Finance Committee - 3/15/2017 Page 2
obligation. Both of those liabilities are estimated but they are actuality determined. There is this whole set of
standards that your actuary uses in developing those estimated liabilities that are presented in your financial
statements.
Our opinion of your financial statements begins on page 16-18. It is what we refer to as an unmodified opinion.
It may be referred to as a clean audit opinion. In summary, it says in our opinion your financial statements are
totally in accordance with generally accepted accounting principles for local governments here in the United
States. Following the opinion is management discussion and analysis, sometimes referred to as MD&A. It’s
on pages 19-32. It’s an excellent resource to go back to at a later point in time to understand why certain key
account balances may have changed as a result of Fiscal Year 2016. That brings us to page 33, which is
where | am going to start looking at some of the numbers on your balance sheet and some of your operating
statements. Page 33 and the following two pages are what are known as long term perspective financial
statements. The net pension liability that was introduced on the balance sheet last year will be the primary
focus of that discussion. Then we will move to the short term perspective, your general fund which is
essentially a cash basis set of books.
Beginning on page 33, the focus is on that column of numbers, which is titled as “Governmental Activities.” It
includes your general fund, all of your special revenue funds, capital projects and many of your trusts. It is
essentially everything except for your enterprise funds but it is reported on the accrual basis of accounting.
The focus here is very typically on that second number up from the bottom in the first column of number. You
will see that the unrestricted net position, with an account balance as of June 30, 2016, is in parentheses
indicating that the liabilities outweigh the assets by a little bit more than $156 million. A couple of inches up
from the bottom of that first column of numbers in the noncurrent liability section, you have a net OPEB
obligation with an account balance of approximately $25 million and then you have your net pension liability
which is approximately $198 million and then the net pension liability associated with the public works system
which is another $9 million. Collectively those liabilities is approximately $230 million in liabilities. This is not a
general fund liability. Those $230 million in long term liabilities are the reason why that unrestricted net position
number is in parentheses of $156 million. It was a year ago, June 30, 2015, that the net pension liability first
appeared on this balance. That wasn’t necessarily a new liability but it was present on the balance sheet for
the first time. Prior to June 30, 2015, that liability was buried in the back of your footnote disclosures. Only
rating agencies and certain financial institutions would probably be reading into that to understand what that
liability was. Accounting standards changed and now that disclosure of those liabilities are now required to be
presented here on your long term perspective financial statements. That’s why your net position has gone
from a couple of years ago of being a very positive number to being in parentheses of approximately $156
million.
Page 36 is a little bit more of a traditional looking balance sheet for governmental entities. This is the first
place almost all readers of your financial statements are going to turn to. The focus here is in the first column
of numbers, the third number up from the bottom. Unassigned fund balance with an account balance as of
June 30, 2016, over $28 million. That $28 million as of June 30, 2016, is up about $400,000 from June 30,
2015. It didn’t have a significant change. | would view that in an entity of this size as essentially remaining the
same, constant and steady. Another way readers will look at that number is they will look at that $28 million as
a percentage of your FY2016 expenditures. That $28 million unassigned fund balance represents about 11
percent of your general fund expenditures. That’s really where rating agencies expect to see communities that
are rated similar to you. The consistency in that account number shows stability and the 11 percent puts you
in a group with peer rated communities. Rating agencies like to see a substantial, and | would classify that as
greater than 10 percent, of an unassigned fund balance compared to the general fund expenditures as a
whole.
Over on page 40, the budget and actual comparative schedule. It deals with strictly the general fund. The
focus is almost always on the last column of numbers. It tells the reader how are operations compared to what
was expected. And to what was expected, I’m referring to the balanced budget. Looking at that last column of
numbers, about half way down, you see total revenues and other sources with a total of $6,128,000. That
means that the city collected $6.1 million more than it anticipated through the budget process. If you look at
the top number in that column of approximately $3.6 million, you can see that over half of that excess revenue
