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Comprehensive Annual Financial Report .. , , ,• .. . s . , V , .. . ''' 11 \ 0 - . • .,, •,. j 1 ,_____,..0.054\0•11k • ..- __....„.,,,ii-rawAw'r-,,,4449.0- i 1 I ... ,r0.1—,,lita” '. ' .....- .,.. . , ...'".'"" '- "''''''* CITY OF ALLEN FINANCE l . . Comprehensive For Fiscal Year End _..., .......,,,„,,, ,,, .... • • Repo. ...rt Financial ed Annual September3 0? 2018 . ..,. , ... .... ...„ „:„. - _.. Public art at Spirit Park CITY OF ALLEN, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT ;UM CITY OF ALLEN FISCAL YEAR ENDED SEPTEMBER 30, 2018 AS PREPARED BY THE FINANCE DEPARTMENT CITY OF ALLEN CITY OF ALLEN, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018 TABLE OF CONTENTS EXHIBIT Page I. INTRODUCTORY SECTION Letter of Transmittal Certificate of Achievement vi Organizational Chart vii Elected Officials and Administrative Officers viii II. FINANCIAL SECTION Independent Auditor's Report 1 A. MANAGEMENT'S DISCUSSION AND ANALYSIS 4 B. BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 1 17 Statement of Activities 2 18 Fund Financial Statements Governmental Funds Financial Statements Balance Sheet—Governmental Funds 3 20 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 4 22 Statement of Revenues, Expenditures, and Changes in Fund Balances—Governmental Funds 5 23 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 6 25 Proprietary Funds Financial Statements Statement of Net Position— Proprietary Funds 7 26 Reconciliation of the Statement of Net Position Proprietary Funds to the Government-wide Statement of Net Position 8 27 Statement of Revenues, Expenses, and Changes In Net Position— Proprietary Funds 9 28 Reconciliation of the Statement of Revenues, Expenses, and Changes in Net Position of Proprietary Funds to the Statement of Activities 10 29 Statement of Cash Flows— Proprietary Funds 11 30 Component Units Financial Statements Statement of Net Position — Component Units 12 31 Statement of Activities—Component Units 13 32 Fiduciary Fund Financial Statements Statement of Fiduciary Net Position 14 33 Statement of Changes in Fiduciary Net Position 15 34 CITY OF ALLEN, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018 TABLE OF CONTENTS EXHIBIT Page Notes to Financial Statements Note 1. Summary of Significant Accounting Policies 35 Note 2. Deposits, Investments, and Investment Policies 43 Note 3. Receivables 47 Note 4. Capital Assets 48 Note 5. Long-Term Debt 52 Note 6. lnterfund Transfers 60 Note 7. Retirement Plan 61 Note 8. Water and Sewer Contracts 65 Note 9. Deferred Compensation Plan 66 Note 10. Risk Management 66 Note 11. Postemployment Benefits Other Than Pensions (OPEB) 67 Note 12. Tax Abatements and Economic Incentives 73 Note 13 Commitments and Contingent Liabilities 74 Note 14 Restatement of Beginning Net Position 74 C. REQUIRED SUPPLEMENTARY INFORMATION Schedule of Changes in Total OPEB Liability and Related Ratios— Supplemental Death Benefits Fund A-1 75 Schedule of Changes in Net OPEB Liability (Asset) and Related Ratios— Defined Benefit Retiree Healthcare Plan A-2 76 Schedule of OPEB Contributions— Defined Benefit Retiree Healthcare Plan A-3 77 Schedule of Changes in the Net Pension Liability and Related Ratios— Retirement Plan (TMRS) A-4 78 Schedule of Contributions —Retirement Plan (TMRS) A-5 79 General Fund Schedule of Revenues, Expenditures, And Changes in Fund Balances — Budget and Actual A-6 80 Notes to Required Supplementary Information 81 D. COMBINING AND BUDGETARY COMPARISON SCHEDULES Major Governmental Funds Budgetary Comparison Schedule—Debt Service Fund B-1 83 Nonmajor Governmental Funds Combining Balance Sheet B-2 85 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances B-3 86 CITY OF ALLEN, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018 TABLE OF CONTENTS EXHIBIT Page Internal Service Funds Combining Statement of Net Position C-1 88 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position C-2 89 Combining Statement of Cash Flows C-3 90 Discretely Presented Component Units Balance Sheet-Allen Economic Development Corporation D-1 92 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position D-2 93 Statement of Revenues, Expenditures, and Change in Fund Balance D-3 94 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Change in Fund Balance to the Statement of Activities D-4 95 Balance Sheet-Allen Community Development Corporation D-5 96 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position D-6 97 Statement of Revenues Expenditures, and Change in Fund Balance D-7 98 Reconciliation of the Governmental Fund Statement of Revenues, Expenditures, and Change in Fund Balance to the Statement of Activities D-8 99 TABLE Page III. STATISTICAL SECTION Net Position by Component 1 101 Changes in Net Position 2 102 Fund Balances, Governmental Funds 3 104 Changes in Fund Balances-Governmental Funds 4 105 Assessed Value and Estimated Actual Value of Taxable Property 5 106 Direct and Overlapping Property Tax Rates 6 107 Principal Property Taxpayers 7 108 Ad Valorem Tax Levies and Collections 8 109 Ratio of Outstanding Debt by Type 9 110 Ratio of General Bonded Debt Outstanding 10 111 Direct and Overlapping Governmental Activities Debt 11 112 Pledged-Revenue Coverage 12 113 Demographic and Economic Statistics 13 114 Principal Employers 14 115 Full-Time Equivalent City Government Employees by Function & Program 15 116 Operating Indicators by Function & Program 16 117 Capital Assets Statistics by Function & Program 17 118 CITY OF ALLEN INTRODUCTORY SECTION CITY OF ALLEN CITY OF ALLEN February 27, 2019 Honorable Mayor and City Council, City Manager, Citizens of Allen: The Finance Department is pleased to submit the Comprehensive Annual Financial Report (CAFR) of the City of Allen, Texas (the City), for the fiscal year ended September 30, 2018. This report is published to provide the City Council, our citizens, City staff, and other readers with detailed information concerning the financial position and activities of the City. Management has prepared the report and is responsible for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures. To the best of our knowledge and belief, the enclosed data is complete and reliable in all material respects. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. Also included in this report is an unmodified ("clean") opinion on the City of Allen's financial statements for the year ended September 30, 2018, issued by Weaver and Tidwell, L.L.P. The independent auditors' report is located at the beginning of the financial section of the CAFR. REPORTING ENTITY This report includes all funds of the City including its component units. Component units are legally separate entities for which the City is financially accountable but are not part of the City's operations. The Allen Economic Development Corporation (AEDC) and Allen Community Development Corporation (ACDC) are included in the financial statements as discretely presented component units. CITY PROFILE The City of Allen is the fourth largest city in population in Collin County, one of the fastest growing counties in the nation. Located 25 miles north of downtown Dallas on US 75, Allen encompasses approximately 27 square miles. The George Bush Tollway and Sam Rayburn Tollway (Hwy 121) provide direct access into the Metroplex and access to Love Field (27 miles) and Dallas Ft Worth International Airport (31 miles). With a population of 7.516 million in the metropolitan area, Allen sits in a prime location for restaurants, shopping centers and other retail venues. The quality of the Allen community attracts well-educated residents with a high level of spending power and disposable income. Current population of 102,653 at September 30, 2018, is estimated to grow to 130,000 at build out. Incorporated in 1953, Allen is a home rule charter city. The Charter can be amended only by a vote of the people and provides for seven non-partisan Council members, including the Mayor, to be elected at-large to staggered terms of three years. The Council is responsible for enacting ordinances, resolutions, and regulations governing the City as well as adopting the annual budget which serves as the foundation for financial planning and control. The City Council appoints the City Manager, who has full responsibility for carrying out Council policies and administering City operations. The Council also appoints the Municipal Judge and various advisory boards. City service departments provide a full range of services including police and fire protection emergency ambulance service, municipal courts, building code enforcement, library, parks and recreation, tourism, water and sewer services, sanitation/solid waste services, traffic engineering, and construction and maintenance of streets and infrastructure. The City employs 818.96 full time equivalent positions. 305 CENTURY PARKWAY•ALLEN,TEXAS 75013-8042•214.509.4100 WEB:www.cityofallen.org•EMAIL:coardcityofallen.org ECONOMIC CONDITIONS AND OUTLOOK Regional Economy In November 2016, the Dallas Morning News ranked the City of Allen as the second-Best Neighborhood in North Texas citing the "small-town feel" and "hometown pride". The City of Allen's unemployment rate as of September 2018 was 3.2%, and the Collin County unemployment rate was 3.2%-- both of which were below the national rate of 3.7%. The Dallas-Fort Worth area has an incredibly diversified economy, an extremely low unemployment rate, a growing labor force, low cost of living, affordable real estate, and a superior business climate. The lower cost of living helps create huge savings to corporations and their employees when they relocate to Texas. Allen's Position in the Region Along with an ideal location just 12 miles north of Dallas on US 75, Allen's appealing demographics have spurred along record-breaking growth. The population of 102,653 is expanding with an estimated 4.2% growth rate. Allen has benefited from a well-educated and affluent workforce with an average household income of $135,502 as reported by the U.S. Census Bureau, American Community Survey. With an average age of 36.2, 54.3% of adults have bachelor's degrees or higher. and the average earnings for a resident with a bachelor's degree is $72,615. Allen is a community that offers exceptional housing, award- winning schools, steady job growth, and dynamic business climate all of which are strong factors in the success of the City's economy. The quality of the Allen community attracts residents with a high level of spending power and disposable income. This makes Allen a prime location for restaurants, shopping centers and other retail venues. Allen's progress continues to be recognized as the City was named the#2''Best Places to Live"in MONEY's prestigious annual list in October 2017. Long Range Financial Planning The City's responsiveness to emerging economic challenges and its long-term planning have been key factors in its fiscal health. The City has a five-year financial plan and a seven-year capital improvement plan where departments reevaluate project priorities, review funding sources, and identify new projects as needed. Using this plan allows the City to plan the timing of projects associated with debt issuance and the effects on the tax rate. Standard and Poor's most recent credit rating report dated July 5th, 2018 stated, "very strong management, with strong financial policies and practices under our Financial Management Assessment methodology." The City continues to maintain the highest 'AAA' rating from Standard and Poor's and during 2016 received a rating increase from Aa1 to Aaa from Moody's on its general obligation, certificate of obligation bonds. This increase makes the City of Allen just one of seven Cities in the State of Texas to have both a AAA rating with both S&P and Moody's. The Water and Sewer Revenue Bonds are rated 'AAA' from Standard and Poor's and Aa2 from Moody's. S&P's July 2018 rating report supporting the 'AAA' rating stated the following credit factors: • Very strong economy • High effective buying income, strong market values • Very strong budgetary flexibility and very strong year end reserves and liquidity • Very strong management and strong financial management practices that are sustainable • Faster than average debt amortization and moderate overlapping debt, while the debt liabilities profile is adequate During fiscal year 2016, the City began a CIP Bond Program that totaled $93 million and estimated to be completed over seven years. In fiscal year 2017, the City issued$11,845,000 related to the bond program, and another$8,355,000 in fiscal year 2018. For more information, related to this program please visit the following link: http://www.cityofallen.org/1718/Allen-Bond-2016. Additionally, during fiscal year 2018, the City issued $9,330,000 in Water and Sewer System Revenue Bonds. The purpose of the bonds is to fund water and sewer line replacements in older neighborhoods within the City. This is a change in philosophy as the City had been funding all Water and Sewer Fund capital improvements with operating funds and has now adopted a hybrid approach that will slow customer rate increases as wholesale rates from NTMWD increase. Fiscal Year 2018 Highlights During fiscal year 2018, the City accomplished many initiatives to enhance livability, improve personal experience, invest in the future, and celebrate the successes. From quality neighborhoods to park development, community safety, and environmental initiatives, it's no surprise that people move here to experience the quality of life the citizens of Allen enjoy. As the City's population continued to grow,the need for new housing continued as well,with the Community Development Department issuing over four-hundred and forty building permits.The City welcomed a variety of new businesses to the city, including Pinstack, Cyrus One Data Center Phase II, Starcreek Village, and the Techcenter on Greenville III. Facilitated several new residential developments including The Village at Twin Creeks — Phase IV, Huntington Villas, Vera at Watters, Dolce Living, Ridgeview Villas, St. Andews Park, and Larkspur. The City also administered Community Development Block Grant funds which went toward the rehabilitation of twenty-one homes within Allen's older neighborhoods. While crime remained flat from fiscal year 2017 to 2018, an increase in population resulted in a 3.51% decrease per 1,000 residents in fiscal year 2018 compared to 2017. The Allen Police Department continually strives to rapidly address emerging crime issues through innovative programs and community engagement. As an example, the Data Driven Approaches to Crime and Traffic Safety program continues to help with effective resource deployment. Allen's partnership with Texas Organized Retail Crime Association has continued to address high volume organized boosters, another example of how Allen works to remain one of the safest communities in the state and nation. The Fire Department continues to improve their service to the community through the redesign of the Central Fire Station and Fire Administration facility. The redesign will expand response capacity and allow for efficient administration of the fire department. The Fire Department, re-wrote medical treatment protocols to include the latest in-patient care, updated fire apparatus to meet the demands of a growing community, expanded professional development programs for staff, and added automatic patient cot loading systems to six ambulances. Additionally, staff applied for and received $450,000+from the Texas Ambulance Supplemental Payment Program. Lastly, the department increased inter-operability with neighboring fire departments through joint training and resource sharing. The City's environmental conservation and green initiatives continued to grow and develop with the implementation of new energy management systems at City Hall, another year of recycling at City facilities with an increased recycling presence at City parks, another year of chemical redistribution at the Chemical Reuse Center, coordination of special events and public education programs related to protecting and conserving natural resources, and winning multiple awards from regional, state and national organizations dedicated to resource conservation. The City has continually been recognized for its efforts to expand in this area, culminating in the winning of the National Recreation and Park Association's Gold Medal Award and being recognized by Keep Texas Beautiful as a Gold Star Affiliate and Governor's Community Achievement Award - Sustained Excellence Award Winner. iii The Library provides a vibrant, welcoming environment for Allen citizens with an emphasis on exemplary customer service and support for lifelong learning, literacy, access to information, and bringing the community closer together. To encourage literacy and lifelong learning, the Library offers programs for children and teens on art, science (including robotics and coding), animals, and reading. Adults find opportunities to feed their literary, cultural, historical, musical, and travel interests augmented by hands-on activities for crafts and food. During the hot Texas summers, visitors of all ages participate in the cool Summer Reading Clubs, while reading, learning, and earning prizes. The Library's digital collection, both e-books and e-audiobooks, continued to grow with the cloud Library service, notably through a consortium with other Texas libraries, to offer more than 123,000 items. Physical books and DVD's remained more popular than ever, especially among children and families. Last fiscal year, the Library checked out 1.18 million items, welcomed more than 400,000 visitors, and hosted over 89,000 program participants. These statistics represent all-time highs for the Allen Public Library. Checkouts achieved new highs for the 23rd consecutive year, visitors for the 5th consecutive year, and program attendance for the 10th consecutive year. In 2018, the CDC provided funding for several capital projects such as substantial completion of Spirit Park, a pedestrian bridge and trail at the Allen Senior Recreation Center,construction of Windridge Neighborhood Park, scoreboard upgrades at the Allen Event Center, and continued Trail Development and Enhancement. The Allen Economic Development Corporation (AEDC)worked to bring a variety of companies and related development to Allen. The AEDC facilitated the completion of One Bethany East at Watters Creek, the 125,000 SF Class A office building that opened in March 2018. One Bethany East saw numerous tenants move into the newly opened building, which include Boss Fight Entertainment, Verado Energy, Cope Equities, and AEDC's administrative office. The AEDC recruited Credit Union of Texas to relocate their corporate headquarters to One Bethany East, which brought in over 200 new jobs. All of this activity boosted the occupancy of the newly opened building to over 70%. Numerous companies opened including: WatchGuard Video moving into their new building, a $46 million headquarters facility in June; NETSCOUT Systems, a cyber-security company,which brought 540 high paying jobs to a new$54 million headquarters building in One Bethany at Watters Creek opened in August; and Yeager Office Suites, who opened their first building in Allen in August. Compass Datacenters constructed their second phase of the$300 million data center campus for lead tenant Jack Henry. CyrusOne broke ground on the first phase of their$1 billion data center that opened in October 2018, and Collin County Technical Campus broke ground in September, in partnership with the AEDC. The AEDC partnered on the planning and announcement of Monarch City, a 270-acre mixed-use development at the corner of US 75 & SH121, and lead a coalition of landowners to block construction of a large electrical transmission line along SH 121. Construction of the electrical transmission line would have negatively impacted future development of corporate campuses along the corridor. These projects not only increased the City's property tax base but also positively affected the City's economy by bringing over 1,500 jobs to Allen. One of the City's major draws, the Allen Event Center, is home to a wide range of entertaining shows and events- Disney on Ice, Khalid, Newsboys, Steve Miller Band & Peter Frampton, Professional Bull Riding, Boxing and other amateur and collegiate sports. The facility hosted multiple graduations as well as several trade shows such as Home&Garden Shows, Bridal Shows, Gun Shows, and Job Fairs among others. The Allen Event Center was also the home to professional sports;the Allen American Hockey Club(ECHL), and the Dallas Sidekicks Soccer Club (MASL). The Allen Americans reached the playoffs for the 9th consecutive year and are currently playing their 10th Anniversary season in Allen. The Allen Event Center will celebrate its 10th anniversary in November 2019. With all this happening within Allen's borders, it's clear that the city is working hard to provide every resident and visitor with great experiences, services and safety. iv Relevant Financial Policies A resolution amending the Debt Management and Fund Balance Reserve Policy to reflect new accounting requirements (GASB 54) was approved by Council in September 2011. The Investment Policy is also approved annually by the Council. All other policies (accounting, budgeting, procurement, capital improvements, asset management, and risk management) are internal policies approved by the Finance department and City Manager. These policies follow guidelines established by management, professional organizations and/or state and federal laws and are reviewed on a periodic basis. Recently, the Training/Travel Policy was updated to reflect changes in city processes and provide added flexibility for travelers, as well as provide greater ease for Finance staff during the reconciliation process. On a quarterly basis, the Finance Department prepares financial and investment reports, which are presented to the City Council. Internal Control Management of the City, through its Finance Department, is responsible for the implementation, maintenance, and monitoring of a set of comprehensive internal controls. The goal of the City's system of internal control is to limit opportunity for theft, fraud, or abuse by ensuring adequate separation of duties and systematic monitoring with a positive control environment set at the top of the organization. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1)the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. AWARDS AND ACKNOWLEDGEMENTS Awards -- The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Allen for its CAFR for the fiscal year ended September 30, 2017. This was the nineteenth consecutive year that the government has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program's requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgements—We would like to express our sincere gratitude to City's personnel who contributed to this report, especially the accounting department. Appreciation is expressed to representatives of Weaver, LLP, for their invaluable assistance in producing the final document, and to the City Manager's office and the members of the City Council, whose leadership and commitment are vital to the health and vitality of the City of Allen. Respectfully submitted, Eric Cannon, CPA Steven Glickman,CPA Chief Financial Officer Assistant Chief Financial Officer v Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Allen Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2017 04.40.44‘.. P ttet4..a Executive Director/CEO vi CITY OF ALLEN ORGANIZATIONAL CHART Citizens of Allen City Council H Boards and Commissions City Attorney City Manager Municipal Judge Assistant City Manager Assistant City Manager Human Resources City Secretary Public and Media Relations H Community Development Community Services Engineering Finance Fire Library Information Technology Police Parks and Recreation vii CITY OF ALLEN, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2018 CITY OF ALLEN Councilmembers Mayor Stephen Terrell Mayor Pro Tern, Place No. 5 Gary L. Caplinger Councilmember, Place No. 1 Kurt Kizer Councilmember, Place No. 2 Carl Clemencich Councilmember, Place No. 3 Lauren Doherty Councilmember, Place No. 4 Robin L. Sedlacek Councilmember, Place No. 6 Baine Brooks Management Staff Interim City Manager Peter H. Vargas Chief Financial Officer Eric Cannon Assistant Chief Financial Officer Steven Glickman Controller Martin Clarke FINANCIAL SECTION CITY OF ALLEN weaver Austin Conroe Dallas Fort Worth Houston Los Angeles Midland New York City l San Antonio Independent Auditor's Report Honorable Mayor and Members of the City Council City of Allen, Texas 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 City of Allen, Texas (the City) as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of 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, 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 as of September 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Weaver and Tidwell, L.L.P. 1 2300 North Field Street,Suite 1000 I Dallas,Texas 75201 Main:972.490.1970 I Fax:972.702.8321 CPAs AND ADVISORS I WEAVER.COM The Honorable Mayor and Members of City Council City of Allen, Texas Emphasis of Matter As discussed in Note 14 to the basic financial statements, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Beginning net position has been restated to reflect the change in accounting principle resulting from this statement. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and Required Supplementary Information, as listed in the table of contents, be presented to supplement the basic financial statements.Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, other supplementary information, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The other supplementary information, as listed in the table of contents, is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the 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. In our opinion, the other supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. 2 The Honorable Mayor and Members of City Council City of Allen,Texas Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 27, 2019, on our consideration of the City'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 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's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. WEAVER AND TIDWELL, L.L.P. Dallas,Texas February 27, 2019 3 CITY OF ALLEN MANAGEMENT'S DISCUSSION AND ANALYSIS CITY OF ALLEN CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) As management of the City of Allen, Texas (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 September 30, 2018. FINANCIAL HIGHLIGHTS • The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources (net position) at September 30, 2018, by $581,648,805. Of this amount, $59,098,047 represents the unrestricted net position,which may be used to meet the City's ongoing obligations to citizens and creditors. • The City's total net position increased by $22,172,536. The increase is primarily a result of an increase in revenues from property tax and charges for services in both governmental and business-type activities. • The City's governmental funds reported combined ending fund balances of $79,988,048 at September 30, 2018, an increase of$577,584 from the prior fiscal year. This increase is attributed to the issuance of$8,355,000 in general obligation bonds in fiscal year 2018 and increased revenue offset by capital outlay of$13,114,988. • At the end of the fiscal year, the unassigned fund balance for the General Fund was $23,626,108 or 25% of total General Fund expenditures. • On a government-wide basis, the City's total liabilities decreased by $2,664,166, primarily as a result of decreases in the City's net pension liability offset by the City issuing $8,355,000 in general obligation bonds in fiscal year 2018. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: 1) government-wide financial statements,2)fund financial statements, and 3)notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide financial statements - The government-wide financial statements are designed to provide readers with a broad overview of the City's finances in a manner like that of a private-sector business. The Statement of Net Position presents information on all of the City's assets, deferred outflows of resources, and liabilities and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as useful indicators of whether the financial position of the City is improving or deteriorating. To assess the overall health of the City, other non-financial factors should also be taken into consideration, such as changes in the City's property tax base and the condition of the City's infrastructure. The Statement of Activities presents information that shows how the City's net position changed during the fiscal year. All changes in net position are reported when the underlying event that gives rise to the change occurs, regardless of the timing of related cash flows. Accordingly, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused compensated absences). Both the Statement of Net Position and the Statement of Activities are prepared utilizing the accrual basis of accounting. In the government-wide financial statements, on pages 17 through 19, the City is divided into three kinds of activities: • Governmental activities-Most of the City's basic services are reported here, including the police, fire, library, community development, parks and recreation, municipal court, and general administration. Property and sales taxes, charges for services, franchise fees, and state and federal grants finance most of these activities. 4 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) • Business-type activities - The City's water, sewer, solid waste, drainage, and golf course operations are reported here. These are functions intended to recover all or a significant portion of their costs through user fees and charges. • Component units-The City includes two separate legal entities in this report: the Allen Economic Development Corporation (AEDC) and the Allen Community Development Corporation (ACDC). Although legally separate, these component units are important because the City is financially accountable for them. Fund financial statements - A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The funds of the City can be divided into three categories: governmental, proprietary, and fiduciary funds. Governmental Funds - These funds are used to account for most of the City's activities, which are essentially the same functions as governmental activities in the government-wide statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near- term inflows and outflows of spendable resources, as well as resources available for future spending at fiscal year-end. These funds are reported using the modified accrual basis of accounting, which measures cash and all other financial assets that can be readily converted to cash. When compared with similar information in the broader government-wide financial statements, readers may better understand the long- term impact of the government's near-term financing decisions. Reconciliation is provided, which details the relationships or differences between governmental activities and governmental funds; reconciliation follows the fund financial statements. The City maintains several 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 balance for the General Fund, Debt Service Fund, General Capital Projects Fund and General Obligation Bond Fund, all of which are major funds. Data for the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the non-major governmental funds is provided in the form of combining statements elsewhere in this report. The basic governmental fund financial statements can be found on pages 20 through 25 of this report. Proprietary Funds - The City maintains two different types of proprietary funds: enterprise funds and internal service funds. 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 operations, solid waste collection, disposal services, drainage operations, and golf course operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses its internal service funds to account for vehicle, machinery, and equipment replacements and costs associated with workers compensation, liability and property insurance, and employee medical and dental insurance programs. These services have been included within governmental activities in the government-wide financial statements as they predominantly benefit governmental rather than business-type functions. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water and sewer operations, solid waste collection, and disposal services since they are major funds of the City. The Drainage Fund and the Golf Course Fund are the only remaining enterprise funds, and they are being presented as major funds even though they do not meet the criteria of a major fund. All internal service funds are combined into a single aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining schedules elsewhere in this report. The basic proprietary fund financial statements can be found on pages 26 through 30 of this report. 