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Comprehensive Annual Financial Report - Fiscal Year Ending June 30, 2017Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2017 City of Monroe, North Carolina Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2017 Prepared By Department of Finance Director of Finance Lisa Strickland Accounting Manager Ashley Ivey                       Page INTRODUCTORY SECTION Letter of Transmittal ix-xvii GFOA's Certificate of Achievement for Excellence in Financial Reporting xviii List of Principal Officials xix Organizational Chart xx FINANCIAL SECTION Independent Auditor's Report 1-3 Management's Discussion and Analysis 5-17 Financial Statements: Exhibit Government-Wide Financial Statements: 1 Statement of Net Position 20-21 2 Statement of Activities 22-23 Fund Financial Statements: 3 Balance Sheet - Governmental Funds 24 4 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 25 5 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 26 6 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 27 7 Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund 29 8 Statement of Net Position - Proprietary Funds 30-31 CITY OF MONROE, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS CITY OF MONROE, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS Exhibit Page 9 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds 32-33 10 Statement of Cash Flows - Proprietary Funds 34-37 Notes to the Financial Statements 38-95 Required Supplemental Financial Data: Law Enforcement Officers' Special Separation Allowance Schedule of Changes in Total Pension Liability 97 Law Enforcement Officers' Special Separation Allowance Schedule of Total Pension Liability as a Percentage of Covered Payroll 98 The Health Care Plan - Schedule of Funding Progress 99 The Health Care Plan - Schedule of Employer Contributions 100 Local Government Employees' Retirement System City of Monroe's Proportionate Share of Net Pension Liability (Asset) - Last Four Fiscal Years 101 Local Government Employees' Retirement System City of Monroe's Contributions - Last Four Fiscal Years 102 Other Supplemental Information: Major Governmental Funds Budgetary Schedule: Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund 103-105 Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds: Combining Balance Sheet 108-109 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 110-111 Nonmajor Governmental Funds Budgetary Schedules: CITY OF MONROE, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Special Revenue Fund - Community Development 112 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Special Revenue Fund - Downtown Monroe 113 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Special Revenue Fund - Monroe Union County Economic Development 114 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Capital Projects Fund - Capital Projects 115 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Capital Projects Fund - Occupancy Tax Capital Projects 116 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - Capital Projects Fund - Governmental Capital Reserve 117 CITY OF MONROE, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS Page Major Enterprise Funds Budgetary Schedules: Schedule of Revenues and Expenditures - Budget and Actual - (NON-GAAP): Water and Sewer Fund 118-120 Water and Sewer Capital Projects Funds - Capital Reserve 121 Water and Sewer Capital Projects Funds 122 Electric Fund 123-125 Electric Capital Projects Fund - Capital Projects 126 Natural Gas Fund 127-129 Natural Gas Capital Projects Fund - Capital Projects 130 Airport Fund 131-133 Airport Capital Projects Fund - Capital Projects 134 Nonmajor Enterprise Funds: Combining Statement of Net Position 135 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 136 Combining Statement of Cash Flows 137 Nonmajor Enterprise Funds Budgetary Schedules: Schedule of Revenues and Expenditures - Budget and Actual - (NON-GAAP): Aquatics and Fitness Center Fund 138-139 Stormwater Fund 140-141 Stormwater Management Capital Projects Fund - Capital Projects 142 Solid Waste Fund 143-144 Internal Service Funds: Combining Statement of Net Position 145 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 146 Combining Statement of Cash Flows 147 Internal Service Funds Budgetary Schedules: Schedule of Revenues and Expenditures - (NON-GAAP): Health and Dental Fund 148 Workers' Compensation Fund 149 Property and Liability Fund 150 CITY OF MONROE, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS Page Other Schedules: Schedule of Ad Valorem Taxes Receivable 151 Analysis of Current Tax Levy - City-Wide Levy 152 Schedule of Municipal Service District Taxes Receivable 153 Analysis of Current Tax Levy - Municipal Service District Levy 154 STATISTICAL SECTION Financial Trends: Net Position by Component 157 Changes in Net Position 158-159 Fund Balances, Governmental Funds 160 Changes in Fund Balances, Governmental Funds 161 Revenue Capacity: Assessed Value and Actual Value of Taxable Property 162 Direct and Overlapping Property Tax Rates 163 Principal Property Taxpayers 164 Property Tax Levies and Collections 165 Debt Capacity: Ratios of Outstanding Debt by Type 166 Ratios of General Bonded Debt Outstanding 167 Direct and Overlapping Governmental Activities Debt 168 Legal Debt Margin Information 169 Pledged-Revenue Coverage 170 Demographic and Economic Information: Demographic and Economic Statistics 171 Principal Employers 172 Operation Information: Full-Time Equivalent City Government Employees by Function 173 Operating Indicators by Function 174 Capital Asset Statistics by Function 175 CITY OF MONROE, NORTH CAROLINA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS Page 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 177-178 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 179-180 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 181-182 Schedule of Findings, Responses, and Questioned Costs 183-184 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 Planning  List of Principal Officials  Organizational Chart                       monroenc.org • 704-282-4500 • PO Box 69, Monroe, NC 28111 October 20, 2017 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, 2017. 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 ix 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. 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 33,000 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, 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, 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 $80 million in new capital investments in manufacturing equipment, facility expansions and relocations over the last 24 months. Monroe’s workforce is diversified, consisting of industrial, construction, agricultural, and retail x employment. The City’s economic base includes major employers involved in aerospace, plastics, 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 County’s industrial workforce. Monroe’s corporate community continues to grow and prosper giving Monroe and Union County national and international recognition. In 2016, Monroe was named in the Top 4 small markets in the southeast for aerospace industry. In 2015, Monroe was named in the Top 5 locations for aerospace suppliers for Boeing and a Top 10 “No-Brainer” manufacturing location in the South by Southern Business & Development magazine. Union County was 10th in the nation in job creation from 2000 to 2008 by CNN/Money. Monroe has been discussed in coverage among international trade magazines and the Wall Street Journal every year since 2007. Because of our recruitment and retention efforts, Union County has maintained one of the lowest unemployment rates in the Charlotte Region for 18+ consecutive years. 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 – Sept 2008). 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. 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 472 miles of natural gas distribution mains per federal regulation 49CFR Part 192. North Carolina Utility Commission’s annual inspection resulted in no violations. Utility locators have located 12,029 NC811 locate tickets including natural gas, electric, and City fiber telecommunications. With the installation of 172 new services, the natural gas customer count has increased to 11,274 customers. New technology is being utilized to increase field workforce efficiencies. The natural gas distribution system field survey to correct gas meter locations in GIS and collect gas metering equipment inventory has been completed. A multitude of capital projects were completed in fiscal year 2017. Industrial meter rebuilds and upgrades allow for the installation and replacement of aging and insufficient metering and regulating equipment based on the demands of the customer. xi ATI Specialty Metals SAF, ConMet, CMC Union, Goulston, Norton Door, Pilgrim’s Pride, and Tyson Plant Heat have received equipment replacements or upgrades to their meter sets. In addition, industrial customer meter instrumentation has been standardized, and data is collected hourly to provide information for system modeling. System improvement projects create system redundancy within areas of the gas system. Completed projects include Hasty St. and the Tyson facility system improvement. Delivery of natural gas to the distribution system from Bivens Rd. and E. Roosevelt Blvd. has been dependent of transporting natural gas through Tyson Foods and Metal Recyclers. With completion of the work, natural gas can now be safely transported along Hasty St. without interruption. In addition, 2,552’ of 4” steel and 1,424’ of 2” steel was abandoned eliminating a monitored gas leak and a gas line underneath a guard shack. Revenue based projects provide service to customers that have been evaluated to recover the initial construction and material expenses within an eight year timeframe for payback. Completed projects include 3,604 feet of 4” PE main extended along Carriker Rd. and a portion of E. Brief Rd. to serve eight chicken houses at 4405 E. Brief Rd. Additionally, installation of 1,202 feet of 2” PE along Emerald Pointe Court provides gas service to ten new homes. Distribution Integrity Management Program projects provide maintenance and remediation to an aging infrastructure to create safe and reliable transportation of natural gas in pipelines. Completed projects include E. Roosevelt Blvd. and Kintyre Dr. along with E. Roosevelt Blvd. and Acme Dr. After completing main extensions to tie over to an existing 4” PE main, 3,509’ of 3” steel and 328’ of 2” steel were abandoned due to future NCDOT roadway plans and the monitoring of two gas leaks. As construction of the Monroe Bypass continues, utilities have the responsibility to relocate in accordance with NCDOT plans. Completed projects include the relocation on N. Rocky River Rd. and installation of a 12” steel future encasement at the Monroe Bypass crossing. Two additional 8” steel future encasements were installed, one at Fowler Rd. and another at Roanoke Church Rd. The Monroe Bypass relocation projects have neared completion with the exception of Deese Rd. regulating station relocation. The addition of a LNG peak shaving facility will provide substantial cost savings for the purchasing and supplying of natural gas to City customers on peak gas usage days. The facility also provides an alternate natural gas source in the event of an unforeseeable incident to the natural gas transmission pipeline. Components of the LNG facility have been purchased, and purchase of the land for site location has been completed. Engineering design is underway and will soon be completed for construction bid proposals. These capital projects provide improved reliability, a reduction in system losses, and optimal system operating capabilities. The City’s Electric Division maintains 19.5 miles of 100 kV transmission lines, 290 miles of distribution lines, and six main substations. The Electric Division provides electric service to 10,879 customers ranging in size from small residential to industrial customers with up to 15 Megawatt electric loads. The system had a peak demand of over 130 MW and annual electric sales of approximately 650,000 MWh. During fiscal year 2017 the following projects have been undertaken:  Re-routed electric and fiber optic lines for the Monroe Bypass.  Additional facilities were installed to serve a new process facility at ATI Metals.  Our last remaining 4 kV lines have been upgraded and converted to 13 kV. The higher voltage is more reliable and the upgrade also includes upgrading the wires that serve some of our oldest neighborhoods.  Expanded electric facilities in the Corporate Center for future growth.  Began installation of new security systems for all of our electrical substations to discourage unauthorized entry and copper theft. 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. xii 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 has completed over 1,300 work orders in addition to completing twelve capital improvement projects between 2009 and 2016. 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 is the corporate gateway and an economic catalyst for Monroe, Union County, and the Charlotte metropolitan area. According to the Institute for Transportation Research and Education, over $22 million in economic output is generated from the tenants and other business users that can be attributed to the airport. With over 100 based aircraft and 56,000 takeoffs and/or landings, there is a significant tax base and operating revenue that is generated at the airport through fuel sales and other services. The 440-acre facility is able to connect our community to all parts of the state, nation, and world. A 7,000-foot runway, with its new enhancements, and the complementary international US Customs terminal provide all-weather, round-the-clock capability for aircraft operations that attract the interest of national and international corporations. The expected completion of an aircraft storage hangar in support of newly established Cirrus aircraft pilot center will bring the newest state-of-art General Aviation aircraft and added operations to the airport, further demonstrating the airport’s significance as the community’s transportation hub and economic catalyst for the community. 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 aids with giving kids something constructive to do, a sense of responsibility and accomplishment. Officers volunteered to participate in a mentoring program called P.A.S.S (Police Advocating Student Success). They meet with 25 at-risk students at Monroe Middle School and Monroe High School to try to reach out to these students. “Coffee with a Cop” along with monthly cookouts have been held throughout the city to increase our community watch programs and provide a place they can relax and have open discussion about their communities. Officers partnered with Children First and gave away 75 bicycles to children at Christmas. 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 xiii 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. Protection is afforded by 81 full-time employees operating 3 engine companies, 1 ladder/rescue combination company, 2 quint companies, 3 aviation firefighting units, 2 brush trucks and 2 hazardous materials units. The department's equipment is housed in 5 strategically located fire stations. The fire department maintained accredited agency status through the Commission on Fire Accreditation International and is one of 238 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. The City has been recently informed that the State has received funding for a safety enhancement project at the intersection of Old Charlotte Highway and Dickerson Boulevard/ ML King Boulevard (NC 200). The project proposes to widen NC 200 to provide dual thru lanes on both approaches as well as increase the storage length of the turn lanes at an estimated cost of $1,537,000. The City of Monroe is to participate 20 percent or $307,400 of the total estimated costs. Through the State Transportation Improvements Program (STIP), opportunities are approaching for major changes to two gateways into Monroe. Projects include US Highway 74 from Rocky River Road to Roland Drive and US 601 from US 74 to the Monroe Bypass. 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 intersection improvements along US 74 at the intersections of Secrest Avenue, Secrest Shortcut Road and Rocky River Road. 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 years. 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 xiv 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, 2017 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 three (3) properties for redevelopment totaling $716,000, had approximately $495,000 in private sector investments in three (3) downtown properties, completed two intersection decorative crosswalks at $58,400, completed Gateway Park at $68,000, had six (6) new business openings and one (1) existing business expansion and hosted downtown special events and promotions. The total value of new public investment in downtown was $842,000 and private investment was $736,200 for a total public/private investment in downtown of approximately $1,578,200, as reported to North Carolina Main Street. Volunteers logged approximately 1,051 hours, valued at $24,162, 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 will be replaced during the 2017-2018 fiscal year. Most of these switches will be interconnected with fiber instead of the current copper connections. 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 City data, which allows them to be more effective on site. New mobile devices are being enrolled in Air Watch for better management. The City has implemented a web based attendance software solution. The virtual server hosts will be replaced during the upcoming year as part of a normal refresh cycle. Network storage will be upgraded also. The IT workshop has been retrofitted to better process equipment for deployment. The City of Monroe pursues grant funding to provide resources for the completion of various projects. During the 2016-2017 year, the Police Department utilized a grant for a forensic recovery of evidence device and software to analyze cellphones and recover evidence from phones in the amount of $31,417. The Police Department also finalized a grant in the fall of 2016 in the amount of $13,134 for technology improvements and equipment upgrades. In the spring of 2017 the Police Department began 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 an Assistance to Firefighters grant in the amount of $39,099 by the U.S. Department of Homeland Security. This grant was used for installation of a sprinkler system at Fire Station 2, as well as for repairing a fire alarm panel and replacement of smoke detectors. The airport is ever positioning itself to continue promoting economic growth for the community. Funded through federal and state grants, the airport has finalized the Glideslope Relocation project, the re-installation of the approach light system, as well as improvements to the runway safety area. Design work for rehabilitating the runway aprons has begun. Also, the airport has received award letters for the construction phase of the rehabilitation of the runway aprons in the amount of $1,292,044 as well as for Federal Aviation Administration (FAA) Non-Primary Entitlement funds intended for airside safety needs in the amount of $150,000. 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. The project is currently in the construction phase. 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. xv 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 is continuing the process of updating its Land Development Plan. This plan has involved city staff as well as the community in an effort to forecast how and where Monroe should grow. Planning staff will initiate the adoption phase of the project in the fall of 2017. 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 the 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 $435 million in capital investment announced and over 1,616 jobs created. 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 $148,902,847. 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 assigning 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. xvi xvii xviii CITY OF MONROE, NORTH CAROLINA LIST OF PRINCIPAL OFFICIALS June 30, 2017 Elected Officials Bobby G. Kilgore Mayor Debra Duncan Mayor Pro Tem Gary Anderson Freddie Gordon Surluta Anthony Billy A. Jordan 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 xix City of Monroe, North Carolina Organizational Chart         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, 2017, 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 includes the design, implementation, and maintenance of internal control relev ant 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 81 percent, 77 percent, and 87 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. 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, 2017, 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 X to the financial statements, for fiscal year ending June 30, 2017, the City adopted new accounting guidance, Governmental Accounting Standards Board (GASB) No. 73, Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement 68 and Amendments to Certain Provisions of GASB Statements 67 and 68.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' Schedules of Funding Progress and Employer Contributions, and the Local Government Employee’s Retirement System Proportionate Share of 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 subj ected to the auditing procedures applied in the audit 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 20, 2017 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 20, 2017 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, 2017. 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 $401,622,694 (net position). Of this amount, $129,501,865 (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 $12,970,588. This increase was the net of a decrease in the amount of $1,785,918 from governmental activities and an increase of $14,756,506 for business-type activities.  As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $34,221,485, an increase of $654,022, in comparison with the prior year. Approximately 25.2 percent of this total amount, or $8,623,502, 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 $18,673,264, or 58.4 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, decreased $2,428,049 (2.8%) during the current fiscal year. The elements of the decrease were the refinancing of the bonds which resulted in the retirement of $23,039,930 and the offsetting issuance of refunding revenue bonds in the amount of $24,548,702. Also, included were other debt retirements totaling $5,724,821 and new installment financing of $1,788,000. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the 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 the City of Monroe can be divided into two categories: Governmental Funds and Proprietary Funds. 6 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 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 governmental 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 nonmajor 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, workers’ 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 38 of this report. 7 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 97 of this report. 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 pages 20-21. City of Monroe’s Net Position Figure 2 Governmental Activities Business-Type Activities Total 2017 2016 2017 2016 2017 2016 Current and other assets $42,709,773 $42,113,567 $131,306,376 $131,104,394 $174,016,149 $173,217,961 Capital assets 74,689,493 74,875,264 265,979,049 253,638,990 340,668,542 328,514,254 Total assets 117,399,266 116,988,831 397,285,425 384,743,384 514,684,691 501,732,215 Deferred outflows of resources 4,990,230 1,099,306 7,012,313 4,384,909 12,002,543 5,484,215 Total assets and deferred outflows of resources 122,389,496 118,088,137 404,297,738 389,128,293 526,687,234 507,216,430 Long-term liabilities outstanding 25,693,500 16,028,027 79,741,940 80,162,366 105,435,440 96,190,393 Other liabilities 4,395,012 4,681,629 14,255,955 13,237,975 18,650,967 17,919,604 Total liabilities 30,088,512 20,709,656 93,997,895 93,400,341 124,086,407 114,109,997 Deferred inflows of resources 712,969 1,021,621 265,164 449,779 978,133 1,471,400 Total liabilities and deferred inflows of resources 30,801,481 21,731,277 94,263,059 93,850,120 125,064,540 115,581,397 Net position: Net investment in capital assets 68,340,932 68,979,453 193,967,233 177,672,688 262,308,165 246,652,141 Restricted 9,812,664 7,384,554 - - 9,812,664 7,384,554 Unrestricted 13,434,419 19,992,853 116,067,446 117,605,485 129,501,865 137,598,338 Total net position $91,588,015 $96,356,860 $310,034,679 $295,278,173 $401,622,694 $391,635,033 The assets and deferred outflows of the City of Monroe exceeded liabilities and deferred inflows by $401,622,694 as of June 30, 2017. Of the City’s total net position, $262,308,165 (65.3%) 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 $9,812,664 represents resources that are subject to external restrictions on how they may be used. The remaining balance of $129,501,865 (32.2%) is unrestricted. This amount may be used at the City’s discretion in meeting its ongoing obligations to citizens and creditors. 8 The City’s net position has increased by $12,970,588 during the current fiscal year. During the current fiscal year, net position for governmental activities decreased $1,785,918 from the prior fiscal year for an ending balance of $91,588,015. The decrease in the net position of governmental activities is primarily the result of increased pension liabilities in the State retirement plan. Also, the City of Monroe implemented GASB 73 this year. With the new reporting change, the City is required to reflect the pension liability for the Law Enforcement Officers’ Special Separation Allowance. A restatement to record this liability decreased the beginning net position for governmental activities by a total of $2,982,927. The net position for business-type activities increased $14,756,506. The biggest part of this increase was due to cash flow generated from operating activity and an increase in capital assets. Capital asset changes are outlined later in this report. At the end of the current fiscal year, the City of Monroe is able to report positive balances in all reported categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. The remainder of this page was intentionally left blank. 