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FY2018 Annual Financial ReportCity of Iowa City Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2018 COMPREHENSIVE ANNUAL FINANCIAL REPORT CITY OF IOWA CITY, IOWA FOR THE FISCAL YEAR ENDED JUNE 30, 2018 PREPARED BY: FINANCE DEPARTMENT CITY OF IOWA CITY, IOWA Introductory Section Tab CITY OF IOWA CITY, IOWA TABLE OF CONTENTS June 30, 2018 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 .................................................................................................................. 33 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 ............ 39 Statement of cash flows – proprietary funds ................................................................................ 40 Statement of fiduciary assets and liabilities ................................................................................. 41 Notes to financial statements .......................................................................................................... 42 REQUIRED SUPPLEMENTARY INFORMATION Budgetary comparison schedule – budget and actual – all governmental funds and enterprise funds – budgetary basis………………………………………………………………………… 84 Budgetary comparison schedule – budget to GAAP reconciliation …………………………….. 86 Note to required supplementary information – budgetary reporting…………………………….. 87 Schedule of the City’s proportionate share of MFPRSI net pension liability…………………… 89 Schedule of City’s MFPRSI contributions……………………………………………………… 90 Notes to required supplementary information – MFPRSI pension liability…………………… . 92 Schedule of the City’s proportionate share of IPERS net pension liability…………………… .. 93 Schedule of City’s IPERS contributions………………………………………………………... 94 Notes to required supplementary information – IPERS pension liability……………………… 96 Required supplementary information – schedule of changes in the City’s total OPEB liability, related ratios and notes…………………….………………………………………….……… . 98 COMBINING FUND STATEMENTS Combining balance sheet – nonmajor governmental funds ............................................................ 100 Combining statement of revenues, expenditures, and changes in fund balances – nonmajor governmental funds ...................................................................................................................... 101 Combining statement of net position – internal service funds ........................................................ 104 Combining statement of revenues, expenses, and changes in fund net position – internal service funds ............................................................................................................................................. 105 1 CITY OF IOWA CITY, IOWA TABLE OF CONTENTS June 30, 2018 Page COMBINING FUND STATEMENTS (continued) Combining statement of cash flows – internal service fund ............................................................ 106 Statement of changes in assets and liabilities – agency funds ......................................................... 108 STATISTICAL SECTION (UNAUDITED) Net position by component ................................................................................................................. 111 Changes in net position ...................................................................................................................... 112 Fund balances – governmental funds ................................................................................................. 114 Changes in fund balances – governmental funds ............................................................................... 115 General government tax revenues by source ...................................................................................... 116 Assessed and taxable value of property .............................................................................................. 117 Property tax rates – direct and overlapping governments .................................................................. 118 Property tax budgets and collections .................................................................................................. 119 Principal taxpayers ............................................................................................................................. 120 Principal water system customers ...................................................................................................... 122 Sales history and total water charges .................................................................................................. 123 Principal sewer system customers ...................................................................................................... 124 Sales history and total sewer charges ................................................................................................. 125 Ratios of outstanding debt by type ..................................................................................................... 126 Ratios of general obligation bonded debt to assessed value and net bonded debt per capita ............. 127 Ratio of annual debt service expenditures for general bonded debt to total general governmental expenditures ..................................................................................................................................... 128 Computation of direct and overlapping debt ...................................................................................... 129 Legal debt margin information ........................................................................................................... 130 General obligation debt annual maturity schedule ............................................................................. 131 Schedule of revenue bond coverage ................................................................................................... 132 Revenue debt annual maturity schedule ............................................................................................. 133 Revenue debt annual maturity by funding source .............................................................................. 134 Demographic and economic statistics ................................................................................................ 136 Principal employers ............................................................................................................................ 137 Full-time equivalent city government employees by function ........................................................... 138 Operating indicators by function ........................................................................................................ 139 Capital assets by function ................................................................................................................... 140 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 ............................................................................................................................. 141 Independent auditor’s report on compliance for each major federal program and report on internal control over compliance required by the Uniform Guidance ............................................................. 143 Schedule of expenditures of federal awards ....................................................................................... 145 Notes to the schedule of expenditures of federal awards ................................................................... 148 Schedule of findings and questioned costs ......................................................................................... 149 2 December 11, 2018 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, 2018 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. Bohnsack & Frommelt, 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, 2018. 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 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 494 full-time and 43 part-time permanent municipal employees and 404 temporary employees, including a police force of 83 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 29,700 employees. The University of Iowa had an enrollment in fall 2018 of 32,948 students, which is a decrease of 616 students from a record high of 33,564 students in the fall of 2017. The academic and research missions of the University, along with the health care services provided at its hospitals and clinics, have an extremely positive economic impact on the area. The City also has a significant number of national and international businesses, including Fortune 500 companies: ACT Inc., NCS Pearson, and Procter & Gamble. In February 2018, Procter and Gamble announced that in approximately two years they would be shifting their beauty care products production from Iowa City to their West Virginia plant. This will eventually reduce the workforce down from approximately 600 to 100 employees. This may also have an impact on nearby businesses that produce bottles and labels for this production plant in Iowa City. Procter and Gamble has added and is expanding an electric toothbrush plant in Iowa City which is expected to employ several hundred employees; it currently has added approximately 150 employees. The estimated investment in this new facility is approximately $100 million. Overall, the continued economic development efforts with the Iowa City and Coralville Chambers of Commerce, private interests, the University of Iowa, other surrounding communities, and the Iowa City Area Development Group, have 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 2.2% for the month of June 2018, as compared to 2.7% for the State of Iowa, and 4.0% 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 157 new single-family houses in 2017 as compared to 172 in 2016; multi-family dwelling units added during fiscal year 2017 was 203, compared to 556 in 2016; and mixed commercial/residential developments added 150 dwelling units in 2017 versus 340 residential units in 2016. Altogether these housing additions totaled 510 units valued at $99,676,806 in 2017 versus a total of 1,068 units valued at $206,478,670 in 2016. In addition to the decrease in residential construction in 2017, the City also had a decrease in commercial construction. The value of permits for commercial construction decreased by $57,651,210 to $5,005,776 from 2016 to 2017; however, the value of remodeling permits for residential and commercial properties increased by $14,578,688 to $107,666,214 from 2016 to 2017. Although there was a decrease in building permit issuance in 2017 versus 2016, the 2016 building permit issuance was an all-time high for the City. 5 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 2017 is estimated to be 75,798 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, helps to insulate the City from any significant negative economic impacts of any recessions. 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. Major Initiatives The City of Iowa City, with the assistance of Kirkwood Community College, 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 • Undertake a comprehensive assessment of the current public transit system and implement changes to assure that the service best meets the needs of the entire community • Effectively market and grow the local food economy • Through cooperation with the Iowa City School District, Iowa Workforce Development, Kirkwood Community College, Iowa Works, and others, increase opportunities for marginalized populations and low-income individuals to obtain access to skills training and good jobs • Work with Procter & Gamble and impacted supply chain companies, local economic development organizations, and labor unions to respond effectively to the company's decision to terminate its local production of beauty care products 2. Encourage a Vibrant and Walkable Urban Core • Collaborate with the University of Iowa on its redevelopment of University-owned property located in the Riverfront Crossings District, and on improving the quality, accessibility, and use of the Iowa River Corridor • Preserve important parts of Iowa City's history by considering the designation of additional buildings as historic landmarks, and by considering the creation of a historic preservation district for part of the downtown after consulting with stakeholders • Evaluate existing strategies and consider additional actions to address the need for reinvestment in the city’s existing private housing stock 6 3. Foster Healthy Neighborhoods throughout the City • Modify the existing Affordable Housing Action Plan to include new strategies to improve the availability and affordability of housing in Iowa City • Embed the "Missing Middle" concept into the City's land development practices by adopting a Form Based Code for at least one (preferably two) of our neighborhoods • Ensure the next two budgets contain sufficient funds to make meaningful progress toward achieving the goals of the Bicycle Master Plan and Parks Master Plan • Complete an analysis of traffic accident data and identify actions to improve the safety of our roadways for motorists, bicyclists, and pedestrians 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 5. Enhance Community Engagement and Intergovernmental Relations • Experiment with innovative ways of engaging with diverse populations in person and on social media • Improve collaborative problem-solving with governmental entities in the region on topics of shared interest • Improve relationships with the executive branch and legislature by reaching out to legislators and other elected officials and working with City lobbyists 6. Promote Environmental Sustainability • Adopt an effective Climate Action and Adaptation Plan and ensure the next two budgets contain sufficient funds to facilitate achieving its goal • Support efforts to increase the reach of the Parks and Recreation Foundation 7. Advance Social Justice and Racial Equity • Support organizations and efforts that provide services to people experiencing and recovering from trauma and crisis related to mental health and substance abuse • Consider a policy to limit city business to vendors that pay all employees a wage of $10.10 or higher • Explore expanded use of a racial equity toolkit within City government, embedding it within city department and Council levels • Consider elevating hourly staff wages to $15/hour or more within two years 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. 7 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 features 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. The Riverfront Crossings area is anchored by a 76.8 acre park 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 through 3 of the park began in 2017 and are expected to be completed during 2018. On the north side of the Riverfront Crossing area, the University of Iowa recently constructed the Voxman School of Music. On the adjacent corner, the redevelopment of an empty lot is under construction which will include a 7-story, mixed-use building with 40 apartment units, retail space on the street level, and office space on the second floor. An adjacent building will house a 7-story extended stay hotel. The estimated cost of these developments is approximately $40 million and are expected to be completed in 2019. There have also been numerous public and private developments that have recently been completed in this area including a 12-story, $33 million Hilton Garden Inn, an $102.5 million mixed-use development with a 14-story tower and a 15-story tower that will include the Hyatt Place hotel, apartments, retail space, and office space, and the $50-$60 million redevelopment of a lumber store into a 40,000 square foot brewery, restaurant, and tap room which will be flanked by nearly 300 dwelling units. The City also completed construction of a $15.3 million, 600 space parking garage in April 2017 to service growth in this area, which subsequently had 28 new townhomes constructed around it. 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 construction and are expected to be completed in 2019. Other buildings in the downtown that are undergoing or have recently completed major re- development include the Wilson Building and public space which 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 is currently under construction. Also under construction is the redevelopment of the City Hall parking lot and neighboring church into 126 residential units, parking, and commercial space. The project is estimated to cost $33.4 million. Both of these projects are expected to be completed in 2019. 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 in the area recently completed was a $7.4 million senior housing complex with 40 units which was built on the former site of a dilapidated commercial structure. Also, currently under construction is the consolidation and redevelopment of two older gas stations located on the primary intersection in this district into a new gas station/marketplace. 8 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 and additional multi- residential housing units were also constructed or renovated. 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 began in 2018 and will continue into 2019. Near 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 beginning in 2018 and anticipated completion in 2019. Long-term Financial Planning It is management’s intent to support the major City Council initiatives through budget appropriations, departmental operations, and employee development so that the organization as a whole is moving in the same direction. A significant influence in the preparation of the three-year financial plan (FY2018 – FY2020) 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 were 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 $17,181,000 between fiscal year 2015 to fiscal year 2024, and the maximum reimbursement from the State during that time period would be $16,572,000 for a net loss in revenues of $609,000. For fiscal years 2015 through 2018, the City received actual State “backfill” payments for the commercial and industrial rollback totaling $6,257,898. 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 $21,560,000 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 $15,945,500, 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 from this provision in fiscal year 2017 was $946,740; the estimated loss in fiscal year 2018 is $1,200,714. 9 Due to the passage of SF295, the City estimates its net revenue losses to be $5,872,655 for fiscal years 2015 through 2018. The cumulative net revenue loss from fiscal years 2015 through 2024 is estimated to be $38,115,000. 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. In fiscal year 2013, the City’s property tax levy rate was $17.269 per $1,000 of assessed value. The property tax levy rate has been reduced for five consecutive years to $16.183 in fiscal year 2019. This has been a reduction of $1.086 per $1,000 of assessed value or 6.29% over that time period. In looking at expenses for the FY18 – FY20 Financial Plan and FY19 operating budget, the City will generally experience increased expenditures; however, at a modest pace. Bargaining unit cost-of-living wage increases are approximately 2.00% to 2.60% each year; however, the budgeted full time equivalents (FTE) has decreased from 607.66 in FY15 to 605.54 in FY19. In addition, public safety pension contribution rates increased slightly in FY19 but are projected to decrease slightly in FY20. The City has averaged an increase in its health insurance premium rates of approximately 3.11% over the previous six years, and is not projecting any dramatic changes to this trend in FY19 or FY20. Employee contributions, deductibles, and out-of-pocket maximums are expected to increase in both FY19 and FY20. In balancing the budget for the three-year period, the City attempted to mitigate the growth of costs while continuing to provide high quality services by identifying and eliminating redundancies within the organization, examining existing and potential new revenue sources, strategically funding new programming and economic development to ensure strong property values, providing for necessary improvements to existing infrastructure, and upholding fiscal integrity by maintaining adequate cash reserves. 