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SECRETARY, DO WE HAVE ANY PUBLIC COMMENTS? REQUESTS FOR ITEMS ON THE AGENDA? NO, MR. MAYOR, WE DO NOT. ALL RIGHT. ITEM NUMBER FOR OUR DISCUSSION AND POSSIBLE ACTION. I THINK WE'RE GOING TO SKIP TO FOUR A BECAUSE OF THE. THE PEOPLE WHO ARE PRESENTING IS NOT HERE. SO
[(b) Receive a Presentation and Possible Discussion - Fiscal Year 2025 Annu...]
WE'LL GO TO ITEM FOUR B TO RECEIVE A RECEIVE A PRESENTATION AND POSSIBLE DISCUSSION FOR FISCAL YEAR 2025 ANNUAL COMPREHENSIVE FINANCIAL REPORT. WE HAVE RHONDA SMITH, CHIEF FINANCIAL OFFICER. THANK YOU. GOOD EVENING, COUNCIL MEMBER, MAYOR AND COUNCIL. GOOD EVENING. TONIGHT, THE CITY'S INDEPENDENT AUDITOR, WHITLEY PIN, IS WITH US TO PRESENT THE FISCAL YEAR 2025 ANNUAL COMPREHENSIVE FINANCIAL REPORT BEFORE INVITING THE ENGAGEMENT PARTNER, MR. LUPE GARCIA, TO BEGIN, I WOULD LIKE TO RECOGNIZE OUR FINANCIAL SERVICES STAFF FOR THEIR DILIGENCE IN CLOSING THE FISCAL YEAR AND SUPPORTING A SUCCESSFUL AUDIT PROCESS. AT THIS TIME, I WILL TURN THE PRESENTATION OVER TO MR. GARCIA.GOOD EVENING. MAYOR. MEMBERS OF COUNCIL. MY PRESENTATION WILL TAKE YOU THROUGH THE AUDIT PROCESS AT A HIGH LEVEL. WE'LL GO THROUGH THE RESULTS OF OUR AUDIT PROCEDURES, GO THROUGH SOME FINANCIAL STATEMENT HIGHLIGHTS FROM THE REPORT ITSELF, AND THEN I'LL END WITH REQUIRED COMMUNICATIONS. THE AUDIT PROCESS TAKES SEVERAL MONTHS TO COMPLETE THE FIRST PHASE OF FIELD WORK, WE FOCUS ON IDENTIFYING THE CITY'S POLICIES AND PROCEDURES, WHAT WE REFER TO AS YOUR INTERNAL CONTROLS OVER THOSE SIGNIFICANT AREAS THAT IMPACT YOUR FINANCIAL STATEMENTS. WE SELECT TRANSACTIONS AT A DETAILED LEVEL TO ENSURE THOSE POLICIES AND PROCEDURES ARE BEING FOLLOWED AND IMPLEMENTED AS DESIGNED. WE ALSO IDENTIFIED THE MAJOR PROGRAM AND THE FEDERAL SINGLE AUDIT. AT THIS POINT IN THE AUDIT, ONCE THE CITY'S FISCAL YEAR IS OVER, WE RETURN FOR YEAR END PROCEDURES WHERE THERE ARE MORE FINANCIAL IN NATURE GEARED TOWARDS YOUR FINANCIAL STATEMENTS, YOUR ACCOUNT BALANCES, AND YOUR TRANSACTION CYCLES, CONFIRMING INFORMATION DIRECTLY WITH YOUR FINANCIAL INSTITUTIONS, PERFORMING A VARIETY OF SUBSTANTIVE PROCEDURES AND ANALYTICAL PROCEDURES. AND OVER ALL THIS TIME, WE'RE GATHERING AUDIT EVIDENCE TO SUPPORT THE OPINION THAT WE'VE EXPRESSED ON THE CITY'S