Comprehensive Annual Financial Report 2020

redoaktx

The Comprehensive Annual Financial Report includes all funds of the city. This report includes all government activities, organizations, and functions for which the City is financially accountable.

City of Red Oak, Texas

Comprehensive Annual Financial

Report

for the Fiscal Year Ended

September 30, 2020

Prepared by the Finance Department


CITY OF RED OAK, TEXAS

YEAR ENDED SEPTEMBER 30, 2020

TABLE OF CONTENTS

Page

Number

INTRODUCTORY SECTION

Letter of Transmittal .....................................................................................................

GFOA Certificate of Achievement ....................................................................................

Organizational Chart .....................................................................................................

City Officials .................................................................................................................

i – vi

vii

viii

ix

FINANCIAL SECTION

Independent Auditors’ Report ......................................................................................... 1 – 2

Management Discussion and Analysis .............................................................................. 3 – 10

Basic Financial Statements

Government-Wide Financial Statements:

Statement of Net Position ......................................................................................... 11

Statement of Activities ............................................................................................. 12 - 13

Fund Financial Statements:

Governmental Funds

Balance Sheet ...................................................................................................... 14 - 15

Reconciliation of the Balance Sheet of Governmental

Funds to the Statement of Net Position ................................................................. 16

Statement of Revenues, Expenditures, and

Changes in Fund Balances .................................................................................. 17 - 18

Reconciliation of Revenues, Expenditures and Changes

In Fund Balances – Governmental Funds to the

Statement of Activities ....................................................................................... 19

Proprietary Funds

Statement of Net Position ......................................................................................... 20

Statement of Revenues, Expenses, and

Changes in Fund Net Position ................................................................................. 21

Statement of Cash Flows .......................................................................................... 22 - 23

Notes to the Financial Statements ................................................................................... 24 – 44


Required Supplementary Information

Schedule of Revenues, Expenditures, and Changes in

Fund Balance – Budget (Budget Basis) and Actual – General Fund .............................. 45

Schedule of Revenues, Expenditures, and Changes in

Fund Balance – Budget (Budget Basis) and Actual – Industrial

Development Corporation ...................................................................................... 46

Schedule of Revenues, Expenditures, and Changes in

Fund Balance – Budget (Budget Basis) and Actual – Economic

Development Corporation ...................................................................................... 47

Schedule of Changes in Net Pension

Liability and Related Ratios .................................................................................... 48 - 49

Texas Municipal Retirement System –

Schedule of Employer Contributions ........................................................................ 50 – 51

Schedule of Changes in Total OPEB

Liability and Related Ratios .................................................................................... 52

Combining Schedules

Combining Balance Sheet – Nonmajor Governmental Funds ............................................ 53

Combining Schedule of Revenues, Expenditures, and

Changes in Fund Balances – Nonmajor Governmental Funds ......................................... 54

Schedule of Revenues, Expenditures, and Changes in

Fund Balance – Budget (Budget Basis) and Actual – Tourism ........................................ 55

Schedule of Revenues, Expenditures, and Changes in

Fund Balance – Budget (Budget Basis) and Actual – Debt Service ................................. 56

STATISTICAL SECTION

Table

Net Position by Component .............................................................................. 1 57 – 58

Changes in Net Position ................................................................................... 2 59 – 62

Fund Balances of Governmental Funds .............................................................. 3 63 – 64

Governmental Activities Tax Revenues by Source ............................................... 4 65 – 66

Assessed Value and Actual Value of Taxable Property .......................................... 5 67 - 68

Direct and Overlapping Property Tax Rates ........................................................ 6 69

Principal Property Tax Payers ........................................................................... 7 70

Property Tax Levies and Collections .................................................................. 8 71

Ratios of General Outstanding Debt .................................................................. 9 72 - 74

Ratios of General Bonded Debt ......................................................................... 10 75 - 76

Direct and Overlapping Governmental Activities Debt .......................................... 11 77

Legal Debt Margin Information ......................................................................... 12 78

Pledge-Revenue Coverage ............................................................................... 13 79


Demographic and Economic Statistics ................................................................ 14 80

Principal Employers ......................................................................................... 15 81

Full-time Equivalent City Employees by Function and Program .............................. 16 82 - 83

Operating Indicators by Function/Program ......................................................... 17 84 - 85

Capital Asset Statistics by Function/Program ...................................................... 18 86

COMPLIANCE SECTION

Independent Auditor’s Report on Internal Control Over Financial Reporting

and on Compliance and Other Matters Based on an Audit of Financial

Statements Performed in Accordance with Government Audit Standards ........................... 87 – 88

Schedule of Findings and Responses ............................................................................ 89


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INTRODUCTORY SECTION


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May 10, 2021

To the Honorable Mayor, City

Council and Citizens of the City of

Red Oak, Texas

Submitted herewith is the Comprehensive Annual Financial Report (the “Annual Report”) of the City of Red Oak

(the “City”) for the fiscal year ended September 30, 2020. Responsibility for the accuracy of the data and the

completeness and fairness of the presentation, including disclosures, rests with the City. To the best of our

knowledge and belief, the enclosed data is accurate in all material respects. The data is reported in a manner

designed to present fairly the financial position and results of operations of the various funds of the City. To

enable the reader to gain an understanding of the City’s financial activities, all necessary disclosures have been

included.

The Annual Report is prepared in accordance with generally accepted accounting principles (GAAP) in the United

States of America established by the Governmental Accounting Standards Board (GASB). The Annual Report is

presented in three sections: introductory, financial and statistical. The introductory section includes this

transmittal letter, the City’s organizational chart, and a list of principal officials. The financial section includes

the management’s discussion and analysis (MD&A), the government-wide and fund financial statements, notes

to basic financial statements, required supplemental information, other supplemental information, as well as

the independent auditor’s report on the basic financial statements. The Statistical section includes selected

financial and demographic information which is presented on a multi-year basis.

The MD&A is a narrative introduction, overview, and analysis to accompany the basic financial statements. The

MD&A can be found immediately following the independent auditor’s report. This transmittal is designed to

complement the MD&A and should be read in conjunction with it.

THE REPORTING ENTITY

The City was incorporated in 1849 under the general laws of the State of Texas. The City operates under a

council-manager form of government. The City provides a full range of municipal services authorized by statute

or charter. These services include police and fire protection, water and wastewater services, the construction

and maintenance of streets, infrastructure and other related facilities, code enforcement, building inspections,

parks and recreation, library, public improvements, planning and zoning, economic development, and general

administrative services.

The Annual Report includes all funds of the City. This report includes all government activities, organizations

and functions for which the City is financially accountable. The criteria used in determining activities to be

reported within the City’s basic financial statements are based upon and consistent with those set forth by the

GASB.

i


THE CITY

The City of Red Oak (the “City” or “Red Oak”) is a political subdivision and municipal corporation of the State,

duly organized and existing under the laws of the State, including the City’s Home Rule Charter. The City first

adopted its Home Rule Charter in 1997. The City operates under a Council/Manager form of government with

a City Council comprised of the Mayor and five Councilmembers. The Mayor and City Councilmembers are elected

for staggered three-year terms. The City Manager is the chief administrative officer for the City. The 2000

Census population for the City was 5,235, The 2010 Census population for Red Oak was 10,769, and North

Central Texas Council of Governments (NCTCOG) projects by the year 2030, Red Oak’s population will grow to

63,329. According to the U.S Census Bureau, as of September 30, 2020, the estimated population for Red Oak

was determined to be 14,732. The City covers approximately 15.22 square miles.

The City is located in northern Ellis County, 20 miles south of downtown Dallas and is served by a major

interstate highway I-35E bisecting the City, and I-20 located nine miles north. Red Oak is also bisected by state

highways 664 and 342 giving easy access in all directions. Red Oak is uniquely situated to provide easy

accessibility to the entire North Texas area. The close proximity to job opportunities in Dallas, Fort Worth and

the Mid-Cities continues to contribute to growth in the City. The City is a member of the Best-Southwest

Communities, which also consists of Cedar Hill, Desoto, Duncanville and Lancaster.

As a result of the exponential growth and development taking place in Red Oak and vicinity, the Texas

Department of Transportation (TxDoT) is in the process of improving the public transportation network.

Construction work has commenced on the improvements and widening to FM 664/Ovilla Road. These

improvements and widening include the expansion of FM 664/Ovilla Road to six lanes extending from I-45 to at

the City of Ferris to US 287 at its intersection with FM 64/Ovilla Road at the City of Waxahachie. In addition, an

overpass will be constructed along I-45 to the south of Ferris which will facilitate the flow of traffic along FM

664/Ovilla Road. Also, the FM 664/Ovilla Road overpass located at I-35E will be reconstructed to improve traffic

flows and increase the capacity of the overpass. This expansion and construction is necessary as current data

shows that the intersection of FM 664 and I-35E in Red Oak is currently one of the busiest intersections in Ellis

County.

Due to the growth and development of the Red Oak vicinity and the related traffic congestion, the long

anticipated South Loop 9 project will become a reality! To this end, TxDoT is in the process of acquiring the

right-of-way (ROW) for constructing Phase 1 of the roadway which will directly connect I-45 with I-35E. The

route for the South Loop 9 project will closely follow along the northern boundary line for Ellis County and the

southern boundary line for Dallas County.

Red Oak is a growing, thriving community with good challenges. The population is increasing and exceptional

quality homes and developments are being built in Red Oak to accommodate this growth. In addition, due to

the growth in the City and the surrounding area, retail development has been rising, and is expected to continue

to do so. The median household income for 2020 is $79,448, which is continuing to rise. Per HomeFacts.com,

Red Oak enjoys a low unemployment rate of 6.3% as compared to 8.8% in 2009. This unemployment rate is

lower than both the State of Texas and the US unemployment rates.

As the community grows, the need for City services continues to increase. Staffing levels have increased in

many areas, including in the police, fire, public works, and finance departments. This growth in staffing has

caused the need for expansion of City facilities. The City issued debt in Fiscal Year 2019. The City used part of

the debt proceeds to purchase a future site for the Municipal Center to meet this need to accommodate growth.

Growth within the city has caused property tax revenues to increase.

In Fiscal Year 2020, General Fund property tax revenues increased by over $691,000 from the previous year.

At the same time, sales taxes revenues increased in the General Fund by $432,852 because of growth in

population and retail services available within the community.

Growth in the city has also created the need for additional public infrastructure. More on this topic will be

included in Management’s Discussion and Analysis, which starts on page 3.

ii


EDUCATION

The Red Oak Independent School District (the “District”) has a total enrollment of approximately 5,900

students and consists of 1 high school serving grades 9 through 12; 1 middle school serving grades 6-8; and 5

elementary schools serving Pre-K through 5. The District employs 863 persons. Quality instruction is provided

by a qualified teaching staff, with a student-teacher ratio of 17:1. The District has many programs for students

that prepare them for the future, including dual credit classes to allow students to receive high school and

college credits at the same time.

Texas State Technical College - North Texas campus located in Red Oak (“TSTC North Texas”) features a

campus of more than 100,000 square feet that opened in September 2014. This campus houses many of TSTC's

high-tech, advanced workforce programs with state-of-the-art labs for students to develop skills that are critical

in the workplace. Located in the heart of Ellis County, this campus is ready to serve the businesses and students

of the Dallas-Fort Worth Metroplex.

The City is readily accessible to higher education facilities with many junior colleges, colleges and universities

within commuting distance. In addition, an adult education program is provided within the City in conjunction

with Navarro College, a two-year accredited, state-supported, community college with Ellis County district

campuses located in Waxahachie and Midlothian.

HOUSING – RESIDENTIAL DEVELOPMENT

Because Red Oak is strategically located within the Dallas-Fort Worth Motorplex, our community is a preferred

residential location for individuals and families. A number of new single family residential developments within

the Red Oak totaling over 2,431 new lots will be constructed over the next few years. These new residential

developments include: Camden Park of Red Oak (80 lots); Cole Manor (71 lots); Creek Bend (152 lots); Crystal

Lake (90 lots); Meadow Ridge (232 lots); Oakmont (518 lots); The Oaks (432 lots); Summerwood (41 lots);

and The Woods of Red Oak (132 lots). In addition, Legacy Oaks of Red Oak, a stratified senior living facility will

feature 20 single story cottages, 87 independent living units in a two-story structure, and 80 assisted living and

memory care units in a single-story structure. This activity is proven by the number of permits issued by the

Community Development Department. In Fiscal Year 2020, there were 291 residential building permits issued,

which was an increase of 94 permits from the previous year.

COMMERCIAL AND RETAIL DEVELOPMENT

In Fiscal Year 2020, there were 8 new commercial building permits issued, which was an increase of 2 permits

from the previous year. Building permit and inspections revenues increased by over $390,000 from the previous

year. New commercial construction in Fiscal Year 2020 included a new facility for Snap Fitness 24-7, La Quinta

del Sol Hotel, the Hamptons Event Venue and Soulman’s Bar-B-Que. Soulman’s Bar-B-Que is now sharing its

barbecue techniques and old family recipes with our residents of Red Oak. Soulman’s Bar-B-Que, which first

opened its doors on October 19, 1974, is located along the south side of FM 664/Ovilla Road at its intersection

with Austin Boulevard. The 3,000 square foot barbecue restaurant features abundant seating for 80 patrons.

Victron Group and B&B Theatres, the 6th largest theatre chain in North America, have partnered in the primary

anchor for Red Oak Legacy Square which will be the B&B Theaters Family Entertainment Center. This new

upscale, state-of-the-art theater complex will feature 12 theaters and some of B&B’s most innovative theatrical

concepts. The Grand Screen will be an unbelievable 70 feet wide, making it one of the largest screens in the

nation! The tranquility of Pearson Park and the serene shores of City Lake provide a picture-perfect opportunity

for Te’Jun the Texas Cajun Restaurant. The 8,000 square foot restaurant currently under construction with its

planned opening during the Summer in 2021, is located on approximately 4 acres along the west side of the I-

35E/US 77 corridor. The 450-seat restaurant will feature the finest in Cajun-style seafood for our Red Oak

residents and visitors. Te’Jun the Texas Cajun is widely renowned for its distinctive Cajun-style cuisine

throughout the North Central Texas and Central Texas Regions.

iii


INDUSTRY

During 2020, Compass Datacenters DFW III, LLC, completed its 40,000 square foot datacenter shell building for

facilitating the first phase of development: “Red Oak 1.” Compass Datacenters Red Oak features a 252 Megawatt

campus that sits on 165 acres along Houston School Road. This 165 acre campus will feature an on-site substation

and is serviced by multiple fiber paths to offer substantial room for future growth. Compass Datacenters

Red Oak plans future expansion on its 165 acre campus to include multiple datacenter buildings for globally

competitive high technology corporations.

In 2012, Triumph Aerospace Structures, LLC initially opened its one million square foot manufacturing facility in

Red Oak. During 2020, Triumph Aerospace Structures capitalized on its successfully partnership with Boeing

Defense, Space & Security and its global supply-chain partners whenever it commenced the construction and

first delivery of the $9.2 billion T-7A project for the United States Department of Defense. The T-7A project

could mean up to 900 new direct and indirect aircraft manufacturing jobs for the Triumph Aerospace Structures

- Red Oak facility.

EDUCATION AND INDUSTRY PARTNERSHIPS

During FY 2018-2019, Bombardier acquired the Global 7500 wing manufacturing operation from Triumph. Since

this acquisition, during 2020 Bombardier partnered with Texas State Technical College North Texas – Red Oak

campus (“TSTC”) to develop a new aviation apprenticeship training program. The two-year Bombardier Aviation

Apprenticeship Program (BAAP) will offer students a chance to enter the high-tech aerospace sector with no

formal qualifications. It challenges them to present a winning attitude and develop mechanical dexterity and

sound logic skills to be able to pass an entry-level aptitude test. In turn, Bombardier and TSTC will offer expert

training in conjunction with TSTC’s excellent facilities, allowing students to benefit at no cost from industrytailored

modules, experienced instructors, tools and equipment and financial support.

In November 2020, the two-year Bombardier Aviation Apprenticeship Program (“BAAP”) was officially certified

by the United State Department of Labor (“USDOL”). The official USDOL certification allows the BAAP to become

a grassroots pipeline to attract quality individuals from across the United States to come to Red Oak and receive

aerospace training through TSTC for a future career path with good-paying jobs at Bombardier in Red Oak.

During 2020, the Red Oak Industrial Development Corporation (“ROIDC”) partnered with Texas State Technical

College North Texas in red Oak (“TSTC”) to provide scholarships that are available to Red Oak students planning

to attend TSTC in Red Oak. The ROIDC scholarship for TSTC will provide financial assistance to Red Oak students

for attaining upward mobility and improving the quality of life for our students and their families. In addition,

the TSTC North Texas campus provides our students the opportunity to receive state-of-the-art higher education

technical and vocational workforce training in Red Oak so they may be better prepared for success well into the

future. The ROIDC scholarship will be available to students living within Red Oak’s city limits and may be used

for TSTC school-related expenses. The recipient must attend the North Texas campus to be eligible.

Students may be traditional or non-traditional students and attend school on a full time or part time basis. The

scholarship is open to new and current students and all students must be in good academic and behavioral

standing to be eligible. The college’s staff will award the scholarship, which may be presented to recipients in

multiple semesters. Scholarships in the amount of $1,000 will be awarded to students.

SERVICES AVAILABLE WITHIN THE COMMUNITY

Six banks presently offer quality services to the citizens of Red Oak and the surrounding areas.

Red Oak residents are indeed fortunate that world-class hospitals and healthcare centers are readily available.

Conveniently located within a 10-minute drive time at the intersection of IH-35E and US 287, the Baylor Scott

& White Medical Center - North Texas provides superior medical and special services from allergists to urologists.

In addition, Baylor Medical Center at Lancaster, located 6 miles away, and Methodist Medical Center, a major

healthcare facility in Dallas County is located 20 miles away. Hospital Corporation of America/Arlington Medical

Center is currently constructing a 20,400 square foot multiple component health care facility which will include

an emergency room, women’s services, imaging, and internal medicine.

Three hotels are available to visitors to the Red Oak and North Texas area.

The City operates two municipal parks and a nature center. Several lakes are within an hour’s drive of the City.

Joe Pool Lake is located 30 minutes away and is a multi-purpose water resource project covering approximately

7,500 acres. Cedar Hill State Park adjoins Joe Pool Lake with abundant camping, hiking, and picnicking facilities.

Several religious faiths are represented in the nine churches established in the City.

iv


The Metroplex offers a wide array of entertainment, cultural and sports activities, including the Dallas Zoo, Fort

Worth Zoo, Dallas World Aquarium, Six Flags Over Texas, Dallas Symphony Orchestra, Dallas Theater Center,

and many museums. Within driving distance, professional and college football, baseball, basketball, hockey,

and soccer games are available for area residents to attend.

Numerous other services are available to the citizens of Red Oak and the surrounding area, as well. This growing

community has something for everyone. The City Council works with staff and community leaders, striving to

anticipate and meet the needs of all residents in order to ensure that once they arrive in Red Oak, they will want

to stay!

FINANCIAL PLANNING AND FISCAL POLICIES

The City continues to update the master plans to guide the City’s long-term growth and financial planning.

Significant master planning activity includes: 1) Comprehensive land use and thoroughfare plan, 2) Parks master

plan, and a 3) Strategic Plan.

Utilizing these plans, the City annually updates a rolling five-year capital improvement schedule. The City also

maintains a police and fire department staffing plan as part of the strategic plan. These plans are used to

determine budget allocations to the various departments and activities of the City.

The City’s fiscal management policy requires a minimum fund balance for numerous funds. The fund balance

reserve plan is guiding the City to meeting the fund balance reserve plans for each of the funds.

ACCOUNTING SYSTEM AND BUDGETARY CONTROL

City management is responsible for establishing and maintaining an internal control structure designed to ensure

that the assets of the City are protected from loss, theft, or misuse. Management must also ensure that adequate

accounting data is compiled to allow for the preparation of financial statements in conformity with GAAP. The

internal control structure designed to provide reasonable, but not absolute, assurance that these objectives are

met. The concept of reasonable assurance recognizes that (1) the cost of the control should not exceed the

benefits likely to be derived, and (2) the valuation of costs and benefits requires estimates and judgments by

management. All internal control evaluations occur within the above framework.

The City’s accounting records for general governmental operations are maintained on a modified accrual basis,

with revenues recognized when measurable and available, and expenditures recorded when the liability is

incurred. Proprietary operations are maintained on full accrual basis.

The objective of budgetary controls is to ensure compliance with legal provisions contained in the annual budget

approved by the City Council. Activities of the general fund, special revenue funds and debt service funds are

included in the annual budget. The budget is developed and controlled at the department level although

appropriations are set at the fund level, and encumbrances are entered at the time a purchase order is issued.

Outstanding encumbrance’s lapse at fiscal year-end, and the subsequent year’s budget must absorb the

expenditures when incurred. Separate multi-year budgets are developed for the capital projects funds.

OTHER INFORMATION

Independent Audit:

The City Charter requires an annual audit of the accounting financial records and transactions of all departments

of the City. The City charter specifies that such audit be conducted by independent auditors selected by the City

Council. Pattillo, Brown & Hill, L.L.P. was selected by the City Council to conduct this year’s audit. The

independent auditor’s report on the basic financial statements is included in the financial section of this report.

Certificate of Achievement:

This is the eighth year the City has submitted the comprehensive annual financial report (“Annual Report”) to

the Government Finance Officers Association of the United States and Canada (GFOA) to be reviewed for the

Certificate of Achievement. The Certificate of Achievement is a prestigious national award that recognizes

conformance with the highest standards for preparation of state and local government financial reports.

v


In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and

efficiently organized Annual Report, whose contents conform to program standards. The Annual Report must

satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year. The City has received the Certificate of Achievement

for the Fiscal Years 2012 - 2019. We believe the current report continues to conform to the Certificate of

Achievement program requirements, and we are submitting the 2020 Annual Report to GFOA to determine its

eligibility for another certificate.

ACKNOWLEDGEMENTS

The preparation of this report could not have been accomplished on a timely basis without the dedication and

efficiency of the entire staff of the Finance Department. We would like to express our appreciation to all City

employees who assisted and contributed to its presentation.

Additionally, we would also like to thank the members of the City Council for their interest and support in

planning and conducting the financial operations of the City in a responsible and progressive manner.

