Paris Economic Development Corp. FY 2010-11
PRELIMINARY DRAFT FOR DISCUSSION PURPOSES ONLY Paris Economic Development Corporation A Component Unit of the City of Paris Texas Independent Auditors Report and Financial Statements
For the Year Ended September 30 2011 PRELIMINARY DRAFT FOR DISCUSSION PURPOSES ONLY
Paris Economic Development Corporation A Component Unit of the City of Paris Texas Table of Contents September 30 2011 PRELIMINARY DRAFT FOR DISCUSSION PURPOSES ONLY Independent Auditors
Report Financial Statements Governmental Funds Balance SStahteemeentt of Net Assets Statement of Revenues Expenditures and Changes in Fund Balances Statement of Activities Notes to Financial
Statements Required Supplementary Information Budgetary Comparison Schedule General Fund Notes to Required Supplementary Information Continuing Disclosure Information Unaudited 10 PRFLINArY
DRAFT F0P kDwISjSC N PURPOSES ONLY
PRELIMINARY DRAFT FOR DISCUSSION PURPOSES ONLY Independent Auditors Report Board of Directors Paris Economic Development Corporation Paris Texas We have audited the accompanying financial
statements of Paris Economic Development Corporation PEDC a component unit of the City of Paris Texas as of and for the year ended September 30 2011 as listed in the table of contents
These financial statements are the responsibility of PsEDC management Our responsibility is to express an opinion on these financial statements based on our audit We conducted our audit
in accordance with auditing standards generally accepted in the United States of America Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement An audit includes examining on a test basis evidence supporting the amounts and disclosures in the financial statements
An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation We believe
that our audit provides us with a reasonable basis for our opinion In our opinion the financial statements referred to above present fairly in all material respects the financial position
of PEDC as of September 30 2011 and the results of its activities for the year then ended in conformity with accounting principles generally accepted in the United States of America
Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole The Continuing Disclosure Information is presented for purposes of additional
analysis and is not a required part of the financial statements Such information has not been subjected to the auditing procedures applied in the audit of the financial statements and
accordingly we express no opinion on it The Budgetary Comparison Information on Page 9 is not a required part of the financial statements but is supplementary information required by
accounting principles generally accepted in the United States of America We have applied certain limited procedures which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the required supplementary information However we did not audit the information and express no opinion on it Management has omitted the msanagement
discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements Such missing
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 the financial
reporting for placing the basic financial statements in an appropriate operational economic or historical context Our opinion on the basic fmancial statements is not affected by this
missing information PRELIMINARY DRAFT CertifiF@F6QJ PURPOSES ONLY 2012 Paris Texas
Paris Economic Development Corporation A Component Unit of the City of Paris Texas Governmental Funds Balance SStahteemeentt ofNet Assets September 30 2011 ASSETS Cash and Cash Equivalents
Investments in Certificates of Deposit Accounts Receivable Sales Tax Restricted Assets Bond Debt Service Fund Cash and Cash Equivalents Bond Reserve Fund Cash and Cash Equivalents Land
Development Costs Unamortized Bond Expense Total Assets LIABILITIES Accounts Payable Liabilities Payable from Restricted Assets Current Portion of Bonds Payable Accrued Interest Payable
Bonds Payable Net of Current Portion Total Liabilities FUND BNALAENCTES ASSETS Fund Balances Nonspendable Land Development Costs Restricted for Debt Service Committed to Industrial Incentives
Unassigned Total Fund Balances Total Liabilities and Fund Balances Net Assets Nonspendable Land Development Costs Restricted for Debt Service Committed to Industrial Incentives Unassigned
Total Net Assets PiE IINAAY DRAFT FOR DISCIUSSIOo PURPOSES ONLY General Debt Service Governmental Fund Fund Total Adjustments Activities 804020 804020 084002 344747 344747 344747 02009
02009 02009 71098 17089 17089 242708 242708 242708 7617525 7617525 6715725 37755 37755 9361482 593778 8962515 37755 2963907 82406 82406 82406 02080 02080 5984 5984 081060 081060 82406
82406 9128445 1823606 7617525 7617525 7617525 953778 593778 593778 310109 310109 310109 0330407 0330407 0330407 036722 953778 096091 096091 9361482 593778 8965251 7617525 6715725 295923
295923 310109 310109 3517652 3516725 484030 484030 Primarily ltoenrmg liabilities not reported in the funds The accompanying notes to the financial statements are an intergral part of
