Comprehensive Annual Financial 2017 Report City and County of Denver, Colorado Year Ended December 31, 2017 Comprehensive Annual Financial Report Year Ended December 31, 2017 City and County of Denver, Colorado ll DENVER It, THE MILE HIGH CITY prepared by Department of Finance Controller’s Office - Accounting and Financial Reporting Division Brendan Hanlon, Chief Financial Officer Beth Machann, CGFM, Controller Available online at www.denvergov.org/finance Photo credits: Evan Semón, Lauren Lang, Lizzie Schoon, Kristin Miller, Raymond Moreno, Susan Helmerich, and Robert Vlier. 311 | POCKETGOV.COM | DENVERGOV.ORG | DENVER 8 TV This page left blank intentionally. Contents Introduction 1 Letter of Transmittal 8 Mayor 9 Auditor, District Attorney, and Clerk and Recorder 10 City Council Members 11 City Organization Chart 12 Government Finance Officers Association Awards Financial 13 Independent Auditor’s Report 17 Management’s Discussion and Analysis (Unaudited) Basic Financial Statements Government-Wide Financial Statements 27 Statement of Net Position 28 Statement of Activities Fund Financial Statements 30 Balance Sheet – Governmental Funds 31 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position 32 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 33 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds to the Statement of Activities 34 Statement of Net Position – Proprietary Funds 38 Statement of Revenues, Expenses, and Changes in Fund Net Position – Proprietary Funds 40 Statement of Cash Flows – Proprietary Funds 44 Statement of Fiduciary Net Position – Fiduciary Funds 45 Statement of Changes in Fiduciary Net Position – Fiduciary Funds 46 Statement of Net Position – Component Units 47 Statement of Activities – Component Units Notes to Basic Financial Statements 49 Contents 50 I. Summary of Significant Accounting Policies 60 II. Stewardship, Compliance, and Accountability 61 III. Detailed Notes for All Funds 92 IV. Other Note Disclosures Required Supplementary Information (unaudited) 120 Required Supplementary Information Budgetary Comparison Schedule – General Fund and Human Services Special Revenue Fund 122 Notes to Required Supplementary Information Budgetary Comparison Schedule 123 Required Supplementary Information Other Postemployment Benefits - Implicit Rate Study 123 Required Supplementary Information Schedule of City’s Proportionate Share of the Net Pension Liability - DERP 124 Required Supplementary Information Schedule of City Contributions - DERP 124 Required Supplementary Information Schedule of City’s Proportionate Share of the Net Pension Liability FPPA SWDB 124 Required Supplementary Information Schedule of City Contributions - FPPA SWDB 125 Required Supplementary Information Schedule of City Contributions - FPPA Old Hire Fire and Police 125 Required Supplementary Information Schedule of City’s Proportionate Share of the Net Pension Liability - PERA 126 Required Supplementary Information Schedule of City Contributions - PERA 127 Required Supplementary Information Schedule of Changes in the City’s Net Pension Liability and Related Ratios - FPPA Old Hire Fire 128 Required Supplementary Information Schedule of Changes in the City’s Net Pension LIability and Related Ratios - FPPA Old Hire Police Combining and Individual Fund Financial Statements and Schedules Governmental Funds 130 Combining Balance Sheet – Nonmajor Governmental Funds 131 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds 132 Combining Balance Sheet – Nonmajor Special Revenue Funds 134 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Special Revenue Funds 136 Combining Balance Sheet – Nonmajor Debt Service Funds 137 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Debt Service Funds 138 Combining Balance Sheet – Nonmajor Capital Projects Funds 140 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Capital Projects Funds 142 Schedule of Expenditures Compared with Authorizations – General Fund 144 Schedule of Expenditures Compared with Authorizations – Human Services Special Revenue Fund 145 Comparative Balance Sheets – General Fund 146 Comparative Statements of Revenues, Expenditures, and Changes in Fund Balance – General Fund Proprietary Funds 147 Combining Statement of Net Position – Nonmajor Enterprise Funds 148 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Nonmajor Enterprise Funds 149 Combining Statement of Cash Flows – Nonmajor Enterprise Funds 150 Combining Statement of Net Position – Internal Service Funds 151 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Internal Service Funds 152 Combining Statement of Cash Flows – Internal Service Funds Fiduciary Funds 153 Combining Statement of Fiduciary Net Position – Pension, Health, and Other Employee Benefit Trust Funds 154 Combining Statement of Changes in Fiduciary Net Position – Pension, Health, and Other Employee Benefit Trust Funds 155 Combining Statement of Changes in Assets and Liabilities – Agency Funds Component Units 158 Combining Statement of Net Position – Nonmajor Component Units 160 Combining Statement of Activities – Nonmajor Component Units Other Supplementary Schedules 164 Combined Schedule of Bonds Payable and Escrows 166 Local Highway Finance Report Statistical (Unaudited) 169 Contents Financial Trends 171 Net Position by Component 172 Changes in Net Position 175 Fund Balances of Governmental Funds 176 Changes in Fund Balances of Governmental Funds 178 Governmental Activities Tax Revenues by Source Revenue Capacity 179 Sales Tax by Category 180 Assessed Value and Estimated Actual Value of Taxable Property 181 Direct and Overlapping Property Tax Rates 182 Principal Property Taxpayers 184 Property Tax Levies and Collections Debt Capacity 186 Ratios of Outstanding Debt by Type 187 Ratios of General Bonded Debt Outstanding 188 Direct and Overlapping Governmental Activities Debt 189 Legal Debt Margin Information 190 National Western Center and Convention Center Excise Pledged-Revenue Coverage 191 Wastewater Management Fund Pledged-Revenue Coverage 191 Golf Fund Pledged-Revenue Coverage 192 Denver International Airport Fund Pledged-Revenue Coverage Demographic and Economic Information 193 Demographic and Economic Statistics 194 Principal Employers Operating Information 195 Full-Time Equivalent City Government Employees by Function 196 Operating Indicators by Function 197 Capital Asset Statistics Introduction Letter of Transmittal Financial 1 June 5, 2018 Citizens of the City and County of Denver, Honorable Mayor, Honorable Auditor, Honorable Clerk and Recorder, Honorable Members of City Council, and Brendan Hanlon Chief Financial Officer Audit Committee State law requires the City and County of Denver (City) to publish within seven months of the close of the fiscal year a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. This report is prepared by the Controller’s Office under the Department of Finance according to Article 2, Part 5 of the City’s Charter. Pursuant to the requirements, I hereby issue the Comprehensive Annual Financial Report (CAFR) of the City for the fiscal year ended December 31, 2017. This report consists of management’s representations concerning the finances of the City. Responsibility for the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the management of the City. To provide a reasonable basis for making those representations, management of the City has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with U.S. GAAP. Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. BKD, LLP, a firm of licensed certified public accountants, has audited the City’s financial statements. The goal of the independent audit is to provide reasonable assurance that the financial statements of the City for the fiscal year ended December 31, 2017, are free of material misstatement. The 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 independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion on the City’s basic financial statements as of and for the year ended December 31, 2017. The independent auditors’ report is presented as the first component of the financial section of this report. Department of Finance,