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Comprehensive Annual Financial Report - June 30, 2018 City of Monroe, North Carolina Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2018 Prepared By Department of Finance Director of Finance Lisa Strickland Accounting Manager Ashley Ivey                       Page INTRODUCTORY SECTION Letter of Transmittal ix-xvi GFOA's Certificate of Achievement for Excellence in Financial Reporting xvii List of Principal Officials xviii Organizational Chart xix FINANCIAL SECTION Independent Auditor's Report 1-3 Management's Discussion and Analysis 5-16 Financial Statements: Exhibit Government-Wide Financial Statements: 1 Statement of Net Position 18-19 2 Statement of Activities 20-21 Fund Financial Statements: 3 Balance Sheet - Governmental Funds 22 4 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 23 5 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 24 6 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 25 7 Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund 27 8 Statement of Net Position - Proprietary Funds 28-29 CITY OF MONROE, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2018 TABLE OF CONTENTS CITY OF MONROE, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2018 TABLE OF CONTENTS Exhibit Page 9 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds 30-31 10 Statement of Cash Flows - Proprietary Funds 32-35 Notes to the Financial Statements 36-92 Required Supplemental Financial Data: Law Enforcement Officers' Special Separation Allowance Schedule of Changes in Total Pension Liability 93 Law Enforcement Officers' Special Separation Allowance Schedule of Total Pension Liability as a Percentage of Covered Payroll 94 Other Post-Employment Benefits Schedule of Changes in the Total OPEB Liability and Related Ratios 95 Local Government Employees' Retirement System City of Monroe's Proportionate Share of Net Pension Liability (Asset) - Last Five Fiscal Years 96 Local Government Employees' Retirement System City of Monroe's Contributions - Last Five Fiscal Years 97 Other Supplemental Information: Major Governmental Funds Budgetary Schedule: Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund 99-101 Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds: Combining Balance Sheet 104-105 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 106-107 CITY OF MONROE, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2018 TABLE OF CONTENTS Page Nonmajor Governmental Funds Budgetary Schedules: Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Special Revenue Fund - Community Development 108 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Special Revenue Fund - Downtown Monroe 109 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Special Revenue Fund - Monroe Union County Economic Development 110 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Capital Projects Fund - Capital Projects 111 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Capital Projects Fund - Occupancy Tax Capital Projects 112 Fund Balances - Budget and Actual - Capital Projects Fund - Governmental Capital Reserve 113 Major Enterprise Funds Budgetary Schedules: Schedule of Revenues and Expenditures - Budget and Actual - (NON-GAAP): Water and Sewer Fund 114-116 Water and Sewer Capital Projects Funds - Capital Reserve 117 Water and Sewer Capital Projects Funds 118 Electric Fund 119-121 Electric Capital Projects Fund - Capital Projects 122 Natural Gas Fund 123-125 Natural Gas Capital Projects Fund - Capital Projects 126 Airport Fund 127-129 Airport Capital Projects Fund - Capital Projects 130 CITY OF MONROE, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2018 TABLE OF CONTENTS Page Nonmajor Enterprise Funds: Combining Statement of Net Position 131 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 132 Combining Statement of Cash Flows 133 Nonmajor Enterprise Funds Budgetary Schedules: Schedule of Revenues and Expenditures - Budget and Actual - (NON-GAAP): Aquatics and Fitness Center Fund 134-135 Stormwater Fund 136-137 Stormwater Management Capital Projects Fund - Capital Projects 138 Solid Waste Fund 139-140 Internal Service Funds: Combining Statement of Net Position 141 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 142 Combining Statement of Cash Flows 143 Internal Service Funds Budgetary Schedules: Schedule of Revenues and Expenditures - (NON-GAAP): Health and Dental Fund 144 Workers' Compensation Fund 145 Property and Liability Fund 146 Other Schedules: Schedule of Ad Valorem Taxes Receivable 147 Analysis of Current Tax Levy - City-Wide Levy 148 Schedule of Municipal Service District Taxes Receivable 149 Analysis of Current Tax Levy - Municipal Service District Levy 150 STATISTICAL SECTION Financial Trends: Net Position by Component 153 Changes in Net Position 154-155 Fund Balances, Governmental Funds 156 Changes in Fund Balances, Governmental Funds 157 CITY OF MONROE, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2018 TABLE OF CONTENTS Page Revenue Capacity: Assessed Value and Actual Value of Taxable Property 158 Direct and Overlapping Property Tax Rates 159 Principal Property Taxpayers 160 Property Tax Levies and Collections 161 Debt Capacity: Ratios of Outstanding Debt by Type 162 Ratios of General Bonded Debt Outstanding 163 Direct and Overlapping Governmental Activities Debt 164 Legal Debt Margin Information 165 Pledged-Revenue Coverage 166 Demographic and Economic Information: Demographic and Economic Statistics 167 Principal Employers 168 Operation Information: Full-Time Equivalent City Government Employees by Function 169 Operating Indicators by Function 170 Capital Asset Statistics by Function 171 COMPLIANCE SECTION Report On Internal Control Over Financial Reporting And On Compliance And Other Matters Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards 173-174 Report On Compliance for Each Major Federal Program; Report On Internal Control Over Compliance; In Accordance With Uniform Guidance; and the State Single Audit Implementation Act 175-176 Report on Compliance for Each Major State Program; Report On Internal Control Over Compliance; In Accordance With Uniform Guidance; and the State Single Audit Implementation Act 177-179 Schedule of Findings, Responses, and Questioned Costs 180-184 Schedule of Prior Year Audit Findings 185 Schedule of Expenditures of Federal and State Awards 186-187                       Introductory Section  Letter of Transmittal  Certificate of Achievement for Excellence in Financial Reporting  List of Principal Officials  Organizational Chart                       monroenc.org • 704-282-4500 • PO Box 69, Monroe, NC 28111 October 29, 2018 To the Honorable Mayor Bobby Kilgore, Members of the City Council, and Citizens of the City of Monroe: We are pleased to present to you the Comprehensive Annual Financial Report (“CAFR”) of the City of Monroe for the fiscal year ended June 30, 2018. The financial statements and supplemental schedules have been audited by the independent certified public accounting firm of Martin Starnes & Associates, CPA’s, P.A. and that firm’s unmodified report is presented as the first component of the Financial Section of this report. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed information is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds of the City. All disclosures necessary to enable the reader to gain an understanding of the City’s financial activities have been included. The financial statements have been prepared in compliance with the applicable requirements of the General Statutes of North Carolina and are consistent with the standards and guidelines recognized for governmental accounting and reporting contained in both Audits of State and Local Governments, and audit guide prepared by the Committee of Governmental Accounting of the American Institute of Certified Public Accountants (AICPA), and Government Auditing Standards, issued by the Comptroller of the United States. Among other resources used in the preparation of the CAFR, the Finance Department has given particular attention to the Governmental Accounting, Auditing and Financial Reporting (GAAFR), issued by the Government Finance Officers Association of the United States and Canada (GFOA) and Governmental Accounting Standards Board (GASB) pronouncements. Management’s Discussion and Analysis (“MD&A”) immediately follows the independent auditors report and provides a narrative introduction, overview and analysis of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it. The goal of the annual independent audit is to provide reasonable assurance that the financial statements of the City for the fiscal year are free from material misstatement. The independent audit involves examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The City is also required to undergo an annual compliance audit on federal and state financial assistance programs in conformity with the provisions of the State Single Audit Implementation Act and the U.S. Office of Management and Budget Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. The auditor’s reports and the Schedule of Expenditures of Federal and State Awards, required as part of a single audit, are found in the Compliance Section of this report. The Reporting Entity In conformity with the standards of GASB, the City of Monroe includes all funds, agencies, boards, commissions and authorities that are controlled by or are financially dependent upon the City. Component units are legally separate entities for which the primary government is financially accountable or for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. The primary Government is considered financially accountable if it appoints a voting majority of the organization’s governing body; and 1) it is able to impose its will on that organization, or 2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burden on the primary government. Discretely presented component units are reported in a separate column in the Government-wide financial statements to emphasize that they are legally separate from the primary government and to distinguish their financial position, results of operations, and cash flows from those of the City. The City of Monroe has included the City of Monroe ABC Board and the Monroe Tourism Development Authority as discretely presented component units. The governing members of both of these units are appointed by the City Council. Additional information on these legally separate reporting entities can be found in the Notes to the Financial Statements. ix Organization of Government The City of Monroe was established in 1844, and is located near the center of Union County in the Southern Piedmont region of North Carolina. The City is a diverse community of over 35,000 residents, and has an incorporated area of over 29 square miles. Monroe serves as the County seat for Union County, and is the County’s largest municipality. Monroe’s corporate limits are approximately seven miles southeast of Charlotte. The City Council may involuntarily annex property into the corporate limits so long as requirements set forth in North Carolina general statutes are met. North Carolina requires that those subject to an involuntary annexation have the opportunity to approve or reject the involuntary annexation initiated by the municipality by referendum. Annexed areas are also required to be guaranteed fire, police, and solid waste services immediately upon annexation and provisions for water and sewer service within three and one-half years of annexation. Voluntary annexations may also be considered and approved at the discretion of City Council, following all statutory requirements. The City is organized under a Council-Manager form of government, with a six-member City Council and Mayor serving as the governing body, and who are responsible for policy-making and establishing legislative authority. Council members are elected on a non-partisan basis to staggered four-year terms. The Mayor is elected to serve a two-year term, and is a full voting member on the City Council. The City Council is responsible for passing ordinances, adopting the annual budget, appointing committees, and appointing the City Manager, City Attorney, City Clerk and Tax Collector. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the daily operations of the government, and for selecting the department heads to manage the various City departments. The City provides numerous services for its citizens including airport operations, cultural and recreational activities, general administration, planning, zoning, economic development, building inspections, code enforcement, police, fire, sanitation, cemetery management, tourism, public works, stormwater, and street maintenance. The City also provides and maintains electric, natural gas, water, and sanitary sewer utilities for the benefit of its citizens and businesses. This report includes the fiscal activities of the City in the provision of these services. The City takes pride in the services offered to our citizens, and the mission of City staff is to provide reliable, responsive, quality service to our customers at the lowest reasonable cost. We accomplish this through professional and courteous service consistent with making Monroe a vibrant and progressive community. City staff strives to be proactive in addressing the various needs of the community, and adheres to the guiding principles of Teamwork, Customer Service, Respect, and Accountability. The City also provides financial support to certain boards, agencies and commissions to assist their efforts in serving our citizens. Organizations that receive support from the City include the American Red Cross, HealthQuest of Union County, Monroe Athletic Foundation, Community Health Services of Union County, Union County Crisis Assistance Ministry, Union County Habitat for Humanity, Union County Community Arts Council, Council on Aging in Union County, the Monroe-Union County Community Development Corporation, the Union County Historic Preservation Commission, Turning Point, Union County Community Action, Inc., the Literacy Council of Union County, the Union County Community Shelter, Arc of Union County, the Police Athletic League, Alliance for Children, Central Academy of Technology and Arts Band, the Humane Society of Union County, Inc., the Union County Youth Ballet and Artists Music Guild. Economic Condition and Outlook Monroe’s manufacturing and commercial base has capitalized on the current economic expansion. New and existing industries have announced nearly $129 million in new capital investments in manufacturing equipment, facility expansions and relocations over the last 24 months. Manufacturing expansion announcements of note in Monroe include: Consolidated MetCo - $50 Million final assembly and distribution facility; ATI Specialty Materials - $20 Million equipment investment; and Charlotte Pipe & Foundry - $22 Million expansion of manufacturing footprint. Monroe continues to evolve as a center for business investment and job creation. Monroe’s workforce is diverse, consisting of industrial, construction, agricultural, and retail employment. The City’s economic base includes major employers involved in aerospace, plastics, healthcare, food processing, professional services, and education. The City maintains a small town atmosphere and enjoys the benefits of being part of the Charlotte metropolitan region. While serving as a significant regional employment and commercial center, Monroe residents also make up nearly 66% of the total industrial workforce in Union County. x Monroe has achieved regional, national and international recognition. Accolades include: Top 10 County for Job Creation Nationally Since 2000 – CNN/Money.com; 18+ Years Lowest Unemployment in the Charlotte Region – NC Department of Commerce, Division of Employment Security; and #1 Aerospace Cluster in North Carolina – NC Department of Commerce. Executive Director, Chris Platé, was named 2016 NC Economic Developer of the Year and currently serves on the Board of Directors of the NC Economic Development Association (NCEDA). Monroe has evolved into a premier location for precision manufacturing. Nearly 15% of the industrial base and 23% of the manufacturing employment is deep-rooted in aerospace, resulting in the highest geographic concentration of aerospace companies in North Carolina (NC Department of Commerce). Also, Monroe’s industrial base is international with 10 countries represented among 16 companies. The continued investment among the community’s existing firms, as well as newly-located operations, shows that Monroe’s economy is strong. It is now reaping the rewards of its unwavering commitment to creating a pro-business environment in which manufacturers prosper. Major Initiatives The City of Monroe has been involved in many significant initiatives during the past fiscal year. The City Council has identified and addressed key issues that are of importance to the future of the City, including utility planning for water, wastewater, electric, and natural gas demands brought on by system growth. The City has developed a fifteen year rate model for projecting water and wastewater rates to address the impact of future capital improvement projects on the City’s rate structure. The goal is to achieve incremental single digit rate increases rather than large rate increases in the year infrastructure is financed. The Water Resources Department continues to monitor economic condition and growth potential and adjust strategic capital project initiatives to match growth projections. A capital reserve fund has also been established to meet long term capital improvement needs. Current initiatives are focusing on system sustainability and asset management programs. The Department recently accepted an NCDEQ grant to develop an asset management and mobile work order system. The renewal and replacement of aging water and wastewater pipeline infrastructure is a priority and the city continues to use innovative trenchless technologies for these programs. The water treatment plant is undergoing a $5.5-million-dollar upgrade to improve capacity, reliability, and safety. Preventative maintenance programs for all equipment continue to be refined. Equipment replacements at the City water and wastewater treatment facilities are ongoing to ensure reliable performance. Utility coordination and infrastructure relocations for the Turnpike Authority Monroe Bypass have been funded, and this major NCDOT project is projected to be complete in 2018. Economic activity from residential, commercial, and industrial development is having a positive effect on revenue. The City of Monroe’s Natural Gas Division operates and maintains a 43-mile natural gas transmission pipeline and 475 miles of natural gas distribution mains per federal regulation 49 CFR Part 192. With the installation of 119 new services, the natural gas customer count has increased to 11,420 customers. Peak gas usage day was on Saturday, January 6, 2018 with a volume of 20,165 MCF (20,165,000 cubic feet). The system experienced seven consecutive days (January 1, 2018 through January 7, 2018) with gas usage volumes exceeding 19,000 MCF per day. The natural gas volume for the fiscal year was 3,438,143 MCF. Utility locators have located 12,471 NC811 locate tickets including natural gas, electric, and City fiber telecommunications. The North Carolina Utility Commission’s annual inspection for fiscal year 2018 resulted in no violations. During fiscal year 2018 the following projects were undertaken:  Replaced turbine meter at ATI Specialty Metals / Ashcraft Ave. facility and industrial meter set at Tyson Foods Feed Mill.  Installed 2,684 feet of two-inch polyethylene main for Woodlands Creek Subdivision (final phase).  Installed 6,410 feet of two-inch polyethylene main for The Oaks at Camden Subdivision (Phase II).  Installed 1,315 feet of two-inch polyethylene main to accommodate the construction of the Union County Community Shelter.  Inspected pipeline for atmospheric corrosion, rehabilitated coating, and replaced hangers on Medlin Rd. and Hwy. 601 bridge crossings.  Rehabilitated the coating of 336 steel natural gas risers.  Installed five galvanic anode ground beds on the distribution 275 psig feeder main and remediated six cathodic protection issues on casings.  Repaired 19 underground natural gas leaks and 190 meter leaks.  Construction is underway for the LNG Peak Shaving Facility on Morgan Mill Rd. xi The City’s Electric Division maintains 19.5 miles of 100 kV transmission lines, 290 miles of distribution lines, and 7 main substations. The Electric Division provides electric service to approximately 11,000 customers ranging in size from residential to small commercial and industrial customers with up to 15 MW electric loads. The system had a peak demand of 134 MW and annual electric sales of approximately 660,000 KILO-Watthours. During fiscal year 2018 the following projects were undertaken:  Replace/retire downtown vault switches and high voltage cables.  Add additional facilities to serve a new process facility at ATI Metals.  Install substation security and wildlife protection.  Expanded electric facilities in the Corporate Center for future growth.  Upgrade wire size on several overhead high voltage circuits to allow for additional growth and reliability.  Extend high voltage overhead power lines to serve new territories.  Paint several substation transformers and replace the oil in them to extend their life and keep them operating efficiently.   The City of Monroe implemented a stormwater utility program on January 1, 2009 to address the Environmental Protection Agency’s (EPA) National Pollutant Discharge Elimination System (NPDES) Phase II requirements and to provide a comprehensive stormwater maintenance program to improve the existing stormwater system. As part of the NPDES requirements, the Engineering Department has developed several stormwater public education and involvement programs. These programs include classroom presentations to area students and home owner associations using a portable, interactive watershed model known as an EnviroScape. Opportunities for public involvement include Adopt-a-Stream, a storm drain marker, and water monitoring programs. The Engineering Department also oversees in-house pollution prevention and good housekeeping by the various City of Monroe facilities to address spill prevention, vehicle/equipment maintenance and outdoor storage of materials and wastes. As part of the NPDES Illicit Discharge Detection and Elimination requirement, the Engineering Department has walked stream segments within the Stewart, Bearskin and Richardson Creek Watersheds in an effort to identify illicit discharges. In a continued effort to identify illicit discharges within the watersheds, the Engineering Department walks one of the three watersheds each year on a rotating basis. Regarding existing infrastructure, the City of Monroe staffs a 6-person stormwater maintenance crew dedicated to the improvement and maintenance of the existing stormwater system. Responsibilities include repair, new construction and routine system maintenance of the stormwater infrastructure. The stormwater maintenance crew with assistance from street maintenance crews as needed have completed over 1,500 work orders in addition to completing twelve capital improvement projects between 2009 and 2017. The Engineering Department has completed the Stormwater Master Plan study for the entire city including an environmental in-stream assessment and water quality monitoring and modeling for the Stewart Creek Watershed, Bearskin Creek Watershed and Richardson Creek Watershed. With a Total Maximum Daily Load (TMDL) for Richardson Creek and Stewart Creek expected in the imminent future, the need for assessing channel stability, sediment loading, nutrient sources and other ecological stressors within the stream corridors is vital. The Engineering Department is implementing a water quality improvement program to improve the water quality in the Stewart Creek watershed as the first major step in Monroe’s water quality improvement initiative. The results from the water sampling were used to select and evaluate suitable sites for potential stormwater control measures (SCM). The results of the SCM evaluation and siting effort will support the implementation of SCMs for the City to capture future grants as they become available. The Charlotte-Monroe Executive Airport continues its position as the regional air transportation hub, and base for over 100 privately owned aircraft. With the estimated 56,000 take-offs and landings, the Airport supports corporate aviation operations and worldwide access with robust fuel sales and other services such as international U. S. Customs terminal. The NC Department of Transportation has awarded the City a grant in the amount of $912,000 to rehabilitate the entire airfield lighting system, replacing the current circuitry with new wiring and LED light fixtures. Expansion of the Airport’s hangar development plan is in full swing with the scheduled opening of a 10,000 square foot hangar in September 2018, and the subsequent commencement of construction of a 12,000 square foot hangar, complete with office space, for corporate jet aircraft and their flight crews. This proposed hangar, measuring 100-feet by 120-feet and having a 28-foot-high hangar door opening, will suit potential customers the opportunity to base their corporate jet aircraft at the Airport. As the corporate gateway and an economic catalyst for Monroe, Union County, and the Charlotte metropolitan area, the Airport provides the City an annual economic impact of over $700,000, and connects our community to all parts of the globe. xii City Council is supportive of the City’s public safety departments and supports their efforts in making Monroe a better community. The following programs were implemented in order for police officers to build stronger relationships with youth and the community. This year, the department provided a “Kids’ Café” that was partnered with Second Harvest Food Bank. This program provided food for children participating in the Police Athletic League and served approximately 100 children throughout the year. The Police Athletic League (PAL) included up to 100 participants between the ages of 8 and 11 each year to learn from officers the fundamentals of basketball, baseball and football. This program gives the youth involved a sense of responsibility and accomplishment. Every summer our School Resource Officers and Community Services section take the Gang Resistance Education and Training (G.R.E.A.T.) students on a weeklong day camp and participate with them doing a different activity each day. This program is used to build trust between law enforcement and our young community members. The Monroe Police Department works in partnership with the Drug Enforcement Administration (DEA) and the Federal Bureau of Investigations (FBI) assigning three task force officers. This is a collaborative effort to investigate serious drug related crimes that occur within the City of Monroe and surrounding areas. The Monroe Police Department has an active Explorer Post, which has an active membership of 15 participants. Law Enforcement Career Exploring is open to young men and women ages 14 (and completed the 8th grade) but not yet 21 years old who have an interest in learning more about careers in the field of law enforcement. Law Enforcement Exploring provides educational training programs for young adults on the purposes, mission, and objectives of law enforcement and provides career orientation experiences, leadership opportunities, and community service activities. The primary goal of the program is to help young adults choose a career path within the law enforcement community and to challenge them to become responsible citizens of their communities and the nation. The Monroe Fire Department provides the residents of Monroe with a high level of fire protection and suppression services. The Operations Division protects the community with 75 full-time employees operating three engine companies, one ladder/rescue combination-company, two quint companies, three aviation firefighting units, two brush trucks and two hazardous materials units. The department's equipment is housed in five strategically located fire stations. Serving in a support role to Operations, the department has nine full-time and two part-time employees from Administration, Fire Marshal and Training Divisions. The fire department maintained accredited agency status through the Commission on Fire Accreditation International and is one of 247 accredited agencies internationally. This is significant not only for the city and fire department but for our residents, business owners and visitors to Monroe. The fire department also received re-certification through the North Carolina Association of Rescue & EMS in the areas of heavy rescue, high angle rescue, confined space rescue and water rescue. The department pursued various goals and objectives included in the department’s 2014-2018 strategic plan. The strategic plan is community driven plan that was developed with citizen input. The city continues to hold a Class 3 fire insurance rating from the Insurance Services Office (ISO), which reflects well on the city’s professional fire operations and water system infrastructure. This rating also allows the city’s businesses and homes to enjoy lower fire insurance premiums. The City of Monroe continues to seek funding for roadway improvements to improve our road system network. Engineering Department Staff as well as the City’s Planning Department continue to work through the State Department of Transportation and the Charlotte Regional Transportation Organization to improve the roadway network in Monroe. Through the State Transportation Improvements Program (STIP), opportunities are approaching for major changes to two gateways into Monroe. Projects include (1) US Highway 74 widening from 4 lanes to 6 lanes from Rocky River Road to Roland Drive; (2) US 74/US 601 Interchange Improvements and (3) Widening of US 601 to 4 lanes with median from US 74 to the Monroe Bypass. The City of Monroe is to participate approximately $360,000 for the US Highway 74 project towards the installation of a 10-foot wide multi-use path (MUP) on one side and an 8-foot wide sidewalk on the opposite side. Similarly, the City of Monroe is to provide $252,980 on the US 74/ US 601 Interchange project towards the installation of 8-foot wide sidewalks on both sides along the project. Staff will also recommend participating in pedestrian improvements on the US 601 Widening Project at the appropriate time. Improvements are also taking shape for Old Charlotte Highway with the first section of a project from Seymour Street to NC 200 (Dickerson Boulevard). Sidewalks and bike lanes are planned for these roadway improvements in addition to center medians that will present landscaping opportunities for Monroe. Other projects include the xiii recently completed intersection improvements along US 74 at the intersection of Secrest Avenue with improvements at Rocky River Road and Secrest Shortcut Road still to come. In conjunction with the project at US 74 and Rocky River Road, the City is contributing $250,000 of the estimated costs of $629,657 to incorporate the realignment of Myers Road and James Hamilton Road with Rocky River Road as part of the superstreet project on US Highway 74. The City currently maintains just over 169 miles of roadway. Staff developed a pavement maintenance plan in 2007 which divides the streets into two categories: priority and local residential. The priority streets within the city are approximately 22 miles in length with various widths and provide connectivity to the State’s Street System and typically serve as collector streets. The local residential streets are considered to be minor streets and primarily serve the immediate neighborhoods, have minimal traffic volumes, and include the remaining 147 miles of street that are currently Powell Bill eligible. The goal of the maintenance plan is to resurface all priority streets on a 12 to 15-year cycle which correlates with the industry standard and local residential streets on longer cycle length. Funding for resurfacing has improved recently with an increase in vehicle tax being approved in Fiscal Year 2017. Prior to the increase, the priority streets were averaging a 19-year cycle for resurfacing and the remaining local residential streets were averaging a 65-year cycle. With the additional funding from the vehicle tax increase, the priority streets should improve to a 15-year cycle and the residential cycle should improve to 35-year cycle. The City of Monroe, Mayor and Council and concerned citizens would like to give Downtown its own market niche. City Council has approved a Master Plan for the downtown area. Opening new businesses Downtown, thereby improving the business mix, attracting shoppers and residents, raising property values and sales tax revenues are all elements of the plan. Restored buildings, attractive storefronts and pedestrian friendly walks and streets will gradually change and reinforce the public’s perception that Downtown is the ‘heart and soul’ of Union County. Monroe is a Main Street America, 2018 Accredited and NC Main Street Designated Community, uses the Main Street approach to Downtown revitalization, a comprehensive, incremental four-point approach. The revitalization effort will focus on the areas of design, organization, promotion, and economic restructuring: a practical Downtown management strategy, in combination with the Downtown Master Plan, will produce fundamental changes in the Downtown’s economic base. The City has acquired one (1) property for redevelopment totaling $120,000, had approximately $217,698 in private sector investments in nine (9) downtown properties, had seven (7) new business openings and hosted downtown special events and promotions. The total value of new public investment in downtown was $1,440,841 and private investment was $217,698 for a total public/private investment in downtown of approximately $1,698,539, as reported to North Carolina Main Street. Volunteers logged approximately 1,051 hours, valued at $25,949, assisting with events, meetings and other downtown revitalization efforts. The Information Technology (IT) department is continuing to update the City’s server hardware and software infrastructure. All endpoint network switches were replaced during the 2017-2018 fiscal year. The tablet technology that has been deployed to field personnel continues to be a success with additional departments and employees utilizing them. Field personnel are able to communicate and access data, which allows them to be more effective on site. A GIS portal has been rolled out for field and internal use, which has been proven to be very useful. The LaserFiche document management system has been upgraded to include workflow and e-forms. E-forms and workflow are now being used to provide citizen input and provide field data collection with employees. The City has implemented a web based attendance software solution, which has cut timesheet processing time considerably. City View software is in the process of being rolled out with a projected go live during this fiscal year as a major upgrade to plan review and permit processing functions. The City of Monroe pursues grant funding to provide resources for the completion of various projects. During the 2017-2018 year, the Police Department utilized a grant for the purchase of an electronic matrix message board with camera in the amount of $18,651. The Police Department continued utilizing a three year COPS Hiring Grant in the amount of $500,000 that funds up to 75% of entry-level salary and fringe benefits for four full-time officers. The Fire Department was awarded a Staffing for Adequate Fire and Emergency Response (SAFER) grant by the U.S. Department of Homeland Security in September 2017. This is a three year grant that pays 75% of three firefighter positions’ salary and benefits in years one and two of the grant and then 35% for the third year. The airport is ever positioning itself to continue promoting economic growth for the community. Funded through federal and state grants, design work for rehabilitating the runway aprons has continued and the taxiway lighting rehabilitation project has completed the bidding process for construction. These projects will ensure that the facilities keep up with the operational demands for the future. The City received a grant award from the North Carolina Department of Transportation in the amount of $1,640,000 for construction of an approximately 1.6 miles of greenway from Icemorlee Street to the end of Don Griffin Park. This project was completed in the Summer of 2018 and the greenway is now open. xiv During the year the City was a sub-recipient from Union County of a Community Development Block Grant (CDBG) through the Urban County Entitlement Program. A cooperative agreement has been entered into with Union County and work has begun on a project for improvements to the Concord Avenue sidewalks and infrastructure. The City was awarded and received a grant from the North Carolina Department of Commerce and Rural Economic Development Center for $100,000 to be used in the revitalization of the Monroe Center Theatre. The Water and Sewer department received two grants through the North Carolina Department of Environmental Quality for Drinking Water and Wastewater Asset Inventory & Assessment in the amount of $150,000 each. These projects began in Spring 2018. Long-Term Financial Planning and Major Initiatives The city seeks to maintain a strong financial position. This objective requires regular long-term planning of operating and capital requirements for its major general government and enterprise programs. In doing so, the City relies on key financial policies and procedures for dealing with future events in financially responsible ways. Annually, the City adopts a 5-year Capital Improvement Program (CIP) that looks ahead to project and plan for capital needs. The program outlines each capital project, the estimated cost, description and funding source. The city takes into consideration and monitors CIP needs that require additional operating costs and personnel. Using this information, the City updates its long range business models for each of its utility functions. This is done to ensure that each utility will continue to be solvent in long-term projections and has adequate reserves for any upcoming capital expenditures. Monroe City Council and management are committed to budgeting and managing all resources in the most cost-effective manner. As part of the City’s strategic plan, the Monroe City Council has formally assigned fund balance for use in future years for the airport and street resurfacing. It has also established a capital reserve fund to accumulate funds for greenway construction. The City adopted Forward Monroe-Land Use/Transportation Plan in April 2018 with a vision that Monroe will be a dynamic and progressive city that promotes growth that boosts our economy, protects our neighborhoods, and enhances our downtown. Our vibrant community will be a great place to live and work, highlighted by safe and attractive neighborhoods, quality parks and open spaces, and transportation options that make it easy to travel throughout the city. Forward Monroe is the city’s blueprint for development, its growth strategy, and the foundation upon which future land use and transportation decisions will be based. The City completed the design and construction for the Bearskin Creek Phase II greenway that consists of a multi-use path that connects three City parks, downtown Monroe and the Union County farmers market. The City completed a housing repair initiative where six owner-occupied homes for low to moderate income and two scattered site children’s home were the beneficiaries made possible through community partnerships and volunteerism. The City is focusing on re-development projects in two areas. The first is the Concord Area Master Plan where the City wishes to improve the aesthetics, safety, viability and appeal of the area through a comprehensive small area redevelopment plan. The plan was adopted in 2015 and an overlay district for the Concord Avenue Area was adopted in 2017 that includes the ordinances and zoning map amendment to initiate the plan implementation. The second area is the Sutton Park area. A redevelopment plan has been created that evaluated existing parcels and made recommendations to redevelop the area to attract new businesses and create business for the local park and surrounding community. In order to continue to grow and enhance the overall economy of the area, the City has continued its partnership with Union County to provide a county-wide economic development organization called Monroe-Union County Economic Development. The goals of the organizational work plan are to:  Create more job opportunities  Generate additional industrial/commercial capital investment  Better define Union County for various target audiences Monroe-Union County Economic Development will seek to accomplish these goals through broad and focused marketing methods; aggressive recruitment missions; continued, enhanced existing industry programs; and new product development. The objective is to average $60 million in new capital investment from both existing and new companies on an annual basis. Since January 1, 2013, there has been $492 million in capital investment announced and over 1,686 jobs created, an average of $98.5 Million per year. xv Relevant Financial Policies The City regularly reviews revenues and expenditures throughout the fiscal year. During the course of the year, if actual revenues are expected to fall short of the budgeted amount, expenditures are reduced to ensure that a shortage of funds or a significant use of fund balance does not occur. City financial policy dictates that our current operating revenues be sufficient to support current operating expenditures. The City administers a cash management and investment program that seeks to maximize, in order of priority, the preservation of funds, liquidity and interest earnings over its cash and investments. Cash resources of the individual funds are combined to form a pool of cash and investments. The average cash and investment pool balance during the year was $152,214,620 . Investment income includes the change in the fair value of investments. During the year monies were invested and secured in accordance with state law. A key financial goal of the City for many years has been the maintenance of a fund balance policy in the General Fund. The City of Monroe restricts the use of the greater of $7,500,000 or 25% of the next year's original adopted budget, net of Federal and State pass-through revenues . In addition, the City has desired to appropriate a portion of fund balance resulting from positive budget variances for one-time capital expenses. Council has the ability to accomplish this by formally assigni,ng money for spending on specific capital projects. Other practices followed are designed to avoid the meeting of recurring expense needs with one-time revenue resources and to ensure an ongoing mix of pay~as-you-go funding of capital needs with long-term debt. Awards and Acknowledgements 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 Monroe for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2017. This was the 25 1h consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. This report must satisfy both GAAP and applicable legal requirements . A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR 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. Acknowledgements. The preparation of this report is a very intensive project, and could not have been accomplished without the assistance and dedication of the Finance Department staff and other personnel from various departments who assisted in its preparation . A particular thank you goes to Accounting Manager Ashley Ivey and Senior Budget Analyst Mary Lou Connelly who have provided valuable assistance with financial and accounting expertise this past year. The Mayor and City Council continue to be very supportive of our efforts to produce the best financial reports possible for our citizens, and they provide leadership and support in maintaining the highest standards of professionalism in the fiscal management of the City. We appreciate their support in granting us the time and funding to generate this document, and allowing us to submit it to the GFOA for consideration. Lastly, we would like to express our appreciation to our independent auditing firm, Martin Starnes & Associates, CPA's, P.A., for their cooperation and assistance in these efforts. Respectfully submitted, Larry Faison City Manager Lisa Strickland Finance Director xvi xvii CITY OF MONROE, NORTH CAROLINA LIST OF PRINCIPAL OFFICIALS June 30, 2018 Elected Officials Bobby G. Kilgore Mayor Gary L. Anderson Mayor Pro Tem Surluta A. Anthony Billy A. Jordan Marion L. Holloway Franco J. McGee Lynn A. Keziah City Administration E. Larry Faison City Manager S. Mujeeb Shah-Khan City Attorney Bridgette H. Robinson City Clerk Brian J. Borne Assistant City Manager/Downtown Monroe Director Lisa Strickland Director of Finance Bruce Bounds Director of Information Technology Russell G. Colbath Director of Water Resources Tonya Edwards Director of Parks & Recreation Ronald D. Fowler Fire Chief J. Bryan Gilliard Police Chief James N. Loyd, Jr. Director of Engineering & Stormwater Don D. Mitchell Director of Energy Services R. Christopher Platé Executive Director of Economic Development Debra C. Reed Director of Human Resources Lisa Stiwinter Director of Planning & Development xviii City of Monroe, North Carolina Organizational Chart  Citizens City Attorney  City Manager  Mayor and City Council  Assistant City Manager  Finance Tourism Development  Authority Information  Technology Police Fire Airport Human Resources Water Resources Energy Services  Engineering Downtown Parks and Recreation Planning Economic  Development City Clerk   ‐Electric ‐Natural Gas ‐Accounting ‐Billing ‐Customer Service ‐Purchasing ‐Fleet ‐Warehouse‐Safety and Risk Management ‐Water Treatment ‐Waste Treatment ‐Parks Maintenance ‐Facilities Maintenance ‐Golf Course ‐Aquatics & Fitness  Center  ‐Building Standards ‐Code Enforcement ‐Community Maintenance ‐Community Redevelopment ‐Permitting ‐Solid Waste  ‐Stormwater ‐Street Maintenance Public Information xix                       xx 730 13th Avenue Drive SE ♦ Hickory, NC 28602 ♦ 828-327-2727 ♦ Fax 828-328-2324 13 South Center Street ♦ Taylorsville, NC 28681 ♦ 828-632-9025 ♦ Fax 828-632-9085 PO Box 5729 ♦ Statesville, NC 28687 ♦ 1710 Wilkesboro Hwy ♦ Statesville, NC 28625 ♦ 704-872-8923 ♦ Fax 704-872-4982 800-948-0585 ♦ www.martinstarnes.com INDEPENDENT AUDITOR’S REPORT To The Honorable Mayor and Members of the City Council City of Monroe Monroe, North Carolina Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Monroe, North Carolina, as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements 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 include s 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. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the City of Monroe ABC Board which represents 74 percent, 71 percent, and 88 percent, respectively, of the assets, net position, and revenues of the aggregate discretely presented component units. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion insofar as it relates to the amounts included for the City of Monroe ABC Board, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The financial statements of the City of Monroe ABC Board and the Monroe Tourism Development Authority were not audited in accordance with Government Auditing Standards. 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 the risks of material misstatement of the financial statements, whether due to fraud or error. 1 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 the 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 opinions. Opinions In our opinion, based upon our audit and the report of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Monroe, North Carolina, as of June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note XI to the financial statements, the City adopted new accounting guidance, Governmental Accounting Standards Board (GASB) No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, in the fiscal year ending June 30, 2018. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis, the Law Enforcement Officers’ Special Separation Allowance Schedules of the Changes in Total Pension Liability and Total Pension Liability as a Percentage of Covered Payroll, the Other Post-Employment Benefits' Schedule of Changes in the Total OPEB Liability and Related Ratios, and the Local Government Employee’s Retirement System’s Schedules of the Proportionate Share of the Net Pension Liability (Asset) and Contributions 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 the financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We and the other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consist 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. 2 Supplementary and Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Monroe’s basic financial statements. The introductory information, combining and individual fund financial statements, budgetary schedules, other schedules, and statistical section, as well as the accompanying Schedule of Expenditures of Federal and State Awards as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirement, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and the State Single Audit Implementation Act, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements, budgetary schedules, other schedules, and the Schedule of Expenditures of Federal and State Awards are the responsibility of management and were derived from, and relate directly to, the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the aud it of the basic financial statements, and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements, or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and other auditors. In our opinion, based on our audit, the procedures performed as described above, and the report of other auditors, the combining and individual fund financial statements, budgetary schedules, other schedules, and the Schedule of Expenditures of Federal and State Awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory information and the statistical section have not been subjected to the auditing procedures applied in the audit of basic financial statements; and accordingly, we do not express an opinion or provide assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 29, 2018 on our consideration of the City of Monroe’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Monroe’s internal control over financial reporting or on compliance. That report is an integral part of an audit prepared in accordance with Government Auditing Standards in considering the City of Monroe’s internal control over financial reporting and compliance. Martin Starnes & Associates, CPAs, P.A. Hickory, North Carolina October 29, 2018 3                       4 Management’s Discussion and Analysis As management of the City of Monroe (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2018. We encourage readers to read the information presented here in conjunction with additional information that we have furnished in the City’s financial statements, which follow this narrative. Financial Highlights  The assets and deferred outflows of resources of the City of Monroe exceeded its liabilities and deferred inflows of resources at the close of the fiscal year by $383,476,999 (net position). Of this amount, $103,986,190 (unrestricted net position) may be used to meet the government’s ongoing obligations to citizens and creditors.  The government’s total net position increased by $10,673,548. This increase was the net of a decrease in the amount of $289,984 from governmental activities and an increase of $10,963,532 for business-type activities.  As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $35,190,339, an increase of $968,854 in comparison with the prior year. Approximately 21.8 percent of this total amount or $7,653,996 is non spendable or restricted by state statute.  At the end of the current fiscal year, unrestricted fund balance (the total of the assigned and unassigned components of fund balance) for the General Fund was $19,746,760 or 57.5 percent of total general fund expenditures for the fiscal year.  The City’s total debt not including compensated absences, pension liability, and OPEB liability, net of retirements, increased $19,257,689 (23%) during the current fiscal year. The elements of the increase were the issuance of bonds in the amount of $22,650,143, debt retirements totaling $5,515,454 and new installment financing of $2,123,000. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to City of Monroe’s basic financial statements. The City’s basic financial statements consist of three components: 1) government-wide financial statements, 2) fund financial statements, and, 3) notes to the financial statements (see Figure 1). The basic financial statements present two different views of the City through the use of government- wide statements and fund financial statements. In addition to the basic financial statements, this report contains other supplemental information that will enhance the reader’s understanding of the financial condition of the City of Monroe. Required Components of Annual Financial Report Figure 1 Management’s Discussion and Analysis Basic Financial Statements Government-wide Financial Statements Fund Financial Statements Notes to the Financial Statements Summary Detail 5 Basic Financial Statements The first two statements (Exhibits 1 and 2) in the basic financial statements are the Government-wide Financial Statements. They provide both short and long-term information about the City’s financial status. The next statements (Exhibits 3 through 10) are Fund Financial Statements. These statements focus on the activities of the individual parts of the City’s government. These statements provide more detail than the government-wide statements. There are three parts to the Fund Financial Statements: 1) the governmental funds statements; 2) the budgetary comparison statements; and, 3) the proprietary fund statements. The next section of the basic financial statements is the notes. The notes to the financial statements explain in detail some of the data contained in those statements. After the notes, supplemental information is provided to show details about the City’s individual funds. Budgetary information required by the General Statutes also can be found in this part of the statements. Government-Wide Financial Statements The government-wide financial statements are designed to provide the reader with a broad overview of the City’s finances, similar in format to a financial statement of a private-sector business. The government-wide statements provide short and long-term information about the City’s financial status as a whole. The two government-wide statements report the City’s net position and how it has changed. Net position is the difference between the City’s total assets and deferred outflows of resources and total liabilities and deferred inflows of resources. Measuring net position is one way to gauge the City’s financial condition. The government-wide statements are divided into three categories: 1) governmental activities; 2) business-type activities; and, 3) component units. The governmental activities include most of the City’s basic services such as public safety, parks and recreation, golf course and general administration. Property taxes and state and federal grant funds finance most of these activities. The business-type activities are those that the City charges customers to provide. These include the water and sewer, electric, natural gas, stormwater maintenance, solid waste collection, aquatics and fitness, and airport services offered by the City of Monroe. The final category is the component units. Although legally separate from the City, the ABC Board and the Tourism Development Authority are important to the City because the City exercises control over both Boards by appointing their members. The component units are also required to distribute a portion of their profits to the City. The government-wide financial statements are on Exhibits 1 and 2 of this report. Fund Financial Statements The fund financial statements (see Figure 1) provide a more detailed look at the City’s most significant activities. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Monroe, like all other governmental entities in North Carolina, uses fund accounting to ensure and reflect compliance (or non- compliance) with finance-related legal requirements, such as North Carolina General Statutes or the City’s budget ordinance. All of the funds of City of Monroe can be divided into two categories: Governmental Funds and Proprietary Funds. Governmental Funds – Governmental funds are used to account for those functions reported as governmental activities in the government-wide financial statements. Most of the City’s basic services are accounted for in governmental funds. These funds focus on how assets can readily be converted into cash flow in and out, and what monies are left at year-end that will be available for spending in the next 6 year. Governmental funds are reported using an accounting method called modified accrual accounting which provides a short-term spending focus. As a result, the governmental fund financial statements give the reader a detailed short-term view that helps him or her determine if there are more or less financial resources available to finance the City’s programs. The relationship between government activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is described in a reconciliation that is a part of the fund financial statements. The City of Monroe maintains seven individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund which is considered to be a major fund. Data from the other six governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. These other six governmental funds are made up of two capital projects funds, a capital reserve fund and three special revenue funds including Community Development, Downtown Monroe and Monroe-Union County Economic Development. The City of Monroe adopts an annual budget for its General Fund, as required by North Carolina General Statutes. The budget is a legally adopted document that incorporates input from the citizens of the City, the management of the City, and the decisions of the Council about which services to provide and how to pay for them. It also authorizes the City to obtain funds from identified sources to finance these current period activities. The budgetary statement provided for the General Fund demonstrates how well the City complied with the budget ordinance and whether or not the City succeeded in providing the services as planned when the budget was adopted. The budgetary comparison statement uses the budgetary basis of accounting and is presented using the same format, language, and classifications as the legal budget document. The statement shows four columns: 1) the original budget as adopted by the Council; 2) the final budget as amended by the Council; 3) the actual resources, charges to appropriations, and ending balances in the General Fund; and, 4) the difference or variance between the final budget and the actual resources and charges. To account for the difference between the budgetary basis of accounting and the modified accrual basis, a reconciliation showing the differences in the reported activities is shown at the end of the budgetary statement. Proprietary Funds – The City of Monroe maintains two types of proprietary funds: enterprise and internal service. Enterprise Funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water and sewer, electric, natural gas, aquatics and fitness center, stormwater, sanitation and airport operations. These funds are the same as those functions shown in the business-type activities in the Statement of Activities. Internal service funds are an accounting tool used to accumulate and allocate costs internally among various functions. The City utilizes an internal service fund for its health, worker’s compensation and property and casualty insurance. Because services accounted for in the internal service fund predominately benefit governmental rather than business-type functions, it has been included within the governmental activities in the government-wide financial statements. Notes to the Financial Statements – The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements begin on page 36 of this report. Other Information – In addition to the basic financial statements and accompanying notes, this report includes certain required supplementary information concerning the City of Monroe’s progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found beginning on page 93 of this report. 7 Interdependence with Other Entities - The City depends on financial resources flowing from, or associated with, both the Federal Government and the State of North Carolina. Because of this dependency, the City is subject to changes in specific flows of intergovernmental revenues based on modifications to Federal and State laws and Federal and State appropriations. It is also subject to changes in investment earnings and asset values associated with U.S. Treasury Securities because of actions by foreign government and other holders of publicly held U.S. Treasury Securities. Government-Wide Financial Analysis The following is a summary of the City’s net position for governmental and business-type activities for the current year as compared to the prior year. For more detail see the Statement of Net Position on page 18-19. City of Monroe’s Net Position Figure 2 Governmental Activities Business-type Activities Total 2018 2017 2018 2017 2018 2017 Current and other assets $43,252,320 $42,709,773 $153,794,100 $131,306,376 $197,046,420 $174,016,149 Capital assets 76,144,900 74,689,493 274,424,738 265,979,049 350,569,638 340,668,542 Total assets 119,397,220 117,399,266 428,218,838 397,285,425 547,616,058 514,684,691 Deferred outflows of resources 3,933,183 4,990,230 6,138,589 7,012,313 10,071,772 12,002,543 Total assets and deferred outflows of resources 123,330,403 122,389,496 434,357,427 404,297,738 557,687,830 526,687,234 Long-term liabilities outstanding 44,025,718 25,693,500 105,633,321 79,741,940 149,659,039 105,435,440 Other liabilities 4,629,200 4,395,012 15,127,892 14,255,955 19,757,092 18,650,967 Total liabilities 48,654,918 30,088,512 120,761,213 93,997,895 169,416,131 124,086,407 Deferred inflows of resources 3,341,231 712,969 1,453,469 265,164 4,794,700 978,133 Total liabilities and deferred inflows of resources 51,996,149 30,801,481 122,214,682 94,263,059 174,210,831 125,064,540 Net position: Net investment in capital assets 69,530,266 68,340,932 200,306,046 193,967,233 269,836,312 262,308,165 Restricted 9,654,497 9,812,664 - - 9,654,497 9,812,664 Unrestricted (7,850,509) 13,434,419 111,836,699 116,067,446 103,986,190 129,501,865 Total net position $71,334,254 $91,588,015 $312,142,745 $310,034,679 $383,476,999 $401,622,694 The assets and deferred outflows of the City of Monroe exceeded liabilities and deferred inflows by $383,476,999 as of June 30, 2018. Of the City’s total net position $269,836,312 (70.4%) reflects its investment in capital assets (e.g. land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of the outstanding related debt, the resources needed to repay that debt must be provided by other sources, since the capital assets cannot be used to liquidate these liabilities. An additional portion of the City’s net position $9,654,497 represents resources that are subject to external restrictions on how they may be used. The remaining balance of $103,986,190 (27.1%) is unrestricted. This amount may be used at the City’s discretion in meeting its ongoing obligations to citizens and creditors. The City’s net position has decreased a total of $18,145,695, which consists of a decrease in governmental activities in the amount of $20,253,761 and an increase in business-type activities in the amount of $2,109,066. This decrease is due to the implementation the new accounting standard, GASB 75, this year. With the new reporting change, the City is required to reflect the liability for Other Post- Employment Benefits (OPEB) and the effects on net position of benefit payments and administrative expenses paid by the City related to OPEB. A restatement to record this liability decreased the beginning 8 net position for the city $28,819,243. This amount consists of a decrease in governmental activities in the amount of $19,963,777 and a decrease for business-type activities by a total of $8,855,466. Net position for the City increased by $10,673,548 prior to this restatement. This amount was the combination of a decrease in governmental activities in the amount of $289,984 and an increase in business-type activities in the amount of $10,963,532. The biggest part of this increase to business-type activities was due to an increase in capital assets. Capital asset changes are outlined later in this report. The following is a summary of the City’s governmental and business-type activities for fiscal year 2018, including revenues and expenses, with a comparison to the prior year. For more detail see the Statement of Activities on page 20-21. City of Monroe’s Changes in Net Position Figure 3 Governmental Activities Business-type Activities Total 2018 2017 2018 2017 2018 2017 Revenues: Program revenues: Charges for services $8,203,805 $8,442,844 $109,863,311 $109,219,135 $118,067,116 $117,661,979 Operating grants and contributions 2,281,335 2,166,839 - - 2,281,335 2,166,839 Capital grants and contributions 1,279,350 207,846 106,812 2,872,715 1,386,162 3,080,561 General revenues: Property taxes, levied for a specific purpose 21,077,587 20,175,656 - - 21,077,587 20,175,656 Sales and use tax 6,215,031 6,195,900 - - 6,215,031 6,195,900 Utility sales taxes 3,077,736 3,128,264 - - 3,077,736 3,128,264 Motor vehicle tax 842,065 678,025 - - 842,065 678,025 Beer & wine and telecommunications tax 462,733 489,736 - - 462,733 489,736 Gross receipts tax 104,468 97,992 - - 104,468 97,992 Other 127,494 (92,088) (857,474) (1,667,901) (729,980) (1,759,989) Total revenues 43,671,604 41,491,014 109,112,649 110,423,949 152,784,253 151,914,963 Expenses: General government $4,932,525 $5,231,791 $ - $ - $4,932,525 $5,231,791 Transportation 5,757,880 5,307,450 - - 5,757,880 5,307,450 Public safety 25,300,345 23,692,685 - - 25,300,345 23,692,685 Culture and recreation 5,153,498 5,910,333 - - 5,153,498 5,910,333 Economic and physical development 1,338,277 1,063,342 - - 1,338,277 1,063,342 Interest in long-term debt 199,984 226,633 - - 199,984 226,633 Water and sewer - - 12,339,410 13,273,733 12,339,410 13,273,733 Electrical - - 60,763,838 60,175,417 60,763,838 60,175,417 Natural Gas - - 14,105,041 12,228,638 14,105,041 12,228,638 Aquatics and Fitness Center - - 4,081,878 3,849,221 4,081,878 3,849,221 Stormwater - - 2,083,956 1,975,579 2,083,956 1,975,579 Solid waste - - 2,348,077 2,511,555 2,348,077 2,511,555 Airport - - 3,705,996 3,497,998 3,705,996 3,497,998 Total expenses 42,682,509 41,432,234 99,428,196 97,512,141 142,110,705 138,944,375 (Decrease) Increase in net position before transfers 989,095 58,780 9,684,453 12,911,808 10,673,548 12,970,588 Transfers (1,279,079) (1,844,698) 1,279,079 1,844,698 - - (Decrease) Increase in net position (289,984) (1,785,918) 10,963,532 14,756,506 10,673,548 12,970,588 Net position, beginning as previously stated 91,588,015 96,356,860 310,034,679 295,278,173 401,622,694 391,635,033 Restatement (19,963,777) (2,982,927) (8,855,466) - (28,819,243) (2,982,927) Net position, beginning as restated 71,624,238 93,373,933 301,179,213 295,278,173 372,803,451 388,652,106 Net position, ending $71,334,254 $91,588,015 $312,142,745 $310,034,679 $383,476,999 $401,622,694 9 Governmental activities – Governmental activities decreased the City of Monroe’s net position by $289,984. Key elements of this net decrease are as follows:  The decrease of $239,039 in Charges for Services consisted of a decrease of $405,213 in the allocation of internal service fund revenue that was allocated to all functions/programs as well as an increase from golf carts traded in at the Golf Course in the amount of $141,975.  Property taxes increased by $901,931. The total assessed value increased by $166,414,815 or 4.9% from the prior year. This increase in value increased the property tax levy by $1,015,889 from the prior year.  Motor vehicle taxes increased by $164,040. In 2017, motor vehicle taxes were increased from $5 per vehicle to $30 per vehicle to offset the cost of increased road maintenance. Fiscal year 2018 was the first full year the increased vehicle fee was received.  The increase of $1,071,504 in Capital Grants and Contributions was due to funds received from a Highway Planning and Construction grant for the Bearskin Creek Greenway, as well as funds received through a Community Development Block Grant for improvements to the Concord Avenue area sidewalk. The Highway Planning and Construction grant was completed in June 2018 and the Community Development Block Grant is still ongoing.  Public Safety expenses went up due to one-time capital equipment purchases of vehicles and the purchase of two fire apparatus. Business-type activities – Business-type activities increased the City of Monroe’s net position by $10,963,532. Key elements of this net increase are as follows:  Charges for Services increased year over year by $644,176 primarily due to the net of the following items:  Natural gas sales were up by $2,403,549 due to a higher demand in the winter months.  Decreased electric sales in the amount of $1,757,777.  Availability fees for the Water & Sewer fund were down by $335,348.  Fuel sales at the Charlotte-Monroe Executive Airport were up by $277,086.  Capital grants and contributions decreased by $2,765,903 primarily due to multiple airport grants that had reimbursable expenditures in fiscal year 2017 but not in 2018.  Water and sewer expenses decreased due to infrastructure renewal in the prior year.  Electric expenses increased due to higher power purchases.  Natural Gas expenses increased due to higher gas purchases that are directly related to sales and increased demand. Financial Analysis of the City’s Funds As noted earlier, the City of Monroe uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds – The focus of the City of Monroe’s governmental funds is to provide information on near-term inflows, outflows, and balances of usable resources. Such information is useful in assessing the City’s financing requirements. Specifically, unassigned fund balance can be a useful measure of a government’s net resources available for spending at the end of the fiscal year. At June 30, 2018, the governmental funds of the City of Monroe reported a combined fund balance of $35,190,339, which is an increase of $968,854 from last year’s total of $34,221,485. Of the governmental funds combined ending fund balances, $5,239,154 represents unassigned fund balance and is available for spending at the City’s discretion. The remainder of fund balance is classified as follows: 1). Non spendable to indicate that it is not available for spending, as it is not in spendable form ($830,617). 2). Restricted to indicate that it is restricted to specific purposes as imposed by law ($10,388,557); 10 3). Committed to indicate that it can only be used for a specific purpose as determined by a formal City Council action ($4,106,991); 4). Assigned to indicate that it is intended to be used for a specific purpose ($14,625,020). More information about fund balance is available in section 1.E.12 and section VIII. in the notes to the financial statements. The general fund is the chief operating fund of the City of Monroe. As of June 30, 2018 the fund balance in the General Fund was $28,563,016, an increase of $1,241,888 in comparison with the prior year. Of the total fund balance in the General Fund, $5,239,154 (18.3%) was unassigned fund balance. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 15.3% of total general fund expenditures, while total fund balance represents 83.2% of that same amount. In addition to unassigned fund balance, $10,106,092 is reserved by a minimum fund balance policy that has been adopted by City Council. Revenues exceeded expenditures prior to transfers by $1,797,665 due to revenue exceeding projections and savings in expenditures. Transfers of available fund balance were primarily for general capital projects, one-time capital purchases, airport capital projects, airport operations and airport debt retirement. The Other Government Funds which consist of the Capital Projects Fund, Occupancy Tax Projects Fund, a Governmental Capital Reserve Fund and special revenue funds for Community Development, Downtown Monroe and Monroe-Union County Economic Development also impact the total fund balance for governmental funds. The primary reason for the decrease of $273,034 in this category is the use of money in the Capital Project Fund for capital projects in progress including the purchase of property adjacent to Belk Tonawanda Park and renovation of the Center Theatre. Proprietary Funds – The City of Monroe’s proprietary funds provide the same type of information found in the government-wide statements but in more detail. The table below presents the unrestricted net position and the growth in total net position for all proprietary funds. City of Monroe’s Unrestricted Net Position Figure 4 Unrestricted Net Position Change in Total Net Position 2018 2017 2018 2017 Water and Sewer $33,351,283 $36,063,614 $4,672,898 $3,645,562 Electric 50,247,591 51,455,436 2,279,763 4,402,662 Natural Gas 25,310,347 22,223,518 3,708,475 3,012,493 Airport 789,334 2,355,849 277,843 3,370,193 Aquatics and Fitness Center 631,030 1,907,315 (38,696) 86,657 Stormwater 747,471 1,184,294 161,570 199,446 Solid Waste 629,291 587,332 61,415 (112,939) Proprietary Funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. The City’s major proprietary funds are water and sewer, electric, natural gas and airport. Minor proprietary funds include Aquatics and Fitness Center, Stormwater and Solid Waste Funds. The Water and Sewer Fund accounts for the provision of potable water and sewer service to City and non-City residents. All activities necessary to the provision of these services are accounted for in this fund, including, but not limited to administration, plant and line maintenance. As of June 30, 2018, the 11 City of Monroe’s water fund reported a total net position of $95,309,158, an increase of $948,046 in comparison with the prior year. Total operating revenues decreased by 1.6% mainly due to a decrease in availability fee revenue because of increased building activity in fiscal year 2017. The City has planned to increase unrestricted net position in the Water and Sewer Fund by increasing water and sewer rates 3.2% each year. Through uniform annual rate increases, unrestricted net position will be grown to create enough reserves to fund 40% of a new wastewater treatment plant facility. This new facility will replace our aging facility and ensure adequate capacity for future development in approximately 2030. The remaining 60% of funding for the project will be provided through financing at that time. The Electric Fund accounts for the provision of electric service to City and non-City residents. All activities necessary to the provision of these services are accounted for in this fund, including, but not limited to administration, plant and line maintenance. As of June 30, 2018, the City of Monroe’s electric fund reported a total net position of $122,348,260 an increase of $654,154 in comparison with the prior year. Electric operating revenues decreased by 2.7% since last fiscal year. This decrease can be attributed to several items as follows:  A large refund due to a multi-year metering issue  A slight increase in system losses from 1.95% to 2.11%  Movement between rate classes by customers from higher to lower gross margin rates  Lower sales resulting in lower revenues in many rate classes  The average price per kilowatt hour for energy sales decreased 1.5% Overall operating income decreased due to a large substation repair and increased use of contract labor. The electric department has implemented a new salary structure that has reduced the need for contract labor. The Natural Gas Fund accounts for the provision of natural gas service to City and non-City residents. All activities necessary to the provision of these services are accounted for in this fund, including, but not limited to administration, plant and line maintenance. As of June 30, 2018, the City of Monroe’s natural gas fund reported total net position of $56,862,257, an increase of $2,884,462 in comparison with the prior year. Natural gas operating revenues were up by 16.5% from prior year. Increased consumption of natural gas is directly attributable to an extended cold snap this past winter. The gross profit for the natural gas fund was up 7% from fiscal year 2017. The Airport Fund accounts for the operation of the Charlotte-Monroe Executive Airport. As of June 30, 2018, the City of Monroe’s airport fund reported a total net position of $27,758,622, a decrease of $411,131 in comparison with the prior year. Fuel sales for the airport have increased 22.2% over the prior year. General Fund Budgetary Highlights During the fiscal year, the City of Monroe revised the budget on several occasions. Generally, budget amendments are either amendments made to adjust the estimates that are used to prepare the original budget ordinance once updated information is available or amendments made to recognize new funding amounts from external sources, such as federal and State grants. Total amendments to the General Fund increased expenditures by $3,448,907 or 9.5%. The key differences between the original budget and the final amended budget can be briefly summarized as follows:  Funds were appropriated for prior year encumbrances in the amount of $2,077,908 and unspent appropriations (various grants, police equitable sharing, and outside agencies), $497,295.  General Government funds were appropriated to replace the air conditioning system in city hall in the amount of $222,311. 12  Funding was appropriated for a work on remodeling a building to serve as a new senior center. Amendments were approved to replace the roof and hire an architect begin design in the total amount of $646,000. Revenues exceeded final budget by $1,217,404. This was primarily due to increased collections for ad valorem taxes due to both an increase in assessed value and increased collection rate. Also, higher than anticipated natural gas sales tax and local option sales tax distributions were received. The year end mark to market on investments resulted in a loss of $1,028,667. Expenditures were under budget by $5,631,060. Expenses were down due to savings realized from vacant positions and turnover totaling approximately $647,361, capital purchases $1,355,024 and $2,739,055 in other operating accounts. Expenditures were 85.9% of the final amended expenditure budget. $2,322,430 was carried over to fiscal year 2019 for items that were not complete at fiscal year- end. Capital Assets The following is a summary of the City of Monroe’s capital assets, net of depreciation for governmental and business-type activities for the current year with a comparison to the prior year. Additional information on the City of Monroe’s capital assets can be found in Note IV.A.5 on pages 55 - 61 of this report. City of Monroe’s Capital Assets (Net of Depreciation) Figure 5 Governmental Activities Business-type Activities Total 2018 2017 2018 2017 2018 2017 Land and land improvements $5,543,726 $5,376,844 $19,600,450 $19,631,874 $25,144,176 $25,008,718 Buildings and improvements 17,131,824 16,818,896 54,137,721 46,738,649 71,268,545 63,557,545 Equipment 1,490,116 1,424,718 4,189,724 2,792,002 5,679,840 4,216,720 Vehicles and motorized equipment 6,174,447 4,501,492 2,639,661 2,585,123 8,814,108 7,086,615 Other Intangibles 283,985 223,595 75,051 125,086 359,036 348,681 Infrastructure 44,025,314 44,673,919 177,371,297 174,494,669 221,396,611 219,168,588 Construction in progress 1,495,488 1,670,029 16,410,834 19,611,646 17,906,322 21,281,675 Total $76,144,900 $74,689,493 $274,424,738 $265,979,049 $350,569,638 $340,668,542 The City of Monroe’s investment in capital assets for its governmental and business–type activities as of June 30, 2018, totals $350,569,638 (net of accumulated depreciation). These assets include buildings, roads and bridges, land, enterprise systems infrastructure, machinery and equipment, park facilities, and vehicles. The total increase in the City’s investment in capital assets for the current fiscal year was $9,901,096. Major capital asset events during the year included the following:  Purchase of property adjacent to Belk Tonawanda Park for future park improvements  Bearskin Creek Greenway construction  Winchester Recreation Center improvements  Belk Tonawanda Park improvements  Purchase of two fire apparatus  Speculative (shell) building #4 for economic development  Corporate Center road and utility infrastructure build-out  Airport runway 23 extended area runway safety area and localizer improvements  Airport glideslope improvements Construction in progress totaling $17,906,322 has decreased overall from last year by $3,375,353. The amount is the net of the completion of projects totaling $11,040,102 and new projects that were added totaling $7,664,749. Projects included in this amount are as follows: 13  General – Center Theatre Renovation  Occupancy Tax Capital Project – Monroe Science Center  Water – John Glen water treatment plant improvements  Stormwater - Pinedell Road culvert replacement and Quail & Oakhill Drive improvements  Electric – Electric system expansion including construction of the ATI Powder facility and various renewal and replacement projects.  Natural Gas – construction of the Liquefied Natural Gas Peak Shaving Facility and utility relocation continued for Highway 74 bypass.  Airport – construction of the corporate aircraft hangar and replacement of the runway 5 approach lights. Debt Administration The following is a summary of the City’s long-term debt for governmental and business-type activity for the current year with a comparison to the prior year. Additional information on long-term debt can be found in note IV.B.8 beginning on page 80 of this report. City of Monroe’s Outstanding Debt Figure 6 Governmental Activities Business-type Activities Total 2018 2017 2018 2017 2018 2017 Install purchase obligations $7,348,694 $6,947,288 $509,000 $- $7,857,694 $6,947,288 Revenue bonds - - 48,552,787 37,250,504 48,552,787 37,250,504 State revolving loans - - 7,697,652 8,178,755 7,697,652 8,178,755 Certificates of participation - - 780,000 1,530,000 780,000 1,530,000 Limited Obligation Bonds - - 38,162,992 29,886,889 38,162,992 29,886,889 Total $7,348,694 $6,947,288 $95,702,431 $76,846,148 $103,051,125 $83,793,436 As of June 30, 2018, the City of Monroe had total debt outstanding of $103,051,125. During the fiscal year, the City issued an installment financing this past year to finance two fire trucks and two street sweepers in the amount of $2,123,000. The City’s bonded debt, $48,552,787, represents bonds secured by the combined revenues of the major business-type funds which include water and sewer, electric, natural gas and airport. This amount includes new debt issued in the amount of $14,181,225 to fund various improvements to the City’s water, sanitary sewer and municipal airport systems. Limited Obligation Bonds totaling $38,162,992 represent bonds that were issued for improvements to the natural gas system. This total includes new debt issued this past year for $8,468,917. The certificates of participation were issued to fund the construction of a natural gas pipeline. These certificates of participation were refinanced in fiscal year 2016 and replaced with limited obligation bonds. City’s total debt, net of retirements, increased $19,257,689 during the fiscal year. The elements of the increase were the issuance of bonds in the total amount of $22,650,143. Also included were other debt retirements totaling $5,515,454 and new installment financing of $2,123,000. The City of Monroe has an A1 bond rating from Moody’s Investor Service and A+ rating from Standard & Poor’s Rating Services for the Combined Enterprise Fund Revenue Bonds. The City also has an Aa3 rating from Moody’s Investor Service and AA rating from Standard and Poor’s Rating Services for the Limited Obligation Bonds. These ratings are indications of the sound financial condition and stable outlook of the City of Monroe. North Carolina General Statutes limit the amount of general obligation debt that a unit of government can issue to eight percent of the total assessed value of taxable property located within that government’s boundaries. The legal debt margin for the City of Monroe is $237,710,622. 14 Economic Factors and Next Year’s Budgets and Rates The following key economic indicators reflect the growth and prosperity of the City.  The annual unemployment rate for City of Monroe has dropped to 4.2%, which is a decrease of 0.2% from last year. This rate is slightly higher than Union County’s rate of 3.7% and the State’s average rate of 4.2%.  The total tax levy increased 5.1% from fiscal year 2017 to fiscal year 2018 along with the tax collection rate by 0.24%.  Population increased 0.9% from 34,725 in 2017 to 35,034 in 2018. Governmental Activities – The City passed a property tax rate of .6163 for fiscal year 2019. This rate reflects a three cent increase over fiscal year 2018 to fund the design and construction of a new police headquarters facility. This is the City’s first tax increase since 2011. The economic conditions that form the foundation of the City’s revenues for the upcoming year indicate some improvement in sales tax and other consumer oriented revenues. Positive economic conditions continue and the City’s revenues for the upcoming year will increase from the prior year. City of Monroe’s fiscal year 2019 budget increased by approximately 10.4% with General and Governmental Funds increasing by 60.7% and business-type funds decreasing by 4.4% over their current year budgets. The large increase in General and Governmental Funds was due to an increase in capital projects. The increase is 3.5% if the additional capital projects are excluded from this calculation. In the fiscal year 2019 budget, the City continues to support initiatives that improve the competitive elements of employee compensation and is focused on capital outlays related to public safety and downtown improvements. In the fiscal year 2016 the city completed a job classification and compensation study. The fiscal year 2019 budget includes funding to implement the final of three phases of the study’s recommended pay plan modifications. This will increase employees pay, ensuring the ability to hire and retain experienced qualified employees. A one-time bonus was also included for all employees in the amount of 2.5% of each employee salary. In addition to the Police Headquarters building mentioned above, also included in the Budget is funding for a temporary facility on City-owned property on Secrest Shortcut Road to serve as Fire Station #6. This facility will allow the fire department to increase service levels by reducing response time in the northwest area in the City. The City takes great pride and shows its commitment to revitalization in the downtown area with three projects as follows: 1. Center Theatre - The City purchased the Center Theatre in 2013 and the adjacent units in 2015. The Center Theatre renovation is currently being designed. The FY 2019 Budget includes debt payments to finance construction costs for this project. 