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City of Fairhope, Alabama
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2019
CITY OF FAIRHOPE, ALABAMA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2019
PREPARED BY:
THE OFFICE OF THE FINANCE DIRECTOR
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CITY OF FAIRHOPE, ALABAMA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
SEPTEMBER 30, 2019
TABLE OF CONTENTS
Page
INTRODUCTORY SECTION
Letter of Transmittal iv
Certificate of Achievement for Excellence in Financial Reporting ix
Organizational Chart x
City Elected and Appointed Officials xi
FINANCIAL SECTION
INDEPENDENT AUDITORS’ REPORT 1
MANAGEMENT’S DISCUSSION AND ANALYSIS 3
BASIC FINANCIAL STATEMENTS
Government-Wide Financial Statements
Statement of Net Position 17
Statement of Activities 18
Fund Financial Statements
Governmental Fund Financial Statements
Fund Balance Sheets - Governmental Funds 19
Reconciliation of Governmental Fund Balances to Net Position
of Governmental Activities 20
Statement of Revenues, Expenditures and Changes in Fund Balances -
Governmental Funds 21
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities 22
Proprietary Fund Financial Statements
Statement of Net Position - Proprietary Funds 23
Statement of Revenues, Expenses and Changes in Net Position -
Proprietary Funds 24
Statement of Cash Flows - Proprietary Funds 25
Discretely Presented Component Units
Combining Statement of Net Position - Discretely Presented
Component Units 26
Combining Statement of Activities - Discretely Presented
Component Units 27
Notes to the Financial Statements 28
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CITY OF FAIRHOPE, ALABAMA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
SEPTEMBER 30, 2019
TABLE OF CONTENTS (continued)
Page
REQUIRED SUPPLEMENTARY INFORMATION
Schedules of Employer Contributions 67
Schedules of Changes in the Net Pension Liability 69
Schedules of Changes in Total OBEB Liability 71
Budgetary Comparison Schedule - General Fund 72
Notes to Required Supplementary Information 73
OTHER SUPPLEMENTARY INFORMATION
Combining Balance Sheets - Nonmajor Governmental Funds 74
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances - Nonmajor Governmental Funds 75
Fund Balance Sheet - Fairhope Public Library Board 76
Reconciliation of Governmental Fund Balances to Net Position
of Governmental Activities - Fairhope Public Library Board 77
Statement of Revenues, Expenditures and Changes in Fund Balances -
Fairhope Public Library Board 78
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities - Fairhope Public Library Board 79
Statement of Net Position - Fairhope Airport Authority 80
Statement of Revenues, Expenses and Changes in Net Position -
Fairhope Airport Authority 81
Statement of Cash Flows - Fairhope Airport Authority 82
Schedule of Capital Projects Expenditures 83
Schedule of Information Required by Bond Indentures 84
Summary of Deposits, Withdrawals and Balances of Selected Trust Accounts as
Required Under Certain Trust Indentures 85
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CITY OF FAIRHOPE, ALABAMA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
SEPTEMBER 30, 2019
TABLE OF CONTENTS (continued)
Page
STATISTICAL SECTION
Net Position by Component 86
Changes in Net Position 87
Governmental Activities Tax Revenues by Source 89
Fund Balances of Governmental Funds 90
Changes in Fund Balances of Governmental Funds 91
Assessed Value and Estimated Actual Value of Taxable Property 92
Property Tax Rates - Direct and Overlapping Governments 93
Principal Property Taxpayers 94
Property Tax Levies and Collections 95
Direct and Overlapping Sales Tax Rates 96
Principal Sales Taxpayers 97
Ratios of Outstanding Debt by Type 98
Ratios of General Bonded Debt Outstanding 99
Computation of Overlapping Debt 100
Legal Debt Margin Information 101
Demographic and Economic Statistics 102
Principal Employers 103
Full-time Equivalent City Government Employees by Function 104
Operating Indicators by Function 105
Capital Asset Statistics by Function 106
INTRODUCTORY SECTION
ix
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CITY OF FAIRHOPE, ALABAMA
ORGANIZATIONAL CHART
SEPTEMBER 30, 2019
xi
CITY OF FAIRHOPE, ALABAMA
CITY ELECTED AND APPOINTED OFFICIALS
SEPTEMBER 30, 2019
Karin Wilson Mayor
Kevin Boone Councilmember
Jay Robinson Councilmember
Jack Burrell, CMO Councilmember
Robert Brown Councilmember
Jimmy Conyers Councilmember
Lisa Hanks City Clerk
Kimberly Creech City Treasurer
Stephanie Hollinghead Police Chief
Marcus McDowell City Attorney
Honorable Haymes Snedeker City Judge
FINANCIAL SECTION
Independent Auditors’ Report
Honorable Mayor and Members of
The City Council
City of Fairhope, Alabama
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities,
the discretely presented component units, each major fund, and the aggregate remaining fund information of the City
of Fairhope, Alabama (the City) as of and for the year ended September 30, 2019, and the related notes to the
financial statements, which collectively comprise the City’s basic financial statements as listed in the table of
contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the standards applicable
to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United
States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditors’ 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
financial statement 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, the discretely presented component
units, each major fund, and the aggregate remaining fund information of the City as of September 30, 2019, and the
respective changes in financial position and, where applicable, cash flows thereof for the year then ended in
conformity 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 analysis, on pages 3 through 16, the schedules of employer contributions, schedules of changes in
net pension liability, schedules of changes in total OBEB liability, and budgetary comparison information on
pages 67 through 73 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’s basic financial statements. The introductory section, combining and individual nonmajor
fund financial statements, other supplementary information, and statistical section are presented for purposes of
additional analysis and are not a required part of the basic financial statements.
The other supplementary information, on pages 74 through 85, is the responsibility of management and was
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 other supplementary information is 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 March 26, 2020, on our
consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is
solely to describe the scope of our testing of internal control over financial reporting and compliance and the results
of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial
reporting or on compliance. That report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the City’s internal control over financial reporting and compliance.
Montgomery, Alabama
March 26, 2020
THIS PAGE INTENTIONALLY LEFT BLANK
MANAGEMENT’S DISCUSSION AND ANALYSIS
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MANAGEMENT’S DISCUSSION AND ANALYSIS
Our discussion and analysis of the City of Fairhope, Alabama’s (the City) financial performance provides a
narrative overview of the City’s financial activities for the fiscal year ended September 30, 2019. The intent
of this Management’s Discussion and Analysis (MD&A) is to review the City’s financial performance as a
whole. Please read it in conjunction with the City’s financial reports, which follow this section and the
additional information furnished in the letter of transmittal, which can be found in the introductory section
of this comprehensive annual financial report (CAFR).
FINANCIAL HIGHLIGHTS
Assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of
resources at the close of the fiscal year by $169,787,034, a current year increase in net position of
$12,350,658 (page 17).
The City adopted GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct
Borrowings and Direct Placements, which requires governments to include more extensive note
disclosures regarding debt, including unused lines of credit, assets pledged as collateral for debt;
and terms specified in debt agreements related to significant events of default or significant
termination events with finance-related consequences, and significant subjective acceleration
clauses. The statement also requires governments to include more extensive note disclosures for
direct borrowings and direct placements of debt separately from other debt. The results of this
adoption are in Note 7, beginning on page 43, of the notes to financial statements.
At the close of the fiscal year, the City’s combined governmental funds, including General,
Capital Projects, and Other Governmental Funds, reported ending fund balances totaling
$19,138,993, a decrease of $3,510,200 from the prior year. The General Fund closed with a fund
balance of $13,243,093, a decrease of $465,031. The reason for the decrease is from the payoff of
the remaining general obligation warrants. The Capital Projects Fund had a decrease in fund
balance of $3,460,061 after capital expenditures of $5,306,289 and transfers from the General and
Impact Fee Funds of $1,393,500 (page 21). A detailed explanation of this decrease can be
viewed on page 8 of this report.
City-Wide, governmental and business-type funds, cash (including restricted cash) totaled
$45,808,287, an increase of $1,872,717 from the previous year. Governmental Funds cash totaled
$17,644,621 at September 30, 2019 (page 17). This is a decrease of $3,877,359 from the prior year.
In addition, cash in the Capital Projects Fund decreased by $3,311,714 due primarily to purchase of
the K-1 Center for $2,511,785 and other large projects including Library renovations and the Rock
Creek Stabilization project. In the other Governmental Funds, the increase of $288,091 was
primarily from the increase in Impact Fee cash of $812,582 due to vast residential and commercial
development, and the decrease in the Debt Service Fund of $542,747. The business-type funds cash
totaled $28,163,666 at year end (page 23), an increase of $5,750,076 from last year. This is a result
of the current year change in net position of $8,389,903.
Revenues in the governmental funds increased approximately $3,200,000 from the previous year.
Expenses increased approximately $7,500,000. During fiscal 2019, revenues from the sales tax
totaled $9,269,702, an increase of approximately $825,000 over the previous year. At year end, the
General Fund’s sales tax reserve totaled $7 million with an additional $4.6 million in unreserved.
The combined governmental funds expended $7,746,773 for capital projects and purchases,
including $5,306,289 for special projects such as the Rock Creek Stabilization project, Library
renovations, City-Wide street upgrades and a $2.5 million purchase of the K-1 Center. $2,440,484
was for vehicles, equipment and other infrastructure additions.
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The business-type activities, (Electric, Gas, Water and Waste Water), ended the year with income
before transfers of $10,168,593, compared to $10,249,466 for fiscal 2018. Revenues increased
approximately $1,400,000. Costs of energy and operating expenses increased about $1,782,000.
The utilities made transfers to the General Fund of $1,638,000 from income, which is $1,543,000
less than transfers last year. The business-type activities recorded an increase in net position, after
transfers, of $8,389,903 (page 24). Details pertaining to these increases can be seen on page 7 of
this report.
The City’s business-type activities made additions to property, plant and equipment of $3,661,510.
The majority of this increase was due to utility system improvements totaling $3 million. Funding
for these additions was prior debt issues, current income and money set aside for this purpose
(pages 25 and 42).
The City’s long-term debt decreased by $4,903,000 during fiscal year 2019, yielding total
outstanding debt of approximately $14,379,000 compared to the previous year’s $19,282,000. This
decrease was due primarily to the payoff of governmental activities direct placements as well as
regularly scheduled debt payments within the business-type activities. In 2019, the City entered
into capital leases totaling $990,929 to finance several large equipment purchases in the Public
Works department. Business-type activities total debt was $13,190,000 (pages 43 and 45).
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 four components: 1) government-wide financial
statements, 2) fund financial statements, 3) notes to the financial statements, and 4) required supplementary
information.
The Statement of Net Position and the Statement of Activities provide information about the activities of the
City as a whole and present a longer-term view of the City’s finances.
For governmental activities, the fund financial statements tell how these services were financed in the short
term as well as what remains for future spending. Fund financial statements also report the City’s operations
in more detail than the government-wide statements by providing information about the City’s most
significant funds. The notes to the financial statements 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 start on page 28 of this report.
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information concerning the City’s General Fund budget. A budgetary comparison
schedule has been provided for the General Fund to demonstrate compliance with the budget on page 73 of
this report.
The Statement of Net Position and the Statement of Activities
The Statement of Net Position and the Statement of Activities report information about the City as a whole
and about its activities. These statements include all assets and liabilities using the accrual basis of
accounting, which is similar to the accounting used by most private-sector companies. All of the current
year’s revenues and expenses are taken into account regardless of when cash is received or paid.
These two statements report the City’s net position and any changes in them. Consideration of the City’s net
position, i.e., the difference between assets and deferred outflows of resources and liabilities and deferred
inflows of resources, is one tool to measure the City’s financial health, or financial condition. Over time,
increases or decreases in the City’s net position are indicators of whether its financial health is improving or
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deteriorating. Consideration of other non-financial factors, however, such as changes in the City’s revenue
sources and the condition of the City’s infrastructure, utility systems and roads, is also necessary for a valid
assessment of the overall health of the City.
In the Statement of Net Position and the Statement of Activities, we divide the City into three kinds of
activities:
Governmental activities — Most of the City’s basic services are reported here, including the police,
fire, public works, youth and senior recreation departments, and general administration. Gross
receipts, business license fees, property and sales taxes, franchise fees, and state and federal grants
finance most of these activities. Funds for Capital Projects, Debt Service, Gas Tax, and Impact
Fees are also reported with Governmental activities.
Business-type activities — The City charges a fee to customers to help it cover all or most of the
cost of certain services provided. Financial information for the Electric Fund, Natural Gas Fund
and the Water and Wastewater Fund is reported in this section.
Component units — The City has two entities classified as component units, the Fairhope Public
Library and the Airport Authority. Although legally separate and managed by City appointed
boards, the Library and Airport Authority receive significant support from the City and the City is
responsible for any deficits.
Net position may serve over time as a useful indicator of a government’s financial condition. The City’s
assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by
$169,787,034 at the close of the most recent fiscal year, as shown in Figure 1, page 12 as well as page 17 of
this report. This is an increase of $12,350,658.
The largest portion of the City’s net position, approximately 87% ($147,799,287), reflects its investment in
capital assets (e.g. land, streets, sidewalks, buildings, infrastructure, equipment, etc.), less any related debt
still outstanding used to acquire those assets. The City uses these capital assets to provide services and
utilities to citizens; therefore, these assets are not available for future spending. Although the City’s
investment in capital assets is reported net of related debt, it should be noted that the resources needed to
repay debt must be provided from other sources, since capital assets themselves cannot be used to liquidate
these liabilities.
An additional portion of the City’s net position, approximately 2% ($2,957,538), represents resources that
are subject to restrictions as to how they may be used. Funds restricted for debt service were $2,730,446 and
$227,092 for road maintenance and construction. Restricted funds decreased approximately $506,000 from
the previous year.
The unrestricted net position, approximately 11% ($19,030,209), may be used to meet the City’s ongoing
obligations to citizens and creditors. Unrestricted net position increased $3,605,876 during fiscal 2019
(pages 12 and 17).
Under GASB Statement 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other
Than Pensions, the City’s total OPEB liability at year end was $8,398,617. This amount is reported on the
Statement of Net Position, page 17, as Postemployment Benefits Other Than Pensions and in Note 13 on
page 59 of this report.
Under GASB 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources,
and Net Position, a service concession arrangement exists between the Airport Authority and the Baldwin
County Board of Education (BCBOE) and three private companies. See Note 16, beginning on page 63 of
this report, for detailed explanation of these agreements. At year end, the balance of this deferred inflow of
resources is $5,442,075.
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At year end, deferred outflows of resources included deferred charge on refunding of $84,487, pension
related items of $2,239,522, and OPEB related items of $550,915. Deferred inflows of resources at year end
included pension related items of $2,397,056 and OPEB related items of $4,401,552. These amounts are
reported on the Statement of Net Position on page 17, Note 10 beginning on page 48 of this report, and Note
13 beginning on page 59. Figure 2 on page 13 of this report is a condensed Statement of Activities for the
City as a whole for all activity types. This condensed statement includes comparative information from the
prior year for the governmental and business-type activities, as well as the Library and Airport Authority
component units.
Fund Financial Statements
The fund financial statements provide detailed information about the most significant funds, not the City as
a whole. Some funds are required to be established by State Law and by bond covenants. However, the City
Council established many other funds to help control and manage money for particular purposes or to show
that it is meeting legal responsibilities for using certain taxes, grants, and other money.
The City’s two kinds of funds, governmental and proprietary, use different accounting approaches.
Governmental funds — Most of the City’s basic services are reported in governmental funds, which
focus on how money flows into and out of those funds and the balances left at year end that are
available for spending. These funds are reported using an accounting method called modified
accrual accounting, which measures cash and all other financial assets that can be readily converted
to cash. The governmental fund statements provide a detailed short-term view of the City’s general
government operations and the basic services it provides. Government fund information helps
determine whether there are more or fewer resources that can be spent in the near future to finance
the City’s programs.
Proprietary funds — When the City charges customers for the services it provides, whether to
outside customers or to other units of the City, these services are reported as proprietary, or
enterprise, funds. Proprietary funds are reported separately, on an accrual basis of accounting, in the
Proprietary Fund Statement of Net Position and the Statement of Revenues, Expenses, and Changes
in Net Position.
The City’s enterprise funds are the same as the business-type activities reported in the government-wide
statements but provide more detail and additional information, such as cash flows. The City’s proprietary
funds include the Electric Fund, Natural Gas Fund and Water and Waste Water Fund, which are used to
account for the operations of the utilities.
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, unrestricted fund balances may serve as a useful measure of a government’s net resources
available for spending at the end of the fiscal year.
Figure 3 on page 14 of this report, presents summaries of the governmental funds (General Fund, Capital
Projects, Debt Service, Gas Tax, and Impact Fees) revenues and expenditures, by function, for the fiscal
year ended September 30, 2019, and the amounts of increases and decreases in relation to prior year
revenues and expenditures.
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Governmental activities revenues increased $3,200,210 from the previous fiscal year. Expenditures of
Governmental funds increased $7,494,202 for the same period. The following significant events, related to
revenues and expense, occurred during fiscal 2019 (the figures are rounded):
Related to revenue:
Local taxes increased $1,743,000 due to an increase of $825,000 in sales tax collections,
$463,000 in lodging taxes, and $412,000 in property taxes.
Charges for Services increased $777,000 due to increases in administrative services as well as
sanitation collection, totaling $414,000. Administrative services increased as a result of the hiring
of additional personnel. The rise in sanitation collection was a result of the increase in garbage rates
by a dollar per month. The remaining increase came from Impact Fee revenue in the other
governmental funds of $363,000 due to vast residential and commercial development.
Other revenue increased $293,000 due to a $115,000 donation to the City as well an increase in
Marina fuel income of $204,000. Although the Marina began selling fuel in the previous year, 2019
was the first full year of fuel sales.
Licenses and permits increased by $206,000. This was due to an increase in business licenses as a
result of the licensing of rental properties implemented in the Spring.
Intergovernmental revenue increased $136,000 due mainly to an increase in financial institute tax
revenue as well as federal grants received.
Related to expenditures:
Capital outlay expenditures were approximately $7,747,000, up $3,873,000 from the prior year.
Expenditures of $3,874,000 for fiscal 2018 included $1,339,000 for special projects such as the
Rock Creek Trail, Golf Clubhouse, Pool building façade and expenditures related to Hurricane
Nate. $2,535,000 was for vehicles, equipment and other infrastructure additions. Major capital
expenditures for fiscal 2019 included $5,306,000 for special projects such as the Rock Creek
Stabilization project, Library renovations, City-Wide street upgrades and approximately $2,500,000
for the purchase of the K-1 Center. $2,440,484 was for vehicles, equipment and other infrastructure
additions.
Debt Service increased $2,200,000 from the prior year due to the City’s payoff of the remaining
General Fund debt in June of 2019.
Expenditures in General Administrative increased $437,000 from the prior year. Salaries increased
$275,000 among all General Administrative departments due to several new positions and
promotions. Also, among all departments in General Administrative, medical insurance was up
$154,000.
Cultural and Recreational expenditures increased $403,000 from the prior year due to several
factors. Over half of the increase was from dredging work that was done at the Marina, causing an
increase of $242,000 in maintenance. In addition, fiscal year 2019 was the first full year of fuel
expenditures at the Marina, totaling $107,000. The additional increase was made up of a rise in
HVAC repairs and maintenance as well as fence repairs to sports fields in the Recreation
department.
Public Safety expenditures increased $369,000 due to several factors including a rise in medical and
casualty/workers compensation insurance of $87,000 and $35,000, respectively, both in Police and
Fire. In Police, general supplies increased $101,000 primarily from a large bulk purchase of
handheld radios and in-car cameras totaling $77,000. The remaining general supplies increase was
due to a variety of line of duty equipment. Required contribution to OPEB for the Police
department was up $43,000 from the prior year. The remaining increase in Public Safety
expenditures related to several smaller purchases including computer, communications, and
corrections related items totaling $89,000.
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Expenditures in Public Works increased $149,000 from the prior year. This is due primarily to one
additional new employee as well as the transfer of two employees into facilities maintenance from
another department. The associated employee costs totaled $131,000, comprising 88% of the
increase.
Fund Balances and Net Position
When reviewing the City’s finances, it is important to ask if the City as a whole is in better financial
condition when compared with the prior year. An indicator of the City’s financial health is whether the fund
balances of the governmental and net position of the proprietary funds increased or decreased as a result of
operating activities.
Fund balances for all governmental funds totaled $19,138,993, a decrease of $3,510,200. This follows an
increase in fund balances of $1,628,186 the previous year. Approximately 24% ($4,574,620) constitutes
unassigned fund balance, which is available for spending at the City’s discretion. Approximately 2%
($323,647) is not in spendable format. Approximately 1% is restricted for road maintenance ($227,092).
Approximately 73% ($14,013,634) is committed for items such as Council approved emergencies
($7,000,000), construction and road maintenance ($3,726,721), debt service ($1,308,666) and capital
projects ($1,978,247). The General Fund had a fund balance of $13,243,093, a decrease of $465,031. The
Capital Projects Fund had a decrease in fund balance of $3,460,061 after a $2,511,785 purchase of the K-1
Center, $1,343,488 for City-Wide street projects such as street upgrades, drainage improvements, new
sidewalks, and a stabilization project, $993,479 for Library renovations, main pier electrical upgrades for
$175,647, expenditures for renovations to the North Beach restrooms of $101,001, additional capital outlay
of $180,889 and transfers from the General and Impact Fee Funds of $1,393,500.
Debt Service and the Other Governmental Funds had fund balances of $3,952,653 at year end, including
restrictions for Road maintenance of $227,092, an increase of $18,557 and committed funds reported in
special revenue fund (Gas Tax and Impact Fees) of $3,726,721, an increase of $939,082 (see pages 17 and
19). Increases and decreases in revenues and expenses are discussed in the Governmental Funds section on
pages 6 and 7 of this report.
The governmental activities’ net position at year end was $95,850,827, an increase of $3,960,755. The
Electric, Gas, and Water and Waste Water Funds had a net position of $73,936,207 at year end, an increase
of $8,389,903 (see pages 17 and 24).
Capital Project and Other Governmental Funds increases in fund balance are discussed above. Following are
major factors affecting increases in fund balance and net position in the General Fund and business-type
operations.
General Fund Balance: The General Fund had an increase in revenues of $2,761,143. Expenditures for the
General Fund were up $1,267,243 from the prior year. Transfers from the proprietary funds (Electric, Gas,
and Water and Waste Water Funds) were $1,638,000 for the current year, a decrease of $1,543,000 from the
prior year. After transfers, the fund balance of the General Fund decreased by $465,031 during fiscal 2019.
The most significant revenue increase of $1,743,320 was from sales tax collections, lodging taxes and
property taxes, all signifying continual growth in the City. Charges for services revenue increased $413,931
due to administrative services as well as sanitation collection (as explained in the detailed revenue variances
on page 6 of this report). Other revenue increased by $292,528 due to a donation to the City as well as an
increase in Marina fuel income. Licenses and permits were up $206,013 from the prior year due to the
licensing of rental properties in Spring of 2019. Increases relating to General Fund expenditures were a
result of various factors. Employee costs including salaries, medical and workers compensation insurance,
and the transfer of two employees out of one of the enterprise funds totaled $768,000. In addition,
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maintenance, supplies and fuel costs were up $450,000 in the Marina, Recreation, and Police departments.
Some of these increases are discussed on pages 6 and 7 of this report.
