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HomeMy WebLinkAboutFY16 Comprehensive Annual Financial Report, City of Bozeman CITY OF BOZEMAN, MONTANA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Prepared by the City of Bozeman Finance Department CITY OF BOZEMAN, MONTANA COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2016 TABLE OF CONTENTS I. INTRODUCTORY SECTION Letter of Transmittal ..................................................................................................................................................................................... 1-12 Government Financial Officers Association Certificate of Achievement ....................................................................................................... 13 Organizational Chart ....................................................................................................................................................................................... 14 City Elected Officials and Officers ............................................................................................................................................................ 15-16 II. FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT ................................................................................................................................................. 17-19 A. MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................................................................................................. 20-36 B. BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position .................................................................................................................................................................... 37-38 Statement of Activities .............................................................................................................................................................................. 39 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet – Governmental Funds ............................................................................................................................................ 40-41 Reconciliation of the Balance Sheet to the Statement of Net Position – Governmental Funds .......................................................... 42 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ........................................................ 43 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to The Statement of Activities – Governmental Funds ........................................................................................................................... 44 Proprietary Fund Financial Statements Statement of Net Position – Proprietary Funds .............................................................................................................................. 45-46 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds ....................................................................... 47 Statement of Cash Flows – Proprietary Funds ............................................................................................................................... 48-49 Fiduciary Fund Financial Statements Statement of Fiduciary Net Position – Fiduciary Funds ..................................................................................................................... 50 Notes to Financial Statements ............................................................................................................................................................ 51-121 CITY OF BOZEMAN, MONTANA COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2016 TABLE OF CONTENTS (CONTINUED) C. REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT DISCUSSION AND ANALYSIS Schedule of Funding Progress – Other Post-Employment Healthcare Benefits ........................................................................................... 122 Schedule of Proportionate Share of Net Pension Liability and Schedule of Contributions ................................................................... 123-125 Notes to Required Supplementary Information - Pension Plan Changes ............................................................................................... 126-128 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget to Actual – General Fund ................................................. 129 Schedule of Revenues, Expenditures, and Changes in fund Balances – Budget to Actual – Other Major Funds Street Impact Fees Special Revenue ........................................................................................................................................................ 130 Street Maintenance Special Revenue ...................................................................................................................................................... 131 Building Inspection Special Revenue ...................................................................................................................................................... 132 Notes to Required Supplementary Information- Budgetary Information ................................................................................................ 133 D. SUPPLEMENTAL INFORMATION Combining and Individual Fund Statements and Schedules – Nonmajor Funds Combining Balance Sheet – Nonmajor Governmental Funds ......................................................................................................... 134-140 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance – Nonmajor Governmental Funds .................. 141-147 Budget-to-Actual Schedules – Other Major Funds Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget to Actual - Other Major Funds SID Sinking Fund .............................................................................................................................................................................. 148 Note to Budget-to-Actual Statements – Other Major Funds ............................................................................................................. 149 Budget-to-Actual Statements- Nonmajor Funds Schedules of Revenues, Expenditures, and Changes in Fund Balances - Budget to Actual – Nonmajor Governmental Funds ................................................................................................................................................... 150-165 Combining Nonmajor Proprietary Funds Combining Statement of Net Position .............................................................................................................................................. 166-167 Combining Statement of Revenues, Expenses, and Changes in Net Position ......................................................................................... 168 Combining Statement of Cash Flows ............................................................................................................................................... 169-170 Internal Service Funds Statements Combining Statement of Net Position ..................................................................................................................................................... 171 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position ............................................................................... 172 Combining Statement of Cash Flows ............................................................................................................................................... 173-174 CITY OF BOZEMAN, MONTANA COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2016 TABLE OF CONTENTS (CONTINUED) D. SUPPLEMENTAL INFORMATION (CONTINUED) Agency Funds Combining Statements of Fiduciary Net Position ................................................................................................................................... 175 Combining Statement of Changes in Assets and Liabilities ................................................................................................................... 176 III. STATISTICAL SECTION Financial Trends Section Net Position by Component ..................................................................................................................................................................... 177 Changes in Net Position ................................................................................................................................................................... 178-179 Fund Balances – Governmental Funds .................................................................................................................................................... 180 Changes in Fund Balances – Governmental Funds ................................................................................................................................. 181 Revenue Capacity Section Assessed value of Taxable Property ........................................................................................................................................................ 182 City Taxable Market and Taxable Values ............................................................................................................................................... 183 Tax Increment District Taxable Valuation Detail ................................................................................................................................... 184 Downtown Bozeman Improvement District & Comparison to City Taxable Value ............................................................................... 185 Property Tax Levies in the Downtown Bozeman Improvement District ................................................................................................ 186 Direct and Overlapping Property Tax Rates ........................................................................................................................................... 187 Principal Property Tax Payers ................................................................................................................................................................. 188 Principal Property Tax Payers in Downtown Bozeman Improvement District ...................................................................................... 189 Property Tax Levies and Collections ...................................................................................................................................................... 190 Water Sold by Type of Customer ............................................................................................................................................................ 191 Water and Sewer Rates ............................................................................................................................................................................ 192 CITY OF BOZEMAN, MONTANA COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2016 TABLE OF CONTENTS (CONTINUED) Debt Capacity Section Ratios of Outstanding Debt by Type ....................................................................................................................................................... 193 Ratios of General Bonded Debt Outstanding .......................................................................................................................................... 194 Direct and Overlapping Governmental Activities Debt .......................................................................................................................... 195 Legal Debt Margin Information .............................................................................................................................................................. 196 Pledged Revenue Coverage ..................................................................................................................................................................... 197 Debt Service Requirements and Coverage for Downtown Tax Increment District ................................................................................ 198 Summary of Outstanding SIDs ................................................................................................................................................................ 199 Revolving Fund Balance and Bond Secured Thereby ............................................................................................................................. 200 Special Improvement District Assessment Billing and Collections ........................................................................................................ 201 Demographics and Economic Section Demographic and Economic Statistics .................................................................................................................................................... 202 Principal Employers for Gallatin County ................................................................................................................................................ 203 Operating Information Full-time Equivalent City Government Employees by Function/Program ............................................................................................. 204 Operating Indicators by Function/Program ............................................................................................................................................. 205 Capital Asset Statistics by Function/Program..........................................................................................................................................206 IV. 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 ......................................... 207-208 PART I INTRODUCTORY SECTION 1 CITY OF BOZEMAN, MONTANA December 22, 2016 To the Citizens of the City of Bozeman, Montana The Comprehensive Annual Financial Report of the CITY OF BOZEMAN, MONTANA for the fiscal year ended JUNE 30, 2016, is hereby submitted. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner designed to present fairly the financial position and results of operations of the various funds of the City. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. Management’s Discussion and Analysis (MD&A) is a narrative introduction, overview and analysis written to accompany the basic financial statements and should be read in conjunction with the transmittal letter. 2 CITY OF BOZEMAN, MONTANA CITY OF BOZEMAN PROFILE The City of Bozeman was incorporated in April of 1883 with a city council form of government, and later in January 1922 transitioned to its current city manager/city commission form of government. Bozeman encompasses an area over 18 square miles and is located on the eastern slope of the Rocky Mountains. The 2012 census put Bozeman's population at 38,695, which is a total increase of 37.90% from 2000 to 2012 and making it the fourth largest city in the state. Bozeman is at the county seat of Gallatin County and is the home to Montana State University – Bozeman, and the fighting Bobcats. The government provides a full range of services. These services include police and fire protection; sanitation services; water, waste water, & stormwater utilities; the construction and maintenance of streets and infrastructure; recreational activities; cultural events; planning and zoning; and general administrative services. The City, as a primary government, is supported or works closely with certain entities to provide these services to the citizens of the City of Bozeman. The Bozeman Public Library Board of Trustees, Senior Advisory Council, and the Parking Commission are excluded from presentation in these financial statements, since their relationship with the City is strictly advisory in nature at this time. BUDGET DEVELOPMENT PROCESS The City of Bozeman budget serves several purposes. For the citizens of the City of Bozeman, it presents a picture of the city government operations and intentions for the year. For the City Commission, it serves as a policy tool and as an expression of goals and objectives. For City Management, it is used as an operating guide and a control mechanism. 3 CITY OF BOZEMAN, MONTANA The City Manager’s Recommended Budget is created and submitted to the City Commission. Public work sessions are then held by the Commissioners at which time the City Manager, Administrative Services Director, and department staff explain the budget recommendations and underlying justification for the requests. The Commission also reviews departmental requests that could not be funded, as an indication of unmet needs. During (or following) the work sessions, the Commissioners may make adjustments to the proposed budget. Following any adjustments to the City Manager's budget recommendation, a tentative appropriation ordinance is prepared and a public hearing is held. The Commission may again make adjustments to the budget following the public hearing, after which time, the Commission passes the appropriation ordinance in final form. Fiscal Year 2016 marked the fourth year in a row where the final budget was adopted before start of the year. It was completed in late April and presented in early May with an adoption of a final budget before June 30th. This revised budget calendar was developed in Fiscal Year 2013 in an effort to improve understandability of our financial plans and to improve staff and commission efficiency. The overall goal of the City’s financial policies is to establish and maintain effective management of the City’s financial resources. ECONOMIC CONDITION AND OUTLOOK The charts contained on this page were developed from information obtained by using the Economic Profile System (EPS), for the City of Bozeman, made available from Headwaters Economics, an independent, nonprofit research group. The statistics are from multiple federal sources – Bureau of Economic Analysis and Bureau of the Census, U.S. Department of Commerce, and Bureau of Labor Statistics, as well as the U.S. Department 0.0%5.0%10.0%15.0%20.0%25.0%30.0% Bozeman Employment by Industry, 2014 Ag, forestry, fishing and hunting, mining Construction Manufacturing Wholesale trade Retail trade Transportation, warehousing, and utilities Information Finance and insurance, and real estate Prof, scientific, mgmt, admin, & waste mgmt Education, health care, & social assistance Arts, entertainment, recr, accomodations, &… Other services, except public administration Public administration Bozeman Employment by Industry, 2014 4 CITY OF BOZEMAN, MONTANA of Labor. The other source of this information is the Bureau of Business and Economic Research (BBER) a research and public service branch of the University of Montana’s School of Business Administration. The Bureau is regularly involved in a wide variety of activities, including economic analysis and forecasting. Regionally, Bozeman is located in southwestern MT in Gallatin County. This area is “one of the fastest growing economic areas in the northern Rocky Mountains. It has a varied economic base, an educated workforce, thriving technology and manufacturing industries, a major research university, abundant cultural and outdoor recreation opportunities, and a scenic natural landscape at the doorstep of Yellowstone National Park” as cited by Prospera Business Network, 2014 Economic Profile of Gallatin and Park Counties, Montana. Gallatin County continues to pace the state economically and remains the fastest growing urban area of Montana. BBER reports that growth in wages in Gallatin County topped all other MT counties in 2015 at 10.5%. A recovering construction industry, continued expansion of high tech industry, growing finance and business services, as well as strong retail and health care sectors are driving Gallatin County’s wage growth. Associated is the fact that Montana State University is the largest basic industry in Gallatin County, accounting for approximately 28 percent of total basic earnings. The projections for long-term continued growth in enrollment suggest that in addition to the significant contribution to Gallatin County’s economic base in the form of wages and salaries, there are and will be additional positive influences on the local economy that are not reflected in the earnings data. BBER forecasts growth in nonfarm earnings between 4.6% and 5.0% in Gallatin County between 2016 and 2019 as compared to 2% overall Montana. While Bozeman experienced recent job growth of 4.57%, the number of jobs is projected to grow 46% over the next 10 years according to Sperling’s Best Places. Home affordability and labor availability are emerging as challenges of the future. Unemployment remains low in Gallatin County at 3.1% compared to 6.3% nationally. 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% Population % change 2000-2014 Percent Change in Population, 2000-2014 Bozeman US 5 CITY OF BOZEMAN, MONTANA FOR THE YEAR Significant Developments during the year include: Continued Growth in Construction Sector: The City’s Building Inspection division continued to experience strong permit issuance in the past 36 months. For the current fiscal year to date (July- March), the total value of Building Permits for New Construction is 15% less of the same time frame during the previous year, but still 24% higher than the 5-year average value, and three-fold what they were in 2010. Numerous positions were added to the Building Inspection division last year in FY15. The department continues to operate with those same staffing levels. Creation of Arterial & Collector Assessment District: In August 2015, the City Commission created a new assessment district to fund reconstruction and maintenance of the City’s backbone street network – the arterial and collector streets. The District issued its first assessment in October. The intent is to build the assessment of up to $2 Million/year over a three-year period. This is a critical funding portion of our Street Maintenance program and capital improvement plan. 6 CITY OF BOZEMAN, MONTANA Implementation of Impervious Area charges and credits in the Stormwater Utility: This past December marked the last of numerous changes in the structure of our Stormwater Utility rates. Initially the structure was established with a flat rate based on the size of a property’s water meter. Now the rate system includes system base charges, credits for properties that have on-site or related stormwater systems, and charges for the amount of impervious area contained on a lot. This new rate structure is a better match between “cost-causer” and “cost-payer,” in recognition of the city’s long-standing fiscal policies. FOR THE FUTURE Water & Sewer Systems: As a result of the newly adopted Wastewater Collection System master plan document updates, two critical projects for FY16 were included in the Capital Improvement Plan. • South University District Wastewater • Bridger Drive Extension Wastewater Project Both of these projects were necessary to serve existing and growing development around town, and were funded by a combination of Wastewater utility and impact fee funds. Water and Sewer rates were increased in the Water Fund (2.5% in FY16 and 2.5% in FY17), and in the Sewer Fund (3% in FY16 and 3% in FY17). The intent of the rate increases was to help keep utility operations and capital projects moving forward, with the required reserves and cash flow for borrowing, as necessary. Construction of a 5.3 million-gallon water storage reservoir will necessitate borrowing $6.6 Million. Water rates will be pledged to repay this loan. This added water storage is a capacity-expanding project that is necessary for continued development in the city. 7 CITY OF BOZEMAN, MONTANA Joint Law & Justice Center: During the summer of 2016 the City Commission partnered to place this shared item on the November 2016 ballot. On November 8th, 2016, City of Bozeman and Gallatin County residents will be asked to vote on the proposed Law and Justice Center. In an effort to provide the community with information about the proposed project, the City and County have held a number of meetings for the community and various organizations to provide them with information on the project and why this need exists. The Bozeman City Commission and administration have spent considerable time educating the community on the effects of the ballot election. Transportation System Improvements: The City is moving forward with planned increases in Street Maintenance and Arterial & Collector District assessments, which provide dollars for street expansions, reconstruction, and maintenance. Transportation items were cited as the number one concern by citizens responding to last year’s Online City Hall budget priorities question. 8 CITY OF BOZEMAN, MONTANA Unified Development Code Design: The Unified Development ordinance was last adopted on November 24, 2003. The Ordinance adopted a new Unified Development Code, which replaced existing zoning and subdivision regulations that govern the use and development of land. In recent months, the Community Development department has updated planning fees and reorganized its divisions in order to better assist the City of Bozeman residents. Along with these changes, new revisions to the Unified Development Code are needed to better address modern development within our rapidly growing city. Broadband for growing local businesses: The Bozeman Fiber Initiative is moving forward. The nonprofit was created in May of 2016 and will secure the private funding needed for system build-out. A number of the City’s Tax Increment Financing (TIF) Districts adopted work plans that play a role in funding infrastructure within their boundaries. The Commission incorporated those work plans into the Approved Budget for the upcoming fiscal year. Other • Water Pipe Replacement Program – approximately $1M every year for the construction of necessary water system replacement work. • Waste Water Pipe Replacement Program – approximately $1M every year for the construction of necessary sewer system replacement work. • Intersection Control - approximately $750,000 every year for improved traffic flow and safety at various intersections. • Continue implementation of financial plans and asset management systems to properly maintain and replace the City’s infrastructure and facilities. • Vision & Strategic Plan: The project is currently underway and is scheduled to be completed during the upcoming fiscal year. This project will identify the community’s preferred long-range future vision, and create a living, breathing Strategic Plan to help the City support it. 9 CITY OF BOZEMAN, MONTANA FINANCIAL POLICIES The overall goal of the City's financial policies is to establish and maintain effective management of the city's financial resources. Formal policy statements and major objectives provide the foundation for achieving this goal. The City avoids budgetary practices that balance current expenditures at the expense of meeting future years' expenses and seeks to maintain a diversified and stable revenue base that is estimated in a realistic and conservative manner. For one-time revenues, highest priority is given to the funding of capital assets or other non-recurring expenditures. On-going expenditures are limited to levels that can be supported by current revenues. Construction projects and capital purchases of $10,000 or more are included in the Capital Improvement Plan (CIP). Minor capital outlays of less than $10,000 are included in the regular operating budget. Spending of resources happen in the following order (they are categorized according to Generally Accepted Accounting Principles (GAAP) for state and local governments, with the following general definitions): • Restricted – Amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government) through constitutional provisions or by enabling legislation. • Committed – Amounts constrained to specific purposes by the City Commission; to be reported as committed, amounts cannot be used for any other purpose unless the City Commission takes action to remove or change the constraint. • Assigned – Amounts the City intends to use for a specific purpose; intent can be expressed by the Commission or by an official or body to which the Commission delegates the authority. The City Commission delegates this authority to the City Manager. • Unassigned – Amounts that are available for any purpose; these amounts are reported only in the General Fund. Long-term debt is limited to capital improvements that cannot be financed from current revenues and repays borrowed funds within a period that does not exceed the expected useful life of the project. The City does not use long-term debt for financing current operations and adheres to a policy of full public disclosure with regard to the issuance of debt. 10 CITY OF BOZEMAN, MONTANA A minimum level of general fund reserve equal to 2 months of annual revenues, or 16.67%, is maintained. This reserve is committed to be used for: cash flow purposes, accrued employee payroll benefits, which are not shown as a liability, unanticipated equipment acquisition and replacement, and to enable the city to meet unexpected expenditure demands or revenue shortfalls. The City manages and accounts for its financial activity in accordance with Generally Accepted Accounting Principles (GAAP), as set forth by the Governmental Accounting Standards Board (GASB). The city maintains its accounting records for general governmental operations on a modified accrual basis, with revenues recorded when available and measurable, and expenditures recorded when services or goods are received and liabilities incurred. Accounting records for proprietary fund types and similar trust funds are maintained on an accrual basis, with all revenues recorded when earned and expenses recorded at the time liabilities are incurred, without regard to receipt or payment of cash. Internal Controls Internal accounting controls are designed to provide reasonable (but not absolute) assurance of the safeguarding of assets against loss, theft or misuse. They are also designed to aid in the reliability of financial records. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and that the evaluation of costs and benefits requires estimates and judgments by management. In developing and evaluating the City’s accounting system, great consideration is given to the adequacy of internal accounting controls. We believe that the City of Bozeman’s internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. 11 CITY OF BOZEMAN, MONTANA OTHER INFORMATION Independent Audit The State of Montana requires a biannual audit of the books of accounts, financial records, and transactions of all administrative departments of the City by independent certified accountants selected by the City Commission. It is the belief of the City Commission and Executive staff that an annual audit assures a higher level of financial management and fiscal responsibility. This policy, along with the legal requirements, has been complied with and the auditors' opinion of Anderson ZurMuehlen & Co. P.C., has been included in this report. Awards The Government Finance Officers' Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Bozeman for its comprehensive annual financial report for the fiscal year ended June 30, 2015. This was the 32nd consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized comprehensive annual financial report. This report satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirement, and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgements The preparation of the Comprehensive Annual Financial Report on a timely basis was made possible by the dedicated service of the entire staff of the Finance Department, with special appreciation extended to Assistant Controller Lisa Duetsch. Each member of the department has our sincere appreciation for the contributions made in the preparation of this report. 13 CITY OF BOZEMAN, MONTANA GOVERNMENT FINANCE OFFICERS ASSOCIATION CERTIFICATE 14 CITY OF BOZEMAN, MONTANA ORGANIZATIONAL CHART Fiscal Year 2016 CITY CLERK Robin Crough CITY COMMISSION PARKING COMMISSION MUNICIPAL JUDGES Karl Seel & Colleen Herrington LIBRARY BOARD OF TRUSTEES LIBRARY DIRECTOR Susan Gregory CITY MANAGER Chris Kukulski ECONOMIC DEVELOPMENT Brit Fontenot PARKING MANAGER ASSISTANT CITY MANAGER Chuck Winn FACILITIES Mike Gray FIRE DEPARTMENT Josh Waldo PUBLIC SERVICE Craig Woolard PARKS & RECREATION Mitch Overton PLANNING & COMMUNITY DEVELOPMENT Wendy Thomas LEGAL Greg Sullivan ADMINISTRATIV E SERVICES Anna Rosenberry POLICE DEPARTMENT Steve Crawford Appointment & Budgetary Control Appointment & Budgetary Control CITIZENS OF BOZEMAN 15 CITY OF BOZEMAN, MONTANA CITY ELECTED OFFICIALS AND OFFICERS Fiscal Year 2016 ELECTED OFFICIALS Legislative Jeffrey Krauss Mayor Carson Taylor Deputy Mayor Cynthia Andrus Commissioner Christopher Mehl Commissioner I-Ho Pomeroy Commissioner Judicial Karl Seel Colleen Herrington Municipal Judge Municipal Judge OFFICERS Executive Chris Kukulski Chuck Winn Robin Crough City Manager Assistant City Manager City Clerk Department of Law Gregory Sullivan City Attorney Timothy A. Cooper Assistant City Attorney Kyla Murray Anna Saverud Karen Stambaugh Bekki Mclean Ed Hirsch Assistant City Attorney Assistant City Attorney Assistant City Attorney Assistant City Attorney Assistant City Attorney Department of Administrative Services Anna Rosenberry, CPA Director of Administrative Services Brian LaMeres, CPA Controller Laurae Clark Treasurer Scott McMahan Information Technology Manager Bethany Jorgenson Human Resources Manager 16 CITY OF BOZEMAN, MONTANA CITY ELECTED OFFICIALS AND OFFICERS (CONTINUED) Fiscal Year 2016 Department of Economic Development Brit Fontenot Department of Public Safety Director of Economic Development Steve Crawford Chief of Police Richard McLane Deputy Chief of Police Josh Waldo Fire Chief Greg Megaard Deputy Fire Chief of Operations Department of Public Service Craig Woolard Director of Public Service Rick Hixson City Engineer John Alston Superintendent of Water and Waste Water Operations John Van Delinder Superintendent of Street Operations Kevin Handelin Superintendent of Sanitation Operations Eric Campbell Superintendent of Water Treatment Plant Herb Bartle Superintendent of Water Reclamation Facility Mike Gray Superintendent of Facilities Department of Public Welfare Mitch Overton Thomas White Jamie Saitta Elizabeth Hill Director of Parks & Recreation Superintendent of Parks & Cemetery Recreation Program Manager Aquatics Manager Susan Gregory Director of Bozeman Public Library Department of Planning and Community Development Wendy Thomas Chris Saunders Brian Krueger Director of Planning and Community Development Community Development Manager Development Review Manager PART II FINANCIAL SECTION 17 10 1 9 E M A I N S T • SU I T E 2 0 1 • BO Z E M A N , M O N T A N A 5 9 71 5 TE L : 40 6 . 55 6 .61 6 0 • FA X : 40 6 . 58 6 .87 1 9 • WE B : ww w . a z w o r l d . c o m ANDERSON ZURMUEHLEN & CO., P.C. • CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS MEMBER: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITOR’S REPORT Honorable Mayor, City Commissioners, and City Manager of the City of Bozeman, Montana Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Bozeman, Montana (the City), as of and for the year ended June 30, 2016 and 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 of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from 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. ANDERSON ZURMUEHLEN & CO., P.C CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS 18 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, each major fund, and the aggregate remaining fund information of City of Bozeman, Montana, as of June 30, 2016 and the respective changes in financial position, and, where applicable, cash flows, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information – General Fund and Special Revenue Major Funds, Schedule of Funding Progress - Other Postemployment Benefits (OPEB), and Schedule of Proportionate Share of Net Pension Liability and Schedule of Contributions be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise City of Bozeman’s basic financial statements. The introductory section, supplemental information, and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The other supplemental information, as listed in the table of contents, are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic 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 basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the other supplemental information, as listed in the table of contents, are fairly stated in all material respects in relation to the basic financial statements as a whole. ANDERSON ZURMUEHLEN & CO., P.C CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS 19 The introductory section and statistical section 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 29, 2016, 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 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. Bozeman, Montana December 29, 2016 A. MANAGEMENT’S DISCUSSION AND ANALYSIS 20 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS June 30, 2016 Our discussion and analysis of the City of Bozeman’s financial performance provides an overview of the City’s financial activities for the fiscal year ended June 30, 2016. Please read it in conjunction with the transmittal letter on page 1 and the City’s financial statements, which begin on page 37. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The Statement of Net Position and the Statement of Activities (on pages 37 – 39) provide information about the activities of the City as a whole and present a longer-term view of the City’s finances. Fund financial statements start on page 40. For governmental activities, these statements tell how these services were financed in the short-term as well as what remains for future spending. Fund financial statements also report the City’s operations in more detail than the government-wide statements by providing information about the City’s most significant funds. The remaining statements provide financial information about activities for which the City acts solely as a trustee or agent for the benefit of those outside of the government. Reporting the City as a Whole The Statement of Net Position and the Statement of Activities Our analysis of the City as a whole begins on page 22. One of the most important questions asked about the City’s finances is, “Is the City as a whole better off or worse off as a result of the year’s activities?” The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City’s net position and changes in net position. You can think of the City’s net position, the difference between assets, what the citizens own, and liabilities, what the citizens owe, as one way to measure the City’s financial health, or financial position. Over time, increases or decreases in the City’s net position are one indicator of whether its financial health is improving or deteriorating. You will need to consider other nonfinancial factors, however, such as changes in the City’s property tax base, income tax base, and the condition of the City’s capital assets (roads, buildings, water, and sewer lines) to assess the overall health of the City. In the Statement of Net Position and the Statement of Activities, we divide the City into two kinds of activities: • Governmental activities – Most of the City’s basic services are reported here, including police, fire, public works, parks, and general administration. Property taxes, charges for services, state shared revenues, court fines, and recreation fees finance most of these activities. • Business-type activities – The City charges a fee to customers to help it cover all or most of the cost of certain services it provides. The City’s water, waste water, stormwater, solid waste, and parking systems are reported here. 21 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 Reporting the City’s Most Significant Funds Fund Financial Statements Our analysis of the City’s funds begins on page 28. The fund financial statements begin on page 40 and provide detailed information about the most significant funds, not the City as a whole. Some funds are required to be established by State law and by bond covenants. However, the City Commission establishes many other funds to help it control and manage money for particular purposes (like Street Maintenance District Funds) or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money (like grants received from the Office of Violence Against Women). The City’s two kinds of funds, governmental and proprietary, use different accounting approaches. Governmental funds--Most of the City’s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City’s general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in reconciliations on pages 42 and 44 of the fund financial statements. Proprietary funds--When the City charges customers for the services it provides, whether to outside customers or to other units of the City, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities. In fact, the City’s enterprise funds (a component of the proprietary funds) are the same as the business-type activities we report in the government-wide statements but provide more detail and additional information, such as cash flows, for proprietary funds. We use internal service funds (the other component of proprietary funds) to report activities that provide supplies and services for the City’s other programs and activities, such as the Vehicle Maintenance Fund and Health Insurance Fund. Internal service fund activity is reported as governmental activity in the government-wide statements since this activity, the financing of goods and services for other funds of the government, is more governmental than business-type in nature. 22 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 The City as Trustee Reporting the City’s Fiduciary Responsibilities The City is the trustee, or fiduciary, for other funds, including the Municipal Court Fund, the Montana Arts Council Fund (Montana Ballet, Bozeman Symphony Orchestra, and Big Sky Association for the Arts), and the CMC Bozeman Asbestos Site Remediation Fund. It is also responsible for other assets that, because of a trust arrangement, can be used only for the trust beneficiaries. The guidelines for the administration of these funds are contained in applicable financial agreements and/or City ordinances. These documents contain the rules governing the receipt, expenditure, and management of the City’s fiduciary funds. All of the City’s fiduciary activities are reported in the Statement of Fiduciary Net Position on page 50 and in the Combining Schedule of Changes in Assets and Liabilities-Agency Funds on page 172. As the statement and schedule reflect, the financial activity during the year for these funds is nominal. We exclude these activities from the City’s other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. THE CITY AS A WHOLE The City’s combined net position increased by $27 million this year as compared to a $1.6 million decrease last year due to a prior period adjustment booked for the first time in that year to implement GASB Statement 68 “Accounting and Financial Reporting for Pensions.” The primary reason for this year’s $27 million increase in the City’s net position this year is simply that the increase in City revenues significantly exceeded the increase in City expenses. Increases in Charges for Services and Restricted Capital Grants & Contributions (mainly road infrastructure provided by private developers) were the primary drivers of the increase in revenues. The specific contributing factors are outlined in the following discussion. Our analysis focuses on the net position (Table 1) and changes in net position (Table 2) of the City’s governmental and business-type activities. 