Document Millcreek_doc_4b65eb59ff

MILLCREEK Basic Financial Statements and Independent Auditor’s Report As of and for the Year Ended June 30, 2022 ---PAGE BREAK--- MILLCREEK Table of Contents Page FINANCIAL SECTION Independent Auditor’s Report 1-3 Management's Discussion and Analysis 4-10 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position 11 Statement of Activities 12 Fund Financial Statements: Balance Sheet - Governmental Funds 13 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 14 Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds 15 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of 16 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 17 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – Community Reinvestment Agency – Special Revenue Fund 18 Statement of Net Position – Proprietary Fund 19 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Fund 20 Statement of Cash Flows – Proprietary Fund 21 Notes to Financial Statements 22-46 Supplemental Information: Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – Capital Projects 47 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – Capital Projects 48 Required Supplementary Information: Schedule of the Proportionate Share of Net Pension Liability 49 Schedule of Pension Contributions 50 Notes to the Required Supplementary Information 51 ---PAGE BREAK--- MILLCREEK Table of Contents COMPLIANCE SECTION Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 52-53 Independent Auditor’s Report on Compliance and on Internal Control Over Compliance in Accordance with the State of Utah Legal Compliance Audit Guide 54-56 ---PAGE BREAK--- 1 INDEPENDENT AUDITOR’S REPORT Honorable Mayor and Members of the City Council Millcreek, Utah Report on the Audit of the Financial Statements Opinions We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Millcreek, Utah (the City), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2022, and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements The City’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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. C O M M I T T E D . E X P E R I E N C E D . T R U S T E D CERTIFIED PUBL IC ACCOUN TAN TS E. LYNN HANSEN, CPA CLARKE R. BRADSHAW, CPA GARY E. MALMROSE, CPA EDWIN L. ERICKSON, CPA MICHAEL L. SMITH, CPA JASON L. TANNER, CPA ROBERT D. WOOD, CPA AARON R. HIXSON, CPA TED C. GARDINER, CPA JEFFREY B. MILES, CPA SHAWN F. MARTIN, CPA H B M E , L L C I S A C E R T I F I E D P U B L I C A C C O U N T I N G F I R M 5 5 9 W E S T 5 0 0 S O U T H B O U N T I F U L , U T 8 4 0 1 0 O : 8 0 1 . 2 9 6 . 0 2 0 0 H B M E . C O M ---PAGE BREAK--- 2 In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 City’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 4 through 10 and the pension schedules on pages 49 through 51 be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 ---PAGE BREAK--- 3 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 7, 2022, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the 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. December 7, 2022 ---PAGE BREAK--- 4 MANAGEMENT’S DISCUSSION AND ANALYSIS This document is a narrative overview and analysis of the financial activities of Millcreek (the City) for the fiscal year ending June 30, 2022. The City was incorporated as of January 1, 2017. City management encourages readers to consider the information presented here in conjunction with the financial statements which follow this section. To help the reader with navigation of this report, the City's activities are classified in the following manner: government activities refer to general administration, parks, streets, police, planning etc. and business-type activities refer to the Storm Water Utility Fund. This fund was established in fiscal year 2021 to account for storm sewer utility fees and expenses related to the City’s storm water system. Fees are collected by Rocky Mountain Power through their current billing system and then remitted to the City. FINANCIAL HIGHLIGHTS • The total net position of the City increased from $177,603,465 to $207,503,365. The total net position is a combination of $185,939,381 from governmental activities and $21,563,984 from business-type activities. • The total net position of governmental activities is made up of $135,663,957 in capital assets, such as land, infrastructure and equipment; $35,882,421 which is restricted for capital projects and the remaining $14,393,003 is unrestricted assets. • The total net position of business-type activities is made up of $18,906,102 in capital assets, such as equipment and infrastructure and $2,657,882 which is considered unrestricted assets. • Total liabilities of the City increased by $33,998,941. This increase is due to the City issuing sales tax revenue bonds for the purpose of building a new city hall, which added $38,354,265 in non-current liabilities while unearned revenue decreased $3,989,561, due to utilizing federal funds which had been deferred in fiscal year 2021. Additionally, the net pension liability decreased by $97,317. REPORTING THE CITY AS A WHOLE This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also includes other supplementary information in addition to the basic financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. • The statement of net position presents information on all of the City’s assets, liabilities, and deferred inflows/outflows of resources, with the difference between the two reported as 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. However, you will also need to consider other nonfinancial factors. • The statement of activities presents information showing how the City’s net position changed during the fiscal year reported. 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, all the current year’s revenues and ---PAGE BREAK--- 5 expenses are considered regardless of when cash is received or paid. The government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities). The government-wide financial statements can be found on pages 11-12 of this report. REPORTING THE CITY’S MOST SIGNIFICANT FUNDS 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 also uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All the funds of the City can be divided into two categories: governmental funds and proprietary funds. • Governmental funds - These funds are used to account for the same functions reported as governmental activities in the government-wide financial statements. These fund statements focus on how money flows into and out of these funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the City’s general government operations and the basic services it provides. Governmental fund information helps users determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in a reconciliation included with the fund financial statements. The City maintains four individual governmental funds, three of which are major funds. The funds include the General Fund, the Capital Projects Fund, the Park Impact Fee Fund (non-major) and the Community Reinvestment Agency Special Revenue Fund. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for each one of these funds. The basic governmental fund financial statements can be found on pages 13-16 of this report. The City adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. • Proprietary funds - The City also maintains one proprietary fund to account for the storm water utility. Information for this fund is listed in the financial statements as a business-type activity and can be found on pages 19-21. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets and deferred outflows exceeded liabilities and deferred inflows by $207,503,365. ---PAGE BREAK--- 6 By far, the largest portion of the City’s net position (74%) reflects its investment in capital assets land, buildings, infrastructure assets, machinery, and equipment). The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. The City’s investment in its capital assets is reported net of related debt. STATEMENT OF NET POSITION 2022 2021 2022 2021 2022 2021 86,779,639 $ 44,257,629 $ 2,861,347 $ 497,973 $ 89,640,986 $ 44,755,602 $ 176,415,130 155,821,222 18,906,102 18,861,314 195,321,232 174,682,536 Total Assets 263,194,769 200,078,851 21,767,449 19,359,287 284,962,218 219,438,138 Deferred outflows of resources Deferred related to pensions 528,115 530,357 58,680 58,929 586,795 589,286 4,868,964 9,199,543 79,791 35,041 4,948,755 9,234,584 58,506,741 20,244,851 30,098 7,218 58,536,839 20,252,069 Total Liabilities 63,375,705 29,444,394 109,889 42,259 63,485,594 29,486,653 Deferred inflows of resources Deferred property tax revenue 13,037,500 12,225,860 - - 13,037,500 12,225,860 Deferred related to pensions 1,370,298 624,101 152,256 69,345 1,522,554 693,446 Total Deferred inflows of resources 14,407,798 12,849,961 152,256 69,345 14,560,054 12,919,306 135,663,957 144,576,786 18,906,102 18,861,314 154,570,059 163,438,100 35,882,421 479,219 - - 35,882,421 479,219 14,393,003 13,258,848 2,657,882 427,298 17,050,885 13,686,146 Total Net Position 185,939,381 $ 158,314,853 $ 21,563,984 $ 19,288,612 $ 207,503,365 $ 177,603,465 $ Net Position: Business-Type Activities Total Governmental Activities Current and other assets Capital Assets Other Liabilities Long-term liabilities outstanding Invested in Capital Assets, net of related debt Restricted Unrestricted ---PAGE BREAK--- 7 Governmental activities. Governmental activities increased the City’s net position by $27,624,528. The majority of this increase was due to a decrease in the amount of transfer from governmental activities to business type activities which was needed in FY21 with the creation of the Storm Water fund. Additionally, 58% of the increase was due to an increase in operating and capital grants. The City was the recipient of several large grants from the State and Federal government though the release of Coronavirus State and Local Fiscal Recovery funds. Business-type activities. Business-type activities increased the City’s net position by $2,275,372. The second year of the Storm Water fund collected $3,381,888 from charges for services and expended $1,123,666. CHANGES IN NET POSITION 2022 2021 2022 2021 2022 2021 Revenues Program Revenues Charges for Services 2,974,413 $ 3,721,059 $ 3,381,888 $ 1,868,447 $ 6,356,301 $ 5,589,506 $ Operating Grants & Contributions 11,765,256 7,434,385 - - 11,765,256 7,434,385 Capital Grants & Contributions 14,882,287 3,147,755 - - 14,882,287 3,147,755 General Revenues Property Taxes 11,997,886 11,902,199 - - 11,997,886 11,902,199 General Sales Taxes 14,836,842 13,227,389 - - 14,836,842 13,227,389 Franchise Taxes 585,581 553,957 - - 585,581 553,957 Interest Income 284,312 128,506 7,900 1,156 292,212 129,662 Transfers, net (8,750) (18,447,736) 8,750 18,447,736 - - Gain on Sale of Assets 192,424 - - - 192,424 - Other 69,023 264,348 - - 69,023 264,348 Total Revenues 57,579,274 21,931,862 3,398,538 20,317,339 60,977,812 42,249,201 Expenses General Government 5,993,878 7,426,768 - - 5,993,878 7,426,768 Public Safety 13,436,161 12,213,011 - - 13,436,161 12,213,011 Streets/Public Works 8,068,929 8,426,540 - - 8,068,929 8,426,540 