10 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, 2017. 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-three 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, 2018. 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 seventh consecutive year the City has received this award. 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, 2018. 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 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 Resource Management Equipment Transportation Services Administration Parking Public Transportation City Council City Manager City Clerk City Clerk City Attorney City Attorney 13 CITY OF IOWA CITY, IOWA LISTING OF CITY OFFICIALS June 30, 2018 ELECTED OFFICIALS Term Expires Mayor Jim Throgmorton January 2, 2020 Council Member and Mayor Pro Tem Pauline Taylor January 2, 2020 Council Member Rockne Cole January 2, 2020 Council Member John Thomas January 2, 2020 Council Member Kingsley Botchway II January 2, 2022 Council Member Susan Mims January 2, 2022 Council Member Mazahir Salih January 2, 2022 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 Tracy Hightshoe August 27, 2001 Library Director Susan Craig July 28, 1975 Director of Public Works Ron Knoche April 28, 1999 Director of Transportation Services Darian Nagle Gamm May 21, 2008 Senior Center Coordinator LaTasha DeLoach July 31, 2018 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 Independent Auditor’s Report To the Honorable Mayor and Members of City Council City of Iowa City, Iowa 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, as of and for the year ended June 30, 2018, 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. 15 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, 2018, 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 As discussed in Note 14 to the basic financial statements, the City implemented Governmental Accounting Standards Board Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. As a result, the City’s net positions for governmental activities and business-type activities, and the aggregate remaining fund information has been restated. 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, budgetary comparison information, schedule of changes in the City’s total OPEB liability and related ratios, schedules of the City’s proportionate share of the net pension liabilities for pension retirement systems, and schedules of the City’s contributions for pension retirement systems on pages 19-29 and 84-98, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual nonmajor fund financial statements, schedule of expenditures of federal awards as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and the other information, including the introductory and statistical sections, are presented for purposes of additional analysis and are not a required part of the basic financial statements. 16 The combining and individual nonmajor fund financial statements and 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 supplementary information of the combining and individual nonmajor fund financial statements and schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 11, 2018 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance. Moline, Illinois December 11, 2018 17 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, 2018. 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, 2018 by $651,667,000 (net position). Of this amount, $136,743,000 (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 $21,828,000 during the fiscal year. Governmental activities increased by $15,620,000 and business-type activities increased by $6,208,000. • At the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $101,810,000, a decrease of $4,571,000 in comparison with the prior year. Of this total amount, approximately $28,478,000 or 28.0% 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 $28,516,000 or 59.2% 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 six major governmental funds: General Fund, Other Shared Revenue and Grants Fund, Employee Benefits Fund, Other Construction 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, Transit, Wastewater Treatment, Water, Sanitation, Stormwater and Housing Authority are considered to be major funds and are reported individually throughout the report. The only non-major enterprise fund, Airport, is listed as non-major on the basic proprietary fund financial statements. 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 – 40 of this report. 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. 20 The basic fiduciary funds financial statements can be found on page 41. 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 42 – 82 of this report. Other Information: The combining statements referred to in the above paragraphs in connection with non- major governmental 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 $651,667,000 at the close of the fiscal year ended June 30, 2018. By far, the largest portion of the City’s net position reflect its investment in capital assets (e.g., land, building, machinery and equipment, improvements other than buildings, and infrastructure), net any related debt to acquire those assets that is still outstanding. The City uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other resources, since the capital assets themselves cannot be used to liquidate these liabilities. City of Iowa City's Net Position June 30, 2018 (amounts expressed in thousands) Governme ntal Business-type activities activities Total 2017 2017 2017 2018 (not restated) 2018 (not restated) 2018 (not restated) Current and other assets 192,519$ 190,352$ 120,389$ 119,968$ 312,908$ 310,320$ Capital assets 248,011 226,143 335,893 335,064 583,904 561,207 Total assets 440,530 416,495 456,282 455,032 896,812 871,527 Deferred outflows of resources 12,114 13,131 2,806 2,345 14,920 15,476 Long-term liabilities outstanding 114,709 112,931 62,121 68,385 176,830 181,316 Current and other liabilities 14,738 11,042 6,730 4,379 21,468 15,421 Total liabilities 129,447 123,973 68,851 72,764 198,298 196,737 Deferred inflows of resources 60,984 58,062 783 799 61,767 58,861 Net position: Net investment in capital assets 157,106 183,651 294,109 285,912 451,215 469,563 Restricted 41,490 47,676 22,219 21,238 63,709 68,914 Unrestricted 63,617 16,264 73,126 76,664 136,743 92,928 Total net position 262,213$ 247,591$ 389,454$ 383,814$ 651,667$ 631,405$ 21 A portion of the City’s net position, $63,709,000 or 9.8%, represents resources that are subject to external restrictions on how they may be used. The remaining balance of the unrestricted net position, $136,743,000 or 21.0%, 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, 2018, 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 FY18’s operation. Governmental Activities: Governmental activities increased the City’s net position by $15,620,000. 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 FY18 were $88,464,000. Governmental activities are primarily funded through taxes, $61,752,000 or 69.8%, and grants and contributions, $11,704,000 or 13.2%. Taxes increased from the prior year by $1,301,000, mostly due to increased property taxes which was due to an increase in the taxable value of all property. Grants and contributions decreased from prior year by $9,076,000 which is due to City’s expenses for a large flood mitigation project that were reimbursed in the prior year. Expenses for governmental activities totaled $74,658,000. Governmental activities are tracked by function including Public Safety, Public Works, Community and Economic Development, Culture and Recreation, and General Government. In FY18, Public Safety accounted for the highest portion of governmental expenses, $25,191,000 or 33.7%, and increased over the prior year due to increases in salaries and benefits. Culture and Recreation expenses of $16,363,000 or 21.9% made up another large portion of the governmental expenses and increased over the prior year due mainly to an increase in pension expense. Public Works expenses of $12,813,000 or 17.2% made up the third highest portion of governmental expenses and increased due to increases in salaries and benefits. Business-type Activities: Business-type activities increased the City’s total net position by $6,208,000. The increase in net position was primarily from the Parking and Transit funds. The increase in Parking is due to the sale of land. The increase in Transit is due to grants to purchase buses. For all business-type activities, revenues exceeded expenses by $8,022,000. Revenues for business-type activities totaled $65,014,000. The primary revenue source for business-type activities is charges for services, $42,208,000 or 64.9%. In addition for FY18, the City’s business type-activities had a significant portion, $18,416,000 or 28.3%, 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 FY18 were $56,992,000. Wastewater Treatment represented the highest portion of business-type activities, $11,392,000 or 20.0%, with Housing Authority, $9,535,000 or 16.7%, Water, $9,472,000 or 16.6%, Sanitation, $9,408,000 or 16.5%, and Transit, $8,071,000 or 14.2%, making up the remainder of the majority of business-type activities expenses. 22 The graphs on the following pages represent a breakdown of revenue by source and expenses by program area for governmental and business-type activities. City of Iowa City's Changes in Net Position (amounts expressed in thousands) Governmental Business-type activities activities Total 2017 2017 2017 2018 (not restated)2018 (not restated)2018 (not restated) Revenues: Program Revenues: Charges for services 7,297$ 8,412$ 42,208$ 41,231$ 49,505$ 49,643$ Operating grants and contributions 10,245 10,828 11,230 10,836 21,475 21,664 Capital grants and contributions 1,459 9,952 7,186 4,799 8,645 14,751 General Revenues: Property taxes 59,046 57,649 - - 59,046 57,649 Other taxes 2,706 2,802 - - 2,706 2,802 Grants and contributions not restricted to specific purposes 1,547 1,583 - - 1,547 1,583 Earnings on investments 2,368 1,397 1,496 938 3,864 2,335 Gain on disposal of capital assets 140 2,151 2,438 69 2,578 2,220 Other 3,656 3,369 456 1,260 4,112 4,629 Total revenues 88,464 98,143 65,014 59,133 153,478 157,276 Expenses: Public safety 25,191 24,002 - - 25,191 24,002 Public works 12,813 12,032 - - 12,813 12,032 Culture and recreation 16,363 15,525 - - 16,363 15,525 Community and economic development 12,019 8,253 - - 12,019 8,253 General government 6,858 6,124 - - 6,858 6,124 Interest on long-term debt 1,414 1,481 - - 1,414 1,481 Wastewater treatment - - 11,392 11,233 11,392 11,233 Water - - 9,472 8,921 9,472 8,921 Sanitation - - 9,408 9,123 9,408 9,123 Housing authority - - 9,535 8,798 9,535 8,798 Parking - - 5,590 4,620 5,590 4,620 Airport - - 1,680 1,402 1,680 1,402 Stormwater - - 1,844 2,432 1,844 2,432 Transit - - 8,071 7,263 8,071 7,263 Total expenses 74,658 67,417 56,992 53,792 131,650 121,209 Change in net position before transfers 13,806 30,726 8,022 5,341 21,828 36,067 Transfers 1,814 (7,053) (1,814) 7,053 - - Change in net position 15,620 23,673 6,208 12,394 21,828 36,067 Net position beginning of year, as restated 246,593 223,918 383,246 371,420 629,839 595,338 Net position end of year 262,213$ 247,591$ 389,454$ 383,814$ 651,667$ 631,405$ 23 Charges for services 8% Grants and Contributions 15% Property taxes 67% Other Taxes 3% Misc. Other 7% Governmental Activities FY2018 Revenue by Source Charges for services 65% Grants and Contributions 28% Misc. Other 7% Business-Type Activities FY2018 Revenue by Source 24 Public Safety Public Works Culture and RecreationCommunity 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 28,000 Dollars ($)Program Area Governmental Activities FY2018 Expenses by Program Area (amounts expressed in thousands) Wastewater Treatment WaterSanitationHousing Authority Parking Airport Stormwater Transit 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 Dollars ($)Program Area Business-Type Activities FY2018 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, 2018, the City’s governmental funds reported combined ending fund balances of $101,810,000, a decrease of $4,571,000 in comparison with the prior year. Of this total amount, $28,478,000 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 $65,975,000 or 64.8% contains external restraints on its use. The committed and assigned fund balances of $4,962,000 or 4.9% and $1,437,000 or 1.4%, respectively, have been identified by the City to be used for specific purposes. The nonspendable fund balance is $958,000 or 0.9%, 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, 2018, the unassigned fund balance of the General Fund was $28,516,000 while General Fund’s total fund balance was $37,650,000. 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 59.2% of total General Fund expenditures of $48,191,000, while total fund balance represents 78.1% of that same amount. During the current fiscal year, the fund balance of the City’s General Fund decreased by $4,446,000. This is due to transfers out to other funds. The fund balance in the Bridge, Street, and Traffic Control Construction Fund was $15,098,000, a decrease of $439,000. 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 $26,752,000, a decrease of $604,000. 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 transfers out to other funds. The ending fund balance of the Debt Service Fund was $8,609,000, an increase of $853,000, 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 $2,847,000, an increase of $326,000 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 $373,385,000, an increase in net position of $5,633,000. 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, $294,109,000 is net investment in capital assets. Unrestricted net position totaled $57,057,000, a decrease of $4,113,000 compared to the previous year. The Internal Service funds showed net position totaling $40,949,000 as of June 30, 2018, an increase of $1,472,000 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 $7,592,000 or 5.2% to a total of $152,606,000 and the expenditure budget by $74,315,000 or 42.9% to a total of $247,645,000. 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, 2018 amounts to $583,904,000, 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, 2018 increased by $21,868,000 for governmental activities compared to the prior year and increased by $829,000 for business- type activities from the prior year. The following table reflects the $583,904,000 investment in capital assets, net of accumulated depreciation. City of Iowa City's Capital Assets (net of depreciation) (amounts expressed in thousands) Governmental Business-type Activities Activities Total 2018 2017 2018 2017 2018 2017 Land 30,894$ 29,778$ 30,317$ 30,737$ 61,211$ 60,515$ Buildings 38,998 39,464 69,855 73,297 108,853 112,761 Improvements other than buildings 3,766 3,954 4,220 4,341 7,986 8,295 Machinery and equipment 17,279 16,686 10,396 7,470 27,675 24,156 Infrastructure 114,792 113,494 205,809 209,505 320,601 322,999 Construction in progress 42,282 22,767 15,296 9,714 57,578 32,481 Total 248,011$ 226,143$ 335,893$ 335,064$ 583,904$ 561,207$ 27 Major capital asset events during the current fiscal year included the following: • Work was completed for Phase 1 of the Riverfront Crossings Park. This park was constructed on the old wastewater plant site and it will also serve as a floodable area/wetlands area. The construction in progress balance at the beginning of the year was $382,000. Additional expenses of $2,727,000 were added in FY 18. The total cost of the project that was capitalized was $3,109,000 and is funded primarily by the state. The Iowa Flood Mitigation Board approves funding for flood mitigation projects using either sales tax increments or funds appropriated by the General Assembly. • Expenses for a variety of street and bridge construction were moved into construction in progress at the end of FY18 for a total balance of $48,008,000. This construction in progress includes $46,356,000 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 $94,730,000. Of this amount, $51,880,000 comprises debt backed by the full faith and credit of the City. $4,435,000 or 8.5% of these bonds is debt that will be paid with Tax Increment Financing revenues. $42,850,000 represents revenue bonds secured solely by specific revenue sources. The City issued $11,995,000 of General Obligation bonds during FY18. This increase in debt was offset by the retirement of debt for a net decrease of City’s total bonded debt by $4,935,000. 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, 2018 were as follows: General obligation bonds Aaa Wastewater treatment revenue bonds Aa2 Water revenue bonds Aa2 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 $274,723,000. With outstanding debt applicable to this limit of $92,432,000 we are utilizing 33.6% of this limit. More detailed information on debt administration is provided in Note 6 of the financial statements. City of Iowa City's Outstanding Debt General Obligation and Revenue Bonds (amounts expressed in thousands) Governmental Business-type Activities Activities Total 2018 2017 2018 2017 2018 2017 General obligation bonds 51,880$ 51,645$ -$ -$ 51,880$ 51,645$ Revenue bonds 15,065 15,200 27,785 32,820 42,850 48,020 Total 66,945$ 66,845$ 27,785$ 32,820$ 94,730$ 99,665$ 28 Economic Factors and Next Year’s Budget and Rates 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 budget where expenditures exceed revenues by $2.3million in the General Fund for FY19 that strives to maintain current service delivery levels. The tax levy rate per $1,000 of assessed valuation for FY19 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 3.229 Employee Benefits Levy 3.344 Transit Levy 0.950 Liability Insurance Levy 0.290 Library Levy 0.270 Total City Levy $ 16.183 29 Governmental Business-type Activities Activities Total Assets Equity in pooled cash and investments 109,860$ 63,520$ 173,380$ Receivables: Property tax 59,538 - 59,538 Accounts and unbilled usage 817 3,660 4,477 Interest 920 647 1,567 Notes 5,304 397 5,701 Internal balances (16,069) 16,069 - Due from other governments 4,067 1,327 5,394 Prepaid item 810 97 907 Inventories 602 733 1,335 Assets held for resale 562 - 562 Restricted assets: Equity in pooled cash and investments 26,108 33,939 60,047 Capital assets: Land and construction in progress 73,176 45,613 118,789 Other capital assets (net of accumulated depreciation)174,835 290,280 465,115 Total assets 440,530 456,282 896,812 Deferred Outflows of Resources Pension related deferred outflows 11,477 2,561 14,038 OPEB related deferred outflows 637 245 882 Total deferred outflows of resources 12,114 2,806 14,920 Liabilities Accounts payable 5,168 2,402 7,570 Contracts payable 3,663 1,407 5,070 Accrued liabilities 4,193 479 4,672 Interest payable 134 520 654 Deposits 952 1,819 2,771 Advances from grantors 124 - 124 Due to other governments 29 103 132 Notes payable 475 - 475 Noncurrent liabilities: Due within one year: Employee vested benefits 1,253 424 1,677 Capital lease obligation - 545 545 Bonds payable 9,612 5,269 14,881 Due in more than one year: Employee vested benefits 987 302 1,289 Net pension liability 38,867 8,966 47,833 Other post employment benefits liability 5,472 2,117 7,589 Notes payable 211 - 211 Capital lease obligation - 11,413 11,413 Bonds payable 58,307 23,826 82,133 Landfill closure/post-closure liability - 9,259 9,259 Total liabilities 129,447$ 68,851$ 198,298$ (continued) (amounts expressed in thousands) CITY OF IOWA CITY, IOWA STATEMENT OF NET POSITION June 30, 2018 30 Governmental Business-type Activities Activities Total Deferred inflows of resources Unavailable revenues: Pension related deferred inflows 1,565$ 475$ 2,040$ OPEB related deferred inflows 246 95 341 Deferred amount on refunding - 213 213 Succeeding year property taxes 59,173 - 59,173 Total deferred inflows of resources 60,984 783 