18 - APPROVED ANNUAL AUDIT OF THE PEDC FOR FY 2013-14Item No. 18
memorandum
TO: Mayor & City Council
John Godwin, City Manager
FROM: Paris EDC Board/Shannon Barrentine, Interim Executive Director
SUBJECT: APPROVED ANNUAL AUDIT OF THE PEDC FOR FY 2013 -14
DATE: February 9, 2015
BACKGROUND: The Paris EDC Board received the .Annual Audit for FY 2013 -14 performed
by McClanahan & Holmes CPAs at their monthly meeting held on January 13, 2015. No
deficiencies were found.
STATUS OF ISSUE: Approved Unanimously by Paris EDC Board on January 13, 2015.
BUDGET: See Audit Report for FY 2013 -14, attached.
RECOMMENDATION: Approve as recommended.
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Independent Auditors' Report
and Financial Statements
Communications with Those Charged with Governance
Year Ended September 30, 2014
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Table of Contents
September 30, 2014
Independent Auditors' Report
Financial Statements:
Governmental Funds Balance Sheet/Statement of Net Position
Statement of Revenues, Expenditures, and Changes in Fund Balances/
Statement of Activities 4
Notes to Financial Statements
Required Supplementary Information — Budgetary Comparison Schedule -
General Fund 10
Notes to Required Supplementary Information
11
Continuing Disclosure Information (Unaudited) 12
McClanahan and Holmes, LLP
CERTIFIED PUBLIC ACCOUNTANTS
R. E. BOSTWICK, CPA
STEVEN W. MOHUNDRO, CPA
GEORGE H. STRUVE, CPA
ANDREW B. REICH, CPA
RUSSELL P. WOOD, CPA
DEBRA J. WILDER, CPA
Independent Auditors' Report
Board of Directors
Paris Economic Development Corporation
Paris, Texas
228 SIXTH STREET S.E.
PARIS, TEXAS 75460
903 -784 -4316
FAX 903 - 7844310
304 WEST CHESTNUT
DENISON, TEXAS 75020
903 -465 -6070
FAX 903 - 465 -6093
1400 WEST RUSSELL
BONHAM, TEXAS 75418
903 -583 -5574
FAX 903- 583 -9453
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, 2014, 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.
Auditors' Responsibility
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 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 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
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
opinion.
Board of Directors
Paris Economic Development Corporation
Page 2
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, 2014, and the results of its operations 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.
Additional Information
Accounting principles generally accepted in the United States of America require that the Budgetary Comparison
Schedule on page 10 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 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.
Management has not presented Management's Discussion and Analysis that governmental 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 financial reporting for
placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion
on the basic financial statements is not affected by this missing information.
`Jc,NA.1� AIJ A&"', L��
Certified Public Accountants
January 5, 2015
Paris, Texas
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Governmental Funds Balance Sheet/Statement of Net Position
September 30, 2014
*Primarily long -term liabilities not reported in the funds.
The notes to financial statements are an integral part of this statement.
