Comprehensive Annual Financial Report City of Norfolk, Virginia 2019 Year Ended June 30, 2019 This page left intentionally blank City of Norfolk, Virginia Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2019 Prepared by: The Department of Finance Christine Garczynski Director of Finance www.norfolk.gov This page left intentionally blank CITY OF NORFOLK, VIRGINIA Code of Ethics The City of Norfolk conducts its business fairly, impartially, ethically and in compliance with all laws and regulations. The City is committed to conducting its business with integrity underlying all relationships, including those with citizens, customers, suppliers, communities and among employees. The highest standards of ethical conduct are required of City employees in performing their responsibilities. Employees will not engage in conduct or activity that may raise questions as to the City's honesty, impartiality or reputation, or otherwise negatively reflect on the City. Values Accountability, Integrity, Innovation and Respect Acknowledgments This report has been accomplished through the efficient and dedicated services of the staff of the Department of Finance and contributing departments and our independent auditors, CliftonLarsonAllen LLP. The contributions of all are invaluable and clearly reflect the high standards set by the City of Norfolk. It is also appropriate to thank the City Manager, Deputy City Managers, Mayor and Members of the City Council for making possible the excellent financial position of the City through their interest and support in planning and conducting the financial affairs of the City. This page left intentionally blank CITY OF NORFOLK, VIRGINIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2019 TABLE OF CONTENTS Exhibit Page INTRODUCTORY SECTION: Municipal Officials 4-5 Organizational Chart 6 Transmittal Letter 7-30 Certificate of Achievement for Excellence in Financial Reporting 31 FINANCIAL SECTION: Independent Auditors’ Report …………………………………………... 37 Management’s Discussion and Analysis (Unaudited) …….……………. 43 Basic Financial Statements: Government-wide Financial Statements: 1 Statement of Net Position …………………………………………...……………………... 61 2 Statement of Activities …………………………………………...………………………… 62 Fund Financial Statements: Governmental Funds: A-1 Balance Sheet – Governmental Funds ………………………..….….….………………….. 63 A-2 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ...………………………………..……................................... 64 A-3 Statement of Revenues, Expenditures and Changes in Fund Balances…………………..… 65 A-4 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities .…………………………………………... 66 Proprietary Funds: B-1 Statement of Fund Net Position ….……………….……………………............................... 67 B-2 Statement of Revenues, Expenses and Changes in Net Position…………………………… 68 B-3 Statement of Cash Flows ……………………….………………….....……………………. 69 Fiduciary Funds: C-1 Statement of Fiduciary Net Position……………………………….…….............................. 70 C-2 Statement of Changes in Fiduciary Net Position – Pension Trust Fund – Employees’ Retirement System ……………………………………………………………………….… 71 Component Units: D-1 Statement of Net Position ….……………….……………….…………............................... 72 D-2 Statement of Activities …………………………………………..…..................................... 73 Notes to the Basic Financial Statements 77-160 1 CITY OF NORFOLK, VIRGINIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2019 TABLE OF CONTENTS Exhibit Page Required Supplementary Information (Unaudited): NERS Schedule of Changes in Net Pension Liability and Related Ratios ……………….. 163 NERS Schedule of Employer Contributions ……………………………………………… 164 VRS State Constitutional Offices Schedule of Changes in Net Pension Liability and Related Ratios …………………………………………………………………………… 165 VRS State Constitutional Offices Schedule of Employer Contributions ………………… 166 VRS Teachers Retirement Plan Schedule of the School Board’s Proportionate Share of the Net Pension Liability ………………………………………………………………... 167 VRS Teachers Retirement Plan Schedule of School Board Contributions ………………. 168 VRS School Board Political Subdivisions’ Schedule of Changes in the School Board’s Net Pension Liability and Related Ratios ………………………………………………. 169 VRS School Board Political Subdivisions’ Schedule of Contributions ………………….. 170 City OPEB Liability Schedule of Changes in Total OPEB Liability and Related Ratios ... 171 City Line of Duty OPEB Liability Schedule of Changes in Total OPEB Liability and Related Ratios …………………………………………………………………………... 