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Home My WebLink AboutSupplemental Attachments - 1/7/19City of Waterloo Finance Committee Open Invoice Report Fetr January 07 2019 Approv Finance Committee Accounts Payable Open Invoice Report Total As of Friday, January 4th, 2019 Wellmark Claims Wellmark Claims Wellmark Claims Friday Total 1,376,086.06 Add: Wellmark Claims !Subtotal - as of Monday, January 07, 2018 Workers Compensation Issued by TPA Housing Authority Housing Assistance EFT's Housing Authority Housing Assistance EFT's Payroll 739,335.37 281,787.96 313,339.38 41,623.35 207,269.04 1,583,355.10 20, 570.44 1,406.00 1,747,415.50 ! Bill Payment Total - Monday January 07, 2019 3,352,747.04 .'Payrcnt: to Co ee eiated e. City of Waterloo Finance Committee Open Invoice Report For December 31, 2018 Approval Finance Committee Accounts Payable Open Invoice Report Total As of Friday, December list, 2018 GATSO Bank Fees Add: Nutri Ject Systems Friday Total 1,422,018.13 1,314,538.62 28, 584.00 6,020.51 72,875.00 ISubtotal - as of Monday, December 31, 2018 1,422,018.13 Workers Compensation Issued by TPA Housing Authority Housing Assistance EFT's Housing Authority Housing Assistance EFT's Payroll 989.43 373,506.77 882.76 1,704,951.49 'Bill Payment Total - Monday December 31, 2018 3,502,348.58 TRAVEL REQUEST CITY OF WATERLOO NAME(S) AND POSITION(S): Michelle Weidner, Chief Financial Officer NAME OF CLASS / MEETING: 23rd Annual Governmental GAAP Update DATE: FINANCE DEPT. STAFF ONLY LINE ITEM USED 010 03 8400 1346 FY 11 BUDGETED 560 'De) EXPENDED YTD 91(4' l,P THIS REQUEST 1 C . 00 LEFT AFTER THIS REQUEST 3/ DATE 1 Lill ec-i Original - Clerk/Finance Copy - be•artment 1/2/2019 DESTINATION. Webinar — in office DEPARTURE POINT IF NOT WATERLOO: DEPARTURE DATE: 1/24/2019 RETURN DATE: 1/24/2019 PURPOSE OF TRAVEL: Class covers governmental auditing and accounting principles update. DATE(S) OF MEETING: 1/24/2019 WILL TRAVEL REQUIRE ADDITIONAL PERSONNEL: x COST $ YES NO METHOD OF TRAVEL: N/A CITY VEHICLE AIRFARE DEPARTING FROM: PRIVATE VEHICLE ESTIMATE OF COST: LODGING TAXI MEALS PARKING 180.00 REGISTRATION AIRFARE MILEAGE/FUEL MISC/TOLLS TOTAL FOR ALL: $ 180.00 BUDGET LINE ITEM: 010 03 8400 1346 x GRANT REIMBURSABLE YES NO REQUIRED CERTIFICATION YES NO TOTAL: $ 180.00 PER PERSON I BELIEVE THIS TRIP SERVES A PUBLIC PURPOSE AND IS NECESSARY AND BENEFICIAL TO THE CITY OF WATERLOO DEPARTMENT HEAD I APPROVE THIS TRAVEL REQUEST MAYOR \/7 DATE DATE K:\Shared Goodies\Forms\Travel Request Form January 2010 TRAVEL REQUEST CITY OF WATERLOO FINANCE DEPT. STAFF ONLY LINE ITEM USED d%0 a/ 01280 1303 FY O/9 BUDGETED 7O06 EXPENDED YTD -- THIS REQUEST (pkv LEFT AFTER THIS REQUEST 36-d DATE ';';:> /' .� r20/Q Original - Clerk/Finance Copy - Department NAME(S) AND POSITION(S): DATE: Quentin Hart December 14, 2018 NAME OF CLASS / MEETING: Mayors' Top Teen Awards Mayors' Volunteer Awards D EPARTURE DATE: April 9, 2019 P URPOSE OF TRAVEL/TRAINING: DESTINATION: Cedar Falls DEPARTURE POINT IF NOT WATERLOO: RETURN DATE: April 9, 2019 DATE(S) OF MEETING: April 9, 2019 Mayors' Top Teen Awards luncheon support Mayor' Volunteer Awards luncheon support WILL TRAVEL REQUIRE ADDITIONAL PERSONNEL: x COST $ YES NO METHOD OF TRAVEL: CITY VEHICLE PRIVATE VEHICLE AIRFARE DEPARTING FROM: ESTIMATE OF COST: LODGING TAXI 650.00 MEALS PARKING REGISTRATION AIRFARE MILEAGE/FUEL MISC/TOLLS TOTAL FOR ALL: $ 650.00 BUDGET LINE ITEM: 010-01-8280-1303 GRANT REIMBURSABLE YES NO REQUIRED CERTIFICATION YES NO TOTAL: $ PER PERSON I BELIEVE THIS TRIP SERVES A PUBLIC PURPOSE AND IS NECESSARY AND BENEFICIAL TO THE CITY OF WATERLOO (A)44± I APPROVE THIS TRAVEL REQUEST D EPARTMENT HEAD MAYOR DATE DATE K:\Shared Goodies\Forms\Travel Request Form January 2010 VI 7 RV114;1_, REQUEST CITY OF WATERLOO NAME(S) AND POSITION(S): Steve Hoambrecker' FINANCE DEPT. STAFF ONLY LINE ITEM USED 6,20 -i4 6a00 '13 Wa FY02!il'/ BUDGETED 6000 ter EXPENDED YTD eg6?f1 THIS REQUEST LEFT AFTER THIS REQUEST r?_ DATE 7p, /r2 Pia7Ci9 Original - Clerk/Finance Co • - be•artment DATE: 12/17/18 NAME OF CLASS / MEETING: 2019 Iowa Rural Water Association Annual Conference DEPARTURE DATE: 02/18/19 DESTINA/TION: DEPARTURE POINT Des Moines, IA IF NOT WATERLOO: RETURN DATE: 02/20/19 PURPOSE OF TRAVEL/TRAINING: Conference -training, education DATE(S) OF MEETING: 02/18-02/20 1 WILL TRAVEL REQUIRE ADDITIONAL PERSONNEL: x COST $ YES NO METHOD OF TRAVEL: x CITY VEHICLE AIRFARE DEPARTING FROM: PRIVATE VEHICLE ESTIMATE OF COST: 300.00 122.00 360.00 LODGING MEALS REGISTRATION MILEAGE/FUEL TOTAL FOR ALL: $ 782.00 TAXI PARKING AIRFARE MSC/TOLLS BELIEVE THIS TRIP SERVES A PUBLIC PURPOSE AND IS NECESSARY AND BENEFICIAL TO THE CITY OF WAT 'LOO DEP'-RI" E :T HEA ' / 7 --J j t BUDGET LINE ITEM: 520-14-5200-1346 x GRANT REIMBURSABLE YES NO x REQUIRED CERTIFICATION YES NO TOTAL: $ 782.00 PER PERSON I APPROVE THIS TRAVEL REQUEST MAYOR DATE DATE K:\Shared Goodies\Forms\Travel Request Form January 2010 leitf 41(k16/11.11•11111•111111.111 / /7 7 Please return to: IRWA 4221 S 22nd Ave East, Newton, IA 50208. Payment must accompany your Name (for badge): Phone: System/City/Company: E -Mail: Address: City: State: Zip: 0 Please contact me regarding my special needs. A Full Conference Registration includes all training, admission to the Exhibit Hall and the Monday ni! Reception, Networking Social, all three lunches and breaks. One -Day Only registration includes training the Exhibit Hall and lunch. ATTENTION City Clerks/Mayors/Council Members! We offer a Tuesday Exhibit for those lust wanting the opportunity to visit with our vendors (lunch and Training Sessions NOT included Registration Fees ❑ Super Saver Full Registration (Members Only) Before Friday, January 18th ❑ Full Registration (Members Only) After Friday, January 18th • Non -Member Full Registration One -Day Registration 0 Monday • Tuesday ❑ Tuesday Exhibit Hall Only ❑ Wednesday $160.00 $160.00 $50.00 $160.00 Additional Tickets (Guest/Spouse): Name of Guest/Spouse Monday Best Tasting Water Luncheon Tuesday Awards Luncheon Wednesday Lunch ■ ■ ■ Total Due: RM "BEST TASTING WATER" CONTEST owe communities and regional systems. `IOWA 1 RURAL WATER OCIATION me East Newton, IA 50208 `G 3 Z N o C O C y t! G. a Q N G 77 S N c� ?1 — n .O. . O O 5. = N a y � 3 O = N •< a) 3a Ncc c9 C = O- G CO ,'rt ,�• CD ^Oi. O ,y. S fD CCD _ CL .1 CD D -o-., m '71 o y 0 O 'AD G `. N 0- ci)0 O = M "I_ Q N O Co a 5 y c, X O CO = y 0 , CO rim O N = •••1 . CD ste, Bouquet and Clarity = 1:0 co y drim •-• CD S = i O. C9 O O = y 7 O C=9 O f0 y 2 N = p O CD t00 = O N CS O T _ — -1 CS O (O CD 1:13 CO O N CD JOso _ O = o O 0 = co CD 1:3 0. ..... O O MOH 1S31N00 WWI; ******************AUTO* T6 P1 STEVEN HOAMBRECKER 3505 EASTON AVE WATERLOO, IA 507 2-20 0 *ALL FOR AADC 506 1626 1ull14Plruld'ihirv1IdPhhququI.idhjI 1IIII"61 PAST STD US POSTAGE PAID Des Moi es, IA Permit No. 762 j L rrsi eut ill L. 19:i I r gplizitil Comprehensive Annual Financial Report CITY OF WATERLOO, IOWA FOR THE FISCAL YEAR ENDED JUNE 30, 2018 CITY OF WATERLOO, IOWA COMPREHENSIVE ANNUAL FINANCIAL REPORT Year Ended June 30, 2018 Prepared by: City of Waterloo Finance Department Michelle C. Weidner, CPA, Chief Financial Officer Emily Graham, Financial Analyst Brent Bohlen, Financial Analyst Kim Bahr, Financial Analyst Contents Introductory Section Table of contents i–ii Transmittal letter iii–viii Officials ix Organizational structure x GFOA Certificate xi Financial Section Independent auditor's report 1-2 Management's discussion and analysis 3-14 Basic financial statements: Government -wide financial statements: Statement of net position 15-16 Statement of activities 17-18 Fund financial statements: Balance sheet—governmental funds 19-22 Reconciliation of governmental funds balance sheet to the statement of net position 23 Statement of revenues, expenditures and changes in fund balances— governmental funds 24-25 Reconciliation of the statement of revenues, expenditures and changes in fund balances of governmental funds to the statement of activities 26 Statement of net position—enterprise funds 27-28 Statement of revenues, expenses and changes in net position— enterprise funds 29 Statement of cash flows—enterprise funds 30-31 Notes to basic financial statements 32-81 Required supplementary information: Schedule of changes in the City's total OPEB liability and related ratios 82 Iowa Public Employees' Retirement System: Schedule of the City's proportionate share of the net pension liability 83 Schedule of City contributions 84 Notes to required supplementary information—IPERS pension liability 85 Municipal Fire and Police Retirement System of Iowa: Schedule of the City's proportionate share of the net pension liability 86 Schedule of City contributions 87 Notes to required supplementary information—MFPRSI pension liability 88 Budgetary comparison schedule—budget and actual (modified cash basis)—all governmental funds and proprietary funds 89-90 Note to required supplementary information—budgetary reporting 91 Schedule of comparison—funds statements (GAAP basis) to budgetary (modified cash) basis 92-95 Schedule of employer contributions for Waterloo Water Works pension plan 96-97 Schedule of changes in net pension liability and related ratios for Waterloo Water Works pension plan 98 Notes to required supplementary information for Waterloo Water Works pension plan 99 (PERS schedule of the Waterloo Water Works' proportionate share of the net pension liability 100 IPERS schedule of Waterloo Water Works contributions 101-102 i Contents Financial Section (continued) Supplementary information: Schedule of revenues, expenditures and changes in fund balances—General Fund Nonmajor governmental funds: Combining balance sheet Combining schedule of revenues, expenditures and changes in fund balances Nonmajor special revenue funds: Fund descriptions Combining balance sheet Combining statement of revenues, expenditures and changes in fund balances (deficit) Capital projects funds: Fund descriptions Combining balance sheet Combining statement of revenues, expenditures and changes in fund balances (deficit) Fiduciary funds, fund descriptions Agency Fund, statement of changes in assets and liabilities 103-113 114 115 116 117-118 119-120 121 122-123 124-125 126 127 Statistical Section (Unaudited) Statistical section contents 128 Net position by component 129 Changes in net position 130-131 Fund balances, governmental funds 132 Changes in fund balances, governmental funds 133 Assessed and taxable value of property 134 Property tax rates 135 Principal taxpayers 136 Property tax levies and collections 137 Ratios of outstanding debt by type 138 Ratios of general bonded debt outstanding 139 Direct and overlapping governmental activities debt 140 Legal debt margin information 141 Sewer revenue bond coverage 142 Demographic and economic statistics 143 Principal area employers 144 Full-time equivalent city government employees by function/program 145 Operating indicators by function/program 146-147 Capital asset statistics by function/program 148 Compliance Section Schedule of expenditures of federal awards Notes to schedule of expenditures of federal awards Summary schedule of prior audit findings Report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards Report on compliance for each major federal program and report on internal control over compliance required by Uniform Guidance Schedule of findings and questioned costs 149-150 151 152 153-154 155-156 157-159 ii Mayor QUENTIN HART COUNCIL MEMBERS MARGARET KLEIN Ward 1 BRUCE JACOBS Ward 2 PATRICK MORRISSEY Ward 3 JEROME AMOS, JR. Ward 4 RAY REUSS Ward 5 SHARON NON At -Large STEVE SCHMITT At -Large CITY OF WATERLOO, IOWA OFFICE OF THE MAYOR & CITY CLERK AND FINANCE DEPARTMENT QUENTIN HART • Mayor MICHELLE WEIDNER, CPA • Chief Financial Officer December 21, 2018 Members of the City Council and Citizens of the City of Waterloo, Iowa We are pleased to present the Comprehensive Annual Financial Report of the City of Waterloo, Iowa (City) for the year ended June 30, 2018 in accordance with the provisions of Chapter 11 of the Code of Iowa. This report is published to provide the City Council and citizens detailed information concerning the financial condition of the City. It has also been audited by an independent certified public accounting firm in accordance with generally accepted auditing standards and the federal single audit act requirements, including the provisions of Title 2 of the U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). RSM US LLP issued an unmodified ("clean") opinion on the financial statements for the year ended June 30, 2018. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. Management's Discussion and Analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. THE CITY'S BACKGROUND AND SERVICES Waterloo is the 6th largest and historically one of the most diverse cities in the state of Iowa, with a population of 68,406. The City was incorporated in 1868 and is the county seat of Black Hawk County. Waterloo and the neighboring City of Cedar Falls are the primary urban centers in the region, serving as a retail and healthcare hub for the region. The City is empowered to levy a property tax on real property located within its boundaries. The City operates under a Mayor — Council form of government, with the mayor as the elected chief executive. The City Council is comprised of seven members, five of whom are elected from separate wards and two who are elected at -large. The Mayor is elected to two-year terms, and the City Council members are elected to four-year staggered terms. The City of Waterloo provides a full range of municipal services to its citizens and is organized into a number of operating departments, the activities of which are directed by WE'RE WORKING FOR YOU! An Equal Opportunity/Affirmative Action Employer the Mayor. The public services provided by the employees of the City include police and fire protection, building inspections and animal control, a regional airport, construction and maintenance of highways, streets and other infrastructure, and recreational and cultural and arts services. The City also provides solid waste collection and wastewater treatment services. Other human services are provided through the community development, housing and human rights departments. The central garage provides vehicle maintenance services, and the human resources, management information systems, city attorney, city clerk and finance departments perform various administrative functions. Funds, agencies, boards, commissions, trusts and authorities involved in the provision of municipal services must be included in the City's financial reporting as component units if the City is financially accountable. Although the Waterloo Water Works and the Waterloo Convention & Visitors Bureau, Inc. are operated as independent entities, they meet the requirements to be considered component units of the City and these entities are included in this report. The Waterloo Community School District and the Metropolitan Transit Authority do not meet the established criteria for component entities of the City and are not included in this report. ECONOMIC OUTLOOK The economy of Waterloo and the Cedar Valley area is seeing continued commercial and industrial activity. Major employers in the City include the John Deere Waterloo Works Drivetrain Operations, Engine Works, Foundry, Product Engineering and Assembly facilities. Other major employers include Tyson Foods, Wheaton Franciscan Healthcare, Omega/Master Brand Cabinetry, Bertch Cabinets, and ConAgra Brands, Inc. The area's regional economic development corporation, the Greater Cedar Valley Alliance & Chamber, partners with the city to stimulate development in Waterloo as well as the entire metropolitan area. Total building permit valuation for Waterloo was over $100 million for the fifth straight year, reaching $104.7 million for the fiscal year ended June 30, 2018. Waterloo is a regional retail center for Black Hawk and surrounding counties. Retail sales have increased steadily over the last few years, although they declined by 2.95% in 2018 to $1.109 billion in fiscal 2018. Waterloo's population has remained relatively stable during the past decade. The overall city tax base has also remained stable, reflecting an average annual growth level of approximately 0.6% for the last five years. The City has developed a more diverse employment base in recent years, although Deere & Co. continues to play a major role in the local economy. Deere (a Fortune 100 company) remains the city's largest employer and one of its largest taxpayers. The company has invested more than one billion dollars in its Waterloo facilities since 2010, including the Westfield advanced manufacturing facility and the Waterloo Foundry, the largest electric foundry in the state. The City's average unemployment level stands at 2.5% compared to the state level of 2.5% and the federal level of 3.7%. iv MAJOR INITIATIVES AND PROJECTS Downtown redevelopment and the creation of economic corridors, districts of similar uses, and opportunities for other compatible development have been development priorities. The City acquired more than 4 blocks of land in the downtown core area, creating sites for development. Cedar Valley Riverfront Renaissance The Riverfront Renaissance project was a major project that utilized state "Vision Iowa" funds, as well as private funds, local funds, and partnerships with other businesses to create three major objectives: o The RiverWalk Loop — a walking and recreational trail system along the banks of Cedar River from 1St Street to 18th Street in Downtown Waterloo. o The Cedar River Dam improvements — an inflatable bladder dam system that improved boatable recreational water depth upstream of the dam at 4th Street. o The Riverfront Amphitheater — this space has become a popular destination for many activities, and is bringing more residents and visitors to downtown Waterloo and the riverfront. Cedar Valley SportsPlex The Cedar Valley SportsPlex is a 125,000 square -foot recreational facility with indoor soccer fields, gyms, a leisure pool and slide, fitness facility, running track and multi- purpose activity spaces. The facility opened in 2014 and now has over 5,200 members. Cedar Valley TechWorks Campus Area At the other end of the Riverwalk Loop, the $52 million Cedar Valley Tech Works Campus Project has transformed two former Deere and Co. 6 -story industrial buildings into a Marriott Hotel, Deere Training center and a multi -tenant green technology and advanced manufacturing innovation center. This was the first project approved under the Iowa Reinvestment District program. This development will also include the creation of a Marina along the Cedar River and lots available for additional commercial development. Other development in the downtown area includes the $15 million Grand Crossing private development. Phases I and II are now complete with 108 condominium units and first floor retail and commercial space. Phase III is now underway. In addition, Hawkeye Community College has nearly completed work on its new $8 million urban campus which will bring additional educational and student services populations downtown. Logan Plaza The former Logan Plaza Shopping Center in the northern part of the City was acquired by a developer and completely demolished, with plans to replace it with several new buildings. The first two new medical office buildings are now open, with others under construction. In addition a new Kwik -Star fuel and convenience store is now open with additional retail being planned. Overall, there will be four phases of projects, with over $9 million in private investment, creating a medical and retail park for this part of the v community. The public-private partnership for the redevelopment of this area has also been created from: > The $30 million Highway 63 redevelopment project which created green space, aesthetics, recreational trails, and economic opportunity along the corridor, as well as improving traffic movements with turning lanes ➢ The continued investment by Unity Point Health (formerly Allen Hospital) with over $40 million in improvements and expansions to the hospital campus, and over $8 million in the Nursing College campus > The new Carver Academy middle school built on the former Logan School site, offering a more aesthetically pleasing campus setup for students with a greenhouse, and partnerships with other entities > Improvements to the secondary road system along Highway 63, with the elimination of un -needed frontage roads for better economic outlots for developments, and improvements in lane configurations and improvements to Donald Street Other New Development Projects Several other major development projects are underway: The former Greyhound Park was demolished, creating new development land near the major intersection of U.S. Highways 20 and 63. The Boys & Girls Club has begun construction on a $5.0 million Teen Center on E. 4th St. Dahlstrom Real Estate has initiated a project to construct a new $8.0 million warehouse and office building near Wagner Road and Airline Highway. John Deere is nearing completion of a $7.3 million addition to its Westfield Avenue manufacturing site. A seven -story 70 -unit residential tower is under construction on the riverfront, immediately adjacent to the RiverLoop Amphitheater and Upper Plaza. Street Improvements The one -cent local option tax was approved in 2013 for another ten years, to be used for street repairs and improvements. Other major construction initiatives that are primarily funded with grants include the reconstruction of Highway 63 through the northern part of the city. The first segment of Highway 63 is open, and construction is well underway on the segment from Jefferson St. to Newell St. Traffic flow improvements to Kimball Avenue have been completed. The reconstruction of University Avenue from Midway Dr. to U.S. Highway 63 has begun, with estimated completion in 2020. Airport Improvements $3.5 million in improvements to taxiways, runways, and parking were made to the Waterloo Regional Airport in 2018. vi Recreational Facilities The City is also continuing to develop its extensive system of bike trails, which are being connected to countywide and regional trail networks, creating a system of more than 117 miles of trails. The Riverwalk Loop trail in downtown Waterloo has been completed and a new trail has been constructed along the newly constructed Shaulis Road connection from Highway 21 to Highway 63. A recreational area for all -terrain vehicle trails has been developed in the Riverview neighborhood, and a new bike trail is being constructed as part of the University Avenue reconstruction project. Plans have been finalized for major improvements to Lincoln Park downtown, including improved infrastructure, new seating, lighting and walkways. Groundbreaking is scheduled in 2019 with completion in 2020. Construction is nearly complete on the Waterloo Boat House project, and the Sherwood Park recreation area improvements have been completed. AWARDS The Small Business Administration named the City of Waterloo as the 2018 Iowa Small Business Community of the Year. The SBA cited key successes including the City's ongoing partnership with neighboring communities, and its support of regional economic development organizations such as the Greater Cedar Valley Alliance, the TechWorks Campus, and the Pappajohn Entrepreneurial Center. 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 Waterloo, Iowa for its Comprehensive Annual Financial Report (CAFR) for fiscal year 2017. This is the fourteenth year that the City received this award, which is a prestigious national award, recognizing conformance with the highest standards for the preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report, whose contents conform to program standards. The CAFR must satisfy both accounting principles generally accepted in the United States of America and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. Management believes that the current report continues to meet the Certificate of Achievement program requirements and we are submitting it to GFOA to determine its eligibility for another certificate. vii FINANCIAL MANAGEMENT INFORMATION Budgetary Controls - The City's management staff is responsible and is actively involved in the financial planning and management of the City for daily operations and long-range strategic planning. The objective of budgetary controls is to ensure compliance with the annual budget approved by the City Council, as well as the budget control procedures mandated by the State of Iowa. Management control policies adopted by the City Council require that departmental and activity budgets comply with line -item appropriations. Amendments exceeding de minimus guidelines require the specific approval of the City Council Finance Committee. These policies also require expenditures exceeding $1,000 to be pre -authorized by the City Council Finance Committee. Long-term financial and capital improvement planning are crucial strategic functions of the City. The City's management staff, coordinated by the Planning Department, prepares and presents the five-year Capital Improvement Program (CIP) to the Mayor and City Council for their review and approval annually. The CIP outlines the City's planned schedule of capital project construction over the next five-year cycle. The CIP provides an analysis of the financial funding impact and capital debt impact of the planned construction project program. The City met the minimum fund balance requirement for the General Fund and adhered to all other financial policies approved by the City Council. ACKNOWLEDGMENTS This report could not have been completed without the dedicated service of the entire Finance department and other City staff in addition to the RSM US LLP audit team. We want to thank all of the City departments for their assistance in providing data necessary for this report. Special thanks go to Emily Graham, Brent Bohlen and Kimberly Bahr in the Finance Department and also the City Clerk staff. Each of you has our appreciation and respect for your contributions to this report. We also want to thank the members of the City Council for their support of our efforts to conduct the financial operations of the City in a responsible and progressive manner. Sincerely, Quentin M. Hart Mayor viii Michelle C. Weidner, CPA Chief Financial Officer City of Waterloo, Iowa Officials As of June 30, 2018 Name Title Term Expires Quentin Hart Margaret Klein Bruce Jacobs Patrick Morrissey Jerome Amos Christopher Shimp Sharon Juon Steven Schmitt Michelle Weidner, CPA Kelley Felchle, CMC Eric Thorson, PE Jamie Knutson, PE David Zellhoefer Daniel Trelka Elected Mayor Council Member- 1st Ward Council Member - 2nd Ward Council Member - 3rd Ward Council Member - 4th Ward Council Member - 5th Ward Council Member - At -Large Council Member - At -Large Appointed Chief Financial Officer City Clerk City Engineer Interim City Engineer City Attorney Chief of Waterloo Police Department ix January, 2020 January, 2022 January, 2020 January, 2022 January, 2020 January, 2022 January, 2022 January, 2020 Indefinite December 31, 2019 Indefinite Indefinite Indefinite Indefinite CITY OF WATERLOO, IOWA — ORGANIZATIONAL STRUCTURE CITIZENS OF WATERLOO City Council Margaret Klein Bruce Jacobs Jerome Amos Patrick Morrissey Chris Shimp Sharon Juon Steven Schmitt Mayor Quentin Hart 1 Community Housing Library Dor. elopment Board Board Board Kelley Felchle City Clerk David Zell- hoefer City Attorney Daniel Trelka Director Safety Services Jamie Knutson; Interim City Engineer Sandie Greco Interim Director Public Works Sandie Greco Traffic Operations Supt. Keith Ka spari Airport Director _Abraham Funchess Human Rights Director Kent Shankle Cultural Arts Director Paul Huting Leisure Services Director Steven Hoambreck- er Waste Managem ent Services Michelle Weidner Chief Financial Officer Lance Dunn Human Resources Director Noel Anderson Community Planning Developm ent Director r Steven Nie lien Library Director G Government Finance Officers Association Certificate Achievement for Excellence in Financial Reporting Presented to City of Waterloo Iowa For its Comprehensive Annual 1 inaricial Report for the Fiscal Year Ended June 30, 2017 Director:'(:60 xi Independent Auditor's Report To the Honorable Mayor and Members of the City Council City of Waterloo, Iowa RSM RSM US LLP Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Waterloo, Iowa (the City) as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the discretely presented component units, Waterloo Water Works and Waterloo Convention & Visitors Bureau, Inc., which collectively represent 100 percent of the assets, net position and revenues of the aggregate discretely presented component units. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the discretely presented component units, is based solely upon the reports of the other auditors. 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 of material misstatement. The financial statements of Waterloo Convention & Visitors Bureau, Inc. were not audited in accordance with Government Auditing Standards. 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 financial statement 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. Opinions In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Waterloo, Iowa as of June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. THE POWER OF BEING UNDERSTOOD AUDIT 1 TAX 1 CONSULTING 1 RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Visitrsmus.com/aboutusformoreinformationregardingRSMUSLLPand RSM International. Emphasis of Matter As explained in Note 13 to the financial statements, the City adopted GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which restated beginning net position and other postemployment benefits liability of the governmental activities, business -type activities, major enterprise fund and the aggregate remaining funds. 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 the Management's Discussion and Analysis, the schedule of changes in the City's total OPEB liability and related ratios, the schedule of the City's proportionate share of the net pension liability and schedule of contributions for the Iowa Public Employees' Retirement System, the schedule of the City's proportionate share of the net pension liability and schedule of City contributions for the Municipal Fire and Police Retirement System of Iowa, budgetary comparison schedule, and the Schedule of Contributions for Waterloo Water Works Pension Plan and Schedule of changes in net pension liability and related ratios for the Waterloo Water Works Pension Plan, 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. We and other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying combining individual and nonmajor fund financial statements and other schedules and statements, listed in the table of contents as supplementary information, and the schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates 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 by us. In our opinion, based on our audit and the procedures performed as described above, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The accompanying introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audits of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 21, 2018 on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. s/4( vs LLP Davenport, Iowa December 21, 2018 2 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 As management of the City of Waterloo, we offer readers of the City of Waterloo's financial statements this narrative overview and analysis of the financial activities of the City of Waterloo for the fiscal year ended June 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 at pages - vii of this report. Financial Highlights • The assets and deferred outflows of resources of the City of Waterloo exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $417,866,994 (net position). Of this amount, the City's unrestricted net position ($25,659,519) is negative, due to recording the City's share of postemployment benefit liabilities as required due to the implementation of GASB Statement No. 75, an accounting standard applicable for the city's participation in postemployment benefits. • The City's total net position increased by $9,580,612 compared to the 2017 ending net position of $408,286,382. • As of the close of this current fiscal year, the City of Waterloo's governmental funds reported combined ending fund balances of $89,774,573, a decrease of $8,816,485 in comparison with the prior year. Approximately 7.1 percent of this total amount, $6,387,374, is available for spending at the City's discretion (unassigned fund balance), although some funds are legally limited for specified purposes. • At the end of the current fiscal year, unassigned fund balance for the General Fund was $9,479,091, or 18.7 percent of total General Fund expenditures. • The City of Waterloo's total long-term liabilities increased by $6,471,484 or 3.9 percent during the current fiscal year, due primarily to the issuance of general obligation bonds and other loans to finance various capital improvements and economic development projects and also due to recognizing the full liability for post -employment healthcare benefits. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Waterloo's basic financial statements. The City of Waterloo's basic financial statements are comprised of three components: (1) government -wide financial statements, (2) fund financial statements and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government -wide financial statements. The government -wide financial statements are designed to provide readers with a broad overview of the City of Waterloo's finances in a manner similar to a private - sector business. The statement of net position presents information about all of the City of Waterloo's assets, deferred outflows of resources, liabilities and deferred inflows of resources, with the difference between them 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 Waterloo is improving or deteriorating. The statement of activities presents information illustrating how the government's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). 3 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 Both of the government -wide financial statements distinguish functions of the City of Waterloo 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 Waterloo include public safety, public works, health and social services, culture and recreation, community and economic development and general government. In addition, the convention bureau provides marketing services for tourism operated as a separate discretely presented component unit of the City. The business -type activities of the City of Waterloo include the sanitary sewer system and the solid waste system. The water utility is operated as a separate discretely presented component unit of the City. For detailed information about the Waterloo Convention & Visitors Bureau, Inc. or the Waterloo Water Works, please see their separate audited financial statements. The government -wide financial statements include only the City of Waterloo itself (known as the primary government) and its discretely presented component units, the Waterloo Water Works and Waterloo Convention and Visitors Bureau, Inc. The Waterloo Community School District and the Metropolitan Transit Authority provide services to the citizens of Waterloo but do not meet established criteria as component units of the City and thus are not included in this report. 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 Waterloo, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. All of the funds of the City of Waterloo can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same 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 may be useful in evaluating a government's near-term financial 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 funds 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 Waterloo maintains 21 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, Trust and Agency Fund, Tax Increment Financing Fund, General Obligation Debt Service Fund, and Road Use Tax Fund, all of which are considered to be major funds. Data from the other 16 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. Proprietary funds. The City of Waterloo maintains two proprietary funds, which are used to report the same functions presented as business -type activities in the government -wide financial statements. 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 sanitary sewer fund and the sanitation fund. The sanitary sewer fund is considered to be a major fund of the City of Waterloo. 4 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government -wide financial statements because the resources of those funds are not available to support the City of Waterloo's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The City has one type of fiduciary fund, an agency fund. There were no assets held in the fiduciary fund as of June 30, 2018. 