Document Whitefish_doc_e7b024ae40

CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA Fiscal Year Ended June 30, 2019 AUDIT REPORT Denning, Downey & Associates, P.C. CERTIFIED PUBLIC ACCOUNTANTS ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA Fiscal Year Ended June 30, 2019 TABLE OF CONTENTS Organization 1 Management Discussion and Analysis 2-9 Independent Auditor’s Report 10-11 Financial Statements Government-wide Financial Statements Statement of Net Position 12 Statement of Activities 13 Fund Financial Statements Balance Sheet – Governmental Funds 14 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 15 Statement of Revenues, Expenditures and Changes in Fund Balance – Governmental Funds 16 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 17 Statement of Net Position – Proprietary Fund Types 18 Statement of Revenues, Expenses and Changes in Net Position – Proprietary Fund Types 19 Statement of Cash Flows – Proprietary Fund Types 20 Statement of Net Position – Fiduciary Fund Types 21 Notes to Financial Statements 22-67 Required Supplementary Information Budgetary Comparison Schedule 68-71 Budgetary Comparison Schedule – Budget-to-GAAP Reconciliation 72 Schedule of Changes in the Total OPEB Liability and Related Ratios 73 Schedule of Proportionate Share of the Net Pension Liability 74 Schedule of Contributions 75 Notes to Required Pension Supplementary Information 76-80 Independent Auditor’s Report on Compliance and 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 81-82 ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA ORGANIZATION Fiscal Year Ended June 30, 2019 John Muhlfeld Mayor CITY COUNCIL Richard Hildner Council Member Frank Sweeney Council Member Katie Williams Council Member Andy Feury Council Member Melissa Hartman Council Member Ryan Hennen Council Member CITY OFFICIALS Adam Hammatt City Manager Dana Smith Assistant City Manager/ Finance Director Angela Jacobs City Attorney Michelle Howke City Clerk ---PAGE BREAK--- City of Whitefish Management’s Discussion and Analysis For Fiscal Year Ending June 30, 2019 The discussion and analysis of the City of Whitefish’s financial performance provides an overview of the City’s financial activities for the fiscal year ended June 30, 2019. The City encourages readers to consider the information presented in conjunction with the City’s financial statements and accompanying notes. FINANCIAL HIGHLIGHTS ● The total assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at June 30, 2019 by $110,952,264 as reported in the Statement of Net Position. This figure represents an increase of $9,942,693 in net position from the prior year. ● The total fiscal year end governmental fund balance was $15,513,053 as reported in the balance sheet for governmental funds. This figure represents an increase of $2,714,312 from the prior year. ● The unassigned General Fund balance at fiscal year-end was $1,499,497. This figure represents an increase of $424,207 from the prior year. EXPLANATION OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements, which are comprised of three components: 1. Government-wide financial statements 2. Fund Financial Statements 3. Notes to the Financial Statements Other required supplementary information is also included at the end of the financial section. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances using the accrual basis of accounting. The Statement of Net Position presents information on all of the City’s assets and deferred outflows of resources and liabilities and deferred inflows of resources with the difference between the two reported as net position. Over time, increases and decreases in net position may serve as a useful indicator of whether the City’s financial position is improving or deteriorating. The Statement of Activities presents information reflecting how the City’s net position has changed during the fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. delinquent taxes and earned, but unused vacation leave). ---PAGE BREAK--- City of Whitefish Management’s Discussion and Analysis For Fiscal Year Ending June 30, 2019 The government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, social and economic services, public works, planning, culture and recreation, housing and economic development, and debt service. The business-type activities of the City include water, wastewater, and solid waste operations. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds - Governmental funds are used to account for those same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide statements, the fund financial statements are prepared on the modified accrual basis. Under the modified accrual basis of accounting, revenues are recognized when measurable and available and expenditures are recognized when the related fund liability is incurred, with the exception of long-term debt and similar long-term items which are recorded when due. Therefore, the focus is on near-term inflows and outflows of spendable resources as well as on the balance of spendable resources available at the end of the fiscal year. Since the focus of the governmental funds is on near-term resources, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide statements. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance provide a reconciliation to facilitate this comparison. Proprietary Funds - There are two types of proprietary funds: enterprise and internal service funds. The City maintains only enterprise funds, which are used to report the same functions presented as business-type activities in the government-wide statements. The City uses enterprise funds to account for its water, sewer, and solid waste operations. Fiduciary Funds - Fiduciary funds are used to account for resources held for the benefit of parties outside the government and are not included in the government-wide financial statements as the resources of these funds are not available to support the City’s own programs. Notes to Financial Statements The notes to the financial statements provide additional narrative and information that is essential to obtaining a complete understanding of the data provided in the government-wide and fund financial statements. ---PAGE BREAK--- City of Whitefish Management’s Discussion and Analysis For Fiscal Year Ending June 30, 2019 Other Required Supplementary Information In addition to the basic financial statements and accompanying notes, certain required supplementary information concerning the City’s budgetary control, schedule of funding progress of other post-employment benefits, and schedule of net pension liability and contributions is provided. FINANCIAL ANALYSIS OF THE CITY Over time, net position serves as a useful indicator of a government’s financial condition. The net position for both governmental and business-type activities for the fiscal year ending June 30, 2019 totaled $110,952,264, which is an increase of $9,942,693 from the prior year. In fiscal year 2015, the City implemented GASB Statement No. 68, which affected both governmental and business-type activities and continues to affect net position in FY19 as noted in the negative unrestricted net position for governmental activities. Although the pension retirement systems are administered by the State of Montana, including determining required contributions for each plan, the City is required to report the related liability per GASB Statement No. 68. attributed to the different plans. The City’s largest portion of net position reflects investment in capital assets (land, buildings, machinery and equipment, etc.) less any related debt used to acquire those assets that is still outstanding. These assets are used to provide services to our citizens. Although the City’s investment in its capital assets are reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Restricted net position represents resources that are subject to external restrictions on how they may be used. The unrestricted net position may be used to meet the City’s ongoing obligations to citizens and creditors. The following table presents consolidated information on the City’s net position as of June 30, 2019 and June 30, 2018. City of Whitefish - Net Position Table 1 - Net Position Change Change FY19 FY18 Inc (Dec) FY19 FY18 Inc (Dec) Current and other assets 21,807,896 $ 18,630,280 $ 3,177,616 $ 13,509,832 $ 11,247,713 $ 2,262,119 $ Capital assets 74,480,442 73,933,112 547,330 34,505,699 34,124,465 381,234 Total assets 96,288,338 $ 92,563,392 $ 3,724,946 $ 48,015,531 $ 45,372,178 $ 2,643,353 $ Long-term debt outstanding 17,149,118 $ 21,940,768 $ (4,791,650) $ 12,209,532 $ 13,246,479 $ (1,036,947) $ Other liabilities 3,104,125 1,270,857 1,833,268 888,830 467,895 420,935 Total liabilities 20,253,243 $ 23,211,625 $ (2,958,382) $ 13,098,362 $ 13,714,374 $ (616,012) $ Net investment in capital assets 65,097,025 $ 60,807,739 $ 4,289,286 $ 24,664,136 $ 22,760,902 $ 1,903,234 $ Restricted 16,548,352 14,641,134 1,907,218 3,397,663 3,072,506 325,157 Unrestricted (deficit) (5,610,282) (6,097,106) 486,824 6,855,370 5,824,396 1,030,974 Total net position 76,035,095 $ 69,351,767 $ 6,683,328 $ 34,917,169 $ 31,657,804 $ 3,259,365 $ Governmental Business-type Activities Activities ---PAGE BREAK--- City of Whitefish Management’s Discussion and Analysis For Fiscal Year Ending June 30, 2019 The City’s revenues totaled $32,500,518 for the fiscal year ending June 30, 2019. The total cost of all programs and services for that same period was $22,557,825. Therefore, the increase in net position was $9,942,693. The table below presents consolidated information on the City’s change in net position for the fiscal years ending June 30, 2019 and June 30, 2018. City of Whitefish – Changes in Net Position Table 2 - Changes in Net Position Change Change FY19 FY18 Inc (Dec) FY19 FY18 Inc (Dec) Revenues Program revenues (by major source): Charges for services 6,850,888 $ 5,688,296 $ 1,162,592 $ 8,134,707 $ 7,443,275 $ 691,432 $ Operating grants and contributions 519,676 478,039 41,637 35,639 - 35,639 Capital grants and contributions 136,371 329,872 (193,501) - - - General revenues (by major source): Property taxes for general purposes 9,411,422 8,769,895 641,527 - - - Resort tax 4,260,456 3,987,447 273,009 - - - Franchise/Utility Fees 472,457 440,391 32,066 - - - Miscellaneous 230,549 503,240 (272,691) - - - Interest/investment earnings 254,086 112,140 141,946 195,432 96,367 99,065 State entitlement 1,107,226 1,090,946 16,280 - - - On-Behalf payments 754,558 692,013 62,545 - 16,780 (16,780) Proceeds from cash in lieu 137,051 49,735 87,316 - - - Total revenues 24,134,740 $ 22,142,014 $ 1,992,726 $ 8,365,778 $ 7,556,422 $ 809,356 $ Program expenses General government 1,416,476 $ 1,757,726 $ (341,250) $ - $ - $ - $ Public safety 7,763,386 7,393,979 369,407 - - - Public works 3,161,551 3,155,668 5,883 - - - Social and economic services 1,500 3,000 (1,500) - - - Culture and recreation 2,368,018 2,270,998 97,020 - - - Housing and community development 1,503,084 1,307,635 195,449 - - - Debt service - interest 330,452 413,351 (82,899) - - - Miscellaneous 54,521 50,792 3,729 - - - Water - - - 2,878,455 2,522,322 356,133 Sewer - - - 3,057,167 2,663,129 394,038 Solid Waste - - - 23,215 6,892 16,323 Total expenses 16,598,988 $ 16,353,149 $ 245,839 $ 5,958,837 $ 5,192,343 $ 766,494 $ Excess (deficiency) before special items and transfers 7,535,752 5,788,865 1,746,887 2,406,941 2,364,079 42,862 Gain (loss) on sale of capital assets - (218,903) 218,903 - - - Transfers - net (852,424) (841,488) (10,936) 852,424 841,488 10,936 Increase (decrease) in net position 6,683,328 $ 4,728,474 $ 1,954,854 $ 3,259,365 $ 3,205,567 $ 53,798 $ Activities Activities Governmental Business-type Governmental activities Revenues for the fiscal year ending June 30, 2019 from governmental activities were $24,134,740 while expenses were $16,598,988. Thus, with the $852,424 in transfers-out, net position increased $6,683,328. Total governmental revenues increased from the prior year by $1,992,726. The increase in revenues was primarily due to increased property taxes and assessments, as well as increased Resort Tax collections and investment earnings. Overall expenses increased by $245,839. Increases in wages and benefit, as well as the costs of post- employment benefits and pension costs all continue to be contributing factors. ---PAGE BREAK--- City of Whitefish Management’s Discussion and Analysis For Fiscal Year Ending June 30, 2019 Business-type activities Revenue for the fiscal year ending June 30, 2019 from business-type activities was $8,365,778. Expenses were $5,958,837 and net transfers-in totaled $852,424, which resulted in an increase in net position of $3,259,365. Charges for services revenue increased by $691,432 from the previous year due to rate increases for both water and sewer service as the City prepares for the complete upgrade of the wastewater treatment plant. Total expenses also experienced an expected increase during FY19, which is primarily attributed increased costs for wages and benefits and the timing of capital projects. Fund Balance – Governmental Funds Balance Sheet The City’s governmental funds reported a total fund balance of $15,513,053 as of June 30, 2019, which is a $2,714,312 increase compared to the fund balance of governmental funds as of June 30, 2018. The significant increase in fund balance is primarily due to the stronger building environment, reduced capital costs since the completion of City Hall and the Parking Structure and improving cash reserves as approved in the FY19 Budget. Of the fund balance at June 30, 2019, $1,499,497 is unassigned in the General Fund. The remaining fund balance is restricted or committed based on the source of revenue or unassigned due to a negative fund balance. GENERAL FUND BUDGETARY HIGHLIGHTS The City’s budget is prepared in accordance with Title 7, Chapter 6, Part 40, MCA (Local Government Budget Act). During fiscal year 2019 four budget amendments were approved by the City Council and are detail below: Fund Amount Justification Resort Fund: 2100-521032-820 2100-460430-931 $83,975.00 To provide for the unanticipated required transfers to the Water Fund for the Haskill Basin Conservation Easement debt service portion of collections as a result of unexpected additional revenue. To provide for the Riverside Improvement Project and City Beach Restroom Renovations that were not properly carried over to fiscal year 2019 when preparing the budget. Fire & Ambulance Fund: 2340-420735-811 $283,730.00 To provide for the significant adjustments required by Medicare and Medicaid for ambulance bills. As ambulance rates increase, so do the required adjustments. Additional revenue from ambulance services helped offset the full $283,729.00. Gas Tax – Special Roads, Streets, and Bridges Allocation Fund: 2821-430230-930 $25,975.00 To provide for the start-up costs of the Monegan Road Improvement Project with fund balance reserved for the project. Parkland Acquisition & Development Fund: 2990-460434-931 $9,345.00 To provide for a landscaping project to reduce future maintenance costs in the West District of the Parkland Acquisition & Development Fund, as well as start-up costs of the Armory Improvement Project in the East District. ---PAGE BREAK--- City of Whitefish Management’s Discussion and Analysis For Fiscal Year Ending June 30, 2019 All other funds expended amounts that were within the budget authority with some funds spending significantly less due to the timing of capital improvement projects and equipment purchases. Overall the General Fund tracked closely with the budget for both revenues and expenditures, once the budget amendment is considered. An increase in Planning Fees and Court Fines & Forfeitures continued into FY19, which is attributed to the strong building environment and the increased issuance of tickets and improved in-house prosecution. The Resort Tax Fund collected $273,009 more than expected due to the thriving economy and increased collections remitted by local businesses. The Tax Increment Fund revenues were overall less than projected due to the timing of the payment from the Whitefish Housing Authority for the property purchased for the Low-Income Housing Tax Credit Project on Edgewood. Payment has been received in FY20. Tax Increment expenditures were less due to urban renewal project timing. The Fire & Ambulance Fund, once the budget amendment was accounted for, tracked closely with the anticipated budget. CAPITAL ASSET AND LONG-TERM DEBT ADMINISTRATION Capital Assets The City’s investment in capital assets for its governmental and business-type activities as of June 30, 2019 total $108,986,141. The City’s capital assets include easements, land, buildings, improvements, machinery and equipment, infrastructure, and construction in progress. The depreciation of capital assets is reflected in the various governmental and business-type expense activities. Total depreciation expense incurred for the governmental and business-type activities during fiscal year 2019 totaled $3,375,697 and $1,278,507, respectively. Major capital assets events during fiscal year 2019:  Completed the Flathead Avenue Extension Project  Significant progress made on Somers Avenue (Resort Tax Project)  Completed the new Woodland Place Parking Lot at City Beach  Purchased vehicles for Building, Police, and Public Works  Continued making improvements to the Whitefish Trail  Continued design and construction for multiple water and sewer projects ---PAGE BREAK--- City of Whitefish Management’s Discussion and Analysis For Fiscal Year Ending June 30, 2019 Long-term Debt The City’s total long-term debt decreased by $5,828,597 compared to prior fiscal year. Below is a summary of the outstanding long-term debt of the City as of June 30, 2019 compared to June 30, 2018. Outstanding Long-term Debt Purpose/Type June 30, 2019 June 30, 2018 Revenue Bonds: TIF 2015 Refunding (ESC) $ 2,261,000 $ 3,722,000 TIF 2016 (City Hall/Park Str.) 5,329,558 7,330,000 Water 6,631,000 7,907,000 Sewer 3,210,563 3,456,563 Special Assessment Bonds: SID 166 450,000 515,000 SID 167 742,946 769,670 Intercap Loans: Ambulance - 31,252 Fire Engine 272,086 320,104 Fire Pumper 92,220 122,358 Fire SCBA Units 93,904 139,989 Ambulance 141,703 175,000 OPEB: Governmental* 1,667,154 1,635,938 Business-type 474,502 485,789 Compensated Absences: Governmental 1,290,008 1,231,967 Business-type 298,588 279,753 Net Pension Liability: Governmental 4,808,539 5,947,490 Business-type 1,594,879 1,117,374 TOTAL $29,358,650 $35,187,247 *See notes to financial statements. FISCAL YEAR 2020 BUDGET AND ECONOMIC FACTORS During a reappraisal year, the growth of property tax revenue includes newly taxable property that results from new construction or annexations, as well as the increase in market value of all taxable properties within the City. The taxable value is provided by the Montana Department of Revenue and final figures received resulted in an increase in the City’s taxable value for FY20 of 6.04% compared to the prior year. With the growth of taxable value and an increase in the Resort Tax Relief from higher than expected collections through the end of FY19, the FY20 budget balanced with the number of total property tax mills levied by the City reducing by 2.71 mills from the prior year. However, even with a reduction in mills, property tax revenue for FY20 is expected to grow about 3.58% Total appropriations for FY20 are $11,492,967 or 25.98% higher than last year’s budget mostly due to an increase in capital projects for the wastewater treatment plant upgrade project, the water treatment plant expansion project, and other Resort Tax funded capital projects. The FY20 Budget also provides for some small increases to maintenance assessments to continue to address capital projects so further deferral does not occur. ---PAGE BREAK--- City of Whitefish Management’s Discussion and Analysis For Fiscal Year Ending June 30, 2019 With construction activity remaining strong in the City of Whitefish, the building license and permit revenue is expected to continue the trend from the prior year with revenues remaining about the same as FY20. The increase in construction also has a positive impact on the City’s impact fees collections. Like the strong construction environment, the spending activity by consumers in the City continues to improve as the Resort Tax collections are tracking higher than the previous year and are expected to continue to grow. Water and Wastewater service charges for FY20 are anticipated to exceed the prior year due to a rate increase that was effective October 1, 2019. 