9 The following is a summary of the City’s governmental and business-type activities for fiscal year 2017, including revenues and expenses, with a comparison to the prior year. For more detail see the Statement of Activities on page 22-23. City of Monroe’s Changes in Net Position Figure 3 Governmental Activities Business-Type Activities Total 2017 2016 2017 2016 2017 2016 Revenues: Program revenues: Charges for services $8,442,844 $9,072,458 $109,219,135 $103,918,352 $117,661,979 $112,990,810 Operating grants and contributions 2,166,839 2,029,170 - - 2,166,839 2,029,170 Capital grants and contributions 207,846 165,000 2,872,715 2,517,594 3,080,561 2,682,594 General revenues: Property taxes, levied for a specific purpose 20,175,656 19,604,789 - - 20,175,656 19,604,789 Sales and use tax 6,195,900 5,248,826 - - 6,195,900 5,248,826 Utility sales taxes 3,128,264 2,905,588 - - 3,128,264 2,905,588 Motor vehicle tax 678,025 140,103 - - 678,025 140,103 Beer & wine and telecommunications tax 489,736 496,655 - - 489,736 496,655 Gross receipts tax 97,992 76,867 - - 97,992 76,867 Other (92,088) 2,525,611 (1,667,901) 5,420,951 (1,759,989) 7,946,562 Total revenues 41,491,014 42,265,067 110,423,949 111,856,897 151,914,963 154,121,964 Expenses: General government 5,231,791 7,646,234 - - 5,231,791 7,646,234 Transportation 5,307,450 5,214,831 - - 5,307,450 5,214,831 Public safety 23,692,685 19,674,852 - - 23,692,685 19,674,852 Culture and recreation 5,910,333 5,389,292 - - 5,910,333 5,389,292 Economic and physical development 1,063,342 2,070,352 - - 1,063,342 2,070,352 Interest in long-term debt 226,633 199,613 - - 226,633 199,613 Water and sewer - - 13,273,733 12,281,287 13,273,733 12,281,287 Electrical - - 60,175,417 58,077,991 60,175,417 58,077,991 Natural Gas - - 12,228,638 13,595,308 12,228,638 13,595,308 Aquatics and Fitness Center - - 3,849,221 3,817,519 3,849,221 3,817,519 Stormwater - - 1,975,579 1,878,917 1,975,579 1,878,917 Solid waste - - 2,511,555 2,302,857 2,511,555 2,302,857 Airport - - 3,497,998 3,328,340 3,497,998 3,328,340 Total expenses 41,432,234 40,195,174 97,512,141 95,282,219 138,944,375 135,477,393 (Decrease) Increase in net position before transfers 58,780 2,069,893 12,911,808 16,574,678 12,970,588 18,644,571 Transfers (1,844,698) 224,737 1,844,698 (224,737) - - (Decrease) Increase in net position (1,785,918) 2,294,630 14,756,506 16,349,941 12,970,588 18,644,571 Net position, beginning as previously stated 96,356,860 94,062,230 295,278,173 278,928,232 391,635,033 372,990,462 Restatement (2,982,927) - - - (2,982,927) - Net position, beginning as restated 93,373,933 94,062,230 295,278,173 278,928,232 388,652,106 372,990,462 Net position, ending $91,588,015 $93,356,860 $310,034,679 $295,278,173 $401,622,694 $391,635,033 10 Governmental Activities – Governmental activities decreased the City of Monroe’s net position by $1,785,918. Key elements of this net decrease are as follows:  The decrease of $629,614 in Charges for Services consisted of a decrease in building permit fee revenue of $196,514 and an allocation of Internal Service Fund revenue that was allocated to all functions/programs.  Motor vehicle taxes increased by $537,922. This past year, motor vehicle taxes were increased from $5 per vehicle to $30 per vehicle. This revenue is used to offset the cost of increased road maintenance.  The increase of $137,669 in Operating Grants and Contributions was due primarily to the net of a decrease of $115,515 from a one-time pass-through grant from the Rural Economic Development Center for an industry expansion in 2016 and an increase of $242,636 in public safety grants, which includes a police COPs Hiring Grant to increase staffing and several one-time grants for equipment and technology improvements.  Expenses decreased in General Government due to an Incentive Grant in the form of a land conveyance to ATI Specialty Materials included in fiscal year 2016.  Public Safety expenses went up due to one-time capital equipment purchases and the Fire Station #4 construction projects that were included in 2017.  Economic Development expenses went down due to one-time capital property purchases for the Center Theatre and Monroe Science Center in 2016. Business-Type Activities – Business-type activities increased the City of Monroe’s net position by $14,756,506. Key elements of this net increase are as follows:  Charges for Services increased year over year by $5,300,783 primarily due to the net of the following items:  Increased water and sewer sales in the amount of $1,027,111.  Increased energy sales in the amount of $4,260,862.  Monthly dues and joining fees increased by $79,955 at the Monroe Aquatics and Fitness Center  Availability fees for the Water and Sewer Fund were up by $83,825.  Fuel sales at the Charlotte-Monroe Executive Airport were up by $60,710.  Water and Sewer expenses increased due to infrastructure renewal.  Electric expenses increased due to higher power purchases which are directly related to sales and increased demand.  Natural Gas expenses decreased in total due to the net effect of a one-time legal expense in 2016 that did not appear in 2017 and increased power purchases resulting from increased sales. 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. 11 At June 30, 2017, the governmental funds of the City of Monroe reported a combined fund balance of $34,221,485, which is an increase of $654,022 from last year’s total of $33,567,463. Of the governmental funds combined ending fund balances, $5,152,474 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 ($1,094,777). 2). Restricted to indicate that it is restricted to specific purposes as imposed by law ($10,411,391); 3). Committed to indicate that it can only be used for a specific purpose as determined by a formal City Council action ($3,843,272); 4). Assigned to indicate that it is intended to be used for a specific purpose ($13,719,571). More information about fund balance is available in section 1.E.11 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, 2017 the fund balance in the General Fund was $27,321,128, a decrease of $2,648,287 in comparison with the prior year. Of the total fund balance in the General Fund, $5,152,474 (18.9%) 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 16.1% of total General Fund expenditures, while total fund balance represents 85.4% of that same amount. In addition to unassigned fund balance, $9,479,708 is reserved by a minimum fund balance policy that has been adopted by the City Council. Revenues exceeded expenditures prior to transfers by $2,500,732 due to revenue exceeding projections and savings in expenditures. Transfers of available fund balance were primarily for general capital projects, economic development, 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 increase of $3,302,309 in this category is the transfer of money from the General Fund for capital projects, including Concord Avenue Redevelopment, purchase of the Enquirer Journal Building 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 2017 2016 2017 2016 Water and Sewer $ 36,063,614 $ 33,399,119 $ 3,645,562 $ 6,145,409 Electric 51,455,436 57,188,467 4,402,662 4,557,468 Natural Gas 22,223,518 22,364,590 3,012,493 1,910,700 Airport 2,355,849 1,196,637 3,370,193 2,720,869 Aquatics and Fitness Center 1,907,315 1,652,680 86,657 269,225 Stormwater 1,184,294 1,052,826 199,446 331,348 Solid Waste 587,332 613,510 (112,939) 31,006 12 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, 2017, the City of Monroe’s Water Fund reported a total net position of $94,361,112, an increase of $3,645,562 in comparison with the prior year. Total operating revenues increased by 6.5% mainly due to a 3.2% rate increase. 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, 2017, the City of Monroe’s Electric Fund reported a total net position of $121,694,106, an increase of $4,402,662 in comparison with the prior year. Electric operating revenues increased by 4.9% since last fiscal year. The winter remained mild for the past year once again, but demand has increased slightly. Overall operating income increased 22.6%. 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, 2017, the City of Monroe’s natural Gas Fund reported total net position of $53,977,795, an increase of $3,012,493 in comparison with the prior year. Natural gas operating revenues were up by 7.7% from prior year, but not back at the same level as fiscal year 2015. Decreased consumption of natural gas is directly attributable to the mild winters that have been experienced for the past two years. Fiscal year 2017 operating revenue is offset by savings in the cost of natural gas purchased in the amount of $2,632,192. Overall operating income was $4,949,563, which is up 96.2% over fiscal year 2016 due to final legal expenses for pipeline construction that were paid in fiscal year 2016. The Airport Fund accounts for the operation of the Charlotte-Monroe Executive Airport. As of June 30, 2017, the City of Monroe’s Airport Fund reported a total net position of $28,169,753, an increase of $3,370,193 in comparison with the prior year. The main cause for the increase was capital grants totaling $2,699,067 received during the fiscal year. Federal grants payments were received in the amount of $278,117 for Airport Extended Runway Safety Area (ERSA), $1,302,636 for runway number 5 glideslope improvements, and $1,096,835 for runway number 5 approach light improvements. 13 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 $3,455,455, or 10.0%. 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 $1,277,851 and unspent appropriations (various grants, police equitable sharing, and outside agencies), $453,588.  General government funds were appropriated for property purchases and improvements, $390,000.  Additional funding included vehicles and equipment for new police officers hired through the Community Oriented Policing Services Grant, $358,294. Revenues exceeded final budget by $843,863. This was primarily due to increased collections for ad valorem taxes and higher than anticipated sales tax distributions. The year-end mark to market on investments resulted in a loss of $1,092,359. Expenditures were under budget by $6,161,332. Expenses were down due to savings realized from vacant positions and turnover totaling approximately $1,049,897, capital purchases of $1,911,018, and $2,703,671 in other operating accounts. Expenditures were 83.9% of the final amended expenditure budget. $2,674,083 was carried over to fiscal year 2018 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 III.A.5 on pages 58 - 64 of this report. City of Monroe’s Capital Assets (Net of Depreciation) Figure 5 Governmental Activities Business-type Activities Total 2017 2016 2017 2016 2017 2016 Land and land improvements $ 5,376,844 $ 5,352,022 $ 19,631,874 $ 15,806,660 $ 25,008,718 $ 21,158,682 Buildings and improvements 16,818,896 16,454,701 46,738,649 48,365,477 63,557,545 64,820,178 Equipment 1,424,718 1,407,663 2,792,002 2,989,691 4,216,720 4,397,354 Vehicles and motorized equipment 4,501,492 4,245,895 2,585,123 2,764,292 7,086,615 7,010,187 Other Intangibles 223,595 153,823 125,086 175,121 348,681 328,944 Infrastructure 44,673,919 46,600,810 174,494,669 172,726,756 219,168,588 219,327,566 Construction in progress 1,670,029 660,350 19,611,646 10,810,993 21,281,675 11,471,343 Total $74,689,493 $74,875,264 $265,979,049 $253,638,990 $340,668,542 $328,514,254 14 The City of Monroe’s investment in capital assets for its governmental and business–type activities as of June 30, 2017 totals $340,668,542 (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 $12,154,288. Major capital asset events during the year included the following:  Purchase of buildings in Downtown Monroe for revitalization  Lancaster Avenue sidewalk  Water and Sewer infrastructure renewal  Electric line installation and replacement  Land purchase for electric for future development  Natural Gas land purchase for construction of a liquefied natural gas facility Construction in progress totaling $21,281,675 has increased significantly from last year. New projects included in this amount are as follows:  General – Center Theatre Renovation  Water – John Glen water treatment plant improvements  Stormwater - Pinedell Road culvert replacement  Electric – Electric system expansion including construction of the ATI Powder facility and various renewal and replacement projects. Construction of remaining infrastructure in the Corporate Center industrial park and construction of speculative building #4 is almost complete.  Natural Gas – construction has begun on the Liquefied Natural Gas Peak Shaving Facility and utility relocation continued for Highway 74 bypass  Airport – improvements to the glideslope and medium intensity approach lighting system 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 III.B.8 beginning on page 83 of this report. City of Monroe’s Outstanding Debt Figure 6 Governmental Activities Business-Type Activities Total 2017 2016 2017 2016 2017 2016 Install purchase obligations $6,947,288 $6,357,269 $ - $ 153,909 $ 6,947,288 $ 6,511,178 Revenue bonds - - 37,250,504 38,527,795 37,250,504 38,527,795 State revolving loans - - 8,178,755 8,717,810 8,178,755 8,717,810 Certificates of participation - - 1,530,000 2,250,000 1,530,000 2,250,000 Limited Obligation Bonds - - 29,886,889 30,214,702 29,886,889 30,214,702 Total $6,947,288 $6,357,269 $76,846,148 $79,864,216 $83,793,436 $86,221,485 As of June 30, 2017, the City of Monroe had total debt outstanding of $83,793,436. The City issued an installment financing this past year to finance three fire trucks in the amount of $1,788,000. The City’s bonded debt, $37,250,504, represents bonds secured by the combined revenues of the major business-type funds, which include water and sewer, electric, natural gas and airport. The City issued Combined Enterprise System Revenue Refunding Bonds to advance refund a portion of the City’s Series 2008A bonds. This transaction saved the City $3,573,013 over the life of the remaining term. The certificates of participation were issued to fund the construction of a natural gas pipeline. These certificates of 15 participation were refinanced in fiscal year 2016 and replaced with limited obligation bonds. The City’s total debt, net of retirements, decreased $2,428,049 during the fiscal year. The elements of the decrease were the refinancing of the bonds which resulted in the retirement of $23,039,930 and the offsetting issuance of refunding revenue bonds in the amount of $24,548,702. Also, included were other debt retirements totaling $5,724,821 and new installment financing of $1,788,000. The City of Monroe has an A2 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 $245,850,619. 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 the City of Monroe has dropped to 4.4%, which is a decrease of 0.5% 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 2.3% from fiscal year 2016 to fiscal year 2017 along with the tax collection rate by 0.2%.  Population increased 1.2% from 34,323 in 2016 to 34,725 in 2017. Governmental Activities – The City passed a property tax rate of $0.5863 for fiscal year 2018. 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. The City of Monroe’s fiscal year 2018 budget increased by approximately 4.2% with General and Governmental Funds decreasing by 4.6% and business-type funds increasing by 7.7% over their current year budgets. In the fiscal year 2018 budget we continue to support initiatives that cultivate work force stability, address deferred maintenance, and implement projects that enhance our community. In the fiscal year 2016, the City completed a job classification and compensation study. The fiscal year 2018 budget includes funding to implement phase two of three of the study’s recommended pay plan modifications. This will increase employees pay, ensuring the ability to hire and retain experienced qualified employees. Next year’s budget also includes adding four new full-time and two new part-time positions in the Police Department and two new part-time positions in the Fire Department to handle increased activity and demands. Funded projects include the purchase of software to enhance and improve the City’s permitting process, adding a generator at the Street Department Facility, and adding a picnic shelter at the Dickerson Center. Improvements to existing facilities remain a priority and include replacement of ballfield lights at Don Griffin Park, soccer field renovations, and erosion repairs at Park Williams. Sidewalk construction along Concord Avenue and sidewalk maintenance to repair unsafe areas is also planned. Also, included is continuing funding for the demolition of dilapidated housing, greenway improvements, and the City’s beautification program. The budget preserves nearly $3 million of unassigned fund balance for the future capital needs of the City. 16 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. Residential solid waste fees increased by $0.50 per month. Electric, natural gas, and stormwater rates remained the same. With the extensive planning within our water, sewer, electric, and natural gas services, Monroe stands alone in Union County to meet any and all residential and industrial development needs. Being ready and able to meet these needs puts Monroe in an excellent position to continue to grow our City. Several projects, including water and wastewater treatment plant improvements, a liquefied natural gas peak shaving facility and a new corporate bulk airplane storage hangar, are planned to be financed with revenue bonds in the upcoming year. Requests for Information This report is designed to provide an overview of the City’s finances for those with an interest in this area. Questions concerning any of the information found in this report or requests for additional information should be directed to the Finance Director at the City of Monroe, 300 West Crowell Street, Monroe, North Carolina, 28112, visit the City’s website at www.monroenc.org., or email accounting@monroenc.org for more information. 17                       18 Basic Financial Statements The Basic Financial Statements provide a summary overview of the financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information at June 30, and the respective changes in financial position and cash flows, where appropriate for the year then ended.  Government-Wide Financial Statements  Fund Financial Statements Governmental Fund Financial Statements Proprietary Fund Financial Statements  Notes to Financial Statements  Required Supplemental Information 19 Exhibit 1 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF NET POSITION JUNE 30, 2017 Monroe City of Tourism Governmental Business-Type Monroe Development Activities Activities Total ABC Board Authority Assets: Current assets: Cash and cash equivalents 35,363,989$ 110,990,124$ 146,354,113$ 746,499$ 412,454$ Taxes receivable 860,565 - 860,565 - - Accounts receivable 1,058,082 14,026,844 15,084,926 - 53,428 Note receivable - short-term 53,763 - 53,763 - - Internal balances - short-term (290,088) 290,088 - - - Due from other governments 3,439,616 - 3,439,616 - - Due from component units 31,298 - 31,298 - - Inventories 217,440 3,777,379 3,994,819 386,557 3,879 Prepaids 1,026,362 63,130 1,089,492 19,740 11,503 Cash and cash equivalents - restricted 1,488,400 567,389 2,055,789 - - Total current assets 43,249,427 129,714,954 172,964,381 1,152,796 481,264 Non-current assets: Note receivable 1,051,768 - 1,051,768 - - Internal balances - long term (1,591,422) 1,591,422 - - - Capital assets: Land, non-depreciable improvements, and construction in progress 7,046,873 39,243,520 46,290,393 317,013 - Other capital assets, net of depreciation 67,642,620 226,735,529 294,378,149 571,121 - Total capital assets 74,689,493 265,979,049 340,668,542 888,134 - Total non-current assets 74,149,839 267,570,471 341,720,310 888,134 - Total assets 117,399,266 397,285,425 514,684,691 2,040,930 481,264 Deferred Outflows of Resources: Contributions to pension plan in current fiscal year 1,314,618 549,679 1,864,297 25,367 - Pension deferrals 3,675,612 1,628,302 5,303,914 69,529 - Charge on debt defeasance - 4,834,332 4,834,332 - - Total deferred outflows of resources 4,990,230 7,012,313 12,002,543 94,896 - Liabilities: Current liabilities: Accounts payable and accrued liabilities 1,180,044 8,803,261 9,983,305 465,332 9,896 Due to primary government - - - 13,489 17,809 Current portion of long-term liabilities 2,690,752 4,851,071 7,541,823 - - Unearned revenue 2,188 34,234 36,422 - - Payable from restricted assets 100,533 567,389 667,922 - - Workers' compensation claims 3,321 - 3,321 - - Healthcare benefits claims 418,174 - 418,174 - - Total current liabilities 4,395,012 14,255,955 18,650,967 478,821 27,705 Non-current liabilities: Net pension liability 5,741,772 2,543,614 8,285,386 99,751 - Total pension liability (LEOSSA) 3,592,717 - 3,592,717 - - OPEB liability 9,896,268 4,385,017 14,281,285 - - Due in more than one year 6,462,743 72,813,309 79,276,052 - - Total non-current liabilities 25,693,500 79,741,940 105,435,440 99,751 - Total liabilities 30,088,512 93,997,895 124,086,407 578,572 27,705 Component UnitsPrimary Government The notes to the financial statements are an integral part of this statement. 20 Exhibit 1 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF NET POSITION JUNE 30, 2017 Monroe City of Tourism Governmental Business-Type Monroe Development Activities Activities Total ABC Board Authority Component UnitsPrimary Government Deferred Inflows of Resources: Pension deferrals 669,529 265,164 934,693 10,142 - Other deferred inflows 43,440 - 43,440 - - Total deferred inflows of resources 712,969 265,164 978,133 10,142 - Net Position: Net investment in capital assets 68,340,932 193,967,233 262,308,165 888,134 - Restricted for: Stabilization by State statute 7,528,725 - 7,528,725 - 61,678 Public safety 506,944 - 506,944 - - Transportation 872,825 - 872,825 - - Occupancy tax capital projects 667,983 - 667,983 - - Economic development 236,187 - 236,187 133,969 - Tourism promotion - - - - 376,499 Unrestricted 13,434,419 116,067,446 129,501,865 525,009 15,382 Total net position 91,588,015$ 310,034,679$ 401,622,694$ 1,547,112$ 453,559$ The notes to the financial statements are an integral part of this statement. 21 Exhibit 2 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2017 Operating Capital Charges Grants and Grants and Functions/Programs Expenses for Services Contributions Contributions Primary Government: Governmental Activities: General government 5,231,791$ 2,203,205$ -$ -$ Transportation 5,307,450 350,454 963,013 207,846 Public safety 23,692,685 4,161,046 560,416 - Culture and recreation 5,910,333 1,728,139 211,910 - Economic and physical development 1,063,342 - 431,500 - Interest on long-term debt 226,633 - - - Total governmental activities 41,432,234 8,442,844 2,166,839 207,846 Business-Type Activities: Water and sewer 13,273,733 17,670,908 - - Electric 60,175,417 65,606,128 - - Natural gas 12,228,638 15,568,545 - 173,648 Aquatics and Fitness Center 3,849,221 4,097,000 - - Stormwater 1,975,579 2,211,365 - - Solid waste 2,511,555 2,410,900 - - Airport 3,497,998 1,654,289 - 2,699,067 Total business-type activities 97,512,141 109,219,135 - 2,872,715 Total primary government 138,944,375$ 117,661,979$ 2,166,839$ 3,080,561$ Component Units: ABC Board 4,542,741$ 4,542,728$ -$ -$ Tourism Development Authority 455,660 - 677,786 - Total component units 4,998,401$ 4,542,728$ 677,786$ -$ Program Revenues The notes to the financial statements are an integral part of this statement. 22 Exhibit 2 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2017 Monroe City of Tourism Governmental Business-Type Monroe Development Functions/Programs Activities Activities Total ABC Board Authority Primary Government: Governmental Activities: General government (3,028,586)$ -$ (3,028,586)$ -$ -$ Transportation (3,786,137) - (3,786,137) - - Public safety (18,971,223) - (18,971,223) - - Culture and recreation (3,970,284) - (3,970,284) - - Economic and physical development (631,842) - (631,842) - - Interest on long-term debt (226,633) - (226,633) - - Total governmental activities (30,614,705) - (30,614,705) - - Business-Type Activities: Water and sewer - 4,397,175 4,397,175 - - Electric - 5,430,711 5,430,711 - - Natural gas - 3,513,555 3,513,555 - - Aquatics and Fitness Center - 247,779 247,779 - - Stormwater - 235,786 235,786 - - Solid waste - (100,655) (100,655) - - Airport - 855,358 855,358 - - Total business-type activities - 14,579,709 14,579,709 - - Total primary government (30,614,705) 14,579,709 (16,034,996) - - Component Units: ABC Board - - - (13) - Tourism Development Authority - - - - 222,126 Total component units - - - (13) 222,126 General Revenues: Taxes: Property taxes, levied for general purpose 20,175,656 - 20,175,656 - - Sales and use tax 6,195,900 - 6,195,900 - - Utility sales taxes 3,128,264 - 3,128,264 - - Motor vehicle tax 678,025 - 678,025 - - Beer & wine and telecommunications taxes 489,736 - 489,736 - - Gross receipts tax 97,992 - 97,992 - - Unrestricted investment earnings (loss) (723,163) (2,072,196) (2,795,359) 111 - Interest earnings on interfund loans - 81,598 81,598 - - Miscellaneous 631,075 322,697 953,772 - - Total general revenues 30,673,485 (1,667,901) 29,005,584 111 - Transfers (1,844,698) 1,844,698 - - - Total general revenues and transfers 28,828,787 176,797 29,005,584 111 - Change in net position (1,785,918) 14,756,506 12,970,588 98 222,126 Net Position: Beginning of year, July 1 96,356,860 295,278,173 391,635,033 1,547,014 231,433 Restatement (2,982,927) - (2,982,927) - - Beginning of year, July 1, restated 93,373,933 295,278,173 388,652,106 1,547,014 231,433 End of year, June 30 91,588,015$ 310,034,679$ 401,622,694$ 1,547,112$ 453,559$ 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. 23 Exhibit 3 CITY OF MONROE, NORTH CAROLINA BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2017 Nonmajor Total Governmental Governmental General Funds Funds Assets: Cash and cash equivalents 24,258,511$ 6,662,877$ 30,921,388$ Receivables: Taxes 858,159 2,406 860,565 Accounts 507,512 13,711 521,223 Due from other governments 3,279,982 159,634 3,439,616 Due from component unit 13,489 17,809 31,298 Inventories 217,440 - 217,440 Prepaids 876,479 858 877,337 Cash and cash equivalents - restricted 1,293,853 177,699 1,471,552 Total assets 31,305,425$ 7,034,994$ 38,340,419$ Liabilities, Deferred Inflows of Resources, and Fund Balances: Liabilities: Accounts payable and accrued liabilities 1,047,813$ 132,231$ 1,180,044$ Accounts payable to be paid from restricted assets 83,685 - 83,685 Due to other funds 168,911 - 168,911 Prepaid privilege license 2,188 - 2,188 Advances from other funds 1,422,511 - 1,422,511 Total liabilities 2,725,108 132,231 2,857,339 Deferred Inflows of Resources 1,259,189 2,406 1,261,595 Fund Balances: Non-spendable: Inventories 217,440 - 217,440 Prepaids 876,479 858 877,337 Restricted: Stabilization by State statute 5,521,299 2,007,426 7,528,725 Public safety 1,105,671 - 1,105,671 Transportation 872,825 - 872,825 Occupancy tax capital projects - 667,983 667,983 Economic development 54,150 182,037 236,187 Committed: Capital projects - 3,843,272 3,843,272 Assigned: Minimum fund balance requirement 9,479,708 - 9,479,708 Airport grant acceptance 588,868 - 588,868 Airport operations - 5-year subsidy 1,000,000 - 1,000,000 Street resurfacing - 5-year program 1,200,000 - 1,200,000 Subsequent year's expenditures 1,252,214 - 1,252,214 Community development - 56,562 56,562 Downtown Monroe - 142,219 142,219 Unassigned 5,152,474 - 5,152,474 Total fund balances 27,321,128 6,900,357 34,221,485 Total liabilities, deferred inflows of resources, and fund balances 31,305,425$ 7,034,994$ 38,340,419$ The notes to the financial statements are an integral part of this statement. 