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. The City's budgetary comparison schedule and the other postemployment benefit plan schedule of funding progress are presented as required supplementary information immediately following the notes to the financial statements. The combining statements referred to earlier in connection with nonmajor 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 Waterloo, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $417,866,994 at the close of the fiscal year ended June 30, 2018. By far the largest portion of the City of Waterloo's net position (94 percent) reflects its investment in capital assets (e.g., land, buildings and improvements, infrastructure and vehicles and equipment), less any related debt used to acquire those assets that is still outstanding. The City of Waterloo uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Waterloo'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. Statement of Net Position A condensed version of the Statement of Net Position as of June 30, 2018 and 2017 follows: City of Waterloo's Net Position Governmental Activities Business -Type Activities Total 2018 2017 2018 2017 2018 2017 As Restated Not Restated As Restated Not Restated As Restated Not Restated Assets Current and other assets $ 153,977,327 $ 160,262,329 $ 24,767,384 $ 24,940,110 $ 178,744,711 $ 185,202,439 Capital assets 373,738,967 361,366,873 96,833,189 96,002,802 470,572,156 457,369,675 Total assets 527,716,294 521,629,202 121,600,573 120,942,912 649,316,867 642,572,114 Deferred outflows of resources 13,519,715 21,156,718 968,914 940,474 14,488,629 22,097,192 Liabilities Current liabilities 22,802,051 20,229,201 4,985,775 4,186,920 27,787,826 24,416,121 Long-term liabilities 145,496,173 140,564,602 24,852,008 23,312,095 170,348,181 163,876,697 Total liabilities 168,298,224 160,793,803 29,837,783 27,499,015 198,136,007 188,292,818 Deferred inflows of resources 47,623,590 51,539,230 178,905 53,056 47,802,495 51,592,286 Net position Net investment in capital assets 312,634,254 306,360,558 78,421,882 79,180,253 391,056,136 385,540,811 Restricted 52,436,491 55,182,022 33,886 672,515 52,470,377 55,854,537 Unrestricted (39,756,550) (31,089,693) 14,097,031 14,478,547 (25,659,519) (16,611,146) Total net position $ 325,314,195 $ 330,452,887 $ 92,552,799 $ 94,331,315 $ 417,866,994 $ 424,784,202 5 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 $52,470,377 of the City of Waterloo's net position (12.6 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($25,659,519) is a negative position, due to the net pension liabilities for the city's share of liabilities in the IPERS and MFPRSI pension plans and the city's liability for other post -employment healthcare benefits. The separate governmental activities had positive balances in the net investment in capital assets and fund balances restricted for specific purposes. Business -type activities also reported positive balances in all categories. The same situation held true for the prior fiscal year. The City's total net position increased compared to the 2017 ending net position. Governmental -type activities' net position increased by $9,301,404 from the 2017 net position of $316,012,791. This increase was largely related to capital contributions received from City infrastructure projects. See page 26 for a reconciliation of this increase. The total business -type activities' net position increased by $279,208 from the 2017 restated net position of $92,273,591. Statement of Activities A condensed version of the Statement of Activities as of June 30, 2018 and 2017 follows: City of Waterloo's Changes in Net Position Governmental Activities Business -Type Activities Total 2018 2017 Not Restated 2018 2017 Not Restated 2018 2017 Not Restated Revenues: Program revenues: Charges for services $ 12,841,227 $ 11,818,461 $ 16,946,246 $ 19,055,784 $ 29,787,473 $ 30,874,245 Operating grants and contributions 11,617,786 13,138,910 310,679 496,658 11,928,465 13,635,568 Capital grants and contributions 12,757,084 35,704,168 145,656 192,977 12,902,740 35,897,145 General revenues: Property taxes 47,404,667 46,530,686 - 47,404,667 46,530,686 Other taxes 17,239,619 17,260,380 17,239,619 17,260,380 Other 5,434,618 3,116,000 150,737 51,489 5,585,355 3,167,489 Total revenues 107,295,001 127,568,605 17,553,318 19,796,908 124,848,319 147,365,513 Expenses: Public safety 20,828,929 33,735,948 20,828,929 33,735,948 Public works 34,150,050 35,579,527 - 34,150,050 35,579,527 Health and social services 369,832 381,203 369,832 381,203 Culture and recreation 12,667,184 15,012,599 - 12,667,184 15,012,599 Community and economic development 17,417,572 12,860,289 - 17,417,572 12,860,289 General government 10,174,531 10,421,434 - 10,174,531 10,421,434 Interest on long-term debt 2,385,499 2,175,284 2,385,499 2,175,284 Sanitary sewer 13,107,645 13,635,403 13,107,645 13,635,403 Sanitation 4,166,465 4,050,778 4,166,465 4,050,778 Transfers Total expenses 97,993,597 110,166,284 17,274,110 17,686,181 115,267,707 127,852,465 Increase in net position before transfers 9,301,404 17,402,321 279,208 2,110,727 9,580,612 19,513,048 Change in net position 9,301,404 17,402,321 279,208 2,110,727 9,580,612 19,513,048 Net position, beginning , restated 316,012,791 313,050,566 92,273,591 92,220,588 408,286,382 405,271,154 Net position, ending $ 325,314,195 $ 330,452,887 $ 92,552,799 $ 94,331,315 $ 417,866,994 $ 424,784,202 6 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 Total governmental activities' revenue for the current fiscal year was $107,295,001. The largest single revenue source for the City was property taxes of $47,404,667. Property taxes increased by $873,981 (1.9 percent) during the year. This increase is a result of a combination of factors, including an increase in the assessed value of property of .7 percent, an increase of 1.7 percent in the taxable value of property and a reduction of 0.03 percent in the levy rate. Certain revenues are generated that are specific to governmental program activities. These totaled $37,216,097 during the fiscal year ended June 30, 2018. The graph below illustrates the comparison between the expenses by governmental activity type and the revenues generated that are specific to those activities. Expenses and Program Revenues—Governmental Activities $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- 1. Pudic safety Public works Health and Culture and Community General Interest and social recreation and government issuance services economic costs an development long-term debt ■Expenses ■Revenues The graph below shows the percentage of the total governmental revenues allocated by each revenue type. Revenues by Source - Governmental Activities Other Taxes 16% Property Taxes 44% Other Charges for 5% [ services 12% 1 Operating Grants and Contributions 11% Capital Grants and Contributions 12% 7 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 Total business -type activities' revenue for the fiscal year was $17,553,318. $17,402,581 of this revenue was generated for specific business -type activity expenses. The graph below shows a comparison between the business -type activity expenses and program revenues. Expenses and Program Revenues - Business -Type Activities $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- Sanitary Sewer San itation ■ Expenses ■ Revenues The graph below shows the breakdown of revenues by source for the business -type activities. Revenues by Source - Business -Type Activities Operating Grants and Contributions 2% Capital Grants and Contributions 1% Charges for services 97% Business -type activities. Business -type activities increased the City of Waterloo's net position by $279,208 from the 2017 restated net position of $92,273,591, accounting for 2.9 percent of the increase in the City's net position. 8 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 Financial Analysis of the Government's Funds As noted earlier, the City of Waterloo uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. Governmental funds. The focus of the City of Waterloo'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 of Waterloo'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 of Waterloo's governmental funds reported combined ending fund balances of $89,774,573, a decrease of $8,816,485 in comparison with the prior year. Fund balance in the amount of $83,387,199 is not available for new spending because it represents amounts previously paid for items that were not exhausted at year-end (nonspendable) or has already been restricted, committed or assigned to be used for a variety of purposes. Approximately 7.1 percent of total fund balance or $6,387,374, constitutes unassigned fund balance. The General Fund is the chief operating fund of the City of Waterloo. At the end of the current fiscal year, unassigned fund balance of the General Fund was $9,479,091, while total fund balance was $23,783,551. As a measure of the General Fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 18.7 percent of total General Fund expenditures, while total fund balance represents 47.0 percent of that same amount. Net general fund operations resulted in an increase in total general fund balance of $63,119, and a decrease in unassigned fund balance of $67,771 for the year. Because of the large health insurance reserves built up the past several years, the City chose to reduce property taxes for health insurance and instead used a portion of the restricted health reserves to pay claims during the year ended June 30, 2018. While most operating activities came in under budget for the year, those savings were primarily due the health care cost savings that are restricted and not available for general use. The City budgeted to use $500,000 in unassigned fund balance for operations in fiscal year 2018, and an additional $210,000 for fiscal year 2019 ($710,000 total for 2019), which was set aside in assigned fund balance at June 30, 2018. Because unassigned fund balance decreased by only $67,771 for the year, overall general fund performance for the year was better than expected by $642,229. Various factors contributed to that performance, including interest revenue earned in the general fund that exceeded the amount budgeted by $126,000; an increase in gas and electric franchise fees earned of $193,000 and positions that were vacant for portions of the year. 9 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 The General Obligation Debt Service Fund—The net increase in fund balance of $135,135 during the current year is largely due to savings realized from the refunding bond issue. TIF Fund—The total fund balance of $3,148,011 is restricted for the payment of debt service related to tax increment financing district projects. The net decrease in fund balance during the current year was $219,032 and is the result of timing differences between revenue collections and the payment of TIF obligations. June 2018 GO Bonds Fund – The net increase in fund balance of $8,039,020 is due to the issuance of general obligation bonds in the current year. Proprietary funds. The City of Waterloo's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. Total net position of the sanitary sewer fund at the end of the year was $88,613,394, a decrease of $826,466 from the 2017 net position of $89,439,860. This decrease was due to several factors, including amounts owing for sewer construction related to the Highway 63 project and other mandated sewer system improvements using bond funds sold in prior years and the expense to recognize the liability for post -employment healthcare benefits. Other factors concerning the finances of the sanitary sewer fund have already been addressed in the discussion of the City of Waterloo's business -type activities. Budgetary Highlights In accordance with the Code of Iowa, the City Council annually adopts a budget on the modified cash basis following required public notice and hearing for all funds. The annual budget may be amended during the year utilizing similar statutorily prescribed procedures. Formal and legal budgetary control is based upon ten major classes of disbursements known as functions, not by fund or fund type. These ten functions are: public safety, public works, health and social services, culture and recreation, community and economic development, general government, debt service, capital projects, business -type and non -program. Function disbursements required to be budgeted include disbursements for the general fund, special revenue funds, debt service fund, capital projects funds and permanent funds. Although the budget document presents function disbursements by fund, the legal level of control is at the aggregated function level, not at the fund or fund type level. These budget amendments are reflected in the final budgeted amounts. Differences between the original budget and the final amended budget for the City of Waterloo are summarized below. The total original expenditure budget of $168,692,801 including transfers out was increased to $191,270,434 (an increase of $22,577,633). • In the Public Safety program category, expenses and related revenue for various law enforcement grants and non -property tax funded projects were increased ($.3 million). • In the Public Works category, the use of Road Use Tax fund balance was added to fund the anticipated increase in expenses for the University Avenue reconstruction and bridge repairs. Additional revenue and expense was budgeted for traffic operations. ($3.5 million). • The Health and Social Services category was reduced to reflect the budgeted amount remaining from the Fair Housing project. ($.1 million). • The Culture & Recreation program category was increased to reflect a number of additional grants and donations received by the Cultural and Arts department, the Library and Leisure Services. 10 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 • Revenue and expenses were increased for the Sportsplex to more closely match operations and the use of unassigned fund balance was increased for Young Arena operations ($.1 million). • Additional federal revenue and expense expected to be completed using Block Grant and Housing funds were added to the Community and Economic Development category. ($.5 million). • Amendments reflecting the use of restricted fund balance for health and liability insurance claims and to expend grant funds received in prior years were made in the General Government category ($1.9 million). • Under the Debt Service category, revenue and expenses were increased to reflect the planned refunding bond issue. ($3.7 million). • In the Capital Projects program, additional expenses relating to grant revenue awarded during the year and not previously budgeted were added. Several construction project budgets were adjusted to more accurately reflect the work expected to be completed by June 30, 2018. ($9.2 million). • Transfers out were increased to reflect the transfer of TIF revenue to the capital improvement fund that was used for TIF -funded projects. Transfers necessary to properly account for the sewer portion of the refunding bond issue were added. ($3.4 million). • In the Business Type/Enterprises activity, which accounts for the activities of the sewer and garbage funds, line item adjustments were made to more accurately reflect the amounts anticipated to be spent for capital improvement projects and operations by June 30, 2018 ($.1 million). The total original revenue budget, including other financing sources of $158,249,078 was increased to $170,256,014 (an increase of $12,006,936.) • State and federal grant revenue was increased to reflect additional grants awarded after the original budget certification for community development block grants, public safety projects, airport and traffic improvements, and storm water lift stations, as well as others ($3.7 million). • Amendments were made to various charges for services to reflect higher revenues than originally anticipated with the certified budget ($.3 million). • Miscellaneous revenue was increased to reflect additional donations received for various City projects and for insurance and other refunds received that exceeded original budget projections ($.8 million). • The City amended the original budget for debt proceeds to reflect bond proceeds from anticipated general obligation and sewer bond refunding issues ($3.6 million). • Transfers in were increased to reflect the sewer portion of the refunding bond issue as well as an increased transfer to the capital projects fund from the tax increment financing fund ($3.4 million.) See pages 84 through 85 for the Budgetary Comparison Schedule - Budget and Actual (Modified Cash Basis) — All Governmental Funds and Proprietary Funds. Capital Asset and Debt Administration Capital Assets. The City of Waterloo's investment in capital assets for its governmental and business - type activities as of June 30, 2018, amounts to $470,672,168 (net of accumulated depreciation) as reflected in the following table. The total increase in the City of Waterloo's investment in capital assets for the current fiscal year was 2.9 percent (a 3.4 percent increase for governmental activities and a 0.9 percent increase for business -type activities). 11 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 This investment in capital assets includes land, buildings and improvements, park facilities, vehicles and equipment, and roads, highways and bridges (also referred to as infrastructure assets) placed in service since July 1, 1980. City of Waterloo's Capital Assets at Fiscal Year End (Net of Depreciation) Governmental Activities Business -Type Activities Total 2018 2017 2018 2017 2018 2017 Land $ 44,688,184 $ 44,395,439 $ 534,242 $ 534,242 $ 45,222,426 $ 44,929,681 Land held for redevelopment 14,614,633 10,989,706 - 14,614,633 10,989,706 Buildings and improvements 65,042,025 67,297,884 44,982,946 46,315,435 110,024,971 113,613,319 Other improvements 41,736,685 40,272,939 41,736,685 40,272,939 Software 94,148 205,011 94,148 205,011 Infrastructure 218,383,910 216,855,739 - 218,383,910 216,855,739 Furniture, vehicles, machinery and equipment 8,922,508 10,214,950 4,822,007 5,318,519 13,744,515 15,533,469 Construction -in -progress 21,993,559 11,408,144 4,757,309 3,561,667 26,750,868 14,969,811 $ 373,738,967 $ 361,366,873 $ 96,833,189 $ 96,002,802 $ 470,572,156 $ 457,369,675 Major capital assets events during the current fiscal year included the following: • The City acquired properties for the continued economic development of the Logan Urban Renewal Area ($3.0 million), as well as other properties for development. ($1.2 million). • New additions to buildings and improvements totaled $1.6 million, including new boilers for the Convention Center, a new chemical storage building and parking garage improvements. • The City invested $.8 million in new vehicles, equipment, computers and software for various city departments. The most significant of these included a tractor with mower, salt brine blender, fuel pump dispensers and an HD upgrade to the TV studio. • New investments in infrastructure assets totaled $11.5 million, including street reconstruction and improvements ($9.6 million), a new bridge canopy ($1.0 million), and recreational trail improvements ($.9 million). • The City invested $2.6 million in infrastructure assets and $.6 million in new vehicles and equipment for the sewer and sanitation departments. Additional information about the City of Waterloo's capital assets can be found in Note 6 of this report. Long-term liabilities. At the end of the current fiscal year, the City of Waterloo had total bonded debt outstanding of $101,489,000. This entire amount is comprised of debt backed by the full faith and credit of the government. 12 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 The City has incurred other debt to purchase land in the City's industrial parks and complete projects, as well as purchase equipment. The City has obligations to employees for benefit time not used at fiscal year-end. During the current fiscal year the balance due on these obligations increased by $6,765,244. The City of Waterloo's total long-term liabilities decreased by $7,020,674 (7.8 percent) during the current fiscal year, due largely to a reduction in estimated pension liabilities. The City issued general obligation bonds in the amount of $11,575,000 during the current fiscal year; $8,090,000 for general purposes, $1,425,000 in general purpose refunding bonds and $2,060,000 in refunding bonds for previously financed sewer projects. The City of Waterloo maintains an Aa2 rating from Moody's Investor Services, Inc. for general obligation debt. State statutes limit the amount of general obligation debt a governmental entity may issue to 5 percent of its total assessed valuation. The current debt limitation for the City of Waterloo is $189,304,947, which is significantly greater than the City of Waterloo's outstanding general obligation debt ($101,105,698) and other debt subject to debt limitation ($8,019,724. The total debt subject to this limitation is $109,125,422, resulting in available debt margin of $80,179,525. Additional information about the City of Waterloo's long-term liabilities can be found in Note 9 of this report. Economic Factors and Next Year's Budgets and Rates Property taxes provide 47 percent of General Fund revenues. Over the past five years, citywide assessed valuations have risen an average of 0.6 percent annually, while property tax regulations imposed by the State of Iowa resulted in taxable values increasing by an average of 1.5 percent over that same time period. The fiscal 2019 budget reflects a reduction in total property tax and utility excise tax revenue of 1.6 percent. State property tax reform added a provision that the state would replace property tax revenue lost due to the implementation of a new reduction in taxable value of commercial and industrial properties. The City budgeted to receive $1.8 million in property tax replacement payments. The gas and electric utility franchise fee was increased to 4 percent from 3 percent to further diversify revenue sources and is expected to generate approximately $3.7 million in revenue for the year ending June 30, 2019. As discussed elsewhere in this report, the City budgeted to use $710,000 in general fund reserves for general operations for the year ended June 30, 2019. Personnel costs comprise a significant portion of City operating costs. Wage increases identified in contractual bargaining agreements are 2.75% percent for fiscal year 2019. The employer contribution rate required for the Municipal Fire and Police Retirement System will increase by 1.32 percent, while the contribution rate for the Iowa Public Employees Retirement System will increase by 5.71 percent. Anticipated health care costs for the year ending June 30, 2019 are expected to increase at a rate of 5 percent. Federal and state mandates for clean water continue to result in additional costs both for sewer system users and property taxpayers. These factors were considered in preparing the City of Waterloo's budget for fiscal year 2019. 13 City of Waterloo, Iowa Management's Discussion and Analysis For Fiscal Year Ended June 30, 2018 Requests for Information This financial report is designed to provide a general overview of the City of Waterloo'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: Michelle C. Weidner, CPA, Chief Financial Officer, City of Waterloo, 715 Mulberry Street, Waterloo, Iowa 50703. 14 City of Waterloo, Iowa Statement of Net Position June 30, 2018 Component Units Primary Government Governmental Business -Type Activities Activities Total Waterloo Convention Waterloo & Visitors Water Works Bureau, Inc. Assets Current assets: Cash and cash equivalents $ 78,204,617 $ 15,499,984 $ 93,704,601 $ 12,594,129 $ 268,962 Restricted cash and cash equivalents 1,241,336 1,241,336 Investments - 397,751 471,959 Receivables: Customer accounts, net of allowance for uncollectible accounts 1,774,931 3,542,118 5,317,049 1,646,192 - Property taxes: Delinquent 315,231 - 315,231 Succeeding year 45,855,101 - 45,855,101 Internal accounts (38,704) 38,704 Due from other governments: Component unit 369,042 1,110,202 1,479,244 - Primary government - - - 298,340 Other 12,904,677 184,525 13,089,202 - Miscellaneous - - Accrued interest 352,230 - 352,230 10,805 210 Special assessments 135,788 365,636 501,424 - Inventories and prepaids 491,670 56,091 547,761 554,778 10,133 Total current assets 141,605,919 20,797,260 162,403,179 15,203,655 1,049,604 Noncurrent assets: Restricted assets: Cash and cash equivalents 12,056,283 3,970,124 16,026,407 - Investments - 188,053 336,261 Receivables 13,168 13,168 - Loans and notes, net of allowance for uncollectible amounts 23,100 23,100 Special assessments receivable 278,857 - 278,857 210,911 - Capital assets, net of accumulated depreciation 292,442,591 91,541,648 383,984,239 25,284,389 23,989 Capital assets not being depreciated 81,296,376 5,291,541 86,587,917 2,664,288 Total noncurrent assets 386,110,375 100,803,313 486,913,688 28,347,641 360,250 Total assets 527,716,294 121,600,573 649,316,867 43,551,296 1,409,854 Deferred Outflows of Resources, pension related amounts 13,519,715 968,914 14,488,629 563,744 See notes to basic financial statements. 15 Component Units Primary Government Governmental Business -Type Activities Activities Total Waterloo Convention Waterloo & Visitors Water Works Bureau, Inc. Liabilities Current: Accounts and retainages payable $ 5,344,478 $ 2,040,530 $ 7,385,008 $ 912,747 $ 9,511 Accrued liabilities and other 1,729,380 169,623 1,899,003 189,895 8,366 Due to primary government - - 1,146,149 - Due to component unit 298,340 - 298,340 Due to other governments - 62,093 Noncurrent liabilities due and payable within one year 13,197,153 2,729,236 15,926,389 Unearned revenues 400,403 - 400,403 Current liabilities payable from restricted assets: Health claims 1,241,336 - 1,241,336 - Other 404,750 - 404,750 Accrued interest 186,211 46,386 232,597 - Total current liabilities 22,802,051 4,985,775 27,787,826 2,310,884 17,877 Noncurrent: Customer deposits 57,140 397,765 454,905 188,053 Worker's compensation claims 636,923 - 636,923 General obligation bonds and notes, net of bond discounts and premium 72,703,300 16,602,494 89,305,794 State revolving fund capital loan - 1,468,000 1,468,000 Other loans and notes 6,891,787 6,891,787 Total postemployment benefits liability 17,302,862 3,003,973 20,306,835 Compensated absences 1,844,358 142,982 1,987,340 Net pension liability 46,059,803 3,236,794 49,296,597 3,353,381 Total noncurrent liabilities 145,496,173 24,852,008 170,348,181 3,541,434 Total liabilities Deferred Inflows of Resources Property taxes Pension related amounts OPEB related amounts Total deferred inflows of resources Net Position 168,298,224 29,837,783 198,136,007 5,852,318 17,877 46,170,332 - 46,170,332 1,165,415 128,931 1,294,346 287,843 49,974 337,817 53,980 47,623,590 178,905 47,802,495 53,980 Net investment in capital assets 312,634,254 78,421,882 391,056,136 27,948,677 23,989 Restricted for: Debt service 3,511,412 7,904 3,519,316 - - Tourism promotion 1,721,229 - 1,721,229 - Public access television 147,187 - 147,187 Civil rights enforcement 51,597 - 51,597 - Housing 4,527,128 4,527,128 - Donor specified 837,956 - 837,956 Library 290,701 - 290,701 Street and right-of-way maintenance 27,771,206 - 27,771,206 Improvements 6,322,545 25,982 6,348,527 Self-funded insurance 6,881,507 - 6,881,507 - Employee benefits 374,023 - 374,023 - Unrestricted (deficit) (39,756,550) 14,097,031 (25,659,519) 10,260,065 1,367,988 Total net position $ 325,314,195 $ 92,552,799 $ 417,866,994 $ 38,208,742 $ 1,391,977 16 City of Waterloo, Iowa Statement of Activities Year Ended June 30, 2018 Program Revenues Operating Capital Direct Indirect Charges for Grants and Grants and Expenses Allocations Services Contributions Contributions Programs/Functions Governmental activities: Public safety $ 20,828,929 $ - $ 4,410,854 $ 706,078 $ Public works 34,530,050 (380,000) 3,641,744 8,737,685 7,789,551 Health and social services 444,832 (75,000) 62,297 - Culture and recreation 12,717,184 (50,000) 3,503,643 290,051 - Community and economic development 17,417,572 - 578,477 1,691,951 4,967,533 General government 10,813,031 (638,500) 706,509 129,724 - Interest and issuance costs on long-term debt 2,385,499 - - - Total governmental activities 99,137,097 (1,143,500) 12,841,227 11,617,786 12,757,084 Business -type activities: Sanitary Sewer 12,415,645 692,000 13,208,176 37,055 145,656 Sanitation 3,714,965 451,500 3,738,070 273,624 Total business -type activities 16,130,610 1,143,500 16,946,246 310,679 145,656 Total primary government Component unit, Waterloo Water Works Component unit, Waterloo Convention & Visitors Bureau, Inc. See notes to basic financial statements. $ 115,267,707 $ $ 29,787,473 $ 11,928,465 $ 12,902,740 $ 6,857,317 $ $ 9,476,836 $ - $ 3,839 $ 606,633 $ $ $ 645,021 $ General Revenues Taxes: Property taxes Other taxes: Local option sales Utility excise Gaming Hotel/motel Gas and electric Cable television Mobile home Investment earnings Miscellaneous Gain on sale of capital assets Total general revenues Changes in net position Net position, beginning of year, as restated Net position, end of year 17 Net (Expense) Revenue and Changes in Net Position Primary Government Component Units Governmental Business -Type Activities Activities Total Waterloo Convention & Waterloo Visitors Water Works Bureau, Inc. $ (15,711,997) $ - $ (15,711,997) $ $ (13,981,070) - (13,981,070) (307,535) - (307,535) (8,873,490) (8,873,490) (10,179,611) (10,179,611) (9,338,298) - (9,338,298) (2,385,499) - (2,385,499) (60,777,500) - (60,777,500) 283,242 283,242 (154,771) (154,771) 128,471 128,471 (60,777,500) 128,471 (60,649,029) - 2,623,358 - 38,388 47,404,667 47,404,667 9,416,283 1,422,316 1,276,144 1,352,467 3,029,140 675,681 67,588 842,018 4,592,600 104,439 46,298 9,416,283 - 1,422,316 - 1,276,144 - 1,352,467 - 3,029,140 - 675,681 67,588 - 946,457 96,914 8,580 4,592,600 909,868 3,625 46,298 11,500 - 70,078,904 150,737 70,229,641 1,018,282 12,205 9,301,404 316,012,791 279,208 9,580,612 3,641,640 50,593 92,273,591 408,286,382 34,567,102 1,341,384 $ 325,314,195 $ 92,552,799 $ 417,866,994 $ 38,208,742 $ 1,391,977 City of Waterloo, Iowa Balance Sheet Governmental Funds June 30, 2018 General Trust and Agency Assets Cash and cash equivalents $ 11,494,635 $ 443,878 Receivables: Customer accounts, net 1,532,841 Property tax: Delinquent 147,701 71,015 Succeeding year 19,680,558 9,442,500 Special assessments 414,645 - Accrued interest 198,850 2,364 Loans and notes 23,100 Due from other funds 4,542,648 Due from other governments: Federal 40,332 Iowa 408,130 - Other 238,693 98,988 Inventories and prepaids 360,459 - Restricted assets: Cash and cash equivalents 8,894,456 1,844,107 Receivables 13,168 - Advances to other funds Total assets $ 47,990,216 $ 11,902,852 (Continued) 19 Tax Increment General Obligation Road Use Other Financing Debt Service Tax Governmental Total $ 4,801,359 $ 894,272 $ 26,901,280 $ 33,669,193 $ 78,204,617 4,681 237,409 1,774,931 39,434 52,642 4,439 315,231 8,823,121 7,318,740 - 590,182 45,855,101 - - - - 414,645 3,151 788 147,077 352,230 - - - 23,100 4,542,648 - - 1,457,661 1,497,993 - 7,113,775 3,249,566 10,771,471 200,956 89,948 310,183 65,487 1,004,255 - - 120,287 10,924 491,670 - 99,868 - 2,459,188 13,297,619 - - - 13,168 - 108,189 21,423 129,612 $ 13,868,021 $ 8,456,258 $ 34,558,395 $ 41,912,549 $ 158,688,291 City of Waterloo, Iowa Balance Sheet (Continued) Governmental Funds June 30, 2018 General Trust and Agency Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities Accounts payable Retainages payable Accrued liabilities Due to other funds Unearned revenue Compensated absences Due to Waterloo Convention & Visitors Bureau, Inc. Payables from restricted assets Advances from other funds Total liabilities Deferred Inflows of Resources Unavailable revenue—property tax Unavailable revenue—local option sales tax Unavailable revenue—special assessments Unavailable revenue—intergovernmental Total deferred inflows of resources Fund balances $ 252,899 $ 1,307,801 135,826 84,275 298,340 1,646,086 168,316 1,280 169,927 3,893,543 171,207 19,828,259 414,645 70,218 9,513,515 20,313,122 9,513,515 Nonspendable 528,775 - Restricted 7,839,825 2,218,130 Committed 33,004 - Assigned 5,902,856 Unassigned 9,479,091 Total fund balances 23,783,551 2,218,130 Total liabilities, deferred inflows of resources and fund balances See notes to basic financial statements. 21 $ 47,990,216 $ 11,902,852 Tax Increment Financing General Obligation Debt Service Road Use Other Tax Governmental Total $ 186,542 $ 10,778 $ 988,580 $ 3,164,658 $ 4,604,737 - 93,041 646,700 739,741 - 151,557 100,095 1,729,380 1,670,913 - 2,871,735 4,542,648 - - 264,577 400,403 - 6,636 4,661 95,572 - - - 298,340 - - 57,140 1,703,226 - - - 168,316 1,857,455 10,778 1,239,814 7,109, 566 14, 282, 363 8,862,555 7,371,382 5,427,088 594,621 585,000 1,964,072 46,170,332 585,000 414,645 7,461, 378 8,862,555 7,371,382 5,427,088 3,143,693 54,631,355 2,623,525 1,074,098 524,486 120,287 10,924 659,986 27,771,206 32,714,875 74,241,659 - - 33,004 - 2,025,208 8,452,550 - (3,091,717) 6,387,374 3,148,011 1,074,098 27,891,493 31,659,290 89,774,573 $ 13,868,021 $ 8,456,258 $ 34,558,395 $ 41,912,549 $ 158,688,291 City of Waterloo, Iowa Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2018 Total governmental fund balances Amounts reported for governmental activities in the statement of net position are different because: Capital assets net of accumulated depreciation used in governmental activities are not financial resources and, therefore, are not reported as assets in the governmental funds Certain revenues are not available to pay for current period expenditures and, therefore, are reported as deferred inflows of resources in the funds Pension and other post employment benefits obligation (OPEB) related deferred outflows of resources and deferred inflows of resources are not reported in the governmental funds, but are amortized and recognized as a component of pension/OPEB expense in the government -wide financial statements, as follows: Deferred outflows of resources—IPERS Deferred outflows of resources—MFPRSI Deferred inflows of resources—IPERS Deferred inflows of resources—MFPRSI Deferred inflows of resources—OPEB Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds: General obligation bonds Other loans and notes Bond discount Bond premium Total OPEB liability Workers' compensation claims payable Compensated absences Net pension liability—IPERS Net pension liability—MFPRSI Accrued interest payable 3,775,158 9,744,557 (502,353) (663,062) (287,843) $ (81,051,000) (8,019,724) 204,487 (1,122,787) (17,302,862) (636,923) (4,552,002) (12,611,453) (33,448,350) (186,211) $ 89,774,573 373,738,967 8,461, 023 12,066,457 (158,726,825) Net position of governmental activities $ 325,314,195 See notes to basic financial statements. 23 City of Waterloo, Iowa Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year Ended June 30, 2018 General Trust and Agency Revenues: Property taxes $ 20,892,430 $ 9,912,499 Other taxes 7,137,065 384,838 Licenses and permits 1,340,458 - Investment income 513,942 30,970 Rent 976,538 Intergovernmental 993,021 Charges for services 7,753,197 Interfund charges for services 2,205,000 Special assessments 176,382 Miscellaneous 1,395,472 Total revenues 43,383,505 10,328,307 Expenditures: Current operating: Public safety Public works Health and social services Culture and recreation Community and economic development General government Debt service: Principal Interest and fees Capital outlay Total expenditures Excess (deficiency) of revenues over expenditures 26,538,729 3,253,216 365,193 9,771,641 1,859,306 8,856,520 4,189,889 4,885 50,644,605 4,194,774 (7,261,100) 6,133,533 Other financing sources (uses): Transfers in 6,221,395 Transfers out (160,806) (5,998,398) Insurance proceeds 1,112,624 Bond premium - Proceeds from sale of capital assets 151,006 Issuance of long-term debt - Total other financing sources (uses) 7,324,219 (5,998,398) Net changes in fund balances 63,119 135,135 Fund balances, beginning of year 23,720,432 2,082,995 Fund balances, end of year $ 23,783,551 $ 2,218,130 See notes to basic financial statements. 24 Tax Increment General Obligation Road Use Other Financing Debt Service Tax Governmental Total $ 8,080,799 $ 7,899,281 $ $ 619,658 $ 47,404,667 277,359 - 9,440,357 17,239,619 24,204 - 1,364,662 38,377 17,029 - 241,700 842,018 58,938 - 184,310 1,219,786 25,394 8,612,422 10,510,920 20,141,757 - 126,389 208,747 8,088,333 - 50,000 2,255,000 - - 176,382 453,272 45,578 1,354,718 3,249,040 8,119,176 8,731,273 8,858,593 22,560,410 101,981,264 1,259,141 138,261 70,668 32,985 11,198,000 2,274,533 - 4,869 30,733,487 7,671,136 11,970,830 22,895,182 - 365,193 808,988 10,580,629 - 7,390,129 10,508,576 - 8,894,390 11,336,261 - 169,560 2,514,761 3,314,637 20,606,618 23,921,255 1,468,070 13,505,518 10,985,773 40,950,994 121,749,734 6,651,106 (4,774,245) (2,127,180) (18,390,584) (19,768,470) 125,000 3,421,214 - 3,386,733 13,154,342 (6,995,138) - (13,154,342) - - 1,112,624 33,797 - 84,558 118,355 - 55,000 206,006 1,425,000 - 8,090,000 9,515,000 (6,870,138) 4,880,011 - 11,616,291 10,951,985 (219,032) 105,766 (2,127,180) (6,774,293) (8,816,485) 3,367,043 968,332 30,018,673 38,433,583 98,591,058 $ 3,148,011 $ 1,074,098 $ 27,891,493 $ 31,659,290 $ 89,774,573 City of Waterloo, Iowa Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended June 30, 2018 Net change in fund balances—governmental funds Amounts reported for governmental activities in the statement of activities are different because: Capital outlays to purchase or construct capital assets are reported in the governmental funds as expenditures. However, those costs are reported in the statement of net position and are allocated over their estimated useful lives as depreciation expense in the statement of activities. The amounts of capital outlay, capital contributions and depreciation expense for the year are as follows: Capital outlay $ 24,451,004 Capital contribution 4,352,849 Depreciation (16,012,144) $ (8,816,485) 12,791,709 The net effect of various miscellaneous transactions involving capital assets is to increase/ decrease net position: Proceeds from sale of capital assets (206,006) Net (loss) on disposal of capital assets (213,609) (419,615) The issuance of long-term debt provides current financial resources to governmental funds while repayment of the principal of long-term debt consumes current financial resources. These transactions have no effect on the change in net position in the statement of activities. Also, governmental funds report the effect of premiums and discounts when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. In addition, interest is accrued on outstanding debt in the statement of net position whereas in the governmental funds an interest expenditure is reported only when due. The following is a detail of the net effect on these differences in the treatment of long-term debt and related items: General obligation bonds issued for governmental purposes (9,515,000) Repayment of general obligation bond principal 11,198,000 Long term debt issued for governmental purposes (6,624,713) Repayment of other long-term debt principal 393,691 Bond premium (118,355) Amortization of bond discounts and premiums 148,899 Change in accrued interest (19,636) Revenue in the statement of activities that does not provide current financial resources is not reported as revenue in the governmental funds: Current year Prior year 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: OPEB expense Change in workers' compensation claims payable Change in compensated absences and deferred compensation liabilities Pension expense—IPERS Pension expense—MFPRSI Change in net position of governmental activities See notes to basic financial statements. 