CITY OF HORNELL, NEW YORK

Transcription

1 CITY OF HORNELL, NEW YORK COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED MARCH 31, 2011

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3 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED MARCH 31, 2011 PREPARED BY: CITY OF HORNELL CHAMBERLAIN S OFFICE THELMA A. PELYCH, CITY CHAMBERLAIN

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5 Comprehensive Annual Financial Report Table of Contents Year Ended March 31, 2011 INTRODUCTORY SECTION Letter of Transmittal... 1 GFOA Certificate of Achievement... 5 Organization Chart... 6 City Officials... 7 FINANCIAL SECTION Independent Auditors Report... 8 Management s Discussion and Analysis Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets Statement of Activities Fund Financial Statements: Balance Sheet Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) of Governmental Funds to the Statement of Activities Statement of Revenues, Expenditures and Change in Fund Balance Budget and Actual General Fund Statement of Revenues, Expenditures and Change in Fund Balance Budget and Actual Water Fund Statement of Fiduciary Net Assets Statement of Changes in Fiduciary Net Assets Notes to the Financial Statements Individual and Combining Fund Statements and Schedules General Fund: Schedule of Revenues and Other Financing Sources Budget and Actual Schedule of Expenditures and Other Financing Uses Budget and Actual Page (continued)

6 Comprehensive Annual Financial Report Table of Contents Year Ended March 31, 2011 (concluded) Page Water Fund: Schedule of Revenues Budget and Actual Schedule of Expenditures and Other Financing Uses Budget and Actual Community Development Fund: Schedule of Revenues and Expenditures Capital Projects Fund: Combining Balance Sheet By Project Combining Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits) By Project Nonmajor Governmental Funds: Combining Balance Sheet Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds Library Fund: Schedule of Revenues and Other Financing Sources Budget and Actual Schedule of Expenditures Budget and Actual STATISTICAL SECTION (Unaudited) Financial Trends: Net Assets Changes in Net Assets Fund Balances (Deficits), Governmental Funds Changes in Fund Balances, Governmental Funds Revenue Capacity: Assessed Value and Actual Value of Taxable Property Direct and Overlapping Property Tax Rates (Per $1,000) Principal Taxpayers Real Property Tax Levies and Collections Debt Capacity: Ratios of General Bonded Debt per Capita Ratios of General Bonded Debt to Taxable Property Values Direct and Overlapping Governmental Activities Debt Computation of Legal Debt Margin Legal Debt Margin Demographic and Economic Information: Demographic and Economic Statistics Principal Employers Operating Information: Full-time Equivalent Town Employees by Function/Program Operating Indicators by Function/Program Miscellaneous Capital Asset Statistics by Function/Program... 97

7 INTRODUCTORY SECTION

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10 The annual budget serves as the foundation for the City s financial planning and control. Budget to actual comparisons are provided in this report for each individual governmental fund for which an annual budget is adopted. Certain funds, such as community development and capital projects, do not have annual adopted budgets. In these funds either the grant documents or project-length budgets are the control device. Local Economy While the City has been faced with many of the same negative economic conditions as other small cities, our revenues and expenditures have remained relatively steady. The City has survived the worst of its problems and has continued to rebound in the past five years. During 1997, Alstom, Inc. acquired all property, leasehold interests and personnel from Amerail. Alstom has made substantial commitments of resources to the City as its first and only location in the United States. Record commercial development over the past year has created viable retail operations within the City. These retail operations provide opportunity for local employment and have assisted in keeping sales tax dollars within the City limits. We continue our efforts to maintain a vital downtown area and central business district. Working in concert with the City s Chamber of Commerce, Hornell Partners for Growth, and the Industrial Development Agency, we continue to identify programs to assist existing merchants and recruit new businesses to this area. During the past ten years, the City s expenses relating to public safety have increased in amount and as a percentage of total expenses. This increase reflects both regional and national trends that have seen the salaries and benefits of police and firefighters growing at a much faster rate than those of other categories of public-sector employees. During this same ten year period, revenues from state aid, federal aid and charges for services have not kept pace with the increase in expenses. Therefore, the burden for supporting ongoing expenses has fallen to local taxpayers in the form of real property and sales taxes. The City of Hornell has been faced with the same economic challenges as all other local governments in New York State has faced. Due to a strong commercial base that has developed in the City over the past decade the City has been able to maintain services and stabilize taxes due to the growth in sales tax revenue. In late 2009 and early 2010 Hornell s major employer Alstom (transit car manufacturing) completed a major NYC contract (R-160). This was the largest transit car contract ever awarded in this country. As the contract neared completion Alstom reduced staffing and has continued to do so. Alstom maintains an employment level of approximately 150 employees; they have laid off over 500 people from 2009 through the spring of Alstom continues to seek contract work and is currently bidding on work as it becomes available. The City continues to work closely with Alstom and offer any assistance that it can so as to continue its success here in the City. That being said, the City also aggressively pursues new economic development opportunities continuously. The City has worked with retailer Tractor Supply and they have opened a new thirty thousand square foot store in the former P&C Market location filling a vacant commercial space with a successful new retailer. The City is also in preliminary conversations with several potential manufacturing businesses that could result in - 2 -

