County of Allegheny, Pennsylvania $75,000,000 Tax and Revenue Anticipation Notes, Series a of 2012 $100,000,000 Tax and Revenue Anticipation Notes, Series B of 2012
NEW ISSUE—BOOK-ENTRY ONLY Rating: Standard & Poor’s “SP-1+” (See “Rating” herein.)
In the opinion of Note Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, interest on the Notes is excluded from gross income for Federal income tax purposes. Note Counsel is also of the opinion that interest on the Notes is not a specific item of tax preference under §57 of the Internal Revenue Code of 1986, as amended (the “Code”), for purposes of federal individual and corporate alternative minimum taxes.
In the opinion of Note Counsel, under existing laws, the Notes, and the interest therefrom, are free from taxation for purposes of personal income, corporate net income and personal property taxes within the Commonwealth of Pennsylvania.
COUNTY OF ALLEGHENY, PENNSYLVANIA $75,000,000 TAX AND REVENUE ANTICIPATION NOTES, SERIES A OF 2012 $100,000,000 TAX AND REVENUE ANTICIPATION NOTES, SERIES B OF 2012
Dated: January 17, 2012 Due: July 16, 2012
Series A of 2012: Interest Rate: 1.50% Price: 100.677 Yield: 0.13% CUSIP: 01728V NP1 Series B-1 of 2012: Interest Rate: 2.00% Price: 100.879 Yield: 0.22% CUSIP: 01728V NQ9 Series B-2 of 2012: Interest Rate: 2.00% Price: 100.884 Yield: 0.21% CUSIP: 01728V NQ9
The County of Allegheny, Pennsylvania (the “County”) is issuing its Tax and Revenue Anticipation Notes, Series A of 2012 in the principal amount of $75,000,000 (“the Series 2012A Note”) and its Tax and Revenue Anticipation Notes, Series B of 2012 in the principal amount of $100,000,000 (“the Series 2012B Note”) (collectively, the “Notes”). The Notes will be issued in registered form in initial denominations of $100,000 or any integral multiple thereof, and will be dated January 17, 2012. The Notes will be issuable only as fully registered Notes, registered in the name of Cede & Co., as nominee for the Depository Trust Company (“DTC”), New York, New York, which will act as securities depository for the Notes. Purchasers will not receive certificates representing their ownership interest in the Notes purchased. So long as Cede & Co. is the registered owner, as nominee of DTC, references herein to “Owners” or “registered owners” shall mean Cede & Co. as aforesaid, and shall not mean the Beneficial Owners of the Notes. Beneficial ownership of the Notes may be acquired in denominations of $100,000 and any integral multiple thereof. The Notes will pay interest at maturity. Principal of and interest on the Notes is payable at the designated corporate trust office of U.S. Bank National Association, Pittsburgh, Pennsylvania (the “Paying Agent”). So long as DTC or its nominee, Cede & Co., is the registered owner, such payments will be made directly to Cede & Co. Disbursement of such payments to the DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants and the Indirect Participants, as more fully described herein.
REDEMPTION: The Notes are not subject to mandatory or optional redemption prior to maturity.
PURPOSE: The purpose of the issuance of the Notes is to fund, in part, current operating expenses of the County in anticipation of the receipt of taxes and revenues during the fiscal year ending December 31, 2012.
SECURITY: The Notes will constitute an irrevocable pledge of the County’s full faith, credit and taxing power for the payment of the principal of, and interest on, the Notes.
INTEREST RATE: The Notes will accrue interest at a fixed rate and interest will be paid upon maturity. See “THE NOTES” herein.
AUTHORITY FOR ISSUANCE: The Notes have been executed and delivered in accordance with the Local Government Unit Debt Act of the Commonwealth of Pennsylvania, 53 Pa. Cons. Stat. §8001 et seq., as amended (the “Debt Act”), and pursuant to a Note Resolution duly adopted by the Allegheny County Council on January 10, 2012 . Proceedings with respect to the issuance of the Notes have been filed with the Department of Community and Economic Development of the Commonwealth of Pennsylvania pursuant to the Debt Act.
This cover page contains certain information for reference purposes only. It is not a complete summary of the issue. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision.
The Notes are offered when, as and if issued by the County, and subject to the approval of the legality thereof by Campbell & Levine, LLC of Pittsburgh, Pennsylvania, Note Counsel. Certain other legal matters will be passed upon for the County by Michael H. Wojcik, Esquire, County Solicitor. The Notes will be available for delivery to DTC in New York, New York, on or about January 17, 2012.
January 10, 2012
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COUNTY OF ALLEGHENY, PENNSYLVANIA
Chief Executive Rich Fitzgerald
County Council
Council-at-Large Council District 5 Council-at-Large John P. DeFazio Vince Gastgeb Heather S. Heidelbaugh
Council District 1 Council District 6 Council District 10 Matt Drozd John F. Palmiere William Russell Robinson
Council District 2 Council District 7 Council District 11 Jan Rea Nicholas Futules** Barbara Daly Danko
Council District 3 Council District 8 Council District 12 James Burn, Jr. Charles J. Martoni, Ph.D.* James Ellenbogen
Council District 4 Council District 9 Council District 13 Michael J. Finnerty Robert J. Macey Amanda Green Hawkins
Controller County Manager Treasurer Chelsa Wagner James M. Flynn, Jr. John K. Weinstein
County Solicitor Michael H. Wojcik, Esquire
Budget and Finance Director Amy B. Griser, CPA
Bond Counsel Campbell & Levine, LLC
Paying Agent U.S. Bank National Association
Financial Advisor Public Financial Management, Inc.
______* President of Council **Vice President of Council
(i) No dealer, broker, salesman, or any other person has been authorized by the County or the Purchaser to give any information or to make any representation in connection with the offering of the Notes, other than those contained in this Official Statement, and, if given or made, such other information or representation must not be relied upon as having been authorized by either of the foregoing. This Official Statement does not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the Notes by any person in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified or licensed to do so or to any person to whom it is unlawful to make such offer, solicitation, or sale. The information herein has been furnished solely by the County and by other sources that are believed by the County to be reliable, but it is not guaranteed as to its accuracy or completeness by, and is not to be construed as a representation of, the Purchaser. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the County after the date hereof. This Official Statement is submitted in connection with the sale of the Notes and may not be reproduced or used, in whole or in part, for any other purpose.
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE RESOLUTION BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE NOTES IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF THE STATES, IF ANY, IN WHICH THE NOTES HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN CERTAIN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE NOTES OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.
(ii)
TABLE OF CONTENTS PAGE
INTRODUCTORY STATEMENT ...... 1 AUTHORITY FOR THE NOTES ...... 1 THE NOTES ...... 1 General ...... 1 Delivery of Certificates; Registered Owners ...... 2 Transfer and Exchange ...... 2 BOOK-ENTRY-ONLY SYSTEM ...... 2 Discontinuance of Book-Entry-Only System ...... 5 SECURITY FOR THE NOTES ...... 5 Security Interest ...... 5 Sinking Fund ...... 5 COUNTY OF ALLEGHENY ...... 6 COMPUTATION OF CUMULATIVE CASH FLOW SURPLUS (DEFICIT) ...... 7 FINANCIAL STATEMENTS ...... 7 LITIGATION ...... 7 LEGAL MATTERS ...... 9 FINANCIAL ADVISOR ...... 9 TAX MATTERS ...... 10 Federal Tax Exemption ...... 10 Original Issue Premium ...... 10 Pennsylvania Tax Exemption ...... 10 CONTINUING DISCLOSURE UNDERTAKING ...... 11 RATING ...... 12 SALE OF NOTES ...... 12 CONCLUDING STATEMENT ...... 12
Appendix A - County of Allegheny Appendix B – Demographic and Economic Information Appendix C – Form of Opinion of Note Counsel Appendix D - County of Allegheny Audited Financial Statements for Year Ended December 31, 2010
(iii)
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OFFICIAL STATEMENT
COUNTY OF ALLEGHENY, PENNSYLVANIA $75,000,000 TAX AND REVENUE ANTICIPATION NOTES, SERIES A OF 2012 $100,000,000 TAX AND REVENUE ANTICIPATION NOTES, SERIES B OF 2012
INTRODUCTORY STATEMENT
This Official Statement (including the cover page and Appendices hereto) is furnished in connection with the offering by the County of Allegheny, Pennsylvania (the “County”) of its Tax and Revenue Anticipation Notes, Series A of 2012 in the principal amount of $75,000,000 and its Tax and Revenue Anticipation Notes, Series B of 2012 in the principal amount of $100,000,000 (collectively, the “Notes”).
The Notes shall be dated January 17, 2012, and are being issued to fund, in part, current operating expenses of the County in anticipation of the receipt of taxes and revenues during the fiscal year ending December 31, 2012.
Neither the delivery of this Official Statement nor any sale of the Notes made hereunder shall, under any circumstances, create any implication that there have been no changes in the affairs of the County since the date of this Official Statement or the earliest date as to which certain information contained herein is given.
The County is a political subdivision of the Commonwealth of Pennsylvania and a home rule county under the Second Class County Charter Law. See “COUNTY OF ALLEGHENY” herein and APPENDIX A – “County of Allegheny” hereto. AUTHORITY FOR THE NOTES
The Notes will be issued pursuant to and in conformity with the terms of the Local Government Unit Debt Act of the Commonwealth of Pennsylvania, 53 Pa. Cons. Stat. §8001 et seq., as amended (the “Debt Act”) and pursuant to a Note Resolution adopted by the Allegheny County Council on January 10, 2012 (the “Note Resolution”). Copies of the Note Resolution will be available for inspection at the offices of the Chief Clerk, Allegheny County. THE NOTES
GENERAL
The principal amount of the Notes to be issued is $175,000,000, consisting of $75,000,000 in principal amount of 2012A Notes and $100,000,000 in principal amount of 2012B Notes. The Notes will be fully registered Notes in denominations of $100,000 or any integral multiple thereof. The Notes will be dated January 17, 2012, will mature on July 16, 2012, and will bear interest at the rate set forth on the cover page of this Official Statement. Interest on the Notes shall be computed on the basis of actual days elapsed in a 366-day year and shall be payable at maturity. The Notes are not subject to mandatory or optional redemption prior to maturity. Interest on the Notes will be paid upon maturity.
The principal of and interest on the Notes shall be payable at the designated corporate trust office of U.S. Bank National Association, Pittsburgh, Pennsylvania (the “Paying Agent”) in such coin or currency of the United States of America as of the time and place of payment is legal tender for public and private debts.
Certificates representing ownership of the Notes will not be issued to the purchasers of the Notes. Rather, The Depository Trust Company, New York, New York (“DTC”) will act as securities depository under a book-
1 entry system for the Notes. Unless such system is discontinued, the provisions described under “BOOK-ENTRY- ONLY SYSTEM” below (including provisions regarding payments to and transfers by the owners of beneficial interests in the Notes) will be applicable to the Notes. While the Notes are in the Book-Entry-Only System, references to the “Owner” or the “Registered Owner” as described herein are to Cede & Co., as nominee of DTC. Each beneficial owner of a Note may desire to make arrangements with a DTC Participant to receive notices or communications with respect to matters described herein. See “BOOK-ENTRY-ONLY SYSTEM” herein. If such system is discontinued, the provisions described under “Discontinuation of Book-Entry-Only System” below will be applicable.
So long as DTC or its nominee, Cede & Co., is the registered owner of the Notes, payments of the principal of, premium, if any, and interest on the Notes will be made by the Paying Agent directly to Cede & Co. Disbursements of such payments to the Direct Participants (as hereinafter defined) is the responsibility of DTC. Disbursement of such payment to the owners of the beneficial interest in the Notes is the responsibility of the Direct Participants and the Indirect Participants (as hereinafter defined). See “BOOK-ENTRY-ONLY SYSTEM” herein.
DELIVERY OF CERTIFICATES; REGISTERED OWNERS
Subject to the provisions described under “BOOK-ENTRY-ONLY SYSTEM” below, in the event that the County determines that it is in the best interest of the County and/or the Beneficial Owners (as hereinafter defined) of the Notes that Note certificates be issued, or if DTC determines to discontinue providing its services with respect to the Notes (and no successor Securities Depository has been designated), Note certificates in fully registered form will be printed and delivered as directed by DTC. The ownership of the Notes so delivered (and any Notes thereafter delivered upon a transfer or exchange described below) shall be registered in the Note Register kept by the Paying Agent at its designated corporate trust office, and the County and the Paying Agent shall be entitled to treat the registered owners of such Notes, as their names appear in such Note Register as of the appropriate dates, as the owners thereof for all purposes described in the Note Resolution.
TRANSFER AND EXCHANGE
Subject to the provisions described under “BOOK-ENTRY-ONLY SYSTEM” below, a Note may be transferred or exchanged only upon presentation thereof to the Paying Agent. Such Note must be accompanied by a written instrument or instruments of transfer or exchange, in form and with guaranty of signatures satisfactory to the County and the Paying Agent, duly executed by the Registered Owner thereof or his duly authorized agent or legal representative. Upon surrender of any Notes to be transferred or exchanged, the Paying Agent shall record the transfer or exchange in its Note Register and shall authenticate and deliver new Notes appropriately registered and in appropriate authorized denominations. Neither the County nor the Paying Agent shall be required to effect or register any transfer or exchange of any Note fifteen (15) days prior to maturity of the Notes. No charge will be imposed in connection with any transfer or exchange, except for taxes or governmental charges related thereto. No service charge shall be made for any transfer of any Note, but the County or the Paying Agent may require payment of any sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Notes. BOOK-ENTRY-ONLY SYSTEM
THE INFORMATION PROVIDED UNDER THIS CAPTION CONCERNING DTC AND DTC’s BOOK- ENTRY SYSTEM HAS BEEN PROVIDED BY DTC. NO REPRESENTATION IS MADE BY THE COUNTY OR THE UNDERWRITERS AS TO THE ACCURACY OR ADEQUACY OF SUCH INFORMATION PROVIDED BY DTC OR AS TO THE ABSENCE OF MATERIAL ADVERSE CHANGES IN SUCH INFORMATION SUBSEQUENT TO THE DATE HEREOF.
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Notes. The Notes will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s
2 partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully- registered Note certificate will be issued for each series of the Notes set forth on the inside front cover page of this Official Statement, each in the aggregate principal amount of such series, and will be deposited with DTC.
DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about the DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of the Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC’s records. The ownership interest of each actual purchaser of each Note (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Notes are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Notes, except in the event that use of the book-entry only system for the Notes is discontinued.
To facilitate subsequent transfers, all Notes deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Notes with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes. DTC’s records reflect only the identity of the Direct Participants to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Notes may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Notes, such as redemptions, tenders, defaults, and proposed amendments to the Note documents. For example, Beneficial Owners of Notes may wish to ascertain that the nominee holding the Notes for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.
3 Redemption notices shall be sent to DTC. If less than all of the Notes within a maturity of the Notes are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Notes unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the County as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts such notes are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Payments of principal of and interest on the Notes will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from the Paying Agent on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent or the County, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Paying Agent. Disbursement of such payments to Direct Participants will be the responsibility of DTC and disbursement of such payments to the Beneficial Owners will be the responsibility of the Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the Notes at any time by giving reasonable notice to the County or the Paying Agent. Under such circumstances, in the event that a successor securities depository is not required under the Ordinance or obtained, Note certificates are required to be printed and delivered in accordance with the Ordinance.
The County may decide to discontinue use of the system of book-entry-only transfers through DTC (or successor securities depository). In that event Note certificates will be printed and delivered to DTC.
The above information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the County believes to be reliable but the County takes no responsibility for the accuracy thereof.
NEITHER THE COUNTY NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO PARTICIPANTS, BENEFICIAL OWNERS OR OTHER NOMINEES OF SUCH BENEFICIAL OWNERS FOR (1) SENDING TRANSACTION STATEMENTS; (2) MAINTAINING, SUPERVISING OR REVIEWING, OR THE ACCURACY OF, ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT OR OTHER NOMINEES OF SUCH BENEFICIAL OWNERS; (3) PAYMENT OR THE TIMELINESS OF PAYMENT BY DTC TO ANY PARTICIPANT, OR BY ANY PARTICIPANT OR OTHER NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNER, OF ANY AMOUNT DUE IN RESPECT OF THE PRINCIPAL OF OR REDEMPTION PREMIUM, IF ANY, OR INTEREST ON BOOK-ENTRY NOTES; (4) DELIVERY OR TIMELY DELIVERY BY DTC TO ANY PARTICIPANT, OR BY ANY PARTICIPANT OR OTHER NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNERS, OF ANY NOTICE (INCLUDING NOTICE OF REDEMPTION) OR OTHER COMMUNICATION WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE ORDINANCE TO BE GIVEN HOLDERS OR OWNERS OF BOOK-ENTRY NOTES; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF BOOK-ENTRY NOTES; OR (6) ANY ACTION TAKEN BY DTC OR ITS NOMINEE AS THE REGISTERED OWNER OF BOOK-ENTRY NOTES.
4 DISCONTINUANCE OF BOOK-ENTRY-ONLY SYSTEM
DTC may determine to discontinue providing its services with respect to the Notes at any time by giving notice to the Paying Agent and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, Note certificates are required to be printed and delivered as described below and in the Note Resolution. A Beneficial Owner, upon registration of certificates held in the Beneficial Owner’s name, will become the Noteholder.
The County may determine to discontinue the system of book-entry transfer through DTC (or a successor securities depository). In such event, Note certificates will be printed and delivered as described below and in the Note Resolution.
Unless otherwise noted, the information contained in this section has been extracted from a report from DTC entitled “Book Entry-Only Municipals”. No representation is made by the County or the Purchaser as to the completeness or the accuracy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof.
In the event that the Book-Entry-Only System is discontinued, the following provisions will apply to the Note certificates in fully registered form will be delivered to, and registered in the names of, the DTC Participants or such other persons as such DTC Participants may specify (which may be the Indirect Participants or the Beneficial Owners), in authorized denominations. The ownership of the Notes so delivered (and any Notes thereafter delivered upon a transfer or exchange described below) shall be registered in the Note Register to be kept by the Paying Agent at its principal corporate trust office. The County and the Paying Agent shall be entitled to treat the registered owners of such Notes, as their names appear in such Note Register as of the appropriate dates, as the owners thereof for all purposes described herein and in the Note Resolution.
SECURITY FOR THE NOTES
SECURITY INTEREST
The Notes shall be payable from and are equally and ratably secured by the pledge of, security interest in, and lien and charge upon, the taxes and other revenues (or both) of the County to be received during the period in which the Notes are outstanding (the “Revenue Receipts”). The County shall cause financing statements to be filed, registered and recorded in such manner and at such places as may be required by law to fully protect the security interests of the owners of the Notes and from time to time shall perform or shall cause to be performed any other act as provided by law, and shall execute and shall cause to be executed any and all further instruments as may be required by law, as governed by and interpreted pursuant to the Debt Act, for such protection or preservation of the security interests of the owners of the Notes. The Note Resolution shall constitute a security agreement between the County and the owners from time to time of the Notes.
SINKING FUND
The County will establish a separate sinking fund to be known as “Sinking Fund – Tax and Revenue Anticipation Notes, Series of 2012” (the “Sinking Fund”) and into said Sinking Fund there shall be paid by the County the Revenue Receipts necessary to pay the debt service on the Notes. Such monies shall be paid into the Sinking Fund in the amount necessary to pay the principal of and interest on the Notes and in such form as will provide available funds at or prior to 10:00 A.M., prevailing time, on the maturity date of the Notes. The Paying Agent, without further authorization, shall withdraw monies from the Sinking Fund and apply the same exclusively to payment of the principal of and interest on the Notes as the same shall become due. Monies, if any, which may be deposited from time to time in the Sinking Fund, and which are not immediately needed for payment of the principal of and interest of the Notes, shall be invested at the order of the County as permitted by law. Such
5 investments shall mature or shall be subject to redemption without penalty, and such deposits shall be subject to withdrawal, on or before the date upon which the monies so invested or deposited are needed to pay the principal of and the interest on the Notes. As provided in the Debt Act, if the Notes are not paid within the fiscal year in which the same are issued, the Notes shall be deemed to be nonelectoral debt enforceable in the manner of a general obligation, and the amount thereto shall be included in the budget of the County for the ensuing fiscal year and shall be payable from the taxes and revenues of such ensuing year.
COUNTY OF ALLEGHENY
The County is the second largest county in Pennsylvania and the City of Pittsburgh is the most populous city in the County. Prior to January 3, 2000, the County was governed by a three-person Board of County Commissioners. On January 3, 2000, the governance of the County transitioned to a Home Rule Charter (the “Charter”) and the Commission form of government was replaced with an elected Chief Executive (the “Chief Executive”), a fifteen-member County Council (the “County Council”) and an appointed professional Manager (the “Manager”). See APPENDIX A - “COUNTY OF ALLEGHENY” hereto.
The executive and administrative power of the County is vested in the Executive Branch that consists of the Chief Executive, the Manager, the Law Department and other departments and agencies established in the County’s Administrative Code.
Rich Fitzgerald is the County’s elected Chief Executive. James M. Flynn, Jr., serves as the appointed County Manager.
The legislative power of the County is vested in the County Council which consists of two at-large members and thirteen members elected by district. The members of the County Council, who are listed on the inside cover of this Official Statement, bring a wide variety of public and private experiences to County government. Charles Martoni, Ph.D. is President of County Council and Nicholas Futules is Vice President of County Council.
For a more detailed review of the County and its operations, see APPENDIX A – “COUNTY OF ALLEGHENY.” Also, for additional information on the County, see APPENDIX B – “DEMOGRAPHIC AND ECONOMIC INFORMATION.”
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6
ALLEGHENY COUNTY TAX AND REVENUE ANTICIPATION NOTES, SERIES OF 2012 COMPUTATION OF CUMULATIVE CASH FLOW SURPLUS (DEFICIT)
Greatest Deficit Divided by Opening Estimated Available Estimated Ending 85% Shown Month Balance Receipts Funds Disbursements Balance Positively
January (29,954,000) 26,678,000 (3,276,000) 58,071,000 (61,347,000) February (61,347,000) 23,074,000 (38,273,000) 52,011,000 (90,284,000) March (90,284,000) 68,539,000 (21,745,000) 87,125,000 (108,870,000) April (108,870,000) 33,757,000 (75,113,000) 48,396,000 (123,509,000) May (123,509,000) 46,771,000 (76,738,000) 85,760,000 (162,498,000) 191,170,000 June (162,498,000) 288,625,000 126,127,000 70,715,000 55,412,000 July 55,412,000 85,393,000 140,805,000 64,949,000 75,856,000 August 75,856,000 53,604,000 129,460,000 71,701,000 57,759,000 September 57,759,000 32,106,000 89,865,000 54,841,000 35,024,000 October 35,024,000 45,112,000 80,136,000 54,798,000 25,338,000 November 25,338,000 30,663,000 56,001,000 93,008,000 (37,007,000) December (37,007,000) 73,583,000 36,576,000 50,030,000 (13,454,000) Total 807,905,000 791,405,000
FINANCIAL STATEMENTS
The financial statements of the County as of and for the year ended December 31, 2010, appearing in Appendix D to this Official Statement, have been audited by Maher Duessel, Pittsburgh, Pennsylvania, independent public accountants, as stated in their report appearing herein.
There can be no assurance that the financial results achieved in the future will be similar to the historical results. Such future results will vary from historical results, and actual variations may be material.
The County represents, as of the date hereof, that there have been no material adverse changes in its financial condition, as set forth in Appendix D of this Official Statement, since December 31, 2010 which is the most recent fiscal year for which a Comprehensive Annual Financial Report (“CAFR”) has been filed.
LITIGATION
The following is a description of certain material legal proceedings and claims involving the County, other than routine litigation incident to the performance of its governmental and other functions, as well as certain other litigation arising out of alleged constitutional violations, civil actions, violations of law or other proceedings. The ultimate outcome of the proceedings and claims described below is not currently predictable; however, an adverse outcome could have a material effect on the County’s financial condition.
7 1. Allegheny County Jail Lawsuits. Approximately fourteen (14) different lawsuits or claims of a potential lawsuit have been filed against the County arising out of alleged incidents or actions at the County’s Jail. Three lawsuits/notices of claim were filed by the estates of certain inmates. In these cases, the plaintiffs allege violations of constitutional rights stemming from deaths of inmates during their period of incarceration. Eleven lawsuits were filed by former or current jail inmates that allege in part civil rights violations during the period of incarceration at the County’s Jail.
2. John Anderson v. Allegheny County et al. Plaintiff, who was charged with sexual assault of a child, alleges violation of his civil rights by CYF caseworkers. According to the complaint, CYF caseworkers investigated the charges and found the allegations to be substantiated and referred the matter to the city police for criminal proceedings. An answer was filed in this matter and discovery has commenced. It remains premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
3. Anthony Holdings International, Inc. v. Allegheny County et al. Plaintiff alleges that termination of a lease agreement by Airport Authority resulted in a violation of its constitutional rights under the 5th and 14th Amendments to the United States Constitution. Preliminary objections filed by the defendants were sustained by the court and an appeal has been taken to Commonwealth Court. It remains premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
4. Association of Community Organizations for Reform Now v. Allegheny County et al. Plaintiff organization initially filed a class action lawsuit in 2004 against the County and GLS Capital, the assignee of a certain County tax liens in 1997 and 1998. In the suit, which was subsequently amended, the Plaintiff alleged that the assignment of these liens and the assessment of attorneys’ fees, interest and costs in the enforcement of tax liens by the County and GLS were unconstitutional. Proceedings in this case were stayed indefinitely at the request of the Plaintiff pending the resolution of related litigation about the constitutionality of a state law governing assessment of attorneys’ fees, interest and costs in the enforcement of tax liens. The related litigation has produced decisions favorable to the positions of the County and GLS. As a consequence of the decisions in the related litigation, a motion for judgment on the pleadings/summary judgment seeking dismissal of the Plaintiff’s case was filed and is presently pending before the Court of Common Pleas.
5. Civil Rights Lawsuits. Eight (8) different lawsuits have been filed at different times by former or current County employees and job applicants that allege in part violations of federal constitutional rights based upon race, gender, political affiliation, and national origin, as well as violations of the Americans with Disabilities Act, Age Discrimination in Employment Act and/or the Family Medical Leave Act.
6. Personal Injury and Property Damage Suits and Claims. The County has received a number of notices of potential claims for personal injury and/or property damage arising out of incidents on County roadways or properties or alleged incidents caused by County employees. Additionally, the County has been named as a defendant in several lawsuits alleging personal injury or property damages.
7. Margaret Poplawski v. Allegheny County et al. Mother of accused murderer alleges negligence of 911 call center dispatcher regarding damage to real property. An answer was filed and the matter entered the discovery phase. It remains premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
8. In Re Real Property Assessment Appeals. At various times real property tax assessment appeals are pending in the Court of Common Pleas. In the aggregate, these appeals represent amounts that may be considered material; however, separately, the amount of County taxes under consideration is generally minimal. Generally, decreases in valuations resulting in reduction of tax revenue in various cases are offset by increases in valuations resulting in increases in tax revenue in other cases. See Appendix A for further information.
8 9. Latoya Randolph, Administrator of the Estate of Damien A. Randolph v. Zachary R. Schell et al. Estate alleges plaintiff-decedent suffered fatal injuries as the result of an automobile accident which occurred on or near a bridge ramp. The matter is in the discovery phase. It remains premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
10. Estate of Mary Safin; Estates of Kimberly Griffith, Brenna Griffith and Mikaela Griffith; Estate of Eric Kelly. The County has been noticed by the representatives of several decedents’ estates of the intention to commence civil actions against the County from alleged damages arising from various incidents. No complaints have been filed against the County in these matters. It remains premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
11. Schaffer v. Embarq et al. This wrongful death and survivor action alleged that there were errors and problems in the design and functioning of the equipment used in the County’s 911 emergency call system. The Plaintiff contends that the errors and problems in the 911 system constituted gross negligence and thereby resulted in delayed emergency response leading to the death of an infant child. The County, which was brought into this matter by the other named defendants as a third party defendant, has denied any liability in this matter. The case is still pending in the Court of Common Pleas. It remains premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
12. Theresa Thorton et al. v. City of Pittsburgh, et al. Plaintiff alleges delayed arrival of emergency personnel to home residence during winter storm period resulted in the death of Curtis Mitchell. Answers have been filed and discovery has commenced in this matter. It remains premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
13. White v. Allegheny County, et al. This is a putative class action suit filed against Allegheny County, the City of Pittsburgh, the Pittsburgh School District and the Woodland Hills School District. The suit, which sought declaratory, injunctive, restitutionary and other forms of relief, alleged that a class of taxpayers has been forced to bear a disproportionate property tax burden due to inequalities resulting from a lack of uniform property assessments within the County. In early January 2011, the Court of Common Pleas sustained preliminary objections and dismissed the plaintiffs’ amended complaint as to all defendants. Plaintiffs appealed the decision to Commonwealth Court, which recently affirmed the lower court ruling.
14. Adrienne Young v. Allegheny County et al. Plaintiff claims she was falsely arrested several times by the City police in violation of her civil rights. Plaintiff also alleges probation officers wrongfully conspired with police officers to keep her in jail. The matter was removed to federal District Court. Answers have been filed. It remains premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome. LEGAL MATTERS
All legal matters incident to the authorization of issuance of the Notes are subject to the receipt of an approving legal opinion from Campbell & Levine, LLC, Pittsburgh, Pennsylvania, as Note Counsel. The text of the opinion is included as Appendix C to this Official Statement. Certain legal matters will be passed upon for the County by its Solicitor, Michael H. Wojcik, Esquire, Pittsburgh, Pennsylvania.
FINANCIAL ADVISOR
Public Financial Management, Inc. (“PFM”) is serving as financial advisor to the County in connection with the issuance of the Notes. PFM has assisted the County in matters relating to the planning, structuring and issuance of the Notes and has provided the County with other financial advice. PFM is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in this official statement. PFM will receive a fee for its services with regard to the issuance of the Notes.
9 TAX MATTERS
FEDERAL TAX EXEMPTION
The opinion of Note Counsel will state that under existing law, the interest on the Notes (a) is excluded from gross income for Federal income tax purposes and (b) is not an item of tax preference for purposes of the Federal alternative minimum tax imposed on individuals and corporations; however, with respect to certain corporations (as defined for federal income tax purposes), such interest may be taken into account in determining “adjusted current earnings” for the purposes of computing the alternative minimum tax imposed by the Code on such corporations. For the purpose of rendering the opinions set forth in this paragraph, Note Counsel will assume compliance by the County with all requirements of the Code that must be satisfied subsequent to the issuance of the Notes in order that interest on the Notes be (or continue to be), excluded from gross income for Federal income tax purposes. Failure by the County to comply with such requirements could cause the interest on the Notes to be included in gross income retroactive to the date of issuance of the Notes. The County has covenanted in the Note Resolution and a non-arbitrage certificate to be delivered on the date of issuance and delivery of the Notes to comply with all such requirements.
Note Counsel will express no opinion regarding other federal tax consequences arising with respect to the Notes.
ORIGINAL ISSUE PREMIUM
The Notes will be sold at an original issue premium (individually referred to as an “OIP Note”). The original issue premium for a Note will be equal to the excess of an owner’s tax basis in the OIP Note over the amount payable at maturity. Under current law, the original issue premium for an OIP Note must be amortized on an annual basis by the owner thereof. The amount of original issue premium amortized each year will not be deductible for federal income tax purposes. Further, Section 1016 of the Code requires that the amount of annual amortization for the OIP Note be deducted by the owner’s tax basis in such OIP Note. This reduction in an owner’s tax basis will affect the amount of capital gain or loss to be recognized by the owner when the OIP Note is sold. Amortizable premium is accounted for as reducing the tax-exempt interest on the OIP Notes rather than creating a deductible expense or loss. Owners of OIP Notes should consult their tax advisors with respect to the termination and treatment of amortizable original issue premium for federal income tax purposes and with respect to the state and local tax consequences of owning such OIP Notes.
PENNSYLVANIA TAX EXEMPTION
The opinion of Note Counsel will state that the Notes are, under existing law, exempt from Pennsylvania personal property taxes and the interest on the Notes is exempt from the Pennsylvania corporate net income tax and from Pennsylvania personal income taxation. Note Counsel expresses no opinion with respect to state or local taxes of any state other than the Commonwealth of Pennsylvania.
10
CONTINUING DISCLOSURE UNDERTAKING
Pursuant to Rule 15c2-12 (the “Rule”) of the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (the “1934 Act”), the County has agreed, as a condition to the purchase of the Notes by the Purchasers, to provide the following information:
(a) Within 180 days after the end of its fiscal year ended December 31, 2011, to the Municipal Securities Rulemaking Board (the “MSRB”) using the Electronic Municipal Market Access (“EMMA”) system created by the MSRB, as described in the Securities and Exchange Commission Release No. 34-59061 and Release No. 34-59062, (i) the County’s audited general purpose financial statements, prepared in accordance with generally accepted accounting principles in effect from time to time, and (ii) certain financial information and operating data (excluding, among other things, any management discussion) of the type found in this Official Statement in Appendix A including, among other things, under the captions “SCHEDULE OF OPERATIONS 2006-2010,” “GENERAL SOURCES OF REVENUE BY PERCENTAGE,” “REAL ESTATE ASSESSED VALUATION,” “PENSION PLAN,” and “STATEMENT OF INDEBTEDNESS”; and
(b) Notice of the occurrence of any of the following events with respect to the Notes to the MSRB using EMMA no later than ten (10) business days after the occurrence thereof:
1. Principal and interest payment delinquencies 2. Non-payment related defaults, if material 3. Unscheduled draws on debt service reserves reflecting financial difficulties 4. Unscheduled draws on credit enhancements reflecting financial difficulties 5. Substitution of credit or liquidity providers, or their failure to perform 6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Notes or other material events affecting the tax-exempt status of the Notes 7. Modifications to rights of holders of the Note, if material 8. Note calls, if material, and tender offers 9. Defeasances 10. Release, substitution or sale of property securing repayment of the Note, if material 11. Rating changes 12. Bankruptcy, insolvency, receivership or similar event of the County (or any other entity that is an obligated person within the meaning of the Rule with respect to the Notes) 13. The consummation of a merger, consolidation, or acquisition involving the County (or any other entity that is an obligated person within the meaning of the Rule with respect to the Notes) or the sale of all or substantially all of the assets of the County or any such obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material 14. The appointment of a successor or additional trustee or the change of name of a trustee, if material; and 15. Failure to make an annual financial information filing on a timely basis.
No Noteholder may institute any suit, action or proceeding at law or in equity (“Proceeding”) for the enforcement of the Undertaking or for any remedy for breach thereof, unless such Noteholder shall have filed with the County Solicitor evidence of ownership and a written notice of and request to cure such breach, and the County shall have refused to comply within a reasonable time. All Proceedings shall be instituted only as specified herein, in the Federal or State courts located in Allegheny County, Pennsylvania, and for the equal benefit of all holders of
11 the outstanding Notes benefited by the same or a substantially similar covenant and no remedy shall be sought or granted other than specific performance of the covenant at issue.
The County has complied with its previous continuing disclosure undertakings.
RATING
Standard & Poor’s has assigned its municipal bond rating of “SP-1+” to the Notes.
Such rating reflect only the views of such organizations and any desired explanation of the significance of such ratings should be obtained from the rating agency furnishing the same, at the following addresses: Standard & Poor’s, 55 Water Street, New York, New York 10007. There is no assurance that such rating will not be revised downward or withdrawn entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Any such downward revision or withdrawal or such rating may have an adverse effect on the market price of the Notes. SALE OF NOTES
After competitive bidding conducted on January 10, 2012, the Notes were awarded to PNC Capital Markets, LLC, RBC Capital Markets, and Citigroup Global Markets (the “Purchasers”). The Notes are being purchased by the Purchasers at an aggregate purchase price of $176,374,250.00 (principal amount of the Notes of $175,000,000 plus original issue premium of $1,390,085.00 less underwriter’s discount of $15,835.00).
CONCLUDING STATEMENT
All estimates, assumptions, statistical information and other statements contained herein, while taken from sources considered to be reliable, are not guaranteed by the Underwriters. So far as any statement herein includes matters of opinion, or estimates of future expenses and income, whether or not expressly so stated, they are intended merely as such and not as representations of fact.
The information contained herein should not be construed as representing all conditions affecting the County or the Notes.
The agreements of the County are set forth in such documents, and the information assembled herein is not to be construed as a contract with Registered Owners of the Notes.
The contents hereof, including the cover page and the appendices hereto, are all part of this Official Statement. The distribution of this Official Statement has been authorized by the County.
COUNTY OF ALLEGHENY
By:./s/ James M. Flynn, Jr.______James M. Flynn, Jr., County Manager
By: /s/ Chelsa Wagner______Chelsa Wagner, Controller
12 APPENDIX A
County of Allegheny
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COUNTY OF ALLEGHENY
INTRODUCTION
STRUCTURE OF GOVERNMENT
The County is the second largest county in Pennsylvania and the City of Pittsburgh is the most populous city in the County. Prior to January 3, 2000, the County was governed by a three-person Board of County Commissioners. On January 3, 2000, the governance of the County transitioned, under the provisions of a new Home Rule Charter (the "Charter"), from the Commission form of government to government by an elected Chief Executive (the "Chief Executive"), a fifteen-member County Council (the "County Council") and an appointed professional Manager (the "Manager"). The County’s change to home rule under the Charter was intended to create a more efficient, effective, representative and accountable County government that will improve the delivery of services and promote economic development in the County.
County Executive. The executive and administrative power of the County is vested in the Executive Branch, consisting of the Chief Executive, the Manager, the Law Department and other departments and agencies established in the County’s Administrative Code. The Chief Executive’s powers and duties include, among others: the approval or veto of any ordinance or resolution adopted by County Council; the enforcement of ordinances and resolutions of the County and the provisions of the Charter; negotiating, awarding and signing, or causing to be negotiated, awarded or signed on behalf of the County, all contracts, agreements and other instruments, except as provided in the Charter; controlling and being accountable for the administration of all departments and agencies except those specifically placed under the jurisdiction of any other officer by law or by the Charter; submission of ordinances, resolutions and other related matters to the County Council; and the power to appoint the Manager and County Solicitor, with the approval of the County Council. The Chief Executive also makes appointments, subject to the approval of the County Council, with respect to most of the County’s administrative bodies, but shares such appointive power, in certain cases, with other governmental units.
Dan Onorato, the County’s elected Chief Executive, has both extensive business experience and organizational leadership. Prior to his election as Chief Executive, he served as the Allegheny County Controller from 2000 to 2004. As the County's chief financial officer and independent auditor, he guided Allegheny County's financial management and uncovered opportunities to streamline government operations. Mr. Onorato also served two terms as a member of Pittsburgh City Council, from 1992-2000. Before entering public office, Mr. Onorato practiced both as an attorney and a Certified Public Accountant. Mr. Onorato is actively involved in the community. He has served as a board member of the Pittsburgh Parks Conservancy, National Aviary, St. Anthony School Programs, Pittsburgh Children's Museum, Carnegie Library of Pittsburgh and Friends of the Riverfront. He is also a member of the World War II Veterans of Allegheny County Memorial Fund Advisory Committee.
Mr. Onorato attended the Pennsylvania State University, where in 1983 he earned a bachelor's degree in accounting. He continued his education at the University of Pittsburgh School Of Law, earning a Juris Doctorate degree in 1989. Mr. Onorato is a life-long resident of the North Side of Pittsburgh.
Mr. Onorato's term of office expires on January 3, 2012.
Rich Fitzgerald, the elected County Executive, has both extensive business experience and organizational leadership. Prior to his election as County Executive, Mr. Fitzgerald was an inaugural member of Allegheny County Council. He served as the District 11 Council Member from 2000-2011, and was President of Council from 2004-2011. As a member of Council, he worked to reform government and save taxpayers money by taking on popular officials and eliminating a number of row offices. Mr. Fitzgerald also worked to improve the way Allegheny County does business. As a small business owner himself, he has been particularly engaged in the creation of jobs and support of emerging A – 1 companies in the county. Since 1982, Mr. Fitzgerald has been the owner of Aquenef (acronym for water and energy efficiency). The company is the leading provider of water treatment equipment and services in the western Pennsylvania region, with over 700 customers.
Mr. Fitzgerald attended the Carnegie Mellon University where in 1981 he earned a bachelor's degree in mechanical engineering, with a minor in business. With the exception of a brief time spent working and living in Illinois, he is a lifelong resident of the City of Pittsburgh. He, his wife and family live in Squirrel Hill.
Mr. Fitzgerald's term of office expires on January 5, 2016.
County Manager. In January 2004, James M. Flynn, Jr. was appointed by Allegheny County Chief Executive Dan Onorato to serve as Allegheny County Manager, the chief operations officer of the County. As Manager, Jim Flynn works to ensure that the day-to-day operations of county government run smoothly and efficiently.
Under the Charter, the Manager serves as the chief administrative officer of the County, responsible to the Chief Executive for the administration of County operations placed in the Manager’s charge by ordinance, by the Chief Executive or by the Charter. The Manager’s duties also include the supervision of all Executive Branch departments and agencies except the Law Department; the preparation and administration of a personnel system, including the authority to hire, discipline and discharge personnel under the jurisdiction of the Manager; and the preparation and administration of the Comprehensive Fiscal Plan (the “CFP”) for the County.
Prior to this appointment, Jim Flynn served as Deputy Allegheny County Controller from 2000 – 2003. He came to Allegheny County with more than 14 years of financial management experience. Previously, Jim Flynn served as Controller for Chester Engineers, Inc., an engineering and construction firm based in Pittsburgh. He also served as a senior accountant for a mechanical contractor.
Jim Flynn was appointed by Chief Executive Onorato to serve on the Allegheny County Board of Health. He also serves on the board for Allegheny Correctional Health Services Inc., which is responsible for providing health care to inmates in the Allegheny County Jail.
A native of Pittsburgh, Jim Flynn earned a B.S. from Carnegie Mellon University in public policy and management, as well as a B.S. from Point Park College in accounting. He continued his education at Robert Morris College, earning an M.B.A. Mr. Flynn also completed the requirements of the C.P.A. exam.
County Council. The legislative power of the County is vested in the County Council, which consists of two at-large members and thirteen members elected by district. The County Council has, among others, the power and duty to: adopt, amend and repeal ordinances, resolutions and motions; make appropriations; levy taxes, fees and service charges and incur indebtedness; adopt balanced annual operating and capital budgets; adopt an Administrative Code; conduct investigations of County departments, agencies or functions; and override, by the appropriate vote, any veto by the Chief Executive. The members of the County Council bring a wide variety of public and private sector experiences to County government.
The Charter can only be amended by referendum vote. Voters of the County have the power to propose ordinances by petition for consideration by the County Council (agenda initiative) or by petition for consideration by the voters of the County (voter referendum) for issues that are germane to County government, with the exception of certain tax issues.
A – 2
COUNTY FINANCIAL MANAGEMENT, BUDGETING AND CONTROLS
Operating and Capital Budget Process
Section 801.02 of the County’s Administrative Code requires the preparation of the Comprehensive Fiscal Plan (the "CFP") which encompasses the preparation of the annual operating budget. In addition to the annual operating budget, the CFP requires the preparation of a two (2) year operating budget beyond the current year, an annual capital budget used for funding and fiscal control of specific facilities, equipment and construction/rehabilitation projects. The CFP also calls for the preparation of a grant and special revenue budget, an agency fund budget accounting for funds held by the County on behalf of other entities and a five (5) year capital improvement plan which identifies needed capital projects and the coordination of the financing and timing of expenditures on a long-term basis. Under the Charter, the preparation of the annual operating budget is the responsibility of the County Manager. Internal management reports detailing the status of the current budget are prepared and distributed monthly.
The Charter limits the Chief Executive’s and County Council’s operating budgets to 0.2% and 0.4% of the County’s locally levied tax revenue respectively. The Charter maintained the previous limits of taxation on real estate, sales and hotel/motel taxes. Any increase in real estate tax revenues is capped at 5% annually (excluding new construction and rehabilitation) in the year after a countywide reassessment. A two-thirds majority of Council is required to effect a change in the rate of taxation for real estate. The Chief Executive has line-item veto power, which may be overridden by a two-thirds vote of Council.
The Charter requires passage of balanced annual operating and capital budgets. No budget may be reopened without a two-thirds vote of Council and concurrence of the Chief Executive.
The operating budget must be prepared in accordance with nationally recognized standards and is based on the premise that no appropriation in any given year will automatically continue into subsequent years.
The Chief Executive must present the budget message and submit the CFP to the Council no later than 75 days before the end of each fiscal year. After submission of the proposed operating and capital budgets and at least two weeks before adoption, the Council is required to hold a minimum of two public hearings. Upon completion of the hearings and no later than 25 days before the end of the fiscal year, the Council is required to adopt, by resolution, balanced annual operating and capital budgets for the next fiscal year. Before adoption, the Council may add, delete, increase or decrease any appropriation item.
Financial Reporting and Control Systems
The current Allegheny County financial information system provides timely and accurate accounting and budgetary data. This fully integrated computerized system encompasses the operating, capital and grants budgets, provides timely information to managers and contributes significantly to the County’s financial monitoring program. The system has enhanced "on-line" processing and reporting capabilities which improve the effectiveness of expenditure control efforts by permitting user departments to obtain immediate access to accounting information.
The County’s financial statements are prepared in accordance with generally accepted accounting principles (GAAP) applicable to government bodies. Governmental funds and activities are accounted for and reported on the modified accrual basis. Proprietary funds, including the Risk Management Fund, are reported on the full accrual basis. The County’s Employees’ Retirement Fund has been on the full accrual basis since 1981 and general fixed assets have been included in audited financial statements of the County since 1982. A – 3
For the thirty-first consecutive year, the Controller released independently audited financial statements. The Controller also issues interim financial statements that are reviewed by independent public accountants. These statements provide a reliable and consistent basis for analysis and forecasting to assist in ensuring the financial stability of the County. Monthly reports on operating and capital revenues, expenditures, and cash flow are available within seven days after each month’s end.
In 2002, the County implemented Governmental Accounting Standards Board (GASB) Statement No. 34, “Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments.” This statement, known as the “Reporting Model”, affects the way the County and its component units prepare and present financial information. The basic financial statements consist of both government-wide (full accrual/economic resource basis) and fund financial statements (modified accrual/current financial resource basis). GASB 34 also required the County to provide a Management’s Discussion and Analysis (MD&A) that presents a narrative overview and analysis of the County’s financial performance for the fiscal year. The MD&A is included in Appendix D with the basic financial statements and notes to the financial statements for the year ended December 31, 2010. It is recommended the MD&A and the summaries that follow be read in conjunction with the basic financial statements and notes in order to obtain a thorough understanding of the County’s financial condition.
2006-2010 Statement of Operations
The following schedule summarizes the results of County operating fund activities for fiscal years 2006 through 2010, presented on a current resource and modified accrual basis of accounting. The information regarding the operating statements for fiscal years 2006 through 2010 was derived from the County’s audited financial statements reported in accordance with GAAP. Only the 2010 audited financial statements are included in Appendix D of this Official Statement.
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A – 4 COUNTY OF ALLEGHENY, PENNSYLVANIA SCHEDULE OF OPERATIONS (1) 2006-2010 (000’s) 2006 2007 2008 2009 2010 REVENUES: Taxes (Sales/Property/Alcohol) $ 300,495 $ 314,002 $ 338,213 $ 333,018 $ 343,500 Federal, State and Local (Grants) 311,266 333,607 303,634 300,456 300,001 Charges for Services 60,903 60,325 60,989 68,384 68,272 Miscellaneous 14,362 15,977 17,125 15,974 11,270
TOTAL REVENUES 687,026 723,911 719,961 717,832 723,043
EXPENDITURES:
General Government 147,951 151,890 155,641 166,708 165,044 Public Safety 70,753 74,226 77,730 78,837 81,383 Public Works 26,992 29,178 28,346 29,063 29,989 Transportation 15,859 24,359 27,453 27,669 27,669 Health & Welfare 323,992 338,059 325,881 337,536 343,550 Culture & Recreation 7,986 8,663 8,870 9,498 10,150 2 1,568 Education 21,590 21,628 22,010 22,488 Economic Development 4,399 6,745 6,563 6,495 5,848 Debt Service: Principal 31,470 32,085 33,205 38,233 41,388 Interest Charges 26,559 26,519 28,643 24,612 28,529 Costs of Issuance - 583 - 156 41
TOTAL EXPENDITURES 677,551 713,875 713,960 740,817 756,079
Excess (deficiency) of revenues over expenditures 9,475 10,036 6,001 (22,985) (33,036)
Net operating transfers (out)/in (9,495) (1,119) 1,282 (5,224) 32,603 Issuance of refunding bonds - 73,219 - 29,266 - Proceeds on sale of bldg. - - - 11,420 - Capital lease - - - 7,679 - Premium on TRAN - - 314 - 85 Payment to refund bond escrow agent - (72,636) - (29,110) -
Net change in fund balances (20) 9,500 7,597 (8,954) (348)
Total fund balance- Beginning of Year 18,250 18,230 27,730 35,327 26,373
Total fund balance - End of Year $ 18,230 $ 27,730 $ 35,327 $ 26,373 $ 26,025
Fund balances (2): Reserved $ 833 $ 1,029 $ 2,007 $ - $ - Designated - 6,009 14,237 - - Undesignated 17,397 20,692 19,083 - - Restricted - - - 4,298 5,635 Assigned - - - 2,610 913 Unassigned - - - 19,465 19,477
Total fund balance - End of Year $ 18,230 $ 27,730 $ 35,327 $ 26,373 $ 26,025
(1) This schedule includes the following Governmental Fund types: General, Transportation, Liquid Fuel Tax, and Debt Service. (2) See Note 1(H) and Exhibit 3 of the 2010 audited financial statements (Appendix D) for detailed fund balance information in accordance with GASB 54. A – 5
MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATING FUNDS
Fiscal Year 2010 Compared to Fiscal Year 2009 Revenues
When compared to the previous year, 2010 revenues, other financing sources - net, and special item increased by $23.9 million, or 3.3%. Overall, revenues from real property taxes increased $3.8 million or 1.4% in fiscal year 2010. The property tax increase resulted from the following (in millions):
Current and delinquent taxes increased $ 1.3 Lien taxes increased 1.9 Interest and penalty increased 0.1 In lieu of taxes increased 0.2 Tax refunds decreased 0.6 Net Change $ 3.8
Current and delinquent taxes increased due to higher certified assessed values in both 2010 and 2009. In addition, lien tax collections have increased as lien receivable balances have increased since the 2007 sale of receivables.
Sales tax revenues increased 4.4% or $1.7 million as November and December’s collections indicated an upswing in the economy.
Alcoholic Beverage/Rental Vehicle tax revenue remained consistent between years. The tax (Transportation Fund) is restricted for expenditures related to the Port Authority Transit.
The 2% Gaming local share assessment tax increased $3.3 million in 2010, as the Rivers Casino was only open for five months in 2009.
Federal revenues decreased by $5.1 million or 5.4% as detailed below (in millions):
· Reimbursement for federal prisoners decreased $(0.7) · Increased stimulus funding for foster care 1.8 · Increase in skilled nursing care 1.0 · Decrease in Medicare Part A (1.1) · Decrease in Title IV-E - Child Placement (5.3) · Decrease in TANF (0.5) · Decrease in Title IV-E - Adoption (0.5)
State revenues decreased by $1.5 million for the reasons detailed below (in millions):
· Decreased Crime Lab and Criminal Justice subsidies $(1.8) · Decreased Act 315 Health Department funding (0.7) · Gaming license revenue ended in 2009, as the County’s $42.5 million for public investment in airport was repaid (10.2) · Increase in Kane’s Intergovernmental Transfers Program performance bonuses 3.2 · Increase in skilled nursing care 0.8 · Increase in Medicaid Paid Prescriptions 0.3 · Increase in Act 148 Special Grant Incentives 10.1 · Decrease in Act 148 CYF services (3.5) · Increase in Liquid Fuel Tax 0.3
Local units revenues increased $6.1 million as the County received $6 million in repaid loans from Redevelopment Authority’s (RAAC) Economic Development Fund Revolving Loan Program. A – 6
Charges for services increased for the following reasons (in millions):
· General government revenue increased $0.3 · Increased reimbursements for Airport security 0.3 · Golf fees decreased (0.2) · Swimming fees increased 0.2 · New ski rental and lesson fees 0.1 · Ice skating fees increased 0.1 · Patient income decreased (0.6) · Collections from guardians and parents decreased (0.4) · Private/Commercial insurance at Kane increased 1.9 · Miscellaneous receipts decreased as Kane had no MA Disproportionate Share income (0.5)
Interest earnings decreased $0.4 million as cash balances dwindled and interest rates dropped throughout the year.
Miscellaneous revenue decreased $4.1 million, as 2009 revenues for insurance reimbursements ($1.0 million), unclaimed property ($1.2 million) and sales of property at Kane ($0.4 million) and Smithfield St. ($1.5 million) did not occur in 2010.
Other financing sources - net were $32.7 million in 2010 for the following reasons (in millions):
· PennDot reimbursements from Capital Projects Fund $41.5 · Reimbursement for capital assets from Capital Projects Fund 0.5 · Excess Debt Service funds 0.4 · Interdepartmental transfer agreements 0.7 · Matching requirement and County Grant deficit funding (7.2) · Matching requirement for Human Service grants (4.8)
Expenditures
Total outlays increased by 2.1%, or $15.3 million, during 2010. General government expenditures decreased by $1.7 million, public safety expenditures increased by $2.5 million, public works expenditures increased by $0.9 million, transportation expenditures remained the same, health and welfare expenditures increased by $6.0 million, culture and recreation expenditures increased by $0.7 million, education expenditures increased by $0.5 million, economic development expenditures decreased by $0.6 million and debt service principal, interest, and cost of issuance payments increased by $7.0 million.
A – 7
The increase in expenditures of $15.3 million, from $740.8 million in 2009 to $756.1 million in 2010, is explained below.
General government expenditures decreased by $1.7 million for the following reasons (in millions):
· No 2010 Capital lease cost $(7.7) · Non-departmental - Decrease in Voluntary Separation payments (0.4) - Transfer of lease payments (0.5) · Salary and fringe benefits increases: - Courts 2.5 - Administrative Services 0.7 - Public Defender 0.7 - District Attorney 0.7 - Sheriff 0.7 - Court Records 0.3 - Treasurer’s Office 0.3 · Increase in Property Assessment postage/temps 0.8 · Increase in Medical Examiner lease payments 0.5
Public safety expenditures rose by $2.5 million as salary and fringe benefits increased at the Jail ($0.9 million) and County Police ($1.0 million). In addition, the Jail’s services increased $0.3 million and supplies increased $0.1 million.
Public works expenditures increased $0.9 million, as rock salt purchases increased $0.8 million and salaries and fringe benefits of maintenance rose $0.8 million. These increases were offset by transfers of eligible costs to the Celebration of Lights project.
Health and welfare expenditures increased $6.0 million. Kane Regional Centers salaries and fringe benefits rose $1.6 million and the Health Department’s Environmental Health Services increased $0.3 million. Medical costs for inmates rose $1.7 million and CYF’s expenditures for foster care payroll, legal counsel and payment to providers increased $2.2 million.
Culture and recreation expenditures increased $0.7 million as salary and fringe benefits rose $0.1 million, material cost for rock salt increased $0.2 million and unexpected legal settlements of $0.6 million.
Economic development’s $0.6 million decrease in expenditures was related to a $0.7 million return of excess escrow funds used to pay debt service for RAAC’s Economic Development Fund.
Debt service payments rose $7.0 million in 2010, as principal payments increased $3.2 million and interest payments escalated $3.8 million. The principal payments for Series 18 and C-57 were responsible for the increase and the C-62 Bond contributed to the increase in interest expenditures.
Summary of Operations, Fiscal Years 2006 through 2010
Sales Tax collections in a recovering economic climate increased $1.7 million (4.4%) to $40.9 million in 2010. The sales tax collected in 2010 was $.6 million (1.5%) higher than the yearly average of the two previous highest taxes collected in 2007 and 2008. The County’s real property tax rate has remained at 4.69 mills since 2002. During the last five years property tax collections have averaged $263.3 million a year; and 2009 and 2010 collections have increased by 2.4% and 1.4%, respectively. Property taxes comprise 36.9% of operating revenues from 2006 through 2010.
Federal, State and Local revenues during the five-year period have accounted for 43.4% of total revenue. Federal revenues were $107.4 million in 2006 and $89.2 million in 2010, a decrease of $18.2 million or 16.9%. State revenues in 2009 and 2010 have decreased an average of $8.5 million or 4.3% over the
A – 8 average of 2006 though 2008. Federal, State and Local revenues have averaged $309.8 million over the past five years.