5 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) Fiduciary Funds-Fiduciary funds are used to account for resources held for the benefit of parties outside of the primary government. Fiduciary funds are not reported in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on pages 33 and 34 of this report. Notes to the Financial Statements -Additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements is provided in the notes to the financial statements found on pages 35 through 74 of this report. Required Supplementary Information includes budgetary comparison schedules that have been provided for the general fund to demonstrate compliance with the budget. Required supplementary information also includes schedules of changes in net liabilities and related ratios and on contributions to the City's pension and other postemployment benefits (OPEB). The City participates in Texas Municipal Retirement System (TMRS)for its pension plan and provides its employees with post-retirement healthcare benefits (OPEB). The required supplementary information is found on pages 75 through 81 of this report. The combining and budgetary schedules referred to earlier include information for nonmajor governmental funds, internal service funds,and the discretely presented component units, and are presented immediately following the required supplementary information. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, over time net position may serve as a useful indicator of the financial position of a government. The assets and deferred outflows of the City of Allen exceed the liabilities and deferred inflows by$581,648,805 at September 30, 2018. By far the largest portion of the City's net position ($482,916,185 or 83%) reflects its net investment in capital assets (i.e. land, buildings, infrastructure,vehicles, machinery, and equipment). The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City reports the net investment in its capital assets, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Table I Statement of Net Position Governmental Activities Business-type Activities Total 2018 2017 2018 2017 2018 2017 Current and other assets $110,027,791 $105,635,402 $ 50,984,983 $ 39,475,215 $161,012,774 $145,110,617 Capital assets 455,359,516 446,809,256 118,218,401 112,803,250 573,577,917 559,612,506 Total Assets 565,387,307 552,444,658 169,203,384 152,278,465 734,590,691 704,723,123 Deferred outflows of resources 7,844,279 12,473,446 875,828 1,457,944 8,720,107 13,931,390 Long-term liabilities 122,968,369 133,248,180 17,898,089 9,311,738 140,866,458 142,559,918 Other liabilities 11,340,373 11,191,215 3,977,673 4,383,757 _ 15,318,046 15,574,972 Total Liabilities 134,308,742 144,439,395 21,875,762 13,695,495 156,184,504 158,134,890 Deferred inflows of resources 4,868,245 927,106 609,244 116,248 5,477,489 1,043,354 Net Position: Net investment in capital assets 379,153,944 366,322,218 103,762,241 107,926,811 482,916,185 474,249,029 Restricted 39,588,223 38,303,226 46,350 195,485 39,634,573 38,498,711 Unrestricted 15,312,432 14,926,159 43,785,615 31,802,370 59,098,047 46,728,529 Total Net Position $434,054,599 $419,551,603 $147,594,206 $139,924,666 $581,648,805 $559,476,269 6 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) An additional portion of the City's net position, $39,634,573, represents resources that are subject to external restrictions on how those resources can be used. The remaining balance of$59,098,047 may be used to meet the government's ongoing obligations to citizens and creditors. Analysis of the City's Operations - As of September 30, 2018, the City had an overall increase in net position of $22,172,536 for the primary government, which represents an increase of $14,502,996 for governmental activities and an increase of $7,669,540 for business-type activities. The increase in governmental activities resulted primarily from an increase in revenue related to charges for services, capital grants and contributions, property taxes, sales taxes, franchise taxes, interest earnings, gain on the sale of capital assets, and miscellaneous revenue. The increase in business-type activities is primarily a result of an increase in charges for services and miscellaneous revenue. A summary of the City's operations for the year ended September 30, 2018, is provided in Table 2. Table 2 Changes in Net Position Governmental Activities Business-type Activities Total 2018 2017 2018 2017 2018 2017 Revenues: Program Revenues: Charges for services $ 17,858,790 $ 16,516,224 $ 54,104,868 $ 48,507,483 $ 71,963,658 $ 65,023,707 . Operating grants and contributions 2,423,768 2,443,054 - - 2,423,768 2,443,054 Capital grants and contributions 18,942,856 15,327,094 9,734,528 5,622,911 28,677,384 20,950,005 General Revenues: - - Property taxes 63,929,379 58,816,876 - - 63,929,379 58,816,876 Sales tax 20,717,505 19,450,088 - - 20,717,505 19,450,088 Franchise taxes 7,990,092 7,553,013 - - 7,990,092 7,553,013 Hotel motel taxes 1,487,066 1,547,244 - - 1,487,066 1,547,244 Other taxes 1,704,227 1,912,559 - - 1,704,227 1,912,559 Interest earnings 944,196 837,577 210,045 199,508 1,154,241 1,037,085 Gain on sale of capital asset 446,117 263,627 13,228 - 459,345 263,627 Miscellaneous 3,592,229 2,703,964 21,030 274,944 3,613,259 2,978,908 Total Revenues 140,036,225 127,371,320 64,083,699 54,604,846 204,119,924 181,976,166 Expenses: General government 26,764,210 28,251,550 - - 26,764,210 28,251,550 Public safety 39,213,768 39,624,788 - - 39,213,768 39,624,788 Public works 24,161,991 20,209,785 - - 24,161,991 20,209,785 Culture and recreation 33,791,438 28,968,534 - - 33,791,438 28,968,534 Community development 3,079,242 3,007,047 - - 3,079,242 3,007,047 Interest on long-term debt 2,920,824 2,980,513 - - 2,920,824 2,980,513 Water and sewer - - 41,134,685 39,527,816 41,134,685 39,527,816 Solid waste services - - 6,223,788 6,078,853 6,223,788 6,078,853 Drainage - - 1,260,262 1,193,057 1,260,262 1,193,057 Golf course - - 3,397,180 3,135,144 3,397,180 3,135,144 Total Expenses 129,931,473 123,042,217 52,015,915 49,934,870 181,947,388 172,977,087 Change in net position before transfers 10,104,752 4,329,103 12,067,784 4,669,976 22,172,536 8,999,079 Transfers 4,398,244 4,610,889 (4,398,244) (4,610,889) - - Change in net position 14,502,996 8,939,992 7,669,540 59,087 22,172,536 8,999,079 Net position,beginning of year,as restated 419,551,603 411,588,028 139,924,666 139,983,664 559,476,269 551,571,692 Net position,end of year $434,054,599 $420,528,020 $147,594,206 $140,042,751 $581,648,805 $560,570,771 7 CITY OF ALLEN,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) Governmental activities Revenues—The following chart visually illustrates the City's revenue by sources for governmental activities: Revenues by Source - Governmental Activities Transfers Charges for services Franchise taxes _ 3% 12% Operating grants 0 6/o Other } 2% 6% • pital grants 13% Property taxes Revenues for the City's governmental activities increased by$12,664,905. Major components of revenue increase and decreases are explained as follows: • Property taxes increased by $5,112,503, or 8.7%, due to an increase of 10.2% from prior year's valuation. This increase is due to real property reappraisals and new property additions. • Sales taxes increased by$1,267,417 over prior year collections. • Franchise tax revenue increased by$437,079 over prior year collections. • Charges for services increased by 8.1% primarily due to an increase in parks and recreations charges and an increase in roadway impact fee revenue. • Fines Revenue(Other Taxes)decreased by 10.9%as a result of warrant revenue and enforcement decreasing. • Interest earnings increased by $106,619, an increase of 12.7%, as a result of interest rates that continue to increase. Expenses for governmental activities increased by $5,912,839, or 4.8%. Components of increases and decreases are explained as follows: • Expenses include employee annual merit increases, general schedule salary market adjustment, adding 18.01 fulltime equivalent positions to address goals in the strategic plan and to maintain the current level of service. • Expenses for Public Safety decreased by 2.4% due primarily to the decrease in net pension liability from fiscal year 2017 to fiscal year 2018. • Expenses for Culture and Recreation increased by 15.9% due to merit increases, increasing the Parks and Recreation and Allen Event Center full-time equivalent by 5.01, collectively, to maintain service levels. Additionally, there was an increase in ticket reimbursement expenses at the Allen Event Center due to an increase in number of events held. 8 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) • Expenses for General Government decreased by 5.8% due to allocating vehicle and equipment replacement to applicable departments and the decrease in net pension liability from fiscal year 2017 to fiscal year 2018. The following chart illustrates the relationship between expenses and program revenues for governmental type activities: Expenses and Program Revenues - Governmental Activities $40,000,000 $35,000,000 $30,000,000 idhld-- $25,000,000$20,000,000$15,000,000$10,000,000 ■Expenses $5,000,000 ■Revenues sec` e�to doe za`�oc Fec` a° ef ` ` `ma aco \a, c c' 4 e e se•e ,�o ° ° o'e e ca a .sae ` Cece ce oc J CP Go ce Business-type activities— Revenues—The following chart visually illustrates the City's revenue by sources for business-type activities: Revenues by Source - Business-type Activities Other Capital grants and 0% contributions 15% Charges for services 85% 9 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) Revenues from business-type activities increased $9,478,853, or 17.4%. Major components of the net increase are as follows: • Charges for services for business-type activities increased by $5,597,385, or 11.5%, due to an increase of$4,344,231 in water charges, and an increase of$1,119,369 in sewer charges. • Capital grants and contributions increased by$4,111,617 over the prior year. Expenses for business-type activities increased by $1,962,960, or 3.9%. The increase was due to an increase of 3.9% in expenses in the Water and Sewer Fund, an increase of 2.2% in expenses in the Solid Waste Fund, an increase of 4.9% in the expenses in the Drainage Fund, and an increase of 7.5% in expenses in the Golf Course Fund. The increase in the Water and Sewer Fund was primarily a result of an increase in the amount paid to North Texas Municipal Water District(NTMWD)as they proceed with capital expansion plans that increased the City's costs associated with water and sewer service from the District. The increases in the Solid Waste Fund were the result of increased contractual services while the increases in the Drainage Fund were the result of increased maintenance. The increase in the Golf Course Fund was primarily a result of increased personnel costs and increased maintenance. The following chart illustrates the relationship between expenses and program revenues for business-type activities: Expenses and Program Revenues - Business-type Activities $60,000,000 l $50,000,000 " $40,000,000 ■Expenses $30,000,000 ■Revenues $20,000,000 $10,000,000 $0 Water and sewer Solid waste services Drainage Golf course 10 CITY OF ALLEN,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS Governmental funds The focus of the City of Allen's governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City's measure of a government's net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the governmental funds reported combined ending fund balances of $79,988,048, an increase of $577,584 in comparison with the prior fiscal year. Approximately 30%, or $23,621,680, constitutes unassigned fund balances, which are available for spending at the government's discretion. The remaining fund balances are classified as non-spendable, restricted, or assigned to indicate that they are not available for new spending allocation. The non-spendable portion includes$25,747 related to prepaid items. The restricted portion includes: debt service ($1,251,938), capital expenditures ($18,101,966),tourism ($1,936,470), asset forfeiture($141,634), state and federal grants ($270,523), park acquisition and development ($1,260,006), tax increment financing agreements ($3,755,679), court technology ($25,303), juvenile case manager ($1,037), PEG fees ($946,059), radio system ($215,019), photo red light enforcement($26,410), and cemetery trust($59,386). In addition, $28,349,191 is assigned to capital expenditures. The General Fund is the chief operating fund of the City. As of the end of the current fiscal year, the total unassigned fund balance was $23,626,108. Current operating expenditures had savings of $4,998,553, which allowed monies to be transferred to the General Capital Projects Fund for self-financing of capital projects. The total fund balance increased from $21,869,796 at September 30, 2017, to $23,711,241 at September 30, 2018. This increase is due to prudent, conservative management by City staff. The Debt Service Fund balance of$1,251,938, all of which is restricted for the payment of debt, represents a decrease from the prior year of $90,064. This decrease was due to the cash defeasance of the 2005 Certificates of Obligation for $405,000. The fund balance meets the fiscal year 2018's 5-10% of annual debt service requirement of$732,140 to$1,464,279. The General Capital Projects Fund provides information on cash financed capital projects and had an ending fund balance of$28,349,191 at September 30, 2018, an increase of$3,070,975. Revenues and other financing sources totaled $10,077,316, which included $1,257,202 received from Collin County for the Alma Drive improvements, $450,193 received from TASPP for the Fire Department expenditures, $347,379 in charges for services for median improvements, $367,604 in miscellaneous revenue for street improvements, and $5,000,000 from other funds to cash finance capital projects. Total expenditures and other uses of $7,006,341 consisted of $1,157,632 for intersection improvements, $2,073,396 for median improvements, $870,379 for Ridgeview Drive improvements, $346,423 for the bridge replacement at the Joe Farmer Recreation Center, $354,941 for the pedestrian bridge and trail at the Allen Senior Recreation Center, $656,350 for Ridgemont Drive improvements, $450,000 in capital lease payments, and $300,000 for miscellaneous street and alley repairs. The General Obligation Bond Fund had an ending fund balance of $18,101,966, which represents a decrease of $1,377,996 from the prior year. Expenditures totaled $10,700,503, which mainly consisted $1,690,091 for Spirit Park enhancement, $2,300,000 for the Collin County College Firearms Training Facility, $3,535,627 for Ridgeview Drive improvements, $584,380 for traffic signal improvements, and $450,388 for Alma Drive improvements. General Fund Budgetary Highlights During April and May each year, all accounts are evaluated to determine whether they are in line with the original budgets. Accounts that are under or over budget are revised to meet year-end final estimates. New projects are not added to the year-end estimate; only the cost of maintaining the current base operation is revised as needed. As is customary, during fiscal year ended September 30, 2018, the City Council amended the budget for the General Fund one time. 11 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) Adjustments made during fiscal year 2017-18 increased the original revenue budget by $651,051 and increased the expenditure budget by $2,100,907. Due to actual expenditures being $4,971,770 less than the revised budget and revenues exceeding the revised budget by$1,491,267,the City was able to transfer $4,500,000 to the General Capital Projects Fund to cash finance future capital projects and transfer$75,000 to the Golf Course Fund to ensure a positive net position at year's end. The General Fund's operational expenditure reserve increased to 92 days from the amended budget of 80 days, which is slightly above the City's financial policy to maintain a 60-to 90-days expenditure reserve. Proprietary funds The City's proprietary funds provide information like the presentation in the government-wide financial statements, but in more detail. As of September 30, 2018, the unrestricted net position for all enterprise funds were as follows: Water and Sewer, $38,006,427; Solid Waste, $3,561,879; Drainage, $1,063,025; and Golf Course, $45,275. The total change in net position for these funds was an increase of$7,268,095; an increase of$1,885; an increase of$333,788; and an increase of$20,798, respectively. The Water and Sewer Fund had an increase in net position as a result of a significant increase in water demand over the summer months of 2018 coupled with an increase in customer rates. The Solid Waste Fund had an increase in net position due to increased revenue coupled with an increase in transfers out to other funds. The Drainage Fund had an increase in net position due to an increase in operating revenues. The Golf Course Fund had an increase in net position due to increased transfers in from other funds. CAPITAL ASSETS The City's investment in capital assets for its governmental and business-type activities as of September 30, 2018, amounts to $573,577,917 (net of accumulated depreciation). Investment in capital assets includes land and improvements, buildings, vehicles, machinery and equipment, park land and facilities, roads and bridges. About 79%of the capital assets are governmental and 21%are business-type activities. There was an increase of 2.5% in the investment in capital assets for the current fiscal year. Table 3 Capital Assets at Year-end,Net of Accumulated Depreciation Govemmental Activities Business-type Activities Total 2018 2017 2018 2017 2018 2017 Land $143,531,148 $139,069,288 $4,072,882 $4,072,882 $147,604,030 $143,142,170 Buildings 70,204,069 72,863,687 - - 70,204,069 72,863,687 Towers,tanks, and pump stations - - 107,724,356 102,147,625 107,724,356 102,147,625 Other Improvements 212,575,308 216,700,731 306,039 318,303 212,881,347 217,019,034 Furniture and fixtures 169,577 229,588 - - 169,577 229,588 Vehicles 6,541,467 6,489,143 388,743 315,323 6,930,210 6,804,466 Machinery and equipment 3,692,505 3,964,661 2,038,203 1,722,145 5,730,708 5,686,806 Construction in progress 18,645,442 7,492,158 3,688,178 4,226,972 22,333,620 11,719,130 Total $455,359,516 $446,809,256 $118,218,401 $112,803,250 $573,577,917 $559,612,506 The major governmental-type capital improvement projects and developer contributions during the current fiscal year included the following: Developer contributed streets, alleys, and rights of way $ 16,932,261 Spirit Park 6,315,321 Collin College Gun Range 2,300,000 Bridge& Trail Park @ ASRC 773,694 Street construction: Ridgeview Drive-Cottonwood Drive to Chelsea Drive 4,407,003 2017 Median Improvements 2,102,103 Bethany Drive Intersection Improvement 1,053,046 12 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) Business-type capital improvement projects and developer contributions during the current fiscal year include the following: Developer contributed water mains and sewer lines $ 7,486,365 Hillside Water& Sewer Rehabilitation Phase 1 2,582,556 Ridgeview Drive Water& Sewer -Cottonwood Dr. to Chelsea Dr. 474,929 Additional information on the City's capital assets can be found in Note 4 of this report. DEBT ADMINISTRATION As shown in Table 4, the City's total outstanding debt at September 30, 2018, was $185,505,200. Of this total, $122,968,369 was associated with governmental activities, $17,898,089 was business-type activities, and $44,638,742 was associated with the Component Units. Total gross bonded debt and a note payable was$153,584,942,which includes$86,785,000 of General Obligation (G.O.) bonds backed by the full faith and credit of the primary government; $13,050,000 secured solely by water and sewer revenues; the Component Units' total of $40,925,000, which is secured by future sales tax revenue; a note payable balance of$3,223,695; and $9,601,247 in net premiums and discounts from bond issuances. Other long- term debt relates to accrued compensated absences, net pension liability, net OPEB liability, and capital leases. During fiscal year 2018, the City issued $8,355,000 of General Obligation Bonds and $9,330,000 in Waterworks and Sewer System Revenue Bonds. The revenue bond debt for both component units relates to debt issued to support public infrastructure improvements, land acquisition, and construction of the Allen Event Center. The notes payable relates to a loan agreement in which Allen Economic Development Corporation entered to finance the purchase of 31 acres of land. Total debt of the Component Units decreased by 9.9%. Total debt for the Allen Economic Development Corporation decreased by 15.8%, and for the Allen Community Development Corporation, total debt decreased by 5.8%. Table 4 Outstanding Debt at Year-end Bonds and Other Long-Term Liabilities Governmental Activities Business-type Activities Component Units Total 2018 2017 2018 2017 2018 2017 2018 2017 Gross Bonded Debt General Obligation Bonds $ 86,785,000 $ 88,575,000 $ - $ - $ - $ - $ 86,785,000 $ 88,575,000 Certificate of Obligation Bonds - 405,000 - - - - - 405,000 Revenue Bonds Payable - - 13,050,000 4,760,000 - - 13,050,000 4,760,000 Premiums&Discounts 7,675,400 7,609,995 800,800 165,847 1,125,047 1,257,405 9,601,247 9,033,247 Sales Tax Revenue Bonds - - - - 40,925,000 45,060,000 40,925,000 45,060,000 Note Payable 635,000 1,255,000 - - 2,588,695 3,204,458 3,223,695 4,459,458 Total Gross Bonded Debt 95,095,400 97,844,995 13.850,800 4,925.847 44,638,742 49.521,863 153,584,942 152,292,705 Other Long-Term Debt Compensated Absences 6,368,701 6,225,795 786,209 726,859 - - 7,154,910 6,952,654 Net Pension Liability 19,444,403 27,661,775 2,396,197 3,424,109 - - 21,840,600 31,085,884 Net OPEB Liability 1,195,620 979,395 145,492 118,444 - - 1,341,112 1,097,839 Capital Leases 864,245 1,250,000 719,391 116,479 - - 1,583,636 1,366,479 Total Other Long-Term Debt 27,872,969 36,116,965 4,047,289 4,385,891 - - 31,920,258 40,502,856 Total $122,968,369 $133,961,960 $ 17,898,089 $ 9.311,738 $ 44,638,742 $ 49,521,863 $185,505,200 $192,795,561 13 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) The underlying credit ratings from both Moody's Investors Service and Standard and Poor's for the City's General Obligation Bonds, Certificates of Obligation, Waterworks and Sewer System Revenue Bonds, Community Development Corporation's Sales Tax Bonds, and Economic Development Sales Tax Revenue Bonds are shown below in Table 5. Additional information on the City's long-term debt can be found in Note 5 to the basic financial statements. Table 5 Bond Ratings Moody's Investors Standard & Service Poor's General Obligation Bonds Aaa AAA Certificates of Obligation Aaa AAA Water& Sewer Revenue Bonds Aa2 AAA CDC Sales Tax Revenue Bonds Aa2 EDC Sales Tax Revenue Bonds Aa2 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The local economy continues to be moderately strong for the City of Allen and for the North Central Texas region. Focused on having a balanced community, the City takes a proactive approach to economic development with its business recruitment and retention efforts, as well as with its variety of housing options. In addition,the City conservatively manages its budget. The fiscal year 2018-2019 budget reflects the commitment of the City Council and City staff to provide services and facilities to the citizens of Allen, while maintaining a strong financial position. The City revenues impacted mostly by a moderately strong economy are property taxes and sales taxes. The property tax revenue source experienced growth due to new construction and reappraisal increases of existing real property. For fiscal year 2018-2019, reappraisal values for existing real (residential and commercial)properties increased 6.45%compared to fiscal year 2018. New construction of residential and commercial property resulted in an increase in valuation of 3.48%. The overall increase in valuation from all categories was 9.93%; however, the property tax revenue increase was budgeted at 5.13% as a result of lowering the tax rate by 1.2 cents. Overall sales tax is expected to increase by 2.11%. As the City's sizeable retail developments near its capacity, the rate of growth of sales tax is expected to increase at a rate that is a combination of population growth and increases in prices for retail items. The rate of residential growth has steadily increased as the economy recovered. The City estimates issuance of 500 single family permits in fiscal year 2019. The population of approximately 102,653 as of September 30, 2018, is expected to reach approximately 130,000 at "build out" in the next twelve years. The population projection at "build out" has been increased recently due to the construction of additional multi-family homes, changes to projected land use plans, and an overall increase in the density of the developments. The various infrastructure and operational needs of the City have resulted in the annual expenditure budget increase from $164.49 million in fiscal year 2012, to $220.73 million in fiscal year 2019 for all funds combined. The certified assessed property value for 2018-2019 equates to an overall increase of approximately $1.228 billion (9.93%) from the preceding year. The fiscal year 2019 tax rate was set at $0.498 per$100 valuation. Of the total tax rate, $0.393463 is dedicated to operations and maintenance in the General Fund, and $0.104537 is dedicated to general obligation debt service. 14 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) Ad valorem taxes are the General Fund's largest revenue source and will contribute $52.726 million or 49.96% of the fund's budgeted revenues in FY2010. Appraisal values are established by the Central Appraisal District of Collin County, and collections are certified at 100% by the Collin County Tax Assessor- Collector's office. New retail development and population growth will continue to increase sales tax at a moderate rate of 2.11% over the revised FY2018 budget. The General Fund ended 2017-2018 with a positive variance of $1,999,932 as compared to the revised budgeted fund balance. This brings the ending fund balance to an equivalent 92 days of operating expenditures, which is higher than the amended estimate of 80 days and just above the range of the City's financial policy of 60 to 90 days. The 2018-2019 General Fund expenditure budget reflects a 5.04% increase from the revised 2017-2018 budget. This is primarily due to a compensation merit increases and a market adjustment in employee pay ranges with emphasis on public safety employees along with the addition of fifteen new budgeted employees. These changes will allow the City to retain staff to meet its strategic goals and continue its commitment to maintaining a high level of service to the public. The City chose to increase the water and sewer rates as proposed in the rate study, which was updated in 2017. The budget includes an increase in rates to the city from NTMWD. Also, included in the FY2019 budget is $3,241,368 to cash finance water and sewer capital projects related to pump station and sewer lift station maintenance, flow meters, water tank repainting, and Central Business District Rehabilitation. The Water and Sewer Fund is expected to finish the fiscal year 2019 with approximately$11.684 million in working capital reserves to result in 95 days of operating expenses in reserve,which is within the City policy of 90 to 120 days. This healthy balance is necessary to fund the future City and NTMWD capital projects and ongoing maintenance projects that are planned to ensure the water and sewer infrastructure meet the demand when the City reaches build out and provides reserves that can be used during periods of drought- related watering restrictions that would have an impact on revenues. The Solid Waste Fund represents a stable operational service, and the City's staff continues its educational outreach programs through several key programs and events held throughout the year. Staff also continues to seek grant funding for future cycles. The City's current contract is with Community Waste Disposal (CWD)as the solid waste provider. No commercial CPI solid waste fee increases are planned in 2019. The contract includes an agreement to adjust the Variable Fuel Adjustment Fee(VFAF)on commercial accounts to a higher fuel cost starting point, which is beneficial to the City's commercial customers. With the continuing decline in fuel costs, the VFAF will probably not be changed. The Solid Waste working capital balance at the end of fiscal year 2019 is expected to be$2.822 million which is approximately 143 operating days of reserve and is greater than the City's policy of 90 to 120 days. The Drainage Fund is supported by drainage fees on utility bills and development inspection fees. The fund continues to sustain a working capital balance which supports drainage maintenance, mosquito abatement, Texas Pollution Discharge Elimination System (TPDES), and capital improvement activities. The City's golf course, formerly called Chase Oaks, is in its seventh year of operation. After the course was redesigned, it was renamed as The Courses at Watters Creek. The renovated course opened in January 2013. The completion of the 33 holes has helped to improve the overall golf experience for the established players and create an enthusiastic environment for new golfers of all ages. There is an 18-hole course, a 9-hole course, 6 additional holes for short iron play, new putting greens, and a lighted driving range. This last year of operations saw an increase in revenue due to damage and flooding that occurred in the prior year that resulted in depressed revenue. The Golf Course Fund working capital balance at the end fiscal year 2019 is expected to be$13,078. 15 CITY OF ALLEN, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2018 (UNAUDITED) For 2018-2019, the Risk Management Fund reflects changes in health care costs of 5%for Plans A and B and Plan C and no increase in dental premiums. For fiscal year 2019, the City will incur an 3.86% increase in costs from the revised fiscal 2018 budget. Prior to fiscal year 2016, the City would pay claims over the stop loss amounts and then get reimbursed. United Healthcare can manage the stop loss once claims have reached the stop loss threshold. Worker's compensation premiums have increased due to the number of hours worked by public safety personnel. Property and liability insurance rates for fiscal year 2019 are expected to increase compared to fiscal year 2018 as there were significant additions of newly insured property. The Risk Fund continues to be in good financial condition. The City of Allen's budget continues to be positively impacted by moderately strong growth and by conservative fiscal management. The 2018-2019 budget reflects the efforts of the governing body and City staff to address the need to provide services and facilities to support our vibrant and growing community, while maintaining a strong financial position. Request for Information The financial report is designed to provide our citizens, customers, investors, and creditors with a general overview of the City's finances. If you have questions about this report or need any additional information, please contact the Finance Department at 305 Century Parkway,Allen,Texas, 75013,or call(214)509-4626. 16 CITY OF ALLEN BASIC FINANCIAL STATEMENTS CITY OF ALLEN CITY OF ALLEN, TEXAS EXHIBIT 1 STATEMENT OF NET POSITION SEPTEMBER 30, 2018 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS-TYPE COMPONENT ACTIVITIES ACTIVITIES TOTAL UNITS ASSETS Cash and cash equivalents $ 21,791,588 $ 14,291,796 $ 36,083,384 $ 4,521,837 Investments 78,858,867 24,884,272 103,743,139 15,185,149 Receivables(net of allowance for uncollectibles) 9,588,702 9,101,278 18,689,980 3,537,343 Internal balances (1,109,009) 1,109,009 - - Prepaid items and other assets 67,184 5,050 72,234 6,298 Net OPEB asset 804,712 - 804,712 - Inventories 25,747 106,402 132,149 - Restricted cash and cash equivalents - 1,487,176 1,487,176 - Capital assets: Non-depreciable 162,176,590 7,761,060 169,937,650 20,618,161 Depreciable(net of depreciation) 293,182,926 110,457,341 403,640,267 47,224,155 TOTAL ASSETS 565,387,307 169,203,384 734,590,691 91,092,943 DEFERRED OUTFLOWS OF RESOURCES Deferred charges on refunding 1,652,107 114,031 1,766,138 1,051,563 Deferred outflows of resources-OPEB 95,436 11,941 107,377 - Deferred outflows of resources-pension 6,096,736 749,856 6,846,592 - TOTAL DEFERRED OUTFLOWS OF RESOURCES 7,844,279 875,828 8,720,107 1,051,563 LIABILITIES Accounts payable 5,353,384 1,622,461 6,975,845 160,442 Accrued liabilities 3,707,507 282,099 3,989,606 31,458 Accrued interest payable 421,429 80,826 502,255 116,247 Customer deposits - 1,840,004 1,840,004 - Unearned revenue 1,123,673 - 1,123,673 - Retainage payable 734,380 152,283 886,663 184,239 Non-current liabilities: Due within one year 15,866,646 2,019,582 17,886,228 4,970,438 Due in more than one year 107,101,723 15,878,507 122,980,230 39,668,304 TOTAL LIABILITIES 134,308,742 21,875,762 156,184,504 45,131,128 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources-OPEB 103,324 12,924 116,248 - Deferred inflows of resources-pension 4,764,921 596,320 5,361,241 - TOTAL DEFERRED INFLOWS OF RESOURCES 4,868,245 609,244 5,477,489 - NET POSITION Net investment in capital assets 379,153,944 103,762,241 482,916,185 37,988,879 Restricted for: Debt service 873,560 46,350 919,910 451,728 Capital projects 30,140,951 - 30,140,951 - Tourism 1,936,470 - 1,936,470 - Park acquisition and development 1,260,006 - 1,260,006 - State and federal grants 270,523 - 270,523 - Tax Increment Financing 3,755,679 - 3,755,679 - Other purposes 1,351,034 - 1,351,034 - Unrestricted 15,312,432 43,785,615 59,098,047 8,572,771 TOTAL NET POSITION $ 434,054,599 $ 147,594,206 $ 581,648,805 $ 47,013,378 The Notes to Financial Statements are an integral part of this statement. 17 CITY OF ALLEN, TEXAS STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2018 Program Revenues Charges for Operating Grants Capital Grants Expenses Services and Contributions and Contributions Functions/Program Activities PRIMARY GOVERNMENT: Governmental Activities. General government $ 26.764,210 $ 525,542 S - $ - Public safety 39,213.768 2,171,332 160.355 - Public works 24,161.991 1,333,506 - 18,864,656 Culture and recreation 33.791,438 9,803,084 1,770,960 78,200 Community development 3,079,242 4,025,326 492,453 - Interest on long-term debt 2,920,824 - - - Total governmental activities 129,931,473 17,858,790 2,423,768 18,942,856 Business-type Activities: Water and sewer 41.134,685 42,453,681 - 9.734,528 Solid waste 6,223,788 6,933,356 - - Drainage 1,260,262 1.907,407 - - Golf course 3.397,180 2.810,424 - - Total business-type activities 52,015,915 54,104,868 - 9,734,528 TOTAL PRIMARY GOVERNMENT $ 181,947,388 $ 71.963,658 S 2.423,768 $ 28.677.384 COMPONENT UNITS: Allen Economic Development Corporation $ 10,353,859 $ - S - S - Allen Community Development Corporation 10.402,577 - - - TOTAL COMPONENT UNITS S 20.756.436 $ - $ - S - General revenues: Taxes: Property taxes,levied for general purposes Sales taxes Franchise taxes Hotel motel taxes Other taxes Investment earnings Gain on sale of assets Miscellaneous Transfers Total general revenues and transfers CHANGE IN NET POSITION NET POSITION, beginning of year as restated NET POSITION,end of year The Notes to Financial Statements are an integral part of this statement. 18 EXHIBIT 2 Net(Expense)Revenue and Changes in Net Position Primary Government Governmental Business-Type COMPONENT Activities Activities TOTAL UNITS $ (26,238,668) $ - $ (26,238,668) $ - (36,882,081) - (36,882,081) - (3,963,829) - (3,963,829) - (22,139,194) - (22,139,194) - 1,438,537 - 1,438,537 - (2,920,824) - (2,920,824) - (90,706,059) - (90,706,059) - 11,053,524 11,053,524 - - 709,568 709,568 - 647,145 647,145 -- - (586,756) (586,756) - 11,823,481 11,823,481 - $ (90,706,059) $ 11,823`481. $ (78,882,578.1 $ - $ - $ - $ - $ (10,353,859) - - - (10,402,577) $ - $ - $ - $ (20,756,436) $ 63,929,379 $ - $ 63,929,379 $ - 20,717,505 - 20,717,505 20,290,350 7,990,092 - 7,990,092 - 1,487,066 - 1,487,066 - 1,704,227 - 1,704,227 - 944,196 210,045 1,154,241 198,028 446,117 13,228 459,345 30,953 3,592,229 21,030 3,613,259 287,217 4,398,244 (4,398,244) - - 105,209,055 (4,153,941) 101,055,114 20,806,548 14,502,996 7,669,540 22,172,536 50,112 419,551,603 139,924,666 559,476,269 46,963,266 $ 434,054,599 $ 147,594,206, 581,648,805 _. 47,013,378 19 CITY OF ALLEN, TEXAS BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2018 GENERAL DEBT CAPITAL GENERAL SERVICE PROJECTS ASSETS Cash and cash equivalents $ 2.050,323 $ 1,235,472 $ 8,430,535 Investments 22,196,564 15,737 19.909,691 Receivables, net of allowances for uncollectibles: Ad valorem taxes 150,524 42,855 - Sales taxes 3,480,141 - - Accounts receivable 4,014 - - Accrued interest 89,453 925 73,330 Other 3,483,132 - 1.727,395 Inventories 27,498 - - Prepaid items 25,747 - - TOTAL ASSETS S 31.507,396 S 1.294.989 S 30.140,951 LIABILITIES, DEFERRED INFLOWS OF RESOURCES,AND FUND BALANCES LIABILITIES Accounts payable $ 3,315,355 $ - $ 1,219,180 Accrued liabilities 2,276,143 - 321,122 Unearned revenue 1,123,674 - - Retainage payable - - 215,898 TOTAL LIABILITIES 6,715,172 - 1,756,200 DEFERRED INFLOWS OF RESOURCES Unavailable revenue-property taxes 150,524 42,855 - Unavailable revenue-charges for services 846,370 - - Unavailable revenue-miscellaneous 10,409 - 20,000 Unavailable revenue-interest 18,981 196 15,560 Unavailable revenue-fines 54,699 - - Unavailable revenue-grants - -TOTAL DEFERRED INFLOWS OF RESOURCES 1,080.983 43,051 35,560 FUND BALANCES Nonspendable Prepaid items 25,747 - - Restricted Debt service - 1,251,938 - Capital expenditures - -Tourism - - - Asset forfeiture - - - State and federal grants - - - Park acquisition and development - - - Tax increment financing agreement - - - Court technology - - - Juvenile case manager - - - PEG fees - - - Radio system - - - Photo red light enforcement - - - Cemetery trust 59,386 - - Assigned Capital expenditures - - 28,349,191 Unassigned 23,626,108 - - TOTAL FUND BALANCES 23,711,241 1,251,938 28,349,191 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES $ 31.507,396 $ 1.294.989 S 30.140.951 The Notes to Financial Statements are an integral part of this statement. 20 EXHIBIT 3 GENERAL OTHER TOTAL OBLIGATION GOVERNMENTAL GOVERNMENTAL BOND FUNDS FUNDS $ 3,230,386 $ 2,732,903 $ 17,679,619 15,754,644 5,664,729 63,541,365 193,379 3,480,141 366,646 370,660 57,899 26,430 248,037 7,804 - 5,218,331 27,498 25,747 $ 19,050,733 $ 8,790,708 $ 90,784,777 $ 483,101 $ 92,716 $ 5,110,352 45,585 2,642,850 1,123,674 453,380 65,102 734,380 936,481 203,403 9,611,256 193,379 846,370 30,409 12,286 5,568 52,591 54,699 8,025 8,025 12,286 13,593 1,185,473 25,747 1,251,938 18,101,966 - 18,101,966 1,936,470 1,936,470 141,634 141,634 270,523 270,523 1,260,006 1,260,006 3,755,679 3,755,679 25,303 25,303 1,037 1,037 946,059 946,059 215,019 215,019 26,410 26,410 59,386 28,349,191 (4,428) _ 23,621,680 18,101,966 8,573,712 79,988,048 $ 19,050,733 $ 8,790,708 $ 90,784,777 21 CITY OF ALLEN,TEXAS EXHIBIT 4 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2018 Total fund balances -governmental funds $ 79,988,048 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds balance sheet. 455,359,516 Funds comprising the net OPEB asset are not current financial resources and therefore are not reported in the governmental funds balance sheet. 804,712 The following deferred outflows of resources and deferred inflows of resources are not reported in governmental funds: Deferred charges on refunding $ 1,652,107 Deferred outflows of resources -OPEB 95,436 Deferred outflows of resources -pension 6,096,736 Deferred inflows of resources -OPEB (103,324) Deferred inflows of resources -pension (4,764,921) 2,976,034 Interest payable on long-term debt does not require current financial resources, therefore interest payable is not reported as a liability on the governmental funds balance sheet. (421,429) Internal service funds are used by management to charge the cost of certain activities, such as insurance and fleet management, to individual funds. The assets and liabilities of the internal service funds ($27,221,073) are net of the amount allocated to business-type activities ($1,109,009) and to capital assets ($8,981,450). 17,130,614 Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements. 1,185,473 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the fund financial statements. Long-term liabilities consist of General obligation bonds $ (86,785,000) Tax notes (635,000) Capital lease payable (864,245) Premiums/discounts (7,675,400) Compensated absences (6,368,701) Net OPEB liability (1,195,620) Net pension liability (19,444,403) (122,968,369) Net position of governmental activities $ 434,054,599 The Notes to Financial Statements are an integral part of this statement. 22 CITY OF ALLEN CITY OF ALLEN, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 DEBT GENERAL SERVICE REVENUES Ad valorem taxes. penalties and interest $ 48.218,839 $ 14.406.808 Franchise taxes 7.803,103 - Municipal sales tax 20.232,104 - Licenses, permits and fees 3,745,689 - Charges for services 11,974,727 - Fines 1,570,939 - Gifts and contributions 852,322 - Hotel /motel fees - - Intergovernmental 138,559 - Investment earnings 338,587 145,919 Miscellaneous 2.069,713 - Total revenues 96,944,582 14,552.727 EXPENDITURES Current General government 23,824,706 - Public safety 37,946,894 - Public works 4.406,346 - Culture and recreation 24,169,342 - Community development 2.723,735 - Capital outlay 614,649 - Debt service: Principal retirement - 11,181,377 Interest and fiscal charges - 3,461,414 Total expenditures 93,685,672 14,642.791 Excess (deficiency)of revenues over(under)expenditures 3,258,910 (90,064) OTHER FINANCING SOURCES (USES) Issuance of bonds - - Premium on bonds issued - - Capital lease obligations - - Transfers in 4,603,089 - Transfers out (6.063,012) - Proceeds from sale of capital assets 42,458 - Total other financing sources(uses) (1,417,465) - NET CHANGE IN FUND BALANCES 1,841,445 (90,064) FUND BALANCES, BEGINNING OF YEAR 21.869,796 1,342.002 FUND BALANCES, END OF YEAR $ 23.711,241 $ 1.251.938 The Notes to Financial Statements are an integral part of this statement. 23 EXHIBIT 5 GENERAL GENERAL OTHER TOTAL CAPITAL OBLIGATION GOVERNMENTAL GOVERNMENTAL PROJECTS BOND FUNDS FUNDS $ - $ - $ 1,149,408 $ 63,775,055 - - 186,989 7,990,092 - - 485,400 20,717,504 - - 748,672 4,494,361 1,468,058 - - 13,442,785 - - 139,415 1,710,354 - - - 852,322 - - 1,487,066 1,487,066 2,287,336 - 1,129,346 3,555,241 186,054 89,499 91,895 851,954 1,135,868 - 71,096 3,276,677 5,077,316 89,499 5,489,287 122,153,411 654,678 145,196 1,066,676 25,691,256 - 90,690 486,994 38,524,578 3,157,125 1,335,776 - 8,899,247 350,623 2,521 5,191,726 29,714,212 - - 352,525 3,076,260 1,993,915 9,126,320 1,380,104 13,114,988 450,000 - - 11,631,377 - - - 3,461,414 6,606,341 10,700,503 8,478,025 134,113,332 (1,529,025) (10,611,004) (2,988,738) (11,959,921) - 8,355,000 - 8,355,000 - 978,386 - 978,386 - 75,622 - 75,622 5,000,000 - 79,093 9,682,182 (400,000) (176,000) - (6,639,012) - - 42,869 85,327 4,600,000 9,233,008 121,962 12,537,505 3,070,975 (1,377,996) (2,866,776) 577,584 25,278,216 19,479,962 11,440,488 79,410,464 $ 28,349,191 $ 18,101,966 $ 8,573,712 $ 79,988,048 24 CITY OF ALLEN,TEXAS EXHIBIT 6 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2018 Net change in fund balances -total governmental funds $ 577,584 Amounts reported for governmental activities in the statement of activities are different because: 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 of capital assets recorded in the current period. 13,114,988 Current year changes in the net other post employment benefit asset are not current financial resources and therefore are not reported in the governmental funds. 80,963 Governmental funds do not recognize contributed capital assets. However, in the statement of activities the acquisition value of those assets is recognized as revenue, then allocated over their estimated useful lives and reported as depreciation expense. 17,010,461 Depreciation expense on capital assets is reported in the statement of activities but does not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in the governmental funds. (21,311,883) The proceeds from issuance of long-term debt provides current financial resources to governmental funds, while the payment of the principal of long-term debt consumes the current financial resources of governmental funds. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued. However, these amounts are amortized in the government-wide financial statements. Bonds issued (8,355,000) Premium on bonds issued (978,386) Bond and capital lease principal retirement 11,631,377 Amortization of bond premiums 912,981 Amortization of deferred charges on refundings (390,029) 2,820,943 Current year changes for compensated absences, net pension liability, net OPEB liability, deferred inflows/outflows related to pensions, and OPEB do not require the use of current financial resources and, therefore, are not reported in govemmental funds. (387,441) Current year changes in accrued interest payable do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (29,015) Internal service funds are used by management to charge the costs of certain activities, such as insurance and fleet management, to individual funds. The net operating and non-operating income and transfers of the intemal service funds is reported with governmental activities net of amounts allocated to business-type activities. 2,310,016 Certain revenues in the government-wide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds. 316,380 Change in net position of governmental activities $ 14,502,996 The Notes to Financial Statements are an integral part of this statement. 25 CITY OF ALLEN, TEXAS EXHIBIT 7 STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2018 BUSINESS-TYPE ACTIVITIES ENTERPRISE FUNDS GOVERNMENTAL ACTIVITIES WATER AND SOLID GOLF INTERNAL SERVICE SEWER WASTE DRAINAGE COURSE TOTAL FUNDS ASSETS CURRENT ASSETS Cash and cash equivalents $ 12,181,941 $ 950,309 $ 328,409 $ 831,137 $ 14,291,796 $ 4,111,967 Investments 22,027,625 2,040,211 816,436 - 24,884,272 15,317,503 Receivables,net of allowance for uncollectibles: Accounts 7,601.049 872,765 260,028 2,888 8,736.730 22,736 Accrued interest 80,325 8.813 3,741 - 92,879 55,418 Other 93,045 174,399 559 3,666 271,669 - Inventories 106,402 - - - 106,402 39,686 Prepaid ferns - - - 5,050 5,050 - Restricted cash and cash equivalents 1,487,176 - - - 1,487,176 - Total current assets 43,577,563 4,046,497 1,409,173 842,741 49,875,974 19,547,310 NONCURRENT ASSETS CAPITAL ASSETS Land 4,072,882 - - - 4,072,882 - Construction in progress 3,688,178 - - - 3,688,178 352,367 Other improvements - - 496,132 - 496,132 - Towers,tanks,and pump stations 201,770,563 - - - 201,770,563 - Vehicles 947,953 140,440 151,554 - 1,239,947 14,440,981 Machinery and equipment 3,893,589 12,359 573,537 1,429,490 5,908,975 6,004,332 Total capital assets 214,373,165 152,799 1,221,223 1,429,490 217,176,677 20,797,680 Less:accumulated depreciation (97,548.690) (45,596) (618,661) (745,329) (98,958,276) (11,816,230) Capital assets,net of accumulated depreciation 116,824,475 107,203 602.562 684,161 118,218,401 8,981,450 Total noncurrent assets 116,824,475 107,203 602,562 684,161 118,218,401 8,981,450 TOTAL ASSETS 160,402,038 4,153,700 2,011,735 1,526,902 168,094,375 28,528,760 DEFERRED OUTFLOWS OF RESOURCES Deferred charges on refunding 114,031 - - - 114,031 - Deferred outflows of resources-OPEB 7,744 887 907 2,403 11,941 - Deferred outflows of resources-pension 495,119 60,257 51,484 142,996 749,856 - TOTAL DEFERRED OUTFLOWS OF RESOURCES 616.894 61,144 52,391 145,399 875,828 - LIABILITIES,DEFERRED INFLOWS OF RESOURCES, AND NET POSITION CURRENT LIABILITIES Accounts payable 1,277,797 181,046 99,816 63,802 1,622,461 243,031 Accrued liabilities 177,272 27,976 18,647 58,204 282,099 447 Retainage payable 152,283 - - - 152,283 - Accrued compensated absences-current 256,984 53,758 33,732 104,276 448,750 - Incurred but not reported claims - - - - - 1,064,209 Payable from restricted assets: Revenue bonds payable-current 1,420,623 - - - 1,420,623 - Capital leases payable-current - - - 150,209 150,209 - Accrued interest payable 80,826 - - - 80,826 - Customer deposits payable 1,804.169 - - 35,835 1,840,004 - Total current liabilities 5,169,954 262,780 152,195 412,326 5,997,255 1,307,687 NONCURRENT LIABILITIES Revenue bonds payable 12,430,177 - - - 12,430,177 - Capital leases payable - - - 569,182 569,182 - Net OPEB liability 93,759 11,485 10,901 29,347 145.492 - Net pension liability 1,592,687 186,134 164,809 452,567 2,396,197 - Accrued compensated absences 193,250 40,427 25,367 78,415 337,459 Total noncurrent liabilities 14,309,873 238,046 201,077 1,129,511 15,878,507 - TOTAL LIABILITIES 19,479,827 500,826 353,272 1,541,837 21,875,762 1,307,687 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources-pension 390,238 43,979 44,285 117,818 596,320 - Deferred inflows of resources-OPEB 8,384 957 982 2,601 12.924 TOTAL DEFERRED OUTFLOWS OF RESOURCES 398,622 44,936 45,267 120.419 609,244 - NET POSITION Net investment in capital assets 103,087,706 107,203 602,562 (35,230) 103,762,241 8,981,450 Restricted for revenue bond principal and interest 46.350 - - - 46,350 - Unrestricted 38,006,427 3,561.879 1,063,025 45,275 42,676.606 18,239,623 TOTAL NET POSITION $141,140,483 $ 3,669,082 $ 1,665,587 $ 10,045 $146,485,197 $ 27,221,073 The Notes to Financial Statements are an integral part of this statement. 26 CITY OF ALLEN, TEXAS EXHIBIT 8 RECONCILIATION OF THE STATEMENT OF NET POSITION OF PROPRIETARY FUNDS TO THE GOVERNMENT—WIDE STATEMENT OF NET POSITION SEPTEMBER 30, 2018 Amounts reported for business-type activities in the statement of net position are different because: Total net position per statement of net position $ 146,485,197 Internal service funds are used by management to charge the costs of replacing machinery and equipment, fleet management, workers compensation, property liability loss, medical and dental insurance, and health claims to individual funds. The assets and liabilities of internal service funds are included in the governmental activities in the government-wide statement of net position. The amount shown represents the net receivable from internal service funds allocated to business-type activities since the adoption of GASB 34. 1,109,009 Total net position of business-type activities $ 147,594.206 The Notes to Financial Statements are an integral part of this statement. 27 CITY OF ALLEN, TEXAS EXHIBIT 9 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 BUSINESS-TYPE ACTIVITIES ENTERPRISE FUNDS GOVERNMENTAL ACTMTIES WATER AND SOLID GOLF INTERNAL SEWER WASTE DRAINAGE COURSE TOTAL SERVICE FUNDS OPERATING REVENUES Charges for sales and services: Water sales $ 25,275,326 $ - $ - $ - $ 25,275,326 $ - Sewer charges 15,887,721 - - - 15,887,721 - Connection fees 261,315 - - - 261,315 - Garbage collections - 6,896,856 - - 6,896,856 - Service charges 692,227 - 235,563 2,811,440 3,739,230 14,943,167 Drainage fees - - 1,665,787 - 1,665,787 - Niscellaneous 337,092 36,500 6,057 20,015 399,664 423,271 Total operating revenues 42,453,681 6,933,356 1,907,407 2,831,455 54,125,899 15,366,438 OPERATING EXPENSES Personnel services 5,159,864 556,832 622,969 1,688,533 8,028,198 334,846 Contractual services 27,831,506 5,476,493 36,511 942,999 34,287,509 11,673,769 Maintenance 482,853 5,478 363,998 284,591 1,136,920 - Supplies 673,303 36,954 38,940 236,841 986,038 784,045 Depreciation 5,999,507 15,293 53,450 167,823 6,236,073 2,092,318 Other 696,424 132,738 144,394 76,393 1,049,949 - Total operating expenses 40,843,457 6,223,788 1,260,262 ' 3,397,180 51,724,687 14,884,978 OPERATING INCOME(LOSS) 1,610,224 709,568 647,145 (565,725) 2,401,212 481,460 NON-OPERATING REVENUES(EXPENSES) Investment earnings 175,688 26,379 7,977 - 210,044 109,854 Interest expense (336,202) - - - (336,202) - Gain on disposal of capital assets 13,228 - - - 13,228 360,790 Total non-operating revenues(expenses) (147,286) 26,379 7,977 - (112,930) 470,644 INCOME(LOSS)BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 1,462,938 735,947 655,122 (565,725) 2,288,282 952,104 CAPITAL CONTRIBUTIONS AND TRANSFERS Development fees 2,248,163 - - - 2,248,163 - Capital contributions 7,486,365 - - - 7,486,365 - Transfers in 38,191 - - 586,523 624,714 1,506,574 Transfers out (3,967,562) (734,062) (321,334) - (5,022,958) (151,500) Total capital contributions and transfers 5,805,157 (734,062) (321,334) 586,523 5,336,284 1,355,074 CHANGE IN NET POSITION 7,268,095 1,885 333,788 20,798 7,624,566 2,307,178 NET POSITION,BEGINNING OF YEAR AS RESTATED 133,872,388 3,667,197 1,331,799 (10,753) 138,860,631 24,913,895 NET POSITION,END OF YEAR $ 141,140,483 $ 3,669,082 $ 1,665,587 $ 10,045 $ 146,485,197 $ 27,221,073 The Notes to Financial Statements are an integral part of this statement. 28 CITY OF ALLEN, TEXAS EXHIBIT 10 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION OF PROPRIETARY FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2018 Amounts reported for business-type activities in the statement of activities are different because: Net change in fund net position-total proprietary funds $ 7,624.566 Internal service funds are used by management to charge the costs of replacing machinery and equipment. fleet management, workers compensation, property liability loss, medical and dental insurance, and health claims to individual funds. The net expenses of certain activities of internal service funds is allocated to business-type activities. 44.974 Change in net position of business-type activities $ 7,669,540 The Notes to Financial Statements are an integral part of this statement. 29 CITY OF ALLEN, TEXAS EXHIBIT 11 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 BUSINESS-TYPE ACTIVITIES ENTERPRISE FUNDS GOVERNMENTAL ACTIVITIES WATER AND SOLID GOLF INTERNAL SEWER WASTE DRAINAGE COURSE TOTAL SERVICE FUNDS CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $41,473,864 $6,802,434 $ 1,859,156 $ 2,825,001 $52,960,455 $ - Cash received from transactions with other funds - - - - - 15,325,604 Cash paid to employees for services (5,116,098) (550,091) (619,836) (1,659,945) (7,945,970) (334,846) Cash paid for goods and services (30,015,668) (5,808,802) (540,420) (1,543,076) (37,907,966) (1,820,890) Cash paid for claims - - - - - (10,895,964) Net cash provided by(used in)operating activities 6,342,098 443,541 698,900 (378,020) 7,106,519 2,273,904 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers in from other funds 38,191 - - 586,523 624,714 1,506,574 Transfers out to other funds (3,967,562) (734,062) (321,334) - (5,022,958) (151,500) Net cash provided by(used in) non-capital financing activities (3,929,371) (734,062) (321,334) 586,523 (4,398,244) 1,355,074 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on revenue bond maturities (1,040,000) - - - (1,040,000) - Interest and fees paid on long-term debt (130,938) - - - (130,938) - Acquisition and construction of capital assets (3,313,253) - (134,616) (716,990) (4,164,859) (1,829,013) Proceeds from sale of capital assets 13,228 - - - 13,228 360,790 Proceeds from capital leases - - - 602,912 602,912 - Proceeds from debt issuance 9,845,148 - - - 9,845,148 - Contributions from developers 2,248,163 - - - 2,248,163 - Net cash provided by(used in) capital and related financing activities 7,622,348 - (134,616) (114,078) 7,373,654 (1,468,223) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment securities (6,431,292) (4,058) (214,193) - (6,649,543) (3,424,358) Interest on investments 137,306 23,313 5,962 - 166,581 83,915 Net cash provided by(used in)investing activities (6,293,986) 19,255 (208,231) - (6,482,962) (3,340,443) NET CHANGE IN CASH AND CASH EQUIVALENTS 3,741,089 (271,266) 34,719 94,425 3,598,967 (1,179,688) CASH AND CASH EQUIVALENTS,BEGINNING OF YEAR 9,928,028 1,221,575 293,690 736,712 12,180,005 5,291,655 CASH AND CASH EQUIVALENTS,END OF YEAR $13,669,117 $ 950,309 $ 328,409 $ 831,137 $ 15,778,972 $ 4,111,967 RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED BY(USED IN)OPERATING ACTIVITIES Net operating income(loss) $ 1,610,224 $ 709,568 $ 647,145 $ (565,725) $ 2,401,212 $ 481,460 Adjustments to reconcile operating income(loss)to net cash provided by operating activities: Depreciation and amortization expense 5,999,507 15,293 53,450 167,823 6,236,073 2,092,318 Change in assets and liabilities: Accounts receivable (1,069,705) (130,920) (48,251) (6,453) (1,255,329) - Other receivables 89,886 - - - 89,886 (15,680) Prepaids - - - - - 43,399 Inventories (7,376) - - - (7,376) - Deferredoutflows-pension 351,478 40,139 41,163 109,060 541,840 - Deferred outflows-OPEB (7,513) (858) (880) (2,331) (11,582) - Accounts payable (461,117) (168,468) 40,946 (7,452) (596,091) (327,593) Accrued liabilities 16,000 11,327 2,477 5,301 35,105 Net OPEB liability 17,545 2,004 2,055 5,444 27,048 - Netpensionliability (666,781) (76,145) (78,090) (206,896) (1,027,912) - Compensated absences 29,241 5,082 1,432 23,594 59,349 - Deposits 120,914 - - 386 121,300 - Deferred inflows-pension 311,411 35,562 36,471 96,628 480,072 - Deferred inflows-OPEB 8,384 957 982 2,601 12,924 Total adjustments 4,731,874 (266,027) 51,755 187,705 4,705,307 1,792,444 Net cash provided by(used in)operating activities $ 6,342,098 $ 443,541 $ 698,900 $ (378,020) $ 7,106,519 $ 2,273,904 NON-CASH FINANCING ACTIVITIES: Contributions of capital assets from developers $ 7,486,365 $ - $ - $ $ 7,486,365 $ - Reconciliation of total cash to the statement of net position Cash and cash equivalents-current $12,181,941 $ 950,309 $ 328,409 $ 831,137 $ 14,291,796 $ 4,111,967 Restricted cash and cash equivalents 1,487,176 - - - 1,487,176 - CASH AND CASH EQUIVALENTS,END OF YEAR $13,669,117 $ 950,309 $ 328,409 $ 831,137 $ 15,778,972 $ 4,111,967 The Notes to Financial Statements are an integral part of this statement. 30 CITY OF ALLEN, TEXAS EXHIBIT 12 STATEMENT OF NET POSITION COMPONENT UNITS SEPTEMBER 30, 2018 ALLEN ALLEN ECONOMIC COMMUNITY DEVELOPMENT DEVELOPMENT CORPORATION CORPORATION TOTALS ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,765,126 $ 1,756,711 $ 4,521,837 Investments 7,544,210 7,640,939 15,185,149 Sales tax receivable 1,740,071 1,740,071 3,480,142 Accrued interest receivable 29,451 27,750 57,201 Prepaid items 6,298 - 6,298 Total current assets 12,085,156 11,165,471 23,250,627 NONCURRENT ASSETS CAPITAL ASSETS Land 14,621,471 2,239,201 16,860,672 Construction in progress - 3,757,489 3,757,489 Buildings - 36,225,091 36,225,091 Furniture and fixtures - 317,194 317,194 Machine& equipment - 2,484,221 2,484,221 Vehicles - 734,305 734,305 Improvements other than buildings - 33,977,616 33,977,616 Total capital assets 14,621,471 79,735,117 94,356,588 Less: accumulated depreciation - (26,514,272) (26,514,272) Capital assets, net of accumulated depreciation 14,621,471 53,220,845 67,842,316 Total noncurrent assets 14,621,471 53,220,845 67,842,316 TOTAL ASSETS 26,706,627 64,386,316 91,092,943 DEFERRED OUTFLOWS OF RESOURCES Deferred charges on refunding 484,470 567,093 1,051,563 TOTAL DEFERRED OUTFLOWS OF RESOURCES 484,470 567,093 1,051,563 LIABILITIES AND NET POSITION CURRENT LIABILITIES Accounts payable 46,661 113,781 160,442 Retainage payable - 184,239 184,239 Accrued interest payable 59,845 56,402 116,247 Accrued and other liabilities 31,458 - 31,458 Current portion of long-term debt 3,235,438 1,735,000 4,970,438 Total current liabilities 3,373,402 2,089,422 5,462,824 NONCURRENT LIABILITIES Noncurrent portion of long-term debt 13,598,304 26,070,000 39,668,304 Total noncurrent liabilities 13,598,304 26,070,000 39,668,304 TOTAL LIABILITIES 16,971,706 28,159,422 45,131,128 NET POSITION Net investment in capital assets 12,005,941 25,982,938 37,988,879 Restricted for debt service 250,560 201,168 451,728 Unrestricted (2,037,110) 10,609,881 8,572,771 TOTAL NET POSITION $ 10,219,391 $ 36,793,987 $ 47,013,378 The Notes to Financial Statements are an integral part of this statement. 31 CITY OF ALLEN, TEXAS EXHIBIT 13 STATEMENT OF ACIVITIES COMPONENT UNITS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Net(Expense)Revenue and Program Revenues Changes in Net Position COMPONENT UNITS ALLEN ALLEN Operating ECONOMIC COMMUNITY Charges for Grants and DEVELOPMENT DEVELOPMENT Expenses Services Contributions CORPORATION CORPORATION TOTALS Function/Program Activities COMPONENT UNITS Allen Economic Development Corporation $ 10,353,859 $ - $ - $ (10,353,859) $ - $ (10,353,859) Allen Community Development Corporation 10,402,577 - - - (10,402,577) (10,402,577) TOTAL COMPONENT UNITS $ 20,756,436 $ - $ - $ (10,353,859 $ (10,402,577) $ (20,756,436) General revenues: Sales taxes $ 10,145,175 $ 10,145,175 $ 20,290,350 Interest on investments 102,300 95,728 198,028 Gain on disposition of capital assets 30,953 - 30,953 Miscellaneous 287,217 - 287,217 Total general revenues 10,565,645 10,240,903 20,806,548 CHANGE IN NET POSITION 211,786 (161,674) 50,112 NET POSITION,beginning of year 10,007,605 36,955,661 46,963,266 NET POSITION,end of year $ 10,219,391 $ 36,793,987 $ 47,013,378. The Notes to Financial Statements are an integral part of this statement. 32 CITY OF ALLEN, TEXAS EXHIBIT 14 STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUND SEPTEMBER 30, 2018 OTHER POSTEMPLOYMENT BENEFITS TRUST FUND ASSETS CURRENT ASSETS Cash and deposits $ 53,121 Investments: Domestic Equities 815,739 Fixed Income 768,096 Real Estate 23,074 Total current assets 1,660,030 TOTAL ASSETS 1,660,030 NET POSITION Restricted for postemployment benefits other than pensions 1,660,030 TOTAL NET POSITION $ 1,660,030 The Notes to Financial Statements are an integral part of this statement. 33 CITY OF ALLEN, TEXAS EXHIBIT 15 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUND FOR THE YEAR ENDED SEPTEMBER 30, 2018 OTHER POSTEMPLOYMENT BENEFITS TRUST FUND ADDITIONS Investment Income: Net increase in fair value of investments $ 94,484 Net Investment Income 94,484 TOTAL ADDITIONS 94,484 DEDUCTIONS Benefit payments 252,781 Administrative expense 10,442 TOTAL DEDUCTIONS 263,223 CHANGE IN NET POSITION (168,739) NET POSITION, BEGINNING OF YEAR 1,828,769 NET POSITION, END OF YEAR $ 1,660,030 The Notes to Financial Statements are an integral part of this statement. 34 CITY OF ALLEN NOTES TO FINANCIAL STATEMENTS CITY OF ALLEN CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Statement The City of Allen (the City) was incorporated in 1953, under the provisions of Chapter 11, Title 28, Texas Revised Civil Statutes of 1925. In 1979, the City adopted a charter making it a home rule city operating under a Council-Manager form of government. The City provides such services as are authorized by its charter to advance the welfare, health, comfort, safety and convenience of its inhabitants. The accounting and reporting policies of the City relating to the funds included in the accompanying basic financial statements conform to accounting principles generally accepted in the United States of America applicable to state and local governments. Generally accepted accounting principles for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB), and the American Institute of Certified Public Accountants in the publication entitled Audits of State and Local Governmental Units. The more significant accounting policies of the City are described below. Financial Reporting Entity As required by accounting principles generally accepted in the United States of America, the financial statements of the City include the primary government and organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The City is financially accountable for legally separate organizations if its officials appoint a voting majority of an organization's governing body and either it can impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the primary government. A primary government may also be financially accountable for governmental organizations that are fiscally dependent on it. A primary government can impose its will on an organization if it can significantly influence the programs, projects, or activities of, or the level of services performed or provided by, the organization. A financial benefit or burden relationship exists if the primary government (a) is entitled to the organization's resources; (b) is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide financial support to, the organization; or (c) is obligated in some manner for the debt of the organization. Some organizations are included as component units because of their fiscal dependency on the primary government. An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval by the primary government. The following entities were found to be component units of the City and are included in the basic financial statements: Allen Economic Development Corporation (AEDC) - The AEDC is responsible for aiding, promoting and furthering economic development within the City. Allen Community Development Corporation (ACDC)-The ACDC is responsible for supporting the improvements in community parks and recreation, streets and sidewalks, public safety and the community library. 