Enterprise Operations: The City’s enterprise operations consist of the Electric Fund, Natural Gas Fund and
Water and Waste Water Fund. The enterprise funds operating revenues increased by $1,381,680 from the
prior fiscal year. This represented a 3% increase. Operating expenses increased by $1,781,916, a 6%
increase. The increase in revenues was due mainly to water and natural gas sales which was a result of
colder weather as well as the addition of water customers. The increase in operating expenses is primarily
due to an increase in other operating expenses including professional services, administrative costs, and
employee costs. These other expenses comprise 40% of the total increase while salaries and maintenance
contributed 53%. Utility rate calculations are based on costs of energy, expenditures for operations, debt
service costs, infrastructure upgrades, capacity increases and transfers to the General Fund to fund public
safety, recreational and environmental activities of the City. Income for the enterprise funds, before transfers
to the General Fund, was $10,168,593, a decrease of $80,873. Transfers to the General Fund were
$1,638,000, or 16% of income. For fiscal 2018 the transfers to the General Fund were $3,181,000, or 31%
of income. For fiscal 2017 the transfers were $2,719,583 or 42%. The change in net position of the three
utilities was an increase of $8,389,903.
General Fund Budgetary Highlights
Although there is no legal requirement to establish a budget, the City prepares an annual budget. The
preparation process involves input from the Mayor, City managers, and the City Council budget committee.
The procedure for preparing the annual budget is listed in Note 2, pages 37 and 38 of this report.
The budgetary comparison schedule for the General Fund is included in the Required Supplementary
Information section on page 73 of this report.
For the purposes of this discussion, variance amounts in excess of $50,000 in each category or department
will be discussed. All amounts are rounded.
For the year ended September 30, 2019, actual revenues were more than budgeted revenues by $113,000.
The primary reasons for the variance are as follows:
Local taxes exceeded budget by $260,000 or 2% due to greater than anticipated revenue from
lodging taxes.
Intergovernmental revenue exceeded budgeted revenue by $345,000 or 171%. This was due
primarily to unbudgeted financial institute excise tax revenue from the State of $238,000. Federal
grants also contributed to this increase.
Other revenue exceeded budgeted revenue by $91,000 or 16%. This increase was a result of a
donation to the City.
Licenses and permits revenue was less than budget by $284,000 or 6%. $278,000 was from a
decrease in building permits.
Golf course revenue was less than budget by $172,000 or 14% due to a decrease in memberships,
cart rentals, green fees and pro shop sales.
For the year ended September 30, 2019, actual expenditures were less than budgeted expenditures by
$718,000. The primary reasons for the variance are as follows:
General administrative expenditures were less than budget by $379,000 or 10% due primarily to a
decrease in employee costs as well as medical insurance. This constituted $297,000 of the
- 10 -
decrease. The remainder was due to decreases in training and travel, legal and professional
services and credit card processing fees.
Building department expenditures were more than budget by $54,000 or 7% due to greater than
anticipated medical insurance costs as well as building fees.
Police expenditures were less than budgeted expenditures by $520,000 or 8%. This was due
primarily to a decrease in employee costs as a result of several vacancies throughout the year.
Fire department expenditures were less than budget by $121,000 or 16% due to a decrease in
equipment and vehicle repair, employee costs and general supplies.
Sanitation department expenditures fell below budget by $227,000 or 9% due mainly to decreases
in employee costs and medical insurance, totaling $222,000.
Street department expenditures fell below budget by $77,000 or 2% due to a decrease in salaries.
Economic and Community Development expenditures were greater than budget by $82,000 or
8% due primarily to greater than anticipated costs related to community events.
Adult Recreation expenditures exceeded budget by $66,000 or 18% due to a rise in utility usage
as well as greater than anticipated medical insurance costs.
Both Golf and Recreation expenditures fell below budget by $186,000 or 11% and $132,000 or
6%, respectively, due to a decrease in employee costs.
Marina expenditures were below budget by $59,000 or 8% due to decreases in general supplies as
well as gas and oil.
Capital outlay expenditures exceeded budget by $670,000 or 38%. This was due to unbudgeted
lease agreements totaling $991,000. Although these leases resulted in an unfavorable budget
variance, two of Cultural and Recreational departments did not spend from their capital budgets,
totaling $374,000.
Capital Assets
As of September 30, 2019, the City’s governmental activities had $95,984,195 invested in capital assets, net
of accumulated depreciation. This is an increase of $3,730,904 from the prior year. The business-type
activities had invested in capital assets, net of accumulated depreciation of $66,087,660, an increase of
$633,894. (see Note 6, Capital Assets, pages 41 and 42).
The City’s governmental activities capital assets, at cost, were $158,080,018 at September 30, 2019, an
increase of $7,625,692 from the prior year. The business-type activities, the Electric, Gas, and Water and
Waste Water Funds, had capital assets, at cost, of $117,403,877, an increase of $3,246,749. Figure 4 on
page 15 of this report summarizes the current year changes in capital assets by type, at cost, and changes in
fixed assets during the year.
Debt Administration
As of September 30, 2019, the City had long-term debt of $14,378,940 (excluding premiums and
discounts), including bonds and warrants payable, notes payable, and obligations under capital
leases. This is a net decrease, City-Wide, of $4,903,383 from the prior year. Governmental
activities’ decrease in long-term debt was $2,784,541. In May 2019, the City paid off the
remaining direct placements for the Governmental activities. In addition, business-type
activities’ decrease in long-term debt was $2,118,842.
Figure 5 on page 16 of this report summarizes the City’s long-term debt, including compensated
absences. Additional information on the City’s long-term debt can be found in Note 7 beginning
on page 43 of this report.
- 11 -
Economic Factors and Next Year’s Budgets and Rates
The following economic factors currently affect the City and were considered in developing the 2019-2020
fiscal year budget.
Property taxes are expected to increase by 9% while a 6% rise in business licenses is projected.
Sanitation collection has been projected to increase 12%, primarily due to a dollar per month
increase in residential and nonresidential garbage rates.
Revenue from utility collection fees and administrative services are expected to increase 16% and
12%, respectively.
Although certain revenues are projected to increase as stated above, many other revenues are
expected to either decrease or remain relatively flat. As a result, overall General Fund revenue is
anticipated to increase by only .3%.
Of the City’s utilities, an 11% increase projection in revenues from actual amounts for 2019 is
expected from Electric.
On the expenditure side, General Administrative is expected to increase due to the rise in employee
and medical insurance costs. Also expected to increase due to employee costs are Facilities
Maintenance, Planning, Police, and Golf. Increases are expected in Civic, Fire, and Recreation due
to capital purchases and improvements. In the General Fund, overall expenditures are projected to
decrease .01%.
In the utilities, costs of energy and operating expenses in the utilities are projected to increase by
approximately 2% from actual amounts for 2019.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a
general overview of the City’s finances and to show the City’s accountability for the money it receives. If
you have questions about this report or need any additional financial information, please contact Jill
Cabaniss, Finance Director, at 161 N. Section Street, Fairhope, Alabama, (251) 928-2136.
- 12 - CITY OF FAIRHOPE, ALABAMA CONDENSED STATEMENT OF NET POSITION SEPTEMBER 30, 2019 Figure 1 9/30/2019 9/30/2018 9/30/2019 9/30/2018 9/30/2019 9/30/2018 9/30/2019 9/30/2018 9/30/2019 9/30/2018Current and Other Assets 20,261,240$ 23,963,987$ 31,243,886$ 25,323,731$ 51,505,126$ 49,287,718$ 639,931$ 558,957$ 666,113$ 386,608$ Capital Assets, Net 95,984,195 92,253,291 66,087,660 65,453,766 162,071,855 157,707,057 70,933 98,902 34,992,621 31,833,077 Total Assets116,245,435 116,217,278 97,331,546 90,777,497 213,576,981 206,994,775 710,864 657,859 35,658,734 32,219,685 Deferred loss on advance refunding - - 84,487 91,528 84,487 91,528 - - - - Pension related items 1,766,102 1,702,614 473,420 466,015 2,239,522 2,168,629 112,195 130,529 - - OPEB related items 441,273 275,411 109,642 64,419 550,915 339,830 - - - - Total Deferred Outflows of Resources2,207,375 1,978,025 667,549 621,962 2,874,924 2,599,987 112,195 130,529 - - Total Assets and Deferred Outflows of Resources118,452,810$ 118,195,303$ 97,999,095$ 91,399,459$ 216,451,905$ 209,594,762$ 823,059$ 788,388$ 35,658,734$ 32,219,685$ Long-Term Liabilities 16,060,657$ 23,396,106$ 17,626,701$ 20,746,570$ 33,687,358$ 44,142,676$ -$ -$ 6,895,629$ 7,095,629$ Other Liabilities 1,105,094 1,315,111 5,073,811 4,706,684 6,178,905 6,021,795 414,183 433,904 437,285 4,200 Total Liabilities17,165,751 24,711,217 22,700,512 25,453,254 39,866,263 50,164,471 414,183 433,904 7,332,914 7,099,829 Pension related items 1,910,664 1,065,180 486,392 276,208 2,397,056 1,341,388 60,519 56,977 - - OPEB related items 3,525,568 528,834 875,984 123,693 4,401,552 652,527 - - - - Service concession arrangement revenue applicable in future years - - - - - - - - 5,442,075 5,640,689 Total Deferred Inflows of Resources5,436,232 1,594,014 1,362,376 399,901 6,798,608 1,993,915 60,519 56,977 5,442,075 5,640,689 Net Position: Net investment in capital assets 94,795,255 88,279,810 53,004,032 50,268,633 147,799,287 138,548,443 70,933 98,902 28,096,992 24,737,448 Restricted227,092 750,122 2,730,446 2,713,478 2,957,538 3,463,600 303,790 274,750 - - 828,480 2,860,140 18,201,729 12,564,193 19,030,209 15,424,333 (26,366) (76,145) (5,213,247) (5,258,281) Total Net Position 95,850,827 91,890,072 73,936,207 65,546,304 169,787,034 157,436,376 348,357 297,507 22,883,745 19,479,167Total Liabilities and Net Position118,452,810$ 118,195,303$ 97,999,095$ 91,399,459$ 216,451,905$ 209,594,762$ 823,059$ 788,388$ 35,658,734$ 32,219,685$ UnrestrictedGOVERNMENTAL BUSINESS - TYPE TOTAL PRIMARY COMPONENT UNITS ACTIVITIES ACTIVITIES GOVERNMENT LIBRARY AIRPORT AUTHORITY
- 13 - CITY OF FAIRHOPE, ALABAMA CONDENSED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2019 Figure 2 AIRPORT AUTHORITY9/30/2019 9/30/2018 9/30/2019 9/30/2018 9/30/2019 9/30/2018 9/30/2019 9/30/2018 9/30/2019 9/30/2018Program Revenues Charges for Services 12,018,370$ 11,219,273$ 41,090,246$ 39,708,566$ 53,108,616$ 50,927,839$ 130,471$ 117,748$ 237,443$ 401,374$ Operating Grants and Contributions 127,978 94,494 - - 127,978 94,494 844,768 900,065 518,614 320,000 Capital Grants and Contributions 1,777,375 1,319,678 253,028 - 2,030,403 1,319,678 - - 3,444,085 335,314 General Revenues Taxes 17,062,385 15,258,612 - - 17,062,385 15,258,612 - - - - Investment Earnings 126,115 59,157 136,797 53,651 262,912 112,808 - - 790 469 Other 292,339 262,849 16,167 14,775 308,506 277,624 - - - - Total Revenues 31,404,562 28,214,063 41,496,238 39,776,992 72,900,800 67,991,055 975,239 1,017,813 4,200,932 1,057,157 Expenses General Government5,859,684 5,534,735 - - 5,859,684 5,534,735 - - - - Public Safety6,747,159 6,744,158 - - 6,747,159 6,744,158 - - - - Public Works 8,273,373 8,223,389 - - 8,273,373 8,223,389 - - - - Cultural and recreational 6,921,431 6,763,005 - - 6,921,431 6,763,005 - - - - Airport Authority320,000 320,000 - - 320,000 320,000 - - - - Public Library Board1,029,124 1,024,522 - - 1,029,124 1,024,522 - - - - Interest on Long-term Debt 71,726 94,506 - - 71,726 94,506 - - - - Electric - - 17,063,612 16,966,013 17,063,612 16,966,013 - - - - Natural Gas - - 5,777,998 4,930,235 5,777,998 4,930,235 - - - - Water and Waste Water - - 8,486,035 7,631,278 8,486,035 7,631,278 - - - - Airport Authority- - - - - - - - 796,354 731,063 Fairhope Public Library- - - - - - 924,389 934,647 - - Total Expenses 29,222,497 28,704,315 31,327,645 29,527,526 60,550,142 58,231,841 924,389 934,647 796,354 731,063 Change in Net Position Before Transfers 2,182,065 (490,252) 10,168,593 10,249,466 12,350,658 9,759,214 50,850 83,166 3,404,578 326,094 Transfers 1,778,690 3,181,000 (1,778,690) (3,181,000) - - - - - - Change in Net Position 3,960,755 2,690,748 8,389,903 7,068,466 12,350,658 9,759,214 50,850 83,166 3,404,578 326,094 Net Position, Beginning 91,890,072 89,199,324 65,546,304 58,477,838 157,436,376 147,677,162 297,507 214,341 19,479,167 19,153,073 Net Position, Ending 95,850,827$ 91,890,072$ 73,936,207$ 65,546,304$ 169,787,034$ 157,436,376$ 348,357$ 297,507$ 22,883,745$ 19,479,167$ COMPONENT UNITS ACTIVITIES ACTIVITIES GOVERNMENT LIBRARYGOVERNMENTAL BUSINESS-TYPE TOTAL PRIMARY
- 14 -
CITY OF FAIRHOPE, ALABAMA
STATEMENT OF REVENUES AND EXPENDITURES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2019
Figure 3
9/30/2019 9/30/2018 Increase
Revenues Total Total (Decrease)
Local taxes 17,002,565$ 15,259,245$ 1,743,320$
Licenses and permits 4,570,915 4,364,902 206,013
Fines and forfeitures 237,812 273,887 (36,075)
Intergovernmental 1,090,181 954,086 136,095
Interest and rents 470,753 401,705 69,048
Charges for services 5,852,747 5,075,950 776,797
Golf course revenue 1,060,650 1,062,204 (1,554)
Recreation department 456,362 442,324 14,038
Other 660,915 368,387 292,528
Totals 31,402,900$ 28,202,690$ 3,200,210$
9/30/2019 9/30/2018 Increase
Expenditures Total Total (Decrease)
General government 5,303,050$ 4,866,282$ 436,768$
Public safety 6,571,647 6,202,161 369,486
Public works 6,510,388 6,361,277 149,111
Cultural and recreational 6,238,487 5,835,429 403,058
Airport Authority 320,000 320,000 -
Public Library Board 818,477 814,600 3,877
Other 170,203 100,732 69,471
Debt Service:
Principal 3,775,470 1,578,340 2,197,130
Interest 87,534 94,751 (7,217)
Capital Outlay 7,746,773 3,874,255 3,872,518
Totals 37,542,029$ 30,047,827$ 7,494,202$
- 15 - CITY OF FAIRHOPE, ALABAMA CAPITAL ASSETS Figure 4 Governmental Activities Balance Transfers/ Balance 10/1/2018 Additions Disposals Reclassifications 9/30/2019Land 23,056,496$ -$ -$ -$ 23,056,496$ Construction in progress 1,403,296 5,367,005 - (5,951,844) 818,457 Buildings and structures 37,130,070 45,922 - 4,643,303 41,819,295 Vehicles and equipment 17,067,783 2,282,406 (336,082) 266,441 19,280,548 Infrastructure 71,796,681 - - 1,308,541 73,105,222 Total Capital Assets 150,454,326$ 7,695,333$ (336,082)$ 266,441$ 158,080,018$ Business-type ActivitiesWater andElectric Natural Gas Waste WaterFund Fund FundBalance at 10/1/2018 37,515,612$ 18,281,527$ 58,359,989$ Additions to plant 729,385 436,712 1,877,857 Addition to land, buildings, vehicles and equipment 90,614 214,835 312,107 Disposals - (78,768) (69,552) Transfers (61,223) (80,241) (124,977) Total Capital Assets at 9/30/2019 38,274,388$ 18,774,065$ 60,355,424$
- 16 -
CITY OF FAIRHOPE, ALABAMA
DEBT ADMINISTRATION
Figure 5
GOVERNMENTAL BUSINESS-TYPE
LONG-TERM DEBT FUNDS ACTIVITIES
Utilities Revenue Warrants, 2011 -$ 12,455,000$
Utilities Revenue Warrants, 2015 - 735,000
Capital leases 1,188,940 -
Compensated absences 1,161,618 526,660
TOTALS 2,350,558$ 13,716,660$
See Note 7 beginning on page 43 for additional detail.
BASIC FINANCIAL STATEMENTS
- 17 -
CITY OF FAIRHOPE, ALABAMA
STATEMENT OF NET POSITION
SEPTEMBER 30, 2019
See independent auditors’ report and notes to the financial statements.
Governmental Fund Types
Governmental Business-type Component
Activities Activities Total Units
ASSETS
Cash 17,644,621$ 25,433,220$ 43,077,841$ 852,929$
Restricted cash - 2,730,446 2,730,446 -
Receivables, net 2,019,775 2,411,211 4,430,986 430,192
Internal balances 238,272 (238,272) - -
Inventories 100,519 746,026 846,545 -
Prepaid items 223,128 125,165 348,293 22,923
Other assets 34,925 36,090 71,015 - Capital assets not being depreciated:
Land 23,056,496 9,260,517 32,317,013 10,674,228
Construction in progress 818,457 - 818,457 28,534
Capital assets net of accumulated
depreciation:
Buildings and improvements 27,951,969 1,234,126 29,186,095 7,227,280
Vehicles and equipment 6,034,733 2,110,157 8,144,890 70,933
Infrastructure 38,122,540 - 38,122,540 -
Distribution and collection systems - 53,482,860 53,482,860 -
Runways - - - 17,062,579
Total assets 116,245,435 97,331,546 213,576,981 36,369,598
DEFERRED OUTFLOWS OF
RESOURCES
Deferred charge on refunding - 84,487 84,487 -
Pension related items 1,766,102 473,420 2,239,522 112,195
OPEB related items 441,273 109,642 550,915 -
Total deferred outflows of
resources 2,207,375 667,549 2,874,924 112,195
Total assets and deferred outflows of resources 118,452,810$ 97,999,095$ 216,451,905$ 36,481,793$
LIABILITIES
Accounts payable and
accrued expenses 1,075,656$ 2,396,167$ 3,471,823$ 453,557$
Unearned revenue - 561,527 561,527 -
Customer deposits 29,438 2,116,117 2,145,555 -
Noncurrent liabilities:Due within one year 717,849 1,013,028 1,730,877 200,000
Due in more than one year:
Net pension liability 6,982,951 2,260,457 9,243,408 397,911
Total OPEB liability 6,727,148 1,671,469 8,398,617 -
Other 1,632,709 12,681,747 14,314,456 6,695,629
Total liabilities 17,165,751 22,700,512 39,866,263 7,747,097
DEFERRED INFLOWS OF
RESOURCES
Pension related items 1,910,664 486,392 2,397,056 60,519
OPEB related items 3,525,568 875,984 4,401,552 -
Service concession arrangementrevenue applicable to future years - - - 5,442,075
Total deferred inflows of
resources 5,436,232 1,362,376 6,798,608 5,502,594
NET POSITION
Net investment in capital assets 94,795,255 53,004,032 147,799,287 28,167,925
Restricted for:
Debt service - 2,730,446 2,730,446 -
Road maintenance 227,092 - 227,092 -
Library improvements - - - 303,790
Unrestricted 828,480 18,201,729 19,030,209 (5,239,613)
Total net position 95,850,827 73,936,207 169,787,034 23,232,102
Total liabilities, deferred inflows
of resources, and net position 118,452,810$ 97,999,095$ 216,451,905$ 36,481,793$
- 18 - CITY OF FAIRHOPE, ALABAMA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2019 See independent auditors’ report and notes to the financial statements. Operating CapitalCharges for Grants and Grants and Governmental Business-type ComponentFunctions/Programs Expenses Services Contributions Contributions Activities Activities Total UnitsPrimary GovernmentGovernmental activities:General government 5,859,684$ 7,953,532$ -$ -$ 2,093,848$ -$ 2,093,848$ -$ Public safety 6,747,159 - 2,500 380,139 (6,364,520) - (6,364,520) - Public works 8,273,373 1,916,788 125,478 600,951 (5,630,156) - (5,630,156) - Cultural and recreational 6,921,431 2,148,050 - 796,285 (3,977,096) - (3,977,096) - Airport Authority 320,000 - - - (320,000) - (320,000) - Public Library Board 1,029,124 - - - (1,029,124) - (1,029,124) - Interest on long-term debt 71,726 - - - (71,726) - (71,726) - Total governmental activities 29,222,497 12,018,370 127,978 1,777,375 (15,298,774) - (15,298,774) - Business-type activities:Electric 17,063,612 20,779,858 - 21,993 - 3,738,239 3,738,239 - Natural gas 5,777,998 7,771,857 - 162,251 - 2,156,110 2,156,110 - Water and Waste Water 8,486,035 12,538,531 - 68,784 - 4,121,280 4,121,280 - Total business-type activities 31,327,645 41,090,246 - 253,028 - 10,015,629 10,015,629 - Total primary government 60,550,142$ 53,108,616$ 127,978$ 2,030,403$ (15,298,774) 10,015,629 (5,283,145) - Component Units 1,720,743$ 367,914$ 1,363,382$ 3,444,085$ 3,454,638 General revenues:Property taxes 5,947,563 - 5,947,563 - Sales tax 9,269,702 - 9,269,702 - Liquor taxes 606,819 - 606,819 - Lodging taxes 1,116,242 - 1,116,242 - Other taxes 122,059 - 122,059 - Investment earnings 126,115 136,797 262,912 790 Other292,339 16,167 308,506 - Transfers 1,778,690 (1,778,690) - - Total general revenues and transfers 19,259,529 (1,625,726) 17,633,803 790 Change in net position 3,960,755 8,389,903 12,350,658 3,455,428 Net position - beginning 91,890,072 65,546,304 157,436,376 19,776,674 Net position - ending 95,850,827$ 73,936,207$ 169,787,034$ 23,232,102$ Changes in Net PositionPrimary GovernmentProgram RevenuesNet (Expense) Revenue and
- 19 -
CITY OF FAIRHOPE, ALABAMA
FUND BALANCE SHEETS
GOVERNMENTAL FUNDS
SEPTEMBER 30, 2019
See independent auditors’ report and notes to the financial statements.
Other Total
Capital Governmental Governmental
General Projects Funds Funds
ASSETSCash 12,127,182$ 1,699,230$ 3,818,209$ 17,644,621$
Receivables, net 1,336,796 648,918 34,061 2,019,775
Inventory 100,519 - - 100,519
Prepaid items 223,128 - - 223,128
Due from other funds 310,659 7,973 126,000 444,632
Other assets 34,925 - - 34,925
Total assets 14,133,209$ 2,356,121$ 3,978,270$ 20,467,600$
LIABILITIES
Accounts payable 705,241$ 286,874$ 25,617$ 1,017,732$
Accrued expenditures and taxes 50,582 - - 50,582
Customer deposits 29,438 - - 29,438
Unearned revenue 24,495 - - 24,495
Due to other funds 80,360 126,000 - 206,360
Total liabilities 890,116 412,874 25,617 1,328,607
FUND BALANCES
Nonspendable:
Prepaid items 223,128 - - 223,128
Inventory 100,519 - - 100,519
Restricted:
Road maintenance - - 227,092 227,092
Committed:
Council approved emergencies 7,000,000 - - 7,000,000
Construction and road maintenance - - 3,726,721 3,726,721
Debt service 1,308,666 - - 1,308,666
Capital projects 35,000 1,943,247 - 1,978,247
Unassigned 4,575,780 - (1,160) 4,574,620
Total fund balances 13,243,093 1,943,247 3,952,653 19,138,993
Total liabilities and fund balances 14,133,209$ 2,356,121$ 3,978,270$ 20,467,600$
- 20 -
CITY OF FAIRHOPE, ALABAMA
RECONCILIATION OF GOVERNMENTAL FUND BALANCES TO
NET POSITION OF GOVERNMENTAL ACTIVITIES
SEPTEMBER 30, 2019
See independent auditors’ report and notes to the financial statements.