11 substantial employment opportunities in the months to come; working with EPX (Electrical Power Works) to create new jobs and with TTA (Transportation Transit Associates) to expand operations locally. Both projects are projected to result in new jobs over the next 2 years. This City is financially stable and has managed to deliver four successive budgets holding the tax levy and most recently reducing taxes by over 5%. We are diligent and mindful of the economic climate and will continue to manage our workforce and spending in a highly responsible manner. This attention to fiscal stability was evident in the recent bond rating upgrade by Standard and Poor s Rating Service. The City received a rating of A/stable with strengths being good financial management contributing to improved fund balance levels and a low overall debt burden. Long-term Financial Planning The City s General Fund, unreserved, undesignated fund balance at March 31, 2011 represents approximately 15.6 percent of its annual appropriations. The City Council feels this is a prudent level of fund balance as we continue to strive to provide excellent service to City residents, while maintaining a stable tax rate. In addition, the City has established certain reserves, which represent legal segregations of fund balance, for specific purposes; and designations, which represent management s intended use of fund balance. These reserves and designations serve to protect the City and assist in stabilizing tax rates. The City has outlined a long-term financial planning document that is updated annually. An important part of our planning process is our continual review and updating of our capital plan. Potential projects are discussed and evaluated as to their benefit to the community, as well as, funding alternatives and cost to taxpayers. This process has assisted in getting project properly prioritized, planned, funded and constructed in an effective manner. Major Initiatives We continue with some major projects that will benefit the City for years to come. Some of our accomplishments and initiatives include: Federation Lofts/Arts Center Restoration of historic building into nine loft apartments and rehabilitation of retail space. General Improvements - Capital projects towards improvements to the City s infrastructure will continue as resources permit. Housing Rehabilitation Program - The City continues to assist homeowners in helping to upgrade their property. The City has also has partnered with the Southern Tier Central BOCES in the construction of three new homes constructed throughout targeted neighborhoods within the City and sold to first time home buyers. Currently completing the fourth BOCES home with the fifth in planning stages. Sewer Line Installation Fairlawn Drive (23 acres) to promote housing development presently in undeveloped land

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14 Organizational Chart The Citizens of the City of Hornell, New York City Chamberlain Mayor Common Council City Attorney City Clerk Hornell Area Transit City Assessor Code Enforcement Zoning Board Board of Health Board of Public Works Board of Public Safety Superintendent of Public Works Police Chief Fire Chief Code Enforcement Engineering Water Filtration Plant General Foreman Water Pollution Control Plant Police Fire Ambulance Sewers Bridges Parks Streets Water City Garage - 6 -

15 City Officials Year Ended March 31, 2011 Name Title Elected: Honorable Shawn D. Hogan Christopher Koehler William Norton Angelo Sciotti Joseph Foreman Joseph Testani Jean Shepard Robert Lockwood John Carbone Robert Murray John Buckley Thelma A. Pelych Joseph E. Damrath Mayor Alderman Alderman Alderman Alderman Alderman Alderman Alderman Alderman Alderman Alderman City Chamberlain City Judge Appointed: Barbara Perot Joseph G. Pelych City Clerk City Attorney - 7 -

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17 FINANCIAL SECTION

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19 Drescher & Malecki LLP 3083 William Street, Suite 5 Cheektowaga, New York Telephone: Fax: Certified Public Accountants INDEPENDENT AUDITORS REPORT Honorable Mayor and Common Council City of Hornell, New York We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of City of Hornell, New York (the City ), as of and for the year ended March 31, 2011, which collectively comprise the City s basic financial statements as listed in the foregoing table of contents. These financial statements are the responsibility of the City s management. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City as of March 31, 2011, and the respective changes in financial position thereof, and the respective budgetary comparisons for the General and Water Funds for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Management s Discussion and Analysis, as listed in the foregoing table of contents, is not a required part of the basic financial statements, but is supplementary information required by accounting principles generally accepted in the United States of America. This required supplementary information is the responsibility of the City s management. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it