35 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Financial Reporting Entity—Continued The members of both the AEDC's and ACDC's Boards of Directors are appointed by the City Council. Both the AEDC and ACDC are fiscally dependent upon the City as the City Council approves their budgets and must approve any debt issuance. However, the component units do not qualify for blending because the component services directly benefit the community rather than the City itself.The AEDC and ACDC are discretely presented as governmental fund types and do not issue separate financial statements. Basis of Presentation The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all the non-fiduciary activities of the primary government and its component units. The effect of interfund activity, within the governmental and business-type activities columns, has been removed from these statements; however, interfund services provided and used are not eliminated in the process of consolidation. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Additionally, the primary government is reported separately from the legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a specific program. Taxes and other items not properly included among program revenues are reported instead as general revenues. Fund Financial Statements: The City segregates transactions related to certain functions or activities in separate funds to aid financial management and to demonstrate legal compliance. Separate statements are presented for governmental funds and proprietary funds. These statements present each major fund as a separate column on the fund financial statements; all nonmajor funds are aggregated and presented in a single column. Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balances of current financial resources. The City has presented the following major governmental funds: General Fund - The General Fund is the general operating fund of the City. It is used to account for all financial resources not accounted for in other funds. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are paid from the General Fund. Debt Service Fund - The Debt Service Fund is used to account for the accumulation of financial resources for the payment of principal, interest and related costs on general long-term debt paid primarily from taxes levied by the City. The fund balance of the Debt Service Fund is reserved to signify the amounts that are restricted exclusively for debt service expenditures. 36 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Basis of Presentation —Continued General Capital Projects Fund - The General Capital Projects Fund is used to account for resources used for the acquisition and/or construction of capital facilities by the City, except those financed by proprietary funds and not accounted for by another capital projects fund. General Obligation Bond Capital Projects Fund - To account for financing, acquisitions. and construction of improvements to City facilities and infrastructure not accounted for by other bond funds. Business-type activities and all Proprietary Funds are accounted for on a flow of economic resources measurement focus and the accrual basis of accounting. The accounting objectives are determinations of net income,financial position and cash flow. All assets and liabilities are included on the Statement of Net Position. 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 relating to a proprietary fund's principal ongoing operations. Operating expenses for the proprietary funds include the cost of personnel and contractual services, supplies and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The City reports the following major proprietary funds: Enterprise Funds: Water and Sewer Fund - The Water and Sewer Fund is used to account for the provision of water and sewer services to the residents of the City. Activities for the fund include administration. operations and maintenance of the water and sewer system and billing and collection activities. The fund also accounts for the accumulation of resources for, and the payment of, long-term debt principal and interest for water and sewer debt. All costs are financed through charges to utility customers with rates reviewed regularly and adjusted, if necessary, to ensure integrity of the fund. Solid Waste Fund - The Solid Waste Fund is used to account for the provision of solid waste services to residents of the City. Drainage Fund - The Drainage Fund is used to account for the provision of developing and maintaining proper drainage services to the residents of the City. Golf Course Fund - The Golf Course Fund is used to account for activities associated with the operations of The Courses at Watters Creek Golf Course purchased by the City in October 2004. 37 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Basis of Presentation —Continued Additionally, the City reports the following Internal Service Funds: Internal Service Funds: Replacement Fund - The Replacement Fund is an internal service fund that accounts for the costs associated with the acquisition and replacement of vehicles, machinery, and equipment through the rental of such items to other departments. Risk Management Fund - The Risk Management Fund accounts for the costs associated with workers compensation, liability and property insurance and medical and dental programs established for City employees and their covered dependents. Facility Maintenance Fund - The Facility Maintenance Fund accumulates resources to address large repairs and aging facility infrastructure. The accumulation of resources will help address major building repairs and prevent building deterioration. Fiduciary Fund— The City's Fiduciary Funds are used to hold assets for the benefit of third parties (pension participants)and cannot be used to address activities or obligations of the primary government. These funds are not incorporated into the government-wide financial statements. The City's fiduciary fund accounts for the assets of the postemployment benefits trust. Measurement Focus and Basis of Accounting Measurement focus refers to what is being measured. Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government-wide statements, fund financial statements for proprietary funds, and fiduciary fund statements are reported using the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus means all assets and liabilities (whether current or non-current) are included on the statement of net position and the operating statements present increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized when earned, including unbilled water and sewer services which are accrued. Expenses are recognized at the time the liabilities are incurred. Governmental fund financial statements are reported using the current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual; i.e., when they become both measurable and available. "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers all revenues as available if they are collected within 60 days after year end. 38 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Measurement Focus and Basis of Accounting—Continued Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. The revenues susceptible to accrual are property and sales taxes, franchise taxes and interest income. Other receipts (special assessments) become measurable and available when cash is received by the City and are recognized as revenue at that time. Cash, Cash Equivalents, and Investments State statutes and policy as established by the City Council authorize the City to invest in certificates of deposit, direct obligations of the U.S. Treasury, investment pools consisting of such U.S. Treasury obligations, repurchase agreements, commercial paper and mutual funds. Substantially all operating cash and cash equivalents are maintained in pooled cash and time deposit accounts. Interest income relating to pooled deposits is allocated to the individual funds based on each fund's pro rata share of total pooled deposits. For purposes of the statement of cash flows, the proprietary funds consider all highly liquid investments (including restricted assets) with an original maturity of three months or less when purchased to be cash equivalents, as they are available for withdrawal on demand. Investments are recorded at amortized cost when original maturity at the time of purchase is less than one year or at market if greater than one year. Encumbrances Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of funds are recorded in order to reserve that portion of the applicable appropriation, is utilized in the governmental funds. Under the City's budgetary process, appropriations lapse at fiscal year-end. Encumbrances are reported as assigned fund balance because they do not constitute expenditures or liabilities. Property Taxes The City's property tax is levied each October 1st on the assessed value listed as of the prior January 1st for all real and certain personal property located within the City. Appraised values are established by Collin County Central Appraisal District at 100% of estimated market value and certified by the Appraisal Review Board. The assessed value upon which the 2017 levy was based is $12,367,609,498. Taxes are due on October 1st and are delinquent after the following January 31 st. The City is permitted by Article XI, Section 5 of the State of Texas Constitution to levy taxes up to $2.50 per $100 of assessed valuation for general governmental services, including the payment of principal and interest on general obligation long-term debt. The combined tax rate to finance general governmental services including the payment of principal and interest on long-term debt for the year ended September 30, 2018, was$0.51 per$100 of assessed valuation. In Texas, countywide central appraisal districts are required to assess all property within the appraisal district based on 100% of its appraised value and are prohibited from applying any assessment ratios. The value of property within the appraisal district must be reviewed every three years; however,the City may, at its own expense, require annual reviews of appraised values. The City may challenge appraised values established by the appraisal district through various appeals and, if necessary, legal action. Under this legislation, the City continues to set tax rates on City property. However, if the effective maintenance and operations tax rate, increased by 8%excluding other contractual obligations, adjusted for new improvements, plus the calculated debt tax rate is less than the proposed city tax rate, then qualified voters of the City may petition for an election to determine whether to limit the tax rate to no more than the rollback tax rate. 39 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Interfund Receivables and Payables Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are reported as "due to/from other funds". Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances". Transactions Between Funds and Between Funds and Component Units Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as a reduction of expenditures/expenses in the fund reimbursed. All other interfund transactions, except transactions between the component units and the primary government are recorded as transfers. Transactions between the component units and the primary government are accounted for as external transactions(revenues and expenses). During the fiscal year ended September 30, 2018, ACDC contributed$438,730 and AEDC contributed$99,891 to the General Fund for administrative costs and for the Allen U.S.A. Celebration. These revenues were reflected as grants and contributions for the primary government in the government-wide statement of activities. Inventories and Prepaid Items Inventories, which are expended when consumed, are recorded using the average cost method, and are valued at cost. Prepaid items are for payments made by the City in the current year to provide services occurring in the subsequent fiscal year. Prepaid items are reported as non-spendable fund balance in the governmental funds in the fund level financial statements to signify that a portion of fund balance is not available for other subsequent expenditures. Special Assessments The City has the authority to make special assessments to property owners as part of the financing of capital improvements. Such assessments are recorded in the capital projects fund as receivables when assessed and are recognized as revenue when both the measurable and available criteria have been met(generally when collected). Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and in the fund financial statements for proprietary funds. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at acquisition value on the date donated. The costs of normal repairs and maintenance that do not add to the value of the asset or materially extend the asset lives are not capitalized. Renewals and betterments are capitalized. Interest has not been capitalized during the construction period on property, plant and equipment. 40 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Capital Assets -Continued Assets capitalized have an original cost of $5,000 or more and over one year of useful life. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Buildings 15-40 Years Towers, tanks, and pump stations 30 Years Infrastructure 10-50 Years Machinery and equipment 3- 15 Years Vehicles 2- 15 years Library books 5 Years Furniture and fixture 5 Years Other improvements 2 -30 Years The City has established the Replacement Fund to account for the replacement of the City-owned vehicle, machinery, and equipment. Charges for use in the form of user payments are made by City departments to the Replacement Fund to provide for future acquisitions and replacements. Compensated Absences City employees earn vacation and sick leave, which may either be taken or accumulated, up to certain amounts, until paid upon retirement or termination. Upon termination or retirement, an employee is reimbursed up to a maximum number of hours of vacation pay and sick leave based upon the years of service. Accumulated vacation and sick leave are accrued when incurred in the government-wide, proprietary, and fiduciary fund financial statements. Pensions For purposes of measuring the net pension liability, pension related deferred outflows and inflows of resources, and pension expense, City specific information about its Fiduciary Net Position in the Texas Municipal Retirement System (TMRS) and additions to/deductions from the City's Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee,which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Information regarding the City's Total Pension Liability is obtained from TMRS through a report prepared for the City by TMRS consulting actuary, Gabriel Roeder Smith &Company, in compliance with Governmental Accounting Standards Board(GASB)Statement No.68,Accounting and Financial Reporting for Pensions. Postemployment Benefits Other Than Pensions(OPEB) For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City's OPEB Plan and the additions to/deductions from the City's OPEB Plan's net fiduciary position have been determined on the same basis as they were reported by the City's Other Postemployment Benefit Plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. The investments are reported at fair value. 41 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—CONTINUED Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position and/or balance sheet 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(s)and so will not be recognized as an outflow of resources(expense/expenditure)until then. The City has the following items that qualify for reporting in this category: • Deferred charges on refunding—A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. • Pension contributions after measurement date — These contributions are deferred and recognized in the following fiscal year. • Difference in projected and actual earnings on pension assets—This difference is deferred and amortized over a closed five-year period. • Difference between expected and actual pension experience —This difference is deferred and amortized over a closed period of 5.49 years. In addition to liabilities, the statement of net position and/or balance sheet 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(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has three types of items that qualify for reporting in this category. In the statement of net position, the City reports the difference in expected and actual pension experience and the changes in actuarial assumptions. These are deferred and recognized over the estimated average remaining lives of all members determined as of the measurement date. In the balance sheet for the governmental funds, the City reports unavailable revenue for property taxes not received within 60 days of year end. Net Position Net position represents the difference between assets, liabilities,and deferred inflows and outflows. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislations adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Fund Balance Fund balance classifications are non-spendable, restricted, committed, assigned, and unassigned. These classifications reflect not only the nature of funds, but also provide clarity to the level of restriction placed upon fund balance. Fund balance can have different levels of constraint, such as external versus internal compliance requirements. Unassigned fund balance is a residual classification within the General Fund. The General Fund should be the only fund that reports a positive unassigned balance. In all other funds, unassigned is limited to negative residual fund balance. The City classifies governmental fund balances as follows: Non-spendable--includes amounts that cannot be spent because they are either not in spendable form, or, for legal or contractual reasons, must be kept intact. This classification includes inventories, prepaid items and long-term receivables. 42 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —CONTINUED Fund Balance—Continued Restricted -- includes fund balance amounts that are constrained for specific purposes which are externally imposed by providers, such as creditors or amounts restricted due to constitutional provisions or enabling legislation. This classification includes retirement of long-term debt, construction programs, and other federal and state grants. Committed -- includes fund balance amounts that are constrained for specific purposes that are internally imposed by the City through formal action of the highest level of decision-making authority. Committed fund balance is reported pursuant to resolution passed by the City Council. Assigned -- includes fund balance amounts that are self-imposed by the City to be used for a particular purpose. Fund balance can be assigned by the City Manager or the Chief Financial Officer. This classification includes insurance deductibles, encumbrances, program start-up costs, projected budget deficit for subsequent years and other legal uses. Unassigned--includes residual positive fund balance within the General Fund which has not been classified within the other above-mentioned categories. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed, or assigned for those specific purposes. When multiple categories of fund balance are available for expenditure, the City will start with the most restricted category and spend those funds first before moving down to the next category with available funds. Minimum General Fund Unassigned Fund Balance-It is the goal of the City to achieve and maintain an unassigned General Fund balance that is within a range of 60 to 90 days of annual expenditures. If unassigned General Fund balance falls below the goal or has a deficiency, the City will establish a timeframe and work plan to replenish the fund balance. The work plan may include tax increases, fee increases, reduction of services, and/or reduction of expenditures (i.e. hiring freeze, salary freeze, or reduction of travel/training). NOTE 2. DEPOSITS, INVESTMENTS AND INVESTMENT POLICIES Deposits — State statutes require that all deposits be fully collateralized by U.S. Government obligations or obligations of Texas and its agencies that have a market value of not less than the principal amount of the deposits. The City's demand deposits and certificates of deposit were fully insured or collateralized at September 30, 2018,with collateral required by state statutes. At year-end, the carrying amount of the City's deposits was $8,543,563 and the bank balance was $9,326,866. Of the bank balance, federal depository insurance covered $250,000 and the remainder was covered by collateral held by the pledging financial institution's agent in the City's name. The City's petty cash balance at September 30, 2018, was $46,025. The carrying amount of deposits for ACDC and AEDC, discretely presented component units, were $84,696 and $1,062,239, respectively, with no corresponding bank balances as they are pooled with the City's deposits. AEDC's petty cash balance at September 30, 2018, was$100. 43 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 2. DEPOSITS, INVESTMENTS AND INVESTMENT POLICIES—CONTINUED Investments— State statutes authorize the City to invest in U.S. Government obligations, obligations of Texas and its agencies and fully collateralized repurchase agreements. The City, AEDC and ACDC invest in TexPool which is an investment fund authorized by the Texas Legislature and administered by the Texas State Treasury. The Texas Treasury Safekeeping Trust Company is trustee of TexPool and is a limited purpose trust company authorized pursuant to Texas Government Code. The purpose of TexPool is to allow for the pooling of public funds to provide a higher yield on the pooled investment than would be possible with the investment of the individual public entity's funds. TexPool investments are subject to the same investment policies maintained by the State Treasury for all state funds. The Legislature has authorized only certain investment instruments for public funds, including repurchase agreements, U.S. Treasury bills and bonds, securities of other U.S. Government agencies, commercial paper and other safe instruments. The Public Funds Investment Act(Government Code Chapter 2256)contains specific provisions in the areas of investment practices, management reports, and establishment of appropriate policies. Among other things, the Public Funds Investment Act requires the City to adopt, implement, and publicize an investment policy. In compliance with the Public Funds Investment Act,the City has adopted a deposit and investment policy. The table below identifies the investment types that are authorized for the City under Government Code Chapter 2256. The table also identifies certain provisions of the City's investment policy that address interest rate risk, credit risk, and concentration of credit risk. Maximum Authorized Maximum Investment Investment Type Maturity in One Issuer Certificates of Deposit 5 years None Repurchase Agreements 5 years None U. S. Treasure Obligations 5 years None Municipal Investment Pool 5 years None Commercial Bank Savings Account 5 years None Money Market Mutual Fund 5 years None U. S. Government Securities (non-callable) 5 years None U. S. Government Securities (callable) 5 years None U. S. Government Sponsored Corp. 5 years None Instruments: non-callable U. S. Government Sponsored Corp. 5 years None Instruments: callable Commercial Paper 5 years None Bankers'Acceptance 5 years None Guaranteed Investment Contracts 5 years None State or Local Governmental Obligations 5 years None The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. GASB Statement No. 72, Fair Value Measurement and Application provides a framework for measuring fair value which establishes a three-level fair value hierarchy that describes the inputs that are used to measure assets and liabilities. • Level 1 inputs are quoted prices (unadjusted)for identical assets or liabilities in active markets that a government can access at the measurement date. • Level 2 inputs are inputs—other than quoted prices included within Level 1—that are observable for an asset or liability, either directly or indirectly. • Level 3 inputs are unobservable inputs for an asset or liability. 44 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 2. DEPOSITS, INVESTMENTS AND INVESTMENT POLICIES—CONTINUED The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. If a price for an identical asset or liability is not observable, a government should measure fair value using another valuation technique that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. If the fair value of an asset or a liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is based on the lowest priority level input that is significant to the entire measurement. The City's investments are measured as presented in the table below. The City's investment balances, weighted average maturity, and credit risk of such investments are as follows: Significant Other Other Total Observable %of Total Weighted Investment Primary Postemployment September 30, Inputs Gowmment-wide Avg.Maturity Credit Type Gosemment AEDC ACDC Benefits Trust 2018 (Level 2) Investments (Years) Rating Government-wide: Investments Measured at Amortized Cost: TexPool $ 308,910 $1,702,787 $1,672,015 $ - $ 3,683,712 $ - 2.39% 0.00 AAAm Investments Measured at NAV: Money Market Accounts 19,935 - - 19,935 - 0.01% 0.00 AAAm TexSTAR 3,069,934 - - - 3,069,934 - 1.99% 0.00 AAAm Texas CLASS 26,745,199 - - - 26,745,199 - 17.36% 0.02 AAAm Investments Measured at Cost: Certificates of Deposit 17,078,347 1,241,939 1,257,863 - 19,578,149 12.71% 0.22 Na Investments Subject to Fair Value: U.S.Agencies 69,250,878 5,035,930 5,100,498 - 79,387,306 79,387,306 51.53% 1.08 AA+ Certificates of Deposit 10,266,345 746,569 756,142 - 11,769,056 11,769,056 7.64% 0.25 nia Commercial Paper 867,736 63,102 63,911 - 994,749 994,749 0.65% 0.00 Al,P1 Municipal Bonds 6,279,833 456,670 462,525 - 7,199,028 7,199,028 4.67% 0.20 AtoAAA PARS OPEB Trust Program: Domestic Equities - - - 815,739 815,739 - Fixed Income - - - 768,096 768,096 Real Estate - - - 23,074 23,074 Total Government-wide Plus PARS OPEB Trust $133,887.117 $9,246,997 $9,312.954 $ 1,606,909 $154,053,977 $99,350.139 Investment pools, money markets, certificates of deposits (Level 1), and domestic equities are measured at amortized cost, net asset value, or cost; are valued using prices quoted in active markets for those securities; and are not required to be reported by levels in the table. Investments in U.S. Agencies securities, certificates of deposits (Level 2), commercial paper, and municipal bonds classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique in accordance with pricing sources by the custodian bank. Matrix pricing is used to value securities based on the securities' relationship to benchmark quoted prices. In order to meet the criteria to be recorded at amortized cost, investment pools must transact at a stable net asset value per share and maintain certain maturity, quality, liquidity and diversification requirements within the investment pool. The investment pools transact at a net asset value of$1.00 per share, have weighted average maturity of 60 days or less and weighted average life of 120 days or less, investments held are highly rated by nationally recognized statistical rating organization, have no more than 5% of portfolio with one issuer (excluding US government securities), and can meet reasonably foreseeable redemptions. TexPool has a redemption notice period of one day and no maximum transaction amounts. The investment pools' authority may only impose restrictions on redemptions in the event of a general suspension of trading on major securities market,general banking moratorium or national or state emergency that affects the pools' liquidity. TexPool is an external investment pool measured at amortized cost. The Texas Comptroller of Public Accounts is the sole officer, director, and shareholder of the Texas Treasury Safekeeping Trust Company, which is authorized to operate TexPool. In addition, the TexPool Advisory Board advises on TexPool's Investment Policy. This Board is composed equally of participants in TexPool and other persons who do not have a business relationship with TexPool who are qualified to advise TexPool. 45 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 2. DEPOSITS, INVESTMENTS AND INVESTMENT POLICIES—CONTINUED Texas CLASS(Texas Cooperative Liquid Assets Security System)and TexSTAR investment pools are external investment pools measured at their net asset value. Texas CLASS and TexSTAR's strategy are to seek preservation of principal, liquidity and current income through investment in a diversified portfolio of short-term marketable securities. The City has no unfunded commitments related to the investment pools. Texas CLASS and TexSTAR have a redemption notice period of one day and may redeem daily. The investment pools' authorities may only impose restrictions on redemptions in the event of a general suspension of trading on major securities market, general banking moratorium or national or state emergency that affects the pools' liquidity. Texas CLASS was organized in March 1996 under a trust agreement executed by and among Texas local governmental entities in accordance with the Public Funds Investment Act, and the Texas Government Code and remains in full compliance with Government Code Chapter 2256. The fund is administered by Public Trust Advisors, LLC and is rated AAAm by Standard & Poor's Rating Services. Investments in the Other Postemployment Benefit Trust Program (the"Trust") are held by a bank trust department separate from the City's cash and investments. The City has contracted with Public Agency Retirement Services (PARS) to manage the investment portfolio of the Trust Fund. The investments are subject to the policies and guidelines established by the committee members of the Trust. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Investments with interest rates that are fixed for longer periods of time are more likely to be subject to increased variability in their fair values due to changes in the market interest rates. The City manages its exposure to market price changes by avoiding over-concentration of assets in a specific maturity sector, limitation of average maturity of operating funds investments to less than eighteen months, and avoidance of over-concentration of assets in specific instruments other than U.S. Treasury Securities and authorized investment pools. Credit Risk The City's Investment policy, in conjunction with state law, specifies the type of credit rating of all authorized investments. Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This type of risk is typically expressed in terms of the credit ratings issued by a nationally recognized statistical rating organization. The City reduces the risk of issuer default by limiting investments to those instruments allowed by the Public Funds Investment Act, Chapter 2256, Texas Government Code. The City's investments in U.S. Agency securities (FFCB, FHLB, FHLMC, and FNMA) are rated AA+ by Standard & Poor's and Aaa by Moody's Investors Service. The City's investments in municipal bonds are rated AA- by Standard and Poor's and Aa3 by Moody's Investors Service. Investments in TexPool, TexSTAR, Texas CLASS, and money market accounts carried a credit rating of AAAm by Standard & Poor's as of September 30, 2018. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The City's investment policy controls concentration of credit risk by limiting the amount of investment with a single issuer to no more than 35% of the total portfolio except for State approved investment pools and U.S. Government Securities. As of September 30, 2018, apart from funds invested in TexPool, TexSTAR, or Texas CLASS, the following table represents 5% or more of the City's investments. 46 CITY OF ALLEN,TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 2. DEPOSITS, INVESTMENTS AND INVESTMENT POLICIES—CONTINUED Concentration of Credit Risk-Continued Issuer Investment Type Reported Amount Percentage FNMA Federal agency securities $ 13,385,998 8.69% FFCB Federal agency securities 19,757,124 12.82% FHLB Federal agency securities 25,459,228 16.53% FHLMC Federal agency securities 20,784,956 13.49% Custodial Credit Risk The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The City's investment policy minimizes custodial credit risk by requiring pledged securities to be in the name of the City. The Public Funds Investment Act does require that financial institutions secure deposits made by state or local governmental bodies by pledging securities in an undivided collateral pool held by a depository regulated under state law. The market value of the pledged securities of the collateral must always remain at least equivalent to the bank balance less the FDIC insurance. As of September 30, 2018, the City's deposits with financial institutions above the federal depository limits were fully collateralized. NOTE 3. RECEIVABLES Receivables at September 30, 2018, for both governmental and business-type activities, including the applicable allowances for uncollectible accounts, consist of the following: Property Sales Accrued Taxes Taxes Accounts Interest Other Total General Fund $785,112 $ 3,480,141 $ 4,014 $ 89,453 $ 5,191,541 $ 9,550,261 Debt Service 215,261 - - 925 - 216,186 General Capital Projects - - - 73,330 1,727,395 1,800,725 G.O. Bond Fund - - - 57,899 7,804 65,703 Nonmajor Governmental Funds - - 366,646 26,430 - 393,076 Water and Sewer - - 7,688,456 80,325 93,045 7,861,826 Solid Waste - - 891,340 8,813 174,399 1,074,552 Drainage - - 264,105 3,741 559 268,405 Golf Course - - 2,888 - 3,666 6,554 Internal Service Funds - - 22,736 55,418 - 78,154 Gross Receivables 1,000,373 3,480,141 9,240,185 396,334 7,198,409 21,315,442 Less:Allowance for Uncollectibles (806,993) _ - (110,0601_ - (1,708,409) (2,625,462) Total Net Receivables, Primary Government $ 193,380 $ 3,480,141 $ 9,130,125 $ 396,334 $ 5,490,000 $ 18,689,980 Component Units $ - $ 3,480,142 $ - $ 57,201 $ - $ 3,537,343 The Water and Sewer Fund, Solid Waste Fund, and Drainage Fund accounts receivable include unbilled charges for services rendered through September 30, 2018. 