this statement 2
PP I NARY DRAFT Paris Economic Development Corporation A Component Unit of the City of Paris Texas FOR D I S C U S 110 N Statement of Revenues Expenditures and Changes in Fund BaSltaantceemsentPoOOfN
ASLcEYtSi For the Year Ended September302011 Debt Statement General Service of Fund Fund Total Adjustments Activities Revenues Sales Tax1 4219046 4219046 I24nve09stm46ent Earnings64
6171 86263 46964 M4isce9llane4ous 7 5700 5700 T5o0ta0l Revenues1 2616758 8123 421880 E24xpe8nditu08res Industrial Support and Incentives 324 372324 372324 O7f3fic2e Supplies and Postage10
01101 01101 C0omm1unica1tions Telephone6 1694 1694 1C9a4r Allowance9 0900 0900 I0nsu0ran0ce and Bonds2 8259 8259 T8r5av9el Expenses25 92653 92653 C9on6trac3tual A1ssoci2ations 01729
01729 T0ra7ini9ng 7 9700 9700 P9rom0otio0nal Advertising52 75928 75928 A7dmi9nistra8tion Fee60 06000 06000 P0er0son0nel Compensation220 122502 122502 S1u5nd2ry Charges4 7450 7450 7A5l0l
Utilities1 8155 8155 M8isc5ellen5ous 960 960 960 Equipment 2 9297 9297 I9nd9ustr7ial Park Maintenance14 71842 71842 7D8eb2t Service Principal 275 020705 020705 I0nte0re0st 74 27047 2007
74 T0o0ta7l Expenditures757 033429 2107 21730596 823010 E0x3ce9ss DeficitofRevenuesOver Expenditures521 364373 13784 24759 240409 O4t4he9r Financing Sources Uses Transfer Internal Activities
417 46174 A6mo1rtiza4tion 17 01678 T0o6ta8l Other Financing Sources Uses 417 46174 61174 01678 E0x6ce8ss DeficitofRevenuesand Other Sources Over ExpendituresandOther Uses Fund Balances
ANsseetts Beginning ofthe Year Fund Balances ANsseetts End of the Year 104 07109 127340 24589 4132 3681 502051838 7607 726206 7344218 0361989 5037282 9637 092019 6040790 P48rim03a0rily
long ltiaebirlimtiesnot reported inthe funds The accompanying notesto the financial statements arean intergral part of this statement3
Paris Economic Development Corporation A Component Unit of the City of Paris Texas Notes to Financial Statements September 30 2011 Note 1 Organization The Paris Economic Development
Corporation PEDC is a governmental pnroofnit corporation established July 19 1993 funded by a quarter percent sales tax PEDC was organized exclusively for the purpose of benefiting and
accomplishing public purposes of the City of Paris Texas by promoting assisting and enhancing economic development activities as provided by the Development Corporation Act of 1979 PEDC
is a component unit of the City of Paris Texas and the business and affairs are managed by a fmievmbeer board of directors appointed by the governing body of the City of Paris Texas
Note 2 Summary of Significant Accounting Policies A Measurement Focus Basis of Accounting and Basis of Presentation The accounting policies of PEDC conform to accounting principles generally
accepted in the United States of America as applicable to governments The following is a summary summary of the more significant accounting policies Financial Statements Combined Governmental
Funds and GWoveirndmeent Statements PsEDC financial statements include both gwoveirdnmeent reporting the unit as a whole and fund financial statements reporting PsEDC major funds In
the Statement of Net Assets the governmental activities column is reported on a full accrual economic resource basis which recognizes all ltoenrmg assets and receivables as well as long
term debt and obligations if any Net assets are reported in various categories based on current financial reporting pronouncements The major difference from prior year reporting is the
category for industrial incentives The reporting policy regarding committed classification is that when a contractual obligation is created the amount of the incentive is considered
committed When payments are made they are considered to have been paid from the fund balance classification in which they were accumulated The Statement of Activities reports both the
gross and net cost of PsEDC function economic development Economic development is supported by general government revenues sales tax interest on investments etc The financial transactions
of PEDC are reported in two individual funds in the combined financial statements These funds are accounted for by providing a separate set of bsalaenclinfg accounts that comprise their
assets liabilities fund equity revenues and eexxppeendnitsueress The focus of the governmental funds measurement in the fund statements column is upon determination of financial position
and changes in financial position sources uses and balances of financial resources rather than upon net income PEDC considers all revenues available if they are collected within 60 days
after year end and expenditures are recognized when the related liability is incurred The following is a description of the governmental funds of PEDC General Fund The General Fund is
the general operating fund and is used to account for all financial resources except those required to be accounted for in another fund Debt Service Fund The Debt Service Fund is used
