv Ni" cv v o0 0 p p U � � 0. c7 °a ¢�"3�m u F 0 p z C 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 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. City of Kalispell, Montana Balance Sheet Governmental Funds June 30,2017 Other Total Street Governmental Governmental General Fund Maintenance CD Misc. SID 344 Funds Funds ASSETS Cash and investments $ 1,654,557 $ 2,124,361 $ 359,457 $ 331,315 $ 10,858,271 $ 15,327,961 Taxes and assessments receivable, net 260,990 102,679 - 2,104,199 738,858 3206,726 Accounts receivable - net - - - - 252,600 252,600 Notes and loans receivable - - 20,955 - 1,957,246 1,978201 Contracts receivable 40,731 - - - 3,408 44,139 Advances to other funds 1,300,000 - - - - 1,300,000 Due from other funds 636,711 - - - 212 636,923 Due from other governments 439,486 180,799 - - 1,202,412 1,822,697 Prepaids 246,190 32,397 2,468 - 28,292 309,347 Properties held for sale - - 1,258,465 - - 1258,465 Other debits 6,023 - - - 761 6,784 Restricted assets: Cash and investments $ - $ - $ - $ - $ 1,306,889 $ 1,306,889 Total assets $ 4,584,688 $ 2,440,236 $ 1,641,345 $ 2,435,514 $ 16,348,949 $ 27,450,732 LIABILITIES Accounts payable $ 61,477 $ 58,420 $ - $ - $ 516,468 $ 636,365 Retainage - 6,435 - - 30,264 36,699 Accrued payroll 116,538 16,726 - - 59,590 192,854 Due to other funds - - 16,250 - 620,673 636,923 Advances from other funds - - 1,300,000 - - 1,300,000 Other credits 2,356 200 - - 761 3,317 Total liabilities $ 180,371 $ 81,781 $ 1,316,250 $ - $ 1,227,756 $ 2,806,158 Deferred inflows of resources Unavailable revenue - deferred accounts receivable $ - $ - $ - $ - $ 240,735 $ 240,735 Unavailable revenue - deferred taxes and assessments 260,990 102,679 - 2,104,199 738,858 3206,726 Total deferred inflows of resources $ 260,990 $ 102,679 $ - $ 2,104,199 $ 979,593 $ 3,447,461 FUND BALANCES Nonspendable - not in spendable form Long-term recievables $ 6,023 $ - $ - $ - $ - $ 6,023 Prepaids 246,190 32,397 2,468 - 28,292 309,347 Restricted General Government - - - - 63,742 63,742 Public Safety - - - - 2,522,110 2,522,110 Public Works - 2,223,379 - - 902,836 3,126215 Culture and Recreation - - - - 1,042,139 1,042,139 Community Development - - 322,627 - 8,913,498 9236,125 Debt Service - - - 331,315 668,983 1,000298 Unrestricted Fund Balances: Assigned Capital Equipment 181,906 - - - - 181,906 Parking 23,542 - - - - 23,542 Miscellaneous 304,172 - - - - 304,172 Unassigned fund balance 3,381,494 - - - - 3,381,494 Total fund balances $ 4,143,327 $ 2,255,776 $ 325,095 $ 331,315 $ 14,141,600 $ 21,197,113 Total liabilities, deferedinflows ofresources, and fund $ 4.584.688 $ 2,440,236 $ 1,641,345 $ 2,435,514 $ 16.348.949 $ 27,450,732 See accompanying Notes to the Financial Statements 29 City of Kalispell, Montana Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2017 Total fund balances - governmental funds $ 21,197,113 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 74,807,258 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 458,472 Deferred outflow of resources related to pensions. - contributions made subsequent to the measurement date, recognized on the statement of net position 2,007,710 - collective contributions 789,252 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 (6,450,389) - Compensated absences (1,380,136) - Other post employment benefits (3,382,586) - Net pension liability (10,005,384) - Deferred inflow of resources - related to pensions (136,310) 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 3,206,726 - ambulance 240,735 Total net position - governmental activities $ 81,352,461 See accompanying Notes to the Financial Statements ME City of Kalispell, Montana Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2017 Other Total Street Governmental Governmental General Fund Maintenance CD Misc. SID344 Funds Funds REVENUES Taxes and assessments $ 5,625,579 $ 2,483,634 $ - $ 264,910 $ 4,082,403 $ 12,456,526 Licenses and permits 131,644 - - - 1,098281 1229,925 Intergovernmental 3,921,872 - - - 2,392,963 6,314,835 Charges for services 925,165 14,962 1,281 - 2,065,099 3,006,507 Fines and forfeitures 454,547 - - - - 454,547 Miscellaneous 33,641 1,789 - - 102,645 138,075 Investment earnings 35,811 15,549 4,302 - 103,701 159,363 Total revenues $ 11,128,259 $ 2,515,934 $ 5,583 $ 264,910 $ 9,845,092 $ 23,759,778 EXPENDITURES General government $ 2,495,710 $ - $ - $ - $ - $ 2,495,710 Public safety 8,777,695 - - - 2,095,915 10,873,610 Public works 39,891 1,789,811 - - 497,976 2,327,678 Parks and recreation - - - - 1,714235 1,714,235 Community development 80,770 - 206,840 - 565,845 853,455 Debt service -principal - 111,946 - 225,000 957,926 1294,872 Debt service -interest - 3,016 - 112,633 126,461 242,110 Capital outlay 179,424 319,342 - - 1293,818 1,792,584 Total expenditures $ 11,573,490 $ 2,224,115 $ 206,840 $ 337,633 $ 7252,176 $ 21,594254 Excess (deficiency) of revenues over expenditures $ (445,231) $ 291,819 $ (201257) $ (72,723) $ 2,592,916 $ 2,165,524 OTHER FINANCING SOURCES (USES) Issuance of debt $ - $ - $ - $ - $ 134287 $ 134287 Proceeds from the sale of general capital asset disposition 3203 16,560 - - 6,750 26,513 Transfers in 901,000 - 50,000 - 69234 1,020,234 Transfers out - - - - (985234) (985,234) Total other financing sources (uses) $ 904,203 $ 16,560 $ 50,000 $ - $ (774,963) $ 195,800 Net Change in Fund Balance $ 458,972 $ 308,379 $ (151257) $ (72,723) $ 1,817,953 $ 2,361,324 Fund balances -beginning $ 3,684,355 $ 1,947,397 $ 476,352 $ 404,038 $ 12,357,581 $ 18,869,723 Restatements - - - - (33,934) (33,934) Fund balances - beginning, restated $ 3,684,355 $ 1,947,397 $ 476,352 $ 404,038 $ 12,323,647 $ 18,835,789 Fund balance - ending $ 4,143,327 $ 2,255,776 $ 325,095 $ 331,315 $ 14,141,600 $ 21,197,113 See accompanying Notes to the Financial Statements 31 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, 2017 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds $ 2,361,324 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 1,786,274 - Depreciation expense (3,930,316) In the Statement of Activities, the loss or gain on the sale or disposal of capital assets is recognized. The fund financial statements recognize only the proceeds from the sale of these assets: - Proceeds from the sale of capital assets (26,513) - Gain on the sale of capital assets 22,183 Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds: - Donated capital assets 11,269 - Long-term receivables (deferred revenue) (103,702) The change in compensated absences is shown as an expense in the Statement of Activities (28,357) 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 1,294,872 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 (134,287) Changes to net pension liability are shown as revenues/expenses on the Statement of Activities (223,679) The increase in other post employment benefits is shown as an expense in the Statement of Activities (432,240) Internal service funds are used by management to share 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 102,116 Change in net position - Statement of Activities $ 698,944 See accompanying Notes to the Financial Statements 32 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. 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. ASSETS Current assets: Cash and investments Taxes and assessments receivable, net Accounts receivable - net Contracts receivable Due from other governments Prepaids Inventories Restricted assets: Cash and investments Total current assets Noncurrent assets: Capital assets (net of accumulated depreciation): Land Construction in Progress Depreciable Total noncurrent assets Total assets City of Kalispell, Montana Statement of Net Position Proprietary Funds June 30, 2017 Business -Type Activities - Enterprise Funds Non -major Governmental Activities Internal $ 7,477,911 $ 5,492,375 $ 1,212,780 $ 14,183,066 $ 321,846 - 29,418 23,299 52,717 - 194,444 252,342 2,121 448,907 - 40,918 201,787 - 242,705 41,431 - 63,969 79,141 143,110 - 54,589 78,845 26,650 160,084 11,907 113,425 - - 113,425 - 1,886,943 8,086,000 9,972,943 - $ 9,768,230 $ 14,204,736 $ 1,343,991 $ 25,316,957 $ 375,184 $ 91,587 $ 311,380 $ 1,359,545 $ 1,762,512 $ - 183,950 1,715,953 - 1,899,903 $ 35,170,109 $ 58,751,072 $ 4,252,142 $ 98,173,323 $ 596,161 DEFERRED OUTFLOWS OF RESOURCES OPEB differences/changes $ 69,183 $ 71,454 $ - $ 140,637 $ Pension plan subsequent contributions/changes 98,372 135,385 54,316 288,073 Total deferred outflows of resources $ 167,555 $ 206,839 $ 54,316 $ 428,710 $ - LIABILITIES Current liabilities: Accounts payable $ 114,624 $ 277,698 $ 11,467 $ 403,789 $ 99,639 Retainage 2,539 17,712 - 20,251 - Accrued payroll 16,315 23,260 7,996 47,571 6,574 Bonds and notes - capital 203,000 943,000 38,728 1,184,728 - Compensated absences payable 58,697 86,714 56,008 201,419 21,648 Other credits 5,740 - - 5,740 - Total current liabilities $ 400,915 $ 1,348,384 $ 114,199 $ 1,863,498 $ 127,861 Noncurrent liabilities: Bonds andnotes- capital $ 1,521,096 $ 9,620,000 $ 39,121 $ 11,180,217 $ - Compensated absences 27,051 53,584 40,367 121,002 9,828 Net OPEB liability 296,506 306,237 - 602,743 - Net pension liability 601,290 827,528 332,002 1,760,820 - Total noncurrent liabilities $ 2,445,943 $ 10,807,349 $ 411,490 $ 13,664,782 $ 9,828 Total liabilities $ 2,846,858 $ 12,155,733 $ 525,689 $ 15,528,280 $ 137,689 DEFERRED INFLOWS OF RESOURCES Pension -dill. between projected and actual earnings $ 3,885 $ 5,347 $ 2,145 $ 11,377 $ - Totaldeferredinflowsofresources $ 3,885 $ 5,347 $ 2,145 $ 11,377 $ - NET POSITION Net investment in capital assets $ 23,677,783 $ 33,983,336 $ 2,830,302 $ 60,491,421 $ 220,977 Restricted for capital projects 1,626,727 5,417,531 - 7,044,258 - Restricted for debt service 260,216 966,731 1,226,947 Restricted for special projects 428,718 1,511,738 1,940,456 Restricted for other purposes - 190,000 190,000 - Unrestricted 6,493,477 4,727,495 948,322 12,169,294 237,495 Total net position $ 32,486,921 $ 46,796,831 $ 3,778,624 $ 83,062,376 $ 458,472 See accompanying Notes to the Financial Statements 33 City of Kalispell, Montana Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2017 Governmental Business -Type Activities - Enterprise Funds Activities Non -major Internal Water Sewer Enterprise Totals Service Funds OPERATING REVENUES Charges for services $ 2,954,669 $ 4,526,174 $ 1,083,945 $ 8,564,788 $ 1,120,257 Miscellaneous revenues 233,695 13,190 - 246,885 1,087 Special assessments - 868,798 868,798 - Total operating revenues $ 3,188,364 $ 5,408,162 $ 1,083,945 $ 9,680,471 $ 1,121,344 OPERATING EXPENSES Personal services $ 1,067,727 $ 1,364,373 $ 476,020 $ 2,908,120 $ 431,261 Supplies 66,525 119,502 84,050 270,077 306,754 Purchased services 338,553 899,738 79,225 1,317,516 226,436 Building materials 72,221 74,230 - 146,451 - Fixed charges 221,982 422,716 150,214 794,912 25,680 Depreciation 911,985 1,814,966 236,871 2,963,822 31,460 Total operating expenses $ 2,678,993 $ 4,695,525 $ 1,026,380 $ 8,400,898 $ 1,021,591 Operating income (loss) $ 509,371 $ 712,637 $ 57,565 $ 1,279,573 $ 99,753 NON -OPERATING REVENUES (EXPENSES) Intergovernmental income $ 11,150 $ 15,346 $ 6,157 $ 32,653 $ hupact Fees 704,557 2,077,588 - 2,782,145 - Interest revenue 88,717 128,042 10,293 227,052 2,363 Gain (loss) on sale of capital assets (1,472) - 15,700 14,228 - Debt service interest expense (55,986) (260,400) (1,657) (318,043) - Total non -operating revenues (expenses) $ 746,966 $ 1,960,576 $ 30,493 $ 2,738,035 $ 2,363 Income (loss) before contributions and transfers $ 1,256,337 $ 2,673,213 $ 88,058 $ 4,017,608 $ 102,116 Contributions of infrastructure - developers 128,603 3,023 - 131,626 - Transfers out - - (35,000) (35,000) - Change in net position $ 1,384,940 $ 2,676,236 $ 53,058 $ 4,114,234 $ 102,116 Net Position - Beginning of the year $ 31,080,328 $ 44,189,594 $ 3,725,566 $ 78,995,488 $ 356,356 Restatements 21,653 (68,999) - (47,346) - Net Position - Beginning of the year - Restated $ 31,101,981 $ 44,120,595 $ 3,725,566 $ 78,948,142 $ 356,356 Net Position - End of the year $ 32,486,921 $ 46,796,831 $ 3,778,624 $ 83,062,376 $ 458,472 See accompanying Notes to the Financial Statements 34 City of Kalispell, Montana Statement of Cash Flows Proprietary Funds Year Ended June 30, 2017 Governmental Business - Type Activities Activities Non -major Internal Service Water Sewer Enterprise Totals Fund Cash flows from operating activities: Cash received from customers $ 2,959,218 $ 4,506265 $ 1,093,727 $ 8,559,210 $ 1,122,937 Cash received from assessments - 871,527 - 871,527 - Cash received from miscellaneous sources 233,695 13,190 246,885 Cash payments for claims (632,788) (1,466,149) (301,675) (2,400,612) (510,003) Cash payments to employees (1,060,651) (1,581,812) (517,829) (3,160,292) (435,412) Net cash provided (used) by operating activities $ 1,499,474 $ 2,343,021 $ 274,223 $ 4,116,718 $ 177,522 Cash flows from capital and related financing activities: Principal paid on bonds, loans and advances $ (196,000) $ (921,000) $ (38,343) $ (1,155,343) $ - Interest paid on bonds, loans and advances (55,986) (260,400) (1,657) (318,043) Acquisition and construction of capital assets (245,145) (1,675,750) (45,405) (1,966,300) (98,365) Proceeds from bonds, loans and advances 63,096 - 63,096 Impact fees 835,336 2,370,999 - 3206,335 Sale of capital asset - - 15,700 15,700 Net cash provided (used) by capital and related financing activities $ 401,301 $ (486,151) $ (69,705) $ (154,555) $ (98,365) Cash flows from non -capital financing activities: Transfers between funds $ - $ $ (35,000) $ (35,000) $ Hydrant meter deposits (2,550) ($2,550) Net cash provided (used) from non -capital financing activities $ (2,550) $ $ (35,000) $ (37,550) $ - Cash flows from investing activities: Interest on investments $ 88,717 $ 128,042 $ 10,292 $ 227,051 $ 2,364 Net cash provided (used) by investing activities $ 88,717 $ 128,042 $ 10,292 $ 227,051 $ 2,364 Net increase(decrease)in cash and cash equivalents $ 1,986,942 $ 1,984,912 $ 179,810 $ 4,151,664 $ 81,521 Cash and cash equivalents at beginning 7,377,912 11,593,463 1,032,970 20,004,345 240,325 Cash and cash equivalents at end $ 9,364,854 $ 13,578,375 $ 1,212,780 $ 24,156,009 $ 321,846 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $ 509,371 $ 712,637 $ 57,565 $ 1279,573 $ 99,753 Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation 911,985 1,814,966 236,871 2,963,822 31,459 Pension Adj. (25,650) (228,615) (48,692) (302,957) - Other Post Employment Benefits Expense 37,889 39,132 77,021 - Changes in assets and liabilities: Accounts receivable - net 4,549 (19,909) (1,797) (17,157) $1,594 Increase in Inventory 24,818 - 24,818 - Taxes and assessments receivable, net - (3,236) 14,398 11,162 - Prepaid expenses 12,844 19,266 6,422 38,532 4,300 Increase Comp Abs 8,787 (6,568) 13,803 16,022 1,071 Decrease in due from County - 5,965 (2,819) 3,146 - Accounts payable 28,831 30,771 5,392 64,994 44,567 Accrued payroll (13,950) (21,388) (6,920) (42,258) (5222) Net cash provided (used) by operating activities $ 1,499,474 $ 2,343,021 $ 274,223 $ 4,116,718 $ 177,522 The City received non cash contributions of land and infrastructure as follows: See accompanying notes to the financial statements $ 128,603 $ 3,023 $ - $ 131,626 $ - 35 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, 2017 Agency Funds ASSETS Cash and short-term investments $ 111,544 Total assets $ 111,544 LIABILITIES Due to others 111,544 Total liabilities $ 111,544 See accompanying Notes to the Financial Statements WO j CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 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, 2017, and for the year then ended. The more significant accounting policies of the City are described below Recently Implemented Accounting Pronouncements For the fiscal year ended June 30, 2017, the City implemented GASB Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This statements purpose is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (OPEB). Another purpose is to improve the information provided by state and local governmental employers about financial support for OPEB that is 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. 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 City's 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. Neither the Business Improvement District nor the Tourism Business Improvement District issue financial statements separate from the City of Kalispell. The two component units are reported in separate columns to emphasize that they are legally separate from the City. 37 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 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. 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. 38 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 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 funds are aggregated and reported in a single column as non -major funds. A fund is considered major if it is the primary operating fund of the City or meets the following criteria: a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type; and b. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise funds are at least 5 percent of the corresponding total for all governmental and enterprise funds combined. Measurement focus and Basis of Accounting Governmental funds are used to account for the City's general government activities. Governmental fund types use the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual. (i.e., when they are "measurable and available") "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The City considers all revenues available if they are collected within 60 days after year-end. Expenditures are recorded when the related fund liability is incurred except for un- matured interest on general long-term debt which is recognized when due, and certain compensated absences and claims and 39 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. Real and personal property taxes, special assessments, charges for current services, and interest earnings are susceptible to accrual. Other receipts and taxes become measurable and available when cash is received by the City and are recognized as revenue at that time. The City recorded real and personal property taxes and assessments levied for the current year as revenue. Taxes and assessments receivable remaining unpaid at year-end and not expected to be collected soon enough thereafter to be available to pay obligations of the current year were recorded as deferred revenue, with a corresponding reduction in revenues, as required by generally accepted accounting principles. In addition, prior period delinquent taxes and assessments collected in the current period were recorded as revenue in the current period as required by generally accepted accounting principles. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. Expenditure driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met. Major Funds The City reports the following major governmental funds: The General Fund is always a major fund. This is the City's primary operating fund and it accounts for all financial resources of the City except those required to be accounted for in other funds. The 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 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. 40 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 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. All Fiduciary funds reported account for assets held by the City of Kalispell in a trustee capacity (agency fund). 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 accrual basis of accounting. The KPD Evidence agency fund is used to account for assets that the City holds as evidence, but will be returned to the owner when it is no longer required. The Payroll Clearing agency fund is used to account for assets payable to providers of payroll benefits until such time as it is due. The Performance Bond agency fund is used to hold assets provided by individuals and businesses until they have completed a task required by contractual agreement with the City of Kalispell. The Tourism Business Improvement District agency fund is used as a pass thru for fees paid by patrons of participating lodging facilities to fund the Tourism Business Improvement District. 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 into governmental -type activities on the government -wide financial statements. Exceptions to this general rule are charges for services between various functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Budget Process An annual appropriated operating budget is adopted each fiscal year for the general fund, special revenue funds, debt service funds and capital projects funds on the modified accrual basis. In addition, a budget is adopted for the enterprise and internal service funds on a full accrual basis. The appropriated budget is prepared by fund, function, and for the general fund and certain other funds, by department. The final budget is legally enacted by the City Council, after holding public hearings as required by State statutes, and within forty-five days of the State providing final shared revenue figures. 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. 41 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 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. There were no material budget amendments or transfers for FY 2017. 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 3, 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. 42 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 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. Amh7/Innce An allowance, based on history, for estimated uncollectible accounts receivable of 55% is maintained for the Ambulance fund. This allowance account has been adjusted to $298,320 at June 30, 2017. Ambulance accounts receivable $542,400 Times allowance percentage 55% @ June 30, 2017 $298,320 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, 2017: Water Sewer $ 14,780 $ 22,644 Contracts The following are contracts payable to the City of Kalispell on June 30, 2017. FUND Source Amount General - Major Governmental Municipal Court $ 40,731 Law Enforcement Grants Flathead Electric Cooperative (Roundup for Safety) $ 3,408 $ 44,139 Information Technology - Internal Service Charter (formerly Bresnan) 41,431 Water- Major Proprietary Impact Fees 40,918 Sewer- Major Proprietary Impact Fees 201,787 Total Proprietary 242,705 Total City contracts receivable $ 328,275 3. Inventories and Prepaid Items Inventories for materials and supplies for governmental fund types are expended at the time of purchase. The amounts on hand in governmental funds are not significant. 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 in both government -wide and fund financial statements. Prepaid items arise when charges are entered in the accounts for benefits not yet received. In subsequent periods, when the benefit criteria are met, or when the City has a legal claim to the resources, the prepaid items are removed from the balance sheet and expenses are recognized. 43 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 On June 30, 2017, the City reported prepaid expenses in the following funds. FUND Purpose Amount FUND General - Major Governmental Workers Compensation $ 106,082 General - Major Governmental Health Insurance 140,108 Water - Major Proprietary Parks Health Insurance 11,691 Water - Major Proprietary Ambulance Health Insurance 11,310 Sewer- Major Proprietary Building Department Prepaid expenditure 488 Sewer - Major Proprietary Building Department Health Insurance 4,803 Solid Waste Street Maintenance - Major Governmental Health Insurance 13,134 Solid Waste Street Maintenance - Major Governmental Prepaid rent 19,263 CD Misc. - Major Governmental Prepaid rent 2,468 Total Governmental Funds 309,347 Information Technology - Internal Service Health Insurance 2,225 Information Technology - Internal Service Prepaid maintenance contracts 6,495 Central Garage - Internal Service Health Insurance 3,187 Total Internal Service 11,907 Total Governmental Activities 321,254 Purpose Amount Health Insurance 16,061 Prepaid rent 38,528 Health Insurance 21,053 Prepaid rent 57,792 Health Insurance 7,386 Prepaid rent 19,264 Total Proprietary Funds 160,084 Total City prepaids $481,338 The City pays quarterly in advance for Health Insurance and Workers' Compensation insurance. Some information technology maintenance contracts span up to three years. A number of City departments have prepaid office rent. 