CITY OF BINGHAMTON Binghamton, New York FINANCIAL REPORT December 31, 2014 CITY OF BINGHAMTON TABLE OF CONTENTS FOR THE YEAR ENDED DECEMBER 31, 2014 Independent Auditor’s Report ............................................................................................................................ 1-2 Required Supplementary Information Management’s Discussion and Analysis ....................................................................................................... 3-3l Basic Financial Statements Government-wide Financial Statements Statement of Net Position ........................................................................................................................... Statement of Activities ................................................................................................................................. Governmental Fund Financial Statements Balance Sheet - Governmental Funds ....................................................................................................... Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position ........................ Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds ................................................................................................................................ Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities ............................................................... Statement of Net Position - Proprietary Funds ........................................................................................... Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds ................. Statement of Cash Flows - Proprietary Funds ........................................................................................... Statement of Fiduciary Net Position - Fiduciary Funds .............................................................................. Statement of Changes in Fiduciary Net Position - Fiduciary Fund ............................................................ 4 5-5a 6-6a 7 8-8a 9 10 11 12 13 14 Notes to Financial Statements ................................................................................................................. 15-38 Required Supplementary Information Budgetary Comparison Schedule (Non-GAAP) - General Fund .................................................................. Budgetary Comparison Schedule (Non-GAAP) - Budgeted Major Special Revenue Funds ...................... Schedule of Funding Progress and Actuarial Information ............................................................................. Schedule of Funding Progress........................................................................................................................ Notes to Required Supplementary Information ............................................................................................. 39 40 41 42 43 Supplementary Information Combining Balance Sheet - Non-Major Governmental Funds ..................................................................... Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds ................................................................................................................. 44 45 Reports Required Under Government Auditing Standards 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 ................................................................................................................ 46-47 Reports Required Under the Single Audit Act (OMB Circular A-133) Independent Auditor's Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 ....................................................... Schedule of Expenditures of Federal Awards ............................................................................................... Notes to Schedule of Expenditures of Federal Awards ................................................................................. Schedule of Findings and Questioned Costs ................................................................................................ 48-49 50 51 52-53 John H. Dietershagen, C.P.A. Jerry E. Mickelson, C.P.A. Thomas K. Van Derzee, C.P.A. Debbie Conley Jordan, C.P.A. Patrick S. Jordan, C.P.A. Duane R. Shoen, C.P.A. Lesley L. Horner, C.P.A. D. Leslie Spurgin, C.P.A. Ciaschi  Dietershagen  Little  Mickelson & Company, LLP Certified Public Accountants and Consultants Frederick J. Ciaschi, C.P.A. INDEPENDENT AUDITOR’S REPORT City Council City of Binghamton Binghamton, New York We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Binghamton, as of and for the year ended December 31, 2014, 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. -1- CORTLAND ITHACA WATKINS GLEN 39 Church Street Cortland, New York 13045 607-753-7439 fax 607-753-7874 401 East State Street ~ Suite 500 Ithaca, New York 14850 607-272-4444 fax 607-273-8372 www.cdlm.com 2 North Franklin Street, Suite 330 Watkins Glen, New York 14891 607-535-4443 fax 607-535-6220 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Binghamton as of December 31, 2014, 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. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information on pages 3-3l and 39-43 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Binghamton’s basic financial statements. The combining fund financial statements are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the financial statements. The combining fund financial statements and the Schedule of Expenditures of Federal Awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining fund financial statements and the Schedule of Expenditures of Federal Awards are fairly stated in all material respects in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2015 on our consideration of the City of Binghamton’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 performed in accordance with Government Auditing Standards in considering City of Binghamton’s internal control over financial reporting and compliance. September 29, 2015 Ithaca, New York -2- CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2014 Our discussion and analysis of the City of Binghamton’s (the City) financial performance provides an overview of the City’s financial activities for the fiscal year ended December 31, 2014. Please read it in conjunction with the City’s financial statements, which begin on page 4. FINANCIAL HIGHLIGHTS  The City implemented Governmental Accounting Standards Board (GASB) Statement Number 45, which requires the reporting of the liability for other postemployment health benefits, as of December 31, 2008. The liability at December 31, 2014 is $37,968,352. This liability is expected to grow each year as there is no legal mechanism in New York State to fund it. Changes to accounting standards are expected to change the way this liability is reported in 2018.  Assets of the City’s governmental activities exceeded liabilities at the close of the most recent fiscal year by $187,937,195 (net position). Of this amount, $(33,879,764) is unrestricted. Liabilities of the City’s BusinessType Activities exceeded assets by $(1,603,795).  The City’s expenses were $(6,941,651) more than the $88,235,915 generated in tax and other revenues for all governmental program activities, primarily due to other postemployment benefits and the loss of joint venture equity. Expenses of the Business-Type Activities were $3,559, and there were no revenues.  The General Fund recorded an operating increase of $6,180,139 in 2014 and had a fund balance of $15,961,940 at year-end.  The City’s long-term debt (including lease obligations) increased by $3,906,601, Bond Anticipation Notes decreased by $(3,325,427), and other long-term liabilities increased by $5,189,435. USING THIS ANNUAL REPORT This annual report consists of a series of basic financial statements. The Statement of Net Position and Statement of Activities (pages 4-5) provide information about the City as a whole and present a longer-term view of the City’s finances. Governmental Fund financial statements start on page 6. These statements, for Governmental Activities, tell how services were financed in the short term, as well as what remains for future spending. Governmental Fund financial statements also report the City’s operations in more detail than the Government-wide financial statements by providing information about the City’s most significant funds. The remaining statements provide financial information about hotel activities which the City operated as a business before selling the property, and for which the City acts solely as a trustee or agent for the benefit of those outside the government. Following these statements are notes that provide additional information essential to a full understanding of the data provided in the financial statements. In addition to basic financial statements, the annual report contains other information in the form of budgetary comparison schedules for the General Fund and Sewer Fund, as well as combining statements for funds that are not considered Major Funds and, therefore, are not presented individually in the basic financial statements. Reporting the City as a Whole Our analysis of the City as a whole begins on page 4, with the Government-wide financial statements. The Statement of Net Position and Statement of Activities report information about the City and about its activities in a way that helps answer the question of whether the City, as a whole, is better or worse off as a result of the year’s activities. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of current year revenues and expenses are taken into account regardless of when the cash is received or paid. -3- CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 These two statements report the City’s net assets and changes in them. One can think of the City’s net assets, the difference between assets and liabilities, as one way to measure the City’s financial health, or financial position. Over time, increases or decreases in the City’s net assets are one indicator of whether its financial health is improving or deteriorating. One will need to consider other nonfinancial factors however, such as changes in the City’s property tax base and the condition of the City’s infrastructure, to assess the overall health of the City. In the Statement of Net Position and Statement of Activities, all of the City’s activities which are governmental in nature are reported in one column including general governmental support, public safety, transportation, economic assistance and opportunity, culture and recreation, home and community services and interest on long-term debt. Business-Type Activities are reported in a separate column in these statements. Property and sales taxes, and state and federal grants finance most of the governmental activities. Reporting the City’s Most Significant Funds Governmental Fund Financial Statements Analysis of the City’s Major Funds begins on page 6. The Governmental Fund financial statements provide detailed information about the most significant funds - not the City as a whole. Some funds are required to be established by State law. However, management establishes many other funds to help it control and manage money for particular purposes or to show it is meeting legal responsibilities for using certain taxes and grants. Governmental Funds: All of the City’s services are reported in the Governmental Funds, which focus on how money flows in and out of those funds, and the balances left at year end that are available for spending. These funds are reported using an accounting method called modified accrual accounting which measures cash and all other financial assets that can be readily converted to cash. The Governmental Fund financial statements provide a detailed short-term view of the City’s general governmental operations and the basic services it provides. Governmental Fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance City programs. The relationship (or differences) between Governmental Activities (reported in the Government-wide financial statements) and Governmental Funds is explained in a reconciliation following the Governmental Fund financial statements. Proprietary Funds: When the City charges customers for the services it provides - whether to outside customers or to other units of the City - these services are generally reported in Proprietary Funds. Proprietary Funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities. The City’s Enterprise Funds (a component of Proprietary Funds) are the same as the Business-type Activities we report in the Government-wide financial statements but provide more detail and additional information, such as cash flows, for Proprietary Funds. The City as Trustee: The City is the trustee, or fiduciary, for other assets held on behalf of others. All of the City’s Fiduciary Activities are reported in separate Statements of Fiduciary Net Assets and Changes in Fiduciary Net Assets. We exclude these activities from the City’s other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring the assets reported in this fund are used for their intended purposes. THE CITY AS A WHOLE A portion of the City’s net position reflects its investment in capital assets (e.g. land, buildings, machinery, equipment and infrastructure) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided by other sources, as the capital assets themselves cannot be used to liquidate these liabilities. - 3a - CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 An additional portion of the City’s net position represents resources subject to external restrictions on how they may be used and are reported as restricted net assets. The remaining category of total net assets is unrestricted net position (deficit). Included in unrestricted net position is the City’s equity interest in two joint ventures. The remaining portion of unrestricted net position may be used to meet the City’s ongoing obligations and services to creditors and citizens. Our analysis below focuses on net position (Figure 1) and changes in net position (Figure 2) of the City’s Governmental Activities. Figure 1 Net Position Current assets Noncurrent assets Capital assets, net Total Assets Current liabilities Noncurrent liabilities Total Liabilities Net investment in capital assets Restricted Unrestricted Total Net Position Governmental Activities 2013 2014 $ 42,636,078 $ 47,394,428 19,842,943 5,462,119 309,377,616 316,477,038 371,856,637 369,333,585 62,939,226 57,728,249 114,038,565 123,668,141 176,977,791 181,396,390 202,852,329 211,048,442 11,429,424 10,768,517 (19,402,907) (33,879,764) $ 194,878,846 $ 187,937,195 Dollar Change 2013 - 2014 $ 4,758,350 (14,380,824) 7,099,422 (2,523,052) (5,210,977) 9,629,576 4,418,599 8,196,113 (660,907) (14,476,857) $ (6,941,651) Percent Change 2013 - 2014 11% (72)% 2% (1)% (8)% 8% 3% 4% (6)% (75)% (4)% Current assets consist largely of $28,550,994 in unrestricted cash, and receivables of $13,843,539. Noncurrent assets consist of the long-term portion of loans receivable of $6,914,534 and the City’s equity interest in joint ventures of $(1,452,415). Current assets increased as a result of significant increases in receivables and prepaid expenditures, offset by lower cash balances. Noncurrent assets decreased as a result of a significant decline of joint venture equity. Capital assets, net of accumulated depreciation, increased as a result of the City’s investment in buildings and infrastructure exceeding current depreciation. Included in current liabilities are Bond Anticipation Notes (BANs) payable of $33,764,524, the current portion of long-term liabilities of $6,602,406 and various payables of $16,975,263. Noncurrent liabilities consist of bonds payable of $80,400,001, compensated absences of $3,836,923, other postemployment benefits payable of $37,968,352 and lease obligations of $1,462,865. The decrease in current liabilities is primarily due to lower BAN balances, offset partially by amounts due to fiduciary funds. Noncurrent liabilities increased as a result of new debt and other postemployment benefits, offset by payments on debt. The net amount invested in capital assets increased overall due to the change in capital assets and the change in debt incurred to fund