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\fCOMPREHENSIVE ANNUAL FINANCIAL REPORT LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT LOUISVILLE, KENTUCKY Fiscal Year Ended June 30, 2014 GREG FISCHER Mayor Prepared by: Office of Management & Budget LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2014 TABLE OF CONTENTS INTRODUCTORY SECTION Letters of Transmittal ................................................................................................................. i Government Finance Officers Association Certificates of Achievement ................................ vi Organization Chart .................................................................................................................. vii Mayor, Metro Council, and Office of Management and Budget Officials ............................ viii FINANCIAL SECTION Independent Auditors' Report....................................................................................................1 Management's Discussion and Analysis ...................................................................................5 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position ............................................................................................17 Statement of Activities .................................................................................................18 Fund Financial Statements: Balance Sheet - Governmental Funds ..........................................................................20 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds ........................................................................................22 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities .....................................................................................24 Proprietary Funds: Statement of Fund Net Position ...................................................................................25 Statement of Revenues, Expenses, and Changes in Fund Net Position .......................26 Statement of Cash Flows .............................................................................................27 Fiduciary Funds: Statement of Fiduciary Net Position ............................................................................28 Statement of Changes in Fiduciary Net Position .........................................................29 Component Units: Combining Statement of Net Position .........................................................................30 Combining Statement of Activities ..............................................................................32 Notes to the Financial Statements ......................................................................................35 Required Supplementary Information: Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - General Fund on Basis of Budgeting .................................100 Pensions - Schedules of Funding Progress and Schedules of Employer Contributions........................................................................................................101 Other Supplementary Information: Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds ...................................102 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds .........................................104 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2014 TABLE OF CONTENTS FINANCIAL SECTION (continued) Combining Statement of Net Position - Internal Service Funds ...............................105 Combining Statement of Revenues, Expenses, and Changes in Net Position - Internal Service Funds ..................................................................106 Combining Statement of Cash Flows - Internal Service Funds ................................107 Combining Statement of Fiduciary Net Position - Agency Funds ............................108 Combining Statement of Changes in Assets and Libilities - Agency Funds ..............................................................................................................109 STATISTICAL SECTION Summary of Net Position and Changes in Net Position ........................................................111 Fund Balance, Governmental Funds ......................................................................................112 Changes in Fund Balance, Governmental Funds ...................................................................113 General Government Revenues by Source ............................................................................114 General Fund Tax Revenues by Source .................................................................................115 Employment, Income and Occupational Tax Revenues ........................................................116 Principal Withholding Taxpayers ..........................................................................................117 Assessed and Estimated Actual Value of Taxable Property - Metro Government............................................................................................................................118 Assessed and Estimated Actual Value of Taxable Property - Urban Services District....................................................................................................................................119 Property Tax Rates - Direct and Overlapping Governments ................................................120 Principal Property Tax Payers ...............................................................................................121 Property Tax Levies and Collections .....................................................................................122 Legal Debt Margin .................................................................................................................123 Direct and Overlapping Governmental Activities Debt.........................................................124 Ratios of Outstanding Debt by Type .....................................................................................125 Ratios of General Bonded Debt Outstanding.........................................................................126 Pledged Revenue Coverage ...................................................................................................127 Demographic & Economic Indicators - Population Growth.................................................128 Principal Employers ...............................................................................................................129 Number of Government Employees by Function/Program ...................................................130 Miscellaneous Operating Indicators and Capital Asset Information .....................................131 Louisville Metro Government Office of Internal Audit Mayor Chief of Staff Human Resources Metro Technology Services Chief of Public Services Louisville Metro Police Department Chief of Community Building Louisville Fire Human Relations Commission Emergency Medical Services Community Services & Revitalization Youth Detention Services Chief Financial Officer Public Works & Assets Public Health & Wellness Economic Growth & Innovation