23 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 The net position of the City’s governmental activities increased by 10.1% ($143.2 million this year compared to $130.1 million last year). Unrestricted net position for governmental activities, the part of net position that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation or other legal requirements increased by $1.2 million, or 142%, from negative ($5.1) million to negative ($3.9) million. The reason for this unrestricted net position being negative is the aforementioned implementation of GASB 68, which required the City to record its share of employee retirement for the first time. The net position of the City’s business-type activities increased by $14 million, or 6.3%, from $223 million to $237 million due primarily to an increase in charges for services and an increase in Restricted Capital Grants & Contribution (mainly water and wastewater infra- structure provided by private developers). Accordingly, unrestricted net position also increased by $4 million, or 60.6%, from $6.6 million to $10.6 million. This net position cannot be used to make up for deficits reported by governmental activities in the event any such deficits were reported. The City generally can only use the net position of business-type activities to finance the continuing operations of the water, wastewater, solid waste, stormwater, and parking operations. 2016 2015 2016 2015 2016 2015 Current and Other Assets 63.7$ 61.1$ 29.8$ 25.0$ 93.6$ 86.1$ Capital Assets 126.1 116.5 257.2 249.1 383.4 365.6 Total Assets 189.9$ 177.5$ 287.1$ 274.1$ 476.9$ 451.7$ Deferred Outlflows of Resources 2.2 1.7 0.6 0.4 2.7 2.1 Long-term Debt Outstanding (41.8) (39.4) (47.7) (46.9) (89.5) (86.3) Other Liabilities (5.8) (6.6) (2.0) (3.5) (7.7) (10.2) Total Liabilities (47.6)$ (46.0)$ (49.7)$ (50.4)$ (97.2)$ (96.5)$ Deferred Inflows of Resources (1.2) (3.2) (0.4) (1.1) (1.7) (4.3) Net Position: Invested in Capital Assets, net of related debt 104.1$ 93.4$ 221.4$ 211.4$ 325.5$ 304.8 Restricted for parking capital projects - - 0.3 0.3 0.3 0.3 Restricted for general government 1.4 0.5 - 1.4 0.5 Restricted for Public Safety 3.4 2.4 - - 3.4 2.4 Restricted for Public Service 16.1 15.3 - - 16.1 15.3 Restricted for Public Welfare 5.5 6.4 - - 5.5 6.4 Restricted for capital projects 9.2 10.0 1.6 1.6 10.8 11.6 Restricted for debt service 7.2 7.2 3.1 3.1 10.3 10.3 Unrestricted (3.7) (5.1) 10.6 6.6 6.9 1.5 Total Net Position 143.2$ 130.0$ 237.0$ 223.0$ 380.2$ 353.0$ Activities Activities Primary Government Tabl e 1 Net Position (in Millions) Governmental Business-type Total 24 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 The City’s total revenues (excluding special items) increased by 18.2% ($14.2 million) from $78.3 million to $92.5 million, driven primarily by a $6.8 million increase in Restricted Capital Grants & Contributions (again, mainly infrastructure provided by developers) and a $5.6 million increase in Charges for Services, which will be discussed in more detail. The total cost of all programs and services increased by $7.1 million, or 12.1%, from $58.6 million last year to $65.7 million this year. This $7.1 million increase was spread relatively evenly across the various City programs, with Public Safety (Police, Fire, Building Inspection), Water and Wastewater each reporting increases of just under $1.5 million. There was also a significant increase in expenses reported for Nonmajor Business-Type activities due to a $1.1 million Solid Waste expense recorded to update the Story Mill Landfill post- closure liability. Our analysis on the following pages separately considers the operations of governmental and business-type activities. 2016 2015 2016 2015 2016 2015 Revenues Program revenues: Charges for Services 16.4$ 15.0$ 25.8$ 22.8$ 42.2$ 37.9$ Restricted Operating Grants & Contributions 2.5 2.2 0.1 0.1 2.6 2.3 Restricted Capital Grants & Contributions 5.0 3.0 11.3 6.4 16.3 9.3 General Revenues - Property Taxes 21.2 20.2 - - 21.2 20.2 Unrestricted Operating Grants & Contributions 8.0 7.8 - - 8.0 7.8 Unrestricted Capital Grants & Contributions - - - - - - Other General Revenues 1.1 0.8 - - 1.1 0.8 Total Revenues 54.2 48.9 37.2 29.3 91.4 78.3 Program Expenses General Government 8.1 7.4 - - 8.1 7.4 Public Safety 18.4 17.0 - - 18.4 17.0 Public Service 6.9 6.5 - - 6.9 6.5 Public Welfare 8.0 7.6 - - 8.0 7.6 Interest and Fiscal Fees 0.9 0.8 - - 0.9 0.8 Water - - 9.3 8.0 9.3 8.0 Waste Water - - 8.2 6.9 8.2 6.9 Non-major activities - - 0.5 4.4 0.5 4.4 Total Expenses 42.2 39.3 17.9 19.3 60.1 58.6 Excess (deficiency) before special items and transfers 12.0 9.6 19.3 10.0 31.3 19.6 Extraordinary items - - - - - - Sale of Capital Assets - - - - - - Transfers of capital assets - - - - - Transfers 1.2 (0.4) (1.2) 0.4 - (0.0) Increase (decrease) in net position 13.2$ 9.2$ 18.1$ 10.4$ 31.3$ 19.6$ Net position - beginning, as originally reported 130.0 137.0 223.0 217.6 353.0 354.6 Prior period adjustment -16.2 -4.9 0.0 -21.2 Net position - beginning, as restated 130.0 120.8 223.0 212.6 353.0 333.5 Net position - ending 143.2$ 130.0$ 241.1$ 223.0$ 384.3$ 353.2$ Activities Activities Primary Government Tabl e 2 Changes in Net Position (in Millions) Governmental Business-type Total 25 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 Governmental Activities Revenues for the year from governmental activities increased by 10.6%, or $5.2 million, from $49 million to $54.2 million, while total expenses increased by 7.6%, or $3 million, from $39.3 million to $42.3 million. Property Tax revenues increased by $1 million, or 4.5%, from $20.2 million to $21.2 million. Charges for services, which include Fire and Street Impact Fees, realized a net increase of $1.4 million, or 9.3%, from $15 million to $16.4 million. Restricted Capital Grants and Contributions (developer-provided infrastructure reported under Program Revenues) increased by $2 million, or 67%, from $3.0 million to $5.0 million. These and the other contributing factors listed below are primarily responsible for this year’s change in net position: Charges for services increased by $1.4 million, or 9.3%, from $15 million last year to $16.4 million this year. Street Impact Fees did increase by over $117,500, but the largest single factor was over $565,000 in revenue from the newly-created Arterial and Collector Streets Special District. Standard Street Assessments also increased significantly by $446,000, or 12.9%, from $3.46 million to $3.9 million due to an increase in the customer base and due to the continued increase in Street Maintenance Assessment rates in response to the City Commission’s policy direction to address deferred street infrastructure maintenance and to build a reserve for curb and sidewalk replacement. Fire impact fee revenues actually decreased by 25.3%, or $85,728, from $424,190 to $338,500. Property Tax collections increased by $1 million, or 4.95%, from $20.2 million last year to $21.2 million this year due mainly to an increase in the number of property tax mills levied for the general functions of the City and to service the debt on the issuance of the remaining Trail & Open Space (TOP) Bonds. This 12.4% increase in the amount of mills levied (188.76 to 210.16) also was needed to offset the decrease in the mill values, which dropped 1.5% from $87,894 to $86,564 after the latest property reappraisal conducted by the Montana Department of Revenue as it changed its appraisal cycle from every 6 years to every 2 years. Property Tax revenues actually decreased in some of the Tax Increment Financing (TIF) Districts, with revenues in the North 7th/Midtown decreasing by 12.6%, or $86,700, from $772,700 to $686,000 and revenues in the Downtown TID decreasing by 5.4%, or $53,570, from $1,039,000 to $985,500 due to the property reappraisal and resulting shift in tax burden from commercial to residential property owners. While property tax revenues did increase City-wide, it is important to note that this year’s tax levy was still 4.2 mills, or approximately $363,000, below the statutory maximum allowable tax rate. Restricted Capital Grants and Contributions (reported under Program Revenues) increased by $2 million, or 67%, from $3.0 million to $5.0 million, mainly due to transportation/road infrastructure provided by developers, which increased by 70%, or $1.7 million, from $2.5 million to $4.2 million. City park assets contributed by developers were also a factor for the year, including $513,000 in developer-provided parkland and $10,000 in park improvements. Private parties also provided a little over $38,000 in donated capital for public safety, including an ambulance for the Fire Department. 26 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 Program Expenses increased by 7.6%, or $3 million, from $39.3 million to $42.3 million. Significant contributors included personnel costs for Public Safety due to increased staffing, with Police increasing 6.8%, or $470,500, from $6.97 million to $7.43 million and Building Inspection increasing 23.2%, or $247,400, from $1.07 million to $1.3 million. However, personnel costs in the Fire Department only increased 1.6%, or $80,500, from $5.08 million to $5.16 million. Non-personnel operating costs in Public Safety also increased significantly by 25.4%, or $635,000, from $2.5 million to $3.1 million, with nearly $631,000 being spent on the design of a new joint City-Gallatin County Law & Justice Center. The cost of all governmental activities this year was $42.3 million compared to $39.3 million last year. However, as shown in the Statement of Activities on page 39 under Net (Expense) Revenue for Total governmental activities, the amount that our taxpayers ultimately financed for these activities through City taxes and other general revenues was only $18,285,579 because some of the cost was paid by those who directly benefited from the programs ($16,402,006 in Charges for Services) or by other governments and organizations that subsidized certain programs with operating and capital grants and contributions ($2,494,244 plus $5,018,559 = $7,512,803). Table 3 presents the cost of each of the City’s six largest programs—Police, Fire, Public Service, Library, Parks, and Recreation—as well as each program’s net cost (total cost less revenues generated by the activities). The net cost shows the financial burden that was placed on the City’s taxpayers by each of these functions. Business-type Activities Total revenues of the City’s business-type activities (see Table 2) increased substantially by $9.0 million, or 30.8% ($38.3 million this year compared to $29.3 million last year) while expenses increased $4.1 million, or 21.2% ($23.4 million compared to $19.3 million last year). The increase in revenues was driven by a $4.2 million overall increase in charges for services and a $4.8 million increase in Restricted Capital Grants & Contributions, which consisted primarily of privately-constructed water, wastewater, and stormwater infrastructure that was contributed to the City by developers. The increase in expenses this year was due to a $1.3 increase in spending in both the Water and Wastewater operations and, due to the aforementioned expense, reported in Solid Waste (reported under Nonmajor activities) to account for the increase in the Landfill post-closure liability. Specific factors driving these and other regular operating results include: 2016 2015 2016 2015 Police 9.4$ 8.2$ 7.8$ 6.7$ Fire 6.0 6.0 5.0 5.0 Public Service 8.7 6.5 (1.9) (3.3) Library 2.3 2.1 1.5 1.4 Parks 1.7 1.6 1.6 1.6 Recreation 1.4 1.3 0.9 0.9 All Others 12.9 13.6 3.4 6.8 Totals 42.2$ 39.3$ 18.3$ 19.1$ Tabl e 3 Governmental Activities (in Millions) Total Cost Net Costof Services of Services 27 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 Water – The City’s water system operating revenue (charges for services) have steadily increased over the past decade as a result of both an increase in the customer base in past years and as a result of regular rate changes, although the Commission voted to hold water rates steady two years ago followed by a 2.5% rate increase this year. Beginning last year, the Public Works Department budget was charged to the Water Fund instead of the General Fund, and this department’s administrative overhead is charged out to the departments that use their services, which resulted in $887,000 in revenue being recorded as part of the $1,074,008 reported under “Other income”. The City’s customer‐base growth grew by 337 customers, 2.9%, from 11,646 average active customer accounts to 11,983. This level of growth rate is trending more closely to the 5% growth experienced between 2005‐2008. In updating the rate study for slower customer growth in recent years, decreased Water Impact Fee collections and new estimates of Water Plant costs, the City implemented water rate increases of 4.5% each year in fiscal years 2011, 2012, and 2013 in order to fund plant construction and other scheduled operations and maintenance costs. As a result, the City was able to revitalize its water distribution pipe replacement program and replace or rehabilitate aging infrastructure every year instead of every two years. After no rate increase last year, in light of the other tax and rate increases imposed upon City residents, the City Commission voted this year to increase rates by 2.5%. Because of the increase in the water rate and in the utility customer base, combined with a $106,300 increase in cash-in-lieu-of-water-rights, operating revenues increased notably by $665,957, or 8.6% from $7.7 million to $8.4 million. Water impact fee revenues increased significantly by $707,000, or 36.7% due to an increase in new and other impact-fee qualifying construction. The $106,300 increase in cash-in-lieu of water rights revenue was a 31% increase to $446,150 from last year’s $339,851. Contributions of infrastructure by private developers increased $873,000, or 20.3%, from $4,305,327 to $5,178,425 this year due to a continued upturn in construction and development. Operating expenses increased by $1.3 million, or 17.4%, from $7,457,485 last year to $8,758,385 this year mainly due to increased Salaries and benefits costs (up $385,000) and a $768,000 increase in Other expenses, including $332,900 spent on the Water Facility Plan update and $103,800 spent on Groundwater Investigation. Other major accomplishments and projects completed during the year include: $673,300 spent on increased replacement of water distribution system pipes (recorded as a Capital Addition as opposed to an expense), $305,000 in finishing touches to the new Water Plant, $206,300 towards a new $5.3 million gallon concrete water storage reservoir at Sourdough, and continued use of six fixed-base water meter receivers at Kenyon Dr. Water Tank, City Shops, 911 center, Laurel Glen Annex, Solid Waste office, and Nelson Story Tower at MSU, which greatly improves the efficiency of the monthly water meter reading process. 28 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 Wastewater – Revenues in the Wastewater Fund have generally been increasing over the past 10 years and are estimated at $8.4 million for the upcoming year. Five years ago the City borrowed significantly to construct the new Water Reclamation Facility. This debt is being repaid by system users over the next 20 years. Accordingly, the City Commission adopted a two-year rate resolution of a 6% increase for fiscal years 2012 and 2013 and 3% for fiscal years 2014 through next fiscal year 2017. As a result of the rate increase, combined with the same customer growth experienced in the water system of 337 customers, operating revenues for the year increased by $296,575 or 3.9% from $7,631,117 last year to $7,927,692 this year. Wastewater operating expenses increased by $1.3 million, or 20.6%, from $6,308,846 to $7,611,043 driven by mainly by the fact that there was an unusual negative $1.1 million adjustment (based on updated information from legal counsel following the most recent engineering update) to operating expenses last year to adjust the Bozeman Solvent Site liability (which was favorable because it actually decreased the amount of the overall liability) but no such negative adjustment occurred this year, so actual expenses recorded are back to normal. Personnel costs charged to Wastewater actually decreased this year by 2.5%, or ($54,680), from $2.17 million to $2.11 million, while Repair and Maintenance increased by $118,900, or 43.9%, from $271,127 to $390,034 with $47,900 being paid out to Columbine Control Company and $47,480 to Williams Plumbing & Heating throughout the year. Major projects during the year also included $225,700 contributed to the North Wallace Avenue reconstruction project and $138,400 spent on updating the Wastewater Facility Plan. THE CITY’S FUNDS As the City completed the year, its governmental funds (as presented in the balance sheet on pages 40 - 41) reported a combined fund balance of $53,151,127. Included in this year’s total change in fund balance is a positive General Fund balance of $6,521,099, up $459,134, or 7.6%, from $6,061,965. The following five separate categories of fund balance are recognized, based on the extent to which the government is bound to honor constraints on the specific purposes for which amounts can be spent: nonspendable fund balance, restricted fund balance, committed fund balance, assigned fund balance, and unassigned fund balance. The total of the last three categories, which include only resources without a constraint on spending or for which the constraint on spending is imposed by the government itself, is termed unrestricted fund balance. The Government Finance Officers Association’s recommends maintaining an unrestricted general fund balance of no less than two months of regular general fund operating revenues, or $4,561,352 for this year. The City’s ending general fund balance of $6,521,099 exceeds this recommendation by $1,959,747. The minimum reserve and the other assignments are detailed below, leaving an Unassigned General Fund Balance of $979,258. The contributing factors to this year’s ending General Fund balance are explained after the table below, followed by an analysis of each of the City’s other Major Funds. 29 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 The general fund balance of $6,521,099 has been assigned as shown: General fund – The City’s general fund balance increased by $459,134, or 7.6%, from $6,061,965 last year to $6,521,099. The City had budgeted for fund balance to actually end up being lower, at $5.3 million, but actual revenues ended up exceeding budgeted expectations, and not as much spending occurred during the year as expected, as indicated by the TOTAL CIP / CAPITAL CARRY-OVER ITEMS in the preceding table. Other savings were realized through careful and cautious budgetary management practices implemented throughout all City departments. Property tax revenues increased modestly in the General Fund by $391,560, or 2.7%, from $14,512,683 to $14,904,243 mainly due to an increase in the number of general fund property tax mills levied (from 144.77 to 155.78) in order to balance this year’s budget. Factoring into the need to levy more mills was a mill value that actually declined this year, dropping 1.5% from $87,894 to $86,564 after the latest property reappraisal conducted by the Montana Department of Revenue as it changed its appraisal cycle from every 6 years to every 2 years. In the prior year, the City realized a 2.6% increase in the value of the property tax mill value (from $85,637 to $87,894). FY16 ENDING GENERAL FUND BALANCE - TOTAL:6,521,099$ ASSIGNMENTS: 1 CIP / CAPITAL CARRY-OVER BUDGETED IN FY16 BUT NOT TO BE SPENT UNTIL FY17: POLICE DEPT: CIP GF050 POLICE & COURT FACILITY -$ STRATEGIC PLAN 53,472$ WEBSITE UPGRADE/REPLACEMENT 48,052$ RECREATION DEPT: CIP GF056 POOL DESIGN 308,373$ PARKS DEPT: CIP GF207 CITYWORKS HARDWARE -$ FACILITIES MGMT: VARIOUS FACILITIES MANAGEMENT CIP PROJECTS 30,591$ TOTAL CIP / CAPITAL-CARRY OVER ITEMS:440,489$ 2 16.67% MINIMUM RESERVE LEVEL REQUIRED BY CITY CHARTER (2 MONTHS OF REVENUES):4,561,352$ 3 FY17 BUDGET: FY16 YEAR-END FUND BALANCE NEEDED TO BALANCE FY17 BUDGET:540,000$ TOTAL GENERAL FUND ASSIGNMENTS:5,541,840$ UNASSIGNED GENERAL FUND BALANCE - FY16:979,258$ 30 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 Intergovernmental revenues increased by $248,711, or 3.7%, from $6,807,755 last year to $7,056,466. Entitlement Share revenue accounted for $125,852 of this increase. Montana State Entitlement Share began in 2001 as a replacement to the City’s dedicated revenue sources from personal property tax reimbursements and taxes on motor vehicles, gaming, alcohol, and banking, among others. After several stagnant years of minimal or no change, Entitlement Share has increased over each of the past three years, this year increasing $125,852, or 3.1%, from $4 million to $4.13 million. The State of Montana’s share of City employee retirement also showed a marginal increase of $70,929, or 3.2%, from $2,209,341 last year to $2,280,269. This revenue amount is a noncash book-entry only on the City’s general accounting ledger, and is offset by an expenditure in the exact same amount (most of which is reported under Public Safety for the police and fire employees), so it increases revenues and expenditures by the same amount, resulting in no change to ending fund balance. Total general fund expenditures increased by $85,153, only .3%, from $26,815,329 to $26,900,482. Payroll expenditures across all functions (General government, Public safety, Public service, Public welfare) increased by just over $1 million, or 5.5% from $18,918,290 to $19,950,607. Salary expenditures increased as positions continued to be filled pursuant to the public safety mill levy beginning in 2009. As the department moved closer to being fully staffed, police personnel costs (net of State Share of Retirement) increased by $405,038, or 7.3%, from $5,543,476 last year to $5,948,514. Fire Department personnel costs (net of State Share of Retirement) increased by $138,245, or 3.5%, from $3,983,096 last year to $4,121,341. However, this increase in personnel costs was more than offset by the decrease in capital outlay expenditures, which decreased by $1,187,166, or 68.3%, from $1,738,493 to $551,327. Last year’s much higher expenditure level was due to $1,259,545 spent that year on the acquisition and design of the Rouse Avenue property proposed as the location for a City of Bozeman Rouse Justice Center. Notable expenditures in the general fund for the year included $630,944 spent on the design of a new City-Gallatin County shared Law & Justice Center collocated at the current South 16th Avenue location, $174,407 spent to purchase and equip new Police vehicles, and $146,564 in support of the Streamline Bus System (which was an additional $60,000 higher this year on top of one mill) and $53,128 spent on lawn mowers for the Parks Department. The largest general fund expenditures continued to be in Public safety (Police and Fire). Also contributing to the strength and relative stability of the General Fund balance is the utilization of conservative budgetary practices. Conservative, yet realistic, revenue estimates, combined with departments operating within their original budgets, naturally has a favorable effect on the bottom line. Maintaining adequate reserves has several internal and external benefits. Internally, reserves can provide for cash flow needs until property tax revenues are received, reducing or eliminating the need for cash flow borrowing; provide funds to leverage state or federal grants; and provide for the unexpected. Externally, reserves tend to be viewed favorably by investors, rating agencies, and local banks with which we do business, thus benefiting rating and the potential need for lines of credit. 31 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 The City’s General Fund balance was a primary focus of a recent upgrade in the City’s General Obligation Bond rating to Aa2 by Moody’s Investor Services. Previously Moody’s had assigned a debt rating of Aa3 in November of 2013 and a rating of Aa3 “Positive Outlook” in November of 2015 for the two issuances of Trails, Open Space, and Parks general obligation bonds. This affirmed Moody’s rating assigned in May, 2012 of Aa3 to the City’s General Obligation Refunding Bonds, Series 2012, issued in the amount of $3.1 million. At the same time, Moody's also affirmed the Aa3 rating on the City's rated outstanding general obligation debt not being refunded by this issue, which included $.6 million outstanding for the 2003 refinancing of the City’s General Obligation Transportation Bonds and the remaining bonds issued in 2003 for the new Library. In each instance bond analysts looked favorably on the amount and trend of the General Fund balance in determining the City’s bond rating. The recent Moody’s upgrade is discussed further in the Debt section on page 34. As shown on page 125, variances in the General Fund between the original budget of $27,184,041 and the final budgeted total charges to appropriations of $28,018,209 amounted to $834,168. $2.6 million of this was for the Public safety budget (from $11,706,232 to $14,329,732), with $608,000 being for the shared City-County Law & Justice Center. The remaining $2 million increase to the Public safety budget and the $2.06 million decrease to Other both relate to opposite sides of the same budget amendment made for the State of Montana’s share of Police officer and Firefighter retirement. This book-only/noncash expenditure is offset (“reimbursed”) by intergovernmental revenue booked in the same amount. By design, the original $2 million of appropriation authority was initially budgeted under Other to avoid confusion throughout the year, and at year-end the $2 million is shifted to the Public Safety budget to cover the increase in reported expenditures required by this book-entry. Other General Fund budget amendments include $234,350 to Transfers to other funds, of which $231,500 was for a transfer to the Health Insurance Internal Service Fund of the cash returned by the Montana Municipal Interlocal Authority (MMIA) to the City of Bozeman, which the City had provided to MMIA as “seed money” for the statewide insurance pool. Street Impact Fees Special Revenue – Fund balance decreased by $237,792, or 1.8%, from $12,885,310 to $12,647,518 this year due to a significant increase in total expenditures compared to last year. Total expenditures were $925,641 last year compared to $4,452,729 this year, which included $2 million spent on improving Cottonwood Road between Fallon Street and Alpha Drive, $1.45 million spent to install a traffic signal at Durston and Cottonwood, and $469,823 spent on right-of-way land acquisition and design work to improve the intersection at Baxter and Davis Lane. Revenues increased by $259,282, or 6.6%, from $3,937,241 to $4,196,523 due to a continuing trend in increased construction and development. Construction activity for the year which required the payment of impact fees included: $325,536 for a new dorm on the campus of Montana State University, $189,380 for the SpringHill Suites Hotel on Baxter Lane, $184,124 for the Talbach House Condos on Enterprise Boulevard, $183,481 for the Stadium View Apartments near MSU campus, $133,200 for the Stoneridge Apartments on Tschache Lane, and $91,739 for the 5 West Mendhenhall project. 32 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 Street Maintenance Special Revenue – Fund balance decreased by $816,045, or 51.3%, from $1,590,993 last year to $774,948 this year due to expenditures and transfers-out exceeding revenues for the year. Revenues did increase by $435,241, or 12.3%, from $3,533,515 last year to $3,968,756 this year, driven by a 10% increase in the street assessment rate targeted mostly at pavement maintenance. Another significant contributing factor was the continued expansion of the City’s Street Maintenance Assessment program to include major street reconstruction projects; the first being the reconstruction of South 8th Avenue two years ago, followed by Story Street and North Wallace Avenue this year. With the Commission’s focused goal of addressing deferred street and curb maintenance, Street Maintenance Assessment rates were increased five years ago by 18%, with the 18% allocated as follows: Continued increase to Curb Replacement Fund (2%); Debt Service Payments for the Reconstruction of South 8th Avenue (7%); Establishment of a Street Reconstruction Fund (6%); and Increase in Operating Budget (3%). Continuing the City Commission’s goal of addressing deferred street maintenance, this year rates were increased 10% this year for a general revenue increase of approximately $340,000, including adding $200,000/year for pavement maintenance (chip seals, overlay, patching) with the overall goal of adding $1 million over three years for additional construction projects. As stated, the decrease in fund balance was driven primarily by expenditures and transfers-out, which combined together increased this year by $632,493, or 14.9%, from $4,233,573 to $4,866,066. Major expenditures during the year included $372,564 for a new asphalt milling machine, $151,825 in McKinistry energy upgrades, including LED streetlights, and $101,455 paid to provide street construction updates to the public. Major transfers-out to other funds included $1.1 million for the reconstruction of North Wallace Avenue and $113,792 for Story Street reconstruction. Building Inspection Special Revenue – Fueled by continued growth in the construction sector, the City’s Building Inspection division again experienced strong permit issuance over the past year. While never completely stopping, building construction significantly slowed during the recession. For the current fiscal year, the total value of building permits for new construction is 15% less than the same time frame during the previous year, but still 24% higher than the 5-year average value, and three-fold what the value reported in 2010. Indeed, revenues increased substantially this year by $303,584, or 19.7%, from $1,539,622 to $1,843,206. The increase in expenditures was less significant, with a 12.3% increase of $179,394 over last year from $1,460,835 to $1,640,229. Driving this increase were personnel costs, as the numerous positions that were added mid-year in FY15 became full-time positions this year. This additional staff included 2.0 FTE Building Inspectors, 1.0 FTE Permit Technician and a 1.0 FTE Senior Plans Examiner, with all of these positions being funded with building permit revenues. As a result of revenues increasing at a higher level than expenditures, fund balance increased by $202,977, or 13.8%, from $1,473,337 last year to $1,676,314 this year. SID Sinking Debt Service – Fund balance increased by 52.7%, or $252,097, from $478,181 to $730,278 due to increased revenues and a decreased level of expenditures and Transfers out. Revenues from Special Improvement District (SID) assessment collections, along with fund interest income and other income, amounted to $716,195, which was $120,685 or 20.3% higher than last year’s revenues of $595,510. The increase was due to a $119,400 early interest-free payoff by the Northeast Urban Renewal Tax Increment Financing (TIF) District board of the entire amount of the North Wallace Avenue Reconstruction special improvement district (SID) assessments billed to property owners within that TIF District. 33 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 Expenditures, however, decreased by $77,727, or 22.5%, from $345,070 to $267,343 mainly because fewer SID bonds were called and paid this year compared to last. For example, last year $140,000 worth of SID bonds for the West Babcock SID were called and paid while this year that amount was $70,000. These amounts can vary based on how much cash is accumulated within each district by the time the bond payments are due. Last year there had been an accumulation of cash in this district due to early payoffs of the entire SID amount owed, which can happen when a piece of property within the district changes ownership. Transfers out in the SID Sinking Debt Service fund continue to be related to the City’s policy of internally financing smaller street SID’s instead of issuing bonds. The amounts are borrowed from the SID Revolving Fund, reported on page 142, by the SID Sinking Debt Service fund, and then the amount is transferred to the appropriate SID construction fund. Going forward the SID Sinking Debt Service fund collects assessments from the property owners and subsequently repays the SID Revolving Fund instead of repaying external bond holders. This year’s Transfer out of $196,755 was for the North Wallace Avenue Reconstruction SID, which, as stated, saw $119,400 of that debt immediately paid off. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets – As shown in Table 4, at the end of 2016 the City had $383.2 million invested in a broad range of capital assets, including police and fire equipment, buildings, park facilities, roads, and water and sewer lines. This amount represents a net increase (including additions and deductions) of roughly $17.9 million, or 4.9% over last year. Refer to capital assets disclosure Note 7 beginning on page 65 for more information. 2016 2015 2016 2015 2016 2015 Land 17.6$ 16.9$ 4.9$ 4.9$ 22.5$ 21.8$ Water Rights - - 2.1 2.1 2.1 2.1 Buildings 32.6 32.4 113.0 112.4 145.6 144.8 Other Structures and Improvements 1.1 1.1 30.8 30.8 31.9 31.9 Machinery & Equipment 11.7 11.3 8.1 7.6 19.8 18.8 Property under Capital Lease 0.4 0.4 0.5 0.5 0.9 0.9 Vehicle 3.5 3.2 2.0 1.9 5.5 5.1 Infrastructure 158.9 146.9 280.4 268.0 439.3 414.9 Subtotal 225.8 212.1 441.7 428.1 667.6 640.3 Accumulated Depreciation (99.9) (95.8) (184.6) (179.2) (284.5) (275.0) Total Capital Assets 125.9$ 116.3$ 257.1$ 249.0$ 383.2$ 365.3$ Activities Activities Totals Tabl e 4 Capital Assets at Year-end (in Millions) Governmental Business-type 34 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 Major additions and capital projects underway include the following expenditures made during this year: Debt – At year-end, the City had $59.2 million in bonds and notes outstanding versus $61.2 million last year—a decrease of $2 million, or 3.2%, as shown in Table 5. This decrease was due to debt repayment ($3.3 million) exceeding new debt issued ($1.3 million) during the year. Debt repayment included $1.8 million for the Water Reclamation Facility; $798,000 for the new Water Plant; $142,000 for the Stormwater-backed landfill mitigation system loan; $245,000 for the refinanced transportation General Obligation (GO) Bonds; $505,000 for the TOP GO Bonds; $195,000 for the Downtown TIF District Bonds to finance the Parking Facility; and $228,000 in SID debt. New debt included an additional $1.28 million drawdown of the Stormwater-backed landfill mitigation system loan and $47,406 from the MT Board of Investments for the McKinstry LED design/retrofit energy upgrades. General obligation debt still outstanding, which is reported under Governmental Activities, consists of $14.27 million for the TOP Bonds along with $1.3 million in Series 2012 Refunding Bonds issued to refinance both the Series 2003A Transportation Refunding bonds and the Series 2001A and Series 2003B Library Construction Project bonds. Debt reported under Business-Type Activities includes $16.6 million of water revenue bonds and $18.9 million of wastewater revenue bonds issued to finance construction of the new Water Treatment and Wastewater Reclamation Facilities. Cottonwood Road Widening: Fallon Street to Alpha Drive 2,017,492$ Traffic Signal: Durston and Cottonwood Road 1,452,014$ Water Line Replacement and Rehabilitation - annual distribution pipe replacement program 733,406$ Midtown Tax Increment Financing District (N. 7th TIF) Street Lighting 722,906$ Story Street Reconstruction Special Improvement District 593,443$ Front Load Garbage Truck Replacement (2)525,223$ Trail and Open Space Bond: Trail to the M Project 519,788$ Baxter and Davis Lane Intersection: Right-of-Way land acquisition and design work 470,657$ Trail and Open Space Bond: Bozeman Ponds Project 464,093$ North Wallace Avenue Reconstruction Special Improvement District 430,787$ Midtown Tax Increment Financing District (N. 7th TIF) Broadband Conduit 390,053$ Street Asphalt Milling Machine 372,564$ Water Plant Construction - final payments: state of the art membrane filtration system 305,452$ Professional Building Reconfiguration / Remodeling 235,097$ Trail and Open Space Bond: Sports Complex 231,278$ Street Improvements - Gas Tax 224,573$ 35 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 Moody’s Investor Services assigned a debt rating of Aa3 in November of 2013 for the first issuance of TOP general obligation bonds. Moody’s views the City’s financial operations as sound, noting in their report that City officials have delivered operating surpluses in four of the last five audited financial years and that the City has a moderately-sized tax base that did not decline during the recession, in addition to a low-debt burden. This affirmed the rating assigned by Moody’s in May, 2012 of Aa3 to the City’s General Obligation Refunding Bonds, Series 2012, issued in the amount of $3.1 million. Most recently, Moody’s upgraded this rating to Aa2 from Aa3, stating in their Credit Opinion, “The Aa2 rating reflects the city's fairly large, growing tax base anchored by Montana State University (Aa3/Stable), improved wealth measures, a trend of sound financial operations and healthy reserve levels, and a limited debt burden that is expected to remain at similar levels in the near-term”. As expressed in the fiscal year 2017 Approved Budget, City officials expect to end next fiscal year with general fund reserves totaling $4.7 million, or 16.67% of operating revenues. This budget meets the minimum level of 16 2/3% required by City Charter, which in May of 2011 was amended to include adoption of GFOA’s Best Practice for Unreserved General Fund Balance into the City’s Budget Administration Ordinance. Property taxes are the City's primary general revenue source (70.1%), followed by unrestricted grants and contributions (26.4%), and investment earnings (1.7%). Additionally, Moody's expects the City to maintain a moderate debt position given current limited debt burden, above average principal payout, and expected tax base growth. More detailed information about the City’s long-term liabilities is presented in Note 9 to the financial statements. 2016 2015 2016 2015 2016 2015 General obligation bonds (backed by the City)15.6$ 16.3$ -$ -$ 15.6$ 16.3$ Tax Increment Financing District (TIFD) bonds 4.6 4.8 - - 4.6 4.8 Special Improvement District Debt 0.7 0.9 - - 0.7 0.9 Notes Payable 0.9 1.0 - - 0.9 1.0 Lease Payable 0.2 0.3 - - 0.2 0.3 Water Revenue Bonds (backed by specific fee revenues)- - 16.6 17.4 16.6 17.4 Wastewater Revenue Bonds (backed by specific fee revenues)- - 18.9 20.0 18.9 20.0 Stormwater Revenue Bonds (backed by specific fee revenues)- - 1.4 0.2 1.4 0.2 Stormwater Lease Payable (backed by specific fee revenues)- - 0.4 0.4 0.4 0.4 Totals 22.0$ 23.3$ 37.3$ 37.9$ 59.2$ 61.2$ Activities Activities Total s Tabl e 5 Outstanding Debt, at Year-end (in Millions) Governmental Business-type 36 CITY OF BOZEMAN, MONTANA MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) June 30, 2016 ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES The City’s elected and appointed officials considered many factors when adopting the 2016-2017 budget for next fiscal year’s tax rates and for fees that will be charged for 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 remain at relatively low yet increasing levels. The Bureau of Labor Statistics of the U.S. Department of Labor reported the Consumer Price Index-Unadjusted for All Items at .7% for the last calendar year and at 1.6% over the last 12 months (as of this report date and before seasonal adjustment), with the energy index rising 3.5%, its largest advance since February of 2013. Inflation rates have historically had a significant impact on the cost of City capital projects. CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or need additional information, contact the City’s Administrative Services Director, Controller, or Assistant Controller at the City of Bozeman, 121 North Rouse Avenue, Bozeman, Montana 59715. B. BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS 37 CITY OF BOZEMAN, MONTANA STATEMENT OF NET POSITION June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Governmental Business-type Activities Activities Total ASSETS Cash and investments 39,932,277$ 19,441,277$ 59,373,554$ Restricted cash and investments 15,543,924 7,909,758 23,453,682 Accrued interest 54,084 33,107 87,191 Receivables, net 6,879,736 1,847,872 8,727,608 Notes receivable 591,916 10,830 602,746 Prepaid expenses 733,166 - 733,166 Capital assets: Non-depreciable land and water rights 17,632,907 7,062,681 24,695,588 Other capital assets, net of depreciation 108,511,533 250,177,850 358,689,383 Total capital assets 126,144,440 257,240,531 383,384,971 Total assets 189,879,543 286,483,375 476,362,918 Deferred outflows of resources: Pension plan contributions 2,158,415 586,193 2,744,608 Total assets and deferred outflows of resources 192,037,958$ 287,069,568$ 479,107,526$ (continued) 38 CITY OF BOZEMAN, MONTANA STATEMENT OF NET POSITION (CONTINUED) June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Governmental Business-type Activities Activities Total LIABILITIES Accounts payable and accrued expenses 5,713,714$ 1,935,716$ 7,649,430$ Unearned revenue 56,343 - 56,343 Current portion of long-term liabilities: Compensated absences payable 1,266,700 401,000 1,667,700 Capital leases 54,905 79,438 134,343 Closure and post-closure care costs - 360,000 360,000 Bonds and notes 1,233,971 1,969,000 3,202,971 Long-term liabilities, due in more than one year: Compensated absences 487,029 198,960 685,989 Capital leases 194,596 284,311 478,907 Closure and post-closure care costs - 2,679,671 2,679,671 Pollution remediation obligations 16,874 1,531,101 1,547,975 Other post-employment health benefits - implicit rate subsidy 1,782,516 450,064 2,232,580 Bonds and notes 20,762,340 34,968,995 55,731,335 Net pension liability 15,993,057 4,819,918 20,812,975 Total liabilities 47,562,045 49,678,174 97,240,219 DEFERRED INFLOWS OF RESOURCES Pension deferrals 1,227,868 432,696 1,660,564 Total deferred inflows of resources 1,227,868 432,696 1,660,564 NET POSITION Net investment in capital assets 104,093,224 221,385,655 325,478,879 Restricted: Restricted for parking capital projects - 295,545 295,545 Restricted for general government 1,395,422 - 1,395,422 Restricted for public safety 3,435,423 - 3,435,423 Restricted for public service 16,081,238 - 16,081,238 Restricted for public welfare 5,503,168 - 5,503,168 Restricted for capital projects 9,230,464 1,592,613 10,823,077 Restricted for debt service 7,183,605 3,102,477 10,286,082 Unrestricted (3,674,499) 10,582,408 6,907,909 Total net position 143,248,045$ 236,958,698$ 380,206,743$ 39 CITY OF BOZEMAN, MONTANA STATEMENT OF ACTIVITIES Year Ended June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Net (Expense) Revenue and Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Primary Government Governmental activities: General government 8,058,925$ 2,530,474$ 117,587$ -$ (5,410,864)$ (5,410,864)$ Public safety 18,391,357 3,347,859 2,011,025 54,297 (12,978,176) (12,978,176) Public service 6,861,939 9,310,147 143,736 4,874,956 7,466,900 7,466,900 Public welfare 7,994,697 1,213,526 221,896 89,306 (6,469,969) (6,469,969) Interest and fiscal fees 893,470 - - - (893,470) (893,470) Total governmental activities 42,200,388 16,402,006 2,494,244 5,018,559 (18,285,579) (18,285,579) Business-type activities: Water 9,273,395 11,751,233 54,110 5,178,425 7,710,373 7,710,373 Waste water 8,163,312 9,217,121 50,952 5,997,522 7,102,283 7,102,283 Solid waste 4,570,884 3,207,605 20,958 - (1,342,321) (1,342,321) Parking 830,869 642,250 4,770 - (183,849) (183,849) Stormwater 469,743 943,621 4,156 111,707 589,741 589,741 Total business-type activities 23,308,203 25,761,830 134,946 11,287,654 13,876,227 13,876,227 Total primary government 65,508,591$ 42,163,836$ 2,629,190$ 16,306,213$ (18,285,579) 13,876,227 (4,409,352) General revenues Property taxes 21,234,288 - 21,234,288 Unrestricted grants and contributions 7,992,180 - 7,992,180 Investment earnings 519,637 241,699 761,336 Miscellaneous 418,215 1,033,340 1,451,555 Gain on sale of assets 123,934 6,595 130,529 Transfers 1,218,036 (1,218,036) - Total general revenues and transfers 31,506,290 63,598 31,569,888 Change in net position 13,220,711 13,939,825 27,160,536 Net position, beginning of the year 130,027,334 223,018,873 353,046,207 Net position, end of the year 143,248,045$ 236,958,698$ 380,206,743$ Primary Government Program Revenues FUND FINANCIAL STATEMENTS GOVERNMENTAL FUND FINANCIAL STATEMENTS MAJOR GOVERNMENTAL FUNDS General Fund – This fund accounts for the financial operations of the City, which are not accounted for in any other Fund. Principal sources of revenue are property taxes, state and local shared revenues, licenses and permits, and charges for services provided to other Funds. Principal expenditures in the general fund are made for police and fire protection, public works, and general government. Street Impact Fees Special Revenue Fund – This special revenue fund accounts for the collection and expenditures associated with the street impact fees. Street Maintenance – This special revenue fund accounts for special assessment revenues levied, received, and expended for street maintenance provided to specific property owners. Building Inspection – This special revenue fund was established to account for all activity of enforcing the building regulation adopted by the City. It includes all the money and staff associated with executing any aspect of the code enforcement program. Section 50-60-101 MCA established the code enforcement program requirement. SID Sinking Debt Service Fund – This debt service fund accounts for the accumulation of resources and payment of special assessment bond principal and interest related to general improvement, sidewalk, and curb construction projects. 