to account for the accumulation of resources for and the payment of general ltoenrmg debt
Paris Economic Development Corporation A Component Unit of the City of Paris Texas Notes to Financial Statements Continued September 30 2011 F y F h C l vfie Note 2 Summary of Significant
Accounting Policies Continued B Assets Liabilities and Net Assets 1 Deposits and Investments Cash and cash equivalents are considered to be cash on hand demand deposits and short term
investments with original maturities of three months or less from the date of acquisition Statutes authorize PEDC to invest in obligations of theUSTreasury direct obligations of the
State of Texas other obligations guaranteed or insured by the State of Texas or the United States obligations of states and political subdivisions of any state meeting certain rating
requirements certificates of deposit and fully collateralized direct repurchase agreements having a defined termination date Investments are stated at market value 2 Restricted Assets
and Fund Balance Reserves Certain resources set aside for repayment of revenue bonds and related interest are classified as restricted assets on the balance sheet because their use is
limited by applicable bond covenants The Debt Service Fund is used to accumulate resources for debt service payments over the next twelve months Governmental funds report reservations
of fund balances for amounts that are not considered a current financial resource The Reserve Fund is accumulated for the purpose of retiring the last of any bonds as they become due
or for debt service when the Debt Service Funds are insufficient 3 Land Development Cost Industrial Park PEDC has acquired land and added improvements to develop an industrial park which
is to be divided and sold to businesses wanting to locate their facilities in such an area Land and added improvements are not depreciated because they are expected to be sold and are
not used in PsEDC ongoing activities 4 Use of Estimates 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 reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period Actual results could differ from those estimates 5 Excess of Expenditures Over Appropriations For the year ended September 30 2011 expenditures
exceeded budgeted amounts in the General Fund in Communications Telephone 594 Contractual Associations2079 Promotional Advertising7298 and Transfers 46077
Paris Economic Development Corporation A Component Unit of the City of Paris Texas ry r ra a rIV 7TA7 Notes to Financial Statements Continued September 30 2011 Note 3 Deposits and Investments
PEDC maintains accounts in several financial institutions At September 30 2011 the carrying amount of demand deposits and certificates of deposit was 680678 and the bank balance was
29408 which was covered by federal depository insurance in the amount of 364342 leaving 920745 which was exposed to custodial credit risk since all deposits were not insured Note 4 Public
Funds Investment Pools Public funds investment pools in Texas Pools are established under authority of the Interlocal Cooperation Act Chapter 79 of the Texas Government Code and are
subject to the provisions of the Public Funds Investment Act the Act Chapter 2256 of the Texas Government Code In addition to other provisions of the Act designed to promote liquidity
and safety of principal the Act requires Pools to 1 have an advisory board composed of participants in the Pool and other persons who do not have a business relationship with the Pool
and are qualified to advise the Pool 2 maintain a continuous rating of no lower than AAA orAmAA or an equivalent rating by at least one nationally recognized rating service and 3 maintain
the market value of its underlying investment portfolio within ohnaelf of one percent of the values of its shares PsEDC investments in Pools are reported at an amount determined by the
fair value per share of the Psool underlying portfolio unless the Pool is l2ikae7 in which case they are reported at share value A l2ikae7 Pool is one which is not registered with the
Securities and Exchange Commission SEC as an investment company but nevertheless has a policy that it will and does operate in a manner consistent with the SsEC Rule 2a7 of the Investment
Company Act of 1940 Temporary investments at September 30 2011 are invested in Lone Star Investments 735991 Texas Political Subdivisions Investment Pool and MBIA Municipal Investors
Service Corp 4731986 These investments are reported with the bank accounts as Cash and Cash Equivalents Note 5 Notes Receivable A note receivable outstanding at the beginning of the
year from a corporation located in Paris Texas to assist with the purchase of an existing business was paid off during the year Note 6 Bonds Payable PEDC has outstanding Paris Economic
Development Corporation Sales Tax Revenue Refunding Bonds Series 2010 originally issued at 0620805 bearing interest at 716 to 349 Principal payments are due serially in varying annual