Parks & recreation 571,069 - - - 571,069 - Interest on Long-Term Debt 1,884,709 636,240 - - 1,884,709 636,240 Storm Water - - 1,123,166 1,028,727 1,123,166 1,028,727 Total Expenses 29,954,746 28,702,559 1,123,166 1,028,727 31,077,912 29,731,286 Increase in Net Position 27,624,528 (6,770,697) 2,275,372 19,288,612 29,899,900 12,517,915 Net Position Beginning 158,314,853 165,085,550 19,288,612 - 177,603,465 165,085,550 Net Position Ending 185,939,381 $ 158,314,853 $ 21,563,984 $ 19,288,612 $ 207,503,365 $ 177,603,465 $ Total Governmental Activities Business-Type Activities ---PAGE BREAK--- 8 ANALYSIS OF GOVERNMENT’S FUNDS The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. As of June 30, 2022, the City’s governmental funds’ equity is $68,029,884, an increase of $45,137,508 from the prior year. The General Fund is the chief operating fund of the City. All activities which are not required to be accounted for in separate funds either by state or local ordinance or by a desire to maintain a matching of revenues and expenses are accounted for in this fund. At the end of the current fiscal year, unassigned fund balance of the general fund was $13,636,969 while total fund balance was $14,418,988. As a measure of the general fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 47% of total general fund expenditures. The City maintains only one type of proprietary fund, an enterprise fund, which is used to report the same type of information found in the government-wide financial statements business-type activities, but in more detail. Net position of the storm water fund at the end of the year was $21,563,984. Net position increased by $2,275,372 from the preceding year. GENERAL FUND BUDGETARY HIGHLIGHTS During the fiscal year, the General Fund was amended, resulting in an increase in revenues from the original budget of $26,652,860 to $81,847,254. The majority of this increase ($39,243,823) was due to recognition of bond proceeds as the City bonded for the building of a new city hall. CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets – The City’s investment in capital assets for its governmental activities as of June 30, 2022, amounts to $176,415,130 (net of accumulated depreciation). This investment in capital assets includes land, infrastructure (streets, sidewalks, curb and gutter, bridges, etc.), and equipment. The City’s investment in capital assets for its business-type activities as of June 30, 2022, equals $18,906,102 (net of accumulated depreciation). This investment in capital assets includes infrastructure and equipment. The City’s total capital asset additions (includes both governmental and business-type activities) during fiscal year 2022 include the following: • Infrastructure, streets, parks and storm drain in the amount of $10,728,635. • Land, buildings (buildings within Millcreek Common) and buildings in progress (city hall) in the amount of $10,092,031. ---PAGE BREAK--- 9 MILLCREEK’S CAPITAL ASSETS Additional information on the City’s capital assets can be found in the footnotes to this financial report and the supplemental section. Long-term debt: At June 30, 2022, the City had $52,770,000 in bonds payable. In June of 2019, to fund the acquisition of real property and construction of public space within the City Center Community Reinvestment Area (CRA), the City issued sales tax revenue bonds for $17,345,000. On August 5, 2021, the City issued Sales Tax Revenue Bonds, Series 2021, in the amount of $36,265,000. Proceeds from the sale of these bonds are being used to finance expenses associated with building a new city hall. In fiscal year 2022, the City paid interest on all bonds in the amount of $1,660,155. MILLCREEK’S LONG-TERM DEBT ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES • The Unemployment rate for Salt Lake County (of which the City is part) was 2.4% compared with the State unemployment rate of 2.0% as of June 30, 2022. • Record high inflation was 8.8% for the State of Utah as of June 2022. Inflation trends will need to continue to be monitored closely throughout fiscal year 2023. • The City continues to outsource for the following services: o Police protection (Unified Police Department) o Animal services (Salt Lake County Animal Services) o Park Maintenance (Salt Lake County Parks Department) o Public works services (Salt Lake County Public Works) 2022 2021 2022 2021 2022 2021 Capital Assets Land 95,821,198 $ 92,067,824 $ - $ - $ 95,821,198 $ 92,067,824 $ Construction in progress 4,038,657 - - - 4,038,657 - Buildings 3,359,843 1,082,828 - - 3,359,843 1,082,828 Improvements 11,414,319 6,227,745 - - 11,414,319 6,227,745 Infrastructure 61,530,738 56,212,570 18,697,405 18,810,129 80,228,143 75,022,699 Machinery and equipment 250,375 230,255 208,697 51,185 459,072 281,440 Total 176,415,130 $ 155,821,222 $ 18,906,102 $ 18,861,314 $ 195,321,232 $ 174,682,536 $ Governmental Activities Business-Type Activities Total 2022 2021 2022 2021 2022 2021 Sales Tax Revenue Bonds 52,770,000 $ 17,345,000 $ - $ - $ 52,770,000 $ 17,345,000 $ Premium 5,484,138 2,616,188 - - 5,484,138 2,616,188 Interest payable on long-term debt 151,754 60,150 - - 151,754 60,150 Net Pension Liability - 196,077 - 9,731 - 205,808 Compensated absences 252,603 87,586 30,098 25,310 282,701 112,896 Total 58,658,495 $ 20,305,001 $ 30,098 $ 35,041 $ 58,688,593 $ 20,340,042 $ Total Governmental Activities Business-Type Activities ---PAGE BREAK--- 10 REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the City’s finances. Questions concerning any information provided in this report or requests for additional financial information should be addressed to: Millcreek Finance Director 3330 South 1300 East Millcreek, UT 84106 ---PAGE BREAK--- MILLCREEK Statement of Net Position June 30, 2022 The accompanying notes are an integral part of this financial statement. 11 Governmental Business-type Activities Actitities Total ASSETS Cash and cash equivalents 33,549,629 $ 2,203,629 $ 35,753,258 $ Receivables: Property and other taxes 16,292,394 - 16,292,394 Accounts - 547,157 547,157 Due from other governments 564,391 - 564,391 Net pension asset 995,045 110,561 1,105,606 Restricted cash and cash equivalents 35,378,180 - 35,378,180 Capital assets: Land 95,821,198 - 95,821,198 Construction in progress 4,038,657 - 4,038,657 Buildings and improvements 3,449,259 - 3,449,259 Improvements 11,605,046 - 11,605,046 Machinery and equipment 711,756 267,753 979,509 Infrastructure 68,937,272 21,119,413 90,056,685 Accumulated depreciation (8,148,058) (2,481,064) (10,629,122) Total assets 263,194,769 21,767,449 284,962,218 DEFERRED OUTFLOWS OF RESOURCES Related to pensions 528,115 58,680 586,795 Total deferred outflows of resources 528,115 58,680 586,795 LIABILITIES Accounts payable 2,960,114 79,791 3,039,905 Accrued interest payable 151,754 - 151,754 Accrued liabilites 61,469 - 61,469 Construction bonds 1,431,627 - 1,431,627 Unearned revenue 264,000 - 264,000 Non-current liabilities: Due within one year 882,082 28,979 911,061 Due in more than one year 57,624,659 1,119 57,625,778 Total liabilities 63,375,705 109,889 63,485,594 DEFERRED INFLOWS OF RESOURCES Deferred property tax revenue 13,037,500 - 13,037,500 Related to pensions 1,370,298 152,256 1,522,554 Total deferred inflows of resources 14,407,798 152,256 14,560,054 NET POSITION Net investment in capital assets 135,663,957 18,906,102 154,570,059 Restricted for: Capital projects 35,882,421 - 35,882,421 Unrestricted 14,393,003 2,657,882 17,050,885 Total net position 185,939,381 $ 21,563,984 $ 207,503,365 $ ---PAGE BREAK--- MILLCREEK Statement of Activities For the Year Ended June 30, 2022 The accompanying notes are an integral part of this financial statement. 12 Operating Capital Charges for Grants and Grants and Governmental Business-type Expenses Services Contributions Contributions Activities Activities Total GOVERNMENTAL ACTIVTITIES General government 5,993,878 $ 2,974,413 $ - $ - $ (3,019,465) $ (3,019,465) $ Public safety 13,436,161 - - - (13,436,161) (13,436,161) Streets and public works 8,068,929 - 4,085,606 22,522,136 18,538,813 18,538,813 Parks and recreation 571,069 - - 39,801 (531,268) (531,268) Interest and fiscal charges 1,884,709 - - - (1,884,709) (1,884,709) Total governmental activities 29,954,746 2,974,413 4,085,606 22,561,937 (332,790) (332,790) BUSINESS TYPE ACTIVITIES Storm Water 1,123,166 3,381,888 - - 2,258,722 2,258,722 Total business-type activities 1,123,166 3,381,888 - - 2,258,722 2,258,722 GENERAL REVENUES Taxes: Property taxes 11,997,886 - 11,997,886 Franchise taxes 585,581 - 585,581 General sales taxes 14,836,842 - 14,836,842 Interest income 285,208 7,900 293,108 Gain on sale of assets 192,424 - 192,424 Miscellaneous 68,127 - 68,127 Transfers, net (8,750) 8,750 - Total general revenues 27,957,318 16,650 27,973,968 Change in net position 27,624,528 2,275,372 29,899,900 Net position - beginning 158,314,853 19,288,612 177,603,465 Net position - ending 185,939,381 $ 21,563,984 $ 207,503,365 $ Net (Expense) Revenues and Changes in Net Position Program Revenues ---PAGE BREAK--- MILLCREEK Balance Sheet – Governmental Funds June 30, 2022 The accompanying notes are an integral part of this financial statement. 13 Special Revenue Capital Special Revenue Totals Community Projects Park Impact Governmental General Reinvestment Fund (non-major) Funds ASSETS Cash and cash equivalents 13,802,705 $ 853,597 $ 18,690,427 $ 202,900 $ 33,549,629 $ Restricted cash and investments 217,628 9,762 35,150,790 - 35,378,180 Receivables: Sales, property and franchise taxes 14,792,831 1,350,000 149,563 - 16,292,394 Intergovernmental 564,391 - - - 564,391 Total assets 29,377,555 $ 2,213,359 $ 53,990,780 $ 202,900 $ 85,784,594 $ LIABILITIES Accounts payable 1,513,971 $ 11,231 $ 1,434,912 $ - $ 2,960,114 $ Accrued liabilities 61,469 - - - 61,469 Construction bonds 1,431,627 - - - 1,431,627 Unearned revenue 264,000 - - - 264,000 Total liabilities 3,271,067 11,231 1,434,912 - 4,717,210 DEFERRED INFLOWS OF RESOURCES Deferred property tax revenue 11,687,500 1,350,000 - - 13,037,500 Total deferred inflows of resources 11,687,500 1,350,000 - - 13,037,500 FUND BALANCE Restricted Class C road projects 782,019 - - - 782,019 Capital projects - 9,762 35,150,790 - 35,160,552 Total restricted 782,019 9,762 35,150,790 - 35,942,571 Assigned to: Special revenue fund - 842,366 - 202,900 1,045,266 Capital projects fund - - 17,405,078 - 17,405,078 Total assigned - 842,366 17,405,078 202,900 18,450,344 Unassigned 13,636,969 - - - 13,636,969 Total fund balances 14,418,988 852,128 52,555,868 202,900 68,029,884 Total liabilities, deferred inflows of resources, and fund balances 29,377,555 $ 2,213,359 $ 53,990,780 $ 202,900 $ 85,784,594 $ ---PAGE BREAK--- MILLCREEK Reconciliation to the Balance Sheet of Governmental Funds To the Statement of Net Position June 30, 2022 The accompanying notes are an integral part of this financial statement. 14 Amounts reported for governmental activities in the Statement of Net Position are different because: Total Fund Balances - Total Governmental Funds (page 13) 68,029,884 $ Capital assets used in governmental activities are not financial resources and therefore, are not reported in the funds. 