20 Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The combining and individual fund financial statements and schedules listed in the foregoing table of contents are presented for the purpose of additional analysis and are not a required part of the basic financial statements of the City. These financial statements and schedules are also the responsibility of the management of the City. Such additional information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections as listed in the foregoing Table of Contents are presented for the purpose of additional analysis and are not a required part of basic financial statements of the City. The introductory and statistical sections are the responsibility of the management of the City. Such additional information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it. July 14,

21 Management s Discussion and Analysis Year Ended March 31, 2011 As management of the City of Hornell, New York (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 March 31, This document should be read in conjunction with additional information that we have furnished in the City s financial statements, which follow this narrative. Financial Highlights The assets of the City exceeded its liabilities at the close of the fiscal year by $32,979,835 (net assets). Of this amount, $3,003,106, (unrestricted net assets) may be used to meet the government s ongoing obligations to citizens and creditors. The City s total net assets increased by $150,596 as a result of this year s activity. At the close of the current fiscal year, the City s governmental funds reported combined ending fund balances of $3,062,661, a decrease of $57,098 in comparison with the prior year. Approximately 77.6 percent of this total amount, $2,376,937, is available for spending at the City s discretion (unreserved, undesignated fund balance). At the close of the current fiscal year, unreserved, undesignated fund balance for the General Fund was $1,754,934, or approximately 15.6 percent of total General Fund expenditures. The City s total bonded indebtedness decreased by $306,257 during the current fiscal year due to payments made on principal on outstanding debt. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City s basic financial statements. The City s basic financial statements comprise 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 themselves. 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 similar to a private-sector business. The statement of net assets presents information on all of the City s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the government s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in prior or future fiscal periods (e.g., earned but unused vacation leave and depreciation expense on capital assets). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are

22 intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, streets maintenance, sanitation, economic development, and culture and recreation; the City does not engage in any business-type activities. The government-wide financial statements can be found on pages of this report. Fund financial statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and fiduciary funds. A. Governmental funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial 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 on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains six individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances (deficits) for the General, Water, Community Development and Capital Projects Funds, all of which are considered to be major funds. Data from the other two governmental funds are combined into a single aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual budget for the General and Water Funds. A budgetary comparison statement has been provided for these funds to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages of this report. B. Fiduciary funds Fiduciary funds are used to account for resources held for the benefit of parties outside the City. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support City s own programs. The basic fiduciary fund financial statements can be found on pages of this report. Notes to the financial statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report

23 Other information In addition to the basic financial statements and the accompanying notes, this report also presents a section with supplemental information about individual funds. The supplemental information can be found following the notes to the financial statements of this report. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the supplemental information mention above. Government-wide Financial Analysis As noted earlier, net assets may serve over time as useful indicator of a government s financial position. In the case of the City, assets exceeded liabilities by $32,979,835 at the close of the most recent fiscal year. Table 1, shown below, presents a condensed statement of net assets, compared to the prior year. TABLE 1 CONDENSED STATEMENT OF NET ASSETS March 31, Current assets $ 5,452,619 $ 5,404,878 Capital assets 37,076,354 37,112,598 Total assets 42,528,973 42,517,476 Current liabilities 2,388,312 2,282,543 Non-current liabilities 7,160,826 7,405,694 Total liabilities 9,549,138 9,688,237 Invested in capital assets, net of related debt 29,976,729 30,253,560 Unrestricted 3,003,106 2,575,679 Total net assets $ 32,979,835 $ 32,829,239 By far the largest portion of the City s net assets (90.9 percent) reflects its investment in capital assets (such as land, buildings, machinery and equipment, and infrastructure); less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City s investment in capital assets is reported net of related debt, 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. For the current year, the City s investment in capital assets, net of related debt decreased by $276,831 in comparison to the prior year. This decrease was primarily the result of depreciation expense incurred during the year and additional debt issued to acquire assets. The remaining balance of unrestricted net assets, $3,003,106, may be used to meet the government s ongoing obligations to citizens and creditors. At the end of the current fiscal year the City is able to report positive balances in both categories of net assets. The same situation held true for the prior year. The City had a current ratio of 2.28 at March 31, Such a ratio implies that the City has sufficient assets on hand to cover its liabilities that will come due in the coming year. A comparison of the ratio of current assets to current liabilities for the City at March 31, 2011 and 2010 is presented in Table

24 TABLE 2 CURRENT ASSETS AND CURRENT LIABILITIES March 31, Current assets $ 5,452,619 $ 5,404,878 Current liabilities 2,388,312 2,282,543 Ratio of current assets to current liabilities Governmental activities Governmental activities increased the City s net assets by $150,596 during the year ended March 31, Key elements of this increase are presented on the following page, in Table