During 2006 and 2007, higher wages, fringe benefits and debt service (2006) resulted in costs increasing by 2.7% and 5.4%, respectively. These increased costs were offset by revenues received for decertifying beds at John J. Kane Regional Health Centers, a reduced Port Authority subsidy, a tax receivable sale and State gaming revenue. 2008 total expenditures were identical to 2007 with the newly enacted Alcoholic Beverage Tax funding the Port Authority’s $27.5 million subsidy. 2009’s expenditures increased by $26.9 million (3.8%) from higher salaries and fringe benefits, the Medical Examiner Lab’s capital lease and increased human service costs. One-time revenues from gaming revenue, sale of One Smithfield Building and use of the Transportation fund balance were used to meet increased expenditures. As previously stated, 2010’s expenditures increased by $15.3 million (2.1%) as Health and Welfare and Debt Service cost rose. Use of PennDot reimbursements were used to offset increased costs associated with 2009 and 2010. Consistent revenues and the use of one-time funding have resulted in the County’s undesignated/unassigned General Fund balance to average $19,031 the past five years.
COUNTY OF ALLEGHENY, PENNSYLVANIA COMBINED OPERATING FUND BALANCES 2006-2010 (000's)
2006 2007 2008 2009 2010 Governmental Funds: General $ 18,224 $ 27,356 $ 19,492 $ 20,152 $ 20,390 Transportation - - 12,430 4,064 5,159 Liquid Fuel 6 374 147 233 476 Debt Service - - 3,258 1,924 - Total fund balance $ 18,230 $ 27,730 $ 35,327 $ 26,373 $ 26,025
Source: Allegheny County Controller.
A – 9
COUNTY OF ALLEGHENY, PENNSYLVANIA BUDGETED STATEMENT OF OPERATIONS 2011-2012
Budgeted* 2011 Adopted 2012 Adopted Revenues: Taxes $362,980,000 $395,025,875 Federal, State and Local (Grants) 312,229,535 299,551,343 Charges for Services 80,811,965 85,195,431 Other Revenue 6,886,170 4,313,500 Use of Fund Balance 4,785,000 0 Total Revenues $767,692,670 $784,086,149
Expenditures: General Government $162,931,313 $170,553,695 Public Safety 84,187,885 85,553,661 Public Works 30,144,947 31,093,811 Transportation 27,668,700 27,668,700 Health and Welfare 351,223,455 350,875,193 Culture and Recreation 8,738,458 8,803,965 Education 22,894,760 25,850,455 Economic Development 6,718,797 6,532,483 Debt Service: Principal Retirement 39,717,930 42,759,035 Interest Charges 33,466,425 34,395,151 $767,692,670 $784,086,149
* Sources - 2011 Adopted Budget passed by County Council on December 1, 2010; 2012 Adopted Budget passed by County Council on December 6, 2011.
A – 10 SOURCES OF ALLEGHENY COUNTY REVENUE
General
The County derives its revenues from local taxes on real property, the County’s portion of a 1% sales tax, user charges and miscellaneous receipts and from the federal government and the Commonwealth of Pennsylvania. The chart below sets forth the principal sources of County revenues and the relative percentages thereof. A discussion of the County’s principal revenue sources follows:
COUNTY OF ALLEGHENY, PENNSYLVANIA GENERAL SOURCES OF REVENUE BY PERCENTAGE 2008 - 2012
Audited Audited Audited Budgeted Budgeted Category 2008 2009 2010 2011 2012
Property Tax 35.4% 36.4% 36.6% 36.9% 40.4% Sales Tax 5.6% 5.5% 5.7% 5.3% 5.3% Drink & Car Rental Tax 6.0% 4.6% 4.5% 4.3% 4.7% State 26.8% 26.3% 25.9% 26.5% 24.9% Federal 12.9% 13.1% 12.3% 11.9% 11.1% Charges for Services 8.5% 9.3% 9.4% 7.4% 7.4% Regional Asset District 2.4% 2.4% 2.4% 2.3% 2.3% Gaming 0.0% 0.2% 0.7% 0.8% 0.7% All Other * 2.4% 2.2% 2.5% 4.6% 3.2% Total County 100.0% 100.0% 100.0% 100.0% 100.0%
* - Includes Interest Earnings, Licenses and Permits, Fines and Forfeitures, Miscellaneous, Non-Revenue Receipts and Prior Years' Financing
Source: 2008-2010, Allegheny County Controller's Annual Financial Reports; 2011-2012, Allegheny County Operating Budgets.
Property Taxes Property taxes, the single largest source of County revenues, is projected to represent 36.9% and 40.4% of total revenue for the 2011 and 2012 fiscal years, respectively.
Under the provisions of the Charter, County Council may levy on the assessed value of taxable real property for general County purposes, a maximum of 25 mills and an additional five mills to support the Community College of Allegheny County. There is no limitation on the millage levy for debt service. The County levy for 2012, as enacted by County Council is 5.69 mills, of which 4.5593 mills is allocated for general County purposes and 1.1307 mills is allocated for debt service. This levy represents a 1 mill increase over the 2011 levy; the first such increase since 2001.
Property Tax Collection Procedures Property tax statements are normally mailed by February 15 of each year. Taxes are due on April 1 and are considered delinquent on May 1. A two percent (2%) discount is allowed for bills paid on or prior to March 31, while taxes paid between April 1 and April 30 are paid at full value. Taxpayers who fail to pay by May 1 are sent a notice of delinquency and charged a five percent (5%) penalty against the delinquent taxes, plus a one percent (1%) interest charge per month for each month the bill remains unpaid. Property taxes are considered liened if they remain unpaid for one year beginning May 1. A – 11
ALLEGHENY COUNTY PROPERTY ASSESSMENTS
In compliance with a 1997 Common Pleas Court decision, Allegheny County issued new assessments for its approximately 600,000 parcels of real property in 2001 and 2002. As part of the implementation of the new reassessments, the County also changed its predetermined ratio for assessing property to 100% of market value. In 2001, the countywide reassessment resulted in over 90,000 appeals filed by taxpayers. In 2002, the second consecutive countywide reassessment resulted in another 90,000 appeals. Appeals from these two years continued to be heard in 2005.
In 2005, relying upon provisions in the General County and Second Class County Assessment Laws, the County changed its system for assessing property. Instead of performing periodic countywide reassessments, the County implemented a “base year” system. The base year system, which is utilized in most other counties within the Commonwealth of Pennsylvania, expresses all property values in terms of a property’s value in the year of the last reassessment. In 2005, the County enacted an ordinance whereby all property values for the 2006 tax years and subsequent years were to be based upon their value in 2002, the year in which the Allegheny County last performed and implemented a countywide reassessment.
Following the County’s implementation of a base year assessment system, the Sto-Rox School District and a Franklin Park homeowner filed a lawsuit against the County. In their suit, the plaintiffs alleged that the base year assessment system violated the Uniformity Clause of the Pennsylvania Constitution and the Equal Protection Clause of the United States Constitution. The basis of the constitutional challenge to the base year assessment system was that a base year system fails to take into account that property values are changing at different rates, both increasing and decreasing, in different parts of the County. By failing to take these constantly changing values into account, the plaintiffs claimed that the base year system forces property owners to pay an unequal and disproportionate share of the tax burden. Specifically, lower valued properties are alleged to bear a greater amount of the tax burden than higher valued properties.
In June 2007, the Court of Common Pleas issued a lengthy opinion in which it declared that the state assessment laws which allowed counties in the Commonwealth of Pennsylvania to utilize a base year in the valuing of property for real estate taxation purposes were facially unconstitutional. The Court of Common Pleas ordered the County to perform and implement new countywide reassessments based upon the actual market values of properties within the County for both the 2009 and 2010 Tax Years. The County filed a direct appeal of the Common Pleas Court’s decision declaring the base year form of assessment facially unconstitutional to the Pennsylvania Supreme Court.
In April, 2009, the Pennsylvania Supreme Court issued a decision in which it held that the state assessment laws which allow counties to utilize a base year in valuing property for real estate taxation purposes were not unconstitutional on their face. Nevertheless, the Supreme Court held that the base year system, as applied in Allegheny County, violated the Uniformity Clause of the Pennsylvania Constitution because the County’s 2002 base year assessments had become stale and less uniform due to the passage of time and the work of market forces. Finally, although the Supreme Court declared that Allegheny County would have to perform a new countywide reassessment, it remanded the case back to the Common Pleas Court for a determination of the County’s progress in executing a countywide reassessment and to set “a realistic timeframe for its completion.”
Pursuant to the mandate from the Supreme Court, the Court of Common Pleas conducted a hearing to determine a timetable for reassessment. On December 4, 2009, the Court of Common Pleas accepted the County’s plan for reassessment. Under the plan, the County is on schedule to complete a new reassessment for use in the year 2012.
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COUNTY OF ALLEGHENY, PENNSYLVANIA CERTIFIED REAL ESTATE ASSESSED VALUATION (VALUES ARE NET OF ABATEMENTS AND HOMESTEAD EXEMPTIONS) 2007-2011 (000's)
Taxable Exempt Provisional All Real Real Real Real Year Estate Estate Estate (1) Estate
2011 58,918,966 16,338,461 191,105 75,448,532 2010 58,710,387 15,805,651 194,553 74,710,591 2009 58,194,681 15,790,650 196,809 74,182,140 2008 57,652,197 15,397,428 199,929 73,249,554 2007 57,774,542 15,217,038 212,661 73,204,241
(1) Provisional exempt real estate includes all property covered by the Public Utility Realty Act, Act of March 10, 1970, P.L. 168 No. 66, under which payment by a public utility of the special taxes imposed upon realty is in lieu of local real estate taxation. The County receives an allocated share of these payments in lieu of taxes each year from the Commonwealth.
Source: County of Allegheny, Department of Property Assessment, Appeals, Review and Registry.
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A – 13
COUNTY OF ALLEGHENY, PENNSYLVANIA Real Property Tax Levies and Collections Assessed Value of Taxable Property – Last Five Years (5) 2006-2010
Collected within the Fiscal Year of the Levy Total Collections to Date Taxes Levied for the Percentage Percentage Fiscal Year Total of of Fiscal (Original Adjusted Original Delinquent Adjusted Year Levy) Adjustments Levy Amount Levy Collections Amount Levy
2010 $ 272,080,809 (886,838) 271,193,971 251,657,283 92.49 % 7,479,722 259,137,005 95.55 %
2009 269,375,834 (1,173,580) 268,202,254 248,684,071 92.32 12,193,771 260,877,842 97.27
2008 266,952,614 30,606 266,983,220 246,869,810 92.48 12,812,015 259,681,825 97.27
2007 267,392,280 (3,380,617) 264,0411,663 244,613,823 91.48 15,457,938 260,071,761 98.51
2006 264,165,345 (2,046,900) 262,118,445 239,866,159 90.80 14,545,477 254,411,636 97.06
Source: Allegheny County Controller
A – 14 ALLEGHENY COUNTY, PENNSYLVANIA TWENTY-FIVE LARGEST REAL PROPERTY TAXPAYERS 2011 PERCENTAGE OF TOTAL RANK OWNER ASSESSMENT ASSESSMENT
1 BUNCHER COMPANY / BUNCHER FAMILY 229,899,474 0.360% FOUNDATION 2 HOLDINGS ACQUISITION CO LP 199,489,600 0.312% 3 500 GRANT ST ASSOCIATES & MELLON BANK 190,000,000 0.297% NA 4 MARKET ASSOCIATES LIMITED PARTNERSHIP 185,000,000 0.290% 5 600 GS PROP LP 175,000,000 0.274% 6 SOUTH HILLS VILLAGE ASSOCIATES 163,408,400 0.256% 7 MELLON BANK, NA 161,242,400 0.252% 8 CBL MONROEVILLE PARTNER LP 148,000,000 0.232% 9 PITTSBURGH MILLS LIMITED PARTNERSHIP 135,116,000 0.211% 10 HUB PROPERTIES TRUST 135,104,500 0.211% 11 PNC BANK, NA 126,002,420 0.197% 12 OXFORD DEVELOPMENT COMPANY 122,719,600 0.192% 13 GRANT LIBERTY DEV GROUP ASSOCIATES & 110,000,000 0.172% LIBERTY 14 ROBINSON MALL JCP ASSOCIATES LTD / 106,039,400 0.166% ROBINSON PERIPHERAL DEVELOPERS
15 PENN ROSS JOINT VENTURE 89,658,700 0.140% 16 USX CORPORATION 88,993,770 0.139% 17 DDRTC WATERFRONT MARKETPLACE LLC / 85,574,950 0.134% DDRTC WATERFRONT STACKS LLC / DDRTC WATERFRONT TOWN CENTER LLC 18 HORIZON DSG ASSOCIATES LP 80,586,100 0.126% 19 TECH ONE ASSOCIATES 74,259,171 0.116% 20 NORTH SHORE DEVELOPERS LP 64,297,550 0.101% 21 PARK ASSOCIATES 52,243,300 0.082% 22 LIBERTY AVENUE HOLDINGS LLC 49,210,000 0.077% 23 CENTURY III ASSOCIATES 46,649,300 0.073% 24 HERTZ GATEWAY CENTER LP 45,700,000 0.072% 25 BAYER CORPORATION 43,659,000 0.068%
TOTAL 2,907,853,635 4.551% Source: Allegheny County Division of Property Assessment, Appeals & Review; certified values as of January 14, 2011.
A – 15 Sales Taxes
In 1994 the Board of County Commissioners, on implementation of Act 77 of 1993 (“Act 77”) of the Pennsylvania General Assembly, enacted an ordinance imposing a 1% County-wide sales tax (the “1% Sales Tax”), based on the retail sale of tangible personal property or services. The 1% Sales Tax is in addition to the State imposed sales tax of 6%.
The 1% Sales Tax is collected by the State Treasurer and disbursed, on or before the tenth (10th) day of each month, by the State Treasurer, out of the moneys in the Allegheny Regional Asset District Sales and Use Tax Fund as of the last day of the previous month as follows:
(a) Fifty percent (50%) to the Allegheny Regional Asset District; (b) Twenty-five percent (25%) to qualified municipalities within the County, including the City of Pittsburgh; and (c) Twenty-five percent (25%) to the County.
The Allegheny Regional Asset District (the “ARAD”) was created on March 31, 1994. The ARAD is a special purpose unit of local government created to support and finance regional assets; to engage in the oversight and coordination of regional assets and to assure the efficient and effective operation and development of regional assets. Under Act 77, a regional asset is defined as a civic, recreational, library, sports or cultural facility or project designated by the ARAD Board as a regional asset.
The ARAD is required to use the funds received by it for payment of administrative expenses and funding of regional assets, subject to the condition that not more than one percent of the monies received by it may be used for payment of administrative expenses. The City of Pittsburgh and the County are required to use the funds received from the 1% Sales Tax for the reduction of local taxes and for gentrification programs. Similarly, other qualified municipalities which receive revenues from the 1% Sales Tax must use the moneys for tax reductions and for gentrification programs, and to assist councils of government.
The ARAD has no power to impose any taxes nor can it pledge the taxing power of the County, the Commonwealth or any political subdivision of the Commonwealth. The Commonwealth and governmental agencies have the power to make grants to the ARAD and to lend credit to the ARAD, but the ARAD cannot compel the making of such grants or the lending of credit. The ARAD can issue bonds and pledge future receipts from the 1 % Sales Tax to pay debt service on those bonds.
The Redevelopment Authority of Allegheny County (the “Authority”) in 1995 issued its Special Tax Development Bonds, Taxable Series of 1995 in the amount of $25,000,000 and in 1999 issued its Special Tax Development Bonds, Taxable Series of 1999 in the amount of $25,000,000 (the “Development Bonds”). The proceeds from Development Bonds were used to fund an economic development fund that is administered through the Authority by the County's Department of Economic Development and used to make loans to and investments in certain projects located within the County.
The County has pledged a portion of its 1% Sales Tax receipts for the payment of debt service on the Development Bonds. Pursuant to intercept agreements with the State Treasurer, the County has irrevocably directed the State Treasurer to deliver a portion of the County’s 1%
A – 16 Sales Tax receipts equal to the debt service on the Development Bonds to the trustee for the Development Bonds.
For budget purposes, the County estimates its portion of the gross 1% Sales Tax receipts as part of its revenues for the year while concurrently setting up an appropriation to pay the debt service on the Development Bonds. This has the same effect as reducing the 1% Sales Tax receipts that are available for general expenditure purposes.
The following table shows, on a cash basis, the County’s portion of the gross 1% Sales Tax receipts with the amounts intercepted to pay the debt service on the Development Bonds and the resulting net 1% Sales Tax receipts for the period 2007 through 2011 (in millions of dollars).
Projected 2007 2008 2009 2010 2011 Gross Sales Tax Receipts $39.9 $40.4 $39.4 $40.5 $41.8 Intercepted Sales Tax Receipts 4.8 4.8 4.8 4.8 4.8 Net Sales Tax Receipts $35.1 $35.6 $34.6 $35.7 $37.0
Source: Allegheny County, Department of Budget and Finance.
Federal and State Grants
The County makes certain expenditures for services required by Federal and State mandates which are then wholly or partially reimbursed through Federal and State categorical grants. The County receives Community Development Block Grants, Job Training Partnership Grants, Social Services Block Grants, and State Liquid Fuel Tax allocations. The social services for which the County is reimbursed include a portion of certain costs for programs for the mentally disabled, controlled substance abusers, neglected and abused children and care for the chronically ill and elderly. All County claims for Federal and State grants are subject to subsequent audit by Federal and State authorities.
Charges for Services
The County receives user fees from recreational and rental facilities, among others, as well as fees charged by court related offices. The charges for services are accounted for among three funds.
General Fund charges make up the second largest component of charges for services revenues. Recording and filing fees from the County’s fee offices generate the most revenue in the General Fund. The County generates fees through rental of groves, shelters, houses and equipment in its 12 regional parks. Also, parks generate fees by charging for the use of swimming pools, golf courses, tennis courts, skating rinks, skiing and other recreational activities. Public safety generates revenue through charges for special police and sheriff services. Health services generate revenue through plumbing inspections, clinic fees and laboratory charges. Commissions are generated from the collection of certain state taxes and fees, such as the State Realty Transfer Tax. Revenues are brought into the operating fund from special revenue funds by
A – 17 Indirect Cost Recovery, Child Enforcement Support and service reimbursement contracts. Patient income results from various assets signed over to the John J. Kane Regional Health Centers. There are also many minor charges for service revenues like "Sale of Maps and Publications". The smallest component of services revenues is from the Internal Service Fund, which is comprised of the central service functions and the risk management accounts. Central service functions are County functions that pay for themselves through billings to user departments. Risk management accounts are the County’s self-insurance programs, the largest component being health insurance. (Internal Service Fund revenues and expense transactions are eliminated for reporting purposes per GASB 34).
Governmental Fund Capital Expenditures
The County’s principal capital expenditures relate to the reconstruction, rehabilitation and expansion of the County’s infrastructure and physical assets, including County mass transit facilities, sewers, streets, bridges and tunnels, and capital investments that will improve productivity in County operations. Capital projects are funded through grants and the issuance of long-term general obligation debt. The following table compares the County’s long-term debt service to total operating expenditures for the years 2006 to 2010:
COUNTY OF ALLEGHENY, PENNSYLVANIA COMPARISON OF LONG-TERM DEBT SERVICE TO TOTAL OPERATING EXPENDITURES 2006-2010
Long-Term Debt Total Operating % of Total Year Service(1) Expenditures(2) Expenditures 2010 $ 69,790,081 $ 768,089,877 9.09 2009 63,000,366 761,553,680 8.27 2008 60,058,232 728,824,083 8.24 2007 58,912,267 720,065,757 8.18 2006 57,813,870 688,474,013 8.40
(1) Includes principal and interest payments on Long-Term Debt of the County. Excludes legally and economically defeased debt. (2) Includes operating transfers to other funds.
Source: Allegheny County Controller.
A – 18 EMPLOYEES AND LABOR RELATIONS/BENEFITS
Employees
As of November 19, 2011 the County employed 5,211 full-time “operating budget funded” employees, of which 4,145 were covered by collective bargaining agreements. For comparison, the number of full-time operating budget funded employees as of December 31, 1995 was 7,226 or 2,015 more than at the present level. This twenty-eight percent (28%) reduction in the workforce has been primarily the end result of four voluntary separation programs coupled with several rounds of layoffs interspersed since 1996. The most recent voluntary separation plan and layoff action occurred in December, 2007 in which approximately 200 persons left County employment.
“Operating budget funded” employees are those employees whose salaries are paid from the operating budget, and thus, do not include employees on certain grant-funded programs operated by the County. In addition, these figures are also exclusive of employees on workers compensation, indefinite suspension or leave of absence.
Labor Relations
The 4,145 union employees funded in the operating budget that are represented by 20 bargaining units include such occupations as laborers, clerks, nurses, health workers, building tradesmen, police, deputy sheriffs, attorneys and correctional officers. Settled contracts are in place through 2012 with most bargaining units; the most noted exceptions are the county police unit and correctional officers where an arbitration award is expected to be in line with existing contracts and is expected to be extended through 2012. The settlements include rate increases that average approximately 2.5% to 3.5% annually, as well as employee contributions to healthcare that equal 2% of the employees’ 2011 base wages.
PENSION PLAN
The Allegheny County Retirement System (the "Retirement System") is under the direction of a seven-member Retirement Board, consisting of the Chief Executive, a member appointed by the Chief Executive, a member appointed by County Council, the Controller, the Treasurer and two members selected by the County’s employees and retirees. The Retirement Board’s Executive Director and staff maintain records on all employees, contributions, disbursements and investments. As of December 31, 2010, the management of the retirement fund was handled by 37 investment managers utilizing a balanced mix of management styles, who follow the investment guidelines established by the Retirement Board.
The Retirement System’s present actuaries, Cowden & Associates, in their most recent report to the Retirement Board, as of January 1, 2010, indicated that the actuarial liabilities exceeded the actuarial (smoothed) value of assets by $466.7 million which translates to a funding percentage of 58.3%. Also, the accrued benefit liability exceeded the market value of assets by $280.1 million which translates to an accrued benefit funded ratio of 70.0%. Total cash and investments were $651.9 million and $698.0 million as of December 31, 2009 and December 31, 2010, respectively, representing an increase of 7%.
A – 19 In addition, a comparison of total liabilities to total assets, which includes the market value of existing assets and the present value of future contributions, indicates a ratio of 71.1% based on $1,338.2 million total liabilities and $952.0 million total assets as of January 1, 2010.
Significant actuarial assumptions include a return on investments of eight percent (8%) and projected salary increases of 3.5% to 6%. Cost of living increases traditionally granted in the past were not granted for 2011.
The method used for asset valuation is as follows: in determining the preliminary actuarial value of assets, the preceding year’s market value of assets is increased by contributions and expected interest at the valuation rate and reduced by benefit payments and expenses. This expected value of assets is then compared to the market value of trust assets and 20% of the difference is recognized for that year, 40% for the prior year, 60% for second prior year and 80% for the third prior year to produce the preliminary actuarial value of the assets. If the resulting actuarial value of assets is outside a corridor of 80% to 120% of the market value, the adjustment is made to maintain the actuarial value of assets at the appropriate corridor limit.
The 6% employee contribution rate which had been in effect since January 2003 was increased to 7% beginning in January, 2011.
Under Pennsylvania law, the Retirement Board has the power to increase the employee contribution rate to more effectively meet the funding changes required by the annual actuarial studies. Changes in the benefits structure require action of the General Assembly of the Commonwealth.
The Retirement System is a single-employer defined benefit, contributory retirement plan covering substantially all employees of the County. Monthly benefit payments are determined for each individual according to the retirement option selected and the age and length of service at retirement. Under normal retirement (attainment of age 50 with 20 years of service for police and firefighters, age 55 with 20 years of service for sheriffs, deputy sheriffs, and jail guards, and age 60 with 20 years of service for non-uniformed employees), the retirement benefit is equal to 50% of final average salary, plus 1% of final average salary for each full year of service between 20 and 40 years. Final average salary is the monthly average of the 24 highest months of compensation in the last 48 months of employment preceding retirement.
Under terms of the Retirement System, employees will contribute 7.0% of covered compensation beginning January 1, 2011. Employee contributions are matched equally by the County, as prescribed by the Second Class County Code of the Commonwealth. Employees with at least 24 months of service who terminate prior to satisfying the minimum service requirements for a retirement benefit are entitled to refunds of their contributions plus interest thereon at approximately 4.5% per annum (3% per annum on contributions made prior to March, 1981). Employees with less than 24 months of service who terminate prior to satisfying the minimum service requirement for a retirement benefit are entitled to refunds of their contributions with no interest.
Other Post-Employment Benefits
In addition to a defined benefit retirement plan for County employees, the County also provides certain health care and life insurance benefits for County retirees and surviving spouses of retirees. These and similar benefits are commonly referred to as “other post-employment
A – 20 benefits” or “OPEB.” Certain retiree benefits are determined through collective bargaining, while the County’s other retiree benefits are determined by the County.
The County annually appropriates funds to meet its obligation to pay such benefits on a “pay-as-you-go” basis. The County has not established any fund or irrevocable trust for the accumulation of assets with which to pay such benefits in future years. Such expenditures are currently funded through the County’s General Fund. In fiscal year 2010, net County costs for such benefits totaled approximately $1,710,000 with retiree contributions totaling $380,000.
On June 21, 2004, the Governmental Accounting Standards Board (GASB) released its Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (“Statement No. 45”). Statement No. 45 establishes standards for the measurement, recognition and display in the financial reports of state and local governments of obligations to pay OPEBs when provided separately from a pension plan expense or expenditures and related liabilities. Under Statement No. 45, governments are required to: (i) measure the costs of benefits, and recognize other post-employment benefits expenses, on the accrual basis of accounting in periods that approximate employees’ years of service; (ii) provide information about the actuarial liabilities of promised benefits associated with past services and whether, or to what extent, those benefits have been funded; and (iii) provide information useful in assessing potential demands on the employer’s future cash flows. Statement No. 45 reporting requirements were effective for the County in fiscal year 2007.
The County retained Willis of Massachusetts, Inc., (“Willis”), an OPEB consulting firm, to provide actuarial services to the County for GASB Statement No. 45 disclosure. Willis’ actuarial valuation of the County’s OPEB obligations as of January 1, 2009 enabled the County to determine the following valuations in accordance with Statement No. 45:
1. Estimated actuarial accrued liability for all beneficiaries (“AAL”) as of January 1, 2009 - $96,617,000.
2. The County’s 2010 OPEB cost, the percentage of annual OPEB cost contributed and the net OPEB obligation were as follows: Annual OPEB Cost (“AOC”) - $7,568,970, Percentage of AOC Contributed 22.6% and the Net OPEB Obligation is $18,750,694. The AOC for 2010 was computed using the following actuarial assumptions: (a) the actuarial cost method projected unit credit; (b) amortization method is level dollar amortization; (c) closed amortization period of 30 years; (d) a discount rate of 4% compounded annually; (e) the mortality RP-2000 table, with projections for future improvement through 2007 by scale AA for active and mortality rates for disabled, and (f) health care cost trend rates of 9%, grading to 5% in 5 years.
A – 21 RETIREMENT SYSTEM OF COUNTY OF ALLEGHENY, PENNSYLVANIA HISTORY OF CONTRIBUTIONS & BENEFIT PAYMENTS 2006-2010
Year Employees’ County Total Benefit Ended Dec. 31 Contributions Contributions Contributions Payments
2010 $20,194,179 $20,115,911 $40,310,090 $65,844,509 2009 19,501,312 19,256,793 38,758,105 64,343,528 2008 18,671,324 18,577,232 37,248,556 62,373,702 2007 18,803,004 18,415,555 37,218,559 59,019,697 2006 17,988,776 17,610,617 35,599,393 56,674,506
Source: Allegheny County Retirement Board.
RETIREMENT SYSTEM OF COUNTY OF ALLEGHENY, PENNSYLVANIA FIVE-YEAR SUMMARY OF LEADING INDICATORS 2006 - 20101
Tot Actuarial Accrued al Liability Year Liability Benefit Funding Beginning Total Rate of Normal Funding Funding Ratio Jan. 1 Contributions Cost (1) Ratio Ratio
2010 12.0% 8.40% 58.39 70.0% 71.1% 2009 12.0 7.40 54.6 66.8 69.0 2008 12.0 8.40 81.5 92.2 93.0 2007 12.0 8.69 82.8 93.6 93.1 2006 12.0 8.81 81.9 94.9 93.2
1 Defined as benefits plus expenses as a percentage of compensation. Source: Retirement System 31st Annual Actuarial Report – Valuation Date of January 1, 2010.
A – 22
COUNTY OF ALLEGHENY, PENNSYLVANIA STATEMENT OF BORROWING POWER Computation of Legal Debt Limit November 30, 2011
Total Revenues – 2008 $ 1,141,500,357 Total Revenues – 2009 1,072,366,627 Total Revenues – 2010 959,777,641
Total $ 3,173,644,625
Average $ 1,057,881,542
Total revenues for purposes of the debt statement includes all monies received from all sources during the fiscal year, as defined by Act 1978-52 amended by Act 1981-19 and Act 1996-177, including special recurring revenues from federal and state programs for special purposes. These special recurring revenues are not included in the operating budget.
MULTIPLES TO DETERMINE GROSS BORROWING CAPACITY November 30, 2011
Nonelectoral Debt: 300% $ 3,173,644,626 Nonelectoral Debt Plus Lease Rental Debt: 400% $ 4,231,526,168
Source: Allegheny County Controller.
A – 23
COUNTY OF ALLEGHENY, PENNSYLVANIA STATEMENT OF INDEBTEDNESS (1) November 30, 2011
Gross Debt: Bonds Issued and Outstanding: Nonelectoral $ 738,135,691 Gross Lease Rental Debt: 12,275,000 Credits: Self-liquidating lease rental debt (2,750,000) Total Net Debt $ 747,660,691
(1) Excludes this issue.
Source: Allegheny County Controller.
COUNTY OF ALLEGHENY, PENNSYLVANIA AVAILABLE DEBT CAPACITY November 30, 2011
Nonelectoral Nonelectoral Debt Plus Debt Lease Rental Debt
Legal Debt Limit $ 3,173,644,626 $ 4,231,526,168 Less: Total Net Debt Applicable to Debt Limit (738,135,691) (750,410,691) Legal Debt Margin $ 2,435,508,935 $ 3,481,115,477
Source: Allegheny County Controller.
A – 24 APPENDIX B
Demographic and Economic Information
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DEMOGRAPHIC AND ECONOMIC INFORMATION
INTRODUCTION
Allegheny County (the “County”) is located in Southwestern Pennsylvania and encompasses approximately 730 square miles of land. Founded in 1788, the County is the second most populated county in Pennsylvania with over 1.23 million residents. Roughly 25% of the County’s residents live within the City of Pittsburgh. The Allegheny and Monongahela Rivers flow through Allegheny County to form the Ohio River in downtown Pittsburgh.
The County is the location of six Fortune 500 corporate headquarters. The County’s 2010 Fortune 500 companies include: U.S. Steel (211), PPG Industries (90), PNC Financial Services Group (123), H.J. Heinz (233), Wesco International, Inc. (448), and Dick's Sporting Goods (466). The County has experienced substantial growth in areas such as technology, tourism and health care. The County is also a strong supporter of its manufacturing industries and has traditionally been one of the major industrial centers of the world with its access to major fields of coal and shipping access to 8,000 miles of navigable rivers. The Port of Pittsburgh is the second largest inland port in the nation. There is annual benefit to the region of over 800 million dollars for the shipping and receiving of 38 million tons of cargo.
The County has undergone an economic transformation spanning more than three decades with a shift from the manufacturing industry to the service and trade industries. Specifically, the new focus industries have been high technology, health care, education and finance. This shift is attributed to the continuing diversification of the employment base.
According to the Pittsburgh Regional Alliance, Pittsburgh is the third largest advanced technology research and development center in the country. The Pittsburgh Technology Council has identified information technology, biomedical technology, environmental technology, and advanced manufacturing as the region’s primary high-tech industries.
Pittsburgh is a major banking center. The PNC Financial Services Group has its headquarters in Allegheny County. Pittsburgh is also a branch office for the Cleveland District of the Federal Reserve System.
Adding to Allegheny County’s diverse labor and business climate, some of the most prestigious health, educational, and cultural institutions in the country are located here. The County’s colleges and universities include Carnegie Mellon University, Carlow College, Chatham College, Community College of Allegheny County, Duquesne University, La Roche College, Point Park University, Robert Morris University, the Art Institute of Pittsburgh and the University of Pittsburgh. Allegheny County is also home to more than fifteen Junior and Technical Colleges.
Several initiatives have been undertaken to link private industry with the advance technology research activities of the local universities. Carnegie Mellon University (“CMU”) has one of the top five ranking computer science departments in the country and is a leader in applied research. The Software Engineering Institute, a federally funded research and development center, has its headquarters in Pittsburgh and is operated by CMU. Additionally, CMU operates the Robotics Institute, which is one of the largest facilities in the world for robotics research. The national Robotics Engineering Consortium, affiliated with the Institute, carries the mandate to commercialize robotics. Its tasks include the application of robotics technology in agriculture, mining, transportation, and sea and space ventures.
The Pittsburgh Supercomputing Center, a joint venture among CMU, the University of Pittsburgh, and Westinghouse Electric Company, has provided state-of-the-art computing technology and services in support of computational science and engineering research. This was one of five centers in the country that spawned the essential infrastructure for the Internet.
B – 1 The University of Pittsburgh’s Biotechnological and Bioengineering Center located in the Pittsburgh Technology Center, is a technology and research and development park, with the development and application of advanced technology and technology transfer as primary objectives. Also located in the Pittsburgh Technology Center are CMU’s Research Institute and Aristech Chemical Research Center. Once a steel mill site along the Monongahela River, the Pittsburgh Technology Center represents the changing landscape of Allegheny County.
The Port Authority of Allegheny County (the “Port Authority”) serves the metropolitan area by operating 861 buses, 83 light rail vehicles, 48 mini-buses and the Monongahela and Duquesne inclines. The Port Authority is the largest operator of mass transit services in Western Pennsylvania and is the among the nation’s largest public transportation system in the country. The Port Authority’s 2,900 employees serve approximately 70 million riders annually.
Pittsburgh International Airport (“PIA”), which offers more than 155 flights per day, is recognized for its state-of-the-art terminals and an Airmall for the over 8.7 million travelers that pass through PIA each year.
The following pages contain certain statistical information relating to the County. The County has not independently verified the information presented by the sources identified for the periods indicated. POPULATION
The County’s population trends, along with those of the City of Pittsburgh and the balance of the Metropolitan Statistical Area (“MSA”) (Beaver, Butler, Fayette, Washington and Westmoreland Counties) and the Pittsburgh MSA from 1990 to 2010 are shown in the following table:
2000-2010 1990 2000 2010 % Change Allegheny County (except 996,570 947,103 917,644 (3.1%) City of Pittsburgh) City of Pittsburgh 369,879 334,563 305,704 (8.6%) Total Allegheny County 1,336,449 1,281,666 1,223,348 (4.6%)
Balance of MSA 1,058,362 1,077,029 1,132,937 5.2% Total MSA 2,424,811 2,358,695 2,356,285 (0.1%)
Source: U.S. Census.
B – 2 LABOR FORCE STATISTICS – ANNUAL AVERAGES 2006 –2010
2006 2007 2008 2009 2010
Allegheny County Civilian Labor Force(1) 629.2 632.3 642.1 637.7 635.2 Allegheny County Employment(1) 601.4 606.5 611.0 594.3 586.2 Allegheny County Unemployment Rate 4.40% 4.10% 4.80% 6.80% 7.70% MSA* Unemployment Rate 4.70% 4.30% 5.10% 7.30% 8.00% Pennsylvania Unemployment Rate 4.50% 4.30% 5.30% 8.00% 8.70% United States Unemployment Rate 4.60% 4.60% 5.80% 9.30% 9.60% (1) In thousands
*Beginning in 1994, the Pittsburgh PMSA changed designations to become the Pittsburgh MSA which includes Beaver and Butler Counties. Source: U.S. Bureau of Labor Statistics.
EMPLOYMENT
In 2010, non-manufacturing industries accounted for approximately 92.2% of the Pittsburgh MSA employment base. The major employment sectors are Services, Trade, and Government. Manufacturing presently represents 7.8% of the MSA’s employment base.
Source: U.S. Bureau of Labor Statistics.
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B – 3
COUNTY OF ALLEGHENY LABOR FORCE DATA
1990 – 2010 Annual Averages
Labor Civilian Rate of (1) (1) (1) Year Force Employment Unemployment Unemployment
1990 644.6 616.7 28.0 4.30% 1991 649.7 615.3 34.3 5.30% 1992 661.7 619.8 41.9 6.30% 1993 665.4 623.3 42.1 6.30% 1994 658.4 620.3 38.0 5.80% 1995 652.0 617.7 34.3 5.30% 1996 656.8 626.5 30.3 4.60% 1997 663.9 635.2 28.6 4.30% 1998 659.3 632.5 26.8 4.10% 1999 658.2 632.7 25.6 3.90% 2000 635.9 610.0 25.9 4.10% 2001 643.4 615.3 28.0 4.40% 2002 644.0 609.6 34.5 5.30% 2003 635.5 600.2 35.3 5.60% 2004 632.2 598.6 33.6 5.30% 2005 630.0 598.7 31.3 5.00% 2006 629.2 601.3 27.9 4.40% 2007 632.3 606.5 25.9 4.10% 2008 642.1 611.0 31.1 4.80% 2009 637.7 594.3 43.4 6.80% 2010 635.2 586.2 49.0 7.70%
______
(1) In thousands Source: U.S. Bureau of Labor Statistics.
B – 4
TEN LARGEST PITTSBURGH-AREA EMPLOYERS
Number of
Rank Name of Business Employees
1 University of Pittsburgh Medical Center 37,000 2 United States Government 18,660 3 Commonwealth of Pennsylvania 13,661 4 West Penn Allegheny Health System 11,432 5 University of Pittsburgh 11,261 6 Wal-Mart Stores Inc. 10,030 7 PNC Financial Services Group Inc. 9,150 8 Giant Eagle Inc. 8,347 9 Allegheny County 7,194 10 The Bank of New York Mellon 6,668
Source: Pittsburgh Business Times, “2010 Book of Lists”.
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B – 5
EFFECTIVE BUYING INCOME AND HOUSEHOLD INCOME
The median household effective buying income for the Metropolitan area (“MA”) in 2010 was $39,545 which is 95.58% of the Commonwealth median household effective buying income. Effective Buying Income (EBI) is defined as all personal income less personal taxes, non tax payments (fines, fees, and penalties) and contributions to social insurance. EBI is also commonly referred to as disposable or after tax income.
County and Metro Effective Buying Income – 2010
Percent of Households by EBI Group
% of Hslds: by EBI Group Median 2010 EBI Household $25,000 to $35,000 to $50,000 ($000) EBI in $ $34,999 49,999 and over
Allegheny Co. $27,461,308 $40,116 13.7% 18.6% 37.8%
Beaver Co. 3,202,720 38,729 15.2 20.2 34.8
Butler Co. 4,080,035 45,954 12.3 19.2 44.8
Fayette Co. 2,139,825 28,987 16.1 17.3 23
Washington Co. 4,391,083 41,439 14 19.1 39.1
Westmoreland Co. 7,382,555 39,618 14 19.1 39.1
Total Pittsburgh MA 49,923,630 39,545 14.1 19.0 36.8
Pennsylvania 265,331,400 41,375 13.7 19.3 39.4
Source: Nielsen Claritas Site Reports
B – 6
COUNTY OF ALLEGHENY, PENNSYLVANIA COUNTY AND METRO MEDIAN HOUSEHOLD EFFECTIVE BUYING INCOME 2006-2010
2006 2007 2008 2009 2010
Allegheny County (including City of Pittsburgh) $36,642 $37,220 $37,605 $38,942 $40,116
City of Pittsburgh 28,406 29,095 29,255 29,751 30,921
Beaver County 36,198 36,331 36,643 37,988 38,729
Butler County 40,403 41,400 43,111 44,216 45,954
Fayette County 28,487 28,904 28,513 27,888 28,987
Washington County 36,778 37,866 39,450 39,978 41,439
Westmoreland County 36,217 37,211 38,153 38,729 39,618
Total MSA 36,065 36,714 37,289 38,411 39,545
Pennsylvania 38,541 39,263 39,854 40,742 41,735
TOTAL RETAIL SALES – MSA
2008 2009 2010
Total Retail Percent Total Retail Percent Total Retail Percent Sales ($000) of MSA Sales ($000) of MSA Sales ($000) of MSA Allegheny County $18,971,934 54.5% $18,394,979 56.6% $18,692,680 57.45%
Armstrong County 555,684 1.6% 550,676 1.7% 543,753 1.67%
Beaver County 2,155,898 6.2% 1,729,788 5.3% 1,715,673 5.27%
Butler County 3,338,863 9.6% 2,910,285 9.0% 2,787,230 8.57%
Fayette County 1,780,175 5.1% 1,587,418 4.9% 1,588,563 4.88%
Washington County 2,830,165 8.1% 2,812,011 8.7% 2,742,458 8.43%
Westmoreland County 5,163,366 14.8% 4,487,903 13.8% 4,465,623 13.73
Total MSA $34,796,085 100.0% $32,473,060 100.0% $32,535,980 100.00% Pennsylvania $197,694,871 $180,948,327 $174,483,293
Source: Nielsen Claritas Site Report
B – 7
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APPENDIX C
Form of Opinion of Note Counsel
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Campbell & Levine, LLC 1700 Grant Building Pittsburgh, PA 15219-2399 Attorneys at Law Phone: 412.261.0310 Fax: 412.261.5066 www.camlev.com
$175,000,000 COUNTY OF ALLEGHENY, PENNSYLVANIA $75,000,000 Tax and Revenue Anticipation Notes, Series A of 2012 $100,000,000 Tax and Revenue Anticipation Notes, Series B of 2012
January 17, 2012
To the Registered Owners of the Above Described Notes:
We have served as Note Counsel to the County of Allegheny, Pennsylvania (the "Issuer") and do hereby undertake to advise you in connection with the issuance, sale and delivery of its $75,000,000 aggregate principal amount, Tax and Revenue Anticipation Notes, Series A of 2012 (the "Series A Notes") and its $100,000,000 aggregate principal amount, Tax and Revenue Anticipation Notes, Series B of 2012 (the "Series B Notes" and, together with the Series A Notes, the "Notes"), issued in fully registered, book entry form, in the denomination of $100,000 and multiples thereof, dated and bearing interest (payable at maturity) from the date hereof, maturing on July 16, 2012 and not subject to early redemption.
In that capacity, we have examined the Constitution of the Commonwealth of Pennsylvania, the Second Class County Code, Act of July 28, 1953 (P.L. 723, No. 230), 16 P.S. §5201, et. seq., as amended, together with the Home Rule Charter of Allegheny County (together, the "County Code"); the Issuer Debt Act, as codified by the Act of December 19, 1996 (P.L. 1158, No. 177), (the "Debt Act"); the formal action of the Governing Body of the Issuer authorizing the issuance of the Notes (the "Note Resolution"); the corresponding Filing Receipt from the Department of Community and Economic Development; the Internal Revenue Code of 1986, as amended (the "Code"); and such other certificates, proceedings and law as we deemed necessary in order to render this opinion. Unless separately noted, we have not reviewed or independently verified factual certifications made to us by the Issuer, its officers and agents during the course of our engagement.
Based on the foregoing, we are of the opinion on this date as follows:
1. The Notes are valid and binding obligations of the Issuer, secured by the pledge of, a security interest in, and, assuming the proper filing of financing statements, a lien and charge on, the taxes and revenues of the Issuer to be received during the period when the Notes are outstanding.
2. The Note Resolution authorizing the Note was duly and properly enacted and is in full force and effect and the Notes conform, in all substantial respects, to the provisions of the Note Resolution.
3. The Notes are payable and enforceable according to their own terms, those of the Note Resolution and all provisions of the Debt Act; however, any such payment and enforcement could be restrained by a court of proper jurisdiction operating under the authority of bankruptcy, receivership and other similar laws of accommodation and adjustment of creditors' rights, as then applicable.
4. The Notes, having all the qualities and incidents of securities under Article 8 of the
To the Registered Owner(s) of the Above-Described Notes January 17, 2012 Page 2
Uniform Commercial Code, are negotiable instruments.
5. Under existing laws, regulations and decisions, interest on the Notes (a) is excludable from gross income for federal income tax purposes and (b) is not an item of tax preference within the meaning of Section 57 of the Code for purposes of the federal alternative minimum tax imposed by Section 55 of the Code on individuals and corporations; however, with respect to certain corporations (as defined for federal income tax purposes), such interest may be taken into account in determining "adjusted current earnings" for the purposes of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations. The opinions set forth in this paragraph are subject to the condition that the Issuer comply with all requirements of the Code (including regulations promulgated thereunder) that must be satisfied subsequent to the issuance of the Notes in order that such interest be (or continue to be) excluded from gross income for federal income tax purposes. Failure to comply with such requirements could cause the interest on the Notes to be included in gross income retroactively to the date of issuance of the Notes. The Issuer has covenanted to comply with all such requirements. We express no opinion regarding other federal tax consequences arising with respect to the Notes.
6. Under the laws of the Commonwealth as presently enacted and construed, the Notes are exempt from personal property taxes in Pennsylvania and interest on the Notes is exempt from Pennsylvania corporate net income tax and from Pennsylvania personal income tax.
We express no opinion herein as to the accuracy, adequacy or completeness of the Official Statement or other disclosure document prepared in connection with the sale of the Notes, and make no representation that we have independently verified the contents of such Official Statement or other disclosure document.
This opinion is given as of the date hereof and we assume no obligation to update or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.
Very truly yours,
CAMPBELL & LEVINE, LLC
APPENDIX D
County of Allegheny Audited Financial Statements for Year Ended December 31, 2010
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2010 COUNTY OF ALLEGHENY PENNSYLVANIA Comprehensive Annual Financial Report
For the Fiscal Year Ended December 31, 2010
PREPARED BY MARK PATRICK FLAHERTY, CONTROLLER
COUNTY OF ALLEGHENY, PENNSYLVANIA Comprehensive Annual Financial Report Year Ended December 31, 2010
TABLE OF CONTENTS
INTRODUCTORY SECTION
Controller's Letter of Transmittal...... 1 GFOA Certificate of Achievement ...... 17 Organizational Chart ...... 19 Officials of Allegheny County ...... 21
FINANCIAL SECTION
Independent Auditor’s Report ...... 25 Management’s Discussion and Analysis...... 29
Basic Financial Statements:
Government-wide Financial Statements Statement of Net Assets...... 53 Statement of Activities...... 56 Governmental Fund Financial Statements Balance Sheet ...... 58 Reconciliation of the Governmental Funds - Balance Sheet to the Statement of Net Assets ...... 63 Statement of Revenues, Expenditures and Changes in Fund Balance ...... 64 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Funds to the Statement of Activities ...... 68 Proprietary Fund Financial Statements Statement of Net Assets ...... 69 Statement of Revenues, Expenses and Changes in Fund Net Assets ...... 70 Statement of Cash Flows ...... 71
i
TABLE OF CONTENTS (continued)
Fiduciary Fund Financial Statements Statement of Fiduciary Net Assets ...... 72 Statement of Changes in Fiduciary Net Assets ...... 73 Component Unit Financial Statements Statement of Net Assets ...... 74 Statement of Activities ...... 80
Notes to Basic Financial Statements:
Notes
(1) Summary of Significant Accounting Policies ...... 83 (2) Legal Compliance ...... 114 (3) Cash and Investments ...... 115 (4) Property and Sales Tax Revenue and Receivables ...... 131 (5) Capital Assets ...... 135 (6) Risk Management ...... 142 (7) Short-Term Debt ..……………………………………………………………………………………………147 (8) Long-Term Debt ...... 149 (9) Interfund Receivables, Payables and Transfers ...... 172 (10) Retirement Benefits ...... 174 A. Plan Description ...... 174 B. Funding Policy, Annual Pension Cost and Net Pension Obligation, Annual Required Contribution and Schedule of Funding...... 175 C. Voluntary Separation Program……………………………………………………………………177 (11) Postemployment Benefits Other Than Pension Benefits……………………………………… 183 (12) Contingencies ...... 191 (13) Related Party Transactions (see Note 1) ...... 195 (14) Derivative Financial Instruments ...... 197 (15) Liquidity ………………………………………………………………………………………………………….202 (16) Subsequent Event………………………………………………………………………………………….…202
ii
TABLE OF CONTENTS (continued)
Required Supplementary Information
Budgetary Comparison Schedule - General Fund ...... 207 Notes to Required Supplementary Information ...... 208
Supplementary Information:
Combining Other Governmental Funds Financial Statements:
Combining Balance Sheet - Other Governmental Funds ...... 215 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Other Governmental Funds...... 216
General Fund:
A‑1 Balance Sheet ...... 219 A‑2 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ...... 221 A‑3 Schedule of Expenditures - Budget and Actual ...... 224
Special Revenue Funds:
B‑1 Combining Balance Sheet Schedule ...... 253 B‑2 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ...... 255 B‑3 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - Transportation Fund...... 256 B‑4 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - Liquid Fuel Tax Fund ...... 257 B‑5 Schedule of Resources and Uses of Federal and State Grant Programs - County Grants Fund ...... 258 B‑6 Schedule of Resources and Uses of Federal and State Grant Programs - Human Service Grants Fund ...... 260
iii
TABLE OF CONTENTS (continued)
Debt Service Fund:
C‑1 Balance Sheet ...... 265 C‑2 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ...... 266
Capital Projects Fund:
D‑1 Balance Sheet ...... 269 D‑2 Statement of Revenues, Expenditures and Changes in Fund Balance...... 270
Internal Service Fund:
E‑1 Statement of Net Assets ...... 273 E‑2 Statement of Revenues, Expenses and Changes in Fund Net Assets ...... 274 E‑3 Statement of Cash Flows ...... 275
Trust and Agency Funds:
F‑1 Statement of Net Assets - Pension Trust Fund ...... 279 F‑2 Statement of Changes in Plan Net Assets - Pension Trust Fund ...... 280 F‑3 Statement of Assets and Liabilities - Combined Agency Funds...... 281 F‑4 Statement of Changes in Assets and Liabilities - All Agency Funds - By Level of Fiduciary Responsibility ...... 282
iv
TABLE OF CONTENTS (continued)
Capital Assets Used in the Operation of Governmental Funds:
G‑1 Schedule of Capital Assets by Function and Activity ...... 295 G‑2 Schedule of Changes in Capital Assets by Function and Activity...... 297 G‑3 Schedule of Capital Assets by Source ...... 298
Budgetary Comparison:
H Budgetary Comparison Schedule for Operating Budget...... 300
Nonmajor Component Units:
I‑1 Combining Statement of Net Assets...... 307 I‑2 Combining Statement of Activities...... 308
Supporting Schedules for Long-Term Debt:
J‑1 Schedule of Long-Term Debt ...... 312 J‑2 Debt Issued and Retired ...... 317 J‑3 Statement of Indebtedness, Borrowing Power and Legal Debt Margin...... 318
STATISTICAL SECTION
Revenue and Expenditure Overview...... 322
Tables
I Net Assets by Component - Last Nine Years…………………………………………………….335 II Changes in Net Assets - Last Nine Years...... 336 III Fund Balances, Governmental Funds - 2010……………...... 339 IV Fund Balances, Governmental Funds - Last Nine Years...... 340
v
TABLE OF CONTENTS (continued)
V Changes in Fund Balances, Governmental Funds - Last Nine Years ...... 342 VI Program Revenues by Function/Program - Last Nine Years ...... 344 VII Tax Revenues by Source, Governmental Funds - Last Ten Years ...... 345 VIII Property Tax Levies and Collections ...... 346 IX Real Property Tax Levies and Collections Assessed Value of Taxable Property – 2001-2003 ...... 347 X Principal Taxpayers ...... 348 XI Certified Estimated Assessed Valuation, Assessed Value and Direct Tax Rate of Taxable Property - Last Ten Years ...... 349 XII Property Tax Rates - Direct and Overlapping Governments - Last Ten Years ...... 350 XIII Ratios of General Obligation Bonds Outstanding and Legal Debt Margin - Last Ten Years ...... 370 XIV Computation of Direct and Overlapping Debt ...... 372 XV Demographic and Economic Statistics - Last Ten Years ...... 374 XVI Principal Employers - Current Year and Nine Years Ago ...... 376 XVII Full-Time Equivalent County Government Employees by Function/Program - Last Ten Years ...... 377 XVIII Operating Indicators by Function/Program - Last Ten Years ...... 378 XIX Capital Asset Statistics by Function/Program ‑ Last Ten Years ...... 380 XX Revenue Bond Coverage Airport Authority Revenue Bonds and Notes - Last Ten Years ...... 381 XXI Pittsburgh International Airport Passenger Volume Trend - Last Ten Years ...... 382 XXII Salaries of Principal Officials ...... 383 XXIII County Council Members’ Expenditure Reimbursements ...... 384 XXIV Primary Government Functions ...... 385
vi COUNTY OF ALLEGHENY
Office of the Controller
104 Courthouse • 436 Grant Street Pittsburgh, PA 15219 Mark Patrick Flaherty Phone (412) 350-4660 • Fax (412) 350-3006 Guy A. Tumolo Controller Deputy Controller
March 31, 2011
TO THE CITIZENS OF ALLEGHENY COUNTY:
I am pleased to present the 2010 Comprehensive Annual Financial Report (CAFR) for the County of Allegheny (the County).
The information presented is accurate in all material respects and is presented in a manner designed to fairly set forth the County's financial position and the results of its operations for the year ended December 31, 2010. These financial statements and supplementary information are the responsibility of the County's management. This report contains the government-wide financial statements and fund financial statements of the County, as well as the financial data of the discretely presented component units that are included as part of the County's reporting entity.
This report is designed to provide information to various users including: the taxpayers of Allegheny County, investors, creditors, governmental officials and the general public. Its intent is to describe the County’s financial position and the financial results of its operations as of and for the year ended December 31, 2010.
PROFILE OF THE GOVERNMENT
COUNTY OF ALLEGHENY, PENNSYLVANIA
Founded in 1788, the County of Allegheny is the second most populous county in Pennsylvania and the 31st most populous in the nation with 1.2 million residents residing in 730.74 square miles encompassing 130 municipalities. The County provides a number of services and programs, such as the delivering of essential human services to the poor and needy, enforcing laws, constructing roads and stimulating economic development.
COUNTY OF ALLEGHENY, PENNSYLVANIA
Effective January 1, 2000, the County began operating under a Home Rule Charter (the Charter). The Charter superseded certain provisions of the Pennsylvania Second Class County Code pertaining to the County’s governing framework. Specifically, the Charter established a 15 -member County Council to serve as the legislative branch of the government and a Chief Executive to perform the executive function. The County Council and Chief Executive replaced the three-member Board of Commissioners that previously performed all legislative and executive functions as set forth in the Second Class County Code.
The Charter also required adoption of an Administrative Code to detail the administration and operation of the County. Unless expressly or implicitly modified or repealed by the Charter, all provisions of the Second Class County Code and other applicable laws still govern the operations of the County.
The Controller is elected to serve as the County's chief financial officer. The Treasurer is elected to collect taxes and invest County funds. The other independently elected row officers are the District Attorney and the Sheriff. The Court of Common Pleas is part of the unified judicial system provided for by the Pennsylvania Constitution.
REPORTING ENTITY
Statement of Governmental Accounting Standards No. 14, "The Financial Reporting Entity," and as amended by Statement No. 39 establishes standards for defining and reporting on the financial reporting entity. The core of the financial reporting entity is the "primary government." The Governmental Accounting Standards Board's Codification, Section 2100.112, classifies all general-purpose local governments as primary governments. For this report, the County is considered the "primary government."
The financial reporting entity includes both the primary government and all of its "component units." A component unit is a legally separate entity that meets any one of the following criteria:
The primary government appoints the voting majority of the board, and is able to impose its will on the component unit, or is in a relationship of financial benefit or burden with the component unit;
The component unit is fiscally dependent on the primary government, or;
The financial statements of the primary government would be misleading if data from the component unit was not included.
2
COUNTY OF ALLEGHENY, PENNSYLVANIA
In conformity with accounting principles generally accepted in the United States, the financial statements of the County's component units are included in this report because of the significance of their operational or financial relationships with the County. The majority of the board of directors of the component units, except Soldiers’ and Sailors’ Memorial Hall and Museum Trust, Inc. (Memorial Hall) are appointed by the County’s Chief Executive and confirmed by the County Council.
Individual financial data for the Allegheny County Airport Authority (ACAA), Port Authority of Allegheny County (PAT), Community College of Allegheny County (CCAC), Redevelopment Authority of Allegheny County (RAAC), Allegheny County Industrial Development Authority (ACIDA), and combined data for the Allegheny HealthChoices Inc. (AHCI), Allegheny County Parks Foundation (Parks Foundation), Allegheny County Conservation District (Conservation District) and Memorial Hall have been included in the County's government-wide financial statements. They are reported in separate columns to emphasize that they are legally separate from the County.