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 government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, City of Whitefish, P.O. Box 158, Whitefish MT 59937. ---PAGE BREAK--- Denning, Downey & Associates, P.C. CERTIFIED PUBLIC ACCOUNTANTS 1740 U.S. Hwy 93 South, P.O. Box 1957, Kalispell, MT 59903-1957 -10- INDEPENDENT AUDITOR’S REPORT Mayor and City Council City of Whitefish Flathead County Whitefish, Montana Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, business- type activities, each major fund, and the aggregate remaining fund information of City of Whitefish, Flathead County, Montana, as of and for the year ended June 30, 2019, and the related notes to the financial statements which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. ---PAGE BREAK--- -11- Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Whitefish, Flathead County, Montana, as of and for the year ended June 30, 2019, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As described in Note 1 to the financial statements, in 2019, the City has changed their method of reporting the claims and payroll clearing funds. In past years these clearing funds were reported as Agency Funds. In accordance with GASB statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments, the clearing funds are now combined with the City General Funds. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, schedule of changes in the total OPEB liability and related ratios, schedules of proportionate share of the net pension liability, and schedules of contributions on pages 2 through 9, 68 through 75 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 26, 2020, on our consideration of the City of Whitefish, Flathead County, Montana’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is 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 internal control over financial reporting or on compliance. That report is an integral part of an audit preformed in accordance with Government Auditing Standards in considering City of Whitefish, Flathead County, Montana’s internal control over financial reporting and compliance. June 26, 2020 ---PAGE BREAK--- -12- Governmental Business-type Activities Activities Total ASSETS Current assets: Cash and investments $ 12,298,349 $ 9,089,564 $ 21,387,913 Taxes and assessments receivable, net 1,540,047 - 1,540,047 Accounts receivable - net 365,436 616,916 982,352 Due from other governments 26,752 - 26,752 Other receivables 23,570 - 23,570 Total current assets $ 14,254,154 $ 9,706,480 $ 23,960,634 Noncurrent assets Restricted cash and investments $ 4,751,143 $ 3,397,663 $ 8,148,806 Deferred special assessments receivables 1,345,114 - 1,345,114 Capital assets - land 9,447,065 8,333,031 17,780,096 Capital assets - construction in progress 5,476,954 3,017,682 8,494,636 Capital assets - depreciable, net 59,556,423 23,154,986 82,711,409 Total noncurrent assets $ 80,576,699 $ 37,903,362 $ 118,480,061 Total assets $ 94,830,853 $ 47,609,842 $ 142,440,695 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources - pensions $ 1,121,353 $ 310,020 $ 1,431,373 Deferred outflows of resources - OPEB 336,132 95,669 431,801 Total deferred outflows of resources $ 1,457,485 $ 405,689 $ 1,863,174 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 96,288,338 $ 48,015,531 $ 144,303,869 LIABILITIES Current liabilities Warrants payable $ 941,623 $ - $ 941,623 Accounts payable 679,382 50,891 730,273 Accrued payroll 331,192 85,415 416,607 Current portion of long-term capital liabilities 4,100,627 1,211,000 5,311,627 Current portion of compensated absences payable 1,047,612 204,348 1,251,960 Total current liabilities $ 7,100,436 $ 1,551,654 $ 8,652,090 Noncurrent liabilities Deposits payable $ - $ 309,950 $ 309,950 Noncurrent portion of long-term liabilities 1,667,154 474,502 2,141,656 Noncurrent portion of long-term capital liabilities 5,282,790 8,630,563 13,913,353 Noncurrent portion of compensated absences 242,396 94,240 336,636 Net pension liability 4,808,539 1,594,879 6,403,418 Total noncurrent liabilities $ 12,000,879 $ 11,104,134 $ 23,105,013 Total liabilities $ 19,101,315 $ 12,655,788 $ 31,757,103 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources - pensions $ 539,365 $ 225,653 $ 765,018 Deferred inflows of resources - OPEB 612,563 174,346 786,909 Total deferred inflows of resources $ 1,151,928 $ 442,574 $ 1,594,502 NET POSITION Net investment in capital assets $ 65,097,025 $ 24,664,136 $ 89,761,161 Restricted for capital projects - 2,409,214 2,409,214 Restricted for debt service 7,238,780 988,449 8,227,229 Restricted for special projects 9,309,572 - 9,309,572 Unrestricted (5,610,282) 6,855,370 1,245,088 Total net position $ 76,035,095 $ 34,917,169 $ 110,952,264 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION $ 96,288,338 $ 48,015,531 $ 144,303,869 See accompanying Notes to the Financial Statements City of Whitefish, Flathead County, Montana Statement of Net Position June 30, 2019 ---PAGE BREAK--- Net (Expenses) Revenues and Changes in Net Position Indirect Operating Capital Business- Expense Charges for Grants and Grants and Governmental type Functions/Programs Expenses Allocation Services Contributions Contributions Activities Activities Total Primary government: Governmental activities: General government $ 1,616,124 $ (199,648) $ 694,392 $ - $ - $ (722,084) $ - $ (722,084) Public safety 7,664,938 98,448 3,518,395 45,338 - (4,199,653) - (4,199,653) Public works 3,144,751 16,800 2,243,758 336,385 136,371 (445,037) - (445,037) Social and economic services 1,500 - - - - (1,500) - (1,500) Culture and recreation 2,340,753 27,265 394,028 137,953 - (1,836,037) - (1,836,037) Housing and community development 1,496,798 6,286 315 - - (1,502,769) - (1,502,769) Debt service - interest 330,452 - - - - (330,452) - (330,452) Miscellaneous 54,521 - - - - (54,521) - (54,521) Total governmental activities $ 16,649,837 $ (50,849) $ 6,850,888 $ 519,676 $ 136,371 $ (9,092,053) $ - $ (9,092,053) Business-type activities: Water $ 2,852,324 $ 26,131 $ 4,027,214 $ 18,037 $ - $ - $ 1,166,796 $ 1,166,796 Sewer 3,032,723 24,444 4,105,686 17,385 - - 1,065,904 1,065,904 Solid Waste 22,941 274 1,807 217 - - (21,191) (21,191) Total business-type activities $ 5,907,988 50,849 $ 8,134,707 $ 35,639 $ - $ - $ 2,211,509 $ 2,211,509 Total primary government $ 22,557,825 $ - $ 14,985,595 $ 555,315 $ 136,371 $ (9,092,053) $ 2,211,509 $ (6,880,544) General Revenues: Property taxes for general purposes $ 9,411,422 $ - $ 9,411,422 Resort tax 4,260,456 - 4,260,456 Franchise/Utility Fees 472,457 - 472,457 Miscellaneous 230,549 - 230,549 Interest/investment earnings 254,086 195,432 449,518 State entitlement 1,107,226 - 1,107,226 On-Behalf payments 754,558 - 754,558 Proceeds from cash in lieu 137,051 - 137,051 Transfers - net (852,424) 852,424 - Total general revenues, special items and transfers $ 15,775,381 $ 1,047,856 $ 16,823,237 Change in net position $ 6,683,328 $ 3,259,365 $ 9,942,693 Net position - beginning $ 69,351,767 $ 31,657,804 $ 101,009,571 Net position - beginning - restated $ 69,351,767 $ 31,657,804 $ 101,009,571 Net position - end $ 76,035,095 $ 34,917,169 $ 110,952,264 See accompanying Notes to the Financial Statements Program Revenues Primary Government City of Whitefish, Flathead County, Montana Statement of Activities For the Fiscal Year Ended June 30, 2019 -13- ---PAGE BREAK--- General Resort Tax Tax Increment Fire & Ambulance Tax Increment Revenue Bond Debt Other Governmental Funds Total Governmental Funds ASSETS Current assets: Cash and investments $ 2,520,373 $ - $ 1,275,107 $ 130,429 $ 3,936,405 $ 4,436,035 $ 12,298,349 Taxes and assessments receivable, net 354,169 - 810,972 97,021 - 277,885 1,540,047 Accounts receivable - net 24,089 - - 337,972 - 3,375 365,436 Due from other funds 23,570 - - - - - 23,570 Due from other governments - - - 26,752 - - 26,752 Other receivables - - - - - 23,570 23,570 Total current assets $ 2,922,201 $ - $ 2,086,079 $ 592,174 $ 3,936,405 $ 4,740,865 $ 14,277,724 Noncurrent assets: Restricted cash and investments $ - $ 3,052,843 $ - $ - $ 1,698,300 $ - $ 4,751,143 Advances to other funds - - - - - 58,699 58,699 Deferred special assessments receivables - - - - - 1,345,114 1,345,114 Total noncurrent assets $ - $ 3,052,843 $ - $ - $ 1,698,300 $ 1,403,813 $ 6,154,956 TOTAL ASSETS $ 2,922,201 $ 3,052,843 $ 2,086,079 $ 592,174 $ 5,634,705 $ 6,144,678 $ 20,432,680 LIABILITIES Current liabilities: Warrants payable $ 941,623 $ - $ - $ - $ - $ - $ 941,623 Accounts payable 7,171 20,866 593,682 2,572 - 55,091 679,382 Accrued payroll 119,741 - 10,158 91,017 - 110,276 331,192 Due to other funds - - - - - 23,570 23,570 Total current liabilities $ 1,068,535 $ 20,866 $ 603,840 $ 93,589 $ - $ 188,937 $ 1,975,767 Noncurrent liabilities: Advances payable $ - $ - $ - $ - $ - $ 58,699 $ 58,699 Total noncurrent liabilities $ - $ - $ - $ - $ - $ 58,699 $ 58,699 Total liabilities $ 1,068,535 $ 20,866 $ 603,840 $ 93,589 $ - $ 247,636 $ 2,034,466 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources - taxes & assessments $ 354,169 $ - $ 810,972 $ 97,021 $ - $ 1,622,999 $ 2,885,161 Total deferred inflows of resources $ 354,169 $ - $ 810,972 $ 97,021 $ - $ 1,622,999 $ 2,885,161 FUND BALANCES Restricted $ - $ 3,031,977 $ 671,267 $ 401,564 $ 5,634,705 $ 4,285,197 $ 14,024,710 Unassigned fund balance 1,499,497 - - - - (11,154) 1,488,343 Total fund balance $ 1,499,497 $ 3,031,977 $ 671,267 $ 401,564 $ 5,634,705 $ 4,274,043 $ 15,513,053 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCE $ 2,922,201 $ 3,052,843 $ 2,086,079 $ 592,174 $ 5,634,705 $ 6,144,678 $ 20,432,680 See accompanying Notes to the Financial Statements City of Whitefish, Flathead County, Montana Balance Sheet Governmental Funds June 30, 2019 -14- ---PAGE BREAK--- -15- Total fund balances - governmental funds $ 15,513,053 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 74,480,442 Property taxes, and special assessments receivable will be collected this year, but are not available soon enough to pay for the current period's expenditures, and therefore are deferred in the funds. 2,885,161 Long-term liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. (12,340,579) Net pension liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. (4,808,539) The changes between actuarial assumptions, differences in expected vs actual pension experiences, changes in proportionate share allocation, and current year retirement contributions as they relate to the net pension liability are a deferred outflow of resources and are not payable in current period, therefore are not reported in the funds. 1,121,353 The changes between actuarial assumptions, differences in projected vs actual investment earnings, and changes in properionate share allocation as they relate to the net pension liability are a deferred inflows of resources and are not available to pay for current expenditures, therefore are not reported in the funds (539,365) The changes between actuarial assumptions, differences in projected vs actual liability as the relate to the total other post-employment benefits liability are a deferred outflows of resources and are not payable in the current period, therefore are not reported in the funds 336,132 The changes between actuarial assumptions and differences in projected vs actual liability as they relate to the total other post-employment benefits liability are a deferred inflows of resources and are not available to pay for current expenditures, therefore are not reported in the funds (612,563) Total net position - governmental activities $ 76,035,095 See accompanying Notes to the Financial Statements City of Whitefish, Flathead County, Montana Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2019 ---PAGE BREAK--- General Resort Tax Tax Increment Fire & Ambulance Tax Increment Revenue Bond Debt Other Governmental Funds Total Governmental Funds REVENUES Taxes and assessments $ 2,211,759 $ 4,260,456 $ 6,773,289 $ 603,729 $ - $ 2,157,240 $ 16,006,473 Licenses and permits 145,297 - - 151,175 - 1,190,893 1,487,365 Intergovernmental 1,010,438 - 248,865 52,448 - 414,520 1,726,271 Charges for services 391,570 - - 1,955,540 - 821,191 3,168,301 Fines and forfeitures 372,983 - - - - 7,568 380,551 Miscellaneous 101,944 - 78,087 35,548 - 375,662 591,241 Investment earnings 118,168 41,930 - - 58,909 17,438 236,445 Total revenues $ 4,352,159 $ 4,302,386 $ 7,100,241 $ 2,798,440 $ 58,909 $ 4,984,512 $ 23,596,647 EXPENDITURES General government $ 825,975 $ - $ - $ - $ - $ 6,838 $ 832,813 Public safety 3,019,182 - - 3,302,991 - 432,302 6,754,475 Public works 25,166 50 - - - 1,304,936 1,330,152 Social and economic services 1,500 - - - - - 1,500 Culture and recreation 9,493 - - - - 1,686,881 1,696,374 Housing and community development - - 1,501,692 - - - 1,501,692 Debt service - principal - - - 188,789 3,461,442 91,725 3,741,956 Debt service - interest - - - 23,333 249,267 57,852 330,452 Miscellaneous - - - - - 54,521 54,521 Capital outlay 41,852 1,589,895 1,464,313 - - 826,967 3,923,027 Total expenditures $ 3,923,168 $ 1,589,945 $ 2,966,005 $ 3,515,113 $ 3,710,709 $ 4,462,022 $ 20,166,962 Excess (deficiency) of revenues over expenditures $ 428,991 $ 2,712,441 $ 4,134,236 $ (716,673) $ (3,651,800) $ 522,490 $ 3,429,685 OTHER FINANCING SOURCES (USES) Proceeds from cash in-lieu $ - $ - $ - $ - $ - $ 137,051 $ 137,051 Transfers in 1,523,957 - 197,994 700,380 3,984,728 887,885 7,294,944 Transfers out (1,528,741) (2,323,905) (3,991,014) (43,362) - (260,346) (8,147,368) Total other financing sources (uses) $ (4,784) $ (2,323,905) $ (3,793,020) $ 657,018 $ 3,984,728 $ 764,590 $ (715,373) Net Change in Fund Balance $ 424,207 $ 388,536 $ 341,216 $ (59,655) $ 332,928 $ 1,287,080 $ 2,714,312 Fund balances - beginning $ 1,075,290 $ 2,643,441 $ 330,051 $ 461,219 $ 5,301,777 $ 2,986,963 $ 12,798,741 Fund balance - ending $ 1,499,497 $ 3,031,977 $ 671,267 $ 401,564 $ 5,634,705 $ 4,274,043 $ 15,513,053 See accompanying Notes to the Financial Statements City of Whitefish, Flathead County, Montana Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2019 -16- ---PAGE BREAK--- -17- Net change in fund balances - total governmental funds $ 2,714,312 Governmental funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets: - Capital assets purchased 3,923,027 - Depreciation expense (3,375,697) Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds: - Long-term receivables (deferred inflows - taxes & assessments) (353,516) The change in compensated absences is shown as an expense in the Statement of Activities (58,041) Repayment of debt principal is an expenditures in the governmental funds, but the repayment reduces long-term debt in the Statement of Net Position: - Long-term debt principal payments 3,741,956 Termination benefits are shown as an expense in the Statement of Activities and not reported on the Statement of Revenues, Expenditures and Changes in Fund Balance: - Post-employment benefits other than retirement liability (730,863) Pension expense related to the net pension liablity is shown as an expense on the Statement of Activities and not reported on the Statement of Revenues, Expenditures, and Changes in Fund Balance (355,624) State aid revenue related to net pension liability is shown as a revenue on the Statement of Activities and not reported on the Statement of Revenues, Expenditures, and Changes in Fund Balance 754,558 Current year contributions to retirement benefits are shown as deferred outflows of resources on the Statement of Net Position and shown as expenditures on the Statement of Revenues, Expenditures, and Changes in Fund Balance when paid. 423,216 Change in net position - Statement of Activities $ 6,683,328 See accompanying Notes to the Financial Statements City of Whitefish, Flathead County, Montana Reconciliation of the Statement of Revenues, Expenditures. to the Statement of Activities For the Fiscal Year Ended June 30, 2019 and Changes in Fund Balances of Governmental Funds ---PAGE BREAK--- -18- Water Sewer Non-major Enterprise Totals ASSETS Current assets: Cash and investments $ 5,457,040 $ 3,524,983 $ 107,541 $ 9,089,564 Accounts receivable - net 314,138 302,778 - 616,916 Total current assets $ 5,771,178 $ 3,827,761 $ 107,541 $ 9,706,480 Noncurrent assets: Restricted cash and investments $ 2,028,348 $ 1,369,315 $ - $ 3,397,663 Capital assets - land 8,065,531 267,500 - 8,333,031 Capital assets - construction in progress 1,771,664 1,246,018 - 3,017,682 Capital assets - depreciable, net 9,748,450 13,406,536 - 23,154,986 Total noncurrent assets $ 21,613,993 $ 16,289,369 $ - $ 37,903,362 Total assets $ 27,385,171 $ 20,117,130 $ 107,541 $ 47,609,842 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources - pensions $ 156,901 $ 151,228 $ 1,891 $ 310,020 Deferred outflows of resources - OPEB 48,579 46,530 560 95,669 Total deferred outflows of resources $ 205,480 $ 197,758 $ 2,451 $ 405,689 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 27,590,651 $ 20,314,888 $ 109,992 $ 48,015,531 LIABILITIES Current liabilities: Accounts payable $ 42,404 $ 8,487 $ - $ 50,891 Accrued payroll 44,011 40,923 481 85,415 Current portion of long-term capital liabilities 959,000 252,000 - 1,211,000 Current portion of compensated absences payable 100,299 103,126 923 204,348 Total current liabilities $ 1,145,714 $ 404,536 $ 1,404 $ 1,551,654 Noncurrent liabilities: Deposits payable $ 307,691 $ 2,259 $ - $ 309,950 Noncurrent portion of long-term liabilities 240,942 230,783 2,777 474,502 Noncurrent portion of long-term capital liabilities 5,672,000 2,958,563 - 8,630,563 Noncurrent portion of compensated absences 48,021 46,027 192 94,240 Net pension liability 807,167 777,984 9,728 1,594,879 Total noncurrent liabilities $ 7,075,821 $ 4,015,616 $ 12,697 $ 11,104,134 Total liabilities $ 8,221,535 $ 4,420,152 $ 14,101 $ 12,655,788 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources - hydro project $ 42,575 $ - $ - $ 42,575 Deferred inflows of resources - pensions 