3
Total
Total
Debt Service
Governmental
Governmental
General Fund
Fund
Funds
Adjustments*
Activities
Assets
Cash and Cash Equivalents
$
754,976
$ -
$ 754,976
$ -
$ 754,976
Certificates of Deposit
285,003
-
285,003
-
285,003
Taxes Receivable
216,000
-
216,000
-
216,000
Restricted Assets:
Bond Debt Service Fund
Cash and Cash Equivalents
-
66,496
66,496
-
66,496
Bond Reserve Fund
Cash and Cash Equivalents
-
472,564
472,564
-
472,564
Land Development Costs
1,655,772
-
1,655,772
-
1,655,772
Total Assets
$
2,911,751
$ 539,060
$ 3,450,811
-
3,450,811
Liabilities
Accounts Payable
$
5,679
$ -
$ 5,679
-
5,679
Liabilities Payable from Restricted Assets
Current Portion of Bonds Payable
-
-
-
(300,000)
300,000
Accrued Interest Payable
-
-
-
(4,189)
4,189
Bonds Payable, Net of Current Portion
-
-
-
(980,000)
980,000
Total Liabilities
5,679
-
5,679
(1,284,189)
1,289,868
Fund Balance/Net Position
Fund Balance:
Nonspendable -Land Development Costs
1,655,772
-
1,655,772
1,655,772
-
Restricted for Debt Service
-
539,060
539,060
539,060
-
Committed to Industrial Incentives
1,749,546
-
1,749,546
1,749,546
-
Unassigned
(499,246)
-
(499,246)
(499,246)
-
Total Fund Balance
2,906,072
539,060
3,445,132
3,445,132
-
Total Liabilities and Fund Balance
$
2,911,751
$ 539,060
$ 3,450,811
Net Position:
Restricted for Land Development Costs
(1,655,772)
1,655,772
Restricted for Debt Service
(234,871)
234,871
Restricted for Industrial Incentives
(1,749,546)
1,749,546
Unrestricted
1,479,246
(1,479,246)
Total Net Position
$ (2,160,943)
$ 2,160,943
*Primarily long -term liabilities not reported in the funds.
The notes to financial statements are an integral part of this statement.
3
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Statement of Revenues, Expenditures, and Changes in Fund Balances /Statement of Activities
Year Ended September 30, 2014
Revenues
Sales Taxes
Investment Earnings
Total Revenues
Expenditures/Expenses
Current:
Personnel
Administration
Marketing and Promotion
Direct Business Incentives
Debt Service:
Principal
Interest
Fees
Total Expenditures/Expenses
Excess (Deficiency) of Revenues Over
Expenditures/Expenses
Other Financing Sources (Uses)
Transfers - Internal Activities
Interest Income
Interest Expense
Total Other Financing Sources (Uses)
Net Change in Fund Balances/Net Position
Fund Balances/Net Position - Beginning
Debt Service
General Fund Fund
$ 1,282,550 $ -
1,596 1,379
1,284,146 1,379
Total Total
Governmental Governmental
Funds Adjustments* Activities
$ 1,282,550 $ $ 1,282,550
2,975 2,975
1,285,525 1,285,525
137,270
-
137,270
-
137,270
189,107
-
189,107
-
189,107
22,516
-
22,516
-
22,516
2,450,244
-
2,450,244
-
2,450,244
-
290,000
290,000
(290,000)
-
-
58,536
58,536
(689)
57,847
-
750
750
-
750
2,799,137
349,286
3,148,423
(290,689)
2,857,734
(1,514,991)
(347,907)
(1,862,898)
(290,689)
(1,572,209)
(376,750)
376,750
-
-
59,965
-
59,965
59,965
(21,715)
-
(21,715)
-
(21,715)
(338,500)
376,750
38,250
38,250
(1,853,491)
28,843
(1,824,648)
(290,689)
(1,533,959)
4,759,563
510,217
5,269,780
1,574,878
3,694,902
Fund Balances/Net Position - Ending $ 2,906,072 $ 539,060 $ 3,445,132 $ 1,284,189 $ 2,160,943
*Primarily long -term liabilities not reported in the funds.
The notes to financial statements are an integral part of this statement.
4
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Notes to Financial Statements
September 30, 2014
Note 1: Organization
The Paris Economic Development Corporation (PEDC) is a governmental non - profit 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 five- member 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 of the more significant
accounting policies:
Financial Statements — Combined Governmental Funds and Government - Wide Statements
PEDC's financial statements include both government -wide (reporting the unit as a whole) and
fund financial statements (reporting PEDC's major funds).
In the Statement of Net Position, the governmental activities column is reported using the accrual
basis of accounting and an economic resources measurement focus, which recognizes all long-
term assets and receivables as well as long -term debt and obligations, if any. Net position is
reported in various categories based on current financial reporting pronouncements. The
reporting policy regarding committed classification is that when a contractual obligation is
created by the governing board, 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 PEDC's function (economic
development). Economic development is supported by general government revenues (sales tax
and interest on investments).
