Annual Comprehensive Financial Report 2021

City of Red Oak, Texas

Annual Comprehensive Financial

Report

for the Fiscal Year Ended

September 30, 2021

Prepared by the Finance Department

CITY OF RED OAK, TEXAS

YEAR ENDED SEPTEMBER 30, 2021

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 – 43

Required Supplementary Information

Schedule of Revenues, Expenditures, and Changes in

Fund Balance – Budget (Budget Basis) and Actual – General Fund .............................. 44


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

Development Corporation ...................................................................................... 45


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

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

Schedule of Changes in Net Pension

Liability and Related Ratios .................................................................................... 47 – 48

Texas Municipal Retirement System –

Schedule of Employer Contributions ........................................................................ 49 – 50

Schedule of Changes in Total OPEB

Liability and Related Ratios .................................................................................... 51

Combining Schedules

Combining Balance Sheet – Nonmajor Governmental Funds ............................................ 52 – 53

Combining Schedule of Revenues, Expenditures, and

Changes in Fund Balances – Nonmajor Governmental Funds ......................................... 54 – 55


Fund Balance – Budget (Budget Basis) and Actual – Tourism ........................................ 56


Fund Balance – Budget (Budget Basis) and Actual – Debt Service ................................. 57

STATISTICAL SECTION

Table

Net Position by Component .............................................................................. 1 58 – 59

Changes in Net Position ................................................................................... 2 60 – 63

Fund Balances of Governmental Funds .............................................................. 3 64 – 65

Governmental Activities Tax Revenues by Source ............................................... 4 66 – 67

Assessed Value and Actual Value of Taxable Property .......................................... 5 68 – 69

Direct and Overlapping Property Tax Rates ........................................................ 6 70

Principal Property Tax Payers ........................................................................... 7 71

Property Tax Levies and Collections .................................................................. 8 72

Ratios of General Outstanding Debt .................................................................. 9 73 – 75

Ratios of General Bonded Debt ......................................................................... 10 76 – 77

Direct and Overlapping Governmental Activities Debt .......................................... 11 78

Legal Debt Margin Information ......................................................................... 12 79

Pledge-Revenue Coverage ............................................................................... 13 80

Demographic and Economic Statistics ................................................................ 14 81

Principal Employers ......................................................................................... 15 82

Full-time Equivalent City Employees by Function and Program .............................. 16 83 – 84

Operating Indicators by Function/Program ......................................................... 17 85 – 86

Capital Asset Statistics by Function/Program ...................................................... 18 87

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 ........................... 88 – 89

Summary Schedule of Prior Year Audit Findings ............................................................. 90

THIS PAGE LEFT BLANK INTENTIONALLY

INTRODUCTORY SECTION


June 2, 2022

To the Honorable Mayor, City Council and

Citizens of the City of Red Oak, Texas

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

“City”) for the fiscal year ended September 30, 2021. 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 ACFR 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 ACFR 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 councilmanager

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 ACFR 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.

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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, the 2020 Census

population for the City was 14,222, and North Central Texas Council of Governments (NCTCOG) projects by the

year 2030, Red Oak’s population will grow to 63,329. 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 2021 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.

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

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. The renovation of the facility is planned for Fiscal Year 2022. Growth

within the city has caused property tax revenues to increase.

In Fiscal Year 2021, General Fund property tax revenues increased by over $720,000 from the previous year. At

the same time, sales taxes revenues increased in the General Fund by $366,855 because of growth in population

and retail services available within the community.

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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.

HOUSING – RESIDENTIAL DEVELOPMENT

The City of Red Oak is strategically located within the Dallas-Fort Worth Motorplex. Therefore, Red Oak is a preferred

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

Oak with approximately 662 new single-family residences are planned for construction during FY 2021-2022, with 2,023

new lots planned for construction during the years 2022 through 2024. The average permitted valuation per single family

residence is approximately $362,760. These new residential developments include the Emerson Apartments, Legacy

Square Apartments, Oakpointe Apartments, and single-family residential developments such as Creek Bend, Crystal Lake,

Meadow Ridge, Oakmont, Summerwood, and The Oaks.

COMMERCIAL AND RETAIL DEVELOPMENT

The phase one portion of the public infrastructure for Red Oak Legacy Square is nearing completion. The Red Oak

Legacy Square development is a major mixed use commercial retail and upper-scale multifamily living facility, The

project is being developed by Victron Energy Group, one of the largest fuel distributorships in the United States. Red

Oak Legacy Square is located on approximately 68 acres at the northwest quadrant of the I-35E and FM 664/Ovilla

Road intersection.

Victron Group and B&B Theatres, the 6 th 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-theart

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 opened in November 2021; it is located on approximately 4

acres along the west side of the I-35E/US 77 corridor. The 450-seat restaurant features 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.

Seven/11 is constructing a convenience store with fuel station at the southeast corner of FM 664/Ovilla Road and

Hickory Creek Drive. Red Sky Development Group, the developer of the Seven/11 project, purchased approximately 2

acres from the Red Oak Economic Development Corporation for the project. The 4,088 square foot building will feature

a Seven/11 convenience store with the co-location of a Laredo Taco Company drive-through taqueria featuring original

Mexican food with authentic tacos served on flour tortillas and fresh salsa bar.

During 2021, Victron Energy Group received approvals from the City of Red Oak to repurpose and redevelop the existing

Knox Travel Center located on approximately 7 acres along the east side of I-35E at Daubitz Road. The newly designed

Red Oak Travel Center development will include a Wendy’s restaurant with drive through, charging stations for electric

vehicles, and landscaping improvements.

INDUSTRY

In 2021, it was announced that Alamo Mission, LLC was selected by Trade & Industry Development as one of fifteen

National Corporate Investment winners of the prestigious CiCi Award for Technology/R&D. The datacenter project in

Red Oak was nominated for the CiCi Award by the Office of Texas Governor Greg Abbott. In mid-2019, it was announced

that the company’s newest hyperscale data center will be located in Red Oak, Texas in a project that will cover 166 acres

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at the intersection of State Highway 342 and Ovilla Road, about 20 miles south of Dallas. The land was previously used

for agricultural purposes. Dallas-Fort Worth is one of the biggest data center markets in the world. The construction of

the new data center is expected to create 40 direct jobs and additional indirect employment within the Red Oak area, both

during construction and permanently.

In 2021, Compass Datacenters/Red Oak was awarded the “Best Datacenter Project” during D-CEO’s 9th Annual

Commercial Real Estate Awards program. Compass Data Centers prestigious award reaffirms the fact that Red Oak is

well on its way to becoming the next major crossroads on the information superhighway. Compass Datacenters’ 225-acre

data center is a huge part of that fact. Compass Datacenters “Red Oak I” facility is a 6MW data center and the first facility

of 16 to be built on the campus that will bring the first 50 of 800 jobs expected to be created by the center. Compass

Datacenters Red Oak development features a 252 Megawatt campus that sits on 225 acres along Houston School Road

featuring an on-site sub-station serviced by multiple fiber paths to offer substantial room for future growth. Compass

Datacenters Red Oak is developing its 225 acre campus to include multiple datacenter buildings for globally competitive

high technology corporations.

In 2021, Triumph Aerospace Structures, LLC was acquired by Arlington Capital Partners, a Washington, DC-area private

equity firm. Subsequently, the business name for the Triumph Aerospace Structures in Red Oak was changed to Qarbon

Aerospace. Qarbon Aerospace is a premier manufacturer of cutting-edge composite components and assemblies at all

levels of complexity, with products installed on the industry’s most advanced commercial and military aircraft. Qarbon

Aerospace Red Oak facility is uniquely situated amid a thriving aerospace & defense marketplace. Leaning on a rich

legacy extending over 100-years, the factory has a dominant military portfolio (Northrop Grumman HALE, Boeing V-22,

Boeing T-7A, and Pratt & Whitney F135), while staying balanced with commercial (Boeing 767, Bell 525 Relentless) and

business (Gulfstream G600) products. Adding to the robust manufacturing capabilities, the site integrates a Thermoplastics

Center of Excellence and structural test capabilities that offer differentiating capabilities to our customers in the

commercial, defense, space, eVTOL, and UAM marketplaces

Bombardier Aerospace Red Oak is the home for the industry’s flagship Global 7500 aircraft. The Global 7500 aircraft

stands alone as the world’s largest and longest range business jet. Within its luxurious interior are four true living spaces,

a full-size kitchen and a dedicated crew suite. Elevate your flight experience and discover the uninhibited freedom and

tailored luxury of the Global 7500 aircraft—a new class of business jet. Bombardier Aerospace Red Oak. Bombardier

Aerospace Red Oak has partnered with Texas State Technical College North Texas in Red Oak (TSTC) in developing

and implementing a two-year Bombardier Aviation Apprenticeship Program (BAAP). This innovative apprenticeship

program offers 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 offer expert training in conjunction with TSTC’s excellent facilities, allowing

students to benefit at no-cost from industry-tailored modules, experienced instructors, tools and equipment and financial

support. The Bombardier apprenticeship training program and its association with Texas State Technical College (TSTC)

in Red Oak, Texas, has gained official registration by the US Department of Labor. With this important designation,

Bombardier can expand its search for talented individuals from across the USA to maximize its talent pool and drive

regional aerospace growth for the manufacture of the advanced metallic wing for the Global 7500 aircraft at its Red Oak

facility.

EDUCATION AND INDUSTRY PARTNERSHIPS

The City of Red Oak Industrial Development Corporation (“CROIDC”) partnered with Texas State Technical College

North Texas in Red Oak (“TSTC”) to provide scholarships to Red Oak students planning to attend TSTC in Red Oak. The

ROIDC scholarship to TSTC provides financial assistance to Red Oak students for attaining upward mobility and

iv

improving the quality of life for our students and their families. In addition, the TSTC North Texas campus provides

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 is 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 awards the scholarship, which may be presented to recipients in

multiple semesters. Scholarships in the amount up to $1,000 are awarded to students.

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.

v

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 ninth year the City has submitted the annual comprehensive financial report (“ACFR”) 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.

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 - 2020. We believe the current report continues to conform to the Certificate of Achievement

program requirements, and we are submitting the 2021 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

vi

Government Finance Officers Association

Certificate of

Achievement

for Excellence

in Financial

Reporting

Presented to

City of Red Oak

Texas

For its Annual Comprehensive

Financial Report

for the Fiscal Year Ended

September 30, 2020

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


CITY OFFICIALS

Mark L. Stanfill, DVM

Mayor

Michael Braly

Mayor Pro-Tern

Willie G. Franklin Jr.

Council Member — Place 1

Ben Goodwyn


William L. Drake


Ron Wilson


City Manager

Todd Fuller

Assistant City Manager

Jonathan Phillips

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FINANCIAL SECTION


INDEPENDENT AUDITOR’S REPORT

Honorable Mayor and

Members of the City Council


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, 2021, 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’ 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, 2021, 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.

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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 June 2,

2022, 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 solely to describe the scope of our testing of internal control over

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

effectiveness of 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

June 2, 2022

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, 2021. 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 $41,380,122

(Net Position). Of this amount, $12,869,728 (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 $4,606,300. This increase is

attributable largely to capital grants and contributions of $2,485,606, operating grants and

contributions of $1,293,401, and the sale of land held for sale in the Economic Development

Corporation in the amount of $1,103,869.

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

fund balances of $43,396,048. Approximately 9.1% of this total amount, $3,962,045 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 $3,962,045

or 27.0% of the total General Fund expenditures.

• The City's outstanding debt increased by $10,490,933 or 21.7% 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

$41,380,122 as of September 30, 2021.

Net Position

Governmental Activities Business-type Activities Totals

2021 2020 2021 2020 2021 2020

Current and other assets $ 47,492,879 $ 41,375,373 $ 15,235,542 $ 5,838,395 $ 62,728,421 $ 47,213,768

Capital assets 31,102,888 24,367,697 19,704,541 16,616,674 50,807,429 40,984,371

Total assets 78,595,767 65,743,070 34,940,083 22,455,069 113,535,850 88,198,139

Deferred outflows of

resources 489,286 506,790 538,856 581,175 1,028,142 1,087,965

Long-term liabilities 39,952,348 30,431,595 16,291,299 15,978,644 56,243,647 46,410,239

Other liabilities 6,435,270 3,778,375 10,059,879 1,979,329 16,495,149 5,757,704

Total liabilities 46,387,618 34,209,970 26,351,178 17,957,973 72,738,796 52,167,943

Deferred inflows of

resources 383,423 295,263 61,651 49,076 445,074 344,339

Net position:

Net investment

in capital assets 3,708,559 3,113,430 4,677,953 833,237 8,386,512 3,946,667

Restricted 19,338,628 23,330,619 785,254 553,249 20,123,882 23,883,868

Unrestricted 9,266,825 5,300,578 3,602,903 3,642,709 12,869,728 8,943,287

Total net position $ 32,314,012 $ 31,744,627 $ 9,066,110 $ 5,029,195 $ 41,380,122 $ 36,773,822

A portion of the City's Net Position, $8,386,512 or 20.3%, 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 ($20,123,882 or 48.6%) represents resources that are

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

Position ($12,869,728 or 31.1%) 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, 2021. On a government-wide basis, governmental activities increased the

City's Net Position by $569,385 and business-type activities increased the City's Net Position by

$4,036,915.