capital projects. Restricted net position consists of $55,461 for debt service, $1,143,019 for retirement contributions and benefits, and $9,566,884 for economic development activities. - 3b - CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 Figure 2 demonstrates the operations of the City’s activities. Figure 2 Changes in Net Assets Changes in Net Position Governmental Activities 2013 2014 REVENUES Program Revenues: Charges for services $ 20,737,131 Operating grants 3,311,982 Capital grants 5,834,236 General Revenues: Property taxes and tax items 36,719,929 Nonproperty taxes 10,688,328 State sources 9,693,892 Use of money and property 809,951 Change in equity interest in joint venture 4,338,437 Other 5,972,264 98,106,150 Total Revenues PROGRAM EXPENSES General government 11,980,364 Public safety 38,217,115 Public health 948,670 Transportation 9,729,873 Economic assistance and opportunity 666,955 Culture and recreation 4,166,241 Home and community services 31,533,076 Interest on long-term debt 3,800,481 101,042,775 Total Expenses (2,936,625) (Decrease) in Net Position $ 22,593,325 2,648,542 10,079,971 Dollar Change 2013 - 2014 $ Percent Change 2013 - 2014 1,856,194 (663,440) 4,245,735 9% (20)% 73% 37,089,332 10,999,064 9,662,719 696,059 (14,514,999) 8,981,902 88,235,915 369,403 310,736 (31,173) (113,892) (18,853,436) 3,009,638 (9,870,235) 1% 3% (0)% (14)% (435)% 50% (10)% 12,089,630 38,156,080 987,331 6,345,062 678,680 4,353,336 29,102,012 3,465,435 95,177,566 (6,941,651) 109,266 (61,035) 38,661 (3,384,811) 11,725 187,095 (2,431,064) (335,046) (5,865,209) (4,005,026) 1% (0)% 4% (35)% 2% 4% (8)% (9)% (6)% (136)% Governmental Activities The net position of the City’s activities decreased from the beginning balance, by more than twice the amount of last years’ decrease. Charges for services increased due mainly to increased water and sewer revenue, offset by decreased special grant activity. Operating grants were down as a result of decreased HUD grant revenue. Capital grants increased substantially as a result of transportation and sewer grants. Operating and capital grants fluctuate from year to year depending on the types of grants the City has applied for and received. Property tax and tax items increased 1% in 2014. Nonproperty taxes were up 3% in 2014 as compared to 2013. Other revenue increased primarily because of payments from the Village of Johnson City on joint venture debt, and reimbursement of prior year expenses for health insurance. The change in the City’s equity interest in joint ventures is dependent on those entity’s yearly operating results. See Note 4 for more information about the City’s joint ventures. - 3c - CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 Expenses decreased primarily due to capital project expenditures in 2013 which did not result in additional capital assets, due to grant programs, flood recovery expenditures, and payments by the City for the joint venture improvements. While these payments continued in 2014, the amounts were somewhat lower. Figure 3 Revenue by Source 2014 Use of money and property 0.80% Change in equity interest in joint Other ventures 10.18% (16.45)% Charges for services 25.61% Operating grants 3.00% Unrestricted State sources 10.95% Capital grants 11.42% Property and tax items 42.03% Nonproperty taxes 12.47% 2013 Change in equity interest in joint Use of money ventures and property 4.42% 0.83% Other 6.09% Unrestricted State sources 9.88% Nonproperty taxes 10.89% Charges for services 21.14% Operating grants 3.38% Capital grants 5.95% Property and tax items 37.42% The cost of all Governmental Activities in 2014 in the Statement of Activities was $95,177,566. However, as shown in the Statement of Activities the amount ultimately financed for these activities through City property and payments in lieu of taxes was $59,855,728, because some of the cost was paid by those who directly benefited from the programs $(22,593,325) or by other governments and organizations that subsidized certain programs with grants and contributions $(12,728,513). Overall, City governmental program revenues, including fees for services and grants, were $35,321,838. The City paid for the remaining “public benefit” portion of Governmental Activities with $52,914,077 in taxes and other revenues, such as interest and general entitlements. - 3d - CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 Total cost and revenue comparison of the Governmental Activities for each of the City’s largest programs is presented below. Note that the City’s home and community service activities which provide water and sewer services include debt service costs in their fee structures. Because debt service costs are not expenses of this function, excess revenue generated by these activities is used to make debt principal and interest payments. Figure 4 Program Cost and Revenue Comparison Governmental Activities 2014 40,000,000 35,000,000 30,000,000 Cost 25,000,000 Revenue 20,000,000 15,000,000 10,000,000 5,000,000 0 2013 40,000,000 35,000,000 30,000,000 Cost 25,000,000 Revenue 20,000,000 15,000,000 10,000,000 5,000,000 0 - 3e - CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 BUSINESS-TYPE ACTIVITIES The City’s Business-Type Activities represent the remaining activity of the Binghamton Regency Hotel. The Hotel was sold in December 2010, and the City received final payment from the buyer in December 2012. The City continues to pay outstanding loans to the U.S. Department of Housing and Urban Development (HUD), and recently received approval from HUD to extend final payment until August 2019. Figure 5 shows the assets, liabilities, and net deficit of the Business-Type Activities: Figure 5 Business-Type Activities Net Position 2013 Current assets Total Assets Current liabilities Noncurrent liabilities Total Liabilities Unrestricted Total Net (Deficit) $ $ Dollar Change 2013 - 2014 2014 -0-0741,361 858,875 1,600,236 (1,600,236) (1,600,236) $ $ -0-0915,920 687,875 1,603,795 (1,603,795) (1,603,795) $ $ 174,559 (171,000) 3,559 (3,559) (3,559) Percent Change 2013 - 2014 0% 0% 24% (20)% 0% (0)% (0)% Changes in liabilities reflect the payment by the City to HUD, offset by funds borrowed from governmental activities. The net position changed by the interest expense recorded during the year. THE CITY’S FUNDS As the City completed the year, its Governmental Funds, as presented in the balance sheets on pages 6-6a, reported a combined fund balance (deficit) of $(2,225,021), which is improved from last year’s total of $(13,101,301). The General Fund showed a $6,180,139 increase in fund balance, and ended the year with an overall fund balance of $15,961,940. The Sewer Fund reported a decrease of $(265,308) due primarily to expenditures associated with the Binghamton-Johnson City Joint Sewer Treatment Plant, and revenues that were less than budgeted. The Capital Projects Fund experienced an $4,634,460 increase in fund balance due to payments from Johnson City, State and Federal aid, and bond and BAN activity in excess of capital outlay; the negative fund balance will be eliminated as short-term debt is converted to long-term financing. - 3f - CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 Figure 6 shows changes in fund balance for the year for the City's funds. Figure 6 Governmental Funds Fund Balance at Year Ending December 31, 2014 15,961,940 (4,481,006) 1,884,068 (17,443,581) Dollar Change 2013 - 2014 $ 6,180,139 (265,308) (871,470) 4,634,460 Percent Change 2013 - 2014 63% (6)% (32)% 21% 260,425 1,943,510 (350,377) (2,225,021) (157,616) 1,445,389 (89,314) 10,876,280 (38)% 290% (34)% 83% Governmental Fund Balances General Fund Sewer Fund Special Grant Fund Capital Projects Fund Non-Major Funds: Refuse and Garbage Fund Water Fund Parking Ramps Fund Totals $ $ 2013 9,781,801 (4,215,698) 2,755,538 (22,078,041) 418,041 498,121 (261,063) (13,101,301) $ $ $ The General Fund increased was mainly the result of repayment of prior year health insurance payments, and transfer of FEMA receipts originally recorded in the Capital Projects Fund. The Special Grant Fund declined as a result of lower grants revenues. The Water Fund increased primarily due to increases in water sales, and health insurance reimbursements. See Note 2.A regarding funds with deficit fund balances. General Fund Budgetary Highlights Over the course of the year, the City Council as well as the management of the City revised the City General Fund budget several times. These budget amendments consist of transfers between functions, encumbrances from the prior fiscal year and acceptance of grant awards. Resources available for appropriation were above the final budgeted amount by $2,134,863. The actual charges to appropriations (expenditures and encumbrances) were below the final budget amounts by $3,320,553. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At December 31, 2014, the City had $316,477,038, net of accumulated depreciation of $209,107,429, invested in a broad range of capital assets, including buildings, machinery and equipment, roads and bridges. This amount represents a net increase (including additions, net of disposals, of $16,583,070 and depreciation expense, net of disposals, of $9,483,648) of $7,099,422 over 2013. - 3g - CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 Figure 7 Capital Assets, Net of Depreciation Land Buildings and improvements Construction in progress Equipment Infrastructure Totals $ $ Governmental Activities 2013 2014 4,279,869 $ 4,279,869 11,088,235 10,623,714 2,455,660 7,149,453 9,781,379 9,371,790 281,772,473 285,052,212 309,377,616 $ 316,477,038 Dollar Change 2013 - 2014 $ -0(464,521) 4,693,793 (409,589) 3,279,739 $ 7,099,422 Percent Change 2013 - 2014 0% (4)% 191% (4)% 1% 2% Debt Administration Debt (bonds, BANs, and lease obligations payable), considered a liability of Governmental Activities, increased overall by $581,174. Accrued compensated absences increased by $522,895 while the liability for other postemployment benefits increased $4,666,540, bringing total debt and long-term liabilities to $164,035,071 as of December 31, 2014, as shown in Figure 8. Of the amount of bonds and BANs outstanding, $51,719,074 is subject to the constitutional debt limit and represented 60% of the City’s statutory debt limit. The City’s bond rating was assigned an A2 by Moody’s. More detailed information about the City’s liabilities is presented in Notes 3.B.2 and 3 to the financial statements. Figure 8 Outstanding Debt and Long-term Liabilities at Year Ending December 31, BANs Serial Bonds Compensated absences Other postemployment benefits payable Lease obligation payable Totals $ $ Governmental Activities and Total Government 2013 2014 37,089,951 $ 33,764,524 81,590,000 86,185,001 3,425,453 3,948,348 33,301,812 2,857,246 158,264,462 37,968,352 2,168,846 $ 164,035,071 Dollar Change 2013 - 2014 $ (3,325,427) 4,595,001 522,895 $ 4,666,540 (688,400) 5,770,609 Percent Change 2013 - 2014 (9)% 6% 15% 14% (24)% 4% ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES According to the New York State Department of Labor the unemployment rate for the City of Binghamton was 6.0% in December of 2014, down from 6.9% in December of 2013, and 8.5% in December of 2012. The City has instituted an aggressive approach to develop and expand the commercial and industrial base within the City and is continuing to establish its central business district as a major retailing, cultural, convention and entertainment center. Today, the business district is thriving during both the day and evening hours. Downtown has also become an entertainment center and a place where thousands of residents and visitors come to socialize following the end of the workday and on weekends. The urban core currently hosts a variety of restaurants, coffeehouses, hotels and taverns that attract people from throughout the region. Binghamton is also the home for the Broome County Arena (host to the AHL Binghamton Senators, and NYSEG Stadium (host of the AA Binghamton Mets). - 3h - CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 On December 15, 2011, The Farmers Insurance Group of Companies announced the Binghamton metropolitan area as the fifth most secure place to live among mid-size U.S. cities. The rankings, compiled by Best Places expert Bert Sperling took into consideration crime statistics, extreme weather, risk of natural disasters, housing depreciation, foreclosures, air quality, terrorist threats, environmental hazards, life expectancy, mortality rates from cancer and motor vehicle accidents, and job loss numbers in 379 U.S. municipalities. The study divided the communities into three groups: large metropolitan areas, mid-size cities and small towns. Successful projects as part of the Governor’s Regional Economic Development Council have spurred economic growth in the City and leveraged millions in private investments. In 2015, Binghamton University broke ground for a High Tech Incubator in downtown Binghamton. The $22 million project will initially generate constructions jobs followed by new businesses related to the research and development being carried out at the University. The purpose of an incubator is to manufacture that first product that will be sold, and to provide the missing piece for the region, which has fundamental research from Binghamton University, job training initiatives, Broome Community College initiatives and great manufacturing facilities. The incubator will also include wrap-around services such as financial, legal and regulatory resources to help developing companies succeed. With such support, young firms increase their likelihood of success. Rather than two or three of 10 firms succeeding beyond three years, with the support available through an incubator, the success rate jumps to eight of 10. The City’s Economic Development Office is working in concert with the College and the University to identify suitable locations for the Governor’s “Start-Up New York” tax free zone program. The Charles Street Business Park and a large manufacturing-ready facility on Court Street in downtown offer both build to suit and move-in opportunities. SUNY Broome has proposed to take over the former Carnegie Library recently acquired by the Broome County Industrial Development Agency to develop a downtown campus for its gaming and hospitality programs. It received a $2.5 million grant to assist in the expansion. Downtown housing options continue to expand in Binghamton. A $4.5 million mixed-use housing and commercial project at 70-72 Court St. will break ground in 2016. A vacant, City-owned parcel is being transformed into a state-of-the-art luxury market rate housing development. A $2.5 million, 20,000 square-foot market rate housing project is underway in 2015. City Center Lofts will target young professionals and families with technologyfocused living amenities. In 2014, a $14.5 million waterfront student housing development opened its doors. These projects have resulted in millions of dollars being invested into the downtown core, while bringing a new life to downtown. Storefronts along Court and Washington Street have filled in with commercial and service business to attract the new residents. Since 2006, more than 40 new businesses opened in the City, including over 20 new restaurants located the City’s Downtown as well. William H. Lane Incorporated, a construction company, returned to the City after a 40 year absence. New eateries such as Remlik’s Grille & Oyster Bar, Amici Pub & Pizzeria, and Burger Mondays Bar & Grill have opened. Binghamton Bag Company, On the Town Dress Boutique, and Sassy Boutique Dress Shop have opened for retail shopping. One of our City’s largest hotels, the 207 unit Binghamton Riverwalk Hotel and Conference Center, was recently accepted as a Double Tree (Hilton) facility. Loan programs of the Binghamton Local Development Corporation (the “BLDC”) have distributed $373,000 in loans over the last two years, resulting in an additional private investment of $5,996,000. The BLDC is currently managing a $250,000 NYS HCD Main Street Grant which will leverage an additional $330,000 in private investment. - 3i - CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 The trend of converting commercial buildings into