Respectfully,

Gloria Platt, CGFO

Director of Finance

Sidney Smith

Assistant Director of Finance

vi


CITY OF RED OAK, TEXAS

CITY OFFICIALS

Mark L. Stanfill, DVM

Mayor

Gordon Toney

Mayor Pro-Tern

Ben Goodwyn

Council Member — Place 2

William L. Drake

Council Member — Place 3

Ron Wilson

Council Member — Place 4

Michael Braly

Council Member — Place 5

City Manager

Todd Fuller

Assistant City Manager

Jonathan Phillips

ix


Government Finance Officers Association

Certificate of

Achievement

for Excellence

in Financial

Reporting

Presented to

City of Red Oak

Texas

For its Comprehensive Annual

Financial Report

for the Fiscal Year Ended

September 30, 2019

vii


CITIZENS

City Attorney

Robert Hager

City Council

Municipal Judge

Scott Kurth

City Manager

Todd Fuller

Assistant City Manager

Jonathan Phillips

Jonathan

Phillips,

Assistant City

Manager

Garland Wolf,

Police Chief

Ben Blanton,

Fire Chief

Caryn Stevens,

Interim City

Secretary

Lee McCleary,

Director of

Economic

Development

Ben Hartman,

City Engineer

Kyle Kelley,

Director of

Parks &

Recreation

Logan Ragsdale,

Director of

Library Services

Administration

Police

Department Fire Department City Secretary

Animal Control

Emergency

Communication

Tourism

Economic

Development

Industrial

Development

Engineering

Code and

Development

Services

Parks &

Recreation

Library Services

Gloria Platt,

Director of

Finance

Scott Williams,

Director of

Public Works

Amanda

Monsivais,

Director of

Human

Resources

John Binford,

Director of

Information

Technology

Finance

Public Works -

Streets

Human

Resources

Information

Technology

Utility Billing

Water & Sewer

Utilities

Municipal Court

Storm Drainage

viii


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FINANCIAL SECTION


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INDEPENDENT AUDITOR’S REPORT

Honorable Mayor and

Members of the City Council

City of Red Oak, Texas

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the businesstype

activities, each major fund, and the aggregate remaining fund information of City of Red Oak, Texas, as

of and for the year ended September 30, 2020, and the related notes to the financial statements, which

collectively comprise the City of Red Oak, Texas’ basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

City of Red Oak, Texas’s management is responsible for the preparation and fair presentation of these

financial statements in accordance with accounting principles generally accepted in the United States of

America; this includes the design, implementation, and maintenance of internal control relevant to the

preparation and fair presentation of financial statements that are free from material misstatement, whether

due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We

conducted our audit in accordance with auditing standards generally accepted in the United States of America

and the standards applicable to financial audits contained in Government Auditing Standards, issued by the

Comptroller General of the United States. Those standards require that we plan and perform the audit to

obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial statements. The procedures selected depend on the auditor’s judgment, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In

making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and

fair presentation of the financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal

control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of

accounting policies used and the reasonableness of significant accounting estimates made by management, as

well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our audit opinions.

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 of Red Oak, Texas, as of September 30, 2020, and the

respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in

accordance with accounting principles generally accepted in the United States of America.

1


Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the

management’s discussion and required supplementary information, as listed in the table of contents, be

presented to supplement the basic financial statements. Such information, although not a part of the basic

financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an

essential part of financial reporting for placing the basic financial statements in an appropriate operational,

economic, or historical context. We have applied certain limited procedures to the required supplementary

information in accordance with auditing standards generally accepted in the United States of America, which

consisted of inquiries of management about the methods of preparing the information and comparing the

information for consistency with management’s responses to our inquiries, the basic financial statements, and

other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion

or provide any assurance on the information because the limited procedures do not provide us with sufficient

evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that

collectively comprise the City of Red Oak, Texas’ basic financial statements. The introductory section,

combining and individual nonmajor fund financial statements and schedules, and statistical section, are

presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining and individual nonmajor fund financial statements and schedules are the responsibility

of management and were derived from and relate directly to the underlying accounting and other records

used to prepare the basic financial statements. Such information has been subjected to the auditing

procedures applied in the audit of the basic financial statements and certain additional procedures, including

comparing and reconciling such information directly to the underlying accounting and other records used to

prepare the basic financial statements or to the basic financial statements themselves, and other additional

procedures in accordance with auditing standards generally accepted in the United States of America. In our

opinion, the combining and individual nonmajor fund financial statements and schedules 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 May 10,

2021, on our consideration of the City of Red Oak, Texas’ internal control over financial reporting and on our

tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other

matters. The purpose of that report is to describe the scope of our testing of internal control over financial

reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of

the City of Red Oak, Texas’ 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

of Red Oak, Texas’ internal control over financial reporting and compliance.

Waco, Texas

May 10, 2021

2


MANAGEMENT’S DISCUSSION AND ANALYSIS

As management of the City of Red Oak, we offer readers of the City's financial statements this narrative

overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2020. We

encourage readers to consider the information presented here in conjunction with additional information

that we have furnished in our letter of transmittal, which can be found preceding this report.

FINANCIAL HIGHLIGHTS

• On a government-wide basis, the assets and deferred outflows of resources of the City exceeded its

liabilities and deferred inflows of resources at the close of the most recent fiscal year by

$36,773,822 (Net Position). Of this amount, $8,943,287 (unrestricted net position) may be used to

meet the government's ongoing obligations to citizens and creditors.

• On a government-wide basis, the City's total net position increased by $13,862,795. This increase

is attributable largely to capital grants and contributions of $3.5 million and the sale of land held for

sale in the Industrial Development Corporation in the amount of $7.5 million.

• As of the close of the current fiscal year, the City's governmental funds reported combined ending

fund balances of $39,493,996. Approximately 10.5% of this total amount, $4,154,178 is unassigned

and available for use at the City's discretion.

• At the end of the current fiscal year, unreserved fund balance for the General Fund was $4,154,178

or 32.2% of the total General Fund expenditures.

• The City's outstanding debt increased by $6,137,690 or 14.5% during the current fiscal year due to

the issuance of bonds for various capital improvements, primarily including construction and

resurfacing of roads, park improvements, and purchase and improvements for municipal buildings.

OVERVIEW OF THE FINANCIAL STATEMENTS

This discussion and analysis is intended to serve as an introduction to the City's basic financial statements.

The City's basic financial statements are comprised of three components: 1) government-wide financial

statements, 2) fund financial statements, and 3) notes to the financial statements. This report also

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'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, deferred outflows,

liabilities and deferred inflows, with the difference between these reported as Net Position. Over time,

increases or decreases in Net Position may serve as a useful indicator of whether the financial position of

the City is improving or deteriorating.

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 when the underlying event giving rise to

the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are

reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g.,

uncollected taxes and earned but unused compensated absences).

3


Both of the government-wide financial statements distinguish functions of the City that are principally

supported by taxes and intergovernmental revenues (governmental activities) from 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, cultural and

recreational, public works, industrial development and economic development. The business-type activities

of the City include utility operations. The Red Oak Economic Development Corporation and Red Oak

Industrial Development Corporation, although legally separate, functions for all practical purposes as a

department of the City, and therefore has been included as an integral part of the primary government.

The government-wide financial statements can be found on pages 11-13 of this report.

Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over

resources that have been segregated for specific activities or objectives. The City, like other state and local

governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal

requirements. All of the funds of the City can be divided into two categories- governmental funds and

proprietary funds.

Governmental Funds. Governmental funds 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 current

sources and uses of spendable resources, as well as on balances of spendable 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 funds 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 government's near-term financing

decisions. Both the governmental fund balance sheet and the governmental fund statements of

revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this

comparison between governmental funds and governmental activities.

The City maintains nine individual governmental funds. Information is presented separately in the

Governmental Fund Balance Sheet and in the Governmental Fund Statement of Revenues, Expenditures,

and Changes in Fund Balances for the General, Industrial Development Corporation, and Economic

Development Corporation funds, all of which are considered to be major funds. Data from the other five

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 this report.

Annual appropriated budgets are adopted for the General Fund, Industrial Development Corporation

and the Economic Development Corporation. A budgetary comparison schedule has been provided for

the General Fund Industrial Development Corporation and the Economic Development Corporation, to

demonstrate compliance with these budgets.

The basic governmental fund financial statements can be found on pages 14-19 of this report.

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 two enterprise funds to account

for its utility operations, one for water and sewer utilities and the other is for storm water utilities.

Proprietary funds provide the same type of information as the government-wide financial statements, only

in more detail.

The basic proprietary fund financial statements can be found on pages 20-23 of this report.

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. The notes to

the financial statements can be found on pages 24-44 of this report.

4


Other Information. In addition to the basic financial statements and accompanying notes, this report

also presents combining statements referred to earlier in connection with non-major governmental funds.

Combining and individual statements and schedules can be found on pages 53-54 of this report.

GOVERNMENT-WIDE FINANCIAL ANALYSIS

As noted earlier, Net Position may serve over time as a useful indicator of a government's financial

position. In the case of the City, assets and deferred outflows exceeded liabilities and deferred inflows by

$36,773,822 as of September 30, 2020.

Net Position

Governmental Activities Business-type Activities Totals

2020 2019 2020 2019 2020 2019

Current and other assets $ 41,375,373 $ 22,563,412 $ 5,838,395 $ 5,137,165 $ 47,213,768 $ 27,700,577

Capital assets 24,367,697 22,568,000 16,616,674 16,744,592 40,984,371 39,312,592

Total assets 65,743,070 45,131,412 22,455,069 21,881,757 88,198,139 67,013,169

Deferred outflows of

resources 506,790 828,933 581,175 605,448 1,087,965 1,434,381

Long-term liabilities 30,431,595 23,668,997 15,978,644 16,633,248 46,410,239 40,302,245

Other liabilities 3,778,375 3,270,848 1,979,329 1,948,055 5,757,704 5,218,903

Total liabilities 34,209,970 26,939,845 17,957,973 18,581,303 52,167,943 45,521,148

Deferred inflows of

resources 295,263 14,735 49,076 640 344,339 15,375

Net position:

Net investment

in capital assets 3,113,430 ( 1,441,691)

833,237 892,476 3,946,667 ( 549,215)

Restricted 23,330,619 18,622,126 553,249 - 23,883,868 18,622,126

Unrestricted 5,300,578 1,825,330 3,642,709 3,012,786 8,943,287 4,838,116

Total net position $ 31,744,627 $ 19,005,765 $ 5,029,195 $ 3,905,262 $ 36,773,822 $ 22,911,027

A portion of the City's Net Position, $3,946,667 or 10.7%, reflects its investments in capital assets (e.g.,

land, construction in progress, buildings, improvements, machinery and equipment and infrastructure),

less any debt used to acquire those assets that is still outstanding. The City uses these capital assets to

provide service to citizens; consequently, these assets are not available for future spending. Although the

City's investment in its 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 ($23,883,868 or 64.9%) represents resources that are

subject to external restriction on how they may be used. The remaining balance of unrestricted Net

Position ($8,943,287 or 24.3%) may be used to meet the government's ongoing obligations to citizens and

creditors.

At the end of the current fiscal year, the City is able to report a positive Net Position, both for the

government as a whole, as well as for its separate categories - governmental activities and business-type

activities.

Analysis of the City's Operations: The following table provides a summary of the City's operations for

the year ended September 30, 2020. On a government-wide basis, governmental activities increased the

City's Net Position by $12,738,862 and business-type activities increased the City's Net Position by

$1,123,933.

5


Changes in Net Position

Governmental Activities Business-type Activities Totals

2020 2019 2020 2019 2020 2019

Revenues:

Program revenues:

Charges for services $ 9,851,729 $ 1,794,898 $ 8,715,261 $ 8,009,066 $ 18,566,990 $ 9,803,964

Operating grants and

contributions 1,372,677 575,728 - - 1,372,677 575,728

Capital grants and

contributions 3,519,935 - 1,104,544 - 4,624,479 -

General revenues:

Property tax 8,000,818 6,917,413 - - 8,000,818 6,917,413

Sales tax 5,584,807 4,693,893 - - 4,693,893

Franchise tax 742,438 777,141 - - 742,438 777,141

Hotel occupancy tax 162,389 195,732 - - 162,389 195,732

Alcoholic beverage tax 9,878 13,950 - - 9,878 13,950

Investment earnings 332,046 353,138 8,215 14,194 340,261 367,332

Miscellaneous 56,382 152,782 - - 56,382 152,782

Gain on sale of assets - - 108,436 - 108,436 -

Total revenues 29,633,099 15,474,675 9,936,456 8,023,260 39,569,555 23,497,935

Expenses:

General government 1,876,147 1,667,818 - - 1,876,147 1,667,818

Public safety 8,680,540 9,257,914 - - 8,680,540 9,257,914

Culture and recreation 848,530 427,254 - - 848,530 427,254

Public works 2,774,598 1,847,970 - - 2,774,598 1,847,970

Industrial development 1,104,636 155,888 - - 1,104,636 155,888

Economic development 58,940 191,916 - - 58,940 191,916

Interest on long-term debt 1,550,846 454,153 - - 1,550,846 454,153

Utility - - 8,488,858 7,505,082 8,488,858 7,505,082

Storm water - - 323,665 333,913 323,665 333,913

Total expenses 16,894,237 14,002,913 8,812,523 7,838,995 25,706,760 21,841,908

Change in net position 12,738,862 1,471,762 1,123,933 184,265 13,862,795 1,656,027

Net position, beginning 19,005,765 17,534,003 3,905,262 3,720,997 22,911,027 21,255,000

Net position, ending $ 31,744,627 $ 19,005,765 $ 5,029,195 $ 3,905,262 $ 36,773,822 $ 22,911,027

FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS

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, unreserved fund balance may serve as a useful measure of a

government's net resources available for spending at the end of the fiscal year.

As of the end of the current fiscal year, the City's governmental funds reported combined ending fund

balances of $39,493,996. Approximately 10.5% of this total amount ($4,154,178) is unassigned fund

balance. The remainder of the fund balance is not available for new spending because it has already been

restricted or assigned for other purposes.

The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund

balance of the General Fund was $4,154,178, while total fund balance reached $4,955,029. As a measure

of the General Fund's liquidity, it may be useful to compare both unassigned fund balance and total fund

balance to total fund expenditures. Unassigned fund balance represents 32.2% of total General Fund

expenditures, while total fund balance represents 38.4% of that same amount.

The fund balance of the City's General Fund has a net increase of $1,876,247 during the current fiscal year

adjustment. The increase is attributable to increases in property taxes, sales taxes, and licenses in

permits. Property taxes and sales tax increased $1.1 million despite economic shutdowns caused by the

COVID-19 pandemic. Licenses and permits increased $397 thousand due to continued growth in the area.

Expenditures in the general fund increased $1.3 million, offsetting some of the increases in revenues.

Increases in expenditures were mainly caused by an increase to Culture and recreation expenses of

$430,000 due to the addition of the Parks Department including personnel, benefits, general supplies and

maintenance costs, an increase to Public Works and Engineering expenses in contractual services, and

increases to capital expenses of $100,000.

6


The Industrial Development Corporation fund has a total fund balance of $12,424,092. The net increase

in fund balance during the current year in the Industrial Development Corporation fund was $4,358,333

and mostly attributable to the sale of land with net gain of $7.5 million, offset by transfers out of $3

million.

The Economic Development Corporation fund has a total fund balance of $13,329,480. The net increase in

fund balance during the current year in the Economic Development Corporation fund was $8,014,612. The

increase is largely attributable to the issuance of Sales Tax Revenue Bonds, Series 2019A and 2019B, in the

amounts of $2.9 million and $5.7 million, respectively.

The Debt Service fund ended the year with total fund balance of $106,055, an increase of $20,414. The

increase was caused by property tax revenues slightly exceeding debt service requirements for the year.

The 2019 CO Bond Fund has a total ending fund balance of $4,329,883, a decrease of $1,017,335. The

decrease was caused by current year capital expenditures of $1.1 million for the improvements to the future

City municipal building and the construction of a sports complex exceeding investment income earned.

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 two enterprise funds were

previously combined on the financial statements but were separated this year to more closely align with

internal reporting.

Unrestricted Net Position of the Utility Fund at the end of the year amounted to $3,168,410. Net Position

increased by a net amount of $998,621. The increase is caused by capital contributions of $1.1 million,

which offset an operating loss of $93 thousand.

Unrestricted Net Position of the Storm Water Fund at the end of the year amounted to $474,299. Net

Position increased by $125,312. The fund experienced operating income of $31 thousand and nonoperating

revenues of $95 thousand.

General Fund Budgetary Highlights - Actual revenues collected exceeded management's original

estimate of the General Fund's revenues by $1,320,139, mostly caused by larger than expected tax

revenues and licenses and permits. Revenue budget amendments during the year included an increase

to fire inspection fee revenue, fire department donations and miscellaneous revenues. Expenditures were

less than appropriations by $1,671,045 due to reduced personnel and benefits costs due to staff

turnovers during the year, reduced paper and supplies cost due to implementation of electronic

processes, reduced training costs related to COVID-19 restrictions, delays to capital spending as well as

an overall effort by all departments to reduce spending due to the unknowns related to COVID-19. These

were offset some by an increase to public safety expenses in response to COVID-19. Significant budget

amendments included increases to public safety vehicle maintenance, supplies, personal protective

equipment, medical supplies and technology costs.

CAPITAL ASSETS

The City's investment in capital assets for its governmental and business-type activities as of September

30, 2020 amounts to $24,367,697 and $16,616,674, respectively (net of accumulated depreciation). This

investment in capital assets includes land, construction in progress, buildings, improvements,

machinery and equipment, and infrastructure.

Significant additions to capital assets included:

• Purchases of land for $590 thousand

• Increases in construction in progress of $1.4 million

• Infrastructure and improvements of $4.1 million

7


Governmental Activities Business-type Activities Totals

2020 2019 2020 2019 2020 2019

Land $ 1,882,695 $ 3,470,485 $ 1,241,293 $ 1,241,293 $ 3,123,988 $ 4,711,778

Construction in progress 2,941,345 1,543,201 404,939 397,344 3,346,284 1,940,545

Buildings 8,258,310 8,163,080 101,181 101,181 8,359,491 8,264,261

Improvements 398,358 398,358 29,753,985 28,649,441 30,152,343 29,047,799

Machinery and equipment 11,036,305 10,943,248 2,156,708 2,141,494 13,193,013 13,084,742

Infrastructure 16,476,752 13,436,443 - - 16,476,752 13,436,443

Accumulated depreciation ( 16,626,068) ( 15,386,815) ( 17,041,432) ( 15,786,161) ( 33,667,500) ( 31,172,976)

Total $ 24,367,697 $ 22,568,000 $ 16,616,674 $ 16,744,592 $ 40,984,371 $ 39,312,592

Additional information on the City of Red Oak capital assets can be found in note V in the notes to the

financial statements.

LONG-TERM DEBT

At the end of the current fiscal year, the City had long-term debt obligations as follows. The full

amount of bonded debt is backed by the full faith and credit of the government.

Governmental Activities Business-type Activities Totals

2020 2019 2020 2019 2020 2019

Certificates of obligation $ 11,696,000 $ 14,149,000 $ 3,146,000 $ 3,407,000 $ 14,842,000 $ 17,556,000

General obligations 5,335,000 3,770,000 12,400,000 13,925,000 17,735,000 17,695,000

Revenue bonds 11,110,000 2,937,000 - - 11,110,000 2,937,000

Tax notes 1,350,000 1,020,000 419,000 73,000 1,769,000 1,093,000

Premiums 1,026,537 813,628 1,181,654 594,457 2,208,191 1,408,085

Note payable - 866,062 - - - 866,062

Compensated absences 754,974 740,824 32,872 18,376 787,846 759,200

Total $ 31,272,511 $ 24,296,514 $ 17,179,526 $ 18,017,833 $ 48,452,037 $ 42,314,347

Additional information on the City of Red Oak long term-debt can be found in note VII in the notes to

the basic financial statements.

ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES

In the fiscal year 2021 Budget, General Fund revenues are budgeted to increase by 0.15% from the

fiscal year 2020 amended budget with ad valorem taxes making up 46% of General Fund

budgeted revenues. Certified assessed valuations, including estimated values on properties under

protest, increased 11.6% for the fiscal year 2021 budget from fiscal year 2020's values. The Fiscal

Year 2021 budget was based on a property tax rate of 0.703645 per $100 of assessed value with

0.549873 for operations and 0.153772 for interest and principal on outstanding debt. Sales taxes

are the second highest revenue source making up 17.5% of budgeted revenues and are

conservatively budgeted to remain flat from fiscal year 2020.

There was no rate increase budgeted for Water and Sewer in the fiscal year 2021 budget. A decrease

of 1.16% in Water and Sewer revenues from the fiscal year 2020 amended budget is budgeted in

fiscal year 2021 due to more conservative projections for water collections and a decrease to the use

of fund balance budgeted in fiscal year 2021.

The state and local economy in this area continues to boom. Red Oak is poised to attract new retail and

industrial development. The City's proximity to the DFW Metroplex and presence on 1-35E, along with the

availability of quality retail and industrial property locations, ensure that the economic outlook for Red Oak

will remain good for many years to come. Red Oak still has ample space available for future expansions in

all sectors of the economy.

In the Fiscal Year 2021 budget, all funds were presented with balanced budgets. Revenue estimates and

expenses were conservative and consistent with established policies. As is the norm, the budget for the

upcoming year sets a foundation for prudent fiscal management of City operations for the coming years and

ensures that the City will have the tools to achieve the City Council's goals.

8


BUILDING FOR THE FUTURE

The City of Red Oak is creating a solid foundation for the future. The foundation is one that is driven by

community needs and Council's vision of the future. The first step is to identify the goals that can guide

policy makers and decision makers over the long-term. The City Council has identified critical goals to

establish that foundation through decisions and the Strategic Planning process. The Strategic Planning Goals

are outlined below.

• Enhance and Maintain Public Safety

• Enhance the Quality of life through Parks and other projects

• Improve the City's Infrastructure

• Enhance Economic Development

• Develop, Retain and Attract Quality Staff

• Improve long-term Financial Sustainability

These goals were the foundation for the Fiscal Year 2021 Budget. These goals serve as a guide to future

budgets and a new era of economic stability. How we spend our money today will impact future citizens of

Red Oak.

The City is working to update the master plans to guide the City's long-term growth and financial

planning. Significant master planning activity includes: 1) Comprehensive land use and thoroughfare plan,

2) Parks master plan, and 3) Strategic Plan. Utilizing these plans, the City annually updates a rolling fiveyear

capital improvement schedule. The City also maintains a police and fire department staffing plan as part

of the strategic plan. These plans were used to determine budget allocations to the various departments and

activities of the City.

Distinguished Budget Award

The City submitted its Annual Budget to the Government Finance Officer Association for the last five

consecutive years and has received the Distinguished Budget Presentation Award for each year. The award

is valid for one year only. The City has submitted the Annual Budget for the fiscal year beginning October 1,

2020 and plans to continue to submit for the award in future years. This represents the continued effort by

the City Council and staff to prepare a budget document that reflects the transparency and professionalism

of the City to its Citizens, bondholders, and rating agencies.