24 Exhibit 4 CITY OF MONROE, NORTH CAROLINA RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2017 Total Governmental Funds Amounts reported for governmental activities in the Statements of Net Position are different because: Fund balances - total governmental funds (Exhibit 3)34,221,485$ Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Gross capital assets at historical cost 147,949,995$ Accumulated depreciation (73,260,502) 74,689,493 Total pension liability (LEOSSA)(3,592,717) Note receivable from outside party 1,105,531 Net pension liability - LGERS (5,741,772) Contributions to the pension plan in the current fiscal year and pension deferrals are deferred outflows of resources on the Statement of Net Position. 4,990,230 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. 2,728,250 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. 1,168,568 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. 810,172 Internal balance due from business-type activities to governmental activities (290,088) Liabilities for earned, but unavailable, revenues in fund statements 1,218,155 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds (Note II.A.).(19,049,763) Pension related deferrals (669,529) Net position of governmental activities (Exhibit 1)91,588,015$ The notes to the financial statements are an integral part of this statement. 25 Exhibit 5 Nonmajor Total Governmental Governmental General Funds Funds Revenues: Ad valorem taxes 20,230,045$ 54,779$ 20,284,824$ Other taxes and licenses 778,383 - 778,383 Unrestricted intergovernmental 9,987,394 - 9,987,394 Restricted intergovernmental 1,550,928 823,756 2,374,684 Sales and services 2,281,613 - 2,281,613 Investment earnings (642,359) (26,144) (668,503) Miscellaneous 316,008 145,090 461,098 Total revenues 34,502,012 997,481 35,499,493 Expenditures: Current: General government 3,977,475 - 3,977,475 Transportation 3,225,230 - 3,225,230 Public safety 18,816,984 - 18,816,984 Culture and recreation 4,556,977 - 4,556,977 Economic and physical development - 1,002,311 1,002,311 Capital outlay - 1,785,182 1,785,182 Debt service: Principal retirement 1,197,981 - 1,197,981 Interest and other charges 226,633 - 226,633 Total expenditures 32,001,280 2,787,493 34,788,773 Revenues over (under) expenditures 2,500,732 (1,790,012) 710,720 Other Financing Sources (Uses): Transfers from other funds 576,000 5,232,321 5,808,321 Transfers to other funds (7,513,019) (140,000) (7,653,019) Installment purchase obligations issued 1,788,000 - 1,788,000 Total other financing sources (uses)(5,149,019) 5,092,321 (56,698) Net change in fund balances (2,648,287) 3,302,309 654,022 Fund Balances: Beginning of year, July 1 29,969,415 3,598,048 33,567,463 End of year, June 30 27,321,128$ 6,900,357$ 34,221,485$ STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS CITY OF MONROE, NORTH CAROLINA FOR THE YEAR ENDED JUNE 30, 2017 The notes to the financial statements are an integral part of this statement. 26 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, 2017 Amounts reported for governmental activities in the Statement of Activities are different because: Net change in fund balances - total governmental funds (Exhibit 5) 654,022$ 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 II.B.). (185,771) Change in deferred outflow - pension 3,817,115 Change in deferred inflows - pension 416,738 Change in net pension liability (4,400,400) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Change in deferred inflows (102,129) 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 II.B.). (590,019) 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. Compensated absences (65,499) Total pension obligation (180,994) OPEB liability (1,501,289) (1,747,782) The Internal Service Fund, determined to be governmental fund type, is used by management to charge the costs, net of investment earnings.352,308 Change in net position of governmental activities (Exhibit 2)(1,785,918)$ The notes to the financial statements are an integral part of this statement. 27                       28 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, 2017 Variance Original Final Actual Over/Under Revenues: Ad valorem taxes 19,589,752$ 19,589,752$ 20,230,045$ 640,293$ Other taxes and licenses 920,920 920,920 778,383 (142,537) Unrestricted intergovernmental 8,759,304 8,759,304 9,987,394 1,228,090 Restricted intergovernmental 1,254,847 1,618,851 1,550,928 (67,923) Sales and services 1,899,402 1,899,402 2,281,613 382,211 Investment earnings 450,000 450,000 (642,359) (1,092,359) Miscellaneous 409,887 419,920 316,008 (103,912) Total revenues 33,284,112 33,658,149 34,502,012 843,863 Expenditures: Current: General government 4,554,049 5,795,691 3,977,475 1,818,216 Transportation 4,006,033 3,838,923 3,225,230 613,693 Public safety 19,343,558 21,551,651 18,816,984 2,734,667 Culture and recreation 5,245,959 5,383,844 4,556,977 826,867 Debt service: Principal retirement 1,361,353 1,361,353 1,197,981 163,372 Interest and other charges 196,205 231,150 226,633 4,517 Total expenditures 34,707,157 38,162,612 32,001,280 6,161,332 Revenues over (under) expenditures (1,423,045) (4,504,463) 2,500,732 7,005,195 Other Financing Sources (Uses): Transfers from other funds 565,000 565,000 576,000 11,000 Transfers to other funds (5,605,623) (7,716,746) (7,513,019) 203,727 Installment purchase obligations issued 1,050,000 1,870,000 1,788,000 (82,000) Total other financing sources (uses)(3,990,623) (5,281,746) (5,149,019) 132,727 Appropriated fund balance 5,413,668 9,786,209 - (9,786,209) Net change in fund balance -$ -$ (2,648,287) (2,648,287)$ Fund Balance: Beginning of year, July 1 29,969,415 End of year, June 30 27,321,128$ Budgeted Amounts The notes to the financial statements are an integral part of this statement. 29 Exhibit 8 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2017 Water and Sewer Electric Natural Gas Airport Assets: Current assets: Cash and cash equivalents 36,931,892$ 44,294,826$ 21,942,389$ 2,860,185$ Accounts receivable 1,804,083 8,928,696 1,424,762 1,333,376 Prepaid expenses 37,559 17,629 4,184 701 Inventories 314,670 3,127,123 301,407 27,422 Total current assets 39,088,204 56,368,274 23,672,742 4,221,684 Non-current assets: Restricted assets: Cash and cash equivalents: Customer deposits 83,577 339,904 143,908 - Advance to other funds - 2,467,001 - - Capital assets: Land and other non-depreciable assets 1,327,993 15,025,084 6,143,821 15,561,796 Other capital assets, net of depreciation 71,388,667 73,037,098 56,699,601 18,932,105 Capital assets (net)72,716,660 88,062,182 62,843,422 34,493,901 Total non-current assets 72,800,237 90,869,087 62,987,330 34,493,901 Total assets 111,888,441 147,237,361 86,660,072 38,715,585 Deferred Outflows of Resources: Contributions to pension plan in current fiscal year 230,973 100,267 51,923 42,971 Pension deferrals 684,205 297,019 153,814 127,294 Charge on debt defeasance 282,290 823,201 3,602,244 126,597 Total deferred outflows of resources 1,197,468 1,220,487 3,807,981 296,862 Liabilities: Current liabilities: Accounts payable and accrued liabilities 608,132 6,220,631 878,529 576,371 Unearned revenue - - - - Compensated absences 206,135 160,050 68,638 15,706 Advance from other funds - - - 875,579 Certificates of participation - - 750,000 - Revenue bonds payable 723,075 1,200,574 279,211 676,082 Limited obligation bonds payable - - 192,813 - State revolving loans payable 481,103 - - - Total current liabilities 2,018,445 7,581,255 2,169,191 2,143,738 Liabilities payable from restricted assets: Customer deposits 83,577 339,904 143,908 - Non-current liabilities: Net pension liability 1,068,815 463,982 240,277 198,849 Compensated absences 101,530 78,832 33,808 7,736 Certificates of participation - net of unamortized discounts - - 780,000 - Revenue bonds payable - net unamortized premium 5,799,622 17,446,139 2,995,289 8,130,512 Limited obligation bonds payable - - 29,694,076 - State revolving loans payable 7,697,652 - - - Other post-employment benefits payable 1,843,736 805,261 408,662 341,129 Total non-current liabilities 16,594,932 19,134,118 34,296,020 8,678,226 Total liabilities 18,613,377 26,715,373 36,465,211 10,821,964 Deferred Inflows of Resources: Pension deferrals 111,420 48,369 25,047 20,730 Net investment in capital assets 58,297,498 70,238,670 31,754,277 25,813,904 Unrestricted 36,063,614 51,455,436 22,223,518 2,355,849 Total net position 94,361,112$ 121,694,106$ 53,977,795$ 28,169,753$ Major Enterprise Funds The notes to the financial statements are an integral part of this statement. 30 Exhibit 8 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2017 Governmental Activities Nonmajor Internal Enterprise Service Funds Total Funds Assets: Current assets: Cash and cash equivalents 4,960,832$ 110,990,124$ 4,442,601$ Accounts receivable 535,927 14,026,844 536,859 Prepaid expenses 3,057 63,130 149,025 Inventories 6,757 3,777,379 - Total current assets 5,506,573 128,857,477 5,128,485 Non-current assets: Restricted assets: Cash and cash equivalents: Customer deposits - 567,389 16,848 Advance to other funds - 2,467,001 - Capital assets: Land and other non-depreciable assets 1,184,826 39,243,520 - Other capital assets, net of depreciation 6,678,058 226,735,529 - Capital assets (net)7,862,884 265,979,049 - Total non-current assets 7,862,884 269,013,439 16,848 Total assets 13,369,457 397,870,916 5,145,333 Deferred Outflows of Resources; Contributions to pension plan in current fiscal year 123,545 549,679 - Pension deferrals 365,970 1,628,302 - Charge on debt defeasance - 4,834,332 - Total deferred outflows of resources 489,515 7,012,313 - Liabilities: Current liabilities: Accounts payable and accrued liabilities 519,598 8,803,261 421,495 Unearned revenue 34,234 34,234 - Compensated absences 97,684 548,213 - Advance from other funds - 875,579 - Certificates of participation - 750,000 - Revenue bonds payable - 2,878,942 - Limited obligation bonds payable - 192,813 - State revolving loans payable - 481,103 - Total current liabilities 651,516 14,564,145 421,495 Liabilities payable from restricted assets: Customer deposits - 567,389 16,848 Non-current liabilities: Net pension liability 571,691 2,543,614 - Compensated absences 48,113 270,019 - Certificates of participation - net of unamortized discounts - 780,000 - Revenue bonds payable - net unamortized premium - 34,371,562 - Limited obligation bonds payable - 29,694,076 - State revolving loans payable - 7,697,652 - Other post-employment benefits payable 986,229 4,385,017 - Total non-current liabilities 1,606,033 80,309,329 16,848 Total liabilities 2,257,549 94,873,474 438,343 Deferred Inflows of Resources: Pension deferrals 59,598 265,164 - Net investment in capital assets 7,862,884 193,967,233 - Unrestricted 3,678,941 115,777,358 4,706,990 Total net position 11,541,825$ 309,744,591 4,706,990$ Adjustment to reflect the consolidation of Internal Service Fund activities related to enterprise funds 290,088 Net position of business-type activities 310,034,679$ The notes to the financial statements are an integral part of this statement. 31 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, 2017 Water and Sewer Electric Natural Gas Airport Operating Revenues: Charges for services 16,223,262$ 65,231,350$ 15,550,098$ 1,575,827$ Interfund charges and employee contributions - - - - Availability fees 953,462 - - - Other operating revenues 357,632 327,349 1,437 72,599 Total operating revenues 17,534,356 65,558,699 15,551,535 1,648,426 Operating Expenses: Distribution systems 4,642,685 4,195,845 3,003,170 - Water filter plant 3,010,325 - - - Waste treatment plant 2,466,598 - - - Electric power purchases - 52,237,592 - - Natural gas purchases - - 6,071,931 - Aquatics and Fitness Center operations - - - - Airport operations - - - 2,324,935 Stormwater operations - - - - Solidwaste operations - - - - Solidwaste maintenance - - - - Operating expenses - - - - Workers' compensation claims and premiums - - - - Health benefit claims and premiums - - - - Property and liability claims and premiums - - - - Depreciation and amortization 2,562,543 2,546,679 1,526,871 678,816 Total operating expenses 12,682,151 58,980,116 10,601,972 3,003,751 Operating income (loss)4,852,205 6,578,583 4,949,563 (1,355,325) Non-Operating Revenues (Expenses): Gain (loss) on sale of capital assets 66,704 13,326 (13,955) - Other non-operating revenues (expenses) 9,943 282,894 25,330 - Investment earnings (691,708) (896,310) (395,510) - Interest income interfund loans - 81,598 - - Interest and other charges (591,582) (1,195,301) (1,612,711) (494,247) Total non-operating revenues (expenses)(1,206,643) (1,713,793) (1,996,846) (494,247) Income (loss) before capital contributions and transfers 3,645,562 4,864,790 2,952,717 (1,849,572) Capital grants and contributions - - 173,648 2,699,067 Transfers from other funds - - - 2,520,698 Transfers to other funds - (462,128) (113,872) - Total transfers (to) from other funds - (462,128) (113,872) 2,520,698 Change in net position 3,645,562 4,402,662 3,012,493 3,370,193 Net Position: Beginning of year, July 1 90,715,550 117,291,444 50,965,302 24,799,560 End of year, June 30 94,361,112$ 121,694,106$ 53,977,795$ 28,169,753$ Major Enterprise Funds The notes to the financial statements are an integral part of this statement. 32 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, 2017 Governmental Activities Nonmajor Internal Enterprise Service Funds Total Funds Operating Revenues: Charges for services 8,450,919$ 107,031,456$ -$ Interfund charges and employee contributions - - 8,024,945 Availability fees - 953,462 - Other operating revenues 242,738 1,001,755 783,524 Total operating revenues 8,693,657 108,986,673 8,808,469 Operating Expenses: Distribution systems - 11,841,700 - Water filter plant - 3,010,325 - Waste treatment plant - 2,466,598 - Electric power purchases - 52,237,592 - Natural gas purchases - 6,071,931 - Aquatics and Fitness Center operations 3,549,890 3,549,890 - Airport operations - 2,324,935 - Stormwater operations 1,844,329 1,844,329 - Solidwaste operations 2,160,964 2,160,964 - Solidwaste maintenance 43,925 43,925 - Operating expenses - - 447,512 Workers' compensation claims and premiums - - 185,527 Health benefit claims and premiums - - 6,982,096 Property and liability claims and premiums - - 610,285 Depreciation and amortization 708,546 8,023,455 - Total operating expenses 8,307,654 93,575,644 8,225,420 Operating income (loss)386,003 15,411,029 583,049 Non-Operating Revenues (Expenses): Gain (loss) on sale of capital assets (26,498) 39,577 - Other non-operating revenues (expenses) 4,530 322,697 - Investment earnings (88,668) (2,072,196) (78,309) Interest income interfund loans - 81,598 - Interest and other charges (2,203) (3,896,044) - Total non-operating revenues (expenses)(112,839) (5,524,368) (78,309) Income (loss) before capital contributions and transfers 273,164 9,886,661 504,740 Capital grants and contributions - 2,872,715 - Transfers from other funds - 2,520,698 - Transfers to other funds (100,000) (676,000) - Transfers (to) from other funds (100,000) 1,844,698 - Change in net position 173,164 14,604,074 504,740 Net Position: Beginning of year, July 1 11,368,661 4,202,250 End of year, June 30 11,541,825$ 4,706,990$ Adjustment to reflect the consolidation of Internal Service Fund activities related to enterprise funds change 152,432 Net position of business-type activities 14,756,506$ The notes to the financial statements are an integral part of this statement. 33 Exhibit 10 Page 1 of 4 CITY OF MONROE, NORTH CAROLINA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2017 Water and Sewer Electric Natural Gas Airport Cash Flows from Operating Activities: Cash received from customers 17,127,578$ 63,971,456$ 15,159,575$ 2,547,534$ Cash paid for goods and services (5,557,470) (53,198,762) (7,441,599) (2,246,232) Cash paid to or on behalf of employees for services (3,997,915) (2,535,331) (957,933) (545,143) Other operating revenues - - - - Net cash provided (used) by operating activities 7,572,193 8,237,363 6,760,043 (243,841) Cash Flows from Non-Capital Financing Activities: Advances from other funds - 197,794 - - Advances to other funds - - - (34,421) Transfers from other funds - - - 2,520,698 Transfers to other funds - (462,128) (113,872) - Net cash provided (used) by non-capital financing activities - (264,334) (113,872) 2,486,277 Cash Flows from Capital and Related Financing Activities: Proceeds from sale of capital assets 70,633 1,306,352 200,000 - Acquisition and construction of capital assets (2,421,776) (13,200,429) (3,782,803) (2,279,797) Capital contributions - - 173,648 2,699,067 Premium on refunding 658,746 2,767,589 462,367 - Principal paid on bond maturities and equipment obligations (1,176,132) (985,866) (1,147,057) (610,000) Retirement of bond debt (4,108,284) (17,260,127) (2,883,559) - Bond refunding proceeds 3,499,804 14,703,722 2,456,474 - Interest paid on bond maturities and equipment obligations (591,582) (1,195,300) (1,612,711) (494,245) Net cash provided (used) by capital and related financing activities (4,068,591) (13,864,059) (6,133,641) (684,975) Cash Flows from Investing Activities: Earnings on investments (691,708) (814,712) (395,510) - Net cash provided (used) by capital and related investing activities (691,708) (814,712) (395,510) - Net increase (decrease) in cash and cash equivalents 2,811,894 (6,705,742) 117,020 1,557,461 Cash and Cash Equivalents: Beginning of year, July 1 34,203,575 51,340,472 21,969,277 1,302,724 End of year, June 30 37,015,469$ 44,634,730$ 22,086,297$ 2,860,185$ Major Enterprise Funds The notes to the financial statements are an integral part of this statement. 34 Exhibit 10 Page 2 of 4 CITY OF MONROE, NORTH CAROLINA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2017 Governmental Activities Nonmajor Internal Enterprise Service Funds Total Funds Cash Flows from Operating Activities: Cash received from customers 8,571,705$ 107,377,848$ 7,725,145$ Cash paid for goods and services (4,629,904) (73,073,967) (8,226,234) Cash paid to or on behalf of employees for services (2,590,295) (10,626,617) - Other operating revenues - - 783,524 Net cash provided (used) by operating activities 1,351,506 23,677,264 282,435 Cash Flows from Non-Capital Financing Activities: Advances from other funds - 197,794 - Advances to other funds - (34,421) - Transfers from other funds - 2,520,698 - Transfers to other funds (100,000) (676,000) - Net cash provided (used) by non-capital financing activities (100,000) 2,008,071 - Cash Flows from Capital and Related Financing Activities: Proceeds from sale of capital assets 11,000 1,587,985 - Acquisition and construction of capital assets (405,373) (22,090,178) - Capital contributions - 2,872,715 - Premium on refunding - 3,888,702 - Principal paid on bond maturities and equipment obligations (153,909) (4,072,964) - Retirement of bond debt - (24,251,970) - Bond refunding proceeds - 20,660,000 - Interest paid on bond maturities and equipment obligations (2,203) (3,896,041) - Net cash provided (used) by capital and related financing activities (550,485) (25,301,751) - Cash Flows from Investing Activities: Earnings on investments (88,668) (1,990,598) (78,309) Net cash provided (used) by capital and related investing activities (88,668) (1,990,598) (78,309) Net increase (decrease) in cash and cash equivalents 612,353 (1,607,014) 204,126 Cash and Cash Equivalents: Beginning of year, July 1 4,348,479 113,164,527 4,255,323 End of year, June 30 4,960,832$ 111,557,513$ 4,459,449$ The notes to the financial statements are an integral part of this statement. 35 Exhibit 10 Page 3 of 4 CITY OF MONROE, NORTH CAROLINA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2017 Water and Sewer Electric Natural Gas Airport Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss)4,852,205$ 6,578,583$ 4,949,563$ (1,355,325)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 2,562,543 2,546,679 1,526,871 678,816 Non operating revenue 9,943 282,894 25,330 - Increase deferred outflows - pension (710,545) (308,453) (159,735) (132,194) Increase in net pension liability 819,122 355,588 184,144 152,395 Decrease deferred inflows - pension (77,575) (33,676) (17,439) (14,432) Changes in assets and liabilities: (Increase) decrease in accounts receivable (392,167) (1,862,110) (416,628) 897,407 (Increase) decrease in inventories (306) 61,285 37,821 6,553 (Increase) decrease in prepaid expenses (28,827) 10,287 2,440 1,701 Increase (decrease) in accounts payable and accrued liabilities 219,500 495,929 553,326 (522,456) Increase (decrease) in customer deposits 4,273 (18,314) (3,102) - Increase (decrease) in net OPEB liability 279,873 122,236 62,033 51,782 Increase (decrease) in compensated absences 34,154 6,435 15,419 (8,088) Total adjustments 2,719,988 1,658,780 1,810,480 1,111,484 Net cash provided (used) by operating activities 7,572,193$ 8,237,363$ 6,760,043$ (243,841)$ Major Enterprise Funds The notes to the financial statements are an integral part of this statement. 36 Exhibit 10 Page 4 of 4 CITY OF MONROE, NORTH CAROLINA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2017 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)386,003$ 15,411,029$ 583,049$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 708,546 8,023,455 - Non operating revenue 4,530 322,697 - Decrease deferred outflows - pension (380,059) (1,690,986) - Increase in net pension liability 438,135 1,949,384 - Decrease deferred inflows - pension (41,493) (184,615) - Changes in assets and liabilities: (Increase) decrease in accounts receivable (138,549) (1,912,047) (281,340) (Increase) decrease in inventories 2,165 107,518 - (Increase) decrease in prepaid expenses (1,008) (15,407) (28,460) Increase (decrease) in accounts payable and accrued liabilities 212,413 958,712 9,186 Increase (decrease) in customer deposits - (17,143) - Increase (decrease) in net OPEB liability 149,706 665,630 - Increase (decrease) in compensated absences 11,117 59,037 - Total adjustments 965,503 8,266,235 (300,614) Net cash provided (used) by operating activities 1,351,506$ 23,677,264$ 282,435$ The notes to the financial statements are an integral part of this statement. 37 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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. 38 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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. 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. 39 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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. 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. 40 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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. 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. 41 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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 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. 42 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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) external investment pool, 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. 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. 43 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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 872,825$ Unexpended debt proceeds 598,727 Health and Dental Fund: Deposits 10,169 Workers' Compensation Fund: Deposits 6,679 Total governmental activities 1,488,400 Business-Type Activities: Water and Sewer Fund: Customer deposits 83,577 Electric Fund: Customer deposits 339,904 Natural Gas Fund: Customer deposits 143,908 Total business-type activities 567,389 Total restricted cash 2,055,789$ 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, 2016. 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. 44 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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. 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 45 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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, 2017. 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, contributions made to the pension plan in the 2017 fiscal year 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 four items that meet the criterion for this category – prepaid items not yet earned, other receivables, property taxes receivable, and deferrals of pension expense that result from the implementation of GASB Statement 68. 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. 46 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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. The Tourism Development Authority had two employees during the year ended June 30, 2017 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. 47 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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. Non-spendable fund balance at June 30, 2017 is as follows: Nonmajor General Governmental Purpose Fund Funds Total Inventories 217,440$ -$ 217,440$ Prepaids 876,479 858 877,337 Total 1,093,919$ 858$ 1,094,777$ 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. 48 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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, 2017 is as follows: Nonmajor General Governmental Purpose Fund Funds Total Stabilization by State statute 5,521,299$ 2,007,426$ 7,528,725$ Public safety 1,105,671 - 1,105,671 Transportation 872,825 - 872,825 Occupancy tax capital projects - 667,983 667,983 Economic development 54,150 182,037 236,187 Total 7,553,945$ 2,857,446$ 10,411,391$ Restricted net position on Exhibit 1 varies from restricted fund balance on Exhibit 3 by the amount of unspent debt proceeds of $598,727 as of June 30, 2017. Committed Fund Balance – This classification includes amounts that can be used only for specific purposes determined by a formal action of the government’s highest level of decision- making authority. The City Council is the highest level of decision-making authority for the government that can, by adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation. Committed for Capital Projects – Portion of fund balance that is committed for use in capital projects. Committed fund balance at June 30, 2017 is as follows: Nonmajor Governmental Purpose Funds Total Capital projects 3,843,272$ 3,843,272$ 49 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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. 