5

Changes in Net Position


2021 2020 2021 2020 2021 2020

Revenues:

Program revenues:

Charges for services $ 4,167,321 $ 9,851,729 $ 9,477,411 $ 8,715,261 $ 13,644,732 $ 18,566,990

Operating grants and

contributions 1,293,401 1,372,677 - - 1,293,401 1,372,677

Capital grants and

contributions 2,485,606 3,519,935 2,705,020 1,104,544 5,190,626 4,624,479

General revenues:

Property tax 8,571,758 8,000,818 - - 8,571,758 8,000,818

Sales tax 6,343,642 5,584,807 - - 5,584,807

Franchise tax 728,690 742,438 - - 728,690 742,438

Hotel occupancy tax 317,525 162,389 - - 317,525 162,389

Alcoholic beverage tax 11,185 9,878 - - 11,185 9,878

Investment earnings 52,373 332,046 12,498 8,215 64,871 340,261

Miscellaneous 45,403 56,382 - - 45,403 56,382

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

Total revenues 24,016,904 29,633,099 12,194,929 9,936,456 36,211,833 39,569,555

Expenses:

General government 1,931,114 1,876,147 - - 1,931,114 1,876,147

Public safety 8,910,297 8,680,540 - - 8,910,297 8,680,540

Culture and recreation 1,051,184 848,530 - - 1,051,184 848,530

Public works 2,895,417 2,774,598 - - 2,895,417 2,774,598

Industrial development 5,596,763 1,104,636 - - 5,596,763 1,104,636

Economic development 209,880 58,940 - - 209,880 58,940

Interest on long-term debt 2,259,864 1,550,846 - - 2,259,864 1,550,846

Utility - - 8,525,891 8,488,858 8,525,891 8,488,858

Storm water - - 225,123 323,665 225,123 323,665

Total expenses 22,854,519 16,894,237 8,751,014 8,812,523 31,605,533 25,706,760

Transfers ( 593,000)

- 593,000 - - -

Change in net position 569,385 12,738,862 4,036,915 1,123,933 4,606,300 13,862,795

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

Net position, ending $ 32,314,012 $ 31,744,627 $ 9,066,110 $ 5,029,195 $ 41,380,122 $ 36,773,822

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 $43,396,048. Approximately 9.1% of this total amount, $3,962,045 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 $3,962,045, while total fund balance reached $5,496,240. 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 27.0% of total

General Fund expenditures, while total fund balance represents 37.5% of that same amount.

The fund balance of the City's General Fund has a net increase of $541,211 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 $1.3 million despite economic shutdowns caused by the

COVID-19 pandemic. Expenditures in the general fund increased $1.76 million, offsetting some of the

increases in revenues. Increases in expenditures were mainly caused by an increase to Culture and

recreation expenses of $150,000 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 $1.1 million.

6

The Industrial Development Corporation fund has a total fund balance of $7,157,198. The net decrease

in fund balance during the current year in the Industrial Development Corporation fund was $5,266,894 and

mostly attributable to sales taxes and contributions being exceeded by current year expenditures and

transfers out.

The Economic Development Corporation fund has a total fund balance of $14,441,660. The net increase in

fund balance during the current year in the Economic Development Corporation fund was $1,112,180. The

increase is largely attributable to the sale of land, reduced by current year expenditures and transfers out.

The Debt Service fund ended the year with total fund balance of $107,620, an increase of $1,565. The

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

The 2021 CO Bond Fund has a total ending fund balance of $3,808,755, an of $3,808,755. The increase is a

result of bonds issued in the amount of $3685,000 during the current year.

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 $3,085,454. Net Position

increased by a net amount of $2,898,244. The increase is caused by capital contributions of $1.7 million, and

an operating income of $1.1 million.

Unrestricted Net Position of the Storm Water Fund at the end of the year amounted to $517,449. Net

Position increased by $1,138,671. The increase is primarily caused by operating income of $142 thousand

and capital contributions in the amount of $1 million.

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

estimate of the General Fund's revenues by $1,294,174, 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 $2,205,520 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, 2021 amounts to $31,102,888 and $19,704,541, 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:

• Increases in construction in progress of $4.7 million

• Machinery and equipment of $1 million

• Infrastructure and improvements of $6.4 million

7


2021 2020 2021 2020 2021 2020

Land $ 1,882,695 $ 1,882,695 $ 1,241,293 $ 1,241,293 $ 3,123,988 $ 3,123,988

Construction in progress 3,724,478 2,941,345 2,076,828 404,939 5,801,306 3,346,284

Buildings 12,229,108 8,258,310 101,181 101,181 12,330,289 8,359,491

Improvements 499,230 398,358 32,501,400 29,753,985 33,000,630 30,152,343

Machinery and equipment 12,069,668 11,036,305 2,362,708 2,156,708 14,432,376 13,193,013

Infrastructure 18,928,780 16,476,752 - - 18,928,780 16,476,752

Accumulated depreciation ( 18,231,071) ( 16,626,068) ( 18,578,869) ( 17,041,432) ( 36,809,940) ( 33,667,500)

Total $ 31,102,888 $ 24,367,697 $ 19,704,541 $ 16,616,674 $ 50,807,429 $ 40,984,371

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.


2021 2020 2021 2020 2021 2020

Certificates of obligation $ 14,966,000 $ 11,696,000 $ 4,809,000 $ 3,146,000 $ 19,775,000 $ 14,842,000

General obligations 4,990,000 5,335,000 11,350,000 12,400,000 16,340,000 17,735,000

Revenue bonds 16,015,000 11,110,000 - - 16,015,000 11,110,000

Tax notes 2,754,000 1,350,000 346,000 419,000 3,100,000 1,769,000

Premiums 1,819,613 1,026,537 1,121,841 1,181,654 2,941,454 2,208,191

Compensated absences 737,255 754,974 34,261 32,872 771,516 787,846

Total $ 41,281,868 $ 31,272,511 $ 17,661,102 $ 17,179,526 $ 58,942,970 $ 48,452,037

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 2022 Budget, General Fund operating revenues are budgeted to increase by 5% from

the fiscal year 2021 revenue collections with ad valorem taxes making up 50% of General Fund budgeted

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

increased 11.5% for the fiscal year 2022 budget from fiscal year 2021's values. The Fiscal Year 2022

budget was based on a property tax rate of 0.703645 per $100 of assessed value with 0.549874 for

operations and 0.153771 for interest and principal on outstanding debt. Sales taxes are the second

highest revenue source making up 23% of budgeted revenues and are budgeted to increase by 9.7%

from fiscal year 2021 collections.

There was no rate increase budgeted for Water and Sewer in the fiscal year 2022 budget. An increase of

9.5% in Water and Sewer revenues from the fiscal year 2021 amended budget is budgeted in fiscal year

2022 due to an increased customer base for water and sewer collections in fiscal year 2022.

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 2022 budget, all funds were presented with balanced budgets. Revenue estimates and

expenses were conservative and consistent with established policies. 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 2022 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 five-year 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, 2021 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, and Standard and Poors (S&P) has raised its long-term rating on the City

from AA- and assigned a rating of "AA", with a stable outlook during fiscal year 2021. 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 2021.

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.

9

This requirement was met, and exceeded, during Fiscal Year 2021.

Capital Projects

Capital project funds were added to the budget 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 2022 budget includes capital budgeted in

governmental capital projects funds in the amount of $14,413,850. These include the purchase of

vehicles, public safety, information technology, public works and parks equipment, facility improvements

for fire stations, animal shelter and the future municipal center, parks improvements and street

improvements. The Water and Sewer Fund, Storm Water Drainage Fund, and Water and Sewer Capital

Project Fund budgets include capital costs for the FY 2022 current year totaling $3,714,624. The capital

projects budgeted in these funds include manhole rehabilitation, lift station improvements, SCADA

upgrade, drainage improvements and various other projects.

City Employees

Staffing levels for FY 2022 will increase by 10 positions from the previous fiscal year. With these added

positions, funding levels will reach 128 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. All employees will receive a market increase of 3% on October 1. Uniformed

employees will receive step increases and other staff receive an annual 3% increase on April 1st,

contingent upon performance review.

Benefits

Health insurance rates for employees and the City remained flat for the fiscal year 2021 Budget. The City

continued to offer additional health plan options for employees. These included a high deductible health

plan along with a corresponding health savings account which the City contributes to on behalf of

employees, a buy-up plan and base PPO.

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



STATEMENT OF NET POSITION

SEPTEMBER 30, 2021

Primary Government

Governmental Business-Type

Activities Activities Total

ASSETS

Cash and cash equivalents $ 5,602,383 $ 4,066,768 $ 9,669,151

Investments 17,131,766 851,986 17,983,752

Accounts receivable (net) 1,847,973 1,856,857 3,704,830

Inventory 21,565 35,118 56,683

Prepaid assets 1,497,911 - 1,497,911

Internal balances ( 4,760,000)

4,760,000 -

Restricted assets:

Cash 6,061,139 1,465,736 7,526,875

Investments 9,638,722 2,199,077 11,837,799

Land held for resale 10,451,420 - 10,451,420

Capital assets, net of

accumulated depreciation:

Non-depreciable 5,607,173 3,318,121 8,925,294

Depreciable 25,495,715 16,386,420 41,882,135

Total Assets 78,595,767 34,940,083 113,535,850

DEFERRED OUTFLOWS OF RESOURCES

Deferred charge on refunding - 459,723 459,723

Pension related 426,364 68,545 494,909

OPEB related 62,922 10,588 73,510

Total Deferred Outflows of Resources 489,286 538,856 1,028,142

LIABILITIES

Accounts payable 3,668,826 924,512 4,593,338

Accrued liabilities 195,282 27,228 222,510

Accrued interest payable 216,848 59,842 276,690

Due to other governments - 5,510,000 5,510,000

Customer deposits payable 6,000 336,637 342,637

Unearned revenue - 1,668,095 1,668,095

Noncurrent liabilities:

Due within one year

Long-term debt 2,348,314 1,533,565 3,881,879

Due in more than one year

Long-term debt 38,933,554 16,127,537 55,061,091

Net pension liability 779,161 125,241 904,402

Total OPEB liability 239,633 38,521 278,154

Total Liabilities 46,387,618 26,351,178 72,738,796

DEFERRED INFLOWS OF RESOURCES

Pension related 373,407 60,032 433,439

OPEB related 10,016 1,619 11,635

Total Deferred Inflows of Resources 383,423 61,651 445,074

NET POSITION

Net investment in capital assets 3,708,559 4,677,953 8,386,512

Restricted for:

Court security 34,519 - 34,519

Court technology 3,293 - 3,293

Public safety 73,534 - 73,534

Culture and recreation 558,270 - 558,270

Industrial development 7,157,198 - 7,157,198

Economic development 11,255,287 - 11,255,287

Capital projects 256,527 785,254 1,041,781

Unrestricted 9,266,825 3,602,903 12,869,728

Total Net Position $ 32,314,012 $ 9,066,110 $ 41,380,122

The notes to the financial statements are an

integral part of these financial statements. 11


STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED SEPTEMBER 30, 2021

Program Revenues

Operating

Charges for

Grants and

Functions/Programs Expenses Services Contributions

Primary government:

Governmental activities:

General government $ 1,931,114 $ - $

-

Public safety 8,910,297 657,512 871,688

Culture and recreation 1,051,184 1,634,550 -

Public works 2,895,417 649,678 -

Industrial development 5,596,763 121,712 421,713

Economic development 209,880 1,103,869 -

Interest and fiscal charges 2,259,864 - -

Total governmental activities 22,854,519 4,167,321 1,293,401

Business-type activities:

Utility 8,525,891 9,123,763 -

Storm water 225,123 353,648 -

Total business-type activities 8,751,014 9,477,411 -

Total primary government $ 31,605,533 $ 13,644,732 $ 1,293,401

General revenues:

Property taxes

Sales taxes

Franchise tax

Hotel occupancy tax

Alcoholic beverage tax

Investment earnings

Miscellaneous

Transfers

Total general revenues and transfers

Change in net position

Net position - beginning

Net position - ending



Program

Revenues

Capital

Net (Expense) Revenue and Changes in Net Position

Primary Government

Grants and Governmental Business-type

Contributions Activities Activities Total

$ - $( 1,931,114) $ - $( 1,931,114)

- ( 7,381,097)

- ( 7,381,097)

- 583,366 - 583,366

2,485,606 239,867 - 239,867

- ( 5,053,338)

- ( 5,053,338)

- 893,989 - 893,989

- ( 2,259,864)

- ( 2,259,864)

2,485,606 ( 14,908,191)

- ( 14,908,191)

1,697,234 - 2,295,106 2,295,106

1,007,786 - 1,136,311 1,136,311

2,705,020 - 3,431,417 3,431,417

$ 5,190,626 ( 14,908,191)

3,431,417 ( 11,476,774)