40 CITY OF BOZEMAN, MONTANA BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Street Street Building SID Other Total General Impact Fees Maintenance Inspection Sinking Governmental Governmental Fund Special Revenue Special Revenue Special Revenue Debt Service Funds Funds ASSETS Cash and investments 7,976,924$ -$ 887,659$ 1,752,709$ 1,178,269$ 28,069,841$ 39,865,402$ Receivables: Property taxes 1,069,513 - - - - 388,318 1,457,831 Accrued interest 6,086 17,028 - 2,529 - 28,441 54,084 Customers, net 1,554,073 6,500 87,182 - - 516,683 2,164,438 Special assessments - - 140,060 - 2,943,579 40,551 3,124,190 Other governments 6,040 6,330 - - - 73,626 85,996 Due from other city funds 11,274 - - - - - 11,274 Advances to other city funds - - - - - 458,208 458,208 Prepaid expenditures - - - - - 350,625 350,625 Notes receivable - - - - - 591,916 591,916 Restricted cash and investments - 12,747,392 - - - 2,796,532 15,543,924 Total assets 10,623,910$ 12,777,250$ 1,114,901$ 1,755,238$ 4,121,848$ 33,314,741$ 63,707,888$ (continued) 41 CITY OF BOZEMAN, MONTANA BALANCE SHEET (CONTINUED) GOVERNMENTAL FUNDS June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Street Street Building SID Other Total General Impact Fees Maintenance Inspection Sinking Governmental Governmental Fund Special Revenue Special Revenue Special Revenue Debt Service Funds Funds LIABILITIES AND FUND BALANCES Liabilities Accounts payable 2,670,065$ 129,732$ 243,606$ 78,312$ (306)$ 2,467,252$ 5,588,661$ Escheat property payable 55,493 - - - - 20,052 75,545 Accrued employee benefits 8,800 - 708 612 - 670 10,790 Advanced from other city funds - - - - 458,208 - 458,208 Total liabilities 2,734,358 129,732 244,314 78,924 457,902 2,487,974 6,133,204 Deferred inflows of resources Unavailable revenue-property taxes 47,017 - - - - 16,697 63,714 Unavailable revenue-special assessments - - 95,639 - 2,933,668 9,100 3,038,407 Unavailable revenue-court fines 1,321,436 - - - - - 1,321,436 Total deferred inflows of resources 1,368,453 - 95,639 - 2,933,668 25,797 4,423,557 Fund balances Nonspendable - - - - - 1,426,575 1,426,575 Restricted - 12,647,518 774,948 1,676,314 730,278 24,027,298 39,856,356 Committed - - - - - 3,528,263 3,528,263 Assigned 5,541,841 - - - - 1,883,557 7,425,398 Unassigned 979,258 - - - - (64,723) 914,535 Total fund balances 6,521,099 12,647,518 774,948 1,676,314 730,278 30,800,970 53,151,127 Total liabilities, deferred inflows, and fund balances 10,623,910$ 12,777,250$ 1,114,901$ 1,755,238$ 4,121,848$ 33,314,741$ 63,707,888$ 42 CITY OF BOZEMAN, MONTANA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Amounts reported for governmental activities in the statement of net position are different because: Fund balances - total governmental funds 53,151,127$ Capital assets used in governmental activities are not financial resources, and therefore, are not reported in the governmental funds. Governmental capital assets 226,017,916$ Less: accumulated depreciation (99,873,476) 126,144,440 Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. Net position 1,243,815 Less: capital assets included in governmental activities (1,637,788) Plus: accumulated depreciation included in governmental activities 488,667 Plus: compensated absences included in governmental activities 50,523 Plus: net pension liability and related deferred outflows and inflows included in governmental activities 301,488 446,705 Deferred inflows of resources are not available to pay for current period expenditures and, therefore, are deferred in the funds.4,423,557 Bond premiums are other financing source revenue in the governmental funds. They are a liability for the government-wide financial statements and amortized over the life of the issuance. Bond premium (269,154) Less: amortization 20,187 (248,967) Impact fee credits do not affect current financial resources and therefore are not reported in the governmental funds.(56,343) Long-term liabilities are not due and payable in the current period and therefore are not reported in the governmental funds. Bonds and notes payable (21,747,344) Net pension liability (15,062,510) Capital lease obligations (249,501) Pollution remediation obligations (16,874) Post-employment health benefits (1,782,516) Compensated absences (1,753,729) (40,612,474) Net position of governmental activities 143,248,045$ 43 CITY OF BOZEMAN, MONTANA STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year Ended June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Street Street Building SID Other Total Impact Fees Maintenance Inspection Sinking Governmental Governmental General Special Revenue Special Revenue Special Revenue Debt Service Funds Funds REVENUES Taxes 14,904,243$ -$ -$ -$ -$ 6,398,831$ 21,303,074$ Special assessments 24 - 30,474 - 705,143 530,313 1,265,954 Licenses and permits 326,627 - 8,282 1,777,181 - - 2,112,090 Intergovernmental 7,056,466 112,897 974 49,761 - 1,700,326 8,920,424 Charges for services 2,165,642 3,967,203 3,908,030 1,778 1,953 2,239,077 12,283,683 Fines and forfeitures 1,131,577 - - - 122,128 1,253,705 Interest on investments 41,217 115,283 10,105 17,100 8,886 287,108 479,699 Interest on loans receivable - - - - - 38,552 38,552 Other 81,257 1,140 10,891 (2,614) 213 324,759 415,646 Total revenues 25,707,053 4,196,523 3,968,756 1,843,206 716,195 11,641,094 48,072,827 EXPENDITURES Current General government 6,219,840 - - - - 1,098,699 7,318,539 Public safety 14,329,580 - - 1,630,541 - 525,428 16,485,549 Public service 146,564 321,312 2,767,265 - - 605,264 3,840,405 Public welfare 5,315,448 - - - - 1,929,977 7,245,425 Other 333,963 - - - - 84,468 418,431 Capital outlay 551,327 4,131,417 668,428 9,688 - 3,976,610 9,337,470 Debt service Principal payments 3,760 - 168,490 - 228,000 945,000 1,345,250 Interest and fiscal fees - - 20,398 - 39,343 833,729 893,470 Total expenditures 26,900,482 4,452,729 3,624,581 1,640,229 267,343 9,999,175 46,884,539 Revenues over (under) expenditures (1,193,429) (256,206) 344,175 202,977 448,852 1,641,919 1,188,288 OTHER FINANCING SOURCES (USES) Transfers in 2,122,260 18,414 31,900 - - 4,310,839 6,483,413 Transfers out (528,172) - (1,241,485) - (196,755) (3,530,080) (5,496,492) Proceeds from long term debt - - 47,406 - - - 47,406 Sale of capital assets 58,475 - 1,959 - - 167,550 227,984 Total other financing sources (uses)1,652,563 18,414 (1,160,220) - (196,755) 948,309 1,262,311 Net change in fund balances 459,134 (237,792) (816,045) 202,977 252,097 2,590,228 2,450,599 FUND BALANCE, beginning of year 6,061,965 12,885,310 1,590,993 1,473,337 478,181 28,210,742 50,700,528 FUND BALANCE, end of year 6,521,099$ 12,647,518$ 774,948$ 1,676,314$ 730,278$ 30,800,970$ 53,151,127$ 44 CITY OF BOZEMAN, MONTANA RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year Ended June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds 2,450,599$ Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of these assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation expense exceeded capital outlays in the current period. Expenditures for capital assets 9,337,470$ Donated infrastructure 4,758,546 Less: current year depreciation (4,332,569) 9,763,447 Governmental funds report asset disposals as sale of capital assets for the cash received. In the statement of activities, those gains and losses must be adjusted by the assets basis, net of any depreciation.(105,437) The issuance of long-term debt (e.g. bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds these amounts report the effect of premiums, discounts, and similar items when debt is first issued, whereas are deferred and amortized in the statement of activities, unless immaterial. This amount is the net effect of these differences in the treatment of long-term debt and related items.1,311,299 Some revenues reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as revenues in governmental funds.(582,212) Governmental funds do not report a liability for compensated absences. The change in the liability is a current period expense.(83,040) Governmental funds do not report a liability for other post-employment health benefits.(110,027) Contributions to the pension plans in the current fiscal year are deferred outflows in the Statement of Net Position 565,043 Governmental funds do not report impact fee credits. The change in these credits during the year are charged to the statement of activities.3,546 Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of the internal service funds is reported in the governmental activities.7,493 Change in net position of governmental activities 13,220,711$ PROPRIETARY FUND FINANCIAL STATEMENTS MAJOR PROPRIETARY FUNDS These funds are used to account for the financing, acquisition, operation and maintenance of water, sewer, and solid waste facilities, which are supported by user charges. Major Enterprise Funds – Water Fund – Accounts for the City’s water utility operations and to collect and administer water impact fees. Waste Water Fund – Accounts for the City’s sewer utility operations and to collect and administer waste water impact fees. Internal Service Funds – used to account for the goods and services provided by one department to other departments of the City on a cost- reimbursement basis. 45 CITY OF BOZEMAN, MONTANA STATEMENT OF NET POSITION PROPRIETARY FUNDS June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Governmental Activities Waste Nonmajor Internal Water Fund Water Fund Enterprise Funds Total Service Funds ASSETS Current assets Cash and investments 13,454,758$ 4,441,839$ 1,544,680$ 19,441,277$ 66,875$ Receivables: Accrued interest 22,391 10,716 - 33,107 - Customers, net 641,535 640,086 566,251 1,847,872 47,281 Prepaid expenses - - - - 382,541 Total current assets 14,118,684 5,092,641 2,110,931 21,322,256 496,697 Non-current assets Other assets: Notes receivable - - 10,830 10,830 - Restricted cash and investments 4,252,597 3,306,285 350,876 7,909,758 - Total other assets 4,252,597 3,306,285 361,706 7,920,588 - Property, plant and equipment Nondepreciable: Land 162,518 693,026 4,086,995 4,942,539 - Water rights 2,120,142 - - 2,120,142 - Depreciable: Buildings 40,488,294 59,831,980 11,793,708 112,113,982 1,401,417 Other structures and improvements 13,907,432 14,745,402 877,710 29,530,544 - Machinery and equipment 1,547,213 2,783,019 2,331,179 6,661,411 166,059 Vehicles 581,347 694,758 3,816,325 5,092,430 70,312 Infrastructure 170,538,774 109,515,501 740,186 280,794,461 - Property under capital lease - - 598,474 598,474 - Accumulated depreciation and amortization (102,272,457) (72,752,227) (9,588,768) (184,613,452) (488,667) Net property, plant and equipment 127,073,263 115,511,459 14,655,809 257,240,531 1,149,121 Total non-current assets 131,325,860 118,817,744 15,017,515 265,161,119 1,149,121 Deferred outflows of resources Pension plan contributions 236,761 199,091 150,341 586,193 37,271 Total assets 145,681,305$ 124,109,476$ 17,278,787$ 287,069,568$ 1,683,089$ continued Enterprise Funds Business-type Activities 46 CITY OF BOZEMAN, MONTANA STATEMENT OF NET POSITION (CONTINUED) PROPRIETARY FUNDS June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Governmental Activities Waste Nonmajor Internal Water Fund Water Fund Enterprise Funds Total Service Funds LIABILITIES Current liabilities Accounts payable and accrued expenses 489,558$ 646,448$ 799,710$ 1,935,716$ 38,718$ Compensated absences payable 120,971 169,927 110,102 401,000 50,523 Due to other city funds - - - - 11,274 Capital lease obligations due in one year - - 79,438 79,438 - Closure and post-closure care costs, current portion - - 360,000 360,000 - Bonds, notes, and loans payable 822,000 1,074,000 73,000 1,969,000 - Total current liabilities 1,432,529 1,890,375 1,422,250 4,745,154 100,515 Noncurrent liabilities Closure and post-closure care costs - - 2,679,671 2,679,671 - Revenue bonds due after one year 15,745,000 17,856,565 1,367,430 34,968,995 - Compensated absences payable 141,984 43,001 13,975 198,960 - Capital lease obligations - - 284,311 284,311 - Other post-employment health benefits 190,781 130,026 129,257 450,064 - Solvent site remediation liability - 1,531,101 - 1,531,101 - Net pension liability 1,899,127 1,656,389 1,264,402 4,819,918 309,188 Total noncurrent liabilities 17,976,892 21,217,082 5,739,046 44,933,020 309,188 Total liabilities 19,409,421 23,107,457 7,161,296 49,678,174 409,703 Deferred inflows of resources Pension deferrals 138,748 161,619 132,329 432,696 29,571 NET POSITION Net investment in capital assets 110,506,263 96,580,894 14,298,498 221,385,655 1,149,121 Restricted for impact capital projects 1,225,684 366,929 - 1,592,613 - Restricted for parking capital projects - - 295,545 295,545 - Restricted for debt service 1,313,885 1,788,592 - 3,102,477 - Unrestricted 13,087,304 2,103,985 (4,608,881) 10,582,408 94,694 Total net position 126,133,136 100,840,400 9,985,162 236,958,698 1,243,815 Total liabilities, deferred inflows of resources, and net position 145,681,305$ 124,109,476$ 17,278,787$ 287,069,568$ 1,683,089$ Enterprise Funds Business-type Activities 47 CITY OF BOZEMAN, MONTANA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS Year Ended June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Governmental Activities Waste Nonmajor Internal Water Fund Water Fund Enterprise Funds Totals Service Funds OPERATING REVENUES 8,414,870$ 7,927,692$ 4,748,464$ 21,091,026$ 5,416,182$ OPERATING EXPENSES Salaries and benefits 2,827,544 2,116,434 1,621,326 6,565,304 389,302 Materials and supplies 915,149 419,347 384,060 1,718,556 523,753 Repairs and maintenance 76,444 390,034 290,042 756,520 8,042 Utilities 249,083 548,868 483,725 1,281,676 4,827 Administrative charges 458,402 951,258 540,286 1,949,946 147,601 Insurance claims - - - - 4,458,971 Other expenses 1,650,130 713,088 803,423 3,166,641 115,413 Depreciation and amortization 2,581,633 2,472,014 608,423 5,662,070 54,519 Changes in estimated closure and post-closure care costs - - 1,118,864 1,118,864 - Total operating expenses 8,758,385 7,611,043 5,850,149 22,219,577 5,702,428 Operating income (loss)(343,515) 316,649 (1,101,685) (1,128,551) (286,246) NON-OPERATING REVENUES (EXPENSES) Interest income 162,813 66,479 12,407 241,699 1,386 Interest expense (515,010) (552,269) (21,347) (1,088,626) (431) Other income 1,074,008 64,338 1,078,352 2,216,698 2,569 Intergovernmental income 54,110 50,952 29,884 134,946 7,735 Impact fees 2,262,355 1,225,091 - 3,487,446 - Gain (loss) on disposal of assets 20,970 - (14,375) 6,595 1,387 Total non-operating revenues (expenses)3,059,246 854,591 1,084,921 4,998,758 12,646 Income (loss) before contributions and transfers 2,715,731 1,171,240 (16,764) 3,870,207 (273,600) Contributions of infrastructure - developers 5,178,425 5,997,522 111,707 11,287,654 - Transfers in - - 1,410,275 1,410,275 231,115 Transfers out (1,002,583) (295,114) (1,330,614) (2,628,311) - Change in net position 6,891,573 6,873,648 174,604 13,939,825 (42,485) NET POSITION, beginning of year 119,241,563 93,966,752 9,810,558 223,018,873 1,286,300 NET POSITION, end of year 126,133,136$ 100,840,400$ 9,985,162$ 236,958,698$ 1,243,815$ Enterprise Funds Business-type Activities 48 CITY OF BOZEMAN, MONTANA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Year Ended June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Governmental Activities Waste Nonmajor Internal Water Fund Water Fund Funds Total Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 8,420,240$ 7,954,877$ 4,628,319$ 21,003,436$ 5,030,773$ Receipts from others 1,074,008 64,338 1,078,351 2,216,697 10,304 Operating loans from other City funds - - - - 11,274 Payments to suppliers (2,905,999) (2,582,469) (3,403,325) (8,891,793) (687,036) Payments to employees (2,844,653) (2,126,172) (1,627,856) (6,598,681) (4,845,619) Payments to internal service funds and administrative fees (458,402) (951,258) (540,286) (1,949,946) (147,601) Net cash flows from operating activities 3,285,194 2,359,316 135,203 5,779,713 (627,905) CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers in - - 1,410,275 1,410,275 231,115 Transfers out (1,002,583) (295,114) (1,330,614) (2,628,311) - Receipts from grants and intergovernmental sources 75,080 50,952 29,884 155,916 - Net cash flows from non-capital financing activities (927,503) (244,162) 109,545 (1,062,120) 231,115 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets (1,546,209) (195,241) (811,868) (2,553,318) (22,914) Principal paid on bonds, interfund loans, loans and leases (798,000) (1,042,000) (70,849) (1,910,849) - Interest paid on bonds, interfund loans, loans and leases (515,010) (552,269) (21,347) (1,088,626) (431) Proceeds from issuance of long-term debt - - 1,210,680 1,210,680 - Impact fees received 2,262,355 1,225,091 - 3,487,446 - Proceeds from sale of property, plant and equipment - - 30,936 30,936 1,387 Net cash flows from capital and related financing activities (596,864) (564,419) 337,552 (823,731) (21,958) CASH FLOWS FROM INVESTING ACTIVITIES Collections on notes - - 2,650 2,650 - Interest on investments 162,339 66,000 12,407 240,746 1,386 Net cash flows from investing activities 162,339 66,000 15,057 243,396 1,386 Net change in cash and investments 1,923,166 1,616,735 597,357 4,137,258 (417,362) Cash and investments, beginning of year 15,784,189 6,131,389 1,298,199 23,213,777 484,237 Cash and investments, end of year 17,707,355$ 7,748,124$ 1,895,556$ 27,351,035$ 66,875$ Classified as: Cash and investments 13,454,758$ 4,441,839$ 1,544,680$ 19,441,277$ 66,875$ Restricted cash and investments 4,252,597 3,306,285 350,876 7,909,758 - Totals 17,707,355$ 7,748,124$ 1,895,556$ 27,351,035$ 66,875$ continued Business-type Activities Enterprise Funds 49 CITY OF BOZEMAN, MONTANA STATEMENT OF CASH FLOWS (CONTINUED) PROPRIETARY FUNDS Year Ended June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Governmental Activities Waste Nonmajor Internal Water Fund Water Fund Funds Total Service Funds RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Operating income (loss)(343,515)$ 316,649$ (1,101,685)$ (1,128,551)$ (286,246)$ Adjustments to reconcile operating income (loss) to net cash flows from operating activities Depreciation and amortization 2,581,633 2,472,014 608,423 5,662,070 54,519 Change in estimated closure and post-closure care costs - - (687,040) (687,040) - Change in solvent site remediation obligation - (314,494) - (314,494) - Other income 1,074,008 64,338 1,078,352 2,216,698 10,304 Change in assets and liabilities: (Increase) Decrease in: Accounts receivable 5,370 27,185 (120,146) (87,591) (2,868) Prepaid expenses - - - - (382,541) Increase (Decrease) in: Accounts payable (15,193) (196,638) 363,829 151,998 (27,819) Due from other city funds - - - - 11,274 Accrued employee benefits payable 33,136 28,289 21,222 82,647 2,654 Net pension (50,245) (38,027) (27,752) (116,024) (7,182) Total adjustments 3,628,709 2,042,667 1,236,888 6,908,264 (341,659) Net cash flows from operating activities 3,285,194$ 2,359,316$ 135,203$ 5,779,713$ (627,905)$ SUPPLEMENTAL CASH FLOW INFORMATION Noncash transactions: Donated infrastructure 5,178,425$ 5,997,522$ 111,707$ 11,287,654$ -$ Enterprise Funds Business-type Activities FIDUCIARY FUND FINANCIAL STATEMENTS FIDUCIARY FUNDS AGENCY FUNDS Agency Funds are used to account for assets held by the City as an agent for individuals, private organizations, other governments, and/or other funds. Municipal Court – Accounts for monies held for appearance bonds and restitution. CMC Bozeman Site Remediation – Accounts for pass-through monies provided by the State of Montana Department of Environmental Quality to Olive & Wallace, LLC, to reimburse the cost of work performed as part of the Voluntary Cleanup Plan of the CMC Asbestos Bozeman Facility. Tourism Business Improvement District – Accounts for amounts collected from hotels on behalf of the District, a special-purpose government, whose purpose is to enhance the economic vitality of Bozeman by promoting tourism through sales and marketing strategies. 50 CITY OF BOZEMAN, MONTANA STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS June 30, 2016 The Notes to Financial Statements are an integral part of this statement. Agency Funds ASSETS Cash and cash equivalents 821,788$ Customer receivables 785 Total assets 822,573$ LIABILITIES Accounts payable 822,573$ Total liabilities 822,573$ NOTES TO FINANCIAL STATEMENTS 51 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS June 30, 2016 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES The City of Bozeman of Gallatin County, Montana (the City) was incorporated as a municipal corporation in 1883. The present City Code of Ordinances was adopted October 3, 2011. Under the charter, the City is governed by a mayor and commission members who comprise the City Commission. The day-to-day affairs of the City are conducted under the supervision of the City Manager, who is appointed by and serves at the pleasure of a majority of the City Commission. The accompanying financial statements of the City 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. In June 1999 the GASB issued Statement 34 Basic Financial Statements-and Management’s Discussion and Analysis-for State and Local Governments (GASB 34). This Statement establishes new financial reporting requirements for state and local governments throughout the United States. It requires new information and restructures much of the information that governments have presented in the past. Comparability with reports issued in prior years is affected. 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, 2016, and for the year then ended. The more significant accounting policies of the City are described below. New Accounting Pronouncements The City implemented the provisions of the following GASB pronouncements for the year ended June 30, 2016: • Statement No. 72, Fair Value Measurement and Application. This Statement addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement provides guidance for determining a fair value measurement for financial reporting purposes. This Statement also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements. This Statement is effective for fiscal years beginning after June 15, 2015. • Statement No. 82, Pension Issues, an amendment of GASB No. 67, 68, and 73. The objective of this Statement is to address certain issues that have been raised with respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. Specifically, this Statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. This Statement is effective for fiscal years beginning after June 15, 2016, with early application encouraged. 52 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Reporting Entity The City has considered all potential component units for which it is financially accountable and other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City’s financial statements to be misleading or incomplete. The Governmental Accounting Standards Board has set forth criteria to be considered in determining financial accountability in Statement 14 The Financial Reporting Entity and Statement 61, The Financial Reporting Entity: Omnibus – an Amendment of GASB Statements No. 14 and No. 34. These criteria include appointing a voting majority of an organization's governing body and (1) the ability of the City to impose its will on that organization or (2) the potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the City. Although the following entities meet the requirements of Statement 61, they are strictly advisory in nature. Therefore, the government-wide financial statements do not include the financial information of the following entities and their omission does not cause the City’s financial statements to be misleading or incomplete. Should there develop a financial element at some point in the future, the City shall include these entities on its government-wide financial statements. Senior Center Advisory Council – This council is advisory in nature on senior issues and on how to run the City-owned Senior Center building. The City is responsible for the maintenance and operation of the building. Parking Commission – The City Commission appoints the governing board of the Parking Commission, which was created by ordinance. The City owns the parking lots, collects the rents, and assigns the lots to the individuals. City Planning Board – The agreement forming the City Planning Board holds that it will submit its budget to the City Commission for approval, and the City provides all accounting functions and is responsible for the issuance of debt. It is presented with the Special Revenue Funds. 53 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Accounting/Measurement Focus The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Government-Wide Financial Statements The Government-Wide Financial Statements (the Statement of Net Position and the Statement of Activities) present information of all the non- fiduciary activities of the primary government and its component units. These statements present summaries of Governmental and Business-Type Activities for the City accompanied by a total column. These statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets and long-term liabilities, are included in the accompanying Statement of Net Position. The City has retroactively included infrastructure in its assets. The Statement of Activities presents changes in Net Position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The types of transactions reported as program revenues for the City are reported in three categories: 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. 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 the 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. The City applies all applicable GASB pronouncements (including all National Council on Governmental Accounting Statements and Interpretations currently in effect) as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements: Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB) of the Committee on Accounting Procedure. 54 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Accounting/Measurement Focus (Continued) Governmental Fund Financial Statements Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures, and Changes in Fund Balances for all major governmental funds and nonmajor funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in fund balances and changes in fund balances as presented in these statements to the net position and changes in net position presented in the Government-Wide Financial Statements. The City has presented all major funds that met those qualifications. All governmental funds are accounted for on a spending or “current financial resources” measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheets. The Statement of Revenues, Expenditures, and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current position. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The primary revenue sources which have been treated as susceptible to accrual by the City are property taxes, intergovernmental revenues, and other taxes. Expenditures are recorded in the accounting period in which the related fund liability is incurred. The City has elected to apply the early recognition option of recognizing debt services expenditures provided by GASB Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements. Under this option, an expenditure and a liability are recorded in debt service funds in the current year for amounts due early in the following year, for which resources have been provided during the current year. Proprietary Fund Financial Statements Proprietary Fund Financial Statements include a Statement of Net Position, a Statement of Revenues, Expenses, and Changes in Net Position, and a Statement of Cash Flows for each major proprietary fund. A column representing internal service funds is also presented with the Proprietary Fund Financial Statements. Internal service balances and activities, however, have been combined with the governmental activities in the Government-Wide Financial Statements. Proprietary funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses, and Changes in Net Position present increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non- operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses. 55 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Accounting/Measurement Focus (Continued) Fiduciary Fund Financial Statements Fiduciary Fund Financial Statements include a Statement of Net Position. The City’s Fiduciary Funds represent Agency Funds, which are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Therefore, Agency Funds do not have a measurement focus. These funds are accounted for using the accrual basis of accounting. The following Agency Funds are included in the Fiduciary Fund financial statements: Municipal Court – Accounts for monies held for appearance bonds and restitution related to criminal arrests and reimbursement for damage caused. CMC Bozeman Site Remediation Fund – Accounts for pass-through monies provided by the State of Montana Department of Environmental Quality to Olive & Wallace, LLC, to reimburse the cost of work performed as part of the Voluntary Cleanup Plan of the CMC Asbestos Bozeman Facility. Tourism Business Improvement District – Accounts for amounts collected from hotels on behalf of the District, a special-purpose government, whose purpose is to enhance the economic vitality of Bozeman by promoting tourism through sales and marketing strategies. Internal Service Funds Internal Service Funds are used to account for goods and services provided by one department to other departments of the City on a cost-reimbursement basis. These direct costs and certain indirect costs are included as part of the program expense reported for the individual functions and activities of these other departments. The following Internal Service Funds are included in the Proprietary Fund Financial Statements: Vehicle Maintenance Shop – Accounts for the maintenance and repair of vehicles used in the operation of City services. Medical Health Insurance – Accounts for insurance premium revenues received from the various City departments and retirees, and the related costs of health, vision, and dental insurance premiums incurred by City employees and retirees. 56 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Funds As mentioned, the Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures, and Changes in Fund Balances for all major governmental funds and nonmajor funds aggregated. The following major funds are presented in separate columns on the Governmental Funds Financial Statements, and the Proprietary Funds Financial Statements, respectively: Governmental Funds General Fund – this fund accounts for the financial operations of the City, which are not accounted for in any other fund. Principal sources of revenue are property taxes, state and local shared revenues, licenses and permits, and charges for services provided to other funds. Principal expenditures in the General Fund are made for police and fire protection, public welfare, and general government. Street Impact Fees Special Revenue Fund – on January 22, 1996, the City Commission adopted fire, street, water, and waste impact fees in Ordinance Number 1414. This fund accounts for the collection and expenditures associated with the street impact fees. Street Maintenance Special Revenue Fund – Accounts for special assessment revenues levied, received, and expended for street maintenance provided to specific property owners. Building Inspection Special Revenue Fund – This fund was established to account for all activity of enforcing the building regulations adopted by the City. It includes all the money and staff associated with executing any aspect of the code enforcement program. Section 50-60-101 MCA established the code enforcement program requirement. SID Sinking Debt Service Fund – Accounts for the accumulation of resources and payment of special assessment debt principal and interest related to general improvement, sidewalk, and curb construction projects. Proprietary Funds Water Fund – Accounts for the City's water utility operations and to collect and administer water impact fees. Waste Water Fund – Accounts for the City's sewer utility operations and to collect and administer waste water impact fees. Use of Restricted/Unrestricted Net Position When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the City’s policy is to apply restricted net position first. 57 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash and Investments Cash and investments are under the management of the City's Treasurer and consist primarily of demand deposits and investments in U.S. Government Bonds. Interest income earned as a result of pooling of City deposits is distributed to the appropriate funds utilizing a formula based on the average balance of cash and investments of each fund. Montana State statutes authorize the City to invest in interest-bearing savings accounts, certificates of deposits, and time deposits insured up to $250,000 by the Federal Deposit Insurance Corporation or fully collateralized, U.S. government and U.S. agency obligations and repurchase agreements where there is a master repurchase agreement and collateral held by a third party. Restricted Cash and Investments Certain proceeds of 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. Impact fees collected and line-oversizing fees are restricted for applicable use. Payments in lieu of parking are restricted by code for future parking related capital projects. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Investments Fair Value The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets (these investments are valued using prices quoted in active markets); Level 2 inputs are significant other observable inputs (these investments are valued using matrix pricing); Level 3 inputs are significant unobservable inputs (these investments are valued using consensus pricing). Eliminations and Reclassifications In the process of aggregating data for the Statement of Net Position and the Statement of Activities, some amounts reported as inter-fund activity and balances in the funds have been eliminated or reclassified. Internal service fund activity has also been eliminated in the Statement of Activities to remove the “doubling-up” effect. 58 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Capital Assets The City’s assets are capitalized at historical cost or estimated historical cost. City policy has set the capitalization threshold for reporting capital assets at $5,000. Gifts or contributions of capital assets are recorded at fair market value when received. Depreciable capital assets are reported on the Statement of Net Position, net of applicable accumulated depreciation. Capital assets, which are not depreciable such as land, and construction in progress are reported separately. Depreciation expense is reported in the Statement of Activities and is calculated using the straight-line method based on the assets estimated useful life. Depreciation is recorded on a straight-line basis over the useful lives of the assets as follows: Vehicles 5 to 10 years Machinery and equipment 5 to 30 years Buildings 20 to 80 years Other structures and improvements 10 to 100 years Infrastructure 25 to 100 years In accordance with GASB 34, the City has recorded infrastructure assets prospectively from 2005, the date of implementation, and has included infrastructure acquired prior to implementation within the four-year required period. The City defines infrastructure as the basic physical assets that allow the City to function. These assets include the street system, comprised of roads, sidewalks, curbs, and street lights; the water purification and distribution system; the sewer collection and treatment system; park and recreation lands and related improvements; stormwater conveyance system; and buildings and site amenities, including parking and landscaped areas. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Improvements are capitalized and depreciated over the remaining useful lives of the related capital assets, as applicable. Compensated Absences Payable Earned but unpaid vacation and sick pay is included as a liability in the proprietary fund types and Government-Wide Financial Statements. The portion relating to the governmental fund types not expected to be paid with expendable, and available resources is not reported in the governmental fund statements unless the liability has matured (i.e., unused reimbursable leave still outstanding following an employee's resignation or retirement). 59 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Inter-fund Receivables and Payables During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Those short-term loans related to goods- and services-type transactions are classified as “due to and from other funds”. Long-term inter-fund loans (noncurrent portion) are reported as “advances to and from other funds”. Inter-fund receivables and payables between funds are eliminated in the Statement of Net Position. On-Behalf Payments for Fringe Benefits On-behalf payments for fringe benefits are direct payments made by one entity to a third-party recipient for the employees of another legally separate entity. On-behalf payments include pension plan contributions. The State's pension contribution is recorded as intergovernmental revenue with an offsetting public safety or general government expenditure in the Pension Special Revenue Fund. (See Note 14) Budgets Each year, the City Manager must submit to the City Commission a proposed operating budget for all budget units within the City for the fiscal year commencing July 1. This operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted to obtain citizen comments on the proposed budget. The budget is then legally adopted through passage of the appropriation resolution by the City Commission. The City adopts a final budget each June and amends the budget in August if the initial taxable value estimates were significantly different from the final Certified Values received from the State. Budgets are legally required for all governmental fund types. These budgets are prepared on the same basis and using the same accounting practices as are used to account and prepare financial reports for the funds. Budgets presented in this report for comparison to actual amounts are presented in accordance with GAAP. Annual appropriated budgets are adopted for all funds and all appropriations lapse at year-end. The level of budgetary control (that is the level at which expenditures cannot legally exceed the appropriated amount) is established at the fund level. The City Commission may amend the budget during the course of the fiscal year. Montana state statute provides a number of different ways to amend the budget. The first involves a reallocation of existing appropriations among the line items within a specific fund. The second defines a series of scenarios where the governing body has authority to amend the budget without a hearing for donations, land sales, and fee‐based budgets. All other increases in appropriation authority that are not specifically permitted by statute must be approved through a public hearing process. 60 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Budgets (Continued) Any accruing revenue of the municipality not appropriated and any balance at any time remaining after the purpose of an appropriation has been satisfied or abandoned, may from time to time be appropriated to other uses that do not conflict with any uses for which specifically the revenue was accrued. A public hearing is required for an overall increase in appropriation authority, except in the case of an emergency. In its annual appropriation resolution, the City Commission delegated budget amendment authority to the City Manager for the expenditure of funds from any or all of the following: debt service funds, enterprise funds, internal service funds, trust funds, federal and state grants accepted and approved by the governing body, special assessments, and donations. In all other funds, the City Manager may, without approval from the City Commission, make budget amendments as long as the total appropriation for the department is not exceeded. Spending control is established by the total amount of expenditures budgeted for the fund, but management may exercise control at budgetary line items. Fund Balance In accordance with GASB Statement 54, the City reports fund balance for governmental funds in two general classifications, nonspendable and spendable. Nonspendable represents the portion of fund balance that is not in spendable form, such as inventories, and, in the general fund, long-term notes and loans receivable. Spendable fund balance is further categorized as restricted, committed, assigned, and unassigned. The restricted fund balance category 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. The committed fund balance category 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 Commission. The City Commission needs to formally adopt a Resolution in order to establish, modify, or rescind a fund balance commitment. Amounts in the assigned fund balance classification are intended to be used by the government for specific purposes but do not meet the criteria to be classified as restricted or committed. The City’s policy to authorize the assignment of fund balance is as follows: Assigned Fund Balance can be expressed and authorized directly by the City Commission or by an official to whom the Commission delegates the authority. The City Commission delegates this authority to the City Manager. 