172 School Board OPEB Liability Schedule of Changes in Total OPEB Liability and Related Ratios …………………………………………………………………………………… 173 VRS – HIC and GLI Programs Schedule of Changes in School Board’s Share of the Net 174-176 OPEB Liability…………………………………………………………………………. VRS – HIC and GLI Programs Schedule of School Board Contributions………………… 177-179 Notes to the Required Supplementary Information related to Pensions and OPEB ……... 180 E-1 Schedule of Revenue, Budget and Actual – General Fund ……………................................. 181 E-2 Schedule of Expenditures, Budget and Actual – General Fund …………...…....................... 182 Notes to Required Supplementary Information – Reconciliation of (non-GAAP) Budgetary Basis to GAAP …………………………………………………………………….…….. 183 Other Supplementary Information: F-1 Combining Balance Sheet – Nonmajor Governmental Funds………..…............................ 189 F-2 Combining Statement of Revenues, Expenditures and Changes in Fund Balance – Nonmajor Governmental Funds……….……………………. 190 G-1 Combining Statement of Net Position – Internal Service Funds…….…..………………... 193 G-2 Combining Statement of Revenues, Expenses and Changes in Fund Net Position – Internal Service Funds………………….………....…..……............................ 194 G-3 Combining Statement of Cash Flows – Internal Service Funds…..….…............................ 195 H-1 Combining Balance Sheet – Agency Funds.…….…….…..………………………….....… 199 H-2 Combining Statement of Changes in Assets and Liabilities – Agency Funds…………….. 200 Schedule of Expenditures of Federal Awards……...…..………………………………….. 203-204 Notes to Schedule of Expenditures of Federal Awards……………………………………. 205-207 J-1 Schedule of Revenues and Expenditures – Budget and Actual – Special Revenue Funds………………………………………………...………………………..... 211-215 J-2 Schedule of Revenues and Expenditures – Budget and Actual – Internal Service Funds………………………………………..…..…..…….................................... 216 J-3 Schedule of Expenditures – Budget and Actual - Capital Improvement Program ….……. 217-218 2 CITY OF NORFOLK, VIRGINIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2019 TABLE OF CONTENTS Table Page STATISTICAL SECTION (Unaudited) I Financial Trends Information…….…........................................................ Schedule 1 – Net Position by Category 223 Schedule 2, 2-1 – Changes in Net Position 224-225 Schedule 3 – Fund Balances – Governmental Funds 226 Schedule 4 – Changes in Fund Balances, Governmental Funds 227 Schedule 5 – Program Revenue by Function 228 Schedule 6 – Total Revenue by Source, Governmental Funds 229 Schedule 7 – Other Local Tax Revenues by Source, Governmental Funds 229 II Revenue Capacity Information…………….………………………….…. Schedule 1 – Assessed Valuations and Estimated Actual Values of Taxable Property 230 Schedule 2 – Direct Property Rates 231 Schedule 3 – Principal Property Taxpayers 232 Schedule 4 – Property Tax Levy and Collections by Tax Year 233 III Debt Capacity Information……………………………..…………….….. Schedule 1 – Ratios of Outstanding Debt by Type 234 Schedule 2 – Ratios of General Bonded Debt, Total Assessed Value and Bonded Debt Per Capita 235 Schedule 3 – Computation of Direct Bonded Debt 235 Schedule 4 – Legal Debt Margin 236 Schedule 5 – Revenue Bonds Debt Service Coverage, Water Utility Fund 237 Schedule 6 – Revenue Bonds Debt Service Coverage, Wastewater Utility Fund 238 Schedule 7 – Ratio of Annual Debt Service Expenditures for General Bonded Debt and Other Debt 239 IV Demographic and Economic Information…………….…………….…… Schedule 1 – Population Statistics 240 Schedule 2 – Ten Largest Employers 241 Schedule 3 – New Construction and Property Values 242 Schedule 4 – Annual Employment Average by Industry 243 V Operating Information…...………………………………………….…… Schedule 1 – Full-Time Equivalent (FTE) Positions by Function/Program 244 Schedule 2 – Operating Indicators by Function/Program 245 Schedule 3 – Capital Assets and Infrastructure Statistics by Function/Program 246 Schedule 4 – Water System Statistics 247 Schedule 5 – Wastewater System Statistics 248 Schedule 6 – Parking System Statistics 249 OTHER REPORTS OF INDEPENDENT AUDITORS Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ...………………. 253 Independent Auditors’ Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance Required by the Uniform Guidance .. 255 Schedule of Findings and Questioned Costs……………………………………………. 257 3 CITY OF NORFOLK, VIRGINIA COMPREHENSIVE ANNUAL FINANCIAL REPORT June 30, 2019 Municipal Officials Honorable City Council President and Mayor Kenneth Cooper Alexander Vice Mayor Martin A. Thomas, Jr. Member Courtney R. Doyle Member Mamie B. Johnson