FINANCIAL STATEMENTS. AS EXTERNAL AUDITORS, WE CAN EXPRESS A FEW DIFFERENT TYPES OF OPINIONS ON A CITY'S FINANCIAL STATEMENTS ON THIS SLIDE. THE DISCLAIMER ON THE FAR LEFT WOULD BE A SITUATION WHERE EITHER THE RECORDS DIDN'T EXIST OR WERE IN SUCH POOR CONDITION. WE WEREN'T ABLE TO PROVIDE ANY TYPE OF ASSURANCE WHATSOEVER. THE OPINION IN THE MIDDLE. A QUALIFIED OPINION IS A TYPE OF MODIFIED OPINION EVERS FAIRLY STATED EXCEPT FOR WHAT WE LISTED IN OUR REPORT, AND THAT IS THE UNMODIFIED OPINION, WHICH IS THE BEST OUTCOME IN A FINANCIAL STATEMENT AUDIT. AND THAT IS THE OPINION WE'VE EXPRESSED ON THE CITY'S FINANCIAL STATEMENTS. IT'S REFERRED TO AS A CLEAN OPINION, INDICATING THAT THE CITY'S FINANCIAL STATEMENTS ARE FAIRLY STATED IN ALL MATERIAL RESPECTS, AND THAT THE CITY IS FOLLOWING ALL GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE PREPARATION OF THOSE FINANCIAL STATEMENTS. WE ALSO ISSUE A REPORT ON THE CITY'S INTERNAL CONTROLS OVER FINANCIAL REPORTING AND ON COMPLIANCE. OUR AUDIT PROCEDURES DID NOT IDENTIFY ANY MATERIAL WEAKNESSES OR SIGNIFICANT DEFICIENCIES, NOR ANY MATERIAL NONCOMPLIANCE RELATED TO YOUR FINANCIAL STATEMENTS. AND THEN THE THIRD AND FINAL REPORT WE ISSUE IS ON YOUR ADMINISTRATION OF FEDERAL GRANTS DURING FISCAL YEAR 2025, THE MAJOR PROGRAM WAS THE CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS PROGRAM. THAT PROGRAM HAS SPECIFIC COMPLIANCE REQUIREMENTS THAT WE HAVE TO TEST THE CITY AGAINST. AND WE DIDN'T HAVE ANY FINDINGS OR QUESTION COSTS OR NONCOMPLIANCE NOTED IN THE FEDERAL SINGLE AUDIT. SO GOOD NEWS THERE AS WELL. JUMPING INTO THE FINANCIAL STATEMENT HIGHLIGHTS THE STATEMENT OF NET POSITION.
IS YOUR BALANCE SHEET. AS OF THE END OF THE FISCAL YEAR, I PROVIDED THE PRIOR YEAR AMOUNTS.
JUST TO GIVE YOU SOME CONTEXT HOW THE BALANCE HAS CHANGED FROM ONE YEAR TO THE NEXT, YOUR TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES TOTALED 637.8 MILLION OF THAT BALANCE.
THAT'S PRIMARILY COMPRISED OF THE CITY'S CAPITAL ASSETS YOUR LAND, YOUR CONSTRUCTION AND PROGRESS, BUILDINGS, VEHICLES, FURNITURE AND EQUIPMENT, NET OF DEPRECIATION. THAT WAS 343.3 MILLION. AND THEN YOU HAVE CASH INVESTMENTS OF 268.1 MILLION. THE OTHER SIDE OF YOUR BALANCE SHEET ARE YOUR LIABILITIES AND DEFERRED INFLOWS OF RESOURCES. THAT TOTALED 329.5 MILLION.