Fund balances as reported on page 19 19,138,993$
Net position reported for governmental activities in the statement of net position
is different from fund balances for governmental activities because:
Capital assets used in governmental activities are financial resources and,
therefore, are not reported in fund financial statements. 158,080,018
Depreciation is provided for the above capital assets in government-wide
reporting, but is not in fund financial statements. (62,095,823)
Other long-term assets are not available to pay for current-period
expenditures and, therefore, are unearned revenue in fund financial statements. 24,495
Deferred outflows of resources are applicable to future periods, and therefore,
are not reported in the governmental funds.
Deferred outflow of resources related to net pension liability
1,766,102
Deferred outflow of resources related to OPEB obligations
441,273
Deferred inflows are not financial resources and, therefore, are not reported
in fund financial statements.
Deferred inflow of resources related to net pension liability
(1,910,664)
Deferred inflow of resources related to OPEB obligations
(3,525,568)
Long-term liabilities, including warrants, notes, capital lease obligations
and OPEB obligations are not due and payable in the current period and,
therefore, are not reported in fund financial statements:
Obligations under capital leases (1,188,940)
Net pension liability (6,982,951)
OPEB obligations (6,727,148)
Accrued interest on long-term debt is not due and payable in the
current period and, therefore, not included in fund financial statements. (7,342)
Compensated absences not expected to be paid with current resources
as determined under Governmental Accounting Standards are not reported
in fund financial statements. (1,161,618)
Net position of governmental activities as reported on page 17 95,850,827$
and GASB Statement No. 68.
and GASB Statement No. 75.
and GASB Statement No. 75.
and GASB Statement No. 68.
- 21 -
CITY OF FAIRHOPE, ALABAMA
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2019
See independent auditors’ report and notes to the financial statements.
Other Total
Capital Governmental Governmental
General Projects Funds Funds
REVENUES
Local taxes 17,002,565$ -$ -$ 17,002,565$
Licenses and permits 4,570,915 - - 4,570,915
Fines and forfeitures 237,812 - - 237,812
Intergovernmental 546,684 447,379 96,118 1,090,181
Interest and rents 440,514 5,349 24,890 470,753
Charges for services 4,570,649 - 1,282,098 5,852,747
Golf course revenue 1,060,650 - - 1,060,650
Recreation department 456,362 - - 456,362
Other 660,915 - - 660,915
Total revenues 29,547,066 452,728 1,403,106 31,402,900
EXPENDITURES
General government 5,303,050 - - 5,303,050
Public safety 6,571,647 - - 6,571,647
Public works 6,510,388 - - 6,510,388
Cultural and recreational 6,238,487 - - 6,238,487
Airport Authority 320,000 - - 320,000
Public Library Board 818,477 - - 818,477
Other 92,600 - 77,603 170,203
Debt service payments:
Principal - - 3,775,470 3,775,470
Interest - - 87,534 87,534
Capital outlay 2,440,484 5,306,289 - 7,746,773
Total expenditures 28,295,133 5,306,289 3,940,607 37,542,029
Excess of revenues
under expenditures 1,251,933 (4,853,561) (2,537,501) (6,139,129)
OTHER FINANCING
SOURCES (USES)
Proceeds from capital lease 990,929 - - 990,929
Transfers in 1,754,393 1,393,500 3,318,786 6,466,679
Transfers out (4,462,286) - (366,393) (4,828,679)
Total other financing
sources (uses) (1,716,964) 1,393,500 2,952,393 2,628,929
Net change in fund balances (465,031) (3,460,061) 414,892 (3,510,200)
Fund balances – beginning of year 13,708,124 5,403,308 3,537,761 22,649,193
FUND BALANCES – END OF YEAR 13,243,093$ 1,943,247$ 3,952,653$ 19,138,993$
- 22 -
CITY OF FAIRHOPE, ALABAMA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO
THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED SEPTEMBER 30, 2019
See independent auditors’ report and notes to the financial statements.
Net change in fund balances – total governmental funds, page 21 (3,510,200)$
Amounts reported for governmental activities in the statement of activities
are different from the statement of revenues, expenditures and changes in
fund balances - governmental funds because:
Capital outlay, reported as expenditures in governmental funds, is shown as
capital assets in the statement of net position. 7,695,333
Depreciation expense on governmental capital assets included in the
capital assets in the statement of net position. (4,100,448)
The net effect of transactions involving the sale, disposal and transfer of
capital assets is to increase net position in the statement of net position. 136,019
Bond and other debt proceeds provide current financial resources to governmental
funds, but issuing debt increases long-term liabilities in the statement of net position.
Repayment of long-term liabilities is an expenditure in governmental funds, but
the repayment reduces long-term liabilities in the statement of net position.
Principal payments on long-term debt 3,775,470
Proceeds from issuance of capital leases (990,929)
Revenues are reported in the funds when there is an established claim
to the resources and the resources are available to finance current
expenditures. Revenues are reported in the statement of activities
when there is an established claim with no availability criterion. The
funds report revenue unavailable in prior periods as current year revenue. 1,662
Some expenses reported in the statement of activities do not require the use
of current resources and, therefore, are not reported as expenditures in
governmental funds.
Compensated absences (53,590)
Accrued interest 15,807
Pensions 373,100
Postemployment benefit plans other than pensions 618,531
Change in net position of governmental activities, page 18 3,960,755$
- 23 -
CITY OF FAIRHOPE, ALABAMA
STATEMENT OF NET POSITION
PROPRIETARY FUNDS
SEPTEMBER 30, 2019
See independent auditors’ report and notes to the financial statements.
Water and
Electric Natural Gas Waste Water
Fund Fund Fund Total
ASSETS
Current assets:
Cash and cash equivalents 6,545,298$ 8,825,065$ 10,062,857$ 25,433,220$
Restricted cash held by fiscal agent 177,448 95,032 2,457,966 2,730,446
Receivables, net 1,208,158 352,791 850,262 2,411,211
Inventories 399,067 208,939 138,020 746,026 Prepaid items 47,822 16,009 61,334 125,165
Due from other funds 110,900 26,613 4,787 142,300
Total current assets 8,488,693 9,524,449 13,575,226 31,588,368
Noncurrent assets:
Other assets 12,030 12,030 12,030 36,090
Capital assets
Land 7,455,163 1,616,172 189,182 9,260,517 Buildings and improvements 1,379,968 775,356 553,300 2,708,624
Vehicles and equipment 5,007,930 3,600,937 3,837,312 12,446,179
Distribution and collection systems 24,431,327 12,781,600 55,775,630 92,988,557
Less accumulated depreciation (16,232,887) (8,862,649) (26,220,681) (51,316,217) Total noncurrent assets 22,053,531 9,923,446 34,146,773 66,123,750
Total assets 30,542,224 19,447,895 47,721,999 97,712,118
DEFERRED OUTFLOWS OFRESOURCES
Deferred charge on refunding - - 84,487 84,487
Pension related items 168,799 117,251 187,370 473,420
OPEB related items 41,961 25,719 41,962 109,642
Total deferred outflows of resources 210,760 142,970 313,819 667,549
Total assets and deferred outflowsof resources 30,752,984$ 19,590,865$ 48,035,818$ 98,379,667$
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 1,612,794$ 411,046$ 372,327$ 2,396,167$ Unearned revenue 73,480 - 488,047 561,527
Customer deposits 1,094,411 608,302 413,404 2,116,117
Warrants, notes and
capital leases payable 81,084 37,467 766,449 885,000
Compensated absences 38,240 34,838 54,950 128,028
Due to other funds 266,127 59,357 55,088 380,572
Total current liabilities 3,166,136 1,151,010 2,150,265 6,467,411
Noncurrent liabilities:
Compensated absences 119,738 127,980 150,914 398,632
Warrants, notes and
capital leases payable 338,843 304,949 11,639,323 12,283,115 Net pension liability 902,919 541,123 816,415 2,260,457
Total OPEB liability 639,698 392,073 639,698 1,671,469
Total noncurrent liabilities 2,001,198 1,366,125 13,246,350 16,613,673
Total liabilities 5,167,334 2,517,135 15,396,615 23,081,084
DEFERRED INFLOWS OF
RESOURCES
Pension related items 175,069 119,167 192,156 486,392
OPEB related items 335,253 205,478 335,253 875,984
Total deferred inflows of resources 510,322 324,645 527,409 1,362,376
NET POSITION
Net investment in capital assets 21,621,574 9,569,000 21,813,458 53,004,032
Restricted:
Debt service 177,448 95,032 2,457,966 2,730,446 Unrestricted 3,276,306 7,085,053 7,840,370 18,201,729
Total net position 25,075,328 16,749,085 32,111,794 73,936,207
Total liabilities and net position 30,752,984$ 19,590,865$ 48,035,818$ 98,379,667$
Business-type Activities
- 24 -
CITY OF FAIRHOPE, ALABAMA
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2019
See independent auditors’ report and notes to the financial statements.
Water and
Electric Natural Gas Waste Water
Fund Fund Fund Total
OPERATING REVENUES
Sales and services 20,419,145$ 7,765,739$ 10,713,746$ 38,898,630$
Other charges, sales and receipts 360,713 6,118 1,824,785 2,191,616
Total operating revenues 20,779,858 7,771,857 12,538,531 41,090,246
OPERATING EXPENSES
Energy purchases and
cost of goods sold 12,330,272 2,104,356 561,000 14,995,628
Salaries 1,035,826 894,725 1,567,513 3,498,064
Depreciation 820,232 516,325 1,549,906 2,886,463
Insurance 478,751 207,082 477,516 1,163,349
Electric energy furnished
to other departments 285,921 38,390 260,728 585,039
Maintenance 531,467 309,916 2,029,455 2,870,838
Other operating expense 1,544,401 1,560,452 1,631,527 4,736,380
Total operating expenses 17,026,870 5,631,246 8,077,645 30,735,761
OPERATING INCOME 3,752,988 2,140,611 4,460,886 10,354,485
NONOPERATING
REVENUES (EXPENSES)
Interest expense (36,742) (13,293) (408,390) (458,425)
Interest income 22,269 39,238 75,290 136,797
Gain on sale of capital assets 300 - 15,867 16,167
Intergovernmental revenue 21,993 162,251 68,784 253,028
Distribution of joint
revenue (expense) – net - (133,459) - (133,459)
Total nonoperating
revenues (expenses) 7,820 54,737 (248,449) (185,892)
INCOME BEFORE TRANSFERS
AND OTHER ITEMS 3,760,808 2,195,348 4,212,437 10,168,593
TRANSFERS AND OTHER ITEMS
Capital contirbutions (11,942) (39,013) (89,735) (140,690)
Transfers out (502,000) (168,000) (968,000) (1,638,000)
Total transfers (513,942) (207,013) (1,057,735) (1,778,690)
Change in net position 3,246,866 1,988,335 3,154,702 8,389,903
Net position – beginning of year 21,828,462 14,760,750 28,957,092 65,546,304
NET POSITION – END OF YEAR 25,075,328$ 16,749,085$ 32,111,794$ 73,936,207$
Business-type Activities
- 25 -
CITY OF FAIRHOPE, ALABAMA
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2019
See independent auditors’ report and notes to the financial statements.
Water and
Electric Natural Gas Waste Water
Fund Fund Fund Total
CASH FLOWS FROM OPERATING ACTIVITIES
Received from customers 21,066,164$ 7,726,590$ 12,608,469$ 41,401,223$
Paid to suppliers for goods and services (15,159,886) (4,053,944) (5,005,629) (24,219,459)
Paid to personnel for services (1,102,852) (874,637) (1,622,052) (3,599,541)
Net cash provided by operating activities 4,803,426 2,798,009 5,980,788 13,582,223
CASH FLOWS FROM INVESTING ACTIVITIES
Distribution of joint expense - (133,459) - (133,459)
Interest income 22,269 39,238 75,290 136,797
Net cash provided by (used in) investing activities 22,269 (94,221) 75,290 3,338
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Repayment of debt (1,228,848) (36,410) (853,584) (2,118,842)
Interest paid (33,001) (10,886) (398,029) (441,916)
Capital grants received 21,993 162,251 68,784 253,028
Proceeds from disposal of capital assets 300 - 16,330 16,630
Acquisition of capital assets (820,000) (651,548) (2,189,962) (3,661,510)
Net cash used in capital and related
financing activities (2,059,556) (536,593) (3,356,461) (5,952,610)
CASH FLOWS FROM NONCAPITAL AND RELATED
FINANCING ACTIVITIES
Change in interfund receivable 227,919 (9,340) (4,697) 213,882
Change in interfund payable (450,182) (26,339) 17,764 (458,757)
Transfers out (502,000) (168,000) (968,000) (1,638,000)
Net cash used in noncapital and
related financing activities (724,263) (203,679) (954,933) (1,882,875)
INCREASE IN CASH 2,041,876 1,963,516 1,744,684 5,750,076
CASH – BEGINNING OF YEAR 4,680,870 6,956,581 10,776,139 22,413,590
CASH – END OF YEAR 6,722,746$ 8,920,097$ 12,520,823$ 28,163,666$
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Operating income 3,752,988$ 2,140,611$ 4,460,886$ 10,354,485$
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation 820,232 516,325 1,549,906 2,886,463
Change in assets and liabilities:
Decrease (increase) in accounts receivable 252,464 (73,276) (90,561) 88,627
Decrease (increase) in inventories (27,819) 32,975 (8,303) (3,147)
Decrease (increase) in prepaid expenses 625 (1,818) (9,491) (10,684)
Decrease (increase) in deferred outflow of resources (30,734) (8,423) (13,471) (52,628)
Increase (decrease) in accounts payable 38,120 135,095 (27,609) 145,606
Increase (decrease) in customer deposits 54,300 28,009 18,426 100,735
Increase (decrease) in net unearned revenue (20,458) - 142,073 121,615
Increase (decrease) in deferred inflow of resources 370,879 226,095 365,501 962,475
Increase (decrease) in net pension liability (109,899) (67,353) (109,900) (287,152)
Increase (decrease) in compensated absences (74,550) 29,645 29,542 (15,363)
Increase (decrease) in net OPEB obligation (222,722) (159,876) (326,211) (708,809)
Net cash provided by operating activities 4,803,426$ 2,798,009$ 5,980,788$ 13,582,223$
Business-type Activities
THIS PAGE INTENTIONALLY LEFT BLANK
- 26 -
CITY OF FAIRHOPE, ALABAMA
COMBINING STATEMENT OF NET POSITION
DISCRETELY PRESENTED COMPONENT UNITS
SEPTEMBER 30, 2019
See independent auditors’ report and notes to the financial statements.
Public Library Airport
Board Authority Total
ASSETS
Cash 564,556$ 288,373$ 852,929$
Receivables, net 68,206 361,986 430,192
Prepaid items 7,169 15,754 22,923
Capital assets not being depreciated:
Land - 10,674,228 10,674,228
Construction in progress - 28,534 28,534
Capital assets net of accumulated
depreciation:
Buildings and improvements - 7,227,280 7,227,280
Vehicles and equipment 70,933 - 70,933
Runways - 17,062,579 17,062,579
Total assets 710,864 35,658,734 36,369,598
DEFERRED OUTFLOWS OF
RESOURCES
Pension related items 112,195 - 112,195
Total assets and deferred
outflows of resources 823,059$ 35,658,734$ 36,481,793$
LIABILITIES
Accounts payable and accrued liabilities 16,272$ 437,285$ 453,557$
Long-term liabilities:
Due within one year - 200,000 200,000
Due in more than one year - 6,695,629 6,695,629
Net pension liability 397,911 - 397,911
Total liabilities 414,183 7,332,914 7,747,097
DEFERRED INFLOWS OF
RESOURCES
Pension related items 60,519 - 60,519
Service concession arrangement revenue
applicable to future years - 5,442,075 5,442,075
Total deferred inflows of resources 60,519 5,442,075 5,502,594
NET POSITION
Net investment in capital assets 70,933 28,096,992 28,167,925
Restricted:
Library improvements 303,790 - 303,790
Unrestricted (26,366) (5,213,247) (5,239,613)
Total net position 348,357 22,883,745 23,232,102
Total liabilities, deferred inflows of
resources, and net position 823,059$ 35,658,734$ 36,481,793$
- 27 - CITY OF FAIRHOPE, ALABAMA COMBINING STATEMENT OF ACTIVITIES DISCRETELY PRESENTED COMPONENT UNITS FOR THE YEAR ENDED SEPTEMBER 30, 2019 See independent auditors’ report and notes to the financial statements. Operating CapitalCharges for Grants and Grants and Governmental Business-typeFunctions/Programs Expenses Services Contributions Contributions Activities Activities TotalGovernmental activities:Public Library Board 924,389$ 130,471$ 844,768$ -$ 50,850$ -$ 50,850$ Business-type activities:Airport Authority 796,354 237,443 518,614 3,444,085 - 3,403,788 3,403,788 1,720,743$ 367,914$ 1,363,382$ 3,444,085$ 50,850 3,403,788 3,454,638 General revenues:Investment earnings - 790 790 Total general revenues - 790 790 Change in net position 50,850 3,404,578 3,455,428 Net position – beginning 297,507 19,479,167 19,776,674 Net position – ending 348,357$ 22,883,745$ 23,232,102$ Changes in Net PositionProgram RevenuesNet (Expense) Revenue and
THIS PAGE INTENTIONALLY LEFT BLANK
NOTES TO THE FINANCIAL STATEMENTS
- 28 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Fairhope, Alabama (the City) was incorporated in April, 1908. The City operates under a
Mayor – Council form of government chosen at large every four years.
The accounting policies of the City conform to accounting principles generally accepted in the United
States of America as applicable to municipal governments. The following is a summary of the more
significant policies.
A. REPORTING ENTITY
The financial statements of the City have been prepared in conformity with the accounting
principles generally accepted in the United States of America as specified by the Governmental
Accounting Standards Board (GASB).
These financial statements present the primary government (the City) and its discretely
presented component units, entities for which the government is considered financially
accountable. The component units are reported in a separate column of the government-wide
statements to emphasize they are legally separate from the primary government. The discretely
presented component units have a September 30 fiscal year end.
Component Units
Fairhope Public Library - The Library has its own governing body which operates the City
public library and is appointed by the City Council. The City provides significantly all the annual
operating financial support to the Library. The Library's other sources of revenue come from
State financial assistance, gifts, bequests and user fees. The Library is reported as a
governmental component unit. The Library Board does not issue separate financial statements.
Fairhope Airport Authority - The Authority operates the City Airport and has its own governing
body which is appointed by the City Council. The City provides a significant portion of the annual
operating funds support to the Airport. The Airport's other sources of revenue come from Hangar
and Office rentals, and fuel sales. Prior to 2019, the Airport Authority was reported as a
governmental component unit. Beginning in 2019, the Airport Authority is reported as a
business-type component unit. The Airport Authority does not issue separate financial statements.
These financial statements do not include the following:
Bay Medical Clinic Board
Industrial Board of the City of Fairhope
Medical Clinic Board – East, West or North
Downtown Redevelopment Authority
Parking Authority
City management does not exert significant influence or control and does not guarantee any of their
outstanding debts.
- 29 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. BASIS OF PRESENTATION – GOVERNMENT-WIDE AND FUND LEVEL
Government-wide
The basic financial statements include government-wide and fund financial statements. The
reporting model focuses on the City, as a whole, and major funds. Government-wide and fund
financial statements categorize primary activities as governmental or business-type. In the
statement of net position, governmental and business-type activities (a) are presented on a
consolidated basis, (b) reflect, full accrual accounting, which incorporates long-term assets and
receivables as well as long-term debt and obligations, and (c) are reported using the economic
resources measurement focus. Receivables and payables between activities are eliminated in the
government-wide presentation through the caption “Internal Balances” on the Statement of Net
Position. For the most part, the effect of interfund activity has been removed from these statements.
The exception to this is interfund services provided and used which are not eliminated in the
process of consolidation.
The statement of activities reflects both the gross and net cost per functional category (street,
police, fire, etc.) which are otherwise being supported by general government revenues (taxes,
licenses, and permits, etc.). The statement of activities reduces gross expenses, including
depreciation, by related program revenues. The program revenues must be directly associated with
a function or a business-type activity. Operating grants include operating-specific and discretionary
(either operating or capital) grants while the capital grants column reflects capital-specific grants.
Fund Level
The governmental fund level financial statements are presented on a current financial resource and
modified accrual basis of accounting. Since governmental fund level financial statements are
presented on a different basis of accounting and measurement focus than governmental activities in
the government-wide presentation, a summary is presented to explain adjustments necessary to
reconcile fund level statements to the government-wide presentation.
The accounts of the City are organized on the basis of funds which are each considered a separate
accounting entity. The operations of each fund are accounted for with a separate set of self-
balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, as
appropriate. Government resources are allocated to and accounted for in individual funds based
upon the purposes for which they are to be spent and the means by which spending activities are
controlled. The various funds are grouped into broad fund categories as follows:
General Fund – The General Fund is used to account for all revenues and expenditures applicable
to the general operations of City government which are not properly accounted for in another fund.
All general operating revenues which are not restricted or designated as to use by outside sources
are recorded in the General Fund.
Special Revenue Fund – Special revenue funds are operating funds for which the use of revenues
(usually from taxes) is restricted or designated by outside sources. They are usually required by
State or local laws to finance certain activities or functions.
- 30 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. BASIS OF PRESENTATION – GOVERNMENT-WIDE AND FUND LEVEL (CONTINUED)
Debt Service Fund – Debt service funds are used to account for the payment of interest and
principal on general long-term warrants and notes not accounted for in the proprietary funds.
Capital Project Fund – Capital project funds are used to account for the financial resources used to
construct or acquire major capital items (other than those financed by proprietary funds).
Enterprise Funds:
The Electric Fund, Natural Gas Fund, and Water and Waste Water Fund are Enterprise Funds,
which are used to account for the operations of the utilities. City utilities are provided to residents
in and around the City of Fairhope. Enterprise Funds are used to account for operations which are
financed or operated in a manner similar to private business enterprises – where the intent of the
governing body is that the costs of providing goods or services to the general public on a
continuing basis be financed or recovered through user charges and fees. Operating revenues,
shown for proprietary operations, generally result from producing or providing goods and services.
Operating expenses include all costs related to providing services or products. All other revenues
or expenses not meeting these criteria are reported as nonoperating income or expenses.
C. BASIS OF ACCOUNTING
Basis of accounting refers to when revenues and expenditures/expenses are recognized in the
accounts and reported in the financial statements. Basis of accounting relates to the timing of the
measurements made, regardless of the measurement focus applied.
All governmental funds are accounted for using the modified accrual basis of accounting. Under
the modified accrual basis, revenues are recognized when they become susceptible to accrual that
is when they become both “measurable” and “available” to finance expenditures of the current
period. Ad valorem and other taxes collected by an intermediary are considered “measurable”
when in the hand of the intermediary collecting governments and may be recognized as revenue at
that time. Expenditures, generally, are recorded at the time liabilities are incurred. Revenues
susceptible to accrual are: lodging tax, property taxes, and federal financial assistance programs,
which are measurable and available to finance expenditures of the current period. The City uses a
60-day availability period except for FEMA disaster recovery grants which are recognized using a
12-month availability period. Revenue which is not both measurable and available includes
licenses, rents, permits and fines.
The proprietary fund financial statements are presented on the accrual basis of accounting in
accordance with Governmental Accounting Standards Board (GASB) Statement No. 20,
Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That
Use Proprietary Fund Accounting.
- 31 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. MAJOR FUNDS
The City reports the following major Governmental funds:
General Fund
Capital Projects Fund
The City reports the following enterprise funds as major funds:
Electric Fund
Natural Gas Fund
Water and Waste Water Fund
E. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term
investments with original maturities of three months or less from the date of acquisition.
