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CAFR FY 2016-2017CITY OF SCHERTZ, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2017 OFFICIALS ISSUING REPORT Brian James Acting City Manager James Walters Director of Finance I rz/,� �N CITY OA 1, CITY OF SC0FD{TZ,TEXA8 TABLE 0PCONTENTS SEPTEMBER 3O,2017 INTRODUCTORY SECTION .......................................................................................................... i LETTER [)F ----------------------------------------.d CITYOFFICIALS ............................................................................................................................................ Lz `/muAN/ZA//OmaL CruAu/ ----------------------------------------.x CERTIFICATE OF ACHIEVEMENT ------------------------------------.ni FINANCIAL SECTION B/\8[C FINANCIAL STATEMENTS ------------------------------------|4 STATEMENT (}F NET POSITION ................................................................................................................ ]5 STATEMENT ()F ACTIVITIES ..................................................................................................................... l7 BALANCE SHEET - GOVERNMENTAL FUNDS ...................................................................................... |9 RECONCILIATION OF BALANCE SRIIET--------------------------------. 21 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - F[[NI]8 ....................................................................................................................... 22 RECONCILIATION OF THE STATEMENT OF REVENUES, GOVERNMENTAL FUNDS TO THE STATEMENT ()F ACTIVITIES ......................................................................................................... 24 STATEMENT (}P NET POSITION - PROPRIETARY FUNDS ................................................................... 25 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NETPOSITION - PROPRIETARY FUNDS ............................................................................................................................. 27 SCHEDULE ()PREVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL -GENERAL FUND ...................................................................................... 6U SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - ECONOMIC DEVELOPMENT CORPORATION .'''''''''''''''''.62 NOTES TO SCHEDULE OP REVENUES, EXPENDITURES AND CHANGES lN FUND BALANCE - BUDGET AND ACTUAL ................................................................................................. 03 SCHEDULE [)p CHANGES - NET PENSION LIABILITY AND RELATED RATIOS ''''''''''''.64 SCHEDULE OP CITY CONTRIBUTIONS .'''''''''''''''''''''''''''''''''''''''''''''''.65 RETIREE HEALTH INSURANCE PLAN - ANALYSIS OF FUNDING PROGRESS ............................. 66 SUPPLEMENTARY INFORMATION -----------------------------------'67 COMPARATIVE BALANCE SHEETS -GENERAL FUND----------------------'60 STATEMENTS COMPARATIVE OF REVENUES, EXPENDITURES AND CHANGES IN F[IN[] BALANCE -GENERAL FUND .............................................................................................................. 69 COMPARATIVE BALANCE SHEETS - ECONOMIC DEVELOPMENT CORPORATION .................. 70 i CITY OF SCHERTZ, TEXAS TABLE OF CONTENTS SEPTEMBER 30, 2017 FINANCIAL SECTION (Continued) PAGE COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - ECONOMIC DEVELOPMENT CORPORATION ................................................ 71 COMPARATIVE BALANCE SHEETS - DEBT SERVICE FUND ........................................................... 72 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - DEBT SERVICE FUND ................................................................................ 73 COMPARATIVE BALANCE SHEETS - CAPITAL PROJECTS FUND .................................................. 74 COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - CAPITAL PROJECTS FUND ............................................................................................ 75 COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS .................................... 76 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES — NONMAJOR GOVERNMENTAL FUNDS .................................................................... 78 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANZCE BUDGET TO ACTUAL - HOTEL OCCUPANCY FUND ....................................................................................... 80 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - PARK FUND .................................................................................................. 81 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - TREE MITIGATION FUND ......................................................................... 82 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - TREASURY FORFEITURES FUND ............................................................ 83 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - JUSTICE FORFEITURES FUND ................................................................. 84 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - STATE FORFEITURES FUND .................................................................... 85 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - LIBRARY ADVISORY BOARD .................................................................. 86 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - HISTORICAL COMMITTEE FUND ............................................................ 87 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - PARKS AND RECREATION FOUNDATION ............................................ 88 STATISTICAL SECTION NET POSITION, BY COMPONENT .......................................................................................................... 90 CHANGE IN NET POSITION ..................................................................................................................... 92 FUND BALANCES - GOVERNMENTAL FUNDS ................................................................................... 96 CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS ........................................................... 98 TAX REVENUE BY SOURCE — GOVERNMENTAL FUNDS .............................................................. 100 TOTAL WATER AND SEWER CONSUMPTION AND RATES ............................... ............................101 PRINCIPAL WATER AND SEWER CONSUMERS ............................................................................... 102 ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY ..................103 DIRECT AND OVERLAPPING PROPERTY TAX RATES ................................................................... 104 PRINCIPAL PROPERTY TAX PAYERS ................................................................................................. 105 PROPERTY TAX LEVIES AND COLLECTIONS .................................................................................. 106 TAXABLE ASSESSED VALUE ............................................................................................................... 107 RATIOS OF OUTSTANDING DEBT BY TYPE ..................................................................................... 108 ii CITY OF SC0FD{TZ,TEXA8 TABLE 0PCONTENTS SEPTEMBER 3O,2017 STATISTICAL SECTION (Continued) RATIOS {lp GENERAL BONDED DEBT OUTSTANDING .................................................................. ||0 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT ........................................... ||| DEBT MARGIN INFORMATION ------------------------------------ll2 PLEDGED REVENUE COVERAGE ........................................................................................................ ||3 TOP TEN PRINCIPAL EMPLOYERS ----------------------------------U5 FULL-TIME CITY D��F[Jy4CTl(}�� 116 OPERATING INDICATORS Bl' ||7 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GO VERNMENTA UDITING STANDARDS ...................... 122 di I rz/,� �N CITY OA 1, INTRODUCTORY SECTION iv March 6, 2018 To the Honorable Mayor, City Council, and the Citizens of City of Schertz: State law requires that local governments publish a complete set of financial statements presented in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and audited in accordance with generally accepted auditing standards in the United States of America by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the City of Schertz for the fiscal year ended September 30, 2017. This report consists of management's representations concerning the finances of the City of Schertz. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Schertz has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Schertz's financial statements in conformity with U.S. GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Schertz comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City of Schertz's financial statements have been audited by Armstrong, Vaughan & Associates P.C. a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Schertz for the fiscal year ended September 30, 2017, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City of Schertz's financial statements for the fiscal year ended September 30, 2017, are fairly presented in conformity with U.S. GAAP. The independent auditor's report is presented as the first component of the financial 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 MD &A and should be read in conjunction with it. The City of Schertz's MD &A can be found immediately following the report of the independent auditors. Profile of the Government The City of Schertz, incorporated in 1958, is located in the central part of Texas, which is considered to be a top growth area in the state, and one of the top growth areas in the country. The City of Schertz currently occupies a land area of 32.21 square miles with a population of 39,453 in 2016 according to the US Census Bureau. The City of Schertz is empowered to levy a property tax on both real and personal properties located within its boundaries. It also is empowered by state statue to extend its corporate limits by annexation, which occurs periodically when deemed appropriate by the governing body. 1400 Schertz Parkway Schertz, Texas 78154 214.619.1000 °f h rtz.c� v The City of Schertz has operated under the council- manager form of government since November 30, 1972. Policymaking and legislative authority are vested in a City Council consisting of the Mayor and seven at- large councilmembers. The City Council is responsible for establishing public policy on City matters by the passage of appropriate ordinances and resolutions. The City Manager is responsible for overseeing the day - to -day operations of the government, implementing policy established by City Council, and for appointing the heads of the various departments. The council is elected on a non - partisan basis. Council members serve three -year staggered terms, with two council members elected every three years and then three council members elected the final three years in the cycle. The mayor is elected to serve a three -year teen. The mayor and all seven council members are elected at large. The City of Schertz provides a full range of services, including police and fire protection, EMS services, the construction and maintenance of streets, recreational facilities, cultural events, water and sewer services. The annual budget and five -year forecast serve as the foundation for the City of Schertz's financial planning and control. All city departments are required to submit requests for appropriation to the City Manager by June of each year. The City Manager uses these requests as the starting point for developing a proposed budget. The City Manager then presents the proposed budget to the council for review in early August. The council then holds public hearings and community meetings on the proposed budget and to adopt a final budget by September 30t''. The fiscal year for Schertz is from October 1 through September 30. The appropriated budget is prepared by each department (e.g. police). The City Manager may make transfers of appropriations within a department. The City Manager may make transfers between departments and funds with City Council approval. Budget to actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on pages 60 -63 as part of the required supplementary information. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City of Schertz operates. Local economy. Economic growth in Schertz remained strong in 2017. As of September, the Federal Reserve Bank of Dallas reported that the San Antonio Business -Cycle Index, of which Schertz data is incorporated, was 5.4 percent in October 2017 which is above the long term growth average of 3.1 percent showing strong growth is continuing in the area. The increase was due to a 3.9 percent increase in job growth in the metro area helping to maintain the unemployment rate at 3.8 percent, which is the lowest rate since the data began in 1975. The City of Schertz realized 0.5% percent year- over -year decrease in sales tax collection during the fiscal year. The decrease was a result of two audit adjustments by the State Comptroller's Office, one during FY 2015 -16 and one during FY 2016 -17. The September 2016 deposit included an additional $1.77,435.53 owed to the City of Schertz from the State Comptroller's Office while April 2017 saw a withdraw of $167,973.47 for payments improperly granted to the City of Schertz by the State. These two audit adjustments were unrelated. Without these two adjustments, sales taxes would have grown by 2% instead. During the 2017 . calendar year, there were three major construction projects completed in Schertz. Each of the projects were built as speculative projects to help absorb increased demand for industrial space within the San Antonio market. The projects included: 9850 Doerr Lane (215,000 square feet), 7377 Doerr Lane (147,499 square feet), and 6729 Guada -Coma Drive (60,700 square feet). Currently those new constructions are 10% occupied. According to the 2017 Q4 Xceligent Market Report, the Far North East market has a total vacancy rate of 13.8 percent, up from 10.6 percent for the previous quarter. Despite the increased supply, average asking rates continue to increase by $0.27 to $5.28 NNN. vi Long -term financial planning. The community approved bond propositions in November 2010 for quality of life projects which included an aquatics facility, improvements to the baseball fields and soccer fields, building a new animal adoption facility, and improvements to Main Street. The only remaining project are the Main Street improvements. Construction was completed for the aquatic facility in January 2017 while the Main Street improvements continue to be developed. In November 2015, the City placed 2 bond propositions before the voters totaling $15 million. $7 million was for FM road ways which the City will partner with the Texas Department of Transportation, who will provide matching funds, and $8 million for a new Fire Station located in the southern portion of Schertz. In June 2017, the second $4 million was issued for the Fire Station to begin construction. Currently the Fire Station is estimated to be completed in 2019. Current Year Budget Initiatives. In FY 2016 -17, the City's main initiatives that had a major budget impact were the implementation of the second -year recommendation of the Classification and Compensation Study to bring the wages up to a more competitive level, hiring 3 additional Fire Fighters that will be needed with the opening of Fire Station #3, and opening the new Aquatics Facility. The City also preformed its first citizen satisfaction survey which will provide valuable insight for the FY 2017 -18 Budget. FY 2016 -17 also saw a grant award by the State for additional trail connections and sidewalks throughout the City. Estimated benefit to the City will be $800,000 received for the $1,000,000 project. Financial Information: Internal Control. Management is responsible for establishing and maintaining internal controls designed to ensure that assets of the City are protected from loss, theft or misuse and to provide adequate accounting information compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles for local governments as prescribed by the Governmental Accounting Standards Board (GASB), the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA). The internal control system is designed to provide reasonable, but not absolute assurance that these objectives are met. The concept of reasonable assurance recognizes that the cost of an internal control should not exceed the benefits derived from the internal control. The City utilizes financial accounting software which is designed with a system of internal controls. These controls are continually being reevaluated to provide reasonable, but not absolute, assurances. Budget Controls. The City also utilizes budgetary controls. Legally expenditures cannot exceed the appropriated amount. The objective of these budgetary controls is to ensure compliance with the adopted budget approved by the City Council as mandated by the city charter and state law. The levels of budgetary control are established at the line -item basis and at the fund level. Staff believes these controls help monitor and direct approved expenditures to a level within the budget parameters which directly results in a strong financial performance. Financial Results. Assets and fund balances continue to grow as the City grows and financial results remain. strong. While additional debt was issued during the year, Staff closely monitors and plans the amount of issuance to keep steady debt ratios per capita, per revenue, and per operations tax rate to the debt tax rate. Examples of these ratios can be found in the Statistical Section on pages 109, 110 and 104. A more detailed summary of the City's Financial Performance is available in the Management Discussion and Analysis section on page 5. Independent Audit. An independent audit is performed every year of the general ledger, accounts, financial records, and transactions of all city departments. The audit is completed by an independent certified public accounting firm selected by the City Council. The City is in compliance with this requirement and the independent auditor's report by Armstrong, Vaughan, & Associates P.C. Certified Public Accountants, has been included in this report. vii 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 to the City of Schertz for its comprehensive annual financial report for the fiscal year ended September 30, 2016. This was the 32nd consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, the City must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the finance department. We would like to express our appreciation to all members of the department who assisted and contributed to the preparation of this report. In conclusion, we would have none of the success we have enjoyed without the assistance of each and every staff member, as well as the support and strategic direction from the Mayor and the City Council during the strategic planning, pre- budget, and budget approval process. Respectfully submitted, Brian C. James Acting City Manager viii James P. Walters Finance Director CITY OF SCHERTZ, TEXAS CITY OFFICIALS MAYOR MICHAEL CARPENTER. MAYOR PRO -TEM CEDRIC EDWARDS, SR. CITY COUNCIL MARK DAVIS RALPH GUTIERREZ f .Y K� 71 Y I � 1 1_ � i •Y �] ROBIN THOMPSON ANGELINA KISER CITY MANAGER JOHN KESSEL DIRECTOR OF FINANCE JAMES WALTERS CITY ATTORNEY CHARLES ZECH, DENTON, NAVARRO, ROCHA, BERNAL, HYDE & ZECH, P.C. ix CITY OF SCHERTZ ORGANIZATIONAL CHART � Appointed by City Count I A 1 ;10 Government Finance Officers Association Presented to Cit-v of Sj�hertz Fur its ConVrehensive,Annual Financial Report for the Fiscal Year Ended m CU� Ij- Exixufivc Di X1 FINANCIAL SECTION INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of the City Council City of Schertz, Texas Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of City of Schertz, as of and for the year ended September 30, 2017, and the related notes to the financial statements, which collectively comprise City of Schertz's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements City of Schertz's 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. 941 West Byrd Blvd., Brute 101. - Universal City, Texas 78148 Phone. 210 - 658 -0229 - Fax: 210. 659 -7611 Email. info@avacpa.cotn www.avacpa.com Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of City of Schertz, as of September 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management's discussion and analysis, budgetary comparison information, schedule of changes in net pension liabilities and related ratios and the schedule of contributions, as listed in the table of contents, be presented to supplement the basic financial statements. Such infonnation, 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. The budgetary comparison information is the responsibility of management and was 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 budgetary comparison information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. We have applied certain limited procedures to 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 management's discussion and analysis, budgetary comparison information, and schedule of changes in net pension liabilities and related ratios and the schedule of contributions because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise City of Schertz's basic financial statements. The comparative financial statements, combining and individual nonmajor fund financial statements, introductory section, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The comparative financial statements and combining and individual nonmajor fund financial statements 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 comparative, combining and individual nonmajor fund financial statements are 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 March 6, 2018 on our consideration of City of Schertz'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 City of Schertz's internal control over financial reporting and compliance. Armstrong, Vaughan & Associates, P.C. March 6, 2018 rd MANAGEMENTS DISCUSSION AND ANALYSIS As management of the City of Schertz, we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City of Schertz for the fiscal year ended September 30, 2017. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. Financial Highlights The assets of the City of Schertz exceeded its liabilities at the close of the most recent fiscal year by $197.8 million (net position). Of this amount, $23.0 million (unrestricted net position) may be used to meet the City's ongoing obligations to citizens and creditors. The City's total net position increased by $24.3 million. A significant portion of this increase, 66.4 %, is attributable to capital contributions from developers. As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $49.1 million, an increase of $10.1 million in comparison with the prior year. At the end of the fiscal year, the combined total of the General Fund assigned and unassigned fund balances was $10.8 million which is 45.5% of the general fund expenditures not including capital outlay. The fund balance policy is to reserve a 26% balance. During the fiscal year, the City issued $9.41 million in general obligation bonds and certificates of obligation of which $540,000 is allocated to the proprietary fund. 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 comprise 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 liabilities, with the difference between the two 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 of Schertz 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 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 of Schertz 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 of Schertz include general government, public safety, streets and parks, health, and culture and recreation. The business -type 5 activities of the City of Schertz include a water and sewer department and an emergency medical services department. 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 of Schertz, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. The funds of the City of Schertz can be divided into two categories: governmental and proprietary. Governmental funds. Governmental funds are used to account for essentially the same functions 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 is useful in evaluating a government's near -term financing requirements. 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 fiends with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long -term impact of the government's near -term financing decisions. 