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Res 2021-03-883 Accepting the Fiscal Year 2020 Financial Audit of the City of Anna
CITY OF ANNA, TEXAS RESOLUTION NO. A RESOLUTION ACCEPTING THE FISCAL YEAR 2020 FINANCIAL AUDIT OF THE CITY OF ANNA. WHEREAS, the City of Anna, Texas ("the City") is committed to principles and practices of open and fair government that honor the public trust; and WHEREAS, Article 7 Section 7.18 of the City's Home -Rule Charter ("the Charter") requires an annual independent audit of all accounts of the City by a certified public accountant. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ANNA, TEXAS, THAT: Section 1. Recitals Incorporated. The above -referenced recitals are incorporated herein as if set forth in full for all purposes. Section 2. Audit Accepted The City Council has hereby accepted the FY 2020 audit attached hereto as Exhibit 1. PASSED AND APPROVED by the City Council of the City of Anna, Texas, on this the 23rd day of March 2021. ATTEST: arrie L. Land, City Secretary APPROVED: ���• \ e rPilc�, Mayor DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 City of Anna, Texas Comprehensive Annual Financial Report For the Fiscal Year Ended September 30, 2020 Prepared by The Finance Department DRAFT FOR DISCUSSION PURPOSES ONLY — Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. City of Anna, Texas 3/16/2021 - version 1 Comprehensive Annual Financial Report For the Fiscal Year Ended September 30, 2020 Table of Contents Page Introductory Section Letter of Transmittal v GFOA Certificate of Achievement x Organizational Chart xi List of Elected Officials and Management xii Financial Section Independent Auditor's Report 3 Management's Discussion and Analysis 7 Basic Financial Statements Government -Wide Financial Statements: Statement of Net Position 19 Statement of Activities 20 Fund Financial Statements: Balance Sheet - Governmental Funds 22 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 23 Statement of Revenues, Expenditures, and Changes in Fund Balances 24 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 25 Proprietary Fund Financial Statements Statement of Net Position -Proprietary Fund 26 Statement of Revenues, Expenses and Changes in Net Position -Proprietary Fund 28 Statement of Cash Flows - Proprietary Fund 29 Fiduciary Fund Financial Statements Statement of Fiduciary Net Position - Agency Fund 31 Notes to the Financial Statements 33 Required Supplementary Information Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget (GAAP Basis) and Actual - General Fund 64 Schedule of Changes in Net Pension Liability and Related Ratios - Texas Municipal Retirement System (TMRS) 65 Schedule of Employer Contributions to Pension Plan -TMRS 66 Schedule of Changes in Total OPEB Liability and Related Ratios - TM RS 67 Schedule of OPEB Contributions -TMRS 68 Combining and Individual Fund Financial Statements and Schedules Combining Balance Sheet -Nonmajor Governmental Funds 72 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 74 Balance Sheet - Community Development Corporation 76 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position - Community Development Corporation 77 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. City of Anna, Texas 3/16/2021 = version 1 Comprehensive Annual Financial Report For the Fiscal Year Ended September 30, 2020 Table of Contents - Continued Page Combining and Individual Fund Financial Statements and Schedules -Continued Statement of RevenuesExpenditures, and ChF anges in und Bal ,ance - Community Development Corporation 78 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities - Comm. Development Corporation 79 Balance Sheet- Economic Development Corporation 80 Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position -Economic Development Corporation 81 Statement of Revenues, Expenditures, and Changes in Fund Balance - Economic Development Corporation 82 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the Governmental Fund to the Statement of Activities- Economic Development Corporation 83 Schedule of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual: Community Development Corporation 84 Economic Development Corporation 85 Debt Service Fund 86 Statement of Changes in Assets and Liabilities - PI D Agency Fund 88 Statistical Section (Unaudited) Financial Trends Net Poson by Component 92 Changes in Net Position 93 Fund Balances of Governmental Funds 95 Changes in Fund Balances of Governmental Funds 96 Revenue Capacity Assessed Value and Estimated Actual Value of Taxable Property 97 Direct and Overlapping Property Tax Rates 98 Principal Property Taxpayers 99 Property Tax Levies and Collections 100 Debt Capacity Ratios of Outstanding Debt by Type 101 Ratios of General Bonded Debt Outstanding 102 Direct and Overlapping Governmental Activities Debt 103 Pledged -Revenue Coverage 104 Demographic and Economic Information Demographic and Economic Statistics 105 Principal Employers 106 Operating Information FulkTiime Equivalent City Government Employees by Function/Program 107 Operating Indicators by Function/Program 108 Capital Asset Statistics by Function/Program 109 ii DRAFT FOR DISCUSSION PURPOSES ONLY — Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Introductory Section DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 IV DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 THE CITY OF manna March xx, 2021 To the Honorable Mayor and City Council, City Manager, Neighbors of Anna. The Comprehensive Annual Financial Report (Annual Report) of the City of Anna, Texas, for the fiscal year ended September 30, 2020 including the independent auditor's report, is hereby submitted in accordance with the provisions of Section 10.3 of the City Charter. Also, state law requires that all general-purpose local governments publish within six months of the close of each fiscal year a complete set of financial statements presented in conformity with the generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by an independent firm of licensed public accountants. This report is published to fulfill those requirements for the fiscal year ended September 30, 2020. This report is published to provide the Mayor and City Council, city staff, our neighbors, representatives of financial institutions, our bondholders and other interested parties with detailed information concerning the financial condition and activities of the City. Responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds of the City. Because the cost of internal controls should not outweigh their benefits, the City of Anna's comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute assurance, that the financial statements will be free from material misstatement. The City of Anna's financial statements have been audited by Weaver and Tidwell, L.L.P., a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended September 30, 2020, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor's report is presented as the first component of the financial section of this report. Management's discussion and analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis to accompany the basic financial statements. This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. v DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Profile of the City The City of Anna, incorporated in 1913, is located u1 north central Collin County on U.S. 75, State Highway 5, and State Highway 121, about 40 miles north of Dallas, and is one of the fastest growing cities in the Dallas/Fort Worth Metroplex. The City currently occupies a land area of approximately 15.96 square miles and services approximately 15,010 residents. The City of Anna is empowered to levy a property tax on both real and personal properties located within its boundaries. It also is empowered by state statue to extend its corporate limits by annexation, which occurs periodically when deemed appropriate by the governing body. The City of Anna operates under a home rule charter adopted in 2005, with a Cowlcil-Manager form of government. Policy -malting and legislative authority are vested in the City Council consisting of the Mayor and six Council members. The City Council is responsible for, among other things, passing ordinances, resolutions, and regulations governing the City as well as adopting the budget which serves as the foundation for financial planning and control. The City Council appoints the City Manager, who has full responsibility for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the government and appointing the heads of the various departments. The City Council also appoints the City Attorney, City Secretary, and Municipal Judge. The Council is elected on a non -partisan basis. Council members serve three-year staggered terms. The City of Anna provides a full range of services, including police and fire protection; municipal court; parks and recreation; water and sewer services, solid waste collection/disposal; and the construction and maintenance of streets and other infrastructure. In addition, the City of Anna is also financially accountable for a legally separate economic development corporation and community development corporation, which are reported separately with the City of Anna's financial statements. Additional information on these legally separate entities can be found in the Notes to the Financial Statements. The City currently has 102.5 budgeted full-time equivalent positions. The annual budget serves as the foundation for the City of Anna's financial planning and control. All departments of the City of Anna are required to submit a budget that would maintain current services and new requests for appropriations separately to the City Manager. The City Manager and Budget Manager then use these requests as the starting point for developing a proposed budget. The City Manager and Budget Manager then presents a proposed budget to Council for review no later than August 15th. The Council is required to hold public hearings on the proposed budget and to adopt the final budget no later than September 20th. The appropriated budget is prepared by fund and department (e.g., police). The City Manager may authorize transfers of appropriations within a department and between departments within a fund and within major line item categories. Increases or decreases of appropriations to a fund; however, require special approval of the City Council in the form of an Ordinance formally amending the adopted budget. Budget -to -actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the General Fund, this comparison is presented as part of the basic financial statement for the governmental funds. For other governmental funds with appropriated annual budgets, this comparison is presented in the governmental fund subsection of the report. vi DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City of Anna operates. Local Economy The City of Anna's economic outlook continues to improve due to the overall improvement in the economy and continued residential and commercial growth. This is evidenced by local economic indicators such as a significant increase in tax appraisal values, the increase in residential building permits, and continued sales tax growth. Residential construction activity remains strong in the City of Anna. In FY 2020, the City received 830 single family building permit applications. In addition, Starbucks, Whataburger, Chick-fil-A, Salsa Tex Mex, Sunrise Cafe, a surgery center, and a free-standing emergency room will be opening in the FY 2020. The Anna Economic Development Corporation (EDC) works in cooperation with the Community Development Corporation to coordinate efforts that expand the city's business tax base with a focus on creating primary jobs within the City of Anna. The corporations have provided incentives that resulted in much of the retail development that has occurred in Anna since 2008. The EDC was instrumental in recruiting Brookshires Grocery Company, CVS pharmacy, McDonalds, and Walmart. The EDC owns and operates Inc -Cube, a small business incubator located in our downtown. The corporations cooperatively purchased an 85-acre tract of land at the northeast corner of State Highway 5 and the Collin County Outer Loop with the intent of developing a business park. Anticipated growth is expected to continue for the north Collin County region. This has improved the overall connectivity and mobility to and within Anna, but also will bring continued growth and new development. Long -Term Financial Planning The City's fund balance/operating position concept continues to be an important factor in policy decisions. The City's Financial Policy states that the City's target unassigned fund balance is an amount equal or greater than 25% of annual general fund operating expenditures. The City's ending unassigned fund balance for fiscal year 2020 reflected a fund balance of 63% of total expenditures, well above the stated goal. These resources allow the City to avoid disruptions in services during economic downturns and to ensure that there will be adequate liquid resources to serve as a financial cushion against the potential shock of unanticipated events. Major Initiatives At the end of the 2019-2020 fiscal year, the City of Anna had a number of major projects in progress. The City Council and City staff continue to work to ensure completion of ongoing projects that will provide infrastructure improvements to the City of Anna. During 2019-2020, the City met with governmental partners including Collin County, TxDOT and the North Central Texas Council of Governments (NCTCOG) to review the City's transportation priorities and to discuss opportunities to partner on future projects. The City also continues to use developer incentives/agreements to improve other critical roadways within the City. v46 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 The City completed the process of selecting a Construction Manager at Risk (CMR) and moved forward with determining the maximum guaranteed price to construct a new municipal complex. These projects are funded from Certificate of Obligation bonds the City issued in the FY 2018. These City facilities are needed in order to continue to expand, provide quality services to the neighbors, and provide a more central location for staff to be located. The new municipal complex will include a City Hall with a Police Department and a stand-alone fire station. In addition, the Public Works Department completed the Foster Crossing Waterline project in August of 2020, extending a 124rich water main from the east side of State Highway 5 to Pecan Grove Phase 1. The City also began the preliminary engineering for Ferguson Parkway, has progressed the engineering design of Rosamond Parkway and engineering design for the Hurricane Creek Trunk Sewer. All of these key projects will improve and expand infrastructure to serve the growing needs of the community. The Parks Department began several key projects during FY 2020. One major project was the restoration of the train depot which was relocated to Shirley Heritage Park. This was done in conjunction with the Anna Area Historical Preservation Society. In addition, a community build playground was constructed at Shirley Heritage Park, as well as a gazebo. In the upcoming year, the City will work to finalize the park by adding a locomotive to the park. Another Park's project that was completed in FY 2020 was the construction of the City's first dog park. The dog park consists of open space, a steel fence, a pergola structure, benches, water fountains, and obstacle equipment for the dogs to utilize. Additional information related to the capital improvement projects and funding for those improvements is located in the Five -Year Capital Improvements Plan located in the City's annual budget book. Fund Accounting: The City's accounting system is organized and operated on a "fund basis." Each fund is a distinct, self -balancing entity. A description of the various major funds and fund types is contained in the Notes of the financial statements. A description of each individual non - major fund is contained at the beginning of its related combined financial statement. Basis of Accounting: The City's accounting records for all governmental funds are maintained on the modified accrual basis of accounting. This method recognizes revenue when it is measurable and available and expenditures when goods or services are received. All proprietary funds are accounted for using the accrual basis of accounting; revenue is recognized when it is earned, and expenses are recognized when they are incurred. Internal Control: Management of the City is responsible for establishing and maintaining an internal control structure. This structure is designed to provide reasonable, but not absolute, assurance that: (1) City assets are protected from loss, theft or misuse; and (2) City financial records and data are accurate and reliable. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived from it, and that the evaluation of cost and benefits requires estimates and judgments by management. viii DRAFT FOR DISCUSSION PURPOSES ONLY — Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Budgetary Control: Each year, on or before September 20u", the City Council adopts an annual operating budget for the ensuing fiscal year. The operating budget includes anticipated revenues and expenditures for the General Fund, Special Revenue Funds, the Debt Service Fund, and Proprietary Funds. The budget is a planning device that defines the type, quality, and quantity of City goods and services that will be provided to our neighbors. The budget is also a control device that serves as a system of "checks and balances" between levels of City government. The budgetary system ensures that individual departments contain their expenditures within limitations set by the City management, and that City management contains expenditures for the entire City within limitations set by the City Council. After adoption, the City Manager may authorize transfers of appropriations within a department and between departments within a fund and within major line item categories. Increases or decreases of appropriations to a fund; however, require special approval of the City Council in the form of an Ordinance formally amending the adopted budget. Awards and Acknowledgements Awards —The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Anna for its Annual Report for the fiscal year ending September 30, 2019. This is the second year the City has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current Annual Report continues to meet the Certificate of Achievement Programs requirements. We will be submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgements -The presentation of this report could not have been accomplished without the efficient and dedicated services of the entire staff of the Finance Department and all department directors. We would like to express our appreciation to all members of the departments who assisted and contributed to the preparation of this report. We would also like to thank the Mayor and the City Council for their continued interest and support for maintaining the highest standards of professionalism in the management of the City of Anna financial operations. Furthermore, the work of the independent auditors from Weaver and Tidwell. L.L.P., is greatly appreciated. Respectfully submitted, Alan Guard Finance Director ix DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revisIon and should not be relied upon or distributed. 