25 TABLE 3 CHANGES IN NET ASSETS Year Ended March 31, Increase/(Decrease) Dollars Percent Program revenues: Charges for services $ 4,114,718 $ 4,287,037 $ (172,319) -4.0% Operating grants and contributions 975,715 1,777,319 (801,604) -45.1% Capital grants and contributions 1,521, , , % General revenues: Real property taxes and items 3,277,210 3,259,184 18, % Sales tax 3,209,351 3,044, , % Mortgage tax 47,497 42,356 5, % Utilities gross receipt tax 94, ,437 (11,218) -10.6% Use of money and property 25,996 20,957 5, % Sale of property and comp. for loss 21,264 11,139 10, % Miscellaneous 378, , , % State aid unrestricted 1,542,781 1,576,077 (33,296) -2.1% Total revenues 15,208,784 14,877, , % Program expenses: General government support 1,763,652 2,256,406 (492,754) -21.8% Public safety 4,174,954 4,085,458 89, % Health 895, , , % Transportation 3,305,890 3,151, , % Culture and recreation 772, ,470 37, % Home and community service 3,949,658 5,049,254 (1,099,596) -21.8% Interest on debt 195, ,900 (31,438) -13.9% Total expenses 15,058,188 16,178,943 (1,120,755) -6.9% Change in net assets 150,596 (1,301,370) Net assets beginning 32,829,239 34,130,609 Net assets ending $ 32,979,835 $ 32,829,239 As presented in Table 3, overall revenues increased 2.2 percent from the 2010 fiscal year. Key elements of this are as follows: Capital grants and contributions increased by $924,447, or percent, primarily as a result of state aid and federal aid received for current airport projects. Operating grants and contributions decreased by $801,604, or 45.1 percent, from the prior fiscal year mainly due to a reduction in community development activities

26 As presented in Figure 1 below, the City s most significant sources of revenues, for the year ended March 31, 2011, are charges for services of $4,114,718, comprising approximately 27.1 percent of total revenues, real property tax and items of $3,277,210, or 21.5 percent of total revenues, and sales tax of $3,209,351, which comprise 21.1 percent of total revenues. FIGURE 1 - REVENUES BY SOURCE Charges for services 27.1% State aid - unresricted 10.1% Sales tax 21.1% Operating grants and contributions 6.4% Other 3.8% Capital grants and contributions 10.0% Real property taxes 21.5% Overall expenses decreased 6.9 percent from the 2010 fiscal year. Key elements of this are as follows: Home and community services decreased by $1,099,596, or 21.8 percent. This decrease was mainly the result of the decreased activities within the Community Development Fund. General government support decreased by $492,754, or 21.8 percent. This decrease is primarily due to a reassessment of capital assets during the prior year which changed depreciation expense allocations. As presented on the following page in Figure 2, the most significant sources of expenses are public safety of $4,174,954, or 27.7 percent of total expenditures, home and community services of $3,949,658, comprising approximately 26.2 percent of total expenditures, transportation of $3,305,890, comprising 22.0 percent of total expenditures and general government support of $1,763,652, which comprise 11.7 percent of total expenditures

27 FIGURE 2 - PROGRAM EXPENSES BY TYPE Public safety 27.7% Home and community services 26.2% General government support 11.7% Other 12.4% Transportation 22.0% Financial Analysis of the City s Funds Governmental funds The focus of the City 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 financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. At March 31, 2011, the City s governmental funds reported combined ending fund balances of $3,062,661; a decrease of $57,098 in comparison with the prior year. Of the combined ending fund balances, $2,376,937 constitutes unreserved, undesignated fund balance, which is available for spending at the government s discretion; while $317,622 has been designated for the subsequent year s expenditures. The remainder of fund balance is reserved to indicate it is not available for new spending because it has been committed and reserved for specific purposes. The General Fund is the chief operating fund of the City. At March 31, 2011, the unreserved, undesignated fund balance of the General Fund was $1,754,934, while the total fund balance reached $2,314,036. As a measure of the General Fund s liquidity, it may be useful to compare both the unreserved, undesignated and total fund balances to total fund expenditures. Unreserved, undesignated fund balance represents approximately 15.6 percent of total General Fund expenditures, while total fund balance represents approximately 20.6 percent of that same amount. Fund balance of the City s General Fund increased by $55,780 during the current fiscal year. This compares favorably to the City s adopted budget which utilized $185,000 of fund balance. This increase is primarily due to the collection of greater than anticipated ambulance fees