The financial transactions of PEDC are reported in two individual funds in the combined financial
statements using the current financial resources measurement focus and the modified accrual
basis of accounting. These funds are accounted for by providing a separate set of self - balancing
accounts that comprise their assets, liabilities, fund equity, revenues, and expenditures. 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 sixty 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 long -term debt.
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Notes to Financial Statements
September 30, 2014
Note 2: Summary of Significant Accounting Policies (continued)
B. Assets, Liabilities, and Net Position
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 the U.S. Treasury, 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 Bond 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 Bond Reserve Fund is accumulated for the purpose of retiring the last of any bonds as
they become due or for debt service when the Bond Debt Service Funds are insufficient.
3) Land Development Costs — 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 or used as
incentives and are not used in PEDC's 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, 2014, expenditures did not exceed appropriations (budget)
in any function or line item.
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Notes to Financial Statements
September 30, 2014
Note 3: Deposits and Investments
PEDC maintains accounts in several financial institutions. At September 30, 2014, the carrying
amount of demand deposits and certificates of deposit was $901,925 and the bank balance was
$837,465, which was covered by federal depository insurance for $683,395 and pledged securities of
$1,000,000.
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 raring of no lower than AAA or AAAm or an equivalent rating by at least one nationally
recognized rating service; and 3) maintain the market value of its underlying investment portfolio
within one -half of one percent of the values of its shares.
PEDC's investments in Pools are reported at an amount determined by the fair value per share of the
Pool's underlying portfolio, unless the Pool is 20-like, in which case they are reported at share
value. A 20-like 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 SEC's Rule 2a7 of the Investment Company Act of 1940. Financial
statements for the Texas CLASS investment pool can be found at TexasClass.com.
Investments at September 30, 2014, are invested in Lone Star Investments, $390,902, (Texas
Political Subdivisions Investment Pool) and Texas CLASS, $285,912. These investments are
reported with the bank accounts as Cash and Cash Equivalents. Investments in the Lone Star
investment pool and Texas CLASS investment pool are not insured or guaranteed by the Federal
Deposit Insurance Corporation (FDIC) or any other government agency.
Note 5: Bonds Payable
PEDC has outstanding Paris Economic Development Corporation Sales Tax Revenue Refunding
Bonds, Series 2010, originally issued at $2,685,000, bearing interest at 2.32% to 4.39 %. Principal
payments are due serially in varying annual amounts to September 1, 2018, from $300,000 to
$340,000.
Sales and Use Taxes (one - quarter 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 $353,417, the average annual
principal and interest requirements of the bonds. At September 30, 2014, the balances in the Debt
Service Fund and Reserve Fund are $66,496 and $472,564, respectively.
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Notes to Financial Statements
September 30, 2014
Note 5: Bonds Payable (continued)
Debt Service requirements related to these bonds are as follows for the years ended September 30:
$ 1,280,000 $ 133,669 $ 1,413,669
A summary of long -term liability transactions for the year ended September 30, 2014, is as follows:
Due
Balance Balance Within
9/30/13 Additions Reductions 9/30/14 One Year
$ 1,570,000 $ - $ 290,000 $ 1,280,000 $ 300,000
Note 6: Pension Plan
PEDC contributes to a simplified employee pension plan for its employees, administered by Edward
Jones. The contribution rate is 5% and amounted to $5,189 during the year ended September 30,
2014.
Note 7: Commitments
PEDC has extended several incentive agreements to various companies and other commitments:
(1) Warehouse Company - Company is to create 35 new jobs providing an incentive amount of
$105,000 of which $30,000 remains to be satisfied as of September 30, 2014.
(2) Commercial Dairy - The incentive is to provide cash payments for creating 150 new jobs in Paris
and Lamar County for five years. This amount is estimated to be $664,300 and expected to
begin in 2017.
(3) Truck Accessories - Company is to open a manufacturing facility in Paris, Texas, and create 15
new jobs. The incentive is for $324,250 for new jobs, training, and infrastructure. At September
30, 2014, $14,746 of the incentive remains to be satisfied. PEDC has also executed a guaranty
in connection with a $75,000 note to a bank.
