This Preliminary Official Statement and the information contained herein are subject to change, completion and amendment with out notice. The 2013B Bonds may not be sold nor may an offer
to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation
of an offer to buy, nor shall there be any sale of the 2013B Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the
securities laws of such jurisdiction.
PRELIMINARY OFFICIAL STATEMENT DATED AUGUST 14, 2013
Ratings:
Moody's: "Aaa"
S&P: "AAA"
Fitch: "AAA"
(See "Ratings" herein)
NEW ISSUE—Book-Entry Only
This Official Statement has been prepared by the Local Government Commission of North Carolina and the City of
Charlotte, North Carolina to provide information in connection with the sale and issuance of the 2013B Bonds
described herein. Selected information is presented on this cover page for the convenience of the user. To make an
informed decision regarding the 2013B Bonds, a prospective investor should read this Official Statement in its
entirety. Unless indicated, capitalized terms used on this cover page have the meanings given in this Official
Statement.
$103,290,000*
City of Charlotte, North Carolina
General Obligation Refunding Bonds, Series 2013B
Due: As shown on inside cover page
Dated: Date of Delivery
Tax Treatment
In the opinion of Parker Poe Adams & Bernstein LLP, Bond Counsel, under
existing law (1) assuming compliance by the City with certain provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), interest on the 2013B
Bonds (a) is excludable from gross income for federal income tax purposes and
(b) is not an item of tax preference for purposes of the federal alternative
minimum tax imposed on individuals and corporations, and (2) interest on the
2013B Bonds is exempt from State of North Carolina income taxation. See
"TAX TREATMENT" herein.
Redemption
The 2013B Bonds are subject to optional redemption prior to their
maturities at the times and prices set forth herein.
Security
The 2013B Bonds constitute general obligations of the City, secured by
a pledge of the faith and credit and taxing power of the City.
Interest Payment Dates
January 1 and July 1, commencing January 1, 2014.
Denominations
$5,000 or any integral multiple thereof.
Expected Closing/Settlement on or
about
September 5, 2013.
Bond Counsel
Parker Poe Adams & Bernstein LLP.
Underwriters' Counsel
McGuireWoods LLP.
Financial Advisor
DEC Associates, Inc.
Wells Fargo Securities
BofA Merrill Lynch
The date of this Official Statement is August __, 2013.
*Preliminary, Subject to Change.
MATURITY SCHEDULE*
$103,290,000 2013B Bonds
Maturity Date
January 1, 2014
July 1, 2014
July 1, 2015
July 1, 2016
July 1, 2017
July 1, 2018
July 1, 2019
July 1, 2020
July 1, 2021
July 1, 2022
July 1, 2023
July 1, 2024
July 1, 2025
July 1, 2026
July 1, 2027
July 1, 2028
July 1, 2029
*Preliminary, Subject to Change.
Amount
$5,860,000
9,630,000
7,070,000
8,490,000
9,065,000
6,915,000
7,315,000
4,030,000
4,260,000
4,505,000
4,765,000
5,035,000
5,310,000
5,610,000
5,920,000
6,240,000
3,270,000
Rate
Yield
CITY OF CHARLOTTE, NORTH CAROLINA
_______________
City Council
Patsy Kinsey ......................................................................................................................................... Mayor
Patrick Cannon ...................................................................................................................... Mayor Pro Tem
John Autry
Michael Barnes
Warren Cooksey
Andy Dulin
Claire Green Fallon
David Howard
Billy Maddalon
LaWana Mayfield
James Mitchell, Jr.
Beth Pickering
_______________
City Staff
Ron Carlee .................................................................................................................................City Manager
Greg C. Gaskins ........................................................................................................ Chief Financial Officer
Robert E. Hagemann, Esq. ........................................................................................................City Attorney
_______________
Financial Advisor
DEC Associates, Inc.
Charlotte, North Carolina
_______________
Bond Counsel
Parker Poe Adams & Bernstein LLP
Charlotte, North Carolina
IN CONNECTION WITH THIS OFFERING , THE UNDERWRITERS (AS DEFINED HEREIN) MAY OVERALLOT OR
EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2013B BONDS AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET , AND SUCH STABILIZING , IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME .
No dealer, broker, salesman or other person has been authorized to give any information or to make
any representation in connection with this offering other than as contained in this Official Statement, and, if
given or made, such other information or representation must not be relied upon. This Official Statement does
not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of the 2013B
Bonds by any person, in any jurisdiction in which it is not lawful for such person to make such offer,
solicitation or sale. The information set forth herein has been obtained from the City and from other sources
that are deemed to be reliable, but is not guaranteed as to accuracy or completeness by the Underwriters, and is
not to be construed as a representation by the Underwriters.
The electronic distribution of this Official Statement does not constitute an offer to sell or the
solicitation of an offer to buy the 2013B Bonds described herein to the residents of any particular state and is
not specifically directed to the residents of any particular state. The 2013B Bonds will not be offered or sold in
any state unless and until they are either registered pursuant to the laws of such state, or qualified pursuant to
an appropriate exemption from registration in such state.
The information set forth herein has been obtained from sources which are believed to be reliable and
is in form deemed final by the City for the purpose of Rule 15c2-12 under the Securities Exchange Act of
1934, as amended (except for certain information permitted to be omitted under Rule 15c2-12(b)(1)).
Neither the 2013B Bonds nor the Bond Resolution (as hereinafter defined) has been registered or
qualified with the Securities and Exchange Commission by reason of the provisions of Section 3(a)(2) of the
Securities Act of 1933, as amended, and Section 304(a)(4) of the Trust Indenture Act of 1939, as amended.
The registration or qualification of the 2013B Bonds and the Bond Resolution in accordance with applicable
provisions of securities laws of the states in which the 2013B Bonds and the Bond Resolution have been
registered or qualified, and the exemption from registration or qualification in other states, will not be regarded
as a recommendation thereof.
In making an investment decision investors must rely on their own examination of the terms of the
offering, including the merits and risks involved. These securities have not been recommended by any federal
or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not
confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a
criminal offense.
All quotations from and summaries and explanations of laws and documents herein do not purport to
be complete, and reference is made to such laws and documents for full and complete statements of their
provisions. Any statements made in this Official Statement involving estimates or matters of opinion, whether
or not expressly so stated, are intended merely as estimates or opinions and not as representations of fact. The
information and expressions of opinion herein are subject to change without notice, and neither the delivery of
this Official Statement nor any sale of the 2013B Bonds will under any circumstances create any implication
that there has been no change in the affairs of the City since the date hereof.
The Underwriters have provided the following sentence for inclusion in this Official Statement. The
Underwriters have reviewed the information in this Official Statement in accordance with, and as a part of,
their respective responsibilities to investors under the federal securities laws as applied to the facts and
circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such
information.
References to web site addresses presented herein are for informational purposes only and may be in
the form of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such web sites and the
information or links contained therein are not incorporated into, and are not part of, this offering document for
purposes of, and as that term is defined in, Rule 15c2-12 (as hereinafter defined).
TABLE OF CONTENTS
Page
INTRODUCTION ....................................................................................................................................... 1
THE LOCAL GOVERNMENT COMMISSION OF NORTH CAROLINA ............................................. 1
THE BONDS ............................................................................................................................................... 1
Description ..................................................................................................................................... 1
Redemption Provisions................................................................................................................... 2
Authorization and Purposes ............................................................................................................ 2
Security........................................................................................................................................... 2
Professionals ................................................................................................................................... 3
THE PLAN OF REFUNDING .................................................................................................................... 3
ESTIMATED SOURCES AND USES OF FUNDS ................................................................................... 3
THE CITY ................................................................................................................................................... 3
General Description and Demographic Characteristics.................................................................. 3
Business and Economic Profile ...................................................................................................... 4
Development Activity .................................................................................................................. 12
Development Beyond Downtown ................................................................................................ 14
Labor Force and Unemployment .................................................................................................. 15
Government and Major Services .................................................................................................. 16
Debt Information .......................................................................................................................... 18
Debt Ratios ................................................................................................................................... 21
General Obligation Debt Service Requirements as of June 30, 2013........................................... 22
Tax Information ............................................................................................................................ 27
Budget Commentary and Outlook ................................................................................................ 29
Pension Plans ................................................................................................................................ 29
Health and Life Benefits ............................................................................................................... 30
Other Post-Employment Benefits ................................................................................................. 30
Contingent Liabilities ................................................................................................................... 31
Financial Information ................................................................................................................... 31
CONTINUING DISCLOSURE ................................................................................................................ 32
APPROVAL OF LEGAL PROCEEDINGS ............................................................................................. 34
RATINGS .................................................................................................................................................. 34
TAX TREATMENT .................................................................................................................................. 34
General ......................................................................................................................................... 34
Original Issue Discount ................................................................................................................ 36
Original Issue Premium ................................................................................................................ 37
FINANCIAL ADVISOR ........................................................................................................................... 37
UNDERWRITING .................................................................................................................................... 37
RELATED PARTIES ................................................................................................................................ 38
MISCELLANEOUS .................................................................................................................................. 38
Appendices
A — The North Carolina Local Government Commission
B — Certain Constitutional, Statutory, and Administrative Provisions Governing or Relevant to the
Incurrence of General Obligation Bonded Indebtedness by Units of Local Government of the
State of North Carolina
C — Management Discussion and Analysis
D — Financial Information
E — Proposed Form of Legal Opinion
F — Book Entry System
-i-
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State of North Carolina
Department of State Treasurer
State and Local Government Finance Division
and the Local Government Commission
JANET COWELL
TREASURER
T. VANCE HOLLOMAN
DEPUTY TREASURER
INTRODUCTION
This Official Statement, including the cover page and the appendices hereto, is intended to
furnish information in connection with the public invitation for bids for the purchase of $103,290,000*
General Obligation Refunding Bonds, Series 2013B (the "2013B Bonds") of the City of Charlotte, North
Carolina (the "City").
The information furnished herein includes a brief description of the City and its economic
condition, government, debt management, tax structure, financial operations, budget, pension plans and
contingent liabilities. The City has assisted the Local Government Commission in gathering and
assembling the information contained herein.
This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy
any securities other than the 2013B Bonds offered hereby, nor shall there be any offer or solicitation of
such offer or sale of the 2013B Bonds in any jurisdiction in which it is unlawful for such person to make
such offer, solicitation or sale. Neither the delivery of this Official Statement nor the sale of any of the
2013B Bonds implies that the information herein is correct as of any date subsequent to the date hereof.
The information contained herein is subject to change after the date of this Official Statement, and this
Official Statement speaks only as of its date.
The Underwriters have provided the following sentence for inclusion in this Official Statement.
The Underwriters have reviewed the information in this Official Statement in accordance with, and as part
of, their respective responsibilities to investors under the federal securities laws as applied to the facts and
circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of
such information.
THE LOCAL GOVERNMENT COMMISSION OF NORTH CAROLINA
The Local Government Commission of North Carolina (the "Commission"), a division of the
Department of State Treasurer, State of North Carolina (the "State"), is a State agency that supervises the
issuance of the bonded indebtedness of all units of local government and assists these units in the area of
fiscal management. Appendix A to this Official Statement contains additional information concerning the
Commission and its functions.
THE BONDS
DESCRIPTION
The 2013B Bonds will be dated as of their date of delivery and will bear interest from their date.
Interest on the 2013B Bonds will be payable semiannually on each January 1 and July 1, commencing
January 1, 2014. The 2013B Bonds will mature, subject to the optional redemption provisions set forth
below, on the dates set forth on the inside cover page of this Official Statement. The record date for the
2013B Bonds will be the fifteenth day of the month preceding each interest payment date.
*Preliminary, Subject to Change.
The 2013B Bonds will be issuable as fully registered bonds in a book-entry system maintained by
The Depository Trust Company ("DTC"). DTC will act as securities depository for the 2013B Bonds.
Purchases and transfers of the 2013B Bonds may be made only in denominations of $5,000 and in
accordance with the practices and procedures of DTC. See Appendix F hereto for a description of the
book-entry system and DTC.
REDEMPTION PROVISIONS
Optional Redemption. The 2013B Bonds maturing on or before July 1, 20__ are not subject to
redemption before their maturities. The 2013B Bonds maturing on or after July 1, 20__ are subject to
redemption before their maturities, at the option of the City, from any money that may be made available
for such purpose, either in whole or in part on any date on or after July 1, 20__, at a redemption price
equal to 100% of the principal amount of the 2013B Bonds to be redeemed, together with interest accrued
thereon to the date fixed for redemption, without premium.
If less than all of the 2013B Bonds are called for redemption, the City will select the maturity or
maturities of the 2013B Bonds to be redeemed in such manner as the City in its discretion may determine
and DTC and its participants will determine which of the 2013B Bonds within a maturity are to be
redeemed by lot; provided, however, that the portion of any Bond to be redeemed will be in the principal
amount of $5,000 or integral multiples thereof and that, in selecting Bonds for redemption, each Bond is
to be considered as representing that number of Bonds which is obtained by dividing the principal amount
of such Bond by $5,000.
Notice of redemption will be given by the City, not less than 30 days nor more than 60 days
before the redemption date by certified or registered United States mail to DTC (or by such other means
as may be permitted by DTC's rules and procedures), but any failure or defect in respect of such mailing
will not affect the validity of the redemption. The City will not be responsible for sending or mailing
notices of redemption to anyone other than DTC, its nominee or another securities depository unless there
is no qualified securities depository acting as the registered owner of the 2013B Bonds.
AUTHORIZATION AND PURPOSES
The 2013B Bonds are being issued pursuant to the provisions of The Local Government Bond
Act, as amended, Article 7, as amended, of Chapter 159 of the General Statutes of North Carolina. The
2013B Bonds are to be issued pursuant to the bond order adopted on July 22, 2013 by the City Council of
the City (the "City Council"). Terms of the 2013B Bonds were established in the resolution duly adopted
by the City Council on July 22, 2013 (the "Bond Resolution").
The 2013B Bonds are being issued to provide funds to (1) refund in advance of their maturities
(a) the City's $100,000,000 General Obligation Bonds, Series 2003A, (the "2003A Bonds"), of which
$76,425,000 is currently outstanding; (b) the City's $42,560,000 General Obligation Refunding Bonds,
Series 2003B (the "2003B Bonds"), of which $11,625,000 is currently outstanding; and (c) the City's
$58,720,000 General Obligation Refunding Bonds, Series 2003C (the "2003C Bonds" and together with
the 2003A Bonds and the 2003B Bonds, the "Refunded Bonds"), of which $25,995,000 is currently
outstanding and (2) pay the costs of issuing the 2013B Bonds.
SECURITY
The City is authorized and required by law to levy on all property taxable by the City such ad
valorem taxes, without limitation as to rate or amount, as may be necessary to pay the 2013B Bonds and
the interest thereon.
2
PROFESSIONALS
Wells Fargo Securities and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Underwriters") are underwriting the 2013B Bonds. DEC Associates, Inc., Charlotte, North Carolina is
serving as Financial Advisor to the City. Parker Poe Adams & Bernstein LLP, Charlotte, North Carolina,
is serving as Bond Counsel to the City. McGuireWoods LLP, Charlotte, North Carolina, is serving as
counsel to the Underwriters. Robert E. Hagemann, Esq., Charlotte, North Carolina, is City Attorney.
THE PLAN OF REFUNDING
Proceeds of the 2013B Bonds will be used to (1) refund in advance of their maturities the
Refunded Bonds and (2) pay the costs of issuing the 2013B Bonds. The Refunded Bonds will be called
for redemption on the date the 2013B Bonds are issued at a price equal to 100% of the outstanding
principal amount of the Refunded Bonds, plus accrued interest to the date of redemption.
ESTIMATED SOURCES AND USES OF FUNDS
The following table presents estimated information as to sources and uses of funds and the plan of
finance:
Sources of Funds:
Par Amount of Bonds
Total
Uses of Funds:
Refunding of the Refunded Bonds
Costs of Issuance1
Total
1
Includes various professional fees, other financing costs and underwriters' discount.
THE CITY
GENERAL DESCRIPTION AND DEMOGRAPHIC CHARACTERISTICS
The City, a municipal corporation of the State located in the County of Mecklenburg (the
"County"), is the largest city between Washington, D.C. and Atlanta. The City was incorporated in 1768,
became the County seat in 1774, and has grown from an initial 360 acres to a present area covering 299
square miles of the 527 square-mile County.
The City has experienced steady population growth over the past several decades. The Charlotte
Chamber of Commerce estimated the City's population to be 772,627 in 2012. The United States Census
Bureau ranked the City as the 9th fastest-growing City in the nation from April 1, 2010 to July 1, 2011 and
has recorded the population as follows:
1990
395,934
2000
540,828
2010
731,424
On June 18, 2013, Forbes.com ranked the City as the 4 th fastest growing city in the United States
in its list of fastest growing cities in the United States since the recession (after 2007).
3
As of 2012, the City is the core of the Charlotte-Gastonia-Salisbury Combined Statistical Area
(the "CSA"), a region of over 2.5 million people (representing an average annual growth rate in population
of 1.98% since 2007) that includes the Charlotte-Gastonia-Concord metropolitan area and seven
micropolitan areas – Albemarle, Mooresville, Salisbury, Shelby and Lincolnton, North Carolina and
Lancaster and Chester, South Carolina. The combination of population growth and location reinforces the
City's role as a regional center in the Southeast.
BUSINESS AND ECONOMIC PROFILE
The City serves as the financial, healthcare, energy, education, distribution, transportation and
manufacturing center of the CSA and is one of the South's leading commercial and industrial areas. The
City is also at the center of the nation's 6th largest urban region.
The City and County are important locations for regional headquarters of major national and
international companies. A number of national corporations have selected the City and County for
establishment of sales offices, division headquarters, research and development facilities and other
administrative units. Fortune magazine's 2013 Fortune 500 list indicated that six of the nation's "Fortune
500" companies are headquartered in the County.
The types of businesses located in the County are illustrated by the following table:
Rank
1
2
3
4
5
6
7
8
Classification
Services
Construction
Wholesale Trade
Manufacturing
Finance, Insurance, Real Estate
Retail Trade
Transportation, Communication, Utilities
Other
Total
Number of companies with
sales of at least $1 Million
located in the County
1,639
629
592
455
345
345
205
17
4,277
____________
Source: Dun and Bradstreet's "Million Dollar Directory" for 2012.
The largest employers in the Charlotte Region (defined by the Charlotte Chamber of Commerce
to include the County and the 15 surrounding counties) are shown by employment ranges in the following
table:
20,000 to 29,999
Employees
Carolinas HealthCare System*
Wells Fargo Corporation*
10,000 to 15,999
Employees
Bank of America Corporation*
Charlotte-Mecklenburg Schools*
Wal-Mart & Sam's Clubs
5,000 to 9,999
Employees
Adecco Staffing
City of Charlotte*
Duke Energy Corporation & Duke Capital LLC*
Food Lion, Inc.*
Lowe's*
North Carolina State Government
4
Novant Health Presbyterian Medical Center*
US Airways
U.S. Postal Service
3,000-4,999
AT&T North Carolina*
Compass Group*
Daimler Trucks North America LLC/MFG
Harris Teeter*1
Lowes Foods, Merchants Distributors Inc., Institution Food House
Inc., Consolidation Services*
Mecklenburg County*
The University of North Carolina at Charlotte*
US Government
1,500 to 2,999
Employees
BB&T*
Belk Inc.*
Best Western
Bi-Lo LLC
Bojangles' Famous Chicken 'N Biscuits*
Burger King
Carowinds
Catawba Valley Medical Center
Central Piedmont Community College
Chick-Fil-A
Chili's Grill & Bar and Maggiano's Little Italy
Commscope*
CVS Caremark
Family Dollar Stores Inc.*
Fedex Freight; Ground; Air and Office
Frye Regional Medical Center
Hickory Springs Manufacturing Co*
Hilton, Doubletree and Embassy Suites
Home Depot Inc.
IBM Corp.
Ingersoll-Rand Co.
Invista
Iredell Memorial Hospital
JC Penney Corp. Inc.
Labor Ready Inc.
Marriott, Courtyard, Renaissance and Fairfield
McDonald's
Parkdale Mills Inc.*
Pharr Yarns LLC*
Piedmont Medical Center
Pizza Hut, Taco Bell, Kentucky Fried Chicken, Long John Silvers
and A&W Restaurants
Red Lobster, Olive Garden, Long Horn Steakhouse and
Capital Grille
Rite Aid Corp
Robert Half International; Robert Half Technology
Ross Dress for Less
Rowan Regional Medical Center*
5
Schaeffler Group
Snyder's-Lance Inc.*
Subway
Target Stores
TIAA-CREF
Time Warner Cable
Tyson Foods
United Parcel Service/Freight
Wendy's – Carolina Rest Group Inc.*
WG (Bill) Hefner Veterans Affairs Medical Center
Windstream Communications
YMCA of Greater Charlotte*
_____________________________
*Principal office is located in the Charlotte Region.
1
On July 9, 2013, The Kroger Co. and Harris Teeter announced a definitive merger agreement in which The Kroger
Co. will acquire all of the outstanding shares of Harris Teeter common stock. Harris Teeter shareholders filed a suit
on July18, 2013 to block the purchase.
Source: Charlotte Chamber of Commerce.
Retail taxable sales for the Fiscal Years 2008 through 2012 for the County and for the first eleven
months of Fiscal Year 2013 are shown in the following table:
Fiscal Year
Ended
June 30
2008
2009
2010
2011
2012
2013 (11 months)*
____________
Total
Taxable Sales
$14,178,740,492
12,476,582,833
12,728,091,544
13,689,815,041
14,853,835,526
14,246,507,211
Increase (Decrease) Over
Previous Year
- %
(12.0)
2.0
8.0
9.0
N/A
Source: North Carolina Department of Revenue, Sales and Use Tax Division.
*Corresponding number for the first eleven months of Fiscal Year 2012 was $13,588,521,382.
Finance. The City continues to be the second largest financial center in the United States,
serving as headquarters for financial institutions with assets of approximately $2.2 trillion. The City's
continued success as a leading financial center in the Southeast can be attributed to multiple factors.
Among the most important factors are certain State laws permitting branch banking and the location of a
branch of the Federal Reserve Bank in the City. Approximately thirty banks operate in the County.
The City is headquarters for Bank of America Corporation. Bank of America Corporation, with
approximately $2.17 trillion in assets as of March 30, 2013, is the parent company of Bank of America,
National Association, the 2nd largest commercial bank in the United States. Bank of America Corporation
is the third largest employer in the Charlotte Region with approximately 15,000 employees as of
March 31, 2013.
Wells Fargo & Co., with approximately $1.44 trillion in assets as of March 31, 2013, is the parent
company of Wells Fargo Bank, National Association, the 4 th largest commercial bank in the United
States. Wells Fargo & Co. is the second largest employer in the Charlotte Region with over 20,000
employees as of December 31, 2011.
6
U.S. Bancorp, with $355 billion in assets as of March 31, 2013, is the parent company of U.S.
Bank National Association, the 5th largest commercial bank in the United States. U.S. Bank opened its
corporate trust office in the City in 2006 and has added additional employees in the past seven years,
primarily through the additions of wholesale banking, Elavon payment services, commercial real estate,
credit administration and high grade fixed income trading groups.
Fifth Third Bank completed its acquisition of First Charter Bank in 2008 and moved its North
Carolina corporate headquarters to the City's downtown in 2010. Fifth Third Bank has added health-care
lending teams, capital markets teams and international banking units in the City. It currently ranks as the
fourth largest bank in the City.
BB&T Corporation ("BB&T"), with $180 billion in assets as of March 31, 2013, is the parent
company of Branch Banking & Trust Company, the 16 th largest commercial bank in the United States.