8,571,758 - 8,571,758

6,343,642 - 6,343,642

728,690 - 728,690

317,525 - 317,525

11,185 - 11,185

52,373 12,498 64,871

45,403 - 45,403

( 593,000)

593,000 -

15,477,576 605,498 16,083,074

569,385 4,036,915 4,606,300

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

$ 32,314,012 $ 9,066,110 $ 41,380,122

13


BALANCE SHEET

GOVERNMENTAL FUNDS


Special Revenue

Industrial

Economic

General Development Development

Fund Corporation Corporation

ASSETS

Cash and cash equivalents $ 378,804 $ 380,301 $ 972,142

Investments 3,254,791 6,977,776 2,849,839

Accounts receivable (net) 1,024,751 479,928 273,027

Due from other funds - - 36,955

Prepaid Expenses - - -

Inventory 21,565 - -

Land held for resale - 4,099,594 6,351,826

Restricted assets:

Cash 1,387,669 412,424 45,916

Investments 944,417 76,000 4,033,305

Total assets $ 7,011,997 $ 12,426,023 $ 14,563,010

LIABILITIES

Accounts payable 1,134,579 454,760 121,350

Accrued liabilities 176,187 16,610 -

Due to other funds 15,392 4,796,955 -

Customer Deposits - - -

Total liabilities 1,326,158 5,268,325 121,350


Unavailable revenue - Property taxes 140,816 500 -

Unavailable revenue - Fines & fees 48,783 - -

Total inflows of resources 189,599 500 -

FUND BALANCES

Nonspendable:

Inventory 21,565 - -

Restricted:

Debt service - - -

Culture and recreation - - -

Industrial development - 7,157,198 -

Economic development - - 14,441,660

Capital projects 256,527 - -

Court security 34,519 - -

Court technology 3,293 - -

Other public safety 73,534 - -

Committed:

Capital projects - - -

Assigned:

Subsequent year's budget 1,144,757 - -

Unassigned 3,962,045 - -

Total fund balances 5,496,240 7,157,198 14,441,660

Total liabilities, deferred inflows

and fund balances $ 7,011,997 $ 12,426,023 $ 14,563,010



Capital

Special

Projects Revenue Other Total

Debt 2021 CO Park Governmental Governmental

Service Bond Fund Improvements Funds Funds

$ 106,314 $ - $ 725,826 $ 3,038,996 $ 5,602,383

- - 33,150 4,016,210 17,131,766

37,930 - - 32,337 1,847,973

- - 121,155 - 158,110

- 1,497,911 - 1,497,911

- - - - 21,565

- - - - 10,451,420

- 4,215,130 - - 6,061,139

- - - 4,585,000 9,638,722

$ 144,244 $ 5,713,041 $ 880,131 $ 11,672,543 $ 52,410,989

- 1,904,286 5,819 48,032 3,668,826

- - - 2,485 195,282

- - - 105,763 4,918,110

- - - 6,000 6,000

- 1,904,286 5,819 162,280 8,788,218

36,624 - - - 177,940

- - - - 48,783

36,624 - - - 226,723

- - - - 21,565

107,620 - - - 107,620

- - - 558,270 558,270

- - - - 7,157,198

- - - - 14,441,660

- 3,808,755 874,312 8,488,866 13,428,460

- - - - 34,519

- - - - 3,293

- - - - 73,534

- - - 2,463,127 2,463,127

- - - - 1,144,757

- - - - 3,962,045

107,620 3,808,755 874,312 11,510,263 43,396,048

$ 144,244 $ 5,713,041 $ 880,131 $ 11,672,543 $ 52,410,989

15



RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE



Total Fund Balances - Governmental Funds $ 43,396,048

Amount reported for governmental activities in the statement of net position are

different because:

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

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

Capital assets 49,333,959

Accumulated depreciation ( 18,231,071)

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 ( 16,015,000)

General obligation bonds ( 4,990,000)

Certificates of obligation ( 14,966,000)

Tax notes ( 2,754,000)

Accrued interest payable on long-term debt ( 216,848)

Compensated absences ( 737,255)

Net pension liability ( 779,161)

Total OPEB liability ( 239,633)

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

therefore, are deferred in the governmental funds. 226,723

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 ( 1,819,613)

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 426,364

Deferred outflows - OPEB related 62,922

Deferred inflows - pension related ( 373,407)

Deferred inflows - OPEB related ( 10,016)

Net Position of Governmental Activities $ 32,314,012




STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS


Special Revenue

Industrial

Economic

General Development Development

Fund Corporation Corporation

REVENUES

Property taxes $ 6,780,776 $ - $ -

Sales taxes 3,169,140 1,587,251 1,587,251

Franchise tax 728,690 - -

Hotel occupancy tax - - -

Alcoholic beverage tax 11,185 - -

Intergovernmental 871,688 - -

Contributions 33,577 421,713 -

Licenses and permits 1,284,074 - -

Fines and forfeitures 341,300 - -

Charges for services 654,699 - -

Investment earnings 23,120 11,750 8,413

Land sale - 121,712 1,103,869

Miscellaneous 44,143 500 -

Total revenues 13,942,392 2,142,926 2,699,533

EXPENDITURES

Current:

General government 1,678,326 - -

Public safety 8,303,211 - -

Culture and recreation 853,375 - -

Public works 2,016,707 - -

Industrial development - 5,596,763 -

Economic development - - 209,880

Capital outlay 1,721,787 37,642 37,642

Debt service:

Principal - 397,000 355,000

Interest and fiscal charges - 87,514 239,641

Bond issuance costs 88,106 - 1,500

Total expenditures 14,661,512 6,118,919 843,663

Excess (deficiency) of revenues

over (under) expenditures ( 719,120) ( 3,975,993) 1,855,870

OTHER FINANCING SOURCES (USES)

Issuance of bonds 1,930,000 - -

Premium on issuance of bonds 160,760 - -

Insurance recovery 23,064 - -

Transfers in 961,364 - -

Transfers out ( 1,814,857) ( 1,290,901) ( 743,690)

Total other financing sources (uses) 1,260,331 ( 1,290,901) ( 743,690)

CHANGE IN FUND BALANCE 541,211 ( 5,266,894) 1,112,180

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

FUND BALANCE - ENDING $ 5,496,240 $ 7,157,198 $ 14,441,660



Capital

Projects

Special

Revenue

Other

Total

Debt 2021 CO Park Governmental Governmental

Service Bond Fund Improvements Funds Funds

$ 1,895,159 $ - $ - $ - $ 8,675,935

- - - - 6,343,642

- - - - 728,690

- - - 317,525 317,525

- - - - 11,185

- - - - 871,688

- - - - 455,290

- - 370,511 - 1,654,585

- - - - 341,300

- - 222,600 19,773 897,072

716 130 2,083 6,161 52,373

- - - - 1,225,581

- - 760 - 45,403

1,895,875 130 595,954 343,459 21,620,269

- - - - 1,678,326

- - - - 8,303,211

- - - 148,096 1,001,471

- - - 93,236 2,109,943

- - - - 5,596,763

- - - - 209,880

- 406,375 2,923,938 1,131,240 6,258,624

1,286,000 - - - 2,038,000

608,310 - - - 935,465

- 119,598 - 1,125,579 1,334,783

1,894,310 525,973 2,923,938 2,498,151 29,466,466

1,565 ( 525,843) ( 2,327,984) ( 2,154,692) ( 7,846,197)

- 3,685,000 - 5,657,000 11,272,000

- 649,598 - 53,579 863,937

- - - 182,248 205,312

- - - 2,314,857 3,276,221

- - - ( 19,773) ( 3,869,221)

- 4,334,598 - 8,187,911 11,748,249

1,565 3,808,755 ( 2,327,984) 6,033,219 3,902,052

106,055 - 3,202,296 5,477,044 39,493,996

$ 107,620 $ 3,808,755 $ 874,312 $ 11,510,263 $ 43,396,048

18


RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES

IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES


Total net change in Fund Balances - Governmental Funds $ 3,902,052

Amounts reported for governmental activities in the statement of activities are

different because:

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. 5,888,165

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. ( 1,605,003)

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 2,452,029

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 ( 5,657,000)

Issuance of tax notes ( 1,930,000)

Premium on issuance ( 863,937)

Issuance of certificates of obligation ( 3,685,000)

Principal paid on bonds 2,038,000

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 48,783

Property taxes ( 104,177)

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 ( 60,477)

Amortization of deferred loss on refunding 70,861

Compensated absences 17,719

Changes in pension liabilities and related deferred outflows/inflows 91,285

Changes in OPEB liabilities and related deferred outflows/inflows ( 33,915)

Total change in net position of Governmental Activities $ 569,385





PROPRIETARY FUNDS


Business-type Activities - Enterprise

Total

Utility Storm Water Proprietary

Fund Fund Funds

ASSETS

Current assets:

Cash and cash equivalents $ 3,547,349 $ 519,419 $ 4,066,768

Investments 851,986 - 851,986

Accounts receivable (net) 1,837,507 19,350 1,856,857

Inventory 30,491 4,627 35,118

Due from other funds 4,760,000 - 4,760,000

Restricted assets:

Cash 1,465,736 - 1,465,736

Investments 1,930,657 268,420 2,199,077

Total current assets 14,423,726 811,816 15,235,542

Noncurrent assets:

Capital assets:

Nondepreciable 3,250,156 67,965 3,318,121

Depreciable, net 15,388,521 997,899 16,386,420

Total noncurrent assets 18,638,677 1,065,864 19,704,541

Total assets 33,062,403 1,877,680 34,940,083

DEFERRED OUTFLOWS OF RESOURCES

Pension related 63,002 5,543 68,545

OPEB related 9,732 856 10,588

Deferred charge on refunding 459,723 - 459,723

Total deferred outflows of resources 532,457 6,399 538,856

LIABILITIES

Current liabilities:

Accounts payable 920,665 3,847 924,512

Accrued liabilities 25,227 2,001 27,228

Unearned revenue 1,668,095 - 1,668,095

Customer deposits payable 336,637 - 336,637

Due to other governments 5,510,000 - 5,510,000

Accrued interest payable 58,354 1,488 59,842

Due within one year:

Long-term debt 1,446,863 86,702 1,533,565

Total current liabilities 9,965,841 94,038 10,059,879

Noncurrent liabilities:

Long-term debt 15,792,942 334,595 16,127,537

Net pension liability 115,137 10,104 125,241

Total OPEB liability 35,410 3,111 38,521

Total noncurrent liabilities 15,943,489 347,810 16,291,299

Total liabilities 25,909,330 441,848 26,351,178


Pension related 55,177 4,855 60,032

OPEB related 1,488 131 1,619

Total deferred inflows of resources 56,665 4,986 61,651

NET POSITION

Net investment in capital assets 3,758,157 919,796 4,677,953

Restricted for capital projects 785,254 - 785,254

Unrestricted 3,085,454 517,449 3,602,903

Total net position $ 7,628,865 $ 1,437,245 $ 9,066,110





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

PROPRIETARY FUNDS



Total


Fund Fund Funds

OPERATING REVENUES

Charges for services:

Water charges $ 3,108,124 $ 353,648 $ 3,461,772

Sewer charges 4,935,457 - 4,935,457

Tap fees and reconnects 205,272 - 205,272

Penalties 44,047 - 44,047

Impact fees 695,196 - 695,196

Miscellaneous 135,667 - 135,667

Total revenues 9,123,763 353,648 9,477,411

OPERATING EXPENSES

Personnel services 1,170,736 91,021 1,261,757

Insurance 230,192 32,495 262,687

Materials and supplies 376,267 18,503 394,770

Contractual services 4,541,520 9,811 4,551,331

Maintenance 116,482 8,917 125,399

Other operating costs 102,557 - 102,557

Depreciation 1,486,992 50,445 1,537,437

Total expenses 8,024,746 211,192 8,235,938

Operating income (loss) 1,099,017 142,456 1,241,473

NON-OPERATING REVENUES (EXPENSES)

Interest earnings 10,138 2,360 12,498

Interest and fiscal charges ( 430,135) ( 13,931) ( 444,066)

Bond issuance costs ( 71,010)

- ( 71,010)

Total non-operating revenues (expenses) ( 491,007) ( 11,571) ( 502,578)

Income (loss) before capital contributions

and transfers 608,010 130,885 738,895

CAPITAL CONTRIBUTIONS AND TRANSFERS

Capital contributions 1,697,234 1,007,786 2,705,020

Transfers in 593,000 - 593,000

CHANGE IN NET POSITION 2,898,244 1,138,671 4,036,915

NET POSITION - BEGINNING 4,730,621 298,574 5,029,195

NET POSITION - END OF YEAR $ 7,628,865 $ 1,437,245 $ 9,066,110




STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS



Total


Fund Fund Funds

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers and users $ 9,144,627 $ 362,748 $ 9,507,375

Payments to suppliers ( 4,372,047) ( 40,516) ( 4,412,563)

Payments to employees ( 1,420,553) ( 137,335) ( 1,557,888)

