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R-2019-0123 - 2/28/2019 RESOLUTION NO. R-2019-0123 WHEREAS,the City of Round Rock's Comprehensive Annual Financial Report("Report")for the fiscal year ended September 30, 2018 has been submitted to the City Council, and WHEREAS, the City Council desires to acknowledge the receipt and acceptance of the attached Report, Now Therefore BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS, That the City of Round Rock's Comprehensive Annual Financial Report for the fiscal year ended September 30, 2018, attached hereto as Exhibit "A" and incorporated herein, is hereby received and accepted. The City Council hereby finds and declares that written notice of the date,hour,place and subject of the meeting at which this Resolution was adopted was posted and that such meeting was open to the public as required by law at all times during which this Resolution and the subject matter hereof were discussed, considered and formally acted upon, all as required by the Open Meetings Act, Chapter 551, Texas Government Code, as amended. RESOLVED this 28th day of February, 2019. - 1,,;(4 Z CRAIG ORG , Mayor City of ound ck, Texas ATTEST: ��. V&4 SARA L. WHITE, City Clerk 0112.1902,00418628 Alikk EXHIBIT ROUND ROCK TEXAS City of Round Rock, Texas Comprehensive Annual Financial Report Fiscal Year Ended September 30, 2018 ELECTED OFFICIALS Craig Morgan, Mayor Writ Baese, Mayor Pro Tem Tammy Young, Council Member Rene Flores, Council Member Matthew Baker, Council Member Will Peckham, Council Member Hilda Montgomery, Council Member MANAGEMENT STAFF Laurie Hadley City Manager Bryan Williams Assistant City Manager Brooks Bennett Assistant City Manager OFFICIAL ISSUING REPORT Susan L. Morgan, CPA Chief Financial Officer �� s'• r` �,�` `s i� s� �: ��'x, � � � ��-` �: '�=' '+� �'�,: � � ,. .. +•��Mr lil Y�4r�� l jJ #q��� � �^'��� TABLE OF CONTENTS INTRODUCTORY SECTION: Letter of Transmittal 3 City Organizational Chart 13 Certificate of Achievement for Excellence in Financial Reporting 14 FINANCIAL SECTION: Independent Auditors' Report 17 Management's Discussion and Analysis 21 Basic Financial Statements Government-Wide Financial Statements: Statement of Net Position 34 Statement of Activities 36 Fund Financial Statements: Governmental Funds: Balance Sheet 38 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 41 Statement of Revenues, Expenditures and Changes in Fund Balances 42 Reconciliation of the Statement of Revenues,Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 44 Statement of Revenues,Expenditures and Changes in Fund Balance- Budget and Actual—General Fund 45 Statement of Revenues,Expenditures and Changes in Fund Balance- Budget and Actual—Round Rock Transportation and Economic Development Corporation Fund 46 Proprietary Funds: Statement of Net Position 48 Statement of Revenues,Expenses and Changes in Net Position 50 Statement of Cash Flows 51 Notes to the Financial Statements 55 Required Supplementary Information Schedule of Changes in the Net Pension Liability and Related Ratios 108 Schedule of Contributions 110 Schedule of Changes in the Total OPEB Liability and Related Ratios 111 TABLE OF CONTENTS Combining and Individual Fund Statements and Schedules Nonmajor Governmental Funds: Combining Balance Sheet-Nonmajor Governmental Funds 113 Combining Statement of Revenues, Expenditures and Changes in Fund Balance—Nonmajor Governmental Funds 114 Combining Balance Sheet—Nonmajor Special Revenue Funds 116 Combining Statement of Revenues,Expenditures and Changes in Fund Balances— Nonmajor Special Revenue Funds 118 Combining Balance Sheet—Nonmajor Capital Projects Funds 122 Combining Statement of Revenues,Expenditures and Changes in Fund Balances— Nonmajor Capital Projects Funds 124 Schedules of Revenues,Expenditures and Changes in Fund Balances— Budget and Actual: General Fund 128 Debt Service Fund 132 Nonmajor Special Revenue Funds: Community Development Block Grant 133 Hotel-Motel Occupancy Tax 134 Hotel-Motel Occupancy Venue Tax 135 Landscape 136 Library 137 Multipurpose Sports Complex 138 Municipal Court 139 Police 140 Public Education&Government 141 Traffic Safety Program 142 Supplemental Schedules: Schedule of Capital Assets for Governmental Activities 144 TABLE OF CONTENTS STATISTICAL SECTION(UNAUDITED): Financial Trends: Net Position by Component—Last Ten Fiscal Years 148 Changes in Net Position—Last Ten Fiscal Years 150 Fund Balances of Governmental Funds—Last Ten Fiscal Years 154 Changes in Fund Balances of Governmental Funds—Last Ten Fiscal Years 156 Revenue Capacity: Actual and Taxable Assessed Value of Property—Last Ten Fiscal Years 158 Property Tax Rates—Direct and Overlapping Governments Per$100 of Assessed Value—Last Ten Fiscal Years 159 Principal Property Taxpayers—Current Year and Nine Years Ago 160 Property Tax Levies and Collections—Last Ten Fiscal Years 161 Sales Tax and Ad Valorem Tax—Last Ten Fiscal Years 162 Taxable Sales by Category—Last Ten Calendar Years 164 Hotel Taxpayers 166 Hotel Occupancy Tax Collection History by Quarter—Last Ten Fiscal Years 167 Debt Capacity: Ratios of Outstanding Debt by Type—Last Ten Fiscal Years 168 Ratios of Net General Bonded Debt Outstanding to Assessed Value and Net Bonded Debt Per Capita—Last Ten Fiscal Years 169 Computation of Direct and Overlapping Bonded Debt 171 Legal Debt Margin Information—Last Ten Fiscal Years 172 Condensed Utility Statement of Operations—Last Ten Fiscal Years 174 Demographic and Economic Information: Demographic and Economic Statistics—Last Ten Fiscal Years 177 Principal Employers—Current Year and Nine Years Ago 178 Operating Information: Full-Time Equivalent City Government Employees by Function—Last Ten Fiscal Years 179 Operating Indicators by Function—Last Ten Fiscal Years 180 Capital Asset Statistics by Function—Last Ten Fiscal Years 182 Top Ten Water Customers 184 Water and Sewer Retail Rates 185 TABLE OF CONTENTS SINGLE AUDIT SECTION: Schedule of Expenditures of Federal Awards 189 Notes to Schedule of Expenditures of Federal Awards 190 Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with GovernmentAtiditingStandards 191 Independent Auditors' Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 193 Schedule of Findings and Questioned Costs 195 INTRODUCTORY SECTION i . Alm jY j/r 2 II1 1 Mayor Councitmembers City Manager Craig Morgan Tarnmy Young Laurie Hadley Rene Flores Matthew Baker ROUND ROCK TEXAS Mayor Pro-Tam Will Peckham City Attorney ADMINISTRATION Writ Baese Hilda Montgomery Stephan L. Sheets February 6,2019 Honorable Mayor and Members of the City Council City of Round Rock,Texas The Comprehensive Annual Financial Report of the City of Round Rock, Texas for the fiscal year ended September 30, 2018, is submitted herewith. This report has been prepared by the City's Finance Department and responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. We believe the data is accurate in all material aspects and is presented in a manner designed to clearly state the financial position and results of operations of the City as measured by the financial activity of its various funds. All disclosures have been included to enable the reader to gain the maximum understanding of the City's financial affairs. The City Charter requires an annual audit of the books of account, financial records and transactions of all departments of the City by independent certified public accountants selected by the City Council. Whitley Penn, L.L.P., Certified Public Accountants, have issued an unmodified("clean")opinion on the City of Round Rock's financial statements for the year ended September 30,2018. The independent auditors'report is located at the front of the financial section of this report. Management's discussion and analysis (MD&A) can be found immediately following the report of the independent auditors. The MD&A is a narrative introduction, overview and analysis to accompany the basic financial statements. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. City of Round Rock Profile The City of Round Rock,established in 1851,is a municipal corporation incorporated under Article Al Section 5 of the Constitution of the State of Texas (Home Rade Amendment). The City operates under a Council- Manager form of government with six council members and a mayor. The City Manager is appointed by the City Council and is responsible to them for managing and administering all City affairs. The Chief Financial Officer is appointed by the City Manager and is responsible for supervising the operations of the Finance Department. This department maintains all accounting records of the City. The financial reporting entity(the government) includes all the funds of the primary government (the City of Round Rock as legally defined) as well as its component units. Component units are legally separate entities for which the primary government is financially accountable. The City provides a full range of services which include police and fire protection,parks and library, construction and maintenance of infrastructure,planning and community development, convention and tourism activities, and general administrative services. In addition,the City owns and operates a water,sewer and drainage utility system. These activities are included in the accompanying financial statements. 3 CITY OF ROUND ROCK 221 East Main Street, Round Rack,Texas 78664 J.P] 512.218.5101 « [F] 512.218.7097» roundrocktexas.gov Blended component units,although legally separate entities,are in substance part of the primary government's operations and included as part of the primary government. Accordingly, Round Rock Transportation and Economic Development Corporation(RRTEDC)revenues are reported in a special revenue fund of the City. Annual budgets are legally adopted for the General Fund, Special Revenue Funds,Debt Service Fund,and the Proprietary Funds. Capital Projects Funds have no binding annual budget. Project-length financial plans are adopted for all capital projects; accordingly, no comparison of budget to actual is presented in the financial statements. Budgetary control is maintained at the department level by the encumbrance of estimated purchase amounts prior to the release of purchase orders to vendors. Purchase orders which result in an overrun of balances are not released until additional appropriations are made available. Significant Local Economic Events Strategic Goals The City of Round Rock is the largest city within Williamson County and is adjacent to the City of Austin. The City has experienced tremendous population growth which has led to an increased demand for city services. To adequately prepare for the effect of this activity on the City, much effort goes into planning and funding infrastructure and service programs. Each February, Council reviews the City's successes and challenges and refines both the short-term and long-term strategic goals for the City. These goals set the direction for the allocation of staff and financial resources and are the basis for the development of the following year's budget. ,... _p4flTS CAp. 4, mai — rfr . ROUND ROCK Financially Sound City Infrastructure for "Sports Capital of City Providing High Today and Tomorrow Texas"for Tourism Value Services and Residents 4 - Great Community Sustainable Authentic Downtown— to Live Neighborhoods— Exciting Community Old and New Destination 4 Economy Round Rock's economy is strong and vibrant.As the largest city in Williamson County and part of the Austin Metropolitan Statistical Area(MSA),Round Rock is a key city in one of the fastest growing regions in Texas and the country. From 2010 to the projected population for 2019, the City of Round Rock has experienced population growth of 15% over the past 10 years. Long-range population estimates predict this increase continuing at a growth rate of around 2%per year for the foreseeable future. The state's strong economy, low unemployment rate, and low rate of overall taxation continues to draw new residents and businesses into Central Texas. The population for 2030 is projected to be over 158,000 within the City limits and over 215,000 in Greater Round Rock, which includes the City limits and the City's extraterritorial jurisdiction (ETJ). While most of the long-range growth will likely occur in northeast Round Rock where there are still large tracts of land that could be developed into additional neighborhoods, population density will likely increase across the City as residential development continues for single family townhomes, multifamily apartments, and senior living facilities. The City is planning and preparing for this population growth to ensure the high-quality services Round Rock residents have come to expect are expanded to serve residents of today and of tomorrow. Round Rock businesses have seen continued growth in revenues, especially in the hotel and restaurant industries and more tourists and visitors come to enjoy Round Rock's "Sports Capital of Texas" sporting events, historic downtown, and unique blend of destination shopping experiences. The City had 3,000 hotel rooms at the end of fiscal year 2018 with another 1,500 in various stages of development. Occupancy rates remain among the highest in the state at 78%. This strong industry bodes well for the hotel occupancy tax collections which support local tourism events and debt service for the Dell Diamond/Convention Center,the home of the "Round Rock Express" Triple A Baseball team and the Round Rock Sports Center, the City's 82,800 square foot indoor sports venue which opened in January 2014. The first year of operations of the Round Rock Multipurpose Complex—a $27 million tournament class outdoor multipurpose sports complex which opened on May 18,2017— has contributed to the economic impact of an additional 30,000 visitors who attended a variety of regional and national tournaments and championships. Tourism is an important component of the City's overall economic development strategy. Round Rock continues to gain recognition for the value of the high-quality services provided to our residents. Below are a few of our most recent accolades: • Ranked number 5 by Niche.com as one of the"2018 Safest Cities in the Country" • Ranked number 3 by LendEDU as one of the"Best Cities to Start a Family" • Ranked number 4 by Livability.com as one of the`Best Affordable Places to Live" • Ranked number 2 by SmartAsset.com as one of the"Best Minor League Baseball Towns of 2018" • Ranked number 8 by SmartAsset.com as one of the"Best Cities for Living the American Dream" • Recognized by Thrillist Travel as "One of the Coolest Suburbs in America" Economic Development The City understands that diversification of Round Rock's economy is a key to financial stability. The local retail market place continues to thrive. The major destination retail hubs provide continued expansion and broaden Round Rock's economy.The Round Rock Premium Outlets'430,000-square foot outlet mall and the nearby Round Rock IKEA, serves as a destination for shoppers from Central Texas and beyond. The Round Rock IKEA celebrated its 101 anniversary in November 2016. Over the past 10 years IKEA has brought in over 18 million shoppers to the City from Texas, Mexico, and beyond. IKEA has diversified the City's economy and brought in millions of dollars in sales tax revenues. Round Rock Premium Outlets, IKEA, and similar destination-based retail stores like Bass Pro Shops which opened in 2015 were intentionally targeted by the City's economic development program to locate in Round Rock. These stores generate sales tax revenues for the City,bring in shoppers to the area which benefits neighboring retail and restaurants,and place a relatively low demand on City services such as police, fire,and parks and recreation.While traditional brick 5 and mortar retail continues to see declines, destination shopping, both in Round Rock and across the nation, continues to thrive. Dell is the largest employer in Round Rock with an estimated 13,000 employees in 2018. Since Dell relocated to Round Rock in 1994 the economic impact to the City has been transformative. Dell remains the City's largest sales tax payer with sales tax receipts projected to continue to grow into fiscal year 2019. Because of the company's commitment to Round Rock,the employment opportunities they offer,and the property tax and sales tax revenues they generate Dell remains a major driver to the City's economy. The City is excited to join with Dell in 2019 in celebrating the 25'anniversary of making Round Rock their home. The long-standing partnership between the City and Round Rock Chamber continues to attract new development to the City. The funding is leveraged with the Chamber Momentum Fund to create a public/private partnership for economic development priorities. This partnership continues to yield a new, inspired approach to economic development for Round Rock. The City will see new additions within the city limits in the next year resulting from these efforts. Round Rock's economy has become stronger and more diverse because of a variety of business relocations bringing capital investment,job opportunities, and new residents to the City. Emerson Process Management opened its$70 million,282,000-square foot international headquarters and technology center in January 2014 for its automation systems and project services businesses which help customers operate facilities in fields like oil and gas. TECO-Westinghouse is the largest manufacturer of electric motors in North America. Houghton Mifflin Harcourt (HMH) relocated its Texas regional office to Round Rock in July 2016. Their relocation brought over 270 jobs to the City and they now anchor a 100,000-square foot Class A office building in La Frontera. ProPortion Foods LLC, a Los Angeles-based food service company relocated its office, food processing, storage, and warehouse facility to the City in 2016, bringing in at least 400 full-time jobs. Airco Mechanical, a commercial and residential heating, ventilation, and air conditioning service provider, has relocated its Central Texas headquarters to a previously vacant 47,000-square foot building,bringing in another 400 full-time jobs. United Parcel Service(UPS)is the newest Fortune 500 company to expand in Round Rock with a new regional distribution center that provides additional operating capacity for the Austin area. The $70 million facility opened in November 2018 in time for the holiday shipping season.The 225,000-square foot facility is located on fifty acres of land near SH 45 and A.W.Grimes Boulevard and will employ more than 300 people. These economic development wins of the past will continue to add to the diversity of Round Rock's economy into the future as several companies have recently announced plans to locate in the City. City Centre is a Class A office development underway at the intersection of McNeil Road and IH 35. The City has committed a loan of$2.2 million towards the total project cost of$24 million which will culminate in a three-building business center providing a total of 125,000-square-feet of Class A office space within walking distance to the historic downtown core. Another potential economic development project for the downtown core is in the planning process which would add a mixed-use development on the downtown block where the City's iconic water tower sits. Pearlstone Holdings is interested in redeveloping that block that could include 76,000-square feet of Class A office space, 9,600-square feet of retail space,a hotel,and a 372-space parking garage. A new$20 million Embassy Suites Hotel and Conference Center is underway on 6 acres of land near Bass Pro Shops and Round Rock Premium Outlets. The project will bring a 160-room hotel with at least 14,000-square feet of convention and meeting space and will generate at least 60 jobs. The hotel and conference center is anticipated to open in 2020. Kalahari Resorts selected Round Rock as the location of its fourth family resort and convention center. The authentically African-themed Kalahari Resorts and convention center will feature a minimum of 975 well- appointed guest rooms, full-service amenities, fully equipped fitness centers, on-site restaurants,unique retail 6 shops, a state-of-the-art 125,000-square foot conference center, and a 200,000-square foot indoor/outdoor water park. This opens new opportunities for Round Rock and will provide substantial property tax revenues and diversity to the local economy and available employment opportunities.The project broke ground on May 15,2018 and is expected to open in November 2020. Its 352-acre site and proximity to Old Settlers Park and the Dell Diamond—two well-established venues that draw more than a million visitors annually—bodes well for a successful,tourism-oriented development. A large mixed-use development project was announced in November 2017 when Mark IV Capital finalized a memorandum of understanding with the City. The $200 million project, named The District, will be a live, work, and play community located near the intersection of IH 35 and Texas 45. Initial plans for the development include 1 million square feet of office space, approximately 900 multifamily residential units, a hotel, a high-end grocery store, and retail/restaurant space. This mixed-use development will be a great opportunity for continued growth and diversification of the City's economy. Round Rock continues to see significant growth in the medical industry. The City is home to several hospitals offering comprehensive world-class healthcare services. Post Acute Medical Rehabilitation Hospital is under construction at the intersection of Medical Center Way and North A.W.Grimes Boulevard.This 48,000-square foot, 40-bed facility will be the City's sixth hospital and is designed to treat patients who have suffered traumatic brain injuries and strokes and is projected to open in mid-2019. Baylor Scott & White recently opened a new 39,000 square foot cancer center on University Boulevard. The facility provides services for radiation oncology,medical oncology, surgical oncology, and hematology. This is the first cancer center in all of Williamson County and further expands the diversity and quality of healthcare services offered in the City's medical corridor. To complement the healthcare and medical facilities, Round Rock is home to several higher education facilities, many of which focus on healthcare disciplines. These institutions of higher learning include the Texas A&M Health Science Center,Texas State University,Austin Community College,and the Art Institute of Austin. Texas State University opened its newest building—Willow Hall —on May 24, 2018. This new $67.5 million, 107,000 square foot facility is home to the university's departments of communication disorders, physical therapy, and respiratory care which all moved from the university's San Marcos campus as the university continues to consolidate the College of Health Professionals in Round Rock. Austin Community College celebrated the opening of a$33 million,45,000 square foot expansion of its Round Rock campus on September 26, 2018. The new expansion features the college's third state-of-the-art ACCelerator with more than 140 computers, advanced science labs, classrooms, and a social staircase where students can gather to relax or study. The new expansion will make room for the enrollment of an additional 1,000 students. Relevant Financial Policies Accountinz System and Controls The City Council approved a change to the General Fund Reserve policy to lower the reserve requirement from 33% to 25% of operating expenditures. The City is not as dependent on volatile sales tax revenues as it once was. Beginning with the fiscal year 2018 budget, the reserve was lowered to gradually transition to the new balance and will continue to maintain a conservative reserve against future risk.The City's Concentration Risk Fund,a separate account to provide additional surety on the City's highest sales tax remitters,remains in place. Working capital in the Water/Wastewater Utility Fund is maintained at 33% of operating expenditures. Balances in excess of the above levels are earmarked for future uses or reduced to the target levels over an appropriate length of time. In developing and evaluating the City's accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition and (2) 7 the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived and (2) the evaluation of costs and benefits requires estimates and judgments by management. All internal control evaluations occur within the above framework. We believe that the City's internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. Long-Term Financial Planning The City uses a 5-year planning model for the General Fund which projects revenues and expenditures over a long-term period using assumptions about economic conditions and future spending scenarios. This model is developed internally and focuses on the anticipated future funding necessary to meet the City's strategic goals. The model takes a comprehensive approach to evaluating the long-term needs for property tax rates and other revenues to provide for the maintenance and operations of the General Fund. The City's General Fund relies heavily on sales tax as a revenue source. The sales tax is a less stable revenue source than the property tax but provides the taxpayers with more discretion and a lower property tax rate. Because of this revenue makeup, the City estimates sales tax revenues conservatively and introduces new programs somewhat more cautiously until projected revenue levels are attained. The City is also more attentive to the health of its economy because of the reliance upon commerce to produce the sales tax. The City's economy is expected to generate approximately$70.2 million in sales tax revenue for fiscal year 2019,net of sales tax rebates paid to Dell,Sears and Bass Pro Shops in accordance with economic development agreements in effect. This amount includes the 1/2%or$19.5 million in additional sales and use tax for roads and economic development. The remaining 1 1/2% is projected to generate $50.7 million for general operations,property tax reduction and capital projects. In 2016, Dell,the City's largest employer and taxpayer, completed its acquisition of EMC Corporation. This acquisition transformed Dell into a major player in the data storage, information security, virtualization, analytics and cloud computing markets. Dell continues to be a vital part of the Round Rock economy and the City continues to be the company's global headquarters. Over fiscal year 2018 the sale tax revenues generated by Dell have grown 50%over fiscal year 2017. Dell sales tax receipts for fiscal year 2018 accounted for 21.5% of total sales tax collected.A concentration risk account has been established to mitigate the City's annual net exposure to declining sales tax from any single sales taxpayer that represents more than 5% of the City's net General Fund revenues. For fiscal year the City Council adopted new financial policies to create balanced and reliable ongoing revenues by limiting Dell sales tax revenues in the General Fund to not exceed 20% of budgeted sales tax revenues. Any revenues received above this limit will be transferred to cash fund one-time capital projects. While the City has reduced its exposure to Dell receipts, the remaining sales tax base has grown from$26.4 million in 2009 to $41.1 million for 2018, an increase of 56% over the ten-year period. The reduced reliance on Dell, and on sales taxes in general, makes the City's finances more stable and less susceptible to any negative effects of economic downturns. The City sets utility rates based on the cost of service, establishing an equitable rate structure for total cost recovery. The utility rate model was last updated during 2017. A 3% water rate increase went into effect on October 1,2018 as the second year of three years of adopted rate increases.With firture development demands anticipated for the water system these rate increases are needed to fund capital improvement programs, an increase in system demands,and operating cost pressures.The base rates for all customer categories have been increased which reduces revenue volatility that results from weather and conservation.In addition to the water rate increases, the tiered water rate structure for residential and irrigation customers have been adjusted to be year-round and is designed to shift more of the cost increase to higher users who are driving the added costs. Based on the utility rate model, there are no wastewater increases anticipated for the next several years. Even 8 with the water rate increases, Round Rock water and wastewater rates continue to be among the lowest in the region. The City planned ahead to ensure its utility system will serve the future citizens of Round Rock.With multiple contracts in place with the Brazos River Authority, the City has secured its water supply through expected buildout in 2050. Water from Lake Georgetown and Stillhouse Hollow Lake in the Brazos River Basin provide water to the City's current 52 million gallons per day (MGD) water treatment plant. The City also secured water from Lake Travis in the Lower Colorado River Basin. In order to treat water from Lake Travis, the City partnered with the Cities of Cedar Park and Leander to form the Brushy Creek Regional Utility Authority (BCRUA). The BCRUA system will ultimately pump and treat 105.6 MGD which meets all three Cities' supply needs through buildout. In 2009, in order to provide the most cost effective wastewater services, the City partnered with the Cities of Cedar Park and Austin to purchase the Brushy Creek Regional Wastewater System (BCRWWS). The system is currently undergoing improvements to increase capacity to collect and treat up to 30 MGD of wastewater. The City's portion will be approximately 20.1 MGD and will serve Round Rock through 2035.The City is assuming operational control of the BCRWWS effective October 1,2018.This will increase efficiencies with no net cost increase. In December 2017 the City's Utility System and BCRUA both received an upgraded rating to AAA,the highest rating of creditworthiness, from Standard and Poor's (S&P). This raised rating reflects the stability of the City's utility system. S&P also noted that the system had good financial management policies and practices. In October 2018 the City's General Obligation bonds also received an upgraded rating to AAA. Round Rock is one of only eight cities in Texas with AAA ratings for both General Obligation(GO)and Utility debt. The upgrade "reflect[ed] Round Rock's very strong economy and maintenance of a strong financial position ... (and) very strong management, with strong financial policies and practices", according to S&P. Round Rock is one of only eight Texas cities to hold the AAA rating on both GO and utility debt. Prospects for the Future As we look to the future, there are several key initiatives in process now that will shape the development of Round Rock for the next decade. The City is leveraging available resources to attract industries from across the globe to strengthen its property tax and sales tax bases. Significant investment in the medical industry including several state-of-the-art medical facility expansions, combined with the impact of multiple higher education centers, will provide community development and unlimited opportunities. Not only will these initiatives shape the physical development of the City, but they will also influence the knowledge base and creativity found in the community. With the City's natural commercial attractiveness, a strong economic development plan and a strengthening economy, the future of the community is bright. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada(GFOA)awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Round Rock,Texas for its comprehensive annual financial report for the fiscal year ended September 30, 2017. This was the thirty-second consecutive year that the City has achieved this prestigious award. To be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. In addition,the City of Round Rock also received the GFOA's Distinguished Budget Presentation Award for its annual budget document for the fiscal year beginning October 1, 2017. To qualify for the Distinguished 9 Budget Presentation Award, the government's budget document had to be judged proficient as a policy document, a financial plan,an operations guide and a communications device. Additionally, the GFOA awarded the City a Certificate of Outstanding Achievement in Popular Annual Financial Reporting for the fiscal year ended September 30,2017. This award recognizes the City's ability to extract information from their comprehensive annual financial report to produce high quality popular annual financial reports specifically designed to be readily accessible and easily understandable to the general public and other interested parties without a background in public finance and then to recognize individual governments that are successful in achieving that goal. The City's investment policy was awarded the Certificate of Distinction by the Government Treasurers' Organization of Texas (GTOT) in February 2018. This certification recognizes the investment policy for meeting strict criteria in safeguarding the City's investments. The City of Round Rock has earned four Transparency Stars from the Texas Comptroller's Office recognizing the City's efforts to make information on the City's traditional finances,debt obligations, public pensions,and economic development transparent and readily available. During fiscal year 2019, the City will continue to increase the level of transparency and will apply for the last remaining star: Contracts and Procurement. The presentation of this report on a timely basis could not be accomplished without the efficient and dedicated services of the entire staff of the Finance Department. We would like to express our appreciation to all members of the Department who assisted and contributed to its presentation. Acknowledgement is also given to Whitley Penn, L.L.P. for their valuable assistance in production of the report. We would also like to thank the Mayor and Council members for their commitment in planning and conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, Laurie Hadley City Manager Susan L.Morgan,CPA Chief Financial Officer t',Parenc,, �� � sareracy�� 9arency �. A ,I,,,59arenc�, �� "blicPen,° IZZcna1 , �' is DeveN09 C>�, ; 3bliga 10 IND �rn�-i li r �s j■ r1M► 11 12 C " v Ililil�l�f II II�� NIIIII �IIIIIIIIIIII 111111 III 14 2 lug 03 ttl s �Li _ ILI LG m v IL AL Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Round Rock Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2017 aL�o P, Afjt� Executive DirectoriCE0 14 FINANCIAL SECTION � J 16 TJ W �f B i t Y INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Members of City Council City of Round Rock, Texas Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Round Rock, Texas (the "City"), as of and for the year ended September 30, 2018, 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 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 of 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. A of 17 Nexia To the Honorable Mayor and Members of City Council City of Round Rock, Texas Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of September 30, 2018, and the respective changes in financial position, the respective budgetary comparison schedule for the General Fund and the Round Rock Transportation and Economic Development Corporation Revenue Fund, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note I.W. to the financial statements, the City adopted the provisions of Government Accounting Standards Board ("GASB") Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, as of September 30, 2018. