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19-R-35 - FY 2017-18 Comprehensive Annual Financial ReportA RESOLUTION BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, AUTHORIZING THE APPROVAL O v O 'i THE COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR 2017-18, AND OTHER MATTERS IN CONNECTION THEREWITH WHEREAS, the City staff of the City of Schertz (the "City ") has recommended that the City Council approve the Comprehensive Annual Financial Report for Fiscal Year 2017 -18 ; and WHEREAS, the Audit Committee has recommended that it is in the best interest of the City to approve the Comprehensive Annual Financial Report for Fiscal Year 2017 -18; and WHEREAS, the City Council has determined that it is in the best interest of the City to approve the Comprehensive Annual Financial Report for Fiscal Year 2017-19. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SCHERTZ, TEXAS THAT: Section 1. The City Council hereby authorizes the approval of the Comprehensive Annual Financial Report for Fiscal Year 2017 -18. Section 2. The recitals contained in the preamble hereof are hereby found to be true, and such recitals are hereby made a part of this Resolution for all purposes and are adopted as a part of the judgment and findings of the City Council. Section 3. All resolutions, or parts thereof, which are in conflict or inconsistent with any provision of this Resolution are hereby repealed to the extent of such conflict, and the provisions of this Resolution shall be and remain controlling as to the matters resolved herein. Section 4. This Resolution shall be construed and enforced in accordance with the laws of the State of Texas and the United States of America. Section 5. If any provision of this Resolution or the application thereof to any person or circumstance shall be held to be invalid, the remainder of this Resolution and the application of such provision to other persons and circumstances shall nevertheless be valid, and the City Council hereby declares that this Resolution would have been enacted without such invalid provision. Section 6. It is officially found, determined, and declared that the meeting at which this Resolution is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Resolution, was given, all as required by Chapter 551, Texas Government Code, as amended. 50506221.1 Dennis -2- k �J Armstrong, Vaughan & Associates, ; C. Certified public Accountants Deborah F. Fraser Phil S. Vaughan Nancy L. Vaughan I lin6erly J. Roach Communication with Those Charged with Governance To the Audit Committee City of Schertz, Texas We have audited the basic financial statements of the City of Schertz, as of and for the year ended September 30, 2018, and have issued our report thereon dated March 19, 2019. Professional standards require that we advise you of the following matters relating to our audit. Our Responsibility under Generally Accepted Auditing Standards (and Government Auditing Standards) As communicated in our engagement letter dated September 17, 2018, our responsibility, as described by professional standards, is to plan and perform our audit to form and express an opinion about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing 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 over financial reporting. Accordingly, as part of our audit, we considered the internal control of City of Schertz solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. Planned Scope and Timing of the Audit We conducted our audit consistent with the planned scope and timing we previously communicated to you. Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, and our firm has complied with all relevant ethical requirements regarding independence. 9411 West Byrd Blvd., Suite 101 a Universal City, Texas 78148 Phone: 210 -658 -6229 * Fax: 210-659-7611 e Email. nfo(aDavacpa.com www.avacpa.com Qualitative Aspects of the Entity's Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by City of Schertz is included in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2018, except for the adoption of GASB Statement No. 75 related to postemployment benefits other than pensions. This required and other postemployment benefit liability of $1.8 million to be recorded on the city's financial statements as well as expanded footnotes and required supplementary information. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgments. The most sensitive accounting estimates affecting the financial statements are: • Useful lives of capital assets • Pension related liabilities, to include the mortality and investment assumptions. • OPEB related liabilities. • Service Concession Arrangement Receivables and Liabilities • Allowance for uncollectible receivables for - Water revenues - EMS billings - Property taxes - Court fines and revenue We evaluated the key factors and assumptions used to develop the estimates and determined that they are reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. Financial Statement Disclosures Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting City of Schertz's financial statements relate to Texas Municipal Retirement System and Long -Term Liabilities. Significant Difficulties Encountered during the Audit We encountered no difficulties in dealing with management relating to the performance of the audit. However, the reconcilatioan of the capital assets were not fully reconciled until the end of February, which delayed the timing of the final audit. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the City of Schertz' financial statements or the auditor's report. No such disagreements arose during the course of the audit. Uncorrected and Corrected Misstatements For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. The following summarized the uncorrected financial statement misstatements whose effects in the current and prior periods, as determined by mangement, are immaterial, both individually and in the aggregate, to the financial statemetns taken as a whole and each applicable opinion unit: • Under accrued payroll liability in the general fund resulting in understatment of payroll expense of $61,367. • Under accrued payroll liability in the EMS fund resulting in understatement of payroll expense of $20,286. In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. The following material misstatements that we identified as a result of our audit procedures were brought to the attention of and corrected by management. • Significant entries were made to reconcile the Capital Assets and record the leases in the proprietary fund. • A material correcting entry was made to correct beginning fund balances or net position in several funds. Representations Requested from Management We have requested certain written representations from management, which are included in a separate letter dated March 19, 2019. Management's Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Matters As a result of our audit for the year ending September 30, 2018, we had the following suggestions and status updated on the prior year comments: Prior Year Comments: TMRS Census Data: The City's internal control policy on GASB Statement No. 68 currently does not address the review of the employee census data recorded in the TMRS employee pension records. Discussions with City personnel revealed that the City has not independently reviewed the information. The City should develop a policy and review the employee's census data periodically to ensure the pension liability estimate is accurate. Status: Management performed a review in August 2018. Cash Reconciling Items: The City is carrying a significant amount of uncleared items on its bank reconciliation and has additional reconciling items from the old operating account. The volume of oustanding items each month makes it more difficult to review the bank reconciliation for errors. In addition, some of these items may need to be sent to the State as unclaimed property. Management should review cash reconciling items and send unclaimed property to the State. Status: Management has plans to review these items in the future and research the requirements for unclaimed property. Current Year Comments: Reconciliation of Capital Assets and Depreciation: Capital Assets and the corresponding depreciation for the assets were not properly recorded and reconciled with the financial statements at year end. Additionally, a few of the capital leases were not recorded in the proprietary fund. The Finance Department did not keep up with the spreadsheet during the year, which creates an enormous project at year end. Multiple journal entries were required as a result. The City should consider monitoring this on a monthly or a quarterly basis rather than only at year end. Consider, reviewing each capital outlay, repair and maintenance and construction line item and recording the corresponding assets. Additionally, consider having the Accounts Payable Clerk flag the transactions as they are entered into Incode. Rental Deposits: Mangement was not properly tracking property rental deposits, which could result in rental deposits being returned to the incorrect individual, or over or underpayment of the deposit. Management should consider tracking these deposits in a subledger in Incode or in a separate Excel spreadsheet. Public Funds Investment Act As a part of our audit, we review the City's compliance with the Public Funds Investment Act. Our procedures determined that the City is in compliance, in all material effects, with the provisions of the Act. Other Significant Findings or Issues In the normal course of our professional association with City of Schertz, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as City of Schertz' auditors. Other Information in Documents Containing Audited Financial Statements Pursuant to professional standards, our responsibility as auditors for other information (statistical section) in documents containing City of Schertz' audited financial statements does not extend beyond the financial . information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. However, in accordance with such standards, we have read the information and considering whether such information, or the manner of its presentation, was materially inconsistent with its presentation in the financial statements. Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its 4 manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements Trend Analysis We have prepared the attached "Trend Analysis" as a financial planning tool for council and staff. Sound financial management dictates that a minimum fund balance be maintained that is sufficient to ensure operations will continue uninterrupted and emergencies that arise from time to time will be met. A rule of thumb for a minimum fund balance for the general fund is three to six months average operating expenditures (exclusive of capital outlay and debt service expenditures). The attachment details the trends over the last five years. This is presented for additional analysis and as a planning tool. We make no recommendation regarding the analysis of this information. This report is intended solely for the information and use of the Audit Committee, City Council, and management of City of Schertz and is not intended to be and should not be used by anyone other than these specified parties. Armstrong, Vaughan & Associates, P.C. March 19, 2019 CITY OF SCHERTZ, TEXAS TREND ANALYSIS 9/30/14 9/30/15 9/30/16 9/30/17 9/30/18 GENERAL GOVERNMENT FUND BALANCE - GENERAL FUND (1) $ 5,587,262 $ 7,280,240 $ 8,509,467 $ 9,976,169 $ 12,548,013 AVERAGE MONTHLY OPERATING EXPENDITURES (2) 1,628,274 1,683,217 1,782,957 1,979,704 2,093,098 GROWTH RATE PER YEAR - AVERAGE MONTHLY OPERATING EXPENDITURES 3.1% 3.4% 5.9% 11.0% 5.7% # MONTHS AVERAGE EXPENDITURES IN FUND BALANCE 3.4 4.3 4.8 5.04 5.99 GENERAL BONDED DEBT (NET OF DEBT SERVICE RESERVES) 60,770,226 56,661,294 62,397,443 66,880,176 66,329,699 RATIO OF GENERAL, BONDED DEBT TO FUND EQUITY 10.9/1 7.8/1 7.3/1 6.7/1 5.3/1 (1) Includes unassigned fund balance only (2) Exclusive of Capital Outlay and Debt Service Expenditure CITY OF SCHERTZ, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2018 CITY -0 OFFICIALS ISSUING REPORT James M. Browne City Manager James Walters Director of Finance I I rz/,� �N CITY OA 1, CITY OF SCHERTZ, TEXAS TABLE OF CONTENTS SEPTEMBER 30, 2018 INTRODUCTORY SECTION ......................................................................................................... iv LETTER OF TRANSMITTAL .......................................................................................................................... v CITYOFFICIALS ............................................................................................................................................ ix ORGANIZATIONALCHART ......................................................................................................................... x CERTIFICATE OF ACHIEVEMENT ............................................................................................................. xi FINANCIAL SECTION U11031 *1 E. 1011191031141 MANAGEMENTS DISCUSSION AND ANALYSIS ...................................................................................... 5 BASIC FINANCIAL STATEMENTS ............................................................................................................ 14 STATEMENT OF NET POSITION ............................................................................................................. 15 STATEMENT OF ACTIVITIES .................................................................................................................. 17 BALANCE SHEET - GOVERNMENTAL FUNDS ................................................................................... 19 RECONCILIATION OF BALANCE SHEET ............................................................................................. 21 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS .................................................................................................................... 22 RECONCILIATION OF THE STATEMENT OF REVENUES, GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES ...................................................................................................... 24 STATEMENT OF NET POSITION - PROPRIETARY FUNDS ................................................................ 25 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION - PROPRIETARYFUNDS ......................................................................................................................... 27 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS .................................................................. 28 NOTES TO BASIC FINANCIAL STATEMENTS ..................................................................................... 30 REQUIRED SUPPLEMENTARY INFORMATION ..................................................................................... 66 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL FUND ...................................................................................... 67 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - ECONOMIC DEVELOPMENT CORPORATION .................................... 69 NOTES TO SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ................................................................................................. 70 SCHEDULE OF CHANGES - NET PENSION LIABILITY AND RELATED RATIOS ......................... 71 SCHEDULE OF CITY CONTRIBUTIONS ................................................................................................ 72 SCHEDULE OF CHANGES - TMRS OTHER POST-EMPLOYMENT BENEFIT LIABILITY AND RELATEDRATIOS ................................................................................................................................. 73 SCHEDULE OF CHANGES - CITY RETIREE HEALTH OTHER POST-EMPLOYMENT BENEFIT LIABILITY AND RELATED RATIOS .................................................................................. 74 i CITY OF SCHERTZ, TEXAS TABLE OF CONTENTS SEPTEMBER 30, 2018 FINANCIAL SECTION (CONTINUED) PAGE SUPPLEMENTARY INFORMATION ........................................................................................................... 75 COMPARATIVE BALANCE SHEETS - GENERAL FUND .................................................................... 76 COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - GENERAL FUND .............................................................................................................. 77 COMPARATIVE BALANCE SHEETS - ECONOMIC DEVELOPMENT CORPORATION .................. 78 COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - ECONOMIC DEVELOPMENT CORPORATION ............................... .............................79 COMPARATIVE BALANCE SHEETS - DEBT SERVICE FUND ........................................................... 80 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL - DEBT SERVICE FUND ................................................................................................. 81 COMPARATIVE BALANCE SHEETS - CAPITAL PROJECTS FUND .................................................. 82 COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - CAPITAL PROJECTS FUND ............................................................................................ 83 NONMAJOR GOVERNMENTAL FUNDS - COMBINING BALANCE SHEETS .................................. 84 NONMAJOR GOVVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND FUND BALANCE ............................................................................................ 85 NONMAJOR CAPITAL PROJECTS FUNDS - COMBINING BALANCE SHEET ................................. 86 0- 1, EXPENDITURES AMD CHANGES IN FUND BALANCES ................................................................ 87 COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS .................................... 88 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS .................................................................... 90 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - CAPITAL RECOVERY - AREA I ............................................................... 92 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL - HOTEL OCCUPANCY FUND ....................................................................................... 93 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - PARK FUND .................................................................................................. 94 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL - TREE MITIGATION FUND ........................................................................................... 95 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - TREASURY FORFEITURES FUND ............................... .............................96 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - JUSTICE FORFEITURES FUND ................................................................. 97 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL - STATE FORFEITURES FUND .................................................................... 98 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - LIBRARY ADVISORY BOARD .................................................................. 