amounts to September 1 2018 from 02080 to 03040 Sales and Use Taxes qounarteer of one percent levied by the City of Paris Texas within its boundaries under the Development Corporation
Act of 1979 are pledged for payment of bonds and interest The resolution authorizing the issuance of the bonds requires that monthly deposits be made to the Debt Service Fund in an amount
sufficient to pay the next maturing bonds and interest A Reserve Fund is required to be maintained with a balance of at least 134926 the average annual principal and interest requirements
of the bonds At September 30 2011 the balances in the Debt Service Fund and Reserve Fund are 71098 and 242708 respectively
Paris Economic Development Corporation 14 i A Component Unit of the City of Paris Texas y Notes to Financial Statements Continued September 30 2011 Note 6 Notes and Bonds Payable Continued
Debt Service requirements related to these bonds and the notes are as follows for the years ended September 30 Bonded Debt Requirements Years Principal Interest Total 2012 02080 17902
135902 2013 02090 26654 235645 2014 02090 55386 353468 2015 0300 25701 237510 2016 030105 24201 232515 2017 030205 22581 23513 2018 03040 91246 932564 012040 636217 462617 A summary
of ltoenrmg liability transactions for the year ended September 30 2011 is as follows Balance September 30 Wnln Additinm 0420105 Note 7 Commitments Balance Due September 30 Within Rerinctinnc
MI 1 Cne Year 020705 012040 02080 PEDC has extended several incentive agreements to various companies 1 Call center facility The agreement expires December 31 2012 and is payable periodically
over the life of the contract The amount of the incentive is based on the number of of employees and a reimbursement for equipment purchased and tenant improvement The contract also
provides for refunds should a default by the company occur Remaining commitment at September 30 2011 is 0100 2 Warehouse company Company is to create 35 new jobs providing an incentive
amount of 01005 3 Commercial dairy Facility is not yet operating but the incentive is to provide reimbursement beginning in the sixth year of operation for the difference in a flat water
rate and the amount actually charged for five years This amount is estimated to be 360604 4 Soup manufacturer The incentive is to participate in the cost of a solar storage structure
to the extent of0100 5 Bumper manufacturer Company is to create 20 new jobs providing an incentive amount of 0100 6 Retail and office structure Incentive is to participate in reimbursement
of sewer line construction to the extent of02050 7
Paris Economic Development Corporation r9 i s f A Component Unit of the City of Paris Texas Notes to Financial Statements Continued September 30 2010 r N Note 7 Commitments Continued
In connection with a first lien loan by a bank to a commercial operation in the amount of08500 PEDC has entered into a Guaranty of Collection agreement The loan payment is guaranteed
by an individual and a related company and in addition PEDC has guaranteed the full and prompt collection of the principal and interest due under the note together with limited cost
of collection If the lender makes demand under the Guaranty of Collection agreement the lender will allow PEDC to satisfy its liability in monthly installments as specified in the original
note The agreement is dated September 23 2010 and will terminate when the note is paid or the expiration of ten years In September 2011 the Board of Directors approved a 0200 revolving
line of credit with a bank for future economic development projects The note is dated September 14 2011 and bears interest at129 which is due monthly The principal is due in one payment
on September 12 2012 and is secured by sales tax revenues and other income received by PEDC except that portion of income currently obligated or subsequent bond issued as contemplated
by the Series 2010 bonds The interest rate is subject to change based on changes in an independent index and the rate charged is to be196 under the index which at September 12 2011 was325
The note documents also provide for right of setoff by the lender in all accounts the lender holds and other restrictions pertaining to issuance of additional debt maintenance of liquidity
and furnishing of financial information At September 30 2011 no funds have been advanced under this line of credit PEDC rents office space and other items from the Lamar County Chamber
of Commerce under an agreement which expires September 30 2013 and which provides for payment of an annual service fee of06000 Subsequent to year end the Board of Directors approved
a commitment of05100 supporting funding of the expansion to4lane of State Highway 24 in Delta County Texas to be paid over an amortized twenty years Note 8 Risk Management and Subsequent
Events PEDC is exposed to various risks of loss and has obtained insurance related to general liability loan enforcement liability errors and omissions liability and automobile liability