2. Senior Center – The City purchased the Enquirer Journal Newspaper building in 2016 and plans to renovate this facility to serve as a new Senior Center. The current Senior Center facility is too small for the demand on the facility and adequate parking has created challenges. The new facility is just beginning design and will provide the same services and plenty of parking. The FY 2019 Budget includes debt payments to finance both the design and construction of this project. 3. Science Center – The City purchased a building that used to be a grocery store near the Union County Public Library on Franklin Street with the intention of converting the facility into a Science Center. The renovation is currently being designed. The FY 2019 Budget includes debt payments to finance the construction costs for this project. The purchase of the building and all project costs will be paid from Occupancy Tax Revenue. 15 The City is enthusiastically pursuing all avenues to beautify our community. Beautification plans provided in this Budget include funding for the purchase of the seventh segment of U.S. 74 tree and flower plantings. Also included is continuing funding for greenway capital improvements. Funding is included to help implement the Concord Avenue revitalization plan and develop cost estimates and a location plan for the placement of wayfinding signs throughout the City. Improving existing facilities is priority and the proposed FY 2019 Budget continues to address many deferred maintenance issues. The replacement of the concrete steps, bleachers and trash receptacles at Don Griffin Park, signage for parks and carpet replacement and painting at the Pro Shop at the golf course are included in the proposed Budget. The budget preserves nearly $4 million of unassigned fund balance for the future capital needs of the City. Business-type Activities – Water and sewer rates were increased by 3.2% each to plan for the significant anticipated cost of future capital projects and necessary system improvements. Electric, natural gas, solid waste and stormwater rates remained the same. With the extensive planning within our water, sewer, electric and natural gas services, Monroe stands alone in Union County to meet any and all residential and industrial development needs. Being ready and able to meet these needs puts Monroe in an excellent position to continue to grow our City. Several projects including water and wastewater treatment plant improvements, a liquefied natural gas peak shaving facility and two new airplane storage hangars are currently under construction. Requests for Information This report is designed to provide an overview of the City’s finances for those with an interest in this area. Questions concerning any of the information found in this report or requests for additional information should be directed to the Finance Director at the City of Monroe, 300 West Crowell Street, Monroe, North Carolina, 28112, visit the City’s website at www.monroenc.org., or email accounting@monroenc.org for more information. 16 Basic Financial Statements The Basic Financial Statements provide a summary overview of the financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information at June 30, and the respective changes in financial position and cash flows, where appropriate for the year then ended.  Government-Wide Financial Statements  Fund Financial Statements Governmental Fund Financial Statements Proprietary Fund Financial Statements  Notes to Financial Statements  Required Supplemental Information 17 Exhibit 1 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF NET POSITION JUNE 30, 2018 Monroe City of Tourism Governmental Business-Type Monroe Development Activities Activities Total ABC Board Authority Assets: Current assets: Cash and cash equivalents 35,942,514$ 117,850,809$ 153,793,323$ 722,284$ 574,568$ Taxes receivable 729,697 - 729,697 - - Accounts receivable 578,212 12,886,212 13,464,424 - 55,712 Note receivable - short-term 55,377 - 55,377 - - Internal balances - short-term (130,352) 130,352 - - - Due from other governments 3,505,580 - 3,505,580 - - Due from component units 18,570 - 18,570 - - Inventories 226,542 3,924,028 4,150,570 258,416 4,090 Prepaids 745,090 34,733 779,823 27,505 11,998 Cash and cash equivalents - restricted 2,000,884 17,545,455 19,546,339 - - Total current assets 43,672,114 152,371,589 196,043,703 1,008,205 646,368 Non-current assets: Note receivable 1,002,717 - 1,002,717 - - Internal balances - long term (1,422,511) 1,422,511 - - - Capital assets: Land, non-depreciable improvements, and construction in progress 7,039,214 36,011,284 43,050,498 317,013 - Other capital assets, net of depreciation 69,105,686 238,413,454 307,519,140 538,160 - Total capital assets 76,144,900 274,424,738 350,569,638 855,173 - Total non-current assets 75,725,106 275,847,249 351,572,355 855,173 - Total assets 119,397,220 428,218,838 547,616,058 1,863,378 646,368 Deferred Outflows of Resources: OPEB deferrals 402,420 178,440 580,860 - - Pension deferrals 3,530,763 1,394,919 4,925,682 66,943 - Charge on debt defeasance - 4,565,230 4,565,230 - - Total deferred outflows of resources 3,933,183 6,138,589 10,071,772 66,943 - Liabilities: Current liabilities: Accounts payable and accrued liabilities 1,355,411 9,006,753 10,362,164 351,761 12,326 Due to primary government - - - - 18,570 Current portion of long-term liabilities 2,743,540 5,560,848 8,304,388 - - Unearned revenue 2,232 33,344 35,576 - - Payable from restricted assets 46,893 526,947 573,840 - - Property claims liability 47,542 - 47,542 - - Workers' compensation claims 4,105 - 4,105 - - Healthcare benefits claims 429,477 - 429,477 - - Total current liabilities 4,629,200 15,127,892 19,757,092 351,761 30,896 Non-current liabilities: Net pension liability 4,101,134 1,816,809 5,917,943 78,372 - Total pension liability (LEOSSA)4,075,929 - 4,075,929 - - Total OPEB liability 28,888,286 12,809,587 41,697,873 - - Due in more than one year 6,960,369 91,006,925 97,967,294 - - Total non-current liabilities 44,025,718 105,633,321 149,659,039 78,372 - Total liabilities 48,654,918 120,761,213 169,416,131 430,133 30,896 Component UnitsPrimary Government The notes to the financial statements are an integral part of this statement. 18 Exhibit 1 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF NET POSITION JUNE 30, 2018 Monroe City of Tourism Governmental Business-Type Monroe Development Activities Activities Total ABC Board Authority Component UnitsPrimary Government Deferred Inflows of Resources: OPEB deferrals 2,887,522 1,280,379 4,167,901 - - Pension deferrals 448,012 173,090 621,102 5,524 - Other deferred inflows 5,697 - 5,697 - - Total deferred inflows of resources 3,341,231 1,453,469 4,794,700 5,524 - Net Position: Net investment in capital assets 69,530,266 200,306,046 269,836,312 855,173 - Restricted for: Stabilization by state statute 6,823,379 - 6,823,379 - 60,712 Public safety 612,606 - 612,606 - - Transportation 1,250,760 - 1,250,760 - - Occupancy tax capital projects 736,716 - 736,716 - - Economic development 231,036 - 231,036 139,601 - Tourism promotion - - - - 538,672 Unrestricted (7,850,509) 111,836,699 103,986,190 499,890 16,088 Total net position 71,334,254$ 312,142,745$ 383,476,999$ 1,494,664$ 615,472$ The notes to the financial statements are an integral part of this statement. 19 Exhibit 2 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF ACTIVITIES Operating Capital Charges Grants and Grants and Functions/Programs Expenses for Services Contributions Contributions Primary Government: Governmental Activities: General government 4,932,525$ 2,212,538$ -$ -$ Transportation 5,757,880 327,357 964,168 1,179,350 Public safety 25,300,345 3,972,731 707,189 - Culture and recreation 5,153,498 1,691,179 201,978 100,000 Economic and physical development 1,338,277 - 408,000 - Interest on long-term debt 199,984 - - - Total governmental activities 42,682,509 8,203,805 2,281,335 1,279,350 Business-Type Activities: Water and sewer 12,339,410 17,227,953 - 6,160 Electric 60,763,838 63,852,805 - 10,000 Natural gas 14,105,041 18,100,865 - - Aquatics and Fitness Center 4,081,878 4,065,373 - - Stormwater 2,083,956 2,256,821 - - Solid waste 2,348,077 2,415,660 - - Airport 3,705,996 1,943,834 - 90,652 Total business-type activities 99,428,196 109,863,311 - 106,812 Total primary government 142,110,705$ 118,067,116$ 2,281,335$ 1,386,162$ Component Units: ABC Board 4,785,982$ 4,731,863$ -$ -$ Tourism Development Authority 472,891 - 634,804 - Total component units 5,258,873$ 4,731,863$ 634,804$ -$ FOR THE YEAR ENDED JUNE 30, 2018 Program Revenues The notes to the financial statements are an integral part of this statement. 20 Exhibit 2 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2018 Monroe City of Tourism Governmental Business-Type Monroe Development Functions/Programs Activities Activities Total ABC Board Authority Primary Government: Governmental Activities: General government (2,719,987)$ -$ (2,719,987)$ -$ -$ Transportation (3,287,005) - (3,287,005) - - Public safety (20,620,425) - (20,620,425) - - Culture and recreation (3,160,341) - (3,160,341) - - Economic and physical development (930,277) - (930,277) - - Interest on long-term debt (199,984) - (199,984) - - Total governmental activities (30,918,019) - (30,918,019) - - Business-Type Activities: Water and sewer - 4,894,703 4,894,703 - - Electric - 3,098,967 3,098,967 - - Natural gas - 3,995,824 3,995,824 - - Aquatics and Fitness Center - (16,505) (16,505) - - Stormwater - 172,865 172,865 - - Solid waste - 67,583 67,583 - - Airport - (1,671,510) (1,671,510) - - Total business-type activities - 10,541,927 10,541,927 - - Total primary government (30,918,019) 10,541,927 (20,376,092) - - Component Units: ABC Board (54,119) - Tourism Development Authority - 161,913 Total component units (54,119) 161,913 General Revenues: Taxes: Property taxes, levied for general purpose 21,077,587 - 21,077,587 - - Sales and use tax 6,215,031 - 6,215,031 - - Utility sales taxes 3,077,736 - 3,077,736 - - Motor vehicle tax 842,065 - 842,065 - - Beer & wine and telecommunications taxes 462,733 - 462,733 - - Gross receipts tax 104,468 - 104,468 - - Unrestricted investment earnings (loss) (616,222) (1,398,405) (2,014,627) 1,671 - Interest earnings on interfund loans - 75,081 75,081 - - Miscellaneous 743,716 465,850 1,209,566 - - Total general revenues 31,907,114 (857,474) 31,049,640 1,671 - Transfers (1,279,079) 1,279,079 - - - Total general revenues and transfers 30,628,035 421,605 31,049,640 1,671 - Change in net position (289,984) 10,963,532 10,673,548 (52,448) 161,913 Net Position: Beginning of year, July 1 91,588,015 310,034,679 401,622,694 1,547,112 453,559 Restatement (19,963,777) (8,855,466) (28,819,243) - - Beginning of year, July 1, restated 71,624,238 301,179,213 372,803,451 1,547,112 453,559 End of year, June 30 71,334,254$ 312,142,745$ 383,476,999$ 1,494,664$ 615,472$ Primary Government Component Units Net (Expense) Revenue and Changes in Net Position The notes to the financial statements are an integral part of this statement. 21 Exhibit 3 CITY OF MONROE, NORTH CAROLINA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2018 Nonmajor Total Governmental Governmental General Funds Funds Assets: Cash and cash equivalents 24,993,135$ 6,504,487$ 31,497,622$ Receivables: Taxes 727,280 2,417 729,697 Accounts 497,177 7,755 504,932 Due from other governments 3,438,124 67,456 3,505,580 Due from component unit - 18,570 18,570 Inventories 226,542 - 226,542 Prepaids 600,433 3,642 604,075 Cash and cash equivalents - restricted 1,842,469 142,351 1,984,820 Total assets 32,325,160$ 6,746,678$ 39,071,838$ Liabilities, Deferred Inflows of Resources, and Fund Balances: Liabilities: Accounts payable and accrued liabilities 1,238,473$ 116,938$ 1,355,411$ Accounts payable to be paid from restricted assets 30,829 - 30,829 Prepaid privilege license 2,232 - 2,232 Advances from other funds 1,422,511 - 1,422,511 Total liabilities 2,694,045 116,938 2,810,983 Deferred Inflows of Resources 1,068,099 2,417 1,070,516 Fund Balances: Non-spendable: Inventories 226,542 - 226,542 Prepaids 600,433 3,642 604,075 Restricted: Stabilization by state statute 5,534,206 1,289,173 6,823,379 Public safety 1,204,315 142,351 1,346,666 Transportation 1,250,760 - 1,250,760 Occupancy tax capital projects - 736,716 736,716 Economic development - 231,036 231,036 Committed: Culture and recreation - 100,000 100,000 Capital projects - 4,006,991 4,006,991 Assigned: Minimum fund balance requirement 10,106,092 - 10,106,092 Airport grant acceptance 188,868 - 188,868 Airport operations - 5-year subsidy 750,000 - 750,000 Street resurfacing - 5-year program 900,000 - 900,000 Subsequent year's expenditures 2,562,646 - 2,562,646 Community Development - 56,562 56,562 Downtown Monroe - 60,852 60,852 Unassigned 5,239,154 - 5,239,154 Total fund balances 28,563,016 6,627,323 35,190,339 Total liabilities, deferred inflows of resources, and fund balances 32,325,160$ 6,746,678$ 39,071,838$ The notes to the financial statements are an integral part of this statement. 22 Exhibit 4 CITY OF MONROE, NORTH CAROLINA RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2018 Total Governmental Funds Amounts reported for governmental activities in the Statements of Net Position are different because: Fund balances - total governmental funds (Exhibit 3)35,190,339$ Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Gross capital assets at historical cost 152,470,382$ Accumulated depreciation (76,325,482) 76,144,900 Total pension liability (LEOSSA)(4,075,929) Note receivable from outside party 1,058,094 Net pension liability - LGERS (4,101,134) Deferred outflows of resources related to OPEB are not reported in the funds.402,420 Deferred outflows of resources related to pensions are not reported in the funds.3,530,763 Deferred inflows of resources related to OPEB are not reported in the funds.(2,887,522) Deferred inflows of resources related to pensions are not reported in the funds.(448,012) Internal service funds are used by management to charge the costs of health and dental insurance to individual funds. The current assets and liabilities of the Internal Service Fund are included in governmental activities in the Statement of Net Position.2,301,190 Internal service funds are used by management to charge the costs of workers' compensation to individual funds. The current assets and liabilities of the Internal Service Fund are included in governmental activities in the Statement of Net Position.1,083,506 Internal service funds are used by management to charge the costs of property and liability insurance to individual funds. The current assets and liabilities of the Internal Service Fund are included in governmental activities in the Statement of Net Position.793,367 Internal balance due from business-type activities to governmental activities (130,352) Liabilities for earned, but unavailable, revenues in fund statements 1,064,819 Total OPEB liability (28,888,286) Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds (Note II.A.).(9,703,909) Net position of governmental activities (Exhibit 1)71,334,254$ The notes to the financial statements are an integral part of this statement. 23 Exhibit 5 Nonmajor Total Governmental Governmental General Funds Funds Revenues: Ad valorem taxes 21,152,299$ 56,156$ 21,208,455$ Other taxes and licenses 948,913 - 948,913 Unrestricted intergovernmental 9,991,018 - 9,991,018 Restricted intergovernmental 1,661,646 1,889,328 3,550,974 Sales and services 2,521,495 - 2,521,495 Investment earnings (560,167) (17,471) (577,638) Miscellaneous 406,946 117,700 524,646 Total revenues 36,122,150 2,045,713 38,167,863 Expenditures: Current: General government 3,673,087 - 3,673,087 Transportation 2,949,918 - 2,949,918 Public safety 21,105,911 - 21,105,911 Culture and recreation 5,182,991 - 5,182,991 Economic and physical development - 1,259,746 1,259,746 Capital outlay - 1,949,699 1,949,699 Debt service: Principal retirement 1,212,594 - 1,212,594 Interest and other charges 199,984 - 199,984 Total expenditures 34,324,485 3,209,445 37,533,930 Revenues over (under) expenditures 1,797,665 (1,163,732) 633,933 Other Financing Sources (Uses): Transfers from other funds 764,688 1,007,818 1,772,506 Transfers to other funds (2,934,465) (117,120) (3,051,585) Installment purchase obligations issued 1,614,000 - 1,614,000 Total other financing sources (uses)(555,777) 890,698 334,921 Net change in fund balances 1,241,888 (273,034) 968,854 Fund Balances: Beginning of year, July 1 27,321,128 6,900,357 34,221,485 End of year, June 30 28,563,016$ 6,627,323$ 35,190,339$ STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS CITY OF MONROE, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2018 The notes to the financial statements are an integral part of this statement. 24 Exhibit 6 CITY OF MONROE, NORTH CAROLINA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2018 Amounts reported for governmental activities in the Statement of Activities are different because: Net change in fund balances - total governmental funds (Exhibit 5)968,854$ Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period (Note III.B.). 1,455,407 Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Change in other deferred inflows (200,773) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction has any effect on net position in the government-wide statements. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued; whereas, these amounts are deferred and amortized in the Statement of Activities. This amount is the net effect of these differences in the treatment of long-term debt and related items (Note III.B.). (401,406) Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Pension expense- LGERS 80,855 Pension expense- LEOSSA (161,379) Compensated absences (149,008) OPEB plan expense (1,513,343) (1,742,875) The Internal Service Fund, determined to be governmental fund type, is used by management to charge the costs, net of investment earnings.(369,191) Change in net position of governmental activities (Exhibit 2)(289,984)$ The notes to the financial statements are an integral part of this statement. 25                       26 Exhibit 7 CITY OF MONROE, NORTH CAROLINA GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2018 Variance Original Final Actual Over/Under Revenues: Ad valorem taxes 20,355,297$ 20,355,297$ 21,152,299$ 797,002$ Other taxes and licenses 905,470 905,470 948,913 43,443 Unrestricted intergovernmental 9,198,441 9,223,441 9,991,018 767,577 Restricted intergovernmental 1,490,945 1,592,818 1,661,646 68,828 Sales and services 2,054,998 2,054,998 2,521,495 466,497 Investment earnings 450,000 468,500 (560,167) (1,028,667) Miscellaneous 293,062 304,222 406,946 102,724 Total revenues 34,748,213 34,904,746 36,122,150 1,217,404 Expenditures: Current: General government 4,950,551 5,390,548 3,673,087 1,717,461 Transportation 3,691,471 3,763,398 2,949,918 813,480 Public safety 20,263,136 22,719,831 21,105,911 1,613,920 Culture and recreation 5,720,163 6,200,451 5,182,991 1,017,460 Debt service: Principal retirement 1,725,506 1,725,506 1,212,594 512,912 Interest and other charges 155,811 155,811 199,984 (44,173) Total expenditures 36,506,638 39,955,545 34,324,485 5,631,060 Revenues over (under) expenditures (1,758,425) (5,050,799) 1,797,665 6,848,464 Other Financing Sources (Uses): Transfers from other funds 655,265 690,119 764,688 74,569 Transfers to other funds (2,549,225) (3,357,881) (2,934,465) 423,416 Installment purchase obligations issued 1,600,000 1,600,000 1,614,000 14,000 Total other financing sources (uses)(293,960) (1,067,762) (555,777) 511,985 Appropriated fund balance 2,052,385 6,118,561 - (6,118,561) Net change in fund balance -$ -$ 1,241,888 1,241,888$ Fund Balance: Beginning of year, July 1 27,321,128 End of year, June 30 28,563,016$ Budgeted Amounts The notes to the financial statements are an integral part of this statement. 27 Exhibit 8 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF NET POSITION PROPRIETARY FUNDS Water and Sewer Electric Natural Gas Airport Assets: Current assets: Cash and cash equivalents 38,737,173$ 43,678,776$ 27,046,302$ 3,092,830$ Accounts receivable 1,846,903 9,451,293 947,785 73,796 Prepaid expenses 7,676 19,049 4,025 701 Inventories 308,875 3,289,104 278,239 40,380 Cash and cash equivalents, restricted 9,076,829 - 5,280,737 2,151,942 Total current assets 49,977,456 56,438,222 33,557,088 5,359,649 Non-current assets: Restricted assets: Customer deposits 74,244 318,254 134,449 - Advance to other funds - 2,262,691 - - Capital assets: Land and other non-depreciable assets 3,359,279 10,201,713 9,032,465 12,191,797 Other capital assets, net of depreciation 74,614,334 78,578,455 55,743,094 22,977,297 Capital assets (net)77,973,613 88,780,168 64,775,559 35,169,094 Total non-current assets 78,047,857 91,361,113 64,910,008 35,169,094 Total assets 128,025,313 147,799,335 98,467,096 40,528,743 Deferred Outflows of Resources: OPEB deferrals 75,047 32,760 16,613 13,883 Pension deferrals 586,139 254,447 131,767 109,048 Charge on debt defeasance 260,211 766,638 3,433,895 104,486 Total deferred outflows of resources 921,397 1,053,845 3,582,275 227,417 Liabilities: Current liabilities: Accounts payable and accrued liabilities 1,111,308 5,561,914 1,511,358 417,939 Unearned revenue - - - - Compensated absences 225,937 153,300 69,208 21,058 Advance from other funds - - - 840,180 Installment purchase obligations - - - - Certificates of participation - - 780,000 - Revenue bonds payable 1,014,757 1,182,328 277,945 753,566 Limited obligation bonds payable - - 395,369 - State revolving loans payable 481,103 - - - Total current liabilities 2,833,105 6,897,542 3,033,880 2,032,743 Liabilities payable from restricted assets: Customer deposits 74,244 318,254 134,449 - Non-current liabilities: Net pension liability 763,415 331,405 171,621 142,030 Compensated absences 111,282 75,506 34,087 10,372 Installment purchase obligations - - - - Revenue bonds payable - net unamortized premium 16,640,369 16,263,809 2,717,344 9,702,668 Limited obligation bonds payable - - 37,767,623 - State revolving loans payable 7,216,549 - - - Total other post-employment benefits liability 5,387,365 2,351,760 1,192,559 996,580 Total non-current liabilities 30,193,224 19,340,734 42,017,683 10,851,650 Total liabilities 33,026,329 26,238,276 45,051,563 12,884,393 Deferred Inflows of Resources: OPEB deferrals 538,492 235,070 119,202 99,613 Pension deferrals 72,731 31,574 16,349 13,532 Total deferred inflows of resources 611,223 266,644 135,551 113,145 Net Position: Net investment in capital assets 61,957,875 72,100,669 31,551,910 26,969,288 Unrestricted 33,351,283 50,247,591 25,310,347 789,334 Total net position 95,309,158$ 122,348,260$ 56,862,257$ 27,758,622$ Major Enterprise Funds JUNE 30, 2018 The notes to the financial statements are an integral part of this statement. 28 Exhibit 8 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2018 Governmental Activities Nonmajor Internal Enterprise Service Funds Total Funds Assets: Current assets: Cash and cash equivalents 5,295,728$ 117,850,809$ 4,444,892$ Accounts receivable 566,435 12,886,212 73,280 Prepaid expenses 3,282 34,733 141,015 Inventories 7,430 3,924,028 - Cash and cash equivalents, restricted 509,000 17,018,508 - Total current assets 6,381,875 151,714,290 4,659,187 Non-current assets: Restricted assets: Customer deposits - 526,947 16,064 Advance to other funds - 2,262,691 - Capital assets: Land and other non-depreciable assets 1,226,030 36,011,284 - Other capital assets, net of depreciation 6,500,274 238,413,454 - Capital assets (net)7,726,304 274,424,738 - Total non-current assets 7,726,304 277,214,376 16,064 Total assets 14,108,179 428,928,666 4,675,251 Deferred Outflows of Resources; OPEB deferrals 40,137 178,440 - Pension deferrals 313,518 1,394,919 - Charge on debt defeasance - 4,565,230 - Total deferred outflows of resources 353,655 6,138,589 - Liabilities: Current liabilities: Accounts payable and accrued liabilities 404,234 9,006,753 481,124 Unearned revenue 33,344 33,344 - Compensated absences 110,277 579,780 - Advance from other funds - 840,180 - Installment purchase obligations 96,000 96,000 - Certificates of participation - 780,000 - Revenue bonds payable - 3,228,596 - Limited obligation bonds payable - 395,369 - State revolving loans payable - 481,103 - Total current liabilities 643,855 15,441,125 481,124 Liabilities payable from restricted assets: Customer deposits - 526,947 16,064 Non-current liabilities: Net pension liability 408,338 1,816,809 - Compensated absences 54,316 285,563 - Installment purchase obligations 413,000 413,000 - Revenue bonds payable - net unamortized premium - 45,324,190 - Limited obligation bonds payable - 37,767,623 - State revolving loans payable - 7,216,549 - Total other post-employment benefits liability 2,881,323 12,809,587 - Total non-current liabilities 3,756,977 106,160,268 16,064 Total liabilities 4,400,832 121,601,393 497,188 Deferred Inflows of Resources: OPEB deferrals 288,002 1,280,379 - Pension deferrals 38,904 173,090 - Total deferred inflows of resources 326,906 1,453,469 - Net Position: Net investment in capital assets 7,726,304 200,306,046 - Unrestricted 2,007,792 111,706,347 4,178,063 Total net position 9,734,096$ 312,012,393 4,178,063$ Adjustment to reflect the consolidation of Internal Service Fund activities related to enterprise funds 130,352 Net position of business-type activities 312,142,745$ The notes to the financial statements are an integral part of this statement. 29 Exhibit 9 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Water and Sewer Electric Natural Gas Airport Operating Revenues: Charges for services 16,313,261$ 63,473,572$ 18,109,456$ 1,849,874$ Interfund charges and employee contributions - - - - Availability fees 618,114 - - - Other operating revenues 318,493 405,035 3,127 78,961 Total operating revenues 17,249,868 63,878,607 18,112,583 1,928,835 Operating Expenses: Distribution systems 2,973,541 4,891,805 3,595,379 - Water filter plant 3,340,339 - - - Waste treatment plant 2,445,739 - - - Electric power purchases - 52,523,790 - - Natural gas purchases - - 7,381,818 - Aquatics and Fitness Center operations - - - - Airport operations - - - 2,451,515 Stormwater operations - - - - Solid waste operations - - - - Solid waste maintenance - - - - Operating expenses - - - - Workers' compensation claims and premiums - - - - Health benefit claims and premiums - - - - Property and liability claims and premiums - - - - Depreciation and amortization 2,740,685 2,630,050 1,535,273 796,921 Total operating expenses 11,500,304 60,045,645 12,512,470 3,248,436 Operating income (loss)5,749,564 3,832,962 5,600,113 (1,319,601) Non-Operating Revenues (Expenses): Gain (loss) on sale of capital assets 51,280 9,935 6,107 21,143 Other non-operating revenues (expenses) 154,178 186,636 119,979 - Investment earnings (449,178) (600,349) (293,894) 16,562 Interest income interfund loans - 75,081 - - Interest and other charges (839,106) (718,193) (1,592,571) (457,560) Total non-operating revenues (expenses)(1,082,826) (1,046,890) (1,760,379) (419,855) Income (loss) before capital contributions and transfers 4,666,738 2,786,072 3,839,734 (1,739,456) Capital grants and contributions 6,160 10,000 - 90,652 Transfers from other funds - - - 1,926,647 Transfers to other funds - (516,309) (131,259) - Total transfers (to) from other funds - (516,309) (131,259) 1,926,647 Change in net position 4,672,898 2,279,763 3,708,475 277,843 Net Position: Beginning of year, July 1 94,361,112 121,694,106 53,977,795 28,169,753 Restatement (3,724,852) (1,625,609) (824,013) (688,974) Beginning of year, July 1, restated 90,636,260 120,068,497 53,153,782 27,480,779 End of year, June 30 95,309,158$ 122,348,260$ 56,862,257$ 27,758,622$ Major Enterprise Funds The notes to the financial statements are an integral part of this statement. 30 Exhibit 9 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Governmental Activities Nonmajor Internal Enterprise Service Funds Total Funds Operating Revenues: Charges for services 8,530,797$ 108,276,960$ -$ Interfund charges and employee contributions - - 7,995,170 Availability fees - 618,114 - Other operating revenues 233,892 1,039,508 232,764 Total operating revenues 8,764,689 109,934,582 8,227,934 Operating Expenses: Distribution systems - 11,460,725 - Water filter plant - 3,340,339 - Waste treatment plant - 2,445,739 - Electric power purchases - 52,523,790 - Natural gas purchases - 7,381,818 - Aquatics and Fitness Center operations 3,767,041 3,767,041 - Airport operations - 2,451,515 - Stormwater operations 2,009,682 2,009,682 - Solid waste operations 2,221,166 2,221,166 - Solid waste maintenance 106,591 106,591 - Operating expenses - - 506,712 Workers' compensation claims and premiums - - 166,032 Health benefit claims and premiums - - 7,366,337 Property and liability claims and premiums - - 662,502 Depreciation and amortization 406,947 8,109,876 - Total operating expenses 8,511,427 95,818,282 8,701,583 Operating income (loss)253,262 14,116,300 (473,649) Non-Operating Revenues (Expenses): Gain (loss) on sale of capital assets - 88,465 - Other non-operating revenues (expenses)5,057 465,850 - Investment earnings (71,546) (1,398,405) (55,278) Interest income interfund loans - 75,081 - Interest and other charges (2,484) (3,609,914) - Total non-operating revenues (expenses)(68,973) (4,378,923) (55,278) Income (loss) before capital contributions and transfers 184,289 9,737,377 (528,927) Capital grants and contributions - 106,812 - Transfers from other funds - 1,926,647 - Transfers to other funds - (647,568) - Transfers (to) from other funds - 1,279,079 - Change in net position 184,289 11,123,268 (528,927) Net Position: Beginning of year, July 1 11,541,825 4,706,990 Restatement (1,992,018) - Beginning of year, July 1, restated 9,549,807 4,706,990 End of year, June 30 9,734,096$ 4,178,063$ Adjustment to reflect the consolidation of Internal Service Fund activities related to enterprise funds change (159,736) Net position of business-type activities 10,963,532$ The notes to the financial statements are an integral part of this statement. 31 Exhibit 10 Page 1 of 4CITY OF MONROE, NORTH CAROLINA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Water and Sewer Electric Natural Gas Airport Cash Flows from Operating Activities: Cash received from customers 17,381,776$ 63,519,576$ 18,700,239$ 3,188,415$ Cash paid for goods and services (3,858,456) (55,339,124) (9,167,532) (2,046,709) Cash paid to or on behalf of employees for services (4,095,466) (2,790,578) (1,093,733) (518,799) Other operating revenues - - - - Net cash provided (used) by operating activities 9,427,854 5,389,874 8,438,974 622,907 Cash Flows from Non-Capital Financing Activities: Advances from other funds - 204,310 - - Advances to other funds - - - (35,399) Transfers from other funds - - - 1,926,647 Transfers to other funds - (516,309) (131,259) - Net cash provided (used) by non-capital financing activities - (311,999) (131,259) 1,891,248 Cash Flows from Capital and Related Financing Activities: Proceeds from sale of capital assets 52,796 9,936 6,107 52,567 Acquisition and construction of capital assets (8,037,181) (3,466,653) (3,469,447) (1,517,509) Capital contributions 6,160 10,000 - 90,652 Premium on issuance of debt 1,405,504 - 188,917 275,720 Principal paid on bond maturities and equipment obligations (1,144,072) (1,025,397) (1,051,636) (640,000) Proceeds from issuance of long-term debt 10,450,000 - 8,280,000 2,050,000 Interest paid on bond maturities and equipment obligations (839,106) (718,193) (1,592,571) (457,560) Net cash provided (used) by capital and related financing activities 1,894,101 (5,190,307) 2,361,370 (146,130) Cash Flows from Investing Activities: Earnings on investments (449,178) (525,268) (293,894) 16,562 Net cash provided (used) by investing activities (449,178) (525,268) (293,894) 16,562 Net increase (decrease) in cash and cash equivalents 10,872,777 (637,700) 10,375,191 2,384,587 Cash and Cash Equivalents: Beginning of year, July 1 37,015,469 44,634,730 22,086,297 2,860,185 End of year, June 30 47,888,246$ 43,997,030$ 32,461,488$ 5,244,772$ Major Enterprise Funds The notes to the financial statements are an integral part of this statement. 32 Exhibit 10 Page 2 of 4CITY OF MONROE, NORTH CAROLINA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Governmental Activities Nonmajor Internal Enterprise Service Funds Total Funds Cash Flows from Operating Activities: Cash received from customers 8,738,123$ 111,528,129$ 8,466,759$ Cash paid for goods and services (5,284,283) (75,696,104) (8,642,738) Cash paid to or on behalf of employees for services (2,774,547) (11,273,123) - Other operating revenues - - 232,764 Net cash provided (used) by operating activities 679,293 24,558,902 56,785 Cash Flows from Non-Capital Financing Activities: Advances from other funds - 204,310 - Advances to other funds - (35,399) - Transfers from other funds - 1,926,647 - Transfers to other funds - (647,568) - Net cash provided (used) by non-capital financing activities - 1,447,990 - Cash Flows from Capital and Related Financing Activities: Proceeds from sale of capital assets - 121,406 - Acquisition and construction of capital assets (270,367) (16,761,157) - Capital contributions - 106,812 - Premium on issuance of debt - 1,870,141 - Principal paid on bond maturities and equipment obligations - (3,861,105) - Proceeds from issuance of long-term debt 509,000 21,289,000 - Interest paid on bond maturities and equipment obligations (2,484) (3,609,914) - Net cash provided (used) by capital and related financing activities 236,149 (844,817) - Cash Flows from Investing Activities: Earnings on investments (71,546) (1,323,324) (55,278) Net cash provided (used) by investing activities (71,546) (1,323,324) (55,278) Net increase (decrease) in cash and cash equivalents 843,896 23,838,751 1,507 Cash and Cash Equivalents: Beginning of year, July 1 4,960,832 111,557,513 4,459,449 End of year, June 30 5,804,728$ 135,396,264$ 4,460,956$ The notes to the financial statements are an integral part of this statement. 33 Exhibit 10 Page 3 of 4CITY OF MONROE, NORTH CAROLINA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Water and Sewer Electric Natural Gas Airport Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss)5,749,564$ 3,832,962$ 5,600,113$ (1,319,601)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 2,740,685 2,630,050 1,535,273 796,921 Non operating revenue 154,178 186,636 119,979 - Increase deferred outflows - pension 329,039 142,839 73,970 61,217 Increase in net pension liability (305,400) (132,577) (68,656) (56,819) Decrease deferred inflows - pension (38,689) (16,795) (8,698) (7,198) Changes in assets and liabilities: (Increase) decrease in accounts receivable (42,820) (522,597) 476,977 1,259,580 (Increase) decrease in inventories 5,795 (161,981) 23,168 (12,958) (Increase) decrease in prepaid expenses 29,883 (1,420) 159 - Increase (decrease) in accounts payable and accrued liabilities 503,176 (658,717) 632,826 (158,430) Increase (decrease) in customer deposits (9,333) (21,650) (9,459) - (Increase) decrease in deferred outflows of resources for OPEB (75,047) (32,760) (16,613) (13,883) Increase (decrease) in deferred inflows of resources for OPEB 538,492 235,070 119,202 99,613 Increase (decrease) in net OPEB liability (181,223) (79,110) (40,116) (33,523) Increase (decrease) in compensated absences 29,554 (10,076) 849 7,988 Total adjustments 3,678,290 1,556,912 2,838,861 1,942,508 Net cash provided (used) by operating activities 9,427,854$ 5,389,874$ 8,438,974$ 622,907$ Major Enterprise Funds The notes to the financial statements are an integral part of this statement. 34 Exhibit 10 Page 4 of 4CITY OF MONROE, NORTH CAROLINA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Governmental Activities Nonmajor Internal Enterprise Service Funds Total Funds Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss)253,262$ 14,116,300$ (473,649)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 406,947 8,109,876 - Non operating revenue 5,057 465,850 - Decrease deferred outflows - pension 175,997 783,062 - Increase in net pension liability (163,353) (726,805) - Decrease deferred inflows - pension (20,694) (92,074) - Changes in assets and liabilities: (Increase) decrease in accounts receivable (30,508) 1,140,632 463,579 (Increase) decrease in inventories (673) (146,649) - (Increase) decrease in prepaid expenses (225) 28,397 8,010 Increase (decrease) in accounts payable and accrued liabilities (116,254) 202,601 58,845 Increase (decrease) in customer deposits - (40,442) - (Increase) decrease in deferred outflows of resources for OPEB (40,137) (178,440) - Increase (decrease) in deferred inflows of resources for OPEB 288,002 1,280,379 - Increase (decrease) in net OPEB liability (96,924) (430,896) - Increase (decrease) in compensated absences 18,796 47,111 - Total adjustments 426,031 10,442,602 530,434 Net cash provided (used) by operating activities 679,293$ 24,558,902$ 56,785$ The notes to the financial statements are an integral part of this statement. 35 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 I. Summary of Significant Accounting Policies The accounting policies of the City of Monroe and its discretely presented component units conform to generally accepted accounting principles as applicable to governments. The following is a summary of the more significant accounting policies: A. Reporting Entity The City of Monroe is a municipal corporation that is governed by an elected mayor and a six- member council. As required by generally accepted accounting principles, these financial statements present the City and its component units, legally separate entities for which the City is financially accountable. The discretely presented component units presented below are reported in a separate column in the City's financial statements in order to emphasize that they are legally separate from the City. City of Monroe ABC Board The members of the City of Monroe ABC Board’s governing board are appointed by the City. In addition, the ABC Board is required by state statute to distribute a portion of its surpluses to the General Fund of the City. The ABC Board, which has a June 30 year-end, is presented as if it were a proprietary fund (discrete presentation). Complete financial statements for the ABC Board may be obtained from the entity’s administrative offices at City of Monroe ABC Board, 1771 Dickerson Boulevard, Monroe, North Carolina 28110. City of Monroe Tourism Development Authority The members of the City of Monroe Tourism Development Authority’s governing board are appointed by the Monroe City Council. The Authority must expend revenues as established in N.C. Session Law 2001-439. Specifically, for the first ten years, at least two-thirds of the proceeds shall be used for tourism-related purposes including tourism-related capital expenditures. The remainder of the funds shall be used to promote travel and tourism as defined by session law. After ten years, two-thirds of the proceeds shall be expended to promote travel and tourism, and one-third expended for tourism-related purposes. The Tourism Development Authority, which has a June 30 year-end, is presented as if it were a general government fund (discrete presentation). Complete financial statements for the Authority may be obtained from the entity’s administrative offices at City of Monroe Tourism Development Authority, 300 West Crowell Street, Monroe, North Carolina 28112. B. Basis of Presentation Government-Wide Statements. The Statement of Net Position and the Statement of Activities display information about the primary government and its component units. These statements include the financial activities of the overall government. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other non-exchange transactions. Business-type activities are financed, in whole or in part, by fees charged to external parties. 36 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 The Statement of Activities presents a comparison between direct expenses and program revenues for the different business-type activities of the City and for each function of the City's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expense allocations that have been made in the funds have been reversed for the Statement of Activities. Program revenues include (a) fees and charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements. The fund financial statements provide information about the City’s funds. Separate statements for each fund category – governmental and proprietary – are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as subsidies result from non-exchange transactions. Other non-operating revenues are ancillary activities, such as investment earnings. The City reports the following major governmental fund: General Fund. The General Fund is the general operating fund of the City. The General Fund accounts for all financial resources except those that are required to be accounted for in another fund. The primary revenue sources are ad valorem taxes, federal and state grants, and various other taxes and licenses. The primary expenditures are for public safety, street maintenance and construction, culture and recreation activities, and general government services. The City reports the following nonmajor governmental funds: Community Development. This fund is used to account for specific revenues that are restricted to fund continuing rehabilitation of housing within certain targeted areas of the City. Downtown Monroe. This fund is used to account for specific revenues that are restricted for the purpose of downtown revitalization. Monroe Union County Economic Development. This fund is used to account for specific revenues that are restricted for the purpose of County-wide economic development. Capital Projects Fund. This fund is used to account for the purchase, renovation, furnishing, or construction of roadway and facility improvements. Occupancy Tax Projects. This fund is used to account for tourism related capital expenditures. Governmental Capital Reserve Fund. This fund is used to accumulate funds for the purpose of constructing greenways. 