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 between governmental funds and governmental activities. The City of Schertz maintains thirteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, the debt service fund, the economic development corporation and the capital projects fund, all of which are considered to be major fiends. Data from the other seven governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non -major governmental funds is provided in the form of combining statements elsewhere in this report. Proprietary funds. The City of Schertz maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City of Schertz uses enterprise fiends to account for its water and sewer department and for its emergency medical services department. Proprietary funds provide the same type of information as the government -wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water and sewer department and for the emergency medical services department, both of which are considered to be major funds of the City of Schertz. Notes to the 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. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's general fund budgetary schedule. The City of Schertz adopts an annual appropriated budget for its general fiend. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with this budget. The economic development corporation also adopts an annual budget, and a comparison schedule for it also is provided in the required supplementary information. The combining statements referred to earlier in connection with non -major governmental funds are presented immediately following the required supplementary information. 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 of Schertz, assets exceeded liabilities by $197.8 million at the close of the most recent fiscal year. The largest portion of the City's total net position (78 %) reflects its net investment in capital assets (e.g., land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding, plus bond proceeds that have not yet been signed. The City of Schertz uses these capital assets to provide services to citizens; consequently, these assets are not available for operational type of 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 sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City's total net position (10.4 %) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position, $23.0 million, may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Schertz 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 same situation held true for the prior fiscal year. TABLE A -1 NET POSITION 7 Governmental Activities Business -Type Activities Total 2017 2016 2017 2016 2017 2016 Current and Other Assets $ 53,489,898 $ 45,626,048 $ 34,305,074 $ 28,142,800 $ 87,794,972 $ 73,768,848 Capital Assets 133,989,421 125,109,658 75,578,798 71,023,364 209,568,219 196,133,022 Total Assets 187,479,319 170,735,706 109,883,872 99,166,164 297,363,191 269,901,870 Deferred Outflows 3,637,434 3,985,590 997,659 1,082,823 4,635,093 5,068,413 Current Liabilities 7,331,101 9,650,691 5,029,905 4,646,767 12,361,006 14,297,458 Long -Tenn Liabilities 76,793,511 71,506,935 14,709,300 15,654,519 91,502,811 87,161,454 Total Liabilities 84,124,612 81,157,626 19,739,205 20,301,286 103,863,817 101,458,912 Deferred Inflows 344,220 - - - 344,220 - Net Investment in Capital Assets 84,537,238 74,237,004 70,361,035 64,210,231 154,898,273 138,447,235 Restricted 20,437,116 17,095,325 - - 20,437,116 17,095,325 Unrestricted 1,673,567 2,231,341 20,781,291 15,737,470 22,454,858 17,968,811 Total Net Position $106,647,921 $ 93,563,670 $ 91,142,326 $ 79,947,701 $ 197,790,247 $ 173,511,371 7 The government's net position increased by $24.3 million during the current fiscal year. Sixty -six percent of this increase represents capital contributions from developers. The following table indicates changes in net position for governmental and business -type activities followed by graphs displaying total revenues and expenses by type: TABLE A -2 CHANGES IN NET POSITION FOR GOVERNMENTAL AND BUSINESS -TYPE ACTIVITIES $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 TOTAL REVENUES- GOVERNMENT -WIDE Charges for Operating Capital Grants Property Taxes Other Taxes Unrestricted Miscellaneous Services Grants and and Investment Contributions Contributions Earnings g Governmental Activities Business -Type Activities Total Revenues: 2017 2016 2017 2016 2017 2016 Program Revenues: Charges for Services $ 5,910,899 $ 5,067,903 $ 31,757,607 $ 27,925,017 $ 37,668,506 $ 32,992,920 Operating Contributions 552,878 342,485 - - 552,878 342,485 Capital Contributions 10,043,483 6,227,664 6,111,474 2,831,126 16,154,957 9,058,790 General Revenues Property Taxes 16,166,006 15,131,997 - - 16,166,006 15,131,997 Other Taxes 13,595,041 13,760,248 - - 13,595,041 13,760,248 Investment Earnings 448,408 187,847 211,466 102,642 659,874 290,489 Miscellaneous 182,754 309,275 475,733 522,221 658,487 831,496 Total Revenues 46,899,469 41,027,419 38,556,280 31,381,006 85,455,749 72,408,425 Expenses: General Government 6,253,926 6,557,778 - - 6,253,926 6,557,778 Public Safety 13,061,120 12,141,968 13,061,120 12,141,968 Public Environment 4,460,540 4,147,653 4,460,540 4,147,653 Parks and Recreation 2,859,974 2,034,964 2,859,974 2,034,964 Cultural 1,004,747 954,871 - - 1,004,747 954,871 Health 776,494 570,204 - - 776,494 570,204 Administration 3,052,102 1,954,276 3,052,102 1,954,276 Interest and Other Fees 2,355,714 2,240,783 - - 2,355,714 2,240,783 Water and Sewer - - 21,346,078 20,269,111 21,346,078 20,269,111 EMS - - 6,006,178 5,004,110 6,006,178 5,004,110 Total Expenses 33,824,617 30,602,497 27,352,256 25,273,221 61,176,873 55,875,718 INCREASE IN NET POSITION BEFORE TRANSFERS 13,074,852 10,424,922 11,204,024 6,107,785 24,278,876 16,532,707 Transfers 9,399 29,211 (9,399) (29,211) - - CHANGE IN NET POSITION 13,084,251 10,454,133 11,194,625 6,078,574 24,278,876 16,532,707 BEGINNING NET POSITION 93,563,670 83,109,537 79,947,701 73,869,127 173,511,371 156,978,664 ENDING NET POSITION $ 106,647,921 $ 93,563,670 $ 91,142,326 $ 79,947,701 $ 197,790,247 $ 173,511,371 $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 TOTAL REVENUES- GOVERNMENT -WIDE Charges for Operating Capital Grants Property Taxes Other Taxes Unrestricted Miscellaneous Services Grants and and Investment Contributions Contributions Earnings g 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 TOTAL EXPENSES - GOVERNMENT -WIDE General Public Safety Public Parks and Cultural Health Interest and Government Environment Recreation Administration Other Fees Revenues- Governmental Activities (Continued) General Revenue by Source - Governmental Activities Sales and Use Tax, 38% Tax, 51 % ®2017 ®2016 Business -Type Activities Business -Type activities accounted for 45.9% of the growth in the net position of the City of Schertz. Of this increase, 54.6% is the result of capital contributions from developers. For the most part, increases in expenses closely paralleled inflation and the change in revenues was primarily related to fluctuations in capital contributions from developers. 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000, 000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $(5,000,000) 2017 2016 Water and Sewer Utilities EMS 10 Financial Analysis of the Government's Funds As noted earlier, the City of Schertz uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental funds. The focus of the City's governmental funds is to provide information on near -term inflows, outflows, and balances of spendable resources. Such information 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. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $49.1 million. Of this total amount, $10.0 million constitutes unassigned fund balance, which is available for spending at the government's discretion. The remainder of fund balance is non- spendable, restricted, or assigned to indicate that it is not available for new spending because it has already been committed to pay debt service, for capital improvement projects, and other assigned purposes. The general fund is the chief operating fund of the City of Schertz. At the end of the current fiscal year, unassigned fund balance of the general fund was $10.0 million, while total fund balance was $13.0 million, an increase of $1.5 million from the prior year. As a measure of the general fund's liquidity, it may be useful to compare both unassigned fund balance and total fiend balance to total fund expenditures. Unassigned fund balance represents 41.8% of total general fund expenditures, not including capital. The debt service fund has a total fund balance of $1_5 million all of which is restricted for the payment of debt service. The net increase in fund balance during the current year in the debt service fund was $0.1 million. The capital projects fund has a total fund balance of $16.9 million, an increase of $5.3 million. The City issued $8.87 million in new governmental bonds to supplement capital project activity during the year. Proprietary funds. The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. Unrestricted net position of the water and sewer fund at the end of the year amounted to $20.2 million and those for the Schertz EMS fund amounted to $1.1 million. The proprietary fund issued $540 thousand in new bonds to supplement capital project activity during the year. General Fund Budgetary Highlights The General Fund expenditures were $939 thousand less than the $25.5 million budget. This was the result of cost savings across most of the General Fund. Revenues were higher by $796 thousand than budgeted. Overall, the fund balance increased by $1.5 million higher than budgeted. 11 CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets. The City's investment in capital assets for its governmental and business -type activities as of September 30, 2017, amounts to $209.6 million (net of accumulated depreciation). Developers contributed $15.4 million in infrastructure during the year. The City also has several projects in progress from voter approved bonds. Additional information on the City's capital assets can be found in the note 7 to the basic financial statements. TABLE A -3 CAPITAL ASSETS (Net of Depreciation) Long -Term Debt. At the end of the current fiscal year, the City of Schertz had total bonded debt outstanding of $76.7 million. The related principal and interest payment for the bonds are backed by an annual ad valorem tax levied against all taxable property within the City. The City of Schertz maintains a "AA +" rating from Standard and Poors. Additional information on the City's long -term debt can be found in note 10 to the basic financial statements. 1 .Ql Governmental Business -Type Activities Activities Total 2017 2016 2017 2016 2017 2016 Land $ 7,499,108 $ 7,499,108 $ 1,354,138 $ 1,354,138 $ 8,853,246 $ 8,853,246 Water Rights - - 70,245 70,245 70,245 70,245 Buildings and Improvements 43,677,947 43,607,412 4,660,001 4,660,001 48,337,948 48,267,413 Machinery, Equipment, $65 ,O 15,000 $ 60,585,000 $11,645,000 $12,590,000 $ 76,660,000 $ 73,175,000 and Vehicles 10,347,015 9,282,067 5,013,077 5,095,324 15,360,092 14,377,391 Infrastructure 109,303,478 100,003,048 92,807,350 85,890,831 202,110,828 185,893,879 Construction in Progress 13,632,514 9,832,153 2,907,404 2,681,683 16,539,918 12,513,836 Accumulated Depreciation (50,470,641) (45,114,130) (31,233,417) (28,728,858) (81,704,058) (73,842,988) TOTALS $ 133,989,421 $ 125,109,658 $ 75,578,798 $ 71,023,364 $209,568,219 $ 196,133,022 Long -Term Debt. At the end of the current fiscal year, the City of Schertz had total bonded debt outstanding of $76.7 million. The related principal and interest payment for the bonds are backed by an annual ad valorem tax levied against all taxable property within the City. The City of Schertz maintains a "AA +" rating from Standard and Poors. Additional information on the City's long -term debt can be found in note 10 to the basic financial statements. 1 .Ql 12 Governmental Business -Type Activities Activities Total 2017 2016 2017 2016 2017 2016 General Obligation Bonds $ 55,225,000 $ 54,995,000 $ 2,530,000 $ 3,010,000 $ 57,755,000 $ 58,005,000 Certificates of Obligation 8,560,000 3,850,000 8,050,000 8,220,000 16,610,000 12,070,000 Tax Notes and Leases 1,230,000 1,740,000 1,065,000 1,360,000 2,295,000 3,100,000 TOTALS $65 ,O 15,000 $ 60,585,000 $11,645,000 $12,590,000 $ 76,660,000 $ 73,175,000 12 Economic Factors and Next Year's Budgets and Rates At the end of the last fiscal year, the assigned and unassigned fund balance in the general fund increased to $10.0 million. The City of Schertz has appropriated $1.5 million of this amount for spending in the 2018 fiscal year budget. The approved tax rate decreased marginally to $0.4910 per $100 of valuation. Each year the City updates its five -year budgeting forecast and has implemented a long -term debt model to assist management in making informed financial decisions that will impact the community now and in the future. Requests for Information This financial report is designed to provide a general overview of the City's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Finance Director, City of Schertz, 1400 Schertz Parkway, Schertz, Texas 78154. 13 I rz/,� �N CITY OA 1, BASIC FINANCIAL STATEMENTS 14 CITY OF SCHERTZ, TEXAS STATEMENT OF NET POSITION SEPTEMBER 30, 2017 ASSETS Current Assets: Cash and Cash Equivalents Investments Receivables (net of allowances) Taxes Accounts and Other Current Service Concession Arrangement Receivable Accrued Interest Income Inventories Internal Balances Total Current Assets Noncurrent Assets: Restricted Assets: Cash and Cash Equivalents Investments Service Concession Arrangement Receivable Capital Assets: Land Water Rights Buildings and Improvements Equipment and Vehicles Infrastructure Construction in Progress Accumulated Depreciation Total Noncurrent Assets TOTAL ASSETS DEFERRED OUTFLOWS OF RESOURCES Deferred Loss on Debt Refundings Deferred Pension Related Outflows TOTAL DEFERRED OUTFLOWS OF RESOURCES See Accompanying notes to basic financial statements. 15 Primary Government Governmental Business -Type Activities Activities Total $ 5,265,632 42,160,733 2,751,71.4 1,678,1.32 90,909 7,949 98,263 59,044 52,112,376 617,075 760,447 7,499,108 43,677,947 10,347,015 109,303,478 13,632,514 (50,470,641) 135,366,943 187,479,319 $ 2,353,733 10,277,545 5,812,200 6,324 133,430 (59,044) 18,524,188 1,444,226 14,336,660 1,354,138 70,245 4,660,001 5,013,077 92,807,350 2,907,404 (31,233,417) 91,359,684 109,883,872 $ 7,619,365 52,438,278 2,751,71.4 7,490,332 90,909 1.4,273 231,693 70,636,564 2,061,301 14,336,660 760,447 8,853,246 70,245 48,337,948 15,360,092 202,110,828 16,539,918 (81,704,058) 226,726,627 297,363,191 733,620 89,998 823,61.8 2,903,81.4 907,661 3,811,475 $ 3,637,434 $ 997,659 $ 4,635,093 CITY OF SCHERTZ, TEXAS STATEMENT OF NET POSITION (CONTINUED) SEPTEMBER 30, 2017 Noncurrent Liabilities Compensated Absences 855,879 Primary Government 1,104,379 Net Other Post - Employment Benefit Payable Governmental Business -Type 655,755 Net Pension Liability Activities Activities Total LIABILITIES 452,983 - 452,983 Current Liabilities: 62,009,570 10,254,029 72,263,599 Accounts Payable $ 884,1.88 $ 2,094,236 $ 2,978,424 Accrued Liabilities 654,1.1.7 176,1.60 830,277 Due to Other Governments 1.19,1.49 - 119,1.49 Unearned Revenue 35,346 431,098 466,444 Accrued Interest Payable 445,372 63,571 508,943 Compensated Absences 213,970 62,125 276,095 Customer Deposits 54,200 590,618 644,818 Current Service Concession Arrangement (Liability) 54,153 - 54,153 Current Portion of Long -Term Debt 4,870,606 1,612,097 6,482,703 Total Current Liabilities 7,331,1.01 5,029,905 12,361,006 Noncurrent Liabilities Compensated Absences 855,879 248,500 1,104,379 Net Other Post - Employment Benefit Payable 506,934 148,821 655,755 Net Pension Liability 12,968,145 4,057,950 17,026,095 Service Concession Arrangement (Liability) 452,983 - 452,983 Long -Term Debt 62,009,570 10,254,029 72,263,599 Total Noncurrent Liabilities 76,793,511 14,709,300 91,502,811 Scholarships and Other Purposes TOTAL LIABILITIES 84,124,612 19,739,205 103,863,817 DEFERRED INFLOWS OF RESOURCES Deferred Service Concession Arrangement 344,220 - 344,220 TOTAL DEFERRED INFLOWS OF RESOURCES 344,220 - 344,220 NET POSITION Net Investment In Capital Assets 84,537,238 70,361,035 154,898,273 Restricted For: Police and Municipal Court 1,243,281 - 1,243,281 PEG Capital Fees 638,506 - 638,506 Tourism Development 1,503,873 - 1,503,873 Economic Development 15,069,420 - 15,069,420 Parks and Tree Mitigation 699,725 - 699,725 Debt Service 1,087,260 - 1,087,260 Scholarships and Other Purposes 195,051 - 195,051 Unrestricted 1,673,567 20,781,291 22,454,858 TOTAL NET POSITION $ 106,647,921 $ 91,142,326 $ 197,790,247 See Accompanying notes to basic financial statements. 16 CITY OF SCHERTZ, TEXAS STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2017 Functions and Programs Expenses Primary Government: Governmental Activities: General Government Public Safety Public Environment Parks and Recreation Cultural Health Administration Interest Total Governmental Activities Business -Type Activities Water and Sewer EMS Total Business -Type Activities Total Primary Government General Revenues: Taxes: Ad Valorem Sales Franchise Fees Hotel /Motel Mixed Drink Investment Earnings Miscellaneous Total General Revenues Transfers Change in Net Position Net Position at Beginning of Year Net Position at End of Year Program Revenues Operating Capital Charges for Grants and Grants and Services Contributions Contributions $ 6,253,926 $ 874,737 $ 189,264 $ 10,042,931 13,061,120 4,131,548 210,681 - 4,460,540 - - - 2,859,974 544,460 129,148 - 1,004,747 330,412 4,144 - 776,494 29,742 19,641 552 3,052,1.02 - - - 2,355,71.4 - - - 33,824,61.7 5,910,899 552,878 1.0,043,483 21,346,078 25,390,713 - 6,111,474 6,006,178 6,366,894 - - 27,352,256 31,757,607 - 6,111,474 $ 61,176,873 $ 37,668,506 $ 552,878 $ 16,154,957 See Accompanying notes to basic financial statements. 17 Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business -Type 16,166,006 Activities Activities Total $ 4,853,006 - $ 4,853,006 (8,71 8,891) - (8,71 8,891) (4,460,540) - (4,460,540) (2,186,3 66) 211,466 (2,186,3 66) (670,191) 475,733 (670,191) (726,559) 687,199 (726,559) (3,052,1.02) (3,052,1.02) (2,355,71.4) (9,399) (2,355,71.4) ( 17,317,357) ( 17,317,357) 13,084,251 $ 10,156,109 10,156,109 93,563,670 360,716 360,716 10,516,825 10,516,825 (17,317,357) 10,516,825 (6,800,532) 16,166,006 - 16,166,006 10,844,503 - 10,844,503 2,208,373 - 2,208,373 499,466 - 499,466 42,699 - 42,699 448,408 211,466 659,874 182,754 475,733 658,487 30,392,209 687,199 31,079,408 9,399 (9,399) - 13,084,251 11,194,625 24,278,876 93,563,670 79,947,701 173,511,371 $ 106,647,921 $ 91,142,326 $ 197,790,247 18 CITY OF SCHERTZ, TEXAS BALANCE SHEET — GOVERNMENTAL FUNDS SEPTEMBER 30, 2017 See Accompanying notes to basic financial statements. 19 General Capital Debt Fund Projects Service ASSETS Cash and Cash Equivalents $ 2,062,393 $ 1,753,815 $ 59,148 Investments 9,485,725 15,546,171 1,390,934 Receivables (net of allowances) Taxes 1,970,300 - 82,550 Accounts and Other 1,677,633 - - Inventory 98,263 - - Restricted Assets: Cash and Cash Equivalents 617,075 - - TOTAL ASSETS $ 15,911,389 $ 17,299,986 $ 1,532,632 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts Payable $ 544,406 $ 267,949 $ - Accrued Salaries and Benefits 653,700 - - Customer Deposits 54,200 - - Due to Other Governments 119,149 - - Due to Other Funds (175,084) 116,040 - Unearned Revenues 35,346 - - Total Liabilities 1,231,717 383,989 - Deferred Inflows of Resources: Unavailable Revenues 1,710,054 - 82,550 Fund Balances: Nonspendable: Inventory 98,263 - - Restricted for: Police and Public SafetytMuncipal Court 101,842 - - Municipal Court 728,350 - - PEG Capital Fees 638,506 - - Capital Improvement - 16,915,997 - Debt Service - - 1,450,082 Tourism Development - - - Parks and Tree Mitigation - - - Historical Committee and Library - - - Eeonomic Development - - - Animal Control 35,660 - - Veterans 4,796 - - Scholarships 77,458 - - Committed for Civic CenterlClED 454,376 - - Assigned for: Property Replacement 854,198 - - Unassigned 9,976,169 - - Total Fund Balances 12,969,618 16,915,997 1,450,082 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 15,911,389 $ 17,299,986 $ 1,532,632 See Accompanying notes to basic financial statements. 19 Economic Nonmajor Total Development Governmental Governmental Corporation Funds Funds $ 893,858 $ 496,421 $ 5,265,635 13,506,156 2,231,747 42,160,733 665,316 33,548 2,751,714 8,448 - 1,686,081 - - 98,263 - 617,075 $ 15,073,778 $ 2,761,716 $ 52,579,501 $ 3,940 $ 67,892 $ 884,187 417 - 654,117 - - 54,200 - - 119,149 - - (59,044) - - 35,346 4,357 67,892 1,687,955 - - 1,792,604 - 98,263 - 413,089 514,931 - - 728,350 - - 638,506 - - 16,915,997 - - 1,450,082 - 1,503,873 1,503,873 - 699,725 699,725 - 77,137 77,137 15,069,421 - 15,069,421 - - 35,660 - - 4,796 - - 77,458 - - 454,376 - - 854,198 - - 9,976,169 15,069,421 2,693,824 49,098,942 $ 15,073,778 $ 2,761,716 $ 52,579,501 20 I rz/,� �N CITY OA 1, CITY OF SCHERTZ, TEXAS RECONCILIATION OF BALANCE SHEET SEPTEMBER 30, 2017 TOTAL FUND BALANCE - TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the Statement of Net Position are different because: Capital Assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Other long -term assets are not available to pay for current - period expenditures and, therefore, are not recognized as revenue in the funds. The governmental funds report other post - employment benefit contributions as expenditures when they become due and payable. However, in the statement of activities differences between other post - employment benefit contributions and actuarially determined costs are reported as an obligation. Long -term liabilities, including bonds payable and capital leases, are not due and payable in the current period and therefore, not reported in the funds: Bonds Payable Unamortized Premiums, Discounts, Losses on Refundings Capital Lease Payable Accrued Interest Payable Compensated Absences Service Concession Arrangements (and related deferred inflows and outflows of resources) do not consume current financial resources and are not reported in governmental funds: Service Concession Arrangement (Liability) Service Concession Arrangement Receivable Deferred Service Concessions Net Pension Liabilities (and related deferred inflows and outflows of resources) do not consume current financial resources are not reported in governmental funds: Net Pension Liability Pension Related Deferred Outflows TOTAL NET POSITION - GOVERNMENTAL ACTIVITIES See accompanying notes to basic financial statements. 21 (65,015,000) (1,106,409) (25,151) (445,372) (1,069,849) (507,136) 851,356 (344,220) $ 49,098,942 133,989,421 1,'792,604 (506,934) (67,661,781) (12,968,145) 2,903,814 (10,064,331) $ 106,647,921 CITY OF SCHERTZ, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES — GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2017 REVENUES Taxes Permits and Fees Service Fees Fines and Fees Intergovernmental Investment Earnings Miscellaneous TOTAL REVENUES EXPENDITURES Current: General Government Public Safety Public Environment Parks and Recreation Cultural Health Administration Capital Outlay Debt Service: Principal Interest and Fiscal Charges Bond Issue Costs TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Proceeds From Issuance of Debt Premiums from Issuance of Debt Transfers In Transfers Out TOTAL OTHER FINANCING SOURCES (USES) Net Change in Fund Balance Fund Balances at Beginning of Year Fund Balances at End of Year General Fund Capital Projects Debt Service Fund $ 19,450,338 $ - $ 6,149,844 2,367,929 - - 2,107,844 - - 1,021,965 - - 307,809 89,264 - 128,158 123,920 47,758 603,477 745,050 100,000 25,987,520 958,234 6,297,602 5,171,635 - - 11,846,184 - - 1,128,979 - - 1,682,955 - - 901,992 - - 672,934 - - 2,395,926 - - 644,773 4,757,930 - 33,174 - 4,440,000 36,513 - 2,077,166 - 211,330 2,950 24,515,065 4,969,260 6,520,116 1,472,455 (4,011,026) (222,514) 8,870,000 - - 381,931 - 68,385 9,399 361,019 68,385 9,261,330 361,019 1,540,840 5,250,304 138,505 11,428,778 11,665,693 1,311,577 $ 12,969,618 $ 16,915,997 $ 1,450,082 See accompanying notes to basic financial statements. 