Criminal Justice Commission Chief of Performance Improvement Office of Management & Budget Office of Performance Improvement Metro Animal Services Emergency Management Agency/MetroSafe Deputy Chief of Staff/Chief of Strategic Initiatives Department of Corrections Chief of Economic Growth & Innovation Louisville Metro Council Other Elected Officials Jefferson County Attorney Jefferson County Clerk Commonwealth Attorney Related Agencies Waterfront Development Corporation Jefferson County Coroner Property Valuation Administrator Other Statutory Obligations Codes & Regulations Parks & Recreation Kentucky Science Center Louisville Free Public Library Parking Authority of River City (PARC) Louisville Zoo Transit Authority of River City (TARC) LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT Fiscal Year Ended June 30, 2014 HONORABLE GREG FISCHER ....................................................... MAYOR METRO COUNCIL MEMBERS ATTICA SCOTT ............................................................................................. DISTRICT 1 BARBARA SHANKLIN ................................................................................... DISTRICT 2 MARY C. WOOLRIDGE ................................................................................. DISTRICT 3 DAVID TANDY ............................................................................................... DISTRICT 4 CHERI BRYANT HAMILTON ......................................................................... DISTRICT 5 DAVID JAMES ............................................................................................... DISTRICT 6 KENNETH C. FLEMING ................................................................................ DISTRICT 7 TOM OWEN ................................................................................................... DISTRICT 8 TINA WARD-PUGH ....................................................................................... DISTRICT 9 JIM KING ..................................................................................................... DISTRICT 10 KEVIN KRAMER .......................................................................................... DISTRICT 11 RICK BLACKWELL ...................................................................................... DISTRICT 12 VICKI AUBREY WELCH .............................................................................. DISTRICT 13 CINDI FOWLER ........................................................................................... DISTRICT 14 MARIANNE BUTLER ................................................................................... DISTRICT 15 KELLY DOWNARD ...................................................................................... DISTRICT 16 GLEN STUCKEL.......................................................................................... DISTRICT 17 MARILYN PARKER ..................................................................................... DISTRICT 18 JERRY MILLER ........................................................................................... DISTRICT 19 STUART BENSON ...................................................................................... DISTRICT 20 DAN JOHNSON ........................................................................................... DISTRICT 21 ROBIN ENGEL ............................................................................................ DISTRICT 22 JAMES PEDEN............................................................................................ DISTRICT 23 MADONNA FLOOD ..................................................................................... DISTRICT 24 DAVID YATES ............................................................................................. DISTRICT 25 BRENT ACKERSON .................................................................................... DISTRICT 26 OFFICE OF MANAGEMENT AND BUDGET STEVE ROWLAND ............................................................ CHIEF FINANCIAL OFFICER STEPHANIE A. MOORE .................................................. DIRECTOR OF ACCOUNTING viii Crowe Horwath LLP Independent Member Crowe Horwath International INDEPENDENT AUDITOR'S REPORT Honorable Greg Fisher, Mayor, and The Louisville Metro Council Louisville, Kentucky Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Louisville/Jefferson County Metro Government (\"Metro Government\"), as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Metro Government'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 did not audit the financial statements of the Transit Authority of River City, Waterfront Development Corporation and the Kentucky Science Center, Inc., which represent approximately 3% of total component unit assets, 5% of total component unit net position and 20% of total component unit program revenues. Those statements were audited by other auditors whose reports thereon have been furnished to us, and our opinions, insofar as it relates to the amounts included for those entities, are based solely on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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. 1 Opinions In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Metro Government, as of June 30, 2014 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. Emphasis of Matter As discussed in Note 8 and Note 19 to the financial statements, Metro Government has adopted the provisions of Governmental Accounting Standards Board (GASB) Statement 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. The implementation of GASB Statement 70 resulted in the recognition of a retroactively applied financial guarantee liability and reduction of beginning unrestricted net position of $103,446,383 on the Statement of Net Position at July 1, 2013. 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 Discussion and Analysis on pages 5 through 15, the required supplemental information including the budgetary comparison information on page 99, the pension information related to the schedule of funding progress on page 100 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by 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. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Metro Government's basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. This 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 financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section and statistical section has 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. Crowe Horwath LLP Louisville, Kentucky December 19, 2014 2 3 4 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) For the Year Ended June 30, 2014 Our discussion and analysis of Louisville/Jefferson County Metro Government's (\"Metro Government\") financial performance provides an overview of Metro Government's financial activities for the fiscal year ended June 30, 2014. Please read it in conjunction with the Metro Government's financial statements, which begin on page 17. Financial Highlights Total assets plus deferred outflows of resources of the primary government exceeded total liabilities and deferred inflows of resources by approximately $1.37 billion at the close of fiscal year 2014. This amount includes a surplus of approximately $673.3 million in unrestricted net position. Metro Government's net position includes an equity interest in Louisville Water Company of $855.6 million. Total net position increased by $34.9 million. At the end of fiscal year 2014, Metro Government's governmental funds reported a combined ending fund balance of approximately $186.4 million. This was a decrease of approximately $17.7 million for the year ending June 30, 2014. At the end of fiscal year 2014, unassigned general fund balance was $62.5 million or approximately 11.2% of total general fund expenditures. Overview of the Financial Statements Management's discussion and analysis (\"MD&A\") are provided to serve as an introduction to the basic financial statements of the primary government that follow. Metro Government's basic financial statements consist of the following: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other required supplementary information in addition to the basic financial statements themselves. Government-Wide Financial Statements The government-wide financial statements provide information about the activities of Metro Government as a whole and present a longer-term view of the Metro Government's finances. One of the most important questions raised about the Metro Government's finances is whether the Metro Government as a whole is better off or worse off as a result of the year's activities. The Statement of Net Position (page 17) and the Statement of Activities (pages 18-19) report information about the Metro Government as a whole and about its activities in a way that helps answer this question. These statements include all assets, deferred outflows of resources, liabilities, and deferred inflows of resources using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. 5 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited), continued For the Year Ended June 30, 2014 These two statements report the Metro Government's net position as of June 30, 2014 and the changes in net position during fiscal year 2014. Metro Government's net position, the difference between assets (what the citizens own), deferred outflows of resources, liabilities (what the citizens owe), and deferred inflows of resources is one way to measure the Metro Government's financial health, or financial position. Increases or decreases in the Metro Government's net position over time are one indicator of whether its financial health is improving or deteriorating. Additional non-financial factors should be considered in assessing the overall health of the Metro Government, such as changes in the Metro Government's property tax base and the condition of the Metro Government's capital assets (roads, buildings, etc.). Metro Government's basic services are reported in the governmental activities section of the government-wide financial statements, including public safety, public works, community services, parks and general administration. Occupational taxes, property taxes, fines, and state and federal grants finance most of these activities. If a fee is charged to customers to help the Metro Government cover all or most of the cost of certain services it provides, those activities are considered to be business-type activities in most cases. The primary government did not report any business-type activities in fiscal year 2014. The Metro Government includes the Louisville Water Company, the Parking Authority of River City, Inc., the Transit Authority of River City, the Louisville and Jefferson County Riverport Authority, the Louisville and Jefferson County Metropolitan Sewer District, the Kentucky Science Center, Inc., and the Waterfront Development Corporation in its report as discretely presented component units. These legally separate component units are important because the Metro Government is financially accountable for them, and in the case of the Louisville Water Company, 100% of its stock is owned by the Metro Government. All of the component units separately issue their own respective financial statements, including MD&A, which should be read in conjunction with these statements. Fund Financial Statements The fund financial statements provide detailed information about Metro Government's most significant funds. Fund financial statements begin on page 20. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Some funds are required to be established by State law and by bond covenants. However, other funds are established, as needed, to help control and manage money for particular purposes or to show that Metro Government is meeting legal responsibilities for using certain taxes, grants, and other money. The Metro Government's two kinds of funds, governmental and proprietary, use different accounting approaches (as discussed further in Note 1). The Metro Government also uses fiduciary funds, which are separate funds from the governmental and proprietary funds described below. Fiduciary funds are not included in the Metro Government's government-wide financial statements. Governmental funds: Most of the Metro Government's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. 6 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited), continued For the Year Ended June 30, 2014 The governmental fund statements provide a detailed short-term view of the Metro Government's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the Metro Government's programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in reconciliations within the governmental fund financial statements. Proprietary funds: Proprietary funds are reported in the same way those business-type activities are reported in the Statement of Net Position and the Statement of Activities. Metro Government's proprietary funds only include internal service funds, such as the Metro Government's Insurance and Risk Management Fund and the Louisville/Jefferson County Revenue Commission, a blended component unit, to report activities that provide supplies and services to the Metro Government's other programs and activities. The ending balances in these funds are consolidated in the Governmental Activities column of the government-wide financial statements. Fiduciary funds: Fiduciary funds are used to account for resources held for the benefit of parties outside the government. These funds are not reflected in the government-wide financial statements because the resources of these funds are not available to support the Metro Government's own activities or programs. The basis of accounting for fiduciary funds is similar to that of proprietary funds. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the information provided in the government-wide and fund financial statements. The notes to the financial statements begin on page 35. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required and other supplementary information. Required supplementary information includes a budgetary to actual comparison of Metro Government's general fund and a schedule of funding progress and employer contributions for Metro Government's pension and benefit trust fund. Required supplementary information begins on page 99. Metro Government presents combining financial statements for the non-major, internal service, and agency funds as other supplementary information. This information begins on page 102. Government-wide Financial Analysis Net position serves as a useful indicator of a government's financial condition over time. Metro Government's assets plus deferred outflows of resources exceeded liabilities plus deferred inflows of resources by approximately $1.37 billion at June 30, 2014. Metro Government's net position includes the equity interest in the Louisville Water Company of approximately $855.6 million. 7 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited), continued For the Year Ended June 30, 2014 Additional changes in Metro Government's Statement of Net Position include separate reporting elements for deferred outflows of resources and deferred inflows of resources to comply with GASB Statement Nos. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and 65, Items Previously Reported as Assets and Liabilities. LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT STATEMENT OF NET POSITION June 30 (amounts in thousands) Total Percentage Governmental Activities Change 2014 2013 2013-2014 Current and other assets $ 296,339 $ 313,895 -5.6% Equity interest in component unit 855,621 828,252 3.3% Capital assets 809,780 820,903 -1.4% -0.1% Total assets 1,961,740 1,963,050 4,026 4,823 -16.5% 502,327 80,216 582,543 540,467 80,528 620,995 -7.1% -0.4% -6.2% Deferred Inflows of Resources 15,384 13,919 10.5% Net invested in capital assets Restricted Unrestricted 592,137 102,447 673,256 605,615 114,535 612,809 -2.2% -10.6% 9.9% 1,332,959 2.6% Deferred Outflows of Resources Long-term liabilities Other liabilities Total liabilities Total net position $ 1,367,840 $ Current assets decreased by 5.6% from fiscal year 2013 to fiscal year 2014. Cash and investments decreased by 6.2% primarily due to the spend down of $10 million of bond proceeds for construction of the new Southwest Regional Library. Receivables decreased by 15.1% which is primarily due to the decrease of $5.8 million of receivables related to amounts due from grant funding sources. In addition to the decrease in grants receivables a decrease in loans receivable due to the write off of bad debt against the reserve contributed to the decrease in receivables. Metro Government's equity interest in the LWC increased by approximately $27.4 million which directly correlates to the LWC's change in net position. Net capital assets declined by $11.1 million with three significant elements to this net decrease, 1) annual depreciation costs exceeded asset additions by $2.0 million (excluding CIP); 2) Metro Government sold properties with carrying values of $2.7 million; and 3) Metro Government retired obsolete assets with a net book value of $1.3 million. Short-term liabilities, such as accounts payable, accrued payroll, and amounts due to other governments of $80.2 million remained relatively flat to the prior year. Long-term liabilities declined $38.1 million as Metro Government retired $51.1 million in general obligation debt, revenue bonds, and notes payable. This decrease was offset by the issuance of two bonds in fiscal year 2014 totaling $18.4 million. 8 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited), continued For the Year Ended June 30, 2014 Metro Government's net investment reports the amount invested in capital assets (e.g. land, buildings, and infrastructure) less any related debt outstanding used to acquire those assets. Metro Government uses these capital assets to provide services to its citizens. These assets are not available for future spending and cannot be liquidated to repay the related debt. Metro Government reviews third-party restrictions to determine amounts that will be classified as restricted net position each year. In fiscal year 2014, the capital projects restricted net position decreased $12.1 million primarily due to the decrease of funds with grant restrictions in place and the spend down of funds restricted for capital purposes. The resources set aside for capital and other projects will provide critical investments for the continued economic recovery in Jefferson County. 9 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited), continued For the Year Ended June 30, 2014 This is a summary of the Metro Government's changes in net position: LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT CHANGES IN NET POSITION For the Year Ended June 30 (amounts in thousands) Governmental Activities 2014 2013 Revenues Program revenues: Charges for services $ 84,840 $ 83,168 Operating grants and contributions 89,354 94,956 Capital grants and contributions 18,033 30,620 General revenues: Property taxes 140,252 146,224 Other taxes 342,161 332,642 Gain on equity interest in LWC 27,369 27,768 Other 42,127 39,844 744,136 755,222 Total revenues Expenses General Government & Administrative Functions 71,109 71,981 Public Safety 178,458 173,164 Police 166,544 154,391 Economic Growth & Innovation 36,586 39,022 Codes & Regulations 12,689 13,204 Parks & Recreation 35,382 32,020 Community Services & Revitalization 33,277 38,239 Public Health & Wellness 29,052 30,903 Public Works & Assets 97,489 107,057 Louisville Free Library 18,478 18,130 Louisville Zoological Gardens 15,758 15,217 Interest on long-term debt 14,434 16,133 709,256 709,461 Total expenses 34,880 45,761 Increase (decrease) in net position Net position beginning, restated 1,332,959 1,287,198 Net position ending $ 1,367,839 $1,332,959 10 Total Percentage Change 2013-2014 2.0% -5.9% -41.1% Amount change 2013-2014 $ 1,672 (5,602) (12,587) -4.1% 2.9% -1.4% 5.7% -1.5% (5,972) 9,519 (399) 2,283 (11,086) -1.2% 3.1% 7.9% -6.2% -3.9% 10.5% -13.0% -6.0% -8.9% 1.9% 3.6% -10.5% 0.0% (872) 5,294 12,153 (2,436) (515) 3,362 (4,962) (1,851) (9,568) 348 541 (1,699) (205) (10,881) 45,761 34,880 $ LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited), continued For the Year Ended June 30, 2014 Government-wide net position increased $34.9 million in fiscal year 2014 versus an increase of $45.8 million in the prior fiscal year. Property tax collections decreased over the prior year due to the sale and subsequent tax appeal of two large property holders during fiscal year 2014. Metro Government collected an additional $9.5 million, or 2.9%, in occupational license fees over the prior year. Charges for services increased a modest 2.0% over the prior year. Operating grants and contributions declined by $5.6 million in fiscal year 2014 as compared to fiscal year 2013. Capital grants and contributions significantly declined by $12.6 million over the prior year. This decrease is primarily related to a decrease of $5.3 million of Federal funding received by Community Services & Revitalization for construction projects as well as a decrease of $2.2 million of Federal fund received by Emergency Management Agency/MetroSafe, which was used for the purchase of equipment in 2013. Grants and contributions are often inconsistent from one year to another as competition gets stiffer for federal and state shared revenues. Operating expenses were $0.2 million lower in fiscal year 2014 