37 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 The City reports the following major enterprise funds: Water and Sewer Fund. This fund is used to account for the activities associated with the production, distribution, and transmission of potable water and the activities associated with operating and maintaining the City’s sewer system. Electric Fund. This fund is used to account for the activities associated with the distribution and transmission of electricity by the City to its users. Natural Gas Fund. This fund is used to account for the activities associated with the distribution of natural gas by the City to its users. Airport Fund. This fund is used to account for the activities associated with the operation of the City’s Airport. The City reports the following nonmajor enterprise funds: Aquatics and Fitness Center. This fund is used to account for the activities associated with the operation of the City’s Aquatics and Fitness Center. Stormwater Fund. This fund is used to account for the activities associated with the operation and maintenance of the City’s stormwater system. Solid Waste. This fund is used to account for the activities associated with the operation of the City’s solid waste services. The City reports the following fund types: Internal Service Funds. Internal service funds are used to account for the financing of goods or services by one department or agency to other departments or agencies of the City on a cost reimbursement basis. The City maintains three internal service funds: Health and Dental Fund, Workers’ Compensation Fund, and the Property and Liability Fund. C. Measurement Focus and Basis of Accounting In accordance with North Carolina General Statutes, all funds of the City are maintained during the year using the modified accrual basis of accounting. Government-Wide and Proprietary Fund Financial Statements. The government-wide and proprietary financial statements are reported using the economic resources measurement focus. The government-wide and proprietary fund financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Non-exchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. 38 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City enterprise funds are charges to customers for sales and services. The City also recognizes as operating revenue the portion of fees intended to recover the cost of connecting new or reconnecting current customers to the water and sewer system. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Governmental Fund Financial Statements. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. The City considers all revenues available if they are collected within 90 days after year-end, except for property taxes. Ad valorem taxes receivable are not accrued as revenue because the amount is not susceptible to accrual. At June 30, taxes receivable for property other than motor vehicles are materially past due and are not considered to be an available resource to finance the operations of the current year. Also, as of September 1, 2013, state law altered the procedures for the assessment and collection of property taxes on registered motor vehicles in North Carolina. Effective with this change in the law, the State of North Carolina is responsible for billing and collecting the property taxes on registered motor vehicles on behalf of all municipalities and special tax districts. Property taxes are due when vehicles are registered. The billed taxes are applicable to the fiscal year in which they are received. Uncollected taxes that were billed in periods prior to September 1, 2013 and for limited registration plates are shown as a receivable in these financial statements and are offset by deferred inflows of resources. Sales taxes and certain intergovernmental revenues, such as the utilities franchise tax, collected and held by the state at year-end on behalf of the City are recognized as revenue. Intergovernmental revenues and sales and services are not susceptible to accrual because generally they are not measurable until received in cash. All taxes, including those dedicated for specific purposes are reported as general revenues rather than program revenues. Grant revenues, which are unearned at year-end, are recorded as unearned revenues. Under the terms of grant agreements, the City funds certain programs by a combination of specific cost-reimbursement grants, categorical block grants, and general revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net position available to finance the program. It is the City’s policy to first apply cost-reimbursement grant resources to 39 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 such programs, followed by categorical block grants, and then by general revenues. D. Budgetary Data The City’s budgets are adopted as required by the North Carolina General Statutes. An annual budget is adopted for all funds except those which operate under project ordinances. All annual appropriations lapse at fiscal year-end. Project ordinances are adopted for the capital projects funds and the enterprise capital projects funds which are consolidated with their respective operating funds for reporting purposes. All budgets are prepared using the modified accrual basis of accounting. Expenditures may not legally exceed appropriations at the functional level for all annually budgeted funds and at the object level for the multi-year funds. The City’s department heads may make transfers of appropriations within a department. Transfers of appropriations between departments require the approval of the City Manager. The legal level of budgetary control is at the functional level for all annually budgeted funds, and any transfers of appropriations between functions require the approval of the City Council. The legal level of budgetary control is at the object level for the funds budgeted by project ordinance, and any transfers of appropriations between objects require the approval of the City Council. The budget ordinance must be adopted by July 1 of the fiscal year or the governing board must adopt an interim budget that covers that time until the annual ordinance can be adopted. E. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Fund Equity 1. Deposits and Investments All deposits of the City, the ABC Board, and the Tourism Development Authority are made in Board-designated official depositories and are secured as required by state law [G.S. 159- 31]. The City, ABC Board, and the Tourism Development Authority may designate, as an official depository, any bank or savings association whose principal office is located in North Carolina. Also, the City, the ABC Board, and the Tourism Development Authority may establish time deposit accounts, such as NOW and SuperNOW accounts, money market accounts, and certificates of deposit. State law [G.S. 159-30(c)] authorizes the City, the ABC Board, and the Tourism Development Authority to invest in obligations of the United States or obligations fully guaranteed both as to principal and interest by the United States; obligations of the State of North Carolina; bonds and notes of any North Carolina local government or public authority; obligations of certain non-guaranteed federal agencies; certain high quality issues of commercial paper and bankers’ acceptances; and the North Carolina Capital Management Trust (NCCMT). The City, the ABC Board, and the Tourism Development Authority’s investments with a maturity of more than one year at acquisition and non-money market investments are reported at fair value as determined by quoted market prices. The NC Capital Management Trust Government Portfolio, an SEC-registered (2a-7) government money market fund, is measured at amortized cost, which is the NCCMT’s share price. The NCCMT Term Portfolio’s securities are valued at fair value. Money market investments that have a remaining maturity at the time of purchase of one year or less are reported at amortized cost. Non-participating interest earning investment contracts are accounted for at cost. 40 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 In accordance with state law, the City has invested in securities which are callable and which provide for periodic interest rate increases in specific increments until maturity. These investments are reported at fair value as determined by quoted market prices. 2. Cash and Cash Equivalents The City pools money from several funds to facilitate disbursement and investment and to maximize investment income. Therefore, all cash and investments are essentially demand deposits and are considered cash and cash equivalents. The ABC Board and the Tourism Development Authority consider all highly liquid investments (including restricted assets) with a maturity of three months or less, when purchased, to be cash and cash equivalents. 3. Restricted Assets Unexpended installment financing obligations received by the City are classified as restricted for the General Fund because their use is completely restricted to the purpose for which the installment obligations were issued. Customer deposits held by the City before any services are supplied are restricted to the service for which the deposit was collected. Powell Bill funds are also classified as restricted cash because they can be expended only for the purposes of maintaining, repairing, constructing, reconstructing, or widening of local streets per G.S. 136-41.1 through 136-41.4. Governmental Activities: General Fund: Streets 1,250,760$ Unexpended debt proceeds 591,709 Capital Projects Fund: Unexpended debt proceeds 142,351 Health and Dental Fund: Deposits 10,169 Workers' Compensation Fund: Deposits 5,895 Total governmental activities 2,000,884 Business-Type Activities: Water and Sewer Fund: Customer deposits 74,244 Unexpended debt proceeds 9,076,829 Electric Fund: Customer deposits 318,254 Natural Gas Fund: Customer deposits 134,449 Unexpended debt proceeds 5,280,737 Airport Fund: Unexpended debt proceeds 2,151,942 Stormwater Fund: Unexpended debt proceeds 509,000 Total business-type activities 17,545,455 Total restricted cash 19,546,339$ 41 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 4. Ad Valorem Taxes Receivable In accordance with state law [G.S. 105-347 and G.S. 159-13(a)], the City levies ad valorem taxes on property other than motor vehicles on July 1st, the beginning of the fiscal year. The taxes are due on September 1st (lien date); however, interest does not accrue until the following January 6th. These taxes are based on the assessed values as of January 1, 2017. As allowed by state law, the City has established a schedule of discounts that apply to taxes that are paid prior to the due date. In the City’s General Fund, ad valorem tax revenues are reported net of such discounts. 5. Allowance for Doubtful Accounts All receivables that historically experience uncollectible accounts are shown net of an allowance for doubtful accounts. This amount is estimated by analyzing the percentage of receivables that were written off in prior years. 6. Inventories and Prepaid Items The inventories of the City, the ABC Board, and the Tourism Development Authority are valued at cost (first-in, first-out), which approximates market. The inventories of the City's General Fund and enterprise funds and those of the ABC Board and the Tourism Development Authority consist of materials and supplies held for subsequent use. The cost of these inventories is expensed when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements and expensed as the items are used. 7. Capital Assets Capital assets are defined by the government as assets with an initial individual cost of more than a certain cost and an estimated useful life in excess of two years. Minimum capitalization costs are as follows: land, $5,000; buildings, improvements, substations, lines, and other plant and distribution systems, $5,000; infrastructure, $100,000; furniture and equipment, $5,000; computer software, $5,000; and vehicles, $5,000. Purchased or constructed capital assets are reported at cost or estimated historical cost. Donated capital assets received prior to June 30, 2015 are recorded at their estimated fair value at the date of donation. Donated capital assets received after June 30, 2015 are recorded at acquisition value. All other purchased or constructed capital assets are reported at cost or estimated historical cost. General infrastructure assets acquired prior to July 1, 2003 consist of the road network assets that were acquired or that received substantial improvements subsequent to July 1, 1980 and are reported at estimated historical cost using deflated replacement cost. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. 42 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Capital assets are depreciated using the straight-line method over the following estimated useful lives: Estimated Asset Class Useful Lives Infrastructure 30-50 Buildings and improvements 20-45 Dams and reservoirs 45 Plants and distribution systems 30-60 Vehicles and motorized equipment 6-12 Computer software 5 Other equipment 5-15 Capital assets of the ABC Board are depreciated over their useful lives on a straight-line basis as follows: Estimated Asset Class Useful Lives Buildings 40 Furniture/equipment 5-7 Vehicles 5 The Tourism Development Authority had no capital assets at June 30, 2018. 8. Deferred Outflows/Inflows of Resources In addition to assets, the Statement of Financial Position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, Deferred Outflows of Resources, represents a consumption of net position that applies to a future period and so will not be recognized as an expense or expenditure until then. The City has three items that meet this criterion: an unamortized loss on a bond defeasance for refunding bonds, OPEB deferrals, and pension deferrals. In addition to liabilities, the Statement of Financial Position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, Deferred Inflows of Resources, represents an acquisition of net position that applies to a future period and so will not be recognized as revenue until then. The City has five items that meet the criterion for this category – prepaid items not yet earned, other receivables, property taxes receivable, OPEB deferrals, and pension deferrals. 43 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 9. Long-Term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type Statement of Net Position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method that approximates the effective interest method. Bonds payable are reported net of the applicable bond premiums or discount. Bond issuance costs, except for prepaid insurance costs, are expensed in the reporting period in which they are incurred. Prepaid insurance costs are expensed over the life of the debt. In fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources, while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 10. Compensated Absences The vacation policy of the City provides for the accumulation of earned vacation leave, with such leave being fully vested when earned as follows: Employees Hired before July 1, 1992 Vacation leave may be accumulated without any applicable maximum until June 30 each year. However, if the employee separates from service, payment for accumulated vacation leave shall not exceed sixty (60) days. On June 30 of each year, any employee with more than 60 days of accumulated leave shall have the excess accumulation removed so that only 60 days are carried forward to July 1 of the next fiscal year. The remaining excess amount will be converted to sick leave and added to the employee’s sick leave balance. Employees Hired after July 1, 1992 Vacation leave may be accumulated without any applicable maximum until June 30 of each year. However, if the employee separates from service, payment for accumulated vacation leave shall not exceed two times the employee’s annual accrual rate (i.e. if the accrual rate is 15 days per year, the employee may only be paid for 30 days). On June 30 of each year, each employee may only carry over into the new fiscal year two times the employee’s annual accrual rate. The remaining excess amount will be converted to sick leave and added to the employee’s sick leave balance. Employees of the City of Monroe ABC Board earn two weeks paid vacation each year. Employees must take vacation leave in the year earned and are not allowed to carry forward any vacation time to subsequent years. 44 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 The Tourism Development Authority had two employees during the year ended June 30, 2018 and falls under the City’s vacation policy. For the City's government-wide and proprietary funds, an expense and a liability for compensated absences and the salary-related payments are recorded as the leave is earned. The City has assumed a first-in, first-out method of using accumulated compensated time. The portion of that time that is estimated to be used in the next fiscal year has been designated as a current liability in the government-wide financial statements. The City’s, the ABC Board’s, and the Tourism Development Authority’s sick leave policies provide for an unlimited accumulation of earned sick leave. Sick leave does not vest, but any unused sick leave accumulated at the time of retirement may be used in the determination of length of service for retirement benefit purposes. Since neither the City, the ABC Board, nor the Tourism Development Authority has any obligation for the accumulated sick leave until it is actually taken, no accrual for sick leave has been made. 11. Net Position/Fund Balances Net Position Net position in government-wide and proprietary fund financial statements are classified as net investment in capital assets; restricted and unrestricted. Restricted net position represents constraints on resources that are either externally imposed by creditors, grantors, contributors, laws or regulations of other governments, or imposed by law through state statute. Fund Balances In the governmental fund financial statements, fund balance is composed of five classifications designed to disclose the hierarchy of constraints placed on how fund balance can be spent. The governmental fund types classify fund balances as follows: Non-Spendable Fund Balance – This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Inventories – Portion of fund balance that is not an available resource because it represents the year-end balance of ending inventories, which are not spendable resources. Prepaids – Portion of fund balance that is not an available resource because it represents certain payments to vendors applicable to future accounting periods and is, therefore, not in spendable form. 45 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Non-spendable fund balance at June 30, 2018 is as follows: Nonmajor General Governmental Purpose Fund Funds Total Inventories 226,542$ -$ 226,542$ Prepaids 600,433 3,642 604,075 Total 826,975$ 3,642$ 830,617$ Restricted Fund Balance – This classification includes amounts that are restricted to specific purposes externally imposed by creditors or imposed by law. Restricted for Stabilization by State Statute – Portion of fund balance that is restricted by State Statute [G.S. 159-8(a)]. Restricted for Public Safety – Portion of fund balance that is restricted by revenue source for certain law enforcement operations. Restricted for Transportation - Powell Bill – portion of fund balance that is restricted by revenue source for street construction and maintenance expenditures. This amount represents the balance of the total unexpended Powell Bill funds. Restricted for Occupancy Tax Capital Projects – Portion of fund balance that is restricted by revenue source for tourism capital projects. Restricted for Economic Development – Portion of fund balance that is restricted by revenue source for economic development purposes. Restricted fund balance at June 30, 2018 is as follows: Nonmajor General Governmental Purpose Fund Funds Total Stabilization by state statute 5,534,206$ 1,289,173$ 6,823,379$ Public safety 1,204,315 142,351 1,346,666 Transportation 1,250,760 - 1,250,760 Occupancy tax capital projects - 736,716 736,716 Economic development - 231,036 231,036 Total 7,989,281$ 2,399,276$ 10,388,557$ Restricted net position on Exhibit 1 varies from restricted fund balance on Exhibit 3 by the amount of unspent debt proceeds of $734,060 as of June 30, 2018. 46 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Committed Fund Balance – This classification includes amounts that can be used only for specific purposes determined by a formal action of the government’s highest level of decision- making authority. The City Council is the highest level of decision-making authority for the government that can, by adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation. Committed for Capital Projects – Portion of fund balance that is committed for use in capital projects. Committed for Culture and Recreation – Portion of fund balance that is committed for use in culture and recreation. Committed fund balance at June 30, 2018 is as follows: Nonmajor Governmental Purpose Funds Culture and recreation 100,000$ Capital projects 4,006,991 Total 4,106,991$ Assigned Fund Balance – Portion of fund balance that the City of Monroe intends to use for specific purposes that is considered neither restricted or committed. The City Council has the responsibility for assigning fund balance by majority vote. Minimum Fund Balance Requirement – The Monroe City Council has adopted a minimum fund balance policy. Airport Grant Acceptance – The Monroe City Council has approved money to be spent at the Charlotte-Monroe Executive Airport to match federal and state grants during the airport expansion project. Airport Operations 5-Year Subsidy – The Monroe City Council has approved an assignment to be used over five years to subsidize airport operations. Street Resurfacing 5-Year Program – The Monroe City Council has approved an assignment to be used over five years to provide funding for additional resurfacing projects. Subsequent Year’s Expenditures – The Monroe City Council has approved a budget ordinance to use fund balance as a resource in next year’s budget to cover a projected excess of expected expenditures over expected revenues. 47 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Community Development – The Monroe City Council has approved an assignment to be used to fund continuing rehabilitation of housing within certain targeted areas of the City. Downtown Monroe – The Monroe City Council has approved an assignment to be used for downtown revitalization. Assigned fund balance at June 30, 2018 is as follows: Nonmajor General Governmental Purpose Fund Funds Total Minimum fund balance requirement 10,106,092$ -$ 10,106,092$ Airport grant acceptance 188,868 - 188,868 Airport operations - 5-year subsidy 750,000 - 750,000 Street resurfacing - 5-year program 900,000 - 900,000 Subsequent year's expenditures 2,562,646 - 2,562,646 Community development - 56,562 56,562 Downtown Monroe - 60,852 60,852 Total 14,507,606$ 117,414$ 14,625,020$ Unassigned Fund Balance – The portion of fund balance that has not been restricted, committed, or assigned to specific purposes or other funds. The City of Monroe has a revenue spending policy that provides guidance for programs with multiple revenue sources. The Finance Officer will use resources in the following hierarchy: bond proceeds, federal funds, state funds, local non-City funds, and City funds. For purposes of fund balance, classification expenditures are to be spent from restricted fund balance first, followed in order by committed fund balance, assigned fund balance and, lastly, unassigned fund balance. The Finance Officer has the authority to deviate from this policy if it is in the best interest of the City. The City of Monroe has also adopted a minimum fund balance policy for the General Fund which instructs management to conduct the business of the City in such a manner that assigned fund balance is the greater of $7,500,000 or 25% of the next year’s original adopted budget, net of federal and state pass-through revenues. Any portion of the General Fund unassigned fund balance in excess of the $7,500,000, or 25% minimum requirement, may be appropriated by the City Council in a subsequent fiscal year to fund capital or debt service expenditures as determined by the City Council during the budget process. If during a fiscal year an excess over the stipulated $7,500,000 or 25% exists, the City Council may request an appropriation to fund unforeseen needs. 48 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 12. Defined Benefit Cost-Sharing Plan For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions and pension expense, information about the fiduciary net position of the Local Governmental Employees’ Retirement System (LGERS) and additions to/deductions from LGERS’ fiduciary net position have been determined on the same basis as they are reported by LGERS. For this purpose, plan member contributions are recognized in the period in which the contributions are due. The City of Monroe’s employer contributions are recognized when due, and the City of Monroe has a legal requirement to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of LGERS. Investments are reported at fair value. 13. Management 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. 14. Other Resources The General Fund provides the basis of local resources for other governmental funds. These transactions are recorded as “Transfers – to other funds” in the General Fund and “Transfers – from other funds” in the Receiving Fund. II. Stewardship, Compliance, and Accountability A. Non-Compliance with North Carolina General Statutes In accordance with G.S. [159-13](b)(3), a contingency appropriation shall not exceed five (5)% of the total of all other appropriations in the same fund. In the current year, there was a violation of the NC General Statute with regard to the contingency appropriation exceeding the aforementioned passage in the Natural Gas Fund. B. Corrective Action/Management Response: Funding intended to return to Natural Gas fund balance for projects that were pre-cash funded, will be budgeted through transfers in the future. Excess funds at the end of the fiscal year in the operating enterprise funds will be transferred to the related capital project fund and designated for future projects. As projects are determined, those funds will be appropriated specifically to a project, or, if needed for operating purposes, a transfer will be made from the capital project fund to the operating fund. 49 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 III. Reconciliation of Government-Wide and Fund Financial Statements A. Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government-Wide Statement of Net Position The governmental fund balance sheet includes reconciliation between fund balance - total governmental funds and net position - governmental activities as reported in government-wide Statement of Net Position. One element of that reconciliation explains that “long-term liabilities, including installment purchase obligations, are not due and payable in the current period and, therefore, are not reported in the funds”. The details of this $(38,592,195) difference are as follows: Installment purchase obligations (7,348,694)$ Compensated absences (2,355,215) Net adjustment to reduce fund balance - total governmental funds to arrive at net position - governmenal activities (9,703,909)$ B. Explanation of Certain Differences Between the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances and the Government-Wide Statement of Activities The governmental fund Statement of Revenues, Expenditures, and Changes in Fund Balances includes reconciliation between net change in fund balances - total governmental funds and change in net position of governmental activities as reported in the government-wide Statement of Activities. One element of that reconciliation explains that “Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense”. The details of this $1,455,407 difference are as follows: Capital outlay 6,653,831$ Disposal, net book value (301,191) Depreciation expense (4,897,233) Net adjustment to decrease net change in fund balances - total governmental funds to arrive at change in net position of governmental activities 1,455,407$ 50 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Another element of that reconciliation is that “the issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction has any effect on net position”. The details of this $(401,406) are as follows: Debt issued or incurred (1,614,000)$ Principal payments: Installment purchase obligations 1,212,594 Net adjustment to decrease net change in fund balances - total governmental funds to arrive at change in net position of governmental activities (401,406)$ IV. Detail on All Funds A. Assets 1.Deposits All of the deposits of the City, the ABC Board, and the Tourism Development Authority are either insured or collateralized by using one of two methods. Under the Dedicated Method, all deposits that exceed the federal depository insurance coverage level are collateralized with agents in these units’ names. Under the Pooling Method, which is a collateral pool, all securities held by the City's, the ABC Board’s, or the Tourism Development Authority’s uninsured deposits are collateralized with securities held by the State Treasurer's agent in the name of the State Treasurer. Since the State Treasurer is acting in a fiduciary capacity for the City, the ABC Board, and the Tourism Development Authority, these deposits are considered to be held by the City's, the ABC Board’s, and the Tourism Development Authority’s agents in their names. The amount of the pledged collateral is based on an approved averaging method for non-interest-bearing deposits and the actual current balance for interest-bearing deposits. Depositories using the Pooling Method report to the State Treasurer the adequacy of their pooled collateral covering uninsured deposits. The State Treasurer does not confirm this information with the City, the ABC Board, the Tourism Development Authority, or the escrow agent. Because of the inability to measure the exact amount of collateral pledged for the City, the ABC Board, and the Tourism Development Authority under the Pooling Method, the potential exists for under collateralization, and this risk may increase in periods of high cash flows. However, the State Treasurer of North Carolina enforces strict standards of financial stability for each depository that collateralizes public deposits under the Pooling Method. The City, the ABC Board and the Tourism Development Authority do not have formal policies regarding custodial credit risk for deposits, but rely on the State Treasurer to enforce standards of minimum capitalization for all pooling method financial institutions and to monitor them for compliance. The City, the ABC Board, and the Tourism Development Authority comply with the provisions of G.S. 159-31 when designating official depositories and verifying that deposits are properly secured. At June 30, 2018, the City's deposits had a carrying amount of $22,145,081 and a bank balance of $23,146,318. Of the bank balance, $250,000 was covered by federal depository insurance and the remainder was covered by collateral held under the Pooling Method. The City’s petty cash fund totaled $6,075. 51 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 At June 30, 2018, the ABC Board’s deposits had a carrying amount of $717,784 and a bank balance of $684,575. Of the bank balance, $500,000 was covered by federal depository insurance, and $184,575 was covered by collateral held under the Pooling Method. The ABC Board had an additional $4,500 in the drawers and petty cash to cover operating needs on a daily basis. At June 30, 2018, the Tourism Development Authority’s deposits had a carrying amount of $574,568 and a bank balance of $574,568. Of the bank balance, $250,000 was covered by federal depository insurance and the remainder was covered by collateral held under the Pooling Method. 2. Investments As of June 30, 2018, the City had the following investments and maturities: Valuation Measurement Book Value 1-3 3-5 5+ Investment Type Method at 6/30/18 1 Year Years Years Years U.S. Government Agencies Fair Value Level 2 133,914,410$ -$ 101,544,136$ 16,812,210$ 15,558,064$ NC Capital Management Trust - Government Portfolio Amortized cost 7,062,691 N/A N/A N/A N/A NC Capital Management Trust - Term Portfolio Fair Value Level 1 10,211,405 10,211,405 - - - Total 151,188,506$ 10,211,405$ 101,544,136$ 16,812,210$ 15,558,064$ All investments are measured using the market approach: using prices and other relevant information generated by market transactions involving identical or comparable assets or a group of assets. Level of Fair Value Hierarchy: Level 1: Debt securities valued using directly observable, quoted prices (unadjusted) in active markets for identical assets. Level 2 debt securities are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities’ benchmark quoted prices. Interest Rate Risk. The City does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk. The City has no formal policy regarding credit risk, but has internal management procedures that limits the City’s investments to the provisions of G.S. 159-30 and restricts the purchase of securities to the highest possible ratings whenever particular types of securities are rated. The investment in U.S. Government Agencies (Federal Home Loan Bank, Federal Farm Credit Bank, Freddie Mac, and Fannie Mae) is rated AAA by Standard and Poor’s and AAA by Moody’s Investors Service. The City’s investment in the NC Capital Management Trust Government Portfolio carried a credit rating of AAAm by Standard and Poor’s as of June 30, 2018. The City’s investment in the NC Capital 52 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Management Trust Term Portfolio is unrated. The Term Portfolio is authorized to invest in obligations of the U.S. government and agencies, and in high-grade money market instruments as permitted under North Carolina G.S. 159-30 as amended. Custodial Credit Risk. For an investment, the custodial risk is the risk that in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City has no formal policy on custodial credit risk, but management procedures are that the City shall utilize a third-party custodial agent for book entry transactions, all of which shall be held in the City’s name. Concentration of Credit Risk. The City’s Board places no limit on the amount that the City may invest in any one issuer. More than 89% of the City’s investments are in Federal Farm, Federal Home Loan Bank, and Fannie Mae securities. In addition, the City had 5% of its investment portfolio in the NCCMT – government portfolio at June 30, 2018. 3. Note Receivable The City granted a promissory note in December 2010 in the amount of $1,250,000 to a developer as an incentive agreement to undertake an economic development project to renovate and rehabilitate a downtown historic structure. Modification to the note on May 1, 2014 calls for interest to be paid monthly at the annual rate of 3.35%. Beginning in June 2014, the promissory note will be repaid through monthly installments of $6,855 through May 2034. 2018 Total receivable 1,013,816$ Less current portion 49,051 Total note receivable - non-current 964,765$ Scheduled future maturities of the note receivable are as follows: Year Ending Total 2019 49,051$ 2020 50,720 2021 52,446 2022 54,230 2023 56,074 Thereafter 751,295 Total 1,013,816$ 53 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 The City granted a promissory note in the amount of $63,255 to an Association for repair of streets in a subdivision. The remaining balance of the promissory note is payable in monthly installments of $6,326 through May 2024. The note allows for no interest. There were principal collections of $6,326 for the fiscal year ended June 30, 2018. 2018 Total receivable 44,278$ Less current portion 6,326 Total note receivable - non-current 37,952$ Scheduled future maturities of the note receivable are as follows: Year Ending Total 2019 6,326$ 2020 6,326 2021 6,326 2022 6,326 2023 6,326 Thereafter 12,648 Total 44,278$ 4.Receivables and Allowances for Doubtful Accounts Receivables as of year-end for the governmental activities and the business-type activities are as follows: Governmental Business-Type Activities Activities Accounts receivable, net 578,212$ 12,886,212$ The amounts presented in the Balance Sheet and the Statement of Net Position are net of the following allowances for doubtful accounts: General Fund: Taxes receivable 38,278$ Downtown Monroe: Taxes receivable 127$ 54 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 5. Capital Assets Primary Government Capital asset activity for the primary government for the year ended June 30, 2018 was as follows: July 1, 2017 Additions Retirements Transfers June 30, 2018 Governmental Activities: General Fund: Non-Depreciable Capital Assets: Land and land improvements 5,296,695$ 166,882$ -$ -$ 5,463,577$ Construction in progress 1,318,630 752,441 300,118 (987,831) 783,122 Total non-depreciable capital assets 6,615,325 919,323 300,118 (987,831) 6,246,699 Depreciable Capital Assets: Buildings and improvements 26,594,942 730,781 - 273,086 27,598,809 Equipment 5,428,383 184,339 130,347 267,183 5,749,558 Vehicles and motorized equipment 17,158,883 3,225,285 1,702,979 - 18,681,189 Other intangibles 767,103 139,653 - - 906,756 Infrastructure 89,566,563 1,093,483 - 447,562 91,107,608 Total depreciable capital assets 139,515,874 5,373,541 1,833,326 987,831 144,043,920 Less Accumulated Depreciation: Buildings and improvements 10,758,503 666,158 - - 11,424,661 Equipment 4,086,963 365,544 130,347 - 4,322,160 Vehicles and motorized equipment 12,657,391 1,551,257 1,701,906 - 12,506,742 Other intangibles 543,508 79,263 - - 622,771 Infrastructure 44,892,644 2,189,650 - - 47,082,294 Total accumulated depreciation 72,939,009 4,851,872$ 1,832,253$ -$ 75,958,628 Total depreciable capital assets, net 66,576,865 68,085,292 General Fund capital assets, net 73,192,190 74,331,991 55 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 July 1, 2017 Additions Retirements Transfers June 30, 2018 Downtown Monroe Fund: Non-Depreciable Capital Assets: Land and land improvements 80,149 -$ -$ -$ 80,149 Depreciable Capital Assets: Buildings and improvements 67,180 - - - 67,180 Equipment 98,071 - - - 98,071 Total depreciable capital assets 165,251 - - - 165,251 Less Accumulated Depreciation: Buildings and improvements 5,039 3,359 - - 8,398 Equipment 98,071 - - - 98,071 Total accumulated depreciation 103,110 3,359$ -$ -$ 106,469 Total depreciable capital assets, net 62,141 58,782 Downtown Monroe Fund capital assets, net 142,290 138,931 Occupancy Tax Fund: Non-Depreciable Capital Assets: Construction in progress 351,399 360,967$ -$ -$ 712,366 Depreciable Capital Assets: Buildings and improvements 966,820 - - - 966,820 Equipment 255,177 - - - 255,177 Total depreciable capital assets 1,221,997 - - - 1,221,997 Less Accumulated Depreciation: Buildings and improvements 46,504 21,422 - - 67,926 Equipment 171,879 20,580 - - 192,459 Total accumulated depreciation 218,383 42,002$ -$ -$ 260,385 Total depreciable capital assets, net 1,003,614 961,612 Occupancy Tax Fund capital assets, net 1,355,013 1,673,978 Governmental activities capital assets, net 74,689,493$ 76,144,900$ 56 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Depreciation expense was charged to functions/programs of the primary government as follows: General Fund: General government 353,093$ Transportation 2,515,859 Public safety 1,389,398 Culture and recreation 587,837 Economic and physical development 5,685 Total General Fund 4,851,872 Downtown Monroe Fund: General government 3,359 Occupancy Tax Fund: Economic and physical development 42,002 Total governmental activities 4,897,233$ July 1, 2017 Additions Retirements Transfers June 30, 2018 Business-Type Activities: Water and Sewer Fund: Non-Depreciable Capital Assets: Land and land improvements 829,827$ -$ -$ -$ 829,827$ Construction in progress 498,166 2,041,141 - (9,855) 2,529,452 Total non-depreciable capital assets 1,327,993 2,041,141 - (9,855) 3,359,279 Depreciable Capital Assets: Buildings and improvements 33,331,138 - - - 33,331,138 Equipment 5,461,977 1,872,504 53,496 - 7,280,985 Vehicles and motorized equipment 3,538,686 260,874 106,616 162,625 3,855,569 Infrastructure 68,521,654 3,862,662 - 9,855 72,394,171 Total depreciable capital assets 110,853,455 5,996,040 160,112 172,480 116,861,863 Less Accumulated Depreciation: Buildings and improvements 14,039,507 704,888 - - 14,744,395 Equipment 3,759,593 561,455 53,496 - 4,267,552 Vehicles and motorized equipment 2,400,244 262,134 104,813 162,625 2,720,190 Infrastructure 19,265,444 1,249,948 - - 20,515,392 Total accumulated depreciation 39,464,788 2,778,425$ 158,309$ 162,625$ 42,247,529 Total depreciable capital assets, net 71,388,667 74,614,334 Water and Sewer Fund capital assets, net 72,716,660 77,973,613 57 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 July 1, 2017 Additions Retirements Transfers June 30, 2018 Electric Fund: Non-Depreciable Capital Assets: Land and land improvements 6,554,884 -$ -$ -$ 6,554,884 Construction in progress 8,470,200 424,067 - (5,247,438) 3,646,829 Total non-depreciable capital assets 15,025,084 424,067 - (5,247,438) 10,201,713 Depreciable Capital Assets: Buildings and improvements 5,581,079 425,151 - 4,020,885 10,027,115 Equipment 2,920,441 56,962 - - 2,977,403 Vehicles and motorized equipment 3,547,539 266,269 36,387 (162,625) 3,614,796 Infrastructure 104,206,636 2,294,204 - 1,226,553 107,727,393 Other intangibles 250,173 - - - 250,173 Total depreciable capital assets 116,505,868 3,042,586 36,387 5,084,813 124,596,880 Less Accumulated Depreciation: Buildings and improvements 783,920 174,176 - - 958,096 Equipment 1,967,928 83,103 - - 2,051,031 Vehicles and motorized equipment 2,658,660 233,041 36,387 (162,625) 2,692,689 Infrastructure 37,933,175 2,208,312 - - 40,141,487 Other intangibles 125,087 50,035 - - 175,122 Total accumulated depreciation 43,468,770 2,748,667$ 36,387$ (162,625)$ 46,018,425 Total depreciable capital assets, net 73,037,098 78,578,455 Electric Fund capital assets, net 88,062,182 88,780,168 Natural Gas Fund: Non-Depreciable Capital Assets: Land and land improvements 1,524,787 -$ -$ -$ 1,524,787 Construction in progress 4,619,034 2,888,644 - - 7,507,678 Total non-depreciable capital assets 6,143,821 2,888,644 - - 9,032,465 Depreciable Capital Assets: Buildings and improvements 569,484 - - - 569,484 Equipment 485,437 14,922 - - 500,359 Vehicles and motorized equipment 1,133,048 127,566 46,841 - 1,213,773 Infrastructure 69,140,456 438,315 - - 69,578,771 Total depreciable capital assets 71,328,425 580,803 46,841 - 71,862,387 Less Accumulated Depreciation: Buildings and improvements 219,662 13,253 - - 232,915 Equipment 430,874 22,315 - - 453,189 Vehicles and motorized equipment 925,768 71,059 46,841 - 949,986 Infrastructure 13,052,520 1,430,683 - - 14,483,203 Total accumulated depreciation 14,628,824 1,537,310$ 46,841$ -$ 16,119,293 Total depreciable capital assets, net 56,699,601 55,743,094 Natural Gas Fund capital assets, net 62,843,422 64,775,559 58 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 July 1, 2017 Additions Retirements Transfers June 30, 2018 Airport Fund: Non-Depreciable Capital Assets: Land and land improvements 9,796,782 -$ 31,424$ -$ 9,765,358 Construction in progress 5,765,014 1,456,405 - (4,794,980) 2,426,439 Total non-depreciable capital assets 15,561,796 1,456,405 31,424 (4,794,980) 12,191,797 Depreciable Capital Assets: Buildings and improvements 26,227,321 - - 4,794,980 31,022,301 Equipment 429,590 34,085 - - 463,675 Vehicles and motorized equipment 477,086 27,019 17,374 - 486,731 Infrastructure 3,138,867 - - - 3,138,867 Total depreciable capital assets 30,272,864 61,104 17,374 4,794,980 35,111,574 Less Accumulated Depreciation: Buildings and improvements 10,094,082 730,473 - - 10,824,555 Equipment 402,217 6,521 - - 408,738 Vehicles and motorized equipment 435,191 11,121 17,374 - 428,938 Infrastructure 409,269 62,777 - - 472,046 Total accumulated depreciation 11,340,759 810,892$ 17,374$ -$ 12,134,277 Total depreciable capital assets, net 18,932,105 22,977,297 Airport Fund capital assets, net 34,493,901 35,169,094 Aquatics and Fitness Center Fund: Non-Depreciable Capital Assets: Land and land improvements 925,594 -$ -$ -$ 925,594 Total non-depreciable capital assets 925,594 - - - 925,594 Depreciable Capital Assets: Buildings and improvements 10,234,165 80,170 - - 10,314,335 Equipment 195,676 114,084 - - 309,760 Vehicles and motorized equipment 49,676 - - - 49,676 Total depreciable capital assets 10,479,517 194,254 - - 10,673,771 Less Accumulated Depreciation: Buildings and improvements 4,204,087 291,673 - - 4,495,760 Equipment 144,525 19,854 - - 164,379 Vehicles and motorized equipment 34,782 3,310 - - 38,092 Total accumulated depreciation 4,383,394 314,837$ -$ -$ 4,698,231 Total depreciable capital assets, net 6,096,123 5,975,540 Aquatics and Fitness Center Fund capital assets, net 7,021,717 6,901,134 59 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 July 1, 2017 Additions Retirements Transfers June 30, 2018 Stormwater Fund: Non-Depreciable Capital Assets: Construction in progress 259,232 41,204$ -$ -$ 300,436 Total non-depreciable capital assets 259,232 41,204 - - 300,436 Depreciable Capital Assets: Buildings and improvements 20,495 - - - 20,495 Equipment 34,448 - - - 34,448 Vehicles and motorized equipment 899,735 34,909 - - 934,644 Infrastructure 162,048 - - - 162,048 Total depreciable capital assets 1,116,726 34,909 - - 1,151,635 Less Accumulated Depreciation: Buildings and improvements 2,504 455 - - 2,959 Equipment 30,430 1,587 - - 32,017 Vehicles and motorized equipment 679,374 66,507 - - 745,881 Infrastructure 14,584 3,241 - - 17,825 Total accumulated depreciation 726,892 71,790$ -$ -$ 798,682 Total depreciable capital assets, net 389,834 352,953 Stormwater Fund capital assets, net 649,066 653,389 Solid Waste Fund: Depreciable Capital Assets: Other intangibles 967,361 -$ -$ -$ 967,361 Vehicles and motorized equipment 83,162 - - - 83,162 Buildings and improvements 143,914 - - - 143,914 Total depreciable capital assets 1,194,437 - - - 1,194,437 Less Accumulated Depreciation: Other intangibles 967,361 - - - 967,361 Vehicles and motorized equipment 9,790 13,124 - - 22,914 Buildings and improvements 25,185 7,196 - - 32,381 Total accumulated depreciation 1,002,336 20,320$ -$ -$ 1,022,656 Total depreciable capital assets, net 192,101 171,781 Solid Waste Fund capital assets, net 192,101 171,781 Business-type activities capital assets, net 265,979,049$ 274,424,738$ 60 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Net Investment in Capital Assets Governmental Business-Type Activities Activities Capital assets 76,144,900$ 274,424,738$ Less: Long-term debt 7,348,694 95,702,430 Add: Deferred outflows - 4,565,230 Add: Unexpended debt proceeds 734,060 17,018,508 Net investment in capital assets 69,530,266$ 200,306,046$ Discretely Presented Component Units Capital asset activity for the ABC Board for the year ended June 30, 2018 was as follows: July 1, 2017 Additions Retirements June 30, 2018 Non-Depreciable Capital Assets: Land and land improvements 317,013$ -$ -$ 317,013$ Total non-depreciable capital assets 317,013 - - 317,013 Depreciable Capital Assets: Buildings and improvements 1,055,185 - - 1,055,185 Equipment 123,233 - - 123,233 Vehicles and motorized equipment 15,830 - - 15,830 Total depreciable capital assets 1,194,248 - - 1,194,248 Less Accumulated Depreciation: Buildings and improvements 493,561 29,963 - 523,524 Equipment 113,736 2,998 - 116,734 Vehicles and motorized equipment 15,830 - - 15,830 Total accumulated depreciation 623,127 32,961$ -$ 656,088 Total depreciable capital assets, net 571,121 538,160 ABC Board capital assets, net 888,134$ 855,173$ The Tourism Development Authority had no capital assets. 