Net cash provided (used) by operating

activities 3,352,027 184,897 3,536,924

CASH FLOWS FROM NONCAPITAL FINANCING

ACTIVITIES

Payments from (to) other funds 593,000 - 593,000

Net cash provided (used) by noncapital

financing activities 593,000 - 593,000

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES

Proceeds from capital related debt 2,020,000 - 2,020,000

Principal paid on bonds ( 1,306,000) ( 84,000) ( 1,390,000)

Interest and fiscal charges paid on bonds ( 599,021) ( 14,487) ( 613,508)

Cash received from other governments 1,668,095 - 1,668,095

Acquisition and construction of capital assets ( 1,852,319) ( 67,965) ( 1,920,284)

Net cash provided (used) by capital and

related financing activities ( 69,245) ( 166,452) ( 235,697)

CASH FLOWS FROM INVESTING ACTIVITIES

Interest on investments 10,138 2,360 12,498

Proceeds from sale and maturities of securities 1,494,514 - 1,494,514

Purchase of investments ( 1,830,356)

- ( 1,830,356)

Net cash provided (used) by investing

activities ( 325,704)

2,360 ( 323,344)

NET INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS 3,550,078 20,805 3,570,883

CASH AND CASH EQUIVALENTS, BEGINNING 1,463,007 498,614 1,961,621

CASH AND CASH EQUIVALENTS, ENDING $ 5,013,085 $ 519,419 $ 5,532,504




STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS


RECONCILIATION OF OPERATING INCOME

(LOSS) TO NET CASH PROVIDED (USED) BY

OPERATING ACTIVITIES

Operating income 1,099,017


Total


Fund Fund Funds

$ $ 142,456 $ 1,241,473

Adjustments to reconcile operating income to net cash

provided (used) by operating activities:

Depreciation and amortization 1,486,992 50,445 1,537,437

(Increase) decrease in:

Accounts receivable 23,096 7,832 30,928

Inventory ( 8,902) ( 2,448) ( 11,350)

Deferred outflows of resources ( 9,997)

1,268 ( 8,729)

Increase (decrease) in:


Other liabilities ( 35,510) ( 6,013) ( 41,523)

Customer deposits ( 2,232)

- ( 2,232)

Deferred inflows of resources 13,469 ( 894) 12,575

Net pension liability ( 31,521) ( 9,906) ( 41,427)

Net OPEB liability 8,424 ( 571)

7,853

Total adjustments 2,253,010 42,441 2,295,451

Net cash provided (used) by operating activities $ 3,352,027 $ 184,897 $ 3,536,924

SCHEDULE OF NON-CASH CAPITAL AND

RELATED FINANCING ACTIVITIES

Contributions of capital assets $ 1,697,234 $ 1,007,786 $ 2,705,020





NOTES TO THE FINANCIAL STATEMENTS


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 City of Red Oak Economic Development Corporation, Inc. (Economic Development Corporation)

is responsible for collecting and disbursing the one-half 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 boardPageP 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 City of Red Oak Industrial Development Corporation, Inc. (Industrial Development Corporation)

is responsible for collecting and disbursing the one-half 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 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-half 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-half 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 2021 Certificates of Obligation Bond Fund is used to account for the proceeds from the

bonds issued for major capital projects.

The Parks Improvements Fund is used to account for restricted revenue sources used to

improve parks facilities in the City.

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

Buildings 10-30

Improvements 10-50

Machinery and equipment 5-15

Infrastructure 10-40

I. Land Held for Sale

The IDC and EDC owns land within the city which is held for the purpose of development. The land

is reported at the lower of cost or net realizable value.

J. Unearned Revenue

The City has unearned revenue in the amount of $1,668,095. This is the amount of funds received

from the State and Local Coronavirus Relief Fund which have not been spent on eligible projects as

of year end. These funds will be recognized as revenue as the funds are spent.

K. Compensated Absences

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.

L. 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.

27

• 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.

M. 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.

N. 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.

O. 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.

P. 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.

28

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.

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

the General, IDC, EDC, Tourism, and Debt Service funds. The capital projects funds are appropriated

on a project-length basis. Other special revenue funds do not have appropriated budgets since other

means controls the use of resources. 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.

29

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.

The City's investments as of September 30, 2021 are:

Weighted

Credit Carrying Average Maturity

Rating Value (days)

Investment Pool:

TexPool AAAm $ 118,518

37

TexSTAR AAAm 1,418,490 39

LOGIC AAAm 28,252,817 59

Total $ 29,789,825

Portfolio 58

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, 2021, 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, 2021, 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.

30

IV.

RECEIVABLES

The City’s receivables as of September 30, 2021 consisted of the following:

Industrial Economic

General Development Development Debt Nonmajor Storm

Fund Corporation Corporation Service Governmental Utility Water Total

Due from other governments $ 750,115 $ - $ - $ - $ - $ - $ - $ 750,115

Due from developer - 206,901 - - - - - 206,901

Taxes 188,855 273,027 273,027 46,430 32,337 - - 813,676

Fines & fees 487,829 487,829

Accounts 80,362 - 36,955 - - 2,627,303 19,350 2,763,970

Gross receivables 1,507,161 479,928 309,982 46,430 32,337 2,627,303 19,350 5,022,491

Less: allowance for

uncollectible accounts ( 482,410)

- - ( 8,500)

- ( 1,539,796) - ( 2,030,706)

Net receivables $ 1,024,751 $ 479,928 $ 309,982 $ 37,930 $ 32,337 $ 1,087,507 $ 19,350 $ 2,991,785

V. CAPITAL ASSETS

Capital asset activity for the year ended September 30, 2021 was as follows:

Beginning Transfers/ Ending

Balance Additions Retirements Balance


Capital assets not being depreciated:

Land $ 1,882,695 $ - $ - $ 1,882,695

Construction in progress 2,941,345 4,748,473 ( 3,965,340) 3,724,478

Total capital assets not

being depreciated 4,824,040 4,748,473 ( 3,965,340) 5,607,173

Capital assets being depreciated:

Buildings 8,258,310 3,970,797 - 12,229,107

Improvements 398,358 100,872 - 499,230

Machinery and equipment 11,036,305 1,033,364 12,069,669

Infrastructure 16,476,752 2,452,028 - 18,928,780

Total assets being depreciated 36,169,725 7,557,061 - 43,726,786

Less accumulated depreciation for:

Buildings ( 2,816,044) ( 319,247)

- ( 3,135,291)

Improvements ( 291,820) ( 1,807)

- ( 293,627)

Machinery and equipment ( 8,754,186) ( 746,178)

- ( 9,500,364)

Infrastructure ( 4,764,018) ( 537,771)

- ( 5,301,789)

Total accumulated depreciation ( 16,626,068) ( 1,605,003)

- ( 18,231,071)

Total capital assets being

depreciated, net 19,543,657 5,952,058 - 25,495,715

Governmental activities capital

assets, net $ 24,367,697 $ 10,700,531 $( 3,965,340) $ 31,102,888

Beginning Transfers/ Ending

Balance Additions Retirements Balance


Capital assets, not being depreciated:

Land $ 1,241,293 $ - $ - $ 1,241,293

Construction in progress 404,939 1,671,889 - 2,076,828

Total capital assets, not being

depreciated 1,646,232 1,671,889 - 3,318,121

Capital assets being depreciated:

Buildings 101,181 - - 101,181

Improvements 29,753,985 2,747,415 - 32,501,400

Machinery and equipment 2,156,708 206,000 - 2,362,708

Total assets being

depreciated 32,011,874 2,953,415 - 34,965,289

Less accumulated depreciation for:

Buildings ( 47,893) ( 5,032)

- ( 52,925)

Improvements ( 15,627,888) ( 1,266,191)

- ( 16,894,079)

Machinery and equipment ( 1,365,651) ( 266,214)

- ( 1,631,865)

Total accumulated depreciation ( 17,041,432) ( 1,537,437)

- ( 18,578,869)

Total capital assets being

depreciated, net 14,970,442 1,415,978 - 16,386,420

Business-type activities capital

assets, net $ 16,616,674 $ 3,087,867 $ - $ 19,704,541

31

Depreciation expense for the year ended September 30, 2021 was charged to functions/programs of

the primary government as follows:


General government $ 262,451

Public safety 661,262

Culture and recreation 52,972

Public works 628,318

Total $ 1,605,003


Utility $ 1,486,992

Storm Water 50,445

Total $ 1,537,437

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 $ 125,149

General Fund Nonmajor governmental 1,814,857

Economic Development Corporation Nonmajor governmental 500,000

Economic Development Corporation General Fund 125,938

Industrial Development Corporation Water & Sewer Fund 475,248

Industrial Development Corporation General Fund 690,504

Economic Development Corporation Water & Sewer Fund 117,752

Non-Major Governmental General Fund 19,773

Total $ 3,869,221

The transfer from the general fund and Economic Development Corporation to nonmajor governmental

funds in the amounts of $1,814,857 and $500,000, respectively, were to fund upcoming capital projects.

The transfer from Industrial Development Corporation to General fund was for upcoming projects.

Interfund receivables and payables as of September 30, 2021 were as follows:

Receivable Fund Payable Fund Amount

Capital Projects General Fund $ 15,392

Capital Projects 2021 Co Bond Fund 105,763

Utility Fund Industrial Development Corporation 4,760,000

Economic Development Corporation Industrial Development Corporation 36,955

Total $ 4,918,110

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.

VII.

LONG-TERM DEBT

Long-term debt activity for the year ended September 30, 2021, was as follows:

Beginning Refunded/ Ending Amount Due

Balance Issued Retired Balance Within One Year


Bonds payable:

General obligation bonds $ 5,335,000 $ - $( 345,000) $ 4,990,000 $ 420,000

Certificates of obligation 11,290,000 - ( 375,000) 10,915,000 390,000

Certificates of obligation

(private placement) 406,000 3,685,000 ( 41,000) 4,050,000 73,000

Revenue bonds 8,555,000 - ( 355,000) 8,200,000 360,000

Revenue bonds (private

placement) 2,555,000 - ( 396,000) 2,159,000 404,000

Tax notes 140,000 - ( 140,000)

- -

Tax notes (private placement) 1,210,000 1,930,000 ( 386,000) 2,754,000 517,000

Special assessment revenue

revenue bonds (private placement) - 5,657,000 - 5,657,000 -

Issuance premium 1,026,537 863,937 ( 70,861) 1,819,613 -

Total bonds payable 30,517,537 12,135,937 ( 2,108,861) 40,544,613 2,164,000

Compensated absences 754,974 512,149 ( 529,868)

737,255 184,314

Total governmental $ 31,272,511 $ 12,648,086 $( 2,638,729) $ 41,281,868 $ 2,348,314


Bonds payable:

General obligation bonds $ 12,400,000 $ - $( 1,050,000) $ 11,350,000 $ 1,105,000

Certificates of obligation 2,247,000 - ( 84,000) 2,163,000 85,000

Certificates of obligation

(private placement) 899,000 2,020,000 ( 273,000) 2,646,000 268,000

Tax notes 8,000 - ( 8,000)

- -

Tax notes (private placement) 411,000 - ( 65,000)

346,000 67,000

Issuance premium 1,181,654 51,009 ( 110,822) 1,121,841 -

Total bonds payable 17,146,654 2,071,009 ( 1,590,822) 17,626,841 1,525,000

Compensated absences 32,872 33,143 ( 31,754)

34,261 8,565

Total business-type $ 17,179,526 $ 2,104,152 $( 1,622,576) $ 17,661,102 $ 1,533,565

32

Bond Reserve Fund

For the Industrial Development Corporation's 2004 Sales Tax Revenue Refunding bonds and 2019 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 and Economic Development Corporation’s bonds are as follows:

Required at Actual at Excess or

9/30/2021 9/30/2021 (Deficiency)

Interest and Sinking:

Sales Tax Revenue Refunding Bonds

Series 2014 - Industrial Development $ 11,558 $ 11,558 $ -

Series 2015 - Industrial Development 48,254 58,665 10,411

Total $ 59,812 $ 70,223 $ 10,411

Bond Reserve:


Series 2014 - Industrial Development $ 76,000 $ 76,000 $ -

Series 2015 - Industrial Development 335,000 342,201 7,201

Total $ 411,000 $ 418,201 $ 7,201

Interest and Sinking:


Series 2019A - Economic Development $ 7,355 $ 7,355 $ -

Series 2019B - Economic Development 41,979 41,979 -

Total $ 49,334 $ 49,334 $ -

Bond Reserve:


Series 2019A - Economic Development $ 286,618 $ 286,618 $ -

Series 2019B - Economic Development 507,865 507,865 -

Total $ 794,483 $ 794,483 $ -

Certificates of Obligation

The City issues Certificates of Obligation to provide for the acquisition and construction of major capital

facilities.

In the current year, the City issued Certificates of Obligations, Series 2021 in the amount of $3,685,000.

The obligations carry interest rates of 2.00-5.00% and mature in 2041. The proceed will be used for the

acquisition and construction of major capital facilities.

In the current year, the City issued Combination Tax and Revenue Certificates of Obligations, Series

2020 in the amount of $2,020,000. The obligations carry interest rates of 2.00% and mature in 2040.

The proceed will be used for the acquisition and construction of major capital facilities.

