City of Baltimore Maryland

City of Baltimore Maryland

Comprehensive Annual Financial Report Year Ended June 30, 2017

City of Baltimore, Maryland

Comprehensive Annual Financial Report Year Ended June 30, 2017

Prepared by the Department of Finance Henry J. Raymond Director of Finance

Bureau of Accounting and Payroll Services Sandra C. Stecker Bureau Chief

469 City Hall, 100 N. Holliday Street, Baltimore, Maryland 21202

ELECTED OFFICIALS

MAYOR Catherine E. Pugh

PRESIDENT OF THE CITY COUNCIL Bernard C. Young

COMPTROLLER Joan M. Pratt

BOARD OF ESTIMATES

PRESIDENT Bernard C. Young

MAYOR Catherine E. Pugh

COMPTROLLER Joan M. Pratt

DIRECTOR OF PUBLIC WORKS Rudolph S. Chow

CITY SOLICITOR Andre M. Davis

CITY COUNCIL Bernard C. Young, President Sharon Green Middleton, Vice-President

FIRST DISTRICT Zeke Cohen

SECOND DISTRICT Brandon M. Scott

THIRD DISTRICT Ryan Dorsey

FOURTH DISTRICT Bill Henry

FIFTH DISTRICT Isaac "Yitzy" Schleifer

SIXTH DISTRICT Sharon Green Middleton SEVENTH DISTRICT

Leon F. Pinkett, III

EIGHTH DISTRICT Kristerfer Burnett NINTH DISTRICT John. T Bullock TENTH DISTRICT Edward Reisinger

ELEVENTH DISTRICT Eric T. Costello

TWELFTH DISTRICT Robert Stokes, Sr.

THIRTEENTH DISTRICT Shannon Sneed

FOURTEENTH DISTRICT Mary Pat Clarke

II

City of Baltimore Comprehensive Annual Financial Report

Year Ended June 30, 2017

TABLE OF CONTENTS

INTRODUCTORY SECTION (UNAUDITED)

Page

Title Page ......................................................................................................................................................................... I Elected Officials..........................................................................................................................................................................................II Table of Contents ............................................................................................................................................................ III Letter of Transmittal ...............................................................................................................................................................VII Municipal Organization Chart ............................................................................................................................................... XX

FINANCIAL SECTION

Report of Independent Public Accountants .......................................................................................................................1 Management's Discussion and Analysis ............................................................................................................................4 Basic Financial Statements:

Government-wide Financial Statements: Statement of Net Position ..................................................................................................................................17 Statement of Activities ......................................................................................................................................18

Fund Financial Statements: Balance Sheet - Government Funds ...........................................................................................................................19 Statements of Revenue, Expenditures and Changes in Fund Balances - Governmental Funds ...................................20 Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities ........................................................................21 Statement of Net Position - Proprietary Funds ..........................................................................................................22 Statement of Revenues, Expenses, and Changes in Net Position ? Proprietary Funds............................................... 23 Statement of Cash Flows - Proprietary Funds ............................................................................................................24 Statement of Fiduciary Net Position - Fiduciary Funds .............................................................................................25 Statement of Changes in Fiduciary Net Position - Pension and OPEB Trust Funds ...................................................26

Index to the Notes to Basic Financial Statements ..........................................................................................................27 Notes to the Basic Financial Statements ....................................................................................................................28

Required Supplementary Information Schedule of Revenues, Expenditures and Encumbrances, and Changes in Fund Balances ? Budget and Actual - Budgetary Basis - General Fund ................................................................................................. 88 Schedule of the City's Proportionate Share of Net Pension Liability ERS Plan..........................................................89 Schedule of Employer Contributions - ERS Plan.......................................................................................................89 Schedule of the City's Proportionate Share of Net Pension Liability Maryland State Retirement and Pension System ? LEOPS ..................................................................................................................................... 89 Schedule of Employer Contributions Maryland State Retirement and Pension System-LEOPS.................................89 Schedule of the City's Proportionate Share of Net Pension Liability Maryland State Retirement and Pension System ? ERPS.................................................................................................................................90 Schedule of Employer Contributions Maryland State Retirement and Pension System-ERPS ...................................90 Schedule of the City's Proportionate Share of Net Pension Liability Maryland State Retirement and Pension System ? JRS .......................................................................................................................................... 90 Schedule of Employer Contributions Maryland State Retirement and Pension System-JRS ......................................90

III

Page Schedule of Changes in Net Pension Liability (Assets) and Related Ratios -

Fire and Police Employees' Retirement System - Single Employer Plan......................................................................91 Schedule of Changes in Net Pension Liability (Assets) and Related Ratios -

Elected Officials' Retirement System - Single Employer Plan .....................................................................................91 Schedule of Employer Contributions - Single Employer Plans ..................................................................................92 Schedule of Funding Progress - OPEB Trust Funds...................................................................................................93 Schedule of Employer Contributions - OPEB Trust Funds ........................................................................................93 Schedule of Changes in the Net OPEB Liabilities and Related Ratios .......................................................................94 Schedule of Net OPEB Liability History ...................................................................................................................94 Notes to the Required Supplementary Information .........................................................................................................95 Combining and Individual Fund Statements and Schedule: Combining Balance Sheet - Nonmajor Governmental Funds ...................................................................................100 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances -

Nonmajor Governmental Funds .................................................................................................................................101 Combining Statement of Net Position - Nonmajor Proprietary Funds......................................................................104 Combining Statement of Revenues, Expenditures, and Changes in Net Position -

Nonmajor Proprietary Funds ......................................................................................................................................105 Combining Statement of Cash Flows - Nonmajor Proprietary Funds .......................................................................106 Combining Statement in Net Position - Internal Service Funds ...............................................................................108 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position -