114,203 110,074 1,376 225,653 Deferred inflows of resources - OPEB 88,529 84,797 1,020 174,346 Total deferred inflows of resources $ 245,307 $ 194,871 $ 2,396 $ 442,574 NET POSITION Net investment in capital assets $ 12,954,645 $ 11,709,491 $ - $ 24,664,136 Restricted for capital projects 1,206,845 1,202,369 - 2,409,214 Restricted for debt service 821,503 166,946 - 988,449 Unrestricted 4,140,816 2,621,059 93,495 6,855,370 Total net position $ 19,123,809 $ 15,699,865 $ 93,495 $ 34,917,169 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSTION $ 27,590,651 $ 20,314,888 $ 109,992 $ 48,015,531 See accompanying Notes to the Financial Statements Proprietary Funds Business-Type Activities - Enterprise Funds City of Whitefish, Flathead County, Montana Statement of Net Position June 30, 2019 ---PAGE BREAK--- -19- Water Sewer Non-major Enterprise Totals OPERATING REVENUES Charges for services $ 4,027,214 $ 4,105,687 $ - $ 8,132,901 Total operating revenues $ 4,027,214 $ 4,105,687 $ - $ 8,132,901 OPERATING EXPENSES Personal services $ 1,462,495 $ 1,414,742 $ 22,464 $ 2,899,701 Supplies 224,887 297,743 495 523,125 Purchased services 290,107 296,632 - 586,739 Fixed charges 207,405 193,278 256 400,939 Depreciation 509,535 768,972 - 1,278,507 Total operating expenses $ 2,694,429 $ 2,971,367 $ 23,215 $ 5,689,011 Operating income (loss) $ 1,332,785 $ 1,134,320 $ (23,215) $ 2,443,890 NON-OPERATING REVENUES (EXPENSES) Intergovernmental revenue $ 18,037 $ 17,385 $ 217 $ 35,639 Interest revenue 119,637 75,794 1,807 197,238 Debt service interest expense (184,026) (85,800) - (269,826) Total non-operating revenues (expenses) $ (46,352) $ 7,379 $ 2,024 $ (36,949) Income (loss) before contributions and transfers $ 1,286,433 $ 1,141,699 $ (21,191) $ 2,406,941 Transfers in 1,046,280 - - 1,046,280 Transfers out (169,138) (24,444) (274) (193,856) Change in net position $ 2,163,575 $ 1,117,255 $ (21,465) $ 3,259,365 Net Position - Beginning of the year $ 16,960,234 $ 14,582,610 $ 114,960 $ 31,657,804 Net Position - End of the year $ 19,123,809 $ 15,699,865 $ 93,495 $ 34,917,169 See accompanying Notes to the Financial Statements Business-Type Activities - Enterprise Funds For the Fiscal Year Ended June 30, 2019 City of Whitefish, Flathead County, Montana Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds ---PAGE BREAK--- -20- Water Sewer Non-Major Enterprise Totals Cash flows from operating activities: Cash received from providing services $ 4,050,935 $ 4,060,992 $ - $ 8,111,927 Cash payments to suppliers (197,125) (324,758) (495) (522,378) Cash payments for professional services (497,512) (489,910) (256) (987,678) Cash payments to employees (1,088,074) (1,043,515) (12,575) (2,144,164) Net cash provided (used) by operating activities $ 2,268,224 $ 2,202,809 $ (13,326) $ 4,457,707 Cash flows from capital and related financing activities: Acquisition and construction of capital assets $ (610,728) $ (1,049,013) $ - $ (1,659,741) Principal paid on debt (1,276,000) (246,000) - (1,522,000) Interest paid on debt (184,026) (85,800) - (269,826) Net cash provided (used) by capital and related financing activities $ (2,070,754) $ (1,380,813) $ - $ (3,451,567) Cash flows from non-capital financing activities: Intergovernmental revenues $ 18,037 $ 17,385 $ 217 $ 35,639 Transfers from (to) other funds 877,142 (24,444) (274) 852,424 Net cash provided (used) from non-capital financing activities $ 895,179 $ (7,059) $ (57) $ 888,063 Cash flows from investing activities: Interest on investments $ 119,637 $ 75,794 $ 1,807 $ 197,238 Net cash provided (used) by investing activities $ 119,637 $ 75,794 $ 1,807 $ 197,238 Net increase (decrease) in cash and cash equivalents $ 1,212,286 $ 890,731 $ (11,576) $ 2,091,441 Cash and cash equivalents at beginning 6,273,102 4,003,567 119,117 10,395,786 Cash and cash equivalents at end $ 7,485,388 $ 4,894,298 $ 107,541 $ 12,487,227 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $ 1,332,785 $ 1,134,320 $ (23,215) $ 2,443,890 Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation 509,535 768,972 - 1,278,507 Changes in assets and liabilities: Accounts receivable 1,810 (45,748) - (43,938) Deferred inflows/outflows 126,855 127,001 (55) 253,801 Accounts payable 27,762 (27,015) - 747 Accrued payroll 3,850 2,478 19 6,347 Compensated absence payable 10,881 7,699 255 18,835 Deposits payable 21,911 1,053 - 22,964 Other post-employment benefits 5,168 (6,061) (58) (951) Net pension liability 227,667 240,110 9,728 477,505 Net cash provided (used) by operating activities $ 2,268,224 $ 2,202,809 $ (13,326) $ 4,457,707 See accompanying notes to the financial statements City of Whitefish, Flathead County, Montana Combined Statement of Cash Flows All Proprietary Fund Types Fiscal Year Ended June 30, 2019 Business - Type Activities ---PAGE BREAK--- -21- Agency Funds ASSETS Cash and short-term investments $ 83,416 Taxes receivable 8,085 Total assets $ 91,501 LIABILITIES Due to others $ 91,501 Total liabilities $ 91,501 See accompanying Notes to the Financial Statements City of Whitefish, Flathead County, Montana Statement of Net Position Fiduciary Funds June 30, 2019 ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -22- NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City complies with generally accepted accounting principles (GAAP). GAAP includes all relevant Governmental Accounting Standards Board (GASB) pronouncements. New Accounting Pronouncements GASB No. 88 Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements, is effective for years beginning after July 15, 2018. The objective of this Statement is to improve the information disclosed below related to the debt of the City, that includes direct borrowings and direct placements. For the purposes of disclosures in the following notes to the financial statements, debt is now defined as a liability that arises from contractual obligation to pay cash in one or more payments to settle amount that is fixed at the date of the contractual obligations. This excludes leases, except for contracts reported as financed purchased of an asset, or accounts payable. In addition, the Statement requires that the City disclose summarized information about unused lines of credit, assets pledged as collateral, and terms specified in debt agreements that are significant. The City has implemented this pronouncement current fiscal year and is related in the debt footnotes below if applicable. Change in Accounting Principle Beginning in fiscal year 2019, the City changed the method of reporting its clearing funds, claims and payroll clearing. Previously, these funds were reported as agency funds, but it was determined in the current year that these funds did not meet the definition of an agency fund as outlined in GASB Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments, as the resources are not being held by the City in a custodial capacity. As explained further in the major fund descriptions, these funds were combined with the General Funds of the City for reporting purposes. Financial Reporting Entity In determining the financial reporting entity, the City complies with the provisions of GASB statement No. 14, The Financial Reporting Entity, as amended by GASB statement No. 61, The Financial Reporting Entity: Omnibus, and includes all component units of which the City appointed a voting majority of the component units’ board; the City is either able to impose its’ will on the unit or a financial benefit or burden relationship exists. In addition, the City complies with GASB statement No. 39 Determining Whether Certain Organizations Are Component Units which relates to organizations that raise and hold economic resources for the direct benefit of the City. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -23- Primary Government The City is a political subdivision of the State of Montana governed by an elected (Mayor and Council duly elected by the registered voters of the City. The City utilizes the manager form of government. The City is considered a primary government because it is a general purpose local government. Further, it meets the following criteria: It has a separately elected governing body It is legally separate and It is fiscally independent from the State and other local governments. Basis of Presentation, Measurement Focus and Basis of Accounting Government-wide Financial Statements: Basis of Presentation The Government-wide Financial Statements (the Statement of Net Position and the Statement of Activities) display information about the reporting government as a whole and its component units. They include all funds of the City except fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other non-exchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. Eliminations have been made in the consolidation of business-type activities. The Statement of Net Position presents the financial condition of the governmental and business-type activities for the City at year end. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the City’s governmental activities. Direct expenses are those that are specifically associated with a program or function. The City charges indirect expenses to programs or functions. The types of transactions reported as program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or activity and 2) operating grants and contributions, and 3) capital grants and contributions. Revenues that are not classified as program revenues, including all property taxes, are presented as general revenues. Certain eliminations have been made as prescribed by GASB 34 in regards to inter-fund activities, payables and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities those transactions between governmental and business-type activities have not been eliminated. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -24- Measurement Focus and Basis of Accounting On the government-wide Statement of Net Position and the Statement of Activities, both governmental and business-type activities are presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred regardless of the timing of the 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 City generally applies restricted resources to expenses incurred before using unrestricted resources when both restricted and unrestricted net assets are available. Fund Financial Statements Basis of Presentation Fund financial statements of the reporting City are organized into funds, each of which is considered to be separate accounting entities. Each fund is accounted for by providing a separate set of self-balancing accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds is maintained consistent with legal and managerial requirements. Funds are organized into three categories: governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary categories. Each major fund is displayed in a separate column in the governmental funds statements. All of the remaining funds are aggregated and reported in a single column as non-major funds. A fund is considered major if it is the primary operating fund of the City or meets the following criteria: a. Total assets combined with deferred outflows of resources, liabilities combined with deferred inflows of resources, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type; and b. Total assets combined with deferred outflows of resources, liabilities combined with deferred inflows of resources, revenues, or expenditures/expenses of that individual governmental or enterprise funds are at least 5 percent of the corresponding total for all governmental and enterprise funds combined. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -25- Measurement Focus and Basis of Accounting Governmental Funds Modified Accrual All governmental funds are accounted for using the current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e., both measurable and available. “Measurable” means the amount of the transaction can be determined. “Available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City defined the length of time used for “available” for purposes of revenue recognition in the governmental fund financial statements is collection within 60 days of the end of the current fiscal period with the exception of property taxes and other state grants that is upon receipt. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long-term debt which is recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. General capital asset acquisitions are reported as expenditures in governmental funds and proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. Property taxes, franchise fees, licenses, and interest 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. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. All other revenue items are considered to be measurable and available only when cash is received by the government. Major Funds: The City reports the following major governmental funds: General Fund - This is the City’s primary operating fund and it accounts for all financial resources of the City except those required to be accounted for in other funds. The payroll and claims clearing funds of the City, previously reported in the agency funds, have been combined with the General Funds for reporting purposes. The cash and related payables of these clearing funds are also reported here. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -26- Resort Tax Fund – A special revenue fund established in 1995 to provide budget opportunity to implement City Ordinance 95-15, the Resort Tax Ordinance. The ordinance imposes a 3% resort tax on a range of good and services sold by establishments within the City. The Ordinance specifies that of the 2% is distributed as follows: property tax relief should be provided to Whitefish taxpayers in the amount equal to 25% of the tax revenues derived during the preceding fiscal year, an amount equal to 65% of these revenues shall be used for repair and improvement of existing infrastructure and an amount equal to 5% of the revenues shall be used for bicycle paths and other park improvements. Finally, each collecting merchant is entitled to withhold 5% to defray costs of collecting the tax. Of the other 1% of the resort tax, 25% goes to additional tax relief, 70% to secure and be pledged to the repayment of a loan or a bond to finance a portion of the costs of, or to otherwise pay for, the acquisition of the Haskill Basin Conservation Easement, and the remaining 5% for the merchants’ costs of administration. In fiscal year 2016, the resort tax rate was increased and is described later in the notes to the financial statements in Note 18. Tax Increment Fund – A special revenue fund that was established in 1987 to account for $2,100,000 of urban renewal bond revenue. Fire and Ambulance Fund – A special revenue fund established to account for the activities of the City’s fire and ambulance services. Tax Increment Revenue Bond Debt Fund – A debt service fund that was established to account for the payment of principle and interest on long-term debt. Proprietary Funds: All proprietary funds are accounted for using the accrual basis of accounting. These funds account for operations that are primarily financed by user charges. The economic resource focus concerns determining costs as a means of maintaining the capital investment and management control. Revenues are recognized when earned and expenses are recognized when incurred. Allocations of costs, such as depreciation, are recorded in proprietary funds. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connections with a proprietary fund’s principal ongoing operations. The principal operating revenues for enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -27- Major Funds: The City reports the following major proprietary funds: Water Fund – An enterprise fund that accounts for the activities of the City’s water distribution operations. Sewer Fund – An enterprise fund that accounts for the activities of the City’s sewer collection and treatment operations and includes the storm sewer system. Fiduciary Funds Fiduciary funds presented using the economic resources measurement focus and the accrual basis of accounting (except for the recognition of certain liabilities of defined benefit pension plans and certain postemployment healthcare plans). The required financial statements are a statement of fiduciary net position and a statement of changes in fiduciary net position. The fiduciary funds are: Agency Funds – To report resources held by the reporting government in a purely custodial capacity (assets equal liabilities). This fund primarily consist of assets held by the City as an agent for individuals, private organizations, other local governmental entities. NOTE 2. CASH, CASH EQUIVALENTS, AND INVESTMENTS Cash Composition Composition of cash, deposits and investments at fair value on June 30, 2019, are as follows: Primary Government Cash on hand and deposits: Cash on hand Petty Cash $ 1,000 Cash in banks: Demand deposits 12,341,841 Savings deposits 412,033 Time deposits 5,442,786 Investments: State Short-Term Investment Pool (STIP) 10,558,194 U.S. Government Securities 864,281 Total $ 29,620,135 ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -28- Cash equivalents Cash equivalents are short-term, highly liquid deposits and investments that both readily convertible to known amounts of cash, and have maturities at purchase date of three months or less. The City’s cash and cash equivalents (including restricted assets) are considered to be cash on hand, demand, savings and time deposits, STIP, and all other short-term investments with original maturity dates of three months or less from the date of acquisition. For purposes of the statement of cash flows, the enterprise funds consider all funds (including restricted assets) held in the City’s cash management pool to be cash equivalents. Fair Value Measurements Investments, are reported at fair value, with the following limited exceptions: 1) investments in non-negotiable certificates of deposit are reported at cost and 2) money market investments, including U.S Treasury and Agency obligations, which mature within one year of acquisition, are reported at amortized cost. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between markets participates at the measurement date. Fair value is determined annually at fiscal year-end and requires use of valuation techniques described below. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted account principles. The hierarchy, as follows, is based on the valuation inputs used to measure fair value. