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FY2017 Annual Financial Report COMPREHENSIVE ANNUAL FINANCIAL REPORT CITY OF IOWA CITY, IOWA FOR THE FISCAL YEAR ENDED JUNE 30, 2017 PREPARED BY: FINANCE DEPARTMENT CITY OF IOWA CITY, IOWA Introductory Section Tab CITY OF IOWA CITY, IOWA TABLE OF CONTENTS June 30, 2017 Page INTRODUCTORY SECTION Table of contents ................................................................................................................................ 1 Letter of transmittal ............................................................................................................................ 3 Certificate of Achievement for Excellence in Financial Reporting ................................................... 12 City organizational chart .................................................................................................................... 13 City officials....................................................................................................................................... 14 FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT ......................................................................................... 15 MANAGEMENT’S DISCUSSION AND ANALYSIS .................................................................... 19 BASIC FINANCIAL STATEMENTS Government-wide financial statements Statement of net position ............................................................................................................. 30 Statement of activities .................................................................................................................. 32 Fund financial statements Balance sheet – governmental funds ............................................................................................ 34 Reconciliation of the balance sheet of the governmental funds to the statement of net position. 35 Statement of revenues, expenditures, and changes in fund balances – governmental funds ....... 36 Reconciliation of the statement of revenues, expenditures, and changes in fund balances of governmental funds to the statement of activities ..................................................................... 37 Statement of net position – proprietary funds .............................................................................. 38 Statement of revenues, expenses, and changes in fund net position – proprietary funds ............ 40 Statement of cash flows – proprietary funds ................................................................................ 42 Statement of fiduciary assets and liabilities ................................................................................. 44 Notes to financial statements .......................................................................................................... 46 REQUIRED SUPPLEMENTARY INFORMATION Budgetary comparison schedule – budget and actual – all governmental funds and enterprise funds – budgetary basis………………………………………………………………………… 88 Budgetary comparison schedule – budget to GAAP reconciliation …………………………….. 90 Note to required supplementary information – budgetary reporting…………………………….. 91 Schedule of the City’s proportionate share of MFPRSI net pension liability…………………… 93 Schedule of City’s MFPRSI contributions……………………………………………………… 94 Note to required supplementary information – MFPRSI pension liability……………………… 96 Schedule of the City’s proportionate share of IPERS net pension liability…………………… .. 97 Schedule of City’s IPERS contributions………………………………………………………... 98 Note to required supplementary information – IPERS pension liability……………………… .. 100 Required supplementary information – schedule of funding progress for health and dental plans…………………….…………………………………………………………….……… .. 101 COMBINING FUND STATEMENTS Combining balance sheet – nonmajor governmental funds ............................................................ 104 Combining statement of revenues, expenditures, and changes in fund balances – nonmajor governmental funds ...................................................................................................................... 105 Combining statement of net position – nonmajor enterprise funds ................................................ 108 Combining statement of revenues, expenses, and changes in fund net position – nonmajor enterprise funds ............................................................................................................................ 109 Combining statement of cash flows – nonmajor enterprise funds .................................................. 110 Combining statement of net position – internal service funds ........................................................ 112 Combining statement of revenues, expenses, and changes in fund net position – internal service funds ............................................................................................................................................. 113 1 --- CITY OF IOWA CITY, IOWA TABLE OF CONTENTS June 30, 2017 Page COMBINING FUND STATEMENTS (continued) Combining statement of cash flows – internal service fund ............................................................ 114 Statement of changes in assets and liabilities – agency funds ......................................................... 116 STATISTICAL SECTION (UNAUDITED) Net position by component ................................................................................................................. 119 Changes in net position ...................................................................................................................... 120 Fund balances – governmental funds ................................................................................................. 122 Changes in fund balances – governmental funds ............................................................................... 123 General government tax revenues by source ...................................................................................... 124 Assessed and taxable value of property .............................................................................................. 125 Property tax rates – direct and overlapping governments .................................................................. 126 Property tax budgets and collections .................................................................................................. 127 Principal taxpayers ............................................................................................................................. 128 Principal water system customers ...................................................................................................... 130 Sales history and total water charges .................................................................................................. 131 Principal sewer system customers ...................................................................................................... 132 Sales history and total sewer charges ................................................................................................. 133 Ratios of outstanding debt by type ..................................................................................................... 134 Ratios of general obligation bonded debt to assessed value and net bonded debt per capita ............. 135 Ratio of annual debt service expenditures for general bonded debt to total general governmental expenditures ..................................................................................................................................... 136 Computation of direct and overlapping debt ...................................................................................... 137 Legal debt margin information ........................................................................................................... 138 General obligation debt annual maturity schedule ............................................................................. 139 Schedule of revenue bond coverage ................................................................................................... 140 Revenue debt annual maturity schedule ............................................................................................. 141 Revenue debt annual maturity by funding source .............................................................................. 142 Demographic and economic statistics ................................................................................................ 144 Principal employers ............................................................................................................................ 145 Full-time equivalent city government employees by function ........................................................... 146 Operating indicators by function ........................................................................................................ 148 Capital assets by function ................................................................................................................... 149 COMPLIANCE SECTION 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 ............................................................................................................................. 151 Independent auditor’s report on compliance for each major federal program and report on internal control over compliance required by the Uniform Guidance ............................................................. 153 Schedule of expenditures of federal awards ....................................................................................... 155 Notes to the schedule of expenditures of federal awards ................................................................... 159 Schedule of findings and questioned costs ......................................................................................... 160 2 --- December 11, 2017 To the Citizens, Honorable Mayor, Members of the City Council and City Manager City of Iowa City, Iowa The Comprehensive Annual Financial Report (CAFR) of the City of Iowa City, Iowa (the City) for the fiscal year ended June 30, 2017 is submitted herewith in accordance with the provisions of Chapter 11 of the Code of Iowa. The City’s Finance Department prepared this report. Responsibility for both the accuracy of the data presented and the completeness and fairness of the presentation, including all disclosures, rest with the City. I believe the information, as presented, is accurate in all material respects and presented in a manner designed to fairly present the financial position and results of operations of the City. All disclosures necessary to enable the reader to gain an understanding of the City's financial affairs have been included. Management assumes full responsibility for the completeness and reliability of all of the information presented in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal controls should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements will be free of any material misstatement. Eide Bailly, LLP, a firm of independent public accountants has issued an unmodified (“clean”) opinion on the City’s financial statements for the year ended June 30, 2017. Their opinion is included in the Financial Section of this report. The City is required to undergo an annual single audit in conformity with the provisions of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Information to comply with the Uniform Guidance and “Government Auditing Standards” is included in the Compliance Section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors. Profile of the Government The City of Iowa City was incorporated April 6, 1853. The City is governed by a seven member Council; each member serves a four-year term. Elections are held every two years allowing for continuation in office of at least three members at each biennial election. The Council members are elected at large, with three members nominated from specific districts and the remaining four members nominated at large. The Council elects the Mayor from its own members for a two-year term. 3 ' ~ 1 -~= -~ ... ~~aj~~ ~ ,. .. ,~t: ~" CITY OF IOWA CITY The City Council is the legislative body and makes all policy determinations for the City through the enactment of ordinances and resolutions. It also adopts a budget to determine how the City will obtain and spend its funds. The Council appoints members of boards, commissions and committees. The City Manager is the chief administrative officer for the City and is appointed by the City Council. The City Manager implements policy decisions of the City Council and enforces City ordinances. In addition, the City Manager appoints and directly supervises the directors of the City’s operating departments and supervises the administration of the City’s personnel system. The City Manager supervises 493 full-time and 44 part-time permanent municipal employees and 405 temporary employees, including a police force of 80 sworn personnel and a fire department of 64 firefighters. The City Clerk is appointed by the City Council and reports to the Council. The City Clerk's Office administers the City government's documentation, City licenses and permits, and provides information from the Municipal Code and City Ordinances to the public and other City departments. The City Clerk’s Office is also responsible for distributing and maintaining accurate records of all City Council proceedings. The Clerk supervises 3 full-time employees and 1 temporary employee. The City Attorney is also appointed by the City Council and works at the direction of the City Council. The City Attorney supervises the City Attorney's Office, including 4 Assistant City Attorneys and 2 other full-time employees. In addition, the City Attorney acts as Chief Legal Counsel to the City Council, City Manager, the various City departments and staff, and most City commissions, committees and boards. The City provides a full range of services including police and fire protection, construction and maintenance of roads, streets and infrastructure, inspection and licensing functions, a municipal airport, library, recreational activities, and cultural events. The City owns and operates its water supply and distribution system and sewage collection and treatment system with secondary treatment also provided. Virtually the entire City has separate storm and sanitary sewer systems. The City operates a municipal off-street and on-street parking system in the downtown area. The City also operates a transit system. The annual budget serves as the foundation for the City’s financial planning and control. All departments of the City are required to submit requests for appropriation to the City Manager in October. The City Manager uses these requests as the starting point for developing a proposed budget. The City Manager then presents this proposed budget to the Council for review in December. The Council is required to hold a public hearing on the proposed budget and to adopt a final budget no later than March 15. The appropriated budget is prepared by fund, function (e.g., Public Safety), and department (e.g., Police). The City adopts a three-year financial plan that includes both operations and capital improvements. This three-year plan permits a more comprehensive review of the City’s financial condition, allowing analysis of the current and future needs and requirements. During preparation of the plan, careful review is made of property tax levy rates, utility and user fee requirements, ending cash balances by fund, debt service obligations, bond financing needs, capital outlay for equipment purchases and major capital improvement projects. The state requires at least a one-year operating budget. While legal spending control is exercised at a state mandated function level, management control is set at the Department Manager level. Encumbrance accounting is utilized in all funds for budgetary control. Appropriations that are not spent lapse at the end of the year. 4 Information Useful in Assessing the Government’s Economic Condition The City's economic strength is based on the educational sector, medical services, and diversified manufacturing. The University of Iowa and the University of Iowa Hospital and Clinics are the City’s largest employers with over 27,300 employees. The University of Iowa had a record high enrollment in fall 2017 of 33,564 students. The academic and research missions of the University, along with the health care services provided at its hospitals and clinics, have a tremendously positive economic impact on the area. The City also has a significant number of national and international businesses, including Fortune 500 companies. The City continues to see sustained production in our major local industries; ACT Inc., NCS Pearson, and Proctor & Gamble. Continued economic development efforts with the Iowa City and Coralville Chambers of Commerce, private interests, the University of Iowa, other surrounding communities, and participation as a member of the Iowa City Area Development Group, have also produced positive results with the retention and expansion of businesses. In addition, Iowa’s Creative Corridor is a seven-county alliance surrounding Iowa City and has been identified as one of the major growth areas for new business development in the State of Iowa. This Corridor gives employers workforce access to a region uniquely Iowan, founded with a manufacturing heritage, but actively seeking new frontiers and opportunities in information technology, biotechnology and bioprocessing, renewable energy, insurance and financial services, advanced manufacturing, and educational services. Continued developments within Iowa City and the region have a favorable impact upon the City's economy. As a whole, the City's economy continues to grow. Established firms continue to prosper and expand in Iowa City and there are opportunities for growth of new businesses. Overall, employment has remained steady as evidenced in the unemployment rate for Iowa City, which continues to remain low at 2.9% for the month of June 2017, as compared to 3.2% for the State of Iowa, and 4.4% for the national average. The rate of new housing construction increased in comparison to the prior year based on the number of building permits issued. This consisted of 172 new single-family houses in 2016 as compared to 137 in 2015; multi-family dwelling units added during fiscal year 2016 was 556, compared to 499 in 2015; and mixed commercial/residential developments added 340 dwelling units in 2016 versus 47 residential units in 2015. Altogether these housing additions totaled 1,068 units valued at $206,478,670 in 2016 versus a total of 683 units valued at $92,701,042 in 2015. In addition to an increase in residential construction in 2016, the City also had an increase in commercial construction. The value of permits for commercial construction increased by $50,415,500 to $62,656,986 from 2015 to 2016, and the value of remodeling permits for residential and commercial increased by $62,046,685 to $93,087,526 from 2015 to 2016. According to the 2010 census, the population of Iowa City is 67,862. This is an increase of 5,672 or 9.1% as compared to the 2000 census. Iowa City population in 2016 is estimated to be 74,398 by the U.S. Census Bureau. The stability of the University of Iowa coupled with historically steady employment by the City’s multi-sector base of manufacturing and service industries, helped insulate the City from any significant negative economic impacts of the national recession. The City’s property valuations continue to rise and along with the low unemployment rate, this is indicative of the City's relative economic stability. 5 Major Initiatives The City of Iowa City, with the assistance of the University of Iowa’s Institute of Public Affairs, completed the City’s Strategic Plan. The strategic planning process involved multiple steps, including gathering input from the general public, front-line City staff, department directors, and the City Council. The Strategic Plan establishes the following organizational priorities, programs, policies, and initiatives: 1. Promote a Strong and Resilient Local Economy  Identify how the City and local partners can effectively market and grow the local foods economy  Review and consider amending the City’s Tax Increment Finance (TIF) policy  Promote neighborhood commercial districts and build stronger relations with business owners throughout the community  Work closely with the University of Iowa and Kirkwood Community College on future facilities and economic development opportunities, especially in the Riverfront Crossings District  Work closely with the ICCSD, Kirkwood Community College, labor organizations, Iowa Works and others to explore the feasibility of an industrial arts/crafts facility in Iowa City  Proactively seek opportunities to facilitate development of our interstate entryways in a manner consistent with this strategic plan  Develop programs aimed to enhance small business development and retention with a focus on diverse communities 2. Encourage a Vibrant and Walkable Urban Core  Consider creating a new City Council committee with a focus on the sustainable built environment  Support historic preservation efforts  Initiate public dialogue about the meaning and importance of a walkable neighborhood and how to achieve it  Encourage diverse housing types and price points for a variety of income levels 3. Foster Healthy Neighborhoods throughout the City  Consider amending the City’s Annexation Policy to require the provision of affordable housing in residential/mixed-use areas  Evaluate the implementation of a Form Based Code in one or two parts of the community  Develop strategies to diversify the membership of neighborhood associations  Substantially improve access and use of public spaces through improvements to sidewalks, streetscapes, parks, and schools 4. Maintain a Solid Financial Foundation  Continue to monitor the impact of the 2013 property tax reform and evaluate alternative revenue sources as determined necessary  Continue to build the City’s Emergency Fund  Monitor potential changes to Moody’s rating criteria and maintain the City’s Aaa bond rating  Continue to reduce the City’s property tax levy  Maintain healthy fund balances throughout the City’s diverse operations 6 5.Enhance Community Engagement and Intergovernmental Relations Provide timely and appropriate input on the ICCSD’s planned 2017 bond referendum Televise regular City Council work sessions Significantly improve the Council and Staff’s ability to engage with diverse populations on complex or controversial topics 6.Promote Environmental Sustainability Raise Iowa City’s Bicycle Friendly Community status from Silver to Gold by 2017 and aspire toward a Platinum status in the future Evaluate and consider implementation of a plastic bag policy Undertake a project in FY 2017 that achieves a significant measurable carbon emission reduction Set a substantive and achievable goal for reducing city-wide carbon emissions by 2030, and create an ad-hoc climate change task force, potentially under an umbrella STAR Communities committee, to devise a cost-effective strategy for achieving the goal Collaborate with community partners on sustainability efforts 7.Advance Social Justice and Racial Equity Develop and implement a racial / socioeconomic equity review toolkit Support the Housing First initiative and other local homeless efforts including the temporary winter shelter Consider creating a City Council committee with a focus on social justice and racial equity Evaluate initiatives to effectively engage the community’s youth Identify and implement an achievable goal to reduce disproportionality in arrests Create a racial equity grant program Develop a partnership with the University of Iowa and other key stakeholders that will aid efforts to recruit and retain a greater minority workforce Identify a substantive and achievable goal for the provision of affordable housing in Iowa City and implement strategies to achieve this goal The City Council has also promoted private investment and re-development of other targeted areas throughout the community. The areas that are currently being focused on include the Riverfront Crossings area, the Downtown District, the Towncrest commercial area, and the Riverside Drive commercial area. The Riverfront Crossing area is an initiative to revitalize the area south of Iowa City’s downtown district. This area was hard hit by flooding in 2008 and ideas for improving the district were initiated as part of a combined flood mitigation plan. The new district will feature a riverfront park with walking and biking trails, a variety of housing options near shopping, restaurants, a state-of-the-art recital hall and recreational facilities and is a short walk to downtown Iowa City and the University of Iowa campus. 7 The Riverfront Crossings area is anchored by a 76.8 acre area that was formerly comprised of public facilities including the City’s north wastewater treatment plant. An $8.5 million hazard mitigation grant from the State of Iowa assisted the City in removing the public facilities in this area and then converting the area into a riverfront park and wetland. Construction of phases 1 and 2 of the park began in 2017 and are expected to be completed in 2018. On the north side of the Riverfront Crossing area, the University of Iowa recently constructed the Voxman School of Music, and there are also several public and private developments under various stages of construction in this area including a 12-story, $33 million Hilton Garden Inn, a $102.5 million mixed-use development with a 14-story tower and a 15-story tower that will include a hotel, apartments, retail space, and office space. The City also completed construction of a $15.3 million, 600 space parking garage to service the growth in this area in 2017. In the Downtown District, the City completed a streetscape plan for the Central Business District which included lighting, landscaping, parking, utility improvements, art work, and pedestrian amenities. Reconstruction and enhancements for the Washington Street corridor were completed in 2017 and reconstruction of Black Hawk mini-park and the downtown pedestrian mall are currently under design and are planned for 2018 and 2019. Other buildings in the downtown that are undergoing or have recently completed major re- development include the Wilson Building and public space is being developed into a 15-story mixed-use development to be known as the Chauncey; this building will have 8 floors of residential units, a 35 unit hotel, two floors of commercial space, a movie theatre and a bowling alley. The project is estimated to be $49 million and will be assisted with tax increment financing. This project is currently under construction. In the Towncrest commercial area, City staff is working to facilitate redevelopment of key properties that will improve the function and aesthetic appeal of the area. The Towncrest Urban Renewal Area was developed to revitalize the Towncrest commercial district in ways that would serve existing businesses while also drawing new retailers, service providers, and consumers to the area. A major project underway is a Low Income Housing Tax Credit project to construct a $7.4 million, 40 unit senior housing complex on the current site of a dilapidated commercial structure. This project is under construction as of June 2017. The Riverside Drive commercial area is an area that stretches from the University of Iowa campus to the intersection of Highways 1 and 6 and is across the river from the Riverfront Crossings development area. The development of a 4-story, $16.1 million multi-family/student housing development in the Riverside Drive area was completed in late 2016, and adjacent to this development several new retail spaces including a gas station/marketplace were also constructed. The City is developing a streetscape plan for this area which will include lighting, trails, landscaping, and other amenities and improvements. Construction of the streetscape improvements are expected to begin in 2017. Adjacent to this area is the City’s aging public works complex, which is being targeted for replacement and redevelopment. A plan for replacement is underway with construction of a new Public Works Facility being designed during 2017 and construction to begin in 2018. Long-term Financial Planning It is our intent to support the major initiatives through budget appropriations, departmental operations, and employee management so that the organization as a whole is moving in the same direction. 8 A significant influence in the preparation of the three-year financial plan (FY2017 – FY2019) was the passage of property tax reform (SF295) by the state legislature in 2013. The property tax reform bill had multiple components including a property tax rollback for commercial and industrial property, which reduced the taxable value of these property types. The bill established a State funded “backfill” to reimburse the City for lost property tax revenues due to the commercial and industrial rollback. The State “backfill” payments began in fiscal year 2015 but will be capped at the fiscal year 2017 levels for years thereafter. The cumulative reduction in commercial and industrial property tax revenues due to this rollback are estimated to be $16,484,000 between fiscal year 2015 to fiscal year 2024, and the maximum reimbursement from the State during that time period would be $15,789,000 for a net loss in revenues of $695,000. For fiscal years 2015 through 2017, the City received actual State “backfill” payments for the commercial and industrial rollback totaling $1,048,359, $2,080,228, and $1,582,567 in fiscal years 2015, 2016, and 2017, respectively. This bill also limited the annual taxable valuation growth of residential and agricultural property to 3 percent, instead of the previous limit of 4 percent. The impact of this provision is that the taxable percentage of residential property is expected grow at a slower pace. Without this change, the estimated taxable percentage of residential property was estimated to be 60.85% in fiscal year 2024. With this provision in place, the estimated taxable percentage in fiscal year 2024 is estimated to be 55.11%, a reduction of 5.74%. Based on the assessed value of residential property in Iowa City, the cumulative loss is estimated to be $21,078,000 from fiscal year 2015 to fiscal year 2024. The City will not receive any money from the State due to lost revenue from this provision. SF295 also established a multi-residential property classification that includes mobile home parks, assisted living facilities, and property primarily intended for human habitation. A gradual rollback will be applied to these properties to eventually tax them similarly to residential property, rather than commercial, by fiscal year 2024. The estimated cumulative loss from fiscal year 2015 to fiscal year 2024 is $15,684,000, which will not be reimbursed by the State of Iowa. Fiscal year 2017 was the first year for this new class of property, and the estimated lost revenue in fiscal year 2017 from this provision is $1,200,000. Due to the passage of SF295, the City estimates its net revenue losses to be $3,033,000 from fiscal year 2015 through fiscal year 2017. The cumulative net revenue loss from fiscal year 2015 through fiscal year 2024 is estimated to be $37,457,000. It is possible that this could affect the City’s ability to finance services at current levels without finding other revenue sources or more efficient ways to deliver services. The City’s long-term financial planning strategy is to promote targeted economic development, diversify its revenue structure, control spending and create efficiencies and to build adequate reserves and contingencies into its financial structure. In addition, the City is annually reviewing and adjusting its user fees, service charges, and fine structures to try to maintain all of its major enterprise funds with a positive net income after depreciation but before capital contributions, transfers, and extraordinary items. The City also continues to strive to reduce the City’s property tax levy rate to be competitive for economic development purposes. For fiscal year 2013, the levy rate was $17.269 per $1,000 of assessed value. The property tax levy rate has been reduced for four consecutive years to $16.533 in fiscal year 2018. This has been a reduction of $.736 per $1,000 of assessed value or 4.26% over that time period. 