28 The Water Fund had total revenues of $1,710,439, which were primarily comprised of charges and fees collected from the distribution of water services. Total expenditures were $1,498,637 and fund balance increased to $556,827. The fund balances of the City s Water Fund increased by $211,802 mainly due to conservative spending and less than anticipated increases in employee benefits. The Capital Projects Fund had a total fund balance deficit of $105,437. The fund balance of the Capital Projects Fund decreased by $388,981 due primarily to capital outlay expenditures incurred for airport improvement projects. The Community Development Fund realized a decrease in fund balance of $935 during the year ended March 31, General Fund Budgetary Highlights During the current year, there were supplemental appropriations to the General Fund s budget totaling $753,225. In the General Fund, health related expenditures, home and community services, debt-service expenditures relating to capital lease payments, and operating transfers exceeded budgetary appropriations. This primarily occurs as the uses of reserved fund balances are not included in the budget process. Significant variances between the final amended budget and actual results include additional revenues of $294,577 of departmental income, primarily due to larger than anticipated ambulance fees. Actual federal aid was $422,278 less than budgeted as the amended budget reflects aid received in the prior year. Additionally, total actual expenditures were $245,022 less than the final amended budget primarily due to transportation including expenditures that were incurred in the prior year. More detailed information about the City s General Fund budget is presented in the Statement of Revenues, Expenditures and Change in Fund Balance Budget and Actual and the notes to the financial statements. Capital Assets and Debt Administration Capital assets The City s investment in capital assets for its governmental activities as of March 31, 2011, amounts to $37,076,354 (net of accumulated depreciation). This investment in capital assets includes land, land improvements, buildings, machinery and equipment, and infrastructure. The City s assets are recorded at historical cost, or estimated historical cost, in the government-wide financial statements. In accordance with governmental accounting standards, the City depreciates all depreciable assets as outlined in the City s capital asset policy

29 A summary of capital assets, net of accumulated depreciation, for the City s governmental activities, at March 31, 2011 is presented in Table 4 below. TABLE 4 - CAPITAL ASSETS (NET OF ACCUMULATED DEPRECIATION) March 31, Land $ 669,498 $ 669,498 Construction in progress 1,634,387 - Land improvements 559, ,613 Buildings 3,607,981 3,760,919 Machinery and equipment 2,968,057 2,808,491 Infrastructure 27,636,843 29,229,077 Total $ 37,076,354 $ 37,112,598 Additional information on the City s capital assets can be found in note 6 to the financial statements. Long-term debt At March 31, 2011, the City had total long-term debt outstanding of $7,160,826 as compared to $7,405,694 in the prior year. Of the total long-term debt outstanding at March 31, 2011, $4,366,906 represents serial bonds issued by the City. New York State statutes limit the amount of general obligation debt a governmental entity may issue up to 7% of its five year valuation. The City is well within this debt limit. Details of the City s long-term outstanding debt are presented in Table 5 below. TABLE 5 - OUTSTANDING LONG-TERM DEBT March 31, Serial bonds $ 4,366,906 $ 4,673,163 EFC note payable 1,944,000 2,074,000 Due to NYS Retirement Systems 142, ,432 Other post-employment benefits 519, ,974 Capital leases 188,719 93,125 Total $ 7,160,826 $ 7,405,694 During the year ended March 31, 2010 the City s bond rating was upgraded from Baa to A. The rating reflects Standard and Poor s Ratings Services opinion that the City has good financial management contributing to improved fund balance levels and a low overall debt burden. Additional information on the City s long-term debt can be found in note 8 to the financial statements

30 Economic Factors and Next Year s Budgets and Rates The following factors were considered in preparing the City s budget for the year ending March 31, 2012, there are many other important factors outside the City s control that exert significant influence on the budget. Some of these factors are as follows. The unemployment rate (not seasonally adjusted) for the County of Steuben, which encompasses the City, was 9.9 percent at March 31, This rate is higher than the state s rate of 8.0 percent and higher than the national rate of 8.8 percent. Health insurance and retirement costs for employees as mandated by the New York State and Local Employees Retirement System and the New York State Police and Fire Retirement System are anticipated to increase at rates significantly above inflation. Revenues from state aid are anticipated to be relatively flat (no increase). During the budget process for the City budget, the City appropriated $317,622 of fund balances. This amount has been shown as a designation as of March 31, Requests for Information This financial report is designed to provide a general overview of the City s finances for all those with an interest in the City s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City Chamberlain s Office, City of Hornell, 82 Main Street, Hornell, New York