176,415,130 Net pension assets and liabilities are not available to pay for current period expenditures and, therefore, are either deferred or not applicable to funds. 152,862 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds. (58,658,495) Net Position - Governmental Activities (page 11) 185,939,381 $ ---PAGE BREAK--- MILLCREEK Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Funds For the Year Ended June 30, 2022 The accompanying notes are an integral part of this financial statement. 15 Special Revenue Capital Special Revenue Totals Community Projects Park Impact Governmental General Reinvestment Fund (non-major) Funds REVENUES Taxes 27,244,251 $ 176,058 $ - $ - $ 27,420,309 $ Special assessments - - - 39,801 39,801 Licenses and permits 2,667,253 - - - 2,667,253 Charges for services 273,508 3,640 - - 277,148 Intergovernmental 11,765,256 1,103,033 13,739,453 - 26,607,742 Fines and forfeitures 30,012 - - - 30,012 Interest 86,479 8,825 189,008 896 285,208 Miscellaneous 68,127 - - - 68,127 Total revenues 42,134,886 1,291,556 13,928,461 40,697 57,395,600 EXPENDITURES Current General government 6,619,277 - - - 6,619,277 Public safety 13,436,161 - - - 13,436,161 Streets and public works 6,322,169 488,581 - - 6,810,750 Parks and recreation 571,069 - - - 571,069 Capital outlay - - 22,607,694 - 22,607,694 Debt service: Principal 840,000 - - - 840,000 Interest and fiscal charges 938,358 721,797 - - 1,660,155 Issuance costs 370,424 - - - 370,424 Total expenditures 29,097,458 1,210,378 22,607,694 - 52,915,530 Excess of revenues over (under) expenditures 13,037,428 81,178 (8,679,233) 40,697 4,480,070 OTHER FINANCING SOURCES (USES) Transfers in - - 51,818,985 - 51,818,985 Transfers out (50,522,240) (1,305,495) - - (51,827,735) Revenue bonds issued 39,370,424 - - - 39,370,424 Sale of capital assets - 1,295,764 - - 1,295,764 Total other financing sources (uses) (11,151,816) (9,731) 51,818,985 - 40,657,438 Net change in fund balances 1,885,612 71,447 43,139,752 40,697 45,137,508 Fund balance, beginning of year 12,533,376 780,681 9,416,116 162,203 22,892,376 Fund balance, end of year 14,418,988 $ 852,128 $ 52,555,868 $ 202,900 $ 68,029,884 $ ---PAGE BREAK--- MILLCREEK Reconciliation of the Statement of Revenues, Expenditures, and Change in Fund Balance of Governmental Funds To the Statement of Activities For the Year Ended June 30, 2022 The accompanying notes are an integral part of this financial statement. 16 Amounts reported for governmental activities in the statement of activities (page 12) are different because: Net change in fund balances - total governmental funds (page 15) 45,137,508 $ Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation and asset transfers exceed capital outlays and contributions in the current period. 20,593,908 The issuance of long-term debt bonds, leases) provides current financial resources to governmental funds, while the payment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Repayment of principal on debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position. This amount is the net effect of these differences in the treatment of long-term debt and related items. (38,384,554) 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. 277,666 Change in net position - governmental activities (page 12) 27,624,528 $ ---PAGE BREAK--- MILLCREEK Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – General Fund For the Year Ended June 30, 2022 The accompanying notes are an integral part of this financial statement. 17 Variance With Final Budget - Original Final Positve Budget Budget Actual (Negative) REVENUES Taxes 21,627,360 $ 27,408,500 $ 27,244,251 $ (164,249) $ Licenses and permits 2,100,500 2,426,250 2,667,253 241,003 Charges for service 180,000 270,000 273,508 3,508 Intergovernmental 2,640,000 11,359,363 11,765,256 405,893 Fines and forfeitures 5,000 30,000 30,012 12 Interest 100,000 130,000 86,479 (43,521) Miscellaneous - 979,318 68,127 (911,191) Bond proceeds - 39,243,823 39,370,424 126,601 Total revenues 26,652,860 81,847,254 81,505,310 (341,944) EXPENDITURES Current: General government: Mayor and city council 424,500 476,000 447,931 28,069 City management 202,500 224,500 209,207 15,293 Recorder 164,700 146,420 136,747 9,673 Building services 1,124,000 1,132,500 1,094,435 38,065 Comunications and programs 328,250 495,155 431,230 63,925 Emergency management 129,250 140,650 125,901 14,749 Justice court 215,000 215,000 208,664 6,336 Legal 502,250 577,250 535,006 42,244 Information center 307,400 260,900 234,017 26,883 IT management 562,000 467,000 362,127 104,873 Economic development 103,200 79,500 63,536 15,964 Business licenses 167,950 176,950 166,435 10,515 Finance 469,750 434,500 408,402 26,098 Human resources 59,500 75,000 53,681 21,319 Nondepartmental 375,000 370,000 288,182 81,818 Facilities administration 179,500 182,000 166,910 15,090 Facilities 367,500 352,500 308,264 44,236 Fleet 67,500 92,686 77,840 14,846 Planning and zoning 1,073,500 1,173,500 1,138,138 35,362 Promise program 110,000 252,700 162,624 90,076 Public safety 12,690,000 13,441,186 13,436,161 5,025 Streets and public works 6,490,900 6,588,244 6,322,169 266,075 Parks and recreation 424,500 609,500 571,069 38,431 Debt service: Principal - 840,000 840,000 - Interest and fiscal charges - 938,361 938,358 3 Issuance costs - 243,823 370,424 (126,601) Transfers 86,860 50,522,241 50,522,240 1 Total expenditures 26,625,510 80,508,066 79,619,698 888,368 Net change in fund balance 27,350 1,339,188 1,885,612 546,424 Fund balance, beginning of year 12,533,376 12,533,376 12,533,376 - Fund balance, end of year 12,560,726 $ 13,872,564 $ 14,418,988 $ 546,424 $ ---PAGE BREAK--- MILLCREEK Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Community Reinvestment Agency – Special Revenue Fund For the Year Ended June 30, 2022 The accompanying notes are an integral part of this financial statement. 18 Variance With Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Taxes 50,000 $ 147,273 $ 176,058 $ 28,785 $ Charges for services - 3,640 3,640 - Intergovernmental 1,100,000 1,132,000 1,103,033 (28,967) Interest - 60 8,825 8,765 Total revenue 1,150,000 1,282,973 1,291,556 8,583 EXPENDITURES Public works 509,000 538,292 488,581 49,711 Debt service 721,800 721,800 721,797 3 Total expenditures 1,230,800 1,260,092 1,210,378 49,714 Net change in fund balance (80,800) 22,881 81,178 58,297 Fund balance, beginning of year 780,681 780,681 780,681 - Fund balance, end of year 699,881 $ 803,562 $ 861,859 $ 58,297 $ ---PAGE BREAK--- MILLCREEK Statement of Net Position – Proprietary Fund June 30, 2022 The accompanying notes are an integral part of this financial statement. 19 Storm Water ASSETS Current assets: Cash and cash equivalents - unrestricted 2,203,629 $ Receivables: Accounts, net 547,157 Total current assets 2,750,786 Net pension asset 110,561 Property, plant and equipment: Infrastructure 21,119,413 Machinery and equipment 267,753 Accumulated depreciation (2,481,064) Net property, plant and equipment 18,906,102 Total assets 21,767,449 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to pensions 58,680 Total deferred outflows of resources 58,680 LIABILITIES Current liabilities: Accounts payable 79,791 Compensated absences, current 28,979 Total current liabilities 108,770 Noncurrent liabilities: Compensated absences 1,119 Total noncurrent liabilities 1,119 Total liabilities 109,889 DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pensions 152,256 Total deferred inflows of resources 152,256 NET POSITION Net investment in capital assets 18,906,102 Unrestricted 2,657,882 Total net position 21,563,984 $ ---PAGE BREAK--- MILLCREEK Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Fund For the Year Ended June 30, 2022 The accompanying notes are an integral part of this financial statement. 20 Storm Water OPERATING REVENUES Charges for services 3,381,888 $ Total operating revenues 3,381,888 OPERATING EXPENSES Wages and fringe benefits 403,800 Operations 11,759 Professional services 129,345 Depreciation and amortization 466,065 Other 112,197 Total operating expenses 1,123,166 Operating income 2,258,722 NON-OPERATING REVENUES (EXPENSES) Interest income 7,900 Total non-operating revenues 7,900 Income before transfers and contributions 2,266,622 Transfers in 8,750 Change in net position 2,275,372 Total net position, beginning of year 19,288,612 Total net position, end of year 21,563,984 $ ---PAGE BREAK--- MILLCREEK Statement of Cash Flows – Proprietary Fund For the Year Ended June 30, 2022 The accompanying notes are an integral part of this financial statement. 21 Storm Water Cash flows from operating activities: Cash received from customers (including cash deposits) 3,056,216 $ Cash paid to suppliers (180,728) Cash paid to employees (436,144) Net cash provided by operating activities 2,439,344 Cash flow from capital and related financing activities: Interest income received 7,900 Transfer from other fund 8,750 Purchase of capital assets (510,853) Net cash used by capital and related financing activities (494,203) Net increase in cash and cash equivalents 1,945,141 Cash and cash equivalents at beginning of year 258,488 Cash and cash equivalents at end of year 2,203,629 $ Reconciliation of operating income to net cash provided by operating activities: Operating income 2,258,722 $ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization expense 466,065 Changes in assets and liabilities: Increase in accounts receivable (325,672) Decrease in deferred ouflows 249 Increase in accounts payable 72,573 Increase in accrued liabilities 4,788 Increase in deferred inflows 82,911 Decrease in net pension liability (120,292) Total adjustments 180,622 Net cash provided by operating activities 2,439,344 $ ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements June 30, 2022 22 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Millcreek, Utah (the City) was incorporated in 2017 under the laws of the State of Utah. The City operates under a Mayor-Council form of government. The City is a municipal corporation governed by an elected five-member Council, which includes the Mayor. The City provides the following services: public safety, highway and streets, public improvements, planning and zoning, and general administrative services. The City’s financial statements are prepared in accordance with generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). The accounting policies of the City conform to accounting principles generally accepted in the United States of America as applicable to governmental units. The more significant accounting policies established in GAAP and used by the City are discussed below. Reporting Entity In evaluating how to define the City for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in the related GASB pronouncement. The basic, but not the only, criterion for including a potential component unit within the reporting entity is the governing body's ability to exercise oversight responsibility. The most significant manifestation of this ability is financial interdependency. Other manifestations of the ability to exercise oversight responsibility include, but are not limited to, the selection of governing authority, the designation of management, the ability to significantly influence operations and accountability of fiscal matters. The other criterion used to evaluate potential component units for inclusion or exclusion from the reporting entity is the existence of special financing relationships, regardless of whether the City is able to exercise oversight responsibilities. Component units that do not meet the criteria for being blended into the City’s primary government are reported discretely. Government-Wide Financial Statements and Fund Financial Statements The City’s basic financial statements include both government-wide (reporting the City as a whole) and fund financial statements. The City’s general administrative services, public safety, highways and streets, planning and engineering, and parks are all classified as governmental activities. Storm water collection services are classified as business-type activities. The government-wide financial statements the Statement of Net Position and the Statement of Activities) report information on all activities of the City and its component units. As a general rule, the effect of inter-fund activity has been eliminated from the government-wide financial statements. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 23 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Government-Wide Financial Statements and Fund Financial Statements (Continued) The Statement of Activities demonstrates the degree to which the direct expenses of a given function or a segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. 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 that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and proprietary funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide 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 use of financial resources to acquire capital assets are capitalized as assets in the governmentwide financial statements, rather than reported as expenditure. Proceeds of long-term debt are recorded as a liability in the government-wide financial statements, rather than other financing source. Amounts paid to reduce long-term debt of the City are reported as a reduction of the related liability, rather than an expenditure in the government-wide financial statements. 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, expenditures related to claims and judgments are recorded only when payment is due. Sales taxes, franchise taxes, and earned but unreimbursed state and federal grants associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Property taxes are measurable as of the date levied (assessed) and are recognized as revenues when they become available. Available means when due, or past due, and received within the current period or collected soon enough thereafter (within 60 days) to be used to pay liabilities of the current period. All other revenues are considered to be measurable and available only when cash is received by the City. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 24 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, reserves, fund balance, revenues, and expenditures or expenses as appropriate. The various funds are summarized by type in the financial statements. The following fund types are used by the City: The City reports the following major governmental funds: • The General Fund is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. • The Capital Projects Fund accounts for the acquisition and construction of the government’s major capital facilities. • The CRA special revenue fund is used to account for financial resources to be used for the revitalization of blighted areas within the City. This fund is a blended component unit. The City reports the following major proprietary fund: • The Storm Water Fund accounts for the operation and maintenance of the storm water system and capital projects for the storm water system. Additionally, the City reports the following fund type: • Special revenue fund: The City accounts for park impact fees in a special revenue fund. 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 all enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales, services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the government’s policy to use restricted resources first, then unrestricted resources as they are needed. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 25 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Budgets Annual budgets are prepared and adopted by ordinance by total for each department, in accordance with State law, by the Mayor and City Council on or before June 22 for the following fiscal year, beginning July 1. Estimated revenues and appropriations may be increased or decreased by resolution of the City Council at any time during the year. A public hearing must be held prior to any proposed increase in a fund's appropriations. Budgets include activities in the General Fund and Special Revenue Funds. Annual budgets are also adopted for Capital Projects Fund which may include activities that overlap several fiscal years. The level of the City's budgetary control (that is, the level at which the City's expenditures cannot legally exceed the appropriated amounts) is established at the department level. Each department head is responsible to the Mayor and City Council for operating within the budget for their department. All annual budgets lapse at fiscal yearend. Utah State law prohibits the appropriation of the sum of unassigned, assigned, and committed General Fund balance until it exceeds 5% of the General Fund revenues. Until the sum of the stated categories of fund balance is greater than the above amount, it cannot be budgeted, but is used to provide working capital until tax revenue is received, to meet emergency expenditures, and to cover unanticipated deficits. Utah State law prohibits the accumulation of the stated fund balance categories in any amount greater than 35% of the current year’s actual revenues. Once adopted, the budget can be amended by subsequent City Council action. The City Council can amend the budget to any extent, provided the budgeted expenditures do not exceed budgeted revenues and appropriated fund balance, in which case a public hearing must be held. With the consent of the Mayor, department heads may reallocate unexpended appropriated balances from one expenditure account to another within that department during the budget year. Budgets for the General Fund, Special Revenue Funds, and Capital Projects Fund are prepared on the modified accrual basis of accounting. Encumbrance accounting is not used by the City. Expenditures in the Capital Projects Fund are budgeted annually on a project-by-project basis. Although it is the intention of the City that each project be funded by a specific revenue source, the adopted budget reflects only total anticipated revenues by source. Since it is not practicable or appropriate to separate revenues and fund balance on a project-by-project basis, the Capital Projects Fund is reported as an individual fund in the accompanying financial statements. For the year ended June 30, 2022, expenditures exceeded appropriations in the debt service principal and interest department (the legal level of budgetary control) within the debt service function of the general fund by $126,598. In accordance with the requirements of state law, there was a budget amendment adopted for the subsequent year’s budget. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 26 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance Cash and Cash Equivalents The government’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Investments City policy allows for the investment of funds in time certificates of deposit with federally insured depositories, investment in the Utah Public Treasurer’s Investment Fund and other investments allowed by the State of Utah’s Money Management Act. Investments are reported at fair value. The State Treasurer’s Investment Fund operates in accordance with state laws and regulations. The reported value of the Fund is the same as the fair value of the Fund shares. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “due to or due from other funds”. Advances between funds as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate they are not available for appropriation and are not available financial resources. Tax, intergovernmental and other receivables at June 30, 2022, consisted of property tax, sales tax, franchise tax, grants, utility billings, and other miscellaneous items. The utility billings for charged services are billed to customers on a basis. Taxes, grants, and utility charges are deemed collectible in full, so no allowance for uncollectibles is recorded. Restricted Assets Certain assets are classified as restricted because their use is restricted by an independent third party, enabling legislation, or other laws and statutes. These restrictions may include future debt service payments, unexpended portions of bonds issued for capital construction, and other agreements with third parties. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets roads, bridges, sidewalks, and similar items), 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 individual cost of more than $5,000 and an estimated useful life in excess of three years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. 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. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 27 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance (Continued) Capital assets are depreciated using the straight-line method over the following estimated useful lives: Infrastructure 50 years Buildings 50 years Machinery and equipment 5 years Compensated Absences For governmental funds, amounts of vested or accumulated personal time off (PTO) are not expected to be liquidated with expendable available financial resources are reported as liabilities in the government-wide statement of net position and as expenses in the government- wide statement of activities. No expenditures are reported for these amounts in the fund financial statements. Accumulated PTO may be paid to employees upon termination or retirement if approved by the City Manager. Taxes On or before June 22 of each year, the City sets the property tax rate for various municipal purposes. If the City intends to increase property tax revenues above the tax rate of the previous year, state law requires the City to provide public notice to property owners and hold public hearings. When these special public hearings are necessary, the adoption of the final budget is made subsequent to June 22. All property taxes levied by the City are assessed and collected by Salt Lake County. Taxes are levied as of January 1 and due November 30; any delinquent taxes are subject to a penalty. Unless the delinquent taxes and penalties are paid before January 15, a lien is attached to the property, and the amount of taxes and penalties bears interest from January 1 until paid. If after five years, delinquent taxes have not been paid, the County sells the property at a tax sale. Tax collections are remitted to the City from the County on a basis. Sales taxes are collected by the Utah State Tax Commission and remitted to the City Franchise taxes are collected by utility companies and remitted to the City periodically. 