COUNTYWIDE SERVICES
Reflected in this report are the services provided by the County, including health and social services, education and cultural programs, public safety, infrastructure construction, repair and maintenance, judicial services, transportation, economic development, long‑term nursing care and rehabilitation of the chronically ill and elderly, treatment, counseling and housing for people with mental disabilities or drug and alcohol dependency, shelter for delinquent children, services for abused children and their families, and general governmental administration.
GASB 34
In 2002, the County implemented Governmental Accounting Standards Board Statement No. 34 (GASB Statement No. 34), ―Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments,‖ issued by the Governmental Accounting Standards Board. The Statement was developed to make annual reports easier to understand and more useful to the people who use governmental financial information to make decisions. GASB Statement No. 34 helps users by:
Assessing the finances of the government in its entirety, including the year’s operating results;
Determining whether the government’s overall financial position improved or deteriorated;
Evaluating whether the government’s current-year revenues were sufficient to pay for current-year services;
Indicating the cost of providing services to its citizenry;
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COUNTY OF ALLEGHENY, PENNSYLVANIA
Indicating how the government finances its programs through user fees and other program revenues versus general tax revenues, and;
Explaining the extent to which the government has invested in capital assets, including roads, and other infrastructure assets.
GASB Statement No. 34 requires that the CAFR include a narrative introduction and an analytical overview of the government’s financial activities in the form of ―Management’s Discussion and Analysis‖ (MD&A). This analysis is similar to analysis the private sector provides in their annual reports. Information regarding the County’s results of operations, formerly included in this transmittal letter, can now be found in the MD&A.
INTERNAL CONTROL
The County’s internal accounting control system is an established comprehensive framework that provides officials with assurances that assets of the government are reasonably safeguarded against loss from unauthorized use and to compile sufficient reliable information for the preparation of the County’s financial statements in conformity with generally accepted accounting principles (GAAP). Because the cost of internal controls should not outweigh their benefits, the County’s internal controls have been designed to provide reasonable rather than absolute assurance the financial statements will be free from material misstatement.
Under provisions of the Second Class County Code, the Controller is responsible for developing and maintaining the accounting system for the County. In addition, the Controller must audit all claims before disbursement, audit accounts of all County offices, file an annual financial report with the Court of Common Pleas and perform many administrative and board functions.
INDEPENDENT AUDIT
For the 31st consecutive year, an independent public accounting firm has audited the County’s financial statements. The firm of Maher Duessel, Certified Public Accountants, performed the current audit. The goal of the audit was to provide reasonable assurance the financial statements of the County for the year ended December 31, 2010, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The auditor concluded there was a reasonable basis for rendering an unqualified opinion that the County’s financial statements for the year ended December 31, 2010, are fairly presented in conformity with GAAP. The independent auditor’s report is presented in the Financial Section of this report.
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BUDGET
As specified in the Home Rule Charter, the Chief Executive must present the annual operating and capital budgets to County Council 75 days before the end of each fiscal year. No later than 25 days before the end of the year, County Council must adopt, by resolution, balanced operating and capital budgets. The annual operating budget contains estimated revenues and expenditures for the following funds: General, Liquid Fuel Tax, Transportation and Debt Service. Budgetary control is maintained at the total budget, fund, department and character levels of expenditures by encumbering the total dollars indicated on purchase requisitions prior to their release to vendors. Encumbrance, as employed in governmental accounting, means a restriction is placed on the budget allowance to control expenditures. Expenditure documents that result in an overrun of available appropriation balances at the various levels of control are not released until appropriation transfers are officially requested and made available. At year‑end, open encumbrances in the General Fund are reported as assigned fund balance and reappropriated at the start of the next fiscal year.
ECONOMIC CONDITIONS
MAJOR INITIATIVES
Allegheny County has endured the recession better than many metropolitan areas in the state and the nation. Relatively stable housing prices and an economic core of highly regarded universities and hospitals permitted the area to support high incomes and steady job counts, strengthening overall stability.
Additional benefits to the region’s economy have been the progression of large commercial construction projects, such as Three PNC Plaza and the Consol Energy Center. Ongoing expansion of high-tech employer Westinghouse is anticipated to further facilitate regional recovery.
Increasing demand and a shrinking supply of inventory improved Pittsburgh’s commercial real estate markets in 2010. Pittsburgh placed number five on Moody’s survey ranking 60 commercial real estate markets in the U.S.
In its fourth quarter market forecast, Grubb & Ellis, a commercial real estate advisory firm, reported that vacant space continued to be absorbed in a market with little new construction to add to inventory. As financing creates challenges to building new office properties, the firm expects continuing office demand from the health care, education, financial services and energy industries to drive up rents as available space declines. The firm also expects an increase in sales activity of industrial property and construction starts as financing becomes more available.
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The region’s leasing activity was controlled by local companies across various submarkets. Modcloth.com, an Internet apparel retailer, increased its square footage in the Pittsburgh submarket while several national and regional retailers have expanded their Pittsburgh presence. In the North/McKnight area, Simon Property Group added a high-end mix of tenants such as Crate and Barrel, Apple and California Pizza Kitchen, to the Ross Park Mall. Lowe’s Home Improvement broke ground in the new 81-acre McCandless Crossing Project, joined by a 45,000 square foot LA Fitness.
What may be indicative of capital loosening and strengthening of the steel service industry is the purchase of the former Ryerson Steel facility in Carnegie for $3 million and the investment by Alro Steel in future expansion by acquiring 15 acres of land in the Findlay Industrial Park at Westport.
Whole Foods will be expanding its presence in the marketplace, selecting the north suburb of McCandless Township as the location of its new store. An existing 33,000-square- foot building will be expanded by 13,750 square feet to accommodate the grocer.
Urban East Side Bakery Square welcomed Anthropologie and Urban Active Fitness to its retail complex, while upscale Neiman Marcus is considering a new concept store in the same area. Bakery Square’s lead tenant is Google which doubled the size of its Pittsburgh operation, and announced plans to expand its space by an additional 70,000 feet, creating room for up to 350 more employees. Also, Target committed to a 143,000-square-foot store in Pittsburgh’s east side, expected to open in the summer of 2011.
In February, Dicks’ Sporting Goods moved into its new headquarters, a 670,000 square foot, $150 million complex occupying 116 acres of land beside the main runway at Pittsburgh International Airport in Findlay. The center is phase one of a potential 2 million square foot complex. Approximately 1,200 employees currently occupy the space. The development includes a large hanger for its fleet of corporate jets and extensive recreational facilities and amenities for staff. The complex is pursuing Leadership in Energy and Environmental Design (LEED) certification, an internationally recognized green building award.
Less fencing appears in downtown Pittsburgh’s business district as a portion of Market Square’s renovation concluded with outdoor seating and a refurbished central plaza. The Fairmont Hotel opened its doors in nearby Three PNC Plaza while a number of restaurants committed to Market Square.
On the North Shore, the Steelers and Continental Real Estate Company recently opened a $12 million entertainment complex next to Heinz Field, with naming rights secured by American Eagle Outfitters: ―Stage AE.‖
Variety Wholesalers, using 40,000 square feet, announced interest in the region for its Roses store brand, while Wal-Mart continues to extend over the local landscape, with new stores on the horizon.
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2010 marked the completion of the $7.6 million Braddock Field Project, creating affordable housing, recreational opportunities and providing human service programs to encourage business growth. The project was made possible with financial assistance from the Allegheny County Department of Economic Development, Pennsylvania Housing Finance Agency (PHFA), Pennsylvania Department of Community and Economic Development (DCED), Federal Home Loan Bank, Citizen’s Bank and Mon Valley Initiative (MVI).
Allegheny County received a grant allocation of $8.1 million from the U.S. Department of Energy to undertake energy efficiency improvement projects, funded by the American Recovery and Reinvestment Act of 2009. One of the programs funded by this grant, the Energy Savings Performance Contract, is a partnership with Duquesne Light Company which draws on Duquesne Light Company’s expertise and incorporates its resources to assist in meeting County objectives such as instituting efficiency incentives and rebate programs that address particular deficiencies. The partnership includes an investment-grade energy audit of County owned buildings and related infrastructure. As a result, various County buildings are undergoing mechanical retrofits to improve energy efficiency.
Consol Energy Center celebrated its grand opening in August, with the Pittsburgh Penguins offering an open house to the public. CONSOL Energy Inc. signed a 21-year naming rights agreement with Pittsburgh’s hockey team on December 15, 2008. The new arena also hosted a wide range of entertainment events, including family shows and concerts by performers such as Sir Paul McCartney and Lady Gaga.
COUNTY HIGHLIGHTS AND GOVERNMENTAL COOPERATION
In order to expand governmental cooperation, the Allegheny County Controller’s Office proposed an agreement with the City of Pittsburgh to financially share a comprehensive financial management system, known as Enterprise Resource Planning. Allegheny County would purchase all necessary software and provide the city with technical support from its shared services center. The project is expected to be implemented within the coming year.
As part of Allegheny County’s strategy to promote reduced energy consumption and greenhouse gases, Allegheny County has also utilized a portion of its energy stimulus grant, received by the U.S. Department of Energy, to launch the Allegheny County Energy Program for Municipalities. This program is designed to achieve an optimal level of energy efficiency improvements to municipal buildings throughout the County.
Allegheny County’s Department of Economic Development partnered with Grow Pittsburgh, a non-profit dedicated to teaching and promoting responsible urban food production, to provide county residents with educational assistance for establishing and sustaining a community gardening initiative. The initiative provides regenerative benefits for communities in need of revitalization and provides healthy food opportunities in economically challenged communities.
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Chapman Business Properties proved how strategic, public/private partnerships can be an effective economic development tool through its partnership with Findlay Township, West Allegheny School District, Allegheny County and the State. These public entities provided financing for infrastructure in the airport corridor, a pivotal area for potential development with expected future economic growth and job creation. Chapman created the aforementioned Dick’s Sporting Goods complex beside the main runway at Pittsburgh International Airport. It is projected this development will create 1,400 jobs at completion.
LOCAL ECONOMY
The metro region is not expected to experience high-volume retail growth in the coming year, according to Grubb & Ellis. However, well-positioned sites will likely attract tenants and rents should begin to rise. Local restaurants will likely experience continued growth, particularly with support from the Small Business Jobs Act signed in the fall of 2010. This package of tax deductions and lending incentives is expected to channel expansion capital to small businesses.
In addition to minimizing the County’s footprint in manufacturing regions, job losses have slowed and incomes reached bottom in most market areas. PNC Financial predicts that housing prices will end their decline by early 2011 in most market areas. Despite these positive emerging economic trends, high unemployment rates will restrain wage gains, thus keeping income growth at a modest pace.
Although the nation’s employment picture is sluggish and foreclosure rates are high, Southwestern Pennsylvania did not experience the run-up in housing prices over the past decade that other regions have experienced. As a result, it was able to avoid the sharp downturn as the housing bubble burst. Thus, when Forbes.com released its latest list of the ten best markets to buy a house, it ranked Pittsburgh number one. The online magazine said Pittsburgh’s appreciating prices, affordability rating and low number of foreclosures with steady home prices all factored into the City’s ranking.
Allegheny County’s unemployment rate dropped by a tenth of a percentage point from 2009 to 2010, ending the year at 7.1 percent, while the nation’s unemployment rate reached 9.4 percent.
Education and health services now comprise 21 percent of all greater Pittsburgh area jobs, holding at 240,300 jobs in December 2010.
Despite sluggish job growth nationwide, the total number of jobs in the Pittsburgh region in December 2010 was up 9,100 over December 2009. The region has suffered less from the recession than other regions and the nation as a whole, with a regional job loss of 1.8 percent between December 2008 and December 2010.
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Projections by the PNC Financial Services Group expect modest job creation and stable economic growth in 2011. ―Moderate and steady‖ will continue to depict the region for the foreseeable future, as it did during the recession.
ALLEGHENY COUNTY AIRPORT AUTHORITY (ACAA) PITTSBURGH INTERNATIONAL AIRPORT
A multitude of factors, including the recession and consolidation within the airline industry, created hurdles for Pittsburgh International Airport’s recovery after losing USAirways hub status. But improvement to the economy in 2010 helped recover some ground.
Passenger traffic rose nearly 11 percent in November, the eighth consecutive month for an increase in commercial scheduled traffic. And there were announcements of plans for new service by several airlines. Delta Airlines announced plans for Pittsburgh to Boston flights and declared its Pittsburgh to Paris nonstop service will be daily in 2011. Southwest Airlines announced added flights to Denver.
Scheduled passenger traffic at Pittsburgh International Airport increased 2.0 percent in 2010 compared to 2009 according to the December 2010 Summary of Airline Traffic report, compiled by the Allegheny County Airport Authority. A total of 8,195,359 scheduled passengers traveled at the Airport for the year compared to 8,031,175 passengers in 2009.
It is the first year in the history of the airport that three airlines – US Airways, Southwest, and Delta – have flown more than 1 million passengers each.
A total of nine airlines reported increases in traffic with AirTran and JetBlue showing increases of more than 29 percent. AirTran showed a gain of almost 200,000 passengers for the year, while JetBlue’s traffic jumped by more than 36 percent. Airlines that reported decreases in traffic for 2010 were US Airways, Southwest and Continental.
Conde Nast Traveler’s 13th Annual Business Travel Awards poll ranked Pittsburgh International Airport seventh best airport for business travel among U.S. airports. It is the fifth year Pittsburgh International has been in the top ten.
Despite declines in service over the years and obstacles to financing operations, the Airport’s long term outlook is hopeful. The loss of its hub operation compelled the Airport to seek alternative sources of revenue and cost cutting measures. Pittsburgh International has generated revenues by refurbishing and selling unneeded jetways to other airlines and continues to find tenants for Airport property.
Approximately $30 million in debt was refinanced by the Airport Authority in 2010 to gain more favorable rates. Additionally, it anticipates $12 million in gaming revenue from the State in 2011. Standard & Poor upgraded the Airport Authority’s debt outlook from ―stable‖ to ―positive.‖ Air traffic is expected to rise once again in 2011.
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PORT AUTHORITY OF ALLEGHENY COUNTY
The Port Authority of Allegheny County coped with numerous difficulties throughout the year. Pennsylvania’s failure to succeed in acquiring federal approval to place tolls on Interstate 80 impaired its ability to fund Act 44, enacted to assist in financing public transit and road and bridge projects. This shortfall led to a $27 million reduction in State funding, and subsequent $47.1 million budget gap for the transit system.
On July 21st, the public transit system outlined a proposed plan to cover its $47.1 million budget deficit. The proposal called for a 35 percent reduction in service, which included eliminating 50 bus routes and laying off 500 employees. It was the Authority’s deepest proposed cut in history.
By November, a $47 million deficit remained without the prospect of State funding. As a result, the Authority’s Planning and Development Committee voted on more cuts to occur in March of 2011. It proposed a total of 35 percent of service hours reduced, the elimination of approximately 40 bus routes, reductions in service affecting almost every route in the system and the elimination or layoff of between 350 to 400 positions.
By the end of 2010, $45 million in federal economic development funds set aside for southwestern Pennsylvania had been reallocated to provide the Port Authority reprieve from its deficit. Pennsylvania’s Governor met with the Southwestern Pennsylvania Commission in order to provide a temporary fix for the transit crisis and allow legislators more time to come up with a permanent solution.
The prospect of reducing service is nothing new to the Port Authority. In 2007, it reduced its service hours by 15 percent and cut routes from 219 to 186. In 2008 the system experienced a 3 percent increase in service hours, due in part to a sharp rise in the price of gasoline. Since that time, pressure to reduce costs and increase productivity has lead to job cuts, fare increases and higher employee contributions to healthcare and pensions. Such measures helped the Port Authority cut $52 million from the budget since 2007 and increase annual revenues by $14 million. Bus routes eliminated in 2007 occurred in neighborhood routes where ridership had markedly declined over time. However the majority of routes targeted for elimination in November 2010, were routes that are considered sustainable, according to the Authority’s CEO, Steve Bland.
The impact of route elimination will be widely felt in the region, as it will heighten the risk of increased weekday traffic congestion and longer commute times. Additionally, even a modest increase in the number of people driving to work may trigger a parking crisis since the majority of the City’s garages are filled to 90 percent capacity during weekdays.
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The outlook of public transit in the region appears uncertain. Without stable State funding, its future could be in peril. As the Port Authority’s CEO has stated, ―public transit is public good. If the consensus is to support the system, finding a solution to supporting it will transpire.‖
PROPERTY ASSESSMENTS
Allegheny County’s property tax values will undoubtedly be altered in the coming year due to reassessments scheduled to evaluate all properties in Allegheny County over the course of 2010 into 2011.
Though the County Executive sought to maintain property assessments on the base year of 2002, in June 2007 a Common Pleas Court ruling was issued that would require every county in Pennsylvania to re-examine its property assessment system.
In April 2009, the Pennsylvania Supreme Court threw out Allegheny County's base-year system of property valuation on grounds that it violated the uniformity clause of the Pennsylvania Constitution. By December 2009, the Common Pleas Court Judge accepted a revised reassessment plan from Allegheny County.
Notices were sent to property owners in the first quarter of 2010 regarding reassessments. Approximately 92 people, 21 County employees and 71 contract employees, were employed full time to visit, enter and analyze information related to approximately 60,000 commercial and 511,000 residential properties. Owners are scheduled to receive preliminary notice of new values assigned to their homes and businesses by July of 2011. It is predicted that most residents will not incur a major shift, either up or down, in taxes to be paid once assessments are updated.
The $11 million reassessment effort continues to move forward despite efforts by County Council to halt the Court order. In February 2011, Council passed a resolution asking State Legislature and the governor to declare a moratorium on property revaluations until lawmakers modify the statewide assessment code. Members further passed a motion to file a law suit in order to have the State’s assessment rule declared unconstitutional.
State law contains anti-wind fall provisions requiring the County, municipalities and school districts to lower their millage rates to reflect higher values. The Administrative Code of Allegheny County section 5-209.08 states the County shall not derive windfall benefits from reassessments. The total amount of real estate tax revenue received from reassessment shall not exceed 105% of the real estate tax revenues received in the preceding year.
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LONG-TERM FINANCIAL PLANNING
FIVE-YEAR CAPITAL IMPROVEMENT PLAN
The Capital Improvement Plan (CIP) is a strategic tool used by the County to identify, and plan for, capital projects. It is also used to coordinate the financing of capital projects in order to maximize the benefits to the public. The CIP forecasts cash flow to ensure funds are available to finance projects for the five-year period within the constraints of the County’s current Debt Policy. The Debt Policy goals are (1) to limit annual payments to $65 million, (2) to only refinance debt if a present-value-economic gain of 3% is realized and (3) to use an annual adjustable rate to replace fixed rate debt. Some of the 2011 and 2012 planned projects include $24.2 million for the rehabilitation of the Mansfield Bridge, $22.6 million for the replacement of the Greensburg Pike Bridge, $17 million for the continued work on the 10th Street Bridge and renovation of the Health Department Offices at 3333 Forbes Ave ($7.8 million). Planned projects to begin in 2012 include $2.9 million for improvements to Campbell’s Run Road and $2.3 million for renovation of Thoms Run Road Extension.
FUTURE COUNTY OPERATION BUDGETS
The Home Rule Charter requires the County to project revenues and expenditures for two subsequent years. The County 2011’s budget is $767.7 million and 2012 and 2013 budgets are forecasted at $776.3 million and $785.7 million respectively.
RELEVANT FINANCIAL POLICIES
It is the County’s goal to ensure current year operating revenues are sufficient to fund current year expenditures without the use of non-recurring revenues. However, non-recurring and unbudgeted areas of funding used to finance 2010 expenditures were as follows:
Capital Fund - PennDOT Reimbursements $ 41.5 million RAAC - Revolving loan repayments from EDF 6.0 million - Excess EDF Debt Service Escrow Funds 0.7 million Department of Real Estate - Technology Fund 0.5 million Department of Administration - Internal Fund 0.2 million
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COUNTY OF ALLEGHENY, PENNSYLVANIA
As described in the Notes to the Financial Statements, the County has a pay-as-you-go policy for the following:
Self-insured Workers’ Compensation and Dental Care Accrued Sick Time Net Pension Obligation Postemployment Benefits Other Than Pension Benefits Termination Payments
AWARDS AND ACKNOWLEDGEMENTS
CERTIFICATE OF ACHIEVEMENT FOR CAFR
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the County of Allegheny, Pennsylvania, for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended December 31, 2009. This was the 28th consecutive year that the County Controller’s Office has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate.
CERTIFICATE OF ACHIEVEMENT FOR PAFR
The Government Finance Officers Association of the United States and Canada (GFOA) has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to the County of Allegheny, Pennsylvania, for its Popular Annual Financial Report (PAFR) for the fiscal year ended December 31, 2009. The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports.
In order to receive an Award for Outstanding Achievement in Popular Annual Financial Reporting, a government unit must publish a Popular Annual Financial Report, whose contents conform to program standards of creativity, presentation, understandability and reader appeal.
An Award for Outstanding Achievement in Popular Annual Financial Reporting is valid for a period of one year only. The County of Allegheny, Pennsylvania has received a Popular Award for the first time for fiscal year ended December 31, 2009.
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COUNTY OF ALLEGHENY, PENNSYLVANIA
INTERNAL AUDIT PEER REVIEW
The Association of Local Government Auditors (ALGA) conducted an external quality control review on the Controller's Audit Division in 2009. The objectives of the peer review were to ensure the Audit Division’s internal quality control system was suitably designed, operating effectively and in compliance with Government Auditing Standards issued by the Comptroller General of the United States. Organizations meeting ALGA’s standards receive full compliance, permitting them to issue audits in accordance with Generally Accepted Government Auditing Standards. The Audit Division received full compliance, which is the best score possible. The peer review is valid for a period of three years. This was the first time a County Controller has ever requested a peer review.
INTERNAL AUDIT
The Controller's Audit Division routinely conducts financial and compliance audits of County departments, agencies, row offices and federal and state grants to ensure that County government is efficient, effective and compliant. Management and performance reviews are performed when the need arises. The division issued 92 financial and compliance audits, reviews and special reports to the County Manager, County Council and the general public during the 2010 calendar year to inform County taxpayers and protect their financial interests.
ACKNOWLEDGMENTS
The information contained in this report provides a comprehensive picture of the financial position of the County of Allegheny. The presentation of this report on a timely basis could not be accomplished without the efficient and dedicated services of many people. I wish to express my thanks and sincere appreciation to all of the staff and auditors who assisted and contributed during its preparation.
Respectfully submitted,
Mark Patrick Flaherty Controller
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Certificate of achievement for excellence in financial reporting
COUNTY OF ALLEGHENY, PENNSYLVANIA Officials of Allegheny County December 31, 2010
CHIEF EXECUTIVE Dan Onorato
COUNTY COUNCIL
COUNCIL DISTRICT AT LARGE #1 COUNCIL DISTRICT AT LARGE #2 John P. DeFazio Chuck McCullough
COUNCIL DISTRICT #1 COUNCIL DISTRICT #5 COUNCIL DISTRICT #10 Matt Drozd Vince Gastgeb William R. Robinson
COUNCIL DISTRICT #2 COUNCIL DISTRICT #6 COUNCIL DISTRICT #11 Jan Rea Vacant*** Rich Fitzgerald*
COUNCIL DISTRICT #3 COUNCIL DISTRICT #7 COUNCIL DISTRICT #12 James R. Burn, Jr. Nicholas Futules James Ellenbogen
COUNCIL DISTRICT #4 COUNCIL DISTRICT #8 COUNCIL DISTRICT #13 Michael J. Finnerty Charles J. Martoni, Ph.D.** Amanda Green
COUNCIL DISTRICT #9 Robert J. Macey
ROW OFFICERS
CONTROLLER DISTRICT ATTORNEY Mark Patrick Flaherty Steven A. Zappala, Jr.
TREASURER SHERIFF John K. Weinstein William P. Mullen, Jr.
DIRECTOR OF COUNTY MANAGER BUDGET AND FINANCE SOLICITOR James M. Flynn Amy Griser Michael H. Wojcik, Esquire
*President of Council **Vice President of Council ***Joan Cleary resigned effective December 21, 2010
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INDEPENDENT AUDITOR’S REPORT
Auditors report
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Auditors report
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MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
INTRODUCTION
This section of the County of Allegheny’s (County) comprehensive annual financial report presents a narrative overview and analysis of the County’s financial performance for the year ended December 31, 2010. It is recommended that it be read in conjunction with the accompanying basic financial statements and notes to the financial statements in order to obtain a thorough understanding of the County’s financial condition at December 31, 2010.
RESULTS IN BRIEF
Government-wide net assets decreased $51.9 million in 2010.
Government-wide unrestricted net deficit at December 31, 2010 was $143.9 million.
The County’s real property tax rate was maintained at 4.69 mills.
The County’s investment bond rating from Standard & Poor’s remained at A+. Moody’s Investor Service rating for the County is A1.
At December 31, 2010, the County had $655.8 million of bond debt outstanding. This represents a decrease of $33.3 million from the previous year.
The General Fund’s unrestricted fund balance increased by $0.2 million in 2010 compared to a $0.6 million increase in 2009.
The total fund balance of the General Fund at December 31, 2010 was $20.4 million. The unassigned portion of the fund balance was $19.5 million, which is approximately 3.1% of revenues in the General Fund for fiscal year 2010. The change in unassigned fund balance between years was negligible.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial section of this report consists of three parts: management’s discussion and analysis, the basic financial statements (including notes to the financial statements) and a section that presents combining and individual fund statements, as well as detailed budgetary comparison schedules. The basic financial statements present two different views of the County through the use of government-wide statements and fund financial statements.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
The following diagram shows how the required components of this comprehensive annual financial report are arranged and relate to one another.
REQUIRED COMPONENTS OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT
Management’s Basic Financial Discussion and Statements Analysis
Government- Fund Wide Notes to Financial Financial Financial Statements Statements Statements
Summary Detail
The first two statements (pages 53-57) are government-wide financial statements that provide information about the primary governments’ overall financial status, as well as the financial status of the County’s component units (pages 74-81). The remaining statements (pages 58-73) are fund financial statements that focus on individual parts of County government, reporting the County’s operations in more detail than the government-wide statements. The fund financial statements include:
Governmental funds statements (pages 58-68) which explain how services such as public safety were financed in the short term, as well as what remains for future spending. A budgetary comparison statement is provided to demonstrate compliance.
Proprietary fund statements (pages 69-71) which offer financial information about the activities the County operates like a business.
Fiduciary funds statements (pages 72-73) which reflect activities involving resources that are held by the County as a trustee or agent for individuals, private organizations, or other government units. Fiduciary funds are not reflected in the government-wide statements because the resources cannot be used to support the County’s programs.
The financial statements also include notes that provide additional information essential to a full understanding of the financial data provided in the government-wide and fund financial statements (pages 83-203) as well as required supplementary information regarding the County’s budget (page 207-209).
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MANAGEMENT’S DISCUSSION AND ANALYSIS
In addition to these required elements, a section is included with combining and detailed individual comparative statements, capital assets and debt schedules, and schedules that provide specifics about major and nonmajor funds (pages 215-319).
The remainder of this overview explains the structure and contents of the government- wide and fund financial statements.
GOVERNMENT-WIDE FINANCIAL STATEMENTS
The government-wide financial statements report information about the County as a whole using accounting methods similar to those used by private-sector companies. The primary features are reflected in the following diagram.
Government-wide Financial Statements
Governmental Activities and Component Units
Measurement Focus: Economic Resources Accounting Basis: Accrual
Statement of Net Assets Statement of Activities
Assets Net Program (Expense) Revenue - Liabilites - General Revenues = Net Assets = Change in Net Assets
The statement of net assets includes all of the County’s assets and liabilities, except fiduciary funds, with the difference between the two reported as net assets. This statement serves a purpose similar to that of the balance sheet of a private-sector business. The statement of activities focuses on how the County’s net assets changed during the year. Because it separates program revenue (revenue generated by specific programs through charges for services, grants and contributions) from general revenue (revenue provided by taxes and others sources not tied to a particular program), it shows to what extent each program has to rely on taxes for funding. All changes in net assets are reported using the accrual method of accounting, which requires that revenues be reported when they are earned and expenses be reported when the goods and/or services are received, regardless of when cash is received or paid. Net assets is one way to measure the County’s financial position. Over time, increases or decreases in the County’s net assets are one indicator of whether the County’s financial position is improving or deteriorating. However, other non-financial factors such as changes in the County’s real property tax base and general economic conditions must be considered to assess the overall position of the County.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
The County’s government-wide financial statements are divided into two categories:
Governmental activities – include the County’s basic services such as public safety, public works, health and welfare, and general government, funded through program based charges for services and intergovernmental operating and capital grants, as well as general revenues such as property taxes, sales taxes and other revenues.
Component units – reflecting the activities of legally separate entities for which the County can exercise influence and/or may be obligated to provide financial support.
FUND FINANCIAL STATEMENTS
The fund financial statements provide more detailed information about the County’s most significant funds, not the County as a whole. Funds are accounting groups that the County uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by state law. Other funds are established to control and manage resources designated for specific purposes. The following diagram presents the major features of the fund financial statements, including the types of information contained therein.
Fund Financial Statements
Governmental Funds Proprietary Funds Fiduciary Funds (excluding Agency Funds) Measurement Focus: Current Measurement Focus: Economic Resources Resources Measurement Focus: Economic Accounting Basis: Modified Account Basis: Accrual Resources Accrual Accounting Basis: Accrual
Balance Sheet Statement of Net Assets Statement of Net Assets
Assets Assets - Liabilities Assets - Liabilities = Liabilities + Fund Balance = Net Assets = Net Assets
Statement of Revenues, Statement of Revenues, Statement of Changes Expenditures and Changes Expenses and Changes in Net Assets in Fund Balance In Net Assets
Revenues - Expenditures Operating Income + (-) Additions - Deductions + (-) Other Financing Non-operating Revenues = Change in Net Assets Sources (Uses) (Expenses) = Net Change in + Capital Contributions Fund Balance = Change in Net Assets
Statement of Cash Flows
32
MANAGEMENT’S DISCUSSION AND ANALYSIS
The County has three kinds of funds, in addition to its component units:
Governmental funds – Most of the County’s basic services are included in governmental funds, which focus on: (1) the flow in and out of cash and other financial assets that can readily be converted into cash, and; (2) the balances left at year-end that are available for spending. These funds are reported using the modified accrual accounting basis and a current financial resources measurement focus. Consequently, the governmental funds statements provide a detailed short-term view that helps determine the financial resources available in the near future to finance County programs. The relationship between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is described in a reconciliation that follows the governmental fund financial statements. The County adopts an annual budget for the General Fund, Transportation and Liquid Fuel Tax Funds and Debt Service Fund, as required by the Home Rule Charter. Because it is considered one of the County’s major funds, a budgetary comparison schedule is presented for the General Fund, reflecting the following: (1) the original budget; (2) the final amended budget; (3) actual revenues and expenditures, and; (4) the variance between the final budget and actual revenues and expenditures.
Proprietary funds – Used to report activities that provide services for the County’s other programs and activities. These internal service activities predominantly benefit governmental rather than business-type activities; therefore, they have been included with governmental activities in the government-wide financial statements.
Fiduciary funds – The County is the trustee, or fiduciary, for the Employees’ Retirement System. In addition, the County is also responsible for certain agency funds, which are clearing accounts for assets held by the County in its role as custodian until the funds are allocated to the private parties, organizations or government agencies to which they belong. The County is responsible for ensuring that the assets reported in these funds are used for their intended purposes. This fiduciary activity is reported in a separate Statement of Fiduciary Net Assets and a Statement of Changes in Fiduciary Net Assets. These funds are excluded from the County’s government-wide financial statements because the County cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE COUNTY AS A WHOLE
The County is presenting its financial statements as required by Governmental Accounting Standards Board Statement No. 34 (GASB Statement No. 34), ―Basic Financial Statements – and Management’s Discussion and Analysis (MD&A) – for State and Local Governments.‖ The Statement of Net Assets and the Statement of Activities report information about the County as a whole and about its activities to measure the results of the year’s activities.
33
MANAGEMENT’S DISCUSSION AND ANALYSIS
GOVERNMENT-WIDE FINANCIAL STATEMENTS:
The County’s net assets at December 31, 2010 and 2009 are presented below:
Summary of Statement of Net Assets
December 31, 2010 With Comparative Totals for December 31, 2009 (rounded in millions)
Governmental Activities -
2010 2009
Current and other assets $ 320.7 395.8
Capital assets 656.7 617.1
Total assets 977.4 1,012.9
Current and other liabilities 289.1 292.7 Non-current liabilities 769.0 749.0 Total liabilities 1,058.1 1,041.7
Net assets:
Invested in capital assets,
net of related debt 28.7 19.4 Restricted 34.5 30.8 Unrestricted (143.9) (79.0) Total net assets $ (80.7) (28.8)
NET ASSETS:
For 2010, net assets of governmental activities decreased $51.9 million to ($80.7) million from ($28.8) million in 2009. The net assets consist of $28.7 million invested in capital assets, net of related debt, $34.5 million restricted for various grant related purposes; and an unrestricted net deficit of $143.9 million. Unfunded long-term liabilities for compensated absences ($7.3 million), worker’s compensation ($1.5 million), pension ($112.2 million), and OPEB ($18.8 million) are responsible for the County’s unrestricted net deficit. These long-term liabilities grew by $46.0 million in 2010.
34
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following table presents the County’s change in net assets for the years ended December 31, 2010 and 2009: Change in Net Assets Year Ended December 31, 2010 With Comparative Amounts for December 31, 2009 (rounded in millions) Governmental Activities - 2010 2009 Variance Revenues Program revenues: Fees, fines and charges for services $ 104.7 105.2 (0.5) Operating grants and contributions 979.9 1,064.8 (84.9) Capital grants and contributions 40.0 28.6 11.4 General revenues: - Property taxes 267.8 266.4 1.4 Sales and use taxes 40.9 39.2 1.7 Gaming local share assessment 4.8 1.6 3.2 Other 2.7 12.7 (10.0) Total revenues 1,440.8 1,518.5 (77.7) Program expenses General government 256.8 235.1 21.7 Public safety 121.4 115.5 5.9 Public works 66.5 84.7 (18.2) Transportation 36.3 37.6 (1.3) Health and welfare 856.2 960.1 (103.9) Culture and recreation 19.9 12.7 7.2 Education 22.6 22.1 0.5 Economic development 45.7 29.8 15.9 Economic opportunity 38.2 37.3 0.9 Interest on long-term debt 29.1 27.9 1.2 Total expenses 1,492.7 1,562.8 (70.1) Change in net assets (51.9) (44.3) (7.6) Net assets – beginning (28.8) 15.5 Net assets – ending $ (80.7) (28.8)
CHANGE IN NET ASSETS:
In 2010, the change in net assets was a decrease of $51.9 million compared to a $44.3 million decrease in 2009. Revenue decreases in 2010 of $77.7 million (mostly Human Service Grants) were offset by decreased health and welfare expenses of $103.9 million.
35
MANAGEMENT’S DISCUSSION AND ANALYSIS
The decrease ($84.9 million) in operating grant revenue can be attributed in part to $113.5 million in health and welfare program costs for Mental Retardation being paid directly by the State to service providers. In prior years, these funds passed through the County. Offsetting this decrease was $15.6 million in additional managed care revenue, $3.7 million more in CDBG (Community Development Block Grant) funds, $5.2 million in Homeland Security grants, and a $10.1 million increase in Special Grant Incentive funds.
Within General Revenues the $11.4 million increase in Capital was largely offset by a $10.0 million decrease in miscellaneous revenues. The decrease in miscellaneous revenue was largely due to a $3.5 million decrease in interest and investment earnings and a 2009 $4.0 million gain on the sale of the One Smithfield Street building.
The decrease ($70.1 million) in expenses included the above health and welfare decrease of $113.5 million for direct State payment offset by increased general government expenses of $21.7 million and higher economic development costs of $15.9 million. The general government expenses rose as fewer assets were capitalized and economic development costs from the community infrastructure and tourism fund and HPRP (Homelessness Prevention and Rapid Re-housing Program) grants increased.
SOURCES OF REVENUES:
The following chart graphically depicts the government-wide sources of revenues for the year ended December 31, 2010: Sources of Revenues Program revenue Total revenues: $1.4 billion Operating Grants 68.0%
Program revenue General revenue other Capital Grants 0.2% 2.8%
General revenue Program revenue fees, gaming LSA fines and charges 0.3% General revenue 7.3% General revenue sales property taxes and use taxes 18.6% 2.8%
36
MANAGEMENT’S DISCUSSION AND ANALYSIS
Total government-wide revenues of $1.4 billion were derived primarily from program based operating grants and contributions, representing 68.0% of the total. Property taxes made up the second largest source of revenue at 18.6%, followed by program fees, fines and charges at 7.3%, sales and use and gaming taxes at 3.1%, program based capital grants and contributions at 2.8%, and other general revenue at 0.2%.
PROGRAM EXPENSES:
The following chart graphically depicts the government-wide program expenses for the year ended December 31, 2010:
Program Expenses Total expenses: $1.5 billion
Health and welfare, 57.4%
Transportation, 2.4%
Public Works, 4.5%
Interest on long-term debt, 1.9%
Economic opportunity, 2.6% Economic Development, 3.1%
Education, 1.5% Public Safety, 8.1% General government, 17.2% Culture and recreation, 1.3%
Total expenses for all programs in 2010 were $1.5 billion. The expenses cover a range of services, with the largest being health and welfare (health, behavioral health/ mental retardation, drug and alcohol program, children, youth and family services, area agency on aging, regional nursing centers) at 57.4%. The second largest program area was general government (central management, administrative services, row offices and courts) at 17.2%, followed by public safety (jail, police, emergency management) at 8.1%, public works (maintenance, engineering, facilities management) at 4.5%, economic development (community development) at 3.1%, economic opportunity (community service, employment and training) at 2.6%, transportation expenses (contributions to the Port Authority of Allegheny County) at 2.4%, interest payments on long-term debt at 1.9%, education contributions to the Community College of Allegheny County) at 1.5%, and culture and recreation (parks) at 1.3%.
37
MANAGEMENT’S DISCUSSION AND ANALYSIS
NET PROGRAM EXPENSES/REVENUES:
Net program expenses/revenues indicates the amount of support required from taxes and other general revenues for the year. The following chart graphically depicts the net program expenses/revenues by function/program for the year ended December 31, 2010:
Net Program Expenses/Revenues (in millions)
$50.0
$0.0
-$50.0
-$100.0
-$150.0
-$200.0
term Debt term
Education
-
Public safety Public
Public Works Public
Transportation
Health and welfareand Health
General government General
Economic Opportunity Economic
Culture and Recreationand Culture
EconomicDevelopment Interest on long Intereston
General government expenses required the most general revenue for support, needing $165.9 million or 64.6% of the $256.9 million in 2010 expenses. Public safety required $70.8 million (58.3%) in general revenue support for $121.4 million of total expenses, while health and welfare required $48.8 million (5.7%) of $856.2 million of expenses; education programs required $22.5 million (99.5%) of $22.6 million of expenses, interest payments on long-term debt required $29.0 million (99.8%) of the $29.1 million of interest expenses, economic development required $4.7 million (10.3%) of the $45.7 million of expenses, public works required $15.3 million (23.0%) in revenue of the $66.5 million of expenses and culture and recreation required $7.8 million (39.4%) of general revenue to support expenses of $19.9 million. Transportation expenses required $3.4 million (9.4%) of general revenue to support costs of $36.3 million of expenses. Economic opportunity expenses of $38.2 million had an excess of $0.1 million (0.1%) of general revenue support.
38 FINANCIAL ANALYSIS OF THE COUNTY’S FUNDS
MANAGEMENT’S DISCUSSION AND ANALYSIS
As noted earlier, Allegheny County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.
GOVERNMENTAL FUNDS:
The General, County Grants, Human Service Grants, Capital Projects, Liquid Fuel Tax, Transportation and Debt Service Funds make up the County’s governmental funds. All are considered major funds, with the exception of the Liquid Fuel Tax and Transportation and Debt Service Funds, which are considered non-major (other governmental) funds. The focus of the governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of the County’s net resources available for spending at the end of the fiscal year.
NORMAL IMPACTS:
There are nine basic impacts on revenues and expenditures, as outlined below:
Revenues:
Economic conditions – which can reflect a growing, stable or declining economic environment, and have a substantial impact on tax revenues as well as public spending habits for permits and other elective user fees and taxable consumed spending. Changing patterns in intergovernmental and grant revenue (both recurring and non-recurring) – certain recurring revenues (formula grants, etc.) may experience significant changes periodically while non-recurring or one-time revenues (project grants, direct payments for specified use, etc.) are less predictable and often distorting in their impact on year-to-year comparisons. Increase in assessed valuations of real property – the County derives a substantial amount of its revenues from property taxes, which are based on the market value of real property. The County’s Home Rule Charter limits property tax revenue from a countywide reassessment to a 5% increase of the amount of real estate tax revenue received in the preceding year, excluding new construction or improvements made to existing structures. Increase/decrease in County Council approved rates – while the County’s sales tax is fixed at one percent, County Council has the authority to periodically increase or decrease various other rates (property taxes, alcoholic beverage and rental vehicle taxes, recording and filing fees, recreation fees, etc.) Market impacts on investments – market conditions can cause income on the County’s investment portfolio to fluctuate year-to-year.
39
MANAGEMENT’S DISCUSSION AND ANALYSIS
Expenditures:
Introduction of new programs – within the functional expense categories (public safety, public works, health and welfare, etc.) individual programs may be added or deleted based upon the changing needs of the community. Increase/decrease in personnel – changes in service demand may cause an increase or decrease in staffing costs (salaries and fringe benefits), which represent a significant expense to the County. Salary increases (cost of living, merit and market adjustment and collective bargaining agreements) – the ability to attract and retain human resources requires the County to strive to approach a competitive salary range position in the marketplace. Inflation – while overall inflation appears to be modest, the County provides various health related programs and services have increased significantly. This sector of the economy has in recent years experienced above average increases in costs. In addition, the County is a consumer of various commodities which may experience unusual commodity specific increases.
Governmental fund revenues, expenditures and net changes at fiscal year ending December 31, 2010 and 2009 were:
Governmental Fund Revenues, Expenditures, Other Financing and Net Change in Fund Balance (rounded in millions) Net Change in Fund 2010 Balances Net Other Fund Revenues Expenditures Financing 2010 2009
General $ 623.6 654.5 31.1 0.2 0.6 County Grants 137.2 141.4 5.9 1.7 5.1 Human Service Grants 537.4 542.5 5.4 0.3 (0.1) Capital Projects 40.2 86.4 (34.5) (80.7) 27.9 Other 99.4 101.6 1.6 (0.6) (9.6)
Total Change $ 1,437.8 1,526.4 9.5 (79.1) 23.9
At December 31, 2010, the County’s governmental funds reported a combined fund balance of $37.5 million, a decrease of $79.1 million compared to the previous year’s increase of $23.9 million.
40
MANAGEMENT’S DISCUSSION AND ANALYSIS
The General Fund net change in fund balance was an increase of $0.2 million compared to a $0.6 million increase in 2009. General Fund revenues and other financing sources increased by $8.0 million and expenditures were $8.4 million higher than the previous year.
The following is an analysis of the General Fund revenue and net other financing sources increase of $8.0 million.
The major factor in the $23.8 million decrease in General Fund taxes was the allocation percentage used in funding the Debt Service Fund. Since state gaming funds were no longer available to pay debt, the percentage of tax allocated to the General Fund decreased 12%, resulting in a comparable year tax allocation decrease of $29.9 million. In addition, higher certified assessed values resulted in $1 million in current tax collections and non-current tax collections increased $5.3 million as tax receivables have grown since the 2007 receivable sale.
Sales tax revenues increased 4.4% or $1.7 million as November and December’s collections indicated an upswing in the economy.
The 2% Gaming local share assessment tax increased $3.3 million in 2010, as the Rivers Casino was only open for five months in 2009.
Federal revenues decreased by $5.1 million or 5.4% as detailed below (in millions):
Decrease in reimbursement for federal prisoners $(0.7) Increase in stimulus funding for foster care 1.8 Increase in skilled nursing care 1.0 Decrease in Medicare Part A (1.1) Decrease in Title IV-E - Child Placement (5.3) Decrease in TANF (0.5) Decrease in Title IV-E - Adoption (0.5)
State revenues increased by $8.5 million for the reasons detailed below (in millions):
Decrease in Crime Lab and Criminal Justice subsidies $(1.8) Decrease in Act 315 Health Department funding (0.7) Increase in Kane’s Intergovernmental Transfers Program performance bonuses 3.2 Increase in skilled nursing care 0.8 Increase in Medicaid Paid Prescriptions 0.3 Increase in Act 148 Special Grant Incentives 10.1 Decrease in Act 148 CYF services (3.5)
41
MANAGEMENT’S DISCUSSION AND ANALYSIS
Local units revenues increased $6.1 million as the County received $6 million in repaid loans from Redevelopment Authority’s (RAAC) Economic Development Fund Revolving Loan Program.
Charges for services increased $1.5 million for the following reasons (in millions):
Increase in general government revenue $0.3 Increase in reimbursements for Airport security 0.3 Decrease in golf fees (0.2) Increase in swimming fees 0.2 Increase due to new ski rental and lesson fees 0.1 Increase in ice skating fees 0.1 Decrease in patient income (0.6) Decrease in collections from guardians and parents (0.4) Increase in Private/Commercial insurance at Kane 1.9 Decrease in miscellaneous receipts as Kane had no MA Disproportionate Share income (0.5)
Interest earnings decreased $0.4 million as cash balances dwindled and interest rates dropped throughout the year.
Miscellaneous revenue decreased $2.6 million, as 2009 revenues for insurance reimbursements ($1.0 million), unclaimed property ($1.2 million) and sales of property at Kane ($0.4 million) did not occur in 2010.
Other financing sources - net totaled $31.1 million in 2010 for the following reasons (in millions):
Transfer of available Debt Service fund balance $41.5 Reimbursement of capital assets from Capital Projects Fund 0.5 Excess Debt Service funds 0.4 Interdepartmental transfer agreements 0.7 Matching requirement and County Grant deficit funding (7.2) Matching requirement for Human Service grants (4.8)
Other financing sources - net in 2009 were $12.1 million, resulting in 2010 having an increase of $19.0 million.
42
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following is an analysis of the General Fund expenditures increase of $8.4 million.
General government expenditures decreased by $1.7 million for the following reasons (in millions):
No 2010 Capital lease cost $(7.7) Non-departmental Decrease in Voluntary Separation payments (0.4) Transfer of lease payments (0.5) Salary and fringe benefits increases: Courts 2.5 Administrative Services 0.7 Public Defender 0.7 District Attorney 0.7 Sheriff 0.7 Court Records 0.3 Treasurer’s Office 0.3 Increase in Property Assessment postage/temps 0.8 Increase in Medical Examiner lease payments 0.5
Public safety expenditures rose by $2.5 million as salary and fringe benefits increased at the Jail ($0.9 million) and County Police ($1.0 million). In addition, the Jail’s services increased $0.3 million and supplies increased $0.1 million.
Public works expenditures increased $0.9 million, as rock salt purchases increased $0.8 million and salaries and fringe benefits of maintenance rose $0.8 million. These increases were offset by transfers of eligible costs to the Celebration of Lights project.
Health and welfare expenditures increased $6.0 million. Kane Regional Centers salaries and fringe benefits rose $1.6 million and the Health Department’s Environmental Health Services increased $0.3 million. Medical costs for inmates rose $1.7 million and CYF’s expenditures for foster care payroll, legal council and payment to providers increased $2.2 million.
Culture and recreation expenditures increased $0.7 million as salary and fringe benefits rose $0.1 million, material cost for rock salt increased $0.2 million and unexpected legal settlements of $0.6 million.
Economic development’s $0.6 million decrease in expenditures was related to a $0.7 million return of excess escrowed funds used to pay debt service for RAAC’s Economic Development Fund.
Debt service increased $0.2 million for the cost of issuance and interest on 2010’s TRAN.
43
MANAGEMENT’S DISCUSSION AND ANALYSIS
The Human Service Grants Funds had no significant change in net fund balances in 2010. This occurs because grants are generally expenditure driven and capped at mandated spending levels. The County Grants Fund $1.7 million increase in fund balance is attributed to the deficit in the Enhanced 911 Program ($3.8 million) and Court program deficits ($4.0 million) being funded. It should be noted the County received decreased Human Service Grant revenues of $103.8 million and increased County Grant revenues of $16.2 million in 2010. The decrease in Human Service Grants is directly attributed to the State paying providers for certain services rather than the County. The increase in County Grant revenues was attributed to $5.2 million in Homeland Security Act funds, CDBG increases of $3.7 million, Allegheny County Economic Development Energy Efficiency grants of $2.0 million and HPRP funds of $1.4 million.
The Capital Projects fund balance decreased by $80.8 million in 2010. The decrease in fund balance results from using $41.5 million in PennDot reimbursements to pay expenditures in the Debt Service fund and expending $46.2 million of prior year bond proceeds on current projects. In addition, bond proceeds of $9.4 million partially offset both the deficiency of revenues over expenditures of $46.2 million and net operating transfers out of $34.5 million.
Other governmental funds (Transportation, Liquid Fuel and Debt Service) fund balances only decreased $0.6 million due to the transfer of all available fund balance in the Debt Service Fund, $41.9 million, to the General Fund.
The following chart graphically depicts the total revenues received and expenditures incurred by fund for the year ended December 31, 2010: Governmental Fund Revenues and Expenditures
(in millions)
Revenues Expenditures Other Financing Sources
$700.0
$600.0
$500.0
$400.0
$300.0
$200.0 $100.0 $0.0 -$100.0 General Fund County Human Capital Other Grants Fund Service Projects Fund Governmental Grants Fund Funds
As shown, the majority of revenues and expenditures occurred in the General Fund and Human Service Grants Fund in 2010.
44
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following table presents the County’s previously analyzed change in governmental fund balances for the year ended December 31, 2010:
Change in Governmental Fund Balances For the fiscal year ended December 31, 2010 (rounded in millions)
Fund Balance Human County Service Capital Other
General Grants Grants Projects Governmental
Beginning 1/1/10 $ 20.2 26.8 - 63.4 6.2
Net Change 0.2 1.7 0.3 (80.7) (0.6) Ending 12/31/10 $ 20.4 28.5 0.3 (17.3) 5.6
The County has issued bonds in 2011 (Note 16) to eliminate the Capital Projects fund deficit.
The following chart illustrates the Governmental Fund fund balances at December 31, 2010:
Governmental Fund Balances at December 31, 2010 (in millions) Restricted Committed Assigned Unassigned
$30.0
$20.0
$10.0
$0.0
-$10.0
-$20.0
-$30.0 General Fund County Grants Human Service Capital Projects Other Fund Grants Fund Fund Governmental Funds
45
MANAGEMENT’S DISCUSSION AND ANALYSIS
The General Fund is the chief operating fund of the County. At December 31, 2010, the total fund balance in the General Fund was $20.4 million. The unassigned fund balance was $19.5 million, the same as the previous year. As a measure of the General Fund’s liquidity, it may be useful to compare unrestricted fund balance to total fund revenues. Unrestricted 2010 fund balance represents 3.3% of total fund revenues and unassigned fund balance was 3.1% of revenues in 2009.
2010 GENERAL FUND BUDGETARY HIGHLIGHTS AND NEXT YEAR’S BUDGET
The difference between the 2010 adopted and the 2010 final amended General Fund budget of $670.8 million, net of $0.7 million in reappropriated 2009 encumbrances, was an increase of $1.1 million.
Numerous budget transfers were approved by County Council throughout the year to increase some and reduce other departments’ appropriations to arrive at the final budget. The major transfers to provide appropriations were $2.3 million to Non-departmental for unrecovered healthcare costs and constable services, $0.6 million to Public Defender’s Office, $0.8 million to Property Assessment, $1.0 million to the Courts and $1.2 million to Public Works’ Maintenance division for salaries and fringe benefits.
The total increase in budgeted expenditures was to be financed by $30 million transferred in from the Debt Service Fund. This transfer would be made possible by using $30 million in Penn Dot reimbursements from the Capital Projects fund to pay Debt Service expenditures. For 2010 the actual transfers were $41.5 million from the Capital Projects Fund to the Debt Service Fund and $41.9 million from the Debt Service Fund to the General Fund.
State and Federal revenues for 2010 were overestimated by $24.6 million, however Health and Welfare expenditures were $13.2 million under budget. Sales tax revenues were $0.6 million over budget, but Gaming tax collections were overestimated by $1.2 million.
In addition, in 2010 the County used RAAC loan proceeds from the Economic Development Fund of $6.0 million and the above one time Debt Service transfer to cover expenditures in the General Fund.
The 2011 General Fund budget was adopted at $664.2 million or 0.2% lower than the previous year’s final budget, however $9.6 million in tax receivable sales and $4.0 million for non-profit donations are needed to balance the budget. In addition, based on 2010 actual revenues, some areas which were under budget in 2010, such as federal, state, and gaming tax revenues, may come in under budget in 2011 as well.
All departments are expected and budgeted to reduce spending in 2011.
46
MANAGEMENT’S DISCUSSION AND ANALYSIS
CAPITAL ASSET AND DEBT ADMINISTRATION
CAPITAL ASSETS:
The County’s investment in capital assets at December 31, 2010, net of accumulated depreciation, amounted to $656.7 million. Capital assets consist primarily of land, land improvements, construction in progress, buildings, capital lease, leasehold improvements, equipment and infrastructure. The following is a summary of capital assets at December 31, 2010 and 2009:
Summary of Capital Assets
Balance at Balance at December 31, 2010 December 31, 2009 Increase Land $ 24,373,153 24,373,153 - Land improvements 8,192,901 8,192,901 - Construction in progress 73,250,586 48,735,755 24,514,831 Buildings 398,653,111 391,000,275 7,652,836 Infrastructure 391,831,794 390,825,195 1,006,599 Furniture and other equipment 112,751,270 80,692,962 32,058,308 Total capital assets 1,009,052,815 943,820,241 65,232,574
Less accumulated depreciation for: Land improvements 5,897,952 5,609,513 288,439 Buildings 161,436,938 152,675,001 8,761,937 Infrastructure 140,494,339 132,429,896 8,064,443 Furniture and other equipment 44,497,105 35,979,379 8,517,726 Total accumulated depreciation 352,326,334 326,693,789 25,632,545 Total $ 656,726,481 617,126,452 39,600,029
The increases in total capital assets of $65.2 million was due to an increase in construction in progress of $24.5 million, buildings of $7.6 million, infrastructure of $1.0 million, and furniture and other equipment of $32.1 million. Furniture and other equipment’s increase includes adjustments for items not previously recorded and depreciated. Major capital projects in progress during the current fiscal year included the following:
Construction continued on the Rankin Bridge, this project is expected to be completed by April 2011. Construction in progress increased approximately $16.0 million. Construction continued on the Duquesne/McKeesport Flyover Bridge, this project is expected to be completed by September 2011. Construction in progress increased $2.1 million.
47
MANAGEMENT’S DISCUSSION AND ANALYSIS
The North Park Lake Sediment Removal Project continued in 2010 and is expected to be completed by August 2011. Construction in progress increased $4.5 million. Construction continued on Jacks Run Bridge and is expected to be completed in July 2011. Construction in progress increased approximately $4.9 million.
Additional information on the County’s capital assets can be found in Note 5 on pages 135 and 136 of this report.
LONG-TERM DEBT:
At December 31, 2010, the County had $655.8 million of bond debt outstanding. This was an decrease of $33.3 million, or 4.8%, from the previous year. The following chart details activity related to general obligation bonds during 2010:
Summary of General Obligation Bond Activity
Beginning Balance at 1/1/2010 $ 689,125,322 Accretion and Component Unit Adjustments 1,102,929
Debt Issued 9,385,000 Less: Principal Payments (41,349,965) General Obligation Bonds/Notes 658,263,286 Less: Amortization of Premium/Discount (2,438,420) Ending Balance at 12/31/2010 $ 655,824,866
On November 30, 2010 the County issued Taxable General Obligation Qualified Energy Conservation Bonds, Series C-64 in the amount of $9,385,000. The proceeds of the Series C- 64 Bonds were used to: (1) finance various projects of the County’s Capital Budget and (2) pay certain costs related to the issuance of the Series C-64 Bonds.
Additional information on the County’s long-term debt can be found in Note 8 on pages 149-154 of this report.
48
MANAGEMENT’S DISCUSSION AND ANALYSIS
BOND RATING:
The County continued to maintain investment grade bond ratings from two major rating agencies on its outstanding debt. Those ratings are: A+ from Standard & Poor’s with an outlook revised to negative and A1 from Moody’s Investor Service, also with a change to a negative outlook. More detailed information about the County’s long-term liabilities can be found in Note 8 of the Notes to the Financial Statements.
