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C.A.F.R., FY 2016-17CITY OF PARIS, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended September 30,2017 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR CITY OF PARIS, TEXAS Fiscal Year Ended September 30, 2017 Prepared By Finance Department W.E. Anderson, Director CITY OF PARIS, TEXAS Table of Contents Year Ended September 30,2017 INTRODUCTORY SECTION Page Statement Letter of Transmittal I-1 Certificate of Achievement for Excellence in Financial Reporting 1-7 City of Paris Organizational Chart 1-8 List of Elected and Appointed Officials 1-9 FINANCIAL SECTION Independent Auditors' Report 1 Management's Discussion and Analysis 3 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 13 1 Statement of Activities 15 2 Fund Financial Statements Balance Sheet - Governmental Funds 17 3 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 18 4 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 20 5 Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund 21 6 Statement of Net Position - Proprietary Funds 23 7 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds 25 8 Statement of Cash Flows - Proprietary Funds 26 9 Notes to Financial Statements 28 Required Supplementary Information Schedule Texas Municipal Retirement System - Schedule of Changes in Net Pension Liability 65 1 Texas Municipal Retirement System - Schedule of City Contributions 66 2 Paris Firefighters' Relief and Retirement Fund - Schedule of Changes in Net Pension Liability 67 3 Paris Firefighters' Relief and Retirement Fund - Schedule of City Contributions 68 4 Combining and Individual Fund Statements and Schedules Nonmajor Governmental Funds 69 Combining Balance Sheet - Nonmajor Governmental Funds 70 5 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 71 6 Schedules of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Special Revenue Fund 72 7 Debt Service Fund 73 8 Capital Projects Fund 74 9 Capital Assets Used in the Operation of Governmental Funds - Comparative Schedules by Source 75 10 Schedule by Function and Activity 76 11 Schedule of Changes by Function and Activity 78 12 CITY OF PARIS, TEXAS Table of Contents (Continued) Year Ended September 30,2017 Page Table STATISTICAL SECTION 79 Financial Trends Net Assets/Position by Component 80 1 Changes in Net Assets/Position 82 2 Fund Balances of Governmental Funds 86 3 Changes in Fund Balances of Governmental Funds 88 4 Revenue Capacity Property Tax Levies and Collections 90 5 Property Tax Rates - All Direct and Overlapping Governments 92 6 Assessed and Estimated Actual Value of Property 93 7 Principal Property Taxpayers 95 8 Debt Capacity Ratio of Net General Obligation Bonded Debt to Assessed Value and Net General Obligation Bonded Debt Per Capita 97 9 Ratio of Outstanding Debt by Type 98 10 Direct and Overlapping Governmental Activities Debt 100 II Legal Debt Margin Information 101 12 Revenue Pledged Coverage - Water and Sewer Revenue Bonds 102 13 Demographic and Economic Information Demographic and Economic Statistics 103 14 Principal Employers 104 15 Operating Information Operating Indicators by Function 105 16 Capital Asset Statistics by Function 107 17 Building Permits at Market Value 109 18 Full-Time Equivalent City Government Employees by Function 110 19 CONTINUING DISCLOSURE INFORMATION (Unaudited) Continuing Disclosure Information 112 INTRODUCTORY SECTION C!I»¥ ©jf MtMlS April 30, 2018 Mayor Steve Clifford, MD and Members of the City Council City of Paris, Texas Dear Mayor and Council Members: I am pleased to submit the Comprehensive Annual Financial Report of the City of Paris, Texas, for the fiscal year ended September 30, 2017, The City of Paris is a financial reporting entity as defined by the Government Accounting Standards Board codification section 2100. As such, it has a separately elected governing body chosen by its citizens in a general, popular election, is a legally separate primary government, and is fiscally independent of other state and local governments. The financial reporting entity includes all the funds of the primary government and its component unit, the Paris Economic Development Corporation. More information about PEDC can be found in footnote I.E. which deals with reporting entity topics. There are no other potential component units. The primary purpose of this report is to provide the City Council, citizens, financial community, and others with detailed information concerning the financial condition and performance of the City of Paris. It is strongly recommended that any user of this report read the Management's Discussion and Analysis included in the financial section of the report. In addition, this report provides assurance that the City presents fairly its financial position as verified by independent auditors. THE COMPREHENSrVE ANNUAL FINANCIAL REPORT The Comprehensive Annual Financial Report of the City of Paris, Texas, for the fiscal year ended September 30, 2017, which follows, was prepared by the Finance Department. The financial statements have been audited by McClanahan and Holmes, LLP, CPAs, whose report is included herein. This audit satisfies Article III, Section 35 of the City Charter which requires that an annual audit of all accounts of the City be