Report_CAFR_2017.pdf - 2017 City and County of Denver Colorado Comprehensive Annual Financial Report Year Ended Comprehensive Annual Financial Report

Report_CAFR_2017.pdf - 2017 City and County of Denver...

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Unformatted text preview: 2017 City and County of Denver, Colorado Comprehensive Annual Financial Report Year Ended December 31, 2017 Comprehensive Annual Financial Report Year Ended December 31, 2017 City and County of Denver, Colorado Ill DENVER t, THE MILE HIGH CITY prepared by Department of Finance Controller’s Office - Accounting and Financial Reporting Division Brendan Hanlon, Chief Financial Officer Beth Machann, CGFM, Controller Available online at Photo credits: Evan Semón, Lauren Lang, Lizzie Schoon, Kristin Miller, Raymond Moreno, Susan Helmerich, and Robert Vlier. 311 | POCKETGOV.COM | DENVERGOV.ORG | DENVER 8 TV This page left blank intentionally. Contents Introduction 1 Letter of Transmittal 8 Mayor 9 Auditor, District Attorney, and Clerk and Recorder 10 City Council Members 11 City Organization Chart 12 Government Finance Officers Association Awards Financial 13 Independent Auditor’s Report 17 Management’s Discussion and Analysis (Unaudited) Basic Financial Statements Government-Wide Financial Statements 27 Statement of Net Position 28 Statement of Activities Fund Financial Statements 30 Balance Sheet – Governmental Funds 31 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position 32 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 33 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds to the Statement of Activities 34 Statement of Net Position – Proprietary Funds 38 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds 40 Statement of Cash Flows – Proprietary Funds 44 Statement of Fiduciary Net Position – Fiduciary Funds 45 Statement of Changes in Fiduciary Net Position – Fiduciary Funds 46 Statement of Net Position – Component Units 47 Statement of Activities – Component Units Notes to Basic Financial Statements 49 Contents 50 I. Summary of Significant Accounting Policies 60 II. Stewardship, Compliance, and Accountability 61 III. Detailed Notes for All Funds 92 IV. Other Note Disclosures Required Supplementary Information (unaudited) 120 Required Supplementary Information Budgetary Comparison Schedule – General Fund and Human Services Special Revenue Fund 122 Notes to Required Supplementary Information Budgetary Comparison Schedule 123 Required Supplementary Information Other Postemployment Benefits - Implicit Rate Study 123 Required Supplementary Information Schedule of City’s Proportionate Share of the Net Pension Liability - DERP 124 Required Supplementary Information Schedule of City Contributions - DERP 124 Required Supplementary Information Schedule of City’s Proportionate Share of the Net Pension Liability FPPA SWDB 124 Required Supplementary Information Schedule of City Contributions - FPPA SWDB 125 Required Supplementary Information Schedule of City Contributions - FPPA Old Hire Fire and Police 125 Required Supplementary Information Schedule of City’s Proportionate Share of the Net Pension Liability - PERA 126 Required Supplementary Information Schedule of City Contributions - PERA 127 Required Supplementary Information Schedule of Changes in the City’s Net Pension Liability and Related Ratios - FPPA Old Hire Fire 128 Required Supplementary Information Schedule of Changes in the City’s Net Pension LIability and Related Ratios - FPPA Old Hire Police Combining and Individual Fund Financial Statements and Schedules Governmental Funds 130 Combining Balance Sheet – Nonmajor Governmental Funds 131 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds 132 Combining Balance Sheet – Nonmajor Special Revenue Funds 134 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Special Revenue Funds 136 Combining Balance Sheet – Nonmajor Debt Service Funds 137 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Debt Service Funds 138 Combining Balance Sheet – Nonmajor Capital Projects Funds 140 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Capital Projects Funds 142 Schedule of Expenditures Compared with Authorizations – General Fund 144 Schedule of Expenditures Compared with Authorizations – Human Services Special Revenue Fund 145 Comparative Balance Sheets – General Fund 146 Comparative Statements of Revenues, Expenditures, and Changes in Fund Balance – General Fund Proprietary Funds 147 Combining Statement of Net Position – Nonmajor Enterprise Funds 148 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Nonmajor Enterprise Funds 149 Combining Statement of Cash Flows – Nonmajor Enterprise Funds 150 Combining Statement of Net Position – Internal Service Funds 151 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Internal Service Funds 152 Combining Statement of Cash Flows – Internal Service Funds Fiduciary Funds 153 Combining Statement of Fiduciary Net Position – Pension, Health, and Other Employee Benefit Trust Funds 154 Combining Statement of Changes in Fiduciary Net Position – Pension, Health, and Other Employee Benefit Trust Funds 155 Combining Statement of Changes in Assets and Liabilities – Agency Funds Component Units 158 Combining Statement of Net Position – Nonmajor Component Units 160 Combining Statement of Activities – Nonmajor Component Units Other Supplementary Schedules 164 Combined Schedule of Bonds Payable and Escrows 166 Local Highway Finance Report Statistical (Unaudited) 169 Contents Financial Trends 171 Net Position by Component 172 Changes in Net Position 175 Fund Balances of Governmental Funds 176 Changes in Fund Balances of Governmental Funds 178 Governmental Activities Tax Revenues by Source Revenue Capacity 179 Sales Tax by Category 180 Assessed Value and Estimated Actual Value of Taxable Property 181 Direct and Overlapping Property Tax Rates 182 Principal Property Taxpayers 184 Property Tax Levies and Collections Debt Capacity 186 Ratios of Outstanding Debt by Type 187 Ratios of General Bonded Debt Outstanding 188 Direct and Overlapping Governmental Activities Debt 189 Legal Debt Margin Information 190 National Western Center and