The City maintains a system in which some excess cash is placed in interest bearing accounts. Cash
applicable to a particular fund is readily identifiable. Interest earned is allocated to each fund based
upon the proportionate balances of each fund’s cash in the account.
For purposes of the statements of cash flows, the proprietary funds consider all highly liquid
investments, purchased within three months of maturity, to be cash equivalents. Investments
consist of U. S. Treasury money market accounts which are presented at cost which equals fair
value.
F. 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 noncurrent portion of inter-fund
loans). Any residual balances outstanding between the governmental activities and business-type
activities are reported in the government-wide financial statements as “internal balances.”
The Electric Fund purchases at face value, the utility receivables of the Natural Gas Fund and the
Water and Waste Water Fund as well as the garbage receivable of the General Fund. Purchase is
made at the time customers are billed. Customer payments for all are then deposited to the Utility
Account in the Electric Fund.
- 32 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. RECEIVABLES AND PAYABLES (CONTINUED)
All ad valorem taxes levied by the state, county and any municipality in Baldwin County are
assessed and collected by the Revenue Commissioner of Baldwin County. The Baldwin County
property tax calendar requires the Revenue Commissioner to assess and attach taxes as enforceable
liens on property as of September 30, and taxes are due October 1 through December 31. Property
taxes not paid by January 1 are considered as delinquent. Tax collections received by the County
Revenue Commissioner are remitted to the City monthly. In accordance with GASB Statement
No. 33, revenue is recorded based upon taxes assessed and considered available.
G. INVENTORIES AND PREPAID ITEMS
Inventories are stated at cost using the average cost method. Inventories of governmental funds are
recorded as expenditures when consumed rather than when purchased.
Inventories are summarized as follows:
Governmental Business-type
Activities Activities Total
Fuel 12,015$ 70,860$ 82,875$
Materials and supplies 88,504 675,166 763,670
Totals 100,519$ 746,026$ 846,545$
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded
as prepaid items in both government-wide and fund financial statements using the consumption
method.
H. CAPITAL ASSETS
The accounting treatment for capital assets depends on whether the assets are used by
governmental funds or proprietary funds and fund level or government-wide reporting.
In government-wide reporting, all capital assets are reported as capital assets for both
governmental and business-type activities. The City has not established a minimum capitalization
threshold at this time. Depreciation is provided on all capital assets at the government-wide level.
In fund level reporting, capital assets are reported as expenditures by governmental funds, while
they remain capital assets in proprietary funds. Depreciation is provided, only, in proprietary funds
at the fund level.
- 33 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. CAPITAL ASSETS (CONTINUED)
Capital assets are valued at historical cost or estimated historical cost if actual historical cost is not
available. Donated capital assets are valued at estimated acquisition value on the date donated.
Depreciation is allocated as an expense in the statement of activities (government-wide level) and
accumulated depreciation is reflected in the statement of net position (government-wide level).
Depreciation has been provided over the estimated useful lives using the straight-line rates as
follows:
Plant and distribution systems 30 – 40 years
Buildings 25 – 50 years
Golf course improvements 10 – 40 years
Vehicles and equipment 3 – 10 years
Infrastructure (roads, bridges, drainage) 25 – 50 years
Runways and taxiways 75 years
I. DEFERRED OUTFLOWS/INFLOWS OF RESOURCES
In addition to assets, the statement of financial position will sometimes report a separate section for
deferred outflows of resources. This separate financial statement element 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 several items that qualify for
reporting in this category. First is the deferred charge on refunding reported in the government-
wide statement of net position. 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. In addition, the City also reports
deferred outflow items related to the City’s pension plan which are described further in Note 10,
and deferred outflow items related to the City’s postemployment benefits other than pensions
which are described further in Note 13.
In addition to liabilities, the statement of financial position will sometimes report a separate section
for deferred inflows of resources. This separate financial statement element 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 several items that qualify for reporting
in this category. The first, of which arises only under a modified accrual basis of accounting, is
unavailable revenue, and 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.
In addition, the City also reports deferred inflow items related to the City’s pension plan which are
described further in Note 10, and deferred inflow items related to the City’s postemployment
benefits other than pensions which are described further in Note 13.
- 34 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
J. COMPENSATED ABSENCES
The City accrues vacation earned by employees as well as other compensated absences with similar
characteristics. Sick leave, which can be paid at termination, if certain conditions are met, is
accrued based on the probability that a portion of the current employees will meet required criteria.
A liability for sick leave to be paid at termination has been accrued based on estimated probability
factors and years of service. The liability to employees who currently meet the criteria to receive
sick leave pay has been accrued at 100% of the current hours sick leave earned at current pay rates.
Accumulated unpaid vacation and sick pay are accrued when incurred in the Proprietary Funds.
Amounts normally paid with expendable available financial resources are recorded in the General
Fund when the obligation has matured.
Employees must use all vacation time annually, and the maximum accumulation of sick leave is
limited to 960 hours. Accumulated sick leave is paid only upon retirement to employees with 25
years or more of service, at any age, and to employees with 10 years of service who have attained
age sixty (60).
K. POSTEMPLOYMENT BENEFITS
The City records a liability in the government-wide financial statements for future healthcare
benefits for eligible retirees and their spouses. The postemployment benefits other than pension
liability at September 30, 2019 totaled $8,398,617.
L. PENSIONS
The Employees' Retirement System of Alabama (the Plan) financial statements are prepared
using the economic resources measurement focus and accrual basis of accounting. Contributions
are recognized as revenues when earned, pursuant to the Plan requirements. Benefits and refunds
are recognized when due and payable in accordance with the terms of the Plan. Expenses are
recognized when the corresponding liability is incurred, regardless of when the payment is made.
Investments are reported at fair value. Financial statements are prepared in accordance with
requirements of GASB. Under these requirements, the Plan is considered a component unit of the
State of Alabama and is included in the State's Comprehensive Annual Financial Report.
- 35 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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.
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 the 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. NET POSITION AND EQUITY CLASSIFICATIONS
Government-wide Financial Statements
The City applies GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources,
Deferred Inflows of Resources, and Net Position, that supersedes GASB Statement No. 34, Basic
Financial Statements – and Management’s Discussion and Analysis – for State and Local
Government. Equity is classified as net position and displayed in three components:
Net investment in capital assets – Consists of capital assets, net of accumulated
depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or
other borrowings that are attributable to the acquisition, construction, or improvement of
those assets. Deferred outflows of resources and deferred inflows of resources that are
attributable to the acquisition, construction, or improvement of those assets or related debt
are also included in this component of net position. If there are significant unspent related
debt proceeds or deferred inflows of resources at year end, the portion of the debt of
deferred inflows of resources attributable to the unspent proceeds is not included in the
calculation of net investment in capital assets. Rather, that portion of the debt or deferred
inflows of resources is included in the same net position as the unspent proceeds.
Restricted net position – Consists of restricted assets reduced by liabilities and deferred
inflows of resources related to those assets.
Unrestricted net position – The net amount of the assets, deferred outflows of resources,
liabilities, and deferred inflows of resources that are not included in the determination of
net investment in capital assets or the restricted component of net position.
- 36 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
N. NET POSITION AND EQUITY CLASSIFICATIONS (CONTINUED)
Fund Financial Statements
The Fund equity of the governmental fund financial statements is classified as fund balance.
GASB standards establish a hierarchy based on the extent to which a government is bound to
observe constraints imposed on the use of the resources reported in governmental funds.
Fund balance is classified into one of the following four components:
Restricted fund balance – Consists of fund balances with constraints placed on the use
either by (1) external groups such as creditors, grantors, contributors, or laws or
regulations of other governments; (2) or the City’s own laws through its enabling
legislation and other provisions of its laws and regulations.
Committed fund balance – Consists of fund balances that are useable only for specific
purposes by formal action of the government’s highest level of decision making
authority. The City’s highest level of decision making lies with the Mayor of the City
and the City Council. In order to establish, modify or rescind a fund balance
commitment, the Mayor and City Council must pass a law by formal action committing
the funds, by passage of a resolution.
Assigned fund balance – Consists of fund balances that are intended to be used for
specific purposes but are neither restricted nor committed. Intent should be expressed
by (1) the governing body itself, or (2) a subordinate high-level body or official who
the governing body has delegated the authority to assign amounts to be used for
specific purposes. The Mayor and the City Council have the power to assign fund
balance amounts to specific purposes. The governing body must vote to grant
authorization of assigned fund balances to specific purposes.
Unassigned fund balances – All other fund balances that do not meet the definition of
“restricted, committed or assigned fund balances.” The General Fund is the only fund
that reports a positive unassigned fund balance amount.
The City considers restricted fund balances to have been spent when both restricted and
unrestricted fund balances are available. Also, the City considers assigned and committed fund
balances to have been spent when unassigned or unrestricted amounts are available.
- 37 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
O. DEBT ISSUE COST
Issuance expenses on long-term debt of proprietary funds are expensed as incurred in accordance
with GASB Statement No. 65. In the fund financial statements, bond discounts, premiums, and
issuance costs are treated as period costs in the year of issue. In the government-wide financial
statements, bond discounts and premiums are deferred and amortized over the term of the bonds
using the bonds outstanding method. Bond discounts and premiums are presented as a reduction or
addition to the face amount of the bonds payable whereas issuance costs are expensed as incurred.
Deferred losses associated with the issuance of long-term debt are presented as deferred outflows
of resources and are amortized on the straight-line method over the term of the bond.
P. UNEARNED REVENUE
The City reports unearned revenue on its fund balance sheet. Unearned revenues arise when
potential revenue does not meet both the measurable and available criteria for recognition in the
current period. Revenues derived from street assessments are deferred and included in revenue
when the receivables become available (collected). Proprietary funds defer revenue recognition
when monies are collected for goods and services prior to the provision of services.
Q. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual results could differ from
those estimates.
R. SUBSEQUENT EVENTS
The City has evaluated subsequent events through March 26, 2020, the date which the financial
statements were available to be issued. There were no material subsequent events which require
disclosure at September 30, 2019.
NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
Budgetary Information
Although no legal requirement to establish a budget exists, the City Council follows these procedures in
establishing the budgets:
(1) The City Council Budget Committee works with City Management to prepare a proposed
working budget for the fiscal year commencing the following October 1. The budget includes
proposed expenditures and the means of financing them for the upcoming year. Line item
budgets are used for administrative control. The level of control for the detailed budgets is at
the department head/function level.
(2) Council budget meetings are conducted to obtain manager and taxpayer input.
- 38 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 2 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (CONTINUED)
Budgetary Information (Continued)
(3) The budget is enacted through council action.
(4) Reports are submitted to the City Council, showing approved budget and actual operations.
(5) The Mayor is authorized to transfer budgeted amounts within departments within any fund;
however, any revisions that alter the total expenditures of any fund or transfer of funds between
departments must be approved by the City Council.
(6) Formal budgetary integration is employed as a management control device during the year for
the General Fund.
(7) Budgets are adopted on a basis consistent with accounting principles generally accepted in the
United States of America (GAAP).
(8) Budgetary data, if any, for capital project funds are budgeted over the life of the respective
project and not on an annual basis.
(9) All appropriations lapse at year end.
Deficit Fund Equity
Funds with deficit fund balance or net position are as follows:
Deficit
Amount
Debt Service Fund 1,160$
NOTE 3 DEPOSIT AND INVESTMENT RISK
At September 30, 2019, the City had investments in U. S. Treasury money market mutual funds
through its trustee agreement for debt sinking funds. The fair value was $3,372,324. The average
maturity of the portfolio was 20 days.
Investment Risk – The City does not have a formal investment policy that limits investment maturities
as a means of managing its exposure to fair value losses arising from increasing interest rates.
Credit Risk – State statutes authorize the City’s investments. The City is authorized to invest in U.S.
Government obligations and its agencies or instrumentalities, direct obligations of the state, or SEC
registered mutual funds. The City has no investment policy that further limits investment choices. As
of September 30, 2019, the City’s mutual fund investments principal stability rating was AAAm as
reported by Standard & Poor’s.
- 39 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 3 DEPOSIT AND INVESTMENT RISK (CONTINUED)
Custodial Credit Risk – The City is a participant in the Security for Alabama Funds Enhancement
(SAFE) Program, a multiple financial institution collateral pool, administered by the State of Alabama.
The program, by law, provides administration of pledged collateral coverage for all governments and
agencies in the State and requires qualified financial institutions to provide collateral to the
administrator adequate to secure all deposits of public funds in that financial institution. The State
guarantees deposits identified as “public funds” will be adequately secured by insurance or collateral.
Any collateral shortages of one financial institution are assessed to other member financial institutions.
NOTE 4 RECEIVABLES
Receivables as of September 30, 2019, for the government’s individual major and nonmajor funds, and
the discretely presented components units, including the applicable allowances for uncollectable
accounts, are as follows:
Nonmajor
Capital Governmental Natural
General Projects Funds Electric Gas
Taxes 1,437,522$ -$ 8,649$ -$ -$
Accounts 424,092 - 25,412 2,071,798 217,444
Intergovernmental 26,177 648,918 - - 162,251
1,887,791 648,918 34,061 2,071,798 379,695
Less allowance for uncollectable
accounts (550,995) - - (863,640) (26,904)
Total receivables 1,336,796$ 648,918$ 34,061$ 1,208,158$ 352,791$
Water and
Waste Water Public Airport
Fund Library Authority Total
Taxes -$ -$ -$ 1,446,171$
Accounts 911,625 - 799 3,651,170
Intergovernmental 68,783 68,206 361,187 1,335,522
980,408 68,206 361,986 6,432,863
Less allowance for uncollectable
accounts (130,146) - - (1,571,685)
Total receivables 850,262$ 68,206$ 361,986$ 4,861,178$
- 40 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 5 INTERFUND TRANSACTIONS
Interfund balances are generally used to meet cash demands necessary to pay operating expenditures. The
amounts reported as due to/from other funds should be repaid during the next fiscal year.
The selling price of electric energy delivered without charge by the Electric Fund to various other funds,
boards, and offices of the City of Fairhope is charged to the Electric Fund’s operations as electric energy
furnished to other divisions of the City of Fairhope.
The composition of interfund balances as of September 30, 2019 is shown below.
Due to/from other funds
Receivable Fund Payable Fund Amount
General Water and Waste Water 35,098$
Electric 238,736
Natural Gas 36,825
Capital Projects General 7,973
Nonmajor Governmental Capital Projects 126,000
Electric General 72,387
Water and Waste Water 19,990
Natural Gas 18,523
Natural Gas Electric 26,613
Water and Waste Water Electric 778
Natural Gas 4,009
Total 586,932$
Interfund Transfers
Nonmajor
Capital Governmental
General Projects Funds Total
General -$ 1,143,500$ 3,318,786$ 4,462,286$
Nonmajor Governmental 116,393 250,000 - 366,393
Electric 502,000 - - 502,000
Natural Gas 168,000 - - 168,000
Water and Waste Water 968,000 - - 968,000
Totals 1,754,393$ 1,393,500$ 3,318,786$ 6,466,679$
Transfer In
Transfer Out
- 41 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 6 CAPITAL ASSETS
Capital asset activity for the year ended September 30, 2019 was as follows:
Beginning Ending
Balance Increases Decreases Transfers Balance
Governmental Activities
Capital assets not subject
to depreciation:
Land 23,056,496$ -$ -$ -$ 23,056,496$
Construction in progress 1,403,296 5,367,005 - (5,951,844) 818,457
Total 24,459,792 5,367,005 - (5,951,844) 23,874,953
Other capital assets:
Buildings and improvements 37,130,070 45,922 - 4,643,303 41,819,295
Vehicles and equipment 17,067,783 2,282,406 (336,082) 266,441 19,280,548
Infrastructure 71,796,681 - - 1,308,541 73,105,222
Total 125,994,534 2,328,328 (336,082) 6,218,285 134,205,065
Less accumulated depreciation for:
Buildings and improvements (12,892,773) (974,553) - - (13,867,326)
Vehicles and equipment (11,780,345) (1,671,130) 331,411 (125,751) (13,245,815)
Infrastructure (33,527,917) (1,454,765) - - (34,982,682)
Total accumulated depreciation (58,201,035) (4,100,448) 331,411 (125,751) (62,095,823)
Other capital assets, net 67,793,499 (1,772,120) (4,671) 6,092,534 72,109,242
Governmental capital assets, net 92,253,291$ 3,594,885$ (4,671)$ 140,690$ 95,984,195$
Depreciation was charged to governmental activities as follows:
General government 608,297$
Public safety 456,079
Public works 1,976,776
Cultural and recreational 848,649
Library 210,647
Total 4,100,448$
- 42 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 6 CAPITAL ASSETS (CONTINUED)
Beginning Ending
Balance Increases Decreases Transfers Balance
Business-type Activities
Capital assets not subject to depreciation:
Land 9,209,695$ 50,822$ -$ -$ 9,260,517$
Other capital assets:
Buildings and improvements 2,662,462 46,162 - - 2,708,624
Vehicles and equipment 12,340,368 520,572 (148,320) (266,441) 12,446,179
Distribution and collection system 89,944,603 3,043,954 - - 92,988,557
Total 104,947,433 3,610,688 (148,320) (266,441) 108,143,360
Less accumulated depreciation for:
Buildings and improvements (1,416,133) (58,365) - - (1,474,498)
Vehicles and equipment (9,995,346) (614,283) 147,856 125,751 (10,336,022)
Distribution and collection system (37,291,883) (2,213,814) - - (39,505,697)
Total accumulated depreciation (48,703,362) (2,886,462) 147,856 125,751 (51,316,217)
Other capital assets, net 56,244,071 724,226 (464) (140,690) 56,827,143
Capital assets, net 65,453,766$ 775,048$ (464)$ (140,690)$ 66,087,660$
Component Unit – Public Library
Vehicles and equipment 507,562$ -$ -$ -$ 507,562$
Less accumulated depreciation (408,660) (27,969) - - (436,629)
Capital assets, net 98,902$ (27,969)$ -$ -$ 70,933$
Component Unit – Airport Authority
Capital assets not subject to depreciation:
Land 10,674,228$ -$ -$ -$ 10,674,228$
Construction in progress 30,328 3,625,352 - (3,627,146) 28,534
Total 10,704,556 3,625,352 - (3,627,146) 10,702,762
Other capital assets:
Buildings and improvements 10,201,765 - - - 10,201,765
Vehicles and equipment 98,885 - - - 98,885
Runways 15,521,844 - - 3,627,146 19,148,990
Total 25,822,494 - - 3,627,146 29,449,640
Less accumulated depreciation for:
Buildings and improvements (2,723,695) (250,790) - - (2,974,485)
Vehicles and equipment (98,885) - - - (98,885)
Runways (1,871,393) (215,018) - - (2,086,411)
Total accumulated depreciation (4,693,973) (465,808) - - (5,159,781)
Other capital assets, net 21,128,521 (465,808) - 3,627,146 24,289,859
Capital assets, net 31,833,077$ 3,159,544$ -$ -$ 34,992,621$
- 43 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 7 LONG-TERM DEBT
Long-term debt activity for the year ended September 30, 2019:
Amounts
Beginning Ending due within
Balance Additions Reductions Balance one year
GOVERNMENTAL ACTIVITIES
Direct placements 3,681,158$ -$ (3,681,158)$ -$ -$
Capital leases 292,323 990,929 (94,312) 1,188,940 341,365
Compensated absences 1,108,028 708,664 (655,074) 1,161,618 376,484
Governmental activities
long-term liabilities 5,081,509 1,699,593 (4,430,544) 2,350,558 717,849
BUSINESS-TYPE ACTIVITIES
Direct placements 15,308,842 - (2,118,842) 13,190,000 885,000
Add issuance discounts (32,182) - 10,297 (21,885) -
Total direct placements 15,276,660 - (2,108,545) 13,168,115 885,000
Compensated absences 542,023 242,807 (258,170) 526,660 128,028
Business-type activities
long-term liabilities 15,818,683 242,807 (2,366,715) 13,694,775 1,013,028
Total long-term debt 20,900,192$ 1,942,400$ (6,797,259)$ 16,045,333$ 1,730,877$
- 44 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 7 LONG-TERM DEBT (CONTINUED)
Capital Leases – Governmental Activities
The City has entered into lease agreements as lessee for financing the acquisition of equipment. These
lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the
present value of their future minimum lease payments as of the inception date. The capital leases are
secured by the underlying equipment.
The assets acquired through capital leases are as follows:
Governmental
Assets Activities
Vehicles and equipment 1,283,252$
Less accumulated depreciation 140,149
Totals 1,143,103$
The future minimum lease obligations and the net present value of these minimum lease payments as of
September 30, 2019, were as follows:
Year ended September 30:
2020 370,338$
2021 454,059
2022 350,157
2023 83,626
1,258,180
Less amount representing interest 69,240
Present value of minimum lease payments 1,188,940$
- 45 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 7 LONG-TERM DEBT (CONTINUED)
Warrants from Direct Placements – Business-type Activities
The following is a summary of warrants from direct placement in proprietary funds as of September 30,
2019:
12,455,000$
735,000
Total warrants from direct placements – Business-type Activities 13,190,000$
Utilities Revenue Warrants, Series 2011 dated October 13, 2011,
original debt obligation of $16,140,000, interest rate 3.15%,
payable semi-annually, principal payable December 1, 2011
through December 1, 2030.
Utilities Revenue Warrants, Series 2015 dated May 14, 2015,
original debt obligation of $1,780,000, interest rate 2.11%,
payable semi-annually, principal payable December 1, 2015
through December 1, 2020.
Revenue warrants from the proprietary funds were for the purpose of financing, or refinancing, new
water tanks, new water wells, UV Sewer System, new booster pump, radio system, support tower, phone
system, construction of warehouse building and mechanics shop, and extensions to the City’s water and
sewer lines. The revenue warrants are secured by a pledge of future utility revenues.
The City’s outstanding warrants from direct placement related to business-type activities of $13,190,000
contain a provision that in event of default, outstanding amounts become due immediately if the City is
unable to make payment.
- 46 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 7 LONG-TERM DEBT (CONTINUED)
Warrants from Direct Placements – Business-type Activities (Continued)
The following schedule illustrates debt service to maturity for warrants from direct placement in
proprietary funds at September 30, 2019:
Year
Ending
September 30, Principal Interest Total
2020 885,000$ 395,801$ 1,280,801$
2021 1,055,000 369,068 1,424,068
2022 1,580,000 329,490 1,909,490
2023 1,630,000 278,933 1,908,933
2024 1,680,000 226,800 1,906,800
2025–2029 5,170,000 481,793 5,651,793
2030–2031 1,190,000 37,800 1,227,800
13,190,000$ 2,119,685$ 15,309,685$
Direct Placements
Business-type Activities
Sinking Funds
The cash and investments in these sinking funds (bond, reserve, and replacement funds) are restricted as
to their use in accordance with their respective bond indentures. Amounts in bond funds are included in
current assets, while amounts in reserve funds are separately listed as restricted assets.
Bond from Direct Placements – Component Units
The following is a summary of the long-term debt of the Airport Authority as of September 30, 2019:
6,895,629$
Airport Improvement Refunding Bond, Series 2017, dated March
22, 2017, original debt obligation of $7,445,629, interest rate
2.18%, principal payable annually through September 1, 2023.
The Airport Improvement Refunding Bond, Series 2017, are secured by a pledge of payments received
from the City pursuant to the 2017 Funding Agreement, dated March 1, 2017. The 2017 Funding
Agreement states the City shall appropriate to the Airport Authority the amount needed to satisfy the
annual debt service of the Airport Improvement Refunding Bond, Series 2017.
- 47 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 7 LONG-TERM DEBT (CONTINUED)
Bond from Direct Placements – Component Units (Continued)
The following is a summary of debt service requirements to maturity of long-term debt of the Airport
Authority as of September 30, 2019:
Year
Ending
September 30, Principal Interest Total
2020 200,000$ 151,836$ 351,836$
2021 200,000 147,432 347,432
2022 225,000 143,028 368,028
2023 6,270,629 138,074 6,408,703
6,895,629$ 580,370$ 7,475,999$
Component Units
Direct Placements
The Airport Authority’s outstanding bond from direct placement of $6,895,629 contains a provision that
in event of default, outstanding amounts become due immediately if the Airport Authority is unable to
make payment.