26 (4,537,114) 8,461,023 (8,580,759) 826,641 (101,736) (273,399) (407,123) 10,358,262 $ 9,301,404 City of Waterloo, Iowa Statement of Net Position Enterprise Funds June 30, 2018 Sanitary Sewer Nonmajor - Sanitation Total Assets Current assets: Cash and cash equivalents $ 12,041,125 $ 3,458,859 $ 15,499,984 Customer accounts receivable 2,883,541 658,577 3,542,118 Special assessments receivable 65,906 299,730 365,636 Due from other governments: Waterloo Water Works 773,618 336,584 1,110,202 Other 151,249 33,276 184,525 Inventories 56,091 - 56,091 Total current assets 15,971,530 4,787,026 20,758,556 Noncurrent assets: Advances to other funds Restricted cash and cash equivalents Capital assets, net of accumulated depreciation Capital assets not being depreciated Net capital assets Total noncurrent assets Total assets Deferred Outflows of Resources, pension related amounts See notes to basic financial statements. 27,003 11,701 38,704 3,846,414 123,710 3,970,124 90,337,465 1,204,183 91,541,648 5,269,541 22,000 5,291,541 95,607,006 1,226,183 96, 833,189 99,480,423 1,361, 594 100,842,017 115,451,953 6,148, 620 121, 600, 573 699,104 269,810 968,914 27 Sanitary Sewer Nonmajor - Sanitation Total Liabilities, Deferred Inflows of Resources, and Net Position Liabilities: Current: Accounts payable Retainages payable Accrued liabilities Current maturities of general obligation and capital loans Compensated absences and deferred compensation Accrued interest Total current liabilities Noncurrent: Security deposits General obligation bonds, net bond discount and premium State revolving fund capital loan Other postemployment benefits liability Compensated absences and deferred compensation Net pension liability Total noncurrent liabilities 1,796,895 $ 104,006 116,232 2,580,000 116,224 46,386 139,629 $ 1,936,524 104,006 53,391 169,623 2,580,000 33,012 149,236 46,386 4,759,743 226,032 4,985,775 274,055 16,602,494 1,468,000 1,884,188 89,353 2,335,457 123,710 1,119,785 53,629 901,337 397,765 16,602,494 1,468,000 3,003,973 142,982 3,236,794 22,653,547 2,198,461 24,852,008 Total liabilities 27,413,290 2,424,493 29,837,783 Deferred Inflows of Resources Pension related amounts OPEB related amounts Total deferred inflows of resources Net position: Net investment in capital assets Restricted for: Debt service Improvements Unrestricted 93,028 31,345 124,373 35,903 18,629 54,532 128,931 49,974 178,905 77,195,699 7,904 25,982 11,383,809 1,226,183 78,421,882 2,713,222 7,904 25,982 14,097,031 Total net position $ 88,613,394 $ 3,939,405 $ 92,552,799 28 City of Waterloo, Iowa Statement of Revenues, Expenses and Changes in Net Position Enterprise Funds Year Ended June 30, 2018 Sanitary Sewer Nonmajor - Sanitation Total Operating revenues: Charges for sales and service $ 13,204,179 $ 3,720,268 $ 16,924,447 Miscellaneous 3,997 17,802 21,799 Total operating revenues 13,208,176 3,738,070 16,946,246 Operating expenses: Salaries and benefits Contractual services Intra -city reimbursements Commodities Depreciation Total operating expenses 4,069,943 2,817,187 692,000 1,687,332 3,204,445 1,744,875 1,112,317 451,500 549,886 307,887 5,814,818 3,929,504 1,143, 500 2,237,218 3,512,332 12,470,907 4,166,465 16,637,372 Operating income (loss) 737,269 (428,395) 308,874 Nonoperating revenues (expenses): Interest income 82,488 21,951 104,439 Intergovernmental 37,055 273,624 310,679 Interest expense (661,208) - (661,208) Amortization 24,470 - 24,470 Gain on sale of capital assets 34,798 11,500 46,298 Total nonoperating revenues (expenses) (482,397) 307,075 (175,322) Income prior to capital contributions 254,872 (121,320) 133,552 Other financing sources, capital contributions 145,656 - 145,656 Change in net position 400,528 (121,320) 279,208 Net position, beginning of year, as restated 88,212,866 4,060,725 92,273,591 Net position, end of year $ 88,613,394 $ 3,939,405 $ 92,552,799 See notes to basic financial statements. 29 City of Waterloo, Iowa Statement of Cash Flows Enterprise Funds Year Ended June 30, 2018 Sanitary Sewer Nonmajor - Sanitation Total Cash flows from operating activities: Receipts from customers and users $ 14,322,898 $ 3,910,002 $ 18,232,900 Payments to suppliers (3,864,003) (1,654,231) (5,518,234) Payments to or on behalf of employees (3,685,501) (1,617,710) (5,303,211) Payment for interfund services used (692,000) (451,500) (1,143,500) Net cash provided by (used in) operating activities 6,081,394 186,561 6,267,955 Cash flows from noncapital financing activities, intergovernmental proceeds 95,751 268,327 364,078 Cash flows from capital and related financing activities: Purchase and construction of capital assets (3,660,549) (335,214) (3,995,763) Proceeds from disposal of capital assets 65,549 11,500 77,049 Proceeds from bonds, loans and notes, net bond premiums 3,687,009 - 3,687,009 Principal paid on debt (4,713,000) - (4,713,000) Interest paid on debt (652,331) - (652,331) Net cash (used in) capital and related financing activities (5,273,322) (323,714) (5,597,036) Cash flows from investing activities, interest received 82,488 21,951 104,439 Increase (decrease) in cash and cash equivalents 986,311 153,125 1,139,436 Cash and cash equivalents, beginning of year 14,901,228 3,429,444 18,330,672 Cash and cash equivalents, end of year $ 15,887,539 $ 3,582,569 $ 19,470,108 Reconciliation of cash and cash equivalents to statement of net position: Unrestricted cash and cash equivalents $ 12,041,125 $ 3,458,859 $ 15,499,984 Restricted cash and cash equivalents 3,846,414 123,710 3,970,124 $ 15,887,539 $ 3,582,569 $ 19,470,108 (Continued) 30 City of Waterloo, Iowa Statement of Cash Flows (Continued) Enterprise Funds Year Ended June 30, 2018 Sanitary Sewer Nonmajor - Sanitation Total Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) $ 737,269 $ (428,395) $ 308,874 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation 3,204,445 307,887 3,512,332 (Increase) in accounts receivable 437,527 41,777 479,304 (Increase) decrease in due from Waterloo Water Works 677,195 130,155 807,350 (Increase) in inventories and prepaids (27,891) - (27,891) Increase (decrease) in accounts payable (537,159) 3,841 (533,318) Increase in security deposits 9,149 4,131 13,280 Increase in accrued liabilities (9,238) (1,173) (10,411) Increase in other post employment benefits obligation 303,343 72,610 375,953 Increase in compensated absences and deferred compensation (29,811) (9,677) (39,488) Increase in net pension liability 75,252 28,680 103,932 (Increase) in deferred outflows of resources (40,236) (3,992) (44,228) (Decrease) in deferred inflows of resources 85,132 40,717 125,849 Net cash provided by operating activities $ 4,884,977 $ 186,561 $ 5,071,538 Schedule of noncash capital and related financing activities: Payables for acquisition of capital assets $ 232,051 $ - $ 232,051 Capital assets contributed 145,656 - 192,977 See notes to basic financial statements. 31 City of Waterloo, Iowa Index to the Notes to Basic Financial Statements Note Number Title Page Number 1 Nature of Operations, Reporting Entity, Basis of Presentation, 33-43 Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies 2 Cash and Investments 43-44 3 Leasing Activities 44-45 4 Loans and Notes 45 5 Interfund Activity 45-47 6 Capital Assets 47-50 7 Compensated Absences 50-51 8 Long -Term Liabilities 51-54 9 Operating Leases 54 10 Retirement Systems 55-70 11 Deficit Fund Balances 71 12 Commitments 71 13 Other Postemployment Benefits 72-75 14 Employee Health Care Plan 75-76 15 Worker's Compensation Plan 76 16 Joint Ventures and Jointly Governed Organizations 76 17 Industrial Development Revenue Bonds 77 18 Risk Management 77 19 Tax Abatements 77 20 Fund Balances 78 21 New GASB Statements and Pending Pronouncements 79-81 32 City of Waterloo, Iowa Notes to Basic Financial Statements Note 1. Nature of Operations, Reporting Entity, Basis of Presentation, Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies Nature of operations: The City of Waterloo, Iowa (City) is a political subdivision of the state of Iowa located in Black Hawk County. It was incorporated in 1868 and operates under the Home Rule provisions of the Constitution of Iowa. The City operates under the Mayor -Council form of government with the full-time Mayor and seven part-time City Council members elected on a nonpartisan basis. The Mayor is elected for a two- year term. City Council members from five wards plus two at -large are elected for staggered four-year terms. The City provides numerous services to citizens including public safety, public works, health and social services, culture and recreation, community and economic development and general government services. The City also provides sanitary sewer and sanitation (garbage pickup) utilities for its citizens. Through its component unit, Waterloo Water Works, water utility services are also provided. Reporting entity: In accordance with Governmental Accounting and Financial Reporting Standards, the basic financial statements include all funds, organizations, agencies, boards, commissions, authorities and material component units and have been prepared in conformity with accounting principles generally accepted in the United States of America, as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The City has considered all potential component units for which it is financially accountable, and other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City's financial statements to be misleading or incomplete. The GASB has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization's governing body, and (1) the ability of the City to impose its will on that organization or (2) the potential for the organization to provide specific benefits to, or impose specific financial burdens on, the City. These financial statements present the City of Waterloo (the primary government) and its discretely presented component units, the Waterloo Water Works and Waterloo Convention & Visitors Bureau, Inc. Complete financial statements of the Waterloo Water Works component unit can be obtained from the Waterloo Water Works administrative office, 325 Sycamore Street, Waterloo, Iowa. Complete financial statements of the Waterloo Convention & Visitors Bureau, Inc. can be obtained from their office at 500 Jefferson Street, Waterloo, Iowa. Blended component unit: The Waterloo Housing Authority (Authority) is governed by a board that includes all seven members of the City Council plus two members appointed by the Mayor, subject to approval of a majority of the City Council, for a total of nine members. Although the Authority is considered legally separate from the City, it receives administrative support from the various departments within the City's General Fund. Due to the nature of its relationship with the City, the Authority is considered part of the primary government. The Authority is reported as a special revenue fund. 33 City of Waterloo, Iowa Notes to Basic Financial Statements Note 1. Nature of Operations, Reporting Entity, Basis of Presentation, Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies (Continued) Discretely presented component units: Waterloo Water Works: The Waterloo Water Works is a component unit that is legally separate from the City, but is financially accountable to the City. The Waterloo Water Works is governed by a three-member board appointed by the City Council and its operating budget is subject to the review of the City Council. The Waterloo Water Works operates on a calendar year-end and prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Due to the different year-end, the amount reported by the Waterloo Water Works as due to the primary government and the primary government's due from the Waterloo Water Works do not agree by $333,095. Waterloo Convention & Visitors Bureau, Inc.: The Waterloo Convention & Visitors Bureau, Inc. is a nonprofit corporation and a component unit of the City whose purpose is to strengthen the local economy by competitively marketing the area as a destination for conventions, tour groups, sporting events and individual travelers. The Organization's operations are funded primarily by an allocation of the local hotel/motel tax from the City's local transient guest tax. By ordinance, the City allocates 50 percent of the tax to the Organization. The Organization is governed by a 15 -member Board of Directors. Five members are appointed by the City, and the other ten are elected by other members of the Organization's Board. Although the City does not appoint the voting majority of the Organization's Board of Directors, the Organization has been determined to be fiscally dependent on the City. Basis of presentation: Government -wide financial statements: The statement of net position and the statement of activities report information on all of the activities of the City. For the most part, the effect of interfund activity has been removed from these statements. However, interfund services provided and used are not eliminated in the process of consolidation. Governmental activities, which normally are supported by tax and intergovernmental revenue, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from the legally separate Waterloo Water Works and Waterloo Convention & Visitors Bureau, Inc. component units. The statement of net position presents the City's assets and deferred outflows of resources and liabilities and deferred inflows of resources, with the difference reported as net position. The statement of activities demonstrates the degree to which the direct and indirect expenses of a given program or function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program or function. Program/function revenue includes: (1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given program/function and (2) grants, contributions and other resources that are restricted to meeting the operational or capital requirements of a particular program/function. Taxes and other items not properly included among program revenue are reported instead as general revenue. 34 City of Waterloo, Iowa Notes to Basic Financial Statements Note 1. Nature of Operations, Reporting Entity, Basis of Presentation, Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies (Continued) Fund financial statements: Separate financial statements are provided for governmental and proprietary funds. The focus of fund financial statements is on major funds. Major individual governmental funds and the major enterprise fund are reported as separate columns in the fund financial statements. All remaining governmental funds are aggregated and reported as other nonmajor governmental funds. The other enterprise fund is reported in a separate column on the enterprise funds financial statements as a nonmajor fund. Description of funds: The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self -balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund balance/net position, revenue and expenditures or expenses, and other financing sources and uses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, in the financial statements in this report, into categories as follows: Governmental Fund Types: Governmental fund types are those funds through which most governmental functions typically are financed. Governmental fund reporting focuses on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used; current liabilities are assigned to the fund from which they are paid; and the difference between governmental fund assets plus deferred outflows of resources and liabilities plus deferred inflows of resources, the fund equity, is referred to as "fund balance." The measurement focus is upon determination of changes in financial position, rather than upon net income determination. The following are the City's governmental fund types: General fund is used to account for and report all financial resources not accounted for and reported in another fund. Special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Debt service funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest on long-term debt. Capital projects funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. The City had the following major governmental funds: General Fund is used to account for and report all financial resources not accounted for and reported in another fund. Trust and Agency (Employee Benefits) Special Revenue Fund is required by the Code of Iowa to account for property taxes levied for employee benefits. This fund either pays benefits as expenditures (primarily police and fire pension costs) or transfers cash to the General Fund to reimburse allowable benefits paid from that fund. 35 City of Waterloo, Iowa Notes to Basic Financial Statements Note 1. Nature of Operations, Reporting Entity, Basis of Presentation, Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies (Continued) Tax Increment Financing Fund is a special revenue fund used to account for the accumulation of resources from tax increment financing projects, payment of contracted rebates and other obligations related to the projects and transfers to the GO Debt Service Fund and/or other funds to reimburse the other funds for expenditures on the projects. General Obligation Debt Service Fund is required by the Code of Iowa to account for the accumulation of resources for, and payment of, debt service on general obligation long-term debt. Road Use Tax Fund is a special revenue fund required by the Code of Iowa to account for the City's share of fuel taxes collected and allocated by the State which is restricted for local street maintenance. Proprietary Fund Type: Proprietary fund types are used to account for a government's ongoing organizations and activities which are similar to those often found in the private sector. The measurement focus is upon income determination, financial position and cash flows. Enterprise funds are used to account for operations (a) that are financed and operated in a manner similar to that of a private business enterprise where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges or (b) where the governing body has decided that periodic determination of revenue earned, expenses incurred and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. The City had the following major enterprise fund: Sanitary Sewer Fund: Operates the sewage collection system and wastewater treatment plant. Fiduciary Fund Type: To account for assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, other governmental units and/or other funds. Agency Fund: This is an Agency Fund used to account for property taxes collected on behalf of the Metropolitan Transit Agency, Water Works kill water assessments, Grout Museum District and building permits passed through to Black Hawk County. Measurement focus and basis of accounting: The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Agency funds follow accrual basis of accounting but do not have a measurement focus as they report only assets and liabilities. Revenue is 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 revenue in the year for which they are levied and budgeted for. Grants and similar items are recognized as revenue at the same time the related asset is recorded. For reimbursable grants, the asset is recorded as soon as all eligibility requirements imposed by the provider have been met. 36 City of Waterloo, Iowa Notes to Basic Financial Statements Note 1. Nature of Operations, Reporting Entity, Basis of Presentation, Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies (Continued) Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as it is both measurable and available. Revenue is considered to be available when it is collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenue to be available if it is collected within 60 days of the end of the fiscal year. Property taxes when levied for, other taxes, charges for services, intergovernmental revenue (shared revenue, grants and reimbursements from other governments) and interest are considered to be measurable and are recognized as revenue, if available. All other revenue items are considered to be measurable and available only when cash is received by the City. Expenditures are generally recorded when a liability is incurred, as under accrual accounting. However, principal and interest on long-term debt, claims and judgments, pension benefits and compensated absences are recorded as expenditures only when payment is due and the liability has matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt, premiums and discounts on the issuance of long-term debt and acquisitions under capital leases are reported as other financing sources. Under terms of grant agreements, the City funds certain programs by a combination of specific cost - reimbursement grants and general revenue. It is the City's policy to first apply cost -reimbursement grant resources to such programs and then by general revenue. Proprietary funds distinguish operating revenue and expenses from nonoperating items. Operating revenue 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 revenue of the City's enterprise funds are charges to customers for services. Operating expenses include the costs of services and administrative expenses. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. Budgets and budgetary accounting: The budgetary comparison and related disclosures are reported as required supplementary information. Summary of significant accounting policies: The significant accounting policies followed by the City include the following: Cash and cash equivalents: The cash balances of most City funds are pooled and deposited into interest-bearing demand deposit accounts, certificates of deposit and Iowa Public Agency Investment Trust (IPAIT). Interest earned on investments is allocated among funds in the ratio of cash provided by the fund unless otherwise provided by law. Interest earned by the Road Use Tax Fund is allocated to the General Fund. Investments consist of nonnegotiable certificates of deposit and deposits in IPAIT money market accounts which are stated at amortized cost plus accrued interest. For purposes of the statement of cash flows, all short-term cash investments that are highly liquid (including restricted assets) are considered to be cash equivalents. Cash equivalents are readily convertible to known amounts of cash and, at the day of purchase, have a maturity date no longer than three months. 37 City of Waterloo, Iowa Notes to Basic Financial Statements Note 1. Nature of Operations, Reporting Entity, Basis of Presentation, Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies (Continued) Receivables and payables: Receivables are reported net of any allowance for uncollectible accounts. As of June 30, 2018, the General Fund had allowances for uncollectible customer accounts totaling $1,079,215. Property taxes receivable are recognized on the levy or lien date, which is the date that the tax asking is certified by the City to the County Board of Supervisors. Current year delinquent property taxes receivable represent unpaid taxes from the current year. The succeeding year property taxes receivable represent taxes certified by the City to be collected in the next fiscal year for the purposes set out in the budget for the next fiscal year. By statute, the City is required to certify its budget to the County Auditor by March 15 of each year for the subsequent fiscal year. However, by statute, the tax asking and budget certification for the following fiscal year becomes effective on the first day of that year. Although the succeeding year property taxes receivable have been recorded, the related revenue is reported as a deferred inflow of resources (unavailable revenue) and will not be recognized as revenue until the year for which it is levied and budgeted for. Property tax revenue which became due and collectible in September and March of the fiscal year with a 11/2 percent per month penalty for delinquent payments; was based on January 1, 2016 assessed property valuations; was for the tax accrual period July 1, 2017 through June 30, 2018; and reflected the tax asking contained in the budget certified to the County Board of Supervisors in March 2017. Special assessments are levied against certain property owners and become liens against the property benefited by the improvement. Special assessments receivable consist of current assessments which are due within one year, delinquent assessments remaining unpaid after the due date, uncollected assessments which have been levied, but are not due within one year. Customer accounts receivable consist of amounts owed from private individuals or organizations for goods and services. Loans and notes consist of amounts advanced to private individuals or organizations. Collections of principal and interest from loans and notes made from federal funds are program income of the federal program when received in cash. Due from other governments consists of grants, shared revenue and amounts collected by other governments on behalf of the City. Inventories and prepaids: Inventories are valued at cost using the first-in/first-out (FIFO) method. The cost of governmental fund -type inventories are recorded as expenditures when purchased. Inventories and prepaids recorded in the governmental fund types do not reflect current available resources; therefore, an equivalent portion of fund balance is nonspendable. Prepaids consist primarily of a deposit for insurance deductibles and premiums paid in advance, which are recorded as an expenditure or an expense when consumed. 38 City of Waterloo, Iowa Notes to Basic Financial Statements Note 1. Nature of Operations, Reporting Entity, Basis of Presentation, Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies (Continued) Restricted assets: Certain assets of the governmental funds and enterprise funds are classified as restricted assets because their use is completely restricted by donors, bond indentures, contracts or grant agreements. Bond discounts, premiums and issuance costs: In the government -wide financial statements and proprietary fund types in the fund financial statements, bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bond issuance costs are reported as an expense in the year the costs are incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts during the current period. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Bond issuance costs are reported as an expenditure in the year the costs are incurred. Capital assets: Capital assets are reported in the applicable governmental or business -type activities columns in the government -wide statement of net position and in the fund financial statements for proprietary funds. Capital assets are recorded at historical cost. Donated capital assets are recorded at estimated acquisition value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset useful lives are not capitalized. Capital assets, other than infrastructure, are defined by the City as assets with an initial, individual cost in excess of $5,000 and estimated useful lives in excess of one year. Infrastructure is defined by the City as assets available for public use, other than buildings, and having a cost of $50,000 or more. 39 City of Waterloo, Iowa Notes to Basic Financial Statements Note 1. Nature of Operations, Reporting Entity, Basis of Presentation, Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies (Continued) Depreciation is computed using the straight-line method over the estimated useful life of the asset. Estimated useful lives are as follows: Years Governmental activities: Buildings and improvements 10 - 40 Infrastructure 15 - 100 Furniture and equipment 3 - 20 Vehicles, machinery and equipment 3 - 25 Software 5 Assets under capital lease 10 - 15 Business -type activities: Buildings 15 - 50 Improvements other than buildings 50 Furniture and equipment 5 - 20 Vehicles, machinery and equipment 5 -10 Software 5 Discretely presented component units: Buildings and improvements Water supply and distribution systems Meters and equipment Machinery and equipment Leasehold improvements 8-40 10-99 5-63 5-26 5-39 The City's collection of works of art, library books and other similar assets are not capitalized. These collections are unencumbered, held for public exhibition and education, protected, cared for and preserved and subject to City policy that requires proceeds from the sale of these items to be used to acquire other collection items. Deferred outflows of resources: In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has two items that qualify for reporting in this category. The first is a deferred charge on refunding reported in the government -wide and enterprise funds statement of net position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The second item is a pension related deferred outflow, which consists of unrecognized items not yet charged to pension expense and contributions from the City after the measurement date but before the end of the City's reporting period. Deferred inflows of resources: In addition to liabilities, the statement of net position and balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The governmental funds report unavailable revenues from four sources: property taxes, local option sales taxes, special assessments and intergovernmental revenue. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. 40 City of Waterloo, Iowa Notes to Basic Financial Statements Note 1. Nature of Operations, Reporting Entity, Basis of Presentation, Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies (Continued) In the City's government -wide statements, the property tax revenues are reported as a deferred inflow of resources and will become an inflow in the year for which they are levied and budgeted for. The City's government -wide statements also include unrecognized pension and OPEB related amounts as deferred inflows. Pensions: The net pension liability, deferred inflows and outflows of resources related to pensions, pension expense, information about the fiduciary net position of the Iowa Public Employees' Retirement System (IPERS) and the Municipal Fire and Police Retirement System of Iowa (MFPRSI) and additions to/deductions from IPERS' and MFPRSI's fiduciary net position have been determined on the same basis as they are reported by (PERS and MFPRSI. 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. Total OPEB liability: For purposes of measuring the total other postemployment benefit (OPEB) liability, deferred inflows of resources related to OPEB and OPEB expense, information has been based on an actuary report. For that purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. The total of OPEB liability attributable to governmental activities will be paid primarily by the General Fund. Interfund transactions: Transactions among City funds that would be treated as revenues and expenditures or expenses if they involved organizations external to City government are accounted for as revenues and expenditures or expenses in the funds involved. Transactions which constitute reimbursements to a fund for expenditures initially made from it which are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the reimbursed fund. Transactions, which constitute the transfer of resources from a fund receiving revenues to a fund through which the revenues are to be expended, are separately reported in the respective fund's operating statements. Activity between funds that are representative of lending/borrowing arrangements at the end of the fiscal year are referred to as "due to/from other funds" in the fund financial statements. Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." Noncurrent portions of long-term interfund loan receivables and payables are reported as advances within the governmental and enterprise funds. Compensated absences: City ordinances and labor contracts with the City call for the accumulation of vacation, compensatory time and sick leave for subsequent use or for payment upon termination or retirement. During 2001, the City began offering an early sick leave payout option for certain employees. Qualifying employees can elect to receive 60 percent of the time in their frozen sick leave bank over a five-year period prior to their retirement or termination of employment. Vacation and compensatory time are accrued when incurred in the government -wide and the proprietary funds statements and reported as a liability. Matured compensated absences, for example, as a result of employee retirements and resignations, are considered due and expected to be liquidated with expendable available financial resources and are reported as an expenditure and a fund liability of the respective governmental fund. Governmental fund liabilities for unmatured compensated absences are not reported in the fund financial statements. 41 City of Waterloo, Iowa Notes to Basic Financial Statements Note 1. Nature of Operations, Reporting Entity, Basis of Presentation, Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies (Continued) Long-term liabilities: In the government -wide financial statements and the proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities. In the governmental fund financial statements, the face amount of long-term debt issued is reported as an other financing source. Fund balance: In the governmental fund financial statements, fund balances are classified as follows: Nonspendable: Amounts which cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact. Restricted: Amounts restricted to specific purposes when constraints placed on the use of the resources are either externally imposed by creditors, grantors or state or federal laws or imposed by law through constitutional provisions or enabling legislation. Committed: Amounts which can be used only for specific purposes pursuant to constraints formally imposed by the City Council through resolution approved prior to year-end. Those committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use by taking the same action it employed to commit those amounts. Assigned: Amounts constrained by the City's intent to use them for a specific purpose. The authority to assign fund balance has been delegated by the City Council to the Chief Financial Officer in accordance with the City's Fund Balance and Reserve Policy. Unassigned: All amounts not included in other spendable classifications. The General Fund is the only fund that would report a positive amount in unassigned fund balance. Residual deficit amounts of other governmental funds would also be reported as unassigned. When an expenditure is incurred in governmental funds which can be paid using either restricted or unrestricted resources, the City's policy is to pay the expenditure from restricted fund balance and then from less -restrictive classifications — committed, assigned and then unassigned fund balances. Net position: Net position represents the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources. Amounts reported as net investment in capital assets consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net investment in capital assets excludes unspent debt proceeds. Unspent debt proceeds for the various capital project GO Bonds Funds are $20,853,846 and the Sanitary Sewer enterprise fund is $2,239,187. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. The government -wide statement of net position reports $52,436,491 of restricted net position of which $5,670,529 is restricted by enabling legislation for debt service, library, tourism promotion and public access television. The City applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available. 