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 acquisition value. As required by GASB, the City of Kalispell has retroactively reported its streets as part of capital assets in the financial reports for fiscal year 2009. More detailed information on the City's streets and all capital assets can be found in Note 3, 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. 44 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 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. 45 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 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 .O CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 NOTE 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Excess of expenditures over appropriations For the year ended June 30, 2017, all City funds expenditures were less than or equal to budgeted appropriations. NOTE 3. DETAILED NOTES ON ALL FUNDS A. Cash and Investments At June 30, 2017, the carrying amount of the City's deposits in local banks and investments is $41,247,002. Interest bearing account balances are covered by the Federal Depository Insurance Corporation (FDIC) up to $250,000 per bank, per depositor. In addition, all noninterest bearing transaction account balances are fully insured by FDIC coverage. The remaining balances are covered by collateral held by the pledging bank's agent in the City's name. The City's cash and investments are reported as follows: Unrestricted Restricted Total Governmental activities $15,649,807 $1,306,889 $16,956,696 Business -type activities 14,183,066 9,972,943 24,156,009 Fiduciary funds 111,544 111,544 Component unit 22,753 22,753 $29,967,170 $11,279,832 $41,247,002 Custodial credit risk for deposits is the risk that in the event of a financial institution failure, the City's deposits may not be returned or the City will not be able to recover the collateral securities in the possession of the outside party. The City minimizes custodial credit risk by restrictions set forth in City policy and state law. Types of securities that may be pledged as collateral are detailed in Section 17-6-103 of the Montana Code Annotated (MCA). On June 30, 2017, the following interest rate risks and valuation inputs were associated with the City's deposits and investments. Credit Risk Fair Valuation Investment Maturities Rating Value Inputs Certificates of Deposit Feb. 2 119 N/A $ 248,000 Level 2 U.S. Government Bonds Dec. 2017- April 2022 S&P AA+ $15,550,000 Level 2 State of Montana - Short Term Investment Pool Account N/A N/A $15,124,486 S & C Bonds -internal 2017-2024 N/A $ 40,060 Demand deposits N/A N/A $10,281,526 Petty Cash N/A N/A $ 2,930 $41,247,002 Credit risk is defined as the risk that an issuer or other counterpart to an investment will not fulfill its obligation. The above credit risk rating indicates the probability that the issuer may default in making timely principal and interest payments. The credit ratings presented in the previous tables are provided by Standard and Poor's Corporation (S&P). The City's investment policy is to hold investments to maturity with the contractual understanding that these investments are low risk, locked in to a guaranteed rate of return, and are, therefore, not impacted significantly by changes in short term interest rates. The City has no formal policy relating to interest risk and no formal policy relating to credit risk. 47 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 The City voluntarily participates in the STIP (Short Term Investment Pool) administered by the Montana Board of Investments (MBOI). A local government's STIP ownership is represented by shares, the prices of which are fined at $1.00 per share, and participants may buy or sell shares with one business days' notice. STIP administrative expenses are charged daily against the STIP income, which is distributed on the first calendar day of each month. Shareholders have the option to automatically reinvest their distribution income in additional shares. STIP is not registered with the Securities and Exchange Commission. STIP is not FDIC insured or otherwise insured or guaranteed by the federal government, the State of Montana, the MBOI or any other entity against investment losses and there is no guaranteed rate of return on funds invested in STIP shares. The MBOI maintains a reserve fund to offset possible losses and limit fluctuations in STIP's valuation. The STIP investment portfolio consists of securities with maximum maturity of 2 years. Information on investments held in the STIP can be found in the Annual Report on the MBOI website at http://invesbuent.com/AmualReportsAudits. B. Interfund Receivables and Payables (Due to/from Other Funds) The composition of interfund balances and due to/from as of June 30, 2017, was as follows: Receivable Fund General Fund - Major Governmental General Fund - Major Governmental General Fund - Major Governmental General Fund - Major Governmental General Fund - Major Governmental General Fund - Major Governmental General Fund - Major Governmental SID Revolving Fund C. Transfers Payable Fund Ambulance - Special Revenue Fund Law Enforcement Grants - Special Revenue Fund Stonegarden Grant - Special Revenue Fund Health Levy - Special Revenue Fund CD Misc. - Major Governmental Kidsports Grant - Capital Project Fund G.O. Bonds - Debt Service Fund S & C's - Debt Service Fund Total - Due To Other Funds (Governmental Funds) Amount Purpose $ 30,400 S/T Loan 1,945 S/T Loan 9,922 S/T Loan 18,907 S/T Loan 16,250 S/T Loan 537,834 S/T Loan 21,453 S/T Loan 212 S/T Loan $ 636,923 The following is an analysis of transfers between funds during Fiscal Year 2017: From West Side TIF - Special Revenue Old School Tech TIF Old School Industrial TIF Health S&C Solid Waste - Nonmajor Proprietary To West Side TIF - Debt Service CD Misc - Major Governmental CD Misc - Major Governmental General - Major Governmental SID Revolving Gas Tax - Special Revenue TOTAL Amount Purpose 33,844 Operations 35,000 Operations 15,000 Operations 901,000 Operations 390 Operations 35,000 Operations $ 1,020,234 48 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 D. Capital Assets Capital asset activity for the year ended June 30, 2017 was as follows Assets Contributed In fiscal year 2017, Governmental Activities report contributed assets from private sources with a value of $11,269. These contributed assets are sidewalk replacement or repair paid for by homeowner's directly or by Sidewalk & Curb assessments. In fiscal year 2017, Business -type Activities report contributed assets from private sources with a value of $131,626. The Water fund received contributions from developers in the amount of $128,603. Contributed to the Water fund were six (6) new fire hydrants ($28,688), and one thousand ffour hundred eleven linear feet (1,411') of water mains ($99,915). The Sewer fund received contributions from developers in the amount of $3,023. Contributed to the Sewer fund were one hundred thirty linear feet (130') of sanitary mains. Gain (Loss) on Sale/Disposal of Capital Assets In fiscal year 2017, Business -type Activities report a gain on disposal of assets of $14,228. Residential and commercial meters were replaced with a depreciated value of $1,472, resulting in a loss on disposal of capital assets in the Water fund. A fully depreciated solid waste truck was sold resulting in a gain on disposal of capital assets in the Solid Waste fund of $15,700. 49 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 Balance Balance Governmental Activities: July 1, 2016 Additions Contributions Transfers Deductions June 30, 2017 Capital assets not being depreciated: Land (Asset type: 010) $ 2,395,299 $ - $ $ $ $ 2,395,299 Construction in Progress $ - $ 885,147 $ $ $ 885,147 Total capital assets not being depreciated 2,395,299 885,147 3,280,446 Capital assets being depreciated: Buildings (Asset type: 020) 17,189,958 39,314 17,229,272 Improvements other than buildings (Asset type: 030) 15,739,372 76,832 11,269 15,827,473 Machinery and equipment General (Asset type: 040) 8,838,466 615,273 - (123,370) 9,330,369 Ambulance (Asset type: 100) 398,059 169,707 (7,500) 560,266 Parking (Asset type: 230) 120,896 - 120,896 Infrastructure (Asset type: 031) 83,135,184 83,135,184 Total capital assets being depreciated 125,421,935 901,126 11,269 (130,870) 126,203,460 Less accumulated depreciation for: Buildings (Asset type: 020) (8,471,140) (588,732) - (9,059,872) Improvements other than buildings (Asset type: 030) (8,096,885) (605,662) (8,702,547) Machinery and equipment General (Asset type: 040) (4,978,624) (630,219) 119,041 (5,489,802) Ambulance (Asset type: 100) (390,607) (25,854) 7,500 (408,961) Parking (Asset type: 230) (114,405) (1,470) - (115,875) Infrastructure (Asset type: 031) (28,821,212) (2,078,379) - (30,899,591) Total accumulated depreciation (50,872,873) (3,930,316) 126,541 (54,676,648) Total capital assets being depreciated, net 74,549,062 (3,029,190) 11,269 (4,329) 71,526,812 Governmental activities capital assets, net $ 76,944,361 $ (2,144,043) $ 11,269 $ $ (4,329) $ 74,807,258 Balance Balance Internal service funds: July 1, 2016 Additions Contributions Transfers Deductions June 30, 2017 Information Technology (Asset type: 200) $ 267,432 $ 72,862 $ $ $ $ 340,294 Less accumulated depreciation - Information Technology (193,635) (22,228) (215,863) Central Garage (Asset type: 220) 272,893 25,503 298,396 Less accumulated depreciation - Central Garage (192,618) (9,232) (201,850) Internal service funds assets, net $ 154,072 $ 66,905 $ $ $ $ 220,977 Governmental activities depreciation was charged to functions/programs of the primary government as follows: Governmental Activities: General Government $ 2,494,895 Public Safety 571,422 Public Works 386,999 Parks and Recreation 477,000 Total Governmental Activities $ 3,930,316 50 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 Balance Construction Balance Business -type activities: July 1, 2016 Additions Contributions in Progress Deductions June 30, 2017 Capital assets not being depreciated: Land Airport (Asset type: 210) $ 1,347,867 $ $ $ $ $ 1,347,867 Water (Asset type: 070) 105,958 105,958 Sewer (Asset type: 120) 282,137 282,137 Sewer (Storm) (Asset type: 150) 26,550 26,550 Construction in progress Water - 183,950 183,950 Sewer/Storm 1,752,557 178,318 (214,922) 1,715,953 Total capital assets not being depreciated 3,515,069 362,268 (214,922) 3,662,415 Capital assets being depreciated: Airport (Asset type: 210) 1,962,813 - 1,962,813 Water General Plant (Asset type: 060) 1,376,903 (58,108) 1,318,795 Source of Supply (Asset type: 070) 4,792,054 - 4,792,054 Transmision and Distribution (Asset type: 080) 28,677,742 80,952 128,603 (35,934) 28,851,363 Pumping Plant (Asset type: 090) 4,014,998 - - 4,014,998 Sewer General Plant (Asset type: 130) 942,198 13,962 956,160 Transmision and Distribution (Asset type: 140) 24,861,110 646,666 3,023 213,600 (8,388) 25,716,011 Storm Sewer System (Asset type: 150) 14,655,901 529,350 - 15,185,251 Treatment Plant Equipment (Asset type: 180) 385,915 18,453 - - 404,368 Treatment Plant (Asset type: 190) 39,288,144 241,100 1,322 - 39,530,566 Solid Waste Buildings (Asset type: 111) 316,731 - 316,731 Machinery and equipment (Asset type: 110) 1,737,911 45,405 - (174,822) 1,608,494 Total capital assets being depreciated 123,012,420 1,575,888 131,626 214,922 (277,252) 124,657,604 Less accumulated depreciation for: Airport (Asset type: 210) (1,043,920) (95,474) - - - (1,139,394) Water General Plant (Asset type: 060) (1,156,968) (45,658) 58,108 (1,144,518) Source of Supply (Asset type: 070) (1,105,623) (109,451) - (1,215,074) Transmision and Distribution (Asset type: 080) (8,944,111) (669,123) 34,464 (9,578,770) Pumping Plant (Asset type: 090) (1,839,123) (87,753) (1,926,876) Sewer General Plant (Asset type: 130) (839,443) (17,629) - (857,072) Transmision and Distribution (Asset type: 140) (10,947,127) (657,986) 8,388 (11,596,725) Storm Sewer System (Asset type: 150) (4,717,283) (342,430) (5,059,713) Treatment Plant Equipment (Asset type: 180) (342,264) (7,973) (350,237) Treatment Plant (Asset type: 190) (20,617,964) (788,949) - (21,406,913) Solid Waste Buildings (Asset type: 111) (281,889) (9,292) (291,181) Machinery and equipment (Asset type: 110) (939,897) (132,105) 174,822 (897,180) Total accumulated depreciation (52,775,612) (2,963,823) 275,782 (55,463,653) Total capital assets being depreciated, net 70,236,808 (1,387,935) 131,626 214,922 (1,470) 69,193,951 Business -type activities capital assets, net $ 73,751,877 $ (1,025,667) $ 131,626 $ - $ (1,470) $ 72,856,366 Business -type activities depreciation was charged to functions/programs of the primary government as follows: Business -type Activities: Airport $ 95,474 Water 911,985 Sewer 1,814,967 Solid Waste 141,397 Total Business -type Activities $ 2,963,823 51 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 E. Long -Term Debt During the year ended June 30, 2017, the following changes occurred in liabilities reported in long-term debt: Balance Balance Due within July 1, 2016 Additions Reductions June 30, 2017 1 year Governmental Activities- G.O. Bonds $ 2,350,000 $ - $ (465,000) $ 1,885,000 $ 470,000 Revenue Bonds 1,098,000 (164,500) 933,500 175,000 Assessments 2,761,499 4,300 (338,739) 2,427,060 326,841 Contract Debt/Loans 832,545 129,987 (300,224) 662,308 292,745 Intermediary Program 568,930 - (26,409) 542,521 26,674 Compensated Absences 1,351,780 991,941 (963,584) 1,380,137 991,941 Governmental Activities Sub Total $ 8,962,754 $ 1,126,228 $ (2,258,456) $ 7,830,526 $ 2,283,201 Internal Service Funds: Compensated Absences $ 30,404 $ 21,648 $ (20,577) $ 31,475 $ 21,648 1memal Service Funds Sub Total $ 30,404 $ 21,648 $ (20,577) $ 31,475 $ 21,648 Business -type Activities: Revenue Bonds $ 610,000 $ - $ (65,000) $ 545,000 $ 70,000 SRF 12,731,000 63,096 (1,052,000) 11,742,096 1,076,000 Contract Debt/Loans 116,192 - (38,343) 77,849 38,728 Compensated Absences 306,400 214,754 (198,733) 322,421 214,755 Business -type Activities Sub Total $13,763,592 $ 277,850 $ (1,354,076) $ 12,687,366 $ 1,399,483 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, 2017 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 June 30, 2017 2022 $4,145,000 varies $ 1,885,000 $4,145,000 $ 1,885,000 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 June 30, 2017 SID343 6/12/ 0001 3.6%-5.59% 20 years 2021 1,581,500 varies 155,000 SID344 6/15/2006 3.7%-5.1% 20years 2026 4,520,000 varies 2,045,000 SID345 5/15/2014 3.00% 15 years 2029 242,000 varies 187,000 2009 S&C 1/4/2010 3.25% 8 years 2018 7,629 varies 953 2010 S&C 1/6/2011 3.00% 8 years 2019 942 varies 235 2011 S&C 1/6/2012 3.00% 8 years 2020 5,792 varies 2,172 2012 S&C 4/12/2013 3.25% 8 years 2021 3,981 varies 1,991 2013 S&C 1/2/2014 3.25% 8 years 2022 17,472 varies 10,920 2014 S&C 1/2/2015 3.25% 8 years 2023 7,845 varies 5,884 2015 S&C 1/4/2016 3.50% 8 years 2024 9,273 varies 8,113 2016 S&C 6/30/2016 3.75% 8 years 2025 9,792 varies 9,792 Total Special Assessment Bonds $ 6,406,226 $ 2,427,060 52 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 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 $184,144. SID 344 Bonds 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). 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 2017 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 Issue Interest Final Bonds Balance Date Rate Term Maturity Issued June 30, 2017 Sep-05 3.8 %4 40 % 10 years 2020 $ 1,445,000 $ 500,000 Mar-12 variable 25 years 2037 500,000 433,500 $ 1,945,000 $ 933,500 Business -type Activities: 2004 Water Refunding May-04 2.5 %4 85 % 20 years 2024 $ 1,840,000 $ 545,000 Business -type Activities Sub Total 1,840,000 545,000 Total Revenue Bonds $ 3,785,000 $ 1,478,500 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 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. 53 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 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, 2017, as all debt service payments were made as of the end of the fiscal year, leaving no accrued interest or principal balance. Reserve Account - The City shall keep in the reserve account an amount equal to the lesser of 10% of the original principal or the maximum amount of principal and interest required in the current or any subsequent fiscal year. For the Water fund the City complies with the maximum principal and interest in the current or any subsequent year. Maximum P & I $ 260,216 Total Reserve Requirement $ 260,216 Reserve balance 6/30/17 260 216 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. Water Fund Cash Flow Debt Coverage Water Service Charges $ 2,954,669 'Misc. Revenue 322,412 Total Operating Revenue 3,277,081 Less: Operating Expense (excludes depreciation) 1,767,008 Available for Debt Service $1,510,073 "Maximum Debt Service $ 260,216 Estimated Coverage FY17 580% 'includes interest revenue "includes all water fund borrowings State Revolving Fund — the City has five (6) loan agreements with the State Revolving Fund (SRF). These obligations are to be repaid from the operating income of the fund. SRF LOANS Interest Amount Outstanding Purpose Origination Rate Term Borrowed June 30, 2017 2013 Sewer - WWTP Digester Lid FY13 3.00% 20 years $ 1,102,748 $ 922,000 2012 Sewer - Hwy 93 S FY13 2.25% 12 years 1,009,000 621,000 2012 Water - Sheepherders Well/Storage FY13 2.25% 15 years 1,340,000 942,000 2012 Water - Main & Idaho Main FY13 2.00% 8 years 404,000 174,000 2017 Water - 4th Ave E FY18 2.50% 20 years 63,096 63,096 2012 Sewer- WWTP System Improvements FY13 2.25% 15 years 12,827,000 9,020,000 Total SRF Loans $16,745,844 $11,742,096 54 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 Sewer Debt Required Information Operating Reserve — The city shall keep in the operating reserve account an amount equal to one month's operating expenses. As of June 30, 2017, 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, 2017, 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 ($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 ($11,966,140 / 16 years = $747,884 * 1.25 — $934,855). The City is in compliance with the 125% of the average debt service payable in any fiscal year. As of June 30, 2017, the debt service reserve account contains $966,731. 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. Sewer Fund Cash Flow Debt Coverage 'Operating Revenue $5,536,204 Impact Fees Pledged for Debt 320,000 Total 5,856,204 Less: Operating Expense (excludes depreciation) 2,880,559 Available for Debt Service $2,975,645 "Maximum Debt Service $1,182,693 Estimated Coverage FY17 252% 'includes interest revenue —includes all sewer fund borrowings 55 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 Loans/Contracted Debt Origination Interest Due Principal Balance Purpose Date Rate Term Date Amount June 30, 2017 Business -type Activities BOI:Garbage Truck 6/13/2015 varies 5 years 2/15/2019 $ 172,988 $ 77,849 Total loanstcontracted debt - Business -type Activities $ 77,849 Governmental Activities BOI:Stumper (Forestry) 2/1/2013 varies 5 years 2/15/2018 20,000 4,090 BOI:P/U & Tractor (Parks) 2/1/2013 varies 5 years 2/15/2018 45,000 9,202 BOI:Dump Trucks (2) (St. Maint.) 5/24/2013 varies 5 years 2/15/2018 174,698 39,507 BOI:Boom Truck (Light Maint.) 8/23/2013 varies 5 years 2/15/2018 97,651 22,055 BOI:Dump Trucks (2) (St. Maint.) 2/28/2014 varies 5 years 2/15/2019 162,696 70,947 BOI:2011stAve E-City Hall 9/11/2015 varies 5years 8/15/2020 412,571 291,121 BOI:Chip Truck (Forestry) 1/8/2016 varies 5 years 2/15/2021 34,498 27,724 BOI:Flatbed Chevy (Parks) 11/23/2016 varies 5 years 2/15/2022 30,966 30,966 BOI:Movver (Parks) 3/31/2017 varies 5 years 2/15/2022 59,707 59,707 BOLWoodland Bathroom (Parks) 6/30/2017 varies 5 years 8/15/2022 39,314 39,314 Rocky Mtn Bank - Fire Truck 3/7/2008 3.95% 10 years 3/1/2018 575,000 67,675 Sub total BOI loans/contracted debt $1,652,101 $ 662,308 USDA:I ntermediary Relending Program 10/12/2004 1.00% 30 years 10/1212034 $ 520,000 $ 361,910 Relending Program 11/27/2006 1.00% 30 years 11/27/2036 257,500 180,611 Sub total USDA Intermediary 777,500 542,521 Total loanstcontracted debt - Governmental Activities $ 2,429,601 $ 1,204,829 BOI - Board of Investments Intercap Loan Program Requirements to amortize debt The annual requirements to amortize all long-term debt outstanding, excluding compensated absences payable, as of June 30, 2017, 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 2018 470,000 34,163 326,841 117,688 292,745 16,900 26,674 5,425 175,000 43,433 1,508,869 2019 475,000 27,113 320,887 102,031 151,460 9,239 26,940 5,159 181,000 36,849 1,335,678 2020 485,000 18,800 246,769 86,455 117,048 5,453 27,210 4,889 191,000 29,838 1,212,462 2021 225,000 9,100 247,045 74,738 75,059 2,526 27,482 4,617 17,000 21,258 703,825 2022 230,000 4,600 246,548 62,803 25,996 650 27,757 4,342 17,500 20,333 640,529 2023-2027 1,012,970 130,704 143,003 17,492 100,000 86,185 1,490,354 2028-2032 26,000 1,455 150,299 10,197 120,500 56,540 364,991 2033-2037 113,156 2,752 131,500 20A33 267,841 TOTAL $ 1,885,000 $ 93,776 $2,427,060 $ 575,874 $ 662,308 $ 34,768 $ 542,521 $ 54,873 $ 933,500 $ 314,869 $ T524,549 Business -type Activities: SRF REVENUE CONTRACTED FOR FISCAL LOANS(1) BONDS LOANS/DEBT YEAR ENDED PRINCIPAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST TOTAL 2018 1,076,000 263,183 70,000 25,943 38,728 1,946 1,475,800 (1) The 2017 water fund SRF loan ($63,096) is 2019 1,101,000 238,615 70,000 22,793 39,121 978 1,472,507 not included on this schedule. The City has not 2020 1,125,000 213,477 75,000 19,643 1,433,120 drawn all funds for this loan. An amortization 2021 1,127,000 187,769 75,000 16,005 1,405,774 schedule will not be available until all funds have 2022 1,126,000 162,222 80,000 12,368 1,380,590 been drawn. Final loan amount will be approx- 2023-2027 5,727,000 419,504 175,000 12,853 6,334,357 imately $2,662,000. 2028-2032 327,000 39,050 366,050 2033-2037 70,000 1,575 71,575 TOTAL $ 11,679,000 $ 1,525,395 $ 545,000 $ 109,605 $ 77,849 $ 2,924 $ 13,9 99773 56 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 F. Employee Benefit Plans Pension Plans Substantially all City of Kalispell full-time employees participate in one of three statewide, cost sharing, multiple -employer retirement benefit plans administered by the Public Employees Retirement Board (PERB). The authority to establish or amend contribution requirements for all plans, and provide cost of living adjustments for defined benefits plans is assigned to the State legislature. PERB issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information for these plans. It is available from the Montana Public Employees' Retirement Administration (MPERA) at 100 North Park Avenue, Suite 200, P.O. Box 200131, Helena, Montana, 59620-0131 or at their website, http://myera.mt.gov. The Montana Public Employees 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, and 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 the period incurred. Investments are reported at fair value. MPERA adheres to all applicable Governmental Accounting Standards Board (GASB) statements. Contributions to pension plans are as required by state statue. Information about each plan follows: PUBLIC EMPLOYEES' RETIREMENT SYSTEM In accordance with GASB Statement 68, Accounting and Financial Reporting for Pensions, employers and the non -employer contributing entity are required to recognize and report certain amounts associated with participation in the Public Employees' Retirement System Defined Benefit Retirement Plan (the Plan). Employers are required to record and report their proportionate share of the collective Net Pension Liability; Pension Expense; and Deferred Outflows and Deferred Inflows of Resources associated with pensions. Pension Amount Totals Employers are provided guidance in GASB Statement 68, paragraph 74, that pension amounts must be combined as a total or aggregate for reporting. This is true when employees are provided benefits through more than one pension, whether cost - sharing, single -employer, or agent plans. Net Pension Liability The Total Pension Liability (TPL) minus the Fiduciary Net Position equals the Net Pension Liability (NPL). As GASB Statement 68 allows, a measurement date of up to 12 months before the employer's fiscal year-end can be utilized to determine the Plan's TPL. The basis for the TPL as of June 30, 2017, was determined by taking the results of the June 30, 2016, actuarial valuation and applying standard roll forward procedures. The roll forward procedure uses a calculation that adds the annual normal cost (also called the service cost), subtracts the actual benefit payments and refunds for the plan year, and then applies the expected investment rate of return for the year. The update procedures are in conformity with Actuarial Standards of Practice issued by the Actuarial Standards Board. 