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management's discussion and analysis on pages 21 through 32, pension information on pages 108 through 110, and other post-employment benefit information on page 111 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 the financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual fund statements and schedules, and statistical section are presented for the purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget ("OMB"); Title 2 U.S Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and is also not a required part of the basic financial statements. The combining and individual fund statements and schedules and 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 18 To the Honorable Mayor and Members of City Council City of Round Rock, Texas 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, combining and individual fund statements and schedules and schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 6, 2019, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. C. ; I ,Y W., L LQ' Austin, Texas February 6, 2019 19 OZ �� �' +Rt�sa•tt••est �^l" tt't tri tt �t CITY OF ROUND ROCK, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2018 The discussion and analysis of the City of Round Rock's financial performance provides an overview and analysis of the City's financial activities for the fiscal year ended September 30, 2018. It should be read in conjunction with the accompanying transmittal letter and the accompanying basic financial statements. Financial Highlights • The assets and deferred outflows of resources of the City of Round Rock exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by$880,026,443 (netposition). Of this amount, $167,566,158 (unrestricted net position) may be used to meet the City's ongoing obligations to its citizens and creditors. • The City's total net position increased by$53,991,370,after restatement of the beginning net position balance as disclosed in Note I (W). Most of this increase is due to $51.3 million of operating and capital grants and contributions from both governmental and business-type activities for infrastructure and developer contributions. • As of the close of the current fiscal year, the City of Round Rock's governmental funds reported combined ending fund balances of$154,639,430, a decrease of$18,558,638 in comparison with the prior year. The decrease is due in part to the spending down of bond proceeds and higher costs incurred for City projects such as the RRTEDC's transportation projects and right-of-way acquisitions relating to RM620; the self-financed construction fund projects included non-arterial street maintenance projects and the Williamson County Regional Animal Shelter; and lastly, the 2014 & 2017 general obligation bonds fund projects included the completion of the Public Safety Training Facility. Approximately 34.6%of the total fund balance amount, $53,558,920, is available for spending at the government's discretion(unassigned fiend balance). • At the end of the current fiscal year, unassigned fund balance for the general fund was $53,558,920, or 53.0%of the total general fund expenditures. • The City of Round Rock's total debt decreased by $17,965,000 during the current fiscal year. The change can be attributed to the issuance of utility system revenue refunding bonds, along with the offset by regularly scheduled debt principal retirements as more fully described in Note IV(F) to the financial statements. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Round Rock's basic financial statements. The City's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City of Round Rock's finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City's assets, liabilities, and deferred outflows (inflows) of resources with the difference reported as net position. Over time, increases or decreases in net 21 CITY OF ROUND ROCK, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2018 Government-wide Financial Statements(Continued) position may serve as a useful indicator of whether the financial position of the City of Round Rock is improving or deteriorating. The statement of activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs,regardless of the timing of related cashflows. Thus,revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., unavailable tax revenues and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City of Round Rock that are principally supported by taxes and intergovernmental revenues(governmental activities)from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business- type activities). The governmental activities of the City include general government, public safety, public works and culture and recreation. The business-type activities of the City of Round Rock include water,sewer and drainage utility and a golf course. Fund Financial Statements A famd is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Round Rock, like other local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Governmental funds Governmental fiords are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on the near-term inflows and outflows of spendable resources, as well as on balances ofspendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental fiords with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental fimds and governmental activities. The City of Round Rock maintains 20 individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues,expenditures, and changes in fund balances for the general fund,debt service fund,the Round Rock Transportation and Economic Development Corporation(RRTEDC)fund,the self-financed construction fund,and the 2014&2017 General Obligation Bonds fund, all of which are considered to be major funds. Data from the other 15 governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in the report. 22 CITY OF ROUND ROCK, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2018 Fund Financial Statements(Continued) The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with the budget. Proprietary funds The City of Round Rock maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water,sewer and drainage utility and for its golf course. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses an internal service fund to account for its self-funded health insurance program and funding of its other post-employment benefits (OPEB) liability as of September 30, 2018. The net income(loss) of the internal service fund is allocated between governmental and business-type activities. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water, sewer and drainage utility and for the golf course. The water, sewer and drainage utility is considered a major fund of the City. Since the golf course fund is the only remaining enterprise fund, it is presented separately even though it does not meet the criteria of a major fund in GASB Statement No. 34. The internal service fund is a single presentation in the proprietary fund financial statements. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Other Information The combining statements referred to earlier in connection with nomnajor governmental funds and individual fund schedules are presented immediately following the notes to the financial statements. Additional information on capital assets used in the operation of governmental funds is provided following the individual fund schedules. Required Supplementary Information In addition to the basic financial statements and accompanying notes, this report also presents required supplementary information concerning the City's progress in funding its obligation to provide pension and OPEB benefits to its employees. Required supplementary information can be found beginning on page 108 of this report. Government-wide Financial Analysis Net position is a useful indicator of a government's financial position. For the City of Round Rock,assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $880,026,443 as of September 30, 2018. 23 CITY OF ROUND ROCK, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2018 Other Information(Continued) The largest portion of the City's net position (72.9%) reflects its investments in capital assets (e.g., land, buildings and improvements, improvements other than buildings, machinery and equipment and construction in progress), less any debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to its 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 from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City's net position (8.1%) represents resources that are subject to external restriction on how they may be utilized.The remaining balance of unrestricted net position$167,566,158 may be used to meet the City's ongoing obligations to citizens and creditors. As of September 30,2018,and 2017,the City was able to report positive balances in all three categories of net position, both for the City as a whole, as well as for its separate governmental and business-type activities. The following table provides a comparative summary of the City's net position as of September 30,2018 and 2017. The 2017 amounts have been restated for the impact of GASB Statement No. 75. Net Position(in 000's) Governmental Business-Type Activities Activities Total 2018 2017 2018 2017 2018 2017 Current and other assets $ 181,885 $ 197,315 $ 178,282 $ 161,585 $ 360,167 $ 358,900 Capital assets 576,557 553,930 342,288 320,800 918,845 874,730 Total assets 758,442 751,245 520,570 482,385 1,279,012 1,233,630 Deferred outflows of resources 13,951 19,953 5,891 6,358 19,842 26,311 Long term liabilities 263,051 285,627 85,424 89,841 348,475 375,468 Other liabilities 53,076 49,813 10,100 7,303 63,176 57,116 Total liabilities 316,127 335,440 95,524 97,144 411,651 432,584 Deferred inflows of resources 6,316 1,163 861 159 7,177 1,322 Net position,as restated: Net investment in capital assets 373,007 356,586 268,467 245,005 641,474 601,591 Restricted 48,357 48,955 22,629 19,801 70,986 68,756 Unrestricted 28,586 29,054 138,980 126,634 167,566 155,688 Total net position $ 449,950 $ 434,595 $ 430,076 $ 391,440 $ 880,026 $ 826,035 24 CITY OF ROUND ROCK, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2018 Analysis of Changes in Net Position The table below summarizes the changes in the City's net position from its activities for the fiscal year ended September 30, 2018, with comparisons to the previous year. The 2017 amounts have been restated for the impact of GASB Statement No. 75. Changes in Net Position(in 000's) Governmental Business-Type Activities Activities Total 2018 2017 2018 2017 2018 2017 Revenues: Program revenues: Charges for services $ 10,218 $ 26,998 $ 55,439 $ 52,715 $ 65,657 $ 79,713 Operating grants and contributions 2,574 1,203 - - 2,574 1,203 Capital grants and contributions 18,206 5,958 30,496 15,642 48,702 21,600 General revenues: Property taxes 54,082 49,107 - - 54,082 49,107 Franchise taxes 7,141 7,103 - - 7,141 7,103 Sales tax 72,862 64,210 - - 72,862 64,210 Hotel occupancy tax 5,714 5,515 - - 5,714 5,515 Public service taxes 647 627 - - 647 627 Investment earnings and other 9,024 8,202 3,131 2,290 12,155 10,492 Total revenues 180,468 168,923 89,066 70,647 269,534 239,570 Expenses: General government 23,409 26,255 - - 23,409 26,255 Public safety 57,988 57,452 - - 57,988 57,452 Public works 47,121 34,779 - - 47,121 34,779 Culture and recreation 25,218 25,287 - - 25,218 25,287 Interest on long-term debt 8,415 8,075 - - 8,415 8,075 Issuance costs - 424 - - - 424 Water and sewer utility - - 51,750 50,604 51,750 50,604 Golf course - - 1,642 1,857 1,642 1,857 Total expenses 162,151 152,272 53,392 52,461 215,543 204,733 Increases in net position before transfers 18,317 16,651 35,674 18,186 53,991 34,837 Transfers 2,962 3,493 2,962 3,493 - - Increase in net position 15,355 20,144 38,636 14,693 53,991 34,837 Net position-beginning,as restated 434,595 414,451 391,440 376,747 826,035 791,198 Net position-ending $ 449,950 $ 434,595 $ 430,076 $ 391,440 $ 880,026 $ 826,035 Governmental Activities Governmental activities increased the City's net position by$15,355,407 or 28.4%of the total increase in the net position of the City over the prior year. Key factors for the increase are as follows: 25 CITY OF ROUND ROCK,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2018 Governmental Activities(Continued) REVENUES • Amounts received for property taxes increased from last year by 10.1%due primarily to an increase of$0.005 in the nominal property tax rate from$0.42500 for fiscal year 2017 to$0.43000 for fiscal year 2018. The 2017 tax rate is 6.7% above the effective tax rate, $0.40317. Other factors include addition of new property to the tax base. Property tax makes up 36.2%of total general revenues. • Sales tax collections of$72.9 million increased 13.5%, compared to prior year. Dell, the City's largest sales tax payer, had fiscal year 2018 sales tax revenues 50% higher than collections in the prior year. This resurgence combined with strong underlying growth in other City businesses led to the increase in sales tax collections. • Charges for services decreased by $16.8 million primarily due to a one time rent payment in 2017. The decrease is offset by an increase in revenues from the first full year of operations of the new Multipurpose Sports Complex. • Hotel occupancy tax revenues increased 3.6%or$199,000. This is a result of new rooms and higher average room rates for area hotel/motels. The occupancy rate increased from 77.1%in 2017 to 77.8% in 2018. The statewide occupancy rate was 67.1%in 2018. • Capital grants and contribution revenues increased $12.2 million over the prior year. This increase is due largely to the amount of capital grants and contributions received in public works, primarily related to the RM620 roadway improvements project. A set percentage of costs incurred by the City on this project are reimbursable from the Texas Department of Transportation. Grants and contribution revenues can vary year to year depending on current development within the City. EXPENSES Expenses for governmental activities for the City totaled$162,151,715 for the year ended September 30,2018. Significant factors are listed below. The variances and percentages are prior to the effects of the GASB Statement No. 75 prior period restatement. • General government costs decreased $1.0 million from $24.4 million in 2017 to $23.4 million in 2018,or 4.2%. This decrease is primarily a result of the change in the net pension liability from 2017 to 2018. An unexpected return on investments resulted in higher net investment income and a reduction to general government expenses,as opposed to an increase in expense in 2017 and previous years. • Public safety program costs including police and fire department activities totaled about $58.0 million, or 35.8%of total expenses for governmental activities. This is an increase of 11.0%, compared to prior year. This increase is due primarily to personnel costs which included contractual salary increases for all sworn fire and police officers and the addition of three firefighters and two police officers for fiscal year 2018. • Public works program costs increased$12.7 million,or 37.1%,compared to prior year. This increase is primarily a result of the RM620 roadway improvements project as several large property and easement acquisitions occurred during 2018. • Culture and recreation increased $1.1 million from $24.1 million in 2017 to $25.2 million, or 4.5%, in 2018. This increase is due in part to funding the first full year of operations of the new Multipurpose Sports Complex. 26 CITY OF ROUND ROCK,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2018 Business-Type Activities Business-type activities increased the City's net position by $38,635,963 or 71.6% of the total growth in the net position of the City over the prior year. Much of this increase was due to the increase in capital grants and contributions,up$14.8 million from the prior year.Additionally,charges for services are up$2.7 million while transfers and investment earnings and other are up$7.3 million. Key factors for the increase are as follows: REVENUES • The City's water, sewer and drainage utility continues to show increases in the number of customers and operating revenues. Scheduled uses of impact fees received have allowed current rates to remain stable while still providing adequate times coverage of utility bonded debt service. Comparative data for the past two fiscal years is presented as follows: 2018 2017 Operating revenues $ 54,941,755 $ 51,980,615 Operating income $ 6,004,652 $ 4,758,268 Income available for debt service $ 26,456,849 $ 23,415,956 Annual debt service $ 5,444,927 $ 6,352,459 Coverage 4.86 3.88 • The City sets utility rates based on the cost of service. This model establishes an equitable rate structure for total cost recovery. A 3.5%water rate increase went into effect on October 1,2017.This rate increase is the first year of a three-year planned implementation stemming from a recently updated water and wastewater rate model.With future development demands anticipated for the water system these rate increases are needed to fund capital improvement programs, an increase in system demands, and operating pressures. Based on the rate model,no wastewater increases are anticipated for the next several years. Even with the rate increases, Round Rock water and wastewater rates continue to be among the lowest in the region. EXPENSES • Expenses of the business-type activities increased$2.1 million from prior year due to costs of treating higher volumes of water to serve a growing number of customers and normal weather fluctuations. This increase is prior to the effects of the GASB Statement No. 75 prior period restatement. The expenses of the Golf Course Fund increased due to the implementation of a new management company and major capital improvements. Financial Analysis of the Government's Funds As noted earlier, the City of Round Rock uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. 27 CITY OF ROUND ROCK,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2018 Governmental Funds The focus of the City's governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular,unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. For the fiscal year ended September 30, 2018, the City's governmental funds reported combined ending fund balances of$154,639,430. Approximately 34.6% of this total amount of$53,558,920 constitutes unassigned fund balance and is available for spending at the City's discretion. $1,274,658 is assigned to culture and recreation while $22,167,119 of the fund balance is committed to either capital projects or special revenue projects/programs. The remainder of fund balance is restricted or non-spendable to indicate that it is not available for new spending because it has already been committed to 1)pay debt service of$4,853,517,2)fund authorized construction of$62,649,029, 3) other restricted purposes of$9,882,595 or 4) non-spendable of $253,592. The General Fund is the chief operating fund of the City. At the close of the current fiscal year, fund balance of the General Fund reached $53,812,512, of which $53,558,920 was unassigned. Unassigned fund balance represented 53.0%of total General Fund expenditures. During the current fiscal year, the fund balance of the General Fund increased by$3,490,428 largely due to a one-time transfer to fund capital projects in the prior year and an increase in investment earnings over the prior year. The General Fund total revenues exceeded the budget by $7,133,166. The City continues to budget revenues conservatively but with the continued population growth and increase in property values,the property taxes and sales tax revenues continue to surpass budgeted projections. The debt service fund had a total fund balance of$4,853,517 at the end of the fiscal year, all of which is restricted for the payment of debt service. The net increase in fund balance during the year was $972,535. Debt service expenditure requirements increased by $1,890,377 during the fiscal year and were adequately funded by the debt service portion of the property tax. The fund balance of the RRTEDC fund was$32,814,280,a decrease of$2,847,927 compared to the prior year. The decrease is a result of higher costs incurred for transportation projects,compared to the prior year. Right- of-way acquisitions for the RM620 roadway improvements project were underway during 2018 and were the primary cause of this decrease. The fund balance of the self-financed construction fund was$20,885,034,a decrease of$6,496,098 compared to the prior year. The decrease is a result of costs incurred for City projects, compared to the prior year. Specifically,$3,315,380 of costs were incurred on non-arterial street maintenance projects,$1,321,643 of costs were incurred on the Williamson County Regional Animal Shelter expansion project, and $709,550 was incurred on the final construction costs and playground equipment purchases for the Play for All Abilities Park expansion project. The fund balance of the 2014 & 2017 general obligation bonds fund was $28,051,947, a decrease of $13,978,406 compared to the prior year. This is a result of the spending down of the 2014 and 2017 general obligation bonds. Specifically, the Public Safety Training Facility which opened in September 2018 was completed with$11,995,708 of costs incurred during 2018. 28 CITY OF ROUND ROCK,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2018 Proprietary Funds The City's proprietary fund statements provide the same type of information found in the government-wide financial statements, but in more detail. The total net position of the proprietary funds totaled $429,147,890, an increase of$38,438,602 over the prior year. Unrestricted net position of the funds totaled$138,052,119 at September 30, 2018. The unrestricted net position represented 32.2% of the proprietary funds' total net position. General Fund Budgetary Highlights One budget amendment was taken to City Council for the General Fund for the year ended September 30, 2018. The budget amendment added eight additional positions to the General Fund to help meet immediate staffing needs. The positions added are six firefighters to add an engine company to Fire Station No. 9, a building construction superintendent for general services, and a management analyst in administration. The budget amendment also appropriated additional funding for overtime pay for the fire department and added budget for revenues and associated expenses related to an opioid treatment grant obtained by the fire department. Capital Assets and Debt Administration Capital Assets The City of Round Rock's investment in capital assets for its governmental and business-type activities as of September 30,2018,amounted to$918,845,207 (net of accumulated depreciation). This investment includes land, buildings and improvements, improvements other than buildings (including infrastructure), machinery and equipment, and construction in progress. Major capital asset events during the year ended September 30,2018,included the following: • Construction is underway on the Kalahari family resort,water park and convention center with$4.0 million spent to date on the convention center. Design is underway for roadway improvements near Kalahari with$1.0 million spent to date. • Projects underway and completed that were funded by the 2014&2017 G.O. bonds are as follows: • Construction was completed on the Old Settler's Park's soccer fields at a cost of$2.6 million. • Design is underway for the Adult Recreation Complex with total cost estimated at$4.4 million and an estimated completion date in Summer 2019. • Expansion of citywide trails began at an estimated cost of $18.9 million with $3.3 million incurred to date. • Neighborhood park improvements, upgrades to comply with the American with Disabilities Act (ADA), and facility improvements are underway with total cost estimated at $5.5 million and$2.6 million spent to date. • Construction was substantially completed on the Public Safety Training Center at a cost of $27.4 million. The facility opened in September 2018. • Design is underway for the new library with$1.6 million spent to date. • Expansion of the Play for All Abilities park was completed at a total cost of$1.1 million. • Renovation of the Forest Creek Golf Course was substantially completed at a cost of$5.9 million. • The Stagecoach Inn was relocated from RM620 to Chisholm Trail in April 2018 at a cost of$929,000. • Construction was substantially completed on the Southwest Downtown Phase 5B Improvement project at a cost of$4.9 million. This project includes improvements to Bagdad Avenue, McNeil Road,Florence Street, and Blair Street. 29 CITY OF ROUND ROCK, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30,2018 Capital Assets(Continued) • Additional Downtown Improvement projects are underway and at various stages of completion. Completed projects totaled $676,000 while construction in progress at year-end approximated $2.3 million. • Major arterial, signal, and road projects for transportation are underway and at various stages of completion. Completed projects totaled $23.2 million while construction in progress at year-end approximated$10.3 million. • City facility improvements were completed at a cost of $713,000 and information technology infrastructure upgrades were completed at a cost of$602,000. • Various street improvement projects were completed at a cost of$3.3 million. • Construction is underway for the new Luther Peterson Service Center which will consolidate the Utility and Environmental Services, Transportation, and General Services Departments. The total estimated cost is$20.7 million funded from both utility funds and future bond funds with$3.4 million spent to date. • Developers contributed infrastructure improvements for governmental activities of$8.9 million, of which $7.9 million was for transportation, and $19.0 million for water, sewer and drainage system infrastructure improvements. • Design is underway for various water pump station improvements throughout the City.The total cost is estimated at$7.5 million with estimated completion in 2020. • Various water and wastewater line replacement projects were completed and placed in service at a cost of$2.8 million and similar projects were in progress costing$6.9 million to date. Capital Assets(in 000's) Governmental Business-Type Activities Activities Total 2018 2017 2018 2017 2018 2017 Land $ 87,134 $ 82,456 $ 8,453 $ 8,453 $ 95,587 $ 90,909 Buildings and improvements 174,940 146,682 22,456 22,436 197,396 169,118 Improvements other than bldgs 682,320 654,984 481,442 453,845 1,163,762 1,108,829 Machinery and equipment 86,966 81,237 22,038 19,860 109,004 101,097 Accumulated depreciation (480,366) (452,082) (205,115) (188,065) (685,481) (640,147) Construction in progress 25,562 40,653 13,015 4,271 38,577 44,924 Total $ 576,556 $ 553,930 $ 342,289 $ 320,800 $ 918,845 $ 874,730 Additional information on the City of Round Rock's capital assets can be found in Note IV(E)to the financial statements. Long-Term Debt At the end of the current fiscal year, the City of Round Rock had total debt outstanding of$289,750,000. Of this amount, $188,340,000 comprises debt backed by the full faith and credit of the City. The remainder of the City's debt is secured solely by specified revenue sources (i.e., revenue bonds). 30 CITY OF ROUND ROCK,TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30,2018 Long-Term Debt(Continued) During the current fiscal year, the City of Round Rock's total debt decreased by $17,965,000. Regularly scheduled debt principal was retired during 2018. In addition, the City issued series 2017 utility revenue refunding bonds, which resulted in reduced debt service payments of$4.2 million and an economic gain of $3.0 million. Details of the refunding can be found in Note IV(F)(4)to the financial statements. Long-Term Debt(in 000's) Governmental Business-Type Activities Activities Total 2018 2017 2018 2017 2018 2017 General obligation bonds $ 162,820 $ 170,615 $ - $ - $ 162,820 $ 170,615 Certificates of obligation 25,520 26,315 - - 25,520 26,315 Hotel tax revenue bonds 11,055 11,675 - - 11,055 11,675 Sales tax revenue bonds 13,925 17,540 - - 13,925 17,540 Water and wastewater revenue bonds - - 76,430 81,570 76,430 81,570 Total $ 213,320 $ 226,145 $ 76,430 $ 81,570 $ 289,750 $ 307,715 The City of Round Rock benefits substantially in reduced interest costs resulting from the bond rating by Standard&Poor's of AAA for the Utility Revenue bonds. There is no direct debt limitation in the City Charter or under state law. The City operates under a Home Rule Charter(Article XI, Section 5,Texas Constitution), approved by the voters, that limits the maximum tax rate, for all City purposes to$2.50 per$100 assessed valuation. Administratively,the Attorney General of the State of Texas will permit allocation of up to$1.50 of the$2.50 maximum tax rate for general obligation debt service. The revenues from this maximum tax rate would be sufficient to cover the debt service on over$2.1 billion of bonds. Of the maximum tax rate for debt service of$1.50, the City uses $0.14214,or 9.5%. Of$53,890,399 levied in property taxes for the fiscal year ended September 30, 2018, 99.79% of taxes levied were collected during the fiscal year. The City is conservative in how it issues debt and has adopted a "pay as you go" philosophy by using excess cash funds to fund current projects and issuing debt only when deemed necessary. Additional information on the City's long-term debt can be found in Note IV(F)to the financial statements. Economic Factors and Next Year's Budgets and Rates The development of the City's budget is guided by several factors including the Council's Strategic Goals, prevailing economic conditions and the continuing need to provide basic and improved customer services for a growing population. The fiscal year 2018-2019 budget adopted by the City Council adheres to the City's financial policies and preserves the City's strong financial position while providing excellent levels of service. During the creation of the 2018-2019 budget process the City Manager and Executive team focused on various budget drivers in the decision-making process. • Addressing council Strategic Goals • Meeting the demands of growth with additions to maintain service levels • Biennial citizen survey results • Voter authorized general obligation debt to expand programs and services • Debt payments for new programs • Competitive employee compensation and benefits 31 CITY OF ROUND ROCK, TEXAS MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2018 Economic Factors and Next Year's Budgets and Rates(Continued) • Maintenance of parks,facilities,and streets • Compliance with financial policies Revenue assumptions in general for fiscal year 2018-2019 are expected to follow the growth curve of job creation,population growth,retail sales activity, and housing starts. The City's economy is expected to generate approximately $70.2 million in sales tax revenue for fiscal year 2019. This amount includes the 1/2%or$19.5 million in additional sales and use tax for roads and economic development. The remaining 1 1/2% is projected to generate $50.7 million for general operations, property tax reduction, and capital projects. The fiscal year 2019 certified taxable property value for Round Rock is$13.6 billion,an increase of 8.8%from last year's $12.5 billion. The adopted property tax rate for fiscal year 2019 is$0.42000 per$100 of valuation. The tax rate is an increase of 1.4 cents over the effective rate of$0.40624, and well below the rollback rate of $0.43074. The 1.4 cent increase over the effective tax rate is to provide funds for additional neighborhood street maintenance, operating costs of voter-approved bond projects, and staff compensation and benefits. With an adopted rate of$0.42000,the City continues to have one of the lowest tax rates in Central Texas,and is among the lowest rates in the state for medium-sized cities. The Water and Wastewater Utility operations are funded primarily through user fees. The City's utility infrastructure and service delivery systems have been carefully planned and have sufficiently met demand for a growing customer base. Water sales are conservatively estimated using customer base projections,while at the same time taking into account changing weather conditions. Water conservation and drought contingency programs continue to help the City conserve existing water sources. There is a 3.0% water rate increase included in the fiscal year 2019 budget which went into effect on October 1, 2018. This rate increase is the second year of a three-year planned implementation stemming from a recently updated water and wastewater rate model. With future development demands anticipated for the water system,these rate increases are needed to fund capital improvement programs,an increase in system demands,and operating pressures. Based on the water and wastewater rate model,no wastewater increases are anticipated for the next several years. Requests for Information This financial report is designed to provide citizens, taxpayers, customers, 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 this report or need additional financial information,contact the Chief Financial Officer, City of Round Rock,221 East Main Street, Round Rock,Texas 78664. 32 BASIC FINANCIAL STATEMENTS 33 CITY OF ROUND ROCK, TEXAS STATEMENT OF NET POSITION SEPTEMBER 30,2018 Governmental Business-Type Activities Activities Total ASSETS Cash and cash equivalents $ 8,337,125 $ 8,940,206 $ 17,277,331 Investments 91,226,854 106,929,060 198,155,914 Receivables(net of allowance for uncollectibles)- Property taxes 332,301 - 332,301 Accounts&other 9,584,060 18,891,316 28,475,376 Accrued interest 335,419 1,018,179 1,353,598 Intergovernmental - 3,672,863 3,672,863 Grants 7,226,631 - 7,226,631 Interfund (928,201) 928,201 - Inventories 202,648 383,675 586,323 Other current assets 138,444 424,382 562,826 Restricted assets - Cash and cash equivalents 18,307,117 2,926,601 21,233,718 Investments 45,160,819 20,700,321 65,861,140 Property tax receivable 202,626 - 202,626 Accounts and other 1,622,272 85,574 1,707,846 Accrued interest 136,956 74,156 211,112 Investment in joint venture - 13,306,933 13,306,933 Capital assets- Land and construction in progress 112,696,626 21,467,713 134,164,339 Capital asset,net of accumulated depreciation 463,860,330 320,820,538 784,680,868 Total assets 758,442,027 520,569,718 1,279,011,745 DEFERRED OUTFLOWS OF RESOURCES Deferred amount on refundings 5,258,914 4,741,745 10,000,659 Deferred outflows related to pensions 7,629,801 1,004,622 8,634,423 Deferred outflows related to OPEB 1,062,701 144,913 1,207,614 Total deferred outflows of resources 13,951,416 5,891,280 19,842,696 The accompanying notes are an integral part of this financial statement. 34 Governmental Business-Type Activities Activities Total LIABILITIES Accounts payable $ 14,801,248 $ 4,276,934 $ 19,078,182 Accrued payroll 1,504,426 194,545 1,698,971 Unearned revenue 11,808,844 - 11,808,844 Accrued interest payable 1,178,659 507,105 1,685,764 Customer deposits - 1,194,160 1,194,160 Due within one year 23,782,088 3,927,153 27,709,241 Net pension liability 28,197,127 3,845,063 32,042,190 Total OPEB liability 14,320,963 1,952,859 16,273,822 Due in more than one year 220,533,370 79,625,765 300,159,135 Total liabilities 316,126,725 95,523,584 411,650,309 DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pensions 6,230,942 849,674 7,080,616 Deferred inflows related to OPEB 85,424 11,649 97,073 Total deferred inflows of resources 6,316,366 861,323 7,177,689 NET POSITION Net investment in capital assets 373,007,353 268,467,171 641,474,524 Restricted for- Debt service 3,877,484 167,186 4,044,670 Capital projects 34,597,082 22,461,414 57,058,496 Hotel-motel tax 7,863,705 - 7,863,705 Public safety 750,657 - 750,657 General government 1,268,233 - 1,268,233 Unrestricted 28,585,838 138,980,320 167,566,158 Total net position $ 449,950,352 $ 430,076,091 $ 880,026,443 35 CITY OF ROUND ROCK, TEXAS STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2018 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Governmental activities: General government $ 23,408,887 $ 2,273,091 $ 2,551,832 $ - Public safety 57,987,997 1,762,172 13,521 51,807 Public works 47,120,999 693,223 - 17,264,564 Culture and recreation 25,218,145 5,489,515 8,655 890,019 Interest on long-term debt 8,415,687 - - - Total governmental activities 162,151,715 10,218,001 2,574,008 18,206,390 Business-type activities: Water and sewer utility 51,749,727 55,139,117 - 29,863,950 Golf course 1,642,036 299,761 - 631,683 Total business-type activities 53,391,763 55,438,878 - 30,495,633 Total primary government $ 215,543,478 $ 65,656,879 $ 2,574,008 $ 48,702,023 The accompanying notes are an integral part of this financial statement. 