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, 2017 is as follows: Nonmajor General Governmental Purpose Fund Funds Total Minimum fund balance requirement 9,479,708$ -$ 9,479,708$ Airport grant acceptance 588,868 - 588,868 Airport operations - 5-year subsidy 1,000,000 - 1,000,000 Street resurfacing - 5-year program 1,200,000 - 1,200,000 Subsequent year's expenditures 1,252,214 - 1,252,214 Community development - 56,562 56,562 Downtown Monroe - 142,219 142,219 Total 13,520,790$ 198,781$ 13,719,571$ 50 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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. 12. Pensions 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. 51 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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. 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 $(19,049,763) difference are as follows: Installment purchase obligations (6,947,288)$ Compensated absences (2,206,207) Net OPEB liability (9,896,268) Net adjustment to reduce fund balance - total governmental funds to arrive at net position - governmenal activities (19,049,763)$ 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 $(185,771) difference are as follows: Capital outlay 4,335,528$ Disposal, net book value (19,685) Depreciation expense (4,501,614) Net adjustment to decrease net change in fund balances - total governmental funds to arrive at change in net position of governmental activities (185,771)$ 52 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Another element of that reconciliation states 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 $(590,019) are as follows: Debt issued or incurred (1,788,000)$ Principal payments: Installment purchase obligations 1,197,981 Net adjustment to decrease net change in fund balances - total governmental funds to arrive at change in net position of governmental activities (590,019)$ III. 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 undercollateralization, 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. 53 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 At June 30, 2017, the City's deposits had a carrying amount of $5,103,790 and a bank balance of $5,880,261. 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. At June 30, 2017, the ABC Board’s deposits had a carrying amount of $741,999 and a bank balance of $720,740. Of the bank balance, $500,000 was covered by federal depository insurance, and $220,740 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, 2017, the Tourism Development Authority’s deposits had a carrying amount of $412,454 and a bank balance of $412,454. Of the bank balance, $250,000 was covered by federal depository insurance and the remainder was covered by collateral held under the Pooling Method. 2. Investments As of June 30, 2017, the City had the following investments and maturities: Valuation Measurement Book Value 1-3 3-5 5+ Investment Type Method at 6/30/17 1 Year Years Years Years U.S. Government Agencies Fair Value Level 2 124,416,831$ -$ 3,981,300$ 13,305,551$ 107,129,980$ NC Capital Management Trust - Government Portfolio Amortized cost 8,820,645 N/A N/A N/A N/A NC Capital Management Trust - Term Portfolio Fair Value Level 1 10,062,561 10,062,561 - - - Total 143,300,037$ 10,062,561$ 3,981,300$ 13,305,551$ 107,129,980$ 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. 54 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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 AA+ 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, 2017. The City’s investment in the NC Capital 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 87% of the City’s investments are in Federal Farm, Federal Home Loan Bank, and Fannie Mae securities. In addition, the City had 6% of its investment portfolio in the NCCMT – government portfolio at June 30, 2017. 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 $6,855 through May 2034. 2017 Total receivable 1,061,253$ Less current portion 47,437 Total note receivable - non-current 1,013,816$ 55 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Scheduled future maturities of the note receivable are as follows: Year Ending Total 2018 47,437$ 2019 49,051 2020 50,720 2021 52,446 2022 54,230 Thereafter 807,369 Total 1,061,253$ 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 $6,326 for the fiscal year ended June 30, 2017. 2017 Total receivable 44,278$ 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 2018 6,326$ 2019 6,326 2020 6,326 2021 6,326 2022 6,326 Thereafter 12,648 Total 44,278$ 56 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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 1,058,082$ 14,026,844$ 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 45,166$ Downtown Monroe: Taxes receivable 127$ 57 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 5. Capital Assets Primary Government Capital asset activity for the primary government for the year ended June 30, 2017 was as follows: July 1, 2016 Additions Retirements Transfers June 30, 2017 Governmental Activities: General Fund: Non-Depreciable Capital Assets: Land and land improvements 5,271,873$ 24,822$ -$ -$ 5,296,695$ Construction in progress 411,908 909,922 - (3,200) 1,318,630 Total non-depreciable capital assets 5,683,781 934,744 - (3,200) 6,615,325 Depreciable Capital Assets: Buildings and improvements 25,575,472 1,016,270 - 3,200 26,594,942 Equipment 5,059,864 398,345 29,826 - 5,428,383 Vehicles and motorized equipment 16,093,357 1,514,238 468,077 19,365 17,158,883 Other intangibles 643,028 124,075 - - 767,103 Infrastructure 89,321,664 244,899 - - 89,566,563 Total depreciable capital assets 136,693,385 3,297,827 497,903 22,565 139,515,874 Less Accumulated Depreciation: Buildings and improvements 10,128,009 630,494 - - 10,758,503 Equipment 3,773,799 342,262 29,098 - 4,086,963 Vehicles and motorized equipment 11,847,462 1,239,684 449,120 19,365 12,657,391 Other intangibles 489,205 54,303 - - 543,508 Infrastructure 42,720,854 2,171,790 - - 44,892,644 Total accumulated depreciation 68,959,329 4,438,533$ 478,218$ 19,365$ 72,939,009 Total depreciable capital assets, net 67,734,056 66,576,865 General Fund capital assets, net 73,417,837 73,192,190 58 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 July 1, 2016 Additions Retirements Transfers June 30, 2017 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 1,680 3,359 - - 5,039 Equipment 91,066 7,005 - - 98,071 Total accumulated depreciation 92,746 10,364$ -$ -$ 103,110 Total depreciable capital assets, net 72,505 62,141 Downtown Monroe Fund capital assets, net 152,654 142,290 Occupancy Tax Fund: Non-Depreciable Capital Assets: Construction in progress 248,442 102,957$ -$ -$ 351,399 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 25,082 21,422 - - 46,504 Equipment 140,584 31,295 - - 171,879 Total accumulated depreciation 165,666 52,717$ -$ -$ 218,383 Total depreciable capital assets, net 1,056,331 1,003,614 Occupancy Tax Fund capital assets, net 1,304,773 1,355,013 Governmental activities capital assets, net 74,875,264$ 74,689,493$ 59 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Depreciation expense was charged to functions/programs of the primary government as follows: General Fund: General government 297,471$ Transportation 2,493,703 Public safety 1,102,288 Culture and recreation 536,757 Economic and physical development 8,314 Total General Fund 4,438,533 Downtown Monroe Fund: General government 10,364 Occupancy Tax Fund: Economic and physical development 52,717 Total governmental activities 4,501,614$ July 1, 2016 Additions Retirements Transfers June 30, 2017 Business-Type Activities: Water and Sewer Fund: Non-Depreciable Capital Assets: Land and land improvements 829,827$ -$ -$ -$ 829,827$ Construction in progress 358,477 426,897 - (287,208) 498,166 Total non-depreciable capital assets 1,188,304 426,897 - (287,208) 1,327,993 Depreciable Capital Assets: Buildings and improvements 33,317,255 13,883 - - 33,331,138 Equipment 5,242,759 244,824 25,606 - 5,461,977 Vehicles and motorized equipment 3,438,329 300,860 181,138 (19,365) 3,538,686 Infrastructure 66,799,134 1,435,312 - 287,208 68,521,654 Total depreciable capital assets 108,797,477 1,994,879 206,744 267,843 110,853,455 Less Accumulated Depreciation: Buildings and improvements 13,334,713 704,794 - - 14,039,507 Equipment 3,313,922 470,317 24,646 - 3,759,593 Vehicles and motorized equipment 2,366,296 231,482 178,169 (19,365) 2,400,244 Infrastructure 18,069,638 1,195,806 - - 19,265,444 Total accumulated depreciation 37,084,569 2,602,399$ 202,815$ (19,365)$ 39,464,788 Total depreciable capital assets, net 71,712,908 71,388,667 Water and Sewer Fund capital assets, net 72,901,212 72,716,660 60 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 July 1, 2016 Additions Retirements Transfers June 30, 2017 Electric Fund: Non-Depreciable Capital Assets: Land and land improvements 3,373,469 4,474,441$ 1,293,026$ -$ 6,554,884 Construction in progress 3,182,769 5,993,471 - (706,040) 8,470,200 Total non-depreciable capital assets 6,556,238 10,467,912 1,293,026 (706,040) 15,025,084 Depreciable Capital Assets: Buildings and improvements 5,581,079 - - - 5,581,079 Equipment 2,806,590 113,851 - - 2,920,441 Vehicles and motorized equipment 3,626,692 44,830 123,983 - 3,547,539 Infrastructure 100,926,760 2,573,836 - 706,040 104,206,636 Other intangibles 250,173 - - - 250,173 Total depreciable capital assets 113,191,294 2,732,517 123,983 706,040 116,505,868 Less Accumulated Depreciation: Buildings and improvements 659,144 124,776 - - 783,920 Equipment 1,897,886 70,042 - - 1,967,928 Vehicles and motorized equipment 2,544,095 238,548 123,983 - 2,658,660 Infrastructure 35,750,221 2,182,954 - - 37,933,175 Other intangibles 75,052 50,035 - - 125,087 Total accumulated depreciation 40,926,398 2,666,355$ 123,983$ -$ 43,468,770 Total depreciable capital assets, net 72,264,896 73,037,098 Electric Fund capital assets, net 78,821,134 88,062,182 Natural Gas Fund: Non-Depreciable Capital Assets: Land and land improvements 880,988 643,799$ -$ -$ 1,524,787 Construction in progress 3,644,849 2,720,261 - (1,746,076) 4,619,034 Total non-depreciable capital assets 4,525,837 3,364,060 - (1,746,076) 6,143,821 Depreciable Capital Assets: Buildings and improvements 569,484 - - - 569,484 Equipment 445,080 40,357 - - 485,437 Vehicles and motorized equipment 1,133,048 - - - 1,133,048 Infrastructure 67,338,051 378,386 322,057 1,746,076 69,140,456 Total depreciable capital assets 69,485,663 418,743 322,057 1,746,076 71,328,425 Less Accumulated Depreciation: Buildings and improvements 206,406 13,256 - - 219,662 Equipment 394,070 36,804 - - 430,874 Vehicles and motorized equipment 857,578 68,190 - - 925,768 Infrastructure 11,749,501 1,411,121 108,102 - 13,052,520 Total accumulated depreciation 13,207,555 1,529,371$ 108,102$ -$ 14,628,824 Total depreciable capital assets, net 56,278,108 56,699,601 Natural Gas Fund capital assets, net 60,803,945 62,843,422 61 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 July 1, 2016 Additions Retirements Transfers June 30, 2017 Airport Fund: Non-Depreciable Capital Assets: Land and land improvements 9,796,782 -$ -$ -$ 9,796,782 Construction in progress 3,485,217 2,279,797 - - 5,765,014 Total non-depreciable capital assets 13,281,999 2,279,797 - - 15,561,796 Depreciable Capital Assets: Buildings and improvements 26,227,321 - - - 26,227,321 Equipment 429,590 - - - 429,590 Vehicles and motorized equipment 477,086 - - - 477,086 Infrastructure 3,138,867 - - - 3,138,867 Total depreciable capital assets 30,272,864 - - - 30,272,864 Less Accumulated Depreciation: Buildings and improvements 9,474,774 619,308 - - 10,094,082 Equipment 398,131 4,086 - - 402,217 Vehicles and motorized equipment 426,321 8,870 - - 435,191 Infrastructure 346,492 62,777 - - 409,269 Total accumulated depreciation 10,645,718 695,041$ -$ -$ 11,340,759 Total depreciable capital assets, net 19,627,146 18,932,105 Airport Fund capital assets, net 32,909,145 34,493,901 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 10,123,662 110,503 - - 10,234,165 Equipment 174,826 20,850 - - 195,676 Vehicles and motorized equipment 49,676 - - - 49,676 Total depreciable capital assets 10,348,164 131,353 - - 10,479,517 Less Accumulated Depreciation: Buildings and improvements 3,922,657 281,430 - - 4,204,087 Equipment 130,918 13,607 - - 144,525 Vehicles and motorized equipment 30,488 4,294 - - 34,782 Total accumulated depreciation 4,084,063 299,331$ -$ -$ 4,383,394 Total depreciable capital assets, net 6,264,101 6,096,123 Aquatics and Fitness Center Fund capital assets, net 7,189,695 7,021,717 62 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 July 1, 2016 Additions Retirements Transfers June 30, 2017 Stormwater Fund: Non-Depreciable Capital Assets: Construction in progress 139,681 119,551$ -$ -$ 259,232 Total non-depreciable capital assets 139,681 119,551 - - 259,232 Depreciable Capital Assets: Buildings and improvements 20,495 - - - 20,495 Equipment 89,208 - 54,760 - 34,448 Vehicles and motorized equipment 863,793 90,677 54,735 - 899,735 Infrastructure 162,048 - - - 162,048 Total depreciable capital assets 1,135,544 90,677 109,495 - 1,116,726 Less Accumulated Depreciation: Buildings and improvements 2,049 455 - - 2,504 Equipment 63,435 3,043 36,048 - 30,430 Vehicles and motorized equipment 617,310 98,012 35,948 - 679,374 Infrastructure 11,343 3,241 - - 14,584 Total accumulated depreciation 694,137 104,751$ 71,996$ -$ 726,892 Total depreciable capital assets, net 441,407 389,834 Stormwater Fund capital assets, net 581,088 649,066 Solid Waste Fund: Depreciable Capital Assets: Other intangibles 967,361 -$ -$ -$ 967,361 Vehicles and motorized equipment 19,370 63,792 - - 83,162 Buildings and improvements 143,914 - - - 143,914 Total depreciable capital assets 1,130,645 63,792 - - 1,194,437 Less Accumulated Depreciation: Other intangibles 678,270 289,091 - - 967,361 Vehicles and motorized equipment 1,614 8,176 - - 9,790 Buildings and improvements 17,990 7,195 - - 25,185 Total accumulated depreciation 697,874 304,462$ -$ -$ 1,002,336 Total depreciable capital assets, net 432,771 192,101 Solid Waste Fund capital assets, net 432,771 192,101 Business-type activities capital assets, net 253,638,990$ 265,979,049$ 63 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Net Investment in Capital Assets Governmental Business-Type Activities Activities Capital assets 74,689,493$ 265,979,049$ Less: Long-term debt 6,947,288 76,846,148 Add: Deferred outflows - 4,834,332 Add: Unexpended debt proceeds 598,727 - Net investment in capital assets 68,340,932$ 193,967,233$ Discretely Presented Component Units Capital asset activity for the ABC Board for the year ended June 30, 2017 was as follows: July 1, 2016 Additions Retirements June 30, 2017 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 132,146 3,635 12,548 123,233 Vehicles and motorized equipment 15,830 - - 15,830 Total depreciable capital assets 1,203,161 3,635 12,548 1,194,248 Less Accumulated Depreciation: Buildings and improvements 463,598 29,963 - 493,561 Equipment 123,772 2,512 12,548 113,736 Vehicles and motorized equipment 15,830 - - 15,830 Total accumulated depreciation 603,200 32,475$ 12,548$ 623,127 Total depreciable capital assets, net 599,961 571,121 ABC Board capital assets, net 916,974$ 888,134$ The Tourism Development Authority had no capital assets. 64 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 B. Liabilities 1. Accounts Payable and Accrued Liabilities Payables at the government-wide level at June 30, 2017 were as follows: Salaries and Vendors Benefits Total Governmental Activities: General Fund 345,164$ 702,649$ 1,047,813$ Nonmajor funds 118,751 13,480 132,231 Total governmental activities 463,915$ 716,129$ 1,180,044$ Business-Type Activities: Enterprise funds 8,449,329$ 353,932$ 8,803,261$ Component units’ payables at June 30, 2017 were as follows: Salaries Vendors and Benefits Other Total ABC Board 432,233$ 19,614$ 26,974$ 478,821$ Tourism Development Authority 9,896$ -$ 17,809$ 27,705$ 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 65 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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, 2017 was 8.00% of compensation for law enforcement officers and 7.32% for general employees and firefighters, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the 66 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 costs of benefits earned by employees during the year. Contributions to the pension plan from the City of Monroe were $1,790,488 for the year ended June 30, 2017. The ABC Board’s contributions to LGERS for the year ended June 30, 2017 were $25,367. 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, 2017, the City reported a liability of $8,285,386 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2016. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2015. The total pension liability was then rolled forward to the measurement date of June 30, 2016 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, 2016, the City’s proportion was 0.39039%, which was a decrease of 0.04090% from its proportion measured as of June 30, 2015. For the year ended June 30, 2017, the City recognized pension expense of $2,030,813. At June 30, 2017, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience 155,668$ 290,329$ Changes of assumptions 567,475 - Net difference between projected and actual earnings on pension plan investments 4,580,771 - Changes in proportion and differences between City contributions and proportionate share of contributions - 573,396 City contributions subsequent to the measurement date 1,790,488 - Total 7,094,402$ 863,725$ 67 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 $1,790,488 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a decrease of the net pension liability in the year ended June 30, 2018. Other amounts reported as deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30 Amount 2018 555,325$ 2019 556,865 2020 2,068,580 2021 1,259,419 2022 - Thereafter - Total 4,440,189$ 5. Actuarial Assumptions The total pension liability in the December 31, 2015 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 7.25 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, 2015 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. 68 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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, 2016 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 6.0%4.0% Total 100.0% The information above is based on 30-year expectations developed with the consulting actuary for the 2016 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 7.25%. 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. 69 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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 7.25%, 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 (6.25%) or one percentage point higher (8.25%) than the current rate: Current 1% 1% Decrease Discount Rate Increase (6.25%)(7.25%)(8.25%) City's proportionate share of the net pension liability (asset)19,665,080$ 8,285,386$ (1,219,785)$ 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. All full-time law enforcement officers of the City are covered by the Separation Allowance. At December 31, 2015, the Separation Allowance’s membership consisted of: Retirees receiving benefits 6 Terminated plan members entitled to, - but not yet receiving, benefits Active plan members 86 Total 92 70 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 A separate report was not issued for the plan. 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 actuarial cost method was used in the December 31, 2015 valuation. The total pension liability in the December 31, 2015 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 3.86 percent The discount rate used to measure the TPL is the weekly average of the Bond Buyer General Obligation 20-year Municipal Bond Index determined at the end of each month. Deaths after Retirement (Healthy): RP-2014 Healthy Annuitant base rates projected to the valuation date using MP-2015, projected forward generationally from the valuation date using MP-2015. Rates are adjusted by 104% for males and 100% for females. Deaths before Retirement: RP-2014 Employee base rates projected to the valuation date using MP-2015, projected forward generationally from the valuation date using MP-2015. Deaths after Retirement (Beneficiary): RP-2014 Healthy Annuitant base rates projected to the valuation date using MP-2015, projected forward generationally from the valuation date using MP-2015. Rates are adjusted by 123% for males and females. Deaths after Retirement (Disabled): RP-2014 Disabled Retiree base rates projected to the valuation date using MP-2015, projected forward generationally from the valuation date 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 71 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Assembly. Administration costs of the Separation Allowance are financed through investment earnings. The City paid $112,097 as benefits came due for the reporting period. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. At June 30, 2017, the City reported a total pension liability of $3,592,717. The total pension liability was measured as of December 31, 2016 based on a December 31, 2015 actuarial valuation. The total pension liability was then rolled forward to the measurement date of December 31, 2016 utilizing update procedures incorporating the actuarial assumptions. For the year ended June 30, 2017, the City recognized pension expense of $255,114. Deferred Deferred Outflows of Inflows of Resources Resources Changes of assumptions -$ 70,968$ City benefit payments and plan administrative expense made subsequent to the measurement date 73,809 - Total 73,809$ 70,968$ $73,809 reported as deferred outflows of resources related to pensions resulting from benefit payments made and administrative expenses incurred subsequent to the measurement date will be recognized as a decrease of the total pension liability in the year ended June 30, 2018. Other amounts reported as deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30 Amount 2018 13,674$ 2019 13,674 2020 13,674 2021 13,674 2022 13,674 Thereafter 2,598 Total 70,968$ $73,809 paid as benefits came due subsequent to the measurement date is reported as a deferred outflow of resources. 72 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Sensitivity of the City’s Total Pension Liability to Changes in the Discount Rate. The following presents the City’s total pension liability calculated using the discount rate of 3.86%, as well as what the City’s total pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.86%) or 1-percentage-point higher (4.86%) than the current rate: 1% Decrease Discount Rate 1% Increase (2.86%)(3.86%)(4.86%) Total pension liability 3,893,596$ 3,592,717$ 3,316,684$ 2017 Beginning balance 3,520,979$ Service cost 144,779 Interest on the total pension liability 123,698 Changes of assumptions or other inputs (84,642) Benefit payments (112,097) Ending balance of the total pension liability 3,592,717$ 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, 2015 valuation were based on the results of an actuarial experience study for the period January 1, 2010 through December 31, 2014. 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 73 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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, 2017 were $420,686, which consisted of $253,687 from the City and $166,999 from the law enforcement officers. No amounts were forfeited. 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, 2017 were $1,714,194, which consisted of $562,574 in regular contributions, $313,709 in matching contributions from the City, and $837,911 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. 74 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Membership of the HealthCare Plan consisted of the following at December 31, 2015: Retirees and dependents receiving benefits 87 Terminated plan members entitled to, - but not yet receiving, benefits Active plan members 433 Total 520 The current ARC rate is 11.9% of annual covered payroll. For the current year, the City contributed $455,985, or 2.1%, of annual covered payroll. For the year ended June 30, 2017, the City made payments for post-retirement health benefit premiums of $455,985. The City’s obligation to contribute to the HealthCare Plan is established and may be amended by the City Council. The City has chosen to fund the healthcare benefits on a pay-as-you-go basis. Summary of Significant Accounting Policies. Post-employment expenditures are made from the Health and Dental Self-Insurance Fund. No funds are set aside to pay benefits and administration costs. These expenditures are paid as they come due. Annual OPEB Cost and Net OPEB Obligation. The City’s annual OPEB cost (expense) is calculated on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation for the healthcare benefits: Annual required contribution 2,601,248$ Interest on net obligation 484,575 Adjustment to annual required contribution (462,919) Annual OPEB cost (expense)2,622,904 Contributions made (455,985) Increase (decrease) in net OPEB obligation 2,166,919 Net OPEB obligation: Beginning of year, July 1 12,114,366 End of year, June 30 14,281,285$ 75 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 The City’s annual OPEB costs, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2017 were as follows: Annual Percentage of Net Year Ended OPEB Annual OPEB OPEB June 30 Cost Cost Contributed Obligation 2015 2,458,504$ 18.6%10,180,118$ 2016 2,535,396 23.7%12,114,366 2017 2,622,904 17.4%14,281,285 Funded Status and Funding Progress. As of December 31, 2015, the most recent actuarial valuation date, the plan was not funded. The actuarial accrued liability for benefits and, thus, the unfunded actuarial accrued liability (UAAL) was $29,858,049. The covered payroll (annual payroll of active employees covered by the plan) was $21,909,673, and the ratio of the UAAL to the covered payroll was 136.3%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include factors such as changes in economic or demographic assumptions, increases or decreases expected as part of the natural operation of the methodology used for these measurements (such as the end of an amortization period or additional cost or contribution requirements based on the plan’s funded status) and changes in the plan provisions or applicable law. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past experiences and new estimates are made about the future. The Schedule of Funding Progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and included the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members at that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value assets, consistent with the long-term perspective of the calculations. 76 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 In the December 31, 2015 actuarial valuation, the projected unit credit cost method was used. The actuarial assumptions included a 4.00% investment rate of return, which is the expected long-term investment returns on the employer’s own investments calculated based on the funded level of the plan at the valuation date, and an annual medical cost trend increase of 7.75 to 5.00% annually. Both rates included a 3.00% inflation assumption. The actuarial value of assets, if any, was determined using market value of investments. The UAAL is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at December 31, 2015 was 30 years. 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 $25,000. All death benefit payments are made from the Death Benefit Plan and not by the City; the City does not determine the number of eligible participants. The City has no liability beyond the payment of monthly contributions. The contributions to the Death Benefit Plan cannot be separated between the post-employment benefit amount and the other benefit amount. Contributions are determined as a percentage of monthly payroll, based upon rates established annually by the State. Separate rates are set for employees not engaged in law enforcement and for law enforcement officers. The City considers these contributions to be immaterial. 4. Deferred Outflows and Inflows of Resources Deferred outflows of resources at year-end are comprised of the following: Deferred Outflows Charge on debt defeasance 4,834,332$ Contributions to pension plan in current fiscal year 1,864,297 Pension deferrals 5,303,914 Total 12,002,543$ 77 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Deferred inflows of resources at year-end are comprised of the following: Deferred Inflows Property taxes receivable: General 858,159$ Nonmajor governmental 2,406 Privilege license receivable: General 102 Code enforcement liens receivable: General 357,488 Prepaid taxes, agreements, gift cards, donations, and store credits, not yet earned: General 43,440 Pension deferrals 934,693 Total 2,196,288$ 5. Construction and Other Significant Commitments Construction Commitments The government has active construction projects as of June 30, 2017. At year-end, the government's commitments with contractors are as follows: Spent Remaining Projects To-Date Commitment Governmental: Capital projects 1,318,630$ 1,350,643$ Occupancy tax 351,399 390,042 Enterprise: Water and Sewer 498,166 562,231 Stormwater 259,232 71,400 Electric 8,470,198 292,350 Natural Gas 4,619,035 1,180,039 Airport 5,765,014 576,216 Total 21,281,674$ 4,422,921$ 78 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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 $1,739,243, which was paid April 30, 2014. Operations and maintenance cost are paid based on a per thousand gallon rate calculated each budget year and based on actual metered consumption. This agreement term is of perpetual duration. This agreement also provides 2.65 MGD of wastewater capacity to Union County via the City WWTP to serve Union County’s eastside customers. Encumbrances Encumbrance accounting is utilized to the extent necessary to assure effective budgetary control and accountability and to facilitate effective cash planning and control. At June 30, 2017 the amount of encumbrances expected to be honored upon performance by the vendor in the next year were as follows: Governmental Activities: General Fund 2,077,906$ Nonmajor funds 1,816,272 Total governmental activities 3,894,178$ Business-Type Activities: Water and Sewer Fund 3,129,047$ Electric Fund 933,880 Natural Gas Fund 1,278,198 Airport Fund 576,216 Nonmajor funds 267,435 Total business-type activities 6,184,776$ 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. 79 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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. 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 $2,000,000 aggregate limit for all employees. The City also carries employer’s liability coverage with similar retention and limit amounts. 80 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Due to the degree of turnover of the outstanding claims, the claims payable as of June 30, 2017 are considered to be current liabilities. Changes in the balance of claims liabilities during the year ended June 30, 2017 are as follows: Health Workers' Property and Benefit Compensation Casualty Fund Fund Fund Unpaid claims as of June 30, 2015 440,310$ 14,880$ 44,207$ Claims and premiums paid 6,842,972 283,637 609,583 Incurred claims and premiums (6,953,711) (284,602) (568,119) 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$ -$ 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. 81 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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, 2017. 7. Claims, Judgments, and Contingent Liabilities The City was a defendant in various matters of litigation as of June 30, 2017. 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. 82 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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 Funds $1,036,000 Executed August 12, 2004, to finance construction of a street maintenance building, requiring 30 semi-annual installments of $34,533, plus interest at 3.89%172,667$ $1,900,000 Executed February 8, 2008, to finance facility improvements, requiring 20 semi-annual installments of $95,000, plus interest at 3.827%190,000 $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%1,116,136 $850,000 Executed May 29, 2014 with a bank, to finance equipment, to semi-annual installments of $88,355, including interest at 1.465%347,040 $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%33,445 $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%3,300,000 $1,788,000 Executed May 9, 2017 with a bank, to finance equipment requiring 10 annual installments ranging from $165,000 to $196,000, plus interest at 2.1532%1,788,000 Total 6,947,288$ 83 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Annual debt service payments of the installment purchase obligations as of June 30, 2017 are as follows: Year Ending June 30 Principal Interest 2018 1,212,594$ 146,805$ 2019 1,024,547 122,704 2020 804,355 100,779 2021 771,448 82,968 2022 775,448 65,767 2023-2027 2,358,896 106,875 Total 6,947,288$ Total interest payments 625,898$ Governmental Activities At June 30, 2017, the City had a legal debt margin of $245,850,619. 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: $30,920,000 Combined Enterprise System Revenue Bonds, Series 2008A, due annually in amounts ranging from $795,000 to $2,055,000 through March 1, 2033, interest rate varying between 4.0% and 5.0%. The 2008A Revenue Bonds were advance refunded on August 11, 2016 for all but two years. The amount shown is for the final year of principal. 1,045,000$ $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 $430,549 in unamortized bond premiums and $231,561 of unamortized deferred loss on defeasance associated with the bonds. 11,653,988 On August 11, 2016, the City issued $20,660,000 in Combined Enterprise System Revenue Bonds, Series 2016 to advance refund a portion of 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 $3,659,954 and $1,141,686 of unamortized deferred loss on defeasance associated with the bonds.23,178,269 Total 35,877,257$ 84 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 The future payments of the revenue bonds for the years ending June 30, 2017 are as follows: Year Ending June 30 Principal Interest 2018 2,575,000$ 1,423,663$ 2019 2,590,000 1,325,513 2020 1,990,000 1,221,913 2021 2,065,000 1,151,713 2022 2,155,000 1,058,163 2023-2027 10,955,000 3,932,463 2028-2032 8,975,000 1,654,663 2033 1,855,001 74,200 Total 33,160,001$ 11,842,291$ Business-Type Activities The future payments as presented above have not been reduced by the net of unamortized bond premiums and deferred loss totaling $2,717,257. The City has been in compliance with the covenants as to rates, fees, rentals, and charges in Section 704 of the Bond Order Authorizing the Issuance of Combined Enterprise System Revenue Bonds (Bond Order) since its adoption on May 3, 1994. Section 704(a) of the Bond Order requires the debt service coverage ratio to be no less than 125% parity indebtedness and 100% of the long-term debt service requirement for subordinated indebtedness for the fiscal year. The debt service coverage ratio calculation for the year ended June 30, 2017, is as follows: Operating revenues 100,293,016$ Operating expenses (1)77,953,081 Operating income 22,339,935 Non-operating revenues (2)(1,983,528) Income available for debt service 20,356,407 Parity debt service 4,332,597 Debt service coverage ratio 470% Income available for debt service 20,356,407 Subordinated debt service 6,335,247 Debt service coverage ratio 321% (1) Per rate covenants, this does not include the depreciation and amortization expense of $7,314,909. (2) Per rate covenants, this includes investment earnings only. 85 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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 $45,002,291. Principal and interest paid for the current year and total customer net revenues were $3,599,535 and $97.9 million, respectively. c. State Revolving Loans The City has entered into seven State Revolving Loans to finance water and sewer improvements. All State 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 $9,622,065, payable over 20 years, with interest at 2.22% 8,178,755$ Annual debt service requirements to maturity for the State Revolving Loans are as follows: Year Ending June 30 Principal Interest 2018 481,103$ 181,568$ 2019 481,103 170,888 2020 481,103 160,207 2021 481,103 149,527 2022 481,103 138,846 2023-2027 2,405,516 534,025 2028-2032 2,405,516 267,012 2033-2034 962,208 32,041 Total 8,178,755$ 1,634,114$ Business-Type Activities 86 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 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 of 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 $1,530,000.1,530,000$ Annual debt service requirements for Certificates of Participation are as follows: Year Ending June 30 Principal Interest 2018 750,000$ 61,200$ 2019 780,000 31,200 Total 1,530,000$ 92,400$ Business-Type Activities e. Limited Obligation Bonds On April 14, 2016, the City issued $27,045,000 in Limited Obligation 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 $3,031,889 and $3,462,025 of unamortized deferred loss on defeasance associated with the bonds.26,424,864$ Year Ending June 30 Principal Interest 2018 2,575,000$ 1,423,663$ 2019 2,590,000 1,325,513 2020 1,990,000 1,221,913 2021 2,065,000 1,151,713 2022 2,155,000 1,058,163 2023-2027 10,955,000 3,932,463 2028-2032 8,975,000 1,654,663 2033 1,855,001 74,200 Total 33,160,001$ 11,842,291$ Business-Type Activities 87 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 The future payments presented above have not been adjusted by the net of unamortized bond premiums and deferred loss totaling ($430,136). 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, 2017, $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, 2017, $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, 2017, $12,015,000 of bonds outstanding are considered defeased. 88 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 g. Changes in Long-Term Liabilities Current Balance Balance Portion of July 1, 2016 Increases Decreases June 30, 2017 Balance Governmental Activities: General and Parks and Recreation Fund: Installment purchasing obligations 6,320,871$ 1,788,000$ 1,174,883$ 6,933,988$ 1,199,294$ Compensated absences 2,107,325 944,688 876,980 2,175,033 1,457,272 Total pension liability (LEOSSA) 425,955 3,166,762 - 3,592,717 - Net pension liability (LGERS) 1,341,372 4,400,400 - 5,741,772 - OPEB liability 8,358,866 1,495,928 - 9,854,794 - Golf Course: Installment purchasing obligations 36,398 - 23,098 13,300 13,300 Compensated absences 33,383 19,172 21,381 31,174 20,886 OPEB liability 36,113 5,361 - 41,474 - Total governmental activities 18,660,283$ 11,820,311$ 2,096,342$ 28,384,252$ 2,690,752$ Business-Type Activities: Water and Sewer Fund: Compensated absences 273,511$ 216,125$ 181,971$ 307,665$ 206,135$ Net pension liability (LGERS) 249,693 819,122 - 1,068,815 - OPEB liability 1,563,863 279,873 - 1,843,736 - Revenue bonds 6,718,855 3,499,911 4,506,296 5,712,470 662,969 Plus bond premium 248,899 658,746 97,418 810,227 60,106 Total revenue bonds 6,967,754 4,158,657 4,603,714 6,522,697 723,075 State revolving loans 8,717,810 - 539,055 8,178,755 481,103 Total Water and Sewer Fund 17,772,631$ 5,473,777$ 5,324,740$ 17,921,668$ 1,410,313$ Electric Fund: Compensated absences 232,447$ 178,442$ 172,007$ 238,882$ 160,050$ Net pension liability (LGERS) 108,394 355,588 - 463,982 - OPEB liability 683,025 122,236 - 805,261 - Revenue bonds 18,555,740 14,703,420 17,240,746 16,018,414 1,025,396 Plus bond premium 180,171 2,767,589 319,461 2,628,299 175,178 Total revenue bonds 18,735,911 17,471,009 17,560,207 18,646,713 1,200,574 Total Electric Fund 19,759,777$ 18,127,275$ 17,732,214$ 20,154,838$ 1,360,624$ 89 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Current Balance Balance Portion of July 1, 2016 Increases Decreases June 30, 2017 Balance Natural Gas Fund: Compensated absences 87,027$ 46,725$ 31,306$ 102,446$ 68,638$ OPEB liability 346,629 62,033 - 408,662 - Net pension liability (LGERS) 56,133 184,144 - 240,277 - Certificates of participation 2,250,000 - 720,000 1,530,000 750,000 Less unamortized discounts - - - - - Total certificates of participation 2,250,000 - 720,000 1,530,000 750,000 Limited obligation bonds 27,045,000 - 190,000 26,855,000 55,000 Plus bond premium 3,169,702 - 137,813 3,031,889 137,813 Total limited obligation bonds 30,214,702 - 327,813 29,886,889 192,813 Revenue bonds 3,325,405 2,456,669 2,952,957 2,829,117 246,635 Plus bond premium 40,233 462,367 57,217 445,383 32,576 Total revenue bonds 3,365,638 2,919,036 3,010,174 3,274,500 279,211 Total Natural Gas Fund 36,320,129$ 3,211,938$ 4,089,293$ 35,442,774$ 1,290,662$ Airport Fund: Compensated absences 31,530$ 18,575$ 26,663$ 23,442$ 15,706$ Net pension liability (LGERS) 46,454 152,395 - 198,849 - OPEB liability 289,347 51,782 - 341,129 - Revenue bonds 9,210,000 - 610,000 8,600,000 640,000 Plus bond premium 248,492 - 41,898 206,594 36,082 Total revenue bonds 9,458,492 - 651,898 8,806,594 676,082 Total Airport Fund 9,825,823$ 222,752$ 678,561$ 9,370,014$ 691,788$ Aquatics and Fitness Center Fund: Compensated absences 84,735$ 45,877$ 44,876$ 85,736$ 57,443$ Net pension liability (LGERS) 90,973 298,440 - 389,413 - OPEB liability 569,877 101,986 - 671,863 - Total Aquatics and Fitness Center Fund 745,585$ 446,303$ 44,876$ 1,147,012$ 57,443$ Stormwater Fund: Compensated absences 48,333$ 37,489$ 27,607$ 58,215$ 39,004$ Net pension liability (LGERS) 40,648 133,345 - 173,993 - OPEB liability 249,203 44,598 - 293,801 - Total Stormwater Fund 338,184$ 215,432$ 27,607$ 526,009$ 39,004$ 90 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Current Balance Balance Portion of July 1, 2016 Increases Decreases June 30, 2017 Balance Solid Waste Fund: Compensated absences 1,612$ 3,333$ 3,099$ 1,846$ 1,237$ Net pension liability (LGERS) 1,935 6,350 - 8,285 - OPEB liability 17,443 3,122 - 20,565 - Installment purchase obligations 153,909 - 153,909 - - Total Solid Waste Fund 174,899$ 12,805$ 157,008$ 30,696$ 1,237$ Total business-type activities 84,937,028$27,710,282$28,054,299$84,593,011$ 4,851,071$ 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, 2017 consist of the following: Due to General Fund Airport Fund Total Electric Fund 1,591,422$ 875,579$ 2,467,001$ The balance of $1,591,422 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 $168,911, and the balance of $1,422,512 is not scheduled to be collected in the subsequent year. The balance of $875,579 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 $35,399, and the balance of $840,180 is not scheduled to be collected in the subsequent year. 91 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 Balances due to/from component units at June 30, 2017 consist of the following: Due to the Primary Government for Profit Distributions From: Monroe ABC Board 13,489$ Due to the Primary Government for Occupancy Tax: Monroe Tourism Development Authority 17,809 Total 31,298$ Transfers to/from other funds at June 30, 2017 consist of the following: From the General Fund to the Airport Fund for current operating needs 1,696,387$ From the General Fund to the Downtown Monroe Special Revenue Fund for general operations 9,431 From the General Fund to the Monroe-Union County Economic Development Special Revenue Fund for county-wide economic development 303,000 From the General Fund to the Airport Capital Projects Fund for a hangar site development net of the reimbursement of excess funds for construction projects 824,311 From the General Fund to the Capital Project Fund for Concord Ave Redevelopment, purchase of the EJ Building, Center Theater Renovation Project, and various road and sidewalk improvements 4,579,890 From the General Fund to the Governmental Capital Reserve for future Greenway Project (year 4 of 6)100,000 From the Governmental Capital Reserve Fund to the Capital Project Fund for greenway construction 140,000 From the Electric Fund to the General Fund for payment in lieu of taxes 462,128 From the Natural Gas Fund to the General Fund for payment in lieu of taxes 113,872 From the Aquatics and Fitness Center Fund to the Capital Project Fund for the Greenway project 100,000 92 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 IV. 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, 2017 were $49,204,902. 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 $8,310 to the Council during the fiscal year ended June 30, 2017. V. 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/. VI. 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. 93 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 VII. Related Party Transactions The City and its discretely presented component units engaged in the following transactions during the year ended June 30, 2017: City of Monroe ABC Board: Payments to the City for profit distributions 170,451$ Payments to the City for law enforcement 86,060 Total 256,511$ Monroe Tourism Development Authority: Payments of a pro-rata portion of the occupancy tax by the City to the Authority 635,730$ Payment by the Authority to the City for the Occupancy Tax Project 211,910$ VIII. 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 27,321,128$ Less: Inventories 217,440 Prepaids 876,479 Stabilization by State Statute 5,521,299 Public safety 1,105,671 Powell Bill reserves 872,825 Economic development 54,150 Minimum fund balance requirement 9,479,708 Airport grant acceptance 588,868 Airport operations - 5-year subsidy 1,000,000 Street resurfacing - 5-year program 1,200,000 Subsequent year's expenditures 1,252,214 Remaining fund balance 5,152,474$ 94 CITY OF MONROE, NORTH CAROLINA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 IX. 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. X. Change in Accounting Principles/Restatement The City implemented Governmental Accounting Standards Board (GASB) No. Statement 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to certain Provisions of GASB Statements 67 and 68, in the fiscal year ending June 30, 2017. The implementation of the statement required the Town to record beginning total pension liability and the effects on net position of benefit payments and administrative expenses paid by the City to the Law Enforcement Officers’ Special Separation Allowance during the measurement period (fiscal year ending December 31, 2016). As a result, net position for governmental activities decreased $2,982,927. 95                       96 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF CHANGES IN TOTAL PENSION LIABILITY LAW ENFORCEMENT OFFICERS' SPECIAL SEPARATION ALLOWANCE FOR THE YEAR ENDED JUNE 30, 2017* 2017 Beginning balance 3,520,979$ Service cost 144,779 Interest on the total pension liability 123,698 Changes of assumptions or other inputs (84,642) Benefit payments (112,097) Ending balance of the total pension liability 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 97 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF TOTAL PENSION LIABILITY AS A PERCENTAGE OF COVERED PAYROLL LAW ENFORCEMENT OFFICERS' SPECIAL SEPARATION ALLOWANCE FOR THE YEAR ENDED JUNE 30, 2017 2017 Total pension liability 3,592,717$ Covered payroll 4,986,204 Total pension liability as a percentage of covered payroll 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. Law Enforcement Officers' Special Separation Allowance 98 CITY OF MONROE, NORTH CAROLINA THE HEALTH CARE PLAN OF THE CITY OF MONROE SUPPLEMENTAL INFORMATION SCHEDULE OF FUNDING PROGRESS FOR THE YEAR ENDED JUNE 30, 2017 ` Actuarial Accrued UAAL as a Actuarial Liability (AAL) - Unfunded Percentage Actuarial Value of Projected AAL Funded Covered of Covered Valuation Assets Unit Credit (UAAL) Ratio Payroll Payroll Date (a)(b)(b-a)(a/b)(c)((b-a)/c) 7/1/2007 -$ 15,877,000$ 15,877,000$ 0.00% 18,700,000$ 84.9% 7/1/2009 - 19,201,000 19,201,000 0.00% 19,927,000 93.4% 12/31/2010 - 20,670,010 20,670,010 0.00% 21,957,134 94.1% 12/31/2011 - 20,626,771 20,626,771 0.00% 21,838,049 94.5% 12/31/2013 - 26,144,876 26,144,876 0.00% 22,305,806 117.2% 12/31/2015 - 29,858,049 29,858,049 0.00% 21,909,673 136.3% 99 CITY OF MONROE, NORTH CAROLINA THE HEALTH CARE PLAN OF THE CITY OF MONROE SUPPLEMENTAL INFORMATION SCHEDULE OF EMPLOYER CONTRIBUTIONS FOR THE YEAR ENDED JUNE 30, 2017 Annual Year Ended Required Percentage June 30 Contribution Contributed 2010 1,513,000$ 26.2% 2011 1,837,058 13.8% 2012 2,043,813 23.5% 2013 1,995,517 21.0% 2014 2,055,383 43.2% 2015 2,443,882 18.7% 2016 2,517,198 23.9% 2017 2,601,248 17.5% Notes to the Required Schedules: The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows: Valuation date December 31, 2015 Actuarial cost method Projected unit credit Amortization method Level percentage of pay open Remaining amortization period 30 years Amortization factor 26.1695 Asset valuation method Market value of assets Actuarial assumptions: Investment rate of return* 4.00% Medical cost trend rate Pre-Medicare trend rate 7.75%-5.00% Post-Medicare trend rate 5.75%-5.00% Year of ultimate trend rate 2022 *Includes inflation at 3.00% 100 CITY OF MONROE, NORTH CAROLINA CITY OF MONROE'S PROPORTIONATE SHARE OF NET PENSION LIABILITY (ASSET) REQUIRED SUPPLEMENTARY INFORMATION LAST FOUR FISCAL YEARS* 2017 2016 2015 2014 Monroe's proportion of the net pension liability (asset) (%) 0.39039% 0.43129% 0.44081% 0.46720% Monroe's proportion of the net pension liability (asset) ($) 8,285,386$ 1,935,602$ (2,599,661)$ 5,631,554$ Monroe's covered-employee payroll 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 35.66% 8.58% ( 11.53%) 25.60% Plan fiduciary net position as a percentage of the total pension liability** 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 101 CITY OF MONROE, NORTH CAROLINA CITY OF MONROE'S CONTRIBUTIONS REQUIRED SUPPLEMENTARY INFORMATION LAST FOUR FISCAL YEARS 2017 2016 2015 2014 Contractually required contribution 1,790,488$ 1,586,301$ 1,611,462$ 1,604,437$ Contributions in relation to the contractually required contribution 1,790,488 1,586,301 1,611,462 1,604,437 Contribution deficiency (excess)-$ -$ -$ -$ Monroe's covered-employee payroll 23,996,590$ 23,236,408$ 22,572,529$ 22,549,809$ Contributions as a percentage of covered-employee payroll 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 102 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, 2017 Variance Budget Actual Over/Under Revenues: Ad Valorem Taxes: Taxes 19,471,752$ 20,099,312$ 627,560$ Penalties and interest 118,000 130,733 12,733 Total 19,589,752 20,230,045 640,293 Other Taxes and Licenses: Beer and wine and taxicab licenses - 2,366 2,366 Gross receipts tax on short-term rental property 67,000 97,992 30,992 Motor vehicle tax 853,920 678,025 (175,895) Total 920,920 778,383 (142,537) Unrestricted Intergovernmental: Sales and use tax 4,971,158 6,195,900 1,224,742 Telecommunications sales tax 366,515 334,384 (32,131) Utility sales tax 2,907,302 2,901,490 (5,812) Video franchise fee 218,329 226,774 8,445 Beer and wine tax 150,000 155,352 5,352 State fire fees 3,000 3,043 43 ABC profit distribution 143,000 170,451 27,451 Total 8,759,304 9,987,394 1,228,090 Restricted Intergovernmental: Powell Bill allocation 963,787 963,013 (774) Public safety reimbursement grants 136,290 84,040 (52,250) ABC Revenue for law enforcement 82,170 86,060 3,890 Resource officer reimbursement 208,890 203,319 (5,571) Fire reimbursement grants 90,612 89,608 (1,004) Economic development grants 137,102 - (137,102) Equitable sharing of federally forfeited property - 97,388 97,388 Interlocal agreements - retail initiative - 27,500 27,500 Total 1,618,851 1,550,928 (67,923) Sales and Services: Recreational fees 853,523 908,394 54,871 Utilities collection fees 420,900 410,254 (10,646) Building permit fees 337,523 459,840 122,317 Cemetery revenues 33,310 41,755 8,445 Sale of fixed assets 40,000 134,514 94,514 Rentals 61,855 111,677 49,822 Other fees 152,291 215,179 62,888 Total 1,899,402 2,281,613 382,211 103 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, 2017 Variance Budget Actual Over/Under Investment Earnings 450,000 (642,359) (1,092,359) Miscellaneous: Payment in lieu of taxes- Monroe Housing Authority 15,000 19,223 4,223 Donations 10,033 12,331 2,298 Other 394,887 284,454 (110,433) Total 419,920 316,008 (103,912) Total revenues 33,658,149 34,502,012 843,863 Expenditures: Current: General Government: Salaries and employee benefits 6,308,406 6,045,154 263,252 Operating expenditures 4,191,358 2,805,564 1,385,794 Capital outlay 708,963 594,977 113,986 Interdepartmental charges (5,413,036) (5,468,220) 55,184 Total general government 5,795,691 3,977,475 1,818,216 Transportation: Streets and highways Salaries and employee benefits 1,150,556 1,022,070 128,486 Operating expenditures 1,691,537 1,259,949 431,588 Capital outlay 1,435,696 1,418,192 17,504 Interdepartmental charges (438,866) (474,981) 36,115 Total 3,838,923 3,225,230 613,693 Public Safety: Salaries and employee benefits 15,791,005 15,335,496 455,509 Operating expenditures 2,784,683 2,068,698 715,985 Capital outlay 2,975,963 1,412,790 1,563,173 Total public safety 21,551,651 18,816,984 2,734,667 Culture and Recreation: Salaries and employee benefits 3,059,668 2,788,327 271,341 Operating expenditures 2,110,048 1,775,436 334,612 Capital outlay 433,500 212,586 220,914 Interdepartmental charges (219,372) (219,372) - Total culture and recreation 5,383,844 4,556,977 826,867 104 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, 2017 Variance Budget Actual Over/Under Debt Service: Principal retirement 1,361,353 1,197,981 163,372 Interest and other charges 231,150 226,633 4,517 Total 1,592,503 1,424,614 167,889 Total expenditures 38,162,612 32,001,280 6,161,332 Revenues over (under) expenditures (4,504,463) 2,500,732 7,005,195 Other Financing Sources (Uses): Transfers from (to) other funds: Special revenue funds: Monroe Union County Economic Development Fund (303,000) (303,000) - Downtown Monroe Fund (80,506) (9,431) 71,075 Capital projects funds: Capital projects (4,579,890) (4,579,890) - Governmental Capital Reserve Fund (100,000) (100,000) - Airport Capital Projects Fund (824,310) (824,311) (1) Airport Fund (1,829,040) (1,696,387) 132,653 Natural Gas Fund 103,000 113,872 10,872 Electric Fund 462,000 462,128 128 Installment purchase obligations issued 1,870,000 1,788,000 (82,000) Total other financing sources (uses)(5,281,746) (5,149,019) 132,727 Appropriated fund balance 9,786,209 - (9,786,209) Net change in fund balance -$ (2,648,287) (2,648,287)$ Fund Balance: Beginning of year, July 1 29,969,415 End of year, June 30 27,321,128$ 105                       106 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. 