57 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 Special Funding The state of Montana, as the non -employer contributing entity, paid to the Plan additional contributions that qualify as special funding. Those employers who received special funding are counties; cities & towns; school districts & high schools; and other governmental agencies. Not Special Funding Per Montana law, state agencies and universities paid their own additional contributions. These employer paid contributions are not accounted for as special funding for state agencies and universities but are reported as employer contributions. The state of Montana, as the non -employer contributing entity, also paid to the Plan coal tax contributions that are not accounted for as special funding for all participating employers. The proportionate shares of the employer's and the state of Montana's NPL for June 30, 2017, and 2016, are displayed below. The employer's proportionate share equals the ratio of the employer's contributions to the sum of all employer and non - employer contributions during the measurement period. The state's proportionate share for a particular employer equals the ratio of the contributions for a particular employer to the total state contributions paid. The employer recorded a liability of $7,348,266 and the employer's proportionate share was 0.4314 percent. Percent of Percento As of measurement Net Pension Net Pension Collective Collective Change in date: Liability as of Liability as of NPL as of NPL as of Percent of 6/30/2017 6/30/2016 6/30/2017 6/30/2016 Collective NPL Employer Proportionate Share $ 7,348,266 $ 5,961,419 0.4314 k 0.4265 % 0.0049 State of Montana Proportionate Share associated with the Em to er $ 89,787 $ 73,226 0.0053k 0.0052k O.000Ok Total $ 7,438,053 $ 6,034,645 0.4367 k 0.4317 k 0.0050 k Changes in actuarial assumptions and methods: There were no changes in assumptions or other inputs that affected the measurement of the TPL. Changes in benefit terms: There have been no changes in benefit terms since the previous measurement date. Changes in proportionate share: Between the measurement date of the collective NPL and the employer's reporting date there were no changes in proportion that would have an effect on the employer's proportionate share of the collective NPL since the previous measurement date. Pension Expense As of measurement date Pension Expense as of Pension Expense as of 6/30/2017 6/30/2016 Employer's Proportionate Share of PERS S 488,800 $ 207,093 State of Montana Proportionate Share associated with the Employer S 7,524 $ 4,550 Grant Revenue - State of Montana Coal Tax for employer i 128,743 $ 143,068 Total $ 925,067 $ 354,711 At June 30, 2017, the employer recognized $488,800 for its proportionate share of the Plan's pension expense and recognized grant revenue of $7,524 for the state of Montana proportionate share of the pension expense associated with the employer. Additionally, the employer recognized grant revenue of $128,743 from the Coal Severance Tax fund. (Two years of pension expense are documented in the above table but are not necessary for the employer's disclosures.) 58 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 Recognition of Deferred Inflows and Outflows At June 30, 2017, the employer reported its proportionate share of the Plan's deferred outflows of resources and deferred inflows of resources from the following sources: Deferred Outflows of Deferred Inflows of Resources Resources Expected vs. Actual Experience $ 39,649 $ 24.323 Projected Investment Earnings vs. Actual Investment Earnings $ 691,325 Changes in Assumptions Changes in Proportion and Differences Between Employer Contributions and Proportionate Share of Contributions $ 23,153 Employer Contributions subsequent to the measurement date $ 471,214 Total $ 1,202,188 $ 47,476 Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in Pension Expense as follows: For the Reporting Year ended June 30: Amount of deferred outflows and deferred inflows recognized in future years as an increase or (decrease) to Pension Expense 2017 $ 33 470.00 2018 $ 33,470.00 2019 $ 392,855.00 2020 $ 246,856.00 2021 $ Thereafter $ Plan Description (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 participants of both the defined benefit and defined contribution 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). 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. 59 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 Summary of Benefits Eligibility for benefit Service retirement: Hired prior to July 1, 2011: Age 60, 5 years of membership service; Age 65, regardless of membership service; or Any age, 30 years of membership service. Hired on or after July 1, 2011: Age 65, 5 years of membership service; Age 70, regardless of membership service. Early retirement, actuarially reduced: Hired prior to July 1, 2011: Age 50, 5 years of membership service; or Any age, 25 years of membership service. Hired on or after July 1, 2011: Age 55, 5 years of membership service. Vesting 5 years of membership service Mcmbcr'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 Compensation Cap Hired on or after July 1, 2013 — 110% annual cap on compensation considered as part of a member's highest average compensation. Monthly benefit formula Members hired prior to July 1, 2011: • Less than 25 years of membership service: 1.785% of RAC 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)* 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. • 3% for members hired prior to July 1, 2007 • 1.5% for members hired on or after July 1, 2007 and June 30, 2013 Members hired on or after July 1, 2013: a) 1.5% for each year PERS is funded at or above 90%; b) 1.5% is reduced by 0.1% for each 2% PERS is funded below 90%; and c) 0% whenever the amortization period for PERS is 40 years or more. 60 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 Overview of Contributions Member and employer contribution rates are specified by state law and are a percentage of the member's compensation. Contributions are deducted from each member's salary and remitted by participating employers. The Montana Legislature has the authority to establish and amend contribution rates. Member and employer contribution rates are shown in the table below. State & Fiscal Universities Local Government School Districts Year Member Employer Employer State Employer State Hired Hired <7/01/11 >7/01/11 2017 7.9% 7.9% 8.470% 8.370% 0.10% 8.10% 0.370% 2016 7.9% 7.9% 8.370% 8270% 0.10% 8.00% 0.370% 2015 7.9% 7.9% 8270% 8.170% 0.10% 7.90% 0.370% 2014 7.9% 7.9% 8.170% 8.070% 0.10% 7.80% 0.370% 2012-2013 6.9% 7.9% 7.170% 7.070% 0.10% 6.80% 0.370% 2010-2011 6.9% 7.170% 7.070% 0.10% 6.80% 0.370% 2008-2009 6.9% 7.035% 6.935% 0.10% 6.80% 0235% 2000-2007 6.9% 6.900% 6.800% 0.10% 6.80% 0.100% 1. Member contributions to the system of 7.9% are 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. 2. Employer contributions to the system: a. Effective July 1, 2014, following the 2013 Legislative Session, PERS-employer contributions increase an additional 0.1% a year and will continue over 10 years through 2024. The additional employer contributions including the 0.27% added in 2007 and 2009, will terminate on January 1 following an actuary valuation that shows the amortization period of the PERS-DBRP has dropped below 25 years and remains below the 25 years following the reduction of both the additional employer and member contributions rates. b. Effective July 1, 2013, employers are required to make contributions on working retirees' compensation. Member contributions for working retirees are not required. c. The portion of employer contributions allocated to the PCR are included in the employers reporting. The PCR was paid off effective March 2016 and the contributions previously directed to the PCR are now directed to member accounts. 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 a portion of Coal Severance Tax income and earnings from the Coal Trust Permanent Trust fund. 61 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 Stand -Alone Statements The financial statements of the Montana Public Employees Retirement Board (PERB) Comprehensive Annual Financial Report (CAFR) and the GASB 68 Report disclose the Plan's fiduciary net position. The reports are available from the PERB at PO Box 200131, Helena MT 59620-0131, (406) 444-3154 or the MPERA website at http://mpera.mt.gov/index.shtml Actuarial Assumptions The TPL used to calculate the NPL was determined by taking the results of the June 30, 2015, actuarial valuation and applying standard roll forward procedures to update the TPL to June 30, 2016. There were several significant assumptions and other inputs used to measure the TPL. The actuarial assumptions used in the June 30, 2016, valuation were based on the results of the last actuarial experience study, dated June 2010, for the six -year period July 1, 2003 to June 30, 2009. Among those assumptions were the following: Investment Return (net of admin expense) 7.75% Admin Expense as % of Payroll 0.27% General Wage Growth' 4% 'includes Inflation at 3% Merit Increases 0%to 6% Post Retirement Increases Mortality assumptions among contributing members, terminated vested members, service retired members and beneficiaries are 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 Sys's fiduciary net position was projected to be adequate to make all the projected future benefit payments of current plan members through the year 2123. 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. A municipal bond rate was not incorporated in the discount rate. Target Allocations The long-term expected return on pension plan assets was reviewed as part of the regular experience study prepared for the Plan. The experience study, performed for the period of fiscal years 2003 through 2009, was outlined in a report dated June 2010 and can be located on the MPERA website. The long-term expected rate of return on pension plan investments was determined by considering information from various sources, including historical rates of return, rate of return assumptions 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 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 by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the target asset allocation as of June 30, 2016, are summarized below. 62 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 Asset Class Target Asset Allocation Real Rate of Return Arithmetic Basis Long -Term Expected Real Rate of Return (a) (b) (a)x (b) Cash Equivalents 2.6% 4.00% 0.10% Domestic Equity 36.0% 4.55% 1.64% Foreign Eui 18.0% 6.35% 1.14% Fixed Income 23.4% 1.00% 0.23% Private E ui 12.0% 7.75% 0.93% Real Estate 8.0 % 4.00 % 0.32 Total 100; 4.37 Inflation 3.00% Portfolio Return Expectation 7.37% Sensitivity Analysis The sensitivity of the NPL to the discount rate is shown in the table below. A small change in the discount rate can create a significant change in the liability. The NPL was calculated using the discount rate of 7.75%, as well as what the NPL would be if it were calculated using a discount rate 1.00% lower or 1.00% higher than the current rate. 1.0% Decrease Current Discount 1.0% Increase (6.75%) Rate (8.751/6) Employer's Net Pension Liability $10,662,875 $7,348,266 $4,493,054 Summary of Significant Accounting Policies MPERA prepared financial statements using the accrual basis of accounting. The same accrual basis was used by MPERA for the purposes of determining the NPL; Deferred Outflows of Resources and Deferred Inflows of Resources related to pensions; Pension Expense; the Fiduciary Net Position; and Additions to or Deductions from Fiduciary Net Position. 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 in which they are due and payable in accordance with the benefit terms. Expenses are recognized in the period incurred. Investments are reported at fair value. MPERA adhered to all accounting principles generally accepted by the United States of America. MPERA applied all applicable pronouncements of the Governmental Accounting Standards Board (GASB). PERS Disclosure for the defined contribution plan The City of Kalispell contributed to the state of Montana Public Employee Retirement System Defined Contribution Retirement Plan (PERS-DCRP) for employees that have elected the DCRP. The PERS-DCRP is administered by the PERB and is reported as a multiple -employer plan established July 1, 2002, and governed by Title 19, chapters 2 & 3, MCA. All new PERS 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 participants of both the defined benefit and defined contribution retirement plans. Member and employer contribution rates are specified by state law and are a percentage of the member's compensation. Contributions are deducted from each member's salary and remitted by participating employers. The Montana Legislature has the authority to establish and amend contribution rates. Benefits are dependent upon eligibility and individual account balances. Participants are vested immediately in their own contributions and attributable income. Participants are vested after 5 years of membership service for the employer's contributions to individual accounts and the attributable income. Non -vested contributions are forfeited upon termination of employment per 19-3-2117(5), MCA. Such forfeitures are used to cover the administrative expenses of the PERS-DCRP. 63 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 At the plan level for the measurement period ended June 30, 2016, the PERS-DCRP employer did not recognize any net pension liability or pension expense for the defined contribution plan. Plan level non -vested forfeitures for the 289 employers that have participants in the PERS-DCRP totaled $382,656. MUNICIPAL POLICE OFFICERS' RETIREMENT SYSTEM In accordance with GASB Statement 68, Accounting and Financial Reporting for Pensions, employers and the non -employer contributing entity are required to recognize and report certain amounts associated with participation in the Municipal Police Officers' Retirement System (the Plan). Employers are required to record and report the proportionate share of the collective Net Pension Liability; Pension Expense; and Deferred Outflows and Deferred Inflows of Resources associated with pensions. Pension Amount Totals Employers are provided guidance in GASB Statement 68, paragraph 74, that pension amounts must be combined as a total or aggregate for reporting. This is true when employees are provided benefits through more than one pension, whether cost -sharing, single -employer, or agent plans. Net Pension Liability The Total Pension Liability (TPL) minus the Fiduciary Net Position equals the Net Pension Liability (NPL). As GASB Statement 68 allows, a measurement date of up to 12 months before the employer's fiscal year-end can be utilized to determine the Plan's TPL. The basis for the TPL as of June 30, 2017, was determined by taking the results of the June 30, 2016, actuarial valuation and applying standard roll forward procedures. The roll forward procedure uses a calculation that adds the annual normal cost (also called the service cost), subtracts the actual benefit payments and refunds for the plan year, and then applies the expected investment rate of return for the year. The update procedures are in conformity with Actuarial Standards of Practice issued by the Actuarial Standards Board. Special Funding The Plan has a special funding situation in which the state of Montana is legally responsible for making contributions directly to the Plan on behalf of the employers. Due to the existence of this special funding situation, the state is required to report a proportionate share of a local government's collective NPL that is associated with the non -state employer. The proportionate shares of the employer's and the state of Montana's NPL for June 30, 2017, and 2016, are displayed below. The employer's proportionate share equals the ratio of the employer's contributions to the sum of all employer and non -employer contributions during the measurement period. The state's proportionate share for a particular employer equals the ratio of the contributions for a particular employer to the total state contributions paid. The employer recorded a liability of $2,822,947 and the employer's proportionate share was 1.5682 percent. Percent of PercentChange in Net Pension Net Pension Collective Collective Percent of As of measurement date: Liability as of Liability as of NPL as of NPL as of Collective 6/30/2017 6/30/2016 6/30/2017 6/30/2016 NPL Employer Proportionate Share $ 2,822,947 $ 2,523,431 1.5682% 1.5255% 0.0427% State of Montana Proportionate Share associated with the Em to er 1 5 603 673 1 5 112 711 3.1129 % 3.0907 % 0.0222 Total $ 8,426,620 $ 7,636,142 4.6811 % 4.6162% 0.0649% Changes in actuarial assumptions and methods: There were no changes in assumptions or other inputs that affected the measurement of the Total Pension Liability. 64 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 Changes in benefit terms: There have been no changes in benefit terms since the previous measurement date. Changes in proportionate share: Between the measurement date of the collective NPL and the employer's reporting date there were no changes in proportion that may have an effect on the employer's proportionate share of the collective NPL since the previous measurement date. Pension Expense As of reporting date Pension Expense as of Pension Expense as of 6/30/2017 6/30/2016 Employer's Proportionate Share of MPORS $ 335,354 $ 266,393 State of Montana Proportionate Share associated with the Employer $ 600,458 $ 519,977 Total $ 935,812 $ 786,370 At June 30, 2016, the employer recognized its proportionate share of the Plan's pension expense of $335,354. The employer also recognized grant revenue of $600,458 for the support provided by the state of Montana for the proportionate share of the pension expense that is associated with the employer. (Two years of pension expense are documented in the above table but are not necessary for the employer's disclosures.) Recognition of Deferred Inflows and Outflows At June 30, 2017, the employer reported its proportionate share of the Plan's deferred outflows of resources and deferred inflows of resources from the following sources: Deferred Outflows of Deferred Inflows of Resources Resources Expected vs. Actual Experience $ $ 57,511 Projected Investment Earnings vs. Actual Investment Earnings S 183,046 $ Changes in Assumptions S $ Changes in Proportion and Differences Between Employer Contributions and Proportionate Share of Contributions S 76,301 $ Employer Contributions subsequent to the measurement date Is 353,045 Total I $ 612,392 1 $ 57,511 Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in Pension Expense as follows: For the Reporting Year ended June 30: Amount of deferred outflows and deferred inflows recognized in future years as an increase or (decrease)to Pension Expense 2017 $ 5,768.00 2018 $ (5,768.00) 2019 $ 77,763.00 2020 $ 59,307.00 2021 $ Thereafter $ 65 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 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 established in 1974 and governed by Title 19, chapters 2 & 9, MCA. This plan provides retirement benefits to 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. 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 only participate in the DROP 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 date as 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. Summary of Benefits Eligibility for benefit 20 years of membership service, regardless of age. Age 50, 5 years of membership service. Vesting Death and disability rights are vested immediately 5 years of membership service for all other rights Member's highest average compensation (HAC) 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. Compensation Cap Hired on or after July 1, 2013 — 110% annual cap on compensation considered as part of a member's highest average compensation. 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. ZQ CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 Overview of Contributions Rates are specified by state law for periodic member and employer contributions and are a percentage of the member's compensation. Contributions are deducted from each member's salary and remitted by participating employers. The State legislature has the authority to establish and amend contribution rates to the plan. Member and employer contribution rates are shown in the table below. Member Hired Hired Hired Hired >6130197 Fiscal Year<7/1/75 >6/30/75 >6130179 GABA Employer State 2000-2017 5.80% 7.00% 8.50% 9.00% 14.41% 29.37% 1998-1999 7.80% 9.00% 10.50% 11.00% 14.41% 29.37% 1997 7.80% 9.00% 10.50% 14.36% 29.37% Stand -Alone Statements The financial statements of the Montana Public Employees Retirement Board (PERB) Comprehensive Annual Financial Report (CAFR) and the GASB 68 Report disclose the Plan's fiduciary net position. The reports are available from the PERB at PO Box 200131, Helena MT 59620-0131, (406) 444-3154 or the MPERA website at http://mpera.mt.gov/index.shtml Actuarial Assumptions The TPL used to calculate the NPL was determined by an actuarial valuation as of June 30, 2014, with update procedures to roll forward the TPL to June 30, 2015. There were several significant assumptions and other inputs used to measure the TPL. The actuarial assumptions used in the June 30, 2015 valuation were based on the results of the last actuarial experience study, dated June 2010 for the six year period July 1, 2003 to June 30, 2009. Among those assumptions were the following: Investment Return (net of admin expense) 7.75% Admin Expense as % of Payroll 020% General Wage Growth' 4.00% 'includes Inflation at 3.00% Merit Increases 0% to 7.3% Post Retirement Increases I. 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 ii. 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 % the compensation of a newly confirmed officer in the city that the member was last employed. Mortality assumptions among contributing members, terminated vested members, service retired members and and beneficiaries are 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 2117. Therefore, the long-term expected rate of return on pension plan investments was applied to 67 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 all periods of projected benefit payments to determine the Total Pension Liability. A municipal bond rate was not incorporated in the discount rate. Target Allocations The long-term expected return on pension plan assets was reviewed as part of the regular experience study prepared for the Plan. The experience study, performed for the period of fiscal years 2003 through 2009, was outlined in a report dated June 2010 and can be located on the MPERA website. The long-term expected rate of return on pension plan investments was determined by considering information from various sources, including historical rates of return, rate of return assumptions 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 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 by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the target asset allocation as of June 30, 2016, are summarized below. Asset Class Target Asset Allocation Real Rate of Return Arithmetic Basis Long -Term Expected Real Rate of Return (a) (b) (a) x (b) Cash Equivalents 2.6% 4.00% 0.10% Domestic Equity 36.0% 4.55% 1.64% Foreign Equity 18.0% 6.35% 1.14% Fixed Income 23.4% 1.00% 0.23% Private E ui 12.0% 7.75% 0.93% Real Estate 8.0% 4.00% 0.32% Total 100.0% 4.37% I nflatio n 3.00% Portfolio Return Expectation 7.37% Sensitivity Analysis The sensitivity of the NPL to the discount rate is shown in the table below. A small change in the discount rate can create a significant change the liability. The NPL was calculated using the discount rate of 7.75%, as well as what the NPL would be if it were calculated using a discount rate 1.00% lower or 1.00% higher than the current rate. 1.0% Decrease Current Discount 1.0% Increase (6.75%) Rate (8.75 % ) Employer's Net Pension Liabili $3,800,948 $2,822,947 $1,756,120 Summary of Significant Accounting Policies MPERA prepared financial statements using the accrual basis of accounting. The same accrual basis was used by MPERA for the purposes of determining the NPL; Deferred Outflows of Resources and Deferred Inflows of Resources related to pensions; Pension Expense; the Fiduciary Net Position; and Additions to or Deductions from Fiduciary Net Position. 