BB&T has been expanding its presence in the City and now has over 1,500 employees and the naming
rights for the Baseball Stadium (as hereinafter defined).
Ally Bank expanded its corporate presence in the City with the addition of approximately 200 net
new jobs. In addition, Advisors Asset Management Inc. is doubling its office space in SouthPark and
hopes to double its number of local employees as well.
Citco Fund Services Inc., a financial services company that works closely with hedge funds, has
established a presence in the City and hopes to grow to approximately 250 jobs in North Carolina.
Healthcare. The City is one of the leading medical centers in the southern United States. The
two major acute care hospitals in the City, Carolinas HealthCare System ("CHS") and Novant Health,
Inc., account for nearly 2,500 hospital beds.
CHS is one of the five largest public hospital systems in the country. CHS operates 33 hospitals
including four acute care hospitals, including Carolinas Medical Center, an inpatient behavioral health
hospital and a rehabilitation hospital in the County. In addition, CHS operates the James G. Cannon
Research Center, providing a central research facility for basic and clinical medicine. In October 2007,
CHS opened the Levine Children's Hospital, the largest children's hospital between Atlanta and
Washington, D.C. The Levine Children's Hospital was named one of the best children's hospitals in
America for kidney disorders by US News and World Report for 2011-2012.
CHS opened the Levine Cancer Institute, an oncology center to be used to provide communitybased cancer care across the Carolinas, in March 2011. The Levine Cancer Institute will increase access
to the hospitals owned or managed by CHS to cancer specialists, treatment, research and support services
for patients living in smaller communities. In addition, in October 2010, the University of North Carolina
formally designated Carolinas Medical Center as the Charlotte campus of the UNC School of Medicine.
Carolinas Medical Center plans to increase enrollment over the next few years to several dozen third and
fourth year students at the Carolinas Medical Center campus.
Novant Health, Inc. has five hospital facilities and a network of primary care and specialty
physicians within the City. Novant Health Presbyterian Medical Center houses the Center for Women's
Health, which includes the most active maternity center in the City, the 72-bed Hemby Children's
Hospital and the Belk Heart Center. Novant Health Presbyterian Medical Center also houses the Center
for Surgery, which performs more surgeries in the State than any other hospital specializing in same-day
service.
Premier, Inc., a global health care company, is moving its headquarters to the City and will be
adding approximately 300 new jobs over the next three to five years.
7
The medical facilities located in the County and their respective licensed bed capacities as of
April 2013 the latest data available, are shown below:
Hospital
Licensed Beds
Carolinas Medical Center1
Novant Health Presbyterian Medical Center2
Carolinas Medical Center Pineville1
Levine Children's Hospital1
Carolinas Medical Center – Mercy1
Novant Health Charlotte Orthopaedic Hospital 2
Carolinas Rehabilitation1
Novant Health Matthews Medical Center2
Carolinas Medical Center - University1
Novant Health Huntersville Medical Center2
Behavioral Health Center-CMC Randolph1
Carolinas Specialty Hospital3
Behavioral Health Center-CMC Mercy Horizons1
____________
629
622
206
198
162
156
129
117
108
75
66
40
11
1
Managed by Carolinas HealthCare System.
Managed by Novant Health, Inc.
3
Managed by Acuity Healthcare.
Source: Charlotte Chamber of Commerce.
2
Energy. Energy firms represent a large and growing component of the City's economy. The
presence of Duke Energy, Fluor Corporation, Siemens Energy, Chicago Bridge and Iron Company
("CBI") and over 110 highly specific "energy cluster" firms combine to create an energy hub in the City.
Duke Energy, the largest regulated U.S. utility, is based in the City. E4 Carolinas, a nonprofit
corporation, has been formed to spearhead an energy initiative previously undertaken by the Charlotte
Regional Partnership. E4 Carolinas' name reflects its intended focus on energy, economy, environment
and efficiency.
The City has become a growing center for engineering and design in the energy industry with the
presence of firms such as AREVA NP, Fluor, Parsons Corporation, Pike Energy Solutions, Siemens, CBI,
Toshiba, Westinghouse and URS. AREVA NP, a leader in the design and construction of nuclear power
plants and research reactors, has approximately 630 employees in the City. Fluor Corporation is an
engineering firm that services power plants. Parsons Corporation provides technical, engineering,
construction and management support to federal, regional, and local government agencies as well as
private industries. Pike Energy Solutions provides engineering, construction and maintenance for
distribution and transmission powerlines and substations, or EPC (Engineering, Procurement and
Construction) for turn-key and renewable energy projects. Siemens Energy completed its $350 million
expansion to its manufacturing plant for turbines and generators. The expansion has already generated
700 jobs, and Siemens currently expects to create 400 more jobs in the City by 2014. CBI purchased the
The Shaw Group, Inc, formerly an international engineering, construction, technology, fabrication,
environmental and industrial services organization whose Shaw Power Group was located in the City, in
February, 2013. Westinghouse Electric opened an engineering office in the City in 2008 which now
employs more than 120 people. In 2009, a nuclear division of Toshiba announced that it would open a
new national project management and engineering center in the City to function as a base for Toshiba's
nuclear power business in the United States. URS Corporation, which provides services for power,
infrastructure, industrial, commercial and federal projects and programs, is located in the City.
8
Other energy companies in the City include: (1) SPX, a Fortune 500 global multi-industry
manufacturing leader with headquarters in the City and operations in more than 20 countries, devises
solutions that are intended to help meet demand for efficient energy use and support the expansion of
global energy infrastructure, (2) CoaLogix, a leading provider of SCR management and catalyst
regeneration technologies, selected the City as its second operations base and has announced plans to
expand its current City workforce of 110 employees by 20% to 50%, (3) Piedmont Natural Gas provides
natural gas services, (4) Celgard, a global leader in the development and production of specialty
microporous membranes, provides a broad portfolio of products in the lithium battery separator industry,
(5) Metso Power provides a full range of services for power and recovery boiler plants and (6) Electric
Power Research Institute, an independent non-profit company, performs research and development in the
electricity sector for the benefit of the public.
Higher Education. The City has a large number of higher education institutions. UNC Charlotte
is the fourth largest institution in The University of North Carolina System. UNC Charlotte's main
campus is over 950 acres approximately eight miles northeast of the City's downtown. Attached to the
main campus is a 100-acre campus created in 2000 called the Charlotte Research Institute. This researchoriented campus focuses on precision metrology and intelligent manufacturing; opto-electronics; and
software and information technology. UNC Charlotte's third campus is located in the City's downtown
where it has constructed a 12-story, approximately 143,000 square-foot building for offices and academic
programs in graduate, professional and continuing education which opened in the fall of 2011.
Central Piedmont Community College ("CPCC") has six campuses (and a Virtual Campus), all in
the Charlotte metropolitan area. CPCC is the largest community college system in North Carolina and
South Carolina. CPCC currently has over 75,000 students on its six campuses and offers a wide
variety of corporate and community education opportunities.
Johnson C. Smith University, founded in 1867, is a private four-year liberal arts institute.
Johnson C. Smith University is an historically African-American university with an approximately 100acre residential campus in the City.
Johnson & Wales University ("Johnson & Wales") consolidated its Norfolk, Virginia and
Charleston, South Carolina campuses and relocated them to an approximately $112 million campus in the
City. Johnson & Wales' campus is located on approximately 6.8 acres in the City's downtown and
includes an approximately 145,000 square-foot academic and administrative building and 2 student
residence facilities. In addition, Johnson & Wales is a minority investor in City View Towers, an eightstory, 145-apartment building for student housing. Johnson & Wales purchased the 187-room Doubletree
Hotel Charlotte at Gateway Village to enhance its hotel management and operations curriculum. Johnson
& Wales's current student population in the City is more than 2,500.
King's College is a small, for-profit career college founded in 1902. Located in the Elizabeth
area, just south of downtown, over half of its students come from the Charlotte area. King's College
awards both diplomas and associate's degrees. King's College's focus is on job placement for its
graduates.
Queens University of Charlotte ("Queens") is a private, coeducational, comprehensive university
with a commitment to both liberal arts and professional studies and is affiliated with the Presbyterian
Church, USA. The main campus of Queens is located in the heart of the historic Myers Park
neighborhood in the City. The 30 acre main campus is approximately two miles outside downtown.
Queens' current student population is approximately 2,600 undergraduate and graduate students.
The Art Institute of Charlotte, one of The Art Institutes, with more than 40 education institutions
located throughout North America, is accredited to offer Bachelor of Arts and Associate of Applied
9
Science degrees as well as Certificates. The Art Institute of Charlotte provides training and education for
careers in the applied arts including design, media arts, fashion and culinary arts.
Other institutions offering undergraduate diplomas or certificates located in the City include:
DeVry University, ECPI College of Technology, ITT Technical Institute, Pfeiffer University – Charlotte
and University of Phoenix – Charlotte.
In addition to undergraduate opportunities, the City also has opportunities for graduate level
studies. UNC Charlotte, Johnson C. Smith University, Pfeiffer University – Charlotte, Queens and
University of Phoenix – Charlotte offer graduate programs including certificates, master's degrees and
doctorate degrees.
Charlotte School of Law opened in 2008 in west Charlotte's Bryant Park Development. The
Charlotte School of Law will relocate to the City's downtown and occupy 10 floors of the Charlotte Plaza
building for the school year beginning Fall 2013.
The University of South Carolina's Darla Moore School of Business offers its Professional Master
of Business Administration degree in the City in west Charlotte's Bryant Park Development. The Darla
Moore School of Business is home to the #1 ranked Master of Business Administration program for
international business at a public university.
Northeastern University has chosen the City for its first physical expansion outside of
Massachusetts. Northeastern University is located in approximately 14,000 square feet on two floors in
the 20-story 101 Independence Center at Trade and Tryon streets, including a street-level presence on the
first floor. Northeastern University currently offers a doctorate program, an MBA degree and master of
science degrees in finance, taxation, project management, sports leadership, education and health
informatics.
Wake Forest University's School of Business has expanded its presence in the City by leasing
approximately 30,000 square feet on the ground floor of the International Trade Center in downtown that
has been renamed the Wake Forest University Charlotte Center.
New Businesses. Notwithstanding the recent economic downturn and its effects on the City's
economy, the Charlotte Chamber of Commerce continues to pursue new investments in various types of
industries including finance, healthcare and energy. According to the Charlotte Chamber of Commerce,
640 firms announced new or expanding operations during the first six months of 2013 creating
approximately 6,999 jobs (3.0 million square feet and $370.4 million investment). The following
companies have recently announced new or expanded business in the City:
ESPN, a global television network focusing on sports-related programming, announced on
May 2, 2013 that the City will be the home of its new SEC Network, which will launch in August 2014.
The SEC Network is expected to create 100 new jobs in the City.
Pactera Technology International, the largest information technology consulting and services firm
in China, announced on April 22, 2013 that it will establish its U.S. headquarters in the City and will add
approximately 200 employees in the next three years.
MetLife Inc., America's largest life insurer, announced in March 2013 that it will establish a hub
for its U.S. retail business in the City. MetLife Inc. anticipates that the new hub will be a $125.5 million
investment in the City and bring approximately 1,300 new jobs by the end of 2015.
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AREVA, a global energy company, announced on March 4, 2013 that it will move its North
American headquarters to the City. AREVA anticipates that the expansion in the City will bring 130 new
energy jobs by 2016.
Convergys, a business process outsourcing global leader in providing customer care, announced
on February 20, 2013, its plans to create more than 1,600 jobs at its two facilities in the City.
Chobani Greek Yogurt announced that the City will serve as home to its North America Sales
Headquarters. Chobani will expand its current sales force from 17 to approximately 60 positions by the
end of 2013.
7-Eleven announced that it has commenced closing on the acquisition of 55 Sam's Mart stores
from Sam's Mart LLC and anticipates adding approximately 120 employees.
Odyssey Logistics & Technology Corporation, a global lead logistics provider, has expanded its
operations in the City, moving to 25,000 square feet of new office space in the City, and currently plans to
add more than 100 new employees in the areas of customer service, operations and logistics management.
XPO Logistics Inc., a trucking and shipping business, opened a North American operations center
in the City in 2012. XPO Logistics currently plans to create approximately 287 new jobs by the end of
2014, bringing the job count to more than 500.
Belk Inc., a national retail department store, announced in December 2012 that it will be adding
150 management-level jobs in Information Technology and e-commerce at its headquarters in the City.
JELD-WEN, inc., a manufacturer of windows and doors, announced in December 2012 that it
will locate its North American headquarters in the City with plans to create 142 jobs in the next two years.
YellowWood Group, LLC, a strategic marketing, consulting, planning and management solutions
firm based in Raleigh, North Carolina, announced in November 2012 that it has chosen the City for its
new sales office and plans to add seven new positions.
Electrolux USA, a home-appliance manufacturer, established its North American corporate
headquarters in the City in 2010. In November 2012, Electrolux USA announced that it will relocate a
laundry-products research center from Iowa to the City, bringing 80 jobs and pushing its employment past
800 in the City.
In October 2012 SunTrust Banks, Inc. announced the opening of a new state-of-the-art sales
center in the City to underwrite and process mortgage loans. SunTrust plans to expand the number of
employees from 40 to 100.
TZ Insurance Solutions LLC announced in September 2012 that it is expanding its workforce
through a new location in the City, creating 125 new jobs with the potential of 250 in the near future.
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The following chart indicates new and expanded business growth in the City:
ANNUAL SUMMARY ANNOUNCED NEW AND EXPANDED BUSINESS
Year
Number of
Firms
Employment
Square Feet
(Millions)
Investment
(Millions)
2008
2009
2010
2011
2012
2013*
1,337
1,029
912
1,089
1,180
257
12,165
15,542
10,781
8,850
9,595
4,627
27.6
11.3
6.4
6.2
6.9
1.8
$2,324.9
1,461.7
1,063.7
669.4
1,252.7
302.1
*Through first quarter 2013. Corresponding numbers for the same period in Fiscal Year 2012 are 285, 2,058, 1.8
and $313.0.
Source: Based on information provided by the Charlotte Chamber of Commerce.
Except where otherwise noted, the statistical data in this "BUSINESS AND ECONOMIC PROFILE"
has been derived from the Charlotte Chamber of Commerce website and City employees.
DEVELOPMENT ACTIVITY
Construction activity in the City and County is illustrated by the following table showing the
number and value of building permits issued by the County Building Inspection Department as reported
by the Chamber of Commerce:
Calendar Year
2008
2009
2010
2011
2012
2013*
Number of
Permits
16,243
11,549
12,968
13,321
15,046
5,211
Value (Millions)
Residential
$1,486.3
669.8
529.3
762.7
1,149.4
435.8
Value (Millions)
Nonresidential
$2,236.8
715.8
719.4
1,173.8
1,259.5
335.0
Total
$3,723.2
1,385.6
1,248.7
1,936.5
2,409.0
770.8
*Through April 2013. Corresponding numbers for the same period in calendar year 2012 are 5,170, $327.8, $536.2
and $864.0.
Source: Based on information provided by the Charlotte Chamber of Commerce.
Since 1984, a County land use planning process has been used to produce policy guidelines for
Charlotte-Mecklenburg as to future growth. The City is currently operating under the 2030 Transit/Land
Use Plan, a long-range plan for Charlotte-Mecklenburg.
The City is currently pursuing a centers and corridors approach to development to accommodate
transit/land use planning and smart growth initiatives. As part of the City's comprehensive land use plan,
infill growth, including infill condominium developments, is being encouraged, particularly in the transit
corridors. Since the South Corridor Light Rail line opened in 2007, over $1.4 billion in new and planned
economic development has occurred along the line, transforming the surrounding areas. On July 18, 2013
the City broke ground on the 9.3 mile extension to the South Corridor Light Rail line which will extend
the line from the City's uptown to UNC Charlotte.
Downtown Development. Significant commercial growth has occurred throughout the City. The
downtown area is home to a number of projects completed over the past decade including: (1) a 19-story
Bank of America office tower which includes adjacent retail shops and an adjacent 800-space parking
12
garage, (2) a 1,600-space parking deck that includes retail space at the street level, (3) renovations to 201
South Tryon Street and the 17-story 200 South Tryon Building, (4) First Ward Place, an approximately
32-acre urban village that is a mixture of residential units, offices, stores and restaurants, (5) the
EpiCentre, an approximately 260,000 square-foot entertainment and retail center located on the City's old
convention center site, (6) a mixed-use project that includes a 146-room Ritz-Carlton hotel and an
approximately 750,000 square-foot 30-story office tower owned and used by Bank of America
Corporation, and (7) the 48-story, LEED-Platinum certified Duke Energy Center at 501 South Tryon
Street. In addition, Skye Condominiums, the 22-story project formerly known as The Park, is currently
under construction as a mixed-use project that will feature condominiums, a 172-room Hyatt Hotel,
ground-floor retail space and an open-air rooftop restaurant.
The Charlotte Knights Triple-A baseball club has broken ground on its approximately 10,000-seat
baseball stadium (the "Baseball Stadium") in the City's downtown. Construction is expected to be
complete in time for the 2014 season. In proximity to the Baseball Stadium, new development is
occurring, including: (1) a 5.4 acre public park named Romare Bearden Park scheduled to open in August
2013 on an adjacent lot and that will feature two gardens, walkways, a courtyard of moveable tables and
chairs, and multiple large grass fields, (2) an approximately 22-story, 352-unit luxury high-rise apartment
complex, which is under construction and scheduled to be completed in the fall of 2014, and (3) an
approximately 7-story, 177-unit luxury apartment complex that is scheduled to be completed in April
2014.
In March 2006, the City was awarded a license by NASCAR to construct and operate a NASCAR
Hall of Fame complex (the "NASCAR Hall of Fame"). The NASCAR Hall of Fame opened in May 2010,
and consists of an approximately 130,000 square-foot museum, an approximately 80,000 square-foot
Great Hall, a ballroom/theater facility with over 5,000 theater-style seats or 2,500 dining seats connected
to the existing convention center and ancillary improvements. Adjacent to the NASCAR Hall of Fame is
an approximately 390,000 square foot 19-story office tower which opened in 2009. The tenants in this
office tower include NASCAR, NASCAR.com (which operates the motorsport group's Web operations
and other digital products), Chiquita Brands International and the Federal Deposit Insurance Corporation.
The focal point of the new Levine Center for the Arts is a 48-story office tower. A portion of the
office tower has been leased to Duke Energy Corporation, and the office tower is called Duke Energy
Center. The Levine Center for the Arts also includes (1) an approximately 145,000 square-foot Mint
Museum of Art, (2) an approximately 35,000 square-foot Bechtler Museum of Modern Art, (3) an 1,150seat Knight Theater which is the primary venue for the North Carolina Dance Theatre and (4) the Harvey
B. Gantt Center for African-American Art and Culture, which includes an outdoor amphitheater, an
indoor theater and two galleries.
Five hotels have opened in the downtown area in the past decade including: (1) a 171-room
Courtyard by Marriott, (2) a 700-room Westin Hotel, (3) a 175-room Aloft hotel, which is part of the
EpiCentre complex, (4) the 146-room Ritz-Carlton hotel described above and (5) a 17-floor, 163room/suites Hyatt House next to the Time Warner Cable Arena (defined below). On July 17, 2013,
Starwood Resorts and Hotels Worldwide announced a $20 million renovation and rebranding of The
Blake Hotel that will divide the hotel's two towers into two connected hotels: Sheraton Charlotte, opening
in August 2013, and Le Meridien, opening in January 2014.
The City's downtown has seen significant residential growth over the past decade. In the summer
of 2006, residents moved into the City's first high-rise condominium tower called Courtside. Two
additional towers, Trademark and Avenue, and the retrofitting of an existing office building into a 13story condominium were completed in 2007. Catalyst, a 27-story luxury apartment high-rise tower, was
completed in 2009. The VUE Charlotte, a 51-story luxury apartment high-rise tower located in City's
downtown, historic Fourth Ward, was completed in 2010. Today, there are approximately 12,000 people
13
living in the City's downtown. Harris Teeter opened a grocery store in the City's downtown in 2002 to
serve the growing downtown residential population.
First Ward, east of downtown, has been redeveloped from a public housing neighborhood to a
mixed income residential neighborhood including elderly housing, public housing units, single family
homes, luxury homes and condominiums. In addition, UNC Charlotte opened the 143,000 square-foot
Center City Building, which houses 25 classrooms and a 300-seat auditorium, in First Ward in 2011.
The Metropolitan, an approximately $225,000,000 reconstruction of a pre-existing shopping mall,
includes approximately 575,000 square feet of retail, residential units, restaurants and office space. Major
retailers currently include Best Buy, Marshalls, Staples, Target and Trader Joe's.
The North Carolina Music Factory (the "Music Factory"), a mixed use development located in
Fourth Ward, east of downtown, opened in June 2009. The Music Factory contains indoor and outdoor
music venues, including an amphitheater with 2,000 fixed seats and 3,000 lawn seats and features office
space, retail stores and currently anticipates adding apartments in the future.
The City has experienced significant growth from government projects including: (1) ImaginOn,
an approximately $45 million project funded by the County, to house the children's library and the
Children's Theatre of Charlotte, opened in 2005, (2) an approximately 18,500-seat, 780,000 square-foot,
downtown sports arena and entertainment facility (the "Time Warner Cable Arena") to house the National
Basketball Association's Charlotte Bobcats, that is in the process of changing its name to the Hornets (the
"Charlotte Bobcats"), opened in October 2005, (3) a nine-story, 568,000 square-foot courthouse which
includes approximately 35 finished courtrooms, 4 shell courtrooms, 35 holding cells and 50 parking
spaces opened in 2007, (4) Jail Central, located in the City's downtown, an approximately 900 bed pretrial facility that cost approximately $58 million opened in 1996 and expanded in 2002 and (5) the
NASCAR Hall of Fame.
DEVELOPMENT BEYOND DOWNTOWN
Northeast. The northeast quadrant of the City and the County, the location of "University City,"
is anchored by the UNC Charlotte campus. University City was designed by City planners and university
and community leaders and has experienced significant growth. University City is a "city-within-a-city"
combining four contiguous parts: university, hospital, town center and research park. Northlake Mall, an
approximately 1.1-million square-foot mall, opened in September 2005.
Near UNC Charlotte is the University Research Park, a business park for expanding firms in the
Charlotte area engaged in product research, technology research, light assembly and information
processing. The area is presently recognized as one of the two leading research and technology oriented
areas in the state and has approximately nine million square feet of building space. Carolinas HealthCare
System owns and operates Carolinas Medical Center - University, an acute care hospital, located near
University Research Park. Wells Fargo Bank, National Association has a 2.1-million square-foot office
complex in the University Research Park at which approximately 9,500 individuals are employed.
Ikea opened an approximately 345,000 square-foot store with a 1,700 space parking lot, on
approximately 25 acres in 2009.
Northwest. Significant growth has recently occurred in the Northwest corner of the City near
Mountain Island Lake on the Catawba River. According to the Brookshire Boulevard/Mountain Island
area plan, significant residential and commercial growth will occur in this area over the next decade. This
is one of the last areas of the City that is relatively rural in character where ample space and infrastructure
are available for development.
14
West. The western portion of the City and County, which includes the Charlotte/Douglas
International Airport and several residential communities, has been a major growth area. The expansion
of Tyvola Road, development of the York Road Renaissance Park and expansions at the Airport represent
significant public economic development investment in the area. A portion of the City-owned acreage
proximate to the old Charlotte Coliseum along the Billy Graham Parkway has been exchanged with
Crescent Resources, Inc., a Duke Energy subsidiary, for several hundred acres of land along the Catawba
River watershed. This portion of the County also includes a notable example of public/private
revitalization which is ongoing in the area known as the north-west corridor. Anchored by Johnson C.