61,767 Net position Net investment in capital assets 157,106 294,109 451,215 Restricted for or by: Employee benefits 3,119 - 3,119 Capital projects 21,463 - 21,463 Debt service 8,423 - 8,423 Police 283 - 283 Other purposes 4,469 - 4,469 Bond ordinance - 13,111 13,111 State statute - 5,876 5,876 Future improvements - 100 100 Grant agreement 3,733 3,132 6,865 Unrestricted 63,617 73,126 136,743 Total net position 262,213$ 389,454$ 651,667$ The notes to the financial statements are an integral part of this statement. June 30, 2018 (amounts expressed in thousands) CITY OF IOWA CITY, IOWA STATEMENT OF NET POSITION (continued) 31 32 Operating Capital Charges Grants and Grants and Governmental Business-type Functions/Programs:Expenses for Services Contributions Contributions Activities Activities Total Governmental activities: Public safety 25,191$ 4,438$ 272$ 15$ (20,466)$ -$ (20,466)$ Public works 12,813 62 8,572 1,095 (3,084) - (3,084) Culture and recreation 16,363 836 16 322 (15,189) - (15,189) Community and economic development 12,019 441 1,385 27 (10,166) - (10,166) General government 6,858 1,520 - - (5,338) - (5,338) Interest on long-term debt 1,414 - - - (1,414) - (1,414) Total governmental activities 74,658 7,297 10,245 1,459 (55,657) - (55,657) Business-type activities: Wastewater treatment 11,392 12,626 - 1,913 - 3,147 3,147 Water 9,472 9,473 - 483 - 484 484 Sanitation 9,408 10,014 3 22 - 631 631 Housing authority 9,535 323 9,065 - - (147) (147) Parking 5,590 5,648 - - - 58 58 Airport 1,680 348 72 49 - (1,211) (1,211) Stormwater 1,844 1,560 2 892 - 610 610 Transit 8,071 2,216 2,088 3,827 - 60 60 Total business-type activities 56,992 42,208 11,230 7,186 - 3,632 3,632 Total 131,650$ 49,505$ 21,475$ 8,645$ (55,657) 3,632 (52,025) General revenues: Property taxes, levied for general purposes 59,046 - 59,046 Hotel/motel tax 1,046 - 1,046 Gas and electric tax 684 - 684 Utility franchise tax 976 - 976 Grants and contributions not restricted to specific purposes 1,547 - 1,547 Earnings on investments 2,368 1,496 3,864 Gain on disposal of capital assets 140 2,438 2,578 Miscellaneous 3,656 456 4,112 Transfers 1,814 (1,814) - Total general revenues and transfers 71,277 2,576 73,853 Changes in net position 15,620 6,208 21,828 Net position beginning of year, as restated 246,593 383,246 629,839 Net position end of year 262,213$ 389,454$ 651,667$ The notes to the financial statements are an integral part of this statement. Program Revenues Net (Expense) Revenue and Changes in Net Position CITY OF IOWA CITY, IOWA STATEMENT OF ACTIVITIES For the Year Ended June 30, 2018 (amounts expressed in thousands) 33 Bridge, Other Street, and Shared Traffic Other Revenue and Employee Other Control Debt Governmental General Grants Benefits Construction Construction Service Funds Total Assets Equity in pooled cash and investments 36,321$ 3,708$ 2,696$ 11,919$ 12,630$ 7,834$ 2,260$ 77,368$ Receivables: Property tax 34,973 - 12,165 - - 12,029 371 59,538 Accounts and unbilled usage 496 21 - - 205 - - 722 Interest 276 8 - 117 103 168 6 678 Notes 1,276 - -- - 362 3,666 5,304 Advances to other funds - - - - - 111 - 111 Due from other governments 1,941 653 299 262 753 - 108 4,016 Inventories - 81 - - - - - 81 Prepaid item 726 - 84 - - - - 810 Assets held for resale 562 - - - - - - 562 Restricted assets: Equity in pooled cash and investments 1,904 1,207 - 17,088 5,852 57 - 26,108 Total assets 78,475$ 5,678$ 15,244$ 29,386$ 19,543$ 20,561$ 6,411$ 175,298$ Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable 1,492$ 223$ 1$ 1,213$ 1,316$ -$ 382$ 4,627$ Contracts payable - - - 1,311 2,352 - - 3,663 Accrued liabilities 1,391 96 2 - 19 - 23 1,531 Advances from other funds - 111 - - - - - 111 Due to other governments 29 - - - - - - 29 Interest payable 5 - - - - - - 5 Notes payable 475 - - - - - - 475 Liabilities payable from restricted assets: Deposits 947 5 - - - - - 952 Advances from grantors 113 6 - 5 - - - 124 Total liabilities 4,452 441 3 2,529 3,687 - 405 11,517 Deferred inflows of resources : Unavailable revenues: Succeeding year property taxes 34,764 - 12,095 - - 11,952 362 59,173 Grants 9 1 - 13 753 - 26 802 Other 1,600 - 299 92 5 - -1,996 Total deferred inflows of resources 36,373 1 12,394 105 758 11,952 388 61,971 Fund balances: Nonspendable 793 81 84 - - - - 958 Restricted 1,942 5,155 2,763 26,752 15,098 8,609 5,656 65,975 Committed 4,962 - - - - - - 4,962 Assigned 1,437 - - - - - - 1,437 Unassigned 28,516 - - - - - (38) 28,478 Total fund balances 37,650 5,236 2,847 26,752 15,098 8,609 5,618 101,810 Total liabilities, deferred inflows of resources and fund balances 78,475$ 5,678$ 15,244$ 29,386$ 19,543$ 20,561$ 6,411$ 175,298$ The notes to the financial statements are an integral part of this statement. Special Revenue Capital Projects CITY OF IOWA CITY, IOWA BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2018 (amounts expressed in thousands) 34 Total governmental fund balances 101,810$ 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.40,949 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.2,798 Capital assets used in governmental activities are not current financial resources and therefore are not reported in the funds. 235,805 Pension and OPEB 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 11,667$ Deferred inflows of resources (1,722) 9,945 Net pension liabilities are not due and payable in the current period and therefore are not reported in the funds.(37,449) Accrued compensated absences are not due and payable in the current period and therefore are not reported in the funds.(2,126) Accrued post employment benefit liabilities are not due and payable in the current period and therefore are not reported in the funds.(5,191) Bonds payable are not due and payable in the current period and therefore are not reported in the funds.(67,919) 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 (16,069) Total net position of governmental activities 262,213$ 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, 2018 35 Bridge, Other Street, and Shared Traffic Other Revenue and Employee Other Control Debt Governmental General Grants Benefits Construction Construction Service Funds Total Revenues Taxes 35,363$ -$ 10,908$ -$ -$ 12,700$ 2,782$ 61,753$ Licenses and permits 2,734 - - - - - - 2,734 Intergovernmental 3,786 8,656 292 371 127 332 1,380 14,944 Charges for services 1,465 422 316 43 49 - - 2,295 Fines and forfeits 695 - - - - - - 695 Use of money and property 1,164 85 - 245 184 207 52 1,937 Miscellaneous 1,878 156 153 163 477 - 48 2,875 Total revenues 47,085 9,319 11,669 822 837 13,239 4,262 87,233 Expenditures Current: Public safety 22,762 - 591 7 - - - 23,360 Public works 1,871 5,885 - 446 1,850 - - 10,052 Culture and recreation 13,099 - - 1,109 - - - 14,208 Community and economic development 2,785 492 - 5,352 - - 2,445 11,074 General government 5,550 - 377 29 - 61 - 6,017 Debt service: Principal - - - - - 11,895 - 11,895 Interest - - - - - 1,570 - 1,570 Capital outlay 2,124 344 - 5,331 20,426 - - 28,225 Total expenditures 48,191 6,721 968 12,274 22,276 13,526 2,445 106,401 Excess (deficiency) of revenues over (under) expenditures (1,106) 2,598 10,701 (11,452) (21,439) (287) 1,817 (19,168) Other Financing Sources (Uses) Issuance of debt 17 - - 5,258 6,665 55 - 11,995 Sale of capital assets 140 - - - - - - 140 Premiums on issuance of bonds - - - 104 131 1 - 236 Transfers in 10,138 1,092 - 6,413 15,603 1,084 336 34,666 Transfers out (13,635) (4,975) (10,375) (927) (1,399) - (1,129) (32,440) Total other financing sources and (uses)(3,340) (3,883) (10,375) 10,848 21,000 1,140 (793) 14,597 Net change in fund balances (4,446) (1,285) 326 (604) (439) 853 1,024 (4,571) Fund Balances, Beginning 42,096 6,521 2,521 27,356 15,537 7,756 4,594 106,381 Fund Balances, Ending 37,650$ 5,236$ 2,847$ 26,752$ 15,098$ 8,609$ 5,618$ 101,810$ The notes to the financial statements are an integral part of this statement. Special Revenue Capital Projects CITY OF IOWA CITY, IOWA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended June 30, 2018 (amounts expressed in thousands) 36 Net change in fund balances - total governmental funds (4,571)$ 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 27,549$ Capital assets contributed 945 Depreciation expense (6,877) 21,617 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 (11,995) Premium on bonds issued (236) Repayments of debt 11,895 Amortization of premium 156 (180) 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.(284) 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 2 Pension expense (1,429) Change in accrued post employment benefit liability (432) 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.897 Change in net position of governmental activities 15,620$ The notes to the financial statements are an integral part of this statement. (amounts expressed in thousands) For the Year Ended June 30, 2018 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 GovernmentalActivities - Internal Wastewater Housing Nonmajor Service Parking Transit Treatment Water Sanitation Stormwater Authority Airport Total Funds Assets Current assets: Equity in pooled cash and investments 12,971$ 6,979$ 14,856$ 8,223$ 14,762$ 1,550$ 3,929$ 250$ 63,520$ 32,492$ Receivables (net of allowance for uncollectibles): Accounts and unbilled usage 14 81 1,569 1,112 693 164 3 24 3,660 95 Interest 82 34 132 102 226 11 58 2 647 242 Notes - - - - - - 397 - 397 - Due from other governments - 1,169 - 58 49 - 34 17 1,327 51 Inventories - 325 - 408 - - - - 733 521 Prepaid item - 19 19 19 18 - - 22 97 - Total current assets 13,067 8,607 16,576 9,922 15,748 1,725 4,421 315 70,381 33,401 Noncurrent assets: Restricted assets: Equity in pooled cash and investments 1 20 9,991 5,163 14,743 - 3,911 110 33,939 - Advances to other funds - - - - 1,666 - -- 1,666 - Capital assets: Land 3,489 2,630 759 6,296 2,264 2,264 620 11,995 30,317 45 Buildings 41,647 15,399 36,858 24,019 5,467 - 5,350 5,377 134,117 1,487 Improvements other than buildings 328 - 7,261 2,742 421 - 9 396 11,157 50 Machinery and equipment 1,575 14,252 7,633 10,833 252 27 106 293 34,971 21,748 Infrastructure - 955 149,981 63,824 17,366 61,227 - 17,868 311,221 2,101 Accumulated depreciation (20,632) (15,633) (80,228) (39,112) (16,375) (14,933) (4,566) (9,707) (201,186) (13,561) Construction in progress - 1,306 7,961 3,494 821 1,634 - 80 15,296 336 Total noncurrent assets 26,408 18,929 140,216 77,259 26,625 50,219 5,430 26,412 371,498 12,206 Total assets 39,475 27,536 156,792 87,181 42,373 51,944 9,851 26,727 441,879 45,607 Deferred Outflows of Resources Pension related deferred outflows 251 716 408 490 471 38 172 15 2,561 415 OPEB related deferred outflows 25 77 34 44 51 1 12 1 245 32 Total deferred outflows of resources 276 793 442 534 522 39 184 16 2,806 447 Liabilities Current liabilities: Accounts payable 124 1,579 80 385 184 5 26 19 2,402 541 Contracts payable 31 - 426 205 705 4 - 36 1,407 - Accrued liabilities 46 151 68 85 86 8 31 4 479 2,662 Employee vested benefits 37 127 61 80 83 1 33 2 424 64 Due to other governments - 13 1 27 1 - 61 - 103 - Interest payable 40 - 330 150 - - - - 520 - Capital lease obligation 545 - - - - - - - 545 - Bonded debt payable (net of unamortized premium and discounts)- - 3,729 1,540 - - - - 5,269 - Total current liabilities 823 1,870 4,695 2,472 1,059 18 151 61 11,149 3,267 Noncurrent liabilities: Liabilities payable from restricted assets: Deposits 1 6 - 1,017 7 - 779 9 1,819 - Advances from other funds 1,666 - - - - - -- 1,666 - Employee vested benefits 27 87 42 58 61 1 24 2 302 50 Capital lease obligation 11,413 - - - - - -- 11,413 - Bonded debt payable (net of unamortized premium and discounts)- - 13,358 10,468 - - - - 23,826 - Net pension liability 894 2,512 1,404 1,680 1,678 143 602 53 8,966 1,418 Other post employment benefits liability 214 665 293 383 439 11 101 11 2,117 281 Landfill closure/postclosure liability - - - - 9,259 - - - 9,259 - Total noncurrent liabilities 14,215 3,270 15,097 13,606 11,444 155 1,506 75 59,368 1,749 Total liabilities 15,038 5,140 19,792 16,078 12,503 173 1,657 136 70,517 5,016 Deferred Inflows of Resources Pension related deferred inflows 47 133 74 89 89 8 32 3 475 75 OPEB related deferred inflows 10 29 13 17 20 1 5 - 95 14 Deferred amount on refunding - - 123 90 - - - - 213 - Total deferred inflow of resources 57 162 210 196 109 9 37 3 783 89 Net Position Net investment in capital assets 14,449 18,909 113,015 59,480 10,216 50,219 1,519 26,302 294,109 12,206 Restricted by bond ordinance - - 9,661 3,450 - - - - 13,111 - Restricted by state statute - - - 5,876 - - - 5,876 - Restricted for future improvements - - - - - - - 100 100 - Restricted by grant agreement - - - - - - 3,132 - 3,132 - Unrestricted 10,207 4,118 14,556 8,511 14,191 1,582 3,690 202 57,057 28,743 Total net position 24,656$ 23,027$ 137,232$ 71,441$ 30,283$ 51,801$ 8,341$ 26,604$ 373,385$ 40,949$ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds.16,069 Net position of business-type activities 389,454$ 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 NET POSITION PROPRIETARY FUNDS June 30, 2018 (amounts expressed in thousands) 38 Governmental Activities - Internal Wastewater Housing Nonmajor Service Parking Transit Treatment Water Sanitation Stormwater Authority Airport Total Funds Operating Revenues: Charges for services 5,648$ 2,216$ 12,626$ 9,473$ 10,014$ 1,560$ 323$ 348$ 42,208$ 19,284$ Miscellaneous 35 69 87 73 79 7 93 13 456 - Total operating revenues 5,683 2,285 12,713 9,546 10,093 1,567 416 361 42,664 19,284 Operating Expenses: Personal services 1,674 4,127 2,948 3,463 2,960 314 905 85 16,476 2,317 Commodities 502 810 1,250 1,427 403 73 85 70 4,620 2,258 Services and charges 1,614 2,235 2,424 2,059 5,301 217 8,434 393 22,677 10,832 3,790 7,172 6,622 6,949 8,664 604 9,424 548 43,773 15,407 Depreciation 1,268 906 4,436 2,372 1,526 1,240 120 1,003 12,871 1,884 Total operating expenses 5,058 8,078 11,058 9,321 10,190 1,844 9,544 1,551 56,644 17,291 Operating income (loss)625 (5,793) 1,655 225 (97) (277) (9,128) (1,190) (13,980) 1,993 Nonoperating Revenues (Expenses): Gain (loss) on disposal of capital assets 2,423 (23) (53) 3 - - 2 (144) 2,208 (30) Operating grants - 2,088 - - 3 2 9,065 72 11,230 - Interest income 129 80 468 292 444 24 54 5 1,496 430 Interest expense (568) - (375) (259) - - - - (1,202) - Total nonoperating revenues (expenses)1,984 2,145 40 36 447 26 9,121 (67) 13,732 400 Income (loss) before capital contributions and transfers 2,609 (3,648) 1,695 261 350 (251) (7) (1,257) (248) 2,393 Capital contributions - 3,827 1,913 483 22 892 - 49 7,186 - Transfers in - 3,376 531 1,041 1 1,623 30 110 6,712 1,202 Transfers out - -(4,727) (715) (1,528) (1,000) (47) - (8,017) (2,123) Change in net position 2,609 3,555 (588) 1,070 (1,155) 1,264 (24) (1,098) 5,633 1,472 Net Position, Beginning, as restated 22,047 19,472 137,820 70,371 31,438 50,537 8,365 27,702 39,477 Net Position, Ending 24,656$ 23,027$ 137,232$ 71,441$ 30,283$ 51,801$ 8,341$ 26,604$ 40,949$ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 575 Change in net position of business-type activities 6,208$ 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, 2018 (amounts expressed in thousands) 39 Governmental Activities - Internal Wastewater Housing Nonmajor Service Parking Transit Treatment Water Sanitation Stormwater Authority Airport Total Funds Cash Flows From Operating Activities Receipts from customers and users 5,679$ 2,219$ 12,669$ 9,472$ 10,118$ 1,557$ 717$ 360$ 42,791$ 19,362$ Payments to suppliers (2,187) (1,678) (3,839) (3,294) (5,082) (358) (8,500) (471) (25,409) (13,078) Payments to employees (1,769) (4,005) (3,084) (3,482) (2,939) (276) (928) (78) (16,561) (2,400) Net cash flows from (used for) operating activities 1,723 (3,464) 5,746 2,696 2,097 923 (8,711) (189) 821 3,884 Cash Flows From Noncapital Financing Activities Grants received - 3,706 - - 1 84 8,993 140 12,924 - Transfers from other funds - 3,376 231 - 1 - 30 110 3,748 - Transfers to other funds - -(2,000) (715) (486) (1,000) (47) - (4,248) (1,453) Repayment/(payment) of notes receivable - -- - - - 143 - 143 - Repayment of advances from other funds - -- - 235 - - - 235 - Repayment of advances to other funds (235) - - - - - - - (235) - Net cash flows from (used for) noncapital financing activities (235) 7,082 (1,769) (715) (249) (916) 9,119 250 12,567 (1,453) Cash Flows From Capital and Related Financing Activities Capital grants received - 3,108 1,291 - 20 - - 78 4,497 - Acquisition and construction of property and equipment (70) (4,830) (4,522) (1,198) (1,185) (22) (22) (152) (12,001) (1,870) Proceeds from sale of property 2,679 - 10 3 - - 2 20 2,714 237 Principal paid on capital lease obligation (2,524) - -- - - - - (2,524) - Interest paid on capital lease obligation (576) - - - - - - - (576) - Principal paid on bonded debt - -(3,556) (1,443) - - - - (4,999) - Interest paid on bonded debt - -(755) (395) - - - - (1,150) - Net cash flows used for capital and related financing activities (491) (1,722) (7,532) (3,033) (1,165) (22) (20) (54) (14,039) (1,633) Cash Flows From Investing Activities Interest on investments 78 61 436 232 310 18 61 4 1,200 277 Net increase (decrease) in cash and cash equivalents 1,075 1,957 (3,119) (820) 993 3 449 11 549 1,075 Cash and Cash Equivalents, Beginning 11,897 5,042 27,966 14,206 28,512 1,547 7,391 349 96,910 31,417 Cash and Cash Equivalents, Ending 12,972$ 6,999$ 24,847$ 13,386$ 29,505$ 1,550$ 7,840$ 360$ 97,459$ 32,492$ Reconciliation of operating income (loss) to net cash flows from (used for) operating activities: Operating income (loss)625$ (5,793)$ 1,655$ 225$ (97)$ (277)$ (9,128)$ (1,190)$ (13,980)$ 1,993$ Adjustments to reconcile operating income (loss) to net cash flows from (used for) operating activities: Depreciation expense 1,268 906 4,436 2,372 1,526 1,240 120 1,003 12,871 1,884 Changes in: Receivables: Accounts and unbilled usage (4) (66) (44) (69) 5 (10) (3) - (191) 62 Due from other governments - -- (57) 18 - 144 - 105 16 Inventories - (31) - 61 - - - - 30 (55) Prepaid item - (19) (19) (19) (18) - - (19) (94) 12 Accounts payable (71) 1,420 (145) 148 (27) (68) (8) 11 1,260 55 Accrued liabilities 3 15 (1) 4 14 (1) 3 2 39 (84) Employee vested benefits (2) 17 (3) 17 - -2 1 32 1 Due to other governments - (3) (1) 2 (1) - 27 - 24 - Deposits - -- 52 2 - 160 (1) 213 - Net pension liability (101) 84 (65) 12 30 33 (6) 4 (9) 21 Deferred outflows of resources (25) (107) (87) (104) (100) 2 (38) (2) (461) (66) Deferred inflows of resources (4) 9 (26) (7) 9 2 1 - (16) 1 Other post employment benefits liability 34 104 46 59 68 2 15 2 330 44 Landfill closure/postclosure liability - - - - 668 - - - 668 - Total adjustments 1,098 2,329 4,091 2,471 2,194 1,200 417 1,001 14,801 1,891 Net cash flows from (used for) operating activities 1,723$ (3,464)$ 5,746$ 2,696$ 2,097$ 923$ (8,711)$ (189)$ 821$ 3,884$ Noncash Investing, Capital, and Financing Activities: Contributions of capital assets from government and others -$ -$ 922$ 1,524$ -$ 2,515$ -$ -$ 4,961$ 1,202$ Contributions of capital assets to government and others -$ -$ 2,727$ -$ 1,042$ -$ -$ -$ 3,769$ 670$ Capital grants not yet received -$ 1,114$ -$ -$ 2$ -$ -$ 5$ 1,121$ -$ Operating grants not yet received -$ 5$ -$ -$ 2$ -$ 34$ 12$ 53$ -$ 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, 2018 (amounts expressed in thousands) 40 Agency Funds Assets Equity in pooled cash and investments 150$ Interest receivable 1 Total assets 151$ Liabilities Accounts payable 12$ Due to agency 139 Total liabilities 151$ The notes to the financial statements are an integral part of this statement. June 30, 2018 (amounts expressed in thousands) CITY OF IOWA CITY STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES 41 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS June 30, 2018 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) 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. 42 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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 Other Shared Revenue and Grants Fund is used to account for revenue from various sources, primarily road use tax monies from the State of Iowa and reimbursable programs funded by federal and state grants. 