Bond Ratings The City's bond ratings provide evidence of its financial strength. Fitch Ratings has assigned a

rating of "AA", with a stable outlook, while Standard and Poors (S&P) has assigned a rating of "AA-", with a

stable outlook. These investment ratings indicate excellent investment quality. More information about

the City's bond ratings is included in the notes to the basic financial statements.

RESERVES

Operating Reserves Another measure of the City's financial strength is the level of its fund balance, or

operating reserves. Operating reserves are maintained by organizations to ensure services can be delivered

during economic downturns, to address unforeseen expenditures in the case of an emergency or other event,

and to take advantage of opportunities that may materialize outside of the budget processes. It is important

to maintain operating cash reserves so that service delivery will not be negatively impacted if the economy

takes a downturn, as 64% of the City's revenue is generated by sales taxes and property taxes. Policy

guidelines adopted by the Council require reserve fund balances to be maintained at 30 days operating

expenditures. This requirement was met, and exceeded, during Fiscal Year 2020.

Development Corporation Reserves Operating reserves are maintained by the development corporations at

25% of sales tax revenue for the year. As sales tax is the only revenue source for the development

corporations, 25% of revenue is held in reserve as contingency amount should economic downturn occur.

This requirement was met, and exceeded, during Fiscal Year 2020.

9


Capital Projects

Capital project funds were added to the budget to account for the remaining bond proceeds issued in FY

2019 and carried over to FY 2021 to facilitate the following Strategic Planning Goals; Improve and Expand

City Offices and other Facilities; Enhance the Quality of life through Parks and other projects; and to Improve

the City's Infrastructure. The FY 2021 budget includes capital budgeted in governmental capital projects funds

in the amount of $7,689,591. In addition, the current General Fund budget includes capital for FY 2021 totaling

$1,696,418, which includes purchases of vehicles, public safety, information technology, public works and

parks equipment, completion of the sports complex project, improvements to the future municipal building and

street resurfacing. The Water and Sewer Fund, Storm Water Drainage Fund, and Water and Sewer Capital

Project Fund budgets include capital costs for the FY 2021 current year totaling $1,740,785. The capital projects

budgeted in these funds include manhole rehabilitation, replacement of lift station pumps, sub-surface leak

detection equipment, and various other projects.

City Employees

Staffing levels for FY 2021 will increase by 1 positions from the previous fiscal year. With these added

positions, funding levels will reach 117 full-time and 3 part-time positions.

Salary Adjustments

We believe it is important to be able to recruit and retain valuable staff by ensuring competitive

compensation rates. Uniformed employees will receive step increases October 1 and other staff receive an

annual 3% increase on April 1 st, contingent upon performance review.

Benefits

Health insurance rates for employees and the City decreased overall by just under 10% for the fiscal year

2021 Budget. The City was able to offer an additional insurance plan to the options for employees. This is a

high deductible health plan and a corresponding health savings account which the City contributes to on

behalf of employees.

REQUESTS FOR INFORMATION

This financial report is designed to provide a general overview of the City's finances for all those with an

interest in the government's finances. Questions concerning any of the information provided in this report

or requests for additional financial information should be addressed to the Office of the City Secretary, P. 0.

Box 393, Red Oak, Texas 75154.

10


BASIC FINANCIAL STATEMENTS


THIS PAGE LEFT BLANK INTENTIONALLY


CITY OF RED OAK, TEXAS

STATEMENT OF NET POSITION

SEPTEMBER 30, 2020

Primary Government

Governmental Business-Type

Activities Activities Total

ASSETS

Cash and cash equivalents $ 3,889,719 $ 598,360 $ 4,488,079

Investments 20,019,042 2,346,500 22,365,542

Accounts receivable (net) 2,085,551 1,137,785 3,223,336

Inventory 4,182 23,768 27,950

Restricted assets:

Cash 549,916 1,363,261 1,913,177

Investments 4,302,659 368,721 4,671,380

Land held for resale 10,524,304 - 10,524,304

Capital assets, net of

accumulated depreciation:

Non-depreciable 4,824,040 1,646,232 6,470,272

Depreciable 19,543,657 14,970,442 34,514,099

Total Assets 65,743,070 22,455,069 88,198,139

DEFERRED OUTFLOWS OF RESOURCES

Deferred charge on refunding - 510,771 510,771

Pension related 464,434 67,224 531,658

OPEB related 42,356 3,180 45,536

Total Deferred Outflows of Resources 506,790 581,175 1,087,965

LIABILITIES

Accounts payable 1,124,384 112,593 1,236,977

Accrued liabilities 471,076 68,751 539,827

Accrued interest payable 156,371 60,898 217,269

Customer deposits payable 3,800 338,869 342,669

Noncurrent liabilities:

Due within one year

Long-term debt 2,022,744 1,398,218 3,420,962

Due in more than one year

Long-term debt 29,249,767 15,781,308 45,031,075

Net pension liability 998,157 166,668 1,164,825

Total OPEB liability 183,671 30,668 214,339

Total Liabilities 34,209,970 17,957,973 52,167,943

DEFERRED INFLOWS OF RESOURCES

Pension related 283,766 47,382 331,148

OPEB related 11,497 1,694 13,191

Total Deferred Inflows of Resources 295,263 49,076 344,339

NET POSITION

Net investment in capital assets 3,113,430 833,237 3,946,667

Restricted for:

Court security 34,519 - 34,519

Court technology 3,293 - 3,293

Public safety 73,534 - 73,534

Culture and recreation 395,547 - 395,547

Industrial development 12,424,092 - 12,424,092

Economic development 10,143,107 - 10,143,107

Capital projects 256,527 553,249 809,776

Unrestricted 5,300,578 3,642,709 8,943,287

Total Net Position $ 31,744,627 $ 5,029,195 $ 36,773,822

The notes to the financial statements are an

integral part of these financial statements. 11


CITY OF RED OAK, TEXAS

STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Program Revenues

Operating

Charges for

Grants and

Functions/Programs Expenses Services Contributions

Primary government:

Governmental activities:

General government $ 1,876,147 $ - $

-

Public safety 8,680,540 410,859 1,372,677

Culture and recreation 848,530 1,105,967 -

Public works 2,774,598 745,400 -

Industrial development 1,104,636 7,589,503 -

Economic development 58,940 - -

Interest and fiscal charges 1,550,846 - -

Total governmental activities 16,894,237 9,851,729 1,372,677

Business-type activities:

Utility 8,488,858 8,376,087 -

Storm water 323,665 339,174 -

Total business-type activities 8,812,523 8,715,261 -

Total primary government $ 25,706,760 $ 18,566,990 $ 1,372,677

General revenues:

Property taxes

Sales taxes

Franchise tax

Hotel occupancy tax

Alcoholic beverage tax

Investment earnings

Gain on sale of capital assets

Miscellaneous

Total general revenues and transfers

Change in net position

Net position - beginning

Net position - ending

The notes to the financial statements are an

integral part of these financial statements. 12


Revenues

Net (Expense) Revenue and Changes in Net Position

Capital

Grants and Governmental

Primary Government

Business-type

Contributions Activities Activities Total

$ - $( 1,876,147) $ - $( 1,876,147)

- ( 6,897,004)

- ( 6,897,004)

335,260 592,697 - 592,697

3,184,675 1,155,477 - 1,155,477

- 6,484,867 - 6,484,867

- ( 58,940)

- (

58,940)

- ( 1,550,846)

- ( 1,550,846)

3,519,935 ( 2,149,896)

- ( 2,149,896)

1,104,544 - 991,773 991,773

- - 15,509 15,509

1,104,544 - 1,007,282 1,007,282

$ 4,624,479 ( 2,149,896)

1,007,282 ( 1,142,614)

8,000,818 - 8,000,818

5,584,807 - 5,584,807

742,438 - 742,438

162,389 - 162,389

9,878 - 9,878

332,046 8,215 340,261

- 108,436 108,436

56,382 - 56,382

14,888,758 116,651 15,005,409

12,738,862 1,123,933 13,862,795

19,005,765 3,905,262 22,911,027

$ 31,744,627 $ 5,029,195 $ 36,773,822

13


CITY OF RED OAK, TEXAS

BALANCE SHEET

GOVERNMENTAL FUNDS

SEPTEMBER 30, 2020

Special Revenue

Industrial

Economic

General Development Development

Fund Corporation Corporation

ASSETS

Cash and cash equivalents $ 371,632 $ 145,501 $ 368,447

Investments 3,749,816 8,467,176 1,692,003

Accounts receivable (net) 1,385,850 439,243 232,342

Due from other funds - - 287,844

Inventory 4,182 - -

Land held for resale - 3,001,084 7,523,220

Restricted assets:

Cash 92,941 411,059 45,916

Investments 1,040,286 76,000 3,186,373

Total assets $ 6,644,707 $ 12,540,063 $ 13,336,145

LIABILITIES

Accounts payable 560,954 105,371 6,665

Accrued liabilities 458,073 10,100 -

Due to other funds 411,951 - -

Customer Deposits - - -

Total liabilities 1,430,978 115,471 6,665

DEFERRED INFLOWS OF RESOURCES

Unavailable revenue - Property taxes 216,907 500 -

Unavailable revenue - Fines & fees 41,793 - -

Total inflows of resources 258,700 500 -

FUND BALANCES

Nonspendable:

Inventory 4,182 - -

Restricted:

Debt service - - -

Culture and recreation - - -

Industrial development - 12,424,092 -

Economic development - - 13,329,480

Capital projects 256,527 - -

Court security 34,519 - -

Court technology 3,293 - -

Other public safety 73,534 - -

Assigned:

Subsequent year's budget 428,796 - -

Unassigned 4,154,178 - -

Total fund balances 4,955,029 12,424,092 13,329,480

Total liabilities, deferred inflows

and fund balances $ 6,644,707 $ 12,540,063 $ 13,336,145

The notes to the financial statements are an

integral part of these financial statements. 14


Capital

Projects

Other

Total

Debt 2019 CO Governmental Governmental

Service Bond Fund Funds Funds

$ 100,856 $ - $ 2,903,283 $ 3,889,719

- 5,118,854 991,193 20,019,042

28,116 - - 2,085,551

- - 669,146 956,990

- - - 4,182

- - - 10,524,304

- - - 549,916

- - - 4,302,659

$ 128,972 $ 5,118,854 $ 4,563,622 $ 42,332,363

- 408,737 42,657 1,124,384

- - 2,903 471,076

- 380,234 164,805 956,990

- - 3,800 3,800

- 788,971 214,165 2,556,250

22,917 - - 240,324

- - - 41,793

22,917 - - 282,117

- - - 4,182

106,055 - - 106,055

- - 395,547 395,547

- - - 12,424,092

- - - 13,329,480

- 4,329,883 3,953,910 8,540,320

- - - 34,519

- - - 3,293

- - - 73,534

- - - 428,796

- - - 4,154,178

106,055 4,329,883 4,349,457 39,493,996

$ 128,972 $ 5,118,854 $ 4,563,622 $ 42,332,363

15


THIS PAGE LEFT BLANK INTENTIONALLY


CITY OF RED OAK, TEXAS

RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE

STATEMENT OF NET POSITION

SEPTEMBER 30, 2020

Total Fund Balances - Governmental Funds $ 39,493,996

Capital assets, net of accumulated depreciation, used in governmental activities are

not financial resources and, therefore, are not reported in the funds.

Capital assets 40,993,765

Accumulated depreciation ( 16,626,068)

Long-term liabilities, including bonds payable, that are not due and payable in the

current period, and, therefore are not reported as liabilities in the funds.

Revenue bonds ( 11,110,000)

General obligation bonds ( 5,335,000)

Certificates of obligation ( 11,696,000)

Tax notes ( 1,350,000)

Accrued interest payable on long-term debt ( 156,371)

Compensated absences ( 754,974)

Net pension liability ( 998,157)

Total OPEB liability ( 183,671)

Other long-term assets are not available to pay for current period expenditures and

therefore, are deferred in the governmental funds. 282,117

Governmental funds report the effect of premiums, discounts, and refundings and

similar items when debt is first issued, whereas these amounts are deferred and

amortized in the statement of activities.

Premium on bonds ( 1,026,537)

Differences between expected and actual experiences, assumption changes and

netdifferences between projected and actual earnings and contributions subsequent

to the measurement date for the postretirement benefits (pension and OPEB) are

recognized asdeferred outflows of resources and deferred inflows of resources on

the statement of netposition.

Deferred outflows - pension related 464,434

Deferred outflows - OPEB related 42,356

Deferred inflows - pension related ( 283,766)

Deferred inflows - OPEB related ( 11,497)

Net Position of Governmental Activities $ 31,744,627

The notes to the financial statements are an

integral part of these financial statements. 16


CITY OF RED OAK, TEXAS

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Special Revenue

Industrial

Economic

General Development Development

Fund Corporation Corporation

REVENUES

Property taxes $ 6,060,672 $ - $ -

Sales taxes 2,802,285 1,391,261 1,391,261

Franchise tax 742,438 - -

Hotel occupancy tax - - -

Alcoholic beverage tax 9,878 - -

Intergovernmental 1,372,133 - -

Contributions 144,367 - -

Licenses and permits 1,068,879 - -

Fines and forfeitures 379,145 - -

Charges for services 550,359 7,589,503 -

Investment earnings 77,730 112,672 63,162

Miscellaneous 43,819 - 10,370

Total revenues 13,251,705 9,093,436 1,464,793

EXPENDITURES

Current:

General government 1,610,525 - -

Public safety 8,070,342 - -

Culture and recreation 704,904 - -

Public works 1,971,561 - -

Industrial development - 1,104,636 -

Economic development - - 58,940

Capital outlay 523,251 109,138 470,332

Debt service:

Principal - 385,000 981,062

Interest and fiscal charges 22,100 99,504 191,627

Bond issuance costs - - 255,321

Total expenditures 12,902,683 1,698,278 1,957,282

Excess (deficiency) of revenues

over (under) expenditures 349,022 7,395,158 ( 492,489)

OTHER FINANCING SOURCES (USES)

Issuance of bonds 773,000 - 8,670,000

Issuance of refunding bonds - -

Premium on issuance of bonds - - 33,386

Payment to escrow agent - current refunding - - -

Transfers in 754,225 - -

Transfers out - ( 3,036,825) ( 196,285)

Total other financing sources (uses) 1,527,225 ( 3,036,825) 8,507,101

CHANGE IN FUND BALANCE 1,876,247 4,358,333 8,014,612

FUND BALANCE - BEGINNING 3,078,782 5,885,528 5,314,868

PRIOR PERIOD ADJUSTMENT - 2,180,231 -

FUND BALANCE - BEGINNING, RESTATED 3,078,782 8,065,759 5,314,868

FUND BALANCE - ENDING $ 4,955,029 $ 12,424,092 $ 13,329,480

The notes to the financial statements are an

integral part of these financial statements. 17


Capital

Projects

Other

Total

Debt 2019 CO Governmental Governmental

Service Bond Fund Funds Funds

$ 1,844,434 $ - $ - $ 7,905,106

- - - 5,584,807

- - - 742,438

- - 162,389 162,389

- - - 9,878

- - - 1,372,133

- - - 144,367

- - 208,241 1,277,120

- - - 379,145

- - 14,353 8,154,215

- 63,554 14,928 332,046

- - 2,193 56,382

1,844,434 63,554 402,104 26,120,026

- - - 1,610,525

- - - 8,070,342

- - 95,526 800,430

- - 92,163 2,063,724

- - - 1,104,636

- - - 58,940

- 1,080,889 41,562 2,225,172

1,168,000 - - 2,534,062

617,900 - - 931,131

43,847 - - 299,168

1,829,747 1,080,889 229,251 19,698,130

14,687 ( 1,017,335)

172,853 6,421,896

- - - 9,443,000

1,830,000 - - 1,830,000

216,945 - - 250,331

( 2,041,218)

- - ( 2,041,218)

- - 2,500,000 3,254,225

- - ( 21,115) ( 3,254,225)

5,727 - 2,478,885 9,482,113

20,414 ( 1,017,335) 2,651,738 15,904,009

85,641 5,347,218 1,697,719 21,409,756

- - - 2,180,231

85,641 5,347,218 1,697,719 23,589,987

$ 106,055 $ 4,329,883 $ 4,349,457 $ 39,493,996

18


CITY OF RED OAK, TEXAS

RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES

IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Total net change in Fund Balances - Governmental Funds $ 15,904,009

Current year capital outlays are expenditures in the fund financial statements, but

they should be shown as increases in capital assets in the government-wide

financial statements. The net effect of removing the current year capital outlays is

to increase net position. 2,294,539

Depreciation is not recognized as an expense in governmental funds since it does

not require the use of current financial resources. The net effect of the current

year's depreciation is to decrease net position. ( 1,454,041)

The net effect of miscellaneous transactions involving capital assets (i.e., sales,

trade-ins, and donations) is to increase net position.

Donation of capital assets 3,375,568

Sales of capital assets ( 236,138)

The issuance of long-term debt (e.g. bonds, loans, 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 the net position.

Issuance of revenue bonds ( 8,670,000)

Issuance of tax notes ( 773,000)

Premium on issuance ( 33,386)

Refunding bonds ( 56,945)

Principal paid on bonds 2,534,062

Revenues and expenditures in the statement of activities that do not provide or use

current financial resources are not reported as revenues and expenses in the

governmental funds.

Fines and fees 41,793

Property taxes 95,712

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 the

governmental funds.

Accrued interest on long-term debt ( 109,238)

Amortization of deferred loss on refunding ( 160,091)

Compensated absences ( 14,150)

Changes in pension liabilities and related deferred outflows/inflows 7,476

Changes in OPEB liabilities and related deferred outflows/inflows ( 7,308)

Total change in net position of Governmental Activities $ 12,738,862

The notes to the financial statements are an

integral part of these financial statements. 19


CITY OF RED OAK, TEXAS

STATEMENT OF NET POSITION

PROPRIETARY FUNDS

SEPTEMBER 30, 2020

Business-type Activities - Enterprise

Total

Utility Storm Water Proprietary

Fund Fund Funds

ASSETS

Current assets:

Cash and cash equivalents $ 114,207 $ 484,153 $ 598,360

Investments 2,346,500 - 2,346,500

Accounts receivable (net) 1,110,603 27,182 1,137,785

Inventory 21,589 2,179 23,768

Restricted assets:

Cash 1,348,800 14,461 1,363,261

Investments 100,301 268,420 368,721

Total current assets 5,042,000 796,395 5,838,395

Noncurrent assets:

Capital assets:

Nondepreciable 1,646,232 - 1,646,232

Depreciable, net 14,929,884 40,558 14,970,442

Total noncurrent assets 16,576,116 40,558 16,616,674

Total assets 21,618,116 836,953 22,455,069

DEFERRED OUTFLOWS OF RESOURCES

Pension related 59,724 7,500 67,224

OPEB related 3,013 167 3,180

Deferred charge on refunding 510,771 - 510,771

Total deferred outflows of resources 573,508 7,667 581,175

LIABILITIES

Current liabilities:

Accounts payable 111,474 1,119 112,593

Accrued liabilities 60,737 8,014 68,751

Customer deposits payable 338,869 - 338,869

Accrued interest payable 60,193 705 60,898

Due within one year:

Long-term debt 1,312,350 85,868 1,398,218

Total current liabilities 1,883,623 95,706 1,979,329

Noncurrent liabilities:

Long-term debt 15,360,540 420,768 15,781,308

Net pension liability 146,658 20,010 166,668

Net OPEB liability 26,986 3,682 30,668

Total noncurrent liabilities 15,534,184 444,460 15,978,644

Total liabilities 17,417,807 540,166 17,957,973

DEFERRED INFLOWS OF RESOURCES

Pension related 41,693 5,689 47,382

OPEB related 1,503 191 1,694

Total deferred inflows of resources 43,196 5,880 49,076

NET POSITION

Net investment in capital assets 1,008,962 ( 175,725)

833,237

Restricted for capital projects 553,249 - 553,249

Unrestricted 3,168,410 474,299 3,642,709

Total net position $ 4,730,621 $ 298,574 $ 5,029,195

The notes to the financial statements are an

integral part of these financial statements. 20


CITY OF RED OAK, TEXAS

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION

PROPRIETARY FUNDS

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Business-type Activities - Enterprise

Total

Utility Storm Water Proprietary

Fund Fund Funds

OPERATING REVENUES

Charges for services:

Water charges $ 3,113,929 $ 339,174 $ 3,453,103

Sewer charges 4,653,364 - 4,653,364

Tap fees and reconnects 280,225 - 280,225

Penalties 128,506 - 128,506

Miscellaneous 200,063 - 200,063

Total revenues 8,376,087 339,174 8,715,261

OPERATING EXPENSES

Personnel services 1,244,551 174,736 1,419,287

Insurance 199,519 39,900 239,419

Materials and supplies 359,374 11,422 370,796

Contractual services 4,338,392 9,164 4,347,556

Maintenance 85,366 8,304 93,670

Other operating costs 98,945 - 98,945

Depreciation 1,421,186 65,116 1,486,302

Total expenses 7,747,333 308,642 8,055,975

Operating income (loss) 628,754 30,532 659,286

NON-OPERATING REVENUES (EXPENSES)

Interest earnings 6,848 1,367 8,215

Interest and fiscal charges ( 556,275) ( 15,023) ( 571,298)

Gain on sale of capital assets - 108,436 108,436

Bond issuance costs ( 185,250)

- ( 185,250)

Total non-operating revenues (expenses) ( 734,677)

94,780 ( 639,897)

Income (loss) before capital contributions ( 105,923)

125,312 19,389

Capital contributions 1,104,544 - 1,104,544

CHANGE IN NET POSITION 998,621 125,312 1,123,933

NET POSITION - BEGINNING 3,732,000 173,262 3,905,262

NET POSITION - END OF YEAR $ 4,730,621 $ 298,574 $ 5,029,195

The notes to the financial statements are an

integral part of these financial statements. 21


CITY OF RED OAK, TEXAS

STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Business-type Activities - Enterprise

Total

Utility Storm Water Proprietary

Fund Fund Funds

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers and users $ 8,451,574 $ 322,328 $ 8,773,902

Payments to suppliers ( 4,852,058) ( 27,390) ( 4,879,448)

Payments to employees ( 1,361,278) ( 180,622) ( 1,541,900)

Net cash provided (used) by operating

activities 2,238,238 114,316 2,352,554

CASH FLOWS FROM NONCAPITAL FINANCING

ACTIVITIES

Payments from (to) other funds 30,428 ( 30,428)

-

Net cash provided (used) by noncapital

financing activities 30,428 ( 30,428)

-

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES

Principal paid on bonds ( 1,233,000) ( 83,000) ( 1,316,000)

Interest and fiscal charges paid on bonds ( 95,179) ( 18,863) ( 114,042)

Disposition of capital assets - 160,000 160,000

Acquisition and construction of capital assets ( 305,404)

- ( 305,404)

Net cash provided (used) by capital and

related financing activities ( 1,633,583) 58,137 ( 1,575,446)

CASH FLOWS FROM INVESTING ACTIVITIES

Interest on investments 5,180 1,367 6,547

Purchase of investments ( 2,100,201)

- ( 2,100,201)

Net cash provided (used) by investing

activities ( 2,095,021)

1,367 ( 2,093,654)

NET INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS ( 1,459,938) 143,392 ( 1,316,546)

CASH AND CASH EQUIVALENTS, BEGINNING 2,922,945 355,222 3,278,167

CASH AND CASH EQUIVALENTS, ENDING $ 1,463,007 $ 498,614 $ 1,961,621

The notes to the financial statements are an

integral part of these financial statements. 22


CITY OF RED OAK, TEXAS

STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS

FOR THE YEAR ENDED SEPTEMBER 30, 2020

RECONCILIATION OF OPERATING INCOME

(LOSS) TO NET CASH PROVIDED (USED) BY

OPERATING ACTIVITIES

Operating income 628,754

Business-type Activities - Enterprise

Total

Utility Storm Water Proprietary

Fund Fund Funds

$ $ 30,532 $ 659,286

Adjustments to reconcile operating income to net cash

provided (used) by operating activities:

Depreciation and amortization 1,421,186 65,116 1,486,302

(Increase) decrease in:

Accounts receivable 24,768 ( 9,179) 15,589

Inventory 9,344 ( 289)

9,055

Deferred outflows of resources ( 19,108) ( 7,667) ( 26,775)

Increase (decrease) in:

Accounts payable ( 40,062) ( 6,514) ( 46,576)

Other liabilities 60,737 8,014 68,751

Customer deposits 50,719 - 50,719

Compensated absences 9,765 4,731 14,496

Developer deposits ( 30,000)

- ( 30,000)

Deferred inflows of resources 42,556 5,880 48,436

Net pension liability 60,489 20,010 80,499

Net OPEB liability 19,090 3,682 22,772

Total adjustments 1,609,484 83,784 1,693,268

Net cash provided (used) by operating activities $ 2,238,238 $ 114,316 $ 2,352,554

SCHEDULE OF NON-CASH CAPITAL AND

RELATED FINANCING ACTIVITIES

Contributions of capital assets $ 1,104,544 $ - $ 1,104,544

The notes to the financial statements are an

integral part of these financial statements. 23


CITY OF RED OAK, TEXAS

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2020

I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity

The City of Red Oak, Texas (the "City") was incorporated in 1949, and operates under a Council-

Manager form of government. The accompanying financial statements present the government and

its component units, entities for which the government is considered to be financially accountable.