NOTE 8 SALARIES – PROPRIETARY FUNDS
The following is a summary of employees’ salaries for the business-type activities for the year ended
September 30, 2019:
Water and
Electric Natural Gas Waste Water
Fund Fund Fund
Total salaries 1,116,451$ 1,032,440$ 1,572,015$
Less:
Salaries capitalized for plant additions 80,625 137,715 4,502
Salaries charged to operations 1,035,826$ 894,725$ 1,567,513$
- 48 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 9 RISK MANAGEMENT AND CONTINGENCIES
The City is exposed to various risks of losses related to torts; theft of, damage to, and destruction of
assets; errors and omissions; injuries to employees; and natural disasters. The City obtains coverage
from commercial insurance companies and effectively manages risk through various employee
education and prevention programs. There were no instances where settlements exceeded insurance
coverage in the last three years.
Various lawsuits are pending against the City. City management believes that the potential adverse
impact of these claims is mitigated by insurance and will not be material to the financial statements of
the City.
The City receives Federal and State grants for specific purposes that are subject to review and audit by
the grantor agencies. Such audits could lead to requests for reimbursements to the grantor agency for
expenditures disallowed under the terms of the grant. City management believes such disallowances, if
any, will be immaterial.
NOTE 10 PENSION PLAN
Plan Description
The Employees’ Retirement System (ERS), an agent multiple-employer public employee retirement plan,
was established as of October 1, 1945, pursuant to the Code of Alabama 1975, Title 36, Chapter 27 (Act
515 of the Legislature of 1945). The purpose of the ERS is to provide retirement allowances and other
specified benefits for state employees, State Police, and, on an elective basis, to all cities, counties, towns,
and quasi-public organizations. The responsibility for the general administration and operation of ERS is
vested in its Board of Control which consists of 13 trustees. The Plan is administered by the Retirement
Systems of Alabama (RSA). The Code of Alabama 1975, Title 36, Chapter 27 grants the authority to
establish and amend the benefit terms to the ERS Board of Control. The Plan issues a publicly available
financial report that can be obtained at www.rsa-al.gov.
The ERS Board of Control consists of 13 trustees as follows:
1) The Governor, ex officio.
2) The State Treasurer, ex officio.
3) The State Personnel Director, ex officio.
4) The State Director of Finance, ex officio.
5) Three vested members of ERS appointed by the Governor for a term of four years, no two of
whom are from the same department of state government nor from any department of which
an ex officio trustee is the head.
6) Six members of ERS who are elected by members from the same category of ERS for a term
of four years as follows:
a. Two retired members with one from the ranks of retired state employees and one from
the ranks of retired employees of a city, county, or a public agency each of whom is an
active beneficiary of ERS.
b. Two vested active state employees.
c. Two vested active employees of an employer participating in ERS pursuant to § 36-
27-6.
- 49 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 10 PENSION PLAN (CONTINUED)
Benefits Provided
State law establishes retirement benefits as well as death and disability benefits and any ad hoc increase
in postretirement benefits for the ERS. Benefits for ERS members vest after 10 years of creditable
service. State employees who retire after age 60 (52 for State Police) with 10 years or more of creditable
service or with 25 years of service (regardless of age) are entitled to an annual retirement benefit, payable
monthly for life. Local employees who retire after age 60 with 10 years or more of creditable service or
with 25 or 30 years of service (regardless of age), depending on the particular entity’s election, are
entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement
benefits are based on a guaranteed minimum or a formula method, with the member receiving payment
under the method that yields the highest monthly benefit. Under the formula method, members of the
ERS (except State Police) are allowed 2.0125% of their average final compensation (highest 3 of the last
10 years) for each year of service. State Police are allowed 2.875% for each year of State Police service
in computing the formula method.
Act 377 of the Legislature of 2012 established a new tier of benefits (Tier 2) for members hired on or
after January 1, 2013. Tier 2 ERS members are eligible for retirement after age 62 (56 for State Police)
with 10 years or more of creditable service and are entitled to an annual retirement benefit, payable
monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or a
formula method, with the member receiving payment under the method that yields the highest monthly
benefit. Under the formula method, Tier 2 members of the ERS (except State Police) are allowed 1.65%
of their average final compensation (highest 5 of the last 10 years) for each year of service. State Police
are allowed 2.375% for each year of state police service in computing the formula method.
Members are eligible for disability retirement if they have 10 years of credible service, are currently in-
service, and determined by the RSA Medical Board to be permanently incapacitated from further
performance of duty. Preretirement death benefits equal to the annual earnable compensation of the
member as reported to the Plan for the preceding year ending September 30 are paid to the beneficiary.
The ERS serves approximately 909 local participating employers. The ERS membership includes
approximately 90,999 participants. As of September 30, 2018, membership consisted of:
ERS City Library
Retirements and beneficiaries currently receiving benefits 24,818 102 4
Terminated employees entitled to but not yet receiving benefits 1,426 8 -
Terminated employees not entitled to a benefit 7,854 23 5
Active Members 56,760 294 17
Post-DROP participants who are still in active service 141 - -
Totals 90,999 427 26
- 50 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 10 PENSION PLAN (CONTINUED)
Contributions
Covered members of the ERS contributed 5% of earnable compensation to the ERS as required by statute
until September 30, 2011. From October 1, 2011, to September 30, 2012, covered members of the ERS
were required by statute to contribute 7.25% of earnable compensation. Effective October 1, 2012,
covered members of the ERS are required by statute to contribute 7.50% of earnable compensation.
Certified law enforcement, correctional officers, and firefighters of the ERS contributed 6% of earnable
compensation as required by statute until September 30, 2011. From October 1, 2011, to September 30,
2012, certified law enforcement, correctional officers, and firefighters of the ERS were required by
statute to contribute 8.25% of earnable compensation. Effective October 1, 2012, certified law
enforcement, correctional officers, and firefighters of the ERS are required by statute to contribute 8.50%
of earnable compensation. State Police of the ERS contribute 10% of earnable compensation. ERS local
participating employers are not required by statute to increase contribution rates for their members.
Tier 2 covered members of the ERS contribute 6% of earnable compensation to the ERS as required by
statute. Tier 2 certified law enforcement, correctional officers, and firefighters of the ERS are required by
statute to contribute 7% of earnable compensation. Tier 2 State Police members of the ERS contribute
10% of earnable compensation. These contribution rates are the same for Tier 2 covered members of
ERS local participating employers.
The ERS establishes rates based upon an actuarially determined rate recommended by an independent
actuary. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits
earned by employees during the year with additional amounts to finance any unfunded accrued liability,
the preretirement death benefit, and administrative expenses of the Plan. For the year ended September
30, 2019, the City’s active employee contribution rate was 8.00% of covered employee payroll. The
Fairhope Public Library’s active employee contribution rate was 7.00% of covered employee payroll.
The City’s contractually required contribution rate for the year ended September 30, 2019, was 8.85% of
pensionable pay for Tier 1 employees, and 6.41% of pensionable pay for Tier 2 employees. The Fairhope
Public Library’s contractually required contribution rate for the year ended September 30, 2019, was
9.57% of pensionable pay for Tier 1 employees, and 6.37% of pensionable pay for Tier 2 employees.
These required contribution rates are based upon the actuarial valuation as of September 30, 2016, a
percent of annual pensionable payroll, and actuarially determined as an amount that, when combined
with member contributions, is expected to finance the costs of benefits earned by members during the
year, with an additional amount to finance any unfunded accrued liability. Total employer contributions
to the pension plan from the City were $1,214,082 and $33,677 from the Fairhope Public Library for the
year ended September 30, 2019.
- 51 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 10 PENSION PLAN (CONTINUED)
Contributions (Continued)
The City’s and Fairhope Public Library’s net pension liabilities were measured as of September 30,
2018, and the total pension liability used to calculate the net pension liability was determined by an
actuarial valuation as of September 30, 2017 rolled forward to September 30, 2018 using standard roll-
forward techniques as shown in the following table:
City of Fairhope
Expected Actual
(a) Total pension liability for September 30, 2017 45,042,187$ 44,012,890$
(b) Entry age normal cost for the period
October 1, 2017 to September 30, 2018 1,072,514 1,072,514
(c) Transfer among employers - (113,767)
(d) Actual benefit payments and refunds for
October 1, 2017 to September 30, 2018 (2,502,104) (2,502,104)
(e) Total Pension Liability as of September 20, 2018
[(a) x 1.0775] + (b) + (c ) - [(d) x (1.03875)] 47,006,410$ 45,782,576$
(f) Difference between expected and actual (1,223,834)$
(g) Less liability transferred for immediate recognition (113,767)
(h) Experience (gain)/loss (1,110,067)$
- 52 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 10 PENSION PLAN (CONTINUED)
Contributions (Continued)
Fairhope Public Library
Expected Actual
(a) Total pension liability for September 30, 2017 1,302,959$ 1,294,600$
(b) Entry age normal cost for the period
October 1, 2017 to September 30, 2018 28,941 28,941
(c) Actual benefit payments and refunds for
October 1, 2017 to September 30, 2018 (56,340) (56,340)
(d) Total pension liability as of September 30, 2018
[(a) x 1.0775] + (b) + (c ) - [(d) x (1.03875)] 1,374,356$ 1,365,349$
(e) Difference between expected and actual
experience (gain)/loss (9,007)$
Actuarial Assumptions
The total pension liability as of September 30, 2018, was determined based on the annual actuarial
funding valuation report prepared as of September 30, 2017. The key actuarial assumptions are
summarized below:
Inflation 2.75%
Salary increases 3.25% – 5.00%
Investment rate of return * 7.70%
* Net of pension plan investment expense
- 53 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 10 PENSION PLAN (CONTINUED)
Actuarial Assumptions (Continued)
Mortality rates were based on the sex distinct RP-2000 Blue Collar Mortality Table Projected with
Scale BB to 2020 with an adjustment of 125% at all ages for males and 120% for females at ages on
and after age 78. The rates of mortality for the period after disability retirement are according to the
sex distinct RP-2000 Disabled Retiree Mortality Table Projected with Scale BB to 2020 with an
adjustment of 130% at all ages for females.
The actuarial assumptions used in the actuarial valuation as of September 30, 2017, were based on the
results of an investigation of the economic and demographic experience for the ERS based upon
participant data as of September 30, 2015. The Board of Control accepted and approved these changes
in September 2016, which became effective at the beginning of fiscal year 2016.
The long-term expected rate of return on pension plan investments was determined using a log-normal
distribution analysis in which best-estimate ranges of expected future real rates of return (expected
returns, net of pension plan investment expense and inflation) are developed for each major asset class.
These ranges are combined to produce the long-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. The
target asset allocation and best estimates of geometric real rates of return for each major asset class are
as follows:
Long-term
Target Expected Rate
Allocation of Return *
Fixed Income 17.0% 4.4%
U.S. Large Stocks 32.0% 8.0%
U.S. Mid Stocks 9.0% 10.0%
U.S. Small Stocks 4.0% 11.0%
International Developed Market Stocks 12.0% 9.5%
International Emerging Market Stocks 3.0% 11.0%
Cash Equivalents 10.0% 10.1%
Real Estate 10.0% 7.5%
Cash 3.0% 1.5%
100.0%
*Includes assumed rate of inflation of 2.50%
- 54 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 10 PENSION PLAN (CONTINUED)
Discount Rate
The discount rate used to measure the total pension liability was the long-term rate of return, 7.70%. The
projection of cash flows used to determine the discount rate assumed that plan member contributions
will be made at the current contribution rate and that the employer contributions will be made in
accordance with the funding policy adopted by the RSA Board of Control. Based on those assumptions,
components of the pension plan’s fiduciary net position were projected to be available to make all
projected future benefit payments of current plan members. 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
City of Fairhope
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
Balances at September 30, 2017 45,042,187$ 34,356,530$ 10,685,657$
Changes for the year:
Service cost 1,072,514 - 1,072,514
Interest 3,393,813 - 3,393,813
Changes in assumptions 251,496 - 251,496
Differences between expected
and actual experience (1,109,067) - (1,109,067)
Contributions – employer - 1,107,892 (1,107,892)
Contributions – employee - 796,436 (796,436)
Net investment income - 3,146,677 (3,146,677)
Benefit payments, including refunds
of employee contributions (2,502,104) (2,502,104) -
Administrative expense
Transfers among employers (113,767) (113,767) -
Net Changes 992,885 2,435,134 (1,442,249)
Balances at September 30, 2018 46,035,072$ 36,791,664$ 9,243,408$
- 55 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 10 PENSION PLAN (CONTINUED)
Changes in Net Pension Liability (Continued)
Fairhope Public Library
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
Balances at September 30, 2017 1,302,959$ 890,742$ 412,217$
Changes for the year:
Service cost 28,941 - 28,941
Interest 98,796 - 98,796
Changes in assumptions 5,140 - 5,140
Differences between expected
and actual experience (9,007) - (9,007)
Contributions – employer - 33,039 (33,039)
Contributions – employee - 22,728 (22,728)
Net investment income - 82,409 (82,409)
Benefit payments, including refunds
of employee contributions (56,340) (56,340) -
Administrative expense
Transfers among employers - - -
Net Changes 67,530 81,836 (14,306)
Balances at September 30, 2018 1,370,489$ 972,578$ 397,911$
Sensitivity of the net pension liability to changes in the discount rate – The following table presents the
Board’s net pension liability calculated using the discount rate of 7.70%, as well as what the City’s
proportionate share of the net pension liability would be if it were calculated using a discount rate that is
1% lower (6.70%) or 1% higher (8.70%) than the current rate:
1% Decrease Current Rate 1% Increase
(6.70%) (7.70%) (8.70%)
Net pension liability, City 14,792,981$ 9,243,408$ 4,561,172$
Net pension liability, Fairhope Public Library 509,378$ 397,911$ 301,450$
- 56 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 10 PENSION PLAN (CONTINUED)
Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the separately issued
RSA Comprehensive Annual Report for the fiscal year ended September 30, 2018. The supporting
actuarial information is included in the GASB Statement No. 68 Report for the RSA prepared as of
September 30, 2018. The auditor’s report dated August 17, 2019 on the Schedule of Changes in
Fiduciary Net Position by Employer and accompanying notes is also available. The additional financial
and actuarial information is available at www.rsa-al.gov.
Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related
to Pensions
For the year ended September 30, 2019, the City recognized pension expense of $707,513 while the
Fairhope Public Library recognized pension expense of $39,650. The fund in which the related payroll
costs are expended will be used to liquidate the net pension liability. At September 30, 2019, the City and
Fairhope Public Library reported deferred outflows of resources and deferred inflows of resources,
respectively, related to pensions of the following sources:
City of Fairhope
Deferred Deferred
Outflows of Inflows of
Resources Resources
Governmental Activities:
Differences between expected and actual experience 26,860$ 955,955$
Changes of assumption 794,415 -
Net difference between projected and actual earnings
on plan investments - 954,709
Employer contributions subsequent to measurement date 944,827 -
Governmental activities pension related items 1,766,102 1,910,664
Business-type Activities:
Differences between expected and actual experience 6,677 237,647
Changes of assumption 197,488 -
Net difference between projected and actual earnings
on plan investments - 248,745
Employer contributions subsequent to measurement date 269,255 -
Business-type activities pension related items 473,420 486,392
2,239,522$ 2,397,056$
- 57 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 10 PENSION PLAN (CONTINUED)
Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related
to Pensions (Continued)
Amounts reported as deferred outflows of resources and deferred inflows of resources to pensions will be
recognized as a decrease in pension expense as follows:
Year Ending
September 30,
2020 (119,661)$
2021 (507,487)
2022 (387,185)
2023 (84,572)
2024 (146,027)
Thereafter (126,684)
(1,371,616)$
Fairhope Public Library
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual experience 3,594$ 29,729$
Changes of assumption 74,925 -
Net difference between projected and actual earnings
on plan investments - 30,790
Employer contributions subsequent to measurement date 33,676 -
Total 112,195$ 60,519$
- 58 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 10 PENSION PLAN (CONTINUED)
Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related
to Pensions (Continued)
Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions
will be recognized as an increase (decrease) in pension expense as follows:
Year Ending
September 30,
2020 10,208$
2021 1,008
2022 4,107
2023 3,374
2024 (634)
Thereafter (63)
18,000$
NOTE 11 COMMITMENTS
The City has various contractual commitments outstanding at year end. The commitments under these
contracts totaled $10,485,759. The commitments funded from governmental activities will be
$3,269,876 and from business-type activities will be $7,215,883.
NOTE 12 DEFERRED COMPENSATION PLAN
The City offers its employees a deferred compensation plan created in accordance with Internal
Revenue Code Section 457. The plan permits employees to defer a portion of their salary until future
years. The plan was established by and is administered by the Retirement Systems of Alabama. Any
plan changes are at the discretion of the administrator. The deferred compensation is not available to
employees until termination, retirement, death, or unforeseeable emergency. The City makes no
contributions to the plan.
All amounts of compensation deferred under the plan, all property and rights purchased with those
amounts, and all income attributable to those amounts, property, or rights are (until paid or made
available to the employee or other beneficiary) solely the property and rights of the individuals who
participate in the deferred compensation plan and are not subject to the claims of the City's general
creditors.
- 59 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 13 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS
GASB Statement No. 75, Accounting and Financial Reporting by Employers for Post-Employment
Benefits Other Than Pensions, requires governments to account for other post-employment benefits
(OPEB) on an accrual basis, rather than on a pay-as-you-go basis. The effect is the recognition of an
actuarially determined expense when a future retiree earns their post-employment benefits, rather than
when they use their post-employment benefit. The total OPEB liability is recorded at the fund level for
proprietary activities and the allocated amount for governmental activities is presented at the
government-wide level. The annual OPEB cost is included in the line item of salaries for proprietary
fund statements and is allocated by function for governmental activities on the government-wide
financial statements.
General Information About the OPEB Plan
Plan Description. The Plan is a single-employer defined benefit healthcare plan administered and
governed solely by the City. The City has the authority to establish and amend benefit provisions. No
assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75 and a
separate report was not issued for the plan.
Benefits Provided. The City provides a comprehensive medical plan to eligible retirees and their spouses
through the City’s group health insurance plan (the Plan), which covers both active and retired members.
Employees covered by benefit terms. At September 30, 2019, the following employees were covered by
the benefit terms:
Inactive employees or beneficiaries currently receiving benefits 29
Active Members 118
Totals 147
Total OPEB Liability
The City’s total OPEB liability of $8,398,617 was measured as of September 30, 2018, and was
determined by an actuarial valuation as of September 30, 2017.
- 60 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 13 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
Total OPEB Liability (Continued)
Actuarial assumptions and other inputs. The total OPEB liability in the September 30, 2018 actuarial
valuation was determined using the following actuarial assumptions and other inputs, applied to all periods
included in the measurement, unless otherwise specified:
Inflation 2.75%
Real wage growth 0.25%
Wage inflation 3.00%
Salary increases 3.25% – 5.00%
Municipal bond index rate
Prior measurement date 3.57%
Measurement date 4.18%
Healthcare cost trend rates
Pre-Medicare 7.25% for 2018 decreasing to an ultimate
rate of 4.75% by 2028
The discount rate was based on the September average of the Bond Buyer General Obligation 20 year
Municipal Bond Index published weekly by The Bond Buyer. The discount rate used to calculate the
OPEB expense for the September 30, 2018 reporting date was 3.57%. The discount rate used to compute
the total OPEB liability for the reporting date of September 30, 2019 was 4.18%.
Mortality rates were based on the sex distinct RP-2000 Employee Mortality Table projected with Scale
BB to 2020 with an adjustment factor of 70% for males and 50% for females. Post-retirement mortality
rates on the sex distinct RP-2000 Blue Collar Mortality Table projected with Scale BB to 2020. An
adjustment of 125% at all ages for males and 120% for females beginning at age 78 was made for service
retirements and beneficiaries. An adjustment of 130% for females at all ages was made for disability
retirements.
The demographic actuarial assumptions for retirement, disability incidence, withdrawal, and salary
increases used in the September 30, 2018 valuation were based on the results of an actuarial experience
study for the period October 1, 2010 through September 30, 2015.
The remaining actuarial assumptions (e.g., initial per capita costs, health care cost trends, rate of plan
participation, rates of plan election, etc.) used in the September 30, 2018 valuation were based on a review
of recent plan experience done concurrently with the September 30, 2018 valuation.
- 61 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 13 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
Changes in Total OPEB Liability
Total OPEB
Liability
Balance at September 30, 2018 12,556,829$
Changes for the year:
Service cost 401,209
Interest 442,731
Differences between expected
and actual experience (4,733,827)
Changes of assumptions or other inputs 45,224
Benefit payments (313,549)
Net Changes (4,158,212)
Balance at September 30, 2019 8,398,617$
Changes in assumptions and other inputs reflect a change in the discount rate from 3.57% used in the
September 30, 2018 valuation to 4.18% used in the September 30, 2019 valuation.
Sensitivity of the total OPEB liability to changes in the discount rate. The following presents the total
OPEB liability of the City, 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 (3.18%) or 1-percentage-point higher (5.18%) than
the current discount rate:
1% Decrease Current Rate 1% Increase
(3.18%) (4.18%) (5.18%)
Net OPEB liability 9,104,346$ 8,398,617$ 7,751,275$
- 62 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 13 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
Changes in Total OPEB Liability (Continued)
Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates. The following presents
the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were
calculated using healthcare cost trend rates that are 1-percentage-point lower (6.25%) or 1-percentage-
point higher (8.25%) than the current healthcare cost trend rates:
1% Decrease Current Rate 1% Increase
(6.25%) (7.25%) (8.25%)
Net OPEB liability 7,611,687$ 8,398,617$ 9,302,119$
OPEB Expense and Deferred Outflows of Resources and Deferred
Inflows of Resources Related to OPEB
For the year ended September 30, 2019, the City recognized OPEB expense of $129,387. The fund in
which the related payroll costs are expended will be used to liquidate the total OPEB liability. At
September 30, 2019, the City reported deferred outflows of resources and deferred inflows of resources
related to OPEB from the following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Governmental Activities:
Differences between expected and actual experience 1,535$ 3,086,935$
Changes of assumption 29,490 438,633
Employer contributions subsequent to measurement date 410,248 -
Governmental activities OPEB related items 441,273 3,525,568
Business-type Activities:
Differences between expected and actual experience 381 766,999
Changes of assumption 7,328 108,985
Employer contributions subsequent to measurement date 101,933 -
Business-type activities OPEB related items 109,642 875,984
550,915$ 4,401,552$
- 63 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 13 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
OPEB Expense and Deferred Outflows of Resources and Deferred
Inflows of Resources Related to OPEB (Continued)
Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB
will be recognized in OPEB expense as follows:
Year Ending
September 30,
2019 (976,028)$
2020 (976,028)
2021 (976,028)
2022 (976,028)
2023 (435,709)
Thereafter (22,997)
(4,362,818)$
NOTE 14 OPERATING LEASES
The City holds various leases with entities for use of City property. Most of these leases are monthly and
insignificant. In addition, the City rents certain facilities to groups for events and activities on a per use
basis.
NOTE 15 LEASE EXPENSE
The City rents equipment, primarily, on monthly arrangements. The leases are not significant to the
operations of the City.