urban homes and lofts has gained momentum and has quickly spread to multiple areas downtown. In addition to the loft living taking place downtown, an "Arts District" is also being formed. Many artists continue to purchase buildings to use as residences, personal studios and art galleries. Area residents recognize the significant artistic talent that exists in the community and the “First Friday Art Walk” which highlights a range of quality artistic shops, galleries, and live entertainment has continued to grow and increase traffic for local businesses. These artists could locate anywhere in the world, but have all chosen the City as a base for their artistic venues. In 2015, more than 25,000 visitors attended the LUMA Projection Arts Festival in our arts district. In 2015, manufacturing expansion projects were underway in the City, including new machinery at the Association for Vision Rehabilitation and Employment, Inc. and Buckingham Manufacturing. The City’s economic development success is not limited to downtown, but is taking place Citywide as businesses continue to take advantage of the positive economic momentum that has developed and the resulting increased customer base. Over the past decade, the City helped facilitate major developments and expansion projects including Monadnock Paper, Horizon’s Federal Credit Union, Team World, F.E. Jones Construction, Manley’s Mighty Mart and Orthopedic Associates who have collectively invested millions of dollars establishing their businesses in the City. In July 2015, ScottTech, LLC, a warehouse management technology company, relocated its corporate headquarters to 336 Court Street, bringing 14 jobs to the City of Binghamton and investing more than $300,000 in building upgrades and equipment. Bates Troy Healthcare Linen Service announced a $1.5 million project for an independent power system supply for their 53,000 square-foot facility. From 2012 to present, 120 projects were reviewed and approved by the Planning Commission and Planning staff. More than 300 building permits were issued in support of the design and construction of these projects. The self-reported value of the total cost of construction for all projects combined is more than $55,000,000. Eight or more projects had a value greater than $1,000,000 and the most expensive project was valued at more than $10,000,000. Four of the latter projects in this group have been completed and are open for business. The remaining projects are either under construction or under design review. In addition to these larger commercial projects, the City also issued more than 1,000 building permits during 2013 and more than six hundred permits in 2014, reflecting steady investment in both residential and commercial growth opportunities. New businesses continue to open throughout the City. Nielsen Hardware, a manufacturing spin off opened on the City’s north side with location assistance from BEDO and a BLDC loan from BEDO. Confluence Running opened a running shoe store in the South Bridge district, again with location assistance and a BLDC Loan, along with Sweet Frog Frozen Yogurt and National Floor Store completing the renovation of a formerly underutilized plaza. Susan Jablon Mosaics moved into a former recycling center on the City’s northeast side. The internally recognized retailer of glass mosaics has participated in multiple beautification projects the City as well bringing a thriving enterprise to the neighborhood. Downtown saw another brew pub, Galaxy Brewing, Simply Sweet Frozen Yogurt, Freshy Sites web design studio, HUE Advertising, North American Business Solutions and the redevelopment of the Lackawanna Train Station with multiple new commercial and professional office spaces. The US Veterans’ Administration is in talks with the Broome County Industrial Development Agency (BC IDA) concerning locating a regional health care facility at the Charles Street Business Park. In 2012 Lourdes Hospital completed the third phase of a five phase, $70 million construction project to update and expand its medical complex in the City. The project consists of an expanded emergency department, a new open MRI facility, two new surgical suites, a flood wall, an ambulatory care building, a two-story main entrance connecting the ambulatory building to the main hospital and an expanded radiology department. A multi-story parking garage was completed in 2014. - 3j - CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 In the fall of 2013 the City completed a $3 Million Court Street Gateway Project, which was a full-depth reconstruction of Court Street in downtown Binghamton. This reconstruction included water/sewer upgrades, full repaving, streetscape changes, a roundabout, pedestrian & bicycle accommodations, and changes in parking and traffic signal upgrades. 95% of the cost of this project was reimbursed by the State Department of Transportation. The City government continues to improve its infrastructure by investing approximately $6.5 million in capital improvements annually. Additional projects to upgrade and rehabilitate the City’s gateways and bridges are currently underway in the amount of $5 million. These projects are the direct result of the City’s successful partnership with the State Department of Transportation, which is contributing 95% of the costs of each of these projects. Over the last ten years this partnership has resulted in a combined $85 million being spent on a diverse range of local roadway and bridge projects. The City is the recipient of three Restore New York Program grants for the removal and/or reconstruction of blighted properties. The City has removed/reconstructed over 120 blighted buildings using more than $6.5 Million in State grants. The City’s Blight Prevention Initiative, which, with some adjustments, has gained a newfound vitality, features a registry that now includes more than 380 properties and their maintenance plans. The initiative includes three components: (1) Legal - develop and pass a new vacant property registration ordinance requiring owners of vacant properties to register the property and submit a maintenance plan; (2) Enforcement - dedicate funds for a new Vacant Property Officer to ensure consistent and aggressive enforcement; (3) Organization Reform incorporate Code Enforcement into the Building and Construction Bureau to improve coordination between the two offices. The new ordinance forces property owners to maintain their properties, which, in turn, reduces code violations. The Initiative has generated $76,000 in fines, up 200% from 2011. These fines are levied against landlords who have failed to register and keep their properties in decent condition. This important initiative is necessary to minimize deterioration and maximize positive development. The City’s Restore Program and Vacant Property Initiative have won 1st place awards in the public administration category from the New York Conference of Mayors (NYCOM). Over the last five years, the City has invested nearly $4.8 million in federal and State grants to help more than 100 homeowners achieve safer, healthier homes. This has been made possible through the City’s two key housing programs, Single Family Repair Program and the First Time Homebuyer Program. Since 2008, the City has issued 91 loans to assist income-qualified, current homeowners to fix code violations, remove lead hazards and improve energy efficiency. About 25% of City homeowners assisted through the Single Family Repair Program were seniors (60 years or older) on limited incomes. The average household income for those receiving assistance was $29,000, and no repayments are required so long as the owner maintains residency and ownership for a set period (generally 10 years). The City has annually received a federal grant through HUD’s HOME Investment Partnerships to fund its Single Family Repair Program, but since 2008, the City has aggressively pursued other federal and State grants to expand housing programs and loan products. Over the last four years, the City has secured four grants totaling more than $1 million from New York State’s Affordable Housing Corporation, and has leveraged nearly $100,000 in home repair grants from Binghamton Homeownership Academy partners, such as Metro Interfaith, Quaranta Housing Services and First Ward Action Council. Over the last three years, the City has also helped a dozen residents become first-time homeowners through its First Time Homebuyer Program. The City currently offers a purchase assistance loan of up to $10,000 to incomeeligible, first-time homebuyers who have graduated from the Binghamton Homeownership Academy. The deferred loan requires no payments so long as the owner maintains residency and ownership, and the full amount is completely forgiven after 5 years. - 3k - CITY OF BINGHAMTON MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 The City’s River Park Project has evolved significantly over the last few years. From Confluence Park, built on the area where the Chenango River flows into the Susquehanna River, City residents are now able to walk, bike or skate along the riverbank to the Cheri Lindsey Park, which includes a cutting edge skateboard facility, providing a high caliber facility for children of all ages. New lighting, walkways, bicycle paths and landscaping are being installed, paid from State and Federal funds. Kennedy Park was reconstructed in 2010 at a cost of approximately $500,000. As a result of the City’s revitalization of Binghamton’s waterways, the New York Upstate Chapter of American Society of Landscape Architects presented the City with a Merit Award for excellence in Public Landscape design for Confluence Park. The City now has a second river crawl where residents meet and walk on river trails from downtown to the south side. The City and the Village of Johnson City have issued bond ordinances to cover the costs associated with the rehabilitation of the Joint Sewer Plant. The plant is currently operating under a consent order and expects to continue until completion of the project, scheduled for 2018. The project is expected to cost approximately $200 million and will turn the treatment facility that was built in the early 1960's into a state-of-the-art facility. The City is dedicated to providing vital services to residents and businesses in the most efficient manner possible. The City made significant cost reductions by consolidating emergency dispatch services and tax collection with Broome County. Other Potentially Significant Matters Due to flooding that occurred in the entire Broome County area from September 7 to September 11, 2011, the sewage treatment plant that is jointly owned by the City and the Village of Johnson City (the “Village”) suffered damage. Plant employees, Board members, and the City Engineer have worked with its insurer and FEMA to identify all damages, and are in the process of repair and mitigation to rebuild facility damage and improve resistance to future flood events. 100% of eligible project costs will be recovered through State and Federal Assistance. In addition, the City, on behalf of the City and the Village, has applied to EFC for approximately $12 million in loans from the State Clean Water Revolving Loan Fund to address this situation. CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about the report or need any additional financial information, contact Clarence E. Shager, City Comptroller, City Hall, 38 Hawley Street, Binghamton, NY 13901. - 3l - CITY OF BINGHAMTON STATEMENT OF NET POSITION DECEMBER 31, 2014 Governmental Activities ASSETS Current Assets: Cash and cash equivalents Restricted cash and cash equivalents Due from state and federal governments Due from other governments Other receivables, net Loans receivable, short-term portion Inventories Prepaid expenses Internal balances Total Current Assets Noncurrent Assets: Restricted investments Loans receivable, long-term portion Equity interest in joint ventures Capital Assets: Land and construction in progress Depreciable capital assets, net Total Noncurrent Assets $ 28,550,994 $ 2,672,403 4,989,536 1,196,558 6,889,163 768,282 14,878 2,210,768 101,846 47,394,428 (101,846) (101,846) LIABILITIES Current Liabilities: Accounts payable Accrued liabilities Due to other governments Due to fiduciary funds Bond Anticipation Notes payable Accrued interest payable Other Current Portion of Long-term Liabilities: Bonds payable Lease obligations payable Compensated absences Total Current Liabilities Long-term Liabilities: Bonds payable Lease obligations payable Other postemployment benefits payable Compensated absences Total Long-term Liabilities 8,807,110 6,386,527 85,590 386,056 33,764,524 1,337,373 358,663 Total Liabilities NET POSITION Net Investment in Capital Assets Restricted Unrestricted (Deficit) $ 28,550,994 $ 2,672,403 4,989,536 1,196,558 6,889,163 768,282 14,878 2,210,768 -047,292,582 -06,914,534 (1,452,415) 11,429,322 305,047,716 321,939,157 369,333,585 Total Primary Government $ 6,914,534 (1,452,415) Total Assets Total Net Position (Deficit) Business-Type Activities 2,142,896 32,178 286,121 2,461,195 136,954 796,854 11,429,322 305,047,716 321,939,157 1,380,440 (101,846) 369,231,739 3,841,635 30,039 643,074 8,807,110 6,386,527 85,590 1,029,130 33,764,524 1,337,373 358,663 5,785,000 705,981 111,425 57,728,249 171,000 80,400,001 1,462,865 37,968,352 3,836,923 123,668,141 687,875 687,875 81,087,876 1,462,865 37,968,352 3,836,923 124,356,016 181,396,390 1,501,949 182,898,339 211,048,442 10,768,517 (33,879,764) (1,603,795) 211,048,442 10,768,517 (35,483,559) 187,937,195 $ (1,603,795) $ 186,333,400 $ 814,074 5,956,000 705,981 111,425 58,542,323 See Independent Auditor's Report and Notes to Financial Statements -4- Component Units 446,632 30,039 30,039 446,632 3,358,593 6,371 3,811,596 CITY OF BINGHAMTON STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2014 Expenses FUNCTIONS/PROGRAMS Governmental Activities: General governmental support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Interest on long-term debt $ Total Governmental Activities Total Primary Government Component Units: Binghamton Local Development Corp. Binghamton Urban Renewal Agency 12,089,630 $ 148,784 $ 38,156,080 1,178,731 987,331 756,840 6,345,062 1,311,162 678,680 4,353,336 18,861 29,102,012 19,178,947 3,465,435 95,177,566 Business-Type Activities: Proprietary funds Program Revenues Operating Capital Charges for Grants and Grants and Services Contributions Contributions 22,593,325 54,642 $ 746,199 490,097 3,649,974 29,523 1,818,178 5,939,900 2,648,542 10,079,971 2,648,542 $ 10,079,971 250,649 $ 38,000 $ -0-0- 3,559 $ $ $ 95,181,125 $ 22,593,325 $ 271,478 $ 69,647 $ 110,468 $ 24,200 $ GENERAL REVENUES Real property taxes Real property tax items Nonproperty tax items Use of money and property Sale of property and compensation for loss Miscellaneous local sources State sources Change in equity interest in joint ventures Total General Revenues and Contributions Change in Net Position Net Position (Deficit) - Beginning Net Position (Deficit) - Ending See Independent Auditor's Report and Notes to Financial Statements -5- Net (Expense) Revenue and Changes in Net Position Governmental Activities $ Business-Type Activities (11,886,204) $ (35,741,053) (230,491) (1,383,926) (678,680) (4,304,952) (2,164,987) (3,465,435) (59,855,728) Component Units $ -0- (59,855,728) Total $ -0- (59,855,728) (3,559) (3,559) (3,559) (59,859,287) 89,639 (7,447) 36,303,480 785,852 10,999,064 696,059 134,232 8,847,670 9,662,719 (14,514,999) 194,878,846 187,937,195 36,303,480 785,852 10,999,064 697,337 134,232 8,848,743 9,662,719 (14,514,999) 1,073 52,914,077 $ 89,639 (7,447) 1,278 (6,941,651) $ (11,886,204) (35,741,053) (230,491) (1,383,926) (678,680) (4,304,952) (2,164,987) (3,465,435) 2,351 52,916,428 (3,559) 84,543 (6,942,859) (1,600,236) 3,727,053 197,005,663 (1,603,795) $ 3,811,596 $ 190,062,804 - 5a - CITY OF BINGHAMTON BALANCE SHEET GOVERNMENTAL FUNDS DECEMBER 31, 2014 Major Funds Special Revenue Funds Special Grant Sewer Fund Fund General Fund ASSETS Assets: Cash and cash equivalents - Unrestricted Due from other funds Due from state and federal governments Due from other governments Other receivables, net Inventory Prepaid expenses Cash with fiscal agent Loans receivable, net $ 10,611,689 2,397,234 175,417 1,129,315 2,109,272 14,878 1,844,298 $ 649,515 $ 7,812 40,924 1,531,027 2,450,501 71,902 7,682,816 Total Assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Due to other funds Due to other governments Bond Anticipation Notes payable Compensated absences Other liabilities $ 18,282,103 $ 9,863,358 $ 2,571,139 $ 838,502 1,306,584 $ 295,094 $ 5,535,640 37,692 1,455,761 85,560 Total Liabilities 89,517 1,380 2,830 2,320,163 296,474 7,031,923 7,682,816 20,222 Deferred Inflows of Resources: Unavailable revenue Fund Balances: Nonspendable Restricted Assigned Unassigned 1,859,176 1,198,480 1,732,953 11,171,331 Total Fund Balances (Deficit) 71,902 1,884,068 (4,552,908) 15,961,940 Total Liabilities and Fund Balances $ 18,282,103 1,884,068 $ 9,863,358 See Independent Auditor's Report and Notes to Financial Statements -6- (4,481,006) $ 2,571,139 Major Funds Capital Projects Fund $ 16,730,905 858,011 3,283,092 58,963 6,693 Total Non-Major Governmental Funds $ 551,073 49,101 Total Governmental Funds $ 28,550,994 3,345,270 4,989,536 1,196,558 6,852,627 14,878 2,146,828 172,403 7,682,816 8,280 2,286,161 230,628 172,403 $ 21,110,067 $ 3,125,243 $ 54,951,910 $ 1,759,228 1,500,803 1,274,260 $ 274,759 152,322 489,523 30 $ 252,121 17,698 106,542 8,703,223 2,997,401 3,219,544 85,590 33,764,524 111,425 358,663 38,550,936 1,040,874 49,240,370 2,712 230,811 7,936,561 230,628 33,764,524 $ (17,443,581) 1,973,307 (350,377) 2,161,706 3,082,548 3,706,260 (11,175,535) (17,443,581) 1,853,558 (2,225,021) 21,110,067 $ 3,125,243 $ 54,951,910 - 6a - CITY OF BINGHAMTON RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION DECEMBER 31, 2014 Total Governmental Fund Balances $ (2,225,021) Amounts reported for Governmental Activities in the Statement of Net Position are different because: Capital assets, net of accumulated depreciation, used in Governmental Activities are not financial resources and, therefore, are not reported in the funds. Capital assets Accumulated depreciation $ 525,584,467 (209,107,429) 316,477,038 Equity interests in joint ventures are not reported in the fund financial statements because they do not represent current resources. These are the investments in the City's joint ventures. (1,452,415) Other long-term assets are not available to pay for current period expenditures and, therefore, are deferred in the funds. 