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2021 City of Nederland Financial Statements CITY OF NEDERLAND, TEXAS ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2021 Prepared by: FINANCE DEPARTMENT TABLE OF CONTENTS INTRODUCTORY SECTION EXHIBIT PAGE Letter of Transmittal i-vii Certificate of Achievement viii List of City Officials ix Organizational Chart x FINANCIAL SECTION Independent Auditor’s Report on Financial Statements 1-2 Management’s Discussion and Analysis (Required Supplementary Information) 3-8 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position A 9 Statement of Activities B 10 Fund Financial Statements: Balance Sheet- Governmental Funds C 11 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position C-1 12 Statement of Revenues, Expenditures and Changes in Fund Balances- Governmental Funds D 13 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities D-1 14 Statement of Revenues, Expenditures and Changes in Fund Balances- Budget and Actual – General Fund E 15 Statement of Net Position – Proprietary Funds F 16 Statement of Revenues, Expenses and Changes in Fund Net Position- Proprietary Funds G 17 Statement of Cash Flows – Proprietary Funds H 18-19 Notes to the Financial Statements 20-49 Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios I 50 Schedule of Employer Contributions – Pension Plan J 51 Schedule of Changes in the Total OPEB Liability and Related Ratios K 52 Combining and Individual Fund Statements and Schedules Nonmajor Governmental Funds 53 Combining Balance Sheet – Nonmajor Governmental Funds L 54 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Nonmajor Governmental Funds M 55 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Debt Service Fund N 56 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Police Narcotics Fund O 57 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Library Fund P 58 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Court Technology Fund Q 59 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Hotel/Motel Occupancy Tax Fund R 60 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Fire Department Fund S 61 TABLE OF CONTENTS (CONTINUED) Component Unit Fund Statements – Nederland Economic Development Corporation Balance Sheet T 62 Statement of Revenues, Expenditures, and Changes in Fund Balance General Operating Fund U 63 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget to Actual V 64 STATISTICAL SECTION SCHEDULE PAGE Statistical Section Summary 65 Net Position by Component I 66 Changes in Net Position II 67-68 Governmental Activities Tax Revenues by Source III 69 Fund Balances of Governmental Funds IV 70 Changes in Fund Balances of Governmental Funds V 71 Assessed Value and Estimated Actual Value of Taxable Property VI 72 Property Tax Rates Direct and Overlapping Governments VII 73 Principal taxpayers VIII 74 Property Tax Levies and Collections IX 75 Ratios of Outstanding Debt by Type X 76 Ratios of General Bonded Debt Outstanding XI 77 Schedule of Direct and Overlapping Bonded Debt XII 78 Direct and Overlapping Governmental Activities Debt XIII 79 Legal Debt Margin Information XIV 80 Pledged Revenue Coverage XV 81 Demographic and Economic Statistics XVI 82 Principal Employers XVII 83 Full-Time Equivalent City Government Employees by Function/Program XVIII 84 Operating Indicators by Function/Program XIX 85 Capital Asset Statistics by Function XX 86 Industrial Contract Revenue XXI 87-88 i City of Nederland Don Albanese, Mayor  Talmadge Austin, Mayor Pro‐Tem  Billy Neal, Councilmember  Randy Sonnier, Councilmember  Sylvia Root, Councilmember  Christopher Duque, City Manager P.O. Box 967 ∙ Nederland, Texas 77627 ∙ (409) 723‐1503 ∙ FAX (409) 723‐1550 To the Honorable Mayor, Members of the City Council, and Citizens of Nederland State and local law requires that the City of Nederland annually publish a complete set of financial statements presented in conformity with generally accepted accounting principles in the United States of America and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. This report was prepared by the Finance Department, in accordance with the City Charter and in compliance with State law, to provide the public, investors, grantor agencies, and other interested parties with reliable financial information about the City. Accordingly, we hereby respectfully submit the Comprehensive Annual Financial Report of the City of Nederland for the fiscal year ended September 30, 2021. The report consists of management’s representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these 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 generally accepted accounting principles (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, assurances 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. The City’s financial statements have been audited by Wathen, DeShong & Juncker, LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended September 30, 2021, were free of material misstatement. The independent 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 auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City’s financial statements for the fiscal year ended September 30, 2020, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors. PROFILE OF THE GOVERNMENT Incorporated in 1940, the City of Nederland is located in the southeast corner of the state and within Jefferson County. With a current population of 18,856, the City currently occupies a land area of approximately 5.5 square miles. The City is served with a regional airport and has ready rail access to all parts of the country. Although empowered to levy a property tax on both real and personal properties located within its boundaries, the City collects no personal or corporate taxes from residents, nor is a state income tax assessed. The City is also empowered by state statute to extend its corporate limits by annexation, which occurs periodically when deemed appropriate.   ii The City operates under a Council-Manager form of government. It is governed by an elected City Council composed of a mayor and four councilmembers, who each serve three-year terms and are elected at-large. The City is divided into four council wards; each ward is represented by a councilmember. The City Council is charged with formulating public policy, enacting local legislation, adopting budgets, and appointing the city manager, city attorney, city clerk, director of finance, police chief, and emergency management coordinator. The City Manager is the chief administrative and executive officer of the City, who implements Council directives and policies, manages the City’s fiscal affairs, and is responsible for the administration of municipal operations. The City provides a full range of services including police and fire protection, the construction and maintenance of streets and other infrastructure, general administration, code enforcement, and cultural and recreational activities. Certain utility services are provided through the Water and Sewer Fund and the Solid Waste Fund, which function as departments of the City. The annual budget serves as the foundation for the City’s financial planning and control. All departments of the City are required to submit requests for appropriations to the City Manager each year. The City Manager uses these requests as the basis for developing a proposed budget. The City Manager then presents the proposed budget to the City Council for review by no later than August 31st. The City Council is then required to conduct public hearings on the proposed budget and to adopt a final budget. The appropriated budget is prepared by fund (e.g. General), function (e.g. public safety), and department (e.g. fire). Department directors may request transfers of appropriations within a department, which are reviewed and approved by the City Manager. Transfer of appropriations between departments, however, requires the approval of the City Council. Budget-to-actual comparisons are provided in this report for the General Fund; this comparison is presented as part of the basic financial statements for the governmental funds. History Nederland's heritage is deeply rooted in the Dutch ancestry, which gives the town its name. Nederland was officially founded on December 24, 1897 when Dutch settlers with an adventuresome spirit and desire for a better life found this site. The community was developed by the Port Arthur Townsite Company and the Port Arthur Land Company as part of the effort by Arthur E. Stilwell to make his newly built Kansas City, Pittsburg and Gulf Railway profitable. Stilwell, who had received much of his financial backing from Dutch investors, wanted a community for Dutch immigrants in Southeast Texas. The first such settler was George Rienstra; forty others arrived in November 1897. As other immigrants followed, Nederland residents began establishing truck and dairy farms. Rice farming was especially popular until overproduction, overspeculation, and the depression of 1907 virtually eliminated the rice industry in Nederland. Many of the recent immigrants left the a rea. Prosperity was restored by the discovery of the Spindletop oilfield on January 10, 1901. The Sun Oil Company established a major terminal just to the north of Nederland and the Texas Company built a plant a mile south of the community. An interurban rail line tied this area with Beaumont and Port Arthur in 1913. Electricity was provided shortly thereafter, and telephone and gas service became available during the mid-1920s. During the same decade, the Humphrey Oil Company and Pure Oil Company (subsequently Union Oil) built a refinery at Smith's Bluff to the east, drawing large numbers of former Louisiana residents to Nederland. The refineries and related petroleum industries have continued to be the mainstays of the City's economy. The town incorporated on April 29, 1940 and the population reached 3,801 in 1950. Nederland grew rapidly as a residential center during the boom years that followed. By 1970, the number of inhabitants had surpassed 16,000. Though the local economy was hurt by the declining demand for petroleum during the 1980s, the number of businesses in the City increased from 136 in 1972-73 to 401 in 1984-85. The population was reported at 16,855 in 1980, 16,192 in 1990, 17,422 in 2000, 17,547 in 2010, and 18,856 in 2020. FACTORS AFFECTING FINANCIAL CONDITIONS The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City of Nederland operates. iii Local Economy The City of Nederland, Texas is located in a metropolitan area in Southeast Texas frequently referred to as the “Golden Triangle” and is a component of the Beaumont-Port Arthur MSA, located in the Mid-County area of Jefferson County. Unfortunately, the recent history of the City has been marred by severe weather and disasters. The City, its residents, and local businesses completed their recovery efforts from the impacts of Hurricane Rita in September 2005, Hurricane Humberto in August 2007, and Hurricane Ike in September 2008; the restoration was a combination of repairs to return structures to pre-storm conditions, of major renovations, and new construction. As a result of this activity, the area was able to grow and experience a major financial boost. In August 2017, the City and region were devastatingly impacted by Tropical Storm Harvey; in September 2019, Tropical Storm Imelda again affected the City and region with the damage much more localized; in 2020, Hurricanes Laura and Delta affected the City and region; and in 2021, Winter Storm Uri affected the City and the State of Texas. Coupled with the damage from these weather disasters and the necessary repairs to homes, businesses, etc., the effects of the COVID-19 pandemic have impacted the City. The regional economy is substantially based on petroleum refining and the production and processing of chemicals and petrochemicals. Area refineries are aggressively expanding their refining infrastructure, several Liquefied Natural Gas facilities are operational and/or under development, and significant construction activity remains in progress to support the personnel and corresponding service needs associated with the industrial projects. These improvements, totaling approximately $20 billion, have provided massive economic stimulus to communities throughout our regional energy corridor, creating a direct impact on the housing, retail, and service markets. In 2019, voters approved over $155M in school bonds; the Nederland Independent School District will complete renovations, improvements, and additions to its elementary and middle schools and build a new high school campus; this work will have an economic and quality life impact for our citizens. City officials and the Nederland Chamber of Commerce continue to aggressively market our community. And the Nederland Economic Development Corporation continues to collaborate with the private sector to provide funding mechanisms that assist in the placement of new businesses in the community. Over the past several years, ad valorem and sales tax have indicated modest growth. In the past five years, taxable assessable values have increased by over $308M or 28.34%. During the same period, ad valorem tax revenue has increased by 23.95% or 4.79% annually, but this increase also reflects ad valorem tax rate increases in October 2017 (Nederland Avenue project debt). For the fiscal years 2019-2020 and 2020-2021, the City’s ad valorem tax rate was reduced as increasing property values resulted in the tax rate calculations decreasing. In addition, during the past five years, sales tax collections increased by 35.93%; a significant increase resulted from the repairs and reconstruction following Hurricanes Laura and Delta and Winter Storm Uri. During this period, industrial in lieu of taxes revenues has increased by 92.28%, which reflects tax rate increases, capital investments in the plants, and expiring tax abatements that helped facilitate the capital improvements. Looking beyond the past five years, long- term trends in taxable values, ad valorem revenue, and sales tax revenue, as well as the on-going instability in the local economy due to oil prices and the COVID-19 pandemic, have resulted in staff conservatively estimating any potential short-term growth. Due to the level of economic grow th, the City has previously initiated actions to ensure financial stability while continuing to identify potential improvements for increased operational efficiencies. In 1994, voters adopted an additional one half of one percent sales and use tax to be used for the promotion and development of new or expanded business enterprises as authorized by Section 4B, Article 5190.6, V.T.C.S. With this additional sales tax revenue, an economic development corporation, also authorized by the Act, was created to promote, assist, and enhance economic and community development activities for the City. In 2007, voters adopted a quarter cent of the City sales tax to be allocated to a Street Improvement Fund by reducing the Section 4B tax to a quarter cent. Funds would be e xpended on street-related improvement projects. With 82.55 0% votes of approval, the street sales tax was re-authorized during the May 2019 election. The following list identifies the major accomplishments that the City has undertaken to improve the community and its economy. iv FY 2020‐2021 IN REVIEW  Reduced the tax rate from $0.599159 to $0.579708 per $100 assessed taxable value; maintained the lowest municipal tax rates in Jefferson County; continued to provide $15,000 Homestead Tax Exemptions for the elderly and the disabled.  Completed street improvements to address the City’s transportation network, approximately $1,693,000, including the hot mix overlay of Boston Avenue (15th St to Twin City Highway), 20th Street (Helena Ave to Canal), the intersection of 27th Street and Nederland Avenue, Avenue L (Twin City Highway to South 16th St), North 23rd Street (Nederland Ave to Helena Ave), South 23rd Street (Ave H to Nederland Ave), and Luling (Twin City Highway to 14th St), concrete street repairs of Avenue H (Twin City Highway to 14th St), Hardy Avenue (Nederland Ave to Ave A), and approximately 500 square yards of repairs on 18th Street due to the winter storm, and bomag and chip sealed over 3 miles of mainly residential neighborhood streets.  Completed the Hodgson Road/Bourque Road Rehabilitation project ($1,347,168).  Completed the Hodgson Road Lift Station Reconstruction project ($505,315).  Completed the South 14th Street Sanitary Sewer Rehabilitation project ($126,061).  Completed the South 6th Street Water Main Improvement project ($289,267), which facilitated one of the NISD bond projects—the expansion/remodeling of Highland Park Elementary.  Completed the Canal Avenue Elevated Water Storage Tank and Avenue G Elevated Water Storage Tank Rehabilitation project ($800,400).  Commenced the installation of generators at four lift stations with Hazard Mitigation Grant Program funding ($289,620).  Commenced Wastewater Treatment Plant Improvements Phase 1 project ($1,198,236), which encompasses ultraviolet disinfection system upgrades, replacing the clarifier weirs, baffles, and suction headers, and expanding the lift station MCC building.  Commenced Wastewater Treatment Plant Improvements Phase 2 project ($1,135,572), which includes removal and replacement of the submersible lift station pumps, installation of variable frequency drives for the lift station pumps, replacing the existing polymer feed systems, a new mechanical screen at the headworks, and upgrades of the sludge de-watering centrifuges.  Completed the Homer E. Nagel Public Safety Complex Parking Lot Improvement project ($224,602.45).  Funded the widening of the Lower Neches Valley Authority’s 18th Street bridge following a traffic impact study triggered by the construction of the new high school ($370,000).  Issued Combination Tax and Revenue Certificates of Obligation, Series 2021 in the amount of $4,350,000 that will be utilized for streets, bridge, and drainage improvements.  Adjusted Utility Rates to ensure the fiscal stability of services; the water base rate was adjusted by $0.25 ($10 to $10.25); and the garbage rate was adjusted by $0.50 ($19.75 to $20.25).  Received $59,083 in grant funding and donations: $2,522 – Law Enforcement Officer Standards and Education Funds (Police), $691 – Law Enforcement Officer Standards and Education Funds (Fire), $1,170 – Texas Forest Service (Fire) $34,200 – Wilton and Effie Mae Hebert Foundation (Library); received donations of $1,500 from Friends of the Library (Library), $14,000 from Sunoco (Fire), and $5,000 from Exxon Mobil (Fire).  Purchased two Police patrol SUVs, a gradall excavator for the Streets Department, a truck for the Wastewater Treatment Plant, a truck for the Water/Sewer Distribution Depar tment, and a trash truck for the Solid Waste Department.  Purchased four sets of bunker gear for the Nederland Fire Department ($13,500).  Purchased four in-car cameras, ticket writer and printer, and laptop for cell phone forensics for the Nederland Police Department.  Completed the installation of a new waterslide for the Nederland Swimming Pool ($152,600) utilizing pipeline easement funds, not tax funds.  Continued to fund spay & neutering program of Nederland residents’ pets in an effort to control the pet population and commenced a feline population control program.  Adopted a five year Capital Improvement Program, 2021-2026.  Approved a five-year collective bargaining agreement with the International Association of Firefighters, Local 3339 and a three-year collective bargaining agreement with the Nederland Police Officers Association. v  Approved the Final Plat of “Heritage Estates private subdivision,” a 20-lot subdivision.  Revised the City’s Essential Services Policy.  Continued the strong working relationship with the Nederland Independent School District to include discounting building permit fees for the NISD bond projects, serving as a secondary evacuation location for Hillcrest Elementary, and approving an interlocal agreement to share CRF funds to assist with the school district’s COVID-19-related expenses.  Completed the Hurricane Delta debris operation and responded to the Winter Storm Uri.  Completed the re-design of the City website providing a greater amount of and better organized information, as well as a greater emphasis on financial transparency.  Hosted three Town Hall meetings to improve communication with citizens.  Continued to reduce the crime rate.  Resumed holding community events including the National Day of Prayer and the July 4th Fireworks Extravaganza.  Awarded for the 23rd year in a row the Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association of the United States and Canada for the City’s comprehensive annual financial report.  Continued the partnership with Adaptive Sports for Kids, which provides athletic/recreational activities, such as baseball, soccer, basketball, Tae Kwan Do, cheerleading , and flag football, for children and adults with disabilities.  Improved workplace safety and reduced the number of injury claims.  Continued the strong relationship with the Nederland Economic Development Corporation and Nederland Chamber of Commerce in order to promote commerce and industrial growth.  Continuation of residential and commercial growth in our City that will impact economic growth and opportunities for our citizenry.  Continued to assess each City department’s delivery of services to ensure the maximum efficiency and effectiveness of tax dollars to provide a better municipal government. GOALS FOR FISCAL YEAR 2021‐2022  Maintain the lowest municipal tax rates in Jefferson County ($0.517206 per $100 assessed taxable value); continue to provide $15,000 Homestead Tax Exemptions for the elderly and the disabled.  Continuation of street improvements to improve the transportation network—$3,015,200.  Complete the installation of generators at four lift stations with Hazard Mitigation Grant Program funding ($289,620).  Complete Wastewater Treatment Plant Improvements Phase 1 project ($1,198,236), which encompasses ultraviolet disinfection system upgrades, replacing the clarifier weirs, baffles, and suction headers, and expanding the lift station MCC building.  Complete Wastewater Treatment Plant Improvements Phase 2 project ($1,135,572), which includes removal and replacement of the submersible lift station pumps, installation of variable frequency drives for the lift station pumps, replacing the existing polymer feed systems, a new mechanical screen at the headworks, and upgrades of the sludge de-watering centrifuges.  Install and/or repair sidewalks near Highland Park Elementary, Hillcrest Elementary, and Langham Elementary.  Complete $4,350,000 in street, bridge, and drainage improvements (City of Nederland, Texas, Combination Tax and Revenue Certificates of Obligation, Series 2021) to include widening of the 18th Street bridge, concrete repairs of Nederland Ave (the railroad tracks to 3rd Street), hot mix overlays of various streets, drainage improvements, and drainage studies.  Commence the Hurricane Harvey CDBG Disaster Recovery Program to address drainage issues in the Hilldale/Hill Terrace area and the areas near 3rd Street, Texas, and 1st Street between Nederland Avenue and Boston Avenue.  Negotiate a new industrial in lieu of tax agreement with Sunoco.  Adjust City Utility Rates to ensure the long-term fiscal stability of water/wastewater services and solid waste services.  Complete a waterline replacement project and other capital improvements to the Water System.  Create a new Police Officer position for the Police Department.  Continue to fund spay & neutering program of Nederland residents’ pets in an effort to control the pet population and a feline population control program.  Increase monthly allocation for the Senior Citizen Center.  