(4) Retail and Office Structure - Incentive is to participate in reimbursement of sewer line
construction to the extent of $250,000.
8
Bonded Debt Requirements
Years
Principal Interest
Total
2015
$ 300,000 $ 50,271
$ 350,271
2016
315,000 40,221
355,221
2017
325,000 28,251
353,251
2018
340,000 14,926
354,926
$ 1,280,000 $ 133,669 $ 1,413,669
A summary of long -term liability transactions for the year ended September 30, 2014, is as follows:
Due
Balance Balance Within
9/30/13 Additions Reductions 9/30/14 One Year
$ 1,570,000 $ - $ 290,000 $ 1,280,000 $ 300,000
Note 6: Pension Plan
PEDC contributes to a simplified employee pension plan for its employees, administered by Edward
Jones. The contribution rate is 5% and amounted to $5,189 during the year ended September 30,
2014.
Note 7: Commitments
PEDC has extended several incentive agreements to various companies and other commitments:
(1) Warehouse Company - Company is to create 35 new jobs providing an incentive amount of
$105,000 of which $30,000 remains to be satisfied as of September 30, 2014.
(2) Commercial Dairy - The incentive is to provide cash payments for creating 150 new jobs in Paris
and Lamar County for five years. This amount is estimated to be $664,300 and expected to
begin in 2017.
(3) Truck Accessories - Company is to open a manufacturing facility in Paris, Texas, and create 15
new jobs. The incentive is for $324,250 for new jobs, training, and infrastructure. At September
30, 2014, $14,746 of the incentive remains to be satisfied. PEDC has also executed a guaranty
in connection with a $75,000 note to a bank.
(4) Retail and Office Structure - Incentive is to participate in reimbursement of sewer line
construction to the extent of $250,000.
8
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Notes to Financial Statements
September 30, 2014
Note 7: Commitments (continued)
(5) In connection with a first lien loan by a bank to a commercial operation in the amount of
$5,800,000, 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.
(6) Bakery - In December 2013, the Board of Directors reached an incentive agreement for training
reimbursement and cash for new job creation of $1,179,000, of which $790,500 remains to be
satisfied as of September 30, 2014.
Note 8: Interfund Transfers
During the year, transfers are used to move revenues from the fund with collection authorization to
the Debt Service Fund as debt service principal and interest payments become due. The interfund
transfers are reported as Other Financing Sources (Uses).
Note 9: 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.
Revenues
Sales Taxes
Investment Earnings
Total Revenues
Expenditures
Current:
Personnel
Administration
Marketing and Promotion
Job Training
Direct Business Incentives
Total Expenditures
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Required Supplementary Information
Budgetary Comparison Schedule - General Fund
Year Ended September 30, 2014
Budgeted Amounts
Actual
Variance with
Original
Final
Amounts
Final Budget
(349,286)
(376,750)
(27,464)
$ 1,200,000
$ 1,200,000
$ 1,282,550
$ 82,550
1,500
1,500
1,596
96
1,201,500
1,201,500
1,284,146
82,646
(359,286)
(338,500)
20,786
Net Change in Fund Balances
253,625
138,450
137,270
1,180
111,200
210,405
189,107
21,298
97,995
29,395
22,516
6,879
5,000
35,000
-
35,000
2,852,746
2,693,246
2,450,244
243,002
3,320,566
3,106,496
2,799,137
307,359
Excess (Deficiency) of Revenues Over Expenditures (2,119,066) (1,904,996) (1,514,991) 390,005
Other Financing Sources (Uses)
Transfers to Debt Service Fund
(348,536)
(349,286)
(376,750)
(27,464)
Interest Income
13,500
13,500
59,965
46,465
Interest Expense
-
(23,500)
(21,715)
1,785
Total Other Financing Sources (Uses)
(335,036)
(359,286)
(338,500)
20,786
Net Change in Fund Balances
(2,454,102)
(2,264,282)
(1,853,491)
410,791
Fund Balances - Beginning
4,759,563
4,759,563
4,759,563
-
Fund Balances - Ending
$ 2,305,461
$ 2,495,281
$ 2,906,072 $
410,791
ffil
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Notes to Required Supplementary Information
September 30, 2014
Note 1: Budgetary Data
PEDC's fiscal year commences October l st 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 of Paris.