22 Economic Development Corporation Other Nonmaj or Governmental Funds Total Governmental Funds $ 3,620,930 $ 499,466 $ 29,720,578 - 172,116 2,540,045 - 24,455 2,132,299 - 195,656 1,217,621 - - 397,073 125,684 22,897 448,417 - 209 1,448,736 3,746,614 914,799 37,904,769 92,829 1.30,454 5,394,918 - 24,452 11,870,636 - - 1,128,979 - 202,960 1,885,91.5 - 19,878 921,870 - - 672,934 450,524 66,405 2,912,855 - 89,493 5,492,196 4,473,174 2,113,679 - - 21.4,280 543,353 533,642 37,081,436 3,203,261 381 ,157 823,333 8,870,000 381,931 438,803 (361,019) (68,385) (429,404 (361,01.9) (68,385) 9,261,330 2,842,242 312,772 10,084,663 12,227,179 2,381,052 39,014,279 $ 15,069,421 $ 2,693,824 $ 49,098,942 23 I rz/,� �N CITY OA 1, CITY OF SCHERTZ, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES NET CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. In addition, capital assets contributed to governmental activities are not recorded on the fund statements. Capital Outlay Capital Contributions Depreciation Expense 4,821,788 10,042,931 (5,734,405) Proceeds from capital asset dispositions produce current financial resources in the fund statements, while the net gain (loss) is recognized in the Statement of Activities. This is net book value of capital assets disposed. Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. The issuance of long -term debt (e.g. bonds, leases) provides current financial resources to governmental funds, which the repayment of the principal of long -term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any affect on net position. This amount is the net effect of these differences in the treatment of long -term debt and related items. Proceeds from the Issuance of Debt (8,870,000) Premiums Received from the Issuance of Debt (381,931) Principal Repayments 4,473,174 Amortization of Premiums, Discounts, Losses 27,898 Governmental funds report required contributions to employee pensions as expenditures. However, in the Statement of Activities the cost of the pension is recorded based on the actuarially determined cost of the plan. This is the amount that actuarially determined pension expense exceeded contributions. 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: Compensated Absences (47,306) Net Other Postemployment Benefits (100,056) Accrued Interest (92,169) CHANGE IN NET POSITION - GOVERNMENTAL ACTIVITIES See accompanying notes to basic financial statements. 24 10,084,663 9,130,314 (250,551) (305,723) (4,750,859) (584,062) (239,531) $ 13,084,251 CITY OF SCHERTZ, TEXAS STATEMENT OF NET POSITION - PROPRIETARY FUNDS SEPTEMBER 30, 2017 ASSETS CurrentAssets: Cash and Cash Equivalents Investments Accounts Receivable, Net of Allowance: Customer Accounts Due from Other Funds Accrued Interest Inventory Total Current Assets Noncurrent Assets: Restricted Assets: Cash and Cash Equivalents Investments Capital Assets: Land Water Rights Buildings and Improvements Machinery, Equipment, and Vehicles Infrastructure Construction in Progress Less: Accumulated Depreciation Total Noncurrent Assets TOTAL ASSETS Governmental Business -Type Activities - Enterprise Funds Activities Water 14,336,660 - 1,354,138 Internal and Sewer Sehertz - Service System EMS Total Fund 2,198,639 5,013,077 - 92,807,350 $ 2,353,733 $ - $ 2,353,733 $ - 9,725,719 551,826 10,277,545 - 2,719,495 3,092,705 5,812,200 - 116,040 - 116,040 - 6,324 - 6,324 - 51,790 81,640 133,430 - 14,973,101 3,726,171 1.8,699,272 - 1,444,226 - 1,444,226 - 14,246,632 90,028 14,336,660 - 1,354,138 - 1,354,138 - 70,245 - 70,245 - 4,653,501 6,500 4,660,001 - 2,814,438 2,198,639 5,013,077 - 92,807,350 - 92,807,350 - 2,907,404 - 2,907,404 - (29,835,794) (1,397,623) (31,233,417) - 90,462,140 897,544 91,359,684 - 105,435,241 4,623,715 110,058,956 - DEFERRED OUTFLOWS OF RESOURCES Deferred Loss on Refunding 89,998 - 89,998 Deferred Pension Related Outflows 359,249 548,412 907,661 _ TOTAL DEFERRED OUTFLOWS $ 449,247 $ 548,412 $ 997,659 $ See accompanying notes to basic financial statements. 25 CITY OF SCHERTZ, TEXAS STATEMENT OF NET POSITION - PROPRIETARY FUNDS (CONTINUED) SEPTEMBER 30, 2017 LIABILITIES Current Liabilities: Accounts Payable Accrued Liabilities Customer Deposits Accrued Interest Payable Due to Other Funds Unearned Revenue Current Portion of Compensated Absences Current Portion of Long -Term Debt Total Current Liabilities Noncurrent Liabilities: Compensated Absences Net Other Post - Employment Benefit Payable Net Pension Liability Long -Term Debt (Net of Current Portion) Total Noncurrent Liabilities TOTAL LIABILITIES NET POSITION Net Investment in Capital Assets Unrestricted TOTAL NET POSITION Governmental Business -Type Activities - Enterprise Funds Activities Water Internal and Sewer Schertz Service System EMS Total Fund $ 2,037,480 $ 56,756 $ 2,094,236 $ 45,370 130,790 176,160 - 590,618 - 590,618 - 55,618 7,953 63,571 - - 175,084 175,084 - 431,088 10 431,098 - 1.9,212 42,913 62,125 - 1,282,556 329,541 1,612,097 - 4,461,942 743,047 5,204,989 - 76,847 171,653 248,500 - 48,451 100,370 148,821 - 1,603,324 2,454,626 4,057,950 - 9,441,450 812,579 10,254,029 - 11,1.70,072 3,539,228 14,709,300 - 15,632,01.4 4,282,275 19,914,289 - 70,065,611 295,424 70,361,035 - 20,186,863 594,428 20,781,291 - $ 90,252,474 $ 889,852 $ 91,142,326 $ - See accompanying notes to basic financial statements. 26 CITY OF SCHERTZ, TEXAS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2017 Business -Type Activities - Enterprise Funds Water and Sewer Sehertz System EMS Total OPERATING REVENUES Governmental A internal Service Fund Fees Charged to Users $ 25,079,280 $ 6,366,894 $ 31,446,174 $ - Charges for Premiums - - - 2,690,926 Other Charges 311,433 - 311,433 - TOTAL OPERATING REVENUES 25,390,713 6,366,894 31,757,607 2,690,926 OPERATING EXPENSES Personnel Services 1,861,475 3,976,190 5,837,665 2,690,926 Contribution to Joint Ventures 2,542,314 - 2,542,314 - Water Purchase 2,918,214 - 2,918,214 - Garbage Contractor 4,342,077 - 4,342,077 - Sewage Treatment 3,763,487 - 3,763,487 - General and Administrative 2,454,165 541,006 2,995,171 - Contractual Services 356,891 651,726 1,008,617 - Supplies and Maintenance 458,539 480,692 939,231 - Depreciation 2,282,145 339,171 2,621,316 - TOTAL OPERATING EXPENSES 20,979,307 5,988,785 26,968,092 2,690,926 OPERATING INCOME (LOSS) 4,411,406 378,109 4,789,515 - NONOPERATING REVENUES (EXPENSES) Investment Earnings 207,817 3,649 211,466 - Lease Income 232,754 - 232,754 - Miseellaneous 122,373 120,606 242,979 - Interest Expense (368,390) (17,393) (385,783) - Amortization 1,619 - 1,619 - TOTAL NONOPERATING REVENUES (EXPENSES) 196,173 106,862 303,035 - INCOME BEFORE CONTRIBUTIONS AND TRANSFERS 4,607,579 484,971 5,092,550 - Transfers In (Out) - (9,399) (9,399) - Capital Contributions 6,111,474 - 6,111,474 - CHANGE IN NET POSITION 10,719,053 475,572 11,194,625 - NET POSITION AT BEGINNING OF YEAR 79,533,421 41.4,280 79,947,701 - NET POSITION AT END OF YEAR $ 90,252,474 $ 889,852 $ 91,142,326 $ - See accompanying notes to basic financial statements. 27 CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2017 Cash Flows From Operating Activities: Cash Received From Customers and Users Cash Received from Interfund Services Cash Paid to Employees for Services Cash Paid to Supplier for Goods & Services Net Cash Provided (Used) by Operating Activities Cash Flows From Noncapital Financing Activities: Cash Advances From /(To) Other Funds _ Net Cash Provided (Used) by Noncapital Financing Activities Cash Flows From Capital and Related Financing Activities: Acquisition and Construction of Capital Assets Interest Paid on Long -Term Debt Principal Paid on Long -Term Debt Net Cash Provided (Used) by Capital and Related Financing Activities Cash Flows From Investing Activities: Purchase of Investments Premium from Issuance of Debt Proceeds from Issuance of Debt Payments from Leases Interest and Investment Earnings Net Cash Provided (Used) by Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year: Cash and Cash Equivalents Restricted Cash and Cash Equivalents Cash and Cash Equivalents at End of Year: Cash and Cash Equivalents Restricted Cash and Cash Equivalents Business -Type Activities - Enterprise Funds Water and Sewer Schertz System EMS Total Governmental A ­,,; +; _ mmemai Service Fund $ 25,048,982 $ 5,591,596 $ 30,640,578 $ - - - - 2,690,926 (1,836,377) (3,810,177) (5,646,554) (2,690,926) (16,460,515) (1,704,734) (18,165,249) - 6,752,090 76,685 6,828,775 - 165,685 165,685 - 165,685 165,685 (1,030,767) (34,510) (1,065,277) - (365,973) (11,336) (377,309) - (1,332,556) (229,541) (1,562,097) - (2,729,296) (275,387) (3,004,683) - (4,904,577) (552,751) (5,457,328) - - 19,399 19,399 - - 540,000 540,000 - 232,754 - 232,754 - 207,817 3,649 211,466 - (4,464,006) 10,297 (4,453,709) - (441,212) (22,720) (463,932) - 1,779,941 22,720 1,802,661 - 2,459,230 - 2,459,230 - 4,239,1.71 22,720 4,261,891 - 2,353,733 - 2,353,733 - 1,444,226 - 1,444,226 - $ 3,797,959 $ - $ 3,797,959 $ - See accompanying notes to basic financial statements. 28 CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2017 Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating Income Revenues from Other Sources Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Decrease (Increase) in Assets: Accounts Receivable (net) Prepaid Expenses Inventory Deferred Pension Outflows Increase (Decrease) in Liabilities: Accounts Payable Accrued Liabilities Customer Deposits Unearned Revenue Compensated Absences Net Pension Liability Net Other Post - employment Benefit Payable Net Cash Provided (Used) by Operating Activities Noncash Capital and Related Financing Transactions: Developer Contributions of Capital Assets See accompanying notes to basic financial statements. Business -Type Activities - Enterprise Funds Water and Sewer Schertz System EMS Total Governmental Activities Internal Service Fund $ 4,411,406 $ 378,109 $ 4,789,515 $ - 122,373 120,606 242,979 - 2,282,145 339,171 2,621,316 - (494,473) (895,886) (1,390,359) - 17,189 19,327 36,516 - 9,928 (47) 9,881 - 25,794 53,434 79,228 348,055 (50,590) 297,465 - (7,659) 11,302 3,643 - 20,868 - 20,868 - 9,501 (1.8) 9,483 - (11,920) 15,727 3,807 - 30,066 62,286 92,352 (11,183) 23,264 12,081 - $ 6,752,090 $ 76,685 $ 6,828,775 $ - $ 6,111,474 $ - $ - $ - 29 NOTES TO BASIC FINANCIAL STATEMENTS 30 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Schertz is a municipal corporation governed by an elected mayor and five- member council. The financial statements of the City have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below: A. Reporting Entity Component Units - As required by generally accepted accounting principles, these financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the govermuent's operations; thus, data from these units are be combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the government -wide financial statements to emphasize it is legally separate from the government. The City reports the following blended component units: Schertz Economic Development Corporation - The Corporation was organized for the purpose of promoting economic development in order to eliminate unemployment and underemployment and to promote and encourage employment and public welfare of, for, and on behalf of the City. The board of directors consists of seven (7) members appointed by the city council. The City is financially accountable for the Corporation because the city council approves the Corporation's budget. For financial reporting purposes, the SEDC is reported as if it were part of the City's operations because its purpose is to benefit the citizens of the City. Complete financial statements for the Schertz Economic Development Corporation may be obtained from City Hall. Parks and Recreation Foundation — The Foundation was organized to improve and expand the community parks, trails, venues, and recreational programs providing fun leisure and healthy activities. The Foundation's governing board is comprised of Schertz residents and employees of the City, the accounting records are maintained by the finance department, cash is held by the City and the City provides financing for the Foundation. In addition, the City includes the Foundation as part of the City budget process. The Foundation qualifies as a blended component unit as it provides services entirely to the City and its citizens. The Foundation was dissolved by the City in the current year. Joint Ventures - A joint venture is a legally separate entity that results from a contractual arrangement and that is owned, operated, or governed by two or more participating governments. The following entities meet the criteria as joint ventures. Separate financial statements for these entities may be obtained at City Hall. 1. Schertz /Seguin Local Government Corporation - is a public, nonprofit corporation organized to aid, assist, and act on behalf of the cities of Schertz and Seguin in acquiring, constructing, maintaining, and operating a water utility system. The participating governments have an ongoing financial responsibility to fund the operation of the corporation through either purchase of services or by subsidizing the operations. Cibolo Valley Local Government Corporation — is a public, nonprofit corporation organized July 28, 2011 to aid, assist, and act on behalf of the cities of Cibolo, Converse and Schertz in acquiring, constructing, maintaining, and operating a water utility system. The participating governments have an ongoing financial responsibility to fund the operation of the corporation through either purchase of services or by subsidizing the operations. 31 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 3. Cibolo Creek Municipal Authority (CCMA) — was created in 1971 and provides regional wastewater services to the area northeast of San Antonio. The City and CCMC entered into a joint project to develop a new treatment facility that will currently only serve the City. The project will have excess capacity to serve other users in the future. The City is solely responsible for funding the project until other users need capacity. B. 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 activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges of customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental fiends and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fiend financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Nonexchange revenues that are measurable but not available are recorded as unavailable revenue (a deferred inflow of resources). These revenues are generally property taxes and warrants outstanding. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Exchange revenues (payments for services) received in advance of the service being provided are recorded as unearned revenue. 32 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) The City reports the following major governmental funds: The General Fund is the City's primary operating fund which accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Debt Service Fund accounts for the resources accumulated and payments made for principal and interest on long -term general obligation debt of governmental funds. The Capital Proiects Fund accounts for financial resources to be used for the acquisition and construction of major capital facilities and is principally financed by the sale of bonds or certificates of obligation and grants. Economic Development Corporation collects sales taxes to support business development and expansion within the City. Nonmaior Funds include Special Revenue funds (other than major projects and grants). The government reports the following major proprietary funds: The Water and Sewer System Fund accounts for the water and sewer services provided to the citizens through user charges. The EMS Fund accounts for the emergency medical services provided to the citizens of the City and other participating governments through user charges. Internal Service Fund accounts for the City's group medical insurance program. As a general rule the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this are charges between the City's general government function and various other functions of the City. Eliminations of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applications for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. General revenues include all taxes and investment earnings. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fiend's principal ongoing operations. The principal operating revenues of the water and sewer enterprise fund and the EMS enterprise fund are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 33 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus. Basis of Accountina. and Financial Statement Presentation (Continued When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. D. Cash and Cash Eauivalents The City's cash and cash equivalents are considered to be cash on hand and demand deposits. Cash is reported as restricted when it has restrictions on its use narrower than the purpose of the fund in which it is reported. This can result in differences in presentation between fund statements and government -wide statements. E. Investments The City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities; (2) direct obligations of the State of Texas or its agencies; (3) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by the State of Texas of the United States; (4) obligations of states, agencies, counties, cities, and other political subdivisions of any state having been rated of not less than "AA" or its equivalent; (5) certificates of deposit issued by state and national banks domiciled in Texas that are guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC) or its successor, or secured by obligations mentioned above; and (6) fully collateralized direct repurchase agreements having a defined termination date. In addition, the City is authorized to invest in local government investment pools. The investment pools operate in accordance with appropriate state laws and regulations and have regulatory oversight from the Texas Public Funds Investment Act Sec. 2256.0016. The fair value of the City's position in each pool is the same as the fair value of the pool shares. F. Receivables and Payables Activities between the funds that are representative of interfund loans outstanding at the end of the fiscal year are referred to as due to /from other funds. Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances ". Accounts receivable are reported net of allowances for uncollectible accounts. The allowance account represents management's estimate of uncollectible accounts based upon experience and historical trends. Property taxes for the City are levied each October 1 on the taxable value as of the preceding January 1, the date a lien attaches, for all taxable real and personal property located in the City. Taxes are due by January 31 following the October 1 assessment date and become delinquent on February 1, at which time they begin accruing penalty and interest. The enforceable legal claim date for property taxes is the assessment date; therefore, the City did not record a receivable for accrual of future taxes at year end. Accordingly, no current taxes receivable are reported. Delinquent taxes have been reported in the financial statements net of the allowance for uncollectible taxes. Tax revenues are recognized as they become available. Accordingly, an amount equal to taxes not yet available has been reported as unavailable revenue (a deferred inflow of resources) at the government fund level. 34 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. Inventories and Prepaid Items All inventories are valued at cost using the first -in /first -out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both governmental -wide and fund financial statements and in the fund financial statements are offset by a nonspendable fund balance which indicates they do not represent "available spendable resources ". H. Restricted Assets Certain proceeds from bonds, resources set aside for their repayment, and other restrictive agreements are classified as restricted assets on the balance sheet because they are maintained in separate bank accounts and their use is limited by applicable bond covenants and/or contractual arrangements. I. Capital Assets Capital assets, which include land, buildings and improvements, machinery, equipment, vehicles, and infrastructure assets (i.e., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. When capital assets are purchased, they are capitalized and depreciated in the government -wide financial statements and the proprietary fund statements. Capital assets are recorded as expenditures of the current period in the governmental fund financial statements. Capital assets are valued at cost where historical records are available and at an estimated cost where no records exist. Donated capital assets, donated works of art and similar items received as part of a service concession arrangement are reported at acquisition value. All other donated capital assets are valued at their estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Improvements to capital assets that materially extend the life of the asset or add to the value are capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during construction will not be capitalized in the governmental activities on the government -wide financial statements; however capitalization of interest is required for business -type activities. There was no capitalized interest during the current fiscal year. Capital assets are depreciated over their useful lives on a straight -line basis as follows: Useful Lives Assets (Years) Buildings and Improvements 10-50 Machinery, Equipment, and Vehicles 2-20 Infrastructure 15-30 35 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. Deferred Inflows /Outflows of Resources A deferred outflow of resources is a consumption of net position by the government that is applicable to a future reporting period while a deferred inflow of resources is an acquisition of net position. These items are presented in separate sections following assets (deferred outflows) or liabilities (deferred inflows) on the statement of net position. K. Compensated Absences It is the City's policy to permit employees to accumulate earned but unused vacation and compensatory time benefits. There is no liability for unpaid accumulated sick leave since the City does not have a policy to pay any amounts when employees separate from service with the City. All vacation and compensatory time pay is accrued when incurred in the government -wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. L. Pensions The net pension liability, deferred inflows, and outflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Texas Municipal Retirement System (TMRS), and additions to and deductions from TMRS's fiduciary net position have been determined on the same basis as they are reported by TMRS. 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. M. Long -Term Obligations In the government -wide financial statements, and proprietary fund types in the fund financial statements, long -term debt and other long -term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net position. Bond premiums, discounts, and losses on defeasance are amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Losses on defeasance are reported as deferred outflows of resources. Bond issuance costs are expensed as incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. N. Fund Equity Fund balances in governmental funds are classified as follows: Nonspendable — Represents amounts that cannot be spent because they are either not in spendable form (such as inventory or prepaid items) or legally required to remain intact. 36 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) N. Fund Equity(Continued) Restricted — Represents amounts that are constrained by external parties, constitutional provisions or enabling legislation. Committed — Represents amounts that can only be used for a specific purpose because of a formal action by the government's highest level of decision making authority: an ordinance adopted by City Council prior to the end of the fiscal year. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation. Assigned — Represents amounts which the City intends to use for a specific purpose but do not meet the criteria of restricted or committed. The City Council may make assignments through fonnal documentation in the minutes. The City Council authorized (by way of policy) the City Manager to also make assignments. The City Manager's assignments do not require formal action; however, the City Manager has not assigned any funds at this time. Unassigned — Represents the residual balance that may be spent on any other purpose of the City. When an expenditure is incurred for a purpose in which multiple classifications are available, the City considers restricted balances spent first, committed second, and assigned third. O. Net Position Net position represents the difference between assets plus deferred outflows of resources less liabilities and deferred inflows of resources. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net assets are reported as restricted when there are limitations imposed by creditors, grantors, or laws or regulations of other governments. P. Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. Q. Budgetary Information Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds except the library grant special revenue fund, police department forfeiture special revenue fund and the capital projects fund, which adopts project - length budgets. R. Reclassifications Certain reclassifications have been made in the presentation of the September 30, 2017 financial statements. All comparative information for prior periods has been reclassified to match the new presentation. The changes in presentation had no impact on the changes in net position or fund balance. 37 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 2 - CASH, CASH EQUIVALENTS AND INVESTMENTS The City's operating deposits are held at one institution. The institution provides a combination of pledged collateral and FDIC insurance to completely collateralize the City's deposits. As of September 30, 2017, the City had the following pooled investment funds: Interest Rate Risk. As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy limits the City's investment portfolio to highly liquid investments to meet unanticipated cash requirements, and/or to redeploy cash into other investments expected to outperfonn current holdings. Credit Risk. State law limits investments in certificates of deposit to guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor or the National Credit Union Share Insurance Fund, or its successor and investment pools continuously rated no lower than AAA or an equivalent rating by at least one nationally recognized rating service. The City's investment policy does not further limit its investment choices. As of September 30, 2017, the City's investments in the pooled investment funds were rated AAAm by Standard & Poor's. The City has also invested in debt securities provided by the Federal Home Loan. Bank, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Federal Farm Credit Banks, and U.S Treasury Notes. As of September 30, 2017, the City's investments in debt securities were rated BBB+ by Standard & Poor's. Custodial Credit Risk - Deposits. In the case of deposits, this is the risk that in the event of a bank failure, the government's deposits may not be returned. As of September 30, 2017, the City's cash and cash equivalents (including certificates of deposit, and component unit holdings) were fully collateralized by the City's depository by a combination of pledged collateral and FDIC insurance. All collateral is held in the City's name. Custodial Credit Risk - Investments. For an investment, this is the risk that, in the event of the failure of the counterparty, the government will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. All of the government securities owned by the City are held by its agent in the City's name. 38 Weighted Average Fair Maturity Investment Type Value in Days LOGIC $ 17,541,325 40 Lone Star Investment Pool 21,322,949 47 Texas CLASS 21,623,633 79 Schertz Bank & Trust - Certificates of Deposit 3,153,510 180 Capital One - U.S. Agency Securities 3,133,521 676 Total $ 66,774,938 91 Interest Rate Risk. As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy limits the City's investment portfolio to highly liquid investments to meet unanticipated cash requirements, and/or to redeploy cash into other investments expected to outperfonn current holdings. Credit Risk. State law limits investments in certificates of deposit to guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor or the National Credit Union Share Insurance Fund, or its successor and investment pools continuously rated no lower than AAA or an equivalent rating by at least one nationally recognized rating service. The City's investment policy does not further limit its investment choices. As of September 30, 2017, the City's investments in the pooled investment funds were rated AAAm by Standard & Poor's. The City has also invested in debt securities provided by the Federal Home Loan. Bank, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Federal Farm Credit Banks, and U.S Treasury Notes. As of September 30, 2017, the City's investments in debt securities were rated BBB+ by Standard & Poor's. Custodial Credit Risk - Deposits. In the case of deposits, this is the risk that in the event of a bank failure, the government's deposits may not be returned. As of September 30, 2017, the City's cash and cash equivalents (including certificates of deposit, and component unit holdings) were fully collateralized by the City's depository by a combination of pledged collateral and FDIC insurance. All collateral is held in the City's name. Custodial Credit Risk - Investments. For an investment, this is the risk that, in the event of the failure of the counterparty, the government will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. All of the government securities owned by the City are held by its agent in the City's name. 38 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 3 - FAIR VALUE MEASUREMENT The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. As of September 30, 2017, . the City's recurring fair value measurement assets consist of Fixed Income U.S. Agency Securities. These investments are valued using prices quoted in active markets for those securities. The following table summarizes the assets for which fair values are determined on a recurring basis as of September 30, 2017: Taxes are levied on and payable as of October 1. The City has contracted with the Guadalupe County Tax Assessor - Collector to collect taxes on its behalf. Current taxes become delinquent February 1. Current year delinquent taxes not paid by July 1 are turned over to attorneys for collection action. The total taxable value as of October 1, 2016, upon which the fiscal 2017 levy was based, was $3,647,504,903 (i.e., market value less exemptions). The estimated market value was $4,296,677,844 making the taxable value 85% of the estimated market value. The City is permitted by the Constitution of the State of Texas to levy taxes up to $2.50 per $100 of taxable assessed valuation for all governmental purposes. Pursuant to a decision of the Attorney General of the State of Texas, up to $1.50 per $100 of assessed valuation may be used for the payment of long -term debt. The combined tax rate to finance general governmental services, including the payment of principal and interest on long -term debt for the year ended September 30, 2017, was $0.4911 per $100 of assessed value, which means that the City has a tax margin of $2.0089 for each $100 value and could increase its annual tax levy by approximately $73,274,726 based upon the present assessed valuation before the limit is reached. However, the City may not adopt a tax rate that exceeds the tax rate calculated in accordance with the Texas Property Tax Code without holding a public hearing. The Property Tax Code subjects an increase in the effective tax rate to a referendum election, if petitioned by registered voters, when the effective tax rate increase is more than eight percent (8 %) of the previous year's effective tax rate. 39 Quoted Prices in Significant Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Investment Type (Level 1) (Level 2) (Level 3) Fair Value Fixed Income Securities $ 3,133,521 $ - $ - $ 3,133,521 Municipal Investment Pools 60,487,907 - - 60,487,907 Total $ 63,621,428 $ - $ - $ 63,621,428 Taxes are levied on and payable as of October 1. The City has contracted with the Guadalupe County Tax Assessor - Collector to collect taxes on its behalf. Current taxes become delinquent February 1. Current year delinquent taxes not paid by July 1 are turned over to attorneys for collection action. The total taxable value as of October 1, 2016, upon which the fiscal 2017 levy was based, was $3,647,504,903 (i.e., market value less exemptions). The estimated market value was $4,296,677,844 making the taxable value 85% of the estimated market value. The City is permitted by the Constitution of the State of Texas to levy taxes up to $2.50 per $100 of taxable assessed valuation for all governmental purposes. Pursuant to a decision of the Attorney General of the State of Texas, up to $1.50 per $100 of assessed valuation may be used for the payment of long -term debt. The combined tax rate to finance general governmental services, including the payment of principal and interest on long -term debt for the year ended September 30, 2017, was $0.4911 per $100 of assessed value, which means that the City has a tax margin of $2.0089 for each $100 value and could increase its annual tax levy by approximately $73,274,726 based upon the present assessed valuation before the limit is reached. However, the City may not adopt a tax rate that exceeds the tax rate calculated in accordance with the Texas Property Tax Code without holding a public hearing. The Property Tax Code subjects an increase in the effective tax rate to a referendum election, if petitioned by registered voters, when the effective tax rate increase is more than eight percent (8 %) of the previous year's effective tax rate. 39 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 4 - PROPERTY TAX (Continued) Property taxes are recorded as receivables and unearned revenues at the time the taxes are assessed. In governmental funds, revenues are recognized as the related ad valorem taxes are collected. Additional amounts estimated to be collectible in the time to be a resource for payment of obligations incurred during the fiscal year and therefore susceptible to accrual in accordance with generally accepted accounting principles have been recognized as revenue. In the government -wide financial statements, the entire levy is recognized as revenue, net of estimated uncollectible amounts (if any), at the levy date. Receivables as September 30, 2017 for the government's individual major funds and nonmajor funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Receivables: Property Taxes Sales Taxes Occupancy Taxes Franchise Taxes Customers Court Fines Grants Other Gross Receivables Less: Allowance for Uncollectibles Net Total Receivables 2,284,486 - 5,269 - 94,474 20,294,324 $ 3,647,933 $ 673,764 -L--82 ,550 -L--33 ,548 -J-2,2 19,495 -J-L092 ,705 Governmental funds report unavailable revenue in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unearned/ unavailable revenue and unavailable revenue reported in the governmental funds were as follows: Unavailable General Fund Delinquent Property Taxes Receivable $ 148,630 Court Fines 1,561,424 Total General Fund 1,710,054 Debt Service Fund Delinquent Property Taxes Receivable 82,550 Total Debt Service Fund 82,550 Total Governmental Funds $ 1,792,604 40 Governmental Funds Proprietary Funds Economic Debt Nonmajor Water and Schertz General Development Service Funds Sewer Fund EMS $ 158,116 $ - $ 87,819 $ - $ - $ 1,330,632 665,316 - - - - - - - 33,548 - - 491,039 - - - - - 116,209 - - - 2,813,969 23,335,745 3,836,423 - - - - - - 8,448 - - - 51,284 5,932,419 673,764 87,819 33,548 2,813,969 23,387,029 2,284,486 - 5,269 - 94,474 20,294,324 $ 3,647,933 $ 673,764 -L--82 ,550 -L--33 ,548 -J-2,2 19,495 -J-L092 ,705 Governmental funds report unavailable revenue in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unearned/ unavailable revenue and unavailable revenue reported in the governmental funds were as follows: Unavailable General Fund Delinquent Property Taxes Receivable $ 148,630 Court Fines 1,561,424 Total General Fund 1,710,054 Debt Service Fund Delinquent Property Taxes Receivable 82,550 Total Debt Service Fund 82,550 Total Governmental Funds $ 1,792,604 40 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 The composition of interfund balances as of September 30, 2017 is as follows: Due From Capital Projects Fund EMS Due To Amount Purpose Water & Sewer $ 116,040 Structured funding for Waterline Project General 175,084 Short -term pooled cash loan The following schedule briefly summarizes the City's transfer activity for the year ending September 30, 201'7: Transfer From Transfer To Nonmajor Governmental General EMS Capital Projects Economic Development Debt Service NOTE 7 - CAPITAL ASSETS Amount Purpose $ 68,385 Supplement DEA expenditures 9,399 Supplement capital purchases 361,019 Pledge in support of debt service Capital asset activity for the year ended September 30, 2017 was as follows: Governmental Activities: Capital Assets, Not Being Depreciated.• Land Construction in Progress Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated.• Buildings and Improvements Machinery, Equipment, and Vehicles Streets and Infrastructure Total Capital Assets Being Depreciated Accumulated Depreciation: Buildings and Improvements Machinery, Equipment, and Vehicles Streets and Infrastructure Total Accumulated Depreciation Total Capital Assets Being Depreciated, Net Governmental Activities Capital Assets, Net Beginning Ending Balance Increases Deletions Transfers Balance $ 7,499,108 $ - $ - $ $ 7,499,108 9,832,153 4,858,158 (1,057,797) 13,632,514 17,331,261 4,858,158 (1,057,797) 21,131,622 43,607,412 - - 70,535 43,677,947 9,282,067 706,131 (628,445) 987,262 10,347,015 100,003,048 9,300,430 - 109,303,478 152,892,527 10,006,561 (628,445) 1,057,797 163,328,440 (10,743,693) (1,536,428) - - (12,280,121) (5,257,401) (934,052) 377,894 (5,813,559) (29,113,036) (3,263,925) - (32,376,961) (45,114,130) (5,734,405) 377,894 (50,470,641) 107,778,397 4,272,156 (250,551) 1,057,797 112,857,799 $ 125,109,658 $ 9,130,314 $ (250,551) $ $ 133,989,421 41 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 7 - CAPITAL ASSETS (Continued) Capital asset activity for the year ended September 30, 2017 was as follows: Business -Type Activities: Capital Assets, Not Being Depreciated: Land Water Rights Construction in Progress Total Assets Not Being Depreciated Capital Assets, Being Depreciated.• Buildings and Improvements Machinery, Equipment, and Vehicles Infrastructure Total Capital Assets Being Depreciated Accumulated Depreciation: Buildings and Improvements Machinery, Equipment, and Vehicles Infrastructure Total Accumulated Depreciation Total Capital Assets Being Depreciated, Net Business -Type Activities Capital Assets, Net Beginning Ending Balance Increases Deletions Transfers Balance $ 1,354,138 $ $ $ $ 1,354,138 70,245 - 70,245 2,681,683 1,030,767 (805,046) 2,907,404 4,106,066 1,030,767 (805,046) 4,331,787 4,660,001 - - 4,660,001 5,095,324 34,510 (116,757) - 5,013,077 85,890,831 6,111,473 805,046 92,807,350 95,646,156 6,145,983 (116,757) 805,046 102,480,428 (2,226,657) (247,349) - - (2,474,006) (2,503,456) (608,901) 116,757 (2,995,600) (23,998,745) (1,765,066) - - (25,763,811) (28,728,858) (2,621,316) 116,757 - (31,233,417) 66,917,298 3,524,667 - 805,046 71,247,011 $ 71,023,364 $ 4,555,434 $ - $ - $ 75,578,798 Depreciation expense was charged to functions /programs of the primary government as follows: Governmental Activities: General Government Public Safety Public Environment Parks and Recreation Cultural Health Administration Total Depreciation Expense - Governmental Activities Business -Type Activities: Water and Sewer System EMS Total Depreciation Expense - Business Type Activities 42 $ 671,298 744,936 3,296,787 851,154 58,617 84,359 27,254 $ 5,734,405 $ 2,282,145 339,171. $ 2,621,316 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 8 - OPERATING LEASE The City has agreements with several telecommunication companies to place cellular towers on City water towers. The following schedule represents the future minimum lease payments. Fiscal Year Ending September 30, Total 2018 $ 248,161 2019 260,569 2020 273,597 2021 287,277 2022 301,641 2023 -2027 1,740,127 2028 -2032 404,227 $ 3,515,599 In 2014, the City entered into two lease agreements qualifying as capital leases for accounting purposes based on a bargain purchase option. Therefore, capital assets and a related capital lease obligation have been recorded at the present value of the future minimum lease payments at the inception date. The assets acquired through capital lease are reported in capital assets with the following accumulated depreciation at September 30, 2017: Assets: Equipment Less Accumulated Depreciation Total Future minimum lease payments are as follows: Year Ending September 30, 2018 2019 Total Payments Less: Amount Representing Interest Present Value of Minimum Lease Payments 43 Governmental Activities $ 1.33,715 (40,15) $ 93,600 Governmental Activities $ 25,505 25,505 (358) $ 25,147 Business -type Activities $ 347,705 (250,218) $ 97,487 Business -type Activities $ 70,041 23,347 93,388 (667) $ 92,721 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 10 - LONG TERM DEBT The City issues a variety of long -term debt instruments in order to acquire and/or construct major capital facilities and equipment for governmental activities. These instruments include general obligation bonds, certificates of obligation, and capital leases. These debt obligations are secured by primarily future property tax revenues. In some cases, these bonds are also secured by a pledge of net revenues from the utility system, emergency medical services and economic development sales taxes. However, the amount of the formal pledge is generally limited to $1,000. In June 2017, the City issued $3,935,000 in General Obligation Bonds Series 2017 and $5,475,000 Certificates of Obligations Series 2017 pursuant to the constitution and general laws of the State of Texas, particularly, Subchapter C of Chapter 271 of the Texas Local Government Code, as amended, and in ordinance adopted by the City Council. The certificates constitute direct and general obligations of the City payable from ad valorem taxes levied against all payable property within the City, as well as pledged revenue of up to $1,000 of the surplus revenues from proprietary funds. The bonds and certificates were issued for the purpose of paying contractual obligations of the City for street improvements, renovations of the Municipal Complex, Senior Center and recreational facilities, purchase of ambulances and fire apparatuses, and the construction of Fire Station No. 2. A summary of the terms of general obligation bonds and combination of tax and revenue certificates of obligation outstanding at September 30, 2017, follows: Total Governmental Long -Term Obligations $ 65,015,000 44 Issue Amount Maturity Rate Balance Primary Government General Obligation Bonds 2007 Series $ 6,000,000 2027 4.07% $ 3,495,000 2008 Series 9,900,000 2028 4.13% 6,510,000 2009 Series 9,500,000 2033 2.0%-5.50% 5,465,000 2010 Series, Refunding 2,865,000 2021 2.0%-4.0% 1,215,000 2011 Series 8,250,000 2036 3.0%-6.0% 7,070,000 2011A Series, Refunding 6,745,000 2024 2.33% 4,085,000 2012 Series 7,625,000 2032 2.00% 6,120,000 2014 Series, Refunding 8,450,000 2030 2.0 % -4.0% 8,200,000 2015 Series, Refunding 4,1.85,000 2031 2.0% -3.25% 3,655,000 2016 Series 5,880,000 2036 2.0 % -4.0% 5,475,000 2017 Series 3,935,000 2037 2.0 % -4.0% 3,935,000 Tax Notes 2013 Notes 835,000 2018 0.7%-1.7% 170,000 2013A Notes 800,000 2018 1.30% 165,000 2015 Notes 245,000 2021 1.75% 145,000 2015A Notes 1,020,000 2023 1.54% 750,000 Certificates of Obligation 2016 . Series A 2,375,000 2036 2.0%-4.0% 2,205,000 2016 . Series B 1,475,000 2036 3.0% -3.75% 1,420,000 2017 Series 4,935,000 2037 3.0% -3.75% 4,935,000 Total Governmental Long -Term Obligations $ 65,015,000 44 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 10 - LONG -TERM DEBT (Continued) Changes in long -term debt for the year ending September 30, 2017 are as follows: Governmental Activities: General Obligation Bonds Unamortized Premium General Obligation Refunding Bonds Unamortized Premium Certificates of Obligation Unamortized Premium Tax Notes Capital Lease Compensated Absences Total Governmental Activities Business -Type Activities: General Obligation Refunding Bonds Unamortized Premium Certificates of Obligation Unamortized Premium Tax Notes Capital Lease Compensated Absences Total Business -Type Activities Balance Issue Amount Maturity Rate Balance Primary Government (Continued) Additions Reductions 9/30/2017 One Year General Obligation Bonds $ 3,935,000 $ (2,250,000) $ 38,070,000 $ 2,230,000 2011 Series, Refunding $ 2,675,000 2021 2.0%-3.0% $ 930,000 2013 Series, Refunding 2,1.30,000 2025 2.58% 1,600,000 Certificates of Obligation - (58,650) 637,446 58,650 2007 Series CIB 1 6,600,000 2026 4.01% 3,880,000 2013 Series 4,965,000 2033 2.0 % -4.0% 3,630,000 2017 Series 540,000 2022 3.0% -3.75% 540,000 Tax Notes - (33,174) 25,147 25,147 2015 Notes 1,880,000 2021 1.75% 1,065,000 Total Business -Type Long -Term Obligations $ 11,645,000 Changes in long -term debt for the year ending September 30, 2017 are as follows: Governmental Activities: General Obligation Bonds Unamortized Premium General Obligation Refunding Bonds Unamortized Premium Certificates of Obligation Unamortized Premium Tax Notes Capital Lease Compensated Absences Total Governmental Activities Business -Type Activities: General Obligation Refunding Bonds Unamortized Premium Certificates of Obligation Unamortized Premium Tax Notes Capital Lease Compensated Absences Total Business -Type Activities Balance - $ (480,000) Balance Due Within 9/30/2016 Additions Reductions 9/30/2017 One Year $ 36,385,000 $ 3,935,000 $ (2,250,000) $ 38,070,000 $ 2,230,000 661,176 126,800 (36,808) 751,168 43,148 18,610,000 - (1,455,000) 17,155,000 1,510,000 696,096 - (58,650) 637,446 58,650 3,850,000 4,935,000 (225,000) 8,560,000 465,000 207,189 255,130 (10,904) 451,415 23,661 1,740,000 - (510,000) 1,230,000 515,000 58,321 - (33,174) 25,147 25,147 1,022,543 251,815 (204,509) 1,069,849 213,970 $ 63,230,325 $ 9,503,745 $ (4,784,045) $ 67,950,025 $ 5,084,576 $ 3,010,000 $ - $ (480,000) $ 2,530,000 $ 405,000 4,595 - (969) 3,626 969 8,220,000 540,000 (710,000) 8,050,000 830,000 111,966 19,400 (6,587) 124,779 6,587 1,360,000 - (295,000) 1,065,000 300,000 162,262 - (69,541) 92,721 69,541 306,818 65,170 (61,363) 310,625 62,125 $ 13,175,641 $ 624,570 $ (1,623,460) $ 12,176,751 $ 1,674,222 45 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 10 - LONG -TERM DEBT (Continued) Annual debt service requirements of bonded debt as of September 30, 2017, are as follows: NOTE 11 - RETIREMENT PLAN Plan Description The City of Schertz participates as one of 872 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the state of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple- employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the system with a six - member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS's defined benefit pension plan is a tax - qualified plan under Section 401(a) of the Internal Service Code. TMRS issues a publicly available comprehensive annual financial report (CAFR) that can be obtained at www.tmrs.com. All eligible employees of the City are required to participate in TMRS. 46 Governmental Activities September 30, Principal Interest Total 2018 $ 4,720,000 $ 2,417,491 $ 7,137,491 2019 4,210,000 2,201,637 6,411,637 2020 4,355,000 2,038,287 6,393,287 2021 4,415,000 1,860,579 6,275,579 2022 4,270,000 1,697,788 5,967,788 2023 -2027 1.9,625,000 6,369,435 25,994,435 2028 - 2032 1.6,165,000 2,974,153 19,139,1.53 2033 -2037 7,255,000 533,363 7,788,363 Total $ 65,015,000 $ 20,092,733 $ 85,107,733 Business -Type Activities September 30, Principal Interest Total 2018 $ 1,535,000 $ 366,416 $ 1,901,416 2019 1,580,000 322,858 1,902,858 2020 1,620,000 279,902 1,899,902 2021 1,500,000 233,599 1,733,599 2022 875,000 191,146 1,066,146 2023 -2027 3,270,000 540,361 3,810,361 2028 -2032 1,03 5,000 152,900 1,187,900 2033 -2037 230,000 4,600 234,600 Total $ 11,645,000 $ 2,091,782 $ 13,736,782 NOTE 11 - RETIREMENT PLAN Plan Description The City of Schertz participates as one of 872 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the state of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple- employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the system with a six - member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS's defined benefit pension plan is a tax - qualified plan under Section 401(a) of the Internal Service Code. TMRS issues a publicly available comprehensive annual financial report (CAFR) that can be obtained at www.tmrs.com. All eligible employees of the City are required to participate in TMRS. 46 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 11 - RETIREMENT PLAN (Continued) Texas Municipal Retirement System (Continued) Benefits Provided TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS. At retirement, the benefit is calculated as if the sum of the employee's contributions, with interest, and the City - financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven payment options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member's deposits and interest. At the December 31, 2016 valuation and measurement date, the following employees were covered by the benefit terms: Inactive Employees or Beneficiaries Currently Receiving Benefits Inactive Employees Entitled to but Not Yet Receiving Benefits Active employees Contributions 2015 2016 79 84 138 155 312 317 529 556 The contribution rates for employees in TMRS are either 5 %, 6 %, or 7% of employee gross earnings, and the City matching percentages are either 100 %, 150 %, or 200 %, both as adopted by the governing body of the City. Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Entry Age Normal (EAN) actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the City were required to contribute 7% of their annual gross earnings during the fiscal year. The contribution rates for the City were 15.94% and 15.87% in calendar years 2016 and 2017, respectively. The City's contributions to TMRS for the year ended September 30, 2017 . were $2,756,511 and were equal to the required contributions. Net Pension Liability The City's Net Pension Liability (NPL) was measured as of December 31, 2016, and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. 47 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 11 - RETIREMENT PLAN (Continued) Texas Municipal Retirement System (Continued) Actuarial Assumptions The Total Pension Liability in the December 31, 2016 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Overall Payroll Growth 3.0% per year Investment Rate of Return* 6.75% * Presented net of pension plan investment expense, including inflation Salary increases were based on a service - related table. Mortality rates for active members, retirees, and beneficiaries were based on the gender - distinct RP2000 Combined Health Mortality Table, with male rates multiplied by 109% and female rates multiplied by 103 %. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements. For disabled annuitants, the gender - distinct RP2000 Disabled Retiree Mortality Tables with Blue Collar adjustment are used with males rates multiplied by 109% and female rates multiplied by 103% with a 3 -year set - forward for both males and females. IN addition, a 3% minimum mortality rate is applied to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements subject to the 3% floor. Actuarial assumptions used in the December 31, 2016 valuation were based on the results of actuarial experience studies. The experience study in TMRS was for the period December 31, 2010 through. December 31, 2014. Healthy post - retirement mortality rates and annuity purchase rates were updated based on a Mortality Experience Investigation Study covering 2009 through 2011, and dated December 31, 2013. These assumptions were first used in the December 31, 2013 valuation, along with a change to the Entry Age Normal (EAN) actuarial cost method. Assumptions are reviewed annually. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in order to satisfy the short-term and long -term funding needs of TMRS. 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 of return (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 rates of return by the target asset allocation percentage and by adding the expected inflation. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, GRS focused on the area between (1) arithmetic mean (aggressive). 48 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 11 - RETIREMENT PLAN (Continued) Texas Municipal Retirement System (Continued) Actuarial Assumptions (Continued) The target allocation and best estimates of arithmetic real rates of return for each major asset class in fiscal year 2017 are summarized in the following table: Asset Class Domestic Equity International Equity Core Fixed Income Non -Core Fixed Income Real Return Real Estate Absolute Return Private Equity Discount Rate Target Allocation 17.50% 17.50% 10.00% 20.00% 1.0.00% 10.00% 10.00% 5.00% 100.00% Long -Term Expected Real Rate of Return (Arithmetic) 4.55% 6.35% 1.00% 4.15% 4.15% 4.75% 4.00% 7.75% The discount rate used to measure the Total Pension Liability was 6.75 %. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of 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. 49 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 11 - RETIREMENT PLAN (Continued) Texas Municipal Retirement System (Continued) Changes in the Net Pension Liability The below schedule presents the changes in the Net Pension Liability as of December 31, 2016: Balance at December 31, 2015 Changes for the year: Service Cost Interest Change of Benefit Terms Difference Between Expected and Actual Experience Changes of Assumptions Contributions - Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expense Other Changes Net Changes Balance at December 31, 2016 Total Pension Plan Fiduciary Net Pension Liability Net Position Liability $ 55,119,232 $ 38,499,857 $ 16,619,375 2,855,745 - 2,855,745 3,763,562 - 3,763,562 139,216 - 139,216 - 2,627,335 (2,627,335) 1,152,864 (1,152,864) 2,602,572 (2,602,572) (1,581,272) (1,581,272) - (29,385) 29,385 (1,583) 1,583 5,177,251 4,770,531 406,720 $ 60,296,483 $ 43 270 388 $ 17 026 095 The following presents the net pension liability of the City, calculated using the discount rate of 6.75 %, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1- percentage point lower (5.75 %) or 1- percentage point higher (7.75 %) than the current rate: Discount Rate Discount Rate Discount Rate 5.75% 6.75% 7.75% Net Pension Liability $ 27,443,427 $ 17,026,095 $ 8,668,647 Pension Plan Fiduciary Net Position Detailed information about the pension plan's Fiduciary Net Position is available in a separately- issued TMRS financial report. That report may be obtained on the Internet at www.tmrs.com. W CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 11 - RETIREMENT PLAN (Continued) Texas Municipal Retirement System Continued) Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended September 30, 2017, the City recognized pension expense of $3,512,360. Also as of September 30, 2017, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between Expected and Actual Economic Experience Changes in Actuarial Assumptions Differences Between Projected and Actual Investment Earnings Contributions Subsequent to the Measurement Date Deferred Deferred Outflows of Inflows of Resources Resources $ 132,647 $ 39,689 1,658,421 1,980,718 $ 3.811.475 $ Deferred outflows of resources in the amount of $1,980,718 is related to pensions resulting from contributions subsequent to the measurement date, and will be recognized as a reduction of the net pension liability for the plan year ending December 31, 2017. The City liquidates their Net Pension Liability through payments from the general fund. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: For the Year ended December 31, 2017 $ 613,689 2018 613,689 2019 531,495 2020 45,274 2021 25,004 Thereafter 1,606 $ 1,830,757 C. Other Post - Employment Benefits The City also participates in the cost sharing multiple- employer defined benefit group -term life insurance plan operated by TMRS known as Supplemental Death Benefits Fund (SDBF). The City elected, by ordinance, to provide group -term life insurance coverage to both current and retired employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. 51 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 11 - RETIREMENT PLAN (Continued) C. Other Post - Employment Benefits (Continued) The death benefit for active employees provides a lump -sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12 -month period preceding the month of death); retired employees are insured for $7,500; this coverage is an "other postemployment benefit," or OPEB. The City contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one -year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to pre -fund retiree life insurance during the employees' entire careers. The City's contributions to the TMRS SDBF for the years ended 2017, 2016, and 2015 were $22,066, $20,324, and $21,681, respectively, which equaled the required contributions each year. NOTE 12 — RETIREE HEALTH INSURANCE PLAN A. Plan Description The City provides another post - employment benefit to eligible retirees of the City whereby they can stay on the City's health insurance plan by paying the full premium. B. Contributions The City's annual other post - employment benefits (OPEB) cost is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of accrual that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize any unfunded actuarial liabilities (or funding excesses) over a period not to exceed thirty years. The City's annual OPEB cost for the fiscal year ending September 30, 2017 is as follows: Annual Required Contribution Interest on OPEB obligation Adjustment to ARC Annual OPEB cost Contributions Increase in net OPEB obligation Beginning Net OPEB Obligation Ending Net OPEB Obligation 52 $ 139,51.5 17,912 (21,183) 136,244 (24,107) 112,137 543,618 $ 655,755 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 12 — RETIREE HEALTH INSURANCE PLAN (Continued) B. Contributions (Continued) The City's annual OPEB cost, the amount contributed by the employer, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for fiscal year ending September 30, 2017 and the preceding two fiscal years were as follows: September 30, Cost Contributions Contributed Obligation 2017 $ 136,244 $ 24,107 17.7% $ 655,755 2016 136,557 23,519 17.2% 543,618 2015 81,159 1.5,485 19.1% 430,580 The Projected Unit Credit Cost Method is used to calculate the actuarial required contribution (ARC) for the City's retiree health care plan. Using the plan benefits, the present health premiums and a set of actuarial assumptions, the anticipated future payments are projected. The actuarial cost method then provides for a systematic funding for these anticipated payments. The yearly ARC is computed to cover the cost of benefits being earned by covered members as well as to amortize a portion of the unfunded accrued liability. Projections of health benefits are based on the plan as understood by the City and include the types of benefits in force at the valuation date and the pattern of sharing benefit costs between the City and the City's employees to that point. Actuarial calculations reflect a long -term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Significant methods and assumptions were as follows: Inflation Rate 2.5% Investment Rate of Return 4.0 %, net of expenses Actuarial Cost Method Projected Unit of Credit Amortization Method Level as a percent of payroll Amortization Period 30 -year open period Payroll Growth 3.0% Medical Trend Initial rate of 7.50 %, declining to an ultimate rate of 4.25% after 15 years Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events in the future. Amounts determined regarding the funded status and the annual required contributions of the City's retiree health care plan are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The required schedule of funding progress presented as required supplementary information provides multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. The funded status as of December 31, 2015, the most recent actuarial valuation date, is as follows: Actuarial Actuarial Value Valuation Date of Assets 12/31/2015 Actuarial Accrued Liability (AAL) Funded Ratio $ 1,055,757 0.0% 53 Unfunded AAL (UAAL) Covered Payroll $ 1,055,757 $ 14,356,845 UAAL as a Percentage of Covered Payroll 7.4% CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 13 - JOINT VENTURES Schertz /Seguin Local Government Corporation The Schertz /Seguin Local Government Corporation is a public, nonprofit corporation organized to aid, assist, and act on behalf of the cities of Schertz and Seguin in acquiring, constructing, maintaining, and operating a water utility system. The participating governments have an ongoing financial responsibility to fund the operation of the corporation through either purchase of services or by subsidizing the operations. Contributions to the corporation are reflected as "operating expenses" in the water and sewer fund and totaled $2,242,314 for the year ended September 30, 2017. Separate financial statements for the Schertz /Seguin Local Government Corporation may be obtained from the City of Seguin, 210 East Gonzales Street, Seguin, Texas 78156. The City of Schertz is jointly liable, together with the City of Seguin, for operating deficits and long -term debt of the Schertz /Seguin Local Government Corporation. Following is a summary of financial data as reported in the Corporation's audited financial statements dated September 30, 2016: ASSETS: Current Assets $ 14,027,427 Restricted Cash and Cash Equivalents 6,859,879 Property, Plant & Equipment (net) 95,187,724 Other Assets 108,809 TOTAL ASSETS 116,183,839 Deferred Charges on Refunding 2,546,875 LIABILITIES: Current Liabilities 4,858,647 Revenue Bonds (Less Current Maturities) 100,976,449 TOTAL LIABILITIES 105,835,096 NET POSITION: Net Investment in Capital Assets (2,288,897) Restricted 5,364,082 Unrestricted 9,820,433 TOTAL NET POSITION $ 12,895,618 The Corporation had net revenue bonds outstanding in the amount of $103,281,449 (as of September 30, 2016) to provide funds to build, improve, extend, enlarge and repair the Corporation's utility system, fund a reserve, and pay the costs of bond issuance. The bond resolution pledges intergovernmental contract revenues from the cities of Schertz and Seguin (the participating governments) to bond holders. Under the intergovernmental water supply contract, the participating governments are unconditionally obligated to pay their respective shares of annual contract revenue bond debt service from the operation of their respective utility systems. 54 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 13 - JOINT VENTURES (Continued) Cibolo Valley Local Government Corporation The Cibolo Valley Local Government Corporation (CVLGC) is a public nonprofit corporation incorporated in March 2012 to assist and act on behalf of the cities of Schertz, and Cibolo to obtain additional water sources. The participating governments have an ongoing financial responsibility to fund the operation of the corporation through either purchase of services or by subsidizing the operations. Contributions to the corporation are reflected as "operating expenses" in the water and sewer fiend. Separate financial statements for the CVLGC may be obtained from the City of Seguin, 210 East Gonzales Street, Seguin, Texas 78156. The City of Schertz is jointly liable, together with the City of Cibolo, for operating deficits and long -term debt of CVLGC. Following is a summary of financial data as reported in the Corporation's audited financial statements dated September 30, 2016: ASSETS: Current Assets $ 613,204 Noncurrent Assets 1,268,516 TOTAL ASSETS 1,881,720 LIABILITIES: Current Liabilities 92,012 TOTAL LIABILITIES 92,012 NET POSITION: Net Investment in Capital Assets 1,268,516 Unrestricted 521,192 TOTAL NET POSITION $ 1,789,708 Cibolo Creek Municipal Authority Cibolo Creek Municipal Authority (CCMA) provides sewage treatment for the area in and around the City. CCMA has agreed to construct a sewage treatment facility in the southern portion of the City to primarily serve citizens of the City but also neighboring Cities and future development. Because the City would be the primary customer at this time, the City agreed to enter into a regional wastewater treatment contract in September 2014. CCMA will issue bonds to finance the project and the City has agreed to make payments to CCMA to cover operation expenses, maintenance expenses, and debt service. The City is the sole member at this time, so it is responsible for 100% of the project costs. Should other members join, the City's share of the costs would be reduced. 55 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 13 - JOINT VENTURES (Continued) Ciholo Creek Municipal Authority (Continued) In September 2014, CCMA issued bonds for the project in the amount of $6,950,000 with debt service requirements as follows: Fiscal Year Ending September 30, Principal 2018 $ 150,000 2019 155,000 2020 160,000 2021 160,000 2022 165,000 2023 -2027 905,000 2028 -2032 1,090,000 2033 -2037 1,340,000 2038 -2042 1,680,000 2043 -2044 775,000 $ 6,580,000 NOTE 14 - COMMITMENTS AND CONTINGENCIES Tax Increment Financing (the "Zone') Interest Total $ 260,250 $ 410,250 257,250 412,250 254,150 41.4,150 250,950 410,950 247,750 410,950 1,156,050 2,061,050 966,450 2,056,450 721,950 2,061,950 372,050 2,052,050 46,800 821,800 $ 4,533,650 $ 11,111,850 The City is a principal in the City of Schertz Tax Increment Reinvestment Zone #2, pursuant to Chapter 311 of the Texas Tax Code. Under the terms of the Zone agreement, the City of Schertz, Bexar County, and San Antonio River Authority are funding infrastructure improvements through tax increment financing to the Sedona Development Project. At the time the Zone was created, the property tax base was "frozen" and increment taxes resulting from the increases to property tax base are being used to finance Zone improvements. The total projected cost is a combined figure of $45,000,000. Project costs of the developer will be funded up to 100% of the tax increment generated by the City of Schertz, Bexar County, and San Antonio River Authority (SARA). The City of Schertz (combined with SARA) have committed up to $32,877,000 of the total $45,000,000. The Zone has a statutory termination date of December 31, 2027. The TIRZ has collected $949,976 from taxing entities (net of administrative reimbursements) and remitted $771,928 to the developer as of September 30, 2017. 380 Agreements The Chapter 380 Incentive program, authorized by Chapter 380 of the Texas Local Government Code, enables the City of Schertz to provide grants or reimbursements from the City's general fund. To become eligible for Chapter 380 Incentives, projects must: create at least of $100 million in new real and personal property; or generate at least $35 million in gross sales that is subject to the collection of local sales and use tax. Businesses that have a 380 Incentive agreement with the City are eligible to receive a reimbursement of taxes paid for the year if they have met the requirements outlined in the agreement by a certain date each year. For the fiscal year ended September 30, 2017, the City reimbursed $965,674 in property taxes paid. 56 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 14 - COMMITMENTS AND CONTINGENCIES (Continued) Economic Development Incentive Agreements The City of Schertz Economic Development Corporation (the SEDC) negotiates economic development incentive agreement on behalf of the SEDC and the City of Schertz (the City) on an individual basis. As of September 30, 2017, the City had nine active incentive agreements. On May 2, 2017, the City and the Corporation approved the Schertz Incentive Policy which outlines the City's primary tools to attract commercial investment and promote economic development. Projects are selected on a case -by -case basis in accordance current policy and state laws at the discretion of the governing body. All incentive agreements are formalized through a performance agreement with specified terms and recapture criteria. The SEDC Incentive program, authorized by Chapters 501, 502 and 505 of the Texas Local Government Code, enables the Corporation to fund allowable projects from the collection of one -half of one percent of sales tax proceeds collected in the City of Schertz. In accordance with state law, the SEDC Incentive Policy establishes grants and loans for businesses that create Primary Jobs for the following categories: Existing Businesses (3 years of operation within. City), Small Businesses (fewer than 50 full -time jobs or annual sales less than $10 million), Large Impact Businesses (Up to $100 million in taxable property), and Extra Large Businesses (over $100 million in taxable property). The City and Corporation's outstanding incentive agreement grants are as follows: FY 2016 -17 Amt. Est. Remaining Grant City of Schertz - LGC 380.001 $ 965,674 $ 2,736,572 SEDC - LGC 501.101 - 451,552 Service Concession Arrangements The City entered into an agreement with YMCA, under which YMCA will operate and collect user fees from the Natatorium and Outdoor Pools for the next 20 years. YMCA will pay the city $100,000 annually over the course of the arrangement; the present value of these installment payments is estimated to be $851,356. The City will approve the rates and services that YMCA will provide, however, YMCA will retain all revenues earned from the operation of the Natatorium. The YMCA will remit all revenues received from operating the Outdoor Pools to the City with the exception of revenues earned from YMCA specific programs. As of September 30, 2017, the Natatorium is still under construction and is reported by the City as Construction in Progress in the amount of $9,801,311. The City reports the Outdoor Pools and related equipment as capital assets with a total carrying amount of $778,529. The City reports a receivable and deferred inflow of resources in the amount of $851,356 on the government -wide statements at year -end pursuant to the service concession arrangement. Additionally, a liability of $507,136 for the present value of maintenance costs estimated over the life of the Service Concession arrangement. Litigation The City is the subject of various claims and litigation that have arisen in the course of its operations. Management is of the opinion that the City's liability in these cases, if decided adversely to the City, will not have a material effect on the City's financial position. W CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2017 NOTE 14 - COMMITMENTS AND CONTINGENCIES (Continued) Construction Commitments The City of Schertz has entered into commitments for various projects as follows: Primary Government: Estimated Project Town Creek Sewer Project (Phase III) Cost to City Governmental Activities: 1,650,000 Lower Seguin Road Improvements $ 304,841 Natatorium Project 9,812,363 FM 78 and Main Street 1,000,000 Fire Station 3 8,000,000 FM 1103 Street Improvements 2,000,000 Building Improvements 1,600,000 Main Street Improvements 407,057 FM 1518 Street Improvements 5,000,000 Total Governmental Commitments 28,124,261 Business -Type Activities: Woman Hollering WasteWater 5,940,424 Town Creek Sewer Project (Phase III) 931,740 Corbett Ground Storage Tank & Pumps 1,650,000 Corbett Elevated Water Tank 2,982,052 Trainer Hale Road Distribution Main 500,000 Total Business -Type Activities 12,004,216 Total Estimated Future Commitments $ 40,1 28,477 Risk Management Expended to Estimated Future Date Commitment $ 263,598 9,812,363 7,513 435,007 181,226 30,364 10,730,071 504,684 931,740 930 286,563 1,723,917 $ 12,453,988 $ 41,243 992,487 7,564,993 1,818,774 1,569,636 407,057 5,000,000 17,394,190 5,435,740 1,649,070 2,695,489 500,000 10,280,299 $ 27,674,489 The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The City contracts with the Texas Municipal League Intergovernmental Risk Pool, a public entity risk pool currently operating as a common risk management and insurance program providing insurance coverage in the following areas: general liability, automobile liability and physical damage, law enforcement liability, worker's compensation, real and personal property, mobile equipment, and errors and omissions liability. TML is a multi - employer group that provides for a combination of risk sharing among pool participants and stop loss coverage. Contributions are set annually by the provider. Liability by the City is generally limited to the contributed amounts. Annual contributions for the year ended September 30, 2017 were $435,914 for property and casualty and workers compensation coverage. There were no significant increases or decreases in coverage from fiscal year 2016. 