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs that include the following: Level 1 Inputs – Quotes prices in active markets for identical assets; these investments are valued using prices quoted in active markets. Level 2 Inputs – Significant other observable inputs other than quoted prices included within Level 1; these investments are valued using matrix pricing. Level 3 Inputs – Significant unobservable inputs, these investments are valued using consensus pricing. The U.S Government Treasury are valued using quoted market prices (Level 1 inputs). Credit Risk As a means of limiting exposure to credit risk, the City is required to follow specific state statutes adding security to the deposits and investments. Below are the legal provisions provided in the state MCA: Section 7-6-202, MCA, limits investments of public money of a local government in the following eligible securities: United States government treasury bills, notes and bonds and in the United States treasury obligations, such as state and local government series separate trading of registered interest and principal of securities (STRIPS), or similar United States treasury obligations; ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -29- United States treasury receipts in a form evidencing the holder’s ownership of future interest or principal payments on specific United States treasury obligations that, in the absence of payment default by the United States, are held in a special custody account by an independent trust company in a certificate or book entry form with the federal reserve bank of New York; or Obligations of the following agencies of the United States, subject to the limitations in subsection 2 (not included): federal home loan bank; (ii) federal national mortgage association; (iii) federal home mortgage corporation; and (iv) federal farm credit bank. With the exception of the assets of a local government group self-insurance program, investments may not have a maturity date exceeding 5 years except when the investment is used in an escrow account to refund an outstanding bond issue in advance. Section 7-6-205 and Section 7-6-206, MCA, state that demand deposits may be placed only in banks and public money not necessary for immediate use by a county, city, or town that is not invested as authorize in Section 7-6-202 may be placed in time or savings deposits with a bank, savings and loan association, or credit union in the state or place in repurchase agreements as authorized in Section 7-6-213. The government has no investment policy that would further limit its investment choices. The government has no investments that require credit risk disclosure. Short Term Investment Pool (STIP) Credit Quality ratings by the S&P’s rating services as of June 30, 2019, (in thousands): Audited financial statements for the State of Montana’s Board of Investments are available at 2401 Colonial Drive 3rd Floor in Helena, Montana. Security Investment Type Total Fixed Income Investments at Fair Value Credit Quality Rating WAM (Days) Treasuries $ 129,877 A-1+ 20 Agency or Government Related 873,181 A-1+ 69 Corporate: Commercial Paper 200,145 A-1+ 16 Notes 448,909 A-1+ 61 Certificates of Deposit 325,235 A-1+ 45 Total Investments $ 1,977,347 ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -30- Custodial Credit Risk Custodial credit risk is the risk that, in the event of a bank failure, the government’s deposits may not be returned to it. The government does not have a deposit policy for custodial credit risk other than that required by state statutes. All deposits are carried at cost plus accrued interest. As of June 30, 2019 the government’s bank balance was exposed to custodial credit risk as follows: June 30, 2019 Balance Depository Account Insured $ 16,000,048 - Collateral held by the pledging bank's trust department but not in the City's name 1,178,447 - Uninsured and uncollateralized 925,470 Total deposits and investments $ 18,103,965 Deposit Security Section 7-6-207, MCA, states The local governing body may require security only for that portion of the deposits which is not guaranteed or insured according to law and, as to such unguaranteed or uninsured portion, to the extent of: 50% of such deposits if the institution in which the deposit is made has a net worth of total assets ratio of 6% or more; or 100% if the institution in which the deposit is made has a net worth of total assets ratio of less than The amount of collateral held for City deposits at June 30, 2019, equaled or exceeded the amount required by State statutes. Interest Rate Risk The government does have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates, but as stated above is limited to investment maturities of 5 years per MCA 7-6-202. The following is a list of individual investments as of June 30, 2019 alone with their related interest rates and maturity dates. Investment Interest Rate Maturity Amount US Treasury 2.590% 11/15/2019 $ 151,112 US Treasury 1.720% 12/15/2019 358,045 US Treasury 2.070% 9/30/2019 355,124 STIP Varies N/A 10,558,194 Total $ 11,422,475 ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -31- NOTE 3. RESTRICTED CASH/INVESTMENTS The following restricted cash/investments were held by the City as of June 30, 2019. These amounts are reported within the cash/investment account on the Statement of Net Position. Fund Description Amount Resort Tax Resort Tax - Streets $ 1,697,321 Resort Tax Resort Tax - Parks 67,990 Resort Tax Resort Tax - Tax Relief 1,287,532 Tax Increment Debt Service -Future 1,698,300 Water Fund Debt Service -Future 821,503 Water Fund Debt Service - Replacement & Depreciation 104,378 Water Fund Impact Fees-Construction 1,102,467 Sewer Fund Debt Service -Future 166,947 Sewer Fund Debt Service - Replacement & Depreciation 102,026 Sewer Fund Impact Fees-Construction 1,100,342 Total $ 8,148,806 NOTE 4. RECEIVABLES Tax Receivables Property tax levies are set in August, after the County Assessor delivers the taxable valuation information to the County, in connection with the budget process and are based on taxable values listed as of January 1 for all property located in the Entity. Taxable values are established by the Montana Department of Revenue, and a revaluation of all property is required to be completed on a periodic basis. Taxable value is defined by Montana statute as a fixed percentage of market value. Real property (and certain attached personal property) taxes are billed within ten days after the third Monday in October and are due in equal installments on November 30 and the following May 31. After those dates, they become delinquent (and a lien upon the property). After three years, the County may exercise the lien and take title to the property. Special assessments are either billed in one installment due November 30 or two equal installments due November 30 and the following May 31. Personal property taxes (other than those billed with real estate) are generally billed no later than the second Monday in July (normally in May or June), based on the prior November’s levies. Personal property taxes, other than mobile homes, are due thirty days after billing. Mobile home taxes are billed in two halves, the first due thirty days after billing; the second due September 30. The tax billings are considered past due after the respective due dates and are subject to penalty and interest charges. Taxes that become delinquent are charged interest at the rate of 5/6 of 1% a month plus a penalty of Real property on which taxes remain delinquent and unpaid may be sold at tax sales. In the case of personal property, the property is to be seized and sold after the taxes become delinquent. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -32- NOTE 5. INVENTORIES The cost of inventories are recorded as an expenditure when purchased. NOTE 6. CAPITAL ASSETS The City’s assets are capitalized at historical cost or estimated historical cost. City policy has set the capitalization threshold for reporting capital assets at $5,000. Gifts or contributions of capital assets are recorded at fair market value when received. The costs of normal maintenance and repairs are charged to operations as incurred. Improvements are capitalized and depreciated over the remaining useful lives of the related capital assets, as applicable. Depreciation is recorded on a straight-line basis over the useful lives of the assets as follows: Buildings 10 – 40 years $ 25,000 Improvements 5 – 20 years $ 25,000 Equipment 3 – 40 years $ 5,000 Infrastructure 10 – 40 years $ 75,000 In June 1999, the Governmental Accounting Standards Board (GASB) issued Statement No. 34 which requires the inclusion of infrastructure capital assets in local governments’ basic financial statements. In accordance with Statement No. 34, the City has included the value of all infrastructure into the 2019 Basic Financial Statements. A summary of changes in governmental capital assets was as follows: Governmental activities: Balance Balance July 1, 2018 Additions Disposals June 30, 2019 Capital assets not being depreciated: Land $ 8,725,278 $ 721,787 $ - $ 9,447,065 Construction in progress 3,040,788 2,871,745 (435,579) 5,476,954 Total capital assets not being depreciated $ 11,766,066 $ 3,593,532 $ (435,579) $ 14,924,019 Other capital assets: Buildings $ 37,249,085 $ 30,400 $ - $ 37,279,485 Improvements other than buildings 2,962,562 12,000 - 2,974,562 Machinery and equipment 8,301,665 284,651 - 8,586,316 Infrastructure 42,399,533 2,444 435,579 42,837,556 Total other capital assets at historical cost $ 90,912,845 $ 329,495 $ 435,579 $ 91,677,919 Less: accumulated depreciation (28,745,799) (3,375,697) - (32,121,496) Total $ 73,933,112 $ 547,330 $ - $ 74,480,442 ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -33- Governmental activities depreciation expense was charged to functions as follows: Governmental Activities: General government $ 450,984 Public safety 420,278 Public works 1,831,399 Culture and recreation 671,644 Housing and community development 1,392 Total governmental activities depreciation expense $ 3,375,697 A summary of changes in business-type capital assets was as follows: Business-type activities: Balance Balance July 1, 2018 Additions Deletions June 30, 2019 Capital assets not being depreciated: Land $ 602,783 $ - $ - $ 602,783 Haskill Basin Conservation Easement 7,730,248 - - 7,730,248 Construction in progress 1,737,598 1,632,009 (351,925) 3,017,682 Total capital assets not being depreciated $ 10,070,629 $ 1,632,009 $ (351,925) $ 11,350,713 Other capital assets: Machinery and equipment $ 134 $ - $ - $ 134 Buildings 834,865 - - 834,865 Pumping plant 3,170,905 - - 3,170,905 Treatment plant 16,515,158 - - 16,515,158 Transmission and distribution 21,811,637 - 351,925 22,163,562 General plant 2,284,005 27,732 - 2,311,737 Total other capital assets at historical cost $ 44,616,704 $ 27,732 $ 351,925 $ 44,996,361 Less: accumulated depreciation (20,562,868) (1,278,507) - (21,841,375) Total $ 34,124,465 $ 381,234 $ - $ 34,505,699 NOTE 7. LONG TERM DEBT OBLIGATIONS In the governmental-wide, proprietary, financial statements, outstanding debt is reported as liabilities. Bond issuance costs, bond discounts or premiums, are expensed at the date of sale. The governmental fund financial statements recognize the proceeds of debt and premiums as other financing sources of the current period. Issuance costs are reported as expenditures. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -34- Changes in Long-Term Debt Liabilities - During the year ended June 30, 2019, the following changes occurred in liabilities reported in long-term debt: Governmental Activities: Balance Balance Due Within July 1, 2018 Additions Deletions June 30, 2019 One Year Revenue bonds $ 11,052,000 $ - $ (3,461,442) $ 7,590,558 $ 3,848,000 Special assessment bond 1,284,670 - (91,724) 1,192,946 92,903 Intercap loans 788,703 - (188,790) 599,913 159,724 Compensated absences 1,231,967 58,041 - 1,290,008 1,047,612 Net pension liability* 5,947,490 - (1,138,951) 4,808,539 - Other post-employment benfits** 1,635,938 31,216 - 1,667,154 - Total $ 21,940,768 $ 89,257 $ (4,880,907) $ 17,149,118 $ 5,148,239 *See Note 9 **See Note 8 In prior years the general fund was used to liquidate compensated absences and claims and judgments. Business-type Activities: Balance Balance Due Within July 1, 2018 Additions Deletions June 30, 2019 One Year Revenue bonds $ 11,363,563 $ - $ (1,522,000) $ 9,841,563 $ 1,211,000 Compensated absences 279,753 18,835 - 298,588 204,348 Net pension liability* 1,117,374 477,505 - 1,594,879 - Other post-employment benfits** 485,789 - (11,287) 474,502 - Total $ 13,246,479 $ 496,340 $ (1,533,287) $ 12,209,532 $ 1,415,348 *See Note 9 **See Note 8 Special Assessment Debt - Special assessment bonds are payable from the collection of special assessments levied against benefited property owners within defined special improvement districts. The bonds are issued with specific maturity dates, but must be called and repaid earlier, at par plus accrued interest, if the related special assessments are collected. Rural special improvement districts bonds were issued with revolving fund backing. The City is not obligated to levy and collect a general property tax on all taxable property in the City to provide additional funding for the debt service payments. The cash balance in the Revolving Fund must equal at least 5% of the principal amount of bonds outstanding. Special assessment bonds outstanding as of June 30, 2019 were as follows: ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -35- Purpose Origination Date Interest Rate Bond Term Maturity Date Bonds Amount Annual Payment Balance June 30, 2019 SID #166 - JP Road Project 7/6/06 3.65-4.80% 20yrs 7/1/26 $ 1,360,000 varies $ 450,000 SID #167 (Glacier Bank) 1/5/17 4.36% 20yrs 7/1/37 389,500 varies 371,473 SID #167 (First Interstate Bank) 1/5/17 4.36% 20yrs 7/1/37 389,500 varies 371,473 $ 2,139,000 $ 1,192,946 Reported in the governmental activities. Annual requirement to amortize debt: For Fiscal Year Ended Principal Interest 2020 $ 92,903 $ 53,367 2021 94,132 49,147 2022 95,416 44,840 2023 96,758 40,443 2024 98,156 35,958 2025 99,618 31,376 2026 96,144 26,730 2027 37,736 22,258 2028 39,400 20,594 2029 41,136 18,858 2030 42,950 17,044 2031 44,842 15,152 2032 46,820 13,174 2033 48,884 11,110 2034 51,038 8,956 2035 53,288 6,706 2036 55,636 4,358 2037 58,089 1,905 Total $ 1,192,946 $ 421,976 Revenue Bonds - The City also issues bonds where the City pledges income derived from the acquired or constructed assets to pay debt service. Revenue bonds outstanding, net of an unamortized premium of at year-end were as follows: Purpose Origination Date Interest Rate Bond Term Maturity Date Bonds Amount Annual Payment Balance June 30, 2019 2016A Tax Increment Urban renewal Bond (Glacier Bank) 3/1/16 2.21% 4 yrs 7/15/20 $ 4,900,000 varies $ 2,664,558 ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -36- 2016B Tax Increment Urban Renewal Bond (First Interstate Bank) 3/1/16 2.21% 4 yrs 7/15/20 4,900,000 varies 2,665,000 2015A Tax Increment Urban Renewal Refunding Bonds 2015A (Glacier Bank) 6/10/15 2.62% 5 yrs 7/15/20 3,591,500 varies 1,130,500 2015B Tax Increment Urban Renewal Refunding Bonds 2015B (First Interstate) 6/10/15 2.62% 5yrs 7/15/20 3,591,500 varies 1,130,500 Water #06098- 2007 6/15/06 2.25% 20 yrs 7/1/26 248,699 varies 372,000 Water WRF #08110 – 2006 9/6/07 2.25% 20 yrs 7/1/27 900,000 varies 375,000 Water SRF (2009B) 10/21/09 0.75% 20 yrs 7/1/29 120,100 varies 60,000 Water System Revenue Bond, Taxable Series 2016 (Haskill Basin) 1/1/16 2.50% 20 yrs 1/1/25 8,219,500 varies 5,718,000 Water DNRC Series 2015 12/7/15 2.50% 30 yrs 1/1/36 120,000 varies 106,000 Sewer SRF 2002 Series 7/1/02 2.00% 20 yrs 7/1/22 200,000 varies 36,000 Sewer DNRC (2008A) 12/11/08 2.25% 20 yrs 7/1/28 500,000 varies 207,000 Sewer DNRC (2008B) 1/16/09 2.25% 20 yrs 1/1/29 1,711,000 varies 704,000 Sewer DNRC (2010B) 2/4/10 0.75% 20 yrs 1/1/30 48,211 varies 30,000 Sewer 2011B 8/1/11 3.00% 20 yrs 7/1/31 340,000 varies 227,000 Sewer 2011C 8/1/11 3.00% 20 yrs 7/1/31 350,000 varies 248,764 Sewer - 2014A - River Lakes 11/20/14 2.50% 20 yrs 1/1/35 300,000 varies 195,799 Sewer 2014 3/6/14 3.00% 20 yrs 1/1/34 452,300 varies 352,000 Sewer DNRC 2015 12/17/15 2.50% 20 yrs 7/1/36 960,000 varies 824,000 Sewer I & I 7/21/16 2.50% 20 yrs 1/1/36 439,085 varies 386,000 $37,730,895 $ 17,432,121 Reported in the governmental activities. Reported in business-type activities. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -37- Revenue bond resolutions include various restrictive covenants. The more significant covenants 1) require that cash be restricted and reserved for operations, construction, debt service, and replacement and depreciation; 2) specify minimum required operating revenue; and 3) specific and timely reporting of financial information to bond holders and the registrar. The most significant covenants are summarized in detail below: Governmental: The City was to create a reserve account and credit $718,300 from the proceeds of the Series 2015 Bonds and $980,000 from the Series 2016 Bonds. Proprietary: The City was to create a reserve account for both the Water and Sewer Revenue Bonds which they were to maintain an amount equal to one-half the sum of the highest cumulate amounts of principle and interest payable on all outstanding bonds in any current or future fiscal year; and the amount of net revenues for both water and sewer will at least equal 1.25 times the maximum annual debt service on the bonds. As of June 30, 2019, the City was in compliance with these requirements. Annual requirement to amortize debt: For Fiscal Year Ended Principal Interest 2020 $ 5,059,000 $ 364,741 2021 5,037,558 248,753 2022 1,366,000 147,665 2023 1,455,000 118,790 2024 1,577,000 89,169 2025 1,060,000 56,805 2026 401,000 42,580 2027 264,000 34,738 2028 171,000 28,151 2029 168,000 24,198 2030 164,000 20,295 2031 163,764 16,135 2032 139,000 11,710 2033 130,000 8,400 2034 120,799 5,375 2035 94,000 2,650 2036 62,000 760 Total $ 17,432,121 $ 1,220,915 ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -38- Intercap Loans Intercap loans have variable interest rates. Interest rates are subject to change annually. Interest rates to the borrower are adjusted on February 16th of each year and are based on a spread over the interest paid on one-year term, tax-exempt bonds which are sold to fund the loans. Intercap loans outstanding as of June 30, 2019 were as follows: Purpose Origination Date Interest Rate Term Maturity Date Principal Amount Balance June 30, 2019 Fire Pumper Type 1 6/20/2014 1.00-1.55% 10 yrs 8/15/2024 $ 485,112 $ 113,526 Fire Pumper 10/3/2014 1.00-1.55% 10 yrs 8/15/2024 282,659 158,560 Water Tender Fire Apparatus 2/13/2015 1.00-1.55% 7 yrs 2/15/2022 211,000 92,220 Fire SCBAs 12/4/2015 1.25-2.5% 5 yrs 2/15/2021 230,453 93,904 Ambulance 2018 2/16/2018 3.15% 5 yrs 2/15/2023 175,000 141,703 Total $ 1,384,224 $ 599,913 Reported in governmental-type activities. Annual requirement to amortize debt: For Fiscal Year Ended Principal Interest 2020 $ 159,724 $ 38,358 2021 161,951 27,555 2022 116,373 16,881 2023 86,713 10,061 2024 50,473 4,823 2025 24,679 1,137 Total $ 599,913 $ 98,816 Compensated Absences Compensated absences are absences for which employees will be paid for time off earned for time during employment, such as earned vacation and sick leave. It is the City’s policy and state law to permit employees to accumulate a limited amount of earned but unused vacation benefits, which will be paid to employees upon separation from City service. Employees are allowed to accumulate and carry over a maximum of two times their annual accumulation of vacation, but no more than 90 days into the new calendar year. There is no restriction on the amount of sick leave that may be accumulated. Upon separation, employees are paid 100 percent of accumulated vacation and 25 percent of accumulated sick leave. The liability associated with governmental fund-type employees is reported in the governmental activities, while the liability associated with proprietary fund-type employees is recorded in the business-type activities/respective proprietary fund. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -39- NOTE 8. POSTEMPLOYMENT HEALTHCARE PLAN Plan Description. The City of Whitefish provides a single-employer defined benefit post-employment health care plan that covers eligible retired employees of the City. A former covered employee whose employment with the City terminates due solely to retirement can continue coverage under the plan as a retiree if they have met the eligibility requirements and are receiving a retirement benefit from a qualified pension plan. Eligibility requirements are as follows: PERS: Age 55 with 5 years of service or 25 years of service regardless of age FURS: Age 50 with 5 years of service or 20 years of service regardless of age MPORS: Age 50 with 5 years of service or 20 years of service regardless of age Coverage will continue for as long as the retiree is enrolled under the plan and the applicable premiums are paid, provided a break in coverage does not occur. If a break in coverage occurs, the retiree is no longer eligible to participate or re-enroll in the plan. The retiree’s termination of coverage from the plan does not apply to the retiree’s spouse, provided the retiree is terminating because of Medicare coverage. The spouse of a retiree is permitted to maintain coverage unless the spouse is also eligible for Medicare coverage or the spouse has or is eligible for equivalent coverage. No assets have been accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement 75. Benefits Provided. Retirees enrolling in the plan may choose medical, dental, vision, and life insurance benefits. All benefits are provided through the Montana Municipal Interlocal Authority. The table below presents a high-level summary of the medical benefits offered in the plan year beginning July 1, 2017. PPO Plan Medical Deductible (Individual/Family) $500/$1000 Out-of-Pocket Maximum (Individual/Family) $1,500/$3,000 Coinsurance (In Network/Out of Network) $20%/40% Prescription Deductible None Prescription Copays: Generic $6 Brand Formulary $12 Brand Non-Formulary $22 Prescription Out-of-Pocket Maximum (Individual/Family) $5,100/$10,200 The life insurance benefit is provided by UNUM Life Insurance Company and provides $25,000 of term life coverage plus $25,000 AD&D coverage for employees and a $5,000 basic term life benefit for dependents. At age 70, the life benefit reduces to $12,500. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -40- This report summarizes the GASB 75 roll forward actuarial valuation for the City of Whitefish, valued at June 30, 2019 for the fiscal year ending on that date. The information presented herein is based on the actuarial assumptions and substantive plan provisions summarized in the City’s July 1, 2017 actuarial valuation. In a roll forward valuation, the census data and assumptions used in the prior year’s valuation are rolled forward to the new measurement date with only minimal change. Employees covered by benefit terms. At June 30, 2018, the following employees were covered by the benefit terms: Inactive employees or beneficiaries receiving benefit payments 19 Active employees 78 Total employees 97 Total Other Post-employment Benefits (OPEB) Liability The City’s total OPEB liability of $2,141,656 at June 30, 2019, and was determined by actuarial valuation using the actuarial entry age normal funding method, with roll forward procedures to the determined liability as of July 1, 2017. Actuarial assumptions and other input. The total OPEB liability in the June 30, 2018 was determined using the following assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Measurement date June 30, 2018 Valuation Date July 1, 2017 Discount rate (average anticipated rate) 3.36% Payroll Growth Rate 3.50% General Inflation 3.0% per year Mortality Rate: Age Male Female 50 0.1879% 0.1578% 55 0.3010% 0.2458% 60 0.5271% 0.4135% 65 0.9041% 0.7624% 70 1.4636% 1.3151% 75 2.5057% 2.2077% 80 4.2816% 3.6037% 85 7.3750% 6.0833% 90 13.0721% 10.5549% ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -41- Termination Before: Service PERS FURS MPORS 0 30.0% 4.25% 16.0% 1 22.5% 4.25% 13.0% 2 15.0% 4.25% 11.0% 3 12.5% 4.25% 9.0% 4-5 10.0% 3.00% 7.0% 6 8.0% 3.00% 7.0% 7 6.0% 2.00% 7.0% 8-9 6.0% 2.0% 5.0% 10 6.0% 2.0% 2.0% 11-14 4.0% 1.0% 2.0% 15+ 2.0% 1.0% 2.0% The discount rate was based on the S & P Municipal Bond 20Year High Grade Rate Index as of July 1, 2019. Payroll Growth Rate was determined by the Pension Actuarial Valuations June 30, 2017. Mortality Rate was determined by the Male and Female RP-2000 Combined Employee and Annuitant Mortality Tables projected to 2020 using scale BB, males set back 1 year, from Pension Actuarial Valuations June 30, 2017. Termination rates were set based on PERS, FURS, and MPORS Pension Actuarial Valuations June 30, 2017. Retirement Rate as follows: PERS Age Less than 30 years 30+ years FURS MPORS 50 0% 10% 5% 12% 51 3% 10% 10% 15% 52 3% 10% 10% 15% 53 3% 10% 10% 15% 54 3% 10% 10% 15% 55 3% 15% 25% 20% 56 4% 15% 25% 20% 57 5% 15% 25% 20% 58 5% 15% 25% 20% 59 6% 15% 25% 20% 60 8% 15% 50% 20% 61 15% 15% 50% 20% ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -42- 62 25% 25% 50% 100% 63 15% 15% 100% 64 15% 15% 65-66 30% 30% 67-69 25% 25% 70 100% 100% Participation Rate – 50% of active employees are assumed to elect the City healthcare coverage in retirement. 20% are assumed to continue the plan after age 65. Current retirees are assumed to continue their existing elections until age 65, however, only 40% of the retirees currently under age 65 are assumed to continue their exiting election after age 65 for their remaining lifetime. Participation Rate Life Insurance – 68% of active employees are assumed to elect the City life insurance coverage in retirement. All current retirees are assumed to continue their existing election for their remaining lifetime. Spousal Coverage – Of the current active employees, 95% of those assumed to elect coverage in the retirement are assumed to be married and 80% of the married participants are assumed to elect coverage for their spouse in retirement. Husbands are assumed to be 3 years older than their wives. Of the current retired employees, existing elections for the spouse coverage are assumed to be maintained until death. Actual spouse information is used where it was available, otherwise, husbands are assumed to be 3 years older than their wives. Medical Trent Rate: Effective July 1 Trend Rate 2018 6.2% 2019 6.0% 2020 5.8% 2021 5.6% 2022 5.4% 2023 5.2% 2024+ 5.0% The Medical Trend Rates above were from the PriceWaterhouseCoopers 2017 Assumption and Disclosure Survey. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -43- Changes in the Total OPEB Liability Balance at 6/30/2018 $ 2,121,727 Changes for the year: Service Cost $ 146,887 Interest 71,290 Differences in experience (83,630) Change in assumptions (114,618) Benefit payments - Net Changes $ 19,929 Balance at 6/30/2019 $ 2,141,656 Sensitivity of the total OPEB liability to changes in the discount rate. The following summarizes the total OPEB liability reported, and how that liability would change if the discount rate used to calculate the OPEB liability were to decrease or increase 1% Decrease (2.36%) Discount Rate (3.36%) 1% Increase (4.36%) Total OPEB Liability $ 2,630,161 $ 2,141,656 $ 1,766,802 Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates. The following summarizes the total OPEB liability reported, and how that liability would change if the healthcare trend rates used in projecting the benefit payments were to decrease or increase 1% Decrease Healthcare Cost Trends* 1% Increase Total OPEB Liability $ 1,767,367 $ 2,141,656 $ 2,654,469 *Reference the assumptions footnotes to determine the healthcare cost trends used to calculate the OPEB liability. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended June 30, 2019, the City recognized an OPEB expense of $19,929. The City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -44- OPEB - Deferred Outflows of Resources OPEB - Deferred Inflows of Resources Differences between expected and actual economic experience $ $ 686,637 Changes in Assumptions 431,801 100,272 Total $ 431,801 $ 786,909 Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: OPEB: Year ended June 30, Amount of Deferred Outflows and Deferred Inflows recognized in future years as an increase or (decrease) to OPEB Expense 2020 $ (24,812) 2021 $ (24,812) 2022 $ (24,812) 2023 $ (24,812) 2024 $ (24,812) 2025 $ (24,812) 2026 $ (24,564) Total $ (173,436) NOTE 9. NET PENSION LIABILITY Summary of Significant Accounting Policies The Montana Public Employee Retirement Administration (MPERA) MPERA prepared financial statements using the accrual basis of accounting. The same accrual basis was used by MPERA for the purposes of determining the NPL; Deferred Outflows of Resources and Deferred Inflows of Resources related to pensions; Pension Expense; the Fiduciary Net Position; and, Additions to or Deductions from Fiduciary Net Position. Member contributions are recognized in the period in which contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Revenues are recognized in the accounting period they are earned and become measurable. Benefit payments and refunds are recognized in the accounting period in which they are due and payable in accordance with the benefit terms. Expenses are recognized in the period incurred. Investments are reported at fair value. MPERA adhered to all accounting principles generally accepted by the United States of America. MPERA applied all applicable pronouncements of the Governmental Accounting Standards Board (GASB). ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -45- Plan Descriptions PERS The PERS-Defined Benefit Retirement Plan (PERS) administered by the Montana Public Employee Retirement Administration (MPERA), is a multiple-employer, cost- sharing plan established July 1, 1945, and governed by Title 19, chapters 2 & 3, Montana Code Annotated (MCA). This plan provides retirement benefits to covered employees of the State, local governments, certain employees of the Montana University System, and school districts. All new members are initially members of the PERS-DBRP and have a 12-month window during which they may choose to remain in the PERS-DBRP or join the PERS-DCRP by filing an irrevocable election. Members may not be participants of both the defined contribution and defined benefit retirement plans. For members that choose to join the PERS-DCRP, a percentage of the employer contributions will be used to pay down the liability of the PERS-DBRP. All new members from the universities also have third option to join the university system’s Montana University System Retirement Program (MUS-RP). The PERS-DBRP provides retirement, disability, and death benefits to plan members and their beneficiaries. Benefits are established by state law and can only be amended by the Legislature. MPORS The Municipal Police Officers’ Retirement System (MPORS), administered by the Montana Public Employee Retirement Administration (MPERA), is a multiple-employer, cost-sharing defined benefit plan established in 1974 and governed by Title 19, chapters 2 & 9, MCA. This plan provides retirement benefits to all municipal police officers employed by first- and second-class cities and other cities that adopt the plan. Benefits are established by state law and can only be amended by the Legislature. The MPORS provides retirement, disability, and death benefits to plan members and their beneficiaries. Deferred Retirement Option Plan (DROP): Beginning July 2002, eligible members of MPORS can participate in the DROP by filing a one-time irrevocable election with the Board. The DROP is governed by Title 19, Chapter 9, Part 12, MCA. A member must have completed at least twenty years of membership service to be eligible. They may elect to participate in the DROP for a minimum of one month and a maximum of 60 months and may only participate in the DROP once. A participant remains a member of the MPORS, but will not receive membership service or service credit in the system for the duration of the member’s DROP period. During participation in the DROP, all mandatory contributions continue to the retirement system. A benefit is calculated based on salary and years of service to date as of the beginning of the DROP period. The benefit is paid into the member’s DROP account until the end of the DROP period. At the end of the DROP period, the participant may receive the balance of the DROP account in a lump-sum payment or in a direct rollover to another eligible plan, as allowed by the IRS. If the participant continues employment after the DROP period ends, they will again accrue membership service and service credit. The DROP account cannot be distributed until employment is formally terminated. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -46- FURS The Firefighters’ Unified Retirement System (FURS), administered by the Montana Public Employee Retirement Administration (MPERA), is a multiple-employer, cost- sharing defined benefit plan established in 1981, and governed by Title 19, chapters 2 & 13, MCA. This plan provides retirement benefits to firefighters employed by first- and second-class cities, other cities and rural fire district departments that adopt the plan, and to firefighters hired by the Montana Air National Guard on or after October 1, 2001. Benefits are established by state law and can only be amended by the Legislature. The FURS provides retirement, disability, and death benefits to plan members and their beneficiaries. Benefits are based on eligibility, years of service and highest average compensation. Member rights are vested after five years of service. Summary of Benefits PERS Service retirement:  Hired prior to July 1, 2011: o Age 60, 5 years of membership service; o Age 65, regardless of membership service; or o Any age, 30 years of membership service.  Hired on or after July 1, 2011: o Age 65, 5 years of membership service; o Age 70, regardless of membership service. Early Retirement (actuarially reduced):  Hired prior to July 1, 2011: o Age 50, 5 years of membership service; or o Any age, 25 years of membership service.  Hired on or after July 1, 2011: o Age 55, 5 years of membership service. Second Retirement (requires returning to PERS-covered employer or PERS service): 1) Retire before January 1, 2016 and accumulate less than 2 years additional service credit or retire on or after January 1, 2016 and accumulate less than 5 years additional service credit: a. A refund of member’s contributions plus return interest (currently .77% effective July 1, 2017). b. No service credit for second employment; c. Start the same benefit amount the month following termination; and d. Guaranteed Annual Benefit Adjustment (GABA) starts again in the January immediately following the second retirement. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -47- 2) Retire before January 1, 2016 and accumulate at least 2 years of additional service credit: a. A recalculated retirement benefit based on provisions in effect after the initial retirement; and b. GABA starts on the recalculated benefit in the January after receiving the new benefit for 12 months. 3) Retire on or after January 1, 2016 and accumulate 5 or more years of service credit: a. The same retirement as prior to the return to service; b. A second retirement benefit as prior to the second period of service based on laws in effect upon the rehire date; and c. GABA starts on both benefits in the January after receiving the original and the new benefit for 12 months. Vesting  5 years of membership service. Member’s highest average compensation (HAC)  Hired prior to July 1, 2011- highest average compensation during any consecutive 36 months;  Hired on or after July 1, 2011-highest average compensation during any consecutive 60 months; Compensation Cap  Hired on or after July 1, 2013-110% annual cap on compensation considered as a part of a member’s highest average compensation. benefit formula Members hired prior to July 1, 2011:  Less than 25 years of membership service: 1.785% of HAC per year of service credit;  25 years of membership service or more: 2% of HAC per year of service credit. Members hired on or after July 1, 2011:  Less than 10 years of membership service: 1.5% of HAC per year of service credit;  10 years or more, but less than 30 years of membership service: 1.785% of HAC per year of service credit;  30 years or more of membership service: 2% of HAC per year of service credit. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -48- Guaranteed Annual Benefit Adjustment (GABA) After the member has completed 12 full months of retirement, the member’s benefit increases by the applicable percentage (provided below) each January, inclusive of other adjustments to the member’s benefit.  3.0% for members hired prior to July 1, 2007  1.5% for members hired between July 1, 2007 and June 30, 2013  Members hired on or after July 1, 2013: • 1.5% for each year PERS is funded at or above 90%; • 1.5% is reduced by 0.1% for each 2% PERS is funded below 90%; and • 0% whenever the amortization period for PERS is 40 years or more. MPORS Service Retirement:  20 years of membership service, regardless of age.  Age 50 with 5 years of membership service.  2.5% of FAC x years of service credit. Second Retirement (applies to members re-employed in a MPORS position after July 1, 2017): 1) If the member works more than 480 hours in a calendar year and accumulates less than 5 years of service credit before terminating again, the member: Is not awarded service credit for the period of reemployment; b. Is refunded the accumulated contributions associated with the period of reemployment; c. Starting the first month following termination of service, receives the same retirement benefit previously paid to the member; and d. Does not accrue post-retirement benefit adjustments during the term of reemployment but receives a Guaranteed Annual Benefit Adjustment (GABA) in January immediately following second retirement. 2) If the member works more than 480 hours in a calendar year and accumulates at least 5 years of service credit before terminating again, the member: a. Is awarded service credit for the period of reemployment; b. Starting the first month following termination of service, receives: i. The same retirement benefit previously paid to the member, and ii. A second retirement benefit for the period of reemployment calculated based on the laws in effect as of the member’s rehire date; and c. Does not accrue post-retirement benefit adjustments during the term of reemployment but receives a GABA: i. On the initial retirement benefit in January immediately following second retirement, and ii. On the second retirement benefit starting in January after receiving that benefit for at least 12 months. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -49- 3) A member who returns to covered service is not eligible for a disability benefit. Vesting 5 years of membership service. Member’s Final Average Compensation (FAC)  Hired prior to July 1, 1977 - average compensation of final year of service;  Hired on or after July 1, 1977 - final average compensation (FAC) for last consecutive 36 months. Compensation Cap  Hired on or after July 1, 2013: 110% annual cap on compensation considered as a part of a member’s FAC. Guaranteed Annual Benefit Adjustment (GABA) Hired on or after July 1, 1997, or those electing GABA, and has been retired for at least 12 months, a GABA will be made each year in January equal to Minimum benefit adjustment (non-GABA) If hired before July 1, 1997 and member did not elect GABA, the minimum benefit adjustment provided is equal to 50% of the current base compensation of a newly confirmed police officer of the employer that last employed the member as a police officer. FURS Service retirement  Hired on or after July 1, 1981, or has elected to be covered by GABA: o 20 years of membership service o 2.5% of HAC x years of service credit  Hired prior to July 1, 1981, and who had not elected to be covered by GABA, the greater of above,or: o If membership service is less than 20 years:  2% of the highest compensation (HMC) x years of service credit and o If membership services is greater or equal to 20 years:  50% of HMC + 2% of HMC x years of service credit in excess of 20 Early retirement  Age 50 with 5 years of membership service ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -50- Second retirement (applies to members re-employed in a FURS position after July 1, 2017): 1) If the member works more than 480 hours in a calendar year and accumulates less than 5 years of service credit before terminating again, the member: a. Is not awarded service credit for the period of reemployment; b. Is refunded the accumulated contributions associated with the period of reemployment; c. Starting the first month following termination of service, receives the same retirement benefit previously paid to the member; and d. Does not accrue post-retirement benefit adjustments during the term of reemployment but receives a Guaranteed Annual Benefit Adjustment (GABA) in January immediately following second retirement. 2) If the member works more than 480 hours in a calendar year and accumulates at least 5 years of service credit before terminating again, the member: a. Is awarded service credit for the period of reemployment; b. Starting the first month following termination of service, receives: i. The same retirement benefit previously paid to the member, and ii. A second retirement benefit for the period of reemployment calculated based on the laws in effect as of the member’s rehire date; and c. Does not accrue post-retirement benefit adjustments during the term of reemployment but receives a GABA: i. On the initial retirement benefit in January immediately following second retirement, and ii. On the second retirement benefit starting in January after receiving that benefit for at least 12 months. 3) A member who returns to covered service is not eligible for a disability benefit. Vesting 5 years of membership service. Member’s compensation period used in benefit calculation  Hired prior to July 1, 1981 and not electing GABA: highest compensation (HMC);  Hired after June 30, 1981 and those electing GABA: highest average compensation (HAC) during any consecutive 36 months (or shorter period of total service).  Part-time firefighter: 15% of regular compensation of a newly confirmed full-time firefighter. Compensation Cap  Hired on or after July 1, 2013: 110% annual cap on compensation considered as a part of a member’s HAC. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -51- Guaranteed Annual Benefit Adjustment (GABA) Hired on or after July 1, 1997, or those electing GABA, and has been retired for at least 12 months – the member’s benefit increases by 3.0% each January. Minimum Benefit Adjustment (non-GABA) If hired before July 1, 1997 and member did not elect GABA - the minimum benefit adjustment is provided equal to 50% of the current base compensation of a newly confirmed active firefighter of the employer that last employed the member as a firefighter. Overview of Contributions PERS 1. Rates are specified by state law and are a percentage of the member’s compensation. a. Contributions are deducted from each member’s salary and remitted by participating employers; b. The State legislature has the authority to establish and amend contribution rates to the plan. 2. Member contributions to the system: a. Plan members are required to contribute 7.90% of member’s compensation. Contributions are deducted from each member’s salary and remitted by participating employers. b. The 7.90% member contributions is temporary and will be decreased to 6.9% on January 1 following actuary valuation results that show the amortization period has dropped below 25 years and would remain below 25 years following the reduction of both the additional employer and additional member contribution rates. 3. Employer contributions to the system: a. Effective July 1, 2014, following the 2013 Legislative session, PERS- employer contributions increase an additional 0.1% a year and will continue over 10 years through 2024. The additional employer contributions including the 0.27% added in 2007 and 2009, will terminate on January 1 following actuary valuation results that show the amortization period has dropped below 25 years and would remain below the 25 years following the reduction of both the additional employer and additional member contributions rates. b. Effective July 1, 2013, employers are required to make contributions on working retirees’ compensation. Member contributions for working retirees are not required. 4. Non Employer Contributions a. Special Funding i. The State contributes 0.1% of members’ compensation on behalf of local government entities. ii. The State contributes 0.37% of members’ compensation on behalf of school district entities. iii. The State contributed a statutory appropriation from its General Fund of $33,454,182. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -52- MPORS Rates are specified by state law for periodic member and employer contributions and are a percentage of the member’s compensation. Contributions are deducted from each member’s salary and remitted by participating employers. The State legislature has the authority to establish and amend contribution rates to the plan. Member and employer contribution rates are shown in the table below. Member Fiscal Year Hired <7/1/75 Hired >6/30/75 Hired >6/30/79 Hired>6/30/97 GABA Employer State 2000-2019 5.800% 7.000% 8.500% 9.000% 14.410% 29.370% 1998-1999 7.800% 9.000% 10.500% 11.000% 14.410% 29.370% 1997 7.800% 9.000% 10.500% 14.360% 29.370% FURS Rates are specified by state law for periodic member and employer contributions and are a percentage of the member’s compensation. Contributions are deducted from each member’s salary and remitted by participating employers. The State legislature has the authority to establish and amend contribution rates to the plan. Member and employer contribution rates are shown in the table below. Member Fiscal Year Non-GABA GABA Employer State 1998-2019 9.500% 10.700% 14.360% 32.610% 1997 7.800% 14.360% 32.610% Stand-Alone Statements The PERS’s, MPORS, FURS financial statements of the Montana Public Employees Retirement Board (PERB) Comprehensive Annual Financial Report (CAFR) and the GASB 68 Report disclose the Plan’s fiduciary net position. The reports are available from the PERB at PO Box 200131, Helena MT 59620-0131, (406) 444-3154 or the MPERA website at http://mpera.mt.gov. Net Pension Liability In accordance with GASB Statement 68, Accounting and Financial Reporting for Pensions, employers are required to recognize and report certain amounts associated with their participation in the Public Employees’ Retirement System (PERS), Municipal Police Officers’ Retirement System (MPORS) and Firefighters’ Unified’ Retirement System (FURS) Statement 68 became effective June 30, 2016 and includes requirements to record and report their proportionate share of the collective Net Pension Liability, Pension Expense, Deferred Inflows and Deferred Outflows of resources associated with pensions. In accordance with Statement 68, the System has a special funding situation in which the State of Montana is legally responsible for making contributions directly to PERS, MPORS, FURS that are used to provide pension benefits to the retired members. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -53- Due to the existence of a special funding situation, employers are also required to report the portion of the State of Montana’s proportionate share of the collective Net Pension Liability that is associated with the employer. The following table displays the amounts and the percentages of Net Pension Liability for the fiscal years ended June 30, 2018 and June 30, 2019 (reporting dates). PERS NPL as of 6/30/2018 PERS NPL as of 6/30/2019 Percent of Collective NPL as of 6/30/2019 FURS NPL as of 6/30/18 FURS NPL as of 6/30/19 Percent of Collective NPL as of 6/30/2019 MPORS NPL as of 6/30/2019 Percent of Collective NPL as of 6/30/2018 Percent of Collective NPL as of 6/30/2019 Total Collective NPL as of 6/30/2019 Percent Totals as of 6/30/2019 Employer Proportionate Share $ 5,129,069 $ 4,493,914 0.2153% $ 834,451 $ 850,163 0.7382% $ 1,059,341 0.6190% 0.6186% $ 6,403,418 1.5721% State of Montana Proportionate Share associated with Employer 68,528 1,504,721 0.2893% 1,894,948 1,943,937 2.4832% 2,165,490 1.8807% 1.8838% $ 5,614,148 4.6563% Total $ 5,197,597 $ 5,998,635 0.5046% $ 2,729,399 $ 2,794,100 3.2214% $ 3,224,831 2.4997% 2.5024% $ 12,017,566 6.2284% At June 30, 2019, the employer recorded a liability of $6,403,418 for its proportionate share of the net pension liability of 1.5721 percent. The net pension liability of PERS, MPORS, FURS reported was determined by taking the results of the June 30, 2017 actuarial valuation and applying roll forward procedures to the June 30, 2018 measurement date. The employer’s proportion of the net pension liability was based on the employer’s contributions received by PERS, MPORS, FURS during the measurement period July 1, 2017, through June 30, 2018, relative to the total employer contributions received from all of PERS, MPORS, FURS participating employers. Changes in actuarial assumptions and methods: PERS, MPORS, FURS There were no changes in assumptions or other inputs that affected the measurement of the total pension liability. Changes in benefit terms: PERS, MPORS, FURS There were no changes in benefit terms since the previous measurement date. Changes in proportionate share: Between the measurement date of the collective NPL and the employer’s reporting date there were some changes in proportion that may have an effect on the employer’s proportionate share of the collective NPL. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -54- Pension Expense as of 6/30/19 PERS FURS MPORS Total Employer Proportionate Share $ 479,149 $ 110,091 $ 126,508 $ 715,748 State of Montana Proportionate Share associated with the Employer 100,424 391,257 298,517 790,198 Total $ 579,573 $ 501,348 $ 425,025 $ 1,505,946 At June 30, 2019, the employer recognized a Pension Expense of $715,748 for its proportionate share of the pension expense. The employer also recognized grant revenue of $790,198 for the support provided by the State of Montana for its proportionate share of the pension expense that is associated with the employer. Additionally, the employer recognized grant revenue of $0 from the State Statutory Appropriation from the General Fund. Recognition of Beginning Deferred Outflow At June 30, 2019, the employer recognized a beginning deferred outflow of resources for the employers fiscal year 2018 contributions of $641,143. Deferred Inflows and Outflows At June 30, 2019, the employer reported its proportionate share of PERS, MPORS, FURS deferred outflows of resources and deferred inflows of resources related to PERS, MPORS, FURS from the following sources: ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -55- PERS Deferred Outflows of Resources PERS Deferred Inflows of Resources FURS Deferred Outflows Resources FURS Deferred Inflows of Resources MPORS Deferred Outflows of Resources MPORS Deferred Inflows of Resources Total Deferred Outflows of Resources Total Deferred Inflows of Resources Differences between expected and actual economic experience $ 341,732 $ - $ 95,431 $ 4,683 $ 2,969 $ 21,128 $ 440,132 $ 25,811 Actual vs. Expected Investment Earnings - 69,790 - 10,312 - 8,032 - 88,134 Changes in Assumptions 382,140 - 83,244 - 49,521 - 514,905 - Changes in Proportion Share and Differences between Employer Contributions and Proportionate Share of Contributions - 566,038 - 56,971 - 28,064 - 651,073 Employer contributions sunsequent to the measurement date - FY19 149,677 - 176,246 - 150,413 - 476,336 - Total $ 873,549 $ 635,828 $ 354,921 $ 71,966 $ 202,903 $ 57,224 $ 1,431,373 $ 765,018 *Amounts reported as deferred outflows of resources related to pensions resulting from the employer’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -56- Deferred Inflows and Outflows PERS: Year ended June 30, Amount of Deferred Outflows and Deferred Inflows recognized in future years as an increase or (decrease) to Pension Expense 2020 $ 257,443 2021 $ 83,583 2022 $ (224,305) 2023 $ (28,676) 2024 $ - Thereafter $ - FURS: Year ended June 30, Amount of Deferred Outflows and Deferred Inflows recognized in future years as an increase or (decrease) to Pension Expense 2020 $ 39,658 2021 $ 24,231 2022 $ 345 2023 $ 24,277 Thereafter $ 18,197 MPORS: Year ended June 30, Amount of Deferred Outflows and Deferred Inflows recognized in future years as an increase or (decrease) to Pension Expense 2020 $ 25,807 2021 $ (5,668) 2022 $ (20,149) 2023 $ (4,724) 2024 $ - Thereafter $ - ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -57- Actuarial Assumptions PERS The Total Pension Liability (TPL) used to calculate the NPL was determined by taking the results of the June 30, 2017, actuarial valuation and applying standard roll forward procedures to update the TPL to June 30, 2018. There were several significant assumptions and other inputs used to measure the TPL. The actuarial assumptions used in the June 30, 2017, valuation were based on the results of the last actuarial experience study, dated May 2017, for the six year period July 1, 2010 to June 30, 2016. Among those assumptions were the following:  Investment Return (net of admin expense) 7.65%  Admin Expense as % of Payroll 0.26%  General Wage Growth* 3.50%  *includes Inflation at 2.75%  Merit Increases 0% to 6.3%  Postretirement Benefit Increase Below: Guaranteed Annual Benefit Adjustment (GABA) After the member has completed 12 full months of retirement, the member’s benefit increases by the applicable percentage each January, Inclusive of other adjustments to the member’s benefit.  3% for members hired prior to July 1, 2007  1.5% for members hired between July 1, 2007 and June 30, 2014  Member hired on or after July 1, 2013: • 1.5% for each year PERS is funded at or above 90%; • 1.5% is reduced by 0.1% for each 2% PERS is funded below 90%; and • 0% whenever the amortization period for PERS is 40 years or more.  Mortality assumptions among contributing members, service retired members and beneficiaries based on RP 2000 Combined Employee and Annuitant Mortality Tables projected to 2020 with scale BB, males set back 1 year.  Mortality assumptions among Disabled members are based on RP 2000 Combined Mortality Tables with no projections. MPORS The TPL used to calculate the NPL was determined by taking the results of the June 30, 2017, actuarial valuation and applying standard roll forward procedures to update the TPL to June 30, 2018. There were several significant assumptions and other inputs used to measure the TPL. The actuarial assumptions used in the June 30, 2017, valuation were based on the results of the last actuarial experience study, dated May 2017, for the six- year period July 1, 2010 to June 30, 2016. Among those assumptions were the following: Investment Return (net of admin expense) 7.65% Admin Expense as % of Payroll 0.24% General Wage Growth* 3.50% *includes Inflation at 2.75% Merit Increases 0% to 6.60% ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -58-  Postretirement Benefit Increases i. Guaranteed Annual Benefit Adjustment (GABA) Hired on or after July 1, 1997, or those electing GABA - after the member has completed 12 full months of retirement, the member’s benefit increases by a maximum of 3% each January, inclusive of all other adjustments to the member’s benefit. ii. Minimum benefit adjustment (non-GABA) If hired before July 1, 1997 and member did not elect GABA - the retirement, disability or survivor’s benefit may not be less than ½ the compensation of a newly confirmed officer in the city that the member was last employed.  Mortality assumptions among contributing members, terminated vested members, service retired members and beneficiaries were based on RP 2000 Combined Employee and Annuitant Mortality Tables projected to 2020 with Scale BB, set back one year for males.  Mortality assumptions among Disabled Retirees were based on RP 2000 Combined Mortality Tables. FURS The TPL used to calculate the NPL was determined by taking the results of the June 30, 2017, actuarial valuation and applying standard roll forward procedures to update the TPL to June 30, 2018. There were several significant assumptions and other inputs used to measure the TPL. The actuarial assumptions used in the June 30, 2017, valuation were based on the results of the last actuarial experience study, dated May 2017, for the six year period July 1, 2010 to June 30, 2016. Among those assumptions were the following:  Investment Return (net of admin expense) 7.65%  Admin Expense as % of Payroll 0.23%  General Wage Growth* 3.50% *includes Inflation at 2.75%  Merit Increases 0% to 6.3%  Postretirement Benefit Increases: Guaranteed Annual Benefit Adjustment (GABA) Members hired on or after July 1, 1997, or those electing GABA - after the member has completed 12 full months of retirement, the member’s benefit increases by a maximum of 3% each January, inclusive of all other adjustments to the member’s benefit. Minimum Benefit Adjustment (non-GABA) Members hired before July 1, 1997 and member did not elect GABA - the retirement, disability or survivor’s benefit may not be less than ½ the compensation of a newly confirmed firefighter employed by the city that last employed the member (provided the member has at least 10 years of membership service). ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -59-  Mortality assumptions among contributing members, service retired members and beneficiaries were based on RP 2000 Combined Employee and Annuitant Mortality Tables projected to 2020 using Scale BB, males set back 1 year.  