Smith University, this community is the site of City-funded "Streetscape" projects, newly developed
privately-funded shopping areas and federally-funded housing redevelopment. The Billy Graham
Evangelistic Association relocated its corporate headquarters to Charlotte in a newly constructed
headquarters building located on land formerly owned by the City in 2004. A private company bought
the old Charlotte Coliseum in 2006, demolished it and has begun construction on an approximately 300unit apartment complex. Rivergate, an approximately 600,000 square-foot shopping center, opened in
2005.
South. The southern part of the City and County continues to experience rapid growth. Carolina
Place, a 1.3-million square-foot regional mall, has approximately 140 shops. The Centrum, a 450,000
square-foot shopping center, is also located in this area. Spurred on by the completion of Interstate 485 in
southwestern Mecklenburg County, the "Ballantyne" area, a 2,000-acre residential, commercial and
recreational development, has been a major source of growth in the Charlotte area. Extensive
development began in 1994 with the opening of the Ballantyne Country Club. Ballantyne consists of (1)
a 535-acre corporate park which currently offers approximately 3.5 million square feet of office space,
approximately 830 hotel rooms and over 380,000 square feet of retail space, (2) extensive residential
development, (3) a town center and (4) a resort hotel facility. A majority of Ballantyne has been annexed
by the City. Neighboring Blakeney, an approximately 270-acre multi-use planned development, contains
office, residential and retail space. Publix, a Florida-based supermarket chain, began expanding into the
Charlotte area in 2012 and has announced plans for (1) a corporate office and (2) several additional stores
to be opened in 2014.
LABOR FORCE AND UNEMPLOYMENT
The Employment Security Commission of North Carolina has estimated the percentage of
unemployment (not seasonally adjusted) in the City to be as follows:
January
February
March
April
May
June
July
August
September
October
November
December
2010
10.2%
10.3
9.9
9.5
9.7
9.9
10.2
9.8
9.0
9.1
9.3
8.9
15
2011
9.1%
9.2
8.9
8.8
9.2
10.0
10.0
9.7
9.2
9.0
9.0
8.7
2012
8.6%
8.5
8.2
7.8
8.4
8.8
8.8
8.5
7.9
7.6
7.9
8.2
2013
8.5%
8.0
7.7
7.5
7.9
8.4
The Employment Security Commission of North Carolina has estimated the percentage of
unemployment (not seasonally adjusted) in the City, the State and the United States to be as follows:
June 2013
June 2012
June 2011
June 2010
City
8.4%
8.7
9.8
9.8
State
9.3%
9.8
10.7
10.8
United States
7.8%
8.4
9.3
9.6
GOVERNMENT AND MAJOR SERVICES
Government Structure. The City is governed by a mayor and an 11-member Council elected
biennially on a partisan basis. The mayor presides over all Council meetings and can vote only in case of
a tie, but does have limited veto power. The Council enacts all general and technical ordinances,
including budgetary appropriations and construction and zoning ordinances, approves contracts and
originates general management policies. The Council employs a City Manager who directs the daily
operations of the City through department heads appointed by the City Manager.
Transportation. Major expansion, maintenance and betterment of primary highways within the
City limits are primarily the responsibility of the State. The City shares with the State acquisition of
right-of-way for such expansion or betterment, and is primarily responsible for related sidewalk
improvements, street lighting and landscaping. City residents have historically approved the issuance of
general obligation bonds for improvements to state-system roads.
The City has the primary responsibility for expansion, maintenance and improvement of the local
street system. Major expansions are funded principally by the sale of bonds and the application of current
revenues. A major portion of the maintenance and improvements is funded from the City's proportionate
share of the amount produced by a one and three-quarter cent State tax on each gallon of motor fuel. In
response to the approval of a 25-year, $3.6 billion Transportation Action Plan ("TAP"), City Council is
seeking alternative revenue sources that would provide adequate funding to implement the TAP.
Two interstate highways pass through the City limits, Interstate Highway 77 and 85, running
north-south and northeast-southwest, respectively. The North Carolina Department of Transportation (the
"NCDOT") has completed major roadway improvement projects to both of these highways, including
widening both highways and constructing the State's first High Occupancy Vehicle ("HOV") lanes on I77. The money for these projects comes from federal and State funding sources. Construction on a 67mile interstate by-pass ("I-485") for the City is scheduled to be completed by the year 2015. The State is
also scheduled to complete a widening of the most congested section of I-485 by 2014.
In addition, NCDOT has completed five phases of a multi-phase improvement program to
Independence Boulevard, a major artery for traffic into the City's downtown. These improvements
include a dedicated bus lane and four miles of limited access freeway design. The next phase has been
funded by NCDOT and will convert an additional 1.6 miles to freeway. The total estimated cost of this
phase is estimated to be $172 million. NCDOT and the Charlotte Area Transit System ("CATS") have
jointly funded a study that concurrently analyzed the rapid transit and highway needs.
The Charlotte Douglas International Airport (the "Airport") is a leader in air transportation in the
United States. Additional information concerning the Airport is set forth under "Utility and Public
Service Enterprises" below.
Recreational, Visitor and Cultural Facilities. CRVA focuses jointly on tourism promotions and
facilities management for the City. Visit Charlotte, an unincorporated division of CRVA, serves as a
16
contractor to the City for the purpose of marketing the City as a destination for convention, business and
leisure travel.
Through CRVA, the City provides entertainment and exhibition facilities at the following venues:
(1) the Charlotte Convention Center, (2) Time Warner Cable Arena, (3) Ovens Auditorium, (4) Bojangles'
Coliseum and (5) the NASCAR Hall of Fame. The Charlotte Convention Center provides approximately
843,000 square feet of total building area, including approximately 277,000 square feet of exhibition
space, 58,000 square feet of meeting rooms and 34,000 square feet of ballroom space. Over the calendar
years 2007 to 2012, the Convention Center has hosted approximately 151 tradeshows and conventions.
As of November 2012, the Convention Center has bookings for 48 future tradeshows and conventions for
the calendar year period 2013 to 2015.
In addition to these events, the Democratic National Committee held its national convention in
the City in September 2012. Approximately 35,000 people attended the convention, including 15,000
members of the media and 6,500 delegates. According to the report by consultant group, Tourism
Economics, the convention led to $91 million in direct spending in the local economy and nearly $163.6
million in total economic impact.
The City is home to two major-league sports franchises: (1) the Carolina Panthers and (2) the
Charlotte Bobcats, which will be renamed the Charlotte Hornets as of their 2014-2015 season. Charlotte
is also home to the American Hockey League's Charlotte Checkers and, as of the 2014 season, the
Charlotte Knights, the Triple-A affiliate of Major League Baseball's Chicago White Sox. The Charlotte
Bobcats and the Checkers play in the Time Warner Cable Arena.
In August, 2006 the U.S. National Whitewater Center (the "Whitewater Center") opened on land
owned by the County just west of the City. The U.S. National Whitewater Center has a multiple-channel
artificial river for canoeing, kayaking and rafting, access to the Catawba River for flatwater boating, a
high adventure center, biking and hiking trails and other outdoor amenities. Total cost of the project was
approximately $38 million.
The City also offers diverse facilities for cultural, the arts and nature and science activities. The
Charlotte Nature Museum, founded in 1946, provides programs and exhibits centered on a science theme
of "Nature and Man." The oldest and best known cultural institution is the Mint Museum of Art, founded
in 1933. In addition to the Levine Center for the Arts described in "Downtown Development" herein, the
following facilities are also located in the downtown area: (1) Discovery Place, a "hands-on" science and
technology museum which features a 300-seat Omnimax theater and the Spitz planetarium, the largest
planetarium dome in the United States, (2) Spirit Square, a place for people of all ages to participate in the
arts, music, theater, dance, photography, painting and ceramics, includes a restored historic church
structure which serves as an auditorium for performances, (3) the McColl Center for the Visual Arts,
located in a former ARP church, is an artist colony that hosts "Artists in Residence" to promote the
development of the arts in the Charlotte region, (4) ImaginOn, a collaborative venture between the Public
Charlotte Mecklenburg Library and the Children's Theatre of Charlotte, (5) The North Carolina
Blumenthal Center for the Performing Arts, a three-level, 125,000 square-foot Performing Arts Center
with a 2,100-seat performance hall and a 440-seat theater, and (6) the Levine Museum of the New South,
an interactive history museum. See "Downtown Development" herein.
Utility and Public Service Enterprises. The City presently owns and operates several utility and
public service enterprises as described below.
Water and Sanitary Sewer System. The Charlotte-Mecklenburg Utility Department administers
and operates a unified water and sanitary sewer system for the City, the County and all municipalities in
the County. The system provides services to the City and County residents under a rate structure designed
17
to produce revenues sufficient to provide for operating expenses, debt service and adequate working
capital. The water system has a total treatment capacity of 242 million gallons per day ("MGD"). Its
average water processing in Fiscal Year 2012 was 100.8 MGD. A maximum day water demand of 169.2
MGD was reached in August 2007. The sanitary sewer system includes approximately 4,073 miles of
wastewater mains and lines and has a total permitted treatment capacity of 123 MGD. The average
wastewater treatment rate in Fiscal Year 2012 was 77.1 MGD. The water sources for the system are the
Mountain Island Lake impoundment and the Lake Norman impoundment, both on the Catawba River.
Charlotte Douglas International Airport. The Airport occupies approximately 6,000 acres of
land within the County and is located approximately seven miles west of downtown Charlotte. The
Airport currently has four runways, all equipped with precision instrument landing systems. The Airport
is a gateway for international travelers and is a port of entry and export with customs service and a
foreign trade zone designation at the Airport. The Bureau of Transportation Statistics reported that the
Airport was the 5th largest in the United States in terms of scheduled flights and 36th largest in terms of
freight/mail by weight for the 12 months ended March 31, 2013. The Airport currently serves as the
largest passenger hub for US Airways.
The Airport is served by 6 domestic carriers, 18 regional carriers and 3 foreign flag carriers as of
December 31, 2012. During the Fiscal Year ended June 30, 2012, 19,710,766 passengers enplaned on
airline flights at the Airport. The Airport is also served by several cargo airlines and is the base for
approximately 76 general aviation aircraft. A unit of the North Carolina Air National Guard and other
aviation support facilities are also located at the Airport.
The main passenger airlines which serve the Airport are Air Canada, American Airlines, Delta
Air Lines, Insel Air, JetBlue Airways, Lufthansa, Southwest Airlines, United Airlines and US Airways.
In February 2013, US Airways and American Airlines announced the proposed merger of US
Airways and AMR Corporation, American Airlines' parent corporation. On July 12, 2013, the
shareholders of US Airways Group Inc., the parent of US Airways, voted to approve the combination. If
approved by the Federal Trade Commission, the resulting airline would be called American Airlines and
would be the largest passenger airline in the world. Doug Parker, US Airways' current CEO, would
become the new company's CEO. On August 13, 2013, the United States Department of Justice and
several state attorneys general filed a lawsuit in federal court in Washington, D.C. challenging the merger.
The City cannot predict the impact the lawsuit and the proposed merger might have on the Airport.
On July 26, 2013, Senate Bill 380 was enacted into law by the North Carolina General Assembly.
The legislation would create the Charlotte Douglas International Airport Commission (the "Airport
Commission"). The Airport Commission would be an agency of the City and composed of thirteen
members that would be appointed as follows: three by the Mayor of the City, four by the City Council,
and one by each of the Boards of Commissioners of Mecklenburg County, Cabarrus County, Gaston
County, Iredell County, Lincoln County and Union County. The Airport Commission would be
responsible for operating the Airport. The City would be responsible for the issuance of revenue or
refunding revenue bonds with respect to the Airport. The City has challenged the legislation's validity
under the State's constitution and the State's authority to create the Airport Commission. On August 1,
2013, a Superior Court judge in the County granted an injunction blocking transfer of control of the
Airport to the Airport Commission pending approval of or issuance of an operating certificate to the
Airport Commission by the Federal Aviation Administration. The City cannot predict the impact the
legislation or the Airport Commission might have on the City or the Airport.
DEBT INFORMATION
Legal Debt Limit. In accordance with the provisions of the State Constitution and The Local
Government Bond Act, as amended, after giving effect to the issuance of all presently authorized bonds,
18
the City had the statutory capacity to incur additional net debt in the approximate amount of
$5,161,148,000* as of June 30, 2013.
*Unaudited and subject to change.
Outstanding General Obligation Debt.
General Obligation Bonds
Enterprises2:
Water Bonds
Sanitary Sewer Bonds
Storm Water Bonds
Total Enterprises
Other Bonds3
Total Debt Outstanding4
(excluding refunded/
defeased obligations)
1
Principal Outstanding as of
June 30,
June 30,
June 30,
2010
2011
2012
June 30,
2013
$113,152,399
165,109,931
12,234,477
290,496,807
530,235,193
$103,752,925
151,396,785
11,414,483
266,564,193
565,258,807
$ 93,873,372
136,989,689
10,555,036
241,418,097
571,240,903
$ 83,697,771
122,203,699
9,640,876
215,542,346
620,104,654
$820,732,000
$831,823,000
$812,659,000
$835,647,000
____________
1
Bonds Issued:
FY2010
$20,000,000 General Obligation Taxable Housing Bonds, Series 2009A, 1.56 years average
maturity, 1.29% true interest cost.
$122,315,000 General Obligation Bonds, Series 2009B, 11.48 years average maturity, 3.64% true
interest cost.
$86,795,000 General Obligation Refunding Bonds, Series 2009C, 8.875 years average maturity,
3.14% true interest cost.
FY2011
$175,495,000 General Obligation Refunding Bonds, Series 2012A, 2.7974% true interest cost.
2
These are utility and public service enterprise bonds, the primary sources of payment of which are the respective
revenues of each enterprise.
3
These bonds include street, building, recreation, public improvement, housing, solid waste, transit and
environmental clean-up bonds. This also includes $98,082,000 of General Obligation Commercial Paper Bonds
outstanding as of June 30, 2013.
4
Includes the Refunded Bonds.
19
Outstanding general obligation debt shown previously does not include outstanding revenue bond
or special obligation bond indebtedness issued by the City:
Revenue Bonds
Principal
Outstanding
June 30, 2013
Airport Special Facilities1
CFC Bonds2
Airport General Revenues
Water and Sewer3
Storm Water Fee
Total Revenue Bonds
$ 114,910,000
60,295,000
663,000,000
1,391,820,000
105,985,000
$2,336,010,000
Principal
Outstanding
June 30, 2013
Special
Obligation Bonds
Downtown Revitalization
Project, Series 2004
$9,220,000
____________
1
Payment of the debt service on these obligations is solely the responsibility of US Airways.
2
On November 9, 2011 the City issued $60,295,000 Taxable Airport Special Facilities Revenue Bonds
(Consolidated Car Rental Facilities Project), Series 2011 which are payable solely by a pledge of revenues
consisting primarily of Airport rental car company facility charges and rental charges.
3
The City approved a Water and Sewer revenue bond anticipation note commercial paper ("CP") program in August
of 2004 to provide short-term financing of the cost of various improvements to its water and sewer system pending
the issuance of long-term revenue bonds to finance such improvements. On April 30, 2009 the City reauthorized
this CP revenue bond anticipation note program. The aggregate amount of CP notes that may be outstanding under
the program at any time may not exceed $400 million. There is no Water and Sewer CP currently outstanding.
Additional revenue bonds are also expected to be issued over the next five years for further
improvements to the City's water and sanitary sewer systems, the airport and stormwater drainage system.
See "--Debt Outlook" herein.
[Remainder of page intentionally left blank]
20
DEBT RATIOS
ASSESSED
TOTAL
AT
JUNE 30 POPULATION1 VALUATION*2 GO DEBT*3
2009
716,874
2010
731,424
2011
750,124
2012
774,462
2013
796,921
_______________
*
1
2
3
4
5
$76,617,331
77,059,551
77,730,480
88,946,915
89,168,609
$810,742 4
820,732 4,5
831,823 4,5
812,659 4,5
835,647 4,5
TOTAL GO
DEBT TO
ASSESSED
VALUATION
TOTAL
GO DEBT
PER CAPITA
GO DEBT
PAYABLE
FROM
ENTERPRISE
REVENUES*4
1.06%
1.07
1.07
0.91
0.94
$1,130.94
1,122.10
1,108.91
1,049.32
1,048.59
$313,640
290,497
266,564
241,418
215,542
GO DEBT
NET OF
GO DEBT
PAYABLE
FROM
ENTERPRISE
REVENUES*4
NET GO
DEBT TO
ASSESSED
VALUATION
NET GO
DEBT
PER CAPITA
$497,102
530,235
565,259
571,241
620,105
0.65%
0.69
0.73
0.64
0.70
$693.43
724.94
753.55
737.60
778.13
PER
CAPITA
ASSESSED
VALUATION
$106,877
105,356
103,624
114,850
111,891
Amounts in thousands.
Estimates of the Charlotte Chamber of Commerce.
The amount of assessed valuation for the current fiscal year reflects the most recent assessed valuation and for prior years is reported as of the end of each fiscal year. The
valuation of motor vehicles is estimated subject to final adjustment.
Includes water, sanitary sewer and storm water bonds.
This amount does not include at June 30, 2009, 2010, 2011, 2012 and 2013 $53,075,000, $46,740,000, $13,860,000, $12,285,000 and $10,645,000, respectively, of
Refunded/Defeased Bonds with respect to which escrow agents are holding in trust certain Government Obligations.
This amount includes current CP bonds outstanding. On April 19, 2012, the City reauthorized the general obligation CP bond program of which the aggregate amount of CP
bonds outstanding under the program at any time is not allowed to exceed $150,000,000. The amount of CP issued which was outstanding as of June 30, 2009, 2010, 2011,
2012 and 2013 is $119,937,000, $46,462,000, $109,248,000, $24,094,000 and $98,082,000, respectively.
21
GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS AS OF JUNE 30, 2013
Fiscal Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
UTILITIES/ ENTERPRISES1
Existing Debt
Principal
Principal
& Interest
$ 27,047,341.72
27,453,102.01
28,481,866.99
29,084,501.80
27,525,697.99
24,903,170.15
18,942,550.93
15,654,158.29
7,042,593.84
7,234,529.40
2,172,833.12
$215,542,346.25
OTHER2
Existing Debt
Principal
Principal
& Interest
$ 37,018,196.34 $ 30,532,658.28
36,098,373.58
31,186,897.99
35,759,138.71
30,763,133.01
34,978,691.99
32,300,498.20
31,992,055.72
32,314,302.01
28,050,359.59
32,491,829.85
21,052,462.15
32,732,449.07
16,848,534.31
33,480,841.71
7,686,366.41
33,607,406.16
7,585,266.25
34,440,470.60
2,216,289.78
32,552,166.88
33,200,000.00
28,670,000.00
29,220,000.00
24,905,000.00
20,240,000.00
10,170,000.00
6,405,000.00
6,405,000.00
6,405,000.00
$259,285,734.81 $522,022,653.75
$ 55,280,067.40
54,536,196.41
52,544,168.78
52,612,878.00
51,065,764.27
49,648,766.66
48,340,500.35
47,505,120.69
45,986,188.59
45,175,013.75
41,670,615.22
40,778,230.00
34,635,990.00
33,762,950.00
28,013,862.50
22,320,675.00
11,385,000.00
7,205,625.00
6,885,375.00
6,565,125.00
$735,918,112.64
TOTAL1,2
Existing Debt
Principal
Principal
& Interest
$ 57,580,000
58,640,000
59,245,000
61,385,000
59,840,000
57,395,000
51,675,000
49,135,000
40,650,000
41,675,000
34,725,000
33,200,000
28,670,000
29,220,000
24,905,000
20,240,000
10,170,000
6,405,000
6,405,000
6,405,000
$737,565,000
$ 92,298,263.74
90,634,569.99
88,303,307.49
87,591,569.99
83,057,819.99
77,699,126.25
69,392,962.50
64,353,655.00
53,672,555.00
52,760,280.00
43,886,905.00
40,778,230.00
34,635,990.00
33,762,950.00
28,013,862.50
22,320,675.00
11,385,000.00
7,205,625.00
6,885,375.00
6,565,125.00
$995,203,847.45
_______________
1
2
These bonds include water, sanitary sewer and storm water bonds.
This amount does not include $98,082,000 of general obligation commercial paper bonds issued and outstanding as of June 30, 2013 used to finance various improvements pending
the issuance of long-term general obligation bonds.
22
General Obligation Bonds Authorized and Unissued as of June 30, 2013 1.
Purpose
Housing3
Housing3
Streets
Neighborhood Improvements
Housing3
Streets
Neighborhood Improvements
Date
Approved
11/7/2006
11/4/2008
11/4/2008
11/4/2008
11/2/2010
11/2/2010
11/2/2010
Balance Authorized
and Unissued2
$ 9,373,366
10,000,000
118,002,266
13,222,139
15,000,000
156,600,000
32,000,000
$354,197,771
_______________
1
On July 22, 2013, the City authorized general obligation refunding bonds in an amount not to exceed
$115,000,000, and the 2013B Bonds will be issued from that amount.
2
The City reauthorized its general obligation CP bond program in November 2009 to provide short-term financing
of various improvements pending the issuance of long-term general obligation bonds to finance such
improvements. The aggregate amount of CP bonds that may be outstanding under the program at any time may not
exceed $150,000,000, of which $98,082,000 was outstanding at June 30, 2013.
3
The City currently intends to issue all but $3,366 of the balance of authorized and unissued Housing bonds on
September 5, 2013.
Debt Information for Overlapping Unit as of June 30, 2013.
Unit
2011
Population1
Assessed
Valuation2
Tax Rate
Per $1002
Mecklenburg County
940,763
$115,745,200,000
$.8166
Levy
Bonds
Authorized
And Unissued
Total
GO Debt
$947,064,890 $625,210,000 $1,286,775,000
Total
GO Debt
Per Capita
$1,367.80
_______________
1
2
Estimate of the Office of State Budget and Management.
In addition, residents of unincorporated areas of the County pay $.1647 in a Law Enforcement Service District Tax.
Debt Outlook. The City plans to issue the balance of its authorized and unissued general
obligation street bonds, neighborhood improvement bonds and housing bonds over a five-year period
based on the City's 2013-2017 Capital Improvement Program ("CIP") described below. The proceeds
from the sale of such bonds, together with other available funds, will be used to finance street,
neighborhood improvements and housing improvements.
The City's water and sewer system and stormwater utility system are each a self-supporting
system. The City Council has adopted a rate and service charge methodology that provides for pricing
based on actual cost recovery, maintenance of adequate working capital and debt service reserves,
including a fixed fee to provide for at least 20% of the annual debt service for the water and sewer
system. The commercial and industrial growth in the City and the metropolitan area has necessitated
continuing expansion of the water and sewer system and the stormwater utility system. The City has
responded to this growth while maintaining competitive utility rates. Advance planning and selective use
of borrowing capacity has enabled orderly and economical expansion of utilities. Various forms of debt
will be evaluated for future borrowings to finance water and sewer projects and stormwater projects,
including revenue bonds, revenue bond anticipation notes (commercial paper), installment contract
financing (certificates of participation) and general obligation bonds.
23
The CIP is the City's five-year financial plan detailing estimated revenues dedicated to the CIP,
financing schedules and funded capital projects over the next five years. The CIP process begins each
year with the identification of capital needs. These needs are evaluated and prioritized according to City
Council policies. The 2014-2018 General CIP was considered and approved by the City Council on June
10, 2013. The $658.1 million general government program includes $440 million out of a new $819
million program. The new program is funded through a 3.17 cent tax increase dedicated to capital The
new program is spread out over four referenda with the first referendum scheduled in November 2014.