Allocate $50,000 for installation of street lights in underserved neighborhoods. vi  Purchase three detective units for the Police Department, a streets broom for the Streets Department, and a garbage truck for the Solid Waste Department.  Complete landscaping improvements and electrical repairs at Tex Ritter Park.  Install new playground equipment at 5th Street Park, construct half-court for basketball at Cropo LeBlanc Park, re-surface tennis court at Doornbos Park, install new playground at Doornbos Park, re-surface parking lot at Babe Ruth field, making parking lot/concrete drive repairs at Doornbos Park, install fencing around the waterslide, and re-surface the swimming pool deck.  Install new carpet at the Marion & Ed Hughes Public Library.  Continue to host town halls/public forums with City leadership to discuss various issues with the public as part of a citizen engagement/outreach effort.  Continue to reduce the crime rate.  Continuation of water and sewer line improvements to upgrade the City’s utility infrastructure.  Continue to provide community events including “Trash Bash”, Nederland Family Nights at the Pool, Monsters in the Park, holiday decorating, Christmas on the Avenue, National Night Out, Veterans’ Day, Memorial Day, and the 4th of July Fireworks Extravaganza.  Improve workplace safety and reduce the number of injury claims.  Continue the strong relationship with the Nederland Economic Development Corporation and Chamber of Commerce in order to promote commerce and industrial growth.  Continuation of residential and commercial growth in our City that will impact economic growth and opportunities for our citizenry.  Continue to assess each City department’s delivery of services to ensure the maximum efficiency and effectiveness of tax dollars to provide a better municipal government. Long‐term Financial Planning Local officials continue to support a strategic and aggressive capital plan for Nederland. Short-term and long-term capital improvement planning is necessary. City staff remains cognizant of the need for long-term fiscal stability. A conservative approach to the budget, including greater efficiency and salary/benefit controls, was required to offset decreases in revenue. While growth will continue in the City a nd surrounding area, a number of factors, specifically natural disasters and the national economy, may adversely impact Nederland’s long-term planning efforts. The City’s elected officials and management have traditionally maintained a prudent approach to budgeting, the expenditure of funds, and the collection of revenues. This philosophy will remain in place, in addition to continuing to evaluate further opportunities to more efficiently and effectively manage public funds. Development opportunities continue to be pursued by the Nederland Economic Development Corporation with the greatest focus on the Jack Brooks Airport Development. Annexed in 2010, this highway frontage acreage is marketed for retail and commercial development. The Nederland EDC actively works with the City of Nederland and Jefferson County. The City’s efforts are focused on industrial development opportunities with Sunoco, Phillips 66, and Air Liquide. Cash Management Policies and Practices Cash temporarily idle during the year was invested in approved investment pools, and interest-bearing demand deposits. The average yield on investments was 0.0489% during fiscal year ended September 30, 2021. Risk Management The City’s risk management program includes risks associated with employee health benefits, worker’s compensation, and general liability. The Personnel Department is responsible for the administration of the City’s plan for accident prevention. Pension and Other Postemployment Benefits The City provides pension benefits for all full-time employees through a nontraditional, joint contributory, hybrid defined benefit plan in the statewide Texas Municipal Retirement System (TMRS), an agent multiple- employer public employee retirement system. As a matter of policy, the City fully funds each year’s annual required contribution to the pension plan as determined by the actuary. The City has funded 108.89% of the present value of the projected benefits earned by employees. The remaining unfunded amount is being systematically funded over 25 years as part of the annual required contribution calculated by the actuary. viii ix CITY OF NEDERLAND, TEXAS ANNUAL COMPREHENSIVE FINANCIAL REPORT September 30, 2021 CITY OFFICIALS ELECTED POSITIONS Don Albanese Mayor Talmadge Austin Council Member - Ward 1, Mayor Pro-Tem Billy Neal Council Member - Ward 2 Randy Sonnier Council Member - Ward 3, Sylvia Root Council Member - Ward 4 KEY STAFF POSITION Christopher Duque City Manager Cheryl Dowden Director of Finance / Assistant City Manager Gay Ferguson City Clerk Jesse Branick City Attorney x FINANCIAL SECTION J. Pat O'Neill,III, CPA MichaelW. Kiefer, CPA TroyW. Domingue, CPA CPAs 6r BUSINESS ADVISORS March 74,2022 INDEPENDENT AUDITOR'S REPORT The Honorable Mayor and City Councii City of Nederland, Texas Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City oitrledertana, Texas [the "City") as of and for the year ended September 30, 202I,and the related notes to the financial statements, which collectively comprise the City's basic financial statements as Iisted in the table of contents. Management's Responsibility for the Financial Statements Managlment is responsible for the preparation and fair presentation of these financial statements in accordance with ,..ornting principles generally accepted in the United States of America. This includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to ""p..tr opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing itandards generally accepted in the United States of America and the standards applicable to financial audits contain "d, in Gor"rr^int Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The piocedures ielected depend on the auditor's judgmen! including the assessment of the risks of material misstatement of the financial statementi, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation ofthe financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity's internai control. Accordingly,weexpress no such opinion. Anauditalso includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Nederland, Texas as of Septemb er 30,202L and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparisonfor the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. 4140 Gladys Avenue, Suite 101 . Beaumont, T:X77706-3643'P-h1one (409) 838-1605 'Fax (409) 838-3316'WDJCPA.com Members of the Anerican Institute of Certfed Public Accountants Stanley (Chip) Majors,Jr., CPA.CITP, CGMA Jane P. Burns, CPA, CDEA ]eremy R. Triska, CPA To the Honorable Mayor and Members of City Council City of Nederland, Texas Page 2 March 14, 2022 -2- Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 through 8, the schedule of changes in net pension liability and related ratios on page 50, the schedule of employer contributions – pension plan on page 51, and the schedule of changes in the total OPEB liability and related ratio on page 52, as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Nederland, Texas’s basic financial statements. The combining and individual fund financial statements and schedules, the other supplementary information, and the introductory and statistical sections, as referenced in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules and other supplementary information are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the basic financial statements themselves, and other additional procedure s in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting required by Governmental Auditing Standards In accordance with Governmental Auditing Standards, we have also issued our report dated March 14, 2022 on our consideration of the City of Nederland, Texas’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Governmental Auditing Standards in considering the City of Nederland, Texas’s internal control over financial reporting and compliance. Wathen, DeShong & Juncker, L.L.P. WATHEN, DeSHONG & JUNCKER, L.L.P. Certified Public Accountants -3- MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the City of Nederland (the City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended September 30, 2021. We encourage readers to consider the information presented here in conjunction with our letter of transmittal at the front of this report and the City’s financial statements, which follow this section. FINANCIAL HIGHLIGHTS The net position of the City at the close of the most recent fiscal year was $97,236,845. This number must be viewed in the context that the majority of the City’s net position of $57,746,222 (59.39%) is the net investment in capital assets and that most capital assets in a government do not directly generate revenue nor can they be sold to generate liquid capital. The net position restricted for specific purposes totals $929,521 (0.96%). The remaining $38,561,102 (39.66%) is the unrestricted net position and may be used to meet the government’s ongoing obligations to citizens and creditors in accordance with the City’s fund designation and fiscal policies. Unrestricted net position increased by $2,004,682 in fiscal year 2021. As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $34,898,099. Within this total $1,536,234 is non-spendable for prepaid items, $11,262,227 is restricted by specific legal requirements, such as by debt covenants and $3,878,191 has been committed and assigned to specific expenditures. The remaining $18,221,447 is unassigned fund balance in the general fund and can be used for any lawful purpose. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements are comprised of four components: 1) government- wide financial statements, 2) fund financial statements 3) notes to the financial statements and 4) required supplementary information which includes this management’s discussion and analysis and multi-year funding progress on the City’s pension plan. In addition to the basic financial statements, this report also contains other supplementary information as listed in the Table of Contents. Government‐wide financial statements ‐ The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the City’s assets, deferred outflows of resources and deferred inflows of resources, and liabilities, with the difference between them reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents information showing how the City’s net position changed during the fiscal year. All changes in net position are reported when the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public works, public safety, cultural and recreation, and administration and general. The business-type activities of the City include two enterprise activities; water and sewer system and a solid waste system. The government- wide financial statements can be found on pages 9-10 of this report. -4- Fund financial statements ‐ A fund is a self-balancing set of accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories- governmental funds and proprietary funds. Governmental Funds ‐ Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on current sources and uses of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Non-financial assets such as governmental buildings, roads, drainage ways, park land and long- term liabilities such as bonds payable or long-term liabilities that will not be paid with current assets are excluded. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains eight governmental funds. Information is presented separately in the Governmental Funds Balance Sheet and in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances for the General Fund, the Capital Improvement Fund and Debt Service Fund. Data from the other five funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in the Annual Comprehensive Financial Report. The basic governmental funds financial statements can be found on pages 11-14. Proprietary Funds ‐ The City maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its water and sewer, and solid waste operations. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Water and Sewer and Solid Waste operations since they are considered to be major funds of the City. The basic proprietary fund financial statements can be found on pages 16-19 of this report. Notes to the Financial Statements – The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 20-49 of this report. Other Information – In addition to the basic financial statements and accompanying notes, this Report also presents certain required supplementary information concerning the City’s progress in funding its obligation to provide pension benefits to its employees -5- GOVERNMENT‐WIDE FINANCIAL ANALYSIS As noted earlier, net position and especially net position by category may serve over time as a useful indicator of a government’s financial position. The City’s net position was $97,236,845 as of September 30, 2021. The largest portion of the City’s net position (59.39%) reflects its investments in capital assets (e.g., land, building, equipment, improvements, and infrastructure), less any debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide service to citizens; consequently, these assets are not available for future spending, and with exception of business type assets, do not generate direct revenue for the City. They do represent, however, an obligation on the part of the City to maintain these assets into the future. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City’s net position (0.96%) represents resources that are subject to restrictions on how they may be used. The remaining balance of $38,561,102 (39.66%) is unrestricted and may be used to meet the government’s ongoing obligations to citizens and creditors. Net Position September 30,2021 and 2020 2021 2020 2021 2020 2021 2020 Current and Other Assets 43,315,183$   37,471,534$   12,798,608$   12,732,760$   56,113,791$   50,204,294$   Capital Assets 42,564,660      40,582,770      31,958,048      30,045,511      74,522,708      70,628,281      Total Assets 85,879,843      78,054,304      44,756,656      42,778,271      130,636,499   120,832,575   Deferred Outflows 1,107,211         873,262             573,470             454,397             1,680,681         1,327,659         Current Liabilities 8,092,080         4,653,367         1,274,911         1,179,393         9,366,991         5,832,760         Long‐term Liabilities Outstanding 23,016,491      20,806,716      611,319             569,343             23,627,810      21,376,059      Total Liabilities 31,108,571      25,460,083      1,886,230         1,748,736         32,994,801      27,208,819      Deferred Inflows 1,471,332         1,668,184         614,202             704,575             2,085,534         2,372,759         Net Position Net Investment in Capital Assets 36,664,862      34,417,770      31,958,048      30,045,511      57,746,222      54,996,633      Restricted 783,691             865,425             145,830             160,178             929,521             1,025,603         Unrestricted 16,958,598      16,516,104      10,725,816      10,573,668      38,561,102      36,556,420      Total Net Position 54,407,151$   51,799,299$   42,829,694$   40,779,357$   97,236,845$   92,578,656$   TotalsGovernmental Activities Business‐Type Activities Governmental activities: Governmental activities increased the City’s net position by $2,607,852. The increase is due to several factors including greater than anticipated revenues from the City’s property tax revenue, sales tax revenue, and in lieu of tax contracts revenue. Grant funds were received from the federal government due to the Coronavirus pandemic. Several Park and Recreation projects were delayed due to weather with funds reallocated in the current budget. In addition, the City received a onetime street use payment from a pipeline company for temporary street use. In Lieu of tax payments increased due to higher industrial values and lower construction contract reductions. The City’s Municipal Court entered into a contract for collection of court fines and fees resulting in greater than expected payments. Business type activities. Business-type activities increased the City’s net position by $2,050,337. The increase is attributable to nonoperating transfers in of $3,371,554. The following table provides a summary of the City’s operations for year ended September 30, 2021 with comparative totals for year ended September 30, 2020. -6- Changes in Net Position For the fiscal years ended September 30, 2021 and 2020 2021 2020 2021 2020 2021 2020 Revenues Program Revenues Charges for Services 679,849$          480,203$          6,929,101$      6,820,447$      7,608,950$      7,300,650$      Operating Grants and Contributions 421,216             1,383,225         ‐                               ‐                               421,216             1,383,225         Capital Grants and Contributions 53,242                ‐                               ‐                               ‐                               53,242                ‐                               General Revenues Property Taxes 7,202,505         7,158,736         ‐                               ‐                               7,202,505         7,158,736         Industrial Payments 3,215,618         2,402,073         ‐                               ‐                               3,215,618         2,402,073         Sales Tax 5,063,576         5,065,369         ‐                               ‐                               5,063,576         5,065,369         Gross Receipts Tax 1,160,013         1,203,836         ‐                               ‐                               1,160,013         1,203,836         Interest 13,317                267,685             4,181                   78,758                17,498                346,443             Miscellaneous 176,469             314,717             328,159             177,212             504,628             491,929             Total Revenues 17,985,805      18,275,844      7,261,441         7,076,417         25,247,246      25,352,261      Expenses General Government 1,038,063         1,711,575         ‐                               ‐                               1,038,063         1,711,575         Public Safety 7,175,908         6,941,338         ‐                               ‐                               7,175,908         6,941,338         Public Works 2,474,918         2,295,576         ‐                               ‐                               2,474,918         2,295,576         Culture and recreation 1,520,515         1,332,467         ‐                               ‐                               1,520,515         1,332,467         Administrative and general 473,705             361,156             ‐                               ‐                               473,705             361,156             Interest on Long Term Debt 633,917             817,081             ‐                               ‐                               633,917             817,081             Other Debt Service 121,461             ‐                               ‐                               ‐                               121,461             ‐                               Water & Sewer ‐                               ‐                               5,353,822         5,076,567         5,353,822         5,076,567         Solid Waste ‐                               ‐                               1,796,748         1,472,886         1,796,748         1,472,886         Total Expenses 13,438,487      13,459,193      7,150,570         6,549,453         20,589,057      20,008,646      Increase (Decrease) in Net Position before Transfers 4,547,318         4,816,651         110,871             526,964             4,658,189         5,343,615         Transfers (1,939,466)       (2,649,925)       1,939,466         2,649,925         ‐                               ‐                               Increase in Net Position 2,607,852         2,166,726         2,050,337         3,176,889         4,658,189         5,343,615         Net Position‐Beginning of Year 51,799,299      49,632,573      40,779,357      37,602,468      92,578,656      87,235,041      Net Position‐End of Year 54,407,151$   51,799,299$   42,829,694$   40,779,357$   97,236,845$   92,578,656$   Governmental Activities Business‐Type Activities Totals FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related requirements. Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $34.9 million, an increase of $2,592,082 over the prior year. The increase is mainly attributable to activities in the General Fund resulting in an increase of $2,298,401 in Fund Balance. Approximately $18.2 million of this amount constitutes unassigned fund balance, which is available for spending at the government’s discretion. The remainder of fund balance is restricted and committed to indicate that it is not available for new spending because it has already been committed to prepaid items $1,536,234, restricted for payment of debt service $146,718, restricted for Capital Acquisition and Contractual Obligations $10,813,415, restricted for Public Safety $171,029, and restricted for Culture and Recreation $131,065. In addition, $3,415,705 is committed for capital projects and $462,486 is assigned for Culture and Recreation. The General Fund is the chief operating fund of the City. At September 30, 2021, the unassigned fund balance of the General Fund was $18,221,447 while total fund balance was $22,733,100. As a measure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures (including transfers out). Unassigned fund balance represents 128.6 percent of total general fund expenditures (including transfers out), while total fund balance represents 160.5 percent of that same amount. -7- Fund balance of the City’s General Fund increased by $2,298,401 during 2021. This increase was primarily due to increases in property tax revenue and in lieu of tax contracts revenue. The Debt Service Fund has a total fund balance of $146,718. The net decrease in fund balance during the fiscal year 2021 in this fund was $43,157 and was due to ad valorem tax revenues being below budget. The Debt Service Fund is funded with property tax revenue at the level necessary to meet debt service requirements. Proprietary funds. The City’s proprietary funds provide the same information found in the government-wide financial statements, but in more detail. The unrestricted net position at the end of the year amounted to $6,823,857 for the Water and Sewer Fund, and $3,901,959 for the Solid Waste Fund. The change in net position for the enterprise funds in 2021 were an increase of $2,104,617 for the Water & Sewer Fund and a decrease of $54,280 for the Solid Waste Fund. General Fund Budgetary Highlights The City made revisions to the original appropriations approved by the City Council. Overall these changes resulted in an increase in budgeted expenditures from the original budget of $1,097,306 or 8.9%. The major changes were Highways and Streets increased $814,850, and Parks and Recreation increased $103,151. During the year budgeted revenues increased $2,466,490 from the original budget which was attributable to better than expected ad valorem tax collections, sales tax collections industrial in lieu of contract collections. Major variances between budget and actual occurred in property tax revenue and sales tax revenue. The City’s highway and street expenditures were $404,114 greater than the anticipated budget due to added street projects including a rebuilt industrial road with concrete material to extend its useful life. Parks and recreation expenditures were $227,296 under budget. Police expenditures were $99,935 under budget. CAPITAL ASSETS Capital assets. The City’s investment in capital assets for governmental and business-type activities as of September 30, 2021, amounted to $74,522,708 (net of accumulated depreciation). This investment in capital assets includes land, and other capital assets such as buildings, improvements, and equipment. The total increase in capital assets for the current fiscal year was approximately 5.51% (4.88% increase for governmental activities and 6.37% increase in business-type activities.) 