NOTE 16 SERVICE CONCESSION ARRANGEMENT
The Airport Authority, entered into an agreement with the Baldwin County Board of Education
(BCBOE), under which the BCBOE will operate and collect tuition from aviation training facility at the
airport for the next 40 years with an automatic extension of 5 years unless written notice is received six
months prior to the expiration of the initial term. BCBOE paid the City $2,700,000 upon execution of the
arrangement. The initial payment was used in the construction of the aviation training facility. The initial
payment was considered a deferred inflow of resources and rental revenue will be recognized over the life
of the initial term of the lease. Upon receipt, the City reported a cash balance in the construction fund of
$2,700,000 with a corresponding balance of $2,700,000 as a deferred inflow of resources pursuant to the
service concession arrangement. The balance of the deferred inflow of resources is $2,295,000 at
September 30, 2019.
- 64 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 16 SERVICE CONCESSION ARRANGEMENT (CONTINUED)
In fiscal year 2015, the Airport Authority, entered into an agreement with a private company, under which
the private company leased space at the airport for the next 25 years. The private company’s lease
agreement with the Airport Authority requires monthly rents in the amount of $12,750 to the Airport
Authority and also required them to invest at least $850,000 in capital improvements on the premises
during the first year of the lease. The total value of the capital improvements, $1,091,254 was considered
a deferred inflow of resources and rent revenue will be recognized over the life of the term of the lease.
The Airport Authority reports the capital improvements as a capital asset and it is depreciated in
accordance with the Airport Authority's depreciation policy. Upon completion in fiscal year 2015, the
Airport Authority reported a capital improvement in the amount of $1,091,254 with a corresponding
balance of $1,091,254 as a deferred inflow of resources pursuant to the service concession arrangement.
The balance of the deferred inflow of resources is $873,003 at September 30, 2019.
In fiscal year 2016, the Airport Authority, entered into an agreement with a private company, under which
the private company leased space at the airport for the next 30 years. The private company’s lease
agreement with the Airport Authority requires monthly rents in the amount of $6,150 to the Airport
Authority and also required them to invest in capital improvements on the premises during the first 15
months of the lease. The total value of the capital improvements, $876,000 was considered a deferred
inflow of resources and rent revenue will be recognized over the life of the term of the lease. The Airport
Authority reports the capital improvements as a capital asset and it is depreciated in accordance with the
Airport Authority's depreciation policy. Upon completion in fiscal year 2018, the Airport Authority
reported a capital improvement in the amount of $876,000 with a corresponding balance of $876,000 as a
deferred inflow of resources pursuant to the service concession arrangement. The balance of the deferred
inflow of resources is $813,429 at September 30, 2019.
In fiscal year 2016, the Airport Authority, entered into an agreement with a private company, under which
the private company leased space at the airport for the next 30 years. The private company’s lease
agreement with the Airport Authority requires monthly rents in the amount of $5,412 to the Airport
Authority and also required them to invest in capital improvements on the premises during the first 18
months of the lease. The total value of the capital improvements, $1,573,000 was considered a deferred
inflow of resources and rent revenue will be recognized over the life of the term of the lease. The Airport
Authority reports the capital improvements as a capital asset and it is depreciated in accordance with the
Airport Authority's depreciation policy. Upon completion in fiscal year 2018, the Airport Authority
reported a capital improvement in the amount of $1,573,000 with a corresponding balance of $1,573,000
as a deferred inflow of resources pursuant to the service concession arrangement. The balance of the
deferred inflow of resources is $1,460,643 at September 30, 2019.
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CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 17 FAIR VALUE DISCLOSURES
Investments are measured at fair value on a recurring basis. Recurring fair value measurements are those
that GASB Statements require or permit in the statement of net position at the end of each reporting
period. Fair value measurements are categorized based on the valuation inputs used to measure an asset’s
fair value.
Level 1 inputs are quoted prices in active markets for identical assets.
Level 2 inputs are significant other observable inputs.
Level 3 inputs are significant unobservable inputs.
Investments’ fair value measurements are as follows at September 30, 2019:
Level 1 Level 2 Level 3 Total
Treasury portfolio 2,730,446$ -$ -$ 2,730,446$
AMIC Insurance - - 36,090 36,090
Total 2,730,446$ -$ 36,090$ 2,766,536$
Debt securities categorized as Level 1 are based on prices quoted in active markets for those securities.
Debt securities categorized as Level 2 are valued using a matrix pricing technique that values securities
based on their relationship to benchmark quoted prices. The investment in AMIC is quoted as a Level 3
input. There is no active market for this investment but an initial investment was required to participate in
AMIC. Fair value of the investment approximates cost.
NOTE 18 ECONOMIC DEVELOPMENT INCENTIVE OBLIGATIONS – TAX ABATEMENTS
The City, in conjunction with the Industrial Development Board of the City of Fairhope and Baldwin
County, enters into economic development incentive agreements with entities that propose to locate
businesses within the City, or expand businesses within the City, which are expected to provide stimulus
to the City's economy. These agreements provide for full or partial abatement of sales, use and/or property
taxes. Property taxes are abated through reductions of assessed values. Sales and use taxes are abated
through exemptions granted on purchases for specified construction or equipment-purchase purposes. The
agreements have limited terms, typically ad-valorem taxes are abated for ten years.
The total property tax abated for the year ended September 30, 2019 totaled $8,431.
The City does not collect property taxes. The Revenue Commissioner of Baldwin County is responsible
for such collection.
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CITY OF FAIRHOPE, ALABAMA
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(continued)
NOTE 19 EFFECT OF NEW PRONOUNCEMENTS
Management has not currently determined what, if any, impact implementation of the following
statements may have on the financial statements of the City.
GASB 84, Fiduciary Activities. This Statement establishes criteria for identifying fiduciary activities of all
state and local governments and clarifies whether and how business-type activities should report their
fiduciary activities. Requirements for this Statement are effective for financial statements whose fiscal
year begins after December 15, 2018.
GASB 87, Leases. This Statement increases the usefulness of governments' financial statements by
requiring recognition of certain lease assets and liabilities for leases that previously were classified as
operating leases and recognized as inflows of resources or outflows of resources based on the payment
provisions of the contract. Requirements for this Statement are effective for financial statements whose
fiscal year begins after December 15, 2019.
GASB 89, Accounting for Interest Cost Incurred before the End of a Construction Period. This
Statement establishes accounting requirements for interest cost incurred before the end of a construction
period. Such interest cost includes all interest that previously was accounted for in accordance with the
requirements of paragraphs 5-22 of Statement No. 62, Codification of Accounting and Financial
Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which
are superseded by this Statement. Requirements for this Statement will take effect for financial
statements starting with the fiscal year that ends December 31, 2020.
NOTE 20 SUBSEQUENT EVENTS
The outbreak of the novel coronavirus has adversely impacted global commercial activity and contributed
to significant declines and volatility in financial markets. The coronavirus pandemic and government
responses are creating disruption in global supply chains and adversely impacting many industries. The
outbreak could have a continued material adverse impact on economic and market conditions and trigger a
period of global economic slowdown. The rapid development and fluidity of this situation precludes any
prediction as to the ultimate material adverse impact of the novel coronavirus. Nevertheless, the novel
coronavirus presents material uncertainty and risk with respect to the City, its performance, and its
financial results.
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REQUIRED SUPPLEMENTARY INFORMATION
OTHER THAN MANAGEMENT’S DISCUSSION AND ANALYSIS
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CITY OF FAIRHOPE, ALABAMA
SCHEDULES OF EMPLOYER CONTRIBUTIONS
LAST 10 FISCAL YEARS ENDING SEPTEMBER 30*
See independent auditors’ report.
City of Fairhope
2019 2018 2017 2016 2015
Actuarially determined contribution 1,214,082$ 1,156,988$ 1,128,689$ 1,161,190$ 1,033,161$
Contributions in relation to the actuarially
determined contribution 1,214,082 1,156,988 1,128,689 1,161,190 1,033,161
Contribution deficiency (excess) -$ -$ -$ -$ -$
Covered payroll 15,117,600$ 14,145,534$ 14,442,516$ 12,686,870$ 11,740,415$
Contributions as a percentage of covered
payroll 8% 8% 8% 9% 9%
Notes to Schedule
Actuarially determined contribution rates are calculated as of September 30, three years prior to the end of the fiscal
year in which contributions are reported. Contributions for fiscal year 2019 were based on the September 30, 2016
actuarial valuation.
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry Age
Amortization method Level percent closed
Remaining amortization period 25.7 years
Asset valuation method Five year smoothed market
Inflation 2.875%
Salary increases 3.375% – 5.125%
Investment rate of return 7.875%, net of pension
plan investment
expense, including
inflation
*This schedule is presented to illustrate the requirement to show information for 10 years. However, currently,
information is only available for 2019 through 2015.
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CITY OF FAIRHOPE, ALABAMA
SCHEDULES OF EMPLOYER CONTRIBUTIONS
LAST 10 FISCAL YEARS ENDING SEPTEMBER 30*
See independent auditors’ report.
Fairhope Public Library
2019 2018 2017 2016 2015
Actuarially determined contribution 33,677$ 34,636$ 41,630$ 39,481$ 43,472$
Contributions in relation to the actuarially
determined contribution 33,677 34,636 41,630 39,481 43,472
Contribution deficiency (excess) -$ -$ -$ -$ -$
Covered payroll 501,964$ 489,687$ 486,684$ 426,252$ 397,846$
Contributions as a percentage of covered
payroll 7% 7% 9% 9% 11%
Notes to Schedule
Actuarially determined contribution rates are calculated as of September 30, three years prior to the end of the fiscal
year in which contributions are reported. Contributions for fiscal year 2019 were based on the September 30, 2016
actuarial valuation.
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry Age
Amortization method Level percent closed
Remaining amortization period 29.2 years
Asset valuation method Five year smoothed market
Inflation 2.875%
Salary increases 3.375% – 5.125%
Investment rate of return 7.875%, net of pension
plan investment
expense, including
inflation
*This schedule is presented to illustrate the requirement to show information for 10 years. However, currently,
information is only available for 2019 through 2015.
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CITY OF FAIRHOPE, ALABAMA
SCHEDULES OF CHANGES IN NET PENSION LIABILITY
LAST 10 FISCAL YEARS ENDING SEPTEMBER 30*
See independent auditors’ report.
2018 2017 2016 2015 2014
Total pension liability
Service cost 1,072,514$ 1,075,003$ 997,552$ 975,740$ 944,066$
Interest 3,393,813 3,286,149 3,131,860 2,977,603 2,852,227
Differences between expected and actual
experience (1,109,067) (296,197) (52,317) 83,217 -
Changes in assumptions 251,496 - 1,344,385 - -
Benefit payments, including refunds of
employee contributions (2,502,104) (2,213,531) (1,969,227) (2,247,432) (2,210,748)
Transfer among employers (113,767) (317,929) (76,441) - -
Net change in total pension liability 992,885 1,533,495 3,375,812 1,789,128 1,585,545
Total pension liability – beginning 45,042,187 43,508,692 40,132,880 38,343,752 36,758,207
Total pension liability – ending (a)46,035,072$ 45,042,187$ 43,508,692$ 40,132,880$ 38,343,752$
Plan fiduciary net position
Contributions – employer 1,107,892$ 1,082,206$ 1,163,477$ 1,035,070$ 1,011,234$
Contributions – member 796,436 679,081 680,391 621,817 599,215
Net investment income 3,146,677 3,943,420 2,891,544 337,639 3,115,563
Benefit payments, including refunds of
employee contributions (2,502,104) (2,213,531) (1,969,227) (2,247,432) (2,210,748)
Transfers among employers (113,767) (317,929) (76,441) (16,923) (36,268)
Net change in plan fiduciary net position 2,435,134 3,173,247 2,689,744 (269,829) 2,478,996
Plan net position – beginning 34,356,530 31,183,283 28,493,539 28,763,368 26,284,372
Plan net position – ending (b)36,791,664$ 34,356,530$ 31,183,283$ 28,493,539$ 28,763,368$
Net pension liability (asset) – ending (a)-(b)9,243,408$ 10,685,657$ 12,325,409$ 11,639,341$ 9,580,384$
Plan fiduciary net position as a percentage
of the total pension liability 79.92% 76.28% 71.67% 71.00% 75.01%
Covered payroll 13,360,562$ 12,944,171$ 13,010,034$ 11,659,254$ 11,394,370$
Net pension liability (asset) as a percentage of
covered payroll 69% 83% 95% 100% 84%
City of Fairhope
*This schedule is presented to illustrate the requirement to show information for 10 years. However, currently,
information is only available for 2018 through 2014.
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CITY OF FAIRHOPE, ALABAMA
SCHEDULES OF CHANGES IN NET PENSION LIABILITY
LAST 10 FISCAL YEARS ENDING SEPTEMBER 30*
See independent auditors’ report.
2018 2017 2016 2015 2014
Total pension liability
Service cost 28,941$ 31,457$ 37,134$ 37,305$ 38,648$
Interest 98,796 93,059 83,555 82,203 79,859
Differences between expected and actual
experience (9,007) 5,392 (40,331) (8,514) -
Changes in assumptions 5,140 - 132,947 - -
Benefit payments, including refunds of
employee contributions (56,340) (55,417) (58,555) (129,622) (48,791)
Net change in total pension liability 67,530 74,491 154,750 (18,628) 69,716
Total pension liability – beginning 1,302,959 1,228,468 1,073,718 1,092,346 1,022,630
Total pension liability – ending (a)1,370,489$ 1,302,959$ 1,228,468$ 1,073,718$ 1,092,346$
Plan fiduciary net position
Contributions – employer 33,039$ 40,040$ 39,583$ 43,472$ 43,802$
Contributions – member 22,728 22,527 21,976 20,166 19,155
Net investment income 82,409 100,700 72,223 8,684 81,118
Benefit payments, including refunds of
employee contributions (56,340) (55,417) (58,555) (129,622) (48,791)
Net change in plan fiduciary net position 81,836 107,850 75,227 (57,300) 95,284
Plan net position – beginning 890,742 782,892 707,665 764,965 669,681
Plan net position – ending (b)972,578$ 890,742$ 782,892$ 707,665$ 764,965$
Net pension liability (asset) – ending (a)-(b)397,911$ 412,217$ 445,576$ 366,053$ 327,381$
Plan fiduciary net position as a percentage
of the total pension liability 70.97% 68.36% 63.73% 65.91% 70.03%
Covered payroll 461,619$ 433,005$ 455,696$ 412,627$ 383,102$
Net pension liability (asset) as a percentage of
covered payroll 86% 95% 98% 89% 85.5%
Fairhope Public Library
*This schedule is presented to illustrate the requirement to show information for 10 years. However, currently,
information is only available for 2018 through 2014.
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CITY OF FAIRHOPE, ALABAMA
SCHEDULES OF CHANGES IN TOTAL OPEB LIABILITY
LAST 10 FISCAL YEARS ENDING SEPTEMBER 30*
See independent auditors’ report.
2018 2017
Total OPEB liability
Service cost 401,209$ 441,966$
Interest 442,731 371,696
Differences between expected and actual
experience (4,733,827) 2,650
Changes in assumptions 45,224 (757,435)
Benefit payments (313,549) (373,128)
Net change in total OPEB liability (4,158,212) (314,251)
Total OPEB liability – beginning 12,556,829 12,871,080
Total OPEB liability – ending 8,398,617$ 12,556,829$
Covered payroll 6,190,702$ 8,226,573$
Net OPEB liability as a percentage of
covered payroll 135.67% 152.64%
*This schedule is presented to illustrate the requirement to show information for 10 years. However, currently,
information is only available for 2018 through 2017.
No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75.
The City does not have a special funding situation.
The reported Covered Employee Payroll during the measurement period is the payroll upon which contributions were
based.
There were no changes of benefit terms during 2019.
Changes of assumptions and other inputs reflect a change in the discount rate from 3.57% to 4.18% due to a change in
the municipal bond rate.
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CITY OF FAIRHOPE, ALABAMA
BUDGETARY COMPARISON SCHEDULE – GENERAL FUND
FOR THE YEAR ENDED SEPTEMBER 30, 2019
See independent auditors’ report.
Variance
Actual with Final
Original Final Amounts Budget
REVENUES
Local taxes 16,742,320$ 16,742,320$ 17,002,565$ 260,245$
Licenses and permits 4,855,015 4,855,015 4,570,915 (284,100)
Fines and forfeitures 280,000 280,000 237,812 (42,188)
Intergovernmental 201,650 201,650 546,684 345,034
Interest and rents 473,420 473,420 440,514 (32,906)
Charges for services 4,581,000 4,581,000 4,570,649 (10,351)
Golf course revenue 1,232,500 1,232,500 1,060,650 (171,850)
Recreation Department 498,500 498,500 456,362 (42,138)
Other 569,600 569,600 660,915 91,315
Total revenues 29,434,005 29,434,005 29,547,066 113,061
EXPENDITURES
General government
General 4,158,925 3,960,045 3,580,780 379,265
Planning 587,267 587,267 635,359 (48,092)
Building 797,310 797,310 851,445 (54,135)
Judicial - 198,880 235,466 (36,586)
Public safety
Police 6,361,664 6,439,101 5,919,002 520,099
Fire 706,375 773,875 652,645 121,230
Public works
Sanitation 2,437,861 2,437,861 2,210,417 227,444
Street 3,483,520 3,483,520 3,406,690 76,830
Fleet maintenance 617,114 617,114 579,850 37,264
Construction and facilities maintenance 295,287 295,287 313,431 (18,144)
Cultural and recreational
Economic and community development 982,064 982,064 1,064,480 (82,416)
Adult recreation 363,699 363,699 429,715 (66,016)
Recreation 2,294,769 2,294,769 2,162,423 132,346
Golf 1,684,395 1,684,395 1,498,738 185,657
Marina 699,550 699,550 640,110 59,440
Civic Center 221,504 227,854 277,202 (49,348)
Museum and Welcome Center 169,549 169,549 165,819 3,730
Airport Authority 320,000 320,000 320,000 -
Public Library 818,477 818,477 818,477 -
Other 92,600 92,600 92,600 -
Capital outlay 1,858,763 1,770,066 2,440,484 (670,418)
Total expenditures 28,950,693 29,013,283 28,295,133 718,150
Excess of revenues over (under) expenditures 483,312 420,722 1,251,933 831,211
OTHER FINANCING SOURCES (USES)
Proceeds from capital lease - - 990,929 990,929
Transfers in 2,096,400 3,006,400 1,754,393 (1,252,007)
Transfers out (3,392,007) (3,392,007) (4,462,286) (1,070,279)
Total other financing sources (uses) (1,295,607) (385,607) (1,716,964) (1,331,357)
Net change in fund balances (812,295)$ 35,115$ (465,031) (500,146)$
Fund balances – beginning of year 13,708,124
FUND BALANCES – END OF YEAR 13,243,093$
Budgeted Amounts
- 73 -
CITY OF FAIRHOPE, ALABAMA
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
SEPTEMBER 30, 2019
See independent auditors’ report.
NOTE 1 EXCESS EXPENDITURES
The following are General Fund expenditures in excess of final budget amounts:
Excess Excess Excess
Expenditures Expenditures Expenditures
General Government Fire Department Recreation DepartmentSalaries – Mayor 147$ Health insurance 41,648$ Overtime 4,821$
Overtime – General 11,059 Insurance 4,565 Insurance 5,860 Overtime – Beach 238 Training 996 Professional services 9,609 Required contributions – OPEB 47,768 Professional services 278 Computer expense 6,081
Training 18,257 Computer expense 3,143 General supplies 27,571 Professional services 38,946 Safety wear 560 General maintenance 7,911
Computer expense 5,419 Gasoline and oil 4,215 Postage 6,703 Sanitation Department Costs – Tennis shop sales 4,435 Parking garage maintenance 9,591 Overtime 9,855 Credit card processing fee 5,944
Dues 7,302 Required contributions – OPEB 21,159 Utilities 25,163 Miscellaneous 3 Insurance 20,062 Special projects 2,460 Gasoline and oil 1,717 Computer expense 1,195 Capital outlay 26,021
Recording fees 179 Bad debt19,681 Land/Right of way 58 Gasoline and oil 12,695 Golf DepartmentPublications and newspapers 4,271 Equipment and vehicle repair32,162 Overtime 2,651
Election expense 23,502 Uniforms 440 Health insurance 53,378 Sidewalk brick 220 Capital outlay 843,039 Required contributions – OPEB 12,574 Haven maintenance 5,384 Professional services 958
Fisherman's Wharf maintenance 1,000 Street Department Computer expense 264 City Hall maintenance 10,543 Overtime 34,164 Supplies – Club House 2,818 Utilities 2,051 Health insurance 38,021 Uniforms 698 Capital outlay 89,934 Required contributions – OPEB 35,812 Credit card processing fee 16,285 Professional services 15,210 Supplies – Grill 2,008
Planning Department Computer expense 3,289 Health insurance – Grounds 26,536 Salaries 25,596 Postage 37 Required contributions – OPEB 2,744 Overtime 3,990 General supplies 26,345 Professional services – Grounds 490
Payroll taxes 1,595 Equipment and vehicle repair48,651 General maintenance – Grounds 2,759 Employee retirement expense 1,134 Uniforms 4,395 Insurance 1,042 Materials and landscaping 16,931 Marina
Professional services 7,261 Utilities 3,356 Insurance 2,125 Computer expense 10,879 Capital outlay 132,467 Office supplies 38 Office supplies 3,415 General maintenance 33,895 General supplies 10,052 Fleet Maintenance Department Costs – Ship store sales 2,148 General maintenance 1,341 Required contributions – OPEB 12,574 Credit card processing fee 10,485
Communications 1,743 Professional services 170 Utilities 4,350 Gasoline and oil 497 General maintenance 2,615 Equipment and vehicle repair724 Gasoline and oil 748 Civic Center
Publications and newspapers 3,876 Equipment and vehicle repair 7,564 Overtime 223 Uniforms 417 Payroll taxes 170 Building Department Capital outlay 8,213 Health insurance 39,321
Health insurance 65,890 Professional services 565 Building fees 48,106 Construction and Facilities Computer expense 2,964 Computer expense 4,402 Maintenance Department Office supplies 301
General supplies 2,072 Salaries 24,092 General supplies 15,644 Gasoline and oil 2,725 Overtime 6,292 General maintenance 7,961
Equipment and vehicle repair471 Payroll taxes 1,902 Credit card processing fee 24,107 Employee retirement expense 2,684 Museum and Welcome CenterPrinting 586 Insurance 685 Overtime 1,632
Capital outlay 1,300 General supplies 5,357 Insurance 2,102 Communications 691 Professional services 5,140 Judicial Department Gasoline and oil 3,062 General supplies 5,811
Overtime 3,084 Safety wear 280 General maintenance 2,974 Employee retirement expense 635 Capital outlay 9,749 Insurance 824 Adult Recreation Department
Training 10,438 Overtime 310 TransfersProfessional services 5,380 Health insurance 17,585 Transfers – Debt Service Fund 1,070,279 Computer expense 8,414 Insurance 2,982
General supplies 4,565 General supplies 7,130 Communications 140 Credit card processing fee 868
Dues 9,360 Kitchen supplies 925 Credit card processing fee 147 Special programs 2,611 Capital outlay 72,883 Dance expense 420
Office expense 1,241 Police Department Shuttle Bus expense 902 Overtime 2,615 Utilities 54,271
Required contributions – OPEB 57,989 Capital outlay 5,557 Training 3,371 General supplies 9,864 Economic and Community Development
General maintenance 8,203 Health insurance 12,937 Communications 6,827 Dues 1,177
Gasoline and oil 17,262 Gasoline and oil 224
Equipment and vehicle repair 1,362 Community events 82,562 Jail expense 25,609 Contributions 1,500
DEA Fund purchases 2,664 Advertising and promotions 5,178 Utilities 6,837 Tourism 3,610 Capital outlay 11,533
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OTHER SUPPLEMENTARY INFORMATION
COMBINING FINANCIAL STATEMENTS
NONMAJOR GOVERNMENTAL FUNDS
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CITY OF FAIRHOPE, ALABAMA
COMBINING BALANCE SHEETS
NONMAJOR GOVERNMENTAL FUNDS
SEPTEMBER 30, 2019
See independent auditors’ report.