107 Page 1 of 2 Monroe Union Community Downtown Economic Development Monroe Development Total Assets: Cash and cash equivalents 56,562$ 192,067$ 230,335$ 478,964$ Taxes receivable - 2,406 - 2,406 Accounts receivable - 13,711 - 13,711 Prepaid items - 81 777 858 Due from other governments - 365 - 365 Due from component unit - - - - Cash and cash equivalents - restricted - - - - Total assets 56,562$ 208,630$ 231,112$ 496,304$ Liabilities, Deferred Inflows of Resources, and Fund Balances: Liabilities: Accounts payable and accrued liabilities -$ 4,792$ 17,767$ 22,559$ Total liabilities - 4,792 17,767 22,559 Deferred Inflows of Resources - 2,406 - 2,406 Fund Balances: Non-spendable: Prepaids - 81 777 858 Restricted: Stabilization by State Statute - 59,132 30,531 89,663 Occupancy tax capital projects - - - - Economic development - - 182,037 182,037 Committed: Capital projects - - - - Assigned 56,562 142,219 - 198,781 Total fund balances 56,562 201,432 213,345 471,339 Total liabilities, deferred inflows of resources, and fund balances 56,562$ 208,630$ 231,112$ 496,304$ Special Revenue Funds CITY OF MONROE, NORTH CAROLINA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2017 108 Page 2 of 2 Total Occupancy Governmental Nonmajor Capital Tax Capital Governmental Projects Projects Reserve Total Funds Assets: Cash and cash equivalents 5,086,596$ 1,097,317$ -$ 6,183,913$ 6,662,877$ Taxes receivable - - - - 2,406 Accounts receivable - - - - 13,711 Prepaid items - - - - 858 Due from other governments 159,269 - - 159,269 159,634 Due from component unit - 17,809 - 17,809 17,809 Cash and cash equivalents - restricted 177,699 - - 177,699 177,699 Total assets 5,423,564$ 1,115,126$ -$ 6,538,690$ 7,034,994$ Liabilities, Deferred Inflows of Resources, and Fund Balances: Liabilities: Accounts payable and accrued liabilities 70,380$ 39,292$ -$ 109,672$ 132,231$ Total liabilities 70,380 39,292 - 109,672 132,231 Deferred Inflows of Resources - - - - 2,406 Fund Balances: Non-spendable: Prepaids - - - - 858 Restricted: Stabilization by State Statute 1,509,912 407,851 - 1,917,763 2,007,426 Occupancy tax capital projects - 667,983 - 667,983 667,983 Economic development - - - - 182,037 Committed: Capital projects 3,843,272 - - 3,843,272 3,843,272 Assigned - - - - 198,781 Total fund balances 5,353,184 1,075,834 - 6,429,018 6,900,357 Total liabilities, deferred inflows of resources, and fund balances 5,423,564$ 1,115,126$ -$ 6,538,690$ 7,034,994$ Capital Project Funds CITY OF MONROE, NORTH CAROLINA COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2017 109 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, 2017 Monroe Union Community Downtown Economic Development Monroe Development Total Revenues: Ad valorem taxes -$ 54,779$ -$ 54,779$ Restricted intergovernmental - - 404,000 404,000 Miscellaneous - 86,965 58,025 144,990 Investment earnings - - (5,351) (5,351) Total revenues - 141,744 456,674 598,418 Expenditures: Current: Economic and physical development: Administration - 130,490 768,864 899,354 Tourism - - - - Capital outlay - - - - Total expenditures - 130,490 768,864 899,354 Revenues over (under) expenditures - 11,254 (312,190) (300,936) Other Financing Sources (Uses): Transfers from other funds - 9,431 303,000 312,431 Transfers to other funds - - - - Total other financing sources (uses)- 9,431 303,000 312,431 Net change in fund balances - 20,685 (9,190) 11,495 Fund Balances: Beginning of year, July 1 56,562 180,747 222,535 459,844 End of year, June 30 56,562$ 201,432$ 213,345$ 471,339$ Special Revenue Funds 110 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, 2017 Total Occupancy Governmental Nonmajor Capital Tax Capital Governmental Projects Projects Reserve Total Funds Revenues: Ad valorem taxes -$ -$ -$ -$ 54,779$ Restricted intergovernmental 207,846 211,910 - 419,756 823,756 Miscellaneous 100 - - 100 145,090 Investment earnings (1,141) (19,652) - (20,793) (26,144) Total revenues 206,805 192,258 - 399,063 997,481 Expenditures: Current: Economic and physical development: Administration - - - - 899,354 Tourism - 102,957 - 102,957 102,957 Capital outlay 1,785,182 - - 1,785,182 1,785,182 Total expenditures 1,785,182 102,957 - 1,888,139 2,787,493 Revenues over (under) expenditures (1,578,377) 89,301 - (1,489,076) (1,790,012) Other Financing Sources (Uses): Transfers from other funds 4,819,890 - 100,000 4,919,890 5,232,321 Transfers to other funds - - (140,000) (140,000) (140,000) Total other financing sources (uses)4,819,890 - (40,000) 4,779,890 5,092,321 Net change in fund balances 3,241,513 89,301 (40,000) 3,290,814 3,302,309 Fund Balances: Beginning of year, July 1 2,111,671 986,533 40,000 3,138,204 3,598,048 End of year, June 30 5,353,184$ 1,075,834$ -$ 6,429,018$ 6,900,357$ Capital Project Funds 111 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, 2017 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$ 112 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, 2017 Variance Budget Actual Over/Under Revenues: Ad valorem taxes 52,401$ 54,779$ 2,378$ Miscellaneous 83,040 86,965 3,925 Total 135,441 141,744 6,303 Expenditures: Current: Economic and physical development: Administration 394,354 130,490 263,864 Total 394,354 130,490 263,864 Revenues over (under) expenditures (258,913) 11,254 270,167 Other Financing Sources (Uses) Transfers from (to) other funds: General Fund 80,506 9,431 (71,075) Appropriated fund balance 178,407 - (178,407) Net change in fund balance -$ 20,685 20,685$ Fund Balance: Beginning of year, July 1 180,747 End of year, June 30 201,432$ 113 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, 2017 Variance Budget Actual Over/Under Revenues: Interlocal agreement 404,000$ 404,000$ -$ Miscellaneous 58,525 58,025 (500) Investment earnings - (5,351) (5,351) Total 462,525 456,674 (5,851) Expenditures: Current: Economic and physical development: Administration 819,665 768,864 50,801 Revenues over (under) expenditures (357,140) (312,190) 44,950 Other Financing Sources (Uses): Transfers from (to) other funds: General Fund 303,000 303,000 - Appropriated fund balance 54,140 - (54,140) Net change in fund balance -$ (9,190) (9,190)$ Fund Balance: Beginning of year, July 1 222,535 End of year, June 30 213,345$ 114 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, 2017 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Revenues: Restricted intergovernmental 1,805,000$ 361,406$ 207,846$ 569,252$ (1,235,748)$ Miscellaneous - 153 100 253 253 Investment earnings - 87,823 (1,141) 86,682 86,682 Total revenues 1,805,000 449,382 206,805 656,187 (1,148,813) Expenditures: Capital outlay: Construction costs capitalized 5,857,633 4,859,746 875,260 5,735,006 122,627 Construction in progress 7,698,000 408,708 909,922 1,318,630 6,379,370 Other costs 3,288 3,288 - 3,288 - Total expenditures 13,558,921 5,271,742 1,785,182 7,056,924 6,501,997 Revenues over (under) expenditures (11,753,921) (4,822,360) (1,578,377) (6,400,737) 5,353,184 Other Financing Sources (Uses): Transfers from (to) other funds: General Fund 5,515,528 995,638 4,519,890 5,515,528 - Parks and Recreation Fund (General Fund) 1,190,000 1,130,000 60,000 1,190,000 - 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 400,000 260,000 140,000 400,000 - Installment purchase obligations issued 4,400,000 4,400,000 - 4,400,000 - Total other financing sources (uses)11,753,921 6,934,031 4,819,890 11,753,921 - Net change in fund balance -$ 2,111,671$ 3,241,513 5,353,184$ 5,353,184$ Fund Balance: Beginning of year, July 1 2,111,671 End of year, June 30 5,353,184$ Actual 115 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, 2017 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Revenues: Restricted intergovernmental 2,400,145$ 2,527,974$ 211,910$ 2,739,884$ 339,739$ Donation 8,000 - - - (8,000) Investment earnings - 71,762 (19,652) 52,110 52,110 Total revenues 2,408,145 2,599,736 192,258 2,791,994 383,849 Expenditures: Current: Construction costs capitalized 1,221,996 1,221,996 - 1,221,996 - Construction in progress 866,328 248,442 102,957 351,399 514,929 Other costs 319,821 142,765 - 142,765 177,056 Total expenditures 2,408,145 1,613,203 102,957 1,716,160 691,985 Net change in fund balance -$ 986,533$ 89,301 1,075,834$ 1,075,834$ Fund Balance: Beginning of year, July 1 986,533 End of year, June 30 1,075,834$ Actual 116 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, 2017 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 (140,000) (140,000) - Total other financing sources (uses)(40,000) (40,000) - Appropriated fund balance 40,000 - (40,000) Net change in fund balance -$ (40,000) (40,000)$ Fund Balance: Beginning of year, July 1 40,000 End of year, June 30 -$ 117 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, 2017 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Water sales 6,631,047$ 7,241,533$ 610,486$ Sewer charges 7,819,046 8,465,160 646,114 Water and sewer taps 40,000 38,661 (1,339) Availability fees 767,271 953,462 186,191 County waste water charges 600,000 477,908 (122,092) Total 15,857,364 17,176,724 1,319,360 Other operating revenues 447,358 357,632 (89,726) Total operating revenues 16,304,722 17,534,356 1,229,634 Non-operating revenues: Other non-operating revenues 9,468 80,576 71,108 Investment earnings 453,200 (691,708) (1,144,908) Total non-operating revenues 462,668 (611,132) (1,073,800) Total revenues 16,767,390 16,923,224 155,834 Other Financing Sources (Uses): Bond refunding proceeds 3,499,805 3,499,804 (1) Bond premium 658,746 658,746 - Total other financing sources (uses)4,158,551 4,158,550 (1) Appropriated fund balance 3,181,705 - (3,181,705) Total revenues and other financing sources (uses)24,107,646$ 21,081,774$ (3,025,872)$ 118 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, 2017 Variance Budget Actual Over/Under Expenditures: Distribution system: Salaries and employee benefits 2,613,903$ 2,531,485$ 82,418$ Repairs and maintenance 1,318,948 947,852 371,096 Operating expenditures 2,465,350 2,253,632 211,718 Total 6,398,201 5,732,969 665,232 Water filter plant: Salaries and employee benefits 847,545 795,550 51,995 Operating expenditures 2,758,101 2,214,775 543,326 Total 3,605,646 3,010,325 595,321 Waste treatment plant: Salaries and employee benefits 1,103,739 1,020,370 83,369 Operating expenditures 1,824,620 1,446,228 378,392 Total 2,928,359 2,466,598 461,761 Debt service: Principal retirement 1,176,137 1,176,132 5 Interest and other charges 606,877 591,582 15,295 Total 1,783,014 1,767,714 15,300 Capital outlay 2,266,840 559,566 1,707,274 Total expenditures 16,982,060 13,537,172 3,444,888 Other Financing Sources (Uses): Payment to refunded bond escrow agent (4,108,284) (4,108,284) - Transfers: Water and Sewer Capital Projects Fund (3,017,302) (3,017,302) - Total other financing uses (7,125,586) (7,125,586) - Total expenditures and other financing sources (uses)24,107,646$ 20,662,758$ 3,444,888$ 119 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, 2017 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources (uses) 21,081,774$ Total expenditures and other financing sources (uses)20,662,758 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses)419,016 Reconciling items: Debt principal 1,176,132 Bond refunding proceeds (3,499,804) Premium on bond refunding (658,746) Retirement of bond debt 4,108,284 Capital outlay 559,566 Capital items not charged to capital outlay 1,435,313 Disposal of capital asset (3,929) Project transfers - intrafund 3,017,302 Increase in compensated absences (34,154) Increase in OPEB liability (279,873) Increase in deferred outflows of resources - pensions 710,545 Increase in net pension liability (819,122) Decrease in deferred inflows of resources - pensions 77,575 Depreciation and amortization (2,562,543) Total reconciling items 3,226,546 Change in net position 3,645,562$ 120 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, 2017 Variance Budget Actual Over/Under Other Financing Sources (Uses): Transfers from other funds: Water and Sewer Fund -$ -$ -$ Increase in fund balance - - - Total other financing sources (uses)-$ - -$ Fund Balance: Beginning of year, July 1 3,318,739 End of year, June 30 3,318,739$ 121 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, 2017 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Revenues: Restricted intergovernmental 517,500$ 280,000$ -$ 280,000$ (237,500)$ Expenditures: Construction costs capitalized 688,237 425,446 - 425,446 262,791 Construction in progress 7,444,250 71,269 426,897 498,166 6,946,084 Total expenditures 8,132,487 496,715 426,897 923,612 7,208,875 Revenues over (under) expenditures (7,614,987) (216,715) (426,897) (643,612) 6,971,375 Other Financing Sources (Uses): Transfers from (to) other funds: Water and Sewer Fund 7,464,987 4,447,686 3,017,302 7,464,988 1 General Fund 150,000 150,000 - 150,000 - Total other financing sources (uses)7,614,987 4,597,686 3,017,302 7,614,988 1 Revenues and other financing sources over (under) expenditures and other financing uses -$ 4,380,971$ 2,590,405$ 6,971,376$ 6,971,376$ Actual 122 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, 2017 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Electric power sales 62,682,500$ 62,768,552$ 86,052$ Sales tax 3,700,000 2,462,798 (1,237,202) Total 66,382,500 65,231,350 (1,151,150) Other operating revenues 307,000 327,349 20,349 Total operating revenues 66,689,500 65,558,699 (1,130,801) Non-operating revenues: Other non-operating revenues 1,314,600 1,589,246 274,646 Investment earnings 604,500 (896,310) (1,500,810) Total non-operating revenues 1,919,100 692,936 (1,226,164) Total revenues 68,608,600 66,251,635 (2,356,965) Interest income from other funds: General Fund 55,754 55,754 - Airport Fund 25,844 25,844 - Total 81,598 81,598 - Total revenues 68,690,198 66,333,233 (2,356,965) Other Financing Sources (Uses): Appropriated fund balance 1,819,762 - (1,819,762) Bond premium 2,767,589 2,767,589 - Bond refunding proceeds 14,703,723 14,703,722 (1) Total other financing sources (uses)19,291,074 17,471,311 (1,819,763) Total revenues and other financing sources (uses)87,981,272$ 83,804,544$ (4,176,728)$ 123 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, 2017 Variance Budget Actual Over/Under Expenditures: Operations: Salaries and employee benefits 3,056,769$ 2,684,742$ 372,027$ Operating expenditures 3,865,240 3,619,679 245,561 Total 6,922,009 6,304,421 617,588 Electric power purchases 53,471,500 52,237,592 1,233,908 Debt service: Principal retirement 985,852 985,866 (14) Interest and other charges 1,259,380 1,195,301 64,079 Total 2,245,232 2,181,167 64,065 Capital outlay 5,235,403 4,633,122 602,281 Total expenditures 67,874,144 65,356,302 2,517,842 Other Financing Soutces (Uses): Payment to refunded bond escrow agent (17,260,128) (17,260,127) (1) Transfers (to) from other funds: Electric Capital Projects Fund (2,385,000) (2,385,000) - General Fund (462,000) (462,128) 128 Total other financing sources (uses)(20,107,128) (20,107,255) 127 Total expenditures and other financing sources (uses)87,981,272$ 85,463,557$ 2,517,715$ 124 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, 2017 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources 83,804,544$ Total expenditures and other financing uses 85,463,557 Revenues and other financing sources (uses) over (under) expenditures and other financing uses (1,659,013) Reconciling items: Debt principal 985,866 Bond refunding proceeds (14,703,722) Premium on bond refunding (2,767,589) Retirement of bond debt 17,260,127 Capital outlay 4,633,122 Capital items not charged to capital outlay 2,250,705 Disposal of capital asset (1,293,026) Transfer to Electric Capital Projects Fund 2,385,000 Increase in compensated absences (6,434) Increase in OPEB liability (122,236) Increase in deferred outflows of resources - pensions 308,453 Increase in net pension liability (355,588) Decrease in deferred inflows of resources - pensions 33,676 Depreciation and amortization (2,546,679) Total reconciling items 6,061,675 Change in net position 4,402,662$ 125 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, 2017 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) Total revenues 5,815,850 5,592,648 - 5,592,648 (223,202) Expenditures: Construction costs capitalized 6,729,505 6,020,736 323,131 6,343,867 385,638 Construction in progress 18,700,632 2,476,729 5,993,471 8,470,200 10,230,432 Other costs 2,788,598 388,982 - 388,982 2,399,616 Total expenditures 28,218,735 8,886,447 6,316,602 15,203,049 13,015,686 Revenues over (under) expenditures (22,402,885) (3,293,799) (6,316,602) (9,610,401) 12,792,484 Other Financing Sources (Uses): Transfers from (to) other funds: Electric Fund 19,989,635 17,604,630 2,385,000 19,989,630 (5) Natural Gas Fund 2,413,250 2,413,250 - 2,413,250 - Total other financing sources (uses)22,402,885 20,017,880 2,385,000 22,402,880 (5) Revenues and other financing sources over (under) expenditures and other financing uses -$ 16,724,081$ (3,931,602)$ 12,792,479$ 12,792,479$ Actual 126 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, 2017 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Natural gas sales 18,212,000$ 15,550,098$ (2,661,902)$ Other operating revenues - 1,437 1,437 Total operating revenues 18,212,000 15,551,535 (2,660,465) Non-operating revenues: Other non-operating revenues 200,000 225,330 25,330 Investment earnings 307,300 (395,510) (702,810) Total non-operating revenues 507,300 (170,180) (677,480) Total revenues 18,719,300 15,381,355 (3,337,945) Other Financing Sources (Uses): Appropriated fund balance 5,349,996 - (5,349,996) Bond premium 462,367 462,367 - Bond refunding proceeds 2,456,474 2,456,474 - Total other financing sources (uses)8,268,837 2,918,841 (5,349,996) Total revenues and other financing sources (uses)26,988,137$ 18,300,196$ (8,687,941)$ 127 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, 2017 Variance Budget Actual Over/Under Expenditures: Operations: Salaries and employee benefits 1,104,021$ 1,046,273$ 57,748$ Operating expenditures 3,311,015 2,894,662 416,353 Total 4,415,036 3,940,935 474,101 Natural gas purchases 9,079,000 6,071,931 3,007,069 Debt service: Principal retirement 1,147,067 1,147,057 10 Interest and other charges 1,619,451 1,612,711 6,740 Total 2,766,518 2,759,768 6,750 Capital outlay 128,906 40,357 88,549 Total expenditures 16,389,460 12,812,991 3,576,469 Other Financing Sources (Uses): Payment to refunded bond escrow agent (2,883,560) (2,883,559) (1) Transfers to other funds: General Fund (103,000) (113,872) 10,872 Natural Gas Capital Project Fund (7,612,117) (7,612,117) - Total other financing sources (uses)(10,598,677) (10,609,548) 10,871 Total expenditures and other financing sources (uses)26,988,137$ 23,422,539$ 3,587,340$ 128 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, 2017 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources (uses) 18,300,196$ Total expenditures and other financing sources (uses)23,422,539 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses)(5,122,343) Reconciling items: Debt principal 1,147,057 Capital outlay 40,357 Capital items not charged to capital outlay 1,022,188 Disposal of capital asset (213,955) Transfer to Natural Gas Capital Projects Fund 7,612,117 Income from capital projects consolidation 173,648 Increase in compensated absences (15,419) Premium on bond refunding (462,367) Bond refunding proceeds (2,456,474) Retirement of bond debt 2,883,559 Increase in OPEB liability (62,034) Increase in deferred outflows of resources - pensions 159,735 Increase in net pension liability (184,144) Decrease in deferred inflows of resources - pensions 17,439 Depreciation and amortization (1,526,871) Total reconciling items 8,134,836 Change in net position 3,012,493$ 129 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, 2017 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Revenues: Miscellaneous -$ 7,393$ 75$ 7,468$ 7,468$ Investment earnings - 72,939 - 72,939 72,939 Restricted intergovernmental 364,199 59,523 173,573 233,096 (131,103) Total revenues 364,199 139,855 173,648 313,503 (50,696) Expenditures: Construction costs capitalized 49,537,035 47,017,566 - 47,017,566 2,519,469 Construction in progress 11,900,154 1,898,776 2,720,258 4,619,034 7,281,120 Other costs 2,163,982 2,154,092 - 2,154,092 9,890 Total expenditures 63,601,171 51,070,434 2,720,258 53,790,692 9,810,479 Revenues over (under) expenditures (63,236,972) (50,930,579) (2,546,610) (53,477,189) 9,759,783 Other Financing Sources (Uses): Transfers from (to) other funds: Natural Gas Fund 27,946,272 20,334,155 7,612,117 27,946,272 - Electric Fund 3,330,000 3,330,000 - 3,330,000 - Bond Premium 331,702 330,135 - 330,135 (1,567) Certificates of Participation 31,628,998 31,628,998 - 31,628,998 - Total other financing sources (uses)63,236,972 55,623,288 7,612,117 63,235,405 (1,567) Revenues and other financing sources over (under) expenditures and other financing uses -$ 4,692,709$ 5,065,507$ 9,758,216$ 9,758,216$ Actual 130 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, 2017 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Leases 294,168$ 333,659$ 39,491$ Customs 4,800 19,305 14,505 Sales of fuel 1,710,000 1,222,863 (487,137) Total 2,008,968 1,575,827 (433,141) Other operating revenues 38,031 72,599 34,568 Total revenues 2,046,999 1,648,426 (398,573) Other Financing Sources (Uses): Transfers from other funds: General Fund 1,829,040 1,696,387 (132,653) Total revenues and other financing sources (uses) 3,876,039 3,344,813 (531,226) Appropriated fund balance 35,619 - 35,619 Total revenues, other financing sources (uses), and appropriated fund balance 3,911,658$ 3,344,813$ (495,607)$ 131 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, 2017 Variance Budget Actual Over/Under Expenditures: Operations: Salaries and employee benefits 597,736$ 594,049$ 3,687$ Operating expenditures 2,175,254 1,681,423 493,831 Total 2,772,990 2,275,472 497,518 Debt service: Principal retirement 644,421 610,000 34,421 Interest and other charges 494,247 494,247 - Total 1,138,668 1,104,247 34,421 Total expenditures and other financing sources (uses) 3,911,658$ 3,379,719$ 531,939$ 132 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, 2017 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources (uses) 3,344,813$ Total expenditures 3,379,719 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses) (34,906) Reconciling items: Debt principal 610,000 Net revenue from capital projects consolidation 2,699,067 Transfer from General Fund 824,311 Increase in compensated absences 8,088 Increase in OPEB liability (51,782) Increase in deferred outflows of resources - pensions 132,194 Increase in net pension liability (152,395) Decrease in deferred inflows of resources - pensions 14,432 Depreciation and amortization (678,816) Total reconciling items 3,405,099 Change in net position 3,370,193$ 133 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, 2017 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Revenues: Restricted intergovernmental 7,872,790$ 3,232,316$ 2,699,067$ 5,931,383$ (1,941,407)$ Investment earnings 1,401 1,399 - 1,399 (2) Total revenues 7,874,191 3,233,715 2,699,067 5,932,782 (1,941,409) Expenditures: Construction costs capitalized 1,354,237 1,354,237 - 1,354,237 - Construction in progress 10,476,155 3,485,216 2,279,797 5,765,013 4,711,142 Other costs 164,176 164,176 - 164,176 - Total expenditures 11,994,568 5,003,629 2,279,797 7,283,426 4,711,142 Revenues over (under) expenditures (4,120,377) (1,769,914) 419,270 (1,350,644) 2,769,733 Other Financing Sources (Uses): Transfers from (to) other funds: General Fund 2,565,765 1,741,454 824,311 2,565,765 - Electric Fund 910,000 910,000 - 910,000 - Airport Fund 450,000 450,000 - 450,000 - Proceeds from refunding revenue bonds 194,612 194,612 - 194,612 - Total other financing sources (uses)4,120,377 3,296,066 824,311 4,120,377 - Revenues and other financing sources over (under) expenditures and other financing uses -$ 1,526,152$ 1,243,581$ 2,769,733$ 2,769,733$ Actual 134 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF NET POSITION NONMAJOR ENTERPRISE FUNDS JUNE 30, 2017 Aquatics and Fitness Center Stormwater Solid Waste Fund Fund Fund Total Assets: Current assets: Cash and cash equivalents 2,936,832$ 1,445,602$ 578,398$ 4,960,832$ Accounts receivable 4,092 235,376 296,459 535,927 Prepaid expenses 1,713 723 621 3,057 Inventories 6,757 - - 6,757 Total current assets 2,949,394 1,681,701 875,478 5,506,573 Non-current assets: Capital assets: Land and other non-depreciable assets 925,594 259,232 - 1,184,826 Other capital assets, net of depreciation 6,096,123 389,834 192,101 6,678,058 Total non-current assets 7,021,717 649,066 192,101 7,862,884 Total assets 9,971,111 2,330,767 1,067,579 13,369,457 Deferred Outflows of Resources: Contributions to pension plan in current fiscal year 84,153 37,601 1,791 123,545 Pension deferrals 249,284 111,382 5,304 365,970 Total deferred outflows of