Blended Component Units

The Red Oak Economic Development Corporation, Inc. (Economic Development Corporation) is

responsible for collecting and disbursing the one-fourth percent sales tax to be used for economic

development within and for the benefit of the City. The City Council is the governing board for the

Corporation. The members of the Corporation's board act as an advisory board and are appointed

by the City. The City holds operational responsibility for the Corporation. The Corporation is

presented as a governmental fund type and has a September 30 year-end.

The Red Oak Industrial Development Corporation, Inc. (Industrial Development Corporation) is

responsible for collecting and disbursing the one-fourth percent sales tax to be used for economic

development within and for the benefit of the City. The City Council is the governing board for the

Corporation. The members of the Corporation's board act as an advisory board and are appointed

by the City. The City holds operational responsibility for the Corporation. The Corporation is

presented as a governmental fund type and has a September 30 year-end.

Separate financial statements for the component units are not issued.

B. Government-wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of Net Position and the statement of

changes in Net Position) report information on all of the primary government and its blended

component units. Governmental activities, which normally are supported by taxes and

intergovernmental revenues, are reported separately from business-type activities, which rely to a

significant extent on fees and charges for support.

The statement of activities demonstrates the degree to which the direct expenses of a given function

or segment is offset by program revenues. Direct expenses are those that are clearly identifiable

with a specific function or segment. Program revenues include 1) charges to customers or applicants

who purchase, use, or directly benefit from goods, services, or privileges provided by a given

function or segment and 2) grants and contributions that are restricted to meeting the operational

or capital requirements of a particular function or segment. Taxes and other items not properly

included among program revenues are reported instead as general revenues.

Separate financial statements are provided for governmental funds and proprietary funds. Major

individual governmental funds and major individual enterprise funds are reported as separate

columns in the fund financial statement.

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation

The government-wide financial statements are reported using the economic resources measurement

focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues

are recorded when earned and expenses are recorded when a liability is incurred, regardless of the

timing of related cash flows. Property taxes are recognized as revenues in the year for which they

are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements

imposed by the provider have been met.

24


Governmental fund financial statements are reported using the current financial resources

measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon

as they are both measurable and available. Revenues are considered to be available when they are

collectible within the current period or soon enough thereafter to pay liabilities of the current period.

For this purpose, the government considers revenues to be available if they are collected within

sixty days of the end of the current fiscal period. Expenditures generally are recorded when a liability

is incurred, as under accrual accounting. However, inventories of materials and supplies are

considered expenditures when used and debt service expenditures, as well as expenditures related

to accumulated unpaid sick pay, are recorded only when payment is due.

Property and taxpayer-assessed taxes estimated to be collectible within sixty days after balance

sheet date, interest, and expenditure driven grants are all considered to be susceptible to accrual

and so have been recognized as revenues of the current fiscal period. All other revenue items are

considered to be measurable and available only when cash is received by the government.

The City reports the following major governmental funds:

The General Fund is the City’s primary operating fund. It accounts for all financial resources of

the general government, except those required to be accounted for in another fund.

The Industrial Development Corporation Fund is responsible for collecting and disbursing

the one-fourth cent sales tax to be used for industrial development within the City.

The Economic Development Corporation Fund is responsible for collecting and disbursing

the one-fourth cent sales tax to be used for economic development within the City.

The Debt Service Fund accounts for the property tax revenues received which were specifically

levied for the purpose of covering debt service requirements.

The 2019 Certificates of Obligation Bond Fund is used to account for the proceeds from the

bonds issued for major capital projects.

The City reports the following major proprietary funds:

The Utility Fund accounts for the activities of the sewage treatment plant, sewage pumping

stations and collection systems, and the water distribution system.

The Storm Water Drainage Fund accounts for the City's storm water revenues and related

projects.

As a general rule, the effect of interfund activity has been eliminated from the government-wide

financial statements. Exceptions to this general rule are charges between the City's utility function

and various other functions of the City. Elimination of these charges would distort the direct costs

and program revenues reported for the various functions concerned.

Amounts reported as program revenues include 1) charges to customers or applicants for goods,

services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and

contributions. Internally dedicated resources are reported as general revenues rather than as

program revenues. Likewise, general revenues include all taxes.

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 utility fund are charges to customers for sales and services and the portion of tap

fees intended to recover the cost of connecting new customers to the system. Operating expenses

for the utility fund include the cost of sales and services, administrative expenses, and depreciation

on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating

revenues and expenses.

When both restricted and unrestricted resources are available for use, it is the government's policy

to use restricted resources first, then unrestricted resources, as they are needed.

25


D. Cash, Deposits and Investments

The City's cash and cash equivalents are considered to be cash on hand, demand deposits and shortterm

investments with original maturities of three months or less from the date of acquisition.

The Economic Development Corporation and Industrial Development Corporation are authorized by

their governing boards to invest in obligations of the U.S. Treasury and local government investment

pools (TexPool and LOGIC).

Investments in government pools are recorded at amortized cost. All other investments are recorded

at fair value. Fair value is the amount at which a financial instrument could be exchanged in a

current transaction between willing parties.

E. Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at

the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion

of inter-fund loans) or "advances to/from other funds" (i.e., the non-current portion of inter-fund

loans). All other outstanding balances between funds are reported as "due to/from other funds."

Any residual balances outstanding between the governmental activities and business-type activities

are reported in the government-wide financial statements as "internal balances."

Advances between funds, as reported in the fund financial statements, are offset by a fund balance

reserve account in applicable governmental funds to indicate that they are not available for

appropriation and are not expendable available financial resources.

All trade and property tax receivables are shown net of an allowance for uncollectibles. Trade

accounts receivables in excess of sixty days comprise the trade accounts receivable allowance for

uncollectibles. The property tax receivable allowance is based on historical collection experience.

The City's property tax is levied each October 1 on the assessed value listed as of the prior January

1 for all real and personal property. Appraised values are established by the Ellis Central Appraisal

District as market value and assessed at 100% of appraised value. Property taxes attach as an

enforceable lien on property as of January 1. The Ellis County Tax Assessor/Collector bills and

collects the City's property taxes, which are due October 1. Full payment can be made prior to the

next January 31 to avoid penalty and interest charges. Overtime, substantially all property taxes

are collected.

F. Inventories and Prepaid Items

All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories are recorded

as expenditures when consumed rather than when purchased.

Certain costs applicable to future accounting periods are recorded as prepaid items. The cost of

prepaid items is recorded as expenditures/expenses when consumed rather than when purchased.

G. Restricted Assets

Certain proceeds of the City's enterprise fund revenue bonds, as well as certain resources set aside

for their repayment, are classified as restricted assets on the statement of Net Position because they

are maintained in separate bank accounts and their use is limited by applicable bond covenants.

The "revenue bond construction" account is used to report those proceeds of bond issuances that

are restricted for use in construction. The "interest and sinking" account is used to segregate

resources accumulated for debt service payments over the next twelve months.

H. Capital Assets

Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads,

bridges, curbs and gutters, streets and sidewalks, drainage systems and lighting systems), are

reported in the applicable governmental or business-type activities columns in the government-wide

financial statements. Capital assets are defined by the City as assets with an initial, individual cost

of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded

at historical cost or estimated historical cost If purchased or constructed. Donated capital assets are

recorded at estimated acquisition value.

26


The costs of normal maintenance and repairs that do not add to the value of the asset or materially

extend asset lives are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed.

Interest incurred during the construction phase of capital assets of business-type activities is

included as part of the capitalized value of the assets constructed, net of interest earned on the

invested proceeds over the same period.

Property, plant, equipment and infrastructure are depreciated using the straight-line method over

the following estimated useful lives:

Asset Type

Number of Years

I. Compensated Absences

Buildings 10-30

Improvements 10-50

Machinery and equipment 5-15

Infrastructure 10-40

It is the government's policy to permit employees to accumulate earned but unused vacation pay

benefits. 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. Vacation leave

shall be taken during the year following its accumulation.

J. Deferred Outflows/Inflows of Resources

In addition to assets, the statement of net 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 City has the following items that qualify for reporting in this category.

• Deferred charges on refunding – 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.

• Pension and OPEB contributions after measurement date – These contributions are deferred

and recognized in the following fiscal year.

• Changes in actuarial assumptions – These changes are deferred and recognized over the

estimated average remaining lives of all members determined as of the measurement date.

• Difference in projected and actual earnings on pension assets – This difference is deferred

and amortized over a closed five-year period.

In addition to liabilities, the statement of net 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. The City

has the following items that qualify for reporting in this category.

• Unavailable revenue is reported only in the governmental funds balance sheet – These

amounts are deferred and recognized as an inflow of resources in the period that the

amounts become available.

• Difference in expected and actual pension and OPEB experience – This difference is deferred

and recognized over the estimated average remaining lives of all members determined as

of the measurement date.

• Changes in actuarial assumptions – These changes are deferred and recognized over the

estimated average remaining lives of all members determined as of the measurement date.

27


K. Long-Term Obligations

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, as well as issuance costs, are deferred and amortized

over the life of the bonds using the effective interest method. Bonds payable are reported net of the

applicable bond premium or discount. Bond issuance costs are reported as deferred charges and

amortized over the term of the related 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.

L. 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 the

Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS’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.

M. Other Post-Employment Benefits

For purposes of measuring the total Texas Municipal Retirement System Supplemental Death Benefit

Fund (TMRS SDBF) OPEB liability, related deferred outflows and inflows of resources, and expense,

City-specific information about its total TMRS SDBF liability and additions to/deductions from the

City’s total TMRS SDBF liability have been determined on the same basis as they are reported by

TMRS. The TMRS SDBF expense and deferred (inflows)/outflows of resources related to TMRS SDBF,

primarily result from changes in the components of the total TMRS SDBF liability. Most changes in

the total TMRS SDBF liability will be included in TMRS SDBF expense in the period of the change.

For example, changes in the total TMRS SDBF liability resulting from current period service cost,

interest on the TOL, and changes of benefit terms are required to be included in TMRS SDBF expense

immediately. Changes in the total TMRS SDBF liability that have not been included in TMRS SDBF

expense are required to be reported as deferred outflows of resources or deferred inflows of

resources related to TMRS SDBF.

N. Net Position and Fund Balance

In the government-wide and proprietary fund financial statements, the City reports restrictions of

net position for amounts that are not available for appropriation or are legally restricted by outside

parties for use for a specific purpose. Net investment in capital assets represents the City’s

investment in the book value of capital assets, less any unspent proceeds from capital-related debt

issuances. Unrestricted net position consists of net position that does not meet the definition of

restricted or net investment in capital assets.

In the fund financial statements, governmental funds report fund balance categorized as follows:

Nonspendable fund balance includes amounts that cannot be spent because they are either

not in spendable form, or, for legal or contractual reasons, must be kept intact. This classification

includes prepaid items.

Restricted fund balance includes fund balance amounts that are constrained for specific

purposes which are externally imposed by providers, such as creditors or amounts restricted

due to constitutional provisions or enabling legislation. This classification includes the child

nutrition program, retirement of long-term debt, construction programs and other federal and

state grants.

28


Committed fund balance includes fund balance amounts that are constrained for specific

purposes that are internally imposed by the City through formal action of the highest level of

decision making authority. Committed fund balance is reported pursuant to resolution passed

by the City Council. This classification includes campus activity funds, local special revenue funds

and potential litigation, claims and judgments.

Assigned fund balance includes fund balance amounts that are self-imposed by the City to be

used for a particular purpose. Fund balance can be assigned by the City Council, the City

Manager, or the Finance Director. This classification includes insurance deductibles,

encumbrances, program start-up costs, projected budget deficit for subsequent years and other

legal uses.

Unassigned fund balance includes residual positive fund balance within the General Fund which

has not been classified within the other above mentioned categories. Unassigned fund balance

may also include negative balances for any governmental fund if expenditures exceed amounts

restricted, committed, or assigned for those specific purposes.

Net Position Flow Assumption

Sometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted

bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as

restricted – net position and unrestricted – net position in the government-wide and proprietary

fund financial statements, a flow assumption must be made about the order in which the resources

are considered to be applied. It is the City’s policy to consider restricted – net position to have been

depleted before unrestricted – net position is applied.

Fund Balance Flow Assumption

Sometimes the City will fund outlays for a particular purpose from both restricted and unrestricted

resources (the total of committed, assigned, and unassigned fund balance). In order to calculate

the amounts to report as restricted, committed, assigned, and unassigned fund balance in the

governmental fund financial statements a flow assumption must be made about the order in which

the resources are considered to be applied. It is the City’s policy to consider restricted fund balance

to have been depleted before using any of the components of unrestricted fund balance. Further,

when the components of unrestricted fund balance can be used for the same purpose, committed

fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied

last.

II.

STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

Budgetary Control

Annual budgets are adopted on a basis consistent with generally accepted accounting principles for

all governmental funds. The annual budget for the utility fund is prepared on the budgetary basis of

accounting. All annual appropriations lapse at fiscal year-end. The legal level of budgetary control

is the fund level.

III.

DEPOSITS AND INVESTMENTS

Statutes authorize the City to invest in obligations of the U.S. Treasury and U.S. Agencies, municipal

bonds, managed public fund investment pools, and certificates of deposit The Interlocal Cooperation

Act, Chapter 791 of the Texas Government Code, and the Public Funds Investment Act, Chapter

2256 of the Texas Government Code (the “Act”), provide for the creation of public funds investment

pools, such as Texas Short-term Reserve Fund (“TexStar”), Local Government Investment

Cooperative (“LOGIC”), TexasDAILY, and Lone Star Investment Pool (“Lone Star”), through which

political subdivisions and other entities may invest public funds.

TexPool, TexSTAR and LOGIC have a redemption notice period of one day and may redeem daily.

The investment pool’s authority may only impose restrictions on redemptions in the event of a

general suspension of trading on major securities markets, general banking moratorium or national

state of emergency that affects the pool’s liquidity.

29


The City's investments as of September 30, 2020 are:

Weighted

Credit Carrying Average Maturity

Rating Value (days)

Investment Pool:

TexPool AAAm $ 118,703

38

TexSTAR AAAm 1,973,876 44

LOGIC AAAm 24,868,343 52

Total $ 26,960,922

Portfolio 51

Interest rate risk: In accordance with its investment policy, the City manages its exposure to

declines in fair values by limiting the weighted average of maturity not to exceed five years;

structuring the investment portfolio so that securities mature to meet cash requirements for ongoing

operations; monitoring credit ratings of portfolio position to assure compliance with rating

requirements imposed by the Public Funds Investment Act; and invest operating funds primarily in

short-term securities or similar government investment pools.

Credit risk: The City's investment policy limits investments to obligations of the United States, State

of Texas, or their agencies and instrumentalities with an investment quality rating of not less than

"A" or its equivalent, by a nationally recognized investment rating firm. Other obligations must be

unconditionally guaranteed (either express or implied) by the full faith and credit of the United

States Government or the issuing U.S. agency and investment pools with an investment quality not

less than AAA or AAA-m, or equivalent, by at least one nationally recognized rating service. As of

September 30, 2020, the City's investment in investment pools were rated AAAm and AAA by

Standard & Poor's.

Custodial credit risk — deposits: In the case of deposits, this is the risk that in the event of a bank

failure, the City's deposits may not be returned to it. State statutes require that all deposits in

financial institutions be insured or fully collateralized by U.S. government obligations or its agencies

and instrumentalities or direct obligations of Texas or its agencies and instrumentalities that have a

market value of not less than the principal amount of the deposits. As of September 30, 2020, the

market values of pledged securities and FDIC insurance exceeded bank balances.

Custodial credit risk — investments: For an investment, this is the risk that, in the event of the

failure of the counterparty, the City will not be able to recover the value of its investments or

collateral securities that are in the possession of an outside party. The City's investment policy

requires that it will seek to safekeeping securities at financial institutions, avoiding physical

possession. Further, all trades, where applicable, are executed by delivery versus payment to ensure

that securities are deposited in the City's safekeeping account prior to the release of funds.

IV.

RECEIVABLES

The City’s receivables as of September 30, 2020 consisted of the following:

Industrial Economic

General Development Development Debt Storm

Fund Corporation Corporation Service Utility Water Total

Due from other governments $ 695,806 $ - $ - $ - $ - $ - $ 695,806

Due from developer - 206,901 - - - - 206,901

Taxes 650,353 232,342 232,242 38,391 - - 1,153,328

Fines & fees 417,926

Accounts 51,020 - - - 2,472,346 27,182 2,523,366

Gross receivables 1,815,105 439,243 232,242 38,391 2,472,346 27,182 4,579,401

Less: allowance for

uncollectible accounts ( 429,255)

- - ( 10,275) ( 1,361,743)

- ( 1,801,273)

Net receivables $ 1,385,850 $ 439,243 $ 232,242 $ 28,116 $ 1,110,603 $ 27,182 $ 2,778,128

30


V. CAPITAL ASSETS

Capital asset activity for the year ended September 30, 2020 was as follows:

Beginning Transfers/ Ending

Balance Additions Retirements Balance

Governmental activities:

Capital assets not being depreciated:

Land $ 3,470,485 $ 592,441 $( 2,180,231) $ 1,882,695

Construction in progress 1,543,201 1,398,144 - 2,941,345

Total capital assets not

being depreciated 5,013,686 1,990,585 ( 2,180,231) 4,824,040

Capital assets being depreciated:

Buildings 8,163,080 95,230 - 8,258,310

Improvements 398,358 - - 398,358

Machinery and equipment 10,943,248 543,983 ( 450,926) 11,036,305

Infrastructure 13,436,443 3,040,309 - 16,476,752

Total assets being depreciated 32,941,129 3,679,522 ( 450,926) 36,169,725

Less accumulated depreciation for:

Buildings ( 2,509,772) ( 306,272)

- ( 2,816,044)

Improvements ( 283,881) ( 7,939)

- ( 291,820)

Machinery and equipment ( 8,271,439) ( 697,536) 214,789 ( 8,754,186)

Infrastructure ( 4,321,723) ( 442,295)

- ( 4,764,018)

Total accumulated depreciation ( 15,386,815) ( 1,454,042) 214,789 ( 16,626,068)

Total capital assets being

depreciated, net 17,554,314 2,225,480 ( 236,137) 19,543,657

Governmental activities capital

assets, net $ 22,568,000 $ 4,216,065 $( 2,416,368) $ 24,367,697

Beginning Transfers/ Ending

Balance Additions Retirements Balance

Business-type activities:

Capital assets, not being depreciated:

Land $ 1,241,293 $ - $ - $ 1,241,293

Construction in progress 397,344 7,595 - 404,939

Total capital assets, not being

depreciated 1,638,637 7,595 - 1,646,232

Capital assets being depreciated:

Buildings 101,181 - - 101,181

Improvements 28,649,441 1,104,544 - 29,753,985

Machinery and equipment 2,141,494 297,809 ( 282,595) 2,156,708

Total assets being

depreciated 30,892,116 1,402,353 ( 282,595) 32,011,874

Less accumulated depreciation for:

Buildings ( 42,842) ( 5,051)

- ( 47,893)

Improvements ( 14,398,877) ( 1,229,011)

- ( 15,627,888)

Machinery and equipment ( 1,344,442) ( 252,240) 231,031 ( 1,365,651)

Total accumulated depreciation ( 15,786,161) ( 1,486,302) 231,031 ( 17,041,432)

Total capital assets being

depreciated, net 15,105,955 ( 83,949) ( 51,564) 14,970,442

Business-type activities capital

assets, net $ 16,744,592 $( 76,354) $( 51,564) $ 16,616,674

Depreciation expense for the year ended September 30, 2020 was charged to functions/programs of

the primary government as follows:

Governmental activities:

General government $ 237,766

Public safety 599,066

Culture and recreation 47,990

Public works 569,220

Total $ 1,454,042

Business-type activities:

Utility $ 1,486,302

Total $ 1,486,302

31


VI.

INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS

Interfund transfers made during the fiscal year were as follows:

Transfer From Transfer To Amount

Industrial Development Corporation General Fund $ 536,825

Industrial Development Corporation Non-Major Governmental 2,500,000

Economic Development Corporation General Fund 196,285

Non-Major Governmental General Fund 21,115

Total $ 3,254,225

The transfers to the General Fund from the Industrial Development Corporation and Economic

Development Corporation consisted of annual transfers to for contract services in the amounts of

$536,825 and $196,285, respectively. In addition, $21,115 was transferred to the General Fund from

the Tourism Fund for rental fees. The Industrial Development Corporation transferred $2,500,000 to the

Parks Improvement Fund for upcoming projects.

Interfund receivables and payables as of September 30, 2020 were as follows:

Receivable Fund Payable Fund Amount

Economic Development Corporation General Fund $ 287,844

Non-Major Governmental 2019 CO Bond Fund 380,234

Non-Major Governmental Non-Major Governmental 164,805

Non-Major Governmental General Fund 124,107

Total $ 956,990

The outstanding balances between funds result mainly 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.

32


VII.

LONG-TERM DEBT

Long-term debt activity for the year ended September 30, 2020, was as follows:

Beginning Refunded/ Ending Amount Due

Balance Issued Retired Balance Within One Year

Governmental activities:

Bonds payable:

General obligation bonds $ 3,770,000 $ 1,830,000 $( 265,000) $ 5,335,000 $ 345,000

Certificates of obligation 13,700,000 - ( 2,410,000) 11,290,000 375,000

Certificates of obligation

(private placement) 449,000 - ( 43,000) 406,000 41,000

Revenue bonds - 8,670,000 ( 115,000) 8,555,000 355,000

Revenue bonds (private

placement) 2,937,000 - ( 497,000) 2,440,000 751,000

Tax notes 287,000 - ( 147,000) 140,000 140,000

Tax notes (private placement) 733,000 773,000 ( 296,000) 1,210,000 182,000

Less deferred amounts:

Underwriter's discount ( 669)

- 669 - -

Issuance premium 814,297 250,331 ( 38,091) 1,026,537 -

Total bonds payable 22,689,628 11,523,331 ( 3,810,422) 30,402,537 2,189,000

Note payable 866,062 - ( 866,062)

- -

Compensated absences 740,824 542,530 ( 528,380) 754,974 188,744

Total governmental $ 24,296,514 $ 12,065,861 $( 5,204,864) $ 31,157,511 $ 2,377,744

Business-type activities:

Bonds payable:

General obligation bonds $ 13,925,000 $ 5,330,000 $( 6,855,000) $ 12,400,000 $ 1,050,000

Certificates of obligation 2,330,000 - ( 83,000) 2,247,000 84,000

Certificates of obligation

(private placement) 1,077,000 - ( 178,000) 899,000 183,000

Tax notes 73,000 - ( 65,000)

8,000 8,000

Tax notes (private placement) - 411,000 - 411,000 65,000

Less deferred amounts:

Underwriter's discount ( 2,966)

- 2,966 - -

Issuance premium 597,423 631,866 ( 47,635) 1,181,654 -

Total bonds payable 17,999,457 6,372,866 ( 7,225,669) 17,146,654 1,390,000

Compensated absences 18,376 22,408 ( 7,912) 32,872 8,218

Total business-type $ 18,017,833 $ 6,395,274 $( 7,233,581) $ 17,179,526 $ 1,398,218

Bond Reserve Fund

For the Industrial Development Corporation's 2004 Sales Tax Revenue Refunding bonds, this section

requires maintaining in the reserve fund the lesser of: (i) the maximum annual principal and interest

requirement of the Bonds; (ii) 1.25 times the average annual principal and interest requirement of the

Bonds; or (iii) 10 percent of the aggregate proceeds of the Bonds. This fund shall be used to pay principal

of and/or interest on these bonds falling due at any time when moneys in the interest and sinking fund

are insufficient for such purpose and to retire the last of the bonds that are outstanding.

Total amounts required to be restricted compared to actual funds for the Industrial Development

Corporation's bonds are as follows:

Required at Actual at Excess or

9/30/2020 9/30/2020 (Deficiency)

Interest and Sinking:

Sales Tax Revenue Refunding Bonds

Series 2014 - Industrial Development $ 11,309 $ 11,537 $

228

Series 2015 - Industrial Development 48,249 58,686 10,437

Total $ 59,558 $ 70,223 $ 10,665

Bond Reserve:

Sales Tax Revenue Refunding Bonds

Series 2014 - Industrial Development $ 76,000 $ 76,000 $ -

Series 2015 - Industrial Development 335,000 340,836 5,836

Total $ 411,000 $ 416,836 $ 5,836

33


Certificates of Obligation

The City issues Certificates of Obligation to provide for the acquisition and construction of major capital

facilities.

Sales Tax Revenue Bonds

In the current year, the City issued Sales Tax Revenue Bonds, Series 2019A and 2019B in the amounts

of $2,990,000 and $5,680,000, respectively. The 2019A bonds carry interest rates of 2.75-3.00% and

mature in fiscal year 2038. The 2019B bonds carry interest rates of 2.10-3.35% and mature in fiscal

year 2040. The proceeds of the bonds will be used for the construction, improvement, and expansion of

streets, roads, sidewalks, parks, land and drainage and utility infrastructure to promote new or

expanded business development.

Tax Notes

The City issues tax notes to provide funds for the acquisition of equipment. Tax notes have been issued

for both governmental and business-type activities. Tax notes are direct obligations and pledge the full

faith and credit of the government.

In the current year, the City issued Tax Notes, Series 2020, in the amount of $1,184,000. The notes

carry an interest rate of 1.80% and mature in fiscal year 2026. The proceeds will be used for the

purchase of materials, supplies, vehicles and equipment for the City.

General Obligation Bonds

The City issues general obligation bonds to provide funds for the acquisition and construction of major

capital facilities. General obligation bonds have been issued for both governmental and business-type

activities. General obligation bonds are direct obligations and pledge the full faith and credit of the

government.

Current Refunding

In the current year, the City issued General Obligation refunding bonds, Series 2020, in the amount of

$7,160,000. The bonds carry an interest rates 3.00% and mature in fiscal year 2030. The proceeds from

issuance were used to refund Certificates of Obligation, Series 2010; General Obligation Refunding

Bonds, Series 2010; Certificates of Obligation, Series 2013; and General Obligation Refunding Bonds,

Series 2013. The net proceeds (including a $848,811 premium after payment of bond issuance costs)

were used to refund the old debt. As a result, a portion of these bonds have been removed from the

statement of net position. The current refunding reduced the City’s total debt service payments by

$1,007,437 and produced an economic gain (difference between the present values of the debt service

payments on the old and new debt) of $915,153.

Compensated Absences

The compensated absence liabilities are generally liquidated by the General, Utility, and Storm Water

Funds depending on the assignment of an employment at termination.

Other Information

Should the City default on its outstanding bonds, any registered owner of the certificates is entitled to

seek a writ of mandamus from a court of proper jurisdiction requiring specific performance from the

City.

34


Bonds payable currently outstanding and reported as liabilities of the City's governmental activities are:

Amounts

Amounts

Interest Original Maturity Outstanding

Description Rate Issue Date 9/30/20

Governmental activities:

Certificates of Obligation, Series 2013 2.00-3.30% $ 1,090,000 2/15/2028 $ 250,000

Certificates of Obligation, Series 2015* 1.81% 569,000 2/15/2026 126,000

Certificates of Obligation, Series 2015* 1.81% 294,000 2/15/2026 280,000

Certificates of Obligation, Series 2017 2.00-4.00% 1,575,000 2/15/2031 1,475,000

Certificates of Obligation, Series 2018 4.00-5.00% 5,015,000 2/15/2038 4,525,000

Certificates of Obligation, Series 2019 3.00-4.00% 5,115,000 2/15/2029 5,040,000

General Obligation Bonds, Series 2014 2.00-3.50% 3,680,000 2/15/2030 2,700,000

General Obligation Bonds, Series 2017 2.00-4.00% 945,000 2/15/2027 805,000

General Obligation Bonds, Series 2020 3.00% 1,830,000 2/15/2030 1,830,000

Revenue Bonds, Series 2014* 2.44% 760,000 8/15/2023 265,000

Revenue Bonds, Series 2015* 3.32% 3,345,000 8/15/2026 2,290,000

Revenue Bonds, Series 2019A 2.75-3.00% 2,990,000 2/15/2039 2,990,000

Revenue Bonds, Series 2019B 2.10-3.35% 5,680,000 2/15/2034 5,565,000

Tax Notes, Series 2014A 1.60% 693,000 2/15/2021 104,000

Tax Notes, Series 2014B 0.60-2.39% 417,000 2/15/2021 36,000

Tax Notes, Series 2017* 1.79% 785,000 2/15/2024 649,000

Tax Notes, Series 2020* 1.80% 773,000 2/15/2026 561,000

Total governmental activities $ 35,556,000

$ 29,491,000

* Private placement

Bonds payable currently outstanding and reported as liabilities of the City's business-type activities are:

Amounts

Amounts

Interest Original Maturity Outstanding

Description Rate Issue Date 9/30/20

Business-type activities:

Certificates of Obligation, Series 2015* 1.81% $ 1,032,000 2/15/2026 $ 630,000

Certificates of Obligation, Series 2015 1.81% 515,000 2/15/2026 312,000

Certificates of Obligation, Series 2016* 1.74% 435,000 8/15/2026 269,000

Certificates of Obligation, Series 2017 2.00-4.00% 3,335,000 2/15/2034 1,760,000

Certificates of Obligation, Series 2018 4.00-5.00% 240,000 2/15/2025 175,000

General Obligation Bonds, Series 2013 2.00-5.00% 10,375,000 2/15/2029 2,740,000

General Obligation Bonds, Series 2014 2.00-3.50% 5,660,000 2/15/2030 1,280,000

General Obligation Bonds, Series 2017 2.00-4.00% 4,285,000 2/15/2030 3,050,000

General Obligation Bonds, Series 2020 3.00% 5,330,000 2/15/2030 5,330,000

Tax Notes, Series 2014B 2.00-3.50% 1,980,000 2/15/2025 8,000

Tax Notes, Series 2020* 1.80% 411,000 2/15/2026 411,000

Total business-type activities $ 31,078,000

$ 15,965,000

* Private placement

35


Annual debt service requirements for the City’s bonds are as follows:

Certificates of Obligation

Governmental Activities Business-Type Activities

Year Ended Total Total

September 30, Principal Interest Principal Interest Principal Interest

2021 $ 375,000 $ 408,475 $ 84,000 $ 83,547 $ 459,000 $ 492,022

2022 390,000 394,525 85,000 80,983 475,000 475,508

2023 405,000 379,475 86,000 78,321 491,000 457,796

2024 335,000 365,100 87,000 75,641 422,000 440,741

2025 505,000 347,575 92,000 72,827 597,000 420,402

2026-2030 3,035,000 1,403,700 378,000 345,979 3,413,000 1,749,679

2031-2035 3,570,000 752,700 1,435,000 117,500 5,005,000 870,200

2036-2040 2,675,000 163,425 - - 2,675,000 163,425

Total $ 11,290,000 $ 4,214,975 $ 2,247,000 $ 854,798 $ 13,537,000 $ 5,069,773

Certificates of Obligation (private placement)

Governmental Activities Business-Type Activities

Year Ended Total Total

September 30, Principal Interest Principal Interest Principal Interest

2021 $ 41,000 $ 6,962 $ 183,000 $ 14,794 $ 224,000 $ 21,756

2022 23,000 6,384 183,000 11,527 206,000 17,911

2023 87,000 5,391 185,000 8,233 272,000 13,624

2024 23,000 4,398 193,000 4,857 216,000 9,255

2025 23,000 3,982 77,000 2,458 100,000 6,440

2026-2030 209,000 1,887 78,000 1,098 287,000 2,985

Total $ 406,000 $ 29,004 $ 899,000 $ 42,967 $ 1,305,000 $ 71,971

General Obligations

Governmental Activities Business-Type Activities

Year Ended Total Total

September 30, Principal Interest Principal Interest Principal Interest

2021 $ 345,000 $ 163,470 $ 1,050,000 $ 366,953 $ 1,395,000 $ 530,423

2022 420,000 148,800 1,105,000 326,478 1,525,000 475,278

2023 445,000 137,713 1,130,000 300,816 1,575,000 438,529

2024 560,000 123,925 1,155,000 272,575 1,715,000 396,500

2025 595,000 107,250 1,250,000 238,900 1,845,000 346,150

2026-2030 2,970,000 227,063 6,710,000 562,575 9,680,000 789,638

Total $ 5,335,000 $ 908,221 $ 12,400,000 $ 2,068,297 $ 17,735,000 $ 2,976,518

Tax Notes

Governmental Activities Business-Type Activities

Year Ended Total Total

September 30, Principal Interest Principal Interest Principal Interest

2021 $ 140,000 $ 1,262 $ 8,000 $ 96 $ 148,000 $ 1,358

Total $ 140,000 $ 1,262 $ 8,000 $ 96 $ 148,000 $ 1,358

Tax Notes (private placement)

Governmental Activities Business-Type Activities

Year Ended Total Total

September 30, Principal Interest Principal Interest Principal Interest

2021 $ 182,000 $ 20,082 $ 65,000 $ 6,813 $ 247,000 $ 26,895

2022 290,000 15,848 67,000 5,625 357,000 21,473

2023 279,000 10,747 68,000 4,410 347,000 15,157

2024 265,000 5,868 69,000 3,177 334,000 9,045

2025 96,000 2,628 70,000 1,926 166,000 4,554

2026-2030 98,000 882 72,000 648 170,000 1,530

Total $ 1,210,000 $ 56,055 $ 411,000 $ 22,599 $ 1,621,000 $ 78,654

36


Revenue Bonds - Governmental Activities

Negotiated

Private Placement

Year Ended Total Total

September 30, Principal Interest Principal Interest Principal Interest

2021 $ 355,000 $ 239,640 $ 396,000 $ 82,494 $ 751,000 $ 322,134

2022 360,000 232,008 404,000 70,104 764,000 302,112

2023 370,000 224,268 420,000 57,474 790,000 281,742

2024 380,000 216,128 430,000 44,322 810,000 260,450

2025 385,000 207,388 445,000 30,046 830,000 237,434

2026-2030 2,085,000 881,185 460,000 15,272 2,545,000 896,457

2031-2035 2,410,000 554,155 - - 2,410,000 554,155

2036-2040 2,210,000 162,250 - - 2,210,000 162,250

Total $ 8,555,000 $ 2,717,022 $ 2,555,000 $ 299,712 $ 11,110,000 $ 3,016,734

VIII.

DEFINED BENEFIT PENSION PLAN

Plan Description

The City participates as one of 887 plans in the nontraditional, joint contributory, hybrid defined benefit

pension plan administered by the Texas Municipal Retirement System (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 multiple-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’s 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 that can be obtained at www.TMRS.org.

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 city-financed monetary credits with interest were used to purchase an annuity. Members may choose

to receive their retirement benefit in one of seven payments 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.

Members can retire at ages 60 and above with five or more years of service or with 20 years of service

regardless of age. A member is vested after five years. The plan provisions arc adopted by the governing,

body of the City, with in the options available in the state statutes governing TMRS and within the

actuarial constraints also in the statutes.

Beginning in 2009, the City granted an annually repeating (automatic) basis monetary credit referred

to as an updated service credit (USC) which is a theoretical amount that takes into account salary

increases or plan improvements. If at any time during their career an employee earns a USC, this

amount remains in their account earning interest at 5% until retirement. At retirement, the benefit is

calculated as if the sum of the employee’s accumulated contributions with interest and the employer

match plus employer-financed monetary credits, such as USC, with interest were used to purchase an

annuity. Additionally, initiated in 2009, the City provided on an annually repeating (automatic) basis

cost of living adjustments (COLA) for retirees equal to a percentage of the change in the consumer price

index (CPI).

37


A summary of plan provisions for the City are 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

Uupdated service credit

100% repeating, transfers

Annuity increase to retirees

70% of CPI repeating

Employees Covered by Benefit Terms

At the December 31, 2019 valuation and measurement date, the following numbers of employees were

covered by the benefit terms:

Inactive employees or beneficiaries currently receiving benefits 34

Inactive employees entitled to but not yet receiving benefits 76

Active employees 105

Total 215

Contributions

The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee gross earnings,

and the municipal matching percentages are either 100%, 150%, or 200%, both as adopted by the

governing body of the municipality. Under the state law governing TMRS, the contribution rate for each

municipality is determined annually by the actuary, using the Entry Age Normal (EAN) 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.

Employees for the City were required to contribute 7% of their annual gross earnings during the fiscal

year. The City increased its employee contribution rate during the year. The contribution rates for the

City were 7% and 7% in calendar years 2019 and 2020, respectively. The City’s contributions to TMRS

for the year ended September 30, 2020, were $544,685, and were equal to the required contributions.

Net Pension Liability

The City’s Net Pension Liability (NPL) was measured as of December 31, 2019, and the Total Pension

Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of

that date.

Actuarial Assumptions

The Total Pension Liability in the December 31, 2019 actuarial valuation was determined using the

following actuarial assumptions:

Inflation

Overall payroll growth

Investment Rate of Return

2.50% per year

2.75% per year

6.75% net of pension plan investment expense,

expense, including inflation

Salary increases are based on a service-related table. Mortality rates for active members are based on

the PUB(10) mortality tables with the Public Safety table used for males and the General Employee table

used for females. Mortality rates for healthy retirees and beneficiaries are based on the Gender distinct

2019 Municipal Retirees of Texas mortality tables. The rates for actives, healthy retirees and

beneficiaries are projected on a fully generational basis by Scale UMP to account for future mortality

improvements. For disabled annuitants, the same mortality tables for healthy retirees is used with a 4-

year set-forward for males and a 3-year set-forward for females. In addition, a 3.5% and 3.0% minimum

mortality rate is applied, for males and females respectively, to reflect the impairment for younger

members who become disabled. The rates are projected on a fully generational basis by Scale UMP to

account for future mortality improvements subject to the floor.

38


The actuarial assumptions were developed primarily from the actuarial investigation of the experience

of TMRS over the four-year period from December 31, 2014 to December 31, 2018. They were adopted

in 2019 and first used in the December 31, 2109 actuarial valuation. The post-retirement mortality

assumption for Annuity Purchase Rates (APRs) is based on the Mortality Experience Investigation Study

covering 2009 through 2011 and dated December 31, 2013. 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 buildingblock

method in which best estimate ranges of expected future real rates of return (expected returns,

net of pension plan investment expenses and inflation) are developed for each major asset class. These

ranges are combined to produce the long-term expected rate of return by weighting the expected future

real rates of return by the target asset allocation percentage and by adding expected inflation. In

determining their best estimate of a 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 arithmetic real

rates return for each major asset class in fiscal year 2020 are summarized in the following table:

Long-Term Expected

Real Rate of Return

Asset Class Target Allocation (Arithmetic)

Global Equity 30.00% 5.30%

Core fixed income 10.00% 1.25%

Non-core fixed income 20.00% 4.14%

Real return 10.00% 3.85%

Real estate 10.00% 4.00%

Absolute return 10.00% 3.48%

Private equity 10.00% 7.75%

Total 100.00%

Discount Rate

The discount rate used to measure the Total Pension Liability 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 Total Pension Liability.

39


Changes in Net Pension Liability

Increase (Decease)

Total Pension Plan Fiduciary Net Pension

Liability Net Position Liability

(a) (b) (a)-(b)

Balance at 12/31/2018 $ 9,949,101 $ 8,225,712 $ 1,723,389

Changes for the year:

Service cost 921,228 - 921,228

Interest 690,759 - 690,759

Difference between expected

and actual experience 105,672 - 105,672

Contributions - employer - 516,348 ( 516,348)

Contributions - employee - 503,403 ( 503,403)

Net investment income - 1,274,464 ( 1,274,464)

Benefit payments, including refunds

of employee contributions ( 352,505) ( 352,505)

-

Change in assumptions 10,591 - 10,591

Administrative expense - ( 7,186)

7,186

Other changes - ( 215)

215

Net changes 1,375,745 1,934,309 ( 558,564)

Balance at 12/31/2019 $ 11,324,846 $ 10,160,021 $ 1,164,825

The City’s net pension liability is generally liquidated by the General Fund and Proprietary Funds

depending on an employee’s assignment at termination.

Discount Rate Sensitivity Analysis

The following presents the net pension liability of the City calculated using the discount rate of 6.75%,

as well as what the City’s net pension liability 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:

1% Decrease in Current Single 1% Increase in

Discount Rate Discount Rate Discount Rate

(5.75%) (6.75%) (7.75%)

City's net pension liability (asset) $ 3,033,324 $ 1,164,825 $( 361,971)

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 electronically at www.TMRS.org.

Pension Expense, Deferred Outflows, and Deferred Inflows of Resources Related to Pensions

For the year ended September 30, 2020, the City recognized pension expense in the governmental and

business-type activities of $529,205 and $88,365, respectively.

At September 30, 2020, the City reported deferred outflows of resources and deferred inflows of

resources related to pensions from the following sources:

Deferred Outflows

of Resources

Deferred Inflows

of Resources

Differences between expected and actual

economic experience $ 106,968 $ 33,353

Changes in actuarial assumptions 40,312 -

Difference between projected and actual

investment earnings - 297,795

Contributions subsequent to the

measurement date 384,378 -

Total $ 531,658 $ 331,148

40


The City reported $384,378 as deferred outflows of resources related to pensions resulting from

contributions subsequent to the measurement date will be recognized as a reduction of the net pension

liability for the year ending September 30, 2021. Other amounts reported as deferred outflows and

inflows of resources related to pensions will be recognized in pension expense as follows:

For the Year Ended

September 30,

2021 $( 27,140)

2022 ( 62,438)

2023 23,601

2024 ( 128,076)

2025 10,185

IX.

DEFINED OTHER POST-EMPLOYMENT BENEFIT (OPEB) PLAN – TMRS SUPPLEMENTAL DEATH

BENEFITS FUND

Plan Description

The City voluntarily participates in a single-employer other postemployment benefit (OPEB) plan

administered by TMRS. The Plan is a group-term life insurance plan known as the Supplemental Death

Benefits Fund (SDBF). The Plan is established and administered in accordance with the TMRS Act

identically to the City’s pension plan. SDBF includes coverage for both active and retired members, and

assets are commingled for the payment of such benefits. Therefore, the Plan does not qualify as an

OPEB Trust in accordance with paragraph 4 of GASB Statement No. 75.

Benefits Provided

The SDBF provides group-term life insurance to City employees who are active members in TMRS,

including or not including retirees. The City Council opted into this program via an ordinance, and 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.

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). The death benefit for retirees is considered an other employment benefit and is a fixed amount

of $7,500.

