CITY OF MOBILE, ALABAMA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2016 William S. Stimpson, Mayor Paul C. Wesch, Executive Director of Finance Patricia A. Aldrich, Comptroller WILLIAM S. STIMPSON MAYOR Part I Introductory Section CITY OF MOBILE, ALABAMA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2016 TABLE OF CONTENTS PAGES I. INTRODUCTORY SECTION Transmittal Letter i – v GFOA Certificate of Achievement vi Organization Chart vii List of Principal Officers viii II. FINANCIAL SECTION Independent Auditor's Report 1 – 2 A. MANAGEMENT’S DISCUSSION AND ANALYSIS 3 – 16 B. BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Position 17 Statement of Activities 18 – 19 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet 20 Reconciliation of the Balance Sheet Governmental Funds to the Statement of Net Position 21 Statement of Revenues, Expenditures, and Changes in Fund Balances 22 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 23 Proprietary Fund Financial Statements Statement of net position 24– 25 Statement of Revenues, Expenses and Changes in Fund Net Position 26 – 27 Statement of Cash Flows 28 – 29 Component Units Financial Statements Statement of Net Position 30 Statement of Activities 31 – 32 Notes to the Financial Statements 33 – 93 C. REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 94 – 96 Notes to Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund 97 Schedule of Changes in Net Pension Liability and Related Ratios – Employees’ Retirement System of Alabama 98 Schedule of Employer Contributions – Employees’ Retirement System of Alabama 99 Schedule of Changes in Net Pension Liability and Related Ratios – Police and Firefighters Retirement Plan 100 Schedule of Employer Contributions – Police and Firefighters Retirement Plan 101 Schedule of Changes in Net Pension Liability and Related Ratios – Transit Workers Pension Plan 102 Schedule of Employer Contributions – Transit Workers Pension Plan 103 – 104 D. COMBINING FINANCIAL STATEMENTS Combining Balance Sheet - Non-major Governmental Funds (by fund type) 105 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Non-major Governmental Funds (by fund type) 106 Non-major Capital Projects Funds Combining Balance Sheet 107 – 108 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 109 – 110 Non-major Debt Service Funds Combining Balance Sheet 111 – 112 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 113 – 114 Non-major Special Revenue Funds Combining Balance Sheet 115 – 116 Combining Statement of Revenues, Expenditures and Changes in Fund Balance 117 – 118 Non-major Enterprise Funds Combining Statement of Net Position 119 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 120 Combining Statement of Cash Flows 121 Internal Service Funds Combining Statement of Net Position 122 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 123 Combining Statement of Cash Flows 124 E. OTHER SUPPLEMENTARY INFORMATION General Fund Schedule of Revenues and Other Financing Sources (Uses) Budget and Actual (Budgetary Basis) 125 – 126 Capital Assets Capital Assets Used in the Operation of Governmental Activities - Schedule by Function 127 Long-Term Debt Schedule of Bonds, Warrants, and Notes Payable 128 – 129 III. STATISTICAL SECTION Net Position by Component 130 – 131 Changes in Net Position 132 – 135 Governmental Activities Tax Revenue by Source 136 – 137 Fund Balances of Governmental Funds 138 – 139 Changes in Fund Balances of Governmental Funds 140 – 141 Value of Taxable Sales 142 Sales Tax Rates Direct and Overlapping Governments 143 – 144 Principal Sales Taxpayers 145 Assessed Value and Estimated Actual Value of Taxable Property 146 – 147 Property Tax Rates Direct and Overlapping Governments 148 Principal Property Taxpayers 149 Property Tax Levies and Collections 150 Ratios of Outstanding Debt by Type 151 – 152 Ratios of General Bonded Debt Outstanding 153 Direct and Overlapping Government Debt 154 Legal Debt Margin Information 155 – 156 Pledged - Revenue Coverage 157 Demographic and Economic Statistics 158 Principal Employers 159 Full-time Equivalent City Government Employees by Function 160 Capital Asset Statistics by Function 161 Operating Indicators by Function 162 – 169 March 31, 2017 TO THE CITIZENS OF THE CITY OF MOBILE, ALABAMA: Enclosed is the Comprehensive Annual Financial Report (CAFR) of the City of Mobile, Alabama (the City) for the fiscal year ended September 30, 2016. The CAFR is provided to give detailed information about the financial position and activities of the City to its citizens, City Council, City staff and other readers. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the City of Mobile management. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner designed to present fairly the financial position and results of operations of the City as a whole and the various funds of the City. All disclosures necessary to enable the reader to gain an understanding of the City’s financial activities have been included. Alabama state law requires an annual audit of the City’s financial statements by independent certified public accountants who must conduct the audit in accordance with generally accepted auditing standards. The accounting firm of Smith, Dukes & Buckalew LLP, conducted the audit and their report on the City’s basic financial statements is included herein. The City is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The audit is underway and the separately issued Single Audit Report will be available for review at the Federal Audit Clearinghouse. Management’s discussion and analysis (the MD&A) immediately follows the independent auditors’ report. It provides a narrative introduction, overview and analysis to accompany the basic financial statements. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. PROFILE OF THE CITY Three hundred-year-old historic Mobile is the county seat of Mobile County and is located in the southwestern section of Alabama, at the head of Mobile Bay, thirty-one miles from the Gulf of Mexico. City of Mobile | P.O. Box 1827 Mobile, Alabama 36633 | www.cityofmobile.org i The city covers an area of 179 square miles. In 2015, the United States Census Bureau estimated that there were 194,288 people residing within the city limits of Mobile and that there were 415,395 people in Mobile County, the third largest metropolitan statistical area in Alabama. The City of Mobile, Alabama (the City) was incorporated on January 20, 1814 under the provisions of Act 1911, No. 281, page 330; Code 1940. The City operates under a Mayor and seven member council form of government, with the council members elected by district. Responsibility for day-to-day operations of the City rests with the Mayor. Various City Council committees also work closely with the Mayor and department heads. This report includes all funds of the City. The City provides a full range of services. These services include police and fire protection; the construction and maintenance of highways, streets and infrastructure; and recreational activities and cultural events. The Mobile Public Library, the Public Parks and Recreation Board (Ladd - Peebles Stadium) and the Solid Waste Disposal Authority have met the criteria to be included in the report as discretely presented component units and are separately presented in the report. The Board of Water and Sewer Commissioners of the City of Mobile, Mobile Housing Board, Mobile Airport Authority, Mobile Board of Health, Mobile Emergency Management, Mobile Personnel Board, and Juvenile Court and Youth Center are excluded from this report. Additional information on all of these entities can be found in the notes to the financial statements (See Note 2). Policy making and legislative authority are vested in a seven member city council which is, among other things, responsible for passing local ordinances, adopting budgets, appointing committees and board members of related organizations, and approving the appointment of executive directors of the City. The Mayor is responsible for carrying out certain ordinances of the City Council, supervising the operation of the City and appointing executive directors. The Mayor and Council members are elected to four-year terms. All council members are elected from within their respective districts. The annual budget serves as the foundation for the City’s financial planning and control. The Mayor is required to submit a balanced budget proposal to the City Council for most of the City’s departments and funds by August 20 of each fiscal year. The Council, after public comment and evaluation, adopts the budget by October 1, the beginning of the fiscal year. The City maintains