7,936,561 Internal Service Funds are used by management to charge the costs of certain activities, such as health and workers' compensation insurance. The assets and liabilities of the Internal Service Funds are included in Governmental Activities in the Statement of Net Position. (1,302,473) Certain accrued expenses reported in the Statement of Net Position do not require the use of current financial resources and, therefore, are not reported as liabilities in Governmental Funds. Accrued interest payable Other postemployment benefits payable Compensated absences $ (1,337,373) (37,968,352) (3,836,923) (43,142,648) Bonds payable are not due and payable in the current period and, therefore, are not reported in the funds. (86,185,001) Lease obligations payable are not due and payable in the current period and, therefore, are not reported in the funds. (2,168,846) Net Position of Governmental Activities $ 187,937,195 See Independent Auditor's Report and Notes to Financial Statements -7- CITY OF BINGHAMTON STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2014 General Fund REVENUES Real property taxes Real property tax items Nonproperty tax items Departmental income Intergovernmental charges Use of money and property Licenses and permits Fines and forfeitures Sale of property and compensation for loss Miscellaneous local sources Interfund revenues State sources Federal sources Total Revenues $ EXPENDITURES Current: General governmental support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Employee benefits Debt Service: Principal Interest Capital outlay Total Expenditures 6,369,076 21,430,596 43,398 2,394,373 215,414 2,778,258 2,060,493 17,907,279 $ 98,135 104,220 1,805,660 2,008,015 59,350,141 5,566,213 OTHER FINANCING SOURCES (USES) Interfund transfers in Interfund transfers (out) BANs redeemed from appropriations Proceeds of obligations Total Other Financing Sources (Uses) Net Changes in Fund Balances 9,170,863 513,089 2,224,977 15,070 88,523 1,807,732 9,772,475 6,148,802 1,715,276 11,911,857 282,594 4,917 2,591,974 5,223,103 619,695 1,805,909 1,478,813 2,879,485 19,989,688 19,989,688 840,777 (226,851) 91,065 (912,581) 613,926 (821,516) 1,637,934 (980,695) 2,170,051 9,885,001 12,712,291 (265,308) 4,634,460 15,961,940 $ (871,470) 9,216,267 (8,077,831) 9,781,801 $ $ 556,208 6,180,139 Fund Balances, Beginning Capital Projects Fund 88,747 4,712,575 1,438,679 Excess of Revenues (Expenditures) Fund Balances, Ending 36,303,480 $ 785,852 10,999,064 1,459,263 600,009 96,185 205,705 704,412 283,745 2,049,746 934,926 9,877,880 616,087 64,916,354 Major Funds Special Revenue Funds Special Grant Sewer Fund Fund (871,470) 2,755,538 (4,215,698) 1,884,068 $ (4,481,006) $ See Independent Auditor's Report and Notes to Financial Statements -8- (22,078,041) (17,443,581) Total Non-Major Governmental Funds $ Total Governmental Funds $ 9,803,000 56,625 76,081 75 456,619 148,190 10,540,590 91,077 672,955 4,427,894 1,420,648 1,624,902 655,006 8,892,482 1,648,108 48,851 (498,500) (449,649) 1,198,459 $ 36,303,480 785,852 10,999,064 20,531,261 2,881,611 700,425 205,705 704,412 283,820 4,506,840 1,083,116 16,026,682 4,137,023 99,149,291 6,548,900 21,430,596 43,398 3,067,328 498,008 2,783,175 14,303,464 19,947,622 8,143,386 3,572,498 19,989,688 100,328,063 (1,178,772) 2,618,627 (2,618,627) 2,170,051 9,885,001 12,055,052 10,876,280 655,099 (13,101,301) 1,853,558 $ (2,225,021) - 8a - CITY OF BINGHAMTON RECONCILIATION OF GOVERNMENTAL FUNDS STATEMENT OF REVENUES EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2014 Net Change in Fund Balances - Total Governmental Funds $ 10,876,280 Amounts reported for Governmental Activities in the Statement of Activities are different because: Governmental Funds report capital outlay as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlay exceeded depreciation expense in the current period. In the Statement of Activities, only the gain or loss on the sale of capital assets is reported, whereas, in the Governmental Funds, the proceeds from the sale of capital assets increase financial resources. The net effect is loss on sale of capital assets on the Government-wide Statement of Activities vs. proceeds from the sale of capital assets on the Governmental Fund financial statements. Capital outlay Depreciation expense Net book value of disposed assets $ 16,821,809 (9,696,666) (25,721) 7,099,422 Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. This is the difference in unearned revenue. (2,129,517) Equity interests in joint ventures are not reported in the fund financial statements because they do not represent current resources. This is the change in the investments in the City's joint ventures. (14,514,999) Bond proceeds provide current financial resources to Governmental Funds, but issuing debt increases long-term liabilities in the Statement of Net Position. Repayment of debt principal is an expenditure in the Governmental Funds, but the repayment reduces long-term liabilities in the Statement of Net Position. This is the amount by which the issuance of new debt and BANs redeemed exceeded repayment of debt principal. Proceeds of debt BANs redeemed Principal payments $ (9,885,001) (2,170,051) 8,143,386 (3,911,666) Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in Governmental Funds. Change in accrued interest payable $ 107,063 Change in noncurrent compensated absences (754,016) Change in other postemployment benefits payable (4,666,540) (5,313,493) Internal Service Funds are used by management to charge the costs of certain activities, such as workers compensation and insurance, to individual funds. Net revenue of the Internal Service Fund is reported with Governmental Activities. Change in Net Position of Governmental Activities See Independent Auditor's Report and Notes to Financial Statements -9- 952,322 $ (6,941,651) CITY OF BINGHAMTON STATEMENT OF NET POSITION PROPRIETARY FUNDS DECEMBER 31, 2014 Enterprise Fund ASSETS Current Assets: Cash and cash equivalents - restricted Accounts receivable Prepaid expenses $ Total Assets Internal Service Fund $ -0- 2,500,000 36,536 63,940 2,600,476 LIABILITIES Current Liabilities: Accounts payable Accrued liabilities Due to governmental funds Due to fiduciary funds Loans payable, current Total Current Liabilities 101,846 643,074 171,000 915,920 Noncurrent Liabilities: Loans payable, long-term portion 687,875 Total Liabilities 103,887 3,389,126 409,936 3,902,949 1,603,795 3,902,949 (1,603,795) (1,302,473) NET POSITION Unrestricted (Deficit) Net Position (Deficit) $ (1,603,795) See Independent Auditor's Report and Notes to Financial Statements - 10 - $ (1,302,473) CITY OF BINGHAMTON STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2014 Enterprise Fund OPERATING REVENUES Interfund transfers Other operating revenues Total Operating Revenues $ OPERATING EXPENSES Salaries and benefits Contractual services Workers compensation claims Total Operating Expenses Income from Operations NONOPERATING (EXPENSES) Interest expense Total Nonoperating (Expenses) Change in Net Position Internal Service Fund $ -0- 3,184,271 62,411 3,246,682 -0- 79,317 364,536 1,850,507 2,294,360 -0- 952,322 3,559 3,559 -0- (3,559) Total Net Position (Deficit), Beginning 952,322 (1,600,236) Total Net Position (Deficit), Ending $ (1,603,795) See Independent Auditor's Report and Notes to Financial Statements - 11 - (2,254,795) $ (1,302,473) CITY OF BINGHAMTON STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED DECEMBER 31, 2014 Enterprise Fund Cash Flows from Operating Activities: Cash received from other funds Cash payments - Employees Cash payments - Suppliers Cash payments - Judgments and claims Refund of prior year expenditures $ Net Cash (Used) by Operating Activities Cash Flows from Non-capital Financing Activities: Interfund transfer Internal Service Fund $ (50,922) 2,206,928 (79,317) (364,536) (1,843,502) 25,875 (50,922) (54,552) 254,481 Net Cash Provided by Non-Capital Financing Activities 254,481 Cash Flows from Capital and Related Financing Activities: Bond payments Interest expense (200,000) (3,559) Net Cash (Used) by Capital and Related Financing Activities (203,559) NET CHANGE IN CASH EQUIVALENTS -0- Cash and Cash Equivalents, January 1, 2014 -0- Cash and Cash Equivalents, December 31, 2014 $ Reconciliation of Income from Operations to Net Cash (Used) by Operating Activities: Income from operations (Increase) in accounts receivable (Increase) in prepaid expenses (Increase) decrease in accounts payable (Decrease) in due to governmental activities -0- -0- $ -0(54,552) 2,554,552 $ $ 952,322 (36,536) (63,940) 70,945 (977,343) $ (54,552) (50,922) Net Cash (Used) by Operating Activities $ (50,922) See Independent Auditor's Report and Notes to Financial Statements - 12 - 2,500,000 CITY OF BINGHAMTON STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS DECEMBER 31, 2014 Private Purpose Trust Fund Agency Fund ASSETS Cash and cash equivalents - Unrestricted Due from other governments Due from governmental funds Due from proprietary funds Other assets Total Assets $ 1,243,557 240,354 386,056 643,074 68,575 $ 2,581,616 $ 76,194 2,505,422 $ 2,581,616 $ 18,908 18,908 LIABILITIES Due to other governments Agency liabilities Total Liabilities -0- NET POSITION Restricted 18,908 Total Net Position $ See Independent Auditor's Report and Notes to Financial Statements - 13 - 18,908 CITY OF BINGHAMTON STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUND DECEMBER 31, 2014 Private Purpose Trust Fund ADDITIONS Other revenue $ Total Additions 5,860 5,860 DEDUCTIONS Employee benefits 5,076 Change in Net Position 784 Net Position - Beginning of Year 18,124 Net Position - End of Year $ - 14 - 18,908 CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014 Note 1 - Summary of Significant Accounting Policies The financial statements of the City of Binghamton (the City) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The City’s reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. GASB is the accepted standard setting body for establishing governmental accounting and financial reporting principles. A. Financial Reporting Entity The City, which was established in 1867, is governed by its Charter, General City Law and other general laws of the State of New York and various local laws. The Common Council is the legislative body responsible for overall operations; the Mayor serves as chief executive officer, and the Comptroller serves as the chief fiscal officer. The following basic services are provided: public safety (police and fire), highways and streets, sanitation, health, culture and recreation, parking facilities, economic and community development, planning and zoning, and general administration. All Governmental Activities and functions performed for the City are its direct responsibility. No other governmental organizations have been included or excluded from the reporting entity. The financial reporting entity consists of the following, as defined by GASB Statement No. 14, “The Financial Reporting Entity,” as amended by GASB Statement No. 39, “Determining Whether Certain Organizations are Component Units” and GASB Statement No. 61, “The Reporting Entity: Omnibus”: 1. The primary government, which is the City, 2. Organizations for which the primary government is financially accountable, and; 3. Other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The decision to include a potential component unit in the City's reporting entity is based on several criteria set forth in GASB Statement No. 14, as amended by GASB Statement Nos. 39 and 61, including legal standing, fiscal dependency, and financial accountability. Based on the application of these criteria, the following has been included in the City's reporting entity, and are discretely reported. 1. Component Units a. Binghamton Urban Renewal Agency The Binghamton Urban Renewal Agency (BURA) was created in 1963 pursuant to an act of the State Legislature (General Municipal Law Article 572). The members of the Agency consist of the Mayor, Comptroller, Corporation Counsel, City Engineer, Commissioner of Public Works, and two members of Common Council. Because of local grants in aid, municipal expenditures on behalf of BURA and municipal debt for BURA purposes, BURA provides benefits and creates burdens for the City. - 15 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 b. Binghamton Local Development Corporation The Binghamton Local Development Corporation (BLDC) was incorporated in 1982 under the not for profit corporation law. BLDC is governed by a Board of Directors consisting of the Mayor, Corporation Counsel, Director of the Economic Development Department, Comptroller, and several members at large. BLDC is fiscally dependent on the City because its operations are substantially funded by grants received from the City under the Federal Community Development Block Grant and Urban Development Action Grant programs. BLDC has a fiscal year end of August 31; the information included in the financial statements is for the year ended August 31, 2014. Financial statements for BURA and BLDC are both available from the City Department of Economic Development. 2. Joint Venture a. Binghamton-Johnson City Joint Sewage and Waste Water Treatment Plant The City jointly operated a sewage treatment operation with the Village of Johnson City. The operation is jointly controlled and the City has an ongoing financial responsibility for and an equity interest in the joint venture. Equity interest in the joint venture has been reflected in the Statement of Net Position. 