61 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fund Balance (Continued) On December 12, 2016, the Audit Committee accepted and approved the City Manager’s recommendation for the amount of General Fund balance presented on page 29 to be assigned this fiscal year for the specific purposes listed on page 23. 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 projected for the next fiscal year. Similarly the City Manager exercised his delegated authority to assign the major Capital Projects Fund balances presented on pages 29 and 143 for the specific purposes listed on page 126. 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 had 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 Projects Funds: Restricted, Committed, Assigned Minimum General Fund – Fund Balance The City does not maintain a stabilization fund. However, the City’s Charter requires an established minimum level of “General Fund Unreserved Fund Balance”, in accordance with the Government Finance Officers’ Association (GFOA) Best Practices. The GFOA significantly changed their Best Practice Recommendation in October 2009. As a result, in May 2010, the Commission increased the required minimum from 12% to 16 2/3%, or 2 months’ worth of revenues. Net Position In funds other than governmental, net position represent the difference between assets and liabilities. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction, or improvement of those assets. Net position is reported as restricted when there are limitations imposed on its use either through enabling legislation or through external restrictions imposed by creditors, grantors, or laws and regulations of other governments. 62 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 2. CASH AND INVESTMENTS At June 30, 2016, the carrying amount of the City's deposits in local banks and investments is $83,649,024. Interest bearing account balances are covered by the Federal Depository Insurance Corporation (FDIC) up to $250,000 per bank, per depositor. In additional, all noninterest bearing transaction account balances are fully insured by FDIC coverage. The remaining balances are covered by collateral held by the pledging bank's agent in the City's name. The City’s cash and investments are reported as follows: Unrestricted Restricted Total Governmental activities 39,932,277$ 15,543,924$ 55,476,201$ Business-type activities 19,441,277 7,909,758 27,351,035 Fiduciary funds 821,788 - 821,788 60,195,342$ 23,453,682$ 83,649,024$ 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. The City’s policy requires deposits to be 104 percent secured by collateral valued at market value. The City Treasurer maintains a listing of financial institutions, which are approved for investment purposes. Types of securities that may be pledged as collateral are detailed in Section 17-6-103 of the Montana Code Annotated (MCA). City policy requires that specific safeguards against risk of loss be evidenced when the City does not physically hold the securities. On June 30, 2016, the following interest rate risks and valuation inputs were associated with the City’s deposits and investments. Credit Risk Investment Maturities Rating Fair Value Valuation Inputs Certificates of deposit August 2016- April 2018 NA 9,143,719$ Level 2 U.S. Government bonds November 2016- June 2021 S&P AA+46,699,500 Level 2 U.S. Bank Municipal Investor Account N/A N/A 12,536,040 Level 2 State of Montana Short Term Investment Pool Account N/A N/A 11,500,000 Demand deposits N/A N/A 3,764,798 Petty cash N/A N/A 4,967 83,649,024$ 63 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 2. CASH AND INVESTMENTS (CONTINUED) Credit risk is defined as the risk that an issuer or other counterpart to an investments 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. 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 fixed 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 Montana Board of Investments or any other entity against investment losses and there is no guaranteed rate of return on funds invested in STIP shares. The Montana Board of Investments 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 Montana Board of Investments website at http://investment.com/AnnualReportsAudits. NOTE 3. PROPERTY TAX AND SPECIAL ASSESSMENTS REVENUE AND RECEIVABLES Property Taxes Real property taxes are assessed and collected each fiscal year according to the following property tax calendar: Lien Date: December 1 for the 1st installment and June 1 for the 2nd installment Levy Date: November 1 Due Dates: November 30th for the 1st installment and May 31 for the 2nd installment Personal property taxes are assessed on January 1 of each year and billed in May, with payment due within thirty days. Gallatin County collects all property taxes on behalf of the City and remits collections, including penalties and interest, on a monthly basis. The County assesses a delinquency penalty of 2%. If taxes become delinquent, the County tax collector may sell the property to collect taxes due plus 0.83% per month interest. 64 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 3. PROPERTY TAX AND SPECIAL ASSESSMENTS REVENUE AND RECEIVABLES (CONTINUED) Property Taxes (continued) In the fund financial statements, the City accrues as receivable all property taxes received during the first sixty (60) days of the new fiscal year from Gallatin County, in accordance with the modified accrual basis. In the government-wide financial statements, all taxes billed, but not yet collected are accrued in accordance with the full accrual basis of accounting, as described in Note 1. Special Assessments Special assessments receivable represent the uncollected amounts levied against benefited property for the cost of local improvements. Assessments are payable over a period of 18 to 20 years and bear interest of 2.5% to 5.75% per annum. Recognition of the revenues from these assessments has been deferred until both measurable and available in governmental funds. In the Government-Wide Financial Statements, however, these amounts are reported as revenues in the period they are levied. Once received, the monies will be used to meet the annual debt service requirements on related bonds and notes payable. NOTE 4. DEFERRED INFLOWS AND OUTFLOWS OF RESOURCES Deferred inflows of resources in the General Fund represent outstanding general property taxes at June 30, 2016. These amounts are reported as revenue in the Government-Wide Financial Statements in the period in which they are levied. Deferred inflows in Special Revenue Funds represent either revenues received but not considered earned or amounts to be received in the future that are recorded as receivables but not yet earned. The deferred inflows in Debt Service Funds represent future assessments to be received to meet the related debt obligation. Deferred inflows and outflows in the Government-Wide Financial Statements relate to payments made on pension plans after the measurement date for the calculated pension obligations. NOTE 5. PREPAID RENT (OPERATING LEASE) On October 22, 1992, the City signed a memorandum of understanding with Gallatin County, Montana, in which the City agreed to lease space from the County's Law and Justice Center for the City Police Department and Municipal Court. The City paid to the County $765,000 during the renovation of the building, which started 1993. The $765,000 constitutes rent for four rental terms of ten years each. During the term of the lease and renewal of the lease, the principal balance of $765,000 will be decreased by equal annual rental payments in the amount of $19,125. If the City and County mutually agree to terminate the lease after the second ten-year term, the County will refund $369,750, to the City for the unused portion of the rent. The lease began when renovations were complete on November 1, 1994. For the year ended June 30, 2016, rent expenditure was $19,125 regarding this lease. 65 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 6. NOTES RECEIVABLE The City had the following notes receivable: Special Revenue Funds Economic Development Loan Fund 506,249$ Community Housing Fund 78,739 Housing Revolving Loan Fund 6,928 Enterprise Funds Parking Fund 10,830 NOTE 7. CAPITAL ASSETS In accordance with GASB 34, the City has reported all capital assets, with the exception of pre-July 1, 2001, infrastructure in the Government-Wide Statement of Net Position. For the year ended June 30, 2016, depreciation expense on capital assets was charged to the functions and programs as follows: Governmental Activities: General Government 286,345$ Public Safety 559,680 Public Services 2,781,335 Public Welfare 705,209 Total depreciation expense - governmental activities 4,332,569$ Business-type Activities: Parking 290,091$ Storm Water 81,149 Water 2,581,633 Waste Water 2,472,014 Solid Waste 237,183 Total depreciation expense - business-type activities 5,662,070$ 66 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 7. CAPITAL ASSETS (CONTINUED) All capital assets of the City are depreciable with the exception of land, and construction in process, when applicable. Capital assets activity of the City for the year ended June 30, 2016, consisted of the following: June 30, 2015 Additions Disposals Transfers June 30, 2016 GOVERNMENTAL ACTIVITIES Non-depreciable: Land 16,887,829$ 844,189$ (99,111)$ -$ 17,632,907$ Depreciable: Buildings 32,410,407 158,251 - - 32,568,658 Other structures and improvements 1,148,427 - - - 1,148,427 Machinery and equipment 11,322,575 710,262 (287,043) - 11,745,794 Property under capital lease 435,737 - - - 435,737 Vehicles 3,188,785 370,742 (20,400) (754) 3,538,373 Infrastructure 146,912,547 12,035,473 - - 158,948,020 Total 212,306,307 14,118,917 (406,554) (754) 226,017,916 Accumulated depreciation (95,842,778) (4,332,569) 301,117 754 (99,873,476) Total governmental activities 116,463,529$ 9,786,348$ (105,437)$ -$ 126,144,440$ BUSINESS-TYPE ACTIVITIES Non-depreciable: Land 4,873,558$ 94,749$ (25,768)$ -$ 4,942,539$ Water rights 2,120,142 - - - 2,120,142 Depreciable: Buildings 112,431,720 559,976 - - 112,991,696 Other structures and improvements 30,808,133 - - - 30,808,133 Machinery and equipment 7,646,509 664,912 (185,922) - 8,125,499 Property under capital lease 519,943 - - - 519,943 Vehicles 1,915,373 123,918 (47,573) 754 1,992,472 Infrastructure 267,975,681 12,377,876 - - 280,353,557 Total 428,291,059 13,821,431 (259,263) 754 441,853,981 Accumulated depreciation (179,184,119) (5,662,070) 233,493 (754) (184,613,450) Total business-type activities 249,106,940$ 8,159,361$ (25,770)$ -$ 257,240,531$ Total capital assets 365,570,469$ 17,945,709$ (131,207)$ -$ 383,384,971$ 67 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 7. CAPITAL ASSETS (CONTINUED) Changes in accumulated depreciation are as follows for the year ended June 30, 2016: June 30, 2015 Additions Disposals Transfers June 30, 2016 GOVERNMENTAL ACTIVITIES Buildings (14,301,481)$ (832,742)$ -$ -$ (15,134,223)$ Other structures and improvements (1,023,265) (22,238) - - (1,045,503) Machinery and equipment (8,018,483) (544,189) 286,582 - (8,276,090) Property under capital lease (52,660) (31,106) - - (83,766) Vehicles (2,523,344) (220,329) 14,535 754 (2,728,384) Infrastructure (69,923,545) (2,681,965) - - (72,605,510) Total governmental activities (95,842,778)$ (4,332,569)$ 301,117$ 754$ (99,873,476)$ BUSINESS-TYPE ACTIVITIES Buildings (11,828,972)$ (2,347,945)$ -$ -$ (14,176,917)$ Other structures and improvements (27,321,150) (451,909) - - (27,773,059) Machinery and equipment (5,879,493) (431,617) 185,920 - (6,125,190) Property under capital lease (25,997) (25,679) 47,573 - (4,103) Vehicles (1,822,227) (51,994) - (754) (1,874,975) Infrastructure (132,306,280) (2,352,926) - - (134,659,206) Total business-type activities (179,184,119) (5,662,070) 233,493 (754) (184,613,450) Total accumulated depreciation (275,026,897)$ (9,994,639)$ 534,610$ -$ (284,486,926)$ NOTE 8. COMPENSATED ABSENCES The City’s policy relating to compensated absences is described in Note 1. The current portion is that which is expected to be paid within one year. This amount is estimated based on past trends and expected upcoming events. Actual amounts could differ. Historically, compensated absences have been liquidated primarily by the general fund and the proprietary funds. 68 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 8. COMPENSATED ABSENCES (CONTINUED) Balance Balance June 30, 2015 Incurred Satisfied June 30, 2016 Compensated absences: Governmental activities 1,670,689$ 1,349,782$ (1,266,742)$ 1,753,729$ Business-type activities 550,966 450,041 (401,047) 599,960 Total compensated absences 2,221,655$ 1,799,823$ (1,667,789)$ 2,353,689$ Due within Due after one year one year Total Compensated absences: Governmental activities 1,266,700$ 487,029$ 1,753,729$ Business-type activities 401,000 198,960 599,960 Total compensated absences 1,667,700$ 685,989$ 2,353,689$ NOTE 9. LONG-TERM DEBT Governmental Activities Long-Term Debt The following is a summary of long-term debt transactions of the City’s governmental activities for the year ended June 30, 2016: Balance Issuances and Repayments Balance June 30, 2015 Additions and Deletions June 30, 2016 General obligation bonds 16,320,000$ -$ (750,000)$ 15,570,000$ Tax increment financing bonds 4,825,000 - (195,000) 4,630,000 Special assessment debt 890,500 - (228,000) 662,500 Intercap notes payable 963,274 47,409 (125,839) 884,844 Subtotal bonds and notes 22,998,774 47,409 (1,298,839) 21,747,344 Bond premiums 262,425 (13,458) 248,967 Compensated absences 1,670,689 1,349,782 (1,266,742) 1,753,729 Other post employment benefits liability 1,672,489 110,027 - 1,782,516 Net pension liability 14,414,020 1,579,037 - 15,993,057 Totals 41,018,397$ 3,086,255$ (2,579,039)$ 41,525,613$ 69 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 9. LONG-TERM DEBT (CONTINUED) Governmental Activities Long-Term Debt (Continued) The above long-term debt of the City’s governmental activities is presented in the accompanying Statement of Net Position as follows: Long-term Current Portion Portion (due within (due after Total one year)one year)Long-Term Debt General obligation bonds 860,000$ 14,710,000$ 15,570,000$ Tax increment financing bonds 205,000 4,425,000 4,630,000 Special assessment debt 27,000 635,500 662,500 Intercap notes payable 128,513 756,331 884,844 Bond premiums 13,458 235,509 248,967 Subtotal bonds and notes 1,233,971 20,762,340 21,996,311 Compensated absences 1,266,700 487,029 1,753,729 Other post employment benefits liability - 1,782,516 1,782,516 Net pension liability - 15,993,057 15,993,057 Totals 2,500,671$ 39,024,942$ 41,525,613$ General Obligation Bonds - The City issues general obligation bonds to provide funds for the acquisition and construction of major capital assets. General obligation bonds are direct obligations of the City and are backed by the full faith and credit of the City. General obligation bonds currently outstanding are as follows: Due within Interest Rate Amount one year General Obligation Refunding Bonds, series 2012 serial maturities through 2021 1.50%1,300,000$ 250,000$ General Obligation TOP Bonds, Series 2013 serial maturities through 2034 2.00%9,280,000 405,000 General Obligation TOP Bonds, Series 2014 serial maturities through 2035 1.00%4,990,000 205,000 Total general obligations bonds 15,570,000$ 860,000$ 70 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 9. LONG-TERM DEBT (CONTINUED) Governmental Activities Long-Term Debt (Continued) Annual debt service requirements to maturity for general obligation bonds are as follows: Principal Interest Total Year ending June 30, 2017 860,000$ 498,738$ 1,358,738$ 2018 875,000 481,538 1,356,538 2019 895,000 464,038 1,359,038 2020 910,000 446,138 1,356,138 2021 925,000 426,863 1,351,863 2022-2026 3,565,000 1,842,138 5,407,138 2027-2031 4,225,000 1,182,100 5,407,100 2032-2036 3,315,000 296,600 3,611,600 15,570,000$ 5,638,153$ 21,208,153$ Tax Increment Financing Bonds - Tax Increment Financing (TIF) Bonds are not general obligations, but are special limited obligations of the City. The Series 2007 Bonds, the premium, and the interest thereon are not a charge against the general credit or taxing powers of the City. The bonds are payable solely, and equally and ratably from the tax increment revenues received by the City from its Downtown Bozeman Improvement District. If the incremental revenues are insufficient to pay the principal and interest due on the TIF bonds when due, such payment shortfall shall not constitute a default under the TIF agreement. If and when the incremental revenues are sufficient, the City shall pay the amount of any shortfall to the paying agent and registrar without any penalty interest or premium thereon. Due to the uncertainty of the future tax increment receipts, future payments on the TIF bonds may vary from the summary of debt service requirements. Annual debt services requirements to maturity for the TIF bonds are as follows: Principal Interest Total Year ending June 30, 2017 205,000$ 220,488$ 425,488$ 2018 210,000 212,288 422,288 2019 220,000 203,573 423,573 2020 230,000 194,222 424,222 2021 240,000 184,103 424,103 2022-2026 1,375,000 743,098 2,118,098 2027-2031 1,745,000 371,263 2,116,263 2032 405,000 20,250 425,250 4,630,000$ 2,149,285$ 6,779,285$ 71 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 9. LONG-TERM DEBT (CONTINUED) Governmental Activities Long-Term Debt (Continued) Special Assessment Debt - Special assessment bonds are payable from the collection of special assessments levied against benefited property owners within each special improvement district. To the extent that such special assessment collections are not sufficient to make the required debt service payments, the City is obligated to levy and collect a general property tax on all taxable property in the City to provide additional funding for the debt service payments. The cash balance in the SID Revolving Fund must equal at least 5% of the principal amount of bonds outstanding. If the cash balance is less than 5%, a levy is required to bring the cash balance to the required minimum. The City has issued various special assessment bonds with various maturities through 2025 at interest rates ranging from 2.5% to 5.75%. In addition, the City has issued two notes payable to finance special assessment projects. The following is a schedule of changes in special assessment debt: Balance Balance June 30, 2015 Issuances Repayments June 30, 2016 Special assessment bonds 605,000$ -$ (200,000)$ 405,000$ Note Payable to Department of Natural Resources and Conservation, #WRF-05067 54,500 - - 54,500 Note Payable to Department of Natural Resources and Conservation, #SRF-05132 231,000 - (28,000) 203,000 890,500$ -$ (228,000)$ 662,500$ Annual debt service requirements to maturity for special assessment notes payable are as follows: Notes Payable Principal Interest Total Year ending June 30, 2017 26,500$ 5,020$ 31,520$ 2018 30,000 4,470 34,470 2019 29,500 3,875 33,375 2020 32,000 3,270 35,270 2021 32,000 2,630 34,630 2022-2023 107,500 3,865 111,365 257,500$ 23,130$ 280,630$ 72 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 9. LONG-TERM DEBT (CONTINUED) Governmental Activities Long-Term Debt (Continued) Annual debt service requirements to maturity for special assessment bonds are as follows: Special Assessment Bonds Year ending June 30, 2017 -$ 2018 - 2019 65,000 2020 65,000 2021 65,000 2022-2026 210,000 405,000$ Substantially all special assessment bonds mature 18 to 20 years after the date of issuance but are redeemable at the option of the City whenever cash is available in the respective funds for each issue. The City follows the policy of early redemption on these bonds. Accordingly, a schedule of future interest payments through maturity of the bonds is deemed to be not meaningful and has been excluded. The net revenues of the water fund have been pledged as collateral to secure the debt service related to SID 665. This collateral is subordinate to commitments made prior to July 12, 1993, to pledge this collateral as a guarantee of the payment of other debt. In the event that the resources available to service debt related to SID 665 are insufficient, the City shall transfer amounts from the water fund to satisfy this obligation. The District will be under no obligation to reimburse the water fund for any such transfer. At this time, the City does not anticipate the need to make any such transfers. Intercap Loans – The City entered in a loan agreement with the Montana Board of Investments to partially finance the reconstruction of South Eight Avenue. This intercap loan payable had a balance outstanding at June 30, 2016, as follows: Due within Due after one year one year Total Note payable to Montana Board of Investments in uneven semi-annual installments including interest at variable rates, as set by MBOI, up to 1.5% through August 2022 128,513$ 756,328$ 884,841$ 73 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 9. LONG-TERM DEBT (CONTINUED) Governmental Activities Long-Term Debt (Continued) The debt service requirements for the intercap loan at June 30, 2016, are as follows: Principal Interest Total Year ending June 30, 2017 128,513$ 24,228$ 152,741$ 2018 129,809 20,450 150,259 2019 131,118 16,635 147,753 2020 132,440 12,781 145,221 2021 133,774 8,889 142,663 2022-2026 214,071 5,950 220,021 2027 15,116 - 15,116 884,841$ 88,933$ 973,774$ Business-type Activities Long-Term Debt Revenue Bonds - The City also issues bonds where the City pledges income derived from the acquired or constructed assets to pay debt service. Water Revenue Bonds Water revenue bonds outstanding at June 30, 2016, are as follows: Balance Repayments Balance Long-Term June 30, 2015 Issuances and Settlements June 30, 2015 Due in One Year Portion State Revolving Fund Revenue Bond - 12247 Series 2011A, serial maturities through 2032, 3% interest rate $ 8,698,000 $ - $ (415,000) $ 8,283,000 $ 427,000 7,856,000$ State Revolving Fund Revenue Bond - 13291 Series 2011B, serial maturities through 2032, 3% interest rate 8,667,000 - (383,000) 8,284,000 395,000 7,889,000 17,365,000$ -$ (798,000)$ 16,567,000$ 822,000$ 15,745,000$ The revenue bond ordinances specifies that the City shall establish various restricted asset accounts and distribute the net revenues for the water fund to the restricted asset accounts and set user rates at levels which will generate minimum net revenues, as defined. The revenue bond ordinances specify that City management and/or the City Commission shall take corrective actions to bring the City into compliance with the revenue bond ordinances, if necessary, and that bondholders shall have the right to institute proceedings, judicial or otherwise, to enforce the covenants of the revenue bond ordinances. The City is in compliance with applicable covenants as of June 30, 2016. 74 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 9. LONG-TERM DEBT (CONTINUED) Business-type Activities Long-Term Debt (Continued) Water revenue bond debt service requirements to maturity are as follows: Principal Interest Total Year ending June 30, 2017 822,000$ 327,260$ 1,149,260$ 2018 847,000 310,700 1,157,700 2019 872,000 293,630 1,165,630 2020 898,000 276,060 1,174,060 2021 926,000 257,960 1,183,960 2022-2026 5,065,000 998,490 6,063,490 2027-2031 5,877,000 456,420 6,333,420 2032 1,260,000 21,970 1,281,970 16,567,000$ 2,942,490$ 19,509,490$ Due within one year $ 822,000 Due after one year 15,745,000 16,567,000$ The revenue bond ordinance specifies that the City shall establish various restricted asset accounts and distribute the net revenues for the water fund to the restricted asset accounts and set user rates at levels that will generate minimum net revenues, as defined. The revenue bond ordinances specify that City management and/or the City Commission shall take corrective actions to bring the City into compliance with the revenue bond ordinances, if necessary, and that bondholder shall have the right to institute proceedings, judicial or otherwise, to enforce the covenants of the revenue bond ordinances. The City is in compliance with applicable covenants as of June 30, 2016. 75 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 9. LONG-TERM DEBT (CONTINUED) Business-type Activities Long-Term Debt (Continued) Waste Water Revenue Bonds Waste Water revenue bonds outstanding at June 30, 2016, are as follows: Balance Repayments Balance Long-Term Interest Rate June 30, 2015 and Settlements June 30, 2016 Due in One Year Portion Waste Water State Revolving -10252 Series 2010B, serial maturities through 2030 1.75% $ 272,000 $ (16,000) $ 256,000 17,000$ 239,000$ Waste Water Reclamation Facility Revenue Bonds - 10230, Series 2010D, serial maturities through 2030 3.00% 7,506,000 (420,000) 7,086,000 433,000 6,653,000 Waste Water Reclamation Facility Revenue Bonds - 10262, Series 2010F, serial maturities through 2030 3.00% 661,000 (36,000) 625,000 36,000 589,000 Waste Water Reclamation Facility Revenue Bonds ARRA A- 10261, Series 2010E, serial maturities through 2030 0.00% 384,000 - 384,000 - 384,000 Waste Water Reclamation Facility Revenue Bonds - 11291, Series 2010C, serial maturities through 2031 3.00% 807,000 (42,000) 765,000 43,000 722,000 Waste Water Reclamation Facility Revenue Bonds - 11292, Series 2010G, serial maturities through 2031 3.00% 2,430,565 (121,000) 2,309,565 125,000 2,184,565 Waste Water Reclamation Facility Revenue Bonds - 11281 Series 2010H, serial maturities through 2031 3.00%7,912,000 (407,000) 7,505,000 420,000 7,085,000 19,972,565$ (1,042,000)$ 18,930,565$ 1,074,000$ 17,856,565$ 76 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 9. LONG-TERM DEBT (CONTINUED) Business-type Activities Long-Term Debt (Continued) Waste Water Revenue Bonds (Continued) Waste water revenue bond debt service requirements to maturity are as follows: Principal Interest Total Year ending June 30, 2017 1,074,000$ 380,600$ 1,454,600$ 2018 1,109,000 358,184 1,467,184 2019 1,141,000 335,059 1,476,059 2020 1,175,000 311,224 1,486,224 2021 1,211,000 286,669 1,497,669 2022-2026 6,648,000 1,037,058 7,685,058 2027-2031 6,572,565 279,201 6,851,766 18,930,565$ 2,987,995$ 21,918,560$ Due within one year $ 1,074,000 Due after one year 17,856,565 18,930,565$ Stormwater Revenue Bonds Waste Water revenue bonds outstanding at June 30, 2016, are as follows. No debt service schedule has been established, as there has only been one draw-down from the total approved amount of $1,815,000. Balance Repayments Balance Long-Term Interest Rate June 30, 2015 Issuances and Settlements June 30, 2016 Due in One Year Portion Stormwater System Revenue Bond, Series 2015 2.00% $ 229,750 $ 1,281,680 $ (71,000) $ 1,440,430 73,000$ 1,367,430$ 77 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 9. LONG-TERM DEBT (CONTINUED) Industrial Revenue and Private Activity Bonds The City issues tax exempt industrial revenue and private activity bonds to finance construction of facilities within the City, which it sells on installment contracts to the facilities' users. The bonds and the interest payable thereon are not obligations of the City and do not constitute or give rise to a pecuniary liability or contingent liability of the City or a charge against the general credit or taxing power of the City. The bonds are issued under and collateralized by the indentures and are payable solely from the payments to be made pursuant to the loan agreements between the City and the facilities users. The bonds are not a lien on any of the City’s properties or revenues, other than the facilities for which they were issued. To provide financial assistance for the acquisition and improvements of the building occupied by a private elementary school, the City has issued a Private Activity Revenue Bond. This bond is secured by the property financed and is payable solely from payments received on the underlying mortgage loan. Upon repayment of the bond, ownership of the acquired facility transfers to the private-sector entity served by the bond issuance. Neither the City nor any political subdivision thereof is obligated in any manner for repayment of the bond. Accordingly, the bond is not reported as a liability in the accompanying financial statements. As of June 30, 2016, the Revenue Bond outstanding had an aggregate principal amount payable of $270,149. NOTE 10. CAPITAL LEASE OBLIGATIONS On April 30, 2012, the City entered into a lease for an Elgin street sweeper. The lease term is five years payable in annual installments of $33,495 at 3.3%. The total amount capitalized of $185,530 represents the present value of the future lease payments. The payments for this obligation are being recorded in the street maintenance fund. In 2014, the City entered into a lease for a motor grader with Caterpillar. The lease term is 6 years payable in annual installments of $27,500 at 3.25%. The total amount capitalized of $234,300 represents the present value of the future lease payments. The payments for this obligation are being recorded in the street maintenance fund. In 2015, the City entered into a lease for a copier. The lease term is 5 years payable in monthly installments of $300. The total amount capitalized of $15,907 represents the present value of the future lease payments. The payments for this obligation are being recorded in the general fund. 78 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 10. CAPITAL LEASE OBLIGATIONS (CONTINUED) In 2015, the City entered into a lease for an Elgin street sweeper. The lease term is five years payable in annual installments of $27,525 at 3.25%. The total amount capitalized of $152,570 represents the present value of the future lease payments. The payments for this obligation are being recorded in the stormwater fund. In 2015, the City entered into a lease for a Vactor vacuum truck. The lease term is six years payable in annual installments of $57,810 at 3.30%. The total amount capitalized of $367,373 represents the present value of the future lease payments. The payments for this obligation are being recorded in the stormwater fund. The capital lease balance outstanding at June 30, 2016, is as follows: Balance Balance June 30, 2015 Issuances Repayments June 30, 2016 Governmental Activities: 2012 Street Sweeper $ 63,802 -$ $ (31,381) $ 32,421 Caterpillar 2014 216,651 - (12,233) 204,418 Savin Copier 2015 15,459 - (2,797) 12,662 $ 295,912 -$ $ (46,411) $ 249,501 Business-Type Activities: 2015 Street Sweeper $ 125,035 -$ $ (23,411) $ 101,624 2015 Vactor Vacuum Truck 309,563 - (47,438) 262,125 $ 434,598 -$ $ (70,849) $ 363,749 79 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 10. CAPITAL LEASE OBLIGATIONS (CONTINUED) The following is a schedule, by year, of future minimum lease payments under capital leases, together with the present value of minimum lease payments at June 30, 2016: Governmental Business-Type Activities Activities Year ending June 30, 2017 $ 54,905 $ 85,345 2018 21,410 85,345 2019 21,411 85,345 2020 173,132 85,345 2021 - 57,812 Less amount representing interest (21,357) (35,443) Present value of future minimum lease payments 249,501$ 363,749$ The property under capital lease and the corresponding accumulated depreciation at June 30, 2016, is as follows: Governmental Business-Type Activities Activities Machinery and equipment 435,737$ 519,943$ Less: accumulated depreciation (83,766) (77,991) 351,971$ 441,952$ NOTE 11. CLASSIFICATION OF NET POSITION In the Government-Wide Financial Statements, net position are classified in the following categories: Net Investment in Capital Assets – This category groups all capital assets, including infrastructure in future years, into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of these assets reduce this category. Restricted Net Position – This category represents external restrictions imposed by creditors, grantors, contributors, or laws or regulations of other governments, and restrictions imposed by law through constitutional provision or enabling legislation. Net Position is presented as restricted by major purpose. Unrestricted Net Position – This category represents the net position of the City that are not restricted for any project or other purpose. 80 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 11. CLASSIFICATION OF NET POSITION (CONTINUED) In the Fund Financial Statements, commitments and assignments segregate portions of fund balance that are either not available or have been earmarked for specific purposes. The various commitments and assignments are established by actions of the City Commission and Management and can be increased, reduced, or eliminated by similar actions. Refer to Note 25 for a further disclosure related to net position classifications. NOTE 12. DEFICIT FUND BALANCES At June 30, 2016, the following fund had a deficit fund balance: Stormwater fund ($513,605). The deficit fund balance in the Stormwater fund is due to a transfer out of $1,234,760 to the Solid Waste fund of the proceeds of a partial drawdown of a $2.135 million loan from the State of Montana Revolving Loan fund in order to identify and put in place a system to limit the migration of volatile organic compounds from the landfill (refer to Note 20). The Loan is secured by the Stormwater fund but will be repaid through a property tax levy deduction, so this deficit will be eliminated by transfers in from the General fund of this property tax revenue. Additionally, budgeted revenues in the Stormwater fund are estimated to exceed budgeted expenses in the upcoming year, so the budget surplus will also serve to eliminate this deficit. As of the report date, the deficit in the Stormwater fund has been reduced to ($222,613). NOTE 13. DEFERRED COMPENSATION PLAN The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. In accordance with GASB Statement No. 32, the City does not report any balances related to the deferred compensation plan, as these amounts represent neither assets nor liabilities to the City, and the plan is administered by an independent third party. 81 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS Plan Description and Provisions All City of Bozeman full-time employees participate in one of three statewide, cost-sharing, multiple-employer, retirement benefit plans administered by the Public Employees Retirement Division (PERD). Contributions to the three plans are as required by State statute. Fiscal years 2016 and 2015 total payroll and covered payroll for all retirement plans were $20,234,004 and $21,311,975, respectively. Financial information for all three plans is reported in the Public Employees' Retirement Board's published Comprehensive Annual Financial Report for the fiscal year-end. It is available from the PERD at 100 North Park Avenue, Suite 220, P.O. Box 200131, Helena, MT 59620-0131. The authority to establish, amend, and provide cost of living adjustments to all three plans is assigned to the State legislature. The authority to establish and amend contribution rates to all three plans is also assigned to the State legislature. Public Employees' Retirement System (PERS) Plan Description The PERS-Defined Benefit Retirement Plan (DBRP), administered by the Montana Public Employee Retirement Administration (MPERA), is a multiple-employer, cost-sharing plan established July 1, 1945, and governed by Title 19, chapters 2 & 3, Montana Code Annotated (MCA). This plan covers the State, local governments, certain employees of the Montana University System, and school districts. All new members are initially members of the PERS-DBRP and have a 12-month window during which they may choose to remain in the PERS- DBRP or join the PERS-DCRP by filing an irrevocable election. Members may not be members of both the defined contribution and defined benefit retirement plans. All new members from the universities also have a third option to join the university system’s Montana University System Retirement Program (MUS-RP). 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. 82 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Public Employees' Retirement System (PERS) 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 services; 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 Member’s highest average compensation (HAC) Hired prior to July 1, 2011 – highest average compensation during any consecutive 36 months; Hired on or after July 1, 2011 – highest average compensation during any consecutive 60 months; Monthly benefit formula Members hired prior to July 1, 2011: • Less than 25 years of membership service: 1.785% of HAC per year of service credit; • 25 years of membership service or more: 2% of HAC per year of service credit. Members hired on or after July 1, 2011: • Less than 10 years of membership service: 1.5% of HAC per year of service credit; • 10 years or more, but less than 30 years of membership service: 1.785% of HAC per year of service credit; • 30 years or more of membership service: 2% of HAC per year of service credit. 83 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Public Employees' Retirement System (PERS) (Continued) Summary of Benefits (Continued) 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 • 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. 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. 1. Member contributions to the system of 7.90% of member’s compensation 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. State and University System employers are required to contribute 8.27% of members’ compensation. 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 84 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Public Employees' Retirement System (PERS) (Continued) Overview of Contributions (Continued) 3. 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 Stand-Alone Statements The PERS financial information is reported in the Public Employees’ Retirement Board’s Comprehensive Annual Financial Report for the fiscal year ended. It is available from the PERB at 100 North Park, PO Box 200131, Helena, MT 59620-0131, 406-444-3154. CAFR information including stand-alone financial statements can be found at http://mpera.mt.gov/annualreports.shtml. The latest actuarial valuation and experience study can be found at http://mpera.mt.gov/actuarialvaluations.shtml. State & Fiscal Universities Year Employer Employer State Employer State Hired Hired <7/01/11 >7/01/11 2016 7.9%7.9%8.370%8.270%0.10%8.00%0.370% 2015 7.9%7.9%8.270%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%0.235% 2000-2007 6.9%6.900%6.800%0.10%6.80%0.100% School DistrictsLocal Government Member 85 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Public Employees' Retirement System (PERS) (Continued) Actuarial Assumptions The total pension liability (TPL) was determined by an actuarial valuation date 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 total pension liability. The actuarial assumptions used in the June 30, 2014, valuation were based on the results of the last actuarial experience study, dated May 2010, for the six-year period July 1, 2003 to June 30, 2009. Among those assumptions were the following: • Investment Return 7.75% • Admin expense as a % of payroll 0.27% • General Wage Growth* 4.00% • *includes Inflation at 3.00% • Merit Increases 0% to 6% • Postretirement Benefit Increases Guaranteed annual Benefit Adjustment (GABA). After the member has completed 12 full months of retirement, the member’s benefit increases by the applicable percentage each January, inclusive of other adjustments to the members’ benefit. ° 3% for members hired prior to July 1, 2007 ° 1.5% for members hired between 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. 86 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Public Employees' Retirement System (PERS) (Continued) Actuarial Assumptions (Continued) • 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 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 Montana Code Annotated. The State contributes 0.1% of salaries for local governments and 0.37% for school districts. In addition, the State contributes coal severance tax and interest money from the general fund. The interest is contributed monthly and the severance tax is contributed quarterly. Based on those assumptions, the System’s fiduciary net position was projected to be adequate to make all the projected future benefit payments of current plan members through the year 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 TPL. A municipal bond rate was not incorporated in the discount rate. 87 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Public Employees' Retirement System (PERS) (Continued) Target Allocations The long-term expected return on pension plan assets is reviewed as part of the regular experience study prepared for the System. The most recent analysis, performed for the period of fiscal years 2003 through 2009, is outlined in a report dated June 2010 and is located on the MPERA website. Several factors are considered in evaluating the long-term rate of return assumption. These factors include rates of return adopted by similar public sector systems, as well as the utilization of a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed by an investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The assumption is intended to be a long-term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. Summarized in the table below are best estimates of the arithmetic real rates of return for each major asset class included in the System’s target asset allocation as of June 30, 2015. Sensitivity Analysis 1.0% Decrease Current Discount 1.0% Increase at 6.75%Rate at 8.75% City of Bozeman's proportion $20,664,965 $13,403,285 $7,270,964 The above table presents the net pension liability (NPL) calculated using the discount rate of 7.75%, as well as what the NPL would be if it were calculated using a discount rate that is 1.00% lower (6.75%) or 1.00% higher (8.75%) than the current rate. Asset Class Target Asset Allocation Long-Term Expected Real Rate of Return Cash Equivalents 2.00%-0.25% Real Estate 8.00%4.25% Fixed Income 24.00%1.25% Private Equity 12.00%8.00% Domestic Equity 36.00%4.55% Foreign Equity 18.00%6.10% 88 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Public Employees' Retirement System (PERS) (Continued) Summary of Significant Accounting Policies The Montana Public Employee Retirement Administration (MPERA) prepares its financial statements using the accrual basis of accounting. For the purposes of measuring the NPL; deferred inflows of resources and deferred outflows of resources related to pensions; pension expense; information about the fiduciary net position; and, additions to/deductions from fiduciary net position have been determined on the same accrual basis as they are reported by MPERA. For this purpose, member contributions are recognized in the period in which contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Revenues are recognized in the accounting period they are earned and become measurable. Benefit payments and refunds are recognized in the accounting period when due and payable in accordance with the benefit terms. Expenses are recognized in the period incurred. Investments are reported at fair value. MPERA adheres to all applicable Governmental Accounting Standards Board (GASB) statements. Pension Amounts GASB Statement 68, Paragraph 74 requires that when employees are provided benefits through more than one pension system, whether provided through cost-sharing, single-employer, or agent pension plans, the employer must combine the amounts reported as a total or aggregate for all pensions. Net Pension Liability 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 their participation in the Public Employees’ Retirement System (PERS). Statement 68, which became effective June 30, 2015, includes requirements for employers to record and report their proportionate share of the collective NPL, pension expense, and deferred inflows and deferred outflows of resources associated with pensions. PERS has a special funding situation in which the State of Montana is legally responsible for making contributions directly to PERS on behalf of the employers. Due to the existence of this special funding situation, the State is required to report a proportionate share of a local government or school district’s collective NPL that is associated with the non-State employer. The State of Montana also has a funding situation that is not special funding whereby the State general fund provides contributions from the coal tax severance fund. All employers are required to report the portion of coal tax severance income and earnings attributable to the employer. 