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 in which they are due and payable in accordance with the benefit terms. Expenses are recognized in the period incurred. Investments are reported at fair value. MPERA adhered to all accounting principles generally accepted by the United States of America. MPERA applied all applicable pronouncements of the Governmental Accounting Standards Board (GASB). M: CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 FIREFIGHTERS' UNIFIED RETIREMENT SYSTEM In accordance with GASB Statement 68, Accounting and Financial Reporting for Pensions, employers and the non -employer contributing entity are required to recognize and report certain amounts associated with participation in the Firefighters' Unified Retirement System (the Plan). Employers are required to record and report their proportionate share of the collective Net Pension Liability; Pension Expense; and Deferred Outflows and Deferred Inflows of Resources associated with pensions. Pension Amount Totals Employers are provided guidance in GASB Statement 68, paragraph 74, that pension amounts must be combined as a total or aggregate for reporting. This is true when employees are provided benefits through more than one pension, whether cost -sharing, single -employer, or agent plans. Net Pension Liability The Total Pension Liability (TPL) minus the Fiduciary Net Position equals the Net Pension Liability (NPL). As GASB Statement 68 allows, a measurement date of up to 12 months before the employer's fiscal year-end can be utilized to determine the Plan's TPL. The basis for the TPL as of June 30, 2017, was determined by taking the results of the June 30, 2016, actuarial valuation and applying standard roll forward procedures. The roll forward procedure uses a calculation that adds the annual normal cost (also called the service cost), subtracts the actual benefit payments and refunds for the plan year, and then applies the expected investment rate of return for the year. The update procedures are in conformity with Actuarial Standards of Practice issued by the Actuarial Standards Board. Special Funding The Plan has a special funding situation in which the state of Montana is legally responsible for making contributions directly to the Plan on behalf of the employers. Due to the existence of this special funding situation, the state is required to report a proportionate share of a local government's collective NPL that is associated with the non -state employer. The proportionate shares of the employer's and the state of Montana's NPL for June 30, 2017, and 2016, are displayed below. The employer's proportionate share equals the ratio of the employer's contributions to the sum of all employer and non -employer contributions during the measurement period. The state's proportionate share for a particular employer equals the ratio of the contributions for a particular employer to the total state contributions paid. The employer recorded a liability of $1,594,992 and the employer's proportionate share was 1.3965 percent. Percent of Percentof Changein Net Pension Net Pension Collective Collective Percent of As of rmeasurement Liability as of Liability as of NPL as of NPL as of Collective date: 6/30/2017 6/30/2016 6/30/2017 6/30/2016 NPL Employer Proportionate Share $ 1,594,992 $ 1,451,892 1.3965% 1.4196% -0.0231% State of Montana Proportionate Share associated with the Em o er 3610374 3,23374 0..0022% Tot $5,28,741$4685,61 43.51664005%% 43..51861148%% -00209% Changes in actuarial assumptions and methods: There were no changes in assumptions or other inputs that affected the measurement of the TPL. Changes in benefit terms: There have been no changes in benefit terms since the previous measurement date. M, CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 Changes in proportionate share: Between the measurement date of the collective NPL and the employer's reporting date there were no changes in proportion that may have an effect on the employer's proportionate share of the collective NPL. Pension Expense As of reporting date Pension Expense as of Pension Expense as of 6/30/2017 6/30/2016 Employer's Proportionate Share of FURS $ 201,815 $ 158,144 Employer Grant Revenue - State of Montana Proportionate Share for the Employer $ 468,491 $ 350,198 Total $ 670,306 $ 508,342 At June 30, 2017, the employer recognized its proportionate share of the Plan's pension expense of $201,815. The employer also recognized grant revenue of $468,491 for the support provided by the state of Montana for the proportionate share of the pension expense that is associated with the employer. (Two years of pension expense are documented in the above table but are not necessary for the employer's disclosures.) Recognition of Deferred Inflows and Outflows At June 30, 2017, 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 Expected vs. Actual Experience $ S 15,015 Projected Investment Earnings vs. Actual Investment Earnings $ 166,979 S Changes in Assumptions $ S Changes in Proportion and Differences Between Employer Contributions and Proportionate Share of Contributions 1 $ $ 27,684 Employer Contributions subsequent to the 1 measurement date $ 314,224 Total I $ 481,203 Is 42,699 Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in Pension Expense as follows: For the Reporting Year ended June 30: Amount of deferred outflows and deferred inflows recognized in future years as an increase or (decrease) to Pension Expense 2017 $ 12,118.00 2018 $ 12,118.00 2019 $ 79,809.00 2020 $ 50,624.00 2021 $ 2,705.00 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 plan 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 70 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 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. Summary of Benefits Eligibility for benefit 20 years of membership service, regardless of age. Age 50, 5 years of membership service. Vesting Death and disability rights are vested immediately. 5 years of membership service for all other rights. Member's highest average compensation (HAC) Hired prior to July 1, 1981 and not electing GABA - highest monthly compensation (HMC) Hired on or after June 30, 1981 and those electing GABA — highest average compensation (HAC) during any consecutive 36 months. Compensation Cap Hired on or after July 1, 2013 — 110% annual cap on compensation considered as part of a member's highest average compensation. 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 2) 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 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 firefighter employed by the city that last employed the member (provided the member has at least 10 years of membership service). 71 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 Overview of Contributions Rates are specified by state law for periodic member and employer contributions and are a percentage of the member's compensation. Contributions are deducted from each member's salary and remitted by participating employers. The State legislature has the authority to establish and amend contribution rates to the plan. Member and employer contribution rates are shown in the table below. Member Fiscal Year Non-GABA GABA Employer State 1998 - 2017 9.50% 10.70% 14.36% 32.61 % 1997 7.80% 14.36% 32.61% Stand -Alone Statements The financial statements of the Montana Public Employees Retirement Board (PERB) Comprehensive Annual Financial Report (CAFR) and the GASB 68 Report disclose the Plan's fiduciary net position. The reports are available from the PERB at PO Box 200131, Helena MT 59620-0131, (406) 444-3154 or the MPERA website at http://myera.mt.gov/index.shtml Actuarial Assumptions The TPL used to calculate the NPL was determined by taking the results of the June 30, 2015, actuarial valuation and applying standard roll forward procedures to update the TPL to June 30, 2016. There were several significant assumptions and other inputs used to measure the TPL. The actuarial assumptions used in the June 30, 2016, valuation were based on the results of the last actuarial experience study, dated June 2010, for the sixyear period July 1, 2003 to June 30, 2009. Among those assumptions were the following: Investment Return (net of admin expense) 7.75% Admin Expense as % of Payroll 0.19% General Wage Growth` 4.00% `includes Inflation at 3.00% Merit Increases 0%to 7.3% Post Retirement Increases i. Guaranteed Annual Benefit Adjustment (GABA) Members 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 ii. Minimum Benefit Adjustment (non-GABA) Members hired before July 1, 1997 and member did not elect GABA - the monthly retirement, disability or survivor's benefit may not be less than % 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). Mortality assumptions among contributing members, terminated vested members, service retired members and and beneficiaries are 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 TPL 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 the Montana Code Annotated. The State contributes 32.61% of salaries 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 2117. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the TPL. A municipal bond rate was not incorporated in the discount rate. 72 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 Target Allocations The long-term expected return on pension plan assets was reviewed as part of the regular experience study prepared for the Plan. The experience study, performed for the period of fiscal years 2003 through 2009, was outlined in a report dated June 2010 and can be located on the MPERA website. The long-term expected rate of return on pension plan investments was determined by considering information from various sources, including historical rates of return, rate of return assumptions 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 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 by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the target asset allocation as of June 30, 2016, are summarized below. Asset Class Target Asset Allocation Real Rate of Return Arthimetic Basis Long -Term Expected Real Rate of Return (a) (b) (a) x (b) Cash Equivalents 2.6% 4.00% -0.25% Domestic Equity 36.0% 4.55% 4.55% Foreign Equity 18.0% 6.35% 6.10% Fixed Income 23.4% 1.00% 1.25% Private E ui 12.0% 7.75% 8.00% Real Estate 8.0% 4.00% 4.25% Total 100.0% 4.37% 1 nflation 3.00% Portfolio Return Expectation 7.37% Sensitivity Analysis The sensitivity of the NPL to the discount rate is shown in the table below. A small change in the discount rate can create a significant change the liability. The NPL was calculated using the discount rate of 7.75%, as well as what the NPL would be if it were calculated using a discount rate 1.00% lower or 1.00% higher than the current rate. 1.0% Decrease Current Discount 1.0% Increase 6.75 % Rate 8.75 % Employer's Net Vension Liability $ 2,511,451 $ 1,594,992 $ 841,459 Summary of Significant Accounting Policies MPERA prepared financial statements using the accrual basis of accounting. The same accrual basis was used by MPERA for the purposes of determining the NPL; Deferred Outflows of Resources and Deferred Inflows of Resources related to pensions; Pension Expense; the Fiduciary Net Position; and Additions to or Deductions from Fiduciary Net Position. 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 in which they are due and payable in accordance with the benefit terms. Expenses are recognized in the period incurred. Investments are reported at fair value. MPERA adhered to all accounting principles generally accepted by the United States of America. MPERA applied all applicable pronouncements of the Governmental Accounting Standards Board (GASB). 73 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 G. Postemployment Health Insurance Benefits (OPEB) 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. 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. To continue coverage, retirees are required to pay the full cost of the benefit. 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. Funding Policy. MMIA health insurance rates are actuarially set annually and benefits altered to ensure the plans remain properly funded. The City receives a monthly bill that it can allocate to participants as it wishes. The City pays MMIA the monthly premiums and has no further liability for health claims. 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 since it has paid the full amount due each month. OPEB Liabilities, OPEB Expenses, and Deferred Outflows of Resources Related to OPEB. The City's total other post - employment benefit (OPEB) liability of $3,985,328 was measured as of June 30, 2017, and was determined by an actuarial valuation as of that date. Actuarial assumptions and other inputs. The total OPEB liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Inflation 3.00 percent Salary increases 2.80 percent Discount rate 3.13 percent Premium trend rate 4.50 percent Retirees share of benefit -related costs 100 percent of projected premiums for retirees 74 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 The discount rate was based on the S&P Municipal Bond 20 Year High Grade Rate Index as of June 30, 2017. Mortality rates were based on the RP-2000 Combined Mortality Table Projection AA Fully Generational. The actuarial assumptions used in the June 30, 2017 valuation represents a reasonable long-term expectation of future OPEB outcomes. The assumptions are tested with each valuation for ongoing reasonableness and are updated if appropriate. Changes in the Total OPEB Liability. Total OPEB Liability Restated balance at June 30,2016 $ 2,546,180.00 Changes for the year: Service cost $ 332,296.00 Interest $ 79,695.00 Difference between expected and actual experience $ 13,222.00 Changes in assumptions $ 1,013,936.00 Changes in benefit terms $ Contributions by employer $ $3,985,329 Restated Balance at 6/30/2016 The total OPEB liability at 6/30/2015, which was the date of the last full GASB 45 valuation, was called the Accrued Actuarial Liability and totaled $2,623,748. This amount has been restated on a GASB 75 basis by making the following changes: • The actuarial cost method was changed from Projected Unit Credit with amortization on a level dollar basis over 30 years to Entry Age Normal, determined as a level percent of projected pay. • The discount rate was changed from 4.29% based on the Moody's Aa bond index to 3.80% based on the S&P Municipal Bond 20-Year High Grade Rate Index as of June 30, 2015. • Includes the impact of the 40% federal high -cost employer -sponsored health plans excise tax (known as the Cadillac Tax) for years 2020 and forward. • Results rolled forward to 6/30/2016. Changes in Assumptions • The discount rate was changed from 3.80% to 3.13%. • The mortality rates were updated to include mortality improvements. • The termination and retirement rates were updated to be consistent with the pension actuarial valuation assumptions for 6/30/2016. • The trend assumption for premiums and age -adjusted premiums was changed from 4.0% to 4.5%. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate. The following table presents the total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower or higher than the current discount rate. 1% Decrease Discount Rate 1% Increase (2.13%) (3.13%) (4.13%) Total OPEB Liability $ 4,958,299 $ 3,985,329 $3,305,999 75 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates. The following table presents the total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using a medical trend rate that is 1-percentage-point lower or higher than the current trend rate. 1% Decrease Trend Rate 1% Increase (3.5%) (4.5%) (5.5%) Total OPEB Liability $ 3,061,308 $ 3,985,329 $5,372,759 For the year ended June 30, 2017, the City reported deferred outflows of resources related to OPEB from the following sources: Deferred Outflows of Resources Differences between expected and actual experience $ 11,970 Changes in assumptions or other inputs $ 917,919 Total $ 929,889 Amounts reported as deferred outflows of resources related to OPEB will be recognized in OPEB expense as follows: Fiscal Year Ending June 30: 2018 $ 97,269 2019 $ 97,269 2020 $ 97,269 2021 $ 97,269 2022 $ 97,269 Thereafter $ 443,544 $ 929,889 H. Amounts Due Fromfro other Governments On June 30, 2017, the amounts due from other governments consisted of the following: General Fund Amount Due from: Flathead County -Taxes $ 438,736 State of Montana -Gambling Fees $ 750 Sub Total $ 439,486 Special Revenue Funds Amount Due from: Flathead County -Taxes $ 446,034 Flathead County EMS $ 51,434 Flathead County Sheriff Dept. $ 2,442 Montana Board of Crime Control $ 1,130 Montana DPHHS $ 22,084 State of Montana-MDOT $ 646 U.S. Department of Justice $ 29,539 EPA $ 13,531 Sub Total $ 566,840 Debt Service Funds Amount Due from: Flathead County -Taxes $ 127,126 Capital Project Funds Amount Due from: Montana Dept. of Commerce $ 689,245 Total Governmental Funds $ 1,822,697 Funds Amount Due from: Flathead County -Taxes $ 143,110 Total Business -type Funds $ 143,110 Total City of Kalispell $ 1,965,807 lug CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 L Restricted Cash/InN�estments The following restricted cash/investments were held as of June 30, 2017. 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 Investmentlimpact Fees (1) Sewer Operating Reserve (2) Bond Contingency Plant Investmentlimpact Fees (sanitary) (1) Plant Investmentlimpact Fees (treatment plant) (1) Plant Investmentlimpact Fees (storm) (1) Treatment Plant Replacement (3) Total business -type activities restricted cash/investments Governmental Activities Impact Fees Public Safety Growth related Capital (1) Urban Forestry Developers (4) Debt Service Airport TIF 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 cash/investments Total restricted cash/investments July 1, 2016 Additions Subtractions June 30, 2017 $ 358,400 $ 2,310 $ (100,494) 260,216 1,063,170 805,878 (242,321) 1,626,727 190,000 - - 190,000 1,109,313 - (142,582) 966,731 1,867,844 1,053,499 (328,143) 2,593,200 471,378 756,854 (225,000) 1,003,232 1,337,939 483,160 - 1,821,099 1,448,800 426,468 (363,530) 1,511,738 7,846,844 3,528,169 (1,402,070) 9,972,943 576,162 299,038 (70,132) 805,068 101,449 2,100 (3,250) 100,299 144,500 - - 144,500 57,795 (50,045) 7,750 11,172 11,172 226,000 226,000 12,100 12,100 1,129,178 301,138 (123,427) 1,306,889 $ 8,976,022 $ 3,829,307 $ (1,525,497) $11,279,832 (1) Plant investment/impact fee cash. Montana State legislation regulating impact fees to fund capital improvements, MCA 7-6-1601 through 7-6-1604 (see 7-6-1603 below related to expending impact fees), became effective April 19, 2005 and sets forth the procedures and requirements for the imposition of impact fees by local governments. On October 16, 2006, by ordinance no. 1587, the Kalispell City Council authorized and established the procedure and imposition of impact fees to fund capital improvements related to additional capacity (growth). MCA 7-6-1603 states that "the collection and expenditure of impact fees must be reasonably related to the benefits accruing to the development paying the impact fees..." (2) Sewer operating reserve cash is restricted by ordinance no. 859 (1 month operating expenses). (3) Treatment plant replacement cash is restricted by an agreement with Flathead County Water District (third party). (4) Urban forestry receives cash from developers to be used to plant trees in new city developments (third party). J. Restatements During the 2017 fiscal year, the following adjustments relating to prior years' transactions were made to fund balance or net position accounts. Fund Amount Reason RD Loan Revolving $ 33,934 Prior period revenues overstated - loan stipulation Subtotal - Governmental Fund Financials $ 33,934 Governmental Funds - OPEB related (GASB 75) $ 387,963 GASB Change (GASB No. 75) Total Statement of Activities - Gov'tal Funds $ 421,897 Water Fund - Major Proprietary $ (21,653) GASB Change (GASB No. 75) Sewer Fund - Major Proprietary $ 68,999 GASB Change (GASB No. 75) Total Proprietary funds/Business-type activities $ 47,346 77 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 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. 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. 78 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 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. 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. Litigant Challinor James Cossitt Ryan Pengally McKeag Johns Madison Brewer Ethan Sloan Damages Loss Requested Potential unspecified unknown unspecified none unspecified unknown unspecified unknown unspecified unknown unspecified unknown Status Not filed Will be dismissed 11/27/17 Not filed Not filed Filed -liability insurance Filed -liability insurance 79 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 O. Receivables Taxes Receivable The following governmental funds had taxes receivable at June 30, 2017. FUND Source Amount General - Major Governmental Taxes $ 260,990 Westside TIF Taxes 17,695 Parks Taxes 43,060 Old School "Tech" TIF Taxes 21,695 Old School"Ind" TIF Taxes 24,958 Health Levy Taxes 45,055 Light District Taxes 14,824 Street Maintenance - Major Governmental Taxes 102,679 Forestry Taxes 8,759 G.O. Bonds Taxes 21,991 Airport TIF debt service Taxes 26,672 SID 344 - Major Governmental Taxes 2,104,199 SID 345 Taxes 186,287 S & C's Taxes 40,050 SID 343 Taxes 287,812 Total Governmental Funds $ 3,206,726 Sewer - Major Business -type Assessments 29,418 Solid waste Assessments 23,299 Total Business -type Funds 52,717 Total City $ 3,259,443 Accounts Receivable At June 30, 2017, the Ambulance fund had accounts receivable deferred net of $240,735. Total net accounts receivable of the Ambulance fund is $244,080. The difference is the result of $3,345 being receivable prior to the Ambulance fund conversion from a proprietary fund to a special revenue fund. Loans Receivable Community Development Loan Revolving The City entered into a community development program, which includes funding from a community development block grant, to make available to eligible applicants (low -to -moderate income residents), a loan for at least one-half of the required rehabilitation cost. These funds from the City, together with loans from the First Federal Savings Bank (now Glacier Bank) of Montana, the lender, must provide the total funds required for the purchase and rehabilitation of the housing unit. At the time the bank loans are closed with the borrower, the proceeds of the City's loan will be deposited into the borrower's construction account at First Federal (Glacier). The City's loan is secured by the property, and filed in a third lien position. Repayment of the City loan will not begin until 30 days after the Lender's loan (second lien) for construction of the unit has been paid off. The City's loan is interest free until such time as repayment begins. The maximum amount of a private lender loan cannot exceed $20,000 per property with a ten-year pay back. In addition, when an owner -occupant is unable to afford a private lender loan at the pre -determined interest rate agreed to by the City and lender, he or she may qualify for City financing. The City may provide a direct loan of up to $25,000 with a varying interest rate (as low as zero percent) or with a longer amortization period (maximum of fifteen years) or a deferred loan to be repaid simultaneously, at a later date, with a balloon payment, or to be released at the end of ten years. 