CONTACTING THE COUNTY’S FINANCIAL MANAGEMENT
This financial report is designed to provide citizens, taxpayers, customers, investors and creditors with a general overview of the County’s finances and to demonstrate the County’s accountability. Questions concerning this report or requests for additional information should be directed to:
Office of the Controller County of Allegheny, Pennsylvania Room 104 Courthouse 436 Grant Street Pittsburgh, PA 15219-2498
49
BASIC FINANCIAL STATEMENTS
GOVERNMENT - WIDE FINANCIAL STATEMENTS GOVERNMENTAL FUND FINANCIAL STATEMENTS PROPRIETARY FUND FINANCIAL STATEMENTS FIDUCIARY FUND FINANCIAL STATEMENTS COMPONENT UNIT FINANCIAL STATEMENTS NOTES TO BASIC FINANCIAL STATEMENTS
Exhibit 1 (Page 1 of 3)
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Net Assets December 31, 2010
Governmental Component Activities Units
Assets
Cash and short-term investments (note 3) $ 64,656,950 118,504,118 Time deposits and other investments (note 3) - 3,973,409 Restricted/noncurrent cash and short-term investments (notes 3) 38,478,207 252,433,171 Delinquent property taxes receivable, net (note 4) 8,024,987 - Liened property taxes receivable, net (note 4) 15,010,217 - Sales tax receivable (note 4) 7,398,566 - Due from other governments, net (note 4) 124,595,622 57,831,974 Due from component units (note 9) 10,714,100 - Due from primary government (note 9) - 1,471,804 Loans receivable (note 4) - 29,275,516 Alcoholic beverage tax receivable 2,215,203 - Rental vehicle tax receivable 277,599 - Accounts receivable (note 4): Trade - 8,028,021 Other 27,225,129 14,611,935 Accrued penalty and interest receivable 249,613 - Accrued interest and dividends receivable 24,369 3,993 Inventory - 18,486,360 Other assets 16,327,477 10,018,217 Land (note 5) 24,373,153 249,580,616 Land improvements (note 5) 2,294,949 - Construction in progress (note 5) 73,250,586 443,089,786 Infrastructure, net of accumulated depreciation (note 5) 251,337,455 - Buildings and equipment, net of accumulated depreciation (note 5) 305,470,338 1,654,943,472 Capital lease investments (note 3) - 94,517,711 Deferred outflow for derivative instrument (note 14) 5,494,517 - Net Pension Asset (note 10) - 10,098,104
Total assets $ 977,419,0370 2,966,868,207
53
Exhibit 1 (Page 2 of 3)
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Net Assets December 31, 2010
Governmental Component Activities Units
Liabilities and Net Assets
Liabilities: Vouchers payable $ 22,275,603 54,224,267 Accrued interest payable 4,321,255 780,234 Accrued payroll 12,763,874 18,239,367 Payroll withholdings 493,350 - Due to component units (note 9) 8,171,758 - Due to primary government (note 9) - 10,714,100 Due to other governments 1,028 2,554,339 Amount due airlines - 936,049 Accrued liabilities 85,398,882 9,112,445 Retainage payable 4,631,264 - Tax refunds payable 659,156 - Unearned revenue Current 101,111,194 40,470,453 Non-current - 39,126,317 Deferred tuition and student deposits - 3,074,241 Accrued state mental hospital costs 113,460 - Accrued unemployment compensation 267,000 - Matured bonds payable 56,266 - Other liabilities Current - 8,401,142 Non-current (note 10) 336,716 764,462 Other post employment benefits (note 11) Non-current 18,750,694 134,211,668 Accrued pension costs Current contributions 1,607,278 - Non-current (note 10) 112,181,848 - Accrued workers' compensation (notes 6 and 8) Current 4,788,538 - Non-current 1,512,981 183,921 Compensated absences (notes 1 and 8) Current 326,269 3,085,992 Non-current 7,333,597 - General obligation/revenue bonds/notes/ leases (notes 8 and 14) Current 39,906,433 183,689,174 Non-current 622,470,090 758,768,107 Reserve for claims and settlements (note 6) Current 2,500,000 26,895,588 Non-current 682,579 5,557,659 Derivative instruments liability: (note 14) Non-current 5,494,517 38,212,484
Total liabilities 1,058,155,6300 1,339,002,009
54
Exhibit 1 (Page 3 of 3)
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Net Assets December 31, 2010
Governmental Component Activities Units
Net assets (deficit): (note 1) Invested in capital assets, net of related debt 28,662,998 1,660,032,258 Restricted for: County grants 28,552,341 - Human service grants 310,924 - Capital projects - 26,950,089 Debt service - 56,965,251 Liquid fuel 476,077 - Transportation 5,158,730 - Scholarship and tuition funds - 349,700 Other student funds - 4,599,025 Other projects - 43,573,875 Permanently - 836,767 Unrestricted net assets (deficit) (143,897,663)0 (165,440,767)
Total net assets (80,736,593)0 1,627,866,198
Total liabilities and net assets $ 977,419,037 2,966,868,207
See accompanying notes to financial statements.
55
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Activities Years Ended December 31, 2010 or June 30, 2010
Net (Expense) Revenue Program Revenues and Changes in Net Assets Operating Charges for Grants and Capital Grants and Primary Government Component Functions/Programs Expenses Services Contributions Contributions Total Units
Primary government: General government $ 256,858,694 46,725,554 42,441,100 1,825,737 (165,866,303) - Public safety 121,367,760 17,521,407 33,070,059 - (70,776,294) - Public works 66,509,806 343,400 12,778,270 38,113,498 (15,274,638) - Transportation 36,283,608 - 32,862,922 - (3,420,686) - Health and welfare 856,172,605 32,979,556 774,384,262 - (48,808,787) - Culture and recreation 19,871,911 4,774,538 7,275,346 - (7,822,027) - Education 22,603,860 - 106,198 - (22,497,662) - Economic development 45,699,609 2,364,980 38,632,513 - (4,702,116) - Economic opportunity 38,243,840 - 38,297,208 - 53,368 - Interest on long-term debt 29,076,616 - - 44,441 (29,032,175) - Total primary government 1,492,688,309 104,709,435 979,847,878 39,983,676 (368,147,320) -
Component units: Allegheny County Airport Authority $ 180,805,622 137,266,103 - 40,589,010 - (2,950,509) Port Authority of Allegheny County 517,673,228 93,220,190 191,507,990 207,132,168 - (25,812,880) Community College of Allegheny County 136,553,734 37,472,870 80,780,859 2,344,372 - (15,955,633) Redevelopment Authority of Allegheny County 36,917,171 3,800,675 31,193,676 - - (1,922,820) Allegheny County Industrial Development Authority 607,986 414,361 142,872 - - (50,753) Nonmajor Component Units 8,173,473 1,759,943 5,578,131 1,343,584 - 508,185 Total component units $ 880,731,214 273,934,142 309,203,528 251,409,134 - (46,184,410)
General Revenues: Property taxes, levied for general purpose $ 205,723,613 - Property taxes, levied for debt service 62,028,968 - Sales taxes 40,904,309 - Gaming local share assessment 4,839,223 - Payment from Allegheny County - 57,965,756 Interest and investment earnings 710,231 11,528,924 Swap termination gain - 5,075,000 Gaming Act revenue - 14,600,000 Net decrease in the fair value of investments - (491,546) Loss on sale of capital assets - (301,920) Transfer to County - (6,715,841) Investment loss on embedded derivative instrument - (14,963,726) Miscellaneous 1,968,643 1,880,245 Total general revenues 316,174,987 68,576,892 Change in net assets (51,972,333) 22,392,482 Net assets - beginning of year, restated (28,764,260) 1,605,473,716 Net assets - end of year $ (80,736,593) 1,627,866,198
See accompanying notes to financial statements.
56
Exhibit 2
Net (Expense) Revenue Program Revenues and Changes in Net Assets Operating Charges for Grants and Capital Grants and Primary Government Component Functions/Programs Expenses Services Contributions Contributions Total Units
Primary government: General government $ 256,858,694 46,725,554 42,441,100 1,825,737 (165,866,303) - Public safety 121,367,760 17,521,407 33,070,059 - (70,776,294) - Public works 66,509,806 343,400 12,778,270 38,113,498 (15,274,638) - Transportation 36,283,608 - 32,862,922 - (3,420,686) - Health and welfare 856,172,605 32,979,556 774,384,262 - (48,808,787) - Culture and recreation 19,871,911 4,774,538 7,275,346 - (7,822,027) - Education 22,603,860 - 106,198 - (22,497,662) - Economic development 45,699,609 2,364,980 38,632,513 - (4,702,116) - Economic opportunity 38,243,840 - 38,297,208 - 53,368 - Interest on long-term debt 29,076,616 - - 44,441 (29,032,175) - Total primary government 1,492,688,309 104,709,435 979,847,878 39,983,676 (368,147,320) -
Component units: Allegheny County Airport Authority $ 180,805,622 137,266,103 - 40,589,010 - (2,950,509) Port Authority of Allegheny County 517,673,228 93,220,190 191,507,990 207,132,168 - (25,812,880) Community College of Allegheny County 136,553,734 37,472,870 80,780,859 2,344,372 - (15,955,633) Redevelopment Authority of Allegheny County 36,917,171 3,800,675 31,193,676 - - (1,922,820) Allegheny County Industrial Development Authority 607,986 414,361 142,872 - - (50,753) Nonmajor Component Units 8,173,473 1,759,943 5,578,131 1,343,584 - 508,185 Total component units $ 880,731,214 273,934,142 309,203,528 251,409,134 - (46,184,410)
General Revenues: Property taxes, levied for general purpose $ 205,723,613 - Property taxes, levied for debt service 62,028,968 - Sales taxes 40,904,309 - Gaming local share assessment 4,839,223 - Payment from Allegheny County - 57,965,756 Interest and investment earnings 710,231 11,528,924 Swap termination gain - 5,075,000 Gaming Act revenue - 14,600,000 Net decrease in the fair value of investments - (491,546) Loss on sale of capital assets - (301,920) Transfer to County - (6,715,841) Investment loss on embedded derivative instrument - (14,963,726) Miscellaneous 1,968,643 1,880,245 Total general revenues 316,174,987 68,576,892 Change in net assets (51,972,333) 22,392,482 Net assets - beginning of year, restated (28,764,260) 1,605,473,716 Net assets - end of year $ (80,736,593) 1,627,866,198
See accompanying notes to financial statements.
57
COUNTY OF ALLEGHENY, PENNSYLVANIA Balance Sheet Governmental Funds December 31, 2010
Other Total County Human Services Capital Governmental Governmental General Grants Fund Grants Fund Projects Funds Funds
Assets
Cash and short-term investments (note 3) $ - 32,569,492 22,755,526 6,666,004 2,665,928 64,656,950 Restricted cash and short-term investments (notes 3) - 1,390,935 35,836,005 - 1,251,267 38,478,207 Delinquent property taxes receivable, net (note 4) 6,141,594 - - - 1,883,393 8,024,987 Liened property taxes receivable, net (note 4) 11,789,735 - - - 3,220,482 15,010,217 Sales tax receivable (note 4) 7,398,566 - - - - 7,398,566 Due from other funds (note 9) 48,351,510 7,135,480 1,191,966 28,908,133 41,710,163 127,297,252 Due from other governments, net of $6,473,419 allowance for doubtful accounts in the General Fund 54,125,565 16,635,404 36,548,315 17,286,338 - 124,595,622 Due from component units (note 9) 7,492,082 - 3,222,018 - - 10,714,100 Alcoholic beverage tax receivable - - - - 2,215,203 2,215,203 Rental vehicle tax receivable - - - - 277,599 277,599 Accounts receivable: Other 15,301,276 2,244,326 9,679,527 - - 27,225,129 Accrued penalty and interest receivable 195,521 - - - 54,092 249,613 Accrued interest and dividends receivable 5,720 - 5,950 12,450 249 24,369
Total assets $ 150,801,569 59,975,637 109,239,307 52,872,925 53,278,376 426,167,814
Liabilities and Fund Balance
Liabilities: Vouchers payable $ 18,271,663 2,285,987 472,234 1,121,993 19,449 22,171,326 Accrued payroll 10,267,403 1,837,670 658,801 - - 12,763,874 Payroll withholdings 493,350 - - - - 493,350 Due to other funds (note 9) 37,950,340 2,192,338 2,183,369 42,843,562 42,306,296 127,475,905 Tax refunds payable 503,232 - - - 155,924 659,156 Accrued liabilities 36,541,072 3,933,096 26,747,203 18,103,135 - 85,324,506 Accrued interest payable - - - - 1,759 1,759 Due to component units (note 9) 4,403,200 242,324 36,280 3,489,954 - 8,171,758 Retainage payable - 61 - 4,631,203 - 4,631,264 Due to other governments 1,028 - - - - 1,028 Deferred revenue 19,600,307 20,707,954 78,734,262 - 5,103,875 124,146,398 Accrued pension costs 1,291,350 232,530 83,398 - - 1,607,278 Accrued state mental hospital costs 113,460 - - - - 113,460 Accrued workers' compensation (note 6) 740,431 10,600 656 - - 751,687 Accrued unemployment compensation 235,169 19,651 12,180 - - 267,000 Matured bonds payable - - - - 56,266 56,266
Total liabilities 130,412,005 31,462,211 108,928,383 70,189,847 47,643,569 388,636,015
58
Exhibit 3 (Page 1 of 2)
Other Total County Human Services Capital Governmental Governmental General Grants Fund Grants Fund Projects Funds Funds
Assets
Cash and short-term investments (note 3) $ - 32,569,492 22,755,526 6,666,004 2,665,928 64,656,950 Restricted cash and short-term investments (notes 3) - 1,390,935 35,836,005 - 1,251,267 38,478,207 Delinquent property taxes receivable, net (note 4) 6,141,594 - - - 1,883,393 8,024,987 Liened property taxes receivable, net (note 4) 11,789,735 - - - 3,220,482 15,010,217 Sales tax receivable (note 4) 7,398,566 - - - - 7,398,566 Due from other funds (note 9) 48,351,510 7,135,480 1,191,966 28,908,133 41,710,163 127,297,252 Due from other governments, net of $6,473,419 allowance for doubtful accounts in the General Fund 54,125,565 16,635,404 36,548,315 17,286,338 - 124,595,622 Due from component units (note 9) 7,492,082 - 3,222,018 - - 10,714,100 Alcoholic beverage tax receivable - - - - 2,215,203 2,215,203 Rental vehicle tax receivable - - - - 277,599 277,599 Accounts receivable: Other 15,301,276 2,244,326 9,679,527 - - 27,225,129 Accrued penalty and interest receivable 195,521 - - - 54,092 249,613 Accrued interest and dividends receivable 5,720 - 5,950 12,450 249 24,369
Total assets $ 150,801,569 59,975,637 109,239,307 52,872,925 53,278,376 426,167,814
Liabilities and Fund Balance
Liabilities: Vouchers payable $ 18,271,663 2,285,987 472,234 1,121,993 19,449 22,171,326 Accrued payroll 10,267,403 1,837,670 658,801 - - 12,763,874 Payroll withholdings 493,350 - - - - 493,350 Due to other funds (note 9) 37,950,340 2,192,338 2,183,369 42,843,562 42,306,296 127,475,905 Tax refunds payable 503,232 - - - 155,924 659,156 Accrued liabilities 36,541,072 3,933,096 26,747,203 18,103,135 - 85,324,506 Accrued interest payable - - - - 1,759 1,759 Due to component units (note 9) 4,403,200 242,324 36,280 3,489,954 - 8,171,758 Retainage payable - 61 - 4,631,203 - 4,631,264 Due to other governments 1,028 - - - - 1,028 Deferred revenue 19,600,307 20,707,954 78,734,262 - 5,103,875 124,146,398 Accrued pension costs 1,291,350 232,530 83,398 - - 1,607,278 Accrued state mental hospital costs 113,460 - - - - 113,460 Accrued workers' compensation (note 6) 740,431 10,600 656 - - 751,687 Accrued unemployment compensation 235,169 19,651 12,180 - - 267,000 Matured bonds payable - - - - 56,266 56,266
Total liabilities 130,412,005 31,462,211 108,928,383 70,189,847 47,643,569 388,636,015
59
COUNTY OF ALLEGHENY, PENNSYLVANIA Balance Sheet Governmental Funds December 31, 2010
Other Total County Human Services Capital Governmental Governmental General Grants Fund Grants Fund Projects Funds Funds
Fund Balances: (note 1H) Restricted for: General government - 10,507,064 - - - 10,507,064 Public safety - 1,152,501 - - - 1,152,501 Transportation - - - - 5,158,730 5,158,730 Health and welfare - 12,814,092 310,924 - - 13,125,016 Culture and recreation - 167,332 - - - 167,332 Economic development - 2,464,099 - - - 2,464,099 Capital projects - - - 7,309,286 - 7,309,286 Road maintenance expenditures - - - - 476,077 476,077 Committed to: General government - 21,628 - - - 21,628 Health and welfare - 958,818 - - - 958,818 Culture and recreation - 44,744 - - - 44,744 Economic development - 87,179 - - - 87,179 Assigned to: General government 255,185 - - - - 255,185 Public safety 32,166 - - - - 32,166 Public works 11,896 950 - - - 12,846 Health and welfare 585,094 - - - - 585,094 Culture and recreation 28,501 333,934 - - - 362,435 Unassigned: 19,476,722 (38,915) - (24,626,208) - (5,188,401)
Total fund balances 20,389,564 28,513,426 310,924 (17,316,922) 5,634,807 37,531,799
Total liabilities and fund balances $ 150,801,569 59,975,637 109,239,307 52,872,925 53,278,376 426,167,814
See accompanying notes to financial statements.
60
Exhibit 3 (Page 2 of 2)
Other Total County Human Services Capital Governmental Governmental General Grants Fund Grants Fund Projects Funds Funds
Fund Balances: (note 1H) Restricted for: General government - 10,507,064 - - - 10,507,064 Public safety - 1,152,501 - - - 1,152,501 Transportation - - - - 5,158,730 5,158,730 Health and welfare - 12,814,092 310,924 - - 13,125,016 Culture and recreation - 167,332 - - - 167,332 Economic development - 2,464,099 - - - 2,464,099 Capital projects - - - 7,309,286 - 7,309,286 Road maintenance expenditures - - - - 476,077 476,077 Committed to: General government - 21,628 - - - 21,628 Health and welfare - 958,818 - - - 958,818 Culture and recreation - 44,744 - - - 44,744 Economic development - 87,179 - - - 87,179 Assigned to: General government 255,185 - - - - 255,185 Public safety 32,166 - - - - 32,166 Public works 11,896 950 - - - 12,846 Health and welfare 585,094 - - - - 585,094 Culture and recreation 28,501 333,934 - - - 362,435 Unassigned: 19,476,722 (38,915) - (24,626,208) - (5,188,401)
Total fund balances 20,389,564 28,513,426 310,924 (17,316,922) 5,634,807 37,531,799
Total liabilities and fund balances $ 150,801,569 59,975,637 109,239,307 52,872,925 53,278,376 426,167,814
See accompanying notes to financial statements.
61
Exhibit 3 - A
COUNTY OF ALLEGHENY, PENNSYLVANIA Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets December 31, 2010
Total Fund Balance - Governmental Funds $ 37,531,799
Amounts reported for governmental activities in the Statement of Net Assets are different because:
Capital assets, including infrastructure and construction in progress, used in governmental activities are not current financial resources and therefore, are not reported as assets in governmental funds. 656,726,481
Property taxes receivable will be collected in future, but are not available to pay for the current period's expenditures and therefore, are deferred in the Fund statements. 23,035,204
Governmental funds report the effect of issuance costs, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. 16,327,477
Net pension obligation and other post employment benefits are reflected on the Statement of Net Assets, but are not considered a current expenditure for the Fund statements. (130,932,542)
Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore, are not reported as liabilities in the funds. Long-term liabilities at year end consist of:
Voluntary separation $ (336,716) Accrued workers' compensation (5,549,832) Compensated absences (7,659,866) GO Bonds/Revenue Bonds/Notes/Leases (662,376,523) Accrued interest on bonds (4,319,496) Claims and Settlements (3,182,579) (683,425,012)
Total Net Assets - Governmental Activities $ (80,736,593)
See accompanying notes to financial statements.
63
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year Ended December 31, 2010
Other Total County Human Services Capital Governmental Governmental General Grants Fund Grants Fund Projects Funds Funds
Revenues: Property taxes (notes 1 and 4) $ 202,932,512 - - - 61,961,346 264,893,858 Sales and use tax (note 4) 40,904,309 - - - - 40,904,309 Alcoholic beverage tax - - - - 27,359,274 27,359,274 Rental vehicle tax - - - - 5,436,982 5,436,982 Gaming local share assessment 4,839,223 - - - - 4,839,223 Licenses and permits 1,919,316 - - - - 1,919,316 Federal revenues 89,232,548 69,576,060 91,779,682 33,101,559 - 283,689,849 State revenues 182,957,577 31,889,525 441,972,379 6,837,676 4,471,527 668,128,684 Local governmental units revenues 23,295,014 - - - 44,441 23,339,455 Charges for services and facilities 68,272,002 23,427,950 - - - 91,699,952 Fines and forfeitures 4,787,652 - - - - 4,787,652 Interest earnings 271,202 30,303 181,080 125,391 102,255 710,231 Miscellaneous 4,189,548 12,243,0840 3,455,754 108,916 66,666 20,063,968
Total revenues 623,600,903 137,166,922 537,388,895 40,173,542 99,442,491 1,437,772,753
Expenditures: Current: General government 165,043,845 45,824,443 - - - 210,868,288 Public safety 81,383,463 33,609,844 - - - 114,993,307 Public works 25,869,178 2,846,643 - - 4,120,000 32,835,821 Transportation - - - - 27,668,700 27,668,700 Health and welfare 343,550,367 18,316,262 504,271,164 - - 866,137,793 Culture and recreation 10,150,132 818,031 - - - 10,968,163 Education 22,488,000 115,860 - - - 22,603,860 Economic development 5,847,833 39,837,249 - - - 45,685,082 Economic opportunity - - 38,243,840 - - 38,243,840 Capital projects - - - 86,214,329 - 86,214,329 Debt Service (note 7): Principal - - - - 41,387,500 41,387,500 Interest 126,389 - - - 28,402,581 28,528,970 Cost of issuance 40,450 - - 183,886 - 224,336
Total expenditures 654,499,657 141,368,332 542,515,004 86,398,215 101,578,781 1,526,359,989
Deficiency of revenue over expenditures (30,898,754) (4,201,410) (5,126,109) (46,224,673) (2,136,290) (88,587,236)
64
Exhibit 4 (Page 1 of 2)
Other Total County Human Services Capital Governmental Governmental General Grants Fund Grants Fund Projects Funds Funds
Revenues: Property taxes (notes 1 and 4) $ 202,932,512 - - - 61,961,346 264,893,858 Sales and use tax (note 4) 40,904,309 - - - - 40,904,309 Alcoholic beverage tax - - - - 27,359,274 27,359,274 Rental vehicle tax - - - - 5,436,982 5,436,982 Gaming local share assessment 4,839,223 - - - - 4,839,223 Licenses and permits 1,919,316 - - - - 1,919,316 Federal revenues 89,232,548 69,576,060 91,779,682 33,101,559 - 283,689,849 State revenues 182,957,577 31,889,525 441,972,379 6,837,676 4,471,527 668,128,684 Local governmental units revenues 23,295,014 - - - 44,441 23,339,455 Charges for services and facilities 68,272,002 23,427,950 - - - 91,699,952 Fines and forfeitures 4,787,652 - - - - 4,787,652 Interest earnings 271,202 30,303 181,080 125,391 102,255 710,231 Miscellaneous 4,189,548 12,243,0840 3,455,754 108,916 66,666 20,063,968
Total revenues 623,600,903 137,166,922 537,388,895 40,173,542 99,442,491 1,437,772,753
Expenditures: Current: General government 165,043,845 45,824,443 - - - 210,868,288 Public safety 81,383,463 33,609,844 - - - 114,993,307 Public works 25,869,178 2,846,643 - - 4,120,000 32,835,821 Transportation - - - - 27,668,700 27,668,700 Health and welfare 343,550,367 18,316,262 504,271,164 - - 866,137,793 Culture and recreation 10,150,132 818,031 - - - 10,968,163 Education 22,488,000 115,860 - - - 22,603,860 Economic development 5,847,833 39,837,249 - - - 45,685,082 Economic opportunity - - 38,243,840 - - 38,243,840 Capital projects - - - 86,214,329 - 86,214,329 Debt Service (note 7): Principal - - - - 41,387,500 41,387,500 Interest 126,389 - - - 28,402,581 28,528,970 Cost of issuance 40,450 - - 183,886 - 224,336
Total expenditures 654,499,657 141,368,332 542,515,004 86,398,215 101,578,781 1,526,359,989
Deficiency of revenue over expenditures (30,898,754) (4,201,410) (5,126,109) (46,224,673) (2,136,290) (88,587,236)
65
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year Ended December 31, 2010
Other Total County Human Services Capital Governmental Governmental General Grants Fund Grants Fund Projects Funds Funds
Other financing sources (uses): Issuance of general obligation bonds (note 8) - - - 9,385,000 - 9,385,000 Premium on TRAN issuance 84,500 - - - - 84,500 Transfers in (note 9) 43,064,149 8,788,516 5,652,213 - 47,567,851 105,072,729 Transfers out (note 9) (12,011,439) (2,854,548) (229,557) (43,959,258) (46,017,927) (105,072,729)
Total other financing sources (uses) 31,137,210 5,933,968 5,422,656 (34,574,258) 1,549,924 9,469,500
Net change in fund balances 238,456 1,732,558 296,547 (80,798,931) (586,366) (79,117,736)
Fund balances at beginning of year 20,151,108 26,780,868 14,377 63,482,009 6,221,173 116,649,535
Fund balances at end of year $ 20,389,564 28,513,426 310,924 (17,316,922) 5,634,807 37,531,799
See accompanying notes to financial statements.
66
Exhibit 4 (Page 2 of 2)
Other Total County Human Services Capital Governmental Governmental General Grants Fund Grants Fund Projects Funds Funds
Other financing sources (uses): Issuance of general obligation bonds (note 8) - - - 9,385,000 - 9,385,000 Premium on TRAN issuance 84,500 - - - - 84,500 Transfers in (note 9) 43,064,149 8,788,516 5,652,213 - 47,567,851 105,072,729 Transfers out (note 9) (12,011,439) (2,854,548) (229,557) (43,959,258) (46,017,927) (105,072,729)
Total other financing sources (uses) 31,137,210 5,933,968 5,422,656 (34,574,258) 1,549,924 9,469,500
Net change in fund balances 238,456 1,732,558 296,547 (80,798,931) (586,366) (79,117,736)
Fund balances at beginning of year 20,151,108 26,780,868 14,377 63,482,009 6,221,173 116,649,535
Fund balances at end of year $ 20,389,564 28,513,426 310,924 (17,316,922) 5,634,807 37,531,799
See accompanying notes to financial statements.
67
Exhibit 4 - A
COUNTY OF ALLEGHENY, PENNSYLVANIA Reconciliation of the Statement of Revenues, Expenditures And Changes in Fund Balance of Governmental Funds To the Statement of Activities Year Ended December 31, 2010
Net Change in Fund Balance - Governmental Funds $ (79,117,736)
Amounts reported for governmental activities in the statement of activities are different because:
Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount, net of deletions, by which capital outlays exceeded depreciation in the current period:
Capital outlays $66,329,775 Less: Depreciation expense (26,729,746) 39,600,029
Some taxes will not be collected for several months after the County's year end, they are not considered as "available" revenues in the governmental Fund statements. Deferred revenues decreased by this amount during the year. 2,858,723
The issuance of long-term obligations (e.g. bonds, leases, loans) provides current financial resources to governmental funds, while the repayment of the principal of long-term obligations consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term obligations and related items. 33,286,145
Net pension obligation and other post employment benefits are reflected on the Statement of Financial Position, but are not considered a current expenditure for the Fund statements. (46,502,495)
Interest accretion on zero coupon bonds is reflected as interest expense on the government-wide statements but is not a use of current financial resources for the governmental fund statements. (1,102,929)
Interest on long-term obligations in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, interest expense is recognized as the interest accrues, regardless of when it is due. The difference between the interest accrued in the statement of activities and the amount due is shown here. 778,569
In the statement of activities, certain operating expenses - accumulated employee benefits (workers' compensation, sick days and voluntary separation, claims and settlements) are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used. This amount represents the difference between the amount earned versus the amount used. (1,772,639)
Change in Net Assets of Governmental Activities $ (51,972,333)
See accompanying notes to financial statements.
68 $ -
Exhibit 5
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Net Assets Proprietary Fund December 31, 2010
Governmental Activities Risk Management Fund
_____Assets
Current assets: Cash and short-term investments $ - Due from other funds: General fund 578,183
Total assets $ 578,183
______Liabilities and Net Assets
Current liabilities: Vouchers payable $ 104,277 Due to other funds: General Fund 399,530
399,530
Accrued liabilities 74,376 Total liabilities 578,183
Net assets: Unrestricted net assets -
Total liabilities and net assets $ 578,183
See accompanying notes to financial statements.
69
Exhibit 6
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Fund Year Ended December 31, 2010
Governmental Activities Risk Management Fund
Operating revenues: Contribution - employee $ 329,578 Contribution - employer 1,603,777 Total operating revenues 1,933,355
Operating expenses: Insurance claims expense 1,933,355 Total operating expenses 1,933,355
Operating loss -
Non-operating expenses: Transfers in -
Change in net assets -
Net assets at beginning of year -
Net assets at end of year $ -
See accompanying notes to financial statements.
70
Exhibit 7
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Cash Flows Proprietary Fund Year Ended December 31, 2010
Governmental Activities Risk Management Fund
Cash flows from operating activities: Receipts from customers $ 1,819,534 Payments to suppliers (2,140,354) - Net cash used by operating activities (320,820)
Balance - begininng of year 320,820
Balance - end of year $ -
Reconciliation of operating income to net cash provided by operating activities Operating income $ -
Adjustments to reconcile operating income to net cash used by operating activities:
Increase in due from other funds $ (113,821) Decrease in due to other funds (264,791) Increase in vouchers payable 97,361 Decrease in accrued liabilities (39,569) - Total adjustments (320,820)
Net cash used by operating activities $ (320,820)
See accompanying notes to financial statements.
71
Exhibit 8
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Fiduciary Net Assets Fiduciary Funds December 31, 2010
Pension Combined Trust Agency Assets Fund Funds
Cash and short-term investments (note 3) $ 18,106,853 48,228,233 Investments (at fair value): (note 3) Equity: U.S. common and preferred stock 103,233,492 - American Depositary Receipts (ADRs) 3,612,126 - S&P 500 index fund 61,321,680 - Non-U.S. stock and equity mutual fund 177,506,160 - Bonds and Notes: U.S. government and related agency debt 32,006,542 - Fannie Mae and Freddie Mac debt 6,818,777 - Fixed income mutual funds 85,432,127 - U.S. corporate debt instruments 54,311,360 - Non-U.S. government and corporate debt 10,348,761 - Other Investments: Hedge funds 959,546 - Real estate 42,827,571 - Commodities fund 21,247,278 - Venture capital / private equity 80,251,928 -
679,877,348 - Amount due from brokers 207,008 - Accrued interest and dividends receivable 1,242,326 2,325 Accrued employer contributions receivable 995,180 - Accrued employee contributions receivable 873,809 - Other assets 51,077 5,728,179
Total assets $ 701,353,601 53,958,737
Liabilities and net assets
Liabilities: Vouchers payable $ 2,171 949,951 Accrued liabilities 1,635,938 - Due to other governments - 5,886,579 Due to litigants - 13,571,809 Collections held in trust - 23,876,064 Amount due to brokers 410,396 - Other liabilities 3,596 9,674,334 Total liabilities 2,052,101 53,958,737
Net assets: Held in trust for pension benefits 699,301,500 -
Total liabilities and net assets $ 701,353,601 53,958,737
See accompanying notes to financial statements.
72
Exhibit 9
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Changes in Fiduciary Net Assets Pension Trust Fund Year Ended December 31, 2010
Pension Trust Fund
Additions: Contributions: Employee $ 20,194,179 Employer 20,115,911
Total contributions 40,310,090
Investment income: Net appreciation in fair value of investments 66,699,939 Interest 5,395,742 Dividends 5,988,654 Stock loan income 81,605 78,165,940 Less: Investment management fees 1,693,912
Total investment gain - net 76,472,028
Miscellaneous income 59,654
Total additions - net 116,841,772
Deductions: Benefit payments 65,844,509 Refunds of employee contributions 3,057,594 Salaries, wages and related expenses 285,917 Administrative and miscellaneous expenses 994,754
Total deductions 70,182,774
Net increase in net assets 46,658,998
Net assets at beginning of year 652,642,502
Net assets at end of the year $ 699,301,500
See accompanying notes to financial statements.
73
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Net Assets Component Units December 31 or June 30, 2010
Redevelopment Allegheny County Nonmajor Allegheny County Port Authority Community College Authority Industrial Development Component Units Airport Authority of Allegheny County of Allegheny County of Allegheny County Authority as of as of December 31 as of June 30 as of June 30 as of December 31 as of December 31 December 31 Total Assets
Cash and short-term investments (note 3) $ 12,949,002 44,692,263 32,078,769 14,575,477 6,976,431 7,232,176 118,504,118 Time deposits and other investments (note 3) - - 3,973,409 - - - 3,973,409 Restricted cash and short-term investments (note 3) 151,667,154 37,971,154 23,085,034 19,979,424 232,847 19,497,558 252,433,171 Due from other governments (note 4) 6,931,831 38,456,235 987,724 10,063,507 1,392,677 - 57,831,974 Due from primary government (note 9) - - 750,000 242,324 - 479,480 1,471,804 Accounts receivable (note 4): Trade, net of allowance for doubtful accounts 5,301,870 - 2,697,677 - 28,474 - 8,028,021 Other 1,695,787 11,668,117 1,003,520 176,834 - 67,677 14,611,935 Accrued interest and dividends receivable 3,993 - - - - - 3,993 Inventory 1,880,557 9,516,913 1,247,507 5,834,200 - 7,183 18,486,360 Other assets 5,123,642 1,144,303 1,059,783 2,446,505 50,000 193,984 10,018,217 Net pension asset - 10,098,104 - - - - 10,098,104 Loans receivable, net of allowance for loan losses (note 4) - - - 26,462,722 2,812,794 - 29,275,516 Capital lease investments (note 3) - 94,517,711 - - - - 94,517,711 Land (note 5) 138,344,068 105,691,782 4,016,466 1,528,300 - - 249,580,616 Construction in progress (note 5) 44,512,788 396,361,457 2,215,541 - - - 443,089,786 Buildings and equipment net of accumulated depreciation (note 5) 543,129,234 1,014,353,401 89,045,173 4,295,251 - 4,120,413 1,654,943,472
Total assets $ 911,539,926 1,764,471,440 162,160,603 85,604,544 11,493,223 31,598,471 2,966,868,207
74
Exhibit 10 (Page 1 of 3)
Redevelopment Allegheny County Nonmajor Allegheny County Port Authority Community College Authority Industrial Development Component Units Airport Authority of Allegheny County of Allegheny County of Allegheny County Authority as of as of December 31 as of June 30 as of June 30 as of December 31 as of December 31 December 31 Total Assets
Cash and short-term investments (note 3) $ 12,949,002 44,692,263 32,078,769 14,575,477 6,976,431 7,232,176 118,504,118 Time deposits and other investments (note 3) - - 3,973,409 - - - 3,973,409 Restricted cash and short-term investments (note 3) 151,667,154 37,971,154 23,085,034 19,979,424 232,847 19,497,558 252,433,171 Due from other governments (note 4) 6,931,831 38,456,235 987,724 10,063,507 1,392,677 - 57,831,974 Due from primary government (note 9) - - 750,000 242,324 - 479,480 1,471,804 Accounts receivable (note 4): Trade, net of allowance for doubtful accounts 5,301,870 - 2,697,677 - 28,474 - 8,028,021 Other 1,695,787 11,668,117 1,003,520 176,834 - 67,677 14,611,935 Accrued interest and dividends receivable 3,993 - - - - - 3,993 Inventory 1,880,557 9,516,913 1,247,507 5,834,200 - 7,183 18,486,360 Other assets 5,123,642 1,144,303 1,059,783 2,446,505 50,000 193,984 10,018,217 Net pension asset - 10,098,104 - - - - 10,098,104 Loans receivable, net of allowance for loan losses (note 4) - - - 26,462,722 2,812,794 - 29,275,516 Capital lease investments (note 3) - 94,517,711 - - - - 94,517,711 Land (note 5) 138,344,068 105,691,782 4,016,466 1,528,300 - - 249,580,616 Construction in progress (note 5) 44,512,788 396,361,457 2,215,541 - - - 443,089,786 Buildings and equipment net of accumulated depreciation (note 5) 543,129,234 1,014,353,401 89,045,173 4,295,251 - 4,120,413 1,654,943,472
Total assets $ 911,539,926 1,764,471,440 162,160,603 85,604,544 11,493,223 31,598,471 2,966,868,207
75
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Net Assets Component Unit December 31 or June 30, 2010
Redevelopment Allegheny County Nonmajor Allegheny County Port Authority Community College Authority Industrial Development Component Units Airport Authority of Allegheny County of Allegheny County of Allegheny County Authority as of as of December 31 as of June 30 as of June 30 as of December 31 as of December 31 December 31 Total ______Liabilities and Net Assets
Liabilities: Vouchers payable $ 11,253,492 34,821,949 3,759,535 4,232,241 58,829 98,221 54,224,267 Accrued interest payable 198,575 - - 581,659 - - 780,234 Accrued payroll - 14,306,058 3,933,309 - - - 18,239,367 Due to primary government (note 9) 1,492,082 - - 6,000,000 - 3,222,018 10,714,100 Due to other governments - - 2,554,339 - - - 2,554,339 Amount due airlines 936,049 - - - - - 936,049 Accrued liabilities 6,032,096 - 2,495,557 - - 584,792 9,112,445 Deferred tuition and student deposits - - 3,074,241 - - - 3,074,241 Other liabilities: Current 2,445,118 5,796,836 - 54,624 - 104,564 8,401,142 Non-current 764,462 - - - - - 764,462 Deferred revenue: Current 5,121,178 33,606,406 80,000 466,949 - 1,195,920 40,470,453 Non-current (note 8) 39,083,340 - 42,977 - - - 39,126,317 Reserve for claims and settlements: Current - 8,621,786 - - - 18,273,802 26,895,588 Non-current - 5,557,659 - - - - 5,557,659 Accrued workers' compensation (note 6) 183,921 - - - - - 183,921 Embedded derivative instrument 374,592 37,837,892 - - - - 38,212,484 Compensated absences: Current - - 3,076,677 - - 9,315 3,085,992 General obligation/revenue bonds/notes/ leases (notes 8 and 14): Current 72,570,356 99,181,273 8,405,443 3,513,114 - 18,988 183,689,174 Non-current 384,574,464 297,808,748 44,596,801 31,780,460 - - 758,760,473 Accrued OPEB liability Non-current 102,171 134,109,497 - - - 7,634 134,219,3020
Total liabilities 525,131,896 671,648,104 72,018,879 46,629,047 58,829 23,515,254 1,339,002,009
76
Exhibit 10 (Page 2 of 3)
Redevelopment Allegheny County Nonmajor Allegheny County Port Authority Community College Authority Industrial Development Component Units Airport Authority of Allegheny County of Allegheny County of Allegheny County Authority as of as of December 31 as of June 30 as of June 30 as of December 31 as of December 31 December 31 Total ______Liabilities and Net Assets
Liabilities: Vouchers payable $ 11,253,492 34,821,949 3,759,535 4,232,241 58,829 98,221 54,224,267 Accrued interest payable 198,575 - - 581,659 - - 780,234 Accrued payroll - 14,306,058 3,933,309 - - - 18,239,367 Due to primary government (note 9) 1,492,082 - - 6,000,000 - 3,222,018 10,714,100 Due to other governments - - 2,554,339 - - - 2,554,339 Amount due airlines 936,049 - - - - - 936,049 Accrued liabilities 6,032,096 - 2,495,557 - - 584,792 9,112,445 Deferred tuition and student deposits - - 3,074,241 - - - 3,074,241 Other liabilities: Current 2,445,118 5,796,836 - 54,624 - 104,564 8,401,142 Non-current 764,462 - - - - - 764,462 Deferred revenue: Current 5,121,178 33,606,406 80,000 466,949 - 1,195,920 40,470,453 Non-current (note 8) 39,083,340 - 42,977 - - - 39,126,317 Reserve for claims and settlements: Current - 8,621,786 - - - 18,273,802 26,895,588 Non-current - 5,557,659 - - - - 5,557,659 Accrued workers' compensation (note 6) 183,921 - - - - - 183,921 Embedded derivative instrument 374,592 37,837,892 - - - - 38,212,484 Compensated absences: Current - - 3,076,677 - - 9,315 3,085,992 General obligation/revenue bonds/notes/ leases (notes 8 and 14): Current 72,570,356 99,181,273 8,405,443 3,513,114 - 18,988 183,689,174 Non-current 384,574,464 297,808,748 44,596,801 31,780,460 - 7,634 758,768,107 Accrued OPEB liability Non-current 102,171 134,109,497 - - - - 134,211,6680
Total liabilities 525,131,896 671,648,104 72,018,879 46,629,047 58,829 23,515,254 1,339,002,009
77
Statement of Net Assets Component Units December 31 or June 30, 2010
Redevelopment Allegheny County Nonmajor Allegheny County Port Authority Community College Authority Industrial Development Component Units Airport Authority of Allegheny County of Allegheny County of Allegheny County Authority as of as of December 31 as of June 30 as of June 30 as of December 31 as of December 31 December 31 Total
Net assets (deficit): Invested in capital assets, net of related debt 330,934,058 1,261,044,325 62,212,843 1,924,313 - 3,916,719 1,660,032,258 Restricted for: Capital projects 26,950,089 - - - - - 26,950,089 Debt service 56,965,251 - - - - - 56,965,251 Scholarship and tuition funds - - 349,700 - - - 349,700 Other student funds - - 4,599,025 - - - 4,599,025 Other projects - - 1,376,519 29,864,673 10,779,817 1,552,866 43,573,875 Permanently - - 836,767 - - - 836,767 Unrestricted net assets (deficit) (note 15) (28,441,368) (168,220,989) 20,766,870 7,186,511 654,577 2,613,632 (165,440,767)
Total net assets 386,408,030 1,092,823,336 90,141,724 38,975,497 11,434,394 8,083,217 1,627,866,1980
Total liabilities and net assets $ 911,539,926 1,764,471,440 162,160,603 85,604,544 11,493,223 31,598,471 2,966,868,207
See accompanying notes to financial statements.
78
Exhibit 10 (Page 3 of 3)
Redevelopment Allegheny County Nonmajor Allegheny County Port Authority Community College Authority Industrial Development Component Units Airport Authority of Allegheny County of Allegheny County of Allegheny County Authority as of as of December 31 as of June 30 as of June 30 as of December 31 as of December 31 December 31 Total
Net assets (deficit): Invested in capital assets, net of related debt 330,934,058 1,261,044,325 62,212,843 1,924,313 - 3,916,719 1,660,032,258 Restricted for: Capital projects 26,950,089 - - - - - 26,950,089 Debt service 56,965,251 - - - - - 56,965,251 Scholarship and tuition funds - - 349,700 - - - 349,700 Other student funds - - 4,599,025 - - - 4,599,025 Other projects - - 1,376,519 29,864,673 10,779,817 1,552,866 43,573,875 Permanently - - 836,767 - - - 836,767 Unrestricted net assets (deficit) (note 15) (28,441,368) (168,220,989) 20,766,870 7,186,511 654,577 2,613,632 (165,440,767)
Total net assets 386,408,030 1,092,823,336 90,141,724 38,975,497 11,434,394 8,083,217 1,627,866,1980
Total liabilities and net assets $ 911,539,926 1,764,471,440 162,160,603 85,604,544 11,493,223 31,598,471 2,966,868,207
See accompanying notes to financial statements.
79
COUNTY OF ALLEGHENY, PENNSYLVANIA Statement of Activities Component Units Year ended December 31 or June 30, 2010
Program Revenues ______Net Revenue (Expense) and Changes in Net Assets______
Allegheny County Port Authority of Community College Redevelopment Authority Allegheny County Industrial Operating Airport Authority Allegheny County of Allegheny County of Allegheny County Development Authority Nonmajor Charges for Grants and Capital Grants & Year Ended Year Ended Year Ended Year Ended Year Ended Component Units Expenses Services Contributions Contributions December 31 June 30 June 30 December 31 December 31 Year Ended December 31 Total
Allegheny County Airport Authority $ 180,805,622 137,266,103 - 40,589,010 (2,950,509) - - - - - (2,950,509)
Port Authority of Allegheny County 517,673,228 93,220,190 191,507,990 207,132,168 - (25,812,880) - - - - (25,812,880)
Community College of Allegheny County Education 125,856,859 28,638,106 80,326,348 - - - (16,892,405) - - - (16,892,405) Auxiliary enterprises 7,942,653 8,615,352 - - - - 672,699 - - - 672,699 Educational Foundation 2,754,222 219,412 454,511 2,344,372 - - 264,073 - - - 264,073 Total Community College 136,553,734 37,472,870 80,780,859 2,344,372 - - (15,955,633) - - - (15,955,633)
Redevelopment Authority of Allegheny County General government 1,093,646 ------(1,093,646) - - (1,093,646) Community development 32,170,593 1,955,755 31,193,676 - - - - 978,838 - - 978,838 Lending 2,396,727 700,992 - - - - - (1,695,735) - - (1,695,735) Rental Activity 1,256,205 1,143,928 - - - - - (112,277) - - (112,277) Total Redevelopment Authority 36,917,171 3,800,675 31,193,676 - - - - (1,922,820) - - (1,922,820)
Allegheny County Industrial Development Authority Economic opportunity 313,446 124,354 ------(189,092) - (189,092) Administrative fund 294,540 235,687290,007 142,872 - - - - - 138,339 - 138,339 Total Industrial Development Authority 607,986 414,361 142,872 - - - - - (50,753) - (50,753)
Nonmajor Component Units 8,173,473 1,759,943 5,578,131 1,343,584 - - - - - 508,185 508,185
Total Component Units $ 880,731,214 273,934,142 309,203,528 251,409,134 (2,950,509) (25,812,880) (15,955,633) (1,922,820) (50,753) 508,185 (46,184,410)
General Revenues: Payment from County $ - 27,668,700 24,900,000 4,854,831 - 542,225 57,965,756 Interest and investment earnings 2,787,975 8,087,237 504,933 135,773 6,276 6,730 11,528,924 Swap termination gain 5,075,000 - - - - - 5,075,000 Gaming Act revenue 14,600,000 - - - - - 14,600,000 Net decrease in the fair value of investments (491,546) - - - - - (491,546) Loss on sale of capital assets (252,331) - - - - (49,589) (301,920) Transfer to County - - - (6,715,841) - - (6,715,841) Investment loss on embedded derivative instrument - (14,963,726) - - - - (14,963,726) Miscellaneous income 1,073,551 - 148,436 542,008 - 116,250 1,880,245
Total general revenues 22,792,649 20,792,211 25,553,369 (1,183,229) 6,276 615,616 68,576,892 Change in net assets 19,842,140 (5,020,669) 9,597,736 (3,106,049) (44,477) 1,123,801 22,392,482 Net Assets beginning of year, restated 366,565,890 1,097,844,005 80,543,988 42,081,546 11,478,871 6,959,416 1,605,473,716 Net Assets end of year $ 386,408,030 1,092,823,336 90,141,724 38,975,497 11,434,394 8,083,217 1,627,866,198
See accompanying notes to financial statements.
80
Exhibit 11
Program Revenues ______Net Revenue (Expense) and Changes in Net Assets______
Allegheny County Port Authority of Community College Redevelopment Authority Allegheny County Industrial Operating Airport Authority Allegheny County of Allegheny County of Allegheny County Development Authority Nonmajor Charges for Grants and Capital Grants & Year Ended Year Ended Year Ended Year Ended Year Ended Component Units Expenses Services Contributions Contributions December 31 June 30 June 30 December 31 December 31 Year Ended December 31 Total
Allegheny County Airport Authority $ 180,805,622 137,266,103 - 40,589,010 (2,950,509) - - - - - (2,950,509)
Port Authority of Allegheny County 517,673,228 93,220,190 191,507,990 207,132,168 - (25,812,880) - - - - (25,812,880)
Community College of Allegheny County Education 125,856,859 28,638,106 80,326,348 - - - (16,892,405) - - - (16,892,405) Auxiliary enterprises 7,942,653 8,615,352 - - - - 672,699 - - - 672,699 Educational Foundation 2,754,222 219,412 454,511 2,344,372 - - 264,073 - - - 264,073 Total Community College 136,553,734 37,472,870 80,780,859 2,344,372 - - (15,955,633) - - - (15,955,633)
Redevelopment Authority of Allegheny County General government 1,093,646 ------(1,093,646) - - (1,093,646) Community development 32,170,593 1,955,755 31,193,676 - - - - 978,838 - - 978,838 Lending 2,396,727 700,992 - - - - - (1,695,735) - - (1,695,735) Rental Activity 1,256,205 1,143,928 - - - - - (112,277) - - (112,277) Total Redevelopment Authority 36,917,171 3,800,675 31,193,676 - - - - (1,922,820) - - (1,922,820)
Allegheny County Industrial Development Authority Economic opportunity 313,446 124,354 ------(189,092) - (189,092) Administrative fund 294,540 235,687290,007 142,872 - - - - - 138,339 - 138,339 Total Industrial Development Authority 607,986 414,361 142,872 - - - - - (50,753) - (50,753)
Nonmajor Component Units 8,173,473 1,759,943 5,578,131 1,343,584 - - - - - 508,185 508,185
Total Component Units $ 880,731,214 273,934,142 309,203,528 251,409,134 (2,950,509) (25,812,880) (15,955,633) (1,922,820) (50,753) 508,185 (46,184,410)
General Revenues: Payment from County $ - 27,668,700 24,900,000 4,854,831 - 542,225 57,965,756 Interest and investment earnings 2,787,975 8,087,237 504,933 135,773 6,276 6,730 11,528,924 Swap termination gain 5,075,000 - - - - - 5,075,000 Gaming Act revenue 14,600,000 - - - - - 14,600,000 Net decrease in the fair value of investments (491,546) - - - - - (491,546) Loss on sale of capital assets (252,331) - - - - (49,589) (301,920) Transfer to County - - - (6,715,841) - - (6,715,841) Investment loss on embedded derivative instrument - (14,963,726) - - - - (14,963,726) Miscellaneous income 1,073,551 - 148,436 542,008 - 116,250 1,880,245
Total general revenues 22,792,649 20,792,211 25,553,369 (1,183,229) 6,276 615,616 68,576,892 Change in net assets 19,842,140 (5,020,669) 9,597,736 (3,106,049) (44,477) 1,123,801 22,392,482 Net Assets beginning of year, restated 366,565,890 1,097,844,005 80,543,988 42,081,546 11,478,871 6,959,416 1,605,473,716 Net Assets end of year $ 386,408,030 1,092,823,336 90,141,724 38,975,497 11,434,394 8,083,217 1,627,866,198
See accompanying notes to financial statements.
81
COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
1) Summary of Significant Accounting Policies
(A) Organization and Reporting Entity
The organization of the County of Allegheny, Pennsylvania (the County) and the basis of the reporting entity are presented below to assist the reader in evaluating the financial statements and the accompanying notes. The County follows Statement of Governmental Accounting Standards No. 14, "The Financial Reporting Entity." As noted below, this statement has required the inclusion of component units in the accompanying financial statements, as well as disclosures concerning other related entities. The reporting period for the County is for the year ended December 31, 2010.
The County provides public safety, public works, health and welfare, economic development, education, economic opportunity, cultural, recreation and transportation services.
The County was organized in 1788. Until January 1, 2000, the County operated under the Second Class County Code, adopted by the Commonwealth of Pennsylvania State Legislature in 1953. A three-member Board of County Commissioners, elected County-wide for four-year terms, performed the executive and legislative functions.
In accordance with the Constitution and laws of the Commonwealth of Pennsylvania, the electorate of Allegheny County approved adoption of a Home Rule Charter (the Charter), to supercede certain provisions of the Second Class County Code pertaining to the governing framework of the County. The effective date of the Charter was January 1, 2000.
The Charter transferred substantial authority and responsibility to act in local affairs from state law to the County’s electorate through their locally elected officials. With regard to County governance, the Charter replaced the three-commissioner form of government with an elected Chief Executive, an elected, 15-member, part-time County Council and an appointed professional County Manager. It also required adoption of an Administrative Code to detail the County’s administration and operation. The Administrative Code was enacted June 30, 2000.
Unless expressly or implicitly modified or repealed by the Charter, the provisions of the Second Class County Code and other applicable laws still govern the operations of the County.
In June 1999, GASB issued Statement No. 34, ―Basic Financial Statement – and Management’s Discussion and Analysis – for State and Local Governments.‖ This statement, known as the ―Reporting Model‖ statement, affects the way the County and its component units prepare and present financial information. State and local governments traditionally have used a financial reporting model substantially different from the one used to prepare private-sector financial reports. GASB Statement No. 35, ―Basic Financial Statement and Management’s Discussion and Analysis - For Public Colleges and Universities‖ establishes accounting and financial reporting standards for public colleges within the financial reporting guidelines of GASB 34.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
GASB Statement Nos. 34 and 35 established requirements and a reporting model for the annual financial reports of state and local governments and colleges. The Statements were developed to make annual reports easier to understand and more useful to the people who use governmental financial information to make decisions and includes:
Management’s Discussion and Analysis – Requires that financial statements be accompanied by a narrative introduction and analytical overview of the government’s financial activities in the form of ―management’s discussion and analysis‖ (MD&A). This analysis is similar to analysis the private sector provides in their annual reports.
Government-wide financial statements – The reporting model includes financial statements prepared using full accrual accounting for all of the government’s activities. This approach includes not just current assets and liabilities (such as cash and accounts payable) but also capital assets and long-term liabilities (such as buildings and infrastructure, including bridges and roads, and general obligation debt). Accrual accounting also reports all of the revenues and cost of providing services each year, not just those received or paid in the current year or soon thereafter.
Statement of Net Assets – The Statement of Net Assets is designed to display the financial position of the primary government (governmental activities) and its discretely presented component units. Governments report all debt and long-term liabilities as well as, capital assets, including infrastructure, in the government-wide Statement of Net Assets and report depreciation expense – the cost of ―using up‖ capital assets – in the Statement of Activities. The net assets of a government will be broken down into three categories – 1) invested in capital assets, net of related debt; 2) restricted; and 3) unrestricted.
Statement of Activities – The government-wide statement of activities reports expenses and revenues in a format that focuses on the cost of each of the government’s functions. The expense of individual functions is compared to the revenues generated directly by the function (for instance, through user charges or intergovernmental grants).
Budgetary Comparison Schedules – Demonstrating compliance with the adopted budget is an important component of a government’s accountability to the public. Many citizens participate in the process of establishing the annual operating budgets of state and local governments, and have a keen interest in following the actual financial progress of their governments over the course of the year. The County and many other governments revise their original budgets over the course of the year for a variety of reasons. Under the new reporting model, governments will continue to provide budgetary comparison information in their annual report and are required to add the government’s original budget to the current comparison of final budget and actual results.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
As required by the accounting principles generally accepted in the United States, these financial statements present the primary government and its component units. A component unit is a legally separate entity that meets any one of the following criteria: 1) the primary government appoints the voting majority of the board, and is able to impose its will on the component unit, or is in a relationship of financial benefit or burden with the component unit; 2) the component unit is fiscally dependent on the primary government, or; 3) the financial statements of the primary government would be misleading if data from the component unit was not included. Blended component units, although legally separate entities, are, in substance, part of the government’s operations and so data from these units are combined with data of the primary government. The County has no component units that meet the requirements for blending. The discretely presented component units, on the other hand, are reported in a separate column in the government-wide statements to emphasize they are legally separate from the primary government. The discretely presented component units have various fiscal year-ends.
Component Units
The following entities are included in the financial statements because of the significance of their operations or financial relationships with the County. The majority of the board of directors of the component units, except Memorial Hall are appointed by the County’s Chief Executive and confirmed by the County Council. The component units’ column of the applicable government-wide statements include financial data for the Allegheny County Airport Authority (ACAA); the Port Authority of Allegheny County (PAT); the Community College of Allegheny County (CCAC); the Redevelopment Authority of Allegheny County (RAAC), and Allegheny County Industrial Development Authority (ACIDA). These entities are considered major component units of the County. Allegheny HealthChoices, Inc (AHCI), Allegheny County Parks Foundation (Parks Foundation), Allegheny County Conservation District (Conservation District), and Soldiers’ and Sailors’ Memorial Hall and Museum Trust, Inc. (Memorial Hall) are nonmajor component units. They are included with the major component units in the Statement of Net Assets in the nonmajor component units’ column of the Statement of Net Assets – Component Units and Statement of Activities – Component Units.