3. Related Organization a. Binghamton Housing Authority The Binghamton Housing Authority was created in 1957 pursuant to an act of the State Legislature. It is governed by seven members, five of whom are appointed by the Mayor. The Authority designates management and exercises complete responsibility for all fiscal matters. B. Basic Financial Statements The City's basic financial statements include both Government-wide (reporting the City as a whole) and Governmental Fund financial statements (reporting the City's Major Funds.) Both the Government-wide and Governmental Fund financial statements categorize primary activities as either governmental or proprietary. The City's general governmental support, education, public safety, health, transportation, highways and streets, economic assistance and opportunity, culture and recreation, and home and community services are classified as Governmental Activities. The remaining activities of the Binghamton Regency Hotel are classified as Business-Type Activities. 1. Government-wide Financial Statements The Government-wide financial statements include a Statement of Net Position and a Statement of Activities. These statements present summaries of activities for the primary government. Government-wide financial statements do not include the activities reported in the Fiduciary Funds. This Government-wide focus is more on the sustainability of the City as an entity and the change in the City's net position resulting from the current year's activities. - 16 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 In the Government-wide Statement of Net Position, the Governmental Activities columns are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The City's net position is reported in three parts - net investment in capital assets; restricted; and unrestricted. The Statement of Activities reports both the gross and net cost for each of the City's functions or programs. Gross expenses are direct expenses, including depreciation, that are specifically associated with a service, program or department and, therefore, are clearly identifiable to a particular function. These expenses are offset by program revenues - charges paid by the recipient of the goods or services offered by the program, grants, and contributions that are restricted to meeting the program or capital requirements of a particular program. Revenues, which are not classified as program revenues, are presented as general revenues of the City, with certain limited exceptions. The net cost represents the extent to which each function or program is self-financing or draws from the general revenues of the City. The City does not allocate indirect costs. Indirect costs are reported in the function entitled “general government.” 2. Governmental Fund Financial Statements The financial transactions of the City are reported in individual funds in the Governmental Fund financial statements. Each fund is accounted for by providing a separate set of selfbalancing accounts that comprise its assets, liabilities, reserves, fund equity, revenues and expenditures or expenses. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. The City records its transactions in the funds described below: a. Governmental Funds Governmental Funds are those through which most governmental functions are financed. The acquisition, use, and balances of expendable financial resources, and the related liabilities are accounted for through Governmental Funds. The measurement focus of the Governmental Funds is based upon determination of financial position and changes in financial position. The following are the City’s Governmental Funds: 1) Major Funds General Fund - Principal operating fund; includes all operations not required to be recorded in other funds. Capital Projects Fund - Accounts for financial resources to be used for the acquisition, construction, or renovation of major capital facilities or equipment. - 17 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 a) Special Revenue Funds Sewer Fund - Accounts for revenues derived from charges for sewer usage and benefited assessments, and the application of such revenues toward related operating expenses and debt retirement. Special Grant Fund - Accounts for Community Development Block Grant activities and other federal revenue sources. 2) Non-Major Funds a) Special Revenue Funds Water Fund - Accounts for revenues derived from charges for water consumption and the application of such revenues toward related operating expenses and debt retirement. Refuse and Garbage Fund - Accounts for revenues derived from charges for garbage, refuse, and recycling consumption, and the application of such revenues toward related operating expenses. Parking Ramps Fund - Accounts for funds collected from parking garage receipts, and related expenditures. b. Proprietary Fund Types The Proprietary Funds are used to account for activities which are similar to those often found in the private sector. The costs of providing goods or services to the general public are financed or recovered primarily through user fees. The measurement focus is upon determination of operating income, changes in net position, financial position, and cash flows. The City reports the following Proprietary Funds: Enterprise Fund - Accounts for the remaining activity associated with the Binghamton Regency Hotel. The City sold the property in December 2010; the Enterprise Fund accounts for remaining activity. Internal Service Fund - Accounts for special activities or services provided by one department to other departments or to other governments on a cost-reimbursement basis, and for insurance coverage when the Board has decided to have a self-insurance program on an actuarial basis. The reimbursements and premiums are treated as operating revenues of the Internal Service Fund and as expenditures/expenses of the reimbursing or insured fund. Included is the following: Self-Insurance Funds for Workers' Compensation - Accounts for the accumulation of resources for payment of compensation, assessments, and other obligations under Workers' Compensation Law, Article 5. - 18 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 c. Fiduciary Fund Types Fiduciary Fund Types are used to account for assets held by the local government in a trustee or custodial capacity. The City reports the following Fiduciary Funds: Agency Fund - Accounts for money and/or property received and held in the capacity of trustee, custodian or agent. Private Purpose Trust Fund - Accounts for local pension funds. C. Basis of Accounting/Measurement Focus Basis of accounting refers to when revenues and expenditures and the related assets and liabilities are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus. Measurement focus is the determination of what is measured, i.e. expenditures or expenses. 1. Accrual Basis - The Government-wide financial statements, Proprietary Fund Types and Fiduciary Fund financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets, as well as infrastructure assets and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recognized when incurred. 2. Modified Accrual Basis - Under this basis of accounting, revenues are recorded when measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Material revenues that are accrued include real property taxes, state and federal aid, sales tax, and certain user charges. The City considers property tax receivables collected within 60 days after year end to be available and recognizes them as revenues of the current year. All other revenues deemed collectible within one year after year end are recognized as revenues in the current year. If expenditures are the prime factor for determining eligibility, revenues from federal and state grants are accrued when the expenditure is made. Expenditures are recorded when incurred. The cost of capital assets is recognized as an expenditure when received. Exceptions to this general rule are that 1) principal and interest on indebtedness are not recognized as an expenditure until due, and 2) compensated absences, such as vacation and sick leave, which vests or accumulates, are charged as an expenditure when paid. - 19 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 D. Deferred Inflows of Resources In addition to liabilities, the Statement of Net Position and the Balance Sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has only one type of deferred inflow, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental fund Balance Sheet. The governmental fund reports unavailable revenues from loans receivable. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. E. Inventory Inventory is valued at cost utilizing the first-in, first-out method for the General Fund. The cost of governmental fund type inventories are recorded as expenditures when consumed rather than when purchased. F. Property Taxes Real property taxes are levied annually by the City no later than December 31, and become a lien on January 1. City taxes are collected in two installments, the first due January 31 and the second due July 31. Effective September 1, 2006, the City signed an intermunicipal agreement with Broome County (County) for the purposes of tax billing, collection, and enforcement of property taxes for the City and the Binghamton City School District. As part of this agreement, the City turned over outstanding delinquent taxes, In Rem Agreements, Payment in Lieu of Tax Agreements, and foreclosures. The County paid the City $3,000,000 and agreed to pay the City for amounts collected that exceed that amount. The City has increased its allowance for doubtful accounts to cover the remaining amounts due under this agreement. The City is working with the County to determine if any funds remain to be th st paid. The County pays the City on or before February 15 (for the January 31 installment) and th st August 15 (for the July 31 installment). G. Receivables Amounts due from state and federal governments represent amounts owed to the City to reimburse it for expenditures incurred pursuant to state and federally funded programs. Other receivables represent amounts owed to the City including sewer rents, water rents, rehabilitation loans, and assessments. Provisions have been made for uncollectible accounts as considered appropriate by management. All receivables net of estimated allowances for uncollectible amounts are expected to be collected within the subsequent fiscal year. - 20 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 H. Cash and Cash Equivalents For financial statement purposes, all highly liquid investments with initial maturities of three months or less are considered cash equivalents. I. Capital Assets All capital assets are valued at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight-line basis over the estimated useful lives of the assets. Governmental capital assets purchased or acquired with an original cost of over $5,000, and having a useful life of greater than three years are capitalized. The estimated useful lives for governmental capital assets are as follows: Buildings Improvements other than buildings Machinery and equipment Infrastructure Water System 30 - 60 years 10 - 20 years 6 - 15 years 5 - 60 years 65 years No interest on construction in progress has been capitalized. J. Insurance The City assumes the liability for most risk including, but not limited to, property damage and personal injury liability. Judgments and claims are recorded when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. K. Vacation and Sick Leave and Compensatory Absences The City recognizes a liability for vacation leave and other compensated absences with similar characteristics and additional salary-related payments as the benefits are earned by the employees, based on the rendering of past service and the probability the employees will be compensated for the benefits through paid time off or some other means. This includes vacation leave and other compensated absences with similar characteristics earned but not used during the current or prior periods and for which employees can receive compensation in a future period. Amounts do not include leave expected to lapse and do include leave that (new) employees will (eventually) qualify for. In addition, the City recognizes a liability for vesting sick leave and other compensated absences with similar characteristics and additional salary-related payments as employees earn benefits and to the extent it's probable that the City will compensate the employees for the benefits through cash payments (which may be conditioned on the employees' termination or retirement), rather than be taken as absences due to illness or other contingencies. The liability for compensated absences is calculated at rates in effect as of the balance sheet date and is recorded in the Governmental Funds inasmuch as it will be funded from current financial resources. The Statement of Net Position records this current portion, as well as amounts to be paid from future financial resources. - 21 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 L. Other Postretirement Benefits In addition to providing pension benefits, the City provides health insurance coverage and survivor benefits for retired employees and their survivors in accordance with employment contracts. Substantially all of the City's employees may become eligible for these benefits if they reach normal retirement age while working for the City. Health care benefits and survivors benefits are provided through an insurance company whose premiums are based on the benefits paid during the year. The City recognizes the cost of providing benefits in accordance with GASB Statement No. 45, as discussed in Note 3.B.4. M. Use of Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. N. Restricted Resources When an expense is incurred for purposes for which both restricted and unrestricted net resources are available, it is the City’s policy to apply restricted funds before unrestricted funds, unless otherwise prohibited by legal requirements. Certain assets are classified on the Balance Sheet as restricted because their use is limited. The proceeds of bond and note sales may only be used for the stated borrowing purpose. Community Development Block Grant Funds must be used for approved programs only. O. Equity Classifications 1. Government-wide Financial Statements Equity is classified as net position and displayed in three components:  Net Investment in Capital Assets - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings attributable to the acquisition, construction, or improvement of those assets.  Restricted - Consists of resources with constraints placed on the use either by 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or 2) law through constitutional provisions or enabling legislation.  Unrestricted - Consists of all other resources that do not meet the definition of “restricted” or “net investment in capital assets.” - 22 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 2. Governmental Fund Financial Statements The City reports fund balance to reflect spending constraints on resources, rather than availability for appropriation. This approach is intended to provide users more consistent and understandable information about a fund’s net resources. Constraints are broken into five classifications: nonspendable, restricted, committed, assigned, and unassigned. These classifications serve to inform readers of the financial statements of the extent to which the government is bound to honor any constraints on specific purposes for which resources in a fund can be spent.  Nonspendable Consists of assets inherently nonspendable in the current period either because of their form or because they must be maintained intact; including prepaid items, inventories, long-term portions of loans receivable, financial assets held for resale, and endowments principal.  Restricted Consists of amounts subject to legal purpose restrictions imposed by creditors, grantors, contributors, or laws and regulations of other governments and enforced externally; or through constitutional provisions or enabling legislation.  Committed Consists of amounts subject to a purpose constraint imposed by formal action of the government’s highest level of decision-making authority prior to the end of the fiscal year, which requires the same level of formal action to remove said constraint.  