61 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 B. Liabilities 1. Accounts Payable and Accrued Liabilities Payables at the government-wide level at June 30, 2018 were as follows: Salaries and Vendors Benefits Total Governmental Activities: General Fund 502,339$ 736,134$ 1,238,473$ Nonmajor funds 104,159 12,779 116,938 Total governmental activities 606,498$ 748,913$ 1,355,411$ Business-Type Activities: Enterprise funds 8,613,554$ 393,199$ 9,006,753$ Component units’ payables at June 30, 2018 were as follows: Salaries Vendors and Benefits Other Total ABC Board 204,001$ 17,877$ 129,883$ 351,761$ Tourism Development Authority 12,326$ -$ 18,570$ 30,896$ 2. Pension Plan Obligations a. Local Governmental Employees' Retirement System 1. Description The City of Monroe and the ABC Board are participating employers in the state-wide Local Governmental Employees’ Retirement System (LGERS), a cost-sharing multiple- employer defined benefit pension plan administered by the State of North Carolina. LGERS membership is comprised of general employees and local law enforcement officers (LEOs) of participating local governmental entities. Article 3 of G.S. Chapter 128 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly. Management of the plan is vested in the LGERS Board of Trustees, which consists of 13 members – nine appointed by the Governor, one appointed by the State Senate, one appointed by the State House of Representatives, and the State Treasurer and State Superintendent, who serve as ex-officio members. The Local Governmental Employees’ Retirement System is included in the Comprehensive Annual Financial Report (CAFR) for the State of North Carolina. The state’s CAFR includes 62 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 financial statements and required supplementary information for LGERS. That report may be obtained by writing to the Office of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-1410, by calling (919) 981-5454, or at www.osc.nc.gov. 2. Benefits Provided LGERS provides retirement and survivor benefits. Retirement benefits are determined as 1.85% of the member’s average final compensation times the member’s years of creditable service. A member’s average final compensation is calculated as the average of a member’s four highest consecutive years of compensation. Plan members are eligible to retire with full retirement benefits at age 65 with five years of creditable service, at age 60 with 25 years of creditable service, or at any age with 30 years of creditable service. Plan members are eligible to retire with partial retirement benefits at age 50 with 20 years of creditable service or at age 60 with five years of creditable service (age 55 for firefighters). Survivor benefits are available to eligible beneficiaries of members who die while in active service or within 180 days of their last day of service and who have either completed 20 years of creditable service regardless of age (15 years of creditable service for firefighters and rescue squad members who are killed in the line of duty) or have completed five years of service and have reached age 60. Eligible beneficiaries may elect to receive a monthly Survivor’s Alternate Benefit for life or a return of the member’s contributions. The plan does not provide for automatic post- retirement benefit increases. Increases are contingent upon actuarial gains of the plan. LGERS plan members who are LEOs are eligible to retire with full retirement benefits at age 55 with five years of creditable service as an officer, or at any age with 30 years of creditable service. LEO plan members are eligible to retire with partial retirement benefits at age 50 with 15 years of creditable service as an officer. Survivor benefits are available to eligible beneficiaries of LEO members who die while in active service or within 180 days of their last day of service and who also have either completed 20 years of creditable service regardless of age, or have completed 15 years of service as a LEO and have reached age 50, or have completed five years of creditable service as a LEO and have reached age 55, or have completed 15 years of creditable service as a LEO if killed in the line of duty. Eligible beneficiaries may elect to receive a monthly Survivor’s Alternate Benefit for life or a return of the member’s contributions. 3. Contributions Contribution provisions are established by G.S. 128-30 and may be amended only by the North Carolina General Assembly. Employees are required to contribute 6% of their compensation. Employer contributions are actuarially determined and set annually by the LGERS Board of Trustees. The City of Monroe’s contractually required contribution rate for the year ended June 30, 2018 was 8.25% of compensation for law enforcement officers and 7.56% for general employees and firefighters, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the 63 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 costs of benefits earned by employees during the year. Contributions to the pension plan from the City of Monroe were $1,920,739 for the year ended June 30, 2018. The ABC Board’s contributions to LGERS for the year ended June 30, 2018 were $24,134. 4. Refunds of Contributions City employees who have terminated service as a contributing member of LGERS may file an application for a refund of their contributions. Members that leave LGERS with less than five years of creditable service are only eligible to receive a refund of employee contributions and interest. By state law, refunds to members include 4% interest. state law requires a 60-day waiting period after service termination before the refund may be paid. The acceptance of a refund payment cancels the individual’s right to employer contributions or any other benefit provided by LGERS. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2018, the City reported a liability of $5,917,943 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2017. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2016. The total pension liability was then rolled forward to the measurement date of June 30, 2017 utilizing update procedures incorporating the actuarial assumptions. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of future payroll covered by the pension plan, relative to the projected future payroll covered by the pension plan of all participating LGERS employers, actuarially determined. At June 30, 2017, the City’s proportion was 0.38737%, which was a decrease of 0.00302% from its proportion measured as of June 30, 2016. For the year ended June 30, 2018, the City recognized pension expense of $1,804,068. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience 340,928$ 167,519$ Changes of assumptions 845,164 - Net difference between projected and actual earnings on pension plan investments 1,436,883 - Changes in proportion and differences between City contributions and proportionate share of contributions - 396,289 City contributions subsequent to the measurement date 1,920,739 - Total 4,543,714$ 563,808$ 64 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 $1,920,739 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a decrease of the net pension liability in the year ended June 30, 2019. Other amounts reported as deferred inflows and outflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30 Amount 2019 102,770$ 2020 1,603,535 2021 801,053 2022 (448,191) 2023 - Thereafter - Total 2,059,167$ 5. Actuarial Assumptions The total pension liability in the December 31, 2016 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.0 percent Salary increases 3.50 to 7.75 percent, including inflation and productivity factor Investment rate of return 7.20 percent, net of pension plan investment expense, including inflation The plan currently uses mortality tables that vary by age, gender, employee group (i.e. general, law enforcement officer) and health status (i.e. disabled and healthy). The current mortality rates are based on published tables and based on studies that cover significant portions of the U.S. population. The healthy mortality rates also contain a provision to reflect future mortality improvements. The actuarial assumptions used in the December 31, 2016 valuation were based on the results of an actuarial experience study for the period January 1, 2010 through December 31, 2014. Future ad hoc COLA amounts are not considered to be substantively automatic and are, therefore, not included in the measurement. 65 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 The projected long-term investment returns and inflation assumptions are developed through review of current and historical capital markets data, sell-side investment research, consultant whitepapers, and historical performance of investment strategies. Fixed income return projections reflect current yields across the U.S. Treasury yield curve and market expectations of forward yields projected and interpolated for multiple tenors and over multiple year horizons. Global public equity return projections are established through analysis of the equity risk premium and the fixed income return projections. Other asset categories and strategies’ return projections reflect the foregoing and historical data analysis. These projections are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class as of June 30, 2017 are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Return Fixed income 29.0%1.4% Global equity 42.0%5.3% Real estate 8.0%4.3% Alternatives 8.0%8.9% Credit 7.0%6.0% Inflation protection 6%4.0% Total 100% The information above is based on 30-year expectations developed with the consulting actuary for the 2017 asset, liability, and investment policy study for the North Carolina Retirement Systems, including LGERS. The long-term nominal rates of return underlying the real rates of return are arithmetic annualized figures. The real rates of return are calculated from nominal rates by multiplicatively subtracting a long-term inflation assumption of 3.00%. All rates of return and inflation are annualized. 6. Discount Rate The discount rate used to measure the total pension liability was 7.20%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on these assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of the current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 66 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 7. Sensitivity of the City’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate. The following presents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.20%, as well as what the City’s proportionate share of the net pension asset or net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.20%) or one percentage point higher (8.20%) than the current rate: 1% Current 1% Decrease Discount Rate Increase (6.20%)(7.20%)(8.20%) City's proportionate share of the net pension liability (asset)17,765,791$ 5,917,943$ (3,971,275)$ 8. Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued Comprehensive Annual Financial Report (CAFR) for the State of North Carolina. b. Law Enforcement Officers' Special Separation Allowance Plan Description. The City of Monroe administers a public employee retirement system (the Separation Allowance), a single-employer defined benefit pension plan that provides retirement benefits to the City’s qualified sworn law enforcement officers under the age of 62 who have completed at least 30 years of creditable service or have attained 55 years of age and have completed five or more years of creditable service. The Separation Allowance is equal to 0.85% of the annual equivalent of the base rate of compensation most recently applicable to the officer for each year of creditable service. The retirement benefits are not subject to any increases in salary or retirement allowances that may be authorized by the General Assembly. Article 12D of G.S. Chapter 143 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly. A separate report was not issued for the plan. All full-time law enforcement officers of the City are covered by the Separation Allowance. At December 31, 2016, the Separation Allowance’s membership consisted of: Retirees receiving benefits 6 Terminated plan members entitled to, but not yet receiving, benefits - Active plan members 85 Total 91 67 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Summary of Significant Accounting Policies Basis of Accounting. The City has chosen to fund the Separation Allowance on a pay-as- you-go basis. Pension expenditures are made from the General Fund, which is maintained on the modified accrual basis of accounting. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. The Separation Allowance has no assets accumulated in a trust that meets the criteria which are outlined in GASB Statement 73: Actuarial Assumptions. The entry age normal actuarial cost method was used in the December 31, 2016 valuation. The total pension liability in the December 31, 2016 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.0 percent Salary increase 3.50 to 7.35 percent, including inflation and productivity factor Discount rate 3.16 percent The discount rate used to measure the TPL is the S&P Municipal Bond 20 Year High Grade Rate Index. Deaths after Retirement (Healthy): RP-2014 Healthy Annuitant base rates projected to 2015 using MP-2015, projected forward generationally from 2015 using MP-2015. Rates are adjusted by 104% for males and 100% for females. Deaths before Retirement: RP-2014 Employee base rates projected to 2015 using MP 2015, projected forward generationally from 2015 using MP-2015. Deaths after Retirement (Beneficiary): RP-2014 Healthy Annuitant base rates projected to 2015 using MP-2015, projected forward generationally from 2015 using MP- 2015. Rates are adjusted by 123% for males and females. Deaths after Retirement (Disabled): RP-2014 Disabled Retiree base rates projected to 2015 using MP-2015, projected forward generationally from 2015 using MP-2015. Rates are adjusted by 103% for males and 99% for females. Contributions. The City is required by Article 12D of G.S. Chapter 143 to provide these retirement benefits and has chosen to fund the amounts necessary to cover the benefits earned on a pay-as-you-go basis through appropriations made in the General Fund operating budget. There were no contributions made by employees. The City’s obligation to contribute to this plan is established and may be amended by the North Carolina General Assembly. Administration costs of the Separation Allowance are financed through investment earnings. The City paid $153,808 as benefits came due for the reporting period. 68 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. At June 30, 2018, the City reported a total pension liability of $4,075,929. The total pension liability was measured as of December 31, 2017 based on a December 31, 2016 actuarial valuation. The total pension liability was then rolled forward to the measurement date of December 31, 2017 utilizing update procedures incorporating the actuarial assumptions. For the year ended June 30, 2018, the City recognized pension expense of $324,721. Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience 111,440$ -$ Changes of assumptions 188,111 57,294 Benefit payments and plan administrative expense made subsequent to the measurement date 82,417 - Total 381,968$ 57,294$ $82,417 reported as deferred outflows of resources related to pensions resulting from benefit payments made subsequent to the measurement date will be recognized as a decrease of the total pension liability in the year ended June 30, 2019. Other amounts reported as deferred inflows and outflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30 Amount 2019 47,962$ 2020 47,962 2021 47,962 2022 47,962 2023 50,409 Thereafter - Total 242,257$ 69 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Sensitivity of the City’s Total Pension Liability to Changes in the Discount Rate. The following presents the City’s total pension liability calculated using the discount rate of 3.16%, as well as what the City’s total pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.16%) or 1-percentage-point higher (4.16%) than the current rate: 1% Discount 1% Decrease Rate Increase (2.16%)(3.16%)(4.16%) Total pension liability 4,406,528$ 4,075,929$ 3,771,999$ 2018 Beginning balance 3,592,717$ Service cost 140,123 Interest on the total pension liability 135,710 Differences between expected and actual experience in the measurement of the total pension liability 134,370 Changes of assumptions or other inputs 226,817 Benefit payments (153,808) Ending balance of the total pension liability 4,075,929$ Schedule of Changes in Total Pension Liability Law Enforcement Officers' Special Separation Allowance The plan currently uses mortality tables that vary by age and health status (i.e. disabled and healthy). The current mortality rates are based on published tables and based on studies that cover significant portions of the U.S. population. The healthy mortality rates also contain a provision to reflect future mortality improvements. The actuarial assumptions used in the December 31, 2016 valuation were based on the results of an actuarial experience study for the period January 1, 2010 through December 31, 2014. 70 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Total Expense, Liabilities, and Deferred Outflows and Inflows of Resources Related to Pensions Following is information related to the proportionate share and pension expense for all pension plans: LGERS LEOSSA Total Pension expense 1,804,068$ 324,721$ 2,128,789$ Pension liability 5,917,943 4,075,929 9,993,872 Proportionate share of the net pension liability 0.38737% n/a - Deferred of Outflows of Resources: Differences between expected and actual experience 340,928 111,440 452,368 Changes of assumptions 845,164 188,111 1,033,275 Net difference between projected and actual earnings on plan investments 1,436,883 - 1,436,883 Benefit payments and administrative costs paid subsequent to the measurement date 1,920,739 82,417 2,003,156 Deferred of Inflows of Resources: Differences between expected and actual experience 167,519 - 167,519 Changes of assumptions 57,294 57,294 Changes in proportion and differences between contributions and proportionate share of contributions 396,289 - 396,289 c. Supplemental Retirement Income Plan Law Enforcement Officers Plan Description. The City contributes to the Supplemental Retirement Income Plan (Plan), a defined contribution pension plan administered by the Department of State Treasurer and a Board of Trustees. The Plan provides retirement benefits to law enforcement officers employed by the City. Article 5 of G.S. Chapter 135 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly. The Supplemental Retirement Income Plan for Law Enforcement Officers is included in the Comprehensive Annual Financial Report (CAFR) for the State of North Carolina. The state’s CAFR includes the pension trust fund financial statements for the Internal Revenue Code Section 401(k) plan that includes the Supplemental Retirement Income Plan for Law Enforcement Officers. That report may be obtained by writing to the Office of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699-1410, or by calling (919) 981-5454. Funding Policy. Article 12E of G.S. Chapter 143 requires the City to contribute each month an amount equal to 5% of each officer’s salary, and all amounts contributed are vested immediately. Also, the law enforcement officers may make voluntary contributions to the plan. Contributions for the year ended June 30, 2018 were $425,557, which consisted of $263,688 from the City and $161,869 from the law enforcement officers. No amounts were forfeited. 71 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 General Employees The City has elected to contribute to the Supplemental Retirement Income Plan for general employees as well as for law enforcement officers. Participation begins after six months of employment. The City has elected to contribute each month an amount equal to 3% of each employee’s salary, the employee contribution will be matched 2% by the City, and all amounts contributed are vested immediately. Also, the employees may make voluntary contributions to the plan. Contributions for the year ended June 30, 2018 were $1,877,774, which consisted of $586,051 in regular contributions, $333,161 in matching contributions from the City, and $958,562 from the employees. No amounts were forfeited. d. Other Post-Employment Benefits Healthcare Benefits Plan Description. Under the terms of a City resolution, the City administers a single employer Health and Dental Care Plan. This plan provides post-employment healthcare and dental benefits to retirees of the City provided they participate in the North Carolina Local Government Employees’ Retirement System and have 20 years of creditable service with the City. The amount the City pays towards these benefits is based on years of service with the City. The City pays the full cost of coverage for these benefits through private insurers. A stand-alone financial report is not issued. Funding Policy. Employees with 20 to 25 years of service – the City pays 50% and 75% of the cost of health and dental insurance, respectively. Employees with 30 years of service – the City pays 100% of the cost of health and dental insurance. In addition, retirees with 30 years of service receive $5,500 of life insurance coverage. When a retiree reaches age 65, they are transferred to the Medicare Supplement Group Plan and Part D Group Plan at the above referenced percentage of cost based on years of service. At that time, any dependents covered are offered COBRA coverage. Membership of the Health Care Plan consisted of the following at June 30, 2017: Retirees and dependents receiving benefits 90 Terminated plan members entitled to, - but not yet receiving, benefits Active plan members 420 Total 510 Total OPEB Liability The City’s total OPEB liability of $41,697,873 was measured as of June 30, 2017 and was determined by an actuarial valuation as of June 30, 2017. 72 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Actuarial Assumptions and Other Inputs. The total OPEB liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement unless otherwise specified: Inflation 2.50 percent Real wage growth 1.00 percent Wage inflation 3.50 percent Salary increases, including wage inflation: General Employees 3.50 to 7.75 percent Firefighters 3.50 to 7.75 percent Law Enforcement Officers 3.50 to 7.35 percent Municipal Bind Index Rate: Prior Measurement Date 3.01 percent Measurement Date 3.56 percent Healthcare cost trend rates: Pre-Medicare 7.50 percent for 2017 decreasing to an ultimate rate of 5.00 percent by 2023 Medicare 5.50 percent for 2017 decreasing to an ultimate rate of 5.00 percent by 2020 The discount rate used to measure the TOL was based on the June average of the Bond Buyer General Obligation 20-year Municipal Bond Index published weekly by The Bond Buyer. Changes in the Total OPEB Liability Total OPEB Liability Balance at July 1, 2017 43,556,512$ Changes for the year: Service cost 2,039,080 Interest 1,304,239 Differences between expect and actual experience (201,752) Changes in assumptions or other inputs (4,544,221) Benefit payments (455,985) Net changes (1,858,639) Balance at June 30, 2018 41,697,873$ Changes in assumptions and other inputs reflect a change in the discount rate from 3.01% to 3.56%. 73 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Mortality rates were based on the RP-2014 mortality tables, with adjustments for LGERS experience and generational mortality improvements using Scale MP-2015. The actuarial assumptions used in the June 30, 2017 valuation were based on a review of recent plan experience done concurrently with the June 30, 2017 valuation. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate. The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using a discount rate that is 1-percentage- point lower (3.56 percent) or 1-percentage-point higher (4.56 percent) than the current discount rate: Current 1% Discount 1% Decrease Rate Decrease (2.56%)(3.56%)(4.56%) Total OPEB liability 50,487,355$ 41,697,873$ 34,909,596$ Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates. The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates: 1%1% Decrease Current Increase Total OPEB liability 34,415,992$ 41,697,873$ 51,434,210$ OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended June 30, 2018, the City recognized OPEB expense of $2,765,247. At June 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB form the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience -$ 177,178$ Changes of assumptions - 3,990,723 Benefit payments and administrative costs made subsequent to the measurement date 580,860 - Total 580,860$ 4,167,901$ 74 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 $580,860 reported as deferred outflows of resources related to OPEB resulting from benefit payments made subsequent to the measurement date will be recognized as a decrease of the total OPEB liability in the year ended June 30, 2019. Other amounts reported as deferred inflows or outflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30 Amount 2018 (578,072)$ 2019 (578,072) 2020 (578,072) 2021 (578,072) 2022 (578,072) Thereafter (1,277,541) Total (4,167,901)$ 3. Other Employment Benefits The City elected to provide death benefits to employees through the Death Benefit Plan for members of the Local Governmental Employees' Retirement System (Death Benefit Plan), a multiple-employer, State-administered, cost-sharing plan funded on a one-year term cost basis. The beneficiaries of those employees who die in active service after one year of contributing membership in the System, or who die within 180 days after retirement or termination of service and have at least one year of contributing membership service in the System at the time of death are eligible for death benefits. Lump-sum death benefit payments to beneficiaries are equal to the employee's 12 highest months’ salary in a row during the 24 months prior to the employee's death, but the benefit may not exceed $50,000 or be less than $25,000. All death benefit payments are made from the Death Benefit Plan and not by the City; the City does not determine the number of eligible participants. The City has no liability beyond the payment of monthly contributions. The contributions to the Death Benefit Plan cannot be separated between the post-employment benefit amount and the other benefit amount. Contributions are determined as a percentage of monthly payroll, based upon rates established annually by the state. Separate rates are set for employees not engaged in law enforcement and for law enforcement officers. The City considers these contributions to be immaterial. 4. Deferred Outflows and Inflows of Resources Deferred outflows of resources at year-end are comprised of the following: Deferred Outflows Charge on debt defeasance 4,565,230$ OPEB deferrals 580,860 Pension deferrals 4,925,682 Total 10,071,772$ 75 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Deferred inflows of resources at year-end are comprised of the following: Deferred Inflows Property taxes receivable: General 727,280$ Nonmajor governmental 2,417 Privilege license receivable: General 105 Code enforcement liens receivable: General 335,017 Prepaid taxes, agreements, gift cards, donations, and store credits, not yet earned: General 5,697 OPEB deferrals 4,167,901 Pension deferrals 621,102 Total 5,859,519$ 5. Construction and Other Significant Commitments Construction Commitments The government has active construction projects as of June 30, 2018. At year-end, the government's commitments with contractors are as follows: Spent Remaining Projects To-Date Commitment Governmental: Capital projects 783,122$ 983,338$ Occupancy tax 712,366 148,742 Enterprise: Water and Sewer 2,529,452 4,270,240 Stormwater 300,436 30,300 Electric 3,646,829 408,718 Natural Gas 7,507,678 4,035,440 Airport 2,426,439 3,692,790 Total 17,906,322$ 13,569,568$ Interlocal Agreement On December 5, 2005, the City entered into an agreement with Union County, which provided 1.99 MGD of additional water capacity to the City. Under the agreement terms, the City will pay fixed costs of approximately $199,176 annually for 20 years beginning July 1, 2006, with one lump-sum payment of $1,739,243, which was paid April 30, 2014. 76 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Operations and maintenance cost are paid based on a per thousand gallon rate calculated each budget year and based on actual metered consumption. This agreement term is of perpetual duration. This agreement also provides 2.65 MGD of wastewater capacity to Union County via the City WWTP to serve Union County’s eastside customers. Encumbrances Encumbrance accounting is utilized to the extent necessary to assure effective budgetary control and accountability and to facilitate effective cash planning and control. At June 30, 2018 the amount of encumbrances expected to be honored upon performance by the vendor in the next year were as follows: Governmental Activities: General Fund 1,934,027$ Nonmajor funds 1,195,392 Total governmental activities 3,129,419$ Business-Type Activities: Water and Sewer Fund 6,654,510$ Electric Fund 681,479 Natural Gas Fund 4,055,237 Airport Fund 3,693,287 Nonmajor funds 634,183 Total business-type activities 15,718,696$ 6. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City is self-funded with regard to group health and workers’ compensation insurance coverages. There have been no significant reductions in insurance coverage from the prior year, and settled claims have not exceeded coverage in any of the past three fiscal years. A liability for a claim is established if information indicates that it is probable that a liability has been incurred at the date of the financial statements, and the amount of the loss is reasonably estimable. Liabilities include an amount for claims that have been incurred, but not reported (IBNRs). The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, and damage awards. Accordingly, claims are reevaluated periodically to consider the effects of inflation, recent claim settlement trends (including frequency and amount of pay outs), and other economic and social factors. The estimate of the claims liability also includes amounts for incremental claim adjustment expenses related to specific claims and other claim adjustment expenses regardless of whether allocated to specific claims. 77 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Flood Insurance The City carries flood insurance for properties located in Flood Zones B, C and X through participation in the North Carolina League of Municipalities Interlocal Risk Financing Fund of North Carolina. The City does not have properties of significant value in these Flood Zones. Self-Funded Insurance The City has established three internal service funds to account for self-insured risk financing. Funding of the Health Benefit Fund is based upon an analysis of historical and projected medical and dental claims paid by the third-party administrator and the availability of unrestricted net position to fund projected claims. Funding of the Workers’ Compensation Fund is based upon payroll rates established by the State of North Carolina and the availability of unrestricted net position to fund projected claims. Funding of the Property and Casualty Fund is based upon experience and exposure risks associated with City operations and the availability of unrestricted net position to fund projected claims. Group Health Insurance Effective July 1, 2002, the City established an employee medical benefit plan to self-insure claims up to $70,000 per year for each individual covered; claims above $70,000 and aggregate claims exceeding 125% of expected incurred and paid claims are covered by a stop/loss insurance policy. Workers’ Compensation Insurance The City has a self-funded workers’ compensation insurance plan. Through this plan, the City has workers’ compensation coverage of up to the statutory limits. The self-insurance plan has a $550,000 retained risk per occurrence with a $2,000,000 aggregate limit for all employees. The City also carries employer’s liability coverage with similar retention and limit amounts. Due to the degree of turnover of the outstanding claims, the claims payable as of June 30, 2018 are considered to be current liabilities. Changes in the balance of claims liabilities during the year ended June 30, 2018 are as follows: Health Workers' Property and Benefit Compensation Casualty Fund Fund Fund Unpaid claims as of June 30, 2016 329,571$ 13,915$ 85,671$ Claims and premiums paid 6,873,987 185,527 610,285 Incurred claims and premiums (6,775,215) (189,442) (695,956) Unpaid claims as of June 30, 2017 428,343 10,000 - Claims and premiums paid 7,252,837 166,032 662,502 Incurred claims and premiums (7,241,534) (166,032) (614,960) Unpaid claims as of June 30, 2018 439,646$ 10,000$ 47,542$ 78 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 The City protects itself from potential loss through participation in the North Carolina League of Municipalities Interlocal Risk Financing Fund of North Carolina for general liability, automobile liability, public officials and law enforcement liability. The City maintains coverage of $5,000,000 for comprehensive general liability, automobile liability, public officials and law enforcement liability. The City’s potential loss for liability coverage is limited to the deductible amount of $50,000 per claim for all coverage, except for real and personal property, which has a deductible of $25,000 per claim. In accordance with G.S. 159-29, the City’s employees that have access to $100 or more at any given time of the City’s funds are performance bonded through a commercial surety bond. The Finance Officer and Tax Collector are each individually bonded for $250,000 each. The remaining employees that have access to funds are bonded under a blanket bond for $250,000. The City of Monroe ABC Board is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The ABC Board has commercial property, general liability, automobile liability, workers’ compensation, and employee health coverage. The ABC Board also has liquor legal liability coverage. There have been no significant reductions in insurance coverage from the prior year, and settled claims have not exceeded coverage in any of the past three fiscal years. In accordance with G.S. 18B-700(i), each Board member and the employees designated as the General Manager and Finance Officer are bonded in the amount of $50,000 secured by a corporate surety. The Tourism Development Authority is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The Authority does not carry commercial insurance to cover these risks of loss. The City’s insurance coverage for these risks also covers the Authority. The Authority does not carry flood insurance. In accordance with G.S. 159-29, the Finance Officer for the Authority is individually bonded for $50,000. All risk management activities are reported in the Authority’s General Fund. Claims expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. Based on available information, the Authority had no liability claims at June 30, 2018. 7. Claims, Judgments, and Contingent Liabilities The City was a defendant in various matters of litigation as of June 30, 2018. While any litigation contains an element of uncertainty, City officials believe that the outcome of any lawsuit or claim which is pending, or all of them combined, will not have a materially adverse effect on the City’s financial condition or operations. In addition, there are known incidents that may result in the assertion of claims, as well as claims from unknown incidents that may be asserted for which the City could be liable for a material amount. However, since such claims have not been asserted and are not determinable or measurable, no provision for loss has been included in the financial statements. Also, City officials believe the City’s insurance is adequate for the actual or pending lawsuits or claims mentioned above. 79 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 8. Long-Term Obligations a. Installment Purchase Obligations The City has entered into various installment purchase obligations to acquire certain equipment and to finance building improvements: Governmental Enterprise Funds Funds Total $1,036,000 Executed August 12, 2004, to finance construction of a street maintenance building, requiring 30 semi-annual installments of $34,533, plus interest at 3.89% 103,600$ -$ 103,600$ $2,391,720 Executed January 30, 2009, to finance construction of a recreation center, requiring 30 semi-annual installments of $79,724, plus interest. Interest Rate Modified June 2013 to 2.67% 956,688 - 956,688 $850,000 Executed May 29, 2014 with a bank, to finance equipment, to semi-annual installments of $88,355, including interest at 1.465% 174,787 - 174,787 $76,262 Executed July 16, 2014 with a vendor, to finance computer equipment, requiring 59 monthly installments of $1,376, including interest at 2.63% 17,619 - 17,619 $4,400,000 Executed September 17, 2014 with a bank, to finance the design, construction and furnishing of a fire station, requiring 20 semi-annual installments of $220,000, plus interest at 2.1% 2,860,000 - 2,860,000 $1,788,000 Executed May 9, 2017 with a bank, to finance equipment requiring 10 annual installments ranging from $165,000 to $196,000, plus interest at 2.1532% 1,622,000 - 1,622,000 $2,123,000 Executed May 8, 2018 with a bank, to finance equipment requiring 10 annual installments ranging from $163,000 to $266,000, plus interest at 3.0462%1,614,000 509,000 2,123,000 Total 7,348,694$ 509,000$ 7,857,694$ 80 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Annual debt service payments of the installment purchase obligations as of June 30, 2018 are as follows: Year Ending June 30 Principal Interest Principal Interest 2019 1,165,547$ 170,913$ 96,000$ 15,204$ 2020 949,355 145,649 99,000 12,581 2021 920,448 123,421 101,000 9,565 2022 929,448 101,682 105,000 6,488 2023 937,448 79,704 108,000 3,290 2024-2028 2,446,448 139,241 - - Total 7,348,694$ 509,000$ Total interest payments 760,610$ 47,128$ Governmental Activities Business-Type Activities At June 30, 2018, the City had a legal debt margin of $239,741,422. b. Revenue Bonds The City also issues bonds where it pledges income derived from the acquired or constructed assets to pay debt service. Revenue bonds outstanding at year-end are as follows: Serviced by the Water and Sewer Fund, Electric Fund, Airport Fund, and Natural Gas Fund: $19,620,000 Combined Enterprise System Revenue Refunding Bonds, Series 2011, due annually in amounts ranging from $945,000 to $1,460,000 through March 1, 2028, interest rate varying between 2.0% and 5.0%. The amount shown includes $355,354 in unamortized bo nd premiums associated with the bonds. 10,280,354$ On August 11, 2016, the City issued $20,660,000 in Combined Ent erprise System Revenue Bonds, Series 2016 to advance refund a portion o f the Series 2008A Revenue Bonds. These 17-year bonds have interest rates varying between 2% and 5%. The total shown is net of the unamortized bond premium of $3,431,207 associated with the bonds. 