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 the measurement date of June 30, 2015. For most employers, their June 30, 2016, reporting will use the 2016 reporting values presented in these notes. 89 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Public Employees' Retirement System (PERS) (Continued) Net Pension Liability (Continued) Net Pension Liability as of 6/30/16 Net Pension Liability as of 6/30/15 Percent of Collective NPL as of 6/30/16 Percent of Collective NPL as of 6/30/15 Change in Percent of Collective NPL City of Bozeman Proportionate Share $ 13,403,285 $ 11,401,613 0.9588350%0.9150490%0.0437860% State of Montana Proportionate Share associated 164,637$ 139,231$ 0.0117780%0.0111740%0.0006040% Total 13,567,922$ 11,540,844$ 0.9706130%0.9262230%0.0443900% The table above displays the employer proportionate share of the NPL and the employer’s proportion of NPL for June 30, 2015 and 2016. The employer’s proportion of the NPL was based on the employer’s contributions received by PERS during the measurement period July 1, 2014, through June 30, 2015, relative to the total employer contributions received from all PERS’ participating employers. As of the employer's reporting date the employer recorded a liability of $ 13,403,285 and the employer's proportionate share was 0.958835%. 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 significant changes in proportion that had an effect on the employer’s proportionate share of the collective NPL. Pension Expense At June 30, 2016, the employer recognized a pension expense of $1,063,870 for its proportionate share of the PERS’ pension expense. The employer also recognized grant revenue of $10,230 for the support provided by the State of Montana for its proportionate share of the pension expense that is associated with the employer and grant revenue of $321,664 from the coal tax fund. 90 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Public Employees' Retirement System (PERS) (Continued) Recognition of Deferred Inflows and Outflows At June 30, 2016, the employer reported its proportionate share of PERS’ deferred outflows of resources and deferred inflows of resources related to PERS from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between actual and expected experience -$ 81,091$ Changes in assumptions -$ -$ Difference between projected and actual investment earnings -$ 1,134,731$ Changes in proportion differences between employer contributions and proportionate share of contributions 528,216$ -$ Employer contributions subsequent to the measurement date 1,052,437$ -$ Total 1,580,653$ 1,215,822$ Amounts reported as deferred outflows of resources related to pensions resulting from the employer's contributions subsequent to the measurement date will be recognized as a reduction of the NPL beginning in the year ended June 30, 2017. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in Pension Expense as follows: Year ended June 30: Amount of deferred outflows and deferred inflows recognized in future years as an increase or (decrease) to pension expense 2017 (325,970)$ 2018 (325,970)$ 2019 (330,787)$ 2020 295,122$ 2021 -$ Thereafter -$ 91 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Firefighters’ Unified Retirement System (FURS) Plan Description 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 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. At 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 a. If less than 20 years of service: 2% of HMC for each year of service; b. 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 92 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Firefighters' Unified Retirement System (FURS) (Continued) 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 ½ 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). 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. Non-GABAGABA Employer State 9.50%10.70%14.36%32.61% 7.80%14.36%32.61% Member Fiscal Year 1998 - 2016 1997 Stand-Alone Statements The FURS financial information is reported in the Public Employees’ Retirement Board’s Comprehensive Annual Financial Report for the fiscal year ended. It is available from the PERB at 100 North Park, PO Box 200131, Helena MT 59620-0131, (406) 444-3154. CAFR information including our stand alone financial statements can be found on our web site at http://mpera.mt.gov/annualReports.shtml. The latest actuarial valuation and experience study can be found on our website at http://mpera.mt.gov/actuarialvaluations.shtml. 93 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Firefighters' Unified Retirement System (FURS) (Continued) 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 7.75% • Admin expense as a % of payroll 0.19% • General Wage Growth* 4.00% • *includes Inflation at 3.00% • Merit Increases 0% to 7.3% 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. 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 ½ 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 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. 94 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Firefighters' Unified Retirement System (FURS) (Continued) 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 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 TPL. A municipal bond rate was not incorporated in the discount rate. Target Allocations Target Asset Long-Term Expected Asset Class Allocation Real Rate of Return Cash Equivalents 2.00%-0.25% Domestic Equity 36.00%4.55% Foreign Equity 18.00%6.10% Fixed Income 24.00%1.25% Private Equity 12.00%8.00% Real Estate 8.00%4.25% The long-term expected return on pension plan assets is reviewed as part of the regular experience study prepared for the System. The most recent analysis, performed for the period of fiscal years 2003 through 2009, is outlined in a report dated June 2010 and is located on the MPERA website. Several factors are considered in evaluating the long-term rate of return assumption. These factors include rates of return adopted by similar public sector systems, as well as the utilization of a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed by an investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The assumption is intended to be a long-term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. Summarized in the table above are best estimates of the arithmetic real rates of return for each major asset class included in the System’s target asset allocation as of June 30, 2015. 95 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Firefighters' Unified Retirement System (FURS) (Continued) Sensitivity Analysis 1.0% Decrease 1.0% Increase to 6.75%Current Discount Rate to8.75% City's proportion $4,015,455 $2,489,054 $1,245,152 The above table presents the NPL calculated using the discount rate of 7.75%, as well as what the NPL would be if it were calculated using a discount rate that is 1.00% lower (6.75%) or 1.00% higher (8.75%) than the current rate. Summary of Significant Accounting Policies The Montana Public Employee Retirement Administration (MPERA) prepares its financial statements using the accrual basis of accounting. For the purposes of measuring the NPL; deferred inflows of resources and deferred outflows of resources related to pensions; Pension Expense; information about the fiduciary net position; and, additions to/deductions from fiduciary net position have been determined on the same accrual basis as they are reported by MPERA. For this purpose, member contributions are recognized in the period in which contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Revenues are recognized in the accounting period they are earned and become measurable. Benefit payments and refunds are recognized in the accounting period when due and payable in accordance with the benefit terms. Expenses are recognized in the period incurred. Investments are reported at fair value. MPERA adheres to all applicable Governmental Accounting Standards Board (GASB) statements. Pension Amount Totals GASB Statement 68, Paragraph 74 requires that when employees are provided benefits through more than one pension system, whether provided through cost-sharing, single-employer or agent pension plans, the employer must combine the amounts reported as a total or aggregate for all pensions. Net Pension Liability In accordance with GASB Statement 68, Accounting and Financial Reporting for Pensions, employers are required to recognize and report certain amounts associated with their participation in the Firefighters’ Unified Retirement System (FURS). Statement 68, which became effective June 30, 2015, includes requirements for employers to record and report their proportionate share of the collective Net Pension Liability (NPL), Pension Expense, and Deferred Inflows and Deferred Outflows of resources associated with pensions. 96 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Firefighters' Unified Retirement System (FURS) (Continued) Net Pension Liability (Continued) FURS has a special funding situation in which the State of Montana is legally responsible for making contributions directly to FURS on behalf of the employers. Due to the existence of this special funding situation, 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 total pension liability (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 the measurement date of June 30, 2015. For most employers, their June 30, 2016, reporting will use the 2016 reporting values presented in these notes. NPL as of 6/30/16 NPL as of 6/30/15 Percent of Collective NPL as of 6/30/16 Percent of Collective NPL as of 6/30/16 Change in Percent of Collective NPL City Proportionate Share $ 2,489,054 $ 2,361,551 2.4336400%2.4192110%0.0144290% State of Montana Proportionate Share associated with Employer 5,543,784$ 5,327,544$ 5.4203640%5.4576220%-0.0372580%Total 8,032,838$ 7,689,095$ 7.8540040%7.8768330%-0.0228290% The Table above displays the employer proportionate share of the NPL and the employer’s proportion of NPL for June 30, 2015 and 2016. The employer’s proportion of the NPL was based on the employer’s contributions received by FURS during the measurement period July 1, 2014, through June 30, 2015, relative to the total employer contributions received from all FURS’ participating employers. As of the employer’s reporting date, the employer recorded a liability of $2,489,054, and the employer’s proportionate share was 2.43364%. Changes in actuarial assumptions and methods: There were no changes in assumptions or other inputs that affected the measurement of the TPL. Changes in benefit terms: There have been no changes in benefit terms since the previous measurement date. Changes in proportionate share: Between the measurement date of the collective NPL and the employer’s reporting date there were no significant changes in proportion that had an effect on the employer’s proportionate share of the collective NPL. 97 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Firefighters' Unified Retirement System (FURS) (Continued) Pension Expense Pension Expense as of 6/30/16 Pension Expense as of 6/30/15 City’s Proportionate Share 276,847$ 262,159$ State of Montana Proportionate Share associated with the Employer 600,192$ 591,417$ Total 877,039$ 853,576$ At June 30, 2016, the employer recognized its proportionate share of the FURS’ pension expense of $877,039. The employer also recognized grant revenue of $600,192 for the support provided by the State of Montana for the proportionate share of the pension expense that is associated with the employer. Recognition of Deferred Inflows and Outflows At June 30, 2016, the employer reported its proportionate share of FURS' deferred outflows of resources and deferred inflows of resources related to FURS from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between actual and expected experience -$ 3,243$ Changes in assumptions -$ -$ Difference between projected and actual earnings on pension plan investments -$ 150,454$ Changes in proportion differences between employer contributions and proportionate share of contributions 14,069$ -$ Difference between actual and expected contributions -$ -$ Contributions paid to PERS subsequent to the measurement date 477,250$ -$ Total 491,319$ 153,697$ Amounts reported as deferred outflows of resources related to pensions resulting from the employer's contributions subsequent to the measurement date will be recognized as a reduction of the NPL beginning in the year ended June 30, 2017. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in Pension Expense as follows: Year ended June 30: Amount recognized in Pension Expense as an increase or (decrease) to Pension Expense 2017 (64,939)$ 2018 (64,939)$ 2019 (64,939)$ 2020 53,025$ 2021 2,165$ Thereafter -$ 98 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Municipal Police Officers’ Retirement System (MPORS) Plan Description 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. The balance held by MPERA for MPORS DROP participants as of June 30, 2016 was approximately 7 million. Municipal Police Officers' Retirement System (MPORS) (Continued) 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 99 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Firefighters' Unified Retirement System (FURS) (Continued) Municipal Police Officers' Retirement System (MPORS) (Continued) 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 ½ 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 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 29.37% 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 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 TPL. A municipal bond rate was not incorporated in the discount rate. 100 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Municipal Police Officers' Retirement System (MPORS) (Continued) Target Allocations Target Asset Long-Term Expected Asset Class Allocation Real Rate of Return Cash Equivalents 2.00%-0.25% Domestic Equity 36.00%4.55% Foreign Equity 18.00%6.10% Fixed Income 24.00%1.25% Private Equity 12.00%8.00% Real Estate 8.00%4.25% The long-term expected return on pension plan assets is reviewed as part of the regular experience study prepared for the System. The most recent analysis, performed for the period of fiscal years 2003 through 2009, is outlined in a report dated June 2010 and is located on the MPERA website. Several factors are considered in evaluating the long-term rate of return assumption. These factors include rates of return adopted by similar public sector systems, as well as the utilization of a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed by an investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The assumption is intended to be a long term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. Summarized in the table above are best estimates of the arithmetic real rates of return for each major asset class included in the System’s target asset allocation as of June 30, 2015. Sensitivity Analysis 1.0% Decrease 1.0% Increase to 6.75%Current Discount Rate to 8.75% City's proportion $6,947,191 $4,920,638 $3,121,565 The above table presents the NPL calculated using the discount rate of 7.75% as well as what the NPL would be if it were calculated using a discount rate that is 1.00% lower (6.75%) or 1.00% higher (8.75%) than the current rate. 101 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Municipal Police Officers' Retirement System (MPORS) (Continued) Summary of Significant Accounting Policies The Montana Public Employee Retirement Administration (MPERA) prepares its financial statements using the accrual basis of accounting. For the purposes of measuring the NPL; deferred inflows of resources and deferred outflows of resources related to pensions; Pension Expense; information about the fiduciary net position; and, additions to/deductions from fiduciary net position have been determined on the same accrual basis as they are reported by MPERA. For this purpose, member contributions are recognized in the period in which contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Revenues are recognized in the accounting period they are earned and become measurable. Benefit payments and refunds are recognized in the accounting period when due and payable in accordance with the benefit terms. Expenses are recognized in the period incurred. Investments are reported at fair value. MPERA adheres to all applicable Governmental Accounting Standards Board (GASB) statements. Pension Amount Totals GASB Statement 68, Paragraph 74 requires that when employees are provided benefits through more than one pension system, whether provided through cost-sharing, single-employer or agent pension plans, the employer must combine the amounts reported as a total or aggregate for all pensions. Net Pension Liability In accordance with GASB Statement 68, Accounting and Financial Reporting for Pensions, employers are required to recognize and report certain amounts associated with their participation in the Municipal Police Officers’ Retirement System (MPORS). GASB Statement 68, which became effective June 30, 2015, includes requirements for employers to record and report their proportionate share of the collective Net Pension Liability (NPL), Pension Expense, and Deferred Inflows and Deferred Outflows of resources associated with pensions. MPORS has a special funding situation in which the State of Montana is legally responsible for making contributions directly to MPORS on behalf of the employers. Due to the existence of this special funding situation, the State is required to report a proportionate share of a local government’ collective NPL that is associated with the non-State employer. The Total Pension Liability (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 the measurement date of June 30, 2015. For most employers, their June 30, 2016 reporting will use the 2016 reporting values presented in these notes. 102 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Municipal Police Officers' Retirement System (MPORS) (Continued) Net Pension Liability (Continued) NPL as of 6/30/2016 NPL as of 6/30/2015 Percent of Collective NPL as of 6/30/2016 Percent of Collective NPL as of 6/30/2015 Change in Percent of Collective NPL City Proportionate Share 4,920,638.02$ 4,746,932.65$ 2.974620%3.020909%-0.046289% State of Montana Proportionate Share associated with Employer 9,969,680.40$ 9,589,371.45$ 6.026863%6.102597%-0.075734% Total 14,890,318.42$ 14,336,304.10$ 9.001483%9.123506%-0.122023% The Table above displays the employer proportionate share of the NPL and the employer’s proportion of NPL for June 30, 2015 and 2016. The employer’s proportion of the NPL was based on the employer’s contributions received by MPORS during the measurement period July 1, 2014, through June 30, 2015, relative to the total employer contributions received from all MPORS’ participating employers. As of the employer’s reporting date the employer recorded a liability of $4,920,638, and the employer’s proportionate share was 2.97462%. Changes in actuarial assumptions and methods: There were no changes in assumptions or other inputs that affected the measurement of the TPL. Changes in benefit terms: There have been no changes in benefit terms since the previous measurement date. Changes in proportionate share: Between the measurement date of the collective NPL and the employer’s reporting date there were no significant changes in proportion that had an effect on the employer’s proportionate share of the collective NPL. Pension Expense Pension Expense as of 6/30/16 Pension Expense as of 6/30/15 City's Proportionate Share 478,745$ 510,604$ State of Montana Proportionate Share associated with the City 1,013,945$ 1,031,481$ Total 1,492,690$ 1,542,086$ At June 30, 2016, the employer recognized its proportionate share of the MPORS’ Pension Expense of $1,492,690. The employer also recognized grant revenue of $1,013,945 for the support provided by the State of Montana for the proportionate share of the pension expense that is associated with the employer. 103 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 14. EMPLOYEE BENEFIT PLANS (CONTINUED) Municipal Police Officers' Retirement System (MPORS) (Continued) Recognition of Deferred Inflows and Outflows At June 30, 2016, the employer reported its proportionate share of MPORS' deferred outflows of resources and deferred inflows of resources related to MPORS from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between actual and expected experience -$ 44,939$ Changes in assumptions -$ -$ Difference between projected and actual earnings on pension plan investments -$ 184,858$ Changes in proportion differences between employer contributions and proportionate share of contributions -$ 61,250$ Contributions paid to PERS subsequent to the measurement date 638,568$ Total 638,568$ 291,047$ Amounts reported as deferred outflows of resources related to pensions resulting from the employer's contributions subsequent to the measurement date will be recognized as a reduction of the NPL beginning in the year ended June 30, 2017. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in Pension Expense as follows: Year ended June 30: Amount recognized in Pension Expense as an increase or (decrease) to Pension Expense 2017 (117,477)$ 2018 (117,477)$ 2019 (117,477)$ 2020 61,386$ 2021 -$ Thereafter -$ 104 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 15. POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS In addition to providing a deferred compensation plan, the City provides other post-employment benefits (OPEB) allowing its retired employees to continue their medical, dental, and vision care coverage through the City's group health plan until death (Retiree Health Plan). The plan allows retirees to participate, as a group, at a rate that does not cover all of the related costs. This results in the reporting of an implied rate subsidy in the financial statements and footnotes. The City's contract with Allegiance Benefits details the plan eligibility. MMIA is the administrator of the benefit plan, which covers both active and retired members. In accordance with MCA 2-18-704, 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 Bozeman. The City's current labor contracts do not include any obligations for payments to retirees. The City also allows terminated employees to continue their health care coverage for 18 months past the date of termination as required by the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). OPEB is recorded on an accrual basis for all enterprise and internal service funds. OPEB is recorded on a modified accrual basis for the governmental funds. Plan contributions are recognized in the period in which the contributions are made. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Funding Policy. The plan is unfunded by the City and plan members receiving benefits contribute 100 percent of their cost of the benefits on a pay-as-you-go basis. The City plan’s administratively established retiree medical, dental, and vision premiums vary between $37 and $912 per month depending on the medical plan selected, family coverage, and Medicare eligibility. The plan provides different coinsurance amounts depending on whether members use preferred, non-preferred, or other hospitals. For a single individual, after an annual deductible of $300 for most non-Medicare-eligible retirees, the plan reimburses 70% for the first $500 medical claims and 100% thereafter. For a family, after an annual deductible of $600 for most non-Medicare-eligible retirees, the plan reimburses 70% for the first $1,000 medical claims and 100% thereafter. For fiscal year ended June 30, 2016, the City has 35 retired members receiving benefits. Annual OPEB Cost and Net OPEB Obligation. The City’s annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC). The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a closed amortization period not to exceed thirty years. 105 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 15. POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation to the Retiree Health Plan: Annual required contribution 330,107$ Interest on net OPEB obligation 83,556 Adjustment to annual required contribution (120,801) Annual OPEB cost (expense)292,862 Contributions made (149,183) Increase in net OPEB obligation 143,679 Net OPEB obligation - beginning of year 2,088,900 Net OPEB obligation - end of year 2,232,579$ The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation for fiscal year ended June 30, 2016, and the five preceding fiscal years were as follows: Percentage of Fiscal Year Annual Annual OPEB Cost Net OPEB Ended OPEB Cost Contributed Obligation June 30, 2012 234,397$ 48.33%1,729,462$ June 30, 2013 221,212 49.14%1,841,971 June 30, 2014 219,207 59.81%1,930,074 June 30, 2015 295,694 46.29%2,088,900 June 30, 2016 292,862 50.94%2,232,579 106 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 15. POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) The June 30, 2016, year-end OPEB cost is reported in the City’s funds as follows: Functions/Programs Expenses PRIMARY GOVERNMENT Governmental activities: General government 23,325$ Public safety 46,504 Public service 8,391 Public welfare 31,807 Total governmental activities 110,027 Business-type activities: Water 13,582 Waste water 10,054 Solid waste 5,996 Parking 2,194 Storm water 1,826 Total business-type activities 33,652 Total primary government 143,679$ Funded Status and Funding Progress. The projection of future benefit payments for an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. The City has elected not to fund this liability. 107 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 15. POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) SCHEDULE OF FUNDING PROGRESS UAAL as a Actuarial Actuarial Actuarial Unfunded Funded Covered Percentage of Valuation Value of Accrued Liability AAL (UAAL)Ratio Payroll Covered Payroll Date Assets (a)(AAL) (b)(b-a)(a/b)(c) (b-a)/c) 7/1/2010 -$ 2,203,253$ 2,203,253$ 0.0%22,051,261$ 9.99% 7/1/2012 - 2,002,345 2,002,345 0.0%23,885,569 8.38% 7/1/2014 - 2,675,667 2,675,667 0.0%26,884,822 9.95% Actuarial Methods and Assumptions. The City’s actuarial valuation is completed on a biennial frequency, provided no significant events have occurred warranting new measurement. The City completed the valuation for fiscal year 2014, with an estimate provided for fiscal year 2016. For fiscal year 2016, an estimated valuation was derived based on the 2014 actual costs and participants. As a result of this biennial valuation, we have marked the fields as “n/a” where actual financial data was not used to generate the estimate. As of July 1, 2014, the most recent valuation date, the City’s actuarially accrued liability (AAL) for benefits was $2,675,667. The AAL by status breakdown is shown below: Fiscal Fiscal Fiscal 2013 2014 2015 Actives 1,223,031$ N/A 1,679,064$ Retirees, Dependents and Surviving Spouses 779,314 N/A 996,603 Total AAL 2,002,345$ N/A 2,675,667$ Normal Cost 131,013$ N/A 168,628$ Impact on Statement of Activities Annual OPEB Cost 221,212$ 219,207$ 295,694$ Impact on Statement of Net Position Assumed Contributions 108,703$ 131,104$ 136,871$ Net OPEB Obligation at June 30 1,841,971$ 1,930,074$ 2,088,897$ Participant Information Actives 309 N/A 358 Retirees, Dependents and Surviving Spouses 73 N/A 68 Total 382 N/A 426 108 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 15. POST-EMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED) The following key assumptions were chosen by the City: 1. Discount Rate: 4.0% 2. Inflation Rate: 2.5% 3. Expected Long-Term Rate of Return on Assets: NA 4. Health Care Claim and Contribution Trend Rates: 7% in fiscal year 2016, decreasing annually, to 4% in fiscal year 2035. 5. Average Salary Increase: 4.0% 6. Retirement Rates: Based upon the separate rates used to value the pension obligations for Police Officers, Firefighters, and all other employees, respectively. 7. Retiree Participation Rate: 30% 8. Marital Assumption: For future retirees, 60% of participants are assumed to be married, with husbands 3 years older than wives. The Projected Unit Credit Actuarial Cost Method was used to determine the annual required contribution. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Examples, as detailed above, include assumptions about future employment, mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revisions as actual results are compared with past expectations, and new estimates are made about the future. Actuarial calculations reflect a long- term perspective. The Schedule of Funding Progress, presented as required supplementary information following the notes to the financial statements, is designed to present multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial liabilities for benefits. Historically, the net other post-employment benefit obligation has been liquidated primarily by the general fund and the proprietary funds. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. This report constitutes the only analysis and presentation of the City’s post-employment benefit plan. There is no separate, audited GAAP-basis post-employment benefit plan report. 109 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 16. JOINT VENTURE AGREEMENTS Joint ventures are legal entities or other organizations that result in a contractual arrangement and that are owned, operated, or governed by two or more participants. Each participant retains both an ongoing financial interest and an ongoing financial responsibility. Joint ventures are legal entities or other organizations that result in a contractual arrangement and that are owned, operated, or governed by two or more participants. Each participant retains both an ongoing financial interest and an ongoing financial responsibility. As of June 30, 2016, the City has entered into joint venture contractual arrangements, as described below. 911 Communication Center The City and Gallatin County, Montana (the County) have entered into an inter-local agreement for the purposes of establishment of the operation and financing of a 911 communication services division (the Division) for dispatch and records services, to define the relationship of the Administrative Board with the City and County, and to establish the line of authority for personnel furnishing the communication services to the City and County and others who may contract for the services. Though the City has no equity interest in the Division, the City has indirect access to the joint venture’s resources, as the Division’s purpose is of direct interest to the City, and the City has the ability to influence the management of the Division. In addition, the City and County have agreed to pay 45% and 55% of the Division expenditures, respectively. The agreement expired December 19, 2005, and automatically renewed until terminated by either party. Financial information regarding the Division can be obtained by contacting Shelley Vance, Gallatin County, Clerk and Records Office, 311 West Main, Bozeman, MT 59715. City-County Drug Forfeitures The City and County have entered into an inter-local agreement for the purposes of establishment of a joint drug forfeiture account funded from drug related forfeitures, seizures, and prosecutions of City and County law enforcement cases and to establish an equitable means of distributing those funds to continue drug interdiction activities. The goal of the agreement is to make the City and County Drug Enforcement operations less reliant on the general and public safety fund monies of the City and County. The original term of the agreement was for a period of one year, beginning September 20, 2004 and automatically renews for a period of one year until terminated by either party with written notice of intent to terminate. Financial information regarding the joint drug forfeiture account can be obtained by contacting the City of Bozeman Department of Finance, 411 East Main Street, Bozeman, MT 59715. 110 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 16. JOINT VENTURE AGREEMENTS (CONTINUED) Montana Municipal Interlocal Authority The City and Montana Municipal Interlocal Authority (MMIA) have entered into a 20-year agreement in December 2012 to share up to $1 million in profits from the sale of city-owned property known as the Mandeville Farm. The agreement came about as part of a settlement on legal claims from the City of Bozeman vs. MMIA litigation. A “profit” shall occur only when the City has recovered its total investment in the property, which includes the original purchase price together with all “costs of development” as defined in the settlement agreement. NOTE 17. RESTRICTED NET POSITION At June 30, 2016, the balances of restricted net position for business-type activities are as follows: Waste Water Solid Waste Nonmajor Water Fund Fund Fund Enterprise Total Restricted by revenue bond covenants: For bond reserve 1,313,885$ 1,788,592$ -$ -$ 3,102,477$ Restricted by ordinance: Cash in lieu of parking - - - 295,545 295,545 Impact fees 1,462,948 1,392,561 - - 2,855,509 2,776,833$ 3,181,153$ -$ 295,545$ 6,253,531$ Business-Type Activities NOTE 18. INTERFUND TRANSFERS AND ASSETS/LIABILITIES A summary of interfund transfers reported in the fund financial statements for the year ended June 30, 2016, follows: Transfers are used to (1) move revenues from the fund that statute or budgets requires to collect them to the fund that statute or budgets require to expend them, (2) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations, and (3) to transfer non-restricted interest income from the permanent fund to the general fund. 111 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 18. INTERFUND TRANSFERS AND ASSETS/LIABILITIES Street SID Debt Nonmajor General Fund Maintenance Service Governmental Water Waste Water Storm Water Total General Fund -$ -$ -$ 2,122,260$ -$ -$ -$ 2,122,260$ Street Impact Fees - 18,414 - - - - - 18,414 Street Maintenance - - - 31,900 - - - 31,900 Non-major Governmental 157,057 1,223,071 196,755 1,340,405 1,002,583 295,114 95,854 4,310,839 Solid Waste Enterprise - - - - 1,234,760 1,234,760 Parking Enterprise - - - 30,000 - - - 30,000 Stormwater Enterprise 140,000 5,515 145,515 Health Insurance Internal Service 231,115 - 231,115 Total 528,172$ 1,241,485$ 196,755$ 3,530,080$ 1,002,583$ 295,114$ 1,330,614$ 8,124,803$ Governmental Funds Transfers From Tr a n s f e r s T o Proprietary Fund A summary of advances and due from/to other funds at June 30, 2016, is as follows: Advances to Advances from other City funds other City funds Major Funds: SID Sinking Debt Service -$ 458,208$ Non-major Governmental Funds: SID Revolving Debt Service 458,208 - 458,208$ 458,208$ Due from Due to other City funds other City funds Major Funds: General fund 11,274$ -$ Internal Service Funds Medical Health Insurance - 11,274 11,274$ 11,274$ Interfund balances reported as due from or due to other funds are usually a result of transfers for reporting purposes to cover negative cash balances within a fund. These transfers are reversed as cash becomes available in a fund where cash previously had been in a deficit. 112 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 19. 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 cost of employees. A variety of methods are used to provide insurance for these risks. Commercial policies, transferring all risks of loss except for small deductible amounts, are purchased for property and content damage and professional liabilities. The City participates in two state-wide public risk pools operated by the Montana Municipal Interlocal Authority, for workers' compensation and for tort liability. Employee medical insurance is provided through a privately-administered, partially self-insured plan. Given the lack of coverage available, the City has no coverage for potential losses from environmental damages. Commercial Policies Coverage limits and the deductibles on the commercial policies have stayed relatively constant for the last several years. The premiums for the policies are allocated between the City's Enterprise Funds and the General Fund. Premiums are subsidized through a special purpose property tax levy, based on total appropriations. Settled claims resulting from these risks did not exceed commercial insurance coverage during the three years ended June 30, 2016, 2015, and 2014. Public Entity Risk Pools In 1986, the City joined together with other Montana cities to form the Montana Municipal Interlocal Authority, which established a workers' compensation plan and a tort liability plan. 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, and $12.5 million per occurrence for any claim that is not subject to the limitations on governmental liability, as described in Montana Code Annotated Section 2-9-108 (the Statute) or any successor statute, either as matter of law, by operation of the Statute, or by a judicial determination that the Statute is inapplicable or is otherwise invalid, with $11,250 deductible per occurrence. State tort law limits the City's liability to $1.5 million. The City pays premiums 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 debt of $4.41 million and $6.155 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 revenues were insufficient to cover the debt service; the debt was retired in 2011. The City also owns a policy with MMIA for loss or damage to property. This is an all-risk policy, essentially all property owned by the City being insured for 100% of replacement cost, subject to a $5,000 deductible per occurrence. MMIA reinsures their property insurance with a national municipal pool, Public Entities’ Property Insurance. 113 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 20. CONTINGENCIES Story Mill Landfill Claims In 2014, the City was named in three lawsuits by residential property owners located on or near the now closed Story Mill landfill. All three cases related to presence and claimed effects of volatile organic compounds (VOCs) in the soil and groundwater outside the boundaries of the landfill. Last year the City obtained approval from the Montana Department of Environmental Quality for a corrective measures assessment and comprehensive remediation system. The three lawsuits themselves all asserted claims for “restoration damages,” referring to restoring the property to its pre-contamination state to the greatest degree possible, diminution in value or stigma damages, property damage, physical injuries, and emotional distress including fear of future injury. All three cases were filed in Gallatin County. These three lawsuits were settled in the summer of 2016. The City’s contribution to the settlement will be $750,000 ($300,000 of which is in the form of a foregone liability program credit). As such, the City’s required cash contribution to settlement will be $450,000. Payment by all defendants to the three plaintiff groups in sum totals $7,500,000 with $2,500,000 to be provided by the other defendants (exclusive of Gallatin County and the State of Montana) and $5,000,000 (inclusive of the City’s share) to be provided through settlement of the insurance coverage dispute in MMIA v. City of Bozeman. At the time of this settlement, however, it was known that there were potential additional claimants who could assert the same types of claims as were made in the three settled cases. Additional claims have now been recently asserted and presently there are three active claims asserted by individual property owners. The claims asserted relate to presence and claimed effects of VOC’s in the soil and groundwater outside the boundaries of the landfill. The claims are principally for diminution in value or stigma damages and property damage. This City does not believe there will be an unfavorable outcome and intends to vigorously resolve these cases. It is not possible presently to state any estimated range of loss. The City is involved with several other lawsuits, which arise out of the normal course of operations by the City. Management of the City intends to vigorously defend each claim and believes no material losses will be incurred on such claims. 