Assigned Consists of amounts subject to a purpose constraint representing an intended use established by the government’s highest level of decision-making authority, or their designated body or official. The purpose of the assignment must be narrower than the purpose of the General Fund. In funds other than the General Fund, assigned fund balance represents the residual amount of fund balance.  Unassigned Represents the residual classification of the government’s General Fund, and could report a surplus or deficit. In funds other than the General Fund, the unassigned classification should only be used to report a deficit balance resulting from overspending amounts restricted, committed, or assigned for specific purposes. P. Interfund Activity Interfund activity is reported as either loans, services provided, reimbursements or transfers. Loans are reported as interfund receivables and payables as appropriate, and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. - 23 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 Note 2 - Stewardship, Compliance, Accountability A. Deficit Fund Balances The Sewer Fund had a deficit fund balance of $(4,481,006) due to expenditures incurred to operate the Binghamton-Johnson City Joint Sewage and Waste Water Treatment Plant. In 2015, the owners of the Joint Sewage Plant changed some of the capital projects at the Plant which will decrease the payables due and decrease the deficit fund balance by more than $1,800,000. The Capital Projects Fund had a deficit fund balance of $(17,443,581), as the City’s Bond Anticipation Notes are accounted for as short-term debt in the Fund. The deficit fund balance will be eliminated as the Bond Anticipation Notes are converted to long-term debt. The Parking Ramps Fund had a deficit fund balance of $(350,377) due to current and previous years' excess of expenditures over revenues. Revenue increases were instituted in 2011 and 2012. Other methods of subsidizing the parking ramps for benefit to the community in excess of fees collected are being explored. The Internal Service Fund had a net position (deficit) of $(1,302,473) due to timing of funding and accrued liabilities. This Fund captures the combined Workers Compensation run-out claims, and General Municipal Law 207c claims for all city employees as well as stop-loss coverage and the expenses associated with being self-insured. Accrued liabilities of the fund are based on actuarially determined liabilities, and are not funded. The Enterprise Fund had a deficit fund balance of $(1,603,795), resulting from the sale of the applicable property (Regency Hotel). The City has received approval from HUD to extend repayment of the remaining loan balance until August 1, 2019. Note 3 - Detailed Notes A. Assets 1. Cash and Investments The City's investment policies are governed by state statutes. In addition, the City has its own written investment policy. City monies must be deposited in Federal Deposit Insurance Corporation (FDIC) insured commercial banks or trust companies located within the State. The Comptroller is authorized to use demand accounts and certificates of deposit. Permissible investments include obligations of the U.S. Treasury and U.S. Agencies, repurchase agreements, and obligations of New York State or its localities. Collateral is required for demand and time deposits and certificates of deposit not covered by federal deposit insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the state and its municipalities and school districts. The written investment policy requires repurchase agreements to be purchased from banks located within the state and that underlying securities must be obligations of the federal government. Underlying securities must have a market value of at least the cost of the repurchase agreement. - 24 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 Deposits and investments are valued at cost or cost plus interest. Total financial institution (bank) balances at December 31, 2014, per the banks, were $32,983,048, which were insured, and collateral, where required, was held by the City's agent in the City's name. 2. Other Receivables Other receivables at December 31, 2014 are as follows: Major Funds: General Fund: Accounts receivable $ Special Revenue Funds: Sewer Fund: Sewer rents receivable Allowance for doubtful accounts Total Sewer Fund 2,109,272 2,575,501 (125,000) 2,450,501 Capital Projects Fund: Accounts receivable 6,693 Non-Major Funds: Special Revenue Funds: Parking Ramps Fund - Accounts Receivable Water Fund - Water rents receivable Allowance for doubtful accounts Refuse and Garbage Fund - Fees Total Non-Major Funds 8,177 2,062,141 (100,540) 316,383 2,286,161 Total Other Receivables - Governmental Funds 6,852,627 Internal Service Fund Accounts receivable 36,536 Total Other Receivables - Governmental Activities $ 6,889,163 3. Sales Taxes and Collection Broome County imposes a 4% sales tax on sales within the County. The County imposed tax is administered and collected by the State Tax Commission in the same manner as that relating to the State imposed 4% (June 1, 2005) sales and compensating use tax. The County remits a portion of sales tax collected to local municipalities, including the City. Net collections, meaning monies collected after deducting expenses of administration and collections and amounts refunded or to be refunded, but inclusive of any applicable penalties and interest, are paid by the State to the County, respectively. In 2014, payments from the County to the City aggregated $10,026,100. - 25 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 4. Property and Equipment A summary of changes in capital assets at December 31, 2014 follows: Balance at 12/31/13 Governmental Activities Non-depreciable Capital Assets: Land Construction in progress Total Non-depreciable Capital Assets $ Balance at 12/31/14 Deletions 4,279,869 $ $ $ 2,455,660 15,976,789 (11,282,996) 6,735,529 15,976,789 (11,282,996) Depreciable Capital Assets: Buildings and improvements Machinery and equipment Infrastructure Total Depreciable Capital Assets 4,279,869 7,149,453 11,429,322 32,949,788 23,324,357 445,991,723 502,265,868 845,020 11,282,996 12,128,016 (238,739) (238,739) 32,949,788 23,930,638 457,274,719 514,155,145 509,001,397 28,104,805 (11,521,735) 525,584,467 (21,861,553) (13,542,978) (164,219,250) (199,623,781) (464,521) (1,228,888) (8,003,257) (9,696,666) Total Historical Cost Less Accumulated Depreciation: Buildings and improvements Machinery and equipment Infrastructure Total Accumulated Depreciation Additions (22,326,074) (14,558,848) (172,222,507) (209,107,429) 213,018 213,018 Governmental Activities Capital Assets, Net $ 309,377,616 $ 18,408,139 $ (11,308,717) $ 316,477,038 Depreciation expense was charged to functions as follows: Governmental Activities General governmental support Public safety Transportation Culture and recreation Home and community services Total Governmental Activities Depreciation Expense - 26 - $ 1,564,300 420,490 2,244,485 245,254 5,222,137 $ 9,696,666 CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 B. Liabilities 1. Pension Plans a. NYS Sponsored Plans Plan Description - The City participates in the New York State and Local Employees' Retirement System (ERS), the New York State and Local Police and Fire Retirement System (PFRS), and the Public Employees' Group Life Insurance Plan (Systems). These are cost-sharing multiple-employer defined benefit public employee retirement systems. The Systems provide retirement benefits as well as death and disability benefits. Obligations of employers and employees to contribute and benefits to employees are governed by the New York State Retirement and Social Security Law (NYSRSSL). As set forth in the NYSRSSL, the Comptroller of the State of New York (Comptroller) serves as sole trustee and administrative head of the Systems. The Comptroller shall adopt and may amend rules and regulations for the administration and transaction of the business of the Systems and for the custody and control of their funds. The Systems issue a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the New York State and Local Retirement Systems, 110 State Street, Albany, NY 12244. Funding Policy - The Systems are noncontributory except for employees who joined the New York State and Local Employees' Retirement System after July 27, 1976 who contribute 3% of their salary. Under the authority of the NYSRSSL, the Comptroller shall certify annually the rates expressed as proportions of payroll of members, which shall be used in computing the contributions required to be made by employers to the pension accumulation fund. The City is required to contribute at an actuarially determined rate. contributions for the current year and two preceding years were: Year 2014 2013 2012 $ ERS 2,470,316 2,600,259 2,590,272 $ The required PFRS 4,994,560 5,111,965 4,013,150 The City's contributions made to the System were equal to 100% of the contributions required for each of the years. The System’s pension relief legislation (New York State Chapter 620, Laws of 2004) was enacted to provide employers with relief in payment of their annual ERS cost. This legislation provides several options to employers, including delaying payments from December 15 to February 6 of the ensuing year, payment of a portion of their cost over an amortized period, and the means to issue serial bonds to provide funding for the employer’s liability. In addition, the employer was given the option of making full payment on December 15 at a discounted amount. The City exercised its option of making payment on December 15, 2014, equal to 100% of the contributions required for the year. - 27 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 b. Locally Sponsored Plan Plan Description - All of the City’s full time Police and Fire employees hired between 1912 and 1935 became participants in the Police and Fire Pension Fund (PFPF), a singleemployer, defined benefit pension plan. There is no employee payroll for these plans. Current membership in the PFPF is 1 retiree and beneficiary in the Police Group. The remaining survivor died in 2015, and plan contributions will not be needed after that date. Surviving widows of retirees are entitled to a uniform monthly benefit, which amounted to $212 as of December 31, 2014. The City funded the plans with general fund contributions. There were no employee contributions. The funding was estimated using the projected unit credit method. Annual Required Contribution and Net Pension Obligation - During the year ended December 31, 2014 no contributions were required or made. Significant actuarial assumptions used to compute past year’s contributions were the same as those used to compute the net pension obligation. The actuarial value of the assets in the Fire Group exceeded the actuarial accrued liabilities at December 31, 2014. There was no net pension obligation. The actuarial value of the assets in the Police Group did not exceed the actuarial accrued liabilities at December 31, 2014, and the General Fund transfers funds as needed. The City transferred $5,860 from the General Fund to the Police Group of the PFPF during the year ended December 31, 2014; $11,520 and $16,000 were transferred in the years ended December 31, 2013 and 2012, respectively. Plan Financial Statements - Statement of Plan Net Assets Police Group Assets Cash $ -0- Net Assets Fire Group $ 18,908 Total $ 18,908 $ 18,908 Plan Financial Statements - Statement of Changes in Plan Net Assets Additions Transfer from General Fund $ Deductions Benefits 5,860 5,076 Net Change in Plan Net Assets 784 Net Assets, Beginning of Year Net Assets, End of Year - 28 - 18,124 $ 18,908 CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 2. Short-term Debt Liabilities for Bond Anticipation Notes are generally accounted for in the Capital Projects Fund to finance capital projects. Principal payments on BANs must be made annually. State law requires BANs issued for capital purposes be converted to long-term obligations within five years after the original issue date. However, BANs issued for assessable improvement projects may be renewed for periods equivalent to the maximum life of the permanent financing, provided stipulated annual reductions of principal are made. BANs issued to the New York State Environmental Facilities Corporation (EFC) do not renew on an annual basis; funds are drawndown as needed, and converted to long-term debt at conclusion. BANs payable at December 31, 2014 in the Capital Fund consisted of the following: Date Issued 2009 2010 2011 2011 2012 2012 2012 2013 2014 2014 2014 Description Various Projects Various Projects Water Projects Various Projects Various Projects Various Projects City Hall improvements Demolition of flooded property Water and Sewer Projects Joint Sewer Project Various Projects Total Maturity Date 01/29/2015 01/29/2015 01/29/2015 01/29/2015 01/29/2015 01/29/2015 01/29/2015 01/29/2015 01/29/2015 01/30/2019 01/29/2015 $ $ Amount 910,000 2,225,000 2,450,000 1,978,000 3,165,000 1,587,000 1,300,000 3,500,000 2,000,000 4,528,948 10,120,576 33,764,524 Interest on short-term debt for the year ended December 31, 2014 was as follows: Interest paid Less: Interest accrued in the prior year Plus: Interest accrued in the current year Total Expense $ 386,263 (355,604) 220,288 $ 250,947 3. Long-term Debt At December 31, 2014, the total outstanding indebtedness of the City aggregated $122,118,371. Of this amount, $51,719,074 was subject to the constitutional debt limit and represented approximately 60% of its debt limit. - 29 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 a. Serial Bonds The City borrows money in order to acquire land or equipment or construct buildings and improvements. This enables the cost of these capital assets to be borne by the present and future taxpayers receiving the benefit of the capital assets. These long-term liabilities, which are full faith and credit debt of the local government, are recorded in the Statement of Net Position. The provision to be made in future budgets for capital indebtedness represents the amount exclusive of interest, authorized to be collected in future years from taxpayers and others, for the liquidation of the long-term liabilities. b. Other Long-term Debt and Liabilities In addition to the above long-term debt, the City had the following non-current liabilities: c.  Compensated Absences - Represents the unfunded value of the liability for compensated absences and is liquidated in the General, Parking Ramps, Water, Sewer, and Refuse and Garbage Funds.  Other Postemployment Benefits Payable - Represents the liability for future health insurance benefits. See Note 3.B.4 for more information.  