99 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL - HISTORICAL COMMITTEE FUND .............................. ............................100 ii CITY OF SC0FD{TZ,TEXA8 TABLE 0PCONTENTS SEPTEMBER 3O,2018 STATISTICAL SECTION NET POSITION, BY 102 CHANGE IN2�BTPO3IT|[)N 104 FUND BALANCES - GOVERNMENTAL FUNDS .................................................................................... lOU CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS--------------------||0 TAX REVENUE UY S[)D]{CB— GOVERNMENTAL FUNDS ................................................................. ||2 TOTAL WATER AND SEWER CONSUMPTION AND RATES .............................................................. ll3 PRINCIPAL WATER AND SEWER CONSUMERS ---------------------------�]|4 ��SSBS8B[)\78LDfl�^NI� ��CTD��L\7ALOB(}F TAJ�AE�LEPB(}PER]��� 115 DIRECT AND OVERLAPPING PROPERTY TAX RATES ....................................................................... ||0 PRINCIPAL PROPERTY TAX PAYERS .................................................................................................... U7 PROPERTY TAX LEVIES AND COLLECTIONS ----------------------------.||0 TAXABLE ASSESSED VALUE .................................................................................................................. ||9 RATIOS OF OUTSTANDING DEBT BY TYPE ......................................................................................... ]2O RATIOS {}F GENERAL BONDED DEBT OUTSTANDING -----------------------l22 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT .............................................. |23 DEBT MARGIN INFORMATION -------------------------------------]24 PLEDGED REVENUE COVERAGE ........................................................................................................... l25 DEMOGRAPHIC AND ECONOMIC STATISTICS ................................................................................... |20 TOP TEN PRINCIPAL EMPLOYERS -----------------------------------|27 FULL-TIME EQUIVALENT CITY GOVERNMENTAL EMPLOYEES B,/ FUNCTION -------'l2U OPERATING INDICATORS BY� |29 /\ CP|TA^LAS8ETBT8Tl3TTCBB�� |]| COMPLIANCE SECTION l33 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED di I rz/,� �N CITY OA 1, INTRODUCTORY SECTION iv COMMUNITY SERVICE SCHHERTZ I OPPORTUNITY March 19, 2019 To the Honorable Mayor, City Council, and the Citizens 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, 2018. 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, 2018, 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, 2018, 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 40,092 in 2017 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. 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- 1400 Schertz Parkway Schertz, Texas 78154 210.619.1000 ,r {r rt, -Iclo v 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 teens, 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 term. 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, and 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 fiend for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on pages 66 -67 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 2018. The Federal Reserve Bank of Dallas reported that the San Antonio Business -Cycle Index, of which Schertz data is incorporated, grew 2.6% year over year for September 2018. This increase in the Index shows this region is still in a state of economic expansion. As of October 2018, the unemployment rate for Texas was 3.9% and several metro areas including Austin, Dallas - Fort Worth, and San Antonio, are below the state average. Schertz in particular had an unemployment rate of 3.1 percent during this time. Per the Federal Reserve Bank of Dallas October 2018 Economic Update, this low unemployment rate combined with a higher wage pressure are major factors in preventing even faster growth in the State. The City of Schertz realized a 17.1% increase year - over -year in sales tax collections during the fiscal year. Sales Tax generated from the construction sector lead the increase in FY 2017 -18. Revenue generated from these sources can fluctuate year by year with the amount of high value project. During the 2018 calendar year, there were several significant construction projects completed in Schertz. The projects included 17745 Lookout Road (187,288 square feet), 17454 Campus Drive (17,850 sf), 17992 Red Iron (35,100 sf) and 5700 Schertz Parkway (25,138 sf). The facility located at 17745 Lookout Road is the fourth of an announced quintet of speculative buildings. The year saw the growth of multiple educational facilities. Danville Middle School (370 Hubertus Road), completed in Q3, is part of Comal Independent School District's overarching plan to address the region's growth. According to a district representative, the student population is experiencing a growth rate of 4.5 %, or 1,000 students per year. Rose Garden. Elementary' s (10414 E. FM 1518) new location can accommodate twice the number of students as the facility it replaced. Samuel Clemens High School's (1001 Elbel Road) $72 million renovation and expansion continued throughout the year and was 84% complete as of January 7, 2019. Founder's Classical Academy of Schertz (8453 E FM 1518 North) underwent a 30,281 square foot expansion of classroom space. Mondelez International (also known by its subsidiaries Nabisco and Kraft), an existing Schertz business, completed a 21,620 square foot expansion. Ryder Truck neared completion of their new fleet and vi maintenance facility which will add 22,756 square feet to their existing Schertz location. According to 2018 Q4 data provided by Costar, the Schertz market has an industrial vacancy rate of 9.3 %, down from the previous quarter's 10.2 %. Average asking rates for this industrial sector stood at $5.30 NNN, a decrease of $0.51 from the third quarter of 2018. 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 2017 -18, the City's main initiatives that had a major budget impact were the implementation of the third -year recommendation of the Classification and Compensation Study to bring the wages up to a more competitive level, new permit software to increase customer responsiveness, the new Moving on Main event, maintenance and improvements on public works and parks infrastructure, and 22 new personnel positions. Financial Information: The new personnel included 4 crossing guards, 2 patrol officers, a Plans Examiner, a new Code Enforcement Officer, the final 6 Fire Fighters needed to open Fire Station #3, 3 Emergency Medical Technicians (EMT), 3 Water & Sewer Servicemen, and 2 Drainage Workers. 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. vii Independent Audit. Every year an independent audit is performed 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. 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 will be 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, James M. Browne City Manager viii James P. Walters Finance Director CITY OF SCHERTZ, TEXAS CITY OFFICIALS MAYOR MICHAEL CARPENTER. CITY COUNCIL MARK DAVIS RALPH GUTIERREZ f .Y K� 71 Y I � 1 1_ � i •Y �] ANGELINA KISER CITY MANAGER JAMES M. BROWNE DIRECTOR OF FINANCE JAMES WALTERS CITY ATTORNEY CHARLES ZECH, DENTON, NAVARRO, ROCHA, BERNAL & ZECH, P.C. ix CITY OF SCHERTZ ORGANIZATIONAL CHART � Appointed by City Count I Govemirtiemt Finance Offiters, Assmiation Certificate o Achievement f6r Excellence in Financial W= WCOMOM City of Schartz Texas For its Conipmhensive Annu Financial Repoit .for the, Fiscal Year Ended -September 30, 2017 E%ecutive. Director 0 Xi FINANCIAL SECTION 4D Armstrong, Vaughan b Associates, _ P. C. Certified Public Accountants Deborah F. Fraser Phil S. Vaughan Nancy L. Vaughan Kinilaerly,J. Roach 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, 2018, 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., Suite 101 ® Universal City, Texas 78148 Phone: 210 -658 -6229 0 1'ax. 210- 659 - 7611 a Email: info @avacpa.com + 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, 2018, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note IT to the financial statements in 2018 the City adopted new accounting guidance from the Governmental Accounting Standards Board Statement No. 75 related to accounting for post - employment benefits. This resulted in a restatement of prior year balances. Our opinion is not modified with respect to this matter. 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, and other post employment benefits as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. 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, and the other postemployment benefits 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 19, 2019 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 1.9, 2019 . 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, 2018. 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 $213.4 million (net position). Of this amount, $35.8 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 $17.2 million. A significant portion of this increase, 45.9 %, 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 $53.7 million, an increase of $4.7 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 $13.4 million which is 53% of the general fund expenditures not including capital outlay. The fund balance policy is to reserve at lease a 26% balance. During the fiscal year, the City issued $16.475 million in general obligation bonds and certificates of obligation of which $5.95 million 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 $213 million at the close of the most recent fiscal year. The largest portion of the City's total net position (71%) 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 (10.9 %) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position, $35.8 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 Note: Comparative information for 2017 has not been restated for the effects of the adoption of GASB Statement No. 75 as the information is not available. See Note IT for more detail. 7 Governmental Activities Business -Type Activities Total 2018 2017 2018 2017 2018 2017 Current and Other Assets $ 58,907,201 $ 53,489,898 $ 43,350,389 $ 34,305,074 $ 102,257,590 $ 87,794,972 Capital Assets 139,558,325 133,989,421 78,668,459 75,578,798 218,226,784 209,568,219 Total Assets 198,465,526 187,479,319 122,018,848 109,883,872 320,484,374 297,363,191 Deferred Outflows 2,896,350 3,637,434 732,459 997,659 3,628,809 4,635,093 Current Liabilities 7,846,103 7,331,101 5,190,642 5,029,905 13,036,745 12,361,006 Long -Term Liabilities 77,074,678 76,793,511 18,905,255 14,709,300 95,979,933 91,502,811 Total Liabilities 84,920,781 84,124,612 24,095,897 19,739,205 109,016,678 103,863,817 Deferred Inflows 1,431,927 344,220 286,584 - 1,718,511 344,220 Net Investment in Capital Assets 89,266,885 84,537,238 64,871,629 70,361,035 154,138,514 154,898,273 Restricted 23,391,047 20,437,116 - - 23,391,047 20,437,116 Unrestricted 2,351,236 1,673,567 33,497,197 20,781,291 35,848,433 22,454,858 Total Net Position $115,009,168 $106,647,921 $ 98,368,826 $ 91,142,326 $ 213,377,994 $ 197,790,247 Note: Comparative information for 2017 has not been restated for the effects of the adoption of GASB Statement No. 75 as the information is not available. See Note IT for more detail. 7 The government's net position increased by $17.2 million during the current fiscal year. Forty 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 Revenues: Program Revenues: Charges for Services Operating Contributions Capital Contributions General Revenues Property Taxes Other Taxes Investment Earnings Miscellaneous Total Revenues Governmental Activities 2018 2017 Business -Type Activities 2018 2017 Total 2018 2017 $ 6,100,438 $ 5,910,899 $ 33,191,796 $ 31,757,607 $ 39,292,234 $ 37,668,506 776,942 552,878 - 6,328,926 776,942 552,878 4,744,489 10,043,483 3,132,348 6,111,474 7,876,837 16,154,957 17,018,950 16,166,006 - — 17,018,950 16,166,006 15,625,556 13,595,041 - - 15,625,556 13,595,041 909,985 448,408 532,367 211,466 1,442,352 659,874 283,496 182,754 453,374 475,733 736,870 658,487 45,459,856 46,899,469 37,309,885 38,556,280 82,769,741 85,455,749 Expenses: General Government 7,421,918 6,328,926 7,421,918 6,328,926 Public Safety 13,899,278 13,840,802 13,899,278 13,840,802 Public Environment 4,930,723 4,728,907 - - 4,930,723 4,728,907 Parks and Recreation 2,707,292 2,859,974 2,707,292 2,859,974 Cultural 1,042,085 1,004,747 1,042,085 1,004,747 Health 724,780 776,494 724,780 776,494 Administration 3,067,983 3,127,102 - - 3,067,983 3,127,102 Interest and Other Fees 2,125,687 2,355,714 - - 2,125,687 2,355,714 Water and Sewer - - 23,579,854 21,370,009 23,579,854 21,370,009 EMS - - 6,110,407 6,356,185 6,110,407 6,356,185 Total Expenses 35,919,746 35,022,666 29,690,261 27,726,194 65,610,007 62,748,860 INCREASE IN NET POSITION BEFORE TRANSFERS 9,540,110 11,876,803 7,619,624 10,830,086 17,159,734 22,706,889 Transfers 19,186 9,399 (19,186) (9,399) - - CHANGE IN NET POSITION 9,559,296 11,886,202 7,600,438 10,820,687 17,159,734 22,706,889 BEGINNING NET POSITION 105,449,872 93,563,670 90,768,388 79,947,701 196,218,260 173,511,371 ENDING NET POSITION S 115,009,168 $105,449,872 $ 98,368,826 $ 90,768,388 $ 213,377,994 $ 196,218,260 Note: Comparative information for 2017 has been restated for the effects of the adoption of GASB Statement No. 75. See Note IT for more detail. $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 8 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% 6 Tux, 51 ®2018 ®2017 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) 2018 2017 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 $53.7 million. Of this total amount, $12.6 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 $12.6 million, while total fund balance was $15.6 million, an increase of $2.7 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 53% of total general fund expenditures, not including capital. The debt service fund has a total fund balance of $1.1 million all of which is restricted for the payment of debt service. The net decrease in fund balance during the current year in the debt service fund was $0.4 million. The refunding resulted in a Net Present Value Saving of $566,500 and a current loss of $89,237. The capital projects fund has a total fund balance of $16.1 million, a decrease of $.9 million. The City issued $4.845 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 $33.0 million and those for the Schertz EMS fund amounted to $.5 million. The proprietary fund issued $5.595 million in new certificate of obligation to supplement capital project activity during the year. General Fund Budgetary Highlights The General Fund expenditures were $2.7 million less than the $25.5 million budget. This was the result of cost savings across most of the General Fund. Revenues were higher by $2.3 than budgeted. Overall, the fund balance increased by $3.3 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, 2018, amounts to $218.2 million (net of accumulated depreciation). Developers contributed $7.9 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 6 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 $80.9 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 9 to the basic financial statements. TABLE A -4 Governmental Business -Type Activities Activities 2018 2017 2018 2017 Total 2018 2017 General Obligation Bonds $ 51,485,000 $ 55,225,000 $ 2,125,000 $ 2,530,000 $ 53,610,000 $ 57,755,000 Certificates of Obligation 12,940,000 8,560,000 12,815,000 8,050,000 25,755,000 16,610,000 Tax Notes and Leases 715,000 1,230,000 765,000 1,065,000 1,480,000 2,295,000 TOTALS $ 65,140,000 $65,015 ,O00 $15,705,000 $11,645,000 $ 80,845,000 $ 76,660,000 12 Governmental Business -Type Activities Activities Total 2018 2017 2018 2017 2018 2017 Land $ 8,069,499 $ 7,499,108 $ 1,357,539 $ 1,354,138 $ 9,427,038 $ 8,853,246 Water Rights - - 70,245 70,245 70,245 70,245 Buildings and Improvements 44,494,208 43,677,947 4,695,503 4,660,001 49,189,711 48,337,948 Machinery, Equipment, and Vehicles 12,299,312 10,347,015 5,441,459 5,013,077 17,740,771 15,360,092 Infrastructure 114,194,414 109,303,478 97,225,671 92,807,350 211,420,085 202,110,828 Construction in Progress 16,640,216 13,632,514 3,391,127 2,907,404 20,031,343 16,539,918 Accumulated Depreciation (56,139,324) (50,470,641) (33,513,085) (31,233,417) (89,652,409) (81,704,058) TOTALS $ 139,558,325 $ 133,989,421 $ 78,668,459 $ 75,578,798 $ 218,226,784 $ 209,568,219 Long -Term Debt. At the end of the current fiscal year, the City of Schertz had total bonded debt outstanding of $80.9 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 9 to the basic financial statements. TABLE A -4 Governmental Business -Type Activities Activities 2018 2017 2018 2017 Total 2018 2017 General Obligation Bonds $ 51,485,000 $ 55,225,000 $ 2,125,000 $ 2,530,000 $ 53,610,000 $ 57,755,000 Certificates of Obligation 12,940,000 8,560,000 12,815,000 8,050,000 25,755,000 16,610,000 Tax Notes and Leases 715,000 1,230,000 765,000 1,065,000 1,480,000 2,295,000 TOTALS $ 65,140,000 $65,015 ,O00 $15,705,000 $11,645,000 $ 80,845,000 $ 76,660,000 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 $13.3 million. The City of Schertz has appropriated $1.6 million of this amount for spending in the 2019 fiscal year budget in accordance to the City's fund balance policy. The approved tax rate increased to $0.5146 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, 2018 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 Refunding Deferred OPEB Related Outflows Deferred Pension Related Outflows TOTAL DEFERRED OUTFLOWS OF RESOURCES See Accompanying notes to basic financial statements. Primary Government Governmental Business -Type Activities Activities Total $ 2,671,069 $ 1,640,418 $ 4,311,487 50,043,465 1.9,224,541 69,268,006 3,001,107 - 3,001,107 1,682,500 5,792,01.7 7,474,517 90,909 - 90,909 7,949 6,324 14,273 94,876 177,099 271,975 (132,179) 132,179 - 57,459,696 26,972,578 84,432,274 701,922 3,962,917 4,664,839 - 12,414,894 12,414,894 745,583 - 745,583 8,069,499 1,357,539 9,427,038 - 70,245 70,245 44,494,208 4,695,503 49,189,711 12,299,312 5,441,459 17,740,771 114,1.94,414 97,225,671 211,420,085 16,640,216 3,391,127 20,031,343 (56,139,324) (33,513,085) (89,652,409) 141,005,830 95,046,270 236,052,1.00 15 198,465,526 1.22,018,848 320,484,374 743,71.8 71,061 814,779 1.31,029 39,982 171,01.1 2,021,603 621,416 2,643,019 $ 2,896,350 $ 732,459 $ 3,628,809 CITY OF SCHERTZ, TEXAS STATEMENT OF NET POSITION (CONTINUED) SEPTEMBER 30, 2018 Noncurrent Liabilities. Compensated Absences 981,859 Primary Government 1,225,790 Total Other Post - Employment Benefit Liabiliy Governmental Business -Type 2,643,565 Net Pension Liability Activities Activities Total LIABILITIES 448,570 - 448,570 Current Liabilities. - 62,507,272 14,520,027 77,027,299 Accounts Payable $ 1,673,922 $ 1,891,230 $ 3,565,152 Accrued Liabilities 633,179 187,520 820,699 Due to Other Governments 143,448 - 143,448 Unearned Revenue 35,720 431,098 466,818 Accrued Interest Payable 375,365 105,055 480,420 Compensated Absences 245,465 60,983 306,448 Customer Deposits 52,456 641,394 693,850 Current Service Concession Arrangement (Liability) 54,694 - 54,694 Current Portion of Long -Term Debt 4,631,854 1,873,362 6,505,216 Total Current Liabilities 7,846,103 5,190,642 13,036,745 Noncurrent Liabilities. Compensated Absences 981,859 243,931 1,225,790 Total Other Post - Employment Benefit Liabiliy 2,023,758 619,807 2,643,565 Net Pension Liability 11,113,219 3,521,490 14,634,709 Service Concession Arrangement (Liability) 448,570 - 448,570 Long -Term Debt 62,507,272 14,520,027 77,027,299 Total Noncurrent Liabilities 77,074,678 18,905,255 95,979,933 TOTAL LIABILITIES 84,920,781 24,095,897 109,01.6,678 DEFERRED INFLOWS OF RESOURCES Deferred Service Concession Arrangement 333,228 - 333,228 Deferred Inflows - Pension Related 1,098,699 286,584 1,385,283 TOTAL DEFERRED INFLOWS OF RESOURCES 1,431,927 286,584 1,71.8,511 NET POSITION Net Investment In Capital Assets 89,266,885 64,871,629 154,138,514 Restricted For: Police and Municipal Court 1,183,1.23 - 1,183,123 PEG Capital Fees 723,353 - 723,353 Tourism Development 1,846,947 - 1,846,947 Economic Development 17,811,968 - 17,811,968 Parks and Tree Mitigation 805,966 - 805,966 Debt Service 809,427 - 809,427 Scholarships and Other Purposes 210,263 - 210,263 Unrestricted 2,351,236 33,497,197 35,848,433 TOTAL NET POSITION $ 11.5,009,168 $ 98,368,826 $ 213,377,994 See Accompanying notes to basic financial statements. 