80 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 The City has $955 recorded as housing rehab loans receivable as of June 30, 2017, 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, 2017, is $71,655, and $387,602, 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, 2017 balance $ 187,961 A 15 year loan at 6% to AGAPE Home Care in May 2009. Original Loan amount $ 42,500 June 30, 2017 balance $ 16,340 A 10 year loan at 3% to Norm's News in January 2013. Original Loan amount $ 50,000 June 30, 2017 balance $ 19,092 A 10 year loan at 6% to SMP, LLC in August 2016. Original Loan amount $ 50,000 June 30, 2017 balance $ 46,208 A 10 year loan at 3% to Wheaton's in April 2014. Original Loan amount $ 41,500 June 30, 2017 balance $ 30,597 81 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 A 10 year loan at 3% to Sail MT & Ameriprise in April 2015. Original Loan amount $ 17,000 June 30, 2017 balance $ 13,418 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 6.5% to Distinctive Countertops in July 2006. Original Loan amount $ 175,000 June 30, 2017 balance $ 114,106 A 10 year loan at 7% to Crossroads Realty in June 2007. Original Loan amount $ 150,000 June 30, 2017 balance $ 92,833 A 6 month loan at 5.25% to Glacier Valley Endodontics, Inc. in January 2012. Original Loan amount $ 35,000 June 30, 2017 balance $ 19,779 A 10 year loan at 5.29% to Parkman Properties, LLC (The Edge Salon), in February 2012. Original Loan amount $ 77,000 June 30, 2017 balance $ 40,992 A 10 year loan at 3% to Whipps, LLC in December 2011. Original Loan amount $ 50,000 June 30, 2017 balance $ 16,796 A 10 year loan at 3% to Bill and Jana Goodman in June 2013. Original Loan amount $ 34,660 June 30, 2017 balance $ 18,913 CD MISCELLANEOUS 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, 2017 balance $ 20,955 82 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS DUNE 30, 2017 SUMMARY COMMUNrrY DEVELOPMENT LOANS RECEIVABLE From To Amount Purpose CD Misc. - Major Governmental Big Sky Manor 20,955 Urban Dev. Assistance Subtotal Major Fund 20,955 CD Loan Revolving Various $ 955 Housing Rehab Distinctive Countertops 187,961 Jobs AGAPE Home Care 16,340 Jobs Norm's News 19,092 Jobs SMP LLC 46,208 Jobs Wheatons 30,597 Jobs Sail MT & Ameriprise 13,418 Jobs Hampstead Partners' 880,000 Low Income Housing Hampstead Partners - Interest Portion' 459,257 Low Income Housing Rural Development Loan Revolving Distinctive Countertops 114,106 Small Business Crossroads Realty 92,833 Small Business Glacier Valley Endodontics, Inc 19,779 Small Business Parkman Properties, LLC 40,992 Small Business Whipps, LLC 16,796 Small Business Bill and Jana Goodman 18,913 Small Business Subtotal Other Governmental Funds 1,957,247 Total Governmental Funds $ 1,978,202 'Long Term Loans Receivable - Matures 2032 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, 2017, amounted to $2,402,034. Q. Wastewater Treatment Plant agreement with Evergreen 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. The City bills the District, monthly, a base charge per account. The City also bills for maintenance and operation and replacement costs per the agreement based on metered flows. 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. 83 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 R. Fund Balance Classification by Major Purposes The table presented below displays the City's fund balances by major purpose as displayed on page 29 of the governmental funds balance sheet. Nonspendable - not in spendable form Long-term recievables Prepaids Total nonspendable Restricted General Government -Health Insurance Public Safety - Public Safety -EMS Public Safety -Building Inspection Public Safety -Fire impact fees Public Safety -Police impact fees Public Safety -Police grants Public Safety -Fire grants Public Works - Public Works -Lighting District Public Works -Gas Tax Culture and Recreation - Culture and Recreation -Park improvements Culture and Recreation -Equipment Culture and Recreation -Programs Culture and Recreation -Urban forestry Community Development - Community Development -Old School Station Community Development -South Kalispell TI Community Development-Westside TIF Community Development -Revolving loan fu Debt Service-SID Debt Service-S & C warrants Debt Service-G.O. Bonds Debt Service -Capital Debt Service-TIF Total restricted Assigned Capital Equipment Parking Miscellaneous Total assigned Unassigned Total net position S. Subsequent Events F n Other Total General Street CD SID Governmental Governmental Fund Maint. Misc. 344 Funds Funds 6,023 - - - 6,023 246,190 32,397 2,468 28,292 309,347 252,213 32,397 2,468 28,292 315,370 - - - 63,742 63,742 13,199 13,199 5,574 5,574 1,589, 269 1,589,269 714,130 714,130 90,937 90,937 43,458 43,458 - 65,543 65,543 2,223,379 21,006 2,244,385 - 291,552 291,552 590,278 590,278 268,361 268,361 1,417 1,417 75,405 75,405 435,389 435,389 - 261,567 261,567 222,215 - 222,215 100,412 24,110 124,522 - 1,786,485 1,786,485 4,004,198 4,004,198 3,098,705 3,098,705 331,315 365,749 697,064 - 760 760 15,552 15,552 11,193 11,193 275,729 275,729 2,223,379 322,627 331,315 14,113,308 16,990,629 181,906 181,906 23,542 23,542 304,172 304,172 509,620 509,620 3,381,494 3,381,494 4,143,327 2,255,776 325,095 331,315 14,141,600 21,197,113 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. The City expects to begin making draws from this award in the fall of 2017. 84 City of Kalispell SCHEDULE OF CITY'S TOTAL LIABILITY AND RELATED RATIOS OTHER POSTEMPLOYMENT BENEFITS June 30, 2017 2017 Total OPEB Liability Service cost $ 332,296 Interest $ 79,695 Difference between expected and actual experience $ 13,222 Changes in assumptions $ 1,013,936 Changes in benefit terms $ - Contributions by employer $ - Net change in total OPEB liability $ 1,439,149 Total OPEB liability -beginning (restated) $ 2,546,180 Total OPEB liability -ending $ 3,985,329 Covered -employee payroll $ 10,456,215 Total OPEB liability as a percentage of covered - employee payroll 38.11 % Notes to Schedule: Changes of assumptions. Changes of assumptions and other inputs reflect the effects of changes in the discount rate each period. The following are the discount rates used in each period: 6/30/2016 3.80% 6/30/2017 3.13% Governmental Accounting Standards Board, Statement 75 requires this information to be provided for 10 years. Because this is the first year of implementation, 10 years is not available. See independent auditor's report 85 City of Kalispell SCHEDULE OF CITY CONTRIBUTIONS OTHER POSTEMPLOYMENT BENEFITS June 30, 2017 2017 Contractually required contribution $ - Contributions in relation to the contractually required contribution $ - Contribution deficiency (excess) $ - City's covered -employee payroll $ 10,456,215 Contributions as a percentage of covered - employee payroll 0% Governmental Accounting Standards Board, Statement 75 requires this information to be provided for 10 years. Because this is the first year of implementation, 10 years is not available. See independent auditor's report 86 CITY OF KALISPELL SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY 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. City's proportion of the net pension liability (asset) City's proportionate share of the net pension liabiltiy (asset). State of Montana's proportionate share of the Net Pension Liability associated with the Employer Total City's covered -employee payroll City's proportionate share of the net pension liability (asset) as a percentage of its covered -employee payroll Plan fiduciary net position as a percentage of the total pension liability City's proportion of the net pension liability (asset) City's proportionate share of the net pension liabiltiy (asset). State of Montana's proportionate share of the Net Pension Liability associated with the Employer Total City's covered -employee payroll City's proportionate share of the net pension liability (asset) as a percentage of its covered -employee payroll Plan fiduciary net position as a percentage of the total pension liability 2015 2016 2017 2015 2016 2017 PERS FURS 0.4364% 0.4265% 0.4314% 1.4283% 1.4196% 1.3965% $5,437,857 $5,961,419 $7,348,266 $1,394,256 $1,451,892 $1,594,992 $66,405 $73,226 $89,787 $3,145,374 $3,233,749 $3,613,749 $5,504,262 $6,034,645 $7,438,053 $4,539,630 $4,685,641 $5,208,741 $4,978,271 $4,976,919 $5,167,438 $1,855,316 $1,907,689 $1,966,524 111.22% 119.78% 142.20% 75.15% 76.11 % 81.11 % 79.87% 78.40% 74.71 % 76.71 % 76.90% 75.48% 2015 2016 2017 MPORS 1.5019% 1.5255% 1.5682% $2,359,962 $2,523,431 $2,822,947 $4,767,405 $5,112,710 $5,603,673 $7,127,367 $7,636,141 $8,426,620 $2,015,102 $2,111,268 $2,213,762 117.11 % 119.52% 127.52% 67.01 % 66.90% 65.62% 'The amounts presented for each fiscal year were determined as of June 30. See independent auditor's report 87 CITY OF KALISPELL SCHEDULE OF CONTRIBUTIONS 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. Contractually required contributions Contributions in relation to the contractually required contribution Contribution deficiency (excess) Employer's Pensionable Payroll Contributions as a percentage of covered payroll 2015 2016 2017 2015 2016 2017 PERS FURS $ 430,109 $ 444,391 $ 471,214 $ 279,275 $ 281,160 $ 314,224 430,109 444,391 471,214 279,275 281,160 314,224 $ 4,976,919 $ 5,167,438 $ 5,629,797 $ 1,907,689 $ 1,966,524 $ 2,188,185 8.64% 8.60% 8.37% 2015 2016 2017 MPORS Contractually required contributions $ 306,050 $ 324,287 $ 353,045 Contributions in relation to the contractually required contribution 306,050 324,287 353,045 Contribution deficiency (excess) $ - $ - $ - Employer's Pensionable Payroll $ 2,111,268 $ 2,213,762 $ 2,479,350 Contributions as a percentage of covered payroll 14.50% 14.65% 14.24% 'The amounts presented for each fiscal year were determined as of June 30 14.64% 14.30% 14.36% See independent auditor's report 88 City of Kalispell, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2017 General Fund ACTUAL AMOUNTS VARIANCE BUDGETED AMOUNTS (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS) See Note A BUDGET RESOURCES (INFLOWS): Taxes and assessments $ 5,635,000 $ 5,635,000 $ 5,625,579 $ (9,421) Licenses and permits 76,700 76,700 131,644 54,944 Intergovernmental 4,137,829 4,137,829 3,921,872 (215,957) Charges for services 863,404 863,404 925,165 61,761 Fines and forfeitures 565,000 565,000 454,547 (110,453) Miscellaneous 27,500 27,500 33,641 6,141 Investment earnings 31,250 31,250 35,811 4,561 Amounts available for appropriation $ 11,336,683 $ 11,336,683 $ 11,128,259 $ (208,424) CHARGES TO APPROPRIATIONS (OUTFLOWS); General government $ 3,135,571 $ 3,135,571 $ 2,968,514 $ 167,057 Public safety 8,326,873 8,326,873 8,304,891 21,982 Public works 40,020 40,020 39,891 129 Community development 85,873 85,873 80,770 5,103 Debt service - principal 25,000 25,000 - 25,000 Debt service - interest 15,000 15,000 - 15,000 Capital outlay 235,842 235,842 179,424 56,418 Total charges to appropriations $ 11,864,179 $ 11,864,179 $ 11,573,490 $ 290,689 OTHER FINANCING SOURCES (USES) Issuance of debt $ $ $ $ Proceeds from the sale of general capital asset disposition - - 3,203 3,203 Transfers in 901,000 901,000 901,000 - Transfers out - - - - Total other financing sources (uses) $ 901,000 $ 901,000 $ 904,203 $ 3,203 Net change in fund balance $ 458,972 Fund balance - beginning of the year $ 3,684,355 Restatements - Fund balance - beginning of the year - restated $ 3,684,355 Fund balance - end of the year $ 4,143,327 See independent auditor's report 89 City of Kalispell, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2017 Street Maintenance ACTUAL AMOUNTS VARIANCE BUDGETED AMOUNTS (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS) See Note A BUDGET RESOURCES (INFLOWS): Taxes and assessments $ 2,465,000 $ 2,465,000 $ 2,483,634 $ 18,634 Licenses and permits - - - - Intergovemmental - - - - Charges for services 5,000 5,000 14,962 9,962 Fines and forfeitures - - - - Miscellaneous 3,500 3,500 1,789 (1,711) Investment earnings 8,000 8,000 15,549 7,549 Amounts available for appropriation $ 2,481,500 $ 2,481,500 $ 2,515,934 $ 34,434 CHARGES TO APPROPRIATIONS (OUTFLOWS); General government $ $ $ $ Public safety - - - - Public works 2,537,660 2,537,660 1,789,811 747,849 Community development - - - - Debt service - principal 111,946 111,946 111,946 - Debt service - interest 3,447 3,447 3,016 431 Capital outlay 1,545,849 1,545,849 319,342 1,226,507 Total charges to appropriations $ 4,198,902 $ 4,198,902 $ 2,224,115 $ 1,974,787 OTHER FINANCING SOURCES (USES) Issuance of debt $ 1,114,018 $ 1,114,018 $ $ (1,114,018) Proceeds from the sale of general capital asset disposition - - 16,560 16,560 Transfers in - - Transfers out - - - Total other financing sources (uses) $ 1,114,018 $ 1,114,018 $ 16,560 $ (1,097,458) Net change in fund balance $ 308,379 Fund balance - beginning of the year $ 1,947,397 Restatements - Fund balance - beginning of the year - restated $ 1,947,397 Fund balance - end of the year $ 2,255,776 See independent auditor's report 90 RESOURCES (INFLOWS): Taxes and assessments $ Licenses and permits Intergovernmental Charges for services Fines and forfeitures Miscellaneous Investment earnings City of Kalispell, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2017 CD Misc. ACTUAL AMOUNTS VARIANCE BUDGETED AMOUNTS (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS) See Note A BUDGET 1,422 1,422 1,281 (141) 2.000 2.000 4302 2302 Amounts available for appropriation $ 3,422 $ 3,422 $ 5,583 $ 2,161 CHARGES TO APPROPRIATIONS (OUTFLOWS); General government $ $ $ $ Public safety Public works - - - - Community development 342,517 342,517 206,840 135,677 Debt service - principal - - - - Debt service - interest Capital outlay - - Total charges to appropriations $ 342,517 $ 342,517 $ 206,840 $ 135,677 OTHER FINANCING SOURCES (USES) Issuance of debt $ $ $ $ Proceeds from the sale of general capital asset disposition Transfers in 50,000 50,000 50,000 Transfers out - - - Total other financing sources (uses) $ 50,000 $ 50,000 $ 50,000 $ Net change in fund balance $ (151,257) Fund balance - beginning of the year $ 476,352 Restatements - Fund balance - beginning of the year - restated $ 476,352 Fund balance - end of the year $ 325,095 See independent auditor's report 91 CITY OF KALISPELL NOTES TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017 A. Pension Plans Changes of benefit terms Public Employees Retirement System (PERS). The following changes to the plan provisions were made as identified: 2013 Legislative Changes: House Bill 454 — Permanent Injunction Limits Application of the GABA Reduction passed under HB454 Guaranteed Annual Benefit Adjustment (GABA) 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 all other adjustments to the member's benefit. • 3% for members hired prior to July 1, 2007 • 1.5% for members hired on or after July 1, 2007 and before July 1, 2013 • Members hired on or after July 1, 2013 a. 1.5% each year PERS is funded at or above 90%; b. 1.5% is reduced by 0.1 % for each 2% PERS is funded below 90%; and, C. 0% whenever the amortization period for PERS is 40 years or more. 2015 Legislative Changes: General Revisions — House Bill 101, effective January 1, 2016 Second Retirement Benefit 1) Applies to PERS members who return to active service on or after January 1, 2016. Members who retire before January 1, 2016, return to PERS-covered employment, and accumulate less than 2 years of service credit before retiring again: • Refund of member's contributions from second employment plus regular interest (currently 0.25%); • No service credit for second employment; • Start same benefit amount the month following termination; and • GABA starts again in the January immediately following second retirement. 2) For members who retire before January 1, 2016, return to PERS-covered employment and accumulate two or more years of service credit before retiring again: • Member receives a recalculated retirement benefit based on laws in effect at second retirement; and, • GABA starts in the January after receiving recalculated benefit for 12 months. 3) For members who retire on or after January 1, 2016, return to PERS-covered employment and accumulate less than 5 years of service credit before retiring again: • Refund of member's contributions from second employment plus regular interest (currently 0.25%); • No service credit for second employment; • Start same benefit amount the month following termination; and, • GABA starts again in the January immediately following second retirement. 4) For members who retire on or after January 1, 2016, return to PERS-covered employment and accumulate five or more years of service credit before retiring again: • Member receives same retirement benefit as prior to return to service; • Member receives second retirement benefit for second period of service based on laws in effect at second retirement; and, See independent auditor's report 92 CITY OF KALISPELL NOTES TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017 • GABA starts on both benefits in January after member receives original and new benefit for 12 months. Revise DC Funding Laws — House Bill 107, effective July 1, 2015 Employer Contributions and the Defined Contribution Plan — for PERS The PCR was paid off effective March 2016 and the contributions of 2.37%, .47%, and 1.0% increase previously directed to the PCR are now directed to the Defined Contribution member's account. Montana Police Officers Retirement (MPORS) The following changes to the plan provision were made as identified: 2015 Lcgislativc Changes: General Revisions — House Bill 101, effective January 1, 2016 MPORS DROP Survivor Benefits — Allow statutory beneficiary (spouse or dependent child) of a deceased DROP Participant to receive a DROP benefit and a survivorship benefit rather than accumulated contributions or a lump sum payment. 19-9-1206(1), MCA. Firefighters Unified Retirement (FURS) The following changes to the plan provision were made as identified: 2015 Lcgislativc Changes: 1. If a PERS member transfers employment to a FURS covered position and fails to elect FURS membership within 90 days, the default is PERS membership. Chanucs in Actuarial Assumptions and Methods — all plans Method and assumptions used in calculations of actuarially determined contributions There were no changes following the 2013 Economic Experience study. The following Actuarial Assumptions are from the June 2010 Experience Study: General wage growth* - 4.00% *includes inflation at 3.0% Merit increase — 0% to 7.3% Investment rate of return — 7.75%, net of pension plan investment expense, and including inflation Asset valuation method — 4-year smoothed market Actuarial cost method — Entry age Amortization method — Level percentage of pay, open The following additions to the actuarial assumptions were adopted in 2014 based upon implementation of GASB 68: Administrative expense as percentage of payroll PERS — 0.27% MPORS — 0.2% FURS — 0.19% See independent auditor's report 93 CITY OF KALISPELL NOTES TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017 B. Budgetary Comparison Schedules BUDGETED FUNDS The City adopts an annual budget for all of its funds in accordance with Title 7, Chapter 6, Part 40 of the Montana Code Annotated. Statute requires the adoption of a preliminary budget, public hearings on the preliminary budget and the final adoption of the budget by the first Thursday after the first Tuesday in September or within 30 calendar days of the receipt of the certified taxable valuations from the Department of Revenue. The City must also submit a copy of the final budget to the Department of Administration by the later of October 1 or 60 days after the receipt of taxable values from the Department of Revenue. State statute limits the making of expenditures or incurring of obligations to the amount ofthe final budget as adopted or as amended. Budget transfers and amendments are authorized by law, and in some instances, may require further public hearings. Any budget amendments providing for additional appropriations must identify the fund reserves, unanticipated revenue, or previously unbudgeted revenue that will fund the appropriations. Appropriations are created by fund, function, and activity and may further be detailed by department. Expenditure limitations imposed by law extend to the department level which is identified as the legal level of budgetary control. BUDGETARY BASIS The City's budgets are prepared on the budgetary basis (modified accrual) of accounting, which results in accounting for certain funds, proprietary and internal service, on a basis other than generally accepted accounting principles (full accrual). The City's accounting records are maintained on the basis of cash receipts and disbursements during the year. At year-end, certain adjustments are made to the City's accounting records to reflect the basis of accounting described above. Reported budget amounts represent the originally adopted budget and the final budget, which includes amendments. Total fund expenditures may not legally exceed the budgeted expenditures. The budget lapses at the end of each year. Results of operations, on the budget basis of accounting, are presented for the general fund and major special revenue funds with legally adopted annual budgets, to provide a meaningful comparison of actual results with the budget. See independent auditor's report 94 COMBINING AND INDIVIDUAL FUND STATEMENTS 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. 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. 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. EPA Brownfields Grant — Accounts for Brownfields revitalization projects monies to be used for phase I and phase II environmental assessments. 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. DEBT SERVICE FUNDS G.O. Bonds — Accounts for the debt service payments associated with the Woodland Water Park and the Fire Station #52 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. Kidsports Grant — Grant to provide funding for the infrastructure necessary to support the development of eight new playing fields at the Kidsports facility. City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2017 OLDSCHOOL AIRPORT TIF WESTSIDE TIT PARKS IN LIEU PARKS AMBULANCE TIT (TECH) ASSETS Cash and investments 1,786,882 4,199,647 1,417 769,489 - 16,696 Taxes and assessments receivable, net - 17,695 - 43,060 - 21,695 Accounts receivable - net - - - 3,987 244,080 - Notes and loans receivable - - - - - - Contracts receivable - - - - - - Due from other funds - - - - - - Due from other governments - 25,054 - 116,185 51,434 - Prepaids - - - 11,691 11,310 - Other debits - - - - - - Restricted assets: Restricted cash and investments - - - - - - Total assets 1,786,882 4,242,396 1,417 944,412 306,824 38,391 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable - 219,650 - 76,275 7,930 - Retamage - - - - - - Accrued payroll 397 853 - 34,231 10,875 - Due to other funds - - - - 30,400 - Other credits - - - - - Total liabilities 397 220,503 - 110,506 49,205 - Deferred inflows of resources Unavailable revenue - deferred accounts receivable - - - - 240,735 - Unavailable revenue - deferred taxes and assessments - 17,695 - 43,060 - 21,695 Total deferred inflows of resources - 17,695 - 43,060 240,735 21,695 Fund Balance: Nonspendable - not in spendable form: Prepaid - - - 11,691 11,310 - Restricted General Government - - - - - - Public Safety - - - - 5,574 - Public Works - - - - - - Culture and Recreation - - 1,417 779,155 - - Community Development 1,786,485 4,004,198 - - - 16,696 Debt Service - - - - - - Unrestricted fund balance: Unassigned - - - - - - Total fund balance 1,786,485 4,004,198 1,417 790,846 16,884 16,696 Total liabilities and fund balance 1,786,882 4,242,396 1,417 944,412 306,824 38,391 See independent auditor's report. 