2021 2020 2021 2020 2021 2020 Land 4,319,781$         4,095,179$      ‐$                             ‐$                            4,319,781$      4,095,179$      Construction in Progress 1,322,023            164,100             2,822,849          436,541             4,144,872         600,641             Buildings 15,248,220         15,220,952      21,450,340       21,450,340      36,698,560      36,671,292      Improvements other than Buildings ‐                                  ‐                               37,861,637       36,854,978      37,861,637      36,854,978      Machinery and Equipment 6,785,629            6,121,911         5,286,223          4,956,742         12,071,852      11,078,653      Infrastructure 46,119,738         44,365,748      ‐                                ‐                               46,119,738      44,365,748      73,795,391         69,967,890      67,421,049       63,698,601      141,216,440   133,666,491   Less: Accumulated Depreciation (31,230,731)       (29,385,120)    (35,463,001)     (33,653,090)    (66,693,732)    (63,038,210)    Capital Assets, net 42,564,660$      40,582,770$   31,958,048$    30,045,511$   74,522,708$   70,628,281$   Governmental Activities Business‐Type Activities Totals Major capital asset events during the current fiscal year included the following:  Street improvements including concrete overlays, chip seal and hot mix totaling $2,548,738  Purchase of Street Department Gradall at a cost of $365,253  Completion of a Public Safety Building Parking Lot at a cost of $224,602  Completion of a new Waterline along S. 6th Street totaling $336,068  Wastewater Treatment Plant Improvements totaling $1,591,281  Completion of elevated water towers rehabilitation totaling $852,370  Purchase of Solid Waste Freightliner Trash Truck at a cost of $205,769 Additional information on the City’s capital assets can be found in Note 1 on page 26 and Note 5 on pages 34-35 of this report. -8- DEBT ADMINISTRATION Long‐Term Debt Long‐term debt. At September 30, 2021, the City had $23,899,840 of long-term debt. 2021 2020 2021 2020 2021 2020 General & Certificates of Obligations 3,550,000$      4,335,000$      ‐$                      ‐$                      3,550,000$      4,335,000$      Tax & Revenue CO's 18,320,000      15,170,000      ‐                         ‐                         18,320,000      15,170,000      Unamortized Bond Premium 1,489,840         1,350,259         ‐                         ‐                         1,489,840         1,350,259         Tax Notes Payable 540,000             1,040,000         ‐                         ‐                        540,000             1,040,000         23,899,840$   21,895,259$   ‐$                      ‐$                      23,899,840$   21,895,259$   Governmental Activities Business‐Type Activities Totals Total long-term bonds and other liabilities outstanding at September 30, 2021 increased by $2,004,581 over September 30, 2020. The City’s General Obligation bond rating is AA. Additional information regarding the City’s long-term debt can be found in Note 7 on pages 36-37 of this report. ECONOMIC FACTORS AND NET YEAR’S BUDGET Under ideal conditions, preparing the proposed budget would not require the consideration of an increase in taxes or fees or the reduction of service levels. In prior years, increases in assessed value and other revenue categories have been sufficient to fund City Council supported programs, including aggressive capital improvements. Although economic conditions have improved, Administration continues to evaluate all aspects of City services and apply the most effective and efficient method of program funding and service delivery. The City of Nederland’s budget for fiscal year 2022 includes a small increase in property tax revenue due to properties added to the tax roll and increased property values. The tax rate decreased from fiscal year 2021 at .517206 per $100 valuation. On the expenditure side, increases are expected in health insurance premiums and the City is actively taking steps to minimize these increases by providing healthy lifestyle incentives. Requests for Information This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City’s finances and to show accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Nederland, Finance Department, P. O. Box 967, Nederland, Texas, 77627. BASIC FINANCIAL STATEMENTS CITY OF NEDERLAND STATEMENT OF NET POSITION SEPTEMBER 30, 2021 The accompanying notes are an integral part of these financial statements. Component Unit Business - Nonmajor Governmental Type Component Activities Activities Total Unit ASSETS Current assets: Cash and Cash Equivalents 5,225,543$ 570,823$ 5,796,366$ 166,482$ Investments - Current 32,705,708 9,017,452 41,723,160 7,411,174 Taxes Receivable, Net 354,501 - 354,501 74,583 Accounts Receivable, Net 1,020,178 875,922 1,896,100 5,359 Due from Component Unit 1,991 - 1,991 - Due from Others 22,705 - 22,705 - Inventories - 125,995 125,995 - Prepaid Items 1,536,234 - 1,536,234 - Total current assets 40,866,860 10,590,192 51,457,052 7,657,598 Noncurrent assets: Cash and Cash Equivalents - 179,607 179,607 - Investments - 855,415 855,415 - Capital Assets: Land Purchase and Improvements 4,319,781 - 4,319,781 350,204 Infrastructure and Improvements, Net 27,275,136 17,538,499 44,813,635 - Buildings, Net 7,828,592 10,345,893 18,174,485 514,961 Machinery and Equipment, Net 1,819,128 1,250,807 3,069,935 7,431 Construction in Progress 1,322,023 2,822,849 4,144,872 200,619 Net Pension Asset 2,448,323 1,173,394 3,621,717 70,521 Total noncurrent assets 45,012,983 34,166,464 79,179,447 1,143,736 Total assets 85,879,843 44,756,656 130,636,499 8,801,334 DEFERRED OUTFLOWS OF RESOURCES Deferred Charge for Refunding 28,118 - 28,118 - Deferred Outflow Related to Pension Plan 868,596 481,402 1,349,998 27,931 Deferred Outflow Related to OPEB 210,497 92,068 302,565 39,047 Total Deferred Outflows of Resources 1,107,211 573,470 1,680,681 66,978 Primary Government CITY OF NEDERLAND STATEMENT OF NET POSITION EXHIBIT A -9- Component Unit Business - Nonmajor Governmental Type Component Activities Activities Total Unit LIABILITIES Current liabilities: Accounts Payable 2,398,506$ 195,961$ 2,594,467$ 147$ Wages and Salaries Payable 361,042 121,055 482,097 - Compensated Absences Payable 368,273 102,480 470,753 - Refundable Customer Deposits - 855,415 855,415 - Retainage Payable 299,142 - 299,142 - Intergovernmental Payable 68,159 - 68,159 - Due to General Fund - - - 1,991 Accrued Interest Payable 65,743 - 65,743 - Unearned Revenues 2,168,945 - 2,168,945 2,500 Bonds Payable - Current 2,362,270 - 2,362,270 - Total current liabilities 8,092,080 1,274,911 9,366,991 4,638 Noncurrent Liabilities: Bonds Payable - Noncurrent 21,537,570 - 21,537,570 - Compensated Absences 338,994 122,857 461,851 - Net OPEB Liability 1,139,927 488,462 1,628,389 207,242 Total noncurrent liabilities 23,016,491 611,319 23,627,810 207,242 Total liabilities 31,108,571 1,886,230 32,994,801 211,880 DEFERRED INFLOWS OF RESOURCES Deferred Inflow Related to Pension Plan 1,354,175 549,379 1,903,554 35,463 Deferred Inflow Related to OPEB 117,157 64,823 181,980 36,272 Total Deferred Inflows of Resources 1,471,332 614,202 2,085,534 71,735 NET POSITION Net Investment in Capital Assets 36,664,862 31,958,048 57,746,222 1,073,215 Restricted for: Restricted for Debt Service 259,079 145,830 404,909 - Restricted for Public Works 222,518 - 222,518 - Restricted for Other Funds 302,094 - 302,094 - Unrestricted 16,958,598 10,725,816 38,561,102 7,511,482 Total Net Position 54,407,151$ 42,829,694$ 97,236,845$ 8,584,697$ Primary Government CITY OF NEDERLAND STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2021 The accompanying notes are an integral part of these financial statements. Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions Primary Government: GOVERNMENTAL ACTIVITIES: General Government 1,038,063$ -$ -$ -$ Public Safety 7,175,908 401,552 334,162 - Public Works 2,474,918 166,978 - 53,242 Culture and Recreation 1,520,515 111,319 65,381 - Administrative and General 473,705 - 21,673 - Interest on Debt 633,917 - - - Other Debt Service 121,461 - - - Total Governmental Activities 13,438,487 679,849 421,216 53,242 BUSINESS-TYPE ACTIVITES Water and Sewer Fund 5,353,822 5,175,026 - - Solid Waste Fund 1,796,748 1,754,075 - - Total Business-Type Activities 7,150,570 6,929,101 - - TOTAL PRIMARY GOVERNMENT 20,589,057$ 7,608,950$ 421,216$ 53,242$ Component Unit: Nonmajor Component Unit 416,540$ -$ -$ -$ TOTAL COMPONENT UNIT 416,540$ -$ -$ -$ General Revenues: Taxes: Property Taxes, Levied for General Purposes Sales Tax In Lieu of Tax Contracts Other Taxes Penalty and Interest on Taxes Miscellaneous Revenue Investment Earnings Transfers In (Out) Total General Revenues and Transfers Change in Net Position Net Position - Beginning Net Position - Ending Program Revenues CITY OF NEDERLAND EXHIBIT B -10- Component Unit Nonmajor Governmental Business-Type Component Activities Activities Total Unit (1,038,063)$ -$ (1,038,063)$ -$ (6,440,194) - (6,440,194) - (2,254,698) - (2,254,698) - (1,343,815) - (1,343,815) - (452,032) - (452,032) - (633,917) - (633,917) - (121,461) - (121,461) - (12,284,180) - (12,284,180) - - (178,796) (178,796) - - (42,673) (42,673) - - (221,469) (221,469) - (12,284,180) (221,469) (12,505,649) - - - - (416,540) - - - (416,540) 7,106,884 - 7,106,884 - 5,063,576 - 5,063,576 1,012,715 3,215,618 - 3,215,618 - 1,160,013 - 1,160,013 - 95,621 - 95,621 - 176,469 328,159 504,628 24,194 13,317 4,181 17,498 13,651 (1,939,466) 1,939,466 - - 14,892,032 2,271,806 17,163,838 1,050,560 2,607,852 2,050,337 4,658,189 634,020 51,799,299 40,779,357 92,578,656 7,950,677 54,407,151$ 42,829,694$ 97,236,845$ 8,584,697$ Primary Government Changes in Net Position Net (Expense) Revenue and CITY OF NEDERLAND BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2021 EXHIBIT C The accompanying notes are an integral part of these financial statements. -11- Total General Debt Service Capital Other Governmental Fund Fund Projects Funds Funds ASSETS Cash and Cash Equivalents 3,363,371$ 38,558$ 1,635,995$ 187,619$ 5,225,543$ Investments - Current 22,519,568 185,944 9,863,759 136,437 32,705,708 Taxes Receivable 283,908 140,676 - - 424,584 Allowance for Uncollectible Taxes (credit) (47,651) (23,915) - - (71,566) Accounts Receivable Net 576,113 - - 21,709 597,822 Due from Other Governments 31,271 1,483 53,242 - 85,996 Due from Others 22,705 - - - 22,705 Due from Other Funds 128,457 - - - 128,457 Due from Component Unit 1,991 - - - 1,991 Prepaid Items 70,178 - 1,466,056 - 1,536,234 Total Assets 26,949,911$ 342,746$ 13,019,052$ 345,765$ 40,657,474$ LIABILITIES Accounts Payable 1,308,250$ -$ 1,063,381$ 26,871$ 2,398,502$ Wages and Salaries Payable 361,042 - - - 361,042 Retainage Payable 104,448 - 194,694 - 299,142 Intergovernmental Payable 68,159 - - - 68,159 Due to Other Funds - 83,667 44,790 - 128,457 Unearned Revenues 2,152,145 - - 16,800 2,168,945 Total Liabilities 3,994,044 83,667 1,302,865 43,671 5,424,247 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes 222,767 112,361 - - 335,128 Total Deferred Inflows of Resources 222,767 112,361 - - 335,128 FUND BALANCES Nonspendable Fund Balance: Prepaid Items 70,178 - 1,466,056 - 1,536,234 Restricted Fund Balance: Capital Acquisition and Contractual Obligation 3,978,989 - 6,834,426 - 10,813,415 Retirement of Long-Term Debt - 146,718 - - 146,718 Other Restricted Fund Balance - - 302,094 302,094 Committed Fund Balance: Other Committed Fund Balance - - 3,415,705 - 3,415,705 Assigned Fund Balance: Other Assigned Fund Balance 462,486 - - - 462,486 Unassigned Fund Balance 18,221,447 - - - 18,221,447 Total Fund Balances 22,733,100 146,718 11,716,187 302,094 34,898,099 Total Liabilities, Deferred Inflows and Fund Balances 26,949,911$ 342,746$ 13,019,052$ 345,765$ 40,657,474$ CITY OF NEDERLAND RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2021 EXHIBIT C‐1 The accompanying notes are an integral part of these financial statements. -12- Total Fund Balances ‐ Governmental Funds 34,898,099$ Capital assets used in governmental activities are not financial resources and, 42,564,660 therefore, are not reported in the funds. Deferred outflow of resources are not reported in the governmental funds: 1,107,211 Deferred outflows related to pension 868,596$ Deferred outflows related to OPEB 210,497 Deferred amounts on refunding bonds 28,118 Long-term liabilities, including bonds payable, are not due and payable in the current (23,899,840) period and, therefore, are not reported in the funds. OPEB liability are not due and payable in the current period and, therefore, are not (1,139,927) reported in the funds. The net pension asset related to TMRS is not a current financial resource and is not 2,448,323 included in the governmental funds. Compensated absences that are not due and payable in the current period (707,267) and, therefore, are not reported in the governmental funds. Property taxes receivable are not available to pay for current period expenditures and, 335,128 therefore, are deferred in the funds. Accrued interest on bonds is not reported in the funds (65,743) Deferred inflow of resources are not reported in the governmental funds. (1,471,332) Warrants and fines outstanding are not recorded as revenue in the governmental 337,839 funds because they are not considered measurable and available. However, in the Statement of Net Position, they are considered accounts receiva ble and recorded. Net Position of Governmental Activities 54,407,151$ CITY OF NEDERLAND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT D The accompanying notes are an integral part of these financial statements. -13- Total General Debt Service Capital Other Governmental Fund Fund Projects Funds Funds REVENUES: Taxes: Property Taxes 5,061,346$ 2,045,798$ -$ -$ 7,107,144$ Sales Tax 5,063,576 - - - 5,063,576 In Lieu of Tax Contracts 3,215,618 - - - 3,215,618 Other Taxes 1,053,513 - - 106,500 1,160,013 Penalty and Interest on Taxes 65,824 29,797 - - 95,621 Grants and Private Contributions 325,520 - 53,242 95,695 474,457 Forfeitures - - - 2,090 2,090 Charges for Services 278,297 - - - 278,297 Fines and Court Costs 359,280 - - 8,757 368,037 Investment Earnings 10,231 92 2,903 91 13,317 Other Revenue 172,994 - - 1,390 174,384 Total Revenues 15,606,199 2,075,687 56,145 214,523 17,952,554 EXPENDITURES: Current: General Government: 1,338,390 - 541,984 - 1,880,374 Public Safety 6,721,477 - 284,641 79,114 7,085,232 Public Works 3,609,223 - 389,798 - 3,999,021 Culture and Recreation 1,182,292 - - 179,285 1,361,577 Administrative and General 472,363 - - - 472,363 Debt Service: Principal on Debt - 2,305,000 - - 2,305,000 Interest on Debt - 769,059 - - 769,059 Other Debt Service - 1,873 121,461 - 123,334 Capital Outlay: Capital Outlay - - 277,844 - 277,844 Total Expenditures 13,323,745 3,075,932 1,615,728 258,399 18,273,804 Excess (Deficiency) of Revenues Over (Under) Expenditures 2,282,454 (1,000,245) (1,559,583) (43,876) (321,250) OTHER FINANCING SOURCES (USES): Issuance of Bonds - - 4,476,851 - 4,476,851 Transfers In 485,000 957,088 825,000 20,000 2,287,088 Transfers Out (845,000) - (3,371,554) (10,000) (4,226,554) Total Other Financing Sources (Uses) (360,000) 957,088 1,930,297 10,000 2,537,385 Net Change in Fund Balances 1,922,454 (43,157) 370,714 (33,876) 2,216,135 Fund Balance - Beginning 20,434,699 189,875 11,345,473 335,970 32,306,017 Prior Period Adjustment 375,947 - - - 375,947 Fund Balance - Ending 22,733,100$ 146,718$ 11,716,187$ 302,094$ 34,898,099$ CITY OF NEDERLAND RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT D‐1 The accompanying notes are an integral part of these financial statements. -14- Total Net Change in Fund Balances ‐ Governmental Funds 2,216,135$ Revenues in the Statement of Activities that do not provide current financial resources 33,255 are not reported as revenues in the funds. Prior year deferred property taxes (335,388)$ Current year deferred property taxes 335,128 Prior year warrants and fines (304,330) Current year warrants and fines 337,845 Governmental funds report capital outlays as expenditures. However, in the Statement 1,981,884 of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation. Capital outlays 3,882,968$ Depreciation (1,901,084) The issuance of long-term debt provides current financial resources to governmental (2,171,851) funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds; however, neither transaction has an effect on net position. Some expenses reported in the Statement of Activities do not require the use of 548,429 current financial resources and, therefore, are not reported as expenditures in the governmental funds. Conversely, certain items reported as expenditures in the governmental funds are considered assets in the government-wide statements. Bond premium amortization 167,270$ Decrease in net pension asset 494,534 Increase OPEB liability (32,237) Increase in compensated absences (50,884) Decrease in deferred charge on refunding (28,118) Decrease in interest payable (2,136) Change in Net Position of Governmental Activities 2,607,852$ CITY OF NEDERLAND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL – GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT E The accompanying notes are an integral part of these financial statements. -15- Variance With Actual Final Budget GAAP BASIS Positive of Original Final (See Note) (Negative) REVENUES: Taxes: Property Taxes 4,559,000$ 4,776,334$ 5,061,346$ 285,012$ Sales Tax 3,687,500 4,712,500 5,063,576 351,076 In Lieu of Tax Contracts 2,025,000 3,169,156 3,215,618 46,462 Other Taxes 996,975 996,975 1,053,513 56,538 Penalty and Interest on 55,900 55,900 65,824 9,924 Grants and Private Contributions 257,025 257,025 325,520 68,495 Charges for Services 240,700 320,700 278,297 (42,403) Fines and Court Costs 224,800 224,800 359,280 134,480 Investment Earnings 122,800 122,800 10,231 (112,569) Other Revenue 71,000 71,000 172,994 101,994 Total Revenues 12,240,700 14,707,190 15,606,199 899,009 EXPENDITURES: Current: General Government: City Council 23,820 23,820 22,297 1,523 Legal 81,050 81,050 80,204 846 City Manager 522,195 487,195 478,566 8,629 Financial Administration 383,330 405,330 394,685 10,645 Personnel 314,929 317,629 305,296 12,333 Civil Service 4,150 4,150 675 3,475 City Hall 54,450 57,800 56,667 1,133 Public Safety: Police 4,469,253 4,550,253 4,450,318 99,935 Fire Protection 1,918,476 1,997,326 1,954,951 42,375 Protective Inspections 238,844 236,094 223,978 12,116 Code Enforcement 104,397 104,397 92,230 12,167 Public Works 337,162 356,712 341,107 15,605 Highways and Streets 1,910,180 2,725,030 3,129,144 (404,114) Animal Control 142,562 147,027 138,972 8,055 Culture and Recreation: Parks and Recreation 797,525 900,676 673,380 227,296 Libraries 532,356 540,241 508,912 31,329 Administrative and General 566,021 563,276 472,363 90,913 Total Expenditures 12,400,700 13,498,006 13,323,745 174,261 Excess (Deficiency) of Revenues Over (Under) Expenditures (160,000) 1,209,184 2,282,454 1,049,184 OTHER FINANCING SOURCES (USES): Transfers In 485,000 485,000 485,000 - Transfers Out (Use) (325,000) (845,000) (845,000) - Total Other Financing Sources (Uses) 160,000 (360,000) (360,000) - Change in Fund Balance - 849,184 1,922,454 1,073,270 Fund Balance -Beginning 20,434,699 20,434,699 20,434,699 - Prior Period Adjustment - - 375,947 375,947 Fund Balance - Ending 20,434,699$ 21,283,883$ 22,733,100$ 1,449,217$ Bud geted Amounts CITY OF NEDERLAND STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2021 The accompanying notes are an integral part of these financial statements. Water and Solid Total Sewer Waste Enterprise Fund Fund Funds ASSETS Current Assets: Cash and Cash Equivalents 352,899$ 217,924$ 570,823$ Investments - Current 5,453,203 3,564,249 9,017,452 Accounts Receivable Net 597,115 278,807 875,922 Inventories 125,995 - 125,995 Total Current Assets 6,529,212 4,060,980 10,590,192 Noncurrent Assets: Cash and Cash Equivalents 179,607 - 179,607 Investments 855,415 - 855,415 Capital Assets: Infrastructure and Improvements 37,861,637 - 37,861,637 Accumulated Depreciation - Infra. & Improvements (20,323,138) - (20,323,138) Buildings 21,450,340 - 21,450,340 Accumulated Depreciation - Buildings (11,104,447) - (11,104,447) Machinery and Equipment 2,286,461 2,999,762 5,286,223 Accumulated Depreciation - Machinery & Equipment (1,830,363) (2,205,053) (4,035,416) Construction in Progress 2,822,849 - 2,822,849 Net Pension Asset 976,228 197,166 1,173,394 Total Noncurrent Assets 33,174,589 991,875 34,166,464 Total Assets 39,703,801 5,052,855 44,756,656 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflow Related to Pension Plan 429,477 51,925 481,402 Deferred Outflow Related to OPEB 66,946 25,122 92,068 Total Deferred Outflows of Resources 496,423 77,047 573,470 Business-Type Activities - Enterprise Funds CITY OF NEDERLAND STATEMENT OF NET POSITION EXHIBIT F -16- Water and Solid Total Sewer Waste Enterprise Fund Fund Funds LIABILITIES Current Liabilities: Accounts Payable 105,499 90,462 195,961 Wages and Salaries Payable 89,921 31,134 121,055 Compensated Absences Payable 73,176 29,304 102,480 Refundable Customer Deposits 855,415 - 855,415 Total Current Liabilities 1,124,011 150,900 1,274,911 Noncurrent Liabilities: Compensated Absences 93,131 29,726 122,857 Net OPEB Liability 355,195 133,267 488,462 Total Noncurrent Liabilities 448,326 162,993 611,319 Total Liabilities 1,572,337 313,893 1,886,230 DEFERRED INFLOWS OF RESOURCES Deferred Inflow Related to Pension Plan 448,180 101,199 549,379 Deferred Inflow Related to OPEB 46,681 18,142 64,823 Total Deferred Inflows of Resources 494,861 119,341 614,202 NET POSITION Net Investment in Capital Assets 31,163,339 794,709 31,958,048 Restricted for Debt Service 145,830 - 145,830 Unrestricted 6,823,857 3,901,959 10,725,816 Total Net Position 38,133,026$ 4,696,668$ 42,829,694$ Business-Type Activities - Enterprise Funds CITY OF NEDERLAND STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT G The accompanying notes are an integral part of these financial statements. -17- Water and Solid Total Sewer Waste Enterprise Fund Fund Funds OPERATING REVENUES: Charges for Water Services 2,227,150$ -$ 2,227,150$ Charges for Sewerage Services 2,947,876 - 2,947,876 Charges for Sanitation Services - 1,754,075 1,754,075 Penalties and Interest 157,611 - 157,611 Other Revenue 83,583 86,965 170,548 Total Operating Revenues 5,416,220 1,841,040 7,257,260 OPERATING EXPENSES: Other Operating Costs Water Treatment 1,243,238 - 1,243,238 Water and Sewer Distribution 883,369 - 883,369 Wastewater Treatment 985,341 - 985,341 Billings and Collections 624,472 - 624,472 Solid Waste - 1,600,496 1,600,496 Other Operating Expenses 3,744 - 3,744 Total Other Operating Costs 3,740,164 1,600,496 5,340,660 Depreciation 1,613,658 196,252 1,809,910 Total Operating Expense 5,353,822 1,796,748 7,150,570 Operating Income 62,398 44,292 106,690 NONOPERATING REVENUES (EXPENSES): Investment Earnings2,753 1,428 4,181 Total Nonoperating Revenue (Expenses) 2,753 1,428 4,181 Income Before Transfers 65,151 45,720 110,871 Transfers In 3,371,554 - 3,371,554 Transfers Out (1,332,088) (100,000) (1,432,088) Change in Net Position 2,104,617 (54,280) 2,050,337 Total Net Position - Beginning 36,028,409 4,750,948 40,779,357 Total Net Position - Ending 38,133,026$ 4,696,668$ 42,829,694$ Business-Type Activities - Enterprise Funds CITY OF NEDERLAND STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT H The accompanying notes are an integral part of these financial statements. -18- Water and Solid Total Sewer Waste Enterprise Fund Fund Funds Cash Flows