THAT'S PRIMARILY YOUR LONG TERM OUTSTANDING DEBT PAYABLE, YOUR BONDS, YOUR CERTIFICATE OF OBLIGATIONS AND RELATED PREMIUMS. THAT WAS 223.3 MILLION. AND THEN RELATED TO THE TEXAS MUNICIPAL RETIREMENT SYSTEM, YOUR PENSION PLAN, THERE'S A NET PENSION LIABILITY AND THAT'S 46.2 MILLION. THE DIFFERENCE BETWEEN YOUR ASSETS AND YOUR OUTFLOWS AND YOUR OUTFLOWS AND YOUR INFLOWS IS YOUR NET POSITION. THAT WAS 308.3 MILLION AT THE END OF THE
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FISCAL YEAR. DRILLING DOWN INTO YOUR LONG TERM LIABILITIES AND HOW THOSE BALANCES CHANGE DURING FISCAL YEAR 2025. STARTING OFF WITH YOUR GENERAL OBLIGATIONS, YOU HAD 146.8 MILLION OUTSTANDING AS THE END OF THE FISCAL YEAR. THAT WAS AN INCREASE OVER THE YEAR BEFORE BECAUSE YOU DID ISSUE JUST UNDER $20 MILLION IN PERMANENT IMPROVEMENT BONDS DURING FISCAL YEAR 2025, CERTIFICATES OF OBLIGATION WERE $56 MILLION, ALSO AN INCREASE FROM THE PRIOR YEAR BECAUSE YOU ISSUED $11 MILLION DURING FISCAL YEAR 2025 OF THE SERIES 2025 CERTIFICATES.YET OTHER BONDS AND LONG TERM LIABILITIES THAT WERE REDUCED BY SCHEDULED PRINCIPAL PAYMENTS COMPENSATED ABSENCES THERE WAS A NEW PRONOUNCEMENT RELATED TO BALANCES THAT EMPLOYEES CAN EARN AND CARRY OVER INTO FUTURE FISCAL PERIODS, AND SO THAT HAD TO BE REMEASURED AND PRESENTED DIFFERENTLY THAN IN THE PAST. SO THAT WAS 6.5 MILLION. YOUR NET PENSION LIABILITY 46.2 MILLION THAT GETS MEASURED EVERY YEAR BY TMRS AND THEIR AUDITORS AND ACTUARIES. YOU TAKE THAT INFORMATION AND RECORD IN YOUR FINANCIAL STATEMENTS AND THEN THE NET, THE TOTAL OPEB LIABILITY IS RELATED TO OTHER POST-EMPLOYMENT BENEFITS, ALSO RETIREE BENEFITS. AND SO THAT ROUNDS OUT YOUR LONG TERM LIABILITIES OF $303.9 MILLION ON THIS SLIDE, JUST TO SHOW YOU HOW ASSETS AND LIABILITIES AND NET POSITION HAVE CHANGED OVER THE PRIOR FOUR FISCAL YEARS. THE FIRST SET OF BARS ARE YOUR TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES. THE MIDDLE SET OF BARS ARE YOUR TOTAL LIABILITIES, AND THEN THE BARS ON THE FAR RIGHT ARE YOUR NET POSITION, WHICH IS THE DIFFERENCE BETWEEN YOUR ASSETS AND LIABILITIES. WHAT I WANTED TO ILLUSTRATE HERE IS THAT THE CITY'S NET WORTH IS INCREASING YEAR OVER YEAR. THE CITY'S REINVESTING INTO ITS INFRASTRUCTURE AND CAPITAL ASSETS, INCREASING THE ASSETS OF THE CITY AT A GREATER RATE THAN THE LIABILITIES ARE INCREASING. SO THAT'S THE UPWARD TREND IN NET POSITION OVER THE PREVIOUS FOUR FISCAL YEARS. YOUR FUND FINANCIAL STATEMENTS ARE PRESENTED ON THIS SLIDE. YOU HAVE YOUR MAJOR FUNDS AND THEN ALL YOUR NONMAJOR FUNDS AGGREGATED IN THE FINAL COLUMN. THE GENERAL FUND IS THE MAIN OPERATING FUND OF THE OF THE CITY. IT ENDED THE YEAR WITH $48.8 MILLION IN FUND BALANCE, WHICH WAS AN INCREASE FROM THE PRIOR YEAR OF 4.6. THE DEBT SERVICE FUND IS WHERE THE INTEREST AND SINKING PORTION OF YOUR TAX RATE IS RECORDED. YOU ENDED THE YEAR THERE WITH $8.6 MILLION IN FUND BALANCE. YOUR CAPITAL PROJECTS FUND IS WHERE THE. THE PROCEEDS FROM SELLING DEBT ARE RECORDED FOR YOUR. YOUR CAPITAL IMPROVEMENT 75.3 MILLION IN FUND BALANCE. AT THE END OF THE YEAR, YOUR TAX INCREMENT REINVESTMENT ZONE NUMBER TWO HAD $32.2 MILLION IN FUND BALANCE. AND THEN YOUR NONMAJOR SPECIAL REVENUE FUNDS 35.2 MILLION IN FUND BALANCE. AT THE END OF THE YEAR. THE GENERAL FUND'S PERFORMANCE COMPARED TO BUDGET REVENUES WERE GREATER THAN BUDGETED REVENUES BY $8 MILLION. YOUR EXPENDITURES CAME IN UNDER BUDGETED REVENUES BY 15.9. OVERALL, REVENUES EXCEEDED YOUR EXPENDITURES. YOU HAD AN INCREASE IN FUND BALANCE OF 4.6 FOR AN ENDING FUND BALANCE OF $48.8 MILLION. OF THAT FUND BALANCE, ONLY 25.5 IS UNASSIGNED OR AVAILABLE FOR SPENDING ON ANY LAWFUL PURPOSE.