made by an independent certified public accountant. The City Finance Department is responsible for both the accuracy of the presented data and the completeness and fairness of the presentations, including all disclosures. I believe the data presented is accurate in all material aspects and is presented in a manner which fairly sets forth the financial position and results of operations of the City. Furthermore, I believe that all disclosures necessary to enable the reader to gain maximum understanding of the City's financial activity have been included. The financial statements have been prepared in accordance with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB). P.O. BOX 9037 • PARIS, TEXAS 75461-9037 • (903) 785-7511 • FAX (903) 785-8519 This Comprehensive Annual Financial Report consists of four parts: 1. The Introductory Section includes an organizational chart, list of elected and appointed officials, and this transmittal letter, which highlights significant aspects of the financial operations during the year and particular issues faced by the City. 2. The Financial Section includes the independent auditors' report, management's discussion and analysis, financial statements and related notes, and supplemental financial data. 3. The Statistical Section includes several tables of unaudited data depicting the financial history of the City, as well as demographic information of other governmental units overlapping the City and other miscellaneous statistics. 4. The Continuing Disclosure Information Section contains thirteen tables of financial information required by the United States Securities and Exchange Commission Rule 15c2-12. These tables provide investors with updated information on all municipal bond issues sold after July 3, 1995. The Notes to the Financial Statements are provided in the Financial Section and are considered essential to fair presentation and adequate disclosure for this financial report. The notes include the Summary of Significant Accounting Policies for the City and other necessary disclosures of important matters relating to the financial position of the City. The notes are treated as an integral part of the financial statements and should be read in conjunction with them. General Information Regarding the City and Surrounding County The City of Paris is the county seat and principal commercial center of Lamar County and is located at the intersection of United States Highways 271 and 82, approximately 100 miles northeast of Dallas near the Red River. The City is served by 5 banks. The City's 2010 census is 25,171, a decrease of 2.80% from the 2000 census of 25,898. Lamar County (the County) is located in northeast Texas and borders the State of Oklahoma. The County, which is situated between the Red River and the Sulphur River, is traversed by United States Highways 271 and 82, State Highways 19 and 24, and 32 farm-to-market roads. The County's 2010 census is 49,793, an increase of 2.66% over the 2000 census of48,499. The City is a regional medical center serving patients in Northeast Texas and Southeast Oklahoma. Founded in 1911 as St. Joseph's Hospital, Paris Regional Medical Center is a 356 bed medical center. Its parent company is RCCH HealthCare Partners. It complements the City's 100 plus doctors and 19 dentists that provide a wide range of general and special medical services. In addition, Christus Dubuis Hospital of Paris operates a 25 bed acute care facility to provide care to medically complex patients. The City provides utilities through its 36 MOD water plant and 7.25 MOD wastewater plant. Electric power is supplied to Paris by TXU Electric's interconnected transmission system. It has a generating capacity of 22,808,000 KW. The supply of electric power is adequate to meet the requirements of any commercial or industrial demand. Atmos Energy provides natural gas for residential, commercial, and industrial users. Atmos Energy is the largest provider of pure natural gas in America. It provides service to over three million customers in 12 states. There are 3 transmission lines serving the City with a line pressure of 300 pounds per square inch. Telephone service is provided by AT &T. 1-2 Educational facilities of the City are provided by 3 independent school districts. Each of the districts is accredited by the Texas Education Agency. Higher education needs in the County are provided at Paris Junior College located in the City. Total enrollment of these entities is 12,180. Tourists are attracted to the area by activities on Lake Crook and Pat Mayse Reservoir. Pat Mayse Reservoir is located 15 minutes from the City and provides 6,000 acres for boating, fishing, and camping. The Gambill Goose Refuge and numerous hunting and fishing areas are also located in the County. Other points of interest and activities include the Sam Bell Maxey House, the A.M. Aikin Archives, Red River Valley Exposition, and the Lamar County Historical Society Museum. Also, the City has one 18-hole golf course, one public swimming pool, 26 tennis courts, 3 walk/jog tracks, a sports complex, and 24 public park areas. Government Organization The City was founded in 1839 with the current charter adopted in November of 1948 and last revised in 2011. The City operates under