The $2.7 billion 2014-2018 CIP for Aviation, Transit, Water/Sewer and Storm Water was approved on
June 10, 2013. The Fiscal Year 2014 Annual Budget Ordinance, which legally provides funds for the
upcoming fiscal year, includes the first year appropriation of funds for approved capital projects. This
Annual Budget Ordinance also was considered and approved by the City Council on June 10, 2013.
Capital planning and debt capacity forecasts are a large and important part of the overall debt policies and
strategies developed and executed by the City. Long-range debt strategies have been one of the most
significant elements of the City's ten-year capital plans for capital needs and a measuring of the
continuing debt issue capabilities within existing resources. Additional sources of revenue, such as the
occupancy tax (October 1983) and ½ percent sales tax (April 1984, January 1987, April 1999 and January
2003), have provided a greater level of revenue diversification that is an objective of the City. The use of
variable rate debt, commercial paper programs, refunding and interest rate swaps are methods employed
by the City to diversify its debt portfolio, increase debt capacity and provide savings for the City. Hedge
strategies, pay-as-you-go funding and fund balance policies are employed to reduce the risk. Recurring
capital improvements are typically funded as part of the annual operating budget utilizing both installment
financing options and operating revenues.
The City regularly reviews its capital investment needs and sells bonds or enters into installment
financings as it deems appropriate.
Other Long-Term Commitments. As noted in the "DEVELOPMENT ACTIVITY – Downtown
Development" and the "GOVERNMENT AND MAJOR SERVICES - Recreational, Visitor and Cultural
Facilities" sections above, four of the City's major recreational and cultural facilities include (1) the
Charlotte Convention Center, (2) the Time Warner Cable Arena, (3) the Levine Center for the Arts and
(4) the NASCAR Hall of Fame. The City has entered into installment contract financings involving
publicly sold certificates of participation to provide funds for the construction costs of the Charlotte
Convention Center, Time Warner Cable Arena, a portion of the Levine Center for the Arts and the
NASCAR Hall of Fame.
Under the authority of certain State legislation, the County has levied (1) a room occupancy tax,
(2) a prepared food and beverage tax and (3) a rental car tax. The proceeds from the prepared food and
beverage tax and a portion of the proceeds of the room occupancy tax are being transferred to and applied
by the City (although not legally and contractually pledged) to pay the installment payments under the
installment financing contract for the Charlotte Convention Center.
A portion of the proceeds from the rental car tax and a portion of the proceeds from the room
occupancy tax are being transferred to and applied by the City (although not legally and contractually
pledged) to pay the installment payments under the installment financing contract related to the Time
Warner Cable Arena.
An amount of money in the City's General Fund equal to a portion of the proceeds from the rental
car tax are freed-up annually to expend on other purposes. The City intends to annually transfer the
freed-up General Fund revenues to the Cultural Arts Fund to pay a portion of the installment payments
(although not legally and contractually pledged) under the installment financing contract related to the
Levine Center for the Arts.
24
A portion of the proceeds from the room occupancy tax are being transferred to and applied by
the City (although not legally and contractually pledged) to pay the installment payments under the
installment financing contract related to the NASCAR Hall of Fame.
In addition, the City has entered into other financing agreements primarily for land, computer
equipment, capital improvements and general capital assets, including rolling stock (the "Other LongTerm Commitments").
The following chart sets forth for each Fiscal Year of the City ending June 30 the amount of
principal (whether at maturity or pursuant to mandatory sinking fund prepayment) and interest required to
be paid by the City with respect to financing agreements related to the Convention Center, the Time
Warner Cable Arena, the Transit System, the NASCAR Hall of Fame, the Levine Center for the Arts and
the Other Long-Term Commitments.
[Chart begins on following page]
25
Installment Payment Requirements of Installment Purchase Contract Financings as of June 30, 2013
FY Ending
June 30
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
Total
Principal
Interest
Total
1
2
3
4
5
6
7
8
9
Convention
Center1
$
15,757,294
15,751,294
15,735,406
15,720,269
15,705,269
16,477,881
17,835,044
13,070,931
17,711,994
5,256,831
5,256,019
5,254,519
5,251,819
2,151,675
2,148,675
2,151,000
2,150,750
2,151,500
2,153,000
2,150,000
2,152,500
$181,993,670
136,230,000
45,763,670
$181,993,670
Arena2,3
Facilities &
Equipment4,5
$ 13,025,384
12,997,956
11,800,244
11,803,494
11,803,994
11,804,019
11,798,469
11,802,169
11,803,806
11,802,594
11,802,744
11,801,994
11,802,906
11,800,975
11,802,975
11,802,975
11,799,975
4,052,975
4,077,975
23,879,475
$ 33,622,416
24,576,820
24,131,331
18,621,517
16,218,096
11,195,375
9,426,982
9,320,346
8,960,212
8,863,447
8,766,488
7,651,623
4,946,125
4,900,825
4,851,638
4,805,213
2,543,075
2,490,750
2,446,350
1,261,700
$ 17,045,199
14,410,088
14,407,838
14,405,363
14,409,563
14,409,044
14,408,994
14,405,888
137,547,650
10,715,213
10,712,513
10,708,044
10,711,594
10,712,394
10,715,944
10,716,850
10,717,350
10,712,850
10,709,738
10,715,250
7,055,500
7,052,813
$235,067,098
150,390,000
84,677,098
$235,067,098
$209,600,329
164,835,000
44,765,329
$209,600,329
$387,405,674
268,395,000
119,010,674
$387,405,674
Transit6,7
NASCAR
Hall of Fame8
Levine Center
For the Arts9
$ 8,667,114
8,684,659
8,696,061
8,726,321
8,754,258
8,774,634
8,792,450
8,832,470
8,858,276
8,890,105
8,917,248
8,959,468
8,995,584
9,030,360
9,063,324
9,114,003
9,160,979
9,203,780
9,251,934
9,309,495
9,365,283
9,423,588
9,316,750
9,318,500
9,316,000
9,313,500
$234,736,144
130,890,000
103,846,144
$234,736,144
$ 9,172,963
9,170,963
9,171,763
9,170,363
9,170,013
9,169,413
9,168,613
9,172,113
9,171,613
9,171,863
9,171,163
9,171,663
9,171,413
9,170,213
9,172,213
9,168,813
9,172,188
9,169,938
9,168,688
9,172,688
9,170,938
9,167,938
9,167,938
9,169,938
9,172,938
9,170,938
$238,439,275
133,875,000
104,564,275
$238,439,275
Total
$
97,290,370
85,591,779
83,942,642
78,447,326
76,061,192
71,830,365
71,430,551
66,603,916
194,053,551
54,700,052
54,626,174
53,547,310
50,879,440
47,766,441
47,754,768
47,758,854
45,544,317
37,781,793
37,807,684
56,488,608
27,744,221
25,644,338
18,484,688
18,488,438
18,488,938
18,484,438
$1,487,242,190
984,615,000
502,627,190
$1,487,242,190
Convention Center obligations are paid from a portion of the Occupancy Tax and the Prepared Food Tax. $19,490,000 of convention center obligations are variable rate, the interest of which has been calculated at
3.5% and does not include liquidity or remarketing fees.
$19,785,000 of arena obligations are variable rate, the interest of which has been calculated at 3.5% and does not include liquidity or remarketing fees. In addition, $128,245,000 of arena obligations are variable rate,
the interest of which has been calculated at 5.0973% (the synthetic fixed rate in the swap agreement related thereto) and does not include liquidity or remarketing fees.
Arena obligations are paid from a portion of the Occupancy Tax and a portion of the Rental Car Tax, plus an annual contribution from CRVA for principal and interest with respect to $2,950,000 of these obligations.
$10,685,000 of Safety Facilities & Capital Equipment are variable rate, the interest of which has been calculated at 3.5% and does not include liquidity or remarketing fees.
A portion of Capital Equipment obligations are paid from Water and Sewer operations.
Transit obligations are paid from a 1/2 cent sales tax. $3,270,000 of transit obligations are variable rate, the interest of which has been calculated at 3.5% and does not include liquidity or remarketing fees.
On May 7, 2013, the Corporation executed and delivered three series of certificates of participation (Transit Projects/Phase III) (collectively, the "2013DEF Certificates") in the aggregate principal amount not to exceed
$300,000,000. The 2013DEF Certificates will be purchased and held by Banc of America Preferred Funding Corp, a subsidiary of Bank of America, N.A. (the "Bank Holder"). Current amount outstanding for the
2013DEF Certificates is $150,000 which is not included in chart. Under the financing documents related to the 2013DEF Certificates, repayment of the principal with respect to the 2013DEF Certificates begins on
June 1, 2017 with a final maturity on June 1, 2021.
NASCAR Hall of Fame obligations are paid from a portion of the Occupancy Tax. $93,595,000 of NASCAR Hall of Fame obligations are variable rate, the interest of which has been calculated at 4.725% (the
synthetic fixed rate in the swap agreement related thereto) and does not include liquidity or remarketing fees (with respect to the 2009D NASCAR Certificates of Participation).
Levine Center for the Arts obligations are paid from freed-up general fund revenues attributable to an increase in the Rental Car Tax, a contribution from the City's General Fund in the amount of $1,651,960 in Fiscal
Years 2013 through and including 2034 and a contribution from the County pursuant to an interlocal agreement with the City in the amount of $2,948,040 in Fiscal Years 2013 through and including 2034.
26
The City has previously entered into various interest rate swap agreements. See Note 4
"DETAILED DISCLOSURES ON ALL FUNDS – (j) Long-term Liabilities - (7) Derivative Instruments"
in the Notes to the Financial Statements of Appendix D hereto for a more complete description of such
interest rate swap agreements and the City's obligations thereunder as of June 30, 2012. In addition, the
City entered into an interest rate swap agreement dated September 13, 2005, with respect to 100% of the
principal amount of the 2013G Certificates (the "2013G Swap") with Wachovia Bank, National
Association, the successor to which is Wells Fargo Bank, National Association (the "Counterparty"),
implemented in the Fiscal Year ended June 30, 2013, under which the Counterparty pays a floating
amount and the City pays a fixed amount and the notional amount of the 2013G Swap will decrease as the
sinking fund prepayments are made on the 2013G Certificates.
TAX INFORMATION
The County is the City's agent for listing and collecting property taxes levied. On November 27,
2012, the County's Board of Commissioners voted to engage Pearson's Appraisal Service to review the
County's 2011 revaluation (the "Revaluation Review") in order to identify neighborhoods where there
may or may not be inequities resulting from the County's 2011 revaluation. On March 4, 2013, bills were
filed jointly in the State House of Representatives (H200) and Senate (S159), that proposed to create State
legislation to allow new revaluation results to be retroactive to January 1, 2011. Senate Bill 159 was
passed by the Senate on March 28, 2013, passed by the State House of Representatives on July 16, 2013
and signed into law by Governor Pat McCrory on July 26, 2013. The legislation requires that (1) the
County conduct a new revaluation within 18 months or (2) have a qualified appraisal company conduct a
total review of all the values in the County by neighborhood and make recommendations as to the true
value of the properties as of January 1 of the year of the last general reappraisal performed. The
legislation will require the County (and consequently the City) to pay taxpayer refunds with interest and
taxpayers to pay any deficiencies indicated by the Revaluation Review. The City currently anticipates
that its refund obligations resulting from the Revaluation Review will be approximately $17.1 million.
The City has currently reserved approximately $17.1 million in various funds to pay these anticipated
obligations. Refund payments are anticipated to begin late October 2013.
[Remainder of page intentionally left blank]
27
General Information.
2011
Assessed Valuation:
Assessment Ratio1
Real Property
Personal Property
Total Assessed Valuation2
Valuation Per Capita3
Regular Rate per $100
Regular Levy4
Special Districts Levies5
Fiscal Year Ended or Ending June 30
2013 Estimate6
2012
100%
$ 64,160,725,376
11,646,567,450
$ 77,730,479,706
$
103,624
.4586
$
356,704,524
$
3,770,856
100%
$ 73,850,316,444
13,023,437,688
$ 88,946,915,319
$
114,850
.4370
$
388,528,050
$
4,458,982
$ 76,129,943,671
13,038,664,909
$ 89,168,608,580
$
111,891
.4370
$
377,293,127
$
4,453,204
______________
1
Percentage of appraised value has been established by statute.
The amount of assessed valuation for the 2013 Fiscal Year reflects the most recent assessed valuation and for prior years is
reported as of the end of each fiscal year by the County Tax Assessor. Valuation of motor vehicles is estimated, subject to final
adjustment.
Calculated on the basis of the most recent population estimates by the Charlotte Chamber of Commerce of 750,124, 774,462
and 796,921 as of July 1, 2011, 2012 and 2013, respectively.
All property owners of the City paid $.8387 for Fiscal Years 2010 and 2011 and $.8166 for Fiscal Year 2012 and 2013 per
$100 assessed valuation in County taxes.
A special tax district was created in Fiscal Year 1979 to provide funding for capital improvements in the downtown area. Two
additional special tax districts were created in Fiscal Year 1985 and one in Fiscal Year 2001 to provide funding for downtown
planning, promotion and revitalization activities in the service districts.
Revaluation of real property became effective with the Fiscal Year 2012 tax levy, and is reflected in the 2013 estimate.
2
3
4
5
6
Tax Collections.
Collected within the Fiscal
Year of the Levy
Year
Ended
June 30
2008
2009
2010
2011
2012
2013 2
Taxes Levied
for the Fiscal
Year1
$340,293
344,391
357,494
362,833
395,901
395,392
Amount1
$332,150
336,270
350,248
355,258
387,890
386,270
Percentage of
Levy
97.61%
97.64
97.97
97.91
97.98
97.69
1
Amounts in thousands.
Unaudited.
2
28
Total Collections to Date
Collections in
Subsequent
Years1
$5,396
6,174
5,131
4,146
(653)
N/A
Amount1
$337,546
342,444
355,379
359,404
387,237
386,270
Percentage of
Levy
99.19%
99.43
99.41
99.05
97.81
97.69
Ten Largest Taxpayers for Fiscal Year 2013.
Assessed
Valuation1
Name
Wells Fargo Bank, National Association
Bank of America
Duke Energy Corporation
US Airways Group, Incorporated
AT&T/ BellSouth, Inc
SouthPark Mall
Time Warner Entertainment
Piedmont Natural Gas
TIAA-CREF, LLC
CK Southern/Childress Klein
Total
$1,461,550
1,455,390
1,047,797
556,309
399,970
339,818
324,487
280,845
246,443
183,424
$6,296,033
Percent of Total
Assessed
Valuation
1.65%
1.64
1.18
0.63
0.45
0.38
0.37
0.32
0.28
0.21
7.11%
1
Amounts in thousands.
BUDGET COMMENTARY AND OUTLOOK
Fiscal Year 2013. At June 30, 2013, the General Fund had collected approximately 101% of its
$551.1 million budgeted revenues for Fiscal Year 2013. Unaudited fiscal year ending revenues were $6.6
million over the budgeted amount primarily due to an increase in fees and other revenues. Unaudited
fiscal year ending expenditures were under the budgeted amount by approximately $10.8 million.
General Fund expenditures and outstanding obligations were approximately 98% of the budgeted amount
for Fiscal Year 2013. Once audited numbers are finalized, the City expects to end Fiscal Year 2013 with
an overall General Fund surplus of $17.4 million. As of June 30, 2013, CATS is projected to collect
approximately 106.4% of the Public Transportation Tax budgeted for Fiscal Year 2013. The City
currently expects that CATS will end Fiscal Year 2013 with revenues $6.0 million more than the
budgeted amount.
Fiscal Year 2014. On June 10, 2013, the Board adopted a fiscal year 2013-2014 general fund
budget of $495 million, an increase of 1.5% from the fiscal year 2012-2013 budget. Increases resulted
primarily from the expansion of the small business opportunities program and increases to health care
costs and personal service.
For fiscal year 2013-2014, the City increased its property tax rate to $0.4687 per $100 valuation,
an increase of $0.0317 dedicated to debt service. The increase is to fund a new $816 million general
capital program. See "--Debt Outlook" herein. Overall, revenues are projected to grow by 2.3%. Fees
and permits are projected to grow by 6% and the local option sales tax is expected to grow by 3.5%.
PENSION PLANS
The City participates in the North Carolina Local Governmental Employees' Retirement System,
the Charlotte Firefighters' Retirement System and several retirement plans for law enforcement officers
including: a retirement plan and the Supplemental Retirement Income Plan for Law Enforcement
Officers.
The City participates in the North Carolina Local Governmental Employees' Retirement System.
The North Carolina Local Governmental Employees' Retirement System is a service agency administered
29
through a board of trustees by the State for public employees of counties, cities, boards, commissions and
other similar governmental entities. While the State Treasurer is the custodian of system funds, pension
costs are borne by the participating employer governmental entities. The State makes no contributions to
the system.
The system provides, on a uniform system-wide basis, retirement and, at each employer's option,
death benefits from contributions made by employers and employees. Employee members contribute six
percent of their individual compensation. The normal contribution rate, uniform for all employers, is
currently 6.88 percent of eligible payroll for general employees and 7.05 percent of eligible payroll for
law enforcement officers. The accrued liability contribution rate is determined separately for each
employer and covers the liability of the employer for benefits based on employees' service rendered prior
to the date the employer joins the system.
Members qualify for a vested deferred benefit at age 50 with at least 20 years of creditable
service; at age 60 after at least five years of creditable service to the unit of local government. Unreduced
benefits are available: at age 65, with at least five years of service; at age 60, with at least 25 years of
creditable service; or after 30 years of creditable service, regardless of age. Benefit payments are
computed by taking an average of the annual compensation for the four consecutive years of membership
service yielding the highest average. This average is then adjusted by a percentage formula, by a total
years of service factor, and by an age service factor if the individual is not eligible for unreduced benefits.
Contributions to the system are determined on an actuarial basis. For information concerning the
City's participation in the North Carolina Local Governmental Employees' Retirement System and the
Supplemental Retirement Income Plan of North Carolina see the Notes to the City's Audited Financial
Statements in Appendix D.
Financial statements and required supplementary information for the North Carolina Local
Governmental Employees' Retirement System are included in the Comprehensive Annual Financial
Report ("CAFR") for the State. Please refer to the State's CAFR for additional information.
Charlotte Firefighters' Retirement System and other City retirement benefits. The Charlotte
Firefighters' Retirement System, a single-employer defined benefit plan, provides retirement, disability
and death benefits to civil service employees of the City Fire Department. See Note 5 "PENSION
PLANS AND OTHER BENEFITS" – (b) "Charlotte Firefighters' Retirement System," (c) "LEO
Separation," (d) "Supplemental Retirement Income Plan for Law Enforcement Officers" (e) "Death
Benefit Plan" and (f) "Other Postemployment Benefits" in the Notes to the Financial Statements included
as Appendix D hereto for a more complete description of such benefits and the City's obligations
thereunder.
HEALTH AND LIFE BENEFITS
The City provides health and life benefits to employees and retirees. See Note 6 "OTHER
INFORMATION" in the Financial Statements included as Appendix D hereto for a more complete
description of such benefits and the City's obligations thereunder.
OTHER POST-EMPLOYMENT BENEFITS
Prior to July 1, 2009, the City provided retiree medical benefits as part of the total compensation
offered to attract and retain the services of qualified employees. These benefits qualified as Other PostEmployment Benefits ("OPEB") under Governmental Accounting Standards Board Statement No. 45
relating to the Accounting and Financial Reporting by Employers for Postemployment Benefit Plans
Other Than Pension Plans (the "GASB 45").
30
In accordance with the requirements of Statement No. 45, the City engaged an actuarial firm to
prepare a report which assisted in reporting the cost of other postemployment benefits in its Fiscal Year
2012 financial report. The City-wide actuarially accrued liability was approximately $224.2 million.
The City has taken actions to continue to manage its OPEB liability. In December 2007, the City
established an irrevocable trust qualifying under Section 115 of the Internal Revenue Code (the
"Employee Benefit Trust") to meet the requirements of GASB 45 and segregate assets for this benefit. The
North Carolina General Assembly enacted legislation in July 2007 that provides the City with expanded
investment options including investment in equities and other long-term investments which will allow
improved asset/liability matching. The City has contributed a total of approximately $40.7 million to the
Employee Benefit Trust for the purpose of advance funding its actuarially accrued liability. Advance
funding the liability on an actuarially determined basis allows the City to build an asset base including
investment earnings that will partially offset its actuarial accrued liability and reduce its OPEB cost. In
addition, the City has eliminated future retiree medical benefits for employees hired after July 1, 2009.
See Note 5 "PENSION PLANS AND OTHER BENEFITS" – (f) "Other Postemployment Benefits" in the
Notes to the Financial Statements included as Appendix D hereto for a more complete description of such
benefits and the City's obligations thereunder.
CONTINGENT LIABILITIES
The City is a party defendant in various legal actions for damages arising from, among other
things, personal injuries suffered by the plaintiffs arising from the City's alleged negligence or alleged
social injustice and by plaintiffs alleging discriminatory practices by the City in hiring, promoting or
terminating employees. In certain of these actions, the City Attorney is of the opinion that the plaintiff's
likelihood of success is remote. Although in a number of other cases the City Attorney is unable to
express an opinion as to the probable outcome due to the preliminary stage of the litigation, taking into
account valid defenses which are available to the City, the City's liability insurance coverage when
available and, in certain instances, indemnification available to the City from third parties, the ultimate
outcome of the other suits either individually or as a whole is, in the opinion of the City Attorney, not
expected to have a materially adverse effect upon the City's financial position.
FINANCIAL INFORMATION
The financial statements of the City have been audited by certified public accountants for the
Fiscal Year ended June 30, 2012. Copies of these financial statements containing the unqualified report
of the independent certified public accountants are available on the City's web-site at Cafr.charmeck.org
or in the office of Mr. Greg C. Gaskins, Chief Financial Officer (704-336-5885) or Mr. Scott L. Greer,
City Treasurer (704-336-5883), City of Charlotte, Charlotte-Mecklenburg Government Center, 600 East
Fourth Street, Charlotte, North Carolina 28202.
The Government Finance Officers Association ("GFOA") has awarded a Certificate of
Achievement for Excellence in Financial Reporting to the City for its Comprehensive Annual Financial
Report for the Fiscal Years ended June 30, 1985 through 2011. To receive this award, the highest form of
recognition in governmental financial reporting, a governmental unit must publish a financial report that
complies with both generally accepted accounting principles and applicable legal requirements. A
Certificate of Achievement is valid for a period of one year. The City anticipates that it will continue to
meet the requirements under the Certificate of Achievement Program and has submitted its
Comprehensive Annual Financial Report for the Fiscal Year ended June 30, 2012 to the GFOA for
review.