31 BASIC FINANCIAL STATEMENTS

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34 Statement of Net Assets March 31, 2011 Governmental Activities ASSETS Cash and cash equivalents $ 2,902,479 Accounts receivable 1,439,368 Due from other governments 1,110,772 Capital assets not being depreciated 2,303,885 Capital assets net of accumulated depreciation 34,772,469 Total assets 42,528,973 LIABILITIES Accounts payable 212,304 Retention payable 64,149 Accrued liabilities 255,949 Unearned revenue 784,966 Due to other governments 470,944 Bond anticipation notes payable 600,000 Non-current liabilities: Due within one year 542,972 Due within more than one year 6,617,854 Total liabilities 9,549,138 NET ASSETS Invested in capital assets, net of related debt 29,976,729 Unrestricted 3,003,106 Total net assets $ 32,979,835 The notes to the financial statements are an intergral part of this statement

35 Statement of Activities Year Ended March 31, 2011 Program Revenues Net (Expense) Revenue and Changes Operating Capital in Net Assets Charges for Grants and Grants and Governmental Function/Program Expense Services Contributions Contributions Activities Primary government: Governmental activities: General government support $ 1,763,652 $ 8,244 $ - $ - $ (1,755,408) Public safety 4,174, ,203 5,403 - (3,941,348) Health 895,720 1,127, ,415 Transportation 3,305, , ,383 1,500,923 (762,272) Culture and recreation 772,852 9,068 13,156 - (750,628) Home and community service 3,949,658 2,385, ,769 20,400 (1,273,125) Interest on debt 195, (195,462) Total primary government $ 15,058, $ 4,114,326 $ 975, $ 1,521,323 $ (8,446,828) 828) The notes to the financial statements are an intergral part of this statement. General revenues: Real property taxes and items 3,277,210 NSales tax 3,209,351 Mortgage tax 47,497 Utilities gross receipt tax 94,219 Use of money and property 25,996 Sale of property and compensation for loss 21,264 Miscellaneous 379,106 State aid unrestricted 1,542,781 Total general revenues 8,597,424 Change in net assets 150,596 Net assets beginning 32,829,239 Net assets ending $ 32,979,

36 Balance Sheet Governmental Funds March 31, 2011 Special Revenue Other Total Community Capital Governmental Governmental General Water Development Projects Funds Funds ASSETS Cash and cash equivalents $ 1,489,731 $ 505,688 $ 20,543 $ 600,976 $ 285,541 $ 2,902,479 Receivables (net of allowance for uncollectibles, where applicable) Accounts 364,392 87, ,574 Taxes 222, ,705 Loans , ,089 Due from other funds , ,467 Due from other governments 1,074, ,003-1,110,772 Total assets $ 3,151,597 $ 592,870 $ 859,099 $ 636,979 $ 285,541 $ 5,526,086 LIABILITIES AND FUND BALANCES (DEFICIT) Liabilities: Accounts payable $ 110,198 $ 20,845 $ 1,759 $ 78,267 $ 1,235 $ 212,304 Retention payable ,149-64,149 Accrued liabilities 193,823 15, , ,873 Due to other funds ,467 73,467 Due to other governments 470, ,944 Deferred revenue 62, , ,688 Bond anticipation notes payable , ,000 Total liabilities 837,561 36, , ,416 80,370 2,463,425 Fund balances (deficit): Reserved for: Special purposes 368, ,102 Unreserved, designated for: Subsequent year's expenditures 191, , ,622 Unreserved, undesignated reported in: General fund 1,754, ,754,934 Special revenue funds - 430,205 92, , ,440 Capital projects fund (deficit) (105,437) - (105,437) Total fund balances (deficit) 2,314, ,827 92,064 (105,437) 205,171 3,062,661 Total liabilities and fund balances (deficit) $ 3,151,597 $ 592,870 $ 859,099 $ 636,979 $ 285,541 $ 5,526,086 The notes to the financial statements are an intergral part of this statement

37 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets March 31, 2011 Amounts reported for governmental activities in the statement of net assets are different because: Total fund balance governmental funds $ 3,062,661 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. The cost of the assets is $96,496,659 and the accumulated depreciation is $59,420, ,076,354 Net accrued interest expense for bonds is not reported in the funds. (41,076) Real property taxes not collected within sixty days of year end are not recognized in the funds. 42,722 Long-term liabilities, including bonds payable, long-term note payable, capital leases, long-term retirement liability and other post employment benefits are not due and payable in the current period and therefore are not reported in the funds: Bonds payable $ (4,366,906) EFC note payable (1,944,000) Capital lease (188,719) Other post-employment benefits (519,156) Retirement liability (142,045) (7,160,826) Total net assets governmental activities $ 32,979,835 The notes to the financial statements are an intergral part of this statement