THE CITY DOES HAVE A TARGET OF TRYING TO MAINTAIN 20 TO 30% OF UNASSIGNED FUND BALANCE EACH YEAR, AND THAT HAS OCCURRED OVER THE PREVIOUS THREE FISCAL YEARS, INCLUDING THE YEAR UNDER AUDIT FISCAL YEAR 2025. SO THE CITY ENDED THE YEAR WITH JUST OVER THREE MONTHS OF UNASSIGNED FUND BALANCE. IN THE GENERAL FUND, THE CITY'S ENTERPRISE FUNDS INCLUDE WATER, WASTEWATER, SOLID WASTE REVENUES, OPERATING REVENUES EXCEEDED OPERATING EXPENSES, YET A POSITIVE CHANGE IN NET POSITION. AND ALL THESE FUNDS FOR AN ENDING NET POSITION OF 106.7 MILLION IN YOUR ENTERPRISE FUNDS. I'LL END MY PRESENTATION WITH THESE REQUIRED COMMUNICATIONS. AS PART OF THE AUDIT, WE ENSURE THAT THE CITY IS FOLLOWING ALL GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AND THE CITY INDEED IS INCLUDING THE NEW GASB 101 IMPLEMENTATION RELATED TO COMPENSATED ABSENCES. FINANCIAL STATEMENTS CAN INCLUDE ESTIMATES, AND ESTIMATES CAN ALWAYS CHANGE IN THE FUTURE. SOME OF THE MORE SIGNIFICANT ESTIMATES YOU NEED TO BE AWARE OF ARE, OF COURSE, ANY ALLOWANCES RELATED TO ANY UNCOLLECTIBLE RECEIVABLES, WHICH IS BASED ON HISTORICAL COLLECTIONS, AND THEN ANYTHING RELATED TO THE PENSION PLAN OR THE OPEB LIABILITY IS THE LARGEST ESTIMATE IN YOUR FINANCIAL STATEMENTS.
MANAGEMENT HAS A SOUND BASIS, AND RECORDING THOSE ESTIMATES IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. IN THE REPORT, I'M HAPPY TO REPORT THAT WE DIDN'T HAVE ANY DIFFICULTIES IN PERFORMING AND COMPLETING THE AUDIT. WE HAD THE CITY'S FULL COOPERATION THROUGH EACH PHASE OF THE AUDIT. INDIVIDUALS THAT WE NEEDED TO MEET WITH WERE MADE AVAILABLE.