95 City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2017 ASSETS Cash and investments Taxes and assessments receivable, net Accounts receivable - net Notes and loans receivable Contracts receivable Due from other funds Due from other governments Prepaids Other debits Restricted assets: Restricted cash and investments Total assets LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Retamage Accrued payroll Due to other funds Other credits Total liabilities Deferred inflows of resources Unavailable revenue - deferred accounts receivable Unavailable revenue - deferred taxes and assessments Total deferred inflows of resources 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 See independent auditor's report. OLD SCHOOL BUILDING PUBLIC SAFETY TIF (IND) HEALTH LEVY DEPT. IMPACT FEES LIGHT DIST. GAS TAX 7,414 - 1,601,505 12,674 281,388 624,178 24,958 45,055 - - 14,824 - - - 4,009 524 - - - 82,649 - - 26,064 - - - 5,291 - - - - 761 - - - 805,068 - - 32,372 127,704 1,610,805 819,027 322,276 624,178 - - 8,673 - 14,485 33,900 - - 7,572 - 1,415 - - 18,907 - - - - - 761 - 18,907 16,245 761 15,900 33,900 - - 5,291 - - - - 63,742 - - - - - - 1,589,269 818,266 - - - - - - 291,552 590,278 7,414 - - - - - 7,414 63,742 1,594,560 818,266 291,552 590,278 32,372 127,704 1,610,805 819,027 322,276 624,178 96 City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2017 ASSETS Cash and investments Taxes and assessments receivable, net Accounts receivable - net Notes and loans receivable Contracts receivable Due from other funds Due from other governments Prepaids Other debits Restricted assets: Restricted cash and investments Total assets LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Retamage Accrued payroll Due to other funds Other credits Total liabilities Deferred inflows of resources Unavailable revenue - deferred accounts receivable Unavailable revenue - deferred taxes and assessments Total deferred inflows of resources 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 See independent auditor's report. Community DRUG URBAN Development Loan RDREVOLVING STONEGARDEN ENFORCEMENT FORESTRY MACI GRANT Revolving LOAN (2) GRANT GRANT 155,345 21,006 427,791 613,168 - 887 8,759 - - - - - - - 1,653,827 303,419 - - 15,283 - - - 19,510 3,572 100.299 - - - - - 279,686 21.006 2,081,618 916,587 19.510 4,459 7,196 - - - 9,588 - 2,164 - - - - 985 - - - - 9,922 - 9,360 - - - 19,510 985 8,759 - - - - - R Sao - - - - - 21,006 261,567 2,081,618 916,587 3,474 261,567 21,006 2,081,618 916,587 - 3,474 279,686 21,006 2,081,618 916,587 19.510 4,459 97 City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2017 ASSETS Cash and investments Taxes and assessments receivable, net Accounts receivable - net Notes and loans receivable Contracts receivable Due from other funds Due from other governments Prepaids Other debits Restricted assets: Restricted cash and investments Total assets LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Retamage Accrued payroll Due to other funds Other credits Total liabilities Deferred inflows of resources Unavailable revenue - deferred accounts receivable Unavailable revenue - deferred taxes and assessments Total deferred inflows of resources 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 See independent auditor's report. COPS Grant LAW ENFORCEMENT GRANTS EPA BrownSelds Grant BROWNFIELDS LOAN REVOLVING FIRE GRANTS 31,134 9,936 - 3,408 739 - 13,531 100,500 - 4,757 - 41,070 4,147 13,531 100,500 4,757 - 1,086 - 2,190 12 1,945 13,531 - - - - - 1,086 4,147 13,531 - - 39,984 - - - - - - 100,500 4,757 - 39,984 - - 100,500 4,757 41,070 4,147 13,531 100,500 4,757 98 City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2017 ASSETS Cash and investments Taxes and assessments receivable, net Accounts receivable - net Notes and loans receivable Contracts receivable Due from other funds Due from other governments Prepaids Other debits Restricted assets: Restricted cash and investments Total assets LIABILITIES AND FUND BALANCE Liabilities: Accounts payable Retamage Accrued payroll Due to other funds Other credits Total liabilities Deferred inflows of resources Unavailable revenue - deferred accounts receivable Unavailable revenue - deferred taxes and assessments Total deferred inflows of resources 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 See independent auditor's report. HAZMAT Total Special City Hall Debt AIRPORT TIF SH) GRANT Revenue Funds G.O. BONDS Service DEBT SERVICE REVOLVING 40,605 10,696,483 - 11,193 51,170 50,495 - 176,046 21,991 - 26,672 - - 252,600 - - - - - 1,957,246 - - - - - 3,408 - - - - - - - 212 22,084 386,041 37,005 - 80,059 - - 28,292 - - - - 761 - - - 905,367 - - 144,500 238,100 62,689 14,406,244 58,996 11,193 302,401 288,807 1,903 395,321 - - - - 59,590 - - - - 61,174 21,453 - - 761 - 1,903 516,946 21,453 - - - - 240,735 - - - - - 176,046 21,991 - 26,672 - - 416,781 21,991 - 26,672 - - 28,292 - - - - - 63,742 - - - - 60,786 2,522,110 - - - - - 902,836 - - - - - 1,042,139 - - - - - 8,913,498 - - - - - - 15,552 11,193 275,729 288,807 60,786 13,472,617 15,552 11,193 275,729 288,807 62,689 14,406,244 58,996 11,193 302,401 288,807 99 City of Kalispell, Montana Nonmajor Governmental Funds Combining Balance Sheet June 30, 2017 Total Nonmajor Total Debt Governmental S & C'S SID 343 SID 345 Service Funds Kidsports Grant Funds ASSETS Cash and investments - 47,552 1,378 161,788 - $ 10,858,271 Taxes and assessments receivable, net 40,050 287,812 186,287 562,812 - 738,858 Accounts receivable - net - - - - - 252,600 Notes and loans receivable - - - - - 1,957,246 Contracts receivable - - - - - 3,408 Due from other funds - - - 212 - 212 Due from other governments 972 8,680 410 127,126 689,245 1,202,412 Prepaids - - - - - 28,292 Other debits - - - - - 761 Restricted assets: Restricted cash and investments - 7,750 11,172 401,522 - 1,306,889 Total assets 41,022 351,794 199,247 1,253,460 689,245 $ 16,348,949 LIABILITIES AND FUND BALANCE Liabilities: Accounts payable - - - - 121,147 516,468 Retamage - - - - 30,264 30,264 Accrued payroll - - - - - 59,590 Due to other funds 212 - - 21,665 537,834 620,673 Other credits - - - - - 761 Total liabilities 212 - - 21,665 689,245 $ 1,227,756 Deferred inflows of resources Unavailable revenue - deferred accounts receivable - - - - - 240,735 Unavailable revenue - deferred taxes and assessments 40,050 287,812 186,287 562,812 - 738,858 Total deferred inflows of resources 40,050 287,812 186,287 562,812 - 979,593 Fund Balance: Nonspendable - not in spendable form: Prepaid - - - - - 28,292 Restricted General Government - - - - - 63,742 Public Safety - - - - - 2,522,110 Public Works - - - - - 902,836 Culture and Recreation - - - - - 1,042,139 Community Development - - - - - 8,913,498 Debt Service 760 63,982 12,960 668,983 - 668,983 Unrestricted fund balance: Unassigned - - - - - - Total food balance 760 63,982 12,960 668,983 - $ 14,141,600 Total liabilities and fund balance 41,022 351,794 199,247 1,253,460 689,245 $ 16,348,949 See independent auditor's report. 100 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30. 2017 OLDSCHOOL REVENUES AIRPORT TIF WESTSIDE TIF PARRS IN LIEU PARRS AMBULANCE TIF (TECH) Taxes and assessments 350,000 285,343 - 1,087,221 - 59,881 Licenses and permits - - - - - - Intergovemmental 42,671 243,128 - - 331,734 3,057 Charges for services - - 503,099 710,158 - Miscellaneous - 5,325 - 57,417 - - Investment earnings 15,391 41,119 15 3,498 - 150 Total revenues 408,062 574,915 15 1,651,235 1,041,892 63,088 EXPENDITURES Public safety - - - - 1,085,704 - Public works - - - - - - Parks and recreation - - - 1,492,440 - - Community Development 35,085 483,732 - - - 21,123 Debt service -principal - - - 9,112 - - Debt service - interest - - - 327 - - Capital outlay - - - 153,976 169,707 - Total expenditures 35,085 483,732 - 1,655,855 1,255,411 21,123 Excess (deficiency) of revenues over expenditures 372,977 91,183 15 (4,620) (213,519) 41,965 OTHER FINANCING SOURCES (USES) Issuance of debt - - - 129,987 - - Proceeds from the sale of general capital asset disposition - - - 6,750 - Transfers in - - - - - - Transfers (out) - (33,844) - - - (35,000) Total other financing sources and uses - (33,844) - 136,737 - (35,000) Net change in fund balance 372,977 57,339 15 132,117 (213,519) 6,965 Fund balances -beginning 1,413,508 3,946,859 1,402 658,729 230,403 9,731 Restatements - - - - - - Fund balances - beginning restated 1,413,508 3,946,859 1,402 658,729 230,403 9,731 Fund balances - ending 1,786,485 4.004.198 1,417 790.846 16,884 16.696 See independent auditor's report. 101 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30. 2017 OLD SCHOOL BUILDING PUBLIC SAFETY REVENUES TIF (IND) HEALTH LEVY DEPT. IMPACT FEES LIGHT DIST. GAS TAX Taxes and assessments 9,840 888,882 - - 385,759 - Licenses and permits - - 1,098281 - - - Intergovemmental - 22,713 - - - 371,303 Charges for services - - 460,560 307,775 - 1,137 Miscellaneous - - - - 20,502 - Investment earnings 146 - 13,438 7,091 1,631 5,043 Total revenues 9,986 911,595 1,572,279 314,866 407,892 377,483 EXPENDITURES Public safety - - 637,986 10,000 - - Public works - - - - 268,399 229,577 Parks and recreation - - - - - - Community Development - - - - - Debt service -principal - - - 65,500 21,862 - Debt service - interest - - - 4,632 596 - Capital outlay - - 63,145 - - 50,678 Total expenditures - - 701,131 80,132 290,857 280,255 Excess (deficiency) of revenues over expenditures 9,986 911,595 871,148 234,734 117,035 97,228 OTHER FINANCING SOURCES (USES) Issuance of debt - - - - - - Proceeds from the sale of general capital asset disposition - - - - - - Transfers in - - - - - 35,000 Transfers (out) (15,000) (901,000) - - - - Total other financing sources and uses (15,000) (901,000) - - - 35,000 Net change in fund balance (5,014) 10,595 871,148 234,734 117,035 132228 Fund balances -beginning 12,428 53,147 723,412 583,532 174,517 458,050 Restatements - - - - - - Fund balances - beginning restated 12,428 53,147 723,412 583,532 174,517 458,050 Fund balances - ending 7,414 63,742 1.594.560 818.266 291,552 590,278 See independent auditor's report. 102 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30. 2017 Community DRUG URBAN Development Loan RD REVOLVING STONEGARDEN ENFORCEMENT REVENUES FORESTRY MACI GRANT Revolving LOAN (2) GRANT GRANT Taxes and assessments 209,634 - - - - - Licenses and permits - - - - - - Intergovemmental 19,250 - - - 93,146 98,197 Charges for services 3,758 - 48,553 16,559 - - Miscellaneous 9,450 - - - - - Investment earnings 2,225 - 4,965 1,362 - - Total revenues 244,317 - 53,518 17,921 93,146 98,197 EXPENDITURES Public safety - - - - 93,146 95,555 Public works - - - - - - Parks and recreation 221,795 - - - - - Community Development - - 1,804 675 - - Debt service - principal 10,824 - - 26,409 - - Debt service - interest 665 - - 5,689 - - Capital outlay - - - - - - Total expenditures 233,284 - 1,804 32,773 93,146 95,555 Excess (deficiency) of revenues over expenditures 11,033 - 51,714 (14,852) - 2,642 OTHER FINANCING SOURCES (USES) Issuance of debt - - - - - - Proceeds from the sale of general capital asset disposition - - - - - Transfers in - - - - - - Transfers (out) - - - - - - Total other financing sources and uses - - - - - - Net change in fund balance 11,033 - 51,714 (14,852) - 2,642 Fund balances - beginning 250,534 21,006 2,029,904 965,373 - 832 Restatements - - - (33,934) - - Fund balances - beginning restated 250,534 21,006 2,029,904 931,439 - 832 Fund balances - ending 261.567 21.006 2.081.618 916.587 - 3,474 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. 2017 LAW EPA BROWNFIELDS ENFORCEMENT Brownlields LOAN REVENUES CHRP GRANT GRANTS Grant REVOLVING FIRE GRANTS Taxes and assessments - - - - - Licenses and permits - - - - - Intergovemmental 97,261 46,399 21,943 1,483 - Charges for services - 13,500 - - - Miscellaneous - 4,565 - - 3,376 Investment earnings - - - - - Total revenues 97,261 64,464 21,943 1,483 3,376 EXPENDITURES Public safety 72,602 64,464 - - 2,685 Public works - - - - - Parks and recreation - - - - - Community Development - - 21,943 1,483 - Debt service - principal - - - - - Debt service - interest - - - - - Capital outlay - - - - Total expenditures 72,602 64,464 21,943 1,483 2,685 Excess (deficiency) of revenues over expenditures 24,659 - - - 691 OTHER FINANCING SOURCES (USES) Issuance of debt - - - - - Proceeds from the sale of general capital asset disposition - - - - Transfers in - - - - Transfers (out) - - - - - Total other financing sources and uses - - - - - Net change in fund balance 24,659 - - - 691 Fund balances -beginning 15,325 - - 100,500 4,066 Restatements - - - - - Fund balances - beginning restated 15,325 - - 100,500 4,066 Fund balances - ending 39,984 - - 100.500 4,757 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. 2017 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 Proceeds from the sale of general capital asset disposition 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 See independent auditor's report. HAZMAT Total Special City Hall Debt AIRPORT TIF WESTSIDE TIF GRANT Revenue Funds G.O. BONDS Service DEBT SERVICE DEBT SERVICE - 3276,560 473200 - 208,074 - - 1,098281 - - - - 51,243 1,443,528 9,433 90,000 - - - 21065,099 - - - - - 100,635 - - - - 403 96,477 1,381 - 2,914 - 51,646 8,080,580 484,014 90,000 210,988 - 33,773 2,095,915 - - - - - 497,976 - - - - - 1,714235 - - - - - 565,845 - - - - - 133,707 465,000 80,980 150,000 14,500 - 11,909 41,488 5,468 28,483 19,516 - 437,506 - - - - 33,773 5,457,093 556,488 86,448 178,483 34,016 17,873 2,623,487 (22,474) 3,552 32,505 (34,016) - 129,987 - - - - - 6,750 - - - - - 35,000 - - - 33,844 - (984,844) - - - - - (813,107) - - - 33,844 17,873 1,810,380 (22,474) 3,552 32,505 (172) 42,913 11,696,171 38,026 7,641 243,224 172 - (33,934) - - - - 42,913 11,662,237 38,026 7,641 243,224 172 60,786 13,472,617 15,552 11.193 275,729 - 105 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30. 2017 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 Proceeds from the sale of general capital asset disposition 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 See independent auditor's report. Total Debt Service SID REVOLVING S & CIS SID 343 SID 345 Funds - 9,875 92,100 22,594 805,843 - - - - 99,433 2,929 - - - 7224 2,929 9,875 92,100 22,594 912,500 - - 7,739 1,412 80,000 11,900 26,000 6285 824,219 114,552 - 9,151 91,900 32285 938,771 2,929 724 200 (9,691) (26271) 390 - - (390) - - - - 34,234 (390) 390 (390) - - 33,844 3,319 334 200 (9,691) 7,573 285,488 426 63,782 22,651 661,410 285,488 426 63,782 22,651 661,410 288.807 760 63,982 12.960 668.983 106 City of Kalispell, Montana Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30. 2017 Total Nonmajor S & C Total Capital Governmental REVENUES Kidsports Grant CONSTRUCTION Project Funds Funds Taxes and assessments - - - 4,082,403 Licenses and permits - - - 1,098,281 Intergovernmental 850,002 - 850,002 2,392,963 Charges for services - - - 2,065,099 Miscellaneous - 2,010 2,010 102,645 Investment earnings - - - 103,701 Total revenues 850,002 2,010 852,012 9,845,092 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 - - - 2,095,915 - - - 497,976 - - - 1,714,235 - - - 565,845 - - - 957,926 - - - 126,461 850,002 6,310 856,312 1,293,818 850,002 6,310 856,312 7,252,176 - (4,300) (4,300) 2,592,916 OTHER FINANCING SOURCES (USES) Issuance of debt - 4,300 4,300 134,287 Proceeds from the sale of general capital asset disposition - - - 6,750 Transfers in - - - 69,234 Transfers (out) - - - (985,234) Total other financing sources and uses - 4,300 4,300 (774,963) Net change in fund balance Fund balances - beginning Restatements Fund balances - beginning restated Fund balances - ending See independent auditor's report. - - - 1,817,953 - - - 12,357,581 12,323,647 - - - 14,141,600 107 BUDGETARY COMPARISON SCHEDULE - OTHER MAJOR FUNDS RESOURCES (INFLOWS): Taxes and assessments $ Licenses and permits Intergovernmental Charges for services Fines and forfeitures Miscellaneous Investment earnings Amounts available for appropriation CHARGES TO APPROPRIATIONS (OUTFLOWS); City of Kalispell, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2017 SID344 ACTUAL AMOUNTS BUDGETED AMOUNTS (BUDGETARY ORIGINAL FINAL BASIS) See Note A 270,000 $ 270,000 $ 264,910 $ VARIANCE WITH FINAL BUDGET (5,090) $ 270,000 $ 270,000 $ 264,910 $ (5,090) General government $ $ $ $ Public safety Public works Community development Debt service - principal 225,000 225,000 225,000 Debt service - interest 112,633 112,633 112,633 Capital outlay - - - Total charges to appropriations $ 337,633 $ 337,633 $ 337,633 $ OTHER FINANCING SOURCES (USES) Issuance of debt $ Proceeds from the sale of general capital asset disposition 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 $ (72,723) $ 404,038 $ 404,038 $ 331,315 See independent auditor's report 108 BUDGETARY COMPARISON SCHEDULE - NONMAJOR FUNDS City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 AIRPORT TIF Westside TIT Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 350,000 350,000 280,000 285,343 5,343 Licenses and permits - - - - - Intergovernmental 42,671 42,671 243,128 243,128 Charges for services - - - - Miscellaneous - - 8,500 5,325 (3,175) Investment earnings 9,000 15,391 6,391 30,000 41,119 11,119 Total revenues 401,671 408,062 6,391 561,628 574,915 13,287 EXPENDITURES Current: Public safety Public works Parks and recreation - - - - - - Community Development 1,785,608 35,085 1,750,523 4,063,341 483,732 3,579,609 Debt service - principal - - - - - - Debt service - interest Capital outlay - - - - - - Total expenditures 1,785,608 35,085 1,750,523 4,063,341 483,732 3,579,609 Excess (deficiency) of revenues over expenditures (1,383,937) 372,977 1,756,914 (3,501,713) 91,183 3,592,896 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - Proceeds from the sale of general capital asset dispos Transfers in - Transfers (out) (32,340) (33,844) 1,504 Total other financing sources and uses (32,340) (33,844) 1,504 Net change in fund balance (1,383,937) 372,977 1,756,914 (3,534,053) 57,339 3,594,400 Fund balances - beginning 1,413,508 3,946,859 Restatements - - Fund balances - beginning restated 1,413,508 3,946,859 Fund balances - ending 1,786,485 4,004,198 See independent auditor's report. 109 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 Parks in Lieu Parks Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 1,098,000 1,087,221 (10,779) Licenses and permits - - Intergovernmental - - Charges for services 518,800 503,099 (15,701) Miscellaneous 20,000 57,417 37,417 Investment earnings 15 15 2,000 3,498 1,498 Total revenues 15 15 1,638,800 1,651,235 12,435 EXPENDITURES Current: Public safety - - - - - Public works - - - Parks and recreation 1,620,411 1,492,440 127,971 Community Development - - - Debt service -principal 29,112 9,112 20,000 Debt service - interest - 784 327 457 Capital outlay 1,417 1,417 161,000 153,976 7,024 Total expenditures 1,417 - 1,417 1,811,307 1,655,855 155,452 Excess (deficiency) of revenues over expenditures (1,402) 15 1,417 (172,507) (4,620) 167,887 OTHER FINANCING SOURCES (USES) Issuance ofdebt - 130,000 129,987 (13) Proceeds from the sale of general capital asset dispos - 6,750 6,750 Transfers in - - Transfers (out) - - - Total other financing sources and uses - - 130,000 136,737 6,737 Net change in fund balance (1,402) 15 1,417 (42,507) 132,117 174,624 Fund balances - beginning 1,402 658,729 Restatements - - Fund balances - beginning restated 1,402 658,729 Fund balances - ending 1,417 790,846 See independent auditor's report 110 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 AMBULANCE OLD SCHOOL TIT (TECH) Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 62,000 59,881 (2,119) Licenses and permits - - - - - - Intergovernmental 260,000 331,734 71,734 3,056 3,057 1 Charges for services 891,000 710,158 (180,842) - - - Miscellaneous - - - - - Investment earnings - - 100 150 50 Total revenues 1,151,000 1,041,892 (109,108) 65,156 63,088 (2,068) EXPENDITURES Current: Public safety 1,116,239 1,085,704 30,535 Public works - - - Parks and recreation - - - Community Development 22,500 21,123 1,377 Debt service - principal - - - Debt service - interest - - - Capital outlay 170,000 169,707 293 - - - Total expenditures 1,286,239 1,255,411 30,828 22,500 21,123 1,377 Excess (deficiency) of revenues over expenditures (135,239) (213,519) (78,280) 42,656 41,965 (691) OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - Proceeds from the sale of general capital asset dispos Transfers in Transfers (out) (35,000) (35,000) Total other financing sources and uses (35,000) (35,000) - Net change in fund balance (78,280) (135,239) (213,519) 7,656 6,965 (691) Fund balances - beginning 230,403 9,731 Restatements - - Fund balances - beginning restated 230,403 9,731 Fund balances - ending 16,884 16,696 See independent auditor's report III City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 OLD SCHOOL TIT (IND) Health Levy Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 9,100 9,840 740 880,000 888,882 8,882 Licenses and permits - - - - - - Intergovernmental 22,025 22,713 688 Charges for services - - - Miscellaneous - - Investment earnings - 146 146 - - - Total revenues 9,100 9,986 886 902,025 911,595 9,570 EXPENDITURES Current: 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 9,100 9,986 886 902,025 911,595 9,570 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - Proceeds from the sale of general capital asset dispos Transfers in Transfers (out) (15,000) (15,000) (901,000) (901,000) Total other financing sources and uses (15,000) (15,000) (901,000) (901,000) - Net change in fund balance (5,900) (5,014) 886 1,025 10,595 9,570 Fund balances - beginning 12,428 53,147 Restatements - - Fund balances - beginning restated 12,428 53,147 Fund balances - ending 7,414 63,742 See independent auditor's report. 112 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 Building Department Impact Fees Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments - - - Licenses and permits 430,000 1,098,281 668,281 Intergovernmental - - - - - Charges for services 100,000 460,560 360,560 145,000 307,775 162,775 Miscellaneous - - - - - - Investment earnings 4,500 13,438 8,938 4,400 7,091 2,691 Total revenues 534,500 1,572,279 1,037,779 149,400 314,866 165,466 EXPENDITURES Current: Public safety 641,901 637,986 3,915 10,000 10,000 Public works - - - - - Parks and recreation Community Development - - Debt service - principal 65,500 65,500 - Debt service - interest - - - 4,651 4,632 19 Capital outlay 65,000 63,145 1,855 560,000 - 560,000 Total expenditures 706,901 701,131 5,770 640,151 80,132 560,019 Excess (deficiency) of revenues over expenditures (172,401) 871,148 1,043,549 (490,751) 234,734 725,485 OTHER FINANCING SOURCES (USES) Issuance of debt Proceeds from the sale of general capital asset dispos 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 See independent auditor's report. (172,401) 871,148 1,043,549 723,412 723,412 1,594,560 (490,751) 234,734 725,485 583,532 583,532 818,266 113 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 Light Maintenance Gas Tag Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 381,500 385,759 4,259 Licenses and permits - - - - - Intergovernmental 369,748 371,303 1,555 Charges for services - 1,137 1,137 Miscellaneous 5,000 20,502 15,502 - - - Investment earnings 400 1,631 1,231 2,000 5,043 3,043 Total revenues 386,900 407,892 20,992 371,748 377,483 5,735 EXPENDITURES Current: Public safety - - - - - - Public works 343,822 268,399 75,423 471,562 229,577 241,985 Parks and recreation - - - - - - Community Development - - Debt service - principal 21,862 21,862 - Debt service - interest 681 596 85 - - - Capital outlay - - - 98,112 50,678 47,434 Total expenditures 366,365 290,857 75,508 569,674 280,255 289,419 Excess (deficiency) of revenues over expenditures 20,535 117,035 96,500 (197,926) 97,228 295,154 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - Proceeds from the sale of general capital asset dispos - - Transfers in 35,000 35,000 Transfers (out) - - Total other financing sources and uses - - - 35,000 35,000 - Net change in fund balance 20,535 117,035 96,500 (162,926) 132,228 295,154 Fund balances - beginning 174,517 458,050 Restatements - - Fund balances - beginning restated 174,517 458,050 Fund balances - ending 291,552 590,278 See independent auditor's report. 114 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 URBAN FORESTRY MACI GRANT Positive / Positive / (Se-ative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 210,250 209,634 (616) Licenses and permits - - - - Intergovernmental 16,750 19,250 2,500 375,067 (375,067) Charges for services - 3,758 3,758 - Miscellaneous - 9,450 9,450 Investment earnings 1,500 2,225 725 - Total revenues 228,500 244,317 15,817 375,067 (375,067) EXPENDITURES Current: Public safety Public works Parks and recreation 364,600 221,795 142,805 Community Development - - - Debt service - principal 15,000 10,824 4,176 Debt service - interest 1,000 665 335 - - Capital outlay 40,000 - 40,000 433,202 433,202 Total expenditures 420,600 233,284 187,316 433,202 433,202 Excess (deficiency) of revenues over expenditures (192,100) 11,033 203,133 (58,135) 58,135 OTHER FINANCING SOURCES (USES) Issuance ofdebt 40,000 - (40,000) - Proceeds from the sale of general capital asset dispos - Transfers in - 43,000 (43,000) Transfers (out) - - Total other financing sources and uses 40,000 - (40,000) 43,000 (43,000) Net change in fund balance 163,133 (152,100) 11,033 (15,135) 15,135 Fund balances - beginning 250,534 21,006 Restatements - - Fund balances - beginning restated 250,534 21,006 Fund balances - ending 261,567 21,006 See independent auditor's report 115 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 Community Development Loan Revolving RD REVOLVING LOAN (2) Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits Intergovernmental - - - - Charges for services 51,096 48,553 (2,543) 82,274 16,559 (65,715) Miscellaneous - - - - - - Investment earnings 3,000 4,965 1,965 650 1,362 712 Total revenues 54,096 53,518 (578) 82,924 17,921 (65,003) EXPENDITURES Current: Public safety Public works Parks and recreation - - - - - - Community Development 302,000 1,804 300,196 260,000 675 259,325 Debt service - principal - - - 26,407 26,409 (2) Debt service - interest 5,693 5,689 4 Capital outlay - - - - - - Total expenditures 302,000 1,804 300,196 292,100 32,773 259,327 Excess (deficiency) of revenues over expenditures (247,904) 51,714 299,618 (209,176) (14,852) 194,324 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - Proceeds from the sale of general capital asset dispos Transfers in Transfers (out) Total other financing sources and uses - - - Net change in fund balance (247,904) 51,714 299,618 (209,176) (14,852) 194,324 Fund balances - beginning 2,029,904 965,373 Restatements - (33,934) Fund balances - beginning restated 2,029,904 931,439 Fund balances - ending 2,081,618 916,587 See independent auditor's report. 