36 Net(Expense)Revenue and Changes in Net Position Primary Government Governmental Business-Type Functions/Programs Activities Activities Total Governmental activities: General government $ (18,583,964) $ - $ (18,583,964) Public safety (56,160,497) - (56,160,497) Public works (29,163,212) - (29,163,212) Culture and recreation (18,829,956) - (18,829,956) Interest on long-term debt (8,415,687) - (8,415,687) Total governmental activities (131,153,316) - (131,153,316) Business-type activities: Water and sewer utility - 33,253,340 33,253,340 Golf course - (710,592) (710,592) Total business-type activities - 32,542,748 32,542,748 Total primary government (131,153,316) 32,542,748 (98,610,568) General revenues: Taxes: Property taxes,levied for general purpose 34,692,837 - 34,692,837 Property taxes, levied for debt service 19,389,451 - 19,389,451 Franchise taxes 7,140,940 - 7,140,940 Sales taxes 72,861,565 - 72,861,565 Hotel occupancy tax 5,714,235 - 5,714,235 Public service taxes 647,243 - 647,243 Unrestricted investment earnings and other 9,024,223 3,131,444 12,155,667 Transfers (2,961,771) 2,961,771 - Total general revenues and transfers 146,508,723 6,093,215 152,601,938 Change in net position 15,355,407 38,635,963 53,991,370 Net position-beginning,as restated 434,594,945 391,440,128 826,035,073 Net position-ending $ 449,950,352 $ 430,076,091 $ 880,026,443 37 CITY OF ROUND ROCK, TEXAS GOVERNMENTAL FUNDS BALANCE SHEET SEPTEMBER 30,2018 Round Rock Transportation and Economic Development General Debt Service Corporation Fund Fund Fund ASSETS Cash and cash equivalents $ 4,592,238 $ - $ 230 Investments 50,244,930 - - Receivables(net of allowance for uncollectibles)- Property taxes,including interest and penalties 332,301 - Accounts and other 5,923,872 - 736,051 Accrued interest 192,181 - Interfund - 11,323 381,508 Grants 268,422 - 6,780,607 Inventories 202,648 - Other current assets 50,944 - - Restricted assets- Cash and cash equivalents - 4,842,194 2,289,517 Investments - - 25,087,845 Receivables- Property taxes,including interest and penalties - 202,626 - Sales tax - - 1,622,272 Accrued interest - - 89,064 Total assets $ 61,807,536 $ 5,056,143 $ 36,987,094 LIABILITIES,DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities- Accounts payable $ 6,184,859 $ - $ 4,172,814 Accrued payroll 1,466,541 - Interfund payables 11,323 - Unearned revenue - Total liabilities 7,662,723 - 4,172,814 Deferred inflows of resources- Unavailable revenue-property taxes 332,301 202,626 - Total deferred inflows of resources 332,301 202,626 - Fund balances- Nonspendable 253,592 - Restricted-debt service - 4,853,517 - Restricted-authorized construction - - 32,814,280 Restricted-hotel-motel tax - Restricted-public safety - _ _ Restricted-general government - _ _ Committed-general government - - _ Committed-capital projects funds - _ _ Assigned-culture and recreation _ _ _ Unassigned 53,558,920 - - Total fund balances 53,812,512 4,853,517 32,814,280 Total liabilities,deferred inflows of resources and fund balances $ 61,807,536 $ 5,056,143 $ 36,987,094 The accompanying notes are an integral part of this financial statement. 38 2014&2017 General Self- Total Total Obligation Financed Nonmajor Governmental Bonds Fund Construction Funds Funds $ - $ 1,953,532 $ 1,099,842 $ 7,645,842 21,406,231 12,000,814 83,651,975 - - 332,301 - - 589,999 7,249,922 - 75,204 42,626 310,011 - - 392,831 74,786 102,816 7,226,631 - - 202,648 - - 50,944 10,620,509 - 554,897 18,307,117 18,173,037 - 1,899,937 45,160,819 - - - 202,626 - - - 1,622,272 41,040 - 6,852 136,956 $ 28,834,586 $ 23,509,753 $ 16,297,783 $ 172,492,895 $ 782,639 $ 2,624,719 $ 549,435 $ 14,314,466 - - 37,885 1,504,426 - 381,508 392,831 - - 1,106,815 1,106,815 782,639 2,624,719 2,075,643 17,318,538 - - - 534,927 534,927 - - - 253,592 - - - 4,853,517 28,051,947 - 1,782,802 62,649,029 - - 7,863,705 7,863,705 - - 750,657 750,657 - - 1,268,233 1,268,233 - 232,243 232,243 20,885,034 1,049,842 21,934,876 - 1,274,658 1,274,658 - - - 53,558,920 28,051,947 20,885,034 14,222,140 154,639,430 $ 28,834,586 $ 23,509,753 $ 16,297,783 $ 172,492,895 39 i 40 CITY OF ROUND ROCK, TEXAS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION Total Fund Balances-Governmental Funds $ 154,639,430 Amounts reported for Governmental Activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and,therefore, are not reported in the funds. These assets consist of: Land $ 87,134,480 Construction in progress 25,562,146 Building and improvements 857,259,849 Equipment 86,966,226 Accumulated depreciation (480,365,745) Total capital assets $ 576,556,956 576,556,956 Deferred amounts on refundings are deferred outflows of resources and, therefore, are not reported in the funds. 5,258,914 Contributions to the pension plan after the measurement date are deferred outflows of resources and,therefore,are not reported in the funds. 6,712,056 Pension actuarial losses (gains) are deferred outflows (inflows) of resources and, therefore,are not reported in the funds. (5,313,197) Contributions to OPEB after the measurement date are deferred outflows of resources and,therefore,are not reported in the funds. 333,950 OPEB actuarial losses (gains) are deferred outflows (inflows) of resources and, therefore,are not reported in the funds. 643,327 Property tax revenues collected in advance of the fiscal year to which they apply are recorded as deferred inflows of resources and recognized as revenue of the period to which they apply.Therefore,they are not reported in the funds. 534,927 Internal service funds are used by management to charge the costs of self-funded insurance to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net Position. 6,988,225 Unearned rent revenue for the land acquisition associated with the Kalahari project is not a current financial resource and,therefore,is not reported in the funds. (10,592,029) Long-term receivable from the Crow Group Series,LLC for a forgivable loan associated with an economic development project is not a current financial resource and,therefore, was reported in the funds as an other financing use,and not as a receivable. 2,200,000 Accrued interest payable in the governmental funds are not recognized because they are not paid within the prescribed time period after year end. (1,178,659) Some long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. They are detailed in Note III(A). (286,833,548) Net Position of Governmental Activities $ 449,950,352 41 CITY OF ROUND ROCK, TEXAS GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED SEPTEMBER 30,2018 Round Rock Transportation and Economic Debt Development General Service Corporation Fund Fund Fund Revenues- Taxes and franchise, including interest and penalties $ 94,608,539 $ 19,345,337 $ 20,464,703 Licenses,permits and fees 1,920,713 - _ Charges for services 4,746,589 - _ Fines and forfeitures 1,322,339 - _ Grants 2,006,282 - 6,945,669 Hotel occupancy tax _ - - Investment and other 5,905,704 249,498 479,379 Contributions - - 2,206,633 Total revenues 110,510,166 19,594,835 30,096,384 Expenditures- Current- General government 20,621,407 - _ Public safety 52,839,251 - _ Public works 13,152,938 - 1,595,099 Culture and recreation 14,432,859 - _ Debt service- Principal retirement - 14,325,970 - Interest and fiscal charges - 9,244,645 - Capital projects - - 28,119,444 Total expenditures 101,046,455 23,570,615 29,714,543 Excess(deficiency)of revenues over expenditures 9,463,711 (3,975,780) 381,841 Other financing sources(uses)- Issuance of lease Payment to borrower _ - _ Transfers in 3,573,858 4,948,315 1,199,188 Transfers out (9,547,141) - (4,428,956) Total other financing sources (uses) (5,973,283) 4,948,315 (3,229,768) Net change in fund balances 3,490,428 972,535 (2,847,927) Fund balances,October 1,2017 50,322,084 3,880,982 35,662,207 Fund balances, September 30,2018 $ 53,812,512 $ 4,853,517 $ 32,814,280 The accompanying notes are an integral part of this financial statement. 42 2014&2017 General Self- Total Total Obligation Financed Nonmajor Governmental Bonds Fund Construction Funds Funds $ - $ - $ 219,399 $ 134,637,978 - 116,498 2,037,211 - 1,817,279 6,563,868 - - 294,583 1,616,922 - 559,071 9,511,022 - 5,714,235 5,714,235 1,599,616 665,475 360,854 9,260,526 - 120,495 8,655 2,335,783 1,599,616 785,970 9,090,574 171,677,545 - - 953,323 21,574,730 96 52,839,347 - 14,748,037 - 4,080,357 18,513,216 - 14,325,970 - - - 9,244,645 15,160,243 14,638,079 1,891,745 59,809,511 15,160,243 14,638,079 6,925,521 191,055,456 (13,560,627) (13,852,109) 2,165,053 (19,377,911) 5,981,044 - 5,981,044 (2,200,000) - (2,200,000) 10,928,276 2,029,181 22,678,818 (417,779) (7,353,309) (3,893,404) (25,640,589) (417,779) 7,356,011 (1,864,223) 819,273 (13,978,406) (6,496,098) 300,830 (18,558,638) 42,030,353 27,381,132 13,921,310 173,198,068 $ 28,051,947 $ 20,885,034 $ 14,222,140 $ 154,639,430 43 CITY OF ROUND ROCK, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2018 Amounts reported for governmental activities in the statement of activities are different because: Net Change in Fund Balances-Total Governmental Funds $ (18,558,638) Governmental funds report capital outlays as expenditures. However, in the statement of activities,the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation. 13,930,015 The net effect of various miscellaneous transactions involving capital assets (i.e. sales,disposals, and donations)is to increase net position. 8,697,290 Property tax revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 94,057 The issuance of long-term debt (i.e. bonds, leases)provides current financial resources to the governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Also,governmental funds report the effect of issuance costs,premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. 8,269,186 Long-term receivable from the Crow Group Series,LLC for a forgivable loan associated with an economic development project was reported in the funds as an other financing use (expenditure), but was reclassified as a long-term receivable in the Statement of Net Position, thereby reducing expenses on the Statement of Activities. 2,200,000 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. These include: Pension costs,net 208,306 OPEB costs,net (1,003,494) Interest and employee expense 441,488 Internal service funds are used to charge the costs of self-funded insurance to the individual funds.The net revenue of certain activities of the internal service fund is reported with governmental activities. 1,077,197 Change in Net Position of Governmental Activities $ 15,355,407 The accompanying notes are an integral part of this financial statement. 44 CITY OF ROUND ROCK, TEXAS GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Taxes and franchise, including interest and penalties $ 88,578,000 $ 89,240,654 $ 94,608,539 $ 5,367,885 Licenses,permits and fees 1,665,625 1,665,625 1,920,713 255,088 Charges for services 4,767,500 4,767,500 4,746,589 (20,911) Fines and forfeitures 1,105,000 1,105,000 1,322,339 217,339 Grants 753,101 2,078,101 2,006,282 (71,819) Investment and other 4,520,120 4,520,120 5,905,704 1,385,584 Total revenues 101,389,346 103,377,000 110,510,166 7,133,166 Expenditures- Current- General government 22,810,331 21,688,378 20,621,407 1,066,971 Public safety 49,964,528 52,846,709 52,839,251 7,458 Public works 17,154,867 14,275,785 13,152,938 1,122,847 Culture and recreation 14,519,621 14,626,129 14,432,859 193,270 Total expenditures 104,449,347 103,437,001 101,046,455 2,390,546 Excess(deficiency)of revenues over expenditures (3,060,001) (60,001) 9,463,711 9,523,712 Other financing sources(uses)- Transfers in 3,389,358 3,579,046 3,573,858 (5,188) Transfers out (6,357,453) (9,547,141) (9,547,141) - Total other financing sources (uses),net (2,968,095) (5,968,095) (5,973,283) (5,188) Net change in fund balance $ (6,028,096) $ (6,028,096) 3,490,428 $ 9,518,524 Fund balance,October 1,2017 50,322,084 Fund balance,September 30,2018 $ 53,812,512 The accompanying notes are an integral part of this financial statement. 45 CITY OF ROUND ROCK, TEXAS ROUND ROCK TRANSPORTATION AND ECONOMIC DEVELOPMENT CORPORATION FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Sales tax $ 17,301,920 $ 17,301,920 $ 20,464,703 $ 3,162,783 Grants 1,669,809 1,669,809 6,945,669 5,275,860 Investment and other 100,000 100,000 479,379 379,379 Contributions 6,133,537 6,133,537 2,206,633 (3,926,904) Total revenues 25,205,266 25,205,266 30,096,384 4,891,118 Expenditures- Public works 2,536,192 2,536,192 1,595,099 941,093 Capital projects 28,119,444 28,119,444 28,119,444 - Total expenditures 30,655,636 30,655,636 29,714,543 941,093 Excess(deficiency)of revenues over expenditures (5,450,370) (5,450,370) 381,841 5,832,211 Other financing sources(uses)- Transfers in - - 1,199,188 1,199,188 Transfers out (3,930,485) (4,428,956) (4,428,956) - Total other financing sources (uses) (3,930,485) (4,428,956) (3,229,768) 1,199,188 Net change in fund balances $ (9,380,855) $ (9,879,326) (2,847,927) $ 7,031,399 Fund balance,October 1,2017 35,662,207 Fund balance,September 30,2018 $ 32,814,280 The accompanying notes are an integral part of this financial statement. 46 tt �........... �.. r r 47 CITY OF ROUND ROCK, TEXAS PROPRIETARY FUNDS STATEMENT OF NET POSITION SEPTEMBER 30, 2018 Business-Type Activities Governmental Enterprise Funds Activities Water and Golf Course Internal Sewer Fund Fund Total Service Fund ASSETS Current assets: Cash and cash equivalents $ 8,601,127 $ 339,079 $ 8,940,206 $ 691,283 Investments 106,914,835 14,225 106,929,060 7,574,879 Receivables(net of allowance for uncollectibles of$508,933)- Accounts 18,816,316 75,000 18,891,316 24,138 Accrued interest 1,016,284 1,895 1,018,179 25,408 Intergovernmental 3,672,863 - 3,672,863 - Inventories 383,675 - 383,675 - Other current assets 424,382 - 424,382 87,500 Total current assets 139,829,482 430,199 140,259,681 8,403,208 Noncurrent assets: Restricted cash,cash equivalents, and investments: Impact fees 12,055,035 - 12,055,035 - Construction 10,246,649 - 10,246,649 - Customer deposits 1,158,052 - 1,158,052 - Revenue bond covenant accounts 167,186 - 167,186 - Restricted accounts and accrued interest receivable: Restricted impact fees 85,574 - 85,574 - Restricted accrued interest 74,156 - 74,156 - Investment in joint venture 13,306,933 - 13,306,933 - Capital assets: Land and construction in progress 19,399,367 2,068,346 21,467,713 - Capital assets being depreciated 312,546,951 8,273,587 320,820,538 - Total capital assets(net of accumulated depreciation of$205,114,858) 331,946,318 10,341,933 342,288,251 - Total noncurrent assets 369,039,903 10,341,933 379,381,836 - Total assets 508,869,385 10,772,132 519,641,517 8,403,208 DEFERRED OUTFLOWS OF RESOURCES Deferred charges on refunding 4,741,745 - 4,741,745 - Deferred outflows related to pensions 1,004,622 - 1,004,622 - Deferred outflows related to OPEB 144,913 - 144,913 - Total deferred outflows of resources 5,891,280 - 5,891,280 - The accompanying notes are an integral part of this financial statement. 48 Business-Type Activities Governmental Enterprise Funds Activities Water and Golf Course Internal Sewer Fund Fund Total Service Fund LIABILITIES Current liabilities: Accounts payable $ 3,848,666 $ 428,268 $ 4,276,934 $ 486,782 Accrued payroll 194,545 - 194,545 - Accrued benefit obligations 439,120 - 439,120 - Accrued interest 507,105 - 507,105 - Customer deposits 1,194,160 - 1,194,160 - Current portion of bonds payable 3,488,033 - 3,488,033 - Total current liabilities 9,671,629 428,268 10,099,897 486,782 Noncurrent liabilities: Net pension liability 3,845,063 - 3,845,063 - Total OPEB liability 1,952,859 - 1,952,859 - Accrued benefit obligations 116,728 - 116,728 - Bonds payable 79,509,037 - 79,509,037 - Total noncurrent liabilities 85,423,687 - 85,423,687 - Totalliabilities 95,095,316 428,268 95,523,584 486,782 DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pensions 849,674 - 849,674 - Deferred inflows related to OPEB 11,649 - 11,649 - Total deferred inflows of resources 861,323 - 861,323 - NET POSITION Net investment in capital assets 258,125,238 10,341,933 268,467,171 - Restricted for: Debt service 167,186 - 167,186 - Capital projects 22,461,414 - 22,461,414 - Unrestricted 138,050,188 1,931 138,052,119 7,916,426 Total net position $ 418,804,026 $ 10,343,864 429,147,890 $ 7,916,426 Reconciliation to government-wide statement of net position: Adjustment to reflect the cumulative net profit of the internal service fund that was allocated to enterprise fund functions. 928,201 Net position of business-type activities $ 430,076,091 The accompanying notes are an integral part of this financial statement. 49 CITY OF ROUND ROCK, TEXAS PROPRIETARY FUNDS STATEMENT OF REVENUES,EXPENSES AND CHANGES IN NET POSITION YEAR ENDED SEPTEMBER 30,2018 Business-Type Activities Governmental Enterprise Funds Activities Water and Golf Course Internal Sewer Fund Fund Total Service Fund Operating revenues- Charges for services $ 50,715,034 $ 299,761 $ 51,014,795 $ 13,080,554 Licenses,permits, and fees 4,226,721 - 4,226,721 - Total revenues 54,941,755 299,761 55,241,516 13,080,554 Operating expenses- Personnel services 10,940,702 - 10,940,702 - Contractual services 16,695,290 1,344,025 18,039,315 2,798,472 Supplies 941,689 - 941,689 - Materials 1,450,726 - 1,450,726 1,880 Heat,light and power 1,578,540 281 1,578,821 - Claims expense - - - 9,755,355 Depreciation 17,330,156 297,730 17,627,886 - Total operating expenses 48,937,103 1,642,036 50,579,139 12,555,707 Operating income(loss) 6,004,652 (1,342,275) 4,662,377 524,847 Nonoperating revenues(expenses)- Investment and other revenues 3,122,041 9,403 3,131,444 749,711 Interest and fiscal charges (2,812,623) - (2,812,623) - Total nonoperating revenues (expenses) 309,418 9,403 318,821 749,711 Income before contributions and transfers 6,314,070 (1,332,872) 4,981,198 1,274,558 Contributions and transfers- Contributions -impact fees 10,655,685 - 10,655,685 - Contributions-infrastructure 19,002,230 - 19,002,230 - Contributions -other 206,035 631,683 837,718 - Transfers in - 6,351,129 6,351,129 - Transfers out (3,389,358) - (3,389,358) - Total contributions and transfers 26,474,592 6,982,812 33,457,404 - Change in net position 32,788,662 5,649,940 38,438,602 1,274,558 Net position,October 1,2017,as restated 386,015,364 4,693,924 6,641,868 Net position,September 30,2018 $ 418,804,026 $ 10,343,864 $ 7,916,426 Reconciliation to government-wide statement of activities: Adjustment to reflect the net profit of the internal service fund that was allocated to enterprise fund functions 197,361 Change in net position of business-type activities $ 38,635,963 The accompanying notes are an integral part of this financial statement. 50 CITY OF ROUND ROCK, TEXAS PROPRIETARY FUNDS STATEMENT OF CASH FLOWS YEAR ENDED SEPTEMBER 30,2018 Business-Type Activities Governmental Enterprise Funds Activities Water and Golf Course Internal Sewer Fund Fund Total Service Fund Cash flows from operating activities: Cash received from customers $ 55,678,709 $ 281,997 $ 55,960,706 $ 607,601 Cash received from other funds for services provided - - - 12,465,970 Cash payments to suppliers for goods and services (18,263,450) (971,455) (19,234,905) (12,815,991) Cash payments to employees for services (10,968,664) - (10,968,664) - Net cash provided(used)by operating activities 26,446,595 (689,458) 25,757,137 257,580 Cash flows from noncapital financing activities: Transfers from other funds - 6,351,129 6,351,129 - Transfers to other funds (3,389,358) - (3,389,358) - Net cash provided(used)by noncapital financing activities (3,389,358) 6,351,129 2,961,771 - Cash flows from capital and related financing activities: Proceeds from sale of capital assets 68,033 - 68,033 - Acquisition and construction of capital assets (13,698,910) (5,315,875) (19,014,785) - Investment in joint venture (680,531) - (680,531) - Principal paid on revenue bonds (3,030,363) - (3,030,363) - Contributions 66,200 - 66,200 - Impact fees 10,655,685 - 10,655,685 - Interest and fiscal charges paid (3,129,131) - (3,129,131) - Net cash used by capital and related financing activities (9,749,017) (5,315,875) (15,064,892) - Cash flows from investing activities: Purchase of investments (21,824,629) (14,225) (21,838,854) (1,083,293) Investment and other income 2,397,761 7,508 2,405,269 733,466 Net cash used by investing activities (19,426,868) (6,717) (19,433,585) (349,827) Net increase(decrease)in cash and cash equivalents (6,118,648) 339,079 (5,779,569) (92,247) Cash and cash equivalents at beginning of year 17,646,376 - 17,646,376 783,530 Cash and cash equivalents at end of year $ 11,527,728 $ 339,079 $ 11,866,807 $ 691,283 The accompanying notes are an integral part of this financial statement. 51 (CONTINUED) CITY OF ROUND ROCK, TEXAS PROPRIETARY FUNDS STATEMENT OF CASH FLOWS YEAR ENDED SEPTEMBER 30, 2018 Business-Type Activities Governmental Enterprise Funds Activities Water and Golf Course Internal Sewer Fund Fund Total Service Fund Reconciliation of Cash and Cash Equivalents to Proprietary Fund Statement of Net Position Cash and cash equivalents $ 8,601,127 $ 339,079 $ 8,940,206 $ 691,283 Restricted assets- Cash and cash equivalents 2,926,601 - 2,926,601 - Cash and cash equivalents $ 11,527,728 $ 339,079 $ 11,866,807 $ 691,283 Reconciliation of operating income(loss,)to net cash provided(used)by operating activities Operating income(loss) $ 6,004,652 $ (1,342,275) $ 4,662,377 $ 524,847 Adjustments to reconcile operating income (loss)to net cash provided(used)by operating activities: Depreciation 17,330,156 297,730 17,627,886 - Provision for bad debts 65,507 - 65,507 - (Increase)decrease in: Receivables 566,325 (555) 565,770 (6,983) Customer deposits (122,260) - (122,260) - Inventory 32,597 - 32,597 - Other assets 9,867 - 9,867 - Pension related deferred outflows 276,664 - 276,664 - OPEB related deferred outflows (100,744) - (100,744) - Increase(decrease) in: Accounts payable 2,482,591 372,851 2,855,442 (260,284) Customer deposits 105,122 - 105,122 - Compensated absences (218,607) - (218,607) - Unearned revenue - (17,209) (17,209) - Pension related deferred inflows 1,316,605 - 1,316,605 - OPEB related deferred inflows 11,649 - 11,649 - Net pension liability (1,539,466) - (1,539,466) - Total OPEB liability 225,937 - 225,937 - Total adjustments 20,441,943 652,817 21,094,760 (267,267) Net cash provided(used)by operations $ 26,446,595 $ (689,458) $ 25,757,137 $ 257,580 NOTES: Noncash capital and related financing activities: In fiscal year 2018, the Water and Sewer Fund had $19,002,230 in capital assets contributed, recognized a change of($7,173)in fair value of investments, and a change of($3,487,035)in joint venture net position. The accompanying notes are an integral part of this financial statement. 52 NOTES TOT E FINANCIAL STATEMENTS 1.64 �t•'���... ..... T ftoo 54 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Round Rock, Texas (the City) is a municipal corporation incorporated under Article U, Section 5 of the Constitution of the State of Texas (Home Rule Amendment),. The City operates under a Council-Manager form of government. The financial statements of the City have been prepared in accordance with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. The GASB periodically updates its codification of the existing Governmental Accounting and Financial Reporting Standards which, along with subsequent GASB pronouncements (Statements and Interpretations), constitutes GAAP for governmental units. The more significant of these accounting policies are described below, and where appropriate, subsequent pronouncements will be referenced. A. REPORTING ENTITY The City provides various services and performs many different functions. These include a police force,a fire fighting and protection force, emergency medical services, a park and recreation system, a municipal golf course, a public library, convention and tourism support,planning and zoning, and a waterworks and sewer utility system. The City's staff provides the necessary support for the services provided. All are responsible to the Citizens of Round Rock and are therefore included within the reporting entity. As required by generally accepted accounting principles,these financial statements present the City and its component unit, an entity for which the City is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the City's operations and so data from these units are combined with data of the City. Blended Component Unit The Round Rock Transportation and Economic Development Corporation(Corporation), an entity legally separate from the City, is governed by a seven-member board appointed by the City Council. The City Council maintains budgetary control of the Corporation. For financial reporting purposes,the Corporation is presented as a part of the City's operations because its purpose is to utilize sales tax revenues for the improvement of the City's transportation system and for economic development purposes. No less than 90%of the Corporation funds will be used for transportation projects. The remaining 10%may be used for economic development purposes covered under local government code. The revenues of the Corporation, its administrative expenditures,and capital projects are accounted for in a special revenue fund. B. BASIS OF PRESENTATION — GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The basic financial statements include both government-wide (based on the City as a whole) and fund financial statements. GASB Statement No. 34 requires certain supplementary information. Management's Discussion and Analysis includes an analytical overview of the City's financial activities. In addition, budgetary comparison statements are presented that compare the adopted and amended budgets of the General Fund and the Round Rock Transportation and Economic Development Corporation Fund with their actual results. 55 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. BASIS OF PRESENTATION—GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (CONTINUED) Government-wide Statements: The government-wide financial statements(i.e.,the statement of net position and the statement of activities) report information on all non-fiduciary activities of the primary government and its component unit. Governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities,which are funded by fees and charges for services. The City's statement of net position includes both non-current assets and non-current liabilities of the City. In addition,the government-wide statement of activities reflects depreciation expense on the City's capital assets,including infrastructure. The government-wide statement of activities demonstrates the degree to which the direct expenses of a functional category (police, fire, public works, etc.) are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges to customers or applicants who purchase,use or directly benefit from goods, services, or privileges provided by a given function or segment, 2) grants and contributions that are restricted to meeting the operational requirements of a particular function or segment, and 3) grants and contributions that are restricted to meeting the capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported as general revenues. The net cost(by function or business-type activity)is normally covered by general revenue(property,sales or franchise taxes, intergovernmental revenues, interest income, etc.). The government-wide focus is more on the sustainability of the City as an entity and the change in aggregate financial position resulting from financial activities of the fiscal period. The focus of the fund financial statements is on the major individual funds of the governmental and business-type categories and the component unit. Each presentation provides valuable information that can be analyzed and compared to enhance the usefulness of the information. Fund Financial Statements: Separate fund based financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. An emphasis is placed on major funds within the governmental and proprietary categories. GASB Statement No. 34 sets forth minimum criteria (percentage of assets, liabilities, revenues or expenditures/expenses of either fund category for the governmental and enterprise combined) for the determination of major funds. The major governmental funds are the General Fund,the Debt Service Fund, the Round Rock Transportation and Economic Development Corporation Fund, the 2014 & 2017 General Obligation Bonds Fund , and the Self-Financed Construction Fund. The nonmajor funds are combined in a separate column in the fund financial statements. The Internal Service Fund, which provides services to the other funds of the government, is presented as part of the proprietary fund financial statements. The net income (loss) of the Internal Service Fund is allocated between governmental and business-type activities. Because the principal users are the City's governmental activities, financial statements of the Internal Service Fund are consolidated into the 56 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. BASIS OF PRESENTATION–GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (CONTINUED) governmental column when presented at the government-wide level. The costs of these services are reflected in the appropriate functional activity(general government,public safety,public works, etc.). C. GOVERNMENTAL FUND TYPES Governmental funds are those through which most governmental functions of the City are financed. The acquisition,use and balances of the City's expendable financial resources and the related current liabilities (except those, if any, which should be accounted for in proprietary funds) are accounted for through governmental funds. The measurement focus is upon determination of financial position and changes in financial position, rather than upon net income determination. The City maintains the following governmental fund types: The General Fund accounts for financial resources in use for general types of operations, which are not encompassed within other funds. The General Fund is considered a major fund in the fund financial statements. The Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than major capital projects)that are legally restricted to expenditures for specified purposes. There are eleven groups of funds within the Special Revenue Funds which account for the activities related to grant programs,hotel-motel room taxes,transportation system improvement and economic development sales tax and funds designated for specific service programs. They are as follows: Major Fund — Round Rock Transportation and Economic Development Corporation Fund Nonmajor Funds — Community Development Block Grant Fund — Hotel-Motel Occupancy Tax Fund — Hotel-Motel Occupancy Venue Tax Fund — Landscape Fund — Library Fund — Multipurpose Sports Complex Fund — Municipal Court Fund — Police Fund — Public Education & Government Fund — Traffic Safety Program Fund The Round Rock Transportation and Economic Development Corporation Fund is considered a major fund in the fund financial statements. It accounts for sales tax monies and donations/developer contributions received for economic development and streets, drainage and other transportation system improvements,including maintenance and capital costs associated with such authorized projects. 57 CITY OF ROUND ROCK,TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. GOVERNMENTAL FUND TYPE(CONTINUED) The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, governmental long-term debt principal, interest and related costs. The Debt Service Fund is considered a major fund in the fund financial statements. The Capital Proiects Funds are used to account for financial resources to be used for the acquisition or construction of capital facilities (other than those financed by proprietary funds). There are seven groups of funds within the Capital Projects Fund which account for the activities related to various capital improvements projects as follows: Major Funds — 2014 c&2017 General Obligation Bonds Fund — Self-Financed Construction Fund Nonmajor Funds — 2014 Certificates of Obligation Fund — Convention Center Complex Fund — Park Development Fund — Streets and Drainage Fund — Tourism Development Fund The Self-Financed Construction Fund and the 2014&2017 General Obligation Bonds Fund are considered major funds in the fund financial statements. The Self-Financed Construction Fund accounts for the costs of authorized general capital improvements and facilities. Financing is provided by general government resources. The 2014 & 2017 General Obligation Bonds Fund accounts for projects related to fire department facilities,parks and recreational purposes,library facilities and police and fire training facilities. D. PROPRIETARY FUND TYPES The Proprietary Funds are used to account for the City's ongoing organizations and activities that are similar to those found in the private sector. These funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. The accounting objectives are the determination of net income, financial position and cash flows. The City maintains the following Proprietary Fund type: The Enterprise Funds are used to account for operations that are financed and operated in a manner similar to private business enterprises-where the intent of the governing body is that the costs(expenses including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. The City's Enterprise Fund consists of the Water and Sewer Utility Fund, which includes the City's storm water drainage program, and the Golf Course Fund. These funds are primarily supported by user charges. 58 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. OTHER FUND TYPES The Internal Service Fund is used to account for the financing of goods or services provided by one department or agency to other City departments or agencies on a cost-plus basis. The City's Internal Service Fund is the Self-Funded Health Insurance Fund,which is used to account for the activities of the City's self- funded health insurance program. F. NON-CURRENT GOVERNMENTAL ASSETS/LIABILITIES GASB Statement No. 34 eliminated the presentation of the general fixed assets and general long-term debt account groups, but provides for these records to be maintained and incorporates the information into the governmental activities column in the government-wide statement of net position. G. BASIS OF ACCOUNTING Government-wide Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Fund Financial Statements In the fund financial statements, all governmental funds are accounted for using a modified accrual basis of accounting. Governmental funds use the current financial resources measurement focus. Under this basis, revenues are recognized in the accounting period in which they become measurable and available. Expenditures are recognized in the accounting period in which the fund liability is incurred,if measurable. Governmental Funds Revenue Recognition In applying the susceptible to accrual concept under the modified accrual basis of accounting,revenues are recorded when deemed both measurable and available. Measurable means that the amount of the transaction can be determined. Available means the amount of the transaction is collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal year. Property tax revenues are recognized when they become available. In this case,available means when due, or past due and receivable within the current period and collected within the current period or soon enough thereafter to be used to pay liabilities of the current period. Such time thereafter shall not exceed 60 days. 59 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) G. BASIS OF ACCOUNTING(CONTINUED) Hotel taxes, franchise fees, and special assessments are recorded when susceptible to accrual, both measurable and available. Sales taxes collected and held by the State at year-end on behalf of the City are also recognized as revenue. Licenses and permits, charges for services, fines and forfeitures and other revenues (except earnings on investments) are recorded as revenues when received in cash because they are generally not measurable until actually received. Earnings on investments are recorded on the accrual basis in all funds. Unrealized gains or losses on investments are also recognized in accordance with GASB Statement No. 31. In applying the susceptible to accrual concept to grant revenues, the legal and contractual requirements of the individual grant programs are used for guidance. Monies received are generally unrestricted as to purpose of expenditure and are revocable only for failure to comply with prescribed compliance requirements. These resources are recognized as revenues at the time of receipt,or sooner,if the susceptible to accrual criteria are met. The City reports unavailable revenue on its fund financial statements. Unavailable revenues arise when potential revenue does not meet both the"measurable"and"available"criteria for recognition in the current period. Unearned revenues arise when the City receives resources before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met or when the City has a legal claim to the resources, the liability for unearned revenue is removed from the balance sheet and revenue is recognized. Expenditure Recognition The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures)rather than expenses. Most expenditures are measurable and are recorded when the related fund liability is incurred except for unmatured principal and interest on governmental long-term debt which are recognized when paid. Allocations of costs, such as depreciation and amortization,are not recognized in the governmental funds' fund financial statements. Proprietary Funds In the fund financial statements and the government-wide statements,proprietary and agency funds utilize the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized in the accounting period in which they are earned and become measurable. Expenses are recorded in the accounting period incurred, if measurable. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Water and Sewer Fund, the Golf Course Fund and the Internal Service Fund are charges to customers for sales and services. Operating expenses for the Enterprise Funds and Internal Service Fund include the cost of sales and service, administrative expenses and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as non-operating revenues and expenses. 