42 City of Waterloo, Iowa Notes to Basic Financial Statements Note 1. Nature of Operations, Reporting Entity, Basis of Presentation, Measurement Focus and Basis of Accounting and Summary of Significant Accounting Policies (Continued) Indirect allocations: Operating funds, departments and activities receive services from supporting funds, departments and activities. Annually, management estimates the value of those services and records applicable indirect allocations. Activities related to federal grant programs have not been included in the indirect cost calculations, but are reported within the function the grant serves. Estimates and assumptions: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Note 2. Cash and Investments Interest rate risk: The City's policy allows the operating funds to be invested in instruments authorized by the City's investment policy that mature within 397 days and funds not identified as operating funds to be invested with maturities longer than 397 days. However, all investments of the City shall have maturities that are consistent with the liquidity needs of the City. As of June 30, 2018, the City had investments in the Iowa Public Agency Investment Trust (IPAIT) which were valued at an amortized cost of $23,929,785 pursuant to GASB Statement No. 79. IPAIT is registered with the Securities and Exchange Commission. The City's investment in IPAIT is not subject to interest rate risk. The discretely presented Waterloo Water Works component unit's certificates of deposit are restricted to comply with debt covenants and to secure customer deposits. Credit risk: In accordance with the City's investment policy, the City may invest in interest bearing savings accounts, interest bearing money market accounts, and interest bearing checking accounts at any bank, savings and loan associations or credit union in the state of Iowa, obligations of the United States government, its agencies and instrumentalities, certificates of deposit and other evidences of deposit at federally insured Iowa depository institutions, IPAIT, prime bankers' acceptances that mature within 270 days of purchase and are eligible for purchase by a Federal Reserve Bank, commercial paper or other short-term corporate debt that matures within 270 days of purchase and is rated within the two highest classifications, as established by at least one of the standard rating services, repurchase agreements, open-end management investment company organized in trust form, registered with Securities & Exchanges Commission. The policy does not allow the City to invest in reverse repurchase agreements and futures and options contracts. The investment in the Iowa Public Agency Investment Trust is rated AAAm by Standard & Poors. Concentration of credit risk: The City's investment policy is to diversify its investment portfolio to eliminate the risk of loss resulting from overconcentration of assets in a specific maturity, a specific issuer or a specific class of securities. Accordingly, the policy limits the City from investing in prime bankers' acceptances or commercial paper of more than 10 percent of the investment portfolio and more than 5 percent of the investment portfolio with a single issuer at the time of purchase. In addition, no more than 5 percent of all amounts invested in commercial paper and other short-term corporate debt shall be invested in paper and debt rated in the second highest classification at the time of purchase. As of June 30, 2018, the City's investments were not subject to concentration of credit risk. 43 City of Waterloo, Iowa Notes to Basic Financial Statements Note 2. Cash and Investments (Continued) Custodial credit risk: For deposits, this is the risk that in the event of bank failure, the City's deposits may not be returned to it. For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City and Waterloo Water Works' deposits as of June 30, 2018 were entirely covered by federal depository insurance, National Credit Union insurance or by the State Sinking Fund in accordance with Chapter 12C of the Code of Iowa. This chapter provides for additional assessments against the depositories to ensure that there will be no loss of public funds. In addition, the City had no investments subject to custodial credit risk since the City does not hold the underlying investments. Note 3. Leasing Activities Airport: The Waterloo Municipal Airport has entered into various operating leases with airlines, fixed base operators, auto lease companies, the airport restaurant and hangar tenants, as well as farm airport land. These agreements range from month-to-month leases to longer-term leases with various specified terms. Some of these lease agreements contain cancellable conditions which eliminate any future guaranteed rentals or are contingent upon income produced by the lessee. The following is a schedule by years of the future minimum lease rentals to be received under these leases as of June 30: During the years ending June 30: 2019 $ 308,517 2020 70,992 2021 70,992 2022 54,921 2023 46,213 2024 46,213 Total future minimum lease rentals to be received $ 597,848 Board of Regents, State of Iowa: The City has entered into a lease agreement with the Board of Regents, State of Iowa, for the former Chicago Great Western Depot building. The term of the lease is from August 21, 2001 through August 20, 2021 at a rate of $6,035 per month. The following is a schedule by years of the future minimum lease rentals to be received under the lease as of June 30: During the years ending June 30: 2019 $ 72,421 2020 72,421 2021 72,421 2022 10,058 Total future minimum lease rentals to be received $ 227,321 44 City of Waterloo, Iowa Notes to Basic Financial Statements Note 3. Leasing Activities (Continued) Waterloo Hotel Equities, LLC d/b/a Ramada Waterloo Civic and Convention Center: The City has entered into a lease agreement with the Waterloo Hotel Equities, LLC d/b/a Ramada Waterloo Civic and Convention Center (Hotel) for the use of the Five Sullivan Brothers Convention Center and City parking facilities. The term of the lease is from May 23, 2005 through December 31, 2019. The rental rates are based on the gross income and sales of the Five Sullivan Brothers Convention Center, also known as the Ramada Inn Convention Center (Center) paid on a monthly basis. The amount of revenue recognized for the year ended June 30, 2018 was $29,000, which was deferred by the governmental funds. The lease includes a management agreement with the Hotel for the management of the Center. Note 4. Loans and Notes Community Development Block Grant (CDBG) Loans: Low-interest loans: The City has thirty low-interest rehabilitation and other loans due as of June 30, 2018, with a balance of $116,193. These loans are estimated to be uncollectible. Collections of CDBG loans are grant program income which is reported in the Special Revenue Fund (CDBG) as charges for services as received. Low-income housing loans: The City has provided seven loans for low-income housing projects, five of which have a below-market interest rate. All have minimal payments required each year until maturity. Maturities range from September 2018 to August 2031. The balance of the seven loans at June 30, 2018 was $1,301,085. Maturities range from September 2018 to August 2031. Cash received is program income and considered to be charges for services. Given the nature and collection history of the loans, the City has determined these amounts are uncollectible and has recorded an allowance for the full amount of the loans. Forgivable loans: The City, through its CDBG, HOME program, Economic Development Initiative program, Lead Paint Removal grant, federal and state Jumpstart funds and Iowans Helping Iowans funds, provides forgivable rehabilitation loans to low-income households. The loans are forgiven on a sliding scale over a five-year period, provided the home is not sold or abandoned. If the home is sold or abandoned, the City's lien against the property prevents a clear title transfer unless the unforgiven portion of the note is satisfied. As of June 30, 2018, the City had made 1,682 such loans totaling $33,341,596. The loan balances are considered forgivable and/or uncollectible by the City given the nature and terms of the loans and therefore, have not been recorded as assets on the balance sheet. Note 5. Interfund Activity The composition of interfund receivables and payables balances as of June 30, 2018 was as follows: Major governmental funds: General Tax increment financing Nonmajor governmental funds 45 Due From Due To $ 4,542,648 1,670,913 2,871,735 $ 4,542,648 $ 4,542,648 City of Waterloo, Iowa Notes to Basic Financial Statements Note 5. Interfund Activity (Continued) Advances to and from other funds as of June 30, 2018, were as follows: Advances To Advances From Major governmental funds: General $ - $ 168,316 Road Use Tax 108,189 - Nonmajor governmental funds 21,423 Major Enterprise Fund, sanitary sewer 27,003 Nonmajor Enterprise Fund, sanitation 11,701 $ 168,316 $ 168,316 Interfund balances result from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system and (3) payments between funds are made. The interfund receivables and payables are scheduled to be collected in the subsequent year whereas the interfund advances are not. Due to/from primary government and component units: Due to governmental funds: Road use tax Aggregate nonmajor Due from Water Works Due to enterprise funds: Sanitary sewer Sanitation Due from Waterloo Water Works $ 310,183 58,859 369,042 773,618 336,584 1,110,202 Total due from Water Works 1,479,244 Waterloo Water Works - due to primary government 1,146,149 Difference $ 333,095 The difference in the above amounts of $333,095 results from the different year ends of the entities as described in Note 1. Due to Waterloo Convention & Visitors Bureau, Inc. from General Fund $ 298,340 46 City of Waterloo, Iowa Notes to Basic Financial Statements Note 5. Interfund Activity (Continued) The following is a schedule of transfers as included in the basic financial statements of the City: Transfers In Transfers Out Major governmental funds: General $ 6,221,395 $ 160,806 Trust and agency 5,998,398 Tax increment financing 125,000 6,995,138 General obligation debt service 3,421,214 - Nonmajor governmental funds 3,386,733 $ 13,154,342 $ 13,154,342 Transfers are used to move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them. Note 6. Capital Assets Capital asset activity for the year ended June 30, 2018 was as follows: Beginning Ending Balance Balance June 30, 2017 Additions Deletions Transfers June 30, 2018 Governmental Activities Capital assets, not being depreciated: Land $ 44,395,439 $ 449,135 $ 156,390 $ $ 44,688,184 Land held for redevelopment 10,989,706 3,800,541 175,614 14,614,633 Construction -in -progress 11,408,144 23,514,286 (12,928,871) 21,993,559 Total capital assets, not being depreciated 66,793,289 27,763,962 332,004 (12,928,871) 81,296,376 Capital assets, being depreciated: Buildings and improvements 130,497,260 200,712 5,912 1,417,770 132,109,830 Infrastructure 362,244,990 11,511,101 373,756,091 Vehicles, machinery, furniture and equipment 31,210,729 839,179 693,777 31,356,131 Software 793,600 13,555 780,045 Total capital assets, being depreciated 524,746,579 1,039,891 713,244 12,928,871 538,002,097 Less accumulated depreciation for: Buildings and improvements 63,199,376 3,873,922 5,493 - 67,067,805 Infrastructure 145, 389,251 9,982,930 155, 372,181 Vehicles, machinery, furniture and equipment 20,995,779 2,047,140 609,296 22,433,623 Software 588,589 108,152 10,844 - 685,897 Total accumulated depreciation 230,172,995 16,012,144 625,633 245,559,506 Total capital assets, being depreciated, net 294,573,584 (14,972,253) 87,611 12,928,871 292,442,591 Governmental activities capital assets, net $ 361,366,873 $ 12,791,709 $ 419,615 $ - $ 373,738,967 47 City of Waterloo, Iowa Notes to Basic Financial Statements Note 6. Capital Assets (Continued) Beginning Ending Balance Balance June 30, 2017 Additions Deletions Transfers June 30, 2018 Business -Type Activities Capital assets, not being depreciated: Land $ 534,242 $ - $ - $ - $ 534,242 Construction -in -progress 3,561,667 3,932,655 124,543 (2,612,470) 4,757,309 Total capital assets, not being depreciated 4,095,909 3,932,655 124,543 (2,612,470) 5,291,551 Capital assets, being depreciated: Buildings 71,132,866 76,498 71,209,364 Improvements other than buildings 57,436,194 - 2,612,470 60,048,664 Vehicles, machinery, furniture and equipment 12,787,432 488,861 546,245 12,730,048 Total capital assets, being depreciated 141,356,492 565,359 546,245 2,612,470 143,988,076 Less accumulated depreciation for: Buildings 24,817,431 1,408,987 26,226,418 Improvements other than buildings 17,163,255 1,148,724 18,311,979 Vehicles, machinery, furniture and equipment 7,468,913 954,621 515,493 7,908,041 Total accumulated depreciation 49,449,599 3,512,332 515,493 52,446,438 Total capital assets, being depreciated, net 91,906,893 Business -type activities capital assets, net (2,946,973) 30,752 2,612,470 91,541,638 $ 96,002,802 $ 985,682 $ 155,295 $ - $ 96,833,189 48 City of Waterloo, Iowa Notes to Basic Financial Statements Note 6. Capital Assets (Continued) Beginning Ending Balance Balance December 31, December 31, Discretely Presented Component Unit - 2017 Additions Deletions 2018 Waterloo Water Works Capital Assets Capital assets, not being depreciated: Land $ 314,543 $ - $ - $ 314,543 Construction -in -progress 1,029,833 1,437,400 (117,488) 2,349,745 Total capital assets, not being depreciated 1,344,376 1,437,400 (117,488) 2,664,288 Capital assets, being depreciated: Buildings and improvements Water supply and distribution systems Meters and equipment Machinery and equipment Total capital assets, being depreciated 1,781,153 30,790,380 1,173, 594 3,586,324 37,331,451 308,718 167,280 475,998 1,781,153 31,099,098 1,173,594 (39,736) 3,713,868 (39,736) 37,767,713 Less accumulated depreciation for: Buildings and improvements 842,435 28,955 871,390 Water supply and distribution systems 8,524,074 463,214 8,987,288 Meters and equipment 744,110 25,125 - 769,235 Machinery and equipment 1,654,257 240,890 (39,736) 1,855,411 Total accumulated depreciation 11,764,876 758,184 (39,736) 12,483,324 Total capital assets, being depreciated, net 25,566,575 (282,186) - 25,284,389 Net discretely presented component unit—Waterloo Water Works capital assets, net $ 26,910,951 $ 1,155,214 $ (117,488) $ 27,948,677 Ending Balance Balance Discretely Presented Component Unit - June 30, 2017 Additions Deletions June 30, 2018 Waterloo Convention & Visitors Bureau, Inc. Capital assets, being depreciated: Equipment $ 66,802 $ 3,971 $ $ 70,773 Leasehold improvements 125,924 - 125,924 Total capital assets, being depreciated 192,726 3,971 196,697 Less accumulated depreciation 159,675 13,033 172,708 Total capital assets, being depreciated, net $ 33,051 $ (9,062) $ - $ 23,989 49 City of Waterloo, Iowa Notes to Basic Financial Statements Note 6. Capital Assets (Continued) Depreciation expense was charged by the City as follows for the year ended June 30, 2018: Governmental activities: Public safety Public works Culture and recreation Community and economic development General government Total governmental activities $ 818,196 12,669,694 2,193,922 144,791 185,541 16,012,144 Business -type activities: Sanitary sewer 3,204,445 Sanitation 307,887 Total business -type activities 3,512,332 Total primary government $ 19,524,476 Component unit—Waterloo Water Works $ 758,184 Component unit—Waterloo Convention & Visitors Bureau, Inc. $ 13,033 Note 7. Compensated Absences City employees accumulate vacation and sick leave hours for subsequent use or for payment upon termination or retirement. A calendar year is primarily used for the calculation of vacation pay benefits while sick leave utilizes the City's fiscal year. Vacation days for most bargaining unit employees must be taken or paid during the calendar year with limited exceptions. Nonbargaining unit employees may carry forward up to 10 -days vacation with proper approval. Upon termination, employees receive payment for unused vacation plus a payment for vacation hours accrued from January through the termination date. As of June 30, 2018, there was $3,187,801 accrued for vacation. Prior to July 1, 1984, sick leave was allowed to accumulate to a maximum of 240 days, except for police and fire personnel who could accumulate a maximum of 260 days. Any unused days as of July 1, 1984 were accumulated into a frozen sick leave bank. The days frozen in the bank are paid upon use, termination or retirement (except for library employees who will only be paid upon use). If paid upon retirement, the amount due to employees is computed as the amount equal to 60 percent of the total accumulated hours times the employee's current pay rate paid to employees. Retirees have the option of receiving the payout immediately or receiving it as an annuity over 60 months. As discussed in Note 7, active employees could elect to receive a payout of 60 percent of their frozen sick dollars beginning in July 2001. As of June 30, 2018, there was $102,631 accrued for the frozen sick leave bank. After July 1, 1984, sick leave is allowed to accumulate up to 12 days per year. At the end of the year, 25 percent of any unused sick leave is rolled over to the employee's casual leave bank and the balance of 75 percent of the unused sick leave is added to the employee's sick leave storage bank for future use. The days accumulated in the bank after July 1, 1984 are not payable upon termination or retirement. Certain Fire Department employees are eligible to roll 75 percent of their unused sick leave, with the balance added to their sick leave storage bank. 50 City of Waterloo, Iowa Notes to Basic Financial Statements Note 7. Compensated Absences (Continued) Certain employees can elect either to be paid overtime compensation or to accrue the hours as compensatory time, defined as additional time off from regular hours. Employees are required to be paid for these services upon termination of employment. Maximum hours eligible to be used later as compensatory time are limited by law and labor contracts. Governmental funds do not recognize these accumulations as expenditures until paid. As of June 30, 2018, there was $1,654,148 accrued for unused compensatory time, which includes unused sick leave and frozen sick leave bank. Employees are also eligible to receive pay -outs of a portion of unused casual leave. The accrued casual pay is reported as compensated absences in the applicable fund which includes $51,147 in governmental funds, as the liabilities are considered matured and are expected to be liquidated with expendable available financial resources. Frozen sick leave, vacation pay and compensatory time liabilities are accrued when incurred in the government -wide and proprietary fund statements and reported as a liability. Note 8. Long -Term Liabilities The following is a summary of the changes in long-term liabilities for the year ended June 30, 2018: Governmental activities: General obligation bonds Loans and notes Compensated absences Total OPEB liability Net pension liability—IPERS Net pension liability—MFPRSI Subtotal Unamortized discounts Bond premium Total long-term liabilities, governmental activities June 30, 2017, Due Within as restated Additions Reductions June 30, 2018 One Year $ 82,734,000 $ 9,515,000 $ 11,198,000 $ 81,051,000 $ 9,266,000 1,788,702 6,624,713 393,691 8,019,724 1,127,937 4,347,734 3,812,117 3,512,277 4,647,574 2,803,216 18,417,346 1,114,484 17,302,862 12,213,965 397,488 - 12,611,453 46,723,287 - 13,274,937 33,448,350 166,225,034 (225,984) 1,174, 828 20,349,318 118,355 29,493,389 (21,497) 170,396 157,080,963 (204,487) 1,122,787 13,197,153 $ 167,173,878 $ 20,467,673 $ 29,642,288 $ 157,999,263 $ 13,197,153 Business -type activities: General obligation bonds $ 21,491,000 $ 2,060,000 $ 4,647,000 $ 18,904,000 $ 2,514,000 State revolving fund capital loan - 1,600,000 66,000 1,534,000 66,000 Compensated absences 331,706 438,639 478,127 292,218 149,236 Total OPEB liability 2,628,020 375,953 3,003,973 - Net pension liability—IPERS 3,132,862 103,932 3,236,794 Subtotal 27,583,588 4,578,524 5,191,127 26,970,985 2,729,236 Unamortized discounts (63,755) - (6,672) (57,083) Bond premium 265,028 61,571 37,119 289,480 Total long-term liabilities, business - type activities $ 27,784,861 $ 4,640,095 $ 5,221,574 $ 27,203,382 $ 2,729,236 51 City of Waterloo, Iowa Notes to Basic Financial Statements Note 8. Long -Term Liabilities (Continued) Compensated absences, deferred compensation and the net pension liability attributable to governmental activities are generally liquidated by the General Fund. The City issues bonds and notes primarily to provide funds for the acquisition and construction of major capital facilities. General obligation bonds and notes have been issued for governmental and business - type activities and to refund debt. Revenue bonds have been issued to fund the acquisition and construction of sanitary sewer facilities and to refund prior general obligation and revenue debt. General obligation bonds and notes are direct obligations and pledge the full faith and credit of the City. Revenue bonds are the obligations of the Sanitary Sewer Enterprise Fund and are generally payable solely from the revenue of the Sanitary Sewer Enterprise Fund. Bonds generally are issued as 15- to 20 - year serial bonds. Debt indentures require that certain covenants relating to the maintenance and efficiency of the operating system, the rate structure, restrictions on borrowings, leasing or disposition of assets and minimum insurance coverage be adhered to. On June 19, 2018, the City issued $10,505,000 in General Obligation Bonds, Series 2018A maturing June 1, 2019 through June 1, 2030 with an interest rate of 3.00 percent. The City used $3,521,772 of the proceeds to refund $3,510,000 of the 2010A bonds ($1,420,000 governmental activities and the $2,090,000 for sewer). As a result of this transaction the City reduced its total debt service requirements by $86,824, which resulted in an economic gain of $73,067. On June 19, 2018, the City issued $1,070,000 in General Obligation Bonds, Series 2018B maturing June 1, 2019 through June 1, 2028 with interest rates ranging from 2.50 percent to 3.50 percent. Reasons for issuance were to refund the General Obligation Bonds, Series 2010A as well as finance certain capital improvements, equipment and vehicle acquisitions and urban renewal projects in the City and pay a portion of the costs of issuance of the Bonds. The City's outstanding general obligation long-term debt is as follows: Outstanding Issue Date Purpose Interest Rates June 30, 2018 June 2009 Taxable 1.00 - 3.00 $ 140,000 June 2010 Taxable 1.00 - 5.00 490,000 June 2011 Tax-exempt - capital improvements/general 2.00 - 4.00 3,715,000 June 2011 Taxable 0.60 - 4.60 4,350,000 June 2012 Tax-exempt - capital improvements/general 2.00 - 2.30 4,660,000 June 2012 Refunding 0.35 - 1.35 815,000 June 2012 Taxable 2.20 - 3.50 3,125,000 June 2013 Tax-exempt - capital improvements/general 2.00 - 3.70 4,090,000 June 2013 Taxable 2.00 - 3.70 4,910,000 June 2013 Refunding 0.50 - 2.50 555,000 June 2014 Tax-exempt - capital improvements/general 2.00 - 3.12 6,365,000 June 2014 Taxable 1.00 - 4.00 3,945,000 June 2014 Refunding 2.00 3,105,000 June 2015 Tax-exempt - capital improvements/general 3.00 - 3.50 10,195,000 June 2015 Taxable 1.50 - 4.00 1,275,000 June 2016 Tax-exempt - capital improvements/general 2.00 - 2.25 7,195,000 June 2016 Taxable 0.80 - 3.10 1,605,000 June 2016 Taxable 0.90 - 3.40 8,545,000 June 2017 Tax-exempt - capital improvements/general 3.00 8,155,000 June 2017 Taxable 1.35 - 3.35 3,390,000 June 2017 Taxable - urban renewal 2.75 - 3.50 7,755,000 June 2018 Tax-exempt - capital improvements/general 3.00 10,505,000 June 2018 Taxable 2.50 - 3.50 1,070,000 $ 99,955,000 52 City of Waterloo, Iowa Notes to Basic Financial Statements Note 8. Long -Term Liabilities (Continued) Annual debt service on general obligation and revenue bonds as of June 30, 2018 are as follows: GO Debt Service General Obligation Bonds Principal Interest Years ending June 30: 2019 $ 9,266,000 $ 2,260,021 2020 8,010,000 2,039,356 2021 6,763,000 1,842,609 2022 6,215,000 1,666,895 2023 5,773,000 1,503,226 2024-2028 28,299,000 5,045,255 2029-2033 13, 390, 000 1,503,329 2034-2036 3,335,000 204,887 $ 81,051,000 $ 16,065,578 Sanitary Sewer Enterprise General Obligation Bonds Principal Interest Years ending June 30: 2019 $ 2,514,000 $ 566,118 2020 2,055,000 506,343 2021 2,002,000 451,543 2022 1,950,000 394,945 2023 1,922,000 338,400 2024-2028 7,231,000 835,531 2029-2032 1,230,000 71,356 $ 18,904,000 $ 3,164,236 Loans and notes: During the years ended June 30, 2013 and 2011, the City had drawn $195,348 and $235,082, respectively, in loans from the Iowa Department of Economic Development, Brownfield Redevelopment Program (Department). The loans are at zero percent with no payments due in years one through five. The loan has been forgiven as planned increases in taxable valuation of property within the redevelopment area have been attained. As of June 30, 2018, the unpaid principal of $255,430 was forgiven. The City has entered into development agreements including rebates of property taxes paid by other parties to the agreements. Most agreements include a set percentage of taxes paid for a specified number of years. Since payment years and amounts are unknown, they are not included in the schedule of maturities of debt. The following agreements require a guaranteed amount of principal plus interest to be paid to the developer. As of June 30, 2018, the outstanding balance of these loans was $8,019,724. • Young Development, Ltd., $20,796 plus interest at 5 percent, payable semiannually beginning November 2009 until paid in full from 100 percent of property tax payments, subject to annual appropriation. • Deer Creek Development, LLC, $1,643,599 plus interest at 7 percent through March 31, 2011 then at 4.750 percent, compounded semiannually. In fiscal year 2014, there were additions to the agreement of $6,130. Payable at $300,000 in fiscal year 2011 and semiannual payments of $100,000 are due beginning November 2011 until principal plus interest have been paid. • North Crossing Development, LLC, $6,624,713 plus interest at 1.81 percent through September 1, 2025. Payable in annual payments of $1,000,000 are due beginning August 29, 2019 until principal plus interest have been paid. 53 City of Waterloo, Iowa Notes to Basic Financial Statements Note 8. Long -Term Liabilities (Continued) Other loans and notes: Other governmental activity loans and notes mature as follows: Governmental Activities Nonmajor Governmental Funds Principal Interest Years ending June 30: 2019 $ 1,127,937 $ 76,840 2020 1,091,619 159,467 2021 1,114,667 136,419 2022 1,138, 334 112,752 2023 1,162,640 88,446 2024-2026 2,384,527 112,787 $ 8,019,724 $ 686,711 Discretely presented component unit: Balance Balance Due Within December 31, 2017 Additions Deletions December 31, 2018 One Year Compensated absences $ 69,914 $ 65,224 $ 69,914 $ 65,224 $ 65,224 Note 9. Operating Leases Effective July 1, 1999, the City's sanitary sewer operations entered into a five-year agreement for the management of biosolid by-products produced at the Wastewater Treatment Facility. The agreement included the lease of a storage facility. This lease was extended August 1, 2014 for another five-year period, ata monthly rental of $4,900. Rental expense for all material operating leases was $191,500 for the year ended June 30, 2018. Cedar Valley SportsPlex: The Cedar Valley SportsPlex, a 125,000 square foot recreational facility that includes indoor soccer fields, gyms, a leisure pool, fitness facility, running track and multi-purpose activity spaces, opened in January 2014. The facility is a joint project of the City and the Waterloo Development Corporation. The Waterloo Development Corporation raised the funds, through a combination of private donations and grants from the Black Hawk County Gaming Association, to construct the $23 million facility. The City acquired the property where the facility is located and signed a lease purchase agreement to operate the facility for $100 per year. The lease purchase agreement gave the City the option to take ownership of the facility at the end of the lease term or to cease operating the facility at that time. In August 2014, the lease agreement was amended to remove that option, so the property will automatically transfer to the City at the end of the lease term. The Waterloo Development Corporation signed an agreement with the City which guarantees that the fundraising for construction will be completed. Because there was an automatic transfer of the assets at the end of the term of the agreement, and that future lease payments to the Waterloo Development Corporation are nominal, the City has no capital contribution to report for the year ended June 30, 2018, and no capital lease liability as of June 30, 2018. The Leisure Services department of the General Fund is operating the facility with the intent for it to be self-supporting. 54 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems Iowa Public Employees' Retirement System: Plan description: Employees of the City are provided with pensions through the Iowa Public Employees Retirement System (IPERS)—a cost-sharing multiple -employer defined benefit pension plan administered by the State of Iowa. IPERS provides retirement and death benefits which are established by State statute to plan members and beneficiaries. IPERS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to IPERS, P.O. Box 9117, Des Moines, Iowa, 50306-9117. Benefits provided: IPERS provides retirement, disability and death benefits. Retirement benefits are determined based on the employee's highest five-year average salary and a multiplier based on the years of service. Employees are eligible for full retirement age 65; at age 62 with at least 20 years of covered employment or when the years of service plus the employee's age equals or exceeds 88. Four years of service is required for nonservice-related disability eligibility. Disability benefits are determined in the same manner as retirement benefits but are payable immediately without an actuarial reduction. Death benefits are calculated based on the actuarial present value of the employee's accrued benefit at the time of death or a calculation based on the employee's contributions, highest covered annual wage and years of service. Contributions: Per Iowa Code Section 97B.4(4)(d) the required contribution rate is determined by the IPERS actuary as the rate necessary to fully fund the benefits as defined by Iowa Code Chapter 97B. Employees are required to contribute 5.95 percent of their annual pay. The City contractually required contribution rate for the year ended June 30, 2018, was 8.93 percent of annual payroll, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Contributions to the pension plan from the City were $1,614,023 for the year ended June 30, 2018. Pension Liabilities, Pension Expense, and Deferred Inflow and Outflows of Resources Related to Pensions: At June 30, 2018, the City reported a liability of $15,848,247 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on a projection of the City's long-term share of contributions to the pension plan relative to the projected contributions of all participating governments, actuarially determined. At June 30, 2018, the City's proportion was 0.2379165 percent, a decrease of .00594275 percent from the City's proportion at June 30, 2017. 55 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) For the year ended June 30, 2018, the City recognized pension expense of $407,123. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ 145,502 $ (137,313) Changes of assumptions 2,753,695 - Net difference between projected and actual earnings on pension plan investments (165,529) Changes in proportion and differences between City contributions and proportionate share of contributions 230,852 (328,442) Total deferred amounts to be recognized in pension expense in future periods 3,130,049 (631,284) City contributions subsequent to the measurement date 1,614,023 Total deferred amounts related to pensions $ 4,744,072 $ (631,284) $1,614,023 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. The deferred outflows and deferred inflows resulting from the difference between projected and actual earnings on pension plan investments will be recognized as a reduction of pension expense over five years. The other deferred inflows and outflows will be recognized in pension expense using the average expected remaining service lives of all IPERS members. The average is determined by taking the calculated total future service years of the Plan divided by the number of the people in the Plan including retirees. Deferred outflows of resources and deferred inflows of resources will be recognized in pension expense as follows: Years ended June 30: 2019 $ 360,862 2020 1,237,840 2021 701,284 2022 29,217 2023 169,562 $ 2,498,765 56 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) Actuarial assumptions: The total pension liability was determined by an actuarial valuation as of June 30, 2017, using the following actuarial assumptions, applied to all periods included in the measurement: Rate of inflation 2.60 percent per annum Rates of salary increases 3.25 to 16.25 percent, average, including inflation. Rates vary by membership group. Long-term effective investment 7.00 percent, compounded annually, net of investment expense, including inflation. Wage growth 3.25 percent, per annum, based on 2.60 percent inflation and 0.65 percent real wage inflation. Mortality rates were based on the RP -2000 Combined Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on Scale AA. The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the four-year period ending June 30, 2014. 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 real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Asset Allocation Long -Term Expected Real Rate of Return Core -plus fixed income 27.0% 2.25% Domestic equity 24.0 6.25 International equity 16.0 6.71 Private equity 11.0 11.15 Private real assets 7.5 4.18 Public real assets 7.0 3.27 Public credit 3.5 3.46 Private credit 3.0 4.25 Cash 1.0 (0.31) 100.0% 57 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) Discount rate: The discount rate used to measure the total pension liability was 7.00 percent. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that contributions from cities will be made at contractually required rates, actuarially determined. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the City's proportionate share of the net pension liability to changes in the discount rate: The following presents the City's proportionate share of the net pension liability calculated using the discount rate of 7.00 percent, as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 -percentage -point lower (6.00 percent) or 1 - percentage -point higher (8.00 percent) than the current rate: 1% Decrease (6.00%) Discount Rate (7.00 %) 1% Increase (8.00 %) City's proportionate share of the net pension liability $ 26,111,554 $ 15,848,247 $ 7,225,098 Pension plan fiduciary net position. Detailed information about the pension plan's fiduciary net position is available in the separately issued IPERS financial report; which can be located at www.ipers.org. Municipal Fire and Police Retirement System of Iowa Plan description: MFPRSI membership is mandatory for fire fighters and police officers covered by the provisions of Chapter 411 of the Code of Iowa. Employees of the City are provided with pensions through a cost-sharing multiple employer defined benefit pension plan administered by MFPRSI. MFPRSI issues a stand-alone financial report which is available to the public by mail at 7155 Lake Drive, Suite #201, West Des Moines, Iowa 50266 or at www.mfprsi.org. MFPRSI benefits are established under Chapter 411 of the Code of Iowa and the administrative rules thereunder. Chapter 411 of the Code of Iowa and the administrative rules are the official plan documents. The following brief description is provided for general informational purposes only. Refer to the plan documents for more information. Pension benefits: Members with 4 or more years of service are entitled to pension benefits beginning at age 55. Full service retirement benefits are granted to members with 22 years of service, while partial benefits are available to those members with 4 to 22 years of service based on the ratio of years completed to years required (i.e., 22 years). Members with less than 4 years of service are entitled to a refund of their contribution only, with interest, for the period of employment. Benefits are calculated based upon the member's highest 3 years of compensation. The average of these 3 years becomes the member's average final compensation. The base benefit is 66 percent of the member's average final compensation. Additional benefits are available to members who perform more than 22 years of service (2 percent for each additional year of service, up to a maximum of 8 years). Survivor benefits are available to the beneficiary of a retired member according to the provisions of the benefit option chosen plus an additional benefit for each child. Survivor benefits are subject to a minimum benefit for those members who chose the basic benefit with a 50 percent surviving spouse benefit. 58 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) Active members, at least 55 years of age, with 22 or more years of service have the option to participate in the Deferred Retirement Option Program (DROP). The DROP is an arrangement whereby a member who is otherwise eligible to retire and commence benefits opts to continue to work. A member can elect a 3, 4, or 5 year DROP period. By electing to participate in DROP the member is signing a contract indicating the member will retire at the end of the selected DROP period. During the DROP period the member's retirement benefit is frozen and a DROP benefit is credited to a DROP account established for the member. Assuming the member completes the DROP period, the DROP benefit is equal to 52 percent of the member's retirement benefit at the member's earliest date eligible and 100 percent if the member delays enrollment for 24 months. At the member's actual date of retirement, the member's DROP account will be distributed to the member in the form of a lump sum or rollover to an eligible plan. Disability and death benefits: Disability coverage is broken down into two types, accidental and ordinary. Accidental disability is defined as permanent disability incurred in the line of duty, with benefits equivalent to the greater of 60 percent of the member's average final compensation or the member's service retirement benefit calculation amount. Ordinary disability occurs outside the call of duty and pays benefits equivalent to the greater of 50 percent of the member's average final compensation, for those with 5 or more years of service, or the member's service retirement benefit calculation amount, and 25 percent of average final compensation for those with less than 5 years of service. Death benefits are similar to disability benefits. Benefits for accidental death are 50 percent of the average final compensation of the member plus an additional amount for each child, or the provisions for ordinary death. Ordinary death benefits consist of a pension equal to 40 percent of the average final compensation of the member plus an additional amount for each child, or a lump -sum distribution to the designated beneficiary equal to 50 percent of the previous year's earnable compensation of the member or equal to the amount of the member's total contributions plus interest. Benefits are increased (escalated) annually in accordance with Chapter 411.6 of the Code of Iowa which states a standard formula for the increases. The surviving spouse or dependents of an active member who dies due to a traumatic personal injury incurred in the line of duty receives a $100,000 lump -sum payment. Contributions: Member contribution rates are set by state statute. In accordance with Chapter 411 of the Code of Iowa as modified by act of the 1994 General Assembly, to establish compliance with the Federal Older Workers Benefit Protections Act, the contribution rate was 9.4 percent of earnable compensation for the year ended June 30, 2018. Employer contribution rates are based upon an actuarially determined normal contribution rate and set by state statute. The required actuarially determined contributions are calculated on the basis of the entry age normal method as adopted by the Board of Trustees as permitted under Chapter 411 of the Code of Iowa. The normal contribution rate is provided by state statute to be the actuarial liabilities of the plan less current plan assets, with such total divided by 1 percent of the actuarially determined present value of prospective future compensation of all members, further reduced by member contributions and state appropriations. Under the Code of Iowa the employer's contribution rate cannot be less than 17 percent of earnable compensation. The City's contribution rate was 27.68 percent for the year ended June 30, 2018. The City's contributions to MFPRSI for the year ended June 30, 2018 were $4,180,091. 