16 CITY OF SCHERTZ, TEXAS STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2018 Program Revenues Operating Capital Charges for Grants and Grants and Functions and Programs Expenses Services Contributions Contributions 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 Prior Period Adjustment Net Position at End of Year $ 7,421,918 $ 1,013,698 $ 100,000 $ 4,744,489 13,899,278 4,104,911 524,015 - 4,930,723 - - - 2,707,292 640,231 132,332 - 1,042,085 313,668 6,854 - 724,780 27,930 13,741 - 3,067,983 - - - 2,125,687 - - - 35,919,746 6,100,438 776,942 4,744,489 23,579,854 27,099,237 - 3,132,348 6,110,407 6,092,559 - - 29,690,261 33,191,796 - 3,132,348 $ 65,610,007 $ 39,292,234 $ 776,942 $ 7,876,837 See Accompanying notes to basic financial statements. 17 Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business -Type - Activities Activities Total $ (1,563,731) $ (1,563,731) (9,270,352) (9,270,352) (4,930,723) (4,930,723) (1,934,729) (1,934,729) (721,563) (721,563) (683,109) (683,109) (3,067,983) (3,067,983) (2,125,687) (2,125,687) (24,297,877) (24,297,877) $ 6,651,731 6,651,731 (17,848) (17,848) 6,633,883 6,633,883 (24,297,877) 6,633,883 (17,663,994) 17,018,950 - 17,018,950 12,668,555 - 12,668,555 2,393,182 - 2,393,182 520,424 - 520,424 43,395 - 43,395 909,985 532,367 1,442,352 283,496 453,374 736,870 33,837,987 985,741 34,823,728 19,186 (19,186) - 9,559,296 7,600,438 17,159,734 106,647,921 91,142,326 197,790,247 (1,198,049) (373,938) (1,571,987) $ 115,009,168 $ 98,368,826 $ 213,377,994 18 CITY OF SCHERTZ, TEXAS BALANCE SHEET — GOVERNMENTAL FUNDS SEPTEMBER 30, 2018 See Accompanying notes to basic financial statements. 19 General Capital Debt Fund Projects Service ASSETS Cash and Cash Equivalents $ 1,391,876 $ 361,260 $ 27,896 Investments 13,202,101 16,469,940 1,071,962 Receivables (net of allowances) Taxes 2,136,274 - 84,934 Accounts and Other 1,682,001 - - Inventory 94,876 - - Restricted Assets: Cash and Cash Equivalents 701,922 - - TOTAL ASSETS $ 19,209,050 $ 16,831,200 $ 1,184,792 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts Payable $ 892,564 $ 658,395 $ - Accrued Salaries and Benefits 742,046 - - Customer Deposits 52,456 - - Due to Other Governments 143,448 - - Due to Other Funds 16,139 116,040 - Unearned Revenues 35,720 - - Total Liabilities 1,882,373 774,435 - Deferred Inflows of Resources: Unavailable Revenues 1,696,224 - 84,934 Fund Balances: Nonspendable: Inventory 94,876 - - Restricted for: Police and Public SafetylMuncipal Court 101,842 - - Municipal Court 728,350 - - PEG Capital Fees 723,353 - - Capital Improvement - 16,056,765 - Debt Service - 1,099,858 Tourism Development - - Parks and Tree Mitigation - - Historical Committee and Library - - Economic Development - - - Animal Control 35,660 - - Veterans 4,796 - - Scholarships 84,989 - - Committed for Civic CenterlCIED 454,376 - - Assigned for: Property Replacement 854,198 - - Unassigned 12,548,013 - - Total Fund Balances 15,630,453 16,056,765 1,099,858 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 19,209,050 $ 16,831,200 $ 1,184,792 See Accompanying notes to basic financial statements. 19 Economic Nonmajor Total Development Governmental Governmental Corporation Funds Funds $ 397,726 $ 492,315 $ 2,671,073 16,664,835 2,634,626 50,043,464 746,350 33,548 3,001,106 8,448 - 1,690,449 - - 94,876 - 701,922 $ 17,817,359 $ 3,160,489 $ 58,202,890 $ 5,391 $ 8,705 $ 1,565,055 - - 742,046 - - 52,456 - - 143,448 - - 132,179 - - 35,720 5,391 8,705 2,670,904 1,781,158 94,876 - 352,931 454,773 - - 728,350 - - 723,353 - 61,122 16,117,887 - - 1,099,858 - 1,846,947 1,846,947 - 805,966 805,966 - 84,818 84,818 17,811,968 - 17,811,968 - - 35,660 - - 4,796 - - 84,989 - - 454,376 - - 854,198 - - 12,548,013 17,811,968 3,151,784 53,750,828 $ 17,817,359 $ 3,160,489 $ 58,202,890 20 I rz/,� �N CITY OA 1, CITY OF SCHERTZ, TEXAS RECONCILIATION OF BALANCE SHEET SEPTEMBER 30, 2018 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. 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 OPEB Liabilities (and related deferred inflows and outflows of resources) do not consume current financial resources are not reported in governmental funds: OPEB Related Deferred Outflows net OPEB Liability 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 Inflows Pension Related Deferred Outflows TOTAL NET POSITION - GOVERNMENTAL ACTIVITIES See accompanying notes to basic financial statements. 21 $ 53,750,828 1.39,558,325 1,781,158 (65,140,000) (1,221,146) (34,264) (375,365) (1,227,324) (67,998,099) (503,264) 836,492 (333,228) - 131,029 (2,023,758) (1,892,729) (11,113,219) (1,098,699) 2,021,603 (10,190,315) $ 115,009,168 CITY OF SCHERTZ, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES — GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 EXPENDITURES Current: General Government 5,544,155 - Debt Public Safety General Capital Service Public Environment Fund Projects Fund REVENUES 1,672,789 - - Taxes $ 21,741,184 $ - $ 6,148,041 Permits and Fees 2,317,534 - - Service Fees 2,139,574 - - Fines and Fees 868,875 - - Intergovernmental 530,122 79,009 - Investment Earnings 252,397 282,213 61,928 Miscellaneous 690,810 - 100,000 TOTAL REVENUES 28,540,496 361,222 6,309,969 EXPENDITURES Current: General Government 5,544,155 - - Public Safety 12,718,070 - - Public Environment 1,136,052 - - Parks and Recreation 1,672,789 - - Cultural 939,095 - - Health 628,054 - - Administration 2,478,964 - - Capital Outlay 1,083,044 6,346,147 - Debt Service: 347,734 5,174,905 236,146 Principal 24,116 - 4,720,000 Interest and Fiscal Charges 3,056 - 2,096,134 Bond Issue Costs - 49,212 80,205 TOTAL EXPENDITURES 26,227,395 6,395,359 6,896,339 Excess (Deficiency) of Revenues Over (Under) Expenditures 2,313,101 (6,034,137) (586,370) OTHER FINANCING SOURCES (USES) Issuance of Debt - 4,845,000 - Issuance of Refunding Debt - - 6,035,000 Premiums from Issuance of Debt - 269,212 - Proceeds from Capital Lease 42,829 - - Payments to Refunding Escrow Agent - - (6,159,623) Transfers In 351,219 60,693 360,769 Transfers Out (46,314) - - TOTAL OTHER FINANCING SOURCES (USES) 347,734 5,174,905 236,146 Net Change in Fund Balance 2,660,835 (859,232) (350,224) Fund Balances at Beginning of Year 12,969,618 16,915,997 1,450,082 Fund Balances at End of Year $ 15,630,453 $ 16,056,765 $ 1,099,858 See accompanying notes to basic financial statements. 22 650,753 Other 6,327,133 Economic Nonmajor Total Development Governmental Governmental Corporation Funds Funds $ 4,223,053 $ 520,424 $ 32,632,702 - 239,522 2,557,056 - 19,619 2,159,193 - 181,114 1,049,989 - - 609,131 264,686 48,454 909,678 - 60,797 851,607 4,487,739 1,069,930 40,769,356 650,753 132,225 6,327,133 - 10,152 12,728,222 - - 1,136,052 - 25,083 1,697,872 - 16,058 955,153 - - 628,054 468,670 67,605 3,015,239 - 279,434 7,708,625 - - 4,744,116 - - 2,099,190 - - 129,417 1,119,423 530,557 41,169,073 3,368,316 539,373 (399,717) (625,769) (81,413) 5,051,603 2,742,547 457,960 4,651,886 15,069,421 2,693,824 49,098,942 $ 17,811,968 $ 3,151,784 $ 53,750,828 23 I rz/,� �N CITY OA 1, CITY OF SCHERTZ, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES •' b b C ' 1 1 NET CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS $ 4,651,886 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 7,476,978 Capital Contributions 4,744,489 Depreciation Expense (6,279,969) 5,941,498 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. (372,594) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. (11,446) 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 (10,880,000) Premiums Received from the Issuance of Debt (269,212) Payment to Refunding Escrow Agent 6,159,623 Principal Repayments 4,629,089 Amortization of Premiums, Discounts, Losses 29,856 (248,850) Governmental funds report required contributions to employee pensions and OPEB's 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 and OPEB's expense exceeded contributions. (31.3,730) 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 (157,475) Accrued Interest 70,007 (87,468) CHANGE IN NET POSITION - GOVERNMENTAL ACTIVITIES $ 9,559,296 See accompanying notes to basic financial statements. 24 CITY OF SCHERTZ, TEXAS STATEMENT OF NET POSITION - PROPRIETARY FUNDS SEPTEMBER 30, 2018 ASSETS Current Assets: 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 DEFERRED OUTFLOWS OF RESOURCES Governmental Business -Type Activities - Enterprise Funds Activities Water Internal and Sewer Schertz Service System EMS Total Fund $ 1,448,185 $ 192,233 $ 1,640,418 $ - 19,167,541 57,000 19,224,541 - 2,907,299 2,884,718 5,792,017 - 116,040 16,139 132,179 - 6,324 - 6,324 - 89,871 87,228 177,099 - 23,735,260 3,237,318 26,972,578 - 3,962,917 - 3,962,917 - 12,414,754 140 12,414,894 - 1,357,539 - 1,357,539 - 70,245 - 70,245 - 4,689,003 6,500 4,695,503 - 2,579,173 2,862,286 5,441,459 - 97,225,671 - 97,225,671 - 3,391,127 - 3,391,127 - (31,934,511) (1,578,574) (33,513,085) - 93,755,918 1,290,352 95,046,270 - 117,491,178 4,527,670 122,018,848 Deferred Loss on Refunding 71,061 - 71,061 Deferred OPEB Related Outflows 13,430 26,552 39,982 Deferred Pension Related Outflows 236,543 384,873 621,416 _ TOTAL DEFERRED OUTFLOWS $ 321,034 $ 411,425 $ 732,459 $ See accompanying notes to basic financial statements. 25 CITY OF SCHERTZ, TEXAS STATEMENT OF NET POSITION - PROPRIETARY FUNDS (CONTINUED) SEPTEMBER 30, 2018 LIABILITIES Current Liabilities: Accounts Payable Accrued Liabilities Customer Deposits Accrued Interest Payable Unearned Revenue Current Portion of Compensated Absences Current Portion of Long -Term Debt Total Current Liabilities Noncurrent Liabilities: Compensated Absences Total Other Post - Employment Benefit Liability Net Pension Liability Long -Term Debt (Net of Current Portion) Total Noncurrent Liabilities TOTAL LIABILITIES Governmental Business -Type Activities - Enterprise Funds Activities Water Internal and Sewer Schertz Service System EMS Total Fund $ 1,777,190 $ 114,040 $ 1,891,230 $ - 55,669 131,851 187,520 - 641,394 - 641,394 - 95,729 9,326 105,055 - 431,088 1.0 431,098 - 22,699 38,284 60,983 - 1,509,71.0 363,652 1,873,362 - 4,533,479 657,163 5,190,642 - 90,795 153,136 243,931 - 208,1.94 411,613 619,807 - 1,423,1.25 2,098,365 3,521,490 - 13,808,605 711,422 14,520,027 - 15,530,71.9 3,374,536 18,905,255 - 20,064,198 4,031,699 24,095,897 - DEFERRED INFLOWS OF RESOURCES Deferred Pension Related Inflows 69,675 216,909 286,584 TOTAL DEFERRED INFLOWS NET POSITION Net Investment in Capital Assets 64,656,352 215,277 64,871,629 - Unrestricted 33,021,987 475,210 33,497,197 - TOTAL NET POSITION $ 97,678,339 $ 690,487 $ 98,368,826 $ - 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, 2018 Business -Type Activities - Enterprise Funds Water and Sewer Schertz System EMS Total OPERATING REVENUES Governmental mLernai Service Fund Fees Charged to Users $ 26,906,716 $ 6,092,559 $ 32,999,275 $ - Charges for Premiums - - - 2,441,307 Other Charges 192,521 - 192,521 - TOTAL OPERATING REVENUES 27,099,237 6,092,559 33,191,796 2,441,307 OPERATING EXPENSES Personnel Services 2,052,660 4,043,032 6,095,692 2,441,307 Contribution to Joint Ventures 3,206,068 - 3,206,068 - Water Purchase 3,217,917 - 3,217,917 - Garbage Contractor 4,687,548 - 4,687,548 - Sewage Treatment 4,066,299 - 4,066,299 - General and Administrative 2,770,165 533,268 3,303,433 - Contractual Services 405,756 699,858 1,105,614 - Supplies and Maintenance 395,850 449,999 845,849 - Depreciation 2,333,982 371,827 2,705,809 - TOTAL OPERATING EXPENSES 23,136,245 6,097,984 29,234,229 2,441,307 OPERATING INCOME (LOSS) 3,962,992 (5,425) 3,957,567 - NONOPERATING REVENUES (EXPENSES) Investment Earnings 521,727 10,640 532,367 - Lease Income 263,469 - 263,469 - Miscellaneous 131,631 58,274 189,905 - Interest Expense (391,609) (12,423) (404,032) - Amortization (52,000) - (52,000) - TOTAL NONOPERATING REVENUES (EXPENSES) 473,218 56,491 529,709 - INCOME BEFORE CONTRIBUTIONS AND TRANSFERS 4,436,210 51,066 4,487,276 - Transfers In (Out) (15,546) (3,640) (19,186) - Capital Contributions 3,132,348 - 3,132,348 - CHANGE IN NET POSITION 7,553,012 47,426 7,600,438 - NET POSITION AT BEGINNING OF YEAR 90,252,474 889,852 91,142,326 - PRIOR PERIOD ADJUSTMENT (127,147) (246,791) (373,938) NET POSITION AT END OF YEAR $ 97,678,339 $ 690,487 $ 98,368,826 $ - See accompanying notes to basic financial statements. 27 CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 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 Proceeds from Issuance of Debt /Capital Leases Interest Paid on Long -Tenn Debt Principal Paid on Long -Term Debt Net Cash Provided (Used) by Capital and Related Financing Activities Cash Flows From Investing Activities: Sale (Purchase) of Investments Premium 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 Activities Internal Service Fund $ 27,080,410 $ 6,332,268 $ 33,412,678 $ - - - - 2,441,307 (1,980,148) (3,976,477) (5,956,625) (2,441,307) (19,047,974) (1,631,429) (20,679,403) - 6,052,288 724,362 6,776,650 15,546 (187,583) (172,037) 15,546 (187,583) (172,037) (1,808,605) (854,517) (2,663,122) - 5,595,000 332,967 5,927,967 - (423,338) (13,828) (437,166) - (1,275,000) (396,134) (1,671,134) - 2,088,057 (931,512) 1,156,545 - (7,609,944) 576,326 (7,033,618) - 282,000 - 282,000 - 263,469 - 263,469 - 521,727 10,640 532,367 - (6,542,748) 586,966 (5,955,782) - 1,613,143 192,233 1,805,376 - 2,353,733 - 2,353,733 - 1,444,226 - 1,444,226 - 3,797,959 - 3,797,959 - 1,448,185 192,233 1,640,418 - 3,962,917 - 3,962,917 - $ 5,411,102 $ 192,233 $ 5,603,335 $ - 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, 2018 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 Deferred OPEB Related Outflows Increase (Decrease) in Liabilities: Accounts Payable Accrued Liabilities Customer Deposits Unearned Revenue Compensated Absences Net Pension Liability Deferred Pension Inflows Net Other Post - employment Benefit Payable Net Cash Provided (Used) by Operating Activities Business -Type Activities - Enterprise Funds Water and Sewer Schertz System EMS Total Governmental Activities Internal Service Fund $ 3,962,992 $ (5,425) $ 3,957,567 $ - 131,631 58,274 1.89,905 - 2,333,982 371,827 2,705,809 - (187,804) 207,987 20,183 - (38,081) (5,588) (43,669) - 122,706 163,539 286,245 (13,430) (26,552) (39,982) (260,290) 57,284 (203,006) - 10,299 1,062 11,361 - 50,776 - 50,776 - 17,435 (23,146) (5,711) - (180,1.99) (356,261) (536,460) 69,675 216,909 286,584 - 32,596 64,452 97,048 - $ 6,052,288 $ 724,362 $ 6,776,650 $ - Noncash Capital and Related Financing Transactions: Developer Contributions of Capital Assets $ 3,132,348 See accompanying notes to basic financial statements. 29 NOTES TO BASIC FINANCIAL STATEMENTS 30 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2018 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 government'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 component unit: 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. 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. L 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, 2018 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, 2018 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) and a Capital Recovery Fund. 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 fund'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 fiends 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, 2018 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus. Basis of Accounting. 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 net asset value value of the pool shares. The city reports investments at fair value based on hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset's fair value: Level 1 inputs are quotes prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. Investments are stated at fair value (plus accrued interest) except for money market investments and participating interest - earning investment contracts (U.S. Treasuries) that have a remaining maturity at time of purchase of one year or less. Those investments are stated at amortized cost. F. Receivables and Payables Activities between the funds that are representative of inter -fund 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 34 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) F. Receivables and Pavables (Continued) 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. 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. 35 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) I. Capital Assets (continued) 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 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. The general fund, water and sewer fund and the EMS fund are used to liquidate compensated absences. 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. 36 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) M. Other Post- Emblovment Benefits The net position of the Texas municipal Retirement System (TMRS) and the City's Retiree Health Insurance have been determined using the flow of economic resources measurement focus and full accrual basis of accounting. This includes for the purposes of measuring OPEB liability, deferred outflows of resources and deferred inflows of resources related to other post - employment benefits, OPEB expense, and information about assets, liabilities and additions or deductions from the net position. Benefit payments are recognized when due and payable in accordance with the benefit terms. There are no investments as both OPEBs are pay as you go. N. Lona -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. O. 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. 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 formal 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. 37 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) O. Fund Equity (Cont.) 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. P. 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. Q. 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. R. 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. S. Reclassifications Certain reclassifications have been made in the presentation of the September 30, 2018 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. T. Adoption of Statement No. 75 In accordance with GASB Statement No. 75, the City has recorded a prior period adjustment to recognize the Other Post - Employment Benefits Liability as described in Note. The OPEB liability was allocated between the general and proprietary funds to restate beginning balances in accordance with the statement. The restatement is noted as a prior period adjustment on the Government -wide Statement of Activities, as well as the Statement of Revenues, Expenses and Changes in Net Position — Proprietary Funds. 38 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 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, 2018, the City had the following pooled investment funds: Investment Type LOGIC Lone Star Investment Pool Texas CLASS Schertz Bank & Trust - Certificates of Deposit Capital One - U.S. Agency Securities Total Value $ 19,740,226 33,252,622 22,367,413 3,1.82,350 3,1.40,289 $ 81,682,900 Weighted Average Input Maturity Level in Days 1 34 1 42 1 79 1 82 1 429 67 Value Method NAV NAV NAV Amortized Cost Amortized Cost 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 outperform 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, 2018, 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, 2018, 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, 2018, 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. Restricted Cash — Cash is restricted in the Proprietary fund for construction projects, impact fees and customer deposits. 