24,091,207 On December 21, 2017, the City issued $12,500,000 in Combined Enterprise System Revenue Bonds, Series 2017 to fund improvements to the City's water, sewer, and airport systems. These 25-year bonds have interest rates varying between 3.125% and 5%. The total shown is net of the unamortized bond premium of $1,681,225 associated with the bonds.14,181,225 Total 48,552,786$ 81 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 The future payments of the revenue bonds for the years ending June 30, 2018 are as follows: Year Ending June 30 Principal Interest 2019 2,865,000$ 1,910,656$ 2020 2,275,000 1,796,056 2021 2,360,000 1,714,456 2022 2,465,000 1,606,156 2023 2,575,000 1,492,956 2024-2028 13,000,000 5,888,331 2029-2033 10,840,000 3,091,219 2034-2038 2,985,000 1,306,981 2039-2043 3,720,000 576,250 Total 43,085,000$ 19,383,061$ Business-Type Activities The future payments as presented above have not been reduced by the net of unamortized bond premiums totaling $5,467,786. The City has been in compliance with the covenants as to rates, fees, rentals, and charges in Section 704 of the Bond Order Authorizing the Issuance of Combined Enterprise System Revenue Bonds (Bond Order) since its adoption on May 3, 1994. Section 704(a) of the Bond Order requires the debt service coverage ratio to be no less than 125% parity indebtedness and 100% of the long-term debt service requirement for subordinated indebtedness for the fiscal year. The debt service coverage ratio calculation for the year ended June 30, 2018, is as follows: Operating revenues 101,169,893$ Operating expenses (1)79,603,926 Operating income 21,565,967 Non-operating revenues (2)(1,326,859) Income available for debt service 20,239,108 Parity debt service 4,775,113 Debt service coverage ratio 424% Income available for debt service 20,239,108 Subordinated debt service 6,778,213 Debt service coverage ratio 299% (1) Per rate covenants, this does not include the depreciation and amortization expense of $7,706,117. (2) Per rate covenants, this includes investment earnings only. 82 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 The City has pledged future water and sewer, electric, airport, and natural gas customer revenues, net of specified operating expenses, to repay $50.5 million in revenue bonds issued in 2008 and 2011. Proceeds from the bonds provided financing for various capital projects and refunded prior issues. The bonds are payable solely from the revenue sources of the enterprise funds noted above and are payable through 2033. Annual principal and interest payments on the bonds are expected to require less than 5% of net revenues. The total principal and interest remaining to be paid on the bonds is $62,468,061. Principal and interest paid for the current year and total customer net revenues were $4,112,440 and $100.3 million, respectively. c. State Revolving Loans The City has entered into seven state revolving loans to finance water and sewer improvements. All tate revolving loans are being serviced by revenues from the Water and Sewer Fund: Loan payable to the State of North Carolina Water Pollution Control Revolving Loan Fund with a maximum limit of $9,622,065, payable over 20 years, with interest at 2.22% 7,697,652$ Annual debt service requirements to maturity for the state revolving loans are as follows: Year Ending June 30 Principal Interest 2019 481,103$ 170,888$ 2020 481,103 160,207 2021 481,103 149,527 2022 481,103 138,846 2023 481,103 128,166 2024-2028 2,405,516 480,622 2029-2033 2,405,516 213,610 2034 481,105 10,681 Total 7,697,652$ 1,452,547$ Business-Type Activities d. Certificates of Participation The City has entered into a Certification of Participation agreement to finance natural gas improvements. All Certificates of Participation are being serviced by revenues from the Natural Gas Fund. On March 1, 2009, the City issued $32,665,000 in Certificates o f Participation (COPS) Installment Contracts to finance the construction of natural gas improvements. These 30-year COPS have interest rates varying between 3% and 5.5%. The COPs issue was advance refunded on April 14, 2016 for all but three years. The two remaining years' principal outstanding totals $780,000.780,000$ 83 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Annual debt service requirements for Certificates of Participation are as follows: Year Ending June 30 Principal Interest 2019 780,000$ 31,200$ Business-Type Activities e. Limited Obligation Bonds On April 14, 2016, the City issued $27,045,000 in Limited Oblig ation Bonds (LOBS) to refund the Certificates of Participation used to finance the construction of natural gas improvements. These 23-year LOBS have interest rates varying between 2% and 5%. The total shown is net of the unamortized bond premium of $2,894,075 associated with t he bonds. 29,694,075$ On February 28, 2018, the City issued $8,280,000 in Limited Obligation Bonds, Series 2018 to fund improvements to the City's natural gas system. These 25-year bonds have interest rates varying between 3% and 5%. The total shown is net of the unamortized bond premium of $188,917 associated with the bonds.8,468,917 Total 38,162,992$ Year Ending June 30 Principal Interest 2019 250,000$ 1,449,606$ 2020 1,070,000 1,438,113 2021 1,110,000 1,395,313 2022 1,160,000 1,350,913 2023 1,215,000 1,295,113 2024-2028 6,945,000 5,610,063 2029-2033 8,715,000 3,821,688 2034-2038 10,415,000 2,128,494 2039-2043 4,200,000 339,738 Total 35,080,000$ 18,829,041$ Business-Type Activities The future payments presented above have not been adjusted by the net of unamortized bond premiums of $3,082,992. 84 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 f. Advance Refunding On August 11, 2016, the City issued Combined Enterprise System Revenue Refunding Bonds to provide resources to purchase U.S. government securities that were placed in an irrevocable trust to be used for future debt service payments of $20,660,000 of revenue bonds. As a result, a portion of the Combined Enterprise System Revenue Bonds, Series 2008A are considered to be defeased and a portion of the liability has been removed from the governmental activities column of the statement of net position. The reacquisition price exceeded the net carrying amount of the old debt by $1,212,041. This amount is being netted against the new debt and amortized over the life of the refunded debt. This advance refunding was undertaken to reduce total debt service payments over the next 17 years by $3,573,013 and resulted in an economic gain of $3,288,671. On June 30, 2018, $22,840,000 of bonds outstanding are considered defeased. On April 14, 2016, the City issued Limited Obligation advance refunding bonds to provide resources to purchase U.S. government securities that were placed in an irrevocable trust to be used for future debt service payments of $26,535,000 of certificates of participation. As a result, a portion of the certificates of participation are considered to be defeased and a portion of the liability has been removed from the governmental activities column of the statement of net position. The reacquisition price exceeded the net carrying amount of the old debt by $3,619,392. This amount is being netted against the new debt and amortized over the life of the refunded debt. This advance refunding was undertaken to reduce total debt service payments over the next 23 years by $4,514,919 and resulted in an economic gain of $4,193,750. On June 30, 2018, $26,535,000 of bonds outstanding are considered defeased. On June 30, 2011, the City issued Combined Enterprise System Revenue Refunding Bonds to provide resources to purchase U.S. government securities that were placed in an irrevocable trust to provide for future debt service payments of $20,015,000. As a result, a portion of the Combined Enterprise System Revenue Bonds, Series 1998 and Series 2008B are considered to be defeased and a portion of the liability has been removed from the governmental activities column of the statement of net position. The reacquisition price exceeded the net carrying amount of the old debt by $564,153. This amount is being netted against the new debt and amortized over the life of the refunded debt. This advance refunding was undertaken to reduce total debt service payments over the next 17 years by $1,618,743 and resulted in an economic gain of $1,264,016. On June 30, 2018, $10,460,000 of bonds outstanding are considered defeased. 85 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 g. Changes in Long-Term Liabilities Balance Current July 1, 2017,Balance Portion of As restated Increases Decreases June 30, 2018 Balance Governmental Activities: General and Parks and Recreation Fund: Installment purchasing obligations 6,933,988$ 1,614,000$ 1,199,294$ 7,348,694$ 1,165,547$ Compensated absences 2,175,033 1,167,916 1,023,083 2,319,866 1,554,310 Total pension liability (LEOSSA) 3,592,717 637,020 153,808 4,075,929 - Net pension liability (LGERS) 5,741,772 - 1,640,638 4,101,134 - Total OPEB liability 29,752,294 - 968,252 28,784,042 - Golf Course: Installment purchasing obligations 13,300 - 13,300 - - Compensated absences 31,174 25,484 21,309 35,349 23,683 Total OPEB liability 107,751 - 3,507 104,244 - Total governmental activities 48,348,029$ 3,444,420$ 5,023,191$ 46,769,258$ 2,743,540$ Business-Type Activities: Water and Sewer Fund: Compensated absences 307,665$ 218,569$ 189,015$ 337,219$ 225,937$ Net pension liability (LGERS) 1,068,815 - 305,400 763,415 - Total OPEB liability 5,568,588 - 181,223 5,387,365 - Revenue bonds 5,712,470 10,450,000 662,969 15,499,501 900,589 Plus bond premium 810,227 1,405,504 60,106 2,155,625 114,168 Total revenue bonds 6,522,697 11,855,504 723,075 17,655,126 1,014,757 State revolving loans 8,178,755 - 481,103 7,697,652 481,103 Total Water and Sewer Fund 21,646,520$ 12,074,073$ 1,879,816$ 31,840,777$ 1,721,797$ Electric Fund: Compensated absences 238,882$ 112,106$ 122,182$ 228,806$ 153,300$ Net pension liability (LGERS) 463,982 - 132,577 331,405 - Total OPEB liability 2,430,870 - 79,110 2,351,760 - Revenue bonds 16,018,414 - 1,025,397 14,993,017 1,008,400 Plus bond premium 2,628,299 - 175,179 2,453,120 173,928 Total revenue bonds 18,646,713 - 1,200,576 17,446,137 1,182,328 Total Electric Fund 21,780,447$ 112,106$ 1,534,445$ 20,358,108$ 1,335,628$ 86 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Current Balance Balance Portion of As restated Increases Decreases June 30, 2018 Balance Natural Gas Fund: Compensated absences 102,443$ 36,578$ 35,726$ 103,295$ 69,208$ Total OPEB liability 1,232,675 - 40,116 1,192,559 - Net pension liability (LGERS) 240,277 - 68,656 171,621 - Certificates of participation 1,530,000 - 750,000 780,000 780,000 Total certificates of participation 1,530,000 - 750,000 780,000 780,000 Limited obligation bonds 26,855,000 8,280,000 55,000 35,080,000 250,000 Plus bond premium 3,031,889 188,917 137,814 3,082,992 145,369 Total limited obligation bonds 29,886,889 8,468,917 192,814 38,162,992 395,369 Revenue bonds 2,829,117 - 246,635 2,582,482 245,911 Plus bond premium 445,383 - 32,576 412,807 32,034 Total revenue bonds 3,274,500 - 279,211 2,995,289 277,945 Total Natural Gas Fund 36,266,784$ 8,505,495$ 1,366,523$ 43,405,756$ 1,522,522$ Airport Fund: Compensated absences 23,442$ 21,764$ 13,776$ 31,430$ 21,058$ Net pension liability (LGERS) 198,849 - 56,819 142,030 - Total OPEB liability 1,030,103 - 33,523 996,580 - Revenue bonds 8,600,000 2,050,000 640,000 10,010,000 710,100 Plus bond premium 206,594 275,720 36,080 446,234 43,466 Total revenue bonds 8,806,594 2,325,720 676,080 10,456,234 753,566 Total Airport Fund 10,058,988$ 2,347,484$ 780,198$ 11,626,274$ 774,624$ Aquatics and Fitness Center Fund: Compensated absences 85,736$ 50,184$ 29,693$ 106,227$ 71,172$ Net pension liability (LGERS) 389,413 - 111,270 278,143 - Total OPEB liability 2,030,035 - 66,065 1,963,970 - Total Aquatics and Fitness Center Fund 2,505,184$ 50,184$ 207,028$ 2,348,340$ 71,172$ Stormwater Fund: Compensated absences 58,215$ 30,174$ 34,580$ 53,809$ 36,052$ Net pension liability (LGERS) 173,993 - 49,716 124,277 - Total OPEB liability 887,871 - 28,895 858,976 - Installment purchase obligations - 509,000 - 509,000 96,000 Total Stormwater Fund 1,120,079$ 539,174$ 113,191$ 1,546,062$ 132,052$ 87 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Current Balance Balance Portion of As restated Increases Decreases June 30, 2018 Balance Solid Waste Fund: Compensated absences 1,846$ 7,593$ 4,882$ 4,557$ 3,053$ Net pension liability (LGERS) 8,285 - 2,367 5,918 - Total OPEB liability 60,341 - 1,964 58,377 - Total Solid Waste Fund 70,472$ 7,593$ 9,213$ 68,852$ 3,053$ Total business-type activities 93,448,474$23,636,109$5,890,414$ 111,194,169$ 5,560,848$ For governmental activities, compensated absences, net pension obligation, and other post- employment benefit liabilities are liquidated by the General Fund. For business-type activities, compensated absences, and other post-employment benefit liabilities are liquidated by the respective business-type fund. C. Interfund Balances and Activity Interfund balances at June 30, 2018 consist of the following: Due to General Fund Airport Fund Total Electric Fund 1,422,511$ 840,180$ 2,262,691$ The balance of $1,422,511 due to the Electric Fund from the General Fund resulted from financing of the Propel, Allvac and ATI Specialty Materials land for economic development incentives. One promissory note is for $1,494,020, payable annually over 15 years with interest accruing at 3.69%. The other promissory note is for $1,058,562, payable annually over 15 years with interest accruing at 2.84%. The current portion of this note is $174,641 and the balance of $1,247,870 is not scheduled to be collected in the subsequent year. The balance of $840,180 due to the Electric fund from the Airport fund resulted from financing of a bulk airplane storage hangar. The promissory note is payable in 20 equal annual installments of $60,265 with interest accruing at 2.84%. The current portion of this note is $36,404 and the balance of $803,776 is not scheduled to be collected in the subsequent year. Balances due to/from component units at June 30, 2018 consist of the following: Due to the Primary Government for Occupancy Tax: Monroe Tourism Development Authority 18,570$ 88 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 Transfers to/from other funds at June 30, 2018 consist of the following: From the General Fund to the Airport Fund for current operating needs 1,526,647$ From the Downtown Monroe Fund to the General Fund for repayment of Downtown Pioneer loans 82,265 From the General Fund to the Monroe-Union County Economic Development Special Revenue Fund for county-wide economic development 306,000 From the General Fund to the Airport Capital Projects Fund for corporate storage hangar 400,000 From the Capital Projects Fund to the General Fund to close projects 34,855 From the General Fund to the Governmental Capital Reserve for future Greenway Project (year 5 of 6) 100,000 From the Electric Fund to the General Fund for payment in lieu of taxes 516,309 From the Natural Gas Fund to the General Fund for payment in lieu of taxes 131,259 From the General Fund to the Downtown Monroe Fund for general operations 49,502 From the General Fund to the Capital Projects Fund for various projects 552,316 89 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 V. Jointly Governed Organizations The City, in conjunction with eighteen other local governments, is a member of the North Carolina Municipal Power Agency Number 1 (Agency). The Agency was formed to enable municipalities that own electric distribution systems to finance, construct, own, operate, and maintain generation and transmission facilities. Each participating government appoints one commissioner to the Agency’s governing board. The nineteen members, which receive power from the Agency, have signed power sales agreements to purchase a specified share of the power generated by the Agency. Except for the power sales purchase requirements, no local government participant has any obligation, entitlement, or residual interest. The City’s purchases of power for the fiscal year ended June 30, 2018 were $49,540,187. Also, the City, in conjunction with nine Central North Carolina counties and sixty-six other municipalities established the Centralina Council of Governments (Council). The participating governments established the Council to coordinate various funding received from federal and state agencies. Each participating government appoints one member to the Council's governing board. The City paid membership fees of $8,334 to the Council during the fiscal year ended June 30, 2018. VI. Joint Venture The City has entered into a joint venture agreement with Public Service Company of North Carolina, Incorporated, a South Carolina corporation d/b/a PSNC Energy (“PSNC”). The City has installed natural gas pipeline, a control station, an emergency connector, various valves and electronic data control equipment in Iredell and Cabarrus Counties which is located in PSNC’s service area. These facilities will be “joint facilities” to be owned by the City. The City will be responsible for providing all operation, maintenance, inspection, and repair of the joint facilities. PSNC has agreed to reimburse the City for 25% of the total cost of operation and maintenance. This reimbursement is equal to PSNC’s right to 25% of the capacity in the joint facilities in Cabarrus and Iredell counties. PSNC files SCANA’s annual SEC Form 10-K with the North Carolina Utilities Commission. A full copy of this report can be obtained from the Commission’s website in Docket No. G-5, Sub 400A or on SCANA’s website at: http://www.scana.com/en/investor-relations/financial-reports/. In addition, PSNC’s financial statements can be found on PSNC’s website at: http://www.psncenergy.com/ en/financial statements/. VII. Related Organization The seven-member Board of the Monroe Housing Authority is appointed by the City Council and Mayor of the City of Monroe. The City is accountable for the Housing Authority because it appoints the governing board; however, the City is not financially accountable for the Housing Authority. The City of Monroe is also disclosed as a related organization in the notes to the financial statements for the Monroe Housing Authority. Complete financial statements for the Housing Authority can be obtained from the Authority’s offices at Post Office Box 805, Monroe, North Carolina 28111. 90 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 VIII. Related Party Transactions The City and its discretely presented component units engaged in the following transactions during the year ended June 30, 2018: City of Monroe ABC Board: Payments to the City for profit distributions 232,500$ Payments to the City for law enforcement 65,169 Total 297,669$ Monroe Tourism Development Authority: Payments of a pro-rata portion of the occupancy tax by the City to the Authority 605,935$ Payment by the Authority to the City for the Occupancy Tax Project 201,978$ IX. Fund Balance The following schedule provides management and citizens with information on the portion of General Fund balance that is available for appropriation: Total fund balance - General Fund 28,563,016$ Less: Inventories 226,542 Prepaids 600,433 Stabilization by state statute 5,534,206 Public safety 1,204,315 Powell Bill reserves 1,250,760 Minimum fund balance requirement 10,106,092 Airport grant acceptance 188,868 Airport operations - 5-year subsidy 750,000 Street resurfacing - 5-year program 900,000 Subsequent year's expenditures 2,562,646 Remaining fund balance 5,239,154$ 91 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2018 X. Summary Disclosures of Significant Contingencies Federal and State-Assisted Programs The City has received proceeds from several federal and state grants. Periodic audits of these grants are required and certain costs may be questioned as not being appropriate expenditures under the grant agreements. Such audits could result in the refund of grant monies to the grantor agencies. Management believes that any required refunds will be immaterial. No provision has been made in the accompanying financial statements for the refund of grant monies. XI. Change in Accounting Principles/Restatement The City implemented Governmental Accounting Standards Board (GASB) No. Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, in the fiscal year ending June 30, 2018. The implementation of the statement required the City to record beginning total OPEB liability and the effects on net position of benefit payments and administrative expenses paid by the City related to OPEB during the measurement period (fiscal year ending June 30, 2017). Beginning deferred outflows and inflows of resources associated with the implementation were excluded from the restatement. As a result, net position for the governmental activities decreased $19,963,777 and $8,855,466 for the business-type activities. XII. Subsequent Events On October 10, 2018, the City of Monroe issued $7,785,000 Series 2018B Limited Obligation Bonds. 92 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF CHANGES IN TOTAL PENSION LIABILITY LAW ENFORCEMENT OFFICERS' SPECIAL SEPARATION ALLOWANCE LAST TWO FISCAL YEARS* 2018 2017 Beginning balance 3,592,717$ 3,520,979$ Service cost 140,123 144,779 Interest on the total pension liability 135,710 123,698 Differences between expected and actual experience in the measurement of the total pension liability 134,370 - Changes of assumptions or other inputs 226,817 (84,642) Benefit payments (153,808) (112,097) Ending balance of the total pension liability 4,075,929$ 3,592,717$ The amounts presented for each fiscal year were determined as of the prior December 31. *Pension schedules are intended to show information for ten years, additional years' information will be displayed as it comes available. Law Enforcement Officers' Special Separation Allowance 93 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF TOTAL PENSION LIABILITY AS A PERCENTAGE OF COVERED PAYROLL LAW ENFORCEMENT OFFICERS' SPECIAL SEPARATION ALLOWANCE LAST TWO FISCAL YEARS* 2018 2017 Total pension liability 4,075,929$ 3,592,717$ Covered payroll 5,106,289 4,986,204 Total pension liability as a percentage of covered payroll 79.82% 72.05% Notes to the Schedules: The City of Monroe has no assets accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement 73 to pay related benefits. *Pension schedules are intended to show information for ten years, additional years' information will be displayed as it comes available. Law Enforcement Officers' Special Separation Allowance 94 CITY OF MONROE, NORTH CAROLINA OTHER POST-EMPLOYMENT BENEFITS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE TOTAL OPEB LIABILITY AND RELATED RATIOS FOR THE YEAR ENDED JUNE 30, 2018 2018 Service cost 2,039,080$ Interest 1,304,239 Differences between expected and actual experience (201,752) Changes of assumptions or other inputs (4,544,221) Benefit payments (455,985) Net change in total OPEB liability (1,858,639) Total OPEB liability - beginning 43,556,512 Total OPEB liability - ending 41,697,873$ Covered payroll 22,116,108$ Total OPEB liability as a percentage of covered payroll 188.54% Notes to the Required Schedules: Changes of assumptions: Changes of assumptions and other inputs reflect the effects of changes in the discount rate of each period. The following are the discount rates used in each period: Fiscal Year Rate 2018 3.56% Information is not required to be presented retroactively. This schedule will not present 10 years' worth of information until fiscal year 2027. Other Post-Employment Benefits 95 CITY OF MONROE, NORTH CAROLINA CITY OF MONROE'S PROPORTIONATE SHARE OF NET PENSION LIABILITY (ASSET) REQUIRED SUPPLEMENTARY INFORMATION LAST FIVE FISCAL YEARS* 2018 2017 2016 2015 2014 Monroe's proportion of the net pension liability (asset) (%)0.38737% 0.39039% 0.43129% 0.44081% 0.46720% Monroe's proportion of the net pension liability (asset) ($) 5,917,943$ 8,285,386$ 1,935,602$ (2,599,661)$ 5,631,554$ Monroe's covered-employee payroll 23,996,590$ 23,236,408$ 22,572,529$ 22,549,809$ 21,999,994$ Monroe's proportionate share of the net pension liability (asset) as a percentage of its covered-employee payroll 24.66% 35.66% 8.58% ( 11.53%) 25.60% Plan fiduciary net position as a percentage of the total pension liability** 94.18% 91.47% 98.09% 102.64% 94.35% * The amounts presented for each fiscal year were determined as of the prior fiscal year ending June 30. ** This will be the same percentage for all participant employers in the LGERS plan. This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. Local Government Employees' Retirement System 96 CITY OF MONROE, NORTH CAROLINA CITY OF MONROE'S CONTRIBUTIONS REQUIRED SUPPLEMENTARY INFORMATION LAST FIVE FISCAL YEARS 2018 2017 2016 2015 2014 Contractually required contribution 1,920,739$ 1,790,488$ 1,586,301$ 1,611,462$ 1,604,437$ Contributions in relation to the contractually required contribution 1,920,739 1,790,488 1,586,301 1,611,462 1,604,437 Contribution deficiency (excess)-$ -$ -$ -$ -$ Monroe's covered-employee payroll 24,933,732$ 23,996,590$ 23,236,408$ 22,572,529$ 22,549,809$ Contributions as a percentage of covered-employee payroll 7.70%7.46%6.83%7.14%7.12% This schedule is intended to show information for ten years. Additional years' information will be displayed as it becomes available. Local Government Employees' Retirement System 97                       98 Page 1 of 3 CITY OF MONROE, NORTH CAROLINA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Revenues: Ad Valorem Taxes: Taxes 20,235,297$ 21,041,201$ 805,904$ Penalties and interest 120,000 111,098 (8,902) Total 20,355,297 21,152,299 797,002 Other Taxes and Licenses: Beer and wine and taxicab licenses - 2,380 2,380 Gross receipts tax on short-term rental property 69,700 104,468 34,768 Motor vehicle tax 835,770 842,065 6,295 Total 905,470 948,913 43,443 Unrestricted Intergovernmental: Sales and use tax 5,556,041 6,215,031 658,990 Telecommunications sales tax 330,000 312,330 (17,670) Utility sales tax 2,805,400 2,861,596 56,196 Video franchise fee 205,000 216,140 11,140 Beer and wine tax 150,000 150,403 403 State fire fees 3,000 3,018 18 ABC profit distribution 174,000 232,500 58,500 Total 9,223,441 9,991,018 767,577 Restricted Intergovernmental: Powell Bill allocation 951,178 964,168 12,990 Public safety reimbursement grants 204,503 203,836 (667) ABC Revenue for law enforcement 84,569 65,169 (19,400) Resource officer reimbursement 209,346 198,015 (11,331) Fire reimbursement grants 83,222 55,728 (27,494) Equitable sharing of federally forfeited property - 174,730 174,730 Interlocal agreements - retail initiative 60,000 - (60,000) Total 1,592,818 1,661,646 68,828 Sales and Services: Recreational fees 840,750 904,901 64,151 Utilities collection fees 402,000 424,434 22,434 Building permit fees 337,523 434,143 96,620 Cemetery revenues 32,810 52,100 19,290 Sale of fixed assets 165,860 277,687 111,827 Rentals 63,605 111,041 47,436 Other fees 212,450 317,189 104,739 Total 2,054,998 2,521,495 466,497 99 Page 2 of 3 CITY OF MONROE, NORTH CAROLINA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Investment Earnings 468,500 (560,167) (1,028,667) Miscellaneous: Payment in lieu of taxes - Monroe Housing Authority 15,000 21,495 6,495 Donations 14,145 14,030 (115) Other 275,077 371,421 96,344 Total 304,222 406,946 102,724 Total revenues 34,904,746 36,122,150 1,217,404 Expenditures: Current: General Government: Salaries and employee benefits 6,483,957 6,214,101 269,856 Operating expenditures 4,160,864 2,781,892 1,378,972 Capital outlay 522,287 474,961 47,326 Interdepartmental charges (5,776,560) (5,797,867) 21,307 Total general government 5,390,548 3,673,087 1,717,461 Transportation: Streets and highways Salaries and employee benefits 1,122,012 1,061,880 60,132 Operating expenditures 1,634,547 1,185,948 448,599 Capital outlay 1,453,200 1,323,105 130,095 Interdepartmental charges (446,361) (621,015) 174,654 Total transportation 3,763,398 2,949,918 813,480 Public Safety: Salaries and employee benefits 16,175,759 16,036,676 139,083 Operating expenditures 2,664,983 1,999,567 665,416 Capital outlay 3,879,089 3,069,668 809,421 Total public safety 22,719,831 21,105,911 1,613,920 Culture and Recreation: Salaries and employee benefits 3,114,274 2,880,127 234,147 Operating expenditures 2,363,666 1,987,077 376,589 Capital outlay 956,283 549,559 406,724 Interdepartmental charges (233,772) (233,772) - Total culture and recreation 6,200,451 5,182,991 1,017,460 100 Page 3 of 3 CITY OF MONROE, NORTH CAROLINA GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Debt Service: Principal retirement 1,725,506 1,212,594 512,912 Interest and other charges 155,811 199,984 (44,173) Total 1,881,317 1,412,578 468,739 Total expenditures 39,955,545 34,324,485 5,631,060 Revenues over (under) expenditures (5,050,799) 1,797,665 6,848,464 Other Financing Sources (Uses): Transfers from (to) other funds: Monroe Union County Economic Development Fund (306,000) (306,000) - Downtown Monroe Fund 82,265 82,265 - Downtown Monroe Fund (170,281) (49,502) 120,779 Capital projects funds: Capital projects (552,316) (552,316) - Capital projects 34,854 34,855 1 Governmental Capital Reserve Fund (100,000) (100,000) - Airport Capital Projects Fund (400,000) (400,000) - Airport Fund (1,829,284) (1,526,647) 302,637 Natural Gas Fund 118,000 131,259 13,259 Electric Fund 455,000 516,309 61,309 Installment purchase obligations issued 1,600,000 1,614,000 14,000 Total other financing sources (uses)(1,067,762) (555,777) 511,985 Appropriated fund balance 6,118,561 - (6,118,561) Net change in fund balance -$ 1,241,888 1,241,888$ Fund Balance: Beginning of year, July 1 27,321,128 End of year, June 30 28,563,016$ 101                       102 Nonmajor Governmental Funds Special Revenue Funds Special Revenue Funds are used to account for specific revenues that are legally restricted to expenditures for specified purposes. Community Development - This fund is used to account for specific revenues that are restricted to fund continuing rehabilitation of housing within certain targeted areas of the City. Downtown Monroe - This fund is used to account for specific revenues that are restricted for the purpose of downtown revitalization. Monroe Union County Economic Development – This fund is used to account for specific revenues that is restricted for the purpose of county- wide economic development. Capital Projects Funds Capital Projects Funds account for financial resources to be used for the acquisition or construction of major capital facilities other than those financed by proprietary funds. Capital Projects - This fund is used to account for the purchase, renovation, furnishing, or construction of roadway and facility improvements. Occupancy Tax Projects - This fund is used to account for tourism related capital expenditures. Capital Reserve Funds Capital Reserve Funds account for financial resources to be accumulated and used for the acquisition or construction of major capital facilities other than those financed by proprietary funds. Governmental Capital Reserve - This fund is used to accumulate funds for the purpose of constructing greenways. 103 Page 1 of 2 Monroe Union Community Downtown Economic Development Monroe Development Total Assets: Cash and cash equivalents 56,562$ 82,455$ 292,073$ 431,090$ Taxes receivable - 2,417 - 2,417 Accounts receivable - 6,855 900 7,755 Prepaid items - 501 3,141 3,642 Due from other governments - 300 - 300 Due from component unit - - - - Cash and cash equivalents - restricted - - - - Total assets 56,562$ 92,528$ 296,114$ 445,204$ Liabilities, Deferred Inflows of Resources, and Fund Balances: Liabilities: Accounts payable and accrued liabilities -$ 3,023$ 16,307$ 19,330$ Deferred Inflows of Resources - 2,417 - 2,417 Fund Balances: Non-spendable: Prepaids - 501 3,141 3,642 Restricted: Stabilization by state statute - 25,735 45,630 71,365 Public safety - - - - Occupancy tax capital projects - - - - Economic development - - 231,036 231,036 Committed: Culture and recreation - - - - Capital projects - - - - Assigned 56,562 60,852 - 117,414 Total fund balances 56,562 87,088 279,807 423,457 Total liabilities, deferred inflows of resources, and fund balances 56,562$ 92,528$ 296,114$ 445,204$ Special Revenue Funds CITY OF MONROE, NORTH CAROLINA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2018 104 Page 2 of 2 Total Occupancy Governmental Nonmajor Capital Tax Capital Governmental Projects Projects Reserve Total Funds Assets: Cash and cash equivalents 5,071,688$ 901,709$ 100,000$ 6,073,397$ 6,504,487$ Taxes receivable - - - - 2,417 Accounts receivable - - - - 7,755 Prepaid items - - - - 3,642 Due from other governments 67,156 - - 67,156 67,456 Due from component unit - 18,570 - 18,570 18,570 Cash and cash equivalents - restricted 142,351 - - 142,351 142,351 Total assets 5,281,195$ 920,279$ 100,000$ 6,301,474$ 6,746,678$ Liabilities, Deferred Inflows of Resources, and Fund Balances: Liabilities: Accounts payable and accrued liabilities 81,358$ 16,250$ -$ 97,608$ 116,938$ Deferred Inflows of Resources - - - - 2,417 Fund Balances: Non-spendable: Prepaids - - - - 3,642 Restricted: Stabilization by state statute 1,050,495 167,313 - 1,217,808 1,289,173 Public safety 142,351 - - 142,351 142,351 Occupancy tax capital projects - 736,716 - 736,716 736,716 Economic development - - - - 231,036 Committed: Culture and recreation - - 100,000 100,000 100,000 Capital projects 4,006,991 - - 4,006,991 4,006,991 Assigned - - - - 117,414 Total fund balances 5,199,837 904,029 100,000 6,203,866 6,627,323 Total liabilities, deferred inflows of resources, and fund balances 5,281,195$ 920,279$ 100,000$ 6,301,474$ 6,746,678$ Capital Project Funds CITY OF MONROE, NORTH CAROLINA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2018 105 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Monroe Union Community Downtown Economic Development Monroe Development Total Revenues: Ad valorem taxes -$ 56,156$ -$ 56,156$ Restricted intergovernmental - - 408,000 408,000 Miscellaneous - 82,265 35,435 117,700 Investment earnings - - (4,196) (4,196) Total revenues - 138,421 439,239 577,660 Expenditures: Current: Economic and physical development: Administration - 220,002 678,777 898,779 Tourism - - - - Capital outlay - - - - Total expenditures - 220,002 678,777 898,779 Revenues over (under) expenditures - (81,581) (239,538) (321,119) Other Financing Sources (Uses): Transfers from other funds - 49,502 306,000 355,502 Transfers to other funds - (82,265) - (82,265) Total other financing sources (uses)- (32,763) 306,000 273,237 Net change in fund balances - (114,344) 66,462 (47,882) Fund Balances: Beginning of year, July 1 56,562 201,432 213,345 471,339 End of year, June 30 56,562$ 87,088$ 279,807$ 423,457$ Special Revenue Funds 106 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Total Occupancy Governmental Nonmajor Capital Tax Capital Governmental Projects Projects Reserve Total Funds Revenues: Ad valorem taxes -$ -$ -$ -$ 56,156$ Restricted intergovernmental 1,279,350 201,978 - 1,481,328 1,889,328 Miscellaneous - - - - 117,700 Investment earnings (459) (12,816) - (13,275) (17,471) Total revenues 1,278,891 189,162 - 1,468,053 2,045,713 Expenditures: Current: Economic and physical development: Administration - - - - 898,779 Tourism - 360,967 - 360,967 360,967 Capital outlay 1,949,699 - - 1,949,699 1,949,699 Total expenditures 1,949,699 360,967 - 2,310,666 3,209,445 Revenues over (under) expenditures (670,808) (171,805) - (842,613) (1,163,732) Other Financing Sources (Uses): Transfers from other funds 552,316 - 100,000 652,316 1,007,818 Transfers to other funds (34,855) - - (34,855) (117,120) Total other financing sources (uses)517,461 - 100,000 617,461 890,698 Net change in fund balances (153,347) (171,805) 100,000 (225,152) (273,034) Fund Balances: Beginning of year, July 1 5,353,184 1,075,834 - 6,429,018 6,900,357 End of year, June 30 5,199,837$ 904,029$ 100,000$ 6,203,866$ 6,627,323$ Capital Project Funds 107 CITY OF MONROE, NORTH CAROLINA SPECIAL REVENUE FUND COMMUNITY DEVELOPMENT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Net change in fund balance -$ -$ -$ Fund Balance: Beginning of year, July 1 56,562 End of year, June 30 56,562$ 108 CITY OF MONROE, NORTH CAROLINA SPECIAL REVENUE FUND DOWNTOWN MONROE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Revenues: Ad valorem taxes 54,602$ 56,156$ 1,554$ Miscellaneous 82,266 82,265 (1) Total 136,868 138,421 1,553 Expenditures: Current: Economic and physical development: Administration 426,316 220,002 206,314 Total 426,316 220,002 206,314 Revenues over (under) expenditures (289,448) (81,581) 207,867 Other Financing Sources (Uses) Transfers from (to) other funds: General Fund (82,265) (82,265) - General Fund 170,281 49,502 (120,779) Total other financing sources (uses)88,016 (32,763) (120,779) Appropriated fund balance 201,432 - (201,432) Net change in fund balance -$ (114,344) (114,344)$ Fund Balance: Beginning of year, July 1 201,432 End of year, June 30 87,088$ 109 CITY OF MONROE, NORTH CAROLINA SPECIAL REVENUE FUND MONROE UNION COUNTY ECONOMIC DEVELOPMENT SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Revenues: Interlocal agreement 408,000$ 408,000$ -$ Miscellaneous 33,050 35,435 2,385 Investment earnings - (4,196) (4,196) Total 441,050 439,239 (1,811) Expenditures: Current: Economic and physical development: Administration 777,581 678,777 98,804 Revenues over (under) expenditures (336,531) (239,538) 96,993 Other Financing Sources (Uses): Transfers from (to) other funds: General Fund 306,000 306,000 - Appropriated fund balance 30,531 - (30,531) Net change in fund balance -$ 66,462 66,462$ Fund Balance: Beginning of year, July 1 213,345 End of year, June 30 279,807$ 110 CITY OF MONROE, NORTH CAROLINA CAPITAL PROJECTS FUND CAPITAL PROJECTS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FROM INCEPTION AND FOR THE YEAR ENDED JUNE 30, 2018 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Revenues: Restricted intergovernmental 2,131,000$ 404,252$ 1,279,350$ 1,683,602$ (447,398)$ Miscellaneous - 253 - 253 253 Investment earnings - 86,682 (459) 86,223 86,223 Total revenues 2,131,000 491,187 1,278,891 1,770,078 (360,922) Expenditures: Capital outlay: Construction costs capitalized 7,686,512 6,050,410 1,164,826 7,215,236 471,276 Construction in progress 5,872,605 30,682 752,440 783,122 5,089,483 Other costs 115,738 83,305 32,433 115,738 - Total expenditures 13,674,855 6,164,397 1,949,699 8,114,096 5,560,759 Revenues over (under) expenditures (11,543,855) (5,673,210) (670,808) (6,344,018) 5,199,837 Other Financing Sources (Uses): Transfers from (to) other funds: General Fund 5,390,317 4,838,001 552,316 5,390,317 - General Fund (34,855) - (34,855) (34,855) - Parks and Recreation Fund (General Fund) 1,140,000 1,140,000 - 1,140,000 - Downtown Monroe Fund 148,393 148,393 - 148,393 - Monroe Fitness and Aquatics Center Fund 100,000 100,000 - 100,000 - Governmental Capital Reserve Fund 400,000 400,000 - 400,000 - Installment purchase obligations issued 4,400,000 4,400,000 - 4,400,000 - Total other financing sources (uses)11,543,855 11,026,394 517,461 11,543,855 - Net change in fund balance -$ 5,353,184$ (153,347) 5,199,837$ 5,199,837$ Fund Balance: Beginning of year, July 1 5,353,184 End of year, June 30 5,199,837$ Actual 111 CITY OF MONROE, NORTH CAROLINA CAPITAL PROJECT FUND OCCUPANCY TAX CAPITAL PROJECTS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FROM INCEPTION AND FOR THE YEAR ENDED JUNE 30, 2018 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Revenues: Restricted intergovernmental 2,607,078$ 2,739,884$ 201,978$ 2,941,862$ 334,784$ Donation 8,000 - - - (8,000) Investment earnings - 52,110 (12,816) 39,294 39,294 Total revenues 2,615,078 2,791,994 189,162 2,981,156 366,078 Expenditures: Current: Construction costs capitalized 1,221,996 1,221,996 - 1,221,996 - Construction in progress 896,728 351,399 360,967 712,366 184,362 Other costs 496,354 142,765 - 142,765 353,589 Total expenditures 2,615,078 1,716,160 360,967 2,077,127 537,951 Net change in fund balance -$ 1,075,834$ (171,805) 904,029$ 904,029$ Fund Balance: Beginning of year, July 1 1,075,834 End of year, June 30 904,029$ Actual 112 CITY OF MONROE, NORTH CAROLINA CAPITAL PROJECT FUND GOVERNMENTAL CAPITAL RESERVE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Other Financing Sources (Uses): Transfers from (to) other funds: Parks and Recreation Fund (General Fund)100,000$ 100,000$ -$ Capital Projects Fund (100,000) - 100,000 Total other financing sources (uses)- 100,000 100,000 Net change in fund balance -$ 100,000 100,000$ Fund Balance: Beginning of year, July 1 - End of year, June 30 100,000$ 113 Page 1 of 3 CITY OF MONROE, NORTH CAROLINA WATER AND SEWER FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Water sales 7,043,038$ 7,250,496$ 207,458$ Sewer charges 8,221,927 8,515,537 293,610 Water and sewer taps 27,239 118,551 91,312 Availability fees 918,353 618,114 (300,239) County waste water charges 550,000 428,677 (121,323) Total 16,760,557 16,931,375 170,818 Other operating revenues 327,984 318,493 (9,491) Total operating revenues 17,088,541 17,249,868 161,327 Non-operating revenues: Other non-operating revenues 4,257 207,261 203,004 Investment earnings 453,200 (510,209) (963,409) Total non-operating revenues 457,457 (302,948) (760,405) Total revenues 17,545,998 16,946,920 (599,078) Other Financing Sources (Uses): Bond refunding proceeds 3,156,448 1,744,680 (1,411,768) Bond premium - 1,405,504 1,405,504 Transfers from other funds: Water & Sewer Capital Project Fund 1,637,292 1,637,292 - Total other financing sources (uses)4,793,740 4,787,476 (6,264) Appropriated fund balance 5,517,789 - (5,517,789) Total revenues and other financing sources (uses)27,857,527$ 21,734,396$ (6,123,131)$ 114 Page 2 of 3 CITY OF MONROE, NORTH CAROLINA WATER AND SEWER FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Expenditures: Distribution system: Salaries and employee benefits 2,770,430$ 2,634,903$ 135,527$ Repairs and maintenance 1,254,200 855,779 398,421 Operating expenditures 2,884,425 2,782,342 102,083 Total 6,909,055 6,273,024 636,031 Water filter plant: Salaries and employee benefits 853,079 744,056 109,023 Operating expenditures 3,134,823 2,596,283 538,540 Total 3,987,902 3,340,339 647,563 Waste treatment plant: Salaries and employee benefits 1,068,514 1,017,012 51,502 Operating expenditures 1,804,045 1,428,727 375,318 Total 2,872,559 2,445,739 426,820 Debt service: Principal retirement 1,528,821 1,144,072 384,749 Interest and other charges 820,194 839,106 (18,912) Total 2,349,015 1,983,178 365,837 Capital outlay 3,543,968 1,938,378 1,605,590 Total expenditures 19,662,499 15,980,658 3,681,841 Other Financing Sources (Uses): Transfers: Capital Reserve Fund (8,165,028) (8,165,028) - Water and Sewer Capital Projects Fund (30,000) (30,000) - Total other financing uses (8,195,028) (8,195,028) - Total expenditures and other financing sources (uses)27,857,527$ 24,175,686$ 3,681,841$ 115 Page 3 of 3 CITY OF MONROE, NORTH CAROLINA WATER AND SEWER FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources (uses) 21,734,396$ Total expenditures and other financing sources (uses)24,175,686 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses)(2,441,290) Reconciling items: Debt principal 1,144,072 Proceeds from issuance of long-term debt (1,744,680) Bond premium (1,405,504) Net revenue from capital projects consolidation 67,191 Capital outlay 1,938,378 Capital items not charged to capital outlay 3,596,209 Disposal of capital asset (1,803) Project transfers - intrafund 6,557,736 Increase in compensated absences (29,554) Change in OPEB liability 181,223 Change in deferred outflows of resources - OPEB 75,047 Change in deferred inflows of resources - OPEB (538,492) Change in deferred outflows of resources - pensions (329,039) Increase in net pension liability 305,400 Change in deferred inflows of resources - pensions 38,689 Depreciation and amortization (2,740,685) Total reconciling items 7,114,188 Change in net position 4,672,898$ 116 CITY OF MONROE, NORTH CAROLINA WATER AND SEWER CAPITAL PROJECTS FUNDS CAPITAL RESERVE SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Other Financing Sources (Uses): Transfers from (to) other funds: Water and Sewer Fund 8,165,028$ 8,165,028$ -$ Water and Sewer Fund (8,165,028) - 8,165,028 Total other financing sources (uses)-$ 8,165,028 8,165,028$ Fund Balance: Beginning of year, July 1 3,318,739 End of year, June 30 11,483,767$ 117 CITY OF MONROE, NORTH CAROLINA WATER AND SEWER CAPITAL PROJECTS FUNDS SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FROM INCEPTION AND FOR THE YEAR ENDED JUNE 30, 2018 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Revenues: Restricted intergovernmental 817,500$ 280,000$ 6,160$ 286,160$ (531,340)$ Investment earnings - - 61,031 61,031 61,031 Total revenues 817,500 280,000 67,191 347,191 (470,309) Expenditures: Construction costs capitalized 1,129,708 297,063 461,453 758,516 371,192 Construction in progress 14,262,570 488,311 2,041,141 2,529,452 11,733,118 Total expenditures 15,392,278 785,374 2,502,594 3,287,968 12,104,310 Revenues over (under) expenditures (14,574,778) (505,374) (2,435,403) (2,940,777) 11,634,001 Other Financing Sources (Uses): Transfers from (to) other funds: Water and Sewer Fund 5,869,458 7,476,750 (1,607,292) 5,869,458 - Proceeds from revenue bonds 8,705,320 - 8,705,320 8,705,320 - Total other financing sources (uses)14,574,778 7,476,750 7,098,028 14,574,778 - Revenues and other financing sources over (under) expenditures and other financing uses -$ 6,971,376$ 4,662,625$ 11,634,001$ 11,634,001$ Actual 118 Page 1 of 3 CITY OF MONROE, NORTH CAROLINA ELECTRIC FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Electric power sales 62,641,000$ 61,107,637$ (1,533,363)$ Sales tax 3,758,000 2,365,935 (1,392,065) Total 66,399,000 63,473,572 (2,925,428) Other operating revenues 307,000 405,035 98,035 Total operating revenues 66,706,000 63,878,607 (2,827,393) Non-operating revenues: Other non-operating revenues 25,000 196,571 171,571 Investment earnings 604,500 (600,349) (1,204,849) Total non-operating revenues 629,500 (403,778) (1,033,278) Interest income from other funds: General Fund 50,215 50,215 - Airport Fund 24,866 24,866 - Total 75,081 75,081 - Total revenues 67,410,581$ 63,549,910$ (3,860,671)$ 119 Page 2 of 3 CITY OF MONROE, NORTH CAROLINA ELECTRIC FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Expenditures: Operations: Salaries and employee benefits 3,064,789$ 2,916,168$ 148,621$ Operating expenditures 5,737,673 4,392,637 1,345,036 Total 8,802,462 7,308,805 1,493,657 Electric power purchases 54,748,624 52,523,790 2,224,834 Debt service: Principal retirement 1,025,396 1,025,397 (1) Interest and other charges 718,182 718,193 (11) Total 1,743,578 1,743,590 (12) Capital outlay 545,057 306,258 238,799 Contingency 321,499 - 321,499 Total expenditures 66,161,220 61,882,443 4,278,777 Other Financing Soutces (Uses): Transfers (to) from other funds: Electric Capital Projects Fund (794,361) (794,361) - General Fund (455,000) (516,309) 61,309 Total other financing sources (uses)(1,249,361) (1,310,670) 61,309 Total expenditures and other financing sources (uses)67,410,581$ 63,193,113$ 4,217,468$ 120 Page 3 of 3 CITY OF MONROE, NORTH CAROLINA ELECTRIC FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources 63,549,910$ Total expenditures and other financing uses 63,193,113 Revenues and other financing sources (uses) over (under) expenditures and other financing uses 356,797 Reconciling items: Debt principal 1,025,397 Capital outlay 306,258 Capital items not charged to capital outlay 2,523,592 Project transfers - intrafund 794,361 Net revenue from capital projects consolidation 10,000 Increase in compensated absences 10,075 Change in OPEB liability 79,110 Change in deferred outflows of resources - OPEB 32,760 Change in deferred inflows of resources - OPEB (235,070) Change in deferred outflows of resources - pensions (142,839) Increase in net pension liability 132,577 Change in deferred inflows of resources - pensions 16,795 Depreciation and amortization (2,630,050) Total reconciling items 1,922,966 Change in net position 2,279,763$ 121 CITY OF MONROE, NORTH CAROLINA ELECTRIC CAPITAL PROJECTS FUNDS CAPITAL PROJECTS SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FROM INCEPTION AND FOR THE YEAR ENDED JUNE 30, 2018 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Revenues: Power agency funding 5,805,850$ 5,592,648$ -$ 5,592,648$ (213,202)$ Restricted revenue 10,000 - 10,000 10,000 - Total revenues 5,815,850 5,592,648 10,000 5,602,648 (213,202) Expenditures: Construction costs capitalized 12,046,960 11,674,396 212,736 11,887,132 159,828 Construction in progress 14,260,632 3,222,762 424,067 3,646,829 10,613,803 Other costs 2,705,506 305,893 - 305,893 2,399,613 Total expenditures 29,013,098 15,203,051 636,803 15,839,854 13,173,244 Revenues over (under) expenditures (23,197,248) (9,610,403) (626,803) (10,237,206) 12,960,042 Other Financing Sources (Uses): Transfers from (to) other funds: Electric Fund 20,783,998 19,989,632 794,361 20,783,993 (5) Natural Gas Fund 2,413,250 2,413,250 - 2,413,250 - Total other financing sources (uses)23,197,248 22,402,882 794,361 23,197,243 (5) Revenues and other financing sources over (under) expenditures and other financing uses -$ 12,792,479$ 167,558$ 12,960,037$ 12,960,037$ Actual 122 Page 1 of 3 CITY OF MONROE, NORTH CAROLINA NATURAL GAS FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Natural gas sales 18,343,000$ 18,109,456$ (233,544)$ Other operating revenues - 3,127 3,127 Total operating revenues 18,343,000 18,112,583 (230,417) Non-operating revenues: Other non-operating revenues - 126,086 126,086 Investment earnings 307,300 (324,446) (631,746) Total non-operating revenues 307,300 (198,360) (505,660) Total revenues 18,650,300 17,914,223 (736,077) Other Financing Sources (Uses): Bond premium - 188,917 188,917 Bond refunding proceeds 13,310,000 5,263 (13,304,737) Total other financing sources (uses)13,310,000 194,180 (13,115,820) Total revenues and other financing sources (uses)31,960,300$ 18,108,403$ (13,851,897)$ 123 Page 2 of 3 CITY OF MONROE, NORTH CAROLINA NATURAL GAS FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Expenditures: Operations: Salaries and employee benefits 1,422,059$ 1,166,450$ 255,609$ Operating expenditures 3,109,974 2,807,305 302,669 Total 4,532,033 3,973,755 558,278 Natural gas purchases 9,195,000 7,381,818 1,813,182 Debt service: Principal retirement 1,198,723 1,051,636 147,087 Interest and other charges 1,819,741 1,592,571 227,170 Total 3,018,464 2,644,207 374,257 Capital outlay 209,000 142,488 66,512 Total expenditures 16,954,497 14,142,268 2,812,229 Other Financing Sources (Uses): Transfers to other funds: General Fund (118,000) (131,259) 13,259 Natural Gas Capital Project Fund 8,245,462 8,245,462 - Total other financing sources (uses)8,127,462 8,114,203 13,259 Contingency 23,133,265 - 23,133,265 Total expenditures and other financing sources (uses)31,960,300$ 6,028,065$ 25,958,753$ 124 Page 3 of 3 CITY OF MONROE, NORTH CAROLINA NATURAL GAS FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources (uses) 18,108,403$ Total expenditures and other financing sources (uses)6,028,065 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses)12,080,338 Reconciling items: Debt principal 1,051,636 Capital outlay 142,488 Capital items not charged to capital outlay 438,315 Project transfers - intrafund (8,245,462) Income from capital projects consolidation 30,552 Increase in compensated absences (850) Bond premium (188,917) Bond proceeds (5,263) Change in deferred outflows of resources - OPEB 16,613 Change in deferred inflows of resources - OPEB (119,202) Change in OPEB liability 40,116 Change in deferred outflows of resources - pensions (73,970) Increase in net pension liability 68,656 Change in deferred inflows of resources - pensions 8,698 Depreciation and amortization (1,535,273) Total reconciling items (8,371,863) Change in net position 3,708,475$ 125 CITY OF MONROE, NORTH CAROLINA NATURAL GAS CAPITAL PROJECTS FUNDS CAPITAL PROJECTS SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FROM INCEPTION AND FOR THE YEAR ENDED JUNE 30, 2018 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Revenues: Miscellaneous -$ 7,468$ -$ 7,468$ 7,468$ Investment earnings - 72,938 30,552 103,490 103,490 Restricted intergovernmental 364,199 233,096 - 233,096 (131,103) Total revenues 364,199 313,502 30,552 344,054 (20,145) Expenditures: Construction costs capitalized 46,939,896 47,017,566 - 47,017,566 (77,670) Construction in progress 14,560,154 4,619,033 2,888,644 7,507,677 7,052,477 Other costs 1,833,840 1,833,840 - 1,833,840 - Total expenditures 63,333,890 53,470,439 2,888,644 56,359,083 6,974,807 Revenues over (under) expenditures (62,969,691) (53,156,937) (2,858,092) (56,015,029) 6,954,662 Other Financing Sources (Uses): Transfers from (to) other funds: Natural Gas Fund 19,710,693 27,956,155 (8,245,462) 19,710,693 - Electric Fund 3,330,000 3,330,000 - 3,330,000 - Limited Obligation Bonds 8,300,000 - 8,274,737 8,274,737 (25,263) Certificates of Participation 31,628,998 31,628,998 - 31,628,998 - Total other financing sources (uses)62,969,691 62,915,153 29,275 62,944,428 (25,263) Revenues and other financing sources over (under) expenditures and other financing uses -$ 9,758,216$ (2,828,817)$ 6,929,399$ 6,929,399$ Actual 126 Page 1 of 3 CITY OF MONROE, NORTH CAROLINA AIRPORT FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Leases 325,470$ 336,969$ 11,499$ Customs 16,800 9,800 (7,000) Sales of fuel 1,450,000 1,503,105 53,105 Total 1,792,270 1,849,874 57,604 Other operating revenues 67,955 78,961 11,006 Total operating revenues 1,860,225 1,928,835 68,610 Non-operating revenues: Other non-operating revenues - 52,567 52,567 Investment earnings - 23 23 Total non-operating revenues - 52,590 52,590 Total revenues 1,860,225 1,981,425 121,200 Other Financing Sources (Uses): Transfers from other funds: General Fund 1,829,284 1,526,647 (302,637) Bond proceeds 45,208 51,471 6,263 Total other financing sources (uses)1,874,492 1,578,118 (296,374) Total revenues and other financing sources (uses)3,734,717$ 3,559,543$ (175,174)$ 127 Page 2 of 3 CITY OF MONROE, NORTH CAROLINA AIRPORT FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Expenditures: Operations: Salaries and employee benefits 599,136$ 577,361$ 21,775$ Operating expenditures 1,970,057 1,816,759 153,298 Total 2,569,193 2,394,120 175,073 Debt service: Principal retirement 675,399 640,000 35,399 Interest and other charges 415,975 457,560 (41,585) Total 1,091,374 1,097,560 (6,186) Capital outlay 74,150 61,104 13,046 Total expenditures 3,734,717$ 3,552,784$ 181,933$ 128 Page 3 of 3 CITY OF MONROE, NORTH CAROLINA AIRPORT FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources (uses) 3,559,543$ Total expenditures 3,552,784 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses) 6,759 Reconciling items: Debt principal 640,000 Capital outlay 61,104 Bond proceeds (51,471) Net book value of assets disposed (31,424) Net revenue from capital projects consolidation 107,191 Transfer from General Fund 400,000 Increase in compensated absences (7,988) Change in OPEB liability 33,523 Change in deferred outflows of resources - OPEB 13,883 Change in deferred inflows of resources - OPEB (99,613) Change in deferred outflows of resources - pensions (61,217) Increase in net pension liability 56,819 Change in deferred inflows of resources - pensions 7,198 Depreciation and amortization (796,921) Total reconciling items 271,084 Change in net position 277,843$ 129 CITY OF MONROE, NORTH CAROLINA AIRPORT CAPITAL PROJECTS FUNDS CAPITAL PROJECTS SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FROM INCEPTION AND FOR THE YEAR ENDED JUNE 30, 2018 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Revenues: Restricted intergovernmental 8,895,555$ 5,931,382$ 90,652$ 6,022,034$ (2,873,521)$ Investment earnings - - 16,539 16,539 16,539 Total revenues 8,895,555 5,931,382 107,191 6,038,573 (2,856,982) Expenditures: Construction costs capitalized 6,622,435 4,794,980 - 4,794,980 1,827,455 Construction in progress 7,550,735 970,034 1,456,405 2,426,439 5,124,296 Total expenditures 14,173,170 5,765,014 1,456,405 7,221,419 6,951,751 Revenues over (under) expenditures (5,277,615) 166,368 (1,349,214) (1,182,846) 4,094,769 Other Financing Sources (Uses): Transfers from (to) other funds: General Fund 1,643,365 1,243,365 400,000 1,643,365 - Electric Fund 910,000 910,000 - 910,000 - Airport Fund 450,000 450,000 - 450,000 - Bond premium 275,721 - 275,721 275,721 - Proceeds from revenue bonds 1,998,529 - 1,998,529 1,998,529 - Total other financing sources (uses)5,277,615 2,603,365 2,674,250 5,277,615 - Revenues and other financing sources over (under) expenditures and other financing uses -$ 2,769,733$ 1,325,036$ 4,094,769$ 4,094,769$ Actual 130 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF NET POSITION NONMAJOR ENTERPRISE FUNDS JUNE 30, 2018 Aquatics and Fitness Center Stormwater Solid Waste Fund Fund Fund Total Assets: Current assets: Cash and cash equivalents 3,149,938$ 1,568,103$ 577,687$ 5,295,728$ Accounts receivable 6,008 249,038 311,389 566,435 Prepaid expenses 1,700 645 937 3,282 Inventories 7,430 - - 7,430 Cash and cash equivalents, restricted - 509,000 - 509,000 Total current assets 3,165,076 2,326,786 890,013 6,381,875 Non-current assets: Capital assets: Land and other non-depreciable assets 925,594 300,436 - 1,226,030 Other capital assets, net of depreciation 5,975,540 352,953 171,781 6,500,274 Total non-current assets 6,901,134 653,389 171,781 7,726,304 Total assets 10,066,210 2,980,175 1,061,794 14,108,179 Deferred Outflows of Resources: OPEB deferrals 27,358 11,966 813 40,137 Pension deferrals 213,557 95,418 4,543 313,518 Total deferred outflows of resources 240,915 107,384 5,356 353,655 Liabilities: Current liabilities: Accounts payable and accrued liabilities 170,470 42,938 190,826 404,234 Unearned revenue 33,344 - - 33,344 Compensated absences 71,172 36,052 3,053 110,277 Installment purchase obligations - 96,000 - 96,000 Total current liabilities 274,986 174,990 193,879 643,855 Non-current liabilities: Net pension liability 278,143 124,277 5,918 408,338 Compensated absences 35,055 17,757 1,504 54,316 Installment purchase obligations - 413,000 - 413,000 Total other post-employment benefits liability 1,963,970 858,976 58,377 2,881,323 Total non-current liabilities 2,277,168 1,414,010 65,799 3,756,977 Total liabilities 2,552,154 1,589,000 259,678 4,400,832 Deferred Inflows of Resources: OPEB deferrals 196,308 85,859 5,835 288,002 Pension deferrals 26,499 11,840 565 38,904 Total deferred inflows of resources 222,807 97,699 6,400 326,906 Net investment in capital assets 6,901,134 653,389 171,781 7,726,304 Unrestricted 631,030 747,471 629,291 2,007,792 Total net position 7,532,164$ 1,400,860$ 801,072$ 9,734,096$ 131 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Aquatics and Fitness Center Fund Stormwater Solid Waste Total Operating Revenues: Charges for services 3,913,564$ 2,234,344$ 2,382,889$ 8,530,797$ Other operating revenues 165,952 33,747 34,193 233,892 Total operating revenues 4,079,516 2,268,091 2,417,082 8,764,689 Operating Expenses: Distribution systems Aquatics and Fitness Center operations 3,767,041 - - 3,767,041 Stormwater operations - 2,009,682 - 2,009,682 Solid waste operations - - 2,221,166 2,221,166 Solid waste maintenance - - 106,591 106,591 Depreciation and amortization 314,837 71,790 20,320 406,947 Total operating expenses 4,081,878 2,081,472 2,348,077 8,511,427 Operating income (loss)(2,362) 186,619 69,005 253,262 Non-Operating Revenues (Expenses): Other non-operating revenues (expenses) 5,037 20 - 5,057 Investment earnings (41,371) (22,585) (7,590) (71,546) Interest and other charges - (2,484) - (2,484) Total non-operating revenues (expenses)(36,334) (25,049) (7,590) (68,973) Change in net position (38,696) 161,570 61,415 184,289 Net Position: Beginning of year, July 1 8,929,032 1,833,360 779,433 11,541,825 Restatement (1,358,172) (594,070) (39,776) (1,992,018) Beginning of year, July 1, restated 7,570,860 1,239,290 739,657 9,549,807 End of year, June 30 7,532,164$ 1,400,860$ 801,072$ 9,734,096$ 132 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Aquatics and Fitness Center Fund Stormwater Solid Waste Total Cash Flows from Operating Activities: Cash received from customers 4,081,760$ 2,254,527$ 2,401,836$ 8,738,123$ Cash paid for goods and services (1,708,958) (1,358,641) (2,216,684) (5,284,283) Cash paid to or on behalf of employees for services (1,924,071) (672,203) (178,273) (2,774,547) Net cash provided (used) by operating activities 448,731 223,683 6,879 679,293 Cash Flows from Capital and Related Financing Activities: Acquisition and construction of capital assets (194,254) (76,113) - (270,367) Principal paid on bond maturities and equipment obligations - 509,000 - 509,000 Interest paid on bond maturities and equipment obligations - (2,484) - (2,484) Net cash provided (used) by capital and related financing activities (194,254) 430,403 - 236,149 Cash Flows from Investing Activities: Earnings on investments (41,371) (22,585) (7,590) (71,546) Net cash provided (used) by investing activities (41,371) (22,585) (7,590) (71,546) Net increase (decrease) in cash and cash equivalents 213,106 631,501 (711) 843,896 Cash and Cash Equivalents: Beginning of year, July 1 2,936,832 1,445,602 578,398 4,960,832 End of year, June 30 3,149,938$ 2,077,103$ 577,687$ 5,804,728$ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss)(2,362)$ 186,619$ 69,005$ 253,262$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 314,837 71,790 20,320 406,947 Non operating revenues 5,037 20 - 5,057 Increase deferred outflows - pension 119,880 53,565 2,552 175,997 Increase in net pension liability (111,270) (49,716) (2,367) (163,353) Decrease deferred inflows - pension (14,096) (6,298) (300) (20,694) Changes in assets and liabilities: (Increase) decrease in accounts receivable (1,916) (13,662) (14,930) (30,508) (Increase) decrease in inventories (673) - - (673) (Increase) decrease in prepaid expenses 13 78 (316) (225) Increase (decrease) in accounts payable and accrued liabilities 15,905 (59,305) (72,854) (116,254) (Increase) decrease in deferred outflows of resources for OPEB (27,358) (11,966) (813) (40,137) Increase (decrease) in deferred inflows of resources for OPEB 196,308 85,859 5,835 288,002 Increase (decrease) in net OPEB liability (66,065) (28,895) (1,964) (96,924) Increase (decrease) in compensated absences 20,491 (4,406) 2,711 18,796 Total adjustments 451,093 37,064 (62,126) 426,031 Net cash provided (used) by operating activities 448,731$ 223,683$ 6,879$ 679,293$ 133 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA AQUATICS AND FITNESS CENTER FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Recreational fees 3,832,750$ 3,913,564$ 80,814$ Other operating revenues 192,000 165,952 (26,048) Total operating revenues 4,024,750 4,079,516 54,766 Non-operating revenues: Other non-operating revenues 40,200 5,037 (35,163) Investment earnings 33,000 (41,371) (74,371) Total non-operating revenues 73,200 (36,334) (109,534) Total revenues 4,097,950 4,043,182 (54,768) Other Financing Sources (Uses): Appropriated fund balance 29,240 - (29,240) Total revenues and other financing sources (uses)4,127,190$ 4,043,182$ (84,008)$ Expenditures: Operations: Salaries and employee benefits 2,129,741$ 2,074,114$ 55,627$ Operating expenditures 1,733,819 1,575,035 158,784 Total 3,863,560 3,649,149 214,411 Capital outlay 263,630 194,254 69,376 Total expenditures 4,127,190 3,843,403 283,787 Total expenditures and other financing sources (uses)4,127,190$ 3,843,403$ 283,787$ 134 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA AQUATICS AND FITNESS CENTER FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources (uses) 4,043,182$ Total expenditures and other financing sources (uses)3,843,403 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses)199,779 Reconciling items: Capital outlay 194,254 Increase in compensated absences (20,491) Change in deferred outflows of resources - OPEB 27,358 Change in deferred inflows of resources - OPEB (196,308) Change in OPEB liability 66,065 Change in deferred outflows of resources - pensions (119,882) Increase in net pension liability 111,270 Change in deferred inflows of resources - pensions 14,096 Depreciation and amortization (314,837) Total reconciling items (238,475) Change in net position (38,696)$ 135 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA STORMWATER FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Stormwater receipts 2,102,835$ 2,234,344$ 131,509$ Other operating revenues 16,950 33,747 16,797 Total operating revenues 2,119,785 2,268,091 148,306 Non-operating revenues: Other non-operating revenues - 20 20 Investment earnings 10,470 (22,585) (33,055) Total non-operating revenues 10,470 (22,565) (33,035) Total revenues 2,130,255 2,245,526 115,271 Other Financing Sources (Uses): Installment purchase obligations issued 550,000 509,000 (41,000) Total other financing sources 550,000 509,000 (41,000) Total revenues and other financing sources (uses)2,680,255$ 2,754,526$ 74,271$ Expenditures: Operations: Salaries and employee benefits 740,152$ 707,813$ 32,339$ Operating expenditures 1,497,986 1,263,726 234,260 Total 2,238,138 1,971,539 266,599 Debt service: Interest and other charges - 2,484 (2,484) Total - 2,484 (2,484) Capital outlay 581,242 34,909 546,333 Total expenditures 2,819,380 2,008,932 810,448 Other Financing Sources (Uses): Appropriated fund balance 139,125 - 139,125 Total other financing sources (uses)139,125 - 139,125 Total expenditures and other financing sources (uses)2,680,255$ 2,008,932$ 671,323$ 136 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA STORMWATER FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources (uses) 2,754,526$ Total expenditures and other financing sources (uses)2,008,932 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses)745,594 Reconciling items: Capital outlay 34,909 Installment purchase obligations issued (509,000) Decrease in compensated absences 4,406 Change in deferred outflows of resources - OPEB 11,966 Change in deferred inflows of resources - OPEB (85,859) Change in OPEB liability 28,895 Change in deferred outflows of resources - pensions (53,565) Increase in net pension liability 49,716 Change in deferred inflows of resources - pensions 6,298 Depreciation and amortization (71,790) Total reconciling items (584,024) Change in net position 161,570$ 137 CITY OF MONROE, NORTH CAROLINA STORMWATER MANAGEMENT CAPITAL PROJECTS FUNDS CAPITAL PROJECTS SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FROM INCEPTION AND FOR THE YEAR ENDED JUNE 30, 2018 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Expenditures: Construction in progress 545,000$ 259,232$ 41,204$ 300,436$ 244,564$ Revenues over (under) expenditures (545,000) (259,232) (41,204) (300,436) 244,564 Other Financing Sources (Uses): Transfers from (to) other funds: Stormwater Fund 545,000 545,000 - 545,000 - Revenues and other financing sources over (under) expenditures and other financing uses -$ 285,768$ (41,204)$ 244,564$ 244,564$ Actual 138 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA SOLID WASTE FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Refuse collection fees 2,490,822$ 2,382,889$ (107,933)$ Other operating revenues 39,000 34,193 (4,807) Total operating revenues 2,529,822 2,417,082 (112,740) Non-operating revenues: Investment earnings 12,275 (7,590) (19,865) Total revenues 2,542,097$ 2,409,492$ (132,605)$ Expenditures: Operations: Salaries and employee benefits 85,536$ 85,131$ 405$ Operating expenditures 2,287,435 2,130,381 157,054 Total 2,372,971 2,215,512 157,459 Maintenance: Salaries and employee benefits 95,674 98,796 (3,122) Operating expenditures 11,599 7,795 3,804 Total 107,273 106,591 682 Debt service: Principal retirement 52,038 - 52,038 Total 52,038 - 52,038 Contingency 9,815 - 9,815 Total expenditures and other financing sources (uses)2,542,097$ 2,322,103$ 219,994$ 139 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA SOLID WASTE FUND SCHEDULE OF REVENUES AND EXPENDITURES - BUDGET AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues, other financing sources (uses) and appropriated fund balance 2,409,492$ Total expenditures 2,322,103 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses)87,389 Reconciling items: Depreciation (20,320) Decrease in compensated absences (2,712) Change in OPEB liability 1,964 Change in deferred outflows of resources - OPEB 813 Change in deferred inflows of resources - OPEB (5,835) Change in deferred outflows of resources - pensions (2,551) Increase in net pension liability 2,367 Change in deferred inflows of resources - pensions 300 Total reconciling items (25,974) Change in net position 61,415$ 140 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS JUNE 30, 2018 Health and Workers' Property and Dental Compensation Liability Fund Fund Fund Total Assets: Current assets: Cash and investments 2,526,372$ 1,077,611$ 840,909$ 4,444,892$ Accounts receivable (net) 73,280 - - 73,280 Prepaids 131,015 10,000 - 141,015 Restricted assets: Deposits 10,169 5,895 - 16,064 Total current assets 2,740,836 1,093,506 840,909 4,675,251 Liabilities: Current liabilities: Accounts payable and accrued liabilities 429,477 4,105 47,542 481,124 Liabilities payable from restricted assets: Deposits 10,169 5,895 - 16,064 Total current liabilities 439,646 10,000 47,542 497,188 Net Position: Unrestricted 2,301,190$ 1,083,506$ 793,367$ 4,178,063$ 141 CHANGES IN FUND NET POSITION Health and Workers' Property and Dental Compensation Liability Fund Fund Fund Total Operating Revenues: Interfund charges and employee contributions 7,079,634$ -$ 715,536$ 7,795,170$ Receipts for interfund charges - 200,000 - 200,000 Other operating revenue 205,690 235 26,839 232,764 Total operating revenues 7,285,324 200,235 742,375 8,227,934 Operating Expenses: Operating expenses 315,487 104,198 87,027 506,712 Workers' compensation claims and premiums - 166,032 - 166,032 Health care clinic 97,883 - - 97,883 Insurance 15,617 - - 15,617 Health benefit claims and premiums 7,252,837 - - 7,252,837 Property and liability claims and premiums - - 662,502 662,502 Total operating expenses 7,681,824 270,230 749,529 8,701,583 Operating income (loss)(396,500) (69,995) (7,154) (473,649) Non-Operating Revenues: Investment earnings (30,560) (15,067) (9,651) (55,278) Change in net position (427,060) (85,062) (16,805) (528,927) Net Position: Beginning of year, July 1 2,728,250 1,168,568 810,172 4,706,990 End of year, June 30 2,301,190$ 1,083,506$ 793,367$ 4,178,063$ FOR THE YEAR ENDED JUNE 30, 2018 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF REVENUES, EXPENSES, AND INTERNAL SERVICE FUNDS 142 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Health and Workers' Property and Dental Compensation Liability Fund Fund Fund Total Cash Flows from Operating Activities: Cash received for services 7,540,598$ -$ 726,161$ 8,266,759$ Other operating revenue 205,690 235 26,839 232,764 Receipts for interfund charges - 200,000 - 200,000 Cash paid for goods and services (7,670,521) (270,230) (701,987) (8,642,738) Net cash provided (used) by operating activities 75,767 (69,995) 51,013 56,785 Cash Flows from Investing Activities: Investment earnings (30,560) (15,067) (9,651) (55,278) Net increase (decrease) in cash and cash equivalents 45,207 (85,062) 41,362 1,507 Cash and Cash Equivalents: Beginning of year, July 1 2,491,334 1,168,568 799,547 4,459,449 End of year, June 30 2,536,541$ 1,083,506$ 840,909$ 4,460,956$ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss)(396,500)$ (69,995)$ (7,154)$ (473,649)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Change in assets and liabilities (Increase) decrease in accounts receivable 463,579 - - 463,579 (Increase) decrease in prepaid expenses (2,615) - 10,625 8,010 Increase (decrease) in accounts payable and accrued liabilities 11,303 - 47,542 58,845 Total adjustments 472,267 - 58,167 530,434 Net cash provided (used) by operating activities 75,767$ (69,995)$ 51,013$ 56,785$ 143 CITY OF MONROE, NORTH CAROLINA HEALTH AND DENTAL FUND SCHEDULE OF REVENUES AND EXPENDITURES - FINANCIAL PLAN AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Financial Variance Plan Actual Over/Under Revenues: Operating revenues: Interfund charges and employee contributions 7,199,230$ 7,079,634$ (119,596)$ Other operating revenue - 205,690 205,690 Total operating revenues 7,199,230 7,285,324 86,094 Non-operating revenues: Investment earnings 8,000 (30,560) (38,560) Total revenues 7,207,230 7,254,764 47,534 Expenditures: Operating expenditures: Other operating expenses 341,028 315,487 25,541 Healthcare clinic 111,205 97,883 13,322 Insurance 16,000 15,617 383 Health benefit claims and premiums 6,924,635 7,252,837 (328,202) Total operating expenditures 7,392,868 7,681,824 (288,956) Appropriated fund balance 185,638 - 185,638 Revenues over (under) expenditures -$ (427,060)$ (427,060)$ 144 CITY OF MONROE, NORTH CAROLINA WORKERS' COMPENSATION FUND SCHEDULE OF REVENUES AND EXPENDITURES - FINANCIAL PLAN AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Financial Variance Plan Actual Over/Under Revenues: Operating revenues: Interfund charges 200,000$ 200,000$ -$ Other operating revenue - 235 235 Total operating revenues 200,000 200,235 235 Non-operating revenues: Investment earnings 4,530 (15,067) (19,597) Total revenues 204,530 185,168 (19,362) Expenditures: Operating expenditures: Other operating expenses 104,198 104,198 - Workers' compensation claims and premiums paid 440,640 166,032 274,608 Total operating expenditures 544,838 270,230 274,608 Appropriated fund balance 340,308 - (340,308) Revenues over (under) expenditures -$ (85,062)$ (85,062)$ 145 CITY OF MONROE, NORTH CAROLINA PROPERTY AND LIABILITY FUND SCHEDULE OF REVENUES AND EXPENDITURES - FINANCIAL PLAN AND ACTUAL (NON-GAAP) FOR THE YEAR ENDED JUNE 30, 2018 Financial Variance Plan Actual Over/Under Revenues: Operating revenues: Interfund charges and employee contributions 715,536$ 715,536$ -$ Other operating revenue 1,500 26,839 25,339 Total operating revenues 717,036 742,375 25,339 Non-operating revenues: Investment earnings 3,000 (9,651) (12,651) Total non-operating revenues 3,000 (9,651) (12,651) Total revenues 720,036 732,724 12,688 Expenditures: Operating expenditures: Other operating expenses 87,027 87,027 - Property and liability claims and premiums 697,500 662,502 34,998 Total expenditures 784,527 749,529 34,998 Other Financing Sources (Uses): Appropriated fund balance 64,491 - (64,491) Revenues over (under) expenditures -$ (16,805)$ (16,805)$ 146 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF AD VALOREM TAXES RECEIVABLE JUNE 30, 2018 Uncollected Uncollected Balance Collections Balance Fiscal Year June 30, 2017 Additions And Credits June 30, 2018 2017 - 2018 -$ 20,938,723$ 20,750,482$ 188,241$ 2016 - 2017 226,637 - 118,421 108,216 2015 - 2016 123,819 - 51,350 72,469 2014 - 2015 133,664 - 54,041 79,623 2013 - 2014 121,853 - 26,385 95,468 2012 - 2013 78,698 - 16,336 62,362 2011 - 2012 54,185 - 13,787 40,398 2010 - 2011 51,557 - 8,780 42,777 2009 - 2010 57,486 - 6,050 51,436 2008 - 2009 27,853 - 3,285 24,568 2007 - 2008 27,573 - 27,573 - Total 903,325$ 20,938,723$ 21,076,490$ 765,558 Less: Allowance for uncollectible ad valorem taxes receivable 38,278 Ad valorem taxes receivable 727,280$ Reconcilement with Revenues:General Fund Ad valorem taxes - General Fund 21,152,299$ Amounts written off per Statute of Limitations 25,214 Refunds, releases of prior years' taxes 31,795 Interest and advertising cost recovery (132,818) Total collections and credits 21,076,490$ 147 CITY OF MONROE, NORTH CAROLINA ANALYSIS OF CURRENT TAX LEVY CITY-WIDE LEVY FOR THE YEAR ENDED JUNE 30, 2018 Excluding Registered Registered Property Total Motor Motor Valuation Rate Levy Vehicles Vehicles Original Levy: Property taxed at current year's rate 3,391,040,597$ 0.5863$ 19,917,764$ 18,607,584$ 1,310,180$ Registered motor vehicles taxed at prior year's rate 62,533,981 366,637 - 366,637 Total 3,453,574,578 20,284,401 18,607,584 1,676,817 Public Utility Allocation 63,881,685 0.5863 374,601 374,601 - Discoveries 42,210,003 0.5863 314,095 314,095 - Releases (3,274,910) 0.5863 (34,374) (34,374) - Total property valuation 3,556,391,356$ Net Levy 20,938,723 19,261,906 1,676,817 Uncollected taxes at June 30, 2018 (188,241) (188,241) - Current Year's Taxes Collected 20,750,482$ 19,073,665$ 1,676,817$ Current Levy Collection Percentage 99.10%99.02%100.00% Secondary Market Disclosures: Property Valuation Rate Levy Assessed Valuation: Assessment Ratio1 100% Real property 2,400,955,741$ Personal property 805,554,213 Public Service Companies2 63,881,685 3,270,391,639 0.5863 19,261,906$ Motor Vehicle Property 285,999,717 0.5863 1,676,817 'Total levy (includes discoveries, releases, and abatements)3 3,556,391,356$ 20,938,723$ Distribution of levy: General Fund 20,938,723$ 1Percentage of appraised value has been established by statute. 2Valuation of railroads, telephone companies and other utilities as determined by the North Carolina Property Tax Commission. 3The levy includes interest and penalties. City-Wide Total Levy Property 148 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF MUNICIPAL SERVICE DISTRICT TAXES RECEIVABLE JUNE 30, 2018 Uncollected Uncollected Balance Collections Balance Fiscal Year June 30, 2017 Additions And Credits June 30, 2018 2017 - 2018 -$ 55,784$ 55,305$ 479$ 2016 - 2017 403 - 331 72 2015 - 2016 58 - - 58 2014 - 2015 297 - 7 290 2013 - 2014 668 - 7 661 2012 - 2013 129 - 5 124 2011 - 2012 195 - - 195 2010 - 2011 355 - - 355 2009 - 2010 161 - - 161 2008 - 2009 149 - - 149 2007 - 2008 118 - 118 - Total 2,533$ 55,784$ 55,773$ 2,544 Less: Allowance for uncollectible ad valorem taxes receivable 127 Ad valorem taxes receivable 2,417$ Reconcilement with Revenues: Ad valorem taxes - Downtown Monroe Fund 56,156$ Amounts written off per Statute of Limitations 118 Refunds, releases of prior years' taxes 10 Interest and advertising cost recovery (511) Total collections and credits 55,773$ 149 CITY OF MONROE, NORTH CAROLINA ANALYSIS OF CURRENT TAX LEVY MUNICIPAL SERVICE DISTRICT LEVY FOR THE YEAR ENDED JUNE 30, 2018 Property Excluding Registered Registered Property Total Motor Motor Valuation Rate Levy Vehicles Vehicles Original Levy: Property taxed at current year's rate 24,061,731$ 0.219$ 52,907$ 50,881$ 2,026$ Registered motor vehicles taxed at prior year's rate 136,831 300 - 300 Total 24,198,562 53,207 50,881 2,326 Public Utility Allocation 1,240,822 0.219 2,717 2,717 - Discoveries 194,986 0.219 461 461 - Releases (249,370) 0.219 (601) (601) - Total property valuation 25,385,000$ Net Levy 55,784 53,458 2,326 Uncollected taxes at June 30, 2018 (479) (479) - Current Year's Taxes Collected 55,305$ 52,979$ 2,326$ Current Levy Collection Percentage 99.14%99.10%100.00% Secondary Market Disclosures: Property Valuation Rate Levy Assessed Valuation: Assessment Ratio1 100% Real property 20,795,675$ Personal property 2,286,403 Public Service Companies2 1,240,822 24,322,900 0.219 53,458$ Motor Vehicle Property 1,062,100 0.219 2,326 Total levy (includes discoveries, releases, and abatements)3 25,385,000$ 55,784$ Distribution of levy: Municipal Service District - Downtown Monroe Fund 55,784$ 1Percentage of appraised value has been established by statute. 2Valuation of railroads, telephone companies and other utilities as determined by the North Carolina Property Tax Commission. 3The levy includes interest and penalties. Total Levy City-Wide 150 Statistical Section This part of the City of Monroe’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Financial Trends – These tables contain trend information to help the reader understand how the City’s financial performance and well being have been changed over time…... ….. ….. ….. ….. Revenue Capacity – These tables contain information to help the reader assess the City’s most significant local revenue source, the property tax….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. .. Debt Capacity – These tables present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. ….. Demographic and Economic Information – These tables offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place….. ….. ….. ….. ….. ….. ….. ….. ….. ….. … Operation Information – These tables contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities….. ….. ….. ….. ….. ….. ….. . Sources: Unless otherwise noted, the information in these tables is derived from the comprehensive annual financial reports to the relevant year. Page 153 158 162 167 169 151                       152 CITY OF MONROE, NORTH CAROLINANET POSITION BY COMPONENTLAST TEN FISCAL YEARS(accrual basis of accounting)(in thousands of dollars)2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Governmental activitiesNet investment in capital assets 74,438$ 73,296$ 71,692$ 70,561$ 69,784$ 69,143$ 69,134$ 68,979$ 68,341$ 69,530$ Restricted 2 255 670 6,740 5,665 6,484 10,499 7,385 9,813 9,654 Unrestricted20,739 20,359 20,979 16,261 16,315 18,861 14,429 19,993 13,434 (7,850) Total governmental activities net position95,179$ 93,910$ 93,341$ 93,562$ 91,764$ 94,488$ 94,062$ 96,357$ 91,588$ 71,334$ Business-type activitiesNet investment in capital assets 127,104$ 141,269$ 144,182$ 152,078$ 160,289$ 169,721$ 172,159$ 177,673$ 193,967$ 200,306$ Unrestricted91,595 86,319 94,053 95,183 92,520 93,303 106,769 117,605 116,067 111,837 Total business-type activities net position218,699$ 227,588$ 238,235$ 247,261$ 252,809$ 263,024$ 278,928$ 295,278$ 310,034$ 312,143$ Primary governmentNet investment in capital assets 201,542$ 214,565$ 215,874$ 222,639$ 230,073$ 238,864$ 241,293$ 246,652$ 262,308$ 269,836$ Restricted 2 255 670 6,740 5,665 6,484 10,499 7,385 9,813 9,654 Unrestricted112,334 106,678 115,032 111,444 108,835 112,164 121,198 137,598 129,501 103,987 Total primary government net position313,878$ 321,498$ 331,576$ 340,823$ 344,573$ 357,512$ 372,990$ 391,635$ 401,622$ 383,477$ Notes:Fiscal year 2012 reflects implementation of GASB Statement 54. Prior year amounts have not been restated.The classification of restricted net position amounts is discussed in the notes to the financial statements section I.E.11.FISCAL YEAR153 Page 1 of 2CITY OF MONROE, NORTH CAROLINACHANGES IN NET POSITIONLAST TEN FISCAL YEARS(accrual basis of accounting)(in thousands of dollars)2009 2010 2011 2012 2013 2014 2015 2016 2017 2018EXPENSESGovernmental activities:General government 4,725$ 4,952$ 5,294$ 5,562$ 4,354$ 4,897$ 4,929$ 7,646$ 5,232$ 4,933$ Transportation 5,441 5,667 4,699 5,109 4,801 5,216 5,207 5,215 5,307 5,758 Public safety 17,974 17,775 18,224 19,512 19,067 19,813 21,069 19,675 23,693 25,300 Environmental protection - - - - - - - - - - Culture and recreation 4,914 4,906 4,545 5,067 4,069 4,899 5,541 5,389 5,910 5,153 Economic and physical development 859 1,784 1,119 953 1,016 1,579 1,134 2,070 1,063 1,338 Interest on long-term debt312 161 107 54 229 164 186 200 227 200 Total governmental activities expenses34,225 35,245 33,988 36,257 33,536 36,568 38,066 40,195 41,432 42,682 Business-type activities:Water and sewer 11,543 11,520 11,955 11,687 12,356 15,162 10,360 12,281 13,274 12,339 Electric41,629 43,588 46,840 49,158 51,729 55,559 60,881 58,078 60,175 60,764 Natural gas16,867 17,585 13,913 11,131 12,710 14,844 13,790 13,595 12,229 14,105 Aquatics and Fitness Center3,725 3,436 3,549 3,783 4,886 3,607 3,652 3,818 3,849 4,082 Stormwater795 1,351 1,709 1,734 1,874 1,674 1,838 1,879 1,976 2,084 Solid Waste2,698 2,702 2,697 2,564 2,213 2,067 2,178 2,303 2,511 2,348 Airport3,232 3,498 3,553 3,611 3,771 3,580 3,405 3,328 3,498 3,706 Total business-type activities expenses80,489 83,680 84,216 83,668 89,539 96,493 96,104 95,282 97,512 99,428 Total primary government expenses 114,714$ 118,925$ 118,204$ 119,925$ 123,075$ 133,061$ 134,170$ 135,477$ 138,944$ 142,110$ PROGRAM REVENUESGovernmental activities:Charges for services:General government2,029$ 1,979$ 1,955$ 1,978$ 2,079$ 2,349$ 2,141$ 2,374$ 2,203$ 2,212$ Transportation243 236 202 218 203 297 359 375 350 327 Public safety2,065 2,213 2,312 2,491 2,230 3,055 4,050 4,589 4,161 3,973 Environmental protection43 - - - - - - - - - Culture and recreation1,239 1,194 1,232 1,289 653 1,499 1,638 1,734 1,728 1,691 Economic and physical development2 8 3 2 - - - - - - Operating grants and contributions:General government- - - - - - 75 - - - Transportation1,082 986 1,032 930 978 961 972 972 963 964 Public safety604 732 616 786 312 448 497 318 560 707 Environmental protection1 - - - - - - - - - Culture and recreation223 195 204 214 223 240 193 193 212 202 Economic and physical development194 326 135 220 264 412 528 547 432 408 Capital grants and contributions:General government- - - - - 170 - - - - Transportation3,460 1,187 - 478 438 304 196 165 208 1,179 Public safety- - 49 - - - - - - - Culture and recreation- 785 304 - - - - - - 100 Total governmental activities program revenues11,184$ 9,841$ 8,044$ 8,606$ 7,380$ 9,735$ 10,649$ 11,267$ 10,817$ 11,763$ FISCAL YEAR154 Page 2 of 2CITY OF MONROE, NORTH CAROLINACHANGES IN NET POSITIONLAST TEN FISCAL YEARS(accrual basis of accounting)(in thousands of dollars)2009201020112012201320142015201620172018Business-type activities:Charge for services:Water and sewer12,207 12,365 12,917 13,642 14,000 15,529 16,155 16,743 17,671 17,228 Electric40,926 43,089 48,454 51,334 53,044 58,057 65,732 62,607 65,606 63,853 Natural gas20,116 24,251 17,320 11,907 14,261 17,185 18,053 14,485 15,569 18,101 Aquatics and Fitness Center4,069 3,907 3,927 3,877 4,297 3,588 3,712 4,013 4,097 4,065 Stormwater822 1,776 1,794 1,820 1,846 1,897 2,099 2,158 2,211 2,257 Solid Waste2,748 2,839 2,822 2,552 2,214 2,190 2,169 2,312 2,411 2,416 Airport1,559 1,493 1,653 2,012 1,984 1,943 1,927 1,600 1,654 1,944 Capital grants and contributions:Water and sewer527 - - - 408 475 - 280 - 6 Natural gas- - - - - - - 62 174 10 Stormwater109 - - - 162 - - - - - Solid Waste- - - - 75 - - 1 - - Airport154 483 2,150 - 235 3,116 139 2,174 2,699 90 Total business-type activities program revenues83,236 90,203 91,037 87,144 92,526 103,980 109,986 106,435 112,092 109,970 Total primary government revenues94,421$ 100,044$ 99,081$ 95,750$ 99,906$ 113,715$ 120,635$ 117,702$ 122,909$ 121,733$ NET (EXPENSE) REVENUEGovernmental activities (23,041)$ (25,404)$ (25,944)$ (27,651)$ (26,156)$ (26,833)$ (27,417)$ (28,928)$ (30,615)$ (30,919)$ Business-type activities2,748 6,523 6,821 3,476 2,987 7,487 13,882 11,153 14,580 10,542 Total primary government net (expense) revenue(20,293)$ (18,881)$ (19,123)$ (24,175)$ (23,169)$ (19,346)$ (13,535)$ (17,775)$ (16,035)$ (20,377)$ GENERAL REVENUES AND OTHER CHANGES IN NET POSITIONGovernmental activities:Taxes:Property taxes, levied for general purpose16,286$ 16,954$ 19,314$ 19,357$ 19,434$ 19,767$ 19,375$ 19,605$ 20,176$ 21,078$ Sales and use tax4,096 3,537 3,906 4,770 4,906 5,136 5,428 5,249 6,196 6,215 Utility sales taxes1,650 1,721 1,834 1,860 1,951 2,111 2,813 2,905 3,128 3,078 Motor vehicle tax128 125 130 125 129 197 143 140 678 842 Beer & wine and telecommunications tax697 566 657 620 564 570 568 496 490 463 Gross receipts tax40 46 49 55 56 63 68 77 98 104 Other licenses and fees780 720 1,085 1,403 1,210 869 879 - - - Grants and contributions not restricted tospecific programs225 