59 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) If approved by the state legislature, state appropriation may further reduce the employer's contribution rate, but not below the minimum statutory contribution rate of 17 percent of earnable compensation. The State of Iowa therefore is considered to be a nonemployer contributing entity in accordance with the provisions of the Governmental Accounting Standards Board Statement No. 67 — Financial Reporting for Pension Plans, (GASB 67). There were no state appropriations to MFPRSI during their fiscal year ended June 30, 2018. Net Pension Liabilities, Pension Expense, and Deferred Inflows and Outflows of Resources Related to Pensions: At June 30, 2018, the City reported a liability of $33,448,350 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on the City's share of contributions to the pension plan relative to the contributions of all MFPRSI participating employers. At June 30, 2018, the City's proportion was 5.703286 percent, a decrease of 0.021249 percent from the City's proportion at June 30, 2017. For the year ended June 30, 2018, the City recognized pension expense of $16,645,922. At June 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 experience Changes of assumptions Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between City contributions and proportionate share of contributions Total deferred amounts to be recognized in pension expense in future periods Deferred Deferred Outflows of Inflows of Resources Resources $ 1,283,586 $ (20,332) 2,842,389 (379,906) 1,370,508 67,983 (262,824) 5,564,466 (663,062) City contributions subsequent to the measurement date 4,180,091 Total deferred amounts related to pensions $ 9,744,557 $ (663,062) 60 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) $4,180,091 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. The deferred outflows and deferred inflows resulting from the difference between projected and actual earnings on pension plan investments will be recognized as a reduction of pension expense over five years. The other deferred inflows and outflows will be recognized in pension expense using the average expected remaining service lives of all MFPRSI members. The average is determined by taking the calculated total future service years of the Plan divided by the number of the people in the Plan including retirees. Deferred outflows of resources and deferred inflows of resources will be recognized in pension expense as follows: Years ended June 30: 2019 $ 642,707 2020 2,983,127 2021 1,581,249 2022 (533,418) 2023 227,739 $ 4,901,404 Actuarial Assumptions: The total pension liability in the June 30, 2017, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.00 percent Salary increases 4.50 to 15.11 percent, average, including inflation. Investment rate of return 7.50 percent, net of pension plan investment expense, including inflation The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the period from July 1, 2002 to June 30, 2012. There were no significant changes of benefit terms. Mortality rates were based on RP 2000 Blue Collar Combined Healthy table with males set -back two years, females set -forward one year and disabled set -forward one year (males only rates), with five years projection of future mortality improvement with Scale BB. 61 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) The long-term expected rate of return on pension plan investments was determined using a building-block method in which best -estimate ranges of expected future real rates (i.e., expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Long -Term Asset Expected Real Allocation Rate of Return U.S. equity 24% 5.85% Non U.S. equity 16 6.32 Private equity 11 10.31 Real estate 8 3.87 Coreplus fixed income 28 1.90 Credit opportunities 5 4.48 TIPS 5 1.36 Other real assets 2 6.42 Cash 1 (0.26) 100% Discount rate: The discount rate used to measure the total pension liability was 7.5 percent. The projection of cash flows used to determine the discount rate assumed that contributions will be made at 9.40 percent of covered payroll and the City contributions will be made at rates equal to the difference between actuarially determined rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of City's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate: The following presents the City's proportionate share of the net pension liability calculated using the discount rate of 7.50 percent, as well as what the city's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 -percent lower (6.50 percent) or 1 -percent higher (8.50 percent) than the current rate. 1% Decrease (6.50%) Discount Rate (7.50 %) 1% Increase (8.50 %) City's proportionate share of the net pension liability $ 57,671,218 $ 33,448,350 $ 20,168,576 Component Unit Waterloo Water Works contributes to the Waterloo Water Works Pension Plan (WWW Plan) and the Iowa Public Employees' Retirement System (IPERS). 62 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) Waterloo Water Works Pension Plan: Plan description: The Waterloo Water Works Pension Plan is a single -employer defined benefit plan administered by the Pension Committee of Waterloo Water Works. The WWW Plan provides retirement benefits to plan members and beneficiaries. No new WWW Plan members were allowed after December 31, 2007. The WWW Plan does not issue a stand-alone financial report. The actuarial report on the Plan is held at the Waterloo Water Work's office. The following brief description is provided for general informational purposes only. Refer to the WWW plan documents for more information. Pension Benefits: Retirement benefits are calculated using the highest three consecutive years of pensionable earnings during the last ten years of employment. The accrued benefit is determined to be 60 percent of average compensation, reduced if years of service is less than thirty years. Normal retirement age is 65. Married members may receive a benefit for life; however, members are required by law to receive a reduced qualified joint and survivor benefit, unless formally elected otherwise. In no event shall pensionable earnings exceed the limitation specified in Section 401(a)(17) of the Internal Revenue Code. Cost -of -living adjustments are provided to members and beneficiaries at the discretion of the Committee. As of December 31, the following members were covered by the WWW Plan: Inactive plan members and beneficiaries currently receiving benefits 34 Inactive plan members entitled to but not yet receiving benefits 1 Active plan members 16 Total members 51 Contributions: The contribution requirements of the Plan members (employees) and Waterloo Water Works are established and may be amended by Waterloo Water Works. Mandatory contributions to the WWW Plan by WWW Plan members are equal to the IPERS rate effective January 1 of the previous year, 5.95 percent for the year ending December 31, 2017. Prior to 2010, WWW Plan member contributions were not required and Waterloo Water Works made all the required contributions. Beginning January 1, 2010, WWW Plan members were required to contribute one-third of the full contribution rate of 4.1 percent and Waterloo Water Works paid the rest of the required contribution. As of January 1, 2011, WWW Plan members were required to contribute two-thirds of the full contribution rate of 4.3 percent and beginning January 1, 2012, WWW Plan members were required to contribute all of the mandatory contributions. The Waterloo Water Works Board of Trustees has approved Waterloo Water Works contributions to the Plan in excess of the amount determined annually by the actuary in an effort to eliminate over time the net pension liability as computed by the actuary. 63 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) Net pension liabilities, pension expense and deferred outflows of resources and deferred inflows of resources related to pensions: At December 31, 2017, the Water Works' recognized pension expense of $372,961. At December 31, 2017, the Water Works' reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Changes in assumptions Net difference between projected and actual earnings on pension plan investments Deferred Deferred Outflows Inflows of Resources of Resources $ 54,701 $ (30,241) 154,618 (3,946) $ 209,319 $ (34,187) Amounts reported as deferred outflows of resources and deferred inflows or resources will be recognized in pension expense as follows: Years ending December 31: 2018 2019 2020 2021 Pension Expense Amount $ 182,235 123,155 (52,418) (77,840) Total $ 175,132 Actuarial Assumptions: The Waterloo Water Works' net pension liability was measured as of December 31, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The total pension liability in the December 31, 2017 was determined using the following actuarial assumptions, applied to all periods included in the measurement: Rate of inflation Rates of salary increases Long-term investment rate of return 64 2.50% per annum 3.00% per annum 8.00%, compounded annually, net of investment expenses. City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) The actuarial assumptions used in the December 31, 2017 valuation were based on the results of an actuarial experience study for the period January 1, 2017 through December 31, 2017. In addition, mortality rates were based on 2018 IRS Combined Mortality Table as appropriate. The long-term expected rate of return on WWW Plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These expected future real rates of return are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the WWW Plan's target asset allocation as of December 31, 2017 are summarized in the following table: Asset Class: Cash and fixed income Equity large cap Equity mid cap Equity small cap Real estate Total Target Allocation Long -Term Expected Real Rate of Return 22% 59 11 8 100% 2.50% 5.50 6.00 6.00 5.00 Discount rate: The discount rate used to measure the total pension liability was 8.00 percent. The projection of cash flows used to determine the discount rate assumed that WWW Plan member contributions will be made at the current contribution rate and that contributions will be made at rates equal to the differences between actuarially determined contribution rates and the member rate. Professional judgement on future contributions has been applied in those cases where contribution patterns deviate from the actuarially determined rates. Based on those assumptions the WWW Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit. Sensitivity of the net pension liability to changes in the discount rate: The following presents the net pension liability calculated using the discount rate of 8.00 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percent lower, or 1 percent higher than the current rate: 1% Decrease (7.00%) Discount Rate (8.00%) 1% Increase (9.00%) Net pension liability $ 3,001,774 65 $ 2,317,605 $ 1,684,115 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) Changes in Waterloo Water Works' net pension liability: Changes in the Waterloo Water Works' net pension liability for the year ended December 31, 2017 were as follows: Balance, beginning of year Changes for the year: Service cost Interest Difference between expected and actual experience Changes in assumptions Contributions, employer Contributions, member Net investment income Benefit payments including refunds of employee contributions Balance, end of year Total Plan Net Pension Fiduciary Net Pension Liability Position Liability $ 8,233,928 $ 5,395,710 $ 2,838,218 45,849 640,457 (45,362) 225,356 507,287 58,087 821,539 (548,118) (548,118) 45,849 640,457 (45,362) 225,356 (507,287) (58,087) (821,539) $ 8,552,110 $ 6,234,505 $ 2,317,605 Payables to the Waterloo Water Works' Plan: All required Waterloo Water Works contributions and required employee contributions which had been withheld from employee wages were remitted to the WWW Plan by December 31, 2017. (PERS — Waterloo Water Works: Plan Description: IPERS membership is mandatory for employees of Waterloo Water Works, except for those covered by another retirement system. Employees of Waterloo Water Works are provided with pensions through a cost-sharing multiple -employer defined benefit pension plan administered by IPERS. IPERS issues a stand-alone financial report which is available to the public by mail at 7401 Register Drive, P.O. Box 9117, Des Moines, IA 50306-9117 or at www.ipers.org. (PERS benefits are established under Iowa Code Chapter 97B and the administrative rules thereunder. Chapter 97B and the administrative rules are the official plan documents. The following brief description is provided for general information purposes only. Refer to the plan documents for more information. 66 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) Pension benefits: A regular member may retire at normal retirement age and receive monthly benefits without an early-retirement reduction. Normal retirement age is age 65, anytime after reaching age 62 with 20 or more years of covered employment, or when the member's years of service plus the member's age at the last birthday equals or exceeds 88, whichever comes first. (These qualifications must be met on the member's first month of entitlement to benefits.) Members cannot begin receiving retirement benefits before age 55. The formula used to calculate a regular member's monthly (PERS benefit includes: • A multiplier (based on years of service). • The member's highest five-year average salary. (For members with service before June 30, 2012, the highest of three-year average salary as of that date will be used if it is greater than the highest five-year average salary). If a member retires before normal retirement age, the member's monthly retirement benefit will be permanently reduced by an early-retirement reduction. The early-retirement reduction is calculated differently for service earned before and after July 1, 2012, the reduction is 0.50 percent for each month that the member receives benefits before age 65. Generally, once a member selects a benefit option, a monthly benefit is calculated and remains the same for the rest of the member's lifetime. However, to combat the effects of inflation, retirees who began receiving benefits prior to July 1, 1990 receive a guaranteed dividend with their regular November benefit payments. Disability and Death Benefits: A vested member who is awarded federal Social Security disability or Railroad Retirement disability benefits is eligible to claim (PERS benefits regardless of age. Disability benefits are not reduced for early retirement. If a member dies before retirement, the member's beneficiary will receive a lifetime annuity or a lump -sum payment equal to the present actuarial value of the member's accrued benefit or calculated with a set formula, whichever is greater. When a member dies after retirement, death benefits depend on the benefit option the member selected at retirement. Contributions: Contribution rates are established by IPERS following the annual actuarial valuation, which applies IPERS' Contribution Rate Funding Policy and Actuarial Amortization Method. Statute limits the amount rates can increase or decrease each year to one percentage point. IPERS' Contribution Rate Funding Policy requires that the actuarial contribution rate be determined using the "entry age normal" actuarial cost method and the actuarial assumptions and methods approved by the IPERS Investment Board. The actuarial contribution rate covers normal cost plus the unfunded actuarial liability payment based on a 30 -year amortization period. The payment to amortize the unfunded actuarial liability is determined as a level percentage of payroll, based on the Actuarial Amortization Method adopted by the Investment Board. In fiscal year 2017, pursuant to the required rate, regular members contributed 5.95 percent of covered payroll and Waterloo Water Works contributed 8.93 percent of covered payroll for a total rate of 14.88 percent. 67 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) The Waterloo Water Works' contributions to IPERS for the year ended December 31, 2017 were $111,801. As December 31, 2017, the Waterloo Water Works' liability for its proportionate share of the net pension liability totaled $1,035,776. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The Water Works' proportion of the net pension liability was based on the Water Works' share of contributions to the pension plan relative to the contributions of all IPERS participating employers. At June 30, 2017, the Water Works' collective proportion was .015549 percent, which was an increase of .000878 percent from its proportion measured as of June 30, 2016. For the year ended December 31, 2017, the Water Works recognized pension expense of $75,887. At December 31, 2017, the Water Works reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ 9,509 $ 8,974 Changes of assumptions 179,970 10,819 Changes in proportion and differences between Water Works contributions and proportionate share of contributions 108,822 Total deferred amounts to be recognized in pension expense in future periods 298,301 19,793 Water Works contributions subsequent to the measurement date 56,124 Total deferred amounts related to pensions $ 354,425 $ 19,793 68 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) Deferred outflows of resources related to pensions of $56,124 represent the amount Waterloo Water Works contributed subsequent to the measurement date and will be recognized as a reduction of the net pension liability in the year ended December 31, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Years ended December 31: 2018 $ 70,299 2019 112,221 2020 65,058 2021 16,031 2022 14,899 $ 278,508 There were no nonemployer contributing entities at IPERS. Actuarial assumptions: The total pension liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurements: Inflation 2.60 percent Salary increases 3.25 to 16.25 percent, average, including inflation. Investment rate of return 7.00 percent, net of pension plan investment expense, including inflation Wage growth 3.25 percent per annum based on 2.60 percent inflation and 0.65 percent real wage inflation The actuarial assumptions used in the June 30, 2017 valuation were based on the results of actuarial experience study dated March 24, 2017. Mortality rates were based on the RP -2000 Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on Scale AA. 69 City of Waterloo, Iowa Notes to Basic Financial Statements Note 10. Retirement Systems (Continued) The long-term expected rate of return on IPERS' investments was determined using a building-block method in which best -estimate ranges of expected future real rates (expected returns, net of investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Asset Allocation Long -Term Expected Real Rate of Return Core -plus fixed income 27.0% 2.25% Domestic equity 24.0 6.25 International equity 16.0 6.71 Private equity 11.0 11.15 Private real assets 7.5 4.18 Public real assets 7.0 3.27 Public credit 3.5 3.46 Private credit 3.0 4.25 Cash 1.0 (0.31) 100.0% Discount rate: The discount rate used to measure the total pension liability was 7.5 percent. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the contractually required rate and that contributions from Waterloo Water Works will be made at contractually required rates, actuarially determined. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Waterloo Water Works' proportionate share of the net pension liability to changes in the discount rate: The following presents the Waterloo Water Works' proportionate share of the net pension liability calculated using the discount rate of 7.00 percent, as well as what the Waterloo Water Works' proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percent lower (6.00 percent) or 1 percent higher (8.00 percent) than the current rate. Water Work's proportionate share of the net pension liability 1% Decrease (6.00%) Discount Rate (7.00%) 1% Increase (8.00%) $ 1,706,543 $ 1,035,776 $ 472,202 IPERS' Fiduciary Net Position: Detailed information about the IPERS' fiduciary net position is available in the separately issued IPERS financial report which is available on (PERS' website at www.ipers.org. Payables to the pension plan: At December 31, 2017, Waterloo Water Works reported payables to (PERS of $8,920 for legally required Waterloo Water Works' contributions and $5,943 for legally required Waterloo Water Works' contributions which had been withheld from employee wages but not yet remitted to (PERS. 70 City of Waterloo, Iowa Notes to Basic Financial Statements Note 11. Deficit Fund Balances Funds with deficit balances as of June 30, 2018 were as follows: Nonmajor governmental: Special revenue: Community Development Block Grant $ 179,405 Grants 1,051,920 Capital projects, Capital Improvements 1,671,600 The deficit of the above funds are expected to be eliminated through future transfers from other funds, grant proceeds or bond proceeds. Note 12. Commitments Construction: The City is involved in construction of capital assets, mainly streets, riverfront improvements and Brownfields reconstruction. Much of the construction is partially funded through federal, state and local grants and donations. City participation in the programs is generally funded through proceeds of debt issues and local option taxes. As of June 30, 2018, the City was committed to approximately $24.5 million of construction contracts. Property tax rebates: The City has entered into a number of development agreements with various businesses located in City tax increment financing districts. The agreements offer rebates of portions of taxes paid for up to 10 years, depending on each individual agreement. The amount of the rebates are a percentage of the actual taxes paid by the business. Rebates are reported at the time property taxes are received. See Note 19 for additional information. Loan guarantee: The City has guaranteed a bank loan of Cedar Skyline Corporation d/b/a Main Street Waterloo, a not-for-profit corporation. Main Street Waterloo and the City are not part of the same reporting entity. In 1999, Main Street Waterloo entered into a loan agreement with a financial institution, which was amended in 2006, 2010 and 2016. The note matures monthly through August 17, 2020. When the loan was entered into, the City voted to extend a nonexchange financial guarantee on the Main Street Waterloo loan. In the event that Main Street Waterloo is unable to repay the loan, the City would be required to make the payment, with no requirements for Main Street Waterloo to repay the City if the City has to pay any amount on the loan. As of June 30, 2018, the loan balance was $197,359. Based on City management's assessment of the qualitative factors and historical data, the City has not recorded a liability for this nonexchange financial guarantee. 71 City of Waterloo, Iowa Notes to Basic Financial Statements Note 13. Other Postemployment Benefits As a result of the adoption of GASB Statement No. 75, the beginning net position of the governmental activities, business -type activities, major enterprise fund and aggregate nonmajor funds was restated. The Statement replaces the requirements of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The net OPEB obligation recorded in accordance with GASB Statement No. 45 was removed and the total OPEB liability was recorded in accordance with GASB Statement No. 75. The effect on the beginning net position is as follows: Net position July 1, 2017, as previously reported Total OPEB liability Removal of net OPEB obligation Net position June 30, 2017, as restated Governmental Activities Business -Type Activities Sanitary Sewer Nonmajor Enterprise Fund $ 330,452,887 $ 3,977,250 (18,417,346) $ 316,012,791 $ 94,331,315 570,296 (2,628,020) 92,273,591 $ 89,439,860 $ 353,851 (1,580,845) $ 88,212,866 $ 4,871,455 216,445 (1,047,175) 4,040,725 Plan description: The City's defined benefit OPEB plan, a single -employer health care plan provides OPEB for all active and retired employees and their eligible dependents. Group insurance benefits are established under Iowa Code Chapter 509A.13. No assets are accumulated in a trust that meets the criteria in paragraph 4 of Statement 75. The plan does not issue a stand-alone financial report. Benefits provided: Individuals who are employed by the City are eligible to participate in the group health plan are eligible to continue healthcare benefits upon retirement. As required by state law, employees who retire from service with the City prior to age 65 are eligible for coverage in the plan. Police and fire employees must have completed four years of service, be age 55 and vested in the Municipal Fire and Police Retirement System. All other employees must have completed four years of service (seven years of service after July 1, 2012), be age 55 and be vested in IPERS to participate in the plan. Retirees are allowed to be covered by the plan until they are Medicare eligible at 65. Spouses of retirees are eligible to be covered on the plan for an additional eight ears or until they reach age 65. Contributions: The current funding policy of the City is to pay health claims as they occur. Contributions are required for both retiree and dependent coverage. Retirees are required to pay the current premium equivalent amounts less a contribution subsidy provided by the City for those employees hired prior to July 1, 1990. The contribution subsidy available to retirees and their eligible dependents is determined by years of service and the date of retirement. The subsidy is available until a retiree reaches age 65. Once the retiree reaches age 65, the dependent may continue coverage at a 100 percent subsidy, grading down 20 percent each year thereafter. This benefit is available only to those hired before July 1, 1990. The percentage of the month contribution that the City subsidizes is detailed in the table on the next page. 72 City of Waterloo, Iowa Notes to Basic Financial Statements Note 13. Other Postemployment Benefits (Continued) Criteria Employer Subsidy Percentage Retire prior to September 1, 1990: All employees 100% Retire on or after September 1, 1990: Hired prior to July 1, 1990: 28+ continuous years of service 100 20-27 continuous years of service 80 15-19 continuous years of service 60 10-14 continuous years of service 40 < 10 continous years of service Hired on or after July 1, 1990: All employees The current full premium equivalent amounts as of June 30, 2018 are shown below: Medical Dental Vision Single $ 518.38 $ 27.41 $ 3.54 Family 1,312.29 87.12 8.96 Disabled retirees follow a contribution schedule that is slightly different from regular retirees. Work related incidents allow disabled retirees and their dependents a 100 percent subsidy until age 65. Nonwork related incidents allow a 75 percent subsidy until age 65. Once the retiree reaches age 65, dependents of disabled retirees receive a 75 percent subsidy, grading down 20 percent each year thereafter. Employees covered by benefit terms: At June 30, 2018, the following employees were covered by the benefit terms: Inactive employees currently receiving benefits 123 Active employees, fully eligible for benefits 40 Active employees, not fully eligible for benefits 492 655 73 City of Waterloo, Iowa Notes to Basic Financial Statements Note 13. Other Postemployment Benefits (Continued) Total OPEB Liability The City's total OPEB liability of $20,306,835 was measured as of June 30, 2018, and was determined by an actuarial valuation as of that date. Actuarial methods and assumptions: The total OPEB liability in the June 30, 2018 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Inflation Salary increases Discount rate Health care cost trend rates: Premedicare medical and Rx benefits Medicare benefits Stop loss fees Administrative fees Mortality rates 3.0% per annum 3.5% per annum 3.58% as of July 1, 2017 and 3.87% as of June 30, 2018 7.0% reduced 0.5% per annum to ultimate of 4.5% 6.0% reduced 0.5% per annum to ultimate of 4.5% 7.0% reduced 0.5% per annum to ultimate of 4.5% 4.5% reduced 0.5% per annum to ultimate of 4.5% RP -2014 generational table scaled using MP -17 and applied on a gender -specific basis The discount rate was based on Bond Buyer 20 -Bond GO index The actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial experience study used in the MFPRSI Actuarial Valuation Report as of July 1, 2017 and IPERS Actuarial Valuation as of June 30, 2017. Changes in the Total OPEB Liability Balance as of June 30, 2017 Changes for the year: Service cost Interest Changes in assumptions or other inputs Contributions and payments made Net changes Balance as of June 30, 2018 Total OPEB Liability $ 21,045,366 671,816 804,928 (379,447) (1,835,828) (738,531) $ 20,306,835 Sensitivity of the total OPEB liability to changes in the discount rate: The following presents the total OPEB liability of the City, as well as what the City's approximate total OPEB liability would be if it were calculated using a discount rate that is 1 -percentage -point lower (2.87 percent) or 1 -percentage -point higher (3.87 percent) than the current discount rate: 1% Decrease Discount Rate 1% Increase 2.87% 3.87% 4.87% Total OPEB liability 21,657,187 74 20,306,835 19,070,415 City of Waterloo, Iowa Notes to Basic Financial Statements Note 13. Other Postemployment Benefits (Continued) Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates: The following presents the total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 -percentage -point lower or 1 -percentage -point higher than the current healthcare cost trend rates: Health Care 1% Decrease Current Trend 1 % Increase Total OPEB liability 22,586,323 20,306,835 18,590,763 OPEB Expense and deferred outflows of resources and deferred inflows of resources related to OPEB: For the year ended June 30, 2018, the City recognized OPEB expense of $$738,531. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following source: Changes of assumptions or other inputs Deferred Outflows Deferred Inflow of Resources of Resources $ - $ (337,817) Amounts reported as the deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense over the average future service to retirement of plan participants as follows: Years ending June 30: 2019 $ (41,631) 2020 (41,631) 2021 (41,631) 2022 (41,631) 2023 (41,631) Thereafter (129,662) $ (337,817) Note 14. Employee Health Care Plan The City provides health care, including dental, vision and prescription coverages, to its employees and certain former employees through a self-funded health insurance plan. Administration is provided by contracted providers. The City accounts for the plan in the General Fund, City Clerk and Finance Department, Health/Life Insurance Activity. Other funds, departments and activities are assessed for costs based on current and former employees within the activity. General Fund costs of these activities are funded by an employee benefits levy in the Trust and Agency Fund. The City is allowed to levy amounts needed to provide benefits. The City purchases stop -loss insurance, $100,000 specific and 125 percent aggregate of expected claims. 75 City of Waterloo, Iowa Notes to Basic Financial Statements Note 14. Employee Health Care Plan (Continued) The City's estimated unpaid claims as of June 30 and its needed reserves for claim fluctuation were determined by an actuarial study performed as of June 30. All outstanding claims are considered matured and expected to be paid in fiscal year 2018, with current available financial resources, and accordingly, a liability payable from restricted resources is reported within the General Fund. Changes and balances are as follows: Estimated unpaid claims, beginning of year Estimated claims incurred Claims payments Estimated unpaid claims, end of year 2018 2017 $ 1,021,123 $ 1,117,473 10, 000, 082 10, 522, 908 (9,779,869) (10,619,258) $ 1,241,336 $ 1,021,123 Note 15. Worker's Compensation Plan The City provides worker's compensation benefits through a self-funded plan. Administration is provided by a contracted provider. The City accounts for the plan in the General Fund, City Clerk and Finance Department, Self -Funded Worker's Compensation Activity. Costs are funded by an employee benefits levy in the Trust and Agency Fund. The City is allowed to levy amounts needed to provide benefits. The City's estimated unpaid claims as of June 30 are based on projected costs of future payments for injuries incurred prior to June 30, 2018, and is recorded as a liability in the government -wide statement of net position. $84,096 is considered matured and is recorded in the General Fund and governmental activities with accrued liabilities. Changes and balances are as follows: Estimated unpaid claims, beginning of year Estimated claims incurred Claims payments Estimated unpaid claims, end of year 2018 2017 $ 597,623 $ 494,081 802,838 1,004,016 (679,442) (900,474) $ 721,019 $ 597,623 Note 16. Joint Ventures and Jointly Governed Organizations The City is a participating member of several organizations including the Black Hawk County Criminal Justice Information System (CJIS), the Consolidated Dispatch Center (Center), the Black Hawk County Solid Waste Management Commission (SWMC) and the Metropolitan Transit Authority (MET). In addition, the City pays its share of costs for CJIS, including debt service, pays its share of costs of the Center, pays landfill fees to SWMC and levies and collects property taxes from Black Hawk County and remits them to MET ($2,118,046 during the year ended June 30, 2018). Also, during the year ended June 30, 2018, the Sanitation Fund received an operating grant of $273,624 from SWMC. This grant was used to offset recycling costs. The Center's financial information is reported within the Black Hawk County annual financial report. CJIS, SWMC and MET issue their own annual reports. Reports are available on the Iowa Auditor of State's website http://auditor.iowa.gov/reports. The City has no equity position in any of the organizations. 76 City of Waterloo, Iowa Notes to Basic Financial Statements Note 17. Industrial Development Revenue Bonds The City has issued a total of $160,401,000 of industrial development revenue bonds under the provisions of Chapter 419 of the Code of Iowa. The amount outstanding as of June 30, 2018 is not reported to the City by either the debtors or creditors. Therefore, outstanding balances are unknown. The bonds and related interest are payable solely from revenue of applicable projects. Bond principal and interest do not constitute liabilities of the City. Note 18. Risk Management The City is exposed to various risks of loss related to torts; theft, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. These risks are covered by the purchase of commercial insurance and self-funded worker's compensation. Settled claims from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. The City assumes the risks of loss of both mobile vehicles and equipment, except for certain pieces of equipment, such are fire and forestry equipment, with large per-unit costs which are insured against loss subject to deductibles. As of June 30, 2018, the City has assigned $5,037,400 of its General Fund, fund balance for insurable risks retained. Note 19. Tax Abatements GASB Statement No. 77 defines tax abatements as a reduction in tax revenues that results from an agreement between one or more governments and an individual or entity in which (a) one or more governments promise to forgo tax revenues to which they are otherwise entitled and (b) the individual or entity promises to take a specific action after the agreement that has been entered into that contributes to economic development or otherwise benefits the governments or the citizens of those governments. City tax abatements: The City provides tax abatements for urban renewal and economic development projects with tax increment financing as provided for in Chapters 15A and 403 of the Code of Iowa. For these types of projects, the City enters into agreements with developers which require the City, after developers meet the terms of the agreements, to rebate a portion of the property tax paid by the developers, to pay the developers an economic development grant or to pay the developers a predetermined dollar amount. No other commitments were made by the City as part of these agreements. For the year ended June 30, 2018, the City abated $2,055,710 of property tax under the urban renewal and economic development projects. 