Convention Center Excise Pledged-Revenue Coverage 191 Wastewater Management Fund Pledged-Revenue Coverage 191 Golf Fund Pledged-Revenue Coverage 192 Denver International Airport Fund Pledged-Revenue Coverage Demographic and Economic Information 193 Demographic and Economic Statistics 194 Principal Employers Operating Information 195 Full-Time Equivalent City Government Employees by Function 196 Operating Indicators by Function 197 Capital Asset Statistics Introduction Letter of Transmittal Financial June 5, 2018 Citizens of the City and County of Denver, Honorable Mayor, Honorable Auditor, Honorable Clerk and Recorder, Honorable Members of City Council, and Brendan Hanlon Chief Financial Officer Audit Committee State law requires the City and County of Denver (City) to publish within seven months of the close of the fiscal year a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. This report is prepared by the Controller’s Office under the Department of Finance according to Article 2, Part 5 of the City’s Charter. Pursuant to the requirements, I hereby issue the Comprehensive Annual Financial Report (CAFR) of the City for the fiscal year ended December 31, 2017. This report consists of management’s representations concerning the finances of the City. Responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the management of the City. To provide a reasonable basis for making those representations, management of the City has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with U.S. GAAP. Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. BKD, LLP, a firm of licensed certified public accountants, has audited the City’s financial statements. The goal of the independent audit is to provide reasonable assurance that the financial statements of the City for the fiscal year ended December 31, 2017, are free of material misstatement. The audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion on the City’s basic financial statements as of and for the year ended December 31, 2017. The independent auditors’ report is presented as the first component of the financial section of this report. Department of Finance, The Controller’s Office 201 W Colfax Ave, Dept 1109 | Denver, CO 80202 p: 720.913.5500 | f: 720.913.5245 311 | POCKETGOV.COM | DENVERGOV.ORG | DENVER 8 TV 1 2 City and County of Denver Financial The Report The CAFR is presented in three sections: • The Introduction section includes this letter of transmittal, Mayor, Auditor, District Attorney, Clerk and Recorder, and City Council introductions, the City’s organization chart, and certificates of achievement. • The Financial section includes the report of the independent auditors, Management’s Discussion and Analysis (MD&A), the basic financial statements, including the governmentwide financial statements comprised of the Statement of Net Position and the Statement of Activities and the accompanying notes to the financial statements. The Financial Section also includes the fund financial statements including the governmental funds financial statements, the proprietary funds financial statements, the fiduciary funds financial statements, the component units financial statements, and the combining individual funds financial statements for the nonmajor governmental funds and the internal service funds. Required supplementary information other than the MD&A is also included in the financial section. • The Statistical section includes selected financial and demographic information, on a multi-year basis. This transmittal letter is designed to complement the MD&A and should be read in conjunction with the MD&A. Management's Discussion and Analysis Governmentwide Financial Statements Summary Basic Financial Statements Fund Financial Statements Required Supplementary Information Notes to the Financial Statements Detail This CAFR includes all funds of the City. The City provides a full range of services including: police and fire protection; the construction and maintenance of highways, streets and other infrastructure; and recreational activities and cultural events. The CAFR also includes the City’s component units, which are legally separate organizations and for which the City is financially accountable or whose relationship with the City is of a nature and significance that would cause the City’s financial statements to be incomplete were they not included. The City maintains budgetary controls that have the objective of ensuring compliance with legal provisions embodied in the annual appropriated budget submitted by the Mayor and adopted by the City Council. All activities of the General Fund and Human Services special revenue fund are included in the annual appropriated budget except for capital outlay. Project-length budgets are adopted for the remaining special revenue funds and capital project funds. Budgetary control (the level at which expenditures and encumbrances cannot legally exceed the appropriated amount) is established at the department level within individual funds, except for special revenue and capital project funds, which are at the funded project level. Disbursements that would result in an overrun of funded project balances (budgets) are not released until additional appropriations are made available. At year-end, if additional monies have not been appropriated where needed, expenditures are properly reflected in the current period causing an over budget condition to exist. In addition to the financial audit, the City undertakes a single audit in conformance with the Single Audit Act Amendments of 1996 and U.S. Office of Management and Budget (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Audits. The results of this single audit, including a schedule of expenditures of federal awards, and the independent auditor’s reports on the City’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards, are available in the City’s separately issued single audit report. Letter of Transmittal Financial City Profile The City is located at the eastern base of the Rocky Mountains in the north-central part of Colorado, encompassing 154.63 square miles. The City is the capital of the state, and