ACAA was established in 1999 to manage and operate Pittsburgh International Airport (PIA) and the Allegheny County Airport (collectively, the Airport System). On November 15, 1999, pursuant to an Airport Operation, Management and Transfer Agreement and Lease between the County and ACAA, as amended (the Transfer Agreement), the County leased and transferred the Airport System to ACAA for a term of 25 years with two 25-year extension options exercisable at ACAA’s option.
In connection with the Transfer Agreement, the County leased to ACAA all land, buildings, fixtures, improvements, structures, aviation easements, rights of access and appurtenances pertaining thereto and all of the listed properties. In addition, the County transferred all of its rights, title and interest in fixtures, equipment, materials and furnishings utilized by the County in connection with the Airport System. In addition, all contractual rights and
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
obligations and liabilities pertaining to the Airport System, including revenue and general obligation bonds issued by the County to finance construction and development of PIA, were transferred to ACAA by the County.
PAT was established under the Second Class Port Authority Act of 1956 to provide mass transit services to the citizens of Allegheny County and portions of adjacent counties. The County provides significant annual operating and capital subsidies to PAT.
As discussed in Note 13, PAT contracts with Veolia Transportation Services, Inc. which provides professional services to coordinate the paratransit system, ACCESS. ACCESS financial statements have not been included in the reporting entity because PAT has neither control, financial responsibility, nor accountability for ACCESS.
CCAC was established under the Community College Act of 1963 to provide two-year post-secondary and college-parallel education programs, as well as education programs for out-of-school youths and adults within Allegheny County. The County, as sponsor, advances its funding based on its budget allocation that is on a calendar year basis. Included in the advance is the County’s required one-half share of capital expenditures.
The Educational Foundation of CCAC (the ―Foundation‖) is a legally separate, tax-exempt component unit of CCAC that acts primarily as a fund-raising organization to supplement the resources that are available to CCAC. The Foundation operates under an independent Board of Trustees and management. In carrying out its responsibilities, the Board of Trustees of the Foundation forms policy and maintains fiscal accountability over funds administered by the Foundation. The majority of resources or income thereon, are restricted to the activities of CCAC by the donors. Accordingly, the financial statements of the Foundation have been included in the basic financial statements with CCAC.
RAAC was incorporated in the Commonwealth of Pennsylvania in 1950 as a redevelopment authority under the provisions of the Urban Redevelopment Law, Act No. 385. RAAC was established with the power to undertake programs for the voluntary repair, rehabilitation and conservation of residential housing and to stimulate residential, office, retail, commercial, industrial and other development. The County allocates a portion of its sales tax receipts from the Allegheny Regional Asset District to RAAC for the purpose of meeting the debt service obligations of bonds issued by RAAC to provide loans related to economic development projects.
RAAC has entered into an agreement whereby the County agreed to provide administrative services on behalf of RAAC at a cost of $537,500 for 2010.
ACIDA was established under the Economic Development Financing Law to aid in alleviating unemployment and to maintain levels of existing employment by promoting the construction of industrial, manufacturing and research and development facilities within the County. Through a guaranty agreement with ACIDA, the County has agreed to pay the principal and interest on ACIDA’s Guaranteed Lease Revenue Bonds, Series 2002A and 2002B; and
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
accordingly the debt is reported on the County’s Statement of Net Assets.
ACIDA has entered into an agreement with the County to provide administrative services on its behalf. As compensation for these services, ACIDA has agreed to transfer to the County the amount of ―surplus revenue‖ remaining at the end of each fiscal year to cover the costs of County personnel responsible for the administration and operation of ACIDA. Surplus revenue is essentially the amount of Administrative Fund unrestricted cash and cash equivalents exceeding $50,000 at the end of each year. ACIDA was not required to pay any amount for administrative services in the current year.
AHCI was incorporated in 1998 as a private, non-profit corporation for the purpose of monitoring the County’s behavioral health services of the HealthChoices program. AHCI has been determined to be exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code as ―other than a private foundation.‖ The County provides the bulk of AHCI’s funding through medical assistance capitation revenue received from the Commonwealth of Pennsylvania.
The Parks Foundation was established in 2007 to facilitate public investment in the Allegheny County parks system, the county riverfront trail system and other greenway initiatives. The Parks Foundation has been determined to be exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The County has provided a significant subsidy to the Parks Foundation’s operations and is committed to match funds, dollar for dollar, raised by the Parks Foundation in the amount of $10,000,000.
The Conservation District was established by the Conservation District Law Act of 1945 to improve the quality of the environment within the County. Conservation efforts are made with various governmental, business and civic organizations, as well as individuals, to improve both public and private lands. The County’s Chief Executive appoints and the County Council confirms a majority of the board of directors.
Memorial Hall separated from the County on January 1, 2000 and became an independent non-profit corporation. Prior to 2000, it was an operating division of the County. Memorial Hall’s goal is to preserve a lasting tribute to those who served their country during the wars spanning the period from the Civil to Gulf II. The County annually appropriates a material subsidy and has assigned certain receipts from the adjacent parking lot to Memorial Hall.
The reporting periods for ACAA, RAAC, ACIDA, ACHI, Parks Foundation, the Conservation District and Memorial Hall are for the year ended December 31, 2010. The reporting periods for PAT and CCAC are for the year ended June 30, 2010. Complete and more detailed financial statements for all of the individual component units can be obtained from their respective administrative offices.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Administrative Offices
Allegheny County Airport Authority Pittsburgh International Airport Landside Terminal, Suite 4000 Pittsburgh, PA 15231-0370
Port Authority of Allegheny County 345 Sixth Avenue, 3rd Floor Pittsburgh, PA 15222-2527
Community College of Allegheny County 800 Allegheny Avenue Pittsburgh, PA 15233-1895
Redevelopment Authority of Allegheny County Regional Enterprise Tower, Suite 800 425 Sixth Avenue Pittsburgh, PA 15219
Allegheny County Industrial Development Authority Regional Enterprise Tower, Suite 800 425 Sixth Avenue Pittsburgh, PA 15219
Allegheny HealthChoices, Inc. 444 Liberty Avenue, Suite 240 Pittsburgh, PA 15222
Allegheny County Parks Foundation 535 Grant Street, Suite 525 Pittsburgh, PA 15222
Allegheny County Conservation District Lexington Technology Park, Building #1, Suite 102 400 North Lexington Avenue Pittsburgh, PA 15208
Soldiers’ and Sailors’ Memorial Hall and Museum Trust, Inc. 4141 Fifth Avenue Pittsburgh, PA 15213
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Related Organizations
The Chief Executive was also responsible for appointing, and the County Council was responsible for confirming, the members of the boards of other organizations, but the County's accountability for these organizations does not extend beyond making the appointments. These organizations include:
Allegheny County Residential Finance Authority Authority for Improvements in Municipalities Allegheny County Hospital Development Authority Allegheny County Higher Education Building Authority Allegheny County Housing Authority
The financial statements for these organizations are not included herein.
Joint Ventures
The Sports and Exhibition Authority of Pittsburgh and Allegheny County was incorporated under the Public Auditorium Authorities Act of 1953 as a joint authority organized by the City of Pittsburgh (the City) and the County to provide space for educational, cultural, physical, civic and social events of benefit to the general public. The County's only access to the Sports and Exhibition Authority's resources would be a residual interest in the net assets in the event of dissolution.
The City and the County are equally responsible for funding certain debt service requirements of the Sports and Exhibition Authority. At December 31, 2010 the County's outstanding portion of this debt, payable through December 2018, totals $1,590,000 and is reflected in the government-wide Statement of Net Assets. Additionally, in accordance with the fiduciary responsibilities of the Hotel Room Rental Tax Act of 1990, the County collects a 7% hotel room tax and distributes the funds to designated agencies, including the Sports and Exhibition Authority. Complete and more detailed financial statements for the Sports and Exhibition Authority of Pittsburgh and Allegheny County can be obtained from the Sports and Exhibition Authority's administrative office:
Sports and Exhibition Authority of Pittsburgh and Allegheny County Regional Enterprise Tower, Suite 2750 425 Sixth Avenue Pittsburgh, PA 15219
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Jointly Governed Organization
The Allegheny County Sanitary Authority (Alcosan) was organized under the Municipality Authorities Act of 1945 to collect, transport and treat wastewater for the City and 77 other Allegheny County municipalities. Alcosan's board has seven members; three are appointed by the County, three are appointed by the City and one is appointed jointly by the County and City. The County has no ongoing financial interest or responsibility in Alcosan.
(B) Government-wide and Fund Financial Statements
The basic financial statements include both government-wide (based on the County as a whole) and fund financial statements. While the previous reporting model emphasized fund types (the total of all funds of a particular type), in the new reporting model, the focus is either on the County as a whole (which includes component units) or major individual funds within the fund financial statements.
Both the government-wide and fund financial statements (within the basic financial statements) categorize primary activities as governmental. In the government-wide statement of net assets, governmental activities are presented on a consolidated basis, and are reflected on a full accrual, economic resource basis, which incorporates long-term assets and receivables as well as long-term debt and obligations. For the most part, the effect of interfund activity has been eliminated from these statements. Activity between component units and the primary government is generally reported as external transactions and not operating transfers. Internal service account balances are reported as governmental activities on the statements of net assets and activities.
The government-wide statement of activities reflects both the gross and net cost per functional category (public safety, public works, health and welfare, etc.) that are otherwise being supported by general government revenues (property, sales and use taxes, interest earnings and certain other general revenues). The statement of activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants, and contributions. The program revenues must be directly associated with the function (public safety, public works, health and welfare, etc). Program revenues include 1) charges (including fines) to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants and contributions that are restricted to meeting the operation or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported as general revenues. The County does not allocate indirect expenses. The operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital-specific grants.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
In the fund financial statements, financial transactions and accounts of the County are organized on the basis of funds. The operation of each fund is considered to be an independent fiscal and separate accounting entity, with a self-balancing set of accounts recording cash and/or other financial resources together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. The governmental fund statements are presented on a current financial resource and modified accrual basis of accounting. Since the governmental fund statements are presented on a different measurement focus and basis of accounting than the government-wide statements’ governmental activities column, a reconciliation is presented which briefly explains the adjustments necessary to reconcile the fund financial statements to the governmental column of the government-wide financial statements.
The County’s fiduciary funds are presented in the fund financial statements by type (pension and agency). Since by definition these assets are being held for the benefit of a third party (other local governments, litigants, pension participants, etc.) and cannot be used to address activities or obligations of the government, these funds are not incorporated into the government-wide statements. The following is a brief description of the specific funds used by the County in the current year.
Governmental Funds
Governmental funds are those through which most governmental functions of the County are financed. The County's expendable, available financial resources and the related liabilities (except those accounted for in proprietary funds) are accounted for through governmental funds wherein the measurement focus is on changes in financial position, rather than on net income. Following are descriptions of the County's governmental funds:
General Fund - Accounts for all financial resources except those required to be accounted for in another fund. Operating activities reflected in the General Fund include County administrative, planning and service departments, the County's Court of Common Pleas and the elected County row officers, as well as the operations of the Kane Regional Health Centers, a series of four regional, long-term healthcare facilities for the chronically ill and elderly who have limited financial resources. The Centers are operated as a general welfare benefit for these people and are partially supported by property tax revenues. Other activities accounted for in the General Fund include child welfare services, social services for the elderly and the Shuman Juvenile Detention Center. The General Fund is always considered a major fund for government-wide reporting purposes.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Special Revenue Funds - Account for the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. The Special Revenue Funds consist of the following: Transportation Fund, Liquid Fuel Tax Fund, County Grants Fund and Human Services Grants Fund. Operating activities in the Human Services Grants Fund include Behavior Health/Intellectual Disability services to eligible citizens. The County Grants Fund operating activities mainly consist of public safety, health and welfare and general government services.
The County Grants Fund and Human Services Grants Fund are considered major funds for government-wide reporting purposes.
Capital Projects Fund - Accounts for financial resources that are restricted, committed, or assigned to expenditures for capital outlays including acquisition or construction of capital facilities and other capital assets. The Capital Projects Fund is considered a major fund for government-wide reporting purposes.
Debt Service Fund - Accounts for and reports financial resources that are restricted, committed, or assigned to expenditures for principal and interest.
Proprietary Fund
Proprietary fund accounts for the County's ongoing activities that are similar to those found in the private sector. The measurement focus is on determination of net income. Following is a description of the County's proprietary fund:
Internal Service Fund - Account for and finance services furnished exclusively to user offices, departments and other agencies and funds of the County on a cost reimbursement basis. The principal services provided include a self-insurance program for health and dental coverage and risk management. Operating revenues are from charges for services and employer/employee contribution and claims expense. All other revenues and expenses are recorded as non-operating. The Internal Service Fund (after eliminations) is included in governmental activities for government-wide reporting purposes.
Fiduciary Funds
Fiduciary funds account for assets held by the County as the agent for individuals, private organizations and other governmental units or funds. Following is a description of the County's fiduciary funds:
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Trust and Agency Funds - Include the Pension Trust, which accounts for the activities of the Allegheny County Employees' Retirement System, and the Agency Fund, which accounts for funds held by the County on behalf of others. The Pension Trust is accounted for in a manner similar to a proprietary fund. The Agency Fund is custodial in nature (assets equal liabilities) and does not involve the measurement or results of operations. Fiduciary funds are not included in the government-wide statements.
(C) Measurement Focus and Basis of Accounting
The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using the current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet in the funds statements. Long- term assets and long-term liabilities are included in the government-wide statements. Operating statements of the governmental funds present increases (i.e., revenues and other financial sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Note 9 discloses interfund transactions and their accounting treatment on the government-wide statement of activities.
The government-wide statements of net assets and statements of activities, the proprietary fund, and pension trust funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these activities are either included on the statement of net assets or on the statement of fiduciary net assets.
The statements of net assets, statements of activities and the financial statements of the Internal Service Fund and Fiduciary Funds are presented on the accrual basis of accounting. Under this method, revenues are recognized when earned and expenses are recorded when liabilities are incurred without regard to receipt or disbursement of cash.
The fund financial statements of the Governmental Funds are maintained and reported on the modified accrual basis of accounting using the current financial resources measurement focus. Under this method of accounting, revenues are recognized in the period in which they become measurable and available. With respect to real property tax revenue and sales taxes, the term ―available‖ is limited to collection within 60 days of the year-end. Property taxes of $23,035,204 is the portion of the County’s deferred revenue recorded because it is not available. Interest income is recorded as earned. Federal and State reimbursement-type grants are recorded as revenue when related eligible expenditures are incurred. Expenditures, other than accrued interest on long-term debt as well as the long- term expenditures related to compensated absences, workers compensation and settlements, are recorded when the fund liability is incurred. Agency Funds do not have a measurement focus.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
(D) Allowance for Uncollectible Accounts
The County calculates its allowance for uncollectible accounts using historical collection data and, in certain cases, specific account analysis. The allowance at December 31, 2010, is composed of the following: Other General Governmental Fund Funds Total Taxes receivable: Property taxes:
Delinquent $ 651,674 157,471 809,145
Liened 6,439,813 2,168,771 8,608,584 Total taxes 7,091,487 2,326,242 9,417,729 Due from other governments 6,473,419 - 6,473,419
Total allowance $ 13,564,906 2,326,242 15,891,148
There were no allowances for: sales tax receivable; loans receivable; accounts receivable trade and other; and accrued interest and dividends receivable.
Component Units - Allowance for Uncollectible Accounts
All Component Units
The allowance at the component unit’s respective year-end is composed of the following: ACAA CCAC RAAC ACIDA
Trade receivable $ 71,519 5,324,194 - 77,400 Other receivable - 5,000 - - Loans receivable - - 3,079,887 247,388 Liens receivable - - 1,700,000 -
Total allowance $ 71,519 5,329,194 4,779,887 324,788
(E) Cash, Cash Equivalents and Investments
For purposes of the accompanying Statement of Cash Flows, the County considers all highly liquid investments with an original maturity of three months or less when acquired to be cash equivalents.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The County follows GASB Statement No. 31, ―Accounting and Financial Reporting for Certain Investments and for External Investment Pools‖ and reports investments at fair value. Additionally, the Pension Trust Fund’s short-term investments are reported at cost, which approximates fair value.
Securities traded on a national exchange are valued at the last reported sales price. Other investments not regularly traded on a national exchange are valued based on the last reported sales price or mean of the latest bid and ask price.
The County allocates income to the various funds based upon their average monthly investment balances.
(F) Capital Assets
Capital outlays are recorded as expenditures of the Governmental Funds and as assets in the government-wide financial statements to the extent the County’s capitalization threshold of $1,000 is met and a useful life of greater than three years. To the extent the County’s capitalization threshold of $1,000 is met, capital outlays are recorded as capital assets and depreciated over their estimated useful lives on the government-wide statements, using the straight-line method and the following estimated useful lives: Years Buildings 50 Leasehold Improvements 20 Furniture and Other Equipment 3-20 Infrastructure 7-40 Equipment 3-20
All capital assets are valued at historical cost or estimated historical cost if actual cost was not available. Donated capital assets are valued at their estimated fair market value on the date donated. The County maintains many artifacts, books, art objects and buildings of historical significance that are held for educational, research, and curatorial purposes. Each of the items is cataloged, preserved, cared for, and activities verifying their existence and assessing their condition are performed periodically. The County has a policy that requires that the proceeds from the sale of historical treasures or works of art be used to acquire other items for the collection. The County does not capitalize historic treasures or works of art.
Maintenance, repairs, and minor equipment are charged to operations when incurred. Expenses that materially change capacities or extend useful lives are capitalized. Upon sale or retirement of land, buildings, and equipment, the cost and related accumulated depreciation, if applicable, are eliminated from the respective accounts and any resulting gain or loss is included in the results of operations.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
(G) Compensated Absences
The County’s vacation policy for union and nonunion employees provides that such employees are to take vacation within the year it is earned, with no carry forward provisions. Thus, there is no County liability for unused vacation at December 31, 2010.
Certain County police, jail guards, probation officers and deputy sheriffs earn vested sick benefits that are paid at termination or retirement based on current rates of compensation. The liability for such benefits is recorded in the government-wide statements at current rates of compensation (see Note 8); amounts currently payable are not material.
Personnel of all other County departments generally may accumulate up to 120 days of sick leave. These future benefits do not vest and, accordingly, have not been recognized in the accompanying financial statement.
(H) Fund/Equity Balances
Classification of Fund Balance
As of December 31, 2010 the County had $912,841 of encumbrances in operating funds which rolled over into the next fiscal year. Capital Projects had $7,309,286 of encumbrances at December 31, 2010. For more details on Capital Projects encumbrances, see Note 5.
GASB Statement No. 54 establishes accounting and financial standards for all governments that report governmental funds. It establishes criteria for classifying fund balances into specifically defined classifications and clarifies definitions as follow:
Nonspendable -- This classification consists of amounts that cannot be spent because they are either not in spendable form or are legally required to be maintained intact. The County has no amount to report in this classification.
Restricted -- This classification consists of amounts that are restricted to specific purposes, as defined below by GASB Statement No. 34. The County’s restricted fund balances consist of external enabling legislation for the state, federal or local government grants.
Committed -- This classification consists of amounts used for specific purposes imposed by formal action of the County’s highest level of decision-making authority (Chief Executive/Council). The removal or modification of the use of committed funds can only be accomplished by formal action prior to fiscal year-end by the County’s highest level of authority.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Assigned—This classification consists of amounts constrained by the County’s intent to be used for specific purposes that are neither restricted nor committed. The present procedure is for the Chief Executive and Controller to jointly assign amounts to be used for specific purposes before issuance of audited financial statements.
Unassigned—This classification consists of amounts that have not been assigned to other funds and that have not been restricted, committed, or assigned to specific purposes within the General Fund. The General Fund should be the only fund that reports a positive unassigned balance.
The County’s policy is to apply expenditures against any restricted fund balance, committed fund balance, assigned fund balance, and then unassigned fund balance.
Classification of Net Assets
GASB Statement No. 34 requires the classification of net assets into three components – Invested in capital assets, net of related debt; restricted; and unrestricted. These classifications are defined as follows:
Invested in capital assets, net of related debt -- This component of net 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 these assets.
Restricted -- This component of net assets consists of constraints placed on net asset use through external restrictions, such as, constitutional provisions or enabling legislation.
Unrestricted -- This component of net assets consists of net assets that do not meet the definition of ―restricted‖ or ―invested in capital assets, net of related debt.‖
The County’s policy is to apply expenses against restricted fund balance then unrestricted fund balance.
(I) Pending Governmental Accounting Standards Board Pronouncements
GASB has issued Statement No. 59 ―Financial Instruments Omnibus‖, effective for periods beginning after June 15, 2010. The objective of this statement is to update and improve existing standards regarding financial reporting and disclosure requirements of certain financial instruments and external investment pools for which significant issues have been identified in practice. The effect of implementation of this statement has not yet been determined.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
GASB has issued Statement No. 60 ―Accounting and Financial Reporting for Service Concession Arrangements‖, effective for periods beginning after December 15, 2011. This statement provides guidance for accounting and financial reporting for service concession arrangements. The effect of implementation of this statement has not yet been determined.
GASB has issued Statement No. 61 ―The Financial Reporting Entity: Omnibus‖, effective for periods beginning after June 15, 2012. The objective of this statement is to improve financial reporting for a governmental financial reporting entity by modifying existing requirements for the assessment of potential component units. The effect of implementation of this statement has not yet been determined.
GASB has issued Statement No. 62 ―Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements‖, effective for periods beginning after December 15, 2011. This statement establishes accounting and financial reporting standards for the financial reporting statements of state and local governments by bringing together reporting literature in one place with the guidance modified as necessary. The effect of implementation of this statement has not yet been determined.
(J) Reclassification of Prior Year Statements
Certain previously reported items in the financial statements have been reclassified to conform with the current year's classifications.
Component Units - Summary of Significant Accounting Policies
Significant accounting policies for the component units included in the accompanying financial statements are described below:
Allegheny County Airport Authority
Basis of Accounting
ACAA's financial statements are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when the related obligations are incurred. As permitted by GASB Statement No. 20, ACAA applies all GASB pronouncements as well as FASB Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins issued on or before November 30, 1989, except those that conflict with GASB pronouncements in accounting for its operations and has elected not to apply FASB Statements and Interpretations issued after November 30, 1989 to its financial statements.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Recognition of Revenue, Receivables and Deferred Revenue
Aviation and terminal building lease rental revenues include amounts computed in accordance with the Airport Operating Agreement (AOA), the term of which will expire no earlier than May 8, 2018, or when all of the debt service requirements have been funded, between the County, as sponsor of ACAA, and signatory airlines serving PIA, as well as certain fixed fees for nonscheduled airlines and private users of Allegheny County Airport (AGC). US Airways, Inc., one of the scheduled airlines, which together with its affiliated commuter airlines, accounted for approximately 26% of total enplaned passengers at PIA in 2010.
The AOA provides that the aggregate of airline fees and charges together with other revenues, including nonairline revenues, for each fiscal year should be sufficient to pay the operating expenses of the cost centers included in the AOA and to make all deposits and payments under bond ordinances and indentures issued for capital projects for ACAA.
Concession and rental car fees are generally based on a fixed percentage of tenant revenues subject to certain minimum monthly fees under the lease and concession agreement. During 2002, the Master Lease was extended through December 31, 2017. As part of the extension, the lessee has agreed to provide $10,000,000 in future years to inure to the benefit of both parties. During 2005, the agreement was amended to reduce the upfront fee paid to ACAA from $10,000,000 to $6,666,667 (received $3,333,333 in 2003 and 2004) and the percent of net revenues to be received by ACAA increased effective April 1, 2006. The deferred amount is being amortized over the term of the lease agreement.
Parking fees are revenues less operating expenses and a management fee, which is based on a fixed percentage of net revenues.
Passenger Facility Charges (PFC) were instituted October 1, 2001. Such PFC revenues are classified as non-operating, as the amounts are restricted for capital improvements, debt service, and certain other uses approved by the Federal Aviation Administration (FAA).
Transactions which are capital, financing, or investing related, are reported as non-operating revenues. Grants from governmental agencies for eligible construction projects are recognized as non-operating revenue as the related expenditures are made.
Current unrestricted deferred revenue consists of prepayments made by the airlines and concessionaires for aviation and rental revenues for the following year.
Current and noncurrent restricted revenue consists of deferred interest income being amortized into income over the term of the forward delivery agreements entered into by ACAA in conjunction with certain bond finance transactions.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Noncurrent deferred revenue includes amounts funded by tenants of ACAA for certain capital assets. The deferred revenue amounts are being amortized using the straight-line method over the depreciable lives of the related assets through credits to current rents payable.
Risks and Uncertainties
Investment securities are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is possible that changes in risks and values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets.
Inventories
Inventories are stated at the lower of cost or market (net realizable value). Cost is determined using the weighted average method of accounting. Inventories are comprised of construction related materials and parts used for maintenance of the facilities and equipment.
Capital Assets
Land, buildings, and equipment are stated at historical cost. Capitalized interest costs, net of related interest income, are recognized during the construction stage on all projects, except for those financed with grants-in-aid or funds restricted through agreements with scheduled airlines serving PIA (see Note 5). Grants receivable from governmental agencies that are included in restricted assets in the accompanying statements of net assets represent earned but uncollected grants that are restricted for use in the qualifying construction projects. Depreciation is computed using the straight-line method over the estimated economic lives of the respective assets. The estimated useful lives are as follows: Years Terminal buildings 10-30 Runways and taxiways 20 Parking Garage / Lots / Etc 15-40 Hangars 5-30 Other Structures 10-30 Roadways 10-20 Mobile and Other Equipment 10-20 Computer/Security Equip & Systems 5-20 Utilities 10-40 Other Assets 10-30
Deferred Issuance Costs
Costs incurred in connection with the issuance of all long-term debt of ACAA are deferred and amortized using the interest method. Unamortized costs are shown on the Statement of Net Assets as noncurrent deferred financing costs.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Advanced Airline Fundings
The AOA provides for advanced airline fundings (which are primarily maintained in the restricted cash funding reserve account) to cover capital, operating and debt service amounts as approved by the airlines, as defined in the AOA.
Vested Sick Benefits
Certain firefighters employed by ACAA earn vested sick benefits that are paid at termination or retirement based upon the then current rates of compensation. Liabilities for such benefits are accrued at current rates of compensation.
Cash and Cash Equivalents
The ACAA maintains unrestricted and restricted equity in pooled cash and cash equivalents. Airport Revenue Bond investments are held in trust in accordance with the bond ordinances.
Fund/Equity Balances
Unrestricted net assets at December 31, 2010 are as follows:
Unrestricted net assets available for operations $ 2,807,514 Restricted net deficit - PFC funds 25,633,854
Unrestricted net assets per Statement of Net Assets - Component Units $ 28,441,368
ACAA has incurred Passenger Facility Charges (PFC) reimbursable expenditures in excess of PFC revenues as of December 31, 2010. The PFC deficit results in a reduction of unrestricted net assets.
Port Authority of Allegheny County
Basis of Accounting
The financial statements of PAT have been prepared in conformity with accounting principles generally accepted in the United States as applicable to governments as previously summarized. Accounting records covering both transit operations and capital grant projects are maintained on the accrual basis of accounting, whereby revenues and expenses are recognized in the period earned or incurred. All transactions are accounted for in a single enterprise fund.
As permitted by GASB Statement No. 20, PAT applies all GASB pronouncements as well as FASB Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins issued on or before November 30, 1989, except those that conflict with GASB pronouncements, in accounting for its operations.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
PAT’s policy is first to apply restricted net assets to expenses incurred for which there are both restricted and unrestricted net assets available.
Cash and Cash Equivalents
Cash and cash equivalents include amounts in demand deposits, as well as short-term investments with a maturity date within three months of the date acquired.
Recognition of Revenue, Receivables and Deferred Revenue
Passenger fares are recorded as revenue at the time services are performed. Revenues from ticket sales are recognized at the point of sale. Weekly and monthly passes are sold on a consignment basis to vendors who maintain the right of return on unsold passes. Revenues from pass sales are recognized upon receipt.
Grants and contributions are recorded as revenue when all applicable eligibility requirements are met. The Federal Transit Administration (FTA), the Pennsylvania Department of Transportation and the County provide financial assistance and make grants directly to PAT for operations, acquisitions of property and equipment and other capital related expenditures.
In fiscal year 2008, Act 44 was enacted by the Commonwealth of Pennsylvania. The Act created a dedicated source of funding called the Public Transportation Trust Fund (PTTF) which provides both operating and capital assistance to PAT as well as all other transit agencies in the State. The PTTF includes several existing sources of state funding as well as some new sources. Also, it eliminates the filing of separate applications to receive those funds.
The sources of revenue available to the State to fund PTTF are: A percentage from sales tax (4.4%), lottery funds for the Free Transit for Senior Citizens Program, State bond funding for capital projects, remainder of Commonwealth of Pennsylvania Public Transportation Assistance Fund (PTAF) after funding payments on existing debt, and annual payments from the Turnpike Commission.
Five program accounts have been created within the new trust fund: Transit Operating Assistance, Asset Improvement Program, Capital Improvements Program, New Initiatives, and Programs of Statewide Significance. Local matching funds are required to receive assistance under most programs.
PAT received $184,457,990 in operating assistance under Act 44. This funding required local matching funds of $27,668,700 which was provided by the County. During fiscal 2010, approximately $9.2 million of Act 44 funds were expended that PAT received and recognized as revenue during fiscal year 2009.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Because of existing debt agreements, PAT received capital funding under PTAF totaling $34.9 million to use for debt service. Local matching share required for this funding was $1.2 million which was provided by the County.
PAT also received $44.8 million in capital funding under Act 44. Approximately $16.8 million was used for Infrastructure Safety and Renewal Programs and approximately $2.8 million was used for vehicle overhaul which do not require County matching funds. Approximately $25.2 million was used for other capital projects and requires County matching funds.
Deferred revenues at June 30, 2010, included: $17.4 million of State Act 3 funds to be used for bus procurement, $5.7 million of County funds to be used for capital grant matching, and $6.7 million of State PTAF funds to be used for 2011 debt service.
Capital Assets
Transit operating property and equipment are recorded at cost and include certain property acquired from predecessor private mass transportation companies. Transit operating property and equipment also include certain capitalized labor and overhead expenses incurred to ready such property and equipment for use. Interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed. During the current year, no interest expense was capitalized.
Depreciation is recorded using the straight-line method based on estimated useful lives that generally range from 4 to 30 years.
Construction in progress primarily consist of the North Shore Connector project. PAT has entered into various construction contracts related to the completion of these projects.
Compensated Absences
PAT accrues vacation benefits earned by its employees.
Fund/Equity Balance Restatement
Effective July 1, 2009, PAT adopted, GASB Statement No. 53, ―Accounting and Financial Reporting for Derivative Instruments.‖ This Statement addresses the recognition, measurement, and disclosure of information regarding derivative instruments entered into by state and local governments. The Statement specifically requires governments to measure most derivative instruments at fair value in their financial statements that are prepared using the accrual basis of accounting. The standard requires that accounting changes to conform with the provisions of this statement should be applied retroactively by restating financial statements for all prior periods presented. As such, beginning net assets as of June 30, 2009 were restated from $1,120,005,518 to $1,097,884,005 to comply with the provision of this statement.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Community College of Allegheny County
Basis of Accounting
The financial statements of CCAC have been prepared in accordance with the accounting guidance and reporting practices applicable to public colleges and universities, as outlined in the accounting pronouncements issued by the GASB. CCAC follows all GASB pronouncements as well as FASB Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins issued on or before November 30, 1989, and has elected not to apply FASB Statements and Interpretations issued after November 30, 1989, to its financial statements.
CCAC has determined that it functions as a business type activity, as defined by GASB. The effect of interfund activity has been eliminated from these financial statements, and they have been prepared on the accrual basis of accounting with a flow of economic measurement focus. Revenues are recognized when earned and expenses are recognized when incurred.
CCAC has not adopted a formal policy regarding whether to apply restricted resources or unrestricted resources when an expense is incurred for purposes that both restricted and unrestricted net assets are available. Generally CCAC attempts to utilize restricted net assets first when practicable.
The Foundation is a private non-profit organization that reports under FASB standards, including FASB No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation’s financial information in CCAC’s financial reporting entity for these differences.
Fund/Equity Balances
Of the total net assets of CCAC as of June 30, 2010, the following constraints upon their use have been imposed, either externally or internally by action of the CCAC Board of Trustees or the Foundation’s Board of Directors, as follows on the next page:
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Restricted Net Assets: Restricted Student Net Assets: Scholarship and tuition funds $ 349,700 Student development funds 1,236,590 Tuition equalization 3,362,435 Restricted Foundation Net Assets: Other projects 1,376,519 Permanently 836,767
Total restricted net assets $ 7,162,011 Unrestricted Net Assets: CCAC Designated Net Assets: Campus building projects $ 6,000,000 Reserve for facilities, emergency and other 6,295,593 West Hills renovations project 12,577 915 Ridge property 740,328 Auxiliary Services – Bookstore 3,679,496 Auxiliary Services – Food Service 663,165 Future operations 1,140,845 Foundation Unrestricted Net Assets 2,234,866 Total unrestricted net assets $ 20,766,870
Restricted Student Net Assets:
Scholarships and Development -- Student net assets include funds that have been generated from student related sources, the principal source of which is student fees. As such, the net assets must be used specifically for the benefit of students. The Board of Trustees determines the allocation of scholarships and development.
Tuition Equalization Reserve -- A reserve within student funds is mandated by the Department of Education which specifies that when student revenues exceed one-third of the annual operating cost of CCAC, the excess must be set aside in restricted fund. Otherwise, when student revenues are less than one-third of the annual operation costs of CCAC that deficiency can be funded through the tuition equalization reserve fund. In fiscal 2010, student revenues exceeded one-third of the annual operating costs by $3,362,435.
Restricted Foundation Net Assets:
Temporarily Restricted -- Temporarily restricted assets whose use is limited by stipulations imposed by contributors or grantors until those stipulations are fulfilled and removed by the Foundation’s actions. Funds are to be used for projects or scholarships.
Permanently Restricted -- The use of principal is restricted indefinitely by stipulations imposed by contributors or donors. Income earned on permanently restricted assets is used for scholarships of students and other needs of the Foundation, as directed by the donor.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Board-Designated Net Assets:
Campus Building Projects and West Hill Renovation Project – At the October 1997 meeting, the Board of Trustees authorized an increase in Campus building projects reserve from a balance of $1,470,613 to $5,000,000 to provide the College share of funds for renovation and construction of science labs at the campuses. The science labs project total was estimated at that time at $10,000,000 and consisted of a new science building at Allegheny Campus, major improvements to the South Campus labs, and less extensive updating costs to the Boyce and North Campuses. In 1998, after discussions with the architect the estimate was increased to $12,000,000. Accordingly, at the October 1998 meeting, the Board allocated an additional $1,000,000 to the reserve from that fiscal year’s interest income. The reserve then amounted to $6,000,000. In May 2006 the Board approved the 2006–2008 Capital Outlay Plan, which included the transfer of this $6,000,000 to a new reserve called the ―West Hills Renovation Project Reserve.‖ At its November 2007 meeting, the Board authorized an addition of $1,000,000 to the Campus Building Projects Reserve from unrestricted net assets as of June 30, 2007, bringing the total in this reserve as of June 30, 2007 to $3,000,000. During fiscal year 2008, $569,435 was spent from that reserve for CCAC’s one-half share of the fiscal 2008 debt service on the portion of the new 2008 bond issue attributable to the Science Center construction project. At its November 2008 meeting, the Board authorized an addition of $3,000,000 from unrestricted net assets as of June 30, 2008, bringing the total of the Campus Building Projects Reserve as of June 30, 2008 to $5,430,565. Payments during 2008-2009 for CCAC’s one-half share amounted to $567,386, further reducing the Reserve to $4,863,179. Payments made during fiscal 2010 for CCAC’s one-half share were $567,586. The Board designated an additional $1,704,407, bringing the reserve total to $6,000,000.
Reserve for Facilities, Emergency, and Other Compelling Needs - At the November 2008 meeting of the CCAC Board, annual operating budget policy was revised to call for an administrative process that annually sets aside a portion of projected revenues and existing unrestricted net assets to create a reserve for future years for ongoing facilities maintenance, renovations, construction, and other emergencies or compelling needs, including but not limited to legal, technological, safety/risk management, academic, or other financial imperatives. After revenues to fund current operating needs and strategic goals for the budget year have been identified, it is the goal to generate excess revenues to provide for an ongoing net asset balance at the level equal to at least fifteen percent of the annual current fund budget, with the target of achieving the goal in five to ten years. During fiscal year 2008, a $4,000,000 reserve was established. In fiscal year 2009, the reserve was increased by an additional $2,000,000. For fiscal 2010, the reserve was increased by another $295,593, resulting in a total of $6,295,593 now set aside in this reserve.
915 Ridge Property – Rental income in excess of rental expenses are designated for future improvements or renovations to 915 Ridge property. During fiscal 2010, expenses exceeded revenues by $30,999, thereby reducing the designated net assets.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Unrestricted Net Assets -- Unrestricted and board-designated resources, which are not subject to restrictions imposed by contributors or grantors.
Auxiliary Services -- The CCAC Board has designated the results of Auxiliary operations to be added or deducted to designated net assets.
Recognition of Revenue
Reimbursements for operating expenditures from the County and the State are recorded as revenue when earned. Audit adjustments are recorded to revenue when they are probable.
The Community College Act of 1963, as amended, specifies that 50% of net qualifying debt service and rental expenditures shall be reimbursed through State capital funds. The County has stipulated that its share of such expenditures (also 50%) is to be paid out of County funds advanced for operating expenditures.
Deferred revenues are composed of deferred grant revenue and student tuition revenue and deposits. Deferred grant revenue represents monies received on approved grants in advance of incurring the corresponding expenses. Student deposits and tuition received at June 30, and applicable to subsequent summer and fall terms, have been deferred and are included in revenue in the succeeding year. The deposits generally are not refundable.
Capital Assets
Property and equipment are recorded at cost less an allowance for depreciation and amortization. Interest expense is capitalized on qualifying assets during the period necessary to ready the assets for its intended use. Interest capitalized is net of interest earnings, if any, from proceeds of tax-exempt borrowings for the respective projects. Repair and maintenance costs are expensed as incurred; renovations and improvements, which extend the physical or economic life of an asset, are capitalized.
Depreciation and amortization of leased and owned assets are computed on the straight-line method over the estimated useful lives of the leased and owned property and equipment.
The estimated useful lives are as follows:
Years Buildings 50 Furniture and fixtures 10 Library books 10 Vehicles 7 Computer equipment 5 Computer software 3 All other equipment 7
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Foundation Endowment
The Foundation’s endowment was established for a variety of purposes, including for scholarships, facilities, or unrestricted operating purposes. Its endowment includes both donor-restricted endowment funds and unrestricted funds designated by the Board of Directors to function as endowments. Net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.
The Foundation has interpreted Pennsylvania State Act 141 of 1998 (Act) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Foundation classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gift to the permanent endowment, and (c) accumulation to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund and investment income in excess of amounts designated for current operations and losses up to the extent of accumulated gains. For purposes of this note, the endowment is considered to be investments.
Endowment net asset composition by type of fund at June 30, 2010, and changes in endowment net assets for the fiscal year ended June 30, 2010, are as follows: Unrestricted Permanently Board Designated Restricted Total
Endowment Net Assets, Beginning of Year $ 1,349,129 769,334 2,118,463 Investment return: Investment income 31,832 - 31,832 Net appreciation (realized and unrealized) 122,634 - 122,634
Total investment 154,466 - 154,466
Contributions - 67,433 67,433
Other changes: Withdrawals (157,619) - (157,619) Miscellaneous income (expense) (8,466) - (8,466)
Endowment Net Assets, End of Year $ 1,337,510 836,767 2,174,277
Redevelopment Authority of Allegheny County
Basis of Accounting
The financial statements of RAAC have been prepared using the accrual basis of accounting,
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
and accordingly reflect all receivables, payables, and other liabilities in conformity with accounting principles generally accepted in the United States as applicable to governments as previously summarized for the County.
Intergovernmental Revenue
Intergovernmental revenue is recognized when the related expenditure is incurred. Deferred revenues arise when RAAC receives resources prior to incurring qualifying expenditures. Any amounts not collected, for which related expenditures have been incurred prior to December 31, 2010, are reflected as due from other governments.
Loans Receivable
Loans receivable are recognized when the loan is established.
RAAC has residential rehabilitation loans, which are presented at a net zero value, as they are only repayable out of available sales proceeds. These loans are fully reserved at the time of issue. The reserve is reversed and income is recognized when the loans are repaid, or when the amount of repayment is determinable and reasonably assured.
Included in RAAC are Economic Development Fund receivables consisting of 33 loans (between $100,000 and $2,500,000) with rates ranging from 0% to 7% and with terms ranging from 10 years to 25 years.
It is RAAC’s policy to provide for future losses on loans based on an evaluation that, in RAAC’s judgment, require consideration in estimating loan losses of the various programs.
Loans receivable are recorded at their principal balance due, less an allowance for uncollectible loans. Interest income on loans is recognized at the loans’ stated interest rates.
Liens Receivable
As of year-end, the liens are fully reserved, as management determined the receivable to be uncollectable.
Capital Assets
Purchases of capital assets, consisting principally of office furniture and equipment, are recognized as expenditures when incurred. Except in the business type activities as discussed below, RAAC does not record capital assets as required by U.S. generally accepted accounting principles because their historical cost is not known. However, capital assets are not believed to be material to RAAC’s financial position.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Real estate acquired in conjunction with RAAC's various programs are recognized as expenditures when purchased and are not capitalized because: (1) the property is not used in RAAC’s operations, and; (2) the ultimate amount to be realized upon disposition of the property does not generally accrue to RAAC's benefit. Land inventory is recorded as an asset at the lower of cost or market value until released to a developer for development program activities.
Capital assets, which include land, buildings, and building improvements, are reported in the applicable business-type activities. Capital assets are defined by RAAC as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of three years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. The cost of normal maintenance and repairs that does not add to the value of the asset or materially extend assets’ lives is not capitalized.
Buildings and building improvements are depreciated using the straight line method. Buildings are assigned a useful life of 30 years and tenant improvements are amortized over the life of the lease.
Allegheny County Industrial Development Authority
Basis of Accounting
ACIDA’s Administrative Fund, the IDA Bond and certain other projects are fund types accounted for on the accrual basis of accounting. Accordingly, revenues are recorded when earned and expenses are recorded when incurred.
As permitted by GASB Statement No. 20, ACIDA applies all GASB pronouncements as well as FASB Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins issued on or before November 30, 1989, except those that conflict with GASB pronouncements, in accounting for its proprietary operations.
Cash and Cash Equivalents
For purposes of presentation, the ACIDA considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Administrative Fees
The Administrative Fund charges those entities on whose behalf debt is issued a closing fee at the inception of each issue and annual fees due on each anniversary of the issue for as long as the issue is outstanding. Beginning in 2003, new loans issued must pay the first annual fee at closing and then on each anniversary of the issue for as long as the issue is outstanding. Administrative fees are non-refundable and are recognized as revenue at the
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
time they are due as management believes this approach best matches revenues with related expenses.
Allegheny HealthChoices, Inc.
Basis of Accounting
The financial statements of AHCI have been prepared using the accrual basis of accounting, and accordingly reflect all significant receivables, payables, and other liabilities.
Capital Assets
Prior to 2001, capital assets purchased with Allegheny County MH/MR base funds, as well as, certain capital assets purchased with Allegheny HealthChoices funds were expensed as opposed to being capitalized and depreciated. These amounts are reported as capital assets with offset costs applied to the program.
Since 2002, acquisitions of furniture and equipment in excess of $1,000 are capitalized. In 2008, the threshold for capitalization was raised to $3,000. Furniture and equipment are carried at cost or, if donated, at the approximate fair value at the date of donation. Depreciation was computed using the straight-line method over the estimated useful lives of the capital assets.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, in banks, as well as, all short-term highly liquid investments with maturities from date of purchase of three months or less.
Recognition of Revenue and Deferred Revenue
AHCI entered into a renewal contract with the County’s Human Services – Division of Behavioral Health. Effective January 1, 2009, AHCI entered into an amended agreement with Allegheny County, whereby AHCI will be paid 3.0% of the capitation payments made by the Pennsylvania Department of Public Welfare to Allegheny County. Of this amount, .05%, shall be retained by AHCI and designated for approved HealthChoices program enhancements. Total AHCI revenue for the year ended December 31, 2010 is $5,194,606. This amount is comprised of gross capitation revenues received of $7,795,888 plus interest earned of $7,019, less the amount to be repaid to the County of $2,567,595 related to 2010, and the decrease in the amount of capitation revenue deferred. The change in the deferred balance from December 31, 2009, of $40,706 is reflected as a decrease in the payable to the County.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The contract permitted AHCI to defer an amount equal to approximately two months revenue as of December 31, 2010 for cash flow purposes. The total deferral amount is $1,082,770 at December 31, 2010.
Concentrations
AHCI receives a substantial amount of its support from various government sources. A significant reduction in the level of this support, if this were to occur, could have an effect on the programs and activities of AHCI.
Allegheny County Parks Foundation
Basis of Accounting
The financial statements of the Parks Foundation have been prepared using the accrual basis of accounting. Net assets, revenues and support are classified based on the existence or absence of donor-imposed stipulations. Accordingly, the net assets of Parks Foundation and the changes therein are classified and reported as either unrestricted net assets—not subject to donor-imposed stipulations and temporarily restricted net assets—subject to donor- imposed stipulation that may or will be met, either by action of the Parks Foundation and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets.
Capital Assets
Property and equipment are stated at cost. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets, which range from 3 or more years. Maintenance and repairs are expensed as incurred.
Fund/Equity Balance
Temporarily restricted net assets as of December 31, 2010, subject exclusively to purpose restrictions, are as follows:
North Park Multi-Use Trail $ 598,000 Friends of the Park Projects 275,000 South Park Connector Trail 254,645 Volunteer Initiative 25,000 Children's Project 25,000 Community Awareness 20,536 $ 1,198,181
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Support and Revenue
Support from grants is recorded when the award is made and any related conditions are known. The support is recorded as unrestricted or temporarily restricted depending upon the existence of conditions placed upon the use of the award by the donor.
Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected beyond one year period are recorded at the net present value of their estimated future cash flows. The discounts on these amounts are computed using risk-free interest rates applicable to the years in which the promises are received. Amortization of the discounts is included in contribution revenue.
Allegheny County Conservation District
Basis of Accounting
The financial statements of the Conservation District have been prepared using the accrual basis of accounting.
Cash and Cash Equivalents
For purposes of presentation, the Conservation District considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents.
Capital Assets
Property and equipment are stated at cost. Depreciation is computed on the straight-line basis over the estimated useful lives of the assets, which range from 5 to 10 years. Maintenance and repairs are expensed as incurred.
Soldiers’ and Sailors’ Memorial Hall and Museum Trust, Inc.
Basis of Accounting
The financial statements of Memorial Hall have been prepared using the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred.
Cash and Cash Equivalents
For presentation purposes, Memorial Hall considers all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Contributions
Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence or nature of any donor restrictions. All other donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.
Contributed services (in-kind contributions) for the year ending December 31, 2010 do not meet the criteria for inclusion in the accompanying financial statements. Memorial Hall receives donation of services of immeasurable benefit to the organization from many individuals.
During 2010, SSMH deaccessioned several collection items. A total of $3,709 was received for the sale of the deaccessioned items. During 2010, SSMH used accumulated proceeds to cover the costs of the display material for the exhibits and a portion was used for salaries.
Capital Assets
Capital assets are recorded at cost. Depreciation of capital assets and leasehold improvements are calculated on a straight-line basis over the estimated service lives. Capital purchases greater than $1,000 and with a life greater than one year are capitalized.
The County transferred ownership to Memorial Hall of the artifacts and collections held. The collections are not recognized as assets on the statement of net assets. Purchases of collection items are recorded as decreases in unrestricted net assets in the year in which the items are acquired or as decreases in restricted for projects section of net assets if the assets used to purchase the items are restricted by donors. Contributed collection items are not reflected on the financial statements. Proceeds from deaccessions or insurance recoveries are reflected as increases in the appropriate net asset classes.
(2) Legal Compliance
Negative Unassigned Fund Balances
The Capital Projects Fund has an unassigned negative fund balance of $24.6 million at December 31, 2010. The County has subsequently (Note 16) issued, on March 1, 2011, General Obligation Bond C-65 in the amount of $76.2 million to provide proceeds for Capital Fund projects.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The County Grants Fund has an unassigned negative fund balance of $38,914 at December 31, 2010. The County will fund this immaterial deficit in 2011.
(3) Cash and Investments
GASB Statement No. 40, ―Deposit and Investment Risk Disclosures,‖ requires disclosures related to the following deposit and investment risks: credit risk, custodial credit risk, concentration of credit risk, interest rate risk, and foreign currency risk. The following is a description of the County’s deposit and investment risks:
Deposits and Investments
Pennsylvania statutes provide for investment of governmental funds into certain authorized investments. The statutes also allow pooling of governmental funds for investment purposes. The County Investment Board has adopted an investment policy that adheres to State statutes and further limits permitted investment types and procedures. This policy was last revised October 28, 2009. The primary objectives, in priority order, of the Board’s investment activities are safety of principal, liquidity, and return on investment.
As of December 31, 2010 the book value of County cash and short-term investments (excluding Trust and Agency funds which will be described separately) was $103,135,157.
The bank balance of deposits and fair value of short-term investments was as follows:
Cash on hand $ 71,815 Checking and savings accounts 56,945,280 Money market checking/savings accounts 46,842,852 Pennsylvania INVEST 16,265,447 Mutual funds 500 Total $ 120,125,894
The following is a description of the risks related to the cash deposits:
Deposits
Custodial Credit Risk – The risk that, in the event of a bank failure, the County’s deposits may not be returned to it. The County’s investment policy mitigates custodial credit risk by requiring collateralization of uninsured balances of certain investments, including certificates of deposit, savings accounts, time deposits, checking with interest accounts, and repurchase agreements. The County’s investment policy limits collateral to U.S. Treasury Obligations and U.S. Government Agency investments. The policy requires a collateralization level of 102% of the market value of principal and accrued interest and that collateralization be pledged in accordance with Act 72 of the Pennsylvania State Legislature, Section 3836-1 through Section 3836-6.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
As of December 31, 2010, $1,500,000 of the County’s bank balance was insured by the Federal Depository Insurance Corporation. The remaining bank balance of $118,554,079 is uninsured, exposed to custodial credit risk but is collateralized in accordance with Act 72, which requires the institution to pool collateral for all governmental deposits and have the collateral held by an approved custodian in the institution's name.
Investments
As of December 31, 2010, the County’s short term investments are considered to be cash equivalents for presentation on the Statement of Net Assets and Governmental Fund Balance Sheet.
The following is a description of the risks related to the County’s investments:
Credit risk - The risk that an issuer or other counterparty to an investment will not fulfill its obligations is called credit risk. Since the highest priority of the investment program is safety of principal, the County’s investment policy minimizes credit risk by permitting only certain types of investments and establishing minimum quality levels for the riskier investments.
The County Treasurer is authorized by the County Board of Investment to invest in U.S. Treasury Obligations, directly issued U.S. Federal Agency securities, repurchase agreements, deposit accounts, obligations of the Commonwealth of Pennsylvania, shares of investment companies (mutual funds), certificates of deposit, commercial paper, Pennsylvania Local Government Investment Trust (PLGIT), and INVEST. INVEST is a government pool established by the State Treasurer exclusively for investment by Pennsylvania municipalities.
Repurchase agreements may only be established with a primary government securities dealer or a depository institution doing business in Pennsylvania. All agreements must be collateralized at 102% of the market value of principal and accrued interest by U.S. Treasury or U.S. Government Agency securities with AAA ratings and maturities of 30 years. In addition, the agreements must include a definite termination date.
Shares of Investment Companies must be rated AAA. The Investment Company’s holdings may only be in the investments listed in the previous paragraph. In addition, the Companies must be in compliance with Section 2a-7 of the SEC rules.
Commercial Paper must be rated A-1 / P-1 (by Moody’s and S&P respectively) or better. Maturities of commercial paper must not exceed 270 days. All transactions must be made from a registered broker or dealer.
At December 31, 2010 the County’s shares of investment companies (mutual fund investments) were all rated Aaa by Moody’s and AAAm by Standard and Poor’s. The Pennsylvania INVEST Daily (investment pool) was rated AAAm by S&P.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Custodial Credit Risk – For an investment, custodial credit risk is the risk that in the event of the failure of the counterparty, the County will not be able to recover the value of its investments or collateral securities that are in the possession of an outside entity. The County’s safekeeping and custody policy minimally requires that all security transactions be conducted within the confines of Act 72. Direct security transactions must be on a delivery- versus payment basis. All securities are to be held in the Treasurer’s name. If a counterparty is used, the counterparty must send written confirmation of the transaction to the Treasurer.
Concentration of Credit Risk – According to the County’s investment policy, diversification will prevent overconcentration in a sector and minimize the opportunity for risky investments. With the exception of U.S. Treasury securities, no more than 75% of Allegheny County’s total investment portfolio will be invested in a single security type or with a single financial institution. As of December 31, 2010 the Treasurer’s Office was in compliance with this policy.
Interest Rate Risk – Unless matching reserve funds to a specific cash flow, the County’s investment policy limits investment maturities to a maximum of 13 months from the date of purchase. An exception to this rule regards repurchase agreements which should be collateralized with maturities of thirty years. Reserve funds may be invested in securities exceeding five years if the maturity of such investments is reasonably coincides with the expected use of the funds.
Agency Fund Deposits and Investments
The County maintains bank accounts for the various Trust & Agency funds. The Office of the County Treasurer is responsible for investing a portion of these deposits. All the policies described above which govern investment of the County’s other funds also govern the Trust & Agency deposits the County Treasurer manages. The other County departments manage the rest of the deposits in accordance with various legislation. The amount of deposits held in investments by departments other than the Treasurer’s Office is very minimal. Most funds are held in FDIC insured checking, savings, or certificates of deposit.
All investments are considered cash equivalents for presentation on the Statement of Fiduciary Net Assets. The maturity dates of all investments are less than one year. As of December 31, 2010 the total book balance for cash and investments was $48,228,233. The bank balance of deposits and fair value of short-term investments were as follows:
Cash on hand $ 57,573 Checking and savings accounts 25,677,218 Certificates of deposit 5,552,834 Money market savings/checking 17,334,555 Mutual fund s 284,388 Total $ 48,906,568
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
As of December 31, 2010, $2,032,454 of the bank balance was insured by the Federal Depository Insurance Corporation. The remaining bank balance of $46,816,541 was uninsured, exposed to custodial credit risk, but is collateralized in accordance with Act 72 of the Pennsylvania State Legislature which requires the institution to pool collateral for all governmental deposits and have the collateral held by an approved custodian in the institution's name.
At December 31, 2010, the Blackrock and Federated mutual funds were both rated AAAm by Standard & Poor’s, and Aaa by Moody’s.
Pension Trust Fund Deposits and Investments
The Pension Trust Fund’s investments are held separately from those of other County funds. Investments in the pension trust fund are stated at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued based on the last reported sale price. Bonds and notes not regularly on a national exchange are valued based on the last reported sale price or the mean of the latest bid and ask price. Other investments consist of ownership interests in various private equity funds. These interests are recorded at the latest available book value of the Pension Trust Fund’s ownership interest, generally being December 31, 2010. The book value for the investments approximates fair value due to the requirement for these funds to follow the guidance of Codification: Accounting Standards Codification 820-10 Fair Value Measurements.
The Retirement Board has adopted investment guidelines that summarize the investment philosophy of the Board and set forth investment targets and performance objectives for the Pension Fund. The investment guidelines were last revised November 9th, 2006. In 2010 the Retirement Board approved changes to the target allocations for investments. The investment policy has not been revised yet to include these changes. However, since the changes are already in effect for the fund, the new target allocations are included in these notes.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
As of December 31, 2010 the Retirement Board had the following cash and investments in its Pension Trust Fund:
Investment Maturities from December 31, 2010 Cash or Less than 1-10 10-20 More than Investment Type Fair Value 1 year Years Years 20 years U. S. Government & related agency debt 32,006,542 $ 903,445 $ 22,039,288 $ 5,636,518 $ 3,427,291 Fannie Mae and Freddie Mac debt 6,818,777 - 875,429 1,361,755 4,581,593 Corporate debt 54,311,360 309,497 45,223,672 2,975,915 5,802,276 Non-U.S. gov't and corporate debt 10,348,761 1,000,000 8,545,448 648,200 155,113 Total debt securities 103,485,440 2,212,942 76,683,837 10,622,388 13,966,273
Cash and cash equivalents 18,106,853 Fixed income mutual funds 85,432,127 U.S. common and preferred stock 103,233,492 ADR's 3,612,126 S&P 500 index fund 61,321,680 Non-U.S. stocks and equity mutual funds 177,506,160 Hedge funds 959,546 Real estate investment trusts 42,827,571 Commodities fund 21,247,278 Private equity/venture capital 80,251,928 Total cash and other investments 594,498,761
Total cash and investments reported on Pension Trust Fund Statement of Net Assets $ 697,984,201
Following is a description of the Pension Trust Fund’s deposit and investment risks:
Credit risk - The risk that an issuer or other counterparty to an investment will not fulfill its obligations is called credit risk. The Pension Fund’s Fixed-Income Investment Managers are authorized by the Retirement Board to invest in marketable debt issues of the U.S. Treasury, U.S. Agencies, U.S. corporations, U.S. banks or other financial institutions, mortgage or asset backed securities, Yankee bonds, and cash equivalents. Domestic bonds in the core- fixed income portfolios must be rated Baa/BBB or better by either Moody’s or Standard & Poor’s.