39 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 3 - PROPERTY TAX 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, 2017, upon which the fiscal 2018 levy was based, was $3,431,208,548 (i.e., market value less exemptions). The estimated market value was $4,546,451,734 making the taxable value 75.5% 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, 2018, was $0.4910 per $100 of assessed value, which means that the City has a tax margin of $2.009 for each $1.00 value and could increase its annual tax levy by approximately $68,932,979 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. 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. 40 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 4 - RECEIVABLES Receivables as September 30, 2018 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 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: General Fund Delinquent Property Taxes Receivable Court Fines Total General Fund Debt Service Fund Delinquent Property Taxes Receivable Total Debt Service Fund Total Governmental Funds 41 $ 158,049 1,538,175 1,696,224 84,934 84,934 $ 1,781,158 Governmental Funds Proprietary Funds Economic Debt Nonmajor Water and Schertz General Development Service Funds Sewer Fund EMS $ 168,137 $ - $ 90,355 $ - $ - $ - 1,492,700 746,350 - - - - - - - 33,548 - - 485,525 - - - - - 143,826 - - - 3,011,81.8 18,450,194 3,779,300 - - - - - - 8,448 - - - 41,932 6,069,488 754,798 90,355 33,548 3,01.1,818 1.8,492,126 2,251,21.3 - 5,421 - 1.04,519 1.5,607,408 $ 3,818,275 $ 754,798 $ 84,934 $ 33,548 $ 2,907,299 $ 2,884,71.8 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: General Fund Delinquent Property Taxes Receivable Court Fines Total General Fund Debt Service Fund Delinquent Property Taxes Receivable Total Debt Service Fund Total Governmental Funds 41 $ 158,049 1,538,175 1,696,224 84,934 84,934 $ 1,781,158 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 5 - INTERFUND BALANCES AND TRANSFERS The composition of interfund balances as of September 30, 2018 is as follows: Due From Capital Projects Fund EMS Due To Water & Sewer General Amount Purpose $ 116,040 Structured funding for Waterline Project 16,139 Short -term pooled cash loan The following schedule briefly summarizes the City's transfer activity for the year ending September 30, 2018: Transfer From Transfer To Amount Purpose Nonmajor Governmental General $ 86,219 Supplement DEA expenditures EMS Capital Projects 3,640 Supplement capital purchases Economic Development Debt Service 360,769 Pledge in support of debt service Economic Development General 265,000 Pledge support of General Fund General Nonmajor Governmental 4,806 Supplement expenses Water & Sewer Capital Projects 15,546 Supplement capital purchases General Capital Projects 41,508 Supplement capital purchases NOTE 6 - CAPITAL ASSETS (6,279,969) Capital asset activity for the year ended September 30, 2018 was as follows: Beginning Ending Balance Increases Deletions Transfers Balance Governmental Activities: Governmental Activities Capital Assets, Net Capital Assets, Not Being Depreciated: $ 8,805,349 Land $ 7,499,108 $ 570,391 $ - $ - $ 8,069,499 Construction in Progress 13,632,514 5,871,553 (2,863,851) 16,640,216 Total Capital Assets Not Being Depreciated 21,131,622 6,441,944 (2,863,851) 24,709,715 Capital Assets, Being Depreciated: Buildings and Improvements 43,677,947 977,816 (161,555) - 44,494,208 Machinery, Equipment, and Vehicles 10,347,015 2,774,622 (822,325) 12,299,312 Streets and Infrastructure 109,303,478 4,890,936 114,194,414 Total Capital Assets Being Depreciated 163,328,440 8,643,374 (983,880) - 170,987,934 Accumulated Depreciation Buildings and Improvements (12,280,121) (1,577,757) 12,117 - (13,845,761) Machinery, Equipment, and Vehicles (5,813,559) (981,491) 599,169 (6,195,881) Streets and Infrastructure (32,376,961) (3,720,721) - - (36,097,682) Total Accumulated Depreciation (50,470,641) (6,279,969) 611,286 - (56,139,324) Total Capital Assets Being Depreciated, Net 112,857,799 2,363,405 (372,594) 114,848,610 Governmental Activities Capital Assets, Net $ 133,989,421 $ 8,805,349 $ (3,236,445) $ $ 139,558,325 42 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 6 - CAPITAL ASSETS (Continued) Capital asset activity for the year ended September 30, 2018 was as follows: Business -Type Activities: Water and Sewer System $ 2,333,982 EMS 371,827 Total Depreciation Expense - Business Type Activities $ 2,705,809 43 Beginning Ending Balance Increases Deletions Transfers Balance Business -Type Activities: Capital Assets, Not Being Depreciated: Land $ 1,354,138 $ 3,401 $ $ $ 1,357,539 Water Rights 70,245 - 70,245 Construction in Progress 2,907,404 1,805,198 (1,321,475) 3,391,127 Total Assets Not Being Depreciated 4,331,787 1,808,599 (1,321,475) 4,818,911 Capital Assets, Being Depreciated: Buildings and Improvements 4,660,001 35,502 4,695,503 Machinery, Equipment, and Vehicles 5,013,077 854,523 (426,141) - 5,441,459 Infrastructure 92,807,350 4,418,321 97,225,671 Total Capital Assets Being Depreciated 102,480,428 5,308,346 (426,141) 107,362,633 Accumulated Depreciation: Buildings and Improvements (2,474,006) (156,004) (2,630,010) Machinery, Equipment, and Vehicles (2,995,600) (1,932,717) - (4,928,317) Infrastructure (25,763,811) (617,088) 426,141 (25,954,758) Total Accumulated Depreciation (31,233,417) (2,705,809) 426,141 (33,513,085) Total Capital Assets Being Depreciated, Net 71,247,011 2,602,537 - 73,849,548 Business -Type Activities Capital Assets, Net $ 75,578,798 $ 4,411,136 $ (1,321,475) $ $ 78,668,459 Depreciation expense was charged to functions /programs of the primary government as follows: Governmental Activities: General Government $ 659,064 Public Safety 803,019 Public Environment 3,747,059 Parks and Recreation 886,559 Cultural 58,61.7 Health 90,1.64 Administration 35,487 Total Depreciation Expense - Governmental Activities $ 6,279,969 Business -Type Activities: Water and Sewer System $ 2,333,982 EMS 371,827 Total Depreciation Expense - Business Type Activities $ 2,705,809 43 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 7 - 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 Business -type September 30, Total 2019 $ 260,569 2020 273,597 2021 287,277 2022 301,641 2023 316,756 2024 -2028 1,827,598 $ 34,264 $ 3,267,438 NOTE 8 - CAPITAL LEASE 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, 2018: Assets: Equipment Less Accumulated Depreciation Total Future minimum lease payments are as follows: Year Ending September 30, 2018 2019 2020 2021 Total Payments Less: Amount Representing Interest Present Value of Minimum Lease Payments 44 Governmental Business -type Activities Activities $ 42,825 $ 680,671 - (364,637) $ 42,825 $ 316,034 Governmental Business -type Activities Activities $ 8,565 $ 89,671 $ 8,565 $ 67,31.3 $ 8,565 $ 67,31.3 8,569 66,875 34,264 291,1.72 - (1,61.9) $ 34,264 $ 289,553 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 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 August 2018, the City issued $10,440,000 in Certificates of Obligations Series 2018 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, designing, constructing , acquiring, purchasing renovating, equipping and enlarging the utility system, upgrading the security locks in city buildings, designing and constructing a new fleet building, parks and recreational facilities for pool and bathrooms and various other item. In January of 2018, the City issued $6,035,000 in General Obligation Refunding Bonds, Series 2018. The proceeds were to be used within 90 days of issuance to pay off the outstanding balance of the General Obligation Bond, Series 2008 remaining balance of $6,035,000. The refunding resulted in a Net Present Value Saving of $566,500 and a current loss of $89,237. A summary of the terms of general obligation bonds and combination of tax and revenue certificates of obligation outstanding at September 30, 2018, follows: 45 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 Total Governmental Long -Term Obligations $ 65,140,000 Issue Amount Maturity Rate Balance Primary Government General Obligation Bonds 2007 Series $ 6,000,000 2027 4.07% $ 3,205,000 2008 Series 9,900,000 2028 4.13% - 2009 Series 9,500,000 2033 2.0%-5.50% 4,915,000 2010 Series, Refunding 2,865,000 2021 2.0%-4.0% 930,000 2011 Series 8,250,000 2036 3.0%-6.0% 6,830,000 2011A Series, Refunding 6,745,000 2024 2.33% 3,450,000 2012 Series 7,625,000 2032 2.00% 5,785,000 2014 Series, Refunding 8,450,000 2030 2.0 % -4.0% 8,100,000 2015 Series, Refunding 4,185,000 2031 2.0% -3.25% 3,165,000 2016 Series 5,880,000 2036 2.0 % -4.0% 5,270,000 2017 Series 3,935,000 2037 2.0 % -4.0% 3,800,000 2018 Series, Refunding 6,035,000 2028 2.12% 6,035,000 Tax Notes 2015 Notes 245,000 2021 1.75% 110,000 2015A Notes 1,020,000 2023 1.54% 605,000 Certificates of Obligation 2016 Series A 2,375,000 2036 2.0%-4.0% 2,040,000 2016 Series B 1,475,000 2036 3.0% -3.75% 1,365,000 2017 Series 4,935,000 2037 3.0% -3.75% 4,690,000 2018 Series 4,845,000 2038 3.0 % -5.0% 4,845,000 Total Governmental Long -Term Obligations $ 65,140,000 46 Issue Amount Maturity Rate Balance Primary Government (Continued) General Obligation Bonds 2011 . Series, Refunding $ 2,675,000 2021 2.0%-3.0% $ 705,000 2013 . Series, Refunding 2,130,000 2025 2.58% 1,420,000 Certificates of Obligation 2007 Series CIB 1 6,600,000 2026 4.01% 3,290,000 2013 Series 4,965,000 2033 2.0 % -4.0% 3,490,000 2017 Series 540,000 2022 3.0% -3.75% 440,000 2018 Series 5,595,000 2028 3.0 % -5.0% 5,595,000 Tax Notes 2015 Notes 1,880,000 2021 1.75% 765,000 Total Business -Type Long -Term Obligations $ 1.5,705,000 46 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 9 - LONG -TERM DEBT (Continued) Changes in long -term debt for the year ending September 30, 2018 are as follows: Business -Type Activities General Obligation Refunding Bonds Balance $ - $ (405,000) Balance Due Within Unamortized Premium 9/30/2017 Additions Reductions 9/30/2018 One Year Governmental Activities: 8,050,000 5,595,000 (830,000) 12,815,000 1,030,000 General Obligation Bonds $ 38,070,000 $ - $ (8,265,000) $ 29,805,000 $ 1,470,000 Unamortized Premium 751,168 - (49,489) 701,679 49,403 General Obligation Refunding Bonds 17,155,000 6,035,000 (1,510,000) 21,680,000 2,095,000 Unamortized Premium 637,446 - (71,229) 566,217 66,659 Certificates of Obligation 8,560,000 4,845,000 (465,000) 12,940,000 720,000 Unamortized Premium 451,415 269,212 (23,661) 696,966 37,227 Tax Notes 1,230,000 - (515,000) 715,000 185,000 Capital Lease 25,147 42,829 (33,712) 34,264 8,565 Compensated Absences 1,069,849 361,984 (204,509) 1,227,324 245,465 Total Governmental Activities $ 67,950,025 $ 11,554,025 $ (11,137,600) $ 68,366,450 $ 4,877,319 Business -Type Activities General Obligation Refunding Bonds $ 2,530,000 $ - $ (405,000) $ 2,125,000 $ 420,000 Unamortized Premium 3,626 - (969) 2,657 969 Certificates of Obligation 8,050,000 5,595,000 (830,000) 12,815,000 1,030,000 Unamortized Premium 124,779 282,000 (10,601) 396,178 27,620 Tax Notes 1,065,000 - (300,000) 765,000 305,000 Capital Lease 92,721 332,966 (136,134) 289,553 89,773 Compensated Absences 310,625 55,652 (61,363) 304,914 60,983 Total Business-Type Activities $ 12,176,751 $ 6,265,618 $ (1,744,067) $ 16,698,302 $ 1,934,345 47 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 9 - LONG -TERM DEBT (Continued) Annual debt service requirements of bonded debt as of September 30, 2018, are as follows: 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. 48 Governmental Activities September 30, Principal Interest Total 2019 4,470,000 2,299,780 6,769,780 2020 4,615,000 2,118,038 6,733,038 2021 4,680,000 1,938,866 6,618,866 2022 4,535,000 1,774,650 6,309,650 2023 4,530,000 1,628,247 6,158,247 2024 -2028 20,200,000 6,062,986 26,262,986 2029 -2033 15,510,000 2,668,949 18,178,949 2034 -2038 6,600,000 425,131 7,025,131 Total $ 65,140,000 $ 18,916,647 $ 84,056,647 Business -Type Activities September 30, Principal Interest Total 2019 $ 1,755,000 $ 565,402 $ 2,320,402 2020 1,805,000 494,452 2,299,452 2021 1,695,000 438,609 2,133,609 2022 1,080,000 386,196 1,466,196 2023 1,000,000 347,917 1,347,917 2024 -2028 3,920,000 1,170,295 5,090,295 2029 -2033 2,625,000 545,269 3,170,269 2034 -2038 1,825,000 159,350 1,984,350 Total $ 1.5,705,000 $ 4,107,490 $ 19,812,490 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. 48 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 10 - 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, 2017 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 2016 2017 84 98 155 166 317 322 556 586 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 2017 and 2018, respectively. The City's contributions to TMRS for the year ended September 30, 2018 . were $2,971,592 and were equal to the required contributions. Net Pension Liability The City's Net Pension Liability (NPL) was measured as of December 31, 2017, and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. 49 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 10 - RETIREMENT PLAN (Continued) Texas Municipal Retirement System (Continued) Actuarial Assumptions The Total Pension Liability in the December 31, 2017 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, 2017 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). CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 10 - 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 2018 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% 10.00% 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. 51 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 10 - 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, 2017: Balance at December 31, 2016 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, 2017 Total Pension Plan Fiduciary Net Pension Liability Net Position Liability $ 60,296,483 $ 43,270,388 $ 17,026,095 3,073,538 4,111,517 3,073,538 4,111,517 416,585 - 416,585 2,793,644 (2,793,644) 1,232,232 (1,232,232) 5,999,805 (5,999,805) (1,843,774) (1,843,774) - (31,080) 31,080 - (1,575) 1,575 5,757, 866 8,149,252 (2,391,3 86) $ 66,054,349 $ 51,419,640 $ 14,634,709 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 $ 26,020,200 $ 14,634,709 $ 5,500,868 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. 52 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 10 - 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, 2018, the City recognized pension expense of $3,133,938. Also as of September 30, 2018, 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 $ 454,423 $ 29,936 1,385,283 2,158,660 - $ 2,643019 $ 1,385,283 Deferred outflows of resources in the amount of $2,158,660 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 September 30, 2018.. 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, 2018 2019 2020 2021 2022 Thereafter 53 $ 69,211 (12,983) (499,204) (519,473) 61,525 $ (900,924) CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 12 — OTHER POST - EMPLOYMENT BENEFITS TMRS Supplemental Death Benefits Other Post- Employment Benefit The City also participates in the cost sharing single- employer defined benefit group -term life insurance plan operated by the Texas Municipal Retirement System (TMRS) known as the 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. 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 post - employment benefit," or OPEB. Membership in the plan at December 31, 2017, the valuation and measurement date, consisted of- Inactive Employees or Beneficiaries Currently Receiving Benefits Inactive Employees Entitled to but Not Yet Receiving Benefits Active employees The SDBF required contribution rates, based on these assumptions, are as follows: 2017 78 49 322 449 Total SDBF Contribution Retiree Portion of SDBF Rate Contribution Rate For the Plan Year Ended December 31, 2017 0.12% 0.01% 2018 0.12% 0.02% These contribution rates are based on actuarial assumptions developed primarily from the actuarial investigation of the experience of TMRS over the four year period from December 31, 2010 to December 31, 2014. They are adopted in 2015 and first used in the December 31, 2015 actuarial valuation. The post - retirement mortality assumption for healthy annuitants and Annuity Purchase Rate (APRs) are based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. In conjunction with these changes first used in the December 31, 2013 valuation, the System adopted the Entry Age Normal actuarial cost method. These assumptions are summarized below. 54 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 12 — OTHER POST - EMPLOYMENT BENEFITS (Continued) TMRS Supplemental Death Benefits Other Post- Employment Benefit (Continued) Methods and Assumptions Used to Determine Contribution Rates: Valuation Date: Actuarially determined contribution rates are calculated as of December 31 and become effective in January, thirteen (13) months later. Methods and Assumptions Used to Determine Contribution Rates: Inflation 2.50% Salary Increases 3.50% to 10.5% Including Inflation Discount Rate 3.31 % (Based on Fidelity's 20 -Year Municipal GO AA Index) Administrative Expenses All administrative expenses are paid though the Pension Trust and accounted for under reporting requirements under GASB Statement No. 68, Mortality Rates - Service Retirees RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with scale BB. RP2000 Combined Mortality Table with Blue Collar Adjustment with Mortality Rates - Disabled Retirees male rates multiplied by 109% and female rates multiplied by 103% with a 3 year set - forward for both males and females. The rates are projected on a fully generational basis with scale BB to account for future mortality improvements subject to the 3% floor. . Other Information: No assets are accumulated in a trust that meets the criteria in paragraph 4 of Statement NO. 75 to pay related benefits. Total. City's Total OPEB Liability (TOL), based on the above actuarial factors, as of December 31, 2017, . the measurement and actuarial valuation date, was calculated as follows: Balance at December 31, 2016 Changes for the year: Service Cost Interest on Total OPEB Liability Change of Benefit Terms Difference Between Expected and Actual Experience Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions Other Changes Balance at December 31, 2017 Total OPEB Liability $ 519,156 29,926 20,123 57,257 (3,521) $ 622 941 There is no separate trust maintained to fund this TOL. No assets have accumulated in a trust that meets the criteria in paragraph 4 of Statement No. 75 to pay related benefits. 