3/16/2021 - version 1 Government Finance Officers Association U1 UJAUMIC OJ Achle%vernent for Excellence in .Fin�r�ei.l R ep Ortir� Presented to arty of A�llna For ifis Cornpreliensive Annul Financial Report for the Fiscal Year Ended �epternber �(�� 2Ql $ Executive Director/CEO x Director/CEO x Mayor and City Council Municipalludgel City Attorney City Manager City Secretary CoommimmIss ssions Assistant City Economic Human Resource Police Financial Service Public Works Development I Fire Rescue Manager (COO) Development Services �rr�r.rr...--+.r.+-• - - ._ �^- fir-- - Business Policy Formula WaterProdudio Comprehensive StrategicPlannin Development &Management CrimePreventio Budget &Distribution Planning Fire Prevention Business Volunteer DevelopmerrtPla Publiclnformati Retention Recruitment& Patrol Accounting Collection& Review FireSuppressioi Retention Treatment �.`ommunlfy& Business Compensation& Criminal Street Building Permitsd� v Fire Safety Neighborhood Recruitment Benefits InvesLgations UulityBdling Maintenance Inspections I Education Servces Market Analysis Labor Relations Community Municipal Court GIS Engi—'nee�ring I Emergency Recreation Discipline Programs Services Management Services --� EDC/CDC CaMl -_� Projects Zoning Ambulatory Code Complian Risk Managemen Animal Control Purchasing Community Services Board Liaison Investment Administration Intl-- - - - Revenue & information g ncy Recognition & Volunteer Technology Awards K-9 Investment Fleet&FaaGSes mute o-an Management gY Relations Management g City of Anna, Texas Elected Officials and Management September 30, 2020 City Council Nate Pike Kevin Toten Josh Vollmer Stan Carver II Randy Atchley Danny Ussery Lee Miller Jim Proce, ICMA-CM Ryan Henderson Clark McCoy Carrie Land Alan Guard Terri Doby Dean Habel Ray Isom Greg Peters, PE Ross Altobelli Stephanie Beitelschies Joey Grisham Marc Marchand DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 Mayor Place 1 Place 2 - Deputy Mayor Pro-Tem Place 3 Place 4 Place 5 Place 6 - Mayor Pro-Tem Management City Manager Assistant City Manager City Attorney City Secretary Finance Director Budget Manager Chief of Police Fire Chief Director of Public Works Director of Development Services Director of Human Resources Economic Development Director Director of Neighborhood Services xii DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Financial Section DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 2 DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 Independent Auditor's Report The Honorable Mayor and Members of the City Council of the City of Anna, Texas Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business - type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Anna, Texas (the City), as of and for the fiscal year ended September 30, 2020, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with aung standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 3 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The Honorable Mayor and Members of the City Council of the City of Anna, Texas Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Anna, Texas, as of September 30, 2020, and the respective changes in financial position, and, where applicable, cash flows thereof for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and the Required Supplementary Information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the Required Supplementary Information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The Introductory Section, Statistical Section and Combining and Individual Fund Statements and Schedules, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining and Individual Fund Statements and Schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Statements and Schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The Honorable Mayor and Members of the City Council of the City of Anna, Texas Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated �x, 2021, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. (Firm Name) 5 DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 Management's Discussion and Analysis As management of the City of Anna, Texas (the "City"), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2020. We encourage readers to consider the information presented here in conjunction with additional information contained in this report. Financial Highlights • The City's total combined net position was $119,600,973 at September 30, 2020. Of this, $13,788,541 (unrestricted net position) may be used to meet the City's ongoing obligations to its citizens and creditors. • The City had an overall increase in net position of $27,547,223. The increase is primarily a result of $13,181,867 of capital grants and contributions. • On a government -wide basis, the City's total liabilities increased by $1,322,691. The increase in liabilities is primarily a result of increased payables due to contractors for PID capital projects. • At the close of the current fiscal year, the City's governmental funds reported combined fund balances of $39,1 15,491, a decrease of $6,928,920. This decrease is largely due to an increase in capital projects expenditures. • As of the end of the year, the unassigned fund balance of the General Fund was $6,421,60/ or 63z of total General Fund expenditures. Overview of the Financial Statements The discussion and analysis provided here is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements consist of three components: 1) government -wide financial statements, 2) fund financial statements, and 3) the notes to financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. Government -Wide 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 aprivate-sector business. The statement of net position presents information on all of the City's assets, deferred inflows of resources, deferred outflows of resources, liabilities, and net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. Other non -financial factors, such as the City's property tax base and the condition of the City's infrastructure, need to be considered in order to assess the overall health of the City. The statement of activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position 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 for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). 7 DRAFT FOR DISCUSSION PURPOSES ONLY — Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 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 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, public works, culture and recreation, and economic development. The business -type activities of the City include water, sewer, and sanitation operations. 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 three categories: governmental funds, proprietary funds, and a fiduciary fund. 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 assessing 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 funds balance sheet and the governmental funds 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 twelve individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund, Capital Projects Fund, Debt Service Fund, and PID Capital Projects Fund, which are all considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non -major governmental funds is provided in a separate section of the report. The City adopts an annual appropriated budget for its General Fund and Debt Service Fund, Proprietary Funds The City's proprietary fund is an enterprise funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City uses an enterprise fund to account for its water, sewer, and sanitation operations. All activities associated with providing such services are accounted for in this fund, including administration, operation, maintenance, debt service, capital improvements, meter maintenance, billing and collection. The City's intent is that costs of providing the services to the general public on a continuing basis is financed through user charges in a manner similar to a private enterprise. Proprietary financial statements provide the same type of information as the government -wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Utility Fund, which is considered to be a major fund of the City. E:3 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Fiduclary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government -wide financial statements because the resources of those funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The City has one fiduciary fund, the PID Agency Fund, Component Units The City maintains the accounting and financial statements for two component units. The Anna Economic Development Corporation and Anna Community Development Corporation are discretely presented component units. Notes to Financial Statements The notes provide additional information that is necessary to acquire a full understanding of the data provided in the government -wide and fund financial statements. Other Information In addition to the basic financial statements, MD&A, and accompanying notes, this report also presents certain Required Supplementary Information (RSI). The required RSI includes a budgetary comparison schedule for the General Fund, schedule of changes in the net pension liability and related ratios, schedule of employer contributions for the Texas Municipal Retirement System (TMRS), schedule of changes in the Total OPEB liability and related ratios, and schedule of OPEB contributions for TMRS. RSI can be found after the basic financial statements. GOVERNMENT -WIDE FINANCIAL ANALYSIS As noted previously, net position may serve over time as a useful indicator of the City's financial position. For the City of Anna, net position was $1 19,600,973 as of September 30, 2020, in the primary government. The largest portion of the ('ity's restricted net position, $84,816,483, reflects its investments in capital assets (e.g., land, park improvements, buildings, furniture and fixtures, streets, drainage, machinery and equipment, etc.), less any 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 its 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 assets themselves cannot be used to liquidate these liabilities. 0 The following table reflects the condensed Statement Of Net Position: Current and other assets Restricted assets Capital assets, net Total assets Deferred outflows of resources Current liabilities Noncurrent liabilities Total liabilities Deferred inflows of resources Net position: Net investment in capital assets Restricted U nrestricted Total net position Statement of Activities: Governmental Activities 2020 2019 Business -Type Activities 2020 $ 22,865,426 $ 27,185,006 $ 7,454,522 21,495,917 21,056,952 13578,283 62,282553 40,208,990 56,968,521 106,643,896 88,450,948 78,001,326 5,942,204 35,188,753 41,130,957 265,350 654,679 2,657,248 35,916,425 38,573,673 113,902 316,144 3,735,447 20,956,999 24,692,446 71,440 2019 $ 6,017,875 9,638,637 51,614,559 67,271,071 327,114 3,617,083 22,308,956 25,926,039 36A48 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Total Primary Government 2020 2019 $ 30,319,948 $ 33,202,881 35,074,200 30,695,589 119,251,074 91,823,549 184 ,645,222 155,722,019 1,1 15,944 9,677,651 56,145,752 65,823,403 336,790 981,793 6,274,331 58,225,381 64,499,712 150,350 49,605,921 33,525,898 35,210,562 28,632,597 84,816,483 62,158,495 7,417,666 10,681,098 13,578,283 9,638,637 20,995*949 20,319,735 9,023,802 6,21 1 t056 4,764,739 3,364A64 13,788,541 9,575,520 $ 66,047,389 $ 50A18,052 $ 53,553,584 $ 41,635,698 $119,600,973 $ 92,053,750 The following table provides a summary of the City's changes in net position: Revenues: Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Property taxes Sales taxes Franchise and local taxes Investment income Other revenue Gain on sale of assets Total revenues Expenses: General government Public safety Culture and recreation Public works Community services Interest and fiscal charges Water, sewer, & sanitation Total expenses Change in net position before transfers Transfers Total transfers Change in net position Net position, beginning Net position, ending Governmental Business -type Activities Activities 2020 2019 2020 2019 $ 5,271,759 $ 3,134,869 $15,852,302 $14,947,376 616,207 182,943 - - 13,181,867 15,179,885 6,716,462 3,346,660 7,929,530 6,728,848 - - 2,271,318 1,835,421 - - 657,331 61 Z332 - - 568,920 1,044,444 1754248 276,200 70,560 84,132 20,111 135,910 - 30,587,603 28,938,784 22,744,012 M570,236 4,0 2,669,302 1,9583 - 5,074,735 3,972,445 - 1,172,862 877,455 - 3,176,361 4,113,592 - lo280A15 1,2894798 - 1,258,204 2,420,375 - - II,152,513 131 *879 14,627,748 11,152*513 4,6 11 ,664,343 11,664,343 15,955,724 14,311,036 11,591,499 6,905,893 (326,387) (48,542) 326,387 48,542 (326,387) (48,542) 326,387 48,542 15,629,337 14,262A94 11,917,886 6,954A35 50,418,052 36,155,558 41,635,698 3081,263 Total Primary Government 2020 2019 $ 21,124,061 616,207 19,898,329 7,929,530 2,271,318 657,331 744,168 70,560 20,111 53,331,615 2,669,302 5,074,735 1,172,862 3,176,361 1,280,415 1,258,204 11,152,513 $18,082,245 182,943 18,526,545 6,728,848 1,835,421 612,332 1,320,644 84,132 135,910 47,509,020 1,954,083 3,972,445 877,455 4,113,592 1,289,798 2,420,375 11 LLA QAq 25,784,392 26,292,091 27,547,223 21,216,929 27,547,223 21,216,929 92,053,750 70,836,821 $66,047,389 $50,418,052 $53,553,584 $41,635,698 $119,600,973 $92,053,750 The following table provides a summary of the City's changes in net position: Revenues: Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Property taxes Sales taxes Franchise and local taxes Investment income Other revenue Gain on sale of assets Total revenues Expenses: General government Public safety Culture and recreation Public works Community services Interest and fiscal charges Water, sewer, & sanitation Total expenses Change in net position before transfers Transfers Total transfers Change in net position Net position, beginning Net position, ending Governmental Business -type Activities Activities 2020 2019 2020 2019 $ 5,271,759 $ 3,134,869 $15,852,302 $14,947,376 616,207 182,943 - - 13,181,867 15,179,885 6,716,462 3,346,660 7,929,530 6,728,848 - - 2,271,318 1,835,421 - - 657,331 61 Z332 - - 568,920 1,044,444 1754248 276,200 70,560 84,132 20,111 135,910 - 30,587,603 28,938,784 22,744,012 M570,236 4,0 2,669,302 1,9583 - 5,074,735 3,972,445 - 1,172,862 877,455 - 3,176,361 4,113,592 - lo280A15 1,2894798 - 1,258,204 2,420,375 - - II,152,513 131 *879 14,627,748 11,152*513 4,6 11 ,664,343 11,664,343 15,955,724 14,311,036 11,591,499 6,905,893 (326,387) (48,542) 326,387 48,542 (326,387) (48,542) 326,387 48,542 15,629,337 14,262A94 11,917,886 6,954A35 50,418,052 36,155,558 41,635,698 3081,263 Total Primary Government 2020 2019 $ 21,124,061 616,207 19,898,329 7,929,530 2,271,318 657,331 744,168 70,560 20,111 53,331,615 2,669,302 5,074,735 1,172,862 3,176,361 1,280,415 1,258,204 11,152,513 $18,082,245 182,943 18,526,545 6,728,848 1,835,421 612,332 1,320,644 84,132 135,910 47,509,020 1,954,083 3,972,445 877,455 4,113,592 1,289,798 2,420,375 11 LLA QAq 25,784,392 26,292,091 27,547,223 21,216,929 27,547,223 21,216,929 92,053,750 70,836,821 $66,047,389 $50,418,052 $53,553,584 $41,635,698 $119,600,973 $92,053,750 4,0 2,669,302 1,9583 - 5,074,735 3,972,445 - 1,172,862 877,455 - 3,176,361 4,113,592 - lo280A15 1,2894798 - 1,258,204 2,420,375 - - II,152,513 131 *879 14,627,748 11,152*513 4,6 11 ,664,343 11,664,343 15,955,724 14,311,036 11,591,499 6,905,893 (326,387) (48,542) 326,387 48,542 (326,387) (48,542) 326,387 48,542 15,629,337 14,262A94 11,917,886 6,954A35 50,418,052 36,155,558 41,635,698 3081,263 Total Primary Government 2020 2019 $ 21,124,061 616,207 19,898,329 7,929,530 2,271,318 657,331 744,168 70,560 20,111 53,331,615 2,669,302 5,074,735 1,172,862 3,176,361 1,280,415 1,258,204 11,152,513 $18,082,245 182,943 18,526,545 6,728,848 1,835,421 612,332 1,320,644 84,132 135,910 47,509,020 1,954,083 3,972,445 877,455 4,113,592 1,289,798 2,420,375 11 LLA QAq 25,784,392 26,292,091 27,547,223 21,216,929 27,547,223 21,216,929 92,053,750 70,836,821 $66,047,389 $50,418,052 $53,553,584 $41,635,698 $119,600,973 $92,053,750 11 ,664,343 11,664,343 15,955,724 14,311,036 11,591,499 6,905,893 (326,387) (48,542) 326,387 48,542 (326,387) (48,542) 326,387 48,542 15,629,337 14,262A94 11,917,886 6,954A35 50,418,052 36,155,558 41,635,698 3081,263 Total Primary Government 2020 2019 $ 21,124,061 616,207 19,898,329 7,929,530 2,271,318 657,331 744,168 70,560 20,111 53,331,615 2,669,302 5,074,735 1,172,862 3,176,361 1,280,415 1,258,204 11,152,513 $18,082,245 182,943 18,526,545 6,728,848 1,835,421 612,332 1,320,644 84,132 135,910 47,509,020 1,954,083 3,972,445 877,455 4,113,592 1,289,798 2,420,375 11 LLA QAq 25,784,392 26,292,091 27,547,223 21,216,929 27,547,223 21,216,929 92,053,750 70,836,821 $66,047,389 $50,418,052 $53,553,584 $41,635,698 $119,600,973 $92,053,750 Total Primary Government 2020 2019 $ 21,124,061 616,207 19,898,329 7,929,530 2,271,318 657,331 744,168 70,560 20,111 53,331,615 2,669,302 5,074,735 1,172,862 3,176,361 1,280,415 1,258,204 11,152,513 $18,082,245 182,943 18,526,545 6,728,848 1,835,421 612,332 1,320,644 84,132 135,910 47,509,020 1,954,083 3,972,445 877,455 4,113,592 1,289,798 2,420,375 11 LLA QAq 25,784,392 26,292,091 27,547,223 21,216,929 27,547,223 21,216,929 92,053,750 70,836,821 $66,047,389 $50,418,052 $53,553,584 $41,635,698 $119,600,973 $92,053,750 DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Graphic presentations of selected data from the summary tables are displayed below to assist in the analysis of the City's activities. Governmental Activities- Revenues Other income Investment categories 0.30% income 1.867o Grants and Property taxes l Contributions 25.92% ` 45.11 % Charges for services 17.23% Franchise and Sales taxes 7.43% local taxes 2.15% For the year ended September 30, 2020, revenues from governmental activities totaled $30,587,603. Capital grants and contributions, property taxes, and charges for services are the City's largest revenue sources. Property taxes increased by $1,200,682 or 18% when compared to 2019 due to an increase in overall assessed property values. Capital grants and contributions decreased by $1,998,018 mainly due to a decrease in contributed capital relating to streets and drainage. The following graph shows the governmental function expenses of the City: Governmental Activities- Expenses Community services Publicworks 22%� 9% Culture and recreation 8% Gener government 1 Publicsafety35% Interest and fiscal charges 9% For the year ended September 30, 2020, expenses for governmental activities totaled $14,631,879. This represents an increase of $4,131 from the prior year. The City's largest increase was in public safety and totaled $1,102,270 or 28%o, due to costs associated with %..UV 19 pandemic response. DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Interest and fiscal charges decreased 1)11 1621171, or 487o, due to decreased interest payments on bonds payable. Business -type activities are shown comparing operating costs to revenues generated by related services. Business -Type Activities -Revenues and Expenses 16,000,000 14,000,000 121000,000 101000,000 8,000,000 6,000,000 4,000,000 2,000,000 ■ Charges for Services For the year ended September 30, 2020, charges for services by business -type activities totaled $15,852,302. This is an increase of $904,926, or (6%), from the previous year. This increase in revenues is directly related to an increase in water (2.36%) and sewer rates (25.77%) and