The investment guidelines allow for two different classifications of fixed-income managers – core fixed income or high-yield fixed income. Core-fixed income portfolios should normally maintain an average market-weighted quality of Aa/AA. High-yield fixed income securities are bonds that are typically below investment grade bonds. These high-yield income securities do carry credit ratings below BBB by definition.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The Pension Trust Fund’s December 31, 2010 fixed income investments have received the following ratings:
Other Non-U.S. Standard & Poor's Corporate FNMA & Government Gov't & Corporate Rating Bonds FHLMC Securities Debt AAA $ 2,472,009 $ 6,818,777 $31,870,276 - AA 4,962,849 - - 349,726 A 14,926,025 - - 1,134,816 BBB 6,294,172 - - 524,090 BB 3,865,986 - - 103,788 B 11,964,362 - - 1,003,681 CCC 8,179,882 - - - Not Rated 1,646,075 - 136,266 7,232,660 Totals $ 54,311,360 $ 6,818,777 $ 32,006,542 $ 10,348,761
Other Non-U.S. Moody's Corporate FNMA & Government Gov't & Corporate Rating Bonds FHLMC Securities Debt Aaa $ 3,585,417 $ 6,818,777 $31,870,276 $ 648,200 Aa 6,908,027 - - 523,977 A 12,203,472 - - 727,650 Baa 5,829,562 - - 757,004 Ba 2,177,316 - - 103,788 B 12,315,467 - - 893,694 Caa 8,850,355 - - 109,988 Ca 520,134 - - - C 207,050 - - - Not Rated 1,714,560 - 136,266 6,584,460 Totals $ 54,311,360 $ 6,818,777 $ 32,006,542 $ 10,348,761
The credit ratings for the Pension Fund’s mutual fund investments are unknown.
Custodial Credit Risk -- Cash and Cash equivalents - For deposits custodial credit risk is the risk that, in the event of bank failure, the fund’s deposits may not be returned to it. As of December 31, 2010, the book value of the Pension Trust Fund's cash and deposits was $1,752,786 and the bank balance was $2,072,693. Of the $2,072,693 bank balance, $500,000 is covered by federal depository insurance. $1,572,693 is uninsured and subject to custodial credit risk and is collateralized in accordance with Act 72. An additional $16,354,067 in cash or cash equivalents was held by the Fund’s investment managers in temporary investment vehicles. The investment guidelines state cash equivalent investments may be U.S. Treasury Bills, U.S. Government repurchase agreements (with a
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
minimum of 102% collateral), money market funds, or commercial paper. If commercial paper is used for short-term investments, it must be rated at least A-1 or A by Moody’s or Standard & Poor’s.
Custodial Credit Risk -- Investments - For investments, custodial credit risk is the risk that in the event of the failure of the counterparty, the Fund will not be able to recover the value of its investments or collateral securities that are in the possession of an outside entity. To mitigate custodial credit risk, the Board’s investment guidelines set target asset allocations for all investments.
The target allocations in effect for 2010 are as follows:
Asset Allocation Target
Diversified Equity 45% Fixed-income 30% Real Estate 10% Venture Capital/Private Equity 10% Commodities 5% Total 100%
Concentration of Credit Risk -- The Retirement Board’s investment guidelines do not set total fund diversification guidelines. However they do attempt to minimize the impact of substantial loss in any specific industry or issue by establishing specific limits for the portfolios of each of the investment managers. For equity investment managers, no more than 5% of each manager’s equity portfolio may be invested in any one company (valued at cost), and no more than 10% of each manager’s equity portfolio may be invested in any one company (valued at market). In addition, equity investments may not exceed the benchmark index by 20% of the GICS economic sector allocation.
For the core fixed-income managers - Except for U.S. Treasury and Agency obligations, each manager’s fixed-income portfolio may not contain more than 10% (valued at market) of a given domestic issuer; no more than 10% of each portfolio’s market value may be in Yankee bonds. If an investment manager chooses to invest in SEC Rule 144A securities without registration rights, such securities may not consist of more than 10% of the portfolio.
With the exception of several mutual fund investments, as of December 31, 2010 no investments exceeded 5% of the net assets of the Pension Trust Fund.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Interest Rate Risk – Limiting investment maturities is a means of managing exposure to fair value losses arising from rising interest rates. The Retirement Board’s investment guidelines require the effective duration of each fixed-income manager’s portfolio to comply with the following schedule:
Fixed-Income Class Index Duration Limitation Short-term Merrill Lynch One-Three-Year Gov’t +20%
Government/Credit Lehman Brothers Gov’t/Credit +20% Core Lehman Brothers Aggregate +20%
Foreign Currency risk -- For cash and investments, foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment. At December 31, 2010, the Pension Trust Fund held $9,961 in foreign cash, $37,536,994 in common stock investments and $10,348,761 in fixed income investments, all in various non- US dollar denominations.
Component Units - Cash and Investments
Allegheny County Airport Authority
Pennsylvania statutes provide for investment of governmental funds into certain authorized investment types including United States Treasury Bills, other short-term U.S. and Pennsylvania government obligations and insured or collateralized time deposits and certificates of deposit. Statutes do not prescribe regulations related to demand deposits; however, they do allow pooling of governmental funds for investment.
The deposit and investment policy of ACAA adheres to State statutes, related trust indentures and prudent business practice. There were no deposit or investment transactions during the year that were in violation of either the state statutes or the policy of ACAA.
Cash and Deposits -- Custodial Credit Risk - Custodial credit risk is the risk that in the event of a bank failure, ACAA’s deposits may not be returned to it. The following is a summary of ACAA’s cash deposits and time deposits which are insured by the Federal Depository Insurance Company or which were not insured or collateralized in ACAA’s name, but were collateralized in accordance with Act 72 of the Pennsylvania State Legislature which requires the institution to pool collateral for all governmental deposits and have the collateral held by an approved custodian in the institutions name. As of December 31, 2010 ACAA had cash in bank of $103,464,679, of this amount $103,214,679 was exposed to custodial credit risk. Included in that amount is $78,810,185 of restricted cash for use as required by the Authority Trust Indentures.
Investments, Unrestricted -- Investments held by ACAA for discretionary future projects and obligations of ACAA are $12,949,002 as of December 31, 2010.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Investments, Restricted -- Investments held by ACAA that are restricted as to their use by terms and agreements of ACAA. These funds, at fair value and amortized cost, as applicable, as of December 31, 2010 are presented on the following page.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Revenue Bond Funds: 1988 Indenture Rebate - Principal Fund $ 102,804 Rebate - Income Fund 1,287,559 1990 Indenture Rebate - Principal Fund 527,342 Rebate - Income Fund 177,309 1992 Indenture Capital Addition Number 2 Project Account 557,474 1993 Indenture Midfield Completion Construction Fund 615,166 Midfield Claims Construction Fund 88,968 1997 Indenture 1997 A and B Clearing Fund 140,428 1997 B Interest Account - 1997 A1 & A2 Interest Account 86 1997 A1 & A2 Principal Account 44 1997 A1 & A2 Debt Service Reserve 36,234,840 1997 Capital Project MII9-97 Construction Fund 349,712 1997 Capital Project MII2-98 Construction Fund 515,716 1997 Parking Garage Construction Fund 1,044,331 2001 Subordinate Lien Indenture Series A & B 2001 Sub Lien Bond 1 2001 Fixed Rate Indenture 2001 A & B Debt Service Fund 25 2001 A & B Debt Service Reserve Fund 8,731,892 2001 A & B Rebate Fund 845,364 2001 A & B Principal Fund 2 2002 Fixed Rate Indenture 2002 A & B Clearing Fund 184 2002 A & B Debt Service Fund 7 2002 A & B Debt Service Reserve Fund 9,274,517 2002 A & B ACAP Clearing Fund 145 2 2007 Indenture 2007 A & B Debt Service Fund 115 2007 A & B Clearing Fund 41,759 2010 Indenture 2010 A Debt Service Interest Fund 25,925 2010 A Debt Service Reserve Fund 3,172,392 2010 A Debt Clearing Fund 29,830 2010 A Debt Revenue Fund 409 Revenue Bond Funds Total 63,764,348 Capital Funds Airport Development Fund 5,041,099 Airport System Capital Fund - Discretionary 1 9,919,110 Airport System Capital Fund - Discretionary 2 11,530,515 Airport System Capital Fund - Restricted 1 8,950,484 Airport System Capital Fund - Restricted 2 12,821,346 Passenger Facility Charge Fund 338,096 Artwork - Grant 26,923 Ground Transportation Fund 972,467 Capital Development Funds 917,865 Equipment and Capital Outlay Fund 3,372,580 Prefunding Reserve Fund 32,502,826 Clinton Tax Increment Financing Reserve Fund 459,395 Clinton Tax Increment Financing Revenue Fund 563,649 Clinton Tax Increment Financing Surplus Fund 15,130 Northfield Tax Increment Financing Resere Fund 81,760 Hangar Loan Fund 389,561 Capital Funds Total 87,902,806 Total Revenue Bonds and Capital Funds $ 151,667,154
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
As of December 31, 2010, ACAA had the following cash and cash equivalents and investments in mutual funds: Moody's % of Total Standard Investor Investment Amount Investment Maturity & Poor's Service Wells Fargo: Federal Home Loan CUSIP 313384AM1 $ 4,177,958 6.8% 1/12/2010 AAA PNC Investmensts: Blackrock Federal Trust Fund 5,012,595 8.2% <90days AAA Aaa Mellon Investments: Goldman Sachs Financial SQ Gov't 52,101,595 85.0% <90days AAA Aaa
Total $ 61,292,148 100.0%
Interest rate risk – ACAA 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 – Pennsylvania law provides for investment of governmental funds into certain authorized investment types, including U.S. Treasury bills, other short-term U.S. and Pennsylvania government obligations, and insured or collateralized time deposits and certificates of deposit. Statutes do not prescribe regulations related to demand deposits; however, they do allow pooling of governmental funds for investment. ACAA has no investment policy that would further limit its investment choices.
Concentration of Credit Risk – ACAA places no limit on the amount ACAA may invest in any one issuer.
Investments – Custodial Credit Risk - Custodial credit risk is the risk that in the event of a bank failure, ACAA’s investments may not be returned to it. ACAA does not have a formal investment policy for custodial credit risk. As of December 31, 2010, $61,292,148 of ACAA’s investments were exposed to custodial credit risk.
In 2002, ACAA entered into Forward Delivery Agreements (FDA), with financial institutions for the continuous investment of the Series 1997 A-1 and 1997 A-2 principal and interest investments through December 2015: Series 1997 B principal and interest investments through November 2018; and Series A and B of 2002 principal and interest investments through January 2022. The future investment earnings under these contracts, discounted at the financial institution’s cost of funds on the contract date, were received by ACAA up-front in lump-sum payments totaling $6,978,000. The amount of the upfront payments is
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
recorded as deferred interest income and is being amortized into income over the term of the agreements. The unearned amount at December 31, 2010 was $3,028,726.
As shown on Financial Statement Cash and short-term investments $ 12,949,002 Restricted cash and short-term investments 151,667,154 $ 164,616,156 As shown in the notes Cash $ 103,324,008 Mutual Funds 61,292,148 $ 164,616,156
Port Authority of Allegheny County
PAT's unrestricted cash and investments are available for general operating purposes, and restricted cash and investments are available for acquisition of assets under capital projects and scheduled payments of the Special Revenue Transportation Bonds, Grant Anticipation Notes outstanding and a capital lease obligations (see Note 8).
Cash equivalents, which consist primarily of money market accounts and repurchase agreements, are stated at fair value, which approximates market.
The investment and deposit of PAT funds is governed by the by-laws of PAT and the Second Class County Port Authority Act. In accordance with these regulations, PAT has established investment procedures that require that monies be deposited with FDIC-insured banks in demand deposit accounts or certificates of deposit (which are required to be 100% collateralized by separately identified U. S. obligations, if not covered by FDIC insurance). Investments are limited to U. S. obligations and repurchase agreements. Repurchase agreements must be purchased from banks located within the Commonwealth of Pennsylvania and the underlying collateral securities must have a market value of at least 100% of the cost of the related repurchase agreement.
PAT's investment procedures do not require the delivery of the underlying securities to PAT; however, it is the obligation of the bank to deposit the pledged obligations with either the Federal Reserve Bank, the trust department of the financial institution issuing the repurchase agreement or another bank, trust company or depository satisfactory to PAT. There were no deposits or investment transactions during the year ended June 30, 2010 that were in violation of either State statutes or the policies of PAT.
PAT does not have a formal investment policy for custodial credit risk, interest rate risk, credit risk, or concentration of credit risk.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The following is a description of PAT's deposit and investment risks:
Custodial Credit Risk – Custodial credit risk is that in the event of a bank failure, PAT’s deposits may not be returned to it. As of June 30, 2010, $34,782,603 of PAT’s bank balance of $35,532,603 was exposed to custodial credit risk, which is collateralized in accordance with Act 72 of the Pennsylvania State Legislature which requires the institution to pool collateral for all governmental deposits and have the collateral held by an approved custodian in the institution’s name. These deposits have a carrying amount of $25,993,868 as of June 30, 2010.
In addition to the deposits noted above, included in cash and cash equivalents on the statements of net assets are the following short-term investments: mutual funds of $13,451 and $36,759,675 invested in the external investment Pool (INVEST) at June 30, 2010.
At June 30, 2010, PAT held the following investment balances: Maturity in years Fair Less 1-5 Value than 1 year years U.S. Treasuries Interest Only Strips $ 43,750,799 26,806,161 16,944,638 FHLB 10,021,570 10,021,570 - Guaranteed Investment Contracts 50,766,912 50,766,912 - Mutual Funds 9,874,853 9,874,853 -
Total $ 114,414,134 97,469,496 16,944,638
The fair value of PATs investments is the same as their carrying amount. The fair value of PATs investments in the external investment pool (INVEST) is the same as the value of the pool shares.
Interest Rate Risk – Interest rate risk is the risk that changes in interest rates will adversely affect the fair market value of PAT’s investments.
Credit Risk – Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. As of June 30, 2010, PAT’s investment in the state investment pool (INVEST), mutual funds, and FHLB were rated AAA by Standard & Poor’s. Additionally, at June 30, 2010, PAT had a guaranteed investment contract that was unrated and relates to lease transactions.
As further described in Note 14, PAT has a derivative instrument that is accounted for as an investment. Credit and interest rate risks related to this investment are described in Note 14.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Community College of Allegheny County
Investments and time deposits (consisting primarily of interest bearing overnight bank deposits, bank repurchase agreements, treasury bills and bank certificates of deposit with a maturity date of one year or less) are stated at cost, which approximates fair value. Time deposits are classified as a current or noncurrent asset based upon the expected timing and/ or anticipated use of the funds. By policy of the Board, CCAC is permitted to invest funds consistent with sound business practices in the following types of investments: U.S. Treasury Bills, obligations of the United Sates of America and related agencies, and the Commonwealth of Pennsylvania, A-1, P-1—rated commercial paper, or equivalent instruments, fully collateralized, per Act 72, time deposits, certificates of deposit, and repurchase agreements of financial institutions which have a short-term rating by Moody’s (or equivalent) of ―p-1‖ or better and whose long-term senior debt rating is ―A2‖ or better, and which have a combined capital surplus and undivided profits of not less than $1,000,000, money market mutual fund/investment companies that are AA-rated by Moody’s (or equivalent), managed to a $1.00 NAV, and are in compliance with Section 2A-7 of SEC rules, and which restrict their investment to instruments described above.
Custodial Credit Risk -- Custodial credit risk is the risk that in the event of a bank failure, CCAC’s deposits may not be returned to it. CCAC does not have a formal deposit policy for custodial credit risk. As of June 30, 2010, $5,776,738 of the bank balance was covered by Federal Depository Insurance Corporation and $50,310,569 of CCAC’s bank balance of $56,087,307 was exposed to custodial credit risk, which is collateralized in accordance with Act 72 of the Pennsylvania State Legislature which requires the institution to pool collateral held by an approved custodian in the institution’s name.
The foundation is a private non-profit organization that reports under FASB standards, including FASB No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made for these differences in CCAC’s financial reporting entity.
Interest Rate Risk -- Interest rate risk is the risk that changes in interest rates will adversely affect the fair market value of CCAC’s investments. By policy of the Board, CCAC is not permitted to invest more than $5 million of cash reserves in instruments with maturities of more than one year and in no event may any investment have a maturity of more than five years. All CCAC’s investments have a maturity of less than one year.
Credit Risk -- Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. CCAC’s Board policy minimizes credit risk by permitting only certain types of investments and establishing minimum quality levels.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Redevelopment Authority of Allegheny County
RAAC's cash and cash equivalents consist of demand deposits as well as short-term certificates of deposit with a maturity date within three months of the date acquired. Certain cash and cash equivalents are classified as restricted assets because their use is limited by applicable project contracts.
The following is a description of RAAC’s deposit and investment risks:
Deposits -- Custodial Credit Risk - Custodial credit risk is the risk that in the event of a bank failure, RAAC’s deposits may not be returned to it. RAAC does not have a formal deposit policy for custodial credit risk. As of December 31, 2010, $22,510,655 of RAAC’s bank balance of $23,510,655 was exposed to custodial credit risk, which is collateralized in accordance with Act 72 of the Pennsylvania State Legislature, which requires the institution to pool collateral for all governmental deposits and have the collateral held by an approved custodian in the institutions name. As of December 31, 2010, the carrying amounts of RAAC’s deposits were $22,754,952.
Investments -- In addition to the deposits noted above, RAAC holds short-term investments of mutual funds of $11,799,949.
Interest Rate Risk -- RAAC 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. All of RAAC’s investments have a maturity of less than one year.
Credit Risk -- RAAC does not have a formal investment policy that would limit its investment choices based on credit ratings by nationally recognized statistical rating organizations. As of December 31, 2010, RAAC had investments of $11,799,949 in various mutual funds that were rated AAA by Standard’s & Poor’s.
Allegheny County Industrial Development Authority
The following is a description of ACIDA’s deposit and investment risks:
Deposits -- Custodial Credit Risk – Custodial credit risk is the risk that in the event of a bank failure, ACIDA’s deposits may not be returned to it. ACIDA does not have a formal deposit policy for custodial credit risk. As of December 31, 2010, approximately $5,500,000 of ACIDA’s bank balance of $6,007,785 was exposed to custodial credit risk, which is collateralized in accordance with Act 72 of the Pennsylvania State Legislature which requires the institution to pool collateral for all governmental deposits and have the collateral held by an approved custodian in the institutions name. As of December 31, 2010, the carrying amounts of ACIDA’s deposits were $7,209,278.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Investments – ACIDA is authorized to make investments of the following types: (1) United States Treasury bills, (2) short-term obligation of the United States government or its agencies or instrumentalities, (3) deposits in saving accounts or time deposits or share accounts of institutions which are insured, (4) obligations of the Commonwealth of Pennsylvania or any of its agencies or instrumentalities of any political subdivision thereof, and (5) shares of an investment company registered under the Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, provided that the investments of that company meet the criteria in (1) through (4) above.
As of December 31, 2010, ACIDA investments were held in the Pennsylvania Local Government Investment Trust (PLGIT). All investments in the external investment pool, which are not SEC registered, are subject to the oversight by the Commonwealth of Pennsylvania. ACIDA has approximately $7,200,000 of cash and cash equivalents, of which approximately $1,200,000 was held in PLGIT at December 31, 2010. The fair value of these cash equivalents was $1,016,026 at December 31, 2010, which is the same as the value of the pool shares.
Interest Rate Risk – ACIDA 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; however, the investments in PLGIT described above all have maturities of less than one year.
Credit Risk – ACIDA does not have a formal investment policy that would limit its investment choices based on credit ratings by nationally recognized statistical rating organizations. As of December 31, 2010 ACIDA’s investments in PLGIT were rated AAA by Standard & Poor’s.
The PLGIT investments are recorded on the Statement of Net Assets as cash and cash equivalents or restricted cash and cash equivalents as these are investment with original maturities less than three months.
Allegheny HealthChoices, Inc.
In accordance with the AHCI contract, separate cash accounts are maintained for DPW- approved reinvestment plan funding and claims funding. AHCI holds the funds on behalf of Allegheny County, therefore; a corresponding liability is reflected on the Statement of Net Assets.
The following is a description of AHCI’s deposit and investment risks:
Custodial Credit Risk – Custodial credit risk is that in the event of a bank failure, AHCI deposits may not be returned to it. AHCI does not have a formal deposit policy for custodial credit risk. As of December 31, 2010, $23,855,600 of AHCI’s bank balance of $24,105,600 was exposed to custodial credit risk, which is collateralized in accordance with Act 72. As of December 31, 2010, the carrying amount of AHCI’s deposits was $24,087,964. Investments are in fixed income and money market funds for the 4579(B) deferred compensation plan.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
These investments are valued at their fair market of $48,448.
Allegheny County Parks Foundation
Custodial Credit Risk – Custodial credit risk is that in the event of a bank failure, Parks Foundation deposits may not be returned to it. The Parks Foundation does not have a formal investment policy. Cash and cash equivalents are held in a bank which carries FDIC insurance. At December 31, 2010, book balance and bank balance of all deposits totaled $1,449,662 and $1,453,167, respectively. $250,000 of the $1,4753,167 bank balance was FDIC insured.
Soldiers’ and Sailors’ Memorial Hall and Museum Trust, Inc.
Cash and cash equivalents are held in a bank which carries FDIC insurance. At December 31, 2010, book balance and bank balance of all deposits totaled $469,440 and $475,025, respectively. $335,041 of the $475,025 bank balance was FDIC insured.
Allegheny County Conservation District
Custodial Credit Risk – Custodial credit risk is that in the event of a bank failure, Conservation District deposits may not be returned to it. Cash and cash equivalents are held in a bank which carries FDIC insurance. At December 31, 2010, book balance and bank balance of all deposits totaled $403,075 and $403,075, respectively. $250,000 of the bank balance was FDIC insured.
In addition, the District has $271,145 at December 31, 2010 in a short term external investment pool (INVEST). The District’s investments in INVEST were rated AAA by Standard & Poor’s.
(4) Property and Sales Tax Revenue and Receivables
Receivables at December 31, 2010 consist of the following: Due from Governmental Activities Property Taxes Receivable Sales Tax Other Delinquent Lien Receivable Governments
General Fund $ 6,141,594 11,789,735 7,398,566 54,125,565 County Grants Fund - - - 16,635,404 Human Service Grant Fund - - - 36,548,315 Capital Projects Fund - - - 17,286,338 Other Governmental Funds 1,883,393 3,220,482 - - Total Governmental Receivables 8,024,987 15,010,217 7,398,566 124,595,622
Less: allowances (Note 1D) 809,145 8,608,584 - 6,473,419
Net Governmental Receivables $ 7,215,842 6,401,633 7,398,566 118,122,203
The reconciliations (Exhibits 3A and 4A) of Governmental Funds to the government-wide
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
statements contain information related to revenue recognition.
Property and Sales Taxes
The County's real property tax is levied by ordinance of the County Council on real property located in the County. In 2001, the County changed its predetermined ratio, which is the ratio of assessed value to market value uniformly applied in determining assessed value in any year. Prior to 2001, the assessed value of real property equaled 25% of market value. Beginning in 2001, the assessed value equaled 100% of market value. The last revaluation of real property was completed for the property list of January 1, 2003. Using this revaluation, the County established a Base Year 2002, to calculate certified assessed value each year. Any changes by the Appeals Board shall be expressed in terms of the 2002 Base Year Values. The total estimated assessed and market value of taxable real estate at January 1, 2010 was $58,710,386,788.
The tax rate to finance general governmental services, other than debt service requirements, for the year ended December 31, 2010 was $.35806 per $100. The tax rate to finance debt service requirements for the year ended December 31, 2010 was $.11094 per $100.
Real property taxes levied are recorded as receivables, net of amounts estimated to be uncollectible. At December 31, 2010, the allowances for uncollectible delinquent and liened property taxes aggregated $809,145 and $8,608,584, respectively.
Real property taxes for 2010 were levied on January 1, 2010, with a final due date of April 30, 2010. A 2% discount was granted on remittances prior to March 31, 2010. In 2010, tax liens were filed for taxes due April 30, 2009.
Effective July 1, 1994, under authority granted by the Commonwealth of Pennsylvania, the Board of Commissioners adopted an ordinance imposing a 1% sales, use and hotel occupancy excise tax within the County. One-half of the annual revenue generated by the sales tax was dedicated to funding regional assets throughout the County. One-quarter of the annual revenue generated was used for municipal tax reform, and the remaining one- quarter was used for County tax reform. Accordingly, the County eliminated the personal property tax in 1995 and reduced real property taxes. The County’s sales tax revenue for 2010 was $40,904,309.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Component Units – Receivables
All Component Units
Receivables at the component unit’s respective year ends consisted of following:
Due from Due from Component Other Primary Trade Other Interest & Loans Unit Governments Government Receivable Receivable Dividends Receivable
ACAA $ 6,931,831 - 5,373,389 1,695,787 3,993 - PAT 38,456,235 - - 11,668,117 - - CCAC 987,724 750,000 8,021,871 1,008,520 - - RAAC 10,063,507 242,324 - 176,834 - 29,542,609 ACIDA 1,392,677 - 105,874 - - 3,060,182 AHCI - 36,280 - 54,336 - - Parks Foundation - 443,200 - 646 - - SSMH - - - 12,695 - - 57,831,974 1,471,804 13,501,134 14,616,935 3,993 32,602,791
Less: allowances - - 5,473,113 5,000 - 3,327,275 Total $ 57,831,974 1,471,804 8,028,021 14,611,935 3,993 29,275,516
Redevelopment Authority of Allegheny County
RAAC makes loans through the Economic Development Fund (EDF) which is a revolving loan fund and the Home Improvement Loan Program (HILP) of Allegheny County. The purpose of the EDF is to positively impact the regional economy by promoting economic development and improved employment opportunities in the County. The HILP issues loans to finance the rehabilitation of residential housing for persons and families of low to middle income throughout the County.
The following is a summary loans receivable outstanding at December 31, 2010:
Allowance Net Receivable for Loan Receivable Balance Losses Balance
Economic Development Fund (EDF) $ 19,773,102 2,974,543 16,798,559 Home Improvement Loan Program (HILP) 3,472,975 105,344 3,367,631 Section 108 Loan Fund * 6,000,000 - 6,000,000 Other loan programs 296,532 - 296,532 $ 29,542,609 3,079,887 26,462,722
* See page 170 in Debt (note 8) for more information.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Allegheny County Industrial Development Authority
The due from other governments of $1,392,677 is due from RAAC. It is the amount IDA expects to receive as repayment from a revolving loan agreement with RAAC to assist small businesses adversely affected by Hurricane Ivan in 2004 and the communities surrounding Pittsburgh.
ACIDA administers certain programs on behalf of other entities. Under this arrangement, ACIDA collects certain loans from third parties. These loans receivable are recorded in the various Proprietary Funds.
The following is a summary of commercial loans outstanding, not including deferred loans that are recorded at a net zero value, at December 31, 2010:
Allowance Net Receivable for Loan Receivable Program Balance Losses Balance
Small Business Distressed Communities $ 521,572 47,388 474,184 Development Action Assistance Program 2,054,828 200,000 1,854,828 Allegheny County EDA Program 481,119 - 481,119 MEC Loans Program 2,663 - 2,663
$ 3,060,182 247,388 2,812,794
The above loans bear interest at rates ranging from 2.375% to 9% per annum. These loans range in amounts from $1,000 to $500,000 and mature through 2021.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
(5) Capital Assets
The following is a summary of the changes in capital assets for the year ended December 31, 2010:
Balance Balance January 1, 2010 Increases Decreases December 31, 2010 Capital Assets, not being depreciated:
Land $ 24,373,153 - - 24,373,153 Construction in progress 48,735,755 33,174,266 8,659,435 73,250,586 Total capital assets, not being depreciated 73,108,908 33,174,266 8,659,435 97,623,739
Capital Assets, being depreciated:
Land Improvements 8,192,901 - - 8,192,901 Buildings 362,736,676 7,652,836 - 370,389,512 Buildings - Capital Lease 7,678,839 - - 7,678,839 Buildings - Leasehold Improvements 20,584,760 - - 20,584,760 Infrastructure 390,825,195 1,006,599 - 391,831,794 Furniture and other equipment 80,692,962 33,155,509 1,097,201 112,751,270
Total capital assets, being depreciated 870,711,333 41,814,944 1,097,201 911,429,076
Less accumulated depreciation for:
Land Improvements 5,609,513 288,439 - 5,897,952 Buildings 154,192,355 7,244,583 - 161,436,938 Infrastructure 132,502,120 7,992,219 - 140,494,339 Furniture and other equipment 34,389,801 11,204,505 1,097,201 44,497,105
Total accumulated depreciation 326,693,789 26,729,746 1,097,201 352,326,334
Net depreciated assets 544,017,544 15,085,198 - 559,102,742
Net capital assets $ 617,126,452 48,259,464 8,659,435 656,726,481
Governmental Activities No events or changes in circumstances affected a capital asset that may indicate impairment.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Depreciation was charged to governmental functions as follows:
General government $ 5,746,434 Public safety 6,032,122 Public works 10,621,023 Health and welfare 3,033,128 Culture and recreation 1,275,275 Economic development 21,764 Total $ 26,729,746
The County has active construction projects as of December 31, 2010. The projects include park lake cleanup, road reconstruction and relocation, rehabilitation of bridges, purchase of equipment and miscellaneous bridge design. At year end the County’s encumbrances with contractors for major projects are as follows:
Project Encumbrance
North Park Lake Sediment Removal $ 1,662,866 Miscellaneous Bridge Construction & Repair 1,264,590 Annual Road & Facilities Improvement 1,016,605 Campbell’s Run Road 891,231 Duquesne/McKeesport Flyover 499,604 Miscellaneous Bridge Design 476,835 Heavy Equipment/Fleet Replacement 362,333
The encumbrances for building and equipment projects are being financed through capital fund general obligation bonds. Bridge and road projects encumbrances are financed initially through the general obligation bonds, with the subsequent costs to be reimbursed by federal and State funding.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Component Units - Capital Assets
Allegheny County Airport Authority
Capital activity for the year ended December 31, 2010 is as follows: Balance Balance January 1, 2010 Increases Decreases Transfers December 31, 2010 Capital assets, not being depreciated: Land and site development $ 137,124,992 - - 1,219,076 138,344,068 Total capital assets, not being depreciated 137,124,992 - - 1,219,076 138,344,068 Capital assets, being depreciated: Terminal buildings 694,428,620 - - 1,000,945 695,429,565 Runways & taxiways 467,870,425 - 2,862,829 20,636,610 485,644,206 Parking Garage / Lots / Etc 83,071,348 - - 523,461 83,594,809 Hangars 42,525,578 - - 87,673 42,613,251 Other Structures 155,258,250 - - 23,412 155,281,662 Roadways 61,858,486 - - 12,192 61,870,678 Mobil and Other Equipment 50,985,741 - 472,706 581,930 51,094,965 Computer/Security Equip & Systems 50,149,668 - - 559,505 50,709,173 Utilities 46,322,826 - - - 46,322,826 Other Assets 20,829,996 - - 48,768 20,878,764 Construction-in-progress 37,887,453 31,318,907 - (24,693,572) 44,512,788 Total capital assets, being depreciated 1,711,188,391 31,318,907 3,335,535 (1,219,076) 1,737,952,687 Less accumulated depreciation for: Terminal buildings 481,470,092 27,398,666 - - 508,868,758 Runways & taxiways 278,669,204 19,305,391 2,642,566 - 295,332,029 Parking Garage / Lots / Etc 42,027,145 2,628,528 - - 44,655,673 Hangars 34,021,616 909,433 - - 34,931,049 Other Structures 76,606,950 5,746,108 - - 82,353,058 Roadways 50,571,529 2,818,814 - - 53,390,343 Mobil and Other Equipment 39,429,089 2,556,461 386,798 - 41,598,752 Computer/Security Equip & Systems 12,843,045 3,290,942 - - 16,133,987 Utilities 28,333,582 1,730,479 - - 30,064,061 Other Assets 7,674,123 903,411 - - 8,577,534 Construction-in-progress 32,536,087 1,869,334 - - 34,405,421 Total accumulated depreciation 1,084,182,462 69,157,567 3,029,364 - 1,150,310,665 Net depreciated assets 627,005,929 (37,838,660) 306,171 - 587,642,022 Net capital assets $ 764,130,921 (37,838,660) 306,171 - 725,986,090
ACAA maintains various collections of inexhaustible assets to which no value can be determined. Such collections could include contributed works of art, historical treasures, literature, etc. that are held for exhibition and public service. These collections are neither disposed of for financial gain nor encumbered in any means. Accordingly, such collections are not capitalized or recognized for financial statement purposes.
As of December 31, 2010, ACAA had equipment purchase and construction commitments of approximately $23 million.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Port Authority of Allegheny County
The following is a summary of changes in capital assets for the year ended June 30, 2010:
Balance Balance July 1, 2009 Increases Decreases June 30, 2010
Capital assets, not being depreciated:
Land $ 105,699,098 - 7,316 105,691,782 Construction in progress 282,512,639 116,734,651 2,885,833 396,361,457
Total capital assets, not being depreciated 388,211,737 116,734,651 2,893,149 502,053,239
Capital assets, being depreciated:
Buildings 218,365,983 2,117,854 - 220,483,837 Transportation equipment 659,067,048 16,020,962 11,222,734 663,865,276 Track, roadway, and subway stations 1,293,666,323 1,936,867 104,792 1,295,498,398 Other property, equipment, and assets 94,769,619 910,282 10,331,105 85,348,796
Total capital assets, being depreciated 2,265,868,973 20,985,965 21,658,631 2,265,196,307
Less accumulated depreciation for:
Buildings 114,560,762 7,257,861 - 121,818,623 Transportation equipment 354,373,908 53,045,953 11,212,318 396,207,543 Track, roadway, and subway stations 622,476,370 44,985,127 116,671 667,344,826 Other property, equipment, and assets 71,493,564 4,298,914 10,320,564 65,471,914
Total accumulated depreciation 1,162,904,604 109,587,855 21,649,553 1,250,842,906
Net depreciated assets 1,102,964,369 (88,601,890) 9,078 1,014,353,401
Net capital assets $ 1,491,176,106 28,132,761 2,902,227 1,516,406,640
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Community College of Allegheny County
The following is a summary of changes in capital assets for the year ended June 30, 2010: Balance Balance July 1, 2009 Increases Decreases June 30, 2010 Capital assets, not being depreciated:
CIP $ 4,015,022 2,229,309 4,028,790 2,215,541 Land 4,016,466 - - 4,016,466 8,031,488 2,229,309 4,028,790 6,232,007 Capital assets, being depreciated:
Buildings 147,743,727 3,868,387 - 151,612,114 Land improvements 6,063,488 304,146 - 6,367,634 Infrastructures 2,933,384 55,055 - 2,988,439 Leasehold improvements 685,732 - - 685,732 Equipment & A.V. equipment 7,415,340 320,316 235,649 7,500,007 Grant related equipment 2,855,809 236,288 17,299 3,074,798 Furniture & fixtures 1,797,713 12,234 2,000 1,807,947
Computer equipment 11,766,144 366,790 1,032,164 11,100,770 Computer software 3,668,580 32,035 75,200 3,625,415 Library books 3,802,038 197,502 - 3,999,540 Microforms 121,767 121,767 121,767 121,767 Operating system software 934,318 934,319 934,319 934,318 Total capital assets, being depreciated 189,788,040 6,448,839 2,418,398 193,818,481
Less accumulated depreciation for:
Buildings 69,476,306 2,993,558 - 72,469,864 Land improvements 4,020,406 256,872 - 4,277,278 Infrastructures 714,725 101,748 - 816,473 Leasehold improvements 482,282 27,429 - 509,711 Equipment & A.V. equipment 5,763,139 427,790 209,471 5,981,458 Grant related equipment 2,145,754 197,627 17,299 2,326,082 Furniture & fixtures 1,151,298 109,028 2,000 1,258,326 Computer equipment 10,521,111 803,041 1,010,397 10,313,755 Computer software 3,552,093 35,530 12,533 3,575,090 Library books 3,151,348 104,717 - 3,256,065 Total accumulated depreciated 100,978,462 5,057,340 1,251,700 104,784,102 Net depreciated assets 88,809,578 1,391,499 1,166,698 89,034,379 Net capital assets 96,841,066 95,266,386
Foundation assets, being depreciated: Property and equipment 19,295 6,236 - 25,531 Less: accumulated depreciation 13,240 1,497 - 14,737
Net depreciated assets 6,055 4,739 - 10,794
Net capital assets with foundation assets $ 96,847,121 95,277,180
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Redevelopment Authority of Allegheny County
The following is a summary of changes in capital assets for the year ended December 31, 2010: Balance Balance January 1, 2010 Increases Decreases December 31, 2010
Capital Assets, not being depreciated:
Land $ 1,528,300 - - 1,528,300
Capital Assets, being depreciated:
Buildings and tenant improvements 5,489,223 - - 5,489,223
Less: accumulated depreciation 787,376 406,596 - 1,193,972
Net depreciated assets 4,701,847 (406,596) - 4,295,251
Net capital assets $ 6,230,147 (406,596) - 5,823,551
Allegheny County Industrial Development Authority
IDA closed on an agreement to sell an office building on December 31, 2009. During 2010, the actual proceeds from the sale of $9,554,945 were paid to Allegheny County.
Allegheny HealthChoices, Inc.
The following is a summary of changes in capital assets for the year ended December 31, 2010: Balance Balance January 1, 2010 Increases Decreases December 31, 2010 Capital Assets, being depreciated:
Furniture & Equipment $ 775,763 74,716 - 850,479 Leashold Improvements - 21,927 - 21,927 775,763 96,643 - 872,406 Less: accumulated depreciation 575,395 130,045 - 705,440
Net depreciated assets $ 200,368 (33,402) - 166,966 Under provisions of the Contract with the County, furniture and equipment acquired with MH/ MR funds remain the property of the funding agency. If the contractual relationship is terminated, the funding agency may, at its discretion, take possession of such assets. The
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
total cost of furniture and equipment acquired with MH/MR funds, including capital assets donated by the County and retained by Allegheny HealthChoices at December 31, 2010 is $92,531.
Allegheny County Parks Foundation
The following is a summary of changes in capital assets for the year ended December 31, 2010: Balance Balance January 1, 2010 Increases Decreases December 31, 2010
Capital Assets, being depreciated:
Furniture & Equipment $ - 19,418 - 19,418 Less accumulated depreciation for:
Furniture & Equipment - 2,235 - 2,235
Net depreciated assets $ - 17,183 - 17,183
Allegheny County Conservation District
The following is a summary of changes in capital assets for the year ended December 31, 2010:
Balance Balance January 1, 2010 Increases Decreases December 31, 2010 Capital Assets, being depreciated: Vehicle $ 29,291 - - 29,291 Furniture & Equipment 21,781 - - 21,781 Leasehold improvements 44,434 - 44,434 Total capital assets, being depreciated 95,506 - - 95,506 Less accumulated depreciation for: Vehicle 16,002 3,550 - 19,552 Furniture & Equipment 21,781 - - 21,781 Leasehold improvements 32,666 1,962 - 34,628 Total accumulated depreciation 70,449 5,512 - 75,961
Net depreciated assets $ 25,057 (5,512) - 19,545
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Soldiers’ and Sailors’ Memorial Hall and Museum Trust, Inc.
The following is a summary of changes in capital assets for the year ended December 31, 2010:
Balance Balance January 1, 2010 Increases Decreases December 31, 2010
Capital Assets, being depreciated:
Equipment $ 275,475 7,625 - 283,100 Leasehold improvements 5,609,065 - - 5,609,065
Total capital assets, being depreciated 5,884,540 7,625 - 5,892,165 Less accumulated depreciation for:
Equipment 233,401 10,199 - 243,600 Leasehold improvements 1,487,208 244,638 - 1,731,846
Total accumulated depreciation 1,720,609 254,837 - 1,975,446
Net depreciated assets $ 4,163,931 (247,212) - 3,916,719
The building (Hall) is owned by Allegheny County and leased to Memorial Hall for $1 per year until December 31, 2025, with options to renew. No financial statement value has been assigned to this donated space, as its fair value is not susceptible to reasonable estimation. Memorial Hall is required to maintain the property in good working order. In 2000, Memorial Hall began undergoing significant projects to renovate its facility. These projects are reflected in the financial statements as leasehold improvements.
(6) Risk Management
The County is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions and natural disasters, as well as from employee occupational and non-occupational illness or injury. The Risk Management Fund is used to account for the risks associated with the self-insured dental program and settlements. The General Fund accounts for all other risks.
The County has changed from being self-insured for healthcare to obtaining third-party insurance for the majority of its employees. The County has retained its self-insured dental program. The Risk Management Fund provides coverage for up to a maximum of $1,000 per year for dental coverage, and between $100,000 and $250,000 for individual medical claims, depending on the carrier.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Payments are made to the Risk Management Fund from the various County funds based on appropriations required to pay prior and current year claims.
The dental, workers’ compensation settlements, workers’ compensation claims and general, automobile and public official liability balance at December 31, 2010 of $6,558,474 is based on the requirements of GASB Statement No. 10, as amended by GASB Statement No. 30, which requires that a liability for claims be reported if information prior to the issuance of financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated.
The claim liability is provided to the County by the various healthcare third-party administrators and the workers’ compensation third-party administrator and other third- party advisors. Any adjustments made to previously recorded estimated liabilities are reflected in current operating results.
The County is self-insured for workers' compensation and claims are paid from the General Fund. As required by the Commonwealth of Pennsylvania, commercial insurance is purchased with a retention of $1,000,000 for each accident and each employee. The County contracts with a program administrator to operate the program.
Changes in the various claims liability for the years ended December 31, 2010 and 2009 were:
Current Year Claims Liability Liability Balance and Changes in Claim Balance as of as of January 1 Estimates Payments December 31 Risk Management fund (Dental and Settlements) 2010 $ 113,945 1,764,667 1,804,236 74,376 2009 $ 224,066 1,677,624 1,787,745 113,945 Government-wide Financial Statement (General, Automobile, and Public Officials Liability) 2010 195,002 235,858 248,281 182,579 2009 274,231 170,625 249,854 195,002 Government-wide Financial Statement (Worker's Compensation Claims) 2010 7,640,289 3,436,205 4,774,975 6,301,519 2009 7,412,652 5,017,885 4,790,248 7,640,289 Total all Funds and government-wide financial statement (Dental and Settlements, Workers' Compensation, General, Automobile and Public Officials Liabilities) 2010 $ 7,949,236 5,436,730 6,827,492 6,558,474 2009 $ 7,910,949 6,866,134 6,827,847 7,949,236
The non-current portion of unpaid workers’ compensation claims amounted to $1,512,981 as of December 31, 2010, and is reflected in the government-wide statements. Two months of the current portion is recorded as an accrued liability in the General Fund and the
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
government-wide financial statements records one year as current claims. Liabilities are reported when it is probable that losses have occurred and the amounts of the losses can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported to date. Liabilities are determined using a combination of actual claims experience and actuarially determined amounts and include incremental claim adjustment expense and estimated recoveries.
There have been no significant changes in insurance coverage since the prior year. Settled claims from risks have not exceeded commercial insurance coverage for the past three years.
Component Units – Risk Management
Allegheny County Airport Authority
ACAA is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions and natural disasters, in addition to workers’ compensation and healthcare programs. ACAA carries commercial insurance to cover these risks of loss. The commercial insurance coverage is on a guaranteed cost basis covering any expense of the ACAA. Claims on this coverage have not exceeded commercial premiums.
Previously, ACAA was covered under the County’s self-insurance plan for workers' compensation benefits. As claims were incurred, provisions were recorded for estimated benefits to be paid. Subsequent to its’ reorganization in 1999, ACAA entered into a guaranteed-cost, premium-based policy for future workers’ compensation claims for the majority of its workers.
The liability for reported claims and claims incurred, but not reported, an estimate of which is based on historical experience and management projections, is reflected as a long-term liability due to the County in the financial statements and is no longer part of the County program. As such, no new claims can occur under this plan.
In accordance with the transfer agreement between ACAA and the County, ACAA reimbursed the County for all payments made to all former Department of Aviation employees remaining in the County’s plan. Changes in the previous self-insured claims liability for the years ended December 31, 2010 and 2009 were:
Liability Current Year Balance as of Claims and Changes In Claim Liability Balance as January 1 Estimates Payments of December 31
2010 $ 220,830 200 37,109 183,921 2009 140,072 111,984 31,226 220,830
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Port Authority of Allegheny County
PAT has a self-insurance program for public liability, property damage, and workers’ compensation claims. Estimated costs for these self-insurance programs are accrued in the year the expenses are incurred, based upon the estimates of the claim liabilities made by management and legal counsel. Estimates of claim liabilities are accrued based on projected settlement for claims and include estimates for claims incurred but not reported. Any adjustments made to previously recorded reserves are reflected in current operating results.
The Supreme Court of Pennsylvania has held PAT to be a Commonwealth Agency as defined in the Political Subdivision Tort Claims Act. As such, PAT is immune from certain claims and its liability is limited to $1,000,000 per occurrence and $250,000 per plaintiff claim arising out of an occurrence. As the result of this holding, it has not been necessary for PAT to purchase excess public liability insurance and it is self-insured for public liability claims.
PAT is self-insured for its compensation and occupational disease liability in accordance with the provisions of Article III, Section 305 of the Pennsylvania Workers’ Compensation Act. On a yearly basis, PAT carries excess workers' compensation insurance in the amount of $5,000,000 over its self-insurance retention of $1,000,000 per occurrence to further ensure that it can meet its obligation under the Workers' Compensation Act. PAT maintains an estimate of its potential liability related to claims that have been filed as of June 30, 2010. The reserve balance is approximately $9.8 million at June 30, 2010.
Changes in the claims liability for the years ended June 30, 2010 and 2009 were:
Liability Current Year Balance as of Claims and Changes In Claim Liability Balance July 1 Estimates Payments as of June 30 2010 $ 15,683,913 608,338 2,112,806 14,179,445 2009 16,111,419 2,397,007 2,824,513 15,683,913
Community College of Allegheny County
The nature of the educational industry is such that, from time to time, CCAC is exposed to various risks of loss related to torts; alleged negligence; acts of discrimination; breach of contract; disagreements arising form the interpretation of laws or regulations; theft of; damage to; and destruction of assets; errors and omissions; injuries to employees and natural disasters.
While some of these claims may be for substantial amounts, they are not unusual in the ordinary course of providing education services in a higher education system. In addition, CCAC’s liability associated with some claims may be negated or substantially reduced by the governmental or sovereign immunity afforded to it through the Torts Claims Act.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
CCAC has not reduced any of its insurance coverage from the prior year and settled claims have not significantly exceeded CCAC’s coverage in any of the past three years. CCAC does not participate in any public entity risk pools, and does not retain risk related to any aforementioned exposure, except for those amounts incurred relative to policy deductibles that are not significant.
CCAC, under the terms of federal and pass-through grants, is subject to periodic audits and certain costs may be questioned as not being appropriate expenditures under the terms of the grants. Such audits could lead to reimbursement to the grantor agencies. CCACs’ management believes disallowances, if any, will be immaterial.
Effective with the 2006 fiscal year, CCAC is no longer subject to audit by the State. All audits through fiscal year 2002 have been completed and resolved with the State. The Pennsylvania Department of Education (PDE) and CCAC had reached negotiated settlements:
In fiscal 2004, CCAC had amounts due for the 1999 and 2000 audit years of $3,005,696, which the PDE began recovering from CCAC by deduction $150,284 from 20 consecutive quarterly remittances to CCAC, which commenced with the March 2005 quarterly payment. CCAC had already recognized this liability and a corresponding reduction of revenue for the full amount of this settlement in previous years. There is no remaining liability at June 30, 2010.
During the 2007 fiscal year, for the audit years 2001 and 2002, CCAC had the final disallowance for those years reduced to $4,144,735. The PDE began recovering from CCAC by deducting $207,236 from 20 consecutive quarterly remittances to CCAC, which commenced with the March 2007 quarterly payment. The amount remaining as a liability at June 30, 2010, is $1,243,416.
Preliminary audit findings for the fiscal 2003 have resulted in potential audit disallowances for that year in the amount of $1,145,088. This amount has been recognized as a liability with a corresponding reduction of revenue in fiscal 2005, although CCAC has appealed these disallowances.
In fiscal year 2004 CCAC recorded a receivable due from the State in the amount of $1,632,691, representing the unremitted portion of the appropriation due CCAC for full -time equivalent students enrolled that year. During fiscal year 2005, the State made a payment in the amount of $213,152 to CCAC towards this obligation. The State made another payment of $213,151 towards this obligation during fiscal 2006. Preliminary audit disallowances for fiscal year 2004 in the amount of $573,483 were recognized as a reduction to revenue in fiscal year 2006, and have been recorded as a further reduction to the receivable due from the State for fiscal year 2004. No further payments have been received from the State towards their outstanding 2004 fiscal obligation to CCAC of $632,905. During fiscal 2010, the audit disallowances for fiscal
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
2005 in the amount of $542,787 were considered repaid to the State by CCAC via a reduction in the shortfall amount for fiscal 2003-2004 of $635,905, reducing the total shortfall amount for 2003-2004 year to $90,118. In addition, during 2009-2010, the State made payments toward this receivable of $90,118. There is no balance due from the State as of June 30, 2010.
The fieldwork for the State audit for the 2005 fiscal year indicated audit disallowances amounting to $542,917. A payable to the State and a reduction of revenue by this amount was recognized in fiscal year 2007. During 2009-2010, this amount was considered repaid to the State by CCAC via a reduction in the shortfall amount for the 2003-2004 year. As of June 30, 2010, there is no balance due the State.
Industrial Development Authority of Allegheny County
ACIDA receives significant financial assistance from governmental agencies in the form of contracts, grants, and other entitlements. The disbursement of funds received under such programs generally requires compliance with terms and conditions specified in the contract/ grant agreements and are subject to audit by grantor agencies. Any disallowed costs resulting from such audits could become a liability of ACIDA. The amount, if any, of expenditure that may be disallowed by the granting agencies cannot be determined at this time. Management expects such amount, if any, to be immaterial.
(7) Short-Term Debt
On January 4, 2010, the County issued Tax and Revenue Anticipation Note (TRAN), Series of 2010, in the amount of $50,000,000. The TRAN had an interest rate of 1% and matured on April 5, 2010. Proceeds from the TRAN were used to ensure sufficient cash flow for County operations prior to the receipt of property tax revenues. The TRAN was repaid on April 1, 2010.
Balance at Balance at January 1, 2010 Increase Decrease December 31, 2010
Tax and Revenue Anticipation Note $ - 50,000,000 (50,000,000) -
Total $ - 50,000,000 (50,000,000) -
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Component Units - Short-Term Debt
Allegheny County Airport Authority
On November 29, 2005, ACAA entered into a credit agreement with Citizens Bank of Pennsylvania for the borrowing of aggregate principal not to exceed $40,000,000. This credit facility is a revolving line of credit (RLOC), and will be used to finance projects for which use of PFC revenue has been approved by the FAA pursuant to the PFC Statute and/ or the PRC Regulations. Interest rate on this RLOC is LIBOR plus 60 basis points.
On September 29, 2008, ACAA received a Reservation of Rights under Credit Agreement letter from Citizens Bank. This letter advised of an Event of Default due to PFC revenues collected for the four previous quarters ending June 30, 2008 falling below the $20,000,000 level as stipulated in the loan agreement. Citizens Bank elected not to exercise its rights and remedies under the Agreement; however, seized the opportunity to require an amendment to reset the financial covenant, line of credit, and pricing terms of the agreement. An Administrative Action was approved by the ACAA Board in February 2009 allowing an amendment to be entered into with Citizens Bank. The amendment changes the financial covenant requiring the minimum TTM collection level of PFC revenues from $20,000,000 to $16,000,000, commitment amount of the revolving line of credit from $40,000,000 to $35,000,000, and pricing from 30 day LIBOR advantage + .60%; plus .125% unused line fee to 30 day LIBOR advantage + 2.50%; plus .25% unused line fee. Additionally the amendment will modify the pricing on the AGC Hangar loan from 30 day LIBOR + .65% to 30 day LIBOR + 2.50%. A second amendment to the loan agreement was executed on November 19, 2010 reducing the interest rate to 12 month LIBOR + 1.5% and further reducing the minimum TTM collection levels of PFC revenue to $14,000,000.
Interest rate on this RLOC is 1.76% at December 31, 2010. The amount outstanding at December 31, 2010 was $27,000,000.
Port Authority of Allegheny County
In September 2009, PAT entered into a $20,000,000 Revolving Credit Loan Agreement (Revolving Loan) with PNC Bank to provide working capital for 2010 operation expenses. The Revolving Loan was secured by the 2010 Operating Assistance grant from the State. The rate of interest was determined as each drawdown date based on one of two interest rate options (Base Rate Option and Euro-Rate Option) selected by PAT. All drawdown requests were repaid in full during 2010 and the Revolving Loan was closed on June 30, 2010.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
(8) Long-Term Debt
General obligation bonds payable at December 31, 2010, are summarized as follows:
Final Bond Issue Maturity Amount Series Interest Rate Dates Dates Issued Outstanding
S-18 6.35 - 7.40% 1990 2012 $ 4,977,038 13,869,587 C-50 Variable (1) 2000 2027 37,345,000 37,295,000 C-51 Variable (1) 2000 2027 14,455,000 14,455,000 C-53 4.35 - 5.25 2000 2020 16,790,000 13,400,000 C-55 1.70 - 5.375 2002 2017 59,705,000 59,670,000 IDA 1.95 - 5.00 2002 2029 19,870,000 9,800,000 C-56 1.25 - 5.00 2003 2016 104,096,051 21,960,000 C-57 3.00 - 5.00 2005 2023 170,835,000 167,790,000
SEA 1.95 - 5.00 2005 2018 4,172,500 1,590,000 C-58 Variable (2) 2006 2016 30,000,000 19,560,000 C-59A 3.68 - 3.89 2007 2016 28,730,000 22,780,411 C-59B Indexed (3) 2007 2026 43,945,000 34,844,589 C-60 3.66 - 4.19 2007 2032 56,625,000 56,610,000 C-61 3.00 - 5.00 2008 2033 49,220,000 49,215,000 C-62 2.50 - 5.00 2009 2029 80,000,000 79,995,000 C-63 2.50 - 5.00 2009 2014 27,500,000 21,120,000 C-64 6.25 2010 2027 9,385,000 9,385,000
General obligation (G.O.) bonds $ 757,650,589 633,339,587
Premium/Discounts and other adjustments 22,556,552
Debt assumed by component units (71,273)
Total long-term debt 655,824,866
Less: current maturities 39,683,102 $ 616,141,764
(1) At December 31, 2010, the rate was 3.30%; the maximum for this issue is 10%. (2) At December 31, 2010, the rate was 3.30%; the maximum for this issue is 12%. (3) The synthetic fixed rate for this series is 4.1355%.
Included in the $633,339,587 of outstanding general obligation bonds is $14,590,000 of Capital Appreciation Bonds, which is net of $720,413 of unamortized discount. Excluded from the $104,096,051 is the $338,949 Allegheny County Airport Authority share of the C-56 debt issuance.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The following is a summary of the changes in general obligation bonds payable of the County during 2010: Governmental Funds G.O. Bonds payable at January 1, 2010 $ 689,125,322 Additions: General Obligation Bonds Series C-64 9,385,000 Accretion adjustment 1,102,929 10,487,929 Deletions: Retirements 41,349,965 Amortization of premium and adjustments 2,438,420 Total deductions 43,788,385
G.O. Bonds payable at December 31, 2010 655,824,866
Less: current maturities 39,683,102 $ 616,141,764
On November 30, 2010 the County issued Taxable General Obligation Energy Conservation Bonds, Series C-64 in the amount of $9,385,000. The proceeds of the Series C-64 Bonds were used to fund various energy conservation projects of the County’s Capital Budget.
On August 12, 2009 the County issued General Obligation Bonds, Series C-62 in the amount of $80,000,000. The proceeds of the Series C-62 Bonds were used to fund various projects of the County’s Capital Budget.