60 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. CASH AND CASH EQUIVALENTS In accordance with GASB Statement No. 9, for reporting purposes, the City has developed a definition of cash equivalents. Cash equivalents are demand deposit account balances, investments with the State Investment Pool, repurchase agreements, obligations of the United States government and its agencies, commercial paper and certificates of deposit with original maturities of three months or less. I. INVESTMENTS All investments are presented at fair value. The fair value of U.S. Government Securities is based upon discounted future cash flows. The fair value of the positions in the state investment pools is the same as the value of the pool shares. The City pools excess cash of the various individual funds to purchase these investments. These pooled investments are reported in the combined balance sheet as investments in each fund based on each fund's share of the pooled investments. Interest income is allocated to each respective individual fund, monthly, based on their respective share of investments in the pooled investments. The City's local government investment pools are recorded at amortized costs as permitted by GASB Statement No. 79, Certain Investment Pools and Pool Participants. J. INVENTORIES AND PREPAID ITEMS Inventories of supplies for all funds are valued at cost. The consumption method is used to account for inventories. Under the consumption method,an expenditure is recognized when inventory items are used. Cost is determined for inventories of supplies on the first-in, first-out method. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items(other current assets)in both the government-wide and fund financial statements. K. JOINT VENTURE Joint venture represents the City's equity interest calculated in accordance with the agreement for the Brushy Creek Regional Utility Authority(BCRUA). The City's initial investment in this joint venture was recorded at cost. The City shares in the operating results in this joint venture so the City adjusts its equity interest by the amount of its participating share of the joint venture's change in net position. L. CAPITAL ASSETS Capital assets are stated at historical cost. Maintenance and repairs are charged to operations as incurred. Improvements and betterments, which extend the useful lives of assets, are capitalized. The accounting and reporting treatment applied to the capital assets associated with a fund are determined by the fund's measurement focus. The minimum capitalization threshold is any individual item with a total cost greater than$5,000 and a useful life of at least 5 years. Donated capital assets, donated works of art, and similar items are reported at acquisition value rather than fair value. 61 CITY OF ROUND ROCK,TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) L. CAPITAL ASSETS (CONTINUED) Public domain capital assets (infrastructure) have been capitalized. Infrastructure consists of certain improvements other than buildings, including roads, curbing, gutters, streets and sidewalks and drainage systems. In the government-wide statements, depreciation of plant and equipment classified by functional components is provided by the straight-line method over their estimated useful lives. Estimated useful lives are as follows: Buildings 30-50 years Improvements other than buildings 10- 40 years Machinery and equipment S- 10 years When capital assets are retired or otherwise disposed of,a gain or loss on disposal of assets is recognized. In the fund financial statements,because of the application of the current financial resources focus and the use of modified accrual accounting for governmental funds, depreciation is only recognized for the Enterprise Funds. For the Enterprise Fund's capital assets,interest is capitalized on construction costs. The amount of interest cost capitalized for assets constructed with tax-exempt borrowings is equal to the cost of borrowing, less interest earned on related interest-bearing investments acquired with proceeds of the related tax-exempt borrowings. The total amount of interest expense incurred and expensed was $2,812,623. M. LONG-TERM DEBT In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities,business-type activities,or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable is reported net of the applicable bond premium or discount. Deferred amounts related to refundings are reported as deferred outflow of resources and amortized over the shorter of the refunded or refunding debt. In the fund financial statements,governmental fund types recognize bond premiums and discounts,as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Hotel Occupancy Tax Revenue Bonds were issued to find the City's portion of the construction of a convention center complex. The project costs were shared with a private corporation in accordance with the Master Agreement Regarding Convention Center Development. Venue Tax and Hotel Occupancy Revenue Bonds were issued to fund a portion of the construction of a sports center. The Hotel Occupancy 62 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) M. LONG-TERM DEBT(CONTINUED) Tax Revenue Bonds and Venue Tax and Hotel Occupancy Tax Revenue Bonds are to be repaid from the hotel tax revenues. Revenue bonds, which have been issued to fund capital projects of the Enterprise Fund, are to be repaid from net revenues of the utility systems. Sales tax revenue bonds have been issued to fund transportation improvements. The bonds are to be repaid from revenues of the Round Rock Transportation and Economic Development Corporation. N. ACCRUED BENEFIT OBLIGATIONS Unpaid Compensated Absences Each employee may accumulate a total of two years vacation eligibility. Employees are paid for the accumulated vacation upon termination. Effective January 1, 1994, sick pay does not vest for non-Civil Service employees;therefore,a liability is only recorded for sick leave relating to Civil Service employees. The City accrues a liability for accumulated vacation and sick leave benefits, which meet the following criteria: — The City's obligation to fiend accumulated vacation and sick leave benefits is attributable to employees'services already rendered. — The obligation relates to rights that vest or accumulate. — Payment of the compensation is probable. — The amount can be reasonably estimated. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example,as a result of employee resignations and retirements. Other Post-Employment Benefits The City provides its retirees the opportunity to maintain health insurance coverage by participating in the City's self insurance plan. The City reports the total liability for this plan on the government-wide and proprietary fund financial statements. The actual cost recorded in the governmental fund financial statements is the cost of the health benefits incurred on behalf of the retirees less the premiums collected from the retirees. Information regarding the City's total liability for this plan is obtained through a report prepared by Holmes Murphy & Associates, the City's third-party actuary, in compliance with GASB Statement No.75,Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Additionally,the City participates in a defined benefit group-term life insurance plan,both for current and retired employees,administered by the Texas Municipal Retirement System(TMRS). The City reports the total liability for this plan on the government-wide and proprietary fund financial statements. Information regarding the City's total OPEB liability is obtained from TMRS through a report prepared for the City by TMRS' consulting actuary, Gabriel Roeder Smith & Company, in compliance with GASB Statement No. 75. 63 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) O. TRANSACTIONS BETWEEN FUNDS Short-term advances between funds are accounted for in the appropriate interfund receivable and payable accounts. All legally authorized transfers are appropriately treated as transfers and are included in the results of operations of both governmental and proprietary funds. Nonrecurring or non-routine transfers of equity between funds — for example, contribution of capital assets to a proprietary fund or transfers of residual balances of discontinued funds to other funds -are accounted for as transfers. As a rule, the effect of interfund activity has been eliminated from the government-wide statement of net position. Exceptions to this rule are cost reimbursement transactions between the enterprise fund and various other functions of the government for utilities and for reimbursement of personnel costs for employees administering grant programs. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. P. NET POSITION Net position in government-wide and proprietary fund financial statements are classified as net investment in capital assets,restricted,and unrestricted. Net investment in capital assets consists of: capital assets net of accumulated depreciation, outstanding balances of capital-related borrowings, and capital-related deferred outflows(inflows)of resources. Net position classified as restricted are balances with constraints on resources that are either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or imposed by law through state statute. Certain bond proceeds,as well as resources set aside for their repayment, are classified as restricted assets because their use is limited by bond covenants. Other assets are restricted due to City Ordinance restrictions on their use. Net position has been restricted for the excess of restricted assets over related liabilities to the extent such restricted assets were accumulated from revenues (i.e., in some cases, restricted assets were obtained in total or in part from the proceeds of bond sales or grants). When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Q. CLASSIFICATION OF FUND EQUITY Governmental funds' fund balance classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: Nonsnendable fund balance—Nonspendable fund balances are amounts that are not in spendable form or are required to be maintained intact. Restricted fund balance—Restricted fund balances are amounts that are constrained to specific purposes by creditors,grantors,contributors,or laws or regulations of other governments. 64 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Q. CLASSIFICATION OF FUND EQUITY(CONTINUED) Committed fund balance—Committed fund balances are amounts that are committed to specific purposes by City Council through an ordinance. Amounts cannot be used for other purposes unless the City Council takes the same action to remove or change the constraint. The most significant commitment in the special revenue funds is for the tree replacement program. The commitments in the capital projects funds are for park improvements,street maintenance, and construction of roads. Assigned fund balance—Assigned fund balances are amounts that the City intends to use for a specific purpose but are neither restricted nor committed. Assignments are made by City management based on City Council direction. Unassigned fund balance — Unassigned fund balances are amounts that are available for any legal purposes. The General Fund is the only fund that reports an unassigned fund balance amount. For the classification of governmental fund balances, the City considers the expenditure to be made from the most restrictive first when more than one classification is available. R. MINIMUM FUND BALANCE POLICY It is the desire of the City to maintain an adequate fund balance in the General Fund to maintain liquidity and in anticipation of economic downturns or natural disasters. The City Council has adopted a financial standard to maintain a General Fund minimum fund balance of 90 days of budgeted expenditures. S. DEFERRED OUTFLOWS/INFLOWS OF RESOURCES In addition to assets, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources,represents a consumption of net position that applies to a future period(s)and so will not be recognized as an outflow of resources (expense/expenditure) until then. The items that qualify for reporting in this category by the City include the following: • Deferred charges on refundings-A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The deferred charge on refundings is reported in the government-wide statement of net position. • OPEB and pension contributions after measurement date-These contributions are deferred and recognized in the following fiscal year. • Difference in projected and actual earnings on pension assets -This difference is deferred and amortized over a closed five-year period. 65 CITY OF ROUND ROCK,TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) S. DEFERRED OUTFLOWS/INFLOWS OF RESOURCES(CONTINUED) In addition to liabilities, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s)and so will not be recognized as an inflow of resources(revenue)until that time. Reported as a deferred inflow for the City both for OPEB and pension are the difference in expected and actual experience and for pension, the difference arising from changes in assumptions (both are deferred and recognized over the estimated average remaining lives of all members determined as of the measurement date). For the governmental funds, property taxes received in advance of the fiscal year to which they apply are reported as deferred inflows of resources. T. TAP-IN(CONNECTION FEES)AND IMPACT FEES Water and sewer tap-in fees(connection fees)represent reimbursement of the costs incurred to perform the connection of the respective utilities. These fees are recorded as operating revenue at the time of service. The impact fee substantially exceeds the cost of connection to the water and sewer system,and is therefore viewed as a contribution. Effective with the implementation of GASB Statement No. 33, impact fees are recorded as contributions in the Enterprise Fund. U. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Specifically, the actuarial calculations to determine the net pension liability and total OPEB liability are based on assumptions about events far into the future. Accordingly, actual results could differ from those estimates. V. PENSIONS For purposes of measuring the net pension liability, pension related deferred outflows and inflows of resources, and pension expense, City specific information about its fiduciary net position in TMRS and additions to/deductions from the City's fiduciary net position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee,which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Information regarding the City's total pension liability is obtained from TMRS through a report prepared for the City by TMRS'consulting actuary,Gabriel Roeder Smith&Company,in compliance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions - an amendment of GASB Statement No. 27. W. NEW AND FUTURE FINANCIAL REPORTING REQUIREMENTS The GASB has issued the statement on the following page which became effective for fiscal year 2018. 66 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) W. NEW AND FUTURE FINANCIAL REPORTING REQUIREMENTS (CONTINUED) Statement No. 75, "Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions." — This statement changes the focus of accounting of postemployment benefits other than pensions from whether they are responsibly funding the benefits over time to a point-in-time liability that is reflected on the employer's financial statements for any actuarially underfunded portion of benefits earned to date. The implementation of GASB Statement No. 75 resulted in restatement of beginning net position for removal of the OPEB liability previously recorded under GASB Statement No. 45, the recording of the total OPEB liability under Statement No. 75, and the beginning deferred outflow for contributions made after the measurement date. Prospectively applying this change results in the adjustment below: Fund Level Government- Wide Statement of Revenues,Expenses Statement of and Changes in Net Position- Activities Proprietary Fund Government Business-type Water and Activities Activities Sewer Fund Net position at September 30,2017 as previously reported $ 443,193,990 $ 392,642,595 $ 387,217,831 Removal of OPEB liability per GASB 45 3,741,147 480,286 480,286 Recording of total OPEB liability as of the measurement date per GASB 75 (12,664,092) (1,726,922) (1,726,922) Deferral for OPEB contributions after the measurement date per GASB 75 323,900 44,169 44,169 Net position at September 30,2017 as restated $ 434,594,945 $ 391,440,128 $ 386,015,364 The GASB has issued the following statement which will become effective for fiscal year 2019. Statement No. 83,"Certain Asset Retirement Obligations."—This statement will enhance comparability of financial statements among governments by establishing uniform criteria for governments to recognize and measure certain asset retirement obligations (AROs), including obligations that may not have been previously reported. An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets will use this statement to recognize a liability. This statement will also enhance the decision-usefulness of the information provided to financial statement users by requiring disclosures related to those AROs. 67 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. BUDGETARY ACCOUNTING The City follows these procedures in establishing the appropriated budget as reflected in the accompanying financial statements: (1) At least sixty days prior to the beginning of each fiscal year, the City Manager submits to the City Council a proposed budget for the fiscal year beginning on the following October 1. The operating budget, which represents the financial plan for the ensuing fiscal year, includes proposed expenditures and the means of financing them. (2) Public hearings are conducted at which all interested persons' comments concerning the budget may be heard. (3) The budget is legally enacted by the City Council through passage of an appropriation ordinance and tax-levying ordinance not later than the final day of the last month of the fiscal year. (4) Formal budgetary integration is employed as a management control device during the year for the General Fund, Special Revenue Funds, Debt Service Fund and Proprietary Funds. Management control for the operating budget is maintained at the individual office, department, or agency level. (5) Annual budgets are legally adopted for the General Fund, Special Revenue Funds, Debt Service Fund and the Proprietary Funds. Capital Projects Funds have no binding annual budget. Project-length financial plans are adopted for all capital projects; accordingly, no comparison of budget to actual is presented in the financial statements. (6) Amendments that alter total expenditures of any fund must be approved by the City Council. Although costs are monitored on a departmental basis,the level of control at which expenditures may not exceed the budget is at the fund level. The reported budgetary data has been revised for amendments authorized. (7) Any appropriation balances lapse or revert to the undesignated fund balances at the close of each fiscal year. 68 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY(CONTINUED) A. BUDGETARY ACCOUNTING(CONTINUED) The budgets of the various funds are prepared on a basis consistent with generally accepted accounting principles as described above. The following table compares original to final budgets for the General Fund. Amendments Original Increase Final Budget (Decrease) Budget Revenues- Taxes evenues-Taxes and franchise, including interest and penalties $ 88,578,000 $ 662,654 $ 89,240,654 Licenses,permits and fees 1,665,625 - 1,665,625 Charges for services 4,767,500 - 4,767,500 Fines and forfeitures 1,105,000 - 1,105,000 Grants 753,101 1,325,000 2,078,101 Investment and other 4,520,120 - 4,520,120 Total revenues 101,389,346 1,987,654 103,377,000 Expenditures- Current- General government 22,810,331 (1,121,953) 21,688,378 Public safety 49,964,528 2,882,181 52,846,709 Public works 17,154,867 (2,879,082) 14,275,785 Culture and recreation 14,519,621 106,508 14,626,129 Total expenditures 104,449,347 (1,012,346) 103,437,001 Excess(deficiency)of revenues over expenditures (3,060,001) 3,000,000 (60,001) Other financing sources(uses)- Transfers in 3,389,358 189,688 3,579,046 Transfers out (6,357,453) (3,189,688) (9,547,141) Total other financing sources (uses) (2,968,095) (3,000,000) (5,968,095) Net change in fund balances $ (6,028,096) $ - $ (6,028,096) B. ENCUMBRANCES Encumbrances represent commitments related to unperformed(executory) contracts for goods or services. For budgetary purposes, encumbrances lapse at fiscal year-end. In accordance with the City Charter, Part 1,Article 8, Section 8.03 (a)(10)—Finance Administration, a capital improvement program may be revised and extended each year to indicate capital improvements pending or in process of construction or acquisition. Therefore, purchase orders and contracts associated with capital improvement programs roll at the end of the fiscal-year. The following page summarizes the encumbrances and significant commitments at September 30, 2018 associated with capital improvements for governmental funds, not proprietary funds, in accordance with GASB Statement No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions." 69 CITY OF ROUND ROCK,TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY(CONTINUED) B. ENCUMBRANCES(CONTINUED) Major Funds Round Rock Transportation and Economic Development Corporation Fund $ 8,189,000 Self-Financed Construction Fund 2,097,000 2014&2017 General Obligation Bonds Fund 4,476,000 Nonmajor Funds Capital projects funds $ 128,000 Special revenue funds 262,000 III. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUNDS BALANCE SHEET AND THE GOVERNMENT-WIDE STATEMENT OF NET POSITION The governmental fund balance sheet includes a reconciliation between fund balance-total governmental funds and netposition-governmental activities as reported in the government-wide statement of net position. One element of that reconciliation explains that"long-term liabilities,including bonds payable,are not due and payable in the current period and therefore are not reported in the funds."The details of this difference are as follows: Bonds payable $ 213,320,000 Plus: Issuance premium(amortized against interest expense) 15,228,817 Less: Issuance discount(amortized against interest expense) (88,390) Capital leases payable 8,400,037 Net pension liability 28,197,127 Compensated absences 7,454,994 Total OPEB 14,320,963 Net adjustment to reduce fund balance-total governmental funds to arrive at net position-governmental activities $ 286,833,548 70 CITY OF ROUND ROCK,TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 III. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (CONTINUED) B. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES AND THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation of net changes in fund balances —total governmental funds to changes in net position of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that"Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense."The details of this difference are as follows: Capital outlay $ 46,896,225 Depreciation expense (32,966,210) Net adjustment to increase net changes in fund balances- total governmental funds to arrive at changes in net position ofgovernmental activities $ 13,930,015 Another element of the reconciliation states that "The net effect of various miscellaneous transactions involving capital assets(i.e. sales,disposals, and donations)is to increase net position." The details of this difference are as follows: Donations $ 8,933,593 Reclassifications,disposals,and transfers (236,303) Net adjustment to increase net changes in fund balances-total governmental funds to arrive at changes in net position of governmental activities $ 8,697,290 Another element of the reconciliation states that "The issuance of long-term debt (e.g. bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long- term debt consumes the current financial resources of governmental funds. Neither transaction,however, has any effect on net position. Also, governmental funds report the effect of issuance costs, premiums, discounts,and similar items when debt is first issued,whereas these amounts are deferred and amortized in the statement of activities." The details of this difference are as follows: Issuance of debt $ (5,981,044) Debt payments/refundings 12,825,000 Capital lease payments 1,425,230 Net adjustment to increase net changes in fund balances- total governmental funds to arrive at changes in net position ofgovernmental activities $ 8,269,186 71 CITY OF ROUND ROCK,TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 III. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (CONTINUED) B. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES AND THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES (CONTINUED) Another element of the reconciliation states that"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." The details of these differences are as follows: Decrease in net pension liability $ 11,289,418 Decrease in deferred outflows related to pensions (6,013,173) Increase in deferred inflows related to pensions (5,067,939) Net adjustment to increase net changes in fund balances-total governmental funds to arrive at changes in net position of governmental activities $ 208,306 Increase in total OPEB liability $ (1,656,871) Increase in deferred outflows related to OPEB 738,801 Increase in deferred inflows related to OPEB (85,424) Net adjustment to decrease net changes in fund balances-total governmental funds to arrive at changes in net position of governmental activities $ (1,003,494) Change in compensated absences $ (463,210) Amortization of bond premium/discount 1,277,963 Change in accrued interest 353,324 Amortization of deferred amount on refunding (726,589) Net adjustment to increase net changes in fund balances-total governmental funds to arrive at changes in net position of governmental activities $ 441,488 IV. DETAILED NOTES ON ALL FUNDS A. CASH AND INVESTMENTS At September 30, 2018, the carrying amount of deposits was a debit balance of$15,025,071, including $2,855,993 in outstanding checks, and the respective bank balances totaled$17,881,064. The City's bank balances were fully insured or collateralized with securities held by the City's agent in the City's name. Investments— All investments are presented at fair value. The fair value of U.S. Government Securities is based upon discounted future cash flows. The fair value of the positions in the state investment pools is the same as the value of the pool shares. The following page presents the change in the fair value of investments during the year ended September 30,2018. 72 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) A. CASH AND INVESTMENTS (CONTINUED) Fair value at September 30,2018 $ 287,503,032 Add: Proceeds of investments matured this fiscal year 220,921,930 Less: Cost of investments purchased this fiscal year (247,794,952) Less: Fair value at September 30,2017 (260,774,328) Change in fair value of investments $ (144,318) Reconciliation of cash and investments to the statement of net position amounts for cash and cash equivalents and investments is as follows: Cash in banks $ 15,025,071 Investments 287,503,032 Total cash and investments $ 302,528,103 Statement of net position presentation: Cash and cash equivalents $ 17,277,331 Investments 198,155,914 Restricted assets - Cash and cash equivalents 21,233,718 Investments 65,861,140 Total cash and cash equivalents and investments $ 302,528,103 Following GASB Statement No. 72, "Fair Value Measurement and Application, the City categorizes its fair value measurements within the hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. As of September 30, 2018, the City has the recurring fair value measurements for U.S. Government securities and municipal bonds of$45,935,434 valued using quoted prices for similar assets in active markets (level 2 inputs). Weighted Average Carrying Fair Maturity Amount Value (Days) U. S. Government Securities $ 34,617,848 $ 34,617,848 479 Municipal Bonds 11,317,586 11,317,586 109 Certificates of Deposit 218,081,619 218,081,619 326 State Investment Pools 23,485,979 23,485,979 29 $ 287,503,032 $ 287,503,032 Portfolio weighted average maturity 312 73 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) A. CASH AND INVESTMENTS(CONTINUED) In accordance with its investment policy, the City manages its interest rate risk by limiting the weighted average maturity of its portfolio to less than 540 days. The City's state investment pool investments are not subject to limitations,penalties, or restrictions on withdrawals. Legal and Contractual Provisions Governing Deposits and Investments The Public Funds Investment Act(PFIA)(Government Code Chapter 2256)contains specific provisions in the areas of investment practices,management reports and establishment of appropriate policies. Among other things,it requires the City to adopt,implement,and publicize an investment policy. That policy must address the following areas: (1)safety of principal and liquidity, (2)portfolio diversification,(3)allowable investments,(4)acceptable risk levels,(5)expected rates of return,(6)maximum allowable stated maturity of portfolio investments, (7) maximum average dollar-weighted maturity allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, and (9) bid solicitation preferences for certificates of deposit. Statutes authorize the City to invest in (1) obligations of the U.S. Treasury, certain U.S. agencies, and the State of Texas, (2) certificates of deposit, (3) certain municipal securities, (4) money market savings accounts, (5) repurchase agreements, (6) banker's acceptances, (7) mutual funds,(8)investment pools,(9)guaranteed investment contracts,and(10)common trust funds. The Act also requires the City to have independent auditors perform test procedures related to investment practices as provided by the Act. The City is in substantial compliance with the requirements of the Act and with local policies. In addition, the funds of the City must be deposited and invested under the terms of a contract, contents of which are set out in the Depository Contract Law. The depository bank places approved pledged securities for safekeeping and trust with the City's agent bank in an amount sufficient to protect City funds on a day- to-day basis during the period of the contract. The pledge of approved securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit Insurance Corporation(FDIC) insurance and any letters of credit that are pledged. Policies Governing Deposits and Investments 1. Foreign Currency Risk—The City's deposits and investments are not exposed to foreign currency risk. 2. Custodial Credit Risk—The City's policy is to be collateralized. The City was fully collateralized during the year. 3. Interest Rate Risk—In compliance with the City's Investment Policy,as of September 30,2018,the City ininiinized its interest rate risk in the portfolio by: a) Limiting the weighted average maturity to 540 days; b) Structuring the portfolio so that maturities meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the secondary market prior to maturity; c) Monitoring credit ratings of portfolio positions to assure compliance with rating requirements imposed by PFIA; and 74 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) A. CASH AND INVESTMENTS (CONTINUED) d) Investing operating funds primarily in short-term securities, money market mutual funds, money market accounts,or government investment pools. 4. Credit Risk — In compliance with the City's Investment Policy, as of September 30, 2018, the City minimized credit risk losses due to default of security issuer or backer by: a) Limiting investments to the safest rated securities. All the City's purchased investments in U. S. Agencies were rated AA+ and Aaa by Standard & Poor's and Moody's respectively; b) Using a registered investment advisor to provide investment and market advice; and c) Diversifying the investment portfolio so that potential losses on individual securities were minimized. 5. Concentration Risk—The City invests in pools, certificates of deposit, money market funds,municipal bonds and U. S. Government Securities. State law authorizes the City to invest in obligations of the United States government and its agencies, commercial paper, money market funds, certificates of deposit of any state or federally chartered bank,obligations of states,agencies,counties,cities and other political subdivisions of any state not rated less than A or equivalent. All investments made in 2018 were in the aforementioned categories. Local Government Investment Pools As of September 30, 2018, the City's investments included TexPool, TexSTAR, and Texas Term TexasDAILY Investment Pools. The investment pools' investments are not evidenced by securities that exist in physical or book entry form and, accordingly, do not have custodial risk. At September 30, 2018, $20,269,074 was invested in TexPool, $194,173 was invested in TexSTAR, and $3,022,732 in TexasDAILY. TexPool policies require that local government deposits be used to purchase investments authorized by the Public Funds Investment Act(PFIA)of 1987,as amended. The Texas State Comptroller of Public Accounts has oversight responsibility for TexPool. TexPool is a public funds investment pool created by the Texas Treasury Safekeeping Trust Company (Trust Company) to provide a safe environment for the placement of local government funds in authorized short-term, fully collateralized investments, including direct obligations or,or obligations guaranteed by,the United States or State of Texas or their agencies; federally insured certificates of deposit issued by Texas banks or savings and loans; and fully collateralized direct repurchase agreements secured by United States Government agency securities and placed through a primary government securities dealer. The Trust Company was incorporated by the State Treasurer by authority of the Texas Legislature as a special purpose trust company with direct access to the services of the Federal Reserve Bank to manage, disburse,transfer,safe keep,and invest public funds and securities more efficiently and economically. The State Comptroller of Public Accounts exercises oversight responsibility over TexPool. Oversight includes the ability to significantly influence operations, designation of management, and accountability for fiscal matters. TexPool uses amortized cost rather than fair value to report net position to compute share prices. The fair value of the position in TexPool is the same as the value of TexPool shares. Accordingly, the City's investments in TexPool are stated at cost,which approximates fair value. TexPool is currently rated 75 CITY OF ROUND ROCK,TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) A. CASH AND INVESTMENTS (CONTINUED) AA.Am by Standard and Poor's. This rating indicates excellent safety and superior capacity to maintain principal value and limit exposure to loss. Texas Short Term Asset Reserve program(TexSTAR)is a local government investment cooperative created under the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code and the PFIA, specifically tailored to meet state and local government investment objectives of preservation of principal, daily liquidity and competitive yield. The fund maintains a maturity of 60 days or less, with a maximum of 13 months for any individual security. The fund seeks to maintain a constant dollar objective and fulfills all requirements of Texas PFIA for local government investment pools. TexSTAR is co-administered by J.P.Morgan Investment Management Inc.and Hilltop Securities Inc. and is overseen by a five-member government board made up of three participants and one of each of the program's co-administrator or an affiliate. The responsibility of the board includes the ability to influence operations, designation of management, and accountability for fiscal matters. In addition, the pool has a Participant Advisory Board which provides input and feedback on the operations and direction of the program and Standard and Poor's reviews the pool on a weekly basis to ensure the pool's compliance with its rating requirements. TexSTAR uses amortized cost(which excludes unrealized gains and losses)rather than fair value to report net assets to compute share price. The fair value of the City's position in TexSTAR is the same as the value of TexSTAR shares. TexasTERM Local Government Investment Pool (the "Pool") was established by the TexasTERM Common Investment Contract, in conformity with Chapters 791 (Interlocal Cooperation Act) and 2256 (Public Funds Investment Act) of the Texas Government Code. An elected Advisory Board is responsible for the overall management of the Pool, including formation and implementation of its investment and operating policies. The Pool is a non-taxable investment fund established for local governments.The Pool has not provided or obtained any legally binding guarantees to support the value of shares.All participation in the Pool is voluntary.The Pool is not required to register with the Securities and Exchange Commission (SEC)as an investment company. The Pool's investment advisor and administrator is PFM Asset Management,LLC.The Pool offers a series of professionally managed portfolios that are available to government entities in the State of Texas.One of these portfolios, TexasDAILY, is a money market portfolio with daily liquidity that is rated AAAm by Standard&Poor's. TexasDAILY's investment objectives are to provide shareholders with as high a level of current income as is consistent with stability, safety of principal,and liquidity, and to maintain a stable net asset value (NAV) of$1.00 per share. TexasDAILY is designed as an investment vehicle for bond proceeds and operating funds of municipalities located in Texas. PFM Fund Distributors, Inc., a wholly- owned subsidiary of PFM Asset Management LLC,serves as the fund's distributor. In accordance with GASB Statement No.79, Certain External Investment Pools and Pool Participants,the Local Government Investment Pools do not have any limitations and restrictions on withdrawals such as notice periods or maximum transaction amounts. These pools do not impose any liquidity fees or redemption gates. 