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. 43 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 The 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. 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. 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 Transit Fund is used to account for the operation and maintenance of the public transportation system. 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. The City has one nonmajor enterprise fund, the Airport Fund is used to account for the operation and maintenance of the airport facility. 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. 44 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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. 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. 45 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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. 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 and OPEB 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. 46 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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 and OPEB related items. 47 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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 $20,830,854 in revenues and other financing sources and by $86,333,581 in expenditures and other financing uses. Appropriations, as adopted or amended, lapse at the end of the fiscal year. 48 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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, 2018 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 or other short-term corporate debt; 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; and warrants or improvement certificates of a drainage district. At June 30, 2018, the City had the following investments: Fair Investment Value Ma t urities Federal Home Loan Bank Notes 10,385,215$ November 2018 to October 2022 Federal Home Loan Mortgage Corporation Notes 5,974,160 May 2019 to March 2023 United States Treasury Notes 8,491,315 July 2018 to April 2019 Federal National Mortgage Association 1,058,048 June 2019 Natixis NY Branch Commercial Paper 2,967,427 September 2018 to November 2018 John Deere Capital Corporation Corporate Notes 997,690 October 2018 Toyota Motor Credit Corporation Corporate Notes 1,989,100 February 2019 31,862,955$ 49 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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. The recurring fair value measurement for the Federal Home Loan Bank securities of $10,385,215, the Federal Home Loan Mortgage Corporation securities of $5,974,160, the Federal National Mortgage Association securities of $1,058,048 and the United States Treasury securities of $8,491,315 were determined using the last reported sales price at current exchange rates (Level 1 inputs). The fair value measurement for the Natixis NY Branch commercial paper of $2,967,427 was determined using the last reported sales price at current exchange rates (Level 1 inputs). The fair value measurements for the John Deere Capital Corporation corporate notes of $997,690 and the Toyota Motor Credit Corporation corporate notes of $1,989,100 were 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 $14,047,707, 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. 50 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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. 3. Interfund Balances and Transfers Interfund balances for the year ended June 30, 2018, consisted of the following: Interfund balances at June 30, 2018, include advances due to/from other funds, which represent amounts for construction loans and a revenue bond redemption loan. $1,423,385 of the $1,665,852 advance to the Parking Fund is not expected to be repaid within the next year. $96,694 of the $110,893 advance to the Other Shared Revenue and Grants Fund is not expected to be repaid within the next year. Debt Service Sanita t ion Total Advances to: Parking -$ 1,665,852$ 1,665,852$ Other Shared Revenue and Grants 110,893 - 110,893 Total 110,893$ 1,665,852$ 1,776,745$ Advances from 51 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Interfund transfers for the year ended June 30, 2018, 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. Capital Projects Bridge, Street Other Capital Projects and Traffic Shared Revenue Employee Other Control Nonmajor General and Grants Benefits Construction Construction Governmental Transfer to: General -$ 93,553$ 9,947,001$ 31,923$ -$ 18,356$ Other Shared Revenue and Grants 650,093 - 427,642 - 13,941 - Debt Service 20,052 - -256 - 1,064,028 Capital Projects Other Construction 994,403 1,018,570 - - 20,986 17,082 Capital Projects Bridge, Street and Traffic Control Construction 8,338,836 3,212,990 - - - - Nonmajor Governmental 133,935 202,104 - - - - Transit 3,376,455 - - - - - Wastewater Treatment 452 231,020 - 300,000 - - Water 392 - - 87,810 952,848 - Sanitation 1,324 - - - - - Stormwater 249 - - 67,252 411,444 - Housing Authority - - - - - 29,287 Nonmajor Enterprise 109,687 - - - - - Internal Service 8,934 216,377 - 439,364 - - Total Transfer to 13,634,812$ 4,974,614$ 10,374,643$ 926,605$ 1,399,219$ 1,128,753$ Transfer from 52 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Wastewater Housing Internal Total Treatment Water Sanitation Stormwater Authority Service Transfer from -$ -$ -$ -$ 46,779$ -$ 10,137,612$ - - - - - - 1,091,676 - - - - - - 1,084,336 1,622,867 500,000 486,141 300,000 - 1,453,180 6,413,229 2,085,761 215,467 860,954 700,000 - 188,961 15,602,969 - - - - - - 336,039 - - - - - - 3,376,455 - - - - - - 531,472 - - - - - - 1,041,050 - - - - - - 1,324 1,018,827 - 124,941 - - - 1,622,713 - - - - - 264 29,551 - - - - - - 109,687 - - 56,469 - - 480,516 1,201,660 4,727,455$ 715,467$ 1,528,505$ 1,000,000$ 46,779$ 2,122,921$ 42,579,773$ Transfer from 53 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 4. Capital Assets Capital asset activity for the year ended June 30, 2018, was as follows: Beginning July 1, 2017 Acquisitions and Transfers Disposals and Transfers Balance June 30, 2018 Governmental activities: Capital assets, not being depreciated: Land 29,778,881$ 1,115,078$ -$ 30,893,959$ Construction in progress 22,766,982 19,850,327 334,743 42,282,566 Total capital assets, not being depreciated 52,545,863 20,965,405 334,743 73,176,525 Capital assets, being depreciated: Buildings 64,183,861 1,235,069 163,326 65,255,604 Improvements other than buildings 7,501,518 103,346 48,019 7,556,845 Machinery and equipment 44,456,239 4,745,142 5,344,321 43,857,060 Infrastructure 156,922,114 4,915,183 1,038,129 160,799,168 Total capital assets being depreciated 273,063,732 10,998,740 6,593,795 277,468,677 Less accumulated depreciation for: Buildings 24,719,781 1,685,194 146,753 26,258,222 Improvements other than buildings 3,547,490 284,040 40,757 3,790,773 Machinery and equipment 27,770,324 3,461,091 4,653,360 26,578,055 Infrastructure 43,427,263 3,331,298 751,064 46,007,497 Total accumulated depreciation 99,464,858 8,761,623 5,591,934 102,634,547 Total capital assets, being depreciated, net 173,598,874 2,237,117 1,001,861 174,834,130 Governmental activities capital assets, net 226,144,737$ 23,202,522$ 1,336,604$ 248,010,655$ 54 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Beginning July 1, 2017 Acquisitions and Transfers Disposals and Transfers Balance June 30, 2018 Business-type activities: Capital assets, not being depreciated: Land 30,737,360$ -$ 420,175$ 30,317,185$ Construction in progress 9,714,893 6,094,744 512,350 15,297,287 Total capital assets, not being depreciated 40,452,253 6,094,744 932,525 45,614,472 Capital assets, being depreciated: Buildings 134,116,842 - - 134,116,842 Improvements other than buildings 10,888,774 273,123 5,395 11,156,502 Machinery and equipment 30,811,069 4,390,048 229,165 34,971,952 Infrastructure 307,426,024 3,969,414 174,260 311,221,178 Total capital assets being depreciated 483,242,709 8,632,585 408,820 491,466,474 Less accumulated depreciation for: Buildings 60,819,791 3,441,770 - 64,261,561 Improvements other than buildings 6,548,221 392,926 4,586 6,936,561 Machinery and equipment 23,340,652 1,431,732 195,972 24,576,412 Infrastructure 97,920,877 7,602,806 112,346 105,411,337 Total accumulated depreciation 188,629,541 12,869,234 312,904 201,185,871 Total capital assets, being depreciated, net 294,613,168 (4,236,649) 95,916 290,280,603 Business-type activities capital assets, net 335,065,421$ 1,858,095$ 1,028,441$ 335,895,075$ Depreciation expense was charged to functions as follows: Governmental activities: Public safety 1,579,960$ Public works 3,829,983 Culture and recreation 2,890,681 Community and economic development 59,345 General government 401,654 Total depreciation expense - governmental activities 8,761,623$ Business-type activities: Parking 1,267,743$ Transit 905,993 Wastewater treatment 4,435,712 Water 2,371,624 Sanitation 1,525,829 Stormwater 1,239,560 Housing authority 120,199 Nonmajor enterprise 1,002,574 Total depreciation expense - business-type activities 12,869,234$ 55 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 5. Capital Lease Obligation Last 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, $516,596 was included in depreciation expense. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of future minimum lease payments as of the inception date. The future minimum lease obligations and the net present value of these minimum lease payments as of June 30, 2018, were as follows: Fiscal Year Ending June 30 Business-type Activities 2019 1,021,221$ 2020 1,021,221 2021 1,021,221 2022 1,021,221 2023 1,021,221 2024-2036 11,313,343 Total minimum lease payments 16,419,448 Less: amount representing interest (4,461,143) Present value of minimum lease payments 11,958,305$ Changes in Capital Lease Obligation Changes in the capital lease obligation for the year ended June 30, 2018, was as follows: Due Within July 1, 2017 Issues Retirements June 30, 2018 One Year Business-type activities:14,482,714$ -$ 2,524,409$ 11,958,305$ 545,281$ 56 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 6. Long Term Debt Changes in Debt for Bonds Bond debt activity for the year ended June 30, 2018, was as follows: General Obligation Bonds Various issues of general obligation bonds totaling $51,880,000 are outstanding as of June 30, 2018. The bonds have interest rates ranging from 1.25% to 3.65% and mature in varying annual amounts ranging from $740,000 to $2,100,000 per issue, with the final maturities due in the year ending June 30, 2028. Interest and principal payments on all general obligation bonds, except tax abated portions recorded in the enterprise funds, are accounted for through the Debt Service Fund. Due Within July 1, 2017 Issues Retirements June 30, 2018 One Year Governmental activities: General obligation bonds 51,645,000$ 11,995,000$ 11,760,000$ 51,880,000$ 9,335,000$ Plus: Unamortized Premium 926,254 235,940 158,670 1,003,524 144,226 Total general obligation bonds 52,571,254 12,230,940 11,918,670 52,883,524 9,479,226 Revenue bonds 15,200,000 - 135,000 15,065,000 135,000 Less: Unamortized Discounts 31,860 - 2,124 29,736 2,124 Total revenue bonds 15,168,140 - 132,876 15,035,264 132,876 67,739,394$ 12,230,940$ 12,051,546$ 67,918,788$ 9,612,102$ Business-type activities: Revenue bonds 32,820,000 - 5,035,000 27,785,000 4,975,000 Plus: Unamortized Premium 1,600,914 - 290,852 1,310,062 294,351 Total revenue bonds 34,420,914$ -$ 5,325,852$ 29,095,062$ 5,269,351$ 57 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Annual debt service requirements to maturity for general obligation bonds are as follows: Fiscal Year Ending June 30 Principal Interest 2019 9,335,000$ 1,257,050$ 2020 8,400,000 1,036,338 2021 7,585,000 819,135 2022 6,395,000 631,263 2023 5,520,000 492,013 2024-2028 14,645,000 882,450 Total 51,880,000$ 5,118,249$ Governmental Activities Revenue Bonds As of June 30, 2018, 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 $ 405,000 to $ 135,000 to $ 2,085,000 $ 1,225,000 $ 965,000 Amount outstanding $ 16,010,000 $ 11,775,000 $ 15,065,000 58 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Revenue bond debt service requirements to maturity are as follows: Fiscal Year Ending June 30 Principal Interest P rincipal Interest 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 1,110,000 413,045 3,840,000 149,270 2024-2028 5,205,000 1,573,275 3,625,000 88,150 2029-2033 4,630,000 816,890 - - 2034-2038 2,595,000 157,200 - - Total 15,065,000$ 4,760,550$ 27,785,000$ 2,571,843$ Governmental Activities Business-type Activities 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, 2018, the Wastewater Treatment Fund had net revenue of $6,559,000 and the amount of principal and interest due was $4,336,000. In fiscal year ended June 30, 2018, the Water Fund had net revenues of $2,889,000 and the amount of principal and interest due was $1,849,000. 59 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Summary of Bond Issues General obligation and revenue bonds payable at June 30, 2018, are comprised of the following issues: Date of Amount Interest Final Outstanding Issue Issued Rates Maturity June 30, 2018 General Obligation Bonds: Refunded Multi-Purpose and Library Construction (1)June 2011 10,930,000 2.0 - 3.625 6/21 3,850,000 Multi-Purpose June 2012 9,070,000 2.0 - 2.25 6/22 3,865,000 Multi-Purpose July 2013 7,230,000 1.0 - 2.0 6/23 4,185,000 Refunded Multi-Purpose (2) June 2014 11,980,000 2.0 - 3.0 6/24 5,785,000 Multi-Purpose June 2015 7,785,000 2.0 - 2.25 6/25 5,655,000 Multi-Purpose June 2016 8,795,000 2.0 - 3.0 6/26 7,680,000 Multi-Purpose June 2017 9,765,000 2.0 - 2.5 6/27 8,865,000 Multi-Purpose June 2018 8,895,000 1.8 - 2.65 6/28 8,895,000 Taxable Multi-Purpose June 2018 3,100,000 2.35 - 2.6 6/20 3,100,000 Total General Obligation Bonds 51,880,000$ Date of Amount Interest Final Outstanding Issue Issued Rates Maturity June 30, 2018 Revenue Bonds: Refunded Wastewater Treatment Bonds (3)Apr. 2010 15,080,000 3.0 - 4.0 7/20 3,940,000 Refunded Wastewater Treatment Bonds (4)June 2016 9,360,000 3.0 - 4.0 7/21 7,520,000 Refunded Wastewater Treatment Bonds (5)June 2017 4,550,000 2.0 - 5.0 7/22 4,550,000 Refunded Water Bonds (6)June 2012 4,950,000 1.5 - 2.1 7/22 2,595,000 Refunded Water Bonds (7)June 2016 3,650,000 1.5 - 5.0 7/24 3,270,000 Refunded Water Bonds (8)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 2,260,000 Taxable Urban Renewal Sept. 2016 12,805,000 3.0 6/36 12,805,000 Total Revenue Bonds 42,850,000$ 94,730,000$ 60 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 (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 December 2001 and April 2002 Wastewater Revenue Bonds. (4)This bond issue refunded the October 2008 Wastewater Revenue Bond. (5) This bond issue refunded the May 2009 Wastewater Revenue Bonds. (6) This bond issue refunded the October 2002 Water Revenue Bonds. (7) This bond issue refunded the October 2008 Water Revenue Bonds. (8) 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, 2018, there were three series of Industrial Development Revenue Bonds outstanding, with an aggregate principal amount payable of $32,063,059. Debt Legal Compliance Legal Debt Margin: As of June 30, 2018, 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 $ 5,399,877 Utilities 94,582 Total valuation $ 5,494,459 Debt limit, 5% of total assessed valuation $ 274,723 Debt applicable to debt limit: General obligation bonds 51,880 Urban renewal revenue bonds 15,065 Letters of credit 475 Other legal indebtedness (TIF rebates) 25,012 Total net debt applicable to limit 92,432 Legal debt margin $ 182,291 61 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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. 62 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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, 2018. 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 25.68% for the year ended June 30, 2018. The City’s contributions to MFPRSI for the year ended June 30, 2018 was $2,758,801. 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, 2018. Net Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2018, the City reported a liability of $21,398,334 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2017, 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, 2017, the City’s proportion was 3.648635% which was a decrease of .048493% from its proportions measured as of June 30, 2016. 63 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 For the year ended June 30, 2018, the City recognized pension expense of $3,155,702. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: $2,758,801 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Total Change of assumptions Deferred Outflows of Resources 821,164$ 1,818,397 Differences between expected and actual experience Deferred Inflows of Resources 13,020$ 243,042 - 876,772 207,083 - 385,959 Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between City contributions and proportionate share of contributions City contributions subsequent to the measurement date 2,758,801 6,482,217$ 642,021$ Year Ended June 30, 2019 June 30, 2020 June 30, 2021 June 30, 2022 June 30, 2023 931,810 495,116$ 1,915,916 (386,431) 124,984 Total 3,081,395$ 64 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Actuarial Assumptions The total pension liability in the June 30, 2017, 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, 2017 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 five years projection of future mortality improvement with Scale BB. 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 3.3 % Emerging Markets 9.0 Emerging Markets Debt 6.3 Large Cap 5.5 Small Cap 5.8 Master Limited Partnerships (MLP)9.0 International Large Cap 7.3 Tactical Asset Allocation 6.4 Private Equity 9.0 Private Non-Core Real Estate 8.0 Private Core Real Estate 6.0 Long-Term Expected Real Rate of Return 65 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Discount Rate The discount rate used to measure the total pension liability was 7.5%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate 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%, 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% lower (6.5%) or 1% higher (8.5%) 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, 2018, 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:35,166,874$ 21,398,334$ 9,946,426$ 66 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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. 67 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 In fiscal year 2018, pursuant to the required rate, Regular members contributed 5.95% of pay and the City contributed 8.93% for a total rate of 14.88%. The City’s total contributions to IPERS for the year ended June 30, 2018 were $2,696,017. Net Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2018, the City reported a liability of $26,432,957 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2017, 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, 2017, the City’s proportion was .3968158% which was an increase of .000546% from its proportions measured as of June 30, 2016. For the year ended June 30, 2018, the City recognized pension expense of $3,283,592. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Total Differences between expected and actual experience 242,681$ 229,022$ Deferred Inflows of Resources Deferred Outflows of Resources 1,396,889$ 891,786 - Change of assumptions 4,592,828 - Net difference between projected and actual earnings on pension plan investments - 276,081 Changes in proportion and differences between City contributions and proportionate share of contributions 23,898 City contributions subsequent to the measurement date 2,696,017 7,555,424$ 68 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 $2,696,017 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Actuarial Assumptions The total pension liability in the June 30, 2017, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: The actuarial assumptions used in the June 30, 2017 valuation were based on the results of actuarial experience study dated March 24, 2017. Mortality rates were based on the RP-2000 Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on Scale AA. Year Ended June 30, 2019 June 30, 2020 June 30, 2021 June 30, 2022 June 30, 2023 1,032,975 99,731 314,293 Total 287,057$ 1,728,462 3,462,518$ Rate of inflation 2.60% per annum (effective June 30, 2017) Salary increases 3.25 to 16.25%, average, including inflation. Rates vary by (effective June 30, 2017)membership group. (effec tive June 30, 2017)expense, including inflation 3.25% per annum based on 2.60% inflation and 0.65% (effective June 30, 2017)real wage inflation 7.00%, net of pension plan investment Wage growth Investment rate of return 69 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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 7.0%. The projection of cash flows used to determine the discount rate assumed employee 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 to current active and inactive employees. 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 7.0%, 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% lower (6.0%) or 1% higher (8.0%) than the current rate. Asset Class Core Plus Fixed Income 27.0 %2.25 % Domestic Equity 24.0 6.25 International Equity 16.0 6.71 Private Equity 11.0 11.15 Private Real Assets 7.5 4.18 Public Real Assets 7.0 3.27 Public Credit 3.5 3.46 Private Credit 3.0 4.25 Cash 1.0 (0.31) Total 100.0 % Long-Term Expected Real Rate of ReturnTarget Allocation 1% Decrease (6.0%) Discount Rate (7.0%) 1% Increase (8.0%) City's proportionate share of the net pension liability:43,550,909$ 26,432,957$ 12,050,589$ 70 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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, 2018, 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, 2018, was as follows: Due Within July 1, 2017 Issues Retirements June 30, 2018 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, 2018, was as follows: Due Within July 1, 2017 Issues Retirements June 30, 2018 One Year Governmental activities: $ 2,240,847 1,251,119$ 1,251,482$ 2,240,484$ 1,252,770$ Business-type activities: $ 691,941 436,353$ 401,049$ 727,245$ 424,180$ 71 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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, 2018, is $9,259,218, which is based on 55.68% usage (filled) of the landfill and is included in accrued liabilities within the Sanitation Fund. It is estimated that an additional amount of approximately $7,370,124 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, 2018, was determined by a licensed professional engineer and approximated at $16,629,342. 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, 2018. 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, 2018, the Sanitation Fund had $13,520,704 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, 2018, was as follows: Due Within July 1, 2017 Issues Retirements June 30, 2018 One Year Business-type activities: $ 8,591,189 $ 668,029 -$ $ 9,259,218 -$ 72 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Changes in Long-Term Liabilities – Other Postemployment Benefits (OPEB) 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. Group insurance benefits are established under Iowa Code Chapter 509A.13. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. 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. Retired participants must be age 55 or older at retirement. At June 30, 2018, the following employees were covered by the benefit terms: Total OPEB Liability: The City’s total OPEB liability of $7,589,740 was measured as of June 30, 2018, and was determined by an actuarial valuation as of that date. Inactive employees or beneficiaries currently receiving benefit payments 66 Active employees 598 Total 664 73 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Actuarial Assumptions: The total OPEB liability in the June 30, 2018 actuarial valuation was determined using the following actuarial assumptions and the entry age normal actuarial cost method, applied to all periods included in the measurement. Discount Rate: The discount rate used to measure the total OPEB liability was 3.87% which reflects the index rate for 20-year tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher as of the measurement date. Mortality rates are from the SOA RPH-2017 total dataset mortality table fully generational using Scale MP- 2017. Annual retirement probabilities are based on varying rates by age and turnover probabilities mirror those used by IPERS and MFPRSI. The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial experience study with dates corresponding to those listed above. Changes of assumptions reflect a change in the discount rate from 3.58% in fiscal year 2017 to 3.87% in fiscal year 2018. Rate of inflation 2.60% per annum (effective June 30, 2018) Rates of salary increases 3.25% per annum based on 2.60% inflation and 0.65% (effective June 30, 2018)real wage inflation Discount rate 3.87%, compounded annually, including inflation (effective June 30, 2018) Healthcare cost trend rate 9.00% initial rate decreasing by .5% annually to an ultimate (effective June 30, 2018)rate of 5.00% Total OPEB Liability Total OPEB liability beginning of year, as restated 6,412,170$ Changes for the year: Service Cost 502,071 Interest 244,435 Difference between expected and actual experience (376,818) Changes in assumptions 982,333 Benefit payments (174,451) Net changes 1,177,570 Total OPEB liability end of year 7,589,740$ 74 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Sensitivity of the City’s Total OPEB Liability to Changes in the Discount Rate: The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using a discount rate that is 1% lower (2.87%) or 1% higher (4.87%) than the current discount rate. Sensitivity of the City’s Total OPEB Liability to Changes in the Healthcare Cost Trend Rate: The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using healthcare cost trend rate that is 1% lower (8.00%) or 1% higher (10.00%) than the current healthcare cost trend rate. OPEB Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB: For the year ended June 30, 2018, the City recognized OPEB expense of $632,606. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following resources: 1% Decrease (2.87%) Discount Rate (3.87%) 1% Increase (4.87%) Total OPEB liability 8,156,991$ 7,589,740$ 7,053,281$ 1% Decrease (8.00%) Healthcare Cost Trend Rate (9.00%) 1% Increase (10.00%) Total OPEB liability 6,754,127$ 7,589,740$ 8,575,140$ Total 884,100$ 339,136$ Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience -$ 339,136$ Change of assumptions 884,100 - 75 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 The amount reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows: 9. Short Term Debt During FY18, the City entered into additional multiple short term loans totaling $480,000 and repaid multiple short term loans totaling $668,000. The outstanding loans mature one year from the date of the loan and bear interest rates ranging from 4.75% to 5.00%. The loans were used to fund the acquisition and rehabilitation of single family homes as part of the UniverCity Neighborhood Partnership Program (UniverCity). UniverCity is a cooperative effort of the City of Iowa City and the University of Iowa dedicated to ensuring that the University of Iowa Campus and surrounding neighborhoods remain vital, safe, affordable, and attractive places to live and work for both renters and homeowners. The short term loans have been repaid and will be repaid with the proceeds from the sale of the rehabilitated homes. 10. Fund Equity Fund balances for the governmental funds are reported in classifications that comprise a hierarchy based on the extent to which the government honors constraints on the specific purposes for which amounts in those funds can be spent. • The Nonspendable classification contains amounts not in spendable form or legally or contractually required to be maintained intact. • Restricted amounts contain restraint on their use externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. Year Ended June 30, 2019 June 30, 2020 June 30, 2021 June 30, 2022 June 30, 2023 Thereafter 60,551 60,551$ 60,551 60,551 60,551 242,209 544,964$ Total Changes in Short-Term Liabilities - Notes Payable Notes Payable activity for the year ended June 30, 2018, was as follows: Due Within July 1, 2017 Issues Retirements June 30, 2018 One Year Governmental activities: $ 663,000 480,000$ 668,000$ 475,000$ 475,000$ 76 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 • 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. Components of Fund Balance Bridge, Other Street and Shared Traffic Other Revenue and Employee Other Control Debt Governmental General Grants Benefits Construction Construction Service Funds Total Nonspendable: Perpetual Care Principal 69,000$ -$ -$ -$ -$ -$ -$ 69,000$ Inventory - 81,070 - - - - - 81,070 Prepaid Items 724,393 - 84,162 - - - - 808,555 Total Nonspendable 793,393 81,070 84,162 - - - - 958,625 Restricted for: Public Safety 418,408 - - - - - - 418,408 Debt Service - - - - - 8,608,613 - 8,608,613 GO Bond Projects - - - 26,752,495 15,097,510 - - 41,850,005 State Funding - 3,893,383 - - - - - 3,893,383 Grant Agreement - 3,968 - - - - 3,831,389 3,835,357 Affordable Housing - 1,208,851 - - - - - 1,208,851 Economic Development - - - - - - 1,563,211 1,563,211 Notes Receivable 1,275,601 - - - - - - 1,275,601 Property Held for Resale 86,800 - - - - - - 86,800 Public Safety Employee Benefits - - 2,762,916 - - - - 2,762,916 Other Restricted 161,013 49,156 - - - - 262,064 472,233 Total Restricted 1,941,822 5,155,358 2,762,916 26,752,495 15,097,510 8,608,613 5,656,664 65,975,378 Committed to: Emergency Fund 4,961,882 - - - - - - 4,961,882 Total Committed 4,961,882 - - - - - - 4,961,882 Assigned to: Library Programs 898,683 - - - - - - 898,683 Senior Center Programs 2,876 - - - - - - 2,876 Replacement and Acquisition Reserves 413,371 - - - - - - 413,371 Other Assigned 123,065 - - - - - - 123,065 Total Assigned 1,437,995 - - - - - - 1,437,995 Unassigned:28,516,324 - - - - - (37,619) 28,478,705 Total Fund Balances 37,651,416$ 5,236,428$ 2,847,078$ 26,752,495$ 15,097,510$ 8,608,613$ 5,619,045$ 101,812,585$ 77 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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, 2018 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 thirty 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. 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, 2018 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, 2018 and 2017 are as follows: Current-Year Beginning-of- Claims and Balance at Fiscal-Year Changes in Claim Fiscal Liability Estimates Payments Year-End 2016 – 2017 $ 2,489,000 $ 706,000 $ 906,000 $ 2,289,000 2017 – 2018 2,289,000 1,309,000 1,425,000 2,173,000 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 $9,980,032. 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, 2018 and 2017 are as follows: Current-Year Beginning-of- Claims and Balance at Fiscal-Year Changes in Claim Fiscal Liability Estimates Payments Year-End 2016 – 2017 $ 350,000 $ 7,356,000 $ 7,321,000 $ 385,000 2017 – 2018 385,000 7,893,000 7,868,000 410,000 78 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 12. Commitments and Contingencies Contractual Commitments The total outstanding contractual commitments as of June 30, 2018 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 $28,331,453 exist, of which $499,747 is expected to be paid in the next fiscal year. These items are expensed in the period in which they are paid. There were no payments made in the current fiscal year. No liability is recognized due to the fact that the agreements are conditional and the payments are to be funded by future property taxes receivable on the project. Project Amount Bridge, street and traffic Paving and Bridge Construction, control cons truction Engineering Design and Consulting 10,616,901$ Other construction Public Works & Culture and Recreation Construction 8,310,930 Parking Parking Facility Restoration Repair 274,726 Wastewater Sewer Construction & Riverfront Crossings Park 949,396 Water Water Construction & Water Plant Computer System 612,033 Sanitation Landfill Cell Reconstruction & Road Improvements 1,041,174 Airport Viewing Area Remodel & North T-Hangar Restroom 29,198 Stormwater Stormwater System Improvements & Storm Sewer 4,681 Replacements 21,839,039$ Fund 79 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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 Governmental Accounting Standards Board Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (OPEB), was implemented during fiscal year 2018. The revised requirements establish new financial reporting requirements for state and local governments which provide their employees with OPEB benefits, including additional note disclosure and required supplementary information. In addition, GASB Statement No. 75 requires a state or local government employer to use the entry age normal actuarial cost method, and requires deferred outflows of resources and deferred inflows of resources which arise from other types of events related to OPEB to be recognized. During the transition year, as permitted, beginning balances for deferred outflows of resources and deferred inflows of resources are not reported. Beginning net position for governmental and business type activities was restated to retroactively report the change in valuation of the beginning total OPEB liability, as follows: Net position June 30, 2017, as previously reported Net OPEB obligation measured under previous standards Total OPEB liability at June 30, 2017 Net position July 1, 2017, as restated Governmental 223,433$ 3,563$ (4,386)$ 222,610$ Internal Service 24,158 62 (237) 23,983 Total Governmental Activities 247,591$ 3,625$ (4,623)$ 246,593$ Parking 22,065$ 162$ (180)$ 22,047$ Transit 19,696 337 (561) 19,472 Wastewater Treatment 137,880 187 (247) 137,820 Water 70,494 201 (324) 70,371 Sanitation 31,550 259 (371) 31,438 Stormwater 50,545 1 (9) 50,537 Housing Authority 8,376 75 (86) 8,365 Airport 27,714 (3) (9) 27,702 Internal Service 15,494 - - 15,494 Total Business Type Activities 383,814$ 1,219$ (1,787)$ 383,246$ 80 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 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. 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, 2018, $139,648 of property tax was diverted from the City 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, 2018 under agreements entered into by any entities. 16. New Governmental Accounting Standards Board (GASB) Standards The Governmental Accounting Standards Board (GASB) has issued six statements not yet implemented by the City. The statements, which might impact the City’s financial statements, are as follows: 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. 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. Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements, will be effective for fiscal year ending June 30, 2019. The objective of this Statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. 81 CITY OF IOWA CITY, IOWA NOTES TO FINANCIAL STATEMENTS (continued) June 30, 2018 Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period, will be effective for fiscal year ending June 30, 2020. The objectives of this Statement are to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and to simplify accounting for interest cost incurred before the end of a construction period. Statement No. 90, Majority Equity Interests – an amendment of GASB Statements No. 14 and No. 61 will be effective for fiscal year ending June 30, 2020. The objectives of this Statement are to improve the consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. The City’s management has not yet determined the effect these statements will have on the City’s financial statements. 82 83 Governmental Fund Types Enterprise Fund Actual Budgetary Types Actual Total Actual Basis Budgetary Basis Budgetary Basis Revenues: Property taxes 56,524$ -$ 56,524$ Delinquent property taxes 1 - 1 Tax increment financing taxes 2,459 - 2,459 Other city taxes 2,767 - 2,767 Special assessments - - - Licenses and permits 2,734 9 2,743 Intergovernmental 15,981 16,905 32,886 Charges for services 5,465 40,898 46,363 Use of money and property 1,887 2,377 4,264 Miscellaneous 3,952 570 4,522 Total revenues 91,770 60,759 152,529 Expenditures/Expenses: Public safety 23,915 - 23,915 Public works 8,801 - 8,801 Health and social services 293 - 293 Culture and recreation 13,969 - 13,969 Community and economic development 7,436 - 7,436 General government 8,525 - 8,525 Debt service 13,470 - 13,470 Capital outlay 33,751 - 33,751 Business-type - 76,609 76,609 Total expenditures/expenses 110,160 76,609 186,769 Excess (deficiency) of revenues over (under) expenditures/expenses (18,390) (15,850) (34,240) Other financing sources and uses, net 13,774 2,512 16,286 Net change in fund balances (4,616) (13,338) (17,954) Balances, beginning of year 101,081 110,292 211,373 Balances, end of year 96,465$ 96,954$ 193,419$ 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, 2018 (dollar amounts expressed in thousands) BUDGETARY BASIS 84 Final to Actual Variance - Positive Original Final (Negative) 56,458$ 56,458$ 66$ - - 1 2,334 2,455 4 2,720 2,778 (11) 1 1 (1) 1,867 1,867 876 29,463 35,413 (2,527) 46,032 46,457 (94) 2,331 2,340 1,924 3,808 4,837 (315) 145,014 152,606 (77) 24,426 24,605 690 9,703 10,134 1,333 300 300 7 14,280 14,427 458 8,835 10,781 3,345 9,544 9,772 1,247 14,256 13,564 94 32,530 77,563 43,812 59,456 86,499 9,890 173,330 247,645 60,876 (28,316) (95,039) 60,799 17,478 18,698 (2,412) (10,838) (76,341) 58,387$ 133,730 211,373 122,892$ 135,032$ Budgeted Amounts 85 Accrual Modified Accrual Budget Basis Adjustments Basis Revenues 91,770$ (4,537)$ 87,233$ Expenditures 110,160 (3,759) 106,401 Net (18,390) (778) (19,168) Other financing sources and uses, net 13,774 823 14,597 Beginning Fund Balances 101,081 5,300 106,381 Ending Fund Balances 96,465$ 5,345$ 101,810$ Accrual Accrual Budget Basis Adjustments Basis Revenues 60,759$ 1,817$ 62,576$ Expenditures 76,609 (18,763) 57,846 Net (15,850) 20,580 4,730 Other financing sources and uses, net 2,512 (1,609) 903 Beginning Fund Balances 110,292 257,460 367,752 Ending Fund Balances 96,954$ 276,431$ 373,385$ 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, 2018 (dollar amounts expressed in thousands) 86 City of Iowa City, Iowa Note to Required Supplementary Information - Budgetary Reporting For the Year Ended June 30, 2018 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 $7,592,000 and expenditures by $74,315,000. The budget amendments were primarily due to changes in the breadth and timing of capital improvement projects, which the City budgets in full during the initial year of the projects and amends future year budgets for carryover. 