242 218 178 173 - - - - - Unrestricted investment earnings495 273 65 822 (544) 366 680 1,946 (723) (616) Miscellaneous520 565 726 807 1,002 1,192 1,095 580 631 744 Gain on sale of capital assets(19) 96 11 - 116 - - - - - Transfers(908) (710) (2,619) (2,126) (4,640) (714) (1,267) 225 (1,845) (1,279) Total governmental activities23,990 24,134 25,376 27,871 24,357 29,557 29,782 31,223 28,829 30,629 Business-type activities:Unrestricted investment earnings 2,992 971 289 2,936 (1,698) 1,493 1,735 5,144 (2,072) (1,398) Interest earnings on interfund loans- - - - 113 88 64 39 81 75 Miscellaneous63 395 858 443 390 433 192 238 323 466 Gain on sale of capital assets(47) 291 60 45 14 - - - - - Transfers908 710 2,619 2,126 4,640 714 1,267 (225) 1,845 1,279 Total business-type activities3,916 2,367 3,826 5,550 3,459 2,728 3,258 5,196 177 422 Total primary government27,906$ 26,501$ 29,202$ 33,421$ 27,816$ 32,285$ 33,040$ 36,419$ 29,006$ 31,051$ CHANGE IN NET POSITIONGovernmental activities 949$ (1,270)$ (568)$ 220$ (1,799)$ 2,724$ 2,365$ 2,295$ (1,786)$ (290)$ Business-type activities6,664 8,890 10,647 9,026 6,446 10,215 17,140 16,349 14,757 10,964 Total primary government7,614$ 7,620$ 10,079$ 9,246$ 4,647$ 12,939$ 19,505$ 18,644$ 12,971$ 10,674$ Notes:Solid Waste and Stormwater funds were established in 2009. Previously, these expenditures were included in the General Fund.Internal service funds were established in 2009. Per GASB, revenues for these funds are allocated between business type and governmental type activities.FISCAL YEAR155 CITY OF MONROE, NORTH CAROLINAFUND BALANCES, GOVERNMENTAL FUNDSLAST TEN FISCAL YEARS(modified accrual basis of accounting)(in thousands of dollars)2009 2010 2011 2012 2013 2014 2015 2016 2017 2018General FundReserved 4,058$ 4,012$ -$ -$ -$ -$ -$ -$ -$ -$ Unreserved13,808 15,614 - - - - - - - - Nonspendable- - 331 339 256 1,138 282 901 1,094 827 Restricted- - 4,130 6,009 5,664 4,840 4,951 5,846 7,554 7,989 Assigned- - 2,975 9,134 11,679 12,457 13,763 18,885 13,521 14,508 Unassigned- - 13,042 5,827 3,607 6,533 8,067 4,337 5,152 5,239 Total General Fund17,866$ 19,626$ 20,478$ 21,309$ 21,206$ 24,968$ 27,063$ 29,969$ 27,321$ 28,563$ All Other Governmental FundsReserved 93$ 233$ -$ -$ -$ -$ -$ -$ -$ -$ Unreserved, reported in:Special Revenue Funds1,600 1,609 - - - - - - - - Capital Projects Funds3,328 (114) - - - - - - - - Nonspendable- - - - 1 13 1 11 1 4 Restricted- - - - - 1,758 5,548 1,705 2,857 2,399 Committed- - - - - 588 996 1,690 3,843 4,107 Assigned- - 1,281 1,560 2,026 102 113 192 199 117 Unassigned- - - - - (2) (46) - - - Total all other governmental funds5,021$ 1,728$ 1,281$ 1,560$ 2,027$ 2,459$ 6,612$ 3,598$ 6,900$ 6,627$ Notes:Fiscal year 2011 reflects implementation of GASB Statement 54. Prior year amounts have not been restated.The classification of fund balance amounts is discussed in the notes to the financial statements section I.E.11.FISCAL YEAR156 CITY OF MONROE, NORTH CAROLINACHANGES IN FUND BALANCES , GOVERNMENTAL FUNDSLAST TEN FISCAL YEARS(modified accrual basis of accounting)(in thousands of dollars)2009 2010 2011 2012 2013 2014 2015 2016 2017 2018REVENUESAd valorem taxes 16,134$ 16,909$ 19,217$ 19,426$ 19,443$ 19,788$ 19,409$ 19,744$ 20,285$ 21,208$ Other taxes and licenses1,220 874 1,249 1,313 1,558 1,497 1,087 219 778 949 Unrestricted intergovernmental6,360 6,044 6,586 7,408 7,567 7,952 8,967 8,839 9,987 9,991 Restricted intergovernmental2,826 3,274 2,399 2,217 1,846 2,060 2,461 2,194 2,375 3,551 Program income2 7 2 2 - - - - - - Sales and services (1)1,961 1,740 1,708 1,766 1,420 1,921 1,944 2,469 2,282 2,521 Investment earnings495 273 64 822 (544) 481 646 1,842 (669) (578) Miscellaneous611 548 747 793 747 779 989 395 461 525 Total revenues29,609 29,669 31,972 33,747 32,037 34,478 35,503 35,702 35,499 38,167 EXPENDITURESGeneral government 4,086 4,170 3,410 3,327 2,052 2,796 1,729 888 2,913 2,882 Transportation2,452 1,727 1,484 1,802 1,970 1,979 1,957 2,400 2,346 2,610 Public safety13,864 14,385 14,332 15,654 15,147 15,394 16,250 14,599 17,430 18,121 Environmental protection (1)- - - - - - - - - - Culture and recreation3,902 3,554 3,894 3,896 3,018 3,930 4,127 4,084 3,655 3,006 Economic and physical development986 1,909 2,045 951 1,415 1,614 2,864 5,157 2,684 2,848 Capital outlay2,619 2,832 1,091 2,298 2,806 2,076 4,158 7,483 4,335 6,654 Debt service:Principal retirement1,828 1,922 1,962 1,685 1,311 1,124 1,193 1,248 1,198 1,213 Interest and other charges310 337 61 54 229 164 186 199 227 200 Total expenditures30,047 30,836 28,279 29,667 27,948 29,077 32,464 36,058 34,788 37,534 Excess (deficiency) of revenues over(under) expenditures (438) (1,167) 3,693 4,080 4,089 5,401 3,039 (356) 711 633 OTHER FINANCING SOURCES (USES)Transfers from (to) others(3,430) (710) (3,419) (2,548) (3,725) (2,057) (1,267) 249 (1,845) (1,279) Repayment of advance from other funds(131) (131) - - - - - - - Installment purchase obligations issued3,661 475 263 748 - 850 4,476 - 1,788 1,614 Total other financing sources (uses)231 (366) (3,287) (1,800) (3,725) (1,207) 3,209 249 (57) 335 Net change in fund balances (207)$ (1,533)$ 406$ 2,280$ 364$ 4,194$ 6,248$ (107)$ 654$ 968$ Debt service as a percentage of noncapital expenditures 7.79% 8.07% 7.44% 6.35% 6.13% 4.77% 4.87% 5.06% 4.68% 4.58%Note:(1) The Solid Waste Fund was established in 2009. Previously, these revenues and expenditures were included in the General Fund.FISCAL YEAR157 CITY OF MONROE, NORTH CAROLINAASSESSED VALUE AND ACTUAL VALUE OF TAXABLE PROPERTYLAST TEN FISCAL YEARS(in thousands of dollars)TotalPublic Total DirectFiscalCommercial ResidentialMotor Service Assessed Tax RateYear Vehicle Other Companies Value (2)2009 1,081,987$ 1,264,542$ 207,793$ 659,913$ 49,487.4$ 3,263,722$ 0.4955$ 2010 1,097,648 1,288,641 186,439 765,537 60,724 3,398,989 0.4964 2011 1,133,184 1,296,350 189,559 777,420 69,218 3,465,731 0.5547 2012 1,151,666 1,298,253 197,410 761,938 66,714 3,475,981 0.5549 2013 1,172,544 1,308,774 219,424 740,811 66,312 3,507,865 0.5527 2014 1,162,848 1,326,417 393,733 742,552 63,594 3,689,144 0.5435 2015 1,156,965 1,347,344 277,624 661,619 61,545 3,505,097 0.5495 2016 1,122,222 1,223,096 303,873 667,684 62,807 3,379,682 0.5780 2017 1,127,552 1,244,699 275,945 703,452 63,375 3,415,023 0.5624 2018 1,153,295 1,268,456 287,062 807,840 65,122 3,581,775 0.5861 Notes:(1) A county-wide property revaluation was done in 2015 and is reflected in the fiscal year 2016 assessed values. This valuation is required by law to be done at least every 8 years, but may be done more often. The last revaluation was in 2008.(2) Property is assessed at actual value; therefore, the assessed value is equal to actual value. Tax Rates are per $100 of assessed value.Sources:Union County Tax Assessor's Office and North Carolina Property Tax Commission.Personal PropertyReal Property(1)158 CITY OF MONROE, NORTH CAROLINADIRECT AND OVERLAPPING PROPERTY TAX RATESLAST TEN YEARS(rate per $100 of assessed value)Overlapping Rate TotalGeneral Municipal Total UnionDirect andFiscal Fund Service District WeightedCountyOverlappingYear Basic Rate Basic Rate Average Rate(1)Basic RateRates2009 0.4950$ 0.2000$ 0.4955$ 0.6650$ 1.1605$ 20100.4950 0.2000 0.4964 0.6650 1.1614 20110.5550 0.2000 0.5547 0.6650 1.2197 20120.5550 0.2000 0.5549 0.6650 1.2199 20130.5550 0.2000 0.5527 0.6600 1.2127 20140.5550 0.2000 0.5435 0.6600 1.2035 20150.5550 0.2000 0.5495 0.7614 1.3109 20160.5863 0.2190 0.5780 0.7765 1.3545 20170.5863 0.2190 0.5624 0.7665 1.3289 20180.5863 0.2190 0.5861 0.7810 1.3671 Notes:(1) Total City tax rate is a weighted average of all types of City of Monroe tax rates. Union County rate is a direct rate.Source: Union County, Tax Assessment DivisionCity of Monroe159 CITY OF MONROE, NORTH CAROLINAPRINCIPAL PROPERTY TAXPAYERSCURRENT YEAR AND NINE YEARS AGO(in thousands of dollars)2018Percentage Percentageof ofTotal TotalTaxable Taxable Taxable TaxableAssessed Assessed Assessed AssessedTaxpayer Value Rank Value Value Rank ValueATI Specialty Materials (Allvac) 180,334$ 1 5.5% 226,421$ 1 6.3%Charlotte Pipe & Foundry Co. 119,091 2 3.6% 122,200 2 3.4%Glenmark Pharmaceuticals - -46,736 31.3%Greiner Bio-One22,249 70.7%43,769 41.2%Tyson Farms, Inc. (Tyson Foods, Inc.)49,900 31.5%41,266 51.2%O'Neil Digital Solutions, LLC- -34,907 61.0%Inland American Monroe Poplin- -31,325 70.9%Goulston Technologies- -26,721 80.7%Consolidated Metco, Inc.31,673 41.0%25,634 90.7%Yale Security (Assa Abloy - Door Security)27,618 60.8%25,208 100.7%Scott Technologies19,715 80.6%- -Monroe Mall (Madison)18,314 90.6%- -Poplin Partners28,158 50.9%- -Verizon South16,635 100.5%- -Total513,687$ 15.7%624,187$ 17.4%City of Monroe Tax System Source: 2009160 CITY OF MONROE, NORTH CAROLINAPROPERTY TAX LEVIES AND COLLECTIONSLAST TEN FISCAL YEARS(in thousands of dollars)TaxesTaxes Public Levied for the Collections in PercentageFiscal Levied for the Utility Fiscal Year Percentage Subsequent of AdjustedYear Fiscal Year Allocation Discoveries Abatements (Adjusted) Amount of LevyYearsAmount Levy200916,100$ 245$ 45$ 159$ 16,231$ 15,669$ 96.54%537$ 16,206$ 99.85%201016,490 300 160 78 16,872 16,292 96.56528 16,820 99.69201118,859 384 69 88 19,224 18,646 96.99535 19,181 99.78201218,962 362 299 335 19,288 18,780 97.37467 19,247 99.79201318,983 361 130 86 19,388 18,887 97.42439 19,326 99.68201419,712 348 81 89 20,052 19,295 96.22661 19,956 99.52201518,915 336 66 57 19,260 18,888 98.07292 19,180 99.58201619,279 363 69 178 19,533 19,270 98.65190 19,460 99.63201719,581 367 133 103 19,978 19,752 98.86118 19,870 98.87201820,338 377 315 35 20,995 20,806 99.10- 20,806 99.10Source: City of Monroe Tax System the LevyCollected within theFiscal Year ofTotal Collections to Date161 CITY OF MONROE, NORTH CAROLINARATIOS OF OUTSTANDING DEBT BY TYPELAST TEN FISCAL YEARS(dollars in thousands, except per capita)GovernmentalPercentageActivitiesofInstallment General Limited State Installment Total Per PersonalFiscal Purchase Obligation Obligation Revenue Revolving Purchase Primary Capita IncomeYearObligations BondsBondsBondsLoans Obligations Government (1)(1)20099,656$ 140$ -$ 53,185$ 5,105$ 36,011$ 104,097$ 2,792$ 1.58%20108,209 - - 51,320 4,278 36,291 100,098 2,626 1.4520116,736 - - 48,980 3,451 35,134 94,301 2,857 1.2920126,024 - - 47,425 4,654 32,671 90,774 2,731 1.1420134,303 - - 45,707 8,504 32,206 90,720 2,732 1.0820144,322 - - 43,394 10,592 30,693 89,001 2,681 0.9920157,605 - - 41,001 9,470 29,569 87,645 2,575 0.9020166,357 - 30,215 38,528 8,718 2,404 86,222 2,512 0.822017 (2) 6,947 - 29,887 37,251 8,179 1,530 83,794 2,413 -2018 (2) 7,349 - 38,163 48,553 7,698 1,289 103,052 2,941 - Notes:Details regarding the City's outstanding debt can be found in the notes to the financial statements.(1) Personal income and population data are on the Demographic and Economic Statistics table. These ratios are calculated using personal income and population for prior calendar year. Calendar year 2016 and 2017 personal income not available to calculate fiscal year 2017 and 2018.(2) Personal income not available for 2017 and 2018.Business-type Activities162 CITY OF MONROE, NORTH CAROLINARATIOS OF GENERAL BONDED DEBT OUTSTANDINGLAST TEN FISCAL YEARS(dollars in thousands, except per capita)Percentageof ActualGeneral Taxable Value PerFiscal Obligation of Property CapitaYear Bonds (2) (1)2009 140$ 0.004% 4$ 2010 - N/A N/A2011 - N/A N/A2012 - N/A N/A2013 - N/A N/A2014 - N/A N/A2015 - N/A N/A2016 - N/A N/A2017 - N/A N/A2018 - N/A N/ANotes: Details regarding the City's outstanding debt can be found in the notes to the financial statements.(1) See the Demographic and Economic Statistics table for population data.(2) See the Assessed Value and Actual Value of Taxable Property table for total assessed value of property.163 CITY OF MONROE, NORTH CAROLINADIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBTAS OF JUNE 30, 2018(in thousands of dollars)EstimatedEstimated Share ofDebt Percentage Direct andOutstanding Applicable Overlapping(1) (2) DebtUnion County, overlapping debt 376,804$ 14.1% 53,123$ Total direct debt 7,349 100%7,349 Total direct and overlapping debt 384,153$ 60,472$ Notes: (1) Includes governmental activities debt only.(2)Determined by ratio of assessed value of property subject to taxation in Union County ($24,405,693,079)and City of Monroe ($3,581,776,356).Source:Union County Administrative Services Finance DivisionGovernmental Unit164 CITY OF MONROE, NORTH CAROLINALEGAL DEBT MARGIN INFORMATIONLAST TEN FISCAL YEARS(in thousands of dollars)2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Debt limit (8% of assessed value) 261,098$ 271,919$ 277,258$ 278,078$ 280,629$ 295,131$ 280,408$ 270,375$ 284,215$ 286,542$ Total net debt applicable to limit 46,667 44,500 41,871 38,500 36,509 35,014 37,175 38,976 38,364 46,801 Legal debt margin 214,431$ 227,419$ 135,387$ 238,578$ 244,120$ 260,117$ 243,233$ 231,399$ 245,851$ 239,741$ Total net debt applicable to the limit as a percentage of debt limit 17.87% 16.37% 15.10% 14.20% 13.01% 11.86% 13.26% 14.42% 13.50% 16.33%Assessed value3,581,776$ Debt limit (8% of total assessed value) 286,542 Bonded debt -$ Debt not evidenced by bonds 46,801 Gross debt46,801$ Less: deductions allowed by North Carolina General Statutes:Bonded debt incurred for water purposes - Bonded debt incurred for sewer purposes- Total deductions- Net debt applicable to limit46,801 Legal debt margin239,741$ Note:NC Statute GS 159-55 limits the City's debt to 8% of the appraised value of property subject to taxation.The following deductions are made from gross to arrive at net debt applicable to the limit: money heldfor payment of principal; debt incurred for water, sewer, gas, or electric purposes; uncollected specialassessments, funding and refunding bonds not yet issued; and revenue bonds. The legal debt marginis the difference between the debt limit and the City's net debt outstanding applicable to the limit, andrepresents the City's legal borrowing authority.Legal Debt MarginCalculation for Fiscal Year 2018FISCAL YEAR165 CITY OF MONROE, NORTH CAROLINAPLEDGED-REVENUE COVERAGELAST TEN FISCAL YEARS(in thousands of dollars)Less IncomeOperating Nonoperating Available forOperating Expenses Operating Revenues DebtRevenues (1) Income (2) Service Principal Interest Coverage74,807$ 66,727$ 8,081$ 2,884$ 10,964$ 1,275$ 2,456$ 294%75,197 67,175 8,022 939 8,961 2,005 2,399 20380,045 66,284 13,761 277 14,038 2,772 2,461 26878,729 65,795 12,935 2,808 15,742 3,112 1,966 31083,091 70,200 12,891 (1,642) 11,249 2,917 2,132 22391,644 78,463 13,181 1,442 14,623 3,002 2,020 291101,194 77,381 23,813 1,679 25,493 3,386 2,158 46095,008 76,367 18,641 4,957 23,597 3,107 1,994 463100,293 77,953 22,340 (1,984) 20,356 3,009 1,324 470101,170 79,604 21,566 (1,327) 20,239 3,056 1,719 424Notes:Details regarding the City's outstanding debt can be found in the notes to the financial statements.(1) Per rate covenants, this does not include the annual depreciation and amortization expense.(2) Per rate covenants, this includes investment earnings only.20172018YearFiscal201120122013201420152016Debt Service20092010166 CITY OF MONROE, NORTH CAROLINADEMOGRAPHIC AND ECONOMIC STATISTICSLAST TEN FISCAL YEARS(County)Personal (County) (County)Income Per Capita Public (County)(City) (thousands of Personal School UnemploymentPopulation dollars) Income Enrollment Rate(2) (3) (3) (4) (5)37,280$ 6,602,954$ 33,240$ 38,554$ 10.80%38,120 6,912,014 34,184 39,366 9.5033,007 7,304,614 35,552 39,900 9.4033,238 7,950,910 38,130 40,359 8.6033,201 8,386,195 39,417 40,958 8.0033,708 8,997,563 41,166 42,047 5.7034,032 9,726,903 43,669 42,035 5.1034,323 10,479,508 46,246 42,552 4.50(1) 34,725 - - 41,541 3.70(1) 35,034 - - 41,509 3.70Note:(1) Personal income not available for 2017 and 2018.Sources:(2) North Carolina Office of State Budget and Management (3) US Department of Commerce - Bureau of Economic Analysis(4) Union County Public Schools(5) Employment Security Commission of North Carolina2010Year20152017201320142018Fiscal2011200920122016167 CITY OF MONROE, NORTH CAROLINAPRINCIPAL EMPLOYERSCURRENT YEAR AND NINE YEARS AGOPercentage of Percentage ofTotal City Total CityEmployment EmploymentEmployer Employees (1) Employees (2)Tyson Foods 1,500 10.3% 1,850 10.4%ATI Specialty Materials 1,200 8.2% 1,465 8.3%Atrium (formerly Carolinas Medical Center-Union) 956 6.5% 1,400 7.9%Union County 573 3.9% 1,022 5.8%Charlotte Pipe 520 3.6% 550 3.1%3M Scott Safety 500 3.4% 550 3.1%City of Monroe 455 3.1% 467 2.6%Wal-Mart Stores, Inc. 350 2.4% 400 2.3%Greiner Bio-One - 0.0% 350 2.0%Windsor Windows - 0.0% 350 2.0%Circor (formerly IMO Industries) 200 1.4% 294 1.7%UTC Aerospace (formerly Goodrich Corporation) 240 1.6% 220 1.2%Total 6,494 44.4% 8,918 50.4%Notes: (1) Percentage of total city employment based on North Carolina Employment Security Commission labor force estimate of 14,636 as of June 30, 2009.(2) Percentage of total city employment based on North Carolina Employment Security Commission labor force estimate of 17,709 as of June 30, 2018.Source: Monroe - Union County Economic Development20182009168 CITY OF MONROE, NORTH CAROLINAFULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTIONLAST TEN FISCAL YEARSFunction 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018General Government:Administration32 28 27 28 29 30 29 28 30 30Planning and zoning11 1188777788Engineering10 10 10 10999999Utility/tax billing and collection18 18 19 17 17 18 19 19 19 19Operations center8999999999Transportation21 24 19 19 19 19 19 19 19 19Police (1)95 101 104 104 98 98 99 99 99 103Fire82 84 82 82 79 79 80 81 81 81Building standards and code enforcement10 1146667788Culture and recreation49 39 38 40 41 37 37 38 38 37Water and sewer:Distribution system33 34 34 34 34 34 34 35 35 35Water filter plant11 11 11 12 12 12 12 12 12 12Waste treatment plant14 14 14 14 14 14 14 14 15 15Stormwater (2)89 11 10 10 11 11 11 11 11Electric24 27 28 28 29 29 29 31 32 32Natural gas13 14 13 14 14 14 14 15 15 18Solid Waste (3)- 1 - 1111113Aquatics and Fitness Center20 10 10 11 11 11 11 11 11 11Airport8999777777Total467 464 450 456 446 445 448 453 459 467Note:(1) In 2018, four additional police officers were added through funding from a COPS Hiring grant.(2) City of Monroe established a Stormwater utility program in 2009.(3) In 2010, a full time position was added to Solid Waste. Previously, the function was the responsibility of the Planning Department.In 2018, two full time positions were added to Solid Waste for Community Maintenance.Source:City of Monroe payroll system.FISCAL YEAR169 CITY OF MONROE, NORTH CAROLINAOPERATING INDICATORS BY FUNCTIONLAST TEN FISCAL YEARS(if available or unless otherwise noted)2009201020112012201320142015201620172018Transportation:Street reclamation (tons)8,065 2,858 2,295 2,720 2,503 1,730 2,400 2,272 1,229 1,023 Street repair (tons)1,219 595 456 915 929 1,012 710 532 272 398 Utility repair (tons)321 527 780 1,019 868 784 406 381 417 928 Sidewalk repair (cubic yards concrete)25 66 116 271 178 329 323 137 166 96 Pipe repair and replacement (linear feet)2,016 2,132 2,526 2,151 1,300 832 853 1,129 1,938 2,737 Police: Physical arrests (calendar year)3,468 3,204 3,132 3,025 2,367 1,852 2,336 2,158 2,494 - Parking violations (calendar year)3,408 3,510 3,558 3,074 3,346 3,138 2,395 2,181 2,625 - Traffic violations (calendar year)4,889 6,368 9,179 6,704 6,305 5,742 5,565 5,056 4,800 - Fire:Calls for service (calendar year)4,993 5,514 5,699 5,714 5,734 5,811 6,269 6,170 7,049 - Fire code inspections (calendar year)1,860 1,220 1,244 1,343 1,114 961 1,185 2,267 2,105 - Civilian fire injuries (calendar year)6 2 2 4 - 5 4 2 3 - Building standards & code enforcement:Building permits issued3,845 2,876 2,701 3,901 3,771 3,429 3,740 4,416 4,250 3,666 Building inspections 8,642 7,553 7,009 7,300 7,411 8,331 8,475 9,865 8,659 8,915 Code enforcement inspections 5,518 6,422 1,750 2,415 1,938 1,240 1,687 2,994 3,091 2,560 Environmental protection: (1)Solid waste collected (annual tonnage)35,928 34,155 31,968 24,405 8,609 9,989 9,576 9,218 9,696 9,735 Recyclables collected (annual tonnage)707 788 748 626 1,467 1,976 2,015 1,912 1,870 1,897 Culture and recreation:Rounds of golf played (calendar year)30,075 26,556 26,565 27,105 27,492 32,598 33,035 36,717 36,381 - Aquatics and fitness center members20,889 20,444 19,972 19,628 19,814 19,169 20,377 20,778 21,526 21,625 Youth athletic program participants (calendar year)486 400 335 467 572 510 456 428 379 - Water:Average daily production (millions of gallons per day)5.5 5.8 6.0 6.2 5.8 6.1 6.6 6.5 6.6 6.2 Maximum daily production (millions of gallons per day)8.1 9.1 9.1 9.1 8.5 8.3 9.3 9.1 8.2 9.1 Customers 11,436 11,462 11,478 11,630 11,700 11,842 11,971 12,217 12,355 12,533 Gallons Billed (in thousands)1,796,500 1,748,800 1,803,119 1,820,040 1,798,377 1,782,067 1,889,153 1,856,038 1,935,186 1,938,273 Sewer:Average daily treatment (millions of gallons per day)6.5 6.8 5.8 5.7 6.6 7.2 6.9 7.3 6.1 5.4 Customers9,948 9,959 9,970 10,099 10,120 10,223 10,363 10,631 10,754 10,921 Gallons Billed (in thousands)2,126,800 2,016,900 2,005,753 2,012,091 2,063,159 2,204,230 2,248,645 2,268,665 2,208,168 2,218,285 Electric:Sales (megawatt hours)595,689 591,112 645,072 653,004 638,273 654,969 710,133 669,778 711,165 718,185 Customers 10,331 10,324 10,300 10,369 11,685 11,675 11,785 11,916 12,005 12,071 Natural gas:Sales/deliveries (thousand cubic feet)264,370 273,909 308,852 287,804 297,961 316,633 326,144 306,735 308,356 343,814 Customers10,287 10,216 10,221 10,667 10,512 10,599 10,795 11,033 11,236 11,374 Airport:Fuel sales (thousands of gallons)324 340 331 309 294 279 326 290 382 350 Based aircraft114 95 96 90 105 109 111 106 106 112 Notes:(1) The City of Monroe stopped providing commercial dumpster collection services in 2012. The Cityof Monroe now provides 95 gallon recycling carts verses 18 gallon bins.Sources:Various City departments.FISCAL YEARFunction170 CITY OF MONROE, NORTH CAROLINACAPITAL ASSET STATISTICS BY FUNCTIONLAST TEN FISCAL YEARS(unless otherwise noted)Function2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Transportation:Municipal Boundary (square miles) 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63 30.05Streets (miles) 164 166 166 167 169 170 170 170 170 170Sidewalks (miles) 54 61 61 62 63 64 64 64 64 65Curb and gutter (miles) 124 127 127 128 130 131 131 131 131 132Stormwater (miles) 33 34 34 35 35 36 36 36 36 51Bridges (square feet) 15,884 15,884 15,884 15,884 15,884 15,884 15,884 15,884 15,884 15,884Speed humps/cushions (each) 242 279 286 301 309 330 336 343 355 358Public safety:Police stations 1 1 1 1 1 1 1 1 1 1 Patrol vehicles92 92 92 92 92 92 92 92 96 96 Fire stations5 5 5 5 5 5 5 5 5 5 Fire apparatus (line and reserve)14 14 14 15 15 15 15 18 18 18 Culture and recreation:Acreage (city limits)552 552 552 552 552 552 552 552 552 554 Aquatics and Fitness Center11 1 1 1 1 1 1 1 1 Playgrounds (1)88 8 8 8 8 8 8 9 9 Gymnasiums (2)34 4 4 4 4 4 4 4 4 Basketball courts (3)8 11 11 11 11 11 11 11 11 11 Tennis courts (4)10 10 10 10 10 10 8 8 6 6 Playing fields (baseball/soccer/football)20 20 20 20 20 20 20 20 20 20 Swimming pools33 3 3 3 3 3 3 3 3 Golf course11 1 1 1 1 1 1 1 1 Driving range11 1 1 1 1 1 1 1 1 Greenway (miles) 0.5 0.5 0.5 0.5 0.5 0.5 2.0 2.0 3.1 4.3 Water:Water mains (miles)291 291 291 291 291 291 291 291 292 293Treatment capacity (millions of gallons per day) (5) 111111 11 11 12.99 12.99 12.99 12.99 12.99Sewer:Sanitary sewers (miles)294 295 295 295 295 295 295 295 295 295Treatment capacity (millions of gallons per day)10.4 10.4 10.4 10.4 10.4 10.4 10.4 10.4 10.4 10.4Electric:Substations (6)99 9 9 9 9 7 7 7 7 Lines (miles per calendar year)281 293 293 285 285 286 289 291 293 - Natural gas:Lines (miles per calendar year)399 443 449 455 455 457 464 468 473 - Airport:Runway (feet) (7)5,500 5,500 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 Hangars (square feet) (8)87,603 87,603 87,603 87,603 87,603 87,603 87,603 87,603 87,603 87,603 Notes:(1) In 2017, a new playground was added at the Dickerson Center.(2)A new gymnasium was built at the J Ray Shute recreation center in 2010.(3)In 2010, three new basketball courts were built in conjunction with the new gymnasium at the J Ray Shute recreation center.(4) In 2017, tennis courts at Sutton Park were replaced with a covered shelter.(5)In 2014, additional water supply became available via a water supply agreement with Union County. The agreement provides a guaranteed 1.99 MGD of watersupply to the City, and the agreement term is in perpetuity, or 99 years if perpetuity is challenged. This water supply is delivered from the Catawba River WTP (CRWTP)which is co-owned by Union County and Lancaster County, South Carolina. The 1.99 MGD represents a 5.53% interest in the CRWTP.(6)In 2009, a substation was added to serve the airport and surrounding area.In 2014, as part of the electric systems ongoing work to retire old 4KV facilities, two 4KV substations were retired.(7)In 2011, an extension of runway 5 was completed.(8)In 2008, the City purchased an existing T-hangar from the Maxwell Group and built a new one. In 2009, the City bought the Southern Cross hangar. In addition to City owned hangars, there are private hangars on airport property. When these leases expire 20 years from initiation, they become property of the City. Currently, there is 7,200 square feet of private hangar space.Sources:Various City departments.FISCAL YEAR171                       172 730 13th Avenue Drive SE ♦ Hickory, NC 28602 ♦ 828-327-2727 ♦ Fax 828-328-2324 13 South Center Street ♦ Taylorsville, NC 28681 ♦ 828-632-9025 ♦ Fax 828-632-9085 PO Box 5729 ♦ Statesville, NC 28687 ♦ 1710 Wilkesboro Hwy ♦ Statesville, NC 28625 ♦ 704-872-8923 ♦ Fax 704-872-4982 800-948-0585 ♦ www.martinstarnes.com Report On Internal Control Over Financial Reporting And On Compliance And Other Matters Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards Independent Auditor’s Report To the Honorable Mayor and Members of the City Council City of Monroe Monroe, North Carolina We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Monroe, North Carolina, as of and for the year ended June 30, 2018, and the related notes to the financial statements which collectively comprise the City’s basic financial statements, and have issued our report thereon dated October 29, 2018. Our report includes a reference to other auditors who audited the financial statements of the City of Monroe ABC Board, as described in our report on the City of Monroe’s financial statements. The financial statements of the City of Monroe ABC Board and the Monroe Tourism Development Authority were not audited in accordance with Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Monroe’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Monroe’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Monroe’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City of Monroe’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination or deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 173 Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did identify a certain deficiency in internal control described in the accompanying Schedule of Findings, Responses, and Questioned Costs as item 2018-001 that we consider to be a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Monroe’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, non-compliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit; and accordingly, we do not express such an opinion. The results of our tests disclosed an instance of non-compliance or other matter that is required to be reported under Government Auditing Standards and which is described in the accompanying Schedule of Findings, Responses, and Questioned Costs as item 2018-001. City of Monroe’s Response to Finding The City of Monroe’s response to the finding identified in our audit is described in the accompanying Schedule of Findings, Responses, and Questioned Costs. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and accordingly, we express no opinion on the response. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness or the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Martin Starnes & Associates, CPAs, P.A. Hickory, North Carolina October 29, 2018 174 730 13th Avenue Drive SE ♦ Hickory, NC 28602 ♦ 828-327-2727 ♦ Fax 828-328-2324 13 South Center Street ♦ Taylorsville, NC 28681 ♦ 828-632-9025 ♦ Fax 828-632-9085 PO Box 5729 ♦ Statesville, NC 28687 ♦ 1710 Wilkesboro Hwy ♦ Statesville, NC 28625 ♦ 704-872-8923 ♦ Fax 704-872-4982 800-948-0585 ♦ www.martinstarnes.com Report On Compliance For Each Major Federal Program; Report On Internal Control Over Compliance; In Accordance With Uniform Guidance; And the State Single Audit Implementation Act Independent Auditor’s Report To the Honorable Mayor and Members of the City Council City of Monroe Monroe, North Carolina Report on Compliance for Each Major Federal Program We have audited the City of Monroe’s compliance with the types of compliance requirements described in the OMB Compliance Supplement and the Audit Manual for Governmental Auditors in North Carolina, issued by the Local Government Commission, that could have a direct and material effect on each of the City of Monroe’s major federal programs for the year ended June 30, 2018. The City of Monroe’s major federal programs are identified in the summary of auditor’s results section of the accompanying Schedule of Findings, Responses, and Questioned Costs. Management’s Responsibility Management is responsible for the compliance with federal statutes, regulations, and the condition of its federal awards applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the City of Monroe’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and the State Single Audit Implementation Act. Those standards, the Uniform Guidance, and the State Single Audit Implementation Act require that we plan and perform the audit to obtain reasonable assurance about whether non-compliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Monroe’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. 175 We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City of Monroe’s compliance. Opinion on Each Major Federal Program In our opinion, the City of Monroe complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2018. Report on Internal Control Over Compliance Management of the City of Monroe is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City of Monroe’s internal control over compliance with the types of requirements that could have a direct and material effect on a major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City of Monroe’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, non-compliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material non-compliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination or deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Martin Starnes & Associates, CPAs, P.A. Hickory, North Carolina October 29, 2018 176 730 13th Avenue Drive SE ♦ Hickory, NC 28602 ♦ 828-327-2727 ♦ Fax 828-328-2324 13 South Center Street ♦ Taylorsville, NC 28681 ♦ 828-632-9025 ♦ Fax 828-632-9085 PO Box 5729 ♦ Statesville, NC 28687 ♦ 1710 Wilkesboro Hwy ♦ Statesville, NC 28625 ♦ 704-872-8923 ♦ Fax 704-872-4982 800-948-0585 ♦ www.martinstarnes.com Report On Compliance For Each Major State Program; Report On Internal Control Over Compliance; In Accordance With Uniform Guidance; And The State Single Audit Implementation Act Independent Auditor’s Report To the Honorable Mayor and Members of the City Council City of Monroe Monroe, North Carolina Report on Compliance for Each Major State Program We have audited the City of Monroe’s compliance with the types of compliance requirements described in the Audit Manual for Governmental Auditors in North Carolina, issued by the Local Government Commission that could have a direct and material effect on each of the City of Monroe’s major state programs for the year ended June 30, 2018. The City of Monroe’s major state programs are identified in the summary of auditor’s results section of the accompanying Schedule of Findings, Responses, and Questioned Costs. Management’s Responsibility Management is responsible for compliance with state statutes, regulations, and the terms and conditions of its state awards applicable to its state programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the City of Monroe’s major state programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, applicable sections of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), as described in the Audit Manual for Governmental Auditors in North Carolina, and the State Single Audit Implementation Act. Those standards, the Uniform Guidance, and the State Single Audit Implementation Act require that we plan and perform the audit to obtain reasonable assurance about whether non-compliance with the types of compliance requirements referred to above that could have a direct and material effect on a major state program occurred. An audit includes examining, on a test basis, evidence about the City of Monroe’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. 177 We believe that our audit provides a reasonable basis for our opinion on compliance for each major state program. However, our audit does not provide a legal determination of the City of Monroe’s compliance. Opinion on Each Major State Program In our opinion, the City of Monroe complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major state programs for the year ended June 30, 2018. Report on Internal Control Over Compliance Management of the City of Monroe is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City of Monroe’s internal control over compliance with the requirements that could have a direct and material effect on a major state program to determine our auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on compliance for each major state program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, non-compliance with a type of compliance requirement of a state program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material non-compliance with a type of compliance requirement of a state program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal over compliance with a type of compliance requirement of a state program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we identified a certain deficiency in internal control over compliance, as described in the accompanying Schedule of Findings, Responses, and Questioned Costs as item 2018-002 that we consider to be a significant deficiency. The City of Monroe’s response to the internal control over compliance finding identified in our audit is described in the accompanying Corrective Action Plan. The City’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. 178 The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirement of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Martin Starnes & Associates, CPAs, P.A. Hickory, North Carolina October 29, 2018 179 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF FINDINGS, RESPONSES, AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2018 1. Summary of Auditor’s Results Financial Statements Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP: Unmodified Internal control over financial reporting: • Material weakness(es) identified? Yes • Significant deficiency(s) identified? None reported Non-compliance material to financial statements noted? Yes Federal Awards Internal control over major federal programs: • Material weakness(es) identified? No • Significant deficiency(s) identified? None reported Type of auditor’s report issued on compliance for major federal programs Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? No Identification of major federal programs: Program Name CFDA# Highway Planning and Construction Cluster 20.205 Dollar threshold used to distinguish between Type A and Type B Programs $750,000 Auditee qualified as low-risk auditee? Yes 180 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF FINDINGS, RESPONSES, AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2018 1. Summary of Auditor’s Results (continued) State Awards Internal control over major state programs: • Material weakness(es) identified? No • Significant deficiency(s) identified? Yes Type of auditor’s report issued on compliance for major state programs Unmodified Any audit findings disclosed that are required to be reported in accordance with the State Single Audit Implementation Act? Yes Identification of major state programs: Program Name Powell Bill Highway Planning and Construction Cluster 181 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF FINDINGS, RESPONSES, AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2018 2. Financial Statement Findings Finding 2018-001 Material Weakness Material Non-Compliance Criteria: Management should have a system in place to ensure the City complies with state statutes. Per North Carolina State Statute [159-13](b)(3), a contingency appropriation shall not exceed five (5) percent of the total of all other appropriations in the same fund. Condition: In the current year, there was a violation of the N.C. General Statute with regards to the contingency appropriation exceeding the aforementioned percentage in the Natural Gas Fund. Effect: The City was in violation of North Carolina General Statutes. Cause: Insufficient monitoring controls during budget preparation by management. Recommendation: Implement more stringent budgetary monitoring controls to prevent exceeding allowable contingency percentages. Name of Contact Person: Lisa Strickland, Finance Director Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding and will adhere to the Corrective Action Plan in this audit report. 3. Federal Award Findings and Questioned Costs None reported. 182 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF FINDINGS, RESPONSES, AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2018 4. State Award Findings and Questioned Costs N.C. Department of Transportation Powell Bill Finding 2018-002 Significant Deficiency Criteria: Management should have a system in place to reduce the likelihood of errors in salaries charged to state awards. Management must monitor activities under state awards to assure compliance with state requirements. Condition: The City did not properly review or timely identify errors in pay rates charged to Powell Bill. Effect: Salaries allocated to Powell Bill were not reported at the correct rates. Cause: The City did not have adequate controls in place to monitor pay rates charged to Powell Bill. Questioned Costs: None. The pay rates charged to Powell Bill were less than the City’s actual pay rate. Recommendation: Management should strengthen the City’s controls over reviewing pay rates charged to Powell Bill. Name of Contact Person: Jim Loyd, Director of Engineering Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding and will adhere to the Corrective Action Plan in this audit report. 183 monroenc.org • 704-282-4500 • PO Box 69, Monroe, NC 28111 Corrective Action Plan For the Year Ended June 30, 2018 2. Findings Related to the Audit of the Basic Financial Statements Finding: 2018-001 Name of Contact Person: Lisa Strickland, Finance Director Corrective Action/Management’s Response: Funding intended to return to Natural Gas fund balance for projects that were pre-cash funded, will be budgeted through transfers in the future. Excess funds at the end of the fiscal year in the operating enterprise funds will be transferred to the related capital project fund and designated for future projects. As projects are determined, those funds will be appropriated specifically to a project, or, if needed for operating purposes, a transfer will be made from the capital project fund to the operating fund. Proposed Completion Date: The Board will implement the above procedure immediately and ongoing. 3. Federal Award Findings and Questioned Costs None reported. 4. State Award Findings and Questioned Costs Finding: 2018-002 Name of Contact Person: Jim Loyd, Director of Engineering Corrective Action/Management’s Response: Pay rates assigned to employees who are charged to Powell Bill and are used in the labor overhead calculation will be updated annually and will be verified by a supervisor to ensure they agree with approved rates in the payroll system. Human Resources staff will aid staff in providing this updated data on an annual basis. Finance staff will also plan to do a semi-annual review of data to ensure its accuracy. Proposed Completion Date: The Board will implement the above procedure immediately and ongoing. 184 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF PRIOR YEAR FINDINGS FOR THE YEAR ENDED JUNE 30, 2018 None 185 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS FOR THE YEAR ENDED JUNE 30, 2018 State/Federal Federal Pass-Through) (Direct and Pass-Through Grantor/Pass-Through CFDA Grantor's Pass-Through) State to Local Grantor/Program Title Number Number Expenditures Expenditures Subrecipients Expenditures Federal Grants: Cash Programs: U.S. Department of Justice: Direct Programs: Drug Enforcement Administration Equitable Sharing Program 16.922 71,954$ 13,558$ -$ 8,900$ Edward Byrne Memorial Justice Assistance Grant Program 16.738 18,651 - - - Public Safety Partnership and Community Policing Grants 16.710 185,186 - - 61,729 U.S. Department of Homeland Security: Federal Emergency Management Agency: Passed through N.C. Department of Public Safety: 2016 Staffing for Adequate Fire and Emergency Response (SAFER)97.083 EMW-2016-FH-00169 73,676 - - 24,559 U.S. Department of Housing & Urban Development: Passed through Union County: Community Development Block Grant- Entitlement Grant 14.218 B-16-UC-37-0004-B35 83,550 - - 1,100 U.S. Department of Transportation: Passed through N.C. Department of Transportation: Highway Planning and Construction Cluster Highway Planning and Construction 20.205 41125.1.1 874,786 218,697 - - Airport Improvement Program 20.106 '36237.15.3; 36244.24.6.1; 36237.17.16.1 87,006 3,646 - - Total Assistance - Federal Programs 1,394,809 235,901 - 96,288 State Grants: Cash Assistance: N.C. Department of Commerce: Passed through to: NC Rural Economic Development Center Monroe Center Theatre Project 2018-53-1257-1534 - 100,000 - 134,937 N.C. Department of Transportation: Powell Bill - 601,977 - - N.C. Department of Environmental Quality: Drinking Water Asset Inventory & Assessment Grant - 3,500 - 3,125 Wastewater Asset Inventory & Assessment Grant - 3,500 - 3,125 Total assistance - State Programs - 708,977 - 141,187 Total assistance 1,394,809$ 944,878$ -$ 237,475$ 186 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS FOR THE YEAR ENDED JUNE 30, 2018 Notes to the Schedule of Expenditures of Federal and State Financial Awards: 1.Basis of Presentation 2.Summary of Significant Accounting Policies The accompanying Schedule of Expenditures of Federal and State Awards (SEFSA) includes the federal and State grant activity of the City of Monroe under the programs of the federal government and the State of North Carolina for the year ended June 30, 2018. The information in this SEFSA is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and the State Single Audit Implementation Act. Because the Schedule presents only a selected portion of the operations of the City of Monroe, it is not intended to, and does not, present the financial position, changes in net position, or cash flows of the City of Monroe. Expenditures reported in the SEFSA are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The City of Monroe has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. 187                       188 P.O. Box 69 Monroe, NC 28111 (704) 282-4500 monroenc.org