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 Utah Retirement Systems Pension Plan (URS) and additions to/deductions from URS's fiduciary net position have been determined on the same basis as they are reported by URS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 28 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Deferred Outflows and Inflows of Resources Deferred outflows of resources represent a consumption of net position that applies to a future period, and is, therefore, deferred until that time. A deferred loss on refunding results from the difference in the carrying value of the refunded debt and the reacquisition price. Deferred inflows of resources represent an acquisition of net position that applies to a future period, and is, therefore, deferred until that time. Governmental funds report unavailable revenue from property taxes as deferred inflows of resources until such time they can be recognized as revenue in the period that they become available. Long-term Obligations In the government-wide financial statements and proprietary fund types, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts are deferred and amortized over the life of the applicable debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts as well as bond issuance costs, during the current period. The face amount of debt issued is 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. Fund Balance Governmental fund balance is reported in five separate categories: Nonspendable, restricted, committed, assigned, and unassigned. When both restricted and unrestricted fund balance is available for use, it is the City’s policy to use restricted fund balance first. When expenditures qualify for more than one unrestricted fund balance classification, it is the City’s policy to use resources in the following order: Committed, assigned, and then unassigned. Inter-fund Transactions During the course of normal operations, the City has transactions between funds to construct assets, to distribute grant proceeds, etc. These transactions are generally reflected as transfers, which are transfers from a fund authorized to receive certain revenues to the fund through which the resources are to be expended. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues, expenditures and expenses during the reporting period. Actual results could differ from those estimates. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 29 2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Explanation of Certain Differences Between the Governmental Funds Balance Sheet and the Government-Wide Statement of Net Position The governmental fund balance sheet includes a reconciliation between total governmental fund balances and net position of governmental activities as reported in the government-wide statement of net position. This difference primarily results from the long-term economic focus of the statement of net position versus the current financial resources focus of the governmental funds balance sheet. Capital related items: When capital assets (property, plant and equipment) that are to be used in governmental activities are purchased or constructed, the costs of those assets are reported as expenditures in governmental funds. However, the statement of net position includes those capital assets among the assets of the City as a whole. Cost of capital assets 184,563,188 $ Accumulated depreciation (8,148,058) Capital assets, net 176,415,130 $ Long-term debt transactions: Long-term liabilities applicable to the City’s governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities in the fund financials. All liabilities (both current and long-term) are reported in the statement of net position. Balances at June 30, 2022 were: Sales Tax Revenue bonds 52,770,000 $ Premiums on sales tax revenue bonds 5,484,138 Accrued interest payable on long-term debt 151,754 Compensated absences 252,603 58,658,495 $ ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 30 2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (CONTINUED) Explanation of Certain Differences Between Governmental Funds Operating Statements and the Statement of Net Activities The governmental funds statement of revenues, expenditures, and change in fund balances includes a reconciliation between net change in fund balances - total governmental funds and change in net position of governmental activities as reported in the government-wide statement of activities. The first element of this reconciliation states that capital outlays and contributions are reported in the governmental fund as expenditures while the government-wide statement of activities allocates these costs over the useful lives of the assets as depreciation. While shown in the reconciliation as the net difference, the elements of this difference are as follow: Capital outlays and contributions 23,241,441 $ Depreciation expense (1,544,193) Loss on disposal of assets (1,103,340) Net difference, as reported 20,593,908 $ 3. DEPOSITS AND INVESTMENTS The City maintains a cash and investment pool that is available for use by all funds. Cash includes amounts in demand deposits and cash on hand. Investments are stated at cost, which approximates fair value. Each fund’s portion of this pool is displayed on the combined balance sheet as “cash and cash equivalents,” which also includes cash accounts that are separately held by several of the City’s funds. As of June 30, 2022, the City’s demand deposits and cash on hand amounted to $71,131,438. Deposits – Utah State law requires that City funds be deposited with a "qualified depository" as defined by the Utah Money Management Act. "Qualified depository" includes any depository institution which has been certified by the Utah State Commissioner of Financial Institutions as having met the requirements as defined in Rule 11 of the Utah Money Management Act. Rule 11 establishes the formula for determining the amount of public funds which a qualified depository may hold in order to minimize risk of loss and defines capital requirements which an institution must maintain to be eligible to accept public funds. Investments – The State of Utah Money Management Council has the responsibility to advise the State Treasurer about investment policies, promote measures and rules that will assist in strengthening the banking and credit structure of the state, and review the rules adopted under the authority of the State of Utah Money Management Act (UMMA) that relate to the deposit and investment of public funds. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 31 3. DEPOSITS AND INVESTMENTS (CONTINUED) The City follows the requirements of UMMA (Utah Code, Title 51, Chapter 7) in handling its depository and investment transactions. The Act requires the depositing of City funds in a qualified depository, which is defined as a financial institution whose deposits are insured by an agency of the Federal Government and which has been certified by the State Commissioner of Financial Institutions as meeting the requirements of the Act and adhering to the rules of the Utah Money Management Council. UMMA defines types of securities authorized as appropriate investments for the City’s funds and the conditions for making investment transactions. Investment transactions may be conducted only through qualified depositories, certified dealers, or directly with issuers of the investment securities. Statutes authorize the City to invest in negotiable or nonnegotiable deposits of qualified depositories and permitted negotiable depositories; repurchase and reverse repurchase agreements; commercial paper that is classified as “first tier” by two nationally recognized statistical rating organizations; bankers’ acceptances; obligations of the United States Treasury including bills, notes, and bonds; obligations, other than mortgage derivative products, issued by U.S. government sponsored enterprises (U.S. Agencies) such as the Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation (Freddie Mac), and Federal National Mortgage Association (Fannie Mae); bonds, notes, and other evidence of indebtedness of political subdivisions of the State; fixed rate corporate obligations and variable rate securities rated or higher, or the equivalent of or higher, by two nationally recognized statistical rating organizations; shares or certificates in a money market mutual fund as defined in UMMA; and the Utah State Public Treasurers’ Investment Fund. The City has complied with the UMMA and rules of the Money Management Council with regard to deposits and investments. The City has a separate deposit and investment policy which requires City to follow UMMA. The Utah State Treasurer’s Office operates the Public Treasurers’ Investment Fund (PTIF). The PTIF is available for investment of funds administered by any Utah public treasurer and is not registered with the SEC as an investment company. The PTIF is authorized and regulated by UMMA. The Act established the Money Management Council which oversees the activities of the State Treasurer and the PTIF and details the types of authorized investments. Deposits in the PTIF are not insured or otherwise guaranteed by the State of Utah, and participants share proportionally in any realized gains or losses on investments. The PTIF operates and reports to participants on an amortized cost basis. The income, gains, and losses of the PTIF, net of administration fees, are allocated based upon the participant’s average daily balance. The fair value of the PTIF investment pool is approximately equal to the value of the pool shares. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 32 3. DEPOSITS AND INVESTMENTS (CONTINUED) Fair Value of Investments The City measures and records its investments using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy, as follows: • Level 1: Financial instruments with unadjusted, quoted prices listed on active market exchanges. • Level 2: Financial instruments lacking unadjusted, quoted prices from active market exchanges, including over-the-counter traded financial instruments. The prices for the financial instruments are determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. • Level 3: Financial instruments that are not actively traded on a market exchange. This category includes situations where there is little, if any, market activity for the financial instruments. The prices are determined using significant unobservable inputs or valuation techniques. Quoted prices for identical investments in active markets. At June 30, 2022, the City had the following recurring fair value measurements. 