31
CONTINUING DISCLOSURE
In accordance with the requirements of Rule 15c2-12 promulgated by the SEC under the
Securities Exchange Act of 1934 ("Rule 15c2-12"), the City has undertaken in the Bond Resolution to
provide:
(1)
by not later than seven months after the end of each Fiscal Year, beginning with the
Fiscal Year ended June 30, 2013, to the Municipal Securities Rulemaking Board (the "MSRB"), in
an electronic format prescribed by the MSRB the audited financial statements of the City for the
preceding Fiscal Year, if available, prepared in accordance with Section 159-34 of the General
Statutes of North Carolina, as it may be amended from time to time, or any successor statute, or if
such audited financial statements are not then available, unaudited financial statements of the City
for such Fiscal Year to be replaced subsequently by audited financial statements of the City to be
delivered within 15 days after such audited financial statements become available for distribution;
(2)
by not later than seven months after the end of each Fiscal Year, beginning with the
Fiscal Year ended June 30, 2013, to the MSRB, the financial and statistical data as of a date not
earlier than the end of the preceding Fiscal Year for the type of information included under the
captions "THE CITY--DEBT INFORMATION" and "--TAX INFORMATION" (excluding any
information for overlapping units);
(3)
in a timely manner not in excess of 10 Business Days after the occurrence of the event, to
the MSRB notice of any of the following events with respect to the 2013B Bonds:
(a)
principal and interest payment delinquencies;
(b)
non-payment related defaults, if material;
(c)
difficulties;
unscheduled draws on the debt service reserves reflecting financial
(d)
difficulties;
unscheduled draws on any credit enhancements reflecting financial
(e)
perform;
substitution of any credit or liquidity providers, or their failure to
(f)
adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form
5701-TEB) or other material notices or determinations with respect to the tax status of the
2013B Bonds or other material events affecting the tax status of the 2013B Bonds;
(g)
if material;
modification of the rights of the Beneficial Owners of the 2013B Bonds,
(h)
call of any of the 2013B Bonds, if material, and tender offers;
(i)
defeasance of any of the 2013B Bonds;
(j)
release, substitution or sale of any property securing repayment of the
2013B Bonds, if material;
32
(k)
rating changes;
(l)
bankruptcy, insolvency, receivership or similar event of the City;
(m)
the consummation of a merger, consolidation, or acquisition involving
the City or the sale of all or substantially all of the assets of the obligated person, other
than in the ordinary course of business, the entry into a definitive agreement to undertake
such an action or the termination of a definitive agreement relating to such actions, other
than pursuant to its terms, if material; and
(n)
the appointment of a successor or additional trustee, or the change in the
name of a trustee, if material;
(4)
in a timely manner, to the MSRB, notice of a failure by the City to provide required
annual financial information described in (1) and (2) above on or before the date specified.
At present, Section 159-34 of the General Statutes of North Carolina requires that the City's
financial statements be prepared in accordance with generally accepted accounting principles and that
they be audited in accordance with generally accepted auditing standards.
The Bond Resolution also provides that the City's undertaking pursuant to Rule 15c2-12 is
intended to be for the benefit of the registered owners and the beneficial owners of the 2013B Bonds and
is enforceable by any of the registered owners and the beneficial owners of the 2013B Bonds, including
an action for specific performance of the City's obligations described in this Section, but a failure to
comply will not be an event of default and will not result in acceleration of the payment of the 2013B
Bonds. An action must be instituted, had and maintained in the manner provided in the Bond Order for
the benefit of all of the registered owners and beneficial owners of the Bonds.
The City has not knowingly failed to comply with its previous continuing disclosure obligations;
however, since 2008, the rating agencies have periodically downgraded the claims-paying ability of
municipal bond insurers and the ratings of financial institutions providing credit or liquidity support to
governmental financings several times without giving notice of such downgrades to the City. The City
has learned of some downgrades through general media sources and, when it did so, filed the appropriate
material event notice related to such ratings downgrades to the extent they are applicable to the City's
indebtedness; however, it is possible that the City either was unaware of a downgrade or did not learn of a
downgrade in order to file a notice in a timely fashion.
The City may modify from time to time, consistent with Rule 15c2-12, the information provided
or the format of the presentation of such information, to the extent necessary or appropriate in the
judgment of the City, but: (1) any such modification may only be made in connection with a change in
circumstances that arises from a change in legal requirements, change in law or change in the identity,
nature or status of the City; (2) the information to be provided, as modified, would have complied with
the requirements of Rule 15c2-12 as of the date of this Official Statement, after taking into account any
amendments or interpretations of Rule 15c2-12 as well as any changes in circumstances; and (3) any such
modification does not materially impair the interest of the registered owners or the beneficial owners, as
determined by nationally recognized bond counsel or by the approving vote of the Owners of a majority
in principal amount of the 2013B Bonds. Any annual financial information containing modified
operating data or financial information will explain, in narrative form, the reasons for the modification
and the impact of the change in the type of operating data or financial information being provided. The
City's Rule 15c2-12 undertakings will terminate on payment, or provision having been made for payment
in a manner consistent with the Rule 15c2-12, in full of the principal of and interest on the 2013B Bonds.
33
All documents provided to the MSRB as described above will be provided in an electronic format
as prescribed by the MSRB and accompanied by identifying information as prescribed by the MSRB.
The City may discharge its undertaking described above by providing such information in a manner
subsequently required by the SEC in lieu of the manner described above.
APPROVAL OF LEGAL PROCEEDINGS
Certain legal matters incident to the authorization and issuance of the 2013B Bonds are subject to
the approval of Parker Poe Adams & Bernstein LLP, Charlotte, North Carolina, Bond Counsel, whose
approving legal opinion will be available at the time of the delivery of the 2013B Bonds. The proposed
form of such opinion is attached hereto as Appendix E.
RATINGS
Moody's Investors Service, Standard & Poor's Ratings Services and Fitch Ratings have given the
2013B Bonds ratings of "Aaa", "AAA" and "AAA," respectively. Those ratings reflect only the respective
views of such organizations, and an explanation of the significance of such ratings may be obtained only
from the respective organization providing such rating. Certain information and materials not included in
the Official Statement were furnished to such organizations. There is no assurance that such ratings will
remain in effect for any given period of time or that any or all will not be revised downward or withdrawn
entirely. Any downward revision or withdrawal of a rating may have an adverse effect on the market
prices of the 2013B Bonds.
TAX TREATMENT
GENERAL
On the date of the issuance of the 2013B Bonds, Parker Poe Adams & Bernstein LLP, Charlotte,
North Carolina ("Bond Counsel"), will render an opinion that, under existing law and assuming
compliance by the City with certain provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the interest on the 2013B Bonds is excludable from gross income for federal income tax
purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed
on individuals and corporations.
The interest on the 2013B Bonds will, however, be taken into account in determining adjusted
current earnings of certain corporations (as defined for federal income tax purposes) and such
corporations are required to include in the calculation of federal alternative minimum taxable income 75%
of the excess of such corporation's adjusted current earnings over its federal alternative minimum taxable
income (determined without regard to this adjustment and prior to reduction for certain net operating
losses).
The Code imposes various restrictions, conditions and requirements relating to the exclusion of
interest on obligations, such as the 2013B Bonds, from gross income for federal income tax purposes,
including, but not limited to, the requirement that the City rebate certain excess earnings on proceeds and
amounts treated as proceeds of the 2013B Bonds to the United States Treasury, restrictions on the
investment of such proceeds and other amounts, and restrictions on the ownership and use of the facilities
financed or refinanced with proceeds of the 2013B Bonds. The foregoing is not intended to be an
exhaustive listing of the post-issuance tax compliance requirements of the Code, but is illustrative of the
requirements that must be satisfied by the City subsequent to issuance of the 2013B Bonds to maintain the
excludability of the interest on the 2013B Bonds from gross income for federal income tax purposes.
Bond Counsel's opinion is given in reliance on certifications by representatives of the City as to certain
facts material to the opinion and the requirements of the Code.
34
The City has covenanted to comply with all requirements of the Code that must be satisfied
subsequent to the issuance of the 2013B Bonds in order that the interest on the 2013B Bonds be, or
continue to be, excludable from gross income for federal income tax purposes. The opinion of Bond
Counsel assumes compliance by the City with such covenants, and Bond Counsel has not been retained to
monitor compliance by the City with such covenants subsequent to the date of issuance of the 2013B
Bonds. Failure to comply with certain of such requirements may cause the interest on the 2013B Bonds to
be included in gross income for federal income tax purposes retroactive to the date of the issuance of the
2013B Bonds. No other opinion is expressed by Bond Counsel regarding the federal tax consequences of
the ownership of or the receipt or accrual of interest on the 2013B Bonds.
If the interest on the 2013B Bonds subsequently becomes included in gross income for federal
income tax purposes due to a failure by the City to comply with any requirements described above, the
City is not required to redeem the 2013B Bonds or to pay any additional interest or penalty.
The Internal Revenue Service has established an ongoing program to audit tax-exempt obligations
to determine whether interest on such obligations is includible in gross income for federal income tax
purposes. Bond Counsel cannot predict whether the Internal Revenue Service will commence an audit of
the 2013B Bonds. Prospective purchasers and owners of the 2013B Bonds are advised that, if the Internal
Revenue Service does audit the 2013B Bonds, under current Internal Revenue Service procedures, at least
during the early stages of an audit, the Internal Revenue Service will treat the City as the taxpayer, and
the owners of the 2013B Bonds may have limited rights, if any, to participate in such audit. The
commencement of an audit could adversely affect the market value and liquidity of the 2013B Bonds until
the audit is concluded, regardless of the ultimate outcome.
Prospective purchasers of the 2013B Bonds should be aware that ownership of the 2013B Bonds
and the accrual or receipt of interest on the 2013B Bonds may result in collateral federal income tax
consequences to certain taxpayers, including, without limitation, financial institutions, property or
casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits,
certain Subchapter S Corporations with "excess net passive income," foreign corporations subject to the
branch profits tax, life insurance companies and taxpayers who may be deemed to have incurred or
continued indebtedness to purchase or carry the 2013B Bonds. Bond Counsel does not express any
opinion as to any such collateral tax consequences. Prospective purchasers of the 2013B Bonds should
consult their own tax advisors as to the collateral tax consequences.
Proposed legislation is considered from time to time by the United States Congress that, if
enacted, would affect the tax consequences of owning the 2013B Bonds. No assurance can be given that
any future legislation, or clarifications or amendments to the Code, if enacted into law, will not contain
provisions which could cause the interest on the 2013B Bonds to be subject directly or indirectly to
federal or State of North Carolina income taxation, adversely affect the market price or marketability of
the 2013B Bonds or otherwise prevent the owners of the 2013B Bonds from realizing the full current
benefit of the status of the interest on the 2013B Bonds.
Bond Counsel is further of the opinion that, under existing law, the interest on the 2013B Bonds
is exempt from State of North Carolina income taxation.
Bond Counsel's opinion is based on existing law, which is subject to change. Such opinion is
further based on factual representations made to Bond Counsel as of the date thereof. Bond Counsel
assumes no duty to update or supplement its opinion to reflect any facts or circumstances that may
thereafter come to Bond Counsel's attention, or to reflect any changes in law that may thereafter occur or
become effective. Moreover, Bond Counsel's opinion is not a guarantee of a particular result, and is not
binding on the Internal Revenue Service or the courts; rather, such opinion represents Bond Counsel's
professional judgment based on its review of existing law, and in reliance on the representations and
35
covenants that Bond Counsel deems relevant to such opinion. Bond Counsel's opinion expresses the
professional judgment of the attorneys rendering the opinion regarding the legal issues expressly
addressed therein. By rendering its opinion, Bond Counsel does not become an insurer or guarantor of the
result indicated by that expression of professional judgment, of the transaction on which the opinion is
rendered, or of the future performance of the City, nor does the rendering of such opinion guarantee the
outcome of any legal dispute that may arise out of the transaction.
ORIGINAL ISSUE DISCOUNT
As indicated on the inside cover page, the 2013B Bonds maturing on July 1, 20__ (collectively,
the "OID Bonds"), are being sold at initial offering prices which are less than the principal amount
payable at maturity. Under the Code, the difference between (a) the initial offering prices to the public
(excluding bond houses and brokers) at which a substantial amount of each maturity of the OID Bonds is
sold and (b) the principal amount payable at maturity of such OID Bonds, constitutes original issue
discount treated as interest which will be excluded from the gross income of the owners of such OID
Bonds for federal income tax purposes.
In the case of an owner of the OID Bond, the amount of original issue discount on such OID
Bond is treated as having accrued daily over the term of such OID Bond on the basis of a constant yield
compounded at the end of each accrual period and is added to the owner's cost basis of such OID Bond in
determining, for federal income tax purposes, the gain or loss upon the sale, redemption or other
disposition of such OID Bond (including its sale, redemption or payment at maturity). Amounts received
upon the sale, redemption or other disposition of an OID Bond which are attributable to accrued original
issue discount on such OID Bonds will be treated as interest exempt from gross income, rather than as a
taxable gain, for federal income tax purposes, and will not be a specific item of tax preference for
purposes of the federal alternative minimum tax imposed on corporations and individuals. However, it
should be noted that with respect to certain corporations (as defined for federal income tax purposes), a
portion of the original issue discount that accrues to such corporate owners of an OID Bond in each year
will be taken into account in determining the adjusted current earnings for the purpose of computing the
federal alternative minimum tax imposed on such corporations and may result in other collateral federal
income tax consequences for certain taxpayers in the year of accrual. Consequently, corporate owners of
an OID Bond should be aware that the accrual of original issue discount on any OID Bond in each year
may result in a federal alternative minimum tax liability or other collateral federal income tax
consequences, even though such corporate owners may not have received any cash payments attributable
to such original issue discount in such year.
Original issue discount is treated as compounding semiannually (which yield is based on the
initial public offering price of such OID Bond) at a rate determined by reference to the yield to maturity
of each individual OID Bond. The amount treated as original issue discount on an OID Bond for a
particular semiannual accrual period is equal to (a) the product of (i) the yield to maturity for such OID
Bond (determined by compounding at the close of each accrual period) and (ii) the amount which would
have been the tax basis of such OID Bond at the beginning of the particular accrual period if held by the
original purchaser, less (b) the amount of interest payable on such OID Bond during the particular accrual
period. The tax basis is determined by adding to the initial public offering price on such OID Bond the
sum of the amounts which have been treated as original issue discount for such purposes during all prior
accrual periods. If an OID Bond is sold between semiannual compounding dates, original issue discount
which would have accrued for that semiannual compounding period for federal income tax purposes is to
be allocated in equal amounts among the days in such compounding period.
The Code contains additional provisions relating to the accrual of original issue discount in the
case of owners of the OID Bonds who subsequently purchase any OID Bonds after the initial offering or
at a price difference from the initial offering price during the initial offering of the 2013B Bonds. Owners
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of OID Bonds should consult their own tax advisors with respect to the precise determination for federal
and state income tax purposes of the amount of original issue discount accrued upon the sale, redemption
or other disposition of an OID Bond as of any date and with respect to other federal, state and local tax
consequences of owning and disposing of an OID Bond. It is possible that under the applicable
provisions governing the determination of state or local taxes, accrued original issue discount on an OID
Bond may be deemed to be received in the year of accrual even though there will not be a corresponding
cash payment attributable to such original issue discount until a later year.
ORIGINAL ISSUE PREMIUM
As indicated on the inside cover page, the 2013B Bonds maturing on July 1, 20__ (collectively,
the "Premium Bonds"), are being sold at initial offering prices which are in excess of the principal amount
payable at maturity. The difference between (a) the initial offering prices to the public (excluding bond
houses and brokers) at which a substantial amount of the Premium Bonds is sold and (b) the principal
amount payable at maturity of such Premium Bonds constitutes original issue premium, which original
issue premium is not deductible for federal income tax purposes. In the case of an owner of a Premium
Bond, however, the amount of the original issue premium which is treated as having accrued over the
term of such Premium Bond is reduced from the owner's cost basis of such Premium Bond in
determining, for federal income tax purposes, the taxable gain or loss upon the sale, redemption or other
disposition of such Premium Bond (whether upon its sale, redemption or payment at maturity). Owners
of Premium Bonds should consult their tax advisors with respect to the determination, for federal income
tax purposes, of the "adjusted basis" of such Premium Bonds upon any sale or disposition and with
respect to any state or local tax consequences of owning a Premium Bond.
FINANCIAL ADVISOR
DEC Associates, Inc, Charlotte, North Carolina, has served as financial advisor to the City in
connection with the issuance and sale of the 2013B Bonds.
UNDERWRITING
The underwriters for the 2013B Bonds are Wells Fargo Securities and Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
The Underwriters have agreed under the terms of a Bond Purchase Agreement to purchase all of
the 2013B Bonds, if any of the 2013B Bonds are to be purchased, at a purchase price equal to 100% of
the principal amount of the 2013B Bonds, less an underwriters' discount of $________ plus a net original
issue premium of $________. The Underwriters' obligation to purchase the 2013B Bonds is subject to
certain terms and conditions set forth in such Bond Purchase Agreement.
Wells Fargo Securities is the trade name for certain capital markets and investment banking
services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank, National
Association ("WFBNA"). WFBNA, one of the underwriters of the 2013B Bonds, has entered into an
agreement (the "Distribution Agreement") with Wells Fargo Advisors, LLC ("WFA") for the retail
distribution of certain municipal securities offerings, including the 2013B Bonds. Pursuant to the
Distribution Agreement, WFBNA will share a portion of its underwriting compensation with respect to
the 2013B Bonds with WFA. WFA is also a subsidiary of Wells Fargo & Company.
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RELATED PARTIES
Parker Poe Adams & Bernstein LLP is serving as bond counsel for the City and, from time to
time it and McGuireWoods LLP, counsel to the Underwriters, have represented the Underwriters as
counsel in other financing transactions. Neither the City nor the Underwriters have conditioned the future
employment of either of these firms in connection with any proposed financing issues for the City or for
the Underwriters on the successful execution and delivery of the 2013B Bonds.
MISCELLANEOUS
Any statements in the Official Statement involving matters of opinion or estimates, whether or not
expressly so stated, are intended as such and not as representations of fact.
Reference herein to the State Constitution and legislative enactments are only brief outlines of
certain provisions thereof and do not purport to summarize or describe all provisions thereof.
This Official Statement has been duly authorized by the Local Government Commission of North
Carolina and the City Council of the City.
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APPENDIX A
THE NORTH CAROLINA LOCAL GOVERNMENT COMMISSION
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APPENDIX A
THE NORTH CAROLINA LOCAL GOVERNMENT COMMISSION
The Local Government Commission (the "Commission") is composed of nine members: the State
Treasurer, the Secretary of State, the State Auditor, the Secretary of Revenue and five others by
appointment (three by the Governor, one by the General Assembly upon recommendation of the President
Pro Tempore of the Senate and one by the General Assembly upon recommendation of the Speaker of the
House of Representatives). The State Treasurer serves as Chairman and selects the Secretary of the
Commission, who heads the administrative staff serving the Commission.
A major function of the Commission is the approval, sale and delivery of substantially all North
Carolina local government bonds and notes. A second key function is monitoring certain fiscal and
accounting standards prescribed for units of local government by The Local Government Budget and
Fiscal Control Act. In addition, the Commission furnishes, upon request, on -site assistance to units of
local government concerning existing financial and accounting systems as well as aid in establishing new
systems. Further, educational programs and materials are provided for local officials concerning finance
and cash management.
Before any unit of local government can incur bonded indebtedness, the proposed bond issue must
be approved by the Commission. In determining whether to give such approval the Commission may
consider, among other things, the unit's debt management procedures and policies, its compliance with
The Local Government Budget and Fiscal Control Act and its ability to service the proposed debt. All
general obligation issues are customarily sold on the basis of formal sealed bids submitted at the
Commission's offices in Raleigh and are subsequently delivered to the successful bidder by the
Commission. The Commission maintains records for all units of local government of principal and
interest payments coming due on bonded indebtedness in the current and future years and monitors the
payment by the units of local government of debt service through a system of monthly reports.
As a part of its role in assisting and monitoring the fiscal programs of units of local government, the
Commission attempts to ensure that the units of local government follow generally accepted accounting
principles, systems and practices. The Commission's staff also counsels the units of local government in
treasury and cash management, budget preparation and investment policies and procedures. Educational
programs, in the form of seminars or classes, are also provided by the Commission in order to accomplish
these tasks. The monitoring of the financial systems of units of local government is accomplished
through the examination and analysis of the annual audited financial statements and other required
reports. The Local Government Budget and Fiscal Control Act requires each unit of local government to
have its accounts audited annually by a certified public accountant or by an accountant certified by the
Commission as qualified to audit local government accounts. A written contract must be submitted to the
Secretary of the Commission for his approval prior to the commencement of the audit.
The Commission has the statutory authority to impound the books and records of any unit of local
government and assume full control of all its financial affairs (a) when the unit defaults on any debt
service payment or, in the opinion of the Commission, will default on a future debt service payment if the
financial policies and practices of the unit are not improved or (b) when the unit persists, after notice and
warning from the Commission, in willfully or negligently failing or refusing to comply with the
provisions of The Local Government Finance Act. When the Commission takes action under this
authority, the Commission is vested with all of the powers of the governing board of the unit of local
government as to the levy of taxes, expenditure of money, adoption of budgets and all other financial
powers conferred upon such governing board by law.
In addition, if a unit of local government fails to pay any installment of principal or interest on its
outstanding debt on or before its due date and remains in default for 90 days, the Commission may take
A-1
such action as it deems advisable to investigate the unit's fiscal affairs, consult with its governing board
and negotiate with its creditors in order to assist the unit in working out a plan for refinancing, adjusting
or compromising such debt. When a plan is developed that the Commission finds to be fair and equitable
and reasonably within the ability of the unit of local government to meet, the Commission will enter an
order finding that the plan is fair, equitable and within the ability of the unit to meet and will advise the
unit to take the necessary steps to implement such plan. If the governing board of the unit declines or
refuses to do so within 90 days after receiving the Commission's advice, the Commission may enter an
order directing the unit to implement such plan and may apply for a court order to enforce such order.
When a refinancing plan has been put into effect, the Commission has the authority (a) to require any
periodic financial reports on the unit's financial affairs that the Secretary deems necessary and (b) to
approve or reject the unit's annual budget ordinance. The governing board of the unit of local
government must also obtain the approval of the Secretary of the Commission before adopting any annual
budget ordinance. The power and authority granted to the Commission as described in this paragraph
will continue with respect to a defaulting unit of local government until the Commission is satisfied that
the unit has performed or will perform the duties required of it in the refinancing plan and until
agreements made with the unit's creditors have been performed in accordance with such plan.
A-2
APPENDIX B
CERTAIN CONSTITUTIONAL, STATUTORY AND ADMINISTRATIVE PROVISIONS
GOVERNING OR RELEVANT TO THE INCURRENCE OF GENERAL OBLIGATION BONDED
INDEBTEDNESS BY UNITS OF LOCAL GOVERNMENT OF THE STATE OF NORTH
CAROLINA
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APPENDIX B
CERTAIN CONSTITUTIONAL, STATUTORY, AND ADMINISTRATIVE PROVISIONS
GOVERNING OR RELEVANT TO THE INCURRENCE OF GENERAL OBLIGATION
BONDED INDEBTEDNESS BY UNITS OF LOCAL GOVERNMENT OF THE STATE OF
NORTH CAROLINA
Constitutional Provisions
The North Carolina Constitution (the "Constitution") requires the General Assembly to enact general
laws relating to the borrowing of money secured by a pledge of the faith and credit and the contracting of
other debts by counties, cities and towns, special districts and other units, authorities and agencies of local
government and prohibits enactment of special or local acts on this subject. These general laws may be
enacted for classes defined by population or other criteria.
The General Assembly has no power under the Constitution to authorize any unit of local
government to contract debts secured by a pledge of its faith and credit unless approved by a majority of
the qualified voters of the unit who vote thereon, except for the following purposes:
(a)
to fund or refund a valid existing debt;
(b)
to supply an unforeseen deficiency in the revenue;
(c)
to borrow in anticipation of the collection of taxes due and payable within the current fiscal
year to an amount not exceeding 50% of such taxes;
(d)
to suppress riots or insurrections;
(e)
to meet emergencies immediately threatening the public health or safety, as conclusively
determined in writing by the Governor; and
(f)
for purposes authorized by general laws uniformly applicable throughout the State, to the
extent of two--thirds of the amount by which the issuing unit's outstanding indebtedness
was reduced during the next preceding fiscal year.