87 88 2018 2017 2016 2015 City's proportion of the net pension liability 3.648635%3.697128%3.704972%3.778137% City's proportionate share of the net pension liability 21,398$ 23,117$ 17,406$ 13,696$ City's covered payroll 10,347 10,019 9,716 9,648 City's proportionate share of the net pension liability as a percentage of its covered payroll 206.80%230.73%179.15%141.96% Plan fiduciary net position as a percentage of the total pension liability 80.60%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 Four Years* (amounts expressed in thousands) 89 2018 2017 2016 2015 Statutorily required contributions 2,679$ 2,682$ 2,782$ 2,955$ Contributions in relation to the statutorily required contribution (2,679) (2,682) (2,782) (2,955) Contribution deficiency (excess)-$ -$ -$ -$ City's covered payroll 10,334$ 10,347$ 10,019$ 9,716$ Contributions as a percentage of covered payroll 25.92%25.92%27.77%30.41% 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) 90 2014 2013 2012 2011 2010 2009 2,906$ 2,383$ 2,277$ 1,654$ 1,336$ 1,425$ (2,906) (2,383) (2,277) (1,654) (1,336) (1,425) -$ -$ -$ -$ -$ -$ 9,648$ 9,122$ 9,197$ 8,310$ 7,860$ 7,601$ 30.12%26.12%24.76%19.90%17.00%18.75% 91 Changes of benefit terms: There were no significant changes of benefit terms. Changes of assumptions: The 2017 valuation added five years projection of future mortality improvement with Scale BB. The 2016 valuation changed postretirement mortality rates to the RP-2000 Blue Collar Combined Healthy Mortality Table with males set-back two years, females set-forward one year and disabled individuals set-forward one year (male only rates), with no projection of future mortality improvement. The 2015 valuation phased in the 1994 Group Annuity Mortality Table for postretirement mortality. This resulted in weighting of 1/12 of the 1971 Group Annuity Mortality Table and 11/12 of the 1994 Group Annuity Morality Table. The 2015 valuation phased in the 1994 Group Annuity Mortality Table for postretirement mortality. This resulted in weighting of 2/12 of the 1971 Group Annuity Mortality Table and 10/12 of the 1994 Group Annuity Morality Table. City of Iowa City, Iowa Notes to Required Supplementary Information - Pension Liability Municipal Fire and Police Retirement System of Iowa Year ended June 30, 2018 92 2018 2017 2016 2015 City's proportion of the net pension liability 0.3968158%0.3962696%0.4159256%0.4378904% City's proportionate share of the net pension liability 26,433$ 24,938$ 20,549$ 17,366$ City's covered payroll 29,619 28,448 28,495 28,654 City's proportionate share of the net pension liability as a percentage of its covered payroll 89.24%87.66%72.11%60.61% Plan fiduciary net position as a percentage of the total pension liability 82.21%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 Four Years* (amounts expressed in thousands) 93 2018 2017 2016 2015 Statutorily required contributions 2,696$ 2,645$ 2,540$ 2,545$ Contributions in relation to the statutorily required contribution (2,696) (2,645) (2,540) (2,545) Contribution deficiency (excess)-$ -$ -$ -$ City's covered payroll 30,190$ 29,619$ 28,448$ 28,495$ 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 94 2014 2013 2012 2011 2010 2009 2,559$ 2,442$ 2,327$ 1,877$ 1,780$ 1,659$ (2,559) (2,442) (2,327) (1,877) (1,780) (1,659) -$ -$ -$ -$ -$ -$ 28,654$ 28,170$ 28,833$ 27,013$ 26,764$ 26,133$ 8.93%8.67%8.07%6.95%6.65%6.35% 95 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% per year measured from the member’s first unreduced retirement age to a 6% reduction for each year of retirement before age 65. Changes of assumptions: The 2017 valuation implemented the following refinements as a result of an experience study dated March 24, 2017: • Decreased the inflation assumption from 3.00% to 2.60%. • Decreased the assumed rate of interest on member accounts from 3.75% to 3.5% per year. • Decreased the discount rate from 7.50% to 7.00%. • Decreased the wage growth assumption from 4.00% to 3.25%. • Decreased the payroll growth assumption from 4.00% to 3.25%. 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. City of Iowa City, Iowa Notes to Required Supplementary Information - Pension Liability Iowa Public Employees' Retirement System Year ended June 30, 2018 96 • 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. 97 2018 Service Cost 502$ Interest 245 Difference between expected and actual experience (377) Changes in assumptions 982 Benefit payments (174) Net change in total OPEB liability 1,178 Total OPEB liability beginning of year, as restated 6,412 Total OPEB liability end of year 7,590$ City's covered-employee payroll 40,524$ Total OPEB liability as a percentage of covered-employee payroll 18.73% Note: GASB Statement No. 75 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. Changes of benefit terms: There were no significant changes of benefit terms. Changes of assumptions: Changes in assumptions and other inputs reflect the effects of changes in the discount rate each period. The following are the discount rates used in each period. Year ended June 30, 2018 3.87% Year ended June 30, 2017 3.58% The payroll growth rate, turnover rate and retirement rate assumptions were updated for IPERS employees based on the Iowa Public Employees' Retirement System July 1, 2017 Acturial Valuation Report. The same rates for MFPRSI employees were updated based on the Municipal Fire and Police Retirement System of Iowa July 1, 2017 Actuarial Valuation Report. The mortaility table has been updated from SOA RPH-2015 Total Dataset Mortality Table fully generational using Scale MP-2015 to SOA RPH-2017 Total Dataset Mortality Table fully generational using Scale MP-2017. City of Iowa City, Iowa Required Supplementary Information - Schedule of Changes in the City's Total OPEB Liability, Related Ratios and Notes For the Current Year (amounts expressed in thousands) 98 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. Metropolitan Planning Organization of Johnson County Fund – accounts for the financial activities of the metropolitan/rural cooperative planning organization. 99 Metropolitan Community Planning Development Organization Economic Block of Johnson Development Grant County Total Assets Equity in pooled cash and investments 1,845$ 181$ 234$ 2,260$ Receivables: Property tax 371 - - 371 Interest 5 - 1 6 Notes - 3,666 - 3,666 Due from other governments - 56 52 108 Total assets 2,221$ 3,903$ 287$ 6,411$ Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable 334$ 36$ 12$ 382$ Accrued liabilities - 10 13 23 Total liabilities 334 46 25 405 Deferred inflows of resources: Unavailable revenues: Succeeding year property taxes 362 - - 362 Grants - 26 - 26 Total deferred inflows of resources 362 26 - 388 Fund balances: Restricted 1,563 3,831 262 5,656 Unassigned (38) - - (38) Total fund balances 1,525 3,831 262 5,618 Total liabilities, deferred inflows of resources and fund balances 2,221$ 3,903$ 287$ 6,411$ Special Revenue CITY OF IOWA CITY COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS June 30, 2018 (amounts expressed in thousands) 100 Metropolitan Community Planning Development Organization Economic Block of Johnson Development Grant County Total Revenues Property taxes 2,782$ -$ -$ 2,782$ Intergovernmental 31 1,038 311 1,380 Use of money and property 15 34 3 52 Miscellaneous - 42 6 48 Total revenues 2,828 1,114 320 4,262 Expenditures Current: Community and economic development 747 1,107 591 2,445 Excess (deficiency) of revenues over (under) expenditures 2,081 7 (271) 1,817 Other Financing Sources (Uses) Transfers in 60 - 276 336 Transfers out (1,098) (31) - (1,129) Total other financing sources and (uses)(1,038) (31) 276 (793) Net change in fund balances 1,043 (24) 5 1,024 Fund Balances, Beginning 482 3,855 257 4,594 Fund Balances, Ending 1,525$ 3,831$ 262$ 5,618$ 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, 2018 (amounts expressed in thousands) 101 102 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. 103 Equipment Central Loss Information Maintenance Services Reserve Technology Total Assets Current assets: Equity in pooled cash and investments 13,700$ 729$ 15,147$ 2,916$ 32,492$ Receivables: Accounts and unbilled usage - - 95 - 95 Interest 112 4 109 17 242 Due from other governments 51 - - - 51 Inventories 521 - - - 521 Total current assets 14,384 733 15,351 2,933 33,401 Noncurrent assets: Capital assets: Land 45 - - - 45 Buildings 1,298 - - 189 1,487 Improvements other than buildings 50 - - 50 Machinery and equipment 19,941 133 19 1,655 21,748 Infrastructure - - - 2,101 2,101 Accumulated depreciation (12,191) (73) (19) (1,278) (13,561) Construction in progress 83 - -253 336 Total noncurrent assets 9,226 60 - 2,920 12,206 Total assets 23,610 793 15,351 5,853 45,607 Deferred Outflows of Resources Pension related deferred outflows 185 6 38 186 415 OPEB related deferred outflows 17 1 1 13 32 Total deferred outflows of resources 202 7 39 199 447 Liabilities Current liabilities: Accounts payable 223 6 215 97 541 Accrued liabilities 36 1 2,589 36 2,662 Employee vested benefits 43 2 2 17 64 Total current liabilities 302 9 2,806 150 3,267 Noncurrent liabilities: Employee vested benefits 33 1 2 14 50 Net pension liability 643 21 134 620 1,418 Other post employment benefits liability 146 11 11 113 281 Total noncurrent liabilities 822 33 147 747 1,749 Total liabilities 1,124 42 2,953 897 5,016 Deferred Inflows of Resources Pension related deferred inflows 34 1 7 33 75 OPEB related deferred inflows 7 1 1 5 14 41 2 8 38 89 Net Position Net investment in capital assets 9,226 60 - 2,920 12,206 Unrestricted 13,421 696 12,429 2,197 28,743 Total net position 22,647$ 756$ 12,429$ 5,117$ 40,949$ (amounts expressed in thousands) CITY OF IOWA CITY COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS June 30, 2018 104 Equipment Central Loss Information Maintenance Services Reserve Technology Total Operating Revenues: Charges for services 6,495$ 219$ 10,313$ 2,257$ 19,284$ Total operating revenues 6,495 219 10,313 2,257 19,284 Operating Expenses: Personal services 1,054 39 222 1,002 2,317 Commodities 1,707 3 58 490 2,258 Services and charges 559 116 9,805 352 10,832 3,320 158 10,085 1,844 15,407 Depreciation 1,619 21 - 244 1,884 Total operating expenses 4,939 179 10,085 2,088 17,291 Operating income (loss)1,556 40 228 169 1,993 Nonoperating Revenues: Gain on disposal of capital assets 232 - - (262) (30) Interest income 179 10 204 37 430 Total nonoperating revenues 411 10 204 (225) 400 Income (loss) before transfers 1,967 50 432 (56) 2,393 Transfers in 706 - - 496 1,202 Transfers out (1,430) (504) - (189) (2,123) Change in net position 1,243 (454) 432 251 1,472 Net Position, Beginning, as restated 21,404 1,210 11,997 4,866 39,477 Net Position, Ending 22,647$ 756$ 12,429$ 5,117$ 40,949$ (amounts expressed in thousands) CITY OF IOWA CITY, IOWA COMBINING STATEMENT OF REVENUES, EXPENSES, INTERNAL SERVICE FUNDS For the Year Ended June 30, 2018 AND CHANGES IN FUND NET POSITION 105 Equipment Central Loss Information Maintenance Services Reserve Technology Total Cash Flows From Operating Activities Receipts from customers and users 6,511$ 219$ 10,375$ 2,257$ 19,362$ Payments to suppliers (2,220) (121) (9,906) (831) (13,078) Payments to employees (1,008) (35) (296) (1,061) (2,400) Net cash flows from operating activities 3,283 63 173 365 3,884 Cash Flows From Noncapital Financing Activities Transfers to other funds (1,430) (23) - - (1,453) Net cash flows from noncapital financing activities (1,430) (23) - - (1,453) Cash Flows From Capital and Related Financing Activities Acquisition and construction of property and equipment (1,708) (34) - (128) (1,870) Proceeds from sale of property 237 - -- 237 Net cash flows used for capital and related financing activities (1,471) (34) - (128) (1,633) Cash Flows From Investing Activities Interest on investments 109 8 132 28 277 Net increase in cash and cash equivalents 491 14 305 265 1,075 Cash and Cash Equivalents, Beginning 13,209 715 14,842 2,651 31,417 Cash and Cash Equivalents, Ending 13,700$ 729$ 15,147$ 2,916$ 32,492$ Reconciliation of operating income (loss) to net cash flows from operating activities: Operating income 1,556$ 40$ 228$ 169$ 1,993$ Adjustments to reconcile operating income to net cash flows from operating activities: Depreciation expense 1,619 21 - 244 1,884 Changes in: Receivables: Accounts and unbilled usage -- 62 - 62 Due from other governments 16 - - - 16 Inventories (55)- - - (55) Prepaid item --- 12 12 Accounts payable 101 (2) (43) (1) 55 Accrued liabilities 5 - (92) 3 (84) Employee vested benefits 8 1 1 (9) 1 Net pension liability 43 1 16 (39) 21 Deferred outflows of resources (35)(1) (1) (29) (66) Deferred inflows of resources 3 1 - (3) 1 Other post employment benefits liability 22 2 2 18 44 Total adjustments 1,727 23 (55) 196 1,891 Net cash flows from operating activities 3,283$ 63$ 173$ 365$ 3,884$ Noncash Investing, Capital, and Financing Activities: Contributions of capital assets from government and others 706$ -$ -$ 496$ 1,202$ Contributions of capital assets to government and others -$481$ -$ 189$ 670$ (amounts expressed in thousands) CITY OF IOWA CITY, IOWA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS For the Year Ended June 30, 2018 106 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. 107 Balance Balance July 1, 2017 Increases Decreases June 30, 2018 Project Green Assets Equity in pooled cash and investments 163$ 72$ 85$ 150$ Interest receivable 1 1 1 1 Total assets 164$ 73$ 86$ 151$ Liabilities Accounts payable 4$ 12$ 4$ 12$ Due to agency 160 61 82 139 Total liabilities 164$ 73$ 86$ 151$ (amounts expressed in thousands) CITY OF IOWA CITY STATEMENT OF CHANGES IN ASSETS AND LIABILITIES For the Year Ended June 30, 2018 AGENCY FUNDS 108 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 Financial Trends 111 These schedules contain trend information to help the reader understand how the government’s financial performance and well-being have changed over time. Revenue Capacity 116 These schedules contain information to help the reader assess the government’s most significant local revenue source, the property tax. Debt Capacity 126 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 136 These schedules offer demographic and economic indicators to help the reader understand the environment within which the government’s financial activities take place. Operating Information 138 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. 109 110 2009 2010 2011 2012 20131 2014 2015 20162 2017 2018 Governmental activities Net investment in capital assets 100,741$ 111,703$ 123,935$ 135,998$ 133,989$ 138,482$ 153,729$ 163,362$ 183,651$ 157,106$ Restricted 26,586 25,588 31,179 35,021 22,867 39,958 36,447 42,154 47,676 41,490 Unrestricted 17,938 32,478 36,862 38,906 50,744 39,758 15,520 18,402 16,264 63,617 Total governmental activities net position 145,265$ 169,769$ 191,976$ 209,925$ 207,600$ 218,198$ 205,696$ 223,918$ 247,591$ 262,213$ Business-type activities Net investment in capital assets 162,211$ 172,601$ 186,177$ 195,073$ 253,617$ 264,727$ 279,272$ 279,679$ 285,912$ 294,109$ Restricted 19,159 17,588 20,658 20,176 19,033 19,438 22,389 22,269 21,238 22,219 Unrestricted 63,842 65,725 61,032 58,850 74,370 71,542 57,367 69,472 76,664 73,126 Total business-type activities net position 245,212$ 255,914$ 267,867$ 274,099$ 347,020$ 355,707$ 359,028$ 371,420$ 383,814$ 389,454$ Primary government Net investment in capital assets 262,952$ 284,304$ 310,112$ 331,071$ 387,606$ 403,209$ 433,001$ 443,041$ 469,563$ 451,215$ Restricted 45,025 43,176 51,837 55,197 41,900 59,396 58,836 64,423 68,914 63,709 Unrestricted 82,500 98,203 97,894 97,756 125,114 111,300 72,887 87,874 92,928 136,743 Total primary government net position 390,477$ 425,683$ 459,843$ 484,024$ 554,620$ 573,905$ 564,724$ 595,338$ 631,405$ 651,667$ 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) 111 2009 2010 2011 2012 20131 2014 2015 20162 2017 2018 Expenses Governmental activities: Public safety 20,730$ 19,955$ 18,867$ 21,186$ 20,989$ 22,721$ 21,193$ 22,029$ 24,002$ 25,191$ Public works 15,177 16,806 19,145 17,556 10,240 8,258 11,037 10,839 12,032 12,813 Culture and recreation 9,574 12,238 10,811 13,107 14,481 16,586 14,049 14,422 15,525 16,363 Community and economic development 8,726 16,913 16,501 16,305 10,596 10,059 7,093 6,786 8,253 12,019 General government 7,600 7,549 7,356 7,591 7,513 7,687 7,752 6,240 6,124 6,858 Debt service 3,264 2,970 2,841 2,400 2,237 1,797 1,517 1,287 1,481 1,414 Total governmental activities expenses 65,071 76,431 75,521 78,145 66,056 67,108 62,641 61,603 67,417 74,658 Business-type activities: Wastewater 11,925 11,274 10,971 11,069 10,464 21,139 12,131 11,866 11,233 11,392 Water 9,185 8,309 8,523 8,781 9,074 8,723 8,403 8,149 8,921 9,472 Sanitation 7,296 7,705 7,461 8,315 7,279 8,402 8,114 8,735 9,123 9,408 Housing authority 7,238 7,838 7,448 7,911 7,658 7,703 7,873 8,378 8,798 9,535 Parking 4,489 4,536 4,135 4,167 4,579 4,093 4,678 4,460 4,620 5,590 Airport 693 724 1,049 1,127 1,086 1,209 1,612 1,597 1,402 1,680 Stormwater 1,223 1,187 1,418 1,304 1,318 1,314 2,091 1,989 2,432 1,844 Cable television 633 645 638 689 692 781 704 - - - Transit - - - - 6,998 7,795 7,379 7,486 7,263 8,071 Total business-type activities expenses 42,682 42,218 41,643 43,363 49,148 61,159 52,985 52,660 53,792 56,992 Total primary government expenses 107,753$ 118,649$ 117,164$ 121,508$ 115,204$ 128,267$ 115,626$ 114,263$ 121,209$ 131,650$ Program Revenues Governmental activities: Charges for services Public safety 2,968$ 2,980$ 3,279$ 3,401$ 4,098$ 3,626$ 3,926$ 4,813$ 5,286$ 4,438$ Public works 1,392 1,061 1,117 1,112 52 61 388 628 724 62 Culture and recreation 715 773 872 825 775 808 801 823 842 836 Community and economic development - - - - - 45 50 1,044 36 441 General government 1,626 2,574 2,931 2,817 2,763 3,030 2,975 1,252 1,524 1,520 Operating grants and contributions 8,185 15,554 13,517 8,682 4,731 3,231 8,701 9,941 10,828 10,245 Capital grants and contributions 3,773 8,291 6,048 6,078 6,876 5,580 11,556 3,999 9,952 1,459 Total governmental activities program revenues 18,659 31,233 27,764 22,915 19,295 16,381 28,397 22,500 29,192 19,001 Business-type activities: Charges for services: Wastewater 12,557 12,637 12,836 12,670 12,832 12,559 12,189 12,266 12,277 12,626 Water 8,107 7,957 8,054 8,419 8,583 8,443 8,527 9,134 9,275 9,473 Sanitation 8,286 8,096 8,259 8,115 8,181 8,467 9,015 9,215 9,927 10,014 Housing authority 181 180 208 207 205 213 237 300 321 323 Parking 5,438 5,377 5,234 4,743 5,043 5,294 5,502 5,438 5,453 5,648 Airport 248 289 293 306 314 328 349 333 345 348 Stormwater 622 617 641 811 974 1,093 1,147 1,168 1,544 1,560 Cable Television 788 790 809 824 816 773 750 - - - Transit1 - - - - 2,117 2,185 2,289 2,099 2,089 2,216 (continued) CITY OF IOWA CITY, IOWA CHANGES IN NET POSITION Last Ten Fiscal Years (Accrual basis of accounting) (amounts expressed in thousands) 112 2009 2010 2011 2012 20131 2014 2015 20162 2017 2018 Capital grants and contributions: Wastewater 266 2,115 2,394 3,223 30,181 7,105 1,370 3,415 2,226 1,913 Capital grants and contributions: Water 132 572 973 977 494 539 581 254 869 483 Capital grants and contributions: Sanitation - 6 - 2 - - - - - 22 Capital grants and contributions: Airport 3,239 3,311 358 1,576 2,452 5,214 137 260 58 49 Capital grants and contributions: Stormwater 68 541 140 436 226 711 792 370 1,251 892 Capital grants and contributions: Housing authority - 25 11 - - - - - - - Capital grants and contributions: Parking - - 269 4 - - - - - - Capital grants and contributions: Transit - - - - 898 243 - 308 395 3,827 Operating grants and contributions: Housing authority 6,668 7,765 7,438 6,782 6,968 6,721 7,628 8,318 8,532 9,065 Operating grants and contributions: Water 15 6 - - 442 6 2 - - - Operating grants and contributions: Airport 2 - - - 11 56 232 128 69 72 Operating grants and contributions: Sanitation 607 6 10 - 23 27 25 3 - 3 Operating grants and contributions: Wastewater 1 - - - - 62 21 - - - Operating grants and contributions: Stormwater - - - - 13 13 279 95 - 2 Operating grants and contributions: Transit - - - - 1,767 2,118 2,082 2,095 2,235 2,088 Total business-type activities program revenues 47,225 50,290 47,927 49,095 82,540 62,170 53,154 55,199 56,866 60,624 Total primary government revenues 65,884$ 81,523$ 75,691$ 72,010$ 101,835$ 78,551$ 81,551$ 77,699$ 86,058$ 79,625$ Net (Expense) / Revenues Governmental activities (46,412)$ (45,198)$ (47,757)$ (55,230)$ (46,761)$ (50,727)$ (34,244)$ (39,103)$ (38,225)$ (55,657)$ Business-type activities 4,543 8,072 6,284 5,732 33,392 1,011 169 2,539 3,074 3,632 Total primary government net expense (41,869)$ (37,126)$ (41,473)$ (49,498)$ (13,369)$ (49,716)$ (34,075)$ (36,564)$ (35,151)$ (52,025)$ General Revenues and Other Changes in Net Position Governmental activities: General revenues: Property taxes 47,085$ 49,467$ 48,011$ 50,516$ 51,017$ 50,551$ 52,205$ 53,114$ 57,649$ 59,046$ Road use tax3 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 1,489 1,535 2,464 2,491 2,609 2,778 2,810 2,717 2,802 2,706 Grants and contributions not restricted to specific purposes - - - - - - 1,048 2,080 1,583 1,547 Earnings on investments 3,057 1,766 1,539 1,823 841 973 1,188 1,045 1,397 2,368 Miscellaneous 4,894 3,893 6,230 4,228 4,390 4,353 5,518 4,464 3,369 3,656 Gain on sale of assets - - 761 2,950 1,312 1,651 135 218 2,151 140 Transfers 205 (625) (4,020) (3,867) (10,485) (6,192) (10,057) (6,395) (7,053) 1,814 Reassignments - - - - - - - 82 - - Total governmental activities 61,984 69,702 69,964 73,179 65,131 61,325 52,847 57,325 61,898 71,277 Business-type activities: General revenues: Earnings on investments 2,577 1,311 954 813 671 494 707 715 938 1,496 Gain on sale of assets 360 230 314 336 293 725 856 2,463 69 2,438 Miscellaneous 317 464 381 484 918 265 374 362 1,260 456 Transfers (205) 625 4,020 3,867 10,485 6,192 10,057 6,395 7,053 (1,814) Reassignments - - - - - - - (82) - - Special items - - - - - - (574) - - - Extraordinary items - - - (5,000) - - - - - - Total business-type activities 3,049 2,630 5,669 500 12,367 7,676 11,420 9,853 9,320 2,576 Total primary government 65,033$ 72,332$ 75,633$ 73,679$ 77,498$ 69,001$ 64,267$ 67,178$ 71,218$ 73,853$ Change in Net Position Governmental activities 15,572$ 24,504$ 22,207$ 17,949$ 18,370$ 10,598$ 18,603$ 18,222$ 23,673$ 15,620$ Business-type activities 7,592 10,702 11,953 6,232 45,759 8,687 11,589 12,392 12,394 6,208 Total primary government 23,164$ 35,206$ 34,160$ 24,181$ 64,129$ 19,285$ 30,192$ 30,614$ 36,067$ 21,828$ 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) 113 2009 2010 20111 2012 20132 2014 2015 20163 2017 2018 General Fund Nonspendable -$ -$ 331$ 314$ 69$ 69$ 69$ 69$ 788$ 793$ Restricted - - 16,268 23,779 25,689 26,533 25,291 18,975 9,974 1,942 Committed - - - - - - - 4,699 5,199 4,962 Assigned - - 3,542 5,191 1,744 3,400 - 1,143 1,342 1,437 Reserved 555 406 - - - - 4,483 - - - Unassigned - - 15,931 14,273 17,113 17,907 19,286 23,366 24,793 28,516 Unreserved 15,362 26,101 - - - - - - - - Total general fund 15,917$ 26,507$ 36,072$ 43,557$ 44,615$ 47,909$ 49,129$ 48,252$ 42,096$ 37,650$ All other Governmental Funds Nonspendable -$ -$ -$ -$ -$ -$ -$ -$ 344$ 165$ Restricted - - 34,889 34,853 28,108 31,285 27,897 38,266 63,941 64,033 Reserved 5,339 3,903 - - - - - - - - Designated for long-term debt 11,759 13,952 - - - - - - - - Unassigned - - (1,741) (366) (5,844) (9) - - - (38) Unreserved, reported in: Special revenue funds (1,852) (1,674) - - - - - - - - Capital projects funds 10,960 8,043 - - - - - - - - Total all other governmental funds 26,206$ 24,224$ 33,148$ 34,487$ 22,264$ 31,276$ 27,897$ 38,266$ 64,285$ 64,160$ 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) 114 2009 2010 2011 2012 20131 2014 2015 20162 2017 2018 Revenues: Property taxes and assessments 48,572$ 59,143$ 59,387$ 61,649$ 62,483$ 53,797$ 55,014$ 55,831$ 60,452$ 61,753$ Licenses and permits 1,284 1,211 1,412 1,307 1,784 1,660 1,806 3,056 3,521 2,734 Intergovernmental 19,521 31,404 29,870 21,952 19,941 17,636 21,086 20,230 24,140 14,944 Charges for services 2,498 2,433 2,515 2,614 1,800 1,819 2,204 3,357 2,355 2,295 Fines and forfeits - - - - - - - 760 750 695 Use of money and property 2,645 1,599 1,479 1,768 782 909 1,080 946 1,235 1,937 Miscellaneous 5,302 4,784 7,749 5,750 6,325 6,040 7,045 2,913 2,101 2,875 Total governmental activities revenues 79,822$ 100,574$ 102,412$ 95,040$ 93,115$ 81,861$ 88,235$ 87,093$ 94,554$ 87,233$ Expenditures Current Public safety 18,752$ 19,108$ 18,717$ 20,091$ 20,648$ 21,370$ 21,996$ 21,701$ 22,513$ 23,360$ Public works 12,405 13,311 14,766 15,462 8,503 8,432 12,071 9,466 9,186 10,052 Culture and recreation 10,849 11,266 12,498 13,075 13,000 13,087 11,821 12,257 13,341 14,208 Community and economic development 8,037 10,520 8,878 8,037 8,219 8,196 5,711 5,346 7,695 11,074 General government 7,300 7,191 7,695 7,553 7,286 7,184 7,608 6,007 5,882 6,017 Debt service Principal 8,418 9,354 10,386 13,294 16,465 13,560 12,564 13,230 13,305 11,895 Interest 3,364 3,064 2,889 2,543 2,339 1,903 1,669 1,475 1,597 1,570 Capital projects 17,096 17,690 21,873 16,006 17,861 14,528 14,762 14,848 18,405 28,225 Total expenditures 86,221$ 91,504$ 97,702$ 96,061$ 94,321$ 88,260$ 88,202$ 84,330$ 91,924$ 106,401$ Excess (deficiency) of revenues over (under) expenditures (6,399)$ 9,070$ 4,710$ (1,021)$ (1,206)$ (6,399)$ 33$ 2,763$ 2,630$ (19,168)$ Other financing sources (uses): Issuance of long-term debt 30,035$ -$ 16,165$ 9,690$ 2,655$ 19,730$ 7,785$ 9,405$ 22,570$ 11,995$ Issuance of refunding debt --10,930$ - - - - - - - Sale of capital assets 554 222 845 3,619 1,369 1,684 165 252 2,292 140 Insurance Recoveries - 20 594 53 - - - - - - Premium (discount) on issuance of bonds 552 -394 165 (42) 385 199 441 120 236 Payment of refunded bonds (23,140) - (11,085) - - - - - - - Transfers in 16,486 16,742 18,658 19,499 25,198 13,040 13,089 25,133 34,675 34,666 Transfers out (16,386) (17,446) (22,722) (23,181) (35,493) (16,134) (23,430) (28,502) (47,033) (32,440) Total other financing sources (uses)8,101$ (462)$ 13,779$ 9,845$ (6,313)$ 18,705$ (2,192)$ 6,729$ 12,624$ 14,597$ Net change in fund balances 1,702$ 8,608$ 18,489$ 8,824$ (7,519)$ 12,306$ (2,159)$ 9,492$ 15,254$ (4,571)$ Debt service as a percentage of noncapital expenditures 17.0%15.3%16.2%18.6%24.0%20.7%19.8%21.2%19.9%17.1% 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) 115 Fiscal Local Option Utility Year Property Tax Road Use Tax Hotel/Motel Tax Sales Tax1 Franchise Fee2 Total 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 2018 59,730 8,427 1,046 - 976 70,179 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) 116 Collection Commercial, Industrial Incremental Value Gas &Residential Taxable Value Total Year Ended Agricultural & Utilities (excluding Military Net (Debt Service Electric Utilities Total Rollback as a Percentage Direct June 30 Residential (Taxed at Ag Rate)Gas & Electric)Exemptions Valuation Levy Only)(excise tax)Value Percentage of Assessed Value Rate 2009 Assessed 2,991,702 1,565 1,108,123 3,396 4,097,994$ 111,540 54,081 4,263,615$ Taxable 1,307,511 1,410 1,105,109 3,396 2,410,634$ 111,540 44,597 2,566,771$ 44.080 60.202 17.717 2010 Assessed 3,065,279 1,499 1,133,818 3,324 4,197,272$ 117,813 61,066 4,376,151$ Taxable 1,384,088 1,407 1,133,818 3,324 2,515,989$ 117,813 45,157 2,678,959$ 45.589 61.217 17.853 2011 Assessed 3,122,875 2,315 1,223,304 3,239 4,345,255$ 25,409 79,196 4,449,860$ Taxable 1,464,644 1,534 1,223,304 3,239 2,686,243$ 25,409 46,333 2,757,985$ 46.909 61.979 17.757 2012 Assessed 3,182,636 2,264 1,231,756 3,163 4,413,493$ 25,409 81,240 4,520,142$ Taxable 1,544,261 1,562 1,231,756 3,163 2,774,416$ 25,409 48,338 2,848,163$ 48.530 63.010 17.842 2013 Assessed 3,284,249 2,516 1,236,609 3,097 4,520,277$ 11,712 83,538 4,615,527$ Taxable 1,666,036 1,448 1,236,609 3,097 2,900,996$ 11,712 47,404 2,960,112$ 50.752 64.134 17.269 2014 Assessed 3,367,052 2,656 1,200,457 3,060 4,567,105$ 14,114 87,100 4,668,319$ Taxable 1,776,096 1,592 1,200,457 3,060 2,975,085$ 14,114 46,813 3,036,012$ 52.817 65.034 16.805 2015 Assessed 3,488,113 3,681 1,238,018 2,939 4,726,873$ 21,132 78,643 4,826,648$ Taxable 1,894,080 1,598 1,175,921 2,939 3,068,660$ 21,132 47,005 3,136,797$ 54.400 64.989 16.705 2016 Assessed 3,603,744 3,554 1,216,054 2,828 4,820,524$ 42,307 87,728 4,950,559$ Taxable 2,008,493 1,588 1,095,272 2,828 3,102,525$ 33,331 46,785 3,182,641$ 55.734 64.289 16.651 2017 Assessed 3,882,757 3,721 1,300,840 2,728 5,184,590$ 72,651 92,987 5,350,228$ Taxable 2,155,033 1,707 1,149,736 2,728 3,303,748$ 72,651 44,987 3,421,386$ 55.626 63.948 16.583 2018 Assessed 4,001,761 3,426 1,316,765 2,635 5,319,317$ 80,560 94,582 5,494,459$ Taxable 2,274,452 1,618 1,147,155 2,635 3,420,590$ 80,560 41,702 3,542,852$ 56.939 64.480 16.333 Sources: Iowa Department of Management Notes: Property is reassessed in the odd numbered years to make adjustments to all property values, according to current market values. As per the Code of Iowa, all real property subject to taxation shall be valued at its actual value and, except as otherwise provided, shall be reassessed at 100% of its actual value. CITY OF IOWA CITY, IOWA ASSESSED AND TAXABLE VALUE OF PROPERTY Last Ten Fiscal Years (amounts expressed in thousands) 117 (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 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 2018 12.755 3.578 16.333 7.180 13.959 1.132 0.003 38.607 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 $1,000 of assessed value. Overlapping Rates City of Iowa City CITY OF IOWA CITY, IOWA PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS Last Ten Fiscal Years 118 Collection Total Tax Current Tax Delinquent Tax Total Tax Year Levied Collections Collections1 Collections 2009 43,168 43,118 99.9 18 43,136 99.9 2010 45,393 45,318 99.8 17 45,335 99.9 2011 47,789 47,826 100.1 8 47,834 100.1 2012 49,595 49,543 99.9 1 49,544 99.9 2013 50,407 50,139 99.5 3 50,142 99.5 2014 50,307 49,835 99.1 1 49,836 99.1 2015 51,609 51,292 99.4 3 51,295 99.4 2016 52,034 52,074 100.1 0 52,074 100.1 2017 55,330 55,331 100.0 0 55,331 100.0 2018 56,458 56,434 100.0 0 56,434 100.0 Source: Certificate of City Taxes and Johnson County Treasurer's Office Note: This schedule is presented on a cash basis of accounting. Taxes are collected by the Johnson County Treasurer and submitted to the City in the following month. Because of the month delay, some years will show Current Tax Collections in excess of the Total Tax Levied. 1 Delinquent tax collection is presented by collection year, rather than levy year, because information is not available from Johnson County Treasurer by levy year. CITY OF IOWA CITY, IOWA PROPERTY TAX BUDGETS AND COLLECTIONS Last Ten Fiscal Years (Cash basis of accounting) (amounts expressed in thousands) Percent of Levy Collected Total as a Percent of Levy 119 % of Total % of Total Taxable Taxable Taxable Taxable Ten largest taxpayers1 Type of Business Valuation Rank Valuation Valuation Rank Valuation ACT Inc (Am College Testing Prgrm)Educational Testing Service 44,435$ 2 1.03 %56,145$ 1 1.64 % BBCS Hawkeye Housing LLC Real Estate Mangment --N/A 45,357 2 1.33 Mid-American Energy Company Public Gas and Electric Utility 45,048 1 1.02 29,806 3 0.87 Vesper Iowa City LLC Real Estate Developer - -N/A 27,191 4 0.79 Midwestone Bank Finanacial - -N/A 26,245 5 0.77 Ann Gerdin Trust (formerly Russell Gerdin)Warehousing 16,939 4 0.39 25,448 6 0.74 Dealer Properties IC LLC (Billion Auto)Car Dealerships - -N/A 21,465 7 0.63 Michael T McLaughlin Property Management - -N/A 18,740 8 0.55 Proctor & Gamble LLC Manufacturing Company 12,688 9 0.29 18,673 9 0.55 Christian Retirement Services (Oaknoll)Retirement Community - -N/A 18,335 10 0.54 SouthGate Development CO RealEstate Developer 20,265 3 0.46 - -N/A National Computer Systems (Pearson)Information Services 16,430 5 0.38 - -N/A MEHSM LC (Sycamore Mall)Shopping Mall 14,954 6 0.34 - -N/A Plaza Towers LLC Condo/Hotel/Commercial space 14,168 7 0.32 - -N/A United Natural Foods Wholesale Distribution Company 13,095 8 0.30 - -N/A Alpha Inc. Industrial 11,715 10 0.27 - -N/A Total 209,737$ 4.80 %287,405$ 8.41 % Sources: 1City of Iowa City Assessor's Office CITY OF IOWA CITY, IOWA PRINCIPAL TAXPAYERS Current Year and Nine Years Ago (amounts expressed in thousands) 20182009 120 121 Customer Name Charges Rank Percentage Charges Rank Percentage Proctor & Gamble 624,483$ 1 8.33 %787,275$ 1 7.91 % Veterans Administration Medical Center 91,529 2 1.22 120,538 2 1.21 Mercy Hospital 71,622 4 0.96 67,081 3 0.67 Campus Apartments 66,600 5 0.89 66,835 4 0.67 Tailwind Iowa City LLC formerly Dolphin Lake 37,843 9 0.50 55,022 5 0.55 Dominium JIT Srv formerly Mark IV Apts 53,273 7 0.71 55,000 6 0.55 Iowa City School District --N/A 47,194 7 0.47 Seville Apts 31,885 10 0.43 38,527 8 0.39 Oaknoll --N/A 37,130 9 0.37 U of I Mayflower 90,330 3 1.20 34,763 10 0.35 Robert's Dairy 63,517 6 0.85 --N/A Lear Corp --N/A --N/A Sheraton Inn/Holiday Inn 35,806 8 0.48 --N/A 1,166,888$ 15.57 %1,309,365$ 13.14 % Total Water System Charges 7,497,903$ 9,953,510$ Sources: City of Iowa City Revenue Division 20182009 CITY OF IOWA CITY, IOWA PRINCIPAL WATER SYSTEM CUSTOMERS Current Year and Nine Years Ago 122 Fiscal Water Sales Water System Year Cubic Feet Sold Charges 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 2018 293,046,636 9,953,510 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 123 Customer Name Charges Rank Percentage Charges Rank Percentage University of Iowa 1,953,325$ 1 15.63 %1,938,618$ 1 15.48 % Proctor & Gamble 1,443,652 2 11.55 1,355,077 2 10.82 Veterans Administration Medical Center 88,204 8 0.71 162,111 3 1.29 Mercy Hospital 122,737 5 0.98 106,938 4 0.85 Campus Apartments 91,889 7 0.74 78,918 5 0.63 Dominium JIT Srv formerly Mark IV Apts 73,987 9 0.59 68,736 6 0.55 University of Iowa Mayflower 163,776 3 1.31 54,414 7 0.43 Seville Apts - -N/A 52,407 8 0.42 Oaknoll Retirement Residence - -N/A 52,205 9 0.42 Tailwind Iowa City LLC formerly Dolphin Lake - -N/A 52,142 10 0.42 Robert's Dairy 155,192 4 1.24 --N/A Iowa City Landfill 92,318 6 0.74 - -N/A Sheraton Iowa City Hotel 62,698 10 0.50 - -N/A 4,247,778$ 33.99 %3,921,566$ 31.31 % Total Sewer System Charges 12,499,949$ 12,524,540$ Sources: City of Iowa City Revenue Department CITY OF IOWA CITY, IOWA PRINCIPAL SEWER SYSTEM CUSTOMERS Current Year and Nine Years Ago 20182009 124 Fiscal Sewer Sales Sewer System Year Cubic Feet Sold Charges 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 2018 283,246,320 12,524,540 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 125 General Capital General Total Percentage Fiscal Obligation Revenue Loan Obligation Revenue Primary of Personal Per Year Bonds1 Bonds1 Note Bonds1 Bonds1 Government Income2 Capita2 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 - 34,420,914 102,371,308 1.25 1,351 2018 52,883,524 15,035,264 211,000 - 29,095,062 97,224,850 1.16 1,256 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 136. Governmental Activities Business-Type Activities CITY OF IOWA CITY, IOWA RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years 126 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 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 591 2018 5,494,459 52,884 - 52,884 8,609 44,275 8.06 : 1000 572 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 136. 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) 127 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 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 2018 11,895 1,570 13,465 138,841 .10 : 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. 128 CITY OF IOWA CITY, IOWA COMPUTATION OF DIRECT AND OVERLAPPING DEBT June 30, 2018 (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 68,130$ 100.00 %68,130$ 1.24 %879.8145$ Iowa City Community School District1 58,955 56.87 33,528 0.63 442.3336 Johnson County1 10,640 42.09 4,478 0.08 59.0781 Clear Creek- Amana Community School District1 76,045 0.04 30 0.00 0.3958 Kirkwood Comm. College1 90,422 14.11 12,759 0.24 168.3290 Total Overlapping Debt 236,062 50,795 670.1365 Total Direct & Overlapping Debt 304,192$ 118,925$ 1,549.9510 Per capita assessed value 70,954$ 1 Long term debt outstanding includes only GO debt. 2City Property Assessed Value of 5,494,459 came from the Iowa Department of Management 3 Population for FY18 of 77,437 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. 129 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Assessed Valuation 4,263,615$ 4,376,151$ 4,449,860$ 4,520,142$ 4,615,527$ 4,668,319$ 4,826,648$ 4,950,559$ 5,350,228$ 5,494,459$ Debt Limit 213,181 218,808 222,493 226,007 230,776 233,416 241,332 247,528 267,511 274,723 G.O. Bonds 84,995 75,050 80,575 75,320 58,550 64,420 59,340 55,350 51,645 51,880 TIF Rev. Bonds ----2,655 2,655 2,655 2,525 15,200 15,065 Letters of credit -498 1,616 805 538 1,943 2,005 582 663 475 TIF rebates 2,180 1,223 867 574 307 170 18,206 13,506 17,356 25,012 Total net debt applicable to limit 87,175 76,771 83,058 76,699 62,050 69,188 82,206 71,963 84,864 92,432 Legal debt margin 126,006$ 142,037$ 139,435$ 149,308$ 168,726$ 164,228$ 159,126$ 175,565$ 182,647$ 182,291$ Total net debt applicable to the limit as a percentage of debt limit 40.89%35.09%37.33%33.94%26.89%29.64%34.06%29.07%31.72%33.65% Note: Under Iowa code, the city's outstanding general obligation debt should not exceed 5 percent of total assessed property value. CITY OF IOWA CITY, IOWA LEGAL DEBT MARGIN INFORMATION Last Ten Fiscal Years (amounts expressed in thousands) Fiscal Year 130 Fiscal Year Principal Interest Total Property Tax Revenue Tax Increment Financing Principal Outstanding at Beginning of Fiscal Year 2018 11,760,000 1,113,386 12,873,386 12,275,274 598,112 51,645,000 2019 9,335,000 1,257,050 10,592,050 9,833,950 758,100 51,880,000 2020 8,400,000 1,036,338 9,436,338 8,680,208 756,130 42,545,000 2021 7,585,000 819,135 8,404,135 7,647,747 756,388 34,145,000 2022 6,395,000 631,263 7,026,263 6,270,783 755,480 26,560,000 2023 5,520,000 492,013 6,012,013 5,313,697 698,316 20,165,000 2024 4,760,000 358,213 5,118,213 4,573,351 544,862 14,645,000 2025 3,830,000 248,913 4,078,913 3,842,203 236,710 9,885,000 2026 3,030,000 160,600 3,190,600 3,027,816 162,784 6,055,000 2027 2,045,000 85,325 2,130,325 1,967,008 163,317 3,025,000 2028 980,000 29,400 1,009,400 1,009,400 - 980,000 Total 63,640,000$ 6,231,636$ 69,871,636$ 64,441,437$ 5,430,199$ Payments Funding Source(s) CITY OF IOWA CITY, IOWA GENERAL OBLIGATION DEBT ANNUAL MATURITY SCHEDULE 131 Fiscal Year Net Revenue Annual Debt Service2 Ended Available for Ratio of June 30 Revenue Expenses1 Debt Service Principal Interest Total Coverage Parking Revenue3 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 - - - - - - - 2018 - - - - - - - Wastewater Treatment Revenue4 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 2018 13,181 6,622 6,559 3,580 756 4,336 1.51 Water Revenue5 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 2018 9,838 6,949 2,889 1,455 394 1,849 1.56 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) 132 Fiscal Year Principal Interest Total Sewer Revenue Water Revenue Tax Increment Financing Principal Outstanding at Beginning of Fiscal Year 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 48,020,000$ 8,939,367$ 56,959,367$ 21,875,832$ 14,666,490$ 20,417,045$ Payments CITY OF IOWA CITY, IOWA REVENUE DEBT ANNUAL MATURITY SCHEDULE Funding Source(s) 133 Fiscal Year Principal Interest Total 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 19,590,000$ 2,285,832$ 21,875,832$ Fiscal Year Principal Interest Total 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 13,230,000$ 1,436,490$ 14,666,490$ CITY OF IOWA CITY, IOWA Outstanding REVENUE DEBT ANNUAL MATURITY BY FUNDING SOURCE Sewer Water 134 Fiscal Year Principal Interest Total 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 15,200,000$ 5,217,045$ 20,417,045$ Taxable Urban Renewal Outstanding CITY OF IOWA CITY, IOWA REVENUE DEBT ANNUAL MATURITY BY FUNDING SOURCE (continued) 135 Per Capita Calendar Personal Personal Average School Retail Year Population6 Income1 Income1 Increase Enrollment2 Sales4 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 2017 75,798 8,217,043 48,672 2.31 15,299 3.0 874,928,988 20185 77,437 8,396,022 49,732 2.18 14,285 2.2 854,538,416 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 schools 3 Iowa Workforce Development Center 4 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 or 2018 are not available. Amounts projected based on average increase over previous 9 years. 