City of Mobile, Alabama Comprehensive Annual Financial Report Fiscal Year Ended September 30, 2017 William S. Stimpson, Mayor Paul C. Wesch, Executive Director of Finance Patricia A. Aldrich, Comptroller CITY OF MOBILE, ALABAMA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2017 TABLE OF CONTENTS PAGES I. INTRODUCTORY SECTION Transmittal Letter i – ix GFOA Certificate of Achievement x Organization Chart xi List of Principal Officials xii Map of City xiii II. FINANCIAL SECTION Independent Auditor's Report 1 – 2 A. MANAGEMENT’S DISCUSSION AND ANALYSIS 3 – 17 B. BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Position 18 Statement of Activities 19 – 20 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet 21 Reconciliation of the Balance Sheet to the Statement of Net Position 22 Statement of Revenues, Expenditures and Changes in Fund Balances 23 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 24 Proprietary Fund Financial Statements Statement of Net Position 25 – 26 Statement of Revenues, Expenses, and Changes in Net Position 27 – 28 Statement of Cash Flows 29 – 30 Component Units Financial Statements Statement of Net Position 31 Statement of Activities 32 – 33 Notes to the Financial Statements 34 – 99 C. REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MD&A General Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 100 – 103 Notes to General Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 104 Schedule of Changes in Net Pension Liability and Related Ratios – Employees’ Retirement System of Alabama 105 Schedule of Employer Contributions – Employees’ Retirement System of Alabama 106 Schedule of Changes in Net Pension Liability and Related Ratios – Police and Firefighters Retirement Plan 107 Schedule of Employer Contributions – Police and Firefighters Retirement Plan 108 Schedule of Changes in Net Pension Liability and Related Ratios – Transit Workers Pension Plan 109 Schedule of Employer Contributions – Transit Workers Pension Plan 110 – 111 D. COMBINING FINANCIAL STATEMENTS Combining Governmental Balance Sheet - Nonmajor Governmental Funds Summary by Fund Type 112 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Summary by Fund Type 113 Nonmajor Capital Projects Funds Combining Balance Sheet 114 – 115 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 116 – 117 Nonmajor Debt Service Funds Combining Balance Sheet 118 – 119 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 120 – 121 Nonmajor Special Revenue Funds Combining Balance Sheet 122 – 123 Combining Statement of Revenues, Expenditures and Changes in Fund Balance 124 – 125 Nonmajor Enterprise Funds Combining Statement of Net Position 126 Combining Statement of Revenues, Expenses, and Changes in Net Position 127 Combining Statement of Cash Flows 128 Internal Service Funds Combining Statement of Net Position 129 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 130 Combining Statement of Cash Flows 131 E. OTHER SUPPLEMENTARY INFORMATION General Fund Schedule of Revenues and Other Financing Sources (Uses) Budget and Actual (Budgetary Basis) 132 – 133 Long-Term Debt Schedule of Bonds, Warrants, and Notes Payable 134 – 135 III. STATISTICAL SECTION Net Position by Component 136 – 137 Changes in Net Position 138 – 141 Governmental Activities Tax Revenue by Source 142 – 143 Fund Balances of Governmental Funds 144 – 145 Changes in Fund Balances of Governmental Funds 146 – 147 Value of Taxable Sales 148 Sales Tax Rates Direct and Overlapping Governments 149 – 150 Principal Sales Taxpayers 151 Assessed Value and Estimated Actual Value of Taxable Property 152 – 153 Property Tax Rates Direct and Overlapping Governments 154 Principal Property Taxpayers 155 Property Tax Levies and Collections 156 Ratios of Outstanding Debt by Type 157 – 158 Ratios of General Bonded Debt Outstanding 159 Direct and Overlapping Government Debt 160 Legal Debt Margin Information 161 – 162 Pledged - Revenue Coverage 163 Demographic and Economic Statistics 164 Principal Employers 165 Full-time Equivalent City Government Employees by Function 166 Capital Asset Statistics by Function 167 Operating Indicators by Function 168 – 173 THIS PAGE INTENTIONALLY LEFT BLANK PART I: INTRODUCTORY SECTION March 30, 2018 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, 2017. 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. City of Mobile | P.O. Box 1827 Mobile, Alabama 36633 | www.cityofmobile.org i PROFILE OF THE CITY Photo by Tad Denson 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. The city covers an area of 179 square miles. In 2016, the United States Census Bureau estimated that there were 192,904 people residing within the city limits of Mobile and that there were 414,836 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. www.mobile.org ii 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 budgetary controls to ensure compliance with legal provisions embodied