114 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 21. SOLID WASTE LANDFILL CLOSURE AND POST-CLOSURE CARE COSTS The City has a municipal solid waste landfill. State and Federal laws and regulations require the City to place a final cover on its landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for 30 years after final closure. The City stopped accepting waste effective June 30, 2008. The final capping of the cells is still pending. The City has accrued a liability for $3,039,671, which is its estimate of future landfill closure and post-closure care costs as of June 30, 2016. This amount is based on a Corrective Measures Assessment completed in September 2014 by a third party engineering firm, from which a remediation plan has been adopted by the City and has been approved the Montana Department of Environmental Quality. The cost of post closure care is an estimate and is subject to changes resulting from inflation, deflation, technology, or changes in applicable laws or regulations. The Solid Waste Fund accounts for the City’s solid waste collection, recycling, and disposal utility operation – including assets, liabilities, and post-closure costs associated with the closed Story Mill landfill. Segment information for the landfill is as follows: Condensed Statement of Net Position Restricted cash and cash equivalents (92,880)$ Capital assets, net of depreciation 4,501,902 Total assets 4,409,022$ Current liabilities 488,224$ Closure and post-closure care cost 3,039,671 Total liabilities 3,527,895 Restricted for debt service 881,127 Total net position 881,127 Total liabilities and net position 4,409,022$ 115 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 21. SOLID WASTE LANDFILL CLOSURE AND POST-CLOSURE CARE COSTS (CONTINUED) Condensed Statement of Revenues, Expenses and Changes in Net Position Operating revenues and expenses: Operating revenues -$ Operating expenses Depreciation 46,063 Change in post closure cost estimate 1,118,864 Other operating 307,706 Total operating expenses 1,472,633 Operating loss (1,472,633) Non-operating revenues (expenses): Interest expense (7,595) Other income 1,016,820 Transfers 1,234,760 Total non-operating revenues 2,243,985 Change in net position 771,352 Net position, beginning of year 109,775 Net position, end of year 881,127$ 116 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 22. SEGMENT INFORMATION FOR WATER ENTERPRISE FUND The City’s Water Fund accounts for the City’s water utility operations and collection and administration of water impact fees. Segment information for the utility operations, excluding impact fees, is as follows: Condensed Statement of Net Position Current assets 16,908,333$ Capital assets 126,311,367 Other assets 236,761 Total assets 143,456,461$ Current liabilities 1,338,814$ Non-current liabilities 18,089,033 Total liabilities 19,427,847 Net investment in capital assets 109,744,367 Restricted for debt service 1,313,885 Unrestricted 12,970,362 Total net position 124,028,614 Total liabilities and net position 143,456,461$ 117 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 22. SEGMENT INFORMATION FOR WATER ENTERPRISE FUND (CONTINUED) Condensed Statement of Revenues, Expenses, and Changes in Net Position Operating revenues and expenses: Operating revenues 8,414,870$ Operating expenses: Depreciation 2,534,184 Other operating 5,793,961 Total operating expenses 8,328,145 Operating loss 86,725 Non-operating revenues (expenses) Interest income 157,013 Interest expense (515,010) Grant income 54,110 Gain on sale of assets 20,970 Contributions of infrastructure 5,178,425 Other income 1,074,008 Transfers 730,167 Total non-operating revenues 6,699,683 Change in net position 6,786,408 Net position, beginning of year 117,242,206 Net position, end of year 124,028,614$ Condensed Statement of Cash Flows Net cash provided by operating activities 3,646,797$ Net cash flows from capital and related financing activities 730,167 Net cash flows from noncapital and financing activities (2,848,075) Net cash flows from investing activities 157,013 Net change in cash flows 1,685,902 Beginning cash and equivalents 14,558,505 Ending cash and equivalents 16,244,407$ 118 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 23. IMPACT FEES On January 22, 1996, the City Commission adopted fire, water, waste water and street impact fees in Ordinance number 1414. The impact fees were first effective on March 23, 1996. Impact fees were set at a percentage of the cost of the impact, as follows: Original, as of Change as of Change as of Change as of Change as of Change as of March 23, 1996 May 10, 1998 January 15, 1999 July 15, 1999 January 1, 2013 March 30, 2013 Fire impact fee 90%90%90%90%100%100% Water impact fee 35%50%90%90%100%100% Waste water impact fee 35%50%90%90%100%100% Street impact fee 10%10%75%90%90%100% An applicant may obtain an Impact Fee Credit by dedication of non-site-related land or construction of non-site-related improvements. Credits must be made before the beginning of improvement construction, must comply with the City’s Capital Improvements Program, and must be approved by the City Commission. Credits may be used only for like-type impact fees. The full provisions for impact fee credits are contained in Chapter 3.24 of the Bozeman Municipal Code. For proprietary type funds, the City records a liability for the impact fee credit and capitalizes the underlying asset. For governmental-type funds, the credits are only disclosed in the footnotes. For government-wide financial reporting, the outstanding credits are reported as unearned revenue. The Water Impact Fee Fund, Street Impact Fee Fund, and Waste water Impact Fee Fund have recorded impact fee credits amounting to $33,232, $59,890, and $129,042, respectively, as of June 30, 2016. The Fire Impact Fee Fund does not have any outstanding credits. The following impact fee revenues were collected and expensed/expended during fiscal year 2016: Expenses, Beginning Expenditures, Balances Impact Fees Other Income and Transfers Ending Balances Fire 892,205$ 338,461$ 9,787$ (2,965)$ 1,237,488$ Water 1,999,359 2,262,355 5,799 (2,162,988) 2,104,525 Waste water 599,357 1,225,091 7,798 (64,785) 1,767,461 Streets 12,885,310 3,967,203 229,320 (4,452,728) 12,629,105 Total 16,376,231$ 7,793,110$ 252,704$ (6,683,466)$ 17,738,579$ 119 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 24. POLLUTION REMEDIATION OBLIGATIONS Jewel v. City of Bozeman / State of Montana v. City of Bozeman This action was filed in the United States District Court for the District of Montana. The multi-count complaint reduced itself to a cost recovery action under the Federal Superfund (CERCLA) and State Superfund (CECRA). On July 8, 1999, the City, Jewel Food Stores, Inc. and the other parties reached a final settlement agreement in this action. The settlement, in part, required Jewel Food Stores, Inc. to pay the City of Bozeman $1,200,000, the City and Jewel to extend alternative water supply to businesses and residents in the North 19th Avenue area of the City; and Jewel and the City to share specified remediation costs on an equal basis (50% each) up to a cumulative amount of $4,000,000, and for eligible costs in excess of that amount, to be shared 70% by Jewel and 30% by the City. The City is reimbursed by insurers for 23% of the City’s expenditures for these purposes. The Montana Department of Environmental Quality (MDEQ) issued the Record of Decision (ROD) for the Bozeman Solvent Site (BSS) in August 2011. The Administrative Order of Consent (AOC) was finalized in January 2012. The ROD and AOC specifically delineate the remediation to be completed for the BSS. The AOC serves as the legal mechanism for the implementation of the selected remedies identified in the ROD. Though remediation may be completed relatively quickly, monitoring of the site will continue for a period of up to 30 years. ATC and Associates, Inc. serves as the Project Engineer for the potentially liable parties (the City of Bozeman and CVS Pharmacy, Inc.). Based on the selected remedies identified in the ROD, ATC has completed a long-term cost projection for the project. The long-term cost projection for the City is $2,355,974 in remediation costs. Reduced by its insurer’s reimbursement, the amount is $1,531,101. This liability is recorded in the Waste Water Fund, is an estimate, and is subject to changes resulting from inflation, deflation, technology, or changes in applicable laws or regulations CMC Asbestos Bozeman CECRA Facility In 2001, the City purchased property located within the CMC Asbestos Bozeman Facility (the “Facility”), a former asbestos ore storage and processing, recycling/salvage yard. In 2002, contractors for the City, under the Montana Voluntary Cleanup and Redevelopment Act (VCRA), submitted a Voluntary Cleanup Plan (VCP), which was approved by the Department of Environmental Quality (DEQ). Remediation work on City-owned property was completed in October 2003. On December 21, 2006, the City agreed to complete remedial actions at the remainder of the Facility, which included adjacent, private properties. The City submitted an Addendum to its original VCP, and cleanup work under the approved Addendum was completed in June 2009. On October 20, 2010, the City received notice from the DEQ stating that no further action is required at the facility and that the DEQ proposes removing the Facility from the CECRA priority list. Pursuant to an August 2007 Stipulated Agreement between the City and all other involved parties, additional cleanup after issuance of the DEQ’s closure letter may be required by DEQ based upon property use changes, modification of structures, or other factors. The City has an ongoing claim against the State orphan share for the orphan share funds’ proportional share of these post-closure clean-up costs. In addition, all other parties are still liable for their proportional share of the clean-up. The result is that should additional work be required at the Facility, the City will only be liable for 1% of the total post-closure clean-up costs. 120 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 25. NET POSITION COMPOSITION The table presented below displays the City’s fund balances by major purpose as displayed on page 41 of the governmental funds balance sheet. Street Street Building Nonmajor Total General Impact Fees Maintenance Inspection SID Sinking Governmental Governmental Fund Special Revenue Special Revenue Special Revenue Debt Service Funds Funds Nonspendable Prepaids -$ -$ -$ -$ -$ 350,625$ 350,625$ Cemetery perpetual care - - - - - 1,075,950 1,075,950 Total nonspendable - - - - - 1,426,575 1,426,575 Restricted General government-Planning - - - - - 1,067,197 1,067,197 General government-Health Insurance - - - - - 328,120 328,120 General government-other - - - - - 105 105 Public safety - Building Inspection - - - 1,676,314 - - 1,676,314 Public safety-Fire Impact - - - - - 1,237,487 1,237,487 Public safety-Victim Witness - - - - - 377,255 377,255 Public safety-other - - - - - 144,367 144,367 Public service - 12,647,518 774,948 - - 1,008,036 14,430,502 Public service - Gas Tax - - - - - 957,235 957,235 Public service - Community Transportation - - - - - 66,564 66,564 Public service - Lighting Districts - - - - - 587,641 587,641 Public welfare - Tax Increment Districts - - - - - 3,896,766 3,896,766 Public welfare - Econ Develop Loan Fund - - - - - 857,430 857,430 Public welfare - Tree Maint. District - - - - - 243,495 243,495 Public welfare - other - - - - - 505,477 505,477 Capital projects-Trail Open Space Parks - - - - - 9,230,464 9,230,464 Debt service-SID Sinking - - - - 730,278 - 730,278 Debt service-SID Revolving Fund - - - - - 3,386,700 3,386,700 Debt service-GO Bonds - - - - - 132,959 132,959 Total restricted - 12,647,518 774,948 1,676,314 730,278 24,027,298 39,856,356 Committed General government - - - - - 1,280,674 1,280,674 Public safety - - - - - 1,099,940 1,099,940 Public service - - - - - 23,062 23,062 Public welfare - - - - - 865,745 865,745 Capital projects - - - - - 258,842 258,842 Debt service - - - - - - - Total committed - - - - - 3,528,263 3,528,263 Assigned General government 540,000 - - - - - 540,000 Capital projects 440,489 - - - - 1,883,557 2,324,046 Debt service - - - - - - - Budget ordinance minimum 16.67%4,561,352 - - - - - 4,561,352 Total assigned 5,541,841 - - - - 1,883,557 7,425,398 Unassigned 979,258 - - - - (64,723) 914,535 Total net position 6,521,099$ 12,647,518$ 774,948$ 1,676,314$ 730,278$ 30,800,970$ 53,151,127$ 121 CITY OF BOZEMAN, MONTANA NOTES TO FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 NOTE 26. SUBSEQUENT EVENTS Subsequent to year end, the City settled the lawsuits related to the Story Mill Landfill claims, as described in Note 20. In August of 2016, the City sold the 85 acre North Park property, with a cost basis of $3.8 million, for gross proceeds of $1.6 million to a local development company. C. REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT DISCUSSION AND ANALYSIS 122 CITY OF BOZEMAN, MONTANA SCHEDULE OF FUNDING PROGRESS – OTHER POST-EMPLOYMENT HEALTHCARE BENEFITS Year Ended June 30, 2016 The annual OPEB costs, the percentage of OPEB cost contibuted to the plan, and the net OPEB obligation for June 30, 2016, for the Retiree Health Plan are as follows: Net OPEB Obligation 1,930,074$ 2,232,579$ 2,232,579$ Year Ended 6/30/2014 Annual OPEB Cost 219,207$ Percentage of OPEB Cost 59.81% ANNUAL OPEB COST Retiree Health Plan 6/30/2016 292,862$ 50.39% 6/30/2015 295,694$ 46.29% The funded status of the plan was as follows: 2,675,667$ - 2,675,667$ 0.0% 26,884,822$ 9.95% Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) (b) Unfunded AAL (UAAL) (b-a) Funded Ratio (a/b) Covered Payroll (c) UAAL as a Percentage of Covered Payroll ((b - a) / c) 7/1/2010 -$ 2,203,253$ 2,203,253$ 0%22,051,261$ 9.99% 7/1/2012 -$ 2,002,345$ 2,002,345$ 0%23,885,569$ 8.38% 7/1/2014 -$ 2,675,667$ 2,675,667$ 0%26,884,822$ 9.95% Retiree Medical Plan (c) Covered payroll FUNDED STATUS Unfunded actuarial accrued liability (funding excess) as a percentage of covered payroll ({(a) - (b)} / (c)) (a) Actuarial accrued liability (AAL) (b) Actuarial value of plan assets (UAAL) Unfunded actuarial accrued liability (funding excess) [(a) - (b)] Funded ratio (b) / (a) SCHEDULE OF FUNDING PROGRESS 123 CITY OF BOZEMAN, MONTANA SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY AND SCHEDULE OF CONTRIBUTIONS Year Ended June 30, 2016 Schedule of Proportionate Share of the Net Pension Liability:PERS 2016 2015 Employer's proportion of the net pension liability $ 13,403,285 $ 11,401,613 Employer's proportionate share of the net pension liability associated with the Employer (as a percentage)9.58835%0.91505% State of MT proportionate share of the net pension liability associated with the Employer $ 164,637 $ 139,231 Total $ 13,567,922 $ 11,540,844 Employer's covered-employee payroll $ 11,189,797 $ 10,358,342 Employer's proportionate share of the net pension liability as of its covered-employee payroll (as a percentage)119.7810%110.0720% Plan fiduciary net position the total pension liability (as a percentage)78.4000%79.9000% Schedule of Contributions:PERS 2016 2015 Contractually required contributions $ 1,052,437 $ 904,184 Contributions in relation to the contractually required contributions $ 1,052,437 $ 904,184 Contribution deficiency (excess) $ - $ - Employer's covered-employee payroll $ 12,238,920 $ 10,358,342 Contributions of covered-employee payroll (as a percentage)8.5990%8.7290% 124 CITY OF BOZEMAN, MONTANA SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY AND SCHEDULE OF CONTRIBUTIONS (CONTINUED) Year Ended June 30, 2016 Schedule of Proportionate Share of the Net Pension Liability:FURS 2016 2015 Employer's proportion of the net pension liability $ 2,489,054 $ 2,361,550 Employer's proportionate share of the net pension liability associated with the Employer (as a percentage)2.42336%2.41921% State of MT proportionate share of the net pension liability associated with the Employer $ 5,543,784 $ 5,327,544 Total $ 8,032,838 $ 7,689,094 Employer's covered-employee payroll $ 3,270,451 $ 3,142,481 Employer's proportionate share of the net pension liability as of its covered-employee payroll (as a percentage)76.1070%75.1490% Plan fiduciary net position the total pension liability (as a percentage)76.9000%76.7000% Schedule of Contributions:FURS 2016 2015 Contractually required contributions $ 477,250 $ 478,776 Contributions in relation to the contractually required contributions $ 477,250 $ 478,776 Contribution deficiency (excess) $ - $ - Employer's covered-employee payroll $ 3,338,041 $ 3,270,451 Contributions of covered-employee payroll (as a percentage)14.0290%14.6390% 125 CITY OF BOZEMAN, MONTANA SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY AND SCHEDULE OF CONTRIBUTIONS (CONTINUED) Year Ended June 30, 2016 Schedule of Proportionate Share of the Net Pension Liability:MPORS 2016 2015 Employer's proportion of the net pension liability $ 4,920,638 $ 4,746,933 Employer's proportionate share of the net pension liability associated with the Employer (as a percentage)2.97462%3.02091% State of MT proportionate share of the net pension liability associated with the Employer $ 9,969,680 $ 9,589,371 Total $ 14,890,318 $ 14,336,304 Employer's covered-employee payroll $ 4,116,930 $ 4,053,265 Employer's proportionate share of the net pension liability as of its covered-employee payroll (as a percentage)119.5220%117.1140% Plan fiduciary net position the total pension liability (as a percentage)66.9000%67.0000% Schedule of Contributions:MPORS 2016 2015 Contractually required contributions $ 638,568 $ 596,791 Contributions in relation to the contractually required contributions $ 638,568 $ 596,791 Contribution deficiency (excess) $ - $ - Employer's covered-employee payroll $ 4,353,897 $ 4,116,930 Contributions of covered-employee payroll (as a percentage)14.6670%14.5397% 126 CITY OF BOZEMAN, MONTANA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION - PENSION PLAN CHANGES Year Ended June 30, 2016 CHANGE OF BENEFIT TERMS The following changes to the PERS, FURS, and MPORS plan provisions were made as identified: 2013 Legislative Changes: Working Retirees – House Bill – PERS, SRS, and FURS, effective July 1, 2013 • The law requires employer contributions on working retiree compensation. • Member contributions are not required. • Working retiree limitations are not impacted. PERS working retirees may still work up to 960 hours a year, without impacting benefits. Highest Average Compensation (HAC) Cap – House Bill 97, effective July 1, 2013 All PERS, FURS, and MPORS members hired on or after July 1, 2013 are subject to 110% annual cap on compensation considered as part of a member’s highest or final average compensation. All bonuses paid to PERS, FURS and MPORS members on or after July 1, 2013 will not be treated as compensation for retirement purposes. House Bill 454 – Permanent Injunction Limits Application of the GABA Reduction passed under HB 454 PERS 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. 127 CITY OF BOZEMAN, MONTANA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION - PENSION PLAN CHANGES Year Ended June 30, 2016 CHANGE OF BENEFIT TERMS (CONTINUED) 2015 Legislative Changes – PERS: General Revisions – House Bill 101, effective January 1, 2016: >PERS 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 each 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 stars 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 sercvice3 credit before retiring again: • Refund of member’s contributions from second employment plus regular interest (currently 0.25%0; • 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 base on laws in effect at second retirement; and, • 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 and MUS-RP The PCR was paid off effective March 2016 and the contributions of 2.37% , 0.47%, and the 1.0% increase previously directed to the PCR are now directed to the Defined Contribution or MUS-RP member’s account. 2015 Legislative Changes - FURS: none 128 CITY OF BOZEMAN, MONTANA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION - PENSION PLAN CHANGES Year Ended June 30, 2016 CHANGE OF BENEFIT TERMS (CONTINUED) 2015 Legislative Changes - MPORS: • 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. CHANGES IN ACTUARIAL ASSUMPTIONS AND METHODS Method and assumptions used in calculations of actuarially determined contributions The following addition to the actuarial assumptions was adopted in 2014 based upon implementation of GASB Statement 68: PERS FURS MPORS Admin Expense as a % of Payroll 0.27% 0.19% 0.20% The following changes were adopted in 2013 based on the 2013 Economic Experience study: PERS, FURS, MPORS General Wage Growth* 4.00% *Includes inflation at 3.00% Investment rate of return 7.75%, net of pension plan investment expense, and including inflation The following Actuarial Assumptions are from the June 2010 Experience Study: PERS FURS and MPORS General Wage Growth* 4.25% 4.25% *Includes inflation at 3.00% 3.00% Merit increase Not applicable 0% to 7.3% Investment rate of return 8.00%, net of pension plan investment expense, and including inflation 8.00%, net of pension plan investment expense, and including inflation Asset valuation method 4-year smoothed market 4-year smoothed market Actuarial cost method Entry age Entry age Amortization method Level percentage of pay, open Level percentage of pay, open 129 CITY OF BOZEMAN, MONTANA SCHEDULE OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET TO ACTUAL – GENERAL FUND Year Ended June 30, 2016 Variance with Actual Final Budget Original Final Amounts Positive (Negative) Budgetary fund balance, July 1 6,061,967$ 6,061,967$ 6,061,967$ -$ Resources (inflows): Taxes 14,628,972 14,628,972 14,904,243 275,271 Special assessments - - 24 24 Licenses and permits 309,859 309,859 326,627 16,768 Intergovernmental 6,845,679 6,845,679 7,056,466 210,787 Charges for services 1,994,995 1,994,995 2,165,642 170,647 Fines and forfeitures 1,203,500 1,203,500 1,131,577 (71,923) Sale of assets - - 58,475 58,475 Interest on investments 45,000 45,000 41,217 (3,783) Transfers from other funds 2,272,004 2,272,004 2,122,260 (149,744) Other 68,100 68,100 81,257 13,157 Amounts available for appropriation 33,430,076 33,430,076 33,949,755 519,679 Charges to appropriations (outflows): Current General government 6,341,341 6,376,909 6,219,840 157,069 Public safety 11,706,232 14,329,732 14,329,580 152 Public service 140,331 146,831 146,564 267 Public welfare 5,481,847 5,478,997 5,315,448 163,549 Other 2,548,040 481,140 333,963 147,177 Capital outlay 672,000 672,000 551,327 120,673 Debt service - 4,000 3,760 240 Transfers to other funds 294,250 528,600 528,172 428 Total charges to appropriations 27,184,041 28,018,209 27,428,654 589,555 Budgetary fund balance, June 30 6,246,035$ 5,411,867$ 6,521,101$ 1,109,234$ Budgeted Amounts 130 CITY OF BOZEMAN, MONTANA SCHEDULE OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET TO ACTUAL OTHER MAJOR FUNDS – STREET IMPACT FEES SPECIAL REVENUE Year Ended June 30, 2016 Variance with Actual Amounts Final Budget Original Final Budgetary Basis Positive (Negative) Budgetary fund balance, July 1 12,885,310$ 12,885,310$ 12,885,310$ -$ Resources (inflows): Taxes - - - - Special assessments - - - - Licenses and permits - - - - Intergovernmental - - 112,897 112,897 Charges for services 2,236,375 2,236,375 3,967,203 1,730,828 Fines and forfeitures - - - - Interest on investments 94,500 94,500 115,283 20,783 Transfers from other funds - - 18,414 18,414 Proceeds from long-term debt - - - - Premium on bonds issued - - - - Proceeds from the sale of capital assets - - - - Other - - 1,140 1,140 Amounts available for appropriation 15,216,185 15,216,185 17,100,247 1,884,062 Charges to appropriations (outflows): Current General government - - - - Public safety - - - - Public service 224,000 321,500 321,312 188 Public welfare - - - - Capital outlay 8,825,640 8,728,140 4,131,417 4,596,723 Debt service - - - - Transfers to other funds - - - - Total charges to appropriations 9,049,640 9,049,640 4,452,729 4,596,911 Budgetary fund balance, June 30 6,166,545$ 6,166,545$ 12,647,518$ 6,480,973$ Budgeted Amounts 131 CITY OF BOZEMAN, MONTANA SCHEDULE OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET TO ACTUAL OTHER MAJOR FUNDS – STREET MAINTENANCE SPECIAL REVENUE Year Ended June 30, 2016 Variance with Actual Amounts Final Budget Original Final Budgetary Basis Positive (Negative) Budgetary fund balance, July 1 1,590,993$ 1,590,993$ 1,590,993$ -$ Resources (inflows): Taxes - - - - Special assessments 21,950 21,950 30,474 8,524 Licenses and permits 17,600 17,600 8,282 (9,318) Intergovernmental - - 974 974 Charges for services 4,082,124 4,082,124 3,908,030 (174,094) Fines and forfeitures - - - - Interest on investments 17,450 17,450 10,105 (7,345) Transfers from other funds 31,900 31,900 31,900 - Proceeds from long-term debt - - 47,406 47,406 Premium on bonds issued - - - - Proceeds from the sale of capital assets - - 1,959 1,959 Other - - 10,891 10,891 Amounts available for appropriation 5,762,017 5,762,017 5,641,014 (121,003) Charges to appropriations (outflows): Current General government - - - - Public safety - - - - Public service 2,710,413 2,767,913 2,767,265 648 Public welfare - - - - Capital outlay 1,426,498 767,898 668,428 99,470 Debt service 184,822 188,922 188,888 34 Transfers to other funds 626,500 1,242,000 1,241,485 515 Total charges to appropriations 4,948,233 4,966,733 4,866,066 100,667 Budgetary fund balance, June 30 813,784$ 795,284$ 774,948$ (20,336)$ Budgeted Amounts 132 CITY OF BOZEMAN, MONTANA SCHEDULE OF REVENUE, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET TO ACTUAL OTHER MAJOR FUNDS – BUILDING INSPECTION SPECIAL REVENUE Year Ended June 30, 2016 Variance with Actual Amounts Final Budget Original Final Budgetary Basis Positive (Negative) Budgetary fund balance, July 1 1,473,337$ 1,473,337$ 1,473,337$ -$ Resources (inflows): Taxes - - - - Special assessments - - - - Licenses and permits 1,599,402 1,599,402 1,777,181 177,779 Intergovernmental - - 49,761 49,761 Charges for services 6,050 6,050 1,778 (4,272) Fines and forfeitures - - - - Interest on investments 13,000 13,000 17,100 4,100 Transfers from other funds - - - - Proceeds from long- term debt - - - - Premium on bonds issued - - - - Proceeds from the sale of capital assets - - - - Other - - (2,614) (2,614) Amounts available for appropriation 3,091,789 3,091,789 3,316,543 224,754 Charges to appropriations (outflows): Current General government - - - - Public safety 1,930,496 1,929,496 1,630,541 298,955 Public service - - - - Public welfare - - - - Capital outlay - 10,000 9,688 312 Debt service - - - - Transfers to other funds - - - - Total charges to appropriations 1,930,496 1,939,496 1,640,229 299,267 Budgetary fund balance, June 30 1,161,293$ 1,152,293$ 1,676,314$ 524,021$ Budgeted Amounts 133 CITY OF BOZEMAN, MONTANA NOTES TO REQUIRED SUPPLEMENTARY INFORMATION – BUDGETARY INFORMATION Year Ended June 30, 2016 Street General Impact Street Building Fund Fees Maintenance Inspection Sources/inflows of resources Actual amounts (budgetary basis) "available for appropriation" from the budgetary comparison schedule 33,949,755$ 17,100,247$ 5,641,014$ 3,316,543$ Differences - budget to GAAP: The fund balance at the beginning of the year is a budgetary resource but is not a current-year revenue for financial reporting purposes.(6,061,967) (12,885,310) (1,590,993) (1,473,337) Transfers from other funds are inflows of budgetary resources but are not revenues for financial reporting purposes (2,122,260) (18,414) (31,900) - The proceeds from the issuance of long-term debt are a budgetary resource but are a other financing source for financial reporting purposes - - (47,406) - The proceeds from the sale of assets are budgetary resources but are regarded as a special item, rather than revenue, for financial reporting purposes (58,475) - (1,959) - Total revenues as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds 25,707,053$ 4,196,523$ 3,968,756$ 1,843,206$ Uses/outflows of resources Actual amounts (budgetary basis) "total charges to appropriations" from the budgetary comparison schedule 27,428,654$ 4,452,729$ 4,866,066$ 1,640,229$ Differences - budget to GAAP: Transfers to other funds are outflows of budgetary resources but are not expenditures for financial reporting purposes.(528,172) - (1,241,485) - Total expenditures as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds 26,900,482$ 4,452,729$ 3,624,581$ 1,640,229$ D. SUPPLEMENTAL INFORMATION COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Departmental Special Revenues – Accounts for monies received and expended for projects relating to various City departments. Fire Impact Fees Special Revenues – Accounts for the collection and expenditures associated with the fire impact fees. City Planning Board – Accounts for monies received from various sources including property taxes, fees, and County revenues. Expenditures are for short-term and long-term planning of City and adjacent County zones. Section 76-1-102 MCA provides that the purpose of City planning is to encourage local governments to improve the present health, safety, convenience, and welfare of the citizens. Health-Medical Insurance – Accounts for property tax revenues received and transferred to the general fund for premiums and deductibles on group insurance coverage for City employees. Gas Tax Apportionment – Accounts for revenues from State gasoline taxes apportioned from the State of Montana Department of Highways. Drug Forfeitures – Accounts for monies received from fines and forfeitures of drug-related criminal prosecution, to be expended on drug law enforcement and education. City-County Drug Forfeitures – Accounts for monies received from fines and forfeitures of drug-related criminal prosecution, from an inter-local agreement with the County, to be expended on drug law enforcement and education. Victim/Witness Advocate – Accounts for monies collected through the Court system to assist with Victim and Witness Advocate Program. Tree Maintenance – Accounts for special assessment revenues levied, received, and expended for tree maintenance provided to specific property owners. Law and Justice Center – Accounts for the receipt and expenditure of monies earmarked by the City Commission for the City’s share of the Law and Justice Center renovation. Community Transportation – Accounts for federal funding for highways, mass transit, and alternative transportation programs as defined by the Intermodal Surface Transportation Efficiency Act (ISTEA). Money is distributed on a per-capita basis. Fire Department Equipment– Accounts for Public Safety mill levy tax revenues for fire department capital and equipment. Economic Development Revolving Loan Fund – Accounts for revenues received and expended relative to loans made in accordance with the Community Development Block Grant Program, for economic development purposes. Housing Revolving Loan Fund – Accounts for revenues received and expended relative to loans made in accordance with the Community Development Block Grant Program, for housing development purposes. Community Housing – Accounts for money set aside by the City Commission and related expenditure for the establishment of safe, decent, and affordable housing for low and moderate-income citizens. Downtown Improvement District – In November 1995, the City adopted an Urban Renewal Plan for the downtown area. This fund accounts for the revenue and expenditures associated with the district. Street Lighting – Accounts for special assessment revenues levied, received, and expended for street and public highway lighting provided to specific property owners. Park Land – Accounts for monies donated for the purpose of acquiring and developing City Parks. Municipal Court Restitution – Accounts for checks that were canceled on the restitution checking account, per MCA 46-18-250. TIF N.E. Urban Renewal – In August of 2005, the City created an Urban Renewal Plan for the Northeast Urban section of Bozeman. This fund accounts for the revenue and expenditures associated with the district. TIF N 7th Corridor - In August of 2005, the City created a Renewal Plan for the North 7th Avenue business district. This fund accounts for the revenue and expenditures associated with the district. DEBT SERVICE FUNDS Special Improvement District (SID) Revolving – Accounts for property tax revenues received and expended for the payment of special improvement district bond principal and interest. General Obligation Bonds Debt Service Fund – Accounts for the debt service payments associated with the Library and Transportation general obligation bonds. Tax Increment Financing Bonds Debt Service Fund – Accounts for the debt service payments associated with the Tax Increment Urban Renewal Revenue Bonds issued as partial funding for the construction of a Downtown Intermodal Parking Facility. CAPITAL IMPROVEMENT FUNDS General Improvements Capital Projects Fund – Accounts for the construction of general improvement projects financed by special assessments other than those financed by proprietary funds. PERMANENT FUNDS Perpetual Cemetery Care – Accounts for 15% maintenance fee received from the sale of City cemetery plots, which is to be used for perpetual care. The interest income from the trust is transferred to the general fund for use in maintaining the City’s cemetery. 134 CITY OF BOZEMAN, MONTANA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS June 30, 2016 City Planning Health-Medical Community Departmental Board Insurance Transportation ASSETS Cash and cash equivalents 2,018,924$ 633,909$ 218,580$ 1,617$ Receivables: Property taxes 4,366 8,751 117,801 - Accrued interest - - - - Customers, net 4,968 - - 108,185 Special assessments - - - - Other governments 73,626 - - - Others - - - - Advances to other city funds - - - - Prepaid expenditures - - - - Notes receivable - - - - Restricted cash and cash equivalents 25,000 457,039 - - Total assets 2,126,884$ 1,099,699$ 336,381$ 109,802$ LIABILITIES Accounts payable 133,620$ 31,490$ -$ 43,238$ Escheat property payable - - - - Accrued employee benefits payable 16 346 - - Total liabilities 133,636 31,836 - 43,238 DEFERRED INFLOWS OF RESOURCES Unavailable revenue-property taxes 327 666 8,261 - Unavailable revenue-special assessments - - - - Total deferred inflows of resources 327 666 8,261 - FUND BALANCES Nonspendable - - - - Restricted 182,226 1,067,197 328,120 66,564 Committed 1,875,418 - - - Assigned - - - - Unassigned (64,723) - - - Total fund balances 1,992,921 1,067,197 328,120 66,564 Total liabilities, deferred inflows of resources, and fund balances 2,126,884$ 1,099,699$ 336,381$ 109,802$ (continued) Special Revenue Funds 135 CITY OF BOZEMAN, MONTANA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) June 30, 2016 Special Revenue Funds Downtown Gas Tax Tree Fire Improvement Apportionment Maintenance Impact Fees District ASSETS Cash and cash equivalents 954,601$ 261,719$ -$ 2,570,451$ Receivables: Property taxes - - - 121,383 Accrued interest - - - 2,502 Customers, net 2,634 - - - Special assessments - 13,615 - 3,651 Other governments - - - - Others - - - - Advances to other city funds - - - - Prepaid expenditures - - - - Notes receivable - - - - Restricted cash and cash equivalents - - 1,238,167 - Total assets 957,235$ 275,334$ 1,238,167$ 2,697,987$ LIABILITIES Accounts payable -$ 22,534$ 680$ 1,018,622$ Escheat property payable - - - - Accrued employee benefits payable - 205 - - Total liabilities - 22,739 680 1,018,622 DEFERRED INFLOWS OF RESOURCES Unavailable revenue-property taxes - - - - Unavailable revenue-special assessments - 9,100 - - Total deferred inflows of resources - 9,100 - - FUND BALANCES Nonspendable - - - - Restricted 957,235 243,495 1,237,487 1,679,365 Committed - - - - Assigned - - - - Unassigned - - - - Total fund balances 957,235 243,495 1,237,487 1,679,365 Total liabilities, deferred inflows of resources, and fund balances 957,235$ 275,334$ 1,238,167$ 2,697,987$ (continued) 136 CITY OF BOZEMAN, MONTANA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) June 30, 2016 Special Revenue Funds Economic Housing City-County Development Community Revolving Drug Drug Revolving Loan Housing Loan Fund Forfeitures Forfeitures ASSETS Cash and cash equivalents -$ 492,717$ 1,319$ 35,991$ 157,075$ Receivables: Property taxes - 12,602 - - - Accrued interest - - - Customers, net 351,181 - - 3,840 - Special assessments - - - - - Other governments - - - - - Others - - - - - Advances to other city funds - - - - - Prepaid expenditures - - - - - Notes receivable 506,249 78,739 6,928 - - Restricted cash and cash equivalents - - - - - Total assets 857,430$ 584,058$ 8,247$ 39,831$ 157,075$ LIABILITIES Accounts payable -$ -$ -$ 5,226$ 28,667$ Escheat property payable - - - - - Accrued employee benefits payable - - - 103 - Total liabilities - - - 5,329 28,667 DEFERRED INFLOWS OF RESOURCES Unavailable revenue-property taxes - 515 - - - Unavailable revenue-special assessments - - - - - Total deferred inflows of resources - 515 - - - FUND BALANCES Nonspendable - - - - - Restricted 857,430 - 8,247 34,502 - Committed - 583,543 - - 128,408 Assigned - - - - - Unassigned - - - - - Total fund balances 857,430 583,543 8,247 34,502 128,408 Total liabilities, deferred inflows of resources, and fund balances 857,430$ 584,058$ 8,247$ 39,831$ 157,075$ (continued) 137 CITY OF BOZEMAN, MONTANA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) June 30, 2016 Special Revenue Funds Law and Street Arterial Justice and Collector TIF TIF N.E.Victim/Witness Fire Department Center District N 7th Corridor Urban Renewal Advocate Equipment ASSETS Cash and cash equivalents -$ 995,022$ 2,028,639$ 530,849$ 403,375$ 666,680$ Receivables: Property taxes - - 27,345 11,213 - 17,450 Accrued interest - - 2,424 - - - Customers, net - - - - 4,907 - Special assessments - 13,150 - - - - Other governments - - - - - - Others - - - - - - Advances to other city funds - - - - - - Prepaid expenditures 350,625 - - - - - Notes receivable - - - - - - Restricted cash and cash equivalents - - - - - - Total assets 350,625$ 1,008,172$ 2,058,408$ 542,062$ 408,282$ 684,130$ LIABILITIES Accounts payable -$ 137$ 221,147$ 160,472$ 31,027$ 788$ Escheat property payable - - - - - - Accrued employee benefits payable - - - - - - Total liabilities - 137 221,147 160,472 31,027 788 DEFERRED INFLOWS OF RESOURCES Unavailable revenue-property taxes - - 1,450 - - 1,290 Unavailable revenue-special assessments - - - - - - Total deferred inflows of resources - - 1,450 - - 1,290 FUND BALANCES Nonspendable 350,625 - - - - - Restricted - 1,008,035 1,835,811 381,590 377,255 - Committed - - - - - 682,052 Assigned - - - - - - Unassigned - - - - - - Total fund balances 350,625 1,008,035 1,835,811 381,590 377,255 682,052 Total liabilities, deferred inflows of resources, and fund balances 350,625$ 1,008,172$ 2,058,408$ 542,062$ 408,282$ 684,130$ (continued) 138 CITY OF BOZEMAN, MONTANA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) June 30, 2016 Special Revenue Funds Street Park Municipal Court Lighting Land Restitution Total ASSETS Cash and cash equivalents 605,685$ 424,870$ 21,157$ 13,023,180$ Receivables: Property taxes - - - 320,911 Accrued interest - - - 4,926 Customers, net - - - 475,715 Special assessments 10,135 - - 40,551 Other governments - - - 73,626 Others - - - Advances to other city funds - - - - Prepaid expenditures - - - 350,625 Notes receivable - - - 591,916 Restricted cash and cash equivalents - - - 1,720,206 Total assets 615,820$ 424,870$ 21,157$ 16,601,656$ LIABILITIES Accounts payable 28,179$ -$ 1,000$ 1,726,827$ Escheat property payable - - 20,052 20,052 Accrued employee benefits payable - - - 670 Total liabilities 28,179 - 21,052 1,747,549 DEFERRED INFLOWS OF RESOURCES Unavailable revenue-property taxes - - - 12,509 Unavailable revenue-special assessments - - - 9,100 Total deferred inflows of resources - - - 21,609 FUND BALANCES Nonspendable - - - 350,625 Restricted 587,641 424,870 105 11,277,175 Committed - - - 3,269,421 Assigned - - - Unassigned - - - (64,723) Total fund balances 587,641 424,870 105 14,832,498 Total liabilities, deferred inflows of resources, and fund balances 615,820$ 424,870$ 21,157$ 16,601,656$ (continued) 139 CITY OF BOZEMAN, MONTANA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) June 30, 2016 SID G.O.TIF Revolving Bonds Bonds Total ASSETS Cash and cash equivalents 2,924,604$ 70,240$ -$ 2,994,844$ Receivables: Property taxes - 67,407 - 67,407 Accrued interest 3,888 - - 3,888 Customers, net - - - - Special assessments - - - - Other governments - - - - Others - - - - Advances to other city funds 458,208 - - 458,208 Prepaid expenditures - - - - Notes receivable - - - - Restricted cash and cash equivalents - - - - Total assets 3,386,700$ 137,647$ -$ 3,524,347$ LIABILITIES Accounts payable -$ 500$ -$ 500$ Escheat property payable - - - - Accrued employee benefits payable - - - - Total liabilities - 500 - 500 DEFERRED INFLOWS OF RESOURCES Unavailable revenue-property taxes - 4,188 - 4,188 Unavailable revenue-special assessments - - - - Total deferred inflows of resources - 4,188 - 4,188 FUND BALANCES Nonspendable - - - - Restricted 3,386,700 132,959 - 3,519,659 Committed - - - - Assigned - - - - Unassigned - - - - Total fund balances 3,386,700 132,959 - 3,519,659 Total liabilities, deferred inflows of resources, and fund balances 3,386,700$ 137,647$ -$ 3,524,347$ (continued) Debt Service Funds 140 CITY OF BOZEMAN, MONTANA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) June 30, 2016 Capital Permanent Total Projects Fund Nonmajor Perpetual Governmental Construction Cemetery Care Funds ASSETS Cash and cash equivalents 12,051,817$ -$ 28,069,841$ Receivables: Property taxes - - 388,318 Accrued interest 19,627 - 28,441 Customers, net 39,223 1,745 516,683 Special assessments - - 40,551 Other governments - - 73,626 Others - - - Advances to other city funds - - 458,208 Prepaid expenditures - - 350,625 Notes receivable - - 591,916 Restricted cash and cash equivalents - 1,076,326 2,796,532 Total assets 12,110,667$ 1,078,071$ 33,314,741$ LIABILITIES Accounts payable 737,804$ 2,121$ 2,467,252$ Escheat property payable - - 20,052 Accrued employee benefits payable - - 670 Total liabilities 737,804 2,121 2,487,974 DEFERRED INFLOWS OF RESOURCES Unavailable revenue-property taxes - - 16,697 Unavailable revenue-special assessments - - 9,100 Total deferred inflows of resources - - 25,797 FUND BALANCES Nonspendable - 1,075,950 1,426,575 Restricted 9,230,464 - 24,027,298 Committed 258,842 - 3,528,263 Assigned 1,883,557 - 1,883,557 Unassigned - - (64,723) Total fund balances 11,372,863 1,075,950 30,800,970 Total liabilities, deferred inflows of resources, and fund balances 12,110,667$ 1,078,071$ 33,314,741$ 141 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS Year ended June 30, 2016 Special Revenue Funds City Planning Health-Medical Community Departmental Board Insurance Transportation REVENUES Taxes 124,100$ 172,383$ 2,334,153$ -$ Special assessments - - - - Licenses and permits - - - - Intergovernmental 464,457 145,697 - 116,410 Charges for services 31,850 774,337 - - Fines and forfeitures - - - - Interest on investments 17,807 6,774 - 4,788 Interest on loans receivable - - - - Other 198,548 54,549 - - Total revenues 836,762 1,153,740 2,334,153 121,198 EXPENDITURES Current: General government - 1,017,254 - - Public safety 230,794 - - - Public service - - - - Public welfare 333,820 - - - Other 82,662 - 1,806 - Capital outlay 117,933 - - 154,630 Debt service: Principal - - - - Interest and fiscal fees - - - - Total expenditures 765,209 1,017,254 1,806 154,630 Revenues over (under) expenditures 71,553 136,486 2,332,347 (33,432) OTHER FINANCING SOURCES (USES) Transfers in - 152,471 - - Transfers out - - (2,185,079) (439,470) Sale of capital assets - - - 107,300 Total other financing sources (uses)- 152,471 (2,185,079) (332,170) Net change in fund balance 71,553 288,957 147,268 (365,602) FUND BALANCES, beginning of year 1,921,368 778,240 180,852 432,166 FUND BALANCES, end of year 1,992,921$ 1,067,197$ 328,120$ 66,564$ (continued) 142 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Special Revenue Funds Downtown Gas Tax Tree Fire Improvement Apportionment Maintenance Impact Fees District REVENUES Taxes -$ -$ -$ 985,532$ Special assessments - 1,093 - 120,508 Licenses and permits - - - Intergovernmental 676,439 988 - 56,050 Charges for services - 453,313 338,461 - Fines and forfeitures - - - - Interest on investments 6,844 1,876 9,787 16,927 Interest on loans receivable - - - - Other - 1,735 - 1,500 Total revenues 683,283 459,005 348,248 1,180,517 EXPENDITURES Current: General government - - - - Public safety - - 2,966 - Public service 197,366 - - - Public welfare - 433,107 - 576,077 Other - - - - Capital outlay 224,573 - - - Debt service: Principal - - - - Interest and fiscal fees - - - - Total expenditures 421,939 433,107 2,966 576,077 Revenues over (under) expenditures 261,344 25,898 345,282 604,440 OTHER FINANCING SOURCES (USES) Transfers in - - - - Transfers out - - - (797,116) Sale of capital assets - - - - Total other financing sources (uses)- - - (797,116) Net change in fund balance 261,344 25,898 345,282 (192,676) FUND BALANCES, beginning of year 695,891 217,597 892,205 1,872,041 FUND BALANCES, end of year 957,235$ 243,495$ 1,237,487$ 1,679,365$ (continued) 143 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Special Revenue Funds Economic Housing City-County Development Community Revolving Drug Drug Revolving Loan Housing Loan Fund Forfeitures Forfeitures REVENUES Taxes -$ 257,191$ -$ -$ -$ Special assessments - - - - - Licenses and permits - - - - - Intergovernmental - - - 111,699 - Charges for services - - - - - Fines and forfeitures - - - 55,879 1,830 Interest on investments 360 3,452 - 202 1,379 Interest on loans receivable 33,991 600 247 - - Other - 10,030 - - - Total revenues 34,351 271,273 247 167,780 3,209 EXPENDITURES Current: General government - - - - - Public safety - - - 243,876 28,667 Public service - - - - - Public welfare 32,000 101,225 - - - Other - - - - - Capital outlay - - - - - Debt service: Principal - - - - - Interest and fiscal fees - - - - - Total expenditures 32,000 101,225 - 243,876 28,667 Revenues over (under) expenditures 2,351 170,048 247 (76,096) (25,458) OTHER FINANCING SOURCES (USES) Transfers in - - - 110,598 - Transfers out - - - - - Sale of capital assets - - - - - Total other financing sources (uses)- - - 110,598 - Net change in fund balance 2,351 170,048 247 34,502 (25,458) FUND BALANCES, beginning of year 855,079 413,495 8,000 - 153,866 FUND BALANCES, end of year 857,430$ 583,543$ 8,247$ 34,502$ 128,408$ (continued) 144 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Special Revenue Funds Law and Street Arterial Justice and Collector TIF TIF N.E.Victim/Witness Fire Department Center District N 7th Corridor Urban Renewal Advocate Equipment REVENUES Taxes -$ -$ 686,023$ 148,335$ -$ 344,501$ Special assessments - 915 - - - - Licenses and permits - - - - - - Intergovernmental - - 37,926 1,353 - - Charges for services - 565,286 - - - - Fines and forfeitures - - - - 64,419 - Interest on investments - 2,759 16,392 3,999 3,670 4,471 Interest on loans receivable - - - - - - Other - - - - - - Total revenues - 568,960 740,341 153,687 68,089 348,972 EXPENDITURES Current: General government - - - - 81,445 - Public safety 19,125 - - - - - Public service - 395 - - - - Public welfare - - 197,665 151,634 - - Other - - .