resources 333,437 148,983 7,095 489,515 Liabilities: Current liabilities: Accounts payable and accrued liabilities 153,675 102,243 263,680 519,598 Unearned revenue 34,234 - - 34,234 Compensated absences 57,443 39,004 1,237 97,684 Total current liabilities 245,352 141,247 264,917 651,516 Non-current liabilities: Net pension liability 389,413 173,993 8,285 571,691 Compensated absences 28,293 19,211 609 48,113 Other post-employment benefits payable 671,863 293,801 20,565 986,229 Total non-current liabilities 1,089,569 487,005 29,459 1,606,033 Total liabilities 1,334,921 628,252 294,376 2,257,549 Deferred Inflows of Resources: Pension deferrals 40,595 18,138 865 59,598 Net investment in capital assets 7,021,717 649,066 192,101 7,862,884 Unrestricted 1,907,315 1,184,294 587,332 3,678,941 Total net position 8,929,032$ 1,833,360$ 779,433$ 11,541,825$ 135 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, 2017 Aquatics and Fitness Center Fund Stormwater Solid Waste Total Operating Revenues: Charges for services 3,898,689$ 2,185,186$ 2,367,044$ 8,450,919$ Other operating revenues 184,814 15,425 42,499 242,738 Total operating revenues 4,083,503 2,200,611 2,409,543 8,693,657 Operating Expenses: Aquatics and Fitness Center operations 3,549,890 - - 3,549,890 Stormwater operations - 1,844,329 - 1,844,329 Solidwaste operations - - 2,160,964 2,160,964 Solidwaste maintenance 43,925 43,925 Depreciation and amortization 299,331 104,752 304,463 708,546 Total operating expenses 3,849,221 1,949,081 2,509,352 8,307,654 Operating income (loss)234,282 251,530 (99,809) 386,003 Non-Operating Revenues (Expenses): Gain (loss) on sale of capital assets - (26,498) - (26,498) Other non-operating revenues (expenses) 4,530 - - 4,530 Investment earnings (52,155) (25,586) (10,927) (88,668) Interest and other charges - - (2,203) (2,203) Total non-operating revenues (expenses)(47,625) (52,084) (13,130) (112,839) Income (loss) before capital contributions and transfers 186,657 199,446 (112,939) 273,164 Total transfers (to) from other funds (100,000) - - (100,000) Change in net position 86,657 199,446 (112,939) 173,164 Net Position: Beginning of year, July 1 8,842,375 1,633,914 892,372 11,368,661 End of year, June 30 8,929,032$ 1,833,360$ 779,433$ 11,541,825$ 136 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2017 Aquatics and Fitness Center Fund Stormwater Solid Waste Total Cash Flows from Operating Activities: Cash received from customers 4,104,593$ 2,130,145$ 2,336,967$ 8,571,705$ Cash paid for goods and services (1,549,047) (1,095,639) (1,985,218) (4,629,904) Cash paid to or on behalf of employees for services (1,862,224) (619,253) (108,818) (2,590,295) Net cash provided (used) by operating activities 693,322 415,253 242,931 1,351,506 Cash Flows from Non-Capital Financing Activities: Transfers to other funds (100,000) - - (100,000) Cash Flows from Capital and Related Financing Activities: Proceeds from sale of capital assets - 11,000 - 11,000 Acquisition and construction of capital assets (131,353) (210,228) (63,792) (405,373) Principal paid on bond maturities and equipment obligations - - (153,909) (153,909) Interest paid on bond maturities and equipment obligations - - (2,203) (2,203) Net cash provided (used) by capital and related financing activities (131,353) (199,228) (219,904) (550,485) Cash Flows from Investing Activities: Earnings on investments (52,155) (25,586) (10,927) (88,668) Net increase (decrease) in cash and cash equivalents 409,814 190,439 12,100 612,353 Cash and Cash Equivalents: Beginning of year, July 1 2,527,018 1,255,163 566,298 4,348,479 End of year, June 30 2,936,832$ 1,445,602$ 578,398$ 4,960,832$ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss)234,282$ 251,530$ (99,809)$ 386,003$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization 299,331 104,752 304,463 708,546 Non operating revenues 4,530 - - 4,530 Increase deferred outflows - pension (258,881) (115,670) (5,508) (380,059) Increase in net pension liability 298,440 133,345 6,350 438,135 Decrease deferred inflows - pension (28,264) (12,628) (601) (41,493) Changes in assets and liabilities: (Increase) decrease in accounts receivable 4,239 (70,248) (72,540) (138,549) (Increase) decrease in inventories 2,165 - - 2,165 (Increase) decrease in prepaid expenses (753) (218) (37) (1,008) Increase (decrease) in accounts payable and accrued liabilities 35,246 69,910 107,257 212,413 Increase (decrease) in net OPEB liability 101,986 44,598 3,122 149,706 Increase (decrease) in compensated absences 1,001 9,882 234 11,117 Total adjustments 459,040 163,723 342,740 965,503 Net cash provided (used) by operating activities 693,322$ 415,253$ 242,931$ 1,351,506$ 137 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, 2017 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Recreational fees 3,594,000$ 3,898,689$ 304,689$ Other operating revenues 178,800 184,814 6,014 Total operating revenues 3,772,800 4,083,503 310,703 Non-operating revenues: Other non-operating revenues - 4,530 4,530 Investment earnings 33,000 (52,155) (85,155) Total non-operating revenues 33,000 (47,625) (80,625) Total revenues 3,805,800 4,035,878 230,078 Appropriated fund balance 43,823 - (43,823) Total revenues and other financing sources (uses)3,849,623$ 4,035,878$ 186,255$ Expenditures: Operations: Salaries and employee benefits 2,001,449$ 1,989,407$ 12,042$ Operating expenditures 1,590,323 1,446,200 144,123 Total 3,591,772 3,435,607 156,165 Capital outlay 157,851 131,353 26,498 Total expenditures 3,749,623 3,566,960 182,663 Other Financing Sources (Uses): Transfers to other funds: Capital Projects Fund 100,000 100,000 - Total expenditures and other financing sources (uses)3,849,623$ 3,666,960$ 182,663$ 138 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, 2017 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources (uses) 4,035,878$ Total expenditures and other financing sources (uses) 3,666,960 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses)368,918 Reconciling items: Capital outlay 131,353 Increase in compensated absences (1,001) Increase in OPEB liability (101,987) Increase in deferred outflows of resources - pensions 258,881 Increase in net pension liability (298,440) Decrease in deferred inflows of resources - pensions 28,264 Depreciation and amortization (299,331) Total reconciling items (282,261) Change in net position 86,657$ 139 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, 2017 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Stormwater receipts 2,064,238$ 2,185,186$ 120,948$ Other operating revenues 16,950 15,425 (1,525) Total operating revenues 2,081,188 2,200,611 119,423 Non-operating revenues: Other non-operating revenues - 11,000 11,000 Investment earnings 10,470 (25,586) (36,056) Total non-operating revenues 10,470 (14,586) (25,056) Total revenues 2,091,658$ 2,186,025$ 94,367$ Expenditures: Operations: Salaries and employee benefits 736,899$ 680,837$ 56,062$ Operating expenditures 1,360,137 1,103,965 256,172 Total 2,097,036 1,784,802 312,234 Capital outlay 92,600 90,677 1,923 Total expenditures 2,189,636 1,875,479 314,157 Other Financing Sources (Uses): Appropriated fund balance 342,978 - 342,978 Transfers from(to) other funds: Intrafund - Stormwater Capital Project Fund (245,000) (245,000) - Total other financing sources (uses)97,978 (245,000) 342,978 Total expenditures and other financing sources (uses)2,091,658$ 2,120,479$ (28,821)$ 140 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, 2017 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues and other financing sources (uses) 2,186,025$ Total expenditures and other financing sources (uses)2,120,479 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses)65,546 Reconciling items: Capital outlay 90,677 Disposal of capital asset (37,498) Intrafund transfers - Stormwater Capital Project Fund 245,000 Decrease in compensated absences (9,882) Increase in OPEB liability (44,598) Increase in deferred outflows of resources - pensions 115,670 Increase in net pension liability (133,345) Decrease in deferred inflows of resources - pensions 12,628 Depreciation and amortization (104,752) Total reconciling items 133,900 Change in net position 199,446$ 141 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, 2017 Project Prior Current Total to Variance Authorization Years Year Date Over/Under Expenditures: Construction in progress 545,000$ 139,681$ 119,551$ 259,232$ 285,768$ Revenues over (under) expenditures (545,000) (139,681) (119,551) (259,232) 285,768 Other Financing Sources (Uses): Transfers from (to) other funds: Stormwater Fund 545,000 300,000 245,000 545,000 - Revenues and other financing sources over (under) expenditures and other financing uses -$ 160,319$ 125,449$ 285,768$ 285,768$ Actual 142 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, 2017 Variance Budget Actual Over/Under Revenues: Operating revenues: Charges for services: Refuse collection fees 2,391,162$ 2,367,044$ (24,118)$ Other operating revenues 37,000 42,499 5,499 Total operating revenues 2,428,162 2,409,543 (18,619) Non-operating revenues: Investment earnings 12,275 (10,927) (23,202) Total revenues 2,440,437 2,398,616 (41,821) Other Financing Sources (Uses): Appropriated fund balance 109,854 - (109,854) Total revenues, other financing sources (uses) and appropriated fund balance 2,550,291$ 2,398,616$ (151,675)$ Expenditures: Operations: Salaries and employee benefits 83,387$ 82,227$ 1,160$ Operating expenditures 2,151,964 2,075,140 76,824 Total 2,235,351 2,157,367 77,984 Maintenance: Salaries and employee benefits 56,968 32,864 24,104 Operating expenditures 23,860 11,061 12,799 Total 80,828 43,925 36,903 Debt service: Principal retirement 153,907 153,909 (2) Interest and other charges 2,205 2,203 2 Total 156,112 156,112 - Capital outlay 78,000 63,792 14,208 Total expenditures 2,550,291$ 2,421,196$ 129,095$ 143 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, 2017 Reconciliation from Budgetary Basis (Modified Accrual) to Full Accrual: Total revenues, other financing sources (uses) and appropriated fund balance 2,398,616$ Total expenditures 2,421,196 Revenues and other financing sources (uses) over (under) expenditures and other financing sources (uses)(22,580) Reconciling items: Debt principal 153,909 Capital outlay 63,792 Depreciation (304,463) Decrease in compensated absences (234) Increase in OPEB liability (3,122) Decrease in deferred outflows of resources - pensions 5,508 Increase in net pension liability (6,350) Decrease in deferred inflows of resources - pensions 601 Total reconciling items (90,359) Change in net position (112,939)$ 144 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS JUNE 30, 2017 Health and Workers' Property and Dental Compensation Liability Fund Fund Fund Total Assets: Current assets: Cash and investments 2,481,165$ 1,161,889$ 799,547$ 4,442,601$ Accounts receivable (net) 536,859 - - 536,859 Prepaids 128,400 10,000 10,625 149,025 Restricted assets: Deposits 10,169 6,679 - 16,848 Total current assets 3,156,593 1,178,568 810,172 5,145,333 Liabilities: Current liabilities: Accounts payable and accrued liabilities 418,174 3,321 - 421,495 Liabilities payable from restricted assets: Deposits 10,169 6,679 - 16,848 Total current liabilities 428,343 10,000 - 438,343 Net Position: Unrestricted 2,728,250$ 1,168,568$ 810,172$ 4,706,990$ 145 CHANGES IN FUND NET POSITION Health and Workers' Property and Dental Compensation Liability Fund Fund Fund Total Operating Revenues: Interfund charges and employee contributions 6,814,645$ -$ 710,300$ 7,524,945$ Receipts for interfund charges - 500,000 - 500,000 Other operating revenue 715,368 4,411 63,745 783,524 Total operating revenues 7,530,013 504,411 774,045 8,808,469 Operating Expenses: Operating expenses 335,152 63,891 48,469 447,512 Workers' compensation claims and premiums - 185,527 - 185,527 Health care clinic 92,824 - - 92,824 Insurance 15,285 - - 15,285 Health benefit claims and premiums 6,873,987 - - 6,873,987 Property and liability claims and premiums - - 610,285 610,285 Total operating expenses 7,317,248 249,418 658,754 8,225,420 Operating income (loss)212,765 254,993 115,291 583,049 Non-Operating Revenues: Investment earnings (46,346) (20,522) (11,441) (78,309) Change in net position 166,419 234,471 103,850 504,740 Net Position: Beginning of year, July 1 2,561,831 934,097 706,322 4,202,250 End of year, June 30 2,728,250$ 1,168,568$ 810,172$ 4,706,990$ FOR THE YEAR ENDED JUNE 30, 2017 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF REVENUES, EXPENSES, AND INTERNAL SERVICE FUNDS 146 CITY OF MONROE, NORTH CAROLINA COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2017 Health and Workers' Property and Dental Compensation Liability Fund Fund Fund Total Cash Flows from Operating Activities: Cash received for services 6,516,970$ -$ 708,175$ 7,225,145$ Other operating revenue 715,368 4,411 63,745 783,524 Receipts for interfund charges - 500,000 - 500,000 Cash paid for goods and services (7,218,476) (263,333) (744,425) (8,226,234) Net cash provided (used) by operating activities 13,862 241,078 27,495 282,435 Cash Flows from Investing Activities: Investment earnings (46,346) (20,522) (11,441) (78,309) Net increase (decrease) in cash and cash equivalents (32,484) 220,556 16,054 204,126 Cash and Cash Equivalents: Beginning of year, July 1 2,523,818 948,012 783,493 4,255,323 End of year, June 30 2,491,334$ 1,168,568$ 799,547$ 4,459,449$ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss)212,765$ 254,993$ 115,291$ 583,049$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Change in assets and liabilities (Increase) decrease in accounts receivable (281,340) - - (281,340) (Increase) decrease in prepaid expenses (16,335) (10,000) (2,125) (28,460) Increase (decrease) in accounts payable and accrued liabilities 98,772 (3,915) (85,671) 9,186 Total adjustments (198,903) (13,915) (87,796) (300,614) Net cash provided (used) by operating activities 13,862$ 241,078$ 27,495$ 282,435$ 147 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, 2017 Financial Variance Plan Actual Over/Under Revenues: Operating revenues: Interfund charges and employee contributions 7,291,879$ 6,814,645$ (477,234)$ Other operating revenue - 715,368 715,368 Total operating revenues 7,291,879 7,530,013 238,134 Non-operating revenues: Investment earnings 8,000 (46,346) (54,346) Total revenues 7,299,879 7,483,667 183,788 Expenditures: Operating expenditures: Other operating expenses 343,681 335,152 8,529 Healthcare clinic 113,400 92,824 20,576 Insurance 17,000 15,285 1,715 Health benefit claims and premiums 6,830,696 6,873,987 (43,291) Total operating expenditures 7,304,777 7,317,248 (12,471) Appropriated fund balance 4,898 - 4,898 Revenues over (under) expenditures -$ 166,419$ 166,419$ 148 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, 2017 Financial Variance Plan Actual Over/Under Revenues: Operating revenues: Interfund charges 500,000$ 500,000$ -$ Other operating revenue - 4,411 4,411 Total operating revenues 500,000 504,411 4,411 Non-operating revenues: Investment earnings 4,530 (20,522) (25,052) Total revenues 504,530 483,889 (20,641) Expenditures: Operating expenditures: Other operating expenses 63,891 63,891 - Workers' compensation claims and premiums paid 440,639 185,527 255,112 Total expenditures 504,530 249,418 255,112 Revenues over (under) expenditures -$ 234,471$ 234,471$ 149 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, 2017 Financial Variance Plan Actual Over/Under Revenues: Operating revenues: Interfund charges and employee contributions 710,300$ 710,300$ -$ Other operating revenue 1,500 63,745 62,245 Total operating revenues 711,800 774,045 62,245 Non-operating revenues: Investment earnings 3,000 (11,441) (14,441) Total revenues 714,800 762,604 47,804 Expenditures: Operating expenditures: Other operating expenses 48,469 48,469 - Property and liability claims and premiums 732,920 610,285 122,635 Total expenditures 781,389 658,754 122,635 Other Financing Sources (Uses): Appropriated fund balance 66,589 - (66,589) Revenues over (under) expenditures -$ 103,850$ 103,850$ 150 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF AD VALOREM TAXES RECEIVABLE JUNE 30, 2017 Uncollected Uncollected Balance Collections Balance Fiscal Year June 30, 2016 Additions And Credits June 30, 2017 2016 - 2017 -$ 19,923,633$ 19,696,996$ 226,637$ 2015 - 2016 263,516 - 139,697 123,819 2014 - 2015 200,574 - 66,910 133,664 2013 - 2014 448,777 - 326,924 121,853 2012 - 2013 107,672 - 28,974 78,698 2011 - 2012 69,800 - 15,615 54,185 2010 - 2011 63,330 - 11,773 51,557 2009 - 2010 63,200 - 5,714 57,486 2008 - 2009 31,561 - 3,708 27,853 2007 - 2008 29,937 - 2,364 27,573 2006 - 2007 28,191 - 28,191 - Total 1,306,558$ 19,923,633$ 20,326,866$ 903,325 Less: Allowance for uncollectible ad valorem taxes receivable 45,166 Ad valorem taxes receivable 858,159$ Reconcilement with Revenues:General Fund Ad valorem taxes - General Fund 20,230,045$ Amounts written off per Statute of Limitations 50,745 Refunds, releases of prior years' taxes 174,235 Interest and advertising cost recovery (128,159) Total collections and credits 20,326,866$ 151 CITY OF MONROE, NORTH CAROLINA ANALYSIS OF CURRENT TAX LEVY CITY-WIDE LEVY FOR THE YEAR ENDED JUNE 30, 2017 Excluding Registered Registered Property Total Motor Motor Valuation Rate Levy Vehicles Vehicles Original Levy: Property taxed at current year's rate 3,390,733,848$ 0.5863$ 19,137,603$ 17,917,940$ 1,219,663$ Registered motor vehicles taxed at prior year's rate 70,552,272 391,565 - 391,565 Total 3,461,286,120 19,529,168 17,917,940 1,611,228 Public Utility Allocation 62,106,543 0.5863 364,131 364,131 - Discoveries 21,010,387 0.5863 133,137 133,137 - Releases (16,764,464) 0.5863 (102,803) (102,803) - Total property valuation 3,527,638,586$ Net Levy 19,923,633 18,312,405 1,611,228 Uncollected taxes at June 30, 2017 (226,637) (226,637) - Current Year's Taxes Collected 19,696,996$ 18,085,768$ 1,611,228$ Current Levy Collection Percentage 98.86%98.76%100.00% Secondary Market Disclosures: Property Valuation Rate Levy Assessed Valuation: Assessment Ratio1 100% Real property 2,351,566,413$ Personal property 701,487,610 Public Service Companies2 62,106,543 3,115,160,566 0.5863 18,312,405$ Motor Vehicle Property 412,478,020 0.5863 1,611,228 'Total levy (includes discoveries, releases, and abatements)3 3,527,638,586$ 19,923,633$ Distribution of levy: General Fund 19,923,633$ 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 152 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF MUNICIPAL SERVICE DISTRICT TAXES RECEIVABLE JUNE 30, 2017 Uncollected Uncollected Balance Collections Balance Fiscal Year June 30, 2016 Additions And Credits June 30, 2017 2016 - 2017 -$ 54,985$ 54,582$ 403$ 2015 - 2016 78 - 20 58 2014 - 2015 321 - 24 297 2013 - 2014 697 - 29 668 2012 - 2013 187 - 58 129 2011 - 2012 197 - 2 195 2010 - 2011 355 - - 355 2009 - 2010 161 - - 161 2008 - 2009 149 - - 149 2007 - 2008 118 - - 118 2006 - 2007 383 - 383 - Total 2,646$ 54,985$ 55,098$ 2,533 Less: Allowance for uncollectible ad valorem taxes receivable 127 Ad valorem taxes receivable 2,406$ Reconcilement with Revenues: Ad valorem taxes - Downtown Monroe Fund 54,779$ Amounts written off per Statute of Limitations 452 Refunds, releases of prior years' taxes 19 Interest and advertising cost recovery (152) Total collections and credits 55,098$ 153 CITY OF MONROE, NORTH CAROLINA ANALYSIS OF CURRENT TAX LEVY MUNICIPAL SERVICE DISTRICT LEVY FOR THE YEAR ENDED JUNE 30, 2017 Property Excluding Registered Registered Property Total Motor Motor Valuation Rate Levy Vehicles Vehicles Original Levy: Property taxed at current year's rate 23,504,059$ 0.219$ 51,593$ 49,599$ 1,994$ Registered motor vehicles taxed at prior year's rate 218,251 478 - 478 Total 23,722,310 52,071 49,599 2,472 Public Utility Allocation 1,269,164 0.219 2,779 2,779 - Discoveries 54,891 0.219 135 135 - Total property valuation 25,046,365$ Net Levy 54,985 52,513 2,472 Uncollected taxes at June 30, 2017 (403) (403) - Current Year's Taxes Collected 54,582$ 52,110$ 2,472$ Current Levy Collection Percentage 99.27%99.23%100.00% Secondary Market Disclosures: Property Valuation Rate Levy Assessed Valuation: Assessment Ratio1 100% Real property 20,684,114$ Personal property 1,964,183 Public Service Companies2 1,269,164 23,917,461 0.219 52,513$ Motor Vehicle Property 1,128,904 0.219 2,472 Total levy (includes discoveries, releases, and abatements)3 25,046,365$ 54,985$ Distribution of levy: Municipal Service District - Downtown Monroe Fund 54,985$ 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 154 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 157 162 166 171 173 155                       156 CITY OF MONROE, NORTH CAROLINANET POSITION BY COMPONENTLAST TEN FISCAL YEARS(accrual basis of accounting)(in thousands of dollars)2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Governmental activitiesNet investment in capital assets 73,467$ 74,438$ 73,296$ 71,692$ 70,561$ 69,784$ 69,143$ 69,134$ 68,979$ 68,341$ Restricted 45 2 255 670 6,740 5,665 6,484 10,499 7,385 9,813 Unrestricted 20,718 20,739 20,359 20,979 16,261 16,315 18,861 14,429 19,993 13,434 Total governmental activities net position 94,229$ 95,179$ 93,910$ 93,341$ 93,562$ 91,764$ 94,488$ 94,062$ 96,357$ 91,588$ Business-type activitiesNet investment in capital assets 127,957$ 127,104$ 141,269$ 144,182$ 152,078$ 160,289$ 169,721$ 172,159$ 177,673$ 193,967$ Unrestricted 84,078 91,595 86,319 94,053 95,183 92,520 93,303 106,769 117,605 116,067 Total business-type activities net position 212,035$ 218,699$ 227,588$ 238,235$ 247,261$ 252,809$ 263,024$ 278,928$ 295,278$ 310,034$ Primary governmentNet investment in capital assets 201,424$ 201,542$ 214,565$ 215,874$ 222,639$ 230,073$ 238,864$ 241,293$ 246,652$ 262,308$ Restricted 45 2 255 670 6,740 5,665 6,484 10,499 7,385 9,813 Unrestricted 104,796 112,334 106,678 115,032 111,444 108,835 112,164 121,198 137,598 129,501 Total primary government net position 306,264$ 313,878$ 321,498$ 331,576$ 340,823$ 344,573$ 357,512$ 372,990$ 391,635$ 401,622$ 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 YEAR157 Page 1 of 2CITY OF MONROE, NORTH CAROLINACHANGES IN NET POSITIONLAST TEN FISCAL YEARS(accrual basis of accounting)(in thousands of dollars)EXPENSES 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Governmental activities:General government 4,945$ 4,725$ 4,952$ 5,294$ 5,562$ 4,354$ 4,897$ 4,929$ 7,646$ 5,232$ Transportation4,966 5,441 5,667 4,699 5,109 4,801 5,216 5,207 5,215 5,307 Public safety14,247 17,974 17,775 18,224 19,512 19,067 19,813 21,069 19,675 23,693 Environmental protection 2,551 - - - - - - - - - Culture and recreation 3,922 4,914 4,906 4,545 5,067 4,069 4,899 5,541 5,389 5,910 Economic and physical development 948 859 1,784 1,119 953 1,016 1,579 1,134 2,070 1,063 Interest on long-term debt 238 312 161 107 54 229 164 186 200 227 Total governmental activities expenses 31,817 34,225 35,245 33,988 36,257 33,536 36,568 38,066 40,195 41,432 Business-type activities:Water and sewer 11,381 11,543 11,520 11,955 11,687 12,356 15,162 10,360 12,281 13,274 Electric39,703 41,629 43,588 46,840 49,158 51,729 55,559 60,881 58,078 60,175 Natural gas16,942 16,867 17,585 13,913 11,131 12,710 14,844 13,790 13,595 12,229 Aquatics and Fitness Center 3,187 3,725 3,436 3,549 3,783 4,886 3,607 3,652 3,818 3,849 Stormwater- 795 1,351 1,709 1,734 1,874 1,674 1,838 1,879 1,976 Solid Waste- 2,698 2,702 2,697 2,564 2,213 2,067 2,178 2,303 2,511 Airport2,865 3,232 3,498 3,553 3,611 3,771 3,580 3,405 3,328 3,498 Total business-type activities expenses 74,077 80,489 83,680 84,216 83,668 89,539 96,493 96,104 95,282 97,512 Total primary government expenses 105,894$ 114,714$ 118,925$ 118,204$ 119,925$ 123,075$ 133,061$ 134,170$ 135,477$ 138,944$ PROGRAM REVENUESGovernmental activities:Charges for services:General government 1,132$ 2,029$ 1,979$ 1,955$ 1,978$ 2,079$ 2,349$ 2,141$ 2,374$ 2,203$ Transportation- 243 236 202 218 203 297 359 375 350 Public safety51 2,065 2,213 2,312 2,491 2,230 3,055 4,050 4,589 4,161 Environmental protection 2,795 43 - - - - - - - - Culture and recreation 844 1,239 1,194 1,232 1,289 653 1,499 1,638 1,734 1,728 Economic and physical development 3 2 8 3 2 - - - - - Operating grants and contributions: General government 8 - - - - - - 75 - - Transportation1,154 1,082 986 1,032 930 978 961 972 972 963 Public safety1,017 604 732 616 786 312 448 497 318 560 Environmental protection2 1 - - - - - - - - Culture and recreation216 223 195 204 214 223 240 193 193 212 Economic and physical development7 194 326 135 220 264 412 528 547 432 Capital grants and contributions:General government- - - - - - 170 - - - Transportation2,435 3,460 1,187 - 478 438 304 196 165 208 Public safety- - - 49 - - - - - - Culture and recreation- - 785 304 - - - - - - Total governmental activities program revenues 9,665$ 11,184$ 9,841$ 8,044$ 8,606$ 7,380$ 9,735$ 10,649$ 11,267$ 10,817$ FISCAL YEAR158 Page 2 of 2CITY OF MONROE, NORTH CAROLINACHANGES IN NET POSITIONLAST TEN FISCAL YEARS(accrual basis of accounting)(in thousands of dollars)2008 2009 2010 2011 2012 2013 2014 2015 2016 2017PROGRAM REVENUES (CONTINUED):Business-type activities:Charge for services:Water and sewer12,705 12,207 12,365 12,917 13,642 14,000 15,529 16,155 16,743 17,671 Electric43,051 40,926 43,089 48,454 51,334 53,044 58,057 65,732 62,607 65,606 Natural gas18,836 20,116 24,251 17,320 11,907 14,261 17,185 18,053 14,485 15,569 Aquatics and Fitness Center4,162 4,069 3,907 3,927 3,877 4,297 3,588 3,712 4,013 4,097 Stormwater- 822 1,776 1,794 1,820 1,846 1,897 2,099 2,158 2,211 Solid Waste- 2,748 2,839 2,822 2,552 2,214 2,190 2,169 2,312 2,411 Airport1,897 1,559 1,493 1,653 2,012 1,984 1,943 1,927 1,600 1,654 Capital grants and contributions:Water and sewer2,918 527 - - - 408 475 - 280 - Natural gas- - - - - - - - 62 174 Stormwater- 109 - - - 162 - - - - Solid Waste- - - - - 75 - - 1 - Airport- 154 483 2,150 - 235 3,116 139 2,174 2,699 Total business-type activities program revenues83,569 83,236 90,203 91,037 87,144 92,526 103,980 109,986 106,435 112,092 Total primary government revenues93,234$ 94,421$ 100,044$ 99,081$ 95,750$ 99,906$ 113,715$ 120,635$ 117,702$ 122,909$ NET (EXPENSE) REVENUEGovernmental activities(22,152)$ (23,041)$ (25,404)$ (25,944)$ (27,651)$ (26,156)$ (26,833)$ (27,417)$ (28,928)$ (30,615)$ Business-type activities9,492 2,748 6,523 6,821 3,476 2,987 7,487 13,882 11,153 14,580 Total primary government net (expense) revenue (12,660)$ (20,293)$ (18,881)$ (19,123)$ (24,175)$ (23,169)$ (19,346)$ (13,535)$ (17,775)$ (16,035)$ GENERAL REVENUES AND OTHER CHANGES IN NET POSITIONGovernmental activities:Taxes:Property taxes, levied for general purpose 15,304$ 16,286$ 16,954$ 19,314$ 19,357$ 19,434$ 19,767$ 19,375$ 19,605$ 20,176$ Sales and use tax4,884 4,096 3,537 3,906 4,770 4,906 5,136 5,428 5,249 