a normal year of rainfall, as opposed to the "wet" year experienced in FY 2019, when water consumption was less than anticipated. Expenses totaled $11,152,513, which was an decrease of $511,830, or 4% due to fewer inflow and infiltration issues the City has experienced than in previous years. The Public Works Department completed several I&I projects during FY 2020 to aid in resolving these issues. The City will continue to complete I&I projects in FY 2021 in order to minimize .the amount of rainfall the City is treating through the City's sewer system. FINANCIAL ANALYSIS OF THE CITY'S FUNDS As noted earlier, fund accounting is used to demonstrate and ensure compliance with finance - related legal requirements. Governmental Funds -The focus of the City's governmental funds is to provide information of near - term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of the City's net resources available for spending at the end of the year. As of September 30, 2020, the General Fund reflected a total fund balance of $6,445,516. Of this, $13,279 is considered restricted for parks.. Unassigned fund balance totaled $6,421,607 as of year-end. The General Fund saw a significant increase in property taxes when compared to the prior year. This directly relates to the addition of new properties to the tax roll, as well as an increase in property values. The Capital Projects Fund had an ending fund balance of $29,456,663 at year-end for a decrease of $4,319,053 due to an increase in payments for current capital projects, primarily the new fire station and City Hall. 12 DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The Debt Service Fund had an ending fund balance of $148,439 at year-end for an increase of $58,562 due primarily to increase in property tax revenue. The PID Capital Projects Fund had an ending fund balance of p2,5671342 at year-end, a decrease of $4,937,437 from the previous year. The decrease in fund balance was primarily due to increased capital projects in the current year. Proprietary Funds -The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. CAPITAL ASSETS As of the end of the year, the City's governmental activities funds had invested $62,282,533 in a variety of capital assets and infrastructure, net of accumulated depreciation. The City's business -type activities funds had invested $56,968,521 in a variety of capital assets and infrastructure, net of accumulated depreciation. Major capital asset events during the current year include the following: • Street contributions of $12,423,201 relating to paving and drainage. • Water & Sewer improvements totaling $7,046,055. • Construction in progress for the Municipal Complex and Fire Station totaling $6,368,363. More detailed information about the City's capital assets is presented in Note 5 to the financial statements. LONG-TERM DEBT At September 30, 2020, the City had total bonds, contractual obligations, and capital leases outstanding Of $56,239,494. During the year, the City made payments on long-term debt totaling $1,704,698. More detailed information about the City's long-term liabilities is presented in Note 6 to the financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The economy remains strong for the City of Anna and the North Texas region. The City continues to focus on economic development and working toward providing a balanced community. The City is taking a more proactive and aggressive approach to economic development with its business recruitment efforts, as well as continued development of residential housing options. In addition, the City continues to conservatively manage its budget. The fiscal year 2019-2020 budget reflects the commitment of the City Council and staff to focus on enhancing the quality of existing services to our neighbors and respond to our city's continuing growth and development, while maintaining a strong financial position. Since property values stabilized in 2013 following the 2008-2011 housing recession, the City has continued to see healthy increases in the value of existing properties. For the tax year 2019, the City saw existing property values increase just over 10% and $73,451,007 in new value was added to the tax roll. Again, for the 2020 tax year, the City saw existing property values increase just over 15% and $170,065,263 in new value was added to the tax roll. We remain cautiously optimistic that we will experience modest, but slowing, appreciation in the value of existing properties and additional value will continue to be added to the tax roll, as a result of new residential and commercial construction in the near term. In FY 2020, Chick-fil-A, Whataburger, Starbucks, a surgery center and a free-standing emergency room was completed. However, the City will not see the full valuation increase reflected in the property tax appraised values until FY 2021 due to the values being set in January of each year. 13 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 In preparation of the passage of Senate Bill 2, the Texas Property Tax Reform and Transparency Act of 2020, the City Council held the FY 2020 tax rate of $.591288 per $100 in valuation. Senate Bill 2 compresses the capability of a local government to generate revenue and provide services by lowering the tax rate a city can adopt without a mandatory election. SB 2 will also change the way property tax rates are calculated, make changes to the appraisal process, and reduce the previously called "rollback rate" of 8% to a new rate of 3.5% now called "the voter -approval rate". This tax rate is the maximum a City can set the tax rate above the "effective tax rate", now known as the "no -new - revenue rate", without voter approval. This bill will tremendously impact growing cities such as Anna into the future. As the City begins to see the impact of the reduction of the amount of property tax a city can levy, sales tax will become increasingly important for growing communities. Sales tax was up approximately 22% in FY 2020 largely due to the continued growth of retail commercial property in the City. A conservative 1.30% increase over the FY 2020 estimated total of $3.46 million was budgeted for sales tax for FY 2021. In FY 2020, Starbucks, Chick-fil-A, Whataburger, Salsa TexMex, and Sunrise Cafe opened. Along with Walmart and people staying close home during the pandemic, the City saw the full impact of the sales tax from these retail establishments in FY 2020 and expects to see strong performance in FY 2021. The growth in both sales tax and taxable value of real property corresponds to a significant increase in residential growth and population over the past 36 months. According to the most recent population estimates published by the North Central Texas Council of Governments, the City of Anna population as of January 1, 2020 was 16,721. However, the population is believed to be well above this estimate due to the number of new utility accounts established and single-family permits which have been issued. The City made a significant effort to reach out to its neighbors to encourage them to complete the 2020 Census to receive a more accurate population count. As a result, Anna had a response rate in excess of 60%, higher than the DFW rate and overall Texas response rate. Reflecting the City's continued high growth in population will be key to attracting additional commercial and retail businesses the City lacks and needs in order to sustain the City into the future to provide the funding for expenditures needed in a rapidly growing community. Furthermore, with the growth in population comes a proportional increase in demand for municipal services that are funded primarily by property taxes. As stated previously, in order to fund the FY 2021 budget, the City adopted a tax rate of $0.583 per $100 valuation which is lower than the tax rate adopted in FY 2019, When compared with other cities in our area, the City of Anna has one of lowest per -capita property tax levies. Rapid population growth has also resulted in significant investment over the past 10 to 15 years in the City's water and sewer system. Currently the Water and Sewer Fund holds just over $21.5 million in outstanding debt. The City has worked closely with our financial advisors, Hilltop Securities, to develop a sound debt management plan for the Water and Sewer Fund. Over the past several years, in order to appropriately manage this debt, the City and Hilltop Securities developed a plan to take advantage of call dates and pursue advance refunding of the City's outstanding debt. Every effort has been made to minimize the present value costs to the City. The City of Anna, along with the cities of Melissa, Van Alstyne, and Howe, belongs to a strategic alliance called the Collin Grayson Municipal Alliance (CGMA). The alliance (CGMA) purchases treated surface water from the North Texas Municipal Water District (NTMWD) through a contract with the Greater Texoma Utility Authority (GTUA). The CMGA purchases a minimum take or pay (MT/P) allocation of water through GTUA from NTMWD. Currently, each city is responsible for the percentage of the total MT/P amount that corresponds to the total amount of water each city uses. 14 DRAFT FOR DISCUSSION PURPOSES ONLY — Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 This treated surface water supplements the City's water supply especially during the summer months when water consumption is highest. As our population has grown and water demand has increased, we have been required to increasingly supplement our well water with treated surface water. As we have forecasted consumption and production of our wells, it appears that the CGMA as a group will likely exceed the MT/P allocation in FY 2021. When this happens, MT/P amount will reset at the new consumption level, and the City of Anna will be responsible for the cost of all the water we consume above the current MT/P amount. Due to this continued increase in water cost, treatment and transportation cost, the growing needs for infrastructure improvements and additions, as well as staffing needs for a growing community, the City worked with a water rate consultant in FY 2020, As a result, the City Council has adopted the rate model and approved a rate increase for FY 2021, as well as a long-range rate plan and capital improvement model. Actual increases will have to be approved each year by City Council as part of the annual budget process. The City of Anna's budget continues to be impacted by both moderately strong growth and conservative fiscal management. The 2020-2021 budget reflects the efforts of the governing body and city staff to address the need to provide services to support our growing community. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide a general overview of the City of Anna's finances for all those with an interest in the City's finances. Questions concerning this report or requests for additional financial information should be directed to the City Finance Director, 101 S. Powell Parkway, Anna, Texas 75409. 15 DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 16 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Basic Financial Statements 17 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 City Of Anna, Texas Statement of Net Position September 30, 2020 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 -version 1 Primary Government Component Units Governmental Business -type Activffies Activities Total CDC EDC ASSETS Cash and cash equivalents $ 20,846,493 $ 4,670,817 $ 25,517,310 $ 1,125,034 $ 460,787 Investments It271,011 1,271,011 21542,022 - Receivables, net 734,292 1,500,990 2,235,282 349,713 87,571 Due from other governments - - - - Prepaids 13,630 - 13,630 - Inventories - 11,704 11,704 - Restricted assets: Restricted cash and cash equivalents 17,316,313 12,752,140 30,068,453 - - Restricted investments 4,179,604 - 41179,604 - - GTUA prepaid reserves - 826,143 826,143 - - Capital assets: Non -depreciable 19,0111934 2,407,074 21AM008 2,757,904 90,346 Net depreciable capital assets 43,270,619 54,561,447 971832,066 - 227,123 Total assets 106,643,896 78,001,326 184,645,222 4,232,651 865,827 DEFERRED OUTFLOWS OF RESOURCES Deferred loss on bond refunding - 100,814 100,814 - - Deferred outflows - pension 779,416 209,842 989,258 9,993 - Deferred outflows- OPEB 20,384 5,488 251872 261 Total deferred outflows of resources 799,800 316,144 11115,944 10,254 LIABILITIES Accounts payable and other liabilities 4,663,966 1,287,163 5,951,129 37,527 449 Accrued salaries 158,370 37,612 195,982 2,835 Customer deposits - 1,102,928 It102,928 - - Unearned revenue 331,829 - 331,829 Due to other governments - 5,540 51540 - - Accrued interest payable 164,298 80,218 244,516 13,467 - Noncurrent liabilities: Due within one year 623,741 1,221,986 1,845,727 226,223 - Due in more than one year 35,188,753 20,956,999 56,145,752 2,6591689 Total liabilities 41,130,957 2402,446 65,823,403 2,939,741 449 DEFERRED INFLOWS OF RESOURCES Deferred inflows - pension 259,284 69,807 329,091 3,324 - Deferred inflows - OPEB 6,066 11633 71699 78 - Total deferred inflows of resources 265,350 71,440 336,790 31402 - NET POSITION Net investment in capital assets 49,605,921 35,210,562 84,816,483 (128,008) 317,469 Restricted for: Debt service 20,461 - 20,461 Water and sewer improvements - 12,752,140 12,752,140 - - Capital projects 7,097,947 - 7,097,947 - - GTUA deposits - 826,143 826,143 - - Culture and recreation 13,279 - 13,279 - - Public safety 285,979 - 285,979 - - Community and economic development - - - Ij427,770 547,909 Unrestricted 9,023,802 4,764,739 13,788,541 - - TOTAL NET POSITION $ Mo047o389 $ 53,553,584 $ 119,600,973 $ 1,299,762 $ 865,378 The Notes to Financial Statements are an integral part of this statement. �'i City of Anna, Texas Statement of Activities For the Fiscal Year Ended September 30, 2020 Functions/Programs Expenses PRIMARY GOVERNMENT Governmental activities: General government $ 2,669,302 Culture and recreation I,172,862 Community services 1,280,415 Public safety 5,074,735 Public works 3,176,361 Interest and fiscal charges 1,258,204 Total governmental activities Business -type activities: Water and sewer Total business -type activities TOTAL PRIMARY GOVERNMENT Component units Community Development Corporation Economic Development Corporation DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 -version 1 Program Revenues Operating Capital Charges for Grants and Grants and Services Contributions Contributions $ 304,993 $ 7000 $ - 1140400 24,350 - 2,64033 - - 21,648 517,057 - 895,585 - 13,181,867 14,631,879 5,271,759 016,207 13,181,867 11,152,513 15,852,302 - 6,716,462 11,152,513 15,852,302 - 6,716,462 $ 25,784,392 $ 21,124,061 $ 616,207 $ 19,898,329 $ 747,096 $ - $ - $ - 16604 - - - Total component units $ 913,790 $ - $ - $ - General revenues: Property taxes Sales taxes Franchise and local taxes Investment income Miscellaneous revenue Gain on sale of capital assets Transfers Total general revenues and transfers Change in net poson Net position, beginning NET POSITION, ENDING The Notes to Financial Statements are an integral part of this statement. 20 Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business -type Activities Activities Total $ (2,289,509) 256,088 1,364,518 (4,536,030) 10,901,091 (1,258,204) 4,437,954 4,437,954 7,929,530 2,271,318 657,331 568,920 70,560 20,111 (326,387) 11,191,383 11,416,251 11,416,251 11,416,251 $ (2,289,509) 256,088 1,364,518 (4,536,030) 10,901,091 (1,258,204) 4A37,954 11,416,251 11,416t251 15,854,205 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revisIon and should not be relied upon or distributed. 3/16/2021 - version 1 Component Units Community Economic Development Development Corporation Corporation - (166,694) (747,096) (166,694) - - 2,271,318 1,362,791 - 657,331 - - 175,248 744,168 1 1,771 022 70,560 - 10,243 20,111 - 326,387 - - - 501,635 11,693,018 1,374,562 17,165 15,629,337 11,917,886 27,547,223 627,466 (149,529) 50,418,052 41,635,698 92,053,750 672,296 1,014,907 $ 66,047,389 $ 53,553,584 $ 119,600,973 $ 1,299,762 $ 865,378 21 City of Anna, Texas Balance Sheet - Governmental Funds September 30, 2020 ASSETS Cash and cash equivalents Investments Receivables, net Due from other governments Due from other funds Prepaids Restricted cash Restricted investments TOTAL ASSETS LIABILITIES Accounts payable and other liabilities Accrued liabilities Accrued salaries Unearned revenue Due to other funds Total liabilities DEFERRED INFLOWS OF RESOURCES: Unavailable revenue - property taxes Total deferred inflows of resources FUND BALANCES Nonspendable Prepaids Restricted for: Culture and recreation Debt service Public safety Capital projects Unassigned Total fund balances TOTAL LIABILITIES, DEFERRED INFLOWS, AND FUND BALANCES DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Total Capital Debt Service PID Capital Nonmajor Governmental General Fund Projects Fund Projects Governmental Funds $ 4,7151618 $ 10,425,803 $ 139,209 $ $ 5,565,863 $ 20,846,493 1,271,011 1,271,011 691,815 6,240 30,900 5,337 734,292 605,859 - - 605,859 10,630 3,000 13,630 13,279 13,046359 4,256,075 17,316,313 41179,604 - - 41179,604 $ 7,308,212 $ 27,658,606 $ 170,109 $ 4,256,075 $ 5,574,200 $ 44,967,202 $ 634,309 $ 1,593,583 $ - $ 1,688,733 $ 425,787 $ 4,342,412 321,554 - 321,554 158,370 158,370 331,829 331,829 - 605,859 605,859 792,679 2,520,996 - 1,688,733 757,616 5,760,024 70,017 - 21,670 - - 91,687 70,017 21,670 91,687 10,630 - - - 3,000 13,630 13,279 - - - - 13,279 - - 148,439 - - 148,439 - 285,979 285,979 - 25,137,610 2,567,342 4,530,605 32,235,557 6,421,607 - (3,000) 6,418,607 6,445,516 25,137,610 148,439 2,567,342 016,584 39,115,491 $ 7,308,212 $ 27,658,606 $ 170,109 $ 4,256,075 $ 5,574,200 $ 44,967,202 The Notes to Financial Statements are an integral part of this statement. 22 City of Anna, Texas Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position September 30, 2020 FUND BALANCES -TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and, therefore not reported in the governmental funds. Capital assets -non-depreciable Capital assets - net depreciable Other long-term assets are not available to pay for current -period expenditures and, therefore, are deferred in the governmental funds. Deferred outflows or resources, represent a consumption of net position that applies to a future periods) and is not recognized as an outflow of resources (expenditure). Deferred outflows -pension Deferred outflows - OPEB DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Deferred inflows of resources, represent an acquisition of net position that applies to a future periods) and will not be recognized as an inflow of resources (revenue) until that time. Deferred inflows -pension Deferred outflows - OPEB Some liabilities, including bonds payable and accrued interest, are not reported as liabilities in the governmental funds. Accrued interest payable General obligation bonds Certificates of Obligation Combination tax and revenue refunding bonds U namortized premiums Capital lease Net pension liability Total OPEB liability Compensated absences NET POSITION OF GOVERNMENTAL ACTIVITIES $ 39,115,491 19,011,934 43,270,619 91, 687 779,416 20,384 (259,284) (6,066) (164,298) (1,815,000J (30,620,000) (425,000) (1,348,872) (388,426) (865,730) (67,143) (282,323) $ 66,047,389 The Notes to Financial Statements are an integral part of this statement. 