76 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) B. PROPERTY TAXES AND RECEIVABLES Property taxes attach as an enforceable lien on January 1. Taxes are levied on or about October 1, are due on November 1, and are past due the following February 1. The Williamson and Travis Central Appraisal Districts established appraisal values in accordance with requirements of the Texas Legislature. The City Council levies taxes based upon the appraised values. Williamson County and Travis County bills and collects the City's property taxes. The property tax rates, established in accordance with state law, were based on 100% of the net assessed valuation of real and personal property within the City on the 2017 tax roll. The tax rate, based on total taxable assessed valuation of$12,451,153,760 was$0.430000 on each$100 valuation and was allocated to the General Fund and Debt Service Fund at$0.287860 and$0.142140,respectively. General Debt Service Fund Fund Total Current year levy $ 92,789 $ 45,702 $ 138,491 Prior years'levies 242,869 158,970 401,839 335,658 204,672 540,330 Less -allowance for uncollectible taxes (3,357) (2,046) (5,403) $ 332,301 $ 202,626 $ 534,927 Allowances for uncollectible taxes are based upon historical experience in collecting property taxes. The City is prohibited from writing off real property taxes without specific statutory authority from the Texas Legislature. C. INTERFUND,RECEIVABLES,PAYABLES AND TRANSFERS Interfund receivables and payables as of September 30,2018 were as follows: Receivable Fund Payable Fund Receivable Payable Debt Service Fund General Fund $ 11,323 $ 11,323 RRTEDC Fund Nonmajor Governmental Funds 381,508 381,508 Governmental Funds $ 392,831 $ 392,831 Remaining balances resulted from the time lag between the dates that(1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3)payments between funds are made. The City reports interfund transfers between many of its funds. These routine transfers are consistent with the activities of the funds. 77 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) C. INTERFUND,RECEIVABLES,PAYABLES AND TRANSFERS(CONTINUED) Transfers are used to(1)move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due,and(3)use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. A summary of transfers between funds is shown below. Governmental Funds Transfers In Transfers Out General Fund- Water and Sewer Fund $ 3,389,358 $ Self-Financed Construction Fund 184,500 9,227,141 Nonmajor Governmental Funds - 320,000 3 Debt Service Fund- ,573,858 9,547,141 Round Rock Transportation and Economic Development Corporation Fund 3,930,485 - Nonmajor Governmental Funds 1,017,830 - 4,948,3 15 Round Rock Transportation and Economic Development Corporation Fund- Self-Financed Construction Fund 817,680 498,471 Debt Service Fund 3,930,485 Nonmajor Governmental Funds 381,508 - 1,199,188 4,428,956 Self-Financed Construction Fund- General Fund 9,227,141 184,500 Golf Course Fund 6,351,129 Round Rock Transportation and Economic Development Corporation Fund 498,471 817,680 2014 and 2017 General Obligation Bonds Fund 417,779 - Nonmajor Governmental Funds 784,885 - 2014 and 2017 General Obligation Bonds Fund 10,928,276 7,353,309 Self-Financed Construction Fund - 417,779 Other Governmental Funds- - 417,779 General Fund 320,000 - Debt Service Fund - 1,017,830 Self-Financed Construction Fund - 784,885 Nonmajor Governmental Funds 1,709,181 2,090,689 2,029,181 3,893,404 Subtotal of Governmental Funds 22,678,818 25,640,589 Proprietary Funds Water and Sewer Fund- General Fund - 3,389,358 Golf Course Fund- 3,389,358 Self-Financed Construction Fund 6,351,129 - 6,351,129 - Subtotal of Proprietary Funds 6,351,129 3,389,358 Total Transfers $ 29,029,947 $ 29,029,947 78 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) D. JOINT VENTURE The City entered into a partnership with the cities of Leander and Cedar Park and formed Brushy Creek Regional Utility Authority(BCRUA). The BCRUA has the responsibility to provide reliable,cost effective sources of water. The City accounts for this partnership as a joint venture. Condensed financial statements for BCRUA are shown below. Financial statements may be obtained at the BCRUA,221 East Main Street, Round Rock,Texas,78664. STATEMENT OF NET POSITION As of September 30, 2018 Total City's Interest ASSETS Cash and cash equivalents $ 7,567,643 $ 3,618,215 Receivables,other current assets 89,553 3,037 Restricted investments 31,165,412 14,669,523 Capital assets 157,891,749 56,757,726 Total assets 196,714,357 75,048,501 DEFERRED OUTFLOWS OF RESOURCES 14,811,692 5,771,676 LIABILITIES Accounts payable 644,857 41,674 Retainage payable 1,582,268 546,199 Current portion of bonds payable 5,455,000 1,860,000 Accrued bond interest payable 1,061,891 374,505 Total current liabilities 8,744,016 2,822,378 Noncurrent portion of bonds payable 179,632,831 64,690,866 Total liabilities 188,376,847 67,513,244 NET POSITION $ 23,149,202 $ 13,306,933 STATEMENT OF ACTIVITIES AND CHANGES IN NET POSITION For the Year Ended September 30, 2018 Total City's Interest Operating revenues $ 1,859,004 $ 304,331 Interest expense (6,554,224) (2,273,356) Other operating expenses (6,017,367) (1,735,934) Other income 496,053 217,924 Changes in Net Position (10,216,534) (3,487,035) Net position,October 1,2017 21,319,648 12,626,402 Contribution of capital,net 12,046,088 4,167,566 Net position, September 30,2018 $ 23,149,202 $ 13,306,933 79 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) E. CAPITAL ASSETS Capital asset activity for the year ended September 30,2018 was as follows: October 1, Additions/ Retirements/ September 30, 2017 Completions Adjustments 2018 Governmental Activities: Capital assets not being depreciated: Land $ 82,456,114 $ 4,741,366 $ (63,000) $ 87,134,480 Construction in progress 40,652,849 54,887,769 (69,978,472) 25,562,146 Total capital assets not being depreciated 123,108,963 59,629,135 (70,041,472) 112,696,626 Capital assets being depreciated: Buildings and improvements 801,665,286 55,984,480 (389,917) 857,259,849 Equipment 81,237,374 10,194,675 (4,465,823) 86,966,226 Total capital assets being depreciated 882,902,660 66,179,155 (4,855,740) 944,226,075 Less accumulated depreciation for: Buildings and improvements 391,768,917 25,203,123 (366,812) 416,605,228 Equipment 60,313,055 7,763,087 (4,315,625) 63,760,517 Total accumulated depreciation 452,081,972 32,966,210 (4,682,437) 480,365,745 Total capital assets being depreciated,net 430,820,688 33,212,945 (173,303) 463,860,330 Governmental activities capital assets,net $ 553,929,651 $ 92,842,080 $ (70,214,775) $ 576,556,956 Business-Type Activities: Capital assets not being depreciated: Land $ 8,452,956 $ - $ - $ 8,452,956 Construction in progress 4,270,870 19,056,393 (10,312,506) 13,014,757 Total capital assets not being depreciated 12,723,826 19,056,393 (10,312,506) 21,467,713 Capital assets being depreciated: Buildings and improvements 476,280,763 27,616,784 - 503,897,547 Equipment 19,859,849 2,881,699 (703,699) 22,037,849 Total capital assets being depreciated 496,140,612 30,498,483 (703,699) 525,935,396 Less accumulated depreciation for: Building and improvements 174,834,565 15,511,487 - 190,346,052 Equipment 13,230,221 2,116,399 (577,814) 14,768,806 Total accumulated depreciation 188,064,786 17,627,886 (577,814) 205,114,858 Total capital assets being depreciated,net 308,075,826 12,870,597 (125,885) 320,820,538 Business-type activities capital assets,net $ 320,799,652 $ 31,926,990 $ (10,438,391) $ 342,288,251 80 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) E. CAPITAL ASSETS(CONTINUED) Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities: General government $ 2,371,605 Public safety 4,500,879 Public works 19,276,413 Culture and recreation 6,817,313 Total depreciation expense—governmental activities $ 32,966,210 Business-Type Activities: Water and sewer utility $ 17,330,156 Golf course 297,730 Total depreciation expense—business-type activities $ 17,627,886 Net Investment in Capital Assets Detailed reconciliation of net investment in capital assets on the Government-wide Statement of Net Position for September 30,2018 follows: Governmental Business-Type Activities Activities Total Net investment in capital assets: Total capital assets(net of accumulated depreciation) $ 576,556,956 $ 342,288,251 $ 918,845,207 Plus capital-related deferred outflows of resources 5,258,914 4,741,745 10,000,659 Less long-term debt (236,860,464) (82,997,071) (319,857,535) Plus unspent bond proceeds 28,051,947 4,434,246 32,486,193 Net investment in capital assets (net of related debt) $ 373,007,353 $ 268,467,171 $ 641,474,524 81 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) F. LONG-TERM DEBT The following is a summary of long-term debt transactions, including current portion, of the City for the year ended September 30,2018: Balance October 1, Balance 2017 Refundings/ September Due within (restated) Additions Retirements 30,2018 one year Governmental Activities General obligation bonds $ 170,615,000 $ - $ (7,795,000) $ 162,820,000 $ 10,060,000 Certificates of obligation 26,315,000 - (795,000) 25,520,000 815,000 Hotel tax revenue bonds 11,675,000 - (620,000) 11,055,000 630,000 Sales tax revenue bonds 17,540,000 - (3,615,000) 13,925,000 3,700,000 Plus deferred amount: For issuance premium 16,520,459 - (1,291,642) 15,228,817 1,291,642 For issuance discount (102,069) - 13,679 (88,390) (13,679) Lease purchase payable 3,844,223 5,981,044 (1,425,230) 8,400,037 2,304,279 Net pension liability 39,486,545 - (11,289,418) 28,197,127 - Compensated absences 6,991,784 4,678,445 (4,215,235) 7,454,994 4,994,846 Total OPEB liability 12,664,092 1,656,871 - 14,320,963 - Total governmental activities 305,550,034 12,316,360 (31,032,846) 286,833,548 23,782,088 Business-Type Activities Revenue bonds 81,570,000 32,785,000 (37,925,000) 76,430,000 3,060,000 Plus deferred amount: For issuance premium 4,457,433 3,797,753 (1,688,116) 6,567,070 428,033 Net pension liability 5,384,529 - (1,539,466) 3,845,063 - Compensated absences 592,515 483,301 (519,968) 555,848 439,120 Total OPEB liability 1,726,922 225,937 - 1,952,859 - Total business-type activities 93,731,399 37,291,991 (41,672,550) 89,350,840 3,927,153 Total government $ 399,281,433 $ 49,608,351 $(72,705,396) $ 376,184,388 $ 27,709,241 The General Fund and Hotel/Motel Fund are responsible for liquidating the liability for compensated absences and OPEB in the governmental activities and the Water and Sewer Fund and Drainage Fund are responsible for liquidating the liability for compensated absences,pension,and OPEB in the business-type activities. 82 CITY OF ROUND ROCK,TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) F. LONG-TERM DEBT(CONTINUED) Long-term debt at September 30,2018 is comprised of the following: Business- Governmental Type Activities Activities General Obligation Bonds: $ 18,575,000 2010 refunding bonds due in annual installments of$ 140,000 to$ 1,940,000 through 2027; interest at 2.0%to 4.0% $ 14,980,000 $ - $ 19,580,000 2011 refunding bonds due in annual installments of$405,000 to$ 1,885,000 through 2027; interest at 2.0%to 4.0% 10,410,000 - $ 8,615,000 2013 refunding bonds due in annual installments of$455,000 to$ 925,000 through 2024; interest at 1.00%to 1.65% 4,135,000 - $ 10,465,000 2014A GO and refunding bonds due in annual installments of$ 270,000 to$ 1,740,000 through 2021;interest at 2.0%to 5.0% 4,030,000 - $ 66,885,000 2014 GO and refunding bonds due in annual installments of$ -0-to$4,790,000 through 2039; interest at 3.0%to 5.0% 66,885,000 - $32,465,000 2015 refunding bonds due in annual installments of$ -0-to$ 3,445,000 through 2032; interest at 4.0%to 5.0% 27,920,000 - $ 6,995,000 2016 refunding bonds due in annual installments of$ -0-to$ 755,000 through 2032; interest at 2.0%to 4.0% 5,875,000 - $ 28,585,000 2017 GO bonds due in annual installments of$ -0-to$ 1,945,000 through 2042; interest at 3.0%to 5.0% 28,585,000 - Total General Obligation Bonds 162,820,000 - Certificates of Obligation: $27,270,000 2014 Combination tax and revenue certificates of obligation due in installments of$ 175,000 to $ 1,700,000 through 2039; interest at 2.0%to 4.0% 25,520,000 - Total Certificates of Obligation 25,520,000 - Hotel Tax Revenue Bonds: $7,715,000 2012 venue tax and hotel bonds due in annual installments of $ 110,000 to$ 590,000 through 2038; interest at 2.0%to 4.0% 7,130,000 - $4,455,000 2016 refunding bonds due in annual installments of $ 30,000 to$ 630,000 through 2025;interest at 2.0%to 4.0% 3,925,000 - Total Hotel Tax Revenue Bonds 11,055,000 - Sales Tax Revenue Bonds: $ 10,930,000 2015 refunding bonds due in annual installments of $ 1.75 to $ 1.89 million through 2021 including interest at 1.56% 5,590,000 - $ 10,140,000 2017 refunding bonds due in annual installments of $ 1.32 to$ 1.92 million through 2023 including interest at 1.78% 8,335,000 - Total Sales Tax Revenue Bonds 13,925,000 - 83 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) F. LONG-TERM DEBT(CONTINUED) Business- Governmental Type Activities Activities Utility System Revenue Bonds: $ 78,785,000 2009 bonds due in annual installments of $ 645,000 to $4,455,000 through 2019; interest at 2.0%to 5.0% - 2,105,000 $ 8,000,000 2014 bonds due in annual installments of $ -0-to$ 585,000 through 2034; interest at 2.0%to 4.0% - 7,030,000 $ 35,185,000 2016 refunding bonds due in annual installments of $ 155,000 to$ 3,400,000 through 2035; interest at 2.0%to 5.0% - 34,870,000 $ 32,785,000 2017 refunding bonds due in annual installments of $ 360,000 to $4,265,000 through 2039; interest at 3.0%to 5.0% - 32,425,000 Total Utility System Revenue Bonds - 76,430,000 Issuance premium 15,228,817 6,567,070 Issuance discount (88,390) - Lease purchases payable: $ 11,681,044 leases due in semi-annual installments including interest ranging from 1.325% -2.9474%due in 2023. The lease obligation is funded with general revenue sources. 8,400,037 - Net pension liability 28,197,127 3,845,063 Compensated absences 7,454,994 555,848 Total OPEB liability 14,320,963 1,952,859 Total Primary Government Debt $ 286,833,548 $ 89,350,840 The annual requirements to amortize bonded, certificates of obligation, loan and lease debt at September 30,2018,including interest are as follows: Governmental Activities: Year Ending September 30, General and Certificates of Obligation Debt Principal Interest Total 2019 $ 10,875,000 $ 7,958,566 $ 18,833,566 2020 11,275,000 7,561,666 18,836,666 2021 10,580,000 7,088,944 17,668,944 2022 11,105,000 6,665,925 17,770,925 2023 11,720,000 6,186,519 17,906,519 2024-2028 45,920,000 24,178,931 70,098,931 2029-2033 36,585,000 15,253,056 51,838,056 2034-2038 36,450,000 7,476,469 43,926,469 2039-2043 13,830,000 1,019,044 14,849,044 $ 188,340,000 $ 83,389,120 $ 271,729,120 84 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) F. LONG-TERM DEBT(CONTINUED) Governmental Activities: Year Ending September 30, Hotel Tax Revenue Principal Interest Total 2019 $ 630,000 $ 382,805 $ 1,012,805 2020 645,000 364,955 1,009,955 2021 665,000 343,280 1,008,280 2022 690,000 317,505 1,007,505 2023 720,000 290,680 1,010,680 2024-2028 2,720,000 1,100,275 3,820,275 2029-2033 2,260,000 745,205 3,005,205 2034-2038 2,725,000 281,300 3,006,300 $ 11,055,000 $ 3,826,005 $ 14,881,005 Year Ending September 30, Sales Tax Revenue Principal Interest Total 2019 $ 3,700,000 $ 235,567 $ 3,935,567 2020 3,750,000 173,755 3,923,755 2021 3,810,000 111,097 3,921,097 2022 1,320,000 47,437 1,367,437 2023 1,345,000 23,941 1,368,941 $ 13,925,000 $ 591,797 $ 14,516,797 Year Ending September 30, Lease Purchases Principal Interest Total 2019 $ 2,304,279 $ 155,084 $ 2,459,363- 2020 2,037,425 119,589 2,157,014 2021 1,657,840 81,150 1,738,990 2022 1,458,744 46,966 1,505,710 2023 941,749 16,644 958,393 $ 8,400,037 $ 419,433 $ 8,819,470 85 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) F. LONGTERM DEBT(CONTINUED) Business-Type Activities: Year Ending September 30, Utility System Revenue Bonds Principal Interest Total 2019 $ 3,060,000 $ 3,042,631 $ 6,102,631 2020 3,180,000 2,902,481 6,082,481 2021 3,325,000 2,748,581 6,073,581 2022 3,475,000 2,587,631 6,062,631 2023 3,530,000 2,426,631 5,956,631 2024-2028 18,380,000 9,608,738 27,988,738 2029-2033 18,180,000 6,659,169 24,839,169 2034-2038 19,035,000 3,346,863 22,381,863 2039-2043 4,265,000 181,263 4,446,263 $ 76,430,000 $ 33,503,988 $ 109,933,988 In prior years, the City defeased certain revenue and general obligation bonds by placing the proceeds of new bonds in an irrevocable trust to provide all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. At September 30,2018,there are no bonds outstanding which have been reported as defeased. Bond ordinances also provide for other limitations and restrictions. The City is in compliance with all significant limitations and restrictions contained in the various bond ordinances. In November 2013, the voters authorized the issuance of general obligation bonds to fund capital assets of the general government. The full faith and credit of the City as well as the City's ad valorem taxing authority back general obligation bonds. Date Amount Amount Unissued Purpose Authorized Authorized Issued(*) Balance Fire Department 11/5/2013 $ 16,500,000 $ 16,500,000 $ - Parks& Recreation 11/5/2013 56,500,000 56,500,000 - Library 11/5/2013 23,200,000 1,500,000 21,700,000 Police&Fire 11/5/2013 27,400,000 27,400,000 - $ 123,600,000 $ 101,900,000 $ 21,700,000 (*)"Amount issued"column is adjusted pursuant to rules used by the Texas Attorney General. The City may incur non-voted debt payments from or secured by its levy and collection of ad valorem taxes and other sources of revenue,including tax notes,public property finance contractual obligations,and leases for various purposes. 86 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) F. LONGTERM DEBT (CONTINUED) (1) UTILITY REVENUE BONDS Utility revenue bonds are used to finance the acquisition and construction of major capital improvements to the City's water and sewer systems. The City is required by bond ordinances to pledge the net revenues of the waterworks and sewer system for the retirement of its outstanding revenue bonds,including interest thereon, and is required for such purposes to maintain debt service funds and bond reserve funds for all outstanding revenue bonds. The debt service funds are restricted within the Enterprise Fund and require that net revenues of the City's waterworks and sewer system, after operating and maintenance expenses are deducted, be irrevocably pledged by providing equal monthly installments which will accumulate to the semi-annual principal and interest requirements as they become due. For fiscal year 2018, net revenues available for debt service were 4.86 times the average annual debt service requirement. The bond reserve funds for revenue bond retirement are also restricted within the Enterprise Fund. The City is in compliance with the requirement to maintain a combined reserve fund containing cash and investments in an amount equal to the average annual principal and interest requirements of all bonds then outstanding. The City also covenants under the bond indentures that reserve funds shall be invested in time deposits, certificates of deposit and direct or guaranteed obligations of the United States of America. (2) HOTEL TAX REVENUE BONDS Hotel occupancy tax revenue bonds were issued to fund the City's portion of the convention center complex. The debt service fund for the hotel tax revenue bonds, aggregating $714,010 at September 30, 2018, is reported in the governmental funds. Bond covenants require that the hotel tax revenues be irrevocably pledged by providing quarterly installments, which will accumulate to the semi-annual principal and interest requirements as they become due. The bond reserve fund for hotel tax revenue bond retirement aggregates $830,901 at September 30, 2018. This amount is in compliance with the requirements contained in the bond's Indenture Agreement. This agreement requires '/z of the average annual debt service requirements of the bonds in the reserve fund be deposited upon issuance of the bonds,with quarterly installments until the required reserve is attained. (3) SALES TAX REVENUE BONDS Sales tax revenue bonds have been issued to fund transportation improvements. The Round Rock Transportation and Economic Development Corporation (RRTEDC) issued the sales tax revenue bonds. RRTEDC is a blended component unit of the City of Round Rock,which collects `/z of I%of the sales tax collected by the State on its behalf. Although RRTEDC is presented as a blended component unit,none of the City's assets are pledged to payment of the bonds. The bonds are secured solely by a pledge of the revenues of RRTEDC. The debt service fund for the sales tax revenue bonds, aggregating $209,027 at September 30, 2018, is reported in the governmental funds. Bond covenants require that RRTEDC's share of the sales tax is 87 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) F. LONG-TERM DEBT(CONTINUED) pledged as security for the bonds. RRTEDC provides monthly installments that accumulate to the semi- annual principal and interest requirements as they become due. A reserve fund was not established for these bonds. RRTEDC purchased bond insurance to provide for payment of the principal and interest requirements in the event that pledged revenues are not sufficient. (4) 2017 REFUNDING/ISSUANCE In December 2017, the City refunded portions of the Utility System Revenue Bonds. The net proceeds of the $32,785,000 Utility System Revenue Refunding Bonds were used to refund certain of the City's outstanding parity debt to achieve a debt service savings and to pay the costs of issuing the bonds. As a result, the refunded bonds are considered defeased, and the debt for these bonds has been removed from the City's financial statements. This refunding will reduce the total debt service payments over the next 21 years by$4,229,397 and will result in an economic gain(i.e. the difference between the present value of the debt service payments of the refunded debt and the refunding bonds)of$3,033,705. G. ACCRUED COMPENSATED ABSENCES Changes to accrued compensated absences for the year ended September 30,2018,were as follows: Governmental Business-Type Activities Activities Balance,October 1,2017 $ 6,991,784 $ 592,515 Additions 4,678,445 483,301 Reductions (4,215,235) (519,968) Balance, September 30,2018 $ 7,454,994 $ 555,848 Accrued compensated absences due within one year were $4,994,846 for governmental activities and $439,120 for business-type activities. Liabilities for accrued compensated absences are funded from General Fund and Hotel/Motel Fund revenues for the governmental activities and water and sewer fund and drainage fund program revenues for the business-type activities. 88 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 IV. DETAILED NOTES ON ALL FUNDS (CONTINUED) H. RESTRICTED ASSETS The following summarizes restricted assets by purpose at September 30,2018: Cash& Property Sales Accrued Cash Taxes Tax Interest Equivalents Investments Receivable Receivable Receivable Governmental Activities: Debt Service Fund $ 4,842,194 $ - $ 202,626 $ - $ - Restricted by debt covenants - Round Rock Transportation and Economic Development Corporation Fund 2,289,517 25,087,845 - 1,622,272 89,064 2014 and 2017 General Obligation Bonds Fund 10,620,509 18,173,037 - - 41,040 Nonmajor capital projects funds 554,897 1,899,937 - - 6,852 Total Governmental Activities $ 18,307,117 $ 45,160,819 $ 202,626 $ 1,622,272 $ 136,956 Cash& Accrued Cash Accounts Interest Equivalents Investments Receivable Receivable Business-Type Activities: Water and Sewer Fund- Impact fees $ 1,008,140 $ 11,046,895 $ 85,574 $ - Construction 593,223 9,653,426 - - Customer deposits 1,158,052 - Revenue bond debt service 167,186 - _ _ Accrued interest receivable - - - 74,156 Total Business-Type Activities $ 2,926,601 $ 20,700,321 $ 85,574 $ 74,156 V. OTHER INFORMATION A. COMMITMENTS AND CONTINGENCIES Tax Collections The City has a contract with the tax offices of Williamson and Travis counties to collect City taxes and deposit monies to the City's accounts. For this service, Williamson County was paid $9,428 and Travis County was paid$611 for the fiscal year ended September 30,2018. 89 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 V. OTHER INFORMATION(CONTINUED) A. COMMITMENTS AND CONTINGENCIES (CONTINUED) Commitments for Road Construction The City's component unit, the Round Rock Transportation and Economic Development Corporation has entered into various commitments with the State of Texas, Department of Transportation and neighboring cities/counties relative to the construction of roadways. Water Supply Agreements On May 2, 1978,the City entered into the"Water Supply Contract"with the Brazos River Authority(BRA), providing the City the right to purchase 6,720 acre-feet of water per year from Lake Georgetown. A new agreement, "System Water Availability Agreement for Lake Georgetown" dated September 1, 2001, replaced that agreement. The new agreement revised the rate methodology from a tiered system rate, wherein rates change based upon the City's consumption, to a level system rate. For the fiscal year ended September 30,2018,the City's cost under this contract was $497,280. On September 12, 1991,the City entered into the"Replacement Water Supply Agreement"with the BRA, wherein it received the right to purchase 8,134 acre-feet of water per year from Stillhouse Hollow Lake. Rights for an additional 10,000 acre-feet of water were acquired in the November 13, 1996"System Water Supply Agreement". These agreements were replaced with the"System Water Availability Agreement for Stillhouse Hollow Lake" dated September 1, 2001. Under this agreement, the City purchases 18,134 acre- feet of water per year at the new system rate. For the fiscal year ended September 30, 2018,the City's cost under this contract was $1,341,916. Effective September 1, 2001, the City entered into a"System Water Availability Agreement for Colorado River Basin Water"with the BRA, wherein it received reserved water rights for an additional 6,944 acre- feet of water. Two subsequent agreements granted Round Rock rights to 13,984 additional acre-feet of water per year from the Colorado River Basin. For the fiscal year ended September 30, 2018, the City's cost under these contracts was $1,640,626. Future annual charges under the Water Supply Agreements will be based upon the system rate periodically set by the BRA. Regional Wastewater Project In October 1996, as part of a plan for a regional wastewater collection, treatment and disposal system, the City and the City of Cedar Park entered into agreements with an alliance formed by the Brazos River Authority(BRA)and the Lower Colorado River Authority(LCRA). In 1998,LCRA acquired the treatment facilities of the City(these facilities were repurchased from the LCRA in 2009, as described below). In September 2009, the Cities of Round Rock, Austin and Cedar Park entered into a Purchase Agreement with the LCRA wherein they agreed to buy the Brushy Creek Regional Wastewater System (BCRWWS) from the LCRA. The agreement outlined the proportional share that each city would purchase of the 90 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 V. OTHER INFORMATION(CONTINUED) A. COMMITMENTS AND CONTINGENCIES (CONTINUED) wastewater transportation and treatment system. On December 8, 2009, the three cities purchased the BCRWWS assets and entered into a Master Contract for the Financing, Construction, Ownership and Operation of the BCRWWS. The Master Contract provided for the terms and conditions by which the cities would jointly own and operate the BCRWWS. In June,2010 the Cities of Round Rock,Austin and Cedar Park sold a share of the BCRWWS assets to the City of Leander, and all parties entered into the Amended and Restated Master Contract for the Financing, Construction,Ownership and Operation of the Brushy Creek Regional Wastewater System. The system currently has a total treatment capacity of 24.5 MGD which is sufficient to meet future projected flows through 2023. The City of Round Rock's current wastewater capacity in the system is 20.1 MGD. The BRA contracted to provide the operations of the system,for which each of the cities is invoiced relative to their system usage. For the fiscal year ended September 30,2018,the City of Round Rock's expenditures for operation of the regional facilities were$3,936,058. Other The City is a defendant in a number of lawsuits arising principally from claims against the City for alleged improper actions by City employees. Total damages claimed are substantial;however,it has been the City's experience that such actions are usually dismissed or settled for amounts substantially less than the claimed amounts. The City Attorney estimates that the potential claims against the City not covered by various insurance policies would not materially affect the financial condition of the City. Arbitrage Rebate Due to requirements of the Tax Reform Act of 1986, the City annually contracts for the computations of arbitrage rebate requirements for the City's various bond issues. At September 30, 2018, the potential rebate was calculated at$0. Deferred Compensation Plan The City offers its employees a deferred compensation plan that permits them to defer a portion of their current salary until future years. Any contributions made to the deferred compensation plan,in compliance with Section 457 of the Internal Revenue Code, are not available to employees until termination of employment, retirement, death or an unforeseen emergency. A third party administrator, Nationwide Retirement Solutions, administers contributions to the plan. Effective January 1997, and in compliance with the provisions of the IRC Section 457(g), the plan assets are in custodial accounts for the exclusive benefit of the plans' participants and beneficiaries. In accordance with GASB Statement No. 32, the City provides neither administrative services nor investment advice to the plans and therefore, no fiduciary relationship exists between the City and the deferred compensation plan. 91 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 V. OTHER INFORMATION(CONTINUED) A. COMMITMENTS AND CONTINGENCIES (CONTINUED) Tax Abatements The City of Round Rock negotiates property tax abatement agreements,property tax rebates,and sales tax rebates on an individual basis. Each agreement was negotiated under The Texas Property Redevelopment and Tax Abatement Act,Chapter 312,Tax Code,V.A.T.S.as amended,allowing localities to abate property taxes for economic development purposes which include business relocation, retention and expansion. Property must be located within a reinvestment zone to be eligible for a tax abatement,and agreements are limited to ten years in length. The abatement value can only be to the extent its value for that year exceeds its value for the year in which the agreement is executed. The City has an Abatement Recapture clause in all Tax Abatement Agreements in the event that the recipient does not fulfill the requirements of the agreement. The tax rebate program is for a period greater than ten years, and taxes paid are reimbursed back to the owner. Amount of Taxes Abated During the Tax Abatement Program Fiscal Year Economic Development Property Tax $ 62,336 Tax Rebate Program Economic Development Property Tax $ 849,644 Sales Tax 6,212,331 The City has not made any commitments as part of the agreements other than to reduce taxes. The City is not subject to any tax abatement agreements entered into by other governmental entities. B. RISK MANAGEMENT The City is a member of the Texas Municipal League's Intergovernmental Risk Pool (Pool). The Pool was created for the purpose of providing coverage against risks, which are inherent in operating a political subdivision. The City pays annual premiums to the Pool for liability, property and workers' compensation coverage and all billed premiums upon the coverage have been paid. The City's agreement with the Pool provides that the Pool will be self-sustaining through member premiums and will provide reinsurance contracts through commercial companies. The Pool agrees to handle all liability, property and workers' compensation claims and provide any defense as is necessary. The Pool makes available to the City loss control services to assist the City in following a plan of loss control that may result in reduced losses. The City agrees that it will cooperate in instituting any and all reasonable loss control recommendations made by the Pool. The City has experienced no significant reductions in coverage through the Pool over the past year. There have been no insurance settlements exceeding Pool coverage for any of the past three years. 92 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 V. OTHER INFORMATION (CONTINUED) B. RISK MANAGEMENT(CONTINUED) Self-Funded Health Insurance Fund The City is self-insured for medical and dental claims. The self-insurance program is maintained in the Self-Funded Health Insurance Internal Service Fund. This program provides health benefit coverage in accordance with a pre-approved plan that establishes coverage limits per employee per year with unlimited health coverage benefits. The City purchases commercial insurance for claims in excess of a contractual City liability limit. Additionally, commercial insurance covers claims in excess of an aggregate amount for the City up to $1,000,000 per plan year. Settled claims have not exceeded the commercial coverage in any of the past three fiscal years. The liability is estimated based upon claims settled within the next month. An analysis of claims activities is presented below: Claims and Beginning Changes in Actual Claim Balance Fiscal Year Liability Estimates Payments at Year-End 2016 $ 421,979 $ 9,625,120 $ 9,310,446 $ 736,653 2017 736,653 10,077,914 10,067,501 747,066 2018 747,066 9,755,355 10,015,639 486,782 C. EMPLOYEE RETIREMENT PLAN Plan Description The City participates as one of 883 plans in the non-traditional,joint contributory, hybrid defined benefit plan administered by TMRS. TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8,Texas Government Code(the TMRS Act) as an agent inultiple-employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six-member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS'defined benefit pension plan is a tax-qualified plan under Section 401 (a) of the Internal Revenue Code. TMRS issues a publicly available comprehensive annual financial report(CAFR) that can be obtained at www.tmrs.com. All eligible employees of the City are required to participate in TMRS. Benefits Provided TMRS provides retirement,disability,and death benefits. Benefit provisions are adopted by the governing body of the City,within the options available in the state statutes governing TMRS. At retirement, the benefit is calculated as if the sum of the employee's contributions, with interest,and the 93 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 V. OTHER INFORMATION(CONTINUED) C. EMPLOYEE RETIREMENT PLAN(CONTINUED) city-financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven payment options. Members may also choose to receive a portion of their benefit as a partial lump sum distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75%of the member's deposits and interest. A summary of plan provisions for the City is as follows: Employee deposit rate 7% Matching ratio(city to employee) 2 to 1 Years required for vesting 5 Service retirement eligibility 20 years at any age, 5 years at age 60 and above Updated Service Credit 100%Repeating,Transfers Annuity increase(to retirees) 70%of CPI Repeating Supplemental death benefits for employees and retirees Yes Employees Covered by Benefit Terms At the December 31,2017 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 299 Inactive employees entitled to but not yet receiving benefits 381 Active employees 927 Total 1,607 Contributions The contribution rates for employees in TMRS are either 5%, 6%, or 7%of employee gross earnings, and the city matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the city. Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the entry age normal actuarial cost method. The actuarially determined rate is the estimated amount necessary to finance the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Since the City needs to know its contribution rates in advance for budgetary purposes,there is a one-year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect. Employees for the City were required to contribute 7%of their annual gross earnings during the fiscal year. The City elected to contribute for calendar years 2017 and 2018 as follows: 2017 2018 Total Retirement Rate 15.55% 15.51% Supplemental Death Benefit 0.13 0.14 Total Combined Contribution 15.68% 15.65% 94 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 V. OTHER INFORMATION (CONTINUED) C. EMPLOYEE RETIREMENT PLAN(CONTINUED) Accordingly, contributions to TMRS for the year ended September 30, 2018, were $9,618,245, and were equal to the required contributions. Net Pension Liability The City's net pension liability(NPL)was measured as of December 31,2017,and the total pension liability (TPL)used to calculate NPL was determined by an actuarial valuation as of that date. Actuarial assumptions: TPL in the December 31, 2017 actuarial valuation was detennined using the following actuarial assumptions: Inflation 2.5%per year Overall payroll growth 3.0%per year Investment rate of return 6.75%,net of pension plan investment expense, including inflation Salary increases were based on a service-related table. Mortality rates for active members, retirees, and beneficiaries were based on the gender-district RP2000 Combined Healthy Mortality Tables with Blue Collar Adjustment,with male rates multiplied by 109%and female rates multiplied by 103%.The rates are projected on a fully generational basis by scale BB to account for future mortality improvements. For disabled annuitants, the gender-distinct RP2000 Combined Healthy Mortality Tables with Blue Collar Adjustment are used with males' rates multiplied by 109% and female rates multiplied by 103% with a 3-year set-forward for both males and females. In addition, a 3% minimum mortality rate is applied to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements subject to the 3% floor. The actuarial assumptions were developed primarily from the actuarial investigation of the experience of TMRS over the four year period from December 31, 2010 to December 31, 2014. They were adopted in 2015 and first used in the December 31,2015 actuarial valuation. The post-retirement mortality assumption for healthy annuitants and annuity purchase rate are based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. In conjunction with these changes first used in the December 31,2013 valuation,TMRS adopted the entry age normal actuarial cost method and a one- time change to the amortization policy. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income,in order to satisfy the short-term and long- term funding needs of TMRS. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimate ranges of expected future real rates of return(expected returns,net of pension plan investment expense and inflation)are developed for each major asset class. These ranges are combined to produce the long-tern expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a 95 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 V. OTHER INFORMATION(CONTINUED) C. EMPLOYEE RETIREMENT PLAN(CONTINUED) recommended investment return assumption under the various alternative asset allocation portfolios,GRS focused on the area between(1)arithmetic mean(aggressive)without an adjustment for time(conservative) and(2) the geometric mean(conservative)with an adjustment for time(aggressive). The target allocation and best estimates of real rates of return for each major asset class in fiscal year 2018 are summarized in the table below: Target Long-Term Expected Real Rate Asset Class Allocation of Return(Arithmetic) Domestic Equity 17.5% 4.55% International Equity 17.5 6.35 Core Fixed Income 10.0 1.00 Non-Core Fixed Income 20.0 3.90 Real Return 10.0 3.80 Real Estate 10.0 4.50 Absolute Return 10.0 3.75 Private Equity 5.0 7.50 Total 100.0% Single Discount Rate The discount rate used to measure the TPL was 6.75%. The projection of cash flows used to determine the discount rate assumed that employee and employer contributions will be made at the rates specified in statute. Based on that assumption,the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long- term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the TPL. 96 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 V. OTHER INFORMATION(CONTINUED) C. EMPLOYEE RETIREMENT PLAN(CONTINUED) Changes in the Net Pension Liability Increase(Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a)-(b) Balance at December 31,2016 $ 240,909,799 $ 196,038,725 $ 44,871,074 Changes for the year: Service cost 10,430,650 - 10,430,650 Interest 16,360,878 - 16,360,878 Difference between expected and actual experience 671,908 - 671,908 Changes of assumptions - - - Contributions-employer - 9,138,705 (9,138,705) Contributions -employee - 4,113,985 (4,113,985) Net investment income - 27,187,574 (27,187,574) Benefit payments, including refunds of employee contributions (7,483,495) (7,483,495) - Administrative expense - (140,808) 140,808 Other - (7,136) 7,136 Net changes 19,979,941 32,808,825 (12,828,884) Balance at December 31,2017 $ 260,889,740 $ 228,847,550 $ 32,042,190 As previously disclosed, the assumed interest rate of return used by GRS is 6.75%. An unexpected return on investments of 13.8%for calendar year 2017 resulted in net investment income of$27,187,574 for the City. This, in turn, resulted in a net decrease of$12,828,884 in the City's NPL.The return on investments is primarily due to overperformance of the various asset classes such as Non-US Equities,Real Estate,and Absolute Return investments. Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the NPL of the City, calculated using the discount rate of 6.75%, as well as what the City's NPL would be if it were calculated using a discount rate that is 1-percentage-point lower(5.75%) or 1-percentage-point higher(7.75%)than the current rate: Current Discount 1%Decrease Rate I% Increase 5.75% 6.75% 7.75% City's Net Pension Liability $ 74,386,889 $ 32,042,190 $ (2,260,214) Pension Plan Fiduciary Net Position Detailed information about the pension plan's fiduciary net position is available in a separately-issued TMRS financial report. That report may be obtained on the Internet at www.tnirs.coin. 97 CITY OF ROUND ROCK,TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 V. OTHER INFORMATION (CONTINUED) C. EMPLOYEE RETIREMENT PLAN(CONTINUED) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources For the year ended September 30,2018,the City recognized pension expense of$9,463,742. At September 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual economic experience $ 1,042,894 $ 366,962 Difference between projected and actual investment earnings - 6,079,936 Pension contributions after measurement date 7,591,529 - Changes in actuarial assumptions used to determine pension liability - 633,718 Total $ 8,634,423 $ 7,080,616 Deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date of$7,591,529 will be recognized as a reduction of the NPL for the measurement year ending December 31, 2018 (i.e.,recognized in the City's financial statements September 30,2019). Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Measurement Net Deferred Year Ended Outflows (Inflows) December 31, of Resources 2018 $ (129,132) 2019 (529,204) 2020 (2,873,933) 2021 (2,661,070) 2022 143,524 Thereafter 12,093 Total $ (6,037,722) D. OTHER POST-EMPLOYMENT BENEFITS Plan Descriptions The City participates in funding two OPEB plans. One plan is the Supplemental Death Benefits Fund (SDBF) administered by TMRS. The other is medical and prescription drug coverage offered to retirees and their dependents and is a self-funded health insurance plan. 98 CITY OF ROUND ROCK,TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 V. OTHER INFORMATION(CONTINUED) D. OTHER POST-EMPLOYMENT BENEFITS(CONTINUED) SDBF: TMRS administers a defined benefit group-term life insurance plan known as the Supplemental Death Benefits Fund(SDBF). This is a voluntary program in which the City has elected,by ordinance, to provide group-term life insurance coverage (supplemental death benefits) to both current and retired employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year, to be effective the following January 1. The retiree portion of the SDBF is considered a single-employer plan. Self-Funded Health Insurance: The City offers its retirees and their dependents medical and prescription drug coverage until age 65. This benefit includes access to medical,dental,and vision insurance. The plans are the same as the active plans. The retirees are required to make significantly higher contributions than the actives. However, these higher contributions still do not fully cover the cost of the retirees on a stand- alone basis,thus generating a retiree medical liability.Once a member becomes eligible for Medicare at age 65,he/she is no longer eligible for benefits. This significantly limits the number of retirees on the plan,the benefits paid during the life of a retiree and consequently,the liability.This plan is also considered a single- employer defined benefit OPEB plan. Benefits Provided SDBF: Payments from this fund are similar to group-term life insurance benefits, and are paid to the designated beneficiaries upon the receipt of an approved application for payment. The death benefit for active employees provides a lump-sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings for the 12-month period preceding the month of death). Retired employees are insured for$7,500; this coverage is an"other post-employment benefit,"or OPEB. The City offers supplemental death benefits to both active employees and retirees. As the SDBF covers both active and retiree participants, with no segregation of assets, the SDBF is considered to be an unfunded OPEB plan(i.e.,no assets are accumulated). Self-Funded Health Insurance: All retirees who are eligible to receive pension benefits under the City's pension system and, for retirees, have at least five years of service with the City at the time of their retirement are eligible for OPEB. Retirees may also enroll eligible dependents under the medical, dental, and vision plan(s) in which they participate. Eligible dependents of the retiree include a legally married spouse and unmarried children dependent on the retiree for support. The children covered include children under age 26 and eligible disabled children beyond 26 years of age,if covered prior to age 26. A surviving spouse of a deceased retiree may continue medical coverage until the date the surviving spouse remarries, or until they are Medicare eligible. A surviving spouse of a deceased retiree may continue dental and/or vision coverage for 36 months by paying the entire premium plus a 2 percent administrative fee. 99 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 V. OTHER INFORMATION (CONTINUED) D. OTHER POST-EMPLOYMENT BENEFITS (CONTINUED) Employees Covered by Benefit Terms At the December 31, 2017 valuation and measurement date, the following employees were covered by the benefit terms: SDBF: Inactive employees currently receiving benefits 240 Inactive employees entitled to but not yet receiving benefits 131 Active employees 927 Total 1,298 Self-Funded Health Insurance: Inactive employees (retirees) 30 Active employees 908 Total 938 Contributions SDBF: The City contributes to SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance and represents 0.14% of required contributions. The City's contributions to SDBF for the years ended 2018, 2017, and 2016 were $13,337, $11,778, and $11,323, respectively, which equaled the required contributions each year. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to pre-fund retiree term life insurance during employees' entire careers. The retiree-only portion of the SDBF rate was 0.02%both for the years ended 2018 and 2017. Self-Funded Health Insurance: OPEB are funded on a pay-as-you-go basis. The City recognizes the cost of providing these benefits as an expense and corresponding revenue in the Internal Service Fund (self- funded health insurance). Medical, dental and life insurance premiums are reported in this fund. The City is under no obligation, statutory or otherwise, to offer OPEB or to pay any portion of the cost of OPEB to any retirees or their dependents. Allocation of City funds to pay OPEB or to make OPEB available is determined on an annual basis by the City Council as part of the budget approval process. Total OPEB Liability For the fiscal year ended September 30, 2018, the City recognized a total OPEB liability of$16,273,822, $1,947,763 of which was for the SDBF,and$14,326,059 for the Self-Funded Health Insurance plan. Both were measured as of December 31, 2017 and were determined by an actuarial valuation as of that date. 100 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 V. OTHER INFORMATION (CONTINUED) D. OTHER POST-EMPLOYMENT BENEFITS(CONTINUED) Actuarial assumptions: The total OPEB liability in the December 31,2017 actuarial valuation was determined using the following actuarial assumptions: SDBF Self-Funded Health Insurance Inflation 2.5% 2.5% Salary increases 3.5%to 10.5%including inflation 3.0% Discount rate** 3.31% 3.31% Healthcare cost trend rate None 10%to 5% Retirees' share of benefit- Varies based on plan elected and related costs $0 years of service Actuarial cost method*** Entry Age Normal Cost Method Entry Age Normal Cost Method Mortality For service retirees: based on the Mortality rates were based on the RP2000 Combined Mortality Table with RP-2014 Dynamic Table projected Blue Collar Adjustment with male rates using MP-2017 multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with scale BB For disabled retirees: based on the RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103% with a 3 year set- forward for both males and females Development of claims None Retiree medical and pharmacy claims were projected to the following fiscal year and age- adjusted to age 65. A composite retiree contribution was netted out. That net age-65 cost was then averaged with the trended, age-65 cost from the prior valuation to smooth out any fluctuations. That average then was allocated to all pre- 65 ages using the same age factors. ** Because this plan is considered an unfunded trust under GASB Statement No. 75, the relevant discount rate for calculating the total OPEB liability is based on the Fidelity Index's "20-Year Municipal GO AA Index"rate as of December 31, 2017. *** This method develops the annual cost of the plan in two parts: that attributable to benefits accruing in the current year, known as the normal cost, and that due to service earned prior to the current year,known as the amortization of the unfunded actuarial accrued liability. The normal cost and the actuarial accrued 101 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 V. OTHER INFORMATION (CONTINUED) D. OTHER POST-EMPLOYMENT BENEFITS (CONTINUED) liability is calculated individually for each member. The normal cost rate for an employee is the contribution rate which, if applied to a member's compensation throughout their period of anticipated covered service with the municipality, would be sufficient to meet all benefits payable on their behalf. The normal cost is calculated using an entry age based on benefit service with the current city. If a member has additional time-only vesting service through service with other TMRS cities or other public agencies, they retain this for determination of benefit eligibility and decrement rates. The salary-weighted average of these rates is the total norinal cost rate. The unfunded actuarial accrued liability reflects the difference between the portion of projected benefits attributable to service credited prior to the valuation date and assets already accumulated. Specific to the self-funded health insurance plan, at the time the employee enters the plan(usually at date of hire),the present value of future benefits is set equal to the present value of future normal costs. Instead of the normal costs being a level dollar amount,they are set as a level percent of salary. The accrued liability then is just the present value of past normal costs brought forward from the entry date to the measurement date. SDBF: The actuarial assumptions used in the December 31,2017 valuation were based on the results of an actuarial experience study for the period December 31,2010 to December 31,2014. They were adopted in 2015 and first used in the December 31,2015 actuarial valuation.The post-retirement mortality assumption for healthy annuitants and annuity purchase rate based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31,2013. Changes in the Total OPEB Liability Self-Funded Health SDBF Insurance Total Balance at December 31,2016 $1,632,491 $ 12,758,523 $ 14,391,014 Changes for the year: Service cost 87,800 837,881 925,681 Interest 63,146 477,714 540,860 Differences between expected and actual experience - (114,595) (114,595) Changes in assumptions or other inputs 176,033 798,106 974,139 Benefit payments (11,707) (431,570) (443,277) Net changes 315,272 1,567,536 1,882,808 Balance at December 31, 2017 $ 1,947,763 $ 14,326,059 $ 16,273,822 102 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 V. OTHER INFORMATION(CONTINUED) D. OTHER POST-EMPLOYMENT BENEFITS(CONTINUED) Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following table presents the total OPEB liability of the City,calculated using the discount rate of 3.31% for each plan,as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower(2.31%)or 1-percentage-point higher(4.31%)than the current discount rate: Current Discount 1%Decrease Rate 1%Increase 2.31% 3.31% 4.31% SDBF $ 2,410,606 $ 1,947,763 $ 1,597,210 Self-Funded Health Insurance 16,131,000 14,326,000 12,791,000 The following table presents the total OPEB liability of the City, calculated using the healthcare trend rate of 10% to 5%, as well as what the City's total OPEB liability would be if it were calculated using a healthcare trend rate that is 1-percentage-point lower(9%to 4%)or 1-percentage-point higher(11%to 6%) than the current healthcare trend rate: Healthcare Trend 1%Decrease Rate 1%Increase (9%to 4%) (10%to 5%) (11%to 6%) Self-Funded Health Insurance $ $12,737,000 $ 14,326,000 $ 16,191,000 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources For the fiscal year ended September 30, 2018, the City recognized total OPEB expense of $1,140,336, $162,582 of which was for the SDBF, and $977,754 for the Self-Funded Health Insurance plan. At September 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Self-Funded Self-Funded Health Health SDBF Insurance Total SDBF Insurance Total Changes in assumptions and other inputs $ 152,050 $ 676,076 $ 828,126 $ Difference between expected and actual experience - - - 97,073 97,073 OPEB contributions after measurement date 9,427 370,061 379,488 - - Total $ 161,477 $ 1,046,137 $ 1,207,614 $ $ 97,073 $ 97,073 103 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30,2018 V. OTHER INFORMATION (CONTINUED) D. OTHER POST-EMPLOYMENT BENEFITS(CONTINUED) Deferred outflows of resources related to OPEB resulting from contributions subsequent to the measurement date of$379,488 will be recognized as a reduction of the total OPEB for the measurement year ending December 31,2018 (i.e.,recognized in the City's financial statements September 30,2019). Other amounts reported as deferred outflows and inflows of resources related to OPEB will be recognized in OPEB expense as follows: Net Deferred Outflows (Inflows) of Resources Measurement Year Ended Self-Funded December 31, SDBF Health Insurance 2018 $ 23,983 $ 104,509 2019 23,983 104,509 2020 23,983 104,509 2021 23,983 104,509 2022 23,983 104,509 Thereafter 32,135 56,458 Total $ 152,050 $ 579,003 E. ECONOMIC DEVELOPMENT PROGRAM AGREEMENT Crow Group Series,LLC On July 26, 2018,the City entered into an Economic Development Program Agreement with Crow Group Series,LLC(Crow). The purpose of this agreement is to promote economic development as contemplated by Chapter 380 of the Texas Local Government Code whereby Crow intends to construct, develop and operate three Class A office buildings containing a total of approximately 125,000 square feet of office, parking, and related space (the "project"). Crow intends to invest approximately $24 million in improvements to the property and the City agreed to provide funding through an economic development loan for$2.2 million. This expense has been recognized as"Payment to borrower,"an other financing use, on the Statement of Revenues,Expenditures and Changes in Fund Balances. The project consists of three phases. Phase I has already been completed which is a Class A office building located on the City Centre Business Park,Block A,Lot 2,containing at least 22,500 square feet,and costing at least$4 million. Phase II is a Class A office building to be constructed on the City Centre Business Park, Block A, Lot 1, containing at least 22,500 square feet,costing at least$4 million, and to be completed no later than December 31, 2020. Phase III is a Class A office building to be constructed on the City Centre Business Park,Block A,Lot 4 and/or 5,containing at least 80,000 square feet,costing at least$16 million. The economic development loan for $2.2 million from the City to Crow is considered forgivable with provision for credits towards the principal amount and forgiveness of interest if Crow complies with its development obligations. Upon the issuance of a Certificate of Occupancy by the City for Phase II,Crow shall be entitled to a credit in the amount of$440,000 to be applied towards the principal amount,plus the accrued interest on the$440,000 shall be forgiven. Upon the issuance of a Certificate of Occupancy by the 104 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 V. OTHER INFORMATION(CONTINUED) E. ECONOMIC DEVELOPMENT PROGRAM AGREEMENT(CONTINUED) City for Phase III, Crow shall be entitled to a credit in the amount of$1.76 million to be applied towards the principal amount borrowed,plus the accrued interest on the$1.76 million shall be forgiven. F. MUNICIPAL GOLF COURSE Management Agreement Management of the City's golf course has been performed by a private operator in accordance with the terms of a Management Agreement since 1989. The current Management Agreement has an initial term of three years that shall automatically renew for two additional 1-year terms. The agreement began on January 1, 2017. Under conditions set forth in the Management Agreement, the operator shall be paid a monthly base management fee. Additionally,the operator may earn an annual incentive management fee based upon gross receipts of the golf course. G. SUBSEQUENT EVENTS Bond Issuance In December 2018, the City issued Combination Tax and Limited Revenue Certificates of Obligation, Series 2018, in the amount of$6,915,000. Proceeds from the sale of the certificates will be used for (1) constructing, improving, and equipping a public works facility for the City's utilities and transportation departments to be located on Luther Peterson Place and related costs, including the acquisition of any necessary easements or land and (2) professional services including fiscal, engineering, architectural and legal fees and other such costs incurred in connection therewith including the costs of issuing the Certificates. Bond Ratings Standard and Poor's upgraded the City's general obligation (GO) bonds from AA+ to AAA, the highest credit rating possible. At the same time, S&P also assigned its AAA rating to the series 2018 combination tax and revenue certificates of obligation. Water Tower Project On September 13,2018,the RRTEDC entered into a Memorandum of Understanding regarding the Water Tower Park Project. The project is a mixed-use development that will include office space, retail space, parking spaces, and a hotel with approximately 140 rooms and meeting facilities. In addition, RRTEDC entered into four agreements to purchase real property and property around the downtown water tower park. The purchase of three parcels was finalized on November 19,2018,for$2,318,386. Burge Tract Purchase On August 23, 2018, the City of Round Rock signed a resolution to purchase approximately 40 acres of land at 1001 N. Red Bud Lane for parkland and/or road right-of-way. The transaction was completed on 105 CITY OF ROUND ROCK, TEXAS NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2018 V. OTHER INFORMATION(CONTINUED) G. SUBSEQUENT EVENTS (CONTINUED) October 31,2018 for$2,975,919. On November 20, 2018, RRTEDC voted to purchase the property from the City of Round Rock for future Transportation Master Plan needs. Operation of Wastewater Treatment Plant In October 2018, the City took over the operations and maintenance of the Brushy Creek Regional Wastewater System(BCRWWS). The BCRWWS collects wastewater from Round Rock,the north end of the City of Austin, and the majority of wastewater from the cities of Cedar Park and Leander. The system then treats the wastewater at one of two wastewater treatment plants.The BCRWWS has been operated by the Brazos River Authority since 1997 on behalf of the partner cities that own the system. The partners agreed for the City of Round Rock to take over the operations for BCRWWS since the City owns a majority of the system and the two wastewater treatment plants are located inside the city limits of Round Rock. 106 i+rrr► `'K rr 11414 {' lISYa•���.M..♦..��N' left 107 CITY OF ROUND ROCK, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2018 (UNAUDITED) Schedule of Changes in the Net Pension Liability and Related Ratios Measurement period ending December 31, 2014 2015 2016 Total Pension Liability Service cost $ 8,066,254 $ 8,990,916 $ 9,609,823 Interest(on the Total Pension Liability) 13,330,143 14,481,391 15,065,206 Difference between expected and actual experience (50,055) (662,530) 704,655 Change of assumptions - (1,208,085) - Benefit payments,including refunds of employee contributions (5,231,094) (5,493,451) (5,706,408) Net Change in Total Pension Liability 16,115,248 16,108,241 19,673,276 Total Pension Liability-Beginning 189,013,034 205,128,282 221,236,523 Total Pension Liability-Ending(a) $ 205,128,282 $ 221,236,523 $ 240,909,799 Plan Fiduciary Net Position Contributions-Employer $ 7,787,328 $ 8,195,714 $ 8,302,118 Contributions-Employee 3,423,287 3,644,800 3,779,341 Net investment income 8,955,552 252,867 12,021,503 Benefit payments,including refunds of employee contributions (5,231,094) (5,493,451) (5,706,408) Administrative expense (93,479) (154,001) (135,695) Other (7,685) (7,607) (7,311) Net Change in Plan Fiduciary Net Position 14,833,909 6,438,322 18,253,548 Plan Fiduciary Net Position-Beginning 156,512,946 171,346,855 177,785,177 Plan Fiduciary Net Position-Ending(b) 171,346,855 177,785,177 196,038,725 Net Pension Liability-Ending(a)-(b) $ 33,781,427 $ 43,451,346 $ 44,871,074 Plan Fiduciary Net Position as a Percentage of Total Pension Liability 83.53% 80.36% 81.37% Covered Payroll $ 48,839,040 $ 51,731,390 $ 53,776,289 Net Pension Liability as a Percentage of Covered Payroll 69.17% 83.99% 83.44% Notes to Schedule: 1)No significant factors noted to disclose. 2)No significant methods and assumptions to disclose. 3) Schedule will be built out to 10 years. See Independent Auditors' Report. 108 2017 $ 10,430,650 16,360,878 671,908 (7,483,495) 19,979,941 240,909,799 $ 260,889,740 $ 9,138,705 4,113,985 27,187,574 (7,483,495) (140,808) (7,136) 32,808,825 196,038,725 228,847,550 $ 32,042,190 87.72% $ 58,533,388 54.74% 109 CITY OF ROUND ROCK, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2018 (UNAUDITED) Schedule of Contributions Fiscal year ending September 30, 2015 2016 2017 2018 Actuarially Determined Contribution $ 8,077,742 $ 8,507,987 $ 8,897,294 $ 9,582,199 Contributions in relation to the actuarially determined contribution 8,193,478 8,739,633 9,059,953 9,618,245 Contribution deficiency(excess) $ (115,736) $ (231,646) $ (162,6L91 $ (36,046) Covered payroll $ 51,159,783 $ 54,924,766 $ 57,346,696 $ 61,743,107 Contributions as a percentage of covered payroll 16.02% 15.91% 15.80% 15.57% Notes to Schedule of Contributions Valuation Date: Actuarially determined contribution rates are calculated as of December 31 and become effective in January, 13 months and a day later. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll,Closed Remaining Amortization Period 25 years Asset Valuation Method 10 year smoothed market; 15%soft corridor Inflation 2.5% Salary Increases 3.50%to 10.5%including inflation Investment Rate of Return 6.75% Retirement Age Experience-based table of rates that are specific to the City's plan of benefits. Last updated for the 2015 valuation pursuant to an experience study of the period 2010-2014. Mortality RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109%and female rates multiplied by 103%and projected on a fully generational basis with scale BB. Other Information: There were no benefit changes during the year. Schedule will be built out to ten years. See Independent Auditors' Report. 110 CITY OF ROUND ROCK, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2018 (UNAUDITED) Schedule of Changes in the Total OPEB Liability and Related Ratios Measurement period ending December 31, 2017 Total OPEB liability Self-Funded SDBF Health Insurance Service Cost $ 87,800 $ 837,881 Interest 63,146 477,714 Changes in assumptions or other inputs 176,033 798,106 Differences between expected and actual experience - (114,595) Benefit payments (11,707) (431,570) Net change in total OPEB liability 315,272 1,567,536 Total OPEB liability-beginning 1,632,491 12,758,523 Total OPEB liability-ending $ 1,947,763 $ 14,326,059 Covered payroll $ 58,533,388 $ 58,533,388 Total OPEB liability as a percentage of covered payroll 3.33% 24.5% Notes to Schedule: 1)No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75 to pay related benefits. 2)No significant methods and assumptions to disclose. 3) Schedule will be built out to 10 years. See Independent Auditors' Report. 111 NONMAJOR GOVERNMENTAL FUNDS NONMAJOR SPECIAL REVENUE FUNDS Special Revenue Funds account for specific resources, other than major capital projects that are restricted to expenditures for specified purposes. NONMAJOR CAPITAL PROJECTS FUNDS Capital Projects Funds are used to account for financial resources to be used for major capital projects (other than those financed by the proprietary fund). General obligation bonds are the primary funding source for capital projects. 112 CITY OF ROUND ROCK, TEXAS NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2018 Total Nonmaj or Special Capital Governmental Revenue Projects Funds ASSETS Cash and cash equivalents $ 920,078 $ 179,764 $ 1,099,842 Investments 10,031,001 1,969,813 12,000,814 Receivables - Accounts and other 589,999 - 589,999 Accrued interest 35,546 7,080 42,626 Grants 102,816 - 102,816 Restricted assets - Cash and cash equivalents - 554,897 554,897 Restricted investments - 1,899,937 1,899,937 Restricted accrued interest - 6,852 6,852 Total assets $ 11,679,440 $ 4,618,343 $ 16,297,783 LIABILITIES AND FUND BALANCES Liabilities - Accounts payable $ 252,059 $ 297,376 $ 549,435 Accrued payroll 37,885 - 37,885 Interfund payables - 381,508 381,508 Unearned revenue - 1,106,815 1,106,815 Total liabilities 289,944 1,785,699 2,075,643 Fund balances - Restricted-authorized construction - 1,782,802 1,782,802 Restricted-hotel-motel tax 7,863,705 - 7,863,705 Restricted-public safety 750,657 - 750,657 Restricted-general government 1,268,233 - 1,268,233 Committed-general government 232,243 - 232,243 Committed-capital projects funds - 1,049,842 1,049,842 Assigned-culture and recreation 1,274,658 - 1,274,658 Total fund balances 11,389,496 2,832,644 14,222,140 Total liabilities and fund balances $ 11,679,440 $ 4,618,343 $ 16,297,783 113 CITY OF ROUND ROCK, TEXAS NONMAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED SEPTEMBER 30,2018 Total Nonmaj or Special Capital Governmental Revenue Projects Funds Revenues- Taxes and franchise $ 219,399 $ - $ 219,399 Licenses,permits and fees 116,498 - 116,498 Charges for services 1,817,279 - 1,817,279 Fines and forfeitures 294,583 - 294,583 Grants 559,071 - 559,071 Hotel occupancy tax 5,714,235 - 5,714,235 Investment and other 277,032 83,822 360,854 Contributions 1,275 7,380 8,655 Total revenues 8,999,372 91,202 9,090,574 Expenditures- Current- General government 953,323 - 953,323 Public safety 96 - 96 Culture and recreation 4,080,357 - 4,080,357 Capital projects - 1,891,745 1,891,745 Total expenditures 5,033,776 1,891,745 6,925,521 Excess(deficiency)of revenues over expenditures 3,965,596 (1,800,543) 2,165,053 Other financing sources(uses)- Transfers in 640,000 1,389,181 2,029,181 Transfers out (2,727,011) (1,166,393) (3,893,404) Total other financing sources (uses) (2,087,011) 222,788 (1,864,223) Net change in fund balances 1,878,585 (1,577,755) 300,830 Fund balances,October 1,2017 9,510,911 4,410,399 13,921,310 Fund balances, September 30,2018 $ 11,389,496 $ 2,832,644 $ 14,222,140 114 NONMAJOR SPECIAL REVENUE FUNDS Special Revenue Funds account for specific resources, other than major capital projects that are restricted to expenditures for specified purposes. Community Development Block Grant Fund —To account for grant monies received for programs benefiting persons of low to moderate income. Hotel-Motel Occupancy Tax Fund—To account for the levy and use of the 7%hotel —motel bed tax received. Proceeds from this tax are to be used toward tourism, community events, cultural enhancements and promotion of the City. Hotel-Motel Occupancy Venue Tax Fund—To account for the levy and use of the 2%hotel—motel bed venue tax received. Proceeds from this tax are to be used toward the construction and maintenance of the sports center that prompts tourism and promotion of the City. Landscape Fund—To account for amounts received through the City's landscape ordinance. Library Fund—To account for contributions received designated to specific programs for the City's library. Multipurpose Sports Complex Fund — To account for amounts received to provide for the operations, maintenance, and programming for the Multipurpose Sports Complex. Municipal Court Fund —To account for amounts received through child safety fines, court security, and court technology fees. Police Fund—To account for amounts received through drug enforcement actions. Public Education & Government Fund — To account for amounts received for programs to provide public education in government. Traffic Safety Program Fund—To account for amounts received to promote traffic safety programs. 