55 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 12 — OTHER POST - EMPLOYMENT BENEFITS (Continued) TMRS Supplemental Death Benefits Other Post- Employment Benefit (Continued) The following presents the TOL of the City, calculated using the discount rate of 3.31 % as well as what the City's TOL would be if it were calculated using a discount rate that is 1- percentage point lower (2.31 %) and 1- percentage point higher (4.31 %) than the current rate: Discount Rate Discount Rate Discount Rate 2.31% 3.31% 4.31% Total SDB OPEB Liability $ 774,205 $ 622,941 $ 509,511 For the year ended September 30, 2018, the City recognized OPEB expense of $54,149. Also as of September 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to the TMRS OPEB 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 Outflows of Resources 49,435 Deferred Inflows of Resources 2,697 - $ 52 132 $ - outflows of resources in the amount of $2,697 is related to OPEB benefits resulting from contributions subsequent to the measurement date, and will be recognized as a reduction of the total TMRS OPEB liability for the plan year ended December 31, 2018. Other amounts reported as deferred outflows and inflows of resources related to the TMRS OPEB will be recognized in OPEB expense in future periods as follows: For the Year ended September 30, 2018 2019 2020 2021 2022 2023 Thereafter 56 $ 7,822 7,822 7,822 7,822 7,822 1.0,325 $ 49,435 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 12 — OTHER POST - EMPLOYMENT BENEFITS (Continued) City of Schertz Retiree Health Other Post- Employment Benefit Plan In addition to the TMRS OPEB, The City administers a single - employer defined benefit healthcare plan for retirees, established under legal authority of the City Charter. The City is the only employer participating in the Plan. The Plan does not issue a publicly available financial report. The City provides post - employment benefits for eligible participants enrolled in City- sponsored plans. The benefits are provided in the form of an implicit rate subsidy where the City contributes towards the retiree health premiums before achieving Medicare eligibility. While the Plan offers retiree only rates, a very small implicit liability still exists. Membership in the plan as of September 30, 2018, the measurement date, consisted of- Inactive Employees or Beneficiaries Currently Receiving Benefits Inactive Employees Entitled to but Not Yet Receiving Benefits Active employees 2017 . 313 319 Current active employees must be eligible for service retirement under the Texas Municipal Retirement System. To attain this eligibility active employees must be at least age 60 with 5 years of service or have at least 20 years of employment with the City. When a regular, full -time employee retires, they are eligible to maintain their coverage in the City's group health coverage. The City does not provide an explicit subsidy for retiree medical insurance. The liability for the city is due to the implicit rate. * The City made no direct contributions for monthly premiums. The retirees pay 1.02% of the monthly premiums which range based on the type of plan from $491.72 for retiree only to $1737.24 for a retiree and their family. W CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 12 — OTHER POST - EMPLOYMENT BENEFITS (Continued) City of Schertz Retiree Health Other Post - Employment Benefit Plan (Continued) Methods and Assumptions Used to Determine Contribution Rates: Valuation Date: December 31, 2017 Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Individual Entry- Age Discount Rate 3.31% as of December 31, 2017 Inflation 2.50% Salary Increases 3.50% to 10.5% Including Inflation Demographic Assumptions: Based on the experience study covering the four -year period ending December 31, 2014 as conducted for the Texas Municipal System(TMRS) Mortality For healthy retirees, the gender distinct RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with scale BB to account for future mortality improvements. Health Care Trend Rates Initial rate of 7.5% to an ultimate rate of 4.25% after 15 years. Participation Rates 30% on non - Medicare retirees Other Information: The discount rate changed form 3.81% as of December 31, 2016 to 3.31% as of December 31, 2017 The City's Retiree Health OPEB Liability (TOL), based on the above actuarial factors, as of September 30, 2018, the measurement and actuarial valuation date, was calculated as follows: Balance at December 31, 2016 Changes for the year: Service Cost Interest on Total OPEB Liability Change of Benefit Terms Difference Between Expected and Actual Experience Changes of Assumptions or Other Inputs Benefit Payments, Including Refunds of Employee Contributions Other Changes Balance at December 31, 2017 58 Total OPEB Liability $ 1,789,769 107,517 69,435 96,092 (42,189) $ 2,020,624 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 12 — OTHER POST - EMPLOYMENT BENEFITS (Continued) City of Schertz Retiree Health Other Post - Employment Benefit Plan (Continued) Methods and Assumptions Used to Determine Contribution Rates (Continued): There is no separate trust maintained to fund this TOL. No assets are accumulated in a trust that meets the criteria in paragraph 4 of Statement NO. 75 to pay related benefits. The following presents the TOL of the City, calculated using the discount rate of 3.31% as well as what the City's TOL would be if it were calculated using a discount rate that is 1- percentage point lower (2.31 %) and 1- percentage point higher (4.31 %) than the current rate: Discount Rate Current Discount Rate Discount Rate Assumption 2.31% 3.31% 4.31% Total OPEB Retiree Health Insurance 2,227,086 $ 2,020,624 $ 1,832,775 Liability The following presents what the total OPEB liability of the City would be if it were calculated using healthcare cost trend rates that are 1- percentage point lower (6% decreasing to 3.5 %) or 1- percentage point higher (8% decreasing to 5.5 %) than the current healthcare cost trends: Discount Rate Current Healthcare Cost Discount Rate Trend Rate Assumption 2.31% 3.31% 4,31% Total OPEB Retiree Health Insurance $ 1,771,544 $ 2,020,624 $ 2,317,552 Liability For the year ended September 30, 2018, the City recognized OPEB expense of $186,440. Also as of September 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Differences between Expected and Actual Economic Experience Changes in Actuarial Assumptions Contributions Subsequent to the Measurement Date Deferred Deferred Outflows of Inflows of Resources Resources 86,604 32,275 - $ 118,879 $ - W CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 12 — OTHER POST - EMPLOYMENT BENEFITS (Continued) City of Schertz Retiree Health Other Post- Employment Benefit Plan (Continued) Methods and Assumptions Used to Determine Contribution Rates (Continued): Amounts reported as deferred outflows and inflows of resources related to the City's Retired Health OPEB will be recognized in OPEB expense as follows: For the Year ended September 30, 2019 $ 9,488 2020 9,488 2021 9,488 2022 9,488 2023 9,488 Thereafter 39,164 $ 86,604 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 $2,906,068 for the year ended September 30, 2018. Separate financial statements for the Schertz /Seguin Local Government Corporation may be obtained from the City of Seguin, 210 East Gonzales Street, Seguin, Texas 781.56. 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, 2017: ASSETS: Current Assets $ 15,779,192 Restricted Cash and Cash Equivalents 73,447,779 Property, Plant & Equipment (net) 95,008,923 Other Assets 28,653 TOTAL ASSETS 184,264,547 Deferred Charges on Refunding 2,412,138 LIABILITIES: Current Liabilities 5,522,205 Revenue Bonds (Less Current Maturities) 164,983,651 TOTAL LIABILITIES 170,505,856 NET POSITION: Net Investment in Capital Assets (1,956,872) Restricted 6,255,257 Unrestricted 11,872,444 TOTAL NET POSITION $ 16,170829 60 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 13 - JOINT VENTURES (Continued) Schertz /Seguin Local Government Corporation (Continued) The Corporation had net revenue bonds outstanding in the amount of $103,281,449 (as of September 30, 2017) 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. 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 fund. 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, 2017: ASSETS: Current Assets $ 443,091. Noncurrent Assets 1,503,917 TOTAL ASSETS 1,947,008 LIABILITIES: Current Liabilities 90,238 TOTAL LIABILITIES 90,238 NET POSITION: Net Investment in Capital Assets 1,503,91.7 Unrestricted 352,853 TOTAL NET POSITION $ 1,856,770 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. 61 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 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 Interest Total 2019 155,000 257,250 412,250 2020 160,000 254,150 414,150 2021 165,000 250,950 410,950 2022 170,000 247,750 410,950 2023 175,000 242,800 410,950 2024 -2028 965,000 1,123,300 2,088,300 2029 -2033 1,105,000 922,850 2,027,850 2034 - 2038 1,340,000 659,950 1,999,950 2039 - 2043 1,800,000 298,600 2,098,600 2044 395,000 15,800 410,800 $ 6,430,000 $ 4,273,400 $ 10,684,750 NOTE 13 — PRIOR PERIOD ADJUSTMENT Government -Wide Governmental Activities Beginning Net Position $ 106,647,921 Understated OPEB Liability in Prior Year (1,198,049) Restated Beginning Net Position $ 105,449,872 Business - Type Activities Water and Sewer Schertz EMS System Beginning Fund Balances $ 90,252,474 $ 889,852 Understated OPEB Liability in Prior Year (127,147) (246,791) Restated Beginning Fund Balances $ 90,125,327 $ 643,061 NOTE 14 - COMMITMENTS AND CONTINGENCIES Tax Increment Financing (the "Zone') Total $ 91,142,326 (373,938) $ 90,768,388 The City is a principal in the City of Schertz Tax Increment Reinvestment Zone #2, pursuant to Chapter 31.1 . 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. 62 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 14 - COMMITMENTS AND CONTINGENCIES (Continued) Tax Increment Financing (the "Zone') (Continued) 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 $1,651,413 from taxing entities (net of administrative reimbursements) and remitted $1,077,316 to the developer as of September 30, 2018. 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, 2018, the City reimbursed $816,192 in property taxes paid. 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, 2018, 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 $1.00 million in taxable property). The City and Corporation's outstanding incentive agreement grants are as follows: FY 2017 -18 Amt. Est. Remaining Grant City of Schertz - LGC 380.001 $ 816,192 $ 1,377,080 SEDC - LGC 501.101 537,500 125,000 SEDC - LGC 201.103 $ - $ 5,934,488 63 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 14 - COMMITMENTS AND CONTINGENCIES (Continued) 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, 2018, 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. Subsequent Event The City issued $8,570,000 General Obligation and Refunding Bonds, Series 2018 . in November 2018. The amount of $8,432,865 was transferred to an escrow agent for the bond refunding of the Series 2009 in the amount of $4,075,000 and Series 2010 General Obligation Refunding Bonds in the amount of $630,000. The coupon rate is 3.375% -5% and the final payment is September 30, 2033. The Net Present Value of Saving is $758,899. New Accounting Pronouncements Statement No. 83, Certain Asset Retirement Obligations — The requirements of this Statement will take effect for reporting periods beginning after June 15, 2018. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets will recognize a liability based on the estimate of the current value of outlays expected to be incurred The City has not early adopted this new pronouncement. Statement No. 84, Fiduciary Activities — The requirements of this Statement will take effect for reporting periods beginning after June 15, 2018. The statement establishes criteria for identifying fiduciary activities of all state and local governments. An activity meeting certain criteria will be reported in a fiduciary fund in the basic financial statements. The City has not early adopted this pronouncement. Statement No. 87, Leases - The requirements of this Statement will take effect for reporting periods beginning after June 15, 2019. . A lessee will be required to recognize the assets and liabilities for leases with lease terms of more than 12 months. The City has not early adopted this pronouncement. 64 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2018 NOTE 15 - COMMITMENTS AND CONTINGENCIES (Continued) Construction Commitments The City of Schertz has entered into commitments for various projects as follows: Primary Government: Estimated Project Expended to Estimated Future Cost to City Date Commitment Governmental Activities: Pedestrian Routes Project $ 350,000 $ 91,654 $ 258,346 Fire Station 2 & Repairs 500,000 481,619 1.8,381 FM 78 and Main Street 1,000,000 7,513 992,487 Fire Station 3 8,000,000 1,215,324 6,784,676 YMCA - Bathroom Renovation 540,500 217,554 322,946 Window Replacement - Recreation Center 1,152,264 792,198 360,066 Building Improvements 1,600,000 72,560 1,527,440 Main Street Improvements 407,057 - 407,057 FM 1518 Street Improvements 5,000,000 600,656 4,399,344 Total Governmental Commitments 1.8,549,821 3,479,078 15,070,743 Business -Type Activities: Woman Hollering Wastewater 5,940,424 832,91.1 5,1.07,513 Scenic Hills /Greenridge 73,252 10,182 63,070 Oil /Water Separator 73,252 22,600 50,652 E. Dietz Creek De- Silting 573,055 114,124 458,931 Corbett Ground Storage Tank & Pumps 1,650,000 930 1,649,070 Corbett Elevated Water Tank 2,982,052 301,296 2,680,756 FM 1.103 Utility Relocation 1,000,000 22,000 978,000 Trainer Hale Road Distribution Main 500,000 - 500,000 Total Business -Type Activities 12,792,035 1,304,043 11,487,992 Total Estimated Future Commitments $ 31,341,856 $ 4,783,121 $ 26,558,735 Risk Management 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, 2018 were $416,192 for property and casualty and workers compensation coverage. There were no significant increases or decreases in coverage from fiscal year 2017. 65 I rz/,� �N CITY OA 1, REQUIRED SUPPLEMENTARY INFORMATION 66 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, 2018 Variance With EXPENDITURES General Government: Council City Manager Municipal Court 311 Customer Relations Planning & Zoning Legal City Secretary Nondepartmental Community & Media Relations Records Management Schertz Magazine Engineering Geographic Information Systems Citizens Assistance Special Events Total General Government Public Safety: Police Department Fire Department Inspection Marshal Service Total Public Safety Public Environment: Streets Total Public Environment 107,152 107,152 82,743 2018 . Final Budget - 1,130,180 Budgeted Amounts Actual Positive 415,821 Original Final Amounts (Negative) REVENUES 8,938 231,301 234,530 226,052 Taxes $ 20,718,437 $ 20,718,437 $ 21,741,184 $ 1,022,747 Permits and Fees 1,454,116 1,624,516 2,317,534 693,018 Service Fees 1,657,929 1,657,929 2,1.39,574 481,645 Fines and Fees 949,125 949,125 868,875 (80,250) Intergovernmental 335,000 505,000 530,122 25,122 Investment Earnings 121,650 121,650 252,397 130,747 Miscellaneous 637,650 710,600 690,810 (19,790) TOTAL REVENUES 25,873,907 26,287,257 28,540,496 2,253,239 EXPENDITURES General Government: Council City Manager Municipal Court 311 Customer Relations Planning & Zoning Legal City Secretary Nondepartmental Community & Media Relations Records Management Schertz Magazine Engineering Geographic Information Systems Citizens Assistance Special Events Total General Government Public Safety: Police Department Fire Department Inspection Marshal Service Total Public Safety Public Environment: Streets Total Public Environment 107,152 107,152 82,743 24,409 1,130,180 1,130,180 1,258,071 (127,891) 397,390 415,821 383,507 32,314 117,469 130,079 1.21,141 8,938 231,301 234,530 226,052 8,478 160,000 160,000 1.29,958 30,042 194,003 209,005 200,851 8,154 1,748,730 1,368,926 1,159,667 209,259 318,344 318,344 301,935 16,409 66,109 66,109 62,624 3,485 395,483 395,483 370,241 25,242 677,509 659,326 639,481 19,845 169,488 179,647 1.72,851 6,796 293,872 313,872 303,623 10,249 170,200 170,200 1.31,964 38,236 6,177,230 5,858,674 5,544,709 313,965 7,515,112 7,543,712 7,238,513 305,199 4,691,609 4,938,469 4,806,963 131,506 778,409 960,055 926,925 33,130 490,472 490,472 372,049 118,423 13,475,602 13,932,708 13,344,450 588,258 1,353,192 1,393,886 1,230,205 163,681 $ 1,353,192 $ 1,393,886 $ 1,230,205 $ 163,681 67 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, 2018 Variance With Administration Information Technology 2,137,993 2,256,774 2018 . Final Budget - Human Resources Budgeted Amounts Actual Positive 13,755 Original Final Amounts (Negative) EXPENDITURES (Continued) Purchasing & Asset Management 247,455 250,455 230,539 Parks and Recreation: Building Maintenance 1,453,183 1,475,210 1,442,251 Parks $ 1,091,472 $ 1,064,663 $ 1,059,505 $ 5,158 Pools 693,978 693,978 578,573 115,405 Community /Civic Center 151,974 151,974 125,438 26,536 Total Parks and Recreation 1,939,924 1,918,115 1,770,369 147,746 Cultural: Library 919,498 962,952 939,095 23,857 Total Cultural 919,498 962,952 939,095 23,857 Health: Animal Control 620,571 620,571 525,424 95,147 Environmental Health 280,576 280,576 199,779 80,797 Total Health 901,147 901,147 725,203 175,944 Administration Information Technology 2,137,993 2,256,774 1,852,663 404,111 Human Resources 474,575 520,615 506,860 13,755 Finance 621,539 622,569 551,921 70,648 Purchasing & Asset Management 247,455 250,455 230,539 19,916 Building Maintenance 1,453,183 1,475,210 1,442,251 32,959 Fleet Service 762,133 792,133 727,81.3 64,320 Interfund Charges (2,638,683) (2,638,683) (2,638,683) - Total Administration 3,058,195 3,279,073 2,673,364 605,709 TOTAL EXPENDITURES 27,824,788 28,246,555 26,227,395 2,019,160 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Lease Proceeds Transfers In Transfers Out TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE - BEGINNING (1,950,881) (1,959,298) 2,313,101 4,272,399 - - 42,829 42,829 2,026,431 2,103,031 425,394 (1,677,637) (75,550) (143,733) (120,489) 23,244 1,950,881 1,959,298 347,734 (1,611,564) 2,660,835 2,660,835 12,969,618 12,969,618 12,969,61.8 FUND BALANCE - ENDING $12,969,618 $ 12,969,618 $ 15,630,453 $ 2,660,835 68 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, 2018 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 2,498,776 2,273,776 3,368,316 1,094,540 OTHER FINANCING SOURCES (USES) Transfers Out TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE - BEGINNING FUND BALANCE - ENDING (625,769) (625,769) (625,769) (625,769) (625,769) (625,769) 1,873,007 1,648,007 2,742,547 1,094,540 15,069,421 15,069,421 15,069,421. $ 16,942,428 $ 16,717,428 $ 17,811,968 $ 1,094,540 69 Variance With 2018 Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 3,962,572 $ 3,962,572 $ 4,223,053 $ 260,481 Investment Earnings 120,300 120,300 264,686 144,386 Miscellaneous - - - - TOTAL REVENUES 4,082,872 4,082,872 4,487,739 404,867 EXPENDITURES Current: General Government 595,500 820,500 650,753 169,747 Administration 988,596 988,596 468,670 519,926 TOTAL EXPENDITURES 1,584,096 1,809,096 1,119,423 689,673 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 2,498,776 2,273,776 3,368,316 1,094,540 OTHER FINANCING SOURCES (USES) Transfers Out TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE - BEGINNING FUND BALANCE - ENDING (625,769) (625,769) (625,769) (625,769) (625,769) (625,769) 1,873,007 1,648,007 2,742,547 1,094,540 15,069,421 15,069,421 15,069,421. $ 16,942,428 $ 16,717,428 $ 17,811,968 $ 1,094,540 69 CITY OF SCHERTZ, TEXAS NOTES TO SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE — BUDGET AND ACTUAL SEPTEMBER 30, 2018 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 2018. The City does not use encumbrances. m CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES — NET PENSION LIABILITY AND RELATED RATIOS LAST FOUR 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 Inl d 707 5 707 A 1017 $ 2,558,743 $ 2,724,337 $ 2,855,745 $ 3,073,538 3,245,266 3,556,428 3,763,562 4,111,517 (122,286) 120,434 139,216 416,585 - 59,193 - (1,843,774) (1,068,487) (1,570,211) (1,581,272) (1,843,774) 4,613,236 4,890,181 5,177,251 575,866 45,615,815 50,229,051 55,119,232 60,296,483 $ 50,229,051 $ 55,119,232 $ 60,296,483 $66,054,349 Plan Fiduciary Net Position ')WA Contributions - :Employer Contributions - Employee Net Investment Income Benefit Payments, Including Refunds of Employee Contributions Administrative Expense Other Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending Net Pension Liability - Ending Plan Fiduciary Net Position as a Percentage of Total Pension Liability Covered Payroll Net Pension Liability as a Percentage of Covered Payroll rrl�sM $ 2,403,929 $ 2,542,565 $ 2,627,335 $ 2,793,644 1,077,097 1,095,260 1,152,864 1,232,232 1,841,586 53,742 2,602,572 5,999,805 (1,068,487) (1,570,211) (1,581,272) (1,843,774) (19,219) (32,727) (29,385) (31,080) (1,580) (1,616) (1,583) (1,575) 4,233,326 2,087,013 4,770,531 8,149,252 32,179,518 36,412,844 38,499,857 43,270,388 $ 36,412,844 $ 38,499,857 $ 43,270,388 $ 51,419,640 $ 13,816,207 $ 16,619,375 $ 17,026,095 $14,634,709 72.49% 69.85% 71.76% 77.84% $ 15,389,154 $ 15,648,114 $ 16,478,620 $17,603,310 89.78% 106.21% 10332% 83.14% 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. 