77 City of Waterloo, Iowa Notes to Basic Financial Statements Note 20. Fund Balances GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, establishes criteria for classifying fund balances into specifically defined classifications and clarifies definitions for governmental fund types. The details for the City's fund balances are as follows: Tax Trust and Increment Fund balances: General Agency Financing Nonspendable: Inventories $ 273,475 $ $ Advances due from funds 168,316 - Prepaids 86,984 Total nonspendable 528,775 General Obligation Road Use Nonmajor Debt Service Tax Governmental Total $ $ $ 273,475 - - 168,316 120,287 10,924 218,195 120,287 10,924 659,986 Restricted: Debt service 2,623,525 1,074,098 - 3,697,623 Self-funded health insurance 5,037,400 1,844,107 6,881,507 Tourism promotion 1,721,229 - - - - - 1,721,229 Public access television 147,187 - - 147,187 Civil rights enforcement 51,597 - 51,597 Housing 44,456 - - 4,482,672 4,527,128 Donor specified 837,956 - - 837,956 Employee benefits 374,023 - - 374,023 Library - - 290,701 290,701 Street and right-of-way maintenance - - - - 27,771,206 - 27,771,206 Improvements - 27,941,502 27,941,502 Total restricted 7,839,825 2,218,130 2,623,525 1.074,098 27,771,206 32,714,875 74,241,659 Committed, Police project 33,004 - - 33,004 Assigned: Insurance 3,452,378 Other postemploy- ment benefits 1,040,792 Improvements Other 699,686 Use of fund balance for future budget 710,000 Total assigned 5,902,856 1,940,822 524,486 - - 84,386 524,486 3,452,378 1,040,792 1,940,822 1,308,558 710,000 2,025,208 8,452,550 Unassigned 9,479,091 (3,091,717) 6,387,374 Total fund balances $ 23,783,551 $ 2,218,130 $ 3,148,011 $ 1,074,098 $ 27,891,493 $ 31,659,290 $ 89,774,573 78 City of Waterloo, Iowa Notes to Basic Financial Statements Note 21. New GASB Statements and Pending Pronouncements The GASB has issued several statements not yet implemented by the City. The statements which might impact the City are as follows: GASB Statement No. 83, Certain Asset Retirement Obligations, issued December 2016, will be effective for the City beginning with its fiscal year ending June 30, 2019. Under Statement No. 83, a government that has legal obligations to perform future asset retirement activities related to its tangible capital assets is required to recognize a liability and a corresponding deferred outflow of resources. The Statement identifies the circumstances that trigger the recognition of these transactions. The Statement also requires the measurement of an asset retirement obligation to be based on the best estimate of the current value of outlays expected to be incurred while the deferred outflow of resources associated with the asset retirement obligation will be measured at the amount of the corresponding liability upon initial measurement and generally recognized as an expense during the reporting periods that the asset provides service. The Statement requires disclosures including a general description of the asset retirement obligation and associated tangible capital assets; the source of the obligation to retire the assets; the methods and assumptions used to measure the liability; and other relevant information. GASB Statement No. 84, Fiduciary Activities, issued February 2017, will be effective for the City beginning with its fiscal year ending June 30, 2020. The objective of Statement No. 84 is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. This Statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. An activity meeting the criteria should be reported in a fiduciary fund in the basic financial statements. Governments with activities meeting the criteria should present a statement of fiduciary net position and a statement of changes in fiduciary net position. An exception to that requirement is provided for a business -type activity that normally expects to hold custodial assets for three months or less. This Statement describes four fiduciary funds that should be reported, if applicable: (1) pension (and other employee benefit) trust funds, (2) investment trust funds, (3) private -purpose trust funds, and (4) custodial funds. Custodial funds generally should report fiduciary activities that are not held in a trust or equivalent arrangement that meets specific criteria. A fiduciary component unit, when reported in the fiduciary fund financial statements of a primary government, should combine its information with its component units that are fiduciary component units and aggregate that combined information with the primary government's fiduciary funds. This Statement also provides for recognition of a liability to the beneficiaries in a fiduciary fund when an event has occurred that compels the government to disburse fiduciary resources. Events that compel a government to disburse fiduciary resources occur when a demand for the resources has been made or when no further action, approval or condition is required to be taken or met by the beneficiary to release the assets. GASB Statement No. 85, Omnibus 2017, issued March 2017, will be effective for the City beginning with its fiscal year ending June 30, 2018. Statement No. 85 is designed to address the practice issues that have been identified during implementation and application of certain GASB Statements. This statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits). 79 City of Waterloo, Iowa Notes to Basic Financial Statements Note 21. New GASB Statements and Pending Pronouncements (Continued) GASB Statement No. 86, Certain Debt Extinguishment Issues, issued May 2017, will be effective for the City beginning with its fiscal year ending June 30, 2018. Statement No. 86 is designed to improve consistency in accounting and financial reporting for in -substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources, other than the proceeds of refunding debt, are placed in an irrevocable trust for the sole purpose of extinguishing debt. This statement also requires the inclusion of any remaining prepaid insurance related to extinguished debt in the net carrying amount of the debt when calculating the difference between the reacquisition price and the net carrying amount of the debt for debt that is extinguished through a legal extinguishment or an in -substance defeasance. This Statement also improves notes to financial statements for debt that is defeased in substance. GASB Statement No. 87, Leases, issued June 2017, will be effective for the City beginning with its fiscal year ending June 30, 2021, with earlier adoption encouraged. Statement No. 87 establishes a single approach to accounting for and reporting leases by state and local governments. Under this statement, a government entity that is a lessee must recognize (1) a lease liability and (2) an intangible asset representing the lessee's right to use the leased asset. In addition, the [City, Authority, County] must report the (1) amortization expense for using the lease asset over the shorter of the term of the lease or the useful life of the underlying asset, (2) interest expense on the lease liability and (3) note disclosures about the lease. The Statement provides exceptions from the single -approach for short-term leases, financial purchases, leases of assets that are investments and certain regulated leases. This statement also addresses accounting for lease terminations and modifications, sale-leaseback transactions, non - lease components embedded in lease contracts (such as service agreements), and leases with related parties. GASB Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placement, issued March 2018, will be effective for the City beginning with its fiscal year ending June 30, 2019, with earlier adoption encouraged. Statement No. 88 clarifies which liabilities governments should include in their note disclosures related to debt. This Statement defines debt that must be disclosed in the notes to financial statements as a liability that arises from a contractual obligation to pay cash in one or more payments to settle an amount that is fixed at the date the contractual obligation is established. Governments must also disclose amounts of unused lines of credit, assets pledged as collateral for debt and the terms specified in debt agreements related to significant events of default with finance -related consequences, termination events with finance -related consequences, and subjective acceleration clauses. Within the notes, governments should separate information regarding direct borrowings and direct placements of debt from other debt. GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period, issued June 2018, will be effective for the City beginning with its fiscal year ending June 30, 2019, with earlier adoption encouraged. Statement No. 89 requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a construction period will not be included in the historical cost of a capital asset reported in a business -type activity or enterprise fund. 80 City of Waterloo, Iowa Notes to Basic Financial Statements Note 21. New GASB Statements and Pending Pronouncements (Continued) GASB Statement No. 90, Majority Equity Interests, will be effective for the City beginning with its fiscal year ending June 30, 2019. Statement No. 90 which clarifies the accounting and financial reporting requirements for a state or local government's majority equity interest in an organization that remains legally separate after acquisition. Under Statement No. 90 a government entity should report its majority equity interest in a legally separate organization as an investment if that equity interest meets the GASB's definition of an investment. In many instances, a majority equity interest that meets the definition of an investment should be measured using the equity method. For a majority equity interest in a legally separate entity that does not meet the definition of an investment, Statement No. 90 requires a government to report the legally separate entity as a component unit. Statement No. 90 also establishes guidance for remeasuring assets and liabilities of wholly acquired governmental organizations that remain legally separate. That guidance brings the reporting of those acquisitions in line now with existing standards that apply to acquisitions that do not remain legally separate. The City's management has not yet determined the effect these Statements will have on the City's financial statements, which may have a material effect on the financial statements. 81 City of Waterloo, Iowa Required Supplementary Information Schedule of Changes in the City's Total OPEB Liability and Related Ratios Last 10 Fiscal Years (Dollar amounts in thousands) 2018 Total OPEB liability Service cost $ 671,816 Interest 804,928 Changes of benefit terms Differences between expected and actual experience Changes of assumptions or other inputs (379,447) Benefit payments (1,835,828) Net change in total OPEB liability (738,531) Total OPEB liability—beginning 21,045,366 Total OPEB liability—ending $ 20,306,835 Covered -employee payroll 31,567,648 Total OPEB liability as a percentage of covered -employee payroll 64% Changes of assumptions: Changes of assumptions and other inputs reflect the effects of changes in the discount rate each period. The following are the discount rates used in each period: 2018 2017 3.58% per annum 3.87% per annum In 2018, amounts reflect a 0.5 -percentage -point decrease in the health care cost trend rates from the prior year and adjustments to assumptions regarding spousal coverage to better reflect actual plan experience. Note: GASB Statement No. 75 requires ten years of information to be presentated in this table. However, until a full 10 -year trend is compiled, the City will present information for those years for which information is available. 82 City of Waterloo, Iowa Required Supplementary Information Schedule of the City's Proportionate Share of the Net Pension Liability Iowa Public Employees' Retirement System 2018 2017 2016 2015 City's proportion of the net pension liability 0.2379165% 0.2438592% 0.2452672% 0.2415504% City's proportionate share of the net pension liability $ 15,848,247 $ 15,346,827 $ 12,117,384 $ 9,579,663 City's covered payroll $ 18,074,184 $ 17,523,333 $ 16,800,363 $ 15,816,626 City's proportionate share of the net pension liability as a percentage of its covered payroll 87.68% 87.58% 72.13% 60.57% Plan fiduciary net position as a percentage of the total pension liability 82.21% 81.82% 85.19% 87.61% Note: GASB Statement No. 68 requires ten years of information to be presented in this table. However, until a full 10 -year trend is compiled, the City will present information for those years for which information is available. The amounts presented each year are as of the City's measurement date. See notes to required supplementary information. 83 City of Waterloo, Iowa Required Supplementary Information Schedule of City Contributions Iowa Public Employees' Retirement System Contributions in Relation to Contributions Statutorily the Statutorily Contributions City's as a Percentage Required Required Deficiency Covered of Covered Contribution Contribution (Excess) Payroll Payroll 2018 $ 1,614,023 $ 1,614,023 $ 18,074,184 8.93% 2017 1,585,908 1,585,908 17,523,333 9.05 2016 1,564,955 1,564,955 17,523,333 8.93 2015 1,500,510 1,500,510 16,800,363 8.93 2014 1,420,507 1,420,507 15,816,626 8.98 2013 1,358,920 1,358,920 N/A N/A 2012 1,250,399 1,250,399 N/A N/A 2011 1,066,879 1,066,879 N/A N/A 2010 991,202 991,202 N/A N/A 2009 923,462 923,462 N/A N/A N/A - information was not available Note: The amounts reported in this schedule are as of the City's fiscal year-end. See notes to required supplementary information. 84 City of Waterloo, Iowa Notes to Required Supplementary Information—IPERS Pension Liability Year Ended June 30, 2018 Note 1. Changes of benefit terms Legislation passed in 2010 modified benefit terms for current Regular members. The definition of final average salary changed from the highest three to the highest five years of covered wages. The vesting requirement changed from four years of service to seven years. The early retirement reduction increased from 3 percent per year measured from the member's first unreduced retirement age to a 6 percent reduction for each year of retirement before age 65. Note 2. Changes of assumptions The 2017 valuation implemented the following refinements as a result of an experience study dated March 24, 2017: • Decreased the inflation assumption from 3.00 percent to 2.60 percent • Decreased the assumed rate of interest on member accounts from 3.75 percent to 3.50 percent per year. • Decreased the discount rate from 7.5o percent to 7.00 percent. • Decreased the wage growth assumption from 4.00 percent to 3.25 percent. • Decreased the payroll growth assumption 4.00 percent to 3.25 percent. 85 City of Waterloo, Iowa Required Supplementary Information Schedule of the City's Proportionate Share of the Net Pension Liability Municipal Fire and Police Retirement System of Iowa 2018 2017 2016 2015 City's proportion of the net pension liability 5.703286% 5.688362% 5.724535% 5.720520% City's proportionate share of the net pension liability $ 33,448,350 $ 46,723,287 $ 36,408,843 $ 26,777,406 City's covered payroll $ 16,277,606 $ 15,365,321 $ 15,012,366 $ 14,608,497 City's proportionate share of the net pension liability as a percentage of its covered payroll 205.49% 304.08% 242.53% 183.30% Plan fiduciary net position as a percentage of the total pension liability 80.60% 78.20% 83.04% 86.27% Note: GASB Statement No. 68 requires ten years of information to be presented in this table. However, until a full 10 -year trend is compiled, the City will present information for those years for which information is available. The amounts presented each year are as of the City's measurement date. See notes to required supplementary information. 86 City of Waterloo, Iowa Required Supplementary Information Schedule of City Contributions Municipal Fire and Police Retirement System of Iowa Statutorily Required Contribution Contributions in Relation to the Statutorily Required Contribution Contributions Deficiency (Excess) City's Covered Payroll Contributions as a Percentage of Covered Payroll 2018 $ 4,180,091 $ 4,180,091 2017 4,186,850 4,186,850 2016 4,280,766 4,280,766 2015 4,565,261 4,565,261 2014 4,418,650 4,418,650 2013 3,844,363 3,844,363 2012 3,522,615 3,522,615 2011 2,731,277 2,731,277 2010 2,249,021 2,249,021 2009 2,417,019 2,417,019 N/A - information was not available Note: The amounts reported in this schedule are as of the City's fiscal year-end. See notes to required supplementary information. 87 $ 16,277,606 15,365,321 15,365,321 15,012,366 14,608,497 N/A N/A N/A N/A N/A 25.68% 27.25 27.86 30.41 30.25 N/A N/A N/A N/A N/A City of Waterloo, Iowa Notes to Required Supplementary Information—MFPRSI Pension Liability Year Ended June 30, 2018 Note 1. Changes of Benefit Terms There were no significant changes of benefit terms. Note 2. Changes of Assumptions The 2017 valuation added five years projection to future mortality improvement scale BB. City of Waterloo, Iowa Budgetary Comparison Schedule Budget and Actual (Modified Cash Basis)—All Governmental Funds and Proprietary Funds Required Supplementary Information Year Ended June 30, 2018 Budgeted Amounts Original Final Revenues and other financing sources receipts: Receipts: Property taxes $ 39,613,829 $ 39,613,829 Tax increment financing 7,392,285 7,564,285 Other City taxes 17,200,755 17,223,054 Licenses and permits 1,378,050 1,378,050 Use of money and property 1,350,720 1,351,672 Intergovernmental 24,911,213 28,582,650 Charges for services 26,282,079 26,597,058 Special assessments 290,290 290,290 Miscellaneous 6,319,186 7,146,954 Total receipts 124,738,407 129,747,842 Other financing sources: Transfer from other funds Issuance of long-term debt Proceeds from sale of capital assets Total other financing sources Total receipts and other financing sources Disbursements and other financing uses: Governmental -type activities: Public safety Public works Health and social services Culture and recreation Community and economic development General government Debt service Capital projects Business -type activities Total disbursements Other financing uses, transfers to other funds Total disbursements and other financing uses Receipts and other financing sources over (under) disbursements and other financing uses Balances, beginning of year Balances, end of year See note to required supplementary information. 89 16,755,671 16,755,000 20,170,172 20,338,000 33, 510,671 40, 508,172 158,249,078 170, 256, 014 31, 831,064 27,883,662 412,954 11,448,385 12, 651,975 8,047,961 15,162,433 16,749,016 27,749,680 32,118,676 31,431,509 401,891 11, 576,083 13,176,412 9,939,775 18,822,433 25,955,770 27,677,713 151, 937,130 171,100,262 16,755,671 20,170,172 168,692,801 191,270,434 (10,443,723) (21,014,420) 85,254,213 85,254,213 $ 74,810,490 $ 64,239,793 Variance Actual Amounts With Final Budgetary Basis Budget $ 39,611,362 $ (2,467) 7,597,223 32,938 17,237,897 14,843 1,386,326 8,276 2,011,316 659,644 27,134,821 (1,447,829) 26,573,256 (23,802) 223,703 (66,587) 7,621,290 474,336 129,397,194 (350,648) 19,084,246 13,217,566 211,006 (1,085,926) (7,120,434) 211,006 32,512,818 (7,995,354) 161,910,012 (8,346,002) 30,672,609 27,547,712 382,696 10,986,941 10,976,027 8,886,011 18, 814,157 20, 556,180 16,292,521 1,446,067 3,883,797 19,195 589,142 2,200,385 1,053,764 8,276 5,399,590 11, 385,192 145,114,854 25,985,408 19, 084, 246 1,085,926 164,199,100 27,071,334 (2,289,088) 18,725,332 113, 276,163 $ 110,987,075 $ 18,725,332 90 City of Waterloo, Iowa Note to Required Supplementary Information—Budgetary Reporting Year Ended June 30, 2018 In accordance with the Code of Iowa, the City Council annually adopts a budget on a modified cash basis following required public notice and hearing for all funds. The annual budget may be amended during the year utilizing similar statutorily prescribed procedures. Formal and legal budgetary control is based upon 10 major classes of disbursements known as functions, not by fund or fund type. These 10 functions are: public safety, public works, health and social services, culture and recreation, community and economic development, general government, debt service, capital projects, business -type and nonprogram. Although the budget document presents function disbursements by fund type, the legal level of control is at the aggregated function level, not at the fund or fund type level. During the year, a budget amendment was adopted which increased budgeted expenditures by $22,977,633. The budget amendment is reflected in the final budgeted amount. The City uses the same modified cash basis of accounting for budgetary reporting as is used for its internal financial records. Under this basis, cash transactions are modified by certain receivables and payables and by certain noncash revenue and expenditures. In addition, many transactions which could be recorded in and reported by the Sanitary Sewer Enterprise Fund are recorded in and reported by governmental funds. 91 City of Waterloo, Iowa Schedule of Comparison Funds Statements (GAAP Basis) to Budgetary (Modified Cash) Basis Required Supplementary Information Year Ended June 30, 2018 Governmental Fund Types GAAP Basis Actual Amounts Enterprise Fund Types GAAP Basis Actual Amounts Total Funds Revenue/Receipts: Property taxes and TIF revenue Other taxes Licenses and permits Use of money and property Intergovernmental Charges for services Interfund charges for services Special assessments Miscellaneous Total revenue/receipts Expenditures and expenses/disbursements: Public safety Public works Health and social services Culture and recreation Community and economic development General government Debt service Capital projects Business -type activities Total expenditures and expenses/ disbursements $ 47,404,667 $ 17,239,619 1,364,662 2,061,804 20,141, 757 8,088,333 2,255,000 176,382 3,249,040 104,439 310,679 16,924,447 238,223 $ 47,404,667 17,239,619 1,364,662 2,166, 243 20,452,436 25,012,780 2,255,000 176,382 3,487,263 101,981,264 17, 577, 788 119,559,052 30,733,487 22,895,182 365,193 10, 580, 629 10,508,576 8,894,390 13, 851, 022 23,921,255 17,298,580 30,733,487 22, 895,182 365,193 10,580,629 10,508,576 8,894,390 13,851,022 23,921,255 17,298,580 121,749,734 17, 298, 580 139, 048, 314 Net (19,768,470) 279,208 (19,489,262) (Continued) 92 Property Tax Collected for and Budgetary Remitted Other GAAP Basis to MET, Grout Conversion Budgetary Exceptions and Water Works Adjustments Basis 2,118,046 $ (2,314,128) $ 47,208,585 (1,722) 17,237,897 21,664 1,386,326 (154,927) 2,011,316 6,682,385 27,134,821 1,560,476 26,573,256 (2,255,000) - 47,321 223,703 4,134,027 7,621,290 2,118,046 7,720,096 129,397,194 (60,878) 30,672,609 2,118,046 2,534,484 27,547,712 17,503 382,696 406,312 10, 986, 941 467,451 10,976,027 (8,379) 8,886,011 4,963,135 18, 814,157 (3,365,075) 20,556,180 (1,006,059) 16,292,521 2,118,046 3,948,494 145,114,854 3,771,602 (15,717,660) City of Waterloo, Iowa Schedule of Comparison Funds Statements (GAAP Basis) to Budgetary (Modified Cash) Basis (Continued) Required Supplementary Information Year Ended June 30, 2018 Governmental Enterprise Fund Fund Types Basis Types Basis Actual Amounts Actual Amounts Total Funds Other financing sources (uses): Transfers in $ 13,154,342 $ - $ 13,154,342 Transfers out (13,154,342) - (13,154,342) Insurance proceeds 1,112,624 - 1,112,624 Bond premium 118,355 - 118,355 Proceeds from sale of capital assets 206,006 - 206,006 Issuance of long-term debt 9,515,000 - 9,515,000 Total other financing sources (uses) 10,951,985 - 10,951,985 Change in fund balance/net position (8,816,485) 279,208 (8,537,277) Balance, beginning of year 98,591,058 92,273,591 190,864,649 Balance, end of year $ 89,774,573 $ 92,552,799 $ 182,327,372 94 Property Tax Collected for and Budgetary Remitted Other GAAP Basis to MET, Grout Conversion Budgetary Exceptions and Water Works Adjustments Basis - $ $ 5,929,904 $ 19,084,246 - (5,929,904) (19,084,246) - (1,112,624) - - (118,355) - - 5,000 211,006 - 3,702,566 13,217,566 2,476,587 13,428,572 6,248,189 (2,289,088) (77,588,486) 113,276,163 $ $ $ (71,340,297) $ 110,987,075 City of Waterloo, Iowa Required Supplementary Information Schedule of Employer Contributions for Waterloo Water Works Pension Plan Last Nine Fiscal Years 2017 2016 2015 2014 Actuarially determined contribution Contributions in relation to actuarially determined contribution Contribution deficiency (excess) $ 505,125 $ 489,448 $ 475,911 $ 481,861 565,374 550,161 540,043 570,419 (60,249) (60,713) (64,132) (88,558) Covered payroll $ 1,047,371 $ 1,004,723 $ 1,045,603 $ 1,064,651 Contributions as a percentage of covered payroll 54.0% 54.8% 51.6% 53.6% 96 2013 2012 2011 2010 2009 2008 $ 480,199 $ 423,689 $ 383,404 $ 357,677 $ 379,444 $ 281,460 538,658 473,114 445,212 396,550 379,444 505,000 (58,459) (49,425) (61,808) (38,873) (223,540) $ 1,100,185 $ 1,105,893 $ 1,248,200 $ 1,306,209 $ 1,374,782 $ 1,356,797 49.0% 42.8% 35.7% 30.4% 27.6% 37.2% 97 City of Waterloo, Iowa Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios for Waterloo Water Works Pension Plan 2018 2017 Total pension liability Service cost $ 45,849 $ 53,886 Interest 640,457 616,847 Difference between expected and actual experience (45,362) 164,103 Changes in assumptions 225,356 13,141 Benefit payments including refunds (548,118) (541,494) Change in total pension liability 318,182 306,483 Total pension liability, beginning of year 8,233,928 7,927,445 Total pension liability, end of year 8,552,110 8,233,928 Plan fiduciary net position Contributions, employer Contributions, member Net investment income Benefit payments including refunds Change in plan fiduciary net position Plan fiduciary net position, beginning of year Plan fiduciary net position, end of year Net pension liability, end of year 507,287 58,087 821,539 (548,118) 489,448 60,713 281,674 (541,494) 838,795 5,395,710 290,341 5,105,369 6,234,505 5,395,710 $ 2,317,605 $ 2,838,218 Plan fiduciary net position as a % of total pension liability 72.9% 65.5% Covered payroll $ 943,430 $ 1,004,723 Net pension liability as a % of covered payroll 245.7% 282.5% Additional years will be added going forward as information becomes available. 98 City of Waterloo, Iowa Notes to Required Supplementary Information for Waterloo Water Works Pension Plan For the Year Ended December 31, 2017 Note 1: Valuation Date: Actuarially determined contributions rates are calculated as of December 31 of the current fiscal year. Note 2: Methods and assumptions used to determine contribution rates Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation Annual pay increases Investment rate of return Retirement age Mortality rates 99 Entry age cost method Level dollar 20 years Market value of assets 2.50% 3.00% 8.00% 100% at age 62 2018 IRS combined mortality City of Waterloo, Iowa Required Supplementary Information (PERS Schedule of the Waterloo Water Works' Proportionate Share of the Net Pension Liability Measurement Date June 30, 2017 2016 2015 2014 Water Work's proportion of the net pension liability 0.015549% 0.014805% 0.014220% 0.012797% Water Work's total proportionate share of the net pension liability $ 1,035,776 $ 923,262 $ 706,956 $ 524,011 Water Work's covered -employee payroll $ 1,079,261 $ 1,018,040 $ 885,398 $ 791,254 Water Work's proportionate share of the net pension liability as a percentage of its covered -employee payroll 96% 91% 80% 61% IPERS' net position as a percentage of the total pension liability 82.21% 81.82% Additional years will be added going forward as information becomes available. 100 85.19% 87.61% City of Waterloo, Iowa Required Supplementary Information (PERS Schedule of Waterloo Water Works Contributions 2017 2016 2015 2014 Statutorily required contribution $ 111,801 $ 96,378 $ 90,911 $ 79,066 Contributions in relation to the Statutorily required contribution (111,801) (96,378) (90,911) (79,066) Contribution deficiency (excess) $ $ $ $ - Water Work's covered -employee payroll $ 1,251,971 $ 1,079,261 $ 1,018,040 $ 885,398 Contributions as a percentage of covered -employee payroll 8.93% 8.93% 8.93% 8.93% Additional years will be added going forward as information becomes available. 101 2013 2012 2011 2010 $ 70,659 $ 56,189 $ 43,676 $ 35,136 (70,659) (56,189) (43,676) (35,136) $ $ - $ - $ - $ 791,254 $ 648,085 $ 541,214 $ 505,554 8.93% 8.67% 8.07% 6.95% City of Waterloo, Iowa Schedule of Revenues, Expenditures and Changes in Fund Balances General Fund Year Ended June 30, 2018 Revenues: Property taxes $ 20,892,430 Other taxes 7,137,065 Licenses and permits 1,340,458 Investment income 513,942 Rent 976,538 Intergovernmental 993,021 Charges for services 7,753,197 Indirect allocations 2,205,000 Special assessments 176,382 Miscellaneous 1,395,472 Total revenues $ 43,383,505 Expenditures: Public safety function Mayor Black Hawk Emergency Management Agency Contractual services $ 81,344 Total activity and department 81,344 Police department Police operations Compensation and benefits 11,839,289 Contractual services 942,146 Commodities 251,266 Total activity 13,032,701 Police computer services Contractual services Commodities Total activity 79,507 112,761 192,268 Police grants Compensation and benefits 511,736 Contractual services 295 Commodities 45,179 Total activity 557,210 Law enforcement programs Compensation and benefits 67,867 Contractual services 154,590 Commodities 239,245 Total activity 461,702 Tobacco grant Compensation and benefits Total activity (Continued) 103 2,373 2,373 City of Waterloo, Iowa Schedule of Revenues, Expenditures and Changes in Fund Balances (Continued) General Fund Year Ended June 30, 2018 Expenditures (continued): Public safety function (continued) Police department (continued) Public safety administration Compensation and benefits $ 150,976 Total activity 150,976 Total department 14,397,230 Fire department Fire protection Compensation and benefits 8,037,748 Contractual services 461,090 Commodities 82,274 Total activity 8,581,112 Fire restricted programs Compensation and benefits 6,094 Commodities 1,070 Total activity 7,164 Fire ambulance services Compensation and benefits 1,642,600 Contractual services 203,558 Commodities 152,614 Total activity 1,998,772 Fire safety program Compensation and benefits 135,455 Contractual services 30,183 Commodities 896 Total activity 166,534 Fire Federal CDC Grant Compensation and benefits Contractual services Total activity Total department 19,265 3,817 23,082 10,776,664 Building inspection department Building and housing safety Compensation and benefits 1,021,041 Contractual services 37,491 Commodities 32,348 Total activity and department 1,090,880 (Continued) 104 City of Waterloo, Iowa Schedule of Revenues, Expenditures and Changes in Fund Balances (Continued) General Fund Year Ended June 30, 2018 Expenditures: Public safety function (continued) Central garage department Fire - garage parts & service Compensation and benefits $ 84,911 Commodities 82,619 Total activity 167,530 Ambulance - garage parts & service Commodities Total activity Total department 25,081 25,081 192,611 Public safety function totals Current Compensation and benefits 23,519,355 Contractual services 1,994,021 Commodities 1,025,353 Subtotal 26,538,729 Total public safety function $ 26,538,729 Public works function Clerk Sidewalk repair/construction Capital outlay $ 330,806 Total activity and department 330,806 Traffic operations Parking maintenance Compensation and benefits Total activity and department 15,120 15,120 Central garage Central garage Compensation and benefits 670,680 Contractual services 19,689 Commodities 110,068 Total activity 800,437 Motor pool service Commodities Total activity Total department (Continued) 105 614,633 614,633 1,415,070 City of Waterloo, Iowa Schedule of Revenues, Expenditures and Changes in Fund Balances (Continued) General Fund Year Ended June 30, 2018 Expenditures: Public works function (continued) Airport Airport administration Compensation and benefits $ 597,703 Contractual services 266,481 Commodities 83,521 Capital outlay 1,901 Total activity and department 949,606 Airport construction Capital outlay Total activity and department Parking operations Contractual services Commodities Total activity and department 6,111 6,111 477,661 58,842 536,503 Public works function totals Current Compensation and benefits 1,283,503 Contractual services 763,831 Commodities 867,064 Subtotal 2,914,398 Capital outlay 338,818 Total public works function $ 3,253,216 Health and social services function Mayor Health and sanitation Contractual services $ 56,250 Total activity and department 56,250 Human rights department Human rights Compensation and benefits 233,741 Contractual services 14,997 Commodities 3,496 Total activity 252,234 EEOC contract Compensation and benefits Contractual services Total activity Housing enforcement Contractual services Total activity Total department 10,000 33,055 43,055 13,654 13,654 308,943 Health and social services function totals Current Compensation and benefits 243,741 Contractual services 117,956 Commodities 3,496 Total health and social services function $ 365,193 (Continued) 106 City of Waterloo, Iowa Schedule of Revenues, Expenditures and Changes in Fund Balances (Continued) General Fund Year Ended June 30, 2018 Expenditures: Culture and recreation function Mayor Fairview cemetery association Contractual services $ 50,000 Total activity and department 50,000 Cultural/arts Center for the arts Compensation and benefits 569,718 Contractual services 80,521 Commodities 28,971 Total activity 679,210 Youth pavilion Compensation and benefits 342,570 Contractual services 49,034 Commodities 26,436 Total activity 418,040 Culture and arts grants and projects Compensation and benefits 3,686 Contractual services 59,742 Commodities 6,239 Total activity 69,667 Total department 1,166,917 Library Library services Compensation and benefits 1,308,670 Contractual services 148,982 Commodities 223,967 Total activity 1,681,619 Library Enrich Iowa Compensation and benefits 11,804 Contractual services 329 Commodities 25 Total activity 12,158 Library access plus Commodities Total activity Library grants Contractual services Commodities Total activity (Continued) 107 2,999 2,999 23,090 43,456 66,546 City of Waterloo, Iowa Schedule of Revenues, Expenditures and Changes in Fund Balances (Continued) General Fund Year Ended June 30, 2018 Expenditures (continued): Culture and recreation function (continued): Library (continued): Library gift and trust Contractual services $ 10,436 Commodities 30,082 Capital outlay 99 Total activity 40,617 Library service area Commodities Total activity County library system Compensation and benefits Total activity Library open access Contractual services Commodities Total activity Total department 4,041 4,041 58,660 58,660 411 5,341 5,752 1,872,392 Leisure services Leisure services Compensation and benefits 1,837,065 Contractual services 231,896 Commodities 237,354 Total activity 2,306,315 Downtown area maintenance Compensation and benefits 236,025 Contractual services 32,597 Commodities 21,946 Total activity 290,568 Leisure services projects Compensation and benefits 1,000 Contractual services 43,503 Commodities 68,339 Capital outlay 15,671 Total activity 128,513 Golf courses Compensation and benefits 914,479 Contractual services 110,845 Commodities 151,970 Total activity 1,177,294 Golf course improvements Contractual services Total activity (Continued) 108 2,938 2,938 City of Waterloo, Iowa Schedule of Revenues, Expenditures and Changes in Fund Balances (Continued) General Fund Year Ended June 30, 2018 Expenditures (continued): Culture and recreation function (continued): Leisure services (continued) Sports and youth services Compensation and benefits $ 476,235 Contractual services 29,984 Commodities 117,197 Total activity 623,416 Young arena Compensation and benefits 464,035 Contractual services 187,637 Commodities 172,343 Total activity 824,015 Sportsplex Compensation and benefits 783,122 Contractual services 376,340 Commodities 169,811 Total activity 1,329,273 Total department 6,682,332 Culture and recreation function totals Current Compensation and benefits 7,007,069 Contractual services 1,438,285 Commodities 1,310,517 Subtotal 9,755,871 Capital outlay 15,770 Total culture and recreation function $ 9,771,641 Community and economic development function Mayor Iowa northland council of governments Contractual services $ 32,151 Total activity 32,151 Tourism promotion Contractual services Total activity Waterloo Convention & Visitors Bureau, Inc. Contractual services Total activity Total department 244,132 244,132 645,021 645,021 921,304 Planning and zoning Planning and zoning Compensation and benefits 597,030 Contractual services 14,781 Commodities 3,845 Capital outlay 726 Total activity 616,382 City property management Contractual services Total activity (Continued) 109 110,878 110,878 City of Waterloo, Iowa Schedule of Revenues, Expenditures and Changes in Fund Balances (Continued) General Fund Year Ended June 30, 2018 Expenditures (continued): Community and economic development function (continued): Planning and zoning (continued) Economic development Compensation and benefits $ 81,955 Total activity 81,955 Total department 809,215 Building inspection department Five Sullivans Civic Center Compensation and benefits 90,131 Contractual services 27,143 Commodities 8,636 Capital outlay 2,877 Total activity and department 128,787 Community and economic development function totals Current Compensation and benefits 769,116 Contractual services 1,074,106 Commodities 12,481 Subtotal 1,855,703 Capital outlay 3,603 Total community and economic development function $ 1,859,306 General government function Mayor Mayor's office Compensation and benefits $ 251,969 Contractual services 115,183 Commodities 819 Total activity 367,971 Administrative and management information services Compensation and benefits 230,890 Contractual services 114,181 Commodities 38,990 Total activity 384,061 Communication Contractual services Commodities Total activity Total department City council Compensation and benefits Contractual services Total activity and department (Continued) 110 3,942 190 4,132 