116 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 STONEGARDEN GRANT Drug Enforcement Grant Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits - - - - Intergovernmental 95,070 93,146 (1,924) 101,614 98,197 (3,417) Charges for services - - - - Miscellaneous Investment earnings - - - - Total revenues 95,070 93,146 (1,924) 101,614 98,197 (3,417) EXPENDITURES Current: Public safety 95,070 93,146 1,924 99,975 95,555 4,420 Public works - - - - - - Parks and recreation Community Development Debt service - principal Debt service - interest - Capital outlay - - - - - Total expenditures 95,070 93,146 1,924 99,975 95,555 4,420 Excess (deficiency) of revenues over expenditures - - - 1,639 2,642 1,003 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - Proceeds from the sale of general capital asset dispos Transfers in Transfers (out) Total other financing sources and uses - - - Net change in fund balance 1,639 2,642 1,003 Fund balances - beginning 832 Restatements - Fund balances - beginning restated 832 Fund balances - ending 3,474 See independent auditor's report. 117 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 CHRP GRANT LAW ENFORCEMENT GRANTS Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits - - - - Intergovernmental 251,750 97,261 (154,489) 67,000 46,399 (20,601) Charges for services - - 20,000 13,500 (6,500) Miscellaneous 2,500 4,565 2,065 Investment earnings - - - - - Total revenues 251,750 97,261 (154,489) 89,500 64,464 (25,036) EXPENDITURES Current: Public safety 191,750 72,602 119,148 89,500 64,464 25,036 Public works - - - - - - Parks and recreation Community Development Debt service - principal Debt service - interest Capital outlay - - - - - - Total expenditures 191,750 72,602 119,148 89,500 64,464 25,036 Excess (deficiency) of revenues over expenditures 60,000 24,659 (35,341) - - - OTHER FINANCING SOURCES (USES) Issuance ofdebt - - Proceeds from the sale of general capital asset dispos Transfers in Transfers (out) Total other financing sources and uses - - Net change in fund balance 60,000 24,659 (35,341) Fund balances - beginning 15,325 Restatements - Fund balances - beginning restated 15,325 Fund balances - ending 39,984 See independent auditor's report. 118 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 EPA Browniields Grant BROWNFIELDS LOAN REVOLVING Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits - - - - Intergovernmental 400,000 21,943 (378,057) 488,407 1,483 (486,924) Charges for services - - - - Miscellaneous Investment earnings - - - - Total revenues 400,000 21,943 (378,057) 488,407 1,483 (486,924) EXPENDITURES Current: Public safety Public works Parks and recreation - - - - - - Community Development 400,000 21,943 378,057 588,907 1,483 587,424 Debt service - principal - - - - - - Debt service - interest Capital outlay - - - - - - Total expenditures 400,000 21,943 378,057 588,907 1,483 587,424 Excess (deficiency) of revenues over expenditures - - - (100,500) - 100,500 OTHER FINANCING SOURCES (USES) Issuance of debt - Proceeds from the sale of general capital asset dispos Transfers in Transfers (out) Total other financing sources and uses - Net change in fund balance (100,500) - 100,500 Fund balances - beginning 100,500 Restatements - Fund balances - beginning restated 100,500 Fund balances - ending 100,500 See independent auditor's report. 119 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 FIRE GRANTS HAZMAT GRANT Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits - - - Intergovernmental 202,500 (202,500) 44,167 51,243 7,076 Charges for services - - - - Miscellaneous 5,200 3,376 (1,824) - - - Investment earnings - - 200 403 203 Total revenues 207,700 3,376 (204,324) 44,367 51,646 7,279 EXPENDITURES Current: Public safety 5,200 2,685 2,515 61,078 33,773 27,305 Public works - - - - - - Parks and recreation Community Development Debt service - principal Debt service - interest - - Capital outlay 225,000 - 225,000 - - - Total expenditures 230,200 2,685 227,515 61,078 33,773 27,305 Excess (deficiency) of revenues over expenditures (22,500) 691 23,191 (16,711) 17,873 34,584 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - Proceeds from the sale of general capital asset dispos - Transfers in 18,434 (18,434) Transfers (out) - Total other financing sources and uses 18,434 (18,434) - - Net change in fund balance (4,066) 691 4,757 (16,711) 17,873 34,584 Fund balances - beginning 4,066 42,913 Restatements - - Fund balances - beginning restated 4,066 42,913 Fund balances - ending 4,757 60,786 See independent auditor's report. 120 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 Total Special Revenue Funds G.O. BONDS Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 3,270,850 3,276,560 5,710 475,500 473,200 (2,300) Licenses and permits 430,000 1,098,281 668,281 - - - Intergovernmental 2,982,953 1,443,528 (1,539,425) 9,500 9,433 (67) Charges for services 1,808,170 2,065,099 256,929 - - - Miscellaneous 41,200 100,635 59,435 - - - Investment earnings 57,765 96,477 38,712 500 1,381 881 Total revenues 8,590,938 8,080,580 (510,358) 485,500 484,014 (1,486) EXPENDITURES Current: Public safety 2,310,713 2,095,915 214,798 Public works 815,384 497,976 317,408 Parks and recreation 1,985,011 1,714,235 270,776 Community Development 7,422,356 565,845 6,856,511 - - Debt service - principal 157,881 133,707 24,174 465,000 465,000 - Debt service - interest 12,809 11,909 900 41,838 41,488 350 Capital outlay 1,753,731 437,506 1,316,225 - - Total expenditures 14,457,885 5,457,093 9,000,792 506,838 506,488 350 Excess (deficiency) of revenues over expenditures (5,866,947) 2,623,487 8,490,434 (21,338) (22,474) (1,136) OTHER FINANCING SOURCES (USES) Issuance ofdebt 170,000 129,987 (40,013) Proceeds from the sale of general capital asset dispos - 6,750 6,750 Transfers in 96,434 35,000 (61,434) Transfers (out) (983,340) (984,844) 1,504 Total other financing sources and uses (716,906) (813,107) (93,193) Net change in fund balance Fund balances - beginning Restatements Fund balances - beginning restated Fund balances - ending See independent auditor's report. (6,583,853) 1,810,380 8,397,241 (21,338) (22,474) (1,136) 11,696,171 (33,934) 11,662,237 13,472,617 38,026 38,026 15,552 121 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 City Hall Debt Service Airport TIF Debt Service Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 174,000 208,074 34,074 Licenses and permits - - - Intergovernmental 90,000 90,000 Charges for services - - Miscellaneous - - - Investment earnings - - 1,500 2,914 1,414 Total revenues 90,000 90,000 175,500 210,988 35,488 EXPENDITURES Current: Public safety Public works Parks and recreation Community Development - - - - Debt service - principal 80,980 80,980 - 150,000 150,000 Debt service - interest 5,768 5,468 300 28,483 28,483 Capital outlay - - - - Total expenditures 86,748 86,448 300 178,483 178,483 - Excess (deficiency) of revenues over expenditures 3,252 3,552 300 (2,983) 32,505 35,488 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - Proceeds from the sale of general capital asset dispos Transfers in Transfers (out) Total other financing sources and uses - - - - - Net change in fund balance 3,252 3,552 300 (2,983) 32,505 35,488 Fund balances - beginning 7,641 243,224 Restatements - - Fund balances - beginning restated 7,641 243,224 Fund balances - ending 11,193 275,729 See independent auditor's report. 122 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 Westside TIT 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 850 2,929 2,079 Total revenues 850 2,929 2,079 EXPENDITURES Current: Public safety - - - Public works Parks and recreation Community Development - - Debt service - principal 14,500 14,500 Debt service - interest 19,516 19,516 Capital outlay - - Total expenditures 34,016 34,016 - - - Excess (deficiency) of revenues over expenditures (34,016) (34,016) 850 2,929 2,079 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - Proceeds from the sale of general capital asset dispos - - - - Transfers in 32,340 33,844 1,504 390 390 Transfers (out) - - - - - Total other financing sources and uses 32,340 33,844 1,504 - 390 390 Net change in fund balance (1,676) (172) 1,504 850 3,319 2,469 Fund balances - beginning 172 285,488 Restatements - - Fund balances - beginning restated 172 285,488 Fund balances - ending - 288,807 See independent auditor's report. 123 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 S & C's SID 343 Positive / Positive / (Se-ative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 9,291 9,875 584 92,100 92,100 Licenses and permits - - - - - Intergovernmental Charges for services Miscellaneous Investment earnings - - - - - Total revenues 9,291 9,875 584 92,100 92,100 EXPENDITURES Current: Public safety Public works Parks and recreation Community Development - - - - - Debt service - principal 7,741 7,739 2 80,000 80,000 Debt service - interest 1,529 1,412 117 13,040 11,900 1,140 Capital outlay - - - - - - Total expenditures 9,270 9,151 119 93,040 91,900 1,140 Excess (deficiency) of revenues over expenditures 21 724 703 (940) 200 1,140 OTHER FINANCING SOURCES (USES) Issuance ofdebt - - - - - - Proceeds from the sale of general capital asset dispos Transfers in - - - Transfers (out) 400 (390) (790) Total other financing sources and uses 400 (390) (790) - - - Net change in fund balance 421 334 (87) (940) 200 1,140 Fund balances - beginning 426 63,782 Restatements - - Fund balances - beginning restated 426 63,782 Fund balances - ending 760 63,982 See independent auditor's report. 124 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 SID 345 Total Debt Service Funds Positive / Positive / (Se-ative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments 23,108 22,594 (514) 773,999 805,843 31,844 Licenses and permits - - - - - - Intergovernmental 99,500 99,433 (67) Charges for services - - - Miscellaneous - - - Investment earnings - - - 2,850 7,224 4,374 Total revenues 23,108 22,594 (514) 876,349 912,500 36,151 EXPENDITURES Current: Public safety Public works Parks and recreation Community Development - - - - - Debt service -principal 26,000 26,000 824,221 824,219 2 Debt service - interest 6,285 6,285 116,459 114,552 1,907 Capital outlay - - - - - Total expenditures 32,285 32,285 940,680 938,771 1,909 Excess (deficiency) of revenues over expenditures (9,177) (9,691) (514) (64,331) (26,271) 38,060 OTHER FINANCING SOURCES (USES) Issuance of debt - - Proceeds from the sale of general capital asset dispos - - - Transfers in 32,340 34,234 1,894 Transfers (out) 400 (390) (790) Total other financing sources and uses - 32,740 33,844 1,104 Net change in fund balance (9,177) (9,691) (514) (31,591) 7,573 39,164 Fund balances - beginning 22,651 661,410 Restatements - - Fund balances - beginning restated 22,651 661,410 Fund balances - ending 12,960 668,983 See independent auditor's report. 125 City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 lUdsports Grant S & C Construction Positive / Positive / (Negative) (Negative) Budget Actual Variance Budget Actual Variance REVENUES Taxes and assessments Licenses and permits - - Intergovernmental 1,412,000 850,002 (561,998) Charges for services - - - Miscellaneous 740,726 (740,726) 2,010 2,010 Investment earnings - - - Total revenues 2,152,726 850,002 (1,302,724) 2,010 2,010 EXPENDITURES Current: Public safety Public works Parks and recreation Community Development Debt service - principal Debt service - interest - - - - - Capital outlay 850,002 850,002 25,000 6,310 18,690 Total expenditures 850,002 850,002 25,000 6,310 18,690 Excess (deficiency) of revenues over expenditures 1,302,724 - (1,302,724) (25,000) (4,300) 20,700 OTHER FINANCING SOURCES (USES) Issuance ofdebt - 25,000 4,300 (20,700) Proceeds from the sale of general capital asset dispos - - Transfers in Transfers (out) - - Total other financing sources and uses - 25,000 4,300 (20,700) Net change in fund balance 1,302,724 (1,302,724) - - Fund balances - beginning Restatements Fund balances - beginning restated Fund balances - ending See independent auditor's report 126 REVENUES Taxes and assessments Licenses and permits Intergovernmental Charges for services Miscellaneous Investment earnings Total revenues City of Kalispell, Montana Budgetary Comparison Schedule Nonmajor Governmental Funds For the Year Ended June 30, 2017 Total Capital Project Funds Positive / (Negative) Budget Actual Variance 1,412,000 850,002 (561,998) 740,726 2,010 (738,716) 2,152,726 852,012 (1,300,714) EXPENDITURES Current: Public safety Public works Parks and recreation Community Development Debt service - principal Debt service - interest - - - Capital outlay 875,002 856,312 18,690 Total expenditures 875,002 856,312 18,690 Excess (deficiency) of revenues over expenditures 1,277,724 (4,300) (1,282,024) OTHER FINANCING SOURCES (USES) Issuance ofdebt 25,000 4,300 Proceeds from the sale of general capital asset dispos - - Transfers in Transfers (out) - - Total other financing sources and uses 25,000 4,300 Net change in fund balance Fund balances - beginning Restatements Fund balances - beginning restated Fund balances - ending See independent auditor's report. (20,700) 1,302,724 - (1,302,724) 127 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, 2017 Airport Enterprise Solid Waste Totals ASSETS Current assets: Cash and investments $ 164,687 $ 1,048,093 $ 1,212,780 Taxes and assessments receivable, net - 23,299 23,299 Accounts receivable - net 2,121 - 2,121 Due from other governments - 79,141 79,141 Prepaids - 26,650 26,650 Total current assets $ 166,808 $ 1,177,183 $ 1,343,991 Noncurrent assets: Capital assets (net of accumulated depreciation): Land 1,359,545 - 1,359,545 Depreciable 811,742 736,864 1,548,606 Total noncurrent assets $ 2,171,287 $ 736,864 $ 2,908,151 Total assets $ 2,338,095 $ 1,914,047 $ 4,252,142 DEFERRED OUTFLOWS OF RESOURCES Pension plan subsequent contributions/changes - 54,316 54,316 Total deferred outflows of resources $ - $ 54,316 $ 54,316 LIABILITIES Current liabilities: Accounts payable $ 190 $ 11,277 $ 11,467 Accrued payroll - 7,996 7,996 Bonds and notes - capital 38,728 38,728 Compensated absences payable - 56,008 56,008 Total current liabilities 190 114,009 114,199 Noncurrent liabilities: Bonds and notes - capital - 39,121 39,121 Compensated absences payable - 40,367 40,367 Net pension liability - 332,002 332,002 Total noncurrent liabilities - 411,490 411,490 Total liabilities $ 190 $ 525,499 $ 525,689 DEFERRED INFLOWS OF RESOURCES Pension -dill. between projected and actual earnings $ - $ 2,145 $ 2,145 Total deferred inflows of resources $ - $ 2,145 $ 2,145 NET POSITION Net investment in capital assets $ 2,171,287 $ 659,015 $ 2,830,302 Unrestricted 166,618 781,704 948,322 Total net position $ 2,337,905 $ 1,440,719 $ 3,778,624 See independent auditor's report 128 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, 2017 Airport Enterprise Solid Waste Totals OPERATING REVENUES Charges for services $ 78,159 $ 1,005,786 $ 1,083,945 Total operating revenues $ 78,159 $ 1,005,786 $ 1,083,945 OPERATING EXPENSES Personal services $ - $ 476,020 $ 476,020 Supplies - 84,050 84,050 Purchased services 49,337 29,888 79,225 Fixed charges 11,065 139,149 150,214 Depreciation 95,474 141,397 236,871 Total operating expenses $ 155,876 $ 870,504 $ 1,026,380 Operating income (loss) $ (77,717) $ 135,282 $ 57,565 NONOPERATING REVENUES (EXPENSES) Intergovernmental revenue $ - $ 6,157 $ 6,157 Interest revenue 1,789 8,504 10,293 Gain (loss) sale of capital asset - 15,700 15,700 Debt service interest expense - (1,657) (1,657) Total non -operating revenues (expenses) $ 1,789 $ 28,704 $ 30,493 Income (loss) before contributions and transfer $ (75,928) $ 163,986 $ 88,058 Transfers (out) $ - $ (35,000) $ (35,000) Change in net position $ (75,928) $ 128,986 $ 53,058 Net Position - beginning of the year $ 2,413,833 $ 1,311,733 $ 3,725,566 Net Position - end of the year $ 2,337,905 $ 1,440,719 $ 3,778,624 See independent auditor's report. 129 City of Kalispell, Montana Combining Statement of Cash Flows Nonmajor Proprietary Funds Year Ended June 30, 2017 Cash flows from operating activities: Cash received from customers 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 Taxes and assessments receivable, net Due from county Comp absences Accounts payable Prepaid Expenses Accrued payroll Pension expens adjustment Net cash provided (used) by operating activities See Independent Audits Report Solid Waste Enterprise Totals $ 76,362 $ 1,017,365 $ 1,093,727 (60,476) (241,199) (301,675) - (517,829) (517,829) $ 15,886 $ 258,337 $ 274,223 $ $ (38,343) $ (38,343) (1,657) (1,657) (45,405) (45,405) 15,700 15,700 $ $ (69,705) $ (69,705) $ $ (35,000) $ (35,000) $ $ (35,000) $ (35,000) $ 1,789 $ 8,503 $ 10,292 $ 1,789 $ 8,503 $ 10,292 $ 17,675 $ 162,135 $ 179,810 147,012 885,958 1,032,970 $ 164,687 $ 1,048,093 $ 1,212,780 $ (77,717) $ 135,282 $ 57,565 95,474 141,397 236,871 (1,797) - (1,797) 14,398 14,398 (2,819) (2,819) - 13,803 13,803 (74) 5,466 5,392 - 6,422 6,422 (6,920) (6,920) - (48,692) (48,692) $ 15,886 $ 258,337 $ 274,223 130 COMBINING AND INDIVIDUAL FUND STATEMENTS AGENCY FUNDS KPD EVIDENCE — Accounts for monies and property confiscated and/or retained as evidence. 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 30,2017 KPD EVIDENCE TBID Clearing Payroll Clearing Performance Totals ASSETS Current assets: Cash and investments $ 10,207 2,600 $ 82,134 $ 16,603 $ 111,544 Total assets $ 10,207 2,600 $ 82,134 $ 16,603 $ 111,544 LIABILITIES Current liabilities: Due to others $ 10,207 2,600 $ 82,134 $ 16,603 $ 111,544 Total liabilities $ 10,207 2,600 $ 82,134 $ 16,603 $ 111,544 See independent auditor's report 131 City of Kalispell, Montana Combined Statement of Changes in Assets and Liabilities Agency Funds For the Fiscal Year Ended June 30, 2017 KPD Evidence Balance 7/1/16 Additions Deletions Balance 6/30/16 ASSETS Current assets: Cash and investments $ - 11,875 (1,668) $ 10,207 Total assets - 11,875 (1,668) 10,207 LIABILITIES Current liabilities: Due to others $ - 11,875 (1,668) $ 10,207 Total liabilities $ - 11,875 (1,668) $ 10,207 Payroll Clearing Balance 7/1/16 Additions Deletions Balance 6/30/17 ASSETS Current assets: Cash and investments $ 534,512 8,930,928 (9,383,306) $ 82,134 Total assets 534,512 8,930,928 (9,383,306) 82,134 LIABILITIES Current liabilities: Due to others $ 534,512 8,930,928 (9,383,306) $ 82,134 Total liabilities $ 534,512 8,930,928 (9,383,306) $ 82,134 Performance Bonds Balance 7/1/16 Additions Deletions Balance 6/30/17 ASSETS Current assets: Cash and investments $ 13,853 9,289 (6,539) $ 16,603 Total assets $ 13,853 9,289 (6,539) $ 16,603 LIABILITIES Current liabilities Due to others $ 13,853 9,289 (6,539) $ 16,603 Total liabilities $ 13,853 9,289 (6,539) $ 16,603 Tourism Business Improvement District Balance 7/1/16 Additions Deletions Balance 6/30/17 ASSETS Current assets: Cash and investments $ 2,996 594,772 (595,168) $ 2,600 Total assets $ 2,996 594,772 (595,168) $ 2,600 LIABILITIES Current liabilities: Due to others $ 2,996 594,772 (595,168) $ 2,600 Total liabilities $ 2,996 594,772 (595,168) $ 2,600 See independent auditor's report. 132 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 - m m -- 7 7 l� I �D 0) C,�D m N w 'I. N G �D 0) 7 'D N l� M w In C1 I l� O1 0 1 l� C, C, N --- Ol N N Ci Ci rq O O N m Ci w In 7 10 N O w 7 m In I w N O cn I: ^- w w N o O N` o I 0 C, I: 0 � N C� m 0 C; C; o0 0 w m m In O N In n m m t` w In r m m 0�1 N ,� C, 7 vNi m oho r w m C,1D � a, I w 7 C\ 7 Vl w w O` w C1 O C^ w N m 10 m o m N ,--i N l� o o l M N- ,--i O Ci vi C, 7 N N` 0 1 O It In I N N o 10 10 w N m C1 7 10 C1 N w N 10 ` m In cn o o w In ItC, 1D In w C1 t` ` N '0 Ci N C,o cn m of I N C1 7 �D C\ O N N --i C, �D I N vi O1 In O �O �D l O N vi crl , w N N D\ O1 In 7 l N m m 7 N N Cl y In of l � of o0f m7 M ` rn O1 N 7 N Ol N 7 w 1 O O N 00 w Vl N w Vl lD O l 7 N I U o C,m 01 N v, C, P. LTy lD 7 C)w 0) - �D N �D w N o N 'o m w N m C1 01 of N M O w N N oo 'o I a 8 w w- �D 0, N w N v, o o v, 10 N oo N N t` a, 10 t` O M C, q � a, N - � � m v�i m cn C� v�i Doi I '0 0i o ` (� F� O O 01 N O O C1 N w l� In = ,--� w lD w I N 1i �6 In 10 In O, In D\ 10 10 w o In m I O N N �D C1 7 t` w w lD m : O 7 CT O1 O O1 I w t ,--� C) �O m rq �O l t C,Ol c+) O C, N 7 C, m N N N 10 10 It 01 w N 10 t` P ~ 61� C C O O f/) 'y U) .N N CO U) fl O U) O U) y U) N U) C N O C � f0 U) N N N Q N Q Q C U > U 2: U C C U C U C � � C : C C C C U a C U U E E 'O > C O) f0 N O U O N N U N N N U > > U ` N > > � C 'i U) C O C 'r N N C O 0) 0) C 'E C Z d' � O) C Z w D- Z w-) O- f0 y N E N O (7 m a` Unaudited statistical section 133 CITY OF KALISPELL, MONTANA CHANGES IN NET POSITION Put Tea Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Expenses Governmental activities: General government 7,230,428 6,78,754 5,149,809 5,310,274 6,995,454 6,709,523 5,688,135 5,401,242 5,823,]6] 5,841,]]5 Pudic Safety 9,608,419 8,%2,M2 9,015,732 8,729,290 8,536,332 9,293,138 9,269,82/ 9,575,487 9,113,674 10,968,010 Pudic Works 2,326,750 2,327,255 3,201,811 3,306,165 2,844,001 3,074,630 2,573,627 2,73,097 2,581,002 2,660,513 Parks and recreation 2,302,240 2,00ol68 1,860,308 1,845,939 1,913,920 1,991,585 2,123,237 2,062,669 2,057,468 2,184,222 Community Development 979,002 1,012,555 1,629,656 2,033,880 1,426,3]] 3,616,337 1,601,170 683,164 928,661 853,455 Interest 701,786 672,386 627,678 580,361 390,]]0 357,857 331,811 286,401 242,110 Total governmental activities expenses $ 23,148,625 $ 21,762,380 $ 21,484,994 $ 21,805,909 $ 21,716,084 $ 25,075,984 $ 21,613,853 $ 20,827,470 $ 20,]90,9]3 $ 22,750,085 Business -type activities Airport 202,122 204,842 176,702 214,636 217,616 225,974 1]],751 154,715 154,091 155,876 Water 2,394,777 2,597,419 2,638,011 2,689,293 2,592,628 2,660,8]] 2,625,046 2,542,119 2,657,816 2,734,979 S- 4,716,788 5,354,062 5,976,393 5,882,868 5,564,219 5,255,654 5,114,591 5,0]],643 5,204,622 4,955,925 Solid Waste 762,782 ]]2,132 801,909 718,139 749,481 783,967 812,650 816,686 880,679 8'R,161 Total business -type activities expenses 8,076,469 8,928,455 9,593,015 9,504,936 9,123,944 8,926,472 8,730,038 8,591,163 8,897,208 8,718,941 Total primary government expenses $ 31,225,094 $ 30,690,835 $ 31,078,009 $ 31,310,845 $ 30,840,028 $ 34,002,456 $ 30,343,891 $ 29,418,633 $ 29,08,181 $ 31,469,026 Program Revenues Governmental activities: Charges for servces: General government 621,250 829,925 951,940 1,039,553 865,223 669,964 628,7N 684,550 892,578 ]89,16] Public Safety 2,441,2/4 1,86/,539 1,622,104 1,678,825 1,753,969 1,928,011 2,033,870 1,W3,898 2,219,795 3,155,476 Public Works 2,269,]]0 2,604,731 2,098,848 2,312,530 2,2M,02/ 2,201,616 2,172,122 2,463,435 2,672,473 2,885,492 Parks and recreation 754,025 547,874 624,158 592,868 619,634 711,969 752,460 728,165 730,928 716,491 Community Development 507,699 228,989 136,598 28,161 b3,088 170,429 283,134 153,431 88,252 66,393 Operating grants and contributions 2,108,149 2,074,401 3,768,083 3,588,307 2,554,322 2,688,746 2,636,321 1,838,425 1,354,890 1,470,485 Capital grants and contributions 6,318,780 6,551,018 2,284,267 3,351,562 1,385,939 1,378,649 1,519,825 3,232,618 942,125 1,544,350 Total governmental activities program n venues $ 15,020,947 $ 14,704,477 $ 11,485,9% $ 12,591,806 $ 9,648,202 $ 9,749,384 $ 10,026,461 $ 11,074,522 $ 8,901'"1 $ 10,627,854 Business -type activities Charges for seances: Airport 91,958 ]2,3]3 70,694 70,900 ]6,5]2 75,813 ]8,65] 79,091 72,623 74,228 Water 2,722,421 2,562,50 2,624,521 2,296,594 2,430,380 2jt0,512 2,985,959 3,018,276 3,535,072 3,891,449 s- 4,IW,508 4,163,757 4,129,271 4,124,020 4,554,155 4,9]],286 4,967,223 5,141,284 5,543,740 7,485,750 Solid Waste 709,514 758,236 76/,404 805,613 851,563 900,643 951,676 973,393 988,145 1,005,786 Operating grants and contributions 10,465 2,416 8,354 8,372 21,M1 137,048 32,653 Capital grants and contributions 9,486,451 1,257,291 1,280,807 888,609 6/9,690 1,012,027 2,137,9]] 1,0%,222 3,338,669 131,626 Total business -type activities program revenues 17,125,317 8,814.226 8,872,697 8,185,736 8,594,]]6 9,714,635 11,129,864 10,337,987 13,615,297 12,621,492 Total primary government program revenues $ 32,146,264 $ 23,518,703 $ 20,358,695 $ 20,77,542 $ 18,1t2,978 $ 19,464,019 $ 21,156,325 $ 21,412,509 $ 22,516,338 $ 23,b 9,346 Net (Expense)/Revenue Governmental activities (8,127,678) (7,057,903) (9,W8,996) (9,214,103) (12,067,881) (15,326,600) (11,587,392) (9,752,948) (11,889,932) (12,122,231) Business -type activities 9,M,848 (114,229) (720,318) (1,319,200) (529,168) 788,163 2,399,826 1,746,824 4,718,089 3,902,551 Total primary government net expense $ 921,170 $ (7,172,132) $ (10,719,314) $ (10,533,303) $ (12,5W,049) $ (14,538,437) $ (9,187,566) $ (8,006,124) $ (7,171,843) $ (8,219,680) General Revenues and Other Charges in Net Position Governmental activities: Taxes Property taxes 5,8b,984 6,252,363 6,370,333 7,563,944 7,469,W2 8,W2,684 8,739,807 7,584,]]5 M57,904 8,848,481 Misc. 98,469 106,783 151,062 184,781 189,921 111,048 200,015 Investment earnings 278,957 159,208 106,799 81,041 130,836 ]1,5]3 48,193 72,531 105,557 159,362 Grants and entitlements not restricted 2,221,506 2,223,398 2,W8,937 2,316,980 2,603,949 2,657,356 2,835,264 3,134,703 3,132,559 3,184,831 Gas Tax 342,2M 354,678 361,349 366,904 361,157 3W,650 3M,563 3M,622 30,749 371,303 Gain (I-) sale of capital assets (392) (212,127) 11,610 ]8,49] 22,183 Transfers 415,503 (194,558) (112,574) 27,188 (358,169) (218,728) (65,000) 35,000 35,000 Total governmental activities $ 9,083,176 $ 8,989,647 $ 9,252,40 $ 10,314,764 $ 10,487,758 $ 10,975,156 $ 11,953,880 $ 11;293,162 $ 12,190,314 $ 12,821,175 Business -type activities: Investment earnings 832,296 467,038 228,143 163,907 142,299 102,311 83,2b 113,963 132,339 227,052 Gain (I-) sale of capital assets (41,786) - 46,710 (3,091) - Other (312,]36) - 2,101 140,616 19,631 Transfers (415,503) 194,558 112,574 358,169 218,728 65,000 (35,000) (35,000) Total business -type activities $ 416,793 $ 467,038 $ 422,701 $ (36,255) $ 100,513 $ 460,480 $ 301,952 $ 227,]]4 $ 234,861 $ 211,683 Total primary government $ 9,4W,969 $ 9,456,685 $ 9,675,169 $ 10,278,509 $ 10,588,271 $ 11,435,636 $ 12,255,832 $ 11,520,936 $ 12,425,178 $ 13,032,858 Change in Net Position Governmental activities 955,498 1,931,744 (746,528) 1,100,661 (1,580,123) (4,351,444) 366,488 1,540,214 300,382 6%,944 Business -type activities 9,465,641 352,809 (297,617) (1,355,455) (428,655) 1,248,643 2,701,]]8 1,974,598 4,952,953 4,114,234 Total primary government $ 10,421,139 $ 2,284,553 $ (1,044,145) $ (254,W4) $ (2,008,]]8) $ (3,102,801) $ 3,00,266 $ 3,514,812 $ 5,253,335 $ 4,813,178 Unaudited statistical section 134 M_ O V l-- l� C, N C� N V N n N �O N C, M c*1 C)W) ;8 C)o0 N W)M 12 �DC, O Go 3 6G3 6G3 �O N r- vi l— �D � n 00 O M N N l� N �t O V) C, N V 00 l— l— M N N N O O M M V Gl3 Ef3 6R 6R V 00 l— 0) N W) O V O V o0 N N M Go 3 6G3 6G3 6G3 O 00 ,--i 01 W) r- � �D vi l— 01 N �D 00 O O M M C) N N 00 EA Ef3 6R 6R 00 V� M o0 O W N N C, 0 a C, 00 N O N W) 00 l� N l— Go 3 6G3 G9 vi V �O vi M vi V N V N V V V) 00 V) C 0 M 00 C, Goll Goll vl N 00 00 M M C, C, vl �D �D N V n 7 C, 00 CIq Goq Goq NN O O N r-r- 00 00 00 V M M 00 M M C, G a� N U -O U U U _6 C � � C LL NNiT N N Z Of Q D C m a� C� H u V r N 'VOA -O C C Q. C E -6 N -F6 — C N O. `p (6 N E N a� C .V O U O Q 460) y e t U C N (6 N O t ~ t Z Of D Of D c6 O m Q H z Unaudited statistical section 135 CITY OF KALISPELL, MONTANA CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS Past Ten Fiscal Years (modified accrual basis of accounting) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Revenues Taxes and assessments 6,879,980 7,367,487 8,085,877 8,301,367 8,857,628 8,915,749 8,735,146 11,275,636 9,324,431 12,456,526 Licenses and permits 729,230 328,040 325,787 323,271 395,211 330,807 423,354 381,045 664,391 1,229,925 Intergovernmental 4,718,521 5,184,134 7,366,576 7,865,669 6,142,095 6,882,344 6,405,255 5,406,703 5,743,188 6,314,835 Charges for services 4,669,634 4,778,786 4,817,847 4,740,643 4,511,738 4,339,260 4,386,312 4,630,575 4,935,344 3,006,507 Fines and forfeitures 554,518 489,108 497,126 549,267 539,579 585,906 572,066 538,234 495,347 454,547 Miscellaneous 527,108 201,852 252,339 251,458 147,907 129,351 184,272 188,615 288,652 138,075 I nvestment earnings 278,957 159,208 106,800 79,484 78,076 71,572 48,193 72,528 105,557 159,363 Total revenues 18,357,948 18,508,615 21,452,352 22,111,159 20,672,234 21,254,989 20,754,598 22,493,336 21,556,910 23,759,778 Expenditures General government 2,634,295 2,437,743 2,565,522 2,532,377 3,409,323 2,512,714 2,893,332 2,623,226 2,991,835 2,495,710 Public safety 9,195,960 8,569,405 8,851,001 8,332,769 8,044,589 8,820,726 8,755,082 9,115,952 9,540,699 10,873,610 Public works 2,194,497 2,210,238 2,761,933 3,039,460 2,673,729 2,904,562 2,376,067 2,672,152 2,191,012 2,327,678 Parks and recreation 1,854,149 1,590,360 1,453,215 1,385,997 1,439,646 1,519,173 1,664,595 1,608,497 1,550,843 1,714,235 Community development 970,861 1,018,756 1,622,982 2,034,606 1,355,200 3,616,337 1,601,170 685,018 923,170 853,455 Capital outlay 2,480,415 1,804,037 949,400 1,944,635 1,075,598 1,701,728 1,201,998 560,750 930,636 1,792,584 Debt service: Principal 1,928,305 1,088,314 1,125,928 1,059,505 5,243,827 1,259,716 1,264,227 1,330,057 1,880,720 1,294,872 Interest 701,786 672,386 627,678 580,361 639,724 390,770 357,857 331,811 286,401 242,110 Total expenditures 21,960,268 19,391,239 19,957,659 20,909,710 23,881,636 22,725,726 20,114,328 18,927,463 20,295,316 21,594,254 Excess of revenues over (under) expenditures (3,602,320) (882,624) 1,494,693 1,201,449 (3,209,402) (1,470,737) 640,270 3,565,873 1,261,594 2,165,524 Other Financing Sources (Uses) Transfers in 1,529,504 1,290,617 1,740,512 1,229,303 1,414,504 1,512,214 1,639,721 2,201,276 2,022,611 1,020,234 Transfers out (1,194,291) (1,290,617) (1,740,512) (1,229,303) (1,414,504) (1,512,214) (1,639,721) (2,176,276) (1,987,611) (985,234) Issuance of debt 2,162,081 8,980 7,629 100,462 4,821,585 243,680 403,623 124,040 461,833 134,287 Sales of capital assets 3,317 6,029 233,637 11,610 93,272 26,513 Bond premium 52,763 Total other financing sources (uses) 2,500,611 15,009 7,629 100,462 5,107,985 243,680 403,623 160,650 590,105 195,800 Net change in fund balances (1,101,709) (867,615) 1,502,322 1,301,911 1,898,583 (1,227,057) 1,043,893 3,726,523 1,851,699 2,361,324 Debt service as a percentage of noncapdalexpenditures 13.50% 10.01% 9239,o 8.65% 25.80% 7.85°,o 8.58% 9.05% 11.199,o 7.769,o Unaudited statistical section 136 I *A CLUVROMMIMIT49M 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 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% 2016 $38,953 $ 1,000 $ 37,953 205.60 $2,294,128 1.65% 2017 $39,229 $ 1,211 $ 38,018 212.70 $2,307,546 1.65% Source: Flathead County and Montana Department of Revenue Note: Assessed by Montana Department of Revenue every other year Unaudited statistical section 137 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 Community Flathead State June 30, Rate Insurance Service Rate District College County Ed. 2008 132.60 14.75 15.50 162.85 334.47 15.01 119.96 46.00 2009 138.76 16.22 15.25 170.23 334.05 15.43 104.51 46.00 2010 140.11 15.20 14.50 169.81 333.79 15.69 113.12 46.00 2011 141.50 14.64 14.20 170.34 333.52 15.96 122.77 46.00 2012 145.88 16.55 13.50 175.93 333.48 16.00 125.69 46.00 2013 154.60 18.50 12.50 185.60 333.96 15.52 125.96 46.00 2014 154.10 18.50 12.50 185.10 333.68 15.80 124.94 46.00 2015 156.80 18.50 12.50 187.80 332.58 16.90 128.88 46.00 2016 170.10 23.00 12.50 205.60 363.75 18.99 145.03 46.00 2017 174.20 26.00 12.50 212.70 348.07 21.45 148.18 46.00 Source: Flathead County Unaudited statistical section 138 CITY OF KALISPELL, MONTANA PRINCIPAL PROPERTY TAX PAYERS Current Year, and Six Years Ago 2017 2011 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable taxpayer Value Rank Value Value Rank Value CENTURYLINK INC 1,860,308 1 4.74% 1,116,553 2 2.67% FLATHEAD ELECTRIC COOPERATIVE INC 1,772,106 2 4.52% 2,699,165 1 6.46% NORTHWESTERN CORP TRANSMISSION & DISTRIBUTION 944,534 3 2.41% 481,270 4 1.15% FLATHEAD HOSPITAL DEVELOPMENT COMPANY LLC 508,052 4 1.30% 571,673 3 1.37% TKG MOUNTAIN VIEW PLAZA LLC 374,458 5 0.95% CHARTER COMMUNICATIONS INC 373,742 6 0.95% WAL-MART ESTATE BUSINESS TRUST 352,534 7 0.90% 333,699 6 0.80% CROWN ENTERPRISES INC (SPORTSMANS) 251,977 8 0.64% NORTHWEST HORIZONS INC 59.9% (DAYS INN) 219,776 9 0.56% STATE OF MONTANA DNRC 215,132 10 0.55% TARGET CORPORATION 216,632 8 0.52% HD DEVELOPMENT OF MARYLAND INC (HOME DEPOT) 187,013 10 0.45% RED LION HOTELS LIMITED PARTNERSHIP 400,451 5 0.96% KALISPELL HOTEL LLC 227,030 7 0.54% VERIZON WIRELESS 187,883 9 0.45% Total 6,872,619 17.52% 6,421,369 15.37% Total City Taxable Assessed Value Source: Flathead County Unaudited statistical section 139 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 Total Collections to Date Ended for the Percentage in Subsequent Percentage June 30, Fiscal Year Amount of Levy Years Amount of Levy 2008 5,831,659 5,614,138 96.27% 107,314 5,721,452 98.11% 2009 6,214,927 5,883,671 94.67% 274,773 6,158,444 99.09% 2010 6,449,723 6,036,354 93.59% 411,906 6,448,260 99.98% 2011 6,719,572 6,182,842 92.01% 535,190 6,718,032 99.98% 2012 7,049,515 6,847,410 97.13% 201,156 7,048,566 99.99% 2013 7,241,555 6,817,096 94.14% 439,087 7,256,183 100.20% 2014 7,280,909 6,986,904 95.96% 277,536 7,264,440 99.77% 2015 7,422,232 7,179,788 96.73% 231,586 7,411,374 99.85% 2016 7,803,137 7,453,486 95.52% 315,814 7,769,300 99.57% 2017 9,020,188 8,612,172 95.48% n/a 8,612,172 95.48% Source: Flathead County Unaudited statistical section 140 CITY OF KALISPELL, MONTANA WATER SOLD BY TYPE OF CUSTOMER Past Ten Fiscal Years (in thousands of gallons) Type of Customer Residential 620,857 565,060 506,020 509,575 545,349 475,419 Commercial 556,018 527,405 540,942 515,959 495,461 544,564 Total 1,176,875 1,092,465 1,046,962 1,025,534 1,040,810 1,019,983 Total direct rate $ 2.05 $ 2.29 $ 2.30 $ 2.06 $ 2.14 $ 2.49 $ per 1000 gallons SEWER SOLD BY TYPE OF CUSTOMER Past Ten Fiscal Years (in thousands of gallons) 2014 2015 2016 2017 587,018 625,397 759,788 648,231 494,608 516,693 644,066 538,038 1,081,626 1,142,090 1,403,854 1,186,269 2.55 $ 2.43 $ 2.30 $ 2.43 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Type of Customer Residential 361,875 354,477 357,747 332,977 331,165 367,916 365,731 364,397 424,171 409,063 Commercial 544,071 519,402 521,204 449,167 527,307 538,810 482,325 497,854 527,792 507,824 Total 905,946 873,879 878,951 782,144 858,472 906,726 848,056 862,251 951,963 916,887 Total direct rate $ 3.77 $ 4.22 $ 3.79 $ 4.20 $ 4.37 $ 4.61 $ 4.87 $ 4.95 $ 4.87 $ 4.85 per 1000 gallons Source: City of Kalispell Finance Department Unaudited statistical section 141 Fiscal Year Ended June 30, 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 CITY OF KALISPELL, MONTANA WATER AND SEWER RATES Water Monthly Base Rate in city out of city $ 1.88 2.34 $ 1.88 2.35 $ 1.88 2.35 $ 1.88 2.35 $ 1.88 2.35 $ 4.69 5.86 $ 7.50 9.38 $ 7.50 9.38 $ 7.50 9.38 $ 7.50 9.38 Rate per 1000 Gallons in city out of city $ 2.43 3.04 $ 2.43 3.04 $ 2.43 3.04 $ 2.43 3.04 $ 2.43 3.04 $ 2.43 3.04 $ 2.43 3.04 $ 2.43 3.04 $ 2.43 3.04 $ 2.43 3.04 Irrigation (sprinkling) Monthly Rate per Base 1000 Rate Gallons in city out of city in city out of city $ 1.88 2.35 $ 1.55 1.94 $ 1.88 2.35 $ 1.55 1.94 $ 1.88 2.35 $ 1.55 1.94 $ 1.88 2.35 $ 1.55 1.94 $ 1.88 2.35 $ 1.55 1.94 $ 4.69 5.86 $ 1.55 1.94 $ 7.50 9.38 $ 1.55 1.94 $ 7.50 9.38 $ 1.55 1.94 $ 7.50 9.38 $ 1.55 1.94 $ 7.50 9.38 $ 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 'hinter months" deduction. Sources: City of Kalispell, Resolutions 4798/4799/5491 Sewer Monthly Base Rate in city out of city $ 1.88 2.35 $ 1.88 2.35 $ 1.88 2.35 $ 4.69 5.86 $ 7.50 9.38 $ 7.50 9.38 $ 7.50 9.38 $ 8.44 10.55 $ 8.44 10.55 $ 8.44 10.55 Rate per 1000 Gallons in city out of city $ 4.19 5.24 $ 4.19 5.24 $ 4.19 5.24 $ 4.19 5.24 $ 4.19 5.24 $ 4.78 5.98 $ 4.78 5.98 $ 4.78 5.98 $ 4.78 5.98 $ 4.78 5.98 Flathead County Water & Sewer District #1 - Evergreen Monthly Rate per Base 1000 Rate Gallons Evergreen" Evergreen" 1.47 1.63 1.85 1.76 1.48 1.67 1.74 1.78 11243.28 2.69 12,024.00 2.76 "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. Unaudited statistical section 142 1010 loll CITY OF KALISPELL, MONTANA RATIOS OF OUTSTANDING DEBT BY TYPE Past Ten Fiscal Years Governmental Activities Business -Type Activities Fiscal Year General Special Total Percentage Ended Obligation Notes Revenue Assessment Revenue Notes Primary of Personal Per June 30, Bonds Payable Bonds Bonds Bonds Payable Government Income Capita 2008 5,475,000 3,303,829 153,073 5,079,534 19,471,713 33,483,149 4.74% $ 1,648.60 2009 5,145,000 3,062,562 78,876 4,760,665 22,193,000 35,240,103 4.68 % $ 1,660.62 2010 4,805,000 2,833,340 1,445,000 4,410,462 19,541,000 33,034,802 4.61 % $ 1,526.56 2011 4,450,000 2,682,566 1,325,000 4,077,194 18,410,000 30,944,760 4.43 % $ 1,552.91 2012 4,145,000 2,422,191 1,700,000 3,845,329 17,333,000 29,445,520 4.03 % $ 1,453.67 2013 3,700,000 2,380,835 1,558,000 3,457,647 15,938,483 27,034,965 3.43 % $ 1,319.62 2014 3,255,000 2,177,968 1,410,000 3,392,922 15,667,682 172,988 26,076,560 325 % $ 1,243.40 2015 2,805,000 1,893,621 1,257,000 3,074,242 14,434,000 154,155 23,618,018 2.82 % $ 1,097.59 2016 2,350,000 1,401,475 1,098,000 2,761,499 13,341,000 116,192 21,068,166 2.45 % $ 955.39 2017 1,885,000 1,204,829 933,500 2,427,060 12,287,096 77,849 18,815,334 1.95 % $ 826.65 Source: City Manager's Recommended Budget City of Kalispell Finance Department Unaudited statistical section 143 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 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 2016 2,350,000 2,761,499 765,985 4,345,514 11.4% $ 197.06 2017 1,885,000 2,427,060 637,055 3,675,005 9.7% $ 161.46 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 144 10 r W h M v1 h � � 00 O� C M C, v 7 01 v, o v M v 00 Ot 7 N 01 O � r 7 C� N 01 N �O Elj N_ o0 7 C ~O h M Elj M 01 M �O O Elj O o N O C,N O O x ,/l N M O N v, 7 o v, 0 O 0 v, o 7 c 7 cn N O O C, 7 O M NElj V M N o r N O o N � � M N Elj o � � N N b4 N 0o Go M O N O O N r N 7 00 N 00 V, M EA N � O O p N N N U U � CL C C CL U CL N O' (0 w c a C 0 J T N N � Q 2 co 7 N 'O > N Of �0 E O O C N 7 d V- > N N 1 p_ Y � 0 E co (6 _ cC w O U � LO o D o N GO Unaudited statistical section 145 CITY OF KALISPELL, MONTANA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT June 30, 2017 Estimated Estimated Share of Debt Percentage Overlapping Governmental Unit Outstanding Applicable (1) Debt Overlapping General Obligation Debt: Flathead County 5,125,000 16.83% 862,363 Flathead Valley Community College 8,475,000 16.83% 1,426,054 Kalispell High School 32,520,000 33.27% 10,819,609 Kalispell Elementary 7,705,000 100.00% 7,705,000 West Valley Elementary 6,250,000 39.02% 2,438,597 City direct debt 5,907,868 100.00% $ 5,907,868 Total direct and overlapping debt 29,159,492 Sources: Assessed value data used to estimate applicable percentages was provided by the State of Montana, Department of Revenue. Debt outstanding data was provided by each governmental unit. Note: Overlapping governments ar those that coincide, at least in part, with the geographic boundaries of the City. This schedule extimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Kalispell. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, or each overlapping government. (1) For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of another governmental unit's taxable assessed value that is within the City's boundaries and dividing it by each unit's total taxable assessed value. Unaudited statistical section 146 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 Coverage 2008 7,628,374 (4,332,133) (553,795) (203,424) 2,539,022 2009 7,572,970 (4,676,950) (579,197) (182,006) 2,134,817 2010 7,213,024 (4,513,881) (1,087,000) (779,083) 833,060 2011 6,810,442 (4,478,406) (1,131,000) (737,866) 463,170 2012 7,359,224 (4,143,706) (1,007,000) (647,296) 1,561,222 2013 8,063,596 (4,410,574) (1,387,000) (446,979) 1,819,043 2014 8,289,654 (4,516,282) (1,226,000) (388,108) 2,159,264 2015 8,587,057 (4,370,296) (1,242,000) (369,564) 2,605,197 2016 9,523,918 (4,769,754) (1,093,000) (342,382) 3,318,782 2017 9,133,285 (4,647,567) (1,117,000) (316,036) 3,052,682 'includes other revenues pledged for debt service " excludes depreciation Source: City of Kalispell Finance Department Special Assessment Bonds Special Assessment Debt Service Collections Principal Interest Coverage 607,086 (325,718) (253,172) 28,196 298,968 (327,423) (241,088) (269,543) 711,971 (357,831) (228,611) 125,529 505,777 (334,210) (212,843) (41,276) 332,474 (396,662) (185,444) (249,632) 399,180 (391,662) (186,121) (178,603) 197,682 (324,198) (171,133) (297,649) 1,400,791 (326,526) (163,360) 910,905 404,275 (319,000) (145,808) (60,533) 389,479 (338,739) (132,230) (81,490) Unaudited statistical section 147 DEMOGRAPHICS AND ECONOMICS CITY OF KALISPELL, MONTANA DEMOGRAPHIC AND ECONOMIC STATISTICS Past Ten Fiscal Years Per Capita K-12 Annual Calendar Personal Personal School Unemployment Year Population Income (in thousands) Income Enrollment* Rate** 2008 20,310 716,151 35,261 5,290 2009 21,221 757,271 35,685 5,425 2010 21,640 705,875 32,619 5,450 2011 19,927 687,222 34,487 5,545 2012 20,256 726,684 35,875 5,707 2013 20,487 783,054 38,222 5,985 2014 20,972 814,385 38,832 5,992 2015 21,518 838,815 38,982 5,992 2016 22,052 932,844 42,302 6,053 2017 22,761 not available not available 6,053 `School District 5 "unadjusted annual (calendar) - October unadjusted (2017) Sources: Kalispell Public Schools Audit Report U.S. Census Bureau U.S. Department of Commerce - Bureau of Economic Analysis Montana Department of Labor & Industry 3.70% 6.00% 10.90% 10.90% 9.00% 7.70% 6.50% 5.70% 5.60% 4.50% Unaudited statistical section 148 CITY OF KALISPELL, MONTANA PRINCIPAL PUBLIC AND PRIVATE INDUSTRY EMPLOYERS Most current information and 2010 Private Employer Kalispell Regional Healthcare Teletech Applied Materials (Semitool Inc.) Immanuel Lutheran Home Summit Medical Fitness Center AON Service Corporation - NFS Applied Health Services Brendan House Glacier Bank L C Staffing Service McDonalds Smith's Food & Drug Super 1 Foods Costco Walmart Healthcenter Northwest 2017 2010 Estimated Estimated # of # of Employees Employees Industry 1000+ 1000+ Healthcare 250-499 500-999 Professional & Tech. 250-499 500-999 Manufacturing 100-249 100-249 Healthcare 100-249 not available Healthcare 100-249 250-499 Insurance 100-249 not available Healthcare 100-249 not available Healthcare 250-499 250-499 Banking 250-499 100-249 Temp. Services 100-249 not available Food 100-249 not available Grocery 250-499 250-499 Grocery 100-249 not available Retail 250-499 250-499 Retail 250-499 not available Healthcare Sources: Montana Department of Labor & Industry The State of Montana, Department of Labor reports all 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. Unaudited statistical section 149 CITY OF KALISPELL, MONTANA Full -Time Equivalent City Government Employees by Function/Program Past Ten Fiscal Years FY 08 FY 09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 General Government Manager 2.00 2.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Human Resources 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 City Clerk 1.00 1.34 1.34 1.34 1.34 1.24 1.23 1.58 1.33 1.33 Media Specialist 0.50 0.55 0.55 0.55 Finance 3.70 3.70 3.20 3.20 3.20 3.20 3.20 3.20 3.20 3.20 Attorney 5.00 4.66 4.66 4.66 4.66 4.66 4.67 4.67 4.67 4.67 Court 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 City Hall 1.00 1.00 1.00 1.40 1.40 1.40 1.40 1.45 1.45 1.45 Planning & Zoning 6.50 6.50 4.75 4.75 4.25 4.25 4.25 4.25 4.25 4.05 Building 7.50 7.50 5.25 3.45 3.95 3.95 3.95 5.20 5.20 6.75 Information Technology 1.00 1.00 1.00 1.00 1.50 2.25 2.25 2.15 2.55 2.55 Total General Government 33.20 33.70 28.25 26.85 27.35 27.45 27.45 29.00 29.15 30.50 Public Safety Police 47.00 48.50 47.50 41.00 42.00 44.00 44.00 44.00 46.00 49.75 Fire 29.60 29.90 24.90 27.30 26.30 27.30 23.30 23.30 23.30 23.30 Ambulance 9.40 9.10 9.10 7.50 7.50 6.50 9.50 9.50 9.50 9.50 Total Public Safety 86.00 87.50 81.50 75.80 75.80 77.80 76.80 76.80 78.80 82.55 Public Works DPW 1.90 0.15 0.15 0.25 0.25 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 11.45 12.05 12.30 12.65 12.35 12.25 12.25 12.25 12.25 13.25 Sign/signal 2.00 2.50 2.50 2.50 2.50 2.50 2.00 2.00 2.00 2.00 Light District 0.10 0.60 0.60 0.80 0.75 0.75 1.25 1.25 1.25 1.25 Water 15.20 15.75 15.95 15.60 15.25 14.90 14.80 14.80 15.30 15.30 Sewer 8.05 8.70 8.40 8.45 7.55 7.00 7.05 7.05 7.55 7.55 WWTP 9.40 9.40 8.40 8.05 7.90 7.55 7.55 7.55 8.55 8.55 Storm 5.35 6.00 6.20 6.40 6.45 6.20 6.20 6.20 6.20 6.20 Solid Waste 7.35 7.55 7.60 7.35 7.25 7.35 7.40 7.40 7.40 7.40 Total Public Works 63.80 65.70 65.10 65.05 63.25 61.75 61.75 61.75 63.75 64.75 Parks and Recreation Parks and Recreation 11.40 11.10 9.20 8.90 8.90 9.45 9.80 9.80 9.80 10.60 Forestry 2.55 2.80 2.80 3.00 3.00 3.20 2.85 1.80 L80 2.00 Total Parks and Recreation 13.95 13.90 12.00 11.90 1 L90 12.65 12.65 11.60 1 L60 12.60 Community Development UDAG/Comm. Dev. 3.50 2.00 2.00 2.00 2.00 2.00 2.00 L75 L75 2.00 Airport Airport 0.75 1.00 1.00 0.50 0.50 0.50 0.50 0.00 0.00 0.00 Total all funds 20L20 203.80 189.85 182.10 1W80 182.15 181.15 180.90 185.05 192.40 Source: City Manager's Recommended Budget Unaudited statistical section 150 CITY OF KALISPELL, MONTANA OPERATING INDICATORS BY FUNCTION Past Ten Fiscal Years FY 08 FY 09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 General Government Resolutions passed 75 89 60 71 66 59 51 41 44 57 Ordinances passed 25 13 21 25 12 12 12 14 17 15 Payroll claims processed 6792 6537 6170 6038 5985 6035 6063 5956 6169 6473 Accounts payable claims processed 7351 6624 6490 6178 6248 6461 6425 6704 6504 6716 Receipts processed 52116 22983 10440 10693 10749 10930 10984 10346 11775 13073 Conditional use permits granted 5 3 7 5 7 5 4 4 6 5 Public Safety Calls for law enforcement service 26506 25976 25498 26550 27600 28650 29706 31419 34626 33186 Citations 8314 6713 6500 6300 6100 5877 5261 5233 5037 4680 Arrests 1849 1853 1865 1800 1700 1643 1316 1549 1734 1405 Calls for fire service 742 725 652 538 627 708 831 697 798 882 Calls for rescue service 2603 2571 2504 2037 2071 2197 2281 2560 2501 2673 Building permits issued: Residential 271 208 227 188 175 258 270 195 195 222 Commercial 273 211 228 196 178 254 262 163 137 137 Public Works Streets and alleys maintained (Miles) 133 139 139 139 139 139 139 140 140 144 Sidewalk replaced (linear feet) 1411 1060 1159 776 1704 1476 1510 1723 1589 794 Alleys paved 11 11 13 12 10 14 7 5 6 6 Parks Park users (reservations) 146801 139727 129602 143190 157288 132291 144937 123633 103438 102533 Acres of parks 429.74 429.74 429.74 429.49 429.49 429.49 429.49 429.49 429.49 429.49 Recreation participants (rec, sports, youth, swim) 30539 48755 31931 27525 32109 36415 43490 41830 35697 35370 Miles of trails 4.00 4.00 4.00 4.70 6.35 6.85 7.98 8.10 8.10 8.85 Community Development TIF Districts 4 4 4 4 4 4 4 4 4 4 New loans 1 1 0 0 3 3 3 1 0 1 Loans being serviced 15 16 16 13 16 19 21 22 19 20 Airport Monthly tie down fees (average) 18 16 13 12 9 7 3 0 0 0 Monthly commercial fees (average) 6 4 5 4 5 6 7 7 6 6 Water Average daily consumption (millions of gallons) 3.22 2.99 2.87 2.81 2.85 2.79 2.96 3.13 3.85 3.25 Number of customers 7110 7258 7362 7468 7530 7625 7641 7675 7785 7907 Sewer Average daily wastewater treated (millions of gallo 2.8 2.7 2.7 3.1 2.7 2.6 2.7 2.7 2.5 2.7 Solid Waste Refuse collected (tons per day) 21.1 20.0 20.7 21.1 21.3 23.0 24.1 25.0 26.0 26.9 Source: City of Kalispell Unaudited statistical section 151 CITY OF KALISPELL, MONTANA Capital Asset Statistics by Function/Program Past Ten Fiscal Years FY 07 FY 08 FY 09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 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) 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 Patrol Units (Motorcycles) 2.00 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 Water Mains (Miles) 104.00 116.00 125.00 125.50 126.00 126.00 126.00 128.00 128.00 129.50 Wastewater Sanitary Mains (Miles) 108.00 119.00 130.00 130.50 130.50 130.50 130.50 131.00 131.00 131.00 Storm Mains (Miles) 40.00 47.00 52.00 52.00 52.00 52.00 53.00 53.00 53.50 53.50 Lift Stations 34.00 38.00 39.00 40.00 40.00 40.00 40.00 41.00 41.00 41.00 Solid Waste Collection Vehicles 8.00 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 Source: City of Kalispell Unaudited statistical section 152 INDEPENDENT AUDITOR'S REPORTS WIPFL1 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS City Council Members City of Kalispell We have audited, in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Go vernment Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Kalispell, Montana (the City) as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated December 22, 2017. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 153 Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Wpfli LLP Helena, Montana December 22, 2017 154