47 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 4. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2018, was as follows: Governmental Activities Balance Balance September 30, Adjustments/ September 30, 2017 Additions Dispositions Transfers 2018 Governmental Funds:- General capital assets not being depreciated: Land and land improvements $ 139,069,288 $ 4,461,860 $ - $ - $ 143,531,148 Construction in progress 7,492,158 12,252,227 - (1,451,310) 18,293,075 Total capital assets not being depreciated 146,561,446 16,714,087 - (1,451,310) 161,824,223 General capital assets being depreciated: Buildings 101,175,168 - - - 101,175,168 Improvements other than buildings 496,340,369 12,566,660 (159,885) 1,451,310 510,198,454 Furniture and fixtures 7,523,758 69,594 (314,457) - 7,278,895 Vehicles 1,689,749 529,806 (102,443) - 2,117,112 Library books 909,025 - (178,884) - 730,141 Machinery and equipment 9,374,280 245,301 (487,718) - 9,131,863 Total capital assets being depreciated 617,012,349 13,411,361 (1,243,387) 1,451,310 630,631,633 Less accumulated depreciation for. Buildings (28,311,481) (2,566,083) - (93,535) (30,971,099) Improvements other than buildings (279,639,638) (18,236,928) 159,885 93,535 (297,623,146) Furniture and fixtures (7,521,391) (5,847) 314,457 - (7,212,781) Vehicles (1,397,108) (146,124) 102,443 - (1,440,789) Library books (681,804) (123,758) 178,884 - (626,678) Machinery and equipment (8,457,872) (233,143) 487,718 - (8,203,297) Total accumulated depreciation (326,009,294) (21,311,883) 1,243,387 - (346,077,790) Total general capital assets being depreciated,net 291,003,055 (7,900,522) - 1,451,310 284,553,843 General capital assets,net $ 437,564,501 $ 8,813,565 $ - $ - $ 446,378,066 48 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 4. CAPITAL ASSETS—CONTINUED Balance Balance September 30, Adjustments/ September 30, 2017 Additions Dispositions Transfers 2018 Internal Service Funds: Internal service funds assets not being depreciated: Construction in progress $ - $ 352,367 $ - $ - $ 352,367 Total capital assets not being depreciated - 352,367 - - 352,367 Internal service assets being depreciated: Vehicles 14,768,075 1,216,234 (1,543,328) - 14,440,981 Machinery and equipment 5,842,625 260,412 (98,705) - 6,004,332 Total internal service assets being depreciated 20,610,700 1,476,646 (1,642,033) - 20,445,313 Less accumulated depreciation for: Vehicles (8,571,574) (1,547,590) 1,543,328 - (8,575,836) Machinery and equipment (2,794,371) (544,728) 98,705 - (3,240,394) Total accumulated depreciation (11,365,945) (2,092,318) 1,642,033 - (11,816,230) Total Internal service funds capital assets being depreciated, net 9,244,755 (615,672) - - 8,629,083 Total Internal service funds capital assets, net 9,244,755 (263,305) - - 8,981,450 Govemmental activities capital assets, net $ 446,809,256 $ 8,550,260 $ - $ - $ 455,359,516 Business-Type Activities Balance Balance September 30, Adjustments/ September 30, 2017 Additions Dispositions Transfers 2018 Water and Sewer Activities: Capital assets not being depreciated: Land $ 4,072,882 $ - $ - $ - $ 4,072,882 Construction in progress 4,226,973 3,114,512 - (3,653,307) 3,688,178 Total capital assets not being depreciated 8,299,855 3,114,512 - (3,653,307) 7,761,060 Capital Assets Being depreciated: Towers,tanks, &pumps stations 190,630,891 7,486,365 - 3,653,307 201,770,563 Machinery and equipment 4,227,482 60,891 (394,784) - 3,893,589 Vehicles 855,033 137,850 (44,930) - 947,953 Total capital assets being depreciated 195,713,406 7,685,106 (439,714) 3,653,307 206,612,105 Less accumulated depreciation for: Towers,tanks, &pumps stations (88,483,267) (5,562,940) - - (94,046,207) Machinery and equipment (2,732,021) (399,654) 394,784 - (2,736,891) Vehicles (773,609) (36,913) 44,930 - (765,592) Total accumulated depreciation (91,988,897) (5,999,507) 439,714 - (97,548,690) Total capital assets being depreciated, net 103,724,509 1,685,599 - 3,653,307 109,063,415 Water and sewer activities capital assets, net a$ 112,024,364 $ 4,800,111 $ - $ - $ 116,824,475 49 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 4. CAPITAL ASSETS-CONTINUED Balance Balance September 30, September 30, 2017 Additions Dispositions 2018 Solid Waste Activities: Capital assets being depreciated: Machinery and equipment $ 12,359 $ - $ - $ 12,359 Vehicles 140,440 - - 140,440 Total capital assets being depreciated 152,799 - - 152,799 Less accumulated depreciation for: Machinery and equipment (9,237) (1,249) - (10,486) Vehicles (21,066) (14,044) - (35,110) Total accumulated depreciation (30,303) (15,293) - (45,596) Solid waste activities capital assets, net $ 122,496 $ (15,293) $ - $ 107,203 Drainage Activities: Capital assets being depreciated: Other improvements $ 496,132 $ - $ - $ 496,132 Vehicles 151,554 - - 151,554 Machinery and equipment 444,171 134,616 (5,250) 573,537 Total capital assets being depreciated 1,091,857 134,616 (5,250) 1,221,223 Less accumulated depreciation for: Other improvements (177,829) (12,264) - (190,093) Vehicles (37,029) (13,473) - (50,502) Machinery and equipment (355,603) (27,713) 5,250 (378,066) Total accumulated depreciation (570,461) (53,45.0) 5,250 (618,661) Drainage activities capital assets, net $ 521,396 $ 81,166 $ - $ 602,562 Golf Course Activities: Capital assets being depreciated: Machinery and equipment $ 1,039,720 $ 716,990 $ (327,220) $ 1,429,490 Total capital assets being depreciated 1,039,720 716,990 (327,220) 1,429,490 Less accumulated depreciation for: Machinery and equipment (904,726) (167,823) 327,220 (745,329) Total accumulated depreciation (904,726) (167,823) 327,220 (745,329) Golf course activities capital assets, net 134,994 549,167 - 684,161 Business-type activities capital assets, net $112,803,250 $ 5,415,151 $ - $ 118,218,401 50 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 4. CAPITAL ASSETS—CONTINUED Balance Balance September 30, Adjustments/ September 30, 2017 Additions Dispositions Transfers 2018 Economic Development Corporation: Capital assets not being depreciated: Land and Land Improvements $ 18,866,830 $ - $(4,245,359) $ - $ 14,621,471 Economic Development Corporation capital assets,net $ 18,866,830 $ - $(4,245,359) $ - $ 14,621,471 Community Development Corporation: Capital assets not being depreciated: Land and Land Improvements $ 2,239,201 $ - $ - $ - $ 2,239,201 Construction in progress 506,944 4,654,176 - (1,403,631) 3,757,489 Total capital assets not being depreciated 2,746,145 4,654,176 - (1,403,631) 5,996,690 Capital assets being depreciated: Buildings 36,225,091 - - - 36,225,091 Machine&Equipment 2,239,457 364,112 (119,348) - 2,484,221 Improvements other than buildings 32,573,985 - - 1,403,631 33,977,616 Furniture and fixtures 317,194 - - - 317,194 Vehicles 646,971 87,334 - - 734,305 Total capital assets being depreciated 72,002,698 451,446 (119,348) 1,403,631 73,738,427 Less accumulated depreciation for. Buildings (7,028,607) (915,036) - - (7,943,643) Machine&Equipment (1,755,755) (175,124) 119,348 - (1,811,531) Improvements other than buildings (13,695,527) (2,111,013) - - (15,806,540) Furniture and fixtures (317,194) - - - (317,194) Vehicles (613,070) (22,294) - - (635,364) Total accumulated depreciation (23,410,153) (3,223,467) 119,348 - (26,514,272) Total capital assets being depreciated,net 48,592,545 (2,772,021) - 1,403,631 47,224,155 Community Development Corporation capital assets,net 51,338,690 1,882,155 - - 53,220,845 Component units capital assets,net $ 70,205,520 $ 1,882,155 $(4,245,359) $ - $ 67,842,316 51 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 4. CAPITAL ASSETS—CONTINUED Depreciation expense was charged as direct expense to programs of the primary government and component units as follows: Governmental activities: General government $ 1,118,234 Public safety 837,607 Public works 15,266,975 Culture and recreation 4,082,639 Community development 6,428 Total depreciation expense-General capital assets 21,311,883 Internal Service Funds 2,092,318 Total depreciation expense-Govemmental activities $ 23,404,201 Business-type activities: Water and sewer $ 5,999,507 Solid waste 15,293 Drainage utility 53,450 Golf course 167,823 Total depreciation expense-Business-type activities $ 6,236,073 Component units: Allen Community Development Corporation $ 3,223,467 Outstanding commitments at September 30, 2018, under authorized construction contracts totaled $15,809,936. These outstanding commitments for capital projects will be funded from unexpended bond proceeds and additional general obligation bonds. NOTE 5. LONG-TERM DEBT At September 30, 2018, bonds payable consisted of the following individual issues: General Obligation Bonds: $1,595,000 Series 2006 Bonds due in annual installments of$50,000 to$115,000 through August 15, 2026; interest at 4.0%to 4.2%. $ 795,000 $8,340,000 Series 2009 Bonds due in annual installments of$435,000 to$855,000 through August 15, 2021; interest at 2.5%to 4.0%. 2,465,000 $12,000,000 Series 2010 Bonds due in annual installments of$370,000 to$865,000 through August 15, 2029; interest at 2.0%to 4.0%. 7,890,000 $8,785,000 Series 2010A Refunding Bonds due in annual installments of$110,000 to$970,000 through August 15, 2022; interest at 2.0%to 3.0%. 3,700,000 $8,840,000 Series 2011 Refunding and Improvement Bonds due in annual installments of$255,000 to$795,000 through August 15, 2030; interest at 2.0%to 4.25%. 4,375,000 52 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. LONG-TERM DEBT—CONTINUED General Obligation Bonds—continued $13,865,000 Series 2012 Refunding and Improvement Bonds due in annual installments of$350,000 to$1,600,000 through August 15,2024; interest at 2.0%to 5.0%. $ 8,495,000 $5,065,000 Series 2013 Bonds due in annual installments of$190,000 to$340,000 through August 15, 2032; interest at 2.0%to 3.5%. 3,965,000 $10,595,000 Series 2014 Bonds due in annual installments of$375,000 to$740,000 through August 15,2033; interest at 2.0%to 4.0%. 8,835,000 $32,245,000 Series 2015 Refunding and Improvement Bonds due in annual installments of$160,000 to$3,605,000 through August 15,2034; interest at 2.0%to 5.0%. 21,285,000 $6,910,000 Series 2016 Refunding Bonds due in annual installments of$775,000 to$1,000,000 through August 15,2028; interest at 2.0%to 4.0%. 5,910,000 $11,845,000 Series 2017 Bonds due in annual installments of$645,000 to$1,130,000 through August 15,2032; interest at 2.25%to 5.0%. 10,715,000 $8,355,000 Series 2018 Bonds due in annual installments of$400,000 to$725,000 through August 15, 2033; interest at 2.0%to 5.0%. 8,355,000 Unamortized premium on general obligation bonds. 7,675,400 $ 94,460,400 Tax Notes: $1,940,000 Series 2016 Tax Notes due in annual installments of$620,000 to $685,000 through August 15, 2019; interest at the rate of 2.0%. $ 635,000 $ 635,000 Water and Sewer Revenue Bonds: $5,795,000 Series 2009 Refunding Bonds due in installments of$530,000 to$630,000 through June 1, 2019; with interest at the rate of 1.2% to 3.5%. $ 630,000 $3,370,000 Series 2013 Refunding Bonds due in installments of$90,000 to$385,000 through June 1, 2025; with interest at the rate of 2.0% to 3.0%. 2,395,000 $1,280,000 Series 2014 Refunding Bonds due in installments of$105,000 to$265,000 through June 1, 2024; with interest at the rate of 2.1%. 695,000 $9,330,000 Series 2018 Bonds due in installments of$290,000 to$670,000 through June 1, 2038; with interest at the rate of 2.0% to 5.0%. 9,330,000 Unamortized premium on water and sewer revenue bonds. 800,800 $ 13,850,800 53 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. LONG-TERM DEBT—CONTINUED AEDC Sales Tax Revenue Bonds: $11,810,000 Series 2017A Refunding Bonds due in annual installments of$880,000 to$1,335,000 through September 1, 2027; interest at 2.0%to 5.0%. $ 10,020,000 $6,140,000 Series 2017B Sales Tax Revenue Bonds due in annual installments of$1,510,000 to$1,565,000 through September 1, 2020; interest at 1.25%to 2.3%. 3,100,000 Unamortized premium on AEDC sales tax revenue bonds. 1,125,047 $ 14,245,047 AEDC Promissory Note: $4,400,000 Promissory Note due in annual installments of$679,853 through June 11, 2022; interest at 2.00%. $ 2,588,695 $ 2,588,695 ACDC Sales Tax Revenue Bonds: $31,235,000 Series 2016 Refunding Bonds due in annual installments of$1,715,000 to $3,825,000 through September 1, 2025; interest at 0.750%to 2.353%. $ 27,805,000 $ 27,805,000 The following is a summary of long-term debt transactions, including current portion, of the City for the year ended September 30, 2018: Balance Balance Due Beginning End Within of Year Increases Decreases of Year One Year Governmental Activities General obligation bonds $ 88,575,000 $ 8,355,000 $ (10,145,000) $ 86,785,000 $ 9,925,000 Certificates of obligation 405,000 - (405,000) - - Tax notes 1,255,000 - (620,000) 635,000 635,000 Capital lease payable 1,250,000 75,622 (461,377) 864,245 819,871 Premiums(discounts) 7,609,995 978,386 (912,981) 7,675,400 897,803 Compensated absences 6,225,795 3,555,517 (3,412,611) 6,368,701 3,588,972 Net OPEB Liability 979,395 216,225 - 1,195,620 Net pension liability 27,661,775 - (8,217,372) 19,444,403 - Governmental activity long-term debt $ 133,961,960 $ 13,180,750 $ (24,174,341) $ 122,968,369 $ 15,866,646 54 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. LONG-TERM DEBT—CONTINUED The general fund has typically been used to liquidate the liability for compensated absences for governmental activities. Balance Balance Due Beginning End Within of Year Increases Decreases of Year One Year Business-Type Activities Water and sewer revenue bonds $ 4,760,000 $ 9,330,000 $ (1,040,000) $ 13,050,000 $ 1,360,000 Capital lease payable 116,479 719,256 (116,344) 719,391 150,209 Premiums(discounts) 165,847 669,156 (34,203) 800,800 60,623 Net pension liability 3,424,109 - (1,027,912) 2,396,197 Net OPEB Liability 118,444 27,048 - 145,492 - Compensated absences 726,859 483,828 (424,478) 786,209 448,750 Business-type activity long-term debt $ 9,311,738 $ 11,229,288 $ (2,642,937) $ 17,898,089 $ 2,019,582 Component Units Allen Community Development Corporation Sales tax revenue bonds $ 29,520,000 $ - $ (1,715,000) $ 27,805,000 $ 1,735,000 ACDC long-term debt $ 29,520,000 $ - $ (1,715,000) $ 27,805,000 $ 1,735,000 Allen Economic Development Corporation Sales tax revenue bonds $ 15,540,000 $ - $ (2,420,000) $ 13,120,000 $ 2,475,000 Note payable 3,204,458 - (615,763) 2,588,695 628,080 Premiums(discounts) 1,257,405 - (132,358) 1,125,047 132,358 AEDC long-term debt $ 20,001,863 $ - $ (3,168,121) $ 16,833,742 $ 3,235,438 Component units long-term debt $ 49,521,863 $ - $ (4,883,121) $ 44,638,742 $ 4,970,438 Bond Issuances On July 15, 2018, the City issued City of Allen, Texas General Obligation Bonds, Series 2018, in the amount of $8,355,000, to make improvements to existing City facilities, streets, drainage, and public safety facilities. The bonds incur an average cost over the life of the debt at a rate of 2.00%-4.00% and mature annually, with semi-annual interest payments. The bonds will fully mature in 2033. Also, on July 15, 2018, the City issued City of Allen, Texas Waterworks and Sewer System Revenue Bonds, Series 2018, in the amount of $9,330,000, to make improvements to the existing water and sewer systems of the City. The bonds incur an average cost over the life of the bonds at a rate of 2.00- 5.00% and mature annually with semi-annual interest payments. The bonds will fully mature in 2038. Annual Requirements to Retire Debt Obligations The City intends to retire all its general long-term liabilities, plus accrued interest, from ad valorem taxes and other current revenues. The proprietary fund type long-term debt, plus accrued interest, will be repaid from operating revenues of the Water and Sewer Fund. The annual aggregate maturities for each bond type for the years subsequent to September 30, 2018, are on the following pages. 55 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. LONG-TERM DEBT—CONTINUED Annual Requirements to Retire Debt Obligations—Continued General Obligation Bonds Annual debt service requirements to maturity for general obligation bonds, including interest, are as follows: Governmental Activities Fiscal Year Ending September 30, Principal Interest Total 2019 $ 9,925,000 $ 3,358,734 $ 13,283,734 2020 8,865,000 2,981,853 11,846,853 2021 8,245,000 2,647,314 10,892,314 2022 7,620,000 2,337,631 9,957,631 2023 6,865,000 2,092,186 8,957,186 2024-2028 29,160,000 6,557,694 35,717,694 2029-2033 15,580,000 1,746,719 17,326,719 2034 525,000 17,063 542,063 Total $ 86,785,000 $ 21,739,194 $ 108,524,194 Tax Notes Annual debt service requirements to maturity for the Tax Notes, including interest, are as follows: Governmental Activities Fiscal Year Ending September 30, Principal Interest Total 2019 $ 635,000 $ 12,700 $ 647,700 Total $ 635,000 $ 12,700 $ 647,700 Waterworks and Sewer System Revenue Bonds Revenue bonds debt service requirements to maturity, including interest, are as follows: Business-type Activities Fiscal Year Ending September 30 Principal Interest Total 2019 $ 1,360,000 $ 389,739 $ 1,749,739 2020 805,000 422,476 1,227,476 2021 815,000 402,873 1,217,873 2022 825,000 382,970 1,207,970 2023 840,000 361,016 1,201,016 2024-2028 2,785,000 1,488,508 4,273,508 2029-2033 2,520,000 961,300 3,481,300 2034-2038 3,100,000 382,000 3,482,000 Total $ 13,050,000 $ 4,790,882 $ 17,840,882 56 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. LONG-TERM DEBT—CONTINUED Annual Requirements to Retire Debt Obligations—Continued AEDC Sales Tax and Revenue Bonds Sales Tax Revenue bond debt service requirements to maturity, including interest, are as follows: AEDC Fiscal Year Ending September 30, Principal Interest Total 2019 $ 2,475,000 $ 529,195 $ 3,004,195 2020 2,530,000 470,295 3,000,295 2021 1,005,000 395,700 1,400,700 2022 1,045,000 355,500 1,400,500 2023 1,100,000 303,250 1,403,250 2024-2027 4,965,000 636,000 5,601,000 Total $ 13,120,000 $ 2,689,940 $ 15,809,940 ACDC Sales Tax and Revenue Bonds Sales Tax Revenue bond debt service requirements to maturity, including interest, are as follows ACDC Fiscal Year Ending September 30, Principal Interest Total 2019 $ 1,735,000 $ 676,819 $ 2,411,819 2020 1,755,000 654,489 2,409,489 2021 1,785,000 626,866 2,411,866 2022 1,815,000 595,735 2,410,735 2023 1,850,000 560,560 2,410,560 2024-2028 9,915,000 2,140,702 12,055,702 2029-2032 8,950,000 697,904 9,647,904 Total $ 27,805,000 $ 5,953,075 $ 33,758,075 AEDC Note Payable The note payable debt service requirements to maturity, including interest, are as follows: AEDC Fiscal Year Ending September 30, Principal Interest Total 2019 $ 628,080 $ 51,774 $ 679,854 2020 640,640 39,212 679,852 2021 653,453 26,400 679,853 2022 666,522 13,330 679,852 Total $ 2,588,695 $ 130,716 $ 2,719,411 57 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. LONG-TERM DEBT—CONTINUED Annual Requirements to Retire Debt Obligations—Continued A schedule of authorized but unissued direct General Obligation Bonds as of September 30, 2018, is as follows: Date of Original Amount Issued in Issued Unissued Purpose Authorization Authorized Prior Fiscal Years in 2018 Balance Service Center Facilities 5/12/2007 $ 14,500,000 $ 12,500,000 $ - $ 2,000,000 Library 5/7/2016 16,045,000 779,725 - 15,265,275 Streets and Drainage 5/7/2016 23,890,000 5,857,725 3,218,290 14,813,985 Parks 5/7/2016 27,000,000 - - 27,000,000 Public Art Projects 5/7/2016 1,770,000 - - 1,770,000 Public Safety 5/7/2016 24,445,000 5,207,550 5,136,710 14,100,740 $ 107,650,000 $ 24,345,000 $ 8,355,000 $ 74,950,000 Waterworks and Sewer System Revenue Bonds Waterworks and Sewer System Revenue Bonds are used to finance the acquisition of major capital improvements for the City's water and sewer system and related facilities. Water and Sewer Revenue Bonds and Refunding Bonds are payable solely from and, equally secured by, a first lien on and pledge of the net revenue of the City's combined waterworks and sanitary sewer systems. The City is required by the applicable revenue bond indentures to pledge the net revenues of the Water and Sewer Enterprise Fund for the retirement of its outstanding revenue bonds, including interest thereon, and is required to maintain debt service funds and bond reserve funds for all such bonds outstanding. Funds aggregating$46,350 at September 30, 2018, are restricted within the Water and Sewer Enterprise Fund for servicing of the debt. The respective bond indentures require the City to make equal monthly payments to the restricted accounts to accumulate the annual principal and interest requirements as they become due. The ordinances authorizing the Revenue Bonds stipulate that the City will deposit, in addition to principal and interest requirements, certain amounts in a reserve fund. Amounts in the reserve fund are to be used to pay principal and interest on outstanding bonds whenever enough funds are not available in the bond interest and redemption fund. The bond indentures require that the City accumulate reserves to an amount equal to the average annual principal and interest requirements of all outstanding bonds secured by the net revenues of the system. Such reserves are funded up to the required level in equal monthly installments over a maximum five-year period, as defined in the indentures. Amounts in the reserve fund at September 30, 2018, of$1,487,176 are adequate to meet the reserve requirements. 58 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. LONG-TERM DEBT-CONTINUED Annual Requirements to Retire Debt Obligations-Continued Water and Sewer Revenue Bonds- Continued At September 30,2018, restricted assets,which include amounts in the Water and Sewer Revenue Bond Debt Service and the Revenue Bond Reserve Fund, were as follows: Revenue bond reserve fund $ 903,063 Revenue bond debt service 584,113 $ 1,487,176 Net position reserved for Water and Sewer revenue bond retirement is detailed as follows: Restricted assets, revenue bond debt Service and reserve funds $ 1,487,176 Accrued interest, payable from restricted assets (80,826) Current maturities of revenue bonds, payable from restricted assets (1,360,000) Reserved for water and sewer revenue bonds principal and interest $ 46,350 The City complies with the various requirements of the bond ordinances. Capital Leases The City has acquired office equipment, a building, and land under various leases accounted for as capital leases. As of September 30, 2018, the capitalized costs of the governmental leased property and business-type leased property under capital leases were$1,700,000 and$1,429,490, respectively. The terms of the leases range from 3- 5 years and call for monthly and annual payments over the life of the leases. The future minimum lease payments under the capitalized leases and the net present value of the future minimum lease payments at September 30, 2018, are as follows: Fiscal Year Ending Governmental Activities Business-type Activities September 30, Principal Interest Total Principal Interest Total 2019 $ 819,871 $ 2,015 $ 821,886 $ 150,209 $ 24,251 $ 174,460 2020 20,609 1,277 21,886 146,027 18,686 164,713 2021 23,765 354 24,119 144,278 13,334 157,612 2022 - - - 149,752 7,859 157,611 2023 - - - 129,125 2,218 131,343 Total $ 864,245 $ 3,646 $ 867,891 $ 719,391 $ 66,348 $ 785,739 59 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 5. LONG-TERM DEBT—CONTINUED Annual Requirements to Retire Debt Obligations—Continued Operating Leases The City leases machinery and equipment under non-cancelable operating leases. Total cost for such leases was $570,250 for the fiscal year ended September 30, 2018. Future minimum lease payments,by year and in the aggregate, under the non-cancelable lease commitments are as follows: Fiscal Year Ending September 30, Amount 2019 $ 521,623 2020 315,860 2021 110,350 2022 11,520 Total $ 959,353 NOTE 6. INTERFUND TRANSFERS All interfund transfers between the various funds are approved supplements to the operations of those funds. Individual fund operating transfers for fiscal year ended September 30, 2018, were as follows: Fund Transfers In Transfers Out Major Governmental Funds: General Fund $ 4,603,089 $ 6,063,012 General Capital Projects 5,000,000 400,000 General Obligation Bonds - 176,000 Total Major Governmental Funds 9,603,089 6,639,012 Nonmajor Governmental Funds: Grants and Special Revenue 79,093 - Total Nonmajor Governmental Funds 79,093 - Major Enterprise Funds: Water and Sewer Fund 38,191 3,967,562 Solid Waste Fund - 734,062 Drainage Utility Fund - 321,334 Golf Course Fund 586,523 - Total Major Enterprise Funds 624,714 5,022,958 Internal Service Funds: Replacement Fund 400,000 - Facility Maintenance Fund 600,000 151,500 Risk Management Fund 506,574 - Total Internal Service Funds 1,506,574 151,500 Total Transfers $ 11,813,470 $ 11,813,470 60 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 6. INTERFUND TRANSFERS—CONTINUED Transfers are used to 1) move amounts from funds receiving administrative and operating support to the appropriate fund incurring the administrative and operating costs and 2)to move unrestricted funds to finance various programs that the City must account for in other funds in accordance with budgetary authorizations, including amounts provided as subsidies or matching funds for various grant programs and to support cash financing of capital projects. The fund financial statements show: . Governmental funds: Total transfers in of$9,682,182 in the governmental funds were made to fund capital projects, provide funds for grant-matching expenditures, and provide funding for technology, procurement, human resources, building maintenance, financial, and administrative support. Transfers out totaling $6,639,012 includes cash financing for capital projects, operational support for the Golf Course Fund, and support to programs recorded in non-major governmental and internal service funds. • Proprietary funds: Total transfers in of $624,714 of the enterprise funds mainly represents amounts transferred into the Golf Course to support operations. The total transfers out of $5,022,958 represents the amount provided by other funds for technology, procurement, human resources, building maintenance, financial and administrative support. The internal service funds total transfer in of$1,506,574 represents the amounts needed for repairs of aging facility infrastructure and administrative support, while the total transfer out of $151,500 represents the amounts needed in the special revenue fund to replace technology. NOTE 7. RETIREMENT PLAN Plan Description The City participates as one of 866 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code(the TMRS Act)as an agent multiple-employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six-member Board of Trustees. Although the Governor, with the advice and consent of the Senate,appoints the Board,TMRS is not fiscally dependent on the State of Texas. TMRS's defined benefit pension plan is a tax-qualified plan under Section 401 (a) of the Internal Revenue Code. TMRS issues a publicly available comprehensive annual financial report (CAFR) that can be obtained at www.tmrs.com. All eligible employees of the city are required to participate in TMRS. Benefits Provided TMRS provides retirement, disability,and death benefits. Benefit provisions are adopted by the governing body of the City,within the options available in the state statutes governing TMRS. At retirement,the benefit is calculated as if the sum of the employee's contributions,with interest, and the city-financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven actuarially equivalent payments options. Members may also choose to receive a portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments,which cannot exceed 75% of the member's deposits and interest. At the date the plan began,the City granted monetary credits for service rendered before the plan began of a theoretical amount equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are 200% of the employee's accumulated contributions. 61 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 7. RETIREMENT PLAN—CONTINUED Beginning in 1993, the City granted an annually repeating (automatic) basis a monetary credit referred to as an Updated Service Credit (USC), which is a theoretical amount that considers salary increases or plan improvements. If at any time during their career an employee earns a USC, this amount remains in their account earning interest at 5% until retirement. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer match plus employer-financed monetary credits, such as USC, with interest were used to purchase an annuity. Additionally, initiated in 1993, the City provided on an annually repeating (automatic) basis cost of living adjustments(COLA)for retirees equal to a percentage of the change in the consumer price index(CPI). A summary of plan provisions for the City are as follows: Employee deposit rate 7% Matching ratio (City to employee) 2 to 1 Years required for vesting 5 Service retirement eligibility 20 years at any age, 5 years at age 60 and above Updated Service Credit 100% Repeating Annuity Increase to retirees 70% of CPI Repeating The City also participates in Social Security. Employees Covered by Benefit Terms: At the December 31, 2017, valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 205 Inactive employees entitled to, but not yet receiving benefits 428 Active employees 737 Total 1,370 Contributions The contribution rates for employees in TMRS are either 5%,6%, or 7%of employee gross earnings, and the city matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the city. Under the state law governing TMRS,the contribution rate for each city is determined annually by the consulting actuary, using the Entry Age Normal (EAN) actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the City were required to contribute 7% of their annual gross earnings during the fiscal year. The actuarially determined contribution rates for retirement benefits for the City were 13.71%, 13.94%, and 13.99% in calendar years 2016, 2017, and 2018, respectively. The City's contributions to TMRS for the years ended September 30, 2016, 2017, and 2018, were $6,181,797, $6,545,488, and $6,927,485, respectively, which were in excess of the required annual contribution for each year. Net Pension Liability The City's Net Pension Liability (NPL) was measured as of December 31, 2017, and the Total Pension Liability(TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. 62 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 7. RETIREMENT PLAN—CONTINUED Actuarial Assumptions The Total Pension Liability in the December 31, 2017, actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Overall payroll growth 3.0% per year Investment Rate of Return 6.75%, net of pension plan investment expense, including inflation Salary increases were based on a service-related table. Mortality rates for active members, retirees, and beneficiaries were based on the gender-distinct RP2000 Combined Healthy Mortality Tables with Blue Collar Adjustment, with male rates multiplied by 109% and female rates multiplied by 103%. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements. For disabled annuitants, the gender-distinct RP2000 Disabled Retiree Mortality Tables with Blue Collar Adjustment are used with males rates multiplied by 109% and female rates multiplied by 103% with a 3 year set-forward for both males and females. In addition a 3%minimum mortality rate is applied to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements subject to the 3%floor. Actuarial assumptions used in the December 31, 2017, valuation were based on the results of actuarial experience studies. The experience study in TMRS was for the period December 31, 2010, through December 31, 2014. Healthy post-retirement mortality rates and annuity purchase rates were updated based on a Mortality Experience Investigation Study covering 2009 through 2011, and dated December 31,2013. These assumptions were first used in the December 31,2013, valuation,along with a change to the Entry Age Normal (EAN) actuarial cost method. Assumptions are reviewed annually. No additional changes were made for the 2014 valuation. After the Asset Allocation Study analysis and experience investigation study,the Board amended the long-term expected rate of return on pension plan investments from 7% to 6.75%. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in order to satisfy the short-term and long- term funding needs of TMRS. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation)are developed for each major asset class. These ranges 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. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, GRS focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time(conservative)and(2)the geometric mean (conservative)with an adjustment for time (aggressive). At its meeting on July 30,2015,the TMRS Board approved a new portfolio target allocation. The target allocation and best estimates of real rates of return for each major asset class are summarized in the following table: Long-Term Expected Target Real Rate of Return Asset Class Allocation (Arithmetic) Domestic Equity 17.5% 4.55% International Equity 17.5% 6.35% Core Fixed Income 10.0% 1.00% Non-Core Fixed Income 20.0% 4.15% Real Return 10.0% 4.15% Real Estate 10.0% 4.75% Absolute Return 10.0% 4.00% Private Equity 5.0% 7.75% Total 100.0% 63 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 7. RETIREMENT PLAN—CONTINUED Discount Rate The discount rate used to measure the Total Pension Liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. 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. Changes in the Net Pension Liability Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a)- (b) Balance at 12/31/2016 $ 179,387,533 $ 148,301,649 $ 31,085,884 Changes for the year: Service cost 8,091,540 - 8,091,540 Interest 12,232,446 - 12,232,446 Change of benefit terms - - - Difference between expected and actual experience 1,293,282 - 1,293,282 Changes of assumptions - - - Contributions-employer - 7,130,557 (7,130,557) Contributions-employee - 3,274,594 (3,274,594) Net investment income - 20,569,321 (20,569,321) Benefit payments, including - refunds of employee contributions (4,423,768) (4,423,768) - Administrative expense - (106,520) 106,520 Other changes - (5,400) 5,400 Net changes 17,193,500 26,438,784 (9,245,284) Balance at 12/31/2017 $ 196,581,033 $ 174,740,433 $ 21,840,600 Sensitivity of the net pension liability to changes in the discount rate The following presents the net pension liability of the City, calculated using the discount rate of 6.75%, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower(5.75%)or 1-percentage-point higher(7.75%)than the current rate: 1% Decrease in 1% Increase in Discount Rate Discount Rate Discount Rate (5.75%) (6.75%) (7.75%) City's net pension liability $ 54,278,949 $ 21,840,600 $ (4,332,349) Pension Plan Fiduciary Net Position Detailed information about the pension plan's Fiduciary Net Position is available in a separately-issued TMRS financial report. That report may be obtained on the Internet at www.tmrs.com. 64 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 7. RETIREMENT PLAN—CONTINUED Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions For the year ended September 30, 2018, the City recognized pension expense of $7,187,404. At September 30, 2018, the City reported deferred outflows and inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ 1,708,413 $ (593,461) Changes in actuarial assumptions - (109,658) Difference between projected and actual investment earnings - (4,658,122) Contributions subsequent to the measurement date 5,138,179 - Total $ 6,846,592 $ (5,361,241) Deferred outflows of resources in the amount of $5,138,179 related to pensions that resulted from contributions made subsequent to the measurement date will be recognized as a reduction of the net pension liability for the measurement year ending December 31, 2018 (i.e. recognized in the City's financial statements for the year ending September 30, 2019). Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Measurement year ended December 31: 2018 $ 36,454 2019 (255,103) 2020 (1,710,161) 2021 (1,785,608) 2022 61,590 Total $ (3,652,828) NOTE 8. WATER AND SEWER CONTRACTS In 1972,the City entered into a forty-year contract with the North Texas Municipal Water District(District) for the purchase of water. Under the terms of this contract, the City is obligated to make a minimum annual payment(adjusted annually)in return for a minimum volume of gallons of water per year. During 1998, the City was annexed into the North Texas Municipal Water District, which guaranteed the City a minimum volume of water. For the year ended September 30, 2018, the cost of water purchased under this contract was $16,711,158. In 1978, the City entered into a contract with the District for the transportation, treatment and disposal of sanitary sewage and other waste. The contract will continue in force at least until all bonds issued by the District pursuant to the contract have been paid in full and will remain in force thereafter throughout the useful life of the District's sanitary sewer system. The contract requires the City to pay varying amounts based on the costs associated with sewage transported and/or treated and disposed. The cost includes the City's proportionate share of the District's operating and maintenance expenses and related debt service costs. During fiscal year 2018, the cost for transportation, treatment and disposal of sewage and other wastes was$9,120,942. 65 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 9. DEFERRED COMPENSATION PLAN As a result of legislative changes, all amounts of compensation deferred, all property and rights purchased, and all income, property or rights are (until paid or made available to the employee or other beneficiary) held in trust for the exclusive benefit of the participants and their beneficiaries, whereas, prior to these legislative changes, these amounts were solely the property and rights of the City subject only to the claims of the City's general creditors. As a result, at September 30, 2018, the deferred compensation investments are not reported in the City's financial statements. NOTE 10. RISK MANAGEMENT Health and Dental Insurance The City provides health and dental insurance benefits to City employees under a modified self- insurance plan. Under the plan, the City and the employee pay a portion of a predetermined monthly premium, which is based on the estimated claims cost for the plan and the extent of medical coverage selected by the employee. To cover annual costs, premium payments are reported as operating revenues of the Risk Management Fund and operating expenditures/expenses of the participating funds. A commercial insurance carrier is utilized to adjudicate and pay medical claims on behalf of the City. The City's medical claims liability is limited by a stop loss insurance policy that covers individuals' medical claims in excess of$125,000 per plan year. Aggregate stop loss coverage of $2,000,000 per plan year provides protection to limit claim liability for the plan as a whole. The liabilities for insurance claims reported are based on GASB No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues,which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. These liabilities include an estimate for incurred but not reported claims. The estimated amount at September 30, 2018, was $1,064,209. Changes in the Risk Management liability during the past five fiscal years were as follows: Balance at Current Year Claims Balance at Year Ending Beginning of and Changes in Claim End of September 30, Fiscal Year Estimates Payments Fiscal Year 2014 $ 812,410 $ 7,054,662 $ 6,931,808 $ 935,264 2015 935,264 7,393,719 7,345,549 983,434 2016 983,434 8,076,640 7,986,738 1,073,336 2017 1,073,336 8,599,895 8,512,397 1,160,834 2018 1,160,834 7,857,200 7,953,825 1,064,209 66 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 10. RISK MANAGEMENT—CONTINUED Workers Compensation & Property and Liability Insurance The City participates in the Texas Municipal League Intergovernmental Risk Pool (TMLIRP) for workers' compensation claims, liability (general, automobile, law enforcement, and errors/omissions), and property insurance. The cost is based on the pool's claims cost, which is adjusted to reflect the City's individual claims experience. As claims arise they are submitted to and paid by TMLIRP. To cover annual costs, premium payments are reported as operating revenues of the Risk Management Fund and operating expenditures/expenses of the participating funds. The City has a workers' compensation deductible of $25,000 per occurrence, with an annual aggregate deductible of $282,222. During fiscal 2018, the City contributed $519,916 to the Risk Management Fund for workers' compensation. The City has various levels of insurance deductibles for property, liability, and automobile insurance with the maximum deductible set at $10.000. All insured claims are paid by TMLIRP, less the appropriate deductible. During fiscal 2018, the City contributed $754,852 for property and general liability. NOTE 11. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) City of Allen Retiree Healthcare Plan: Plan Description and Benefits Provided In addition to the pension benefits described in Note 7, and as required by state law, the City provides post-retirement health care benefits for all permanent full-time employees through a single-employer defined benefit medical plan. To be eligible under the plan, a participant must either attain age sixty (60) and at least five (5) years of TMRS service or be any age with twenty (20) or more years of service. Retirees must make a one-time irrevocable decision to continue benefits at the time of retirement, after which their eligibility for this benefit ends. The retiree benefit consists of medical, dental and vision care until age 65. Employees who retired on or before December 31, 2012, were"grandfathered" in and allowed to pay the same blended medical premium rates as COBRA participants, which are the total cost of premiums (no City subsidy) plus 2% administration fees. The retirees are also subject to the same rate increases as COBRA participants. Employees who retire on or after January 1, 2013, can elect health care coverage but will be required to pay the (higher) unblended rate. Current OPEB benefits are made on a pay-as-you-go basis from the Risk Management Fund. During fiscal year ended September 30. 2018, retirees paid $94,616 in the form of premiums and incurred $73,163 in plan expenses. Employees Covered by Benefit Terms Membership in the defined benefit medical plan consisted of the following at the measurement date of September 30, 2017: Inactive employees or beneficiaries currently receiving benefits 13 Inactive employees entitled to but not yet receiving benefits - Active plan members 678 Total members 691 67 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)—CONTINUED City of Allen Retiree Healthcare Plan Funding Policy Due to the significant increase in retiree premium costs, the City elected to create a separate Other Postemployment Defined Benefit Medical Plan for retirees, effective January 1, 2013. The single-employer defined benefit plan is created by City ordinance and appoints the City Manager as Plan Administrator for the program. The trust was established with Public Agency Retirement Services Company (PARS) and is used to accumulate resources to fund future benefits. However, it does not represent the activities of the plan. Related medical costs are incurred in and paid from the City's Risk Management Fund. The plan benefit provisions and obligations to contribute are established by City Council action and are actuarily determined. Net OPEB Liability (Asset) Actuarial Methods and Assumptions -The City's net OPEB liability (asset)was measured as of October 1, 2017, and the total OPEB liability used to calculate the net OPEB liability (asset) was determined by an actuarial valuation as of that date,which was rolled forward using standard update procedures to determine the September 30, 2018, total OPEB liability as of October 1, 2017, based on the following actuarial methods and assumptions: Actuarial Assumptions Valuation Date October 1, 2017 Measurement Date October 1, 2017 Discount Rate 7.50% Inflation 2.50% Payroll Growth Rate 3.00%per annum, including inflation Mortality, Non-Annuitants Sex distinct RP 2014h mortality table, with mortality improvement scale MP-2018. Mortality,Annuitants Sex distinct RP 2014h mortality table,with mortality improvement scale MP-2018. Medical& Pharmacy Healthcare Trend -Medical-7.3%for 2018,decreasing to an ultimate rate of 4.0% in 2044 and later years. -Dental-3.0%for 2018 and later years. Participation Rate 20%of participants eligible for medical or dental benefits upon retirement are assumed to elect coverage. Investment Rate of Return 5.00%, net of OPEB plan investment expenses The long-term expected rate of return on OPEB plan investments was determined using a building- block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges 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 are summarized in the following table: Long-Term Expected Real Asset Class Target Allocation Rate of Return Domestic Equities 45.0% 5.80% Fixed Income 35.0% 2.00% Private Equity 10.0% 8.25% Real Estate 5.0% 5.90% Cash 5.0% 1.00% Total 100.0% 68 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)—CONTINUED City of Allen Retiree Healthcare Plan -Continued Discount Rate -The discount rate used to measure the total OPEB liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability. Changes in the Net OPEB Liability(Asset) Increase(Decrease) Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability(Asset) (a) (b) (a)- (b) Balance at 09/30/2017 $ 906,198 $ 1,828,769 $ (922,571) Changes for the year: Interest 41,469 - 41,469 Change of benefit terms (91,701) - (91,701) Changes of assumptions (30,415) - (30,415) Net investment income - 94,484 (94,484) Benefit payments 29,767 (252,781) 282,548 Administrative expense - (10,442) 10,442 Net changes (50,880) (168,739) 117,859 Balance at 09/30/2018 $ 855,318 $ 1,660,030 $ (804,712) Sensitivity of the Net OPEB Liability (Asset)to Changes in the Discount Rate and Healthcare Cost Trend Rates The following presents the net OPEB liability (asset) of the City for the City of Allen Retiree Healthcare Plan, as well as what the City's net OPEB liability(asset)would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current discount rate of 7.50%: 1% Decrease in Current 1% Increase in Discount Rate Discount Rate Discount Rate (6.50%) (7.50%) (8.50%) City's net OPEB (Asset) $ (774,539) $ (804,712) $ (844,865) The following presents the net OPEB liability (asset) of the City for the City of Allen Retiree Healthcare Plan, as well as what the City's net OPEB liability(asset)would be if it were calculated using healthcare cost trend rates that is 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates: Healthcare Cost 1% Decrease Trend Rates 1% Increase City's net OPEB (Asset) $ (846,988) $ (804,712) $ (772,860) 69 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)—CONTINUED City of Allen Retiree Healthcare Plan - Continued OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended September 30, 2018, the collective OPEB expense of the City of Allen Retiree Healthcare Plan was a credit of $58,006. At September 30, 2018, the City reported deferred outflows and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ - $ (81,512) Changes in actuarial assumptions - (27,036) Difference between projected and actual investment earnings - (7,700) Total $ - $ (116,248) Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as part of OPEB expense as follows. Measurement year ending Annual September 30, Amortization 2019 $ (29,061) 2020 (29,061) 2021 (29,061) 2022 (29.065) Total $ (116,248) Supplemental Death Benefits Plan: Program Description The City also participates in the cost sharing multiple-employer defined benefit group-term life insurance plan administered by Texas Municipal Retirement System (TMRS), which is known as the Supplemental Death Benefits Fund (SDBF). The City elected, by ordinance, to provide group- term life insurance coverage to both current and retired employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provides a lump-sum payment approximately equal to an employee's annual salary (calculated based on the employee's actual earnings for the 12-month period preceding the month of death). Retired employees are each insured for $7,500, and this coverage is reported as an "other postemployment benefit" or (OPEB). As the SDBF covers both active and retired participants, with no segregation of assets, the SDBF is considered as an unfunded OPEB plan (i.e. no assets are accumulated in a trust). 70 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)—CONTINUED Supplemental Death Benefits Plan -Continued Contributions and Funding Policy The City contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year of term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year. The intent is to not pre-fund retiree term life insurance during employees' entire careers. The City's contributions to the TMRS SDBF for retirees for the years ended September 30, 2018, 2017,and 2016 were$4,648, $64,347,and$60,990, respectively,which equals the annual required contributions (ARC)for each year. Summary of Actuarial Assumptions and Other Inputs Used Inflation 2.5% Salary Increases 3.5%to 10.5%, including inflation. Discount Rate 3.31%(The discount rate was based on the Fidelity Index's"20-Year Municipal GO AA Index" rate as of December 31,2017) Retirees'share of benefit-related costs $0.00 Administrative Expenses All administrative expenses are paid through the Pension Trust and accounted for under reporting requirements under GASB Statement No.68. Mortality Rates—service retirees RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109%and female rates multiplied by 103%and projected on a fully generational basis with scale BB. Mortality Rates—disabled retirees RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109%and female rates multiplied by 103%with a 3-year set- forward for both males and females. The rates are projected on a fully generational basis with scale BB to account for future mortality improvements subject to the 3%floor. Note: The actuarial assumptions used in the December 31, 2017, valuation was based on the results of an actuarial experience study for the period December 31,2010, to December 31,2014. Employees Covered by Benefit Terms* At the December 31, 2017, the actuarial valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 148 Inactive employees entitled to, but not yet receiving benefits 91 Active employees 737 Total 976 *Membership counts for inactive employees currently receiving or entitled to but not yet receiving benefits will differ from GASB 68 as they include only those eligible for a SDBF benefit (i.e.excludes beneficiaries,non-vested terminations due a refund,etc.). 71 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)—CONTINUED Supplemental Death Benefits Plan -continued: Changes in total OPEB Liability Total OPEB Liability—beginning of year $ 1,097,839 Changes for the year: Service Cost 83,658 Interest on Total OPEB Liability 42,992 Changes in assumptions or other inputs 121,271 Benefit payments (4,648) Net Change 243,273 Total OPEB Liability-end of year $ 1,341,112 The City's total OPEB liability of$1,341,112 was measured at December 31, 2017, and determined by an actuarial valuation as of that date. Accordingly, no roll-forward is required. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower(2.31%) or 1-percentage-point higher(4.31%)than the current discount rate: 1.0% Decrease Current 1.0% Increase in Discount Rate Discount Rate in Discount Rate (2.31%) (3.31%) (4.31%) Total OPEB Liability $ 1,655,159 $ 1,341,112 $ 1,100,481 OPEB Expense and Deferred Outflows and Deferred Inflows of Resources Related to OPEB For the year ended September 30, 2018, the City recognized OPEB expense of$143,852. OPEB expense recognized is as follows Components of OPEB Expense: Service Cost $ 83,658 Interest on Total OPEB Liability 42,992 Change in assumptions or other input 17,202 Total OPEB Expense $ 143,852 At September 30, 2018,the City reported deferred outflows and inflows of resources related to OPEB from the following sources: Deferred Deferred outflows of inflows of Resources Resources Contributions made subsequent to measurement date $ 3,308 - Changes in assumptions or other inputs 104,069 Total $ 107,377 $ - 72 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 11. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)—CONTINUED Supplemental Death Benefits Plan -continued: Deferred outflows of resources in the amount of $3,308 related to OPEB that resulted from contributions made subsequent to the measurement date will be recognized as a reduction of the net OPEB liability for the measurement year ending December 31, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in future OPEB expense as follows: Year Ending Net deferred outflows/ September 30, (inflows)of resources 2018 $ 17,202 2019 17,202 2020 17,202 2021 17,202 2022 17,202 Thereafter 18,059 Total $ 104,069 NOTE 12. TAX ABATEMENTS AND ECONOMIC INCENTIVES The City enters into economic development agreements designed to promote development and redevelopment within the City, spur economic improvement, stimulate commercial activity, generate additional sales tax, and enhance the property tax base and economic vitality of the City. These programs abate or rebate property and sales taxes and include incentive payments and rebates of fees that are not tied to taxes. The City's economic development agreements are authorized under Chapter 380 of the Texas Local Government Code, Chapter 311 (Tax Increment Financing Act), and 312 (Property Redevelopment and Tax Abatement Act)of the Texas Tax Code. Recipients may be eligible to receive economic assistance based on the employment impact, economic impact, or community impact of the project requesting assistance. Recipients of assistance generally commit to building or remodeling real property and related infrastructure, demolishing and redeveloping outdated properties, expanding operations, renewing facility leases, or bringing targeted businesses to the City.Agreements generally contain recapture provisions that may require repayment or termination if recipients do not meet the required provisions of the economic incentives. The following are the three categories of economic development agreements City has contracted: Tax Abatements -Tax Abatements under Chapter 312 of the Texas Tax Code allow the City to designate tax reinvestment zones and negotiate tax abatement agreements with applicants. These abatement agreements authorize the appraisal districts to reduce the assessed value of the taxpayer's property by a percentage specified in the agreement, and the taxpayer pays taxes on the lower assessed value during the term of the agreement. Property taxes abated under this program were $296,059 for the fiscal year ended September 30, 2018. General Economic Development -The City, Allen Economic Development Corporation, and Allen Community Development Corporation enter into various agreements under Chapter 380 of the Texas Local Government Code to stimulate economic development. Agreements may rebate a flat amount or percentage of property taxes or sales tax received, may result in fee reductions or rebates, or make lump sum payments to offset moving expenses, tenant finish-outs, demolition costs, infrastructure reimbursements, redevelopment costs or other expenses. During fiscal year 2018, the City rebated $6,076,255 in taxes and rebated fees of$416,291 under these agreements. Additionally,for fiscal year 2018, the Allen Economic Development Corporation rebated taxes in the amount of $197,187 and made incentive payments of$7,434,613,while the Allen Community Development Corporation rebated taxes in the amount of $197,187 and made incentive payments of $4,803,610. Allen Economic Development Corporation also sold land to developers during fiscal year 2018. 73 CITY OF ALLEN, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 2018 NOTE 12. TAX ABATEMENTS AND ECONOMIC INCENTIVES—CONTINUED Tax Increment Financing -The City has adopted two Tax Increment Financing (TIF) zones under Chapter 311 of the Texas Tax Code. The City enters into economic development and infrastructure reimbursement agreements that earmark TIF revenues for payment to developers and represent obligations over the life of the TIF or until all terms of the agreements have been met. Additionally, the City may enter into general economic development agreements, under Chapter 380 of the Texas Local Government Code, which are funded with TIF resources. The City made$871,067 in payments for TIF obligations during fiscal year 2018. NOTE 13. COMMITMENTS AND CONTINGENT LIABILITIES Federal Grants-The City participates in several State and Federal assisted grant programs. Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the Federal Government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the City expects such amounts, if any, to be immaterial. Litigation The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, it is the opinion of the City's legal counsel that resolution of these matters will not have a material adverse effect on the financial condition of the City. Economic Development Grant -The City has several economic development agreements whereby the City has agreed to pay a grant(s) to a developer and/or business in return for the design, construction, operating, and/or managing of the business within the City of Allen. All grants are performance based and do not constitute liabilities on the City's financial records. NOTE 14. RESTATEMENT OF BEGINNING NET POSITION The City adopted the provisions of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions(OPEB),which became effective during the year ended September 30,2018. In June 2015, GASB issued Statement No.75,and the intention of this Statement is to improve the usefulness of information for decisions made by the various users of the financial reports of governments whose employees - both active employees and inactive employees - are provided with postemployment benefits other than pensions by requiring recognition of the entire net OPEB liability and a more comprehensive measure of OPEB expense. The implementation of GASB 75 required the City to restate the beginning of year net position. The beginning net positions of the Governmental Activities and Business-Type Activities were restated as follows: GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES Net position,October 1,2017,as previously reported $420,528,020 $140,042,751 Adjustment for GASB 75 implementation (976,417) (118,085) Net position,October 1,2017,as restated $419,551,603 $139,924,666 The beginning net positions of the Water and Sewer, Solid Waste, Drainage, and Golf Course Funds has been restated on the fund financial statements as follows: WATER AND SOLID WASTE DRAINAGE GOLF COURSE SEWER FUND FUND FUND FUND Net position,October 1,2017,as previously reported $ 133,948,371 $ 3,676,649 $ 1,340,618 $ 13,078 Adjustment for GASB 75 implementation (75,983) (9,452) (8,819) (23,831) Net position,October 1,2017,as restated $ 133,872,388 $ 3,667,197 $ 1,331,799 $ (10,753) 74 REQUIRED SUPPLEMENTARY INFORMATION CITY OF ALLEN CITY OF ALLEN, TEXAS EXHIBIT A-1 SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS - SUPPLEMENTAL DEATH BENEFITS FUND FOR THE MEASUREMENT YEAR ENDED DECEMBER 31, 2017 2017* Total OPEB liability: Service cost $ 83,658 Interest(on the total pension liability) 42,992 Changes in benefit terms - Difference in expected and actual experience - Change in assumptions or other inputs 121,271 Benefit payments (4,648) Net change in total OPEB liability 243,273 Total OPEB liability, beginning of year 1,097,839 Total OPEB liability, end of year $ 1,341,112 Covered payroll $ 46,476,391 Total OPEB liability as a percentage of covered payroll 2.89% Notes to Schedule: None of the Plan assets are accumulated in a trust to pay related benefits that meets the criteria in paragraph 4 of GASB statement No.75. The schedule is intended to show information for 10 years. However, additional years will be displayed as they become available. 75 CITY OF ALLEN,TEXAS EXHIBIT A-2 SCHEDULE OF CHANGES IN NET OPEB LIABILITY (ASSET)AND RELATED RATIOS - DEFINED BENEFIT RETIREE HEALTHCARE PLAN FOR THE MEASUREMENT YEAR ENDED SEPTEMBER 30, 2017 2018 Total OPEB liability Service cost $Interest 41,469 Changes in benefit terms - Difference in expected and actual experience (91,701) Change in assumptions (30,415) Benefit payments 29,767 Net change in total OPEB liability (50,880) Total OPEB liability, beginning of year 906,198 Total OPEB liability, end of year(a) $ 855,318 Plan fiduciary net position: Contributions -employer $ - Contributions -employee Net investment income 94,484 Benefit payments (252,781) Administrative expense (10,442) Net change in plan fiduciary net position (168,739) Plan fiduciary net position - beginning 1,828,769 Plan fiduciary net position -ending (b) $ 1,660,030 Plan Net OPEB liability (asset) -ending (a) -(b) $ (804,712) Plan fiduciary net position as a % of total pension liability 194.08% Covered payroll $ 41,451,256 Net OPEB liability (asset) as a % of covered payroll -1.94% * The schedule is intended to show information for 10 years. However, additional years will be presented as they become available. 76 CITY OF ALLEN, TEXAS EXHIBIT A-3 SCHEDULE OF OPEB CONTRIBUTIONS - DEFINED BENEFIT RETIREE HEALTHCARE PLAN FOR THE YEAR ENDED SEPTEMBER 30, 2018 2018* Actuarially determined contributions $ Contributions in relation to actuarially determined contribution Contributions deficiency(excess) $ Covered payroll $ 41,451,256 Contributions as a percentage of covered payroll 0.00% * This schedule is intended to show information for 10 years. Additional years will be presented as they become available. Notes to Schedule Valuation Date: October 1, 2017 Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll Discount Rate 7.50% Investment Rate of Return 5.00%, net of OPEB plan investment expenses Payroll Growth Rate 3.00%, including inflation General Inflation 2.50% Mortality, Non-Annuitants Sex distinct RP 2014h mortality table,with mortality improvement scale MP-2018. Medical& Pharmacy Healthcare Trend Medical-7.3%for 2018, decreasing to an ultimate rate of 4.0% in 2044 and later years. Medical& Pharmacy Healthcare Trend Dental-3.0%for 2018 and later years. Participation Rate 20% of participants eligible for medical or dental benefits upon retirement are assumed to elect coverage Healthcare Specific Assumption Medicare eligible employees are not offered medical and pharmacy benefits by the City,thus there are no liability after age 65. There were no benefit changes during the year. 77 CITY OF ALLEN, TEXAS EXHIBIT A-4 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS— RETIREMENT PLAN (TMRS) FOR THE MEASUREMENT YEAR ENDED DECEMBER 31, 2017 2014* 2015* 2016* 2017* Total pension liability: Service cost $ 6,407,942 $ 7,377,440 $ 7,740,829 $ 8,091,540 Interest(on the total pension liability) 9,749,386 10,562,818 11,165,087 12,232,446 Changes in benefit terms - - - - Difference in expected and actual experience (1,791,341) 196,259 894,580 1,293,282 Change in assumptions - (231,950) - - Benefit payments,including refunds of employee contributions (3,213,118) (3,247,435) (3,902,489) (4,423,768) Net change in total pension liability 11,152,869 14,657,132 15,898,007 17,193,500 Total pension liability,beginning of year 137,679,525 148,832,394 163,489,526 179,387,533 Total pension liability,end of year $148,832,394 $163,489,526 $179,387,533 $196,581,033 Plan fiduciary net position: Contributions-employer $ 5,455,902 $ 6,063,051 $ 6,473,617 $ 7,130,557 Contributions-employee 2,754,779 3,021,766 3,129,050 3,274,594 Net investment income 6,648,346 188,559 9,039,319 20,569,321 Benefit payments,including refunds of employee contributions (3,213,118) (3,247,435) (3,902,489) (4,423,768) Administrative expense (69,397) (114,830) (102,024) (106,520) Other (5,706) (5,671) (5,497) (5,400) Net change in plan fiduciary net position 11,570,806 5,905,440 14,631,976 26,438,784 Plan fiduciary net position-beginning 116,193,427 127,764,233 133,669,673 148,301,649 Plan fiduciary net position-ending $127,764,233 $133,669,673 $ 148,301,649 $174,740,433 Net pension liability-ending $ 21,068,161 $ 29,819,853 $ 31,085,884 $ 21,840,600 Plan fiduciary net position as a%of total pension liability 85.84% 81.76% 82.67% 88.89% Covered payroll $ 39,335,988 $ 43,142,910 $ 44,410,952 $ 46,476,391 Net pension liability as a%of covered payroll 53.56% 69.12% 70.00% 46.99% *The schedule is intended to show information for 10 years. However,additional years will be presented as they become available. 