38 Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) Governmental Funds Year Ended March 31, 2011 Special Revenue Other Total Community Capital Governmental Governmental General Water Development Projects Funds Funds REVENUES Real property taxes $ 2,644,945 $ - $ - $ - $ 150,000 $ 2,794,945 Other tax items 498, ,002 Non-property tax items 3,303, ,303,570 Departmental income 2,079,527 1,697,838 83, ,055 3,998,620 Intergovernmental charges ,668-19,668 Use of money and property 13,238 12, ,221 Licenses and permits 35, ,632 Fines and forfeitures 60, ,181 Sale of property and compensation for loss 21, ,264 Miscellaneous 66, , ,217 10, ,106 State aid 2,286, ,730 8,582 3,129,950 Federal aid 330, , , ,362 Total revenues 11,340,181 1,710, ,165 1,509, ,328 15,224,521 EXPENDITURES Current: General government support 1,061,068 86, ,147,385 Public safety 2,764, ,961 2,864,418 Health 578, ,757 Transportation 2,349, ,349,889 Culture and recreation 287, , ,367 Home and community service 1,378, , , ,703,009 Employee benefits 2,367, , ,297 2,620,723 Capital outlay ,967,139-1,967,139 Debt service: Principal 277, , ,268 Interest 177,069 33, ,269 Total expenditures 11,241,756 1,498, ,100 1,967, ,592 15,425,224 Excess (deficiency) of revenues over (under) expenditures 98, ,802 (935) (457,731) (52,264) (200,703) OTHER FINANCING SOURCES (USES) Proceeds from capital lease 143, ,605 Transfers in 185, , , ,250 Transfers out (371,250) (371,250) Total other financing sources (uses) (42,645) , , ,605 Net change in fund balances (deficits) 55, ,802 (935) (388,981) 65,236 (57,098) Fund balances beginning 2,258, ,025 92, , ,935 3,119,759 Fund balances (deficit) ending $ 2,314,036 $ 556,827 $ 92,064 $ (105,437) $ 205,171 $ 3,062,661 The notes to the financial statements are an intergral part of this statement

39 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) of Governmental Funds to the Statement of Activities Year Ended March 31, 2011 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances (deficits) total governmental funds $ (57,098) Governmental funds report capital asset additions as expenditures. However, in the statement of activities, assets with an initial, individual cost of more than $1,000 are capitalized and the cost is allocated over their estimated useful lives and reported as depreciation expense. Capital asset additions $ 2,469,342 Depreciation expense (2,484,901) Loss on disposal of assets (20,685) (36,244) The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, interest is recognized as an expenditure in the governmental funds when it is due. In the statement of activities, interest expense is recognized as it accrues, regardless of when it is due. The net effect of these differences in the treatment of general obligation bonds and related items is as follows: Principal repayment of serial bonds $ 306,257 Principal repayment of EFC notes 130,000 Change in capital lease activity (95,594) Change in interest expense accrued 14, ,470 In the statement of activities, certain operating expenses (e.g. other post-employment benefits and retirement costs) are measured by the amounts earned by employees during the year. However, in the governmental funds expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). The net effect of these differences is: Other post-employment benefits $ (127,182) Retirement liability 31,387 (95,795) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds (i.e., deferred taxes). (15,737) Change in net assets of governmental activities $ 150,596 The notes to the financial statements are an intergral part of this statement

40 Statement of Revenues, Expenditures and Change in Fund Balance Budget and Actual General Fund Year Ended March 31, 2011 Budgeted Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Real property taxes $ 2,635,499 $ 2,635,499 $ 2,644,945 $ 9,446 Other tax items 474, , ,002 23,502 Non-property tax items 3,335,000 3,335,000 3,303,570 (31,430) Departmental income 1,784,950 1,784,950 2,079, ,577 Use of money and property 22,500 22,500 13,238 (9,262) Licenses and permits 49,000 49,000 35,632 (13,368) Fines and forfeitures 50,000 50,000 60,181 10,181 Sale of property and compensation for loss 30,000 30,000 21,264 (8,736) Miscellaneous 6,000 6,000 66,237 60,237 State aid 2,333,854 2,333,854 2,286,638 (47,216) Federal aid - 753, ,947 (422,278) Total revenues 10,721,303 11,474,528 11,340,181 (134,347) EXPENDITURES Current: General government support 1,159,477 1,091,441 1,061,068 30,373 Public safety 2,739,729 2,771,893 2,764,457 7,436 Health 559, , ,757 (19,183) Transportation 2,090,750 2,815,058 2,349, ,169 Culture and recreation 309, , ,033 24,429 Home and community services 1,198,850 1,167,567 1,378,534 (210,967) Employee benefits 2,295,813 2,368,826 2,367,295 1,531 Debt service: Principal 229, , ,654 (48,011) Interest 155, , ,069 (5,755) Total expenditures 10,738,553 11,486,778 11,241, ,022 Excess (deficiency) of revenues over (under) expenditures (17,250) (12,250) 98, ,675 OTHER FINANCING SOURCES (USES) Proceeds from capital lease , ,605 Transfers in 18,500 18, , ,500 Transfers out (186,250) (191,250) (371,250) (180,000) Total other financing sources (uses) (167,750) (172,750) (42,645) 130,105 Net change in fund balance (185,000) (185,000) 55, ,780 Fund balance beginning 2,258,256 2,258,256 2,258,256 - Fund balance ending $ 2,073,256 $ 2,073,256 $ 2,314,036 $ 240,780 The notes to the financial statements are an integral part of this statement