Mortality assumptions among Disabled Members were based on RP 2000 Combined Mortality Tables. Discount Rate PERS, MPORS, FURS The discount rate used to measure the Total Pension Liability was 7.65%. The projection of cash flows used to determine the discount rate assumed that contributions from participating plan members, employers, and non-employer contributing entities will be made based on the Board’s funding policy, which establishes the contractually required rates under Montana Code Annotated. For PERS the State contributes 0.1% of salaries for local governments and 0.37% for school districts. In addition, the state contributed coal severance tax and interest money from the general fund. The interest was contributed and the severance tax was contributed quarterly. Based on those assumptions, the Plan’s fiduciary net position was projected to be adequate to make all the projected future benefit payments of current plan members through the year 2121. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the TPL. A municipal bond rate was not incorporated in the discount rate. For MPORS the State contributes 29.37% of salaries paid by employers. Based on those assumptions, the System’s fiduciary net position was projected to be adequate to make all the projected future benefit payments of current plan members through the year 2132. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the TPL. A municipal bond rate was not incorporated in the discount rate. For FURS the State contributes 32.61% of salaries paid by employers. Based on those assumptions, the System’s fiduciary net position was projected to be adequate to make all the projected future benefit payments of current plan members through the year 2134. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the TPL. A municipal bond rate was not incorporated in the discount rate. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -60- Target Allocations PERS, MPORS, FURS Asset Class Target Asset Allocation Long-Term Expected Real Rate of Return Arithmetic Basis Cash Equivalents 2.60% 4.00% Domestic Equity 36.00% 4.55% Foreign Equity 18.00% 6.35% Fixed Income 23.40% 1.00% Private Equity 12.00% 7.75% Real Estate 8.00% 4.00% Total 100.00% The long-term expected return on pension plan assets was reviewed as part of the regular experience study prepared for the Plan. The most recent analysis, performed for the period of July 1, 2010 to June 30, 2016, is outlined in a report dated May 2017 and can be located on the MPERA website. The long-term expected rate of return on pension plan investments was determined by considering information from various sources, including historical rates of return, rate of return assumptions adopted by similar public sector systems, and by 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 were 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 above table outlines the best estimates of arithmetic real rates of return for each major asset class included in the target asset allocation as of June 30, 2018. Sensitivity Analysis Current Discount Rate PERS $ 6,499,241 $ 4,493,914 $ 2,847,222 FURS $ 1,457,133 $ 850,163 $ 361,237 MPORS $ 1,608,777 $ 1,059,341 $ 619,940 1.0% Decrease 1.0% Increase PERS, MPORS, FURS In accordance with GASB 68 regarding the disclosure of the sensitivity of the net pension liability to changes in the discount rate, the above table presents the net pension liability calculated using the discount rate of 7.65%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1.00% lower (6.65%) or 1.00% higher (8.65%) than the current rate. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -61- NOTE 10. INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS The composition of interfund balances as of June 30, 2019, was as follows: Due to/from other funds Purpose Receivable Fund Payable Fund Amount Deficit Cash General – Major Governmental WF Trail Constructions – Nonmajor Governmental $ 23,570 Advances to/from other funds Purpose Receivable Fund Payable Fund Amount Half of annual assessment SID Revolving- Nonmajor Governmental SID 166- Nonmajor Governmental $ 58,699 Interfund Transfers The following is an analysis of operating transfers in and out during fiscal year 2019: Purpose Receivable Fund Payable Fund Amount Operating Parks, Recreation, & Community Service – Nonmajor Governmental General – Major Governmental $ 793,990 Operating Fire and Ambulance – Major Governmental General– Major Governmental 700,380 Operating Library – Nonmajor Governmental General– Major Governmental 34,371 Indirect Cost Allocation Transfer General– Major Governmental Street & Alley– Nonmajor Governmental 12,299 Indirect Cost Allocation Transfer General– Major Governmental Parks, Recreation, & Community Service – Nonmajor Governmental 23,114 Indirect Cost Allocation Transfer General– Major Governmental Library– Nonmajor Governmental 4,151 Indirect Cost Allocation Transfer General– Major Governmental Tax Increment – Major Governmental 6,286 Indirect Cost Allocation Transfer General– Major Governmental Fire and Ambulance– Nonmajor Governmental 43,362 Indirect Cost Allocation Transfer General– Major Governmental Building Codes– Nonmajor Governmental 9,274 ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -62- Indirect Cost Allocation Transfer General– Major Governmental Light District Nonmajor Governmental 645 Indirect Cost Allocation Transfer General– Major Governmental Light District Nonmajor Governmental 645 Indirect Cost Allocation Transfer General– Major Governmental Storm Water– Nonmajor Governmental 3,211 Indirect Cost Allocation Transfer General– Major Governmental Water– Nonmajor Governmental 26,131 Indirect Cost Allocation Transfer General– Major Governmental Sewer– Nonmajor Governmental 24,444 Indirect Cost Allocation Transfer General– Major Governmental Solid Waste– Nonmajor Governmental 274 Property Tax Relief General – Major Governmental Resort Tax – Major Governmental 1,277,625 Resort Tax Transfer Water– Nonmajor Governmental Resort Tax – Major Governmental 1,046,280 Operating Gas Tax– Nonmajor Governmental Street and Alley – Non Major Governmental 9,013 TIF Debt Service Tax Increment Revenue Bond Debt – Major Governmental Tax Increment – Major Governmental 3,984,728 Impact Fees Transfer Tax Increment – Major Governmental Impact Fees– Nonmajor Governmental 197,994 Operating Parks, Recreation, & Community Service– Nonmajor Governmental Water– Nonmajor Governmental 50,511 Property Tax Relief General – Major Governmental Water– Nonmajor Governmental 92,496 Total $ 8,341,224 ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -63- NOTE 11. LOCAL RETIREMENT PLANS Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan available to all City employees permits them to defer a portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. Fire Department Relief Association Disability and Pension City volunteer firefighters are covered by the Fire Department Relief Association Disability and Pension Fund, which is established by State Law. The Association is managed by a Board of Trustees made up of members of the fire department, and is accounted for as a pension trust fund of the City. A member of a volunteer fire department who has served 20 years or more is entitled to benefits regardless of age. Volunteer serving less than 20 years but more than 10 years may receive reduced benefits. The amount of the pension benefits are set by the Association’s Board of Trustees. NOTE 12. FUND BALANCE CLASSIFICATION POLICIES AND PROCEDURES Governmental Fund equity is classified as fund balance. The City categorizes fund balance of the governmental funds into the following categories: Restricted – includes constraint for specific purposes which are externally imposed by a third party, State Constitution, or enabling legislation. Unassigned – includes negative fund balances in all funds, or fund balance with no constraints in the General Fund. The City considers restricted amounts to have been spent first when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. The City considers that committed amounts would be reduced first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications could be used. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -64- Restricted Fund Balance Major Fund Amount Purpose of Restriction Resort Tax $ 3,031,977 Street and park improvements and tax relief Tax Increment 671,267 Urban development Fire & Ambulance 401,564 Emergency services Tax Increment Revenue Bond Debt 5,634,705 Debt service All Other Aggregate 1,602,445 Maintenance 142,034 Culture and recreation services and improvements 534,457 Construction inspections 824,749 Improvements 90,492 Utility services 841,628 Storm drainage 3,217 Miscellaneous 246,175 Debt dervice Total $ 14,024,710 NOTE 13. DEFICIT FUND BALANCES/NET POSITION Fund Name Amount Reason for Deficit How Deficit will be Eliminated SID Bond Debt $ (7,350) Insufficient cash to pay interfund advance Increased cash from receivable collection and future assessment revenues WF Trail Construction (3,804) Insufficient cash to pay current liabilities Future grant revenues and donations which will increase cash Total $ (11,154) NOTE 14. INTERLOCAL AGREEMENT The City of Whitefish, Montana and the City of Columbia Falls, Montana entered into an interlocal agreement for the provision of building code inspection services in August 1999. The City of Whitefish through its building department agreed to provide plan review, site review, and site inspection services relating to the enforcement of the State’s and City of Columbia Falls technical, building and plumbing codes within the extended jurisdictional limits of Columbia Falls’. Columbia Falls agreed to pay Whitefish a sum equal to 65% of the permitting fees paid by the permit applicant on the project inspected, payable on a basis. Whitefish agreed to provide Columbia Falls, on a basis, a report concerning all services provided to Columbia Falls. NOTE 15. JOINT VENTURES Joint ventures are independently constituted entities generally created by two or more governments for a specific purpose which are subject to joint control, in which the participating governments retain 1) an ongoing financial interest or 2) an ongoing financial responsibility. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -65- Flathead County 911 Emergency Coordination Center 911 Dispatch Center is operated under an interlocal agreement between Flathead County, the City of Columbia Falls, the City of Whitefish and the City of Kalispell. The Center operates under the supervision and control of the Flathead Emergency Communications Center Board. The Board consists of six members, the Flathead County Sheriff, a County Commissioner chosen by the Board of County Commissioners, the County Attorney or other elected County officer, and an elected official or designee from each of the cities of Kalispell, Whitefish, and Columbia Falls. The Department is financed by funds received by all member from the State (9-1-1 fees) pursuant to Section 10-4-302, M.C. A. Any additional operating funds needed will be shared proportionally by all members. Under the supervision of the Board, the Director shall hire and direct staff to carry out the responsibilities of the County’s Office of Emergency Services and the Flathead County Fire Service Area. We would suggest that the 911 Dispatch Center be called the Flathead Emergency Communications Center, FECC, as it is noted in the Flathead County’s financial statements. It is a Discretely Presented Component Unit in the Flathead County’s CAFR. Big Mountain County Sewer District The City permits the District to connect to the City’s sanitary sewage collection system. The usage rate charged by the City to the District is $40.00 for each customer classified as SC2/Outside. NOTE 16. SERVICES PROVIDED BY OTHER GOVERNMENTS County Provided Services The City is provided various financial services by Flathead County. The County also serves as cashier and treasurer for the City for tax and assessment collections and other revenues received by the County which are subject to distribution to the various taxing jurisdictions located in the County. The collections made by the County on behalf of the City are accounted for in an agency fund in the City’s name and are periodically remitted to the City by the County Treasurer. No service charges have been recorded by the City or the County. NOTE 17. RISK MANAGEMENT The County faces a considerable number of risks of loss, including damage to and loss of property and contents, employee torts, professional liability, i.e., errors and omissions, environmental damage, workers’ compensation, i.e., employee injuries, and medical insurance costs of employees. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. Insurance Pools: The City participates in the state-wide public safety risk pool, Montana Municipal Insurance Authority for workers’ compensation. ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -66- In 1986, the City joined together with other Montana cities to form the Montana Municipal Insurance Authority which established a workers’ compensation plan and a tort liability plan. Both public entity risk pools currently operate as common risk management and insurance programs for the member governments. The liability limits for damages in tort action are $750,000 per claim and $1.5 million per occurrence with a $3,750 deductible per occurrence. State tort law limits the City’s liability to $1.5 million. The City pays an annual premium for its employee injury insurance coverage, which is allocated to the employer funds based on total salaries and wages. The agreements for formation of the pools provide that they will be self-sustaining through member premiums. Separate audited financial statements are available from the Montana Municipal Insurance Authority. NOTE 18. RESORT TAX In 1995, the citizens of the City of Whitefish approved a 2% resort tax. City Ordinance 15 restricted the tax proceeds as follows: Administration 5% Parks Improvements 5% Street Improvements 65% Tax Relief 25% In April 2015, it was voted and approved to increase the resort tax 1% starting July 1, 2015. The 1% tax proceeds are restricted as follows: Tax Relief 25% Debt Service 70% Administration fee to business owners 5% On June 30, 2019 the Resort Tax Fund had a cash balance of $3,052,843. This balance was restricted as follows: Park Improvements $ 67,990 Street Improvements $ 1,697,321 Tax Relief $ 1,287,532 ---PAGE BREAK--- CITY OF WHITEFISH FLATHEAD COUNTY, MONTANA NOTES TO THE FINANCIAL STATEMENTS June 30, 2019 -67- NOTE 19. WHITEFISH LAKE GOLF COURSE In January 2011, the City leased the Whitefish Lake Golf Course to the Whitefish Lake Golf Club, Inc. The term of the lease is 30 years beginning January 1, 2011 and ending December 21, 2040. The annual rental payments due to the City are $22,375 per year and shall increase by the December to December change in the Consumer Price Index every five years beginning with the payment due in June 2016. In addition, the City will receive a net profits payment beginning February 2012 of 3% of the prior year’s net profits for the Whitefish Lake Golf Club, Inc. NOTE 20. PENDING LITIGATION The following is a list of litigation pending against the City and the amount of damages claimed by the Plaintiff. The City Attorneys have made no evaluations as to the outcome of each case. The City has liability insurance which may cover all or part of the damages requested. Case Damages Requested Potential of Loss James Hartshorne and Angelo Queirolo v. City of Whitefish, DV-18-987A None None Edward Moffatt and Chris Clouse v. City of Whitefish, DV-19-264A Unknown Unknown CommUnity Consulting, LLC v. City of Whitefish, DV- 15-19-566C Unknown Unknown Michael Goguen v. City of Whitefish Unknown Unknown South Whitefish Neighborhood Association v. City of Whitefish, DV-15-19-1016-DK Unknown Unknown NOTE 21. SUBSEQUENT EVENTS In December 2019, The City awarded the Wastewater Treatment Plant construction for $20,307,000. To date, $3.9 million has been spent on the project. In August 2019, The City closed on the sale of the 530 Edgewood Place property to the Whitefish Housing Authority for $111,236. The City also closed on the sale of the 524 and 534 Edgewood Place properties for $370,764 in August 2019. The City purchased these properties in December 2018, with the intention of selling them for a low income housing development. The City, like all governments in the United States is dealing with the effects of the COVID-19 virus. Possible City operational changes or even shutdowns may occur. Additionally, the financial effects to the City are equally as uncertain. ---PAGE BREAK--- REQUIRED SUPPLEMENTAL INFORMATION ---PAGE BREAK--- -68- ACTUAL AMOUNTS VARIANCE (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS) See Note A BUDGET RESOURCES (INFLOWS): Taxes and assessments $ 2,241,019 $ 2,241,019 $ 2,211,759 $ (29,260) Licenses and permits 120,083 120,083 145,297 25,214 Intergovernmental 887,861 887,861 875,886 (11,975) Charges for services 262,100 262,100 391,570 129,470 Fines and forfeitures 351,250 351,250 372,983 21,733 Miscellaneous 89,084 89,084 89,575 491 Investment earnings 45,000 45,000 118,168 73,168 Amounts available for appropriation $ 3,996,397 $ 3,996,397 $ 4,205,238 $ 208,841 CHARGES TO APPROPRIATIONS (OUTFLOWS): General government $ 622,921 $ 622,921 $ 626,327 $ (3,406) Public safety 577,479 577,479 530,257 47,222 Public works 13,581 13,581 25,166 (11,585) Social and economic services - - 1,500 (1,500) Culture and recreation - - 9,493 (9,493) Miscellaneous 15,520 15,520 - 15,520 Capital outlay 25,000 25,000 1,622 23,378 Total charges to appropriations $ 1,254,501 $ 1,254,501 $ 1,194,365 $ 60,136 OTHER FINANCING SOURCES (USES) Transfers in $ 1,370,121 $ 1,370,121 $ 1,569,769 $ 199,648 Transfers out (3,895,603) (3,895,603) (3,895,603) - Total other financing sources (uses) $ (2,525,482) $ (2,525,482) $ (2,325,834) $ 199,648 Net change in fund balance $ 685,039 Fund balance - beginning of the year $ 1,021,467 Fund balance - end of the year $ 1,706,506 BUDGETED AMOUNTS General City of Whitefish, Flathead County, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2019 ---PAGE BREAK--- -69- ACTUAL AMOUNTS VARIANCE (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS) See Note A BUDGET RESOURCES (INFLOWS): Taxes and assessments $ 3,987,447 $ 3,987,447 $ 4,260,456 $ 273,009 Investment earnings 23,749 23,749 41,930 18,181 Amounts available for appropriation $ 4,011,196 $ 4,011,196 $ 4,302,386 $ 291,190 CHARGES TO APPROPRIATIONS (OUTFLOWS): Public works $ - $ - $ 50 $ (50) Capital outlay 1,567,100 1,651,075 1,589,895 61,180 Total charges to appropriations $ 1,567,100 $ 1,651,075 $ 1,589,945 $ 61,130 OTHER FINANCING SOURCES (USES) Transfers out $ (2,262,775) $ (2,262,775) $ (2,323,905) $ (61,130) Total other financing sources (uses) $ (2,262,775) $ (2,262,775) $ (2,323,905) $ (61,130) Net change in fund balance $ 388,536 Fund balance - beginning of the year $ 2,643,441 Fund balance - end of the year $ 3,031,977 Resort Tax BUDGETED AMOUNTS City of Whitefish, Flathead County, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2019 ---PAGE BREAK--- -70- ACTUAL AMOUNTS VARIANCE (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS) See Note A BUDGET RESOURCES (INFLOWS): Taxes and assessments $ 6,560,765 $ 6,560,765 $ 6,773,289 $ 212,524 Intergovernmental 248,865 248,865 248,865 - Miscellaneous 748,460 748,460 78,087 (670,373) Amounts available for appropriation $ 7,558,090 $ 7,558,090 $ 7,100,241 $ (457,849) CHARGES TO APPROPRIATIONS (OUTFLOWS): Housing and community development $ 1,660,063 $ 1,660,063 $ 1,501,692 $ 158,371 Capital outlay 2,063,310 2,063,310 1,464,313 598,997 Total charges to appropriations $ 3,723,373 $ 3,723,373 $ 2,966,005 $ 757,368 OTHER FINANCING SOURCES (USES) Transfers in $ 2,366,862 $ 2,366,862 $ 197,994 $ (2,168,868) Transfers out (4,016,359) (4,016,359) (3,991,014) 25,345 Total other financing sources (uses) $ (1,649,497) $ (1,649,497) $ (3,793,020) $ (2,143,523) Net change in fund balance $ 341,216 Fund balance - beginning of the year $ 330,051 Fund balance - end of the year $ 671,267 Tax Increment BUDGETED AMOUNTS City of Whitefish, Flathead County, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2019 ---PAGE BREAK--- -71- ACTUAL AMOUNTS VARIANCE (BUDGETARY WITH FINAL ORIGINAL FINAL BASIS) See Note A BUDGET RESOURCES (INFLOWS): Taxes and assessments $ 608,313 $ 608,313 $ 603,729 $ (4,584) Licenses and permits 110,300 110,300 151,175 40,875 Intergovernmental 45,000 45,000 52,448 7,448 Charges for services 1,811,635 1,811,635 1,955,540 143,905 Miscellaneous 15,000 15,000 35,548 20,548 Amounts available for appropriation $ 2,590,248 $ 2,590,248 $ 2,798,440 $ 208,192 CHARGES TO APPROPRIATIONS (OUTFLOWS): Public safety $ 3,062,622 $ 3,346,352 $ 3,302,991 $ 43,361 Debt service - principal 188,789 188,789 188,789 - Debt service - interest 23,333 23,333 23,333 - Total charges to appropriations $ 3,274,744 $ 3,558,474 $ 3,515,113 $ 43,361 OTHER FINANCING SOURCES (USES) Transfers in $ 700,380 $ 700,380 $ 700,380 $ - Transfers out - - (43,362) (43,362) Total other financing sources (uses) $ 700,380 $ 700,380 $ 657,018 $ (43,362) Net change in fund balance $ (59,655) Fund balance - beginning of the year $ 461,219 Fund balance - end of the year $ 401,564 City of Whitefish, Flathead County, Montana Budgetary Comparison Schedule For the Fiscal Year Ended June 30, 2019 Fire & Ambulance BUDGETED AMOUNTS ---PAGE BREAK--- -72- Note A - Explanation of differences between budgetary inflows and outflows and GAAP Revenues and Expenditures General Resort Tax Tax Increment Fire & Ambulance Sources/Inflows of resources Actual amounts (budgetary basis) "available for appropriation" from the budgetary comparison schedule $ 4,205,238 $ 4,302,386 $ 7,100,241 $ 2,798,440 Combined funds (GASBS 54) revenues 146,921 - - - Total revenues as reported on the statement of revenues, expenditures and changes in fund balances-governmental funds. $ 4,352,159 $ 4,302,386 $ 7,100,241 $ 2,798,440 Actual amounts (Budgetary basis) "total charges to appropriations" from the budgetary comparison schedule $ 1,194,365 $ 1,589,945 $ 2,966,005 $ 3,515,113 Combined funds (GASBS 54) expenditures 2,529,155 - - - Indirect cost allocation plan transfers (ICAP) shown on Statement of Activities. 