from Operating Activities: Cash Received from Customers 5,332,216$ 1,654,881$ 6,987,097$ Cash Payments to Employees for Services (1,526,687) (474,605) (2,001,292) Cash Payments for Goods and Services (2,307,447) (1,119,005) (3,426,452) Other operating cash receipts 83,583 86,965 170,548 Net Cash Provided by Operating Activities 1,581,665 148,236 1,729,901 Cash Flows from Non-Capital Financing Activities: Transfer from Other Funds 3,371,554 - 3,371,554 Transfers to Other Funds (1,332,088) (100,000) (1,432,088) Net Cash Provided by (Used for) Non-Capital Financing Activities 2,039,466 (100,000) 1,939,466 Cash Flows from Capital and Related Financing Activities: Acquisition of Capital Assets (3,489,026) (233,422) (3,722,448) Cash Flows from Investing activities: Purchase of Investment Securities (932,755) (701,428) (1,634,183) Investment Income 2,753 1,428 4,181 Net Cash Provided by (Used for) Investing Activities (930,002) (700,000) (1,630,002) Net Increase (Decrease) in Cash and Cash Equivalents (797,897) (885,186) (1,683,083) Cash and Cash Equivalents at the Beginning of the Year 1,330,403 1,103,110 2,433,513 Cash and Cash Equivalents at the End of the Year 532,506 217,924 750,430 Cash and Cash Equivalents End of Year, Restricted (179,607) - (179,607) Cash and Cash Equivalents, Current 352,899$ 217,924$ 570,823$ Business-Type Activities - Enterprise Funds CITY OF NEDERLAND STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT H(continued) The accompanying notes are an integral part of these financial statements. -19- Water and Solid Total Sewer Waste Enterprise Fund Fund Funds Reconciliation of Operating Income to Net Cash Provided By Operating Activities: Operating Income 62,398$ 44,292$ 106,690$ Adjustments to Reconcile Operating Income To Net Cash Provided by Operating Activities: Depreciation 1,613,658 196,252 1,809,910 Effect of Increases and Decreases in Current Assets and Liabilities: Decrease (Increase) in Receivables (25,690) (99,194) (124,884) Decrease (Increase) in Inventories 9,840 - 9,840 Decrease (Increase ) in Net Pension Asset 10,500 (10,203) 297 Decrease (Increase) in Pension Outflows (78,013) (17,234) (95,247) Decrease (Increase) in OPEB Outflows (17,325) (6,501) (23,826) Increase (Decrease) in Accounts Payable 15,386 39,424 54,810 Increase (Decrease) in Wages Payable 8,003 1,421 9,424 Increase (Decrease) in Compensated Absences 4,377 1,638 6,015 Increase (Decrease) in Customer Deposits 25,269 - 25,269 Increase (Decrease) in Noncurrent Compensated Absences 17,815 6,435 24,250 Increase (Decrease) in Net Pension Inflows (91,483) (18,477) (109,960) Increase (Decrease) in OPEB Liabilities 12,890 4,836 17,726 Increase (Decrease) in OPEB Inflows 14,040 5,547 19,587 Net Cash Provided by Operating activities 1,581,665$ 148,236$ 1,729,901$ Business-Type Activities - Enterprise Funds NOTES TO THE FINANCIAL STATEMENTS CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -20- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City of Nederland, Texas (the “City”) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The following represents the significant accounting policies used by the City. A. Reporting Entity The City of Nederland, Texas was incorporated in 1940, and was chartered as a Home Rule City in March, 1955. The City operates under a council-manager form of govern ment and provides the following services as authorized by its charter: Public Safety-Police and Fire, Streets, Water and Sewer, Sanitation; Culture- Recreation, Public Improvements, and General Administrative Services. As required by generally accepted accounting principles, the financial statements present the City of Nederland, Texas and its component unit. The discretely presented component unit is reported in a separate column of the financial statement after a total column for the primary government, to emphasize that it is legally separate from the primary government. B. Discretely Presented Component Unit The Nederland Economic Development Corporation (NEDC) was created under Section 4B of the Development Corporation Act of 1979, Texas Revised Civil Statutes Annotated Article 5190.6, as amended. The NEDC is governed by a board of directors appointed by the City Council. The NEDC is organized exclusively for the purpose of benefiting and accomplishing public purposes of the City of Nederland, Texas by promoting, assisting, and enhancing economic and community development activities for the City. The NEDC is funded by one-quarter of one percent City sales and use tax. The City performs all accounting functions for the NEDC. The City tax provided to the Corporation during the year ended September 30, 2021 totaled $1,012,715. The discretely presented component unit is reported in a separate column in the government-wide financial statements to emphasize that it is legally separate from the government. The notes to the financial statements include disclosures pertaining to the City as the primary government and also the EDC as a component unit. Separately issued financ ial statements for the EDC are not available. C. Related Organizations The City’s elected officials are also responsible for appointing the members of the various boards and commissions established by City Charter and/or state statutes but the City’s accountability for these boards and commissions does not extend beyond making the appointments. The City Council appoints board members of the following: Nederland Economic Development Corporation, Zoning Board of Appeals, Planning and Zoning Commission, Construction Board of Adjustments and Appeals, Parks Advisory Board, Animal shelter advisory committee and the Civil Service Commission. Positions on these boards are appointed in certain instances in entirety, partially, or with City Council members. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -21- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Joint Venture Mid-County Dispatch The City of Nederland and two neighboring cities, Groves and Port Neches, have a contractual agreement to pool resources and share the costs, risks, and rewards of providing a central radio dispatching service and information technology services for the participating cities in compliance with the “Interlocal Cooperation Act”. Each of the participating cities has an ongoing financial interest in, and responsibility for the Mid-County Dispatch. Funds shall be provided by each City for dispatch operations based on their population and evenly split for information technology services. Based on the agreement, there is no explicit, measurable equity interest for any of entities in the joint ventures resources. During the year ended September 30, 2021 the City contributed $571,415 to the joint venture. Fund balance of the joint venture at September 30, 2021 was $399,072. Separately issued financial statements are not available for this joint venture. E. Government‐wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Changes in Net Position) report information on all of the nonfiduciary activities of the primary government and its component unit. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business‐type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given structure or segment, are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment; and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. F. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide, proprietary, and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -22- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Measurement Focus, Basis of Accounting and Financial Statement Presentation, (Continued) Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual, i.e, both measurable and available to finance expenditures of the fiscal period. Revenues are considered available when they are collectible within the current period or soon enough thereafter to be pay liabilities of the current period. For this purpose, the government considers revenues available if they are collected within 60 days of the end of the current fiscal period. Grant revenue is considered available if collected within twelve months. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, claims and judgments, are recorded only when the payment is due. Property taxes, franchise taxes, sales taxes, industrial payments, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: The general fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The debt service fund accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. The capital projects fund accounts for the purchase of capital assets, including infrastructure acquisitions and construction from general government resources. The City reports the following major proprietary funds: The water and sewer fund accounts for the activities of the water and sewer utility of the City. This fund operates the water treatment and distribution functions, along with the wastewater collection and treatment and the related revenue collection activity. The solid waste fund accounts for the City’s operation of garbage collection and green waste disposal services. Additionally, the City reports the following non-major governmental funds: The special revenue funds account for the proceeds of specific revenue sources that are legally restricted to expenditure for specified purposes. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. However, interfund services provided and used are not eliminated in the process of consolidation. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -23- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Measurement Focus, Basis of Accounting and Financial Statement Presentation, (Continued) Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenue rather than as program revenue. Likewise, general revenue includes all taxes. Proprietary funds distinguish operating revenue and expense from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenue of the water fund and of the solid waste fund are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non- operating revenue and expenses. G. Budgetary Data The following procedures are utilized in establishing the budgetary data reflected in the basic financial statements: a. By August 31st, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following October 1 (except the capital projects funds, which adopt project length budgets). The operating budget includes proposed expenditures and the means of financing them. Funds with legally adopted annual budgets are listed as follows: General fund, Police Narcotics fund, Library fund, Court Technology fund, Hotel/Motel Occupancy Tax fund, Fire Department Special fund, Debt Service fund, Water and Sewer fund, and Solid Waste fund. b. A Public hearing is conducted, after proper official journal notification, to obtain taxpayer comments. c. Prior to September 30th, the budget is legally enacted through passage of an ordinance. d. The City Manager is authorized to transfer budgeted amounts within the departmental categories within any fund. All other budget amendments must be approved by the City Council. e. Budget appropriations lapse at year-end and are re-established in the succeeding year. f. Budgets for the governmental funds are adopted on a basis consistent with generally accepted accounting principles (GAAP). H. Encumbrance Accounting Encumbrances for goods or purchased services are documented by purchase orders or contracts. Under Texas law, appropriations lapse at September 30th, and encumbrances outstanding at that time are to be either canceled or appropriately provided for in the subsequent year’s budget. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -24- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Cash and Investments Cash includes amounts in demand and time deposit accounts. Investments are reported at fair value. Short-term investments, such as certificates of deposit and debt securities with a maturity date of less than one year, are reported at cost, which approximates fair value. Securities traded on a national or international exchange, if any, are valued at the last reported sales price or current exchange rates. For the purposes of the statement of cash flows, highly liquid investments are considered to be cash equivalents if they have a maturity of three months or less when purchased. All certificates of deposits and investments in other securities and instruments are considered to be investments. Investments State statutes authorize the city to invest in obligations of the U.S. Treasury, the State of Texas, those unconditionally guaranteed by the United States of America or the State of Texas, agencies thereof, Counties, Cities, and other political subdivisions of any state having been rated as investment quality by a nationally recognized investment rating firm, and having received a rating of not less than “A” or its equivalent, as well as Certificates of Deposit, fully collateralized direct repurchase agreements purchased through a primary government securities dealer or a bank domiciled in Texas and joint pools of political subdivisions in the State of Texas, such as TexPool which is described in more detail below. The Public Funds Investment Act (“Act”) requires an annual audit of investment practices. Audit procedures in this area conducted as a part of the audit of the basic financial statements disclosed that in the areas of investment practices, management reports and establishment of appropriate policies, the city adhered to the requirements of the Act. Additionally, investment practices of the City were in accordance with local policies. GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools states that governmental entities should make certain disclosures concerning their investments, including disclosures about any investments in local government investment pools. Specifically, the statement directs a governmental entity to disclose “for any investment in an external investment pool that are not SEC-registered, a brief description of any regulatory oversight for the pool and whether the fair-value of the position in the pool is the same value as the value of the pool shares”. To facilitate compliance with this disclosure requirement, the following description of TexPool is provided. The City invests in TexPool, which is a public funds investment pool. The pool was organized in conformity with the Interlocal Cooperation Act and the Public Funds Investment Act of the Texas Government Code. The Comptroller of Public Accounts maintains oversight of the services provided to TexPool by Chase Bank of Texas, N.A. and First Southwest Asset Management, Inc., with additional oversight by the TexPool Advisory Board. Public funds investment pools (“Pools”) in Texas are established under the authority of the Interlocal Cooperation Act, Chapter 79 of the Texas Government Code, and are subject to the provisions of the Public Funds Investment Act (the Act), Chapter 2256 of the Texas Government Code. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -25- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Cash and Investments, (Continued) Investments, (Continued) In addition to other provisions of the Act designed to promote liquidity and safety of principal, the Act requires Pools to: 1) have an advisory board composed of participants in the pool and other persons who do not have a business relationship with the pool and are qualified to advise the pool; 2) maintain a continuous rating of no lower than AAA or AAAm or an equivalent rating by at least on nationally recognized rating service; and 3) maintain the market value of its underlying investment portfolio within on half of one percent of the value of its shares. The City’s investment in TexPool operates in a manner consistent with the Securities and Exchange Commission’s (SEC) Rule 2a7 of the Investment Company Act of 1940. A 2a7-like pool is one which is not registered with the SEC as an investment company, but nevertheless has a policy that it will, and does, operate in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940. J. Property Taxes Receivable Property appraisal within the City is the responsibility of the Jefferson Central Appraisal District (Appraisal District). The Appraisal District is required under the Property Tax Code to appraise all property within the County on the basis of 100% of its market value. The value of real property within the Appraisal District must be reviewed every five years; however, the City may, at its own expense, require annual reviews of appraised values. The City may challenge appraised values established by the Appraisal District through various appeals and legal action. Under the Property Tax Code legislation, the City establishes tax rates for property within the City’s corporate limits. However, a voter approved tax rate is calculated as the maximum rate allowed by law without voter approval. The voter approved tax rate provides cities with about the same amount of tax revenue it spent the previous year for day to day operations plus an extra three and a half percent. The City’s property taxes are levied annually in October on the basis of the Appraisal District’s assessed values as of January 1 of that calendar year. Taxes are applicable to the fiscal year in which they are levied. They become delinquent, with an enforceable lien on property, on February 1 of the subsequent calendar year. The City has contracted with the Jefferson County Tax Assessor-Collector to bill and collect its taxes. In the governmental fund financial statements, property taxes that are measurable and available (receivable within the current period and collected within the current period or within 60 days thereafter to be used to pay liabilities of the current period) are recognized as revenue in the year of levy. Property taxes that are measurable, but not available, are recorded, net of estimated uncollectible amounts, as deferred outflow in the year of levy. Such deferred outflows are recognized as revenue in the fiscal year in which they become available. K. Tax Abatements During the fiscal year ending September 30, 2021, the City did not participate in a tax abatement agreement relating to the property taxes levied for the 2020 tax year levy. L. Receivables All receivables are reported at their gross value and, where appropriate, are reduced by the estimated portion that is expected to be uncollectible. Estimated revenues from the Water and Sewer fund are recognized at the end of each fiscal year on a pro rata basis. The estimated amount is based on billings during the month following the close of the fiscal year. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -26- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) M. Short‐Term Interfund Receivables and Payables During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as “due to/from other funds” on the balance sheet. N. Inventories and Prepaid Items Inventories are valued at cost using the first in/first out (FIFO) method. The costs of governmental fund- type inventories are recorded as expenditures when consumed rather than when purchased. The reserve for the inventory is equal to the amount of inventory to indicate that a portion of the fund balance is not available for future expenditure. Inventories in the Enterprise Fund consist of repair materials, spare parts and water meters, and water treatment and wastewater treatment chemicals. Generally, enterprise funds value inventory at cost or average cost and expense supply inventory as it is consumed, known as the consumption method of accounting. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. Prepaid items are recorded using the consumption method. O. Restricted Assets Certain proceeds of general obligation and revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. A restricted asset is shown on the balance sheet related to TMRS. The use of this asset is limited to pension benefits. Restricted assets also include interest accrued on unexpended bond proceeds and cash received for customer utility deposits. P. Capital Assets Capital assets which include property, plant, equipment and infrastructure assets (e.g. streets and waterlines, sidewalks and similar items) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of $5,000 or more and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are reported at acquisition value at the date of donation. The City reports major general infrastructure for assets acquired beginning in 1980. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. When assets are retired or otherwise disposed of, the related costs or other recorded amounts are removed. Property, plant and equipment of the City are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings 20 - 25 Improvements other than buildings Equipment 5-20 5 - 7 Infrastructure 20 - 50 CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -27- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Q. Long‐term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight line method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. R. Fund Equity Beginning with fiscal year 2011, the City of Nederland, Texas implemented GASB Statement No. 54 “Fund Balance Reporting and Governmental Fund Type Definitions.” This Statement provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government’s fund balances more transparent. The following classifications describe the relative strength of the spending constraints: Non-spendable Fund Balance – includes the portion of net resources that cannot be spent because of their form or because they must remain in-tact. As such, the inventory and prepaid items have been properly classified in the Governmental Funds Balance Sheet. Restricted Fund Balance – includes the portion of net resources on which limitations are imposed by creditors, grantors, contributors, or by laws or regulations of other governments (i.e. externally imposed limitations). Amounts can be spent only for the specific purposes stipulated by external resource providers or as allowed by law through constitutional provisions or enabling legislation. Examples include grant awards and bond proceeds. Committed Fund Balance – includes the portion of net resources upon which the City Council has imposed limitations on use. Amounts that can be used only for the specific purposes determined by a formal action of the City Council, commitments may be changed or lifted only by the Council taking the same formal action that originally imposed the constraint. The formal action must be approved before the end of the fiscal year in which the commitment will be reflected on the fi nancial statements. The amount subject to the constraint may be determined in the subsequent period (i.e. the Council may approve the calculation or formula for determining the amount to be committed). The City establishes (and modifies or rescinds) fund balance commitments by passage of a resolution. Assigned Fund Balance- includes the portion of net resources for which an intended use has been established by the City Council or the City Official authorized to do so by the City Council. The City Council by resolution has authorized the City Manager as the City Official responsible for the assignment of fund balance to a specific purpose. Assignments generally only exist temporarily. Additional action does not normally have to be taken for the removal of an assignment. A portion of fund balance has been assigned for street maintenance. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -28- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) R. Fund Equity, (Continued) Unassigned fund balance – includes the amounts in the general fund in excess of what can properly be classified in one of the other four categories of fund balance. It is the residual net resources as a positive balance within the general fund only. Classification of the general fund includes all amounts not contained in other classifications. Order of Expenditure of Funds - When multiple categories of fund balance are available for expenditure (for example, a construction project is being funded partly by a grant, funds set aside by the City Council, and unassigned fund balance), the City will first spend the most restricted funds before moving down to the next most restrictive category with available funds. Minimum Unassigned Fund Balance - The City’s goal is to achieve and maintain an unassigned fund balance in the general fund equal to 50% of expenditures. The City considers a balance of less than 25% to be cause for concern, barring unusual or deliberate circumstances. In the event that the unassigned fund balance is calculated to be less than the policy stipulates, the City shall plan to adjust budget resources in subsequent fiscal years to restore the balance. Replenishment of Minimum Fund Balance Reserves - If unassigned fund balance unintentionally falls below 25% or if it is anticipated that at the completion of any fiscal year the projected unassigned fund balance will be less than the minimum requirement, the City Manager shall prepare and submit a plan to restore the minimum required level as soon as economic conditions allow. The plan shall detail the steps necessary for the replenishment of fund balance as well as an estimated timeline for achieving such. These steps may include, but are not limited to, identifying new, nonrecurring, or alternative sources of revenue; increasing existing revenues, charges and/or fees; use of year end surpluses; and/or enacting cost saving measures such as holding capital purchases, reducing departmental operating budgets, freezing vacant positions, and/or reducing the workforce. The replenishment of fund balance to the minimum level shall be accomplished within a three-year period. If restoration of the reserve cannot be accomplished within such a period without severe hardship to the City, then the Council shall establish an extended time line for attaining the minimum balance. Appropriation of Unassigned Fund Balance - Appropriation from the minimum unassigned fund balance shall require the approval of the Council and shall be utilized only for one-time expenditures, such as capital purchases, and not for ongoing expenditures unless a viable revenue plan designed to sustain the expenditure is simultaneously adopted. The Council may appropriate unassigned fund balances for emergency purposes, as deemed necessary, even if such use decreases the fund balance below the established minimum. S. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represent a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The government has the following items that qualify for reporting in this category: a. A deferred charge on refunding reported in the government-wide statement of net position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -29- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) S. Deferred Outflows/Inflows of Resources, (Continued) b. Pension and OPEB contributions made after the measurement date. These contributions are deferred and recognized in the following fiscal year. c. Difference in projected and actual earnings on pension assets and OPEB liability. This is the difference deferred and amortized over a closed five year period. In addition to liabilities, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has the following items that qualify for reporting in this category: a. A deferred inflow which arises under the accrual basis of accounting and reported in the statement of financial position. The deferred inflow is the difference in the expected and actual pension and OPEB experience and is deferred and recognized over the estimated average remaining lives of all members determined as of the measurement date. b. A deferred inflow which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from property taxes. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. T. Net Position flow assumption Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to be reported as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied. As of September 30, 2021, Restricted for Other Funds included these balances: Public Safety: Police Narcotics 88,410$ Court Technology 7,258 Fire Department 75,361 171,029 Culture and Recreation: Library 34,002 Hotel/Motel 97,063 131,065 Total Restricted for Other Funds 302,094$ CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -30- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) U. Fund balance flow assumptions Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. V. Compensated absences The City’s employees earn vacation and sick leave, all of which may either be taken or accumulated, up to certain amounts, until paid upon voluntary termination or retirement. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. All vacation pay is accrued when incurred in the government-wide and proprietary fund financial statements. W. Interfund Transactions Interfund transactions that would be treated as revenues, expenditures, or expenses if they involved organizations external to the city are accounted for as revenues, expenditures, or expenses in the funds involved. Transactions which constitute reimbursements of a fund for expenditures or expenses initially made from it which are properly applicable to another fund are recorded as expenditures or expenses (as appropriate) in the reimbursing fund and as reduct ions of expenditures or expenses in the fund that is reimbursed. These transfers are reported in the “Other Financing Sources (Uses)” section in the Statement of Revenues, Expenditures, and Changes in Fund Balances (governmental funds) and in the “Transfers” section in the Statement of Revenues, Expenses, and Changes in Fund Net Position (proprietary fund). X. Grants from Other Governmental Agencies Federal and State governmental agencies represent an important source of supplementary funding to finance activities beneficial to the community. These funds, primarily in the form of grants, are recorded in the General, Special Revenue and Enterprise Funds. A grant receivable is recorded when the City has a right to reimbursement under the related grant. The grants normally specify the purpose for which the funds may be used and are subject to audit by the granting agency or its representative. Y. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the Fiduciary Net Position of the Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS’s Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -31- NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Z. Date of Management’s Review In preparing the financial statements, the City has evaluated events and transactions for potential recognition for disclosure through March 14, 2022 the date that the financial statements were available to be issued. AA. Other Post‐Employment Benefits In the fiscal year ended September 30, 2018, the City implemented the following standard: GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits other than Pensions (“GASB 75”) establishes accounting and financial reporting standards for other post-employment benefits (OPEB) that are provided to the employees of state and local governmental employers through plans that are administered through trusts or similar arrangements that meet certain criteria. The Statement establishes standards for measuring and recognizing liabilities, deferred outflow of resources, deferred inflow of resources and expense/expenditures. Implementation is reflected in the financial statements, notes to the financial statements and required supplementary information. NOTE 2: RECONCILIATION OF GOVERNMENT‐WIDE FINANCIAL STATEMENTS Explanation of Reclassification Required on the Government‐Wide Statement of Net Position When governmental activities report debt that financed the acquisition of capital assets that business- type activities report, that debt is not considered to be capital-related debt of the governmental activities. Such debt should not be part of the calculation of net investment in capital assets. However, when the total reporting entity is presented as the reporting u nit, the debt is related to the capital assets within that reporting unit. Thus, a reconciliation is necessary as follows: Business Governmental Type Reclassif- Activities Activities ications Total Net Investment in Capital Assets 36,664,862$ 31,958,048$ (10,876,688)$ 57,746,222$ Restricted for: Debt Service 259,079 145,830 - 404,909 Public Works 222,518 - - 222,518 Other Funds 302,094 - - 302,094 Unrestricted 16,958,598 10,725,816 10,876,688 38,561,102 Total Net Position 54,407,151$ 42,829,694$ -$ 97,236,845$ NOTE 3: CASH AND INVESTMENTS Cash Deposits At year-end, the City’s carrying amount of deposits (including NEDC) was $6,142,455 and the bank balance was $6,457,188. Of the bank balance, $250,000 was covered by federal depository insurance. The remaining bank balance was collateralized by securities held by the City or by the City’s agent in name of the City. The City was under collateralized for multiple days during the months of January and February. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -32- NOTE 3: CASH AND INVESTMENTS (CONTINUED) Investments – The City has a written investment policy regarding the investment of its funds. The investments of the City are in compliance with the investment policy, the City Charter, the Public Funds Investment Act (Chapter 2256 of the Government Code, as amended) and all other state and local statutes governing the investment of public funds. The City is authorized to invest in U.S. government obligations and its agencies or instrumentalities, collateralized certificates of deposit, fully collateralized repurchase agreements, no load money market mutual funds and approved government investment pools. As of September 30, 2021, the City of Nederland (including NEDC) had the following investments: Investment Type Fair Value Maturity TexPool 47,170,266$ N/A First Public - Lone Star 2,322,219 N/A Certificates of Deposit 497,264 6 months - 1 year 49,989,749$ Investment rate risk: In accordance with the investment policy, the city manages exposure to declines in fair value by avoiding an over-concentration of assets in specific instruments other than U.S. Treasury Securities and Insured or Collateralized Certificates of Deposits. Credit risk. It is the policy of the City to limit its investment in commercial paper and corporate bonds to those having received a top rating of “A” or its equivalent from a nationally recognized investment rating firm. Standard & Poor’s rated TexPool AAAm as of September 30, 2021. Standard & Poor’s rated First Public – Lone Star AAA as of September 30, 2021. Concentration of credit risk. The City will minimize credit risk by limiting investments to the safest types of securities. Custodial credit risk. In the case of deposits, this is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. Both the City and the NEDC, a discretely presented component unit, require that all deposits and investments be secured by pledged collateral. In order to anticipate market changes and provide a level of security for all funds, the collateralization level is required to be 100% of the market value of the principal and interest, less an amount insured by the FDIC or FSLIC. Additionally, the collateral pledged shall be held by the Federal Reserve Bank or an institution not affiliated with the firm pledging the collateral. Local government Investment Pools are established under the authority of the Interlocal Cooperation Act, Chapter 791 of the Texas Government Code, and are subject to the provisions of the Public Funds Investment Act (PFIA), Chapter 2236 of the Texas Government Code. In addition to other provisions of the PFIA designed to promote liquidity and safety of principle, the (PFIA) requires Pools to (1) have an advisory board composed of participants in the pool and other persons who do not have a business relationship with the pool and are qualified to advise the pool; (2) maintain a continuous rating of no lower than AAA or AAA-m or an equivalent rating by at least on nationally recognized rating service; and (3) maintain the market value of its underlying investment portfolio within one half of one percent of the value of its shares. In addition, the Texas State of Comptroller of Public Accounts exercises oversight responsibility over TexPool. The City’s investments in a 2a7-like pool are reported at share value. A 2a7-like pool is one that is not registered with the Securities and Exchange Commission (SEC) as an investment company, but nevertheless has a policy that it will, and does, operate in a manner consistent with the SEC’s Rule 2a7 of the Investment Company Act of 1940. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -33- NOTE 4: RECEIVABLES In the fund financial statements, property taxes that are measurable and available (receivable within the current period and collected within the current period or within 60 days thereafter to be used to pay liabilities of the current period) are recognized as revenue in the year of levy. Property taxes that are measurable, but not available, are recorded, net of estimated uncollectible amounts, as unavailable revenues in the year of levy. Such unavailable revenues are recognized as revenue in the fiscal year in which they become available. The balance of property taxes receivable and property tax assessments included in unavailable revenues as of September 30, 2021 are as follows: General Debt Fund Service Total Property Taxes Receivable: Gross Receivables 283,908$ 140,676$ 424,584$ Less: Allowance for Doubtful Accounts (47,651) (23,915) (71,566) Net Property Taxes Receivable 236,257$ 116,761$ 353,018$ Unavailable Property Taxes 222,767$ 112,361$ 335,128$ Other Receivables as of September 30, 2021 for the City are as follows: General Debt Capital Other Fund Service Projects Funds Total Accounts 784,937$ -$ -$ 21,709$ 806,646$ Due From Other Governments 31,271 1,483 53,242 - 85,996 Due From Others 22,705 - - - 22,705 Gross Receivables 838,913 1,483 53,242 21,709 915,347 Less: Allowance for Uncollectibles (208,824) - - - (208,824) Net Total Receivables 630,089$ 1,483$ 53,242$ 21,709$ 706,523$ CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -34- NOTE 5: CAPITAL ASSETS Capital asset activity for the governmental activities for the year ended September 30, 2021 is described in the table below. Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Land 4,095,179$ 224,602$ -$ 4,319,781$ Construction in progress 164,100 1,317,023 (159,100) 1,322,023 Total capital assets not being depreciated 4,259,279 1,541,625 (159,100) 5,641,804 Capital assets being depreciated: Buildings 15,220,952 27,268 - 15,248,220 Machinery and equipment 6,121,911 719,191 (55,473) 6,785,629 Infrastructure 44,365,748 1,753,990 - 46,119,738 Total capital assets being depreciated 65,708,611 2,500,449 (55,473) 68,153,587 Less accumulated depreciation: Buildings (7,107,765) (311,863) - (7,419,628) Machinery and equipment (4,539,010) (482,964) 55,473 (4,966,501) Infrastructure (17,738,345) (1,106,257) - (18,844,602) Total capital assets being depreciated (29,385,120) (1,901,084) 55,473 (31,230,731) Total capital assets being depreciated, net 36,323,491 599,365 - 36,922,856 Governmental activities capital assets, net 40,582,770$ 2,140,990$ (159,100)$ 42,564,660$ Current Year Governmental Activities: Depreciation expense of the governmental activities was charged to functions/programs as follows: General Government 117,335$ Public Safety 311,785 Public Works 1,253,983 Culture & Recreation 217,981 Total Depreciation Expense - Governmental Activities 1,901,084$ Construction in progress consisted of payments made towards construction of a pool slide and road reconstruction project. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -35- NOTE 5: CAPITAL ASSETS, (CONTINUED) Beginning Ending Balance Increases Decreases Balance Capital assets not being depreciated: Construction in progress 436,541$ 3,247,083$ (860,775)$ 2,822,849$ Total capital assets not being depreciated 436,541 3,247,083 (860,775) 2,822,849 Capital assets being depreciated: Buildings 21,450,340 - - 21,450,340 Improvements other than buildings 36,854,978 1,006,659 - 37,861,637 Machinery and equipment 4,956,742 329,481 - 5,286,223 Total capital assets being depreciated 63,262,060 1,336,140 - 64,598,200 Less accumulated depreciation: Buildings (10,632,826) (471,621) - (11,104,447) Improvements other than buildings (19,352,300) (970,838) - (20,323,138) Machinery and equipment (3,667,964) (367,452) - (4,035,416) Total capital assets being depreciated (33,653,090) (1,809,911) - (35,463,001) Total capital assets being depreciated, net 29,608,970 (473,771) - 29,135,199 Business‐type activities capital assets, net 30,045,511$ 2,773,312$ (860,775)$ 31,958,048$ Business‐type Activities: Current Year Depreciation expense of the business-type activities was charged to functions/programs as follows: Water & Sewer 1,613,658$ Solid Waste 196,253 Total Depreciation Expense - Business Type Activities 1,809,911$ Construction in progress consisted of wastewater treatment plant rehabilitation and Hodgson Road Lift Station repairs. NOTE 6: INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS The composition of interfund balances as of September 30, 2021, is as follows: Receivable Fund Payable Fund Amount General Debt Service 83,667$ General Capital Projects 44,790 128,457$ CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -36- NOTE 6: INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS, (CONTINUED) The outstanding balances between funds resulted mainly from a time lag between the dates (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. Certain transfers occur among funds to allocate appropriate costs related to the operations of the funds as follows: Other Debt Capital Govern- Water & General Service Projects mental Sewer Total Transfers out General fund -$ -$ 825,000$ 20,000$ -$ 845,000$ Capital Projects - - - - 3,371,554 3,371,554 Other Governmental 10,000 - - - - 10,000 Water & Sewer 375,000 957,088 - - - 1,332,088 Solid Waste 100,000 - - - - 100,000 485,000$ 957,088$ 825,000$ 20,000$ 3,371,554$ 5,658,642$ Transfers In Transfers are used to (1) move revenues from the fund with collection authorization to the Debt Service Fund as debt service principal and interest payments become due; (2) move unrestricted water and sewer revenues and solid waste revenues to finance va rious programs that the government must account for in other funds in accordance with budgetary authorizations, including amounts provided as subsidies or matching funds for various grant programs; (3) to move monies into the appropriate capital projects fund; and (4) transfer capital assets between departments. NOTE 7: LONG TERM‐DEBT The City issues general obligation bonds and certificates of obligation to provide funds for the acquisition and construction of major capital facilities. General obligation bonds and certificates of obligation are direct obligations and pledge the full faith and credit of the government. General obligation bonds and certificates of obligation payable at September 30, 2021, are summarized as follows: Date of Original Final Annual Outstanding Issue issue Maturity Installments % Rate Debt 2013 3,520,000$ 2023 $25,000 to $665,000 2.00% - 3.50% 1,310,000$ 2013 2,600,000 2033 $80,000 to $185,000 3.75% - 4.50% 1,800,000 2017 4,975,000 2027 $100,000 to $680,000 3.00% - 4.00% 3,710,000 2018 9,695,000 2038 $340,000 to $655,000 2.00% - 3.50% 8,640,000 2020 2,410,000 2031 $15,000 to $285,000 5.00% 2,240,000 2021 4,170,000 2036 $190,000 to $330,000 1.375% - 4.00% 4,170,000 21,870,000$ The tax notes payable at September 30, 2021, are summarized as follows: Date of Original Final Annual Outstanding Issue issue Maturity Installments % Rate Debt 2020 1,040,000$ 2025 $130,000 to $500,000 1.26% 540,000$ CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -37- NOTE 7: LONG TERM‐DEBT, (CONTINUED) Annual debt service requirements to maturity for the bonds are as follows: Fiscal Year Principal Interest Total Principal Interest Total 2022 2,065,000$ 782,107$ 2,847,107$ 130,000$ 6,804$ 136,804$ 2023 2,145,000 701,331 2,846,331 135,000 5,166 140,166 2024 1,585,000 617,057 2,202,057 135,000 3,465 138,465 2025 1,645,000 557,066 2,202,066 140,000 1,764 141,764 2026 1,710,000 495,326 2,205,326 - - - 2027-2031 6,605,000 1,625,438 8,230,438 - - 2032-2036 4,825,000 643,532 5,468,532 - - - 2037-2038 1,290,000 68,075 1,358,075 - - - 21,870,000$ 5,489,932$ 27,359,932$ 540,000$ 17,199$ 557,199$ Bonds Tax Notes Changes in long-term debt Long-term debt activity for the year ended September 30, 2021, was as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities: Bonds Payable General obligations bonds 19,505,000$ 4,170,000$ 1,805,000$ 21,870,000$ 2,065,000$ Add: Premium on bonds 1,350,259 306,851 167,270 1,489,840 167,270 Total Bonds 20,855,259 4,476,851 1,972,270 23,359,840 2,232,270 Notes Payable Tax Notes 1,040,000 - 500,000 540,000 130,000 Total governmental long-term debt 21,895,259$ 4,476,851$ 2,472,270$ 23,899,840$ 2,362,270$ In August 2021, the City issued general obligation refunding bonds, Series 2021, of $4,170,000 with a stated interest rate ranging from 1.375% to 4.00% and a final maturity of September 1, 2036. The bonds were issued to fund study, design, acquisition, construction, equipping, renovation, extension, and improvement of streets and bridges as well as drainage and detention facilities. Arbitrage Rebate Liability The Federal Tax Reform Act of 1986 requires issuers of tax-exempt debt to make payments to the United States Treasury for investment income received at yields that exceed the issuer’s tax exempt borrowing rates. The Treasury requires payment for each issue every five years. The City had no arbitrage liability as of September 30, 2021. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -38- NOTE 8: OTHER INFORMATION A. Risk Management The City is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets; errors and omissions; and natural disasters. During fiscal year 2020-2021, the City obtained general liability coverage at a cost that is considered to be economically justifiable by joining together with other governmental entities in the State as a member of the Texas Municipal League Intergovernmental Risk Pool (TML). TML is a self-funded pool operating as a common risk management and insurance program. The City pays an annual premium to TML for its above insurance coverage. The agreement for the formation of TML provides that TML will be self-sustaining through member premiums and will reinsure through commercial companies for claims in excess of acceptable risk levels; however, each category of coverage has its own level of reinsurance. The City continues to carry commercial insurance for the risks of loss. There were no significant reductions in commercial insurance coverage in the past fiscal year and settled claims resulting from these risks have not exceeded coverage in any of the past three fiscal years. B. Contingent Liabilities Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the City expects such amounts, if any to be immaterial. From time to time the City is a defendant in legal proceedings relating to its operations. Although the outcome of the legal proceedings is not presently determinable, in the opinion of the City’s counsel, the legal proceedings are without merit. Counsel believes there is little, if any, adverse exposure to the City. NOTE 9: DEFINED BENEFIT PENSION PLAN Plan Description The City participates as one of 895 plans in the defined benefit cash-balance plan administered by the Texas Municipal Retirement System (TMRS). TMRS is a statewide public retirement plan created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple-employer retirement system for employees of Texas participating cities. The TMRS Act places the general administration and management of TMRS with a six-member, Governor-appointed Board of Trustees; however, TMRS is not fiscally dependent on the State of Texas. TMRS issues a publicly available annual comprehensive financial report (ACFR) that can be obtained at www.tmrs.com. All eligible employees of the city are required to participate in TMRS. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -39- NOTE 9: DEFINED BENEFIT PENSION PLAN, (CONTINUED) Benefits Provided TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS. At retirement, the Member’s benefit is calculated based on the sum of the Member’s contributions, with interest, and the city-financed monetary credits with interest. The retiring Member may select one of seven monthly benefit payment options. Members may also choose to receive a portion of their benefit as a lump sum distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the total Member contributions and interest. A summary of plan provisions for the City are as follows: Employee deposit rate 7% City deposit rate 7.36% for calendar year 2021 and 6.47% for 2020 Years required for vesting 10 Service retirement eligibility 20 years at any age, 10 years at age 60 and above Updated service credit Last adopted 2000 – Annually repeating- 100% Cost of living adjustment (COLA) for retirees Last adopted 1984 – 30% Military service credit Yes, adopted 3-1982 Restricted prior service credit Yes, adopted 1-2000 Buy back last adopted 12-1983 SDB for employees Not elected SDB for Retirees Not elected Employees covered by benefit terms – At the December 31, 2020 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 108 Inactive employees entitled to but not yet receiving benefits 33 Active employees 124 265 CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -40- NOTE 9: DEFINED BENEFIT PENSION PLAN, (CONTINUED) Contributions Member contribution rates for employees in TMRS are either 5%, 6%, or 7% of the member’s total compensation, and the city matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the city. Under the state law govern ing TMRS, the contribution rate for each city is determined annually by the actuary, using the Entry Age Normal (EAN) actuarial cost method. The City’s contribution rate is based on the liabilities created from the benefit plan options selected by the City and any changes in benefits or actual experience over time. Employees for The City were required to contribute 7% of their annual compensation during the fiscal year. The contribution rates for the City were 7.36% and 6.47% in calendar years 2021 and 2020, respectively. The City’s contributions to TMRS for the year ended September 30, 2021, were $664,995, and were equal to the required contributions. Net Pension Liability The City’s Net Pension Liability (NPL) was measured as of December 31, 2020, and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. Actuarial assumptions The Total Pension Liability in the December 31, 2020 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Overall payroll growth 2.75% per year, adjusted down for population declines, if any Investment Rate of Return 6.75%, net of pension plan investment expense, including inflation Salary increases are based on a service-related table. Mortality rates for active members are based on the PUB(10) mortality tables with the Public Safety table used for males and the General Employee table used for females. Mortality rates for healthy retirees and beneficiaries are based on the Gender- distinct 2019 Municipal Retirees of Texas mortality tables. The rates for actives, healthy retirees and beneficiaries are projected on a fully generational basis by Scale UMP to account for future mortality improvements. For disabled annuitants, the same mortality tables for healthy retirees is used with a 4-year set-forward for males and a 3-year set-forward for females. In addition, a 3.5% and 3.0% minimum mortality rate is applied, for males and females respectively, to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by Scale UMP to account for future mortality improvements subject to the floor. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -41- NOTE 9: DEFINED BENEFIT PENSION PLAN, (CONTINUED) Actuarial assumptions, Continued The actuarial assumptions were developed primarily from the actuarial investigation of the experience of TMRS over the four-year period from December 31, 2014 to December 31, 2018. They were adopted in 2019 and first used in the December 31, 2019 actuarial valuation. The post- retirement mortality assumption for Annuity Purchase Rates (APRs) is based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income in order to satisfy the short-term and long-term funding needs of TMRS. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, GRS focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (2) the geometric mean (conservative) with an adjustment for time (aggressive). The target allocation and best estimates of arithmetic real rates of return for each major asset class in fiscal year 2021 are summarized in the following table: Target Long-Term Expected Real Asset Class Allocation Rate of Return (Arithmetic) Global Equity 30.00% 5.30% Core-Fixed Income 10.00% 1.25% Non-Core Fixed Income 20.00% 4.14% Real Return 10.00% 3.85% Real Estate 10.00% 4.00% Absolute Return 10.00% 3.48% Private Equity 10.00% 7.75% Total 100.00% Discount Rate The discount rate used to measure the Total Pension Liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that Member and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan’s Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -42- NOTE 9: DEFINED BENEFIT PENSION PLAN, (CONTINUED) Changes in the Net Pension Liability (Asset) Plan Net Total Fiduciary Pension Pension Net Liability Liability Position (Asset) (a) (b) (a) - (b) Balance at 12/31/2019 58,686,455$ 62,316,801$ (3,630,346)$ Changes for year: Service cost 1,408,909 - 1,408,909 Interest 3,909,780 - 3,909,780 Difference between expected and actual experience 561,380 - 561,380 Changes in assumptions - - - Contributions - employer - 600,503 (600,503) Contributions - employee - 649,694 (649,694) Net investment income - 4,723,565 (4,723,565) Benefit payments, including refunds of employee contributions (2,936,482) (2,936,482) - Administrative expense - (30,608) 30,608 Other changes - (1,193) 1,193 Net change 2,943,587 3,005,479 (61,892) Balance at 12/31/2020 61,630,042$ 65,322,280$ (3,692,238)$ Plan fiduciary net position as a percentage of the total pension liability 105.99% Covered-employee payroll 9,281,348$ Net pension liability/(asset) as a percentage of covered employee payroll -39.78% Presented in Exhibit A as follows: Governmental Activities 2,448,323$ Business-Type Activities 1,173,394 Nonmajor Component Unit 70,521 3,692,238$ Sensitivity of the net pension asset to changes in the discount rate. The following presents the net pension asset of the City, calculated using the discount rate of 6.75%, as well as what the City’s net pension asset would be if it were calculated using a discount rate that is 1-percentage-point lower (5.75%) or 1-percentage-point higher (7.75%) than the current rate: 1% 1% Decrease in Current Increase in Discount Discount Discount Rate Rate Rate Primary government's net pension liability (asset) 3,678,949$ (3,621,717)$ (9,736,301)$ Nonmajor component unit net pension liability (asset) 71,636 (70,521) (189,584) CITY OF NEDERLAND, TEXAS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -43- NOTE 9: DEFINED BENEFIT PENSION PLAN, (CONTINUED) Pension Plan Fiduciary Net Position Detailed information about the pension plan’s Fiduciary Net Position is available in a separately- issued TMRS financial report. That report may be obtained on the Internet at www.tmrs.com. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions: For the year ended September 30, 2021, the City recognized pension income of $50,139. At September 30, 2021, the City reported deferred outflows and inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual economic experience 828,954$ 164,521$ Changes in actuarial assumptions 49,175 - Difference between projected and actual investment earnings - 1,774,496 Contributions subsequent to the measurement date 499,800 - Total 1,377,929$ 1,939,017$ Presented in Exhibit A as follows: Governmental Activities 868,596$ 1,354,175$ Business-Type Activities 481,402 549,379 Nonmajor Component Unit 27,931 35,463 1,377,929$ 1,939,017$ Deferred outflows of resources of $499,800 related to employer contributions subsequent to the measurement date and will be recognized as a reduction of the net pension asset for the year ending September 30, 2022. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Net Deferred Outflows/ Year Ending (Inflows) of December 31, Resources 2021 (512,236)$ 2022 286,331 2023 (838,366) 2024 3,383 2025 - Thereafter - (1,060,888)$ CITY OF NEDERLAND NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -44- NOTE 10: DEFERRED COMPENSATION PLAN The City offers its employees a deferred compensation plan created in accordance with the Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. The City’s plan was amended effective December 14, 1998 to provide that all assets and income of the plan are held in trust for the exclusive benefit of the participants and their beneficiaries. The City has delegated administrative and investment responsibilities to a third-party administrator, ICMA Retirement Corporation, and as such, the plan assets do not meet the requirements for inclusion in the City’s financial statements at September 30, 2021. NOTE 11: POST‐EMPLOYEMENT HEALTH CARE BENEFITS Plan Description The City’s defined benefit OPEB plan provides health care benefits for employees who retire from the City and who are eligible to receive benefits from a City sponsored retirement program (Texas Municipal Retirement System). Benefit provisions are approved by Council and represent a single- employer postemployment benefit plan. Benefits provided Pursuant to approval by the City Council, the policy for eligibility to participate in retiree health and dental insurance plans require a retiree to be age 58 to receive the benefit and must have a minimum of 20 years of service of which 20 years must be with the City of Nederland; for the TMRS retirement option of “10 years of service, at least 60 years of age” and “TMRS Disability” a retiree must have a minimum of 7.5 years of service with the City of Nederland. A retiree would become ineligible for the benefit if they gained full-time employment with an employer that offers medical insurance. A retiree would be ineligible to participate in the City’s retirement insurance plan if there was a disruption in their enrollment or failure to pay their monthly premiums on time.  Employees who retire after July 1, 2012 would receive a one-time flat rate contribution of $7,675 that would be deposited in an employer-controlled Health Reimbursement Account to be utilized for qualifying medical expenses including health insurance premiums, co-pays, prescriptions, etc. The age requirement is not applicable.  Employees who retire after July 1, 2015 would receive a one-time flat rate contribution of $7,900 that would be deposited in an employer-controlled Health Reimbursement Account to be utilized for qualifying medical expenses including health insurance premiums, co-pays, prescriptions, etc. CITY OF NEDERLAND NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -45- NOTE 11: POST‐EMPLOYEMENT HEALTH CARE BENEFITS, (CONTINUED) Benefits provided (continued)  Retirees who retired between January 1, 1997 and July 1, 2012 would receive: i. For those retirees who have remained eligible but have yet to receive the SSB subsidy, they would receive a one-time flat rate contribution of $7,675 that would be deposited in an employer-controlled Health Reimbursement Account to be utilized for qualifying medical expenses including health insurance premiums, co-pays, prescriptions, etc. ii. For those retirees who have already begun to receive the SSB subsidy, they would receive a one- time flat rate contribution equivalent to $7,675 minus the calculated SSB subsidy the retiree has already received (i.e. retiree is age 62 and City’s subsidy equaled $2,000, then the retiree would receive a contribution of $5,765) that would be deposited in an employer-controlled Health Reimbursement Account to be utilized for qualifying medical expenses including health insurance premiums, co-pays, prescriptions, etc. iii. The age requirement of 58 years old does not apply to these groups of retirees. iv. Retirees who have not remained eligible for the previous “Sliding Scale Benefit” would not receive any additional benefit Once a retiree reaches age 65, he/she is no longer eligible to participate in the Health Insurance Plan and coverage is terminated. Employees Covered by Benefit Term at December 31, 2020 Inactive employees or beneficiaries currently receiving benefit payments 66 Inactive employees entitled to but not yet receiving benefit payments - Active employees 124 190 Total OPEB Liability The City’s total OPEB liability of $1,835,631 was measured as of December 31, 2020 for the measurement period January 1, 2020 through December 31, 2020 and was determined by an actuarial valuation as of December 31, 2020. CITY OF NEDERLAND NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -46- NOTE 11: POST‐EMPLOYEMENT HEALTH CARE BENEFITS, (CONTINUED) Actuarial Assumptions and Other Inputs The total OPEB liability in the December 31, 2020 valuation was determined using the following assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified. Valuation Date:December 31, 2020 Methods and Assumptions: Actuarial cost method Individual Entry-Age Normal Discount Rate 2.00% as of December 31, 2020 Inflation Rate 2.50% Salary Increases 3.50% to 11.50%, including inflation Demographic Assumptions Based on the experience study covering the four-year period ending December 31, 2018 as conducted for the Texas Municipal Retirement System (TMRS) Mortality For healthy retirees, the gender-distinct 2019 Municipal Retirees of Texas mortality tables are used. The rates are projected on a fully generational basis using the ultimate mortality improvement rates in the MP tables published through 2019 to account for future mortality improvements. Health Care Trend Rates Initial rate of 6.80% declining to an ultimate rate of 4.15% after 12 years Participation Rates 75% of pre-65 retirees who are eligible for HRA contribution are assumed to initially maintain health coverage. After the HRA contribution is depleted, 60% of retirees who initially maintained coverage are assumed to discontinue. For those not eligible for the HRA contribution, 30% were assumed to maintain health coverage at their own expense. Other Information: Notes The discount rate changed from 2.75% as of December 31, 2019 to 2.00% as of December 31, 2020. Discount Rate For plans that do not have formal assets, the discount rate should equal the tax-exempt municipal bond rate based on an index of 20-year general obligation bonds with an average AA credit rating as of the measurement date. For the purpose of this valuation, the municipal bond rate is 2.00% (based on the daily rate closest to but not later than the measurement date of the Fidelity “20-Year Municipal GO AA Index”). The discount rate was 2.75% as of the prior measurement date. Plan Assets There are no plan assets accumulated in a trust that meets the criteria in paragraph 4 of GASB statement No. 75. CITY OF NEDERLAND NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -47- NOTE 11: POST‐EMPLOYMENT HEALTH CARE BENEFITS, (CONTINUED) Changes in OPEB Liability The changes in the total OPEB liability for the plan are as follows: City's Total OPEB liability Total Amount Service Cost 92,408$ 81,975$ Interest on the total OPEB liability 48,206 42,764 Changes of benefit terms - - Difference between expected and actual experience (114,992) (100,430) Changes of assumptions 151,019 133,969 Benefit payments (95,522) (84,738) Net change in total OPEB liability 81,119 73,540 Total OPEB liability ‐ beginning 1,754,512 1,554,849 Total OPEB liability ‐ ending 1,835,631$ 1,628,389$ Covered‐employee payroll 9,281,349$ Total OPEB liability as a percentage of covered‐employee payroll 19.78% Presented in Exhibit A as follows: Governmental Activities 1,139,927$ Business-Type Activities 488,462 Nonmajor Component Unit 207,242 1,835,631$ Sensitivity of the Total OPEB liability to the Discount Rate Assumption Regarding the sensitivity of the total OPEB liability to changes in the discount rate, the following presents the plan’s total OPEB liability, calculated using a discount rate of 2.00%, as well as what the plan’s total OPEB liability would be if it were calculated using a discount rate that is one percent lower or one percent higher: 1% 1% Decrease in Current Increase in Discount Discount Discount Rate Rate Rate 1.00% 2.00% 3.00% Primary government's OPEB liability 1,840,603$ 1,628,389$ 1,453,740$ Nonmajor component unit's OPEB liability 234,251 207,242 185,015 Sensitivity of the Total OPEB liability to the Healthcare Cost Trend Rate Assumption Regarding the sensitivity of the total OPEB liability to changes in the healthcare cost trend rates, the following presents the plan’s total OPEB liability, calculated using the assumed trend rates as well as what the plan’s total OPEB liability would be if it were calculated using a trend rate that is one percent lower or one percent higher: Current Healthcare Cost Trend 1% Decrease Rate Assumption 1% Increase Primary government's OPEB liability 1,534,382$ 1,628,389$ 1,739,718$ Nonmajor component unit's OPEB liability 195,279 207,242 221,412 CITY OF NEDERLAND NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -48- NOTE 11: POST‐EMPLOYMENT HEALTH CARE BENEFITS, (CONTINUED) OPEB Expense and Deferred Outflow of Resources and Deferred Inflow of Resources Related to OPEB For the fiscal year ended September 30, 2021, the City recognized OPEB expense of $149,853. At September 30, 2021, the City’s deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual economic experience 7,617$ 170,079$ Changes in actuarial assumptions 267,140 48,173 Contributions subsequent to the measurement date 66,855 - Total 341,612$ 218,252$ Presented in Exhibit A as follows: Governmental Activities 210,497$ 117,157$ Business-Type Activities 92,068 64,823 Nonmajor Component Unit 39,047 36,272 341,612$ 218,252$ The $66,855 reported as deferred outflow of resources related to contributions subsequent to the December 31, 2020 measurement date will be recognized as a reduction of the total OPEB liability during the fiscal year ending September 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Net Deferred Outflows/ Year Ending (Inflows) of September 30, Resources 2022 9,239$ 2023 9,239 2024 7,118 2025 8,551 2026 18,508 Thereafter 3,850 56,505$ CITY OF NEDERLAND NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 2021 -49- NOTE 12: LEASE OBLIGATIONS The City of Nederland is obligated under operating (noncapitalized) leases for equipment. For the year ended September 30, 2021, lease expenditures of $5,533 were made from the General Fund. The following is a schedule of minimum lease payments under non-cancelable operating leases as of September 30, 2021. Year Ending General September 30, Fund 2022 4,341$ 2023 3,545 2024 1,800 2025 1,800 2026 600 Thereafter - 12,086$ NOTE 13: PRIOR PERIOD ADJUSTMENT The General Fund recorded a prior period adjustment of $375,947 to remove the beginning Compensated Absences Payable. It was determined that the Compensated Absences Payable did not related to terminated employees as of September 30, 2020 so therefore it should not be recorded in the governmental financial statements. REQUIRED SUPPLEMENTARY INFORMATION CITY OF NEDERLAND SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS TEXAS MUNICIPAL RETIREMENT SYSTEM FOR THE YEAR ENDED SEPTEMBER 30, 2021 FY 2021 FY 2020 FY 2019 FY 2018 Plan Year Plan Year Plan Year Plan Year 2020 2019 2018 2017 A. Total Pension Liability Service Cost 1,408,909$ 1,304,271$ 1,262,738$ 1,207,336$ Interest (on the Total Pension Liability) 3,909,780 3,742,924 3,664,635 3,534,367 Changes of Benefit Terms - - - - Difference between Expected and Actual Experience 561,380 629,983 (335,625) 38,533 Changes of Assumptions - 83,207 - - Benefit Payments, Including Refunds of Employee Contributions (2,936,482) (3,745,039) (3,160,312) (2,595,771) Net Change in Total Pension Liability 2,943,587 2,015,346 1,431,436 2,184,465 Total Pension Liability - Beginning 58,686,455 56,671,109 55,239,673 53,055,208 Total Pension Liability - Ending 61,630,042$ 58,686,455$ 56,671,109$ 55,239,673$ B. Total Fiduciary Net Position Contributions - Employer 600,503$ 547,036$ 536,414$ 528,708$ Contributions - Employee 649,694 603,032 583,058 558,213 Net Investment Income 4,723,565 8,690,225 (1,800,508) 7,507,467 Benefit Payments, Including Refunds of Employee Contributions (2,936,482) (3,745,039) (3,160,312) (2,595,772) Administrative Expenses (30,608) (49,157) (34,822) (38,925) Other (1,193) (1,477) (1,819) (1,973) Net Change in Plan Fiduciary Net Position 3,005,479 6,044,620 (3,877,989) 5,957,718 Plan Fiduciary Net Position - Beginning 62,316,801 56,272,181 60,150,170 54,192,452 Plan Fiduciary Net Position - Ending 65,322,280$ 62,316,801$ 56,272,181$ 60,150,170$ C. Net Pension Liability (Asset)(3,692,238)$ (3,630,346)$ 398,928$ (4,910,497)$ D. Plan Fiduciary Net Position as a 105.99% 106.19% 99.30% 108.89% Percentage of Total Pension Liability E. Covered Payroll 9,281,348$ 8,614,739$ 8,329,405$ 7,974,475$ F. Net Pension Liability (Asset) as a Percentage of Covered Payroll -39.78% -42.14% 4.79% -61.58% Note: GASB 68, Paragraph 46, a and b requires that the data in this schedule be presented for the time period covered by the measurement date rather that the governmental entity’s current fiscal year. Note: Only seven years of data are presented in accordance with GASB 68, paragraph 138. “The information for all periods for the 10-year schedules that are required to be presented as required supplementary information may not be available initially. In these cases, during the transition period, that information should be presented for as many years as are available. The schedules should not include information that is not measured in accordance with the requirements of this Statement. CITY OF NEDERLAND SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIONS TEXAS MUNICIPAL RETIREMENT SYSTEM XX EXHIBIT I -50- FY 2017 FY 2016 FY 2015 Plan Year Plan Year Plan Year 2016 2015 2014 1,131,700$ 1,107,837$ 933,120$ 3,440,413 3,369,020 3,258,955 - - - (563,449) (190,195) (521,515) - 1,086,415 - (2,713,373) (2,376,190) (1,994,954) 1,295,291 2,996,887 1,675,606 51,759,917 48,763,030 47,087,424 53,055,208$ 51,759,917$ 48,763,030$ 405,945$ 462,351$ 516,968$ 524,282 525,397 470,583 3,544,819 79,424 2,968,745 (2,713,373) (2,376,190) (1,994,954) (40,050) (48,383) (31,001) (2,158) (2,390) (2,549) 1,719,465 (1,359,791) 1,927,792 52,472,987 53,832,778 51,904,986 54,192,452$ 52,472,987$ 53,832,778$ (1,137,244)$ (713,070)$ (5,069,748)$ 102.14% 101.38% 110.40% 7,489,760$ 7,505,674$ 6,722,617$ -15.18% -9.50% -75.41% CITY OF NEDERLAND, TEXAS SCHEDULE OF EMPLOYER CONTRIBUTIONS – PENSION PLAN FOR THE YEAR ENDED SEPTEMBER 30, 2021 TEXAS MUNICIPAL RETIREMENT SYSTEM 2021 2020 2019 2018 Actuarially Determined Contributions 664,995$ 590,570$ 540,779$ 534,340$ Contributions in Relation to the Actuarially Determined Contributions 664,995 590,570 540,779 534,340 Contribution Deficiency (Excess) -$ -$ -$ -$ Covered Payroll 9,344,015$ 9,173,167$ 8,483,398$ 8,231,820$ Contributions as a Percentage of Covered Payroll 7.12% 6.44% 6.37% 6.49% Note: GASB 68, Paragraph 81 requires that the data in this schedule be presented as of the City’s respective fiscal years as opposed to the time periods covered by the measurement dates ending. Note: In accordance with GASB 68, Paragraph 138, only seven years of