The Constitution requires that the power of taxation be exercised in a just and equitable manner, for
public purposes only, and never be surrendered, suspended or contracted away. Since general obligation
bonded indebtedness pledges the taxing power, it may therefore be incurred only for "public purposes."
The North Carolina Supreme Court determines what is and is not a public purpose within the meaning of
the Constitution.
The Constitution requires voter approval for any unit of local government to give or lend its credit in
aid of any person, association or corporation, and such lending of credit must be for public purposes as
authorized by general law. A loan of credit is defined by the Constitution as occurring when a unit of
local government exchanges its obligations with or in any way guarantees the debts of an individual,
association or private corporation.
The Constitution does not impose a limit on the total indebtedness of a unit of local government.
Of the sources of revenue available to units of local government, only the property tax is subject to
special Constitutional regulation. The Constitution does not mandate a general property tax; rather, it
authorizes the General Assembly to classify property for taxation under two conditions: (1) each class of
B-1
property selected for taxation must be taxed by uniform rule and (2) every classification must be made by
general law uniformly applicable to every unit of local government. No class of property is accorded
exemption from ad valorem taxation by the Constitution except property belonging to the State, counties
and municipal corporations. The General Assembly may exempt cemeteries and property held for
educational, scientific, literary, cultural, charitable or religious purposes and, to a value not exceeding
$300, any personal property. The General Assembly may also exempt from taxation not exceeding
$1,000 in value of property used as the place of residence of the owner. Property of the United States is
exempt by virtue of the supremacy clause of the United States Constitution.
The Constitution requires that any property tax must be levied for purposes authorized by general
law uniformly applicable throughout the State, unless approved by a majority of the qualified voters of
the unit of local government who vote thereon.
Under the Constitution, property taxes levied for unit--wide purposes must be levied uniformly
throughout the territorial jurisdiction of the taxing unit, but the General Assembly may enact general laws
authorizing the governing body of any county, city or town to define territorial areas and to levy taxes
within those areas in order to finance, provide or maintain services, facilities and functions in addition to
or to a greater extent than those financed, provided or maintained for the entire county, city or town.
The Local Government Bond Act
No unit of local government has authority to incur general obligation bonded indebtedness otherwise
than in accordance with the limitations and procedures prescribed in The Local Government Bond Act,
G.S. Ch. 159, Art. 4 (the "Act") and G.S. Ch. 159, Art. 7 or to issue short-term general obligation notes
otherwise than in accordance with G.S. Ch. 159, Art. 9.
By statute, the faith and credit of the issuing unit are pledged for the payment of the principal of and
interest on all bonds issued under the Act according to their terms, and the power and obligation of the
issuing unit to levy taxes and raise other revenues for the prompt payment of installments of principal and
interest or for the maintenance of sinking funds is unrestricted as to rate or amount.
The revenues of each utility or public service enterprise owned or leased by a unit of local
government are required by statute to be applied in accordance with the following priorities: (1) to pay the
operating, maintenance and capital outlay expenses of the utility or enterprise; (2) to pay when due the
interest on and principal of outstanding bonds issued for capital projects that are or were a part of the
utility or enterprise; and (3) for any other lawful purpose. In its discretion, an issuing unit may pledge the
revenues (or any portion thereof) of a utility or enterprise for the payment of the interest on and principal
of bonds issued under the Act to finance capital projects that are to become a part of the utility or
enterprise.
Bonds may be issued only for purposes specifically authorized by the Act.
No bonds may be issued under the Act without the approval of the Local Government Commission.
The criteria for approval have been summarized in the description of the powers of the Commission in
Appendix B to this Official Statement.
The Act provides that, subject to certain exceptions, no bond order may be adopted by the governing
body of a unit of local government unless it appears from a sworn statement of debt filed in connection
therewith that the net debt of the unit does not exceed 8% of the assessed value of property subject to
taxation by the issuing unit. Under current law, the mandated assessment ratio is 100% of appraised
value. This limitation does not apply to funding and refunding bonds, bonds issued for water, gas or
electric power purposes, or two or more of such purposes, certain sanitary sewer, sewage disposal or
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sewage purification plant bonds, bonds or notes issued for erosion control purposes or bonds or notes
issued for the purposes of erecting jetties or other protective works to prevent encroachment by certain
bodies of water.
"Net debt" is defined as gross debt less certain statutory exclusions and deductions. Gross debt,
excluding therefrom debt incurred or to be incurred in anticipation of tax or other revenue collections or
in anticipation of the sale of bonds other than funding or refunding bonds, is the sum of (i) outstanding
debt evidenced by bonds, (ii) bonds authorized by orders introduced but not yet adopted, (iii) unissued
bonds authorized by adopted orders and (iv) outstanding debt not evidenced by bonds. From gross debt
are deducted (a) funding and refunding bonds (both those authorized by orders introduced but not yet
adopted and those authorized but not yet issued), (b) the amount of money held in sinking funds or
otherwise for the payment of any part of the principal of gross debt other than debt incurred for the
purposes set forth in clause (e) below, (e) the amount of bonded debt included in gross debt and incurred,
or to be incurred, for water, gas or electric light or power purposes, or two or more of such purposes, and
certain bonded debt for sanitary sewer purposes, and (d) the amount of uncollected special assessments
theretofore levied or estimated to be levied for local improvements for which any part of the gross debt
(that is not otherwise deducted) was or is to be incurred, to the extent that the special assessments, when
collected, will be applied to the payment of any part of the gross debt. Revenue bond indebtedness is not
included in, nor deducted from, gross debt.
Bonds may be issued under an approved bond order at any time within seven years after the bond
order takes effect. The effective date of the bond order is the date of formal passage of the bond order in
the case of bonds that do not require voter approval and the date of voter approval in all other cases. If
the issuance of bonds is prevented or prohibited by any order of any court or certain litigation, the period
of time is extended by the length of time elapsing between the date of institution of the action or litigation
and the date of its final disposition. The General Assembly may, prior to the expiration of the maximum
period, also extend such period. In addition, such period may be extended from seven to ten years by the
governing body of a unit of local government under certain circumstances with approval by the
Commission. In any such case, no further voter approval is required.
The Commission has by regulation established the maximum useful lives of capital projects that
may be financed by bonds. The maturity dates of any bonds issued for any project may not exceed the
maximum useful life of the project, measured from the date of the bonds.
All bonds must mature in annual installments, the first of which must be payable not more than three
years after the date of the bonds and the last of which must be payable within the maximum useful life of
the project. Payment of an installment of principal may be provided for by the maturity of a bond,
mandatory redemption of principal prior to maturity, a sinking fund, a credit facility or any other means
satisfactory to the Commission. In addition, the Act prohibits "balloon installments" in that it requires
that no installment of any issue may be greater than four times as large in amount as the smallest prior
installment of the same issue. Bonds authorized by two or more bond orders may be consolidated into a
single issue, and bonds of each issue may be issued from time to time in series with different provisions
for each series. Each series is deemed a separate issue for the purposes of the limitations discussed in this
paragraph. Bonds may be made payable from time to time on demand or tender for purchase as provided
in the Act, and bonds may be made subject to redemption prior to maturity, with or without premium.
The requirement that the bonds must mature in annual installments and the prohibition against balloon
installments as described above does not apply to (a) refunding bonds, (b) bonds purchased by a State or
federal agency or (c) bonds the interest on which is or may be includable in gross income for purposes of
federal income tax, provided that the dates on which such bonds are stated to mature are approved by the
Commission and the Commission may require that payment of all or any part of the principal of any
interest and any premium on such bond be provided for by mandatory sinking fund redemption.
B-3
Short-Term Obligations
Bond Anticipation Notes - Units of local government are authorized to issue short-term notes in
anticipation of the sale of bonds validly authorized for issuance within the maximum authorized amount
of the bonds. General obligation bond anticipation notes must be payable not later than seven years after
the effective date of the bond order and shall not be renewed or extended beyond that time unless the
period of time within which the bonds may be issued has been extended as mentioned above. The faith
and credit of the issuing unit are pledged for the payment of general obligation bond anticipation notes,
and the power and obligation of the issuing unit to levy taxes and raise other revenues for the prompt
payment of such notes is unrestricted as to rate or amount. The proceeds of each general obligation bond
issue are also pledged for the payment of any notes issued in anticipation of the sale thereof, and any such
notes shall be retired from the proceeds of the bonds as a first priority.
Tax Anticipation Notes - Units of local government having the power to levy taxes are authorized to
borrow money for the purpose of paying appropriations made for the current fiscal year in anticipation of
the collection of taxes due and payable within the current fiscal year, and to issue negotiable notes in
evidence thereof. Any tax anticipation note must mature not later than 30 days after the close of the fiscal
year in which it is issued and may not be renewed beyond that time. No tax anticipation note shall be
issued by the unit of local government if the amount thereof, together with the amount of all authorized or
outstanding tax anticipation notes on the date the note is authorized, would exceed 50% of the amount of
taxes uncollected as of the date of the proposed note authorization. The faith and credit of the issuing unit
are pledged for the payment of tax anticipation notes, and the power and obligation of the issuing unit to
levy taxes and raise other revenues for the prompt payment of such notes is unrestricted as to rate or
amount.
Revenue Anticipation Notes - Units of local government are authorized to borrow money for the
purpose of paying appropriations made for the current fiscal year in anticipation of the receipt of the
revenues, other than taxes, estimated in their budgets to be realized in cash during such fiscal year, and to
issue negotiable notes in evidence thereof. Any revenue anticipation note must mature not later than 30
days after the close of the fiscal year in which it is issued and may not be renewed beyond that time. No
revenue anticipation note shall be issued if the amount thereof, together with the amount of all revenue
anticipation notes authorized or outstanding on the date the note is authorized, would exceed 80% of the
revenues of the issuing unit, other than taxes, estimated in its budget to be realized in cash during such
fiscal year. Revenue anticipation notes are special obligations of the issuing unit, and neither the credit
nor the taxing power of the issuing unit may be pledged for the payment of revenue anticipation notes.
Grant Anticipation Notes - Units of local government are authorized to borrow money for the
purpose of paying appropriations made for capital projects in anticipation of the receipt of moneys from
grant commitments for such capital projects from the State or the United States or any agencies of either,
and to issue negotiable notes in evidence thereof. Grant anticipation notes must mature not later than 12
months after the estimated completion date of such capital project and may be renewed from time to time,
but no such renewal shall mature later than 12 months after the estimated completion date of such capital
project. No grant anticipation note may be issued if the amount thereof, together with the amount of all
other notes authorized or issued in anticipation of the same grant commitment, exceeds 90% of the unpaid
amount of said grant commitment. Grant anticipation notes are special obligations of the issuing unit, and
neither the credit nor the taxing power of the issuing unit may be pledged for the payment of grant
anticipation notes.
The Local Government Budget and Fiscal Control Act
The Local Government Budget and Fiscal Control Act, G.S. Ch. 159, Art. 3 (the "Fiscal Control
Act"), sets forth procedures for the adoption and administration of budgets of units of local government.
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The Fiscal Control Act also prescribes certain accounting and auditing requirements. The Fiscal Control
Act attempts to achieve close conformity with the accounting principles contained in the American
Institute of Certified Public Accountants' Industry Audit Guide, Audits of State and Local Government
Units.
Budget - The Fiscal Control Act requires the adoption of an annual balanced budget, which includes
all appropriations required for debt service and for eliminating any deficit. Any deficit is required to be
eliminated by the imposition of a property tax at a rate which will produce the revenue necessary to
balance revenues and appropriations in the budget. The Secretary of the Commission is required to notify
each local government unit by May 1 of each year of its debt service obligations for the coming fiscal
year, including sums to be paid into sinking funds. At least 30 days prior to the due date of each
installment of principal or interest on outstanding debt, the Secretary must notify each unit of the payment
due, the due date, the place which the payments should be sent, and a summary of the legal penalties for
failing to meet debt service obligations.
The Fiscal Control Act directs that the budget ordinance be adopted by the governing board of the
unit of local government by July 1 of the fiscal year to which it applies. There is no penalty for failure to
meet this deadline. The fiscal year begins July 1 and ends the following June 30. The governing board is
required to hold a public hearing concerning the budget prior to its adoption. A project ordinance
authorizing all appropriations necessary for the completion of a capital project or a grant project may be
adopted in lieu of annual appropriations for each project and need not be readopted in any subsequent
fiscal year.
Fiscal Control - The Fiscal Control Act sets forth certain fiscal control requirements concerning the
duties of the finance officer; the system of accounting; budgetary accounting for appropriations;
investment of idle funds; semiannual reports of financial information to the Commission; and an annual
independent audit.
Except as otherwise provided by regulation of the Commission, the Fiscal Control Act requires a
unit of local government to use the modified accrual basis of accounting in recording transactions. The
Commission is empowered to prescribe regulations as to (a) features of accounting systems; (b) bases of
accounting, including identifying in detail the characteristics of a modified accrual basis, identifying what
revenues are susceptible to accrual, and permitting or requiring the use of a basis other than modified
accrual in a fund that does not account for the receipt of a tax; and (c) definitions of terms not clearly
defined in the Fiscal Control Act.
The Fiscal Control Act requires each unit of local government to have its accounts audited annually
by an independent certified public accountant or by an independent accountant certified by the
Commission as qualified to audit local government accounts. The audit must be conducted pursuant to a
written contract containing the form, terms and fees for the audit. The Secretary of the Commission must
approve this contract before the audit may begin and must approve invoices for the audit fee. Approval of
final payment is not given until the audit report is rendered in accordance with the requirements of the
contract. All audits are to be performed in conformity with generally accepted auditing standards.
Major General Fund Revenue Sources
Ad Valorem Tax - Each unit of local government having authority to incur general obligation bonded
indebtedness also has authority to levy ad valorem taxes on property having a situs within the unit. The
ad valorem tax is levied on classes of property selected for taxation by the General Assembly through
laws that are uniform throughout the State. The statute governing the listing, appraisal and assessment of
property for taxation and the collection of taxes levied is the Machinery Act, G.S. Ch. 105, Subchapter II.
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Tax Base - The basic class of property selected for taxation comprises all real and tangible personal
property. Thus, unless a class of property is specifically excluded from the property tax base, exempted
from taxation or specifically accorded some kind of preferential tax treatment, it must be taxed by each
unit of local government exercising its authority to levy property taxes. Several classes of property have
been selected for exclusion from the property tax base, exemption from taxation or taxation at reduced
valuation or for special appraisal standards. The most significant of these classes are:
(1)
Tangible household personal property is excluded from the property tax base.
(2)
Stocks and bonds, accounts receivable and certain other types of intangible personal
property are excluded from the property tax base.
(3)
Property belonging to certain qualified owners and used wholly and exclusively for
religious, educational, charitable, cultural, fraternal or civic purposes is wholly exempted
from taxation. Property belonging to the United States, the State and units of local
government is also exempt from taxation.
(4)
Real and personal property owned by certain nonprofit homes for the aged, sick or infirm
are excluded from property taxation, provided such homes are exempt from the State
income tax.
(5)
Certain kinds of tangible personal property held for business purposes are excluded from
taxation, the most important of which are:
(a)
Manufacturers' inventories (raw materials, goods in process, finished
goods, materials or supplies consumed in processing, crops, livestock, poultry, feed
used in production of livestock and poultry, and other agricultural or horticultural
products held for sale) and inventories of retail and wholesale merchants (tangible
personal property held for sale and not manufactured, processed or produced by the
merchant).
(b)
Property imported through a North Carolina seaport terminal and stored at such
terminal for less than 12 months awaiting further shipment.
(c)
Certain pollution abatement and resource recovery equipment.
(d)
"Bill and hold" goods manufactured in North Carolina and held by the manufacturer
for shipment to a nonresident customer.
(e)
Nuclear materials held for or in the process of manufacture or processing or held by
the manufacturer for delivery.
(f)
Motor vehicle frames that belong to nonresidents and enter the State temporarily for
the purpose of having a body mounted thereon.
(6)
A homestead exemption of the greater of $25,000 or 50% of the appraised value of the
residence is allowed if the property owner is a North Carolina resident, has income for
the preceding calendar year of not more than the eligibility limit, and is at least 65 years
of age or totally and permanently disabled.
(7)
Certain agricultural, horticultural and forest land is eligible for taxation at its value for
agricultural, horticultural or forest use.
B-6
Appraisal Standard - All property must be appraised at its true value in money, except agricultural,
horticultural and forest land eligible for appraisal at its present-use value. Property must be assessed for
taxation at 100% of its appraised value.
Frequency of Appraisal - Real property must be appraised at least once in every eight years. The
requirement of octennial real property revaluations has been enforced since 1965, and no taxing unit has
been permitted to postpone a scheduled revaluation since that time. Many units revalue real property
more frequently than every eight years. Personal property is appraised annually.
Tax Day - All real and tangible personal property (other than most motor vehicles) subject to ad
valorem taxation must be listed for taxation as of January 1 each year. Motor vehicles, with certain
exceptions, must be listed annually in the name of the record owner on the day on which the current
vehicle registration is renewed or the day on which the application is submitted for a new vehicle
registration.
Tax Levy - Property taxes are levied in conjunction with the adoption of a budget which covers a
July 1 to June 30 fiscal year. The property tax levy must be sufficient to raise during the fiscal year a sum
of money equal to the difference between total appropriations and the total estimated receipts of all other
revenues. In estimating the percentage of the levy that will be collected during the fiscal year, the taxing
unit is prohibited from estimating a greater collection percentage than that of the prior fiscal year.
The tax rate may not exceed $1.50 per $100 assessed valuation unless the voters approve a higher
rate. Tax levies by counties for the following purposes are not counted against the rate limit: courts, debt
service, deficits, elections, jails, schools, mandated social services programs and joint undertakings with
any other taxing unit with respect to any of these. Tax levies by cities for the following purposes are not
counted against the rate limit: debt service, deficits and civil disorders.
Tax Collection - The taxing unit has a lien by operation of law on all real property within its
jurisdiction that attaches as of January 1 for all taxes levied for the fiscal year beginning on the following
July 1. Taxes levied on a parcel of real property are a lien on that parcel but not on other real property
owned by the taxpayer. Taxes levied on personal property are a lien on all real property owned by the
taxpayer within the taxing unit. The tax lien enjoys absolute priority against all other liens and claims
whatsoever except, in limited circumstances, federal tax liens and certain other prior liens and perfected
security interests.
Except for motor vehicles, taxes fall due on September 1 following the date of levy and are payable
at par until January 6. For the period January 6 to February 1, interest accrues at the rate of 2%, and for
the period February 1 until the principal amount of the taxes, the accrued interest, and any penalties are
paid, interest accrues at the rate of 3/4% per month or fraction thereof. Each taxing unit may enforce
collection of its tax levy by (a) foreclosure of the lien on real property, (b) levy and sale of tangible
personal property and (c) garnishment and attachment of intangible personal property. There is no right
of redemption of real property sold in a tax foreclosure action.
Discounts for early payment of property taxes are allowed by some taxing units. To allow such
discounts, the unit must adopt a discount schedule which must then be approved by the Ad Valorem Tax
Division of the Department of Revenue.
No taxing unit has authority to release or refund any valid tax claim. The members of any
governing board voting to make an unlawful release or refund of property taxes are personally liable for
the amount unlawfully released or refunded.
B-7
The Commission periodically publishes statistics on the percentage of property tax levies collected
before the close of the fiscal year for which levied. These statistics are available upon request.
Although the State has not levied a general property tax in more than forty years, it does continue
general oversight of property tax administration by units of local government through the Ad Valorem
Tax Division of the Department of Revenue. The Division has three main functions: (1) it appraises the
property of electric power, gas, telephone and telegraph companies, the rolling stock of bus companies
and motor freight carriers and the flight equipment of airlines; (2) it oversees local property tax
administration; and (3) it provides staff assistance to the Property Tax Commission, an administrative
appellate agency hearing listing and valuation appeals from local taxing units.
Local Government Sales and Use Taxes
The one percent local sales and use tax authorized by the Local Government Sales and Use Tax Act
is levied by 99 of the 100 counties of the State (Mecklenburg County levies a virtually identical tax under
a 1967 local act). The local sales tax base is the same as the State general sales tax base excluding
exempt food sales, except that for goods sold to out-of-county purchasers for delivery out-of-county and
sales of certain utility services. The situs of a transaction is the location of the retailer's place of business.
Sales of tangible personal property delivered to out-of-county purchasers will be subject to sales tax in the
county in which the retailer's place of business is located and will not be subject to the use tax of the
destination county. The tax is collected by the State on behalf of local government, and the net proceeds,
after deduction of the cost of collection and administration, are returned to the county of collection. The
county governing board selects one of two formulas for allocation of the tax among the county and the
municipalities therein. One formula calls for allocation on the basis of population and the other on the
basis of ad valorem tax levy.
Counties are also authorized under the Supplemental Local Government Sales and Use Tax Act to
levy a one-half percent sales tax. This sales tax is collected by the State, allocated to counties on a per
capita basis and divided among each county and the municipalities located therein in accordance with the
method by which the one percent sales and use taxes are distributed. An adjustment factor is applied to
the per capita allocation for each county. All 100 counties levy this one-half percent supplemental sales
tax.
Counties are also authorized under the Additional Supplemental Local Government Sales and Use
Tax Act to levy an additional one-half percent sales tax. This additional supplemental sales tax is
collected and distributed on the same basis as the supplemental one-half percent tax until October 1, 2009.
On October 1, 2009 the distribution will switch from per capita allocation to point-of-origin allocation.
During the first 16 fiscal years in which this tax is in effect, 60% of the revenue derived by counties from
this tax is required to be used for public school capital outlay purposes or to retire any indebtedness
incurred by the county for these purposes during the period beginning five years prior to the date the taxes
took effect. Counties may be relieved of the percentage restriction if it can demonstrate to the satisfaction
of the Local Government Commission that it is able to meet the aforementioned capital outlay needs
without resorting to proceeds of such tax. All 100 counties levy this additional supplemental one--half
percent sales tax.
Counties are also currently authorized under the Third One-Half Cent Local Government Sales and
Use Tax Act, to levy an additional one-half cent local option sales tax. However, as a part of a Medicaid
relief package for the counties, this third one-half cent tax will be replaced by the Local Government Hold
Harmless Provision. Effective until October 1, 2008, this tax has been reduced to one-fourth cent and the
remaining one-fourth cent tax will be eliminated effective October 1, 2009. The phase out of this tax is
part of an effort to allow the State to assume the county's portion of the Medicaid expense over a three
year period. The State must guarantee that each county's gain will be at least $500,000 for each fiscal year
B-8
as a result of the State assuming the county Medicaid share. After the Third One-Half Cent tax is
completely phased out on October 1, 2009, if the amount of a county's Medicaid cost assumed by the
State plus $500,000 is less than the county's repealed local sales tax amount, the State must reimburse the
county for the amount of the difference. Counties are to hold municipalities that are incorporated as of
October 1, 2008, harmless for the phase-out of the Third One-Half Cent tax. The hold harmless funds are
paid to municipalities by the Secretary of Revenue each month from funds obtained by reducing the
county's monthly allocation of the local sales and use one per cent tax proceeds. The Medicaid relief
package also provides for corresponding increases in the State sales tax to accompany the reduction of the
Third One-Half Cent tax effective October 1, 2008 and its repeal on October 1, 2009. Thus, the State sales
tax will increase by one-quarter cent on October 1, 2008, and by another one quarter cent on October 1,
2009.