INFORMATION WE REQUESTED WAS PROVIDED TO US IN A TIMELY MANNER. QUESTIONS WE HAD WERE ANSWERED VERY QUICKLY. SO WE APPRECIATE APPRECIATE THE CITY'S COOPERATION AND THE EMPHASIS, THE IMPORTANCE THEY GAVE THE AUDIT, BECAUSE WE'RE PRESENTING THIS REPORT TO YOU AND ISSUING THIS REPORT TO YOU AS SCHEDULED AND ON TIME. NO DISAGREEMENTS WITH MANAGEMENT
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TO REPORT ON ANY MATTERS. WE DO OBTAIN A LETTER FROM MANAGEMENT INDICATING THAT THEY'VE PROVIDED US WITH EVERYTHING WE REQUESTED. NOTHING'S BEEN WITHHELD THAT WOULD MATERIALLY MISSTATE YOUR FINANCIAL STATEMENTS. AS FAR AS WE'RE AWARE, THE CITY IS NOT CONSULTING WITH OTHER AUDITORS OR ACCOUNTANTS ON ANY FINANCIAL REPORTING OR COMPLIANCE RELATED MATTERS. AND THEN THE LAST BULLET ON THIS SLIDE, DURING THE YEAR, WE'RE AVAILABLE TO ANSWER QUESTIONS, PROVIDE INFORMATION AND GUIDANCE TO THE CITY. BUT AT NO TIME DO WE FEEL THE WAY WE RESPOND OR THE POSITION WE TAKE IMPACTS OUR ABILITY TO BE INDEPENDENT AND SERVE AS YOUR EXTERNAL FINANCIAL STATEMENT AUDITORS. SO THAT COMPLETES MY PRESENTATION ON THE FINANCIAL STATEMENT AUDIT AND THE FEDERAL SINGLE AUDIT. IF THERE ARE ANY QUESTIONS, I'D BE HAPPY TO TAKE THOSE QUESTIONS AT THIS TIME. ALL RIGHT. THANK YOU. I'M GOING TO RECOGNIZE COUNCILMEMBER BROWN. MARSHALL. OKAY. THANK YOU MAYOR. THANK YOU FOR THE REPORT. I REALLY APPRECIATE IT. ON SLIDE 22, I JUST HAD A QUESTION YOU POINTED OUT. TERSE TWO. WE HAVE TERSE THREE. IS THERE ANY PARTICULAR REASON WHY THAT ONE WAS NOT INCLUDED IN THIS SLIDE? SO TERSE THREE IS INCLUDED IN THAT NON-MAJOR COLUMN. SO OKAY, YOUR FUNDS THAT DON'T MEET A QUALITATIVE THRESHOLD TO BE PRESENTED AS A MAJOR FUND IN ITS OWN INDIVIDUAL COLUMN. ALL THOSE FUNDS GET AGGREGATED INTO THAT NON-MAJOR COLUMN. SO TERSE THREE IS INCLUDED IN THE REPORT IN YOUR FINANCIAL STATEMENTS, BUT IT'S INCLUDED IN THAT NON-MAJOR COLUMN. AND THAT WOULD BE THE SAME FOR ANY MANAGEMENT DISTRICTS OR ANYTHING LIKE THAT THAT WE MAY HAVE. IT'S ALSO IN THE NON-MAJOR COLUMN. CORRECT. OKAY.THANK YOU. OKAY, SO I, I SIGNED UP. I JUST HAVE A QUESTION. WHERE IS THAT? SO WHEN YOU SAY THAT'S IN THE NON MAJOR WITH THE TERSE THREE. SO HOW MUCH WHAT IS THE FUND BALANCE ON THAT TERSE. SO IN THE REPORT ITSELF WE DO HAVE THE INDIVIDUAL COMBINING STATEMENTS FOR THAT NON-MAJOR. AND YES IN THE IN THE BOOK YOU HAVE THEIR WEB PAGE. WOULD THAT BE. SO IF YOU LOOK ONTO PAGE. 106, PAGE 106. YES. IN THE TOP RIGHT IT SAYS PAGE FIVE OF SIX. SO YOU SEE TERSE NUMBER THREE HAS AN ENDING FUND BALANCE OF $14.1 MILLION. OKAY. GOTCHA. AND THEN THE I THINK COUNCILMEMBER BROWN MARSHALL HAD ASKED THE MANAGEMENT DISTRICTS, WHERE DOES THAT FALL UNDER THAT ALSO FALLS UNDER NON-MAJOR.