data are presented this reporting period. “This information for all periods for the 10-year schedules that are required to be presented as required supplementary information may not be available initially. In these cases, during the transition period, that information should be presented for as many years as are available. The schedules should not include information that is not measured in accordance with the requirements of this Statement.” NOTES TO SCHEDULE OF CONTRIBUTIONS Valuation Date: Actuarially determined contribution rates are calculated as of December 31 and become effective in January, 13 months later. Methods and Assumptions Used to Determine Contribution Rates: Actual Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll, Closed Remaining Amortization Period N/A Asset Valuation Method 10 Year smoothed market; 12% soft corridor Inflation 2.5% Salary Increases 3.5% to 11.5% including inflation Investment Rate of Return 6.75% Retirement Age Experience-based table of rates that are specific to the City’s plan of benefits. Last updated for the 2019 valuation pursuant to an experience study of the period 2014-2018. Mortality Post-retirement: 2019 Municipal Retirees of Texas Mortality Tables. The rates are projected on a full generational basis with scale UMP. Pre-retirement: PUB(10) mortality tables, with the Public Safety table used for males and the General Employee table used for females. The rates are projected on a fully generational basis with scale UMP. Other Information: Notes: There were no benefit changes during the year. CITY OF NEDERLAND, TEXAS REQUIRED SUPPLEMENTARY INFORMATION Xx EXHIBIT J -51- 2017 2016 2015 496,719$ 414,694$ 462,576$ 496,719 414,694 462,576 -$ -$ -$ 7,879,026$ 7,409,498$ 7,102,664$ 6.30% 5.60% 6.51% CITY OF NEDERLAND SCHEDULE OF CHANGES IN THE TOTAL OPEB LIABILITY AND RELATED RATIOS TEXAS MUNICIPAL RETIREMENT SYSTEM FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT K -52- FY 2021 FY 2020 FY 2019 FY 2018 Plan Year Plan Year Plan Year Plan Year 2020 2019 2018 2017 Total OPEB Liability Service Cost 92,408$ 79,410$ 86,825$ 53,710$ Interest on the Total OPEB Liability 48,206 57,710 57,081 59,825 Changes of Benefit Terms - - - - Difference between Expected and Actual Experience (114,992) 4,977 (132,721) 9,959 Changes of Assumptions 151,019 144,242 (88,544) 91,702 Benefit Payments (95,522) (95,277) (80,574) (74,340) Net Change in Total OPEB Liability 81,119 191,062 (157,933) 140,856 Total OPEB Liability - Beginning 1,754,512 1,563,450 1,721,383 1,580,527 Total OPEB Liability - Ending 1,835,631$ 1,754,512$ 1,563,450$ 1,721,383$ Covered Payroll 9,281,349$ 8,614,734$ 8,106,393$ 7,608,396$ Total OPEB Liability as a Percentage of the Covered Payroll 19.78% 20.37% 19.29% 22.62% Notes to Schedule: FYE20 – The demographic assumptions were updated to reflect the 2019 TMRS Experience Study. FYE19 – The health care trend assumption was slightly modified. Changes of assumptions reflect the effects of changes in the discount rate each period. The following are the discount rates used in each period: FYE Discount Rate 2021 2.00% 2020 2.75% 2019 3.71% 2018 3.31% 2017 3.81% COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES CITY OF NEDERLAND, TEXAS NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS -53- The Special Revenue Funds are used to account for the proceeds of specific revenue sources other than expendable trust, or major capital projects that are for specific purposes. Included in this heading are t he following individual funds: Police Narcotics Fund This fund was established to account for funds awarded to the City by the Courts from money and property seized during operations of the Jefferson County Narcotics Task Force. Library Fund This fund was established to account for revenues, including donations and grants, to fund special projects, purchase equipment, books and supplies not ordinarily provided for in the library’s operating budget. Court Technology Fund This fund accounts for fines allocated to finance the purchase of technological enhancements for the municipal court. Hotel/Motel Tax Fund This fund accounts for revenue from hotel and motel occupancy tax. The funds generated by this tax are restricted by State law for disbursements to support convention and meeting facility construction, operation and maintenance, tourism, historical preservation and promotion of the arts. Fire Department Fund This fund was established to account for revenues, including donations and grants, to fund special projects, purchase equipment and supplies not ordinarily provided for in the fire department’s operating budget. CITY OF NEDERLAND, TEXAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2021 Hotel/Motel Police Court Occupancy Narcotics Library Technology Tax Fund Fund Fund Fund ASSETS Cash and Cash Equivalents 2,645$ 828$ 7,258$ 101,527$ Investments - Current 85,765 50,672 - - Accounts Receivable Net - - - 21,709 Total Assets 88,410$ 51,500$ 7,258$ 123,236$ LIABILITIES Accounts Payable -$ 698$ -$ 26,173$ Unearned Revenues - 16,800 - - Total Liabilities - 17,498 - 26,173 FUND BALANCES Other Restricted Fund Balance 88,410 34,002 7,258 97,063 Total Fund Balances 88,410 34,002 7,258 97,063 Total Liabilities and Fund Balances 88,410$ 51,500$ 7,258$ 123,236$ CITY OF NEDERLAND, TEXAS REQUIRED SUPPLEMENTARY INFORMATION Xx EXHIBIT L -54- Total Total Fire Nonmajor Nonmajor Department Special Governmental Fund Revenue Funds Funds 75,361$ 187,619$ 187,619$ - 136,437 136,437 - 21,709 21,709 75,361$ 345,765$ 345,765$ -$ 26,871$ 26,871$ - 16,800 16,800 - 43,671 43,671 75,361 302,094 302,094 75,361 302,094 302,094 75,361$ 345,765$ 345,765$ CITY OF NEDERLAND, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ‐ NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2021 Hotel/Motel Police Court Occupancy Narcotics Library Technology Tax Fund Fund Fund Fund REVENUES: Taxes: Other Taxes -$ -$ -$ 106,500$ Grants and Private Contributions 2,522 63,382 - - Forfeitures 2,090 - - - Fines and Court Costs - - 8,757 - Investment Earnings 52 39 - - Other Revenue 1,100 290 - - Total Revenues 5,764 63,711 8,757 106,500 EXPENDITURES: Public Safety 11,971 - 6,951 - Culture and Recreation - 68,753 - 110,532 Total Expenditures 11,971 68,753 6,951 110,532 Excess (Deficiency) of Revenues Over (6,207) (5,042) 1,806 (4,032) (Under) Expenditures OTHER FINANCING SOURCES (USES): Transfers In - - - - Transfers Out (Use) (10,000) - - - Total Other Financing Sources (Uses) (10,000) - - - Net Change in Fund Balance (16,207) (5,042) 1,806 (4,032) Fund Balance - Beginning 104,617 39,044 5,452 101,095 Fund Balance - Ending 88,410$ 34,002$ 7,258$ 97,063$ CITY OF NEDERLAND, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE ‐ NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT M -55- Total Total Fire Nonmajor Nonmajor Department Special Governmental Fund Revenue Funds Funds -$ 106,500$ 106,500$ 29,791 95,695 95,695 - 2,090 2,090 - 8,757 8,757 - 91 91 - 1,390 1,390 29,791 214,523 214,523 60,192 79,114 79,114 - 179,285 179,285 60,192 258,399 258,399 (30,401) (43,876) (43,876) 20,000 20,000 20,000 - (10,000) (10,000) 20,000 10,000 10,000 (10,401) (33,876) (33,876) 85,762 335,970 335,970 75,361$ 302,094$ 302,094$ CITY OF NEDERLAND, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL – DEBT SERVICE FUND FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT N -56- Variance With Actual Final Budget GAAP BASIS Positive or Original Final (See Note) (Negative) REVENUES: Taxes: Property Taxes 2,088,441$ 2,088,441$ 2,045,798$ (42,643)$ Penalty and Interest on Taxes 25,000 25,000 29,797 4,797 Investment Earnings 1,000 1,000 92 (908) Total Revenues 2,114,441 2,114,441 2,075,687 (38,754) EXPENDITURES: Debt Service: Principal on Debt 2,305,000 2,305,000 2,305,000 - Interest on Debt 763,279 763,279 769,059 (5,780) Other Debt Service 3,250 3,250 1,873 1,377 Total Expenditures 3,071,529 3,071,529 3,075,932 (4,403) Excess (Deficiency) of Revenues Over (957,088) (957,088) (1,000,245) (43,157) (Under) Expenditures OTHER FINANCING SOURCES (USES): Transfers In 957,088 957,088 957,088 - Total Other Financing Sources (Uses) 957,088 957,088 957,088 - Change in Fund Balance - - (43,157) (43,157) Fund Balance - Beginning 189,875 189,875 189,875 - Fund Balance - Ending 189,875$ 189,875$ 146,718$ (43,157)$ Bud geted Amounts CITY OF NEDERLAND, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL – POLICE NARCOTIC FUND FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT O -57- Variance With Actual Final Budget GAAP BASIS Positive or Original Final (See Note) (Negative) REVENUES: Grants and Private Contributions -$ -$ 2,522$ 2,522$ Forfeitures 35,000 35,000 2,090 (32,910) Investment Earnings 400 400 52 (348) Other Revenue - - 1,100 1,100 Total Revenues 35,400 35,400 5,764 (29,636) EXPENDITURES: Public Safety 25,400 25,400 11,971 13,429 Total Expenditures 25,400 25,400 11,971 13,429 Excess (Deficiency) of Revenues Over 10,000 10,000 (6,207) (16,207) (Under) Expenditures OTHER FINANCING SOURCES (USES): Transfers Out (Use) (10,000) (10,000) (10,000) - Total Other Financing Sources (Uses) (10,000) (10,000) (10,000) - Change in Fund Balance - - (16,207) (16,207) Fund Balance - Beginning 104,617 104,617 104,617 - Fund Balance - Ending 104,617$ 104,617$ 88,410$ (16,207)$ Budgeted Amounts CITY OF NEDERLAND, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL – LIBRARY FUND FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT P -58- Variance With Actual Final Budget GAAP BASIS Positive or Original Final (See Note) (Negative) REVENUES: Grants and Private Contributions 60,800$ 60,800$ 63,382$ 2,582$ Investment Earnings 1,000 1,000 39 (961) Other Revenue 6,500 6,500 290 (6,210) Total Revenues 68,300 68,300 63,711 (4,589) EXPENDITURES: Culture and Recreation 111,380 111,380 68,753 42,627 Total Expenditures 111,380 111,380 68,753 42,627 Change in Fund Balance (43,080) (43,080) (5,042) 38,038 Fund Balance - Beginning 39,044 39,044 39,044 - Fund Balance - Ending (4,036)$ (4,036)$ 34,002$ 38,038$ Budgeted Amounts CITY OF NEDERLAND, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL – COURT TECHNOLOGY FUND FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT Q -59- Variance With Actual Final Budget GAAP BASIS Positive or Original Final (See Note) (Negative) REVENUES: Fines and Court Costs 5,600$ 8,300$ 8,757$ 457$ Total Revenues 5,600 8,300 8,757 457 EXPENDITURES: Public Safety 5,600 7,000 6,951 49 Total Expenditures 5,600 7,000 6,951 49 Change in Fund Balance - 1,300 1,806 506 Fund Balance - Beginning 5,452 5,452 5,452 - Fund Balance - Ending 5,452$ 6,752$ 7,258$ 506$ Bud geted Amounts CITY OF NEDERLAND, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL – HOTEL/MOTEL OCCUPANCY TAX FUND FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT R -60- Variance With Final Budget Actual Positive or Original Final Amounts (Negative) REVENUES: Other Taxes 100,000$ 100,000$ 106,500$ 6,500$ Investment Earnings 100 100 - (100) Total Revenues 100,100 100,100 106,500 6,400 EXPENDITURES: Culture and Recreation 100,100 115,122 110,532 4,590 Total Expenditures 100,100 115,122 110,532 4,590 Change in Fund Balance - (15,022) (4,032) 10,990 Fund Balance - Beginning 101,095 101,095 101,095 - Fund Balance - Ending 101,095$ 86,073$ 97,063$ 10,990$ Bud geted Amounts CITY OF NEDERLAND, TEXAS SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL – FIRE DEPARTMENT FUND FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT S -61- Variance With Final Budget Actual Positive or Original Final Amounts (Negative) REVENUES: Grants and Private Contributions 25,000$ 25,000$ 29,791$ 4,791$ Tota Total Revenues 25,000 25,000 29,791 4,791 EXPENDITURES: Public Safety 25,000 30,000 60,192 (30,192) Total Expenditures 25,000 30,000 60,192 (30,192) Excess (Deficiency) of Revenues Over - (5,000) (30,401) (25,401) (Under) Expenditures OTHER FINANCING SOURCES (USES): Transfers In - 20,000 20,000 - Total Other Financing Sources (Uses) - 20,000 20,000 - Change in Fund Balance - 15,000 (10,401) (25,401) Fund Balance - Beginning 85,762 85,762 85,762 - Fund Balance - Ending 85,762$ 100,762$ 75,361$ (25,401)$ Budgeted Amounts CITY OF NEDERLAND COMPONENT UNIT NEDERLAND ECONOMIC DEVELOPMENT CORPORATION BALANCE SHEET SEPTEMBER 30, 2021 EXHIBIT T -62- Total General Funds ASSETS: Cash and Cash Equivalents 166,482$ 166,482$ Investments 7,411,174 7,411,174 Receivables (net of allowances for doubtful accounts) Taxes Receivable 74,583 74,583 Accounts Receivable 5,359 5,359 Total Assets 7,657,598$ 7,657,598$ LIABILITIES AND FUND BALANCES: LIABILITIES: Accrued Expenses and Other Liabilities 147$ 147$ Due to General Fund 1,991 1,991 Unearned Revenues 2,500 2,500 Total Liabilities 4,638 4,638 FUND BALANCES: Committed Fund Balance 4,250,000 4,250,000 Unassigned Fund Balance 3,402,960 3,402,960 Total Fund Balances 7,652,960 7,652,960 Total Liabilities and Fund Balances 7,657,598$ Capital assets used in governmental activities are not financial resources, and therefore, are not reported in these funds 1,073,215 Included in restricted assets is the recognition of the City's proportionate share of the net pension asset required by GASB 68 in the amount of $70,521, a Deferred Resource Outflow related to TMRS in the amount of $27,931, and a Deferred Resource inflow related to TMRS in the amount of $35,463. This amounted to an increase in Net Position in the amount of $62,989. 62,989 Included in restricted assets is the recognition of the City's proportionate share of the net OPEB liability required by GASB 75 in the amount of $207,242, a Deferred Resource Outflow related to TMRS in the amount of $39,047, and a Deferred Resource Inflow related to TMRS in the amount of $36,272. This amounted to a decrease in Net Position in the amount of ($204,467). (204,467) 8,584,697$ CITY OF NEDERLAND COMPONENT UNIT NEDERLAND ECONOMIC DEVELOPMENT CORPORATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT U -63- Total General Funds REVENUES: Sales Tax 1,012,715$ 1,012,715$ Interest 13,651 13,651 Other Miscellaneous 24,194 24,194 Total Revenues 1,050,560 1,050,560 EXPENDITURES: Current: Economic Development 1,032,022 1,032,022 Total Expenditures 1,032,022 1,032,022 Net Change in Fund Balances 18,538 18,538 Fund Balance - October 1 (Beginning) 7,634,422 Fund Balance - September 30 (Ending) 7,652,960$ The change in capital assets are reflected in the current financial resources of governmental funds, however has no effect on net position 609,335 The implementation of GASB 68 eliminates pension expenditures reflected in the current financial resources and decreases net position. 15,691 The implementation of GASB 75 eliminates pension expenditures reflected in the current financial resources and decreases in net position. (9,544) CHANGE IN NET POSITION 634,020 NET POSITION - BEGINNING 7,950,677 NET POSITION - ENDING 8,584,697$ CITY OF NEDERLAND COMPONENT UNIT NEDERLAND ECONOMIC DEVELOPMENT CORPORATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL FOR THE YEAR ENDED SEPTEMBER 30, 2021 EXHIBIT V -64- Variance With Final Budget Actual Positive or Original Final Amounts (Negative) REVENUES: Sales Tax 794,022$ 794,022$ 1,012,715$ 218,693$ Interest 70,335 70,335 13,651 (56,684) Other Miscellaneous 1,500 1,500 24,194 22,694 Total Revenues 865,857 865,857 1,050,560 184,703 EXPENDITURES: Current: Economic Development 865,857 865,857 1,032,022 166,165 Total Expenditures 865,857 865,857 1,032,022 166,165 Net Change in Fund Balances - - 18,538 18,538 Fund Balance - Beginning 7,634,422 7,634,422 7,634,422 - Fund Balance - Ending 7,634,422$ 7,634,422$ 7,652,960$ 18,538$ Budgeted Amounts STATISTICAL SECTION -65- STATISTICAL SECTION This part of the City of Nederland, Texas' annual comprehensive financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over time. 66-71 Revenue Capacity These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax. 72-75 Debt Capacity These schedules present information to help the reader assess the affordability of the government's current levels of outstanding debt and the government's ability to issue additional debt in the future. 76-81 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. 82-83 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government provides and the activities it performs. 84-88 CITY OF NEDERLAND, TEXASSCHEDULE IGovernmental Activities 2012 2013 2014 2015 2016 2017 2018 2019 2020 202123,127,039$ 24,837,113$ 29,440,152$ 28,104,077$ 29,940,213$ 30,868,378$ 30,923,655$ 32,660,306$ 34,417,770$ 36,664,862$ Restricted 2,405,754 4,633,213 3,161,349 7,880,701 3,977,350 4,893,240 7,634,601 814,301 865,425 783,691 Unrestricted (9,596,034) (8,070,156) (5,404,853) (396,078) 4,570,988 5,817,251 7,120,631 16,157,966 16,516,104 16,958,598 Total governmental activities net position 15,936,759$ 21,400,170$ 27,196,648$ 35,588,700$ 38,488,551$ 41,578,869$ 45,678,887$ 49,632,573$ 51,799,299$ 54,407,151$ Business-type Activities29,921,166$ 29,502,539$ 29,813,324$ 29,931,590$ 29,443,855$ 28,413,217$ 27,438,324$ 26,140,194$ 30,045,511$ 31,958,048$ Restricted 2,324,808 1,401,389 1,402,225 2,114,473 931,829 788,521 1,476,711 160,178 160,178 145,830 Unrestricted 3,790,728 4,421,146 5,042,025 6,280,610 7,490,363 8,274,313 8,243,111 11,302,096 10,573,668 10,725,816 Total business-type activities net position 36,036,702$ 35,325,074$ 36,257,574$ 38,326,673$ 37,866,047$ 37,476,051$ 37,158,146$ 37,602,468$ 40,779,357$ 42,829,694$ Primary Government34,208,205$ 37,034,652$ 43,683,476$ 44,265,667$ 47,444,068$ 59,281,595$ 50,256,979$ 51,575,045$ 54,996,633$ 57,746,222$ Restricted 4,730,562 6,034,602 4,563,574 9,995,174 4,909,179 9,111,312 9,111,312 974,479 1,025,603 929,521 66Unrestricted 13,034,694 13,655,990 15,207,172 19,654,532 24,001,351 14,091,564 23,468,742 34,685,517 36,556,420 38,561,102 Total primary government net position 51,973,461$ 56,725,244$ 63,454,222$ 73,915,373$ 76,354,598$ 82,484,471$ 82,837,033$ 87,235,041$ 92,578,656$ 97,236,845$ Fiscal Year Invested in capital assets, net of related debt (ACCRUAL BASIS OF ACCOUNTING)NET POSITION BY COMPONENTLAST TEN FISCAL YEARS Invested in capital assets, net of related debt Invested in capital assets, net of related debt CITY OF NEDERLAND, TEXASSCHEDULE IILAST TEN FISCAL YEARS (1)2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Governmental activitiesGeneral government 912,280$ 873,884$ 1,022,795$ 1,133,595$ 1,877,002$ 1,879,601$ 1,453,810$ 2,759,459$ 1,711,575$ 1,038,063$ Public safety 4,873,250 4,991,907 5,447,749 5,380,222 5,596,872 6,506,680 6,090,633 6,390,752 6,941,338 7,175,908 Public works 1,825,249 1,805,477 1,839,892 2,276,934 1,908,479 1,116,983 1,984,912 2,027,955 2,295,576 2,474,918 Culture and recreation 1,075,263 1,160,750 1,280,927 1,225,890 1,410,272 1,360,968 1,352,159 1,432,531 1,332,467 1,520,515 Administrative and general 395,998 418,261 349,660 313,638 317,459 323,600 540,643 431,598 361,156 473,705 Interest on long-term debt and other debt service 700,763 679,559 616,072 513,579 330,460 411,785 470,165 708,938 817,081 755,378 Capital Outlay-----634,102 - - - -Total governmental activities 9,782,803 9,929,838 10,557,095 10,843,858 11,440,544 12,233,719 11,892,322 13,751,233 13,459,193 13,438,487 Business-type activitiesWater and sewer 4,408,929 4,480,355 4,387,935 4,193,292 4,635,956 4,664,576 4,842,030 4,505,371 5,076,567 5,353,822 Solid Waste 1,015,675 1,103,974 1,092,862 1,076,963 1,169,954 1,513,065 1,599,620 1,431,112 1,472,886 1,796,748 Total business-type activities 5,424,604 5,584,329 5,480,797 5,270,255 5,805,910 6,177,641 6,441,650 5,936,483 6,549,453 7,150,570 Total Primary Government Expenses 15,207,407$ 15,514,167$ 16,037,892$ 16,114,113$ 17,246,454$ 18,411,360$ 18,333,972$ 19,687,716$ 20,008,646$ 20,589,057$ Program RevenuesGovernmental activities:Charges for services:Public safety 166,945$ 350,177$ 193,761$ 317,684$ 153,263$ 231,213$ 290,766$ 408,929$ 361,094$ 401,552$ Public works 126,566 147,864 147,716 146,329 154,082 101,530 156,561 135,808 71,465 166,978 Culture and recreation 95,460 85,630 92,762 110,178 124,360 105,674 104,374 90,538 47,644 111,319 67Operating grants and contributions 248,145 431,584 3,458,451 1,333,094 218,717 303,049 287,856 422,790 1,383,225 421,216 Capital grants and contributions---------53,242 Total governmental activities program revenues 637,116 1,015,255 3,892,690 1,907,285 650,422 741,466 839,557 1,058,065 1,863,428 1,154,307 Business activities:Charges for services:Water & sewer 4,313,232 4,198,873 4,233,087 4,525,083 4,348,123 4,444,922 4,730,022 4,989,641 5,117,728 5,175,026 Solid waste 1,364,893 1,405,833 1,590,802 1,631,189 1,643,525 1,682,773 1,691,752 1,699,844 1,702,719 1,754,075 Capital grants and contributions-----355,233 296,417 - - -Total business-type activities program revenues 5,678,125 5,604,706 5,823,889 6,156,272 5,991,648 6,482,928 6,718,191 6,689,485 6,820,447 6,929,101 Total primary government program revenues 6,315,241$ 6,619,961$ 9,716,579$ 8,063,557$ 6,642,070$ 7,224,394$ 7,557,748$ 7,747,550$ 8,683,875$ 8,083,408$ Net (expense) revenueGovernmental activities (9,145,687)$ (8,914,583)$ (6,664,405)$ (8,936,573)$ (10,790,122)$ (11,492,253)$ (11,052,765)$ (12,693,168)$ (11,595,765)$ (12,284,180)$ Business-type activities 253,521 20,377 343,092 886,017 185,738 305,287 276,541 753,002 270,994 (221,469) Total primary government net expense (8,892,166)$ (8,894,206)$ (6,321,313)$ (8,050,556)$ (10,604,384)$ (11,186,966)$ (10,776,224)$ (11,940,166)$ (11,324,771)$ (12,505,649)$ CHANGES IN NET POSITION(ACCRUAL BASIS OF ACCOUNTING) CITY OF NEDERLAND, TEXASSCHEDULE II2012 2013 2014 2015 2016 2017 2018 2019 2020 2021General Revenues and Other Changes in Net PositionGovernmental ActivitiesProperty taxes, penalties and interest 5,634,574$ 5,727,560$ 5,786,607$ 5,929,520$ 6,095,105$ 6,335,621$ 6,748,020$ 6,873,738$ 7,158,736$ 7,202,505$ In lieu of tax contracts 1,768,745 1,819,377 1,784,626 1,737,247 1,723,214 1,672,348 1,995,382 2,205,696 2,402,073 3,215,618 Sales tax 3,713,845 3,681,434 3,844,714 4,227,148 4,104,845 3,725,211 4,550,091 4,621,939 5,065,369 5,063,576 Other taxes 1,230,797 1,164,178 1,219,125 1,261,713 1,216,030 1,297,399 1,364,631 1,314,128 1,203,836 1,160,013 Interest 21,291 27,164 19,828 17,529 26,515 51,219 216,153 498,468 267,685 13,317 Gain on sale of capital assets - 1,125,155 678,376 155,000 317,411 - - - 13,900 -Grants and Contributions Not Restricted-----279,208 ----Other miscellaneous 55,811 81,126 103,041 124,263 97,460 219,290 445,105 524,100 300,817 176,469 Transfers 959,948 752,000 (620,963) (198,629) 685,784 733,175 546,900 608,785 (2,649,925) (1,939,466) Total government activities 13,385,011 14,377,994 12,815,354 13,253,791 14,266,364 14,313,471 15,866,282 16,646,854 13,762,491 14,892,032 Business-type activitiesInterest 11,927 8,119 7,703 7,302 10,320 14,866 39,213 127,701 177,212 4,181 Other miscellaneous (120,378) 11,876 (39,258) (62,007) 77,187 23,026 167,311 172,404 78,758 328,159 Transfers (959,948) (752,000) 620,963 198,629 (685,784) (733,175) (546,900) (608,785) 2,649,925 1,939,466 Total business-type activities (1,068,399) (732,005) 589,408 143,924 (598,277) (695,283) (340,376) (308,680) 2,905,895 2,271,806 Total primary government 12,316,612$ 13,645,989$ 13,404,762$ 13,397,715$ 13,668,087$ 13,618,188$ 15,525,906$ 16,338,174$ 16,668,386$ 17,163,838$ Change in Net Position68Governmental activities 4,239,324$ 5,463,411$ 6,150,949$ 4,317,218$ 3,476,242$ 2,821,218$ 4,793,545$ 3,953,686$ 2,166,726$ 2,607,852$ Business-type activities (814,878) (711,628) 932,500 1,029,941 (412,539) (389,996) (68,965) 444,322 3,176,889 2,050,337 Prior Period Adjustment----(372,116) 269,101 (942,469) - - -Total primary government 3,424,446$ 4,751,783$ 7,083,449$ 5,347,159$ 2,691,587$ 2,700,323$ 3,782,111$ 4,398,008$ 5,343,615$ 4,658,189$ Fiscal YearCHANGES IN NET POSITION (continued) CITY OF NEDERLAND, TEXAS SCHEDULE III GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE LAST TEN FISCAL YEARS (1) (ACCRUAL BASIS OF ACCOUNTING) (AMOUNTS EXPRESSED IN THOUSANDS) Fiscal