Lease Obligations Payable - Represents the amount outstanding on a capital lease for energy improvements. The gross amount of assets in the Statement of Net Position recorded under capital leases is $3,120,195, which is recorded under buildings. The associated accumulated amortization of these assets is $2,402,954. Changes in Indebtedness and Other Long-term Liabilities The following is a summary of changes in the City’s indebtedness and long-term liabilities for the period ended December 31, 2014: Description General obligation debt Less: Refunding of debt Regency Hotel Bond Anticipation Notes Lease obligations payable Liability for other postemployment benefits Compensated absences Total Balance at New Issues/ Maturities/ Balance at Due Within 12/31/13 Additions Payments 12/31/14 One Year $ 81,590,000 $ 27,530,001 $ 22,935,000 $ 86,185,001 $ 5,785,000 (17,645,000) (17,645,000) 1,058,875 200,000 858,875 171,000 82,648,875 9,885,001 5,490,000 87,043,876 5,956,000 37,089,951 14,684,624 18,010,051 33,764,524 33,764,524 2,857,246 688,400 2,168,846 705,981 33,301,812 3,425,453 4,666,540 522,895 37,968,352 3,948,348 111,425 $ 159,323,337 $ 29,759,060 $ 24,188,451 $ 164,893,946 $ 40,537,930 Additions and deletions to the liability for other postemployment benefits and compensated absences are shown net, as it is impractical to determine these amounts separately. - 30 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 On June 7, 2012, $11,905,000 in general obligation bonds, with variable interest rates ranging from 3% to 5%, were issued to refund $12,230,000 of outstanding bonds with interest rates ranging from 3.5% to 4.5%. The proceeds of $11,905,000 were used to purchase U.S. government securities and pay bond issue costs. The securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the bonds. As a result, the $12,230,000 in bonds is considered defeased and the liability for those bonds has been removed from the financial statements. The outstanding principal of the defeased bonds was $11,955,000 at December 31, 2014. d. Debt Maturity Schedule The following is a statement of serial bonds with corresponding maturity schedules. Governmental Activities Description Water Projects Various Projects Wastewater Projects Water Projects Combined Sewer Overflow Wastewater Projects Various Projects Wastewater Projects Refunding Bonds - 2004 & 2005 Various Projects Various Projects General Capital Improvements Water and Sewer Improvements Refunding Bonds Refunding Bonds Date of Issue 2005 2005 2000 2000 2003 2005 2007 2010 2012 2012 2012 2014 2014 2014 2014 Interest 5.13% 5.13% 3.80% 4.60% 4.54% 3.00% 4.25% 4.11% 3.00% 2.00% 2.00% 3.79% 3.79% 2.63% 3.89% Total Maturity Date Outstanding 2017 $ 220,623 2017 3,229,377 2019 995,000 2022 6,015,000 2031 3,770,000 2034 14,425,000 2029 1,850,000 2039 4,500,000 2026 11,630,000 2029 8,809,400 2029 3,210,600 2034 4,579,721 2034 5,305,280 2029 16,680,000 2029 965,000 $ Business Type Activities Description Regency Hotel - 31 - Date of Issue 1993 Interest 1.25% 86,185,001 Maturity Date Outstanding 2019 $ 858,875 CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 The following table summarizes the City's future debt service requirements as of December 31, 2014: Governmental Activities Year Ending Bonds December 31, Principal Interest 2015 $ 5,785,000 $ 3,827,955 $ 2016 5,995,000 3,588,106 2017 6,180,000 3,347,664 2018 5,160,001 3,076,655 2019 5,285,001 2,862,029 2020-2024 25,825,002 10,886,159 2025-2029 22,265,002 4,979,212 2030-2034 8,614,995 1,180,079 2035-2039 1,075,000 150,628 Total Installment Business Type Purchase Activities Principal Interest Principal Interest 705,981 $ 50,673 $ 171,000 $ 2,827 724,132 32,520 171,000 2,264 603,665 13,777 172,000 1,701 135,068 2,418 172,000 1,135 172,875 570 $ 86,185,001 $ 33,898,487 $2,168,846 $ 99,388 $ 858,875 $ 8,497 Interest on long-term debt for the year ended December 31, 2014 (including installment purchase agreements) is as follows: Interest paid $ Less: Interest accrued in the prior year Plus: Interest accrued in the current year Total Expense $ 3,186,235 (1,082,852) 1,111,105 3,214,488 4. Postemployment Benefits Other Than Pensions In 2008, the City adopted GASB Statement No. 45 “Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions.” Prior to 2008, the City reported the cost of its retiree health care postretirement benefits on a “pay-as-you-go” basis. An actuarial valuation of the City Postretirement Health Care Plans (Plan) was performed as of January 1, 2013 for the years ended December 31, 2014 and 2013 and January 1, 2010 for the fiscal years ending December 31, 2012, 2011, and 2010. The valuation of the Plan was performed using the entry age normal method. Plan Description. The Plan is a single-employer, defined benefit healthcare plan administered by the City. The Plan consists of a traditional indemnity plan, a self insured PPO plan, and a community rated Medicare supplemental plan to eligible retirees and dependents. The Plan provides medical and prescription drug benefits to eligible retirees, spouses, and their covered dependents. Benefit provisions are established through negotiations between the City and bargaining units and are renegotiated each three-year period. The City assigns the authority to establish and amend benefit provisions to the City Council for non-bargaining unit employees. The Plan does not issue a stand-alone financial report. - 32 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 The contribution requirements of Plan members and the City are established and may be amended by the City Council. The City Council has negotiated several collective bargaining agreements, which include obligations of Plan members and the City. The required contribution is based on projected pay-as-you-go financing requirements. Plan members receiving benefits may be required to contribute to the Plan depending on their collective bargaining unit. The City’s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and accumulate sufficient total accruals for all postretirement benefits when due. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the Plan, and changes in the City’s net OPEB obligation to the City’s Plan: Annual required contribution Interest on net OPEB obligation Adjustment to annual required contribution Total Annual OBEB Cost (Expense) Contributions made (expected) Increase in Net OPEB Obligation Net OPEB Obligation - January 1, 2014 Net OPEB Obligation - December 31, 2014 $ 8,157,310 1,332,072 (1,746,636) 7,742,746 (3,076,206) 4,666,540 33,301,812 37,968,352 $ The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation for 2014, 2013 and 2012 are as follows: Fiscal Year Ended 12/31/2014 12/31/2013 12/31/2012 $ $ $ Annual OPEB Cost 7,742,746 7,433,347 7,910,864 Percentage of Annual OPEB Cost Contributed 39.7% 35.1% 51.0% $ $ $ Net OPEB Obligation 37,968,352 33,301,812 28,477,440 Funded Status and Funding Progress - As of December 31, 2014, the Plan was not funded. Actuarial accrued liability for benefits was $83,374,986; there are no assets legally segregated for the Plan. The covered payroll (annual payroll of active employees covered by the Plan) was $31,003,710 and the ratio of the Unfunded Actuarial Accrued Liability (UAAL) to the covered payroll was 268.9%. Actuarial valuations of an ongoing Plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding funded status of the Plan and annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. - 33 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 Actuarial Methods and Assumptions - Projections of benefits for financial reporting purposes are based on the substantive Plan (the Plan as understood by the employer and the Plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and Plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2013, Actuarial Valuation Report, the entry age normal method was used. The actuarial value of assets was determined as the accumulation of prior accruals, less benefits paid. Actuarial assumptions included an annual discount rate of 4%. Additional actuarial assumptions included an annual medical cost trend rate of 9% initially, decreased by decrements to a trend rate of 5% after 4 years. C. Interfund Receivables and Payables During the course of normal operations, the City has numerous transactions between funds including expenditures and transfers of resources, primarily to provide services, which are routine annual events for the budget and accounting process. Interfund receivables and payables at December 31, 2014 were as follows: General Fund Sewer Fund Capital Projects Fund Non-Major Funds Interfund Receivables $ 2,397,234 $ 40,924 858,011 49,101 Total Governmental Funds 3,345,270 Internal Service Fund Enterprise Fund Agency Fund Total Interfund Payables $ 1,455,761 1,274,260 489,523 3,219,544 Interfund Revenue 840,777 $ 91,065 1,637,934 48,851 Interfund Expense 226,851 912,581 980,695 498,500 2,618,627 2,618,627 2,618,627 $ 2,618,627 409,936 744,920 1,029,130 $ 4,374,400 $ - 34 - 4,374,400 $ CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 D. Fund Equity 1. Restricted Fund Balance Restricted fund balance includes the following: Balance December 31, 2014 Purpose General Fund - Restricted: Retirement Contribution Retirement Benefits Debt Total $ Special Grant Fund - Restricted: Grant activities 2. $ 962,556 180,463 55,461 1,198,480 $ 1,884,068 Assigned Fund Balance Assigned fund balance includes the following: Purpose General Fund Appropriated for the 2015 budget Encumbrances Total Balance December 31, 2014 $ 1,506,013 226,940 1,732,953 Water Fund Remaining fund balance $ 1,808,556 Refuse and Garbage Fund Remaining fund balance $ 164,751 Note 4 - Joint Venture The following is the activity undertaken jointly with another municipality. Except for their equity interest in the joint venture, this activity is excluded from the financial statements of the participating municipalities. Separate financial statements are issued for this joint venture and may be obtained from the City Comptroller’s office. - 35 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 A sewage project is operated jointly with the Village of Johnson City (Village), under an agreement originally dated July 14, 1965 and most recently amended March 20, 2013. The agreement is for an indefinite period. A six member board constitutes the governing body; three members of the board are appointed by the City, and three by the Village. Ownership of the project, operational and capital costs are shared by the participants as follows: City - 54.8%; Village - 45.2%. The board of the project has established charges at rates intended to be self-sustaining to cover all operating costs and debt service. In addition to providing services for the City and Village, the project also provides services for several other municipalities; the charges that are established are the same for the other municipalities. The following is an unaudited summary of financial information included in financial statements for the joint venture: Year Ending 12/31/2014 $ 50,284,760 52,935,153 (2,650,393) 16,306,910 17,139,636 Total Assets Total Liabilities Joint Venture Equity Total Revenues Total Expenses Note 5 - Public Entity Risk Pool A. Risk Financing The City’s Corporation Counsel reviews all claims made against the City and estimates liabilities, if any, based on expertise and experience. All amounts reflected as an estimated liability are at present value with no discount. No annuity contracts have been purchased to satisfy claims. Effective June 1, 1985, the City became self-insured for general liability exposure. A selfinsurance fund was established as an internal service fund to administer the City’s insurance program for general liability for all City departments and funds. Effective July 1, 1995, the City became self-insured for workers' compensation insurance. The City annually appropriates funds for compensation pay awarded to disabled employees or surviving family. The City is negotiating premium costs related to claims incurred prior to July 1, 1995 with the insurance carrier in force at that time. Effective December 1, 1999 the City purchased stop loss insurance for workers compensation claims. City officials believe annual appropriations, reserves and stop loss insurance are sufficient to liquidate the City’s obligations. Note 6 - Summary of Significant Commitments and Contingencies A. General Information The City is exposed to various risks of loss related to, but not limited to, torts; theft of, damage to, and destruction of assets; injuries to employees; errors and omissions; natural disasters. Settled claims from these risks have not exceeded commercial insurance coverage for the past three years. - 36 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 B. Judgments and Claims The City and/or its agencies are named in several lawsuits, some of which are for substantial amounts. These claims are either adequately covered by insurance or, in the opinion of City officials, will not result in material judgments against the City or will not be pursued and, therefore, are not expected to have a material effect on the basic financial statements. C. State and Federally Assisted Programs The City receives many different state and federal grants to be used for specific purposes. These grants are generally conditioned on compliance with certain statutory, regulatory and/or contractual requirements. The City makes every effort to comply with all applicable requirements. However, because these grants are audited from time to time, it is possible that the City will be required, upon audit, to repay portions of the grant monies received and recorded as revenue in a prior year. City officials do not anticipate material grant-in-aid disallowances, and no provision, therefore, is reflected in the basic financial statements. D. Tax Certiorari Proceedings Various tax certiorari proceedings pending against the City as of December 31, 2014 seek reductions in property tax assessments. The City’s Assessment Rolls were changed to full market value in 1994, and are updated on a regular basis. Negotiations continue to settle open cases. E. Hotel In 1993 the City utilized a Section 108 loan in the amount of $1,400,000 to provide permanent financing to a local hotel. The hotel was sold in December 1998. The collateral for the loan is secured by the personal guarantees of the former owners. The term of this loan is 20 years, and principal payments began in 1999. In 2008 the City refinanced its agreement with the U.S. Department of Housing and Urban Development (HUD) and has been paying interest at variable rates. The City was not required to pledge its full faith and credit. The required security is limited to future federal grants under the Housing & Community Development Act of 1974, proceeds from foreclosure sale of the property, and if necessary, certain other funds generated by Federal Grant Programs. The City has been granted an extension from HUD to complete repayment of the loan to August 1, 2019. F. Stadium In 1992 the BURA agreed to make certain payments as an incentive for private investment in a municipal stadium development plan located on blighted railroad land. The obligations to Sterling Doubleday, L.P. as developer were satisfied in 1996. The other obligation is to the Binghamton Mets Baseball Club, Inc. for an annual repair and replacement payment. During 2014, payment of $50,000 was made. - 37 - CITY OF BINGHAMTON NOTES TO FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 Note 7 - Subsequent Events In January of 2015, the City issued $12,006,255 of serial bonds, and redeemed Bond Anticipation Notes. Repayments begin in 2016 and continue through 2040, with interest ranging from 3.25% to 4.25. In July 2015, the City refunded $3,495,000 in an outstanding bond, originally issued in 2005. Repayments on the refunded debt will continue through 2017. In September of 2015, NYSEFC refinance a bond issued in 2005 on the City’s behalf. Repayments begin in 2016 and continue through 2034, with interest ranging from 3.808% to 4.569%. - 38 - CITY OF BINGHAMTON BUDGETARY COMPARISON SCHEDULE GENERAL FUND - NON-GAAP BUDGET BASIS FOR THE YEAR ENDED DECEMBER 31, 2014 Original Budget REVENUES Real property taxes Real property tax items Nonproperty tax items Departmental income Intergovernmental charges Use of money and property Licenses and permits Fines and forfeitures Sale of property and compensation for loss Miscellaneous local sources Interfund revenues State sources Federal sources Total Revenues Final Budget $ 36,334,924 $ 531,408 11,334,313 1,424,400 466,226 127,670 224,850 516,500 90,500 217,765 931,926 9,880,957 175,503 62,256,942 EXPENDITURES Current: General governmental support Public safety Public health Transportation Economic assistance and opportunity Culture and recreation Home and community services Employee benefits Debt Service: Principal and Interest Total Expenditures Excess of Revenues (Expenditures) OTHER FINANCING SOURCES (USES) Interfund transfers in Interfund transfers (out) Total Other Financing (Used) Sources Excess of (Expenditures) and Other (Uses) Over Revenues and Other Financing Sources 36,334,924 $ 36,303,480 $ 531,408 785,852 11,334,313 10,999,064 1,440,000 1,459,263 506,344 600,009 127,670 96,185 224,850 205,705 516,500 704,412 187,150 283,745 297,172 2,049,746 931,926 934,926 9,880,957 9,877,880 468,277 616,087 62,781,491 64,916,354 $ -0- 6,369,076 21,430,596 43,398 2,394,373 215,414 2,778,258 2,060,493 17,907,279 5,869,194 62,008,811 6,152,272 62,897,634 6,151,254 59,350,141 226,940 1,018 3,320,553 5,566,213 (226,940) 5,455,416 248,131 (116,143) (248,131) (248,131) (248,131) (248,131) (364,274) 71,808 42,725 91 19,444 (31,444) 254,444 (335,249) 19,263 93,665 (31,485) (19,145) 187,912 96,595 1,752,574 3,000 (3,077) 147,810 2,134,863 6,769,303 21,804,889 44,713 2,423,648 222,030 3,002,255 2,128,998 20,349,526 -0- 92,220 652 840,777 (226,851) 613,926 6,180,139 $ -0- (226,940) $ 364,274 $ Variance Fav./(Unfav.) Encumbrances 6,418,071 21,376,654 44,233 2,335,042 226,461 2,831,079 2,159,214 20,748,863 Appropriated Fund Balances Net Change in Fund Balance Actual -0- $ Fund Balance, Beginning -0- 6,180,139 9,781,801 Fund Balance, Ending $ 15,961,940 See Independent Auditor's Report and Notes to Required Supplementary Information - 39 - 328,419 331,568 1,224 9,831 6,616 131,777 67,853 2,442,247 840,777 21,280 862,057 6,317,473 CITY OF BINGHAMTON BUDGETARY COMPARISON SCHEDULE BUDGETED MAJOR SPECIAL REVENUE FUNDS - NON-GAAP BUDGET BASIS FOR THE YEAR ENDED DECEMBER 31, 2014 Sewer Fund Original Budget REVENUES Departmental income Use of money and property Miscellaneous local sources Total Revenues Final Budget $ 10,521,011 $ 596,901 EXPENDITURES Current: General governmental support Home and community services Employee benefits Debt Service: Principal and interest Total Expenditures Excess of Revenues Over (Expenditures) OTHER FINANCING SOURCES (USES) Interfund transfers in Interfund transfers (out) Total Other Financing (Uses) Excess of (Expenditures) and Other (Uses) Over Revenues and Other Financing Sources 10,521,011 $ 596,901 11,117,912 136,247 5,812,209 756,377 136,247 5,835,838 747,406 88,747 5,223,103 619,695 4,073,079 10,777,912 3,500,498 10,219,989 3,284,722 9,216,267 340,000 897,923 556,208 (340,000) (340,000) (912,581) (912,581) 91,065 (912,581) (821,516) -0- (14,658) Variance Fav./(Unfav.) Encumbrances 9,170,863 $ 513,089 88,523 9,772,475 11,117,912 Appropriated Fund Balances Net Change in Fund Balance Actual (265,308) $ $ (1,350,148) (83,812) 88,523 (1,345,437) -0- 47,500 609,398 127,711 3,337 215,776 1,000,385 3,337 (3,337) (345,052) -0- 91,065 -091,065 (3,337) $ (253,987) 14,658 $ -0- $ -0- (265,308) Fund Balance (Deficit), Beginning (4,215,698) Fund Balance (Deficit), Ending $ (4,481,006) See Independent Auditor's Report and Notes to Required Supplementary Information ` - 40 - CITY OF BINGHAMTON SCHEDULE OF FUNDING PROGRESS FOR THE YEAR ENDED DECEMBER 31, 2014 Actuarial Accrued Liability (AAL) Entry Age Actuarial Value of Assets Year Ended Unfunded AAL (UAAL) Funded Ratio POLICE FUND 12/31/2014 $ 18,908 $ 18,908 $ -0- 100.00% 12/31/2013 $ 18,124 $ 18,124 $ -0- 100.00% 12/31/2012 $ 29,758 $ 94,095 $ 64,337 46.25% 12/31/2011 $ 18,834 $ 83,171 $ 64,337 29.27% 12/31/2010 $ (609) $ 63,728 $ 64,337 (0.95)% 12/31/2009 $ (22,457) $ 41,880 $ 64,337 (34.91)% 12/31/2008 $ (38,287) $ 26,050 $ 64,337 (59.51)% 12/31/2007 $ (22,368) $ 41,969 $ 64,337 (34.77)% 12/31/2006 $ 3,013 $ 67,350 $ 64,337 4.47% FIRE FUND 12/31/2014 $ -0- $ -0- $ -0- 12/31/2013 $ -0- $ -0- $ -0- 12/31/2012 $ (17,344) $ (22,822) $ (5,478) (316.61)% 12/31/2011 $ (9,307) $ (14,785) $ (5,478) (169.90)% 12/31/2010 $ 2,537 $ (2,941) $ (5,478) 46.31% 12/31/2009 $ 17,765 $ 12,287 $ (5,478) 144.58% 12/31/2008 $ 32,993 $ 27,515 $ (5,478) 119.91% 12/31/2007 $ 48,222 $ 42,744 $ (5,478) 112.82% 12/31/2006 $ 63,450 $ 57,972 $ (5,478) 109.45% See Independent Auditor's Report and Notes to Required Supplementary Information - 41 - CITY OF BINGHAMTON SCHEDULE OF FUNDING PROGRESS FOR THE YEAR ENDED DECEMBER 31, 2014 Year Ended Actuarial Valuation Date Actuarial Value of Assets Actuarial Accrued Liability (AAL) Entry Age Unfunded AAL (UAAL) Funded Ratio Covered Payroll UAAL as a Percentage of Covered Payroll 12/31/2014 1/1/2013 $ -0- $ 83,374,986 $ 83,374,986 0.0% $ 31,003,710 268.9% 12/31/2013 1/1/2013 $ -0- $ 79,119,248 $ 79,119,248 0.0% $ 25,775,259 307.0% 12/31/2012 1/1/2010 $ -0- $ 82,452,268 $ 82,452,268 0.0% $ 29,549,822 279.0% 12/31/2011 1/1/2010 $ -0- $ 82,452,268 $ 82,452,268 0.0% $ 31,137,684 264.8% 12/31/2010 1/1/2010 $ -0- $ 130,997,882 $ 130,997,882 0.0% $ 24,923,657 525.6% 12/31/2009 1/1/2008 $ -0- $ 130,997,882 $ 130,997,882 0.0% $ 24,923,657 525.6% See Independent Auditor's Report and Notes to Required Supplementary Information - 42 - CITY OF BINGHAMTON NOTES TO REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2014 Note 1 - Budgeting Policies The budget policies are as follows: 1. No later than September 15, the budget officer submits a tentative budget to the City Council for the fiscal year commencing the following January 1. The tentative budget includes proposed expenditures and the proposed means of financing for all funds. 2. After public hearings are conducted to obtain taxpayer comments, no later than December 31, the governing board adopts the budget. 3. All modifications of the budget must be approved by the governing board. (However, the Comptroller is authorized to transfer certain budgeted amounts within departments.) Note 2 - Budget Basis of Accounting Except as indicated below, budgets are adopted annually on a basis consistent with accounting principles generally accepted in the United States of America. Appropriations authorized for the current year are increased by the amount of encumbrances carried forward from the prior year. Encumbrances are not considered a disbursement in the financial plan or an expenditure in GAAP based financial statements. Encumbrances reserve a portion of the applicable appropriation for purchase orders, contracts, and other commitments not expended at year end, thereby ensuing that appropriations are not exceeded. An annual legal budget is not adopted for the Special Grant Fund, which is one of the Special Revenue Funds. Budgetary controls for the Special Grant Fund are established in accordance with the applicable grant agreements. Projects within the Special Grant Fund also cover periods other than the City’s fiscal year. Note 3 - Reconciliation of the General Fund Budget Basis to GAAP No adjustment is necessary to convert the General Fund’s excess of revenues and other sources over expenditures and other uses on the GAAP basis to the budget basis. Encumbrances, if present, are presented in a separate column and are not included in the actual results at December 31, 2014. Note 4 - Schedules of Funding Progress The Schedules of Funding Progress, presented as required supplementary information presents multi-year trend information about whether the actuarial value of Plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. - 43 - CITY OF BINGHAMTON COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS DECEMBER 31, 2014 Special Revenue Funds Parking Refuse and Ramps Water Garbage Fund Fund Fund Non-Major Governmental Funds ASSETS Assets: Cash and cash equivalents - Unrestricted Due from other funds Due from other governments Other receivables, net Prepaid expenses Total Assets $ $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Due to other funds Due to other governments Compensated absences Other liabilities $ 5,589 8,280 8,177 $ Total Liabilities 372,423 Deferred Inflows of Resources: Unavailable revenues Fund Balances: Nonspendable Assigned Unassigned Total Fund Balances (Deficit) (350,377) (350,377) Total Liabilities and Fund Balances $ 22,046 $ 231,177 11,710 $ 551,073 49,101 8,280 2,286,161 230,628 316,383 95,674 2,448,253 $ 654,944 $ 3,125,243 117,372 82,054 279,400 $ 57,987 7,368 $ 4,947 30 12,751 106,542 274,759 152,322 489,523 30 17,698 106,542 483,773 184,678 1,040,874 20,970 209,841 230,811 134,954 1,808,556 95,674 164,751 1,943,510 260,425 230,628 1,973,307 (350,377) 1,853,558 $ 2,448,253 See Independent Auditor's Report - 44 - $ 1,961,601 134,954 22,046 $ 99,400 62,900 210,123 319,896 31,802 $ 654,944 $ 3,125,243 CITY OF BINGHAMTON COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED DECEMBER 31, 2014 Special Revenue Funds Parking Ramps Fund REVENUES Departmental income Intergovernmental charges Use of money and property Sale of property and compensation for loss Miscellaneous local sources Interfund revenues Total Revenues $ 929,053 Water Fund $ 7,957,221 $ 916,726 56,625 $ 76,081 75 929,128 EXPENDITURES Current: General governmental support Transportation Home and community services Employee benefits Debt Service: Principal Interest Total Expenditures 973,351 88,747 2,330 3,442,834 1,265,361 985,060 155,287 91,077 672,955 4,427,894 1,420,648 1,142,677 1,624,902 655,006 8,892,482 672,955 204,016 145,810 1,022,781 1,420,886 509,196 6,727,024 (93,653) OTHER FINANCING SOURCES (USES) Interfund transfers in Interfund transfers (out) Total Other Financing Sources 5,339 (1,000) 4,339 Excess of (Expenditures) and Other (Uses) Over Revenues and Other Financing Sources (89,314) 1,445,389 (261,063) 498,121 Fund Balances (Deficit), Beginning $ (350,377) $ 1,911,087 31,802 (497,500) (465,698) 1,943,510 $ See Independent Auditor's Report - 45 - 9,803,000 56,625 76,081 75 456,619 148,190 10,540,590 456,619 148,190 8,638,111 Excess of (Expenditures) Revenues Fund Balances (Deficit), Ending Total Non-Major Governmental Funds Refuse and Garbage Fund (169,326) 1,648,108 11,710 48,851 (498,500) (449,649) 11,710 (157,616) 1,198,459 418,041 260,425 655,099 $ 1,853,558 Ciaschi  Dietershagen  Little  Mickelson & Company, LLP John H. Dietershagen, C.P.A. Jerry E. Mickelson, C.P.A. Thomas K. Van Derzee, C.P.A. Debbie Conley Jordan, C.P.A. Patrick S. Jordan, C.P.A. Duane R. Shoen, C.P.A. Lesley L. Horner, C.P.A. D. Leslie Spurgin, C.P.A. Certified Public Accountants and Consultants Frederick J. Ciaschi, C.P.A. 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 City Council City of Binghamton Binghamton, New York We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the businesstype activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Binghamton as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City of Binghamton’s basic financial statements, and have issued our report thereon dated September 29, 2015. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Binghamton'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 the City of Binghamton’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Binghamton’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control 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. - 46 - CORTLAND ITHACA WATKINS GLEN 39 Church Street Cortland, New York 13045 607-753-7439 fax 607-753-7874 401 East State Street ~ Suite 500 Ithaca, New York 14850 607-272-4444 fax 607-273-8372 www.cdlm.com 2 North Franklin Street, Suite 330 Watkins Glen, New York 14891 607-535-4443 fax 607-535-6220 Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Binghamton’s financial statements are free from 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 result of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. September 29, 2015 Ithaca, New York - 47 - Ciaschi  Dietershagen  Little  Mickelson & Company, LLP John H. Dietershagen, C.P.A. Jerry E. Mickelson, C.P.A. Thomas K. Van Derzee, C.P.A. Debbie Conley Jordan, C.P.A. Patrick S. Jordan, C.P.A. Duane R. Shoen, C.P.A. Lesley L. Horner, C.P.A. D. Leslie Spurgin, C.P.A. Certified Public Accountants and Consultants Frederick J. Ciaschi, C.P.A. INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 City Council City of Binghamton Binghamton, New York Report on Compliance for Each Major Program We have audited the City of Binghamton’s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the City of Binghamton’s major federal programs for the year ended December 31, 2014. The City of Binghamton’s major federal programs are identified in the summary of auditor’s results section of the accompanying Schedule of Findings and Questioned Costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the City of Binghamton’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Binghamton’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City of Binghamton’s compliance. - 48 CORTLAND ITHACA WATKINS GLEN 39 Church Street Cortland, New York 13045 607-753-7439 fax 607-753-7874 401 East State Street ~ Suite 500 Ithaca, New York 14850 607-272-4444 fax 607-273-8372 www.cdlm.com 2 North Franklin Street, Suite 330 Watkins Glen, New York 14891 607-535-4443 fax 607-535-6220 Opinion on Each Major Federal Program In our opinion, the City of Binghamton complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2014. Report on Internal Control Over Compliance Management of the City of Binghamton is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City of Binghamton’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City of Binghamton’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A133. Accordingly, this report is not suitable for any other purpose. September 29, 2015 Ithaca, New York - 49 - CITY OF BINGHAMTON, NEW YORK SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED DECEMBER 31, 2014 Federal CFDA # Federal Grantor/Pass - Through Grantor Program Title U.S. Department of Housing and Urban Development Community Development Block Grant: Entitlement Grant Entitlement Grant - Section 108 Loan Total Community Development Block Grant Emergency Shelter Grants Program Home Investment Partnerships Program Community Challenge Planning Grants Pass - Through Grantor # 14.218 14.218 N/A N/A 14.231 14.239 14.704 N/A N/A N/A Expenditures $ 138,594 651,581 210,931 Total U.S. Department of Housing and Urban Development U.S. Department of Transportation Passed Through NYS Department of Transportation: Highway Planning and Construction 1,785,351 203,559 1,988,910 2,990,016 20.205 (1) 2,030,050 2,030,050 Total U.S. Department of Transportation U.S. Department of Justice Byrne Justice Assistance Grant Public Safety Partnership and Community Policing Grants - ARRA 16.738 16.710 N/A N/A 98,055 359,005 457,060 Total U.S. Department of Justice U.S. Department of Homeland Security Staffing for Adequate Fire and Emergency Response Passed through New York State Division and Homeland Security and Emergency Services: FEMA Hazard Mitigation Grants FEMA Public Assistance Grants 97.083 N/A 97.039 97.036 4031DR NY 4031DR NY 285,821 2,119,692 500,956 Total U.S. Department of Homeland Security 2,906,469 Total Expenditures of Federal Awards $ (1) Unable to obtain See Independent Auditor's Report and Notes to Schedule of Expenditures of Federal Awards - 50 - 8,383,595 CITY OF BINGHAMTON NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED DECEMBER 31, 2014 Note 1 - Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards presents the activity of all federal awards programs administered by the City, an entity as defined in Note 1 to City’s basic financial statements. Federal awards received directly from federal agencies, as well as federal awards passed through from other government agencies, are included on the Schedule of Expenditures of Federal Awards. Note 2 - Basis of Accounting The basis of accounting varies by federal program consistent with the underlying regulations pertaining to each program. The amounts reported as federal expenditures generally were obtained from the appropriate federal financial reports for the applicable program and periods. The amounts reported in these federal financial reports are prepared from records maintained for each program. These records are periodically reconciled to the general ledger which is the source of the financial statements. - 51 - CITY OF BINGHAMTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED DECEMBER 31, 2014 Section I - Summary of Auditor’s Results: Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting: Material weakness(es) identified? yes x no Significant deficiency(ies) identified that are not considered to be material weakness(es)? yes x none reported Noncompliance material to financial statements noted? yes x no Federal Awards Internal control over major programs: Material weakness(es) identified? yes x no Significant deficiency(ies) identified that are not considered to be material weakness(es)? yes x none reported x no x no Type of auditor’s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? yes Identification of major programs: CFDA Number(s) Name of Federal Program or Cluster 14.239 Home Investment Partnerships Program 97.039 FEMA Hazard Mitigation Grant 97.036 FEMA Public Assistance Grants 20.205 Highway Planning and Construction Dollar threshold used to distinguish between type A and type B programs Auditee qualified as low-risk auditee: $300,000 yes - 52 - CITY OF BINGHAMTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2014 Section II - Financial Statement Findings: None Section III - Federal Award Findings and Questioned Costs: None - 53 -