115 CITY OF ROUND ROCK, TEXAS NONMAJOR SPECIAL REVENUE FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2018 Community Hotel-Motel Hotel-Motel Development Occupancy Occupancy Block Grant Tax Venue Tax Landscape ASSETS Cash and cash equivalents $ - $ 221,384 $ 393,861 $ 22,696 Investments - 2,425,858 4,281,285 248,700 Receivables - Accounts and other - 479,022 109,777 - Accrued interest - 8,672 15,204 884 Grants 102,816 - _ _ Total assets $ 102,816 $ 3,134,936 $ 4,800,127 $ 272,280 LIABILITIES AND FUND BALANCES Liabilities - Accounts payable $ 102,816 $ 6,793 $ 34,250 $ 40,037 Accrued payroll - 8,130 22,185 - Totalliabilities 102,816 14,923 56,435 40,037 Fund balances - Restricted-hotel-motel tax - 3,120,013 4,743,692 - Restricted-public safety _ _ - _ Restricted-general government - _ _ _ Committed-general government - - - 232,243 Assigned-culture and recreation - _ _ _ Total fund balances - 3,120,013 4,743,692 232,243 Total liabilities and fund balances $ 102,816 $ 3,134,936 $ 4,800,127 $ 272,280 116 Total Nonmaj or Multipurpose Public Traffic Special Sports Municipal Education& Safety Revenue Library Complex Court Police Government Program Funds $ 1,350 $ 111,276 $ 32,103 $ 14,702 $ 106,750 $ 15,956 $ 920,078 14,797 1,202,894 351,782 161,098 1,169,742 174,845 10,031,001 - 1,200 - - 589,999 53 4,406 1,379 575 4,373 - 35,546 - - - - - - 102,816 $ 16,200 $ 1,318,576 $ 385,264 $ 177,575 $ 1,280,865 $ 190,801 $ 11,679,440 $ - $ 52,548 $ 2,983 $ - $ 12,632 $ - $ 252,059 7,570 - - - - 37,885 60,118 2,983 - 12,632 - 289,944 - - - - - 7,863,705 382,281 177,575 - 190,801 750,657 - - 1,268,233 - 1,268,233 - - - - - 232,243 16,200 1,258,458 - - - - 1,274,658 16,200 1,258,458 382,281 177,575 1,268,233 190,801 11,389,496 $ 16,200 $ 1,318,576 $ 385,264 $ 177,575 $ 1,280,865 $ 190,801 $ 11,679,440 117 CITY OF ROUND ROCK, TEXAS NONMAJOR SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED SEPTEMBER 30, 2018 Community Hotel-Motel Hotel-Motel Development Occupancy Occupancy Block Grant Tax Venue Tax Landscape Revenues- Taxes and franchise $ - $ - $ Licenses,permits and fees - - - 116,498 Charges for services - - 1,266,044 - Fines and forfeitures - - Grants 559,071 - - _ Hotel occupancy tax - 4,444,435 1,269,800 - Investment and other - 123,290 96,675 3,567 Contributions - - Total revenues 559,071 4,567,725 2,632,519 120,065 Expenditures- Current- General government 559,071 - - 12,525 Public safety - - - - Culture and recreation - 1,208,754 1,927,446 - Total expenditures 559,071 1,208,754 1,927,446 12,525 Excess(deficiency)of revenues over expenditures - 3,358,971 705,073 107,540 Other financing sources(uses)- Transfers in - Transfers out - (2,360,981) (366,030) - Total other financing sources (uses) - (2,360,981) (366,030) - Net change in fund balances - 997,990 339,043 107,540 Fund balances,October 1,2017 - 2,122,023 4,404,649 124,703 Fund balances, September 30,2018 $ - $ 3,120,013 $ 4,743,692 $ 232,243 118 Total Nonmaj or Multipurpose Public Traffic Special Sports Municipal Education& Safety Revenue Library Complex Court Police Government Program Funds $ - $ - $ - $ - $ 219,399 $ - $ 219,399 - - 116,498 551,235 - - - - 1,817,279 - 121,723 172,860 - - 294,583 - - - - 559,071 - - - - - 5,714,235 251 21,471 6,487 4,700 20,591 - 277,032 525 750 - - - - 1,275 776 573,456 128,210 177,560 239,990 - 8,999,372 - - 140,895 - 240,832 - 953,323 - - - - 96 96 503 943,654 - - - - 4,080,357 503 943,654 140,895 - 240,832 96 5,033,776 273 (370,198) (12,685) 177,560 (842) (96) 3,965,596 - 640,000 - - - - 640,000 - - - - - (2,727,011) - 640,000 - - - - (2,087,011) 273 269,802 (12,685) 177,560 (842) (96) 1,878,585 15,927 988,656 394,966 15 1,269,075 190,897 9,510,911 $ 16,200 $ 1,258,458 $ 382,281 $ 177,575 $ 1,268,233 $ 190,801 $ 11,389,496 119 Yiti 1*VVV/`i� M 120 NONMAJOR CAPITAL PROJECTS FUNDS Capital Projects Funds are used to account for financial resources to be used for major capital projects (other than those financed by the proprietary fund). 2014 Certificates of Obligation Fund—To account for transportation improvements. Convention Center Complex Fund—To account for the ongoing repairs,maintenance and capital improvements to the City-owned Dell Diamond, a minor league baseball stadium and conference center. Funding is provided by hotel tax revenues. Park Development Fund—To account for the development of and improvements to various neighborhood parks. Funding is provided by general government resources. Streets and Drainage Fund —To account for street and drainage improvements in the Arterial II section of the City. Funding is provided by general government resources. Tourism Development Fund — To account for the development of tourism. Funding is provided by hotel tax revenues. 121 CITY OF ROUND ROCK,TEXAS NONMAJOR CAPITAL PROJECTS FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2018 Convention Center Park 2014 Series CO Complex Development ASSETS Cash and cash equivalents $ - $ - $ 118,566 Investments - - 1,299,214 Receivables - Accrued interest - - 4,669 Restricted assets - Cash and cash equivalents 381,508 111,881 - Restricted investments - 1,225,958 - Restricted accrued interest - 4,409 - Total assets $ 381,508 $ 1,342,248 $ 1,422,449 LIABILITIES AND FUND BALANCES Liabilities - Accounts payable $ - $ 16,703 $ - Interfund payables 381,508 - Unearned revenue - - 1,106,815 Total liabilities 381,508 16,703 1,106,815 Fund balances - Restricted-authorized construction - 1,325,545 - Committed-capital projects funds - - 315,634 Total fund balances - 1,325,545 315,634 Total liabilities and fund balances $ 381,508 $ 1,342,248 $ 1,422,449 122 Total Nonmaj or Streets and Tourism Capital Projects Drainage Development Funds $ 61,198 $ - $ 179,764 670,599 - 1,969,813 2,411 - 7,080 - 61,508 554,897 - 673,979 1,899,937 - 2,443 6,852 $ 734,208 $ 737,930 $ 4,618,343 $ - $ 280,673 $ 297,376 - - 381,508 - 1,106,815 280,673 1,785,699 457,257 1,782,802 734,208 - 1,049,842 734,208 457,257 2,832,644 $ 734,208 $ 737,930 $ 4,618,343 123 CITY OF ROUND ROCK,TEXAS NONMAJOR CAPITAL PROJECTS FUNDS COMBINING STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES YEAR ENDED SEPTEMBER 30,2018 Convention Center Park 2014 Series CO Complex Development Revenues- Investment and other $ 9,919 $ 24,278 $ 21,961 Contributions - - 4,880 Total revenues 9,919 24,278 26,841 Expenditures- Capital projects 43,898 549,058 2,475 Total expenditures 43,898 549,058 2,475 Excess(deficiency)of revenues over expenditures (33,979) (524,780) 24,366 Other financing sources(uses)- Transfers in - 1,200,000 - Transfers out (1,014,550) - (2,405) Total other financing sources(uses) (1,014,550) 1,200,000 (2,405) Net change in fund balances (1,048,529) 675,220 21,961 Fund balances,October 1,2017 1,048,529 650,325 293,673 Fund balances, September 30,2018 $ - $ 1,325,545 $ 315,634 124 Total Streets Nonmajor and Tourism Capital Projects Drainage Development Funds 11,348 $ 16,316 $ 83,822 - 2,500 7,380 11,348 18,816 91,202 1,296,314 1,891,745 - 1,296,314 1,891,745 11,348 (1,277,498) (1,800,543) - 189,181 1,389,181 - (149,438) (1,166,393) - 39,743 222,788 11,348 (1,237,755) (1,577,755) 722,860 1,695,012 4,410,399 734,208 $ 457,257 $ 2,832,644 125 41 126 SCHEDULES OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL, DEBT SERVICE AND NONMAJOR SPECIAL REVENUE FUNDS 127 CITY OF ROUND ROCK, TEXAS GENERAL FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2018 WITH COMPARATIVE TOTALS FOR YEAR ENDED SEPTEMBER 30, 2017 Variance- Budgeted Amounts Positive 2017 Original Final Actual (Negative) Actual Revenues- Taxes and franchise- Property tax $ 34,200,000 $ 34,200,000 $ 34,559,009 $ 359,009 $ 31,397,927 Penalty and interest 75,000 75,000 83,884 8,884 77,335 Sales tax 46,950,000 47,612,654 52,396,862 4,784,208 46,595,602 Franchise 6,815,000 6,815,000 6,921,541 106,541 6,875,050 Bingo tax 38,000 38,000 29,654 (8,346) 38,156 Mixed drink tax 500,000 500,000 617,589 117,589 589,008 Total taxes and franchise 88,578,000 89,240,654 94,608,539 5,367,885 85,573,078 Licenses,permits and fees- Building permits 608,987 608,987 810,291 201,304 663,161 Other permits 48,000 48,000 54,165 6,165 47,750 Fees 1,008,638 1,008,638 1,056,257 47,619 894,501 Total licenses,permits,and fees 1,665,625 1,665,625 1,920,713 255,088 1,605,412 Charges for services- Trash collection fees 1,298,000 1,298,000 1,130,295 (167,705) 1,261,138 Swimming pool fees 1,084,000 1,084,000 1,133,890 49,890 1,220,042 Recreation program fees 2,209,400 2,209,400 2,375,512 166,112 2,214,546 Filing and reproduction fees 25,000 25,000 27,643 2,643 27,598 Other 151,100 151,100 79,249 (71,851) 131,528 Total charges for services 4,767,500 4,767,500 4,746,589 (20,911) 4,854,852 Fines and forfeitures 1,105,000 1,105,000 1,322,339 217,339 1,235,903 Grants 753,101 2,078,101 2,006,282 (71,819) 649,921 Investment and other- Investment income 425,000 425,000 926,562 501,562 518,868 Other 4,095,120 4,095,120 4,979,142 884,022 4,608,876 Total investment and other 4,520,120 4,520,120 5,905,704 1,385,584 5,127,744 Total revenues 101,389,346 103,377,000 110,510,166 7,133,166 99,046,910 128 (CONTINUED) CITY OF ROUND ROCK, TEXAS GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL (CONTINUED) YEAR ENDED SEPTEMBER 30,2018 WITH COMPARATIVE TOTALS FOR YEAR ENDED SEPTEMBER 30,2017 Variance- Budgeted Amounts Positive 2017 Original Final Actual (Negative) Actual Expenditures- Current- General government Executive- Personnel services $ 13,629,244 $ 12,765,106 $ 12,550,174 $ 214,932 $ 11,211,849 Contractual services 4,812,622 4,806,172 4,450,050 356,122 4,262,965 Supplies and materials 766,087 768,087 715,953 52,134 723,906 Other services and charges 2,666,108 2,398,358 2,034,636 363,722 2,079,888 Capital outlay 75,000 81,480 80,523 957 80,501 Total executive 21,949,061 20,819,203 19,831,336 987,867 18,359,109 Judicial- Personnel services 775,694 783,599 719,115 64,484 742,752 Contractual services 56,886 56,886 48,265 8,621 51,989 Supplies and materials 17,340 17,340 13,858 3,482 11,211 Other services and charges 11,350 11,350 8,833 2,517 6,824 Total judicial 861,270 869,175 790,071 79,104 812,776 Total general government 22,810,331 21,688,378 20,621,407 1,066,971 19,171,885 Public safety Police- Personnel services 26,083,894 27,027,262 27,026,608 654 24,706,332 Contractual services 949,851 900,851 900,446 405 864,832 Supplies and materials 1,740,792 1,812,942 1,812,931 11 1,664,289 Other services and charges 1,226,396 1,127,416 1,126,745 671 1,186,390 Capital outlay 50,432 68,262 66,650 1,612 310,635 Total police 30,051,365 30,936,733 30,933,380 3,353 28,732,478 Fire- Personnel services 17,823,534 18,846,247 18,843,906 2,341 16,942,371 Contractual services 468,417 393,417 392,545 872 371,108 Supplies and materials 1,319,048 1,461,648 1,461,641 7 1,148,958 Other services and charges 210,084 1,158,584 1,158,083 501 156,117 Capital outlay 92,080 50,080 49,696 384 - Total fire 19,913,163 21,909,976 21,905,871 4,105 18,618,554 Total public safety 49,964,528 52,846,709 52,839,251 7,458 47,351,032 129 (CONTINUED) CITY OF ROUND ROCK, TEXAS GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (CONTINUED) YEAR ENDED SEPTEMBER 30,2018 WITH COMPARATIVE TOTALS FOR YEAR ENDED SEPTEMBER 30, 2017 Variance- Budgeted Amounts Positive 2017 Original Final Actual (Negative) Actual Expenditures-(cont'd) Current-(cont'd) Public works Administration- Personnel services $ 3,712,524 $ 3,780,290 $ 3,698,509 $ 81,781 $ 3,270,012 Contractual services 166,443 183,958 183,863 95 203,298 Supplies and materials 892,897 886,727 876,520 10,207 829,068 Other services and charges 1,819,267 1,799,567 1,748,809 50,758 906,666 Capital outlay - 19,800 19,750 50 47,895 Total administration 6,591,131 6,670,342 6,527,451 142,891 5,256,939 Streets- Personnel services 2,471,208 2,495,909 2,164,602 331,307 2,122,906 Contractual services 5,401,570 2,401,570 2,112,012 289,558 1,552,458 Supplies and materials 848,007 848,007 723,362 124,645 791,545 Other services and charges 46,672 46,672 21,620 25,052 18,109 Capital outlay 186,000 186,000 130,025 55,975 113,565 Total streets 8,953,457 5,978,158 5,151,621 826,537 4,598,583 Maintenance shop- Personnel services 1,299,008 1,316,014 1,281,516 34,498 1,304,834 Contractual services 52,818 52,818 41,908 10,910 43,701 Supplies and materials 224,079 220,879 122,802 98,077 128,914 Other services and charges 14,374 17,574 17,569 5 18,440 Capital outlay 20,000 20,000 10,071 9,929 83,026 Total maintenance shop 1,610,279 1,627,285 1,473,866 153,419 1,578,915 Total public works 17,154,867 14,275,785 13,152,938 1,122,847 11,434,437 130 (CONTINUED) CITY OF ROUND ROCK, TEXAS GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL (CONTINUED) YEAR ENDED SEPTEMBER 30,2018 WITH COMPARATIVE TOTALS FOR YEAR ENDED SEPTEMBER 30, 2017 Variance- Budgeted Amounts Positive 2017 Original Final Actual (Negative) Actual Expenditures-(cont'd) Current-(cont'd) Culture and recreation Library- Personnel services $ 2,107,720 $ 2,138,278 $ 2,087,192 $ 51,086 $ 2,078,413 Contractual services 152,825 153,025 127,981 25,044 133,813 Supplies and materials 370,416 352,016 342,063 9,953 331,568 Other services and charges 195,864 214,064 208,302 5,762 192,662 Culture-Library-capital outlay - - - - 17,495 Total library 2,826,825 2,857,383 2,765,538 91,845 2,753,951 Parks and recreation- Personnel services 7,817,417 8,104,367 8,103,391 976 7,818,576 Contractual services 1,880,514 1,612,354 1,612,161 193 1,609,747 Supplies and materials 1,576,100 1,566,100 1,560,419 5,681 1,649,731 Other services and charges 261,465 336,265 336,173 92 307,286 Capital outlay 157,300 149,660 55,177 94,483 123,131 Total parks and recreation 11,692,796 11,768,746 11,667,321 101,425 11,508,471 Total culture and recreation 14,519,621 14,626,129 14,432,859 193,270 14,262,422 Total expenditures 104,449,347 103,437,001 101,046,455 2,390,546 92,219,776 Excess(deficiency)of revenues over expenditures (3,060,001) (60,001) 9,463,711 9,523,712 6,827,134 Other financing sources(uses)- Transfers in 3,389,358 3,579,046 3,573,858 (5,188) 3,355,800 Transfers out (6,357,453) (9,547,141) (9,547,141) - (12,660,934) Total other financing sources(uses) (2,968,095) (5,968,095) (5,973,283) (5,188) (9,305,134) Net change in fund balances $ (6,028,096) $ (6,028,096) 3,490,428 $ 9,518,524 (2,478,000) Fund balance,October 1,2017 50,322,084 52,800,084 Fund balance,September 30,2018 $ 53,812,512 $ 50,322,084 131 CITY OF ROUND ROCK, TEXAS DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30,2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Taxes and franchise $ 17,362,000 $ 19,181,830 $ 19,345,337 $ 163,507 Investment and other 5,000 5,000 249,498 244,498 Total revenues 17,367,000 19,186,830 19,594,835 408,005 Expenditures Debt service- Principal retirement 13,391,933 14,325,983 14,325,970 13 Interest and fiscal charges 7,341,044 9,244,654 9,244,645 9 Total expenditures 20,732,977 23,570,637 23,570,615 22 Excess(deficiency) of revenues over expenditures (3,365,977) (4,383,807) (3,975,780) 408,027 Other financing sources(uses)- Transfers in 3,930,485 4,948,315 4,948,315 - Total other financing sources (uses) 3,930,485 4,948,315 4,948,315 - Net change in fund balances $ 564,508 $ 564,508 972,535 $ 408,027 Fund balance,October 1,2017 3,880,982 Fund balance, September 30,2018 $ 4,853,517 132 CITY OF ROUND ROCK, TEXAS SPECIAL REVENUE FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL COMMUNITY DEVELOPMENT BLOCK GRANT YEAR ENDED SEPTEMBER 30,2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Grants $ 559,071 $ 559,071 $ 559,071 $ - Total revenues 559,071 559,071 559,071 - Expenditures- Current- General government- General government 82,683 82,683 82,683 - Supplies and materials 199,729 199,729 199,729 - Other services and charges 96,933 96,933 96,933 - Capital outlay 179,726 179,726 179,726 - Total expenditures 559,071 559,071 559,071 - Net change in fund balances $ - $ - - $ _ Fund balance,October 1,2017 _ Fund balance, September 30,2018 $ _ 133 CITY OF ROUND ROCK, TEXAS SPECIAL REVENUE FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL HOTEL-MOTEL OCCUPANCY TAX FUND YEAR ENDED SEPTEMBER 30,2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Hotel occupancy tax $ 4,200,000 $ 4,200,000 $ 4,444,435 $ 244,435 Investment and other 25,000 25,000 123,290 98,290 Total revenues 4,225,000 4,225,000 4,567,725 342,725 Expenditures- Current- Culture and recreation- Personnel services 559,257 559,257 402,766 156,491 Contractual services 705,380 471,377 428,129 43,248 Supplies and materials 30,550 30,550 4,407 26,143 Other services and charges 824,475 519,297 373,452 145,845 Total expenditures 2,119,662 1,580,481 1,208,754 371,727 Excess(deficiency)of revenues over expenditures 2,105,338 2,644,519 3,358,971 714,452 Other financing sources (uses)- Transfers out (1,821,800) (2,360,981) (2,360,981) - Total other financing sources (uses) (1,821,800) (2,360,981) (2,360,981) - Net change in fund balances $ 283,538 $ 283,538 997,990 $ 714,452 Fund balance,October 1,2017 2,122,023 Fund balance,September 30,2018 $ 3,120,013 134 CITY OF ROUND ROCK, TEXAS SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL HOTEL-MOTEL OCCUPANCY VENUE TAX FUND YEAR ENDED SEPTEMBER 30, 2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Charges for services $ 1,080,000 $ 1,080,000 $ 1,266,044 $ 186,044 Hotel occupancy tax 1,200,000 1,200,000 1,269,800 69,800 Investment and other 65,000 65,000 96,675 31,675 Total revenues 2,345,000 2,345,000 2,632,519 287,519 Expenditures- Current- Culture and recreation- Personnel services 1,072,941 1,117,219 1,117,219 - Contractual services 328,775 215,394 214,302 1,092 Supplies and materials 275,297 344,400 344,400 - Other services and charges 59,218 59,218 54,279 4,939 Capital outlay - 203,514 197,246 6,268 Total expenditures 1,736,231 1,939,745 1,927,446 12,299 Excess(deficiency)of revenues over expenditures 608,769 405,255 705,073 299,818 Other financing sources(uses)- Transfers out (366,030) (366,030) (366,030) - Total other financing sources (uses) (366,030) (366,030) (366,030) - Net change in fund balances $ 242,739 $ 39,225 339,043 $ 299,818 Fund balance,October 1,2017 4,404,649 Fund balance,September 30,2018 $ 4,743,692 135 CITY OF ROUND ROCK, TEXAS SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL LANDSCAPE FUND YEAR ENDED SEPTEMBER 30, 2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Licenses,permits and fees $ 35,000 $ 35,000 $ 116,498 $ 81,498 Investment and other 100 100 3,567 3,467 Contributions 1,000 1,000 - (1,000) Total revenues 36,100 36,100 120,065 83,965 Expenditures- Current- General government- Supplies and materials 135,920 135,920 12,525 123,395 Total expenditures 135,920 135,920 12,525 123,395 Net change in fund balances $ (99,820) $ (99,820) 107,540 $ 207,360 Fund balance,October 1,2017 124,703 Fund balance,September 30,2018 $ 232,243 136 CITY OF ROUND ROCK, TEXAS SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL LIBRARY FUND YEAR ENDED SEPTEMBER 30, 2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Investment and other $ 10 $ 10 $ 251 $ 241 Contributions 3,000 3,000 525 (2,475) Total revenues 3,010 3,010 776 (2,234) Expenditures- Current- General government- Supplies and materials 2,400 2,400 503 1,897 Other services and charges 14,987 14,987 - 14,987 Total expenditures 17,387 17,387 503 16,884 Net change in fund balances $ (14,377) $ (14,377) 273 $ 14,650 Fund balance,October 1,2017 15,927 Fund balance, September 30,2018 $ 16,200 137 CITY OF ROUND ROCK, TEXAS SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL MULTIPURPOSE SPORTS COMPLEX YEAR ENDED SEPTEMBER 30, 2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Charges for services $ 154,645 $ 334,645 $ 551,235 $ 216,590 Investment and other - - 21,471 21,471 Contributions - - 750 750 Total revenues 154,645 334,645 573,456 238,811 Expenditures- Personnel services 278,974 382,738 379,948 2,790 Contractual services 128,220 159,828 150,372 9,456 Supplies and materials 299,532 337,093 326,214 10,879 Other services and charges 36,100 36,100 30,053 6,047 Capital outlay 50,000 57,067 57,067 - Total expenditures 792,826 972,826 943,654 29,172 Excess(deficiency)of revenues over expenditures (638,181) (638,181) (370,198) 267,983 Other financing sources(uses)- Transfers in 640,000 640,000 640,000 - Total other financing sources (uses) 640,000 640,000 640,000 - Net change in fund balances $ 1,819 $ 1,819 269,802 $ 267,983 Fund balance,October 1,2017 988,656 Fund balance,September 30,2018 $ 1,258,458 138 CITY OF ROUND ROCK, TEXAS SPECIAL REVENUE FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL MUNICIPAL COURT FUND YEAR ENDED SEPTEMBER 30, 2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Fines and forfeitures $ 80,000 $ 80,000 $ 121,723 $ 41,723 Investment and other 150 150 6,487 6,337 Total revenues 80,150 80,150 128,210 48,060 Expenditures- Current- General government- Supplies and materials 38,160 96,036 96,036 - Other services and charges 349,715 246,839 122 246,717 Capital outlay - 45,000 44,737 263 Total expenditures 387,875 387,875 140,895 246,980 Excess(deficiency)of revenues over expenditures (307,725) (307,725) (12,685) 295,040 Other financing sources (uses)- Transfers out (52,000) (52,000) - 52,000 Total other financing sources (uses) (52,000) (52,000) - 52,000 Net change in fund balances $ (359,725) $ (359,725) (12,685) $ 347,040 Fund balance,October 1,2017 394,966 Fund balance,September 30,2018 $ 382,281 139 CITY OF ROUND ROCK, TEXAS SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL POLICE FUND YEAR ENDED SEPTEMBER 30,2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Fines and forfeitures $ 80,000 $ 80,000 $ 172,860 $ 92,860 Investment and other - - 4,700 4,700 Total revenues 80,000 80,000 177,560 97,560 Expenditures- Current- Public safety- Personnel services Total expenditures - _ _ _ Net change in fund balances $ 80,000 $ 80,000 177,560 $ 97,560 Fund balance,October 1,2017 15 Fund balance,September 30,2018 $ 177,575 140 CITY OF ROUND ROCK, TEXAS SPECIAL REVENUE FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL PUBLIC EDUCATION & GOVERNMENT FUND YEAR ENDED SEPTEMBER 30,2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Revenues- Taxes and franchise $ 240,000 $ 240,000 $ 219,399 $ (20,601) Investment and other 50 50 20,591 20,541 Total revenues 240,050 240,050 239,990 (60) Expenditures- Current- General Government- Capital outlay 1,414,032 1,414,032 240,832 1,173,200 Total expenditures 1,414,032 1,414,032 240,832 1,173,200 Net change in fund balances $ (1,173,982) $ (1,173,982) (842) $ 1,173,140 Fund balance,October 1,2017 1,269,075 Fund balance, September 30,2018 $ 1,268,233 141 CITY OF ROUND ROCK, TEXAS SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL TRAFFIC SAFETY PROGRAM FUND YEAR ENDED SEPTEMBER 30,2018 Variance- Budgeted Amounts Positive Original Final Actual (Negative) Expenditures- Current- Other services and charges $ 60,636 $ 60,636 $ 96 $ 60,540 Total expenditures 60,636 60,636 96 60,540 Net change in fund balances $ (60,636) $ (60,636) (96) $ 60,540 Fund balance,October 1,2017 190,897 Fund balance,September 30,2018 $ 190,801 142 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS 143 CITY OF ROUND ROCK, TEXAS SCHEDULE OF CAPITAL ASSETS FOR GOVERNMENTAL ACTIVITIES SEPTEMBER 30, 2018 Capital assets- Land $ 87,134,480 Construction in progress 25,562,146 Buildings and improvements 857,259,849 Equipment 86,966,226 $ 1,056,922,701 Investment in capital assets from- Capital projects funds- General obligation bonds $ 329,371,263 Federal grants 5,934,039 State grants 1,008,753 General fund revenues 198,085,992 Special revenue fund revenues 177,092,554 Hotel occupancy tax revenues 47,648,201 Gifts 297,064,990 Special assessments 716,909 $ 1,056,922,701 144 STATISTICAL SECTION i�p'i itxx'i x � i �'�� iii•iM iisx•xx*• � ji� 146 CITY OF ROUND ROCK, TEXAS STATISTICAL SECTION (UNAUDITED) This part of the City of Round Rock's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and supplementary information says about the City's overall financial health. This information has not been audited by the independent auditors. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the 148 City's financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the City's significant 158 local revenue sources, the property and sales tax. Debt Capacity These schedules present information to help the reader assess the affordability of the 168 City's currently outstanding debt and the City's ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader 177 Understand the environment within which the City's financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand 179 how the infonnation contained in the City's financial report relates to the services the City provides and the activities it performs. Sources: Unless otherwise noted,the information in these schedules is derived from the City's comprehensive annual financial reports for the relevant year. 147 CITY OF ROUND ROCK, TEXAS NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (accrual basis of accounting) 2009 2010 2011 2012 Governmental activities- Net investment in capital assets $ 244,059,034 $ 248,153,129 $ 245,403,528 $ 252,984,681 Restricted 59,433,510 61,882,505 66,810,986 72,780,050 Unrestricted 74,490,409 76,111,460 77,864,804 76,870,782 Total governmental activities net position $ 377,982,953 $ 386,147,094 $ 390,079,318 $ 402,635,513 Business-type activities- Net investment in capital assets $ 217,990,010 $ 210,960,047 $ 213,536,543 $ 212,883,311 Restricted 15,571,119 9,125,932 11,984,130 13,994,028 Unrestricted 66,770,620 85,930,757 95,693,542 104,985,805 Total business-type activities net position $ 300,331,749 $ 306,016,736 $ 321,214,215 $ 331,863,144 Primary government- Net investment in capital assets $ 462,049,044 $ 459,113,176 $ 458,940,071 $ 465,867,992 Restricted 75,004,629 71,008,437 78,795,116 86,774,078 Unrestricted 141,261,029 162,042,217 173,558,346 181,856,587 Total primary government net position $ 678,314,702 $ 692,163,830 $ 711,293,533 $ 734,498,657 Source: Comprehensive Annual Financial Reports Notes: The City implemented GASB Statement No. 68 in 2015.As a result,net position for 2014 was restated.The City implemented GASB Statement No. 75 in 2018.As a result,net position for 2017 has been restated. 148 2013 2014 2015 2016 2017 2018 $ 295,777,997 $ 303,977,353 $ 299,730,557 $ 310,185,706 $ 356,586,425 $ 373,007,353 42,970,091 43,974,370 48,019,726 51,813,118 48,954,352 48,357,161 74,833,175 44,713,408 53,355,360 52,451,939 29,054,168 28,585,838 $ 413,581,263 $ 392,665,131 $ 401,105,643 $ 414,450,763 $ 434,594,945 $ 449,950,352 $ 214,178,908 $ 221,062,599 $ 228,866,895 $ 234,981,264 $ 245,005,044 $ 268,467,171 6,868,062 7,764,750 19,215,972 15,275,659 19,800,722 22,628,600 116,650,981 114,901,064 110,519,279 126,490,054 126,634,362 138,980,320 $ 337,697,951 $ 343,728,413 $ 358,602,146 $ 376,746,977 $ 391,440,128 $ 430,076,091 $ 509,956,905 $ 525,039,952 $ 528,597,452 $ 545,166,970 $ 601,591,469 $ 641,474,524 49,838,153 51,739,120 67,235,698 67,088,777 68,755,074 70,985,761 191,484,156 159,614,472 163,874,639 178,941,993 155,688,530 167,566,158 $ 751,279,214 $ 736,393,544 $ 759,707,789 $ 791,197,740 $ 826,035,073 $ 880,026,443 149 CITY OF ROUND ROCK, TEXAS CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) 2009 2010 2011 2012 Expenses: Governmental activities- General government $ 24,856,934 $ 27,064,905 $ 28,487,648 $ 30,406,768 Public safety 37,104,418 36,688,203 39,140,352 40,944,978 Public works 13,955,375 29,053,781 36,442,333 29,295,041 Culture and recreation 16,433,602 14,260,057 14,514,561 15,069,456 Interest on long-term debt 9,410,388 9,394,116 8,608,399 7,144,755 Issuance costs - - Total governmental activities expenses 101,760,717 116,461,062 127,193,293 122,860,998 Business-type activities- Water and sewer utility 37,178,011 37,623,591 38,602,875 38,842,107 Golf course 182,521 192,595 174,149 157,135 Total business-type activities expenses 37,360,532 37,816,186 38,777,024 38,999,242 Total primary government expenses 139,121,249 154,277,248 165,970,317 161,860,240 Program revenues: Governmental activities- Charges for services- General government 3,820,455 3,927,379 3,519,857 3,104,355 Public safety 3,646,892 4,150,577 4,295,283 4,215,243 Public works 877,676 836,169 2,032,530 2,760,386 Culture and recreation 2,503,925 2,531,989 3,136,422 2,737,969 Operating grants and contributions 1,064,411 932,879 1,130,628 1,135,386 Capital grants and contributions 14,083,063 7,634,857 9,257,876 9,782,214 Total governmental activities program revenues 25,996,422 20,013,850 23,372,596 23,735,553 Business-type activities- Charges for services- Water and sewer utility 37,802,909 37,512,213 44,922,715 43,327,656 Golf course 485,972 349,424 431,413 480,116 Capital grants and contributions 12,490,491 6,014,265 9,518,890 7,533,264 Total business-type activities program revenues 50,779,372 43,875,902 54,873,018 51,341,036 Total primary government program revenues 76,775,794 63,889,752 78,245,614 75,076,589 Net(expense)revenue- Governmental activities (75,764,295) (96,447,212) (103,820,697) (99,125,445) Business-type activities 13,418,840 6,059,716 16,095,994 12,341,794 Total primary government net expense $ (62,345,455) $ (90,387,496) $ (87,724,703) $ (86,783,651) 150 2013 2014 2015 2016 2017 2018 $ 27,923,780 $ 28,050,936 $ 27,917,481 $ 28,204,761 $ 24,441,262 $ 23,408,887 41,842,363 45,283,826 45,236,987 49,439,902 52,243,460 57,987,997 31,215,489 33,537,533 33,412,841 33,448,357 34,359,785 47,120,999 15,702,435 18,024,001 19,202,557 20,885,009 24,130,067 25,218,145 6,915,772 8,478,700 8,118,490 8,294,279 8,075,351 8,415,687 - - 942,596 229,245 423,510 - 123,599,839 133,374,996 134,830,952 140,501,553 143,673,435 162,151,715 42,657,792 44,605,155 46,069,705 47,947,818 49,400,833 51,749,727 141,153 71,090 144,993 133,270 1,857,334 1,642,036 42,798,945 44,676,245 46,214,698 48,081,088 51,258,167 53,391,763 166,398,784 178,051,241 181,045,650 188,582,641 194,931,602 215,543,478 2,822,715 2,559,380 2,168,842 2,258,333 19,778,439 2,273,091 3,248,867 2,652,480 2,461,782 1,669,550 1,478,161 1,762,172 2,942,382 726,785 749,524 742,437 607,398 693,223 2,844,842 3,032,109 3,288,970 3,919,254 5,133,816 5,489,515 829,367 1,042,301 1,199,574 946,604 1,202,810 2,574,008 5,310,541 5,901,038 4,234,018 8,013,039 5,958,205 18,206,390 17,998,714 15,914,093 14,102,710 17,549,217 34,158,829 30,998,399 43,094,185 43,705,878 45,898,090 48,653,788 51,980,615 55,139,117 522,169 382,081 320,846 360,371 733,883 299,761 6,514,369 10,226,302 17,742,568 19,607,086 15,642,381 30,495,633 50,130,723 54,314,261 63,961,504 68,621,245 68,356,879 85,934,511 68,129,437 70,228,354 78,064,214 86,170,462 102,515,708 116,932,910 (105,601,125) (117,460,903) (120,728,242) (122,952,336) (109,514,606) (131,153,316) 7,331,778 9,638,016 17,746,806 20,540,157 17,098,712 32,542,748 $ (98,269,347) $ (107,822,887) $ (102,981,436) $ (102,412,179) $ (92,415,894) $ (98,610,568) (CONTINUED) 151 CITY OF ROUND ROCK, TEXAS CHANGES IN NET POSITION (CONTINUED) LAST TEN FISCAL YEARS (accrual basis of accounting) 2009 2010 2011 2012 General revenues and other changes in net position: Governmental activities- Taxes- Property $ 29,867,765 $ 33,040,085 $ 33,578,991 $ 34,379,529 Franchise 6,213,263 5,934,540 6,221,790 6,326,735 Sales 58,777,622 59,545,288 61,734,643 63,305,917 Hotel occupancy 2,394,145 2,291,326 2,684,046 3,252,542 Public service 315,739 327,723 352,159 316,320 Investment earnings and other 4,112,703 1,365,802 988,222 1,635,630 Transfers 1,605,828 2,106,589 2,193,070 2,464,967 Total governmental activities 103,287,065 104,611,353 107,752,921 111,681,640 Business-type activities- Investment earnings 1,305,841 1,731,860 1,294,555 772,102 Transfers (1,605,828) (2,106,589) (2,193,070) (2,464,967) Total business-type activities (299,987) (374,729) (898,515) (1,692,865) Total primary government 102,987,078 104,236,624 106,854,406 109,988,775 Change in net position: Governmental activities 27,522,770 8,164,141 3,932,224 12,556,195 Business-type activities 13,118,853 5,684,987 15,197,479 10,648,929 Total primary government $ 40,641,623 $ 13,849,128 $ 19,129,703 $ 23,205,124 152 2013 2014 2015 2016 2017 2018 $ 34,979,578 $ 36,502,409 $ 39,932,573 $ 44,239,067 $ 49,107,424 $ 54,082,288 5,952,712 6,460,448 7,255,212 7,175,948 7,103,548 7,140,940 66,216,447 68,462,292 67,620,848 67,340,120 64,209,719 72,861,565 4,140,920 4,646,208 5,083,556 5,407,667 5,515,163 5,714,235 347,846 477,606 515,778 566,712 627,164 647,243 2,026,554 1,882,139 5,020,786 7,957,942 8,201,944 9,024,223 2,882,818 1,800,895 3,740,000 3,610,000 3,492,871 (2,961,771) 116,546,875 120,231,997 129,168,753 136,297,456 138,257,833 146,508,723 1,385,847 1,397,321 866,927 1,214,674 2,289,777 3,131,444 (2,882,818) (1,800,895) (3,740,000) (3,610,000) (3,492,871) 2,961,771 (1,496,971) (403,574) (2,873,073) (2,395,326) (1,203,094) 6,093,215 115,049,904 119,828,423 126,295,680 133,902,130 137,054,739 152,601,938 10,945,750 2,771,094 8,440,511 13,345,120 28,743,227 15,355,407 5,834,807 9,234,442 14,873,733 18,144,831 15,895,618 38,635,963 $ 16,780,557 $ 12,005,536 $ 23,314,244 $ 31,489,951 $ 44,638,845 $ 53,991,370 153 CITY OF ROUND ROCK, TEXAS FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) 2009 2010 2011 2012 Nonspendable- Inventories,prepaids and other $ - $ - $ 288,758 $ 321,044 Restricted for- Debt service 2,887,281 1,944,761 2,238,270 2,301,340 Authorized construction 90,000,407 88,064,514 88,021,123 81,424,206 Hotel-motel tax 7,005,856 7,314,509 8,114,729 8,927,441 Public safety 497,243 862,273 1,024,405 937,105 General government - - - - Committed to- General government 158,886 158,990 901,229 911,674 Capital projects funds 31,250,099 33,739,591 35,731,396 35,645,374 Streets and drainage - - 573,809 1,179,777 Culture and recreation 14,302 11,176 11,239 6,625 Assigned to- Culture and recreation 574,093 571,705 542,779 248,771 Unassigned 36,785,055 36,857,155 36,238,854 36,912,381 Total governmental funds $ 169,173,222 $ 169,524,674 $ 173,686,591 $ 168,815,738 154 2013 2014 2015 2016 2017 2018 $ 375,087 $ 397,271 $ 430,821 $ 372,288 $ 232,004 $ 253,592 2,415,427 2,278,062 2,351,780 2,749,645 3,880,982 4,853,517 43,630,036 106,539,802 117,515,606 77,545,478 81,086,426 62,649,029 9,549,082 11,173,765 10,934,476 12,653,710 6,526,672 7,863,705 1,249,246 1,050,349 1,274,293 676,724 585,878 750,657 - - - - 1,269,075 1,268,233 865,493 684,199 856,977 1,081,159 124,703 232,243 31,856,334 26,570,024 24,696,122 24,865,777 28,397,665 21,934,876 1,570,994 - 1,145,826 1,152,195 - - 10,530 12,438 322,576 293,694 - 283,518 264,662 272,666 212,080 1,004,583 1,274,658 38,604,781 38,726,365 50,277,389 52,427,796 50,090,080 53,558,920 $ 130,410,528 $ 187,696,937 $ 210,078,532 $ 174,030,546 $ 173,198,068 $ 154,639,430 155 I CITY OF ROUND ROCK, TEXAS CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (modified accrual basis of accounting) 2009 2010 2011 2012 Revenues- Taxes and franchise $ 95,097,743 $ 98,990,298 $ 101,914,916 $ 104,318,270 Licenses,permits and fees 1,053,959 907,705 2,155,358 3,094,983 Charges for services 3,757,215 3,767,565 3,985,634 4,198,815 Fines and forfeitures 2,057,353 2,260,401 2,492,261 2,814,987 Intergovernmental 1,232,594 3,953,092 3,302,276 2,158,621 Hotel occupancy tax 2,394,145 2,291,326 2,684,046 3,252,543 Investment and other 8,406,513 3,652,629 3,786,134 2,635,613 Contributions 1,729,637 972,641 3,282,812 5,858,346 Total revenues 115,729,159 116,795,657 123,603,437 128,332,178 Expenditures- General government 22,640,290 22,874,155 24,346,515 25,332,577 Public safety 34,099,601 34,539,844 36,556,318 37,646,821 Public works 10,065,601 9,565,430 8,797,799 9,791,618 Culture and recreation 11,813,663 11,157,995 11,336,602 11,958,179 Capital projects 38,798,458 21,184,635 22,981,288 39,916,082 Debt service- Principal retirement 10,942,820 11,456,810 11,815,968 13,040,604 Interest and fiscal charges 9,290,481 9,097,057 8,072,821 6,825,065 Payment to refunding agent - - - - Other charges - 1,327,989 247,433 256,373 Total expenditures 137,650,914 121,203,915 124,154,744 144,767,319 Excess of revenues over(under)expenditures (21,921,755) (4,408,258) (551,307) (16,435,141) Other financing sources(uses)- Issuance of lease 1,505,390 1,310,569 1,372,023 500,000 Payment to borrower _ - - Issuance of debt - 18,575,000 16,145,000 27,295,000 Premium on bonds issued - 1,387,593 223,248 1,317,881 Payment to refunded bond escrow agent - (19,682,356) (16,083,357) (20,616,784) Transfers in 33,385,722 24,459,490 27,752,457 34,447,300 Transfers out (30,579,894) (21,290,586) (24,696,147) (31,379,109) Total other financing sources(uses) 4,311,218 4,759,710 4,713,224 11,564,288 Net change in fund balances $ (17,610,537) $ 351,452 $ 4,161,917 $ (4,870,853) Capital outlay including amounts reported under departmental current expenditures $ 40,000,535 $ 22,684,310 $ 23,932,697 $ 41,282,292 Debt service as a percentage of noncapital expenditures 20.7% 20.9% 19.8% 19.2% 156 2013 2014 2015 2016 2017 2018 $ 107,417,612 $ 111,592,909 $ 115,508,506 $ 119,211,433 $ 121,142,245 $ 134,637,978 3,567,437 1,243,857 1,704,374 1,843,633 1,646,077 2,037,211 4,436,779 4,645,527 4,513,428 5,172,465 6,307,377 6,563,868 3,208,637 2,673,670 2,451,316 1,573,476 1,440,795 1,616,922 1,225,195 3,044,095 1,679,993 990,683 2,950,833 9,511,022 4,140,920 4,646,208 5,083,556 5,407,667 5,515,163 5,714,235 3,565,842 4,783,567 7,207,478 7,963,854 8,253,614 9,260,526 2,567,327 3,152,100 600,919 368,748 931,601 2,335,783 130,129,749 135,781,933 138,749,570 142,531,959 148,187,705 171,677,545 23,783,735 24,375,794 23,838,520 24,394,392 21,055,932 21,574,730 39,475,791 42,306,841 43,067,272 44,388,881 47,595,884 52,839,347 11,852,443 11,291,499 12,328,284 12,062,839 12,682,503 14,748,037 12,440,948 13,775,702 14,766,040 15,078,964 17,219,700 18,513,216 65,523,775 38,694,239 33,476,554 65,414,999 63,268,686 59,809,511 12,852,059 14,395,697 13,919,366 13,463,922 13,287,160 14,325,970 6,797,281 7,372,652 8,597,372 9,641,498 8,306,767 9,244,645 - - - - 10,050,443 - 98,630 862,888 942,596 229,245 423,510 - 172,824,662 153,075,312 150,936,004 184,674,740 193,890,585 191,055,456 (42,694,913) (17,293,379) (12,186,434) (42,142,781) (45,702,880) (19,377,911) 1,000,000 1,450,000 2,000,000 2,250,000 - 5,981,044 - - (2,200,000) 8,615,000 77,350,000 70,665,000 11,450,000 38,725,000 - - 6,161,887 6,369,020 1,094,690 2,652,531 - (8,509,756) (11,682,994) (48,205,991) (12,309,895) - - 49,547,722 32,984,237 27,070,865 30,552,126 31,908,470 22,678,818 (46,363,263) (31,683,342) (23,330,865) (26,942,126) (28,415,599) (25,640,589) 4,289,703 74,579,788 34,568,029 6,094,795 44,870,402 819,273 $ (38,405,210) $ 57,286,409 $ 22,381,595 $ (36,047,986) $ (832,478) $ (18,558,638) $ 67,059,226 $ 38,644,877 $ 35,385,140 $ 65,116,395 $ 90,020,515 $ 46,896,225 18.6% 19.0% 19.5% 19.3% 20.8% 16.4% 157 CITY OF ROUND ROCK, TEXAS ACTUAL AND TAXABLE ASSESSED VALUE OF PROPERTY LAST TEN FISCAL YEARS Actual Assessed Value Less: Total Taxable Fiscal Real Personal Tax Exempt Assessed Total Direct Year Property Property Total Property Valuation Tax Rate 2009 $ 7,623,482,042 $ 957,142,673 $ 8,580,624,715 $ 386,156,997 $ 8,194,467,718 $ 0.3652 2010 7,843,041,122 880,412,269 8,723,453,391 401,156,676 8,322,296,715 0.3966 2011 7,581,182,068 831,489,169 8,412,671,237 395,522,799 8,017,148,438 0.4173 2012 7,654,036,144 850,976,608 8,505,012,752 408,354,355 8,096,658,397 0.4232 2013 7,837,387,397 947,316,007 8,784,703,404 493,653,067 8,291,050,337 0.4204 2014 8,195,046,631 1,062,520,327 9,257,566,958 567,914,523 8,689,652,435 0.4195 2015 9,193,035,124 1,030,331,518 10,223,366,642 589,210,216 9,634,156,426 0.4146 2016 10,040,964,402 1,018,628,138 11,059,592,540 567,506,618 10,492,085,922 0.4147 2017 10,935,482,664 1,031,249,775 11,966,732,439 639,556,585 11,327,175,854 0.4250 2018 12,013,959,238 1,124,094,154 13,138,053,392 686,899,632 12,451,153,760 0.4300 Source: Williamson Central Appraisal District/Travis Central Appraisal District Note-Property in the City is assessed each year. Property is assessed at actual value; therefore,the assessed values are equal to actual value. Tax rates are per$100 of assessed value. 