At the December 31, 2019 valuation and measurement date, the following employees were covered by

the benefit terms:

Contributions

Inactive employees or beneficiaries currently receiving benefits 30

Inactive employees entitled to but not yet receiving benefits 12

Active employees 105

Total 147

The City contributes to the SDBF at a contractually required rate as determined by an annual actuarial

valuation, which was 0.13% for 2020 and 0.13% for 2019, of which 0.01% and 0.01%, respectively,

represented the retiree-only portion for each year, as a percentage of annual covered payroll. The rate

is equal to the cost of providing one-year term life insurance. 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 prefund retiree term life insurance during employees’ entire careers. The City’s

contributions to the SDBF for the years ended September 30, 2020 and 2019 were $742 and $701,

respectively, representing contributions for both active and retiree coverage, which equaled the required

contributions each year.

Total OPEB Liability

The City's Net OPEB Liability (TOL) was measured as of December 31, 2019 and was determined by an

actuarial valuation as of that date.

41


Actuarial assumptions

The Total OPEB Liability in the December 31, 2019 actuarial valuation was determined using the

following actuarial assumptions:

Inflation rate 2.50%

Salary increases

3.5% to 11.5% including inflation

Discount rate 2.75%

Mortality rates for active members, retirees, and beneficiaries were based on the gender-distinct 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 male 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

became disabled. The rates are projected on a fully generational basis by scale BB to account for future

mortality improvements subject to the 3% floor. Administrative expenses for the SDBF are paid through

the TMRS Pension Trust Fund and are wholly accounted for under the provisions of GASB Statement No.

68.

Changes in assumptions reflect the annual change in the municipal bond rate. The actuarial assumptions

used in the December 31, 2019 valuation were based on the results of an actuarial experience study for

the period December 31, 2014 to December 31, 2018.

Discount Rate

The SDBF program is treated as an unfunded OPEB plan because the SDBF trust covers both actives

and retirees and the assets are not segregated for these groups. As such, a single discount rate of

2.75% was used to measure the Total OPEB Liability. Because the plan is essentially a “pay-as-you-go”

plan, the single discount rate is equal to the prevailing municipal bond rate. The source of the municipal

bond rate was fixed-income municipal bonds with 20 years to maturity that include only federally taxexempt

municipal bonds as reported in Fidelity Index’s “20-year Municipal GO AA Index” as of December

31, 2019.

Changes in the Total OPEB Liability

Total OPEB

Liability

Balance at 12/31/2018 $ 157,925

Changes for the year:

Service cost 12,226

Interest 6,072

Difference between expected and actual experience (2,388)

Changes of assumptions 41,224

Benefit payments (720)

Net changes 56,414

Balance at 12/31/2019 $ 214,339

Discount Rate Sensitivity Analysis

The following presents the total OPEB liability of the City, calculated using the discount rate of 2.75%,

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 (1.75%) or 1 percentage-point higher (3.75%) than the current rate:

1% Decrease in 1% Increase in

Discount Rate Discount Rate Discount Rate

Total OPEB Liability $ 267,238 $ 214,339 $

173,999

42


OPEB Expense, Deferred Outflows, and Deferred Inflows of Resources Related to OPEB

For the year ended September 30, 2020, the City recognized OPEB expense in the governmental

activities and business-type activities of $20,010 and $3,341, respectively.

At September 30, 2020, 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

Differences between expected and actual

economic experience $ -

$ 2,853

Changes in actuarial assumptions 44,995 10,338

Contributions subsequent to the

measurement date 541 -

Total $ 45,536 $ 13,191

The City reported $541 as deferred outflows of resources related to OPEB resulting from contributions

subsequent to the measurement date which will be recognized as a reduction of the total OPEB liability

for the year ending September 30, 2021. Other amounts reported as deferred outflows and inflows of

resources related to pensions will be recognized in pension expense as follows:

For the Year Ended

September 30,

2021 $ 5,053

2022 5,053

2023 5,053

2024 5,053

2025 5,053

Thereafter 6,539

X. COMMITMENTS AND CONTINGENCIES

Wastewater Treatment Services

The City has entered into a contract with the Trinity River Authority of Texas - Red Oak Creek Regional

Wastewater System to obtain wastewater treatment services, which has no expiration date. In the

contract, the Authority agreed to acquire and construct a regional wastewater treatment system to serve

the City and other contractual parties, in the area of the watershed or drainage basin of Red Oak Creek,

being a tributary of the Trinity River, and located in Ellis and Dallas Counties, Texas. The Trinity River

Authority is a governmental agency, which is controlled by directors appointed by the governor.

The City is responsible for a proportionate share of the system's annual operation, maintenance and

debt service costs for the term of the contract. These costs are determined annually and are payable in

monthly installments. Actual payments for the year ended September 30, 2020 were $3,452,046. The

payments to be received from the City of Red Oak are used as collateral for the bonds issued by TRA to

construct the facility.

Complete separate financial statements far the Trinity River Authority may be obtained at Trinity River

Authority of Texas, 5300 South Collins, P.O. Box 60, Arlington, Texas 76004.

Police Dispatching Services

The City has entered into a contract with the City of Midlothian, Texas to combine dispatching services

for both cities, effective October 1, 2009. In May 2020, the contract was extended another five years..

In the contract, the City of Midlothian will assume and provide all dispatching services.

The City of Red Oak is responsible for a proportionate share of the cost of dispatching services for the

term of the contract. The City of Red Oak has agreed to pay the sum of $585,396 to the City of Midlothian

annually for the first three years of the contract, payable in quarterly installments. After the initial three

years of the contract the costs will be determined annually and are payable in quarterly installments.

43


Amounts received or receivable from grantor agencies ore subject to audit and adjustment by grantor

agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the

applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor, cannot

be determined at this time although the government expects such amounts, if any, to be immaterial.

XI.

RISK MANAGEMENT

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of

assets; errors and omissions; injuries to employees; and natural disasters. The City maintains

commercial insurance coverage covering each of those risks of loss. Management believes such coverage

is sufficient to preclude any significant uninsured losses to the City. Settled claims have not exceeded

this commercial coverage in any of the past three fiscal years.

XII.

TAX ABATEMENTS

The city enters into economic development agreements designed to promote development and

redevelopment within the City, spur economic improvement, stimulate commercial activity, generate

additional sales tax and enhance the property tax base and economic vitality of the City. A portion of

the City's economic development agreements are authorized under Chapter 312 (Property

Redevelopment and Tax Abatement) of the Texas Tax Code. The economic development agreements

are designed to support the creation of new businesses, the expansion and retention of existing

businesses within the City, and the attraction of companies that offer high impact jobs and share the

community's values. Recipients may be eligible to receive economic assistance based on the

employment, or community impact of the project requesting assistance. Recipients generally commit to

building or remodeling real property and related infrastructures, redeveloping properties, expanding

operations or bringing targeted businesses to the City. These agreements have no formal recapture

provisions. For FY 2020, the City abated $673,135 in taxes.

The City enters into various agreements under Chapter 380 of the Texas Local Government Code to

stimulate economic development. The City benefits from 380 agreements through the promotion of

economic development activity, job creation, increased tax revenues, increased opportunity for input

into new development construction of city/county projects, creation of new businesses, infrastructure

commitments, and streamlining implementation. These development incentives typically take the form

of property tax abatements, loans or grants, commitments for infrastructure, or payments of portions

of the sales tax generated by the project. For FY 2020, the City did not rebate any taxes.

XIII.

PRIOR PERIOD ADJUSTMENTS

Beginning fund balance in the Industrial Development Corporation was restated by $2,180,231 to correct

assets held for sale purchased in prior years.

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THIS PAGE LEFT BLANK INTENTIONALLY


REQUIRED SUPPLEMENTARY

INFORMATION


CITY OF RED OAK, TEXAS

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCE - BUDGET (BUDGET BASIS) AND ACTUAL

GENERAL FUND

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Variance with

Final Budget

Original Final Positive

Budget Budget Actual (Negative)

REVENUES

Property taxes $ 5,948,267 $ 5,948,267 $ 6,060,672 $ 112,405

Sales taxes 2,523,556 2,523,556 2,802,285 278,729

Franchise tax 771,218 771,218 742,438 ( 28,780)

Alcoholic beverage tax 15,000 15,000 9,878 ( 5,122)

Intergovernmental 567,930 567,930 1,372,133 804,203

Contributions 20,000 26,385 144,367 117,982

Licenses and permits 704,000 704,000 1,068,879 364,879

Fines and forfeitures 575,900 575,900 379,145 ( 196,755)

Charges for services 606,510 606,510 550,359 ( 56,151)

Investment earnings 75,000 75,000 77,730 2,730

Miscellaneous 54,000 117,800 43,819 ( 73,981)

Total revenues 11,861,381 11,931,566 13,251,705 1,320,139

EXPENDITURES

Current:

General government 1,713,318 1,713,318 1,610,525 102,793

Public safety 8,438,423 8,448,608 8,070,342 378,266

Culture and recreation 1,069,460 1,069,460 704,904 364,556

Public works 2,081,287 2,081,287 1,971,561 109,726

Capital outlay 1,094,660 1,154,660 523,251 631,409

Debt service:

Principal 66,395 66,395 - 66,395

Interest and fiscal charges 40,000 40,000 22,100 17,900

Total expenditures 14,503,543 14,573,728 12,902,683 1,671,045

Excess (deficiency) of revenues

over (under) expenditures ( 2,642,162) ( 2,642,162) 349,022 2,991,184

OTHER FINANCING SOURCES (USES)

Issuance of bonds 790,000 790,000 773,000 ( 17,000)

Transfers in 799,110 799,110 754,225 ( 44,885)

Total other financing sources

(uses) 1,589,110 1,589,110 1,527,225 ( 61,885)

CHANGE IN FUND BALANCE ( 1,053,052) ( 1,053,052) 1,876,247 2,929,299

FUND BALANCE - BEGINNING 3,078,782 3,078,782 3,078,782 -

FUND BALANCE - ENDING $ 2,025,730 $ 2,025,730 $ 4,955,029 $ 2,929,299

45


CITY OF RED OAK, TEXAS

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCE - BUDGET (BUDGET BASIS) AND ACTUAL

INDUSTRIAL DEVELOPMENT CORPORATION

FOR YEAR ENDED SEPTEMBER 30, 2020

Variance with

Final Budget

Original Final Positive

Budget Budget Actual (Negative)

REVENUES

Sales taxes $ 1,286,450 $ 1,286,450 $ 1,391,261 $ 104,811

Investment earnings 7,500 7,500 112,672 105,172

Charges for services - 2,500,000 7,589,503 5,089,503

Total revenues 1,293,950 3,793,950 9,093,436 5,299,486

EXPENDITURES

Current:

Industrial development 1,071,586 1,071,586 1,104,636 ( 33,050)

Capital outlay 1,000 1,000 109,138 ( 108,138)

Debt service:

Principal 385,000 385,000 385,000 -

Interest and fiscal charges 99,539 99,539 99,504 35

Total expenditures 1,557,125 1,557,125 1,698,278 ( 141,153)

Excess (deficiency) of revenues

over (under) expenditures ( 263,175) 2,236,825 7,395,158 5,158,333

OTHER FINANCING SOURCES (USES)

Transfers out ( 536,825) ( 3,036,825) ( 3,036,825)

-

Total other financing sources

(uses) ( 536,825) ( 3,036,825) ( 3,036,825)

-

CHANGE IN FUND BALANCE ( 800,000) ( 800,000) 4,358,333 5,158,333

FUND BALANCE - BEGINNING 5,885,528 5,885,528 5,885,528 -

PRIOR PERIOD ADJUSTMENT - - 2,180,231 2,180,231

FUND BALANCE - BEGINNING,

RESTATED 5,885,528 5,885,528 8,065,759 2,180,231

FUND BALANCE - ENDING $ 5,085,528 $ 5,085,528 $ 12,424,092 $ 5,158,333

46


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CITY OF RED OAK, TEXAS

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCE - BUDGET (BUDGET BASIS) AND ACTUAL

ECONOMIC DEVELOPMENT CORPORATION

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Variance with

Final Budget

Original Final Positive

Budget Budget Actual (Negative)

REVENUES

Sales taxes $ 1,286,450 $ 1,286,450 $ 1,391,261 $ 104,811

Investment earnings 42,750 42,750 63,162 20,412

Miscellaneous - - 10,370 10,370

Total revenues 1,329,200 1,329,200 1,464,793 135,593

EXPENDITURES

Current:

Economic development 3,458,475 11,731,366 58,940 11,672,426

Capital outlay 1,800 39,100 470,332 ( 431,232)

Debt service:

Principal 489,891 866,587 981,062 ( 114,475)

Interest and fiscal charges - - 191,627 ( 191,627)

Bond issuance costs - 16,500 255,321 ( 238,821)

Total expenditures 3,950,166 12,653,553 1,957,282 ( 10,696,271)

Excess (deficiency) of revenues

over (under) expenditures ( 2,620,966) ( 11,324,353) ( 492,489) 10,831,864

OTHER FINANCING SOURCES (USES)

Issuance of bonds - 8,670,000 8,670,000 -

Premium on issuance of bonds - 33,386 33,386 -

Transfers out ( 196,285) ( 196,285) ( 196,285)

-

Total other financing sources (uses)

(uses) ( 196,285) 8,507,101 8,507,101 -

CHANGE IN FUND BALANCE ( 2,817,251) ( 2,817,252) 8,014,612 10,831,864

FUND BALANCE - BEGINNING 5,314,868 5,314,868 5,314,868 -

FUND BALANCE - ENDING $ 2,497,617 $ 2,497,616 $ 13,329,480 $ 10,831,864

47


CITY OF RED OAK, TEXAS

SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS

TEXAS MUNICIPAL RETIREMENT SYSTEM (TMRS)

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Measurement year December 31, 2015 2016 2017

Total pension liability

Service cost $ 512,394 $ 580,682 $ 626,818

Interest (on the total pension liability) 407,518 468,608 534,454

Change in benefit terms including

substantively automatic status - - -

Difference between expected and

actual experience 34,307 46,944 ( 21,482)

Changes in assumptions 251,468 - -

Benefit payments, including refunds

of employee contributions ( 117,105) ( 121,238) ( 166,370)

Net change in total pension liability 1,088,582 974,996 973,420

Total pension liability - beginning 5,624,035 6,712,617 7,687,613

Total pension liability - ending (a) $ 6,712,617 $ 7,687,613 $ 8,661,033

Plan fiduciary net position

Contributions - employer $ 230,360 $ 278,291 $ 332,845

Contributions - employee 289,761 314,449 343,776

Net investment income 7,757 382,950 903,473

Benefit payments, including refunds

of employee contributions ( 117,105) ( 121,238) ( 166,370)

Administrative expenses ( 4,722) ( 4,321) ( 4,677)

Other ( 234) ( 234) ( 237)

Net change in plan fiduciary net position 405,817 849,897 1,408,810

Plan fiduciary net position - beginning 5,255,769 5,661,586 6,511,483

Plan fiduciary net position - ending (b) $ 5,661,586 $ 6,511,483 $ 7,920,293

Net Pension Liability (a) - (b) $ 1,051,031 $ 1,176,130 $ 740,740

Plan fiduciary net position as a

percentage of total pension liability 84.34% 84.70% 91.45%

Covered payroll $ 4,719,828 $ 5,113,962 $ 5,634,270

Net pension liability as a percentage

of covered payroll 22.27% 23.00% 13.15%

Note: GASB Statement 68 requires this schedule to report 10 years of data. Data prior to 2014 is not

available.

48


2018 2019

$ 823,175 $ 921,228

613,494 690,759

147,850 -

( 33,117)

105,672

- 10,591

( 263,334) ( 352,505)

1,288,068 1,375,745

8,661,033 9,949,101

$ 9,949,101 $ 11,324,846

$ 409,733 $ 516,348

401,432 503,403

( 237,587) 1,274,464

( 263,334) ( 352,505)

( 4,585) ( 7,186)

( 240) ( 215)

305,419 1,934,309

7,920,293 8,225,712

$ 8,225,712 $ 10,160,021

$ 1,723,389 $ 1,164,825

82.68% 89.71%

$ 6,386,149 $ 7,191,473

26.99% 16.20%

49


CITY OF RED OAK, TEXAS

SCHEDULE OF EMPLOYER CONTRIBUTIONS

TEXAS MUNICIPAL RETIREMENT SYSTEM (TMRS)

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Fiscal year ended September 30, 2015 2016 2017

Actuarially determined contribution $ 220,318 $ 270,906 $ 325,033

Contribution in relation to the actuarially

determined contribution 220,318 270,906 325,033

Contribution deficiency - - -

Covered payroll $ 4,719,828 $ 5,113,962 $ 5,631,270

Contributions as a percentage of covered

payroll 4.67% 5.30% 5.77%

Notes to Schedule

Valuation date

Actuarially determined contribution rates are calculated

Methods and assumptions used to determine contribution rates:

Actuarial Cost Method

Amortization Method

Remaining Amortization Period

Asset Valuation Method

Inflation

Salary increases

Investment rate of return

Retirement Age

Entry age normal

Level percentage of payroll, closed

25 years

10 year smoothed market: 12% soft corridor

2.5%

3.50% to 11.5% including inflation

6.75%

Experienced-based table of rates that are specific to the

City's plan of benefits. Last updated for the 2019

valuation pursuant to an experience study of the period

2014-2018.

Mortality

Other information:

Notes

Post-retirement:2019 Municipal Retirees of Texas

Mortality Tables. The rates are projected on a fully

generational basis with scale UMP. Pre-retirement:

PUB(10) mortality tables, with the Public Safety table

used for males and General Employee table used for

females. The rates are projected on a fully generational

basis with scale UMP.

There were no benefit changes during the year.

50


2018 2019 2020

$ 380,870 $ 511,496 $ 544,685

380,870 511,496 544,685

- - -

$ 6,173,535 $ 7,012,203 $ 7,419,342

6.17% 7.29% 7.34%

51


CITY OF RED OAK, TEXAS

SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS

TEXAS MUNICIPAL RETIREMENT SYSTEM (TMRS)

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Measurement year December 31, 2017 2018 2019

Total pension liability

Service cost $ 10,313 $ 12,772 $ 12,226

Interest (on the total pension liability) 4,945 5,340 6,072

Difference between expected and

actual experience - ( 1,035) ( 2,388)

Changes in assumptions 14,611 ( 13,762)

41,224

Benefit payments, including refunds

of employee contributions ( 573) ( 639) ( 720)

Net change in total pension liability 29,296 2,676 56,414

Total pension liability - beginning 125,953 155,249 157,925

Total pension liability - ending (a) $ 155,249 $ 157,925 $ 214,339

Covered payroll $ 5,634,270 $ 6,386,149 $ 7,191,473

Net pension liability as a percentage

of covered payroll 2.755% 2.473% 2.980%

52


COMBINING SCHEDULES


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NONMAJOR GOVERNMENTAL FUNDS

TOURISM FUND – This fund is to account for hotel occupancy taxes collected within the City. These resources

are restricted for the purpose of promoting tourism in the City.

PARKS IMPROVEMENT FUND – This fund is to account for contributions and fees restricted for for

improvements to parks.

STREET CONSTRUCTION – This fund is to account for street construction and improvements in the City.

2018 CO BOND FUND – This fund is to account for capital construction funded by the 2018 Certificates of

Obligation.


CITY OF RED OAK, TEXAS

COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS

SEPTEMBER 30, 2020

Special

Revenue

Capital Projects

Total Nonmajor

Park Street 2018 CO Governmental

Tourism Improvements Construction Bond Fund Funds

ASSETS

Cash and cash equivalents $ 403,283 $ 2,500,000 $ - $ - $ 2,903,283

Investments - 33,150 - 958,043 991,193

Accounts receivable (net) - - - - -

Due from other funds - 669,146 - - 669,146

Total assets $ 403,283 $ 3,202,296 $ - $ 958,043 $ 4,563,622

LIABILITIES

Accounts payable $ 1,033 $ - $ - $ 41,624 $ 42,657

Accrued liabilities 2,903 - - - 2,903

Due to other funds - - - 164,805 164,805

Customer Deposits 3,800 - - - 3,800

Total liabilities 7,736 - - 206,429 214,165

FUND BALANCES

Restricted:

Culture and recreation 395,547 - - - 395,547

Capital projects - 3,202,296 - 751,614 3,953,910

Total fund balances 395,547 3,202,296 - 751,614 4,349,457

Total liabilities and fund balances $ 403,283 $ 3,202,296 $ - $ 958,043 $ 4,563,622

53


CITY OF RED OAK, TEXAS

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Special

Revenue

Capital Projects

Total Nonmajor

Park Street 2018 CO Governmental

Tourism Improvements Construction Bond Fund Funds

REVENUES

Property taxes $ - $ - $ - $ - $

-

Hotel occupancy tax 162,389 - - - 162,389

Licenses and permits - 208,241 - - 208,241

Charges for services 14,353 - - - 14,353

Investment earnings - - - 14,928 14,928

Miscellaneous 1,564 629 - - 2,193

Total revenues 178,306 208,870 - 14,928 402,104

EXPENDITURES

Current:

Culture and recreation 95,526 - - - 95,526

Public works - - - 92,163 92,163

Capital outlay - - - 41,562 41,562

Debt service:

Principal - - - - -

Interest and fiscal charges - - - - -

Bond issuance cost - - - - -

Total expenditures 95,526 - - 133,725 229,251

Excess (deficiency) of revenues

over expenditures 82,780 208,870 - ( 118,797) 172,853

OTHER FINANCING SOURCES

(USES)

Issuance of bonds - - - - -

Premium on issuance of bonds - - - - -

Transfers in - 2,500,000 - - 2,500,000

Transfers out ( 14,353)

- ( 6,762)

- ( 21,115)

Total other financing sources

(uses) ( 14,353) 2,500,000 ( 6,762)

- 2,478,885

CHANGE IN FUND BALANCE 68,427 2,708,870 ( 6,762) ( 118,797) 2,651,738

FUND BALANCE - BEGINNING 327,120 493,426 6,762 870,411 1,697,719

FUND BALANCE - ENDING $ 395,547 $ 3,202,296 $ - $ 751,614 $ 4,349,457

54


CITY OF RED OAK, TEXAS

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCE - BUDGET (BUDGET BASIS) AND ACTUAL

TOURISM

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Variance with

Actual Final Budget

Original Final GAAP Positive

Budget Budget Basis (Negative)

REVENUES

Hotel occupancy tax $ 220,000 $ 220,000 $ 162,389 $( 57,611)

Charges for services 66,000 66,000 14,353 ( 51,647)

Miscellaneous - - 1,564 1,564

Total revenues 286,000 286,000 178,306 ( 107,694)

EXPENDITURES

Current:

Culture and recreation 142,936 142,936 95,526 47,410

Total expenditures 142,936 142,936 95,526 47,410

Excess (deficiency) of revenues

over (under) expenditures 143,064 143,064 82,780 ( 60,284)

OTHER FINANCING SOURCES (USES)

Transfers out ( 66,000) ( 66,000) ( 14,353) 51,647

Total other financing sources (uses) ( 66,000) ( 66,000) ( 14,353) 51,647

CHANGE IN FUND BALANCE 77,064 77,064 68,427 ( 8,637)

FUND BALANCE - BEGINNING 327,120 327,120 327,120 -

FUND BALANCE - ENDING $ 404,184 $ 404,184 $ 395,547 $( 8,637)

55


CITY OF RED OAK, TEXAS

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCE - BUDGET (BUDGET BASIS) AND ACTUAL

DEBT SERVICE FUND

FOR THE YEAR ENDED SEPTEMBER 30, 2020

Variance with

Actual Final Budget

Original Final GAAP Positive

Budget Budget Basis (Negative)

REVENUES

Property taxes $ 1,811,428 $ 1,811,428 $ 1,844,434 $ 33,006

Total revenues 1,811,428 1,811,428 1,844,434 33,006

EXPENDITURES

Debt service:

Principal 1,007,028 1,007,028 1,168,000 ( 160,972)

Interest and fiscal charges 804,400 804,400 617,900 186,500

Bond issuance costs - - 43,847 ( 43,847)

Total expenditures 1,811,428 1,811,428 1,829,747 ( 18,319)

Excess (deficiency) of revenues

over expenditures - - 14,687 14,687

OTHER FINANCING SOURCES (USES)

Issuance of refunding bonds - 1,830,000 1,830,000 -

Premium on issuance of bonds - 216,945 216,945 -

Payment to escrow agent - current refunding - ( 2,041,218) ( 2,041,218)

-

Total other financing sources (uses) - 2,046,945 5,727 ( 2,041,218)

CHANGE IN FUND BALANCE - 2,046,945 20,414 ( 2,026,531)

FUND BALANCE - BEGINNING 85,641 85,641 85,641 85,641

FUND BALANCE - ENDING $ 85,641 $ 2,132,586 $ 106,055 $( 1,940,890)

56


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STATISTICAL SECTION


THIS PAGE LEFT BLANK INTENTIONALLY


STATISTICAL SECTION

(Unaudited)

This part of the City of Jacksonville, Texas’ comprehensive annual financial report presents detailed

information as a context for understanding what the information in the financial statements, note

disclosures, and required supplementary information says about the government’s overall financial

health.