6,196 Utility sales taxes1,681 1,650 1,721 1,834 1,860 1,951 2,111 2,813 2,905 3,128 Motor vehicle tax133 128 125 130 125 129 197 143 140 678 Beer & wine and telecommunications tax647 697 566 657 620 564 570 568 496 490 Gross receipts tax42 40 46 49 55 56 63 68 77 98 Other licenses and fees805 780 720 1,085 1,403 1,210 869 879 - - Grants and contributions not restricted tospecific programs251 225 242 218 178 173 - - - - Unrestricted investment earnings1,259 495 273 65 822 (544) 366 680 1,946 (723) Miscellaneous476 520 565 726 807 1,002 1,192 1,095 580 631 Gain on sale of capital assets199 (19) 96 11 - 116 - - - - Transfers(442) (908) (710) (2,619) (2,126) (4,640) (714) (1,267) 225 (1,845) Total governmental activities25,239 23,990 24,134 25,376 27,871 24,357 29,557 29,782 31,223 28,829 Business-type activities:Unrestricted investment earnings4,853 2,992 971 289 2,936 (1,698) 1,493 1,735 5,144 (2,072) Interest earnings on interfund loan- - - - - 113 88 64 39 81 Miscellaneous60 63 395 858 443 390 433 192 238 323 Gain on sale of capital assets1 (47) 291 60 45 14 - - - - Transfers442 908 710 2,619 2,126 4,640 714 1,267 (225) 1,845 Total business-type activities5,356 3,916 2,367 3,826 5,550 3,459 2,728 3,258 5,196 177 Total primary government30,596$ 27,906$ 26,501$ 29,202$ 33,421$ 27,816$ 32,285$ 33,040$ 36,419$ 29,006$ CHANGE IN NET POSITIONGovernmental activities3,087$ 949$ (1,270)$ (568)$ 220$ (1,799)$ 2,724$ 2,365$ 2,295$ (1,786)$ Business-type activities14,848 6,664 8,890 10,647 9,026 6,446 10,215 17,140 16,349 14,757 Total primary government17,935$ 7,614$ 7,620$ 10,079$ 9,246$ 4,647$ 12,939$ 19,505$ 18,644$ 12,971$ 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 YEAR159 CITY OF MONROE, NORTH CAROLINAFUND BALANCES, GOVERNMENTAL FUNDSLAST TEN FISCAL YEARS(modified accrual basis of accounting)(in thousands of dollars)2008 2009 2010 2011 2012 2013 2014 2015 2016 2017General FundReserved 4,972$ 4,058$ 4,012$ -$ -$ -$ -$ -$ -$ -$ Unreserved15,635 13,808 15,614 - - - - - - - Non-spendable- - - 331 339 256 1,138 282 901 1,094 Restricted- - - 4,130 6,009 5,664 4,840 4,951 5,846 7,554 Assigned- - - 2,975 9,134 11,679 12,457 13,763 18,885 13,521 Unassigned- - - 13,042 5,827 3,607 6,533 8,067 4,337 5,152 Total General Fund 20,607$ 17,866$ 19,626$ 20,478$ 21,309$ 21,206$ 24,968$ 27,063$ 29,969$ 27,321$ All Other Governmental FundsReserved 3$ 93$ 233$ -$ -$ -$ -$ -$ -$ -$ Unreserved, reported in:Special Revenue Funds1,418 1,600 1,609 - - - - - - - Capital Projects Funds1,179 3,328 (114) - - - - - - - Non-spendable- - - - - 1 13 1 11 1 Restricted- - - --- 1,758 5,548 1,705 2,857 Committed- - - --- 588 996 1,690 3,843 Assigned- - - 1,281 1,560 2,026 102 113 192 199 Unassigned- - - ---(2) (46) - - Total all other governmental funds 2,600$ 5,021$ 1,728$ 1,281$ 1,560$ 2,027$ 2,459$ 6,612$ 3,598$ 6,900$ 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.11FISCAL YEAR160 CITY OF MONROE, NORTH CAROLINACHANGES IN FUND BALANCES , GOVERNMENTAL FUNDSLAST TEN FISCAL YEARS(modified accrual basis of accounting)(in thousands of dollars)2008 2009 2010 2011 2012 2013 2014 2015 2016 2017REVENUESAd valorem taxes 15,265$ 16,134$ 16,909$ 19,217$ 19,426$ 19,443$ 19,788$ 19,409$ 19,744$ 20,285$ Other taxes and licenses1,227 1,220 874 1,249 1,313 1,558 1,497 1,087 219 778 Unrestricted intergovernmental7,177 6,360 6,044 6,586 7,408 7,567 7,952 8,967 8,839 9,987 Restricted intergovernmental2,378 2,826 3,274 2,399 2,217 1,846 2,060 2,461 2,194 2,375 Program income6 2 7 2 2 - - - - - Sales and services (1)5,137 1,961 1,740 1,708 1,766 1,420 1,921 1,944 2,469 2,282 Investment earnings1,259 495 273 64 822 (544) 481 646 1,842 (669) Miscellaneous650 611 548 747 793 747 779 989 395 461 Total revenues 33,099 29,609 29,669 31,972 33,747 32,037 34,478 35,503 35,702 35,499 EXPENDITURESGeneral government 4,578 4,086 4,170 3,410 3,327 2,052 2,796 1,729 888 2,913 Transportation2,426 2,452 1,727 1,484 1,802 1,970 1,979 1,957 2,400 2,346 Public safety13,304 13,864 14,385 14,332 15,654 15,147 15,394 16,250 14,599 17,430 Environmental protection (1)2,551 - - - - - - - - - Culture and recreation3,536 3,902 3,554 3,894 3,896 3,018 3,930 4,127 4,084 3,655 Economic and physical development830 986 1,909 2,045 951 1,415 1,614 2,864 5,157 2,684 Capital outlay5,487 2,619 2,832 1,091 2,298 2,806 2,076 4,158 7,483 4,335 Debt service:Principal retirement1,660 1,828 1,922 1,962 1,685 1,311 1,124 1,193 1,248 1,198 Interest and other charges182 310 337 61 54 229 164 186 199 227 Total expenditures 34,554 30,047 30,836 28,279 29,667 27,948 29,077 32,464 36,058 34,788 Excess (deficiency) of revenues over(under) expenditures (1,456) (438) (1,167) 3,693 4,080 4,089 5,401 3,039 (356) 711 OTHER FINANCING SOURCES (USES)Transfers from (to) others(573) (3,430) (710) (3,419) (2,548) (3,725) (2,057) (1,267) 249 (1,845) Repayment of advance from other funds- - (131) (131) - - - - - - Installment purchase obligations issued3,317 3,661 475 263 748 - 850 4,476 - 1,788 Total other financing sources (uses) 2,744 231 (366) (3,287) (1,800) (3,725) (1,207) 3,209 249 (57) Net change in fund balances 1,288$ (207)$ (1,533)$ 406$ 2,280$ 364$ 4,194$ 6,248$ (107)$ 654$ Debt service as a percentage of non-capital expenditures 6.34% 7.79% 8.07% 7.44% 6.35% 6.13% 4.77% 4.87% 5.06% 4.68%Note:(1) The Solid Waste Fund was established in 2009. Previously, these revenues and expenditures were included in the General Fund.FISCAL YEAR161 CITY OF MONROE, NORTH CAROLINAASSESSED VALUE AND ACTUAL VALUE OF TAXABLE PROPERTYLAST TEN FISCAL YEARS(in thousands of dollars)TotalPublicTotalDirectFiscalCommercialResidentialMotorServiceAssessedTax RateYearVehicleOtherCompaniesValue(2)2004839,762$ 650,721$ 170,653$ 451,967$ 41,854$ 2,154,957$ 0.500 2005861,358 830,018 198,995 444,329 41,408 2,376,108 0.480 2006739,892 957,402 238,446 459,106 43,934 2,438,780 0.490 2007769,343 1,009,984 226,844 521,941 43,261 2,571,373 0.5300 2008810,780 1,067,270 227,535 583,078 49,984 2,738,647 0.5491 20091,081,987 1,264,542 207,793 659,913 49,487 3,263,722 0.4955 20101,097,648 1,288,641 186,439 765,537 60,724 3,398,989 0.4964 20111,133,184 1,296,350 189,559 777,420 69,218 3,465,731 0.5547 20121,151,666 1,298,253 197,410 761,938 66,714 3,475,981 0.5549 20131,172,544 1,308,774 219,424 740,811 66,312 3,507,865 0.5527 20141,162,848 1,326,417 393,733 742,552 63,594 3,689,144 0.5435 20151,156,965 1,347,344 277,624 661,619 61,545 3,505,097 0.5495 20161,122,222 1,223,096 303,873 667,684 62,807 3,379,682 0.5780 20171,127,552 1,244,699 413,607 703,452 63,375 3,552,685 0.5624 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 $100 of assessed value.Sources:Union County Tax Assessor's Office and North Carolina Property Tax Commission.Personal PropertyReal Property(1)162$ CITY OF MONROE, NORTH CAROLINADIRECT AND OVERLAPPING PROPERTY TAX RATESLAST TEN YEARS(rate per $100 of assessed value)TotalGeneral Municipal Total UnionDirect andFiscal Fund Service District WeightedCountyOverlappingYear Basic Rate Basic Rate Average Rate(1)Basic RateRates2008 0.5500$ 0.2000$ 0.5491$ 0.7111$ 1.2602$ 2009 0.4950 0.2000 0.4955 0.6650 1.1605 2010 0.4950 0.2000 0.4964 0.6650 1.1614 2011 0.5550 0.2000 0.5547 0.6650 1.2197 2012 0.5550 0.2000 0.5549 0.6650 1.2199 2013 0.5550 0.2000 0.5527 0.6600 1.2127 2014 0.5550 0.2000 0.5435 0.6600 1.2035 2015 0.5550 0.2000 0.5495 0.7614 1.3109 2016 0.5863 0.2190 0.5780 0.7765 1.3545 2017 0.5863 0.2190 0.5624 0.7665 1.3289 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. Union County, Tax Assessment DivisionCity of Monroe Overlapping RateSource: 163 CITY OF MONROE, NORTH CAROLINAPRINCIPAL PROPERTY TAXPAYERSCURRENT YEAR AND NINE YEARS AGO(in thousands of dollars)2017Percentage Percentageof ofTotal TotalTaxable Taxable Taxable TaxableAssessed Assessed Assessed AssessedTaxpayer Value Rank Value Value Rank ValueATI Specialty Materials (Allvac) 120,090$ 1 4.4% 195,903$ 1 5.5%Charlotte Pipe & Foundry Co. 118,649 2 4.3% 117,242 2 3.3%Tyson Farms, Inc. (Tyson Foods, Inc.) 50,192 3 1.8% 39,989 3 1.1%Greiner Bio-One 21,956 6 0.8% 37,628 4 1.1%O'Neil Digital Solutions, LLC - -34,698 51.0%Inland American Monroe Poplin- -31,325 60.9%Goulston Technologies- -25,719 70.7%Yale Security (Assa Abloy - Door Security)25,861 51.0%24,488 80.7%Scott Technologies17,367 80.6%23,104 90.7%Consolidated Metco, Inc.27,882 41.0%22,830 100.6%Monroe Mall (Madison)15,693 100.6%- -Poplin Partners16,889 90.6%- -Verizon South18,152 70.7%- -Total432,731$ 15.9%552,926$ 15.6%Source: City of Monroe Tax System 2008164 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 Levy Years Amount Levy2008 14,647$ 275$ 278$ 107$ 15,093$ 14,607$ 96.78% 458$ 15,065$ 99.81%200916,100 245 45 159 16,231 15,669 96.54534 16,203 99.83201016,490 300 160 78 16,872 16,292 96.56522 16,814 99.66201118,859 384 69 88 19,224 18,646 96.99526 19,172 99.73201218,962 362 299 335 19,288 18,780 97.37454 19,234 99.72201318,983 361 130 86 19,388 18,887 97.42422 19,309 99.59201419,712 348 81 89 20,052 19,295 96.22634 19,929 99.39201518,915 336 66 57 19,260 18,888 98.07238 19,126 99.30201619,279 363 69 178 19,533 19,270 98.65129 19,399 99.31201719,581 367 133 103 19,978 19,752 98.86- 19,752 98.86Source: City of Monroe Tax System the LevyCollected within theFiscal Year ofTotal Collections to Date165 CITY OF MONROE, NORTH CAROLINARATIOS OF OUTSTANDING DEBT BY TYPELAST TEN FISCAL YEARS(dollars in thousands, except per capita)GovernmentalPercentageActivitiesofInstallmentGeneral Limited State Installment Total Per PersonalFiscalPurchaseObligation Obligation Revenue Revolving Purchase Primary Capita IncomeYear Obligations Bonds Bonds Bonds Loans Obligations Government (1) (1)2008 7,821$ 790$ -$ 53,810$ 5,932$ 5,061$ 73,414$ 2,041$ 1.13%2009 9,656 140 - 53,185 5,105 36,011 104,097 2,792 1.582010 8,209 - - 51,320 4,278 36,291 100,098 2,626 1.452011 6,736 - - 48,980 3,451 35,134 94,301 2,857 1.292012 6,024 - - 47,425 4,654 32,671 90,774 2,731 1.142013 4,303 - - 45,707 8,504 32,206 90,720 2,732 1.082014 4,322 - - 43,394 10,592 30,693 89,001 2,681 0.992015 7,605 - - 41,001 9,470 29,569 87,645 2,575 0.902016 (2) 6,357 - 30,215 38,528 8,718 2,404 86,222 2,512 -2017 (2) 6,947 - 29,887 37,251 8,179 1,530 83,794 2,413 - 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 2015 and 2016 personal income not available to calculate fiscal year 2016 and 2017.(2) Personal income not available for 2016 and 2017.Business-Type Activities166 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)2008 790$ 0.03%22$ 2009140 0.0044 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/ADetails 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.Notes:167 CITY OF MONROE, NORTH CAROLINADIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBTAS OF JUNE 30, 2017(in thousands of dollars)EstimatedEstimated Share ofDebt Percentage Direct andOutstanding Applicable Overlapping(1) (2) DebtUnion County, overlapping debt 358,910$ 14.5% 51,877$ Total direct debt 6,947 100%6,947 Total direct and overlapping debt 365,857$ 58,824$ Notes: (1) Includes governmental activities debt only.(2)Determined by ratio of assessed value of property subject to taxation in Union County ($24,579,263,896)Source:Union County Finance DepartmentGovernmental Unitand City of Monroe ($3,552,684,950).168 CITY OF MONROE, NORTH CAROLINALEGAL DEBT MARGIN INFORMATIONLAST TEN FISCAL YEARS(in thousands of dollars)2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Debt limit (8% of assessed value) 219,092$ 261,098$ 271,919$ 277,258$ 278,078$ 280,629$ 295,131$ 280,408$ 270,375$ 284,215$ Total net debt applicable to limit 12,882$ 46,667$ 44,500$ 41,871$ 38,500$ 36,509$ 35,014$ 37,175$ 38,976$ 38,364$ Legal debt margin 206,210$ 214,431$ 227,419$ 135,387$ 238,578$ 244,120$ 260,117$ 243,233$ 231,399$ 245,851$ Total net debt applicable to the limit as a percentage of debt limit 5.88% 17.87% 16.37% 15.10% 14.20% 13.01% 11.86% 13.26% 14.42% 13.50%Assessed value 3,552,685$ Debt limit (8% of total assessed value) 284,215$ Bonded debt -$ Debt not evidenced by bonds 38,364 Gross debt38,364$ 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 limit38,364 Legal debt margin245,851$ 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.Note:FISCAL YEARCalculation for Fiscal Year 2017Legal Debt Margin169 CITY OF MONROE, NORTH CAROLINAPLEDGED-REVENUE COVERAGELAST TEN FISCAL YEARS(in thousands of dollars)Less IncomeOperating Non-Operating Available forOperating Expenses Operating Revenues DebtRevenues (1) Income (2) Service Principal Interest Coverage76,489$ 67,113$ 9,376$ 4,683$ 14,059$ 1,250$ 815$ 681%74,807 66,727 8,081 2,884 10,964 1,275 2,456 29475,197 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 1,324 470 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.2014201520162017YearNotes:Debt ServiceFiscal200820092010201120122013170 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)35,966 6,512,312$ 33,673$ 37,110 5.60%37,280 6,602,954 33,240 38,554 10.8038,120 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 5.10(1) 34,323 - - 42,552 4.50(1) 34,725 - - 41,541 3.70Note:(1) Personal income not available for 2016 and 2017.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 Carolina2009Year20142016201220132017Fiscal2010200820112015171 CITY OF MONROE, NORTH CAROLINAPRINCIPAL EMPLOYERSCURRENT YEAR AND NINE YEARS AGOPercentage of Percentage ofTotal City Total CityEmployment EmploymentEmployerEmployees(1)Employees(2)Tyson Foods 1,350 8.9% 1,850 10.7%ATI Specialty Materials 1,203 8.0% 1,465 8.5%Carolinas Medical Center-Union 956 6.3% 1,400 8.1%Union County 573 3.8% 982 5.7%Charlotte Pipe 680 4.5% 600 3.5%Scott Safety 580 3.9% 550 3.2%City of Monroe 455 3.0% 459 2.7%Wal-Mart Stores, Inc. 350 2.3% 400 2.3%Greiner Bio-One - 0.0% 335 1.9%Windsor Windows 350 2.1% 258 1.5%Boggs Group 488 3.2% - 0.0%Total 6,985 46.0% 8,299 47.9%(1) Percentage of total City employment based on North Carolina Employment Security Commissionlabor force estimate of 15,130 as of June 30, 2008.(2) Percentage of total City employment based on North Carolina Employment Security Commissionlabor force estimate of 17,313 as of June 30, 2017.Monroe - Union County Economic DevelopmentNotes:20172008Sources:172 CITY OF MONROE, NORTH CAROLINAFULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTIONLAST TEN FISCAL YEARSFunction 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017General Government:Administration 30 32 28 27 28 29 30 29 28 30Planning and zoning 11 11 118877778Engineering 10 10 10 10 1099999Utility/tax billing and collection 18 18 18 19 17 17 18 19 19 19Operations center 12 899999999Transportation 24 21 24 19 19 19 19 19 19 19Police 91 95 101 104 104 98 98 99 99 99Fire 78 82 84 82 82 79 79 80 81 81Building standards and code enforcement 9 10 114666778Culture and recreation 50 49 39 38 40 41 37 37 38 38Water and sewer:Distribution system 31 33 34 34 34 34 34 34 35 35Water filter plant 10 11 11 11 12 12 12 12 12 12Waste treatment plant 15 14 14 14 14 14 14 14 14 15Stormwater (1) - 8 9 11 10 10 11 11 11 11Electric25 24 27 28 28 29 29 29 31 32Natural gas14 13 14 13 14 14 14 14 15 15Solid Waste (2)- - 1 - 111111Aquatics and Fitness Center20 20 10 10 11 11 11 11 11 11Airport7 899977777Total455 467 464 450 456 446 445 448 453 459Note:(1) City of Monroe established a Stormwater utility program in 2009.(2) In 2010, a full-time position was added to Solid Waste. Previously, the function was the responsibility of the Planning Department.Source:City of Monroe payroll system.FISCAL YEAR173 CITY OF MONROE, NORTH CAROLINAOPERATING INDICATORS BY FUNCTIONLAST TEN FISCAL YEARS(if available or unless otherwise noted)2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Transportation:Street reclamation (tons) 6,545 8,065 2,858 2,295 2,720 2,503 1,730 2,400 2,272 1,229 Street repair (tons)2,100 1,219 595 456 915 929 1,012 710 532 272 Utility repair (tons)296 321 527 780 1,019 868 784 406 381 417 Sidewalk repair (cubic yards concrete)451 25 66 116 271 178 329 323 137 166 Pipe repair and replacement (linear feet)911 2,016 2,132 2,526 2,151 1,300 832 853 1,129 1,938 Police: Physical arrests (calendar year)4,094 3,468 3,204 3,132 3,025 2,367 1,852 2,336 2,158 - Parking violations (calendar year)3,918 3,408 3,510 3,558 3,074 3,346 3,138 2,395 2,181 - Traffic violations (calendar year)6,672 4,889 6,368 9,179 6,704 6,305 5,742 5,565 5,056 - Fire:Calls for service (calendar year)4,664 4,993 5,514 5,699 5,714 5,734 5,811 6,269 6,170 - Fire code inspections (calendar year) 1,860 1,860 1,220 1,244 1,343 1,114 961 1,185 2,267 - Civilian fire injuries (calendar year)8 6 2 2 4 - 5 4 2 - Building standards & code enforcement:Building permits issued3,951 3,845 2,876 2,701 3,901 3,771 3,429 3,740 4,416 4,250 Building inspections 11,381 8,642 7,553 7,009 7,300 7,411 8,331 8,475 9,865 8,659 Code enforcement inspections 2,565 5,518 6,422 1,750 2,415 1,938 1,240 1,687 2,994 3,091 Environmental protection: (1)Solid waste collected (annual tonnage)42,352 35,928 34,155 31,968 24,405 8,609 9,989 9,576 9,218 9,696 Recyclables collected (annual tonnage)925 707 788 748 626 1,467 1,976 2,015 1,912 1,870 Culture and recreation:Rounds of golf played (calendar year)28,667 30,075 26,556 26,565 27,105 27,492 32,598 33,035 36,717 - Aquatics and fitness center members20,824 20,889 20,444 19,972 19,628 19,814 19,169 20,377 20,778 21,526 Youth athletic program participants (calendar year)775 486 400 335 467 572 510 456 428 - Water:Average daily production (millions of gallons per day)5.7 5.5 5.8 6.0 6.2 5.8 6.1 6.6 6.5 6.6 Maximum daily production (millions of gallons per day)8.7 8.1 9.1 9.1 9.1 8.5 8.3 9.3 9.1 8.2 Customers 11,534 11,436 11,462 11,478 11,630 11,700 11,842 11,971 12,217 12,355 Gallons Billed (in thousands)1,973,800 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 Sewer:Average daily treatment (millions of gallons per day)6.1 6.5 6.8 5.8 5.7 6.6 7.2 6.9 7.3 6.1 Customers10,025 9,948 9,959 9,970 10,099 10,120 10,223 10,363 10,631 10,754 Gallons Billed (in thousands)2,264,600 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 Electric:Sales (megawatt hours)620,185 595,689 591,112 645,072 653,004 638,273 654,969 710,133 669,778 711,165 Customers 10,467 10,331 10,324 10,300 10,369 11,685 11,675 11,785 11,916 12,005 Natural gas:Sales/deliveries (thousand cubic feet) 275,840 264,370 273,909 308,852 287,804 297,961 316,633 326,144 306,735 308,356 Customers10,340 10,287 10,216 10,221 10,667 10,512 10,599 10,795 11,033 11,236 Airport:Fuel sales (thousands of gallons)421 324 340 331 309 294 279 326 290 382 Based aircraft111 114 95 96 90 105 109 111 106 106 Notes(1) The City of Monroe stopped providing commercial dumpster collection services in 2012. The City of Monroe now provides 95 gallon recycling carts verses 18 gallon bins.Sources:Various City departments.FISCAL YEARFunction174 CITY OF MONROE, NORTH CAROLINACAPITAL ASSET STATISTICS BY FUNCTIONLAST TEN FISCAL YEARS(unless otherwise noted)2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Transportation:Municipal Boundary (square miles) 29.60 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63 29.63Streets (miles)161 164 166 166 167 169 170 170 170 170Sidewalks (miles)50 5461 61 62 63 64 64 64 64Curb and gutter (miles)119 124 127 127 128 130 131 131 131 131Stormwater (miles)32 3334 34 35 35 36 36 36 36Bridges (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)232 242 279 286 301 309 330 336 343 355Public safety:Police stations1 1 1 1 1 1 1 1 1 1 Patrol vehicles89 92 92 92 92 92 92 92 92 96 Fire stations5 5 5 5 5 5 5 5 5 5 Fire apparatus (line and reserve)14 14 14 14 15 15 15 15 18 18 Culture and recreation:Acreage (city limits)552 552 552 552 552 552 552 552 552 552 Aquatics and Fitness Center1 11 1 1 1 1 1 1 1 Playgrounds (1)8 88 8 8 8 8 8 8 9 Gymnasiums (2)3 34 4 4 4 4 4 4 4 Basketball courts (3)8 8 11 11 11 11 11 11 11 11 Tennis courts (4)10 10 10 10 10 10 10 8 8 6 Playing fields (baseball/soccer/football)20 20 20 20 20 20 20 20 20 20 Swimming pools3 33 3 3 3 3 3 3 3 Golf course1 11 1 1 1 1 1 1 1 Driving range1 11 1 1 1 1 1 1 1 Greenway (miles) 0.5 0.5 0.5 0.5 0.5 0.5 0.5 2.0 2.0 3.1 Water:Water mains (miles)291 291 291 291 291 291 291 291 291 292Treatment capacity (millions of gallons per day) ( 11 1111 11 11 11 12.99 12.99 12.99 12.99Sewer:Sanitary sewers (miles)294 294 295 295 295 295 295 295 295 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)8 99 9 9 9 9 7 7 7 Lines (miles per calendar year)269 281 293 293 285 285 286 289 291 - Natural gas:Lines (miles per calendar year)383 399 443 449 455 455 457 464 468 - Airport:Runway (feet) (7)5,500 5,500 5,500 7,000 7,000 7,000 7,000 7,000 7,000 7,000 Hangars (square feet) (8)77,292 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 YEARFunction175                       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 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 disc retely 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, 2017, and the related notes to the financia l statements which collectively comprise the City’s basic financial statements, and have issued our report thereon dated October 20, 2017. 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. This report does not include the results of the other audito rs’ testing of internal control over financial reporting or compliance and other matters that are reported separately by those auditors. 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 opi nion 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 d eficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 177 Our consideration of internal control over financial reporting 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 financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 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 no instances of non-compliance or other matters that are required to be reported under Government Auditing Standards. 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 20, 2017 178 730 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, 2017. The City of Monroe’s maj or 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 the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor’s Responsibilit y 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 audi ting 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. 179 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, 2017. 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 20, 2017 180 730 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 St ate 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 re quirements 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 maj or State programs for the year ended June 30, 2017. 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 the requirements of laws, regulations, contracts, and grants 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 maj or 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 Audi t 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 Implementa tion 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. 181 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, 2017. 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 maj or State program to determine our auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on compliance for each maj or 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 deficiencies, significant deficiencies, or material weaknesses. 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 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 20, 2017 182 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF FINDINGS, RESPONSES, AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2017 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?No •Significant deficiency(s) identified? None reported Non-compliance material to financial statements noted?No 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# Airport Improvement Program 20.106 Dollar threshold used to distinguish between Type A and Type B Programs $750,000 Auditee qualified as low-risk auditee?No 183 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF FINDINGS, RESPONSES, AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2017 1.Summary of Auditor’s Results (continued) State Awards Internal control over major State programs: •Material weakness(es) identified?No •Significant deficiency(s) identified? None reported Type of auditor’s report issued on compliance for major State programs Unmodified Any audit findings disclosed that are required to be reported in accordance with the State Single Audit Implementation Act?No Identification of major State programs: Program Name Powell Bill 2.Financial Statement Findings None reported. 3.Federal Award Findings and Questioned Costs None reported. 4.State Award Findings and Questioned Costs None reported. 184 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF PRIOR YEAR FINDINGS FOR THE YEAR ENDED JUNE 30, 2017 None 185 Page 1 of 2 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS FOR THE YEAR ENDED JUNE 30, 2017 State/ Federal Federal Pass-Through) (Direct and Pass-Through Grantor/Pass-Through CFDA Grantor's Pass-Through) State to Local Grantor/Program Title Number Number Expenditures Expenditures Subrecipients Expenditures Federal Grants: Cash Programs: U.S. Department of Justice: Direct Programs: Drug Enforcement Administration Equitable Sharing Program 16.922 28,068$ 9,018$ -$ 8,900$ Edward Byrne Memorial Justice Assistance Grant Program 16.738 13,134 - - - Public Safety Partnership and Community Policing Grants 16.710 39,490 - - - U.S. Department of Homeland Security: Direct Programs: 2015 Assistance to Firefighters Grant 97.044 41,080 - - - Passed through N.C. Department of Public Safety: Disaster Grants- Public Assistance 97.036 139747-10/10/16-NC 15,779 - - - Passed through N.C. Department of Agriculture: Disaster Grants- Public Assistance 97.036 160935-11/11/16-NC 36,658 - - - U.S. Department of Treasury: Direct Programs: Treasury Forfeiture Fund Program 21.000 26,410 - - - 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 38,862 144,698 - - Airport Improvement Program 20.106 36237.13.2; 36237.15.1; 36237.15.2; 36237.15.3; 36244.24.6.1 2,232,267 - - - Total Assistance - Federal Programs 2,471,748 153,716 - 8,900 State Grants: Cash Assistance: N.C. Department of Public Safety: Passed through to: Governor's Crime Commission 2016- HERO and Internet Crimes Against Children PROJ012655 - 31,417 - - N.C. Department of Transportation: Powell Bill - 969,975 - - Total assistance - State Programs - 1,001,392 - - Total assistance 2,471,748$ 1,155,108$ -$ 8,900$ 186 Page 2 of 2 CITY OF MONROE, NORTH CAROLINA SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS FOR THE YEAR ENDED JUNE 30, 2017 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, 2017. The information in this SEFSA is presented in accordance with the requirements of Title 2 US 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