Property In Lieu Sales Other Year Tax of Tax Tax Taxes Total 2012 5,635 1,769 3,714 1,231 12,349 2013 5,728 1,819 3,681 1,164 12,392 2014 5,787 1,785 3,845 1,219 12,636 2015 5,930 1,737 4,227 1,262 13,156 2016 6,095 1,723 4,105 1,216 13,139 2017 6,326 1,672 3,725 1,297 13,020 2018 6,613 1,995 4,550 1,365 14,523 2019 6,783 2,206 4,622 1,314 14,925 2020 7,082 2,402 5,065 1,204 15,753 2021 7,107 3,216 5,064 1,160 16,547 69 CITY OF NEDERLAND, TEXAS SCHEDULE IV FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (1) (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (AMOUNTS EXPRESSED IN THOUSANDS) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 General Fund Reserved -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Unreserved - - - - - - - - - Nonspendable 3 2 2 3 1 2 12 123 3 70 Restricted - 1,135 - 197 - 3,176 4,005 3,799 3,979 Assigned - 1,350 - 2,800 2,692 2,953 223 364 256 463 Unassigned 9,332 8,809 12,660 10,817 11,850 12,174 13,012 14,314 16,377 18,221 Total general fund 9,335 11,296 12,662 13,817 14,543 15,129 16,423 18,806 20,435 22,733 All other governmental funds Reserved - - - - - - - - - Unreserved, reported in: Special revenue funds - - - - - - - - - Capital projects funds - - - - - - - - - Nonspendable - - - - - - - - 1,466 1,466 Restricted Debt Service 309 261 229 224 174 157 136 166 190 147 Grants and Awards 289 320 310 414 417 427 301 312 336 302 Construction - - - 280 4 5,330 3,179 8,968 6,311 6,834 Committed Capital projects 1,795 4,939 3,029 2,495 2,384 2,642 3,937 4,145 3,568 3,416 Total all other governmental funds 2,393 5,520 3,568 3,413 2,979 8,556 7,553 13,591 11,871 12,165 Total governmental funds 11,728$ 16,816$ 16,230$ 17,230$ 17,522$ 23,685$ 23,976$ 32,397$ 32,306$ 34,898$ 70 CITY OF NEDERLAND, TEXASSCHEDULE VCHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDSLAST TEN FISCAL YEARS (1)Revenues 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Property taxes, penalties and interest5,615,078$ 5,699,431$ 5,785,757$ 5,911,963$ 6,113,742$ 6,326,289$ 6,781,817$ 6,894,413$ 7,138,819$ 7,202,765$ In lieu of tax contracts 1,768,745 1,819,377 1,784,628 1,737,247 1,723,214 1,672,348 1,995,382 2,205,696 2,402,073 3,215,618 Sales Tax 3,713,845 3,681,434 3,844,714 4,227,148 4,104,845 3,725,211 4,550,091 4,621,939 5,065,369 5,063,576 Other taxes 1,230,797 1,164,178 1,219,125 1,261,713 1,216,030 1,297,399 1,364,631 1,314,128 1,203,836 1,160,013 Charges for services 222,026 233,494 240,478 256,507 278,442 207,204 260,935 226,346 119,109 278,297 Fines, forfeits and penalties 187,836 276,470 226,571 267,359 227,737 231,213 265,662 298,190 309,866 370,127 Interest21,291 27,164 19,826 17,528 26,515 51,219 216,153 498,468 267,685 13,317 Grants and Private contributions 248,145 431,584 3,458,451 1,333,096 218,717 582,257 287,857 422,790 1,383,224 474,457 Other miscellaneous 91,373 81,126 103,041 124,261 97,460 100,674 87,554 91,980 318,727 174,384 Total revenues 13,099,136 13,414,258 16,682,591 15,136,822 14,006,702 14,193,814 15,810,082 16,573,950 18,208,708 17,952,554 ExpendituresCurrent:General government910,170 965,139 1,008,005 2,561,602 1,217,555 1,328,398 1,265,040 2,391,589 1,467,170 1,880,374 Public safety4,718,219 4,834,661 5,227,808 5,311,775 5,402,174 6,179,043 7,926,820 9,686,702 7,112,430 7,085,232 Public works 1,408,350 1,644,195 3,151,978 1,619,023 2,983,236 1,908,454 2,254,408 1,723,813 3,001,415 3,999,021 Culture and recreation 1,096,082 1,132,087 1,148,460 1,297,498 1,499,537 1,496,688 1,280,388 1,415,757 1,425,624 1,361,577 Administration and general353,183 369,587 323,473 296,162 317,459 323,600 785,762 431,598 365,167 472,363 Capital Outlay511,508 2,120,742 4,030,394 555,478 812,262 769,887 268,929 118,781 277,844 Debt Service:Principal retirement1,825,000 1,680,000 1,815,000 1,890,000 1,925,000 1,985,000 2,154,999 2,415,000 2,395,000 2,305,000 Interest and fiscal charges 713,822 853,412 617,638 559,780 511,780 517,041 593,068 817,175 764,984 769,059 Issuance Costs 61,537 198,462 2,325 2,724 2,225 3,250 2,625 2,766 130,050 123,334 Total expenditures 11,597,871 13,798,285 17,325,081 14,094,042 14,671,228 14,511,361 16,263,110 19,153,329 16,780,621 18,273,804 Excess (Deficiency) of Revenues Over (Under) Expenditures 1,501,265 (384,027) (642,490) 1,042,780 (664,526) (317,547) (453,028) (2,579,379) 1,428,087 (321,250) Other Financing Sources (Uses)Bonds issued 85,000 6,120,000 - - - 4,975,000 - 9,695,000 4,076,662 4,476,851 Premium on bonds - 337,985 - - - 624,206 - 263,787 - Bond issuance costs - - - - - - - - Payment to refunded escrow agent- (3,375,000) - - - - - - (2,946,021) Transfers in 1,334,948 3,160,6501,799,078 1,170,2982,243,055 2,175,099 2,288,098 3,124,6953,443,495 2,287,088Transfers out(375,000) (2,408,650) (2,420,041) (1,368,927) (1,557,272) (1,441,925) (1,741,198) (2,515,910)(6,093,420) (4,226,554)Sale of general capital assets - 1,636,470 678,376 155,000 317,412 147,802 332,448 432,120 0 - Total Other Financing Sources and Uses 1,044,948 5,471,455 57,413 (43,629) 1,003,195 6,480,182 879,348 10,999,692 (1,519,284) 2,537,385 Net Change in Fund Balance 2,546,213$ 5,087,428$ (585,077)$ 999,151$ 338,669$ 6,162,635$ 426,320$ 8,420,313$ (91,197)$ 2,216,135$ Debt service as a percentage ofnon-capital expenditures 24.01% 23.77% 21.57% 20.71% 20.97% 20.67% 21.84% 23.87% 22.65% 21.36%Fiscal Year71(MODIFIED ACCRUAL BASIS OF ACCOUNTING) CITY OF NEDERLAND, TEXAS SCHEDULE VI ASSESED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS TOTAL ESTIMATED MARKET VALUE LESS: TAXABLE TOTAL FISCAL TAX ROLL RESIDENTIAL COMMERCIAL INDUSTRIAL TAX-EXEMPT ASSESSED DIRECT YEAR YEAR PROPERTY PROPERTY PROPERTY PROPERTY VALUE TAX RATE 2012 2011 759,356,680$ 223,565,400$ 9,378,740$ 31,566,020$ 960,734,800$ 0.0578000 2013 2012 752,795,130 220,034,960 13,785,390 29,928,476 956,687,004 0.0591853 2014 2013 762,806,954 228,548,890 46,558,802 72,936,303 964,978,343 0.0591853 2015 2014 784,202,131 218,685,410 69,521,792 80,972,053 991,437,280 0.0591853 2016 2015 813,977,607 224,764,320 95,130,156 112,331,501 1,021,540,582 0.0591853 2017 2016 841,020,598 232,242,560 94,158,834 111,045,255 1,056,376,737 0.0594000 2018 2017 872,766,523 231,908,670 98,115,491 115,842,819 1,086,947,865 0.0609578 2019 2018 884,850,214 246,951,596 101,241,859 113,461,412 1,119,582,257 0.0609578 2020 2019 943,506,133 260,889,005 101,664,495 119,762,104 1,186,297,529 0.5991590 2021 2020 993,343,211 264,457,623 99,591,657 120,453,897 1,236,938,594 0.5797080 Source: Jefferson County Appraisal District Note: Property in Jefferson County is reassessed once every two years 72 SCHEDULE VII PROPERTY TAX RATES- DIRECT AND OVERLAPPING GOVERNMENTS Last Ten Fiscal Years Debt Fiscal Maintenance & Service Total Direct Jefferson Nederland Drainage Navigation Year Operations Rate Rate Rate County ISD District #7 District 2012 0.370566$ 0.207434$ 0.578000$ 0.365000$ 1.109500$ 0.140949$ 0.027311$ 2013 0.390395 0.201458 0.591853 0.365000 1.105000 0.140949 0.027870 2014 0.371479 0.220374 0.591853 0.365000 1.120000 0.149917 0.029374 2015 0.372368 0.219485 0.591853 0.365000 1.145000 0.170602 0.089374 2016 0.385689 0.206164 0.591853 0.365000 1.160000 0.165305 0.091640 2017 0.390828 0.203172 0.594000 0.365000 1.160000 0.160545 0.091640 2018 0.390828 0.218750 0.609578 0.364977 1.150000 0.199875 0.091640 2019 0.404100 0.205478 0.609578 0.364977 1.150000 0.239850 0.092067 2020 0.414765 0.184394 0.599159 0.364977 1.330000 0.311805 0.092067 2021 0.413141 0.166567 0.579708 0.364977 1.275200 0.294990 0.090426 Source: Jefferson County Tax Office Note: The City establishes tax rates based on values established by the Jefferson County Appraisal District. A no-new revenue tax rate is calculated as the tax rate that would produce the same amount of taxes if applied to the same properties that are taxed in both years. The voter approved rate is the highest tax rate that a taxing unit may adopt without holding an election to seek voter approval of the rate. CITY OF NEDERLAND, TEXAS Overlapping RatesCity Direct Rates 73 Schedule VIII PRINCIPAL TAXPAYERS Percent of Percent of Assessed Estimated Assessed Estimated TAXPAYER Valuation Actual Value Valuation Actual Value Philpott Ford, Inc. 13,748,970$ 1.43% 14,723,046$ 1.19% Nederland Avenue Apartments 7,681,440 0.80% 13,195,783 1.07% Entergy Texas, Inc. 8,286,250 0.86% 11,619,056 0.94% Fivepoint Federal Credit Union 8,707,330 0.91% 9,973,503 0.81% Chateau Residential LP 3,906,250 0.41% 6,202,654 0.50% Albanese Nederland Spe LLC - - 6,051,250 0.49% JK Chevrolet Isuzu - - 5,979,153 0.48% LaPlace Apartments - - 5,311,037 0.43% JAG Nederland Properties LTD 5,035,820 0.52% 5,293,803 0.43% Florida Gas Transmission Co - - 4,898,258 0.40% Megas Constantine 6,659,120 0.69% - - Southwstern Bell Telephone Co 3,842,220 0.40% - - Edward Hughes 3,927,750 0.41% - - HLP Properties or Port Arthur 5,333,220 0.56% - - Total 67,128,370$ 6.99% 83,247,543$ 6.73% Source: Jefferson County Appraisal District Notes: Total taxable value including real and personal property for tax year 2011 (fiscal year 2012) is $960,734,800 Total taxable value including real and personal property for tax year 2020 (fiscal year 2021) is $1,236,938,594 Fiscal Year 2021 CITY OF NEDERLAND, TEXAS Current Year and Nine Years Ago Fiscal Year 2012 74 CITY OF NEDERLAND Schedule IX PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS COLLECTED WITHIN THE TOTAL COLLECTIONS FISCAL YEAR OF LEVY TO DATE FISCAL YEAR TAXES COLLECTIONS ENDED LEVIED FOR PERCENTAGE IN SUBSEQUENT PERCENTAGE SEPTEMBER 30, FISCAL YEAR AMOUNT OF LEVY YEAR AMOUNT OF LEVY 2012 5,556,337$ 5,422,024$ 97.58% 122,113$ 5,544,137$ 99.78% 2013 5,639,091 5,502,387 97.58% 124,074 5,626,461 99.78% 2014 5,692,249 5,555,702 97.60% 120,998 5,676,700 99.73% 2015 5,858,251 5,726,009 97.74% 116,000 5,842,009 99.72% 2016 6,030,615 5,908,543 97.98% 102,231 6,010,774 99.67% 2017 6,265,415 6,139,152 97.98% 99,092 6,238,244 99.57% 2018 6,614,207 6,500,741 98.28% 76,865 6,577,606 99.45% 2019 6,799,257 6,680,461 98.25% 68,532 6,748,993 99.26% 2020 7,099,045 6,983,872 98.38% 41,286 7,025,158 98.96% 2021 7,141,696 7,021,913 98.32% - 7,021,913 98.32% Source: Jefferson County Appraisal District and Jefferson County Tax Office 75 Schedule X RATIOS OF OUTSTANDING DEBT BY TYPE Business-type Governmental Activities Activities Total Percentage Fiscal Certificates of Tax General Water & Sewer Primary of Personal Year Obligation Notes Obligation Bonds Revenue Bonds Government Income Per Capita 2012 4,350,000$ -$ 14,490,000$ -$ 18,840,000$ 4.26% 1,074$ 2013 6,914,234 - 13,508,405 - 20,422,639 4.64% 1,164 2014 6,660,360 - 11,914,996 - 18,575,356 4.41% 1,059 2015 6,448,900 - 10,400,809 - 16,849,709 3.82% 960 2016 6,349,772 - 8,367,763 - 14,717,535 3.34% 839 2017 11,373,884 - 6,809,971 - 18,183,855 4.13% 1,036 2018 10,915,799 - 4,965,170 - 15,880,969 3.60% 905 2019 20,053,305 - 3,210,369 - 23,263,674 3.66% 1,326 2020 15,887,031 1,040,000 4,968,228 - 21,895,259 3.67% 1,248 2021 19,248,430 540,000 4,111,410 - 23,899,840 3.41% 1,267 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Population data can be found in Schedule XVI CITY OF NEDERLAND, TEXAS LAST TEN FISCAL YEARS 76 CITY OF NEDERLAND, TEXAS Schedule XI RATIOS OF GENERAL BONDED DEBT OUTSTANDING Percentage of Estimated Amounts Actual Taxable Fiscal Certificates of Tax General Available in Value of Per Year Obligation Notes Obligation Bonds Debt Service Fund Total Property Capita 2012 4,350,000$ -$ 14,490,000$ 308,653$ 18,531,347$ 1.93% 1,056$ 2013 6,790,000 - 13,115,000 261,027 19,643,973 2.05% 1,120 2014 6,545,000 - 11,545,000 228,616 17,861,384 1.85% 1,018 2015 6,285,000 - 9,915,000 223,567 15,976,433 1.61% 910 2016 6,349,772 - 8,367,763 174,078 14,543,457 1.42% 829 2017 11,373,884 - 6,809,971 156,911 18,026,944 1.71% 1,027 2018 10,915,799 - 4,965,170 136,158 15,744,811 1.45% 897 2019 20,053,305 - 3,210,369 165,746 23,097,928 2.06% 1,316 2020 15,887,031 1,040,000 4,968,228 189,875 21,705,384 1.83% 1,237 2021 19,248,430 540,000 4,111,410 146,718 23,753,122 1.92% 1,260 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements Population data can be found in Schedule XVI LAST TEN FISCAL YEARS General Bonded Debt Outstanding 77 CITY OF NEDERLAND, TEXAS SCHEDULE XII SCHEDULE OF DIRECT AND OVERLAPPING BONDED DEBT ALL DIRECT AND OVERLAPPING GOVERNMENTS Estimated Estimated Share Debt Percentage of Direct and Governmental Unit Outstanding Applicable (1) Overlapping Debt Debt repaid with property taxes Nederland Independent School District $149,453,333 36.96% $55,237,952 Jefferson County, Texas 31,295,000 3.67% 1,148,527 Jefferson County Drainage District #7 14,515,000 7.29% 1,058,144 Subtotal overlapping debt 57,444,622 City direct debt 23,899,840 TOTAL 81,344,462$ Notes: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of Nederland. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident and therefore responsible for repaying the debt of each overlapping government. (1)For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated using applicable percentages and were estimated by determining the portion of another govern- mental unit's taxable assessed value that is within the City's boundaries and dividing it by each unit's total taxable assessed value. SEPTEMBER 30, 2021 78 CITY OF NEDERLAND, TEXAS Schedule XIII Estimated Estimated Share of Debt Percentage Overlapping Governmental Unit Outstanding Applicable Debt Debt repaid with property taxes; City 11,530,000$ 100.00% 11,530,000$ DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT AS OF SEPTEMBER 30, 2021 79 Schedule XIVLEGAL DEBT MARGIN INFORMATIONLAST TEN FISCAL YEARS(AMOUNTS EXPRESSED IN THOUSANDS) Debt Margin Calculation for Fiscal Year 2021Assessed value 1,236,939$ Debt Limit (25% of assessed value) 309,235 Debt applicable to limit:General Obligation Bonds 11,530 Less: amount set aside for repayment of general obligation debt (147) Total net debt applicable to limit 11,383 Debt Margin297,852$ 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Debt limit 221,641$ 219,528$ 223,384$ 231,883$ 241,284$ 264,081$ 271,723$ 279,886$ 270,941$ 297,852$ Total net debt applicable to limit 18,543 19,644 17,861 15,976 14,101 14,101 11,669 9,764 8,955 11,383 Legal debt margin 203,098$ 199,884$ 205,523$ 215,907$ 227,183$ 249,980$ 260,054$ 270,122$ 261,986$ 286,469$ 80 Legal debt margin as a percentageof the debt limit 91.63% 91.05% 92.00% 93.11% 94.16% 94.66% 95.71% 96.51% 96.69% 96.18%Note: There is no debt limit established by law; therefore, the limit is governed by the City's ability to levyand collect taxes to service the debt. The Attorney General of the State of Texas will not approvemore than $1.00 of the tax rate for debt service. The City's maximum legal tax rate is $2.00 per$100 valuation assessed at 100% of market value. Twenty-five percent of the assessed value hasbeen applied as a "rule of thumb" procedure.CITY OF NEDERLAND, TEXAS CITY OF NEDERLAND, TEXAS Schedule XV PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS Water Revenue Bonds Fiscal Year Water & Sewer Charges for Services Less: Operating Expenses Net Available Revenue Principal Interest Coverage 2012 4,127,641 3,089,241 1,038,400 - - - 2013 4,064,990 2,906,750 1,158,240 - - - 2014 4,065,404 2,975,514 1,089,890 - - - 2015 4,364,421 2,983,052 1,381,369 - - - 2016 4,348,123 3,233,957 1,114,166 - - - 2017 4,444,922 3,254,861 1,190,061 - - - 2018 4,876,004 3,428,757 1,447,247 - - - 2019 5,134,333 3,096,940 2,037,393 - - - 2020 5,232,827 3,639,226 1,593,601 - - - 2021 5,332,637 3,740,164 1,592,473 - - - Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Operating expenses do not include interest, depreciation, or amortization expenses. 81 CITY OF NEDERLAND, TEXAS Schedule XVI DEMOGRAPHIC AND ECONOMIC STATISTICS Personal Per Income Capita Calendar (amounts expressed Personal Median School Unemployment Year Population in thousands)Income Age Enrollment Rate 2012 17,547$ 461,223$ 26,285$ 37.3 5,022 ** 9.89% 2013 17,547 460,539 26,246 37.3 5,026 ** 9.70% 2014 17,547 483,157 27,535 36.8 5,006 ** 7.3% 2015 17,547 545,431 31,084 36.6 5,156 ** 6.4% 2016 17,547 541,571 30,864 38.7 5,030 ** 7.2% 2017 17,547 566,259 32,271 38.8 5,229 ** 8.2% 2018 17,547 546,449 31,142 39.1 5,388 ** 5.6% 2019 17,547 635,728 36,230 38.3 5,372 ** 5.3% 2020 17,547 597,107 34,029 36.5 4,981 **11.9% 2021 18,856 700,859 37,169 37.0 5,022 **8.0% Sources: U.S. Census Bureau, U.S. Bureau of Labor Statistics, State and local economic development entities Notes: **Local unemployment rate is no longer available, the rate reported is area wide N/A-Data not available LAST TEN CALENDAR YEARS 82 CITY OF NEDERLAND, TEXAS Schedule XVII PRINCIPAL EMPLOYERS 2021 Employer Employees Percentage of Total City Employment Nederland Independent School District 665 7.67% Mid Jefferson Extended Care Hospital 169 1.95% Time Warner 130 1.50% Philpott Motors 133 1.53% Energy Transfer 125 1.44% Five Point Credit Union 125 1.44% City of Nederland 124 1.43% Whataburger 72 0.83% Dupont 75 0.87% Unocal 66 0.76% JK Chevrolet 64 0.74% Hargrove Engineers 58 0.67% Source: Nederland Economic Development Corporation Note: Historical Information not available. CURRENT YEAR 83 CITY OF NEDERLAND, TEXAS Schedule XVIII FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION/PROGRAM 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Function/Program General government City manager 333333333 3 Finance 111111122 2 Personnel 222222222 2 Public safety Police 26 27 27 28 28 29 29 31 31 31 Fire 15 15 15 15 15 15 15 15 16 16 Dispatch 10 10 10 11 11 11 11 11 11 11 Information Technology 122333333 3 Public works Inspections 222222222 2 Code Enforcement - - 1 1 1 1 1 1 1 1 Public works administration 222222222 2 Streets 888888888 9 City shop 22322********** Animal Control - - - 1 1 1 1 1 1 1 Culture and recreation Parks and recreation 333444444 4 Library 444444444 4 Water and sewer Water treatment 666667666 6 Water utility billing/collections 445555555 5 Wastewater treatment *****4444 4 Water and sewer distribution 10 10 9 9 9 9 9 9 9 9 Solid Waste 777779999 9 Total 106 108 110 114 114 120 119 122 123 124 Source: Finance Department Notes: A full-time employee (except for firefighter) is scheduled to work 2,080 hours per year (including vacation and sick leave.) Firefighters are scheduled to work 2,912 hours per year including vacation, sick and Kelly days.) Full-time equivalent employment is calculated by dividing total labor hours by 2,080 for employees other than firefighters and 2,912 for firefighters. * The wastewater treatment operation had been contracted in 2004 and the City took over operations in FY 16-17. ** Operations of City Shop were moved under Solid Waste LAST TEN FISCAL YEARS 84 CITY OF NEDERLAND, TEXASSchedule XIXLAST TEN CALENDAR YEARS2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Function/ProgramGeneral governmentBuilding permits issued 1,026 1,028 981 1,035 1,127 815 990 901 821 945Public safetyPolicePhysical arrests 360 245 364 459 413 438 427 612 440 506Traffic violations 2,058 3,503 2,589 2,508 1,704 1,735 1,824 2,457 *6,945 *3,759Dispatch calls for service 12,463 14,455 14,667 17,377 17,199 19,246 17,453 19,754 17,434 19,967Offense reports filled 2,049 2,195 2,015 2,161 1,973 2,151 1,797 3,437 1,819 1,755FireFire runs 91 66 72 52 77 74 81 65 63 56EMS & other non-fire runs 1,608 1,632 1,731 1,830 1,700 1,938 1,894 2,204 2,280 2,147LibraryTotal volumes borrowed 103,602 106,526 96,449 94,428 89,490 86,499 85,784 82,764 47,982 49,721Water and sewerNumber of connections 7,865 7,926 8,308 8,569 8,680 8,680 9,021 8,910 9,093 9,135Water main breaks 176 248 114 129 103 133 99 66 69 79Average daily consumption (thousands of gallons)2 2.13 2.01 1.97 1.97 2.00 2.11 2.02 2.19 2.13Peak daily consumption (thousands of gallons)3.47 3.43 3.63 3.16 2.77 2.76 3.65 2.44 2.65 4.46Solid wasteRefuse collected average yards per day (compacted)128.000 117.000 120.000 85.000 117.000 85.000 84.000 106.000 129.000 93.000Refuse collected average yards per day (non-compacted)104.000 192.000 117.000 110.000 144.000 138.000 114.000 128.000 144.00089.000Source: City Departments* Change in recording method to including warningsOPERATING INDICATORS BY FUNCTION/PROGRAM85 CITY OF NEDERLAND, TEXAS Schedule XX LAST TEN FISCAL YEARS 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Police Stations 1111111111 Vehicles 20 19 19 19 19 19 21 21 21 21 Fire stations 1111111111 Aerials 1111111111 Engines 3333333333 Vehicles 3333333344 Rescue 1111112222 Public works Streets (lane miles) 175 175 175 175 175 175 175 175 175 175 Traffic signals 6777777777 Parks and recreation Parks 6556666666 Swimming pools 1111111111 Water and sewer Water mains (miles) 103.96 103.96 103.96 103.96 103.96 103.96 104.22 104.22 104.22 104.22 Sewer mains (miles) 93.67 94 94 94 94 94 97.77 97.77 97.77 97.77 Fire hydrants 407 407 407 407 407 407 481 481 481 481 Source:City Departments CAPITAL ASSET STATISTICS BY FUNCTION 86 CITY OF NEDERLAND, TEXAS Schedule XXI Industrial Contract Revenue 2011-2012 Fiscal Year 2011 Assessed Taxable Valuation Value Payments Air Liquide America Corporation $ 31,177,290 $ 23,211,219 $ 134,161 Union Oil of California 149,718,890 61,835,512 357,409 Sun Pipeline Company 301,689,110 220,964,553 1,277,175 Total $ 482,585,290 $ 306,011,284 $ 1,768,745 2012-2013 Fiscal Year 2012 Assessed Taxable Valuation Value Payments Air Liquide America Corporation 24,067,050$ 17,907,656$ 105,987$ Union Oil of California 125,825,490 57,674,339 341,347 Sun Pipeline Company 321,881,020 231,821,470 1,372,042 Total 471,773,560$ 307,403,465$ 1,819,376$ 2013-2014 Fiscal Year 2013 Assessed Taxable Valuation Value Payments Air Liquide America Corporation 22,792,750$ 16,950,446$ 100,322$ Union Oil of California 130,086,870 57,687,463 341,425 Sun Pipeline Company 344,778,530 226,894,368 1,342,881 Total 497,658,150$ 301,532,277$ 1,784,628$ 2014-2015 Fiscal Year 2014 Assessed Taxable Valuation Value Payments Air Liquide America Corporation 22,583,320$ 16,781,950$ 99,324$ Union Oil of California 59,708,970 11,971,863 70,856 Phillips 66 56,523,680 42,086,025 249,087 Sun Pipeline Company 325,835,540 222,686,850 1,317,979 Total 464,651,510$ 293,526,688$ 1,737,246$ 2015-2016 Fiscal Year 2015 Assessed Taxable Valuation Value Payments Air Liquide America Corporation 22,620,890$ 16,815,589$ 99,524$ Union Oil of California 35,522,610 7,134,591 42,226 Phillips 66 56,314,170 41,921,193 248,112 Sun Pipeline Company 456,923,780 225,284,313 1,333,352 Total 571,381,450$ 291,155,686$ 1,723,214$ 87 CITY OF NEDERLAND, TEXAS Schedule XXI Industrial Contract Revenue 2016-2017 Fiscal Year 2016 Assessed Taxable Valuation Value Payments Air Liquide America Corporation 21,797,760$ 16,213,438$ 96,308$ Union Oil of California 19,236,810 3,877,431 23,032 Phillips 66 55,326,810 41,193,103 244,687 Sun Pipeline Company 562,028,080 220,256,137 1,308,321 Total 658,389,460$ 281,540,109$ 1,672,348$ 2017-2018 Fiscal Year 2017 Assessed Taxable Valuation Value Payments Air Liquide America Corporation 21,797,760$ 16,213,438$ 96,245$ Union Oil of California 19,236,810 3,877,431 5,138 Phillips 66 55,326,810 41,193,103 397,041 Sun Pipeline Company 562,028,080 220,256,137 1,496,958 Total 658,389,460$ 281,540,109$ 1,995,382$ 2018-2019 Fiscal Year 2018 Assessed Taxable Valuation Value Payments Air Liquide America Corporation 21,193,760$ 15,746,600$ 95,988$ Phillips 66 135,645,520 98,359,140 599,576 Sun Pipeline Company 628,272,240 247,734,064 1,510,132 Total 785,111,520$ 361,839,804$ 2,205,696$ 2019-2020 Fiscal Year 2019 Assessed Taxable Valuation Value Payments Air Liquide America Corporation 21,397,860$ 15,895,341$ 95,238$ Phillips 66 204,609,530 121,580,498 728,461 Sun Pipeline Company 689,322,200 263,431,541 1,578,374 Total 915,329,590$ 400,907,380$ 2,402,073$ 2020-2021 Fiscal Year 2020 Assessed Taxable Valuation Value Payments Air Liquide America Corporation 19,316,334$ 14,334,205$ 83,097$ Phillips 66 269,869,575 133,802,596 775,664 Sun Pipeline Company 709,418,500 406,559,323 2,356,857 Total 998,604,409$ 554,696,124$ 3,215,618$ 88