it is also the cultural, distribution, entertainment, financial, service and transportation hub of the Rocky Mountain region. With an elevation of 5,280 feet the “Mile High City” has a cool, dry, sunny climate that makes it a magnet for health seekers and those enjoying outdoor recreation all year round. The Colorado Demographer’s Office projects a population of 693,292 for Denver County for 2017. It is estimated that over 3 million people reside in the Denver metro area, which includes the suburban counties of Adams, Arapahoe, Boulder, Broomfield, Douglas and Jefferson. Denver was founded November 22, 1858, after a gold discovery at the confluence of Cherry Creek and the South Platte River. Town founder William H. Larimer, Jr. named the city for James W. Denver, Governor of Kansas Territory, of which east central Colorado was then a part. Denver Metro Area's Suburban Population (numbers in thousands) 3,400 3,200 The mayor and 13-member council, elected in nonpartisan elections govern the City. The Mayor is the chief executive, exercising all administrative and executive powers granted to the City, except as otherwise delegated by the City Charter. The legislative powers of the City are vested in the City Council. The City has an elected Auditor and an elected Clerk and Recorder. All elected officials’ terms are concurrent and last four years, and each position is subject to term limits of 12 years. The Charter establishes an audit committee consisting of seven members; two members appointed by the Mayor, two members appointed by the City Council and two members appointed by the Auditor, with the Auditor as the Chair. The audit committee, among other things, is responsible for the selection and management of the external auditor. During the course of the annual city-wide audit the audit committee monitors the progress of the audit and discusses with the external auditor any matters related to the audit. The audit committee also accepts the results of the audit. Regional Economic Conditions 3,000 2,800 The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operates. 2,600 2,400 2,200 2006 Numerous gold discoveries sparked a mass migration of some 100,000 in 1859-1861, leading the federal government to establish Colorado Territory in 1861. The City was incorporated on November 7, 1861 by a special act of the first session of the Legislative Assembly of Colorado Territory. In 1867 the City became the Capital of Colorado Territory and remained the capital after Colorado became a state on August 1, 1876. Denver became a City and County with home rule when Article XX was added to the Colorado Constitution in 1902. The City’s charter was enacted on March 29, 1904 establishing a strong mayor/city council form of government and an independent, elected city auditor. 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 3 4 City and County of Denver The City is the center of economic activity of the region, serving as a business, recreational, higher educational and cultural hub. Major features of the economy include the central business district, state capitol building, Denver International Airport, extensive library facilities, several professional sports teams, institutions of higher learning, and numerous museums and other cultural facilities. The economy of the metropolitan area generally mirrors that of the state. As of February 2018 state unemployment was 2.7%. Colorado’s unemployment rate is below the national average of 4.1% for 2018, according to the US Department of Labor Construction The March 2018 Office of State Planning and Budgeting (OSPB) Colorado Economic Perspective report states that nonresidential construction growth fell by 4.0% in 2017 following three years of doubledigit growth. The forecast projects a decline of construction growth of 3.0% in 2018. In 2017, U.S. housing permits grew by 4.8%, but are expected to grow by 5.1% in 2018. Personal Income and Wages The March 2018 OSPB Colorado Economic Perspective report shows that Colorado personal income growth is expected to have rebounded to 5.4% in 2017. Personal income growth is expected to slow slightly to 5.1% in 2018 with an expected slowdown in employment growth due to tight labor market conditions and less in-migration. Consumer Spending Overall, consumer spending continues to increase according to the OSPB. Colorado retail trade sales grew by 4.8% in 2017 and are expected to increase 4.6% in 2018. Sales and use tax revenue, which makes up half of the City’s General Fund revenue stream, increased by 6.5 % in 2017. The City anticipates that core sales and use tax revenue will grow approximately 9.6% in 2018. Financial City Financial Policies and Planning The City’s formal financial policies, as well as operating practices, have helped sustain the City through rapid population growth and a changing economy. Formal policies exist in areas such as balanced budgets, revenue diversification, and use of one-time and predictable revenues, operating expenditures, reserves, investments, and debt. Revenue Administration The City’s main source of revenue for operating expenditures is sales and use tax, which makes up 48% of total General Fund revenues. This is less than the 70.0% average for most local governments in the region. In addition, the City reviews all fees, fines, and charges for services on a rotating basis to ensure they are meeting cost recovery goals. One-time and unpredictable revenues are spent on one-time costs, such as equipment replacement, or transferred to capital improvement funds for repair and rehabilitation projects. Expenditure Administration Expenditure budgets are carefully reviewed by both the implementing departments and the Budget and Management Office. Careful attention is paid to ensure departments are meeting projected vacancy savings and that excess budget is not transferred to non-personnel line items. For 2017, there was $34 million in additional savings beyond the revised budget by year-end. The primary contributors to this unspent appropriation were significant position vacancies that resulted from a ...
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