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MANAGEMENT'S DISCUSSION AND ANALYSIS <br />As management of the City of Paris (the City), we offer readers of the City of Paris, Texas' financial <br />statements this narrative overview and analysis of the financial activities of the City of Paris for the fiscal <br />year ended September 30, 2012. We encourage readers to consider the information presented here in <br />conjunction with additional information that we have furnished in our letter of transmittal as well as the <br />City's financial statements. <br />Financial Highlights of the Primary Government <br />• The City maintained its tax rate of 0.52 per $100 of valuation for fiscal year 2011-12. This is the fourth <br />consecutive year at this rate. The City has lowered its rate four times since the 2003-04 fiscal year when <br />the tax rate was 0.695. For the upcoming 2012-13 fiscal year, the City lowered its tax rate to .51107 per <br />$100 of valuation or a 1.71% decrease. The City has accomplished this 18.39 cent tax rate reduction by <br />strict review of its operational needs and increases to the taxable value of property within the City. The <br />City was able to maintain the $0.52 tax rate despite a 9.28% decrease in local sales taxes in the 2009-10 <br />fiscal year caused by the United States economic recession. The City has recovered 25.10% of that initial <br />drop in sales taxes as of September 30, 2012. <br />• The number of budgeted positions dropped from a peak of 369 in fiscal year 2002-03 to 322 in fiscal year <br />2009-10. This reduction of 47 positions was also part of an operational review and represents a significant <br />and annually repeating savings to the City. Two positions were added in fiscal year 2010-11 and 1.5 <br />positions were added in 2011-12, bringing the total City employees to 325.5. <br />• City-wide revenues this year exceeded City-wide expenses by $3,308,597 compared to $2,321,372 last <br />year. The City has made a concentrated effort to reduce expenses plus seeking new sources of revenue and <br />protecting its existing revenue sources. <br />• The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $ 88,651,725 <br />(net assets) an increase of $3,308,597 or 3.87% over the previous year amount of $85,343,128. The most <br />important factor in this change was the decrease of long-term debt. Of the amount known as net assets, <br />$21,197,755 (unrestricted net assets) may be used to meet the government's ongoing obligations to <br />citizens and creditors. <br />• As of the close of the current fiscal year, governmental funds reported combined ending fiznd balances of <br />$17,861,144 compared to $16,759,950 the previous year. This amounts to an increase of $1,101,194 or <br />6.57%. This increase was due primarily to an increase in the cash and investments in all of the <br />governmental funds and decreased outstanding debt. Unassigned fund balance is available for spending at <br />the government's discretion. <br />• At the end of the fiscal year, unassigned fund balance for the general fund was $11,764,593 or 5235% of <br />total general fund expenditures. The prior year unassigned fund balance was $12,156,169 or 57.15% of <br />general fund expenditures. General fund expenditures were up $1,012,746 or 4.71% while the unassigned <br />fund balance decreased due to the jump in general fund expenditures compared to the $294,642 (1.39%) <br />increase in general fund revenues. <br />• The City's non-current liabilities decreased by $2,878,662 or 1436% during the current fiscal year due to <br />reduction in long-term debt. <br />• Total charges for services for the City were $19,112,759 compared to $18,808,783 the previous year. This <br />represents a 1.61% increase in charges over the previous year with all charge centers contributing to the <br />increase. Operating/capital grants and contributions were $1,942,361 compared to $2,159,259 the previous <br />year. This decrease was due to decreased contributions from public works and general government. <br />General revenues were $18,908,728 compared to $17,503,660 the previous year. This increase was due to <br />significant contribution income. Property taxes, sales taxes, and franchise taxes were essentially flat <br />compared to the previous year. The delinquent hotel taxes from the previous year were collected in <br />2011-12, resulting in a$49,454 (11.00%) increase in collections. <br />• Transfers from business-type activities to governmental activities and from governmental activities to <br />business-type activities occurred during the year in the net amount of $3,486,508. This included <br />administrative and franchise fees transferred from business-type activities :o governmental activities. <br />• City-wide liabilities decreased $4,763,269 from $26,407,770 to $21,644,SOL This amounted to 18.03%. <br />Long-term debt was the single factor most affecting this change. <br />• City-wide expenses increased $504,921 (139%), going from $36,150,330 to $36,655,251 with slight <br />increases in both governmental activities and business-type activities. <br />