The proposed budget shall contain such classifications and shall be in such form as may be prescribed
from time to time by the City 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 the General
Fund is presented to provide a meaningful comparison of actual results with the budget. For the year
ended September 30, 2014, expenditures did not exceed appropriations (budget) in any function or line
item.
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Continuing Disclosure Information
September 30, 2014
(Unaudited)
Sales Tax Collections
The following table shows Sales Tax Collections for the Paris Economic Development Corporation's 1/4% sales tax for the
five years ended September 30:
Pro Forma Bonded Debt Service Coverage
Maximum Annual Debt Service Requirement (2016)
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Estimated Pro Forma Coverage
2014
2013
2012
2011
2010
October
$ 97,701.57
$ 97,3]0.53
$ 95,420.37
$ 93,160.73
$ 91,316.16
November
114,348.83
112,362.90
107,894.61
113,944.71
112,001.77
December
100,022.29
87,692.97
85,472.54
83,756.09
81,876.99
January
99,144.63
93,398.77
95,604.34
94,198.44
72,605.01
February
139,328.22
135,537.65
128,112.10
123,832.73
129,328.54
March
83,304.86
87,514.04
86,791.28
84,926.35
85,110.53
April
94,682.24
92,841.95
89,313.73
91,263.32
77,960.05
May
127,251.18
123,708.09
116,340.62
118,937.01
118,561.33
June
99,797.86
98,039.23
90,696.91
93,615.93
90,126.28
July
100,455.16
106,267.35
97,350.69
89,290.63
90,902.36
August
116,746.73
114,731.18
111,539.71
119,235.15
115,346.90
September
103,766.17
106,635.71
98,234.76
96,332.78
100,762.81
Totals
$ 1,276,549.74
$ 1,256,040.37
$ 1,202,771.66
$ 1,202,493.87
$ 1,165,898.73
Pro Forma Bonded Debt Service Coverage
Maximum Annual Debt Service Requirement (2016)
$ 355,221
Projected Annual Sales Tax Receipts 2014 -15
$ 1,250,000
(Pledged Revenues are Gross 1/4 Cent Sales Tax)
Estimated Pro Forma Coverage
3.52 x
Average Annual Remaining Debt Service at September 30, 2014
$ 353,417
Projected Annual Sales Tax Receipts 2014 -15
$ 1,250,000
(Pledged Revenues are Gross 1/4 Cent Sales Tax)
Estimated Pro Forma Coverage
3.54 x
Condensed Corporation Operating Statement
Fiscal Year Ended September 30,
2014 2013 2012 2011 2010
Operating Revenues:
Sales Taxes $ 1,282,550 $ 1,261,040 $ 1,198,772 $ 1,206,494 $ 1,168,612
Other Income (Loss) (1) 41,225 6,497 (51,210) (13) 22,977
Total Revenues 1,323,775 1,267,537 1,147,562 1,206,481 1,191,589
Operating Expenses:
Projects 2,450,244 194,883 1,757,106 (2) 324,732 684,921
Administration, Personnel
and Promotion 348,893 602,356 730,349 432,300 395,827
Total Expenses 2,799,137 797,239 2,487,455 757,032 1,080,748
Net Available for Additional
Economic Incentives or
Debt Service $ (1,475,362) $ 470,298 $ (1,339,893) $ 449,449 $ 110,841
Source: Information received from the Issuer.
(1) The net of interest income, interest expense, and gain or loss on the sale of assets.
(2) Includes a one -time contribution to a regional highway project for $1,488,588.