23 City of Anna, Texas Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds For the Fiscal Year Ended September 30, 2020 REVENUES Property taxes Sales taxes Charges for services License and permits Franchise and local taxes Investment income Other revenues Intergovernmental Fines and forfeitures Contributions and donations Total revenues EXPENDITURES Current: General government Culture and recreation Community services Public safety Public works Debt service: Principal Interest and fiscal charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Inception of capital lease Proceeds from sale of capital assets Total Net change in fund balances FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Nonmajor Total Capital Debt Service PID Capital Governmental Governmental General Projects Fund Projects Funds Funds $ 6,095,539 $ - $ 1,873,923 $ $ $ 7,969,462 2,271,318 - - - 2,271*318 188,258 - - 2,300,185 2,488,443 2683,906 - - 2,683306 657,331 - - - - 657,331 102,302 35076 9,801 59,473 42,468 568,920 38,117 758,666 - - 639,972 1,436,755 123,195 - - - - 123* 195 97,374 - - - - 97,374 475 - - - - 475 12,257,815 1,113,542 1,883,724 59,473 21982,625 18,297,179 2,508,399 - - 251,565 2,759,964 729,407 - - 85,623 815,030 1,113,095 - - 1,113,095 4,767,242 - - 60,516 4,827,758 833,484 81246 - - 1000 857,730 40,791 497,000 - - 537,791 16,568 - 1,328,162 - 1,344,730 147393 7,400,402 - 41996,910 449,679 12,994,384 10,156379 7,408,648 Io825,162 4,996310 863,383 25,250,482 2,101,436 (6,295,106) 58,562 (4,937,437j - (1,614,776) - - - 17,432 - - (1,597,344) 1,976,053 - 50092 (4,319,053) 58,562 (4,937,437) 5,94I A24 29,456,663 89,877 7,504,779 2,119,242 (6,953,303) 3,553 1,979,606 (361,625) (1,976,401J 3,746 214178 (354,326) 24,383 1,764,916 (6,928,920) 3,051,668 46,044,411 $ 6,445,516 $ 25,137,610 $ 148,439 $ 2567,342 $ 4,816584 $ 39,115,491 The Notes to Financial Statements are an integral part of this statement. 24 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. City of Anna, Texas 3/16/2021 = version 1 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities September 30, 2020 NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital contributions are only recognized on the statement of activities. Capital outlay Depreciation expense Capital contributions Transfer of capital assets to utility fund Net effect of proceeds from the sale of capital assets and gains on disposal Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Increase in compensated absences Decrease in accrued interest Changes to net pension liability and pension related deferred outflows and inflows of resources do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Changes to other postemployment benefits liability and related deferred outflows and inflows of resources do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Various other reclassification and eliminations are necessary to convert from the modified accrual basis of accounting to accrual basis of accounting. This includes the realization of changes in unavailable revenues from the prior year. The issuance of long-term debt (e.g., bonds, leases, certificates of obligation) 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 position. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas the amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Amortization of debt premium Principal payments Capital lease payments CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ (6,928,920) 12,994,384 (3,013,364) 12,423,200 (329,592) (1,067) (68,156) 2,187 91,597 (10,176) (152,886) 84,339 497,000 40,791 $ 15,629,337 The Notes to Financial Statements are an integral part of this statement. 25 City of Anna, Texas Statement of Net Position Proprietary Fund September 30, 2020 ASSETS Current assets Cash and cash equivalents Certificate of deposit Receivables, net I nventories DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Utility Fund $ 4,670,817 1,271,011 1,5001990 11,704 Total current assets 7,454,522 Noncurrent assets Restricted cash and pooled investments 12,752,140 GTUA prepaid reserves 826,143 Capital assets Non -depreciable 2,407,074 Net depreciable capital assets 54,561,447 Total noncurrent assets 70,546,804 Total assets 78,001,326 DEFERRED OUTFLOWS OF RESOURCES Deferred charges on bond refunding 100,814 Deferred outflows - pension 209,842 Deferred outflows - OPEB 5,488 Total deferred outflows of resources The Notes to Financial Statements are an integral part of this statement. 26 City of Anna, Texas Statement of Net Position - Continued Proprietary Fund September 30, 2020 LIABILITIES Current liabilities Accounts payable Salaries payable Other liabilities Bond interest payable Due to other governments Customer deposits Revenue bonds payable - current Capital lease payable - current Compensated absences - current DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Utility Fund $ 1,239,944 37,612 47,219 80,218 5,540 1,102,928 1,075,750 129,869 16,367 Total current liabilities 3,735,447 Noncurrent liabilities Revenue bonds payable 19,685,906 Capital lease payable 967,248 Compensated absences 5207 Net pension liability 233,081 Total OPEB liability 18,077 Total noncurrent liabilities Total liabilities DEFERRED INFLOWS OF RESOURCES Deferred inflows -pension Deferred inflows - OPEB Total deferred inflows of resources NET POSITION Net investment in capital assets Restricted for: GTUA deposits Water and sewer improvements U nrestricted TOTAL NET POSITION 20,956,999 24,692,446 69,807 1,633 71 A40 35,210,562 826,143 12,752,140 4,764,739 $ 53,553,584 The Notes to Financial Statements are an integral part of this statement. 27 City of Anna, Texas Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Fund For the Fiscal Year Ended September 30, 2020 OPERATING REVENUES Water Sewer Sanitation Service charges Connection fees Developer and impact fees Miscellaneous DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed, 3/16/2021 - version 1 0 Util Fund 4,973,527 3,1 11,577 1,199,931 1,214,231 380,752 4,794,475 1771809 Total operating revenues 15,852,302 OPERATING EXPENSES Personnel services 1,841,722 Contracted services 4,744,833 Maintenance 699,536 Supplies 160,275 Utilities 397,519 Depreciation 2,253,267 Other expenses 190,830 Total operating expenses 10,287,982 Operating income 5,564,320 NONOPERATING REVENUES (EXPENSES) I nvestment income 175,248 Interest expense (864,531 Total nonoperating revenues (expenses) (689,283) Income before transfers and capital contributions 075,037 Transfers out (31205) Contributed capital 7,046,054 Change in net position 1 1,917,886 Net position, beginning of year 41,635,698 NET POSITION, END OF YEAR $ 53,553,584 The Notes to Financial Statements are an integral part of this statement. City of Anna, Texas Statement of Cash Flows - Proprietary Fund For the Fiscal Year Ended September 30, 2020 OPERATING ACTIVITIES Receipts from customers and users Payments to suppliers Payments to employees Net cash provided by operating activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Cash to GTUA reserve accounts Cash paid for acquisition and construction of capital assets I nterest and fees paid on long-term debt Principal payments on debt and capital leases Net cash provided by capital and related financing activities NONCAPITAL AND RELATED FINANCING ACTIVITIES Transfers to other funds Net cash provided by noncapital financing activities INVESTING ACTIVITIES Purchase of investment securities Interest received Net cash used by investing activities Net increase in cash and cash equivalents DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 Utility Fund $ 15,804,889 (6,267,918) (1,857A50) 7,679,521 (630) (561,175) (924,978) (1,166,907) (2,653,690) (3,205) (3,205) 626,937 175,248 802,185 5,824,811 Cash and cash equivalents, beginning of year 1 1,598,146 Cash and cash equivalents, end of year $ 17,422,957 RECONCILIATION TO STATEMENT OF NET POSITION Cash and cash equivalents $ 4,670,817 Restricted cash and cash equivalents 12,752,140 $ 17,422,957 The Notes to Financial Statements are an integral part of this statement. 29 City of Anna, Texas Statement of Cash Flows - Proprietary Fund - Continued For the Fiscal Year Ended September 30, 2020 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income Adjustments to reconcile operating income to cash provided by operating activities: Depreciation expense Changes in assets and liabilities Accounts receivable I nv entories Deferred outflows - pension and OPEB Deferred inflows - pension and OPEB Net pension and total OPEB liability Accounts payable Salaries payable Customer deposits Accrued compensated absences NET CASH PROVIDED BY OPERATING ACTIVITIES NON -CASH CAPITAL ACTIVITIES Contributions of capital assets DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 Utility Fund $ 5,564,320 2,253,267 (180,235) 2,446 (5,832) 34,992 (75,441) (77,371) 9,418 132,822 21,135 $ 7,679,521 $ 7,046,054 The Notes to Financial Statements are an integral part of this statement. 30 City of Anna, Texas Statement of Fiduciary Net Position Agency Fund September 30, 2020 ASSETS Cash and cash equivalents Total assets LIABILITIES Accounts payable Total liabilities DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 PID Agency Fund $ 11145,975 $ 1,145,975 $ 1,145,975 $ 1,145,975 The Notes to Financial Statements are an integral part of this statement. 31 DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 32 City of Anna, Texas Notes to Financial Statements Note 1. Summary of Significant Accounting Policies A. Reporting Entity DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The City of Anna, Texas (the "City") is a home rule charter city that operates under aCouncil-Manager form of government. The City Council is the principal legislative body of the City. The City Manager is appointed by a majority vote of the City Council and is responsible to the Council for the administration of all the affairs of the City. The City Manager is responsible for the appointment and removal of department directors and employees, supervision and control of all City departments, and preparation of the annual budget. The City provides the following services: public safety, ambulance, streets, sanitation, planning and zoning, and general administrative services. Other services include water, sewer, and sanitation operations. The City is an independent political subdivision of the State of Texas governed by an elected council and a mayor and is considered a primary government. As required by generally accepted accounting principles, these basic financial statements have been prepared based on considerations regarding the potential for inclusion of other entities, organizations, or functions as part of the City's financial reporting entity. The component units listed below, although legally separate, are considered part of the reporting entity. No other entities have been included in the City's reporting entity. Additionally, as the City is considered a primary government for financial reporting purposes, its activities are not considered a part of any other governmental or other type of reporting entity. Considerations regarding the potential for inclusion of other entities, organizations, or functions in the City's financial reporting entity are based on criteria prescribed by generally accepted accounting principles. These same criteria are evaluated in considering whether the City is a part of any other governmental or other type of reporting entity. The overriding elements associated with prescribed criteria considered in determining that the City's financial reporting entity status is that of a primary government are that it has a separately elected governing body, it is legally separate, and it is fiscally independent of other state and local governments. Additionally, prescribed criteria under generally accepted accounting principles include considerations pertaining to organizations for which the primary government is financially accountable and considerations pertaining to 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. Discretely Presented Component Units Some organizations are included as component units because of their fiscal dependency on the primary government. An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without the approval by the primary government. The following entities were found to be component units of the City and are included in the basic financial statements: Anna Economic Development Corporation The Anna Economic Development Corporation (EDC) fund was incorporated in the state of Texas as a nonprofit industrial development corporation under Section 4B of the Development Corporation Act of 1979. The purpose of the EDC is to promote economic development within the City of Anna. Anna Community Development Corporation The Anna Community Development Corporation (CDC) fund was incorporated in the state of Texas as a nonprofit industrial development corporation under Section 4A of the Development Corporation Act of 1979. The purpose of the CDC is to promote community development within the City of Anna. 33 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The members of both the EDC and CDC's board of seven directors are appointed by the City Council. Both the EDC and CDC are fiscally dependent upon the City as the City Council approves their budgets and must approve any debt issuance. Adding the creation of the EDC and CDC to the resources currently available significantly increases the City's ability to assist community development and financing development projects beneficial to the City. All of the EDC and CDC funding can be used for direct assistance to prospects and continued development of infrastructure. The nature and significance of the relationship between the primary government and the organization is such that exclusion would cause the City's financial statements to be misleading or incomplete. Separate financial statements are not issued for the EDC or the CDC. B. Government -wide Financial Statements The government -wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government. Governmental activities, which normally are supported by taxes, intergovernmental revenues, and other nonexchange transactions, are reported separately from business -type activities, which rely to a significant extent on fees and charges to external customers for support. C. Basis of Presentation -Government-wide Financial Statements While government -wide and fund financial statements are presented separately, they are interrelated. The governmental activities column incorporates data from governmental funds and internal service funds, while business -type activities incorporate data from the City's enterprise funds. Separate financial statements are provided for governmental funds and proprietary funds. As a general rule, the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this general rule are payments in lieu of taxes where the amounts are reasonably equivalent in value to the interfund services provided and other charges between the City's water and wastewater functions and various other functions of the City. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. D. Basis of Presentation -Fund Financial Statements The fund financial statements provide information about the City's funds. Separate statements for each fund category -governmental and proprietary -are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds. The City reports the following major governmental funds: The general fund is used to account for and report all financial resources not accounted for and reported in other funds. The principal sources of revenues include local property taxes, sales and franchise taxes, licenses and permits, fines and forfeitures, and charges for services. Expenditures include general government, public safety, public works, and culture and recreation. The general fund is always considered a major fund for reporting purposes. The capital projects fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. The capital projects fund is considered a major fund for reporting purposes. 34 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The debt service fund is used to account for the accumulation of resources that are restricted, committed, or assigned for the payment of principal and interest on long-term obligations of governmental funds. The primary source of revenue for debt service is local property taxes. The debt service fund is considered a nonmajor fund for reporting purposes. The PID capital projects fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets relating to the Hurricane Creeks PID. Additionally, the City reports the following nonmajor governmental funds: The City accounts for resources restricted to, or designated for, specific purposes in Special Revenue Funds. These funds consist of the roadway impact fee service area one and two, and road capital developer agreements fund, police seizure fund, park development fund, fire department capital improvement fund, grant fund, and other special revenue fund. The City reports the following enterprise fund: The Utility Fund is used to account for the provision of water, sewer, and solid waste collection services and wastewater treatment operations. Activities of the fund include administration, operations and maintenance of the water system, and billing and collection activities. The fund also accounts for the accumulation of resources for, and the payment of, long-term debt principal and interest. All costs are financed through charges to utility customers with rates reviewed regularly and adjusted if necessary to ensure integrity of the fund. The City reports the following fiduciary fund: The Public Improvement District (PIDj Agency Fund accounts for bond proceeds, assessments, and related debt associated with the issuance of bonds issued by the City as an agent for the Public Improvement District. During the course of operations the City has activity between funds for various purposes. Any residual balances outstanding at year end are reported as due from/to other funds and advances to/from other funds. While these balances are reported in fund financial statements, certain eliminations are made in the preparation of the government -wide financial statements. Balances between the funds included in governmental activities (i.e., the governmental and internal service funds) are eliminated so that only the net amount is included as internal balances in the governmental activities column. Similarly, balances between the funds included in business -type activities (i.e., the enterprise funds) are eliminated so that only the net amount is included as internal balances in the business -type activities column. Further, certain activity occurs during the year involving transfers of resources between funds. In fund financial statements these amounts are reported at gross amounts as transfers in/out. While reported in fund financial statements, certain eliminations are made in the preparation of the government -wide financial statements. Transfers between the funds included in governmental activities are eliminated so that only the net amount is included as transfers in the governmental activities column. Similarly, balances between the funds included in business -type activities are eliminated so that only the net amount is included as transfers in the business -type activities column. E. Measurement Focus and Basis of Accounting The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. 4- Cullen, as financial resources a economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. 