Contents

Page Number

Financial Trends 57

These schedules contain trend information to help the reader

understand how the City’s financial performance and well-being have

changed over time.

Revenue Capacity 65

These schedules contain trend information to help the reader assess

factors affecting the City’s ability to generate its property and sales

taxes.

Debt Capacity 72

These schedules present information to help the reader assess the

affordability of the City’s current levels of outstanding debt and the

City’s ability to issue additional debt in the future.

Demographic and Economic Information 80

These schedules offer demographic and economic indicators to help

the reader understand the environment within which the City’s

financial activities take place.

Operating Information 84

These schedules contain service and infrastructure data to help the

reader understand how the information 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

comprehensive annual financial reports for the relevant year


CITY OF RED OAK, TEXAS

NET POSITION BY COMPONENET

LAST TEN FISCAL YEARS

(UNAUDITED)

(ACCRUAL BASIS OF ACCOUNTING)

2011 2012 2013 2014

Governmental activities:

Net investment in capital assets $ 5,871,282 $ 5,758,275 $ 2,857,779 $ 3,924,047

Restricted 3,936,986 4,666,499 7,755,036 4,630,580

Unrestricted 1,494,086 1,526,449 1,200,906 2,195,547

Total governmental activities $ 11,302,354 $ 11,951,223 $ 11,813,721 $ 10,750,174

Business-type activities:

Net investment in capital assets $ 2,871,854 $ 791,014 $ 880,487 $ 47,760

Restricted - - - -

Unrestricted 236,512 1,729,831 1,151,083 892,368

Total business-type activities $ 3,108,366 $ 2,520,845 $ 2,031,570 $ 940,128

Primary government

Net investment in capital assets $ 8,743,136 $ 6,549,289 $ 3,738,266 $ 3,971,807

Restricted 3,936,986 4,666,499 7,755,036 4,630,580

Unrestricted 1,730,598 3,256,280 2,351,989 3,087,915

Total primary government $ 14,410,720 $ 14,472,068 $ 13,845,291 $ 11,690,302

57


Table 1

2015 2016 2017 2018 2019 2020

$ 3,341,213 $( 61,393) $ 1,205,774 $ 1,569,243 $( 1,441,691) $ 3,113,430

5,182,954 6,588,865 13,639,229 14,435,879 18,622,126 23,330,619

3,379,870 3,238,006 1,256,990 1,528,881 1,825,330 5,300,578

$ 11,904,037 $ 9,765,478 $ 16,101,993 $ 17,534,003 $ 19,005,765 $ 31,744,627

$( 557,294) $( 2,110,124) $( 2,232,567) $( 258,524) $ 892,476 $ 833,237

- - - - - 553,249

1,395,088 2,857,208 4,656,000 3,979,521 3,012,786 3,642,709

$ 837,794 $ 747,084 $ 2,423,433 $ 3,720,997 $ 3,905,262 $ 5,029,195

$ 2,783,919 $( 2,171,517) $( 1,026,793) $ 1,310,719 $( 549,215) $ 3,946,667

5,182,954 6,588,865 13,639,229 14,435,879 18,622,126 23,883,868

4,774,958 6,095,214 5,912,990 5,508,402 4,838,116 8,943,287

$ 12,741,831 $ 10,512,562 $ 18,525,426 $ 21,255,000 $ 22,911,027 $ 36,773,822

58


CITY OF RED OAK, TEXAS

CHANGES IN NET POSITION

LAST TEN FISCAL YEARS

(UNAUDITED)

(ACCRUAL BASIS OF ACCOUNTING)

2011 2012 2013 2014

EXPENSES

Governmental activities:

General government $ 919,332 $ 1,083,403 $ 1,042,914 $ 1,166,129

Public safety 4,736,612 6,076,660 5,628,721 5,955,135

Culture and recreation 232,818 212,746 228,287 367,775

Public works 1,827,254 1,477,838 1,488,066 1,194,723

Industrial development 156,953 334,982 249,388 1,265,510

Economic development 221,164 167,579 180,873 215,678

Interest and fiscal charges 329,807 378,979 453,192 489,796

Total governmental activities expense 8,423,940 9,732,187 9,271,441 10,654,746

Business-type activities:

Utility and storm water 4,690,889 4,982,041 5,239,606 5,849,502

Total business-type activities expense 4,690,889 4,982,041 5,239,606 5,849,502

Total Primary government expense 13,114,829 14,714,228 14,511,047 16,504,248

PROGRAM REVENUES

Governmental activities:

Charges for services

General government 140,565 - - -

Public safety 660,196 644,856 554,342 668,752

Cultural and recreational 38,856 17,669 161,049 240,294

Public works - 282,194 405,231 399,922

Industrial development - - - -

Operating grants/contributions 337,921 641,779 427,099 162,785

Capital grants/contributions 115,491 161,266 643,386 -

Total governmental activities 1,293,029 1,747,764 2,191,107 1,471,753

Business-type activities:

Charges for services 2,768,747 3,380,120 3,208,811 3,924,307

Capital grants/contributions 18,350 147,996 205,388 -

Total business-type activities 2,787,097 3,528,116 3,414,199 3,924,307

Total primary government 4,080,126 5,275,880 5,605,306 5,396,060

NET (EXPENSE) REVENUES

Governmental activities ( 6,255,809) ( 5,913,026) ( 6,232,833) ( 8,260,434)

Business-type activities ( 1,581,597) ( 678,143) ( 1,276,690) ( 1,057,734)

Total primary government ( 7,837,406) ( 6,591,169) ( 7,509,523) ( 9,318,168)

59


Table 2

2015 2016 2017 2018 2019 2020

$ 1,213,141 $ 1,588,331 $ 1,785,438 $ 1,082,232 $ 1,667,818 $ 1,876,147

6,324,778 6,781,475 7,043,748 8,386,948 9,257,914 8,680,540

355,288 367,427 393,236 415,230 427,254 848,530

1,407,964 1,601,788 1,642,088 1,483,194 1,847,970 2,774,598

85,544 63,339 96,124 173,975 155,888 1,104,636

134,769 188,748 394,622 251,187 191,916 58,940

444,474 328,730 563,095 453,671 454,153 1,550,846

9,965,958 10,919,838 11,918,351 12,246,437 14,002,913 16,894,237

5,672,450 6,461,674 6,605,036 6,838,560 7,838,995 8,812,523

5,672,450 6,461,674 6,605,036 6,838,560 7,838,995 8,812,523

15,638,408 17,381,512 18,523,387 19,084,997 21,843,908 25,706,760

- - - - - -

744,683 744,683 467,813 467,813 432,708 410,859

321,703 321,703 453,860 453,860 811,267 1,105,967

401,870 401,870 456,898 456,898 550,923 745,400

- - - - - 7,589,503

224,921 224,921 339,721 339,721 575,728 1,372,677

- - - - - 3,519,935

1,693,177 1,693,177 1,718,292 1,718,292 2,370,626 14,744,341

4,747,708 4,747,708 5,577,700 5,577,700 8,009,066 8,715,261

- - 818,071 818,071 - 1,104,544

4,747,708 4,747,708 6,395,771 6,395,771 8,009,066 9,819,805

6,440,885 6,440,885 8,114,063 8,114,063 10,379,692 24,564,146

( 8,961,569) ( 8,961,569) ( 8,247,666) ( 8,247,666) ( 11,632,287) ( 2,149,896)

( 1,101,794) ( 1,101,794) ( 94,750) ( 94,750) 170,071 1,007,282

( 10,063,363) ( 10,063,363) ( 8,342,416) ( 8,342,416) 11,462,216 ( 1,142,614)

60


CITY OF RED OAK, TEXAS

CHANGES IN NET POSITION

LAST TEN FISCAL YEARS

(UNAUDITED)

(ACCRUAL BASIS OF ACCOUNTING)

2011 2012 2013 2014

GENERAL REVENUES

Governmental activities:

Taxes

Property taxes $ 3,724,495 $ 3,740,229 $ 3,828,869 $ 4,090,144

Sales tax 1,943,444 2,430,548 2,754,847 3,020,651

Franchise tax 585,450 585,424 577,663 648,314

Hotel/motel taxes 55,940 83,506 94,877 103,030

Alcoholic Beverage tax 3,731 4,186 5,728 8,224

Investment earnings 102,726 98,132 87,121 103,083

Gain on sale of land held for resale - 1,178,986 - -

Miscellaneous 87,343 92,067 91,657 304,230

Transfers - - - 84,731

Total governmental activities 6,503,129 8,213,078 7,440,762 8,362,407

Business-type activities:

Investment earnings 15,887 6,877 2,623 918

Transfers - - - ( 84,731)

Gain on sale of capital assets - - - -

Total business-type activities 15,887 6,877 2,623 ( 83,813)

Total primary government 6,519,016 8,219,955 7,443,385 8,278,594

CHANGE IN NET POSITION

Governmental activities ( 449,058) 648,869 ( 137,502) ( 845,039)

Business-type activities ( 750,695) ( 587,521) ( 489,275) ( 754,231)

Total primary government $( 1,199,753) $ 61,348 $( 626,777) $( 1,599,270)

61


Table 2

2015 2016 2017 2018 2019 2020

$ 4,188,900 $ 4,722,883 $ 5,271,979 $ 5,900,323 $ 6,917,413 $ 8,000,818

4,072,836 3,897,973 3,761,566 4,433,407 4,693,893 5,584,807

780,644 759,708 853,683 735,818 777,141 742,438

1,228,282 165,188 162,468 169,662 195,732 162,389

8,663 12,501 11,887 13,641 13,950 9,878

108,996 117,567 138,709 189,107 353,138 332,046

881 1,148,148 196,685 - - -

279,436 166,420 199,281 126,087 - 56,382

- - - ( 137,958) 152,782 -

10,990,388 10,990,388 10,429,431 11,430,087 13,104,049 14,888,758

881 1,412 5,545 13,203 14,194 8,215

- - 166,821 137,958 - -

- - - - - 108,436

881 1,412 172,366 151,161 14,194 116,651

9,563,238 10,991,800 10,601,797 11,581,248 13,118,243 15,005,409

1,314,691 2,022,092 546,815 1,537,785 1,471,762 12,738,862

( 93,869) ( 90,710) 1,515,367 1,303,131 184,265 1,123,933

$ 1,220,822 $ 1,931,382 $ 2,062,182 $ 2,840,916 $ 1,656,027 $ 13,862,795

62


CITY OF RED OAK, TEXAS

FUND BALANCES

GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS

(UNAUDITED)

(MODIFIED ACCRUAL BASIS OF ACCOUNTING)

2011 2012 2013 2014

General Fund

Nonspendable:

Prepaids and Inventory $ 45,024 $ 93,372 $ 75,521 $ 91,123

Restricted:

Use of Bond proceeds - - 1,057,000 -

Capital projects - - - -

Committed:

Court Security 72,582 74,970 50,748 35,799

Court Technology 65,772 46,611 39,835 29,049

Public Safety 27,414 36,849 15,650 61,143

Assigned:

Subsequent year's budget - - - -

Unassigned 932,165 1,016,686 1,064,147 958,619

Total General Fund $ 1,142,957 $ 1,268,488 $ 2,302,901 $ 1,175,733

All other Governmental Funds

Nonspendable:

Prepaid $ - $ - $ - $ -

Restricted:

Debt service 41,236 90,662 89,728 75,585

Capital projects 1,469,680 1,243,228 506,821 231,865

Committed:

Culture and recreation - 16,270 28,229 54,852

Industrial & economic development 3,067,049 2,814,814 4,278,133 6,229,501

Total all other governmental funds 4,577,965 4,164,974 4,902,911 6,591,803

Total Fund Balances $ 7,227,643 $ 5,720,922 $ 5,433,462 $ 7,205,812

63


Table 3

2015 2016 2017 2018 2019 2020

$ 91,692 $ 92,413 $ 16,017 $ 7,222 $ 8,085 $ 4,182

- - - - - -

218,825 218,825 218,825 256,527 256,527 256,527

6,246 13,885 20,064 25,482 31,542 34,519

28,868 923 1,017 305 37 3,293

39,213 44,755 35,075 31,169 35,382 73,534

- - - - - 428,796

1,479,205 1,580,167 2,032,692 2,205,015 2,747,209 4,154,178

$ 1,864,049 $ 1,950,968 $ 2,323,690 $ 2,525,720 $ 3,078,782 $ 4,955,029

$ - $ - $ 198,789 $ 32,336 $ 32,336 $ -

118,350 98,857 79,449 96,442 85,641 106,055

180,078 155,502 355,991 372,997 6,717,817 8,283,793

74,911 118,313 238,186 268,902 327,120 395,547

5,642,893 6,864,906 12,491,833 13,332,513 11,168,060 25,753,572

6,016,232 7,237,578 13,364,248 14,103,190 18,330,974 34,538,967

$ 7,767,536 $ 7,880,281 $ 15,687,938 $ 16,628,910 $ 21,409,756 $ 39,493,996

64


CITY OF RED OAK, TEXAS

CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS

(UNAUDITED)

(MODIFIED ACCRUAL BASIS OF ACCOUNTING)

2011 2012 2013 2014

REVENUE

Property taxes $ 3,727,806 $ 3,751,225 $ 3,842,276 $ 4,081,650

Sales tax 1,943,444 2,430,548 2,754,847 3,020,651

Franchise tax 585,450 585,424 577,663 648,314

Hotel occupancy taxes 55,940 83,506 94,877 103,030

Alcoholic Beverage tax 3,731 4,186 5,728 8,224

Licenses and permits 240,294 236,842 321,703 342,782

Fines and Forfeitures 668,752 707,514 744,683 495,823

Charges for services 399,922 399,136 401,870 428,433

Investment earnings 102,726 98,132 87,121 103,083

Contributions - - - -

Miscellaneous 87,343 100,902 91,657 328,881

Grants from governmental agencies - 600,002 - -

Intergovernmental 762,785 224,484 224,921 180,262

Total Revenues 8,578,193 9,221,901 9,147,346 9,741,133

EXPENDITURES

Current:

General government 854,042 840,664 888,119 1,023,145

Public safety 4,391,479 4,739,546 5,095,260 6,122,424

Culture and recreation 162,124 159,214 184,047 319,174

Public works 916,419 897,334 927,032 919,529

Industrial development 115,968 297,788 210,253 1,261,582

Economic development 206,930 153,764 168,353 212,274

Capital Outlay 3,720,815 2,553,143 595,495 1,703,768

Debt Service:

Principal 323,762 517,725 342,045 1,150,444

Interest and fiscal charges 422,110 366,727 439,288 490,263

Issuance costs - - - -

Total Expenditures 11,113,649 10,525,905 8,849,892 13,202,603

EXCESS (DEFICIENCY) OF REVENUES

OVER (UNDER) EXPENDITURES ( 2,535,456) ( 1,304,004) 297,454 ( 3,461,470)

OTHER FINANCING SOURCES (USES)

Sale of real property - 1,985,786 - -

Release of reserve - ( 769,300)

- -

Note and Lease proceeds 445,367 950,986 1,368,851 -

Issuance of refunding bonds - - - -

Issuance of bonds 1,790,000 - 1,090,000 1,674,000

Payment to refunding escrow agent - - - -

Premium on issuance of bonds 45,371 - ( 33,000)

-

Transfers in 226,825 245,140 290,544 457,750

Transfers out ( 226,825) ( 245,140) ( 290,544) ( 373,019)

Total other financing sources (uses) 2,280,738 2,167,472 2,425,851 1,758,731

NET CHANGE IN FUND BALANCE $( 254,718) $ 863,468 $ 2,723,305 $( 1,702,739)

Debt service as a percentage of

noncapital expenditures 10.1% 11.1% 9.5% 14.3%

65


Table 4

2015 2016 2017 2018 2019 2020

$ 4,177,442 $ 4,718,288 $ 5,248,141 $ 5,919,915 $ 6,881,332 $ 7,905,106

4,072,836 3,897,973 3,761,566 4,433,407 4,693,893 5,584,807

780,644 759,708 853,683 735,818 777,141 742,438

122,882 165,188 162,468 169,662 195,732 162,389

8,663 12,501 11,887 13,641 13,950 9,878

453,860 383,631 448,161 924,535 811,267 1,277,120

467,813 469,496 469,637 363,928 432,708 379,145

456,898 490,104 492,042 525,998 550,923 8,154,215

108,996 117,567 138,703 189,107 353,138 332,046

- - - - - 144,367

274,542 167,734 189,597 126,087 140,620 56,382

- - - - - -

339,721 608,311 454,275 701,691 567,042 1,372,133

11,264,297 11,790,501 12,230,160 14,103,789 15,417,746 26,120,026

1,033,065 1,165,085 1,277,771 755,204 1,052,036 1,610,525

5,607,528 6,044,534 6,403,553 7,547,007 8,519,195 8,070,342

309,878 342,409 324,024 373,696 393,798 800,430

980,329 1,240,448 1,160,727 1,071,367 1,411,637 2,063,724

81,704 59,489 94,367 173,975 155,888 1,104,636

131,452 581,446 157,583 70,634 191,916 58,940

541,862 937,304 2,494,281 1,203,551 7,000,822 2,225,172

707,505 706,007 1,024,536 1,145,992 1,838,205 2,534,062

472,014 401,682 599,303 491,610 822,758 931,131

- - - - - 299,168

9,865,337 11,478,404 13,536,145 12,833,036 21,386,255 19,698,130

1,398,960 312,097 (1,305,985) 1,270,753 ( 5,968,509) 6,421,896

- 1,148,148 196,685 - - -

- - - - - -

- - - - - -

- - - - - 1,830,000

4,097,000 4,208,000 3,305,000 - 10,130,000 9,443,000

( 3,762,314)

- ( 1,016,257)

- - ( 2,041,218)

176,016 - 238,193 - 619,355 250,331

398,950 402,540 578,062 449,480 1,251,476 3,254,225

( 398,950) ( 402,540) ( 744,883) ( 587,438) ( 1,251,476) ( 3,254,225)

510,702 5,356,148 2,556,800 ( 137,958) 10,749,355 9,482,113

$ 1,909,662 $ 5,668,245 $ 1,250,815 $ 1,132,795 $ 4,780,846 $ 15,904,009

12.7% 10.5% 14.7% 14.1% 18.5% 21.6%

66


CITY OF RED OAK, TEXAS

ASSESSED VALUE AND ACTUAL VALUE OF TAXABLE PROPERTY

LAST TEN FISCAL YEARS

Fiscal

Year

Less:

Tax

Ended Real Personal Productivity Exempt Homestead

9/30 Property Property Loss Property Cap

2011 652,514,386 29,903,129 26,412,051 83,514,075 330,918

2012 668,354,184 28,879,710 28,239,195 94,244,102 261,107

2013 683,801,129 30,765,344 29,451,035 100,008,667 214,758

2014 714,110,049 45,594,786 29,860,819 101,265,277 131,063

2015 829,443,843 95,263,154 30,316,461 247,705,056 1,219,014

2016 933,659,144 162,451,667 30,586,921 340,827,403 593,397

2017 1,024,499,733 174,197,205 30,293,701 340,525,233 6,793,892

2018 1,109,089,140 180,656,088 29,393,387 329,333,359 8,777,701

2019 1,234,812,295 226,387,780 34,876,283 402,360,627 16,130,226

2020 1,399,353,442 326,185,986 35,911,751 519,618,786 17,745,742

Source: Ellis Central Appraisal District.