58 I rz/,� �N CITY OA 1, REQUIRED SUPPLEMENTARY INFORMATION 59 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED SEPTEMBER 30, 2017 Variance With Public Safety. Police Department 6,994,853 7,021,097 2017 Final Budget - Fire Department Budgeted Amounts Actual Positive 5,829 Original Final Amounts (Negative) REVENUES Marshal Service 503,837 503,837 481,980 Taxes $ 19,912,226 $ 1.9,912,226 $ 19,450,338 $ (461,888) Permits and Fees 1,283,660 1,455,660 2,367,929 912,269 Service Fees 1,523,530 1,523,530 2,107,844 584,31.4 Fines and Fees 1,232,858 1,232,858 1,021,965 (210,893) Intergovernmental 318,000 378,000 307,809 (70,191) Investment Earnings 60,800 60,800 128,158 67,358 Miscellaneous 561,502 627,502 603,477 (24,025) TOTAL REVENUES 24,892,576 25,190,576 25,987,520 796,944 EXPENDITURES General Government: Council 116,982 106,982 93,412 13,570 City Manager 1,122,395 1,112,395 1,078,187 34,208 Municipal Court 390,363 390,363 342,585 47,778 311 Customer Relations 114,369 119,269 117,777 1,492 Planning & Zoning 218,124 224,024 214,454 9,570 Legal 240,000 172,000 150,698 21,302 City Secretary 195,762 195,762 190,571 5,191 Nondepartmental 1,543,640 1,191,940 1,135,288 56,652 Community & Media Relations 324,789 331,789 319,030 12,759 Records Management 65,682 55,682 47,680 8,002 Schertz Magazine 392,668 392,668 349,950 42,71.8 Engineering 553,751 560,551 540,453 20,098 Geographic Information Systems 160,959 165,159 163,735 1,424 Citizens Assistance 245,260 312,545 298,164 14,381. Special Events 119,600 175,600 130,375 45,225 Total General Government 5,804,344 5,506,729 5,172,359 334,370 Public Safety. Police Department 6,994,853 7,021,097 6,870,568 150,529 Fire Department 3,963,560 4,082,360 4,076,531 5,829 Inspection 638,929 847,529 811,916 35,613 Marshal Service 503,837 503,837 481,980 21,857 Total Public Safety 12,101,179 12,454,823 12,240,995 213,828 Public Environment: Streets 1,133,776 1,267,162 1,264,787 2,375 Total Public Environment $ 1,133,776 $ 1,267,162 $ 1,264,787 $ 2,375 60 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL) GENERAL FUND (CONTINUED YEAR ENDED SEPTEMBER 30, 2017 Administration: Information Technology 1,570,102 1,582,166 1,535,541 Variance With Human Resources 470,531 457,569 2017 Final Budget - Finance Budgeted Amounts Actual Positive 21,829 Original Final Amounts (Negative) EXPENDITURES (Continued) Building Maintenance 1,271,334 1,437,558 1,405,157 Parks and Recreation: Fleet Service 745,927 745,927 695,951 Parks $ 1,016,070 $ 1,082,749 $ 1,003,804 $ 78,945 Pools 717,978 657,278 629,056 28,222 Community /Civic Center 1.64,216 154,216 117,289 36,927 Total Parks and Recreation 1,900,764 1,896,743 1,752,642 144,101 Cultural: Library 865,661 904,661 901,992 2,669 Total Cultural 865,661 904,661 901,992 21669 Health: Animal Control 568,209 602,834 555,661 47,173 Environmental Health 219,645 219,645 204,879 14,766 Total Health 787,854 822,479 760,540 61,939 Administration: Information Technology 1,570,102 1,582,166 1,535,541 46,625 Human Resources 470,531 457,569 428,739 28,830 Finance 602,032 602,032 580,203 21,829 Purchasing & Asset Management 201,620 191,620 1.91.,914 (294) Building Maintenance 1,271,334 1,437,558 1,405,157 32,401 Fleet Service 745,927 745,927 695,951 49,976 Interfund Charges (2,415,755) (2,415,755) (2,415,755) - Total Administration 2,445,791 2,601,117 2,421,750 179,367 TOTAL EXPENDITURES 25,039,369 25,453,714 24,515,065 938,649 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers In Transfers Out TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE - BEGINNING (146,793) (263,138) 1,472,455 1,735,593 232,095 1,308,440 (72,450) (1,022,450) 68,385 (1,240,055) - 1,022,450 159,645 285,990 68,385 (217,605) 12,852 22,852 1,540,840 1,517,988 11,428,778 1.1,428,778 11,428,778 FUND BALANCE - ENDING $11,441,630 $ 11,451,630 $ 12,969,61.8 $ 1,517,988 61 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES — BUDGET AND ACTUAL ECONOMIC DEVELOPMENT CORPORATION YEAR ENDED SEPTEMBER 30, 2017 REVENUES Taxes Investment Earnings TOTAL REVENUES EXPENDITURES Current: General Government Administration TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers Out TOTAL OTHER FINANCING SOURCES (USES) ►_ ■ :► 1► 1�� -IN I W.1110m, 111110► 01.11IF_\ikl[e =C3K"10101 ►[!I FUND BALANCE - ENDING Budgeted Amounts Original Final 2017 Actual Amounts Variance With Final Budget - Positive (Negative) $ 3,692,710 $ 3,692,710 $ 3,620,930 $ (71,780) 45,550 45,550 125,684 80,134 3,738,260 3,738,260 3,746,614 8,354 733,900 733,900 92,829 641,071 961,929 961,929 450,524 511,405 1,695,829 1,695,829 543,353 1,152,476 2,042,431 2,042,431 3,203,261 1,160, 830 (366,788) (366,788) (361,019) 5,769 (366,788) (366,788) (361,019) 5,769 1,675,643 1,675,643 2,842,242 1,166,599 12,227,179 12,227,179 12,227,179 $ 13,902,822 $ 13,902,822 $ 15,069,421 $ 1,166,599 62 CITY OF SCHERTZ, TEXAS NOTES TO SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE — BUDGET AND ACTUAL SEPTEMBER 30, 2017 Budgetary Information — The budget is prepared in accordance with accounting principles generally accepted in the United States of America. The City maintains strict budgetary controls. The objective of these controls is to ensure compliance with legal provision embodied in the annual appropriated budget approved by the City Council and as such is a good management control device. Annual budgets are adopted for the general fund; debt service fund; hotel motel tax, park fund, tree mitigation; police forfeiture fund, library advisory board fund, and the historical committee fund. Project - length financial plans are adopted for capital projects funds. Of these budgets, only the General Fund, Debt Service and Economic Development Corporation are legally adopted. Budgetary preparation and control is exercised at the department level. Actual expenditures may not legally exceed appropriations at the fund level. The City did not exceed the budgeted expenditures in any funds with legally adopted budgets during 2017. The City does not use encumbrances. 63 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES — NET PENSION LIABILITY AND RELATED RATIOS LAST THREE PLAN YEARS Service Cost Interest (on the Total Pension Liability) Changes of Benefit Terms Difference between Expected and Actual Experience Change of Assumptions Benefit Payments, Including Refunds of Employee Contributions Net Change in Total Pension Liability Total Pension Liability - Beginning Total Pension Liability - Ending Total Pension Liability 2014 2015 2016 $ 2,558,743 3,245,266 (1.22,286) $ 2,724,337 3,556,428 120,434 59,193 $ 2,855,745 3,763,562 1.39,216 (1,068,487) (1,570,211) (1,581,272) 4,613,236 4,890,181 5,177,251 45,615,815 50,229,051 55,119,232 $ 50,229,051 $ 55,119,232 $ 60,296,483 Plan Fiduciary Net Position Note: The schedule above reflects the changes in the net pension liability for the current year and the previous two plan years. GASB Statement No. 68 requires 10 fiscal years of data to be provided in this schedule. The City will build this schedule over the 10 -year period beginning December 31, 2014 as data becomes available. 64 2014 2015 2016 Contributions - Employer $ 2,403,929 $ 2,542,565 $ 2,627,335 Contributions - Employee 1,077,097 1,095,260 1,152,864 Net Investment Income 1,841,586 53,742 2,602,572 Benefit Payments, Including Refunds of Employee Contributions (1,068,487) (1,570,211) (1,581,272) Administrative Expense (19,219) (32,727) (29,385) Other (1,580) (1,616) (1,583) Net Change in Plan Fiduciary Net Position 4,233,326 2,087,013 4,770,531 Plan Fiduciary Net Position - Beginning 32,179,518 36,412,844 38,499,857 Plan Fiduciary Net Position - Ending $ 36,412,844 $ 38,499,857 $ 43,270,388 Net Pension Liability - Ending $ 13,81.6,207 $ 16,619,375 $ 17,026,095 Plan Fiduciary Net Position as a Percentage of Total Pension Liability 72.49% 69.85% 71.76% Covered Employee Payroll $ 15,389,154 $ 15,648,114 $ 16,478,620 Net Pension Liability as a Percentage of Covered Employee Payroll 89.78% 106.21% 1.03.32% Note: The schedule above reflects the changes in the net pension liability for the current year and the previous two plan years. GASB Statement No. 68 requires 10 fiscal years of data to be provided in this schedule. The City will build this schedule over the 10 -year period beginning December 31, 2014 as data becomes available. 64 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CITY CONTRIBUTIONS LAST THREE FISCAL YEARS Actuarially Determined Contribution Contributions in Relation to the Actuarially Determined Contribution Contribution Deficiency (Excess) Covered Employee Payroll Contributions as a Percentage of Covered Employee Payroll 2015 2016 $ 2,487,856 $ 2,592,593 2017 $ 2,756,511 2,487,856 2,592,593 2,756,511. $ 15,486,735 16.06% $ 16,175,988 16.03% $ 17,347,849 15.89% Note: The schedule above reflects the TMRS contributions made by the City for the current year and the previous two fiscal years. GASB Statement No. 68 requires 10 fiscal years of data to be provided in this schedule. The City will build this schedule over the 10 -year period beginning December 31, 2014 as data becomes available. Valuation Date: Actuarially determined contribution rates are calculated as of December 31 and become effective in January, thirteen (1.3) months later. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll, Closed Remaining Amortization Period 29 Years Asset Valuation Method 10 Year Smoothed Market; 15% Soft Corridor Inflation 2.50% Salary Increases 3.50% to 10.5% Including Inflation Investment Rate of Return 6.75% Retirement Age Experience -based table of rates that are specific to the City's plan of benefits. Last updated for the 2015 valuation pursuant to an experience study of the period 2010 - 2014. Mortality RP2000 Combined Mortality Table with blue Collar Adjustment with male rates multiplied by 109% and femal rates multiplied by 103% and projected on a fully generational basis with scale BB. 65 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION RETIREE HEALTH INSURANCE PLAN ANALYSIS OF FUNDING PROGRESS LAST TWO ACTUARIAL VALUATIONS 66 UNFUNDED ACTUARIAL ACCRUED LIABILITY UNFUNDED ASA ACTUARIAL ACTUARIAL ACTUARIAL ANNUAL PERCENTAGE ACTUARIAL VALUE OF ACCRUED ACCRUED FUNDING COVERED OF COVERED VALUATION ASSETS LIABILITY* LIABILITY RATIO PAYROLL PAYROLL DATE (a) (b) (b -a) (a/b) (d) (b -a) /d 12/31/2013 $ - $ 493,114 $ 493,114 0.0% $14,356,845 3.4% 12/31/2015 $ - $ 1,055,757 $ 1,055,757 0.0% $15,648,114 6.7% 66 SUPPLEMENTARY INFORMATION • Comparative Statements • General Fund • Economic Development Corporation • Debt Service Fund • Capital Projects Fund Combining and Comparative Individual Fund Statements - Nonmajor Governmental Funds • Hotel Occupancy - will account for proceeds of hotel occupancy taxes to be used strictly for those kinds of programs that promote the tourism industry. • Park Fund - will account for revenues from developers' fees (in lieu of park land dedication), grants, and donations and is designed to monitor and manage improvement of park system. • Tree Mitigation Fund - will account for revenues from permits, grants and donations to preserve and replace trees in the City. • Treasury Forfeitures Fund - will account for revenue received from drug related cases in conjunction with other law enforcement agencies within the jurisdiction of the U.S. Treasury department. • Justice Forfeitures Fund - will account for revenue received from drug related cases in conjunction with other law enforcement agencies within the jurisdiction of the US Department of Justice. • State Forfeitures Fund - will account for revenue received from drug related cases in conjunction with other law enforcement agencies within the jurisdiction of the State Forfeiture Program. • Library Advisory Board - to account for certain fees generated at the library to be used by the Board for general improvements to the Library. • Parks and Recreation Foundation - to account for revenues from events, fundraisers and donations to improve and maintain City parks. • Historical Committee Fund - will account for funds received for the preservation of the history of the city. 67 CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS GENERAL FUND SEPTEMBER 30, 2017 AND 2016 68 2017 2016 ASSETS Cash and Cash Equivalents $ 2,062,393 $ 1,174,602 Investments 9,485,725 9,365,670 Receivables (net of allowances): Taxes 1,970,300 1,955,953 Accounts and Other 1,677,633 1,949,153 Inventory 98,263 107,529 Prepaid Items - 112,974 Restricted Cash 617,075 554,657 TOTAL ASSETS $ 15,911,389 $ 1.5,220,538 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts Payable $ 544,406 $ 1,000,892 Accrued Salaries and Benefits 653,700 552,820 Customer Deposits 54,200 48,067 Due to Other Governments 119,149 120,321 Unearned Revenue 35,346 39,572 Total Liabilities 1,231,717 1,761,672 Deferred Inflows of Resources: Unavailable Revenue 1,710,054 2,030,088 Fund Balance: Nonspendable: Inventory 98,263 107,529 Prepaid Items - 112,974 Restricted for: Police and Public Safety 101,842 218,144 Municipal Court 728,350 714,609 PEG Capital Fees 638,506 577,590 Animal Control 35,660 18,667 Veterans 4,796 4,985 Scholarships 77,458 63,048 Committed for Civic CenterlCIED 454,376 342,519 Assigned for: Property Replacement 854,198 752,503 Special Events - 6,743 Unassigned 9,976,169 8,509,467 Total Fund Balance 12,969,618 11,428,778 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCE $ 15,911,389 $ 15,220,538 68 CITY OF SCHERTZ, TEXAS COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GENERAL FUND FOR THE YEARS ENDED SEPTEMBER 30, 2017 AND 2016 REVENUES Taxes Permits and Fees Service Fees Fines and Fees Intergovernmental Investment Earnings Miscellaneous TOTAL REVENUES EXPENDITURES Current: General Government Public Safety Public Environment Parks and Recreation Cultural Health Administration Capital Outlay Debt Service: Principal Interest and Fiscal Charges TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out TOTAL OTHER FINANCING SOURCES (USES) Net Change in Fund Balance Fund Balance at Beginning of Year Fund Balance at End of Year 69 2017 $ 1.9,450,338 2,367,929 2,107,844 1,021,965 307,809 128,158 603,477 25,987,520 5,1.71,635 11,846,184 1,128,979 1,682,955 901,992 672,934 2,395,926 644,773 33,1.74 36,513 24,515,065 2016 $ 18,850,031 1,234,048 1,610,940 1,343,236 293,727 58,724 599,791. 23,990,497 4,323,209 11,010,802 1,007,326 1,173,070 843,643 480,175 2,557,257 498,251 33,175 38,214 21,965,122 1,472,455 2,025,375 68,385 3,019 (216,103) 68,385 (213,084) 1,540,840 1,812,291 11,428,778 9,616,487 $ 12,969,618 $ 11,428,778 CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS ECONOMIC DEVELOPMENT CORPORATION SEPTEMBER 30, 2017 AND 2016 ASSETS Cash and Cash Equivalents Investments Receivables (net of allowances): Taxes Accounts and Other Prepaid Items TOTAL ASSETS LIABILITIES AND FUND BALANCE Liabilities: Accounts Payable Accrued Salaries and Benefits Total Liabilities Fund Balance: Restricted for: Economic Development Total Fund Balance TOTAL LIABILITIES AND FUND BALANCE ME 2017 $ 893,858 13,506,156 665,316 8,448 2016 $ 393,738 11,181,434 666,534 7,949 1,120 $ 15,073,778 $ 1.2,250,775 $ 3,940 $ 16,295 417 7,301 4,357 23,596 15,069,421 1.2,227,179 15,069,421 12,227,179 $ 15,073,778 $ 12,250,775 CITY OF SCHERTZ, TEXAS COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE ECONOMIC DEVELOPMENT CORPORATION FOR THE YEARS ENDED SEPTEMBER 30, 2017 AND 2016 REVENUES Taxes Investment Earnings Miscellaneous Revenue TOTAL REVENUES EXPENDITURES Current: General Government Administration Debt Service: Principal Interest and Fiscal Charges TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Transfers Out TOTAL OTHER FINANCING SOURCES (USES) Net Change in Fund Balance Fund Balance at Beginning of Year Fund Balance at End of Year 71 2017 2016 $ 3,620,930 $ 3,660,101 125,684 52,546 3,746,614 3,712,647 92,829 286,943 450,524 322,596 1.55,000 - 6,215 543,353 770,754 3,203,261 2,941,893 (361,019) (536,461) (361,019) (536,461) 2,842,242 2,405,432 12,227,179 9,821,747 $ 1.5,069,421 $ 12,227,179 CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS DEBT SERVICE FUND SEPTEMBER 30, 2017 AND 2016 ASSETS Cash and Cash Equivalents Investments Receivables (net of allowances): Taxes TOTAL ASSETS LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCE Deferred Inflows of Resources: Unavailable Revenue Fund Balance: Restricted for: Debt Service Total Fund Balance TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCE 72 2017 2016 $ 59,148 $ 37,717 1,390,934 1,273,860 82,550 68,239 $ 1,532,632 $ 1,379,816 82,550 68,239 1,450,082 1,311,577 1,450,082 1,311,577 $ 1,532,632 $ 1,379,816 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL DEBT SERVICE FUND FOR THE YEAR ENDED SEPTEMBER 30, 2017 (WITH COMPARATIVE ACTUAL TOTALS FOR 2016) 73 Variance with 2017 Final Budget- 2016 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Property Taxes $ 6,102,433 $ 6,102,433 $ 6,149,844 $ 47,411 $ 5,810,724 Investment Earnings 4,500 4,500 47,758 43,258 34,438 Miscellaneous 100,000 100,000 100,000 - - TOTAL REVENUES 6,206,933 6,206,933 6,297,602 90,669 5,845,162 EXPENDITURES Debt Service: Principal 3,810,000 3,810,000 4,440,000 (630,000) 3,852,800 Interest and Fiscal Charges 1,777,092 1,777,092 2,077,166 (300,074) 1,852,482 Bond Issue Costs 1,027,489 1,027,489 2,950 1,024,539 84,774 TOTAL EXPENDITURES 6,614,581 6,614,581 6,520,116 94,465 5,790,056 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (407,648) (407,648) (222,514) 185,134 55,106 OTHER FINANCING SOURCES Transfers In 407,648 407,648 361,019 (46,629) 356,119 Issuance of Refunding Debt - - - - 4,185,000 Premiums from Refunding Bonds - - - - 83,656 Payments to Refund Escrow Agents - - - - (4,215,482) TOTAL OTHER FINANCING SOURCES 407,648 407,648 361,019 (46,629) 409,293 Net Change in Fund Balance - - 138,505 138,505 464,399 FUND BALANCE, BEGINNING 1,311,577 1,311,577 1,311,577 - 847,178 FUND BALANCE, ENDING $ 1,311,577 $ 1,311,577 S 1,450,082 $ 138,505 $ 1,311,577 73 CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS CAPITAL PROJECTS FUND SEPTEMBER 30, 2017 AND 2016 ASSETS Cash and Cash Equivalents Investments Receivables (net of allowances): Accounts and Other TOTAL ASSETS LIABILITIES AND FUND BALANCE Liabilities: Accounts Payable Due to Other Funds Total Liabilities Fund Balance: Restricted for Capital Improvement Total Fund Balance TOTAL LIABILITIES AND FUND BALANCE 74 2017 2016 $ 1,753,815 $ 2,908,320 1.5,546,171 11,573,240 - 18,781 $ 17,299,986 $ 14,500,341 $ 267,949 $ 2,718,608 1.1.6,040 116,040 383,989 2,834,648 16,915,997 11,665,693 16,915,997 1.1,665,693 $ 17,299,986 $ 14,500,341 CITY OF SCHERTZ, TEXAS COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE CAPITAL PROJECTS FUND FOR THE YEARS ENDED SEPTEMBER 30, 2017 AND 2016 REVENUES Intergovernmental Investment Earnings Miscellaneous TOTAL REVENUES EXPENDITURES Capital Outlay Debt Service: Bond Issue Costs TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Proceeds from Issuances of Debt Premiums From Issuance of Debt Transfers In Transfers Out TOTAL OTHER FINANCING SOURCES (USES) Net Change in Fund Balance Fund Balance at Beginning of Year Fund Balance at End of Year 75 2017 2016 $ 89,264 $ 107,767 123,920 34,384 745,050 929,250 958,234 1,071,401 4,757,930 9,641,290 211,330 364,584 4,969,260 10,005,874 (4,011,026) (8,934,473) 8,870,000 10,750,000 381,931 506,776 9,399 452,610 - (33,807) 9,261,330 11,675,579 5,250,304 2,741,106 11,665,693 8,924,587 $ 1.6,915,997 $ 11,665,693 CITY OF SCHERTZ, TEXAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2017 Special Revenue Funds Hotel Occupancy Park Tree Treasury Fund Fund Mitigation Forfeitures ASSETS Cash and Cash Equivalents $ 183,537 $ 96,587 $ 19,515 $ 21,015 Investments 1,295,228 330,364 312,398 - Accounts Receivable, Net of Allowance Taxes 33,548 - - - Other - - - - TOTAL ASSETS $ 1,512,313 $ 426,951 $ 331,913 $ 21,015 LIABILITIES AND FUND BALANCE Liabilities Accounts Payable $ 8,440 $ 59,139 Total Liabilities 8,440 59,139 - - Fund Balance Restricted for: Tourism Development 1,503,873 - - - Tree Mitigation - - 331,913 - Parks - 367,812 - - Police Forfeiture - - - 21,015 Library - - - - Historical Committee - - - - Total Fund Balances 1,503,873 367,812 331,913 21,015 TOTAL LIABILITIES AND FUND BALANCE $ 1,51.2,313 $ 426,951 $ 331,913 $ 21,015 76 Special Revenue Funds Library Parks & Historical Justice State Advisory Recreation Committee Forfeitures Forfeitures Board Foundation Fund Totals $ 132,658 $ 11,270 $ 22,382 $ - $ 9,457 $ 496,421 248,146 - 45,611 - - 2,231,747 - - - - - 33,548 $ 380,804 $ 11,270 $ 67,993 $ - $ 9,457 $ 2,761,716 125 125 - 380,804 11,270 - - - 67,868 380,804 11,270 67,868 188 $ 67,892 188 67,892 - 1,503,873 - - 331,913 - - 367,812 - - 413,089 - - 67,868 - 9,269 9,269 9,269 2,693,824 $ 380,804 $ 11,270 $ 67,993 $ - $ 9,457 $ 2,761,716 0 CITY OF SCHERTZ, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES — NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2017 EXPENDITURES Current: General Government 127,545 Special Revenue Funds - - Hotel - - - Occupancy Park Tree Treasury 19,487 Fund Fund Mitigation Forfeiture REVENUES - - - Occupancy Tax $ 499,466 $ - $ - $ - Permits and Fees - 98,000 74,116 - Service Fees - - - - Fines and Fees - - - 51143 Investment Earnings 12,295 3,716 3,312 46 Miscellaneous - - - - TOTAL REVENUES 511,761 101,716 77,428 5,189 EXPENDITURES Current: General Government 127,545 - - - Public Safety - - - - Parks and Recreation - 19,487 85,901 - Cultural - - - - Administration 66,405 - - Capital Outlay - 59,139 - - TOTAL EXPENDITURES 193,950 78,626 85,901 - Excess (Deficiency) of Revenues Over (Under) Expenditures 317,811 23,090 (8,473) 5,189 OTHER FINANCING SOURCES (USES) Transfers Out - - - - TOTAL OTHER FINANCING SOURCES (USES) - - - - Net Change in Fund Balance 317,811 23,090 (8,473) 5,189 Fund Balances, Beginning 1,186,062 344,722 340,386 15,826 Fund Balances, Ending $ 1,503,873 $ 367,812 $ 331,913 $ 21,015 78 - - - - 2,909 130,454 19,418 5,034 - - - 24,452 - - - 97,572 - 202,960 19,878 - - 19,878 - - - - - 66,405 24,154 6,200 - - - 89,493 43,572 11,234 19,878 97,572 2,909 533,642 138,708 (1) 4,127 (96,884) (2,410) 381,157 (68,385) - - - - (68,385) (68,385) - - - - (68,385) 70,323 (1) 4,127 (96,884) (2,410) 312,772 310,481 11,271 63,741 96,884 11,679 2,381,052 $ 380,804 $ 11,270 $ 67,868 $ - $ 9,269 $ 2,693,824 0 Special Revenue Funds Library Parks & Historical Justice State Advisory Recreation Committee Forfeiture Forfeiture Board Foundation Fund Totals 499,466 - - - - - 172,116 - - 23,381 575 499 24,455 179,308 11,205 - - - 195,656 2,972 28 516 12 - 22,897 - - 108 101 - 209 182,280 11,233 24,005 688 499 914,799 - - - - 2,909 130,454 19,418 5,034 - - - 24,452 - - - 97,572 - 202,960 19,878 - - 19,878 - - - - - 66,405 24,154 6,200 - - - 89,493 43,572 11,234 19,878 97,572 2,909 533,642 138,708 (1) 4,127 (96,884) (2,410) 381,157 (68,385) - - - - (68,385) (68,385) - - - - (68,385) 70,323 (1) 4,127 (96,884) (2,410) 312,772 310,481 11,271 63,741 96,884 11,679 2,381,052 $ 380,804 $ 11,270 $ 67,868 $ - $ 9,269 $ 2,693,824 0 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL HOTEL OCCUPANCY FUND FOR THE YEAR ENDED SEPTEMBER 30, 2017 (WITH COMPARATIVE ACTUAL TOTALS FOR 2016) . Excess (Deficiency) of Revenues Over (Under) Expenses 464,862 464,862 317,811 (147,051) 369,093 OTHER FINANCING SOURCES (USES) Transfers Out (114,405) (114,405) - 114,405 (48,000) TOTAL OTHER FINANCING SOURCES (USES) (114,405) (114,405) - 114,405 (48,000) Net Change in Fund Balance 350,457 350,457 317,811 Variance with FUND BALANCE, BEGINNING 1,186,062 1,186,062 1,186,062 2017 Final Budget- 2016 Budgeted Amounts Actual Positive Actual $ (32,646) $ 1,186,062 Original Final Amounts (Negative) Amounts REVENUES Occupancy Tax $ 609,302 $ 609,302 $ 499,466 $ (109,836) $ 544,871 Investment Earnings 2,150 2,150 12,295 10,145 3,953 TOTAL REVENUES 611,452 611,452 511,761 (99,691) 548,824 EXPENDITURES Current: General Government 146,590 146,590 127,545 19,045 179,731 Administration - - 66,405 (66,405) - TOTAL EXPENDITURES 1.46,590 146,590 193,950 (47,360) 179,731 Excess (Deficiency) of Revenues Over (Under) Expenses 464,862 464,862 317,811 (147,051) 369,093 OTHER FINANCING SOURCES (USES) Transfers Out (114,405) (114,405) - 114,405 (48,000) TOTAL OTHER FINANCING SOURCES (USES) (114,405) (114,405) - 114,405 (48,000) Net Change in Fund Balance 350,457 350,457 317,811 (32,646) 321,093 FUND BALANCE, BEGINNING 1,186,062 1,186,062 1,186,062 - 864,969 FUND BALANCE, ENDING $ 1,536,51.9 $ 1,536,519 $ 1,503,873 $ (32,646) $ 1,186,062 80 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL PARK FUND FOR THE YEAR ENDED SEPTEMBER 30, 2017 (WITH COMPARATIVE ACTUAL TOTALS FOR 2016) REVENUES Licenses and Permits Investment Earnings Miscellaneous TOTAL REVENUES EXPENDITURES Current: Parks and Recreation Capital Outlay TOTAL EXPENDITURES Excess (Deficiency) of Revenues 15,000 22,700 19,487 Variance with 147 170,000 168,000 2017 Final Budget- 2016 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts $ 145,000 $ 145,000 $ 98,000 $ (47,000) $ 132,000 1,250 1,250 3,716 2,466 728 - - - - 870 146,250 146,250 101,716 (44,534) 133,598 15,000 22,700 19,487 3,213 147 170,000 168,000 59,139 108,861 22,857 85,000 190,700 78,626 112,074 23,004 Over (Under) Expenditures (38,750) (44,450) 23,090 (67,540) 110,594 OTHER FINANCING USES Transfers In 38,750 44,450 - 44,450 - TOTAL OTHER FINANCING 38,750 44,450 - 44,450 - Net Change in Fund Balance 23,090 (23,090) 110,594 FUND