9 In looking at expenses for the FY17 – FY19 financial plan, the City will generally experience increased expenditures; however at a modest pace. Bargaining unit wage increases are approximately 2.40% to 2.60% each year; however, the budgeted full time equivalents (FTE) has decreased from 607.66 in FY15 to 601.89 in FY18. In addition, public safety pension contribution rates have decreased slightly in FY18 but are projected to increase slightly in FY19. The City has averaged an increase in its health insurance premium rates of approximately 2.5% over the previous five years, and is not projecting any dramatic changes to this trend in FY19. Employee contributions, deductibles, and out-of-pocket maximums are expected to increase in FY18 and FY19. In balancing the budget for the three-year period, the City attempted to reduce costs where possible while continuing to provide high quality services, identify and eliminate redundancies that may exist within the organization, examine existing and potential new revenue sources, promote and plan for economic development and redevelopment throughout the City to ensure strong property values, provide for necessary improvements to existing infrastructure, and uphold fiscal integrity and maintain adequate cash reserves. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting (the Certificate) to the City of Iowa City, Iowa for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2016. The Certificate is the highest form of recognition for excellence in state and local financial reporting. In order to be awarded the Certificate, a governmental unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report, whose contents conform to program standards. The Comprehensive Annual Financial Report must satisfy both accounting principles generally accepted in the United States of America and applicable legal requirements. The Certificate is valid for a period of one year only. The City has received the Certificate for the last thirty-two consecutive years. I believe our current report continues to conform to the Certificate requirements and I will submit it to GFOA to determine its eligibility for another certificate. In addition, the City received the GFOA’s Award for Distinguished Budget Presentation for its annual appropriated budget beginning July 1, 2017. In order to qualify for the Distinguished Budget Presentation Award, the City’s budget document was judged to be proficient or outstanding in several categories including policy documentation, financial planning, and organization. This is the sixth consecutive year the City has received this award. 10 Responsibility and Acknowledgments The Department of Finance prepared the Comprehensive Annual Financial Report of the City of Iowa City, Iowa for the fiscal year ended June 30, 2017. The City Council, as required by law, is responsible for the complete and accurate preparation of the City’s Comprehensive Annual Financial Report. I believe that the information presented is accurate in all material respects and that this report fairly presents the financial position and results of operations of the various funds of the City. The preparation of this report on a timely basis could not have been accomplished without the efficient and dedicated services of the entire staff of the City's Finance Department. I would like to express my appreciation to all members of the department who assisted and contributed to its preparation. I want to especially recognize the contributions of the City’s Controller, Nicole Knudtson-Davies, Assistant Controller, Sara Sproule, Senior Accountants, TaraLynne Atkins and Angie Ogden and Senior Payroll Accountant, Chris Hurlbert. Also, I thank the Mayor, members of the City Council and the City Manager for their interest and support in planning and conducting the financial operations of the City in a dedicated, responsible, and progressive manner. Respectfully submitted, Dennis Bockenstedt Director of Finance 11 12 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Iowa City Iowa For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016 Executive Director/CEO City of Iowa City Organization Chart           Community City Manager City Manager Communications Office Human Resources Human Rights Economic Development Airport Airport Operations City Attorney City Clerk Library Board Airport Commission Library Library Operations Library Foundation Fire Administration Emergency Operations Fire Prevention Training Police Administration Support Services Field Operations Parks & Recreation Administration Recreation Park Maintenance Cemetery Finance Administration Accounting Purchasing Revenue Risk Management Information Technology Services Senior Center Senior Center Operations Neighborhood & Development Services Administration Development Services Neighborhood Services Metropolitan Planning Organization of Johnson County Public Works Administration Engineering Streets Wastewater Water Refuse Collection Landfill Storm Water Equipment Transportation & Resource Management Administration Parking Public Transportation City Council City Manager City Clerk City Clerk City Attorney City Attorney 13 / ' '-~ ] I I I I I -I -I ,r '/' '\ /' /' " /' " '-'-\.. / \.. / - /' / / / " '--'--'-.) '-- CITY OF IOWA CITY, IOWA LISTING OF CITY OFFICIALS June 30, 2017 ELECTED OFFICIALS Term Expires Mayor Jim Throgmorton January 2, 2020 Council Member and Mayor Pro Tem Kingsley Botchway II January 2, 2018 Council Member Susan Mims January 2, 2018 Council Member Terry Dickens January 2, 2018 Council Member Rockne Cole January 2, 2020 Council Member Pauline Taylor January 2, 2020 Council Member John Thomas January 2, 2020 APPOINTED OFFICIALS Date of Hire City Manager Geoff Fruin November 28, 2011 City Clerk Kellie Fruehling July 10, 2000 City Attorney Eleanor Dilkes March 18, 1996 DEPARTMENT DIRECTORS Assistant City Manager Ashley Monroe December 1, 2016 Director of Neighborhood Development Services Douglas W. Boothroy September 22, 1975 Library Director Susan Craig July 28, 1975 Director of Public Works Ron Knoche April 28, 1999 Director of Transportation Services Chris O’Brien December, 29, 1997 Senior Center Coordinator Linda Kopping March 20, 1995 Fire Chief John Grier August 10, 1992 Parks and Recreation Director Juli Seydell Johnson January 4, 2016 Director of Finance Dennis Bockenstedt February 15, 2013 Chief of Police Jody Matherly January 23, 2017 14 Financial Section Tabs What inspires you, inspires us. Let’s talk. | eidebailly.com 1545 Associates Dr., Ste. 101 | Dubuque, IA 52002-2299 | T 563.556.1790 | F 563.557.7842 | EOE 15 Independent Auditor’s Report To the Honorable Mayor and Members of the City Council City of Iowa City, Iowa 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 the City of Iowa City, Iowa, (City) as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States 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. CPAs & BUSINESS ADVISORS 16 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 the City of Iowa City, Iowa, as of June 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter Fund Balance Restatement As discussed in Note 14 to the financial statements, the City has elected to change its accounting method for Notes Receivable. Accordingly, adjustments were made to restate beginning fund balances. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and the other required supplementary information listed in the table of contents 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 inquires of management about the methods or preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Iowa City, Iowa’s financial statements. The introductory section, combining nonmajor fund financial statements, and statistical section are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and is not a required part of the financial statements. The combining nonmajor fund financial statements and the schedule of expenditures of federal awards 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 combining nonmajor fund financial statements and the Schedule of Expenditures of Federal Awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. 17 The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 11, 2017, on our consideration of the City of Iowa City, Iowa’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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Iowa City, Iowa’s 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. Dubuque, Iowa December 11, 2017 18 (This page left blank intentionally.) Management’s Discussion and Analysis As management of the City of Iowa City, we present this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2017. This narrative is intended to be used in conjunction with additional information that is included in the letter of transmittal, which can be found on pages 3 – 11 of this report. Financial Highlights The assets and deferred outflows of resources of the City of Iowa City exceeded its liabilities and deferred inflows of resources at the close of the fiscal year ending June 30, 2017 by $631,405,000 (net position). Of this amount, $92,928,000 (unrestricted net position) may be used to meet the government’s ongoing obligations to its citizens and creditors. The City’s total net position increased by $36,067,000 during the fiscal year. Governmental activities increased by $23,673,000 and business-type activities increased by $12,394,000. At the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $106,381,000, an increase of $15,254,000 in comparison with the prior year. Of this total amount, approximately $24,793,000 or 23.3% is unassigned and available for spending at the City’s discretion. At the end of the current fiscal year, the City’s unassigned fund balance for the General Fund was $24,793,000 or 53.1% of total General Fund expenditures. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements; and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements: The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances in a manner similar to a private-sector business. The statement of net position presents information on all of the City’s assets and deferred outflows of resources, liabilities and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include Public Safety, Public Works (roads and traffic controls), Culture and Recreation, Community and Economic Development, General Government, and Interest on long-term debt. The business-type activities of the City include Airport, Housing Authority, Parking, Sanitation, Stormwater Collection, Transit, Wastewater Treatment, and Water. The government-wide financial statements may be found on pages 30 – 33 of this report. 19 Fund Financial Statements: A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds: Governmental funds are used to account for essentially the same function reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements and is typically the basis that is used in developing the next annual budget. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison. The City has four major governmental funds: General Fund, Employee Benefits Fund, Bridge, Street and Traffic Control Construction Fund, and Debt Service Fund. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for these major funds. Data from all other non-major governmental funds is combined into a single aggregated presentation and are referenced under a single column as “Other Governmental Funds”. Individual fund data on each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for all governmental funds as required by state statute. Budget comparisons have been provided for the Governmental funds and the Enterprise funds, to demonstrate compliance with the adopted budget. The basic governmental funds financial statements can be found on pages 34 – 37 of this report. Proprietary Funds: The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its Airport, Housing Authority, Parking, Sanitation, Stormwater Collection, Transit, Wastewater Treatment, and Water activities. Internal Service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City has four Internal Service Funds: Equipment Maintenance, Central Services, Loss Reserve, and Information Technology. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds financial statements provide the same type of information as the government-wide financial statements, only in more detail. Parking, Wastewater Treatment, Water, Sanitation, Stormwater and Housing Authority are considered to be major funds and are reported individually throughout the report. The other two non-major enterprise funds are grouped together for reporting purposes and listed under a single heading “Other Enterprise Funds”. Detailed information for each of the non-major funds is provided in the combining statements on pages 108 – 110. Individual fund data for the Internal Service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 38 – 43 of this report. 20 Fiduciary Funds: Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not available to support the City’s own programs and therefore are not reflected in the government-wide financial statements. The City has one fiduciary fund: Project Green, which is maintained as an agency fund. The basic fiduciary funds financial statements can be found on page 44. Notes to Financial Statements: The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 46 – 86 of this report. Other Information: The combining statements referred to in the above paragraphs in connection with non- major governmental funds, non-major enterprise funds, and internal service funds are presented immediately following the notes. Government-wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $631,405,000 at the close of the fiscal year ended June 30, 2017. By far, the largest portion of the City’s net position reflect its investment in capital assets (e.g., land, building, machinery and equipment, improvements other than buildings, and infrastructure), net any related debt to acquire those assets that is still outstanding. The City uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other resources, since the capital assets themselves cannot be used to liquidate these liabilities. City of Iowa City's Net Position June 30, 2017 (amounts expressed in thousands) Governmental Business-type activities activities Total 2017 2016 2017 2016 2017 2016 Current and other assets, as restated 190,352$ 176,348$ 119,968$ 116,163$ 310,320$ 292,511$ Capital assets 226,143 207,222 335,064 319,926 561,207 527,148 Total assets, as restated 416,495 383,570 455,032 436,089 871,527 819,659 Deferred outflows of resources 13,131 7,192 2,345 1,217 15,476 8,409 Long-term liabilities outstanding 112,931 94,598 68,385 57,712 181,316 152,310 Current and other liabilities 11,042 13,146 4,379 7,217 15,421 20,363 Total liabilities 123,973 107,744 72,764 64,929 196,737 172,673 Deferred inflows of resources, as restated 58,062 59,100 799 957 58,861 60,057 Net position: Net investment in capital assets 183,651 163,362 285,912 279,679 469,563 443,041 Restricted 47,676 42,154 21,238 22,269 68,914 64,423 Unrestricted 16,264 18,402 76,664 69,472 92,928 87,874 Total net position 247,591$ 223,918$ 383,814$ 371,420$ 631,405$ 595,338$ 21 A portion of the City’s net position, $68,914,000 or 10.9%, represents resources that are subject to external restrictions on how they may be used. The remaining balance of the unrestricted net position, $92,928,000 or 14.7%, may be used to meet the government’s ongoing obligations to its citizens and creditors. At the end of the fiscal year ended June 30, 2017, the City is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. The following is a more detailed review of FY17’s operation. Governmental Activities: Governmental activities increased the City’s net position by $23,673,000. The increase in net position of governmental activities is primarily due to receiving grants to fund expenses for operations and capital assets. The total revenues for governmental activities for FY17 were $98,143,000. Governmental activities are primarily funded through taxes, $60,451,000 or 61.6%, and grants and contributions, $20,780,000 or 21.2%. Taxes increased from the prior year by $4,620,000, mostly due to increased property taxes which was due to an increase in the taxable value of all property. Grants and contributions increased from prior year by $6,840,000 which is due to City’s expenses for a large flood mitigation project. Expenses for governmental activities totaled $67,417,000. Governmental activities are tracked by function including Public Safety, Public Works, Community and Economic Development, Culture and Recreation, and General Government. In FY17, Public Safety accounted for the highest portion of governmental expenses, $24,002,000 or 35.6%, and increased over the prior year due to an increase in pension expense. Culture and Recreation expenses of $15,525,000 or 23.0% made up another large portion of the governmental expenses and increased over the prior year due mainly to increases in parks and recreation operating costs. Public Works expenses of $12,032,000 or 17.8% made up the third highest portion of governmental expenses and increased due to an increase in depreciation and operating expenses. Business-type Activities: Business-type activities increased the City’s total net position by $12,394,000. The increase in net position was primarily from the Water and Wastewater Treatment funds. The increases in both Water and Wastewater Treatment funds are due to transfers of capital assets from governmental capital project funds. For all business-type activities, revenues exceeded expenses by $5,341,000. Revenues for business-type activities totaled $59,133,000. The primary revenue source for business-type activities is charges for services, $41,231,000 or 69.7%. In addition for FY17, the City’s business type- activities had a significant portion, $15,635,000 or 26.4%, of their revenues from grants and contributions used to help fund operation and capital projects for business-type activities. The total expenses for business-type activities in FY17 were $53,792,000. Wastewater Treatment represented the highest portion of business-type activities, $11,233,000 or 20.9%, with Sanitation, $9,123,000 or 17.0%, Water, $8,921,000 or 16.6%, Housing Authority, $8,798,000 or 16.4%, and Transit, $7,263,000 or 13.5%, making up the remainder of the majority of business-type activities expenses. 22 The graphs on the following pages represent a breakdown of revenue by source and expenses by program area for governmental and business-type activities. City of Iowa City's Changes in Net Position (amounts expressed in thousands) Governmental Business-type activities activities Total 2017 2016 2017 2016 2017 2016 Revenues: Program Revenues: Charges for services 8,412$ 8,560 $ 41,231 $ 39,953$ 49,643 $ 48,513$ Operating grants and contributions 10,828 9,941 10,836 10,639 21,664 20,580 Capital grants and contributions 9,952 3,999 4,799 4,607 14,751 8,606 General Revenues: Property taxes 57,649 53,114 - - 57,649 53,114 Other taxes 2,802 2,717 - - 2,802 2,717 Grants and contributions not restricted to specific purposes 1,583 2,080 - - 1,583 2,080 Earnings on investments 1,397 1,045 938 715 2,335 1,760 Gain on disposal of capital assets 2,151 218 69 2,463 2,220 2,681 Other 3,369 4,464 1,260 362 4,629 4,826 Total revenues 98,143 86,138 59,133 58,739 157,276 144,877 Expenses: Public safety 24,002 22,029 - - 24,002 22,029 Public works 12,032 10,839 - - 12,032 10,839 Culture and recreation 15,525 14,422 - - 15,525 14,422 Community and economic development 8,253 6,786 - - 8,253 6,786 General government 6,124 6,240 - - 6,124 6,240 Interest on long-term debt 1,481 1,287 - - 1,481 1,287 Wastewater treatment - - 11,233 11,866 11,233 11,866 Water - - 8,921 8,149 8,921 8,149 Sanitation - - 9,123 8,735 9,123 8,735 Housing authority - - 8,798 8,378 8,798 8,378 Parking - - 4,620 4,460 4,620 4,460 Airport - - 1,402 1,597 1,402 1,597 Stormwater - - 2,432 1,989 2,432 1,989 Transit - - 7,263 7,486 7,263 7,486 Total expenses 67,417 61,603 53,792 52,660 121,209 114,263 Change in net position before transfers and special item 30,726 24,535 5,341 6,079 36,067 30,614 Transfers (7,053) (6,395) 7,053 6,395 - - Reassignment of Cable Television to governmental activities - 82 - (82) - - Change in net position 23,673 18,222 12,394 12,392 36,067 30,614 Net position beginning of year 223,918 205,696 371,420 359,028 595,338 564,724 Net position end of year 247,591$ 223,918$ 383,814$ 371,420$ 631,405$ 595,338$ 23 Charges for services 8% Grants and Contributions 23% Property taxes 59% Other Taxes 3% Misc. Other 7% Governmental Activities FY2017 Revenue by Source Charges for services 70% Grants and Contributions 26% Misc. Other 4% Business-Type Activities FY2017 Revenue by Source 24 i Public Safety Public Works Culture and Recreation Community and Econ Dev General Govt Interest Expense 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 Do l l a r s ( $ ) Program Area Governmental Activities FY2017 Expenses by Program Area (amounts expressed in thousands) Wastewater Treatment WaterSanitationHousing Authority Parking Airport Stormwater Transit 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 Do l l a r s ( $ ) Program Area Business-Type Activities FY2017 Expenses by Program Area (amounts expressed in thousands) 25 Financial Analysis of the Government’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds: The financial reporting focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information may be/is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. The City implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions effective with the June 30, 2011 financial statements. Fund balances for the governmental funds are reported in classifications that comprise a hierarchy based on the extent to which the government honors constraints on the specific purposes for which amounts in those funds can be spent. As of the fiscal year ended June 30, 2017, the City’s governmental funds reported combined ending fund balances of $106,381,000, an increase of $15,254,000 in comparison with the prior year. Of this total amount, $24,793,000 constitutes unassigned fund balance, which is available to use as working capital for the General Fund since property tax revenues are received only twice a year and the remainder is available to meet the future needs of the City. The remainder of the fund balance is not available for new spending because of constraints imposed externally by creditors, grantors, contributors, or laws or regulations of other governments or constraints imposed internally on the specific purposes for which these amounts can be spent. The restricted fund balance of $73,915,000 or 69.5% contains external restraints on its use. The committed and assigned fund balances of $5,199,000 or 4.9% and $1,342,000 or 1.3%, respectively, have been identified by the City to be used for specific purposes. The nonspendable fund balance is $1,132,000 or 1.1%, which the City is contractually required to maintain intact or cannot be spent because it is in a nonspendable format, such as inventories. The General Fund is the chief operating fund of the City. As of the fiscal year ended June 30, 2017, the unassigned fund balance of the General Fund was $24,793,000 while General Fund’s total fund balance was $42,096,000. As a measure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 53.1% of total General Fund expenditures of $46,706,000, while total fund balance represents 90.1% of that same amount. During the current fiscal year, the fund balance of the City’s General Fund decreased by $7,405,000. This is due to transfers out to other funds. The fund balance in the Bridge, Street, and Traffic Control Construction Fund was $15,537,000, an increase of $2,366,000. This fund accounts for transactions relating to the acquisition or construction of major streets, bridges, and traffic control facilities. The fund balance in the Other Construction Fund was $27,356,000, an increase of $18,607,000. This fund accounts for the construction or replacement of other governmental general capital assets, such as administrative buildings, with various funding sources, including general obligation bonds, intergovernmental revenues, and contributions. The change in these fund balances is due to timing of the sale of GO bonds. The ending fund balance of the Debt Service Fund was $7,756,000, an increase of $1,183,000, all of which is reserved for the payment of debt service (i.e. payment of general obligation principal and interest). The ending fund balance of the Employee Benefits Fund was $2,521,000, an increase of $850,000 due to an increase in property tax revenues. 26 Proprietary Funds: The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The ending net position of the enterprise funds was $368,320,000, an increase in net position of $10,606,000. This was primarily due to capital contributions of federal and state grants to fund capital improvement projects and transfers of business-type capital assets from governmental capital project funds. Of the enterprise funds’ net position, $285,912,000 is net investment in capital assets. Unrestricted net position totaled $61,170,000, an increase of $5,404,000 compared to the previous year. The Internal Service funds showed net position totaling $39,652,000 as of June 30, 2017, an increase of $4,188,000 primarily due to operating income in the Equipment Reserve Fund to build up reserves for future capital outlay. Budgetary Highlights The City presents budgetary information as allowed by GASB Statement No. 41. Budgets are based on nine functional areas as required by state statute, not by fund or fund type. The City had two budget amendments during the fiscal year. These amendments increased budgeted revenues by $9,148,000 or 6.2% to a total of $155,743,000 and the expenditure budget by $74,037,000 or 44.0% to a total of $242,301,000. These increases were due primarily to capital projects in governmental and business- type funds because of timing of completion of projects. Capital Assets and Debt Administration Capital Assets: The City’s investment in capital assets for its governmental and business-type activities as of June 30, 2017 amounts to $561,207,000, net of accumulated depreciation. This investment in capital assets, including land, buildings, improvements other than buildings, equipment, streets, bridges, trails, wastewater and water systems, and other infrastructure represents the value of resources utilized to provide services to its citizens. The City’s investment in capital assets for the fiscal year ended June 30, 2017 increased by $18,921,000 for governmental activities compared to the prior year and increased by $15,138,000 for business-type activities from the prior year. The following table reflects the $561,207,000 investment in capital assets, net of accumulated depreciation. City of Iowa City's Capital Assets (net of depreciation) (amounts expressed in thousands) Governmental Business-type Activities Activities Total 2017 2016 2017 2016 2017 2016 Land 29,778$ 24,081 $ 30,737$ 35,590 $ 60,515$ 59,671$ Buildings 39,464 41,126 73,297 60,636 112,761 101,762 Improvements other than buildings 3,954 4,092 4,341 4,703 8,295 8,795 Machinery and equipment 16,686 15,825 7,470 8,596 24,156 24,421 Infrastructure 113,494 97,904 209,505 207,756 322,999 305,660 Construction in progress 22,767 24,194 9,714 2,645 32,481 26,839 Total 226,143$ 207,222$ 335,064$ 319,926$ 561,207$ 527,148$ 27 Major capital asset events during the current fiscal year included the following:  Work was completed for the 1st Avenue/IAIS Railroad Crossing Improvement which lowered 1st Avenue under the IAIS Railroad and included a railroad bridge, retaining wall and utilities. The construction in progress balance at the beginning of the year was $9,187,000. Additional expenses of $3,111,000 were added in FY 17. The total cost of the project that was capitalized was $12,298,000 and is funded primarily by GO bonds with the remainder of the funding by federal or state grants.  Work was completed for the Washington Street Construction Project, which includes in addition to reconstruct Washington Street, improvements to the sidewalk pavement and water main and stormwater enhancement. The construction in progress balance at the beginning of the year was $1,350,000. Additional expenses of $3,085,000 were added in FY 17. The total cost of the project that was capitalized was $4,435,000 and is funded primarily from GO bonds.  