Alcoholic Beverage Control Store Profits
The sale of liquor in the State is a government monopoly. Stores are operated by counties and
municipalities that have been authorized and have chosen to establish them. The net profits of these
stores are distributed to the units of local government in which they operate. The General Assembly has
enacted numerous local acts prescribing different formulas for the distribution of profits. Local elections
are authorized to permit sales of liquor by the drink by qualified restaurants and clubs. An additional tax
of $20 per four liters is levied on liquor purchased by restaurants or clubs for resale as mixed beverages,
and $10 of the $20 is paid to the State's General Fund.
Intragovernmental Shared Revenues
The excise tax levied by the State on beer, fortified and unfortified wine is shared with counties and
municipalities in which the sale of these beverages is lawful. Counties and cities where beer and wine are
sold receive on a per capita basis an annual distribution equal to the following percentages of the net
amount of excise taxes collected on the sale of malt beverages and wine during the 12-month period
ending March 31 each year: 23.75% of beer tax revenue, 62% of unfortified wine tax revenue and 22%
of fortified wine tax revenue. A city or a county is eligible to share in both beer and wine excise tax
revenues if beer and wine may legally be sold within its boundaries. If only one beverage may be sold, the
city or county shares only in the excise tax for that beverage. Two hundred thousand dollars ($200,000)
from the net proceeds of the excise tax collected on unfortified wine is appropriated quarterly to the
Department of Commerce to be used to promote the North Carolina grape and wine industry. The local
share of these collections is computed on the net proceeds after deducting the transfer to the Department
of Commerce. Some counties and municipalities do not permit the sale of either beer or wine and thus do
not receive any share of this revenue. In balancing the State Budget for 2009-11, the North Carolina
General Assembly reduced amounts of beer and wine tax revenues distributed to cities and counties
effective only for the fiscal year 2009-10 by changing the distributions percentages noted above to
20.47% of the beer tax revenue, 49.44% of the unfortified wine tax revenue and 18% of the fortified wine
tax revenue.
Under the utility franchise tax law, the State levies a gross receipts tax on certain public utilities at
rates of 3.22% to 6%. Cities receive quarterly distributions equal to 3.09% of taxable gross receipts from
sales within municipalities of electric power during the preceding calendar quarter, minus one-fourth of
the city's hold back amount and one fourth of the city's proportionate share of the annual cost to
administer.
The State levies a sales tax on the gross receipts of telecommunications and ancillary services at a
statutorily prescribed rate. The rate is equal to the sum of the State's sales tax rate and the rates of local
sales taxes levied in all 100 Counties. Each quarter, the State distributes to cities 18.7. percent of these
proceeds from that quarter, minus $2,620,948.
B-9
The State imposes a State excise tax on the distribution of piped natural gas, with statutorily
prescribed rates that decrease with the amount of piped natural gas used by each customer. The State
distributes quarterly to each city served by piped natural gas one-half of the tax attributed to sales within
that city.
Cities and towns receive annually an allocation equal to the amount produced during the year by a
1.75 cents tax on each gallon of motor fuel. Payments are made from the collections of the prior fiscal
year. Under the present distribution formula, the funds are allocated 75% on the basis of population of
eligible municipalities and 25% on the basis of mileage of public streets not a part of the State highway
system.
Effective January 1, 2007, the local cable franchise system was replaced with a State-issued
franchise system. All cities and counties receive shares of three state sales tax revenues-currently 7.7
percent of the net proceeds of taxes collected on telecommunications and ancillary services, 23.6 percent
of the net proceeds of taxes collected on video programming services (other than direct-to-home satellite
service), and 37.1 percent of the net proceeds of taxes collected on direct-to-home satellite services. The
distributions can be used for any public purpose after earmarking provisions are met. The first $2 million
of the local share of the proceeds from these three taxes must be used by the local governments to support
local public, educational, or governmental (PEG) access channels. A city or county that imposed
subscriber fees during the first six months of the 2006-07 fiscal year must use a portion of the funds
distributed to it for the operation and support of PEG channels, equal to two times the amount of
subscriber fee revenue the county or city certifies it imposed during the period. In addition, a city or
county that used part of its franchise tax revenue in fiscal year 2005-06 for the operation and support of
PEG channels, or a publicly owned and operated television station, must continue the same level of
support.
State and Local Fiscal Relations
The State finances from State revenues (primarily individual income taxes, corporate income taxes
and sales taxes) several governmental programs that are largely financed from local revenues in other
states, thus decreasing reliance on the property tax for these purposes. The major programs of this nature
are as follows:
Public Schools and Community Colleges -- The State provides approximately 70% of the funds
required for current operating costs of the public school and community college systems, while county
government finances the greater portion of the capital costs of these systems. North Carolina school
administrative units do not have independent tax-levying authority. The local share of the costs of the
public school and community college systems are raised primarily by county government from its general
revenues.
Court System -- The State finances virtually all of the current operating costs of the General Court of
Justice. County government is required to provide courthouses, certain jails and related judicial facilities.
Correctional System -- The State finances all of the cost of correctional facilities used for
confinement of convicted felons and long--term (more than 30 days) misdemeanants. Counties and some
municipalities furnish jails for short--term misdemeanants and prisoners awaiting trial.
Highway System – The State finances the cost of public roads and highways outside corporate limits
of cities and towns. Effective July 2008, Counties may voluntarily participate in improvements to public
roads and highways. Within cities and towns, the State finances the cost of major thoroughfares and
streets connecting elements of the State highway System. Cities share responsibility with the State for
State-maintained roads inside city limits and take full responsibility for the remaining public streets
within town limits.
B-10
APPENDIX C
MANAGEMENT DISCUSSION AND ANALYSIS
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Management's Discussion and Analysis
The Management's Discussion and Analysis of the financial activities of the City, lifted from the
Comprehensive Annual Financial Report for the City for the fiscal year ended June 30, 2012, is included
in this Appendix. Management's Discussion and Analysis provides an objective and easily readable short
and long-term analysis of the City's financial activities based on currently known facts, decisions or
conditions. Management's Discussion and Analysis is not a required part of the Basic Financial
Statements but is supplementary information required by the Governmental Accounting Standards Board.
The independent auditors of the City have applied certain limited procedures, which consist primarily of
inquiries of management regarding the methods of measurement and presentation of the required
supplementary information. However, they did not audit this information and did not express an opinion
on it.
C-1
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C-2
MANAGEMENT’S DISCUSSION AND ANALYSIS
(Dollar Amounts in Millions)
This section of the City of Charlotte’s (City) annual financial report presents a narrative overview and
analysis of the City’s financial performance for the fiscal year ended June 30, 2012. Please read it in
conjunction with the transmittal letter at the front of this report and the City’s financial statements,
which follow this section.
FINANCIAL HIGHLIGHTS
The assets of the City exceeded its liabilities at the close of the most recent fiscal year by
$8,998.8, (net assets). Of this amount, $1,324.7 (unrestricted net assets) may be used to meet
the government’s ongoing obligations to citizens and creditors.
The overall financial position of the City improved in 2012 as evidenced by an increase in total net
assets of $272.3. This increase was from both governmental ($102.1) and business-type ($170.2)
activities.
As of the close of the current fiscal year, the City’s governmental funds reported combined ending
fund balances of $624.0, an increase of $5.4 in comparison with the prior year. This increase
resulted from increased property tax revenue.
Unassigned fund balance in the General fund was $88.4 at June 30, 2012 and represents a
traditional fund balance reserve maintained for emergencies, liquidity and overall financial
strength. This meets the City Council’s goal of 16 percent of the budget for fiscal year 2013. The
amount exceeding the City Council’s goal of 16 percent, $5.7, is committed.
The City maintained its AAA bond rating from all three major rating agencies.
OVERVIEW OF THE FINANCIAL STATEMENTS
This
discussion
and
analysis
serves as an introduction to the
Components of the Annual Financial Report
City’s basic financial statements.
The basic financial statements
present two different views of the
City
through
the
use
of
Management's
Discussion and
Analysis
Basic Financial Statements
government-wide statements and
fund financial statements.
diagram
shows
how
This
the
Governmentwide Financial
Statements
components of the annual report
are arranged and relate to one
another.
Summary
C-3
Fund Financial
Statements
Notes to the
Financial
Statements
Detail
The first two statements (pages 31-33) are government-wide financial statements that provide both
long-term and short-term information about the City’s overall financial status. The remaining
statements (pages 34-51) are fund financial statements that focus on individual parts of the City
government, reporting the City’s operations in more detail than the government-wide statements.
The governmental funds statements tell how general government services like public safety
were financed in the short term as well as what remains for future spending. A budgetary
comparison statement has been provided for the General fund to demonstrate budgetary
compliance.
Proprietary funds statements offer short- and long-term financial information about the
activities the City operates like businesses, such as the water and sewer system.
The fiduciary funds statements reflect the financial relationship with the Firefighters’
Retirement System, which provides benefits exclusively for certain City employees, and the
Employee Benefit Trust, which accumulates resources for the provision of other
postemployment benefit payments for retirees and their beneficiaries.
The financial statements also include notes that explain some of the information in the financial
statements and provide more detailed data (pages 52-114). A section is also included with combining
statements that provides details about nonmajor governmental funds, internal service funds, and
fiduciary funds, each of which are totaled and presented in single columns in the basic financial
statements. This section (pages 115-164) also includes detailed budgetary information required by
North Carolina General Statutes.
The remainder of this overview section explains the structure and contents of the government-wide
and fund financial statements.
Government-wide financial statements. The government-wide statements report information about
the City as a whole using accounting methods similar to those used by private-sector companies.
The statement of net assets includes all of the City’s assets and liabilities, with the difference between
the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful
indicator of whether financial position is improving or deteriorating. Other nonfinancial factors such as
changes in the City’s property tax base and the condition of the City’s roads must be considered to
assess the overall health of the City.
The statement of activities presents information showing how the City’s net assets changed during the
most recent fiscal year. The statement accounts for all of the current year’s revenues and expenses
regardless of when cash is received or paid.
The government-wide financial statements are divided into three categories:
Governmental activities - Most of the City’s basic services are included here, such as public
safety, community planning and development, and streets and highways. Property taxes,
other taxes, and grants and contributions finance most of these activities.
Business-type activities - The City charges fees to customers to cover the costs of certain
services provided. The City’s water and sewer system, storm water system, airport, and public
transit system are included here.
C-4
Component unit - The City’s annual report includes one other entity, the Charlotte Regional
Visitors Authority. Although legally separate, the City appoints the governing board and
provides financial support.
Fund financial statements. The fund financial statements provide more detailed information about
the City’s most significant funds, not the City as a whole. Funds are accounting groups that the City
uses to keep track of specific sources of funding and spending for particular purposes. Some funds
are required by State Statutes.
Other funds are established to control and manage resources
designated for specific purposes.
The City has three kinds of funds:
Governmental funds - Most of the City’s basic services are included in governmental funds,
which focus on (1) the flow in and out of cash and other financial assets that can readily be
converted to cash and (2) the balances left at year-end that are available for spending. These
funds are reported using the modified accrual accounting basis and a current financial
resources measurement focus. Consequently, the governmental funds statements provide a
detailed short-term view that helps determine the financial resources available in the near
future to finance the City’s programs.
The relationship between governmental activities
(reported in the Statement of Net Assets and the Statement of Activities) and governmental
funds is described in a reconciliation that follows the governmental fund financial statements.
The City adopts an annual budget for the General fund, as required by State Statutes. A
budgetary comparison statement is presented for the General fund using the City’s budgetary
basis of accounting. This statement reflects the following: (a) the original budget, (b) the final
budget as amended, (c) actual resources, and (d) the variance between the final budget and
actual resources.
Because the budgetary basis of accounting differs from the modified
accrual basis used in the funds statements, a reconciliation is provided at the end of the
statement.
Proprietary funds – Services for which the City charges customers a fee are generally
reported in proprietary funds. Proprietary funds, like the government-wide statements, provide
both long- and short-term financial information. The City has two types of proprietary funds.
Enterprise funds are the same as the business-type activities (shown in the government-wide
financial statements), but provide more detail and additional information, such as cash flows.
Internal service funds are used to report activities that provide supplies and services for the
City’s other programs and activities. These internal service activities predominately benefit
governmental rather than business-type activities; therefore, they have been included with
governmental activities in the government-wide financial statements.
Fiduciary funds - The City is the trustee, or fiduciary, for the Firefighters’ Retirement System
and the Employee Benefit Trust. The City is responsible for ensuring that the assets reported
in these funds are used for their intended purposes. This fiduciary activity is reported in a
separate statement of fiduciary net assets and a statement of changes in fiduciary net assets.
These funds are excluded from the City’s government-wide financial statements because the
City cannot use these assets to finance its operations.
C-5
FINANCIAL ANALYSIS OF THE CITY AS A WHOLE
Net assets. As noted earlier, net assets may serve over time as a useful indicator of a government’s
financial position. For the City, assets exceeded liabilities by $8,998.8 at the close of the most recent
fiscal year. A summary of the City’s net assets at June 30, 2012 and 2011 is presented below.
Net Assets
Governm ental
Business-type
Activities
2012
Current and other assets
Capital assets
Total assets
Current and other liabilities
Noncurrent liabilities
Total liabilities
Net assets:
Invested in capital assets,
net of related debt
Restricted
Unrestricted
Total net assets
Total Prim ary
Activities
Governm ent
2012
2011
2012
2011
897.8
5,886.7
$ 1,622.5
5,206.3
$ 1,454.2
5,076.1
$ 2,583.7
11,227.0
$ 2,352.0
10,962.8
6,981.9
6,784.5
6,828.8
6,530.3
13,810.7
13,314.8
132.9
1,564.0
111.4
1,490.2
139.8
2,975.2
135.1
2,851.5
272.7
4,539.2
246.5
4,341.7
1,696.9
1,601.6
3,115.0
2,986.6
4,811.9
4,588.2
4,642.1
221.8
421.1
4,523.2
233.3
426.4
2,493.3
316.9
903.6
2,450.4
256.0
837.2
7,135.4
538.7
1,324.7
6,973.6
489.3
1,263.6
$ 5,285.0
$ 5,182.9
$ 3,713.8
$ 3,543.6
$ 8,998.8
$ 8,726.5
$
961.2
6,020.7
2011
$
By far the largest portion of the City’s net assets (79 percent) reflects its investment in capital assets
(land, buildings, roads, bridges, etc.), less any related debt used to acquire those assets that are still
outstanding. The City uses these capital assets to provide services to citizens; consequently, these
assets are not available for future spending.
An additional portion of the City’s net assets (6 percent) represents resources that are subject to
external restrictions on how they may be used. The remaining balance of unrestricted net assets
($1,302.1) may be used to support operations and provide for payment of long-term debt.
At the end of the current fiscal year, the City is able to report positive balances in all three categories
of net assets, both for the government as a whole, as well as for its separate governmental and
business-type activities. The same situation held true for the prior fiscal year.
Government-wide net assets increased by $272.2 during the current fiscal year from increases in both
governmental and business-type activities. The increases resulted in part from contributed assets
including the addition of streets due to annexation and contributions of infrastructure assets from
developers.
C-6
Changes in net assets. The following table presents the City’s changes in net assets for the fiscal
years ended June 30, 2012 and 2011:
Change in Net Assets
Governm ental
Business-type
Total Prim ary
Activities
Activities
Governm ent
2012
Revenues
Program revenues:
Fees, fines and charges for services
Operating grants and contributions
Capital grants and contributions
General revenues:
Property taxes
Other taxes
Grants and contributions not restricted
to specific programs
Other
Total revenues
Program expenses
Public safety
Sanitation
General administration
Support services
Engineering and property management
Streets and highw ays
Culture and recreation
Community planning and development
Interest and other charges
Water
Sew er
Storm w ater
Airport
Public transit
Total expenses
Excess before transfers
Transfers
Increase in net assets
Net assets - beginning
Net assets - ending
$
93.9
78.6
121.7
2011
$
87.3
64.0
103.0
2012
$
591.4
12.6
73.9
2011
$
552.0
12.9
85.3
2012
$
685.3
91.2
195.6
377.3
272.2
2011
$
639.3
76.9
188.3
377.3
206.4
362.8
190.1
65.8
57.3
18.5
(14.4)
17.0
12.1
7.7
17.5
882.0
836.3
751.4
725.0
1,633.4
1,561.3
347.4
47.9
45.0
35.4
24.9
114.4
17.9
73.5
55.1
-
324.9
48.2
38.3
21.4
27.3
119.0
10.1
83.6
57.4
-
116.6
132.8
20.7
168.7
160.8
105.1
141.7
20.2
160.3
151.1
347.4
47.9
45.0
35.4
24.9
114.4
17.9
73.5
55.1
116.6
132.8
20.7
168.7
160.8
324.9
48.2
38.3
21.4
27.3
119.0
10.1
83.6
57.4
105.1
141.7
20.2
160.3
151.1
761.5
730.2
599.6
578.4
1,361.1
1,308.6
120.5
(18.4)
106.1
(18.4)
151.8
18.4
146.6
18.4
272.3
-
252.7
-
18.5
(6.7)
362.8
247.4
17.0
29.6
102.1
5,182.9
87.7
5,095.2
170.2
3,543.6
165.0
3,378.6
272.3
8,726.5
252.7
8,473.8
$ 5,285.0
$ 5,182.9
$ 3,713.8
$ 3,543.6
$ 8,998.8
$ 8,726.5
Total government-wide revenues of $1,633.4 were derived primarily from grants and contributions (18
percent) and property and other taxes (40 percent). These sources of revenues increased 7 percent
from the prior year, primarily due to increased sales tax due to the improving economy.
The total expenses of all programs were $1,361.1. The expenses cover a range of services with the
two largest being transportation (streets and highways, airport and public transit) for 33 percent and
public safety (fire and police) for 26 percent. Transportation expenses increased over the prior year
due in part to the addition of staff for the Blue Line Extension project.
C-7
Governmental Activities
Governmental Revenues
by Source
As shown in the chart, property, sales and other
taxes (66 percent) and grants and contributions
(25 percent) were the major sources of revenues
11% -2%
for governmental activities.
25%
66%
Governmental expenses increased from $730.2 to
$761.5 during this fiscal year. Expenses in the
Taxes (Property, sales, and other)
Grants and contributions
Fees, fines and charges for services
Other
current year related to the Democratic National
Convention (funded by a Federal grant), purchase
of digital radios, and the Broadband Technology
Opportunities Programs where broadband access
is being expanded in the area. As in prior years, public safety continues to be the largest expense
with 46 percent in the current and 44 percent in the prior year.
This chart highlights the net cost (total cost less fees generated by the activities and intergovernmental
grants) of the City’s governmental programs mainly public safety, streets and highways and
community planning and development. The net cost shows the financial support provided by taxes
and other general revenue sources not restricted to specific programs.
Governmental Expenses Compared with Program Revenues
$400
$300
$200
Community planning
and development
Culture and
recreation
Engineering and
property
management
Program revenues
Streets and highways
Expenses
Support services
General
administration
Sanitation
$-
Public safety
$100
In addition to property and other taxes, the total cost of services of $761.5 was supported by $200.3
provided by other governments and organizations for specific programs and $93.9 provided by fees,
fines and charges from those who directly benefited from the programs.
C-8
Business-type Revenues
by Source
Business-type Activities
9%
11%
Revenues for the business-type activities were
$751.4, an increase of 4 percent from the prior
year.
1%
79%
This increase is due in part to a 8.8
percent increase in water and sewer rates in the
Fees, fines and charges for services
current year.
Grants and contributions
Sales taxes levied for Public Transit
The chart below highlights the net cost of the
Other
City’s business-type programs. For all business-
type activities except Public Transit, user rates and fees are established to provide for operating
expenses, debt service costs and adequate working capital.
Public transit passenger fares are
established to provide reasonably priced public mass transportation and therefore may not cover all
operating costs. In addition to fare revenues, state operating assistance grants, a one-half percent
sales tax and contributions from other local governments fund the transit program.
Business-type Expenses Compared with
Program Revenues
$250
$200
$150
$100
$50
Expenses
Public
transit
Airport
Storm
water
Sewer
Water
$-
Program revenues
Airport expenses increased $8.4 or 5 percent from the prior year due in part to increased fuel costs,
the expansion of runways and issuing new debt. Transit expenses increased $9.7 or 6 percent from
the prior year due in part to the purchase of new equipment such as buses, the addition of staff for the
Blue Line Extension project and the North Davidson facility renovation was also completed.
C-9
FINANCIAL ANALYSIS OF THE CITY’S FUNDS
The City uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements.
Governmental funds. The focus of the City’s governmental funds is to provide information on nearterm inflows, outflows, and balances of spendable resources. Such information is useful in assessing
the 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 June 30, 2012,
the governmental funds reported a combined fund balance of $624.0, an increase of $5.4, or 1 percent
from last year. This amount consists of the following:
(a) $4.1 nonspendable for inventories and perpetual care,
(b) $218.7 restricted for State Statutes, special obligation debt service and specific programs,
(c) $95.3 committed primarily for capital projects,
(d) $217.5 assigned for debt service and specific programs, and
(e) $88.4 unassigned.
The general fund is the chief operating fund of the City.
At the end of the current fiscal year,
unassigned fund balance of the general fund was $88.4, while total fund balance reached $159.2.
The City’s Capital Investment Plan Financial Policies include a policy to maintain fund balance at 16
percent of the operating budget. Any portion in excess of 16 percent is dedicated to capital expenses,
unless otherwise directed by City Council. $5.7 is committed for capital projects.
Other major governmental funds are the debt service and the capital projects funds. The debt service
fund has a total fund balance of $229.9, all of which will be used for either the payment of debt service
or is restricted by State Statutes. Debt service fund balance increased $9.4 from the prior year due
primarily to transfers from other funds to pay future debt service. The capital projects fund has a total
fund balance of $86.9, all of which is committed for future capital projects.
Capital project fund
balance decreased $5.1 from the prior year due to construction of public facilities.
Proprietary funds. Proprietary funds provide the same type of information found in the governmentwide financial statements, but in more detail.
Unrestricted net assets at the end of the year amounted to $342.8 in the Water and Sewer fund, $47.9
in the Storm Water fund, $365.6 in the Airport fund and $150.2 in the Public Transit fund. The change
in net assets for the funds was $54.0, $35.5, $60.4 and $16.5 respectively. Factors concerning the
finances of these funds have already been addressed in the discussion of the business-type activities.
C-10
GENERAL FUND BUDGETARY HIGHLIGHTS
During the fiscal year, City Council approved several immaterial budget amendments.
The most
significant amendments related to funding a transfer from the debt service fund from general obligation
bond refunding savings to be applied to the other post-employment benefit liability.
Revenues were $5.4 above the final budgeted amount. Property tax revenues were $6.1 greater than
expected due in part to lower than estimated rebates and higher than expected collection rates.
The fiscal 2012 budget reflected slow growth following a three-year period of economic decline, which
the City weathered through budget reductions and conservative financial strategies. As a result, the
most significant expenditure increases were $2.3 to fund 50 police officers hired under the American
Recovery and Reinvestment Act Grant, $1.6 to fund increased operating costs for Police, and $1.0 for
maintenance and repair of the digital and analog Public Safety Radio System. Actual expenditures
were $2.9 below final budget amounts for fiscal year 2012.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets. At June 30, 2012, the City had $11,227.0 (net of accumulated depreciation) in capital
assets consisting primarily of land, buildings, roads, and water and sewer lines.