756,164 68,679 1,636 70,315 City of Waterloo, Iowa Schedule of Revenues, Expenditures and Changes in Fund Balances (Continued) General Fund Year Ended June 30, 2018 Expenditures: General government function (continued): City clerk and finance Telecommunications Compensation and benefits $ 143,883 Contractual services 1,441 Commodities 2,596 Total activity 147,920 City clerk and finance Compensation and benefits 699,311 Contractual services 224,821 Commodities 103,257 Total activity 1,027,389 Liability insurance Compensation and benefits Contractual services Total activity 53,390 1,712,998 1,766,388 Self-funded health/life insurance Compensation and benefits 188 Contractual services 3,147,645 Total activity 3,147,833 Self-funded worker's compensation Contractual services Total activity Print shop Contractual services Total activity Total department 701,101 701,101 32,458 32,458 6,823,089 City attorney City attorney Compensation and benefits 164,674 Contractual services 62,912 Commodities 6,574 Total activity and department 234,160 Human resources Employee assistance program Contractual services Total activity 12,238 12,238 Human resources Compensation and benefits 365,209 Contractual services 55,174 Commodities 2,791 Total activity 423,174 (Continued) 111 City of Waterloo, Iowa Schedule of Revenues, Expenditures and Changes in Fund Balances (Continued) General Fund Year Ended June 30, 2018 Expenditures (continued): General government function (continued): Human resources (continued): Safety committee Contractual services $ 3,333 Commodities 2,398 Total activity 5,731 Total department 441,143 Building inspection department Facilities maintenance Compensation and benefits 260,305 Contractual services 211,531 Commodities 43,770 Total activity 515,606 Facilities restricted project Compensation and benefits 560 Contractual services 264 Commodities 8,017 Total activity 8,841 Veteran's memorial hall Contractual services Total activity Total department 7,202 7,202 531,649 General government function totals Current Compensation and benefits 2,239,058 Contractual services 6,408,060 Commodities 209,402 Total general government function $ 8,856,520 (Continued) 112 City of Waterloo, Iowa Schedule of Revenues, Expenditures and Changes in Fund Balances (Continued) General Fund Year Ended June 30, 2018 Expenditures: Public safety Public works Health and social services Culture and recreation Community and economic development General government $ 26,538,729 3,253,216 365,193 9,771,641 1,859,306 8,856,520 Total expenditures $ 50,644,605 Revenue under expenditures $ (7,261,100) Other financing sources (uses): Transfers in Transfers out Insurance proceeds Proceeds from sale of capital assets Total other financing sources Net change in fund balance Fund balance, beginning of year Fund balance, end of year 113 6,221,395 (160,806) 1,112,624 151,006 7,324,219 63,119 23,720,432 $ 23,783,551 City of Waterloo, Iowa Combining Balance Sheet Nonmajor Governmental Funds June 30, 2018 Special Revenue Capital Projects Total Assets Cash and cash equivalents $ 11,580,364 $ 22,088,829 $ 33,669,193 Receivables: Customer accounts 13,064 224,345 237,409 Property taxes: Delinquent 4,439 - 4,439 Succeeding year 590,182 - 590,182 Accrued interest 95,365 51,712 147,077 Due from other governments: Federal 1,457,661 - 1,457,661 Iowa 3,249,566 3,249,566 Other 65,487 - 65,487 Inventories and prepaids 10,924 - 10,924 Restricted assets, cash and cash equivalents 2,459,188 - 2,459,188 Advances to other funds 21,423 - 21,423 Total assets Liabilities, Deferred Inflows of Resources and Fund Balances $ 19,547,663 $ 22,364,886 $ 41,912,549 Liabilities: Accounts payable $ 1,650,097 $ 1,514,561 $ 3,164,658 Retainages payable 542,529 104,171 646,700 Accrued liabilities 100,095 100,095 Due to other funds 1,393,600 1,478,135 2,871,735 Compensated absences 4,661 - 4,661 Payable from restricted assets 57,140 57,140 Unearned revenue 264,577 - 264,577 Total liabilities 4,012,699 3,096,867 7,109,566 Deferred inflows of resources: Unavailable revenue -property taxes 594,621 - 594,621 Unavailable revenue -local option sales tax 585,000 - 585,000 Unavailable revenue -intergovernmental 1,878,302 85,770 1,964,072 Total deferred inflows of resources 3,057,923 85,770 3,143,693 Fund Balances: Nonspendable Restricted Assigned Unassigned Total fund balances 10,924 11,811,969 2,025,208 (1,371,060) 20,902,906 (1,720,657) 10,924 32,714,875 2,025,208 (3,091,717) 12,477,041 19,182,249 31,659,290 Total liabilities, deferred inflows of resources and fund balances $ 19,547,663 $ 22,364,886 $ 41,912,549 114 City of Waterloo, Iowa Combining Schedule of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds Year Ended June 30, 2018 Special Revenue Capital Projects Total Revenues: Property taxes $ 619,658 $ - $ 619,658 Other taxes 9,440,357 - 9,440,357 Investment income 74,971 166,729 241,700 Rent 184,310 - 184,310 Intergovernmental 10,510,920 - 10,510,920 Charges for services 208,747 - 208,747 Miscellaneous 11,831 1,342,887 1,354,718 Total revenues 21,050,794 1,509,616 22,560,410 Expenditures: Current: Public safety 4,869 - 4,869 Public works 11,970,830 - 11,970,830 Culture and recreation 808,988 - 808,988 Community and economic development 7,390,129 - 7,390,129 Debt service, interest and fees - 169,560 169,560 Capital outlay - 20,606,618 20,606,618 Total expenditures 20,174,816 20,776,178 40,950,994 Revenues over (under) expenditures 875,978 (19,266,562) (18,390,584) Other financing sources (uses): Transfers in - 3,386,733 3,386,733 Bond premium - 84,558 84,558 Issuance of long-term debt - 8,090,000 8,090,000 Proceeds from the sale of capital assets 55,000 - 55,000 Total other financing sources (uses) 55,000 11,561,291 11,616,291 Net change in fund balance 930,978 (7,705,271) (6,774,293) Fund balance, beginning of year 11,546,063 26,887,520 38,433,583 Fund balance, end of year $ 12,477,041 $ 19,182,249 $ 31,659,290 115 City of Waterloo, Iowa Nonmajor Special Revenue Funds June 30, 2018 Special Revenue Funds account for the proceeds of specific revenue sources that are legally or contractually restricted for particular purposes. The proceeds are segregated into individual funds to ensure that expenditures are made exclusively for qualified purposes, as follows: Nonmajor: Local Option Tax Fund: This fund is used to account for resources provided from a 1 percent sales tax approved by the citizens of Waterloo which is restricted for the construction, reconstruction and repair of City streets. Library Tax Levy Fund: This fund is used to account for property taxes levied, as passed by local referendum, to be used to increase the hours of operation of the Waterloo Public Library. Community Development Block Grant Fund: This fund accounts for revenue received under the Community Development Block Grant federal entitlement. Housing Programs Fund: This fund is used to account for resources received to provide housing assistance, primarily Federal Section 8 and Ridgeway Towers. Grants Fund: This fund is used to account for resources received for various federal and Iowa funded projects which are not accounted for elsewhere and are restricted to specific programs. Federal Aviation Agency Projects Fund: This fund is used to account for resources from the Federal Aviation Agency and Passenger Facility Charges restricted for airport development. 116 City of Waterloo, Iowa Combining Balance Sheet Nonmajor Special Revenue Funds June 30, 2018 Community Local Option Library Development Sales Tax Tax Levy Block Grant Assets Cash and cash equivalents $ 8,784,125 $ 383,813 $ 700 Receivables: Customer accounts Property taxes: Delinquent - 4,439 Succeeding year - 590,182 Accrued interest 9,454 788 13,869 Due from other governments: Federal - 480,465 Iowa 1,422,736 Other 58,859 6,188 Inventories and prepaids - Restricted cash and cash equivalents - Advances to other funds 13,598 7,825 Total assets Liabilities, Deferred Inflows of Resources and Fund Balances (Deficit) $ 10,288,772 $ 993,235 $ 495,034 Liabilities: Accounts payable $ 482,448 $ $ 80,026 Retainages payable 396,296 8,062 Accrued liabilities 39,367 21,368 20,105 Due to other funds - 373,676 Compensated absences 2,159 Payable from restricted assets Unearned revenue - Total liabilities 918,111 23,527 481,869 Deferred inflows of resources: Unavailable revenue - property taxes Unavailable revenue - local option sales tax Unavailable revenue - intergovernmental Total deferred inflows of resources 594,621 585,000 30,659 192,570 615,659 594,621 192,570 Fund balances (deficit): Nonspendable - Restricted 6,814,180 290,701 Assigned 1,940,822 84,386 Unassigned - (179,405) Total fund balances (deficit) 8,755,002 375,087 (179,405) Total liabilities, deferred inflows of resources and fund balances (deficit) $ 10,288,772 $ 993,235 $ 495,034 117 Special Revenue Federal Aviation Housing Programs Grants Agency Projects Total $ 2,411,726 $ $ $ 11,580,364 13,064 13,064 - - 4,439 - - 590,182 11,254 60,000 - 95,365 26,507 18,118 932,571 1,457,661 - 1,793,923 32,907 3,249,566 - 440 65,487 10,924 - - 10,924 2,165,465 - 293,723 2,459,188 - 21,423 $ 4,638,940 $ 1,872,041 $ 1,259,641 $ 19,547,663 60,546 $ 134,284 $ 892,793 $ 1,650,097 - 34,036 104,135 542,529 18,854 401 - 100,095 - 943,074 76,850 1,393,600 2,502 - 4,661 57,140 57,140 - 264,577 - 264,577 139,042 1,376,372 1,073,778 4,012,699 - - 594,621 - - 585,000 6,302 1,547,589 101,182 1,878,302 6,302 1,547,589 101,182 3,057,923 10,924 4,482,672 224,416 (1,051,920) (139,735) 10,924 11,811,969 2,025,208 (1,371,060) 4,493,596 (1,051,920) 84,681 12,477,041 $ 4,638,940 $ 1,872,041 $ 1,259,641 $ 19,547,663 118 City of Waterloo, Iowa Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) Nonmajor Special Revenue Funds Year Ended June 30, 2018 Community Local Option Library Development Sales Tax Tax Levy Block Grant Revenues: Property taxes $ - $ 619,658 $ Other taxes 9,416,283 24,074 Investment income 50,382 2,655 Rent - Intergovernmental - 1,782,053 Charges for services - 53,597 Miscellaneous - 10,049 Total revenues 9,466,665 646,387 1,845,699 Expenditures: Current: Public safety Public works Culture and recreation Community and economic development Total expenditures 8,891,295 556,989 1,881,248 8,891,295 556,989 1,881,248 Excess of revenues over expenditures 575,370 Other financing sources (uses): Transfers in Proceed from the sale of capital assets Total other financing sources (uses) 89,398 (35,549) Change in fund balance (deficit) 575,370 89,398 (35,549) Fund balances (deficit), beginning of year 8,179,632 285,689 (143,856) Fund balances (deficit), end of year $ 8,755,002 $ 375,087 $ (179,405) 119 Special Revenue Federal Aviation Housing Programs Grants Agency Projects Total $ - $ $ - $ 619,658 - - 9,440,357 20,476 1,458 74,971 184,310 184,310 5,268,621 1,255,510 2,204,736 10,510,920 51,609 103,541 208,747 1,782 - 11,831 5,526,798 1,255,510 2,309,735 21,050,794 4,869 508,429 251,999 5,398,937 109,944 2,571,106 4,869 11, 970, 830 808,988 7,390,129 5,398,937 875,241 2,571,106 20,174,816 127,861 380,269 (261,371) 875,978 55,000 55,000 55,000 - 55,000 127,861 435,269 4,365,735 (1,487,189) (261,371) 930,978 346,052 11,546,063 $ 4,493,596 $ (1,051,920) $ 84,681 $ 12,477,041 City of Waterloo, Iowa Capital Projects Funds June 30, 2018 Capital Projects Funds account for the City's financial resources used for the acquisition or construction of major nonproprietary capital facilities. The City of Waterloo has capital projects funds as follows: Nonmajor: June 2012 GO Bonds Fund: This fund is used to account for proceeds bond sale until expended for the restricted purpose. June 2013 GO Bonds Fund: This fund is used to account for proceeds bond sale until expended for the restricted purpose. June 2014 GO Bonds Fund: This fund is used to account for proceeds bond sale until expended for the restricted purpose. June 2015 GO Bonds Fund: This fund is used to account for proceeds bond sale until expended for the restricted purpose. June 2016 GO Bonds Fund: This fund is used to account for proceeds bond sale until expended for the restricted purpose. June 2017 GO Bonds Fund: This fund is used to account for proceeds bond sale until expended for the restricted purpose. June 2018 GO Bonds Fund: This fund is used to account for proceeds bond sale until expended for the restricted purpose. from the 2012 general obligation from the 2013 general obligation from the 2014 general obligation from the 2015 general obligation from the 2016 general obligation from the 2017 general obligation from the 2018 general obligation Capital Improvements Funds: This fund is used to account for the use of resources on governmental capital projects not accounted for in other capital projects funds and are restricted for specific projects. 121 City of Waterloo, Iowa Combining Balance Sheet Capital Projects Funds June 30, 2018 June 2013 GO Bonds June 2014 GO Bonds June 2015 GO Bonds Assets Cash and cash equivalents $ 978,350 $ 492,719 $ 1,789,209 Receivables, customer accounts - - Accrued interest 2,756 1,333 4,948 Total assets Liabilities, Deferred Inflows of Resources and Fund Balances (Deficit) $ 981,106 $ 494,052 $ 1,794,157 Liabilities: Accounts payable $ 101,324 $ 186,063 $ 590,094 Retainages payable 2,236 Due to other funds - Total liabilities 103,560 186,063 590,094 Deferred inflows of resources, unavailable revenue—intergovernmental Fund balances (deficit): Restricted Unassigned Total fund balances (deficit) 877,546 307,989 1,204,063 877,546 307,989 1,204,063 Total liabilities, deferred inflows of resources and fund balances (deficit) $ 981,106 $ 494,052 $ 1,794,157 122 June 2016 GO Bonds June 2017 GO Bonds June 2018 Capital GO Bonds Improvements Total $ 4,111,257 $ 6,630,064 $ 8,087,230 $ - $ 22,088,829 224,345 224,345 9,519 13,347 19,809 - 51,712 $ 4,120,776 $ 6,643,411 $ 8,107,039 $ 224,345 $ 22,364,886 $ 182,454 $ 113,222 $ 68,019 $ 273,385 $ 1,514,561 23,023 20,257 - 58,655 104,171 - - - 1,478,135 1,478,135 205,477 133,479 68,019 1,810,175 3,096,867 - - 85,770 85,770 3,915,299 6,509,932 8,039,020 49,057 20,902,906 - (1,720,657) (1,720,657) 3,915,299 6,509,932 8,039,020 (1,671,600) 19,182,249 $ 4,120,776 $ 6,643,411 $ 8,107,039 $ 224,345 $ 22,364,886 City of Waterloo, Iowa Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) Capital Projects Funds Year Ended June 30, 2018 June 2012 GO Bonds June 2013 GO Bonds June 2014 GO Bonds Revenues: Investment income Miscellaneous Total revenues Expenditures: Debt service, interest expense Capital outlay Total expenditures 5,083 $ 9,705 $ 5,636 5,083 9,705 5,636 130 2,479 7,000 1,019,336 214,620 590,630 1,019,466 217,099 597,630 Revenues over (under) expenditures (1,014,383) (207,394) (591,994) Other financing sources (uses): Transfers in - Bond premium - Issuance of long-term debt - Total other financing sources (uses) - Net change in fund balances (deficit) (1,014,383) (207,394) (591,994) Fund balances (deficit), beginning of year 1,014,383 1,084,940 899,983 Fund balances (deficit), end of year $ - $ 877,546 $ 307,989 124 June 2015 June 2016 June 2017 June 2018 Capital GO Bonds GO Bonds GO Bonds GO Bonds Improvements Total $ 18,464 $ 39,210 $ 64,239 $ 24,392 $ $ 166,729 - - - 1,342,887 1,342,887 18,464 39,210 64,239 24,392 1,342,887 1,509,616 - - 21 159,930 169,560 1,681,057 1,731,257 10,796,234 - 4,573,484 20,606,618 1,681,057 1,731,257 10,796,255 159,930 4,573,484 20,776,178 (1,662,593) (1,692,047) (10,732,016) (135,538) (3,230,597) (19,266,562) - 3,386,733 3,386,733 - 84,558 84,558 - 8,090,000 8,090,000 - - - 8,174,558 3,386,733 11,561,291 (1,662,593) (1,692,047) (10,732,016) 8,039,020 156,136 (7,705,271) 2,866,656 5,607,346 17,241,948 (1,827,736) 26,887,520 $ 1,204,063 $ 3,915,299 $ 6,509,932 $ 8,039,020 $ (1,671,600) $ 19,182,249 125 City of Waterloo, Iowa Fiduciary Funds June 30, 2018 Fiduciary Funds account for assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, other governmental units and/or other funds. The City of Waterloo has the following fiduciary fund: Agency Fund: This fund is used to account for property taxes collected on behalf of the Metropolitan Transit Agency, Grout Museum District, Water Works kill water assessments and building permits passed through to Black Hawk County. 126 City of Waterloo, Iowa Statement of Changes in Assets and Liabilities Agency Fund Year Ended June 30, 2018 Balance Balance June 30, June 30, 2017 Additions Deletions 2018 Assets, cash $ - $ 2,118,046 $ 2,118,046 $ Liabilities, due to private entities $ - $ 2,118,046 $ 2,118,046 $ 127 City of Waterloo, Iowa Statistical Section This part of the City of Waterloo's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the City's most significant local revenue source, the property tax. Debt Capacity 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 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the city provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The city implemented GASB Statement 34 in fiscal 2003; therefore, schedules presenting government -wide information include information beginning in that year. 128 129 134 138 143 145 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 City of Waterloo, Iowa Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) 2009 $ 216,863,066 32,652,537 4,738,557 $ 254,254,160 2010 $ 233,853,135 36,648,414 3,591, 308 $ 274,092,857 2011 $ 243,084,776 28,098,845 9,823,688 $ 281,007,309 2012 2013 2014 2015 $ 250,819,314 $ 264,695,106 $ 273,871,470 $ 307,415,275 31,552,558 30,823,956 30,579,471 30,438,501 9,694,131 7,214,587 8,998,045 (31,681,588) $ 292,066,003 $ 302,733,649 $ 313,448,986 $ 306,172,188 $ 65,420,051 $ 66,494,749 $ 67,576,579 $ 71,243,134 3,171,308 3,178,807 3,170,694 1,655,694 9,440,050 10, 719, 450 13, 086, 820 14, 659, 699 $ 74,508,694 1,383,659 14,202,857 $ 78,031,409 $ 80,393,006 $ 83,834,093 $ 87,558,527 $ 90,095,210 $ 282,283,117 35,823,845 14,178,607 Total primary government net position $ 332,285,569 $ 300,347,884 39,827,221 14,310,758 $ 354,485,863 $ 310,661,355 31,269,539 22,910,508 $ 364,841,402 2016 $ 316,701,068 20,032,995 (23,683,497) $ 313,050,566 2017 $ 306,360,558 55,182,022 (31,089,693) $ 330,452,887 2018 $ 313,405,227 52,436,491 (40,527,523) $ 325,314,195 $ 79,920,865 $ 78,270,214 $ 79,522,665 $ 79,180,253 $ 82,504,631 1,310,099 727,235 672,515 672,515 672,515 11,445,832 11,638,646 12,025,408 14,478,547 9,375,653 $ 92,676,796 $ 90,636,095 $ 92,220,588 $ 94,331,315 $ 92,552,799 $ 322,062,448 $ 339,203,800 $ 353,792,335 $ 385,685,489 $ 396,223,733 33,208,252 32,207,615 31,889,570 31,165,736 20,705,510 24,353,830 21,417,444 20,443,877 (20,042,942) (11,658,089) $ 379,624,530 $ 392,828,859 $ 406,125,782 $ 396,808,283 $ 405,271,154 129 $ 385,540,811 55,854,537 (16,611,146) $ 424,784,202 $ 395,909,858 53,109,006 (31,151,870) $ 417,866,994 City of Waterloo, Iowa Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (Page 1 of 2) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Expenses Governmental activities: Public safety $ 26,719,053 $ 28,612,482 $ 29,629,282 $ 30,037,249 $ 31,913,280 $ 31,773,269 $ 25,988,767 $ 34,120,160 $ 33,735,948 $ 20,828,929 Public works 22,435,723 22,839,814 23,276,707 23,297,561 24,938,888 28,911,525 29,570,277 29,670,192 35,579,527 34,150,050 Health and social services 260,584 244,594 257,618 278,589 299,282 368,173 325,607 295,088 381,203 369,832 Culture and recreation 9,512,453 9,951,066 10,080,005 10,515,120 10,491,266 11,315,704 11,676,287 11,950,688 15,012,599 12,667,184 Community and economic development 13,520,082 15,138,776 16,675,218 16,138,333 14,129,616 12,910,299 13,190,672 13,753,669 12,860,289 17,417,572 General government 5,150,029 4,548,726 4,860,959 4,219,355 3,714,993 2,749,672 4,869,696 5,247,593 10,421,434 10,174,531 Interest on long-term debt 2,880,205 2,736,194 2,639,047 2,459,710 2,680,614 2,349,054 2,208,744 2,048,517 2,175,284 2,385,499 Total governmental activities expenses 80,478,129 84,071,652 87,418,836 86,945,917 88,167,939 90,377,696 87,830,050 97,085,907 110,166,284 97,993,597 Business -type activities: Sanitary sewer 8,573,832 8,682,068 10,437,723 9,730,465 10,033,041 9,811,929 12,518,569 14,018,836 13,635,403 13,107,645 Sanitation 3,593,300 3,873,028 3,408,358 3,680,500 3,640,314 3,215,663 3,612,307 3,921,263 4,050,778 4,166,465 Total business -type activities expenses 12,167,132 12,555,096 13,846,081 13,410,965 13,673,355 13,027,592 16,130,876 17,940,099 17,686,181 17,274,110 Total primary government expenses $ 92,645,261 $ 96,626,748 $ 101,264,917 $ 100,356,882 $ 101,841,294 $ 103,405,288 $ 103,960,926 $ 115,026,006 $ 127,852,465 $ 115,267,707 Program Revenue Governmental activities: Charges for services: Public safety $ 3,143,136 $ 3,331,924 $ 3,874,275 $ 3,602,246 $ 3,683,489 $ 3,800,273 $ 4,018,731 $ 4,325,957 $ 4,231,224 $ 4,410,854 Public works 1,894,200 1,887,850 1,984,786 2,224,870 2,192,414 2,802,925 2,498,057 1,284,289 2,474,497 3,641,744 Culture and recreation 2,441,457 2,337,191 2,339,044 2,592,204 2,492,426 3,010,899 3,361,891 3,645,647 3,538,243 3,503,643 Other activities 1,139,772 1,125,370 1,229,991 1,268,316 1,489,631 1,531,761 1,667,019 769,733 1,574,497 1,284,986 Operating grants and contributions 16,803,356 18,592,551 16,376,376 16,603,449 14,967,188 11,938,221 11,335,064 18,581,010 13,138,910 11,617,786 Capital grants and contributions 13,787,329 14,938,736 9,832,416 10,720,735 9,364,734 12,668,122 39,116,737 9,065,137 35,704,168 12,757,084 Total governmental activities program revenue 39,209,250 42,213,622 35,636,888 37,011,820 34,189,882 35,752,201 61,997,499 37,671,773 60,661,539 37,216,097 Business -type activities: Charges for services: Sanitary sewer 9,628,876 11,185,490 13,283,908 13,147,754 12,285,502 12,845,301 12,661,602 14,277,752 15,235,503 13,208,176 Sanitation 3,349,978 3,398,533 3,446,332 3,572,238 3,615,787 3,609,500 3,585,270 3,650,271 3,820,281 3,738,070 Operating grants and contributions: Sanitary sewer 339,496 125,802 54,041 - 24,236 1,892 206,145 37,055 Sanitation 274,988 314,940 399,000 215,584 273,869 272,755 274,324 273,624 290,513 273,624 Capital grants and contributions: Sanitary sewer 106,200 81,302 82,443 1,271,776 192,977 145,656 Sanitation 3,000 - 560 13,585 - - - Total business -type activities program revenue 13,702,538 14,898,963 17,336,344 17,072,620 16,188,743 16,727,556 16,545,432 19,475,315 19,745,419 17,402,581 Total primary government program revenue $ 52,911,788 $ 57,112,585 $ 52,973,232 $ 54,084,440 $ 50,378,625 $ 52,479,757 $ 78,542,931 $ 57,147,088 $ 80,406,958 $ 54,618,678 Net (Expense)/Revenue Governmental activities Business -type activities $ (41,268,879) $ (41,858,030) $ (51,781,948) $ (49,934,097) $ (53,978,057) $ (54,625,495) $ (25,832,551) $ (59,414,134) $ (49,504,745) $ (60,777,500) 1,535,406 2,343,867 3,490,263 3,661,655 2,515,388 3,699,964 414,556 1,535,216 2,059,238 128,471 Total primary government net expense $ (39,733,473) $ (39,514,163) $ (48,291,685) $ (46,272,442) $ (51,462,669) $ (50,925,531) $ (25,417,995) $ (57,878,918) $ (47,445,507) $ (60,649,029) 130 General Revenue and Other Changes in Net Position Governmental activities: Taxes: Property taxes Other taxes Investment earnings Miscellaneous Gain on sale of assets Transfers Total governmental activities Business -type activities: Investment earnings Gain (loss) on sale of assets Transfers Total business -type activities Total primary government Changes in Net Position Governmental activities Business -type activities Total primary government City of Waterloo, Iowa Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (Page 2 of 2) 2009 $ 38,776,426 14,208,362 426,353 6,556,363 2010 $ 40,497,163 13,911,219 170,946 5,189,217 1,827,508 2011 2012 2013 $ 41,028,851 $ 42,822,680 $ 45,536,650 14,566,088 14,844,322 15,142,297 152,078 54,485 45,578 2,879,152 3,315,471 3,925,918 70,231 (44,167) (4,740) 59,967,504 61,596,053 58,696,400 60,992,791 64,645,703 85,352 85,352 $ 60,052,856 17,730 17,730 $ 61,613,783 2014 $ 44,585,915 16,745,434 117,515 2,748,468 2015 $ 45,514,979 17,471,721 180,123 1,108,633 (2,035) 2016 $ 46,327,997 17,554,079 187,046 2,034,957 188,433 2017 $ 46,530,686 17,260,380 339,895 2,741,240 34,865 2018 $ 47,404,667 17,239,619 842,018 4,592,600 64,197,332 64,273,421 66,292,512 66,907,066 70,078,904 21,055 18,612 16,555 25,122 39,714 49,277 51,489 104,439 - 1,711 - - 46,298 (70,231) 44,167 4,740 2,035 - (49,176) 62,779 21,295 25,122 43,460 49,277 51,489 150,737 $ 58,647,224 $ 61,055,570 $ 64,666,998 $ 64,222,454 $ 64,316,881 $ 66,341,789 $ 66,958,555 $ 70,229,641 $ 18,698,625 $ 19,738,023 $ 6,914,452 $ 11,058,694 $ 10,667,646 $ 10,715,337 $ 38,440,870 $ 6,878,378 $ 17,402,321 $ 9,301,404 1,620,758 2,361,597 3,441,087 3,724,434 2,536,683 2,581,586 458,016 1,584,493 2,110,727 279,208 $ 20,319,383 $ 22,099,620 $ 10,355,539 $ 14,783,128 $ 13,204,329 $ 13,296,923 $ 38,898,886 $ 8,462,871 $ 19,513,048 $ 9,580,612 131 General Fund Nonspendable Restricted Committed Assigned Unassigned Reserved Unreserved: Designated Undesignated Total general fund All Other Governmental Funds Nonspendable Restricted Assigned Unassigned Reserved Undesignated, reported in: Special revenue funds Debt service funds Capital project funds Total all other governmental funds City of Waterloo, Iowa Fund Balances - Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 2009 2,367,516 2010 3,064,085 4,720,531 5,077,047 8,152,625 8,610,737 2011 $ 310,432 3,602,691 662,415 4,878,877 8,417,600 2012 2013 $ 326,276 $ 322,077 3,438,392 5,497,065 4,802,837 9,644,699 2014 2015 $ 392,741 $ 323,781 8,667,499 9,109,347 36,595 - 5,318,721 4,430,460 4,848,307 8,907,668 10,184,876 10,224,959 2016 2017 $ 267,413 $ 197,324 10,390,434 8,565,653 5,007,033 9,836,132 5,410,593 9,546,862 2018 $ 528,775 7,839,825 33,004 5,902,856 9,479,091 $ 15,240,672 $ 16,751,869 $ 17,872,015 $ 18,212,204 $ 20,045,531 $ 23,712,171 $ 24,506,394 $ 25,501,012 $ 23,720,432 $ 23,783,551 2,923,228 2,786,146 17, 918, 742 16, 410, 755 14,259,781 12,144,579 $ 208,100 39,357,168 2,322,606 (5,150,315) $ 297,516 42,286,946 2,332,997 (7,161,884) $ 233,192 42,907,706 2,370,221 (4,608,778) $ 466,165 28,709,385 80,148 (1,929,863) $ 298,880 38,887,421 2,396,279 (5,711,850) $ 290,117 $ 261,770 47,673,892 75,498,203 2,424,601 2,458,279 (4,495,025) (3,347,626) $ 131,211 66,401,834 2,549,694 (3,091,717) $ 35,101,751 $ 31,341,480 $ 36,737,559 $ 37,755,575 $ 40,902,341 $ 27,325,835 $ 35,870,730 $ 45,893,585 $ 74,870,626 $ 65,991,022 GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, implemented in fiscal year 2011. 132 Revenue Property taxes Other taxes Licenses and permits Investment income Rent* Intergovernmental Charges for services* Interfund charges for service Special assessments Miscellaneous Total revenue Expenditures Current: Public safety Public works Health and social services Culture and recreation Community and economic development General government Debt service Principal Interest and fees Bond Issuance Costs** Capital projects Total expenditures Revenue over (under) expenditures Other financing sources (uses) Transfers in Transfers out Insurance proceeds Proceeds from sale of assets Refunding bonds issued Payment to refunded bond escrow agent Proceeds from debt issued Bond discounts and premiums Total other financing sources (uses) Net change in fund balances Debt service as a percentage of noncapital expenditures City of Waterloo, Iowa Changes in Fund Balances - Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 2009 $ 38,789,695 14,368,254 977,306 426,353 1,060,566 22,932,392 5,963,660 2,808,833 37,216 6,043,260 93,407,535 2010 $ 40,454,704 13,982,362 996,031 170,946 1,060,889 30,681,962 5,932,437 2,385,680 225,198 3,773,963 2011 $ 41,013,565 14,703,052 1,236,912 152,078 1,094,271 30,092,432 6,397,007 2,134,553 47,171 3,292,228 99,664,172 100,163,269 2012 42,864,091 15,460,718 1,119,886 54,485 1,186,419 25,596,988 6,748,285 1,935,000 93,870 3,702,763 2013 $ 45,485,229 14,683,459 1,128,513 45,578 1,191,376 27,797,797 6,512,462 1,935,000 124,467 4,503,173 98, 762, 505 103, 407, 054 25,941,016 26,947,910 27,686,410 29,272,717 23,846,845 27,635,226 19,761,835 25,565,737 333,706 316,974 325,730 346,952 8,844,296 9,264,689 8,960,633 9,396,914 13,954,851 17,423, 767 15, 740,405 13, 794,104 5,532,557 5,097,361 5,623,650 4,956,104 7,698,818 8,783,299 9,565,662 8,623,207 2,975,411 2,799,830 2,623,038 2,536,705 16,639,618 15,126,719 11,792,357 14,140,916 105, 767,118 113, 395, 775 102, 079, 720 108, 633, 356 (12,359,583) (13,731,603) (1,916,451) (9,870,851) 15,295,255 14,434,303 13,368,149 14,206,860 (15,295,255) (14,434,303) (13,297,918) (14,206,860) 1,421,521 1,734,450 138,157 19,968 74,294 2,243,301 221,807 - 4,271,100 4,240,000 5,500,000 4,200,000 (4,200,992) (4,172,380) (5,586,483) - 9,400,000 7,500,000 7,735,081 6,740,000 (40,080) (62,842) 353,883 269,088 10,925,843 11,482,529 8,432,676 11,229,056 $ (1,433,740) $ (2,249,074) $ 6,516,225 $ 1,358,205 2014 2015 $ 44,623,905 $ 45,440,607 16, 946, 689 17, 599, 304 1,350,599 1,413,739 117,515 183,938 1,263,682 1,293,559 23,425,271 28, 647,425 6,894,308 7,371,370 1,935,000 1,935,000 139,408 127,266 3,425,567 2,760,949 100,121,944 106,773,157 2016 $ 46,259,411 17,309,079 1,491,131 187,047 1,235,525 26,670,622 8,142,707 1,935,000 138,434 2,032,729 105,401,685 2017 2018 $ 46,530,686 $ 47,404,667 17, 541, 380 17, 239, 619 1,543,716 1,364,662 339,895 842,018 1,257,433 1,219,786 43,647,665 20,141,757 8,025,850 8,088,333 2,185,000 2,255,000 133,943 176,382 1,765,900 3,249,040 122,971,468 101,981,264 30,517,147 30,865,364 30,588,630 31,380,988 30,518,380 30,733,487 26,286,055 29,009,814 34,515,685 26,664,570 19,526,031 22,895,182 370,275 365,847 407,060 375,769 379,958 365,193 9,134, 554 9,835,758 10, 633, 238 10, 837, 983 10, 616, 332 10, 580, 629 13,555,391 12,966,402 11, 783,311 13,483,447 12,265,460 10,508,576 3,980,405 2,468,932 5,459,817 5,671,640 10,042,300 8,894,390 8,708,554 8,886,944 9,659,890 11,314,503 9,698,561 11,336,261 2,276,310 2,150,525 2,023,366 2,169,997 2,268,663 2,514,761 100,798 149,580 - - 9,646,195 14,033,868 11,855,746 12,835,209 19,625,850 23,921,255 104,575,684 110,733,034 116,926,743 114,734,106 114,941,535 121,749,734 (1,168,630) (10,611,090) (10,153,586) (9,332,421) 8,029,933 (19,768,470) 12,765,878 11,006,208 10,276,970 14,882,427 11,857,853 13,154,342 (12,765,878) (11,006,208) (10,276,970) (14,882,427) (11,857,853) (13,154,342) 173,397 356,454 1,400 766,470 1,624,380 1,112,624 71,014 47,937 (6,168) 335,618 95,564 206,006 2,630,000 8,670,000 - - - 1,425,000 (6,744,723) (8,806,014) - - (2,040,000) - 9,900,348 11, 595, 000 8,000,000 19,140, 000 19, 210, 000 8,090,000 118,687 205,713 129,606 107,806 276,585 118,355 6,148,723 12,069,090 8,124,838 20,349,894 19,166,529 10,951,985 $ 4,980,093 $ 1,458,000 $ (2,028,748) $ 11,017,473 $ 27,196,462 $ (8,816,485) 12.0% 11.8% 13.5% 11.8% 13.2% 12.3% 13.2% 13.2% 12.6% 14.2% * For the fiscal years ended June 30, 2003 and 2004, some rents were included in charges for services and miscellaneous revenue on the Statement of Activities. They have been reclassified to rent on this schedule. **For the fiscal years prior to June 30, 2013, bond issuance costs were included with interest and fees 133 City of Waterloo, Iowa Assessed and Taxable Value of Property Last Ten Fiscal Years For Fiscal Less: Total Taxable Assessment Year Military Total Taxable Total Total Value as a Date Ended Residential Commercial Industrial TIF Other Tax -Exempt Assessed Direct Assessed Percentage of January 1, June 30, Property Property Property Property Property Property Value Tax Rate Value Assessed Value 2007 2009 1,021,046,822 766,647,219 98,127,515 125,534,846 109,339,414 7,908,493 2,112,787,323 18.36687 3,447,851,253 61.28% 2008 2010 1,080,004,413 787,580,318 99,231,835 134,668,232 110,644,404 7,754,888 2,204,374,314 18.30689 3,542,643,298 62.22% 2009 2011 1,119,328,144 786,637,586 99,943,010 136,188,661 106,874,812 7,498,605 2,241,473,608 18.26406 3,566,368,445 62.85% 2010 2012 1,166,201,221 781,318,790 100,090,080 150,383,839 111,996,683 7,253,351 2,302,737,262 18.53335 3,747,030,046 61.45% 2011 2013 1,251,445,651 813,065,056 121,443,090 179,551,015 111,367,841 6,985,742 2,469,886,911 18.20505 3,738,165,467 66.07% 2012 2014 1,316,533,993 800,057,810 122,324,860 183,333,664 111,068,231 6,742,623 2,526,575,935 17.49319 3,762,106,346 67.16% 2013 2015 1,303,730,888 717,175,119 112,118,499 207,637,570 112,027,732 6,558,362 2,446,131,446 17.95159 3,623,346,971 67.51% 2014 2016 1,347,497,993 662,021,833 105,004,150 214,993,747 110,527,435 6,267,608 2,433,777,550 17.76370 3,656,417,436 66.56% 2015 2017 1,383,126,415 620,075,361 104,318,361 229,899,157 151,573,034 6,008,327 2,482,984,001 17.60522 3,770,142,165 65.86% 2016 2018 1,426,734,942 626,685,915 102,735,087 230,753,488 100,143,383 5,774,986 2,523,121,864 17.60000 3,786,098,936 66.64% Source: Black Hawk County Auditor. Notes: (1) Does not include tax-exempt property. Tax rates are per $1,000 of assessed value. (2) Property tax on machinery and equipment was phased out during the period FYE2001 through FYE2003. 134 City of Waterloo, Iowa Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years Overlapping Rates City of Waterloo Black Hawk County Schools Total Total Total Direct & Fiscal Operating Debt Total City Operating Debt County Operating Debt School Overlapping Year Millage Service Millage Millage Service Millage Millage Service Millage Other Rates 2009 15.10748 3.25939 18.36687 6.35616 0.57975 6.93591 15.65725 1.00000 16.65725 1.36422 43.32425 2010 15.01876 3.28813 18.30689 6.12831 0.57689 6.70520 15.45746 1.00000 16.45746 1.33721 42.80676 2011 14.92433 3.33973 18.26406 6.22972 0.44212 6.67184 15.43697 1.00000 16.43697 1.38794 42.76081 2012 15.16068 3.37267 18.53335 5.92415 0.67322 6.59737 15.28141 1.00000 16.28141 1.28109 42.69322 2013 15.03346 3.17159 18.20505 5.59849 0.64144 6.23993 14.80265 1.00000 15.80265 1.33770 41.58533 2014 14.39276 3.10043 17.49319 5.39234 0.62882 6.02116 13.12135 2.60683 15.72818 1.36950 40.61203 2015 14.74920 3.20239 17.95159 5.52447 0.59472 6.11919 13.28631 2.68895 15.97526 1.35851 41.40455 2016 14.50433 3.25937 17.76370 5.43985 1.30832 6.74817 12.92607 2.69825 15.62432 1.34988 41.48607 2017 14.44418 3.16104 17.60522 5.48507 0.96070 6.44577 12.72660 2.67340 15.40000 1.33315 40.78414 2018 14.48927 3.11073 17.60000 5.60805 0.80702 6.41507 12.33034 2.65121 14.98155 1.33495 40.33157 Source: Black Hawk County Auditor. 135 Employer City of Waterloo, Iowa Principal Taxpayers Current Year and Nine Years Ago 2018 2009 Assessed Percentage of Assessed Percentage of Value Total Assessed Value Total Assessed 1/1/2016 Rank Value 1/1/2007 Rank Value Deere and Company $ 54,809,060 1 1.45% $ 26,613,160 4 0.77% IOC Black Hawk County, Inc. 54,593,550 2 1.44% $ 31,395,090 3 0.91% Con Agra k/n/a Hunt Wesson, Inc. 28,194,870 3 0.74% 23,573,110 6 0.68% Crossroads Realty LLC 25,408,870 4 0.67% 40,167,120 2 1.16% Ferguson Enterprises, Inc. 20,707,670 5 0.55% 24,732,360 5 0.72% Tyson Fresh Meats (formerly IBP, Inc.) 17,693,715 6 0.47% 20,042,040 7 0.58% Bertch Cabinet Manufacturing 16,383,920 7 0.43% 15,608,870 8 0.45% VGM Management 14,209,941 8 0.38% Walmart Stores 13,346,060 9 0.35% Ocwen Financial Corporation 11,202,670 10 0.30% -- -- MidAmerican Energy -- 112,802,634 1 3.27% Qwest Corporation (formerly US West) 12,570,171 9 0.36% Banco Mortgage Company 11,431,160 10 0.33% Total $ 256,550,326 6.78% Source: Official Bond Statements prepared by Speer Financial, Inc. 136 $ 318,935,715 9.25% City of Waterloo, Iowa Property Tax Levies and Collections Last Ten Fiscal Years Percent of Percent of Assessment Fiscal Year Current Current Tax Delinquent Total Total Tax Date Ended Total Tax Collections Tax Tax Collections January 1, June 30, Tax Levy Collections To Tax Levy Collections Collections To Tax Levy 2007 2009 $ 35,238,473 35,092,505 99.59% 40,319 $ 35,132,824 99.70% 2008 2010 36,645,462 36,619,212 99.93% 16,989 36,636,201 99.97% 2009 2011 37,312,210 37,186,887 99.66% 34,746 37,221,633 99.76% 2010 2012 38,703,447 38,469,916 99.40% 20,895 38,490,811 99.45% 2011 2013 40,620,062 40,275,404 99.15% 18,966 40,294,370 99.20% 2012 2014 39,993,210 39,763,526 99.43% (72,698) * 39,690,828 99.24% 2013 2015 39,200,603 38,901,557 99.24% (362,370) * 38,539,187 98.31% 2014 2016 38,480,720 38,405,051 99.80% (176,170) * 38,228,881 99.35% 2015 2017 33,086,343 33,010,145 99.77% 9,310 * 33,019,455 99.80% 2016 2018 39,598,288 39,602,704 100.01% 8,658 * 39,611,362 100.03% Source: Black Hawk County Auditor's office. Current year tax collections can exceed the total tax levy in certain instances, such as when property valuation adjustments are made after the tax levy certifications are completed. Information regarding changes to levies and the years that delinquent payments are attributable is not available to the City. * A number of property valuation appeals for the valuation at the January 1, 2011 assessment date were settled during the fiscal years ended June 30, 2014, 2015 and 2016 which resulted in refunds owed for prior taxes paid on those properties. Black Hawk County netted those refunds from delinquent taxes paid to the City, resulting in negative delinquent tax collections. 137 City of Waterloo, Iowa Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Business -Type Activities General General Obligation General Total Percentage Fiscal Obligation Capital Loan Capital Other Obligation Revenue Capital Other Primary of Personal Per Year Bonds Notes Leases Debt Bonds Bonds Leases Debt Government Income* Capita* 2009 $ 66,068,610 -- $ 3,392,268 $ 15,132,212 $ 10,870,000 - $ 95,463,090 3.98% 1,389 2010 66,058,804 2,145,466 17,774,173 9,285,000 95,263,443 3.85% 1,386 2011 65,772,821 2,806,900 20,062,809 7,655,000 - 96,297,530 3.85% 1,408 2012 68,651,784 2,111,193 20,870,997 4,727,951 96,538,068 3.82% 1,411 2013 65,966,220 2,524,312 24,400,407 3,119,608 - 96,010,547 3.58% 1,404 2014 69,226,920 -- 2,281,997 22,253,712 1,914,460 95,677,089 3.38% 1,399 2015 67,833,111 -- 2,061,307 25,804,346 719,286 96,418,050 3.37% 1,409 2016 75,897,719 1,934,063 23,198,824 142,604 - 101,173,210 3.59% 1,479 2017 83,682,844 1,788,702 21,692,273 107,163,819 3.78% 1,566 2018 81,969,301 8,019,724 19,136,397 1,534,000 - 110,659,422 3.81% 1,598 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. * Personal income and population data can be found in the Schedule of Demographic and Economic Statistics. These ratios are calculated using personal income and population for the prior calendar year. 138 Fiscal Year City of Waterloo, Iowa Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years General Obligation Bonds Total Assessed Value of Property 2009 $ 83,832,977 $ 3,542,643,298 2010 2011 2012 2013 2014 2015 2016 2017 2018 85,835,630 89,522,781 90,366,627 91,480,632 93,637,457 99,096,543 105,375,117 105,375,117 101,105, 698 3,566,368,445 3,747,030,046 3,747,030,046 3,738,165,467 3,623,346,971 3,656,417,436 3,770,142,165 3,770,142,165 3,786,098,936 Percentage of Assessed Value of Property 2.37% 2.41% 2.39% 2.38% 2.42% 2.58% 2.71% 2.79% 2.79% 2.67% Per Capita* 1,219 1,249 1,309 1,302 1,321 1,369 1,449 1,540 1,540 1,478 Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. * Population data can be found in the Schedule of Demographic and Economic Statistics. 