Expenses for a variety of street and bridge construction were moved into construction in progress at the end of FY17 for a total balance of $28,791,000. This construction in progress includes $27,874,000 for the Iowa City Gateway Project, which will reconstruct and elevate Dubuque Street and Park Road Bridge to provide flood protection. Additional information on the City’s capital assets can be found in Note 4 to the financial statements. Debt Administration: At the end of the fiscal year, the City had total bonded debt outstanding of $99,665,000. Of this amount, $51,645,000 comprises debt backed by the full faith and credit of the City. $5,084,000 or 9.8% of these bonds is debt that will be paid with Tax Increment Financing revenues. $48,020,000 represents revenue bonds secured solely by specific revenue sources. The City issued $9,765,000 of General Obligation bonds and $23,265,000 of Revenue bonds during FY17. This increase in debt was mostly offset by the retirement of debt for a net increase of City’s total bonded debt by $3,370,000. The City continues to have the same excellent bond rating on its General Obligation bonds that it has had for the past several years. This rating is given to those bonds judged to be of the best quality and carrying the smallest degree of investment risks. The City's bond ratings by Moody’s Investors Services, Inc. as of June 30, 2017 were as follows: General obligation bonds Aaa Wastewater treatment revenue bonds Aa2 Water revenue bonds Aa2 City of Iowa City's Outstanding Debt General Obligation and Revenue Bonds (amounts expressed in thousands) Governmental Business-type Activities Activities Total 2017 2016 2017 2016 2017 2016 General obligation bonds 51,645 $ 55,055 $ -$ 295 $ 51,645 $ 55,350 $ Revenue bonds 15,200 2,525 32,820 38,420 48,020 40,945 Total 66,845$ 57,580$ 32,820$ 38,715$ 99,665$ 96,295$ 28 The City continues to operate well under the State debt capacity debt limitations. State statute limits the amount of debt outstanding to 5% of the assessed value of all taxable property in Iowa City. Debt subject to the debt limit includes general obligation debt and revenue bonds issued pursuant to Iowa Code Chapter 403 (tax increment). The current debt limitation for the City is $267,511,000. With outstanding debt applicable to this limit of $84,864,000 we are utilizing 31.7% of this limit. More detailed information on debt administration is provided in Note 6 of the financial statements. Economic Factors and Next Year’s Budget and Rates During the 2009 session, the Iowa State Legislature passed a law allowing cities to utilize franchise fee tax as a revenue alternative to property tax. The Iowa City Council passed a local franchise fee tax of 1% on natural gas and electricity that became effective April 1, 2010. This revenue is being utilized to support additional public safety initiatives, including operating a fourth fire station. In FY17, the City collected $939,000 in local franchise fee. The City expects continued constraints by the State’s property tax formula. The State passed property tax reform, which will negatively affect the City’s general operating funds. Without the potential for new revenue sources, like those mentioned above, the City’s opportunities for new initiatives are limited. The Council has established a balanced budget in the General Fund for FY18 that strives to maintain current service delivery levels. The tax levy rate per $1,000 of assessed valuation for FY18 is provided below: Requests for Information This report is designed to provide a general overview of the City of Iowa City’s finances for all of those with an interest in the government’s finances. Questions concerning any of the information provided in this report, or requests for additional financial information should be addressed to City of Iowa City, Finance Department, 410 East Washington Street, Iowa City, IA, 52240. General Levy $ 8.100 Debt Service Levy 3.579 Employee Benefits Levy 3.144 Transit Levy 0.950 Liability Insurance Levy 0.290 Library Levy 0.270 Total City Levy $ 16.333 29 Governmental Business-type Activities Activities Total Assets Equity in pooled cash and investments 111,030$ 64,719$ 175,749$ Receivables: Property tax 56,639 - 56,639 Accounts and unbilled usage 820 3,469 4,289 Interest 428 351 779 Notes 5,524 540 6,064 Internal balances (15,494) 15,494 - Due from other governments 4,519 2,435 6,954 Prepaid item 811 3 814 Inventories 730 763 1,493 Assets held for resale 750 - 750 Restricted assets: Equity in pooled cash and investments 24,560 32,191 56,751 Other post employment benefits asset 35 3 38 Capital assets: Land and construction in progress 52,545 40,451 92,996 Other capital assets (net of accumulated depreciation)173,598 294,613 468,211 Total assets 416,495 455,032 871,527 Deferred Outflows of Resources Pension related deferred outflows 13,131 2,345 15,476 Liabilities Accounts payable 2,127 997 3,124 Contracts payable 2,521 539 3,060 Accrued liabilities 4,182 440 4,622 Interest payable 133 718 851 Deposits 1,230 1,606 2,836 Advances from grantors 144 - 144 Due to other governments 42 79 121 Notes payable 663 - 663 Noncurrent liabilities: Due within one year: Employee vested benefits 1,252 403 1,655 Capital lease obligation - 524 524 Bonds payable 8,230 5,326 13,556 Due in more than one year: Employee vested benefits 989 291 1,280 Net pension liability 39,080 8,975 48,055 Other post employment benefits obligation 3,660 1,222 4,882 Notes payable 211 - 211 Capital lease obligation - 13,958 13,958 Bonds payable 59,509 29,095 88,604 Landfill closure/post-closure liability - 8,591 8,591 Total liabilities 123,973$ 72,764$ 196,737$ (continued) (amounts expressed in thousands) CITY OF IOWA CITY, IOWA STATEMENT OF NET POSITION June 30, 2017 30 Governmental Business-type Activities Activities Total Deferred inflows of resources Unavailable revenues: Pension related deferred inflows 1,603$ 550$ 2,153$ Deferred amount on refunding - 249 249 Succeeding year property taxes 56,459 - 56,459 Total deferred inflows of resources 58,062 799 58,861 Net position Net investment in capital assets 183,651 285,912 469,563 Restricted for or by: Employee benefits 2,810 - 2,810 Capital projects 30,856 - 30,856 Debt service 7,221 - 7,221 Police 349 - 349 Other purposes 2,590 - 2,590 Bond ordinance - 12,112 12,112 State statute - 5,939 5,939 Future improvements - 100 100 Grant agreement 3,850 3,087 6,937 Unrestricted 16,264 76,664 92,928 Total net position 247,591$ 383,814$ 631,405$ The notes to the financial statements are an integral part of this statement. June 30, 2017 (amounts expressed in thousands) CITY OF IOWA CITY, IOWA STATEMENT OF NET POSITION (continued) 31 Operating Capital Charges Grants and Grants and Functions/Programs:Expenses for Services Contributions Contributions Governmental activities: Public safety 24,002$ 5,286$ 196$ 467$ Public works 12,032 724 8,711 9,343 Culture and recreation 15,525 842 74 36 Community and economic development 8,253 36 1,847 106 General government 6,124 1,524 - - Interest on long-term debt 1,481 - - - Total governmental activities 67,417 8,412 10,828 9,952 Business-type activities: Wastewater treatment 11,233 12,277 - 2,226 Water 8,921 9,275 - 869 Sanitation 9,123 9,927 - - Housing authority 8,798 321 8,532 - Parking 4,620 5,453 - - Airport 1,402 345 69 58 Stormwater 2,432 1,544 - 1,251 Transit 7,263 2,089 2,235 395 Total business-type activities 53,792 41,231 10,836 4,799 Total 121,209$ 49,643$ 21,664$ 14,751$ General revenues: Property taxes, levied for general purposes Hotel/motel tax Gas and electric tax Utility franchise tax Grants and contributions not restricted to specific purposes Earnings on investments Gain on disposal of capital assets Miscellaneous Transfers Total general revenues and transfers Changes in net position Net position beginning of year Net position end of year The notes to the financial statements are an integral part of this statement. Program Revenues CITY OF IOWA CITY, IOWA STATEMENT OF ACTIVITIES For the Year Ended June 30, 2017 (amounts expressed in thousands) 32 Governmental Business-type Activities Activities Total (18,053)$ -$ (18,053)$ 6,746 - 6,746 (14,573) - (14,573) (6,264) - (6,264) (4,600) - (4,600) (1,481) - (1,481) (38,225) - (38,225) - 3,270 3,270 - 1,223 1,223 - 804 804 - 55 55 - 833 833 - (930) (930) - 363 363 - (2,544) (2,544) - 3,074 3,074 (38,225) 3,074 (35,151) 57,649 - 57,649 1,137 - 1,137 726 - 726 939 - 939 1,583 - 1,583 1,397 938 2,335 2,151 69 2,220 3,369 1,260 4,629 (7,053) 7,053 - 61,898 9,320 71,218 23,673 12,394 36,067 223,918 371,420 595,338 247,591$ 383,814$ 631,405$ Net (Expense) Revenue and Changes in Net Position 33 Capital Special Revenue Projects Bridge, Street, and Traffic Other Employee Control Debt Governmental General Benefits Construction Service Funds Total Assets Equity in pooled cash and investments 32,500 $ 2,413$ 12,151 $ 7,090 $ 25,459 $ 79,613 $ Receivables: Property tax 32,965 10,783 - 12,564 327 56,639 Accounts and unbilled usage 410 - 252 - 1 663 Interest 161 - 43 106 29 339 Notes 1,292 - - 399 3,833 5,524 Advances to other funds - - - 125 - 125 Due from other governments 1,887 316 931 - 1,318 4,452 Inventories - - - - 264 264 Prepaid item 719 80 - - - 799 Assets held for resale 750 - - - - 750 Restricted assets: Equity in pooled cash and investments 10,268 - 5,272 - 9,020 24,560 Total assets 80,952$ 13,592$ 18,649$ 20,284$ 40,251$ 173,728$ Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable 1,191 $ 4$ 11 $ 5 $ 430 $ 1,641 $ Contracts payable - - 2,077 - 444 2,521 Accrued liabilities 1,321 2 12 - 101 1,436 Advances from other funds - - - - 125 125 Due to other governments 38 - - - 4 42 Interest payable 4 - - - - 4 Notes payable 663 - - - - 663 Liabilities payable from restricted assets: Deposits 1,224 - - - 6 1,230 Advances from grantors 7 - - - 137 144 Total liabilities 4,448 6 2,100 5 1,247 7,806 Deferred inflows of resources : Unavailable revenues: Succeeding year property taxes 32,863 10,750 - 12,523 323 56,459 Grants 6 - 581 - 117 704 Other 1,539 315 431 - 93 2,378 Total deferred inflows of resources 34,408 11,065 1,012 12,523 533 59,541 Fund balances: Nonspendable 788 80 - - 264 1,132 Restricted 9,974 2,441 15,537 7,756 38,207 73,915 Committed 5,199 - - - - 5,199 Assigned 1,342 - - - - 1,342 Unassigned 24,793 - - - - 24,793 Total fund balances 42,096 2,521 15,537 7,756 38,471 106,381 Total liabilities, deferred inflows of resources and fund balances 80,952 $ 13,592$ 18,649 $ 20,284 $ 40,251 $ 173,728 $ The notes to the financial statements are an integral part of this statement. CITY OF IOWA CITY, IOWA BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2017 (amounts expressed in thousands) 34 Total governmental fund balances 106,381$ Amounts reported for governmental activities in the statement of net position are different because: 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.39,652 Other long-term assets are not available to pay for current period expenditures and therefore are unavailable in the funds: Grants and other receivables - Earned but unavailable.3,082 Capital assets used in governmental activities are not current financial resources and therefore are not reported in the funds. 214,188 Pension related deferred outflows of resources and deferred inflows of resources are not due and payable in the current period and therefore are not reported in the funds. Deferred outflows of resources 12,750$ Deferred inflows of resources (1,515) 11,235 Net pension liabilities are not due and payable in the current period and therefore are not reported in the funds.(37,683) Accrued compensated absences are not due and payable in the current period and therefore are not reported in the funds.(2,128) Accrued post employment benefit obligations are not due and payable in the current period and therefore are not reported in the funds.(3,563) Bonds payable are not due and payable in the current period and therefore are not reported in the funds.(67,739) Notes payable are not due and payable in the current period and therefore are not reported in the funds.(211) Accrued interest on bonds (129) Internal balance due to integration of internal service funds (15,494) Total net position of governmental activities 247,591$ The notes to the financial statements are an integral part of this statement. (amounts expressed in thousands) CITY OF IOWA CITY RECONCILIATION OF THE BALANCE SHEET OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION June 30, 2017 35 Capital Special Revenue Projects Bridge, Street, and Traffic Other Employee Control Debt Governmental General Benefits Construction Service Funds Total Revenues Taxes 34,290$ 10,537$ -$ 13,109$ 2,516$ 60,452$ Licenses and permits 3,521 - - - - 3,521 Intergovernmental 3,574 295 8,663 359 11,249 24,140 Charges for services 1,665 302 22 - 366 2,355 Fines and forfeits 750 - - - -750 Use of money and property 839 - 69 181 146 1,235 Miscellaneous 1,692 12 1 - 396 2,101 Total revenues 46,331 11,146 8,755 13,649 14,673 94,554 Expenditures Current: Public safety 22,005 484 - - 24 22,513 Public works 1,803 - 2,290 - 5,093 9,186 Culture and recreation 12,890 - -- 451 13,341 Community and economic development 3,074 - -- 4,621 7,695 General government 5,471 384 - 16 11 5,882 Debt service: Principal - - - 13,305 - 13,305 Interest - - - 1,597 - 1,597 Capital outlay 1,463 - 14,704 - 2,238 18,405 Total expenditures 46,706 868 16,994 14,918 12,438 91,924 Excess (deficiency) of revenues over (under) expenditures (375) 10,278 (8,239) (1,269) 2,235 2,630 Other Financing Sources (Uses) Issuance of debt - - 6,023 654 15,893 22,570 Sale of capital assets 268 - - - 2,024 2,292 Premiums on issuance of bonds - - 32 3 85 120 Transfers in 10,725 - 16,343 1,795 5,812 34,675 Transfers out (18,023) (9,428) (11,793) - (7,789) (47,033) Total other financing sources and (uses)(7,030) (9,428) 10,605 2,452 16,025 12,624 Net change in fund balances (7,405) 850 2,366 1,183 18,260 15,254 Fund Balances, Beginning, as restated 49,501 1,671 13,171 6,573 20,211 91,127 Fund Balances, Ending 42,096$ 2,521$ 15,537$ 7,756$ 38,471$ 106,381$ The notes to the financial statements are an integral part of this statement. CITY OF IOWA CITY, IOWA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended June 30, 2017 (amounts expressed in thousands) 36 Net change in fund balances - total governmental funds 15,254 $ Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the asset. Capital outlays and contributed capital assets exceeded depreciation expense in the current year as follows: Expenditures for capital assets 17,060 $ Transfers of capital assets (to)\from enterprise funds - net 4,863 Capital assets contributed 2,574 Depreciation expense (6,749) 17,748 Bond proceeds are reported as other financing sources in governmental funds and thus contribute to the change in fund balance. In the statement of net position, however, issuing debt increases long-term liabilities and does not affect the statement of activities. Similarly, repayment of principal is an expenditure in the governmental funds but reduces the liability in the statement of net position. Debt issued (22,570) Premium on bonds issued (120) Repayments of debt 13,305 Amortization of premium 135 (9,250) Because some revenues will not be collected for several months after the City's year end, they are not considered available revenues in the governmental funds.(1,323) Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds: Change in accrued compensated absences (99) Pension expense (458) Change in accrued post employment benefit obligations (424) Change in accrued interest on debt (19) In the statement of activities, only the gain on the sale of the capital assets is recognized, whereas in the governmental funds, the proceeds from the sale increased financial resources. Thus, the change in net position differs from the change in fund balance by the cost of the capital asset sold.(156) Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of certain activities of internal service funds is reported with governmental activities.2,400 Change in net position of governmental activities 23,673 $ The notes to the financial statements are an integral part of this statement. (amounts expressed in thousands) For the Year Ended June 30, 2017 CITY OF IOWA CITY RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES 37 Governmental Activities - Other Internal Wastewater Housing Enterprise Service Parking Treatment Water Sanitation Stormwater Authority Funds Total Funds Assets Current assets: Equity in pooled cash and investments 11,896 $ 18,830 $ 9,566 $ 13,965 $ 1,547 $ 3,685 $ 5,230 $ 64,719 $ 31,417$ Receivables: Accounts and unbilled usage 10 1,525 1,043 698 154 - 39 3,469 157 Interest 31 100 42 92 5 65 16 351 89 Notes - - - - - 540 - 540 - Advances to other funds - - - 1,901 - - - 1,901 - Due from other governments - 1 1 63 82 106 2,182 2,435 67 Inventories - - 469 - - - 294 763 466 Prepaid item - - - - - - 3 3 12 Assets held for resale - - - - - - - - - Total current assets 11,937 20,456 11,121 16,719 1,788 4,396 7,764 74,181 32,208 Noncurrent assets: Restricted assets: Equity in pooled cash and investments 1 9,136 4,640 14,547 - 3,706 161 32,191 - Other post employment benefits asset - - - - - - 3 3 35 Capital assets: Land 3,746 759 6,296 2,264 2,264 620 14,788 30,737 45 Buildings 41,647 36,858 24,019 5,467 - 5,350 20,776 134,117 1,531 Improvements other than buildings 328 7,119 2,616 421 - 9 396 10,889 50 Machinery and equipment 1,504 7,612 10,801 147 27 106 10,613 30,810 22,333 Infrastructure - 149,533 63,017 17,366 58,796 - 18,713 307,425 2,849 Accumulated depreciation (19,364) (76,030) (36,740) (14,845) (13,693) (4,468) (23,488) (188,628) (15,346) Construction in progress - 5,940 1,566 129 1,537 - 542 9,714 493 Total noncurrent assets 27,862 140,927 76,215 25,496 48,931 5,323 42,504 367,258 11,990 Total assets 39,799 161,383 87,336 42,215 50,719 9,719 50,268 441,439 44,198 Deferred Outflows of Resources Pension related deferred outflows 251 $ 355 $ 430 $ 422 $ 41 $ 146 $ 700 $ 2,345 $ 381$ (continued) Business-type Activities - Enterprise Funds CITY OF IOWA CITY, IOWA STATEMENT OF NET POSITION PROPRIETARY FUNDS June 30, 2017 (amounts expressed in thousands) 38 GovernmentalActivities - Other Internal Wastewater Housing Enterprise ServiceParkingTreatmentWaterSanitationStormwaterAuthorityFundsTotalFunds Liabilities Current liabilities: Accounts payable 82 $ 225 $ 237 $ 211 $ 41 $ 34 $ 167 $ 997 $ 486$ Contracts payable 144 210 34 55 45 - 51 539 - Accrued liabilities 43 69 81 72 9 28 138 440 2,746 Employee vested benefits 39 62 69 83 1 32 117 403 63 Due to other governments - 2 25 2 - 34 16 79 - Interest payable 48 426 244 -- - - 718 - Capital lease obligation 524 - - -- - - 524 - Bonded debt payable (net of unamortized premium and discounts)- 3,841 1,485 -- - - 5,326 - Total current liabilities 880 4,835 2,175 423 96 128 489 9,026 3,295 Noncurrent liabilities: Liabilities payable from restricted assets: Deposits 1 - 965 5 - 619 16 1,606 - Advances from other funds 1,901 - --- - - 1,901 - Employee vested benefits 27 44 52 61 1 23 83 291 50 Capital lease obligation 13,958 - --- - - 13,958 - Bonded debt payable (net of unamortized premium and discounts)- 17,087 12,008 -- - - 29,095 - Net pension liability 995 1,469 1,668 1,648 110 608 2,477 8,975 1,397 Other post employment benefits obligation 162 187 201 259 1 75 337 1,222 97 Landfill closure/postclosure liability - - - 8,591 - - - 8,591 - Total noncurrent liabilities 17,044 18,787 14,894 10,564 112 1,325 2,913 65,639 1,544 Total liabilities 17,924 23,622 17,069 10,987 208 1,453 3,402 74,665 4,839 Deferred Inflows of Resources Pension related deferred inflows 61 88 102 100 7 36 156 550 88 Deferred amount on refunding - 148 101 -- - - 249 - Total deferred inflow of resources 61 236 203 100 7 36 156 799 88 Net Position Net investment in capital assets 13,379 110,715 57,981 10,949 48,931 1,617 42,340 285,912 11,955 Restricted by bond ordinance - 8,707 3,405 -- - - 12,112 - Restricted by state statute - -- 5,939 - - - 5,939 - Restricted for future improvements - -- -- - 100 100 - Restricted by grant agreement - -- -- 3,087 -3,087 - Unrestricted 8,686 18,458 9,108 14,662 1,614 3,672 4,970 61,170 27,697 Total net position 22,065 $ 137,880 $ 70,494 $ 31,550 $ 50,545 $ 8,376$ 47,410 $ 368,320 $ 39,652$ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds.15,494 Net position of business-type activities 383,814 $ The notes to the financial statements are an integral part of this statement. (amounts expressed in thousands) June 30, 2017 PROPRIETARY FUNDS STATEMENT OF NET POSITION (continued) Business-type Activities - Enterprise Funds CITY OF IOWA CITY, IOWA 39 -------------------------------------------- -------------------------------------------- -------------------------------------------- -------------------------------------------- -------------------------------------------- -------------------------------------------- -------------------------------------------- -------------------------------------------- -------------------------------------------- ===== ===== ===== ===== ===== = = ===== ====== Governmental Activities - Other Internal Wastewater Housing Enterprise Service Parking Treatment Water Sanitation Stormwater Authority Funds Total Funds Operating Revenues: Charges for services 5,453$ 12,277$ 9,275$ 9,927$ 1,544$ 321$ 2,434$ 41,231 $ 18,355$ Miscellaneous 41 754 41 77 136 147 64 1,260 - Total operating revenues 5,494 13,031 9,316 10,004 1,680 468 2,498 42,491 18,355 Operating Expenses: Personal services 1,767 2,899 3,288 3,165 310 913 4,042 16,384 2,175 Commodities 621 1,094 1,031 220 583 20 751 4,320 1,838 Services and charges 1,295 2,364 2,013 4,880 358 7,765 2,122 20,797 9,455 3,683 6,357 6,332 8,265 1,251 8,698 6,915 41,501 13,468 Depreciation 880 4,506 2,344 1,560 1,192 121 1,884 12,487 1,798 Total operating expenses 4,563 10,863 8,676 9,825 2,443 8,819 8,799 53,988 15,266 Operating income (loss)931 2,168 640 179 (763) (8,351) (6,301) (11,497) 3,089 Nonoperating Revenues (Expenses): Gain (loss) on disposal of capital assets - (4,835) 1 (88) - 47 3 (4,872) 84 Operating grants - -- - - 8,532 2,304 10,836 - Interest income 37 352 213 253 8 45 30 938 163 Interest expense (134) (558) (447) - - - - (1,139) - Total nonoperating revenues (expenses)(97) (5,041) (233) 165 8 8,624 2,337 5,763 247 Income (loss) before capital contributions and transfers 834 (2,873) 407 344 (755) 273 (3,964) (5,734) 3,336 Capital contributions - 2,226 869 - 1,251 - 453 4,799 35 Transfers in - 5,911 2,305 - 2,978 - 3,385 14,579 1,322 Transfers out - (2,436) (250) (191) (115) (46) - (3,038) (505) Change in net position 834 2,828 3,331 153 3,359 227 (126) 10,606 4,188 Net Position, Beginning 21,231 135,052 67,163 31,397 47,186 8,149 47,536 35,464 Net Position, Ending 22,065 $ 137,880 $ 70,494 $ 31,550 $ 50,545 $ 8,376$ 47,410 $ 39,652$ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 1,788 Change in net position of business-type activities 12,394 $ The notes to the financial statements are an integral part of this statement. Business-type Activities - Enterprise Funds CITY OF IOWA CITY, IOWA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS For the Year Ended June 30, 2017 (amounts expressed in thousands) 40 ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- ---------------------------------------------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- 41 ~:~ ---------------- Governmental Activities - Other Internal Wastewater Housing Enterprise Service Parking Treatment Water Sanitation Stormwater Authority Funds Total Funds Cash Flows From Operating Activities Receipts from customers and users 5,493 $ 12,961 $ 9,277 $ 9,863 $ 1,641 $ 615 $ 2,497 $ 42,347$ 18,318 $ Payments to suppliers (1,802) (3,397) (2,834) (4,852) (1,069) (7,695) (3,216) (24,865) (11,845) Payments to employees (1,732) (2,862) (3,269) (3,140) (309) (903) (3,975) (16,190) (2,295) Net cash flows from (used for) operating activities 1,959 6,702 3,174 1,871 263 (7,983) (4,694) 1,292 4,178 Cash Flows From Noncapital Financing Activities Grants received - - - 6 85 8,437 641 9,169 - Transfers from other funds - 5,911 2,305 - 2,978 - 3,385 14,579 1,332 Transfers to other funds - (2,436) (250) (191) (115) (46) - (3,038) (505) Repayment/(payment) of notes receivable - - - - - 48 - 48 - Repayment of advances from other funds (229) - - - - (18) - (247) - Repayment of advances to other funds - - - 229 - - - 229 - Net cash flows from (used for) noncapital financing activities (229) 3,475 2,055 44 2,948 8,421 4,026 20,740 827 Cash Flows From Capital and Related Financing Activities Capital grants received - 3,108 - - - - 151 3,259 - Acquisition and construction of property and equipment (95) (8,616) (2,701) (1,327) (2,958) (1) (947) (16,645) (3,136) Proceeds from sale of property - 18 1 - - 47 3 69 118 Proceeds from issuance of debt - 10,123 4,032 - - - - 14,155 - Principal paid on capital lease obligation (1,015) - - - - - - (1,015) - Interest paid on capital lease obligation (86) - - - - - - (86) - Principal paid on bonded debt - (13,863) (5,542) - - - - (19,405) - Interest paid on bonded debt (984) (524) - - - - (1,508) - Net cash flows from (used for) capital and related financing activities (1,196) (10,214) (4,734) (1,327) (2,958) 46 (793) (21,176) (3,018) Cash Flows From Investing Activities Interest on investments 32 333 204 197 7 34 26 833 147 Net increase (decrease) in cash and cash equivalents 566 296 699 785 260 518 (1,435) 1,689 2,134 Cash and Cash Equivalents, Beginning 11,331 27,670 13,507 27,727 1,287 6,873 6,826 95,221 29,283 Cash and Cash Equivalents, Ending 11,897$ 27,966$ 14,206$ 28,512$ 1,547 $ 7,391 $ 5,391 $ 96,910$ 31,417 $ (continued) Business-type Activities - Enterprise Funds CITY OF IOWA CITY, IOWA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended June 30, 2017 (amounts expressed in thousands) 42 Governmental Activities - Other Internal Wastewater Housing Enterprise Service Parking Treatment Water Sanitation Stormwater Authority Funds Total Funds Reconciliation of operating income (loss) to net cash flows from (used for) operating activities: Operating income (loss)931$ 2,168$ 640$ 179$ (763)$ (8,351)$ (6,301)$ (11,497) $ 3,089$ Adjustments to reconcile operating income (loss) to net cash flows from (used for) operating activities: Depreciation expense 880 4,506 2,344 1,560 1,192 121 1,884 12,487 1,798 Changes in: Receivables: Accounts and unbilled usage - (71) (124) (85) (25) 2 (2) (305) (13) Due from other governments - 1 - (53) - (1) 1 (52) (24) Inventories - -(18) - - - (14) (32) 5 Prepaid item - -- - - - (3) (3) (12) Assets held for resale - -- - - 73 - 73 - Accounts payable 114 59 221 (74) (128) 13 (298) (93) (545) Accrued liabilities 1 7 11 2 1 3 9 34 (151) Employee vested benefits 6 7 (6) 8 (1) 1 (1) 14 10 Due to other governments - 2 7 (1) - 4 (28) (16) - Unearned revenue - -- -(14) - - (14) - Deposits (1) - 85 (3) - 146 - 227 - Net pension liability 175 246 283 276 25 101 451 1,557 249 Deferred outflows of resources (114) (160) (207) (204) (23) (66) (354) (1,128) (186) Deferred inflows of resources (47) (81) (76) (77) (2) (36) (88) (407) (56) Other post employment benefits asset/obligation 14 18 14 20 1 7 50 124 14 Landfill closure/postclosure liability - - - 323 - - - 323 - Total adjustments 1,028 4,534 2,534 1,692 1,026 368 1,607 12,789 1,089 Net cash flows from (used for) operating activities 1,959$ 6,702$ 3,174$ 1,871$ 263$ (7,983)$ (4,694)$ 1,292$ 4,178$ Noncash Investing, Capital, and Financing Activities: Contributions of capital assets from government and others -$ 1,151$ 869$ -$ 1,251$ -$ -$ 3,271$ 35$ Contributions of capital assets to government and others -$ 4,853$ -$ -$ -$ -$ -$ 4,853$ -$ Purchase of building with capital lease 15,497 $ -$ -$ -$ -$ -$ -$ 15,497 $ -$ The notes to the financial statements are an integral part of this statement. Business-type Activities - Enterprise Funds CITY OF IOWA CITY, IOWA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended June 30, 2017 (amounts expressed in thousands) 43 Agency Funds Assets Equity in pooled cash and investments 163$ Interest receivable 1 Total assets 164$ Liabilities Accounts payable 4$ Due to agency 160 Total liabilities 164$ The notes to the financial statements are an integral part of this statement. June 30, 2017 (amounts expressed in thousands) CITY OF IOWA CITY STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES 44 45 ~:~ ---------------- CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS June 30, 2017 1. Accounting Policies The City of Iowa City, Iowa, (the City) was incorporated April 6, 1853, and operates under the Council/Manager form of government. The City provides a broad range of services to its citizens including general government, public safety, streets, parks, and cultural facilities. It also operates an airport, a mass transportation system, parking facilities, water treatment, wastewater treatment, storm water collection, sanitation collection and disposal (including landfill operations), cable television, and a housing authority. The financial statements of the City have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant accounting policies of the City are described below. The Reporting Entity For financial reporting purposes, the City includes all of its funds, organizations, agencies, boards, commissions, and authorities. The City has also 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. 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 benefits to, or impose specific financial burdens on the City. There were no component units required to be included. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the non-fiduciary activities of the primary government. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported as general revenues. As a general rule, the effect of inter-fund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the City’s water and sewer function and various other functions of the government. Eliminations of these charges would distort the direct costs and program revenues reported for the various functions concerned. 46 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Description of Funds These financial statements include all funds owned or administered by the City or for which the City acts as custodian. The accounts of the City are organized on the basis of funds, each of which is considered to be a separate accounting entity. The fund categories are governmental, proprietary, and fiduciary. Each fund is accounted for by providing a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, net position, revenues, and expenditures or expenses, as appropriate. The individual funds account for the governmental resources allocated to them for the purpose of carrying on specific activities in accordance with laws, regulations, or other restrictions. Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its “measurement focus.” The government-wide financial statements and proprietary funds are accounted for on the flow of economic resources measurement focus and use the accrual basis of accounting. Agency funds do not have a measurement focus and use the accrual basis of accounting. Under the accrual method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. All governmental funds are accounted for using a current financial resources measurement focus, which generally includes only current assets and current liabilities on the balance sheet. The modified accrual basis of accounting is used for these funds. Under the modified accrual basis, revenue is recognized when susceptible to accrual, which is in the period in which it becomes both available (collectible within the current period or soon thereafter to be used to pay liabilities of the current period) and measurable (the amount of the transaction can be determined). Revenue accrued includes property taxes, intergovernmental revenue, and interest earned on investments (if they are collected within 60 days after the year-end). Expenditures are recorded when the related fund liability is incurred. Principal and interest on long-term debt, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. The City reports the following major governmental funds: The General Fund is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Employee Benefits Fund is used to account for the employee benefits related to those employees who are paid through governmental fund types, which are funded by a separate property tax levy. The Bridge, Street, and Traffic Control Construction Fund accounts for the construction or replacement of infrastructure fixed assets, such as streets, bridges, dams, sidewalks, and lighting systems. The Debt Service Fund accounts for the accumulation of resources for the payment of general long- term debt principal, interest, and related costs. 47 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 The City reports the following major proprietary funds: The Parking Fund is used to account for the operation and maintenance of the “on” and “off” street public parking facilities. The Wastewater Treatment Fund is used to account for the operation and maintenance of the wastewater treatment facility and sanitary sewer system. The Water Fund is used to account for the operation and maintenance of the water system. The Sanitation Fund is used to account for the operation and maintenance of the solid waste collection system and landfill. The Stormwater Fund is used to account for the operation and maintenance of the stormwater utility system. The Housing Authority Fund is used to account for the operations and activities of the City’s low and moderate income housing assistance and public housing programs. Additionally, the City reports internal service funds to account for goods and services provided by one department to other City departments on a cost reimbursement basis. The funds in this category are the Equipment Maintenance Fund, Central Services Fund, Loss Reserve Fund, and the Information Technology Fund. The City also reports fiduciary funds which are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The City has one fiduciary fund which is maintained as an agency fund, with no attempt to create an ongoing fund balance. The fund in this category is Project Green, which accounts for donations that are received to plant and develop yards and lawns, both public and private, within Iowa City. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise funds and of the City’s internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the government’s policy to use restricted resources first, then unrestricted resources as they are needed. 