the Council/Manager form of government with 7 council members elected from single member districts. The Mayor is elected by the Council itself to serve as moderator of the group. The Council members can serve a maximum of three consecutive 2 year staggered terms. The Mayor and Council appoint the City Manager, the City Attorney, and the Municipal Judge. The City is a Home Rule City with all powers granted to home rule cities by the constitution and laws of the State of Texas. The Council enacts legislation, adopts budgets, and determines policies of the City of Paris. The City Manager executes the laws and administers the government of the City. Economic Condition and Outlook Taxable values, as originally certified by the Lamar County Appraisal District, for fiscal year 2016-17 reflect a 3.33% increase over the 2015-16 values. Building permits for new residential and commercial construction were valued at $16,567,738 for fiscal year 2016-17. This activity should be reflected in next year's taxable values. Sales taxes for 2016-17 increased from the prior year by 2.57%. Current rebates are 1.77% below the 2015-16 rebates through April 2017. This decrease was caused by a large audit collection of sales tax in the prior year. Without that aberration, sales tax would be up 0.72%. Hotel occupancy taxes were up 4.24% compared to 2015-16 taxes. First quarter 2017-18 collections were 9.69% below the same period in 2016-17. Franchise fees increased 68.28% compared to the previous year. This increase is due to the recognition of the franchise fee from the water and sewer utility. The City of Paris, Paris Economic Development Corporation, and the Lamar County Chamber of Commerce have been actively recruiting new business to the area as well as supporting already existing businesses. PEDC has several active incentive commitments in regard to its recruitment of new industry and support of existing industry. General Fund receipts equaled 97.46% of budget. This shortfall of revenues was caused by delayed intergovernmental revenue. General Fund expenditures were only 94.15% of budget. For the 2017-18 fiscal year, the City Council adopted a tax 1-3 rate of .55195 cents per $100 of value. This was an increase of .05 cents per $100 of value to pay for G.O. Bonds approved by citizen vote. This rate allows maintaining all services at their current levels or above and funds all required interest and sinking funds. Long-term Financial Planning and Relevant Financial Policies The City is in the process of developing a new long-range financial plan. The City formalized a key financial policy in 2010 that had been informally followed previously: a utility rate maintenance policy. The utility rate maintenance policy will help assure the financial integrit)' of the enterprise fund along with its related interest and sinking funds. Another policy was formalized in 2013 in the form of a reserve level guideline for both the general fund and utility fund. Adequate reserve levels provide the City with the ability to deal with extraordinary events and maintain its credit worthiness. This credit worthiness, as reflected in the current financial statements, allowed the City to obtain very favorable interest rates on the general obligation bonds issued in 2016 and 2017. Major Initiatives The City continues to work on its long range plan to maintain its infrastructure. The City called for a general obligation bond election in May 2013 in the amount of $45,000,000 which passed overwhelmingly. Proceeds from these bonds are being used for water and sewer infrastructure improvements. These bonds will be paid for out of utility system revenues. With the payoff of earlier debt issues, it will not be necessary to raise utility rates to fund the new debt. Likewise a $9,750,000 bond election for street construction and repair was approved in 2017. The City also continues to expand its effort in law enforcement related area. Programs in this effort include the Auto Theft Task Force and Justice Assistance Grant for needed equipment. From a development standpoint, the City has taken several steps. Reentry into the State of Texas Main Street Program has channeled additional funds for re vital ization of existing structures and businesses. The City continues to work closely with the Paris Economic Development Corporation to attract new business to Paris and to support existing businesses as well. Working with the Chamber of Commerce, the City is effectively using the civic center to attract people and business to Paris. City officials are also closely working with Keep Paris Beautiful, Inc. to promote and improve the City. The Historic Preservation Committee is working with local property owners to maintain the historical character of the City. In addition, the City Planner has been formulating long range plans for city development. Other Financial Information The financial statements of the City of Paris, Texas, have been prepared in conformity with generally accepted accounting principles as applied to governmental units. The Governmental Accounting Standards Board is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Using the GASB 34 reporting model, the City's Comprehensive Annual Financial Report provides for a management's discussion