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 2021, in the amount of $1,095,000. The notes

carry interest rates of 2.00-4.00% and mature in fiscal year 2028. The proceeds will be used for the

purchase of materials, supplies, vehicles and equipment for the City.

In the current year, the City issued Tax Notes, Series 2021A, in the amount of $835,000. The notes

carry interest rates of 1.15% and mature in fiscal year 2027. 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.

33

Special Assessment Revenue Bonds

In the current year, the City issued Special Assessment Revenue Bonds, Series 2021 in the amount of

$5,657,000. The obligations carry interest rates of 2.65-4.00% and mature in 2051. The proceed will

be used for the financing of Red Oak Public Improvement District (PID) Number 1.

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.

Bonds payable currently outstanding and reported as liabilities of the City's governmental activities are:

Amounts

Interest Original Maturity Amounts

Description Rate Issue Date Outstanding


Certificates of Obligation, Series 2013 2.00-3.30% $ 1,090,000 2/15/2023 $ 170,000

Certificates of Obligation, Series 2015 1.81% 569,000 2/15/2026 86,000


Certificates of Obligation, Series 2017 2.00-4.00% 1,575,000 2/15/2031 1,375,000



Certificates of Obligation, Series 2021 2.00-5.00% 3,685,000 2/15/2041 3,685,000

General Obligation Bonds, Series 2014 2.00-3.50% 3,680,000 2/15/2030 2,505,000

General Obligation Bonds, Series 2017 2.00-4.00% 945,000 2/15/2030 730,000

General Obligation Bonds, Series 2020 3.00% 1,830,000 2/15/2030 1,755,000

Revenue Bonds, Series 2014 2.44% 760,000 8/15/2023 179,000

Revenue Bonds, Series 2015 3.32% 3,345,000 8/15/2026 1,980,000

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 5,210,000

Tax Notes, Series 2017 1.79% 785,000 2/15/2024 556,000

Tax Notes, Series 2020 1.80% 773,000 2/15/2026 472,000

Tax Notes, Series 2021 2.00-4.00% 1,095,000 2/15/2028 1,095,000

Tax Notes, Series 2021A 1.15% 835,000 2/15/2027 631,000

Special Assessment Bonds, Series 2021 2.65-4.00% 5,657,000 9/15/2051 5,657,000

Total governmental activities $ 45,718,000

$ 38,725,000

Bonds payable currently outstanding and reported as liabilities of the City's business-type activities are:

Amounts

Interest Original Maturity Amounts

Description Rate Issue Date Outstanding


Certificates of Obligation, Series 2015 1.81% $ 1,032,000 2/15/2026 $ 490,000




Certificates of Obligation, Series 2018 4.00-5.00% 240,000 2/15/2022 145,000

Certificates of Obligation, Series 2020 2.00% 2,020,000 2/15/2040 1,930,000




General Obligation Bonds, Series 2020 3.00% 5,330,000 2/15/2030 5,265,000

Tax Notes, Series 2020 1.80% 411,000 2/15/2026 346,000

Total business-type activities $ 31,118,000

$ 16,505,000

34

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

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 460,000 327,025 53,000 70,879 513,000 397,904

2027-2031 3,480,000 1,276,575 665,000 325,700 4,145,000 1,602,275

2032-2036 3,390,000 631,250 1,095,000 66,900 4,485,000 698,150

2037-2041 1,950,000 84,975 - - 1,950,000 84,975

Total $ 10,915,000 $ 3,806,500 $ 2,163,000 $ 771,251 $ 13,078,000 $ 4,577,751

Certificates of Obligation (private placement)




2022 $ 73,000 $ 139,493 $ 268,000 $ 49,277 $ 341,000 $ 188,770

2023 137,000 141,841 270,000 44,283 407,000 186,124

2024 73,000 138,348 283,000 39,157 356,000 177,505

2025 73,000 135,432 167,000 34,958 240,000 170,390

2026 259,000 130,837 168,000 31,798 427,000 162,635

2027-2031 720,000 572,500 485,000 125,050 1,205,000 697,550

2032-2036 1,245,000 310,500 535,000 74,050 1,780,000 384,550

2037-2041 1,470,000 76,100 470,000 19,000 1,940,000 95,100

Total $ 4,050,000 $ 1,645,051 $ 2,646,000 $ 417,573 $ 6,696,000 $ 2,062,624

General Obligations




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 680,000 87,438 1,285,000 200,875 1,965,000 288,313

2027-2031 2,290,000 139,625 5,425,000 361,700 7,715,000 501,325

Total $ 4,990,000 $ 744,751 $ 11,350,000 $ 1,701,344 $ 16,340,000 $ 2,446,095

Tax Notes (private placement)




2022 $ 517,000 $ 68,077 $ 67,000 $ 5,625 $ 584,000 $ 73,702

2023 507,000 57,663 68,000 4,410 575,000 62,073

2024 510,000 44,964 69,000 3,177 579,000 48,141

2025 352,000 33,260 70,000 1,926 422,000 35,186

2026 365,000 22,539 72,000 648 437,000 23,187

2027-2031 503,000 16,521 - - 503,000 16,521

Total $ 2,754,000 $ 243,024 $ 346,000 $ 15,786 $ 3,100,000 $ 258,810

Governmental Acitivites

Revenue Bonds

Negotiated

Private Placement



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 395,000 197,955 460,000 15,272 855,000 213,227

2027-2031 2,145,000 823,323 - - 2,145,000 823,323

2032-2036 2,485,000 478,925 - - 2,485,000 478,925

2037-2041 1,680,000 97,388 - - 1,680,000 97,388

Total $ 8,200,000 $ 2,477,383 $ 2,159,000 $ 217,218 $ 10,359,000 $ 2,694,601

35

Governmental Activities

Special Assessment Bonds

Year Ended

September 30, Principal Interest

2022 $ - $ 243,888

2023 120,000 201,839

2024 123,000 198,689

2025 127,000 195,460

2026 130,000 192,126

2027-2031 709,000 900,663

2032-2036 832,000 778,551

2042-2046 986,000 628,128

2042-2047 1,183,000 435,160

2042-2048 1,447,000 178,280

Total $ 5,657,000 $ 3,952,784

VIII.

DEFINED BENEFIT PENSION PLAN

Plan Description

The City participates as one of 895 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 annual comprehensive 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).

36

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, 2020 valuation and measurement date, the following numbers of employees were

covered by the benefit terms:

Contributions

Inactive employees or beneficiaries currently receiving benefits 38

Inactive employees entitled to but not yet receiving benefits 85

Active employees 108

Total 231

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, 2021, were $540,444, and were equal to the required contributions.

Net Pension Liability

The City’s Net Pension Liability (NPL) was measured as of December 31, 2020, 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, 2020 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.

37

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, 2019 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 2021 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.

Changes in Net Pension Liability

Increase (Decease)

Total Pension Plan Fiduciary Net Pension

Liability Net Position Liability

(a) (b) (a)-(b)

Balance at 12/31/2019 $ 11,324,846 $ 10,160,021 $ 1,164,825

Changes for the year:

Service cost 949,953 - 949,953

Interest 784,454 - 784,454

Difference between expected

and actual experience ( 154,487)

- ( 154,487)

Contributions - employer - 540,005 ( 540,005)

Contributions - employee - 532,399 ( 532,399)

Net investment income - 773,124 ( 773,124)

Benefit payments, including refunds

of employee contributions ( 356,560) ( 356,560)

-

Change in assumptions - - -

Administrative expense - ( 4,990)

4,990

Other changes - ( 195)

195

Net changes 1,223,360 1,483,783 ( 260,423)

Balance at 12/31/2020 $ 12,548,206 $ 11,643,804 $ 904,402

38

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) $ 2,974,434 $ 904,402 $( 781,020)

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, 2021, the City recognized pension expense in the governmental and

business-type activities of $384,857 and $61,872, respectively.

At September 30, 2021, 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 $ 75,696 $ 148,139

Changes in actuarial assumptions 6,725 -

Difference between projected and actual

investment earnings - 285,300

Contributions subsequent to the

measurement date 412,488 -

Total $ 494,909 $ 433,439

The City reported $412,488 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, 2022. 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,

2022 $( 109,958)

2023 ( 23,918)

2024 ( 175,596)

2025 ( 37,337)

2026 ( 4,209)

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.

39

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, 2020 valuation and measurement date, the following employees were covered by

the benefit terms:

Contributions

Inactive employees or beneficiaries currently receiving benefits 33

Inactive employees entitled to but not yet receiving benefits 16

Active employees 108

Total 157

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 0.11% for 2021, of which 0.01% and 0.02%, 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, 2021 and 2020 were $2,046 and $742,

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, 2020 and was determined by an

actuarial valuation as of that date.

Actuarial assumptions

The Total OPEB Liability in the December 31, 2020 actuarial valuation was determined using the

following actuarial assumptions:

Inflation rate 2.50%

Salary increases

3.5% to 11.5% including inflation

Discount rate 2.00%

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, 2020 valuation were based on the results of an actuarial experience study for

the period December 31, 2014 to December 31, 2018.

40

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

2.00% 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, 2020.

Changes in the Total OPEB Liability

Total OPEB

Liability

Balance at 12/31/2019 $ 214,340

Changes for the year:

Service cost 16,733

Interest 6,114

Difference between expected and actual experience (754)

Changes of assumptions 42,482

Benefit payments (761)

Net changes 63,814

Balance at 12/31/2020 $ 278,154

Discount Rate Sensitivity Analysis

The following presents the total OPEB liability of the City, calculated using the discount rate of 2.00%,

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 (1.00%) or 1 percentage-point higher (3.00%) than the current rate:

1% Decrease in 1% Increase in

Discount Rate Discount Rate Discount Rate

Total OPEB Liability $ 351,411 $ 278,154 $

223,405

OPEB Expense, Deferred Outflows, and Deferred Inflows of Resources Related to OPEB

For the year ended September 30, 2021, the City recognized OPEB expense in the governmental

activities and business-type activities of $28,816 and $4,633, respectively.

At September 30, 2021, 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 $ -

$ 3,009

Changes in actuarial assumptions 71,684 8,626

Contributions subsequent to the

measurement date 1,826 -

Total $ 73,510 $ 11,635

The City reported $1,826 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, 2022. 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,

2022 $ 10,603

2023 10,603

2024 10,603

2025 10,603

2026 8,858

Thereafter 8,779

41

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, 2021 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.

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.

Litigation Settlement

In March 2022, the City of Red Oak and the City of Red Oak Industrial Development Corporation

(CROIDC) signed a settlement agreement with the Rockett Special Utility District (RSUD). Under the

settlement, the City has accrued $4,760,000 as of September 30, 2021 for the transfer of a portion of

RSUD’s Certificate of Convenience and Necessity (CCN) to the City of Red Oak.

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.

42

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 2021, the City abated $559,132 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 2021, the City did not rebate any taxes.

XIII. SIGNIFICANT FORTHCOMING STANDARDS

Statement No. 87, Leases – This statement changes the recognition requirements for certain lease

assets and liabilities for leases that are currently classified as operating leases. This statement will

become effective in fiscal year 2022.

Statement No. 96, Subscription-Based Information Technology Arrangements – This Statement provides

guidance on the accounting and financial reporting for subscription-based information technology

arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA;

(2) establishes that a SBITA results in a right-to-use subscription asset-an intangible asset-and a

corresponding subscription liability; (3) provides the capitalization criteria for outlays other than

subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures

regarding a SBITA.