BALANCE, BEGINNING 344,722 344,722 344,722 - 234,128 FUND BALANCE, ENDING $ 344,722 $ 344,722 $ 367,812 $ (23,090) $ 344,722 81 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL TREE MITIGATION FUND FOR THE YEAR ENDED SEPTEMBER 30, 2017 (WITH COMPARATIVE ACTUAL TOTALS FOR 2016) EXPENDITURES Current: Parks and Recreation 142,000 142,000 85,901 56,099 119,564 TOTAL EXPENDITURES 142,000 142,000 85,901 56,099 119,564 Excess (Deficiency) of Revenues Over (Under) Expenditures (54,950) (54,950) (8,473) 46,477 9,237 OTHER FINANCING USES Transfers In 54,950 54,950 TOTAL OTHER FINANCING 54,950 54,950 Net Change in Fund Balance (54,950) - (54,950) - (8,473) (8,473) 9,237 FUND BALANCE, BEGINNING 340,386 340,386 340,386 - 331,149 FUND BALANCE, ENDING $ 340,386 $ 340,386 $ 331,913 $ (8,473) $ 340,386 82 Variance with 2017 Final Budget- 2016 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Licenses and Permits $ 85,300 $ 85,300 $ 74,116 $ (11,184) $ 127,288 Miscellaneous 1,750 1,750 3,312 1,562 1,513 TOTAL REVENUES 87,050 87,050 77,428 (9,622) 128,801. EXPENDITURES Current: Parks and Recreation 142,000 142,000 85,901 56,099 119,564 TOTAL EXPENDITURES 142,000 142,000 85,901 56,099 119,564 Excess (Deficiency) of Revenues Over (Under) Expenditures (54,950) (54,950) (8,473) 46,477 9,237 OTHER FINANCING USES Transfers In 54,950 54,950 TOTAL OTHER FINANCING 54,950 54,950 Net Change in Fund Balance (54,950) - (54,950) - (8,473) (8,473) 9,237 FUND BALANCE, BEGINNING 340,386 340,386 340,386 - 331,149 FUND BALANCE, ENDING $ 340,386 $ 340,386 $ 331,913 $ (8,473) $ 340,386 82 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL TREASURY FORFEITURES FUND FOR THE YEAR ENDED SEPTEMBER 30, 2017 (WITH COMPARATIVE ACTUAL TOTALS FOR 2016) REVENUES Fines and Fees Investment Earnings TOTAL REVENUES EXPENDITURES Current: Public Safety TOTAL EXPENDITURES Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING Budgeted Amounts Original Final $ - $ - Variance with 2017 Final Budget - Actual Positive Amounts (Negative) $ 5,143 $ 5,1.43 5,189 5,189 2016 Actual Amounts 2 2 - - 5,189 5,189 2 15,826 15,826 15,826 - 15,824 $ 15,826 $ 15,826 $ 21,015 $ 5,189 $ 15,826 83 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL JUSTICE FORFEITURES FUND FOR THE YEAR ENDED SEPTEMBER 30, 2017 (WITH COMPARATIVE ACTUAL TOTALS FOR 2016) OTHER SOURCES (USES) Transfers Out - - (68,385) (68,385) - TOTAL OTHER SOURCES - - (68,385) (68,385) - Net Change in Fund Balance 147,000 147,000 70,323 (76,677) 37,170 FUND BALANCE, BEGINNING 310,481 310,481 310,481 - 273,311 FUND BALANCE, ENDING $ 457,481 $ 457,481 $ 380,804 $ (76,677) $ 310,481 84 Variance with 2017 Final Budget- 2016 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Fines and Fees $ 47,000 $ 47,000 $ 179,308 $ 132,308 $ 71,378 Investment Earnings - - 2,972 2,972 1,259 TOTAL REVENUES 47,000 47,000 182,280 135,280 72,637 EXPENDITURES Current: Public Safety (100,000) (100,000) 19,418 (119,418) 6,637 Capital Outlay - - 24,154 (24,154) 28,830 TOTAL EXPENDITURES (100,000) (100,000) 43,572 (143,572) 35,467 Excess (Deficiency) of Revenues Over (Under) Expenditures 1.47,000 147,000 138,708 (8,292) 37,170 OTHER SOURCES (USES) Transfers Out - - (68,385) (68,385) - TOTAL OTHER SOURCES - - (68,385) (68,385) - Net Change in Fund Balance 147,000 147,000 70,323 (76,677) 37,170 FUND BALANCE, BEGINNING 310,481 310,481 310,481 - 273,311 FUND BALANCE, ENDING $ 457,481 $ 457,481 $ 380,804 $ (76,677) $ 310,481 84 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL STATE FORFEITURES FUND FOR THE YEAR ENDED SEPTEMBER 30, 2017 (WITH COMPARATIVE ACTUAL TOTALS FOR 2016) REVENUES Fines and Fees Investment Earnings TOTAL REVENUES EXPENDITURES Current: Public Safety TOTAL EXPENDITURES Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING Budgeted Amounts Original Final $ - $ - Variance with 2017 Final Budget- 2016 Actual Positive Actual Amounts (Negative) Amounts $ 11,205 $ 11,205 $ 26,860 11,233 11,233 26,861 - - 5,034 (5,034) 31,328 11,234 (11,234) 31,328 - - (1) (1) (4,467) 11,271 11,271 11,271 - 15,738 $ 11,271 $ 11,271 $ 11,270 $ (1) $ 11,271 85 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL LIBRARY ADVISORY BOARD FOR THE YEAR ENDED SEPTEMBER 30, 2017 (WITH COMPARATIVE ACTUAL TOTALS FOR 2016) :. Variance with 2017 Final Budget- 2016 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Service Fees $ 22,000 $ 22,000 $ 23,381 $ 1,381 $ 21,846 Investment Earnings 60 60 516 456 241. Miscellaneous 1,000 1,000 108 (892) 390 TOTAL REVENUES 23,060 23,060 24,005 945 22,477 EXPENDITURES Current: Cultural 22,000 22,000 19,878 2,122 25,519 TOTAL EXPENDITURES 22,000 22,000 19,878 2,122 25,519 Net Change in Fund Balance 1,060 1,060 4,127 3,067 (3,042) FUND BALANCE, BEGINNING 63,741 63,741 63,741 - 66,783 FUND BALANCE, ENDING $ 64,801 $ 64,801 $ 67,868 $ 3,067 $ 63,741 :. CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL HISTORICAL COMMITTEE FUND FOR THE YEAR ENDED SEPTEMBER 30, 2017 (WITH COMPARATIVE ACTUAL TOTALS FOR 2016) Excess (Deficiency) of Revenues Over (Under) Expenditures (10,750) (10,750) (2,410) 8,340 (2,160) OTHER FINANCING SOURCES (USES) Transfers In 10,750 10,750 - (10,750) 3,835 TOTAL OTHER FINANCING SOURCES (USES) 10,750 10,750 - (10,750) 3,835 Net Change in Fund Balance (2,410) (2,410) 1,675 FUND BALANCE, BEGINNING 1.1,679 11,679 11,679 - Variance with FUND BALANCE, ENDING 2017 Final Budget- 2016 11,679 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Sale of Merchandise $ 1,000 $ 1,000 $ 499 $ (501) 1,675 TOTAL REVENUES 1,000 1,000 499 (501) 1,675 EXPENDITURES Current General Government 11,750 11,750 2,909 8,841 3,835 TOTAL EXPENDITURES 11,750 11,750 2,909 8,841 3,835 Excess (Deficiency) of Revenues Over (Under) Expenditures (10,750) (10,750) (2,410) 8,340 (2,160) OTHER FINANCING SOURCES (USES) Transfers In 10,750 10,750 - (10,750) 3,835 TOTAL OTHER FINANCING SOURCES (USES) 10,750 10,750 - (10,750) 3,835 Net Change in Fund Balance (2,410) (2,410) 1,675 FUND BALANCE, BEGINNING 1.1,679 11,679 11,679 - 10,004 FUND BALANCE, ENDING $ 11,679 $ 11,679 $ 9,269 $ (2,410) $ 11,679 M CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL PARKS AND RECREATION FOUNDATION FOR THE YEAR ENDED SEPTEMBER 30, 2017 (WITH COMPARATIVE ACTUAL TOTALS FOR 2016) REVENUES Charges and Fees at Events Investment Earnings Miscellaneous Income and Donations TOTAL REVENUES EXPENDITURES Current Parks and Recreation Capital Outlay TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In TOTAL OTHER FINANCING SOURCES (USES) Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING Budgeted Amounts Original Final Q e 2017 Actual Amounts - $ 575 - 12 - 101 $ 575 688 Variance with Final Budget- 2016 Positive Actual (Negative) Amounts $ 575 $ 154,860 12 50 101 23,296 688 178,206 - 97,572 (97,572) 235,575 - - 1,170 97,572 (97,572) 236,745 (96,884) (96,884) (58,539) 48,000 - - - - 48,000 - - (96,884) (96,884) (10,539) 96,884 96,884 96,884 - 107,423 $ 96,884 $ 96,884 $ - $ (96,884) $ 96,884 :: STATISTICAL SECTION This part of the City of Schertz's annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. Financial Trends (Tables 1 through 4) Net Position by Component Change in Net Position Fund Balances, Governmental Funds Changes in Fund Balances, Governmental Funds These schedules contain trend information to help reader understand how the City's financial performance and well -being have changed over time. Revenue Capacity (Tables S through 12) Tax Revenues by Source, Governmental Funds Total Water and Sewer Consumption and Rates Principal Water and Sewer Consumers Assessed Value and Estimated Actual Value of Taxable Property Direct and Overlapping Property Tax Rates Principal Property Taxpayers Property Tax Levies and Collections Taxable Assessed Value These schedules contain information to help readers assess the factors affecting the City's ability to generate its property and sales tax. Debt Capacity (Tables 13 through 17) Ratios of Outstanding Debt by Type Ratios of General Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Debt Margin Information Pledged Revenue Coverage These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information (Tables 18 through 19) Demographic and Economic Statistics Principal Employers These schedules offer demographic and economic indicators to help the reader understand how the City's financial activities take place and to help make comparisons over time and with other governments. Operating Information (Tables 20 throug22) Full -time Equivalent City Government Employees by Function Operating Indicators by Function /Program Capital Asset Statistics by Function/Program These schedules contain information about the City's operations and resources to help the reader understand how the City's financial information relates to the services the City provides and the activities it performs. m CITY OF SCHERTZ, TEXAS NET POSITION, BY COMPONENT LAST TEN FISCAL YEARS Governmental Activities Net Investment in Capital Assets Restricted Unrestricted Total Governmental Activities Net Position Business -Type Activities Net Investment in Capital Assets Restricted Unrestricted Total Business -Type Activities Net Position Primary Government Net Investment in Capital Assets Restricted Unrestricted Total Primary Government Net Position Fiscal Year 2008 2009 2010 2011 $ 47,327,175 $ 57,324,482 $ 54,010,139 $ 55,415,699 1,058,514 1,170,786 897,324 2,089,971 11,029,326 3,650,287 7,548,859 7,370,101 $ 59,415,015 $ 62,145,555 $ 62,456,322 $ 64,875,771 $ 41,350,184 $ 50,047,301 $ 50,778,490 $ 51,838,589 10,286,447 3,633,244 4,217,098 7,441,722 $ 51,636,631 $ 53,680,545 $ 54,995,588 $ 59,280,311 $ 88,677,359 $ 107,371,783 $ 104,788,629 $ 107,254,288 1,058,51.4 1,170,786 897,324 2,089,971. 21,315,773 7,283,531 11,765,957 14,811,823 $ 111,051,646 $ 115,826,100 $ 117,451,910 $ 124,156,082 Note — GASB Statement No. 68 has been prospectively implemented in year -end 2015. 90 TABLE 1 Fiscal Year 2012 2013 2014 2015 2016 2017 $ 56,616,809 $ 57,543,618 $ 62,792,671 $ 68,125,738 $ 74,237,004 $ 84,537,238 1,917,098 7,788,354 10,401,728 13,343,280 17,095,325 20,437,116 8,907,326 6,645,418 8,613,239 1,640,519 2,231,341 1,673,567 $ 67,441,233 $ 71,977,390 $ 81,807,638 $ 83,109,537 $ 93,563,670 $ 106,647,921 $ 50,161,157 $ 53,071,836 $ 53,674,437 $ 59,625,205 $ 64,210,231 $ 70,361,035 11,577,645 11,902,282 16,450,988 14,243,922 15,737,470 20,781,291 $ 61,738,802 $ 64,974,118 $ 70,125,425 $ 73,869,127 $ 79,947,701 $ 91,142,326 $ 1.06,777,966 $ 110,615,454 $ 116,467,108 $ 127,750,943 $ 138,447,235 $ 154,898,273 1,917,098 7,788,354 10,401,728 1.3,343,280 17,095,325 20,437,116 20,484,971 18,547,700 25,064,227 1.5,884,441 17,968,81.1 22,454,858 $ 129,180,035 $ 136,951,508 $ 151,933,063 $ 156,978,664 $ 173,511,371 $ 197,790,247 91 CITY OF SCHERTZ, TEXAS CHANGE IN NET POSITION LAST TEN FISCAL YEARS Fiscal Year 2008 2009 2010 2011 . Expenses Governmental Activities General Government $ 7,093,762 Public Safety 7,227,406 Public Environment 2,300,425 Parks and Recreation 1,184,866 Cultural 492,991 Health 330,736 Administration 1,364,194 Interest and Other Fees 1,984,151. Total Governmental Activities Expenses 21,978,531. Business -Type Activities $ 7,987,977 7,755,056 2,740,755 1,193,525 769,928 377,1.25 734,584 1,818,984 23,377,934 $ 7,892,516 7,897,298 2,966,642 1,593,075 809,323 345,455 1,084,430 2,230,452 24,819,191 $ 8,112,954 8,390,740 3,152,119 1,673,098 876,339 374,516 1,321,055 2,251,472 26,152,293 Water and Sewer 12,379,584 13,568,065 14,434,709 15,280,871 EMS 2,976,112 3,365,544 3,690,007 3,659,031 Total Business -Type Activities 15,355,696 16,933,609 18,124,716 18,939,902 Total Primary Government Expenses $ 37,334,227 $ 40,311,543 $ 42,943,907 $ 45,092,195 Program Revenues Governmental Activities Charges for Service: General Government Public Safety Parks and Recreation Cultural Health Operating Grants and Contributions Capital Grants and Contributions Total Governmental Aactivities Program Revenues Business -Type Activities Charges for Service: Water and Sewer EMS Capital Grants and Contributions Total Business -Type Activities Program Revenues Total Primary Government Program Revenues $ 1,497,472 1,643,635 155,168 219,749 41,390 595,401 12,595,635 $ 1,720,279 1,481,004 273,917 219,029 33,930 1,044,884 3,023,377 $ 1,905,600 1,986,536 536,609 265,714 36,728 587,643 1,276,465 $ 1,495,563 2,815,029 524,443 228,242 39,743 717,105 2,998,115 16,748,450 7,796,420 6,595,295 8,818,240 13,620,440 14,668,137 15,147,332 17,073,075 3,150,428 2,889,518 3,061,414 3,564,852 5,190,039 2,241,726 973,437 2,175,889 21,960,907 $ 38,709,357 19,799,381 $ 27,595,801 19,182,183 $ 25,777,478 Note — GAS13 Statement No. 68 has been prospectively implemented in year -end 2015. M 22,813,816 $ 31,632,056 TABLE 2 Fiscal Year 2012 . 2013 2014 2015 . 2016 . 2017 . $ 7,802,092 $ 7,066,087 $ 6,958,530 $ 6,443,227 $ 6,557,778 $ 6,253,926 9,103,676 9,567,595 10,025,703 10,836,712 12,141,968 13,061,120 3,586,087 3,622,834 3,740,538 3,876,644 4,147,653 4,460,540 1,584,605 1,807,559 1,807,136 2,164,604 2,034,964 2,859,974 916,967 907,676 870,159 892,194 954,871 1,004,747 357,658 344,647 407,114 470,468 570,204 776,494 1,117,044 1,180,656 1,942,312 1,845,877 1,954,276 3,052,102 2,302,912 3,340,951 2,352,856 2,226,635 2,240,783 2,355,714 26,771,041 27,838,005 28,104,348 28,756,361 30,602,497 33,824,617 16,349,967 16,954,871 17,762,116 18,440,959 20,269,111 21,346,078 3,758,425 3,959,445 4,268,125 4,719,526 5,004,110 6,006,178 20,108,392 20,914,316 22,030,241 23,160,485 25,273,221 27,352,256 $ 46,879,433 $ 48,752,321 $ 50,134,589 $ 51,916,846 $ 55,875,718 $ 61,176,873 $ 2,286,488 $ 2,230,800 $ 1,974,637 $ 1,840,547 $ 1,507,252 $ 874,737 2,216,385 2,516,547 2,536,476 2,603,476 2,415,537 4,131,548 541,512 721,222 917,639 794,003 788,727 544,460 279,267 305,932 309,897 325,178 326,079 330,412 36,746 38,149 32,429 26,744 30,308 29,742 764,997 234,084 220,264 336,252 342,485 552,878 1,178,573 1,531,740 5,756,456 5,509,530 6,227,664 10,043,483 7,303,968 7,578,474 11,747,798 11,435,730 11,638,052 16,507,260 17,411,568 17,696,327 19,147,872 20,700,369 22,003,794 25,390,713 3,561,114 4,459,600 4,533,753 4,415,126 5,921,223 6,366,894 828,853 1,301,235 2,809,110 4,158,552 2,831,126 6,111,474 21,801,535 23,457,162 26,490,735 29,274,047 30,756,143 37,869,081 $ 29,105,503 $ 31,035,636 $ 38,238,533 $ 40,709,777 $ 42,394,195 $ 54,376,341 93 CITY OF SCHERTZ, TEXAS CHANGE IN NET POSITION (CONTINUED) LAST TEN FISCAL YEARS Fiscal Year 2008 2009 2010 2011 . Net (Expenses) Revenue Governmental Activities $ (5,230,081) $ (15,581,514) $ (18,223,896) $ (17,334,053) Business -Type Activities 6,605,211 2,865,772 1,057,467 3,873,914 Total Primary Government Net Expenses $ 1,375,130 $ (12,715,742) $ (17,166,429) $ (13,460,139) Governmental Revenues and Other Changes in Net Position Governmental Activities Taxes: Ad Valorem Sales Franchise Fees Hotel /Motel Mixed Drink Bingo Unrestricted Investment Earnings Miscellaneous Transfers Total Governmental Activities Business -Type Activities Interest and Investment Earnings Miscellaneous Transfers Total Business -Type Activities Total Primary Government Changes In Net Position Government Activities Business -Type Activities Total Primary Government $ 7,841,928 $ 8,980,102 $ 9,715,645 $ 10,280,768 6,175,759 6,017,782 6,240,749 7,054,394 1,240,642 1,462,199 1,448,620 1,542,046 273,558 305,073 348,1.47 391,181. 32,364 31,790 32,144 33,630 4,751 5,105 4,651 2,173 1,310,310 364,648 117,776 48,235 293,763 84,748 611,510 316,840 - 1,060,607 15,421 84,235 17,173,075 18,312,054 18,534,663 19,753,502 522,595 128,233 36,824 37,950 1.79,121 110,516 236,173 457,094 - (1,060,607) (15,421) (84,235) 701,716 (821,858) 257,576 410,809 $ 17,874,791 $ 17,490,196 $ 18,792,239 $ 20,164,311 $ 11,942,994 $ 2,730,540 $ 310,767 $ 2,419,449 7,306,927 2,043,914 1,315,043 4,284,723 $ 19,249,921 $ 4,774,454 $ 1,625,810 $ 6,704,172 94 TABLE 2 (Continued) Fiscal Year 2012 . 2013 2014 2015 . 2016 . 2017 . $ (19,467,073) $ (20,259,531) $ (16,356,550) $ (17,320,631) $ (18,964,445) $ (17,317,357) 1,693,143 2,542,846 4,460,494 6,113,562 5,482,922 10,516,825 $ (17,773,930) $ (17,716,685) $ (11,896,056) $ (11,207,069) $ (13,481,523) $ (6,800,532) $ 11,298,204 $ 12,359,146 $ 12,794,172 $ 14,139,037 $ 15,131,997 $ 16,166,006 7,968,212 9,637,097 10,553,382 10,315,125 10,921,489 10,844,503 1,647,712 1,681,079 2,073,162 2,263,783 2,250,815 2,208,373 470,290 503,267 552,570 563,734 544,871 499,466 28,586 30,421 39,917 43,656 43,073 42,699 60,265 54,270 43,279 56,820 187,847 448,408 621,560 505,268 180,316 197,881 309,275 182,754 (62,294) 25,140 (50,000) (42,235) 29,211 9,399 22,032,535 24,795,688 26,186,798 27,537,801 29,418,578 30,401,608 36,409 53,089 31,81.0 47,728 102,642 211,466 666,645 664,521 609,003 344,731 522,221 475,733 62,294 (25,1.40) 50,000 42,235 (29,211) (9,399) 765,348 692,470 690,813 434,694 595,652 677,800 $ 22,797,883 $ 25,488,158 $ 26,877,611 $ 27,972,495 $ 30,014,230 $ 31,079,408 $ 2,565,462 $ 4,536,157 $ 9,830,248 $ 10,217,170 $ 10,454,133 $ 13,084,251 2,458,491 3,235,316 5,151,307 6,548,256 6,078,574 11,194,625 $ 5,023,953 $ 7,771,473 $ 14,981,555 $ 16,765,426 $ 16,532,707 $ 24,278,876 95 CITY OF SCHERTZ, TEXAS FUND BALANCES - GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS 96 Fiscal Year 2008 2009 2010 2011 . Nonspendable Fund Balance: Inventory $ 46,014 $ 44,217 $ 46,473 $ 43,504 Prepaid Items - - - - Note Receivable - - 150,000 120,080 Total Nonspendable Fund Balance 46,014 44,217 196,473 163,584 Restricted Fund Balance: Police and Public Safety 394,122 355,451 421,265 403,799 Municipal Court 269,961 332,1.17 402,744 459,244 PEG Capital Fees - - - 317,453 Capital Improvement 16,416,440 1.4,342,553 3,914,323 1.0,219,300 Debt Service 429,289 444,369 286,215 117,250 Tourism Development 502,883 180,710 250,379 301,517 Tree Mitigation 271,071 191,834 164,424 173,999 Parks 169,529 120,501 79,317 84,329 Historical Committee & Library 68,207 163,661 200,359 231,686 Economic Development Corporation 2,331,951 2,543,010 3,548,067 3,394,850 Animal Control - - - - Veterans - - - - Scholarships - - - - Total Restricted Fund Balance 20,853,453 1.8,674,206 9,267,093 1.5,703,427 Committed Fund Balance: Capital Improvement - - - - Total Assigned Fund Balance - - - - Assigned Fund Balance: Property Replacement 400,247 201,850 202,341 202,723 Special Events 88,778 62,263 142,465 93,447 Capital Improvement - - - 162,113 Recycling 14,748 - - - Historical Committee - 10,149 9,940 9,940 Youth Activities - - - - Total Assigned Fund Balance 503,773 274,262 354,746 468,223 Unassigned Fund Balance 5,269,890 1,209,451 1,372,779 1,899,105 Total Governmental Funds $ 26,673,130 $ 20,202,136 $ 11,191,091 $ 18,234,339 96 TABLE 3 Fiscal Year �nin �ni� �nin nnic nnit nnin $ 63,556 $ 50,768 $ 88,518 $ 101,084 $ 107,529 $ 98,263 2,367 754,443 21,735 16,000 112,974 - 120,080 120,080 - - - - 186,003 925,291 110,253 117,084 220,503 98,263 338,118 496,890 529,264 494,337 555,722 514,931 527,513 646,422 628,459 683,558 714,609 728,350 409,870 456,175 489,509 509,535 577,590 638,506 17,104,595 15,360,800 9,600,028 8,924,587 1.1,665,693 1.6,915,997 227,674 517,199 625,435 847,178 1,311,577 1,450,082 390,561 470,250 501,996 848,969 1,186,062 1,503,873 217,600 157,659 359,205 331,149 340,386 331,913 90,718 136,647 304,655 341,551 441,606 367,812 65,409 77,554 78,098 76,787 75,420 77,137 4,366,005 6,022,128 7,792,578 9,821,747 12,227,179 15,069,421 - - - - 18,667 35,660 - - - - 4,985 4,796 - - 54,176 60,944 63,048 77,458 23,738,063 24,341,724 20,963,403 22,940,342 29,182,544 37,715,936 - 165,000 31,718 - 342,519 454,376 - 1.65,000 31,718 - 342,519 454,376 322,656 456,034 694,916 785,005 752,503 854,198 92,555 99,770 31,177 6,657 6,743 - 243,546 145,167 - - - - 11,090 - - - - - 669,847 700,971 726,093 791,662 759,246 854,198 2,560,667 4,206,734 5,587,262 7,280,240 8,509,467 9,976,169 $ 27,154,580 $ 30,339,720 $ 27,418,729 $ 31,129,328 $ 39,014,279 $ 49,098,942 97 CITY OF SCHERTZ, TEXAS CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS EXPENDITURES Current: General Government 6,184,705 Fiscal Year 6,989,561 7,164,667 Public Safety 2008 2009 2010 2011 . REVENUES 745,307 884,158 816,939 846,150 Taxes $ 15,583,058 $ 16,786,590 $ 17,811,547 $ 19,309,675 Permits and Fees 992,953 822,105 1,160,197 1,776,292 Service Fees 1,018,197 973,781 1,492,130 1,645,489 Fines and Fees 1,387,677 1,517,821 1,655,183 1,452,610 Intergovernmental 4,376,072 1,444,966 570,386 1,216,211 Other Revenue 1,864,877 1,066,097 1,161,182 603,498 TOTAL REVENUES 25,222,834 22,611,360 23,850,625 26,003,775 EXPENDITURES Current: General Government 6,184,705 6,765,315 6,989,561 7,164,667 Public Safety 6,638,352 7,235,501 7,409,720 7,885,119 Public Environment 745,307 884,158 816,939 846,150 Parks and Recreation 800,079 869,166 1,178,455 1,195,171 Cultural 667,995 821,048 872,668 937,611 Health 295,156 348,448 331,860 360,746 Administration 1,517,785 941,675 1,251,368 1,506,831 Capital Outlay 19,189,505 14,963,950 11,347,876 2,956,511 Debt Service: Principal 2,025,043 4,816,928 1,893,086 2,371,070 Interest and Fiscal Charges 1,617,876 1,987,384 2,183,852 2,066,221 Bond Issue Costs 122,290 191,066 20,000 244,237 TOTAL EXPENDITURES 39,804,093 39,824,639 34,295,385 27,534,334 Excess (Deficiency) of Revenues Over (Under) Expenditures (14,581,259) (17,213,279) (10,444,760) (1,530,559) OTHER FINANCING SOURCES (USES) Bonds & Debt Issuances 9,900,000 9,681,678 1,418,294 8,206,572 Refunding Bond Issuance - - - - Premium (Discount) on Bond Issue - - - 283,000 Payment to Refund Agent - - - - Transfers In 593,294 2,778,593 242,539 348,846 Transfers (Out) (593,294) (1,717,986) (227,118) (264,611) TOTAL OTHER FINANCING SOURCES (USES) 9,900,000 10,742,285 1,433,715 8,573,807 NET CHANGE IN FUND BALANCE $ (4,681,259) $ (6,470,994) $ (9,011,045) $ 7,043,248 Debt Service as a percentage of Noneapital Expenditures 14.6% 26.1% 17.7% 17.4% •: l Fiscal Year 2012 2013 2014 2015 . 2016 . 2017 . $ 21,401,991 $ 24,181,863 $ 26,021,730 $ 27,348,297 $ 28,865,727 $ 29,720,578 1,363,461 1,609,954 1,805,047 1,731,302 1,493,336 2,540,045 1,547,007 1,739,387 1,763,964 1,797,151 1,789,321 2, 132,299 2,027,613 1,927,744 1,750,311 1,534,588 1,441,474 1,217,621 1,000,413 492,332 221,769 393,607 401,494 397,073 969,921 767,110 671,731 689,805 1,741,436 1,897,153 28,310,406 30,718,390 32,234,552 33,494,750 35,732,788 37,904,769 7,094,834 6,311,276 5,981,439 5,582,441 5,657,998 5,394,918 8,690,849 9,113,840 9,409,894 10,158,401 11,048,767 11,870,636 976,327 951,528 1,012,607 952,663 1,007,326 1,128,979 1,398,692 1,412,329 1,338,232 1,658,197 1,528,356 1,885,915 845,124 840,595 815,691 821,146 869,162 921,870 346,318 341,961 394,918 404,008 480,175 672,934 1,249,557 1,289,078 2,270,041 2,056,646 2,015,573 2,912,855 1,299,843 3,277,397 8,000,467 2,314,668 10,1.92,398 5,492,196 2,704,898 3,217,325 3,695,597 3,918,008 4,040,975 4,473,174 2,313,51.0 2,381,1.71 2,108,610 2,112,746 1,896,911 2,113,679 254,971 31,750 165,650 7,992 449,358 214,280 27,174,923 29,168,250 35,193,146 29,986,916 39,186,999 37,081,436 1,135,483 1,550,140 (2,958,594) 3,507,834 (3,454,211) 823,333 14,370,000 1,635,000 8,583,715 245,000 10,750,000 8,870,000 - - - - 4,185,000 - 175,473 - 686,137 - 590,432 381,931. (6,698,421) - (9,182,250) - (4,215,482) - 139,635 788,084 1,243,833 989,1.20 863,583 438,803 (201,929) (788,084) (1,293,832) (1,031,355) (834,371) (429,404) 7,784,758 1,635,000 37,603 202,765 11,339,162 9,261,330 $ 8,920,241 $ 3,185,140 $ (2,920,991) $ 3,710,599 $ 7,884,951 $ 10,084,663 19.5% 21.6% 21.3% 213% 20.5% 20.4% 99 CITY OF SCHERTZ, TEXAS TAX REVENUE BY SOURCE — GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS Fiscal Mixed Hotel Year Property Sales & Use Franchise Beverage Bin oo Occupancy 2017 $ 16,125,537 $ 10,844,503 $ 2,208,373 $ 42,668 $ 31 $ 499,466 2016 15,105,480 10,921,489 2,250,815 43,072 1 544,870 2015 14,161,999 10,315,125 2,263,783 43,553 103 563,734 2014 12,802,668 10,553,382 2,073,162 39,917 31 552,570 2013 12,329,999 9,637,097 1,681,079 30,421 - 503,267 2012 11,287,191 7,968,212 1,647,712 28,586 - 470,290 2011 10,286,251 7,054,394 1,542,046 33,630 2,173 391,1.81 2010 9,737,236 6,240,749 1,448,620 32,144 4,651 348,1.47 2009 8,964,642 6,017,781 1,462,199 31,790 5,105 305,073 2008 7,855,984 6,175,759 1,240,642 32,364 4,751 273,558 11 Total Revenue $ 29,720,578 28,865,727 27,348,297 26,021,730 24,181, 863 21,401,991 9,309,675 1.7,811,547 6,786,590 1.5,583,058 CITY OF SCHERTZ, TEXAS TOTAL WATER AND SEWER CONSUMPTION AND RATES LAST TEN FISCAL YEARS Fiscal Year Ended September 30, 2017 . 