On August 12, 2009, the County issued General Obligation Bonds, Series C-63 in the amount of $27,500,000. The proceeds of the Series C-63 Bonds were used to: (1) partially refund the County’s General Obligation Bonds, Series C-47; and (2) refund the County’s General Obligation Bonds, Series C-48.
As noted above, in 2009 the County General Obligation Bonds, Series C-47 were partially refunded and the County’s General Obligation Bonds Series C-48 were refunded, thereby decreasing the County’s total debt service payments over the next 5 years by approximately $1,870,543 representing an economic gain (the difference between the present valve of the old and new debt service payments) to the County of $1,968,789.
On June 19, 2008 the County issued General Obligation Bonds, Series C-61 in the amount of $49,220,000. The proceeds of the Series C-61 Bonds were used to : (1) finance various capital projects of the County’s capital improvement program; (2) refund, on a current refunding basis, a portion of the County’s outstanding Adjustable Rate Demand General Obligation Bond, Series C-58A; and (3) provide capitalized interest on the Bonds.
150
COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
On March 14, 2007, the County issued General Obligation Refunding Notes, Series C-59A (Fixed Rate), in the amount of $28,730,000 and General Obligation Refunding Notes, Series C-59B (Index Rate) in the amount of $43,945,000, totaling an aggregate principal amount of $72,675,000. The proceeds of the Series C-59 A & B Notes were to: (1) refund certain of the Allegheny County Industrial Development Authority series 2002A and 2002B Bonds; and (2) refund the County’s General Obligation Bond Series C-45. To achieve a synthetic fixed rate for the C-59B interest payments, the County entered into an interest rate swap contract. See Note 14, Derivative Financial Instruments, for more detail on this contract.
As noted above, in 2007 the Allegheny County Industrial Development Authority Series 2002A and 2002B Bonds were partially refunded and the County’s General Obligation Bonds Series C-45 were refunded, thereby decreasing the County’s total debt service payments over the next 23 years by approximately $2,357,648 representing an economic gain (the difference between the present value of the old and new debt service payments) to the County of $2,825,825. The deferred refunding loss on this issue was $1,431,781.
On March 14, 2007, the County issued General Obligation Notes, Series C-60 in the amount of $56,625,000. The proceeds of the Series C-60 Notes were used to fund various projects of the County’s Capital Budget.
On November 27, 2006, the County issued Adjustable Rate Demand General Obligation Bonds, Series C-58A in the amount of $30,000,000. The proceeds of the Series C-58A Bonds were used to finance various bridge and road projects of the County’s capital improvements program.
The C-58A Bonds were issued with three variable rate periods encompassing daily, weekly and monthly rates. The bonds utilize an irrevocable direct pay letter of credit. The bonds are subject to purchase on demand of the holders while in the daily, weekly or monthly modes at a price equal to the principal plus accrued interest.
Starting January 1, 2007 and each quarter thereafter, the County paid a facility fee to the irrevocable direct pay letter of credit holder. At December 31, 2010 the fee was 1.4% of the stated amount.
On January 19, 2005 the County issued General Obligation Refunding Bonds, Series C-57 in the amount of $170,835,000. The proceeds of the Series C-57 Bonds were used to: (1) refund certain of the County’s outstanding General Obligation Bonds, Series C-44, C-46 and C-49; and (2) defease certain of the County’s General Obligation Bonds, Series C-47, C-48, C-52, C-53 and C-54.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
As noted above, in 2005 the County’s General Obligation Bonds Series C-47, C-48, C-49 and C- 53 were partially refunded and the County’s General Obligation Bonds Series C-44, C-46, C- 52 and C-54 were refunded, thereby decreasing the County’s total debt service payments over the next 19 years by approximately $5,648,483 representing an economic gain (the difference between the present value of the old and new debt service payments) to the County of $5,010,308.
On September 29, 2005, pursuant to a supporting agreement with the Sports and Exhibition Authority of Pittsburgh and Allegheny County, the County agreed along with City of Pittsburgh to each pay one-half of the principal and interest on the Sports and Exhibition Authority Auditorium Bonds, Refunding Series A 2005, in the amount of $8,345,000 (County’s share $4,172,500). This issue was used to: (1) refund the Sports and Exhibition Authority Auditorium Bonds Series 1999; (2) pay interest on outstanding indebtedness of the Authority; and (3) to fund certain expenses of the Convention Center. The County and the City shared equally the debt service payments for the Series 1999 Bonds.
On August 15, 2003, the County issued General Obligation Refunding Bonds, Series C-56, in the amount of $104,435,000. Of this total $338,949 is the obligation of the ACAA. The proceeds of the Series C-56 Bonds were used to: (1) refund certain of the County’s outstanding Institution District Series 14 and General Obligation Bonds Series C-40; and (2) defease certain of the County’s General Obligation Bonds, Series C-42, C-44 and C-46.
As noted above, in 2003 the County’s Institution District Series 14 and General Obligation Bonds Series C-40 were refunded, General Obligation Bonds Series C-42, C-44 and C-46 were partially refunded, thereby decreasing the County’s total debt service payments over the next 13 years by approximately $7,614,317 representing an economic gain (the difference between the present value of the old and new debt service payments) to the County of $7,134,829.
As noted above, in 2005 the Sports and Exhibition Authority Bonds Series 1999 were fully refunded, thereby decreasing the County’s share of total debt service payments over the next 14 years by approximately $118,169, representing an economic loss (difference between present value of the old and new debt service payments) to the County of $5,776.
In prior years the County has defeased various general obligation bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the accompanying government-wide financial statements. At December 31, 2010, $150,275,000 of bonds and other long-term debt obligations outstanding are considered defeased.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The annual debt service requirements to amortize all general obligation bonds outstanding as of December 31, 2010, are as follows:
Year Ending Principal Interest Total December 31 2011 $ 39,694,559 26,606,656 66,301,215 2012 40,954,559 25,504,541 66,459,100 2013 42,512,059 24,048,834 66,560,893 2014 44,604,559 22,115,876 66,720,435 2015 42,084,559 20,024,921 62,109,480 2016-2020 164,710,295 74,541,657 239,251,952 2021-2025 106,075,294 49,175,022 155,250,316 2026-2030 113,669,116 25,349,237 139,018,353 2031-2033 39,755,000 2,805,000 42,560,000 634,060,000 270,171,745 904,231,745 Accretion (720,413) - (720,413) Debt assumed by component units (71,273) (16,923) (88,196) Premium on issues 38,619,054 - 38,619,054 Amortization (15,312,496) - (15,312,496) Discount on issue (833,340) - (833,340) Amortization 83,334 - 83,334
$ 655,824,866 270,154,822 925,979,688
Capital Leases – In 2006 the County entered into a capital lease agreement to renovate a building for the Medical Examiner’s laboratory and office space. The terms of the lease arrangement are 20 years and provide an option for the County to purchase the building at the end of the lease term in 2026. The present value amount of the capital lease obligation was $7,678,839. The lease obligation is at a 4.0% interest rate, and is payable in monthly installments of $34,174 through June 2026. Also included in the obligation amount is a bargain purchase option of $4,125,000, payable at the end of the lease. The balance due as of December 31, 2010 is $6,551,657.
Future minimum payments required under the capital lease obligations are as follows: Year Ending December 31 Principal Interest Total 2011 $ 223,331 $ 186,762 $ 410,093
2012 232,264 177,829 410,093
2013 241,554 168,539 410,093
2014 251,217 158,876 410,093 2015 261,266 148,827 410,093 2016-2020 1,471,703 578,762 2,050,465 2021-2025 1,790,553 259,912 2,050,465 2026 2,079,769 2,250,278 4,330,047 $ 6,551,657 $ 3,929,785 $ 10,481,442
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Workers' compensation and claims as well as compensated absences for sick benefits are paid from the General Fund. The following is a summary of changes in all other long-term liabilities for the year ended December 31, 2010:
Balance at Balance at Current January 1, 2010 Increase Decrease December 31, 2010 Portion
Accrued sick benefits (Note 1G) $ 7,197,560 818,481 (356,175) 7,659,866 326,269 Accrued workers' compensation 7,640,289 3,436,205 (4,774,975) 6,301,519 4,788,538
Total $ 14,837,849 4,254,686 (5,131,150) 13,961,385 5,114,807
At December 31, 2010, the County has no significant potential arbitrage liability.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Component Units - Long-Term Debt
Allegheny County Airport Authority
General obligation and revenue bonds payable at December 31, 2010, are as follows:
Amount Outstanding Airport Revenue Bonds: Subordinate Lien Series A 2001, interest rate of 5.50%, due through 2017 $ 2,445,000 Subordinate Lien Series B 2001, interest rates of 6.03% to 6.73%, due through 2017 7,375,000 Airport Revenue Refunding Bonds: Series 2010A, interest rate of 5.00%, due through 2018 30,310,000 Series 2007A, interest rate of 5.00%, due through 2016 53,445,000 Series 2007B, interest rate of 5.00%, due through 2019 100,375,000 Series 2002A, interest rate of 4.00% to 4.50%, due through 2015 21,715,000 Series 2002B, interest rate of 4.50% to 5.00%, due through 2023 50,075,000 Series A 2001, interest rate of 4.00% to 4.50%, due through 2016 22,870,000 Series B 2001, interest rate of 5.00%, due through 2022 45,500,000 Series 1997A-1, interest rates of 5.00% to 5.75%, due through 2016 76,530,000 General Obligation Refunding Bonds: Series C-56, County of Allegheny, interest rates of 1.25% to 5.00%, due through 2016 71,273 Net unamortized premium 10,699,006 421,410,279 Commonwealth of Pa Department of Transportation Infrastructure Bank Aviation Loan, interest rate 4.125%, due through 2017 718,949 Industry drive loan, interest rate of 4.7%, due through 2028 1,309,667 Tax Increment Financing, interest rate 5.75%, due through 2025 4,596,718 Business in our sites program loan, interest rate of 3%, due though 2030 2,000,000 Hangar loan, variable interest rate, due through 2028 1,105,000 Northfield tax increment financing, interest rate of 6.5%, due through 2019 3,787,885 Gaming grant anticipation loan, variable interest rate, due through 2015 15,000,000 28,518,219 Total debt 449,928,498 Deferred amount on refundings (19,783,678) Less: current maturities (45,570,356) Total long term debt $ 384,574,464
On October 6, 1997, the County issued Airport Revenue Refunding Bonds, Series 1997A-1, 1997A-2 and 1997B (the 1997 Refunding Bonds) in the amounts of $337,530,000, $10,015,000 and $103,045,000, respectively. The Series 1997A-1 and 1997A-2 Bonds were
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
issued to refund the remaining portion of the 1988 Revenue Bonds not refunded by the 1993 Bonds. The 1997B Refunding Bonds were issued to advance refund a portion of the 1990 Revenue Bonds and 1992 Revenue Bonds. The total amount of the bonds refunded was $457,505,000, consisting of $433,020,000 of the 1988 Revenue Bonds; $5,340,000 of the 1990 Revenue Bonds, and $19,145,000 of the Series 1992 Revenue Bonds. Included in the 1997 Refunding Bonds were escrowed funds to advance refund $6,790,000 of the 1992 Revenue Bonds (Non-defeased Bonds). The 1997 Bonds are secured by a pledge of certain net revenues of the ACAA, and are also guaranteed by various third-party insurers and guarantors.
The proceeds from the sale of the 1997 Refunding Bonds are being held in escrow under an escrow refunding agreement and have been invested in United States Treasury obligations. The principal amount of such investments, together with interest earned thereon, will permit the payment of principal and interest on the refunded bonds up to and including their respective call dates. The refunded bonds are treated in the financial statements as defeased obligations. Accordingly, neither the trust account assets nor the refunded bonds appear in the accompanying government-wide financial statements. The Non-Defeased Bonds are included in the financial statements along with the respective portion of the trust account assets. Based upon the requirements of Governmental Accounting Standards Board Statement No. 23, ―Accounting and Financial Reporting for Refundings of Debt Reported by Proprietary Activities‖, ACAA recorded a deferred amount on refunding of $21,095,769. This amount is being amortized over the life of the 1997 Refunding Bonds. The deferred amount is recorded as a component of long-term debt in the Statement of Net Assets. Effective January 1, 2002, the defeased bonds were fully refunded.
On July 1, 2001, ACAA issued Subordinate Lien Airport Revenue Bonds, Series 2001A (PIA Energy System Project) (the 2001 Series A Bonds) in the amount of $2,445,000 and Subordinate Lien Airport Revenue Bonds, Series 2001B Taxable (PIA Energy System Project) (the 2001 Series B Bonds) in the amount of $16,670,000. The 2001 Series A Bonds and the 2001 Series B Bonds are referred to together as the 2001 Bonds. The proceeds of the 2001 Bonds were used to acquire the equipment constituting the Energy Service Facility (the Facility) located at PIA. The 2001 Bonds are subordinated and limited obligations of ACAA. The principal of, interest on and premium, if any, on the 2001 Bonds are payable by ACAA only out of net revenues and from such other monies as may be available for such purpose. The general credit of ACAA is not pledged for the payment of the 2001 Bonds. The 2001 Bonds shall not be deemed a general obligation of ACAA.
On October 1, 2001, ACAA issued Airport Revenue Refunding Bonds, Series 2001A (the 2001 Series A Refunding Bonds) in the amount of $52,600,000, and Airport Revenue Refunding Bonds, Series 2001B (the 2001 Series B Refunding Bonds) in the amount of $52,575,000. The 2001 Series A Refunding Bonds and the 2001 Series B Refunding Bonds are referred to together as the 2001 Refunding Bonds. The proceeds of the 2001 Refunding Bonds were used to pay a portion of the costs of refunding the 1999 Revenue Notes, Series A outstanding under the Trust Indenture dated December 1, 1999 by and between ACAA and
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
National City Bank of Pennsylvania, as trustee, and the concomitant refunding of the 1992 Revenue Bonds, Series A and B, outstanding under the Certain Resolution of the County of Allegheny dated July 22, 1988, as supplemented and amended. ACAA recorded a deferred amount on refunding of $8,035,439 that is being amortized over the life of the 2001 Refunding Bonds.
On October 1, 2002, ACAA issued Airport Revenue Bonds, Refunding Series 2002A (the 2002 Series A Refunding Bonds) in the amount of $57,250,000 and Airport Revenue Bonds, Refunding Series 2002B in the amount of $57,250,000 (the 2002B Series Refunding Bonds). The 2002 Series A Refunding Bonds and the 2002 Series B Refunding Bonds are referred to together as the 2002 Refunding Bonds. The proceeds of the 2002 Refunding Bonds were used to refund the outstanding principal balance of Revenue Bonds Series 1993 A, B, and C, which are equal to and represented by the outstanding principal balance of the ACAA Revenue Note, Series 1999B. The ACAA recorded a deferred amount on refunding of $8,208,615 that is being amortized over the life of the 2002 bonds.
On November 30, 2006, the ACAA remarketed the 2001 Refunding Bonds, and the 2002 Refunding Bonds for the purpose of changing the nature of the bonds from variable rate auction bonds to fixed rate serial bonds. The remarketed bonds have substantially the same repayment terms, except for the interest rate. The ACAA recorded a deferred amount on the remarketing of $8,335,129 that is being amortized over the life of the 2001 and 2002 bonds.
On October 3, 2007, ACAA issued Airport Revenue bonds, Refunding Series A of 2007 in the amount of $53,445,000 and Airport Revenue Bonds, Refunding Series B of 2007 in the amount of $100,375,000 (the 2007 Refunding Bonds). The proceeds of the 2007 Refunding Bonds together with investment income were used to refund the County of Allegheny Airport Revenue Bonds Series 1997A-1 (AMT) ($54,130,000) and 1997 Series B ($103,045,000). The Authority recorded a deferred loss on refunding of $1,657,212 that is being amortized over the life of the 2007 Bonds. Proceeds of the 2007A & B Bonds were placed in escrow and with interest earned were used to redeem the refunded bonds on January 1, 2008. In accordance with the Trust Indenture, all funds related to the 1997 A-1 and B Bonds were held in their existing accounts until the bonds were redeemed on January 1, 2008. Upon the redemption of the 1997 A-1 and B Bonds, all remaining funds related to the 2007A & B Bonds were transferred over to the new accounts.
On September 15, 2010 the ACAA issued Airport Revenue Bonds, Refunding Series A of 2010, in the amount of $30,310,000 (the 2010 Refunding Bonds). The proceeds of the 2010 Refunding Bonds together with investment income were used to refund the County of Allegheny Airport Revenue Bonds Series 1999 (the Refunded Bonds). The ACAA recorded a deferred loss on refunding of $518,548 which is being amortized over the life of the 2010 Bonds. The Series 2010A Bonds currently refunded $32,055,000 principal amount of the Refunded Bonds maturing on or after January 1, 2012 at a redemption price of 101% plus interest to the redemption date on or about September 17, 2010. The Series 1999 Bonds maturing on January 1, 2011 were redeemed using funds already in the Debt Service Fund
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
and the Debt Service Reserve Fund.
The 2010 Refunding Bonds carry fixed rates of interest. The coupons ranged from 4.00% to 5.00% with an average coupon of 4.68%. The arbitrage yield was 3.65% and the individual yields ranged from 2.26% to 4.11% in 2018. The Series 2010A Bonds are not subject to optional redemption prior to the respective maturities. There was an economic present value savings of $1,671,648 and an approximate annual savings of $200,000 applicable to the refunding.
The 2010 Refunding Bonds are limited obligations of the ACAA. The principal, interest and premium, if any, on the 2010 Refunding Bonds are payable by the ACAA solely from revenues (defined as operating and other revenues after certain adjustments minus the operation and maintenance expenses) and proceeds of Refunding Bonds held or set aside under the Indenture. Neither the general credit of the ACAA nor the credit or taxing power of the County, the Commonwealth or any political subdivision thereof is pledged for the payment of the 2010 Refunding Bonds.
Certain bonds within all series of debt are subject to redemption, at the option of the ACAA, as a whole or in part, from time to time, beginning January 1, 2002, or at any time thereafter, upon payment of the stipulated redemption price which ranges from 100% to 102% of the principal amount plus accrued interest to the date fixed for redemption.
Industry Drive Loan - On March 26, 2003, ACAA entered into an agreement with the RAAC in which RAAC provides funding for the construction of an extension of the existing public road known as Industry Drive to permit further development of the undeveloped land lying mostly north of the Industry Drive Extension right-of–way between the right-of-way and the Pennsylvania Route 60 by-pass. RAAC has agreed to lend $4,000,000 to ACAA for this project and ACAA has agreed to contribute $2,800,000. Disbursements from RAAC towards the Industry Drive Project at December 31, 2010 were $1,484,629. The ACAA repaid $52,918 in 2010. The repayment terms are $9,652 per month on a twenty year term expiring in 2028.
Tax Increment Financing (TIF) - On November 1, 2005, ACAA entered into an agreement with RAAC in which RAAC provides TIF for the development and financing of the Clinton Industrial Park Project that includes certain substantial public on-site and off-site improvements. RAAC has issued a series of TIF Notes in an aggregate principal of $5,000,000 to fund public improvements relating to Phase I of the Clinton Industrial Park Project with another $500,000 unissued notes. As of December 31, 2010, RAAC disbursed $4,596,718 for construction fund deposit, debt service reserve fund and financing fees and expenses. Interest only payments are required through December 1, 2010. Semi-annual principal and interest commence June 1, 2011. The source of repayment of this TIF is limited to the tax revenues and lease rental income generated by the project.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Commonwealth of Pennsylvania Department of Transportation Loan -- On September 12, 2007, ACAA entered into a loan agreement with the Commonwealth of Pennsylvania, Department of Transportation, to provide a portion of funding necessary to complete ACAA’s South Ramp Taxilanes Relocation and Hangar Redevelopment Project at the Allegheny County Airport. The estimated project cost is $4,100,000 of which the Department of Transportation agreed to loan ACAA $1,000,000 at an annual interest rate of 4.125%. The term of the loan is 120 months and requires monthly payments of $10,184. The remaining project costs are to be funded through ACAA funds, FAA grants, Pennsylvania Department of Transportation grants and an additional $1,300,000 10-year term loan. ACAA repaid $90,516 in 2010. The ACAA has the ability to prepay this loan, in $1,000 increments, without penalty.
Commonwealth Financing Authority Business in Our Sites Program (BIOS) -- On January 18, 2007, the ACAA entered into a loan agreement with the Commonwealth Finance Authority to provide a $2,000,000 loan for the purpose of completing the Cherrington Parkway Extension. Terms of this loan are 20 years with a 3% interest rate. All principal and interest payments will be deferred, and interest will not accrue, until one of the following occurs: sale of the property, property is leased, or if five years have passed since completion of the site development work.
Allegheny County Airport (AGC) Hangar Loan -- On January 11, 2008, the ACAA entered into a loan agreement with Citizens Bank to a provide $1,300,000 loan for the purpose of constructing 18 new T-hangars and certain taxilane improvements. Terms of this loan are 40 equal consecutive quarterly payments of $16,250, which commenced in April 2008, and one final payment of all outstanding balances of principal and interest accrued. Interest rate is 30-day LIBOR + 2.50% effective January 1, 2009. A second amendment to the loan agreement was executed on November 19, 2010 reducing the interest rate to 12 month LIBOR + 1.50%. The ACAA repaid $65,000 in 2010 .
Northfield Tax Increment -- On May 1, 2008, ACAA entered into an agreement with RAAC for a second TIF for the development of the Northfield site located on the north side of the airfield. The TIF proceeds will fund certain on-site and off-site public infrastructure and improvements. RAAC issued a TIF note in the amount of $5,000,000 to fund the improvements related to the Northfield site. As of December 31, 2010 the amount borrowed was $3,787,885 for construction fund deposit, debt service reserve fund, and financing fees and expenses. Monthly interest only payments are required through the fifth anniversary of the first draw by the ACAA. Semi-annual principal and interest payments commence June 30, 2014. The source of repayment of the TIF is the tax revenues and lease rental income generated by the project.
Gaming Grant Anticipation Loan -- On June 22, 2009, ACAA entered into a loan agreement with PNC Bank, National Association to provide a $20,000,000 loan for anticipated gaming revenue grants to finance projects authorized by Section 3(2)(I)(e) of Act 53 in advance of the receipt of Airport Development Grants from the Gaming Fund. Terms of this loan include
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
principal payments commencing on January 15, 2011 with consecutive annual payments of $4,000,000 through January 15, 2015. The interest rate will be LIBOR +2.00%. The interest rate at December 31, 2010 was 2.82%. The ACAA advance paid $8,000,000 in January 2011.
The annual debt service requirements of long-term debt for the years subsequent to December 31, 2010 assuming the current interest rates remain the same for the term of the debt are as follows: Year Ended December 31 Principal** Interest* Total
2011 $ 45,570,356 21,951,857 67,522,213 2012 47,664,741 19,662,933 67,327,674 2013 50,104,571 17,211,811 67,316,382 2014 51,394,644 14,675,404 66,070,048 2015 49,993,232 12,282,462 62,275,694 2016-2020 174,408,260 25,217,436 199,625,696 2021-2025 19,051,851 2,127,906 21,179,757
2026-2030 1,041,837 85,974 1,127,811
$ 439,229,492 113,215,783 552,445,275
* The interest payments have been estimated as noted above, such estimated values are subject to uncertainty and, therefore, may differ from the values that will be paid in the future and such differences could be material. ** Principal includes the Bonds due 1/1/ of the succeding years, as the ACAA has paid January 1, 2011 in December 2010 and plans to continue that practice.
The following is a summary of changes in long-term liabilities for ACAA for the year ended December 31, 2010: Balance at Balance at Current January 1, 2010 Additions Reductions December 31, 2010 Portion Bonds payable: Revenue bonds payable $ 441,544,935 30,310,000 70,228,333 401,626,602 Industry Drive Loan 1,362,585 - 52,918 1,309,667 PA Department of Transportation loan 809,465 - 90,517 718,948 Tax Increment Financing 4,596,718 - - 4,596,718 Business in Our Sites Program Loan 2,000,000 - - 2,000,000 Moon Township Municipal Authority Loan 400,000 - 400,000 - Hangar Loan 1,170,000 - 65,000 1,105,000 Northfield tax increment financing 2,709,883 1,078,002 - 3,787,885 Gaming grant anticipation loan 20,000,000 - 5,000,000 15,000,000 Constant Maturity Swap - 374,592 374,592 Other long-term liability 861,347 87,036 - 948,383 Advance airline fundings 32,163,666 339,160 - 32,502,826 Accrued post employment benefits 77,097 25,074 - 102,171 Deferred revenues 8,745,012 - 1,074,749 7,670,263 Total $ 516,440,708 32,213,864 76,911,517 471,743,055 46,660,105
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
ACAA has two purchase commitments: (1) Natural Gas -- ACAA has entered into a contract with a natural gas provider for the purchase of approximately 200,000 dth of natural gas each year. ACAA will pay the provider at the New York Mercantile Exchange rate, plus $.535 per dth beginning January 1, 2010 through December 31, 2013. A Blend and Extend Agreement was executed in August 2010 reducing the rate to $.48 per dth beginning May 1, 2011 though December 31, 2015. ACAA is responsible for the nominations under the contract and can adjust the monthly nominations of the natural gas purchases up to 20% each year. ACAA anticipates using the full amount of the commitment, and (2) Electricity -- ACAA has entered into a contract with an electricity provider for the purchase of electricity for specific meters at rate of $6.94/kWh. The contract was to be in effect until December 31, 2011. An extension of the contract was executed in May 2010 reducing the rates to a range of $5.74kWh to $5.94kWh for the period December 1, 2011 through December 1, 2013. The commitment includes most of ACAA forecasted electricity usage.
Port Authority of Allegheny County
Long-term obligations of PAT consist of the following at June 30, 2010:
Special Revenue Transportation Bonds
$ Unpaid principal 303,585,787 Unamortized bond discount 262,083 Deferred amount on refunding (10,514,401) 293,333,469 Capital Lease Agreements 94,517,711 Swaption 9,138,841
Total long-term debt 396,990,021 Less current maturities: Bonds 21,160,762 Leases 78,020,511
$ 297,808,748
On November 4, 1999, PAT issued $225,000,000 of Special Revenue Transportation Bonds, Series of 1999 (the 1999 Bonds). The proceeds from the sale of the 1999 Bonds were used primarily to fund certain capital additions and improvements to PAT’s public transit system.
On March 1, 2001, PAT issued $250,695,000 of Special Revenue Transportation Bonds, Series of 2001 (the 2001 Bonds). Approximately $240.0 million of the proceeds from the sale of the 2001 Bonds were used to advance refund the 1999 Bonds. An additional $7.5 million was realized for capital projects.
In connection with the advance refunding, a portion of the proceeds of the 2001 Bonds was deposited in an irrevocable trust with an escrow agent to provide for certain debt service
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
payments on the refunded bonds. The advance refunding resulted in a deferred refunding adjustment of $15,771,597 that will be amortized over the life of the 2001 Bonds. At June 30, 2010, $5,257,199 has been amortized.
Interest on the 2001 Bonds is payable semiannually on March 1 and September 1, commencing September 1, 2001. Interest rates range from 3.75% to 5.75% throughout the term of the bonds.
Amortization of the bond discount of $1,564,785 and the bond issuance costs of $1,207,946 will be recognized over the twenty-eight year term of the bonds. At June 30, 2010, $521,595 of the bond premium and $465,710 of the bond issuance costs had been amortized.
The bond agreements for the above issues require, among other things, that PAT maintain a Debt Service Reserve Fund for each issue. The Debt Service Reserve Fund is required to be funded at all times in an amount equal to the relevant debt service requirement relating to each series of bonds outstanding.
During fiscal year 2003, PAT entered into a Master Financing Agreement (Agreement) for the purchase of capital assets, primarily buses. As of June 30, 2009, PAT had incurred $131,631,500 of debt related to this financing. This debt is secured by an equity interest in the purchased assets.
Interest on the debt is payable semiannually on each March 1 and September 1, commencing September 1, 2003. Interest rates are set at the time of the draw down, current bonds outstanding bear interest at 5.25%.
The debt was issued at a premium of $6,010,768 which is being amortized over the ten year term of the Agreement. At June 30, 2010, $4,705,448 have been amortized.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The following is a summary of PAT’s changes in bond transactions for the year ended June 30, 2010: Amortization/ Balance at Payments and Balance at July 1, 2009 Retirements June 30, 2010
Series of 2001 Bonds $ 244,490,000 (7,150,000) 237,340,000 Master Financing Agreement 79,159,672 (12,913,885) 66,245,787 323,649,672 (20,063,885) 303,585,787
Bond discount and premium 805,466 (543,383) 262,083 Deferred amount on refunding (11,077,672) 563,271 (10,514,401)
Net outstanding 313,377,466 (20,043,997) 293,333,469
Less current amounts: Series of 2001 Bonds (7,560,000) Koch Bonds (13,600,762)
Total current portion of long-term debt (21,160,762) Total long term debt - net $ 272,172,707
The annual debt service requirements related to the bonds are as follows:
Year Ending June 30 Principal Interest Total
2011 $ 21,160,763 15,491,412 36,652,175 2012 22,289,175 14,361,680 36,650,855 2013 23,481,064 13,171,643 36,652,707 2014 18,345,766 11,960,475 30,306,241 2015 16,532,858 11,034,845 27,567,703 2016-2020 61,401,161 44,245,494 105,646,655 2021-2025 70,350,000 28,401,000 98,751,000 2026-2029 70,025,000 8,966,500 78,991,500
Total $ 303,585,787 147,633,049 451,218,836
Restricted assets include approximately $19.9 million of cash invested in a debt service reserve fund restricted for debt service on the above bonds.
In conjunction with their swaption transaction described in Note 14, PAT received an up front cash payment. A portion of the upfront cash payment received by PAT was considered to be borrowing at a rate of 4%. As of June 30, 2010, the borrowing had an outstanding balance of $9,138,841. No payments will be made on the borrowing until the swaption is exercised by the counterparty. If exercised, principal and interest payments will begin in March 2012 and continue until the borrowing’s final maturity in 2029. Interest is currently being accreted to the principal amount annually. Accreted interest on the borrowing was $2,005,841 at June 30, 2010.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The annual debt service requirements related to the swaption are as follows:
Year Ending June 30 Principal Interest Total
2011 $ - - - 2012 877,137 365,554 1,242,691 2013 889,123 330,468 1,219,591 2014 851,589 294,903 1,146,492 2015 812,553 260,840 1,073,393 2016-2020 3,370,336 850,134 4,220,470 2021-2025 1,900,062 292,922 2,192,984 2026-2029 438,041 30,953 468,994
Total $ 9,138,841 2,425,774 11,564,615
Subsequent to PAT’s year-end the swaption was terminated and this borrowing was repaid.
On June 11, 1997, PAT entered into a sale-leaseback transaction related to some of its existing light rail vehicles (US Lease). The terms of the lease arrangement are 14 years and provide an option for PAT to repurchase the light rail vehicles at the end of the lease term in 2011. A deferred gain of $3,737,955 is being amortized over the life of the lease arrangement. Restricted assets for the capital lease obligations include investments purchased by PAT to meet future cash flow needs of the lease.
As part of the lease arrangement, PAT entered into a payment undertaking arrangement with a subsidiary of AIG Insurance Company, the purpose of which was to deposit funds to meet future cash flow needs of the lease. Thus, PAT has a receivable in the amount of $50,766,912, which is guaranteed by AIG. Additionally, PAT has treasury securities in the amount of $43,750,799 at June 30, 2010 that are restricted for lease payments. Interest only payments began in fiscal year 2002 and interest and principal payments began in fiscal year 2005.
The US Lease documents require PAT to replace AIG as the payment undertaker in the event that (a) the long-term unsecured debt obligations of AIG are not rated A- by Standard & Poor’s or A3 by Moody’s and (b) PAT is directed to do so by an equity investor (First Hawaiian Corporation and EntreCap Financial). This replacement is required to occur within 60 days of receipt of the direction and would be at the sole cost of PAT.
AIG’s ratings are currently A– and A3 (November 22, 2010) which means that any further downgrade would require PAT to replace AIG if requested by an equity investor.
In addition, PAT also has another agreement related to the US Lease with Ambac Indemnity Corporation (Ambac). The documents require that PAT replace Ambac in the event that (a) the long-term unsecured debt obligations of Ambac are not rated AA– by Standard & Poor’s and Aa3 by Moody’s and (b) PAT is directed to do so by an equity investor. This
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
replacement is required to occur within 60 days of receipt of the direction and would be at the sole cost of PAT.
Ambac’s ratings are currently R and Caa2 (as of November 22, 2010). During the fourth quarter of 2008, PAT was notified by both equity investors that given the decline in the credit rating of the equity strip provider (Ambac), and pursuant to the terms of the documents, PAT was required to replace the Equity Strip Agreement and provider in accordance with the documents. As the market value of the underlying investments exceeded the termination value of the lease, PAT requested that the equity investors forebear the requested replacement of the equity strip provider since PAT has continued to make payments under the lease and the equity investors do not have any current risk exposure. The equity investors have not further pursued their requests. As of November 22, 2010, the equity value of the underlying investments remains sufficient to pay the current termination value of the lease.
The following is the present value of the net minimum lease payments (MLP) due under the capital leases:
Year Ending US Lease June 30 Principal 2011 $ 79,594,515 2012 16,984,057 Subtotal 96,578,572 Less: Interest (2,060,861)
Net obligation under capital lease $ 94,517,711
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Community College of Allegheny County
Long-term obligations of CCAC consist of the following at June 30, 2010:
Final Long-Term Interest Rate Maturity Date Obligation
Bonds payable - SPSBA:
2.0 - 3.5% 2003 Jan 15 2012 $ 4,635,000 2.0 - 4.8% 2004 July 15 2013 8,570,000 2.0 - 4.8% 2nd Series 2004 July 15 2025 17,110,000 3.3 - 4.4% 2005 July 15 2025 4,780,000 3.3 - 4.4% 2008 June 15 2027 16,175,000 Total bonds payable 51,270,000 Loans payable:
4.42%, $25,310 paid monthly 2011 $ 296,567 2.25%, $22,025 paid monthly 2013 758,531 Total bonds payable 1,055,098 Capitalized equipment leases:
4.42%, $35,721 paid monthly 2010 211,588 4.55%, $20,332 paid monthly 2012 465,558 Total capitalized leases 677,146
53,002,244 Less: current portion 8,405,443 Total long-term debt $ 44,596,801
Series of 2003 State Public School Building Authority (SPSBA) Refinancing Debt Service Bonds – These bonds were issued to refund the 1993 ACHEBA Bonds. The issuance totaled $12,380,000 and included retirement of $12,025,000 in 1993 ACHEBA Bonds and $355,000 in issuance costs. The interest rates for the 2003 refinancing bonds ranged from 2% to 3.5%. The final payment for the bonds is 2012. Principal payments on the bonds are due annually in July, while interest is due semi–annually on January and July 15th.
Series of 2004 SPSBA Refinancing Debt Service Bonds – These bonds were issued in June of 2004 to refinance the 1994 ACHEBA Bonds. The issuance totaled $23,755,000 and included the retirement of $23,855,000 in 1994 ACHEBA Bonds, a net original issue premium of $1,352,609 and closing costs totaling $223,025. The interest rates for the 2004 refinancing bonds ranged from 2% to 4.8% as compared to the 4.6% to 5.2% remaining under the 1994A&B Series. The final payments for the bonds are scheduled for July 15, 2013 (1994A refinancing) and 2010 (1994B refinancing). Principal payments on the bonds are due
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
annually in July, while interest is due semi-annually on January and July 15th.
Second Series of 2004 SPSBA -- In July 2004 CCAC, through the SPSBA, accomplished a new $20,000,000 bond issue (Second Series of 2004) for the funding of deferred maintenance and critical infrastructure projects required to upgrade CCAC’s physical plant. The final payments for the bonds are scheduled for July 15, 2025. Principal payments on the bonds are due annually in July, while interest is due semi-annually on January and July 15th. Total annual debt service is approximately $1.5 million each year through 2025-2026.
Series of 2005 SPSBA Bonds -- In July 2005 CCAC, through the SPSBA, accomplished a new $5,600,000 bond issue (Series of 2005) for the funding to purchase the Siemen’s Building in Oakdale, PA (West Hills Center). The final payments for the bonds are scheduled for July 15, 2025. Principal payments on the bonds are due annually in July, while interest is due semi-annually on January and July 15th. Total annual debt service is approximately $410,798 each year through 2025-2026.
Series of 2008 SPSBA Bonds -- In June 2008 CCAC, through the SPSBA, accomplished a new $22,040,000 bond issue (Series of 2008). Bond proceeds pertaining to the construction of a Science Center Facility on Allegheny Campus totaled $15,950,000 and the remaining $6,090,000 was for funding renovation projects to upgrade infrastructure at all four campuses. The final payments for the bonds are scheduled for June 15, 2027. Principal payments on the bonds are due annually in June, while interest is due semi-annually on June and December 15th. Total annual debt service is approximately $2,431,372 each year through 2011-2012. Total annual debt service from 2013-2027 is $1,134,437.
Loans Payable -- In 2009, CCAC entered into a loan for technology microcomputer systems, laptops and workstations in the amount of $1,030,150. The loan is at a 2.25% interest rate, and is payable in monthly installments of $22,025 over a four-year period through June 2013. The balance as of June 30, 2010 is $758,531.
In 2007, CCAC entered into a five-year loan for technology infrastructure upgrades including an enterprise document management system, server replacements, a student tracking system, an automated timekeeping system, etc., in the original amount of $1,419,000. The loan is at a 4.42% interest rate, and is payable in monthly installments of $25,310 through May 2011. The balance due as of June 30, 2010 is $296,567.
Capital Leases -- In 2008, CCAC entered into a four-year capitalized lease obligation for 1,217 desktop and laptop computers in the original amount of $911,000. The lease obligation is at a 4.55% interest rate, and is payable in monthly installments of $20,332 through June 2012. The balance due as of June 30, 2010, is $465,558.
In 2007, CCAC entered into a three-year capitalized lease obligation for 1,708 desktop and laptop computers in the original amount of $1,594,103. The lease was amended by $21,273, which reduced the amount to $1,572,830. The lease obligation is at a 4.42%
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
interest rate, and is payable in monthly installments of $35,721 through December 2010. The balance due as of June 30, 2010, is $211,588.
The loans payable and the capitalized equipment leases are collateralized by the equipment.
Operating Leases - CCAC leases various other facilities throughout the County that are separate from the main campuses and involve commitments that extend into future years. The facilities are used for educational purposes only. The following schedule of future minimum payments lists these obligations as ―operating leases.‖
Future minimum payments required under long-term debt and lease obligations existing at June 30, 2010, are as follows:
Year Ending Capitalized Operating June 30 SPSBA Bonds Loans Leases Leases Total
2011 $ 9,336,075 568,018 458,304 622,896 10,985,293 2012 7,883,723 264,304 243,979 269,023 8,661,029 2013 6,582,955 256,298 - 160,196 6,999,449 2014 4,964,665 - - 78,812 5,043,477 2015 3,038,061 - - 53,376 3,091,437 2016-2020 15,168,497 - - - 15,168,497 2021-2025 15,160,828 - - - 15,160,828 2026-2027 4,171,390 - - - 4,171,390
Total 66,306,194 1,088,620 702,283 1,184,303 69,281,400 Less: Portion representing interest 15,036,194 33,522 25,137 - 15,094,853 $ 51,270,000 1,055,098 677,146 1,184,303 54,186,547
Long-term liability changes are summarized below for the year ended June 30, 2010:
Beginning Ending Balance at Balance at Current July 1, 2009 Additions Reductions June 30, 2010 Portion
Long-term obligations $ 61,309,386 - 8,307,142 53,002,244 8,405,443 Advances from Federal sponsors 42,793 184 - 42,977 Accrued compensated absences 2,908,967 167,710 - 3,076,677 3,076,677
Total long-term liabilities $ 64,261,146 167,894 8,307,142 56,121,898
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The composition of the compensated absences liability was as follows as of June 30, 2010:
Accrued vacation leave $ 1,750,915
Banked credits 1,325,762
$ 3,076,677
Redevelopment Authority of Allegheny County
The annual debt service requirements related to bonds and mortgage are as follows:
Maturity Principal Interest Total
2011 $ 3,513,114 2,179,786 5,692,900 2012 3,725,679 1,973,532 5,699,211 2013 3,948,416 1,753,532 5,701,948 2014 4,188,424 1,514,025 5,702,449 2015 4,449,815 1,258,996 5,708,811 2016-2020 10,995,269 2,764,638 13,759,907
2021-2025 5,133,521 544,571 5,678,092
Total $ 35,954,238 11,989,080 47,943,318
Long-term debt was comprised of bonds payable which were issued by RAAC as Special Tax Development Bonds, Taxable Series of 1995 for $25 million and Series 1999 for $25 million.
The Special Tax Development Bonds constitute limited obligations of RAAC payable solely from a portion of the Allegheny Regional Asset District tax (the RAD tax) paid to RAAC or its trustee and certain funds held under a trust indenture and the earnings thereon. The RAD tax consists of a portion of the County's allocation of the 1% sales, use and hotel excise tax. The County has pledged the assigned receipts to RAAC, which has in turn pledged and assigned the same to the trustee to pay principal of and interest on the Special Tax Development Bonds. The assigned receipts and the bond insurance are the sole security for repayment of the Special Tax Development Bonds.
On September 1, 2005, RAAC issued $18,655,000 of Special Tax Development Refunding Bonds (2005 Bonds). The proceeds of the 2005 Bonds were used to provide funds for the current refunding of the 1995 Bond Series. In connection with the debt refunding, RAAC recorded a deferred refunding adjustment of $1,504,435, which is being amortized as an adjustment to interest expense over the life of the bonds using the straight-line method.
The 2005 bonds were issued at a premium of $263,213, which is being amortized as an adjustment to interest expense over the life of the bonds using the straight-line method.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The 2005 bonds are not subject to optional redemption.
The 1999 Bonds maturing on or after September 1, 2010 are subject to redemption prior to maturity at the option of RAAC on or after September 1, 2009, in whole or in part at any time and in such order of maturity as shall be selected by RAAC at redemption price, expressed as a percentage of par, of 102% if redeemed September 1, 2009 to August 31, 2010, 101% if redeemed September 1, 2010 to August 31, 2011 and 100% if redeemed September 1, 2011 or thereafter, plus accrued interest to the date fixed for redemption.
During 2007, RAAC assumed a mortgage in relation to the purchase of a building. The original mortgage was executed in 1999 in the amount of $5,000,000. As of December 31, 2010, the interest rate is 8.31% and the outstanding principal balance is $3,899,238.
The following is a summary of changes in long-term debt for RAAC during 2010:
Beginning Ending Balance at Balance at Current January 1, 2010 Additions Reductions December 31, 2010 Portion
G. O. Bonds $ 29,035,000 - 2,980,000 26,055,000 3,155,000 Mortgage Payable 4,044,887 - 145,649 3,899,238 157,114 Section 108 Loan 6,000,000 - - 6,000,000 201,000
Total long-term liabilities $ 39,079,887 - 3,125,649 35,954,238 3,513,114
Unamortized original isssuance premium 134,732 Unamortized loss on refunding (795,396) Current portion (3,513,114) Long-term debt at year-end 31,780,460
As of December 31, 2010, RAAC had outstanding commitments of $6,885,057 related to loans which have not yet been fully drawn upon. This amount includes commitments to related parties as further discussed in Note 13.
During 2000, 2001, 2003, 2004, 2005, 2007 and 2008 RAAC issued Tax Increment Financing Bonds (TIF Bonds) to provide funds to finance infrastructure improvements within Allegheny County. The outstanding balance of the TIF Bonds at December 31, 2010 was approximately $110 million. The TIF Bonds are a limited obligation of RAAC payable solely from the tax increment revenues from the taxing bodies within the TIF District. RAAC is not obligated to pay the principal of, premium, interest, or other costs associated with the TIF Bonds. Accordingly, RAAC is substantively a conduit facilitator and the TIF Bonds are not included in RAAC's financial statements. RAAC and the County entered into an agreement in fiscal year 2005 with the US Department of Housing and Urban Development (HUD) to receive a Section 108 loan for $6 million. These funds were to be made available for loans to RIDC for specific economic development projects. As of December 31, 2010, $6,000,000 of loans had been made from these proceeds.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
RAAC currently makes quarterly interest payments to HUD as the loan earns interest at three month LIBOR plus 20 basis points. As of year end, 3 month LIBOR was .30031%. Interest payments made by RAAC during 2010 were approximately $100,000. RAAC will be required to start making annual principal payment to HUD beginning August 1, 2011. The required principal payments schedule was established by HUD and includes a final balloon payment of $2,314,000 due August 1, 2025.
RIDC is currently required to make interest payments on the outstanding loan balance at a rate of 3 month LIBOR plus 50 basis points. RAAC is permitted to retain the 30 basis points as income along with the $60,000 origination fee paid by the borrower. RIDC will begin making principal payments in 2011 to correspond with RAAC’s obligation to HUD.
Along with the Section 108 loan, RAAC also received a $2 million Brownfield Economic Development Improvement (BEDI) Grant from HUD. The proceeds of the grant are to be drawn down by RAAC and granted to the same RIDC as with the Section 108 loan funds. $500,000 of the grant funds must be retained by RAAC in a debt service reserve account. Grant funds are to be disbursed in a ratio not less than $1 of grant funds for every $3 of loan funds disbursed. As of December 31, 2010 RAAC had not received any of these grant funds from HUD, nor had RAAC made any grant disbursements. RAAC was granted an extension to draw these grant funds, and made the first draw down during March, 2011.
Allegheny County Industrial Development Authority
ACIDA issues tax-exempt and taxable limited-obligation debt through various lending and financial institutions to provide below-market interest rate financing to private-sector entities for eligible projects. The debt is secured by the property financed and is payable solely from the payments received on the underlying loans. Neither ACIDA, the Commonwealth of Pennsylvania, nor any political subdivision thereof, is obligated in any manner for the repayment of the debt. Accordingly, the debt is not reported as a liability in the accompanying financial statements.
The principal amount outstanding for the debt issued as of December 31, 2010, is approximately $714.0 million.
Allegheny HealthChoices, Inc.
AHCI has entered into an operating lease for program facility space and office equipment. Rental expenses for this operating lease were approximately $177,000 for the year ended December 31, 2010.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The following minimum rental payments are required under the lease for annual periods beyond December 31, 2010:
Year Ending December 31 Total
2011 $ 160,164 2012 159,021 2013 158,640 2014 39,660 $ 517,485
Soldiers’ and Sailors’ Memorial Hall and Museum Trust, Inc.
Memorial Hall established two $100,000 lines of credit, renewed annually, for short-term operating cash flow purposes. The rate of interest for each is 3.25% at December 31, 2010. The balances outstanding under the lines of credit at December 31, 2010 were $17,135 and $0 for operating purposes.
(9) Interfund Receivables, Payables and Transfers
Interfund receivables, payables and transfers at December 31, 2010 were comprised of the following amounts on an individual fund basis:
Due from Due to Transfers Fund Other Funds Other Funds In Out Major: General $ 48,351,510 37,950,340 43,064,149 (12,011,439) County Grants 7,135,480 2,192,338 8,788,516 (2,854,548) Human Service Grants 1,191,966 2,183,369 5,652,213 (229,557) Capital Projects 28,908,133 42,843,562 - (43,959,258)
Non-Major: Debt Service 41,710,163 42,306,296 47,567,851 (41,918,075) Transportation - - - (4,099,852) Other: Internal Service 578,183 399,530 - -
$ 127,875,435 127,875,435 105,072,729 (105,072,729)
Transfers and interfund receivables are eliminated in the government-wide statement of activities.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Usually the majority of interfund receivable and payable balances represent adjustments to reimburse the General Fund for cash disbursements made on behalf of the other funds.
In 2010, the majority of the due to due from and transfers in and out balances resulted from year-end entries transferring $41.5 million in PennDot reimbursement funds from the Capital Projects Fund to the Debt Service Fund. The large resulting fund balance in the Debt Service Fund is considered over-allocated tax revenue, which was then transferred to the General Fund.
The amount due to the Capital Projects Fund from the General Fund was mainly for temporary funding needed as a result of delays in state funding.
The General Fund Transfer Out represents a transfer to cover deficits and County matches in the Grant Funds.
The County Grants Fund Transfer Out represents interfund interdepartmental contract payments to the General Fund.
The Transportation Fund Transfer Out represents a transfer to the Debt Service Fund to pay costs associated with bonds issued for PAT projects.
Component Unit – Transactions
Due from/to component units and due to/from primary government balances were:
Due from Due to Component Unit Primary Government ACAA $ 1,492,082 1,492,082 RAAC 6,000,000 6,000,000 ACIDA - - AHCI 3,222,018 3,222,018
Due to Due from Component Unit Primary Government CCAC $ 3,960,000 750,000 PAT 3,489,954 - RAAC 242,324 242,324 AHCI 36,280 36,280 Parks Foundation 443,200 443,200
The difference in the County’s payable to CCAC and CCAC’s receivable and the difference between the County’s payable to PAT and PAT’s receivable is the result of differing fiscal years for CCAC and PAT (both June 30, 2010) and the County (December 31, 2010).
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
(10) Retirement Benefits
A. Plan Description
The County sponsors the Allegheny County Retirement System (Retirement System), a single-employer, defined benefit, contributory retirement plan covering substantially all employees. Employees contribute to the Retirement System through payroll withholdings based on a contracted rate.
At January 1, 2010, the Retirement System membership consisted of:
Retirees and beneficiaries receiving benefits 4,428 Terminated employees entitled to benefits but not yet receiving them 174
4,602 Current employees: Vested: Non-uniform 3,745 Police and Fire 155 Others 489 Nonvested: Non-uniform 2,786 Police and Fire 92 Others 212
7,479
Total 12,081
Benefit and contribution provisions for the Retirement System are determined under statutes enacted by the General Assembly of the Commonwealth of Pennsylvania. The Retirement Board, pursuant to express statutory authority, has the right to increase the employee contributions in the event it is actuarially determined that a contribution increase is required in order for the Board to meet its funding requirements. Any increase in employee contributions imposes a statutory requirement upon the County to match the employee contributions. Also, the obligation of the fund to pay retirement benefits is further secured by statutory obligation imposed upon the County to utilize its taxing authority to meet the Retirement Board's obligation to make monthly benefit payments to retirees.
Monthly benefit payments are determined for each individual according to the retirement option selected and the age and length of service at retirement. Under normal retirement (attainment of age 50 with 20 years of service for police and firefighters, age 55 with 20 years of service for jail guards, deputy sheriffs and probation officers and age 60 with 20
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
years of service for non-uniformed employees), the retirement benefit is equal to 50% of final average salary plus 1% of final average salary for each full year of service between 20 and 40 years. Final average salary is the monthly average of the 24 highest months of compensation in the last 48 months of employment preceding retirement.
The Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for the plan. A copy of the report may be obtained by writing to: Allegheny County Retirement Board 106 County Office Building 542 Forbes Avenue Pittsburgh, PA 15219
B. Funding Policy, Annual Pension Cost and Net Pension Obligation, Annual Required Contribution and Schedule of Funding
Effective January 1, 2003 and continuing through December 31, 2010, employees were required to contribute 6.0% percent of covered compensation. For the period January 1, 2002 through December 31, 2002, employees were required to contribute 5.0% percent of covered compensation. For the period January 1, 2000 through December 31, 2001, employees were required to contribute 3.8% percent of covered compensation. For the period February 1, 1998 through December 31, 1999, employees were required to contribute 6.0% of covered compensation. Prior to February 1, 1998, employees were required to contribute 7.5%. Employee contributions are matched equally by the County, as prescribed by the Second Class County Code, and deposited in the Pension Trust Fund. Employees with at least 24 months of service who terminate prior to satisfying the minimum service requirements for a retirement benefit are entitled to refunds of their contributions plus interest thereon. Interest earned for 2010 was at 2.4% per annum on contributions. Employees with less than 24 months of service who terminate prior to satisfying the minimum service requirements for a retirement benefit are entitled to refunds of their contributions only.
The County’s annual pension cost and net pension obligation for the current year is as follows:
Annual required contribution $ 63,394,000 Interest (8%) on net pension obligation 5,723,037 Adjustment to annual required contribution (8,357,238) Annual pension cost 60,759,799 Contributions made 20,115,911 Increase in net pension obligation 40,643,888 Net pension obligation beginning of year 71,537,960 Net pension obligation end of year $ 112,181,848
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The net pension obligation is included as a liability on the Statement of Net Assets.
The annual required contribution for the current year was determined as part of an actuarial valuation as of January 1, 2010, using the entry-age normal actuarial cost method. Significant actuarial assumptions and amortization methods used include: (1) a level dollar amortization method with an open, fifteen-year amortization period; (2) a rate of return on the investment of present and future assets of 8.0% per year compounded annually; (3) projected salary increases ranging from 3.5% per year to 6.0% per year according to age, compounded annually, attributable to inflation and seniority/merit; (4) non-investment expenses are assumed to be the same as in the prior year, and; (5) the actuarial value of assets is the fair market value of plan assets.
The annual pension cost for the Retirement System is as follows:
Fiscal Year Annual Pension Percentage of APC Net Pension Ended Costs (APC) Contributed Obligation (Asset)
December 31, 2010 $ 60,759,799 33.1% 112,181,848 December 31, 2009 62,952,238 30.6 71,537,960 December 31, 2008 28,662,118 64.8 27,842,515
The schedule of funding progress (in thousands) for the Retirement System is as follows:
(7) Overfunded/ (Unfunded) (3) (4) Actuarial Accrued (2) Actuarial Overfunded/ (5) Liability as a (1) Actuarial Accrued (Unfunded) Funded (6) Percentage of Actuarial Value of Liability- Actuarial Ratio Covered Covered Payroll Valuation Date Assets Entry Age Accrued Liability (2/3) Payroll [4/6]
January 1, 2010 $ 652,643 1,119,326 (466,683) 58.3% 340,879 (136.9%) January 1, 2009 582,099 1,067,015 (484,916) 54.6 326,803 (148.4) January 1, 2008 798,203 979,599 (181,396) 81.5 317,380 (57.2)
As noted above, certain pension information and calculations are based upon an actuarial valuation performed as of January 1, 2010. The next actuarial valuation will be performed as of January 1, 2011 and will take into account subsequent increases in the market value of investments being held in the plan and the January 1, 2011 1.0% employee/employer increase in the contribution rate. While the exact impact is not known, it is expected that the market increases will positively impact the funding status of the plan and decrease the future funding requirements of the plan.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
C. Voluntary Separation Program
The County offered to certain employees a Voluntary Separation Program in 2007 which provided two groups with four options. The first group had to meet the minimum retirement age of 55 and have 20 years of service or who are at least 60 years of age with at least eight years of service as of December 29, 2007. The first group could accept one of three options as follows: Option A - a one time cash payment of $12,000 payable January 11, 2008. A total of 19 employees accepted that option. Option B - $400 per month for four years that may be used to offset the cost of healthcare coverage beginning January, 2008. A total of 72 employees accepted that option. Option C - a one time cash payment of $5,000 payable January 11, 2008 and $200 per month for four years that may be used to offset the cost of healthcare coverage beginning January, 2008. A total of 7 employees accepted this offer. The second group must have at least eight years of service as of December 29, 2007, to be eligible for the following: Option D - a one time cash payment of $8,000 payable on January 11, 2008. A total of 20 employees accepted that offer. At December 31, 2010, 67 employees continue to collect the $400 healthcare allowance and 7 employees continue to collect the $200 healthcare allowance. The future estimated liability of the healthcare allowance has been calculated using the discounted present value of expected future benefits payments method and a discount rate of 0.5%. The future estimated liability of the healthcare allowance is approximately $336,716 and has been included in the County's government-wide statements as other liabilities.
Component Units - Retirement Benefits
Allegheny County Airport Authority
Employees of ACAA are members of the County’s Retirement System, and as such, all required disclosures are the same.
Port Authority of Allegheny County
A. Plan Description
All full-time employees of PAT are eligible to participate in one of three retirement and disability allowance plans to which PAT contributes. The three plans are as follows: (1) plan for employees represented by Local 85 of the Amalgamated Transit Union (ATU Plan); (2) plan for employees represented by Local 29 of the International Brotherhood of Electrical Workers (IBEW Plan), and; (3) plan for employees who are not represented by a union (Non -Rep Plan).
Under each of the three plans, employees’ eligibility for normal benefits begins at age 65, at which time the individual is entitled to an annual retirement benefit, payable monthly for life, in an amount equal to 2.25% of the average annual compensation for the last 16 quarters
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
of employment times the years and months of continuous service, or the average of the highest four of the last eight years immediately preceding the date of retirement, whichever is highest.
Early retirement is available to all participants who have reached the age of 55 and have at least 10 years of service or who meet certain continuous service requirements. Early retirement with full benefits is available after 25 years of continuous service for all plans. Early retirement with full benefits also is available after age 55 to those participants meeting certain service requirements. Individuals not meeting these requirements who retire after age 55 but prior to the date of normal benefits receive reduced benefits. The cost sharing of healthcare benefits is being provided from PATs operating revenues for ATU and IBEW employees. Health care benefits for retirees in the NonRep Plan were eliminated for those retiring on or after July 1, 2007.