139 City of Waterloo, Iowa Direct and Overlapping Governmental Activities Debt As of June 30, 2018 Governmental Unit Estimated Estimated Percentage Share of Debt Applicable Overlapping Outstanding To City* Debt City of Waterloo direct debt $ 89,989,025 100.00% $ 89,989,025 Overlapping: Black Hawk County $ 24,175,000 43.37% 10,484,698 Hudson Community Schools 243,072 6.38% 15,508 Hawkeye Community College 8,430,000 24.93% 2,101,599 Subtotal, overlapping debt $ 32,848,072 $ 12,601,805 Total direct and overlapping debt $ 122,837,097 $ 102,590,830 Source: Black Hawk County Auditor Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the city. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Waterloo. This process recognizes that, when considering the city's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. *The percentage of overlapping debt applicable is estimated using net taxable property values. Applicable percentages were estimated by determining the portion of the County's net value that is within the government's boundaries and dividing it by the County's total value. Source: Black Hawk County Auditor City of Waterloo, Iowa Legal Debt Margin Information Last Ten Fiscal Years 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Debt Limit $ 172,392,563 $ 178,318,422 $ 178,318,423 $ 187,351,502 $ 186,908,273 $ 188,105,317 $ 181,167,349 $ 182,820,872 $ 188,507,108 $ 189,304,947 Total net debt applicable to limit 85,978,443 88,642,530 91,810,117 92,890,939 93,762,629 95,698,764 101,030,606 101,030,606 107,163,819 109,125,422 Legal debt margin $ 86,414,120 $ 89,675,892 $ 86,508,306 $ 95,513,435 $ 94,503,961 $ 92,406,553 $ 80,136,743 $ 81,790,266 $ 81,343,289 $ 80,179,525 Total net debt applicable to the limit as a percentage of debt limit 49.87% 49.71% 51.49% 49.58% 49.02% 49.44% 49.44% 55.26% 55.26% 57.65% Legal Debt Margin Calculation for Fiscal Year 2018 Estimated actual valuation (assessed) as of January 1, 2016 $ 3,786,098,936 Debt limit (5% of total estimated actual valuation) 189,304,947 Debt applicable to debt limit: General obligation bonds 101,105,698 General obligation capital loan notes 8,019,724 Total net debt applicable to limit 109,125,422 Legal debt margin $ 80,179,525 Note: Under the State of Iowa Constitution, the city's outstanding general obligation debt should not exceed 5% of total assessed property value. 141 City of Waterloo, Iowa Sewer Revenue Bond Coverage Last Ten Fiscal Years Less: Applicable Net Revenue Debt Fiscal Gross Operating Available for Service Year Revenue Expenses Debt Service Requirements Coverage 2009 10,030,590 5,070,016 4,960,574 2,038,173 2.4338 2010 11,195,472 5,266,284 5,929,188 2,079,198 2.8517 2011 13,468,610 7,041,089 6,427,521 2,059,323 3.1212 2012 13,217,083 6,450,294 6,766,789 1,655,847 4.0866 2013 12,312,670 6,803,784 5,508,886 1,659,883 3.3188 2014 12,863,347 8,069,660 4,793,687 1,259,403 3.8063 2015 12,716,670 9,894,071 2,822,599 1,233,703 2.2879 2016 14,261,375 11,319,925 2,941,450 592,413 4.9652 2017 15,229,015 11,307,231 3,921,784 144,200 29.2810 2018 13,362,514 9,263,755 4,098,759 66,469 61.6642 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Gross revenue includes both operating and non-operating revenue. Operating expenses do not include interest, depreciation or amortization of bond issue costs. 142 City of Waterloo, Iowa Demographic and Economic Statistics Last Ten Calendar Years Per Capita Personal Personal Median Unemployment School Year Population' Income Income2 Age' Rate3 Enrollment4 2008 68,747 2,396,932,902 34,866 35.9 4.7% 10,069 2009 68,747 2,475,029,494 36,002 35.9 6.8% 10,150 2010 68,406 2,501,812,638 36,573 35.9 7.3% 10,020 2011 68,406 2,524,386,618 36,903 35.9 7.1% 10,103 2012 68,406 2,681,173,170 39,195 35.9 6.5% 10,239 2013 68,406 2,827,835,634 41,339 35.7 5.6% 10,483 2014 68,406 2,857,250,214 41,769 35.5 6.5% 10,611 2015 68,406 2,817,779,952 41,192 35.8 5.4% 10,445 2016 68,406 2,837,344,068 41,478 36.2 4.8% 10,357 2017 68,406 2,871,842,930 41,982 36.5 4.7% 10,401 N/A = Not available. Sources: 1 2000 and 2010 U.S. Census 2 U.S. Department of Commerce, Bureau of Economic Analysis 3 Iowa Workforce Development 4 Waterloo Community Schools 143 Employer City of Waterloo, Iowa Principal Area Employers Current Year and Nine Years Ago 2018 2009 Percentage Percentage of Total City of Total City Employees Rank Employment Employees Rank Employment Deere & Company 5,600 1 17.55% 5,600 1 16.67% Tyson Fresh Meats (formerly IBP, Inc.) 2,900 3 9.09% 2,500 3 7.44% Wheaton Franciscan Health Care * 2,885 2 9.04% 3,025 2 9.00% Unity Point Health (Allen Memorial Hospital) 2,520 4 7.90% 1,980 4 5.89% University of Northern Iowa 1,815 5 5.69% 1,780 5 5.30% Hy -Vee 1,735 6 5.44% 1,155 8 3.44% Waterloo Community Schools 1,605 7 5.03% 1,450 6 4.32% Omega Cabinetry Ltd 995 8 3.12% 1,200 7 3.57% Target Regional Distribution Center 840 9 2.63% -- -- -- Bertch Cabinet Manufacturing 825 10 -- 1,100 10 3.27% Waterloo Community Schools 1,450 6 4.32% Area Education Agency 7 -- 1,150 9 3.42% Total 21,720 65.50% Source: Official Bond Statements from Speer Financial, Inc. * Formerly known as Covenant Medical Center 144 22,390 66.64% City of Waterloo, Iowa Full -Time Equivalent City Government Employees by Function/Program Last Ten Fiscal Years Function/Program 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Public Safety Police 131.0 135.0 139.0 138.0 131.0 130.0 130.0 130.0 130.0 129.0 Fire 113.0 116.5 114.5 112.5 109.5 108.5 106.5 109.5 107.5 104.5 Building Inspection 15.0 15.5 10.5 12.5 12.5 12.5 13.5 13.5 13.0 11.0 Public Works City Engineer 20.0 19.0 18.0 20.0 20.0 20.0 20.0 20.0 20.0 21.0 Traffic 13.0 12.0 12.0 12.0 15.0 16.0 16.0 14.0 15.0 14.0 Central Garage 10.0 8.0 9.0 9.0 9.0 10.0 10.0 9.0 9.0 9.0 Street 40.0 39.0 37.0 38.0 36.0 34.0 37.0 35.0 36.0 35.0 Airport 5.5 5.5 5.5 6.0 5.0 6.0 6.0 6.0 6.0 6.0 Health & Social Services Human Rights 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Culture & Recreation Cultural & Arts 13.5 13.5 14.0 14.5 13.0 11.0 13.0 12.0 13.0 10.0 Library 24.5 25.0 24.5 24.5 25.0 25.0 24.5 24.0 23.5 22.5 Leisure Services 41.0 40.0 40.0 39.0 36.0 40.0 43.0 42.0 41.0 43.0 Community & Economic Development Community Planning & Development 24.0 24.0 24.0 24.0 22.0 23.0 23.0 22.0 21.0 22.0 General Government Mayor's Office Info Tech City Clerk & Finance City Attorney/Code Enforcement Human Resources Facilities Maintenance 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 2.0 2.0 2.0 2.0 1.0 1.0 1.0 2.0 4.0 5.0 13.0 13.0 13.0 13.0 14.0 14.0 12.0 12.0 9.0 10.0 1.5 1.5 1.5 1.5 1.5 1.5 1.5 6.0 6.0 6.0 2.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 4.0 4.0 3.0 3.0 3.0 3.0 3.0 4.0 4.0 4.0 4.0 5.0 Waste Management Services Sewer 30.1 29.0 32.0 35.0 33.9 41.0 39.0 40.0 39.0 36.0 Sanitation 13.9 13.0 15.0 14.0 17.1 13.0 17.0 13.0 13.0 13.0 Total 520.0 521.5 521.5 525.5 511.5 517.5 524.0 521.0 518.0 510.0 Source: City Human Resources Department records. 145 Function/Program City of Waterloo, Iowa Operating Indicators by Function/Program Last Ten Fiscal Years (Page 1 of 2) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Public Safety Police * Traffic accidents 2,141 1,941 1,712 1,630 1,598 1,839 1,726 1,607 1,633 1,441 Cases 13,740 13,411 12,079 11,591 11,344 11,298 11,111 10,110 9,683 8,930 Citations 6,781 7,983 6,851 7,271 6,448 6,989 5,060 4,917 3,947 3,748 Calls for service 75,932 82,044 81,110 80,872 75,626 77,161 67,717 61,944 60,652 50,773 Total arrests 5,506 5,590 5,243 5,244 4,984 4,931 4,728 4,004 3,874 3,444 Fire Fire responses 5,208 4,885 4,238 4,307 4,622 5,011 5,129 5,232 5,638 5,542 Ambulance responses 7,234 6,928 5,328 6,062 6,997 6,729 6,830 6,650 7,036 8,720 Building Inspection Construction permits issued 8,143 8,657 9,386 8,012 8,682 9,969 10,327 10,620 9,704 8,483 Construction value of permits $ 74,920,243 $ 82,650,598 $ 103,199,063 $ 124,803,841 $ 91,192,766 $ 101,677,108 $ 100,224,478 $ 127,513,038 $ 108,699,337 $ 104,700,306 Public Works Engineering Street reconstruction (miles) 2.55 2.45 1.98 2.90 3.08 3.15 1.59 2.61 3.35 3.08 Street resurfacing (miles) 18.63 12.42 14.15 12.64 14.05 12.21 18.63 12.53 0.64 1.66 Street Department Tons of salt used for streets 5,506.97 6,043.06 5,012.05 4,816.00 5,700.00 5,162.00 4,217.00 3,024.00 3,307.00 5,699.72 Man hours for road maintenance 71,448 71,448 72,800 68,640 67,345 66,650 67,320 79,357 66,924 68,644 Airport Commercial Enplanements 25,467 22,255 23,206 22,173 19,897 21,573 26,170 27,325 25,534 22,836 Aircraft take -offs and landings 25,921 22,738 20,772 21,521 20,589 19,109 19,550 21,037 18,585 18,943 Based aircraft 100 100 101 101 104 104 74 75 75 75 Health & Social Services Human Rights Civil Rights complaints New cases opened 62 74 78 95 106 64 66 50 57 49 Cases closed 182 88 76 103 59 43 100 50 69 72 Active cases at year-end 126 109 113 103 154 177 143 142 129 105 Culture & Recreation Leisure Services SportsPlex Members N/A N/A N/A N/A N/A 2,594 4,450 4,965 5,095 5,243 Young Arena facility usage Event Visitors 121,324 118,286 118,089 127,508 118,639 119,903 100,064 100,913 103,547 105,938 Recreational Visitors 138,541 143,370 153,018 164,315 174,780 186,384 189,121 189,586 183,749 180,545 Sports - youth programs 5,034 5,117 5,691 5,720 5,451 5,571 5,623 5,689 5,573 5,434 Sports - adult programs 1,461 1,665 1,621 1,620 1,588 1,598 1,617 1,543 1,497 1,412 Pool attendance 40,561 41,743 42,883 44,741 39,611 37,603 33,866 34,733 28,861 22,065 Golf rounds 93,932 95,898 87,173 97,032 81,218 75,737 74,891 76,137 69,989 60,640 Annual flowers grown for parks 22,880 28,008 24,984 22,488 23,304 - - - - - Public Library Total Circulation 426,593 441,746 419,333 424,435 405,341 422,204 470,786 446,467 365,656 299,035 Total Library Visits $ 241,539 $ 274,903 $ 290,161 $ 207,597 $ 263,261 $ 271,603 $ 278,431 $ 253,929 $ 262,073 $ 250,804 Waterloo Center for the Arts In House Visitors $ 125,351 $ 118,541 $ 113,411 $ 119,404 $ 125,958 $ 118,970 $ 128,140 $ 122,334 $ 157,628 $ 189,153 Events, meetings, and programs $ 1,839 $ 1,683 $ 1,625 $ 1,578 $ 1,563 $ 1,074 $ 1,103 $ 1,003 $ 1,261 $ 1,513 146 Function/Program City of Waterloo, Iowa Operating Indicators by Function/Program Last Ten Fiscal Years (Page 2 of 2) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Community & Economic Development Planning and Zoning Planning commission agenda items 50 54 77 65 72 91 100 86 63 70 CORA applications received ** 46 29 20 12 24 30 41 31 35 25 CURA improvements value $ 5,972,779 $ 12,309,630 $ 2,063,995 $ 9,307,075 $ 2,776,663 $ 11,368,905 $ 7,856,518 $ 13,451,612 $ 13,439,875 $ 3,793,731 CLURA applications received*** - - - 6 19 58 69 41 74 46 CLURA improvments value $ - $ - $ - $ 1,249,100 $ 4,385,349 $ 14,418,617 $ 15,057,131 $ 8,849,239 $ 17,426,350 $ 11,090,817 Community Development Down payment assistance 50 57 12 22 10 3 4 8 7 - Home buyer education 183 147 - - - - - - Owner -occupied homes rehabilitated 36 10 32 46 31 42 26 24 24 25 Emergency repairs (including roofs) 38 44 39 45 49 37 33 34 32 21 Demolitions (residential & commercial) 20 27 11 20 18 21 13 - 1 Housing Actual vouchers 1,007 1,003 994 996 1,005 931 937 975 1,017 1,010 Public housing units 50 48 50 50 50 50 50 50 50 50 Family self sufficiency participants 59 49 53 54 47 36 31 34 28 26 Sewer Sewer system customers 25,769 25,565 25,450 25,707 25,393 26,102 25,584 26,498 26,522 25,235 Source: Various city departments * Statistics for Police Department are for the calendar year ending within the fiscal year shown. ** Consolidated Urban Revitalization Area. *** City Limits Urban Revitalization Area Started FY12 # Door counter was broken for several months, so not all visitors could be counted. N/A - not available 147 Function/Program City of Waterloo, Iowa Capital Asset Statistics by Function/Program Last Ten Fiscal Years 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Public Safety Police Stations 1 1 1 1 1 1 1 1 1 1 Fire* Stations 7 7 7 7 7 7 7 7 7 7 Trucks and special vehicles 32 32 32 34 31 29 ** 29 30 33 35 Public Works Miles of streets - paved 356 357 364 364 364 364 364 360 360 361 Miles of streets - unpaved 73 73 72 72 72 72 72 68 68 68 Street lights 1,800 1,800 1,800 1,800 1,800 1,807 1,807 1,807 1,807 1,847 Traffic Signals 198 197 200 200 200 197 198 198 199 200 Airport runway lengths Runway 12/30 8,400 8,400 8,400 8,400 8,400 8,400 8,400 8,400 8,400 8,400 Runway 18/36 6,002 6,002 6,002 6,002 6,002 6,002 6,002 6,002 6,002 6,002 Runway 6/24 5,403 5,403 5,403 5,403 5,403 5,403 5,403 5,403 5,403 5,403 Culture & Recreation City recreation areas 3 3 3 3 3 3 3 3 3 3 City parks 48 48 48 48 48 48 48 48 48 48 Golf courses 3 3 3 3 3 3 3 3 3 3 Swimming pools 2 2 2 2 2 2 2 2 2 2 Softball diamonds 23 23 23 23 23 23 23 23 20 20 Baseball diamonds 8 6 6 6 6 6 6 6 6 6 Baseball stadium 1 1 1 1 1 1 1 1 1 1 Softball complexes 2 2 2 2 2 2 2 2 2 2 Tennis courts 27 27 27 27 27 27 27 27 27 27 Ice arena 1 1 1 1 1 1 1 1 1 1 Soccer complex 1 1 1 1 1 1 1 1 1 1 Exposition plaza 1 1 1 1 1 1 1 1 1 1 Skatepark 1 1 1 1 1 1 1 1 1 1 Dog park 1 1 1 1 1 1 1 1 1 1 Amphitheater 0 0 0 1 1 1 1 1 1 1 Splash Park 0 0 0 1 1 1 1 1 1 1 SPORTSPLEX 0 0 0 0 0 0 1 1 1 1 Center for the Arts collection size 3,153 3,362 3,766 4,178 4,352 4,682 5,102 5,498 5,647 6,001 Library collection size 200,246 168,295 172,580 163,247 161,462 164,486 138,540 138,305 124,649 112,777 Sewer Miles of sanitary sewer 356 356 356 356 356 357 358 368 372 373 Source: Various city departments * Effective July 1, 2007, fire station at the Airport being maintained by Airport maintenance personnel ** Added boats N/A - not available 148 City of Waterloo, Iowa Schedule of Expenditures of Federal Awards Year Ended June 30, 2018 Federal Grantor/Pass-Through Grantor/Program Title Pass -Through Federal Amount Entity Identifying CFDA Provided to Federal Number Number Subrecipients Expenditures Department of Housing and Urban Development Direct: Community Development Block Grants/Entitlement Grants 14.218 $ 42,663 $ 1,046,412 HOME Investments Partnerships Program 14.239 78,082 652,102 Fair Housing Assistance Program -State and Local 14.401 - 13,654 Public and Indian Housing 14.850 - 232,850 Section 8 Housing Choice Vouchers 14.871 5,096,789 Public Housing Capital Fund 14.872 14,000 Public Housing Capital Fund 14.872 35,924 Subtotal - 49,924 Lead -Based Paint Hazard Control 14.900 650 173,365 Total Department of Housing and Urban Development Department of Justice Direct: Bulletproof Vest Partnership Program Bulletproof Vest Partnership Program Subtotal Edward Byrne Memorial Justice Assistance Grant Program Edward Byrne Memorial Justice Assistance Grant Program Subtotal Total direct Indirect: Pass Through Crime Victims Assistance Division, Federal Violence Against Women Act Contract Pass Through Governor's Office of Drug Control Policy, Public Safety Partnership and Community Policing Grants Edward Byrne Memorial Justice Assistance Grant Program Total indirect Total Department of Justice VW -16 -92 -CJ 16 -CAMP -04 15 -JAG -197189 (Continued) 149 16.607 16.607 16.738 16.738 121,395 7,265,096 7,937 4,763 12,700 33,101 57,781 90,882 103,582 16.588 36,113 16.710 7,999 16.738 115,884 24,726 182,385 123,883 243,224 123,883 346,806 City of Waterloo, Iowa Schedule of Expenditures of Federal Awards (Continued) Year Ended June 30, 2018 Federal Grantor/Pass-Through Grantor/Program Title Department of Transportation Direct: Federal Aviation Administration: Airport Improvement Program Total direct Indirect: Federal Highway Administration Pass Through Iowa Department of Transportation: Highway Planning and Construction Subtotal 20.205 Pass -Through Entity Identifying Number Federal CFDA Number Amount Provided to Subrecipients Federal Expenditures National Highway Traffic Safety Administration Pass Through Iowa Department of Public Safety Governors Traffic National Priority Safety Programs Subtotal Total indirect Total Department of Transportation U.S. Equal Employment Opportunity Commission Direct: Employment Discrimination Title VII of the Civil Rights Act of 1964 Employment Discrimination Title VII of the Civil Rights Act of 1964 Total U.S. Equal Employment Opportunity Commission National Foundation on the Arts and the Humanities Indirect, National Endowment for the Humanities Pass Through Iowa Arts Council Promotion of the Humanities: Federal/State Partnership Environmental Protection Agency Direct: Brownfield Assessment & Cleanup Cooperative Department of Homeland Security Indirect: Pass Through Iowa Homeland Security and Emergency Management Division: Disaster Grants - Public Assistance (Presidentially Declared Disasters) Subtotal Staffing for Adequate Fire & Emergency Response (SAFER) Total Department of Homeland Security Total expenditures of federal awards Total Edward Byrne Memorial Justice Assistance Grant Program (CFDA No. 16.738): $273,267 See notes to schedule of expenditures of federal awards. TAP -U-8155(741)--81--07 N H SX -63-6 (69)--3 H-07 STP -U-8155(74)--70-07 STP -U-8155(756)--70-07 STP -U-8155(754)--86-07 STP -U-8155(743)--86-07 STP -U-8155(757)--86-07 20.106 $ 20.205 20.205 20.205 20.205 20.205 20.205 20.205 PAP-17-405d-M6OT, Task 54 20.616 PAP-17-405d-M60T, Task 42 20.616 OSP 1420 FY15 013-82425-00 DR 4187 013-82425-00 DR 4289 30.001 30.001 45.129 66.818 97.036 97.036 EMW-2014-FH-00136 97.083 150 $ 2,069,350 2,069,350 11,305 1,603 23,069 30,000 135,567 94,308 525 296,377 14,055 21,931 35,986 332,363 2,401,713 22,967 25,676 48,643 17,608 110,603 335 119,120 119,455 23,245 142,700 $ 245,278 $ 10,333,169 City of Waterloo, Iowa Notes to Schedule of Expenditures of Federal Awards Year Ended June 30, 2018 Note 1. Basis of Presentation The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of the City of Waterloo, Iowa (the City). The schedule of expenditures of federal awards does not include the federal grant activity of the City's discretely presented component units. All federal awards received directly from federal agencies, as well as federal awards passed through other governmental agencies are included in this Schedule. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in or used in the preparation of the basic financial statements. Note 2. Significant Accounting Policies Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments, the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirement, Cost Principles, and Audit Requirements for Federal Awards or Uniform Guidance, as appropriate, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Note 3. Indirect Cost Rate The City has elected not to use the 10 percent deminimis indirect cost rate allowed under the Uniform Guidance. 151 City of Waterloo, Iowa Summary Schedule of Prior Audit Findings Year Ended June 30, 2018 The prior year Single Audit disclosed no findings in the Schedule of Findings and Questioned Costs and no uncorrected or unresolved findings exist from prior audits Summary of Prior Audit Findings. 152 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Independent Auditor's Report To the Honorable Mayor and Members of City Council City of Waterloo, Iowa RSM RSM US LLP We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Waterloo, Iowa, (the City) as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated December 21, 2018. The City's beginning net position of the governmental activities, business -types activities, major enterprise fund and aggregate remaining fund information, have been restated due to the implementation of GASB Statement No. 75 to recognize the total other postemployment liability. Our report includes a reference to other auditors who audited the financial statements of the Waterloo Water Works as of and for the year ended December 31, 2017 and the Waterloo Convention & Visitors Bureau, Inc. as of and for the year ended June 30, 2018, both discretely presented component units, as described in our report on the City's financial statements. This report does not include the results of the other auditor's testing of internal control over financial reporting or compliance and other matters that are reported separately by those auditors. The financial statements of Waterloo Convention & Visitors Bureau, Inc. were not audited in accordance with Government Auditing Standards. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the 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. THE POWER OF BEING UNDERSTOOD AUDIT 1 TAX 1 CONSULTING 153 RSM US LLP is the U.5. member firm of R5M International, a global network of independent audit, tax, and consulting firms. Visitrsmus.com/aboutusformoreinformationregardingRSMUSLLPand RSM International. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Comments involving statutory or other legal matters about the City's operations for the year ended June 30, 2018 are based exclusively on the knowledge obtained from procedures during our audit of the basic financial statements of the City. Since our audit was based on tests and samples, not all transactions that might have had an impact on the comments were necessarily audited. The comments involving statutory and other legal matters are not intended to constitute legal interpretation of those statues. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. s,., PS ,LLP Davenport, Iowa December 21, 2018 154 Report on Compliance For Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance Independent Auditor's Report To the Honorable Mayor and Members of the City Council City of Waterloo, Iowa RSM RSM US LLP Report on Compliance for Each Major Federal Program We have audited the City of Waterloo, Iowa's (the City) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the City's major federal programs for the year ended June 30, 2018. The City's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Scope The City's basic financial statements include the operations of the Waterloo Water Works and the Waterloo Convention & Visitors Bureau, Inc. discretely presented component units which did not have a single audit performed for their fiscal years ended December 31, 2017 and June 30, 2018, respectively. Our audit, described below, does not include the operations of the Waterloo Water Works or the Waterloo Convention and Visitors Bureau, Inc. because these discretely presented component units were audited by other auditors. Management's Responsibility Management is responsible for compliance with the requirements of federal statutes, regulations and the terms and conditions of its federal awards applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of the City of Waterloo, Iowa's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City's compliance. THE POWER OF BEING UNDERSTOOD AUDIT 1 TAX 1 CONSULTING 155 RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Visitrsmus.com/aboutusformoreinformationregardingRSMUSLLPand RSM International. Opinion on each Major Federal Program In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2018. Report on Internal Control Over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of Uniform Guidance. Accordingly, this report is not suitable for any other purpose. si.f vs L4.P Davenport, Iowa December 21, 2018 156 City of Waterloo, Iowa Schedule of Findings and Questioned Costs Year Ended June 30, 2018 I. Summary of the Independent Auditor's Results Financial Statements Type of auditor's report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? Significant deficiencies identified? Noncompliance material to financial statements noted? Federal Awards ❑ Yes 0 No ❑ Yes 0 None Reported ❑ Yes 0 No Internal control over major programs: Material weakness(es) identified? ▪ Yes 0 No Significant deficiencies identified? ❑ Yes 0 None Reported Type of auditor's report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Section 2 CFR 200.516(a)? Identification of major programs: CFDA Number Name of Federal Program or Cluster 14.218 Community Development Block Grants/Entitlement Grants 20.106 Airport Improvement Program Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low-risk auditee? (Continued) 157 ▪ Yes 0 No E Yes ❑ No City of Waterloo, Iowa Schedule of Findings and Questioned Costs (Continued) Year Ended June 30, 2018 11. Findings Relating to the Financial Statement Audit as Required to be Reported in Accordance With Generally Accepted Government Auditing Standards A. Significant Deficiency in Internal Control None reported. B. Compliance findings None reported. 111. Findings and Questioned Costs for Federal Awards A. Internal Control None reported. B. Compliance Findings None reported. IV. Findings Related to Statutory Reporting 18 -IV -A Certified Budget Expenditure/expenses during the year ended June 30, 2018, did not exceed the budgeted amounts. 18 -IV -B Questionable Disbursements No questionable disbursements were noted. 18 -IV -C Travel Expenses No expenditures of City money for travel expenses of spouses of City officials or employees were noted. 18 -IV -D Business Transactions No material business transactions between the City and City officials or employees were noted. 18 -IV -E Bond Coverage Surety bond coverage of City officials and employees is in accordance with statutory provisions. 18 -IV -F Council Minutes and Resolutions No instances of noncompliance with the council minutes and resolutions. 18 -IV -G Deposits and Investments No instances of noncompliance with the deposit and investment provisions of Chapter 12B and 12C of the Code of Iowa and the City's investment policy were noted. 18 -IV -H Deficit Balances Finding: The following funds had deficit balances as of June 30, 2018: Grants, Special Revenue Community Development Block Grant, Special Revenue Capital Improvements, Capital Projects 158 $ 1,051,920 179,405 1,671,600 City of Waterloo, Iowa Schedule of Findings and Questioned Costs (Continued) Year Ended June 30, 2018 Recommendations: The City should investigate alternatives to eliminate these deficits in order to return the funds to sound financial positions. Management's Response: The Grants, Special Revenue Fund reported a deficit fund balance due to timing delays in receiving grant reimbursements. Most grants that the City receives require the City request and receive reimbursement from the granting agencies only after the City has expended the funds. This creates a temporary deficit in the funds. Because the City's books are maintained on an accrual basis, expenses are recorded for invoices that may not be paid until after year-end. The City can not request reimbursements until after the invoices are paid, creating temporary timing deficits. The City continues to investigate alternatives for shortening the turnaround time between spending grant funds and receiving reimbursements where possible. 18 -IV -I Revenue Bonds No instances of noncompliance noted regarding the provisions of the revenue bond indentures. Information required by sewer revenue bond resolutions is reported in the statistical section. 18 -IV -J Airport Ordinance Finding: The City adopted ordinance number 4400 on December 13, 1999 which established an Airport Board of Directors and requires the Board to "Maintain a positive cash balance at all times in airport operations." Airport operations are accounted for in the General Fund (Fund 010), Airport Commission Department (Department number 29), Airport Administration Activity (Activity number 7700). Through June 30, 2018, the accumulative cash deficit totaled $491,719. Recommendations: To ensure the City is in compliance with its own ordinances, we recommend that the City either provide airport operations with additional cash resources to enable it to achieve and maintain a positive cash balance or amend the ordinance to repeal the positive cash balance requirement. Management's Response: It is the City's intent at this time to continue to require the positive cash balance, although City management realizes that the Airport may not be able to maintain that balance due to current economic conditions. 159 CITY OF WATERLOO, IOWA To: City Council Members Re: Notice of Severance CITY HALL • 715 MULBERRY STREET 50703 Department PUBLIC WORKS - STREET Today's Date: 12/17/2018 Effective Date: 12/3/2018 Employment Date: 2/6/2000 Job TItIe/Classification EQUIPMENT OPERATOR I This is to report that the employment of ROBERT HERTGES with the City of Waterloo has been severed by reason of: ei Retired Disability Related ❑ No ❑ Yes ❑ Resigned ❑ Termination ❑ Other In accordance with City Policy, it is requested to allow payment which consists of the following: Comments: Approved by capiA=1t Human Resources Routing: Original to Human Resources by Department Human Resources will forward original to City Clerk (Copy in Personnel File) Clerk's Office will forward copy of approved form to Department and Human Resources Council Agenda Date: ❑ Accruals ❑Status ❑-9 Date Z111,1� Date Updated 6/28/11 Benefits Total Hours (x) Hourly Rate Total Payout Vacation -Accrued 148 $ 25.72 $ 3,806.56 Vacation -Current I $ - Usable Sick Leave (x) 25% $ - Frozen Sick Leave (x) 60% $ - Personal Hours 21.28 $ 25.72 $ 547.32 comp Time Pay 100 $ 25.72 $ 2,572.00 Unscheduled Leave $ - [Other Pay 1 $ - Total Payment $ 6,925.88 Approved by capiA=1t Human Resources Routing: Original to Human Resources by Department Human Resources will forward original to City Clerk (Copy in Personnel File) Clerk's Office will forward copy of approved form to Department and Human Resources Council Agenda Date: ❑ Accruals ❑Status ❑-9 Date Z111,1� Date Updated 6/28/11 MAZNTE VANNICE 130ND KNOW ALL MEN BY THESE PRESENTS: nand No. 2255019 That, Aspro, Inc. of Waterloo, Iowa as Principal, and the North American Specialty Insurance Company as Surety, are held and firmly bound unto City of Waterloo, IA in the penal sum of Seven Million Seven Hundred Thirty-nine Thousand Five Hundred Sixty-seven And 82/100 Dollars, lawful money of the United States of America, for the payment of which, well and truly to be made, the Principal and Surety bind themselves, their and each of their heirs, executoa's, administrators, successors and assigns, jointly and severally, firmly by these presents, ($ $7,739,567.82 ) Whereas. the said Principal entered into a certain contract. with City of Waterloo, IA To furnish all the material and labor necessary for the construction of FY 2017 Street Reconstruction Program, Waterloo, IA - Contract No. 921 in Waterloo, Iowa In conformity with certain specifications; and Whereas, a further condition of said contract is that the said Principal should furnish a bond in indemnity, guaranteeing to remedy any defects in workmanship or materials that may develop in said work within a period of Two (2) years from the date of acceptance of the work under said contract; and Whereas, the said North American Specialty Insurance Company fora vatuabie consideration, has agreed to join with said Principal in such bond or guarantee, indemnifying said City of Waterloo, IA Now, therefore, the condition of this obligation is such, that if the said Principal shall, at his own cost and expense, remedy any and all defects that may develop in said work within the period of Two (2) years from the date of acceptance of the work under said contract, by reason of bad workmanship or poor material used in the construction of said work, and shall keep all work in continuous good repair during said period, and shall in all other respects, comply with all the terms and conditions of said contract with respect to maintenance and repair of said work, then this obligation to be null and void; otherwise to be and remain in full force and virtue in law. In Witnes � whereof, we have hereunto set our hands and seals this day of `b,N6ty 1 Aspro, Inc. 13 ra North merican Specialty Durance Company Surety By; Dione R. Young prn2y-in-l-act SWISS RE CORPORATE SOLUTIONS NORTH AMERICAN SPECIALTY INSURANCE COMPANY WASHINGTON INTERNATIONAL INSURANCE COMPANY WESTPORT INSURANCE CORPORATION GENERAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT North American Specialty Insurance Company, a corporation duly organized and existing under laws of the State of New Hampshire, and having its principal office in the City of Overland Park, Kansas and Washington International Insurance Company a corporation organized and existing under the laws of the State of New Hampshire and having its principal office in the City of Overland Park, Kansas, and Westport Insurance Corporation, organized under the laws of the State of Missouri, and having its principal office in the City of Overland Park, Kansas each does hereby make, constitute and appoint: JAY D. FREIERMUTH, CRAIG E. HANSEN, BRIAN M. DEIMERLY, SHIRLEY S. BARTENHAGEN, CINDY BENNETT, ANNE CROWNER, TIM McCULLOH„ STACY VENN, DIONE R. YOUNG, and WENDY ANN CASEY JOINTLY OR SEVERALLY Its true and lawful Attorney(s)-in-Fact, to make, execute, seal and deliver, for and on its behalf and as its act and deed, bonds or other writings obligatory in the nature of a bond on behalf of each of said Companies, as surety, on contracts of suretyship as are or may be required or permitted by law, regulation, contract or otherwise, provided that no bond or undertaking or contract or suretyship executed under this authority shall exceed the amount of: ONE HUNDRED TWENTY FIVE MILLION ($125,000,000.00) DOLLARS This Power of Attorney is granted and is signed by facsimile under and by the authority of the following Resolutions adopted by the Boards of Directors of North American Specialty Insurance Company and Washington International Insurance Company at meetings duly called and held on March 24, 2000 and Westport Insurance Corporation by written consent of its Executive Committee dated July 18, 2011. "RESOLVED, that any two of the President, any Senior Vice President, any Vice President, any Assistant Vice President, the Secretary or any Assistant Secretary be, and each or any of them hereby is authorized to execute a Power of Attorney qualifying the attorney named in the given Power of Attorney to execute on behalf of the Company bonds, undertakings and all contracts of surety, and that each or any of them hereby is authorized to attest to the execution of any such Power of Attorney and to attach therein the seal of the Company; and it is FURTHER RESOLVED, that the signature of such officers and the seal of the Company may be affixed to any such Power of Attorney or to any certificate relating thereto by facsimile, and any such Power of Attorney or certificate bearing such facsimile signatures or facsimile seal shall be binding upon the Company when so affixed and in the future with regard to any bond, undertaking or contract of surety to which it is attached." \.011N11111/ry/ tumuouaatubay *44 gg' SEAL :n=_ z •-i SEAL ii 711;% 1973 'u; o f. a 2. ti L. ; .o i Ip 1\1\ Mike A. Ito, Senior Vice President of Washington International Insurance Company /lllllllll\ �Yaruaaa>a & Senior Vice President of North American Specialty Insurance Company & Senior Vice President of Westport Insurance Corporation IN WITNESS WHEREOF, North American Specialty Insurance Company, Washington International Insurance Company and Westport Insurance Corporation have caused their official seals to be hereunto affixed, and these presents to be signed by their authorized officers this this 3rd day of November 20 17 teSteven P. Anderson, Senior Vice President of Washington International Insurance Company & Senior Vice President of North American Specialty Insurance Company & Senior Vice President of Westport Insurance Corporation State of Illinois County of Cook On this 3rd day of ss: North American Specialty Insurance Company Washington International Insurance Company Westport Insurance Corporation November , 20 17, before me, a Notary Public personally appeared Steven P. Anderson , Senior Vice President of Washington International Insurance Company and Senior Vice President of North American Specialty Insurance Company and Senior Vice President of Westport Insurance Corporation and Michael A. Ito Senior Vice President of Washington International Insurance Company and Senior Vice President of North American Specialty Insurance Company and Senior Vice President of Westport Insurance Corporation, personally known to me, who being by me duly sworn, acknowledged that they signed the above Power of Attorney as officers of and acknowledged said instrument to be the voluntary act and deed of their respective companies. OFFICIAL SEAL ! M. KENNY I Notary Public • State of Illiao s M I My Commission Expires 12104/2021 M. Kenny, Notary Public I, Jeffrey Goldberg , the duly elected Vice President and Assistant Secretary of North American Specialty Insurance Company, Washington International Insurance Company and Westport Insurance Corporation do hereby certify that the above and foregoing is a true and correct copy of a Power of Attorney given by said North American Specialty Insurance Company, Washington International Insurance Company and Westport Insurance Corporation which is still in full force and effect. IN WITNESS WHEREOF, I have set my hand and affixed the seals of the Companies this day of Ti!hvaht1 , 7)(�1 /. Jeffrey Goldberg, Vice President & Assistant Secretary of Washington International Insurance Company & North American Specialty Insurance Company & Vice President & Assistant Secretary of Westport Insurance Corporation