- - - Capital outlay - - 1,112,959 20,000 - 39,355 Debt service: Principal - - - - - - Interest and fiscal fees - - - - - - Total expenditures 19,125 395 1,310,624 171,634 81,445 39,355 Revenues over (under) expenditures (19,125) 568,565 (570,283) (17,947) (13,356) 309,617 OTHER FINANCING SOURCES (USES) Transfers in - 439,470 343,479 - - - Transfers out - - (41,515) (35,000) - - Sale of capital assets - - - - - - Total other financing sources (uses)- 439,470 301,964 (35,000) - - Net change in fund balance (19,125) 1,008,035 (268,319) (52,947) (13,356) 309,617 FUND BALANCES, beginning of year 369,750 - 2,104,130 434,537 390,611 372,435 FUND BALANCES, end of year 350,625$ 1,008,035$ 1,835,811$ 381,590$ 377,255$ 682,052$ (continued) 145 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Special Revenue Funds Tourism Municipal Business Street Park Court Improvement Lighting Land Restitution Totals REVENUES Taxes -$ -$ -$ -$ 5,052,218$ Special assessments 407,797 - - 530,313 Licenses and permits - - - - - Intergovernmental - - - - 1,611,019 Charges for services - - - - 2,163,247 Fines and forfeitures - - - - 122,128 Interest on investments - 5,274 3,626 - 110,387 Interest on loans receivable - - - - 34,838 Other - - 43,197 - 309,559 Total revenues - 413,071 46,823 - 9,933,709 EXPENDITURES Current: General government - - - - 1,098,699 Public safety - - - - 525,428 Public service - 407,503 - - 605,264 Public welfare 27,981 - - - 1,853,509 Other - - - - 84,468 Capital outlay - - - - 1,669,450 Debt service: Principal - - - - - Interest and fiscal fees - - - - - Total expenditures 27,981 407,503 - - 5,836,818 Revenues over (under) expenditures (27,981) 5,568 46,823 - 4,096,891 OTHER FINANCING SOURCES (USES) Transfers in - - - 1,046,018 Transfers out - (31,900) - - (3,530,080) Sale of capital assets - - - - 107,300 Total other financing sources (uses)- (31,900) - - (2,376,762) Net change in fund balance (27,981) (26,332) 46,823 - 1,720,129 FUND BALANCES, beginning of year 27,981 613,973 378,047 105 13,112,369 FUND BALANCES, end of year -$ 587,641$ 424,870$ 105$ 14,832,498$ (continued) 146 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 SID G.O.TIF Revolving Bonds Bonds Totals REVENUES Taxes -$ 1,346,613$ -$ 1,346,613$ Special assessments - - - - Licenses and permits - - - - Intergovernmental - - - - Charges for services - - - - Fines and forfeitures - - - - Interest on investments 26,315 929 - 27,244 Interest on loans receivable 3,714 - - 3,714 Other - - - - Total revenues 30,029 1,347,542 - 1,377,571 EXPENDITURES Current: General government - - - - Public safety - - - - Public service - - - - Public welfare - - - - Other - - - Capital outlay - - - - Debt service:- Principal - 750,000 195,000 945,000 Interest and fiscal fees - 605,091 228,638 833,729 Total expenditures - 1,355,091 423,638 1,778,729 Revenues over (under) expenditures 30,029 (7,549) (423,638) (401,158) OTHER FINANCING SOURCES (USES) Transfers in - 423,638 423,638 Transfers out - - - - Sale of capital assets - - - - Total other financing sources (uses)- - 423,638 423,638 Net change in fund balance 30,029 (7,549) - 22,480 FUND BALANCES, beginning of year 3,356,671 140,508 - 3,497,179 FUND BALANCES, end of year 3,386,700$ 132,959$ -$ 3,519,659$ (continued) Debt Service Funds 147 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Capital Permanent Total Projects Fund Nonmajor Cemetery Governmental Construction Perpetual Care Funds REVENUES Taxes -$ -$ 6,398,831$ Special assessments - - 530,313 Licenses and permits - - - Intergovernmental 89,307 - 1,700,326 Charges for services - 75,830 2,239,077 Fines and forfeitures - - 122,128 Interest on investments 140,297 9,180 287,108 Interest on loans receivable - - 38,552 Other 15,200 - 324,759 Total revenues 244,804 85,010 11,641,094 EXPENDITURES Current: General government - - 1,098,699 Public safety - - 525,428 Public service - - 605,264 Public welfare 76,468 - 1,929,977 Other - - 84,468 Capital outlay 2,307,160 - 3,976,610 Debt service:- Principal - - 945,000 Interest and fiscal fees - - 833,729 Total expenditures 2,383,628 - 9,999,175 Revenues over (under) expenditures (2,138,824) 85,010 1,641,919 OTHER FINANCING SOURCES (USES) Transfers in 2,841,183 - 4,310,839 Transfers out - - (3,530,080) Sale of capital assets 60,250 - 167,550 Total other financing sources (uses)2,901,433 - 948,309 Net change in fund balance 762,609 85,010 2,590,228 FUND BALANCES, beginning of year 10,610,254 990,940 28,210,742 FUND BALANCES, end of year 11,372,863$ 1,075,950$ 30,800,970$ BUDGET TO ACTUAL SCHEDULES OTHER MAJOR FUNDS 148 CITY OF BOZEMAN, MONTANA SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL OTHER MAJOR FUNDS – SID SINKING FUND Year Ended June 30, 2016 Variance with Actual Amounts Final Budget Original Final Budgetary Basis Positive (Negative) Budgetary fund balance, July 1 478,181$ 478,181$ 478,181$ -$ Resources (inflows): Taxes - - - - Special assessments 616,449 616,449 705,143 88,694 Licenses and permits - - - - Intergovernmental - - - - Charges for services - - 1,953 1,953 Fines and forfeitures - - - - Interest on investments 9,940 9,940 8,886 (1,054) Transfers from other funds - - - - Proceeds from long-term debt - - - - Premium on bonds issued - - - - Proceeds from the sale of capital assets - - - Other - - 213 213 Amounts available for appropriation 1,104,570 1,104,570 1,194,376 89,806 Charges to appropriations (outflows): Current: General government - - - - Public safety - - - - Public service - - - - Public welfare - - - - Capital outlay - - - - Debt service 379,800 379,800 267,343 112,457 Transfers to other funds 10,700 197,700 196,755 945 Total charges to appropriations 390,500 577,500 464,098 113,402 Budgetary fund balance, June 30 714,070$ 527,070$ 730,278$ 203,208$ Budgeted Amounts 149 CITY OF BOZEMAN, MONTANA NOTE TO BUDGET TO ACTUAL STATEMENT - OTHER MAJOR FUNDS Year Ended June 30, 2016 SID Sinking Fund Sources/inflows of resources Actual amounts (budgetary basis) "available for appropriation" from the budgetary comparison schedule 1,194,376$ Differences - budget to GAAP: The fund balance at the beginning of the year is a budgetary resource but is not a current-year revenue for financial reporting purposes.(478,181) Transfers from other funds are inflows of budgetary resources but are not revenues for financial reporting purposes.- The proceeds from the issuance of long-term debt are a budgetary resource but are a other financing source for financial reporting purposes - The proceeds from the sale of assets are budgetary resources but are regarded as a special item, rather than revenue, for financial reporting purposes - Total revenues as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds 716,195$ Uses/outflows of resources Actual amounts (budgetary basis) "total charges to appropriations" from the budgetary comparison schedule 464,098$ Differences - budget to GAAP: Transfers to other funds are outflows of budgetary resources but are not expenditures for financial reporting purposes.(196,755) Total expenditures as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds 267,343$ BUDGET TO ACTUAL SCHEDULES – NONMAJOR FUNDS 150 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS Year Ended June 30, 2016 Special Revenue Funds Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes 116,428$ 124,100$ 7,672$ 178,125$ 172,383$ (5,742)$ Special assessments - - - - - - Licenses and permits - - - - - - Intergovernmental 346,133 464,457 118,324 109,225 145,697 36,472 Charges for services 27,500 31,850 4,350 461,150 774,337 313,187 Fines and forfeitures - - - - - - Interest on investments 1,230 17,807 16,577 3,000 6,774 3,774 Loan repayment - - - - - - Other 59,150 198,548 139,398 13,000 54,549 41,549 Total revenues 550,441 836,762 286,321 764,500 1,153,740 389,240 EXPENDITURES - BUDGET UNIT 798,569 765,209 33,360 1,215,809 1,017,254 198,555 Revenues over (under) expenditures (248,128) 71,553 319,681 (451,309) 136,486 587,795 OTHER FINANCING SOURCES (USES) Transfers in - - - 164,228 152,471 (11,757) Transfers out - - - - - - Long-term debt issued - - - - - - Sale of capital assets - - - - - - Total other financing sources (uses)- - - 164,228 152,471 (11,757) Revenues and other sources over (under) expenditures (248,128)$ 71,553 319,681$ (287,081)$ 288,957 576,038$ FUND BALANCES, beginning of year 1,921,368 778,240 FUND BALANCES, end of year 1,992,921$ 1,067,197$ (continued) Departmental Special Revenues City Planning Board 151 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Special Revenue Funds Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes 2,346,544$ 2,334,153$ (12,391)$ -$ -$ -$ Special assessments - - - - - - Licenses and permits - - - - - - Intergovernmental - - - 239,548 116,410 (123,138) Charges for services - - - - - - Fines and forfeitures - - - - - - Interest on investments - - - - 4,788 4,788 Loan repayment - - - - - - Other - - - - - - Total revenues 2,346,544 2,334,153 (12,391) 239,548 121,198 (118,350) EXPENDITURES - BUDGET UNIT 1,850 1,806 44 239,548 154,630 84,918 Revenues over (under) expenditures 2,344,694 2,332,347 (12,347) - (33,432) (33,432) OTHER FINANCING SOURCES (USES) Transfers in - - - - - - Transfers out (2,344,694) (2,185,079) 159,615 (439,500) (439,470) 30 Long-term debt issued - - - - - - Sale of capital assets - - - - 107,300 107,300 Total other financing sources (uses)(2,344,694) (2,185,079) 159,615 (439,500) (332,170) 107,330 Revenues and other sources over (under) expenditures -$ 147,268 147,268$ (439,500)$ (365,602) 73,898$ FUND BALANCES, beginning of year 180,852 432,166 FUND BALANCES, end of year 328,120$ 66,564$ (continued) Health-Medical Insurance Community Transportation 152 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes -$ -$ -$ -$ -$ -$ Special assessments - - - 1,350 1,093 (257) Licenses and permits - - - - - - Intergovernmental 658,500 676,439 17,939 250 988 738 Charges for services - - - 451,496 453,313 1,817 Fines and forfeitures - - - - - - Interest on investments 3,900 6,844 2,944 1,600 1,876 276 Loan repayment - - - - - - Other - - - 6,000 1,735 (4,265) Total revenues 662,400 683,283 20,883 460,696 459,005 (1,691) EXPENDITURES - BUDGET UNIT 1,121,500 421,939 699,561 473,051 433,107 39,944 Revenues over (under) expenditures (459,100) 261,344 720,444 (12,355) 25,898 38,253 OTHER FINANCING SOURCES (USES) Transfers in - - - - - - Transfers out - - - - - - Long-term debt issued - - - - - - Sale of capital assets - - - - - - Total other financing sources (uses)- - - - - - Revenues and other sources over (under) expenditures (459,100)$ 261,344 720,444$ (12,355)$ 25,898 38,253$ FUND BALANCES, beginning of year 695,891 217,597 FUND BALANCES, end of year 957,235$ 243,495$ (continued) Tree Maintenance Special Revenue Funds Gas Tax Apportionment 153 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Special Revenue Funds Fire Impact Fees Special Revenue Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes -$ -$ - 762,113$ 985,532$ 223,419$ Special assessments - - - 132,200 120,508 (11,692) Licenses and permits - - - - - - Intergovernmental - - - 45,436 56,050 10,614 Charges for services 265,000 338,461 73,461 - - - Fines and forfeitures - - - - - - Interest on investments - 9,787 9,787 11,000 16,927 5,927 Loan repayment - - - - - - Other - - - 14,500 1,500 (13,000) Total revenues 265,000 348,248 83,248 965,249 1,180,517 215,268 EXPENDITURES - BUDGET UNIT 3,000 2,966 34 1,263,100 576,077 687,023 Revenues over (under) expenditures 262,000 345,282 83,282 (297,851) 604,440 902,291 OTHER FINANCING SOURCES (USES) Transfers in - - - - - - Transfers out - - - (797,200) (797,116) 84 Long-term debt issued - - - - - - Sale of capital assets - - - - - - Total other financing sources (uses)- - - (797,200) (797,116) 84 Revenues and other sources over (under) expenditures 262,000$ 345,282 83,282$ (1,095,051)$ (192,676) 902,375$ FUND BALANCES, beginning of year 892,205 1,872,041 FUND BALANCES, end of year 1,237,487$ 1,679,365$ (continued) Downtown Improvement District 154 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Special Revenue Funds Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes -$ -$ -$ 241,158$ 257,191$ 16,033$ Special assessments - - - - - - Licenses and permits - - - - - - Intergovernmental - - - - - - Charges for services - - - - - - Fines and forfeitures - - - - - - Interest on investments - 360 360 2,850 3,452 602 Loan repayment 48,500 33,991 (14,509) 9,500 600 (8,900) Other - - - - 10,030 10,030 Total revenues 48,500 34,351 (14,149) 253,508 271,273 17,765 EXPENDITURES - BUDGET UNIT 32,000 32,000 - 101,400 101,225 175 Revenues over (under) expenditures 16,500 2,351 (14,149) 152,108 170,048 17,940 OTHER FINANCING SOURCES (USES) Transfers in - - - - - - Transfers out - - - - - - Long-term debt issued - - - - - - Sale of capital assets - - - - - - Total other financing sources (uses)- - - - - - Revenues and other sources over (under) expenditures 16,500$ 2,351 (14,149)$ 152,108$ 170,048 17,940$ FUND BALANCES, beginning of year 855,079 413,495 FUND BALANCES, end of year 857,430$ 583,543$ (continued) Economic Development Revolving Loan Fund Community Housing 155 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes -$ -$ -$ -$ -$ -$ Special assessments - - - - - - Licenses and permits - - - - - - Intergovernmental - - - 54,000 111,699 57,699 Charges for services - - - - - - Fines and forfeitures - - - 73,000 55,879 (17,121) Interest on investments 50 - (50) - 202 202 Loan repayment 5,275 247 (5,028) - - - Other - - - - - - Total revenues 5,325 247 (5,078) 127,000 167,780 40,780 EXPENDITURES - BUDGET UNIT - - - 244,039 243,876 163 Revenues over (under) expenditures 5,325 247 (5,078) (117,039) (76,096) 40,943 OTHER FINANCING SOURCES Transfers in - - - 110,562 110,598 36 Transfers out - - - - - - Long-term debt issued - - - - - - Sale of capital assets - - - - - - Total other financing sources (uses)- - - 110,562 110,598 36 Revenues and other sources over (under) expenditures 5,325$ 247 (5,078)$ (6,477)$ 34,502 40,979$ FUND BALANCES, beginning of year 8,000 - FUND BALANCES, end of year 8,247$ 34,502$ (continued) Housing Revolving Loan Fund Drug Forfeitures Special Revenue Funds 156 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes -$ -$ -$ -$ -$ -$ Special assessments - - - - - - Licenses and permits - - - - - - Intergovernmental - - - - - - Charges for services - - - - - - Fines and forfeitures - 1,830 1,830 - - - Interest on investments - 1,379 1,379 - - - Loan repayment - - - - - - Other - - - - - - Total revenues - 3,209 3,209 - - - EXPENDITURES - BUDGET UNIT 29,000 28,667 333 19,125 19,125 - Revenues over (under) expenditures (29,000) (25,458) 3,542 (19,125) (19,125) - OTHER FINANCING SOURCES Transfers in - - - - - - Transfers out - - - - - - Long-term debt issued - - - - - - Sale of capital assets - - - - - - Total other financing sources (uses)- - - - - - Revenues and other sources over (under) expenditures (29,000)$ (25,458) 3,542$ (19,125)$ (19,125) -$ FUND BALANCES, beginning of year 153,866 369,750 FUND BALANCES, end of year 128,408$ 350,625$ (continued) City-County Drug Forfeitures Law and Justice Center Special Revenue Funds 157 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes -$ -$ -$ 719,213$ 686,023$ (33,190)$ Special assessments 575,996 915 (575,081) - - - Licenses and permits - - - - - - Intergovernmental - - - - 37,926 37,926 Charges for services - 565,286 565,286 - - - Fines and forfeitures - - - - - - Interest on investments - 2,759 2,759 8,800 16,392 7,592 Loan repayment - - - - - - Other - - - - - - Total revenues 575,996 568,960 (7,036) 728,013 740,341 12,328 EXPENDITURES - BUDGET UNIT 1,000,496 395 1,000,101 1,310,980 1,310,624 356 Revenues over (under) expenditures (424,500) 568,565 993,065 (582,967) (570,283) 12,684 OTHER FINANCING SOURCES Transfers in - 439,470 439,470 - 343,479 343,479 Transfers out - - - (41,600) (41,515) 85 Long-term debt issued - - - - - - Sale of capital assets - - - - - - Total other financing sources (uses)- 439,470 439,470 (41,600) 301,964 343,564 Revenues and other sources over (under) expenditures (424,500)$ 1,008,035 1,432,535$ (624,567)$ (268,319) 356,248$ FUND BALANCES, beginning of year - 2,104,130 FUND BALANCES, end of year 1,008,035$ 1,835,811$ (continued) Street Arterial and Collector District TIF N 7th Corridor Special Revenue Funds 158 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes 85,000$ 148,335$ 63,335$ -$ -$ -$ Special assessments - - - - - - Licenses and permits - - - - - - Intergovernmental - 1,353 1,353 - - - Charges for services - - - - - - Fines and forfeitures - - - 76,800 64,419 (12,381) Interest on investments 1,800 3,999 2,199 3,000 3,670 670 Loan repayment - - - - - - Other - - - - - - Total revenues 86,800 153,687 66,887 79,800 68,089 (11,711) EXPENDITURES - BUDGET UNIT 386,002 171,634 214,368 140,000 81,445 58,555 Revenues over (under) expenditures (299,202) (17,947) 281,255 (60,200) (13,356) 46,844 OTHER FINANCING SOURCES Transfers in - - - - - - Transfers out (35,000) (35,000) - - - - Long-term debt issued - - - - - - Sale of capital assets - - - - - - Total other financing sources (uses)(35,000) (35,000) - - - - Revenues and other sources over (under) expenditures (334,202)$ (52,947) 281,255$ (60,200)$ (13,356) 46,844$ FUND BALANCES, beginning of year 434,537 390,611 FUND BALANCES, end of year 381,590$ 377,255$ (continued) Victim/Witness Advocate Special Revenue Funds TIF N.E. Urban Renewal 159 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes 321,324$ 344,501$ 23,177$ -$ -$ -$ Special assessments - - - 368,160 407,797 39,637 Licenses and permits - - - - - - Intergovernmental - - - - - - Charges for services - - - - - - Fines and forfeitures - - - - - - Interest on investments 600 4,471 3,871 - 5,274 5,274 Loan repayment - - - - - - Other - - - - - - Total revenues 321,924 348,972 27,048 368,160 413,071 44,911 EXPENDITURES - BUDGET UNIT 40,000 39,355 645 418,205 407,503 10,702 Revenues over (under) expenditures 281,924 309,617 27,693 (50,045) 5,568 55,613 OTHER FINANCING SOURCES Transfers in - - - - - - Transfers out - - - (31,900) (31,900) - Long-term debt issued - - - - - - Sale of capital assets - - - - - - Total other financing sources (uses)- - - (31,900) (31,900) - Revenues and other sources over (under) expenditures 281,924$ 309,617 27,693$ (81,945)$ (26,332) 55,613$ FUND BALANCES, beginning of year 372,435 613,973 FUND BALANCES, end of year 682,052$ 587,641$ (continued) Street LightingFire Department Equipment 160 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes -$ -$ -$ -$ -$ -$ Special assessments - - - - - - Licenses and permits - - - - - - Intergovernmental - - - - - - Charges for services - - - - - - Fines and forfeitures - - - - - - Interest on investments - 3,626 3,626 - - - Loan repayment - - - - - - Other - 43,197 43,197 - - - Total revenues - 46,823 46,823 - - - EXPENDITURES - BUDGET UNIT - - - - - - Revenues over (under) expenditures - 46,823 46,823 - - - OTHER FINANCING SOURCES Transfers in - - - - - - Transfers out - - - - - - Long-term debt issued - - - - - - Sale of capital assets - - - - - - Total other financing sources (uses)- - - - - - Revenues and other sources over (under) expenditures -$ 46,823 46,823$ -$ - -$ FUND BALANCES, beginning of year 378,047 105 FUND BALANCES, end of year 424,870$ 105$ (continued) Special Revenue Funds Park Land Municipal Court Restitution 161 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Variance Positive Budget Actual (Negative) REVENUES Taxes 4,769,905$ 5,052,218$ 282,313$ Special assessments 1,077,706 530,313 (547,393) Licenses and permits - - - Intergovernmental 1,453,092 1,611,019 157,927 Charges for services 1,205,146 2,163,247 958,101 Fines and forfeitures 149,800 122,128 (27,672) Interest on investments 37,830 110,387 72,557 Loan repayment 63,275 34,838 (28,437) Other 92,650 309,559 216,909 Total revenues 8,849,404 9,933,709 1,084,305 EXPENDITURES - BUDGET UNIT 8,837,674 5,808,837 3,028,837 Revenues over (under) expenditures 11,730 4,124,872 4,113,142 OTHER FINANCING SOURCES Transfers in 274,790 1,046,018 771,228 Transfers out (3,689,894) (3,530,080) 159,814 Long-term debt issued - - - Sale of capital assets - 107,300 107,300 Total other financing sources (uses)(3,415,104) (2,376,762) 1,038,342 Revenues and other sources over (under) expenditures (3,403,374)$ 1,748,110 5,151,484$ FUND BALANCES, beginning of year 13,084,388 FUND BALANCES, end of year 14,832,498$ (continued) Special Revenue Funds Total 162 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Debt Service Funds Variance Variance Positive Positive Budget Actual (Negative)Budget Actual (Negative) REVENUES Taxes -$ -$ -$ 1,353,891$ 1,346,613$ (7,278)$ Special assessments - - - - - - Intergovernmental - - - - - - Charges for services - - - - - - Interest on investments 19,000 26,315 7,315 - 929 929 Loan repayment - 3,714 3,714 - - - Other - - - - - - Total revenue 19,000 30,029 11,029 1,353,891 1,347,542 (6,349) EXPENDITURES Other - - - - - - Debt service: Principal - - - 750,000 750,000 - Interest and fiscal fees - - - 605,091 605,091 - Total expenditures - - - 1,355,091 1,355,091 - Revenues over (under) expenditures 19,000 30,029 11,029 (1,200) (7,549) (6,349) OTHER FINANCING SOURCES (USES) Transfers in 18,235 - (18,235) - - - Transfers out (626,500) - 626,500 - - - Total other financing sources (uses)(608,265) - 608,265 - - - Revenues and other sources over (under) expenditures (589,265)$ 30,029 619,294$ (1,200)$ (7,549) (6,349)$ FUND BALANCES, beginning of year 3,356,671 140,508 FUND BALANCES, end of year 3,386,700$ 132,959$ (continued) G.O. BondsSID Revolving 163 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Variance Variance Favorable Positive Budget Actual (Unfavorable)Budget Actual (Negative) REVENUES Taxes -$ -$ -$ 1,353,891$ 1,346,613$ (7,278)$ Special assessments - -$ - - - - Intergovernmental - - - - - - Charges for services - - - - - - Interest on investments - - - 19,000 27,244 8,244 Loan repayment - - - - 3,714 3,714 Other - - - - - - Total revenue - - - 1,372,891 1,377,571 4,680 EXPENDITURES Other - - - - - - Debt service: Principal 195,000 195,000 - 945,000 945,000 - Interest and fiscal fees 228,638 228,638 - 833,729 833,729 - Total expenditures 423,638 423,638 - 1,778,729 1,778,729 - Revenues over (under) expenditures (423,638) (423,638) - (405,838) (401,158) 4,680 OTHER FINANCING SOURCES (USES) Transfers in 422,088 423,638 1,550 440,323 423,638 (16,685) Transfers out - - - (626,500) - 626,500 Total other financing sources (uses)422,088 423,638 1,550 (186,177) 423,638 609,815 Revenues and other sources over (under) expenditures (1,550)$ - 1,550$ (592,015)$ 22,480 614,495$ FUND BALANCES, beginning of year - 3,497,179 FUND BALANCES, end of year -$ 3,519,659$ continued TIF Bonds Total Debt Service Funds 164 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Variance Favorable Budget Actual (Unfavorable) REVENUES Taxes -$ -$ -$ Special assessments - - - Intergovernmental - 89,307 89,307 Charges for services - - - Interest on investments - 140,297 140,297 Loan repayment - - - Other - 15,200 15,200 Total revenue - 244,804 244,804 EXPENDITURES Other 77,000 76,468 532 Capital outlay 8,112,250 2,307,160 5,805,090 Total expenditures 8,189,250 2,383,628 5,805,622 Revenues over (under) expenditures (8,189,250) (2,138,824) 6,050,426 OTHER FINANCING SOURCES (USES) Transfers in 1,253,000 2,841,183 1,588,183 Transfers out - - - Long term debt issuance 4,900,000 - (4,900,000) Sale of capital assets - 60,250 60,250 Total other financing sources (uses)6,153,000 2,901,433 (3,251,567) Revenues and other sources over (under) expenditures (2,036,250)$ 762,609 2,798,859$ FUND BALANCES, beginning of year 10,610,254 FUND BALANCES, end of year 11,372,863$ (continued) Construction Capital Projects Funds 165 CITY OF BOZEMAN, MONTANA SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGET TO ACTUAL NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) Year Ended June 30, 2016 Variance Positive Budget Actual (Negative) REVENUES Intergovernmental -$ -$ -$ Charges for services 100,000 75,830 (24,170) Interest on investments 6,000 9,180 3,180 Total revenues 106,000 85,010 (20,990) EXPENDITURES - BUDGET UNIT - - - Revenues over (under) expenditures 106,000 85,010 (20,990) OTHER FINANCING SOURCES (USES)- - - Revenues and other sources over (under) expenditures 106,000$ 85,010 (20,990)$ FUND BALANCES, beginning of year 990,940 FUND BALANCES, end of year 1,075,950$ Cemetery Perpetual Care Permanent Fund COMBINING NONMAJOR PROPRIETARY FUNDS NONMAJOR PROPRIETARY FUNDS Solid Waste Fund – Accounts for the City’s garbage collection service and recycling operations. Parking Fund – Accounts for the City’s parking enforcement and facilities operations. Stormwater Fund – Accounts for the City’s stormwater management and mitigation operations. 166 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF NET POSITION NONMAJOR PROPRIETARY FUNDS June 30, 2016 Business-type Activities Enterprise Funds Parking Stormwater Solid Fund Fund Waste Fund Total ASSETS Current assets Cash and investments 261,842$ 546,900$ 735,938$ 1,544,680$ Receivables: Customers, net 128,040 121,039 317,172 566,251 Total current assets 389,882 667,939 1,053,110 2,110,931 Non-current assets Other assets: Notes receivable 10,830 - - 10,830 Restricted cash and investments 295,545 55,331 - 350,876 Total other assets 306,375 55,331 - 361,706 Property, plant and equipment, net Nondepreciable: Land 303,436 - 3,783,559 4,086,995 Depreciable: Buildings 11,793,708 - - 11,793,708 Other structures and improvements - - 877,710 877,710 Machinery and equipment 27,974 147,905 2,155,300 2,331,179 Vehicles 86,057 110,874 3,619,394 3,816,325 Infrastructure 47,058 173,692 519,436 740,186 Property under capital lease - 519,943 78,531 598,474 Accumulated depreciation and amortization (3,543,204) (282,777) (5,762,787) (9,588,768) Net property, plant and equipment 8,715,029 669,637 5,271,143 14,655,809 Total non current assets 9,021,404 724,968 5,271,143 15,017,515 Deferred outflows of resources Pension plan contributions 23,707 12,634 114,000 150,341 Total assets 9,434,993$ 1,405,541$ 6,438,253$ 17,278,787$ continued 167 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF NET POSITION NONMAJOR PROPRIETARY FUNDS (CONTINUED) June 30, 2016 Business-type Activities Enterprise Funds Parking Stormwater Solid Fund Fund Waste Fund Total LIABILITIES Current liabilities Accounts payable and accrued expenses 159,418$ 9,339$ 630,953$ 799,710$ Compensated absences payable 9,570 12,572 87,960 110,102 Capital lease obligations payable in one year - 79,438 - 79,438 Closure and post-closure care costs, current portion - - 360,000 360,000 Bonds and leases payable in one year - 73,000 - 73,000 Total current liabilities 168,988 174,349 1,078,913 1,422,250 Noncurrent liabilities Closure and post-closure care costs - - 2,679,671 2,679,671 Capital lease obligations - 284,311 - 284,311 Revenue bonds due after one year - 1,367,430 - 1,367,430 Compensated absences payable 299 4,669 9,007 13,975 Other post-employment health benefits 30,740 4,888 93,629 129,257 Net pension liability 198,630 84,772 981,000 1,264,402 Total noncurrent liabilities 229,669 1,746,070 3,763,307 5,739,046 Total liabilities 398,657 1,920,419 4,842,220 7,161,296 Deferred inflows of resources Pension deferrals 20,299 (5,132) 117,162 132,329 NET POSITION Net Investment in capital assets 8,715,029 312,326 5,271,143 14,298,498 Restricted for impact capital projects - - - - Restricted for parking capital projects 295,545 - - 295,545 Restricted for debt service - - - - Unrestricted 5,463 (822,072) (3,792,272) (4,608,881) Total net position 9,016,037 (509,746) 1,478,871 9,985,162 Total liabilities and net position 9,434,993$ 1,405,541$ 6,438,253$ 17,278,787$ 168 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION - NONMAJOR PROPRIETARY FUNDS Year Ended June 30, 2016 Parking Stormwater Solid Fund Fund Waste Fund Totals OPERATING REVENUES 597,238$ 943,621$ 3,207,605$ 4,748,464$ OPERATING EXPENSES Salaries and benefits 270,783 225,803 1,124,740 1,621,326 Materials and supplies 21,442 26,301 336,317 384,060 Repairs and maintenance 34,490 383 255,169 290,042 Utilities 24,086 1,487 458,152 483,725 Administrative charges 58,491 21,597 460,198 540,286 Other expenses 131,486 91,676 580,261 803,423 Depreciation and amortization 290,091 81,149 237,183 608,423 Changes in estimated closure and post-- closure care costs - - 1,118,864 1,118,864 Total operating expenses 830,869 448,396 4,570,884 5,850,149 Operating income (loss)(233,631) 495,225 (1,363,279) (1,101,685) NON-OPERATING REVENUES (EXPENSES) Interest income 5,271 5,996 1,140 12,407 Interest expense - (21,347) - (21,347) Other income 45,012 - 1,033,340 1,078,352 Intergovernmental income 4,770 4,156 20,958 29,884 Gain (loss) on sale of assets - (19,543) 5,168 (14,375) Total non-operating revenues (expenses)55,053 (30,738) 1,060,606 1,084,921 Income (loss) before contributions and transfers (178,578) 464,487 (302,673) (16,764) Contributions of infrastructure - developers - 111,707 - 111,707 Transfers in 30,000 145,515 1,234,760 1,410,275 Transfers out - (1,330,614) - (1,330,614) Change in net position (148,578) (608,905) 932,087 174,604 NET POSITION, beginning of year 9,164,615 99,159 546,784 9,810,558 NET POSITION, end of year 9,016,037$ (509,746)$ 1,478,871$ 9,985,162$ Enterprise Funds 169 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF CASH FLOWS - NONMAJOR PROPRIETARY FUNDS Year Ended June 30, 2016 Parking Stormwater Solid Waste Fund Fund Fund Total CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 583,285$ 865,176$ 3,179,858$ 4,628,319$ Receipts from others 45,011 - 1,033,340 1,078,351 Payments to suppliers (112,942) (123,756) (3,166,627) (3,403,325) Payments to employees (270,039) (223,710) (1,134,107) (1,627,856) Payments to internal service funds and administrative fees (58,491) (21,597) (460,198) (540,286) Net cash flows from operating activities 186,824 496,113 (547,734) 135,203 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers in 30,000 145,515 1,234,760 1,410,275 Transfers out - (1,330,614) - (1,330,614) Receipts from grants and intergovernmental sources 4,770 4,156 20,958 29,884 Net cash flows from non-capital financing activities 34,770 (1,180,943) 1,255,718 109,545 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets (24,037) (80,034) (707,797) (811,868) Principal paid on bonds, interfund loans, loans and leases - (70,849) - (70,849) Interest paid on bonds, interfund loans, loans and leases - (21,347) - (21,347) Proceeds from issuance of long-term debt - 1,210,680 - 1,210,680 Proceeds from sale of property, plant and equipment - - 30,936 30,936 Net cash flows from capital and related financing activities (24,037) 1,038,450 (676,861) 337,552 CASH FLOWS FROM INVESTING ACTIVITIES Collections on notes 2,650 - - 2,650 Interest on investments 5,271 5,996 1,140 12,407 Net cash flows from investing activities 7,921 5,996 1,140 15,057 Net change in cash and investments 205,478 359,616 32,263 597,357 Cash and investments, beginning of year 351,909 242,615 703,675 1,298,199 Cash and investments, end of year 557,387$ 602,231$ 735,938$ 1,895,556$ continued 170 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF CASH FLOWS - NONMAJOR PROPRIETARY FUNDS (CONTINUED) Year Ended June 30, 2016 Parking Stormwater Solid Waste Fund Fund Fund Total Cash and investments classified as: Cash and investments 261,842$ 546,900$ 735,938$ 1,544,680$ Restricted cash and investments 295,545 55,331 - 350,876 Totals 557,387$ 602,231$ 735,938$ 1,895,556$ Noncash transactions: donated infrastructure -$ 111,707$ -$ 111,707$ RECONCILIATION OF OPERATING LOSS TO NET CASH FROM OPERATING ACTIVITIES: Operating income (loss)(233,631)$ 495,225$ (1,363,279)$ (1,101,685)$ Adjustments to reconcile operating loss to net cash from operating activities: Depreciation and amortization 290,091 81,149 237,183 608,423 Change in estimated closure costs - - (687,040) (687,040) Other income 45,012 - 1,033,340 1,078,352 Change in assets and liabilities: (Increase) decrease in: Accounts receivable (13,954) (78,445) (27,747) (120,146) Increase (decrease) in: Accounts payable 98,562 (3,909) 269,176 363,829 Accrued employee benefits payable 5,174 5,954 10,094 21,222 Net pension liabilities (4,430) (3,861) (19,461) (27,752) Total adjustments 420,455 888 815,545 1,236,888 Net cash from operating activities 186,824$ 496,113$ (547,734)$ 135,203$ INTERNAL SERVICE FUND STATEMENTS INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the goods or services provided by one department to other departments of the City on a cost-reimbursement basis. Vehicle Maintenance Shop – Accounts for the maintenance and repair of vehicles used in operation of City services. Medical Health Insurance – Accounts for insurance premiums received from the various City departments and retirees, and the related costs of health and dental premiums paid to the City’s insurance provider. 171 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS June 30, 2016 Vehicle Medical Maintenance Health Shop Insurance Total ASSETS Current assets Cash and equivalents 66,875$ -$ 66,875$ Customer receivables, net 21 47,260 47,281 Prepaid expenses - 382,541 382,541 Total current assets 66,896 429,801 496,697 Property, plant, and equipment Machinery and equipment 166,059 - 166,059 Vehicles 70,312 - 70,312 Buildings 1,401,417 - 1,401,417 Less: accumulated depreciation (488,667) - (488,667) Net property, plant, and equipment 1,149,121 - 1,149,121 Deferred outflows of resources Pension plan contributions 37,271 - 37,271 Total assets and deferred outflows of resources 1,253,288$ 429,801$ 1,683,089$ LIABILITIES Current liabilities Accounts payable 37,599$ 1,119$ 38,718$ Compensated absences payable 50,523 - 50,523 Due to other city funds - 11,274 11,274 Total current liabilities 88,122 12,393 100,515 Non-current liabilities Net pension liability 309,188 - 309,188 Total liabilities 397,310 12,393 409,703 Deferred inflows of resources Pension deferrals 29,571 - 29,571 NET POSITION Net investment in capital assets 1,149,121 - 1,149,121 Unrestricted (322,714) 417,408 94,694 826,407 417,408 1,243,815 1,253,288$ 429,801$ 1,683,089$ 172 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION - INTERNAL SERVICE FUNDS Year Ended June 30, 2016 Vehicle Medical Maintenance Health Shop Insurance Total OPERATING REVENUES 869,879$ 4,546,303$ 5,416,182$ OPERATING EXPENSES Salaries and benefits 389,302 - 389,302 Materials and supplies 523,753 - 523,753 Repairs and maintenance 8,042 - 8,042 Utilities 4,827 - 4,827 Administrative charges 147,601 - 147,601 Insurance claims - 4,458,971 4,458,971 Other expenses 22,525 92,888 115,413 Depreciation 54,519 - 54,519 Total operating expenses 1,150,569 4,551,859 5,702,428 Operating income (loss)(280,690) (5,556) (286,246) NON-OPERATING REVENUES (EXPENSES) Interest income 1,386 - 1,386 Interest expense - (431) (431) Other income 129 2,440 2,569 Intergovernmental income 7,735 - 7,735 Sale of assets 1,387 - 1,387 Total non-operating revenue (expenses)10,637 2,009 12,646 Income before transfers (270,053) (3,547) (273,600) Transfers in - 231,115 231,115 Change in net position (270,053) 227,568 (42,485) NET POSITION, beginning of year 1,096,460 189,840 1,286,300 NET POSITION, end of year 826,407$ 417,408$ 1,243,815$ 173 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF CASH FLOWS - INTERNAL SERVICE FUNDS Year Ended June 30, 2016 Vehicle Medical Maintenance Health Shop Insurance Total CASH FLOWS FROM OPERATIONS Receipts from customers 869,858$ 4,160,915$ 5,030,773$ Receipts from others 7,864 2,440 10,304 Operating loans from other City funds - 11,274 11,274 Payments to suppliers (595,108) (91,928) (687,036) Payments to employees (386,648) (4,458,971) (4,845,619) Payments to Internal Service Funds and administrative fees (147,601) - (147,601) Net cash flows from operating activities (251,635) (376,270) (627,905) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Additions to property, plant and equipment (22,914) - (22,914) Proceeds from sale of capital assets 1,387 - 1,387 Interest paid on bonds, interfund loans, loans and leases - (431) (431) Net cash flows from capital and related financing activities (21,527) (431) (21,958) CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers in - 231,115 231,115 CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 1,386 - 1,386 Net increase (decrease) in cash and cash equivalents (271,776) (145,586) (417,362) CASH AND EQUIVALENTS, beginning of year 338,651 145,586 484,237 CASH AND EQUIVALENTS, end of year 66,875$ -$ 66,875$ (continued) 174 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF CASH FLOWS - INTERNAL SERVICE FUNDS (CONTINUED) Year Ended June 30, 2016 Vehicle Medical Maintenance Health Shop Insurance Total RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Operating income (loss) (280,690)$ (5,556)$ (286,246)$ Adjustments to reconcile operating income (loss) to net cash from operating activities: Depreciation 54,519 - 54,519 Other income 7,864 2,440 10,304 Changes in assets and liabilities: (Increase) decrease in: Customer receivables (21) (2,847) (2,868) Prepaid expenses - (382,541) (382,541) Increase (decrease) in: Accounts payable (28,779) 960 (27,819) Due to other city funds - 11,274 11,274 Compensated absences payable 2,654 - 2,654 Net pension (7,182) - (7,182) Total adjustments 29,055 (370,714) (341,659) Net cash from operating activities (251,635)$ (376,270)$ (627,905)$ AGENCY FUNDS STATEMENTS AGENCY FUNDS Agency Funds are used to account for assets held by the City as an agent for individuals, private organizations, or other governments. Municipal Court – Accounts for monies held for appearance bonds and restitution related to criminal arrests and reimbursement for damage caused. CMC Bozeman Site Remediation Fund – Accounts for pass-through monies provided by the State of Montana Department of Environmental Quality to Olive & Wallace, LLC, to reimburse the cost of work performed as part of the Voluntary Cleanup Plan of the CMC Asbestos Bozeman Facility. Tourism Business Improvement District – Accounts for amounts collected from hotels on behalf of the District, a special-purpose government, whose purpose is to enhance the economic vitality of Bozeman by promoting tourism through sales and marketing strategies. 