For new hires, the Plans were amended to replace the eligibility requirement for unreduced early retirement benefits from 25 years of service without regard to age, to 25 years of service and age 55. These amendments were effective as of December 1, 2005 for the ATU and NonRep Plans and May 1, 2006 for the IBEW Plan.
Benefit provision for the ATU and IBEW Plans are established and amended by the Retirement and Disability Allowance Committees for each plan, as stated in written agreements. All three plans issue separate audited financial statements that can be obtained from PAT’s Finance Department.
B. Funding Policy, Annual Pension Cost and Schedule of Funding
Participants in the Non-Rep and IBEW Plans contribute 4.5% and 4.0%, respectively, of pension earnings to their respective plan. Effective January 1, 2010, ATU employees contribute 5.5% to their respective plan. Prior to January 1, 2010, ATU employees contributed 4.5%. PAT’s contributions to the plans are based on actuarially determined rates.
The annual required contributions were computed as part of an actuarial valuation performed as of January 1, 2009, for all the Plans, using the entry-age normal actuarial cost method. Significant assumptions utilized in performing the valuations were: (1) a rate of return on the investment of present and future assets of 8.0% per year compounded annually; (2) mortality table-RP-2000, for healthy lives; for disabled lives, mortality is in accordance with the mortality table specified in the IRS Revenue Ruling 96-7 for disabilities occurring prior to 1995; (3) retirement probabilities at each age applied, beginning with the earliest eligibility for retirement and ending at age 65; (4) projected wage increases of 2%-3% for ATU Plan, 3.5% for IBEW and NonRep Plan; (5) actuarial cost method entry age normal; (6) amortization method level dollar monthly payments; (7) asset valuation method smoothed market; (8) closed remaining amortization periods of 21 years for the ATU Plan, 25 years for the IBEW Plan, and 22 years for the Non-Rep Plan, and the ATU Plan has 2005 Actuarial
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
loss of 12 years and the ATU Plan and the Non-Rep Plan has 2006 Actuarial loss of 13 years. Assumption change at 1/1/07 is 23 years for ATU Plan and Non-Rep Plan, the 2007 Actuarial gain is 14 years for ATU Plan and Non-Rep Plan. NonRep Plan has Assumption change and Plan change at 1/1/08 of 24 years, and 2008 Actuarial loss of 15 years. ATU Plan has 2009 Actuarial loss of 15 years and Assumption change at 1/1/09 of 25 years.
The annual pension cost for the three plans are as follows: ATU Plan
Net Pension Fiscal Year Annual Pension Percentage of (Asset) Ending Cost (APC) APC Contributed Obligation
June 30, 2010 $ 23,470,193 121% (8,893,896) June 30, 2009 9,734,310 146% (3,991,305) June 30, 2008 12,859,942 116% 481,296
IBEW Plan Net Pension Fiscal Year Annual Pension Percentage of (Asset) Ending Cost (APC) APC Contributed Obligation June 30, 2010 683,933 79% (296,098) June 30, 2009 255,013 515% (517,433) June 30, 2008 1,098,927 60% 540,401
Non-Rep Plan Net Pension Fiscal Year Annual Pension Percentage of (Asset) Ending Cost (APC) APC Contributed Obligation
June 30, 2010 5,022,569 109% (908,110) June 30, 2009 3,675,660 124% (444,416) June 30, 2008 4,544,609 90% 431,923
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Individual schedules of funding progress for the three plans are as follows:
ATU Plan (Amounts in thousands) (3) (4) (7) (1) (2) Actuarial Unfunded (5) Unfunded Actuarial Actuarial Accrued Actuarial Funded (6) Actuarial Accrued Liability Valuation Value of Liability- Accrued Ratio Covered (4) as a Percentage of Date Assets Entry Age Liability (2/3) Payroll Covered Payroll [4/6]
January 1, 2009 $ 624,449 774,856 150,407 80.6% 134,547 111.8% January 1, 2008 741,403 762,018 20,615 97.3 123,955 16.6 January 1, 2007 706,909 754,026 47,117 93.8 129,386 36.4 January 1, 2006 690,376 711,093 20,717 97.1 128,006 16.2 January 1, 2005 703,755 706,123 2,368 99.7 128,433 1.8
IBEW Plan (Amounts in thousands)
(3) (4) (7) (1) (2) Actuarial Unfunded (5) Unfunded Actuarial Actuarial Accrued Actuarial Funded (6) Actuarial Accrued Liability Valuation Value of Liability- Accrued Ratio Covered (4) as a Percentage of Date Assets Entry Age Liability (2/3) Payroll Covered Payroll [4/6] January 1, 2009 $ 18,565 23,613 5,048 78.6% 2,897 174.2% January 1, 2008 22,448 22,844 396 98.3 3,083 12.8 January 1, 2007 20,798 23,774 2,976 87.5 3,252 91.5 January 1, 2006 20,293 21,012 719 96.6 3,233 22.2 January 1, 2005 20,235 20,183 (52) 100.3 3,107 (1.7)
Non-Rep Plan (Amounts in thousands)
(3) (4) (7) (1) (2) Actuarial Unfunded (5) Unfunded Actuarial Actuarial Accrued Actuarial Funded (6) Actuarial Accrued Liability Valuation Value of Liability- Accrued Ratio Covered (4) as a Percentage of Date Assets Entry Age Liability (2/3) Payroll Covered Payroll [4/6] January 1, 2009 $ 57,197 100,652 43,455 56.8% 16,954 256.3% January 1, 2008 67,237 99,555 32,318 67.5 16,242 199.0 January 1, 2007 68,630 107,269 38,639 64.0 17,481 221.0 January 1, 2006 65,570 96,734 31,164 67.8 17,039 182.9 January 1, 2005 65,904 94,345 28,441 69.9 16,687 170.4
The ATU, IBEW, and NonRep Plans had actuarial losses during 2008 (January 1, 2009 actuarial valuation) of $147 million, $5.2 million, and $11.7 million, respectively. The rate of return on the actuarial value of assets, which is the smoothed value used for funding was less than the 8.0% valuation interest assumption, resulting in actuarial losses. The next actuarial valuation will be performed as of January 1, 2010.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Annual pension cost and net pension assets for the three plans for the current year are as follows: NonRep
ATU Plan IBEW Plan Plan Annual required contribution $ 23,775,612 678,544 5,013,989 Interest on net pension obligation (319,304) (41,395) (35,553) Adjustment to annual required contribution 13,885 46,784 44,133 Annual pension cost 23,470,193 683,933 5,022,569 Contributions made 28,372,784 462,598 5,486,264 Increase (decrease) in net pension obligation (4,902,591) 221,335 (463,695) Net pension obligation (asset) beginning of year (3,991,305) (517,433) (444,415) Net pension obligation (asset) end of year $ (8,893,896) (296,098) (908,110)
Community College of Allegheny County
Substantially all full-time employees of CCAC are covered under either the Pennsylvania Public School Employees Retirement System (PSERS), the Pennsylvania State Employees Retirement System (SERS), the Teachers Insurance and Annuity Association - College Retirement and Equity Fund (TIAA-CREF) or the Fidelity Retirement Plan. About 96.5% of eligible employees participate in TIAA-CREF, Fidelity or Lincoln Financial plans, which are cost-sharing, multiple-employer defined contribution plans plus investment earnings. Employer and employee contribution rates are established by collective bargaining agreements with the American Federation of Teachers and the Service Employees International Union (SEIU). The agreements require contributions by active members and CCAC. Active members contribute at a rate of 5% of qualifying compensation and CCAC contributes at a rate of 5% of the first $6,000 and 10% of the remaining qualifying compensation. The contributions to TIAA-CREF Fidelity and Lincoln Financial plans for the year ended June 30, 2010, were $4,239,372 from CCAC and $2,077,926 from employees.
PSERS is a governmental, cost-sharing, multiple-employer defined benefit public employee retirement system in which about 2.5% of eligible employees participate. It provides retirement and disability benefits, legislatively mandated ad-hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying annuitants. PSERS issues a comprehensive annual financial report that includes financial statements and required supplementary information for the plan. A copy of the report may be obtained by writing to:
Public School Employees’ Retirement System P. O. Box 125 Harrisburg, PA 17108 - 0125
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Article II of the Commonwealth of Pennsylvania’s Constitution assigns the authority to establish and amend the benefit provisions of the plan to the General Assembly. The contribution policy for PSERS is established in the Public School Employees’ Retirement Code and requires contributions by active members, CCAC, and the Commonwealth of Pennsylvania. The contribution rate for CCAC and the Commonwealth is an actuarially determined rate. The current rate at June 30, 2010, is 2.38% of annual covered payroll for each.
CCAC and the Commonwealth’s contributions to PSERS for the year ending June 30, 2010, was $91,857 and equaled the required contractual contribution. At the time of transition to GASB Statement No. 27, "Accounting for Pensions by State and Local Government Employers," there was no pension liability or asset.
SERS is a governmental, cost-sharing, multi-employer defined benefit public employee retirement plan. It provides retirement, death and disability benefits, and legislatively mandated ad-hoc cost-of-living adjustments. Article II of the Commonwealth of Pennsylvania’s Constitution assigns the authority to establish and amend the benefit provisions of the plan to the General Assembly. SERS issues a publicly available annual financial report that includes financial statements and required supplementary information for the plan. A copy of the report may be obtained by writing to:
Commonwealth of Pennsylvania State Employees’ Retirement System P. O. Box 1147 Harrisburg, PA 17108 - 1147
The contribution policy for SERS, as established by SERS’ Board, requires contributions by active members, CCAC and the Commonwealth. Active members contribute at a rate of 6.25% of their qualifying compensation. The contribution rate for both CCAC and the Commonwealth, which at June 30, 2010, was 3.15% of annual covered payroll, is an actuarially determined rate. CCAC contributions to SERS for the years ending June 30, 2010, was $26,889, equal to the required contractual contribution. At the time of transition to GASB Statement No. 27, "Accounting for Pensions by State and Local Government Employers," there was no pension liability or asset.
CCAC, as part of its collective bargaining agreement with the American Federation of Teachers, has an Early Retirement Incentive Program (ERIP) for eligible participants. At various times, CCAC has also offered different versions of early retirement incentive plans to both administrative and clerical employees.
An ERIP was offered in the Spring of 2004 for eligible AFT and Administrative employees. Four employees elected to participate in the plan, but deferred their retirement to a later date. Subsequently, these four individuals retired and received their lump sum payments prior to June 30, 2005, and their first $6,500 payment was scheduled for September 1, 2005
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
and each September 1 thereafter, through September 1, 2009. The final $6,500 payment for these four individuals was accrued as a liability at their net present value, including associated FICA taxes, as of June 30, 2009.
(11) Postemployment Benefits Other Than Pension Benefits
A. Plan Description
In addition to the pension benefits, previously described, the County provides post-retirement life insurance benefits to all retirees, and healthcare coverage and major medical insurance to certain retirees through a single employer defined benefit plan. The benefit, limits and employee and employer contributions are established through union contracts and past practices. The plan is not accounted for as a trust fund, an irrevocable trust has not been established, the plan does not issue a separate report and activity of the plan is reported in the County’s General and Internal Service Funds.
B. Benefits Provided
Life Insurance Benefits
The County provides postemployment life insurance benefits in accordance with the requirements set forth by the Retirement Board of Allegheny County to all employees who retire from the County. Retired members of bargaining units are eligible for a $4,000 life insurance benefit and retired management and confidential employees are eligible for $10,000 life insurance benefit. The County's share of the life insurance premiums is determined by the retiree’s former bargaining unit. Currently, 3,696 retirees meet those eligibility requirements. The County's General Fund expenditures for all postemployment life insurance benefits were $626,127 ($679,214 net of retiree contributions of $53,087) in 2010.
HealthCare Coverage
The County provides postemployment healthcare coverage benefits to certain retirees in accordance with agreements between the County and the respective unions. At December 31, 2010, 80 retired police officers are covered by health insurance. The County’s expenditures for health insurance benefits were $674,784 ($834,227 net of retiree contributions of $159,443) in 2010. The costs associated with this benefit are paid by the County’s General Fund and are not prefunded.
At December 31, 2010, 43 correctional officers who retired are eligible to receive up to $300 per month towards the cost of health insurance for the correctional officer and spouse for up to 5 years. The County’s expenses for health insurance benefits were $119,725 in 2010. The costs associated with this benefit are paid by the County’s General Fund and are not prefunded.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
At December 31, 2010, 13 sheriffs who retired are eligible to receive up to $300 per month towards the cost of health insurance for the correctional officer and spouse for up to 5 years. The County’s expenses for health insurance benefits were $36,429 in 2010. The costs associated with this benefit are paid by the County’s General Fund and are not prefunded.
Major Medical Insurance
The County provides postemployment major medical insurance benefits to certain retirees who retired prior to January 1, 1994. The coverage entitles retirees to benefits for medical services rendered that are in excess of their individual plans. Currently, 156 retirees are enrolled in the major medical insurance program. The County's expenses for major medical insurance benefits were $253,298 ($420,539, net of retiree contributions of $167,241) in 2010.
C. Funding Policy
These Other Post Employment Benefits (OPEB) are expensed when incurred and are financed on pay-as-you-go basis. For 2010, the County incurred $1,710,363 for post employment benefits other than pension benefits. Retiree’s receiving benefits contributed $379,771 through their deductions.
Eligible police retirees contribute 20% of the medical monthly premium rate.
The closed group of retired and disabled employees participating in the retiree major medical insurance contribute $78.10 monthly for individual coverage and $139.87 monthly for family coverage. These required monthly contributions will not increase in the future. Surviving spouse may continue coverage by making required contribution.
The County’s annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (of funding excess) over a closed period not to exceed 30 years. The following table shows the component of the County’s annual OPEB cost, the amount actually contributed, and changes in the County’s net OPEB obligation:
Annual required contribution $ 7,770,311 Interest on net OPEB obligation 515,683 Adjustment to annual required contribution (717,024) Annual OPEB cost 7,568,970 Contributions made (1,710,363) Increase in net OPEB obligation 5,858,607 Net OPEB obligation – beginning of year 12,892,087 Net OPEB obligation – end of year $ 18,750,694
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The County’s annual OPEB cost, the percentage of annual OPEB cost contributed and the net OPEB obligation were as follows: Percentage of Net OPEB Annual OPEB AOC Obligation Fiscal Year Ending Cost (AOC) Contributed (Asset)
December 31, 2010 $ 7,568,970 22.6% $ 18,750,694 December 31, 2009 7,661,821 22.4 12,892,087 December 31, 2008 6,313,930 26.9 6,946,765 December 31, 2007 6,370,065 26.3 4,694,436 An actuarial valuation was performed as of January 1, 2009 thus the Net OPEB obligation is an estimate for 2009 and 2010. The ARC was computed using the following actuarial assumptions: (1) actuarial cost method projected unit credit; (2) amortization method level dollar; (3) closed amortization period of 30 years; (4) discount rate of 4% compounded annually; (4) mortality RP-2000 table, with projections for future improvement through 2007 by scale AA for active and mortality rates for disabled, and (5) healthcare cost trend rates of 9%, grading to 5% in 5 years.
The schedule of funding progress (in thousands) for the postemployment medical and life insurance benefits is as follows:
Unfunded UAAL as a Actuarial Actuarial Percentage Accrued Accrued of Actuarial Liability Liability Funded Covered Covered Actuarial Value of (AAL)-PUC (UAAL) Ratio Payroll Payroll Valuation Date Assets (a) (b) (b)-(a) (a)/(b) (c) [(b)-(a)]/(c)
January 1, 2009 $ - 96,617 96,617 0.00% 316,473 30.52% January 1, 2009 - 96,617 96,617 0.00% 306,213 31.55 January 1, 2008 - 83,674 83,674 0.00 293,809 28.48 January 1, 2007 - 73,313 73,313 0.00 264,631 27.70 Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Healthcare cost trend assumptions are based on recent experience and anticipated future cost increases under the County’s medical plans. Amounts determined regarding the funded status and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.
Component Units - Postemployment Benefits Other Than Pension Benefits
Allegheny County Airport Authority
In addition ACAA has a Post Employment Medical Benefits Plan which is a single-employer defined benefit healthcare plan administered by the ACAA. There is no separate audit requirement. The plan provides reimbursement for medical benefits to eligible firefighter retirees hired before May 1, 2005 and their spouses. Benefits are provided according to retirees date of retirement and the benefits allotted as of the plan benefits at that date. The retiree is responsible for any premium cost in excess of the provided benefit. Payments to the retirees are made on a reimbursement basis. The ACAA does not have a funding policy for post employee benefits at this time.
The ACAA’s annual other post employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities over an open period not to exceed thirty years. An actuarial valuation was performed for 2009. The following table shows the components of the ACAA’s annual OPEB cost, the amount actuarially contributed to the plan, and the changes in the net OPEB obligation:
Annual required contribution $ 105,647 Interest on net OPEB obligation 1,841 Adjustment to annual required contribution (3,445) Annual OPEB cost 104,043 Contributions made 78,969 Increase in net OPEB obligation 25,074 Net OPEB obligation - beginning of year 77,097 Net OPEB obligation - end of year $ 102,171
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The ACAA’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2010, 2009 and 2008 were as follows:
Percentage of Net OPEB Fiscal Year Annual OPEB Annual OPEB Obligation Ended Costs Cost Contributed (Asset)
December 31, 2010 $ 104,043 75.90% $ 102,171 December 31, 2009 101,381 69.40% 77,097 December 31, 2008 101,381 84.80% 46,024
As of January 1, 2009, the date of the most recent actuarial valuation date, the actuarial accrued liability for benefits was $991,481, all of which was unfunded. The contributions were made on a pay as you go basis. Actuarial valuation of an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and healthcare cost trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions as actual results are compared with past expectations and new estimates are made about the future.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short- term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.
In the January 1, 2009 actuarial valuation, the following actuarial assumptions were used:
Actuarial cost method Projected unit credit Interest rate 4% compounded annually Amortization method Level dollar Amortization period 30 years, open
Port Authority of Allegheny County
Plan Descriptions: In addition to the pension benefits PAT provides certain post-retirement healthcare benefits to its retirees. In accordance with the Retirement and Disability Allowance Plans for union and non-union employees, post-retirement benefits are provided to those who become entitled to receive a pension allowance or a disability allowance. Post- retirement benefits consisting of medical, hospital, prescription, dental and vision insurance coverage, and Medicare Part B premium reimbursement is provided for the life of the retiree.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Benefit provisions for the ATU and IBEW Plans are established and amended though negotiations between PAT and the respective unions. For the NonRep Plan, that authority rests with the PAT’s Board of Directors. The Plans do not issue publicly available financial reports.
Funding Policy: PATs contribution is based on projected pay-as-you-go financing requirements. For fiscal year 2010, PAT contributed $32,591,679 to the plans. Plan members receiving benefits contributed $2,406,982 through their contributions as required by the cost sharing provisions of the Plans. Under these provisions, retirees receiving benefits pay a certain percentage of any cost increases after the base year, as determined by the respective plans. Retiree cost sharing percentages for the ATU, IBEW, and NonRep plans are based on the particular health care coverage that is selected by the retiree, the number of family members covered and the age of the retiree and each covered family member, and when retirement became effective.
Annual OPEB Cost: PAT’s annual OPEB cost (expense) for each plan is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (of funding excess) over a period not to exceed thirty years.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.
The net OPEB obligation were computed as of January 1, 2009, projected forward to January 1, 2010 used the following assumptions: (1) actuarial cost method projected unit credit; (2) amortization method level dollar; (3) an open amortization period of 30 years; (4) investment rate of return 4%; (4) projected salary increases 3.5%; mortality RP-2000 table,
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
with collar adjustments, and projected to 2007; and (5) inflation rate in medical 8.85% in 2009, grading to 5% in 2018, dental 7% in 2009, grading to 5% in 2018, and vision 2% per year.
PAT’s OPEB cost for 2010 increased approximately $16 million from 2009. The next actuarial valuation will be performed as of January 1, 2011.
Three year trend information:
ATU Plan Percentage of Net OPEB Fiscal Year Annual OPEB AOC Obligation Ending Cost (AOC) Contributed (Asset)
June 30, 2010 $ 60,154,667 47% $ 127,855,275 June 30, 2009 44,675,402 60% 95,860,409 June 30, 2008 63,593,737 35% 78,054,137
IBEW Plan Percentage of Net OPEB Fiscal Year Annual OPEB AOC Obligation Ending Cost (AOC) Contributed (Asset) June 30, 2010 1,872,221 39% 4,944,807 June 30, 2009 1,787,170 34% 3,793,715 June 30, 2008 1,725,178 22% 2,609,741
Non-Rep Plan Percentage of Net OPEB Fiscal Year Annual OPEB AOC Obligation Ending Cost (AOC) Contributed (Asset)
June 30, 2010 4,353,911 85% 1,309,415 June 30, 2009 3,476,526 105% 666,253 June 30, 2008 3,553,400 107% 841,424
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Individual schedules of funding progress for the three plans are as follows:
ATU Plan (Amounts in thousands)
(3) (4) (7) (2) Actuarial Unfunded (5) Unfunded Actuarial (1) Actuarial Accrued Actuarial Funded (6) Accrued Liability (4) as a Actuarial Value of Projected Accrued Ratio Covered Percentage of Covered Valuation Date Assets Unit Credit Liability (2/3) Payroll Payroll [4/6]
January 1, 2009 * $ - 713,477 713,477 0.0% 134,547 530.3% January 1, 2008 ** $ - 568,970 568,970 0.0% 129,386 439.7% January 1, 2007 *** - 650,103 650,103 0.0% 129,386 502.5%
IBEW Plan (Amounts in thousands)
(3) (4) (7) (2) Actuarial Unfunded (5) Unfunded Actuarial (1) Actuarial Accrued Actuarial Funded (6) Accrued Liability (4) as a Actuarial Valuation Value of Projected Accrued Ratio Covered Percentage of Covered Date Assets Unit Credit Liability (2/3) Payroll Payroll [4/6]
January 1, 2009 * $ - 22,325 22,325 0.0% 2,897 770.6% January 1, 2008 ** $ - 17,813 17,813 0.0% 3,252 547.8% January 1, 2007 *** - 16,903 16,903 0.0% 3,252 519.8%
Non-Rep Plan (Amounts in thousands)
(3) (4) (7) (2) Actuarial Unfunded (5) Unfunded Actuarial (1) Actuarial Accrued Actuarial Funded (6) Accrued Liability (4) as a Actuarial Valuation Value of Projected Accrued Ratio Covered Percentage of Covered Date Assets Unit Credit Liability (2/3) Payroll Payroll [4/6]
January 1, 2009 * $ - 76,701 76,701 0.0% 16,954 452.4% January 1, 2008 ** $ - 61,241 61,241 0.0% 17,481 350.3% January 1, 2007 *** - 62,675 62,675 0.0% 17,481 358.5%
* Projected forward to 1/1/10 ** Projected forward to 1/1/09 *** Projected forward to 1/1/08
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
The following table shows the PAT’s annual OPEB cost, the amount actually contributed, and changes in the net OPEB for the three plans.
NonRep ATU Plan IBEW Plan Plan Annual required contribution $ 61,650,652 1,931,425 4,364,309 Interest on net OPEB obligation 3,834,416 151,749 26,650 Adjustment to annual required contribution (5,330,401) (210,953) (37,048) Annual OPEB cost 60,154,667 1,872,221 4,353,911 Contributions made 28,159,801 721,129 3,710,749 Increase (decrease) in net OPEB obligation 31,994,866 1,151,092 643,162 Net OPEB obligation (asset) beginning of year 95,860,409 3,793,715 666,253 Net OPEB obligation (asset) end of year $ 127,855,275 4,944,807 1,309,415
(12) Contingencies
The County is subject to certain regulatory and contractual requirements and is party to various litigation and claims, the more significant of which are described below. No amounts have been accrued for these cases unless otherwise stated.
A. The County receives significant financial assistance from federal and Commonwealth of Pennsylvania governmental agencies in the form of grants and other entitlements. The receipt of funds under such programs generally requires compliance with terms and conditions specified in the grant agreements, and is subject to audit by grantor agencies. Any disallowed costs resulting from such audits could become a liability of the County's General Fund or other applicable funds. The amount, if any, of expenditures that may be disallowed by the granting agencies cannot be determined at this time. County management expects such additional amounts, if any, to be immaterial.
B. In the ordinary course of the County's operations, there have been various legal proceedings initiated by citizens, job applicants, subcontractor’s employees, former or current County employees for alleged violations of federal constitutional rights, such as, wrongful terminations, civil rights violations, political affiliation, race, gender, and equal pay brought against the County. Management is of the opinion that these matters will not have a materially adverse effect on the County's financial position.
C. The County is a defendant in approximately 15 actions associated with former inmates for deaths, unwanted sexual contact, constitutional and/or civil rights violations. Discovery continues in six cases, three answers have been filed, two motions granted and under appeal, one appeal to the Third Circuit Court of Appeals and one trial, mediation and stay. It is premature at this time to state with any degree of certainty the likelihood of favorable
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or unfavorable outcomes in any of these cases.
D. The County is a defendant in an action filed by an inmate alleging violation of his constitutional rights from an 18 year incarceration and subsequent acquittal for murder. Plaintiff also alleges malicious prosecution and professional negligence. The Third Circuit Court of Appeals affirmed a lower court ruling in favor of defendants. Plaintiff recently filed a petition to the U.S. Supreme Court. It remains, premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
E. The County is a defendant or has received notice of ten potential claims for deaths/ personal injury and/or property damage from incidents on County roadways or properties. One case is scheduled for trial, one case has a hearing scheduled and eight cases are in discovery. It is premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
F. The County is a defendant in a wrongful death action filed by the administrator of a decedent’s estate alleging problems in design and functioning of the equipment used in the County’s 911 Call Center System. The case is still pending in the Court of Common Pleas. . It remains premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
G. The County is a defendant in a suit alleging negligence of a 911 Call Center dispatcher in regard to real property damage. An answer was filed in this matter and the case has entered the discovery phase. It is premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
H. The County is a defendant in a class action alleging disproportionate distribution of the property tax burden within the County in violation of the PA and U.S. Constitutions. Preliminary objections were granted to all defendants by the trial court and plaintiffs appealed to Commonwealth Court. It is premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
I. The County is a defendant in an alleged class action lawsuit relating to the sale of delinquent tax liens and attempted enforcement by a third party. An answer and a new matter were filed to plaintiff’s amended complaint. It is premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
J. The County is a defendant in a suit alleging a plaintiff’s right was interfered with to enter onto and conduct surface mining operations on a 93 acre portion of South Park and that such interference constitutes a de facto taking of his coal rights. Commonwealth Court recently affirmed a lower court ruling in favor of County denying plaintiff’s request to strip mine coal. It is premature at this time to state with any degree of certainty the likelihood of a favorable or unfavorable outcome.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
K. The County settled a case alleging the unconstitutionality of strip searches in the Jail between 2004 and 2008 in the amount of $3 million. This expense is included in the government-wide financial statements. The expenditures on the fund financial statements will be recognized as follows: $2.5 million in 2011 and $.5 million in 2012.
L. The County is engaged in employment contract negotiation with Jail employees. They are currently engaged in arbitration. The expected outcome to be an agreement which will include raises retroactive to July 1, 2010. It is premature at this time to state with any degree of certainty the amount of the award.
Component Units - Contingencies
Allegheny County Airport Authority
A. ACAA revenue bond obligations (the Revenue Bonds) total $410,640,000 at December 31, 2010. The principal, interest and redemption premiums, if any, related to the Revenue Bonds are payable by ACAA only out of "net revenues" as defined and from such other monies as may be available for such purpose (Debt Service Reserve Fund). Certain bonds are subject to redemption, at the option of PIA, as a whole or in part, from time to time. The Revenue Bonds do not constitute a legal or equitable pledge, charge, lien or encumbrance upon any of ACAA's properties, including PIA, or upon any of its income, receipts or revenues except as noted above in Note 8. The holders of the Revenue Bonds have no claim upon the taxing power or tax revenues of the County.
ACAA's ability to derive net revenues from its operation of PIA depends upon various factors, many of which are not within the control of ACAA. The primary source of net revenues is the AOA (see Note 1) between ACAA and the signatory airlines, of which US Airways is the primary airline, accounting for approximately 30.8% of the total revenues of PIA in 2010. The AOA provides for the landing fees, terminal rentals and ramp fees to be charged the airlines. In addition, the signatory airlines are also obligated to pay costs associated with aircraft support systems and tenant improvements, and US Airways is obligated to pay costs associated with certain exclusive-use systems and facilities.
At any point in time, the U.S. economy, excess airline capacity and industry-wide competition through airfare discounting constitute significant constraints on the operations of the airlines. Due to these factors, the financial results of PIA are largely dependent upon conditions in the national economy and the U.S. airline industry, and the financial condition of carriers, such as US Airways, which provide significant levels of service at PIA.
The scheduled payments of principal and interest on the Revenue Bonds when due are guaranteed by various third-party insurers and guarantors. Payment of the principal and interest on the Series 1997 and Series 2001 Bonds is insured by MBIA. Payment of the principal and interest on the Series 2002 Bonds is insured by FGIC. Payments of the principal and interest on the Series 2007 Bonds is insured by FSA, Inc. Payments of the
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
principal and interest on the Series 2010 Bonds is insured by Assured Guaranty Municipal Corporation. The ultimate ability of such insurers and guarantors to meet their obligations with respect to the Revenue Bonds will be predicated on their future financial condition.
B. ACAA receives significant financial assistance from federal and state governmental agencies in the form of grants and other entitlements. The disbursement of resources received under such programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by grantor agencies. ACAA’s management believes disallowances, if any, will be immaterial.
C. The Pennsylvania Department of Environmental Protection (DEP) issued an Administrative Order dated January 26, 1998 to the County, which alleges violations of a January 1994 Consent Order and Adjudication and violations of the Pennsylvania Clean Streams Law at PIA. The Administrative Order cited several areas, all of which have been resolved, except for the deicing. ACAA has withdrawn a previous appeal without prejudice and continues to negotiate with DEP to reach a resolution of the matter. ACAA continues to address the deicing issues and has spent and continues to budget for significant capital funds in the near future to attempt to resolve the deicing problem.
D. In the ordinary course of ACAA’s operations, there have been various legal proceedings brought against ACAA. ACAA management is of the opinion that these matters will not have a materially adverse effect on ACAA's financial position and results of operations.
Port Authority of Allegheny County
A. In the ordinary course of PAT's operations and capital grant projects, there have been various legal proceedings brought against PAT. PAT has estimated and accrued a provision of approximately $4.4 million in potential losses resulting from all of the cases for which it is currently aware. Based on an evaluation which included consultation with outside legal counsel concerning the legal and factual issues involved, PAT management is of the opinion that these matters will not result in materially adverse effect on PAT's operations and financial position.
B. PAT is subject to state and federal audits by grantor agencies. These laws and regulations are complex and subject to interpretation. PAT management is not aware of any pending audit involving prior or current years; however, compliance with such laws and regulations can be subject to future reviews and interpretation, which could result in disallowed costs.
C. PAT has entered into a full funding grant agreement with the Federal Transit Administration for the federal share of the North Shore Connector project. It involves extending PAT’s existing Light Rail Transit system (LRT) in Pittsburgh’s urban core. The project would create a 1.5 mile extension of the LRT from the Gateway Center Station to Pittsburgh’s North Shore via a bored tunnel under the Allegheny River. The capital costs of this project are estimated to be $528.8 million and will be paid from federal, state and local
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
sources. At June 30, 2010, approximately $384.4 million of projects costs had been incurred and PAT’s contract commitments related to this project approximated $111.5 million.
Community College of Allegheny County
CCAC is defendant in several legal proceedings related to alleged discrimination, violation of civil rights, negligence, and other matters which individually or in the aggregate involve amounts that could be material to its financial statements. CCAC plans to vigorously defend itself related to these matters and believes it has meritorious defenses to the claims brought against it. At this time, management cannot determine the outcome of these matters or timing thereof. Accordingly, no provision for any loss that may result upon resolution of these matters has been made at June 30, 2010.
Redevelopment Authority of Allegheny County
RAAC is exposed to various risks of loss related to torts; theft of damage to, and destruction of assets; errors and omissions; breach of contract; and natural disasters, for which the RAAC carries commercial insurance. There have been no claims resulting from these risks in the current year.
Allegheny HealthChoices, Inc.
AHCI’s financial and program records are subject to examination by appropriate government authorities in accordance with terms of the various grant awards and contracts. The government authorities are authorized to review actual expenditures and to make necessary adjustments in subsequent reimbursements or request refunds of grant amounts, if warranted.
Allegheny County Parks Foundation
The Foundation has received a conditional grant from the Jewish Healthcare Foundation in the amount of $60,000 to fund the Montour Trail Project. The grant is contingent upon successful completion of project milestones established in connection with the initial unconditional grant received from the Jewish Healthcare Foundation and the Parks Foundation’s successful solicitation of additional funds to complete the project.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
(13) Related Party Transactions (see Note 1)
The County provides various administrative support services to the following related organizations: Allegheny County Residential Finance Authority Authority for Improvements in Municipalities Allegheny County Hospital Development Authority Allegheny County Higher Education Building Authority The costs of services provided to these organizations are fully recovered through contractual arrangements.
The County also enters into agreements with the Allegheny County Housing Authority. These agreements are for services performed for the County by the Housing Authority related to federal and state grant projects.
Component Unit – Related Party Transactions
Port Authority of Allegheny County
PAT has a contract with Veolia Transportation Services, Inc. which provides professional services to coordinate the paratransit system, ACCESS, which provides transit services within the County for elderly and handicapped individuals. Expenses under this contract amounted to $24 million in fiscal 2010. PAT currently receives partial reimbursement for these services from the Commonwealth in the form of a grant. The amount is based on ridership and average fare statistics. Revenue under this program totaled $11.8 million in fiscal 2010.
Redevelopment Authority of Allegheny County
RAAC entered into an agreement with C.B. Richard Ellis (who employs a RAAC board member) to provide management services for a property owned by RAAC. During fiscal year 2010 RAAC paid approximately $27,097 in management, engineering, and maintenance fees to C.B. Richard Ellis. This contract was entered into prior to the board member being employed by C.B. Richard Ellis.
RAAC has entered into an agreement to provide funding through CDBG funds and an EDF loan to the ACAA for costs related to the design, engineering, and construction of the Industry Drive Extension. Total CDBG funds committed are not to exceed $2.25 million. As of December 31, 2010, the loan has an outstanding balance of $1,314,172. Additionally, RAAC received grant funds which were used to provide infrastructure improvements related to the Industry Drive Extension on behalf of ACAA in the amount of $1,264,569.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
In fiscal year 2008, RAAC approved the issuance of an additional EDF loan to the ACAA. The total funds committed are not to exceed $1,000,000 and the loans bear an annual interest rate of 4% for a period of 12 months. As of December 31, 2010, the loan has not been disbursed.
RAAC has also entered into an agreement to provide funding through an EDF Loan to the Sports and Exhibition Authority for costs related to the design, engineering , and construction of a multi-purpose arena. Total funds committed are not to exceed $2.75 million. As of December 31, 2010, the loan has not been disbursed and expired as of that date.
RAAC has entered into an agreement with RIDC (who employs a RAAC Board member) to provide certain loan and grant funds. This agreement was entered into prior to the Board member being employed by RIDC.
Allegheny County Parks Foundation
The Parks Foundation leased temporary office space from the Jewish Healthcare Foundation at $500 per month on a month to month basis. The President of the Jewish Healthcare Foundation is a member of the Parks’ Foundation's Board of Directors. Rent expenses under the lease for the year ended December 31,2010 was $1,500. There are no amounts due to the Jewish Healthcare Foundation attributable to the lease at December 31, 2010.
(14) Derivative Financial Instruments
During fiscal year 2007, the County entered into a pay-fixed, receive-variable interest rate swap contract. The interest rate swap was effective March 14, 2007. Per the swap agreement the County makes semi-annual interest payments on the first of each May and November through November 1, 2026. The Counterparty makes quarterly interest payments on the first of each May, August, November and February through November 1, 2026.
The intention of the swap is to effectively change the County’s variable interest rate on the $43,945,000 General Obligation Refunding Notes, Series C-59B (Index Rate), (C-59B Notes), to a synthetic fixed rate of 4.1355%.
The Series C-59B Notes will accrue interest at a weekly rate that is determined by a remarketing agent on each effective rate date. Per the interest rate swap agreement, the County will receive 67% of 3 month LIBOR plus 0.55% while paying a fixed rate of 4.1355%. The Counterparty’s interest rate may not exceed a maximum of 15%.
The interest payments on the interest rate swap are calculated based on a notional amount of $43,945,000, which reduces beginning on November 1, 2017 so that the notional amount approximates the principal outstanding on the Series C-59B Notes. The interest rate swap
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
expires on November 1, 2026 consistent with the final maturity of the Series C-59B Notes.
During 2010, the County paid $1,817,345 and received $340,495 related to the swap.
As of December 31, 2010 and 2009, the swap had a fair value of ($5,494,517) and ($3,817,518), respectively. The current period change in market value of ($1,676,999) for the interest rate swap accounted for as a hedge is recorded on the statements of net assets as a deferred outflow. The fair market value of the interest rate swap of December 31, 2010 is reported on the statement of net assets as a swap liability. The mark to market value is an estimated net present value of the expected cash flows calculated using relevant mid-market data inputs and based on the assumption of no unusual market conditions or forced liquidation.
The County has the ability to early terminate the swap and to cash settle the transaction on any business day by providing at least two business days written notice to the counterparty. Evidence that the County has sufficient funds available to pay any amount payable to the counterparty must be provided at the time notice is given. At early termination, the County will be required to pay or receive a settlement amount which is comprised of the market value of the terminated transaction based on market quotations and any amounts accrued under the contract.
Through the use of derivative instruments such as this interest rate swap, the County is exposed to a variety of risks, including credit risk, interest rate risk, termination risk, market-access risk, and basis risk.
Credit risk is the risk that a counterparty will not fulfill its obligations. The interest rate swap counterparty is rated A by Standard and Poor’s, a nationally recognized statistical rating organization. If the counterparty failed to perform according to the terms of the interest rate swap agreement, there is some risk of loss to the County, up to the fair market value of the swap. Performance of the counterparty as it relates to this transaction is guaranteed by the counterparty’s parent company.
Because the interest rate swap has a negative fair market value, there is no current credit risk to the County. This risk includes the potential for the counterparty to fail to make periodic variable rate payments to the County and the counterparty to fail to make termination payments to the County, if the swaps are terminated and a termination payment is due from the counterparty.
The County has not entered into a master netting arrangements with its counterparty, as there is only one transaction outstanding.
The County’s does not have an agreement with the counterparty that requiries the counterparty to post collateral if certain circumstances exist related to the swap
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
transaction. During the year, no collateral was posted by the Counterparty nor had an event of termination occurred.
Interest rate risk is the risk that changes in interest rates will adversely affect the fair values of the County’s financial instruments or the County’s cash flows. The County could be exposed to interest rate risk if long-term interest rates are less than 4.1355%.
Termination risk is the risk that a derivative’s unscheduled end will affect the County’s asset/liability strategy or will present the County with potentially significant unscheduled termination payments to the counterparty. The counterparty to the transaction does not have the ability to voluntarily terminate the interest rate swap; however, the County is exposed to termination risk in the event that the counterparty defaults. The transaction would be considered to be terminated in the event that the counterparty’s credit rating on their long-term unsecured, unenhanced senior debt (not taking into account the guarantee of the parent) is withdrawn, suspended or falls below Baa3 (Moody’s) or BBB- (S&P).
Basis risk is the risk that arises when variable interest rates on a derivative and an associated bond or other interest-paying financial instrument are based on different indexes. The County is not subject to basis risk as the interest index on the variable rate arm of the swap is based on the same index (67% 3-month LIBOR plus 0.55%) as the variable interest rate on the Series C-59B Notes.
Rollover risk is the risk that a derivative associated with the County’s debt does not extend to the maturity of that debt. When the derivative terminates, the associated debt will no longer have the benefit of the derivative. The County is not exposed to rollover risk as the swap agreement terminates on November 1, 2026 which is the same day as the last payment is due on the Series C-59B Notes.
Component Unit – Derivative Financial Instruments
Allegheny County Airport Authority
On November 14, 2006, the ACAA entered into a Constant Maturity Swap (CMS) for the purpose of reducing debt service by taking advantage of the flat interest rate curves that were in affect at the time of the remarketing of the Series 2001 and Series 2002 bonds. The transaction is effective beginning July 1, 2007, and continues until January 1, 2023. The CMS is structured so that the ACAA receives funds quarterly at the rate of 67% of the USD-ISDA Swap Rate minus 0.11% times a notional amount that is initially $182,000,000 and which decreases annually as debt payments are made on the Series 2001 and Series 2002 bonds, and the ACAA pays the counterparty quarterly at the USD-BMA-Municipal Swap Index rate times the notional amount as described above. On June 15, 2010, the ACAA amended the swap, suspending accruals and payments from and including July 1, 2010 to
199
COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
but excluding January 1, 2014. Upon the amendment, ACAA received a net termination payment of $5,075,000. The fair value of the CMS as of December 31, 2010 was $(374,592) with a notional amount of $102,635,000. When the swap becomes effective on January 1, 2014, ACAA will continue to pay the SIFMA index and receive 67% of the 10- year CMS minus 11 basis points; the notional amount of the swap will be $102,635,000 on January 1, 2014.
Port Authority of Allegheny County
During fiscal year 2004, PAT entered into a swaption contract that provided PAT with an up- front payment of $10.1 million. The swaption gives the counterparty the option to make PAT enter into a pay-fixed, receive-variable interest rate swap on the first day of each March or September during the period commencing on, and including, March 1, 2011 and terminating on, March 1, 2014.
Per the swap agreement, PAT would receive interest at the variable rate of 67% of one month LIBOR (London Interbank Offered Rate) while paying a fixed rate of 4.53%. The interest payments are calculated based on a notional amount of $234,470,000, with reduces beginning on March 1, 2012. The swap would expire on March 1, 2029.
If the option is exercised, PAT would make net swap payments as required by the terms of the contract, that is, receiving a variable rate as noted above for the term of the swap from the counterparty and making a fixed rate payment to the counterparty.
As of June 30, 2010, the swaption had a fair value of ($46,976,733). As the swaption is considered to be an investment type derivative instrument per accounting standards, it is reported as a derivative liability and as borrowing on the statements of net assets. The change in fair market value of ($14,963,726) is recorded as a component of investment income on the statements of revenues, expenses and changes in net assets. The mark to market value is calculated using a combination of the zero-coupon method and an option pricing model.
A portion of the upfront cash payment received by PAT at the time the swaption was entered into is considered to be a borrowing at a rate of 4%. As of June 30, 2010, the borrowing had an outstanding balance of $9,138,841 and is disclosed more in Note 8.
PAT has the ability to early terminate the swaption and to cash settle the transaction on any business day by providing at least five business days written notice to the counterparty. Evidence that PAT has sufficient funds available to pay any amount payable to the counterparty must be provided at the time notice is given. At early termination, PAT will be required to pay or receive a settlement amount which is comprised of the market value of the terminated transaction based on market quotations and any amounts accrued under the contract.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
In connection with this transaction, PAT has issued a Subordinate Lien Special Revenue Transportation Note, Series of 2004 (2004 Note). The 2004 Note was issued for the purpose of evidencing and securing PAT’s uninsured payment obligations with respect to the interest rate swap. The amount due under this 2004 Note agreement is dependent on the swap, but at no time may exceed $38,750,000. As of June 30, 2010, this 2004 Note had not been drawn on and as such there was no balance outstanding.
Through the use of derivative instruments such as this swaption, PAT is exposed to a variety of risks, including credit risk, interest rate risk, termination risk, market-access risk, and basis risk.
Credit risk is the risk that a counterparty will not fulfill its obligations. Although the underlying swap exposes PAT to credit risk should the swap be executed, the swaption itself does not expose PAT to credit risk. On June 30, 2010, the swaption counterparty is rated A2 by Moody’s Investors Services, Inc., and A by Standard & Poor’s, Inc. nationally recognized statistical rating organizations. If the option was exercised and the counterparty failed to perform according to the terms of the swap agreement, there is some risk of loss to PAT, up to the fair market value of the swaption. However, as of June 30, 2010, the swaption had a negative market value to PAT and as such PAT had no credit risk exposure related to this transaction. Performance of the counterparty as it relates to this transaction is guaranteed by the counterparty’s parent company. In the event that the counterparty's rating is downgraded to a certain level (based on the fair value of the swap at the time of the downgrade) the counterparty would be required to post collateral to support its obligations under the swap. As of June 30, 2010, there is no collateral posted by the counterparty related to this transaction, no has there been any collateral posted since inception of the swaption.
Interest rate risk is the risk that changes in interest rates will adversely affect the fair values of PAT’s financial instruments or PAT’s cash flows. PAT’s swaption is exercisable by the counterpary beginning in March 2011. The swaption is highly sensitive to changes in interest rates; changes in the variable rate will have a material effect on the swaption’s fair market value. If exercised, the resulting interest rate swap will have scheduled maturity dates beginning in fiscal year 2012 through 2029. As of year-end, PAT is currently evaluating alternative financing arrangements most of which include terminating the swaption prior to its exercise date.
Contingent Features -- The counterparty may require PAT to post collateral in the event that the swaption is exercised and the fair value is a negative amount which exceeds the threshold amount which is determined by PAT’s then current S&P or Moody’s rating, if any. In the event that the collateral is called, PAT would have to post collateral of cash and short term securities up to the fair market value of the swaption at that time. As of June 30, 2010, PAT had not posted any collateral. As of November 22, 2010, the fair value of the swap is ($50,118, 127).
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
(15) Liquidity
Port Authority of Allegheny County
Act 44 was enacted by the Commonwealth in 2007. A key funding provision of the act required Federal Highway Administration approval of the tolling of Interstate 80. During the fiscal year, the Federal government rejected that request and to date the State has not provided adequate alternative funding. As a result, a funding shortfall for statewide transit agencies and transportation programs currently exists.
To mitigate the resulting deficit PAT’s Board of Directors voted on November 24, 2010 to increase fares and reduce expenditures resulting in a balanced budget. Fare increases will go in effect beginning January 1, 2011 with significant service reductions implemented in March 2011. Combined with use of reserves, PAT expects to meet current financial obligations. PAT continues to work with the State elected officials to address the funding shortfall.
PAT has a line of credit for working capital in the amount of $20 million. In fiscal year 2010, PAT drew a maximum of $10 million for cash flow purposes which was paid back within two months.
(16) Subsequent Event
Short-term Debt
On January 4, 2011, the County issued Tax and Revenue Anticipation Note (TRAN), Series of 2011, in the amount of $50,000,000. The TRAN bears an interest rate of 1% and mature on April 5, 2011. Proceeds from the TRANs will be used to ensure sufficient cash flow for County operations prior to the receipt of property tax revenues.
Long-term Debt
On March 1, 2011 the County issued General Obligation Bonds, Series C-65 in the amount of $76,155,000. The proceeds of the Series C-65 Bonds were used to: (1) fund various projects of the County’s Capital Budget, and (2) capitalized interest on the C-65 Bonds.
On March 1, 2011, the County issued General Obligation Refunding Bonds, Series C-66 in the amount of $13,895,000. The proceeds of the Series C-66 Bonds were used to refund the County’s General Obligation Bonds, Series C-53.
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COUNTY OF ALLEGHENY Notes to the Financial Statements December 31 and June 30, 2010
Component Unit – Subsequent Event
Port Authority of Allegheny County
PAT’s swaption contract can be exercised by the counterparty, Merrill Lynch Capital Services, Inc. on March 1, 2011. The counterparty has indicated it will likely exercise the option and put PAT into the associated pay-fixed, receive-variable interest rate swap. PAT has determined it is in its best interest to terminate the option and cash settle the transaction. PAT’s Board of Directors on November 24, 2010 authorized the issuance of Special Revenue Transportation Bonds, Refunding Series of 2011 the purpose of which is to refund the Special Revenue Transportation Bonds, Series of 2001 and terminate the swap contract. Subsequent to the issuance of PAT’s June 30th, 2010 financial statements, in February 2011, PAT issued the bonds and used part of the proceeds to terminate the contract.
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REQUIRED SUPPLEMENTARY INFORMATION
In accordance with Governmental Accounting Standards Board Statement No. 34, the following Budgetary Comparison Schedule for the General Fund’s legally adopted annual budget is presented as required supplementary information
Exhibit 12
COUNTY OF ALLEGHENY, PENNSYLVANIA Budgetary Comparison Schedule General Fund Year Ended December 31, 2010
Budget Variance to Original Final Final Budget Budget Actual Budget
Revenues: Property taxes (notes 1 and 4) $ 202,587,000 202,587,000 202,932,512 345,512 Sales and use tax 40,290,000 40,290,000 40,904,309 614,309 Gaming local share assessment 6,000,000 6,000,000 4,839,223 (1,160,777) Licenses and permits 1,861,200 1,861,200 1,919,316 58,116 Federal revenues 94,274,364 94,274,364 89,232,548 (5,041,816) State revenues 201,083,915 201,083,915 182,957,577 (18,126,338) Local government units revenues 17,815,000 17,815,000 23,295,014 5,480,014 Charges for services and facilities 63,381,777 63,381,777 68,272,002 4,890,225 Fines and forfeitures 4,915,500 4,915,500 4,787,652 (127,848) Interest earnings 1,707,432 1,707,432 271,202 (1,436,230) Miscellaneous 6,023,075 6,023,075 4,189,548 (1,833,527)
Total revenues 639,939,263 639,939,263 623,600,903 (16,338,360)
Expenditures: Current: General government 166,624,515 167,268,498 165,043,845 2,224,653 Public safety 85,314,017 82,253,544 81,383,463 870,081 Public works 26,024,947 26,853,557 25,869,178 984,379 Health and welfare 357,956,976 356,761,765 343,550,367 13,211,398 Culture and recreation (note 2) 9,211,997 10,157,104 10,150,132 6,972 Education 22,488,000 22,488,000 22,488,000 - Economic development 2,503,797 6,618,797 5,847,833 770,964 Debt service: Cost of issuance expenses 40,450 40,450 40,450 - Interest charges 624,564 126,394 126,389 5
Total expenditures 670,789,263 672,568,109 654,499,657 18,068,452
Deficiency of revenues over expenditures (30,850,000) (32,628,846) (30,898,754) 1,730,092
Other financing sources (uses): Premium on issuance of tax revenue anticipation note - - 84,500 84,500 Proceeds from sale of building - - - - Capital lease - - - - Transfers in 30,850,000 30,850,000 43,064,149 12,214,149 Transfers out - - (12,011,439) (12,011,439)
Total other financing sources (uses) 30,850,000 30,850,000 31,137,210 287,210
Net change in fund balances - (1,778,846) 238,456 2,017,302
Fund balances at beginning of year 20,151,108 20,151,108 20,151,108 -
Fund balances at end of year $ 20,151,108 18,372,262 20,389,564 2,017,302
See notes to required supplementary information.
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COUNTY OF ALLEGHENY Notes to the Required Supplementary Information December 31, 2010
(1) Budgetary Data
The County’s 2009 comprehensive fiscal plan, which includes the annual appropriated budgets reflected in the supplemental financial statements, was adopted for the primary government as outlined below based upon provisions of the County’s Home Rule Charter.
The County Manager prepared the 2009 comprehensive fiscal plan, consisting of the 2009 op- erating budget and capital budget, a two-year projected operating budget, a five-year capi- tal improvement plan, a grants and special revenues budget, a trust and agency budget and a budget message. The operating budget included proposed expenditures and estimated revenues for the General Fund, the Liquid Fuel and Transportation Tax Fund (Special Reve- nue Funds) and the Debt Service Fund. The budgets for the capital, other special revenue (Human Service and County Grant Funds) and trust and agency funds were adopted on a project basis that covers the life of the project.
No later than 75 days before the end of the year, the Chief Executive must appear before County Council to present the budget message and to submit the fiscal plan. County Council must hold a minimum of two public hearings on the proposal to obtain taxpayers' com- ments.
No later than 25 days before the end of the fiscal year, the Council must adopt, by resolution, a balanced operating and capital budget for the fiscal year 2010 and established a property tax millage rate for the coming fiscal year. Before adoption, Council is able to add, delete, increase or decrease any appropriation item.
Budgeted appropriations can be amended to the extent that additional, expendable financial resources become available. Only the appropriations for the operating budget lapse at year‑end. Previous year encumbrances for all budgets are reappropriated.
The Chief Executive is able to transfer up to 20% of any unencumbered operating appropria- tion balance within the same department during the last four months of the year, upon noti- fication of County Council. Upon the recommendation of the Chief Executive, County Coun- cil, by resolution, could make transfers within and between departments and agencies or to any new account at any time.
Bill no. 5180-09 established 2010’s Operating Budget at $773,480,142, of which $670,789,263 is for the General Fund.
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COUNTY OF ALLEGHENY Notes to the Required Supplementary Information December 31, 2010
The 2009 operating budget was adopted using the modified accrual basis of accounting, and revenues and expenditures are presented in accordance with the accounting principles gen- erally accepted in the United States. Legal control over expenditures was exercised by total budget, by fund, by department and by character of expenditure.
(2) Legal Compliance
Adopted Budget
In 2010 no functional expense category as a whole was over budget.
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OTHER SUPPLEMENTARY INFORMATION
Include combining and individual detailed comparative financial information for the County’s major and Other Governmental Funds, Operating Budget, Capital Assets, Nonmajor Compo- nent Units and Long-Term Debt
COMBINING OTHER GOVERNMENTAL FUNDS FINANCIAL STATEMENTS
Combines the County’s Liquid Fuel Tax and Transportation Special Revenue Funds and Debt Service Fund.
Exhibit 13
COUNTY OF ALLEGHENY, PENNSYLVANIA Combining Balance Sheet Other Governmental Funds December 31, 2010
Transportation Liquid Fuel Debt Service Fund Tax Fund Fund Totals
Assets
Cash and short-term investments $ 2,665,928 - - 2,665,928 Restricted cash and short-term investments - 475,891 775,376 1,251,267 Delinquent property taxes receivable, net - - 1,883,393 1,883,393 Liened property taxes receivable, net - - 3,220,482 3,220,482 Due from other funds - - 41,710,163 41,710,163 Alcoholic beverage tax receivable 2,215,203 - - 2,215,203 Rental vehicle tax receivable 277,599 - - 277,599 Accrued penalty and interest receivable - - 54,092 54,092 Accrued interest receivable - 186 63 249
Total assets $ 5,158,730 476,077 47,643,569 53,278,376
Liabilities and Fund Balances
Liabilities: Vouchers payable $ - - 19,449 19,449 Accrued interest payable - - 1,759 1,759 Due to other funds - - 42,306,296 42,306,296 Tax refunds payable - - 155,924 155,924 Deferred revenues - - 5,103,875 5,103,875 Matured bonds payable - 0 - 56,266 56,266
Total liabilities - - 47,643,569 47,643,569
Fund balances: Restricted for: Road maintenance expenditures - 476,077 - 476,077 Transportation 5,158,730 - - 5,158,730
Total fund balances 5,158,730 476,077 - 5,634,807
Total liabilities and fund balances $ 5,158,730 476,077 47,643,569 53,278,376
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Exhibit 14
COUNTY OF ALLEGHENY, PENNSYLVANIA Combining Statement of Revenues, Expenditures and Changes in Fund Balances Other Governmental Funds Year Ended December 31, 2010
Transportation Liquid Fuel Debt Service Fund Tax Fund Fund Totals
Revenues: Property taxes $ - - 61,961,346 61,961,346 Alcoholic beverage tax 27,359,274 - - 27,359,274 Rental vehicle tax 5,436,982 - - 5,436,982 State revenues - 4,359,244 112,283 4,471,527 Local governmental units revenues - - 44,441 44,441 Interest earnings - 3,679 98,576 102,255 Miscellaneous 66,666 - - 66,666
Total revenues 32,862,922 4,362,923 62,216,646 99,442,491
Expenditures: Transportation 27,668,700 - - 27,668,700 Public works - 4,120,000 - 4,120,000 Debt service: Principal - - 41,387,500 41,387,500 Interest - - 28,402,581 28,402,581
Total expenditures 27,668,700 4,120,000 69,790,081 101,578,781
Excess (deficiency) of revenues over expenditures 5,194,222 242,923 (7,573,435) (2,136,290)
Other financing sources (uses): Transfer in - - 47,567,851 47,567,851 Transfer out (4,099,852) - (41,918,075) (46,017,927)
Total other financing sources (uses) (4,099,852) - 5,649,776 1,549,924
Net change in fund balances 1,094,370 242,923 (1,923,659) (586,366)
Fund balances at beginning of year 4,064,360 233,154 1,923,659 6,221,173
Fund balances at end of year $ 5,158,730 476,077 - 5,634,807
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