67


Table 5

Total Total Total

Taxable Freeze Direct

Assessed Freeze Adjusted Tax

Value Taxable Taxable Rate

572,160,471 38,539,898 533,620,573 0.64900

574,489,490 41,253,593 533,235,897 0.64900

584,892,013 42,696,948 542,195,065 0.64900

628,447,676 45,092,454 583,355,222 0.64900

645,466,466 51,633,715 593,832,751 0.64900

724,103,090 51,347,942 672,755,148 0.64900

821,084,112 66,884,157 754,199,955 0.64900

922,240,781 72,570,160 849,670,321 0.64900

1,007,832,939 84,595,368 923,237,571 0.70548

1,152,263,149 102,372,801 1,049,890,348 0.70365

68


CITY OF RED OAK, TEXAS

DIRECT AND OVERLAPPING PROPERTY TAX RATES

Table 6

LAST TEN FISCAL YEARS

Fiscal

Year

City Direct Rates

Debt

Ended General Service Ellis Red Oak

9/30 Fund Fund Total County ISD

2011 0.553700 0.095300 0.649000 0.360091 1.540000

2012 0.565100 0.083900 0.649000 0.380091 1.540000

2013 0.559700 0.089300 0.649000 0.380091 1.540000

2014 0.554100 0.094900 0.649000 0.380091 1.540000

2015 0.544500 0.104500 0.649000 0.413599 1.540000

2016 0.544300 0.104700 0.649000 0.413599 1.540000

2017 0.544300 0.104700 0.649000 0.413599 1.540000

2018 0.541800 0.107200 0.649000 0.393221 1.540000

2019 0.549700 0.155780 0.705480 0.370533 1.540000

2020 0.539203 0.164442 0.703645 0.329557 1.438350

Source: Ellis Central Appraisal District

69


CITY OF RED OAK, TEXAS

PRINCIPAL PROPERTY TAX PAYERS

Table 7

CURRENT YEAR AND NINE YEARS AGO

2020 FY % of Total 2011 FY % of Total

Taxable Taxable Taxable Taxable

Assessed Assessed Assessed Assessed

Taxpayer Rank Valuation Valuation Valuation Valuation

Triumph Aerostructures LLC 1 $ 51,194,772

4.44% $

-

Red Oak Town Village LP 2 32,200,000 2.79% 17,337,410 3.03%

Wal Mart Real Estate 3 10,229,250 0.89% - -

Red Oak Depot 1 LTD 4 8,287,500 0.72% 5,402,430 0.94%

Oncor Electric Delivery Company 5 7,342,170 0.64% 5,619,530 0.98%

Rose Sierra Grande LP 6 6,427,670 0.65% 3,401,110 0.59%

Ovilla 35 Plaza LLC 7 5,463,120 0.47% - -

Rose Living Oaks LP 8 5,113,300 0.44% 2,700,000 0.47%

Access Self Storage Red Oak LP 9 5,091,650 0.44% - -

Knapheide Truck Equipment Southwest 10 4,766,960 0.41% - -

Red Oak Senior Care Center LLC 3,302,770 0.58%

Blackstone Developers LLC 2,798,850 0.49%

Tiger Mart #12 2,322,200 0.41%

Apple Capital LLC 2,300,000 0.40%

Southwestern Bell Telephone Co 2,236,490 0.39%

$ 136,116,392 14.76% $ 47,420,790

8.29%

Source: First Southwest Securities

Ellis Central Appraisal District

70


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CITY OF RED OAK, TEXAS

PROPERTY TAX LEVIES AND COLLECTIONS

Table 8

LAST TEN FISCAL YEARS

Fiscal

Interest

Year and % of Delinquent

Ended Tax General Sinking Adjusted Current Tax Tax

9/30 Rate Fund Fund Tax Levy Collected Collections

2011 0.649000 0.553700 0.095300 3,719,127 97.98% 41,953

2012 0.649000 0.565100 0.083900 3,729,833 98.20% 53,372

2013 0.649000 0.559700 0.089300 3,803,694 98.99% 49,498

2014 0.649000 0.554100 0.094900 4,066,389 99.08% 29,363

2015 0.649000 0.544500 0.104700 4,168,461 99.13% 25,275

2016 0.649000 0.544300 0.104700 4,670,316 99.18% 55,383

2017 0.649000 0.544300 0.104700 5,269,689 98.67% 26,384

2018 0.649000 0.541800 0.107200 5,892,911 99.06% 50,326

2019 0.705480 0.549700 0.155780 6,895,960 99.12% 20,516

2020 0.703645 0.539203 0.164442 7,843,461 99.36% 68,634

Note: Includes General and Debt Service Funds.

Data comes from year end Tax Report form Ellis County.

71


CITY OF RED OAK, TEXAS

RATIOS OF GENERAL OUTSTANDING DEBT

LAST TEN FISCAL YEARS

Fiscal

Year General

Governmental Activities

Certificate of

Ended Obligation Obligation Revenue Tax Capital

9/30 Bonds Bonds Bonds Notes Leases

Governmenta

2011 5,450,000 1,770,000 985,000 - 563,938

2012 5,260,000 1,770,000 895,000 - 1,274,237

2013 5,065,000 2,860,000 800,000 - 1,185,006

2014 4,865,000 2,825,000 739,000 914,000 269,282

2015 4,580,000 2,770,000 663,000 1,171,000 170,124

2016 4,415,000 3,493,000 3,931,000 934,000 96,752

2017 4,200,000 4,881,000 3,663,000 1,477,000 65,244

2018 3,990,000 4,669,000 3,305,000 1,254,000 32,769

2019 3,770,000 14,149,000 2,937,000 1,020,000 -

2020 5,335,000 11,696,000 11,110,000 1,350,000 -

Note: Detail regarding the City's outstanding debt can be found in the notes to the financial statement.

Source: City Staff and Statistical Projections based on U.S. Census Bureau data. As reported by Ellis

County Appraisal District and City records.

72


Table 9

Governmental

Activities

Unamortized General

Business Type Activities

Certificate of Unamortized Total

Premium Obligation Obligation Tax Capital Premium Primary

(Discount) Bonds Bonds Notes Leases (Discount) Government

73,910 8,060,000 10,200,000 - 56,553 86,795 27,246,196

69,949 7,775,000 9,930,000 - 32,603 81,146 27,087,935

65,012 17,810,000 - - 140,528 34,398 27,959,944

61,102 17,215,000 - 399,000 102,624 31,937 27,421,945

197,856 16,740,000 - 380,000 72,504 103,631 26,848,115

184,664 16,245,000 1,982,000 301,000 40,733 93,841 31,716,990

392,848 15,520,000 3,652,000 221,000 12,305 528,973 34,613,370

362,548 14,875,000 3,429,000 140,000 - 487,829 32,545,146

332,248 13,925,000 3,407,000 73,000 - 446,685 40,059,933

1,026,537 12,400,000 3,146,000 419,000 - 1,181,654 47,549,191

73


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CITY OF RED OAK, TEXAS

RATIOS OF GENERAL OUTSTANDING DEBT

Table 9

LAST TEN FISCAL YEARS

Fiscal

% of

Year Taxable Actual Taxable

Ended Assessed Value of Estimated Per

9/30 Valuation (2) Property Population (1) Capita

2011 573,055,050 4.75% 10,769 0.0395%

2012 574,704,657 4.71% 11,090 0.0409%

2013 586,085,389 4.77% 11,090 0.0397%

2014 628,447,676 4.36% 11,245 0.0410%

2015 645,466,466 4.16% 11,530 0.0429%

2016 724,103,090 4.38% 12,260 0.0387%

2017 821,084,112 4.22% 12,600 0.0364%

2018 922,240,781 3.53% 12,760 0.0392%

2019 923,237,571 4.34% 13,400 0.0334%

2020 1,152,263,149 413.00% 14,732 0.0310%

74


CITY OF RED OAK, TEXAS

RATIOS OF GENERAL BONDED DEBT

LAST TEN FISCAL YEARS

Net G.O. Certificates

Fiscal Taxable Tax Debt of

Year Taxable Assessed Outstanding Obligation

Ended Estimated Assessed Valuation at End at End

9/30 Population (1) Valuation (2) Per Capita of Year of Year

2011 10,769 572,160,471 51,673 13,670,705 11,970,000

2012 11,090 574,489,490 51,822 13,186,095 11,700,000

2013 11,090 584,892,013 52,134 22,974,410 2,860,000

2014 11,245 628,447,676 55,887 22,173,039 2,825,000

2015 11,530 645,466,466 55,981 21,621,487 2,770,000

2016 11,560 724,103,090 62,639 20,938,505 5,475,000

2017 12,600 821,084,112 65,165 20,248,973 8,533,000

2018 12,760 922,240,781 72,276 19,715,377 8,098,000

2019 13,400 1,007,832,939 75,211 18,473,933 17,556,000

2020 14,732 1,152,263,149 78,215 19,943,191 14,842,000

(1) Source: City Staff and Statistical Projections based on U.S. Census Bureau data.

(2) As Reported by Ellis County Appraisal District.

(3) See Statement of Net Position - Net Position Restricted for Debt Service.

N/A Information not Available

75


Table 10

Accumulated Ratio of Net Net

General Resources G.O. Tax Debt G.O. Tax

Bonded Restricted for to Taxable Debt

Tax Debt Repayment Net General Assessed Per

Notes in Total of Debt (3) Bonded Debt Valuation Capita

- 25,640,705 N/A N/A 2.39% 651

- 24,886,095 N/A N/A 2.30% 634

- 25,834,410 75,585 25,758,825 3.93% 2,072

1,313,000 26,311,039 118,350 26,192,689 3.53% 1,972

1,551,000 25,942,487 98,857 25,843,630 3.35% 1,875

1,235,000 27,648,505 97,121 27,551,384 2.89% 1,811

1,698,000 30,479,973 79,449 30,400,524 2.47% 1,607

1,394,000 29,207,377 96,442 29,110,935 2.14% 1,545

1,093,000 37,122,933 85,641 37,037,292 1.83% 1,379

1,769,000 36,554,191 106,055 36,448,136 316.00% 2,474

76


CITY OF RED OAK, TEXAS

DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES

Table 11

SEPTEMBER 30, 2020

City's

Total Estimated Overlapping

Tax Debt % GO

Taxing Jurisdiction as of 9/30/2020 Applicable Tax Debt

Overlapping Debt

Ellis County $ 33,200,000 7.70% $ 2,556,400

Red Oak Independent School District 98,605,000 51.87% 51,146,414

Total Overlapping Debt 53,702,814

Direct Debt

City of Red Oak 34,346,000 100.00% 34,346,000

Total Direct Debt 34,346,000

Total Direct and Overlapping GO Tax Debt $ 88,048,814

Source: Hilltop Securities and/or Municipal Advisory Council of Texas

77


CITY OF RED OAK, TEXAS

LEGAL DEBT MARGIN INFORMATION

Table 12

SEPTEMBER 30, 2020

Net Assessed Value $

1,152,263,149

Plus Exempt Property 573,276,279

Total Assessed Value $

1,725,539,428

Debt Limit - (10%) of Total Assessed Value $

172,553,943

Less amount of debt applicable to debt limits 33,332,000

Legal Debt Margin 139,221,943

The Debt Rate legal limit percentage 19%

As a home rule city, the City of Red Oak is not limited by law in the amount of debt it may issue.

Chapter VIII, Section 8.01 of the City of Red Oak Charter states in part:

The Council shall have the power granted to municipalities by the Constitution and laws of the state of Texas

to levy, assess and collect lawful taxes on property within the territory of the City, not to exceed the

maximum limits set by the constitution and laws of the State of Texas.

Texas Local Government code section 1507.152 -.154 states the governing body may pledge to the payment

of bonds issued under this subchapter an ad valorem tax sufficient to pay when due the principal of and

interest on the bonds. A municipality may not issue bonds under this subchapter in a principal amount that:

Exceeds the amount of loss sustained or anticipated by the municipality and the cost of issuing the bonds; or

would result in the outstanding aggregate principal amount of tax bond indebtedness of the municipality

exceeding 10% of the Assessed valuation of taxable property in the municipality according to the most

recent ad valorem tax roll of the municipality.

78


CITY OF RED OAK, TEXAS

PLEDGE-REVENUE COVERAGE

Table 13

LAST TEN FISCAL YEARS

Fiscal (1) (2) (3)

Year Less Net Average

Ended Gross Operating Available Debt

9/30 Revenue Expense Revenue Service Coverage

2011 3,924,307 2,744,619 1,179,688 1,745,700 1.03

2012 4,367,643 3,104,920 1,262,723 1,775,620 0.95

2013 4,747,708 3,491,798 1,255,910 1,389,497 1.05

2014 5,179,084 4,042,943 1,136,141 1,521,694 1.31

2015 5,577,700 3,945,042 1,632,658 1,542,945 1.54

2016 6,369,552 4,579,093 1,790,459 1,698,340 1.42

2017 7,129,965 4,631,965 2,498,000 1,484,467 1.97

2018 7,676,753 4,851,428 2,825,325 1,538,190 1.79

2019 8,009,066 5,633,340 2,375,726 1,581,608 1.27

2020 8,727,199 6,569,673 2,157,526 1,316,000 1.14

Source: Comprehensive annual report

(1) Gross Revenue includes all Water and Sewer revenues.

(2) Operating expense includes all Water and Sewer expense excluding depreciation.

(3) Average annual debt service is the average principal and interest payments due over the

remaining term of all water and sewer bonds.

79


CITY OF RED OAK, TEXAS

DEMOGRAPHIC AND ECONOMIC STATISTICS

Table 14

LAST TEN FISCAL YEARS

Fiscal

Year Per Capita Median

Ended Estimated Personal Household Median

9/30 Population (1) Income Income Age

2011 10,769 24,823 66,375 33

2012 11,090 24,075 63,098 33

2013 11,090 24,075 63,098 33

2014 11,245 24,985 64,992 33

2015 11,530 24,985 64,992 33

2016 11,560 24,985 64,992 33

2017 12,600 N/A N/A N/A

2018 12,760 27,019 70,250 34

2019 13,400 28,250 78,712 34

2020 14,732 32,195 79,448 34

(1) Source: City Staff and Statistical Projections based on U.S. Census Bureau data.

Note: Unable to obtain some date for the City of Red Oak

N/D No reliable data

N/A Information not available

80


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CITY OF RED OAK, TEXAS

PRINCIPAL EMPLOYERS

Table 15

SEPTEMBER 30, 2020

Approximate

Number of

Name of Firm Type of Business Employees

Red Oak Independent School District Education 863

Bombardier US Aerospace Corporation Industry 802

Triumph Aerostructures Industry 482

Walmart General retail/grocery 328

City of Red Oak Local Government 117

Red Oak Health & Rehab Medical 105

Life School Elementary School 103

Brookshire Grocery Grocery Supermarket 95

Life School Central Office School 79

NFI Industries Industry 75

Source: City Staff

81


CITY OF RED OAK, TEXAS

FULL-TIME EQUIVALENT CITY EMPLOYEES BY FUNCTION AND PROGRAM

LAST TEN FISCAL YEARS

Function/Program 2011 2012 2013 2014 2015 2016

General Government:

Administration 9 9 9 9 3 3

City Secretary - - - - 1 1

Finance - - - - 4 4

Human Resource - - - - 1 1

Information Technology 1 1 1 1 1 1

Economic/ Industrial Development 1 1 1 1 1 1

Utility Billing 2 2 2 2 2 2

Public Works:

Street 6 6 7 8 8 8

Water and Sewer 7 8 9 10 10 10

Storm Water Drainage N/A N/A N/A N/A N/A 2

Public Safety:

Police 21 22 25 25 27 27

Fire 21 24 26 26 26 26

Municipal Court 2 2 2 2 2 2

Community Services

Code Enforcement 1 1 3 3 3 4

Animal Control 1 1 1 1 1 1

Parks 1 - - - - -

Library - - - - - -

Tourism 1 1 1 1 1 1

Total City Employees 74 78 87 88 90 94

Note: FTE are based on 2080 hours

The Water and Sewer personnel are paid by the Water and Sewer Fund

Economic development employees are paid from the General Fund

Human Resources was created in 2007, terminated in 2010, re-instated in 2015.

The Library is contracted through LSSI

Storm Water Drainage was created in 2016

N/A Information not available

Source: City Staff

82


Table 16

2017 2018 2019 2020

3 3 3 3

1 1 1 1

4 4 4 4

1 2 2 2

1 1 2 2

1 1 1 1

2 3 3 3

8 9 9 10

10 10 10 10

3 4 4 4

27 30 33 33

26 27 30 30

2 3 2 2

4 7 7 6

1 1 1 2

- - - 4

- - - -

1 1 1 1

95 106 112 117

83


CITY OF RED OAK, TEXAS

OPERATING INDICATORS BY FUNCTION/PROGRAM

LAST TEN FISCAL YEARS

Function/Program 2011 2012 2013

General Government:

Information Technology

Installed computer 12 12 13

Installed servers 2 1 2

Public Works:

Street

Number of Lane Miles of Paved Streets N/D N/D N/D

Lane Miles - Concrete N/D N/D N/D

Lane Miles - Asphalt N/D N/D N/D

Water and Sewer

Number of Water Customers 2,293 2,351 2,585

Number of Sewer Customers 1,970 2,037 3,201

Public Safety:

Police

Calls for Service 18,739 36,965 43,889

Fire

Calls for Service 2,265 2,226 2,200

Municipal Court

Cases Filed 8,037 7,077 7,663

Cases Closed 6,626 8,397 7,566

Cases appealed - - 2

Warrant issued 3,036 3,696 3,958

Community Services

Code Enforcement

Building Permits Issued

Residential 47 56 87

Value $ 6,783,986 $ 8,358,180 $ 13,345,633

Commercial 4 5 2

Value $ 10,571,000 $ 22,351,000 $ 601,833,170

Animal Control

Number of Animals N/D 397 422

Source: City Departments

N/D No reliable data

N/A Information not available

(1) Represents a partial year

84


Table 17

2014 2015 2016 2017 2018 2019 2020

12 12 16 55 122 124 135

2 2 5 22 24 24 22

N/D N/D N/D N/D 67 72 75

N/D N/D N/D N/D 30 35 38

N/D N/D N/D N/D 36.42 36.42 36

2,473 2,539 2,751 2,923 3,016 3,098 3,297

3,318 3,413 3,365 3,520 3,611 3,833 4,007

44,987 46,216 48,000 48,156 41,410 60,793 71,261

2,297 2,115 2,300 2,655 2,789 2,710 3,468

3,773 2,977 2,800 2,487 2,278 3,213 2,689

4,217 3,455 2,300 652 1,818 1,218 963

3 - - - - - -

3,032 2,259 2,181 2,303 2,275 3,637 1,714

106 168 102 94 180 197 291

$ 17,251,329 $ 30,083,192 $ 20,857,288 $ 38,822,818 $ 67,114,128 $ 68,791,522 $ 85,152,245

11 25 5 8 29 16 8

$ 1,324,400 $ 6,766,841 $ 3,605,000 $ 14,907,191 $ 44,895,826 $ 10,652,239 $ 52,117,773

473 708 675 590 (1) 513 616 456

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CITY OF RED OAK, TEXAS

CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM

Table 18

LAST TEN FISCAL YEARS

Function/Program 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Public Works:

Utilities

Buildings 1 1 1 1 1 1 1 1 1 1

Public Safety:

Police

Stations 2 2 2 2 2 2 2 2 2 2

Fire

Stations 2 2 2 2 2 2 2 2 2 2

Municipal Court

Buildings 1 1 1 1 1 1 1 1 1 1

Community Services

Parks

Acreage 176.5 176.5 176.5 176.5 176.5 176.5 176.5 176.5 176.5 176.5

Parks

Buildings 1 1 1 1 1 1 1 1 1 1

Animal Control

Buildings 1 1 1 1 1 1 1 1 1 1

Source:

N/D

N/A

City Departments

No reliable data

Information not available

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INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL

REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN

AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE

WITH GOVERNMENT AUDITING STANDARDS

Honorable Mayor

Members of the City Council

City of Red Oak, Texas

We have audited, in accordance with auditing standards generally accepted in the United States of

America and the standards applicable to financial audits contained in Government Auditing Standards issued

by the Comptroller General of the United States, the financial statements of the governmental activities, the

business-type activities, the aggregate discretely presented component units, each major fund, and the

aggregate remaining fund information of the City of Red Oak, Texas as of and for the year ended September

30, 2020, and the related notes to the financial statements, which collectively comprise the City of Red Oak,

Texas’ basic financial statements and have issued our report thereon dated May 10, 2021.

Internal Control Over Financing Reporting

In planning and performing our audit of the financial statements, we considered the City of Red Oak,

Texas’ internal control over financial reporting (internal control) as a basis for designing audit procedures that

are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements,

but not for the purpose of expressing an opinion on the effectiveness of City of Red Oak, Texas’ internal

control. Accordingly, we do not express an opinion on the effectiveness of City of Red Oak, Texas’ internal

control.

A deficiency in internal control exists when the design or operation of a control does not allow

management or employees, in the normal course of performing their assigned functions, to prevent, or detect

and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of

deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the

entity’s financial statements will not be prevented or detected and corrected on a timely basis. A significant

deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a

material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over financial reporting was for the limited purpose described in

the preceding paragraph and was not designed to identify all deficiencies in internal control that might be

material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies

may exist that have not been identified. We did identify certain deficiencies in internal control, described in

the accompanying schedule of findings and responses as item 2020-001, to be material weaknesses.

87


Compliance and Other Matters

As part of obtaining reasonable assurance about whether the City of Red Oak, Texas’ 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 financial statements. 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 instances of noncompliance or other matters that are required to be reported under

Government Auditing Standards, and which are described in the accompanying schedule of findings and

responses as item 2020-001.

City of Red Oak, Texas’ Response to Findings

The City of Red Oak, Texas’ response to the findings identified in our audit is described in the

accompanying schedule of findings and responses. The City’s response was not subjected to the auditing

procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

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.

Waco, Texas

May 10, 2021

88


CITY OF RED OAK, TEXAS

SCHEDULE OF FINDINGS AND RESPONSES

SEPTEMBER 30, 2020

Item 2020-001

Criteria:

Condition:

Effect:

Recommendation:

Management’s Response:

Before a municipality may enter into a contract that requires an

expenditure of more than $50,000, the municipality must comply with

State of Texas competitive bidding requirements (Local Government Code

Chapter 252, Chapter 2269, or Chapter 2254).

While the City’s purchasing policy includes guidance for competitive bids,

the purchasing policy does not reflect the current process for procurement.

Rapid growth in the City coupled with turnover in staff has led to the City’s

purchasing policy becoming outdated.

Expenditures were made with vendors who were not procured in

accordance with State of Texas competitive bidding requirements noted

above.

The City should strengthen the internal controls governing the procurement

process, including designing and implementing a purchasing policy that

complies with state and federal procurement law.

Management agrees with the auditor’s finding and recommendation. The

City has developed the following corrective action plan to strengthen

internal controls governing the procurement process.

The City has engaged a purchasing specialist to provide a policy that will

ensure purchasing requirements set by state and federal procurement laws

are met. Once the policy is updated, the City will ensure that procurement

processes align with the policy and will provide training to all City

purchasers on both policy and process. The City will evaluate procurement

related personnel duties and consider providing specific duties related to

the review of purchasing requirements, providing guidance and support to

department purchasers, and monitoring and reporting on all purchases

applicable to competitive requirements from budget to expense. A review

of current fiscal year purchases will be conducted and monitored to ensure

that all competitive requirements are being met.

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