158 CITY OF ROUND ROCK,TEXAS PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS PER $100 OF ASSESSED VALUE LAST TEN FISCAL YEARS City Direct Rates Overlapping Rates Round Rock Total Independent Direct and Fiscal Operating Debt Service Total School Williamson Special Overlapping Year Rate Rate Direct District County Districts Rates 2009 $ 0.2171 $ 0.1481 $ 0.3652 $ 1.3324 $ 0.4683 $ 0.1154 $ 2.2813 2010 0.2491 0.1475 0.3966 1.3800 0.4900 0.1146 2.3812 2011 0.2665 0.1508 0.4173 1.3800 0.4900 0.1151 2.4024 2012 0.2751 0.1481 0.4232 1.3350 0.4877 0.1148 2.3607 2013 0.2830 0.1373 0.4203 1.3800 0.4890 0.1151 2.4044 2014 0.2800 0.1395 0.4195 1.3674 0.4890 0.1149 2.3908 2015 0.2628 0.1518 0.4146 1.3375 0.4865 0.1142 2.3528 2016 0.2545 0.1602 0.4147 1.3325 0.4815 0.1205 2.3492 2017 0.2719 0.1531 0.4250 1.3325 0.4765 0.1220 2.3560 2018 0.2879 0.1421 0.4300 1.3048 0.4665 0.1208 2.3221 Source: Williamson County Tax Office 159 CITY OF ROUND ROCK, TEXAS PRINCIPAL PROPERTY TAXPAYERS CURRENT YEAR AND NINE YEARS AGO 2018 2009 %of Total %of Total Net Net Net Net Assessed Assessed Assessed Assessed Name of Taxpayer Valuation Rank Valuation Valuation Rank Valuation Dell Computer Holdings,LP $ 394,116,340 1 3.165% $ 197,709,697 1 2.413% CPG Round Rock,LP/ Round Rock Premium Outlets 144,548,264 2 1.161 122,593,318 2 1.496 CMF 15 Portfolio,LLC/ Colonial Grand Apartments 80,725,992 3 0.648 37,413,622 7 0.457 Baltgem Development Corp./ La Frontera Village 73,065,199 4 0.587 90,144,431 3 1.100 Columbia/St. David Healthcare 70,935,634 5 0.570 59,356,180 4 0.724 Fisher-Rosemount Systems Inc. 63,496,059 6 0.510 - - Dell Computer Corp. 61,115,478 7 0.491 53,332,060 5 0.651 Baev-Lasalle Round Rock University Blvd LLC 54,350,711 8 0.437 - - FST La Frontera LLC 52,855,810 9 0.423 Las Brisas Luxury Apartment Homes LLC 50,411,848 10 0.405 - - Oncor Electricity Delivery Co. - - 40,913,638 6 0.499 Toppan Photomasks, Inc. - - 36,692,978 8 0.448 2800 La Frontera#IA, LTD - - 33,610,124 9 0.410 HEB Grocery Co.,LP - - 30,107,994 10 0.367 $ 1,045,621,335 8.397% $ 701,874,042 8.565% Source: Williamson Central Appraisal District 160 CITY OF ROUND ROCK, TEXAS PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS Collected within the Fiscal Year of the Levy Total Collections to Date Taxes Levied Collections Fiscal for the Percentage in Subsequent Percentage Year Fiscal Year Amount Of Levy Years Amount Of Levy 2009 $ 29,931,048 $ 29,745,017 99.38% $ 289 $ 29,745,306 99.38% 2010 33,001,196 32,822,350 99.46 2,023 32,824,373 99.46 2011 33,469,184 33,330,239 99.58 132 33,330,371 99.59 2012 34,255,559 34,161,567 99.73 187 34,161,754 99.73 2013 34,865,783 34,717,536 99.57 2,482 34,720,018 99.58 2014 36,452,223 36,281,479 99.53 3,872 36,285,351 99.54 2015 39,792,302 39,697,745 99.76 2,791 39,700,536 99.77 2016 44,063,923 43,894,949 99.62 1,431 43,896,380 99.62 2017 49,113,540 48,988,540 99.75 37,529 49,026,069 99.82 2018 53,890,399 53,775,618 99.79 - 53,775,618 99.79 161 CITY OF ROUND ROCK, TEXAS SALES TAX AND AD VALOREM TAX LAST TEN FISCAL YEARS Total 1% %of Equivalent 1% Fiscal Sales Tax Ad Valorem Ad Valorem of Ad Valorem Sales Tax Year Collected Tax Levy Tax Levy Tax Rate Population Per Capita 2009 $ 30,849,792 $ 29,931,048 103.07% $ 0.3765 99,500 $ 310 2010 30,758,801 33,001,196 93.21 0.3696 99,887 308 2011 31,306,675 33,469,184 93.54 0.3905 100,659 311 2012 31,652,958 34,255,559 92.40 0.3909 101,702 311 2013 33,108,223 34,865,783 94.96 0.3993 102,349 323 2014 34,231,146 36,452,223 93.91 0.3939 103,107 332 2015 33,810,424 39,792,302 84.97 0.3509 105,405 321 2016 33,670,060 44,063,923 76.41 0.3209 106,591 316 2017 34,970,879 49,113,540 71.20 0.3087 108,353 323 2018 40,929,405 53,890,399 75.95 0.3287 112,201 365 Note: The City has adopted the Municipal Sales and Use Tax Act, Texas Tax Code, Chapter 321, which grants the City the power to impose and levy a 1% Local Sales and Use Tax within the City; the proceeds are credited to the General Fund and are not pledged to the payment of the bonds. Collections and enforcements are effected through the office of the Texas Comptroller of Public Accounts who remits the proceeds of the tax, after deduction of a 2%service fees,to the City monthly. The calculations above are only based on the 1%sales and use tax,not the 1/2%sales and use tax collected for reduction of ad valorem taxes and 1/2% sales and use tax collected for transportation improvements. 162 «ryws �r�s Q .� •..............fo T 163 CITY OF ROUND ROCK, TEXAS TAMABLE SALES BY CATEGORY LAST TEN CALENDAR YEARS Calendar Retail Wholesale Year Trade Manufacturing Services Trade Utilities 2008 $ 1,169,189,726 $ 1,075,483,223 $ 331,119,293 $ 179,784,677 $ 16,648,480 2009 1,101,311,223 990,398,877 324,328,200 145,345,099 16,322,477 2010 1,070,089,059 1,111,487,638 331,304,579 117,424,010 17,788,882 2011 1,107,689,836 1,095,938,383 346,422,899 85,234,726 22,224,004 2012 1,228,352,605 985,127,289 381,294,220 99,025,592 26,448,906 2013 1,399,874,606 1,103,790,424 402,483,896 131,162,463 29,351,784 2014 1,529,469,558 1,061,444,585 432,758,149 128,755,561 34,412,553 2015 1,556,013,209 951,496,554 476,798,645 123,940,513 41,822,044 2016 1,592,542,371 905,719,610 505,372,604 141,775,154 41,190,339 2017 1,582,407,350 925,729,209 521,326,342 132,124,078 38,444,682 $ 13,336,939,543 $ 10,206,615,792 $ 4,053,208,827 $ 1,284,571,873 $ 284,654,151 Source: Texas Comptroller of Public Accounts Note: Sales information is not available on a fiscal year basis. Also, due to State of Texas confidentiality rules, names of sales tax payers are not available. The categories presented provide alternative information indicative of sales tax revenue sources. 164 City Direct State Finance, Sales Tax Sales Tax Over- Construction Insurance Total Rate Rate lapping $ 46,245,654 $ 1,639,355 $ 2,820,110,408 2.00% 6.25% 8.25% 30,440,097 2,160,587 2,610,306,560 2.00 6.25 8.25 46,023,961 2,114,837 2,696,232,966 2.00 6.25 8.25 61,286,941 3,006,901 2,721,803,690 2.00 6.25 8.25 70,736,973 2,846,478 2,793,832,063 2.00 6.25 8.25 90,125,307 2,368,176 3,159,156,656 2.00 6.25 8.25 95,799,482 2,497,918 3,285,137,806 2.00 6.25 8.25 110,293,477 2,600,258 3,262,964,700 2.00 6.25 8.25 135,370,923 2,951,985 3,324,922,986 2.00 6.25 8.25 144,818,546 2,773,206 3,347,623,413 2.00 6.25 8.25 $ 831,141,361 $ 24,959,701 $ 30,022,091,248 165 CITY OF ROUND ROCK,TEXAS HOTEL TAXPAYERS SEPTEMBER 30, 2018 Hotel Motel Hotel Motel Total Collections Occupancy Occupancy Year Ended Number of %of Total Taxpayer Tax Venue Tax September 30,2018 Rooms Collections Austin Marriott North $ 639,194 $ 182,627 $ 821,821 295 14.4% Homewood Suites 303,337 86,668 390,005 115 6.8 Hilton Garden Inn 264,307 75,516 339,823 122 6.0 Hyatt Place 250,287 71,511 321,798 138 5.6 Home 2 Suites 217,646 62,184 279,830 91 4.9 Courtyard Marriot 208,545 59,584 268,129 113 4.7 Holiday Inn Express N 199,213 56,918 256,131 109 4.5 Hampton Inn 196,688 56,197 252,885 93 4.4 Residence Inn 186,453 53,272 239,725 96 4.2 Holiday Inn 165,561 47,303 212,864 116 3.7 Towneplace Suites 148,241 42,355 190,596 102 3.3 Springhill Suites 142,768 40,791 183,558 104 3.2 La Quinta S 137,018 39,153 176,172 96 3.1 La Quinta N 116,948 33,414 150,362 116 2.6 Staybridge Suites 112,133 32,038 144,171 81 2.5 Wingate Inn 108,891 31,111 140,002 100 2.5 Holiday Inn Express S 105,167 30,026 135,193 91 2.4 Best Western 103,277 29,501 132,778 64 2.3 Red Roof Inn 100,728 28,779 129,507 107 2.3 Microtel 99,064 28,290 127,354 82 2.2 Sleep Inn 97,646 27,899 125,545 74 2.2 Motel 79,851 22,815 102,666 59 1.8 Comfort Suites 78,745 22,499 101,244 63 1.8 Value Place(Woodsprings) 71,269 20,363 91,632 121 1.6 Extended Stay America#6030 67,990 18,467 86,457 138 1.5 Country Inn 63,812 18,232 82,044 63 1.4 Candlewood Suites 60,000 17,143 77,143 98 1.4 Days Inn&Suites 57,978 16,561 74,539 48 1.3 Extended Stay American#6197 55,888 16,929 72,817 104 1.3 VRBO Homes 5,310 1,517 6,827 4 0.1 Provident Crossing Retirement 480 137 617 2 0.0 $ 4,444,435 $ 1,269,800 $ 5,714,235 3,005 100.0% 166 CITY OF ROUND ROCK, TEXAS HOTEL OCCUPANCY TAX COLLECTION HISTORY BY QUARTER LAST TEN FISCAL YEARS Fiscal 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Oct.—Dec. Jan.—Mar. Apr.—June July—Sept. Total 2009 $ 609,608 $ 589,006 $ 640,846 $ 554,685 $ 2,394,145 2010 504,062 582,719 661,356 543,189 2,291,326 2011 684,430 678,090 716,629 604,897 2,684,046 2012 610,280 835,331 1,004,705 802,227 3,252,543 2013 964,181 1,091,350 1,152,982 932,407 4,140,920 2014 1,071,926 1,217,483 1,271,649 1,085,150 4,646,208 2015 1,114,213 1,274,209 1,437,121 1,258,012 5,083,555 2016 1,214,093 1,354,383 1,570,064 1,269,127 5,407,667 2017 1,249,406 1,411,265 1,509,276 1,345,218 5,515,165 2018 1,365,737 1,429,006 1,637,645 1,281,847 5,714,235 167 CITY OF ROUND ROCK, TEXAS RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Business-Type Governmental Activities Activities General Percentage Fiscal Obligation Certificates of Other Debt Revenue Total Primary of Personal Per Year Bonds Obligation Obligations Bonds Government Income Capita 2009 $ 115,725,000 $ 14,475,000 $ 69,270,163 $ 11,555,000 $ 211,025,163 7.10% $ 2,121 2010 110,470,000 13,530,000 65,830,308 91,166,635 280,996,943 9.16 2,813 2011 105,980,000 12,965,000 60,691,660 89,888,648 269,525,308 8.63 2,678 2012 101,185,000 12,380,000 62,571,173 87,765,660 263,901,833 8.27 2,595 2013 96,340,000 11,770,000 56,131,110 85,392,673 249,633,783 7.56 2,439 2014 155,780,000 11,135,000 55,963,734 90,799,894 313,678,628 9.12 3,042 2015 154,925,000 29,675,000 56,701,818 87,827,948 329,129,766 10.00 3,123 2016 149,540,000 27,095,000 52,746,502 89,364,624 318,746,126 6.43 2,990 2017 170,615,000 26,315,000 49,477,613 86,027,443 332,435,056 6.87 3,068 2018 162,820,000 25,520,000 48,520,464 82,997,070 319,857,534 5.93 2,851 Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. See the Schedule of Demographic and Economic Statistics for personal income and population data. 168 CITY OF ROUND ROCK, TEXAS RATIOS OF NET GENERAL BONDED DEBT OUTSTANDING TO ASSESSED VALUE AND NET BONDED DEBT PER CAPITA LAST TEN FISCAL YEARS Ratio of Net Amount Bonded Net Net Assessed Gross Available in Debt to Bonded Fiscal (() Value(in Bonded Debt Service Net Bonded Assessed Debt Per Year Population thousands) Debt Fund Debt Value Capita 2009 99,500 $ 8,194,468 $ 127,721,445 $ 2,887,281 $ 124,834,164 1.52% $ 1,255 2010 99,887 8,322,297 123,017,131 1,944,761 121,072,370 1.45 1,212 2011 100,659 8,017,148 118,122,822 2,238,270 115,884,552 1.45 1,151 2012 101,702 8,096,658 114,268,570 2,301,340 111,967,230 1.38 1,101 2013 102,349 8,291,050 108,241,436 2,415,427 105,826,009 1.28 1,034 2014 103,107 8,689,652 172,890,871 2,278,062 170,612,809 1.96 1,655 2015 105,405 9,634,156 181,245,000 2,351,780 178,893,220 1.86 1,697 2016 106,591 10,492,086 173,280,000 2,749,645 170,530,355 1.63 1,600 2017 108,353 11,327,176 196,930,000 3,880,982 193,049,018 1.70 1,782 2018 112,201 12,451,154 188,340,000 4,853,517 183,486,483 1.47 1,635 Note: Includes Certificates of Obligation and General Obligation Bonds. (1) Source: Planning Department, City of Round Rock 169 .... .1N �,,i 170 CITY OF ROUND ROCK, TEXAS COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT SEPTEMBER 30, 2018 Total ** Estimated General Estimated Share of Debt Percentage Overlapping Name of Governmental Unit Outstanding Applicable Debt Debt repaid with property taxes- Williamson County $878,234,942* 20.54% $ 180,389,457 Round Rock Independent School District 717,150,000* 36.52 261,903,180 Travis County 705,136,179* 0.24 1,692,327 Austin Community College 418,335,000* 5.96 24,932,766 Georgetown ISD 317,130,000* 0.19 602,547 Travis County Healthcare District 9,380,000* 0.24 22,512 Subtotal, overlapping debt 469,542,789 City direct debt 236,860,464 Total direct and overlapping debt $ 706,403,253 * Gross Debt as of September 30,2018 ** The percentage of overlapping debt applicable is estimated using taxable assessed property values. Source: City of Round Rock Finance Department and Texas Municipal Reports Note: Overlapping governments are those that coincide,at least in part,with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City of Round Rock, Texas. This process recognizes that, when considering the government's ability to issue and repay long-term debt,the entire debt borne by the residents and businesses should be taken into account. However,this does not imply that every taxpayer is a resident,and therefore responsible for repaying the debt,of each overlapping government. 171 CITY OF ROUND ROCK, TEXAS LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS 2009 2010 2011 2012 Debt limit $ 1,468,905,352 $ 1,491,819,433 $ 1,437,119,854 $ 1,451,372,470 Total net debt applicable to limit 122,512,295 117,540,239 112,406,730 107,568,660 Legal debt margin $ 1,346,393,057 $ 1,374,279,194 $ 1,324,713,124 $ 1,343,803,810 Total net debt applicable to the limit as a percentage of debt limit 8.34% 7.88% 7.82% 7.41% Legal Debt Margin Calculation for Fiscal Year 2018 Total assessed value $ 12,451,153,760 Debt limit-Maximum serviceable at permitted allocation of$1.50 per$100 of assessed value $ 2,120,343,710 Amount of debt applicable to debt limit: Total General Obligation Debt $ 188,340,000 Less: Amount available in Debt Service Fund (4,853,517) Total net debt applicable to debt limit 183,486,483 Legal debt margin $ 1,936,857,227 There is no direct debt limitation in the City Charter or under state law. The City operates under a Home Rule Charter(Article XI,Section 5,Texas Constitution),approved by voters in August 1977,that limits the maximum tax rate,for all City purposes, to $2.50 per$100 assessed valuation. Administratively, the Attorney General of the State of Texas will permit allocation of $1.50 of the$2.50 maximum tax rate for general obligation debt service. Assuming the maximum tax rate for debt service of$1.50 on January 1,2017,assessed valuation of$12,451,153,760 at 100% collection,tax revenue of$186,767,306 would be produced. This revenue could service the debt on$2,120,343,710 issued as 20-year serial bonds at 5.50%(with level debt service payment). Interest and Sinking Fund Budget Projection General Obligation Debt Service Requirements,Fiscal Year 2019 $ 18,833,566 Tax Year 2018 Interest and Sinking Fund Tax Levy @ 99%Collection $ 19,427,448 Interest and Sinking Fund Balance as of 9-30-18 4,853,517 24,280,965 Estimated Balance,9-30-19 $ 5,447,399 172 2013 2014 2015 2016 2017 2018 $ 1,486,218,341 $ 1,557,670,054 $ 1,640,628,922 $ 1,786,728,268 $ 1,928,938,196 $ 2,120,343,710 101,824,573 161,006,938 178,893,220 170,530,355 193,049,018 183,486,483 $ 1,384,393,768 $ 1,396,663,116 $ 1,461,735,702 $ 1,616,197,913 $ 1,735,889,178 $ 1,936,857,227 6.85% 10.34% 10.90% 9.54% 10.01% 8.65% 173 CITY OF ROUND ROCK, TEXAS CONDENSED UTILITY STATEMENT OF OPERATIONS LAST TEN FISCAL YEARS 2009 2010 2011 2012 Gross Revenue(1) Charges for services $ 37,802,909 $ 37,512,213 $ 44,922,715 $ 43,327,656 Licenses,permits and fees - - 1,114,142 1,921,789 Interest income and other 1,292,130 1,728,177 1,292,672 770,977 Total 39,095,039 39,240,390 47,329,529 46,020,422 Direct Operating Expense(2) Personnel services 7,258,877 7,479,392 8,576,547 8,599,771 Contracted services 15,790,749 11,305,080 9,839,091 9,913,713 Materials and supplies 1,785,769 1,652,634 2,055,399 2,106,220 Heat, light and power 2,521,364 1,806,175 2,474,391 1,966,864 Total 27,356,759 22,243,281 22,945,428 22,586,568 Net available for Debt Service $ 11,738,280 $ 16,997,109 $ 24,384,101 $ 23,433,854 Debt Service Requirements(P&I) $ 568,400 $ 4,007,882 $ 5,081,298 $ 5,893,953 Revenue Bond Coverage 20.65 4.24 4.79 3.87 Metered Water Customers 30,001 30,362 30,676 30,989 Metered Sewer Customers 29,407 29,759 30,061 30,359 Average Annual Principal and Interest Requirements,2019-2039 $ 5,234,952 Coverage of Average Requirements by fiscal 2018 Net Revenue 5.05 times Estimated Maximum Principal and Interest Requirements,2019 $ 6,102,631 Estimated Coverage of Maximum Requirements by 2018 Net Revenue 4.34 times Parity Debt Outstanding at FY2018 $ 76,430,000 (1) Water and Sewer Fund operating and non-operating revenues (2) Water and Sewer Fund operating expenses,excluding depreciation 174 2013 2014 2015 2016 2017 2018 $ 43,094,185 $ 40,762,523 $ 41,880,906 $ 44,406,721 $ 47,769,478 $ 50,715,034 1,941,121 2,943,355 4,017,184 4,247,067 4,211,137 4,226,721 1,385,965 1,397,259 863,900 1,211,532 2,284,171 3,122,041 46,421,271 45,103,137 46,761,990 49,865,320 54,264,786 58,063,796 8,634,094 8,939,263 9,228,272 9,742,128 11,871,681 10,940,702 14,335,824 14,200,624 14,500,269 15,222,355 14,854,212 16,695,290 1,890,480 2,163,731 1,837,026 2,091,331 2,504,640 2,392,415 1,951,428 1,829,036 1,783,408 1,662,779 1,618,297 1,578,540 26,811,826 27,132,654 27,348,975 28,718,593 30,848,830 31,606,947 $ 19,609,445 $ 17,970,483 $ 19,413,015 $ 21,146,727 $ 23,415,956 $ 26,456,849 $ 6,101,113 $ 6,347,632 $ 6,894,788 $ 5,994,842 $ 6,352,459 $ 5,444,927 3.13 2.83 2.82 3.53 3.88 4.86 31,431 32,012 32,447 32,930 33,602 34,581 30,766 31,133 31,531 31,984 32,614 33,277 175 t '•'� fir, y�Y.•ttt•ff 4f ttlttf! � �� v�TvMl►' � ��� 176 CITY OF ROUND ROCK, TEXAS DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (4) (2) (3) (2) Fiscal Personal Per Capita Median School Unemployment Year Population Income Income Age Enrollment Rate 2009 99,500 $ 2,971,866,000 $ 29,868 31.2 41,867 6.4% 2010 99,887 3,038,262,879 30,417 31.4 42,683 6.2 2011 100,659 3,096,874,794 30,766 31.6 44,331 6.1 2012 101,702 3,164,864,538 31,119 32.0 45,000 5.9 2013 102,349 3,221,434,775 31,475 32.0 45,361 5.0 2014 103,107 3,282,514,452 31,836 31.7 45,924 4.2 2015 105,405 4,104,259,890 38,938 33.5 47,093 3.2 2016 106,591 4,636,495,318 43,498 33.9 47,580 3.3 2017 108,353 4,841,103,687 44,679 34.4 48,121 3.0 2018 112,201 5,395,858,291 48,091 34.2 48,888 2.9 Sources: (1) Planning Department,City of Round Rock (2) Round Rock Chamber of Commerce (3) Round Rock Independent School District (4) U.S. Dept. of Commerce/Bureau of Economic Development; data is for Williamson County,which is representative of the City; data for City not available. 177 CITY OF ROUND ROCK, TEXAS PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 2018 2009 %of Total %of Total City City Name of Employer Employees Rank Employment Employees Rank Employment Dell Technologies 13,000 1 19.53% 8,500 1 16.80% Round Rock Independent School District 6,106 2 9.17 5,400 2 10.68 City of Round Rock,Texas 965 3 1.45 839 4 1.64 Emerson Process Management 875 4 1.31 Round Rock Premium Outlets 800 5 1.20 Scott&White Healthcare 750 6 1.13 800 5 1.58 Round Rock Medical Center 689 7 1.04 710 6 1.40 Liquidation Channel 600 8 0.90 Sears Telesery 600 9 0.90 1,300 3 2.57 Wayne,a GE Energy Business 550 10 0.83 420 9 0.83 Texas Guaranteed Student Loan 485 11 0.73 700 7 1.38 Seton Medical Center Williamson 450 12 0.68 500 8 0.99 Field Asset Services 440 13 0.66 ProPortion Foods 380 14 0.57 Airco Mechanical 375 15 0.56 Michael Angelo's Gourmet Food 370 15 0.55 400 10 0.79 Chasco Constructors 300 16 0.45 TECO-Westinghouse Motor Company 300 17 0.45 Toppan Photomask 250 18 0.37 Premier Research Labs 220 19 0.33 28,505 42.88% 19,561 38.66% Source: City of Round Rock Finance Department/Round Rock Chamber of Commerce 178 CITY OF ROUND ROCK, TEXAS FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Function: General government 176 176 165 147 149 157 159 163 179 194 Public safety- Police- OfFcers 152 152 152 152 153 159 167 168 174 176 Civilians 61 61 67 67 68 64 67 72 74 75 Fire- Firefighters&officers 124 124 124 124 124 129 129 132 134 149 Civilians 5 5 5 5 6 8 8 8 8 9 Public works- Streets&Drainage 48 48 48 64 70 70 69 76 73 77 Shop 15 15 15 15 15 16 18 19 18 18 Culture&Recreation- Library 29 29 29 29 30 31 31 31 31 31 Parks&Recreation 97 98 94 94 91 91 91 106 102 105 Water&Sewer Utility 132 132 125 127 126 128 129 128 128 131 Total 839 840 824 826 832 853 868 903 921 965 Source:City of Round Rock Finance Department 179 CITY OF ROUND ROCK, TEXAS OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS 2009 2010 2011 2012 Function: Police- Arrests 3,908 4,328 4,521 6,715 Accident reports 1,646 1,877 2,747 4,485 Index crimes reported 2,960 3,154 3,154 2,777 Crimes per thousand residents 30.30 31.30 31.30 27.10 Officers per thousand of population 1.52 1.48 1.48 1.49 Fire- Incident volume 8,000 8,500 8,141 8,350 Priority calls answered 5,800 6,000 5,916 3,475 Non-emergency calls answered 2,200 2,500 2,225 4,875 Priority calls-response less than 6 minutes 65% 65% 65% 60% Public Works- Street- Street resurfacing(lane miles) 137 137 45 60 Potholes repaired annually 4,000 4,000 4,000 4,000 Signals maintained 59 59 68 76 Shop- Work orders 6,330 6,930 4,609 5,336 Number of departments served 12 12 12 12 Culture and Recreation- Library- Number of items circulated 780,000 810,000 854,000 903,219 Number of card holders 51,000 53,000 59,000 55,336 Number of library visits 310,000 320,000 292,000 294,768 Parks&Recreation- Total park acres maintained 1,757 1,780 1,935 2,035 Number of athletic fields maintained 43 45 46 49 Number of trees planted 877 350 345 558 *Number of recreation enrollees 401,000 401,000 420,000 420,000 Number of recreation participants - - - - Water- New connections 254 356 335 313 Line maintenance work orders 4,226 4,044 3,185 3,279 Average monthly consumption 589,159,550 466,096,342 655,615,475 560,281,041 Sewer- Average monthly treatment 301,433,205 327,351,600 475,482,100 457,967,400 Line feet reviewed for infiltration&inflow 156,934 114,176 317,789 361,784 Source: City of Round Rock Finance Department *Note:Parks and Recreation started recording all participants in all programs in Fiscal Year 2015 180 2013 2014 2015 2016 2017 2018 6,182 5,773 4,600 4,476 4,600 4,152 4,845 6,383 2,249 2,370 2,370 2,762 2,632 2,338 2,329 2,383 2,383 2,870 25.10 21.70 22.00 22.50 22.50 26.50 1.46 1.42 1.53 1.43 1.48 1.56 8,749 9,027 9,928 9,346 10,777 11,328 3,728 3,713 2,780 3,735 2,548 5,083 5,021 5,314 7,148 5,611 8,229 6,245 60% 63% 56% 61% 58% 53% 80 80 40 60 60 60 4,000 4,000 1,500 400 300 300 79 83 84 83 89 90 4,447 4,178 4,399 4,761 4,620 4,733 12 12 12 12 12 12 940,135 975,291 972,094 1,080,312 1,188,757 1,229,141 81,620 74,192 99,822 77,818 79,415 81,181 323,384 309,167 388,625 391,256 389,930 388,732 2,035 2,045 2,045 2,045 2,270 2,270 49 49 49 49 49 49 163 165 110 195 408 43 487,455 490,704 - - - _ - - 832,184 988,337 1,080,853 1,140,094 442 360 402 480 665 911 5,500 6,734 3,317 3,512 3,346 3,013 549,154,150 491,936,100 505,251,158 536,082,308 571,062,558 612,026,451 409,000,000 394,000,000 385,611,068 416,357,161 425,631,471 426,330,521 377,783 459,128 187,464 189,418 206,675 169,579 181 CITY OF ROUND ROCK, TEXAS CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS 2009 2010 2011 2012 Function: Police- Number of stations 1 1 1 1 Number of units 195 199 199 199 Fire- Number of stations 7 7 7 7 Number of fire trucks 14 15 16 16 Public Works- Street- Lane miles 1,124 1,137 1,200 1,200 Drainage miles 100 100 100 100 Number of street lights 5,103 5,104 5,119 5,312 Number of traffic signals 59 59 68 76 Shop- Repair facilities 1 1 1 1 Number of bays 19 19 19 19 Culture and Recreation- Library- Number of library books 185,000 185,000 183,000 195,000 Number of library facilities 1 1 1 1 Parks&Recreation- Total park acres 1,855 2,119 2,274 2,035 Number of athletic fields 44 46 47 49 Number of parks 60 84 85 62 Number of tennis courts 23 23 23 23 Number of pools 5 5 4 4 Water- Number of miles of water lines 503 591 584 585 Pumping stations 10 10 10 10 Tanks 19 20 20 20 Treatment capacity(millions of gallons/day) 48 52 52 52 Sewer- Number of miles of sewer mains 400 417 422 422 Wastewater lift stations 12 12 12 12 Source: City of Round Rock Finance Department 182 2013 2014 2015 2016 2017 2018 1 1 1 1 1 1 201 229 240 259 256 261 7 7 7 7 9 9 16 14 16 15 16 16 1,250 1,250 1,250 1,200 1,200 1,300 150 150 150 150 151 200 6,000 6,800 5,400 5,433 5,604 5,674 79 83 84 83 89 90 1 1 1 1 1 1 19 19 19 13 18 18 150,211 154,278 156,277 257,667 213,381 225,903 1 1 1 1 1 1 2,035 2,035 2,035 2,035 2,270 2,270 49 49 49 49 59 59 62 62 62 62 61 61 23 25 25 25 22 21 4 4 4 4 4 4 587 601 608 615 614 651 10 10 10 10 10 10 20 19 19 19 19 19 52 52 52 52 52 52 424 432 424 427 428 461 12 12 12 12 12 12 183 CITY OF ROUND ROCK,TEXAS TOP TEN WATER CUSTOMERS SEPTEMBER 30,2018 %of Total Water Water Consumption Consumption Name of Customer Type of Business in Gallons in Gallons Fern Bluff Municipal Utility District Municipal Utility District 311,809,800 4.370% Paloma Lake Municipal Utility District#1 &#2 Municipal Utility District 211,147,900 2.959 Williamson County Municipal Utility District#11 Municipal Utility District 191,439,930 2.683 Williamson County Municipal Utility District#10 Municipal Utility District 169,649,000 2.378 Chandler Creek Municipal Utility District Municipal Utility District 160,247,000 2.246 Vista Oaks Municipal Utility District Municipal Utility District 128,158,900 1.796 Dell,Inc. Electronic Equipment 110,086,900 1.543 Round Rock Independent School District Public Schools 87,019,800 1.220 Mid America Apartments,LP Property Management 65,507,000 0.918 Walsh Ranch Municipal Utility District Municipal Utility District 54,672,200 0.766 1,489,738,430 20.880% Source: City of Round Rock Finance Department 184 CITY OF ROUND ROCK,TEXAS WATER AND SEWER RETAIL RATES SEPTEMBER 30, 2018 Water rates for retail customers inside the city limits are as follows: Volume Rate Monthly Service Charge Billing periods for residential: Meter Size Base Monthly Water Four block structure for use in excess of predetermined amounts set by meter size- Serving Customer Service Charge Block 1:$2.49 5/8 inch $ 16.04 Block 2: $3.11 3/4 inch 22.33 Block 3:$3.74 1 inch 35.26 Block 4:$5.60 1 1/2 inch 67.56 2 inch 106.32 Billing periods for commercial. 3 inch 196.78 $2.72 per 1,000 gallons of water used by all customers 4 inch 326.01 6 inch 1,016.37 Billing periods for irrigation: 8 inch 1,776.48 Four block structure for use in excess of predetermined amounts set by meter size- 10 inch 2,789.97 Block 1:$3.11 12 inch 3,423.41 Block 2:$3.74 Block 3:$5.60 Sewer rates for retail customers inside the city limits are as follows: Volume Rate Monthly Service Charge $3.39 per 1,000 gallons of water used by all customers * Meter Size Base Monthly Sewer Serving Customer Service Charge 5/8 inch $ 13.27 3/4 inch 17.31 1 inch 24.82 1 1/2 inch 45.26 2 inch 69.79 3 inch 127.01 4 inch 208.75 6 inch 615.27 8 inch 1,073.67 10 inch 1,684.85 12 inch 2,066.84 *Sewer customers'volume is measured as the rate per 1,000 gallons of the lesser of a three-month winter average or actual water use. Note:New rates and rate structure became effective October 1,2017. Source: City of Round Rock Chapter 44,Section 44-32,Code of Ordinances.(2010 Edition)amended with ordinance No.0-2017-4779 185 186 SINGLE AUDIT SECTION ��; � �y� ��C�: '�I �, � _� ��� .. ..- �� �]]jj � �1 'TT' *�wNM' 188 CITY OF ROUND ROCK, TEXAS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS SEPTEMBER 30,2018 Pass- Grantor Through to Federal Grantor/Pass-Through Entity CFDA Identifying Non-State Expenditures Program Name Number Number Entities Direct Total Institute of Museum and Library Services Pass-Through from Texas State Library and Archives Commission Grants to States 45.310 LS-00-17-0044-17 $ S 19,268 $ 19,268 Total Institute of Museum and Library Services - 19,268 19,268 U.S.Department of Health&Human Services Pass-Through from Texas Health and Human Services State Targeted Response to the Opioid Crisis Grants 93.788 HHS000122100001 220,913 748,840 969,753 Total U.S.Department of Health&Human Services 220,913 748,840 969,753 U.S.Department of Homeland Security Pass-Through from the Texas A&M Engineering Extension Service Hurricane Maria(Puerto Rico) 97.025 DR-4339 8,643 8,643 Hurricane Harvey 97.025 DR-4332 35,703 35,703 Pass-Through from Texas Division of Emergency Management Hurricane Harvey for SOC Warehouse San Antonio and Tender 97.036 DR-4332 82,380 82,380 Total U.S.Department of Homeland Security - 126,726 126,726 U.S.Department of Housing&Urban Development Community Development Block Grants/Entitlement Grants Cluster Community Development Block Grants/Entitlement Grants 14.218 B13MC480514 11,447 - 11,447 Community Development Block Grants/Entitlement Grants 14.218 B14MC480514 73,560 37,064 110,624 Community Development Block Grants/Entitlement Grants 14.218 B15MC480514 90,000 - 90,000 Community Development Block Grants/Entitlement Grants 14.218 B16MC480514 - 142,661 142,661 Community Development Block Grants/Entitlement Grants 14.218 B17MC480514 85,486 118,853 204,339 Total Community Development Block Grants/Entitlement Grants Cluster 260,493 298,578 559,071 Total U.S.Department of Housing&Urban Development 260,493 298,578 559,071 U.S.Department of Transportation Federal Transit Formula Grants 20.507 TX-2017-035-00 - 754,948 754,948 Pass-Through from Capitol Metropolitan Transportation Authority Job Access and Reverse Commute Program 20.516 TX-37-X065-01 43,932 43,932 Highway Planning and Construction Cluster Pass-Through fi-om Texas Department of Transportation CSJ#0914-05-164/ Quiet Zone Project 20.205 0914-05-165 - 30,016 30,016 RM 620 Right of Way Acquisitions Project 20.205 CSJ 0883-01-056 - 7,520,396 7,520,396 Southwest Downtown Infrastructure Improvements Project 20.205 CSJ 0914-05-185 - 432,336 432,336 Total Highway Planning and Construction Cluster - 7,982,748 7,982,748 Total U.S.Department of Transportation - 8,781,628 8,781,628 Total Expenditures of Federal Awards $ 481,406 $ 9,975,040$ 10,456,446 189 CITY OF ROUND ROCK, TEXAS NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS SEPTEMBER 30,2018 1. BASIS OF PRESENTATION The Schedule of Expenditures of Federal Awards (SEFA)presents the activity of all applicable federal awards of the City of Round Rock, Texas. The City's reporting entity is defined in the notes of the basic financial statements. Federal financial assistance received directly from federal agencies as well as federal financial assistance passed through other governmental agencies is included on the Schedule of Expenditures of Federal Awards. The information on this schedule is presented in accordance with the requirements of Uniform Guidance, Audits of States, Local Governments and Non-Profit Organizations. Therefore,some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of the basic financial statements. 2. BASIS OF ACCOUNTING The Schedule of Expenditures of Federal Awards is prepared on the modified accrual basis of accounting. Expenditures are recognized when the related fund liability is incurred. Federal grants are considered to be earned to the extent of expenditures made under the provision of the grant and are received on a reimbursement basis. 3. INDIRECT COST RATE The City of Round Rock has not elected to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. 4. EXPENDITURES INCURRED IN A PRIOR YEAR Expenditures recorded in the SEFA associated with Hurricanes Maria and Harvey that were passed through the Texas A&M Engineering Extension Service to the City of Round Rock from the U.S. Department of Homeland Security,were incurred in a prior year. Similarly, a portion of the funds passed through the Texas Division of Emergency Management to the City of Round Rock from the U.S. Department of Homeland Security,were incurred in a prior year. Even though the expenditures were incurred in a prior year, the final invoices were not approved for payment until FY2018. Accordingly, these expenditures are being reported on the City of Round Rock's SEFA in the year they were approved for payment, in compliance with the OMB Compliance Supplement. 190 Bustin Office IN 3600 N.(:hpitai ,f xas Hwy. all Bldg.B,Suite 250 w t Ieypenn Austin,TX 73746 737.931.8200 Main whitleynenn.com INDEPENDENT AUDITORS' 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 To the Honorable Mayor and Members of City Council City of Round Rock,Texas We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Round Rock, Texas (the"City"), as of and for the year ended September 30,2018, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated February 6, 2019. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness,yet important enough to merit attention by those charged with governance. Our consideration of internal control 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. A member of 191 e A a international To the Honorable Mayor and Members of City Council City of Round Rock, Texas Compliance and Other Matters As part of obtaining reasonable assurance about whether the City'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 results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly,this communication is not suitable for any other purpose. Austin, Texas February 6, 2019 192 Austin Office an 3600 N.Capital of texas Hwy. an Bldg,a,Suite 250 whitleypennAustin,TX 78746 737.931.8200 Main whltleynenn.com INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Honorable Mayor and Members of City Council City of Round Rock,Texas Report on Compliance for Each Major Federal Program We have audited City of Round Rock, Texas' (the "City") compliance with the types of requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the City's major federal programs for the year ended September 30, 2018. The City'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 federal statues, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of the City'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 the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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'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's compliance. A member of 193 Nexia international To the Honorable Mayor and Members of City Council City of Round Rock,Texas Opinion on Each Major Federal Program In our opinion, the City 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 September 30, 2018. Report on Internal Control Over Compliance Management of the City 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'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 the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control 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 a 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 the Uniform Guidance.Accordingly,this report is not suitable for any other purpose. W 2.1-P Austin, Texas February 6, 2019 194 CITY OF ROUND ROCK, TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended September 30,2018 I. Summary of Auditor's Results Financial Statements Type of auditor's report issued Unmodified Internal control over financial reporting: Material weakness(es) identified? No Significant deficiency (ies) identified that are not considered to be material weaknesses? None reported Noncompliance material to the financial statements noted? No Federal Awards Internal controls over major programs: Material weakness(es) identified? No Significant deficiency(ies) identified that are not considered to be material weaknesses? None reported 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 2 CFR 200.516(a)? No Identification of Major Programs: Name of Federal Program or Cluster CFDA Number CDBG- Entitlement Grants Cluster: Community Development Block Grants/Entitlement Grants 14.218 Federal Transit Cluster: Federal Transit Formula Grants 20.207 Medicaid Cluster: Texas Targeted Opioid Response(TTOR) 93.778 Dollar threshold used to distinguish Between Type A and Type B federal programs: $750,000 Auditee qualified as low-risk auditee? Yes 195 CITY OF ROUND ROCK, TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended September 30, 2018 II. Financial Statement Findings None Noted III. Federal Award Findings and Questioned Costs None Noted 196