06/30/22 Level 1 Level 2 Level 3 Debt Securities PTIF 70,373,593 $ - $ 70,373,593 $ - $ Total debt securities 70,373,593 $ - $ 70,373,593 $ - $ Fair Value Measurements Using The City’s cash and cash equivalents and investments are exposed to certain risks as outlined below: Custodial credit risk – deposits is the risk that in the event of a bank failure, the City’s deposits may not be returned. As of June 30, 2022, $1,296,134 of the City’s $1,546,134 balance of deposits was exposed to custodial credit risk because it was uninsured and uncollateralized. UMMA does not require deposits to be insured or collateralized and the City has no formal policy regarding deposit credit risk. UMMA requires that the City keep deposits in a qualified depository, which the City has done. Custodial credit risk – investments 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 that are in the possession of an outside party. Of the City’s investment in the PTIF of $70,373,593, the City has no custodial credit risk exposure as the PTIF is an external investment pool managed by the Utah State Treasurer and is not categorized as to custodial credit risk. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 33 3. DEPOSITS AND INVESTMENTS (CONTINUED) Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The City’s policy for limiting the credit risks of investments is to comply with UMMA. Interest rate risk is the risk that changes in the interest rates will adversely affect the fair value of an investment. The City has no formal policy relating to specific investment-related interest rate risk. The City manages its exposure by investing mainly in the PTIF and by adhering to UMMA. The Act requires that the remaining term to maturity may not exceed the period of availability of the funds to be invested. The Act further limits the remaining term to maturity on all investments in commercial paper, bankers’ acceptances, fixed rate negotiable deposits, and fixed rate corporate obligations to 270 days - 15 months or less. The Act further limits the remaining term to maturity on all investments in obligations of the United States Treasury; obligations issued by U.S. government sponsored enterprises; and bonds, notes, and other evidence of indebtedness of political subdivisions of the State to 5 years. In addition, variable rate negotiable deposits and variable rate securities may not have a remaining term to final maturity exceeding 3 years. As of June 30, 2022, the City’s investments had the following maturities and ratings: Investment Type Fair Value Less Than 1 1-5 Quality Ratings PTIF 70,373,593 $ 70,373,593 $ - $ Unrated 70,373,593 $ 70,373,593 $ - $ Investment Maturities (in Years) Concentration of credit risk is the risk of loss attributed to the magnitude of a City’s investment in a single issuer. The City’s policy for reducing this risk of loss is to comply with the rules of the Money management Council. Rule 17 of the Money Management Council limits investments in a single issuer of commercial paper and corporate obligations to 5-10% depending upon the total dollar amount held in the portfolio. The City’s investment in the PTIF has no concentration of credit risk as the PTIF is an external investment pool managed by the Utah State Treasurer. The PTIF invests in high-grade securities which are delivered to the custody of the Utah State Treasurer, assuring a perfected interest in the securities, and, therefore, there is very little credit risk except in the most unusual and unforeseen circumstances. The maximum weighted average life of the portfolio does not exceed 90 days. Twice a year, at June 30 and December 31, which are the accounting periods for public entities, the investments are valued at fair value and participants are informed of the fair value valuation factor. Additional information is available at the Utah State Treasurers’ Office. The City did not enter into any reverse repurchase agreements during the year. Bond deposits are held by an appointed trustee in accordance with the Bond Resolutions. Repurchase agreements are secured by uninsured, unregistered securities held by the counter party but not in the City’s name. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 34 4. ACCOUNTS RECEIVABLE Receivables as of June 30, 2022 for the City’s individual major funds, including the applicable allowances for uncollectible accounts, are as follows: Special General Revenue Fund Storm Water Fund Total Receivables: Taxes 14,792,831 $ 1,350,000 $ - 16,142,831 $ Accounts and others - - 547,157 547,157 Intergovernmental 564,391 - - 564,391 Gross receivables 15,357,222 1,350,000 547,157 17,254,379 Less: allowance for uncollectibles - - - - Net total receivables 15,357,222 $ 1,350,000 $ 547,157 $ 17,254,379 $ Governmental funds report deferred revenue as deferred inflows of resources in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At June 30, 2022, the various components of deferred revenue and unearned revenue reported in the government funds were as follows: Deferred Inflows of Resources Unearned Property taxes receivable 11,687,500 $ - $ Property taxes receivable (CRA) 1,350,000 - ARPA funds - 264,000 Total deferred inflows of resources/ unearned revenue, governmental funds 13,037,500 $ 264,000 $ ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 35 5. CAPITAL ASSETS Capital asset activity for the year ended June 30, 2022 was as follows: 7/1/21 Increases Decreases 6/30/22 Governmental activities Capital assets: Land 92,067,824 $ 4,856,714 $ (1,103,340) $ 95,821,198 $ Construction in progress - 4,038,657 - 4,038,657 Buildings and improvements 1,149,259 2,300,000 - 3,449,259 Other improvements 6,283,925 5,321,121 - 11,605,046 Infrastructure 62,360,925 6,576,347 - 68,937,272 Machinery and equipment 563,154 148,602 - 711,756 Total capital assets 162,425,087 23,241,441 (1,103,340) 184,563,188 Accumulated depreciation: Buildings and improvements (66,431) (22,985) - (89,416) Other improvements (56,180) (134,547) - (190,727) Infrastructure (6,148,355) (1,258,179) - (7,406,534) Machinery and equipment (332,899) (128,482) - (461,381) Total accumulated depreciation (6,603,865) (1,544,193) - (8,148,058) Net governmental capital assets 155,821,222 $ 21,697,248 $ (1,103,340) $ 176,415,130 $ 7/1/21 Increases Decreases 6/30/22 Business-type activities Capital assets: Storm water infrastructure 20,812,815 $ 306,598 $ - $ 21,119,413 $ Equipment 63,499 204,254 - 267,753 Total capital assets 20,876,314 510,852 - 21,387,166 Accumulated depreciation: Storm water infrastructure (2,002,686) (419,322) - (2,422,008) Equipment (12,314) (46,742) - (59,056) Total accumulated depreciation (2,015,000) (466,064) - (2,481,064) Net business-type capital assets 18,861,314 $ 44,788 $ - $ 18,906,102 $ In the government-wide financial statements depreciation was charged as follows by program or activity: Governmental activities: General government 286,014 $ Highways and public improvements 1,258,179 Total depreciation expense - governmental activities 1,544,193 $ Business-type activities: Storm water 466,064 $ ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 36 6. LONG-TERM DEBT Changes in Long-Term Liabilities Long-term liability activity for the year ended June 30, 2022 was as follows: 7/1/21 Additions Reductions 6/30/22 Due in One Year Governmental activities Bonds payable: Sales tax revenue 17,345,000 $ 36,265,000 $ (840,000) $ 52,770,000 $ 680,000 $ Premium 2,616,188 3,105,424 (237,474) 5,484,138 - Total bonds payable 19,961,188 39,370,424 (1,077,474) 58,254,138 680,000 Compensated absences 196,077 265,715 (209,189) 252,603 202,082 Net pension liability 87,589 - (87,589) - - Governmental activity long-term liabilities 20,244,854 $ 39,636,139 $ (1,374,252) $ 58,506,741 $ 882,082 $ 7/1/21 Additions Reductions 6/30/22 Due in One Year Business-type activities Compensated absences 25,310 $ 31,565 $ (26,777) $ 30,098 $ 28,979 $ Net pension liability 9,731 - (9,731) - - Business-type activity long-term liabilities 35,041 $ 31,565 $ (36,508) $ 30,098 $ 28,979 $ Revenue Bonds Bond Description Original Issue Annual Principal Interest Rate Final Due Date Outstanding as of 6/30/22 Sales Tax Revenue $140,000 to Bonds, Series 2019 17,345,000 $ $1,770,000 4% to 5% 12/1/39 17,345,000 $ Sales Tax Revenue $680,000 to 2.125% to Bonds, Series 2021 36,265,000 $1,740,000 5.00% 6/1/51 35,425,000 53,610,000 $ 52,770,000 $ On August 5, 2021, the City issued Sales Tax Revenue Bonds Series 2021 in the amount of $36,265,000. The bonds were sold at a premium of $3,105,424, less an underwriter’s discount and bond issuance costs totaling $370,424, resulting in total proceeds of $39,000,000. The bonds were issued for the construction of a new city administration building. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 37 6. LONG-TERM DEBT (CONTINUED) Revenue bond debt service requirements to maturity are as follows: Principal Interest Total 680,000 $ 1,821,050 $ 2,501,050 $ 715,000 1,787,050 2,502,050 890,000 1,747,800 2,637,800 1,065,000 1,699,800 2,764,800 1,220,000 1,643,675 2,863,675 2028 - 2032 8,950,000 7,090,025 16,040,025 2033 - 2037 13,035,000 4,899,900 17,934,900 2038 - 2042 11,795,000 2,521,650 14,316,650 2043 - 2047 7,670,000 1,226,256 8,896,256 2048 - 2051 6,750,000 362,313 7,112,313 52,770,000 $ 24,799,519 $ 77,569,519 $ 2023 2024 2025 2026 2027 7. RETIREMENT SYSTEMS AND PENSION PLANS General Information About the Pension Plan Plan Description Eligible plan participants are provided with pensions through the Utah Retirement Systems. The Utah Retirement Systems are comprised of the following pension trust funds: Public Employees Noncontributory Retirement System (Noncontributory System); is a multiple employer, cost sharing, public employee retirement system. Tier 2 Public Employees Contributory Retirement System (Tier 2 Public Employees System) is a multiple employer, cost sharing, public employee retirement system. The Tier 2 Public Employees System became effective July 1, 2011. All eligible employees beginning work on or after July 1, 2011, who has no previous service credit with any of the Utah Retirement Systems, are members of the Tier 2 Retirement System. The Utah Retirement Systems (Systems) are established and governed by the respective sections of Title 49 of the Utah Code Annotated 1953, as amended. The Systems’ defined benefit plans are amended statutorily by the State Legislature. The Utah State Retirement Office Act in Title 49 provides for the administration of the Systems under the direction of the Board, whose members are appointed by the Governor. The Systems are fiduciary funds defined as pension (and other employee benefit) trust funds. URS is a component unit of the State of Utah. Title 49 of the Utah Code grants the authority to establish and amend the benefit terms. URS issues a publicly available financial report that can be obtained by writing Utah Retirement System, 560 E 200 S, Salt Lake City, Utah 84102 or visiting the website: www.urs.org/general/publications. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 38 7. RETIREMENT SYSTEMS AND PENSION PLANS (CONTINUED) Summary of Benefits by System URS provides retirement, disability, and death benefits. Retirement benefits are as follows: System Final Average Salary Years of Service Required and/or Age Eligible for Benefit Benefit Percent Per Year of Service COLA** Noncontributory System Highest 3 years 30 years any age 25 years any age* 20 years age 60* 2.0% per year all years Up to 4% 10 years age 62* 4 years age 65 Tier 2 Public Employees System Highest 5 years 35 years any age 20 years any age 60* 1.5% per year all years Up to 10 years age 62* 2.50% 4 years age 65 *with actuarial reductions **All post-retirement cost-of-living adjustments are non-compounding and are based on the original benefit except for Judges, which is a compounding benefit. The cost-of-living adjustments are also limited to the actual Consumer Price Index (CPI) increase for the year, although unused CPI increases not met may be carried forward to subsequent years. Contribution Rate Summary As a condition of participation in the Systems, employers and/or employees are required to contribute certain percentages of salary and wages as authorized by statute and specified by the URS Board. Contributions are actuarially determined as an amount that, when combined with employee contributions (where applicable), is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded actuarial accrued liability. Contribution rates as of June 30, 2022 are as follows: Employer Employer Employee Contribution Rate for Paid Rates 401(k) Plan Contributory System 111- Local Governmental Division Tier 2 N/A 16.07% 0.62% Noncontributory System 15- Local Governmental Division Tier 1 N/A 18.47% N/A Tier 2 DC Only 211 - Local Government N/A 6.69% 10.00% Tier 2 rates include a statutory required contribution to finance the unfunded actuarial accrued liability of the Tier 1 plans. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 39 7. RETIREMENT SYSTEMS AND PENSION PLANS (CONTINUED) For fiscal year ended June 30, 2022, the employer and employee contributions to the System were as follows: Employer Employee System Contributions Contributions Noncontributory System 293,166 $ N/A Tier 2 Public Employees System 148,876 - Tier 2 DC Only System 35,775 N/A Total Contributions 477,817 $ - $ Contributions reported are the URS Board-approved required contributions by System. Contributions in the Tier 2 Systems are used to finance the unfunded liabilities in the Tier 1 Systems. Combined Pension Assets, Liabilities, Expense, and Deferred Outflows and Inflows of Resources Relating to Pensions At June 30, 2022, the City reported a net pension asset of $1,105,606 and a net pension liability of Net Net Proportionate Pension Pension Proportionate Share Asset Liability Share December 31, 2020 Change Noncontributory System 1,084,221 $ - $ 0.1893139% 0.1752062% 0.0141077% Tier 2 Public Employees System 21,385 - 0.0505277% 0.0517776% -0.0012499% Total Net Pension Asset / Liability 1,105,606 $ - $ (Measurement Date): December 31, 2021 The net pension asset and liability was measured as of December 31, 2021, and the total pension liability used to calculate the net pension asset and liability was determined by an actuarial valuation as of January 1, 2021 and rolled-forward using generally accepted actuarial procedures. The proportion of the net pension asset and liability is equal to the ratio of the employer’s actual contributions to the Systems during the plan year over the total of all employer contributions to the System during the plan year. For the year ended June 30, 2022, the City recognized pension expense of $102,938. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 40 7. RETIREMENT SYSTEMS AND PENSION PLANS (CONTINUED) At June 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources relating to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience 123,949 $ 2,755 $ Changes in assumptions 121,698 7,200 Net difference between projected and actual earnings on pension plan investments - 1,512,598 Changes in proportion and differences between contributions and proportionate share of contributions 95,702 - Contributions subsequent to the measurement date 245,446 - Total 586,795 $ 1,522,553 $ $245,446 reported as deferred outflows of resources related to pensions results from contributions made by the City prior to the fiscal year end, but subsequent to the measurement date of December 31, 2021. These contributions will be recognized as a reduction of the net pension liability in the upcoming fiscal year. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions, will be recognized in pension expense as follows: Year Ended December 31, Net Deferred Outflows (Inflows) of Resources 2021 (188,929) $ 2022 (409,635) 2023 (360,732) 2024 (247,591) 2025 4,451 Thereafter 21,231 ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 41 7. RETIREMENT SYSTEMS AND PENSION PLANS (CONTINUED) Noncontributory System Pension Expense and Deferred Outflows and Inflows of Resources For the year ended June 30, 2022, the City recognized pension expense of $28,411. At June 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources relating to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience 113,560 $ - $ Changes in assumptions 101,758 6,998 Net difference between projected and actual earnings on pension plan investments - 1,459,758 Changes in proportion and differences between contributions and proportionate share of contributions 80,679 - Contributions subsequent to the measurement date 154,759 - Total 450,756 $ 1,466,756 $ $154,759 reported as deferred outflows of resources related to pensions results from contributions made by the City prior to the fiscal year end, but subsequent to the measurement date of December 31, 2021. These contributions will be recognized as a reduction of the net pension liability in the upcoming fiscal year. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions, will be recognized in pension expense as follows: Year Ended December 31, Net Deferred Outflows (Inflows) of Resources 2021 (179,270) $ 2022 (397,177) 2023 (351,769) 2024 (242,544) 2025 - Thereafter - ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 42 7. RETIREMENT SYSTEMS AND PENSION PLANS (CONTINUED) Tier 2 Public Employees System Pension Expense and Deferred Outflows and Inflows of Resources For the year ended June 30, 2022, the City recognized pension expense of $74,527. At June 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources relating to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience 10,389 $ 2,755 $ Changes in assumptions 19,940 202 Net difference between projected and actual earnings on pension plan investments - 52,840 Changes in proportion and differences between contributions and proportionate share of contributions 15,023 - Contributions subsequent to the measurement date 90,687 - Total 136,039 $ 55,797 $ $90,687 reported as deferred outflows of resources related to pensions results from contributions made by the City prior to the fiscal year end, but subsequent to the measurement date of December 31, 2021. These contributions will be recognized as a reduction of the net pension liability in the upcoming fiscal year. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions, will be recognized in pension expense as follows: Year Ended December 31, Net Deferred Outflows (Inflows) of Resources 2021 (9,659) $ 2022 (12,459) 2023 (8,964) 2024 (5,047) 2025 4,451 Thereafter 21,231 ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 43 7. RETIREMENT SYSTEMS AND PENSION PLANS (CONTINUED) Actuarial Assumptions The total pension liability in the December 31, 2021 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50 percent Salary increases 3.25 - 9.75 percent, average, including inflation Investment rate of return 6.85 percent, net of pension plan investment expense, including inflation Mortality rates were developed from actual experience and mortality tables based on gender, occupation and age as appropriate, with adjustments for future improvement in mortality based on Scale AA, a model developed by the Society of Actuaries. The actuarial assumptions used in the January 1, 2021 valuation were based on the results of an actuarial experience study for the five-year period ending December 31, 2019. The long-term expected rate of return of 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. The target allocation and best estimates of arithmetic real rates of return or each major asset class are summarized in the following table: Real Return Long-Term Expected Target Asset Arithmetic Portfolio Real Asset Class Allocation Basis Rate of Return Equity securities 37% 6.58% 2.43% Debt securities 20% -0.28% -0.06% Real assets 15% 5.77% 0.87% Private equity 12% 9.85% 1.18% Absolute return 16% 2.91% 0.47% Cash and cash equivalents 0% -1.01% 0.00% Totals 100% 4.89% Inflation 2.50% Expected arithmetic nominal return 7.39% Expected Return Arithmetic Basis The 6.85% assumed investment rate of return is comprised of an inflation rate of 2.50% and a real return of 4.35% that is net of investment expense. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 44 7. RETIREMENT SYSTEMS AND PENSION PLANS (CONTINUED) Discount Rate The discount rate used to measure the total pension liability was 6.85 percent. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that contributions from all participating employers will be made at contractually required rates that are actuarially determined and certified by the URS Board. Based on those assumptions, 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. The discount rate does not use the Municipal Bond Index Rate. The discount rate was reduced from 6.95 to 6.85% percent from the prior measurement date. Sensitivity to the Proportionate Share of the Net Pension Asset and Liability to Changes in the Discount Rate The following presents the proportionate share of the net pension liability calculated using the discount rate of 6.85 percent, as well as what the proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.85 percent) or 1-percentage-point higher (7.85 percent) than the current rate: 1% Discount 1% Decrease Rate Increase System (5.85%) (6.85%) (7.85%) Noncontributory System 583,018 $ (1,084,221) $ (2,475,207) $ Tier 2 Public Employees System 127,418 (21,385) (135,635) Total 710,436 $ (1,105,606) $ (2,610,842) $ ***Pension plan fiduciary net position: Detailed information about the fiduciary net position of the pension plans is available in the separately issued URS financial report. Defined Contribution Savings Plans The Defined Contribution Savings Plans are administered by the Utah Retirement Systems Board and are generally supplemental plans to the basic retirement benefits of the Retirement Systems but may also be used as a primary retirement plan. These plans are voluntary tax-advantaged retirement savings programs authorized under sections 401(k), 457(b) and 408 of the Internal Revenue Code. Detailed information regarding plan provisions is available in the separately issued URS financial report. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 45 7. RETIREMENT SYSTEMS AND PENSION PLANS (CONTINUED) Defined Contribution Savings Plans (Continued) Millcreek City participates in the following Defined Contribution Savings Plans with Utah Retirement Systems: • 401(k) Plan • 457(b) Plan • Roth IRA Plan Employee and employer contributions to the Utah Retirement Defined Contribution Savings Plans for fiscal year ended June 30 were as follows: 2022 2021 2020 401(k) Plan* Employer contributions 292,028 $ 261,357 $ 260,538 $ Employee contributions 221,260 193,126 174,862 457 Plan Employer contributions - - - Employee contributions 47,375 34,700 28,400 Roth IRA Plan Employer contributions N/A N/A N/A Employee contributions 11,030 4,810 5,510 * The employer paid 401(k) contributions include the totals paid for employees in the Tier 2 Defined Contribution 401(k) Plan. 8. COMMITMENTS The City has entered into several contracts with other governmental agencies to provide various services. These services include Public Safety (police and animal services) and Public Works. The term of each of these contracts is one year or less. 9. CONTINGENT LIABILITIES The City is involved in various claims and legal actions arising in the ordinary course of events. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the City’s financial position or results of operations. ---PAGE BREAK--- MILLCREEK Notes to the Financial Statements (Continued) June 30, 2022 46 10. 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. The City participates in the Utah Local Government Insurance Trust, a public entity risk pool to manage its risk of loss. The City pays an annual premium to the trust for its general insurance coverage. The Trust was created to be self- sustaining through member premiums and will reinsure through commercial companies for claims in excess of one million dollars for each insured event. As of June 30, 2022, there were no outstanding unpaid claims for the City. Also, the City had no claim settlements during the three years ending June 30, 2022 which exceeded its insurance coverage. The City also has fidelity bond coverage with a private carrier. 11. TRANSFERS RECONCILIATION Transfers among the funds for the year ended June 30, 2022 are described below. Transfers are made to meet the ongoing needs of the City to complete various projects. In Out General Fund - $ 50,522,240 $ Capital Projects Fund 51,818,985 - Community Reinvestment Fund - 1,305,495 Storm Water Fund 8,750 - Totals 51,827,735 $ 51,827,735 $ ---PAGE BREAK--- MILLCREEK Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Capital Projects Fund For the Year Ended June 30, 2022 47 Variance With Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Intergovernmental - $ 13,593,730 $ 13,739,453 $ 145,723 $ Interest 10,000 170,000 189,904 19,904 Total revenues 10,000 13,763,730 13,929,357 165,627 EXPENDITURES Capital outlay 2,803,860 71,398,242 22,607,694 48,790,548 Total expenditures 2,803,860 71,398,242 22,607,694 48,790,548 Excess (deficiency) of revenues over (under) expenditures (2,793,860) (57,634,512) (8,678,337) 48,956,175 OTHER FINANCING SOURCES Transfers in 857,860 51,809,255 51,818,985 9,730 Total other financing sources 857,860 51,809,255 51,818,985 9,730 Net change in fund balance (1,936,000) (5,825,257) 43,140,648 48,965,905 Fund balance at beginning of year 9,416,116 9,416,116 9,416,116 - Fund balance at end of year 7,480,116 $ 3,590,859 $ 52,556,764 $ 48,965,905 $ ---PAGE BREAK--- MILLCREEK Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Park Impact Special Revenue Fund For the Year Ended June 30, 2022 48 Variance With Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES Special assessments - $ - $ 39,801 $ 39,801 $ Interest income - - 896 896 Total revenues - - 40,697 40,697 Net change in fund balance - - 40,697 40,697 Fund balance at beginning of year 162,203 162,203 162,203 - Fund balance at end of year 162,203 $ 162,203 $ 202,900 $ 40,697 $ ---PAGE BREAK--- MILLCREEK Schedule of the Proportionate Share of the Net Pension Liability Last Ten Fiscal Years 49 Proportionate Share Plan Fiduciary Proportionate of the Net Pension Net Position as Proportion of Share of the Liability (Asset) as a Percentage As of Net Pension Net Pension Covered a Percentage of its of its Covered December 31, Liability (Asset) Liability (Asset) Payroll Covered Payroll Payroll Noncontributory System 2018 0.1140939% 840,156 $ 920,290 $ 91.29% 87.00% 2019 0.1684213% 634,758 1,297,950 48.90% 93.70% 2020 0.1752062% 89,871 1,329,498 6.76% 99.20% 2021 0.1893139% (1,084,221) 1,446,729 -74.94% 108.70% Tier 2 Public Employees System 2018 0.0350169% 14,997 $ 406,399 $ 3.69% 90.80% 2019 0.0595987% 13,404 828,342 1.62% 96.50% 2020 0.0517776% 7,447 827,639 0.90% 98.30% 2021 0.0505277% (21,385) 938,349 -2.28% 103.80% Note: * This schedule usually covers the 10 most recent fiscal years; however, this is the information available as of the implementation year of GASB 68. ---PAGE BREAK--- MILLCREEK Schedule of Pension Contributions Last Ten Fiscal Years 50 Contributions in Relation to the Contributions As of fiscal Actuarial Contractually Contribution as a Percentage year ended Determined Required Deficiency Covered of Covered June 30, Contributions Contribution (Excess) Payroll Payroll Noncontributory System 2018 83,431 $ 83,431 $ - $ 451,711 $ 18.47% 2019 214,893 214,893 - 1,165,396 18.44% 2020 246,160 246,160 - 1,332,755 18.47% 2021 253,244 253,244 - 1,371,109 18.47% 2022 293,166 293,166 - 1,587,253 18.47% Tier 2 Public Employees System* 2018 28,752 28,752 - 190,281 15.11% 2019 103,052 103,052 - 663,143 15.54% 2020 128,272 128,272 - 819,108 15.66% 2021 142,376 142,376 - 901,108 15.80% 2022 148,876 148,876 - 926,421 16.07% Tier 2 Public Employees DC Only System* 2018 942 942 - 14,080 6.69% 2019 5,844 5,844 - 87,351 6.69% 2020 15,459 15,459 - 228,177 6.78% 2021 24,831 24,831 - 369,975 6.71% 2022 32,775 32,775 - 489,912 6.69% Note: This schedule usually covers the 10 most recent fiscal years; however, this is the information available as of the implementation year of GASB 68. Contributions as a percentage of covered-employee payroll may be different than the Board certified rate due to rounding or other administrative issues. * Contributions in Tier 2 include an amortization rate to help fund the unfunded liabilities in the Tier 1 systems. Tier 2 systems were created effective July 1, 2011. ---PAGE BREAK--- MILLCREEK Notes to the Required Supplementary Information June 30, 2022 51 1. CHANGE IN ASSUMPTIONS The investment return assumption was decreased by 0.10% to 6.85% for use in the January 1, 2021 actuarial valuation. This assumption change was based on analysis performed by the actuary and adopted by the Utah State Retirement Board. In aggregate, this assumption change resulted in $509 million increase in the Total Pension Liability, which is about 1.3% of the Total Pension Liability as of December 31, 2020 for all systems combined. The demographic assumptions were reviewed and updated in the January 1, 2020 actuarial valuation and are currently scheduled to be reviewed in the year 2023. ---PAGE BREAK--- 52 INDPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Mayor and City Council Millcreek, Utah We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities and each major fund of Millcreek, Utah (the City), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements and have issued our report thereon dated December 7, 2022. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered City’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. C O M M I T T E D . E X P E R I E N C E D . T R U S T E D CERTIFIED PUBL IC ACCOUN TAN TS E. LYNN HANSEN, CPA CLARKE R. BRADSHAW, CPA GARY E. MALMROSE, CPA EDWIN L. ERICKSON, CPA MICHAEL L. SMITH, CPA JASON L. TANNER, CPA ROBERT D. WOOD, CPA AARON R. HIXSON, CPA TED C. GARDINER, CPA JEFFREY B. MILES, CPA SHAWN F. MARTIN, CPA H B M E , L L C I S A C E R T I F I E D P U B L I C A C C O U N T I N G F I R M 5 5 9 W E S T 5 0 0 S O U T H B O U N T I F U L , U T 8 4 0 1 0 O : 8 0 1 . 2 9 6 . 0 2 0 0 H B M E . C O M ---PAGE BREAK--- 53 Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. December 7, 2022 ---PAGE BREAK--- 54 INDEPENDENT AUDITOR’S REPORT IN ACCORDANCE WITH THE STATE COMPLIANCE AUDIT GUIDE ON COMPLIANCE WITH GENERAL STATE COMPLIANCE REQUIREMENTS, AND INTERNAL CONTROL OVER COMPLIANCE Mayor and City Council Millcreek, Utah Report On Compliance with General State Compliance Requirements We have audited Millcreek, Utah's (the City) compliance with general and major State program compliance requirements described in the State Compliance Audit Guide issued by the Office of the Utah State Auditor, that could have a direct and material effect on the City for the year ended June 30, 2022. General state compliance requirements were tested for the year ended June 30, 2022 in the following areas: Budgetary Compliance Fraud Risk Assessment Government Fees Fund Balance Restricted Taxes and Related Revenues Cash Management Management’s Responsibility Management is responsible for compliance with the general state requirements referred to above. Auditor’s Responsibility Our responsibility is to express an opinion on the City’s compliance based on our audit of the compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and the State Compliance Audit Guide. Those standards and the State Compliance Audit Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a direct and material effect on the City occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. C O M M I T T E D . E X P E R I E N C E D . T R U S T E D CERTIFIED PUBL IC ACCOUN TAN TS E. LYNN HANSEN, CPA CLARKE R. BRADSHAW, CPA GARY E. MALMROSE, CPA EDWIN L. ERICKSON, CPA MICHAEL L. SMITH, CPA JASON L. TANNER, CPA ROBERT D. WOOD, CPA AARON R. HIXSON, CPA TED C. GARDINER, CPA JEFFREY B. MILES, CPA SHAWN F. MARTIN, CPA H B M E , L L C I S A C E R T I F I E D P U B L I C A C C O U N T I N G F I R M 5 5 9 W E S T 5 0 0 S O U T H B O U N T I F U L , U T 8 4 0 1 0 O : 8 0 1 . 2 9 6 . 0 2 0 0 H B M E . C O M ---PAGE BREAK--- 55 We believe that our audit provides a reasonable basis for our opinion on compliance with general state compliance requirements. However, our audit does not provide a legal determination of the City’s compliance. Opinion on General State Compliance Requirements In our opinion, Millcreek, Utah complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on the City for the year ended June 30, 2022. Report on Internal Control Over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City’s internal control over compliance with the state compliance requirements referred to above to determine the audit that are appropriate in the circumstances for the purpose of expressing our opinion on compliance with those state compliance requirements and to test and report on internal control over compliance in accordance with the State Compliance Audit Guide, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a state compliance requirement on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a state compliance requirement will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a state compliance requirement that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses in internal control over compliance. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses may exist that have not been identified. ---PAGE BREAK--- 56 Purpose of Report The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control and compliance and the results of that testing based on the requirements of the State Compliance Audit Guide. Accordingly, this communication is not suitable for any other purpose. December 7, 2022