78 CITY OF ALLEN, TEXAS EXHIBIT A-5 SCHEDULE OF CONTRIBUTIONS— RETIREMENT PLAN (TMRS) FOR THE YEAR ENDED SEPTEMBER 30, 2018 2015* 2016* 2017* 2018* Actuarially determined contributions $ 5,785,220 $ 6,028,939 $ 6,217,858 $ 6,678,295 Actual contributions (5,797,651) (6,181,797) (6,545,488) $ (6,927,485) Contributions deficiency(excess) $ (12,431) $ (152,858) $ (327,630) $ (249,190) Covered payroll $ 40,985,314 $ 43,564,466 $ 45,962,313 $ 47,782,955 Ratio of actual contributions to covered payroll amount 14.15% 14.19% 14.24% 14.50% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. Notes to Schedule Valuation Date: Actuarial determined contribution rates are calculated as of December 31st each year and become effective in January, 13 months later. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll,Closed Remaining Amortization Period 28 years Asset Valuation Method 10 year smoothed market; 15%soft corridor Inflation 2.50% Salary Increases 3.50%to 10.5%including inflation Investment Rate of Return 6.75% Retirement Age Experience-based table of rates that are specific to the City's plan of benefits. Last updated for the 2015 valuation pursuant to an experience study of the period 2010-2014. Mortality RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with scale BB. There were no benefit changes during the year. 79 CITY OF ALLEN, TEXAS EXHIBIT A-6 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES—BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2018 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET- POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Ad valorem taxes,penalties and interest $ 47,830,040 $ 48,280,481 $ 48,218,839 $ (61,642) Municipal sales tax 19,998,330 19,385,619 20,232,104 846,485 Franchise taxes 7,200,853 7,533,278 7,803,103 269,825 Licenses,permits and fees 3,003,375 3,378,688 3,745,689 367,001 Charge for services 12,006,429 12,220,125 11,974,727 (245,398) Fines 1,794,749 1,503,506 1,570,939 67,433 Gifts and contributions 803,531 865,969 852,322 (13,647) Intergovernmental 111,826 102,500 138,559 36,059 Investment earnings 398,000 475,000 338,587 (136,413) Miscellaneous 1,655,131 1,708,149 2,069,713 361,564 Total revenues 94,802,264 95,453,315 96,944,582 1,491,267 EXPENDITURES Current: General government 23,425,060 25,472,124 23,824,706 (1,647,418) Public safety 38,771,681 39,005,313 37,946,894 (1,058,419) Public works 4,859,236 4,688,404 4,406,346 (282,058) Culture and recreation 25,838,770 25,876,924 24,169,342 (1,707,582) Community development 3,168,684 3,026,811 2,723,735 (303,076) Capital Outlay 493,104 587,866 614,649 26,783 Total expenditures 96,556,535 98,657,442 93,685,672 (4,971,770) Excess(deficiency)of revenues over(under)expenditures (1,754,271) (3,204,127) 3,258,910 6,463,037 OTHER FINANCING SOURCES(USES) Transfers in 4,603,089 4,603,089 4,603,089 - Transfers out (1,530,144) (1,588,728) (6,063,012) (4,474,284) Sale of capital assets 10,000 31,279 42,458 11,179 Total other financing sources(uses) 3,082,945 3,045,640 (1,417,465) (4,463,105) NET CHANGE IN FUND BALANCE 1,328,674 (158,487) 1,841,445 1,999,932 FUND BALANCES,BEGINNING OF YEAR 21,869,796 21,869,796 21,869,796 - FUND BALANCES,END OF YEAR $ 23,198,470 $ 21,711,309 $ 23,711,241 $ 1,999,932 80 CITY OF ALLEN, TEXAS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED SEPTEMBER 30, 2018 BUDGETARY INFORMATION The City Council adheres to the following procedures in establishing the budgets reflected in the financial statements: 1. Each year the City Manager is required to submit to the City Council a proposed budget for the fiscal year beginning on the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayers'comments. 3. Prior to each October 1, the budget is legally enacted by the City Council through passage of an ordinance. 4. Annual budgets are legally adopted for the General Fund and Debt Service Fund on a basis consistent with accounting principles generally accepted in the United States of America. Formal budgetary integration is not employed for proprietary funds. However, the City adopts an annual budget for those funds for managerial control purposes. 5. The City Manager is authorized to adjust budgeted amounts. However, such revisions may not result in total expenditures (appropriations) in excess of budgeted expenditures without approval of the City Council. Therefore, the legal level of budgetary control is the combined total budgeted expenditures for all fund types. 6. Formal budgetary integration is not employed for Special Revenue Funds, Proprietary Funds or Capital Projects Funds. However, the City also adopts an annual budget for those funds for managerial control purposes. 7. Budgetary data for the Special Revenue Funds and Capital Projects Funds has not been presented in the accompanying basic financial statements because such funds are budgeted over the life of the respective grant or project and not on an annual basis. Budgetary information for the Proprietary Funds has not been presented since reporting on such budgets is not legally required. The Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual — General Fund presents a comparison of budgetary data to actual results. The General Fund utilizes the same basis of accounting for both budgetary purposes and actual results. 81 CITY OF ALLEN COMBINING AND BUDGETARY COMPARISON SCHEDULES CITY OF ALLEN MAJOR GOVERNMENTAL FUNDS DEBT SERVICE FUND The Debt Service Fund is used to account for the accumulation of resources for and the payment of general obligation bonds, certificate of obligation bonds, and interest from governmental resources. 82 CITY OF ALLEN, TEXAS EXHIBIT B-1 BUDGETARY COMPARISON SCHEDULE DEBT SERVICE FUND FOR THE YEAR ENDED SEPTEMBER 30, 2018 VARIANCE WITH FINAL BUDGETED AMOUNTS BUDGET POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES Ad valorem taxes $ 14,314,472 $ 14,354,447 $ 14,406,808 $ 52,361 Investment earnings 82,000 100,000 145,919 45,919 Total revenues 14,396,472 14,454,447 14,552,727 98,280 EXPENDITURES Principal retirement 10,810,000 11,121,316 11,181,377 60,061 Interest and fiscal charges 3,478,610 3,458,192 3,461,414 3,222 Total expenditures 14,288,610 14,579,508 14,642,791 63,283 NET CHANGE IN FUND BALANCES 107,862 (125,061) (90,064) 34,997 FUND BALANCE, BEGINNING OF YEAR 1,342,002 1,342,002 1,342,002 - FUND BALANCE, END OF YEAR $ 1,449,864 $ 1,216,941 $ 1,251,938 $ 34,997 83 NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Hotel Occupancy Tax Fund—To account for funds received from hotel occupancy tax and expend as allowed by state law. Asset Forfeiture Fund--To account for activities associated with assets legally seized and forfeited. Grants Fund—To account for monies received from other governmental agencies that have restricted legal requirements and multi-year budgets. Special Revenue Fund —To account for monies that have external legal restrictions associated with their use. Park Dedication Fund—To account for funds received and expended for the acquisition of additional park land and for the development of neighborhood parks. Tax Increment Financing Fund —To account for the tracking of property tax and sales tax revenue and associated expenses for the City's Tax Increment Financing agreements. 84 CITY OF ALLEN, TEXAS EXHIBIT B-2 COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2018 TOTAL HOTEL TAX NON-MAJOR OCCUPANCY ASSET SPECIAL PARK INCREMENT GOVERNMENTAL TAX FORFEITURE GRANTS REVENUE DEDICATION FINANCING FUNDS ASSETS Cash and cash equivalents $ 361,189 $ 81,511 $ 224,059 $ 245,195 $ 273,896 $ 1,547,053 $ 2,732,903 Investments 1,470,908 79,590 26,651 892,825 1,092,281 2,102,474 5,664,729 Accounts receivable 126,499 1,817 53,971 86,852 - 97,507 366,646 Accrued interest 5,653 455 975 3,722 4,652 10,973 26,430 TOTAL ASSETS $ 1,964,249 $ 163,373 $ 305,656 $ 1,228,594 $ 1,370,829 $ 3,758,007 $ 8,790,708 LIABILITIES,DEFERRED INFLOWS OF RESOURCES,AND FUND BALANCES LIABILITIES Accounts payable $ 16,710 $ - $ 656 $ 12,538 $ 62,812 $ - $ 92,716 Accrued liabilities 9,869 21,643 8,207 5,866 - - 45,585 Retainage payable - - 18,078 - 47,024 - 65,102 TOTAL LIABILITIES 26,579 21,643 26.941 18,404 109,836 - 203,403 DEFERRED INFLOWS OF RESOURCES Unavailable revenue-interest 1,200 96 167 790 987 2,328 5,568 Unavailable revenue-grants - - 8.025 - - - 8,025 TOTAL DEFERRED INFLOWS OF RESOURCES 1,200 96 8,192 790 987 2,328 13,593 FUND BALANCES Restricted Tourism 1,936,470 - - - - - 1,936,470 Asset forfeiture - 141,634 - - - - 141,634 State and federal grants - - 270,523 - - - 270,523 Park acquisition and development - - - - 1,260,006 - 1,260,006 Tax increment financing agreement - - - - - 3,755,679 3,755,679 Court technology - - - 25,303 - - 25,303 Juvenile case manager - - - 1,037 - - 1,037 PEG fees - - - 946,059 - - 946,059 Radio system - - - 215,019 - - 215,019 Photo red light enforcement - - - 26,410 - - 26,410 Unassigned - - - (4,428) - - (4,428) TOTAL FUND BALANCES 1,936,470 141,634 270,523 1,209,400 1,260,006 3,755,679 8,573,712 TOTAL LIABILITIES,DEFERRED INFLOWS OF RESOURCES,AND FUND BALANCES $ 1,964,249 $ 163,373 $ 305,656 $ 1,228,594 $ 1,370,829 $ 3,758,007 $ 6,790,708 85 CITY OF ALLEN EXHIBIT B-3 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 TOTAL HOTEL TAX NON-MAJOR OCCUPANCY ASSET SPECIAL PARK INCREMENT GOVERNMENTAL TAX FORFEITURE GRANTS REVENUE DEDICATION FINANCING FUNDS REVENUES Ad valorem taxes,penalties and interest $ - $ - $ - $ - $ - $ 1,149,408 $ 1,149,408 Franchise taxes - - - 186,989 - - 186,989 Municipal sales tax - - - - - 485,400 485,400 Licenses,permits,and fees - - - - 748,672 - 748,672 Fines - - - 139,415 - - 139,415 Hotel/motel taxes 1,487,066 - - - - - 1,487,066 Intergovernmental - - 835,893 168,184 - 125,269 1,129,346 Investment eamings 30,519 1,695 3,066 9,715 17,062 29,838 91,895 Miscellaneous 415 70,681 - - - - 71,096 Total revenues 1,518,000 72,376 838,959 504,303 765,734 1,789,915 5,489,287 EXPENDITURES General government - - - 165,608 - 901,068 1,066,676 Public safety - 141,733 178,463 166,798 - - 486,994 Culture and recreation 4,482,468 - 38,346 - 670,912 - 5,191,726 Community development - - 352,525 - - - 352,525 Capital outlay - - 302,758 154,431 922,915 - 1,380,104 Total expenditures 4,482,468 141,733 872,092 486,837 1,593,827 901,068 8,478,025 Excess(deficiency)of revenues over(under)expenditures (2,964,468) (69,357) (33,133) 17,466 (828,093) 888,847 (2,988,7381 OTHER FINANCING SOURCES Transfers in - - 28,828 50,265 - - 79,093 Sale of capital assets - 42,869 - - - - 42,869 Total other financing sources - 42,869 28,828 50,265 - - 121,962 NET CHANGE IN FUND BALANCES (2,964,468) (26,488) (4,305) 67,731 (828,093) 888,847 (2,866,776) FUND BALANCES,BEGINNING OF YEAR 4,900,938 168,122 274,828 1,141,669 2,088,099 2,866,832 11,440,488 FUND BALANCES,END OF YEAR $ 1,936,470 $ 141,634 $ 270,523 $ 1,209,400 $ 1,260,006 $ 3,755,679 $ 8,573,712 86 CITY OF ALLEN INTERNAL SERVICE FUNDS The Internal Service Funds are used to account for financing of services provided by one department to other departments of the City on a cost-reimbursement basis. Replacement Fund - accounts for the costs associated with the acquisition of vehicles, machinery, and equipment through the rental of such items to other departments. Risk Management Fund —accounts for the costs associated with workers compensation, liability and property insurance and medical and dental programs established for City employees and their covered dependents. Facility Maintenance Fund -The Facility Maintenance Fund accumulates resources to address large repairs and aging facility infrastructure. The accumulation of resources will help address major building repairs and prevent building deterioration. 87 CITY OF ALLEN, TEXAS EXHIBIT C-1 COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS SEPTEMBER 30, 2018 RISK FACILITY REPLACEMENT MANAGEMENT MAINTENANCE FUND FUND FUND TOTALS ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,003,948 $ 729,769 $ 378,250 $ 4,111,967 Investments 9,240,492 5,342,841 734,170 15,317,503 Accounts receivable - 22,736 - 22,736 Accrued interest receivable 34,198 18,183 3,037 55,418 Prepaid items - 39,686 - 39,686 Total current assets 12,278,638 6,153,215 1,115,457 19,547,310 CAPITAL ASSETS Machinery and equipment 6,004,332 - - 6,004,332 Vehicles 14,440,981 - - 14,440,981 Construction in progress 352,367 - - 352,367 Accumulated depreciation (11,816,230) - - (11,816,230) Capital assets, net of accumulated depreciation 8,981,450 - - 8,981,450 TOTAL ASSETS 21,260,088 6,153,215 1,115,457 28,528,760 LIABILITIES AND NET POSITION LIABILITIES Accounts payable 60,095 62,112 120,824 243,031 Accrued liabilities - 447 - 447 Incurred but not reported claims - 1,064,209 - 1,064,209 TOTAL LIABILITIES 60,095 1,126,768 120,824 1,307,687 NET POSITION Net investment in capital assets 8,981,450 - - 8,981,450 Unrestricted 12,218,543 5,026,447 994,633 18,239,623 TOTAL NET POSITION $ 21,199,993 $ 5,026,447 $ 994,633 $ 27,221,073 88 CITY OF ALLEN, TEXAS EXHIBIT C-2 COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION INTERNAL SERVICE FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 RISK FACILITY REPLACEMENT MANAGEMENT MAINTENANCE FUND FUND FUND TOTALS OPERATING REVENUES Charges forserHces $ 3,210,988 $ 11,732,179 $ - $ 14,943,167 Other income - 423,271 - 423,271 Total operating revenues 3,210,988 12,155,450 - 15,366,438 OPERATING EXPENSES Personal services - 334,846 - 334,846 Contractual services 67,837 11,129,378 476,554 11,673,769 Supplies 784,045 - - 784,045 Depreciation 2,092,318 - - 2,092,318 Total operating expenses 2,944,200 11,464,224 476,554 14,884,978 OPERATING INCOME(LOSS) 266,788 691,226 (476,554) 481,460 NON-OPERATING REVENUES Investment earnings 76,985 24,607 8,262 109,854 Gain on disposal of capital assets 360,790 - - 360,790 Total non-operating revenues 437,775 24,607 8,262 470,644 INCOME BEFORE TRANSFERS 704,563 715,833 (468,292) 952,104 TRANSFERS Transfers in 400,000 506,574 600,000 1,506,574 Transfers out - - (151,500) (151,500) Total transfers 400,000 506,574 448,500 1,355,074 CHANGE IN FUND NET POSITION 1,104,563 1,222,407 (19,792) 2,307,178 NET POSITION, BEGINNING OF YEAR 20,095,430 3,804,040 1,014,425 24,913,895 NET POSITION, END OF YEAR $ 21,199,993 $ 5,026,447 $ 994,633 $ 27,221,073 89 CITY OF ALLEN,TEXAS EXHIBIT C-3 COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 RISK FACILITY REPLACEMENT MANAGEMENT MAINTENANCE FUND FUND FUND TOTALS CASH FLOWS FROM OPERATING ACTIVITIES Cash received from transactions with other funds $ 3,210,988 $ 12,114,616 $ - $ 15,325,604 Cash paid to employees for services - (334,846) - (334,846) Cash paid for goods and services (1,164,241) (300,920) (355,729) (1,820,890) Cash paid for claims - (10,895,964) - (10,895,964) Net cash provided by(used in)operating activities 2,046,747 582,886 (355,729) 2,273,904 CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers in 400,000 506,574 600,000 1,506,574 Transfers out - - (151,500) (151,500) Net cash provided by non-capital financing activities 400,000 506,574 448,500 1,355,074 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets (1,829,013) - - (1,829,013) Proceeds from sale of capital assets 360,790 - - 360,790 Net cash used in capital and related financing activities (1,468,223) - - (1,468,223) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment securities (1,713,996) (1,702,089) (8,273) (3,424,358) Interest on investments 61,570 15,178 7,167 83,915 Net cash used in investing activities (1,652,426) (1,686,911) (1,106) (3,340,443) NET CHANGE IN CASH AND CASH EQUIVALENTS (673,902) (597,451) 91,665 (1,179,688) CASH AND CASH EQUIVALENTS,BEGINNING OF YEAR 3,677,850 1,327,220 286,585 5,291,655 CASH AND CASH EQUIVALENTS,END OF YEAR $ 3,003,948 $ 729,769 $ 378,250 $ 4,111,967 RECONCILIATION OF OPERATING INCOME(LOSS)TO NET CASH PROVIDED BY(USED IN)OPERATING ACTIVITIES Net operating income(loss) $ 266,788 $ 691,226 $ (476,554) $ 481,460 Adjustments to reconcile operating income(loss) to net cash provided by(used in)operating activities: Depreciation 2,092,318 - - 2,092,318 Change in assets and liabilities: Accounts receivables - (15,680) - (15,680) Prepaids - 43,399 - 43,399 Liabilities (312,359) (136,059) 120,825 (327,593) Total adjustments 1,779,959 (108,340) 120,825 1,792,444 Net cash provided by(used in)operating activities $ 2,046,747 $ 582,886 $ (355,729) $ 2,273,904 90 DISCRETELY PRESENTED COMPONENT UNITS Allen Economic Development Corporation (AEDC)—AEDC is a legally separate entity from the City and is responsible for aiding, promoting and furthering economic development within the City. Allen Community Development Corporation (ACDC) —ACDC is a legally separate entity from the City and is responsible for supporting the improvements in community parks and recreation, streets and sidewalks, public safety and the community library. 91 CITY OF ALLEN, TEXAS EXHIBIT D-1 BALANCE SHEET ALLEN ECONOMIC DEVELOPMENT CORPORATION SEPTEMBER 30, 2018 ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,765,126 Investments 7,544,210 Sales tax receivable 1,740,071 Accrued interest receivable 29,451 Prepaid items 6,298 TOTAL ASSETS $ 12,085,156 LIABILITIES AND FUND BALANCES CURRENT LIABILITIES Accounts payable $ 46,661 Accrued and other liabilities 31,458 TOTAL LIABILITIES 78,119 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - interest 6,249 TOTAL DEFERRED INFLOWS OF RESOURCES 6,249 FUND BALANCE Nonspendable 6,298 Restricted Debt service 250,560 Unassigned 11,743,930 TOTAL FUND BALANCE 12.000,788 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE $ 12,085,156 92 CITY OF ALLEN, TEXAS EXHIBIT D-2 RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET TO THE STATEMENT OF NET POSITION ALLEN ECONOMIC DEVELOPMENT CORPORATION SEPTEMBER 30, 2018 Total governmental fund balance $ 12,000,788 Amounts reported for govemmental activities in the statement of net position are different because: Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements. 6,249 Interest payable on long-term debt does not require current financial resources. Accordingly, interest payable is not reported as a liability on the governmental funds balance sheet. (59,845) Long-term liabilities, including bonds payable are not due and payable in the current period and, accordingly, are not reported in the fund financial statements. (16,349,272) Capital assets (net of accumulated depreciation) used in govemmental activities are not current financial resources and, accordingly, are not reported on the governmental funds balance sheet. 14,621,471 Net position of governmental activities $ 10,219,391 93 CITY OF ALLEN, TEXAS EXHIBIT D-3 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE ALLEN ECONOMIC DEVELOPMENT CORPORATION FOR THE YEAR ENDED SEPTEMBER 30, 2018 REVENUES Sales and other taxes $ 10,145,175 Investment earnings 106,438 Miscellaneous 287,217 Total revenues 10,538,830 EXPENDITURES Current: Economic development 9,875,999 Debt service: Principal retirement 3,035,763 Interest and fiscal charges 648,499 Total expenditures 13,560,261 Deficiency of revenues under expenditures (3,021,431) OTHER FINANCING SOURCES Proceeds from sale of capital assets 4,276,312 Total other financing sources 4,276,312 NET CHANGE IN FUND BALANCE 1,254,881 FUND BALANCE, BEGINNING OF YEAR 10,745,907 FUND BALANCE, END OF YEAR $ 12,000,788 94 CITY OF ALLEN, TEXAS EXHIBIT D-4 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES ALLEN ECONOMIC DEVELOPMENT CORPORATION FOR THE YEAR ENDED SEPTEMBER 30, 2018 Net change in fund balance-total governmental fund $ 1,254,881 Amounts reported for governmental activities in the statement of activities are different because: The payment of the principal of long-term debt consumes the current financial resources of governmental funds. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued. However, these amounts are amortized in the government-wide financial statements. Bond principal retirement $ 2,420,000 Note principal retirement 615,763 Amortization of bond premiums 132,357 Amortization of deferred charges on refunding 30,185 3,198,305 Current year changes in accrued interest payable do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. 8,097 Certain revenues in the government-wide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds. (4,138) In the governmental fund financial statements, the proceeds from a sale of assets are shone as an increase in financial resources. However, in the statement of activities, gain or loss from the transaction is calculated and reported. (4,245,359) Change in net position of governmental activities $ 211,786 95 CITY OF ALLEN, TEXAS EXHIBIT D-5 BALANCE SHEET ALLEN COMMUNITY DEVELOPMENT CORPORATION SEPTEMBER 30, 2018 ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,756,711 Investments 7,640,939 Sales tax receivable 1,740,071 Accrued interest receivable 27,750 TOTAL ASSETS $ 11,165,471 LIABILITIES AND FUND BALANCES CURRENT LIABILITIES Accounts payable $ 113,781 Retainage payable 184,239 TOTAL LIABILITIES 298,020 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - interest 5,888 TOTAL DEFERRED INFLOWS OF RESOURCES 5,888 FUND BALANCES Restricted Debt service 201,168 Assigned for capital projects 1,745,887 Unassigned 8,914,508 TOTAL FUND BALANCE 10,861,563 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCE $ 11,165,471 96 CITY OF ALLEN, TEXAS EXHIBIT D-6 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION ALLEN COMMUNITY DEVELOPMENT CORPORATION SEPTEMBER 30, 2018 Total governmental fund balance $ 10,861,563 Amounts reported for governmental activities in the statement of net position are different because: The following deferred outflows of resources are not reported in governmental funds: Deferred charges on refunding 567,093 Revenues earned but not available within sixty days of the year end are not recognized as revenue in the fund financial statements. 5,888 Interest payable on long-term debt does not require the use of current financial resources, and, accordingly, is not reported as a liability on the governmental fund balance sheet. (56,402) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the fund financial statements. (27,805,000) Capital assets (net of accumulated depreciation) used in governmental activities are not current financial resources and therefore are not reported on the governmental fund balance sheet. 53,220,845 Net position of governmental activities $ 36,793,987 97 CITY OF ALLEN, TEXAS EXHIBIT D-7 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE ALLEN COMMUNITY DEVELOPMENT CORPORATION FOR THE YEAR ENDED SEPTEMBER 30, 2018 REVENUES Sales and other taxes $ 10,145,175 Investment earnings 100,983 Total revenues 10,246,158 EXPENDITURES Current: Community development 6,403,330 Capital projects: Community development 5,105,621 Debt service: Principal retirement 1,715,000 Interest and fiscal charges 696,331 Total expenditures 13,920,282 Excess (deficiency) of revenues over expenditures (3,674,124) NET CHANGE IN FUND BALANCE (3,674,124) FUND BALANCE, BEGINNING OF YEAR 14,535,687 FUND BALANCE, END OF YEAR $ 10,861,563 98 CITY OF ALLEN, TEXAS EXHIBIT D-8 RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES ALLEN COMMUNITY DEVELOPMENT CORPORATION FOR THE YEAR ENDED SEPTEMBER 30, 2018 Net change in fund balance-total governmental fund $ (3,674,124) Amounts reported for govemmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets are allocated over their estimated useful lives and reported as depreciation expense. 5,105,621 Certain revenues in the government-wide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds. (5,255) Governmental funds report the effect of premiums, discounts, and similar items when debt is first issued. However, these amounts are amortized in the government-wide financial statements. (81,013) Current year changes in accrued interest payable do not require the use of current financial resources and, accordingly, are not reported as expenditures in governmental funds. 1,563 Depreciation expense on capital assets is reported in the statement of activities but does not require the use of current financial resources. Accordingly, depreciation expense is not reported as expenditures in the governmental funds. (3,223,466) Repayment of the principal on long-term debt consumes the current financial resources of governmental funds. However, these transactions have no effect on net position. 1,715,000 Change in net position ofgovemmental activities $ (161,674) 99 CITY OF ALLEN STATISTICAL SECTION (UNAUDITED) CITY OF ALLEN STATISTICAL SECTION This part of the City of Allen's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, notes disclosures, and required supplementary information says about the City's overall financial health. This information has not been audited by the independent auditor. Contents Table Financial Trends 1, 2, 3 &4 These tables contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity 5, 6, 7&8 These tables contain information to help the reader assess the City's two most significant local revenue sources, the property and sales taxes. Debt Capacity 9, 10, 11 &12 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. Economic and Demographic Information 13 & 14 These tables offer economic and demographic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 15, 16 &17 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. Source: Unless otherwise noted, the information in these tables derived from the comprehensive annual financial reports for each respective year. The City implemented GASB Statement 34 in fiscal year 2003: tables presenting government-wide information include information beginning in that year. 100 CITY OF ALLEN,TEXAS TABLE 1 NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (Accrual Basis of Accounting) (Unaudited) September 30, 2009 2010 _ 2011 2012 2013 2014 2015 2016 2017 2018 Govemmental activities Net investment in capital assets $ 362,579,369 $ 375,929,040 $ 366,601,816 $ 373,586,071 $ 369,314,466 $ 363,168,607 $ 355,756,224 $ 364,667,251 $ 366,322,218 $ 379,153,944 Restricted 1,068,651 889,439 18,656,870 21,042,413 26,511,231 26,066,205 31,476,026 32,485,173 38,303,226 39,588,223 Unrestricted 27,024,433 23,658,628 7,621,235 8,054,347 8,960,703 12,436,903 16,596,955 14,435,604 15,902,576 15,312,432 Total govemmental net position $ 390,672,453 $ 400,477,107 $ 392,879,921 $ 402,682,831 $ 404,786,400 $ 401,671,715 $ 403,829,205 $ 411,588,028 $ 420,528,020 $ 434,054,599 Business-type activities Net investment in capital assets $ 92,988,242 $ 94,983,309 $ 96,288,053 $ 99,960,794 $ 99,544,466 $ 100,991,443 $ 102,340,588 $ 106,174,191 $ 107,926,811 $ 103,762,241 Restricted for debt service 654,521 376,962 349,692 428,646 364,510 26,859 344,421 216,664 195,485 46,350 Unrestricted 27,166,614 25,861,166 29,434,587 31,346,727 33,860,716 32,720,930 34,165,174 33,592,809 31,920,455 43,785,615 Total business-type net position $ 120,809,377 $ 121,221,437 $ 126,072,332 $ 131,736,167 $ 133,769,692 $ 133,739,232 $ 136,850,183 $ 139,983,664 $ 140,042,751 $ 147,594,206 Primary govemment Net imestment in capital assets $ 455,567,611 $ 470,912,349 $ 462,889,869 $ 473,546,865 $ 468,858,932 $ 464,160,050 $ 458,096,812 $ 470,841,442 $ 474,249,029 $ 482,916,185 Restricted for debt service 1,723,172 1,266,401 19,006,562 21,471,059 26,875,741 26,093,064 31,820,447 32,701,837 38,498,711 39,634,573 Unrestricted 54,191,047 49,519,794 37,055,822 39,401,074 42,821,419 45,157,833 50,762,129 48,028,413 47,823,031 59,098,047 Total primary govemment net position $ 511,481,830 $ 521,698,544 $ 518,952,253 $ 534,418,998 $ 538,556,092 $ 535,410,947 $ 540,679,388 $ 551,571,692 $ 560,570,771 $ 581,648,805 Source:City of Allen Comprehensive Annual Financial Reports 101 CITY OF ALLEN, TEXAS TABLE 2 CHANGES IN NET POSITION LAST TEN FISCAL YEARS (Accrual Basis of Accounting) (Unaudited) Fiscal Year Ended September 30, 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Expenses Govemmental activities: General govemment $ 14,304,910 $ 20,415,700 $ 16,989,047 $ 18,347,067 $ 22,271,050 $ 24,940,939 $ 24,464,246 $ 25,304,811 $ 28,251,550 $ 26,764,210 Public safety 24,498,604 26,106,950 27,110,778 28,675,146 28,935,911 30,408,487 31,607,444 35,199,937 39,624,788 39,213,768 Public works 14,893,306 16,036,561 16,779,393 17,681,730 17,807,948 18,252,130 18,349,569 19,083,214 20,209,785 24,161,991 Culture and recreation 17,689,583 23,160,807 30,645,922 32,112,451 29,983,224 30,987,689 32,407,934 32,851,598 28,968,534 33,791,438 Community development 2,718,864 2,665,534 2,742,284 2,527,518 2,230,968 2,689,517 2,861,704 3,251,555 3,007,047 3,079,242 Interest on long-term debt 4,326,330 4,860,527 4,715,550 4,539,622 4,067,303 3,955,305 3,921,989 3,356,234 2,980,513 2,920,824 Total govemmental activities expenses 78,431,597 93,246,079 98,982,974 103,883,534 105,296,404 111,234,067 113,612,886 119,047,349 123,042,217 129,931,473 Business-type activities: Water and sewer 22,227,624 26,344,371 25,638,007 26,359,698 29,160,281 30,081,379 32,304,628 35,604,182 39,527,816 41,134,685 Solid waste 4,893,175 5,111,913 5,411,960 5,429,049 5,495,654 5,383,215 5,560,294 5,870,269 6,078,853 6,223,788 Drainage 692,180 895,924 819,947 882,726 910,179 951,973 914,322 1,146,138 1,193,057 1,260,262 Golf Course 2,165,144 2,029,699 1,912,583 1,179,015 2,483,467 2,839,098 2,911,476 3,089,041 3,135,144 3,397,180 Total business-type activities expenses 29,978,123 34,381,907 33,782,497 33,850,488 38,049,581 39,255,665 41,690,720 45,709,630 49,934,870 52,015,915 Total primary government expenses $108,409,720 $127,627,986 $132,765,471 $137,734,022 $143,345,985 $150,489,732 $155,303,606 $164,756,979 $172,977,087 $181,947,388 Program Revenues Govemmental activities: Charges for Services: General government $ 553,322 $ 619,950 $ 575,406 $ 712,432 $ 675,196 $ 823,801 $ 705,064 $ 467,786 $ 497,243 $ 525,542 Public safety 1,514,091 1,464,849 1,521,787 1,577,643 1,541,985 1,568,294 1,647,407 1,801,984 2,712,076 2,171,332 Public works 26,940 131,147 117,518 137,357 196,685 154,418 233,808 210,687 293,559 1,333,506 Culture and recreation 2,638,116 4,347,601 7,762,439 8,019,145 8,443,286 8,425,791 9,177,211 10,289,465 8,747,206 9,803,084 Community development 1,492,567 1,498,580 1,394,833 1,265,485 2,220,438 3,103,410 3,021,708 3,216,799 4,266,140 4,025,326 Operating grants and contributions 2,771,709 3,148,752 2,736,094 1,504,355 2,067,482 1,121,356 1,749,567 1,557,260 2,443,054 2,423,768 Capital grants and contributions 70,200,823 21,884,059 5,437,433 26,626,381 14,737,780 9,571,206 10,552,610 16,039,869 15,327,094 18,942,856 Total governmental activities program revenues 79,197,568 33,094,938 19,545,510 39,842,798 29,882,852 24,768,276 27,087,375 33,583,850 34,286,372 39,225,414 Business-type activities: Charges for services: Water and sewer 24,642,034 25,588,187 30,798,158 28,693,707 30,808,084 28,955,282 34,135,714 36,335,868 37,163,882 42,453,681 Solid waste 5,541,375 5,789,828 6,138,900 6,040,165 6,114,951 6,309,729 6,474,386 6,687,182 6,735,559 6,933,356 Drainage 1,116,881 1,238,278 1,284,058 1,338,680 1,352,671 1,378,662 1,465,044 1,519,405 1,648,681 1,907,407 Golf Course 1,628,697 1,430,861 1,406,555 59,054 1,924,706 2,537,564 2,361,384 2,705,799 2,959,361 2,810,424 Operating grants and contributions - - 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 - - - Capital grants and contributions 2,135,885 5,142,221 2,749,029 7,151,043 3,788,300 3,685,960 4,416,642 6,172,301 5,622,911 9,734,528 Total business-type activities program revenues 35,064,872 39,189,375 43,376,700 44,282,649 44,988,712 43,867,197 49,853,170 53,420,555 54,130,394 63,839,396 Total primary government program revenues $114,262,440 $ 72,284,313 $ 62,922,210 $ 84,125,447 $ 74,871,564 $ 68,635,473 $ 76,940,545 $ 87,004,405 $ 88,416,766 $103,064,810 (continued) 102 CITY OF ALLEN, TEXAS TABLE 2 CHANGES IN NET POSITION LAST TEN FISCAL YEARS (CONTINUED) (Accrual Basis of Accounting) (Unaudited) Net(Expenses)Revenue Governmental activities $ 765,971 $ (60,151,141) $ (79,437,464) $ (64,040,736) $ (75,413,552) $ (86,465,791) $ (86,525,511) $ (85,463,499) $ (88,755,845) $ (90,706,059) Business-type activities 5,086,749 4,807,468 9,594,203 10,432,161 6,939,131 4,611,532 8,162,450 7,710,925 4,195,524 11,823,481 Total primary government net expenses $ 5,852,720 $ (55,343,673) $ (69,843,261) $ (53,608,575) $ (68,474,421) $ (81,854,259) $ (78,363,061) $ (77,752,574) $ (84,560,321) $ (78,882,578) General Revenues and Other Changes in Net Assets Governmental activities: Taxes: Property taxes $ 39,450,387 $ 40,757,240 $ 41,111,106 $ 42,042,753 $ 44,474,745 $ 46,232,565 $ 50,143,986 $ 54,102,952 $ 58,816,876 $ 63,929,379 Sales taxes 11,140,337 12,461,268 13,907,095 15,038,519 16,289,761 18,004,636 18,141,683 19,274,983 19,450,088 20,717,505 Franchise taxes 5,533,573 6,091,857 6,421,059 6,150,419 6,302,018 6,973,705 7,412,447 