and analysis, government-wide financial statements, major fund financial statements, notes to the financial statements, and other required supplementary information. The City has a written investment policy that conforms to state statutes, which outlines permissible investments. The City pools its cash balances for investment purposes from the various funds maintained in its consolidated cash account. Interest earnings of the pool are allocated to the various funds of the City based upon a fund's equity position in the pool. The City of 1-4 Paris' primary risk exposures are in the areas of workers' compensation and tort liability. Provision for these risks is made through participation in the Texas Municipal League's risk pool. Between 30 days and 90 days prior to the beginning of each fiscal year, the City Manager submits to the City Council a proposed budget for the fiscal year beginning on the following October 1. The operating budget, which represents the financial plan for the ensuing fiscal year, includes proposed expenditures and the means of financing them. Public hearings are conducted at which all interested persons' comments concerning the budget for the next fiscal year are heard. The budget is legally enacted by the City Council through passage of an ordinance not later than the 21^ day of the last month prior to the beginning of the fiscal year. Generally, appropriations are legally adopted at the department level. Budgetary controls are maintained at the major category of expenditure level within each operating division. All anticipated expenditures are budgeted for control purposes. Capital project fiinds are appropriated on a project by project basis. Expenditures and/or expenses are directly monitored by the City Council. Internal Controls Internal accounting controls are designed to provide reasonable, but not absolute, assurance of the safeguarding of assets against loss from unauthorized use or disposition and reliable financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived. All internal control evaluations occur within this framework. The Finance Department's staff believes the City's internal control structure adequately ensures compliance with laws and regulations and reasonable assurance for safeguarding of assets. Debt The following schedule outlines the outstanding City debt as of 09-30-17: 2010 Tax and Rev. C. 0.$ 2,445,000 $12-15-29 Aa3 2010 G. 0. Refunding Bonds 1,685,000 2,730,000 06-15-20 Aa3 2012 G. 0. Refunding Bonds 2,290,000 -12-15-21 Aa3 2013 C. O. (TWDB)-2,450,000 06-15-32 N/A 2013 G. 0. Bond -31,615,000 12-15-32 Aa3 2016 G.O. Bonds -8,780,000 12-15-36 Aa3 2017 G.O. Bonds 9,750,000 -06-15-37 Aa3 Capital Lease-Firetrucks 1,397,929 -10-21-24 N/A Total $ 17,567,929 $ 45,575,000 Independent Audit The City Charter requires an annual audit to be made of the accounts, financial records, and transactions of all administrative departments of the City by a certified public accountant selected by the City Council. The requirement has been complied with, and the Independent Auditors' Report has been included in this report. 1-5 Awards 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 Paris for its comprehensive annual financial report for the fiscal year ended September 30, 2016. This was the 21" consecutive year that the government has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements, A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgments The preparation of this report could not have been accomplished without the full support and efficient and dedicated efforts of the entire staff of the Finance Department and the competent services of the independent auditors, McClanahan and Holmes, LLP, CPAs. 1 express my appreciation to all members of the Finance Department who assisted and contributed to the completion of this report and to all City departments involved in the preparation of information for this report. In addition, I express my appreciation to the Mayor, City Council, and City Manager for their continuing interest and support in planning and conducting the financial affairs of the City in a responsible and progressive manner. Respectfully submitted. W. E. Anderson Director of Finance 1-6 Goveimnent Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Paris Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30,2016 Executive Director/CEO 1-7 CITY OF PARIS ORGANIZATIONAL CHARTCITIZENS OF PARISCITY ATTORNEYCITY COUNCILMUNICIPAL JUDGECITY MANAGERMUNICIPAL COURTPLANNING,ENGINEERING, &DEVELOPMENTPOLICE .C TY CLERKLBRARYCOMMUNITYDEVELOPMENTUTLTESUTILITY BILLING/COLLECTIONWAREHOUSE/PURCHASINGWASTEWATERTREATMENTLPT STATONSPUBLIC WORKSWATERDISTRIBUTIONWASTEWATERCOLLECTIONTRAFFIC/PUBLIC LIGHTINGSANTATONSTREETS/HIGHWAYSGARAGE List of Elected and Appointed Officials Elected Officials Dr. Steve Clifford - Mayor Cleonne Drake - Mayor Pro-Tern Aaron Jenkins Bill Trenado Linda Knox Billie Sue Lancaster Paula Portugal Appointed Officials John Godwin - City Manager Gene Anderson - Finance Director Stephanie Harris - City Attorney Janice Ellis - City Clerk Pricilla McAnally - Library Director Tom E. Hunt, III - Presiding Municipal Court Judge Bob Hundley - Police Chief Doug Harris - Utilities Director Lany H Wright III- Fire Chief 1-9 FINANCIAL SECTION