199,648 - - - Total expenditures as reported on the statement of revenues, expenditures, and changes in fund balances - governmental funds $ 3,923,168 $ 1,589,945 $ 2,966,005 $ 3,515,113 City of Whitefish, Flathead County, Montana Budgetary Comparison Schedule Budget-to-GAAP Reconciliation ---PAGE BREAK--- -73- City of Whitefish, Flathead County, Montana Required Supplementary Information Schedule of Changes in the Total OPEB Liability and Related Ratios For the Year Ended June 30, 2019 2019 2018 Total OPEB liability Service Cost $ 146,887 $ 171,915 Total OPEB Liability - beginning 2,121,727 2,121,532 Interest 71,290 65,767 Difference between expected and actual experience (83,630) (801,946) Change in assumptions or other inputs (114,618) 564,459 Total OPEB Liability - ending $ 2,141,656 $ 2,121,727 Covered-employee payroll $ 5,363,904 $ 5,137,380 Total OPEB liability as a percentage of covered -employee payroll 39.9% 41.3% *The above schedule is presented by combining the required schedules from GASB 75 paragraphs 170a and 170b. The GASB requires that 10 years of information related to the OPEB liability be presented, additional data will be reported as it becomes available. ---PAGE BREAK--- -74- City of Whitefish, Flathead County, Montana Required Supplementary Information Schedule of Proportionate Share of the Net Pension Liability For the Year Ended June 30, 2019 PERS PERS PERS PERS PERS 2019 2018 2017 2016 2015 Employer’s proportion of the net pension liability 0.2153% 0.2633% 0.2728% 0.2464% 0.2405% Employer’s proportionate share of the net pension liability associated with the Employer $ 4,493,914 $ 5,129,069 $ 4,646,925 $ 3,443,819 $ 2,996,189 State of Montana’s proportionate share of the net pension liability associated with the Employer $ 1,504,721 $ 68,528 $ 56,780 $ 42,302 $ 36,588 Total $ 5,998,635 $ 5,197,598 $ 4,703,705 $ 3,486,121 $ 3,032,777 Employer’s covered payroll $ 3,540,966 $ 3,266,903 $ 3,267,805 $ 2,875,089 $ 2,757,858 Employer’s proportionate share of the net pension liability as a percentage of its covered payroll 126.91% 157.00% 14.20% 119.78% 111.22% Plan fiduciary net position as a percentage of the total pension liability 73.47% 73.75% 74.71% 78.40% 79.87% FURS FURS FURS FURS FURS 2019 2018 2017 2016 2015 Employer’s proportion of the net pension liability 0.8382% 7.3820% 0.7974% 0.8118% 0.8339% Employer’s proportionate share of the net pension liability associated with the Employer $ 850,163 $ 834,451 $ 910,727 $ 830,332 $ 814,039 State of Montana’s proportionate share of the net pension liability associated with the Employer $ 1,943,937 $ 1,894,948 $ 2,063,421 $ 1,849,371 $ 1,836,432 Total $ 2,794,100 $ 2,729,399 $ 2,974,148 $ 2,679,704 $ 2,650,471 Employer’s covered payroll $ 1,162,570 $ 1,103,598 $ 1,122,869 $ 1,091,002 $ 1,083,229 Employer’s proportionate share of the net pension liability as a percentage of its covered payroll 73.13% 75.61% 81.11% 76.11% 75.15% Plan fiduciary net position as a percentage of the total pension liability 79.03% 77.77% 75.48% 76.90% 76.71% MPORS MPORS MPORS MPORS MPORS 2019 2018 2017 2016 2015 Employer’s proportion of the net pension liability 0.6186% 0.6190% 67.9200% 0.6233% 0.6024% Employer’s proportionate share of the net pension liability associated with the Employer $ 1,059,341 $ 1,101,345 $ 1,222,583 $ 1,031,015 $ 946,627 State of Montana’s proportionate share of the net pension liability associated with the Employer $ 2,165,490 $ 2,244,725 $ 2,426,881 $ 2,088,934 $ 1,912,300 Total $ 3,224,831 $ 3,346,070 $ 3,649,464 $ 3,119,949 $ 2,858,927 Employer’s covered payroll $ 976,361 $ 925,719 $ 958,753 $ 862,615 $ 808,297 Employer’s proportionate share of the net pension liability as a percentage of its covered payroll 108.50% 118.97% 127.52% 119.52% 117.11% Plan fiduciary net position as a percentage of the total pension liability 70.95% 68.34% 65.62% 66.90% 67.01% Schedule is intended to show information for 10 years. Additional years will be displayed as they become available. ---PAGE BREAK--- -75- City of Whitefish, Flathead County, Montana Required Supplementary Information Schedule of Contributions For the Year Ended June 30, 2019 PERS PERS PERS PERS PERS 2019 2018 2017 2016 2015 Contractually required contributions $ 149,677 $ 299,199 $ 273,442 $ 282,462 $ 253,208 Contributions in relation to the contractually required contributions $ 149,677 $ 299,919 $ 273,442 $ 282,462 $ 253,208 Contribution deficiency (excess) $ - $ - $ - $ - $ - District's covered payroll $ 1,726,378 $ 3,540,966 $ 3,266,903 $ 3,267,805 $ 2,875,089 Contributions as a percentage of covered payroll 8.67% 8.47% 8.37% 8.64% 8.81% FURS FURS FURS FURS FURS 2019 2018 2017 2016 2015 Contractually required contributions $ 176,246 $ 171,113 $ 158,477 $ 160,540 $ 159,717 Contributions in relation to the contractually required contributions $ 176,246 $ 171,113 $ 158,477 $ 160,540 $ 159,717 Contribution deficiency (excess) $ - $ - $ - $ - $ - District's covered payroll $ 1,227,340 $ 1,162,570 $ 1,103,598 $ 1,122,869 $ 1,091,002 Contributions as a percentage of covered payroll 14.36% 14.72% 14.36% 14.30% 14.64% MPORS MPORS MPORS MPORS MPORS 2019 2018 2017 2016 2015 Contractually required contributions $ 150,413 $ 146,032 $ 133,396 $ 140,445 $ 125,045 Contributions in relation to the contractually required contributions $ 150,413 $ 146,032 $ 133,396 $ 140,445 $ 125,045 Contribution deficiency (excess) $ - $ - $ - $ - $ - District's covered payroll $ 1,043,810 $ 976,361 $ 925,719 $ 958,753 $ 862,615 Contributions as a percentage of covered payroll 14.41% 14.96% 14.41% 14.65% 14.50% Schedule is intended to show information for 10 years. Additional years will be displayed as they become available. ---PAGE BREAK--- City of Whitefish, Flathead County, Montana Notes to Required Supplementary Information Schedule of Proportionate Share of the Net Pension Liability and Schedule of Contributions For the Year ended June 30, 2019 -76- Public Employees’ Retirement System of Montana (PERS) Changes of Benefit Terms The following changes to the plan provision were made as identified: 2013 Legislative Changes Working Retirees - House Bill 95 - PERS, SRS, and FURS, effective July 1, 2013 • The law requires employer contributions on working retiree compensation. • Member contributions are not required. • Working retiree limitations are not impacted. PERS working retirees may still work up to 960 hours a year, without impacting benefits. Highest Average Compensation (HAC) Cap - House Bill 97, effective July 1, 2013 • All PERS members hired on or after July 1, 2013 are subject to a 110% annual cap on compensation considered as part of a member’s highest or final average compensation. • All bonuses paid to PERS members on or after July 1, 2013 will not be treated as compensation for retirement purposes. Permanent Injunction Limits Application of the GABA Reduction – Passed under House Bill 454 Guaranteed Annual Benefit Adjustment (GABA) - for PERS After the member has completed 12 full months of retirement, the member’s benefit increases by the applicable percentage (provided below) each January, inclusive of all other adjustments to the member’s benefit. • 3% for members hired prior to July 1, 2007 • 1.5% for members hired on or after July 1, 2007 and before July 1, 2013 • Members hired on or after July 1, 2013: o 1.5% each tear PERS is funded at or above 90%; o 1.5% is reduced by 0.1% for each 2% PERS is funded below 90%; and o 0% whenever the amortization period for PERS is 40 years or more. 2015 Legislative Changes General Revisions - House Bill 101, effective January 1, 2016 Second Retirement Benefit - for PERS • Applies to PERS members who return to active service on or after January 1, 2016. Members who retire before January 1, 2016, return to PERS-covered employment, and accumulate less than 2 years of service credit before retiring again: o Refund of member’s contributions from second employment, plus regular interest (currently o No service credit for second employment; o Start same benefit amount the month following termination; and o GABA starts again in the January immediately following second retirement. ---PAGE BREAK--- City of Whitefish, Flathead County, Montana Notes to Required Supplementary Information Schedule of Proportionate Share of the Net Pension Liability and Schedule of Contributions For the Year ended June 30, 2019 -77- • For members who retire before January 1, 2016, return to PERS-covered employment and accumulate two or more years of service credit before retiring again: o Member receives a recalculated retirement benefit based on laws in effect at second retirement; and, o GABA starts in the January after receiving recalculated benefit for 12 months. • For members who retire on or after January 1, 2016, return to PERS-covered employment and accumulate less than 5 years of service credit before retiring again: o Refund of member’s contributions from second employment, plus regular interest (currently o No service credit for second employment o Start same benefit amount the month following termination; and, o GABA starts again in the January immediately following second retirement. • For members who retire on or after January 1, 2016, return to PERS-covered employment, and accumulate five or more years of service credit before retiring again: o Member receives same retirement benefit as prior to return to service; o Member receives second retirement benefit for second period of service based on laws in effect at second retirement; and o GABA starts on both benefits in January after member receives original and new benefit for 12 months. Revise DC Funding Laws - House Bill 107, effective July 1, 2015 Employer Contributions and the Defined Contribution Plan – for PERS and MUS-RP The PCR was paid off effective March 2016, and the contributions of 2.37%, 0.47%, and the 1.0% increase previously directed to the PCR are now directed to the Defined Contribution or MUS-RP member’s account. Changes in Actuarial Assumptions and Methods Method and assumptions used in calculations of actuarially determined contributions The following addition to the actuarial assumptions was adopted in 2014, based upon implementation of GASB Statement 68: Admin Expense as % of Payroll 0.27% The following changes were adopted in 2013 based on the 2013 Economic Experience Study: General Wage Growth 4.00% Includes inflation at 3.00% Investment rate of return 7.75%, net of pension plan investment expense and including inflation ---PAGE BREAK--- City of Whitefish, Flathead County, Montana Notes to Required Supplementary Information Schedule of Proportionate Share of the Net Pension Liability and Schedule of Contributions For the Year ended June 30, 2019 -78- The following actuarial assumptions are from the June 2010 Experience Study: General Wage Growth 4.25% Includes inflation at 3.00% Merit increase 0% to 7.3% Investment rate of return 8.00%, net of pension plan investment expense, and including inflation Asset valuation method 4-year smoothed market Actuarial cost method Entry age Amortization method Level percentage of pay, open Montana Municipal Police Officers’ Retirement System of Montana(MPORS) Changes of Benefit Terms The following changes to the plan provision were made as identified: 2013 Legislative Changes Highest Average Compensation (HAC) Cap - House Bill 97, effective July 1, 2013 • All MPORS members hired on or after July 1, 2013 are subject to a 110% annual cap on compensation considered as part of a member’s highest or final average compensation. • All bonuses paid to MPORS members on or after July 1, 2013 will not be treated as compensation for retirement purposes. 2015 Legislative Changes General Revisions - House Bill 101, effective January 1, 2016 • Allow statutory beneficiary (spouse or dependent child) of a deceased DROP participant to receive a DROP benefit and a survivorship benefit rather than accumulated contributions or a lump sum payment. 19-9- 1206(1), MCA. Changes in Actuarial Assumptions and Methods Method and assumptions used in calculations of actuarially determined contributions The following addition to the actuarial assumptions was adopted in 2014, based upon implementation of GASB Statement 68: Admin Expense as % of Payroll 0.20% The following changes were adopted in 2013 based on the 2013 Economic Experience Study: General Wage Growth 4.00% Includes inflation at 3.00% Investment rate of return 7.75%, net of pension plan investment expense and including inflation ---PAGE BREAK--- City of Whitefish, Flathead County, Montana Notes to Required Supplementary Information Schedule of Proportionate Share of the Net Pension Liability and Schedule of Contributions For the Year ended June 30, 2019 -79- The following actuarial assumptions are from the June 2010 Experience Study: General Wage Growth 4.25% Includes inflation at 3.00% Merit increase 0% to 7.3% Investment rate of return 8.00%, net of pension plan investment expense, and including inflation Asset valuation method 4-year smoothed market Actuarial cost method Entry age Amortization method Level percentage of pay, open Montana Firefighters’ Unified Retirement System of Montana (FURS) Changes of Benefit Terms The following changes to the plan provision were made as identified: 2013 Legislative Changes Working Retirees - House Bill 95 - PERS, SRS, and FURS, effective July 1, 2013 • The law requires employer contributions on working retiree compensation. • Member contributions are not required. • Working retiree limitations are not impacted. SRS working retirees may still work up to 480 hours a year, without returning to active service. Highest Average Compensation (HAC) Cap - House Bill 97, effective July 1, 2013 • All FURS members hired on or after July 1, 2013 are subject to a 110% annual cap on compensation, considered as part of a member’s highest or final average compensation. • All bonuses paid to FURS members on or after July 1, 2013 will not be treated as compensation for retirement purposes. 2015 Legislative Changes There were no legislative changes with regards to FURS in 2015. Changes in Actuarial Assumptions and Methods Method and assumptions used in calculations of actuarially determined contributions The following addition to the actuarial assumptions was adopted in 2014, based upon implementation of GASB Statement 68: Admin Expense as % of Payroll 0.19% ---PAGE BREAK--- City of Whitefish, Flathead County, Montana Notes to Required Supplementary Information Schedule of Proportionate Share of the Net Pension Liability and Schedule of Contributions For the Year ended June 30, 2019 -80- The following changes were adopted in 2013 based on the 2013 Economic Experience Study: General Wage Growth 4.00% Includes inflation at 3.00% Investment rate of return 7.75%, net of pension plan investment expense and including inflation The following actuarial assumptions are from the June 2010 Experience Study: General Wage Growth 4.25% Includes inflation at 3.00% Merit increase 0% to 7.3% Investment rate of return 8.00%, net of pension plan investment expense, and including inflation Asset valuation method 4-year smoothed market Actuarial cost method Entry age Amortization method Level percentage of pay, open ---PAGE BREAK--- Denning, Downey & Associates, P.C. CERTIFIED PUBLIC ACCOUNTANTS 1740 U.S. Hwy 93 South, P.O. Box 1957, Kalispell, MT 59903-1957 -81- 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 Mayor and City Council City of Whitefish Flathead County Whitefish, Montana We have audited, in accordance with the 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, business-type activities, each major fund, and the aggregate remaining fund information of City of Whitefish, Flathead County, Montana, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the City of Whitefish’s basic financial statements and have issued our report thereon dated June 26, 2020. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered City of Whitefish, Flathead County, Montana’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 of Whitefish, Flathead County, Montana’s internal control. Accordingly, we do not express an opinion on the effectiveness of City of Whitefish’s internal control over financial reporting. 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 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 material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. ---PAGE BREAK--- -82- Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Whitefish’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 compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. June 26, 2020