2016 2015 2014 2013 2012 2011 2010 2009 2008 Total Water & Sewer Consumption (In Gallons) 1,583,462,300 1,509,250,000 1,472,948,300 1,543,351,600 1,550,039,700 1,604,952,300 1,676,323,900 1,231,376,600 1,511,567,900 855,779,200 1M] Water & Sewer Base Rate 23.19 20.89 19.71 19.32 18.94 18.94 18.94 18.94 18.94 15.94 Water & Sewer Initial Rate Per 1,000 Gallons $ 2.86 2.58 2.43 2.39 2.34 2.34 2.34 2.25 2.16 1.92 Consumers Caterpillar Inc. Scenic Hill Lawn Care Schertz 1518 Beck Readymix Concrete Pecan Grove TX LLC Sycamore Creek Apartments Big Time Management Properties Sebastian Apartments Waterford Ridge Apartments Wal -mart Supercenter Beck Readymix Prologis Trust Pecan Grove Investments Landscape of Texas AOH- Vantage at Schertz, LLC Lack's Legacy Oaks Apartments Samuel Clemens High Schools TOTAL Total City Water Consumption CITY OF SCHERTZ, TEXAS PRINCIPAL WATER AND SEWER CONSUMERS CURRENT YEAR AND NINE YEARS AGO 2017 2008 Total Percentage of Total Percentage of Water Total City Water Total City Consumption Water Consumption Water (in Gallons) Rank Consumption (in Gallons) Rank Consumption 18,837,200 1 1.17% 12,896,100 2 0.80% 12,586,700 3 10,546,200 4 8,132,300 5 0.51% 7,871,300 6 0.49% 4,714,000 9 0.33% 7,372,600 7 0.46% 0.00% 6,740,000 8 6,131,700 9 5,928,400 10 0.37% 5,831,400 6 0.40% 11,685,700 1 0.81% 9,139,400 2 0.63% 7,751,000 3 0.54% 6,946,900 4 0.48% 6,162,100 5 0.43% 5,644,100 7 0.39% 5,236,200 8 0.36% 4,110,800 10 0.28% 97,042,500 3.79% 67,221,600 4.65% 1,609,793,100 1,446,023,900 1® CITY OF SCHERTZ, TEXAS ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Fiscal Year Ended September 30, Total Taxable Assessed Value Total Direct Tax Rate 2017 $ 3,647,504,903 0.4911 2016 3,375,850,131 0.4911 2015 3,037,267,611 0.4974 2014 2,752,562,574 0.4974 2013 2,600,365,551 0.4999 2012 2,411,270,623 0.4843 2011 2,363,893,708 0.4493 2010 2,342,355,490 0.4342 2009 2,230,825,045 0.4090 2008 2,221,073,744 0.4090 Source: Bexar, Comal and Guadalupe County Appraisal Districts NOTES: Property in the City of Schertz is reassessed every year at estimated actual value. For this reason, assessed value is equal to estimated actual value. Tax rates are per $100 of assessed value. Total taxable assessed value is before any applicable fi°eeze adjustments. 103 Source NOTE: Fiscal Year 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 Fiscal Year 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 CITY OF SCHERTZ, TEXAS DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS (UNAUDITED) City Direct Rates Overlapping School Districts Schertz- Cibolo- Basic Debt Universal Coma] Rate Service Total City ISD ISD 0.3168 0.1743 0.4911 1.4700 1.3900 0.3159 0.1752 0.4911 1.4900 1.3900 0.3164 0.1810 0.4974 1.4900 1.3900 0.3010 0.1964 0.4974 1.4900 1.4300 0.2993 0.2006 0.4999 1.4600 1.4300 0.2993 0.1850 0.4843 1.4350 1.4300 0.2993 0.1500 0.4493 1.4350 1.3700 0.2842 0.1500 0.4342 1.4200 1.3100 0.2590 0.1500 0.4090 1.3850 1.3100 0.2590 0.1500 0.4090 1.3150 1.3100 County 0.2933 0.2975 0.3269 0.3269 0.3269 0.3269 0.3269 0.3269 0.3269 0.3269 Hospital District 0.2762 0.2762 0.2762 0.2762 0.2762 0.2762 0.2662 0.2610 0.2374 0.2439 Overlapping Counties Bexar Comal Guadalupe River Authority 0.0173 0.01.73 0.01.78 0.01.74 0.0174 0.0167 0.0160 0.0160 0.0160 0.01.60 Bexar, Comal and Guadalupe County Tax Offices Community College District 0.1492 0.1492 0.1492 0.1492 0.1416 0.1416 0.1359 0.1359 0.1346 0.1371 County 0.2928 0.3429 0.3504 0.3504 0.3504 0.3340 0.3130 0.3080 0.3180 0.3152 County 0.3449 0.3311 0.3999 0.4036 0.4036 0.3999 0.3895 0.3895 0.3895 0.4031. Overlapping rates are those of local and county governments that apply within the City of Schertz. Not all overlapping rates apply to all City of Schertz property owners. 1M CITY OF SCHERTZ, TEXAS PRINCIPAL PROPERTY TAX PAYERS CURRENT YEAR AND NINE YEARS AGO Taxnaver Caterpillar Inc. SYSCO San Antonio, Inc. Amazon.com KYDC, LLC US Real Estate, LP Republic Beverage Co. Distribution Visionary Properties GE Oil & Gas Shell US Gas & Power LLC San Antonio MTA LP SC Schertz LLC Sprint Spectrum, LP Wal -Mart Real Estate Business Trust H.E.B. Grocery Co. EM Limited Partnership Eye Care Centers of America, Inc. Lowe's Home Center Inc. Prologis North American Properties Fund GD Bar Family Ltd. Partnership Atlantic Financial Group, Ltd. TOTALS TOTAL TAXABLE ASSESSED VALUE $ 3,647,504,903 $ 2,221,073,744 Source: Bexar, Comal and Guadalupe County Appraisal Districts 1*, TABLE 10 2017 2008 Percentage Percentage of of Total City Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Value Rank Value Value Rank Value $ 141,584,070 1 3.88% 105,604,943 3 2.90% 80,897,236 2 2.22% 57,155,244 4 1.57% 49,373,850 6 1.35% 40,740,300 7 1.12% 31,044,393 5 0.85% 27,182,290 8 0.75% 24,351,699 9 0.67% 23,048,580 1 1.04% 23,430,800 10 0.64% 16,699,920 2 1.23% 14,804,831 3 0.67% 11 ,958,400 4 11,136,474 6 0.50% 11,298,734 5 0.51% 10,010,608 7 0.45% 9,104,240 8 0.41% 8,589,227 9 0.39% 8,566,675 10 0.39% $ 581,364,825 15.94% $ 125,217,689 5.58% $ 3,647,504,903 $ 2,221,073,744 Source: Bexar, Comal and Guadalupe County Appraisal Districts 1*, CITY OF SCHERTZ, TEXAS PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) Source: Guadalupe County Tax Office 106 Collected Within Total Collections Fiscal Year Taxes Levied Fiscal Year of Levy Collections In To Date Ended for the % of Subsequent % of September 30, Fiscal Year Amount Levy Years Amount Levy 2017 $ 17,356,822 $ 17,241,556 99.34% $ - $ 17,241,556 99.34% 2016 16,238,180 16,160,248 99.52% 43,500 16,203,748 99.79% 2015 14,793,867 14,738,760 99.63% 40,391 14,779,151 99.90% 2014 . 13,383,759 13,297,258 99.35% 64,948 13,362,206 99.84% 2013 . 12,536,540 12,455,336 99.35% 70,027 12,525,363 99.91% 2012 . 11,239,572 11,159,974 99.29% 70,626 11,230,600 99.92% 2011 9,978,430 9,895,240 99.17% 75,817 9,971,057 99.93% 2010 9,639,945 9,559,899 99.17% 73,205 9,633,104 99.93% 2009 8,800,927 8,703,978 98.90% 91,252 8,795,230 99.94% 2008 7,793,405 7,711,714 98.95% 77,047 7,788,761 99.94% Source: Guadalupe County Tax Office 106 CITY OF SCHERTZ, TEXAS TAXABLE ASSESSED VALUE LAST TEN FISCAL YEARS (UNAUDITED) * Taxable Assessed Value is before any applicable freeze adjustments. Source: Bexar, Comal, and Guadalupe County Appraisal Districts. 107 TABLE 12 Fiscal Year Taxable Total Taxable Total Ended Value Residential Commercial Tax - Exempt Other Assessed Direct September 30, January 1, Property Property Property Property Value* Tax Rate 2017 2016 $ 1,895,085,016 $ 2,269,590,522 $ (649,173,041) $ 132,002,406 $ 3,647,504,903 0.4911 2016 2015 1,702,601,947 2,087,223,204 (544,328,535) 130,353,515 3,375,850,131 0.4911 2015 2014 1,568,651,309 1,793,803,709 (460,271,461) 135,084,054 3,037,267,611 0.4974 2014 2013 1,445,731,509 1,540,565,195 (340,747,650) 107,013,520 2,752,562,574 0.4974 2013 2012 1,383,423,359 1,396,349,905 (285,245,142) 105,837,429 2,600,365,551 0.4999 2012 2011 1,337,223,390 1,233,687,039 (262,591,896) 102,952,090 2,411,270,623 0.4843 2011 2010 1,272,970,256 1,253,600,729 (280,015,063) 117,337,786 2,363,893,708 0.4493 2010 2009 1,234,950,439 1,237,284,878 (251,217,268) 121,337,441 2,342,355,490 0.4342 2009 2008 1,169,845,869 1,191,387,341 (248,544,582) 118,136,417 2,230,825,045 0.4090 2008 2007 1,096,587,777 1,276,925,393 (345,068,394) 192,628,968 2,221,073,744 0.4090 * Taxable Assessed Value is before any applicable freeze adjustments. Source: Bexar, Comal, and Guadalupe County Appraisal Districts. 107 CITY OF SCHERTZ, TEXAS RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Governmental Activities NOTES: a Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. b. See Table 18 for personal income and population data for the City. These ratios are calculated using personal income and population for the prior calendar year. 1: General Certificates Certificates Fiscal Obligation of Tax Capital Revenue of Year Bonds Obligation Notes Lease Bonds Obligation 2017 $ 56,613,614 $ 9,011,41.5 $ 1,230,000 $ 25,147 $ - $ 8,174,779 2016 56,352,272 4,057,189 1,740,000 58,321 - 8,331,966 2015 53,410,128 277,801 1,210,000 91,495 - 8,946,153 2014 56,487,433 543,934 1,585,000 123,370 - 9,561,204 2013 58,693,750 801,767 2,155,000 22,398 2,215,000 5,048,233 2012 60,878,759 1,581,300 190,000 60,190 2,342,656 5,383,700 2011 48,035,253 8,615,077 250,000 97,188 2,476,681 5,704,200 2010 37,804,450 12,404,034 310,000 1.33,408 5,436,773 6,149,350 2009 38,773,456 13,326,340 - - 5,779,949 6,571,150 2008 32,903,213 1.4,230,297 - 107,078 6,203,126 6,976,300 NOTES: a Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. b. See Table 18 for personal income and population data for the City. These ratios are calculated using personal income and population for the prior calendar year. 1: TABLE 13 1• Business -Type Activities Public General Total Percent Facility Obligation Capital Tax Primary of Gross Per Loan Bonds Lease Notes Government Income Capita $ - $ 2,533,626 $ 92,721 $ 1,065,000 $ 78,746,302 6.22% 1,996 - 3,014,595 162,262 1,360,000 75,076,605 6.39% 1,979 - 3,490,564 231,803 1,640,000 69,297,944 5.99% 1,830 - 3,966,533 347,705 65,000 72,680,179 6.35% 1,992 - 2,127,502 - 130,000 71,193,650 6.50% 1,982 - 2,413,471 - 190,000 73,040,076 8.15% 2,117 - 2,684,440 - 250,000 68,112,839 8.01% 2,031 - - - 310,000 62,548,01.5 7.07% 1,923 7,000 - - - 64,457,895 7.05% 2,049 14,000 - - - 60,434,01.4 7.20% 1,885 1• CITY OF SCHERTZ, TEXAS RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS Percentage of Actual Taxable Value of Property Per Capita General Bonded Debt Outstanding 1,700 1.86% 1,658 1.88% 1,504 General Certificates Available in 1,707 Fiscal Obligation of Debt Service 2.12% Year Bonds Obligation Funds Total 2017 $ 59,147,240 $ 9,011,415 $ (1,087,260) $ 67,071,395 2016 59,366,867 4,057,189 (517,199) 62,906,857 2015 56,900,692 277,801 (227,674) 56,950,819 2014 60,453,966 543,934 (117,250) 60,880,650 2013 60,821,252 801,767 (286,215) 61,336,804 2012 63,292,230 1,581,300 (444,369) 64,429,161. 2011 . 50,719,693 8,615,077 (429,289) 58,905,481 2010 . 37,804,450 1.2,404,034 (556,884) 49,651,600 2009 38,773,456 1.3,326,340 (347,739) 51,752,057 2008 32,903,213 1.4,230,297 (263,740) 46,869,770 Percentage of Actual Taxable Value of Property Per Capita 1.84% 1,700 1.86% 1,658 1.88% 1,504 2.21% 1,669 2.36% 1,707 2.67% 1,868 2.49% 1,756 2.12% 1,527 2.32% 1,645 2.11% 1,462 NOTE: Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. See Table 8 for the City's property tax value data. City population data can be found in Table 18. ®1 CITY OF SCHERTZ, TEXAS DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT CURRENT YEAR Governmental Unit Debt repaid with property taxes: Debt Outstanding Estimated Percentage Applicable* TABLE 15 Estimated Share of Overlapping Debt Alamo CCD $ 394,680,000 0.19% $ 749,892 Bexar County 1,743,140,000 0.20% 3,486,280 Bexar County Hospital District 643,960,000 0.19% 1,223,524 Coma] County 126,550,000 4.45% 5,631,475 ComalISD 568,250,107 2.60% 1.4,774,503 Guadalupe County 7,095,000 18.91% 1,341,665 Schertz- Cibolo- Universal ISD 381,086,092 50.56% 1.92,677,128 Subtotal, Overlapping Debt City Governmental Activities Direct Debt TOTAL NET OVERLAPPING DEBT 219,884,466 66,855,029 $ 286,739,495 NOTES: The overlapping debt was received fi°om the Municipal Advisory Council of Texas. Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. Overlapping debt is the proportionate share of the debts of local jurisdictions located wholly or in part within the limits of the City of Schertz. This schedule is intended to demonstrate the total debt that the City of Schertz property taxpayers will be expected to repay. The amount of debt applicable to the City of Schertz is computed by (a) determining what portion of total assessed value of the overlapping jurisdiction lies within the limits of the City and (b) applying this percentage to the total governmental activities debt of the overlapping jurisdiction. CITY OF SCHERTZ, TEXAS DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS Assessed Value, 2016 Tax Roll Debt Limit - Texas statues do not provide a legal debt limit for cities; however, through accepted practice a practical "economic" debt limit is considered to be 10% of the assessed value. Amount of Applicable Debt: General Bonded Debt Less Debt Service Net Position DEBT MARGIN Total Net Debt as a Percentage of Debt Margin Assessed Value Debt Limit Total Net Debt Applicable to Limit Total Debt Margin Assessed Value Debt Limit Total Net Debt Applicable to Limit Total Debt Margin Assessed Value Debt Limit Total Net Debt Applicable to Limit Total Debt Margin $ 3,647,504,903 $ 364,750,490 $ 66,880,176 (1,087,260) 65,792,916 $ 298,957,574 22.01% Fiscal Year 2014 2015 2016 $ 2,752,562,574 $ 3,037,267,611 $ 3,375,850,131 $ 275,256,257 $ 303,726,761 $ 337,585,013 56,803,499 53,424,303 61,181,169 $ 218,452,758 $ 250,302,458 $ 276,403,844 2010 2011 2013 $ 2,363,893,708 $ 2,411,270,623 $ 2,600,365,551 $ 236,389,371 $ 241,127,062 $ 260,036,555 55,298,550 60,973,626 60,499,568 $ 181,090,821 $ 180,153,436 $ 199,536,987 2007 2008 2009 $ 2,221,073,744 $ 2,230,825,045 $ 2,342,355,490 $ 222,107,374 $ 223,082,505 $ 234,235,549 45,466,903 50,41.4,481 48,81.9,435 $ 176,640,471 $ 172,668,024 $ 185,416,114 112 CITY OF SCHERTZ, TEXAS PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS TABLE 17 Water Revenue Bonds NOTE: Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. Operating expenses do not include depreciation, interest, amortization or joint venture expenses. 113 Utility Less: Net Debt Service Fiscal Service Operating Available Year Charges Expenses Revenue Principal Interest Coverage 2017 $ 25,390,71.3 $ 18,697,1.62 $ 6,693,551 $ 1,554,541 $ 368,390 3.48 2016 22,003,794 17,603,487 4,400,307 1,441,741 41.7,346 2.37 2015 20,700,369 15,916,597 4,783,772 1,448,407 428,912 2.55 2014 19,147,872 15,246,653 3,901,219 1,010,500 426,100 2.72 2013 17,696,327 14,553,274 3,143,053 728,800 359,680 2.89 2012 17,411,568 14,185,126 3,226,442 697,100 396,968 2.95 2011 16,843,780 13,229,037 3,614,743 577,824 409,801 3.66 2010 14,993,648 12,399,880 2,593,768 615,400 502,629 3.74 2009 14,533,390 9,973,940 4,559,450 685,400 534,634 3.74 2008 13,620,440 9,040,264 4,580,176 665,400 558,569 4.86 NOTE: Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. Operating expenses do not include depreciation, interest, amortization or joint venture expenses. 113 CITY OF SCHERTZ, TEXAS DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Sources: Population, personal income, median age and education level information provided by City Economic Development Corporation. School enrollment provided by Schertz- Cibolo- Universal City Independent School District. Unemployment data provided by Texas Workforce Commission. 114 Education Per Capita Level in Personal Personal Median Years of School Unemployment Fiscal Year Population Income Income Age Schooling Enrollment Rate 2016-2017 39,453 $1,266,046,770 $ 32,090 37.2 15.9 15,497 3.8% 2015-2016 37,938 1,175,319,240 30,980 36.9 15.8 15,460 3.4% 2014-2015 37,865 1,157,835,970 30,578 36.1 15.6 15,009 3.2% 2013-2014 36,477 1,144,465,875 31,375 36.9 15.4 14,515 5.1% 2012-2013 35,929 1,095,331,494 30,486 37.1 15.4 14,058 5.5% 2011-2012 34,499 895,739,206 25,964 36.8 15.4 13,016 5.6% 2010-2011 33,544 850,069,800 25,342 37.8 15.4 12,533 5.7% 2009-2010 32,523 885,015,876 27,212 34.4 15.4 12,330 5.1% 2008-2009 31,465 913,919,790 27,923 36.5 13.9 11,700 5.0% 2007-2008 32,057 839,701,058 26,194 35.1 14.0 10,991 4.0% Sources: Population, personal income, median age and education level information provided by City Economic Development Corporation. School enrollment provided by Schertz- Cibolo- Universal City Independent School District. Unemployment data provided by Texas Workforce Commission. 114 CITY OF SCHERTZ, TEXAS TOP TEN PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO Source: City Economic Development Corporation 2017 2008 Percentage Percentage of Total City of Total City Employer Employees Employment Employees Employment Schertz /Cibolo/UC ISD 1,837 12.92% 1,495 1.0.09% Amazon.com 1,256 8.83% Sysco Central. Texas 815 5.73% Baker Hughes, a GE Company 600 4.22% The Brandt Companies, LLC 437 3.07% FedEx Ground 475 3.34% 165 1.11% Visionworks 400 2.81% Republic Beverage Company 382 2.69% 100 0.67% HEB Grocery CO 350 2.46% 300 2.02% City of Schertz 341 2.40% 303 2.04% Wal -Mart Stores 420 2.83% EyeCare Centers of America 320 2.16% Valero Diamond Distribution 160 1.08% Metro Ambulance LP 110 0.74% Manco 100 0.67% TOTAL 6,893 48.47% 3,473 23.41% Source: City Economic Development Corporation I rz/,� �N CITY OA 1, CITY OF SCHERTZ, TEXAS FULL -TIME EQUIVALENT CITY GOVERNMENTAL EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS TOTAL 272.1 285.1 289.6 299.3 310.9 317.9 319.9 327.4 338.7 345.7 Source: City Adopted Budgets Note: Full -time equivalent is based on the schedule hours of positions to a 40 hour work week. 116 Full -Time Equivalent Employees as of September 30, Function 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Government City Manager 6 7 6 6 7 7 6 6 5 5 Court Support 0 0 0 0 0 0 0 0 0 0 Municipal Court 4 5 5 5 6 6 6 6 6 6 Customer Relations 4 4 4 4.5 4.5 4.5 4.5 4.5 4.5 4.5 Planning and Zoning 5 4 4 4 3 3 3 3 4 4 General Services 9 9.5 1.3.5 1.4.7 14.7 12.7 12.7 1.3 0 0 City Secretary 2 2 2 2 2 2 2 2 2 2 Public Affairs 3 3 3 3 4 4 4 4 4 4 Records Management 3 3 1 1 1 1 1 1 1 1 Schertz Magazine 0 0 0 2 2 2 2 2 2 2 Engineer 3 1 2 2 4 3 3 3 7 7 GIS 0 2 2 2 2 2 2 2 2 2 Information Technology 3 3 3 4 4 6 6 6 6 7 Human Resources 3 3 4 4 4 4 4 4 5 5 Finance 6 6 6 6 6 6 6 8 8 8 Purchasing 2 5 5 5 5 4 3 3 3 3 Fleet Service 3 3 3 4 4 4 4 6 6 6 Building Maintenance 0 0 0 0 0 2 2 3 0 0 Facility Services 0 0 0 0 0 0 0 0 15.6 15.6 Public Safety Police 68.6 64.6 64.6 64.6 69.7 74.7 74.7 75.2 77.6 80.6 Fire 32 32 32 32 32 32 33 33 36 39 Inspections 8 7 6 7 7 7 8 9 8 8 Marshal Services 0 5 5 8 8 8 8 8 8 5 Health Animal Control 6 6 6 6 6 6 7 7 8 8 Environmental Health 0 0 0 0 0 0 0 0 3 3 Parks and Culture Parks 8 8 8 9 9 9 9 9 9 10 Pools 0 0 0 0 0 0 0 0 0 0 Event Facilities 1 1 2 1 1 1 1 1 1 1 Library 10.5 11 13.5 13.5 14 14 14 14 14 14 Public Environment Streets 13 13 13 14 14 14 14 14 14 14 Public Works Public Works 6 6 5 4 4 6 6 6 4 4 Business Office 10 10 10 10 1.0 1.0 1.0 1.0 1.0 1.0 Water and Sewer 14 16 16 17 1.7 1.6 1.6 1.6 1.6 1.6 Drainage 6 7 7 7 7 8 8 8 6 6 EMS 30 34 34 34 35 35 36 37 39 41 Economic Development 3 4 4 3 4 4 4 4 4 4 TOTAL 272.1 285.1 289.6 299.3 310.9 317.9 319.9 327.4 338.7 345.7 Source: City Adopted Budgets Note: Full -time equivalent is based on the schedule hours of positions to a 40 hour work week. 116 CITY OF SCHERTZ, TEXAS OPERATING INDICATORS BY FUNCTIONTROGRAM LAST TEN FISCAL YEARS Fiscal Year Function 2009 2010 2011 2012 2013 General Government Building Permits Issued 5,181 4,806 4,950 2,643 3,054 Schertz Tales Number of Magazines printed 120,000 144,000 168,000 168,000 168,000 Police CFS 36,319 37,269 26,205 19,434 19,894 Arrests 873 790 762 666 800 Traffic Violations 20,452 19,259 13,231 20,881 19,335 Accidents 1,491 1,606 1,575 1,665 1,960 Fire Number of Rescue /Other Responses 1,536 1,671 1,657 1,799 2,046 Number of Fire Responses 135 76 110 74 108 Number of Inspections 447 425 616 429 332 Number of Training Classes Conducted 264 107 142 168 132 Number of Pre -Plan Inspections 452 642 536 714 729 EMS Requests for Transport 7,061 7,281 7,443 7,545 8,391 Actual Transports 4,341 4,575 4,801 4,766 5,451 EMT Students 80 80 85 79 116 Marshal Service Warrants Issued 5,974 5,444 4,141 2,888 3,344 Warrants Cleared 3,836 4,023 3,985 4,118 4,687 Food Establishment Permits 134 129 118 123 127 Food Establishment Inspection 209 202 244 180 281 Foster /Adoption Inspections 34 27 18 14 24 Parks Facility Reservations 671 719 237 234 258 Community and Civic Centers Civic Center 484 594 354 325 444 Community Center Rentals - 635 666 816 735 North Community Center Rentals - - 241 307 288 Animal Services Number of Animals Handled 1,804 2,021 1,802 1,463 1,326 Number of Adoptions 255 249 257 291 362 Number of Return to Owners 252 279 313 149 231 Number of Transfers 415 451 300 312 301 Library Annual Circulation 263,131 392,528 414,074 410,312 404,691 Library Visits 188,118 257,235 254,934 256,349 254,633 Library Program Attendance 10,499 10,610 13,767 16,035 12,581 Registered Users 20,360 24,628 28,589 30,475 31,658 Water New Connections 446 509 439 271 168 Water Main Breaks 72 25 76 52 38 Total Consumption (thousands of gallons) 15,115,679 12,313,766 16,763,239 16,131,415 15,500,413 Daily Average Consumption (thousands of gallons) 38,550 33,736 45,927 44,196 42,466 Peak Daily Consumption (thousands of gallons) 7,520 7,040 11,000 9,290 9,483 Total Customers 10,198 10,134 12,234 12,557 12,757 Average Use Per Connection 6,913 5,054 5,725 5,517 5,905 Sewer Total Customers 9,974 9,499 10,907 10,988 11,456 Facilities Maintenance Number of Buildings Maintained 19 19 19 19 19 Square Footage 166,591 166,591 166,591 166,591 166,591 Source: Various City Departments. Prior year information for some functions is not available. 117 Fiscal Year 2014 2015 2016 2016 2017 2,869 3,087 5,919 5,919 4,800 180,000 180,000 180,000 180,000 180,000 19,067 36,138 39,064 39,064 34,428 776 595 603 603 423 15,077 12,306 8,960 8,960 8,001 1,823 2,040 2,119 2,119 2,057 1,759 2,167 2,327 2,327 2,758 110 99 67 67 86 252 698 440 440 519 125 150 460 460 340 735 980 867 867 922 8,840 9,286 9,723 9,723 9,956 5,713 6,118 6,123 6,123 6,201 87 84 89 89 90 2,354 3,798 2,587 2,587 2,816 3,781 3,691 3,492 3,492 2,822 82 135 145 145 201 218 136 153 153 13 16 22 21 21 21 301 275 240 240 251 458 478 483 483 590 437 455 370 370 455 244 209 185 185 230 1,218 1,304 1,313 1,313 1,283 309 357 410 410 348 222 213 205 205 228 316 296 316 316 326 395,998 394,766 399,622 399,622 385,206 253,237 259,413 255,109 255,109 235,428 15,048 13,825 15,282 15,282 16,814 30,759 31,138 30,702 30,702 31,432 235 369 213 213 303 45 45 45 45 45 15,497,071 14,757,134 16,097,931 16,097,931 15,222,373 42,458 40,431 43,942 43,942 41,705 10,089 8,385 10,985 10,985 11,000 13,324 13,570 13,877 13,877 14,124 5,467 5,135 5,352 5,352 5,244 11,578 11,413 12,282 12,282 12,398 19 21 21 21 21 166,591 234,202 234,202 234,202 234,202 CITY OF SCHERTZ, TEXAS CAPITAL ASSET STATISTICS BY FUNCTIONTROGRAM LAST TEN FISCAL YEARS Function Police Stations Patrol Units Fire Stations Training Facility Fire Vehicles EMS Ambulances Marshal Service Vehicles Streets Streets, paved (miles) Streets, unpaved (miles) Parks and Recreation Parks - Developed Parks - Undeveloped Playground Swimming Pools Baby Pools Baseball /Softball Diamonds Soccer Fields Community Centers Animal Control Control Vehicle Library Facility Volumes in Collection Water Number of Reservoirs Number of Pump Stations Water Mains (Miles) Sewer Sanitary Sewers (Miles) Storm Sewers (Miles) Facilities Maintenance Vehicles Generators Source: Various City Departments Fiscal Year 2008 2009 2010 2011 2012 1 1 1 1 1 33 38 40 42 42 2 2 2 2 2 1 - - - - 1.4 13 13 13 13 6 6 6 6 6 - 5 7 8 8 1.22 124 125 1.32 1.34 7 7 7 5 5 7 11 12 17 17 4 4 4 4 4 20 20 19 15 15 2 2 2 2 2 2 2 2 2 2 12 12 12 9 9 - 12 12 12 12 2 2 4 4 4 3 3 3 3 3 1 60,650 1 64,400 1 71,929 1 73,904 1 81,468 - 5 5 5 5 1.82 188 190 1.92 1.92 71 78 78 84 85 8 9 9 10 10 4 5 5 5 4 3 3 3 3 3 119 TABLE 22 Fiscal Year 2013 2014 2015 2016 2017 1 1 1 1 1 42 42 48 50 64 2 2 2 2 2 13 15 16 16 16 7 7 9 9 8 7 7 7 7 7 1.37 141 149 153 159 5 5 5 5 5 13 13 14 15 20 8 8 9 10 4 16 16 18 19 19 2 2 2 2 4 2 2 2 2 2 12 12 15 15 15 12 12 12 12 12 4 4 4 4 4 3 3 3 4 3 1 1 1 1 1 86,221 100,478 113,085 97,412 107,382 5 5 5 5 5 197 199 210 211 221 87 90 96 98 110 11 11 12 12 12 5 5 6 6 6 3 3 4 4 4 120 I rz/,� �N CITY OA 1, COMPLIANCE SECTION 121 INDEPENDENT AUDITOR'S REPORT Row 011 11 ']up WIL Altf L419101YERAIN WAN Weil A% IV STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS To the City Council and management City of Schertz We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of City of Schertz as of and for the year ended September 30, 2017, and the related notes to the financial statements, which collectively comprise City of Schertz's basic financial statements, and have issued our report thereon dated March 6, 2018. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered City of Schertz'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 Schertz's internal control. Accordingly, we do not express an opinion on the effectiveness of City of Schertz's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 941 West Byrd Blvd., Suite 101 - Universal City, Texas 78148 Phone; 210-658-6229 - pax. 210 -659 -7611 - Email; info @avacpa.com * www.avacpa.com 122 Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Schertz'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. We noted certain matters that we have reported to management of City of Schertz in a separate letter dated March 6, 2018. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Armstrong, Vaughan & Associates, P.C. March 6, 2018 123 rr