175 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF FIDUCIARY NET POSITION – AGENCY FUNDS June 30, 2016 CMC Tourism Total Municipal Bozeman Site Business Agency Court Remediation Improvement Funds ASSETS Cash and cash equivalents 353,598$ -$ 468,190$ 821,788$ Customer receivables 785 - - 785 Total assets 354,383$ -$ 468,190$ 822,573$ LIABILITIES Accounts payable 354,383$ -$ 468,190$ 822,573$ Total liabilities 354,383$ -$ 468,190$ 822,573$ 176 CITY OF BOZEMAN, MONTANA COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES – AGENCY FUNDS Year Ended June 30, 2016 Balance Balance June 30, 2015 Additions Deletions June 30, 2016 ASSETS Cash and cash equivalents 343,108$ 10,490$ -$ 353,598$ Customer receivables - 785 785 Interfund receivable - - - - Total assets 343,108$ 11,275$ -$ 354,383$ LIABILITIES Accounts payable 343,108$ 11,275$ -$ 354,383$ Total liabilities 343,108$ 11,275$ -$ 354,383$ Court Municipal Balance Balance June 30, 2015 Additions Deletions June 30, 2016 ASSETS Cash and cash equivalents 30,920$ (30,920)$ -$ -$ Customer receivables - - - - Total assets 30,920$ (30,920)$ -$ -$ LIABILITIES Accounts payable 30,920$ (30,920)$ -$ -$ Total liabilities 30,920$ (30,920)$ -$ -$ Site Remediation CMC Bozeman Balance Balance June 30, 2015 Additions Deletions June 30, 2016 ASSETS Cash and cash equivalents -$ 468,190$ -$ 468,190$ Customer receivables - - - - Total assets -$ 468,190$ -$ 468,190$ LIABILITIES Accounts payable -$ 468,190$ -$ 468,190$ Total liabilities -$ 468,190$ -$ 468,190$ Site Remediation Tourism Business Improvement District PART III STATISTICAL SECTION Statistical Section This part of the City of Bozeman's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures 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 levels 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 Bozeman comprehensive annual financial reports for the relevant year. FINANCIAL TRENDS SECTION 177 CITY OF BOZEMAN, MONTANA NET POSITION BY COMPONENT Past Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Governmental activities Net investment in capital assets 77,734,584$ 80,873,924$ 83,707,824$ 84,113,904$ 88,844,404$ 88,500,437$ 89,081,484$ 89,267,076$ 93,409,850$ 104,342,191$ Restricted 546,916 9,254,307 7,699,511 8,082,181 20,962,038 20,797,365 27,255,029 35,621,803 41,755,126 42,829,320 Unrestricted 28,481,673 23,443,921 20,871,106 25,076,908 16,049,044 15,470,543 11,521,053 12,127,224 (5,137,642) (3,923,466) Total governmental activities 106,763,173$ 113,572,152$ 112,278,441$ 117,272,993$ 125,855,486$ 124,768,345$ 127,857,566$ 137,016,103$ 130,027,334$ 143,248,045$ Business-type activities Net investment in capital assets 154,227,534$ 177,379,168$ 188,077,778$ 189,965,189$ 188,180,889$ 192,485,459$ 199,394,551$ 205,501,357$ 211,419,777$ 221,385,655$ Restricted 17,099,866 18,322,089 19,775,588 9,044,280 12,660,466 11,446,886 3,098,125 3,372,927 4,977,984 4,990,635 Unrestricted 16,550,235 17,547,218 11,936,119 16,069,597 12,382,018 2,809,558 10,643,337 8,723,353 6,619,399 10,582,408 Total business-type activities 187,877,635$ 213,248,475$ 219,789,485$ 215,079,066$ 213,223,373$ 206,741,903$ 213,136,013$ 217,597,637$ 223,017,160$ 236,958,698$ Primary government Net investment in capital assets 231,962,118$ 258,253,092$ 271,785,602$ 274,079,093$ 277,025,293$ 280,985,896$ 288,476,035$ 294,768,433$ 304,829,627$ 325,727,846$ Restricted 17,646,782 27,576,396 27,475,099 17,126,461 33,622,504 32,244,251 30,353,154 38,994,730 46,733,110 47,819,955 Unrestricted 45,031,908 40,991,139 32,807,225 41,146,505 28,431,062 18,280,101 22,164,390 20,850,577 1,481,757 6,658,942 Total primary government net position 294,640,808$ 326,820,627$ 332,067,926$ 332,352,059$ 339,078,859$ 331,510,248$ 340,993,579$ 354,613,740$ 353,044,494$ 380,206,743$ Fiscal Year 178 CITY OF BOZEMAN, MONTANA CHANGES IN NET POSITION Past Ten Fiscal Years (accrual basis of accounting) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Expenses Governmental Activities: General Government 5,733,371$ 6,969,181$ 6,629,783$ 6,299,831$ 6,122,190$ 8,706,665$ 7,373,368$ 6,989,830$ 7,417,644$ 8,058,925$ Public Safety 10,488,873 11,183,637 11,556,016 12,382,157 12,859,702 13,215,680 14,340,301 15,297,088 17,023,578 18,391,357 Public Service 8,511,308 8,979,085 10,130,184 9,703,594 9,190,515 8,174,461 3,939,061 6,031,768 6,458,930 6,861,939 Public Welfare 5,536,741 5,412,192 6,465,940 6,915,557 7,500,727 7,249,008 6,518,822 7,417,158 7,579,653 7,994,697 Interest and Fiscal Fees 549,667 649,226 737,762 714,714 679,652 636,478 433,766 179,280 824,266 893,470 Total Governmental Activities Expenses 30,819,960 33,193,321 35,519,685 36,015,853 36,352,786 37,982,292 32,605,318 35,915,124 39,304,071 42,200,388 Business-Type Activities: Water 10,490,811 11,150,266 11,872,984 12,016,149 11,649,639 11,674,222 6,154,746 6,869,870 7,995,910 9,273,395 Waste Water 7,376,348 8,061,412 10,293,894 9,143,077 10,128,397 10,203,165 6,121,663 8,955,592 6,940,983 8,163,312 Nonmajor Activities 3,283,135 2,574,651 3,454,044 3,528,201 3,569,821 3,575,128 3,328,241 7,924,663 4,407,212 5,871,496 Total Business-Type Activities Expenses 21,150,294 21,786,329 25,620,922 24,687,427 25,347,857 25,452,515 15,604,650 23,750,125 19,344,105 23,308,203 Total Primary Government Expenses 51,970,254$ 54,979,650 61,140,607 60,703,280 61,700,643 63,434,807 48,209,968 59,665,249 58,648,176 65,508,591 Program Revenues Governmental Activities: Charges for Services: General Government 2,023,362$ 2,237,962$ 1,795,469$ 2,774,869$ 2,870,443$ 1,949,125$ 1,966,966$ 2,453,015$ 1,947,445$ 2,530,474$ Public Safety 3,712,280 3,575,133 3,500,929 2,414,893 2,684,724 2,638,811 3,219,231 3,290,573 3,211,911 3,347,859 Public Service 5,361,852 4,858,444 4,790,460 3,742,856 4,454,492 4,983,420 6,655,604 7,623,178 8,784,447 9,310,147 Public Welfare 704,790 713,342 779,841 399,280 451,960 1,102,896 1,593,212 613,322 1,097,845 1,213,526 Operating Grants and Contributions 409,263 502,863 439,131 693,342 1,114,835 566,586 406,239 457,354 2,254,052 2,494,244 Capital Grants and Contributions 18,694,375 7,153,103 8,219,791 5,307,118 7,867,093 635,758 844,935 4,762,416 2,960,051 5,018,559 Total Governmental Activities Program Revenues 30,905,922 19,040,847 19,525,621 15,332,358 19,443,547 11,876,596 14,686,187 19,199,858 20,255,751 23,914,809 Business-Type Activities Charges for Services: Water 8,604,498 8,222,724 7,221,378 6,986,247 7,064,571 7,921,483 9,585,939 9,842,699 9,969,058 11,935,016 Waste Water 7,052,987 6,918,132 6,052,668 6,505,119 6,930,036 7,488,473 8,560,438 8,852,738 9,008,247 9,283,600 Non-Major Activities 2,428,230 2,608,662 2,859,248 3,043,801 2,986,721 2,953,612 3,177,348 3,597,790 3,844,793 5,824,848 Operating Grants and Contributions - - - - - - - 9,596 123,439 134,946 Capital Grants and Contributions:26,464,222 29,405,599 6,465,230 3,621,051 6,589,612 566,138 156,123 5,898,923 6,385,418 11,287,654 Total Business-Type Activities Program Revenues 44,549,937 47,155,117 22,598,524 20,156,218 23,570,940 18,929,706 21,479,848 28,201,746 29,330,955 38,466,064 Total Primary Government Program Revenues 75,455,859$ 66,195,964 42,124,145 35,488,576 43,014,487 30,806,302 36,166,035 47,401,604 49,586,706 62,380,873 continued Fiscal Year 179 CITY OF BOZEMAN, MONTANA CHANGES IN NET POSITION (CONTINUED) Past Ten Fiscal Years (accrual basis of accounting) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Net (Expense) / Revenue Governmental Activities 85,962$ (14,152,474)$ (15,994,064)$ (20,683,495)$ (16,909,239)$ (26,105,696)$ (17,919,131)$ (16,715,266)$ (19,048,320)$ (18,285,579)$ Business-Type Activities 23,399,643 25,368,788 (3,022,398) (4,531,209) (1,776,917) (6,522,809) 5,875,198 4,060,921 9,986,850 15,157,861 Total Primary Government Net Expense 23,485,605$ 11,216,314$ (19,016,462)$ (25,214,704)$ (18,686,156)$ (32,628,505)$ (12,043,933)$ (12,654,345)$ (9,061,470)$ (3,127,718)$ General Revenues and Other Changes in Net Position Governmental Activities: Taxes Property Taxes 11,836,748$ 12,070,765$ 14,629,230$ 15,501,316$ 16,342,053$ 15,716,055$ 16,429,959$ 17,561,022$ 20,203,718$ 21,234,288$ Unrestricted Grants and Contributions 5,375,807 5,617,243 6,125,789 6,284,467 6,782,383 6,898,717 6,342,884 7,436,419 7,699,711 7,992,180 Investment Earnings 1,093,115 1,362,790 671,859 352,378 301,424 283,090 243,744 355,790 403,151 519,637 Miscellaneous 1,940,156 1,859,313 2,766,671 2,256,071 1,556,790 155,484 - 293,884 374,966 418,215 Sale of Capital Assets 490,637 51,342 68,057 761,952 (8,168) 4,414 1,765 236,688 - 123,934 Transfers of Capital Assets - - (6,311,324) - - (2,088) - - - - Transfers 489,780 - (3,249,929) 521,863 517,250 (37,136) (10,000) (10,000) (410,016) 1,218,036 Extraordinary Items - - - - - - - - - - Total Governmental Activities 21,226,243 20,961,453 14,700,353 25,678,047 25,491,732 23,018,536 23,008,352 25,873,803 28,271,530 31,506,290 Business-Type Activities: Unrestricted Grants and Contributions 3,182 2,052 2,155 342,653 438,475 2,115 508,912 - - - Transfers of Capital Assets - - 6,311,324 - - 2,088 - - - - ARRA Debt Forgiveness - - - - - - - 390,700 - - Transfers (489,780) - 3,249,929 (521,863) (517,251) 37,136 10,000 10,000 380,347 (1,218,036) Extraordinary Items - - - - - - - - - - Total Business-Type Activities (486,598) 2,052 9,563,408 (179,210) (78,776) 41,339 518,912 400,700 380,347 (1,218,036) Total Primary Government 20,739,645$ 20,963,505 24,263,761 25,498,837 25,412,956 23,059,875 23,527,264 26,274,503 28,651,877 30,288,254 Change in Net Position Governmental Activities 21,312,205$ 6,808,979$ (1,293,711)$ 4,994,552$ 8,582,493$ (3,087,160)$ 5,089,221$ 9,158,537$ 9,223,211$ 13,220,711$ Business-Type Activities 22,913,045 25,370,840 6,541,010 (4,710,419) (1,855,693) (6,481,470) 6,394,110 4,461,621 10,367,197 13,939,825 Total Primary Government 44,225,250$ 32,179,819$ 5,247,299$ 284,133$ 6,726,800$ (9,568,630)$ 11,483,331$ 13,620,158$ 19,590,408$ 27,160,536$ Fiscal Year 180 CITY OF BOZEMAN, MONTANA FUND BALANCE - GOVERNMENT FUNDS Past Ten Fiscal Years (modified accrual basis of accounting) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Fund: Reserved 3,000$ 3,000$ 63,000$ -$ -$ -$ -$ -$ -$ -$ Unreserved 4,367,538 4,516,814 5,301,397 5,119,400 Nonspendable Restricted Committed Assigned 5,991,388 7,062,964 7,327,375 6,420,760 4,887,652 5,541,841 Unassigned 905,862 264,091 - 193,534 1,174,313 979,258 Total general fund 4,370,538$ 4,519,814$ 5,364,397$ 5,119,400$ 6,897,250$ 7,327,055$ 7,327,375$ 6,614,294$ 6,061,965$ 6,521,099$ All Other Governmental: Reserved 2,996,832$ 3,045,231$ 2,660,918$ 6,597,569$ -$ -$ -$ -$ -$ -$ Unreserved, reported in: Special revenue funds 13,205,328 13,723,846 12,516,240 14,916,152 Capital projects funds - 2,884,553 - 1,793,287 Debt service funds - - - - Nonspendable 999,464 1,113,484 1,193,530 1,269,557 1,360,690 1,426,575 Restricted 19,962,574 19,683,881 26,061,499 19,927,526 12,546,935 39,856,356 Committed 3,278,422 3,463,714 851,322 3,075,505 3,088,936 3,528,263 Assigned 58,419 - - 229,602 - 7,425,398 Unassigned - (51,586) 456,669 (184,101) (97,173) 914,535 Total all other governmental funds 16,202,160$ 19,653,630$ 15,177,158$ 23,307,008$ 24,298,879$ 24,209,493$ 28,563,020$ 24,318,089$ 16,899,388$ 53,151,127$ Note: The City of Bozeman implemented the new standards for reporting fund balance GASB Statement 54 in fiscal year 2011 Fiscal Year 181 CITY OF BOZEMAN, MONTANA CHANGES IN FUND BALANCES - GOVERNMENT FUNDS Past Ten Fiscal Years (modified accrual basis of accounting) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Revenues Taxes 11,853,872$ 12,004,946$ 14,451,954$ 15,055,844$ 16,634,924$ 16,057,318$ 16,540,972$ 17,385,371$ 20,404,236$ 21,303,074$ Special assessments 1,866,717 1,793,813 1,633,896 1,643,500 1,866,272 1,898,007 1,752,615 2,011,944 1,578,855 1,265,954 Licenses and permits 1,762,086 1,351,887 1,140,831 958,590 1,308,378 1,214,705 1,629,744 1,784,282 1,827,842 2,112,090 Intergovernmental 6,115,697 9,642,918 7,102,049 7,900,176 8,299,803 7,697,637 7,586,007 8,208,770 8,562,937 8,920,424 Charges for service 7,403,739 6,748,891 6,468,006 5,790,382 6,629,507 6,891,594 8,806,969 9,656,123 10,629,791 12,283,683 Fines and forfeitures 1,746,213 1,644,767 1,597,236 1,518,481 1,441,383 1,364,617 1,394,652 1,411,162 1,305,166 1,253,705 Interest on investments 1,068,802 1,360,914 671,859 352,378 300,516 281,239 239,778 329,086 370,305 479,699 Loan repayment 10,193 19,849 9,985 10,401 193,302 306,385 157,069 63,980 29,929 38,552 Other 1,940,156 1,859,313 2,766,671 2,256,071 1,556,790 155,484 394,677 287,089 363,274 415,646 Total revenues 33,767,475 36,427,298 35,842,487 35,485,823 38,230,875 35,866,986 38,502,483 41,137,807 45,072,335 48,072,827 Expenditures General government 5,577,810 6,153,838 5,946,355 5,690,488 5,939,771 6,266,566 7,276,839 6,138,575 6,594,474 7,318,539 Public safety 10,160,291 10,778,917 11,056,742 11,709,170 12,137,616 12,513,270 13,822,691 14,637,886 15,086,695 16,485,549 Public service 3,060,672 3,020,855 2,976,711 2,702,510 3,002,021 2,738,066 2,805,612 3,498,770 3,786,283 3,840,405 Public welfare 4,315,086 4,819,758 5,161,997 4,916,828 6,435,916 6,184,073 6,216,387 6,678,347 6,927,365 7,245,425 Other - - - - - - 15,776 1,046,712 1,113,340 418,431 Capital outlay 11,397,365 12,205,040 9,380,742 4,248,758 3,299,017 3,881,388 2,782,435 8,053,456 9,905,333 9,337,470 Debt service: Principal 833,158 2,013,232 1,138,051 1,194,819 1,611,087 3,235,664 1,826,126 1,482,142 1,121,593 1,345,250 Interest & Fiscal Fees 549,667 649,662 738,198 715,150 680,088 666,082 445,736 380,950 824,266 893,470 Total expenditures 35,894,049 39,641,302 36,398,796 31,177,723 33,105,516 35,485,109 35,191,602 41,916,838 45,359,349 46,884,539 Excess of revenues over (under) expenditures (2,126,574) (3,214,004) (556,309) 4,308,100 5,125,359 381,877 3,310,881 (779,031) (287,014) 1,188,288 Other Financing Sources (Uses) Proceeds from borrowing - - - - - - - - - - Transfers in 4,565,896 4,604,100 8,394,126 10,857,332 6,985,734 3,482,550 4,291,417 3,103,787 4,816,671 6,483,413 Transfers out (4,076,116) (4,604,100) (11,733,378) (11,033,925) (7,255,505) (3,821,010) (4,454,505) (3,113,787) (5,197,018) (5,496,492) Issuance of debt - 6,554,166 177,346 890,000 - 3,357,798 1,203,279 10,012,647 5,619,361 47,406 Premium on Bonds Issued - 10,896 - - - - - - - - Payments to Refunded Bond Escrow Agent - - - - - (3,120,000) - - - - Sales of capital assets 490,637 249,688 86,326 766,922 10,555 59,204 2,775 243,092 64,855 227,984 Total other financing sources (uses)980,417 6,814,750 (3,075,580) 1,480,329 (259,216) (41,458) 1,042,966 10,245,739 5,303,869 1,262,311 Extraordinary items Net change in fund balances (1,146,157)$ 3,600,746$ (3,631,889)$ 5,788,429$ 4,866,143$ 340,419$ 4,353,847$ 9,466,708$ 5,016,855$ 2,450,599$ Debt service as a percentage of noncapital expenditures 5.6%9.7%6.9%7.1%7.7%12.3%7.0%5.5%5.5%6.0% Fiscal Year REVENUE CAPACITY SECTION 182 CITY OF BOZEMENA, MONTANA ASSESSED VALUE OF TAXABLE PROPERTY Past Ten Fiscal Years Fiscal Total Total Assessed Taxable Year Commercial & Taxable Direct Total Value ** as a Ended Residential Industrial Other Assessed Tax Market Percentage of June 30,Property Property Property Value **Rate Value *Total Market Value 2007 35,419,440$ 24,034,620$ 3,794,940$ 63,249,000$ 163.42 1,959,659,877$ 3.228% 2008 38,629,360 26,212,780 4,138,860 68,981,000 154.18 2,192,163,035 3.147% 2009 41,539,680 28,187,640 4,450,680 74,178,000 171.16 2,407,420,224 3.081% 2010 43,842,400 29,750,200 4,697,400 78,290,000 170.19 2,655,766,251 2.948% 2011 45,023,440 30,551,620 4,823,940 80,399,000 168.75 2,827,548,097 2.843% 2012 45,954,720 31,183,560 4,923,720 82,062,000 166.75 2,994,740,226 2.740% 2013 46,606,560 31,625,880 4,993,560 83,226,000 166.75 3,176,282,865 2.620% 2014 47,956,720 32,542,060 5,138,220 85,637,000 173.08 3,386,295,608 2.529% 2015 50,978,520 31,641,840 5,273,640 87,894,000 188.76 3,598,269,877 2.443% 2016 50,207,224 31,163,105 5,193,851 86,564,180 210.16 5,698,588,679 1.519% Source: Based on information provided by Gallatin County and Montana Department of Revenue Note: Property in Gallatin County is reassessed by the State Department of Revenue every six years. * Sales price of property is not public record in the State of Montana, so the Total Market Value was used instead ** Includes tax-exempt property 183 CITY OF BOZEMENA, MONTANA CITY TAXABLE MARKET AND TAXABLE VALUES Past Nine Fiscal Years Fiscal Net Taxable Value Year Incremental Value (excludes Tax Taxable Value Ended Taxable Full for All Tax Increment Districts for Open Space June 30,Market Value Taxable Value Increment Districts Incremental Values)Purposes 2007 1,959,659,877$ 64,133,892$ 884,321$ 63,249,571$ n/a * 2008 2,192,163,035 70,016,605 1,035,352 68,981,253 n/a * 2009 2,407,420,224 75,458,468 1,280,371 74,178,097 n/a * 2010 2,655,766,251 80,850,582 2,560,601 78,289,981 n/a * 2011 2,827,058,097 83,309,165 2,910,650 80,398,515 n/a * 2012 2,994,740,226 85,345,227 3,282,766 82,062,461 n/a * 2013 3,176,282,865 86,934,533 3,708,138 83,226,395 n/a * 2014 3,386,295,608 89,650,917 4,013,561 85,637,356 85,615,328 2015 3,598,269,877 92,081,322 4,186,781 87,894,541 90,735,030 2016 5,698,588,679 90,787,797 4,223,617 86,564,180 234,985,893 Source: Based on information provided by Gallatin County and Montana Department of Revenue Note: Property is assessed by the State Department of Revenue every six years. * No certified value available, first certification available for FY2014 184 CITY OF BOZEMENA, MONTANA TAX INCREMENT DISTRICT TAXABLE VALUATION DETAIL Past Nine Fiscal Years Fiscal Year Ended Base Incremental Total Base Incremental Total Base Incremental Total June 30,Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable 2007 1,833,875 884,321 2,718,196 - - - - - - 2008 1,858,491 931,030 2,789,521 423,054 48,790 471,844 2,886,997 55,532 2,942,529 2009 1,858,491 1,115,768 2,974,259 423,054 71,287 494,341 2,886,997 93,316 2,980,313 2010 1,328,695 1,947,249 3,275,944 423,054 104,987 528,041 2,886,997 450,625 3,337,622 2011 1,328,695 2,060,807 3,389,502 423,054 135,162 558,216 2,886,997 664,127 3,551,124 2012 1,328,695 2,251,286 3,579,981 423,054 133,197 556,251 2,886,997 840,137 3,727,134 2013 1,328,695 2,396,293 3,724,988 423,054 150,217 573,271 2,886,997 1,084,216 3,971,213 2014 1,328,695 2,586,963 3,915,658 423,054 172,608 595,662 2,886,997 1,193,297 4,080,294 2015 1,328,695 2,718,220 4,046,915 423,054 190,579 613,633 2,886,997 1,225,604 4,112,601 2016 1,328,695 2,898,551 4,227,246 423,054 214,470 637,524 2,886,997 1,055,385 3,942,382 Fiscal Year Ended Base Incremental Total Base Incremental Total Base Incremental Total June 30,Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable Taxable 2007 - - - - - - 1,833,875 884,321 2,718,196 2008 - - - - - - 5,168,542 1,035,352 6,203,894 2009 - - - - - - 5,168,542 1,280,371 6,448,913 2010 12,059 57,740 69,799 - - - 4,650,805 2,560,601 7,211,406 2011 12,059 50,554 62,613 - - - 4,650,805 2,910,650 7,561,455 2012 12,059 58,146 70,205 - - - 4,650,805 3,282,766 7,933,571 2013 12,059 77,412 89,471 - - - 4,650,805 3,708,138 8,358,943 2014 12,059 60,693 72,752 417 - 417 4,651,222 4,013,561 8,664,783 2015 12,059 52,376 64,435 417 3 420 4,651,222 4,186,782 8,838,004 2016 12,059 55,211 67,270 417 - 417 4,651,222 4,223,617 8,874,839 Source: Based on information provided by Gallatin County and Montana Department of Revenue Note: Property is assessed by the State Department of Revenue every six years. MANDEVILLE FARM INDUSTRIAL BOZEMAN TECHNOLOGY TOTAL BOZEMAN DOWNTOWN NORTHEAST URBAN RENEWAL DISTRICT NORTH 7TH CORRIDOR 185 CITY OF BOZEMENA, MONTANA DOWNTOWN BOZEMAN IMPROVEMENT DISTRICT & COMPARISON TO CITY TAXABLE VALUE Past Nine Fiscal Years Fiscal Taxable City Taxable Value The District's Year Market Value Taxable Value of Incremental (Excluding ALL tax Incremental Taxable Ended of Property in Property in the Taxable increment district Value as Percentage of June 30,the District District Value valuations)City's Taxable Value 2007 88,480,413$ 2,718,196$ 884,321$ 63,249,571$ 1.40% 2008 94,996,536 2,789,521 931,030 68,981,253 1.35% 2009 98,234,423 2,974,259 1,115,768 74,178,097 1.50% 2010 110,487,369 3,275,944 1,947,249 78,289,981 2.49% 2011 119,431,550 3,389,502 2,060,807 80,398,515 2.56% 2012 129,285,686 3,579,981 2,251,286 82,062,461 2.74% 2013 142,099,662 3,724,988 2,396,293 83,226,395 2.88% 2014 153,063,721 3,915,658 2,586,963 85,367,356 3.03% 2015 190,128,511 4,046,915 2,718,220 87,894,541 3.09% 2016 259,138,001 4,227,246 2,898,551 86,564,180 3.35% Source: Based on information provided by Gallatin County and Montana Department of Revenue Note: Property is assessed by the State Department of Revenue every six years. Downtown Bozeman Improvement District 186 CITY OF BOZEMENA, MONTANA PROPERTY TAX LEVIES IN THE DOWNTOWN BOZEMAN IMPROVEMENT DISTRICT Past Eight Fiscal Years 2009 2010 2011 2012 2013 2014 2015 2016Taxing Entity Statewide School Equalization 40.00 40.00 40.00 40.00 40.00 40.00 40.00 40.00 Gallatin County Operating and Bond 79.78 85.19 89.94 88.69 87.40 88.38 89.55 99.77 Open Space Bond 4.63 5.81 6.14 5.99 4.89 4.90 4.95 5.03 County-Wide School 100.26 94.02 95.74 95.61 96.47 101.28 99.94 106.85 Bozeman High School District 71.40 69.05 75.34 73.48 71.81 73.16 72.97 76.76 Bozeman Elementary School District 141.13 130.49 121.55 123.38 131.45 145.25 143.70 151.15 City of Bozeman 171.16 170.19 168.75 166.75 166.75 173.08 188.76 210.16 Total Taxing Entity 608.36 594.75 597.46 593.90 598.77 626.05 639.87 689.72 Exempt from Tax Increment University Millage 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Gallatin Conservation District 1.04 1.01 0.99 1.00 0.98 0.97 0.95 1.05 County-Wide Planning 2.58 2.50 2.40 2.40 2.39 2.39 2.35 2.39 Source: Based on information provided by Gallatin County and Montana Department of Revenue Note: Property is assessed by the State Department of Revenue every six years. Fiscal Year 187 CITY OF BOZEMENA, MONTANA DIRECT AND OVERLAPPING PROPERTY TAX RATES Past Ten Fiscal Years (rate per $1,000 of assessed value) Fiscal General Total Year Obligation Direct Bozeman Ended Basic Debt Tax School Gallatin State of June 30,Rate Service Rate District County Montana 2007 152.07 11.35 163.42 182.74 197.36 46.00 2008 142.98 11.20 154.18 183.85 205.40 46.00 2009 160.59 10.57 171.16 212.53 210.14 46.00 2010 160.18 10.01 170.19 199.54 210.25 46.00 2011 158.96 9.79 168.75 196.89 217.21 46.00 2012 157.19 9.56 166.75 196.86 215.77 46.00 2013 158.38 8.37 166.75 203.26 215.10 46.00 2014 164.83 8.25 173.08 218.41 221.00 46.00 2015 177.52 11.24 188.76 216.67 215.78 46.00 2016 194.51 15.65 210.16 227.91 241.69 46.00 Source: Based on information provided by Gallatin County and Department of Revenue 188 CITY OF BOZEMENA, MONTANA PRINCIPAL PROPERTY TAX PAYERS Current Year and Ten Years Ago Percentage Percentage of Total City of Total City Taxable Taxable Total Taxable Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Northwestern Energy - Transmission & Distribution 4,203,090$ 1 4.86%3,291,272$ 1 5.20% Centurylink, Inc. (Qwest)736,068 2 0.85%1,462,577 2 2.31% Bresnan Communications 708,027 3 0.82% Verizon Wireless 495,140 6 0.57% Harry Daum - Gallatin Mall 444,051 4 0.51%518,025 3 0.82% Stone Ridge Partners LLC 417,262 5 0.48% Mitchell Development & Investment 390,752 9 0.45% First Security Bank 362,625 7 0.42% J & D Family Limited Partnership 349,579 8 0.40% Bridger Peaks Holding LLC 348,926 10 0.40%275,786 9 0.44% Bozeman Deaconess Foundation 422,509 4 0.67% Wal-Mart Stores Inc 389,417 5 0.62% Highgate Bozeman LLC 317,174 6 0.50% Montana Rail Link 304,394 10 0.48% Bomont LLC 294,798 7 0.47% Costco Wholesale 283,730 8 0.45% Total 8,455,520$ 9.77%7,559,682$ 11.95% Total City Taxable Assessed Value 86,564,180$ 63,249,000$ Source: Gallatin County Treasurer 2016 2007 189 CITY OF BOZEMENA, MONTANA PRINCIPAL PROPERTY TAX PAYERS IN DOWNTOWN BOZEMAN IMPROVEMENT DISTRICT Current Year and Prior Year Percentage Percentage of Total City of Total City Total Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Business Value Rank Value Value Rank Value First Security Bank Bank 228,171$ 1 5.40%301,257$ 1 7.44% F&H, LLC Property Investor/Developer 128,240 2 3.03%124,572 3 3.08% Moose Point LP Commercial Property Developer 110,531 3 2.61%128,407 2 3.17% 777 Building Multi Tennant Office Retail Building 107,477 4 2.54%111,161 5 2.75% Atlantic Financial Group Ltd.Bank 89,991 5 2.13%88,937 6 2.20% Downtowner Group LLC Business Support Services 89,618 6 2.12%88,531 7 2.19% M & J Cowdrey LLC Property Investor/Developer 88,667 7 2.10%114,091 4 2.82% 777 LLC & UND 50%Property Investor/Developer 71,497 8 1.69% First Security Bank of Bozeman Bank 69,695 9 1.65% Baxter Main LLC Commercial 62,268 10 1.47% American Bank of MT Wells Fargo Bank Bank 87,555 8 2.16% Callender Street LLP Design-Construction Oversight 72,769 9 1.80% Martel Plaza Ltd.Multi Story Office Building 0.00%66,691 10 1.65% Total 1,046,155$ 24.75%1,183,971$ 29.26% Total Downtown BID Taxable Assessed Value 4,227,246$ 4,046,915$ Source: Gallatin County Treasurer 20152016 190 CITY OF BOZEMENA, MONTANA PROPERTY TAX LEVIES AND COLLECTIONS Past Ten Fiscal Years Fiscal Year Taxes Levied Collections Ended for the Percentage in Subsequent Percentage June 30,Fiscal Year Amount of Levy Years Amount of Levy 2007 10,336,467$ 10,227,386$ 98.94%106,611$ 10,333,998$ 99.98% 2008 10,635,491 10,324,653 97.08%239,140 10,563,793 99.33% 2009 12,696,306 12,493,145 98.40%149,497 12,642,642 99.58% 2010 13,324,175 12,415,922 93.18%887,241 13,303,163 99.84% 2011 13,567,611 13,001,537 95.83%492,141 13,493,678 99.46% 2012 13,683,839 13,108,003 95.79%238,749 13,346,752 97.54% 2013 13,878,293 13,633,347 98.24%61,554 13,694,901 98.68% 2014 14,821,724 14,482,502 97.71%- 14,482,502 97.71% 2015 16,590,871 15,795,913 95.21%155,126 15,951,039 96.14% 2016 18,191,892 18,009,556 99.00%- 18,009,556 99.00% Source:Gallatin County City Manager's Final Adopted Budget Collected within the Fiscal Year of the Levy Total Collections to Date 191 CITY OF BOZEMENA, MONTANA WATER SOLD BY TYPE OF CUSTOMER Past Ten Fiscal Years (in hundreds of cubic feet “HCF”) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Type of Customer Residential 1,437,114$ 1,379,115$ 1,516,359$ 1,224,164$ 1,181,195$ 1,323,816$ 1,513,986$ 1,433,833$ 1,385,140$ 1,493,192$ Government 62,913 49,623 66,253 51,168 48,228 49,349 59,589 52,448 53,165 51,923 MSU 298,352 260,232 254,891 228,789 227,019 235,965 233,484 213,698 210,107 208,618 Commercial 659,831 626,846 670,961 571,223 568,474 602,352 638,337 607,444 599,193 610,741 Total 2,458,209$ 2,315,816$ 2,508,464$ 2,075,343$ 2,024,916$ 2,211,481$ 2,445,396$ 2,307,423$ 2,247,605$ 2,364,474$ Total direct rate 2,190.03$ 2,478.36$ 2,495.43$ 2,679.44$ 2,787.06$ 2,887.40$ 2,955.66$ 3,053.40$ 3,105.14$ 2,951.66$ per 1,000 HCF Source: City of Bozeman Finance Department Fiscal Year 192 CITY OF BOZEMENA, MONTANA WATER AND SEWER RATES Past Ten Fiscal Years Fiscal Year Monthly Rate per Monthly Rate per Ended Base 1,000 Base 1,000 June 30,Rate Gallons Rate Gallons 2007 12.60$ 19.74$ 10.87$ 18.00$ 2008 12.60$ 19.74$ 11.17$ 18.50$ 2009 12.60$ 19.74$ 12.13$ 20.10$ 2010 13.00$ 20.37$ 13.37$ 22.15$ 2011 13.42$ 21.02$ 14.73$ 24.41$ 2012 14.02$ 21.96$ 15.61$ 25.87$ 2013 14.65$ 22.95$ 16.55$ 27.42$ 2014 14.65$ 22.95$ 17.56$ 29.10$ 2015 14.65$ 22.95$ 17.56$ 29.10$ 2016 15.39$ 24.11$ 18.63$ 30.87$ * For Residential Customers, using 5/8 inch meter size. Sources:City of Bozeman, Montana Commission Resolution 3804 City of Bozeman, Montana Commission Resolution 3805 City of Bozeman, Montana Commission Resolution 3929 City of Bozeman, Montana Commission Resolution 3930 City of Bozeman, Montana Commission Resolution 4042 City of Bozeman, Montana Commission Resolution 4043 City of Bozeman, Montana Commission Resolution 4184 City of Bozeman, Montana Commission Resolution 4185 City of Bozeman, Montana Commission Resolution 4327 City of Bozeman, Montana Commission Resolution 4328 City of Bozeman, Montana Commission Resolution 4454 Water Sewer DEBT CAPACITY 193 CITY OF BOZEMAN, MONTANA RATIO OF OUTSTANDING DEBT BY TYPE Past Ten Fiscal Years Fiscal Year General Special Tax Increment Water Wastewater Total Percentage Ended Obligation Notes Assessment Financing Revenue State of MT Primary of Personal Per June 30,Bonds Payable Bonds Bonds Bonds RLF Loans Government Income Capita 2007 5,840,000$ 79,198$ 6,736,700$ -$ 226,460$ -$ 12,882,358$ 2.00%369.84$ 2008 5,340,000 - 5,601,000 6,000,000 143,729 - 17,084,729 2.43%475.32$ 2009 4,815,000 - 5,211,000 5,850,000 56,615 - 15,932,615 1.97%431.39$ 2010 4,275,000 851,071 4,819,000 5,695,000 28,992 7,902,127 23,571,191 2.72%632.27$ 2011 3,710,000 509,705 4,351,500 5,535,000 - 24,017,080 38,123,285 4.65%1,021.69$ 2012 3,080,000 306,727 2,269,500 5,370,000 182,577 23,853,427 35,062,231 4.36%919.88$ 2013 2,445,000 1,198,823 1,659,500 5,195,000 13,751,878 22,501,119 46,751,320 5.54%1,206.39$ 2014 11,685,000 1,086,396 1,185,500 5,015,000 18,140,000 21,025,565 58,137,461 6.82%1,496.07$ 2015 16,320,000 963,274 890,500 4,825,000 17,365,000 19,972,565 60,336,339 7.11%1,448.30$ 2016 15,570,000 884,841 662,500 4,630,000 16,567,000 18,930,565 57,244,906 6.74%1,318.86$ Sources:City Manager's Final Adopted Budget City of Bozeman Finance Department Business-Type ActivitiesGovernmental Activities 194 CITY OF BOZEMAN, MONTANA RATIO OF GENERAL BONDED DEBT OUTSTANDING Past Ten Fiscal Years Percentage of Fiscal Actual Year General Tax Increment Taxable Ended Obligation Financing District Value of Per June 30,Bonds Bonds Total Property Capita 2007 5,840,000$ -$ 12,576,700$ 19.9%361.07$ 2008 5,340,000 6,000,000 11,340,000 16.4%315.49$ 2009 4,815,000 5,850,000 10,665,000 14.4%288.77$ 2010 4,275,000 5,695,000 9,970,000 12.7%267.44$ 2011 3,710,000 5,535,000 9,245,000 11.5%247.76$ 2012 3,080,000 5,370,000 8,450,000 10.3%221.69$ 2013 2,445,000 5,195,000 7,640,000 9.2%197.15$ 2014 11,685,000 5,015,000 16,700,000 19.5%429.75$ 2015 16,320,000 4,825,000 21,145,000 24.1%507.56$ 2016 15,570,000 4,630,000 20,200,000 23.3%465.38$ Source:City Manager's Final Adopted Budget General Bonded Debt Outstanding 195 CITY OF BOZEMAN, MONTANA DIRECT & OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT Debt Estimated Outstanding Estimated Share of as of Percentage Overlapping June 30, 2016 Applicable (1)Debt Overlapping Bonded Indebtedness Gallatin County: Various issues outstanding 48,637,635$ 36%17,426,572$ Bozeman School District #7: Various issues outstanding 99,605,844 31%30,769,973 Subtotal overlapping debt 48,196,545 City of Bozeman, Montana Direct Debt 15,570,000$ 100%15,570,000 Total Direct & Overlapping Debt 63,766,545$ Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Bozeman. 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, of each overlapping government. (1) 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 entity's total taxable assessed value. Sources: City of Bozeman Finance Department Gallatin County Assessor's Office Bozeman School District #7 196 CITY OF BOZEMAN, MONTANA LEGAL DEBT MARGIN INFORMATION Past Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Debt limit*34,755,653$ 54,804,000$ 60,185,000$ 66,375,000$ 70,688,000$ 74,875,000$ 76,450,000$ 84,657,000$ 84,500,000$ 142,464,717$ Total net debt applicable to limit (5,595,558) (5,423,128) (4,842,905) (4,295,240) (3,638,239) (3,386,727) (3,643,823) (12,771,396) (15,356,726) (16,454,841) Legal debt margin 29,160,095$ 49,380,872$ 55,342,095$ 62,079,760$ 67,049,761$ 71,488,273$ 72,806,177$ 71,885,604$ 69,143,274$ 126,009,876$ Total net debt applicable to the limit 16.1%9.9%8.0%6.5%5.1%4.5%4.8%15.1%18.2%11.6% as a percentage of debt limit *2.5% of total market value of taxable property of $3.38 Billion Source: City Manager's Final Adopted Budget Fiscal Year 197 CITY OF BOZEMAN, MONTANA PLEDGED REVENUE COVERAGE Past Ten Fiscal Years Fiscal Year Utility Less:Special Ended Service Operating Assessment June 30,Charges Expenses Principal Interest Coverage Collections Principal Interest Coverage 2007 6,124,533 (3,114,053) (473,952) (23,391) 2,513,137 1,428,084 (268,069) (309,119) 850,896 2008 6,163,883 (3,769,941) (82,731) (10,231) 2,300,981 1,178,846 (1,135,700) (278,393) (235,247) 2009 5,938,745 (3,770,800) (87,009) (5,978) 2,074,958 1,022,641 (390,000) (241,395) 391,246 2010 5,860,144 (3,950,566) (27,622) (2,440) 1,879,516 989,977 (392,000) (223,763) 374,214 2011 6,013,211 (3,869,048) (28,992) (1,070) 2,114,101 1,134,049 (467,500) (211,204) 455,345 2012 6,814,990 (4,063,529) (159,000) (6,405) 2,586,056 858,699 (2,082,000) (192,320) (1,415,621) 2013 7,806,922 (4,364,506) (502,000) (163,250) 2,777,166 820,090 (650,975) (103,198) 65,917 2014 7,871,386 (4,405,464) (751,000) (429,438) 2,285,484 1,054,483 (474,000) (73,760) 506,723 2015 7,748,913 (4,973,926) (775,000) (538,425) 1,461,562 586,116 (295,000) (50,070) 241,046 2016 8,414,870 (6,176,752) (798,000) (515,010) 925,108 705,143 (228,000) (39,343) 437,800 Fiscal Year Utility Less: Ended Service Operating June 30,Charges Expenses Principal Interest Coverage 2007 4,262,052 (2,792,274) - - 1,469,778 2008 4,739,702 (2,981,164) - - 1,758,538 2009 4,905,772 (4,843,180) - - 62,592 2010 5,389,070 (3,468,705) (166,300) (69,470) 1,684,594 2011 5,939,996 (4,183,596) (606,000) (494,298) 656,102 2012 6,385,404 (3,784,420) (883,000) (857,842) 860,141 2013 6,916,226 (3,947,821) (1,465,227) (847,778) 655,400 2014 7,204,486 (5,895,751) (1,084,854) (660,771) (436,891) 2015 7,631,117 (3,914,454) (1,053,000) (632,268) 2,031,395 2016 7,927,692 (5,139,029) (1,042,000) (552,269) 1,194,394 Waste Water Revenue Bonds Debt Service Water Revenue Bonds Special Assessment Bonds Debt Service Debt Service 198 CITY OF BOZEMAN, MONTANA DEBT SERVICE REQUIREMENTS AND COVERAGE FOR DOWNTOWN TAX INCREMENT DISTRICT Past Eight Fiscal Years Fiscal Year Revenues Annual Ended Available Debt Service June 30,for Debt Service Payment Coverage 2008 585,839$ 416,223$ 1.41 2009 742,192 425,288 1.75 2010 1,209,378 424,288 2.85 2011 1,135,166 423,088 2.68 2012 1,266,104 421,688 3.00 2013 1,497,572 425,088 3.52 2014 1,644,960 423,088 3.89 2015 1,853,725 425,888 4.35 2016 2,066,749 423,288 4.88 199 CITY OF BOZEMAN, MONTANA SUMMARY OF OUTSTANDING SIDs Current Fiscal Year Bond Original Maturity Bonds Cash Assessments Delinquent Issue Amount Date Outstanding Balance Outstanding Assessments SID 669 1,160,000$ 7/1/2020 255,000$ 65,975$ 250,503$ 5,544$ SID 683 1,372,000 7/1/2024 280,000 13,809 515,402 6,967 SID 684 1,376,869 7/1/2025 70,000 56,903 568,709 1,321 TOTAL 3,908,869$ 605,000$ 136,687$ 1,334,614$ 13,832$ As of June 30, 2016 200 CITY OF BOZEMAN, MONTANA REVOLVING FUND BALANCE AND BOND SECURED THEREBY Past Nine Fiscal Years Fiscal Year Ended Revolving Fund Principal June 30,Cash Balance Amount of Bonds 2007 569,446$ 6,271,200$ 2008 629,510 5,155,000 2009 647,235 4,785,000 2010 1,228,197 4,415,000 2011 3,160,685 3,970,000 2012 3,190,244 1,910,000 2013 2,443,769 1,468,529 2014 2,474,971 1,006,726 2015 2,948,129 1,009,724 2016 2,924,604 863,208 201 CITY OF BOZEMAN, MONTANA SPECIAL IMPROVEMENT DISTRICT ASSESSMENT BILLING AND COLLECTIONS Past Nine Fiscal Years Fiscal Assessment Total Annual Year Billing Collections 2007 1,040,977$ 1,428,085$ 2008 1,074,991 1,178,846 2009 951,885 1,022,641 2010 915,398 989,977 2011 871,180 1,134,049 2012 750,418 858,699 2013 741,886 820,090 2014 676,613 1,054,484 2015 538,697 586,116 2016 543,351 705,143 DEMOGRAPHIC AND ECONOMIC INFORMATION 202 CITY OF BOZEMAN, MONTANA DEMOGRAPHIC AND ECONOMIC STATISTICS Past Ten Fiscal Years Fiscal Estimated Per Residents Year Annual %Capita Median with Bachelors K-12 Ended Change in Personal Personal Age Degree or School Unemployment June 30,Population Population Income Income (years)Higher Schooling Enrollment Rate 2007 34,832 4.5%643,862,953$ 21,581$ 26.5 49.5%5,356 2.2% 2008 35,944 3.1%703,013,220 23,387 27.2 53.7%5,432 2.7% 2009 36,933 2.7%808,624,803 26,313 27.0 52.7%5,463 4.6% 2010 37,280 0.9%866,396,960 25,909 26.0 50.6%5,509 5.8% 2011 37,314 0.1%819,014,169 25,611 27.2 50.1%5,679 5.6% 2012 38,116 2.1%803,487,262 24,709 27.2 53.9%5,810 5.2% 2013 38,753 1.6%843,399,480 25,608 27.1 55.4%5,994 4.3% 2014 38,860 0.3%852,165,042 26,427 26.8 53.3%6,216 3.5% 2015 41,660 6.7%849,198,410 26,335 27.3 53.6%6,294 2.9% 2016 43,405 4.0%849,682,100 26,350 27.5 54.4%6,533 2.8% Sources: Bozeman Public Schools U.S. Bureau of Labor Statistics U.S. Census Bureau 203 CITY OF BOZEMAN, MONTANA PRINCIPAL EMPLOYERS FOR GALLATIN COUNTY Current Year and Ten Years Ago Private Employer Private Employer Employers Class Employers Class By Class Size By Class Size Bozeman Deaconess Hospital 9 Bozeman Deaconess Hospital 8 Oracle America 7 Home Care Services 8 Town Pump Convenience Stores 7 Kenyon Noble Lumber & Hardware 7 Wal Mart 7 Right Now Technologies 7 Albertson's 6 Wal-Mart 7 Barnard Construction 6 Albertsons 6 Best Western Gran Tree Inn 6 Bozeman Daily Chronicle 6 Bridger Bowl 6 Community Food Coop 6 Community Food Co-Op 6 Costco 6 Costco 6 First Security Bank 6 First Student 6 JTL group Inc - Belgrade 6 JC Billion 6 Laidlaw Transit 6 Kenyon Noble Lumber & Hardware 6 Martel Construction 6 Korman Marketing Group 6 Murdoch's Ranch & Home Supply 6 Martel Construction 6 Ressler Motor Co 6 McDonalds 6 Simkins Hallin Lumber 6 Murdoch's Ranch & Home Supply 6 Town and Country Foods 6 Ressler Motor 6 Williams Plumbing and Heating 6 Rosauers Super Markets 6 Zoot Enterprises 6 Target 6 Town & Country Foods 6 Zoot Enterprises 6 Public Employer Public Employer Employers Class Employers Class By Class Size By Class Size Montana State University 9 Montana State University 9 School District #7 9 Bozeman School District 8 Belgrade School District 8 City of Bozeman 7 City of Bozeman 7 Gallatin County 7 Department of Agriculture 7 Gallatin County 7 Class 6 - 100 to 249 Employees Class 7 - 250 to 499 Employees Class 8 - 500 to 999 Employees Class 9 - 1,000+ Employees Source: Montana Department of Labor & Industry 2016 2007 June June OPERATING INFORMATION 204 CITY OF BOZEMAN, MONTANA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION / PROGRAM Past Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General GovernmentCity Commission 2.10 2.10 2.10 2.10 2.10 2.10 2.10 2.10 2.10 2.10 City Manager *9.50 10.50 10.50 11.50 11.50 8.00 8.00 5.00 5.00 6.00 Municipal Court 6.00 7.00 7.00 7.50 8.50 8.50 8.50 8.50 9.00 8.50 City Attorney 6.00 7.00 6.00 11.50 7.00 7.00 7.00 7.00 9.00 10.20 Administrative Services - - - - - - - 19.00 21.00 21.50 Finance *16.00 10.00 10.00 8.75 8.75 10.00 11.00 - - - Information Technology *- 6.00 6.00 5.88 5.88 6.00 6.00 - - - Community Development 12.70 15.20 13.70 12.20 12.20 8.75 9.00 8.00 12.60 11.60 Building Maintenance 2.55 3.05 3.55 3.55 3.55 3.00 3.50 3.50 3.50 3.50 Total General Government 54.85 60.85 58.85 62.98 59.48 53.35 55.10 53.10 62.20 63.40 Public Safety Police Department 54.75 57.75 62.75 71.75 71.75 71.25 72.75 72.75 72.25 71.70 Fire Department 31.25 34.25 45.25 41.75 41.75 41.75 43.75 45.75 45.00 46.00 Building Inspection 15.55 16.55 13.55 9.55 10.55 10.55 10.55 12.55 14.00 18.50 Parking 3.75 3.75 4.75 4.75 4.75 4.50 4.50 5.50 6.00 6.00 Total Public Safety 105.30 112.30 126.30 127.80 128.80 128.05 131.55 136.55 137.25 142.20 Public Services Public Services Administration / Engineering 7.15 8.15 8.15 8.15 8.15 10.00 10.00 12.00 6.58 10.25 Streets 15.62 15.62 17.62 17.62 17.62 17.62 17.62 18.62 16.20 18.85 Storm Water - - - - - - 1.00 1.00 4.00 6.25 Water Treatment Plant 9.27 9.27 9.27 9.27 9.27 9.77 9.77 11.27 12.75 10.50 Water Operations 14.62 15.62 16.62 15.62 15.62 15.62 15.62 15.62 17.33 14.45 Wastewater Operations 9.25 10.25 11.25 10.25 10.25 10.25 10.25 11.25 13.09 13.30 Wastewater Plant 14.87 14.87 15.87 15.87 15.87 15.87 16.37 17.47 15.50 14.75 Solid Waste Collection/Recycling 12.74 15.74 15.74 15.74 15.74 15.74 15.74 15.74 15.90 15.15 Solid Waste Disposal 7.66 2.00 - - - - - - - - Vehicle Maintenance 4.00 3.00 4.00 5.00 5.00 5.00 5.00 5.00 5.00 6.50 Total Public Services 95.18 94.52 98.52 97.52 97.52 99.87 101.37 107.97 106.35 110.00 Public Welfare Cemetery (numerous short terms)5.25 5.75 5.75 5.75 5.75 3.33 3.33 3.33 4.90 5.04 Parks (numerous short terms)12.95 13.45 13.45 13.45 13.45 11.77 11.77 11.77 15.40 14.51 Forestry 4.60 4.60 4.60 4.60 4.60 4.60 4.60 4.60 5.95 5.65 Library 19.66 20.66 21.66 21.66 21.66 21.66 21.56 23.11 23.41 26.02 Recreation (numerous short terms)14.65 14.90 15.00 15.00 15.00 15.83 15.83 16.83 16.83 23.55 Community Services 1.00 2.00 1.00 2.00 2.00 2.00 2.00 4.00 3.50 3.50 Total Public Welfare 58.11 61.36 61.46 62.46 62.46 59.19 59.09 63.64 69.99 78.27 Total of all Funds 313.44 329.03 345.13 350.76 348.26 340.46 347.11 361.26 375.79 393.87 Source: City Manager's Final Adopted Budget * Administrative Services was created in fiscal year 2014 and consists of Finance, Information Technology and Human Resources Fiscal Year Ended June 30, 205 CITY OF BOZEMAN, MONTANA OPERATING INDICATORS BY FUNCTION / PROGRAM Past Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Finance SID Statements 11,086 14,919 15,000 15,816 16,000 16,000 16,200 16,424 16,506 16,893 Utility Bills 112,775 134,460 134,000 135,000 135,000 135,000 138,000 155,000 162,000 166,000 Accounts Payable Checks Processed 11,387 13,301 12,218 12,076 12,122 11,962 12,519 10,453 11,098 11,000 Business Licenses 3,711 3,825 3,836 3,789 3,986 3,886 3,831 3,779 4,164 4,200 PoliceNumber of Officers 45 51 52 55 56 60 63 63 61 60 Calls for Service 40,758 42,728 45,145 43,385 45,131 45,358 47,361 48,542 46,290 47,400 Arrests 2,524 2,581 2,853 2,338 2,325 2,152 2,096 2,165 2,195 2,078 Misdemeanor Citations Issued - includes traffic **n/a n/a n/a 3,311 4,504 5,234 5,205 6,045 6,169 6,390 Traffic Stops **n/a n/a n/a 10,702 10,036 9,358 10,629 8,210 7,757 7,482 Traffic Crashes 1,780 1,519 1,302 1,194 1,486 1,264 1,320 1,469 1,601 1,792 Fire Fires, Hazardous Conditions & Rupture/Explosions 242 230 248 248 278 278 309 340 296 349 Emergency Medical Services/Rescue 1,454 1,658 1,441 1,441 1,483 1,483 1,941 2,051 2,032 2,424 Service Calls 118 148 145 145 187 187 145 212 202 244 Building Inspection Commercial Permits: Number 1,015 972 1,047 961 1,535 1,420 1,305 1,165 1,560 1,200 Value (Millions)140.95 151.50 140.50 70.41 106.90 95.03 69.64 90.27 $98.02 $65.00Residential Permits: Number 1,775 1,710 1,571 1,543 3,613 2,421 2,338 2,911 2,836 3,500 Value (Millions)181.89 141.22 79.67 67.02 72.57 89.74 146.32 130.68 $191.97 $130WaterNew Service Main Taps 79 15 39 16 3 20 41 57 70 60Meter Replacement/Repair 663 878 368 650 467 279 113 479 1006 1500 Water Main Breaks/Repairs 8 5 6 4 1 6 4 7 5 6WastewaterMain Line Flushing (in Miles)95 110 90 81 78.26 90 47 30 90 60New Infrastructure TV (in Miles)19 4.8 1 1 1 1 2.6 2 8 11New Service Taps 37 22 15 5 4 4 17 37 44 45Solid Waste Collection & RecyclingResidential Accounts 6,608 6,779 6,957 7,130 7,092 7,240 7,470 7,869 8,369 8,878 Commercial Customers 239 254 262 268 271 281 265 258 265 270 Recycling Customers - 484 881 965 970 1,000 1,135 1,601 2,100 2,663 Annual Tonnage Collected: Collections Program 11,953 11,879 10,397 10,657 10,920 11,248 10,695 10,960 11,457 11,691 Vehicle MaintenanceWork Orders Processed 1,070 974 870 1,005 1,435 1,473 1,646 1,717 1,549 1,453 Gallons of Oil Disposed 10,000 9,350 9,350 9,175 9,445 8,751 8,640 8,740 8,969 7,395 ParksPark Reservations 340 360 221 280 319 320 350 400 400 400 Sources: City Manager's Final Adopted Budget City of Bozeman Finance Department ** Not used as an operating indicator until 2010 Fiscal Year Ended June 30, 206 CITY OF BOZEMAN, MONTANA CAPITAL ASSET STATISTICS BY FUNCTION / PROGRAM Past Ten Fiscal Years 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Police Stations 1 1 1 1 1 1 1 1 1 1 Patrol Units (Cars)17 18 19 20 20 20 20 20 22 21 Patrol Units (Motorcycles)4 4 4 4 4 4 4 4 2 3 Fire Stations 2 2 3 3 3 3 3 3 3 3 Fire Trucks 5 5 5 6 6 6 6 7 7 7 Streets Street & Alley Mileage 229.905 234.736 242.650 246.951 254.565 254.957 255.769 252 253 254 Lane Miles Painted 40.0 42.0 34.8 40.0 40.3 41.0 37.0 34.6 49.2 50.0 Number of Signs Installed/Repaired 652 652 732 750 722 1120 669 798 600 600 Water Water Mains (Miles)247.23 250.16 253.73 256.32 257.51 261.33 264.61 267.28 268.57 274.89 Fire Hydrants 2,206 2,238 2,274 2,308 2,324 2,351 2,388 2,406 2,419 2,511 Wastewater Sanitary Sewers (Miles)198.17 200.01 201.37 205.00 205.00 207.56 210.22 211.51 212.53 219.14 Number of Manholes 3,888 3,946 3,988 4,034 4,080 4,084 4,154 4,185 4,219 4,360 Solid Waste Number of Collection Vehicles 8 7 8 8 8 8 8 8 8 8 Number of Roll-off Trucks 2 3 4 4 4 4 4 4 4 4 Number of Recycling Trucks 0 0 1 1 1 1 1 2 2 2 Number of Compost Collection Trucks 2 2 2 2 2 2 2 2 2 2 Parks Formal Turf Acres 258 265 120 120 125 125 125 125 126 140 Natural Parkland Acres 110 115 205 205 210 220 220 220 220 220 Miles of Trails 45 50 50 54 55 55 55 61 63 63 Sources: City Manager's Final Adopted Budget City of Bozeman Finance Department City of Bozeman GIS Department City of Bozeman Police Department Fiscal Year Ended June 30, PART IV REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS – GOVERNMENT AUDITING STANDARDS 207 10 1 9 E M A I N S T • SU I T E 2 0 1 • BO Z E M A N , M O N T A N A 5 9 71 5 TE L : 40 6 . 55 6 .61 6 0 • FA X : 40 6 . 58 6 .87 1 9 • WE B : ww w . a z w o r l d . c o m ANDERSON ZURMUEHLEN & CO., P.C. • CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS MEMBER: AMERICAN INSTITUTE OF CERTIFIED 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 Honorable Mayor, City Commissioners, and City Manager of the City of Bozeman, Montana We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Bozeman, Montana (the City), as of and for the year ended June 30, 2016, which collectively comprise the City’s basic financial statements and have issued our report thereon, dated December 29, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Bozeman’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 City of Bozeman’s internal control. Accordingly, we do not express an opinion on the effectiveness of City of Bozeman’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 was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 208 Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Bozeman’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. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance, and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Bozeman, Montana December 29, 2016