Total
Special Special Nonmajor
Revenue Fund Revenue Fund Governmental
Impact Fees Gas Tax Debt Service Funds
ASSETS
Cash 3,599,766$ 218,443$ -$ 3,818,209$
Receivables 955 8,649 24,457 34,061
Due from other funds 126,000 - - 126,000
Total assets 3,726,721$ 227,092$ 24,457$ 3,978,270$
LIABILITIES
Accounts payable -$ -$ 25,617$ 25,617$
Total liabilities - - 25,617 25,617
FUND BALANCES
Restricted:
Road maintenance - 227,092 - 227,092
Committed:
Construction and road maintenance 3,726,721 - - 3,726,721
Unassigned - - (1,160) (1,160)
Total fund balances 3,726,721 227,092 (1,160) 3,952,653
Total liabilities and fund balances 3,726,721$ 227,092$ 24,457$ 3,978,270$
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CITY OF FAIRHOPE, ALABAMA
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
FOR THE YEAR ENDED SEPTEMBER 30, 2019
See independent auditors’ report.
Total
Special Special Nonmajor
Revenue Fund Revenue Fund Debt Governmental
Impact Fees Gas Tax Service Funds
REVENUES
Intergovernmental -$ 96,118$ -$ 96,118$
Charges for services 1,282,098 - - 1,282,098
Interest and rents 23,419 - 1,471 24,890
Total revenues 1,305,517 96,118 1,471 1,403,106
EXPENDITURES
Other 42 77,561 - 77,603
Debt service
Principal - - 3,775,470 3,775,470
Interest - - 87,534 87,534
Total expenditures 42 77,561 3,863,004 3,940,607
Excess of revenues over
(under) expenditures 1,305,475 18,557 (3,861,533) (2,537,501)
OTHER FINANCING
SOURCES (USES)
Transfers in - - 3,318,786 3,318,786
Transfers out (366,393) - - (366,393)
Total other financing
sources (uses) (366,393) - 3,318,786 2,952,393
Net change in fund balances 939,082 18,557 (542,747) 414,892
Fund balances – beginning of year 2,787,639 208,535 541,587 3,537,761
FUND BALANCES –
END OF YEAR 3,726,721$ 227,092$ (1,160)$ 3,952,653$
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INDIVIDUAL FUND FINANCIAL STATEMENTS
DISCRETELY PRESENTED COMPONENT UNITS
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CITY OF FAIRHOPE, ALABAMA
FUND BALANCE SHEET
FAIRHOPE PUBLIC LIBRARY BOARD
SEPTEMBER 30, 2019
See independent auditors’ report.
ASSETS
Cash and cash equivalents 564,556$
Receivables, net 68,206
Prepaid items 7,169
Total assets 639,931$
LIABILITIES
Accounts payable and accrued liabilities 16,272$
FUND BALANCES
Nonspendable:
Prepaid items 7,169
Restricted:
Library improvements 303,790
Unassigned 312,700
Total fund balances 623,659
Total liabilities and fund balances 639,931$
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CITY OF FAIRHOPE, ALABAMA
RECONCILIATION OF GOVERNMENTAL FUND BALANCES TO
NET POSITION OF GOVERNMENTAL ACTIVITIES
FAIRHOPE PUBLIC LIBRARY BOARD
SEPTEMBER 30, 2019
See independent auditors’ report.
Fund balances as reported on page 76 623,659$
Net position reported for governmental activities in the statement of net position
are different from fund balances for governmental activities because:
Capital assets used in governmental activities are financial resources and,
therefore, are not reported in fund financial statements. 507,562
Depreciation is provided for the above capital assets in government-wide
reporting, but is not in fund financial statements. (436,629)
Other assets used in governmental activities are not financial resources and,
therefore, are not reported in the governmental funds.
Employment retirement contributions 112,195
Long-term liabilities, including warrants, notes, capital lease obligations
and OPEB obligations are not due and payable in the current period and,
therefore, are not reported in fund financial statements:
Net pension liability (397,911)
Deferred inflows of resources (60,519)
Net position of governmental activities as reported on page 26 348,357$
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CITY OF FAIRHOPE, ALABAMA
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FAIRHOPE PUBLIC LIBRARY BOARD
FOR THE YEAR ENDED SEPTEMBER 30, 2019
See independent auditors’ report.
REVENUES
Fines and lost books 13,985$
Donations, gifts, memorials and bequests 102,586
State aid 26,291
Lease income 1,500
Payments from City of Fairhope 818,477
Miscellaneous 12,400
Total revenues 975,239
EXPENDITURES
Salaries 505,203
Payroll taxes 37,891
Insurance 11,182
Employees’ retirement 33,677
Books, periodicals, audio visual 114,602
Supplies 15,212
Janitorial service 21,198
Professional fees 8,058
Telecommunications 773
Capital outlay 43,640
Maintenance 39,413
Miscellaneous 58,001
Total expenditures 888,850
Net change in fund balances 86,389
Fund balances – beginning of year 537,270
FUND BALANCES – END OF YEAR 623,659$
- 79 -
CITY OF FAIRHOPE, ALABAMA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO
THE STATEMENT OF ACTIVITIES
FAIRHOPE PUBLIC LIBRARY BOARD
FOR THE YEAR ENDED SEPTEMBER 30, 2019
See independent auditors’ report.
Net change in fund balances – total governmental funds, page 77 86,389$
Amounts reported for governmental activities in the statement of activities
are different from the statements of revenues, expenditures and changes in
fund balances – governmental funds because:
Governmental funds report capital outlays as expenditures while governmental
activities report depreciation expense to allocate those expenditures over
the life of the assets.
Depreciation expense for the year (27,969)
Some expenses reported in the statement of activities do not require the use
of current resources and, therefore, are not reported as expenditures in
governmental funds.
Change in net pension liability and deferred inflows of resources (7,570)
Change in net position of governmental activities, page 27 50,850$
- 80 -
CITY OF FAIRHOPE, ALABAMA
STATEMENT OF NET POSITION
FAIRHOPE AIRPORT AUTHORITY
SEPTEMBER 30, 2019
See independent auditors’ report.
ASSETS
Cash and cash equivalents 288,373$
Receivables, net 361,986
Prepaid items 15,754
Capital assets not being depreciated:
Land 10,674,228
Construction in progress 28,534
Capital assets net of accumulated depreciation:
Buildings and improvements 7,227,280
Runways 17,062,579
Total assets 35,658,734$
LIABILITIES
Accounts payable and accrued liabilities 437,285$
Long-term liabilities:
Due within one year 200,000
Due in more than one year 6,695,629
Total liabilities 7,332,914
DEFERRED INFLOWS OF RESOURCES
Service concession arrangement revenue
applicable to future years 5,442,075
NET POSITION
Net investment in capital assets 28,096,992
Unassigned (5,213,247)
Total net position 22,883,745
Total liabilities and fund balances 35,658,734$
- 81 -
CITY OF FAIRHOPE, ALABAMA
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
FAIRHOPE AIRPORT AUTHORITY
FOR THE YEAR ENDED SEPTEMBER 30, 2019
See independent auditors’ report.
OPERATING REVENUES
Fuel sales and rentals 237,443$
Total operating revenues 237,443
OPERATING EXPENSES
Insurance 38,906
Legal and professional 28,146
Maintenance 84,163
Depreciation 465,808
Other 12,162
Total operating expenses 629,185
OPERATING LOSS (391,742)
NONOPERATING REVENUES (EXPENSES)
Revenue from service concession arrangement 198,614
Intergovernmental revenue 3,444,085
Payments from City of Fairhope 320,000
Interest expense (167,169)
Interest income 790
Total nonoperating revenues (expenses) 3,796,320
Change in net position 3,404,578
Net position – beginning of year 19,479,167
NET POSITION – END OF YEAR 22,883,745$
- 82 -
CITY OF FAIRHOPE, ALABAMA
STATEMENT OF CASH FLOWS
FAIRHOPE AIRPORT AUTHORITY
FOR THE YEAR ENDED SEPTEMBER 30, 2019
See independent auditors’ report.
CASH FLOWS FROM OPERATING ACTIVITIES
Received from customers 237,443$
Paid to suppliers for goods and services (157,993)
Net cash provided by operating activities 79,450
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income 790
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Repayment of debt (200,000)
Interest paid (154,739)
Capital grants received 3,422,299
Acquisition of capital assets (3,210,081)
Net cash used in capital and related
financing activities (142,521)
DECREASE IN CASH (62,281)
CASH – BEGINNING OF YEAR 350,654
CASH – END OF YEAR 288,373$
RECONCILIATION OF OPERATING LOSS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Operating loss (391,742)$
Adjustments to reconcile operating loss to
net cash provided by operating activities:
Depreciation 465,808
Change in operating assets and operating liabilities:
Increase (decrease) in accounts payable 5,384
Net cash provided by operating activities 79,450$
- 83 -
CITY OF FAIRHOPE, ALABAMA
SCHEDULE OF CAPITAL PROJECTS EXPENDITURES
FOR THE YEAR ENDED SEPTEMBER 30, 2019
See independent auditors’ report.
CR 13 Sedge to Manley Sidewalk 178,831$
Rock Creek Stabilization Project 646,573
Drainage Improvements 118,974
City Street Upgrades 243,975
BRATS Hub Transit Shelter 57,250
Library Renovations 993,479
North Beach Restrooms 101,001
US 98 and CR 13 Sidewalks 155,135
K-1 Center 2,511,785
Main Pier Electrical Upgrades 175,647
Civic Center HVAC Upgrades 45,557
Other Projects 78,082
Total 5,306,289$
The above items are only from the capital projects fund.
- 84 -
CITY OF FAIRHOPE, ALABAMA
SCHEDULE OF INFORMATION REQUIRED BY BOND INDENTURES
SEPTEMBER 30, 2019
See independent auditors’ report.
Natural Water and
Electric Gas Waste Water
Fund Fund Fund
A. Utility customers at September 30, 2019 were as follows:
Number of customers 7,027 11,511 19,740
Number of metered customers 7,027 11,511 19,740
Number of unmetered customers - - -
Number of waste water customers - - 11,358
B. Annual Net Income of Utility Operations Natural Water and
Electric Gas Waste Water
Fund Fund Fund Total
Income from operations 3,752,988$ 2,140,611$ 4,460,886$ 10,354,485$
Add:
Depreciation and amortization 820,232 516,325 1,549,906 2,886,463
Interest income 22,269 39,238 75,290 136,797
Annual net income as prescribed by debt covenants 4,595,489$ 2,696,174$ 6,086,082$ 13,377,745$
C. Utility fund casualty insurance coverage on electrical substations, natural gas facilities, water and waste-
water facilities is included in a blanket policy with the Governmental Funds general capital assets, buildings
and facilities. The City of Fairhope, Alabama is the named insured on all policies.
Comprehensive general liability – expires January 2021 $ 1,000,000
Buildings and facilities – expires January 2021 108,522,359
Equipment – expires January 2021 5,419,664
Automobile – expires January 2021
Liability 1,000,000
Uninsured motorist 50,000
Public officials errors and omissions liability – expires January 2021
Aggregate 2,000,000
Per occurrence 1,000,000
Police liability – expires January 2021
Aggregate 2,000,000
Per occurrence 1,000,000
Excess liability policy for general liability, police and public official – expires January 2021 6,000,000
D. The City has complied with all requirements of the respective bond indentures.
- 85 - CITY OF FAIRHOPE, ALABAMA SUMMARY OF DEPOSITS, WITHDRAWALS AND BALANCES OF SELECTED TRUST ACCOUNTS AS REQUIRED UNDER CERTAIN TRUST INDENTURES SEPTEMBER 30, 2019 See independent auditors’ report. 19962011 2011 2015 2015Warrant FundReserve Fund Reserve Fund Warrant FundBalance October 1, 2018 50,000$ 559,483$ 1,421,028$ 378,125$ 304,839$ Deposits - 913,909 27,313 7,268 380,775 Disbursements - (905,286) (25,844) (6,910) (374,254) Balance September 30, 2019 50,000$ 568,106$ 1,422,497$ 378,483$ 311,360$ Capital Improvement
THIS PAGE INTENTIONALLY LEFT BLANK
STATISTICAL SECTION
This part of the City of Fairhope, Alabama's comprehensive annual financial report presents detailed information as a context for
understanding what the information in the financial statements, note disclosures, and required supplementary information says
about the government's overall financial health.
Contents Page
Financial Trends
These schedules contain trend information to help the reader understand how the
government's financial performance and well-being have changed over time.86-91
Revenue Capacity
These schedules contain information to help the reader assess the government's
most significant local revenue sources, the sales tax and the property tax.92-97
Debt Capacity
These schedules present information to help the reader assess the affordability of
the government's current levels of outstanding debt and the government's ability
to issue additional debt in the future.98-101
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the government's financial activities
take place.102-103
Operating Information
These schedules contain service and infrastructure data to help the reader
understand how the information in the government's financial report relates
to the services the government provides and the activities it performs.104-106
Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports
for the relevant year.
STATISTICAL SECTION
- 86 - CITY OF FAIRHOPE, ALABAMA NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (accrual basis of accounting) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Governmental activities Net investment in capital assets 65,963,325$ 66,845,689$ 66,016,012$ 65,671,272$ 74,804,467$ 76,208,248$ 83,545,906$ 86,900,546$ 88,279,810$ 94,795,255$ Restricted 840,781 1,193,604 1,015,592 2,007,967 1,557,163 2,308,667 1,706,056 650,031 750,122 227,092 Unrestricted 4,506,443 5,064,845 7,056,984 8,586,709 9,513,008 4,619,015 2,124,391 8,284,540 2,860,140 828,480 Total governmental activities net position 71,310,549$ 73,104,138$ 74,088,588$ 76,265,948$ 85,874,638$ 83,135,930$ 87,376,353$ 95,835,117$ 91,890,072$ 95,850,827$ Business-type activities Net investment in capital assets 24,697,607$ 25,786,974$ 17,990,946$ 29,971,506$ 42,025,762$ 44,488,322$ 45,962,724$ 48,750,251$ 50,268,633$ 53,004,032$ Restricted 1,649,106 1,658,631 12,337,047 3,698,889 3,718,288 2,619,251 2,907,634 2,693,371 2,713,478 2,730,446 Unrestricted 6,696,480 10,610,123 10,047,736 10,197,284 2,273,605 5,238,460 7,587,850 8,586,317 12,564,193 18,201,729 Total business-type activities net position 33,043,193$ 38,055,728$ 40,375,729$ 43,867,679$ 48,017,655$ 52,346,033$ 56,458,208$ 60,029,939$ 65,546,304$ 73,936,207$ Primary government Net investment in capital assets 90,660,932$ 92,632,663$ 84,006,958$ 95,642,778$ 116,830,229$ 120,696,570$ 129,508,630$ 135,650,797$ 138,548,443$ 147,799,287$ Restricted 2,489,887 2,852,235 13,352,639 5,706,856 5,275,451 4,927,918 4,613,690 3,343,402 3,463,600 2,957,538 Unrestricted 11,202,923 15,674,968 17,104,720 18,783,993 11,786,613 9,857,475 9,712,241 16,870,857 15,424,333 19,030,209 Total primary government net position 104,353,742$ 111,159,866$ 114,464,317$ 120,133,627$ 133,892,293$ 135,481,963$ 143,834,561$ 155,865,056$ 157,436,376$ 169,787,034$ Fiscal Year
- 87 - CITY OF FAIRHOPE, ALABAMA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019ExpensesGovernmental activities: General government6,929,734$ 6,176,077$ 8,103,118$ 7,451,793$ 9,067,340$ 8,890,052$ 9,828,668$ 7,232,746$ 5,580,501$ 5,859,684$ Public safety5,757,528 5,696,701 5,387,302 4,848,790 4,651,958 4,370,285 4,873,102 6,051,285 6,744,158 6,747,159 Public works 6,425,612 6,119,768 7,317,191 5,820,858 5,968,995 5,848,267 5,777,295 6,323,212 8,041,071 8,273,373 Cultural and recreational 2,974,186 2,899,439 2,722,089 2,910,651 2,893,490 3,055,121 3,564,948 4,896,744 6,899,557 6,921,431 Airport Authority249,856 225,843 281,124 443,000 443,000 412,632 428,000 342,000 320,000 320,000 Public Library Board772,539 798,997 810,636 840,636 886,028 924,736 1,025,236 1,025,887 1,024,522 1,029,124 Interest on long-term debt 694,083 633,161 589,174 507,982 472,222 344,808 339,051 53,853 94,506 71,726 Total governmental activities expenses 23,803,538 22,549,986 25,210,634 22,823,710 24,383,033 23,845,901 25,836,300 25,925,727 28,704,315 29,222,497 Business-type activities: Natural gas 5,757,648 5,037,587 4,484,683 5,234,887 5,529,610 5,056,618 4,886,415 4,949,991 4,930,235 5,777,998 Electric 15,664,835 16,909,931 16,912,834 17,164,781 18,379,231 18,227,563 17,683,205 17,622,258 16,966,013 17,063,612 Water and waste water6,533,138 6,616,671 7,050,997 7,294,799 7,165,113 7,085,714 8,042,137 8,413,111 7,631,278 8,486,035 Total business-type activities expenses 27,955,621 28,564,189 28,448,514 29,694,467 31,073,954 30,369,895 30,611,757 30,985,360 29,527,526 31,327,645 Total primary government expenses 51,759,159$ 51,114,175$ 53,659,148$ 52,518,177$ 55,456,987$ 54,215,796$ 56,448,057$ 56,911,087$ 58,231,841$ 60,550,142$ Program RevenuesGovernmental activities: Charges for services: General government5,249,279$ 5,383,822$ 6,301,207$ 6,052,493$ 6,225,471$ 3,585,456$ 7,837,796$ 8,676,864$ 7,523,386$ 7,953,532$ Public safety261,070 241,104 289,432 291,749 285,573 - - - - - Public works 1,380,238 1,391,722 1,408,179 1,431,883 1,462,243 4,730,645 1,547,682 1,594,839 1,769,059 1,916,788 Cultural and recreational 1,188,745 1,360,254 1,411,138 1,544,278 1,553,287 1,622,983 1,649,815 1,664,643 1,926,828 2,148,050 Operating grants and contributions 22,267 24,402 - - 9,144 - - 102,507 94,494 127,978 Capital grants and contributions 1,389,592 302,963 1,317,475 438,033 8,416,283 1,319,753 1,467,355 1,642,474 1,319,678 1,777,375 Total governmental activities program revenues 9,491,191 8,704,267 10,727,431 9,758,436 17,952,001 11,258,837 12,502,648 13,681,327 12,633,445 13,923,723 Business-type activities: Charges for services: Natural gas 8,631,935 8,219,447 6,191,986 6,769,649 8,023,473 7,354,080 6,276,414 6,382,976 7,410,880 7,771,857 Electric 18,496,651 19,838,004 18,891,334 19,647,662 21,049,277 20,527,031 20,218,941 19,244,121 20,767,707 20,779,858 Water and waste water 8,959,041 10,287,898 9,838,580 9,980,089 10,018,231 10,860,135 11,164,497 11,870,652 11,529,979 12,538,531 Capital grants and contributions - - - - - - - - - 253,028 Total business-type activities program revenues 36,087,627 38,345,349 34,921,900 36,397,400 39,090,981 38,741,246 37,659,852 37,497,749 39,708,566 41,343,274 Total primary government program revenues 45,578,818$ 47,049,616$ 45,649,331$ 46,155,836$ 57,042,982$ 50,000,083$ 50,162,500$ 51,179,076$ 52,342,011$ 55,266,997$ Fiscal Year
- 88 - CITY OF FAIRHOPE, ALABAMA CHANGES IN NET POSITION LAST TEN FISCAL YEARS (accrual basis of accounting) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Net (expense)/revenueGovernmental activities (14,312,347)$ (13,845,719)$ (14,483,203)$ (13,065,274)$ (6,431,032)$ (12,587,064)$ (13,333,652)$ (12,244,400)$ (16,070,870)$ (15,298,774)$ Business-type activities 8,132,006 9,781,160 6,473,386 6,702,933 8,017,027 8,371,351 7,048,095 6,512,389 10,181,040 10,015,629 Total primary government net expense (6,180,341)$ (4,064,559)$ (8,009,817)$ (6,362,341)$ 1,585,995$ (4,215,713)$ (6,285,557)$ (5,732,011)$ (5,889,830)$ (5,283,145)$ General Revenues and Other Changes in Net PositionGovernmental activities: Taxes Property taxes 4,842,366$ 4,590,840$ 4,591,739$ 4,298,046$ 4,330,537$ 4,550,766$ 4,869,877$ 5,050,643$ 5,535,117$ 5,947,563$ Sales tax 4,443,325 4,590,149 4,898,362 5,437,863 6,518,249 6,797,757 7,422,726 8,069,350 8,444,241 9,269,702 Liquor taxes 392,255 393,123 425,888 425,816 445,132 451,719 482,755 536,643 498,044 606,819 Lodging taxes 483,271 495,870 569,142 643,495 614,278 681,419 696,379 762,562 653,697 1,116,242 Other taxes 131,135 120,518 124,234 139,666 138,204 138,382 133,057 139,444 127,513 122,059 Intergovernmental 424,359 248,011 314,525 596,816 389,561 1,695,688 568,566 - - - Investment earnings 239,256 249,489 226,642 251,512 239,205 228,670 302,181 335,106 59,157 126,115 Loss on sale of assets - - - - (261,340) - - - - - Other 1,293,419 124,161 143,319 213,169 147,672 705,142 147,452 283,385 262,849 292,339 Transfer of Golf Fund to Governmental Activities - - - - - - - - - - Transfers in/(out) 4,897,104 4,827,147 4,173,802 3,236,251 3,612,482 1,826,575 2,951,082 2,753,244 3,181,000 1,778,690 Total government activities 17,146,490 15,639,308 15,467,653 15,242,634 16,173,980 17,076,118 17,574,075 17,930,377 18,761,618 19,259,529 Business-type activities: Investment earnings 23,385 58,522 20,417 25,268 30,815 18,440 15,162 23,552 53,651 136,797 Other - - - - - - - 19,276 14,775 16,167 Transfer of Golf Fund to Governmental Activities - - - - - - - - - - Transfers in/(out) (4,897,104) (4,827,147) (4,173,802) (3,236,251) (3,612,482) (1,826,575) (2,951,082) (2,753,244) (3,181,000) (1,778,690) Total business-type activities (4,873,719) (4,768,625) (4,153,385) (3,210,983) (3,581,667) (1,808,135) (2,935,920) (2,710,416) (3,112,574) (1,625,726) Total primary government 12,272,771$ 10,870,683$ 11,314,268$ 12,031,651$ 12,592,313$ 15,267,983$ 14,638,155$ 15,219,961$ 15,649,044$ 17,633,803$ Change in Net PositionGovernmental activities 2,834,143$ 1,793,589$ 984,450$ 2,177,360$ 9,742,948$ 4,489,054$ 4,240,423$ 5,685,977$ 2,690,748$ 3,960,755$ Business-type activities 3,258,287 5,012,535 2,320,001 3,491,950 4,435,360 6,563,216 4,112,175 3,801,973 7,068,466 8,389,903 Total primary government 6,092,430$ 6,806,124$ 3,304,451$ 5,669,310$ 14,178,308$ 11,052,270$ 8,352,598$ 9,487,950$ 9,759,214$ 12,350,658$ Fiscal Year