71 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CITY CONTRIBUTIONS LAST FOUR FISCAL YEARS 2015 2016 2017 2018 Actuarially Determined Contribution $ 2,487,856 $ 2,592,593 $ 2,756,511 $ 2,971,592 Contributions in Relation to the Actuarially Determined Contribution 2,487,856 2,592,593 2,756,511 2,971,592 Contribution Deficiency (Excess) $ - $ - $ - $ - Covered Payroll $ 15,486,735 $ 16,175,988 $ 17,347,849 $19,605,654 Contributions as a Percentage of Covered Payroll 16.06% 16.03% 15.89% 15.16% 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 (13) 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 female rates multiplied by 103% and projected on a fully generational basis with scale BB. 72 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES — TMRS OTHER POST - EMPLOYMENT BENEFIT LIABILITY AND RELATED RATIOS LAST CALENDAR YEAR Covered Employee Payroll $ 17,603,310 Total OPEB Liability as a Percentage of Covered Payroll 3.54% Notes to Schedule of Contributions Valuation Date: Actuarially determined contribution rates are calculated as of December 31 and become effective in January, thirteen (13) months later. Methods and Assumptions Used to Determine Contribution Rates: Inflation Total OPEB Liability Salary Increases 2017 Service Cost $ 29,926 Interest (on the Total OPEB Liability) 20,123 Changes of Benefit Terms - Difference between Expected 68. and Actual Experience - Change of Assumptions 57,257 Benefit Payments (3,521) Net Change in Total OPEB Liability 103,785 Total OPEB Liability - Beginning 519,156 Total OPEB Liability - Ending $ 622,941 Covered Employee Payroll $ 17,603,310 Total OPEB Liability as a Percentage of Covered Payroll 3.54% Notes to Schedule of Contributions Valuation Date: Actuarially determined contribution rates are calculated as of December 31 and become effective in January, thirteen (13) months later. Methods and Assumptions Used to Determine Contribution Rates: Inflation 2.50% Salary Increases 3.50% to 10.5% Including Inflation Discount Rate 3.31 % (Based on Fidelity's 20 -Year Municipal GO AA Index) Administrative Expenses All administrative expenses are paid though the Pension Trust and accounted for under reporting requirements under GASB Statement No. 68. Mortality Rates - Service Retirees RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with scale BB. RP2000 Combined Mortality Table with Blue Collar Adjustment with Mortality Rates -Disabled Retirees male rates multiplied by 109% and female rates multiplied by 103% with a 3 year set - forward for both males and females. The rates are projected on a fully generational basis with scale BB to account for future mortality improvements subject to the 3% floor. . Other Information: No assets are accumulated in a trust that meets the criteria in paragraph 4 of Statement NO. 75 to pay related benefits. 73 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES — CITY RETIREE HEALTH OTHER POST- EMPLOYMENT BENEFIT LIABILITY AND RELATED RATIOS LAST CALENDAR YEAR Total OPEB Liability - Retiree Insurance 2017 Service Cost $ 107,517 Interest (on the Total OPEB Liability) 69,435 Changes of Benefit Terms - Difference between Expected 3.50% to 10.5% Including Inflation and Actual Experience - Change of Assumptions 96,092 Benefit Payments (42,189) Net Change in Total OPEB Liability 230,855 Total OPEB Liability - Beginning 1,789,769 Total OPEB Liability - Ending $ 2,020,624 Covered Payroll $ 16,068,891 Net OPEB Liability as a Percentage of Covered Payroll 12.57% Notes to Schedule of Contributions Valuation Date: December 31, 2017 Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Individual Entry- Age Discount Rate 3.31% as of December 31, 2017 Inflation 2.50% Salary Increases 3.50% to 10.5% Including Inflation Demographic Assumptions: Based on the experience study covering the four -year period ending December 31, 2014 as conducted for the Texas Municipal System(TMRS) Mortality For healthy retirees, the gender distinct RP2000 Conbined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with scale BB to account for future mortality improvements. Health Care Trend Rates Initial rate of 7.5% to an ultimate rate of 4.25% after 15 years. Participation Rates 30% on non - Medicare retirees Other Information: The discount rate changed form 3.81% as of December 31, 2016 to 3.31% as of December 31, 2017 74 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. 75 CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS GENERAL FUND SEPTEMBER 30, 2018 AND 2017 76 2018 2017 ASSETS Cash and Cash Equivalents $ 1,391,876 $ 2,062,393 Investments 13,202,101 9,485,725 Receivables (net of allowances): Taxes 2,136,274 1,970,300 Accounts and Other 1,682,001 1,677,633 Due from Other Funds - 175,084 Inventory 94,876 98,263 Restricted Cash 701,922 617,075 TOTAL ASSETS $ 19,209,050 $ 16,086,473 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts Payable $ 892,564 $ 544,406 Accrued Salaries and Benefits 742,046 653,700 Customer Deposits 52,456 54,200 Due to Other Governments 143,448 119,149 Due to Other Funds 16,139 - Unearned Revenue 35,720 35,346 Total Liabilities 1,882,373 1,406,801 Deferred Inflows of Resources: Unavailable Revenue 1,696,224 1,710,054 Fund Balance: Nonspendable: Inventory 94,876 98,263 Restricted for: Police and Public Safety 101,842 101,842 Municipal Court 728,350 728,350 PEG Capital Fees 723,353 638,506 Animal Control 35,660 35,660 Veterans 4,796 4,796 Scholarships 84,989 77,458 Committed for Civic Center /LIED 454,376 454,376 Assigned for: Property Replacement 854,198 854,198 Unassigned 12,548,013 9,976,169 Total Fund Balance 15,630,453 12,969,618 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCE $ 19,209,050 $ 16,086,473 76 CITY OF SCHERTZ, TEXAS COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GENERAL FUND FOR THE YEARS ENDED SEPTEMBER 30, 2018 AND 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 TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Lease Proceeds 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 0 2018 2017 $ 21,741,184 2,317,534 2,139,574 868,875 530,122 252,397 690,810 28,540,496 5,544,155 12,718,070 1,136,052 1,672,789 939,095 628,054 2,478,964 1,083,044 24,116 3,056 26,227,395 $ 19,450,338 2,367,929 2,107,844 1,021,965 307,809 128,158 603,477 25,987,520 5,171,635 1.1, 846,184 1,128,979 1,682,955 901,992 672,934 2,395,926 644,773 33,174 36,513 24,515,065 2,313,101 1,472,455 42,829 - 351,219 68,385 (46,314) - 347,734 68,385 2,660,835 1,540,840 12,969,618 11,428,778 $ 15,630,453 $ 1.2,969,618 CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS ECONOMIC DEVELOPMENT CORPORATION SEPTEMBER 30, 2018 AND 2017 ASSETS Cash and Cash Equivalents Investments Receivables (net of allowances): Taxes Accounts and Other 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 78 2018 2017 . $ 397,726 $ 893,858 16,664,835 13,506,1.56 746,350 665,31.6 8,448 8,448 $ 17,817,359 $ 15,073,778 $ 5,391 $ 3,940 - 417 5,391 4,357 17,811,968 15,069,421 17,811,968 15,069,421 $ 17,817,359 $ 15,073,778 CITY OF SCHERTZ, TEXAS COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE ECONOMIC DEVELOPMENT CORPORATION FOR THE YEARS ENDED SEPTEMBER 30, 2018 AND 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) Net Change in Fund Balance Fund Balance at Beginning of Year Fund Balance at End of Year 0 2018 2017 $ 4,223,053 $ 3,620,930 264,686 125,684 4,487,739 3,746,614 650,753 92,829 468,670 450,524 1,119,423 543,353 3,368,316 3,203,261. (625,769) (361,019) (625,769) (361,019) 2,742,547 2,842,242 15,069,421 1.2,227,179 $ 17,811,968 $ 1.5,069,421 CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS DEBT SERVICE FUND SEPTEMBER 30, 2018 AND 2017 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 80 2018 2017 $ 27,896 $ 59,148 1,071,962 1,390,934 84,934 82,550 $ 1,184,792 $ 1,532,632 84,934 82,550 1,099,858 1,450,082 1,099,858 1,450,082 $ 1,184,792 $ 1,532,632 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, 2018 (WITH COMPARATIVE ACTUAL TOTALS FOR 2017) REVENUES Property Taxes Investment Earnings Miscellaneous TOTAL REVENUES EXPENDITURES Debt Service: Principal Interest and Fiscal Charges Bond Issue Costs TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES Transfers In Issuance of Refunding Debt Payments to Refund Escrow Agents TOTAL OTHER FINANCING SOURCES Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING 4,720,000 4,720,000 4,720,000 - Variance with 2,271,982 2,271,982 2,096,134 175,848 2018 Final Budget- 2017 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts $ 6,030,353 $ 6,030,353 $ 6,148,041 $ 117,688 $ 6,149,844 16,300 16,300 61,928 45,628 47,758 100,000 100,000 100,000 - 100,000 6,146,653 6,146,653 6,309,969 163,316 6,297,602 4,720,000 4,720,000 4,720,000 - 4,440,000 2,271,982 2,271,982 2,096,134 175,848 2,077,166 2,550 2,550 80,205 (77,655) 2,950 6,994,532 6,994,532 6,896,339 98,193 6,520,116 (847,879) (847,879) (586,370) 261,509 (222,514) 847,879 847,879 360,769 (487,110) 361,019 6,035,000 6,035,000 - (6,159,623) (6,159,623) - 847,879 847,879 236,146 (611,733) 361,019 - - (350,224) (350,224) 138,505 1,450,082 1,450,082 1,450,082 - 1,311,577 $ 1,450,082 $ 1,450,082 $ 1,099,858 $ (350,224) $ 1,450,082 81 CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS CAPITAL PROJECTS FUND SEPTEMBER 30, 2018 AND 2017 ASSETS Cash and Cash Equivalents Investments 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 82 2018 2017 . $ 361,260 $ 1,753,81.5 16,469,940 15, 546,171. $ 16,831,200 $ 17,299,986 $ 658,395 $ 267,949 116,040 116,040 774,435 383,989 16,056,765 16,915,997 16,056,765 16, 915, 997 $ 16,831,200 $ 17,299,986 CITY OF SCHERTZ, TEXAS COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE CAPITAL PROJECTS FUND FOR THE YEARS ENDED SEPTEMBER 30, 2018 AND 2017 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 TOTAL OTHER FINANCING SOURCES (USES) Net Change in Fund Balance Fund Balance at Beginning of Year Fund Balance at End of Year 83 2018 2017 . $ 79,009 $ 89,264 282,213 123,920 - 745,050 361,222 958,234 6,346,147 4,757,930 49,212 211,330 6,395,359 4,969,260 (6,034,137) (4,011,026) 4,845,000 8,870,000 269,212 381,931 60,693 9,399 5,174,905 9,261,330 (859,232) 5,250,304 16,915,997 11,665,693 $ 16,056,765 $ 16,915,997 CITY OF SCHERTZ, TEXAS NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED SEPTEMBER 30, 2018 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net of Allowance Taxes Other Interfund Borrowings Prepaid Items TOTAL ASSETS LIABILITIES AND FUND BALANCE Liabilities Accounts Payable Total Liabilities Fund Balance Nonspendable Prepaids Restricted for: Tourism Development Tree Mitigation Parks Police Forfeiture Roadways Library Historical Committee Total Fund Balances TOTAL LIABILITIES AND FUND BALANCE Combined Combined Special Revenue Capital Projects Funds Funds Totals $ 431,193 $ 61,122 $ 492,31.5 2,634,626 - 2,634,626 33,548 - 33,548 $ 3,099,367 $ 61,122 $ 3,160,489 $ 8,705 $ - $ 8,705 8,705 - 8,705 1,846,947 - 1,846,947 431,805 - 431,805 374,161 - 374,1.61. 352,931 - 352,931. - 61,122 61,1.22 71,881 - 71,881 12,937 - 12,937 3,090,662 61,122 3,151,784 $ 3,099,367 $ 61,1.22 $ 3,160,489 84 CITY OF SCHERTZ, TEXAS NONMAJOR GOVVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND FUND BALANCE FOR THE YEAR ENDED SEPTEMBER 30, 201.8 REVENUES Occupancy Tax Permits and Fees Service Fees Fines and Fees Investment Earnings Miscellaneous TOTAL REVENUES EXPENDITURES Current: General Government Public Safety Parks and Recreation Cultural Administration Capital Outlay 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 Balances, Beginning Fund Balances, Ending Combined Combined 10,1.52 Special Revenue Capital Projects - 25,083 Funds Funds Totals - 67,605 279,434 $ 520,424 $ - $ 520,424 239,522 - 239,522 19,61.9 - 1.9,619 181,1.1.4 - 1.81,114 48,1.25 329 48,454 4 60,793 60,797 1,008,808 61,122 1,069,930 132,225 - 132,225 10,1.52 - 1.0,152 25,083 - 25,083 16,058 - 1.6,058 67,605 - 67,605 279,434 - 279,434 530,557 - 530,557 478,251 61,122 539,373 4,806 - 4,806 (86,21.9) - (86,219) (81,41.3) - (81,413) 396,838 61,122 457,960 2,693,824 - 2,693,824 $ 3,090,662 $ 61,122 $ 3,151,784 85 CITY OF SCHERTZ, TEXAS NONMAJOR CAPITAL PROJECTS FUNDS COMBINING BALANCE SHEET FOR THE YEAR ENDED SEPTEMBER 30, 2018 ASSETS Cash and Cash Equivalents TOTAL ASSETS LIABILITIES AND FUND BALANCE Liabilities Accounts Payable Total Liabilities Fund Balance Roadways Total Fund Balances TOTAL LIABILITIES AND FUND BALANCE 86 Capital Recovery Roadways Area 1 Totals $ 61,122 $ 61,122 $ 61,122 $ 61,122 61,122 61,122 61,122 61,122 $ 61,122 $ 61,122 CITY OF SCHERTZ, TEXAS NONMAJOR CAPITAL PROJECTS FUND STATEMENT OF REVENUES AND EXPENDITURES AMD CHANGES IN FUND BALANCES FOR THE YEAR ENDED SEPTEMBER 30, 2018 REVENUES Investment Earnings Miscellaneous TOTAL REVENUES Net Change in Fund Balance Fund Balances, Beginning Fund Balances, Ending 87 Capital Recovery Roadways Area 1 Totals 329 $ 329 60,793 60,793 61,122 61,1.22 61,122 61,1.22 $ 61,122 $ 61,1.22 CITY OF SCHERTZ, TEXAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2018 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net of Allowance Taxes TOTAL ASSETS LIABILITIES AND FUND BALANCE Liabilities Accounts Payable Total Liabilities Fund Balance Restricted for: Tourism Development Tree Mitigation Parks Police Forfeiture Library Historical Committee Total Fund Balances TOTAL LIABILITIES AND FUND BALANCE Special Revenue Funds Hotel Occupancy Park Tree Treasury Fund Fund Mitigation Forfeitures $ 143,041 $ 37,743 $ 53,671 $ 34,81.5 1,671,398 336,418 378,134 - 33,548 - - - $ 1,847,987 $ 374,161 $ 431,805 $ 34,81.5 $ 1,040 $ - $ - $ 7,349 1,040 - - 7,349 1,846,947 - - - - - 431,805 - 374,161 - - - - 27,466 1,846,947 374,161 431,805 27,466 $ 1,847,987 $ 374,161 $ 431,805 $ 34,81.5 88 Special Revenue Funds Library Parks & Historical Justice State Advisory Recreation Committee Forfeitures Forfeitures Board Foundation Fund Totals $ 11.1,902 $ 11,334 $ 25,81.9 $ - $ 12,868 $ 431,1.93 202,229 - 46,447 - - 2,634,626 - - - - - 33,548 $ 31.4,131 $ 11,334 $ 72,266 $ - $ 12,868 $ 3,099,367 385 $ - $ (69) $ 8,705 385 - (69) 8,705 - 1,846,947 - - 431,805 - - - - - 374,1.61. 314,131 11,334 - - - 352,931. - - 71,881 - - 71,881. - - - - 12,937 12,937 31.4,131 11,334 71,881 - 12,937 3,090,662 $ 314,131 $ 11,334 $ 72,266 $ - $ 12,868 $ 3,099,367 89 CITY OF SCHERTZ, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES — NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 REVENUES Occupancy flax Permits and Fees Service Fees Fines and Fees Investment Earnings Miscellaneous TOTAL REVENUES EXPENDITURES Current: General Government Public Safety Parks and Recreation Cultural Administration Capital Outlay 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 Balances, Beginning Fund Balances, Ending Special Revenue Funds Hotel Occupancy Park Tree Treasury Fund Fund Mitigation Forfeiture 343,074 6,349 99,892 6,451 343,074 6,349 99,892 6,451 1,503,873 367,812 331,913 21,015 $ 1,846,947 $ 374,161 $ 431,805 $ 27,466 •1 Special Revenue Funds Library Historical Justice State Advisory Committee Forfeiture Forfeiture Board Fund Totals $ - $ - $ - $ - $ 520,424 239,522 - - 18,863 756 19,619 167,347 - - - 181,114 4,247 64 1,207 - 48,125 - - 1 3 4 171,594 64 20,071 759 1,008,808 - - - 1,897 132,225 10,152 - - - 10,152 - - - - 25,083 - - 16,058 - 16,058 - - - - 67,605 141,896 - - - 279,434 152,048 - 16,058 1,897 530,557 19,546 64 4,013 (1,138) 478,251 - - 4,806 4,806 (86,219) - - - (86,219) (86,219) - - 4,806 (81,413) (66,673) 64 4,013 3,668 396,838 380,804 11,270 67,868 9,269 2,693,824 $ 314,131 $ 11,334 $ 71,881 $ 12,937 $ 3,090,662 91 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL CAPITAL RECOVERY — AREA l FOR THE YEAR ENDED SEPTEMBER 30, 2018 (WITH COMPARATIVE ACTUAL TOTALS FOR 2017) . REVENUES Investment Earnings Miscellaneous TOTAL REVENUES Excess (Deficiency) of Revenues Over (Under) Expenditures Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING 2018 Budgeted Amounts Actual Original Final Amounts $ 329 - 60,793 - - 61,122 Variance with Final Budget- 2017 Positive Actual (Negative) Amounts $ 329 $ 60,793 61,122 - 61,122 61,122 $ - $ - $ 61,122 $ 61,122 $ - 92 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, 2018 (WITH COMPARATIVE ACTUAL TOTALS FOR 2017) . Excess (Deficiency) of Revenues Over (Under) Expenses 240,814 240,814 343,074 102,260 317,811 Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING 240,814 240,814 343,074 102,260 317,811 1,503,873 1,503,873 1,503,873 - 1,186,062 $ 1,744,687 $ 1,744,687 $ 1,846,947 $ 102,260 $ 1,503,873 93 Variance with 2018 Final Budget- 2017 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Occupancy Tax $ 550,000 $ 550,000 $ 520,424 $ (29,576) $ 499,466 Investment Earnings 13,650 13,650 28,838 15,188 12,295 TOTAL REVENUES 563,650 563,650 549,262 (14,388) 511,761 EXPENDITURES Current: General Government 191,425 191,425 130,328 61,097 127,545 Administration 67,605 67,605 67,605 - 66,405 TOTAL EXPENDITURES 322,836 322,836 206,188 116,648 193,950 Excess (Deficiency) of Revenues Over (Under) Expenses 240,814 240,814 343,074 102,260 317,811 Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING 240,814 240,814 343,074 102,260 317,811 1,503,873 1,503,873 1,503,873 - 1,186,062 $ 1,744,687 $ 1,744,687 $ 1,846,947 $ 102,260 $ 1,503,873 93 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL PARK FUND FOR THE YEAR ENDED SEPTEMBER 30, 2018 (WITH COMPARATIVE ACTUAL TOTALS FOR 2017) . Excess (Deficiency) of Revenues Over (Under) Expenditures (56,900) (166,730) 6,349 Variance with 23,090 2018 Final Budget- 2017 Budgeted Amounts Actual Positive Actual 56,900 Original Final Amounts (Negative) Amounts REVENUES 166,730 - 166,730 - Licenses and Permits $ 70,000 $ 70,000 $ 139,000 $ 69,000 $ 98,000 Investment Earnings 3,100 3,100 6,848 3,748 3,716 Miscellaneous - - - - - TOTAL REVENUES 73,100 73,100 145,848 72,748 101,716 EXPENDITURES Current: Parks and Recreation 10,000 36,900 1.7,565 19,335 19,487 Capital Outlay 120,000 202,930 121,934 80,996 59,139 TOTAL EXPENDITURES 130,000 239,830 139,499 100,331 78,626 Excess (Deficiency) of Revenues Over (Under) Expenditures (56,900) (166,730) 6,349 (160,381) 23,090 OTHER FINANCING USES Transfers In 56,900 166,730 - 166,730 - TOTAL OTHER FINANCING 56,900 166,730 - 166,730 - Net Change in Fund Balance - - 6,349 6,349 23,090 FUND BALANCE, BEGINNING 367,812 367,812 367,812 - 344,722 FUND BALANCE, ENDING $ 367,812 $ 367,812 $ 374,161 $ 6,349 $ 367,812 94 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, 2018 (WITH COMPARATIVE ACTUAL TOTALS FOR 2017) . EXPENDITURES Current: Parks and Recreation 157,000 157,000 7,518 149,482 85,901 TOTAL EXPENDITURES 157,000 157,000 7,518 149,482 85,901 Excess (Deficiency) of Revenues Over (Under) Expenditures (81,400) (81,400) 99,892 181,292 (8,473) OTHER FINANCING USES Variance with Transfers In 81,400 81,400 2018 Final Budget- 2017 81,400 Budgeted Amounts Actual Positive Actual - Original Final Amounts (Negative) Amounts REVENUES 331,913 - 340,386 FUND BALANCE, ENDING $ 331,913 $ 331,913 Licenses and Permits $ 72,500 $ 72,500 $ 100,522 $ 28,022 $ 74,116 Miscellaneous 3,100 3,100 6,888 3,788 3,312 TOTAL REVENUES 75,600 75,600 107,410 31,810 77,428 EXPENDITURES Current: Parks and Recreation 157,000 157,000 7,518 149,482 85,901 TOTAL EXPENDITURES 157,000 157,000 7,518 149,482 85,901 Excess (Deficiency) of Revenues Over (Under) Expenditures (81,400) (81,400) 99,892 181,292 (8,473) OTHER FINANCING USES Transfers In 81,400 81,400 - (81,400) - TOTAL OTHER FINANCING 81,400 81,400 - (81,400) - Net Change in Fund Balance - - 99,892 99,892 (8,473) FUND BALANCE, BEGINNING 331,913 331,913 331,913 - 340,386 FUND BALANCE, ENDING $ 331,913 $ 331,913 $ 431,805 $ 99,892 $ 331,913 W 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, 2018 (WITH COMPARATIVE ACTUAL TOTALS FOR 2017) . Budgeted Amounts Original Final REVENUES Fines and Fees Investment Earnings TOTAL REVENUES EXPENDITURES Current: Public Safety Capital Outlay TOTAL EXPENDITURES Excess (Deficiency) of Revenues Variance with 2018 Final Budget- 2017 Actual Positive Actual Amounts (Negative) Amounts $ 13,767 $ 13,767 $ 5,143 33 33 46 13,800 13,800 5,189 7,349 (7,349) 7,349 (7,349) 96 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, 2018 (WITH COMPARATIVE ACTUAL TOTALS FOR 2017) . OTHER SOURCES (USES) FUND BALANCE, ENDING $ 463,239 $ 463,239 $ 314,131 $ (149,108) $ 380,804 M Variance with 2018 Final Budget- 2017 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Fines and Fees $ 81,000 $ 81,000 $ 167,347 $ 86,347 $ 179,308 Investment Earnings 1,435 1,435 4,247 2,812 2,972 TOTAL REVENUES 82,435 82,435 171,594 89,159 182,280 EXPENDITURES Current: Public Safety - - 10,1.52 (10,152) 19,418 Capital Outlay - - 141,896 (141,896) 24,154 TOTAL EXPENDITURES - - 152,048 (152,048) 43,572 Excess (Deficiency) of Revenues Over (Under) Expenditures 82,435 82,435 19,546 (62,889) 138,708 OTHER SOURCES (USES) FUND BALANCE, ENDING $ 463,239 $ 463,239 $ 314,131 $ (149,108) $ 380,804 M 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, 2018 (WITH COMPARATIVE ACTUAL TOTALS FOR 2017) REVENUES Fines and Fees Investment Earnings TOTAL REVENUES EXPENDITURES Current: Public Safety TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Expenditures Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING Budgeted Amounts Original Final Variance with 2018 Final Budget- 2017 Actual Positive Actual Amounts (Negative) Amounts - $ - $ 11,205 64 64 28 64 64 11,233 - - - 5,034 - - - - 11,234 - 64 64 (1) - - 64 64 (1) 11,270 11,270 11,270 - 11,271 $ 11,270 $ 11,270 $ 11,334 $ 64 $ 11,270 98 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, 2018 (WITH COMPARATIVE ACTUAL TOTALS FOR 2017) . EXPENDITURES Current: Cultural 22,500 20,900 1.6,058 4,842 19,878 TOTAL EXPENDITURES 22,500 20,900 16,058 4,842 19,878 Net Change in Fund Balance 200 1,800 Variance with 2,213 4,127 FUND BALANCE, BEGINNING 67,868 2018 Final Budget- 2017 Budgeted Amounts Actual Positive Actual $ 68,068 Original Final Amounts (Negative) Amounts REVENUES Service Fees $ 22,000 $ 22,000 $ 18,863 $ (3,137) $ 23,381 Investment Earnings 200 200 1,207 1,007 516 Miscellaneous 500 500 1 (499) 108 TOTAL REVENUES 22,700 22,700 20,071 (2,629) 24,005 EXPENDITURES Current: Cultural 22,500 20,900 1.6,058 4,842 19,878 TOTAL EXPENDITURES 22,500 20,900 16,058 4,842 19,878 Net Change in Fund Balance 200 1,800 4,013 2,213 4,127 FUND BALANCE, BEGINNING 67,868 67,868 67,868 - 63,741 FUND BALANCE, ENDING $ 68,068 $ 69,668 $ 71,881 $ 2,213 $ 67,868 99 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, 2018 (WITH COMPARATIVE ACTUAL TOTALS FOR 2017) . REVENUES Sale of Merchandise Miscellaneous TOTAL REVENUES EXPENDITURES Current General Government TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Expenditures 2018 Budgeted Amounts Actual Original Final Amounts $ 1,000 $ 1,000 $ 756 3 1,000 1,000 759 Variance with Final Budget- 2017 Positive Actual (Negative) Amounts $ (244) 499 3 - (241) 499 11,750 11,750 1,897 9,853 2,909 11,750 11,750 1,897 9,853 2,909 (10,750) (10,750) (1,138) 9,612 (2,410) OTHER FINANCING SOURCES (USES) Transfers In 10,750 10,750 4,806 (5,944) - TOTAL OTHER FINANCING SOURCES (USES) 10,750 10,750 4,806 (5,944) - Net Change in Fund Balance - - 3,668 3,668 (2,410) FUND BALANCE, BEGINNING 9,269 9,269 9,269 - 11,679 FUND BALANCE, ENDING $ 9,269 $ 9,269 $ 12,937 $ 3,668 $ 9,269 100 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 I 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 Q 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 tae. 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 through 22) 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. 1® 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 2009 2010 2011 2012 $ 57,324,482 $ 54,010,1.39 $ 55,415,699 $ 56,616,809 1,170,786 897,324 2,089,971 1,91.7,098 3,650,287 7,548,859 7,370,101 8,907,326 $ 62,1.45,555 $ 62,456,322 $ 64,875,771 $ 67,441,233 $ 50,047,301 $ 50,778,490 $ 51,838,589 $ 50,1.61,157 3,633,244 4,217,098 7,441,722 11,577,645 $ 53,680,545 $ 54,995,588 $ 59,280,311 $ 61,738,802 $ 107,371,783 $ 104,788,629 $ 107,254,288 $ 106,777,966 1,170,786 897,324 2,089,971 1,917,098 7,283,531 11,765,957 14,811,823 20,484,971 $ 115,826,100 $ 117,451,910 $ 1.24,156,082 $ 129,180,035 Note — GASB Statement No. 68 has been prospectively implemented in year -end 2015. mm TABLE 1 Fiscal Year 2013 2014 2015 . 2016 . 2017 2018 $ 57,543,618 $ 62,792,671 $ 68,125,738 $ 74,237,004 $ 84,537,238 $ 89,266,885 7,788,354 10,401,728 13,343,280 1.7,095,325 20,437,1.1.6 23,391,047 6,645,41.8 8,613,239 1,640,519 2,231,341 1,673,567 2,351,236 $ 71,977,390 $ 81,807,638 $ 83,109,537 $ 93,563,670 $ 1.06,647,921 $ 115,009,168 $ 53,071,836 $ 53,674,437 $ 59,625,205 $ 64,210,231 $ 70,361,035 $ 64,871,629 1.1,902,282 16,450,988 14,243,922 1.5,737,470 20,781,291 33,497,197 $ 64,974,118 $ 70,125,425 $ 73,869,127 $ 79,947,701 $ 91,1.42,326 $ 98,368,826 $ 11.0,615,454 $ 116,467,108 $ 127,750,943 $ 138,447,235 $ 154,898,273 $ 154,138,514 7,788,354 10,401,728 13,343,280 1.7,095,325 20,437,1.16 23,391,047 18,547,700 25,064,227 15,884,441 1.7,968,811 22,454,1.1.6 35,848,433 $ 136,951,508 $ 151,933,063 $ 156,978,664 103 1.73,511,371 $ 197,789,505 $ 213,377,994 CITY OF SCHERTZ, TEXAS CHANGE IN NET POSITION LAST TEN FISCAL YEARS Fiscal Year 2009 2010 2011 . 2012 Expenses Governmental Activities General Government $ 7,987,977 Public Safety 7,755,056 Public Environment 2,740,755 Parks and Recreation 1,1.93,525 Cultural 769,928 Health 377,125 Administration 734,584 Interest and Other Fees 1,81.8,984 Total Governmental Activities Expenses 23,377,934 Business -Type Activities $ 7,892,51.6 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 $ 7,802,092 9,103,676 3,586,087 1,584,605 916,967 357,658 1,117,044 2,302,912 26,771,041 Water and Sewer 13 ,568,065 1.4,434,709 1.5,280,871 16,349,967 EMS 3,365,544 3,690,007 3,659,031 3,758,425 Total Business- Type Activities 16,933,609 18,124,716 1.8,939,902 20,1.08,392 Total Primary Government Expenses $ 40,311,543 $ 42,943,907 $ 45,092,195 $ 46,879,433 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 $ 1,720,279 1,481,004 273,917 219,029 33,930 1,044,884 3,023,377 $ 1,905,600 1,986,536 536,609 265,71.4 36,728 587,643 1,276,465 $ 1,495,563 2,815,029 524,443 228,242 39,743 717,105 2,998,115 $ 2,286,488 2,21.6,385 541,512 279,267 36,746 764,997 1,1.78,573 7,796,420 6,595,295 8,818,240 7,303,968 14,668,137 15,147,332 17,073,075 17,41.1,568 2,889,518 3,061,414 3,564,852 3,561,114 2,241,726 973,437 2,175,889 828,853 19,799,381 $ 27,595,801 19,182,183 $ 25,777,478 22,813,816 $ 31,632,056 21,801,535 $ 29,105,503 Note — Years 2009 -2014 have not been restated for the adoption of GASB Statement No. 68. Years 2009 -20017 have not been restated for the adoption of GASB Statement No. 75. 10 TABLE 2 Fiscal Year 2013 2014 2015 2016 2017 2018 $ 7,066,087 9,567,595 3,622,834 1,807,559 907,676 344,647 1,1.80,656 3,340,951. 27,838,005 1 6,954,871 3,959,445 20,914,316 $ 48,752,321. $ 6,958,530 $ 6,443,227 $ 6,557,778 $ 6,253,926 $ 7,421,918 10,025,703 10,836,712 12, 1.41,968 13,061, 120 1.3,899,278 3,740,538 3,876,644 4,147,653 4,460,540 4,930,723 1,807,136 2,164,604 2,034,964 2,859,974 2,707,292 870,159 892,194 954,871 1,004,747 1,042,085 407,11.4 470,468 570,204 776,494 724,780 1,942,312 1,845,877 1,954,276 3,052,102 3,067,983 2,352,856 2,226,635 2,240,783 2,355,71.4 2,125,687 28,104,348 28,756,361 30,602,497 33,824,617 35,919,746 17,762,116 18,440,959 20,269,111 21,346,078 23,579,854 4,268,125 4,719,526 5,004,110 6,006,1.78 6,110,407 22,030,241 23,160,485 25,273,221 27,352,256 29,690,261. $ 50,134,589 $ 51,916,846 $ 55,875,718 $ 61,176,873 $ 65,610,007 $ 2,230,800 $ 1,974,637 $ 1,840,547 $ 1,507,252 $ 874,737 $ 1,013,698 2,516,547 2,536,476 2,603,476 2,41.5,537 4,131,548 4,104,91.1 721,222 917,639 794,003 788,727 544,460 640,231 305,932 309,897 325,178 326,079 330,412 313,668 38,149 32,429 26,744 30,308 29,742 27,930 234,084 220,264 336,252 342,485 552,878 776,942 1,531,740 5,756,456 5,509,530 6,227,664 10,043,483 4,744,489 7,578,474 1.1,747,798 11,435,730 11,638,052 16,507,260 1.1,621,869 17,696,327 4,459,600 1,301,235 23,457,162 $ 31,035,636 19,147,872 4,533,753 2,809,110 26,490,735 $ 38,238,533 20,700,369 22,003,794 25,390,71.3 27,099,237 4,415,126 5,921,223 6,366,894 6,092,559 4,158,552 2,831,126 6,111,474 3,132,348 29,274,047 30,756,143 37,869,081 36,324,144 $ 40,709,777 $ 42,394,195 $ 54,376,341 $ 47,946,013 105 CITY OF SCHERTZ, TEXAS CHANGE IN NET POSITION (CONTINUED) LAST TEN FISCAL YEARS Business -Type Activities Interest and Investment Earnings 128,233 Fiscal Year 37,950 36,409 2009 2010 2011 2012 Net (Expenses) Revenue Transfers (1,060,607) (15,421) (84,235) Governmental Activities $ (15,581,514) $ (18,223,896) $ (1.7,334,053) $ (19,467,073) Business -Type Activities 2,865,772 1,057,467 3,873,91.4 1,693,143 Total Primary Government Net Expenses $ (12,715,742) $ (17,166,429) $ (13,460,139) $ (17 ,773,930) Governmental Revenues and Other Government Activities $ 2,730,540 $ 310,767 $ 2,419,449 Changes in Net Position Business -Type Activities 2,043,914 1,315,043 4,284,723 Governmental Activities Total Primary Government $ 4,774,454 $ 1,625,810 $ 6,704,1.72 Taxes: Ad Valorem $ 8,980,102 $ 9,715,645 $ 10,280,768 $ 11,298,204 Sales 6,017,782 6,240,749 7,054,394 7,968,212 Franchise Fees 1,462,199 1,448,620 1,542,046 1,647,71.2 Hotel /Motel 305,073 348,147 391,1.81 470,290 Mixed Drink 31,790 32,144 33,630 28,586 Bingo 5,105 4,651 2,1.73 - Unrestricted Investment Earnings 364,648 117,776 48,235 60,265 Miscellaneous 84,748 611,510 316,840 621,560 Transfers 1,060,607 1.5,421 84,235 (62,294) Total Governmental Activities 18,31.2,054 18,534,663 19,753,502 22,032,535 Business -Type Activities Interest and Investment Earnings 128,233 36,824 37,950 36,409 Miscellaneous 110,516 236,173 457,094 666,645 Transfers (1,060,607) (15,421) (84,235) 62,294 Total Business -Type Activities (821,858) 257,576 410,809 765,348 Total Primary Government $ 17,490,196 $ 18,792,239 $ 20,164,311 $ 22,797,883 Changes In Net Position Government Activities $ 2,730,540 $ 310,767 $ 2,419,449 $ 2,565,462 Business -Type Activities 2,043,914 1,315,043 4,284,723 2,458,491. Total Primary Government $ 4,774,454 $ 1,625,810 $ 6,704,1.72 $ 5,023,953 Note - Years 2009 -2014 have not been restated for the adoption of GASB Statement No. 68. Years 2009 -20017 have not been restated for the adoption of GASB Statement No. 75. 1.06 TABLE 2 (Continued) Fiscal Year 2013 2014 2015 2016 2017 2018 $ (20,259,531) $ (16,356,550) $ (17,320,631) $ 18,964,445 $ (17,317,357) $ (24,297,877) 2,542,846 4,460,494 6,113,562 5,482,922 1.0,516,825 6,633,883 $ (17,716,685) $ (1.1,896,056) $ (11,207,069) $ 24,447,367 $ (6,800,532) $ (17,663,994) $ 12,359,1.46 $ 12,794,172 $ 14,139,037 $ 15,131,997 $ 16,166,006 $ 17,018,950 9,637,097 1.0,553,382 10,315,125 10,921,489 10,844,503 1.2,668,555 1,681,079 2,073,162 2,263,783 2,250,815 2,208,373 2,393,182 503,267 552,570 563,734 544,871 499,466 520,424 30,421 39,91.7 43,656 43,073 42,699 43,395 54,270 43,279 56,820 187,847 448,408 909,985 505,268 180,31.6 197,881 309,275 182,754 283,496 25,140 (50,000) (42,235) 29,211 9,399 19,1.86 24,795,688 26,186,798 27,537,801 29,41.8,578 30,401,608 33,857,173 53,089 31,81.0 47,728 102,642 211,466 532,367 664,521 609,003 344,731 522,221 475,733 453,374 (25,1.40) 50,000 42,235 (29,211) (9,399) (19,186) 692,470 690,81.3 434,694 595,652 677,800 966,555 $ 25,488,1.58 $ 26,877,61.1 $ 27,972,495 $ 30,014,230 $ 31,079,408 $ 34,823,728 $ 4,536,1.57 $ 9,830,248 $ 10,217,170 $ 10,454,133 $ 13,084,251 $ 9,559,296 3,235,31.6 5,151,307 6,548,256 6,078,574 1.1,194,625 7,600,438 $ 7,771,473 $ 14,981,555 $ 16,765,426 $ 16,532,707 $ 24,278,876 $ 1.7,159,734 107 CITY OF SCHERTZ, TEXAS FUND BALANCES - GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS Committed Fund Balance: Capital Improvement - - - - Total Assigned Fund Balance - - - - Assigned Fund Balance: Fiscal Year Property Replacement 2009 2010 2011 . 2012 Nonspendable Fund Balance: 62,263 142,465 93,447 92,555 Inventory $ 44,217 $ 46,473 $ 43,504 $ 63,556 Prepaid Items - - - 2,367 Note Receivable - 150,000 120,080 1.20,080 Total Nonspendable Fund Balance 44,217 196,473 163,584 186,003 Total Assigned Fund Balance 274,262 Restricted Fund Balance: 468,223 669,847 Police and Public Safety 355,451 421,265 403,799 338,1.18 Municipal Court 332,117 402,744 459,244 527,513 PEG Capital Fees - - 317,453 409,870 Capital Improvement 14,342,553 3,914,323 10,219,300 17,104,595 Debt Service 444,369 286,215 117,250 227,674 Tourism Development 1.80,710 250,379 301,517 390,561 Tree Mitigation 191,834 1.64,424 173,999 21.7,600 Parks 120,501 79,317 84,329 90,71.8 Historical Committee & Library 163,661 200,359 231,686 65,409 Economic Development Corporation 2,543,010 3,548,067 3,394,850 4,366,005 Animal Control - - - - Veterans - - - - Scholarships - - - - Total Restricted Fund Balance 18,674,206 9,267,093 15,703,427 23,738,063 Committed Fund Balance: Capital Improvement - - - - Total Assigned Fund Balance - - - - Assigned Fund Balance: Property Replacement 201,850 202,341 202,723 322,656 Special Events 62,263 142,465 93,447 92,555 Capital Improvement - - 162,113 243,546 Recycling - - - - Historical Committee 10,1.49 9,940 9,940 - Youth Activities - - - 11,090 Total Assigned Fund Balance 274,262 354,746 468,223 669,847 Unassigned Fund Balance 1,209,451 1,372,779 1,899,105 2,560,667 Total Governmental Funds $ 20,202,136 $ 11,191,091 $ 18,234,339 $ 27,154,580 1: TABLE 3 Fiscal Year 2013 2014 2015 2016 2017 2018 $ 50,768 $ 88,518 $ 101,084 $ 107,529 $ 98,263 $ 94,876 754,443 21,735 1.6,000 112,974 - - 120,080 - - - - - 925,291 110,253 1.17,084 220,503 98,263 94,876 496,890 529,264 494,337 555,722 514,931 454,773 646,422 628,459 683,558 714,609 728,350 728,350 456,175 489,509 509,535 577,590 638,506 723,353 15,360,800 9,600,028 8,924,587 11,665,693 16,915,997 16,11.7,887 517,199 625,435 847,178 1,311,577 1,450,082 1,099,858 470,250 501,996 848,969 1,186,062 1,503,873 1,846,947 157,659 359,205 331,149 340,386 331,913 431,805 136,647 304,655 341,551 441,606 367,812 374,161 77,554 78,098 76,787 75,420 77,137 84,818 6,022,128 7,792,578 9,821,747 12,227,179 15,069,421 17,811,968 - - - 18,667 35,660 35,660 - - - 4,985 4,796 4,796 - 54,176 60,944 63,048 77,458 84,989 24,341,724 20,963,403 22,940,342 29,182,544 37,715,936 39,799,365 165,000 31,718 - 342,519 454,376 454,376 165,000 31,718 - 342,51.9 454,376 454,376 456,034 694,916 785,005 752,503 854,198 854,198 99,770 31,177 6,657 6,743 - - 145,167 - - - - - 700,971 726,093 791,662 759,246 854,198 854,198 4,206,734 5,587,262 7,280,240 8,509,467 9,976,169 12,548,013 $ 30,339,720 $ 27,418,729 $ 31,129,328 $ 39,014,279 $ 49,098,942 $ 53,750,828 109 CITY OF SCHERTZ, TEXAS CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS EXPENDITURES Current: General Government 6,765,315 Fiscal Year 7,164,667 7,094,834 Public Safety 2009 2010 2011 . 2012 REVENUES 884,158 816,939 846,150 976,327 Taxes $ 16,786,590 $ 1.7,811,547 $ 19,309,675 $ 21,401,991 Permits and Fees 822,105 1,160,197 1,776,292 1,363,461 Service Fees 973,781 1,492,130 1,645,489 1,547,007 Fines and Fees 1,517,821 1,655,183 1,452,610 2,027,613 Intergovernmental 1,444,966 570,386 1,216,211 1,000,413 Other Revenue 1,066,097 1,161,182 603,498 969,921 TOTAL REVENUES 22,611,360 23,850,625 26,003,775 28,310,406 EXPENDITURES Current: General Government 6,765,315 6,989,561 7,164,667 7,094,834 Public Safety 7,235,501 7,409,720 7,885,119 8,690,849 Public Environment 884,158 816,939 846,150 976,327 Parks and Recreation 869,166 1,178,455 1,195,171 1,398,692 Cultural 821,048 872,668 937,611 845,124 Health 348,448 331,860 360,746 346,318 Administration 941,675 1,251,368 1,506,831 1,249,557 Capital Outlay 14,963,950 1.1,347,876 2,956,511 1,299,843 Debt Service: Principal 4,816,928 1,893,086 2,371,070 2,704,898 Interest and Fiscal Charges 1,987,384 2,183,852 2,066,221 2,313,510 Bond Issue Costs 191,066 20,000 244,237 254,971 TOTAL EXPENDITURES 39,824,639 34,295,385 27,534,334 27,174,923 Excess (Deficiency) of Revenues Over (Under) Expenditures (17,213,279) (10,444,760) (1,530,559) 1,135,483 OTHER FINANCING SOURCES (USES) Bonds & Debt Issuances 9,681,678 1,418,294 8,206,572 14,370,000 Refunding Bond Issuance - - - - Premium (Discount) on Bond Issue - - 283,000 175,473 Payment to Refund Agent - - - (6,698,421) Transfers In 2,778,593 242,539 348,846 139,635 Transfers (Out) (1,717,986) (227,118) (264,611) (201,929) TOTAL OTHER FINANCING SOURCES (USES) 10,742,285 1,433,715 8,573,807 7,784,758 NET CHANGE IN FUND BALANCE $ (6,470,994) $ (9,011,045) $ 7,043,248 $ 8,920,241 Debt Service as a percentage of Noncapital Expenditures 26.1% 17.7% 17.4% 19.5% 11.0 l Fiscal Year 2013 2014 2015 2016 2017 2018 $ 24,181,863 $ 26,021,730 $ 27,348,297 $ 28,865,727 $ 29,720,578 $ 32,632,702 1,609,954 1,805,047 1,731,302 1,493,336 2,540,045 2,557,056 1,739,387 1,763,964 1,797,151 1,789,321 2,132,299 2,159,193 1,927,744 1,750,31.1 1,534,588 1,441,474 1,217,621 1,049,989 492,332 221,769 393,607 401,494 397,073 609,131 767,110 671,731 689,805 1,741,436 1,897,153 1,761,285 30,718,390 32,234,552 33,494,750 35,732,788 37,904,769 40,769,356 6,311,276 5,981,439 5,582,441 5,657,998 5,394,91.8 6,327,133 9,113,840 9,409,894 10,1.58,401 11,048,767 11,870,636 12,728,222 951,528 1,012,607 952,663 1,007,326 1,128,979 1,136,052 1,412,329 1,338,232 1,658,197 1,528,356 1,885,91.5 1,697,872 840,595 815,691 821,146 869,162 921,870 955,153 341,961 394,918 404,008 480,175 672,934 628,054 1,289,078 2,270,041 2,056,646 2,015,573 2,912,855 3,015,239 3,277,397 8,000,467 2,31.4,668 10,1.92,398 5,492,196 7,708,625 3,217,325 3,695,597 3,918,008 4,040,975 4,473,174 4,744,116 2,381,171 2,108,610 2,112,746 1,896,911 2,113,679 2,099,190 31,750 165,650 7,992 449,358 214,280 129,417 29,168,250 35,193,146 29,986,916 39,186,999 37,081,436 41,169,073 1,550,140 (2,958,594) 3,507,834 (3,454,211) 823,333 (399,717) 1,635,000 8,583,715 245,000 10,750,000 8,870,000 4,887,829 - - - 4,185,000 - 6,035,000 686,137 - 590,432 381,931 269,212 - (9,182,250) - (4,215,482) - (6,159,623) 788,084 1,243,833 989,120 863,583 438,803 777,487 (788,084) (1,293,832) (1,031,355) (834,371) (429,404) (758,302) 1,635,000 37,603 202,765 11,339,162 9,261,330 5,051,603 $ 3,185,140 $ (2,920,991) $ 3,710,599 $ 7,884,951 $ 10,084,663 $ 4,651,886 21.6% 21.3% 21.3% 20.5% 20.4% 22.2% 111 CITY OF SCHERTZ, TEXAS TAX REVENUE BY SOURCE — GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS Fiscal Mixed Hotel Total Year Property Sales & Use Franchise Beverage Bingo Occupancy Revenue 2018 $ 1.7,007,148 $ 12,668,555 $ 2,393,182 $ 43,384 $ 11 $ 520,424 $ 32,632,704 2017 16,125,537 10,844,503 2,208,373 42,668 31 499,466 29,720,578 2016 15,105,480 10,921,489 2,250,815 43,072 1 544,870 28,865,727 2015 1.4,161,999 10,31.5,125 2,263,783 43,553 103 563,734 27,348,297 2014 1.2,802,668 10,553,382 2,073,162 39,917 31 552,570 26,021,730 2013 1.2,329,999 9,637,097 1,681,079 30,421 - 503,267 24,181,863 2012 11,287,191 7,968,212 1,647,712 28,586 - 470,290 21,401,991. 