48 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Uses of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue, expenditures and expenses, as appropriate, during the reporting period. Actual results could differ from these estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of other post employment benefit obligation, net pension liability, landfill closure and post-closure care costs, total capacity of the landfill at closure, and calculation of the costs of claims incurred, but not reported. Cash and Investments The City maintains one primary demand deposit account through which the majority of its cash resources are processed. Substantially all investment activity is carried on by the City in an investment pool, except for those funds required to maintain their investments separately. The earnings on the pooled investments are allocated to the funds on a systematic basis. All investments are stated at fair value except for the Iowa Public Agency Investment Trust (IPAIT) which is valued at amortized cost pursuant to Rule 2a-7 under the Investment Company Act of 1940. For the purpose of the Statement of Cash Flows, restricted and non-restricted investments with a maturity of three months or less when purchased are considered cash equivalents. Receivables and Revenue Recognition Property tax receivable is recognized in governmental funds on the levy or lien date, which is the date that the tax asking is certified by the City to the County Board of Supervisors. Current year delinquent property tax receivable represents unpaid taxes from the current year. The succeeding year property tax receivable represents taxes certified by the City to be collected in the next fiscal year for the purposes set out in the budget for the next fiscal year. By statute, the City is required to certify its budget to the County Auditor by March 15 of each year for the subsequent fiscal year. However, by statute, the tax asking and budget certification for the following fiscal year becomes effective on the first day of that year. Although the succeeding year property tax receivable has been recorded, it will not be recognized as revenue until the year for which it is levied. Federal and state grants are recorded as receivables and the revenue is recognized during the period in which the City fulfills the requirements for receiving the grant awards, as long as the susceptible to accrual criteria are met. Income from investments in all fund types and from charges for services in proprietary fund types is recognized when earned. Licenses and permits, fines and forfeitures, fees and refunds, charges for services (in governmental fund types), miscellaneous, and other revenues are recorded as revenue when received in cash because they are generally not measurable until actually received. 49 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Inventories Inventories are recognized only in those funds in which they are material to the extent of affecting operations. For the City, these are the Other Shared Revenue and Grants Fund, Transit Fund, Water Fund, and the Equipment Maintenance Fund. Inventories of materials and supplies are determined by actual count and priced on the FIFO method. Capital Assets Capital assets, which include property, buildings, equipment, and infrastructure assets (e.g., roads, bridges, water mains, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The City follows the policy of not requiring capitalization of an asset with an initial, individual cost of less than $50,000 for infrastructure, $25,000 for buildings and improvements, and $5,000 for equipment assets. Such assets are recorded at original purchase cost or at acquisition value at the date of donation when received as donated properties. Depreciation is computed using the straight-line method over the following estimated useful lives: Infrastructure 3 – 100 years Buildings and structures 20 – 50 years Improvements other than buildings 10 – 50 years Vehicles 2 – 20 years Other equipment 3 – 30 years Deferred Outflows of Resources Deferred outflows of resources represent a consumption of net position that applies to a future period(s) and will not be recognized as an outflow of resources (expense/expenditure) until then. Deferred outflows of resources consist of unrecognized items not yet charged to pension expense and contributions from the employer after the measurement date but before the end of the employer’s reporting period. Bond Premiums and Discounts Debt issued at a premium or discount is recorded net of the unamortized premium or discount. In the governmental funds, premiums and discounts are recorded entirely as other financing sources or uses in the year of issuance. In the proprietary funds and the government-wide statements, they are amortized over the life of the bonds. 50 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Compensated Absences Permanent City employees accumulate vacation and sick leave hours for subsequent use or for payment upon death, resignation, or retirement. The City pays its employees (except firefighters) one-half of the accumulated sick leave at the time of termination on the basis of the employee’s then effective hourly base salary, provided that the dollar amount of the payment may be up to, but not exceed, the amount that an employee would be paid if the employee had terminated on June 28, 1985. Employees hired on or after June 29, 1985, are not eligible for payment of accumulated sick leave upon termination, death, or retirement. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Iowa Public Employees’ Retirement System and the Municipal Fire and Police Retirement System (Systems’) and additions to/deductions from the Systems’ fiduciary net position have been determined on the same basis as they are reported by the Systems. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Landfill Closing Costs Costs expected to be incurred in ultimately closing the present landfill site are being systematically provided for through charges to expense over the estimated useful life of the landfill on the basis of capacity used (see Note 8). Deferred Inflows of Resources Deferred inflows of resources represent an acquisition of net position that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time. Although certain revenues are measureable, they are not available. Available means collected within the current year or expected to be collected soon enough thereafter to be used to pay liabilities of the current year. Deferred inflows of resources in the governmental fund financial statements represent the amount of assets that have been recognized, but the related revenue has not been recognized since the assets are not collected within the current year or expected to be collected soon enough thereafter to be used to pay liabilities of the current year. Deferred inflows of resources consist of property tax receivable, grants receivable and other receivables. Deferred inflows of resources in the Statement of Net Position consist of succeeding year property tax receivable that will not be recognized as revenue until the year for which they are levied, the difference in the carrying value of refunded debt and it’s acquisition price and the unamortized portion of pension related items. 51 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Budgetary and Legal Appropriation and Amendment Policies The City prepares and adopts an annual function budget, as prescribed by Iowa statutes, for all funds except internal service and agency funds. This is formalized in a separate budgetary report, the Financial Plan. This budget is adopted on or before March 15 of each year to become effective July 1, and constitutes the City’s appropriation for each program and purpose specified therein until amended. The adopted budget must include the following: a. Expenditures for each function: Public safety Public works Health and social services Culture and recreation Community and economic development General government Debt service Capital projects Business-type/enterprise b. The amount to be raised by property taxation c. Income from sources other than property taxation d. Transfers in and transfers out The legal level of control (the level at which expenditures may not legally exceed appropriations) is the function level for all funds combined, rather than at the individual fund level. Management can transfer appropriations within a function, within a fund type, and between fund types, without the approval of the governing body so long as the total budget by function area will not be exceeded. It is necessary, therefore, to aggregate the expenditures of the budgeted activities within the governmental fund types with the expenditures of the budgeted activities within the enterprise funds on a function basis, and to compare such function totals to function budgeted totals in order to demonstrate legal compliance with the budget. The City’s budget for revenue focuses on aggregated totals by revenue source. The City formally adopts budgets for several funds that are not required by state law to be included in the annual function budget. Annual operating budgets are adopted for the internal service funds for management control purposes. Such budgets, however, are not legally required to be adopted under state statutes. A City budget for the current fiscal year may be amended for any of the following purposes as prescribed by Iowa statute: a. To permit the appropriation and expenditure of unexpended, unencumbered cash balances on hand at the end of the preceding fiscal year. b. To permit the appropriation and expenditure of amounts anticipated being available from sources other than property taxation. c. To permit transfers between funds. d. To permit transfers between functions. A budget amendment must be prepared and adopted in the same manner as the original budget. The City’s budget was amended as prescribed, and the effects of those amendments are shown in the accompanying budgetary comparison schedule. The original budget was increased by $30,470,230 in revenues and other financing sources and by $86,120,048 in expenditures and other financing uses. Appropriations, as adopted or amended, lapse at the end of the fiscal year. 52 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 As allowed by GASB Statement No. 41, Budgetary Comparison Schedules – Perspective Differences, the City presents budgetary comparison schedules as required supplementary information based on the program structure of nine functional areas as required by state statute for its legally adopted budget. Restricted Assets Assets within the individual funds, which can be designated by the City Council for any use within the fund’s purpose, are considered to be unrestricted assets. Assets, which are restricted for specific uses by bonded debt requirements, grant provisions, or other requirements, are classified as restricted assets. Liabilities, which are payable from restricted assets, are classified as such. Classification of Fund Balances Fund balances for the governmental funds are reported in classifications based on the nature of any limitations requiring the use of resources for specific purposes (see Note 10). 2. Cash and Pooled Investments The City’s deposits in banks at June 30, 2017 were entirely covered by federal depository insurance, national credit union administration, or by the State Sinking Fund in accordance with Chapter 12C of the Code of Iowa. This chapter provides for additional assessments against the depositories to insure there will be no loss of public funds. The City is authorized by statute to invest public funds in obligations of the United States government, its agencies and instrumentalities; certificates of deposit or other evidences of deposit at federally insured Iowa depository institutions approved by City Council and secured pursuant to the limitations set forth in Chapter 12C of the Code of Iowa; prime eligible bankers acceptances; certain high rated commercial paper; perfected repurchase agreements; Iowa Public Agency Investment Trust (IPAIT); certain registered open– end management investment companies registered with the Securities & Exchange Commission under the federal Investment Company Act of 1940; certain joint investment trusts; and warrants or improvement certificates of a drainage district. At June 30, 2017 the City had the following investments: The City uses the fair value hierarchy established by generally accepted accounting principles 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. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs. Fair Investment Value Maturities Federal Home Loan Bank Notes 7,989,640$ July 2017 to June 2019 Federal Home Loan Mortgage Corporation Notes 3,990,660 June 2018 to May 2019 United States Treasury Note 498,789 May 2018 Credit Agricole Corporate and Investment Bank NY Commercial Paper 495,237 March 2018 12,974,326$ 53 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 The recurring fair value measurement for the Federal Home Loan Bank securities of $7,989,640, the Federal Home Loan Mortgage Corporation securities of $3,990,660 and the United States Treasury securities of $498,789 were determined using the last reported sales price at current exchange rates (Level 1 inputs). The fair value measurement for the Credit Agricole Corporate and Investment Bank NY commercial paper of $495,237 was determined using the last reported sales price at current exchange rates (Level 1 inputs). The City had no other investments meeting the disclosure requirements of Governmental Accounting Standards Board Statement No. 72. In addition, the City had investments in the Iowa Public Agency Investment Trust (IPAIT), which are valued at an amortized cost of $40,361,714, which approximates fair value. The Diversified Portfolio consists of cash and short-term investments valued at amortized cost, which approximates fair value, pursuant to Governmental Accounting Standards Board Statement No. 79. The Iowa Public Agency Investment Trust (IPAIT) represents an investment in a pool managed by others. IPAIT is a common trust established under Iowa law pursuant to Iowa Code Chapter 28E in 1987 to enable eligible Iowa public agencies to safely and effectively invest their available operating and reserve funds. IPAIT is registered under the Investment Company Act of 1940. The IPAIT portfolios have followed established money market mutual fund investment parameters designed to maintain a $1 per unit net asset value since inception and were registered with the Securities and Exchange Commission (SEC). Interest rate risk - The City’s investment policy limits the investment of general and operating funds to one year, unless a temporary extension of maturities is approved by the City Council. In such cases, the average maturity of each fund’s portfolio shall not exceed 397 days. Funds not identified as operating funds may be invested in instruments whose maturities do not exceed five years at the time of purchase. Credit risk. State law limits investments to commercial paper and corporate bonds to the top two ratings issued by nationally recognized statistical rating organizations. It is the City’s policy to comply with rating restrictions. The investment in Iowa Public Agency Investment Trust is not rated by Moody’s Investors service as it is a state security that is backed by the full faith and credit of the issuing government and is not subject to credit risk. Concentration of credit risk. The City investment policy limits the amount that may be invested in any one issuer to a maximum amount approved by the City Council. Due to legal and budgetary reasons, the General Fund is assigned a portion of the investment earnings associated with other funds. These funds are the employee benefits, other shared revenue, and sanitation funds. 54 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 3. Interfund Balances and Transfers Interfund balances for the year ended June 30, 2017, consisted of the following: Interfund balances at June 30, 2017, include advances due to/from other funds, which represent amounts for construction loans and a revenue bond redemption loan. $1,665,852 of the $1,901,161 advance to the Parking Fund is not expected to be repaid within the next year. $110,893 of the $124,595 advance is not expected to be repaid within the next year. Debt Service Sanitation Total Advances to: Parking -$ 1,901,161$ 1,901,161$ Nonmajor governmental 124,595 - 124,595 Total 124,595$ 1,901,161$ 2,025,756$ Advances from 55 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Interfund transfers for the year ended June 30, 2017, consisted of the following: Transfers are used to move revenues and bond proceeds from the fund that State statutes or the budget requires to collect them to the fund that the State statutes or the budget requires to expend them. In the fund financial statements, total transfers in and transfers out of $50,576,822 are less than total transfers of $55,439,701 because of the treatment of transfers of capital assets to the governmental activities capital assets. Capital Projects Bridge, Street and Traffic Employee Control Nonmajor Wastewater General Benefits Construction Governmental Treatment Transfer to: General -$ 9,096,921$ -$ 823,503$ 758,987 $ Debt Service 60,052 - - 1,735,400 - Capital Projects Bridge, Street and Traffic Control Construction 11,305,966 - - 3,505,674 1,241,013 Nonmajor Governmental 3,239,963 330,662 - 1,359,918 381,901 Wastewater Treatment - - 5,829,861 - - Water - - 2,304,989 - - Stormwater - - 2,977,881 - - Nonmajor Enterprise 3,384,842 - - - - Internal Service 31,738 - 680,396 364,470 54,352 Total Transfer to 18,022,561$ 9,427,583$ 11,793,127 $ 7,788,965$ 2,436,253 $ Transfer from 56 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 During the year, land for the construction of the Riverfront Crossing Park with a value of $4,852,938 was transferred to governmental activities capital assets from Wastewater Treatment. No amounts were reported in the governmental funds, as the amounts did not involve the transfer of financial resources. However, Wastewater Treatment did report a disposal for the capital resources given. During the year, a capital asset related to public safety with a value of $9,941 was transferred from Equipment to governmental activities capital assets. No amounts were reported in the governmental funds, as the amounts did not involve the transfer of financial resources. However, Equipment did report a disposal for the capital resources given. Housing Internal Total Water Sanitation Stormwater Authority Service Transfer from -$ - $ - $ 46,087 $ -$ 10,725,498$ - - - - - 1,795,452 174,975 - 115,260 - - 16,342,888 - - 5 - 500,000 5,812,449 75,457 - - - 5,318 5,910,636 - - - - - 2,304,989 - - - - - 2,977,881 - - - - - 3,384,842 - 191,231 - - - 1,322,187 250,432$ 191,231 $ 115,265 $ 46,087 $ 505,318 $ 50,576,822 Transfers to governmental activities capital assets from an enterprise fund 4,852,938 Transfers to governmental activities capital assets from an internal service fund 9,941 55,439,701$ Transfer from 57 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 4. Capital Assets Capital asset activity for the year ended June 30, 2017, was as follows: Beginning July 1, 2016 Acquisitions and Transfers Disposals and Transfers Balance June 30, 2017 Governmental activities: Capital assets, not being depreciated: Land 24,081,394$ 5,697,487$ -$ 29,778,881$ Construction in progress 24,193,739 23,219,327 24,646,084 22,766,982 Total capital assets, not being depreciated 48,275,133 28,916,814 24,646,084 52,545,863 Capital assets, being depreciated: Buildings 64,312,273 126,520 254,932 64,183,861 Improvements other than buildings 7,358,005 148,833 5,320 7,501,518 Machinery and equipment 41,741,748 4,208,769 1,494,278 44,456,239 Infrastructure 137,980,063 18,947,356 5,305 156,922,114 Total capital assets being depreciated 251,392,089 23,431,478 1,759,835 273,063,732 Less accumulated depreciation for: Buildings 23,185,807 1,632,505 98,531 24,719,781 Improvements other than buildings 3,266,179 286,631 5,320 3,547,490 Machinery and equipment 25,916,289 3,271,570 1,417,535 27,770,324 Infrastructure 40,075,777 3,356,791 5,305 43,427,263 Total accumulated depreciation 92,444,052 8,547,497 1,526,691 99,464,858 Total capital assets, being depreciated, net 158,948,037 14,883,981 233,144 173,598,874 Governmental activities capital assets, net 207,223,170$ 43,800,795$ 24,879,228$ 226,144,737$ 58 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Beginning July 1, 2016 Acquisitions and Transfers Disposals and Transfers Balance June 30, 2017 Business-type activities: Capital assets, not being depreciated: Land 35,590,298$ -$ 4,852,938$ 30,737,360$ Construction in progress 2,647,044 9,381,759 2,313,910 9,714,893 Total capital assets, not being depreciated 38,237,342 9,381,759 7,166,848 40,452,253 Capital assets, being depreciated: Buildings 118,486,975 15,747,867 118,000 134,116,842 Improvements other than buildings 10,783,445 105,329 - 10,888,774 Machinery and equipment 31,095,957 338,098 622,986 30,811,069 Infrastructure 298,117,591 9,308,433 - 307,426,024 Total capital assets being depreciated 458,483,968 25,499,727 740,986 483,242,709 Less accumulated depreciation for: Buildings 57,850,943 3,086,848 118,000 60,819,791 Improvements other than buildings 6,081,033 467,188 - 6,548,221 Machinery and equipment 22,500,066 1,375,916 535,330 23,340,652 Infrastructure 90,363,007 7,557,870 - 97,920,877 Total accumulated depreciation 176,795,049 12,487,822 653,330 188,629,541 Total capital assets, being depreciated, net 281,688,919 13,011,905 87,656 294,613,168 Business-type activities capital assets, net 319,926,261$ 22,393,664$ 7,254,504$ 335,065,421$ Depreciation expense was charged to functions as follows: Governmental activities: Public safety 1,413,945$ Public works 3,814,919 Culture and recreation 2,839,333 Community and economic development 61,853 General government 417,447 Total depreciation expense - governmental activities 8,547,497$ Business-type activities: Parking 879,706$ Transit 887,095 Wastewater treatment 4,506,493 Water 2,343,883 Sanitation 1,560,499 Stormwater 1,192,434 Housing authority 120,681 Nonmajor enterprise 997,031 Total depreciation expense - business-type activities 12,487,822$ 59 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 5. Capital Lease Obligation This year, the government entered into a lease agreement as lessee for financing the acquisition of a parking ramp valued at $15,497,867. The parking ramp has a 30-year estimated useful life. This year, $129,149 was included in depreciation expense. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of future minimum lease payments as of the inception date. The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2017, were as follows: Changes in Capital Lease Obligation Changes in the capital lease obligation for the year ended June 30, 2017, was as follows: Fiscal Year Ending June 30 Business-type Activities 2018 1,100,821$ 2019 1,100,821 2020 1,100,821 2021 1,100,821 2022 1,100,821 2023-2036 15,411,500 Total minimum lease payments 20,915,605 Less: amount representing interest (6,432,891) Present value of minimum lease payments 14,482,714$ Due Within July 1, 2016 Issues Retirements June 30, 2017 One Year Business-type activities:-$ 15,497,867$ 1,015,153$ 14,482,714$ 524,409$ 60 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 6. Long Term Debt Changes in Debt for Bonds Bond debt activity for the year ended June 30, 2017, was as follows: General Obligation Bonds Various issues of general obligation bonds totaling $51,645,000 are outstanding as of June 30, 2017. The bonds have interest rates ranging from 1.0% to 4.0% and mature in varying annual amounts ranging from $345,000 to $1,330,000 per issue, with the final maturities due in the year ending June 30, 2027. Interest and principal payments on all general obligation bonds, except tax abated portions recorded in the enterprise funds, are accounted for through the Debt Service Fund. Due Within July 1, 2016 Issues Retirements June 30, 2017 One Year Governmental activities: General obligation bonds 55,055,000$ 9,765,000$ 13,175,000$ 51,645,000$ 7,960,000$ Plus: Unamortized Premium 943,392 120,083 137,221 926,254 137,221 Total general obligation bonds 55,998,392 9,885,083 13,312,221 52,571,254 8,097,221 Revenue bonds 2,525,000 12,805,000 130,000 15,200,000 135,000 Less: Unamortized Discounts 33,984 - 2,124 31,860 2,124 Total revenue bonds 2,491,016 12,805,000 127,876 15,168,140 132,876 58,489,408$ 22,690,083$ 13,440,097$ 67,739,394$ 8,230,097$ Business-type activities: General obligation bonds 295,000$ -$ 295,000$ -$ -$ Revenue bonds 38,420,000 10,460,000 16,060,000 32,820,000 5,035,000 Plus: Unamortized Premium 1,531,661 645,415 576,162 1,600,914 290,852 Total revenue bonds 39,951,661 11,105,415 16,636,162 34,420,914 5,325,852 40,246,661$ 11,105,415$ 16,931,162$ 34,420,914$ 5,325,852$ 61 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Annual debt service requirements to maturity for general obligation bonds are as follows: Revenue Bonds As of June 30, 2017, the following unmatured revenue bond issues are outstanding: Wastewater Taxable Urban Treatment Water Renewal Original issue amount $ 37,650,000 $ 24,260,000 $ 15,200,000 Interest rates 2.0% to 5.0% 1.5% to 5.0% 1.0% to 3.9% Annual maturities $ 275,000 to $ 380,000 to $ 135,000 to $ 2,085,000 $ 1,225,000 $ 965,000 Amount outstanding $ 19,590,000 $ 13,230,000 $ 15,200,000 The City of Iowa City defeased the remaining $6,605,000 of its 2009 parking revenue bonds on November 12, 2014 by prepaying all remaining outstanding bonds and interest from cash on hand. The total defeased outstanding as of June 30, 2017 is $5,465,000. The total amount of interest that was paid was $574,186. Liabilities for the defeased bonds are not included in the City’s financial statements. On June 15, 2017, the City issued $4,550,000 of sewer revenue bonds for a current refunding of $5,245,000 of sewer revenue bonds on July 1, 2017. As a result, the sewer revenue bonds from that issue are considered to be defeased and the liability has been removed from the financial statements. The refunding was undertaken to reduce total future debt service payments. The result of the transaction is a reduction of $1,030,981 in future debt service payments and an economic gain of $723,184. On June 15, 2017, the City issued $5,910,000 of water revenue bonds for a current refunding of $5,725,000 of water revenue bonds on July 1, 2017. As a result, the water revenue bonds from that issue are considered to be defeased and the liability has been removed from the financial statements. The refunding was undertaken to reduce total future debt service payments. The result of the transaction is a reduction of $1,137,664 in future debt service payments and an economic gain of $1,033,306. Fiscal Year Ending June 30 Principal Interest 2018 7,960,000$ 1,197,996$ 2019 8,125,000 1,031,994 2020 8,330,000 835,606 2021 7,090,000 613,841 2022 5,540,000 438,663 2023-2027 14,600,000 778,963 Total 51,645,000$ 4,897,063$ Governmental Activities 62 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Revenue bond debt service requirements to maturity are as follows: The revenue bond ordinances required that wastewater treatment, water revenues, and urban renewal tax revenues be set aside into separate and special accounts as they are received. The use and the amounts to be included in the accounts are as follows: Account Amount (a) Revenue Bond and Interest Amount sufficient to pay current bond and interest maturities. Sinking Reserve (b) Revenue Debt Service Reserve Amount required to be deposited in the Revenue Bond and Interest Reserve until the reserve fund equals: Water Revenue and Taxable Urban Renewal Revenue bonds – maximum debt service due on the bonds in any succeeding fiscal year. Wastewater Revenue bonds – 125% of the average principal and interest payments over the life of all the Wastewater Revenue bonds. (c) Improvement Reserve $20,000 per month until the reserve balance equals or exceeds $2,000,000 for Wastewater Revenue bonds and $5,000 per month until the reserve balance equals or exceeds $450,000 for Water Revenue bonds, with no further deposits once the minimum balance is reached. If the reserve falls below the required minimum, monthly transfers in the aforementioned amounts will resume. In fiscal year ended June 30, 2017, the Wastewater Treatment Fund had net revenue of $7,026,000 and the amount of principal and interest due was $4,610,000. In fiscal year ended June 30, 2017, the Water Fund had net revenues of $3,197,000 and the amount of principal and interest due was $2,284,000. Fiscal Year Ending June 30 Principal Interest Principal Interest 2018 135,000$ 456,495$ 5,035,000$ 1,150,476$ 2019 135,000 454,335 4,975,000 872,703 2020 140,000 451,635 5,385,000 685,365 2021 140,000 448,695 5,610,000 477,665 2022 1,110,000 445,475 4,350,000 298,690 2023-2027 5,420,000 1,735,955 7,465,000 237,420 2028-2032 4,710,000 964,955 - - 2033-2037 3,410,000 259,500 - - Total 15,200,000$ 5,217,045$ 32,820,000$ 3,722,319$ Governmental Activities Business-type Activities 63 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Summary of Bond Issues General obligation and revenue bonds payable at June 30, 2017, are comprised of the following issues: Date of Amount Interest Final Outstanding Issue Issued Rates Maturity June 30, 2017 General Obligation Bonds: Multi-Purpose Aug. 2010 7,420,000 2.0 - 2.75 6/20 2,370,000 Multi-Purpose June 2011 7,925,000 2.0 - 3.625 6/21 3,080,000 Refunded Multi-Purpose and Library Construction (1) June 2011 10,930,000 2.0 - 3.625 6/21 5,055,000 Multi-Purpose June 2012 9,070,000 2.0 - 2.25 6/22 4,780,000 Multi-Purpose July 2013 7,230,000 1.0 - 2.0 6/23 4,975,000 Refunded Multi-Purpose (2) June 2014 11,980,000 2.0 - 3.0 6/24 6,685,000 Multi-Purpose June 2015 7,785,000 2.0 - 2.25 6/25 6,380,000 Multi-Purpose June 2016 8,795,000 2.0 - 3.0 6/26 8,555,000 Multi-Purpose June 2017 9,765,000 2.0 - 2.5 6/27 9,765,000 Total General Obligation Bonds 51,645,000$ Date of Amount Interest Final Outstanding Issue Issued Rates Maturity June 30, 2017 Revenue Bonds: Refunded Wastewater Treatment Bonds (3) May 2009 8,660,000 3.5 - 5.0 7/25 525,000 Refunded Wastewater Treatment Bonds (4) Apr. 2010 15,080,000 3.0 - 4.0 7/20 5,155,000 Refunded Wastewater Treatment Bonds (5) June 2016 9,360,000 3.0 - 4.0 7/21 9,360,000 Refunded Wastewater Treatment Bonds (6) June 2017 4,550,000 2.0 - 5.0 7/22 4,550,000 Refunded Water Bonds (7) May 2009 9,750,000 4.0 - 4.5 7/25 585,000 Refunded Water Bonds (8) June 2012 4,950,000 1.5 - 2.1 7/22 3,085,000 Refunded Water Bonds (9) June 2016 3,650,000 1.5 - 5.0 7/24 3,650,000 Refunded Water Bonds (10) June 2017 5,910,000 2.0 - 2.25 7/25 5,910,000 Taxable Urban Renewal Nov. 2012 2,655,000 1.0 - 3.9 6/32 2,395,000 Taxable Urban Renewal Sept. 2016 12,805,000 3.0 6/36 12,805,000 Total Revenue Bonds 48,020,000 99,665,000$ 64 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 (1) This bond issue refunded the May 2002 General Obligation Bonds. (2) This bond issue is an advance refunding of portions of the September 2006 and May 2007 General Obligation Bonds. (3) This bond issue refunded the October 2000 Wastewater Revenue Bonds. (4) This bond issue refunded the December 2001 and April 2002 Wastewater Revenue Bonds. (5) This bond issue refunded the October 2008 Wastewater Revenue Bond. (6) This bond issue refunded the May 2009 Wastewater Revenue Bonds. (7) This bond issue refunded the December 2000 Water Revenue Bonds. (8) This bond issue refunded the October 2002 Water Revenue Bonds. (9) This bond issue refunded the October 2008 Water Revenue Bonds. (10) This bond issued refunded the May 2009 Water Revenue Bonds. Conduit Debt Obligations From time to time, the City has issued Industrial Development Revenue Bonds and Midwestern Disaster Area Revenue Bonds to provide financial assistance to private sector entities for the acquisition, construction, and renovation of industrial and commercial facilities deemed to be in the public interest. The bonds are collateralized by the property financed and are payable solely from payments received on the underlying mortgage loans. All payments on the bonds are made by the private sector entities directly to a bond trustee, who is a third party financial institution, and in turn, disburses the payment to the respective bond holders. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. As of June 30, 2017, there were three series of Industrial Development Revenue Bonds and Midwest Disaster Area Revenue Bonds outstanding, with an aggregate principal amount payable of $33,867,375. Debt Legal Compliance Legal Debt Margin: As of June 30, 2017, the general obligation debt issued by the City did not exceed its legal debt limit computed as follows (amounts expressed in thousands): Assessed valuation: Real property $ 5,257,241 Utilities 92,987 Total valuation $ 5,350,228 Debt limit, 5% of total assessed valuation $ 267,511 Debt applicable to debt limit: General obligation bonds 51,645 Urban renewal revenue bonds 15,200 Letters of credit 663 Other legal indebtedness (TIF rebates) 17,356 Total net debt applicable to limit 84,864 Legal debt margin $ 182,647 65 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 7. Pension and Retirement Systems Municipal Fire and Police Retirement System of Iowa (MFPRSI) Plan Description MFPRSI membership is mandatory for fire fighters and police officers covered by the provisions of Chapter 411 of the Code of Iowa. Employees of the City are provided with pensions through a cost-sharing multiple employer defined benefit pension plan administered by MFPRSI. MFPRSI issues a stand-alone financial report which is available to the public by mail at 7155 Lake Drive, Suite #201, West Des Moines, Iowa 50266 or at www.mfprsi.org. MFPRSI benefits are established under Chapter 411 of the Code of Iowa and the administrative rules thereunder. Chapter 411 of the Code of Iowa and the administrative rules are the official plan documents. The following brief description is provided for general informational purposes only. Refer to the plan documents for more information. Pension Benefits Members with 4 or more years of service are entitled to pension benefits beginning at age 55. Full service retirement benefits are granted to members with 22 years of service, while partial benefits are available to those members with 4 to 22 years of service based on the ratio of years completed to years required (i.e., 22 years). Members with less than 4 years of service are entitled to a refund of their contribution only, with interest, for the period of employment. Benefits are calculated based upon the member’s highest 3 years of compensation. The average of these 3 years becomes the member’s average final compensation. The base benefit is 66 percent of the member’s average final compensation. Additional benefits are available to members who perform more than 22 years of service (2 percent for each additional year of service, up to a maximum of 8 years). Survivor benefits are available to the beneficiary of a retired member according to the provisions of the benefit option chosen plus an additional benefit for each child. Survivor benefits are subject to a minimum benefit for those members who chose the basic benefit with a 50 percent surviving spouse benefit. Active members, at least 55 years of age, with 22 or more years of service have the option to participate in the Deferred Retirement Option Program (DROP). The DROP is an arrangement whereby a member who is otherwise eligible to retire and commence benefits opts to continue to work. A member can elect a 3, 4, or 5 year DROP period. By electing to participate in DROP the member is signing a contract indicating the member will retire at the end of the selected DROP period. During the DROP period the member’s retirement benefit is frozen and a DROP benefit is credited to a DROP account established for the member. Assuming the member completes the DROP period, the DROP benefit is equal to 52% of the member’s retirement benefit at the member’s earliest date eligible and 100% if the member delays enrollment for 24 months. At the member’s actual date of retirement, the member’s DROP account will be distributed to the member in the form of a lump sum or rollover to an eligible plan. Disability and Death Benefits Disability coverage is broken down into two types, accidental and ordinary. Accidental disability is defined as permanent disability incurred in the line of duty, with benefits equivalent to the greater of 60 percent of the member’s average final compensation or the member’s service retirement benefit calculation amount. Ordinary disability occurs outside the call of duty and pays benefits equivalent to the greater of 50 percent of the member’s average final compensation, for those with 5 or more years of service, or the member’s service retirement benefit calculation amount, and 25 percent of average final compensation for those with less than 5 years of service. 66 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Death benefits are similar to disability benefits. Benefits for accidental death are 50 percent of the average final compensation of the member plus an additional amount for each child, or the provisions for ordinary death. Ordinary death benefits consist of a pension equal to 40 percent of the average final compensation of the member plus an additional amount for each child, or a lump-sum distribution to the designated beneficiary equal to 50 percent of the previous year’s earnable compensation of the member or equal to the amount of the member’s total contributions plus interest. Benefits are increased annually in accordance with Chapter 411.6 of the Code of Iowa which states a standard formula for the increases. The surviving spouse or dependents of an active member who dies due to a traumatic personal injury incurred in the line of duty receives a $100,000 lump-sum payment. Contributions Member contribution rates are set by state statute. In accordance with Chapter 411 of the Code of Iowa, the contribution rate was 9.40% of earnable compensation for the year ended June 30, 2017. Employer contribution rates are based upon an actuarially determined normal contribution rate and set by state statute. The required actuarially determined contributions are calculated on the basis of the entry age normal method as adopted by the Board of Trustees as permitted under Chapter 411 of the Code of Iowa. The normal contribution rate is provided by state statute to be the actuarial liabilities of the plan less current plan assets, with such total divided by 1 percent of the actuarially determined present value of prospective future compensation of all members, further reduced by member contributions and state appropriations. Under the Code of Iowa the employer’s contribution rate cannot be less than 17.00% of earnable compensation. The contribution rate was 25.92% for the year ended June 30, 2017. The City’s contributions to MFPRSI for the year ended June 30, 2017 was $2,681,511. If approved by the state legislature, state appropriation may further reduce the employer’s contribution rate, but not below the minimum statutory contribution rate of 17.00% of earnable compensation. The State of Iowa therefore is considered to be a nonemployer contributing entity in accordance with the provisions of the Governmental Accounting Standards Board Statement No. 67 – Financial Reporting for Pension Plans, (GASB 67). There were no state appropriations to MFPRSI during the fiscal year ended June 30, 2017. Net Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2017, the City reported a liability of $23,116,697 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of the net pension liability was based on the City’s share of contributions to the pension plan relative to the contributions of all MFPRSI participating employers. At June 30, 2016, the City’s proportion was 3.697128% which was a decrease of .007844% from its proportions measured as of June 30, 2015. 67 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 For the year ended June 30, 2017, the City recognized pension expense of $3,216,923. At June 30, 2017, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: $2,681,511 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Total 8,678,201$ 606,829$ - 268,755 Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between City contributions and proportionate share of contributions 316,636 2,681,511 - 4,087,567 Change of assumptions Deferred Outflows of Resources 596,612$ 976,000 Differences between expected and actual experience Deferred Inflows of Resources 21,438$ City contributions subsequent to the measurement date 336,511 Year Ended June 30, 2018 June 30, 2019 June 30, 2020 June 30, 2021 June 30, 2022 Total 5,389,861$ 1,323,484 (12,851) 879,619 2,319,990 879,619$ 68 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Actuarial Assumptions The total pension liability in the June 30, 2016, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the period from July 1, 2002 to June 30, 2012. Postretirement mortality rates were based on the RP-2000 Blue Collar Combined Healthy Mortality Table with males set-back two year, females set-forward one year and disabled individuals set-forward one year (male only rates), with no projection of future mortality improvement. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates (i.e., expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Rate of inflation 3.00 percent per annum Salary increases 4.50 to 15.11 percent, including inflation Investment rate of return 7.50 percent, net of pension plan investment expense, including inflation Asset Class Core Plus Fixed Income 3.8 % Emerging Markets 8.8 Emerging Markets Debt 6.5 Large Cap 6.0 Small Cap 5.8 Master Limited Partnerships (MLP)8.5 International Large Cap 7.0 Treasury Inflation Protected Securities 2.8 Tactical Asset Allocation 6.0 Private Equity 9.8 Private Non-Core Real Estate 9.3 Private Core Real Estate 6.8 Long-Term Expected Real Rate of Return 69 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Discount Rate The discount rate used to measure the total pension liability was 7.5 percent. The projection of cash flows used to determine the discount rate assumed that contributions will be made at 9.40 percent of covered payroll and the City contributions will be made at rates equal to the difference between actuarially determined rates and the member rate. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of City’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.5 percent, as well as what the city’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percent lower (6.5 percent) or 1-percent higher (8.5 percent) than the current rate. Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued MFPRSI financial report which is available on MFPRSI’s website at www.mfprsi.org. Payables to the Pension Plan At June 30, 2017, there were no amounts due to MFPRSI. Iowa Public Employees Retirement System (IPERS) Plan Description IPERS membership is mandatory for employees of the City, except for those covered by another retirement system. Employees of the City are provided with pensions through a cost-sharing multiple employer defined benefit pension plan administered by IPERS. IPERS issues a stand-alone financial report which is available to the public by mail at 7401 Register Drive P.O. Box 9117, Des Moines, Iowa 50306-9117 or at www.ipers.org. IPERS benefits are established under Iowa Code chapter 97B and the administrative rules thereunder. Chapter 97B and the administrative rules are the official plan documents. The following brief description is provided for general informational purposes only. Refer to the plan documents for more information. 1% Decrease (6.5%) Discount Rate (7.5%) 1% Increase (8.5%) City's proportionate share of the net pension liability: 36,280,488$ 23,116,701$ 12,154,074$ 70 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Pension Benefits A regular member may retire at normal retirement age and receive monthly benefits without an early- retirement reduction. Normal retirement age is age 65, any time after reaching age 62 with 20 or more years of covered employment, or when the member’s years of service plus the member’s age at the last birthday equals or exceeds 88, whichever comes first. (These qualifications must be met on the member’s first month of entitlement to benefits.) Members cannot begin receiving retirement benefits before age 55. The formula used to calculate a Regular member’s monthly IPERS benefit includes:  A multiplier (based on years of service).  The member’s highest five-year average salary. (For members with service before June 30, 2012, the highest three-year average salary as of that date will be used if it is greater than the highest five- year average salary.) If a member retires before normal retirement age, the member’s monthly retirement benefit will be permanently reduced by an early-retirement reduction. The early-retirement reduction is calculated differently for service earned before and after July 1, 2012. For service earned before July 1, 2012, the reduction is 0.25 percent for each month that the member receives benefits before the member’s earliest normal retirement age. For service earned starting July 1, 2012, the reduction is 0.50 percent for each month that the member receives benefits before age 65. Generally, once a member selects a benefit option, a monthly benefit is calculated and remains the same for the rest of the member’s lifetime. However, to combat the effects of inflation, retirees who began receiving benefits prior to July 1990 receive a guaranteed dividend with their regular November benefit payments. Disability and Death Benefits A vested member who is awarded federal Social Security disability or Railroad Retirement disability benefits is eligible to claim IPERS benefits regardless of age. Disability benefits are not reduced for early retirement. If a member dies before retirement, the member’s beneficiary will receive a lifetime annuity or a lump-sum payment equal to the present actuarial value of the member’s accrued benefit or calculated with a set formula, whichever is greater. When a member dies after retirement, death benefits depend on the benefit option the member selected at retirement. Contributions Effective July 1, 2012, as a result of a 2010 law change, the contribution rates are established by IPERS following the annual actuarial valuation, which applies IPERS’ Contribution Rate Funding Policy and Actuarial Amortization Method. Statute limits the amount rates can increase or decrease each year to 1 percentage point. IPERS Contribution Rate Funding Policy requires that the actuarial contribution rate be determined using the “entry age normal” actuarial cost method and the actuarial assumptions and methods approved by the IPERS Investment Board. The actuarial contribution rate covers normal cost plus the unfunded actuarial liability payment based on a 30-year amortization period. The payment to amortize the unfunded actuarial liability is determined as a level percentage of payroll, based on the Actuarial Amortization Method adopted by the Investment Board. 71 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 In fiscal year 2017, pursuant to the required rate, Regular members contributed 5.95 percent of pay and the City contributed 8.93 percent for a total rate of 14.88 percent. The City’s total contributions to IPERS for the year ended June 30, 2017 were $2,645,105. Net Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2017, the City reported a liability of $24,938,496 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s proportion of the net pension liability was based on the City’s share of contributions to the pension plan relative to the contributions of all IPERS participating employers. At June 30, 2016, the City’s proportion was .3962696% which was a decrease of .019656% from its proportions measured as of June 30, 2015. For the year ended June 30, 2017, the City recognized pension expense of $2,599,601. At June 30, 2017, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Total Changes in proportion and differences between City contributions and proportionate share of contributions - City contributions subsequent to the measurement date 2,645,105 6,798,943$ Change of assumptions 380,484 - Net difference between projected and actual earnings on pension plan investments 3,552,947 1,548,571$ 1,250,940 - - Deferred Inflows of Resources Deferred Outflows of Resources Differences between expected and actual experience 220,407$ 297,631$ 72 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 $2,645,105 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Actuarial Assumptions The total pension liability in the June 30, 2016, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: The actuarial assumptions used in the June 30, 2016 valuation were based on the results of actuarial experience studies with dates corresponding to those listed above. Mortality rates were based on the RP-2000 Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on Scale AA. Year Ended June 30, 2018 June 30, 2019 June 30, 2020 June 30, 2021 June 30, 2022 1,561,079 866,632 (65,282) Total 121,419$ 121,419 2,605,267$ Rate of inflation 3.00 percent per annum (effective June 30, 2014) Salary increases 4.00 to 17.00 percent, average, including inflation. Rates vary by (effective June 30, 2010)membership group. (effective June 30, 1996)expense, including inflation 4.00 percent per annum based on 3.00 inflation and 1.00 (effective June 30, 1990)real wage inflation Investment rate of return 7.50 percent, net of pension plan investment Wage growth 73 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates (i.e., expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Discount Rate The discount rate used to measure the total pension liability was 7.5 percent. The projection of cash flows used to determine the discount rate assumed that contributions will be made at the contractually required rate and that the contributions from the City will be made at contractually required rates, actuarially determined. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of City’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.5 percent, as well as what the city’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percent lower (6.5 percent) or 1-percent higher (8.5 percent) than the current rate. Asset Class Core Plus Fixed Income 28 %1.9 % Domestic Equity 24 5.85 International Equity 16 6.32 Private Equity/Debt 11 10.31 Real Estate 8 3.87 Credit Opportunities 5 4.48 U.S. TIPS 5 1.36 Other Real Assets 2 6.42 Cash 1 (0.26) Total 100 % Long-Term Expected Real Rate of ReturnTarget Allocation 1% Decrease (6.5%) Discount Rate (7.5%) 1% Increase (8.5%) City's proportionate share of the net pension liability: 40,347,112$ 24,938,496$ 11,933,423$ 74 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued IPERS financial report which is available on IPERS’ website at www.ipers.org. Payables to the Pension Plan At June 30, 2017, there were no amounts due to IPERS. 8. Other Long-term Liabilities A note payable was issued to Greater Iowa City Housing Fellowship for the purchase of an 11 unit apartment building for low income and disabled housing in the Peninsula Neighborhood. The terms of the loan are 1%, interest only payments for twenty years with a final balloon payment of $211,000 due on August 1, 2025. For the governmental activities, employee vested benefits are generally liquidated by the General Fund, Community Development Block Grant Fund and Other Shared Revenue and Grants Fund. Changes in Long-Term Liabilities - Notes Payable Note Payable activity for the year ended June 30, 2017, was as follows: Due Within July 1, 2016 Issues Retirements June 30, 2017 One Year Governmental activities: $ 211,000 -$ - $ 211,000$ - $ Changes in Long-Term Liabilities - Employee Vested Benefits Employee Vested Benefits activity for the year ended June 30, 2017, was as follows: Due Within July 1, 2016 Issues Retirements June 30, 2017 One Year Governmental activities: $ 2,133,179 1,292,682$ 1,185,014 $ 2,240,847$ 1,251,482$ Business-type activities: $ 678,973 405,439 $ 392,471 $ 691,941$ 401,049$ 75 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 In August 1993, the GASB issued Statement No. 18, Accounting for Municipal Solid Waste Landfill Closure and Post-closure Care Costs (the Statement). Under these rules, in addition to operating expenses related to current activities of the landfill, an expense provision and related liability are being recognized based on the future closure and post-closure care costs that will be incurred near or after the date the landfill no longer accepts waste. The recognition of these landfill closure and post-closure care costs is based on the amount of the landfill used during the year. The estimated liability for landfill closure and post-closure care costs as of June 30, 2017, is $8,591,189, which is based on 52.16% usage (filled) of the landfill and is included in accrued liabilities within the Sanitation Fund. It is estimated that an additional amount of approximately $7,879,648 will be recognized as closure and post-closure care expenses between the date of the balance sheet and the date the landfill is expected to be filled to capacity by the year ended June 30, 2039. The estimated total current cost of the landfill closure and post-closure care costs at June 30, 2017, was determined by a licensed professional engineer and approximated at $16,470,837. It is based on the amount that would be paid if all equipment, facilities, and services required to close, monitor, and maintain the landfill were acquired as of June 30, 2017. These amounts are based on an estimated post-closure care and monitoring period of 30 years, consistent with current State Department of Natural Resources regulations. However, the actual cost of closure and post-closure care may be higher due to inflation, changes in technology, or changes in landfill laws and regulations. The City is required by federal and state laws and regulations to provide some form of financial assurance to finance closure and post-closure care. The City will meet its financial assurance obligations through the issuance of general obligation bonds. As of June 30, 2017, the Sanitation Fund had $13,227,106 in related equity in pooled cash and investments, at fair value designated for satisfaction of closure and post-closure costs. The City estimates that these cash reserves will only provide a fraction of the dollars needed to close and monitor the landfill. The remaining portion of post-closure care costs, anticipated future inflation costs and additional costs that might arise from changes in post-closure requirements (due to changes in technology or more rigorous environmental regulations, for example) may need to be covered by charges to future landfill users as well as City taxpayers. Changes in Long-Term Liabilities - Landfill Closure Post-closure Care Costs Landfill Closure Post-closure care activity for the year ended June 30, 2017, was as follows: Due Within July 1, 2016 Issues Retirements June 30, 2017 One Year Business-type activities: $ 8,268,394 $ 322,795 -$ $ 8,591,189 -$ 76 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Plan Description: The City operates one self-funded medical and dental plan for all employees, which is offered to current and retired employees and their dependents. All full-time employees who retire or terminate/resign and their eligible dependents are offered the following post-employment benefit options: Health insurance and dental insurance – The option of continuing with the City’s health insurance plan at the individual’s expense. These benefits cease upon Medicare eligibility. Life insurance – The option of converting the employee’s City-paid policy to an individual policy at the individual’s expense with the City’s life insurance carrier. Long-term disability – For employees who terminate/resign and have been on the plan for a minimum of one year, the option of converting the employee’s City-paid group policy to a personal policy at the individual’s expense with the City’s long-term disability insurance carrier. The above options, while at the individual’s own expense, are included within the City’s overall insurance package, which results in an implicit rate subsidy and an OPEB liability. Funding Policy: The plan member’s contribution requirements are established and may be amended by the City. The City currently finances the benefit plans on a pay-as-you-go basis. For governmental activities, this liability is expected to be liquidated by the General Fund. Annual OPEB Cost and Net OPEB Obligation: The City’s annual OPEB cost is calculated based on the annual required contribution (ARC) of the City, an amount actuarially determined in accordance with GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities over a period not to exceed 30 years. Changes in Long-Term Liabilities - Other Postemployment Benefits Net OPEB Obligation July 1, 2016 Current Year June 30, 2017 Governmental activities: $ 3,187,337 $ 438,375 $ 3,625,712 Business-type activities: $ 1,095,202 $ 123,398 $ 1,218,600 77 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 The following table shows the components of the City’s annual OPEB cost for the year ended June 30, 2017, the amount actually contributed to the plans, and changes in the City’s net OPEB obligation: For calculation of the net OPEB obligation, the actuary has set the transition day as July 1, 2008. The end of year net OPEB obligation was calculated by the actuary as the cumulative difference between the actuarially determined funding requirements and the actual contributions for the year ended June 30, 2017. The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plans and the net OPEB obligation are summarized as follows: Percentage of Annual Annual OPEB Cost Net OPEB Year Ended OPEB Cost Contributed from City Obligation June 30, 2015 $ 573,338 38.0% $3,969,641 June 30, 2016 $ 672,867 53.5% $4,282,539 June 30, 2017 $ 738,121 23.9% $4,844,312 Funded Status and Funding Progress: As of July 1, 2016, the most recent actuarial valuation date for the period July 1, 2016 through June 30, 2017, the actuarial accrued liability was $6,560,682, with no actuarial value of assets, resulting in an unfunded actuarial accrued liability (UAAL) of $6,560,682. The covered payroll (annual payroll of active employees covered by the plans) was $37,814,968 and the ratio of the UAAL to covered payroll was 17.3%. As of June 30, 2016, there were no trust fund assets. Actuarial Methods and Assumptions: Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Examples include assumption about future employments, mortality, and the health care cost trend. Actuarially determined amounts are subject to continual review as actual results are compared with past expectations and new estimates are made about the future. Actuarial calculations of the OPEB plan reflect a long-term perspective. The required schedule of funding progress, presented as required supplementary information in the section following the Notes to Financial Statements, will present multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Annual required contribution 735,979$ Interest on net OPEB obligation 149,889 Adjustment to annual required contribution (147,747) Annual OPEB costs 738,121 Contributions made (176,348) Increase in net OPEB obligation 561,773 Net OPEB obligation beginning of year 4,282,539 Net OPEB obligation end of year 4,844,312 $ 78 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Calculations are based on the types of benefits provided under the terms of the substantive plan at the time of each valuation and on the pattern of sharing of costs between the employer and plan members to that point. The projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations on the pattern of cost sharing between the employer and plan members in the future. As of the July 1, 2016 actuarial valuation date, the actuarial cost method used is the entry-age normal method. The actuarial assumption includes a 3.5% discount rate and an inflation rate of 3% per annum. The projected annual medical trend rate is 9.0%. The ultimate medical trend rate is 5.0%. The medical trend rate is decreased to 8.5% for year two and then reduced by 0.5% each year until reaching the 5.0% ultimate trend rate. Mortality rates for active employees and retirees are from the SOA RPH-2014 Total Dataset Mortality table fully generational using Scale MP-2015. Annual retirement and termination probabilities were developed from the retirement probabilities from the MFPRSI and IPERS pension plan turnover tables, adjusted to be consistent with expected first fiscal year retirements. Projected claim costs of the health plan is $933.33 per month for retirees and $816.67 for their spouses. The salary increase rate was assumed to be 3.5% per year. The UAAL is being amortized as a level percentage of projected payroll expenses over 30 years on an open basis. 9. Short Term Debt During FY17, the City entered into additional multiple short term loans totaling $669,000 and repaid multiple short term loans totaling $588,000. The outstanding loans mature one year from the date of the loan and bear interest rates ranging from 2% to 4.25%. The loans were used to fund the acquisition and rehabilitation of single family homes as part of the UniverCity Neighborhood Partnership Program (UniverCity). UniverCity is a cooperative effort of the City of Iowa City and the University of Iowa dedicated to ensuring that the University of Iowa Campus and surrounding neighborhoods remain vital, safe, affordable, and attractive places to live and work for both renters and homeowners. The short term loans have been repaid and will be repaid with the proceeds from the sale of the rehabilitated homes. Changes in Short-Term Liabilities - Notes Payable Notes Payable activity for the year ended June 30, 2017, was as follows: Due Within July 1, 2016 Issues Retirements June 30, 2017 One Year Governmental activities: $ 582,000 669,000$ 588,000 $ 663,000$ 663,000$ 79 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 10. Fund Equity Fund balances for the governmental funds are reported in classifications that comprise a hierarchy based on the extent to which the government honors constraints on the specific purposes for which amounts in those funds can be spent.  The Nonspendable classification contains amounts not in spendable form or legally or contractually required to be maintained intact.  Restricted amounts contain restraint on their use externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation.  Committed amounts can only be used for specific purposes imposed by formal action of the government’s highest level of decision-making authority. The highest level of decision-making authority is the City Council and it takes a resolution to establish, modify or rescind a fund balance commitment.  Amounts intended to be used for specific purposes are Assigned. Assignments should not cause deficits in the Unassigned fund balance. The Finance Director has been delegated authority by the City Council through a resolution to assign amounts to be used for specific purposes.  Unassigned fund balance is the residual classification for the General Fund. The General Fund is the only fund that would report a positive amount in unassigned fund balance. Residual deficit amounts of other governmental funds would also be reported as unassigned. The City would use Restricted fund balances first, followed by Committed resources, and then Assigned resources, as appropriate opportunities arise, but reserves the right to selectively spend Unassigned resources first to defer the use of these other classified funds. 80 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 11. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; workplace accidents, errors and omissions; and natural disasters. During fiscal year 1988 the City established the Loss Reserve Fund, an internal service fund, to account for and finance its uninsured risks of loss. During the year ended June 30, 2017 the City purchased property, liability, and workers’ compensation insurance under the program that provides for a $100,000 self-insured retention per occurrence on property losses, a $500,000 self-insured retention per occurrence on liability, and a $500,000 self-insured retention on workers’ compensation losses. The liability insurance provides coverage for claims in excess of the aforementioned self-insured retention up to a maximum of $21,000,000 annual aggregate of losses paid. Settled claims have not exceeded this commercial coverage in any of the past twenty nine fiscal years. The operating funds pay annual premiums to the Loss Reserve Fund. Accumulated monies in the Loss Reserve Fund are available to cover the self-insured retention amounts and any uninsured losses. Components of Fund Balance Bridge, Street and Traffic Other Employee Control Debt Governmental General Benefits Construction Service Funds Total Nonspendable: Perpetual Care Principal 69,000$ -$ -$ -$ -$ 69,000$ Inventory - - - - 263,610 263,610 Prepaid Items 718,919 79,591 - - - 798,510 Total Nonspendable 787,919 79,591 - - 263,610 1,131,120 Restricted for: Public Safety 348,934 - - - - 348,934 Local Option Sales Tax 8,021,582 - - - - 8,021,582 Debt Service - - - 7,756,146 - 7,756,146 GO Bond Projects - - 15,537,011 - 27,356,404 42,893,415 State Funding - - - - 5,714,241 5,714,241 Grant Agreement - - - - 3,911,201 3,911,201 Affordable Housing - - - - 468,102 468,102 Notes Receivable 1,291,801 - - - - 1,291,801 Property Held for Resale 86,800 - - - - 86,800 Public Safety Employee Benefits - 2,441,357 - - - 2,441,357 Other Restricted 224,712 - - - 757,771 982,483 Total Restricted 9,973,829 2,441,357 15,537,011 7,756,146 38,207,719 73,916,062 Committed to: Emergency Fund 5,198,779 - - - - 5,198,779 Total Committed 5,198,779 - - - - 5,198,779 Assigned to: Library Programs 814,236 - - - - 814,236 Senior Center Programs 13,882 - - - - 13,882 Replacement and Acquisition Reserves 378,811 - - - - 378,811 Other Assigned 135,390 - - - - 135,390 Total Assigned 1,342,319 - - - - 1,342,319 Unassigned:24,793,417 - - - - 24,793,417 Total Fund Balances 42,096,263$ 2,520,948$ 15,537,011$ 7,756,146$ 38,471,329$ 106,381,697$ 81 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 The Housing Authority Fund is insured under a separate policy with the Assisted Housing Risk Management Association. The remaining funds participate in the Loss Reserve Fund. The funds make payments to the Loss Reserve Fund based on actuarial estimates of the amounts needed to pay prior- and current-year claims and to establish a reserve for catastrophic losses. The Fund’s accrued liabilities balance includes a claims liability at June 30, 2017 based on the requirements of GASB Statement No. 10, as amended, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes in the Loss Reserve Fund’s claims liability amount for property, liability, and workers’ compensation for the years ended June 30, 2017 and 2016 are as follows: Current-Year Beginning-of- Claims and Balance at Fiscal-Year Changes in Claim Fiscal Liability Estimates Payments Year-End 2015 – 2016 $ 2,536,000 $ 827,000 $ 874,000 $ 2,489,000 2016 – 2017 2,489,000 706,000 906,000 2,289,000 Also, the City is partially self-insured, through stop-loss insurance, for employee health care coverage, which is available to all of its permanent employees. This insurance provides stop-loss coverage for claims in excess of $125,000 per employee with an aggregate stop-loss of $9,716,893. The operating funds are charged premiums by the Loss Reserve Fund. The City reimburses a health insurance provider for actual medical costs incurred, plus a claims processing\administrative fee. Changes in the Loss Reserve Fund’s claims liability amount for health care coverage for the years ended June 30, 2017 and 2016 are as follows: Current-Year Beginning-of- Claims and Balance at Fiscal-Year Changes in Claim Fiscal Liability Estimates Payments Year-End 2015 – 2016 $ 568,000 $ 7,035,000 $ 7,253,000 $ 350,000 2016 – 2017 350,000 7,356,000 7,321,000 385,000 82 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 12. Commitments and Contingencies Contractual Commitments The total outstanding contractual commitments as of June 30, 2017 are as follows: Developer Commitments In order to encourage development within designated TIF districts, the City Council has approved developer grants to 7 different projects. The grants are to be paid only after certain conditions have been met by each project developer, and are to be paid over many years in the form of a rebate of a predetermined percentage of future property taxes generated by the property. Currently, it is estimated that outstanding commitments totaling $25,526,444 exist, of which $330,157 is expected to be paid in the next fiscal year. These items are expensed in the period in which they are paid. There were no payments made in the current fiscal year. No liability is recognized due to the fact that the agreements are conditional and the payments are to be funded by future property taxes receivable on the project. Project Amount Bridge, street and traffic Paving and Bridge Construction, control construction Engineering Design and Consulting 22,051,540$ Parking Parking Facility Restoration Repair 529,689 Wastewater Sewer Construction & Riverfront Crossings Park 3,563,486 Water Ground Storage Resevoir & Water Plant Computer 45,341 Sanitation Landfill Cell Reconstruction & Road Improvements 552,749 Airport Runway, S. Taxiway Extension, N T-Hangar Restroom 71,888 Stormwater Stormwater system improvements & Storm Sewer 26,317 Replacements 26,841,010$ Fund 83 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 13. Contingent Liabilities Litigation The City is a defendant in a number of lawsuits arising principally from claims against the City for alleged improper actions by City employees, with such lawsuits typically involving claims of improper police action, unlawful taking of property by zoning, negligence, appeals of condemnations, and discrimination. Total damages claimed are substantial; however, it has been the City’s experience that such actions are settled for amounts substantially less than claimed amounts. The City’s management estimates that the potential claims against the City, not covered by various insurance policies, would not materially affect the financial condition of the City. The City has the authority to levy additional taxes (outside the regular limit) to cover uninsured judgments against the City. 14. Accounting Change/Restatement Beginning fund balances for the General Fund and the Community Development Block Grant Fund (a nonmajor governmental fund) were restated to reflect the reclassification of deferred inflow of resources to restricted fund balance for notes receivable. Long-term notes receivable were previously recorded as a deferred inflow of resources, as their revenue was not considered available. However, in evaluating the balances during the current year, it was determined that the presentation would be more representative to reflect the long-term note receivable balances as part of restricted fund balance. 15. Tax Abatements Governmental Accounting Standards Board Statement No. 77 defines tax abatements as a reduction in tax revenues that results from an agreement between one or more governments and an individual or entity in which (a) one or more governments promise to forgo tax revenues to which they are otherwise entitled and (b) the individual or entity promises to take a specific action after the agreement has been entered into that contributes to economic development or otherwise benefits the governments or the citizens of those governments. Restatements of fund balances previously reported are as follows: (Amounts in thousands) Fund Fund Balances Ending June 30, 2016 as Previously Reported Effect of Reclassification of Deferred Inflow of Resources to Restricted Fund Balance Fund Balances Ending June 30, 2016 as Restated General 48,252$ 1,249$ 49,501$ Other Governmental Funds 16,851$ 3,360$ 20,211$ 84 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 City Tax Abatements The City provides tax abatements for urban renewal and economic development projects with tax increment financing as provided for in Chapters 15A and 403 of the Code of Iowa. For these types of projects, the City enters into agreements with developers which require the City, after developers meet the terms of the agreements, to rebate a portion of the property tax paid by the developers, to pay the developers an economic development grant or to pay the developers a predetermined dollar amount. No other commitments were made by the City as part of these agreements. For the year ended June 30, 2017, the City did not abate any property tax under the urban renewal and economic development projects. Tax Abatements of Other Entities Property tax revenues of the City were not reduced by any amount for the year ended June 30, 2017 under agreements entered into by any entities. 16. New Governmental Accounting Standards Board (GASB) Standards The Governmental Accounting Standards Board (GASB) has issued seven statements not yet implemented by the City. The statements, which might impact the City’s financial statements, are as follows: Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, will be effective for fiscal year ending June 30, 2018. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. Statement No. 81, Irrevocable Split-Interest Agreements, will be effective for fiscal year ending June 30, 2018. The objective of this Statement is to improve accounting and financial reporting for irrevocable split interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. Statement No. 83, Certain Asset Retirement Obligations, will be effective for fiscal year ending June 30, 2019. The objective of this Statement is to address legally enforceable liabilities associated with tangible capital assets. Statement No. 84, Fiduciary Activities, will be effective for fiscal year ending June 30, 2020. The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. Statement No. 85, Omnibus 2017, will be effective for fiscal year ending June 30, 2018. The objective of this Statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. 85 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2017 Statement No. 86, Certain Debt Extinguishment Issues, will be effective for fiscal year ending June 30, 2018. The primary objective of this Statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources—resources other than the proceeds of refunding debt—are placed in an irrevocable trust for the sole purpose of extinguishing debt. This Statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. Statement No. 87, Leases, will be effective for fiscal year ending June 30, 2021. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. The City’s management has not yet determined the effect these statements will have on the City’s financial statements. 86 87 ~:~ ---------------- Governmental Fund Types Enterprise Fund Actual Budgetary Types Actual Total Actual Basis Budgetary Basis Budgetary Basis Revenues: Property taxes 55,357$ -$ 55,357$ Delinquent property taxes 1 - 1 Tax increment financing taxes 2,226 - 2,226 Other city taxes 2,868 - 2,868 Special assessments - - - Licenses and permits 3,521 10 3,531 Intergovernmental 24,573 14,592 39,165 Charges for services 5,718 39,954 45,672 Use of money and property 1,168 1,754 2,922 Miscellaneous 3,560 1,488 5,048 Total revenues 98,992 57,798 156,790 Expenditures/Expenses: Public safety 22,963 - 22,963 Public works 7,948 - 7,948 Health and social services 301 - 301 Culture and recreation 13,782 - 13,782 Community and economic development 8,105 - 8,105 General government 8,166 - 8,166 Debt service 15,218 - 15,218 Capital outlay 32,903 - 32,903 Business-type - 66,545 66,545 Total expenditures/expenses 109,386 66,545 175,931 Excess (deficiency) of revenues over (under) expenditures/expenses (10,394) (8,747) (19,141) Other financing sources and uses, net 25,551 11,995 37,546 Net change in fund balances 15,157 3,248 18,405 Balances, beginning of year 85,925 107,044 192,969 Balances, end of year 101,082$ 110,292$ 211,374$ See Note to Required Supplementary Information. CITY OF IOWA CITY BUDGETARY COMPARISON SCHEDULE BUDGET AND ACTUAL - ALL GOVERNMENTAL FUNDS AND ENTERPRISE FUNDS REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2017 (dollar amounts expressed in thousands) BUDGETARY BASIS 88 Final to Actual Variance - Positive Original Final (Negative) 55,330$ 55,330$ 27$ - - 1 2,277 2,277 (51) 2,773 2,773 95 1 1 (1) 1,739 1,739 1,792 32,760 41,140 (1,975) 44,894 45,045 627 2,184 2,285 637 4,637 5,153 (105) 146,595 155,743 1,047 23,533 23,995 1,032 9,309 9,328 1,380 350 350 49 14,042 14,141 359 7,510 11,170 3,065 9,209 9,085 919 15,146 15,390 172 35,452 79,145 46,242 53,713 79,697 13,152 168,264 242,301 66,370 (21,669) (86,558) 67,417 18,080 27,319 10,227 (3,589) (59,239) 77,644$ 128,702 192,969 125,113$ 133,730$ Budgeted Amounts 89 Accrual Modified Accrual Budget Basis Adjustments Basis Revenues 98,992$ (4,438)$ 94,554$ Expenditures 109,386 (17,462) 91,924 Net (10,394) 13,024 2,630 Other financing sources and uses, net 25,551 (12,927) 12,624 Beginning Fund Balances 85,925 5,202 91,127 Ending Fund Balances 101,082$ 5,299$ 106,381$ Accrual Accrual Budget Basis Adjustments Basis Revenues 57,798$ 1,266$ 59,064$ Expenditures 66,545 (11,418) 55,127 Net (8,747) 12,684 3,937 Other financing sources and uses, net 11,995 (5,326) 6,669 Beginning Fund Balances 107,044 250,670 357,714 Ending Fund Balances 110,292$ 258,028$ 368,320$ See Note to Required Supplementary Information. CITY OF IOWA CITY Governmental Fund Types Enterprise Fund Types BUDGETARY COMPARISON SCHEDULE BUDGET TO GAAP RECONCILIATION REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2017 (dollar amounts expressed in thousands) 90 City of Iowa City, Iowa Note to Required Supplementary Information - Budgetary Reporting For the Year Ended June 30, 2017 In accordance with the Code of Iowa, the City Council annually adopts a budget following required public notice and hearing which includes all funds, except internal service funds and agency funds. The budget basis of accounting is a modified accrual basis. The annual budget may be amended during the year utilizing similar statutorily prescribed procedures. Formal and legal budgetary control is based upon nine major classes of expenditures known as functions, not by fund or fund type. These nine functions are: public safety, public works, health and social services, culture and recreation, community and economic development, general government, debt service, capital outlay and business-type. The legal level control is at the aggregated function level, not at the fund or fund type level. During the year, budget amendments increased budgeted revenues by $9,148,000 and expenditures by $74,037,000. The budget amendments were primarily due to changes in the breadth and timing of capital improvement projects, which the City budgets in full during the initial year of the projects and amends future year budgets for carryover. 91 92 ~:~ ---------------- 2017 2016 2015 City's proportion of the net pension liability 3.697128%3.704972%3.778137% City's proportionate share of the net pension liability 23,117$ 17,406$ 13,696$ City's covered payroll 10,019 9,716 9,648 City's proportionate share of the net pension liability as a percentage of its covered payroll 230.73%179.15%141.96% Plan fiduciary net position as a percentage of the total pension liability 78.20%83.04%86.27% * In accordance with GASB Statement No. 68, the amounts presented for each fiscal year were determined as of June 30 of the preceding fiscal year. Note: GASB Statement No. 68 requires ten years of information to be presented in this table. However, until a full 10-year trend is compiled, the City will present information for those years for which information is available. City of Iowa City, Iowa Required Supplementary Information - Schedule of the City's Proportionate Share of the Net Pension Liability Municipal Fire and Police Retirement System of Iowa For the Last Three Years* (amounts expressed in thousands) 93 2017 2016 2015 2014 Statutorily required contributions 2,682 $ 2,782 $ 2,955 $ 2,906 $ Contributions in relation to the statutorily required contribution (2,682) (2,782) (2,955) (2,906) Contribution deficiency (excess)- $ - $ -$ -$ City's covered payroll 10,347 $ 10,019 $ 9,716 $ 9,648 $ Contributions as a percentage of covered payroll 25.92%27.77%30.41%30.12% City of Iowa City, Iowa Required Supplementary Information - Schedule of the City's Contributions Municipal Fire and Police Retirement System of Iowa For the Last Ten Years (amounts expressed in thousands) 94 2013 2012 2011 2010 2009 2008 2,383 $ 2,277 $ 1,654 $ 1,336 $ 1,425 $ 1,893 $ (2,383) (2,277) (1,654) (1,336) (1,425) (1,893) - $ - $ - $ - $ - $ - $ 9,122 $ 9,197 $ 8,310 $ 7,860 $ 7,601 $ 7,430 $ 26.12% 24.76% 19.90% 17.00% 18.75% 25.48% 95 Changes of benefit terms: There were no significant changes of benefit terms. Changes of assumptions: Postretirement mortality changed to the RP-2000 Blue Collar Combined Healthy Mortality Table with males set-back two years, females set-forward one year and disableds set-forward one year (male only rates), with no projection of future mortality improvement. City of Iowa City, Iowa Notes to Required Supplementary Information - Pension Liability Municipal Fire and Police Retirement System of Iowa Year ended June 30, 2017 96 2017 2016 2015 City's proportion of the net pension liability 0.3962696%0.4159256%0.4378904% City's proportionate share of the net pension liability 24,938$ 20,549$ 17,366$ City's covered payroll 28,448 28,495 28,654 City's proportionate share of the net pension liability as a percentage of its covered payroll 87.66%72.11%60.61% Plan fiduciary net position as a percentage of the total pension liability 81.82%85.19%87.61% * In accordance with GASB Statement No. 68, the amounts presented for each fiscal year were determined as of June 30 of the preceding fiscal year. Note: GASB Statement No. 68 requires ten years of information to be presented in this table. However, until a full 10-year trend is compiled, the City will present information for those years for which information is available. City of Iowa City, Iowa Required Supplementary Information - Schedule of the City's Proportionate Share of the Net Pension Liability Iowa Public Employees' Retirement System For the Last Three Years* (amounts expressed in thousands) 97 2017 2016 2015 2014 Statutorily required contributions 2,645 $ 2,540 $ 2,545 $ 2,559 $ Contributions in relation to the statutorily required contribution (2,645) (2,540) (2,545) (2,559) Contribution deficiency (excess)- $ - $ -$ -$ City's covered payroll 29,619 $ 28,448 $ 28,495 $ 28,654 $ Contributions as a percentage of covered payroll 8.93%8.93%8.93%8.93% (amounts expressed in thousands) City of Iowa City, Iowa Required Supplementary Information - Schedule of the City's Contributions Iowa Public Employees' Retirement System For the Last Ten Years 98 2013 2012 2011 2010 2009 2008 2,442 $ 2,327 $ 1,877 $ 1,780 $ 1,659 $ 1,522 $ (2,442) (2,327) (1,877) (1,780) (1,659) (1,522) - $ - $ - $ - $ - $ - $ 28,170 $ 28,833 $ 27,013 $ 26,764 $ 26,133 $ 25,151 $ 8.67% 8.07% 6.95% 6.65% 6.35% 6.05% 99 Changes of benefit terms: Legislation passed in 2010 modified benefit terms for current Regular members. The definition of final average salary changed from the highest three to the highest five years of covered wages. The vesting requirement changed from four years of service to seven years. The early retirement reduction increased from 3 percent per year measured from the member’s first unreduced retirement age to a 6 percent reduction for each year of retirement before age 65. Changes of assumptions: The 2014 valuation implemented the following refinements as a result of a quadrennial experience study: • Decreased the inflation assumption from 3.25 percent to 3.00 percent • Decreased the assumed rate of interest on member accounts from 4.00 percent to 3.75 percent per year. • Adjusted male mortality rates for retirees in the Regular membership group. • Moved from an open 30 year amortization period to a closed 30 year amortization period for the UAL beginning June 30, 2014. Each year thereafter, changes in the UAL from plan experience will be amortized on a separate closed 20 year period. The 2010 valuation implemented the following refinements as a result of a quadrennial experience study: • Adjusted retiree mortality assumptions. • Modified retirement rates to reflect fewer retirements. • Lowered disability rates at most ages. • Lowered employment termination rates • Generally increased the probability of terminating members receiving a deferred retirement benefit. • Modified salary increase assumptions based on various service duration. City of Iowa City, Iowa Notes to Required Supplementary Information - Pension Liability Iowa Public Employees' Retirement System Year ended June 30, 2017 100 City of Iowa City, Iowa Required Supplementary Information – Schedule of Funding Progress for Health and Dental Plans For the Year Ended June 30, 2017 Actuarial Valuation Date Fiscal Year Actuarial Value of Assets Actuarial Accrued Liability (AAL) Unfunded AAL (UAAL) Funded Ratio Covered Payroll UAAL As a Percentage of Covered Payroll July 1, 2012 June 30, 2013 $ - $ 7,163,715 $ 7,163,715 0.00% $ 34,992,423 20.5% July 1, 2014 June 30, 2015 $ - $ 5,150,697 $ 5,150,697 0.00% $ 35,972,242 14.3% July 1, 2016 June 30, 2017 $ - $ 6,560,682 $ 6,560,682 0.00% $ 37,814,968 17.3% 101 102 ~:~ ---------------- NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Special Revenue Funds account for revenues derived from specific sources that are required to be accounted for as separate funds. The funds in this category and their purpose are as follows: Economic Development Fund – accounts for revenue and expenditures of economic development activities. Community Development Block Grant Fund – accounts for revenue from the U.S. Department of Housing and Urban Development’s Community Development Block Grant programs. Other Shared Revenue and Grants Fund – accounts for revenue from various sources, primarily road use tax monies from the State of Iowa and reimbursable programs funded by federal and state grants. Metropolitan Planning Organization of Johnson County Fund – accounts for the financial activities of the metropolitan/rural cooperative planning organization. CAPITAL PROJECT FUND Capital Projects Funds are utilized to account for all resources used in the acquisition and construction of capital facilities and other major fixed assets, with the exception of those that are financed by proprietary fund monies. The fund in this category is as follows: Other Construction Fund - accounts for the construction or replacement of other City general fixed assets, such as administrative buildings with various funding sources, including general obligation bonds, intergovernmental revenues, and contributions. 103 Capital Projects Metropolitan Community Other Planning Development Shared Organization Economic Block Revenue and of Johnson Other Development Grant Grants County Construction Total Assets Equity in pooled cash and investments 476$ 24$ 5,029$ 227$ 19,703$ 25,459$ Receivables: Property tax 327 - - - - 327 Accounts and unbilled usage - - 1 - - 1 Interest 2 - 2 1 24 29 Notes - 3,833 - - - 3,833 Due from other governments - 113 1,039 49 117 1,318 Inventories - -264 - - 264 Restricted assets: Equity in pooled cash and investments - - 476 - 8,544 9,020 Total assets 805$ 3,970$ 6,811$ 277$ 28,388$ 40,251$ Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable -$ 23$ 42$ 5$ 360$ 430$ Contracts payable - - - - 444 444 Accrued liabilities - 1 85 15 - 101 Advances from other funds - -125 - - 125 Due to other governments - -4 - - 4 Liabilities payable from restricted assets: Deposits - - 6 - - 6 Advances from grantors - - 27 - 110 137 Total liabilities - 24 289 20 914 1,247 Deferred inflows of resources: Unavailable revenues: Succeeding year property taxes 323 - - - - 323 Grants - 91 1 - 25 117 Other - - - - 93 93 Total deferred inflows of resources 323 91 1 - 118 533 Fund balances: Nonspendable - - 264 - - 264 Restricted 482 3,855 6,257 257 27,356 38,207 Total fund balances 482 3,855 6,521 257 27,356 38,471 Total liabilities, deferred inflows of resources and fund balances 805$ 3,970$ 6,811$ 277$ 28,388$ 40,251$ Special Revenue CITY OF IOWA CITY COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS June 30, 2017 (amounts expressed in thousands) 104 Capital Projects Metropolitan Community Other Planning Development Shared Organization Economic Block Revenue and of Johnson Other Development Grant Grants County Construction Total Revenues Property taxes 2,516$ -$ -$ - $ - $ 2,516 $ Intergovernmental 29 1,110 9,205 291 614 11,249 Charges for services - - 67 - 299 366 Use of money and property 4 20 81 1 40 146 Miscellaneous - 50 94 4 248 396 Total revenues 2,549 1,180 9,447 296 1,201 14,673 Expenditures Current: Public safety - - - - 24 24 Public works - - 5,052 - 41 5,093 Culture and recreation - - - - 451 451 Community and economic development 318 963 711 609 2,020 4,621 General government - - - - 11 11 Capital outlay - - 597 - 1,641 2,238 Total expenditures 318 963 6,360 609 4,188 12,438 Excess (deficiency) of revenues over (under) expenditures 2,231 217 3,087 (313) (2,987) 2,235 Other Financing Sources (Uses) Issuance of debt - - - - 15,893 15,893 Sale of capital assets - - - - 2,024 2,024 Premium on issuance of bonds - - - - 85 85 Transfers in - 4 336 268 5,204 5,812 Transfers out (1,988) (175) (4,014) - (1,612) (7,789) Total other financing sources and (uses)(1,988) (171) (3,678) 268 21,594 16,025 Net change in fund balances 243 46 (591) (45) 18,607 18,260 Fund Balances, Beginning, as restated 239 3,809 7,112 302 8,749 20,211 Fund Balances, Ending 482$ 3,855$ 6,521$ 257 $ 27,356 $ 38,471 $ Special Revenue CITY OF IOWA CITY, IOWA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS For the Year Ended June 30, 2017 (amounts expressed in thousands) 105 106 ~:~ ---------------- NONMAJOR ENTERPRISE FUNDS Enterprise Funds account for operations and activities of the City that are financed and operated in a manner similar to a private business enterprise, and where the costs of providing services to the general public on a continuing basis are expected to be financed or recovered primarily through user charges, or where the City has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. The funds in this category are as follows: Airport Fund – accounts for the operation and maintenance of the airport facility. Transit Fund – accounts for the operation and maintenance of the public transportation system. 107 Airport Transit Total Assets Current assets: Equity in pooled cash and investments 238$ 4,992$ 5,230$ Receivables: Accounts and unbilled usage 24 15 39 Interest 1 15 16 Due from other governments 114 2,068 2,182 Inventories -294 294 Prepaid item 3 - 3 Total current assets 380 7,384 7,764 Noncurrent assets: Restricted assets: Equity in pooled cash and investments 111 50 161 Other post employment benefits asset 3 - 3 Capital assets: Land 12,158 2,630 14,788 Buildings 5,377 15,399 20,776 Improvements other than buildings 396 - 396 Machinery and equipment 281 10,332 10,613 Infrastructure 17,758 955 18,713 Accumulated depreciation (8,704) (14,784) (23,488) Construction in progress 66 476 542 Total noncurrent assets 27,446 15,058 42,504 Total assets 27,826 22,442 50,268 Deferred Outflows of Resources Pension related deferred outflows 14 686 700 Liabilities Current liabilities: Accounts payable 8 159 167 Contracts payable 51 -51 Accrued liabilities 2 136 138 Employee vested benefits 2 115 117 Due to other governments -16 16 Total current liabilities 63 426 489 Noncurrent liabilities: Liabilities payable from restricted assets: Deposits 10 6 16 Employee vested benefits 1 82 83 Net pension liability 49 2,428 2,477 Other post employment benefits obligation -337 337 Total noncurrent liabilities 60 2,853 2,913 Total liabilities 123 3,279 3,402 Deferred Inflows of Resources Pension related deferred inflows 3 153 156 Net Position Net investment in capital assets 27,332 15,008 42,340 Restricted for future improvements 100 - 100 Unrestricted 282 4,688 4,970 Total net position 27,714$ 19,696$ 47,410$ CITY OF IOWA CITY, IOWA COMBINING STATEMENT OF NET POSITION NONMAJOR ENTERPRISE FUNDS June 30, 2017 (amounts expressed in thousands) 108 Airport Transit Total Operating Revenues: Charges for services 345$ 2,089$ 2,434$ Miscellaneous 2 62 64 Total operating revenues 347 2,151 2,498 Operating Expenses: Personal services 76 3,966 4,042 Commodities 105 646 751 Services and charges 239 1,883 2,122 420 6,495 6,915 Depreciation 997 887 1,884 Total operating expenses 1,417 7,382 8,799 Operating loss (1,070) (5,231) (6,301) Nonoperating Revenues: Gain on disposal of capital assets - 3 3 Operating grants 69 2,235 2,304 Interest income 1 29 30 Total nonoperating revenues 70 2,267 2,337 Loss before capital contributions and transfers (1,000) (2,964) (3,964) Capital contributions 58 395 453 Transfers in 113 3,272 3,385 Change in net position (829) 703 (126) Net Position, Beginning 28,543 18,993 47,536 Net Position, Ending 27,714$ 19,696$ 47,410$ NONMAJOR ENTERPRISE FUNDS AND CHANGES IN FUND NET POSITION COMBINING STATEMENT OF REVENUES, EXPENSES, CITY OF IOWA CITY, IOWA (amounts expressed in thousands) For the Year Ended June 30, 2017 109 Airport Transit Total Cash Flows From Operating Activities Receipts from customers and users 350$ 2,147$ 2,497$ Payments to suppliers (344) (2,872) (3,216) Payments to employees (75) (3,900) (3,975) Net cash flows used for operating activities (69) (4,625) (4,694) Cash Flows From Noncapital Financing Activities Operating grants received 29 612 641 Transfers from other funds 113 3,272 3,385 Net cash flows from noncapital financing activities 142 3,884 4,026 Cash Flows From Capital and Related Financing Activities Capital grants received 151 - 151 Acquisition and construction of property and equipment (472) (475) (947) Proceeds from sale of property - 3 3 Net cash flows used for capital and related financing activities (321) (472) (793) Cash Flows From Investing Activities Interest on investments - 26 26 Net decrease in cash and cash equivalents (248) (1,187) (1,435) Cash and Cash Equivalents, Beginning 597 6,229 6,826 Cash and Cash Equivalents, Ending 349$ 5,042$ 5,391$ Reconciliation of operating loss to net cash flows used for operating activities: Operating loss (1,070)$ (5,231)$ (6,301)$ Adjustments to reconcile operating loss to net cash flows used for operating activities: Depreciation expense 997 887 1,884 Changes in: Receivables: Accounts and unbilled usage 3 (5) (2) Due from other governments - 1 1 Inventories - (14) (14) Prepaid item (3) - (3) Accounts payable 3 (301) (298) Accrued liabilities - 9 9 Employee vested benefits - (1) (1) Due to other governments - (28) (28) Net pension liability 9 442 451 Deferred outflows of resources (7) (347) (354) Deferred inflows of resources (2) (86) (88) Other post employment benefits asset/obligation 1 49 50 Total adjustments 1,001 606 1,607 Net cash flows used for operating activities (69)$ (4,625)$ (4,694)$ CITY OF IOWA CITY, IOWA COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS For the Year Ended June 30, 2017 (amounts expressed in thousands) 110 INTERNAL SERVICE FUNDS Internal Service Funds account for goods and services provided by one department to other City departments on a cost-reimbursement basis. The funds in this category are: Equipment Maintenance Fund – accounts for the provision of maintenance for City vehicles and equipment and vehicle rental to other City departments from a central vehicle pool. Central Services Fund – accounts for the support services of photocopying, mail, overnight shipping, and two-way radios provided to other City departments. Loss Reserve Fund – accounts for the property, liability, Workers’ Compensation and health insurance premiums and claims activity for City departments, including the self-insured retention portion. Information Technology Fund – accounts for the accumulation and allocation of costs associated with telecommunications and data processing, including the operation and replacement of equipment. 