- 89 - CITY OF FAIRHOPE, ALABAMA GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE LAST TEN FISCAL YEARS (accrual basis of accounting) Beer, WineFiscal Sales Ad Valorem Automobile and Liquor Cigarette Lodging DogYearTaxTaxTaxTaxTaxTaxTaxTotal2010 4,443,325$ 4,421,646$ 420,720$ 392,255$ 131,063$ 483,271$ 73$ 10,292,352$ 2011 4,590,149 4,102,942 487,897 393,123 120,458 495,870 61 10,190,500 2012 4,898,362 4,065,822 525,917 425,888 124,183 569,142 51 10,609,365 2013 5,437,863 3,738,511 559,534 425,816 139,526 643,495 141 10,944,886 2014 6,518,174 3,759,584 570,954 445,132 138,203 614,278 75 12,046,400 2015 6,797,757 3,950,750 600,015 451,719 138,298 681,419 85 12,620,043 2016 7,422,726 4,218,538 651,339 482,755 132,957 696,379 100 13,604,794 2017 8,069,350 4,310,029 740,614 536,643 139,380 762,562 64 14,558,642 2018 8,444,241 4,874,223 660,894 498,044 127,427 653,697 86 15,258,612 2019 9,269,702 5,270,773 676,789 606,819 122,006 1,116,242 54 17,062,385
- 90 - CITY OF FAIRHOPE, ALABAMA FUND BALANCES OF GOVERNMENTAL FUNDS (modified accrual basis of accounting) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019General fund Nonspendable -$ -$ -$ -$ -$ -$ -$ 85,490$ 303,387$ 323,647$ Committed 2,723,595 5,014,205 7,000,000 7,000,000 7,000,000 7,000,000 7,000,000 7,062,075 8,343,666 8,343,666 Unassigned 1,985,914 2,145,950 3,295,547 3,447,451 3,449,523 3,992,803 3,629,943 6,819,862 5,061,071 4,575,780 Total general fund 4,709,509$ 7,160,155$ 10,295,547$ 10,447,451$ 10,449,523$ 10,992,803$ 10,629,943$ 13,967,427$ 13,708,124$ 13,243,093$ All other governmental fundsRestricted: Debt service – other governmental funds 351,008$ 350,020$ 325,214$ 339,308$ 357,156$ 348,720$ 516,120$ 527,858$ 541,587$ -$ Road maintenance – other governmental funds - - - 274,746 46,007 105,947 35,936 122,173 208,535 227,092 Committed, reported in: Other governmental funds 127,419 167,786 1,029,075 1,252,213 851,448 826,435 1,478,912 2,255,722 5,403,308 3,726,721 Capital projects fund 362,354 675,799 - 58,625 1,956,986 4,398,406 1,364,704 4,147,827 2,787,639 1,943,247 Unassigned: Capital projects fund - - (1,069,424) 181,085 - - - - - - Other governmental funds - - - - - - - - - (1,160) Total all other governmental funds 840,781$ 1,193,605$ 284,865$ 2,105,977$ 3,211,597$ 5,679,508$ 3,395,672$ 7,053,580$ 8,941,069$ 5,895,900$ The City implemented GASB Statement number 54 fiscal year 2011. This statement replaces the previous classifications of reserved, unreserved, designated and undesignated fund balances.Fiscal Year
- 91 - CITY OF FAIRHOPE, ALABAMA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019REVENUES Local taxes 10,292,352$ 10,190,500$ 10,609,364$ 10,944,885$ 12,046,399$ 12,620,043$ 13,604,795$ 14,681,633$ 15,259,245$ 17,002,565$ Licenses and permits 2,178,982 2,295,795 2,612,793 2,731,766 3,000,673 3,306,620 3,596,049 3,945,641 4,364,902 4,570,915 Fines and forfeitures 261,070 241,104 289,432 291,749 285,573 278,837 236,724 284,893 273,887 237,812 Intergovernmental 547,556 345,966 667,344 1,022,649 991,614 639,523 693,761 876,086 954,086 1,090,181 Contribution from Public Library Board65,000 183,285 1,000 1,500 - - - - - - Interest and rents 239,256 249,489 226,748 253,003 239,205 228,669 302,181 335,106 401,705 470,753 Charges for services 4,450,535 4,479,749 5,096,593 5,317,255 5,165,291 5,395,287 6,504,860 6,910,066 5,075,950 5,852,747 Assessments - - 3,659 - - - - - - - Golf course revenue 858,237 1,020,250 1,001,627 1,113,277 1,067,593 1,137,114 1,127,306 1,190,281 1,062,204 1,060,650 Recreation Department - 369,135 368,493 391,024 436,453 444,410 476,772 466,437 442,324 456,362 BP settlement proceeds - - - - - 1,361,255 - - - - Legal settlement - - - - - 598,640 - - - - Other 1,705,991 170,422 184,411 253,146 196,913 180,644 223,293 338,058 368,387 660,915 Total revenues 20,598,979 19,545,695 21,061,464 22,320,254 23,429,714 26,191,042 26,765,741 29,028,201 28,202,690 31,402,900 EXPENDITURES General government 6,279,197 5,335,143 7,026,721 6,862,394 8,311,150 8,289,346 8,738,427 6,451,497 4,912,047 5,303,050 Public safety5,242,400 5,336,275 5,010,671 4,477,321 4,276,774 4,152,128 4,518,908 5,469,039 6,202,161 6,571,647 Public works 4,556,109 4,385,201 5,480,435 4,002,098 4,379,670 3,980,822 4,118,350 4,651,125 6,386,662 6,510,388 Cultural and recreational2,698,686 2,659,218 2,378,268 2,512,499 2,491,611 2,664,900 2,989,627 4,017,963 6,028,022 6,238,487 Airport Authority249,856 225,843 281,124 443,000 443,000 412,632 428,000 342,000 320,000 320,000 Public Library Board 565,000 565,000 600,000 630,000 674,100 714,100 814,600 814,600 814,600 818,477 Other 75,000 89,620 160,888 89,133 89,785 93,436 162,736 115,753 100,732 170,203 Debt service: Principal 1,047,483 831,483 4,804,960 1,485,545 2,894,540 483,780 6,478,558 1,573,560 1,578,340 3,775,470 Interest 704,043 666,652 616,221 508,483 465,409 374,479 390,971 111,633 94,751 87,534 Capital outlay1,565,192 1,474,937 664,526 1,418,813 1,908,464 3,840,803 7,698,341 2,359,222 3,610,512 7,746,773 Total expenditures 22,982,966 21,569,372 27,023,814 22,429,286 25,934,503 25,006,426 36,338,518 25,906,392 30,047,827 37,542,029 Excess (deficiency) of revenues over expenditures (2,383,987) (2,023,677) (5,962,350) (109,032) (2,504,789) 1,184,616 (9,572,777) 3,121,809 (1,845,137) (6,139,129) OTHER FINANCING SOURCES (USES) Transfers in 6,541,730 6,557,708 10,379,818 7,236,241 9,640,199 7,272,735 8,568,025 6,817,864 7,400,003 6,466,679 Proceeds from issuance of debt - - 4,015,200 - - - 3,975,000 - - Proceeds from capital lease - - - - - - - - 292,323 990,929 Transfers out (1,644,626) (1,730,561) (6,206,016) (3,999,990) (6,027,718) (5,446,160) (5,616,944) (4,098,281) (4,219,003) (4,828,679) Total other financing sources (uses) 4,897,104 4,827,147 8,189,002 3,236,251 3,612,481 1,826,575 6,926,081 2,719,583 3,473,323 2,628,929 Net change in fund balance 2,513,117$ 2,803,470$ 2,226,652$ 3,127,219$ 1,107,692$ 3,011,191$ (2,646,696)$ 5,841,392$ 1,628,186$ (3,510,200)$ Debt service as a percentage of noncapital expenditures 8.2% 7.5% 20.6% 9.5% 14.0% 4.1% 24.0% 7.2% 6.3% 13.0%Fiscal Year
- 92 - CITY OF FAIRHOPE, ALABAMA ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS FiscalTotal EstimatedYearLess: Total Taxable Direct ActualEnded Residential Commercial Industrial Tax Exempt Assessed Tax TaxableSeptember 30 Property Property Property Real Property Value Rate Value2010 166,238,280$ 1,362,280$ 212,323,800$ 61,797,320$ 318,127,040$ 15 4,771,905,600$ 2011 152,409,500 1,293,000 199,340,360 61,323,460 291,719,400 15 4,375,791,000 2012 151,955,400 1,165,600 205,976,380 69,676,780 289,420,600 15 4,341,309,000 2013 142,695,840 1,188,460 189,033,860 64,091,460 268,826,700 15 4,032,400,500 2014 146,270,400 1,188,460 195,105,420 67,346,480 275,217,800 15 4,128,267,000 2015 173,467,000 1,448,760 185,206,880 56,434,980 303,687,660 15 4,555,314,900 2016 188,693,940 1,246,280 201,141,240 64,329,960 326,751,500 15 4,901,272,500 2017 204,961,080 379,420 207,388,960 65,103,500 347,625,960 15 5,214,389,400 2018 227,170,100 1,190,460 217,138,040 69,413,140 376,085,460 15 5,641,281,900 2019 252,096,200 1,136,540 221,101,860 70,209,480 404,125,120 15 6,061,876,800 Source: Baldwin County Revenue Commissioner
- 93 - CITY OF FAIRHOPE, ALABAMA PROPERTY TAX RATES DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS TotalTotal Road/ Health Care Total Total Direct andFiscal General School Bond Tax City General Bridge Fire School Authority County General School Soldier State OverlappingYear Millage Millage Millage Millage Millage Millage Millage Millage Millage Millage Millage Millage Millage Millage Rates2010 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.02011 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.02012 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.02013 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.02014 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.02015 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.02016 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.02017 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.02018 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.02019 5.0 5.0 5.0 15.0 5.0 2.5 1.5 12.0 0.5 21.5 2.5 3.0 1.0 6.5 43.0Source: Baldwin County CommissionCountyStateOverlapping RatesCity
- 94 - CITY OF FAIRHOPE, ALABAMA PRINCIPAL PROPERTY TAXPAYERS YEARS ENDED SEPTEMBER 30, 2019 AND 2010 Taxable TaxableAssessed AssessedTaxpayer Value Rank Value RankFST Wal-mart Stores East L P 2,717,280$ 1 0.7% -$ - 0.0%Arbor Gates Holdings LLC 2,471,340 2 0.6% 2,328,600 1 0.7%Battles Road LLC 2,294,280 3 0.6% 1,801,020 2 0.5%FST Mississippi Baldwin Square LLC 2,111,180 4 0.5% - - 0.0%PSM Alabama Holdings LLC 2,086,960 5 0.5% - - 0.0%FST Fairhope Hospitality Group LLC 1,562,800 6 0.4% 1,615,720 4 0.5%Truland Homes LLC 1,553,020 7 0.4% - - 0.0%A 1 Corte Jr Family Limited Partnership 1,497,500 8 0.4% - - 0.0%Fairhope Ridge LLC 1,384,660 9 0.3% - - 0.0%Bones Set Too LLC 1,366,640 10 0.3% - - 0.0%Fairhope LLC - - 0.0% 1,686,080 3 0.5%Bellsouth Tele, Inc dba AT&T - - 0.0% 1,162,520 5 0.3%CHS Properties Inc - - 0.0% 1,142,480 6 0.4%Fairhope Yacht Club - - 0.0% 1,112,080 7 0.3%Pelican Properties, Inc - - 0.0% 1,104,960 8 0.3%Bones & Babies, LLC - - 0.0% 1,063,900 9 0.4%Fairhope Commercial Investments - - 0.0% 1,052,580 10 0.4%19,045,660$ 4.7% 14,069,940$ 4.3%Source: Baldwin County Revenue CommissionerAssessed Value2019Percentage ofTotal TaxableAssessed ValuePercentage ofTotal Taxable2010
- 95 - CITY OF FAIRHOPE, ALABAMA PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISAL YEARS Fiscal Year Total Tax Collections Ended Levy for in SubsequentSeptember 30 Fiscal Year Amount Years Amount2010 4,771,906$ 4,293,008$ 89.96% 347,908$ 4,640,916$ 97.25%2011 4,375,791 3,336,261 76.24% 971,558 4,307,819 98.45%2012 4,341,309 3,327,041 76.64% 673,667 4,000,708 92.15%2013 4,032,401 3,590,944 89.05% 414,166 4,005,110 99.32%2014 4,128,267 3,834,734 92.89% 175,177 4,009,911 97.13%2015 4,556,121 4,123,187 90.50% 74,801 4,197,988 92.14%2016 4,911,340 4,751,476 96.75% 4,727 4,756,203 96.84%2017 4,908,058 4,540,127 92.50% 7,296 4,547,423 92.65%2018 5,612,862 5,401,624 96.24% 5,662 5,407,286 96.34%2019 6,019,599 5,950,335 98.85% 3,919 5,954,254 98.91%Source: Baldwin County Revenue Commissioner Percentage of LevyCollected within the Total Collections to DateFiscal Year of the LevyPercentage of Levy
- 96 -
CITY OF FAIRHOPE, ALABAMA
DIRECT AND OVERLAPPING SALES TAX RATES
CURRENT AND LAST FOUR FISCAL YEARS
City
Fiscal Direct Baldwin State of
Year Rate County Alabama
2015 2.00% 3.00% 4.00%
2016 2.00% 3.00% 4.00%
2017 2.00% 3.00% 4.00%
2018 2.00% 3.00% 4.00%
2019 2.00% 3.00% 4.00%
Source: City Clerk's Office
The City implemented its first sales tax effective July 1, 2009
- 97 -
CITY OF FAIRHOPE, ALABAMA
PRINCIPAL SALES TAXPAYERS
LAST TEN YEARS
Fiscal Top 25 Taxpayers
Year (approximate) Total Tax % of Total Tax
2010 2,124,169$ 4,443,325$ 48%
2011 2,502,259 4,591,088 55%
2012 2,525,722 4,855,972 52%
2013 2,641,175 5,437,863 49%
2014 3,673,425 6,518,249 56%
2015 3,624,562 6,733,115 54%
2016 3,788,930 7,232,073 52%
2017 4,059,864 7,865,989 52%
2018 4,871,492 8,249,479 59%
2019 4,450,078 8,723,465 51%
Source: City Treasurer's Office and Alabama Department of Revenue
Note: State law prohibits the disclosure of tax information for specific taxpayers.
- 98 - CITY OF FAIRHOPE, ALABAMA RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS General General Utilities Total Percentage LiabilityFiscal Obligation Capital Obligation Revenue Notes Capital Primary of Personal PerYear Debt Leases Debt Debt Payable Leases Government Income Capita2010 15,773,979$ 47,745$ 256,962$ 15,610,000$ 24,681$ -$ 31,713,367$ 6.43% 1,933$ 2011 14,965,792 24,449 241,993 14,925,000 - - 30,157,234 6.47% 1,818 2012 14,200,481 - 226,260 23,125,000 - - 37,551,741 8.07% 2,279 2013 12,682,152 - 209,680 21,636,094 - - 34,527,926 6.93% 2,107 2014 9,789,376 - 5,904,220 20,571,057 - - 36,264,653 6.23% 2,159 2015 9,307,360 - 4,743,000 16,574,669 - - 30,625,029 4.87% 1,693 2016 6,833,058 - 3,581,942 16,152,226 - - 26,567,226 3.92% 1,418 2017 5,259,498 - 2,420,502 14,842,522 - - 22,522,522 3.18% 1,160 2018 3,681,158 292,323 1,258,842 14,017,818 - - 19,250,141 2.38% 920 2019 - 1,188,940 735,000 12,455,000 - - 14,378,940 1.58% 651 Governmental Activities Business-Type Activities
- 99 -
CITY OF FAIRHOPE, ALABAMA
RATIOS OF GENERAL BONDED DEBT OUTSTANDING
LAST TEN FISCAL YEARS
General Less: Amounts Percentage of Liability
Fiscal Obligation Available in Debt Net Taxable Per
Year Debt Service Fund Total Sales Capita
2010 16,030,941$ 351,008$ 15,679,933$ 3.18% 956$
2011 15,207,785 350,020 14,857,765 3.19% 896
2012 14,426,741 325,214 14,101,527 3.03% 856
2013 12,891,832 339,308 12,552,524 2.52% 766
2014 15,693,596 357,156 15,336,440 2.64% 913
2015 14,050,360 348,720 13,701,640 2.18% 757
2016 10,415,000 516,120 9,898,880 1.46% 529
2017 7,680,000 527,858 7,152,142 1.01% 368
2018 4,940,000 541,587 4,398,413 0.54% 210
2019 - - - 0.00% -
- 100 -
CITY OF FAIRHOPE, ALABAMA
COMPUTATION OF OVERLAPPING DEBT
SEPTEMBER 30, 2019
Percentage Amount
of debt of debt
Applicable Applicable
Outstanding to the City of to the City of
Debt Fairhope (1) Fairhope
Direct debt of the City 1,188,940$ 100.00% 1,188,940$
Overlapping Debt (Supported by ad valorem tax)
Baldwin County 84,823,407$ 8.32%(1)7,057,307
8,246,247$
(1) Percentage of net assessed value of property in City ($404,131,240) to net assessed value of property in Baldwin
County ($4,858,253,600) on October 1, 2019.
- 101 - CITY OF FAIRHOPE, ALABAMA LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Debt limit 63,625,408$ 58,343,880$ 57,884,120$ 53,765,340$ 55,043,560$ 60,737,532$ 65,350,300$ 69,525,192$ 75,223,856$ 80,826,248$ Total net debt applicable to limit 16,030,941 15,207,785 14,426,741 12,924,616 15,724,616 14,079,616 10,415,000 7,680,000 4,265,804 1,188,940 Legal debt margin 47,594,467$ 43,136,095$ 43,457,379$ 40,840,724$ 39,318,944$ 46,657,916$ 54,935,300$ 61,845,192$ 70,958,052$ 79,637,308$ Total net debt applicable to limitas a percentage of debt limit 25.20% 26.07% 24.92% 24.04% 28.57% 23.18% 15.94% 11.05% 5.67% 1.47%Legal Debt Margin Calculation for Fiscal Year 2019Total assessed value 404,131,240$ Debt limit (20% of total assessed value) 80,826,248$ Debt applicable to limit:General obligation warrants (including capital leases) 1,188,940 Legal debt margin 79,637,308$ Fiscal Year
- 102 -
CITY OF FAIRHOPE, ALABAMA
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN FISCAL YEARS
Per
Capita
Fiscal Personal Personal School Unemployment
Year Population Income Income Enrollment Rate
2010 16,409 492,959,178$ 30,042$ 4,385 8.9%
2011 16,588 466,189,152 28,104 4,477 8.7%
2012 16,479 465,548,229 28,251 4,487 7.1%
2013 16,385 497,890,995 30,387 4,526 6.1%
2014 16,794 581,996,070 34,655 4,734 5.8%
2015 18,089 628,773,640 34,760 4,995 5.4%
2016 18,730 677,183,150 36,155 5,333 5.3%
2017 19,421 708,905,342 36,502 5,416 4.7%
2018 20,935 809,116,815 38,649 5,473 4.3%
2019 22,085 911,690,885 41,281 5,528 3.8%
Sources: U.S. Census Bureau
Sperling's Best Places Website
State of Alabama Department of Industrial Relations
Eastern Shore Chamber of Commerce
Baldwin County Board of Education
www.schooldigger.com
- 103 -
CITY OF FAIRHOPE, ALABAMA
PRINCIPAL EMPLOYERS
YEARS ENDED SEPTEMBER 30, 2019 AND 2010
Percentage of Percentage of
Total City Total City
Employer Employees Rank Employment Employees Rank Employment
Thomas Hospital 1,000 1 11.8% 1,160 1 19.4%
Grand Hotel 750 2 8.9% 725 2 12.1%
City of Fairhope 465 3 5.5% 367 4 6.1%
Wal-Mart 320 4 3.8% 350 3 6.0%
Publix 150 5 1.8% 135 5 2.3%
Segers Aero 130 6 1.5%- - 0.0%
Winn-Dixie 75 7 0.9% 113 6 1.9%
Piggly Wiggly 75 8 0.9%- - 0.0%
CPSI 75 9 0.9%- - 0.0%
Bayside Orthopedics 68 10 0.8%- - 0.0%
Print Xcel - - 0.0% 61 7 1.1%
Bruno's - - 0.0% 67 8 1.1%
Fokkert AIR Inc - - 0.0% 60 9 1.0%
Balloons Everywhere - - 0.0% 55 10 0.9%
3,108 36.8% 3,093 51.9%
Sources: Eastern Shore Chamber of Commerce and State Department of Industrial Relations
Note: Total city employment number represents people residing in City of Fairhope that are employed
(place of residence) rather than employment for City of Fairhope businesses
2010: 5,971 2019: 8,804
2019 2010
- 104 - CITY OF FAIRHOPE, ALABAMA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019FunctionGeneral Government 55 53 53 48 48 49 49 49 53 76 Public Safety: Police 48 48 44 48 46 46 45 49 52 61 Fire Firefighters and Dispatch 13 17 18 17 18 17 14 15 16 21 Highways and Streets: Public Works 37 35 36 39 39 41 46 42 49 66 Sanitation 20 20 19 17 21 22 20 19 18 18 Cultural and Recreational: Recreation 18 19 19 24 23 25 26 29 32 91 Adult Recreation 13 14 14 9 10 11 12 11 11 19 Gas Department 18 18 18 17 15 15 15 16 18 19 Electric Department 17 17 18 17 22 21 19 19 22 20 Water/Waste Water Department 23 24 26 24 23 23 22 26 29 32 Golf Department 19 16 14 15 16 18 20 19 18 40 Total 281 281 279 275 281 288 288 294 318 463 Source: City of Fairhope Human Resources DepartmentFull-time Equivalent Employees as of September 30,
- 105 - CITY OF FAIRHOPE, ALABAMA OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019FunctionPolice: Physical arrests 833 1,134 603 759 750 1,423 983 1,350 1,542 1,538 Parking violations 201 163 128 22 49 121 240 359 89 22 Traffic violations 1,245 1,419 2,215 1,379 887 633 1,726 2,490 1,684 1,656 Fire: Number of calls answered 658 801 657 690 853 836 865 1,025 1,058 1,023 Inspections 291 143 101 85 35 161 147 73 823 669 Highways and streets: Street resurfacing (miles) - - 8.1 - - - 13.2 - 1.2 1.2 Potholes repaired* 400 425 450 1,345 1,480 1,620 2,933 2,300 4,928 4,928 Sanitation: Garbage collected (tons/year) 8,627 9,100 8,711 7,564 8,509 8,236 8,654 9,222 9,554 10,108 Trash collected (tons/year) 7,385 6,487 5,767 5,513 6,292 5,545 5,902 8,228 7,189 7,741 Recyclables collected (tons/year) 1,281 1,495 1,508 1,512 1,714 1,779 1,855 1,843 1,835 1,803 Cultural and recreational: Golf course rounds @ 9 hole rounds 62,720 61,283 65,500 62,266 59,261 57,405 56,613 58,416 53,995 55,971 Pavilion/park parties 80 64 56 58 61 59 44 28 32 22 Waste water: Average daily sewage treatment (millions of gallons) 1.8 1.8 1.8 1.8 1.8 2.0 2.2 2.4 2.4 2.3 Sources: Various government departments* The City changed the calculation method for potholes for fiscal year 2016 resulting in an increase.Fiscal Year
- 106 - CITY OF FAIRHOPE, ALABAMA CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019FunctionPublic safety: Police: Stations 1111111111 Patrol units 45 45 45 43 37 38 39 44 45 47 Fire stations 3333344444Highways and streets: Streets (miles) 98.1 98.1 99.1 99.1 103.84 106.54 108.64 111.14 112.64 112.64Cultural and recreational: Parks acreage 248 248 248 248 356 504 504 504 504 657 Parks 51 51 51 51 52 54 54 54 54 56 Swimming pools3333333333 Tennis courts 6 6 6 6 6 6 12 12 12 16 Community center 3333333333Sewer: Sanitary sewers (miles) 125 125 125 126 126 130 135 175 175 180 Storm sewers (miles) 16.75 16.75 17.25 17.25 19.17 20.57 22.77 25.77 27.29 27.29 Maximum daily treatment capacity (millions of gallons)4444 4 44.2 4 4 4Sources: Various government departmentsFiscal Year