2011 10,286,251 7,054,394 1,542,046 33,630 2,1.73 391,181 1.9,309,675 2010 9,737,236 6,240,749 1,448,620 32,144 4,651 348,147 1.7,811,547 2009 8,964,642 6,017,781 1,462,199 31,790 5,105 305,073 16,786,590 Im CITY OF SCHERTZ, TEXAS TOTAL WATER AND SEWER CONSUMPTION AND RATES LAST TEN FISCAL YEARS Fiscal Year Total Water & Water & Water & Sewer Ended Sewer Consumption Sewer Initial Rate Per September 30, (In Gallons) Base Rate 1,000 Gallons 2018 1,583,312,400 $ 23.89 $ 2.95 2017 1,583,462,300 23.19 2.86 2016 1,509,250,000 20.89 2.58 2015 1,472,948,300 19.71 2.43 2014 1,543,351,600 1.9.32 2.39 2013 1,550,039,700 18.94 2.34 2012 1,604,952,300 18.94 2.34 2011 1,676,323,900 1.8.94 2.34 2010 1,231,376,600 1.8.94 2.25 2009 1,511,567,900 1.8.94 2.16 113 CITY OF SCHERTZ, TEXAS PRINCIPAL WATER AND SEWER CONSUMERS CURRENT YEAR AND NINE YEARS AGO TAXPAYERS Caterpillar Inc. Sycamore Creek Apartments Beck Readymix Concrete Crossvine Master Community SA WFR Partners, LLC IPT San Antonio Logistics CTR Pecan Grove TXLLC City of Schertz Ballpark EXP Sebastian Apartments Sysco / Cooling Tower Amazon.com.KYDC LLC Hampton- Silverwest- I (H) LLC Wal -Mart Supermarket #3391 spk Legacy Oaks Apartments Val Verde 6561 Schertz(60232 , Pickrell Park WP Murphy Inc Total City Water Consumption 2018 t otai rercemage or Water Total City Consumption Water (In Gallons) Rank Consumption 2008 t otai rercemage or Water Total City Consumption Water (In Gallons) Rank Consumption 27,845,500 1 1.76% 1.0,266,400 2 0.65% 13,873,200 1 9,861,900 3 0.62% 4,696,000 5 9,411,300 4 0.59% 0.00% 8,343,300 5 0.53% 7,243,200 6 0.46% 0.00% 7,173,700 7 0.45% 4,994,000 8 0.32% 4,903,600 9 0.31% 4,883,800 10 0.31% 3,826,800 9 4,524,800 11 0.29% 7,620,000 2 1.35% 6,368,300 3 1.13% 4,783,900 4 0.85% 4,270,600 6 0.76% 4,076,800 7 0.72% 3,826,800 8 0.68% 10 0.00% 0.00% 99,451,500 6.28% 53,342,400 5.49% 1,583,462,300 563,511,000 114 CITY OF SCHERTZ, TEXAS ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Fiscal Year Ended Total Taxable Total Direct September 30, Assessed Value Tax Rate 2018 $ 3,783,027,833 0.4910 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 2,221,073,744 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 fteeze adjustments. Source NOTE: Fiscal Year 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Fiscal Year 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 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 Comal Rate Service Total City ISD ISD 0.3248 0.1662 0.4910 1.4900 1.3900 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 County 0.2928 0.2928 0.2929 0.2929 0.2782 0.3052 0.3269 0.3269 0.3269 0.3269 Hospital District 0.2762 0.2762 0.2762 0.2762 0.2762 0.2762 0.2762 0.2662 0.2610 0.2374 Overlapping Counties Bexar Comal Guadalupe River Authority 0.0173 0.0173 0.0173 0.0178 0.0174 0.0174 0.0167 0.0160 0.0160 0.0160 Bexar, Comal and Guadalupe County Tax Offices Community College District 0.1492 0.1492 0.1492 0.1492 0.1492 0.1416 0.1416 0.1359 0.1359 0.1346 County 0.3078 0.2928 0.2929 0.2929 0.2782 0.3504 0.3340 0.3130 0.3080 0.3180 County 0.3799 0.3851 0.3851 0.3941 0.3999 0.4036 0.4036 0.3999 0.3895 0.3295 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. 116 Taxpayer Caterpillar Inc. SYSCO San Antonio, Inc. Amazon.com KYDC, LLC US Real Estate, LP Republic Beverage Co. Distribution GE Oil & Gas WR Lookout Road LLC Shell US Gas & Power LLC SC Scbertz LLC H.E.B. Grocery Co. San Antonio MTA LP AOH Vantage at Schertz LLC EM Limited Partnership Sprint Spectrum LP Walmart Real Estate Business Trust Eye Care Centers of America, Inc Lowe's Home Center Inc. Prologis North American Properties Atlantic Financial Group, Ltd. TOTALS TOTAL TAXABLE ASSESSED VALUE CITY OF SCHERTZ, TEXAS PRINCIPAL PROPERTY TAX PAYERS CURRENT YEAR AND NINE YEARS AGO 2018 2009 $ 3,783,027,833 $ 2,221,073,744 Source: Bexar, Comal and Guadalupe County Appraisal Districts 117 Percentage Percentage of of Total City Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Value Rank Value Value Rank Value $ 1.45,738,490 1 3.85% 1.05,389,350 2 2.79% 66,422,573 3 1.76% 59,667,065 4 1.58% 50,525,410 5 1.34% 30,427,735 6 0.80% 29,669,770 7 0.80% 27,111,440 8 0.72% 23,650,000 9 0.63% 23,650,000 10 0.63% 1.1,849,626 6 0.53% 23,049,000 1 1.04% 1.6,884,584 2 0.76% 1.5,880,110 3 0.71% 1.5,461,600 4 0.70% 1.4,529,843 5 0.65% 1.1,298,734 7 0.51% 9,258,951 8 0.42% 9,104,240 9 0.41% 8,408,771 10 0.38% $ 562,251,833 14.88% $ 135,725,459 6.11% $ 3,783,027,833 $ 2,221,073,744 Source: Bexar, Comal and Guadalupe County Appraisal Districts 117 CITY OF SCHERTZ, TEXAS PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) Source: Guadalupe County Tax Office 118 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 2018 $ 18,010,824 $ 17,899,825 99.38% $ - $ 17,899,825 99.38% 2017 17,356,822 17,241,556 99.34% 72,675 17,314,231 99.75% 2016 16,238,180 16,160,248 99.52% 57,835 16,218,083 99.88% 2015 14,793,867 14,738,760 99.63% 44,730 14,783,490 99.93% 2014 13,383,759 13,297,258 99.35% 68,412 13,365,670 99.86% 2013 12,536,540 12,455,336 99.35% 71,432 12,526,768 99.92% 2012 11,239,572 11,159,974 99.29% 71,740 11,231,714 99.93% 2011 9,978,430 9,895,240 99.17% 74,770 9,970,010 99.92% 2010 9,639,945 9,559,899 99.17% 74,503 9,634,402 99.94% 2009 8,800,927 8,703,978 98.90% 92,246 8,796,224 99.95% Source: Guadalupe County Tax Office 118 CITY OF SCHERTZ, TEXAS TAXABLE ASSESSED VALUE LAST TEN FISCAL YEARS (UNAUDITED) 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 2018 2017 $ 2,049,067,806 $ 2,344,365,139 $ (757,265,921) $ 146,860,809 $ 3,783,027,833 0.4910 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 1,096,587,777 1,191,387,341 (248,554,582) 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. IM CITY OF SCHERTZ, TEXAS RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS 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. 120 Governmental Activities General Certificates Certificates Fiscal Obligation of Tax Capital Revenue of Year Bonds Obligation Notes Lease Bonds Obligation 2018 $ 52,752,896 $ 13,636,966 $ 715,000 $ 34,264 $ - $ 13,211,178 2017 56,613,614 9,011,415 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 12,404,034 310,000 133,408 5,436,773 6,149,350 2009 38,773,456 13,326,340 - - 5,779,949 6,571,150 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. 120 Business -Type Activities 5.98% 2,028 6.22% 1,996 6.39% 1,979 5.99% Public General 1,992 6.50% Total Facility Obligation Capital Tax Primary Loan Bonds Lease Notes Government $ - $ 2,127,657 $ 289,553 $ 765,000 $ 83,532,514 - 2,533,626 92,721 1,065,000 75,076,605 - 3,014,595 162,262 1,360,000 75,076,605 - 3,490,564 231,803 1,640,000 69,297,944 - 3,966,533 347,705 65,000 72,680,179 - 2,127,502 - 130,000 71,193,650 - 2,413,471 - 190,000 73,040,076 - 2,684,440 - 250,000 68,112,839 - - - 310,000 62,548,015 7,000 - - - 64,457,895 IM TABLE 13 Percent of Gross Income Per Capita 5.98% 2,028 6.22% 1,996 6.39% 1,979 5.99% 1,830 6.35% 1,992 6.50% 1,982 8.15% 2,117 8.01% 2,031 7.07% 1,923 7.05% 2,049 CITY OF SCHERTZ, TEXAS RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS Percentage of General Bonded Debt Outstanding Value of Per Property Capita General Certificates Available in 1,714 Fiscal Obligation of Debt Service 2.21% Year Bonds Obligation Funds Total 2.49% 2018 $ 54,880,553 $ 13,636,966 $ (809,427) $ 67,708,092 2017 59,147,240 9,011,415 (517,1.99) 67,641,456 2016 59,366,867 4,057,189 (227,674) 63,196,382 2015 56,900,692 277,801 (117,250) 57,061,243 2014 60,453,966 543,934 (286,215) 60,711,685 2013 60,821,252 801,767 (444,369) 61,178,650 2012 63,292,230 1,581,300 (429,289) 64,444,241. 2011 50,719,693 8,615,077 (556,884) 58,777,886 2010 37,804,450 12,404,034 (347,739) 49,860,745 2009 38,773,456 13,326,340 (263,740) 51,836,056 Percentage of Actual Taxable Value of Per Property Capita 1.79% 1,644 1.85% 1,714 1.87% 1,666 1.88% 1,507 2.21% 1,664 2.35% 1,703 2.67% 1,868 2.49% 1,752 2.13% 1,533 2.33% 1,647 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. 122 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 $ 488,500,000 0.26% $ 1,270,100 Bexar County 1,702,665,000 0.26% 4,426,929 Bexar County Hospital District 876,814,000 0.26% 2,279,716 Comal County 122,864,914 5.02% 6,167,819 ComalISD 767,165,107 7.02% 53,854,991 Guadalupe County 13,655,000 0.21% 28,170 Schertz- Cibolo- Universal ISD 418,156,092 49.49% 206,945,449 Subtotal, Overlapping Debt City Governmental Activities Direct Debt TOTAL NET OVERLAPPING DEBT 274,973,174 67,104,862_ $ 342,078,036 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. 123 CITY OF SCHERTZ, TEXAS DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS Assessed Value, 2017 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 $ 3,783,027,833 $ 378,302,783 $ 67,139,126 (809,427) 66,329,699 $ 311,973,084 21.26% 124 Fiscal Year 2015 2016 2017 Assessed Value $ 3,037,267,611 $ 3,375,850,131 $ 3,647,504,903 Debt Limit $ 303,726,761 $ 337,585,013 $ 364,750,490 Total Net Debt Applicable to Limit 53,424,303 61,181,169 65,792,916 Total Debt Margin $ 250,302,458 $ 276,403,844 $ 298,957,574 2012 2013 2014 Assessed Value $ 2,600,365,551 $ 2,600,365,551 $ 2,752,562,574 Debt Limit $ 260,036,555 $ 260,036,555 $ 275,256,257 Total Net Debt Applicable to Limit 60,499,568 60,499,568 56,803,499 Total Debt Margin $ 199,536,987 $ 199,536,987 $ 218,452,758 2009 2010 2011 Assessed Value $ 2,342,355,490 $ 2,363,893,708 $ 2,411,270,623 Debt Limit $ 234,235,549 $ 236,389,371 $ 241,127,062 Total Net Debt Applicable to Limit 48,819,435 55,298,550 60,973,626 Total Debt Margin $ 185,416,114 $ 181,090,821 $ 180,153,436 124 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. 125 Utility Less: Net Debt Service Fiscal Service Operating Available Year Charges Expenses Revenue Principal Interest Coverage 2018 $ 27,099,237 $ 20,802,263 $ 6,296,974 $ 1,671,1.34 $ 391,609 3.05 2017 25,390,713 18,697,162 6,693,551 1,554,541 368,390 3.48 2016 22,003,794 17,603,487 4,400,307 1,441,741 417,346 2.37 2015 20,700,369 15,916,597 4,783,772 1,448,407 428,91.2 2.55 2014 19,147,872 15,246,653 3,901,219 1,01.0,500 426,100 2.72 2013 17,696,327 14,553,274 3,143,053 728,800 359,680 2.89 2012 17,41.1,568 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 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. 125 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. 126 Education Per Capita Level in Personal Personal Median Years of School Unemployment Fiscal Year Population Income Income Age Schooling Enrollment Rate 2018 41,182 1,396,481,620 33,910 37.3 15.9 15,817 3.2% 2017 39,453 1,266,046,770 32,090 37.2 15.9 15,497 3.8% 2016 37,938 1,175,319,240 30,980 36.9 15.8 15,460 3.4% 2015 37,865 1,157,835,970 30,578 36.1 15.6 15,009 3.2% 2014 36,477 1,144,465,875 31,375 36.9 15.4 14,515 5.1% 2013 35,929 1,095,331,494 30,486 37.1 15.4 14,058 5.5% 2012 34,499 895,739,206 25,964 36.8 15.4 13,016 5.6% 2011 33,544 850,069,800 25,342 37.8 15.4 12,533 5.7% 2010 32,523 885,015,876 27,212 34.4 15.4 12,330 5.1% 2009 31,465 913,919,790 27,923 36.5 13.9 11,700 5.0% 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. 126 CITY OF SCHERTZ, TEXAS TOP TEN PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO Source: City Economic Development Corporation 127 2018 2009 Percentage Percentage of Total City of Total City Employer Employees Employment Employees Employment Schertz/Cibolo/UC ISD 1,837 9.92% 1,400 4.28% Amazon.com 900 4.86% Sysco Central Texas 807 4.36% Baker Hughes, a GE Company 500 2.70% The Brandt Companies, LLC 476 2.57% 400 1.22% FedEx Ground 462 2.49% 120 0.37% Visionworks 396 2.14% Republic Beverage Company 372 2.01% 220 0.67% HEB Grocery CO 350 1.89% 300 0.92% City of Schertz 316 1.71% 313 0.95% EyeCare Centers of America 320 0.98% Valero Diamond Distribution 200 0.61% Theis Distributing 125 0.38% Manco 120 0.37% TOTAL 6,416 34.63% 3,518 10.75% Source: City Economic Development Corporation 127 I rz/,� �N CITY OA 1, CITY OF SCHERTZ, TEXAS FULL -TIME EQUIVALENT CITY GOVERNMENTAL EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS TOTAL 285.1 289.6 299.3 310.9 317.9 319.9 327.4 338.7 345.7 3662 Source: City Adopted Budgets Note: Full -time equivalent is based on the schedule hours of positions to a 40 hour work week. 128 Full -Time Equivalent Employees as of September 30, Function 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 General Government City Manager 7 6 6 7 7 6 6 5 5 5 Court Support 0 0 0 0 0 0 0 0 0 0 Municipal Court 5 5 5 6 6 6 6 6 6 6 Customer Relations 4 4 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 Planning and Zoning 4 4 4 3 3 3 3 4 4 4 General Services 9.5 13.5 14.7 14.7 12.7 12.7 13 0 0 0 City Secretary 2 2 2 2 2 2 2 2 2 2 Public Affairs 3 3 3 4 4 4 4 4 4 5 Records Management 3 1 1 1 1 1 1 1 1 0 Schertz Magazine 0 0 2 2 2 2 2 2 2 0 Engineer 1 2 2 4 3 3 3 7 7 7 GIS 2 2 2 2 2 2 2 2 2 2 Information Technology 3 3 4 4 6 6 6 6 7 8 Human Resources 3 4 4 4 4 4 4 5 5 5 Finance 6 6 6 6 6 6 8 8 8 8 Purchasing 5 5 5 5 4 3 3 3 3 3 Fleet Service 3 3 4 4 4 4 6 6 6 6 Building Maintenance 0 0 0 0 2 2 3 0 0 0 Facility Services 0 0 0 0 0 0 0 15.6 15.6 16.7 Public Safety Police 64.6 64.6 64.6 69.7 74.7 74.7 75.2 77.6 80.6 86.0 Fire 32 32 32 32 32 33 33 36 39 45 Inspections 7 6 7 7 7 8 9 8 8 11 Marshal Services 5 5 8 8 8 8 8 8 5 0 Health Animal Control 6 6 6 6 6 7 7 8 8 7 Environmental Health 0 0 0 0 0 0 0 3 3 4 Parks and Culture Parks 8 8 9 9 9 9 9 9 10 11.5 Pools 0 0 0 0 0 0 0 0 0 0.0 Event Facilities 1 2 1 1 1 1 1 1 1 1.0 Library 11 13.5 13.5 14 14 14 14 14 14 14.5 Public Environment Streets 13 13 14 14 14 14 14 14 14 14 Public Works Public Works 6 5 4 4 6 6 6 4 4 4 Business Office 10 10 10 10 10 10 10 10 10 10 Water and Sewer 16 16 17 17 16 16 16 16 16 19 Drainage 7 7 7 7 8 8 8 6 6 8 EMS 34 34 34 35 35 36 37 39 41 45 Economic Development 4 4 3 4 4 4 4 4 4 4 TOTAL 285.1 289.6 299.3 310.9 317.9 319.9 327.4 338.7 345.7 3662 Source: City Adopted Budgets Note: Full -time equivalent is based on the schedule hours of positions to a 40 hour work week. 128 CITY OF SCHERTZ, TEXAS OPERATING INDICATORS BY FUNCTIONTROGRAM LAST TEN FISCAL YEARS Fiscal Year Function 2010 2011 2012 2013 2014 General Government Building Permits Issued 4,806 4,950 2,643 3,054 2,869 Schertz Tales Number of Magazines printed 144,000 168,000 168,000 168,000 180,000 Police CFS 37,269 26,205 19,434 19,894 19,067 Arrests 790 762 666 800 776 Traffic Violations 19,259 13,231 20,881 19,335 15,077 Accidents 1,606 1,575 1,665 1,960 1,823 Fire Number of Rescue /Other Responses 1,671 1,657 1,799 2,046 1,759 Number of Fire Responses 76 110 74 108 110 Number of Inspections 425 616 429 332 252 Number of Training Classes Conducted 107 142 168 132 125 Number of Pre -Plan Inspections 642 536 714 729 735 EMS Requests for Transport 7,281 7,443 7,545 8,391 8,840 Actual Transports 4,575 4,801 4,766 5,451 5,713 EMT Students 80 85 79 116 87 Marshal Service Warrants Issued 5,444 4,141 2,888 3,344 2,354 Warrants Cleared 4,023 3,985 4,118 4,687 3,781 Food Establishment Permits 129 118 123 127 82 Food Establishment Inspection 202 244 180 281 218 Foster /Adoption Inspections 27 18 14 24 16 Parks Facility Reservations 719 237 234 258 301 Community and Civic Centers Civic Center 594 354 325 444 458 Community Center Rentals 635 666 816 735 437 North Community Center Rentals - 241 307 288 244 Animal Services Number of Animals Handled 2,021 1,802 1,463 1,326 1,218 Number of Adoptions 249 257 291 362 309 Number of Return to Owners 279 313 149 231 222 Number of Transfers 451 300 312 301 316 Library Annual Circulation 392,528 414,074 410,312 404,691 395,998 Library Visits 257,235 254,934 256,349 254,633 253,237 Library Program Attendance 10,610 13,767 16,035 12,581 15,048 Registered Users 24,628 28,589 30,475 31,658 30,759 Water New Connections 509 439 271 168 235 Water Main Breaks 25 76 52 38 45 Total Consumption (thousands of gallons) 12,313,766 16,763,239 16,131,415 15,500,413 15,497,071 Daily Average Consumption (thousandsofgallons) 33,736 45,927 44,196 42,466 42,458 Peak Daily Consumption (thousands of gallons) 7,040 11,000 9,290 9,483 10,089 Total Customers 10,134 12,234 12,557 12,757 13,324 Average Use Per Connection 5,054 5,725 5,517 5,905 5,467 Sewer Total Customers 9,499 10,907 10,988 11,456 11,578 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. Fiscal Year 2015 2016 2016 2017 2018 3,087 5,919 5,919 4,800 5,251 180,000 180,000 180,000 180,000 180,000 36,138 39,064 39,064 34,428 45,190 595 603 603 423 624 12,306 8,960 8,960 8,001 11,359 2,040 2,119 2,119 2,057 2,244 2,167 2,327 2,327 2,758 3055 99 67 67 86 161 698 440 440 519 562 150 460 460 340 600 980 867 867 922 788 9,286 9,723 9,723 9,956 10,059 6,118 6,123 6,123 6,201 6,165 84 89 89 90 90 3,798 2,587 2,587 2,816 1,598 3,691 3,492 3,492 2,822 2,022 135 145 145 201 181 136 153 153 13 211 22 21 21 21 18 275 240 240 251 248 478 483 483 590 516 455 370 370 455 381 209 185 185 230 235 1,304 1,313 1,313 1,283 926 357 410 410 348 319 213 205 205 228 218 296 316 316 326 297 394,766 399,622 399,622 385,206 414,790 259,413 255,109 255,109 235,428 258,695 13,825 15,282 15,282 16,814 16,945 31,138 30,702 30,702 31,432 30,806 369 213 213 303 235 45 45 45 45 50 14,757,134 16,097,931 16,097,931 15,222,373 15,833,124 40,431 43,942 43,942 41,705 43,378 8,385 10,985 10,985 11,000 9,083 13,570 13,877 13,877 14,124 14678 5,135 5,352 5,352 5,244 5294 11,413 12,282 12,282 12,398 12866 21 21 21 21 25 234,202 234,202 234,202 234,202 245,218 130 CITY OF SCHERTZ, TEXAS CAPITAL ASSET STATISTICS BY FUNCTIONTROGRAM LAST TEN FISCAL YEARS 131 Fiscal Year Function 2009 2010 2011 2012 2013 Police Stations 1 1 1 1 1. Patrol Units 38 40 42 42 42 Fire Stations 2 2 2 2 2 Training Facility - - - - - Fire Vehicles 13 13 13 13 13 EMS Ambulances 6 6 6 6 7 Marshal Service Vehicles 5 7 8 8 7 Streets Streets, paved (miles) 1.24 125 1.32 134 137 Streets, unpaved (miles) 7 7 5 5 5 Parks and Recreation Parks - Developed 11 12 17 17 13 Parks - Undeveloped 4 4 4 4 8 Playground 20 19 15 15 16 Swimming Pools 2 2 2 2 2 Baby Pools 2 2 2 2 2 Baseball/Softball Diamonds 12 12 9 9 12 Soccer Fields 12 12 12 1.2 12 Community Centers 2 4 4 4 4 Animal Control Control Vehicle 3 3 3 3 3 LibrarX Facility 1 1 1 1 1 Volumes in Collection 64,400 71,929 73,904 81,468 86,221 Water Number of Reservoirs - - - - - Number of Pump Stations 5 5 5 5 5 Water Mains (Miles) 188 190 192 192 197 Sewer Sanitary Sewers (Miles) 78 78 84 85 87 Storm Sewers (Miles) 9 9 10 10 11 Facilities Maintenance Vehicles 5 5 5 4 5 Generators 3 3 3 3 3 Source: Various City Departments 131 TABLE 22 132 Fiscal Year 2014 2015 2016 2017 2018 1 1 1 1 1 42 48 50 64 69 2 2 2 2 3 15 16 16 16 18 7 9 9 8 8 7 7 7 7 7 141 149 153 1.59 1.53 5 5 5 5 5 13 14 15 20 21 8 9 10 4 4 16 18 19 19 19 2 2 2 4 4 2 2 2 2 2 12 15 15 15 15 12 12 12 12 12 4 4 4 4 4 3 3 4 3 4 1 1 1 1 1 1.00,478 113,085 97,412 107,382 110,266 - - - - 0 5 5 5 5 5 199 210 211 221 225 90 96 98 110 113 11 12 12 12 13.6 5 6 6 6 11 3 4 4 4 7 132 I rz/,� �N CITY OA 1, COMPLIANCE SECTION 133 COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GO VERNMENT 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, 2018, 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 19, 2019. 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 0 Fax: 210 -659 -7611 a Email, info@avacpt.com ® www.avacpa.com 134 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 19, 2019. 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 19, 2019 135 rr