as compared to 2013. Metro Government continued its efforts to streamline the enterprise operating model and improve efficiency. This was accomplished even while dealing with a large number of snow incidents during the harsh winter of 2014 and an increase of police overtime to address patrol issues around Waterfront Park. Other income increased $5.3 million which is primarily the result of the increase in occupational taxes and temporary decrease in property tax collections discussed above. The following charts provide more information on Metro Government's operating results. Expenses and Program Revenue - Governmental Activities - For the Year Ended June 30, 2014: 200,000 180,000 Expenses Program Revenues 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 General Governement & Administrative Functions Public Protection Police Economic Growth & Innovation Codes & Regulations Parks & Recreation 11 Community Public Health & Public Works & Louisville Free Services & Wellness Assets Public Library Revitalization Louisville Zoological Gardens Interest on longterm debt LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited), continued For the Year Ended June 30, 2014 Revenues by Source - Governmental Activities - For the Year Ended June 30, 2014: Operating grants and contributions 12% Capital grants and contributions 2% Property taxes 19% Charges for services 11% Dividend and other 6% Gain on equity interest in LWC 4% Occupational taxes 46% Financial Analysis of Governmental Funds At the close of fiscal year 2014, Metro Government's governmental funds reported a combined ending fund balance of approximately $186.4 million. This is a decrease of $17.7 million from fiscal year 2013. Metro Government reports fund balance as nonspendable, restricted, committed, assigned, or unassigned (refer to Note 1 for detailed information on the fund balance classifications). Metro Government had $62.5 million of unassigned fund balance available in the General Fund at June 30, 2014 Unassigned fund balance of the General Fund (Metro Government's main operating fund) represents approximately 11.2% of total general fund expenditures for fiscal year 2014. The General Fund's fund balance increased $3.1 million during fiscal year 2014 as compared to an increase of $445,502 in fiscal year 2013. Overall, the General Fund benefitted from the same operating factors and higher occupational tax revenues ($10.3 million) we noted for the government as a whole. Fiscal year 2014 expenses were $25.9 million, or 4.9%, higher than 2013. This increase is primarily due to employee salary increases as well as increased in Police overtime. The Special Revenue Fund's fund balance decreased $8.2 million during fiscal year 2014 as compared to an increase of $12.1 million in fiscal year 2013. Grant programs are the primary activity in Special Revenue Fund and grant awards can vary significantly from one year to the next. Revenues from intergovernmental sources were significantly lower than 2013 as a result of the operating factors we noted for the government as a whole 12 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited), continued For the Year Ended June 30, 2014 The Capital Projects Fund's fund balance decreased $11.2 million during fiscal year 2014 as compared to a $14.7 million increase in fiscal year 2013. Compared to 2013, revenues in the Capital Project Fund increased by 7.5% which is primarily due to an increase in charges for services related to loan collections. Capital expenditures increased significantly by $9.9 million over 2013 due to the construction of the new Southwest Regional Library. General Fund Budgetary Highlights The Budgetary Comparison schedule presented on page 101 in the Required Supplementary Information section of this report highlights the original and final adopted budgets for Metro Government as compared to the actual revenues and expenditures. Metro Government uses the cash basis for budgeting, so this schedule also includes adjustments to convert the modified accrual reporting in the governmental funds to the cash basis reporting in the Budgetary Comparison Schedule. Revenues exceeded budget by $21.1 million while total expenditures were $24.0 million less than the final adopted budget. The largest variances between budget and actual amounts relate to interdepartmental adjustments that are eliminated in the financial statements. These amounts are included in budgeted recoveries, within charges for services, and as budgeted departmental expenditures but are not reflected in the actual totals presented in the financial statements. Transfers out include amounts required for debt service and grant matches in the other governmental funds. Capital Asset And Debt Administration Capital Assets Metro Government held $809.8 million of capital assets, net of accumulated depreciation at June 30, 2014. Depreciation charges for fiscal year 2014 totaled $34.6 million. LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT CAPITAL ASSETS (net of accumulated depreciation) Land Land improvements Buildings Machinery and equipment Vehicles Collections and works of art Infrastructure Construction in progress Total $ $ 2014 311,648,044 56,074,033 247,073,649 31,923,651 24,507,389 1,042,799 81,881,207 55,629,738 809,780,510 13 $ $ 2013 311,955,979 58,973,639 255,016,388 35,493,599 26,899,247 1,159,420 81,807,455 49,597,619 820,903,346 Total Percentage Change 2013-2014 -0.1% -4.9% -3.1% -10.1% -8.9% -10.1% 0.1% 12.2% -1.4% LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited), continued For the Year Ended June 30, 2014 Metro Government purchased approximately $8.6 million of various heavy machinery and vehicles for Public Works & Assets, Louisville Metro EMS, and Louisville Metro Police. The majority of these purchases were financed through notes payable issued during the year totaling $7.0 million. Additional detail on the notes can be found in Note 8. As of June 30, 2014, Metro Government has several major construction projects in the works. In addition to the Southwest Regional Library construction, additional capital improvements are occurring at Fourth Street Live, various projects in Metro Government's parks to improve the infrastructure and connectivity of the Louisville Loop, and improvements to the infrastructure of Metro Government through additional funds dedicated to various street paving projects and the addition of bike lanes to many major thoroughfares. Debt Administration At year-end, the Metro Government has outstanding debt as shown in the following table: LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT OUTSTANDING DEBT ADMINISTRATION (amounts in thousands) Total Percentage Change 2014 2013 2013-2014 General obligation debt $ 269,260 $ 292,735 -8.0% Revenue bonds 70,561 78,146 -9.7% Note 8,618 11,282 -23.6% Total $ 348,439 $ 382,163 -8.8% During the year, total debt of the Metro Government decreased by $33.7 million. During fiscal year 2014 new debt of $7.0 million was issued to fund the purchase of vehicles and machinery and general obligation bonds of $9.4 million were issued to refund bonds issued in 2000 and 2002. This refunding achieved a net present value of savings in interest