35 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The government -wide and proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due. General capital asset acquisitions are reported as expenditures in governmental funds. Issuance of long-term debt and acquisitions under capital leases are reported as other financing sources. The City considers revenues available if they are collected within 60 days of the end of the current period. Property taxes, sales taxes, franchise taxes, and interest associated with the current period are all considered to be susceptible to accrual and so have been recognized as revenues of the current period. Other receipts and other taxes become measurable and available when cash is received by the government and are recognized as revenue at that time. Generally, the effect of interfund activity has been eliminated from the government- wide financial statements. F. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance 1. Cash and Cash Equivalents The City's cash and cash equivalents are considered to be cash on hand, demand deposits, balances in local government investment pools, and short-term investments with original maturities of three months or less from the date of acquisition. For the purpose of the statement of cash flows, the proprietary fund types consider temporary investments with maturity of three months or less when purchased to be cash equivalents. The City maintains pooled cash and investment accounts. Each fund whose monies are deposited in the pooled cash and investment accounts has equity therein, and interest earned on the investment of these monies is allocated based upon relative equity at the previous month end. 2. Investments Investments, with certain exceptions, are reported at fair value. The exceptions are investments in external investment pools and nonparticipating interest earning contracts, such as certificates of deposit, which are reported at amortized cost and a cost -based measure, respectively. The City has adopted a written investment policy regarding the investment of its funds as defined in the Public Funds Investment Act, Chapter 2256, Texas Government Code. In summary, the City is authorized to invest in the following: Direct obligations of the U.S. government, its agencies and instrumentalities Certificates of deposit that meet certain criteria Money market mutual funds that meet certain criteria Local government investment pools 36 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 3. Receivables and Inferfund Transactions Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the year are referred to as either "interfund receivables/payables" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the noncurrent portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds" in the fund financial statements. If the transactions are between the primary government and its component unit, these receivables and payables are classified as "due to/from component unit/primary government." Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." 4. Invenfories and Prepaid Items Inventories are valued at cost using the first-in/first-out (FIFO) method. The cost of such inventories is recorded as expenditures/expenses when the related liability is incurred, (i.e., the purchase method). Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government -wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. 5. Capital Assets Capital assets, which include land and improvements, construction in progress, buildings and improvements, machinery and equipment, infrastructure (e.g. roads, bridges, sidewalks, and similar items), and water and sewer systems are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000, and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. Interest costs incurred during the construction phase of capital assets of business -type activities acquired with tax-exempt debt is included as part of the capitalized value of the assets constructed. Land and improvements and construction in progress are not depreciated. Buildings and improvements, machinery and equipment, infrastructure, and water and sewer systems of the primary government are depreciated using the straight-line method over the following estimated useful lives: Estimated Asset Description Useful Life Buildings 20 years Water and sewer system 35 years Equipment 3-20 years Streets 20 years 37 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 6. Deferred Oufflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has the following items that qualify for reporting in this category: In the government -wide and proprietary fund statements of net position: • A deferred charge on refunding bonds results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. • Deferred outflows related to net pension and other postemployment benefit liabilities result from differences in projected and actual earnings on plan investments, expected and actual economic experience, changes in actuarial assumptions and other inputs, and contributions made subsequent to the measurement date of each plan. These activities are amortized over the weighted average remaining service life of all participants in the respective qualified pension and OPEB plan, except for projected and actual earnings differences on investments, which are amortized on a closed basis over a 5-year period, and contributions made subsequent to the measurement date of each plan, which are recognized in the subsequent fiscal year. In addition to liabilities, the statement of financial position (or balance sheet) will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position (or fund balance) that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has the following items that qualify for reporting in this category: In the governmental funds balance sheet: • Unavailable revenues from property taxes and grants are deferred and recognized as an inflow of resources in the period that the amounts become available. In the government -wide and proprietary fund statements of net position: • Deferred inflows related to net pension and other postemployment benefit liabilities results from differences in projected and actual earnings on plan investments, expected and actual economic experience, changes in actuarial assumptions and other inputs. These activities are amortized over the weighted average remaining service life of all participants in the respective qualified pension plan, except for projected and actual earnings differences on investments, which are amortized on a closed basis over a 5-year period. 7. Compensated Absences The City maintains formal programs for vacation and sick leave. Eligible employees are granted vacation pay benefits in varying amounts to specified maximums depending on tenure with the City. The City's personnel policy permits its eligible employees to accumulate earned but unused vacation pay benefits. There is no liability for unpaid accumulated sick leave as the City will not pay any unused amounts when employees separate from service with the City. The estimated amount of accrued vacation and sick pay benefits that is expected to be liquidated with expendable available financial resources is reported as an expenditure and a fund liability of the governmental fund that will pay it upon maturity. Amounts of accrued vacation pay benefits that are not expected to be liquidated with expendable available financial resources are maintained separately and represent a reconciling item between the fund and government -wide presentations. m City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 8. Long -Term Obligations The government -wide financial statements and proprietary fund type fund financial statements report long-term debt and other long-term liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net position. Bond premiums and discounts are amortized over the life of the bonds using the effective interest method, if material. Bonds payable are reported net of the applicable bond premiums or discounts. The fund financial statements report bond premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Long-term debt is recognized as a liability of a governmental fund when due, or when resources have been accumulated in the debt service fund for payment early in the following year. For other long-term obligations, only that portion expected to be paid from expendable available financial resources is reported as a fund liability of a governmental fund. Long-term liabilities expected to be paid from proprietary fund operations are accounted for in those funds. Assets acquired under the terms of a capital lease are recorded as liabilities and capitalized in the government -wide financial statements at the present value of net minimum lease payments at inception of the lease. In the year of acquisition, capital lease transactions are recorded as other financing sources and as capital outlay expenditures in the applicable fund. Lease payments representing both principal and interest are recorded as expenditures in the general fund upon payment with an appropriate reduction of principal recorded in the government -wide financial statements. 9. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows Of resources related to pensions, and pension expense, information about the Fiduciary Net Position of the Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS's Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 10. Other Postemployment Benefits (OPEB) The City offers one OPEB plan, a defined benefit group -term life insurance plan known as the Supplemental Death Benefits Fund ("SDBF") administered by TMRS. Total OPEB liability, deferred outflows of resources and deferred inflows of resources related to total OPEB liability, and total OPEB expense have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 11. Net Position Flow Assumptions Sometimes the City will fund outlays for a particular purpose from both restrictedrestricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted - net position and unrestricted - net position in the government -wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City's policy to consider restricted - net position to have been depleted before unrestricted - net position is applied. 39 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 12. Fund Balance Flow Assumptions Sometimes the City will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City's policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. 13. Fund Balance Policies Fund balance of governmental funds is reported in various categories based on the nature of any limitations requiring the use of resources for specific purposes. The City itself can establish limitations on the use of resources through either a commitment (committed fund balance) or an assignment (assigned fund balance). The City reports the following classifications of fund balance: Nonspendable fund balance -includes amounts that are not in spendable form or are legally or contractually required to be maintained intact. Restricted fund balance -includes amounts that have external constraints imposed upon the use of the resources by creditors, grantors, contributors, laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. Committed fund balance -includes amounts that can be used only for the specific purposes pursuant to constraints imposed by a formal action of the City's highest level of decision -making authority. The City Council is the highest level of decision -making authority for the City that can, by approval of a resolution prior to the end of the fiscal year, commit fund balance. Once approved, the limitation imposed by the resolution remains in place until a similar action is taken (the approval of another resolution) to remove or revise the limitation. Assigned fund balance -includes amounts that are intended to be used by the City for specific purposes but do not meet the criteria to be classified as committed. The City Council has, by resolution, authorized the City's Finance Director to assign fund balance to a specific purpose as approved by the City's fund balance policy. Unlike commitments, assignments generally only exist temporarily. In other words, an additional action does not normally have to be taken for the removal of an assignment. Conversely, as discussed above, an additional action is essential to either remove or revise a commitment. Unassigned fund balance the residual classification for the government's General Fund and includes all spendable amounts not contained in the other classifications, and other funds that have total negative fund balances. 14. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and deferred outflows and inflows of resources, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. m City of Anna, Texas Notes to Financial Statements G. Revenues and Expenditures/Expenses DRAFT FOR DISCUSSION PURPOSES ONLY- SubJect to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 1. Program Revenues Amounts reported as program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions (including special assessments) that are restricted to meeting the operational or capital requirements of a particular function or segment. All taxes, including those dedicated for specific purposes, and other internally dedicated resources are reported as general revenues rather than as program revenues. 2. Property Taxes Property taxes are levied by October 1 on the assessed value listed as of the prior January 1 for all real and business personal property in conformity with Subtitle E, Texas Property Tax Code. Taxes are due on receipt of the tax bill and are delinquent if not paid before February 1 of the year following the year in which imposed. Penalties are calculated after February 1 up to the date collected by the government at the rate of 6% for the first month and increased 1 % per month up to a total of 12%. Interest is calculated after February 1 at the rate of 1 % per month up to the date collected by the government. Under state law, property taxes levied on real property constitute a lien on the real property which cannot be forgiven without specific approval of the State Legislature. The lien expires at the end of twenty years. Taxes levied on personal property can be deemed uncollectible by the City. 3. Proprietary Funds Operating and Nonoperating Revenues and Expenses Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the utility fund is charges to customers for sales and services. The utility fund also recognizes as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for the utility fund includes the operating cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Note 2. Stewardship, Compliance and Accountability Budgetary Information Annual budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP) for the General, Debt Service, and Utility Fund. The original budget is adopted by the City Council prior to the beginning of the year. The legal level of control is defined at the fund level. No funds can be transferred or added to a budgeted fund without Council approval. Appropriations lapse at the end of the year. 41 City of Anna, Texas Notes to Financial Statements Note I Deposits and Investments DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Deposits -State statutes require that all deposits be fully collateralized by U.S. Government obligations or obligations of Texas and its agencies that have a market value of not less than the principal amount of the deposits. The City's demand deposits and certificates of deposit were fully insured or collateralized at September 30, 2020, with collateral required by state statutes. At year-end, the carrying amount of the City's deposits (including component units and fiduciary funds) was $30,519,782 and the bank balance was $30,516,515. Of the bank balance, federal depository insurance covered $250,000 and the remainder was covered by collateral held by the pledging financial institution's agent in the City's name. Cash and cash equivalents as of September 30, 2020 consist of and are classified in the accompanying financial statements as follows: Statement of net position: Primary government: Cash and cash equivalents Restricted cash and cash equivalents Total primary government Fiduciary Fund: Cash and cash equivalents Component units: Cash and cash equivalents Total cash and investments Cash on hand Deposits with financial institution Investment pools / money market Total cash and investments As of September 30, 2020, the City had the following investments: Certificates of deposit TexPool Money market accounts Total $ 25,517,310 30,068,453 55,585,763 1,145,975 1,585,821 $ 58,317,559 $ 2,000 30,519,782 27,795,777 $ 58,317,559 Value $ 6,721,626 27,584,409 211,368 $ 34,517,403 Weighted Average Maturity (Years) 0.8950 0.1040 0.0761 42 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY — Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Interest rate risk Interest rate risk is the risk that changes in interest rates may adversely affect the value of an investment. The City structures its investment portfolio so that securities mature to meet cash requirements for ongoing operations, and monitors interest rate risk using weighted average maturity analysis. In accordance with its investment policy, the City manages its exposure to declines in fair values by limiting the weighted average maturity of its investment portfolio as a whole to no more than 365 days. Credit risk The City's policy requires that investments are limited to only certain instruments that are authorized by the Public Funds Investment Act. Further specifications are that external investment pools must be rated no lower than "AAA" or an equivalent rating by at least one nationally recognized rating service, United States Treasury and agency investments are guaranteed (either express or implied) and backed by the full faith and credit of the United States or its respective agencies, and certificates of deposit are guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC) or fully collateralized under an approved pledge agreement. As of September 30, 2020, the City's investment in TexPool was rated "AAAm" by Standard & Poor's. The certificates of deposit are unrated but were fully collateralized. Custodial credit risk -deposits In the case of deposits, this is the risk that in the event of a bank failure, the City's deposits may not be returned. The City's investment policy requires funds on deposit at the depository bank to be collateralized by securities, to the extent the deposits exceed FDIC coverage. As of September 30, 2020, the combined values of pledged securities and FDIC coverage exceeded bank balances for the City. Custodial credit risk -investments For an investment, this is the risk that, in the event of the failure Of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City's investment policy requires that custody of securities is maintained at financial institutions, avoiding physical possession, and that securities owned by the City shall be held in the City's account. Concentration of credit risk The risk is the risk of loss attributed to the magnitude of a City's investment in a single issuer. The City's investment policy specifies undue concentrations of assets in a specific maturity sector shall be avoided. The City's investments are stated at fair value, with certain exceptions described below. The City categorizes its fair value measurements within the fair value hierarchy established by GASB Statement No. 72, Fair Value Measurement and Application, which provides a framework for measuring fair value and establishes a three -level fair value hierarchy that describes the inputs that are used to measure assets and liabilities. • Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets that a government can access at the measurement date. • Level 2 inputs are inputs, other than quoted prices within Level 1, that are observable for an asset or liability, either directly or indirectly. • Level 3 inputs are unobservable inputs for an asset or liability. City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. If a price for an identical asset or liability is not observable, a government should measure fair value using another valuation technique that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs. If the fair value of an asset or a liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement. Certain investments are not required to be measured at fair value; these include its investment in the TexPool external investment pool, which is measured at amortized cost and is included in cash equivalents, and its investments in certificates of deposit, which are measured based on cost. These instruments are exempt from categorization within the fair value hierarchy. TexPool TexPool is a local government investment pool, duly chartered and overseen by the State Comptroller's Office, and administered and managed by Federated Investors, Inc. State Street Bank serves as the custodial bank. TexPool's investment portfolio consists of U.S. Government securities; collateralized repurchase and reverse repurchase agreements; and AAA -rated money market mutual funds. The pool's investments are highly rated by nationally recognized statistical rating organizations, have no more than five percent concentrated in one issuer (excluding U.S. government securities), and are sufficiently liquid to meet reasonably foreseeable redemptions. TexPool transacts at a net asset value of $1.00 per share, and maintains a weighted average maturity of 60 days or less and a weighted average life of 120 days or less. TexPool has a redemption notice period of one day and investors may redeem daily. TexPool's authority may only impose restrictions on redemptions in the event of a general suspension of trading on major securities markets, general banking moratorium, or national state of emergency that affects TexPoolIs liquidity. Note 4. Receivables The following comprise receivable balances of the primary government as of September 30, 2020: Debt Service Nonmajor General Capital Projects Fund Governmental Utility Fund Property taxes $ 70,017 $ - $ 21,670 $ - $ - Sales taxes 430,672 - - - 10,092 Accounts 189,284 - - 51337 11791,101 I nterest 1,842 6,215 - - 16,221 Other - 25 9,230 - - Less: Allowance - - - - (316,424) Totals $ 691,815 $ 61240 $ 30300 $ 51337 $ 11500,990 City of Anna, Texas Notes to Financial Statements Note a. Capital Assets DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The following is a summary of changes in capital assets for governmental activities for the year ended September 30, 2020: Governmental activities: Capital assets, not being depreciated: Land Construction in progress Total capital assets, not being depreciated Depreciable assets: Park improvements Buildings Furniture and fixtures Streets and drainage Machinery and equipment Total depreciable assets Less accumulated depreciation for: Park improvements Buildings Furniture and fixtures Streets and drainage Machinery and equipment Total accumulated depreciation Total depreciable assets, net Governmental activities capital assets, net Beginning Adjustments / Ending Balance Additions Dispositions Transfers Balance $ 3,974,343 $ 4,000 $ - $ - $ 3,9781343 31399,943 12,536,677 - (903,029) 15,033,591 7,374,286 12,540,677 - (903,029) 19,0111934 5,933,835 - - 123,704 61057,539 11542,758 - - - 11542,758 33,911 - - - 33,911 38,947,127 12,423,200 - 449,733 51,820,060 3,825,082 451709 (40,066) - 41238,725 501282,713 12,876,909 (40,066) 573,437 63,692,993 2,337,620 300,175 - - 21637,795 576,483 82,499 - - 658,982 27,079 707 - - 27,786 12,2101494 1,951,204 - - 14,161,698 2,296,333 678,779 (38399) - 2,936,113 17,4481009 31013,364 (38,999) - 201422,374 32,834,704 9,863,545 (11067) 573,437 43,2701619 $ 40,208,990 $ 22,404,222 $ (11067) $ (329,592) $ 62,282,553 Depreciation expense was charged to governmental functions as follows: Governmental activities: General government Culture and recreation Community services Public safety Public works $ 31,519 363,227 1,615 293,847 2,323,156 Total governmental activities depreciation expense $ 3,013,364 45 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The following is a summary of changes in capital assets for business -type activities for the year ended September 30, 2020: Business -type activities: Capital assets, not being depreciated: Land Construction in progress Total capital assets, not being depreciated Depreciable assets: Furniture and fixtures Buildings and improvements Machinery and equipment Water treatment system GTUA water improvements GTUA sewer improvements Water and sewer system Total depreciable assets Less accumulated depreciation for: Furniture and fixtures Buildings and improvements Machinery and equipment Water treatment system GTUA water improvements GTUA sewer improvements Water and sewer system Total accumulated depreciation Total depreciable assets, net Business type activities capital assets, net Beginning Adjustments / Ending Balance Additions Dispositions Transfers Balance $ 1,056,627 $ 166,116 $ $ $ 11222,743 1 t057o269 395,057 (267,995) 1,184,331 2,113,896 561,173 (267,995) 2,407,074 51620 5,620 486,244 - 486,244 1,929,005 11929,005 14,943,500 31814,510 - 88,611 18,846,621 17,189,179 17,189,179 939,796 - - 939,796 31,455,136 2,901,954 508,976 34,86066 6048,480 6,716,464 597,587 740262,531 5,620 51620 218,323 23,567 241,890 1,408,963 183,328 1,592,291 3,363,787 11055,282 4,419,069 51093,522 489,202 5,582,724 264,037 26,851 - 290,888 7,093,565 475,037 - 7,568,602 17,447,817 2,253,267 19,701,084 49,500,663 4,463,197 597,587 54,561,447 $ 51,614,559 $ 5,024,370 $ $ 329,592 $ 56,968,521 Depreciation expense was charged to business -type functions as follows: Water and sewer $ 2,253,267 Total business -type activities depreciation expense $ 2,253,267 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The following is a summary of changes in capital assets for component units for the year ended September 30, 2020: Community Development Corporation: Capital assets, not being depreciated: Land Total capital assets, not being depreciated Beginning Balance Additions $ 21757,904 $ - 21757,904 - Ending Dispositions Balance $ - 2,757,904 ft Community Development Corporation capital assets, net $ 2,757,904 $ - $ - Economic Development Corporation: Capital assets, not being depreciated: Land Total capital assets, not being depreciated Depreciable assets: Buildings and improvements Furniture and fixtures Total depreciable assets Less accumulated depreciation for: Buildings and improvements Furniture and fixtures Total accumulated depreciation Total depreciable assets, net Economic Development Corporation capital assets, net Beginning Balance Additions Dispositions $ 2,757,904 Ending Balance 90,346 - - K346 366,589 - - 366,589 13,871 - - 13,871 380,460 - - 380,460 129,833 18,329 - 148,162 3,789 1,386 - 5,175 133,622 19,715 - 153,337 246,838 (19,715) - 227,123 $ 337,184 $ (19,715) $ - $ 317,469 Remaining commitments under related construction contracts for general government and utility construction projects at year end were as follows: City Hall Municipal Complex Rosamund Parkway Ext Ferguson Parkway Design Hackberry Dr Reconstruction Sherley Park Foster Crossing Road PID-VHC-MIA PID-VHC-I A# 1 East Fork Regional Sewer US75 Util Relo Design CR371 to Mantua E/W Collector Water Line Oak Ridge Sewer Total Approved Stored and Opinion Construction Completed Remaining The remaining commitments above will be primarily financed through completion of construction with the resources of the capital projects funds, supplemented by the general fund and issuance of debt, as needed. 47 City of Anna, Texas Notes to Financial Statements Note 6. Long-term Liabilities DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The following mcnC'otaon-ery m iilitifthyear ended September 30, 2020. In general, the City uses the general and debt service funds to liquidate governmental long-term liabilities. Amounts Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities: Bonds, notes and other payables: General obligation bonds $ 1,922,000 $ $ (107,000) $ 10815,000 $ 259*000 Certificates of obligation 30P820,000 (200,000) 300620,000 195,000 Combination tax and revenue refunding bonds 615,000 - (190*000) 425*000 50,000 Capital lease payable 429,217 - (40,791) 388,426 42,366 Unamortized premiums 11433*211 - (84*339) 11348,872 - Total bonds, notes and other payables, net 35,219,428 - (622,130) 34,597,298 546,366 Other liabilities: Compensated absences 214,167 200*606 (132,450) 282,323 77375 Net pension liability 977,249 10523,416 (1,634,935) 865,730 - Other postemployment benefit liability 43,372 24,921 (11150) 67,143 Total governmental activities Business -type activities: Bonds, notes and other payables: Contract revenue bonds TWDB participation agreement Combination tax and revenue certificates of obligation Combination tax and revenue refunding bonds Capital leases Unamortized prenriurs (discounts) Total bonds, notes and other payables, net Other liabilities: Compensated absences Net pension liability Other postemployment benefit liability Total business -type activities Component Units -CDC: Bonds, notes and other payables: Sales tax revenue bonds Other liabilities: Compensated absences Net pension liability Other postemployment benefit liability Total component units $ 36,454,216 $ 1,748,943 $ (2,390,665J $ 35,812,494 $ 623,741 Amounts Beginning Ending Due Within Balance Additions Reductions Balance One Year $ 3,446,667 $ - $ (289,584J $ 3,157,083 $ 298,750 2,168,750 - - 2,168,750 - 7,695,000 - (160,000) 7,535,000 170*000 8,122,000 - (590,000) 7,532000 607*000 1,094,571 - (127,323) 967,248 129,869 571,023 - (72,331) 49802 - 23084011 - (1,239,238) 21,858,773 1,205,619 47,919 52,231 (31,096) 69,054 16,367 312,720 360,536 (440,175) 233,081 - 13,879 4,507 f309) M077 $ 23,472529 $ 417,274 $ (1,710,818) $ 22,178,985 $ 1,221,986 Beginning Balance Additions Amounts Ending Due Within Reductions Balance One Year $ (215,000) $ 2,870,000 $ 225,000 - 3,952 - 3,952 13,030 19,030 (20,961) 11,099 578 298 (15) 861 $ 3,098,608 $ 23,280 $ (235,976) $ 2485,912 $ 226,223 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Long-term liabilities applicable to the Qly's governmental activities are not due and payable in the current period and, accordingly, are not reported as fund liabilities in the governmental funds. The governmental activities compensated absences, OPEB liability, and net pension liability are generally liquidated by the general fund. Interest on long-term debt is not accrued in governmental funds, but rather is recognized as an expenditure when due. Long-term debt at year end was comprised of the following debt issues: Description Governmental activities: General obligation refunding bonds Series 20148 Series 2016 Total general obligation bonds Certificates of obligation Series 2018 Total certificates of obligation Combination tax and revenue refunding bonds Series 2017 Total certificates of obligation Total governmental activities long-lerm debt Business -type activities: Contract revenue and revenue refunding bonds Series 2006 GTUA Contract Revenue Bonds (12 &15) 2007 GTUA Contract CGMA Pipeline Project Phase I CGMA Pipeline Project Phase I I I Total contract revenue and revenue refunding bonds NJDB state participation agreement CGMA Pipeline Project Phase II Total TW D8 state participation agreement Combination tax &revenue certificates of obligation Series 2012 Series 2014 Total combination tax &revenue certificates of obligation Combination tax and revenue refunding bonds Series 20I4A Series 2017 Total combination lax and revenue refunding bonds Capital Leases 2017AMI Meters Total capital leases Total business -type activifies long-term debt Component units: Sales Tax Revenue Bonds CDC -Sales Tax Revenue Bonds -Series 20128 CDC - Soles Tax Revenue Bonds - Series 2016 Total CDC long-term debt Interest Rates 0.30 - 2.40 % 1.90 - 4,50 % 3.00 - 4,00 % 2.00 - 4.00 2.95 - 4.10 5.74 % 5.62 % Balance $ 1,228,000 587*000 1 *815,000 30,620,000 0%620,000 425,000 425*000 $ 32,860,000 $ 805,000 1,155,000 334,583 862,500 3,157,083 5,83 % 2,168,750 2,1684750 2.50 % 3,720,000 2.65 % 3,815,000 7,535,000 2,11 % 1,832,000 2.00 - 4.00 % 5,700,000 7,532,000 2.00% 967,248 967,248 $ 21,360,081 3.30% $ 1,380,000 1.9%-4.5% 1,490,000 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The annual requirements to amortize general obligation bonds, certificates of obligation outstanding, and sales tax revenue bonds at year end were as follows: Year Ending GO Bonds September30, Principal Interest Governmental Activities CO Bonds Interest 2021 $ 259,000 $ 35,538 $ 195,000 $ 1,256,625 $ 50,000 $ 1&000 2022 265,000 30,689 215,000 1,250,475 40,000 15,000 2023 285,000 25,189 215,000 1,242,950 35,000 14,200 2024 286,000 19,112 235,000 1,233,950 35,000 13,400 2025 306,000 12,556 240,000 1,224,450 25,000 12,700 2026-2030 414,000 6,583 2,970,000 5,833,000 240,000 12,000 2031-2035 - - 6340,000 4,702,825 - - 2036-2040 - - 7,125,000 3,316,700 - - 2041-2045 - - 7,680,000 1,873,400 - - 2046-2048 - - 51405,000 33,100 - - Totals $ 11815,000 $ 129,667 $ 30,620,000 $ 21,967,475 $ 425,000 $ 83,300 Principal Combination Tax and Revenue Principal Interest Business -type Activities Year Ending M/DB State Participation Combination Tax and Revenue Contract Revenue Bonds Agreement Certificates of Obligation September30, Principal Interest Principal Interest Principal Interest 2021 $ 298,750 $ 141,400 $ - $ 125,206 $ 170,000 $ 223,388 2022 306,250 129,433 - 125,206 170,000 219,588 2023 320,000 117,005 - 125,206 175,000 215,300 2024 332,500 103,924 - 125,206 210,000 210,000 2025 355,000 89,875 125,206 245,000 203,663 2026-2030 681,667 5974395 532,500 568,632 3,5250000 760,351 2031-2035 763,750 113,478 703,750 397,281 3,040,000 167,011 2036-2040 103,750 2,915 932,500 168,884 - - Totals $ 3,161,667 1 1,295,425 1 2,168,750 $ 1,760,827 $ 71535,000 $ 1,999,301 Year Ending Combination Tax and Revenue September30, Principal Interest 2021 $ 607,000 $ 276,714 2022 635,000 255,300 2023 65000 232,313 2024 649,000 208,528 2025 645,000 184,452 2026-2030 2Al2,000 643,376 2031-2033 1,930,000 11600 Totals $ 7,532,000 $ 1,917,283 50 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 September30, Principal Interest 2021 $ 225,000 $ 104,250 2022 160,000 167,463 2023 100,000 226,660 2024 115,000 211 t08O 2025 135,000 194,238 2026-2030 955,000 679,969 2031-2035 905,000 171,744 2036-2037 275,000 12,488 Totals $ 2,870,000 $ 1,767,892 Contractual Obligations with Greater Texoma Utility Authority Under the terms of long term water supply and sewer service contracts between the City and Greater Texoma Utility Authority (GTUA), the City recognizes that GTUA has an undivided ownership interest in the City's water system and sewer collection and treatment facility equivalent to the percentage of the total cost of the facility provided by GTUA through the issuance of GTUA bonds. The City has a contractual obligation to make payments specified by the contract to GTUA to pay the principal and interest on the bonds, maintain a Reserve Fund for the security and payment of bonds similarly secured, pay the administrative and overhead expenses of GTUA directly attributable to the bonds, and pay any extraordinary expenses incurred by GTUA in connection with the bonds. Under terms of the contracts the City's obligation to make payments to GTUA, as well as GTUA's ownership interest in the facilities terminates, when all of GTUA 's bonds issued in connection with construction of the facilities have been paid in full, are retired, and are no longer outstanding. Collin Grayson Municipal Alliance Transmission Water Pipeline In 2004, the City, along with the City of Van Alst7ne1 Howe, and Melissa, formed a group called the Collin Grayson Municipal Alliance ("CGMA"). CGMA entered into a long-term contractual obligation with GTUA for the purpose of providing funds for the construction of a transmission water pipeline that will provide water to CGMA cities. The cost of the pipeline is being funded in four phases. Each CMGA city was required to make payments to GTUA in an amount equivalent to 25% of the total obligation to cover their portion of the cost of the obligation until the pipeline project was completed. As water continues to flow to each CGMA city, the City shall be charged it's percentage or fraction share of debt service on the obligation based upon the amount of water to be paid by the City under its water contract (i.e. the greater of its minimum take -or -pay amount or the actual amount of water taken) divided by the total amount of water to be paid by all CGMA cities. The sum of the four (4) fractional amounts shall always equal 100% of the debt service on the contractual obligation with GTUA. The billing rates for each City will be calculated to provide funds necessary to cover the contractual obligation, interest, repairs, maintenance, and production costs. At the end of the contractual obligation with GTUA, the City will own an undivided interest in the transmission water pipeline based on the percentage of water it utilized and paid for during the contract term. The contract will expire and the transfer of ownership will occur during the fiscal year ended September 30, 2040, as long as no new debt is issued. 51 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 Capital Leases On October 9, 2018, the City entered into a new lease agreement as lessee for financing the acquisition of a fire apparatus which is payable from the general fund. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of their future minimum lease payments as of the inception date. On November 28, 2016, the City entered into a capital lease to finance the acquisition of water meters which is payable from the utility fund. The assets acquired through the capital leases as of September 30, 2020 are as follows: Assets: Fire apparatus Water meters Less: Accumulated depreciation Governmental Activities (86,914) Business -type Activities 1,340,010 (400,003) Total $ 398,154 $ 940,007 The future minimum lease obligations and the net present value of these minimum lease payments as of September 30, 2020 are as follows: Year Ending September 30, 2021 2022 2023 2024 2025 2026-2028 Total minimum future lease payments Less: amount representing interest Governmental Activities Business -type Activities $ 57,359 $ 149,179 57,359 149,179 57359 149,179 57,359 149,179 57,359 149,179 172,077 298,356 458,872 1,044,251 (70,446) (77,003) Present value of minimum lease payments $ 388,426 $ 967,248 52 City of Anna, Texas Notes to Financial Statements Note 7. Interfund Balances and Activity DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 1. Inferfund Receivables and Payables (nterfund receivables and payables of the various funds at September 30, 2020 were as follows: I nterfund I nterfund Receivables Payables General Fund $ 605,859 $ - Capital Projects Fund - 605,859 Totals $ 605,859 $ 605,859 (nterfund balances consist of short-term lending/borrowing arrangements that have resulted primarily from expenditures that are paid by one fund and then charged back to the appropriate other fund. Additionally, some lending/borrowing may occur between two or more governmental funds due to earned revenues not being received from outside agencies until the subsequent year. 2. (nterfund Transfers Transfers between funds during the year were as follows: Transfers Out Transfers In Amounts General Fund Capital Projects Fund $ 1,611,223 General Fund Nonmajor Funds 3,553 Utility Fund Capital Projects Fund 3,205 Nonmajor Funds Capital Projects Fund 361,625 Totals $ 1,979,606 Transfers to the special revenue fund were for year-end budgeted transfers to the grant fund. Transfers to the capital project fund were for the road project. Note 8. Other Information A. Risk Management The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the City participates along with approximately 2,800 other entities in the Texas Municipal League's Intergovernmental Risk Pools (the "Pool"), The Pool purchases commercial insurance at group rates for participants in the Pool. The City has no additional risk or responsibility to the Pool, outside of the payment of insurance premiums. The City has not significantly reduced insurance coverage or had settlements that exceeded coverage amounts for the past three years. 