111 Equipment Central Loss Information Maintenance Services Reserve Technology Total Assets Current assets: Equity in pooled cash and investments 13,209$ 715$ 14,842$ 2,651$ 31,417$ Receivables: Accounts and unbilled usage - - 157 - 157 Interest 42 2 37 8 89 Due from other governments 67 - - - 67 Inventories 466 - - - 466 Prepaid item - - - 12 12 Total current assets 13,784 717 15,036 2,671 32,208 Noncurrent assets: Restricted assets: Other post employment benefits asset 15 - 20 - 35 Capital assets: Land 45 - - - 45 Buildings 1,298 - - 233 1,531 Improvements other than buildings 50 - - - 50 Machinery and equipment 19,271 804 24 2,234 22,333 Infrastructure - 31 - 2,818 2,849 Accumulated depreciation (12,228) (307) (24) (2,787) (15,346) Construction in progress - - - 493 493 Total noncurrent assets 8,451 528 20 2,991 11,990 Total assets 22,235 1,245 15,056 5,662 44,198 Deferred Outflows of Resources Pension related deferred outflows 167 6 38 170 381 Liabilities Current liabilities: Accounts payable 122 8 258 98 486 Accrued liabilities 31 1 2,681 33 2,746 Employee vested benefits 38 1 2 22 63 Total current liabilities 191 10 2,941 153 3,295 Noncurrent liabilities: Employee vested benefits 30 1 1 18 50 Net pension liability 600 20 118 659 1,397 Other post employment benefits obligation - 7 - 90 97 Total noncurrent liabilities 630 28 119 767 1,544 Total liabilities 821 38 3,060 920 4,839 Deferred Inflows of Resources Pension related deferred inflows 38 1 8 41 88 Net Position Net investment in capital assets 8,436 528 - 2,991 11,955 Unrestricted 13,107 684 12,026 1,880 27,697 Total net position 21,543$ 1,212$ 12,026$ 4,871$ 39,652$ (amounts expressed in thousands) CITY OF IOWA CITY COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS June 30, 2017 112 Equipment Central Loss Information Maintenance Services Reserve Technology Total Operating Revenues: Charges for services 5,913$ 238$ 10,072$ 2,132$ 18,355$ Total operating revenues 5,913 238 10,072 2,132 18,355 Operating Expenses: Personal services 978 36 205 956 2,175 Commodities 1,474 10 12 342 1,838 Services and charges 545 150 8,446 314 9,455 2,997 196 8,663 1,612 13,468 Depreciation 1,494 60 1 243 1,798 Total operating expenses 4,491 256 8,664 1,855 15,266 Operating income (loss)1,422 (18) 1,408 277 3,089 Nonoperating Revenues: Gain on disposal of capital assets 84 - - - 84 Interest income 69 4 74 16 163 Total nonoperating revenues 153 4 74 16 247 Income (loss) before transfers 1,575 (14) 1,482 293 3,336 Capital contributions - - - 35 35 Transfers in 559 - - 763 1,322 Transfers out - - - (505) (505) Change in net position 2,134 (14) 1,482 586 4,188 Net Position, Beginning 19,409 1,226 10,544 4,285 35,464 Net Position, Ending 21,543$ 1,212$ 12,026$ 4,871$ 39,652$ (amounts expressed in thousands) CITY OF IOWA CITY, IOWA COMBINING STATEMENT OF REVENUES, EXPENSES, INTERNAL SERVICE FUNDS For the Year Ended June 30, 2017 AND CHANGES IN FUND NET POSITION 113 Equipment Central Loss Information Maintenance Services Reserve Technology Total Cash Flows From Operating Activities Receipts from customers and users 5,889$ 238$ 10,059$ 2,132$ 18,318$ Payments to suppliers (2,702) (159) (8,365) (619) (11,845) Payments to employees (965) (36) (370) (924) (2,295) Net cash flows from operating activities 2,222 43 1,324 589 4,178 Cash Flows From Noncapital Financing Activities Transfers from other funds 559 - - 763 1,322 Transfers to other funds - - - (505) (505) Net cash flows from noncapital financing activities 559 - - 258 817 Cash Flows From Capital and Related Financing Activities Acquisition and construction of property and equipment (2,270) (5) - (861) (3,136) Proceeds from sale of property 128 - -- 128 Net cash flows used for capital and related financing activities (2,142) (5) - (861) (3,008) Cash Flows From Investing Activities Interest on investments 57 4 71 15 147 Net increase in cash and cash equivalents 696 42 1,395 1 2,134 Cash and Cash Equivalents, Beginning 12,513 673 13,447 2,650 29,283 Cash and Cash Equivalents, Ending 13,209$ 715$ 14,842$ 2,651$ 31,417$ Reconciliation of operating income (loss) to net cash flows from operating activities: Operating income (loss)1,422$ (18)$ 1,408$ 277$ 3,089$ Adjustments to reconcile operating income (loss) to net cash flows from operating activities: Depreciation expense 1,494 60 1 243 1,798 Changes in: Receivables: Accounts and unbilled usage - - (13) - (13) Due from other governments (24) - - - (24) Inventories 5 - - - 5 Prepaid item - -- (12) (12) Accounts payable (688) 1 93 49 (545) Accrued liabilities 4 - (164) 9 (151) Employee vested benefits 6 - (3) 7 10 Net pension liability 106 3 23 117 249 Deferred outflows of resources (84) (3) (20) (79) (186) Deferred inflows of resources (23) (1) (2) (30) (56) Other post employment benefits asset/obligation 4 1 1 8 14 Total adjustments 800 61 (84) 312 1,089 Net cash flows from operating activities 2,222$ 43$ 1,324$ 589$ 4,178$ Noncash Investing, Capital, and Financing Activities: Contributions of capital assets from government and others -$ -$ -$ 35$ 35$ (amounts expressed in thousands) CITY OF IOWA CITY, IOWA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the Year Ended June 30, 2017 114 AGENCY FUND The Agency Fund accounts for assets held by the City in a trustee or custodial capacity for other entities, such as individuals, private organizations, or other governmental units. The fund in this category is: Project Green Fund – accounts for donations that are received to plant and develop yards and lawns, both public and private, within Iowa City. 115 Balance Balance July 1, 2016 Increases Decreases June 30, 2017 Project Green Assets Equity in pooled cash and investments 175$ 72$ 84$ 163$ Interest receivable - 1 - 1 Total assets 175$ 73$ 84$ 164$ Liabilities Accounts payable 10$ 4$ 10$ 4$ Due to agency 165 69 74 160 Total liabilities 175$ 73$ 84$ 164$ (amounts expressed in thousands) CITY OF IOWA CITY STATEMENT OF CHANGES IN ASSETS AND LIABILITIES For the Year Ended June 30, 2017 AGENCY FUNDS 116 Statistical Section Tabs Statistical Section This part of the City of Iowa City’s comprehensive annual financial report represents 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 Page F i n a n c i a l T r e n d s 1 1 9 These schedules contain trend information to help the reader understand how the government’s financial performance and well-being have changed over time. R e v e n u e C a p a c i t y 1 2 4 These schedules contain information to help the reader assess the government’s most significant local revenue source, the property tax. D e b t C a p a c i t y 1 3 4 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 144 These schedules offer demographic and economic indicators to help the reader understand the environment within which the government’s financial activities take place. O p e r a t i n g I n f o r m a t i o n 1 4 6 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 comprehensive annual financial report for the relevant year. 117 118 ~:~ ---------------- 2008 2009 2010 2011 2012 20131 2014 2015 20162 2017 Governmental activities Net investment in capital assets 104,833 $ 100,741 $ 111,703 $ 123,935 $ 135,998 $ 133,989 $ 138,482 $ 153,729 $ 163,362 $ 183,651 $ Restricted 23,741 26,586 25,588 31,179 35,021 22,867 39,958 36,447 42,154 47,676 Unrestricted 1,119 17,938 32,478 36,862 38,906 50,744 39,758 15,520 18,402 16,264 Total governmental activities net position 129,693 $ 145,265 $ 169,769 $ 191,976 $ 209,925 $ 207,600 $ 218,198 $ 205,696 $ 223,918 $ 247,591 $ Business-type activities Net investment in capital assets 156,075 $ 162,211 $ 172,601 $ 186,177 $ 195,073 $ 253,617 $ 264,727 $ 279,272 $ 279,679 $ 285,912 $ Restricted 21,320 19,159 17,588 20,658 20,176 19,033 19,438 22,389 22,269 21,238 Unrestricted 60,225 63,842 65,725 61,032 58,850 74,370 71,542 57,367 69,472 76,664 Total business-type activities net position 237,620 $ 245,212 $ 255,914 $ 267,867 $ 274,099 $ 347,020 $ 355,707 $ 359,028 $ 371,420 $ 383,814 $ Primary government Net investment in capital assets 260,908 $ 262,952 $ 284,304 $ 310,112 $ 331,071 $ 387,606 $ 403,209 $ 433,001 $ 443,041 $ 469,563 $ Restricted 45,061 45,025 43,176 51,837 55,197 41,900 59,396 58,836 64,423 68,914 Unrestricted 61,344 82,500 98,203 97,894 97,756 125,114 111,300 72,887 87,874 92,928 Total primary government net position 367,313 $ 390,477 $ 425,683 $ 459,843 $ 484,024 $ 554,620 $ 573,905 $ 564,724 $ 595,338 $ 631,405 $ 1 The City of Iowa City reclassified the Mass Transportation Fund from the General fund to an Enterprise Fund effective the fiscal year ending June 30, 2013. 2 The City of Iowa City reclassified the Cable Fund from an Enterprise Fund to the General Fund effective July 1, 2015. CITY OF IOWA CITY, IOWA NET POSITION BY COMPONENT Last Ten Fiscal Years (Accrual basis of accounting) (amounts expressed in thousands) 119 2008 2009 2010 2011 2012 20131 2014 2015 20162 2017 Expenses Governmental activities: Public safety 20,504 $ 20,730 $ 19,955 $ 18,867 $ 21,186$ 20,989 $ 22,721 $ 21,193 $ 22,029 $ 24,002$ Public works 13,727 15,177 16,806 19,145 17,556 10,240 8,258 11,037 10,839 12,032 Culture and recreation 13,460 9,574 12,238 10,811 13,107 14,481 16,586 14,049 14,422 15,525 Community and economic development 1,850 8,726 16,913 16,501 16,305 10,596 10,059 7,093 6,786 8,253 General government 7,433 7,600 7,549 7,356 7,591 7,513 7,687 7,752 6,240 6,124 Debt service 3,517 3,264 2,970 2,841 2,400 2,237 1,797 1,517 1,287 1,481 Total governmental activities expenses 60,491 65,071 76,431 75,521 78,145 66,056 67,108 62,641 61,603 67,417 Business-type activities: Wastewater 11,757 11,925 11,274 10,971 11,069 10,464 21,139 12,131 11,866 11,233 Water 8,804 9,185 8,309 8,523 8,781 9,074 8,723 8,403 8,149 8,921 Sanitation 6,868 7,296 7,705 7,461 8,315 7,279 8,402 8,114 8,735 9,123 Housing authority 7,374 7,238 7,838 7,448 7,911 7,658 7,703 7,873 8,378 8,798 Parking 3,913 4,489 4,536 4,135 4,167 4,579 4,093 4,678 4,460 4,620 Airport 560 693 724 1,049 1,127 1,086 1,209 1,612 1,597 1,402 Stormwater 1,072 1,223 1,187 1,418 1,304 1,318 1,314 2,091 1,989 2,432 Cable television 598 633 645 638 689 692 781 704 - - Transit -- - - - 6,998 7,795 7,379 7,486 7,263 Total business-type activities expenses 40,946 42,682 42,218 41,643 43,363 49,148 61,159 52,985 52,660 53,792 Total primary government expenses 101,437 $ 107,753 $ 118,649 $ 117,164 $ 121,508$ 115,204 $ 128,267 $ 115,626 $ 114,263$ 121,209 $ Program Revenues Governmental activities: Charges for services Public safety 3,019 $ 2,968 $ 2,980 $ 3,279 $ 3,401 $ 4,098$ 3,626 $ 3,926 $ 4,813$ 5,286 $ Public works 1,047 1,392 1,061 1,117 1,112 52 61 388 628 724 Culture and recreation 680 715 773 872 825 775 808 801 823 842 Community and economic development -- - - - - 45 50 1,044 36 General government 1,633 1,626 2,574 2,931 2,817 2,763 3,030 2,975 1,252 1,524 Operating grants and contributions 3,611 8,185 15,554 13,517 8,682 4,731 3,231 8,701 9,941 10,828 Capital grants and contributions 1,747 3,773 8,291 6,048 6,078 6,876 5,580 11,556 3,999 9,952 Total governmental activities program revenues 11,737 18,659 31,233 27,764 22,915 19,295 16,381 28,397 22,500 29,192 Business-type activities: Charges for services: Wastewater 12,318 12,557 12,637 12,836 12,670 12,832 12,559 12,189 12,266 12,277 Water 8,195 8,107 7,957 8,054 8,419 8,583 8,443 8,527 9,134 9,275 Sanitation 7,853 8,286 8,096 8,259 8,115 8,181 8,467 9,015 9,215 9,927 Housing authority 149 181 180 208 207 205 213 237 300 321 Parking 4,673 5,438 5,377 5,234 4,743 5,043 5,294 5,502 5,438 5,453 Airport 258 248 289 293 306 314 328 349 333 345 Stormwater 616 622 617 641 811 974 1,093 1,147 1,168 1,544 Cable Television 814 788 790 809 824 816 773 750 - - Transit1 -- - - - 2,117 2,185 2,289 2,099 2,089 (continued) CITY OF IOWA CITY, IOWA CHANGES IN NET POSITION Last Ten Fiscal Years (Accrual basis of accounting) (amounts expressed in thousands) 120 2008 2009 2010 2011 2012 20131 2014 2015 20162 2017 Capital grants and contributions: Wastewater 577 266 2,115 2,394 3,223 30,181 7,105 1,370 3,415 2,226 Capital grants and contributions: Water 314 132 572 973 977 494 539 581 254 869 Capital grants and contributions: Sanitation -- 6 - 2 - - - - - Capital grants and contributions: Airport 1,580 3,239 3,311 358 1,576 2,452 5,214 137 260 58 Capital grants and contributions: Stormwater 302 68 541 140 436 226 711 792 370 1,251 Capital grants and contributions: Housing authority 17 - 25 11 - - - - - - Capital grants and contributions: Parking 8 - -269 4 - - - - - Capital grants and contributions: Transit -- - - - 898 243 - 308 395 Operating grants and contributions: Housing authority 6,281 6,668 7,765 7,438 6,782 6,968 6,721 7,628 8,318 8,532 Operating grants and contributions: Water -15 6 - - 442 6 2 - - Operating grants and contributions: Airport -2 - - - 11 56 232 128 69 Operating grants and contributions: Sanitation -607 6 10 - 23 27 25 3 - Operating grants and contributions: Wastewater -1 - - - -62 21 - - Operating grants and contributions: Stormwater --- - - 13 13 279 95 - Operating grants and contributions: Transit --- - - 1,767 2,118 2,082 2,095 2,235 Total business-type activities program revenues 43,955 47,225 50,290 47,927 49,095 82,540 62,170 53,154 55,199 56,866 Total primary government revenues 55,692 $ 65,884 $ 81,523 $ 75,691$ 72,010 $ 101,835$ 78,551 $ 81,551 $ 77,699 $ 86,058$ Net (Expense) / Revenues Governmental activities (48,754)$ (46,412)$ (45,198)$ (47,757)$ (55,230)$ (46,761)$ (50,727)$ (34,244)$ (39,103)$ (38,225)$ Business-type activities 3,009 4,543 8,072 6,284 5,732 33,392 1,011 169 2,539 3,074 Total primary government net expense (45,745)$ (41,869)$ (37,126)$ (41,473)$ (49,498)$ (13,369)$ (49,716)$ (34,075)$ (36,564)$ (35,151)$ General Revenues and Other Changes in Net Position Governmental activities: General revenues: Property taxes 43,400 $ 47,085 $ 49,467 $ 48,011$ 50,516 $ 51,017$ 50,551 $ 52,205 $ 53,114 $ 57,649 $ Road use tax3 5,432 5,254 5,525 6,068 6,394 6,589 6,745 - - - Local Sales Option tax -- 8,141 8,911 8,644 8,858 466 - - - Other taxes 1,435 1,489 1,535 2,464 2,491 2,609 2,778 2,810 2,717 2,802 Grants and contributions not restricted to specific purposes -- - - - - - 1,048 2,080 1,583 Earnings on investments 3,932 3,057 1,766 1,539 1,823 841 973 1,188 1,045 1,397 Miscellaneous 3,516 4,894 3,893 6,230 4,228 4,390 4,353 5,518 4,464 3,369 Gain on sale of assets (7)- - 761 2,950 1,312 1,651 135 218 2,151 Transfers 488 205 (625) (4,020) (3,867) (10,485) (6,192) (10,057) (6,395) (7,053) Reassignments -- - -- - - - 82 - Total governmental activities 58,196 61,984 69,702 69,964 73,179 65,131 61,325 52,847 57,325 61,898 Business-type activities: General revenues: Earnings on investments 3,279 2,577 1,311 954 813 671 494 707 715 938 Gain on sale of assets 1,260 360 230 314 336 293 725 856 2,463 69 Miscellaneous 454 317 464 381 484 918 265 374 362 1,260 Transfers (488)(205) 625 4,020 3,867 10,485 6,192 10,057 6,395 7,053 Reassignments --- - - - - - (82) - Special items --- - - - - (574) - - Extraordinary items --- - (5,000) - - - -- Total business-type activities 4,505 3,049 2,630 5,669 500 12,367 7,676 11,420 9,853 9,320 Total primary government 62,701 $ 65,033 $ 72,332 $ 75,633 $ 73,679$ 77,498 $ 69,001 $ 64,267 $ 67,178 $ 71,218 $ Change in Net Position Governmental activities 9,442 $ 15,572 $ 24,504 $ 22,207$ 17,949 $ 18,370 $ 10,598$ 18,603 $ 18,222 $ 23,673 $ Business-type activities 7,514 7,592 10,702 11,953 6,232 45,759 8,687 11,589 12,392 12,394 Total primary government 16,956 $ 23,164 $ 35,206 $ 34,160$ 24,181 $ 64,129 $ 19,285$ 30,192 $ 30,614 $ 36,067$ 1 The City of Iowa City reclassified the Mass Transportation Fund from the General Fund to an Enterprise Fund effective the fiscal year ending June 30, 2013. 2 The City of Iowa City reclassified the Cable Fund from an Enterprise Fund to the General Fund effective July 1, 2015. 3 The City of Iowa City reclassified Road Use Tax from General Revenues to Operating Grants effective for the fiscal year ending June 30, 2015. CITY OF IOWA CITY, IOWA CHANGES IN NET POSITION (continued) Last Ten Fiscal Years (Accrual basis of accounting) (amounts expressed in thousands) 121 2008 2009 2010 20111 2012 20132 2014 2015 20163 2017 General Fund Nonspendable -$ -$ -$ 331$ 314$ 69$ 69$ 69$ 69$ 788$ Restricted - - - 16,268 23,779 25,689 26,533 25,291 18,975 9,974 Committed - - - - - - - - 4,699 5,199 Assigned - - - 3,542 5,191 1,744 3,400 - 1,143 1,342 Reserved 446 555 406 - - - - 4,483 - - Unassigned - - - 15,931 14,273 17,113 17,907 19,286 23,366 24,793 Unreserved 14,488 15,362 26,101 - - - - - - - Total general fund 14,934$ 15,917$ 26,507$ 36,072$ 43,557$ 44,615$ 47,909$ 49,129$ 48,252$ 42,096$ All other Governmental Funds Nonspendable -$ -$ -$ -$ -$ -$ -$ -$ -$ 344$ Restricted - - - 34,889 34,853 28,108 31,285 27,897 38,266 63,941 Reserved 3,107 5,339 3,903 - - - - - - - Designated for long-term debt 8,691 11,759 13,952 - - - - - - - Unassigned - - - (1,741) (366) (5,844) (9) - - - Unreserved, reported in: Special revenue funds 2,571 (1,852) (1,674) - - - - - - - Capital projects funds 11,118 10,960 8,043 - - - - - - - Total all other governmental funds 25,487$ 26,206$ 24,224$ 33,148$ 34,487$ 22,264$ 31,276$ 27,897$ 38,266$ 64,285$ 1 The City of Iowa City implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions , issued March 2009, effective the fiscal year ending June 30, 2011. This Statement establishes new standards for fund balance classifications based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. 2 The City of Iowa City reclassified the Mass Transportation Fund from the General fund to an Enterprise Fund effective the fiscal year ending June 30, 2013. 3 The City of Iowa City reclassified the Cable Fund from an Enterprise Fund to the General Fund effective July 1, 2015. CITY OF IOWA CITY, IOWA FUND BALANCES, GOVERNMENTAL FUNDS Last Ten Fiscal Years (Modified accrual basis of accounting) (amounts expressed in thousands) 122 2008 2009 2010 2011 2012 20131 2014 2015 20162 2017 Revenues: Property taxes and assessments 44,835$ 48,572$ 59,143$ 59,387$ 61,649$ 62,483$ 53,797$ 55,014$ 55,831$ 60,452$ Licenses and permits 1,270 1,284 1,211 1,412 1,307 1,784 1,660 1,806 3,056 3,521 Intergovernmental 12,764 19,521 31,404 29,870 21,952 19,941 17,636 21,086 20,230 24,140 Charges for services 2,228 2,498 2,433 2,515 2,614 1,800 1,819 2,204 3,357 2,355 Fines and forfeits - - - - - - - - 760 750 Use of money and property 3,206 2,645 1,599 1,479 1,768 782 909 1,080 946 1,235 Miscellaneous 3,977 5,302 4,784 7,749 5,750 6,325 6,040 7,045 2,913 2,101 Total governmental activities revenues 68,280$ 79,822$ 100,574$ 102,412$ 95,040$ 93,115$ 81,861$ 88,235$ 87,093$ 94,554$ Expenditures Current Public safety 18,705$ 18,752$ 19,108$ 18,717$ 20,091$ 20,648$ 21,370$ 21,996$ 21,701$ 22,513$ Public works 12,108 12,405 13,311 14,766 15,462 8,503 8,432 12,071 9,466 9,186 Culture and recreation 10,703 10,849 11,266 12,498 13,075 13,000 13,087 11,821 12,257 13,341 Community and economic development 4,437 8,037 10,520 8,878 8,037 8,219 8,196 5,711 5,346 7,695 General government 7,207 7,300 7,191 7,695 7,553 7,286 7,184 7,608 6,007 5,882 Debt service Principal 7,323 8,418 9,354 10,386 13,294 16,465 13,560 12,564 13,230 13,305 Interest 3,556 3,364 3,064 2,889 2,543 2,339 1,903 1,669 1,475 1,597 Capital projects 11,811 17,096 17,690 21,873 16,006 17,861 14,528 14,762 14,848 18,405 Total expenditures 75,850$ 86,221$ 91,504$ 97,702$ 96,061$ 94,321$ 88,260$ 88,202$ 84,330$ 91,924$ Excess (deficiency) of revenues over (under) expenditures (7,570)$ (6,399)$ 9,070$ 4,710$ (1,021)$ (1,206)$ (6,399)$ 33$ 2,763$ 2,630$ Other financing sources (uses): Issuance of long-term debt 9,150$ 30,035$ -$ 16,165$ 9,690$ 2,655$ 19,730$ 7,785$ 9,405$ 22,570$ Issuance of refunding debt ---10,930 - - - - - - Sale of capital assets 111 554 222 845 3,619 1,369 1,684 165 252 2,292 Insurance Recoveries - - 20 594 53 - - - - - Premium (discount) on issuance of bonds 16 552 -394 165 (42) 385 199 441 120 Payment of refunded bonds -(23,140) -(11,085) - - - - - - Transfers in 25,413 16,486 16,742 18,658 19,499 25,198 13,040 13,089 25,133 34,675 Transfers out (23,328) (16,386) (17,446) (22,722) (23,181) (35,493) (16,134) (23,430) (28,502) (47,033) Total other financing sources (uses)11,362$ 8,101$ (462)$ 13,779$ 9,845$ (6,313)$ 18,705$ (2,192)$ 6,729$ 12,624$ Net change in fund balances 3,792$ 1,702$ 8,608$ 18,489$ 8,824$ (7,519)$ 12,306$ (2,159)$ 9,492$ 15,254$ Debt service as a percentage of noncapital expenditures 16.6%17.0%15.3%16.2%18.6%24.0%20.7%19.8%21.2%19.9% 1 The City of Iowa City reclassified the Mass Transportation Fund from the General fund to an Enterprise Fund effective the fiscal year ending June 30, 2013. 2 The City of Iowa City reclassified the Cable Fund from an Enterprise Fund to the General Fund effective July 1, 2015. CITY OF IOWA CITY, IOWA CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) (amounts expressed in thousands) 123 Fiscal Local Option Utility Year Property Tax Road Use Tax Hotel/Motel Tax Sales Tax1 Franchise Fee 2 Total 2008 44,101 5,432 734 - - 50,267 2009 47,861 5,254 713 - - 53,828 2010 50,256 5,525 699 8,141 47 64,668 2011 48,831 6,068 776 8,912 868 65,455 2012 51,374 6,394 811 8,644 822 68,045 2013 51,836 6,589 872 8,858 918 69,073 2014 51,331 6,745 967 466 1,031 60,540 2015 53,056 7,231 1,057 - 902 62,246 2016 53,878 8,320 1,079 - 874 64,151 2017 58,375 8,672 1,137 - 939 69,123 1 1% Local Option Sales Tax went into effect 7/1/09 and was effective through 6/30/13. 2 1% Utility Franchise Fee went into effect 4/1/10. CITY OF IOWA CITY, IOWA GENERAL GOVERNMENT TAX REVENUES BY SOURCE Last Ten Fiscal Years (Modified accrual basis of accounting) (amounts expressed in thousands) 124 Co l l e c t i o n Co m m e r c i a l , I n d u s t r i a l In c r e m e n t a l V a l u e G a s & Residential Taxable Value Total Ye a r E n d e d Ag r i c u l t u r a l & U t i l i t i e s ( e x c l u d i n g M i l i t a r y Ne t (D e b t S e r v i c e E l e c t r i c U t i l i t i e s To t a l R o l l b a c k a s a P e r c e n t a g e Direct Ju n e 3 0 Re s i d e n t i a l (T a x e d a t A g R a t e ) Ga s & E l e c t r i c ) Ex e m p t i o n s Va l u a t i o n Le v y O n l y ) (e x c i s e t a x ) Va l u e Percentage of Assessed Value Rate 20 0 8 A s s e s s e d 2 , 7 2 2 , 7 5 4 1 , 5 3 4 1 , 0 5 8 , 5 8 0 3 , 4 2 4 3 , 7 7 9 , 4 4 4 $ 9 4 , 8 6 4 5 4 , 0 5 3 3 , 9 2 8 , 3 6 1 $ Ta x a b l e 1 , 2 3 4 , 8 7 2 1 , 5 3 4 1 , 0 5 8 , 5 8 0 3 , 4 2 4 2 , 2 9 1 , 5 6 2 $ 9 4 , 8 6 4 4 1 , 5 4 2 2 , 4 2 7 , 9 6 8 $ 4 5 . 5 6 0 61.806 17.297 20 0 9 A s s e s s e d 2 , 9 9 1 , 7 0 2 1 , 5 6 5 1 , 1 0 8 , 1 2 3 3 , 3 9 6 4 , 0 9 7 , 9 9 4 $ 1 1 1 , 5 4 0 5 4 , 0 8 1 4 , 2 6 3 , 6 1 5 $ Ta x a b l e 1 , 3 0 7 , 5 1 1 1 , 4 1 0 1 , 1 0 5 , 1 0 9 3 , 3 9 6 2 , 4 1 0 , 6 3 4 $ 1 1 1 , 5 4 0 4 4 , 5 9 7 2 , 5 6 6 , 7 7 1 $ 4 4 . 0 8 0 60.202 17.717 20 1 0 A s s e s s e d 3 , 0 6 5 , 2 7 9 1 , 4 9 9 1 , 1 3 3 , 8 1 8 3 , 3 2 4 4 , 1 9 7 , 2 7 2 $ 1 1 7 , 8 1 3 6 1 , 0 6 6 4 , 3 7 6 , 1 5 1 $ Ta x a b l e 1 , 3 8 4 , 0 8 8 1 , 4 0 7 1 , 1 3 3 , 8 1 8 3 , 3 2 4 2 , 5 1 5 , 9 8 9 $ 1 1 7 , 8 1 3 4 5 , 1 5 7 2 , 6 7 8 , 9 5 9 $ 4 5 . 5 8 9 61.217 17.853 20 1 1 A s s e s s e d 3 , 1 2 2 , 8 7 5 2 , 3 1 5 1 , 2 2 3 , 3 0 4 3 , 2 3 9 4 , 3 4 5 , 2 5 5 $ 2 5 , 4 0 9 7 9 , 1 9 6 4 , 4 4 9 , 8 6 0 $ Ta x a b l e 1 , 4 6 4 , 6 4 4 1 , 5 3 4 1 , 2 2 3 , 3 0 4 3 , 2 3 9 2 , 6 8 6 , 2 4 3 $ 2 5 , 4 0 9 4 6 , 3 3 3 2 , 7 5 7 , 9 8 5 $ 4 6 . 9 0 9 61.979 17.757 20 1 2 A s s e s s e d 3 , 1 8 2 , 6 3 6 2 , 2 6 4 1 , 2 3 1 , 7 5 6 3 , 1 6 3 4 , 4 1 3 , 4 9 3 $ 2 5 , 4 0 9 8 1 , 2 4 0 4 , 5 2 0 , 1 4 2 $ Ta x a b l e 1 , 5 4 4 , 2 6 1 1 , 5 6 2 1 , 2 3 1 , 7 5 6 3 , 1 6 3 2 , 7 7 4 , 4 1 6 $ 2 5 , 4 0 9 4 8 , 3 3 8 2 , 8 4 8 , 1 6 3 $ 4 8 . 5 3 0 63.010 17.842 20 1 3 A s s e s s e d 3 , 2 8 4 , 2 4 9 2, 5 1 6 1, 2 3 6 , 6 0 9 3,0 9 7 4, 5 2 0 , 2 7 7 $ 11 , 7 1 2 83 , 5 3 8 4, 6 1 5 , 5 2 7 $ Ta x a b l e 1 , 6 6 6 , 0 3 6 1, 4 4 8 1, 2 3 6 , 6 0 9 3,0 9 7 2, 9 0 0 , 9 9 6 $ 11 , 7 1 2 47 , 4 0 4 2, 9 6 0 , 1 1 2 $ 50.752 64.134 17.269 20 1 4 A ss e s s e d 3 , 3 6 7 , 0 5 2 2, 6 5 6 1, 2 0 0 , 4 5 7 3,0 6 0 4, 5 6 7 , 1 0 5 $ 14 , 1 1 4 87 , 1 0 0 4, 6 6 8 , 3 1 9 $ Ta x a b l e 1 , 7 7 6 , 0 9 6 1, 5 9 2 1, 2 0 0 , 4 5 7 3,0 6 0 2, 9 7 5 , 0 8 5 $ 14 , 1 1 4 46 , 8 1 3 3, 0 3 6 , 0 1 2 $ 52.817 65.034 16.805 20 1 5 A s s e s s e d 3 , 4 8 8 , 1 1 3 3, 6 8 1 1, 2 3 8 , 0 1 8 2,9 3 9 4, 7 2 6 , 8 7 3 $ 21 , 1 3 2 78 , 6 4 3 4, 8 2 6 , 6 4 8 $ Ta x a b l e 1 , 8 9 4 , 0 8 0 1, 5 9 8 1, 1 7 5 , 9 2 1 2,9 3 9 3, 0 6 8 , 6 6 0 $ 21 , 1 3 2 47 , 0 0 5 3, 1 3 6 , 7 9 7 $ 54.400 64.989 16.705 20 1 6 A s s e s s e d 3 , 6 0 3 , 7 4 4 3, 5 5 4 1, 2 1 6 , 0 5 4 2,8 2 8 4, 8 2 0 , 5 2 4 $ 42 , 3 0 7 87 , 7 2 8 4, 9 5 0 , 5 5 9 $ Ta x a b l e 2 , 0 0 8 , 4 9 3 1, 5 8 8 1, 0 9 5 , 2 7 2 2,8 2 8 3, 1 0 2 , 5 2 5 $ 33 , 3 3 1 46 , 7 8 5 3, 1 8 2 , 6 4 1 $ 55.734 64.289 16.651 20 1 7 A s s e s s e d 3 , 8 8 2 , 7 5 7 3, 7 2 1 1, 3 0 0 , 8 4 0 2,7 2 8 5, 1 8 4 , 5 9 0 $ 72 , 6 5 1 92 , 9 8 7 5, 3 5 0 , 2 2 8 $ Ta x a b l e 2 , 1 5 5 , 0 3 3 1, 7 0 7 1, 1 4 9 , 7 3 6 2,7 2 8 3, 3 0 3 , 7 4 8 $ 72 , 6 5 1 44 , 9 8 7 3, 4 2 1 , 3 8 6 $ 55.626 63.948 16.583 So u r c e s : Io w a D e p a r t m e n t o f M a n a g e m e n t No t e s : Pr o p e r t y i s r e a s s e s s e d i n t he o d d n u m b e r e d y e a r s t o m a k e a d j u s t me n t s t o a l l p r o p e r t y v a l u e s , a c c o r d i n g t o c u r r e n t m a r k e t v a l u e s . A s p e r t h e C o d e o f I o w a , a l l r e a l p r o p e r t y s u b j e c t t o t a x a t i o n sh a l l b e v a l u e d a t i t s a c t u a l v a l u e a n d , e x c e p t a s o t h e r w i s e p r o v i d e d , s h a l l b e r e a s s e s s e d a t 1 0 0 % o f i t s a c t u a l v a l u e . CI T Y O F I O W A C I T Y , I O W A AS S E S S E D A N D T A X A B L E V A L U E O F P R O P E R T Y La s t T e n F i s c a l Y e a r s (a m o u n t s e x p r e s s e d i n t h o u s a n d s ) 12 5 (per $1,000 assessed valuation) Total Iowa City Kirkwood Direct & Collection Operating Debt Service Total City Johnson School Community State of Overlapping Year Millage Millage Millage County1 District College Iowa Rates 2008 13.511 3.786 17.297 6.823 13.852 0.855 0.004 38.831 2009 13.414 4.303 17.717 7.803 14.192 0.852 0.004 40.568 2010 13.634 4.219 17.853 7.708 14.191 0.840 0.003 40.595 2011 13.319 4.438 17.757 7.540 14.690 0.926 0.003 40.916 2012 13.193 4.649 17.842 7.320 14.591 0.999 0.003 40.755 2013 12.826 4.443 17.269 7.075 14.073 1.079 0.003 39.499 2014 12.775 4.030 16.805 7.077 13.688 1.065 0.003 38.638 2015 12.575 4.130 16.705 7.062 13.700 1.058 0.003 38.528 2016 12.822 3.829 16.651 7.228 13.868 1.061 0.003 38.811 2017 13.005 3.578 16.583 7.093 13.989 1.080 0.003 38.748 Source: "Tax Levies for Johnson County, Iowa," compiled by the Johnson County Auditor. Note: 1Includes Johnson County, City of Iowa City Assessor, and Agricultural Extension levies. Tax rates are per $1,000 of assessed value. Overlapping Rates City of Iowa City CITY OF IOWA CITY, IOWA PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS Last Ten Fiscal Years 126 Collection Total Tax Current Tax Delinquent Tax Total Tax Year Levied Collections Collections1 Collections 2008 39,973 39,768 99.5 70 39,838 99.7 2009 43,168 43,118 99.9 18 43,136 99.9 2010 45,393 45,318 99.8 17 45,335 99.9 2011 47,789 47,826 100.1 8 47,834 100.1 2012 49,595 49,543 99.9 1 49,544 99.9 2013 50,407 50,139 99.5 3 50,142 99.5 2014 50,307 49,835 99.1 1 49,836 99.1 2015 51,609 51,292 99.4 3 51,295 99.4 2016 52,034 52,074 100.1 0 52,074 100.1 2017 55,330 55,331 100.0 0 55,331 100.0 Source: Certificate of City Taxes and Johnson County Treasurer's Office Note: This schedule is presented on a cash basis of accounting. Taxes are collected by the Johnson County Treasurer and submitted to the City in the following month. Because of the month delay, some years will show Current Tax Collections in excess of the Total Tax Levied. 1 Delinquent tax collection is presented by collection year, rather than levy year, because information is not available from Johnson County Treasurer by levy year. Percent of Levy Collected Total as a Percent of Levy CITY OF IOWA CITY, IOWA PROPERTY TAX BUDGETS AND COLLECTIONS Last Ten Fiscal Years (Cash basis of accounting) (amounts expressed in thousands) 127 % of Total % of Total Taxable Taxable Taxable Taxable Ten largest taxpayers 1 Type of Business Valuation Rank Valuation Valuation Rank Valuation ACT Inc (Am College Testing Prgrm)Educational Testing Service 34,535 $ 2 1.42 % 47,791 $ 1 1.40 % Mid-American Energy Company Public Gas and Electric Utility 44,496 1 1.83 31,555 2 0.92 Ann Gerdin Trust (formerly Russell Gerdin) Warehousing - -N/A 22,836 3 0.67 Midwestone Bank Finanacial - -N/A 21,066 4 0.62 Dealer Properties IC LLC (Billion Auto) Car Dealerships - -N/A 18,889 5 0.55 Proctor & Gamble LLC Manufacturing Company 11,985 10 0.49 16,459 6 0.48 BBCS Hawkeye Housing LLC Real Estate Mangment - -N/A 15,328 7 0.45 Vesper Iowa City LLC Real Estate Developer - -N/A 14,358 8 0.42 Alpha Inc. Industrial - -N/A 13,949 9 0.41 National Computer Systems (Pearson)Information Services 16,227 5 0.67 12,815 10 0.37 Jame A and Lorretta Clark Apartments 28,506 3 1.17 - -N/A Kobrin Deve Co Inc (Southgate Dev Co) Real Estate Developer 19,267 4 0.79 - -N/A Plaza Towers LLC Condo/Hotel/Commercial space 15,300 6 0.63 - -N/A MEHSM LC (Sycamore Mall)Shopping Mall 15,011 7 0.62 - -N/A Russell Gerdin Trucking Company 14,611 8 0.60 - -N/A United Natural Foods Wholesale Distribution Company 13,059 9 0.54 - - N/A Total 212,997 $ 8.76 % 215,046 $ 6.29 % Sources: 1City of Iowa City Assessor's Office - 2016 Annual Report CITY OF IOWA CITY, IOWA PRINCIPAL TAXPAYERS Current Year and Nine Years Ago (amounts expressed in thousands) 20172008 128 129 ~:~ ---------------- Customer Name Charges Rank Percentage Charges Rank Percentage Proctor & Gamble 630,949$ 1 7.91 %768,168$ 1 8.39 % Veterans Administration Medical Center 98,229 2 1.23 115,589 2 1.26 Mark IV Apts - -N/A 69,603 3 0.76 Campus Apartments 65,318 5 0.82 65,672 4 0.72 Mercy Hospital 72,710 3 0.91 65,422 5 0.71 University of Iowa (Mayflower Apartments)42,709 8 0.54 43,148 6 0.47 Oaknoll Retirement Residence - -N/A 39,154 7 0.43 Seville Apts - -N/A 37,563 8 0.41 Iowa City School District - -N/A 35,999 9 0.39 RBD Iowa City LLC DBA Sheraton - -N/A 33,165 10 0.36 Dolphin Lake Point (Rus Properties Mngmt)67,054 4 0.84 - -N/A Robert's Dairy 63,503 6 0.80 - -N/A ACT 50,923 7 0.64 - -N/A Lear Corp 38,531 9 0.48 - -N/A Sheraton Inn/Holiday Inn 34,970 10 0.44 - -N/A 1,164,896$ 14.61 %1,273,483$ 13.90 % Total Water System Charges 7,976,536$ 9,156,005$ Sources: City of Iowa City Revenue Division 20172008 CITY OF IOWA CITY, IOWA PRINCIPAL WATER SYSTEM CUSTOMERS Current Year and Nine Years Ago 130 Fiscal Water Sales Water System Year Cubic Feet Sold Charges 2008 249,361,929 7,976,536 2009 234,804,167 7,497,903 2010 234,342,825 7,568,378 2011 236,838,370 7,661,898 2012 246,618,257 7,953,738 2013 254,616,773 8,194,467 2014 239,790,719 7,778,364 20151 240,423,612 8,161,522 2016 255,524,943 8,758,683 2017 267,511,531 9,156,005 Sources: City of Iowa City Revenue Department Notes: 1Beginning in March 2015, Water Sales by Cubic Feet Sold also includes unbilled usage. CITY OF IOWA CITY, IOWA SALES HISTORY AND TOTAL WATER CHARGES Last Ten Fiscal Years 131 Customer Name Charges Rank Percentage Charges Rank Percentage University of Iowa 2,017,440$ 1 16.51 %1,860,993$ 1 15.00 % Proctor & Gamble 1,131,315 2 9.26 1,086,165 2 8.76 Iowa City Landfill 106,445 7 0.87 159,650 3 1.29 Veterans Administration Medical Center 110,306 5 0.90 135,049 4 1.09 Mercy Hospital 118,333 4 0.97 104,653 5 0.84 Mark IV Apts 66,229 10 0.54 91,500 6 0.74 Campus Apartments 85,198 8 0.70 76,669 7 0.62 University of Iowa Mayflower 71,611 9 0.59 68,568 8 0.55 Oaknoll Retirement Residence - -N/A 55,788 9 0.45 RBD Iowa City LLC DBA Sheraton - -N/A 53,955 10 0.43 Dolphin Lake Point (Rus Properties Mngmt)110,129 6 0.90 - -N/A Robert's Dairy 160,445 3 1.31 - -N/A 3,977,451$ 32.55 %3,692,990$ 29.77 % Total Sewer System Charges 12,221,769$ 12,404,360$ Sources: City of Iowa City Revenue Department CITY OF IOWA CITY, IOWA PRINCIPAL SEWER SYSTEM CUSTOMERS Current Year and Nine Years Ago 20172008 132 Fiscal Sewer Sales Sewer System Year Cubic Feet Sold Charges 2008 285,492,596 12,221,769 2009 276,455,246 12,499,949 2010 265,375,857 12,541,905 2011 280,303,237 12,748,695 2012 282,134,840 12,784,321 2013 285,472,392 12,883,641 2014 269,494,125 12,382,031 20151 266,830,947 12,278,153 2016 270,547,701 12,022,203 2017 277,712,785 12,404,360 Sources: City of Iowa City Revenue Department Notes: 1Beginning in March 2015, Sewer Sales by Cubic Feet Sold also includes unbilled usage. CITY OF IOWA CITY, IOWA SALES HISTORY AND TOTAL SEWER CHARGES Last Ten Fiscal Years 133 General Capital General Total Percentage Fiscal Obligation Revenue Loan Obligation Revenue Primary of Personal Per Year Bonds1 Bonds1 Note Bonds1 Bonds1 Government Income2 Capita2 2008 82,268,532 - 211,000 4,885,710 94,549,386 181,914,628 3.04 2,682 2009 81,222,533 - 211,000 4,317,787 87,875,855 173,627,175 2.92 2,513 2010 71,791,737 - 211,000 3,731,167 79,281,888 155,015,792 2.57 2,284 2011 77,743,957 - 211,000 3,130,849 75,857,306 156,943,112 2.38 2,276 2012 74,225,654 - 211,000 1,483,473 69,059,307 144,979,434 2.08 2,103 2013 57,688,803 2,614,644 211,000 1,182,315 62,764,738 124,461,500 1.72 1,775 2014 64,132,510 2,616,768 211,000 886,157 57,568,517 125,414,952 1.65 1,752 2015 59,421,203 2,618,892 211,000 590,000 45,566,903 108,407,998 1.43 1,477 2016 55,998,392 2,491,016 211,000 295,000 39,951,661 98,947,069 1.26 1,333 2017 52,571,254 15,168,140 211,000 - 34,670,297 102,620,691 1.25 1,379 Notes: Details regarding the city's outstanding debt can be found in the notes to the financial statements. 1 Bonds reported net of related premiums and discounts. 