7,295,931 7,553,013 7,990,092 Hotel/Motel taxes 597,512 805,185 1,113,312 1,229,996 1,350,286 1,499,512 1,544,160 1,607,263 1,547,244 1,487,066 Other taxes 1,987,765 2,128,167 1,886,665 1,622,633 1,389,503 2,151,232 1,851,397 1,621,012 1,912,559 1,704,227 Investment earnings 1,558,913 1,154,160 644,169 538,863 177,495 416,828 689,736 735,832 837,577 944,196 Gain on disposition of capital assets 113,734 103,095 233,783 40,509 92,401 - - - 263,627 446,117 Miscellaneous 1,052,184 1,312,462 1,451,743 1,802,747 2,079,082 2,445,491 2,650,103 3,794,277 2,703,964 3,592,229 Transfers 3,211,453 5,142,361 5,071,346 5,377,207 5,361,830 5,627,137 6,249,489 4,790,072 4,610,889 4,398,244 Total govemmental activities 64,645,858 69,955,795 71,840,278 73,843,646 77,517,121 83,351,106 88,683,001 93,222,322 97,695,837 105,209,055 Business-type activities: Investment earnings 499,148 338,849 184,709 197,613 70,382 134,988 194,051 197,125 199,508 210,045 Gain on disposition of capital assets - - - - - - - 15,503 - 13,228 Miscellaneous - 408,104 143,329 411,268 385,842 850,157 1,003,939 - 274,944 21,030 Transfers (3,211,453) (5,142,361) (5,071,346) (5,377,20p (5,361,830) (5,627,137) (6,249,489) (4,790,072) (4,610,889) (4,398,244) Total business-type activities (2,712,305) (4,395,408) (4,743,308) (4,768,326) (4,905,606) (4,641,992) (5,051,499) 4,577,444) (4,136,437) (4,153,941) Total primary govemment $ 61,933,553 $ 65,560,387 $ 67,096,970 $ 69,075,320 $ 72,611,515 $ 78,709,114 $ 83,631,502 $ 88,644,878 $ 93,559,400 $101,055,114 Change in Net Position Govemmental activities $ 65,411,829 $ 9,804,654 $ (7,597,186) $ 9,802,910 $ 2,103,569 $ (3,114,685) $ 2,157,490 $ 7,758,823 $ 8,939,992 $ 14,502,996 Business-type activities 2,374,444 412,060 4,850,895 5,663,835 2,033,525 (30,460) 3,110,951 3,133,481 59,087 7,669,540 Total primary government $ 67,786,273 $ 10,216,714 $ (2,746,291) $ 15,466,745 $ 4,137,094 $ (3,145,145) $ 5,268,441 $ 10,892,304 $ 8,999,079 $ 22,172,536 Source:City of allen Comprehensive Annual Financial Reports 103 CITY OF ALLEN, TEXAS TABLE 3 FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting) (Unaudited) Fiscal Year Ended September 30, 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 General Fund Nonspendable $ 941 $ 862 $ 156 $ 2,081 $ 2,098 $ 4,767 $ 1,486 $ 2,129 $ 126,833 $ 25,747 Restricted - - 55,898 513,801 726,953 752,238 779,185 907,908 58,910 59,386 Assigned - - 1,402 133,478 851,564 748,200 921,030 - 2,000,000 - Unassigned 13,584,544 15,187,065 15,349,834 15,857,642 14,672,989 17,368,187 18,407,873 20,911,943 19,684,053 23,626,108 Total General Fund $13,585,485 $15,187,927 $15,407,290 $16,507,002 $16,253,604 $18,873,392 $ 20,109,574 $ 21,821,980 $ 21,869,796 $ 23,711,241 All Other Govemmental Funds Restriced $54,286,739 $39,138,691 $31,131,674 $26,297,587 $34,132,037 $42,149,113 $ 51,398,430 $ 46,610,702 $ 57,540,668 $ 27,922,044 Assigned - - - - - - - - - 28,349,191 Unassigned(deficit) - - - - - - - - - (4,428) Total all othergovemmental funds $54,286,739 $39,138,691 $31,131,674 $26,297,587 $34,132,037 $42,149,113 $ 51,398,430 $ 46,610,702 $ 57,540,668 $ 56,266,807 Source: City of Allen Comprehensive Annual Financial Reports 104 CITY OF ALLEN, TEXAS TABLE 4 CHANGES IN FUND BALANCES -GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting) (Unaudited) Fiscal Year Ended September 30, 2009 _ 2010 2011 2012 2013 2014 2015 2016 2017 2018 REVENUES Ad valorem taxes $39,524,538 $ 40,555,218 $41,167,524 $42,045,252 $44,725,261 $46,142,222 $50,177,840 $54,104,132 $58,875,936 $63,775,055 Franchise taxes 5,533,573 6,091,857 6,421,059 6,150,419 6,302,018 6,973,705 7,412,447 7,295,931 7,553,013 7,990,092 Municipal sales tax 11,140,337 12,461,268 13,907,095 15,038,519 16,289,761 18,004,636 18,141,683 19,274,983 19,450,088 20,717,504 Licenses, permits and fees 1,888,823 1,120,401 1,270,493 1,215,677 2,294,955 2,915,533 3,134,551 3,064,580 4,450,639 4,494,361 Charges for services 1,923,778 5,790,716 9,234,618 10,051,684 10,623,970 10,580,553 11,734,344 13,002,770 11,664,328 13,442,785 Fines 1,996,179 2,134,324 1,886,665 1,648,194 1,402,725 2,160,168 1,805,230 1,579,628 1,851,735 1,710,354 Gifts and contributions 23,902,163 609,522 986,125 1,443,766 1,322,228 819,408 1,012,103 832,211 712,437 852,322 Hotel/motel fees 597,512 805,185 1,113,312 1,229,996 1,350,286 1,499,512 1,544,160 1,607,263 1,547,244 1,487,066 Recreation fees 2,309,331 - - - - - - - - - Intergovemmental 22,358,605 5,528,449 3,795,087 4,637,343 5,267,026 1,704,404 3,570,737 2,645,089 1,927,567 3,555,241 Investment earnings 1,318,704 985,219 547,525 440,065 144,604 344,386 577,014 627,760 643,928 851,954 Miscellaneous 1,123,436 5,199,090 1,939,352 2,241,166 2,671,410 3,394,197 3,420,441 3,711,870 3,428,366 3,276,677 Total revenues 113,616,979 81,281,249 82,268,855 86,142,081 92,394,244 94,538,724 102,530,550 107,746,217 112,105,281 122,153,411 EXPENDITURES General government 13,585,542 19,656,265 16,502,188 17,145,603 21,785,677 23,544,055 23,996,598 24,101,637 27,182,391 26,141,256 Public safety 24,086,875 24,994,107 26,089,579 27,291,201 28,317,603 29,214,552 30,731,310 32,966,265 37,294,550 38,524,578 Public works 3,614,305 5,186,355 3,856,373 4,104,118 4,055,500 4,077,961 4,888,798 4,865,431 5,428,996 8,899,247 Culture and recreation 13,422,415 14,581,130 21,785,214 22,460,071 20,864,140 21,435,581 22,540,516 24,287,382 23,745,884 29,714,212 Community development 2,663,153 2,584,454 2,549,235 2,406,485 2,211,253 2,631,289 2,880,880 2,833,011 2,951,864 3,076,260 Capital outlay 48,473,906 34,219,102 17,398,837 7,972,159 6,123,786 6,573,002 6,555,445 15,408,293 7,053,863 13,114,988 Debt service Principal retirement 5,200,000 5,995,000 6,930,000 7,634,130 7,964,914 8,364,986 9,322,537 9,135,000 10,445,000 11,181,377 Interest and fiscal charges 4,309,099 4,710,336 4,775,982 4,562,965 3,955,639 3,882,394 3,931,548 3,801,812 3,378,943 3,461,414 Total expenditures 115,355,295 111,926,749 99,887,408 93,576,732 95,278,512 99,723,820 104,847,632 117,398,831 117,481,491 134,113,332 Excess(deficiency)of revenues over(under)expenditures (1,738,316) (30,645,500) (17,618,553) (7,434,651) (2,884,2681 (5,185,096) (2,317,082) (9,652,614) (5,376,210) (11,959,921) OTHER FINANCING SOURCES(USES) Refunding bonds issued - - 12,625,000 13,940,000 - - 32,245,000 6,910,000 - Premium on bonds issued 189,872 150,733 667,702 2,296,042 350,071 432,879 3,772,133 1,039,610 955,225 978,386 Issuance of debt 15,400,000 12,000,000 5,000,000 - 5,065,000 10,595,000 - 1,940,000 11,845,000 8,355,000 Capital lease obligations 35,069 - - 29,905 - - - 1,700,000 - 75,622 Payment to refund bond escrow agent - - (12,998,419) (16,050,003) - - (28,097,931) (7,789,058) - - Transfer in 5,973,735 10,136,842 6,849,982 7,074,436 9,598,187 9,257,105 9,711,565 9,137,082 9,805,859 9,682,182 Transfer out (5,318,064) (5,285,873) (2,336,625) (3,599,726) (4,571,226) (4,484,282) (4,847,771) (6,384,490) (6,295,989) (6,639,012) Proceeds from sale of capital assets 77,571 98,192 23,259 9,622 23,288 21,258 19,585 24,148 43,897 85,327 Total other financing sources 16,358,183 17,099,894 9,830,899 3,700,276 10,465,320 15,821,960 12,802,581 6,577,292 16,353,992 12,537,505 NET CHANGE IN FUND BALANCES $14,619,867 $(13,545,606) $(7,787,654) $(3,734,375) $ 7,581,052 $10,636,864 $ 10,485,499 $ (3,075,322) $ 10,977,782 $ 577,584 Debt service as a percentage of noncapital expenditures 14.4% 13.8% 14.2% 14.3% 13.4% 13.2% 13.6% 12.7% 12.5% 12.1% Source:City of Allen Comprehensive Annual Financial Reports 105 CITY OF ALLEN,TEXAS TABLE 5 ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (Unaudited) Estimated Market Value Fiscal Year Ended Less: Tax-Exempt Total Taxable Total Direct Tax September 30, Real Property Personal Property Property Assessed Value Rate 2009 $ 7,250,071,630 $ 612,812,456 $ 827,934,570 $ 7,034,949,516 0.55600 2010 7,546,057,552 627,120,557 855,810,360 7,317,367,749 0.55500 2011 7,592,460,367 673,537,481 876,322,043 7,389,675,805 0.55400 2012 7,721,491,897 496,008,713 615,320,140 7,602,180,470 0.55300 2013 7,810,983,131 833,800,673 643,485,592 8,001,298,212 0.55200 2014 8,197,352,931 789,414,854 613,723,945 8,373,043,840 0.55000 2015 9,347,795,862 885,946,440 1,071,401,599 9,162,340,703 0.54000 2016 10,892,510,607 949,453,680 1,665,547,504 10,176,416,783 0.53000 2017 12,247,829,044 1,019,719,862 1,799,062,766 11,468,486,140 0.52000 2018 13,546,087,428 1,031,270,509 1,878,212,643 12,699,145,294 0.51000 Sources: City of Allen Budget Documents Collin Central Appraisal District 106 CITY OF ALLEN,TEXAS TABLE 6 DIRECT AND OVERLAPPING PROPERTY TAX RATES (PER$100 OF ASSESSED VALUE) LAST TEN FISCAL YEARS (unaudited) City Direct Rates Overlapping Rates Collin Allen Plano McKinney Love Joy County Fiscal Year Operating/ General Independent Independent Independent Independent Community Ended General Obligation School School School School Collin College September 30, Rate Debt Service Total Direct District District District District County District 2009 0.42370 0.13231 0.55600 1.47030 1.30340 1.51700 1.51500 0.24250 0.08649 2010 0.41075 0.14425 0.55500 1.54000 1.32840 1.54000 1.53500 0.24250 0.08630 2011 0.40908 0.14492 0.55400 1.54000 1.35340 1.52800 1.53500 0.24000 0.08630 2012 0.40533 0.14767 0.55300 1.67000 1.37340 1.54000 1.53500 0.24000 0.08630 2013 0.40506 0.14694 0.55200 1.67000 1.37340 1.54000 1.53500 0.24000 0.08630 2014 0.40912 0.14088 0.55000 1.67000 1.45300 1.67000 1.53500 0.23750 0.08364 2015 0.39836 0.14164 0.54000 1.64000 1.44800 1.67000 1.56000 0.23500 0.08196 2016 0.40627 0.12373 0.53000 1.61000 1.43900 1.67000 1.56000 0.22500 0.08196 2017 0.39627 0.12373 0.52000 1.59000 1.43900 1.62000 1.67000 0.20840 0.08122 2018 0.39274 0.11726 0.51000 1.57000 1.43900 1.62000 1.67000 0.19225 0.07981 Source: Collin Central Appraisal District 107 CITY OF ALLEN,TEXAS TABLE 7 PRINCIPAL PROPERTY TAXPAYERS CURRENT YEAR AND NINE YEARS AGO (Unaudited) 2018 2009 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Assessed Assessed Taxable Assessed Assessed Taxpayer Value Valuea Taxpayer Value Valuer' The Village At Allen LP $ 154,189,216 1.21% AT&T Mobility LLC $ 75,081,716 1.07% AT&T Mobility LLC 124,662,836 0.98% Chelsea Allen Development LP 73,500,000 1.05% Waiters Creek Owner LLC 124,209,362 0.98% Coventry II DDR/Trademark Montgomery Farm 60,036,182 0.85% Chelsea Allen Development LP 96,186,822 0.76% BH Benton Pointe Apartments LLC 38,283,472 0.55% Cisco Systems Inc 66,630,696 0.52% Oncor Electric Delivery Company 37,370,308 0.53% Benton Pointe LP 63,830,248 0.50% Lexington Allen LP 36,728,836 0.52% AT&T Services Inc 63,379,704 0.50% BH Settlers Gate Apartments LP 34,802,477 0.50% Creekside Acquisition LP 63,151,074 0.50% Sanmina Corporation 33,353,599 0.47% Settlers Gate Apartments LP 62,729,086 0.49% TC Village Inc 31,430,738 0.45% Twin Creeks Crossing LP 46,591,880 0.37% Village At Allen LP 30,248,041 0.43% Total $ 865,560,924 6.82% Total $ 450,835,369 6.43% Total Assessed Valuation $ 12,699,145,294 100.00% Total Assessed Valuation $ 7,023,771,639 100.00% Source:Collin Central Appraisal District Notes: aTaxpayers are assessed on January 1, 2017(2017 tax year)for the 2018 fiscal year. bTaxpayers are assessed on January 1,2008(2008 tax year)for the 2009 fiscal year. 108 CITY OF ALLEN, TEXAS TABLE 8 AD VALOREM TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (Unaudited) Collected within the Fiscal Year of the Levy Total Collections to Date Fiscal Year Collections in Ended Total Tax Levy Percentage Subsequent Percentage September 30, for Fiscal Year Amount of Levy Years Amount of Levy 2009 $ 39,165,026 $ 38,887,961 99.29 % $ 201,225 $ 39,089,186 99.81 % 2010 40,506,583 40,162,971 99.15 % 317,798 40,480,769 99.94 % 2011 41,262,761 41,006,394 99.38 % 218,814 41,225,208 99.91 % 2012 42,945,211 41,817,303 97.37 % 504,415 42,321,718 98.55 % 2013 44,380,826 44,005,302 99.15 % 290,827 44,296,129 99.81 % 2014 46,357,955 45,924,321 99.06 % 303,600 46,227,921 99.72 % 2015 49,831,250 49,472,535 99.28 % 223,058 49,695,592 99.73 % 2016 54,206,875 53,821,573 99.29 % 211,640 54,033,213 99.68 % 2017 58,493,057 58,282,589 99.64 % 56,409 58,338,998 99.74 % 2018 63,144,743 62,950,713 99.69 % - 62,950,713 99.69 % Source: Collin County Tax Assessor 109 CITY OF ALLEN, TEXAS TABLE 9 RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (Unaudited) Governmental Activities Business-Type Activities Fiscal Year General Water and Percentage Ended Obligation Certificates Other Sewer Revenue Other Total Primary of Personal September 30, Bonds of Obligation Tax Notes Obligations Bonds Obligations Government Income' Per Capita' 2009 $99,325,000 $4,905,000 $ - $ 876,068 $ 14,100,000 $ 69,633 $119,275,701 3.94% 1,421 2010 105,550,000 4,685,000 - 1,053,242 12,960,000 6,179 124,254,421 4.24% 1,456 2011 104,330,000 4,455,000 - 914,918 11,770,000 (34,414) 121,435,504 4.01% 1,402 2012 99,365,000 1,060,000 - 1,957,998 10,535,000 (74,053) 112,843,945 3.42% 1,281 2013 96,735,000 800,000 - 2,433,439 9,370,000 456,061 109,794,500 2.96% 1,224 2014 99,245,000 530,000 - 4,615,649 8,015,000 691,493 113,097,142 3.19% 1,241 2015 95,690,000 490,000 - 7,258,749 6,735,000 596,700 110,770,449 2.81% 1,188 2016 86,445,000 450,000 1,940,000 9,175,844 5,760,000 448,387 104,219,231 2.73% 1,102 2017 96,184,995 405,000 1,255,000 1,250,000 4,760,000 282,326 104,137,321 2.60% 1,043 2018 94,460,400 - 635,000 864,245 13,050,000 1,520,191 110,529,836 2.34% 1,077 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. 'See Table 13 for personal income and population data. 110 CITY OF ALLEN, TEXAS TABLE 10 RATIO OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (Unaudited) General Bonded Debt Outstanding Percentage of Fiscal Year Actual Taxable Ended General Certificates of Value of September 30, Obligation Bonds Obligation Tax Notes Total Propertya Per Capitab 2009 $ 99,325,000 $ 4,905,000 $ - $ 104,230,000 1.48% 1,242 2010 105,550,000 4,685,000 - 110,235,000 1.51% 1,292 2011 104,330,000 4,455,000 - 108,785,000 1.47% 1,256 2012 99,365,000 1,060,000 - 100,425,000 1.32% 1,140 2013 96,735,000 800,000 - 97,535,000 1.22% 1,087 2014 99,245,000 530,000 - 99,775,000 1.19% 1,095 2015 95,690,000 490,000 - 96,180,000 1.05% 1,031 2016 86,445,000 450,000 1,940,000 88,835,000 0.87% 939 2017 103,794,990 405,000 1,255,000 105,454,990 0.92% 1,056 2018 94,460,400 - 635,000 95,095,400 0.75% 927 Notes: Details regarding the city's outstanding debt can be found in the notes to the financial statements. aSee Table 5 for property value data. bSee Table 13 for population data. 111 CITY OF ALLEN, TEXAS TABLE 11 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF SEPTEMBER 30, 2018 (Unaudited) Estimated Estimated Share Percentage of Direct and Governmental Unit Debt Outstanding Applicable (a) Overlapping Debt Debt repaid with property taxes: Allen I.S.D. $ 629,244,570 90.31% $ 568,270,771 Plano I.S.D. 957,625,000 0.85% 8,139,813 McKinney I.S.D. 572,155,000 0.14% 801,017 Lovejoy I.S.D. 162,875,234 10.45% 17,020,462 Collin County 319,710,000 10.09% 32,258,739 Collin College 246,415,000 10.09% 24,863,274 Subtotal, overlapping debt $ 651,354,075 City of Allen direct debt outstanding $ 95,959,645 100.00% 95,959,645 Total Direct and Overlapping Debt $ 747,313,720 Source: Taxable value data used to estimated applicable percentages provided by Collin Central Appraisal District. Net Bonded Debt Outstanding and Percentage of debt obtained from the Texas Municipal Report("TMR") that was prepared by the Municipal Advisory Council of Texas ("MAC"). Notes: (a)The percentage of overlapping debt applicable is estimated using taxable property values. Applicable percentages w ere estimated by determining the portion of the county's taxable assessed value that is w ithin the City of Allen's boundaries and dividing it by the county's total taxable assessed value. Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City. This process recognizes that,when considering the City's ability to issue and repay long-term debt,the entire debt burden borne by the residents and businesses should be taken into account.This does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt of each overlapping government. 112 CITY OF ALLEN, TEXAS TABLE 12 PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS (Unaudited) Water and Sewer System Revenue Bonds Fiscal Year Ended Total Less: Operating Net Available Annual Times September 30, Revenues' Expensesb Revenue Requirements Coverage 2009 $ 25,075,813 $ 17,202,595 $ 7,873,218 $ 1,659,529 4.74 2010 28,773,833 20,620,871 8,152,962 1,698,662 4.80 2011 32,088,556 19,752,880 12,335,676 1,703,356 7.24 2012 30,218,985 20,244,240 9,974,745 1,702,074 5.86 2013 32,199,528 23,061,918 9,137,610 1,588,049 5.75 2014 30,887,999 23,754,848 7,133,151 1,585,519 4.50 2015 36,275,063 26,397,770 9,877,293 1,513,860 6.52 2016 36,509,983 29,287,984 7,221,999 1,173,576 6.15 2017 37,609,746 33,023,729 4,586,017 1,169,082 3.92 2018 42,629,369 34,843,950 7,785,419 1 ,181 ,675 6.59 Notes: aAs of 2009 Development fees are no longer included as part of the non-operating revenues and therefore are not included in the times coverage calculation. blncludes operating expenses minus depreciation. `Includes Principal and Interest. 113 CITY OF ALLEN, TEXAS TABLE 13 DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (Unaudited) Fiscal Year Per Capita Ended Estimated Personal School Unemployment September 30, Populationa Personal Income Incomeb Enrollment Rated 2009 83,929 $ 3,025,808,308 $ 36,052 18,091 7.5% 2010 85,315 2,930,399,620 34,348 18,715 6.7% 2011 86,633 3,030,508,973 34,981 19,387 7.2% 2012 88,103 3,298,664,423 37,441 19,765 5.4% 2013 89,705 3,709,032,635 41,347 20,295 5.2% 2014 91,157 3,542,543,334 38,862 20,503 4.4% 2015 93,261 3,940,277,250 42,250 20,755 3.2% 2016 94,576 3,823,896,832 40,432 20,973 3.6% 2017 99,852 4,007,759,724 40,137 21,054 3.1 2018 102,632 4,715,221,976 45,943 21,567 3.2% Sources: aEstimated population provided by the City of Allen. bEstimated Per Capita Income provided by U.S. Census Bureau based on current income trends within the area. °Allen Independent School District. dTexas Workforce Commission. 114 CITY OF ALLEN, TEXAS TABLE 14 PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO (Unaudited) 2018 2009 Percentage of Percentage of Total Total City Total Total City Employer Employees Employment Employer Employees Employment Allen Independent School District 2,660 6.83% Allen Independent School District 2,363 9.58% Experian Information Solutions 973 2.50% Presbyterian Hospital 879 3.56% CVE Technology Group, Inc 860 2.21% City of Allen 732 2.97% City of Allen 819 2.10% Experian 550 2.23% Texas Health Presbyterian Hospital 715 1.83% Jack Henry & Associates 380 1.54% Jack Henry & Associates 687 1.76% Sanmina SCI 300 1.22% Frontier Communications 630 1.62% State Farm 200 0.81% Netscout 501 1.29% Sage Telecommunications 175 0.71% PFSweb 425 1.09% Photronics 165 0.67% WatchGuard Video 327 0.84% Quest Medical 155 0.63% Total 8,597 22.06% Total 5,899 23.92% Total Allen Daytime Employees 38,969 Total Allen Daytime Employees 24,659 Source:Top ten employers and employee count provided by Allen Economic Development Corporation. 115 CD O O N O CD CD O CD W CO Cf) CD CO CO CO CO LO O CD O) 5 � O crs N C CO r cO 0 CO rCO-J NcoQ I— ca O CD ,- O I- CD CD CD L) N- LC) CD O CO CD CO CO 0 CD C3) 5 60) � N CO N r 0) N N N N CD COO CD O CO CD CCOO CO O CD C3) 5 Or 00) LO N Or CO N r 6N) N N N N CD O OO COI) r CD COO L CD O CM O coCO OO) a co in Jr) CO CCOO N r N- N N N r O co N QCD CD CD LO N CD CO CD CD N CO CC ..-� O CD co LON COO M N V CO CO C7 (V N N N r O CC a) d -o 08 lL CD CD O CDCD O CO OD CO O CO O CO CO CO CD CD N N Z (S COM - co CO 0.) 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H 5 Q a3 aa) c 0 E i W �N .0 0 3 N (U 0 0 J W 'L ° C` >, Cn cc 0) 0 a' a Q Y a) :T 0 W I— ,a m a 9 0 E g o J H U a) < U U c a) _ C } J (/� C C - r' 0 0 (0 0— I=L J ii C7 m a a 0 5 0 0 E W H CITY OF ALLEN, TEXAS TABLE 16 OPERATING INDICATORS BY FUNCTION & PROGRAM LAST TEN FISCAL YEARS (Unaudited) Fiscal Year Ended September 30, Function/Program 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Public Safety Police Number of Employees 157 157 160 172 174 175 183 185 185 189 Number of Violations(Citations) 18,251 17,504 17,925 13,812 13,902 19,943 14,000 13,645 18,778 17,025 Fire Number of Employees 98 98 98 104 110 111 112 114 114 116 Number of Fire/Other runs 2,045 1,362 1,468 1,325 1,377 1,541 1,622 1,822 1,886 1,896 Number of EMS runs 2,084 2,885 3,155 3,193 3,613 3,703 3,812 4,162 4,210 4,667 Development Services Streets paved(miles) 2 4 3 4 1 4 1 5 5 6 Building Permits Issueda 4,014 4,689 4,993 5,192 6,013 9,538 7,549 7,022 7,116 7,126 Cultural and Recreational Parks and Recreation Park maintained&operated per acre $ 5,017 $ 4,887 $ 5,393 $ 5,117 $ 3,827 $ 4,022 $ 4,083 $ 4,092 $ 4,668 $ 4,675 Participants in Leisure Service Programs 501,626 581,535 624,643 683,645 666,452 646,719 568,503 638,367 911,064 955,441 Rounds of Golf 43,527 37,857 38,775 0 33,615 45,546 39,723 44,478 47,010 44,163 Library Volumes in Collectionb 131,048 127,665 122,522 124,471 124,226 128,501 132,380 138,041 141,774 139,605 Water and Sewer Number of Water Consumers 26,598 27,094 27,495 27,974 28,669 29,124 29,750 30,332 30,920 31,391 Average Daily Water Consumption (gallons) 14,019,701 14,542,980 17,115,783 14,336,000 14,479,000 11,863,621 13,284,000 14,472,000 15,107,156 15,926,000 Maximum Storage Capacity(million of gallons) 31.0 31.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 Sanitation Recyclables Collected(tons) 9,232 9,374 9,307 9,517 9,667 9,920 10,015 10,108 10,578 10,723 Solid Waste Collected(tons) 52,457 53,660 56,233 53,960 53,445 55,142 59,591 62,009 63,712 66,333 Source: City of Allen Departments Notes: alncludes residential,commercial,and miscellaneous permits(e.g.for pools,fences,and roof repairs). blncludes books and media. °The Golf Course was closed for renovations in fiscal 2012 and was re-opened in January 2013. 117 CITY OF ALLEN, TEXAS TABLE 17 CAPITAL ASSET STATISTICS BY FUNCTION & PROGRAM FOR THE YEAR ENDED SEPTEMBER 30, 2018 (Unaudited) Fiscal Year Ended September 30, Function/Program 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Public Safety Police Stations 1 1 1 1 1 1 1 1 1 1 Police Patrol Units 24 23 23 27 27 27 27 28 31 31 Fire Stations 4 4 4 5 5 5 5 5 5 5 Police Motorcycle Units 4 4 4 4 4 4 4 4 4 4 Development Services Streets-Paved (miles) 314 318 321 325 326 330 331 336 341 347 Alleys-Paved (miles) 161 163 163 163 163 165 166 167 168 169 Cultural and Recreational Parks (acres) 578 576 576 597 597 599 599 607 614 689 Playgrounds 32 32 32 32 32 32 32 32 32 32 Swimming Pools (outdoor) 1 1 1 1 1 1 1 1 1 1 Recreation Centers 1 1 1 1 1 1 1 1 1 1 Senior Center 1 1 1 1 1 1 1 1 1 1 Tennis Courts 5 5 5 5 5 5 5 5 5 5 Natatorium 1 1 1 1 1 1 1 1 1 1 Visitor(Youth) Center 1 1 1 1 1 1 1 1 1 1 Golf Course 1 1 1 1 1 1 1 1 1 1 Event Center - 1 1 1 1 1 1 1 1 1 Water and Sewer Water Mains (miles) 445 452 456 461 467 471 474 481 494 506 Fire Hydrants 3,954 3,981 4,022 4,144 4,210 4,329 4,398 4,560 4,675 4,982 Sanitary Sewers (miles) 336 339 342 346 352 354 356 361 370 379 Storm Sewer Lines (miles) 104 105 106 107 108 109 110 112 117 123 Source: City Of Allen Departments 118 CITY OF ALLEN City of Allen, Texas Single Audit Report September 30, 2018 weaver - Assurance.Tax•Advisor CITY OF ALLEN CONTENTS Page Independent Auditor's 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 1 Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance in Accordance with Uniform Guidance, and on the Schedule of Expenditures of Federal Awards 3 Schedule of Expenditures of Federal Awards 6 Notes to Schedule of Expenditures of Federal Awards 7 Schedule of Findings and Questioned Costs 8 CITY OF ALLEN weaver Austin I Conroe I Dallas I Fort Worth I Houston Los Angeles I Midland I New York City I San Antonio Independent Auditor's 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 The Honorable Mayor and Members of the City Council City of Allen, Texas We have audited, 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, the 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 Allen, Texas (the City) as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated February 27, 2019. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of internal control. Accordingly, we do not express an opinion on the effectiveness of the City'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 a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in the City's 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's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance 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 noncompliance or other matters that are required to be reported under Government Auditing Standards. Weaver and Tidwell, L.L.P. 2300 North Field Street,Suite 1000 I Dallas,Texas 75201 Main:972.490.1970 I Fax:972.702.8321 CPAs AND ADVISORS I WEAVER.COM The Honorable Mayor and Members of the City Council City of Allen, Texas 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 of the City'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 City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. LtJ.oAe iie,e_e_,f. e. WEAVER AND TIDWELL, L.L.P. Dallas,Texas February 27, 2019 2 Austin I Conroe I Dallas I Fort Worth I Houston Los Angeles I Midland I New York City I San Antonio Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance in Accordance with Uniform Guidance, and on the Schedule of Expenditures of Federal Awards The Honorable Mayor and Members of the City Council City of Allen,Texas Report on Compliance for Each Major Federal Program We have audited the City of Allen, Texas (the City) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement that could have a direct and material effect on each of the City's major federal programs for the year ended September 30, 2018. The City's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of the City's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance 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's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. 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's compliance. Opinion on Each Major Federal Program In our opinion, the City 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 September 30, 2018. 3 Weaver and Tidwell, L.L.P. 2300 North Field Street,Suite 1000 I Dallas,Texas 75201 Main:972.490.1970 I Fax:972.702.8321 CPAs AND ADVISORS I WEAVER.COM The Honorable Mayor and Members of the City Council City of Allen, Texas Report on Internal Control over Compliance Management of the City 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's internal control over compliance with the types of requirements that could have a direct and material effect on each 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 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, noncompliance 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 noncompliance 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 of 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 Uniform Guidance. Accordingly, this report is not suitable for any other purpose. 4 The Honorable Mayor and Members of the City Council City of Allen, Texas Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the 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 as of September 30, 2018, and the related notes to the financial statements, which collectively comprise the City's basic statements. We issued our report thereon dated February 27, 2019, which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements.The information has been subjected to the auditing procedures applied in the audit of the 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. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. WEAVER AND TIDWELL, L.L.P. Dallas,Texas February 27, 2019 5 City of Allen, Texas Schedule of Expenditures of Federal Awards Year Ended September 30, 2018 GRANTOR OR PASS-THROUGH PROGRAM PASSED FEDERAL GRANTOR\PASS THROUGH GRANTOR CFDA GRANTOR'S AWARD THROUGH TO PROGRAM TITLE NUMBER NUMBER EXPENDITURES SUBRECIPIENTS DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Direct Programs: Community Development Block Grant' 14.218 B-15-MC-48-0044 $ 2,625 $ - Community Development Block Grant' 14.218 B-17-WC-48-0044 339,899 51,433 TOTAL DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 342,524 51,433 DEPARTMENT OF JUSTICE Direct Programs: Federal Seizure Forfeitures 16.000 N/A 90,992 - Vest Grant 16.607 N/A 546 - Vest Grant 16.607 N/A 7,981 - Passed Through Office of the Governor-Criminal Justice Division: Edward Byrne Memorial Justice Assistance Grant Program' 16.738 2016-DJ-BX-0161 80,000 - TOTAL DEPARTMENT OF JUSTICE 179,519 - DEPARTMENT OF THE INTERIOR Passed Through Texas Parks and Wildlife Commission: Allen Wafters Branch Community Park 15.916 48-001133 200,000 TOTAL DEPARTMENT OF THE INTERIOR 200.000 - NATIONAL ENDOWMENT FOR THE HUMANITIES Passed Through Texas State Library and Archives Commission: Interlibrary Loan Program 45.310 N/A 2,480 TOTAL NATIONAL ENDOWMENT FOR THE HUMANITIES 2,480 - DEPARTMENT OF TRANSPORTATION Passed Through Texas Department of Transportation: Statewide Transportaion Improvement Program 20.205 40019 102,758 - STEP Comprehensive 20.600 2018-AllenPD-S-IYG-0087 49,949 - Total Highway and Safety Cluster 49,949 - TOTAL DEPARTMENT OF TRANSPORTATION 152,707 - TOTAL FEDERAL ASSISTANCE $ 877,230 $ 51,433 'Denotes Major Federal Program See Accompanying Notes to the Schedule of Expenditures of Federal Awards 6 City of Allen, Texas Notes to Schedule of Expenditures of Federal Awards Year Ended September 30, 2018 Note A - Basis of Presentation The City of Allen, Texas (the City) accounts for its grants in Special Revenue Funds. Special Revenue Funds are governmental funds used to account for resources restricted to, or designated for, specific purposes by a grantor. Generally, unused balances are returned to the grantor at the close of specified project periods. The accompanying Schedule of Expenditures of Federal Awards (SEFA) includes the federal grant activity of the City, and is presented on the modified accrual basis of accounting as described in Note 1(b) to the basic financial statements for the year ended September 30, 2018. Federal grant funds are considered to be earned to the extent of expenditures made under the provisions of the grant and when all eligibility requirements have been met, and, accordingly, when such funds are received, they are recorded as unavailable until earned. The period of performance for federal grant funds for the purpose of liquidation of outstanding obligations made on or before the ending date of the federal project period extends 90 days beyond the federal project period ending date, in accordance with provisions in Subpart D - Post Federal Award Requirements-Closeout, Section 200.343 (b) Uniform Guidance. Note B - Contingencies The City participates in several grant programs, which are governed by various rules and regulations of the grantor agencies. Costs charged to the respective grant programs are subject to audit and adjustment by the grantor agencies. Therefore, to the extent that the City has not complied with the rules and regulations governing the grants, refunds of any money received may be required, and the collectability of any related receivable at September 30, 2018 may be impaired. In the opinion of management, there are no significant contingent liabilities relating to compliance with the rules and regulations governing the respective grants. Note C - Indirect Cost Rate The City has elected not to use the 10%deminimis indirect cost rate. 7 City of Allen, Texas Schedule of Findings and Questioned Costs Year Ended September 30, 2018 Section I -Summary of Auditor's Results FINANCIAL STATEMENTS: a. An unmodified opinion was issued on the financial statements. b. Internal control over financial reporting: • Material weakness(es) identified? Yes X No • Significant deficiency(ies) identified that are not considered to be material weakness(es)? Yes X None noted c. Noncompliance material to the financial statements noted? Yes X No FEDERAL AWARDS: d. An unmodified opinion was issued for the major program. e. Internal control over major programs: • Material weakness(es) identified? Yes X No • Significant deficiencies identified that are not considered to be material weakness(es)? Yes X None noted f. Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Yes X No g. Identification of Major Programs: CFDA Number Program Title 14.218 Community Development Block Grant 16.738 Edward Byrne Memorial Justice Assistance Grant Program h. Dollar threshold used to distinguish between type A and type B programs: $750,000 i. Auditee qualified as low-risk auditee? Yes X No 8 City of Allen, Texas Schedule of Findings and Questioned Costs Year Ended September 30, 2018 Section II - Financial Statement Findings None Section III - Federal Award Findings and Questioned Costs None Section IV -Schedule of Prior Year Findings and Questioned Costs None 9