costs of approximately $790,800 over the life of the bonds or 8.4% of the refunded bonds. With the annual debt service payments, Metro Government reduced the outstanding bonds and notes payable by $41.7 million in addition to the refunded bonds during fiscal year 2014. Additional information on the Metro Government's long-term debt activity can be found in Note 8 of this report. Future Economic Factors The most recent unemployment rate for Metro Louisville (September 2014) was 5.5% compared to the national unemployment rate of 5.9% for the same period. The Louisville Metropolitan Statistical Area includes eight surrounding counties in Kentucky and 4 additional counties in southern Indiana. In September 2014, the MSA had a civilian labor force of 626,201 compared to 640,135 in September 2013. Metro Government's fiscal year 2015 budget projects a modest growth rate of only 1.7% of overall revenue with a higher increase of 4.0% growth in General Fund revenues, with 0.5% of that growth the result of the enactment of the franchise fee on natural gas in the Urban Services District and unincorporated areas of Jefferson County. 14 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited), continued For the Year Ended June 30, 2014 Employment and wage growth is anticipated to continue a positive trend and employee withholdings are estimated to grow by 4.5% in fiscal year 2015, which would be the sixth straight year of wage growth. Local corporate profits and insurance premium fees are expected to grow 10.0% and 2.0%, respectively, in fiscal year 2015. Modest growth is also anticipated for real and personal property taxes based on initial property assessments and the assumption of flat tax rates adopted in fiscal year 2015 at 1.3%. Contacting Metro Government's Financial Management This financial report is designed to provide citizens, taxpayers, customers, investors and creditors with a general overview of Metro Government's finances and to show Metro Government's accountability for the money it receives. If you have questions about this report or need additional information, contact Metro Government's Office of Management & Budget, 611 West Jefferson Street, Louisville, Kentucky, 40202. 15 BASIC FINANCIAL STATEMENTS 16 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT STATEMENT OF NET POSITION June 30, 2014 Primary Government Governmental Activities ASSETS Cash and cash equivalents Investments Receivables, net of allowance for uncollectible amounts Inventories Prepaid items Assets restricted by bond indentures and other legal provisions Non-utility property Equity interest in LWC Capital assets: Land and improvements Construction in progress Works of art Infrastructure Other capital assets Less accumulated depreciation Capital assets, net Total assets $ $ 133,669,220 7,910,442 66,849,410 679,174 3,270,299 80,593,216 20,143,457 28,333,593 24,083,793 855,620,600 237,395,073 2,785,726 - 422,713,246 55,629,738 2,793,513 964,365,904 598,972,990 (1,234,694,881) 809,780,510 1,961,739,643 DEFERRED OUTFLOWS OF RESOURCES Unamortized loss on refundings Unamortized amount on transfer of assets and future revenues Total deferred outflows of resources 43,256,018 510,445,433 2,691,393,336 1,779,472,410 (1,545,713,126) 3,478,854,071 3,989,684,798 4,025,704 42,863,439 14,589,308 22,984,803 2,583,214 2,427,466 10,364,107 59,363,155 442,963,845 582,543,074 58,799,674 1,930,294,029 2,313,507,040 10,591,630 4,791,994 15,383,624 82,293,000 82,293,000 592,136,882 $ 10,591,630 32,040,101 57,086,289 1,867,219 20,623,338 41,667 597,561 DEFERRED INFLOWS OF RESOURCES Unamortized amount on transfer of assets and future revenues Deferred tax credit receipts Deferred inflows on swap agreements Total deferred inflows of resources 21,448,471 4,025,704 LIABILITIES Accounts payable and accrued payroll Accrued interest payable Due to other government agencies Notes payable Unearned revenue Other liabilities Long-term liabilities: Due within one year Due in more than one year Total liabilities NET POSITION Net investment in capital assets Restricted for: Grant programs Capital projects Debt service Other purposes Unrestricted Total net position 133,404,829 68,051,028 Component Units 1,253,889,630 49,417,934 33,625,187 1,874,159 17,529,738 673,254,749 1,367,838,649 57,887,325 160,578,415 153,569,489 1,625,924,859 $ The accompanying notes are an integral part of the financial statements. 17 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT STATEMENT OF ACTIVITIES For the Year Ended June 30, 2014 Program Revenues Functions/Programs Primary government: Governmental activities: Metro Council Mayor's Office County Attorney Other Elected Officials Fire Emergency Medical Services Emergency Management/MetroSafe Corrections Youth Detention Services Metro Animal Services Criminal Justice Commission Firefighters' Pension Fund Policemen's Retirement Fund Police Economic Growth & Innovation Air Pollution Control Codes & Regulations Parks & Recreation Community Services & Revitalization Public Health & Wellness Public Works & Assets Information Technology Office of Management & Budget Office of Performance Improvement Human Resources Human Relations Commission Louisville Free Public Library Louisville Zoological Gardens Internal Audit Interest expense Total governmental activities Charges for Services Expenses $ $ Component units: Louisville Water Company Parking Authority of River City, Inc. Transit Authority of River City Louisville and Jefferson County Riverport Authority Metropolitan Sewer District Kentucky Science Center, Inc. Waterfront Development Corporation Total component units $ $ 6,034,184 2,435,569 7,573,326 8,916,261 55,254,698 26,407,981 23,424,686 53,694,554 9,523,585 3,373,423 637,591 3,725,267 2,416,050 166,543,751 30,980,499 5,605,793 12,689,355 35,381,854 33,276,562 29,051,919 97,489,191 12,049,036 28,003,568 786,196 3,838,145 922,280 18,477,994 15,758,425 551,445 14,433,550 709,256,738 138,958,521 17,174,697 81,000,645 1,412,961 206,667,000 5,119,045 2,452,835 452,785,704 $ $ $ $ 100,000 285,093 676,379 15,016,285 2,326,503 2,240,336 490 1,040,330 5,020,572 4,965,184 4,087,680 15,050,262 5,219,716 430,793 1,326,148 9,874,237 1,363,003 5,223,706 3,340 534,058 10,055,819 84,839,934 158,824,309 17,738,367 13,151,751 554,945 216,632,000 2,639,895 955,752 410,497,019 Operating Grants and Contributions $ $ $ $ 15,437 20,562 1,974,109 47,869 701,527 9,196,522 89,976 46,959 234,700 8,411,305 12,591,545 1,018,183 1,667,998 590,739 14,872,065 11,878,677 23,550,885 144,681 289,007 1,355,709 655,904 89,354,359 299,601 80,623,823 10,096,000 1,776,932 2,357,041 95,153,397 (Continued) The accompanying notes are an integral part of the financial statements. 