43

REQUIRED SUPPLEMENTARY

INFORMATION



SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCE - BUDGET (BUDGET BASIS) AND ACTUAL

GENERAL FUND


Variance with

Final Budget

Original Final Positive

Budget Budget Actual (Negative)

REVENUES

Property taxes $ 6,800,074 $ 6,800,074 $ 6,780,776 $( 19,298)

Sales taxes 2,489,095 2,489,095 3,169,140 680,045

Franchise tax 763,000 763,000 728,690 ( 34,310)

Alcoholic beverage tax 15,312 15,312 11,185 ( 4,127)

Intergovernmental 596,000 716,773 871,688 154,915

Contributions 20,000 20,000 33,577 13,577

Licenses and permits 716,000 716,000 1,284,074 568,074

Fines and forfeitures 432,500 432,500 341,300 ( 91,200)

Charges for services 624,464 624,464 654,699 30,235

Investment earnings 45,000 45,000 23,120 ( 21,880)

Miscellaneous 26,000 26,000 44,143 18,143

Total revenues 12,527,445 12,648,218 13,942,392 1,294,174

EXPENDITURES

Current:

General government 1,843,116 1,843,116 1,678,326 164,790

Public safety 8,620,029 8,740,802 8,303,211 437,591

Culture and recreation 1,147,202 1,129,100 853,375 275,725

Public works 2,067,139 2,067,139 2,016,707 50,432

Capital outlay 2,462,718 2,980,480 1,721,787 1,258,693

Debt service:

Principal 66,395 66,395 - 66,395

Bond issuance costs 40,000 40,000 88,106 ( 48,106)

Total expenditures 16,246,599 16,867,032 14,661,512 2,205,520


over (under) expenditures ( 3,719,154) ( 4,218,814) ( 719,120) 3,499,694


Issuance of bonds 802,654 802,654 1,930,000 1,127,346

Premium on issuance of bonds - - 160,760 160,760

Insurance recovery - - 23,064 23,064

Transfers in 689,856 944,856 961,364 16,508

Transfers out - ( 1,814,857) ( 1,814,857)

-

Total other financing sources

(uses) 1,492,510 ( 67,347) 1,260,331 1,327,678

CHANGE IN FUND BALANCE ( 2,226,644) ( 4,286,161) 541,211 4,827,372

FUND BALANCE - BEGINNING 4,955,029 4,955,029 4,955,029 -

FUND BALANCE - ENDING $ 2,728,385 $ 668,868 $ 5,496,240 $ 4,827,372

44




INDUSTRIAL DEVELOPMENT CORPORATION

FOR YEAR ENDED SEPTEMBER 30, 2021

Variance with

Final Budget



REVENUES

Sales taxes $ 1,286,450 $ 1,286,450 $ 1,587,251 $ 300,801

Contributions - - 421,713 421,713


Land sale - - 121,712 121,712

Miscellaneous - - 500 500

Total revenues 1,321,450 1,321,450 2,142,926 821,476

EXPENDITURES

Current:

Industrial development 9,550,499 9,550,499 5,596,763 3,953,736

Capital outlay 55,000 55,000 37,642 17,358

Debt service:

Principal 397,000 397,000 397,000 -

Interest and fiscal charges 87,542 87,542 87,514 28

Total expenditures 10,090,041 10,090,041 6,118,919 3,971,122


over (under) expenditures ( 8,768,591) ( 8,768,591) ( 3,975,993) 4,792,598


Transfers out ( 515,198) ( 515,198) ( 1,290,901) ( 775,703)


(uses) ( 515,198) ( 515,198) ( 1,290,901) ( 775,703)

CHANGE IN FUND BALANCE ( 9,283,789) ( 9,283,789) ( 5,266,894) 4,016,895


FUND BALANCE - ENDING $ 3,140,303 $ 3,140,303 $ 7,157,198 $ 4,016,895

45




ECONOMIC DEVELOPMENT CORPORATION


Variance with

Final Budget



REVENUES

Sales taxes $ 1,286,450 $ 1,286,450 $ 1,587,251 $ 300,801


Land sale - - 1,103,869 1,103,869

Total revenues 1,321,450 1,321,450 2,699,533 1,378,083

EXPENDITURES

Current:

Economic development 4,724,948 4,724,948 209,880 4,515,068

Capital outlay 218,000 218,000 37,642 180,358

Debt service:

Principal 594,640 594,640 355,000 239,640

Interest and fiscal charges - - 239,641 ( 239,641)

Bond issuance costs - - 1,500 ( 1,500)

Total expenditures 5,537,588 5,537,588 843,663 ( 4,693,925)


over (under) expenditures ( 4,216,138) ( 4,216,138) 1,855,870 6,072,008


Transfers out 4,216,138 4,216,138 ( 743,690) ( 4,959,828)

Total other financing sources (uses) -

(uses) 4,216,138 4,216,138 ( 743,690) ( 4,959,828)

CHANGE IN FUND BALANCE - - 1,112,180 1,112,180


FUND BALANCE - ENDING $ 13,329,480 $ 13,329,480 $ 14,441,660 $ 1,112,180

46


SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS

TEXAS MUNICIPAL RETIREMENT SYSTEM (TMRS)


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 - -


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


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 2015 is not

available.

47

2018 2019 2020

$ 823,175 $ 921,228 $ 949,953

613,494 690,759 784,454

147,850 - -

( 33,117)

105,672 ( 154,487)

- 10,591 -

( 263,334) ( 352,505) ( 356,560)

1,288,068 1,375,745 1,223,360

8,661,033 9,949,101 11,324,846

$ 9,949,101 $ 11,324,846 $ 12,548,206

$ 409,733 $ 516,348 $ 540,005

401,432 503,403 532,399

( 237,587) 1,274,464 773,124

( 263,334) ( 352,505) ( 356,560)

( 4,585) ( 7,186) ( 4,990)

( 240) ( 215) ( 195)

305,419 1,934,309 1,483,783

7,920,293 8,225,712 10,160,021

$ 8,225,712 $ 10,160,021 $ 11,643,804

$ 1,723,389 $ 1,164,825 $ 904,402

82.68% 89.71% 92.79%

$ 6,386,149 $ 7,191,473 $ 7,605,707

26.99% 16.20% 11.89%

48


SCHEDULE OF EMPLOYER CONTRIBUTIONS



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

24 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.

49

2018 2019 2020 2021

$ 380,870 $ 511,496 $ 544,685 $ 540,444

380,870 511,496 544,685 540,444

- - - -

$ 6,173,535 $ 7,012,203 $ 7,419,342 $ 7,605,707

6.17% 7.29% 7.34% 7.11%

50


SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY AND RELATED RATIOS



Measurement year December 31, 2017 2018 2019 2020

Total pension liability

Service cost $ 10,313 $ 12,772 $ 12,226 $ 16,733

Interest (on the total pension liability) 4,945 5,340 6,072 6,114

Difference between expected and

actual experience - ( 1,035) ( 2,388) ( 754)

Changes in assumptions 14,611 ( 13,762) 41,224 42,482


of employee contributions ( 573) ( 639) ( 720) ( 760)

Net change in total pension liability 29,296 2,676 56,414 63,815

Total pension liability - beginning 125,953 155,249 157,925 214,339

Total pension liability - ending (a) $ 155,249 $ 157,925 $ 214,339 $ 278,154

Covered payroll $ 5,634,270 $ 6,386,149 $ 7,191,473 $ 7,605,707

Net pension liability as a percentage

of covered payroll 2.755% 2.473% 2.980% 3.657%

51

COMBINING SCHEDULES


COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS


Special

Revenue

Capital Projects

2018 CO 2019 CO

Tourism Bond Fund Bond Fund

ASSETS

Cash and cash equivalents $ 541,891 $ - $

-

Investments - 628,325 3,387,885

Accounts receivable (net) 32,337 - -

Restricted assets:

Investments - - -

Total assets $ 574,228 $ 628,325 $ 3,387,885

LIABILITIES


Accrued liabilities 2,485 - -

Due to other funds - - 105,763

Customer Deposits 6,000 - -

Total liabilities 15,958 3,362 108,982

FUND BALANCES

Restricted:


Capital projects - 624,963 3,278,903

Commited:

Capital projects - - -

Total fund balances 558,270 624,963 3,278,903

Total liabilities and fund balances $ 574,228 $ 628,325 $ 3,387,885

52

Special

Revenue

General

Total Nonmajor

Capital

Governmental

Projects Fund PID Funds

$ 2,497,105 $ - $ 3,038,996

- - 4,016,210

- - 32,337

- 4,585,000 4,585,000

$ 2,497,105 $ 4,585,000 $ 11,672,543

33,978 - 48,032

- - 2,485

- - 105,763

- - 6,000

33,978 - 162,280

- - 558,270

- 4,585,000 8,488,866

2,463,127 - 2,463,127

2,463,127 4,585,000 11,510,263

$ 2,497,105 $ 4,585,000 $ 11,672,543

53


COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS


Special

Revenue

Capital Projects

2018 CO 2019 CO

Tourism Bond Fund Bond Fund

REVENUES

Hotel occupancy tax $ 317,525 $ - $

-

Charges for services 19,773 - -

Investment earnings 902 569 4,690

Total revenues 338,200 569 4,690

EXPENDITURES

Current:


Public works - 93,236 -

Capital outlay 7,608 33,984 1,055,670

Debt service:

Bond issuance cost - - -

Total expenditures 155,704 127,220 1,055,670


over expenditures 182,496 ( 126,651) ( 1,050,980)

OTHER FINANCING SOURCES

(USES)

Issuance of bonds - - -

Premium on issuance of bonds - - -

Insurance recovery - - -

Transfers in - - -

Transfers out ( 19,773)

- -


(uses) ( 19,773)

- -

CHANGE IN FUND BALANCE 162,723 ( 126,651) ( 1,050,980)

FUND BALANCE - BEGINNING 395,547 751,614 4,329,883

FUND BALANCE - ENDING $ 558,270 $ 624,963 $ 3,278,903

54

Special

Revenue

General

Total Nonmajor

Capital

Governmental

Projects Fund PID Fund Funds

$ - $ - $ 317,525

- - 19,773

- - 6,161

- - 343,459

- - 148,096

- - 93,236

33,978 - 1,131,240

- 1,125,579 1,125,579

33,978 1,125,579 2,498,151

( 33,978) ( 1,125,579) ( 2,154,692)

- 5,657,000 5,657,000

- 53,579 53,579

182,248 - 182,248

2,314,857 - 2,314,857

- - ( 19,773)

2,497,105 5,710,579 8,187,911

2,463,127 4,585,000 6,033,219

- - 5,477,044

$ 2,463,127 $ 4,585,000 $ 11,510,263

55




TOURISM


Variance with

Actual Final Budget

Original Final GAAP Positive

Budget Budget Basis (Negative)

REVENUES

Hotel occupancy tax $ 220,000 $ 220,000 $ 317,525 $ 97,525

Charges for services 50,000 50,000 19,773 ( 30,227)

Investment earnings - - 902 902

Total revenues 270,000 270,000 338,200 68,200

EXPENDITURES

Current:

Culture and recreation 172,558 172,558 148,096 24,462

Capital outlay - - 7,608 ( 7,608)

Total expenditures 172,558 172,558 155,704 16,854


over (under) expenditures 97,442 97,442 182,496 85,054


Transfers out ( 50,000) ( 50,000) ( 19,773) 30,227

Total other financing sources (uses) ( 50,000) ( 50,000) ( 19,773) 30,227

CHANGE IN FUND BALANCE 47,442 47,442 162,723 115,281

FUND BALANCE - BEGINNING 395,547 395,547 395,547 -

FUND BALANCE - ENDING $ 442,989 $ 442,989 $ 558,270 $ 115,281

56




DEBT SERVICE FUND


Variance with

Actual Final Budget

Original Final GAAP Positive

Budget Budget Basis (Negative)

REVENUES

Property taxes $ 1,901,212 $ 1,901,212 $ 1,895,159 $( 6,053)

Investment earnings - - 716 716

Total revenues 1,901,212 1,901,212 1,895,875 ( 6,053)

EXPENDITURES

Debt service:

Principal 1,231,810 1,231,810 1,286,000 ( 54,190)

Interest and fiscal charges 542,385 542,385 608,310 ( 65,925)

Bond issuance costs 134,570 134,570 - 134,570

Total expenditures 1,908,765 1,908,765 1,894,310 14,455


over expenditures ( 7,553) ( 7,553)

1,565 9,118


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) - 5,727 - ( 5,727)

CHANGE IN FUND BALANCE ( 7,553) ( 1,826)

1,565 3,391

FUND BALANCE - BEGINNING 106,055 106,055 106,055 106,055

FUND BALANCE - ENDING $ 98,502 $ 104,229 $ 107,620 $ 109,446

57


STATISTICAL SECTION


STATISTICAL SECTION

(Unaudited)

This part of the City of Red Oak, Texas’ annual comprehensive 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 58

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 66

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 73

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 81

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 85

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

annual comprehensive financial reports for the relevant year


NET POSITION BY COMPONENET

LAST TEN FISCAL YEARS

(UNAUDITED)

(ACCRUAL BASIS OF ACCOUNTING)

2012 2013 2014 2015


Net investment in capital assets $ 5,758,275 $ 2,857,779 $ 3,924,047 $ 3,341,213

Restricted 4,666,499 7,755,036 4,630,580 5,182,954

Unrestricted 1,526,449 1,200,906 2,195,547 3,379,870

Total governmental activities $ 11,951,223 $ 11,813,721 $ 10,750,174 $ 11,904,037


Net investment in capital assets $ 791,014 $ 880,487 $ 47,760 $( 557,294)

Restricted - - - -

Unrestricted 1,729,831 1,151,083 892,368 1,395,088

Total business-type activities $ 2,520,845 $ 2,031,570 $ 940,128 $ 837,794

Primary government

Net investment in capital assets $ 6,549,289 $ 3,738,266 $ 3,971,807 $ 2,783,919

Restricted 4,666,499 7,755,036 4,630,580 5,182,954

Unrestricted 3,256,280 2,351,989 3,087,915 4,774,958

Total primary government $ 14,472,068 $ 13,845,291 $ 11,690,302 $ 12,741,831

58

Table 1

2016 2017 2018 2019 2020 2021

$( 61,393) $ 1,205,774 $ 1,569,243 $( 1,441,691) $ 3,113,430 $ 3,708,559

6,588,865 13,639,229 14,435,879 18,622,126 23,036,280 19,338,628

3,238,006 1,256,990 1,528,881 1,825,330 5,335,717 9,266,825

$ 9,765,478 $ 16,101,993 $ 17,534,003 $ 19,005,765 $ 31,485,427 $ 32,314,012

$( 2,110,124) $( 2,232,567) $( 258,524) $ 892,476 $ 833,237 $ 4,677,953

- - - - 553,249 785,254

2,857,208 4,656,000 3,979,521 3,012,786 3,642,709 3,602,903

$ 747,084 $ 2,423,433 $ 3,720,997 $ 3,905,262 $ 5,029,195 $ 9,066,110

$( 2,171,517) $( 1,026,793) $ 1,310,719 $( 549,215) $ 3,946,667 $ 8,386,512

6,588,865 13,639,229 14,435,879 18,622,126 23,589,529 20,123,882

6,095,214 5,912,990 5,508,402 4,838,116 8,978,426 12,869,728

$ 10,512,562 $ 18,525,426 $ 21,255,000 $ 22,911,027 $ 36,514,622 $ 41,380,122

59


CHANGES IN NET POSITION


(UNAUDITED)