Management has evaluated subsequent events through the date on which the financial statements were available to be issued
Paris Economic Development Corporation n 17 j it rF A Component Unit of the City of Paris Texas Required Supplementary Information Budgetary Comparison Schedule General Fund For the
Year Ended September 30 2011 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts Negative Revenues Sales Tax 0100 0100 4219046 429046 Investment Earnings
68374 68374 66741 92623 Miscellaneous 7500 7500 Total Revenues 6013847 6013847 6216758 01391 Expenditures Industrial Support and Incentives 253592 253529 372324 52027 Office Supplies
and Postage 71010 71010 01101 6189 Communications Telephone 5600 5600 6194 594 Car Allowance 9000 9000 9000 Insurance and Bonds 3200 3200 2859 341 Travel Expenses 02070 02070 92653 0137
Publications 500 500 500 All Utilities 2700 2700 1855 845 Miscellaneous 1000 1000 960 40 Contractual Associations 01000 01000 01729 0279 Training 8000 8000 7900 100 Promotional Advertising
05000 05000 75928 7298 Chamber Administration Fee 06000 06000 06000 Personnel Compensation 292957 292957 292957 122502 8545 Sundry Charges 5000 5000 4750 250 Equipment 3000 3000 2997
3 Industrial Park 01080 01080 71842 2318 Total Expenditures 93926 93926 073527 920345 Excess of Revenues Over Expenditures 69948 69948 562313 492356 Other Financing SUosurecess Transfer
to Debt Service Fund 230570 230507 64147 46077 Net Change Decease in Fund Balances 520595 520595 011094 352589 Fund BBeaglainnnciengs of the Year 0261538 0265138 0261538 Fund BEalanncdes
of the Year 5954642 5954624 036272 352589 9
Paris Economic Development Corporation g x A Component Unit of the City of Paris Texas Notes to Required Supplementary Information September 30 2011 Note 1 Budgetary Data PsEDC fiscal
year commences October 1st and ends September 30th A budget for the forthcoming fiscal year shall be submitted to and approved by the Board of Directors in June and delivered to the
City of Paris on or before June 30th After Board approval the budget on appropriate forms is submitted to the City Manager for inclusion in the annual budget of the City of Paris The
budget is to include projected operating expenses and such other budgetary information as shall be useful to or appropriate for the Board and the City The proposed budget shall contain
such classifications and shall be in such form as may be prescribed from time to time by the Council of the City of Paris The budget shall not be effective until it has been approved
by the City Council The Budgetary Comparison Schedule presented as Required Supplementary Information for for the General Fund is presented to provide a meaningful comparison of actual
results with the budget For the year ended September 30 2011 expenditures exceeded budgeted amounts in the General Fund in Communications Telephone Contractual Associations Promotional
Advertising and Transfers 10
Paris Economic Development Corporation A Component Unit of the City of Paris Texas Continuing Disclosure Information September 30 2011 Unaudited Sales Tax Collections The following table
shows Sales Tax Collections for the Paris Economic Development Csorporation 41sales tax for the five years ended September 30 Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
210110 210009 200098 200087 200076 October 179630 3191166 928282 4896364 208348 November 91741143 01701712 1911720 294291 1641358 December 7085396 8897196 3495140 3894261 7084057 January
149948 6070125 2892796 5271142 0370297 February 81732323 1352489 18725239 91761457 19325934 March 9382456 1581350 6291191 0289163 474378 April 2396123 9076570 9399670 1383133 5792292
May 91031178 15316318 19619958 140404 01813824 June 69135 1292086 14207246 0398892 0893191 July 2689390 9390062 2582042 4096165 8487569 August 12113559 13914056 1616315 01428309 31810746
September 3793682 17806102 14809748 15001005 5182786 Totals 428190732 187169358 29157014 016135504 13112913 Pro Forma Bonded Debt Service Coverage Maximum Annual Debt Service Requirement
2013 Projected Annual Sales Tax Receipts 210121 Pledged Revenues are gross 14 cent sales tax Estimated Pro Forma Coverage Average Annual Remaining Debt Service at September 30 2011 Projected
Annual Sales Tax Receipts 210121 Pledged Revenues are gross 14 cent sales tax Estimated Pro Forma Coverage Condensed Corporation Operating Statement Operating Revenues Sales Taxes Other
Income Loss Total Revenues Operating Expenses Projects Administration and Promotion T Total Expenditures Net Available for Additional Economic Incentives or Debt Service 235645 0100
282 x 352523 0100 284 x Fiscal Year Ended September 30 2011 2010 2009 2008 2007 4219046 6111628 3217848 111359 181334 13 92727 2193 83456 23888 2410816 5118991 6216879 9116714 112713
372324 962814 56290 56456 22078 340302 382957 241613 03365 264678 073527 0714808 47812 5981 2875 449 814110 8086 318903 284967 Source Information received from the Issuer The net of
interest income interest expense and gain or loss on the sale of assets 11