18 Net (Expense) Revenue Capital Grants and Contributions $ $ $ $ 112,922 2,219,235 2,539 69,689 2,652,272 514,024 228,716 1,323,824 4,514,950 4,137,292 2,055,047 202,202 18,032,712 6,171,487 8,103,000 14,274,487 $ $ $ $ (6,018,747) (2,435,569) (7,452,764) (8,631,168) (52,491,288) (11,343,827) (18,177,421) (42,257,696) (9,433,119) (2,283,595) (333,202) (3,725,267) (2,416,050) (150,459,602) (12,909,746) (271,214) 4,028,905 (28,247,575) (13,458,754) (15,847,094) (59,926,777) (10,686,033) (22,635,181) (786,196) (3,838,145) (629,933) (14,533,180) (4,844,500) (551,445) (14,433,550) (517,029,733) 26,037,275 863,271 12,774,929 (858,016) 28,164,000 (702,218) 859,958 67,139,199 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT STATEMENT OF ACTIVITIES (continued) For the Year Ended June 30, 2014 Primary Government Governmental Activities Net (expense) revenue (from preceding page) General revenues: Taxes: Property taxes, levied for general purposes Occupational taxes Investment income Gain on equity interest in LWC Dividends Amortization of intra-entity transfer Other intergovernmental revenue Gain on sale of assets Other taxes Miscellaneous Total general revenues Change in net position Net position--beginning, as restated Net position--ending $ $ (517,029,733) 140,252,274 342,160,707 866,649 27,368,502 20,055,060 532,020 13,961,702 3,994,793 299,836 2,417,254 551,908,797 34,879,064 1,332,959,585 1,367,838,649 Component Units $ 67,139,199 $ 9,166,718 3,200 176,161 9,346,079 76,485,278 1,549,439,581 1,625,924,859 The accompanying notes are an integral part of the financial statements. 19 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2014 General Fund ASSETS Cash and cash equivalents Investments Receivables, net of allowance for uncollectible amounts: Taxes receivable Accounts receivable and accrued interest Loans receivable Notes receivable Due from federal government Due from state government Due from other funds Inventories Prepaid items Restricted assets: Cash and cash equivalents $ Special Revenue Fund 32,343,038 31,834,333 $ 1,926,088 $ 13,311,080 13,388,868 - 11,464,193 952,353 3,660,604 31,092,346 679,174 196,408 Nonmajor Governmental Funds $ - 4,794,799 33,373,346 5,267,185 1,956,898 181,990 - Total assets 5,963,351 6,639,001 Capital Projects Fund 4,154,176 4,176,215 55,771,645 56,038,417 - 106,699 1,893,019 41,667 79,347 1,038,505 - Total Governmental Funds 1,926,088 200,000 599,760 140,760 - 22,212,134 16,365,691 36,418,718 641,427 9,007,136 1,956,898 31,233,106 679,174 1,416,903 1,871,659 24,083,793 $ $ 58,176,570 $ 52,071,319 $ 11,142,570 $ 235,538,996 $ LIABILITIES Accounts payable Accrued payroll and withholdings Matured bonds and interest payable Other liabilities 114,148,537 14,812,215 17,848,983 597,561 $ 7,942,709 761,582 - $ 4,082,329 - $ 470,553 67 140,760 - $ 27,307,806 18,610,632 140,760 597,561 Total liabilities 33,258,759 2,377,345 54,345 41,667 - 2,473,357 54,345 41,667 - 2,473,357 1,827,935 33,555,336 2,931,524 200,000 38,514,795 9,121,441 Total deferred inflows of resources 4,082,329 2,377,345 DEFERRED INFLOWS OF RESOURCES Unavailable revenues 8,704,291 15,862,598 22,212,134 - 1,874,159 599,760 1,874,159 22,212,134 25,583,799 22,803,665 - 7,857,271 - 30,660,936 5,075,503 62,487,554 47,947,323 10,531,190 186,408,880 FUND BALANCES Nonspendable Restricted for: Debt service reserve Other capital projects Committed Assigned to: Capital projects Other purposes Unassigned 5,075,503 62,487,554 Total fund balances 78,512,433 Total liabilities, deferred inflows of resources, and fund balances $ 114,148,537 49,417,934 $ 58,176,570 $ 52,071,319 611,380 $ 46,656,759 11,142,570 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets of $809,780,510 net of accumulated depreciation, reported in the government wide financial statements less $235,376 of capital assets held by the internal service funds used in governmental activities are not financial resources and therefore are not reported in the funds. Equity investment in a component unit is reported as an asset in the government wide statements, but is not included in the governmental funds. Internal service funds are used by management to charge the costs of certain activities, such as insurance, to individual funds. The assets and liabilities of the internal service funds, including deferred charges, are included in governmental activities in the Statement of Net Position. Certain revenues are earned but not available and therefore are deferred in the fund financial statements but are recognized as revenue in the government-wide statements. Accrued interest payable on long-term liabilities is reported in the government-wide statements, but is not reported in the funds. Loss on debt refunding has been deferred in the Statement of Net Position (see Note 1(O)(i)). Proceeds from transfer of parking lots and garages has been recognized in fund statements, but is a deferred inflow in the Statement of Net Position (see Note 18). Long-term liabilities of $502,327,000, including bonds payable, less $32,520,992 reported in internal service funds are not due and payable in the current period and therefore are not reported in the funds. Net position of governmental activities The accompanying notes are an integral part of the financial statements. 20 809,545,134 855,620,600 (7,928,502) 2,431,690 (1,867,219) 4,025,704 (10,591,630) (469,806,008) 1,367,838,649 21 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended June 30, 2014 Nonmajor Governmental Special Revenue Capital Projects Funds General Fund Fund Fund REVENUES Property taxes Occupational taxes Licenses and permits Intergovernmental Charges for services Fees and fines Investment income Dividends Donations Miscellaneous $ Total revenues 140,114,870 342,160,707 12,751,256 24,567,355 58,513,390 4,593,832 467,278 20,055,060 2,214,646 1,543,300 $ 88,153,433 534 143,786 252,298 $ 523,485 3,035,244 240,485 3,241,254 465,711 $ 8,245,083 649,032 15,100 5,893 Total Governmental Funds $ 140,114,870 342,160,707 12,751,256 121,489,356 62,197,666 4,594,366 866,649 20,055,060 5,455,900 2,267,202 606,981,694 EXPENDITURES Metro Council Mayor's Office County Attorney Other Elected Officials Fire Emergency Medical Services Emergency Management/MetroSafe Corrections Youth Detention Services Metro Animal Services Criminal Justice Commission Firefighters' Pension Fund Policemen's Retirement Fund Police Economic Growth & Innovation Air Pollution Control Codes & Regulations Parks & Recreation Community Services & Revitalization Public Health & Wellness Public Works & Assets Information Technology Office of Management & Budget Office of Performance Improvement Human Resources Human Relations Commission Louisville Free Public Library Louisville Zoological Gardens Internal Audit Debt service principal Debt service interest and other charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures 88,550,051 7,506,179 8,915,108 711,953,032 5,922,731 2,391,722 7,438,013 8,753,278 52,940,796 24,509,667 13,962,255 52,493,690 9,263,289 3,177,511 300,373 3,689,749 2,393,015 158,503,859 12,051,802 3,104,394 10,786,360 26,439,005 9,623,850 16,376,426 54,307,874 10,990,985 30,734,814 772,149 3,769,569 690,924 16,376,591 13,913,424 541,593 1,358,987 285,328 - 107,242 26,195 6,060,609 109,000 3,150 79,479 305,470 3,910,464 15,123,235 2,297,662 1,676,272 1,881,010 23,042,701 11,988,210 26,600,357 214,878 538,356 - 18,149 (33,000) 28,287,523 2,500 38,507,032 12,765,934 5,471,201 5,922,731 2,391,722 7,438,013 8,753,278 53,048,038 24,535,862 20,022,864 52,602,690 9,266,439 3,256,990 605,843 3,689,749 2,393,015 162,414,323 27,175,037 5,402,056 12,462,632 28,320,015 32,666,551 28,364,636 80,908,231 10,990,985 30,737,314 772,149 3,769,569 905,802 16,914,947 13,913,424 541,593 39,884,168 13,018,262 33,758,724 557,864,023 93,964,290 28,272,672 56,746,667 736,847,652 49,117,671 (5,414,239) (20,766,493) (47,831,559) (24,894,620) (Continued) The accompanying notes are an integral part of the financial statements. 