41 Statement of Revenues, Expenditures and Change in Fund Balance Budget and Actual Water Fund Year Ended March 31, 2011 Budgeted Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Departmental income $ 1,619,000 $ 1,619,000 $ 1,697,838 $ 78,838 Use of money and property 7,000 7,000 12,593 5,593 Miscellaneous 3,000 3,000 8 (2,992) Total revenues 1,629,000 1,629,000 1,710,439 81,439 EXPENDITURES Current: General government support 87,550 87,550 86,317 1,233 Home and community services 1,152,140 1,152, , ,765 Employee benefits 278, , ,131 71,869 Debt service: Principal 206, , ,614 - Interest 28,908 28,908 33,200 (4,292) Total expenditures 1,753,212 1,753,212 1,498, ,575 Excess (deficiency) of revenues over (under) expenditures (124,212) (124,212) 211, ,014 OTHER FINANCING SOURCES (USES) Transfers in 19,000 19,000 - (19,000) Transfers out (43,000) (43,000) - 43,000 Total other financing sources (uses) (24,000) (24,000) - 24,000 Net change in fund balance (148,212) (148,212) 211, ,014 Fund balance beginning 345, , ,025 - Fund balance ending $ 196,813 $ 196,813 $ 556,827 $ 360,014 The notes to the financial statements are an integral part of this statement

42 Statement of Fiduciary Net Assets March 31, 2011 Private - Purpose Trust ASSETS Cash and cash equivalents $ 63,318 Total assets 63,318 NET ASSETS Reserved for private purposes $ 63,318 The notes to the financial statements are an integral part of this statement

43 Statement of Changes in Fiduciary Net Assets Year Ended March 31, 2011 Private - Purpose Trust ADDITIONS Interest income $ 31 Miscellaneous revenue 33,789 Total additions 33,820 DEDUCTIONS Trust awards 38,483 Total deductions 38,483 Change in net assets (4,663) Net assets beginning 67,981 Net assets ending $ 63,318 The notes to the financial statements are an integral part of this statement

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45 Notes to the Financial Statements Year Ended March 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City of Hornell, New York (the City ) have been prepared in conformity with accounting principles generally accepted in the United States of America as applied to government units. The Governmental Accounting Standards Board ( GASB ) is the accepted standardsetting body for establishing governmental accounting and financial reporting principles. The more significant of the City s accounting policies are described below. A. Reporting Entity The City, which was incorporated in 1888, is governed by the Charter of the City of Hornell, the General City Law and other laws of the State of New York and various local laws and ordinances. The Common Council, which is the legislative body responsible for the overall operation of the City, consists of ten aldermen. The Mayor serves as chief executive officer and the Chamberlain serves as chief fiscal officer of the City. The City provides the following basic services: police and law enforcement, fire protection, street maintenance, culture and recreation, sanitation, water facilities and community development. All governmental activities and functions performed for the City are its direct responsibility. No other governmental organizations have been included or excluded from the reporting entity. The financial reporting entity consists of (a) the primary government which is the City of Hornell, (b) organizations for which the primary government is financially accountable, and (c) 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. Based on the foregoing criteria, no other organizations, functions or activities are included in the City s reporting entity. Related Organizations Although the following organizations, functions or activities are related to the City, they are not included in the City reporting entity. The City of Hornell Industrial Development Agency (the Agency ) is a Public Benefit Corporation created under Article 18-A, Title 1, of New York State General Municipal Law to promote the economic welfare, recreation opportunities and prosperity of the City s inhabitants. Members of the Agency are appointed by the City Common Council. Agency members have complete responsibility for management of the Agency and accountability for fiscal matters. The City is not liable for the Agency s debt