53 City of Anna, Texas Notes to Financial Statements We 9, Defined Benefit Pension Plan DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Plan Description The City participates in one of 888 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple -employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six -member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS's defined benefit pension plan is a tax -qualified plan under Section 401(a) of the Internal Revenue Code. TMRS issues a publicly available comprehensive annual financial report that can be obtained at www.tmrs.com. All eligible employees of the City are required to participate in TMRS. Benefits Provided TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS. At retirement, the benefit is calculated as if the sum of the employee's contributions, with interest, and the city -financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven payments options. Members may also choose to receive a portion of their benefit as a partial lump sum distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member's deposits and interest. The plan provisions are adopted by City were as follows: Employee deposit rate Matching ratio (City to employee) Years required for vesting Service requirement eligibility (expresed as age/years of service) Updated service credit Annuity increase (to retirees) 2019 7.00% 2 to 1 5 60/5, 0/20 100% Repeating, Transfers 2018 7.00% 2 to 1 5 60/5,0/20 100% Repeating, Transfers 70% of CPI Repeating 70% of CPI Repeating Employees Covered by Benefit Terms At the December 31, 2019 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 13 Inactive employees entitled to but not yet receiving benefits Active employees Total 47 89 149 54 City or Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Contributions The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee gross earnings, and the City matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the City. Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Entry Age Normal (EAN) actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the City were required to contribute 7% of their annual gross earnings during the fiscal year. The contribution rates for the City were 14,67% and 14.09% in calendar years 2019 and 2020, respectively. The City's contributions to TMRS for the year ended September 30, 2020, were $906,255, and were equal to the required contributions. Net Pension Liability The City's Net Pension Liability (NPL) was measured as of December 31, 2019, and the Total Pension Liability (TPL) used to calculate the NPL was determined by an actuarial valuation as of that date. Actuarial Assumptions The total pension liability in the December 31, 2019 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Overall payroll growth 2.75% per year I nvestment rate of return 6,75%, net of pension plan investment expense, including infla Salary increases are based on aservice-related table. Mortality rates for active members are based on the PUB(10) mortality tables with the Public Safety table used for males and the General Employee table used for females. Mortality rates for healthy retirees and beneficiaries are based on the Gender -distinct 2019 Municipal Retirees of Texas mortality tables. The rates for actives, healthy retirees and beneficiaries are projected on a fully generational basis by Scale UMP to account for future mortality improvements. For disabled annuitants, the some mortality tables for healthy retirees is used with a 4-year set -forward for males and a 3-year set -forward for females. In addition, a 3.5% and 3.0% minimum mortality rate is Applied, for males and females respectively, to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by Scale UMP to account for future mortality improvements subject to the floor. The actuarial assumptions were developed primarily from the actuarial investigation of the experience of TMRS over the four-year period from December 31, 2014 to December 31, 2018. They were adopted in 2019 and first used in the December 31, 2019 actuarial valuation. The post -retirement mortality assumption for Annuity Purchase Rates (APRs) is based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income in order to satisfy the short-term and long-term funding needs of TMRS. 55 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 The long-term expected rate of return on pension plan investments was determined using a building- block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, the actuary focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (2) the geometric mean (conservative) with an adjustment for time (aggressive). The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-term Expected Real Target Rate of Return Asset Class Allocation (Arithmetic) Global Equity 30.0% 5.30% Core Fixed Income 10.0% 1.257o Non -Core Fixed Income 20.0% 4.14% Real Return 10.0% 3.85% Real Estate 10.0% 4.007o Absolute Return 10.0% 3.48% Private Equity 10.0% 7.75% Total 100.0% Discount Rate The discount rate used to measure the Total Pension Liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. [3� City or Anna, Texas Notes to Financial Statements Changes in Net Pension Liability DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability (a) Balance at December 31, 2018 $ 7,690,204 Changes for the year: Service cost 1,008,055 Interest 546,834 Change of benefit terms - Difference between expected and actual experience 294,521 Changes of assumptions 47,825 Contributions - employer - Contributions - employee - Net investment income - Benefit payments, including refunds of employee contributions (185,961) Administrative expense - Other changes - Net changes Balance at December 31, 2019 1,711,274 Net Position (b) $ 6387,205 Liability (a) - (b) $ 1,302,999 - 1,008,055 - 546,834 - 294,521 - 47,825 747,632 (747,632) 356,743 991,697 (185,961) (5,580) (168) 1,904,363 (356,743) (991, 697) 5,580 168 (193,089) $ 9,401,478 $ 8,291,568 $ 1,109,910 Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the NPL of the City, calculated using the discount rate of 6.75%, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1-percentage- point lower (5.75%) or 1-percentage-point higher (7.75%) than the current rate: 1 %Decrease in Discount Rate (5.75% Net pension liability $ 2,810,215 Discount Rate 1 %Increase in Discount Rate $ 1,109,910 $ (241,965) Pension Plan Fiduciary Net Position Detailed information about the pension plan's fiduciary net position is available in aseparately-issued TMRS financial report. That report may be obtained on the Internet at www.tmrs.com. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended September 30, 2020, the City recognized pension expense of $766,404. 57 City OT Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 At September 30, 2020, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual economic experience Changes in actuarial assumptions Difference between projected and actual investment earnings Contributions subsequent to the measurement date Totals Deferred Deferred Outflows of Inflows of Resources Resources $ 254,946 $ 94,631 45,508 - - 237,784 698,797 - $ 999,251 $ 332,415 $698,797 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability for the year ending September 30, 2021. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending December 31, 2020 $ (51,977) 2021 (35,674) 2022 50,688 2023 (55,810) 2024 5007 Thereafter 41505 Totals $ (31,961) Note 10. Other Postemployment Benefits Plan Plan Description Texas Municipal Retirement System (TMRS) administers a defined benefit group -term life insurance plan known as the Supplemental Death Benefits Fund (SDBF). This is a voluntary program in which participating member cities may elect, by ordinance, to provide group -term life insurance coverage for their active members, including or not including retirees. Employers may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The City has elected to participate in the SDBF for its active members including retirees. As the SDBF covers both active and retiree participants, with no segregation of assets, the SDBF is considered to be an unfunded single -employer OPEB plan (i.e. no assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75) for City reporting. Benefits Provided The death benefit for active employees provides alump-sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12-month period preceding the month of death). The death benefit for retirees is considered an other postemployment benefit (OPEB) and is a fixed amount of $7,500. City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 At the December 31, 2019 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees currently receiving benefits 9 Inactive employees entitled to but not yet receiving benefit 5 Active employees 89 Total 103 Contributions The member city contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year. The intent is not to pre -fund retiree term life insurance during employees' entire careers. Contributions are made monthly based on the covered payroll of employee members of the participating member city. The contractually required contribution rate is determined annually for each city. The rate is based on the mortality and service experience of all employees covered by the SDBF and the demographics specific to the workforce of the city. There is a one-year delay between the actuarial valuation that serves as the basis for the employer contribution rate and the calendar year when the rate goes into effect. The funding policy of this plan is to assure that adequate resources are available to meet all death benefit payments for the upcoming year. The retiree portion of contribution rates to the SDBF for the City was 0.01 % in calendar years 2019 and 2020. The City's contributions to the SDBF for the year ended September 30, 2020 were $8,286, and were equal to the required contributions. Total OPEB Liability The City's Total OPEB Liability was measured as of December 31, 2019 and was determined by an actuarial valuation as of that date. Actuarial Assumptions The Total OPEB Liability In the December 31, 2019 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Salary increases 3.5% to 11.5%including inflation Discount rate 2.75% Salary increases were based on aservice-related table. Mortality rates for service retirees were based on the RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 1037o and projected on a fully generational basis with scale BB. Mortality rates for disabled retirees were based on the RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103%. Based on the size of the City, rates are multiplied by an additional factor of 100.0%. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements. 59 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 The actuarial assumptions used in the December 31, 2019 valuation were developed primarily from an actuarial experience study of the four-year period from December 31, 2014 through December 31, 2018. The post -mortality assumption for healthy annuitants and Annuity Purchase Rate (APRs) are based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. In conjunction with these changes first used in the December 31, 2013 valuation, TMRS adopted the Entry Age Normal Actuarial Cost Method. The discount rate (2.75%) was based on the Fidelity Index's "20-Year Municipal GO AA Index" rate as of December 31, 2019. Changes in Total OPEB Liability Balance at December 31, 2018 Changes for the year: Service cost Interest on Total OPEB Liability Change of benefit terms Difference between expected and actual experience Changes of assumptions or other inputs Benefit payments Net changes Balance at December 31, 2019 Total OPEB Liability $ 57,829 9,173 2,306 (964) 18,247 (510) 28,252 $ 86,081 Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liabilityusing , calculated the discount rate of 2.75%, as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is 1 percentage -point lower (1.75%) or 1 percentage -point higher (3,75%) than the current rate: 1 %Decrease in Discount Rate Discount Rate (1.75%) (2.75%) Discount Rate (3.75%) 1 %Increase in $ 108,849 $ 86,081 $ 68,961 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended September 30, 2020, the City recognized OPEB expense of $13,030. At September 30, 2020, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Differences between expected and actual experience Changes in actuarial assumptions and other inputs Contributions made subsequent to the measurement date Totals Deferred Deferred Outflows of Inflows of Resources Resources $ - $ 3,652 19,686 4,125 6,447 - $ 26,133 $ 7,777 City of Anna, Texas Notes to Financial Statements DRAFT FOR DISCUSSION PURPOSES ONLY - SubJ mt to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 The $6,"/ reported as deferred outflows of resources resulting from contributions subsequent to the measurement date will reduce the Total OPEB liability during the year ending September 30, 2021. The other amounts reported as deferred outflows and inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year Ending December 31, 2020 $ 1,551 2021 1,551 2022 1,551 2023 1,551 2024 1,551 thereafter 4,154 Totals $ 11,909 Note 11. Villages of Hurricane Creek Public Improvement District On November 13, 2018, the City of Anna City Council approved Ordinance No. 2018-01-506 authorizing the creation of a Public Improvement District. The Hurricane Creek Public Improvement District consists of approximately 368.20 acres within the jurisdictions of the City. This district was created in accordance with Chapter 372,003 of the Texas Local Government Code, as amended. On March 28, 2019 the City of Anna City Council approved the issuance and sale of two Special Assessment Revenue Bonds in the amounts of $7,735,000 and $3,535,000 known as Hurricane Creek Public Improvement District Improvement Area #1 Project and Hurricane Creeks Public Improvement District Improvement Major Improvement Area Project, respectively. These bonds were authorized in order to finance the projects benefiting the entire Hurricane Creek Public Improvement District including certain roadway, water, sewer, and drainage improvements. Note 12. Coronavirus Pandemic In March 2020, the World Health Organization declared the novel coronavirus ('COVID-19') a global pandemic and recommended containment and mitigation measures worldwide. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected public education, workforces, economies, and financial markets globally, potentially leading to economic downturn. It has also disrupted the normal operations of many businesses and organizations. It is not possible for management to predict the duration or magnitude of the adverse results of the outbreak and its disruptive effects on the City's operations and financial results at this time. 61 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 62 DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Required Supplementary Information 63 City of Anna, Texas Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual General Fund For the Year Ended September 30, 2020 REVENUES Property taxes Sales taxes Charges for services License and permits Franchise and local taxes Investment income Other revenues Intergovernmental Fines and forfeitures Contributions and donations Total revenues EXPENDITURES Current: General government Culture and recreation Community services Public safety Public works Debt service Principal Interest and fiscal charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Transfers out Total other financing sources (uses) Net change in fund balance Beginning fund balance ENDING FUND BALANCE Original Budget 5,892,319 1,911,312 118,700 1,272,750 646,600 129,714 23,150 118,190 MOW 2,000 0 DRAFT FOR DISCUSSION PURPOSES ONLY - SubJect to final review and possible revisIon and should not be relied upon or distributed. 3/16/2021 - version 1 Final Budget Actual 6,126,026 2,1601000 138,450 1,685,200 1,600 103,000 26,064 123,195 80,000 375 6,095,539 2,271,318 188,258 2,683,906 657,331 102,302 38,117 123,195 97,374 475 Final Budget Positive (Negative) (30,487) 111,318 49,808 998,706 55,731 (698) 12,053 17,374 100 10,194,735 11,043,910 12,257,815 1,213,905 2,604,283 2,604,283 2,508,399 95,884 681,312 686,683 729,407 (42,724) 1,333,421 1,339,533 1,113,095 226,438 4,488,241 4,63011 4,767,242 (132,331) 624,924 851,372 833,484 17,888 40,791 40,791 40,791 - 16,568 16,568 16,568 - 293,648 67,200 147,393 (80,193) 10,083,188 10,241,341 I O,156,379 8062 1 1 1,547 802,569 2,101,436 1,298,867 40,000 17,432 17,432 - (151,547) (1,616,098) (1,614,776) 1,322 (11 1,547) (1,598t666) (1,597,344) 1,322 - (796,097) 50092 1,300,189 5,941,424 5,941,424 5,941,424 - $ 5,941 A24 $ 5,145,327 $ 6,445,516 $ 1,300,189 Notes to Schedule 1. Annual budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP) Ci! City of Anna, Texas Schedule of Changes in the Net Pension Liability and Related Ratios - TMRS Last Six Measurement Periods TOTAL PENSION LIABILITY Service cost Interest Changes of benefit terms Differences between expected and actual experience Change of assumptions Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability - beginning TOTAL PENSION LIABILITY -ENDING (a) PLAN FIDUCIARY NEi POSITION Contributions - employer Contributions - employee Net investment income (loss) Benefit payments, including refunds of employee contributions Administrative expense Other Net change in plan fiduciary net position Plan fiduciary net position - beginning PLAN FIDUCIARY NET POSITION -ENDING (b) NET PENSION LIABILITY -ENDING (a)-(b) Plan fiduciary net position as a percentage of total pension liability Covered payroll Net pension liability as a percentage of covered payroll Notes to Schedule DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 2019 2018 2017 2016 2015 2014 $ 1,008,055 $ 860*365 $ 698,771 $ 608*067 $ 527,867 $ 429,268 546,834 464*692 398,225 343,924 309,015 277,884 294,521 13,331 (9,109) (60,518) (110,141) (173,824) 47,825 - - 19,349 - (185,961) (204,657) (163,326) (101,394) (109,637) (166,160) 1,711,274 1 * 133*731 924,561 790,079 636A53 367,168 70OZ4 6,556,473 5,631,912 041,833 4,205,380 3,838,212 $ 9,401,478 $ 700,204 $ 6,556,473 $ 5,631,912 $ 041,833 $ 4,205,380 $ 7474632 $ 618,080 $ 516,066 $ 442,230 $ 386,733 $ 270,279 356,743 298,589 249,306 217,388 194,478 170,293 99107 (175,951) 641J30 257,535 4,915 165*488 (185,961) (204,657) (163,326) (101,394) (109,637) (166,160) (5,580) (1389) (3,315i (2,902) (21992) (1,727) (168) (176) (169) (156) (148) (142) 1,904,363 532A96 1*239,692 81 AI 473,349 438,031 6,387,205 5,854,709 4,615,017 3,802,316 3,328,967 2,890,936 $ 8,291,568 $ 6,387,205 $ 5,854,709 $ 4,615,017 $ 3,802,316 $ 3,328367 $ Io109,910 $ 1,302,999 $ 701,764 $ 1,01095 $ 1,039,517 $ 876,413 88% 83% 89% 82% 79% 79% $ 5,096,334 $ 4,265,561 $ 3561,515 $ 1,194,348 $ 2,778,260 $ 2,432,756 22% 31% 20% 85% 37% 36% 1. This schedule is presented to illustrate the requirement to show information for ten years. Howev er, until a full ten-year trend is compiled, only available information is shown. City of Anna, Texas Schedule of Employer Contributions to Pension Plan - TMRS Last Five Six Years Actuarially determined contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 2020 2019 2018 2017 2016 2015 $ 906,255 $ 701,932 $ 592,188 $ 490,248 $ 444,631 $ 353,170 906,255 701,932 592,188 490,248 444,631 353,170 $ 073,692 $ 4,798,511 $ 086,822 $ 3,396,686 $ 3,140,567 $ 2,881,090 14.22% 14.63% 14.49% 14.43% 14.16% 12.26% Notes to Schedule 1. This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, only available information is shown. 