2012 2013 2014 2015

EXPENSES


General government $ 1,083,403 $ 1,042,914 $ 1,166,129 $ 1,213,141

Public safety 6,076,660 5,628,721 5,955,135 6,324,778


Public works 1,477,838 1,488,066 1,194,723 1,407,964

Industrial development 334,982 249,388 1,265,510 85,544

Economic development 167,579 180,873 215,678 134,769

Interest and fiscal charges 378,979 453,192 489,796 444,474

Total governmental activities expense 9,732,187 9,271,441 10,654,746 9,965,958


Utility and storm water 4,982,041 5,239,606 5,849,502 5,672,450

Total business-type activities expense 4,982,041 5,239,606 5,849,502 5,672,450

Total Primary government expense 14,714,228 14,511,047 16,504,248 15,638,408

PROGRAM REVENUES


Charges for services

Public safety 644,856 554,342 668,752 744,683

Cultural and recreational 17,669 161,049 240,294 321,703

Public works 282,194 405,231 399,922 401,870

Industrial and economic development - - - -

Operating grants/contributions 641,779 427,099 162,785 224,921

Capital grants/contributions 161,266 643,386 - -

Total governmental activities 1,747,764 2,191,107 1,471,753 1,693,177


Charges for services 3,380,120 3,208,811 3,924,307 4,747,708

Capital grants/contributions 147,996 205,388 - -

Total business-type activities 3,528,116 3,414,199 3,924,307 4,747,708

Total primary government 5,275,880 5,605,306 5,396,060 6,440,885

NET (EXPENSE) REVENUES

Governmental activities ( 5,913,026) ( 6,232,833) ( 8,260,434) ( 8,961,569)

Business-type activities ( 678,143) ( 1,276,690) ( 1,057,734) ( 1,101,794)

Total primary government ( 6,591,169) ( 7,509,523) ( 9,318,168) ( 10,063,363)

60

Table 2

2016 2017 2018 2019 2020 2021

$ 1,588,331 $ 1,785,438 $ 1,082,232 $ 1,667,818 $ 1,876,147 $ 1,931,114

6,781,475 7,043,748 8,386,948 9,257,914 8,680,540 8,910,297

367,427 393,236 415,230 427,254 848,530 1,051,184

1,601,788 1,642,088 1,483,194 1,847,970 2,774,598 2,895,417

63,339 96,124 173,975 155,888 1,104,636 5,596,763

188,748 394,622 251,187 191,916 58,940 209,880

328,730 563,095 453,671 454,153 1,550,846 2,259,864

10,919,838 11,918,351 12,246,437 14,002,913 16,894,237 22,854,519

6,461,674 6,605,036 6,838,560 7,838,995 8,812,523 8,751,014

6,461,674 6,605,036 6,838,560 7,838,995 8,812,523 8,751,014

17,381,512 18,523,387 19,084,997 21,843,908 25,706,760 31,605,533

744,683 467,813 467,813 432,708 410,859 657,512

321,703 453,860 453,860 811,267 1,105,967 1,634,550

401,870 456,898 456,898 550,923 745,400 649,678

- - - - 7,589,503 1,225,581

224,921 339,721 339,721 575,728 1,372,677 1,293,401

- - - - 3,519,935 2,485,606

1,693,177 1,718,292 1,718,292 2,370,626 14,744,341 7,946,328

4,747,708 5,577,700 5,577,700 8,009,066 8,715,261 9,477,411

- 818,071 818,071 - 1,104,544 2,705,020

4,747,708 6,395,771 6,395,771 8,009,066 9,819,805 12,182,431

6,440,885 8,114,063 8,114,063 10,379,692 24,564,146 20,128,759

( 8,961,569) ( 8,247,666) ( 8,247,666) ( 11,632,287) ( 2,149,896) ( 14,908,191)

( 1,101,794) ( 94,750) ( 94,750) 170,071 1,007,282 3,431,417

( 10,063,363) ( 8,342,416) ( 8,342,416) 11,462,216 ( 1,142,614) ( 11,476,774)

61


CHANGES IN NET POSITION


(UNAUDITED)


2012 2013 2014 2015

GENERAL REVENUES


Taxes

Property taxes $ 3,740,229 $ 3,828,869 $ 4,090,144 $ 4,188,900

Sales tax 2,430,548 2,754,847 3,020,651 4,072,836

Franchise tax 585,424 577,663 648,314 780,644

Hotel/motel taxes 83,506 94,877 103,030 1,228,282

Alcoholic Beverage tax 4,186 5,728 8,224 8,663

Investment earnings 98,132 87,121 103,083 108,996

Gain on sale of land held for resale 1,178,986 - - 881

Gain on sale of capital assets - - - -

Miscellaneous 92,067 91,657 304,230 279,436

Transfers - - 84,731 -

Total governmental activities 8,213,078 7,440,762 8,362,407 10,990,388


Investment earnings 6,877 2,623 918 881

Transfers - - ( 84,731)

-

Gain on sale of capital assets - - - -

Total business-type activities 6,877 2,623 ( 83,813)

881

Total primary government 8,219,955 7,443,385 8,278,594 9,563,238

CHANGE IN NET POSITION

Governmental activities 648,869 ( 137,502) ( 845,039) 1,314,691

Business-type activities ( 587,521) ( 489,275) ( 754,231) ( 93,869)

Total primary government $ 61,348 $( 626,777) $( 1,599,270) $ 1,220,822

62

Table 2

2016 2017 2018 2019 2020 2021

$ 4,722,883 $ 5,271,979 $ 5,900,323 $ 6,917,413 $ 8,000,818 $ 8,571,758

3,897,973 3,761,566 4,433,407 4,693,893 5,584,807 6,343,642

759,708 853,683 735,818 777,141 742,438 728,690

165,188 162,468 169,662 195,732 162,389 317,525

12,501 11,887 13,641 13,950 9,878 11,185

117,567 138,709 189,107 353,138 332,046 52,373

1,148,148 196,685 - - - -

- - - - - -

166,420 199,281 126,087 - 56,382 45,403

- - ( 137,958) 152,782 - ( 593,000)

10,990,388 10,429,431 11,430,087 13,104,049 14,888,758 15,477,576

1,412 5,545 13,203 14,194 8,215 12,498

- 166,821 137,958 - - 593,000

- - - - 108,436 -

1,412 172,366 151,161 14,194 116,651 605,498

10,991,800 10,601,797 11,581,248 13,118,243 15,005,409 16,083,074

2,022,092 546,815 1,537,785 1,471,762 12,738,862 569,385

( 90,710) 1,515,367 1,303,131 184,265 1,123,933 4,036,915

$ 1,931,382 $ 2,062,182 $ 2,840,916 $ 1,656,027 $ 13,862,795 $ 4,606,300

63


FUND BALANCES

GOVERNMENTAL FUNDS


(UNAUDITED)

(MODIFIED ACCRUAL BASIS OF ACCOUNTING)

2012 2013 2014 2015

General Fund

Nonspendable:

Prepaids and Inventory $ 93,372 $ 75,521 $ 91,123 $ 91,692

Restricted:

Use of Bond proceeds - 1,057,000 - -

Capital projects - - - 218,825

Committed:

Court Security 74,970 50,748 35,799 6,246

Court Technology 46,611 39,835 29,049 28,868

Public Safety 36,849 15,650 61,143 39,213

Assigned:

Subsequent year's budget - - - -

Unassigned 1,016,686 1,064,147 958,619 1,479,205

Total General Fund $ 1,268,488 $ 2,302,901 $ 1,175,733 $ 1,864,049

All other Governmental Funds

Nonspendable:

Prepaid $ - $ - $ - $ -

Restricted:

Debt service 90,662 89,728 75,585 118,350

Capital projects 1,243,228 506,821 231,865 180,078

Committed:


Capital projects - - - -

Industrial & economic development 2,814,814 4,278,133 6,229,501 5,642,893

Total all other governmental funds 4,164,974 4,902,911 6,591,803 6,016,232

Total Fund Balances $ 5,720,922 $ 5,433,462 $ 7,205,812 $ 7,767,536

64

Table 3

2016 2017 2018 2019 2020 2021

$ 92,413 $ 16,017 $ 7,222 $ 8,085 $ 4,182 $ 21,565

- - - - - -

218,825 218,825 256,527 256,527 256,527 256,527

13,885 20,064 25,482 31,542 34,519 34,519

923 1,017 305 37 3,293 3,293

44,755 35,075 31,169 35,382 73,534 73,534

- - - - 428,796 1,144,757

1,580,167 2,032,692 2,205,015 2,747,209 4,154,178 3,962,045

$ 1,950,968 $ 2,323,690 $ 2,525,720 $ 3,078,782 $ 4,955,029 $ 5,496,240

$ - $ 198,789 $ 32,336 $ 32,336 $ - $ -

98,857 79,449 96,442 85,641 106,055 107,620

155,502 355,991 372,997 6,717,817 8,283,793 13,171,933

118,313 238,186 268,902 327,120 395,547 558,270

- - - - - 2,463,127

6,864,906 12,491,833 13,332,513 11,168,060 25,753,572 21,598,858

7,237,578 13,364,248 14,103,190 18,330,974 34,538,967 37,899,808

$ 7,880,281 $ 15,687,938 $ 16,628,910 $ 21,409,756 $ 39,493,996 $ 43,396,048

65


CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS


(UNAUDITED)

(MODIFIED ACCRUAL BASIS OF ACCOUNTING)

2012 2013 2014 2015

REVENUE

Property taxes $ 3,751,225 $ 3,842,276 $ 4,081,650 $ 4,177,442

Sales tax 2,430,548 2,754,847 3,020,651 4,072,836

Franchise tax 585,424 577,663 648,314 780,644

Hotel occupancy taxes 83,506 94,877 103,030 122,882

Alcoholic Beverage tax 4,186 5,728 8,224 8,663

Licenses and permits 236,842 321,703 342,782 453,860

Fines and Forfeitures 707,514 744,683 495,823 467,813

Charges for services 399,136 401,870 428,433 456,898

Land sale - - - -

Investment earnings 98,132 87,121 103,083 108,996

Contributions - - - -

Miscellaneous 100,902 91,657 328,881 274,542

Grants from governmental agencies 600,002 - - -

Intergovernmental 224,484 224,921 180,262 339,721

Total Revenues 9,221,901 9,147,346 9,741,133 11,264,297

EXPENDITURES

Current:

General government 840,664 888,119 1,023,145 1,033,065

Public safety 4,739,546 5,095,260 6,122,424 5,607,528


Public works 897,334 927,032 919,529 980,329

Industrial development 297,788 210,253 1,261,582 81,704

Economic development 153,764 168,353 212,274 131,452

Capital Outlay 2,553,143 595,495 1,703,768 541,862

Debt Service:

Principal 517,725 342,045 1,150,444 707,505

Interest and fiscal charges 366,727 439,288 490,263 472,014

Issuance costs - - - -

Total Expenditures 10,525,905 8,849,892 13,202,603 9,865,337

EXCESS (DEFICIENCY) OF REVENUES

OVER (UNDER) EXPENDITURES ( 1,304,004) 297,454 ( 3,461,470) 1,398,960


Sale of capital assets 1,985,786 - - -

Release of reserve ( 769,300)

- - -

Note and Lease proceeds 950,986 1,368,851 - -

Insurance recovery - - - -

Issuance of refunding bonds - - - -

Issuance of bonds - 1,090,000 1,674,000 4,097,000

Payment to refunding escrow agent - - - ( 3,762,314)

Premium on issuance of bonds - ( 33,000)

- 176,016

Transfers in 245,140 290,544 457,750 398,950

Transfers out ( 245,140) ( 290,544) ( 373,019) ( 398,950)