2 Population and personal income information can be found on page 144. Governmental Activities Business-Type Activities CITY OF IOWA CITY, IOWA RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years 134 Property Debt Debt Net General Ratio of Net Net Bonded Fiscal Assessed Payable from Payable from Gross Debt Service Obligation Bonded Debt to Debt Year Value2 Governmental Proprietary Bonded Debt Fund Balance Bonded Debt Assessed Value Per Capita3 2008 3,928,361 82,268 4,886 87,154 8,691 78,463 19.97 : 1000 1,157 2009 4,263,615 81,222 4,318 85,540 11,759 73,781 17.30 : 1000 1,068 2010 4,376,151 71,792 3,731 75,523 13,952 61,571 14.07 : 1000 907 2011 4,449,860 77,744 3,131 80,875 13,151 67,724 15.22 : 1000 982 2012 4,520,142 74,226 1,483 75,709 11,009 64,700 14.31 : 1000 938 2013 4,615,527 57,689 1,182 58,871 6,527 52,344 11.34 : 1000 746 2014 4,668,319 64,133 886 65,019 6,872 58,147 12.46 : 1000 812 2015 4,826,648 59,421 590 60,011 7,052 52,959 10.97 : 1000 721 2016 4,950,559 55,998 295 56,293 6,573 49,720 10.04 : 1000 670 2017 5,350,228 52,571 - 52,571 7,756 44,815 8.38 : 1000 602 Notes: 1 General Obligation bonds, net of related premiums and discounts. 2City of Iowa City Budget Book. 3 Population data can be found on page 144. CITY OF IOWA CITY, IOWA RATIOS OF GENERAL OBLIGATION BONDED DEBT1 TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA Last Ten Fiscal Years (amounts expressed in thousands, except per capita) 135 CITY OF IOWA CITY, IOWA RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL BONDED DEBT TO TOTAL GENERAL GOVERNMENTAL EXPENDITURES1 Last Ten Fiscal Years (amounts expressed in thousands) Total General Fiscal Year Governmental Ratio of Debt Ended Total Expenditures Service to General June 30 Principal2 Interest2 Debt Service and Transfers Expenditures 2008 7,323 3,556 10,879 99,178 .11 : 1.00 2009 8,418 3,364 11,782 102,607 .11 : 1.00 2010 9,354 3,064 12,418 108,950 .11 : 1.00 2011 10,386 2,889 13,275 120,424 .11 : 1.00 2012 13,294 2,543 15,837 119,242 .13 : 1.00 2013 16,465 2,339 18,804 129,814 .14 : 1.00 2014 13,560 1,903 15,463 104,394 .15 : 1.00 2015 12,564 1,669 14,233 111,632 .13 : 1.00 2016 13,230 1,475 14,705 112,832 .13 : 1.00 2017 13,305 1,597 14,902 138,957 .11 : 1.00 Notes: 1 General Fund, Special Revenue Funds, Debt Service Fund and Capital Projects Funds. 2 Beginning in FY13, Taxable Urban Renewal Revenue Bonds are also included. 136 CITY OF IOWA CITY, IOWA COMPUTATION OF DIRECT AND OVERLAPPING DEBT June 30, 2017 (amounts expressed in thousands, except per capita) Total General Percent Amount Long-Term Applicable Applicable Name of Direct Debt to the City of to the City of Debt/Actual Governmental Unit Outstanding Iowa City Iowa City Market Value 2 Per Capita3 City of Iowa City 67,950$ 100.00 %67,950$ 1.27 %913.3310$ Iowa City Community School District1 3,205 57.23 1,834 0.03 24.6512 Johnson County1 10,970 42.54 4,667 0.09 62.7302 Clear Creek- Amana - Community School District1 58,795 0.04 26 0.00 0.3495 Kirkwood Comm. College1 79,468 14.17 11,261 0.21 151.3616 Total Overlapping Debt 152,438 17,788 239.0925 Total Direct & Overlapping Debt 220,388$ 85,738$ 1,152.4235 Per capita assessed value 71,914$ 1 Long term debt outstanding includes only GO debt. 2City Property Assessed Value of 5,350,228 came from the Iowa Department of Management 3 Population for FY17 of 74,398 came from the US Census Bureau Source: Johnson County Auditor's Office. each overlapping government. However,this does not imply that every taxpayer is a resident,and therefore responsible for repaying the debt,of 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 Iowa City.This process recognizes that,when considering the City's ability to issue and repay long-term debt,the entire burden borne by the residents and businesses should be taken into account. 137 20 0 8 20 0 9 20 1 0 20 1 1 20 1 2 20 1 3 20 1 4 20 1 5 2016 2017 De b t L i m i t 19 6 , 4 1 8 $ 21 3 , 1 8 1 $ 21 8 , 8 0 8 $ 22 2 , 4 9 3 $ 22 6 , 0 0 7 $ 23 0 , 7 7 6 $ 23 3 , 4 1 6 $ 24 1 , 3 3 2 $ 247,528 $ 267,511 $ To t a l n e t d e b t a p p l i c a b l e t o l i m i t 8 7 , 0 9 0 84 , 9 9 5 75 , 0 5 0 80 , 5 7 5 75 , 3 2 0 61 , 2 0 5 67 , 0 7 5 77 , 5 0 6 71,963 84,864 Le g a l d e b t m a r g i n 1 0 9 , 3 2 8 $ 12 8 , 1 8 6 $ 14 3 , 7 5 8 $ 14 1 , 9 1 8 $ 15 0 , 6 8 7 $ 16 9 , 5 7 1 $ 16 6 , 3 4 1 $ 16 3 , 8 2 6 $ 175,565 $ 182,647 $ To t a l n e t d e b t a p p l i c a b l e t o t h e l i m i t a s a p e r c e n t a g e o f d e b t l i m i t 44 . 3 4 % 3 9 . 8 7 % 3 4 . 3 0 % 3 6 . 2 1 % 3 3 . 3 3 % 2 6 . 5 2 % 2 8 . 7 4 % 3 2 . 1 2 % 2 9 . 0 7 % 3 1 . 7 2 % To t a l A s s e s s e d V a l u a t i o n De b t L i m i t - 5 % o f T o t a l A s s e s s e d V a l u a t i o n 267,511 Le s s : A m o u n t o f D e b t A p p l i c a b l e t o D e b t L i m i t 84,864 Le g a l D e b t M a r g i n No t e : U n d e r I o w a c o d e , t h e c i t y ' s o u t s t a n d i n g g e n e r a l o b l i g a t i o n d e b t s h o u l d n o t e x c e e d 5 p e r c e n t o f t o t a l a s s e s s e d p r o p e r t y v a l u e . CI T Y O F I O W A C I T Y , I O W A LE G A L D E B T M A R G I N I N F O R M A T I O N La s t T e n F i s c a l Y e a r s (a m o u n t s e x p r e s s e d i n t h o u s a n d s ) 182,647 $ 5,350,228 $ Fi s c a l Y e a r Le g a l D e b t M a r g i n C a l c u l a t i o n f o r F i s c a l Y e a r 2 0 1 7 13 8 Fiscal Year Principal Interest Total Property Tax Revenue Tax Increment Financing Water Revenue Principal Outstanding at Beginning of Fiscal Year 2017 13,470,000 1,255,554 14,725,554 13,826,542 598,112 300,900 55,350,000 2018 7,960,000 1,197,996 9,157,996 8,397,916 760,080 - 51,645,000 2019 8,125,000 1,031,994 9,156,994 8,398,894 758,100 - 43,685,000 2020 8,330,000 835,606 9,165,606 8,409,476 756,130 - 35,560,000 2021 7,090,000 613,841 7,703,841 6,947,453 756,388 - 27,230,000 2022 5,540,000 438,663 5,978,663 5,278,182 700,481 - 20,140,000 2023 4,645,000 325,063 4,970,063 4,271,748 698,315 - 14,600,000 2024 3,865,000 217,512 4,082,512 3,537,650 544,862 - 9,955,000 2025 2,915,000 135,063 3,050,063 2,813,353 236,710 - 6,090,000 2026 2,090,000 74,200 2,164,200 2,001,416 162,784 - 3,175,000 2027 1,085,000 27,125 1,112,125 948,808 163,317 - 1,085,000 Total 65,115,000$ 6,152,617$ 71,267,617$ 64,831,438$ 6,135,279$ 300,900$ Payments Funding Source(s) CITY OF IOWA CITY, IOWA GENERAL OBLIGATION DEBT ANNUAL MATURITY SCHEDULE 139 Fiscal Year Net Revenue Annual Debt Service2 Ended Available for Ratio of June 30 Revenue Expenses1 Debt Service Principal Interest Total Coverage Parking Revenue3 2008 4,995 2,454 2,541 355 606 961 2.64 2009 5,630 3,024 2,606 370 584 954 2.73 20106 5,509 3,149 2,360 390 504 894 2.64 2011 5,389 2,920 2,469 420 391 811 3.04 2012 4,945 3,034 1,911 500 339 839 2.28 2013 5,122 3,549 1,573 515 324 839 1.87 2014 5,365 2,969 2,396 530 308 838 2.86 20157 5,620 3,828 1,792 540 254 794 2.26 2016 - - - - - - - 2017 - - - - - - - Wastewater Treatment Revenue4 20086 13,332 4,581 8,751 4,105 3,071 7,176 1.22 20096 13,462 5,202 8,260 4,260 2,813 7,073 1.17 20106 13,174 5,050 8,124 4,205 2,307 6,512 1.25 20116 13,281 5,477 7,804 1,840 2,054 3,894 2.00 2012 13,175 5,663 7,512 4,615 1,693 6,308 1.19 2013 13,301 5,340 7,961 4,865 1,547 6,412 1.24 2014 12,835 5,708 7,127 3,250 1,428 4,678 1.52 2015 12,620 6,574 6,046 3,370 1,305 4,675 1.29 2016 12,681 6,513 6,168 3,520 1,175 4,695 1.31 2017 13,383 6,357 7,026 3,625 985 4,610 1.52 Water Revenue5 20086 9,258 5,348 3,910 955 1,229 2,184 1.79 20096 8,833 5,726 3,107 995 1,171 2,166 1.43 20106 8,336 5,153 3,183 680 1,055 1,735 1.83 2011 8,354 5,464 2,890 1,110 902 2,012 1.44 20126 8,649 5,653 2,996 1,200 861 2,061 1.45 20136 9,342 6,348 2,994 845 758 1,603 1.87 20146 8,613 5,818 2,795 1,335 650 1,985 1.41 2015 8,715 5,632 3,083 1,380 610 1,990 1.55 2016 9,323 5,387 3,936 1,715 579 2,294 1.72 2017 9,529 6,332 3,197 1,760 524 2,284 1.40 Notes: 1 Excludes depreciation and interest. 2 Includes principal and interest of revenue bonds only. 3 Parking Revenue bonds ratio of "Net Revenue Available for Debt Service" to "Total Annual Debt Service" is required to be at least 1.25. 4 Wastewater Treatment Revenue bonds ratio of "Net Revenue Available for Debt Service" to "Total Annual Debt Service" is required to be at least 1.10. 5 Water Revenue bonds ratio of "Net Revenue Available for Debt Service" to "Total Annual Debt Service" is required to be at least 1.10. 6 Refunded Revenue Bonds paid are excluded from the principal of Annual Debt Service. 7 Parking Revenue Bonds defeased are excluded from the principal and interest of Annual Debt Service. CITY OF IOWA CITY, IOWA SCHEDULE OF REVENUE BOND COVERAGE Last Ten Fiscal Years (amounts expressed in thousands) 140 Fiscal Year Principal Interest Total Sewer Revenue Water Revenue Tax Increment Financing Principal Outstanding at Beginning of Fiscal Year 2017 16,190,000 1 1,577,137 17,767,137 9,855,265 7,707,837 204,035 40,945,000 2018 5,170,000 1,606,970 6,776,970 4,336,332 1,849,143 591,495 48,020,000 2019 5,110,000 1,327,039 6,437,039 4,057,850 1,789,854 589,335 42,850,000 2020 5,525,000 1,137,000 6,662,000 4,267,400 1,802,965 591,635 37,740,000 2021 5,750,000 926,361 6,676,361 4,264,625 1,823,041 588,695 32,215,000 2022 5,460,000 744,165 6,204,165 2,812,500 1,836,190 1,555,475 26,465,000 2023 4,950,000 562,315 5,512,315 2,137,125 1,852,145 1,523,045 21,005,000 2024 2,850,000 436,171 3,286,171 - 1,800,826 1,485,345 16,055,000 2025 2,430,000 373,577 2,803,577 - 1,351,082 1,452,495 13,205,000 2026 1,665,000 320,589 1,985,589 - 561,244 1,424,345 10,775,000 2027 990,000 280,725 1,270,725 - -1,270,725 9,110,000 2028 895,000 250,365 1,145,365 - -1,145,365 8,120,000 2029 915,000 222,495 1,137,495 - -1,137,495 7,225,000 2030 940,000 193,820 1,133,820 - -1,133,820 6,310,000 2031 965,000 164,325 1,129,325 - -1,129,325 5,370,000 2032 995,000 133,950 1,128,950 - -1,128,950 4,405,000 2033 815,000 102,300 917,300 - -917,300 3,410,000 2034 840,000 77,850 917,850 - -917,850 2,595,000 2035 865,000 52,650 917,650 - -917,650 1,755,000 2036 890,000 26,700 916,700 - -916,700 890,000 Total 64,210,000$ 10,516,504$ 74,726,504$ 31,731,097$ 22,374,327$ 20,621,080$ Notes: 1 Additional principal payments above the funding sources for 2017 were funded through the refunding of bonds issued June 2017. Payments CITY OF IOWA CITY, IOWA REVENUE DEBT ANNUAL MATURITY SCHEDULE Funding Source(s) 141 Fiscal Year Principal Interest Total 2017 8,870,000$ 985,265$ 9,855,265$ 2018 3,580,000 756,332 4,336,332 2019 3,465,000 592,850 4,057,850 2020 3,820,000 447,400 4,267,400 2021 3,980,000 284,625 4,264,625 2022 2,660,000 152,500 2,812,500 2023 2,085,000 52,125 2,137,125 2024 - - - 2025 - - - 2026 - - - 2027 - - - 2028 - - - Total 28,460,000$ 3,271,097$ 31,731,097$ (continued) Fiscal Year Principal Interest Total 2017 7,190,000$ 517,837$ 7,707,837$ 2018 1,455,000 394,143 1,849,143 2019 1,510,000 279,854 1,789,854 2020 1,565,000 237,965 1,802,965 2021 1,630,000 193,041 1,823,041 2022 1,690,000 146,190 1,836,190 2023 1,755,000 97,145 1,852,145 2024 1,745,000 55,826 1,800,826 2025 1,325,000 26,082 1,351,082 2026 555,000 6,244 561,244 2027 - - - 2028 - - - Total 20,420,000$ 1,954,327$ 22,374,327$ CITY OF IOWA CITY, IOWA Outstanding REVENUE DEBT ANNUAL MATURITY BY FUNDING SOURCE Sewer Water 142 Fiscal Year Principal Interest Total 2017 130,000$ 74,035$ 204,035$ 2018 135,000 456,495 591,495 2019 135,000 454,335 589,335 2020 140,000 451,635 591,635 2021 140,000 448,695 588,695 2022 1,110,000 445,475 1,555,475 2023 1,110,000 413,045 1,523,045 2024 1,105,000 380,345 1,485,345 2025 1,105,000 347,495 1,452,495 2026 1,110,000 314,345 1,424,345 2027 990,000 280,725 1,270,725 2028 895,000 250,365 1,145,365 2029 915,000 222,495 1,137,495 2030 940,000 193,820 1,133,820 2031 965,000 164,325 1,129,325 2032 995,000 133,950 1,128,950 2033 815,000 102,300 917,300 2034 840,000 77,850 917,850 2035 865,000 52,650 917,650 2036 890,000 26,700 916,700 Total 15,330,000$ 5,291,080$ 20,621,080$ Taxable Urban Renewal Outstanding CITY OF IOWA CITY, IOWA REVENUE DEBT ANNUAL MATURITY BY FUNDING SOURCE (continued) 143 Per Capita Calendar Personal Personal Average School Retail Year Population6 Income1 Income1 Increase Enrollment2 Sales4 2008 67,831 5,981,912 40,201 3.47 12,911 3.1 958,509,729 2009 69,086 5,943,049 39,214 -2.46 13,049 4.3 905,139,461 2010 67,862 6,039,549 39,477 0.67 13,319 5.0 725,329,723 2011 68,947 6,606,394 42,471 7.58 13,638 4.8 741,407,021 2012 68,947 6,956,611 43,809 3.15 13,862 4.1 767,122,555 2013 70,133 7,217,188 44,608 1.82 14,057 3.8 793,201,342 2014 71,591 7,594,813 46,204 3.58 14,162 3.5 649,794,164 2015 73,415 7,846,426 47,036 1.80 14,495 2.9 838,853,686 2016 74,220 8,031,750 47,574 1.14 15,186 3.2 853,258,347 20175 74,398 8,217,043 48,672 2.31 15,299 3 874,928,988 Sources and Notes:1 Personal Income and Per Capita Personal Income based on metropolitan Iowa City / Coralville and based on figures from Bureau of Economic Analysis. Personal Income expressed in thousands. 2 Iowa City Community School District and local private schools3 Iowa Workforce Development Center4 Iowa Retail Sales & Use Report, Iowa Department of Revenue and Finance. Fiscal year ending June 30. 5 Personal Income and Per Capita Personal Income for 2017 are not available. Amounts projected based on average increase over previous 9 years.6 US Census Bureau DEMOGRAPHIC AND ECONOMIC STATISTICS CITY OF IOWA CITY, IOWA Last Ten Calendar Years Unemployment Rate3 144 Employers Employees Rank Percentage Employees Rank Percentage University of Iowa 28,236 1 31.3 %30,110 1 29.1 % Veterans Administration Medical Center 1,351 5 1.5 2,300 2 2.2 Iowa City Community School District 1,700 2 1.9 1,844 3 1.8 Mercy Hospital 1,383 4 1.5 1,347 4 1.3 ACT Inc. (formerly American College Testing Program)1,646 3 1.8 1,244 5 1.2 Hy-Vee 1,166 6 1.3 1,222 6 1.2 NCS Pearson 982 7 1.1 1,150 7 1.1 Proctor & Gamble 664 10 0.7 1,130 8 1.1 City of Iowa City --N/A 942 9 0.9 Johnson County --N/A 544 10 0.5 Systems Unlimited 681 9 0.8 - -N/A International Automotive Components (formerly Lear Corp)750 8 0.8 - -N/A 38,559 42.8 %41,833 40.5 % Total Employees 90,300 103,400 Sources: Iowa City Area Development Group Various Employers 2017 CITY OF IOWA CITY, IOWA PRINCIPAL EMPLOYERS Current Year and Nine Years Ago 2008 145 2008 2009 2010 2011 2012 2013 2014 Public Safety Police 96.25 103.25 103.25 98 97 103 105 Animal Shelter1 66666- - Fire 57 57 57 66 65 65 65 Inspection Services 15.38 15.55 15.55 15.55 15.55 15.55 13.55 Public Works Public Works Admin 2222222 Engineering 5 11.35 11.35 11.35 12.1 12.1 12.1 12.1 Flood Recovery - - - 0.4 0.4 0.4 0.38 Culture and Recreation Parks and Rec Admin 2222222 Recreation 15.42 15.42 15.42 15.42 15.42 15.42 15.42 Parks 13 13 13 13 13 13 13 Forestry 3333333 Cemetery 3333333 CBD Maintenance 3333333 Library 43.14 43.14 43.14 43.14 43.64 43.63 45.13 Senior Center 6.31 6.31 6.31 6.31 6.5 6.5 6.5 Community and Economic Development 8.95 9.05 9.05 9.1 9.1 8.4 8.95 General Government City Council 7777777 City Clerk 4444444 City Attorney 6.6 6 6 5.6 5.6 5.6 5.6 City Manager2 3333356 Personnel 4444443 Human Rights 2.5 2.5 2.5 2.5 2.5 2 2 Finance 26.5 26.3 26.3 26.24 27.53 23.47 23.97 Government Buildings 4.96 4.96 4.96 4.96 4.83 4.83 4.83 Energy Conservation 0.25 0.25 0.25 - - - - Transit3 54.75 58.5 58.5 56.25 56.25 - - Special Revenue Employee Benefits 0.29 0.29 0.29 0.26 0.55 0.55 0.55 CIP / Roads 1 2 2 - - - - Flood Mitigation Grants - - - 1.6 1.6 - - Community Development 3.98 3.88 3.88 3.83 3.83 3.33 2.98 UniverCity Program - - - - - 0.2 - Traffic Engineering 4.15 4.15 4.15 4.15 4.15 4.15 4.15 Streets 23.5 25.5 25.5 25.5 25.5 25.5 25.5 MPOJC (formerly JCCOG) 6.6 6.6 6.6 6.6 6.6 5.6 5.6 Other Shared Revenues - - - - - 1.6 1.62 Library Development 111111- Capital Projects Administration5 - - - 3566 Internal Service Funds Information Technology 12.3 12.3 12.3 11.3 11.8 10.86 9.86 Equipment 11.26 11.26 11.26 11.26 11.26 10.75 10.75 Central Services 0.75 0.75 0.75 0.75 0.75 0.76 0.5 Risk Management 1.73 1.93 1.93 2.01 1.8 1.8 1.8 Business-Type Activities Parking 32.75 33.25 33.25 32.75 32.75 29.25 26.25 Mass Transit3 - - - - - 51.75 51.25 Wastewater Treatment 25.5 25.6 25.6 25.6 25.4 25.4 24.4 Water 32.75 32.75 32.75 32.75 32.75 32.75 31.75 Sanitation 34.85 34.85 35.85 35.85 37.85 37.85 35.85 Airport 1.6 1.75 1.75 1.75 1.75 1 1 Cable Television4 6.19 6.44 6.44 6.69 6.63 6.63 6.63 Stormwater 2 1.9 1.9 1.9 2.1 2.1 2.1 Housing Authority 13.25 13.25 13.25 13.25 13.25 13.18 12.19 Total 614.81 629.03 630.03 633.37 637.74 623.91 615.16 Source: City's Financial Plan CITY OF IOWA CITY, IOWA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION Last Ten Fiscal Years Full-Time Equivalent Employees as of June 30 146 ---- ---- ------------ ---- ---- 2015 2016 2017 105 105 105 - - - 64 64 64 13.55 12.85 13.5 222 12.1 12 16 - - - 222 15.42 14.42 15.42 13 13 16 333 333 33- 45.13 44.77 46.17 6.5 6.5 7 8.95 10.8 12.63 777 444 5.6 5.5 5.5 6 10.5 10.5 333 222 22.47 23.07 23.13 4.83 5.33 4.33 - - - - - - 0.55 0.55 0.55 - - - - - - 2.98 2.83 - - - - 4.15 3.9 4.5 25.5 25.25 25.5 5.6 4.7 4.7 - - - - - - 54- 9.86 9.86 9.8 10.75 10.75 10.75 0.5 0.5 0.5 1.8 1.8 1.8 26.25 23.13 21.63 51.25 51.13 53.63 24.65 24.65 25.4 32 32 31.75 35.85 33.35 31.5 1 Beginning in FY13, Animal Services is reported under Police 1112 Beginning in FY13, Communications Division has been moved from Finance to City Manager 5.63 - - 3 Beginning in FY13, Transit was moved from the General Fund to an Enterprise Fund 2.6 2.6 2.1 4 Beginning in FY16, Cable was moved from an Enterprise Fund to the General Fund 10.19 10.19 9.6 5 Beginning in FY17, Capital Project Administration was moved to Engineering 607.66 598.93 599.89 147 ---- ---- ---- 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Public Safety Police 1 Physical arrests 6,434 6,486 5,983 6,590 5,911 4,468 6,192 5,595 5,465 4,000 Traffic Violations 5,827 4,460 4,446 3,403 3,761 2,499 3,718 3,356 2,989 2,387 Fire 1 Number of calls answered 4,257 4,152 4,472 4,635 5,173 4,713 5,828 6,016 6,974 5,354 Inspections conducted 1,712 1,959 2,145 1,806 1,970 1,431 2,032 1,903 2,459 817 Parking Parking Violations 147,673 126,050 118,717 109,553 96,117 88,909 60,680 65,196 57,549 62,930 Wastewater Treatment Daily average treatment in million gallons 12.81 12.34 12.86 10.37 8.28 9.84 10.02 9.76 10.48 8.32 Maximum daily capacity of plant in million gallons 41.0 41.0 41.1 41.1 41.1 41.1 41.1 43.3 43.3 43.3 Number of sewer system customers 22,909 23,161 23,344 23,527 23,529 24,059 24,389 24,533 25,085 25,485 Water Daily average consumption in million gallons 5.48 5.51 5.48 5.51 5.49 5.54 5.64 5.33 5.32 5.50 Maximum daily capacity of plant in million gallons 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 Customers by Classification Residential 23,097 23,391 23,657 23,875 24,086 24,442 24,790 23,089 23,638 24,025 Commercial 1,465 1,494 1,481 1,498 1,489 1,491 1,491 1,409 1,415 1,425 Industrial 14 15 15 15 15 15 15 14 14 14 Other 138 144 153 156 200 204 202 135 131 134 Total Customers 24,714 25,044 25,306 25,544 25,790 26,152 26,498 24,647 25,198 25,598 Sanitation Number of Customers 14,574 14,700 14,831 14,926 15,030 15,177 15,331 14,811 15,620 15,917 Tonnage 8,834 8,747 8,869 8,969 8,935 8,956 9,160 9,210 9,476 9,623 Landfill Tonnage 132,760 140,810 150,369 147,265 148,953 111,445 115,624 123,692 126,875 137,025 Sources: Various city divisions. Notes: 1 Numbers are based on a calendar year and 2017 figures are compiled through 10/15/17. CITY OF IOWA CITY, IOWA OPERATING INDICATORS BY FUNCTION Last Ten Fiscal Years 148 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Public Safety Police Stations 1111111111 Patrol units 17 17 18 18 18 18 20 20 20 24 Fire Stations 3333444444 Fire apparatus 9999 1 1 1 1 1 1 1 1 1 0 1 0 Public Works Streets Miles 269 270 272 272 275 276 279 281 283 286 Street lights 3,403 3,408 3,410 3,412 3,412 3,412 3,412 3,412 3,412 3,612 Culture and Recreation Library 1111111111 Cemetery 1111111111 Acreage 40 40 40 40 40 40 40 40 40 40 Parks 61 61 40 41 41 42 43 46 46 49 Acreage 1,603 1,603 1,335 1,354 1,441 1,506 1,897 1,897 1,902 1,932 Recreation Recreation centers 2222222222 Swimming pools 3333333333 Ball diamonds 31 30 30 30 30 27 27 27 27 27 Tennis courts 12 12 12 12 12 12 12 12 12 9 Soccer fields 25 20 20 20 20 20 20 20 20 20 Pickle Ball Courts 8 Futscal Courts 2 Full Basketball Courts 3 Parking Facilities 5555555556 Spaces 3,085 3,086 3,086 3,086 3,086 3,086 3,086 3,086 3,086 3,686 Wastewater Treatment Miles of sanitary sewer 288 289 291 292 294 295 298 300 301 304 Miles of storm sewer 118 120 122 124 127 128 131 133 136 139 Number of treatment plants 2222221111 Number of service connectors 22,576 22,875 23,093 23,308 23,529 23,851 24,175 24,533 25,085 25,485 Water Miles of water mains 262 263 264 264 266 268 271 273 275 277 Number of city owned fire hydrants 2,575 2,635 2,662 2,680 2,735 3,330 3,385 3,415 3,447 3,503 Sanitation Landfills 1111111111 Acreage 395 395 395 395 411 411 411 418 418 418 Sources: Various city divisions. CITY OF IOWA CITY, IOWA Last Ten Fiscal Years CAPITAL ASSETS BY FUNCTION 149 150 ~:~ ---------------- Compliance Section Tab What inspires you, inspires us. Let’s talk. | eidebailly.com 1545 Associates Dr., Ste. 101 | Dubuque, IA 52002-2299 | T 563.556.1790 | F 563.557.7842 | EOE 151 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 To the Honorable Mayor and Members of the City Council City of Iowa City, Iowa 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 the City of Iowa City, Iowa (City) as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated December 11, 2017. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. CPAs & BUSINESS ADVISORS 152 Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Comments involving statutory and other legal matters about the City’s operations for the year ended June 30, 2017, are based exclusively on knowledge obtained from procedures performed during our audit of the financial statements of the City and are reported in Part IV of the accompanying Schedule of Findings and Questioned Costs. Since our audit was based on tests and samples, not all transactions that might have had an impact on the comments were necessarily audited. The comments involving statutory and other legal matters are not intended to constitute legal interpretations of those statutes. 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 City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Dubuque, Iowa December 11, 2017 What inspires you, inspires us. Let’s talk. | eidebailly.com 1545 Associates Dr., Ste. 101 | Dubuque, IA 52002-2299 | T 563.556.1790 | F 563.557.7842 | EOE 153 Independent Auditor’s Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance Required by the Uniform Guidance To the Honorable Mayor and Members of the City Council City of Iowa City, Iowa Report on Compliance for Each Major Federal Program We have audited the City of Iowa City, Iowa’s (City) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended June 30, 2017. The City’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on the compliance for each of the City’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of City of Iowa City, Iowa’s compliance. Opinion on Each Major Federal Program In our opinion, the City of Iowa City, Iowa, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, 2017. CPAs & BUSINESS ADVISORS 154 Report on Internal Control over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a compliance requirement will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Dubuque, Iowa December 11, 2017 155 City of Iowa City, Iowa Schedule of Expenditures of Federal Awards Year Ended June 30, 2017 Federal Pass-Through Amounts Passed- Federal Grantor/Pass-Through CFDA Entity Identifying Federal Through to Grantor/Program or Cluster Title Number Number Expenditures Subrecipients U.S. Department of Agriculture: Pass-through program from: Iowa Department of Agriculture: Specialty Crop Block Grant Program - Farm Bill 10.170 15SCBGPIA0001 13,236$ 13,236$ U.S. Department of Housing and Urban Development: Direct program: CDBG - Entitlement Grants Cluster: Community Development Block Grants/ Entitlement Grants 14.218 886,190 669,355 Community Development Block Grants/ Entitlement Grants 14.218 364,183 227,273 Community Development Block Grants/ Entitlement Grants 14.218 309,144 142,213 Cluster total 1,559,517 1,038,841 Home Investment Partnerships Program 14.239 82,554 12,971 Home Investment Partnerships Program 14.239 62,823 39,521 Home Investment Partnerships Program 14.239 36,300 - Home Investment Partnerships Program 14.239 10,405 3,000 192,082 55,492 Public and Indian Housing 14.850 135,284 - Public and Indian Housing 14.850 125,354 - 260,638 - Housing Voucher Cluster: Section 8 Housing Choice Vouchers 14.871 8,154,473 - Public Housing Capital Fund 14.872 61,572 - Public Housing Capital Fund 14.872 54,951 - 116,523 - Total U.S. Department of Housing and Urban Development 10,283,233 1,094,333 156 City of Iowa City, Iowa Schedule of Expenditures of Federal Awards Year Ended June 30, 2017 Federal Pass-Through Amounts Passed- Federal Grantor/Pass-Through CFDA Entity Identifying Federal Through to Grantor/Program or Cluster Title Number Number Expenditures Subrecipients U.S. Department of Justice: Pass-through program from: Iowa Department of Justice: Violence Against Women Formula Grants 16.588 VW-17-04-CJ 63,583$ -$ Direct program: Bulletproof Vest Partnership Program 16.607 389 - Pass-through program from: Governor's Office of Drug Control Policy: Public Safety Partnership and Community Policing Grants 16.710 15-CAMP-03 3,906 3,020 Direct program: Edward Byrne Memorial Justice Assistance Grant Program 16.738 13,657 13,657 Edward Byrne Memorial Justice Assistance Grant Program 16.738 605 - Pass-through program from: Governor’s Office of Drug Control Policy: Edward Byrne Memorial Justice Assistance Grant Program 16.738 14-JAG-158322 94,041 61,041 108,303 74,698 Total U.S. Department of Justice 176,181 77,718 U.S. Department of Transportation: Direct program: Airport Improvement Program 20.106 68,382 - Pass-through program from: Highway Planning and Construction Cluster: Iowa Department of Transportation: Highway Planning and Construction 20.205 HDP-3715(652) --71-52 6,713,789 - Highway Planning and Construction 20.205 IA-95-X018-371-15 76,114 - Iowa Department of Transportation and Metropolitan Planning Organization of Johnson County: Highway Planning and Construction 20.205 17MPO-MPOJC 147,608 - Cluster total 6,937,511 - 157 City of Iowa City, Iowa Schedule of Expenditures of Federal Awards Year Ended June 30, 2017 Federal Pass-Through Amounts Passed- Federal Grantor/Pass-Through CFDA Entity Identifying Federal Through to Grantor/Program or Cluster Title Number Number Expenditures Subrecipients U.S. Department of Transportation: (continued) Pass-through program from: (continued) Metropolitan Transportation Planning and State and Non- Metropolitan Planning and Research 20.505 17MPO-MPOJC 42,392$ -$ Federal Transit Cluster: Direct program: Federal Transit – Formula Grants 20.507 1,622,763 - Pass-through program from: Iowa Department of Transportation: Bus and Bus Facilities Formula Program 20.526 IA-2016-019-371- 16 #18520 242,614 - Cluster total 1,865,377 - Pass-through program from: Iowa Department of Transportation: Public Transportation for Nonurbanized Areas 20.509 IA-2016-027-371- 16 #18518 76,114 - Transit Services Program Cluster: Enhanced Mobility of Seniors and Individuals with Disabilities 20.513 IA-2016-026-371-17 #18404 112,960 - Highway Safety Cluster: Iowa Department of Public Safety: Governor's Traffic Safety Bureau: National Priority Safety Programs 20.616 PAP 17-405d- M6OT, Task 24 21,451 - National Priority Safety Programs 20.616 PAP 16-405d- M6OT, Task 21 7,743 - Cluster total 29,194 - Total U.S. Department of Transportation 9,131,930 - 158 City of Iowa City, Iowa Schedule of Expenditures of Federal Awards Year Ended June 30, 2017 Federal Pass-Through Amounts Passed- Federal Grantor/Pass-Through CFDA Entity Identifying Federal Through to Grantor/Program or Cluster Title Number Number Expenditures Subrecipients U.S. Department of Homeland Security: Pass-through program from: Iowa Homeland Security and Emergency Management Division: Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 FEMA DR-4187-IA 28,513$ -$ Hazard Mitigation Grant 97.039 DR-4187-0003-01 467,242 - Total U.S. Department of Homeland Security 495,755 - Total 20,100,335$ 1,185,287$ 159 City of Iowa City, Iowa Notes to the Schedule of Expenditures of Federal Awards Year Ended June 30, 2017 Note 1 - Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Iowa City, Iowa, and is presented on the modified accrual basis of accounting for governmental funds and the full accrual basis of accounting for proprietary funds. The information in this schedule is presented in accordance with the requirements of Uniform Guidance. The City received federal awards both directly from federal agencies and indirectly through pass-through entities. Federal financial assistance provided to a subrecipient is treated as an expenditure when it is paid to the subrecipient. Note 2 - Significant Accounting Policies Governmental and proprietary fund types account for the City’s federal grant activity. Therefore, expenditures in the schedule of expenditures of federal awards are recognized on the modified accrual basis – when they become a demand on current available financial resources in the governmental fund types and on the full accrual basis – when expenditures are incurred in the proprietary fund types. The City’s summary of significant accounting policies is presented in Note 1 in the City’s basic financial statements. The City has not elected to use the 10% de minimis cost rate. 160 City of Iowa City, Iowa Schedule of Findings and Questioned Costs Year Ended June 30, 2017 Part I: Summary of the Independent Auditor's Results: Financial Statements Type of auditor's report issued Unmodified Internal control over financial reporting: Material weaknesses identified No Significant deficiencies identified not considered to be material weaknesses None reported Noncompliance material to financial statements noted?No Federal Awards Internal control over major programs: Material weaknesses identified No Significant deficiencies identified not considered to be material weaknesses None reported Type of auditor's report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Uniform Guidance 2 CFR 200.516:No Identification of major programs: Name of Federal Program CFDA Number CDBG - Entitlement Grants Cluster:14.218 Community Development Block Grants/ Entitlement Grants Highway Planning and Construction Cluster:20.205 Highway Planning and Construction Dollar threshold used to distinguish between type A and type B programs:750,000$ Auditee qualified as low-risk auditee?Yes Part II: Findings Related to the Financial Statements: There were no findings to report. 161 City of Iowa City, Iowa Schedule of Findings and Questioned Costs Year Ended June 30, 2017 Part III: Findings and Questioned Costs for Federal Awards: There were no findings and questioned costs to report. Part IV: Other Findings Related to Required Statutory Reporting: 2017-IA-A Certified Budget – Disbursements during the year ended June 30, 2017, did not exceed the amount budgeted. 2017-IA-B Questionable Expenditures – We noted no expenditures that we believe may fail to meet the requirements of public purpose as defined in an Attorney General’s opinion dated April 25, 1979. 2017-IA-C Travel Expense – No expenditures of City money for travel expenses of spouses of City officials or employees were noted. 2017-IA-D Business Transactions – No business transactions between the City and City officials or employees were noted. 2017-IA-E Bond Coverage – Surety bond coverage of City officials and employees is in accordance with statutory provisions. The amount of coverage should be reviewed annually to ensure the coverage is adequate for current operations. 2017-IA-F Council Minutes – No transactions were found that we believe should have been approved in the City Council minutes but were not. 2017-IA-G Deposits and Investments – No instances of non-compliance with the deposit and investment provisions of Chapters 12B and 12C of the Code of Iowa and the City’s investment policy were noted. 2017-IA-H Revenue Bonds – No instances of non-compliance with the provisions of the City’s revenue bond resolutions were noted. 2017-IA-I Annual Urban Renewal Report - - The annual urban renewal report was properly approved and certified to the Iowa Department of Management on or before December 1.