2. GASB 68, paragraph 81.2.b requires that the data in this schedule be presented as of the City's fiscal year as opposed to the time period covered by the measurement date. City Of Anna, Texas Schedule of Changes in Total OPEB Liability and Related Ratios - TMRS Last Three Measurement Periods TOTAL OPEB LIABILITY Service cost Interest (on the Total OPEB Liability) Change of benefit terms Differences between expected and actual experience Changes in assumptions or other imputs Benefit payments Net change in total OPEB liability Totol OPEB liability -beginning TOTAL OPEB LIABILITY -ENDING (a) Covered payroll Total OPEB liability as a percentage of covered payroll Notes to Schedule DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 2019 2018 2017 $ 9,173 $ 8,958 $ 6,767 2,306 1,996 1,716 (964) (3,622) - 18,247 (5,341) 5,334 (510) - - 28,252 1,991 13,817 57,829 55,838 42,021 $ 86,081 $ 57,829 $ 55,838 $ 5,096,334 1.69% 1. This schedule is presented to illustrate the requirement to show information for 10 years. However, recalculations of prior years are not reported in accordance with the standards of GASB 74/75 and should not be shown here. Therefore, only years for which the new GASB statements have been implemented have been shown and ultimately ten years will be presented. $ 4,265,563 1.36% $ 3,561,515 1.57% 67 City of Anna, Texas Schedule of OPEB Contributions - TMRS Last Three Fiscal Years Actuarially determined contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll Notes to Schedule DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revisIon and should not be relied upon or distributed. 3/16/2021 - version 1 2020 2019 2018 $ 8,286 $ 6,238 $ 4,496 8,286 6,238 4A96 6,373,692 0.13% 4,798,51 1 0.13% 4,086,822 0.11% this schedule is presented to illustrate the requirement to show for 10 years. However, recalculations of prior years are not reported in accordance with the standards of GASB 74/75 and should not be shown here. Therefore, only years for which the new GASB statements have been implemented will be shown and ultimately ten years will be presented. 2. GASB 75 paragraph 57 requires that the data in this schedule be presented as of the City's fiscal year as opposed to the time period covered by the measurement date. DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 . version 1 Combining and Individual Fund Financial Statements and Schedule DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 70 DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revisIon and should not be relied upon or distributed. 3/16/2021 = version 1 Nonmajor Governmental Funds Special Revenue Funds Roadway Impact Fee Service Area 1 Accounts for revenue and expenditures from developer impact fees for future strategic roadway improvements for service area 1. Roadway Impact Fee Service Area 2 Accounts for revenue and expenditures from developer impact fees for future strategic roadway improvements for service area 2. Road Capital Development Agreement Fund Accounts for negotiated developer agreements for road and street impact fees. Police Seizure Fund Accounts for revenues generated from property seized in connection with illegal activity once the property is forfeited after prosecution that can only be used in accordance with applicable state and federal laws. Park Development Fund Accounts for park development fees from developer agreements or the subdivision ordinance in support of the City's parks master plan. Fire Department Capital Improvement Fund Accounts for voluntary fees negotiated with developers in support of the Anna Fire Department for fire capital projects. Grant Fund Accounts for proceeds and expenditures relating to all grants. Other Special Revenue Fund Accounts for all other miscellaneous restricted funds not described in other special revenue funds. 71 DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. City of Anna, Texas 3/16/2021 -version 1 Combining Balance Sheet Nonmajor Governmental Funds September 30, 2020 Roadway Roadway Road Capital Park Impact Fee Impact Fee Dev. Agr. Police Seizure Development SVC Area 1 SVC Area 2 Fund Fund Fund ASSETS Cash and cash equivalents $ 842,820 $ 897,861 $ 867,262 $ 9,556 $ 2338,393 Receivables, net - - - - - Due from other governments - - - - - Prepaids - - - - - Total assets $ 842,820 $ 897,861 $ 867,262 $ 9,556 $ 2,338,393 LIABILITIES Accounts payable and other liabilities $ - $ - $ 399,479 $ - $ 16,252 Unearned revenue - - - - - Total liabilities - - 399,479 16,252 FUND BALANCES Nonspendable - - - - Restricted for: Public safety - - - 9,556 - Capital projects 842,820 897,861 467,783 - 2,322,141 Unassigned - - - - Total fund balances 8420820 8970861 467,783 9,556 2,322,141 TOTAL LIABILITIES AND FUND BALANCES $ 842,820 $ 897,861 $ 867,262 $ 9,556 $ 2,338,393 72 DRAFT FOR DISCUSSION PURPOSES ONLY - SubJect to final review and possible revisIon and should not be relied upon or distributed. 3/16/2021 - version 1 Fire Dept. Totaonmajor Capital Impr. Other Special Governmental Fund Grant Fund Revenue Fund Funds $ 132,332 $ 338,885 $ 138,754 $ 5,565,863 - - 5,337 5,337 3,000 - 3,000 $ 132,332 $ 341,885 $ 144,091 $ 5,574,200 $ - $ 10,056 $ - $ 425,787 331,829 - 331,829 - 34105 - 757,616 - 3,000 - 3,000 132,332 - 144,091 285,979 - - 4,530,605 (31000) - (31000) 132,332 - 144,091 41816,584 $ 132,332 $ 341,885 $ 14091 $ 5,5741200 73 City of Anna, Texas Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended September 30, 2020 REVENUES Charges for services Investment income Other revenue Total revenues EXPENDITURES Current: General government Culture and recreation Public safety Public works Interest and fiscal charges Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Proceeds from sale of capital assets Total other financing (uses) Net change in fund balances Fund balances, beginning of year FUND BALANCES, END OF YEAR Roadway Impact Fee SVC Area 1 Roadway Impact Fee SVC Area 2 $ 449,508 $ 9,418 Road Capital Dev. Agr. Fund 363,177 $ - 6,893 6,039 458,926 370,070 6,039 DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 -version 1 Park Police Seizure Development Fund Fund $ - $ 1,404,600 90 16,404 7,650 24,350 7,740 11445,354 - - - 1,042 - 8,000 8,000 - - - 14,578 - - 4,000 230,546 22,578 8,000 - 5,042 316,169 436,348 362,070 6,039 2,698 1,129,185 (361,625) - - - - - - - 3,746 - (361,625) - - 3,746 - 74,723 362,070 6,039 6,444 1,129,185 768,097 535,791 461,744 3,112 1,192956 $ 842,820 $ 897,861 $ 467,783 $ 9,556 $ 2,322,141 Fire Dept. Capital Impr. Fund DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revisIon and should not be relied upon or distributed. /2021 "version 1 Total Nonmajor Other Special Governmental Grant Fund Revenue Fund Funds $ 82,900 $ 858 1,545 581,143 83,758 58208 - $ 2,300,185 1,221 42,468 26,829 639,972 28,050 2,982,625 - 251,565 - 251,565 - - - 85,623 - 49,049 10,425 60,516 - - - 16,000 26,446 174,109 - 449,679 26,446 474,723 10,425 863,383 57,312 107,965 17,625 2,119,242 - 3,553 - 3,553 - - - (361,625) - - 3,746 3,553 - (354,326) 57,312 111,518 17,625 1,764,916 75,020 (111,518) 126,466 3,051,668 $ 132,332 $ - $ 14091 $ 016,584 75 City of Anna, Texas Balance Sheet Community Development Corporation September 30, 2020 ASSETS Cash and cash equivalents Receivables, net TOTAL ASSETS LIABILITIES Accounts payable Accrued salaries Total liabilities DEFERRED INFLOWS OF RESOURCES Local business loans Total deferred inflows of resources FUND BALANCES Restricted for: Community Development Total fund balances TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Anna Community Development Corporation $ 1,125,034 349,713 $ 1,474,747 $ 37,527 2,835 40,362 41,310 41,310 1,393,075 1,393,075 $ 1,474,747 76 City of Anna, Texas Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position Community Development Corporation September 30, 2020 FUND BALANCES -TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. The following deferred outflows of resources and deferred inflows of resources are not reported in governmental funds: Deferred outflows of resources - OPEB Deferred outflows of resources - pension Deferred inflows of resources - OPEB Deferred inflows of resources - pension Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the fund financial statements. Long-term liabilities consist of: Sales tax revenue bonds Compensated absences Accrued interest Total OPEB liability Net pension liability Unavailable revenues are removed for the statement of net position. NET POSITION OF GOVERNMENTAL ACTIVITIES DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 $ 1,393,075 2,757,904 261 9,993 (78) (3,324) (2,870,000) (3,952) (13A67) (861) (11,099) 41,310 $ 1,299,762 77 City of Anna, Texas Statement of Revenues, Expenditures, and Changes in Fund Balances Community Development Corporation For the Year Ended September 30, 2020 REVENUES Sales taxes Investment income Total revenues EXPENDITURES Current: Community and economic development Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Net change in fund balances Fund balance, beginning of year Fund balance, end of year DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 Anna Community Development Corporation $ 1,362,791 1 1,771 1,374,562 634,317 215,000 110,901 960,218 414,344 414,344 978,731 $ 1,393,075 m City of Anna, Texas Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Community Development Corporation For the Year Ended September 30, 2020 NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the statement of activities are different because: DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revisIon and should not be relied upon or distributed. 3/16/2021 - version 1 Current year long-term debt principal payments on tax notes payable are expenditures in the fund financial statements but are shown as reductions in long-term debt in the government -wide financial statements. Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Decrease in accrued interest: Increase in accrued compensated absences: Decrease in net pension liability and related deferred inflows and outflows: Increase in total OPEB liability and related deferred inflows and outflows: CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ 414,344 215,000 785 (3,952) 1,399 (110) $ 627,466 `L'i City of Anna, Texas Balance Sheet Economic Development Corporation September 30, 2020 ASSETS Cash and cash equivalents Receivables, net TOTAL ASSETS LIABILITIES Accounts payable Total liabilities DEFERRED INFLOWS OF RESOURCES Unavailable revenue: Local business loans Total deferred inflows of resources FUND BALANCES Restricted for: Economic Development Total fund balances TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES DRAFT FOR DISCUSSION PURPOSES ONLY - SubJect to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Anna Economic Development Corporafion $ 460,787 87,571 $ 548,358 87,527 87,527 460,382 460,382 $ 548,358 City of Anna, Texas Reconciliation of Governmental Fund Balance Sheet to the Statement of Net Position Economic Development Corporation September 30, 2020 FUND BALANCES -TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Unavailable revenues are not included in the government -wide financial statements. NET POSITION OF GOVERNMENTAL ACTIVITIES DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revisIon and should not be relied upon or distributed. 3/16/2021 = version 1 $ 460,382 317,469 87,527 $ 865,378 City Of Anna, Texas Statement of Revenues, Expenditures, and Changes in Fund Balance Economic Development Corporation For the Year Ended September 30, 2020 REVENUES Charges for services I nvestment income Miscellaneous income Total revenues EXPENDITURES Current: Community and economic development Total expenditures Excess (deficiency) of revenues over (under) expenditures Net change in fund balances Fund balance, beginning of year Fund balance, end of year DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Anna Economic Development Corporation $ 10,243 6,922 1,500 18,665 146,979 146,979 (128,314) (128,314) $ 460,382 E:� City of Anna, Texas Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of the Governmental Fund to the Statement of Activities Economic Development Corporation For the Year Ended September 30, 2020 NET CHANGE IN FUND BALANCES -TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the statement of activities are different because: Depreciation is not recognized as an expense in governmental funds since it does not require the use of current financial resources Various other reclassification and eliminations are necessary to convert from the modified accrual basis of accounting to accrual basis of accounting. This includes the change in unavailable revenue from the prior year CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 $ (128,314) (19,715) $ (149,529) City of Anna, Texas Schedule of Revenues, Expenditures, and Changes In Fund Balances - Budget and Actual Community Development Corporation For the Year Ended September 30, 2020 REVENUES Sales and use tax Investment income Total revenues EXPENDITURES Current: Community and economic development Debt Service: Principal retirement I nterest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures Net change in fund balance Fund balances, beginning of year FUND BALANCES, END OF YEAR DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Final Budget Original Final Positive Budget Budget Actual (Negative) $ 1,137,630 $ 1,300,000 $ 1,362,791 $ 62,791 11,140 11,140 11,771 631 1,148,770 1,311,140 1,374,562 63A22 822,894 822,894 634,317 188,577 215,000 215,000 215,000 - 110,876 110,876 110,901 (25) 1,148,770 1,148,770 978,731 162,370 162,370 978,731 960,218 414,344 414,344 978,731 188,552 251,974 251,974 $ 978,731 $ 1,141,101 $ 1,393,075 $ 251,974 Notes to Required Supplementary Information l .Annual budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP) E:� City Of Anna, Texas Statement of Revenues, Expenditures, and Changes In Fund Balances - Budget and Actual Economic Development Corporation For the Year Ended September 30, 2020 REVENUES Charges for services - rentals Investment income Other income Total revenues EXPENDITURES Current: Community and economic development Total expenditures Excess (deficiency) of revenues over (under) expenditures Net change in fund balance Fund balances, beginning of year FUND BALANCES, END OF YEAR 0 Original Final Budget Budget 10,776 3,996 3,000 17,772 75,730 75,730 (57,958) (57,958J 588,696 $ 12,000 6,000 1,500 19,500 225,730 225,730 (206,230) (206,230) 588,696 DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Actual $ 10,243 6,922 1,500 18, 665 146,979 146,979 (128,314) (128,314) 588,696 Final Budget Positive (Negative) 922 (835) 78,751 78,751 77,916 77,916 $ 530,738 $ 382,466 $ 460,382 $ 77,916 Notes to Required Supplementary I nformation l .Annual budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP) DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. City of Anna, Texas 3/16/2021 - version 1 Statement of Revenues, Expenditures, and Changes In Fund Balances - Budget and Actual Debt Service Fund For the Year Ended September 30, 2020 Final Budget Original Final Positive Budget Budget Actual (Negative) REVENUES Property taxes $ 1,823,632 $ 1,823,632 $ 1,873,923 $ 50,291 Investmentincome 15,882 111000 9,801 (1,199) Total revenues 1,839,514 1,834,632 1,883,724 49,092 EXPENDITURES Principal retirement 497,000 497,000 497,000 Interest and fiscal charges 1,328,632 1,328,632 1,328,162 470 Total expenditures 1,825,632 1,825,632 1,825,162 470 Excess (deficiency) of revenues over (under) expenditures 13,882 91000 58,562 49,562 Net change in fund balances 13,882 91000 58,562 49,562 Fund balances, beginning of year 89,877 89,877 89,877 - FUND BALANCES, END OF YEAR $ 103,759 $ 98,877 $ 148,439 $ 49,562 DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Agency Funds PID Agency Fund To account for bond proceeds, assessments, and related debt associated with bonds issued by the City as an agent for the Hurricane Creek public improvement district. City of Anna, Texas Statement of Changes in Assets and Liabilities PID Agency Fund For the Year Ended September 30, 2020 ASSETS Restricted cash and cash equivalents Total assets LIABILITIES Liability to bond holders Total liabilities DRAFT FOR DISCUSSION PURPOSES ONLY - Subject to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 Balance at Beginning of Year Additions Deletions $ 11799,220 $ 14,211 $ (667,456) $ $ 1,799,220 $ 14,21 1 $ (667,456) $ Balance at End of Year 1,145,975 1,145,975 1,799,220 $ 14,211 $ (667,456) $ 1,145,975 1,799,220 $ 14,211 $ (667,456) $ It145,975 :S DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 = version 1 Statistical Section DRAFT FOR DISCUSSION PURPOSES ONLY to final review and possible revision and should not be relied upon or distributed. 3/16/2021 - version 1 DRAFT FOR DISCUSSION PURPOSES ONLY - Subj mt to final review and possible revis(on and should not be relied upon or distributed. 3/16/2021 - version 1 Statistical Section (Unaudited) This part of the City's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and Required Supplementary Information says about the City's overall financial health. Financial Trends Tables These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity 5,6,7&8 These schedules contain information to help the reader assess the City's most significant local revenue source, property tax. Debt Capacity 9,10,11&12 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 15, 16 8� 17 These schedules contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides and the activities it performs. 91 W � U C C: D N x O a U C C: U /U :• O QL.L fit= 0 0 IL Uz j N N N M N a ih N h O N O CV .n a e �2 v F04 N P M a L13 n N .- fV a o c1 M M P � CV hgg �S n 9 b � Q M CI o O Id O Cq Id O tV h C7 Cd b4 1� 0HD C6 CV pOp M Y m b Um O O PI N p cei O %d V N a � g r a S 1z CI: N 0 E o > a a Q C c ma w � a N w U z Z C U t N o z 0 I �1 M n h e.4 � P a^O b P C`1 C; N t2 ooR ?? d CV C O 4I d %d nl b4 n n 0 h Y 06 oz � OD P f7 V} d � � h N o a�d-%g N h � C6 ? 0 a U m y � a � U U H > U z � Z m N d h a b h Cn CCI g b � N � � o � � v «9 n n g r � O C) CJ 06 P � � O. try t� o t1P. M a0 h YI t�: N � cq Cr O. 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