Total other financing sources (uses) 2,167,472 2,425,851 1,758,731 510,702

NET CHANGE IN FUND BALANCE $ 863,468 $ 2,723,305 $( 1,702,739) $ 1,909,662

Debt service as a percentage of

noncapital expenditures 11.1% 9.5% 14.3% 12.7%

66

Table 4

2016 2017 2018 2019 2020 2021

$ 4,718,288 $ 5,248,141 $ 5,919,915 $ 6,881,332 $ 7,905,106 $ 8,675,935

3,897,973 3,761,566 4,433,407 4,693,893 5,584,807 6,343,642

759,708 853,683 735,818 777,141 742,438 728,690

165,188 162,468 169,662 195,732 162,389 317,525

12,501 11,887 13,641 13,950 9,878 11,185

383,631 448,161 924,535 811,267 1,277,120 1,654,585

469,496 469,637 363,928 432,708 379,145 341,300

490,104 492,042 525,998 550,923 8,154,215 897,072

- - - - - 1,225,581

117,567 138,703 189,107 353,138 332,046 52,373

- - - - 144,367 455,290

167,734 189,597 126,087 140,620 56,382 45,403

- - - - - -

608,311 454,275 701,691 567,042 1,372,133 871,688

11,790,501 12,230,160 14,103,789 15,417,746 26,120,026 21,620,269

1,165,085 1,277,771 755,204 1,052,036 1,610,525 1,678,326

6,044,534 6,403,553 7,547,007 8,519,195 8,070,342 8,303,211

342,409 324,024 373,696 393,798 800,430 1,001,471

1,240,448 1,160,727 1,071,367 1,411,637 2,063,724 2,109,943

59,489 94,367 173,975 155,888 1,104,636 5,596,763

581,446 157,583 70,634 191,916 58,940 209,880

937,304 2,494,281 1,203,551 7,000,822 2,225,172 6,258,624

706,007 1,024,536 1,145,992 1,838,205 2,534,062 2,038,000

401,682 599,303 491,610 822,758 931,131 935,465

- - - - 299,168 1,334,783

11,478,404 13,536,145 12,833,036 21,386,255 19,698,130 29,466,466

312,097 (1,305,985) 1,270,753 ( 5,968,509) 6,421,896 (7,846,197)

1,148,148 196,685 - - - -

- - - - - -

- - - - - -

- - - - - 205,312

- - - - 1,830,000 -

4,208,000 3,305,000 - 10,130,000 9,443,000 11,272,000

- ( 1,016,257)

- - ( 2,041,218)

-

- 238,193 - 619,355 250,331 863,937

402,540 578,062 449,480 1,251,476 3,254,225 3,276,221

( 402,540) ( 744,883) ( 587,438) ( 1,251,476) ( 3,254,225) ( 3,869,221)

5,356,148 2,556,800 ( 137,958) 10,749,355 9,482,113 11,748,249

$ 5,668,245 $ 1,250,815 $ 1,132,795 $ 4,780,846 $ 15,904,009 $ 3,902,052

10.5% 14.7% 14.1% 18.5% 21.5% 12.6%

67


ASSESSED VALUE AND ACTUAL VALUE OF TAXABLE PROPERTY


Fiscal

Year

Less:

Tax

Ended Real Personal Productivity Exempt Homestead

9/30 Property Property Loss Property Cap

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

2021 1,534,224,036 232,686,584 41,465,658 432,064,796 20,471,643

Source: Ellis Central Appraisal District.

68

Table 5

Total Total Total

Taxable Freeze Direct

Assessed Freeze Adjusted Tax

Value Taxable Taxable Rate

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

1,272,908,523 101,249,110 1,171,659,413 0.70365

69


DIRECT AND OVERLAPPING PROPERTY TAX RATES

Table 6


Fiscal

Year

City Direct Rates

Debt

Ended General Service Ellis Red Oak

9/30 Fund Fund Total County ISD

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

2021 0.549873 0.153772 0.703645 0.320194 1.359200

Source: Ellis Central Appraisal District

70


PRINCIPAL PROPERTY TAX PAYERS

Table 7

CURRENT YEAR AND NINE YEARS AGO

2021 FY % of Total 2012 FY % of Total

Taxable Taxable Taxable Taxable

Assessed Assessed Assessed Assessed

Taxpayer Rank Valuation Valuation Valuation Rank Valuation

Red Oak Town Village LP 1 $ 34,243,130

2.69% $ 17,337,410 1 3.02%

Triumph Aerostructures LLC 2 31,973,748 2.51%

CSL Red Oak 2018 LLC 3 12,956,584 1.02%

Wal Mart Real Estate 4 10,466,520 0.82%

First Texas Homes Inc 5 9,636,130 0.76% 5,402,430 3 0.94%

Oncor Electric Delivery Company 6 9,365,090 0.74% 5,619,530 2 0.98%

Red Oak Depot 1 LTD 7 8,996,740 0.71% 3,401,110 4 0.59%

Ovilla 35 Plaza LLC 8 7,526,200 0.59%

Access Self Storage Red Oak LP 9 6,516,404 0.51% 2,700,000 7 0.47%

Rose Sierra Grande LP 10 6,203,000 0.49%

Knapheide Truck Equipment Southwest

Red Oak Senior Care Center LLC 3,302,770 5 0.57%

Blackstone Developers LLC 2,798,850 6 0.49%

Tiger Mart #12 2,322,200 8 0.40%

Apple Capital LLC 2,300,000 9 0.40%

Southwestern Bell Telephone Co 2,236,490 10 0.39%

$ 137,883,546 10.83% $ 47,420,790

8.25%

Source: First Southwest Securities

Ellis Central Appraisal District

71



PROPERTY TAX LEVIES AND COLLECTIONS

Table 8


Fiscal

Interest

Year and % of Delinquent

Ended Tax General Sinking Adjusted Current Tax Tax

9/30 Rate Fund Fund Tax Levy Collected Collections

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

2021 0.703645 0.549873 0.153772 8,668,760 98.88% 69,328

Note: Includes General and Debt Service Funds.

Data comes from year end Tax Report form Ellis County.

72


RATIOS OF GENERAL OUTSTANDING DEBT


Fiscal

Governmental Activities

Year General Certificate of

Ended Obligation Obligation Revenue Tax Special Assessment Capital

9/30 Bonds Bonds Bonds Notes Revenue Bonds Leases

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 - -

2021 4,990,000 14,965,000 10,359,000 2,754,000 5,657,000 -

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.

73

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

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

1,819,613 11,350,000 4,809,000 346,000 - 1,121,841 58,171,454

74



RATIOS OF GENERAL OUTSTANDING DEBT

Table 9


Fiscal

% of

Year Taxable Actual Taxable

Ended Assessed Value of Estimated Per

9/30 Valuation (2) Property Population (1) Capita

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 4.13% 14,732 0.0310%

2021 1,272,908,523 4.57% 16,324 0.0281%

75


RATIOS OF GENERAL BONDED DEBT


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

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

2021 16,324 1,272,908,523 77,978 19,281,454 19,774,000

(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

76

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

- 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 - 36,448,136 1.73% 2,474

3,100,000 42,155,454 - 42,047,834 3.30% 2,576

77


DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES

Table 11


City's

Total Estimated Overlapping

Tax Debt % GO

Taxing Jurisdiction as of 9/30/2021 Applicable Tax Debt

Overlapping Debt

Ellis County $ 30,460,583 7.59% $ 2,311,958

Red Oak Independent School District 94,795,000 51.13% 48,468,684

Total Overlapping Debt 50,780,642

Direct Debt

City of Red Oak 40,544,613 100.00% 40,544,613

Total Direct Debt 40,544,613

Total Direct and Overlapping GO Tax Debt $ 91,325,255

Source: Hilltop Securities and/or Municipal Advisory Council of Texas

78


LEGAL DEBT MARGIN INFORMATION

Table 12


Net Assessed Value $

1,272,908,523

Plus Exempt Property 494,002,097

Total Assessed Value $

1,766,910,620

Debt Limit - (10%) of Total Assessed Value $

176,691,062

Less amount of debt applicable to debt limits 39,214,000

Legal Debt Margin 137,477,062

The Debt Rate legal limit percentage 22%

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.

79


PLEDGE-REVENUE COVERAGE

Table 13


Fiscal (1) (2) (3)

Year Less Net Average

Ended Gross Operating Available Debt

9/30 Revenue Expense Revenue Service Coverage

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

2021 9,477,411 6,701,841 2,775,570 1,390,000 1.51

Source: Annual Comprehensive Financial 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.

80


DEMOGRAPHIC AND ECONOMIC STATISTICS

Table 14


Fiscal

Year Per Capita Median

Ended Estimated Personal Household Median

9/30 Population (1) Income Income Age

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

2021 16,324 32,194 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

81



PRINCIPAL EMPLOYERS

Table 15


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

82


FULL-TIME EQUIVALENT CITY EMPLOYEES BY FUNCTION AND PROGRAM


Function/Program 2012 2013 2014 2015 2016

General Government:

Administration 9 9 9 3 3

City Secretary - - - 1 1

Finance - - - 4 4

Human Resource - - - 1 1

Information Technology 1 1 1 1 1

Economic/ Industrial Development 1 1 1 1 1

Utility Billing 2 2 2 2 2

Public Works:

Street 6 7 8 8 8

Water and Sewer 8 9 10 10 10

Storm Water Drainage N/A N/A N/A N/A 2

Public Safety:

Police 22 25 25 27 27

Fire 24 26 26 26 26

Municipal Court 2 2 2 2 2

Community Services

Code Enforcement 1 3 3 3 4

Animal Control 1 1 1 1 1

Parks - - - - -

Library - - - - -

Tourism 1 1 1 1 1

Total City Employees 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


Source: City Staff

83

Table 16

2017 2018 2019 2020 2021

3 3 3 3 4

1 1 1 1 1

4 4 4 4 5

1 2 2 2 1

1 1 2 2 2

1 1 1 1 1

2 3 3 3 2

8 9 9 10 10

10 10 10 10 10

3 4 4 4 4

27 30 33 33 33

26 27 30 30 30

2 3 2 2 2

4 7 7 6 6

1 1 1 2 2

- - - 4 4

- - - - -

1 1 1 1 1

95 106 112 117 118

84


OPERATING INDICATORS BY FUNCTION/PROGRAM


Function/Program 2012 2013 2014 2015

General Government:

Information Technology

Installed computer 12 13 12 12

Installed servers 1 2 2 2

Public Works:

Street

Number of Lane Miles of Paved Streets N/D N/D N/D N/D

Lane Miles - Concrete N/D N/D N/D N/D

Lane Miles - Asphalt N/D N/D N/D N/D

Water and Sewer

Number of Water Customers 2,351 2,585 2,473 2,539

Number of Sewer Customers 2,037 3,201 3,318 3,413

Public Safety:

Police

Calls for Service 36,965 43,889 44,987 46,216

Fire

Calls for Service 2,226 2,200 2,297 2,115

Municipal Court

Cases Filed 7,077 7,663 3,773 2,977

Cases Closed 8,397 7,566 4,217 3,455

Cases appealed - 2 3 -

Warrant issued 3,696 3,958 3,032 2,259

Community Services

Code Enforcement

Building Permits Issued

Residential 56 87 106 168

Value $ 8,358,180 $ 13,345,633 $ 17,251,329 $ 30,083,192

Commercial 5 2 11 25

Value $ 22,351,000 $ 601,833,170 $ 1,324,400 $ 6,766,841

Animal Control

Number of Animals 397 422 473 708

Source: City Departments

N/D No reliable data


(1) Represents a partial year

85

Table 17

2016 2017 2018 2019 2020 2021

16 55 122 124 135 162

5 22 24 24 22 28

N/D N/D 66.58 71.86 75.00 75.00

N/D N/D 30.16 35.44 38.00 38.58

N/D N/D 36.42 36.42 36.42 36.42

2,751 2,923 3,016 3,098 3,297 3,438

3,365 3,520 3,611 3,833 4,007 4,042

48,000 48,156 41,410 60,793 71,261 60,244

2,300 2,655 2,789 2,710 3,468 4,280

2,800 2,487 2,278 3,213 2,689 2,591

2,300 652 1,818 1,218 963 697

- - - - - -

2,181 2,303 2,275 3,637 1,714 2,454

102 94 180 197 291 799

$ 20,857,288 $ 38,822,818 $ 67,114,128 $ 68,791,522 $ 85,152,245 $ 73,501,527

5 8 29 16 8 99

$ 3,605,000 $ 14,907,191 $ 44,895,826 $ 10,652,239 $ 52,117,773 $ 54,300,832

675 590 (1) 513 616 456 498

86


CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM

Table 18


Function/Program 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

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 176.5 176.5 176.5 176.5 176.5 176.5 176.5 176.5 176.5 182.7

Parks

Buildings 1 1 1 1 1 1 1 1 1 10

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

87

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 AUDITING STANDARDS

Honorable Mayor and

Members of the City Council


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, 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, 2021, 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 June 2, 2022.

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 was for the limited purpose described in the first paragraph of

this section and was not designed to identify all deficiencies in internal control that might be material

weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any

deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses

may exist that have not been identified.

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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 no instances of noncompliance or other matters that are required to be reported under

Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and

compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s

internal control or on compliance. This report is an integral part of an audit performed in accordance with

Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this

communication is not suitable for any other purpose.

Waco, Texas

June 2, 2022

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FINANCE DEPARTMENT

200 Lakeview Parkway

Red Oak, Texas 75154

Redoaktx.org

(972) 617-3638

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS


Item 2020-001

Condition:

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.

Current Status:

This matter has been resolved. 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.

Address or P.O. BOX 393 | Red Oak, TX 75154

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Building Our Future From Our Heritage

www.redoaktx.org


Annual Comprehensive Financial Report 2021

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