6 US Census Bureau Population number is not avaible for 2018. Amounts projected based on an average over previous 9 years DEMOGRAPHIC AND ECONOMIC STATISTICS CITY OF IOWA CITY, IOWA Last Ten Calendar Years Unemployment Rate3 136 Employers Employees Rank Percentage Employees Rank Percentage University of Iowa 28,781 1 30.7 %29,705 1 28.7 % Veterans Administration Medical Center 1,351 5 1.4 2,150 2 2.1 Iowa City Community School District 1,700 2 1.8 1,575 3 1.5 Mercy Hospital 1,305 4 1.4 1,325 4 1.3 ACT Inc. (formerly American College Testing Program)1,427 3 1.5 1,187 5 1.1 Proctor and Gamble - -N/A 1,084 6 1.0 Hy Vee 1,166 6 1.2 1,012 7 1.0 City of Iowa City 982 8 1.0 931 8 0.9 NCS Pearson 1,152 7 1.2 775 9 0.7 Johnson County - -N/A 609 10 0.6 Internaltion Automotive Components formerly Lear Corp 805 9 0.9 - -N/A Systems Unlimited 700 10 0.7 - -N/A 39,369 41.8 %40,353 38.9 % Total Employees 93,700 103,400 Sources: Iowa City Area Development Group Various Employers CITY OF IOWA CITY, IOWA PRINCIPAL EMPLOYERS Current Year and Nine Years Ago 2009 2018 137 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Public Safety Police 103.25 103.25 98 97 103 105 105 105 105 105 Animal Shelter1 6 6 6 6 - - - - - - Fire 57 57 66 65 65 65 64 64 64 64 Inspection Services 15.55 15.55 15.55 15.55 15.55 13.55 13.55 12.85 13.5 13.5 Public Works Public Works Admin 2 2 2 2 2 2 2 2 2 2 Engineering5 11.35 11.35 12.1 12.1 12.1 12.1 12.1 12 16 16 Flood Recovery - - 0.4 0.4 0.4 0.38 - - - - Culture and Recreation Parks and Rec Admin 2 2 2 2 2 2 2 2 2 2 Recreation 15.42 15.42 15.42 15.42 15.42 15.42 15.42 14.42 15.42 14.75 Parks 13 13 13 13 13 13 13 13 16 16 Forestry 3 3 3 3 3 3 3 3 3 3 Cemetery 3 3 3 3 3 3 3 3 3 3 CBD Maintenance 3 3 3 3 3 3 3 3 - - Library 43.14 43.14 43.14 43.64 43.63 45.13 45.13 44.77 46.17 46.17 Senior Center 6.31 6.31 6.31 6.5 6.5 6.5 6.5 6.5 7 7 Community and Economic Development 9.05 9.05 9.1 9.1 8.4 8.95 8.95 10.8 12.63 13.13 General Government City Council 7 7 7 7 7 7 7 7 7 7 City Clerk 4 4 4 4 4 4 4 4 4 4 City Attorney 6 6 5.6 5.6 5.6 5.6 5.6 5.5 5.5 5.5 City Manager2 3 3 3 3 5 6 6 10.5 10.5 9 Personnel 4 4 4 4 4 3 3 3 3 3 Human Rights 2.5 2.5 2.5 2.5 2 2 2 2 2 2 Finance 26.3 26.3 26.24 27.53 23.47 23.97 22.47 23.07 23.13 22.13 Government Buildings 4.96 4.96 4.96 4.83 4.83 4.83 4.83 5.33 4.33 5 Energy Conservation 0.25 0.25 - - - - - - - - Transit3 58.5 58.5 56.25 56.25 - - - - - - Special Revenue Employee Benefits 0.29 0.29 0.26 0.55 0.55 0.55 0.55 0.55 0.55 0.55 CIP / Roads 2 2 - - - - - - - - Flood Mitigation Grants - - 1.6 1.6 - - - - - - Community Development 3.88 3.88 3.83 3.83 3.33 2.98 2.98 2.83 - - UniverCity Program - - - - 0.2 - - - - - Traffic Engineering 4.15 4.15 4.15 4.15 4.15 4.15 4.15 3.9 4.5 3 Streets 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.25 25.5 29 MPOJC (formerly JCCOG)6.6 6.6 6.6 6.6 5.6 5.6 5.6 4.7 4.7 4.7 Other Shared Revenues - - - - 1.6 1.62 - - - - Library Development 1 1 1 1 1 - - - - - Capital Projects Administration5 - - 3 5 6 6 5 4 - - Internal Service Funds Information Technology 12.3 12.3 11.3 11.8 10.86 9.86 9.86 9.86 9.8 10.8 Equipment 11.26 11.26 11.26 11.26 10.75 10.75 10.75 10.75 10.75 10.75 Central Services 0.75 0.75 0.75 0.75 0.76 0.5 0.5 0.5 0.5 0.5 Risk Management 1.93 1.93 2.01 1.8 1.8 1.8 1.8 1.8 1.8 1.8 Business-Type Activities Parking 33.25 33.25 32.75 32.75 29.25 26.25 26.25 23.13 21.63 21.63 Mass Transit3 - - - - 51.75 51.25 51.25 51.13 53.63 54.63 Wastewater Treatment 25.6 25.6 25.6 25.4 25.4 24.4 24.65 24.65 25.4 26 Water 32.75 32.75 32.75 32.75 32.75 31.75 32 32 31.75 31.75 Sanitation 34.85 35.85 35.85 37.85 37.85 35.85 35.85 33.35 31.5 31.5 Airport 1.75 1.75 1.75 1.75 1 1 1 1 1 1 Cable Television4 6.44 6.44 6.69 6.63 6.63 6.63 5.63 - - - Stormwater 1.9 1.9 1.9 2.1 2.1 2.1 2.6 2.6 2.1 1.5 Housing Authority 13.25 13.25 13.25 13.25 13.18 12.19 10.19 10.19 9.6 9.6 Total 629.03 630.03 633.37 637.74 623.91 615.16 607.66 598.93 599.89 601.89 Source: City's Financial Plan 1 Beginning in FY13, Animal Services is reported under Police 2 Beginning in FY13, Communications Division has been moved from Finance to City Manager 3 Beginning in FY13, Transit was moved from the General Fund to an Enterprise Fund 4 Beginning in FY16, Cable was moved from an Enterprise Fund to the General Fund 5 Beginning in FY17, Capital Project Administration was moved to Engineering CITY OF IOWA CITY, IOWA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION Last Ten Fiscal Years Full-Time Equivalent Employees as of June 30 138 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Public Safety Police1 Physical arrests 6,486 5,983 6,590 5,911 4,468 6,192 5,595 5,465 4,482 3,373 Traffic Violations 4,460 4,446 3,403 3,761 2,499 3,718 3,356 2,989 2,246 2,061 Fire1 Number of calls answered 4,152 4,472 4,635 5,173 4,713 5,828 6,016 6,974 6,749 5,258 Inspections conducted 1,959 2,145 1,806 1,970 1,431 2,032 1,903 2,459 874 864 Parking Parking Violations 126,050 118,717 109,553 96,117 88,909 60,680 65,196 57,549 62,930 50,346 Wastewater Treatment Daily average treatment in million gallons 12.34 12.86 10.37 8.28 9.84 10.02 9.76 10.48 8.32 7.77 Maximum daily capacity of plant in million gallons 41.0 41.1 41.1 41.1 41.1 41.1 43.3 43.3 43.3 43.3 Number of sewer system customers 23,161 23,344 23,527 23,529 24,059 24,389 24,533 25,085 25,485 26,069 Water Daily average consumption in million gallons 5.51 5.48 5.51 5.49 5.54 5.64 5.33 5.32 5.50 5.84 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 23,391 23,657 23,875 24,086 24,442 24,790 23,089 23,638 24,025 24,595 Commercial 1,494 1,481 1,498 1,489 1,491 1,491 1,409 1,415 1,425 1,436 Industrial 15 15 15 15 15 15 14 14 14 15 Other 144 153 156 200 204 202 135 131 134 136 Total Customers 25,044 25,306 25,544 25,790 26,152 26,498 24,647 25,198 25,598 26,182 Sanitation Number of Customers 14,700 14,831 14,926 15,030 15,177 15,331 14,811 15,620 15,917 15,960 Tonnage 8,747 8,869 8,969 8,935 8,956 9,160 9,210 9,476 9,623 9,694 Landfill Tonnage 140,810 150,369 147,265 148,953 111,445 115,624 123,692 126,875 137,025 140,658 Sources: Various city divisions. Notes: 1 Numbers are based on a calendar year and 2018 figures are compiled through 10/03/18. CITY OF IOWA CITY, IOWA OPERATING INDICATORS BY FUNCTION Last Ten Fiscal Years 139 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Public Safety Police Stations 1 1 1 1 1 1 1 1 1 1 Patrol units 17 18 18 18 18 20 20 20 24 23 Fire Stations 3 3 3 4 4 4 4 4 4 4 Fire apparatus 9 9 9 11 11 11 11 10 10 10 Public Works Streets Miles 270 272 272 275 276 279 281 283 286 288 Street lights 3,408 3,410 3,412 3,412 3,412 3,412 3,412 3,412 3,412 3,307 Culture and Recreation Library 1 1 1 1 1 1 1 1 1 1 Cemetery 1 1 1 1 1 1 1 1 1 1 Acreage 40 40 40 40 40 40 40 40 40 40 Parks 61 40 41 41 42 43 46 46 49 50 Acreage 1,603 1,335 1,354 1,441 1,506 1,897 1,897 1,902 1,932 1,942 Recreation Recreation centers 2 2 2 2 2 2 2 2 2 2 Swimming pools 3 3 3 3 3 3 3 3 3 3 Ball diamonds 30 30 30 30 27 27 27 27 27 27 Tennis courts 12 12 12 12 12 12 12 12 9 9 Soccer fields 20 20 20 20 20 20 20 20 20 20 Pickle Ball Courts - - - - - - - - 8 8 Futscal Courts - - - - - - - - 2 2 Full Basketball Courts - - - - - - - - 3 3 Gaga Pits - - - - - - - - - 2 Parking Facilities 5 5 5 5 5 5 5 5 6 6 Spaces 3,086 3,086 3,086 3,086 3,086 3,086 3,086 3,086 3,686 3,686 Wastewater Treatment Miles of sanitary sewer 289 291 292 294 295 298 300 301 304 306 Miles of storm sewer 120 122 124 127 128 131 133 136 139 140 Number of treatment plants 2 2 2 2 2 1 1 1 1 1 Number of service connectors 22,875 23,093 23,308 23,529 23,851 24,175 24,533 25,085 25,485 26,069 Water Miles of water mains 263 264 264 266 268 271 273 275 277 279 Number of city owned fire hydrants 2,635 2,662 2,680 2,735 3,330 3,385 3,415 3,447 3,503 3,529 Sanitation Landfills 1 1 1 1 1 1 1 1 1 1 Acreage 395 395 395 411 411 411 418 418 418 418 Sources: Various city divisions. CITY OF IOWA CITY, IOWA Last Ten Fiscal Years CAPITAL ASSETS BY FUNCTION 140 Compliance Section Tab 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 City Council City of Iowa City, Iowa Iowa City, Iowa We have audited, in accordance with the 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, as of and for the year ended June 30, 2018, 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, 2018. Our report included an emphasis of matter paragraph for the implementation of Governmental Accounting Standards Board Statement No. 75. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered City of Iowa City, Iowa’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City of Iowa City, Iowa’s internal control. Accordingly, we do not express an opinion on the effectiveness of City of Iowa City, Iowa’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 141 Our consideration of internal control 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. 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. Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Iowa City, Iowa’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, 2018 are based exclusively on knowledge obtained from procedures performed during our audit of the financial statements of the City. 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 City of Iowa City, Iowa’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 of Iowa City, Iowa’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Moline, Illinois December 11, 2018 142 Independent Auditor’s Report on Compliance For Each Major Federal Program and On Internal Control Over Compliance Required By the Uniform Guidance To the Honorable Mayor and Members of City Council City of Iowa City, Iowa Iowa City, Iowa Report on Compliance for Each Major Federal Program We have audited City of Iowa City, Iowa’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of City of Iowa City, Iowa’s major federal programs for the year ended June 30, 2018. City of Iowa City, Iowa’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 compliance for each of City of Iowa City, Iowa’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 Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of 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 City of Iowa City, Iowa’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. 143 Opinion on Each Major Federal Program In our opinion, 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, 2018. Report on Internal Control Over Compliance Management of City of Iowa City, Iowa is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered City of Iowa City, Iowa’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 City of Iowa City, Iowa’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 combination of deficiencies, in internal control over compliance, such that there is reasonable possibility that material noncompliance with a type of compliance requirement of a federal program 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 over compliance 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. Moline, Illinois December 11, 2018 144 City of Iowa City, Iowa Schedule of Expenditures of Federal Awards Year Ended June 30, 2018 Federal Pass-Through Passed Total Federal Grantor/Pass-Through Grantor/CFDA Entity Identifying Through to Federal Program Title or Cluster Title Number Number Subrecipients Expenditures U.S. Department of Agriculture Indirect: Pass-through Iowa Department of Agriculture Specialty Crop Block Grant Program-Farm Bill 10.170 15SCBGPIA0001 2,553$ 2,553$ U.S. Department of Housing and Urban Development Direct: Community Development Block Grants (CDBG)/ Entitlement Grants Cluster: CDBG/Entitlement Grants 14.218 B-14-MC-19-0009 971 971 CDBG/Entitlement Grants 14.218 B-15-MC-19-0009 14,486 35,444 CDBG/Entitlement Grants 14.218 B-16-MC-19-0009 49,366 245,834 CDBG/Entitlement Grants 14.218 B-17-MC-19-0009 201,856 310,845 Subtotal CDBG/Entitlement Grants Cluster 266,679 593,094 Home Investment Partnerships Program 14.239 M-14-MC-190205 180,107 181,202 Home Investment Partnerships Program 14.239 M-15-MC-190205 67,521 70,134 Home Investment Partnerships Program 14.239 M-16-MC-190205 206,857 252,396 Home Investment Partnerships Program 14.239 M-17-MC-190205 49,918 84,380 504,403 588,112 Public and Indian Housing 14.850 IA022-00000116D - 370 Public and Indian Housing 14.850 IA022-00000117D - 125,905 Public and Indian Housing 14.850 IA022-00000118D - 95,287 - 221,562 Housing Voucher Program Cluster: Section 8 Housing Choice Vouchers 14.871 IA022VO - 8,689,021 Public Housing Capital Fund 14.872 IA05P022501-16 - 51,790 Public Housing Capital Fund 14.872 IA05P022501-17 - 102,589 - 154,379 Total U.S. Department of Housing and Urban Development 771,082 10,246,168 U.S. Department of the Interior Direct: Historic Preservation Fund Grants-In-Aid 15.904 P17AP00060 - 8,026 U.S. Department of Justice Direct: Bulletproof Vest Partnership Program 16.607 2016-BUBX16082008 - 4,279 Edward Byrne Memorial Justice Assistance Grant 16.738 2015-DJ-BX-0661 - 1,249 Edward Byrne Memorial Justice Assistance Grant 16.738 2016-DJ-BX-0589 - 14,796 - 16,045 (1) (Continued) 145 City of Iowa City, Iowa Schedule of Expenditures of Federal Awards (Continued) Year Ended June 30, 2018 Federal Pass-Through Passed Total Federal Grantor/Pass-Through Grantor/CFDA Entity Identifying Through to Federal Program Title or Cluster Title Number Number Subrecipients Expenditures U.S. Department of Justice (Continued) Indirect: Pass-through International Association of Chiefs of Police, Inc. Crime Victim Assistance-Discretionary Grants 16.582 IACP-2018-7586-04 5,363$ 54,867$ Pass-through Iowa Department of Justice Violence Against Women Formula Grants 16.588 VW-18-04-CJ - 63,583 Pass-through Iowa Governor's Office of Drug Control Policy Public Safety Partnership and Community Policing Grants 16.710 16-CAMP-05 16,038 18,266 Edward Byrne Memorial Justice Assistance Grant 16.738 15-JAG-197460 56,736 88,868 (1) Total U.S. Department of Justice 78,137 245,908 U.S. Department of Transportation Direct: Airport Improvement Program 20.106 3-19-0047-024-2017 - 71,837 Indirect: Pass-through Iowa Department of Transportation Highway Planning and Construction Program Cluster: Highway Planning and Construction Program 20.205 HDP-3715(652)--71-52 - 117,860 Highway Planning and Construction Program 20.205 BROS-3715(663)--8J-52 - 35,195 Highway Planning and Construction Program 20.205 IA-95-X018-371-14 - 1,696,000 - 1,849,055 Pass-through Iowa Department of Transportation and Metropolitan Planning Organization of Johnson County Highway Planning and Construction Program Cluster: Highway Planning and Construction Program 20.205 18MPO-MPOJC - 157,785 Subtotal Highway Planning and Construction Program Cluster - 2,006,840 Direct: Federal Transit Cluster: Federal Transit-Formula Grants 20.507 IA-2018-008-01-00 - 1,497,897 Indirect: Federal Transit Cluster: Pass-through Iowa Department of Transportation Federal Transit- Capital Investment Grants 20.500 IA-04-0117-371-12 - 325,360 Federal Transit- Capital Investment Grants 20.500 IA-34-0002-371-14 - 206,559 Federal Transit- Capital Investment Grants 20.500 IA-1812-2016-10-371-15 - 740,064 - 1,271,983 Bus and Bus Facilities Formula Program 20.526 IA-34-0002-371-14 - 509,264 Bus and Bus Facilities Formula Program 20.526 IA-2016-019-371-16 - 4,714 - 513,978 Subtotal Federal Transit Cluster - 3,283,858 (Continued) 146 City of Iowa City, Iowa Schedule of Expenditures of Federal Awards (Continued) Year Ended June 30, 2018 Federal Pass-Through Passed Total Federal Grantor/Pass-Through Grantor/CFDA Entity Identifying Through to Federal Program Title or Cluster Title Number Number Subrecipients Expenditures U.S. Department of Transportation (Continued) Indirect: Pass-through Iowa Department of Transportation and Metrpolitan Planning Organization of Johnson County Metropolitan Transportation Planning and State and Non-Metropolitan Planning and Research 20.505 18MPO-MPOJC -$ 42,215$ Pass-through Iowa Department of Transportation Formula Grants for Rural Areas 20.509 IA-2016-027-371-16 - 349,744 Transit Services Program Cluster: Enhanced Mobility of Seniors and Individuals with Disabilities 20.513 IA-2016-026-01-371-18 - 108,764 Pass-through Iowa Department of Public Safety/ Governor's Traffice Safety Bureau Highway Safety Cluster: National Priority Safety Programs 20.616 PAP 17-405d-M6OT, Task 24 - 10,582 National Priority Safety Programs 20.616 PAP 18-405d-M6OT, Task 18 - 31,140 Subtotal Highway Safety Cluster - 41,722 Total U.S. Department of Transportation - 5,904,980 U.S. Department of Homeland Security Indirect: Pass-through Iowa Department of Homeland Security and Emergency Management Division Hazard Mitigation Grant 97.039 DR-4187-0003-01 - 201,484 Total Expenditures of Federal Awards 851,772$ 16,609,119$ (1) Total CFDA 16.738 $104,913 See Notes to the Schedule of Expenditures of Federal Awards. 147 City of Iowa City, Iowa Notes to the Schedule of Expenditures of Federal Awards Year Ended June 30, 2018 Note 1. Basis of Presentation The accompanying schedule of expenditures of federal awards (schedule) includes the federal grant activity of the City under programs of the federal government for the year ended June 30, 2018. The information in this schedule is presented in accordance with the 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). Because the schedule presents only a selected portion of the operations of the City, it is not intended to and does not present the financial position, changes in net position or cash flows of the entity. Note 2. Summary of Significant Accounting Policies Expenditures reported on the schedule are reported on the modified accrual basis of accounting for governmental funds and accrual basis of accounting for proprietary funds. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Expenditures of federal awards are recognized in the accounting period when the liability is incurred and has met the eligibility criteria of the federal grant. Revenue from federal awards is recognized when the City has done everything necessary to establish its right to the revenue. In the governmental funds, revenue from federal grants is recognized when the revenue is both measureable and available. In proprietary funds, revenue from federal grants is recognized when it is earned. Pass-through entity identifying numbers are presented where available. Note 3. Indirect Cost Rate The City has not elected to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. 148 City of Iowa City, Iowa Schedule of Findings and Questioned Costs Year Ended June 30, 2018 I. Summary of the Independent Auditor's Results Financial Statements Type of auditor's report issued: Unmodified Internal control over financial reporting: ● Material weakness(es) identified? Yes No ● Significant deficiency identified? Yes None Reported ● Noncompliance material to financial statements noted? Yes No Federal Awards Internal control over major programs: ● Material weakness(es) identified? Yes No ● Significant deficiency identified? Yes 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 2 CFR 200.516(a)? Yes No Identification of major programs: CFDA Number Name of Federal Program or Cluster 14.871 Housing Choice Voucher Cluster: Section 8 Housing Choice Vouchers Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low-risk auditee? Yes No (Continued) 149 City of Iowa City, Iowa Schedule of Findings and Questioned Costs (Continued) Year Ended June 30, 2018 II. Findings Relating to the Basic Financial Statements as Required to be Reported in Accordance with Generally Accepted Government Auditing Standards A. Internal Control No matters reported. B. Instances of Noncompliance No matters reported. III. Findings and Questioned Costs for Federal Awards A. Internal Control for Federal Awards No matters reported. B. Instances of Noncompliance No matters reported. IV. Other Findings Related to Required Statutory Reporting IV-A-18 Certified Budget – Expenditures for the year ended June 30, 2018 did not exceed the amounts budgeted. IV-B-18 Questionable Expenditures – No expenditures were noted that we believe may not meet the requirements of public purpose as defined in an Attorney General’s opinion dated April 25, 1979. IV-C-18 Travel Expenses – No expenditures of City money for travel expenses of spouses of City officials or employees were noted. IV-D-18 Business Transactions – No business transactions between the City and City officials or employees were noted. IV-E-18 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 insure that the coverage is adequate for current operations. IV-F-18 Council Minutes – No transactions requiring Council approval which had not been approved by the Council were noted. IV-G-18 Deposits and Investments – No instances of noncompliance with the deposit and investment provisions of Chapter 12B and Chapter 12C of the Code of Iowa and the City’s investment policy were noted. IV-H-18 Revenue Notes – There were no instances of noncompliance with revenue note provisions. IV-I-18 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. IV-J-18 Payment of General Obligation Bonds – The City appears to be in compliance with Chapter 384.4 of the Code of Iowa. 150