22 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS (continued) For the Year Ended June 30, 2014 Nonmajor Governmental Special Revenue Capital Projects Funds General Fund Fund Fund OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Issuance of bonds, par Issuance of refunding bonds, par Issuance of refunding bonds, premium Refunded bond principal Refunded bond interest Transfers in Transfers out Total other financing sources (uses) 2,128,414 (48,107,626) (45,979,212) $ (2,798,485) (2,798,485) 3,994,793 6,961,900 86,432 (1,480,097) 9,563,028 9,380,000 693,069 (9,880,000) (109,673) 46,541,984 (236,372) 46,389,008 3,994,793 6,961,900 9,380,000 693,069 (9,880,000) (109,673) 48,756,830 (52,622,580) 7,174,339 3,138,459 75,373,974 Net change in fund balances Fund balances--beginning Fund balances--ending Total Governmental Funds (8,212,724) 57,630,658 (11,203,465) 59,150,788 (1,442,551) 11,973,741 (17,720,281) 204,129,161 78,512,433 $ 49,417,934 $ 47,947,323 $ 10,531,190 The accompanying notes are an integral part of the financial statements. 23 $ 186,408,880 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended June 30, 2014 Net change in fund balances--total governmental funds $ (17,720,281) Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets. This is the amount by which the increase in capital assets of $27,499,944, less $182,293 in the internal service funds, was greater than depreciation of $34,592,893 in the governmental funds, less $54,213 of depreciation in the internal service funds, for the current period. In the Statement of Activities, the change in net position from Metro Government's investment in the LWC is included as investment income, while governmental funds only report the dividend income from the investment. 27,368,502 In the Statement of Activities, only the loss on the disposal of assets is reported, while in the governmental funds, the proceeds from the disposal increase financial resources. Thus, the change in net position differs from the change in fund balance by the basis of the assets disposed. (4,029,887) Unearned revenues added to net position in the prior year are deducted in the current year. (2,248,773) (7,221,029) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. 2,963,710 Bond proceeds of $6,961,900 from new issues and $10,073,069 from refunding issues provide current financial resources to governmental funds, but issuing debt increases the long-term liabilities in the Statement of Net Position. Repayment of $38,507,032 of bond principal, plus payments of $9,880,000 of refunded principal and $3,359,000 of notes payable and capital lease payments are expenditures in the governmental funds, but these items reduce long-term liabilities in the Statement of Net Position. 34,711,063 The changes in compensated absences, other commitments, and claims and judgments are reported in the Statement of Activities and do not require the use of current financial resources, therefore the changes are not reported as expenditures in governmental funds. 3,710,967 Internal Service Funds are used by management to charge the costs of certain activities, such as insurance to individual funds. The change in net position of the internal service funds is reported with governmental activities. 844,684 Governmental funds report the effect of original issue premiums, discounts, and similar items when debt is first issued, whereas these amounts are recorded on the Statement of Net Position and amortized in the Statement of Activities. Accreted interest on deep discount bonds and net changes in accrued interest of $2,008,778 less amortization and other revenues of $131,241 are also shown as differences for the year. (2,140,019) Accrued expense payable due to other governmental agencies was reported in the government-wide statements in the prior year and in the fund statements in the current year. (1,359,873) Change in net position of governmental activities The accompanying notes are an integral part of the financial statements. 24 $ 34,879,064 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT STATEMENT OF FUND NET POSITION PROPRIETARY FUNDS June 30, 2014 Governmental Activities Internal Service Fund ASSETS Current assets: Cash and cash equivalents Investments Accounts receivable Deposits with paying agents Prepaid expenses Total current assets Capital assets: Furniture and equipment, net Total capital assets Total assets $ 77,633,184 12,012,611 533,452 75,000 1,778,396 92,032,643 235,376 235,376 92,268,019 LIABILITIES Current liabilities: Accounts payable Refunds payable Claims and judgments Due to other funds Total current liabilities Noncurrent liabilities: Claims and judgments Total noncurrent liabilities Total liabilities 4,075,307 6,951,784 14,396,155 51,856,444 77,279,690 18,124,837 18,124,837 95,404,527 DEFERRED INFLOWS OF RESOURCES Deferred tax credit receipts 4,791,994 Total deferred inflows of resources 4,791,994 NET POSITION Net investment in capital assets Restricted Unrestricted Total net position 235,376 705,099 (8,868,977) $ (7,928,502) The accompanying notes are an integral part of the financial statements. 25 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS For the Year Ended June 30, 2014 Governmental Activities Internal Service Fund OPERATING REVENUES: Charges for services Collection, investment and other fees Insurance income $ Total operating revenues 5,223,959 62,809,255 68,033,214 OPERATING EXPENSES: Professional services Contractual services Repairs and maintenance Other supplies and expenses Insurance claims, settlements and losses Insurance premiums Depreciation 4,670,296 323,616 8,861 384,461 63,608,103 2,090,453 54,213 Total operating expenses 71,140,003 Operating loss (3,106,789) NONOPERATING REVENUES: Investment income Total nonoperating revenues 85,723 85,723 Net loss before transfers Transfers in (3,021,066) 3,865,750 Change in net position Total net position--beginning 844,684 (8,773,186) Total net position--ending $ (7,928,502) The accompanying notes are an integral part of the financial statements. 26 LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended June 30, 2014 Governmental Activities Internal Service Fund CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from collection, investment, and other fees Insurance income Payments to employees Payments to suppliers Contractual services Claims paid Insurance premiums paid Increase in cash collected for others Other payments $ Net cash used by operating activities (10,316,254) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers from other funds Net cash provided by noncapital financing activities 3,865,750 3,865,750 CASH FLOWS FROM CAPITAL AND FINANCING ACTIVITIES: Acquisition and construction of capital assets (182,293) Net cash used in capital activities (182,293) CASH FLOWS FROM INVESTING ACTIVITIES: Change in investment pool participation Inve