THEY HOLD THEIR OWN FUNDS, DON'T THEY? YEAH. GO AHEAD. YEAH. THE CITY WOULD NOT BE REFLECTING THE MANAGEMENT DISTRICTS ON OUR BOOKS. NONE OF THEM. THEY HOLD THEM BECAUSE THOSE ARE THEY'RE HOLDING IT ON THERE. OKAY. THANK YOU. THERE IS A CONTRACTUAL OBLIGATION THAT THE CITY DOES RECORD FOR THE SIENNA MANAGEMENT DISTRICT, BUT THAT LIABILITY IS IN THE CITY'S FINANCIAL STATEMENTS RELATED TO THE THE DEBT THAT SIENNA MANAGEMENT DISTRICT HAS OUTSTANDING. GOTCHA, GOTCHA. AND THEN THE. ONE OTHER QUESTION THAT I HAD, I DON'T KNOW WHERE THAT IS. I'M SORRY. SO I GUESS I WOULD LIKE TO HAVE OUR FINANCE DIRECTOR, RHONDA TO COME UP. MAYOR, IF I COULD ASK BERTHA TO COME UP TOO. YES, YES, YES, YES, ABSOLUTELY. SO, RANA, SINCE YOU SINCE YOU'VE BEEN HERE, I'M SURE THIS CAME UP REAL QUICK BEFORE YOU. WELL, I GUESS I'M LOOKING AT AND I KNOW THE SLIDES THAT WE HAVE. I MEAN, THE BOOK IS ABOUT WHAT, 200 SOME PAGES AND WE CUT IT INTO 6 OR 7 SLIDES. BUT I JUST WANT TO HEAR FROM OUR FINANCE DIRECTOR AND THEN ALSO BERTHA, TO SEE OR YOUR OVERALL ASSESSMENT OF THIS
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REPORT OF THE REPORT. SO THE GOOD NEWS IS THAT NO FINANCIAL ISSUES AND OPERATIONALLY. SO WE WE HAD A LOT OF CONVERSATIONS AND WE ACTUALLY ASKED, OKAY, IF THERE ARE NO ITEMS TO DISCUSS, CAN YOU GIVE US ANY INPUT? AND SO WE WERE PLEASED TO SAY THAT THEY DID NOT HAVE ONE. AND THE STAFF HAS BEEN WORKING VERY CLOSELY WITH THE AUDITORS. AND SO I'D LIKE TO JUST MAKE SURE THAT THAT THAT IS STATED. IN ADDITION, THE FUND BALANCE IS VERY WELL FUNDED, AND THAT WAS ONE THING I WANTED TO SEE WHEN I GOT HERE. AND IT'S NOT ONLY WELL FUNDED, BUT HOW WE ACCOUNT FOR IT IS WELL PROCESSED. THE PROCESS IS THERE. SO I AM LOOKING AT PROCESSES NOW. AND IN TERMS OF THIS AUDIT, THIS WAS THE FIRST PROCESS AND IT'S IN PRETTY GOOD SHAPE. SURE. AND I'LL DEFER TO NO FINDINGS. I AM THRILLED. OKAY. OKAY. WELL, I WOULD JUST ASK THE CITY MANAGER ONE THING TOO. I KNOW THAT COUNCIL HAD THAT RESERVE. I MEAN, THE WHAT PERCENT WAS THAT THAT WE WERE KEEPING? WE HAVE TO KEEP IT UNDER THE RESERVE. AND WHAT THE COUNCIL DECIDED TO DO ANYTHING OVER THE 30%, ANYTHING OVER 30. RIGHT. AND THEN THE ALLOCATION FROM THAT TO SUBDIVIDING IT TO. THAT'S CORRECT. THE AREAS THAT'S THAT'S CONTINUING. EVEN WITH THAT, IT'S STILL THE 30%. YES. OKAY. ALL RIGHT. I NO OTHER QUESTIONS. I THINK BERT, TO ANSWER THE QUESTION. ALRIGHT. WELL, THANK YOU SO MUCH. THANK YOU. ALRIGHT. THANK YOU. WE GET TO KEEP THIS BOOK. OKAY. SO WE'LL, I GUESS GO TO ITEM FOR A OR. I DON'T HAVE THAT[5. CLOSED EXECUTIVE SESSION]
PRESENTATION. IS THAT HERE? OKAY, WELL, SO WE'LL TAKE ITEM NUMBER FIVE. THE TIME IS 4:47 P.M. CITY COUNCIL WILL NOW GO INTO A CLOSED EXECUTIVE SESSION PURSUANT TO SECTION FIVE FIVE,* This transcript was compiled from uncorrected Closed Captioning.