Internal Service Funds................................................................................................................................................109 Combining Statement in Cash Flows - Internal Service Funds ................................................................................110 Combining Statement of Fiduciary Net Position - Pension Trust Funds ..................................................................113 Combining Statement of Changes in Fiduciary Net Position - Pension Trust Funds ................................................114 Combining Statement of Assets and Liabilities - Agency Funds..............................................................................115 Combining Statement of Changes in Assets and Liabilities - Agency Funds ...........................................................116

STATISTICAL SECTION (UNAUDITED)

Financial Trends ...........................................................................................................................................................122 Net Position by Component, Last Ten Fiscal Years ...................................................................................................124 Changes in Net Position, Last Ten Fiscal Years.........................................................................................................126 Fund Balances, Governmental Funds, Last Ten Fiscal Years.....................................................................................126 Changes in Fund Balances, Governmental Funds, Last Ten Fiscal Years ..................................................................127

Revenue Capacity.........................................................................................................................................................128 Property Tax Levies and Collections, Last Ten Fiscal Years .....................................................................................130 Assessed and Estimated Actual Value of Taxable Property, Last Ten Fiscal Years ...................................................130 Direct and Overlapping Property Tax Rates, Last Ten Fiscal Years...........................................................................131 Principal Property Taxpayers, Current Year and Nine Years Ago .............................................................................131

Debt Capacity...............................................................................................................................................................132 Ratios of Outstanding Debt by Type, Primary Government, Last Ten Fiscal Years...................................................134 Ratios of General Bonded Debt Outstanding, Last Ten Fiscal Years .........................................................................135 Direct and Overlapping Governmental Activities Debt..............................................................................................136 Legal Debt Margin Information .................................................................................................................................136 Pledged Revenue Coverage, Last Ten Fiscal Years....................................................................................................136

Demographic and Economic Information .....................................................................................................................138 Demographic and Economic Statistics, Last Ten Calendar Years ..............................................................................140 Principal Employers, Current Year and Nine Years Ago ...........................................................................................141

Operating Information ..................................................................................................................................................142 Full Time Equivalent Employees by Function, Last Ten Years .................................................................................144 Operating Indicators by Function/Program, Last Ten Fiscal Years ............................................................................145 Capital Asset Statistics by Function/Program, Last Ten Fiscal Years ........................................................................146

IV

INTRODUCTORY SECTION

Letter of Transmittal Municipal Organization Chart

(THIS PAGE INTENTIONALLY LEFT BLANK)

CITY OF BALTIMORE Catherine E. Pugh, Mayor

DEPARTMENT OF FINANCE

HENRY J. RAYMOND, Director 454 City Hall Baltimore, Maryland 21202

Honorable President and Members of The Board of Estimates City of Baltimore, Maryland

December 22, 2017

In compliance with Article VII, Section 8, of the revised City Charter (November, 1964), submitted herewith is the Comprehensive Annual Financial Report (CAFR) of the City of Baltimore, Maryland, (the City) for the year ended June 30, 2017. The CAFR was prepared by the City's Department of Finance. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. We believe that the data, as presented, is accurate in all material aspects; that it is presented in a manner designed to fairly set forth the financial position and changes in financial position of the City; and, that all disclosures necessary to enable the reader to gain the maximum understanding of the City's financial affairs have been provided.

The CAFR is presented in three sections: introductory, financial, and statistical. The introductory section includes this transmittal letter and the City's organizational chart. The financial section includes the independent accountants' opinion, management's discussion and analysis, basic financial statements with related notes, and required supplementary information with related notes. The financial section also includes the combining and individual fund financial statements and schedules. The statistical section includes selected financial and demographic information, generally presented on a multi-year basis.

Management has provided a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of a Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the 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 in the financial section of the CAFR.

The City Charter established a Department of Audits under the general supervision of the City Comptroller. The Charter requires the City Auditor to "annually make a general comprehensive public report of the financial position of the City; in the discretion of the Comptroller, such report may be in the form of an opinion on the annual financial statements prepared by the Director of Finance." The Comptroller has elected to have the City Auditor render an opinion as to the fairness of the Director of Finance's presentation of the City's basic financial statements. Additionally, the Board of Estimates awarded a contract to the nationally recognized independent certified public accounting firm, SB & Company, LLC, to perform a joint audit with the City Auditor of the basic financial statements of the City as of and for the year ended June 30, 2017. Their joint audit report is contained herein. Their audit was conducted in accordance with auditing standards generally accepted in the United States and, for the basic financial statements of the City, the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. On the basis of this examination, the independent public accountants have issued an unmodified opinion that the presentation of the basic financial statements conforms with accounting principles generally accepted in the United States. In conducting the audit, the auditors performed tests of the accounting records and such other procedures as were considered necessary in the circumstances to provide a reasonable basis for this opinion on the financial statements. The auditors also assessed the accounting principles used and significant estimates made by management, as well as evaluated the overall financial statement presentation.

The independent audit of the City's financial statements is part of a broader, federally mandated Uniform Grant Guidance "Single Audit" designed to meet the special needs of Federal grantor agencies. This audit is being conducted by the City Auditor, and the Single Audit Report will be available as a separate document as of a later date.

This report includes all of the funds that we consider to be part of, controlled by or dependent on the City. Professional judgment must be used to determine whether or not a potential component unit should be included in the reporting entity. Various potential component units were evaluated to determine whether they should be reported in the City's CAFR. Three component units, the Baltimore Industrial Development Authority (blended component unit), the Baltimore City Public School System and the Baltimore Hotel Corporation (discretely presented component units), were considered to be part of the City's reporting entity when it was concluded that the City was financially accountable for these entities. The Housing Authority of Baltimore City and certain other organizations are not considered to be component units and are not included in the City's basic financial statements.

VII

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