12
Paris Economic Development Corporation
(A Component Unit of the City of Paris, Texas)
Communications with Those Charged with Governance
Year Ended September 30, 2014
McClanahan and Holmes, LLP
CERTIFIED PUBLIC ACCOUNTANTS
R. E. BOSTWICK, CPA
228 SIXTH STREET S.E.
STEVEN W. MOHUNDRO, CPA
PARIS, TEXAS 75460
GEORGE H. STRUVE, CPA
903 - 784 -4316
ANDREW B. REICH, CPA
FAX 903 - 784 -4310
RUSSELL P. WOOD, CPA
DEBRA J. WILDER, CPA
304 WEST CHESTNUT
DENISON, TEXAS 75020
903 -465 -6070
FAX 903 -465 -6093
1400 WEST RUSSELL
BONHAM, TEXAS 75418
903- 583 -5574
FAX 903 - 583 -9453
Board of Directors
Paris Economic Development Corporation
Paris, Texas
We have audited the financial statements of the Paris Economic Development Corporation (PEDC) for the
year ended September 30, 2014. Professional standards require that we provide you with information about
our responsibilities under generally accepted auditing standards, as well as certain information related to the
planned scope and timing of our audit. We have communicated such information in our engagement letter
to you dated October 6, 2014. Professional standards also require that we communicate to you the
following information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by PEDC are described in notes to the financial statements. No new accounting
policies were adopted and the application of existing policies was not changed during the year ended
September 30, 2014. We noted no transactions entered into by PEDC during the year for which there is a
lack of authoritative guidance or consensus. All significant transactions have been recognized in the
financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are based
on management's knowledge and experience about past and current events and assumptions about future
events. Certain accounting estimates are particularly sensitive because of their significance to the financial
statements and because of the possibility that future events affecting them may differ significantly from
those expected. The most sensitive estimates affecting the financial statements were sales tax receivable
and accrued interest payable.
Certain financial statement disclosures are particularly sensitive because of their significance to the
financial statement users. The most sensitive disclosures affecting the financial statements were debt and
commitments.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our
audit.
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Paris Economic Development Corporation
Page 2
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the
audit, other than those that are clearly trivial, and communicate them to the appropriate level of
management. Management has corrected all such misstatements. In addition, none of the misstatements
detected as a result of audit procedures and corrected by management were material, either individually or
in the aggregate, to each opinion unit's financial statements taken as a whole. PEDC prepares its budget and
maintains its general ledger primarily on a cash basis while the year -end financial reports are prepared on a
modified accrual or accrual basis. At year end, we are provided information to convert the cash basis to
accrual basis for financial statement presentation. In addition, a receivable from the prior year was deemed
to not be collectible and was written off.
Debit Credit
Sales Tax Receivable $ 6,000
Direct Business Incentives 46,744
Sales Tax Revenue $ 6,000
Other Receivable 46,744
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing
matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the
auditors' report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated January 5, 2014.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting
matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application
of an accounting principle to the governmental unit's financial statements or a determination of the type of
auditor's opinion that may be expressed on those statements, our professional standards require the
consulting accountant to check with us to determine that the consultant has all the relevant facts. To our
knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing
standards, with management each year prior to retention as the governmental unit's auditors. However,
these discussions occurred in the normal course of our professional relationship and our responses were not
a condition to our retention.
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Paris Economic Development Corporation
Page 3
Other Matters
With respect to the supplementary information accompanying the financial statements, we made certain
inquiries of management and evaluated the form, content, and methods of preparing the information to
determine that the information complies with accounting principles generally accepted in the United States
of America, the method of preparing it has not changed from the prior period, and the information is
appropriate and complete in relation to our audit of the financial statements. We compared and reconciled
the supplementary information to the underlying accounting records used to prepare the financial statements
or to the financial statements themselves.
This information is intended solely for the use of management, board of directors, and others within the
organization and is not intended to be, and should not be, used by anyone other than these specified parties.
Paris, Texas
January 5, 2015
gtg� , pa" Zed
Certified Public Accountants
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS