07 - Annual Comprehensive Financial Report

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CITY OF PARIS, TEXAS Notes to Financial Statements (Continued) September 30, 2021 IV. Detailed Notes on All Activities and Funds (Continued) N. Related Party The City Council appoints the governing board of an entity which is legally separate from the City. The City is not able to impose its will on this entity, and a financial benefit/burden relationship is not present; therefore, it is considered a related organization. O. Contingent Liabilities Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the City expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, it is the opinion of the City's counsel that resolution of these matters will not have a material adverse effect on the financial condition of the City. The City has incurred certain asset retirement obligations related to the operation of its wastewater utility system. The U.S. Environmental Protection Agency and the Texas Commission on Environmental Quality regulates wastewater utility system closure and post closure requirements. Environmental engineers calculated the asset retirement obligation based on the estimated current cost of remediation and removal of the contamination and contaminated sludge and dirt in the wastewater treatment facilities. The estimated liability of the legally required closure costs for the wasterwater utility system was estimated as of September 30, 2021 to be $2,901,000. The estimated remaining wastewater utility system life is 30 years. The actual cost of closure and post closure may be higher due to inflation, changes in technology, or changes in wasterwater utility system laws and regulations. At September 30, 2021, there were no assets restricted to pay this liability. P. Tax Abatements As of September 30, 2021, the City provides tax abatements through two progams-Industrial and Residential: 1. Industrial abatements are possible for manufacturing, research, regional distribution, regional services, regional tourist entertainment, basic industry, and any primary jobs creating industry. The property involved must be newly created or improvements to an existing facility. Abatements may be extended to the value of buildings, structures, fixed machinery and equipment, site improvements, tangible personal property, and office space and improvements necessary to the operation and administration of the facility. Inventory and supplies are not eligible for abatement. The City Council grants abatements on a case by case basis. The abatement is stated as a percentage of the eligible property under consideration and for a specified period of time up to ten years. The City has a written industrial tax abatement policy. Provisions for recapturing abated taxes, if any, are included in this policy. 2. Residential abatements are granted for five year periods. The property involved must be new residential structures or improvements to existing structures that will be at least a 20% increase in the previous appraised value of the property. The abatements are stated as a percentage of the increased value using the following schedule: Year 1-100%, Year 2-100%, Year 3-80%, Year 4-60%, and Year 5-40%. The City has a standard written residential tax abatement agreement. Provisions for recapturing abated taxes, if any, are included in this policy. Tax Abatement Pro ram Industrial Incentives 66 Amount of Taxes Abated 2020-21 $ 1,256,201