This amount
represents a net increase of $264.2, or 2 percent over last year. The following is a summary of capital
assets at June 30, 2012 and 2011:
Capital Assets
(Net of Depreciation)
Governm ental
Business-type
Total Prim ary
Activities
Activities
Governm ent
2012
Land
Buildings
Improvements other than buildings
Infrastructure
Intantibles
Machinery and equipment
Construction in progress
Totals
2011
2012
2011
2012
$
3,110.4
809.1
1,652.2
1.7
43.9
403.4
$
3,045.5
822.1
1,653.6
1.6
41.2
322.7
$
388.7
325.6
3,229.0
3.4
133.9
1,125.7
$
382.3
341.9
3,236.6
3.8
125.4
986.1
$
$
6,020.7
$
5,886.7
$
5,206.3
$
5,076.1
$ 11,227.0
C-11
3,499.1
1,134.7
3,229.0
1,652.2
5.1
177.8
1,529.1
2011
$
3,427.8
1,164.0
3,236.6
1,653.6
5.4
166.6
1,308.8
$ 10,962.8
This year’s major capital asset additions included:
Discovery Place museum improvements - $.9
Streets in annexed areas - $110.9
Water main construction - $9.5
Sanitary sewer rehabilitation - $11.4
Airport Master Plan land acquisition - $5.3
Airport ticket lobby renovations - $5.5
Bus expansion and replacement - $18.9
At June 30, 2012, authorized and unexpended capital projects totaled $1,866.9 as follows:
governmental ($558.2), water and sewer ($798.2), airport ($299.9), storm water ($117.8), and public
transit ($92.8). The City has plans to issue additional debt to finance these projects in addition to using
resources currently available.
More detailed information about the City’s capital assets is presented in Note 4.f. to the financial
statements.
Long-term Debt. At June 30, 2012, the City had $4,335.3 of debt outstanding in bonds, installment
purchases, commercial paper notes, derivative instrument liability, and other financing agreements.
This was a increase of $146.9 or 4 percent over last year. Details by type of debt are presented in the
following table:
Outstanding Debt
Governm ental
Activities
General obligation bonds (backed by
the City’s taxing authority)
Revenue bonds (backed by specific
fee revenues)
Special obligation bonds
Installment purchases
Commercial paper notes
Derivative instrument liability
Other financial agreements
Totals
Business-type
Activities
Total Prim ary
Governm ent
2012
2011
2012
2011
2012
2011
$ 547.2
$ 456.0
$ 241.4
$ 266.6
$ 788.6
$ 722.6
10.1
712.2
24.1
68.0
56.4
11.0
722.8
109.2
28.3
58.0
2,404.9
163.8
101.6
5.6
2,299.4
173.4
57.4
6.3
2,404.9
10.1
876.0
24.1
169.6
62.0
2,299.4
11.0
896.2
109.2
85.7
64.3
$ 1,418.0
$ 1,385.3
$ 2,917.3
$ 2,803.1
$ 4,335.3
$ 4,188.4
New debt for 2012 resulted from issuing general obligation bonds ($175.5) to repay commercial paper
notes for governmental activities and to refund debt; and Airport revenue bonds ($201.6) for airport
improvements and constructing a consolidated rental car facility.
C-12
The City’s sound financial condition is evidenced by the continuation of its Aaa rating from Moody’s
Investors Service and AAA rating from Standard & Poor’s Ratings Services and Fitch Ratings.
Charlotte is one of the few cities in the nation that maintains the highest financial category rating from
these major rating agencies. This achievement is a primary factor in keeping interest costs low on the
City’s outstanding debt.
The City’s total debt of $4,335.3 arises from both governmental and business-type activities. The
largest portion of debt is revenue bonds (55 percent), which are backed by specific fee revenues,
rather than the City’s taxing authority.
North Carolina General Statutes limit the amount of general obligation debt that the City can issue to 8
percent of the total assessed value of taxable property. The legal debt margin for the City at June 30,
2012, was $5.2 billion. The City had $428.2 in authorized but unissued debt for streets, housing, and
neighborhood improvements.
More detailed information about the City’s long-term liabilities is presented in Note 4.j. of the financial
statements.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The following economic indicators impact the City’s budget outlook:
During fiscal year 2012, 14,572 building permits were issued with a value of over $2.4 billion
compared to 13,209 permits for 2011.
Retail sales during 2011 were $14.3 billion compared to $13.3 billion for 2010.
The June 2012 unemployment rate was 8.8 percent compared to 9.9 percent for the state and
8.4 percent for the nation.
Assessed property valuations are expected to exceed $89.2 billion for 2012 compared to
$85.5 billion for 2011, or an increase of 4 percent, and is due primarily to a county-wide
revaluation.
The fiscal 2013 operating budget reflects slow growth following the economic recession, weathered by
the City through budget reductions and a continuation of conservative financial strategies. The fiscal
2013 capital budget primarily reflects Enterprise Fund projects, as City Council did not approve any
new bond-supported General Fund capital projects.
The General fund budget increased to $552.6. Property tax revenues including current and prior year
collections, interest, and other penalties and rebates are expected to increase 4.7 percent over 2012.
Sales tax and user fees are expected to increase 3.9 and 8.4 percent respectively. The most
significant expenditure increases are $2.43 to fund 50 police officers hired under the American
Recovery and Reinvestment Act Grant, $.7 for maintenance and repair of Fire vehicles and equipment
plus fuel price escalations, $.9 for increased solid waste disposal costs, and $.4 for maintenance and
repair of Solid Waste Service vehicles and equipment.
C-13
The following are highlights for the 2013 budgets for the business-type activities:
Utilities customers will experience an increase in the volume rate, fixed billing charge, and the
availability fee for both water and sewer. The average monthly total water and sewer bill for
residential customers is estimated to increase $3.30 per month.
Operating expenses will
increase by $128.8 over 2012.
Storm water impervious surface fee rate will increase 6 percent while expenses are expected
to increase by 5.3 percent.
Airport revenues are expected to increase 10.5 percent largely due to cargo area and ground
rent increases. Operating expenses are also expected to increase 10.5 percent. This increase
is due primarily to increased transfers to debt service funds.
Public transit revenues are expected to increase from the Sales and Use Tax by 4.5 percent
along with $1.0 increase from advertising revenue. Operating expenditures are expected to
increase 3.4 percent due in part to increased projected fuel costs.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide citizens, taxpayers, customers, investors and creditors with
a general overview of the City’s finances and to demonstrate the City’s accountability. Questions
concerning this report or requests for additional financial information should be directed to the City of
Charlotte’s Finance Department, 600 East Fourth Street, Charlotte, NC 28202-2848.
C-14
APPENDIX D
FINANCIAL INFORMATION
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Financial Information
The financial statements of the City have been audited by certified public accountants for the
fiscal year ended June 30, 2012. Copies of these financial statements containing the unqualified report of
the independent certified public accountant are available online at www.cafr.charmeck.org.
The following financial statements are the Basic Financial Statements of the City, the notes
thereto and certain required supplementary information, lifted from the Comprehensive Annual Financial
Report of the City for the fiscal year ended June 30, 2012.
D-1
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D-2
CITY OF CHARLOTTE, NORTH CAROLINA
STATEMENT OF NET ASSETS
JUNE 30, 2012
(In Thousands)
Primary Government
Governmental Business-type
Activities
Activities
ASSETS
Cash and cash equivalents
$
Receivables, net
Due from other governmental agencies
Due from component unit
Due from primary government
Internal balances
Inventories
Other
Restricted assets:
Temporarily restrictedCash and cash equivalents
Investments
Permanently restrictedCash and cash equivalents
Receivables
Notes receivable
Deferred charges
Deferred outflow of resources
Other postemployment benefit assets (Note 5.f.)
Pension assets (Note 5.b.)
Capital assets (Note 4.f.)
Land
Buildings, improvements, infrastructure,
intangibles, and machinery and equipment, net
Construction in progress
Total assets
LIABILITIES
Accounts payable/claims payable
Deposits and retainage payable
Accrued interest payable
Due to component unit
Due to primary government
Unearned revenues
Liabilities payable from restricted assets
Noncurrent liabilities (Note 4.j.):
Due within one year
Due after one year
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted for:
State statute
Debt service
Perpetual care - Nonexpendable
Public safety
Streets and highways
Culture and recreation
Community planning and development
Passenger facility charges
Contract facility charges
Airport working capital
Unrestricted
Total net assets
$
689,316
18,227
71,982
7,407
3,003
1,004
272
Total
$ 1,046,448 $
75,115
62,309
(3,003)
8,581
-
1,735,764
93,342
134,291
7,407
9,585
272
Component Unit
Charlotte Regional
Visitors
Authority
$
8,759
3,383
548
1,223
378
613
1,894
21,699
70,767
203,172
72,661
224,871
-
3,111
10
97,692
7,790
31,793
6,033
29,101
101,626
28,361
-
3,111
10
97,692
36,891
133,419
28,361
6,033
-
3,110,363
388,669
3,499,032
-
2,506,897
403,399
6,981,892
3,691,917
1,125,712
6,828,775
6,198,814
1,529,111
13,810,667
14,904
111,772
4,526
9,354
981
3,158
3,157
50,706
8,857
31,386
242
48,540
162,478
13,383
40,740
1,223
3,158
51,697
4,220
4,001
7,407
694
-
96,151
1,467,831
1,696,930
86,440
2,888,804
3,114,975
182,591
4,356,635
4,811,905
3,321
19,643
4,642,043
2,493,316
7,135,359
-
65,271
10,120
3,121
9,003
8,359
120,924
5,034
421,087
5,284,962
57,099
215,358
22,851
21,606
903,570
$ 3,713,800
65,271
67,219
3,121
9,003
8,359
120,924
5,034
215,358
22,851
21,606
1,324,657
8,998,762
The notes to the financial statements are an integral part of this statement.
D-3
$
$
20
(4,759)
(4,739)
CITY OF CHARLOTTE, NORTH CAROLINA
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2012
(In Thousands)
ACTIVITIES
Primary Government:
GovernmentalPublic safety
Sanitation
General administration
Support services
Engineering and property management
Streets and highways
Culture and recreation
Community planning and development
Interest and other charges
Total governmental
Business-typeWater
Sewer
Storm water
Airport
Public transit
Total business-type
Total primary government
Component Unit:
Charlotte Regional
Visitors Authority
Expenses
$
347,380
47,925
45,030
35,427
24,876
114,400
17,856
73,513
55,101
761,508
Program Revenues
Fees, Fines
and
Operating
Capital
Charges for Grants and Grants and
Services Contributions Contributions
$
23,761
12,336
16,851
25,815
5,436
5,386
1,047
3,290
93,922
116,634
132,829
20,742
168,661
160,776
599,642
$ 1,361,150
115,459
177,377
52,075
219,990
26,508
591,409
$ 685,331
$
$
53,458
31,909
$
29,465
501
12
4,554
22,930
4,562
16,569
78,593
D-4
3,913
191
3,734
38
111,798
1,258
713
121,645
$
8
8
12,570
12,586
91,179
$
6,615
6,126
1,962
5,396
53,801
73,900
195,545
$
-
$
-
General revenues:
TaxesProperty
Sales
Sales, levied for Public Transit
Utility franchise
Occupancy
Prepared foods
Business privilege
Municipal vehicle
Payment from City of Charlotte
Grants and contributions not restricted
to specific programs
Investment earnings
Miscellaneous
Transfers
Total general revenues and transfers
Change in net assets
Net assets - beginning
Net assets - ending
The notes to the financial statements are an integral part of this statement.
$
Net (Expense) Revenue and
Changes in Net Assets
Primary Government
Component Unit
Charlotte Regional
Governmental Business-type
Visitors
Activities
Activities
Total
Authority
$ (290,241) $
(34,897)
(28,167)
(5,878)
(14,848)
25,714
(10,989)
(52,941)
(55,101)
(467,348)
(467,348)
5,448
50,682
33,295
56,725
(67,897)
78,253
78,253
$ (290,241) $
(34,897)
(28,167)
(5,878)
(14,848)
25,714
(10,989)
(52,941)
(55,101)
(467,348)
-
5,448
50,682
33,295
56,725
(67,897)
78,253
(389,095)
-
-
-
-
377,309
82,730
36,442
32,590
22,523
16,375
15,740
-
65,754
-
377,309
82,730
65,754
36,442
32,590
22,523
16,375
15,740
-
19,066
18,513
(10,085)
3,427
661,318
272,223
8,726,539
$ 8,998,762 $
47
160
19,273
(2,276)
(2,463)
(4,739)
18,513
(16,546)
6,461
2,167
1,260
(18,399)
18,399
569,444
91,874
102,096
170,127
5,182,866
3,543,673
$ 5,284,962 $ 3,713,800
(21,549)
-
D-5
CITY OF CHARLOTTE, NORTH CAROLINA
BALANCE SHEET
GOVERNMENTAL FUNDS
JUNE 30, 2012
(In Thousands)
ASSETS
Cash and cash equivalents
Receivables, net:
Property taxes
Accounts
Other
Total receivables
Due from other governmental agencies
Due from other funds
Due from component unit
Inventories
Prepaid expenses
Restricted assets:
Cash and cash equivalents
Investments
Total restricted assets
Notes receivable
Total assets
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
Deposits and retainage payable
Due to other funds
Due to component unit
Deferred revenues
Liabilities payable from restricted assets
Total liabilities
Fund balances:
Nonspendable:
Inventories
Perpetual care
Restricted:
State statute
Special obligation debt service
Public safety
Streets and highways
Culture and recreation
Community planning and development
Committed:
Capital projects
Culture and recreation
Component unit
Assigned:
Debt service
Capital projects
Community planning and development
Unassigned
Total fund balances
Total liabilities and fund balances
Other
Total
Capital Governmental Governmental
Projects
Funds
Funds
General
Debt
Service
$ 163,082
$ 228,873
$ 74,651
6,176
3,252
9,428
38,489
3,585
1,004
-
142
142
3,592
5,460
-
901
5,127
6,028
3,784
298
-
191
4
57
252
26,117
22
7,410
8,383
57
15,850
71,982
3,585
5,758
1,004
22
46
$ 215,634
7
7
$ 238,074
1,894
21,692
23,586
44,862
$ 153,209
52,784
218,656
1,894
21,699
23,593
97,692
825,573
$ 43,021
2,395
503
10,565
56,484
$
2,551
5,602
8,153
$ 10,204
1,502
200
51,200
3,157
66,263
1,004
-
-
-
3,121
1,004
3,121
61,679
-
3,592
10,120
-
-
9,003
8,359
120,924
5,034
65,271
10,120
9,003
8,359
120,924
5,034
5,674
1,100
-
86,946
-
1,500
-
92,620
1,500
1,100
395
875
88,423
159,150
$ 215,634
216,209
229,921
$ 238,074
86,946
$ 153,209
147,941
218,656
216,209
395
875
88,423
623,958
825,573
The notes to the financial statements are an integral part of this statement.
D-6
$
$
$
$
139,481
10,859
629
3,585
781
54,861
70,715
$
$
$
$
606,087
66,635
4,526
4,088
981
122,228
3,157
201,615
CITY OF CHARLOTTE, NORTH CAROLINA
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET ASSETS
JUNE 30, 2012
(In Thousands)
Total fund balances for governmental funds
$
623,958
Total net assets reported for governmental activities in the
statement of net assets is different because:
Capital assets used in governmental activities are not financial
resources and, therefore, are not reported in the funds.
6,020,650
Pension assets resulting from contributions in excess of the
annual required contributions are not financial resources and
therefore are not reported in the funds.
6,033
Other long-term assets are not available to pay for current-period
expenditures and, therefore, are deferred in the funds.
162,149
Internal service funds are used to charge the costs of insured and
uninsured risks of loss as well as employee health and life claims to
individual funds. The assets and liabilities of the internal service funds
are included in governmental activities in the statement of net assets.
38,795
Long-term liabilities are not due and payable in the current period
and therefore are not reported in the funds. (Note 2.a.)
Total net assets of governmental activities
(1,566,623)
$
The notes to the financial statements are an integral part of this statement.
D-7
5,284,962
CITY OF CHARLOTTE, NORTH CAROLINA
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2012
(In Thousands)
REVENUES:
Property taxes
Other taxes
Intergovernmental
Licenses, fees and fines
Investment earnings
Private contributions
Administrative charges
Charges for current services
Miscellaneous
Total revenues
EXPENDITURES:
CurrentPublic safety
Sanitation
General administration
Support services
Engineering and property management
Streets and highways
Culture and recreation
Community planning and development
Debt servicePrincipal
Interest and other charges
Capital outlay
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
OTHER FINANCING SOURCES (USES):
Sales of capital assets
Commercial paper issued
Installment purchases issued
Refunding debt issued
Premium on debt issuance
Private loan
Payment to refunded bond escrow agent
Transfers in
Transfers out
Total other financing sources (uses)
Net change in fund balances
Fund balances - beginning
Fund balances - ending
Other
Total
Capital Governmental Governmental
Projects
Funds
Funds
General
Debt
Service
$ 308,484
73,490
64,856
47,798
698
29,406
8,325
2,684
535,741
$ 55,242
13,294
1,414
55
1,417
1,258
570
73,250
$ 10,210
8,616
5,519
12,343
358
1,119
688
38,853
302,251
45,419
39,928
26,820
20,944
29,066
27,449
-
-
38,136
275
2,051
4,028
1,773
27,300
13,632
23,766
340,387
45,694
41,979
30,848
22,717
56,366
13,632
51,215
491,877
72,849
58,606
131,455
137,506
137,506
110,961
72,849
58,606
137,506
871,799
43,864
(58,205)
(98,653)
32,495
(80,499)
$
568
1,288
64,846
33,155
177,485
33,320
2,705
270
- (209,457)
6,366
69,994
18,134
(41,165)
(3,712)
(26,871)
(34,231)
67,630
93,527
9,633
9,425
(5,126)
149,517
220,496
92,072
$ 159,150 $ 229,921 $ 86,946 $
The notes to the financial statements are an integral part of this statement.
D-8
4,473
54,164
78,169
907
1,071
4,672
143,456
$
378,409
149,564
149,958
61,103
3,544
2,377
29,406
8,325
8,614
791,300
87
1,943
64,846
33,155
177,485
36,025
270
(209,457)
16,710
111,204
(57,855)
(129,603)
(41,058)
85,868
(8,563)
5,369
156,504
618,589
147,941 $ 623,958
CITY OF CHARLOTTE, NORTH CAROLINA
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2012
(In Thousands)
Net change in fund balances - total governmental funds
$
5,369
The change in net assets reported for governmental activities in the
statement of activities is different because:
Governmental funds report capital outlays as expenditures.
However, in the statement of activities the cost of those assets is
allocated over their estimated useful lives and reported as
depreciation expense. This is the amount by which capital outlays
exceeded depreciation in the current period. (Note 2.b.)
26,079
The net effect of various miscellaneous transactions involving
capital assets (i.e., sales and donations) is to increase
net assets. (Note 2.b.)
107,885
Revenues in the statement of activities that do not provide current
financial resources are not reported as revenues in the funds.
4,430
The issuance of long-term debt (e.g., bonds and installment purchases)
provides current financial resources to governmental funds, while the
repayment of the principal of long-term debt consumes the current financial
resources of governmental funds. Neither transaction has any effect on net
assets in the government-wide statements. Also, governmental funds report
the effect of issuance costs, premiums, discounts and similar items when
debt is issued, whereas these amounts are deferred and amortized in the
statement of activities. This amount is the net effect of these differences
in the treatment of long-term debt and related items. (Note 2.b.)
(48,439)
Some expenses reported in the statement of activities do not
require the use of current financial resources and therefore are not
reported as expenditures in governmental funds. (Note 2.b.)
(1,468)
Internal service funds are used to charge the costs of insured and
uninsured risks of loss as well as employee health and life claims to
individual funds. The net revenue of certain activities of the internal
service funds is reported with governmental activities.
8,240
Change in net assets of governmental activities
$ 102,096
The notes to the financial statements are an integral part of this statement.
D-9
CITY OF CHARLOTTE, NORTH CAROLINA
STATEMENT OF BUDGETARY COMPARISON
GENERAL FUND
FOR THE YEAR ENDED JUNE 30, 2012
(In Thousands)
Budgeted Amounts
Original
Final
Actual
(Budgetary Basis)
Variance with
Final Budget
Positive
(Negative)
308,484
69,504
36,442
13,991
4,082
12,082
15,822
15,603
2,454
9,111
3,082
5,396
4,253
492
1,202
568
939
3,607
29,195
6,366
542,675
7,406
550,081
$
204,420
101,630
46,291
20,844
17,922
11,625
4,922
1,521
2,223
500
15,473
4,229
10,387
30,622
1,426
76,046
550,081
$
Resources (inflows):
Property tax
Sales tax
Utilities franchise tax
Police services
Tax reimbursements
Solid waste fee
Business privilege licenses
Licenses and permits
Fines, forfeits and penalties
Interlocal grants and agreements
Federal and state shared revenues
General government
Public safety
Cemeteries
Use of money and property
Sale of salvage and land
Other
Occupancy taxes
Intragovernmental
Transfers from other funds
Resources available for appropriation
Fund balance appropriated
Total amounts available for appropriation
$ 302,389
66,800
37,600
14,006
3,916
12,290
16,800
15,609
2,907
9,452
2,023
3,904
3,915
503
1,271
1,816
963
3,276
26,826
3,032
529,298
16,061
$ 545,359
$ 302,389
66,800
37,600
14,006
3,916
12,290
16,800
15,665
2,907
10,649
2,053
3,904
3,915
503
1,178
1,816
983
3,276
30,218
6,443
537,311
15,716
$ 553,027
$
Charges to appropriations (outflows):
Police
Fire
Solid waste
Transportation
Engineering and property management
Neighborhood development
Planning
Mayor and council
City attorney
City clerk
City manager
Human resources
Finance
Business support services
Budget and evaluation
Non-departmentals
Total charges to appropriations
$ 203,349
100,430
46,360
22,073
20,459
12,123
5,470
1,468
2,239
534
16,422
4,656
10,674
25,756
1,665
71,681
$ 545,359
$ 204,652
101,630
46,528
20,981
18,388
11,910
5,470
1,550
2,239
533
15,483
4,656
10,674
30,622
1,665
76,046
$ 553,027
$
The notes to the financial statements are an integral part of this statement.
D-10
$
$
$
$
6,095
2,704
(1,158)
(15)
166
(208)
(978)
(62)
(453)
(1,538)
1,029
1,492
338
(11)
24
(1,248)
(44)
331
(1,023)
(77)
5,364
232
237
137
466
285
548
29
16
33
10
427
287
239
2,946
CITY OF CHARLOTTE, NORTH CAROLINA
RECONCILIATION OF THE STATEMENT OF BUDGETARY COMPARISON TO THE
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GENERAL FUND
FOR THE YEAR ENDED JUNE 30, 2012
(In Thousands)
Sources (inflows) of resources:
Actual amounts (budgetary basis) "available for appropriation" from
the statement of budgetary comparison
Differences - budget to GAAP:
Contributed fund balance is a budgetary resource available for appropriation
but is not a current-year revenue for financial reporting purposes.
Transfers from other funds are inflows of budgetary resources but
are not revenues for financial reporting purposes.
Proceeds from the sale of salvage and land are budgetary
resources but are regarded as other financing resources, rather
than revenue, for financial reporting purposes.
Total revenues as reported on the statement of revenues,
expenditures and changes in fund balances - governmental funds
Uses (outflows) of resources:
Actual amounts (budgetary basis) "total charges to appropriations" from
the statement of budgetary comparison
Differences - budget to GAAP:
Encumbrances for supplies and equipment ordered but not received are
reported in the year the order is placed for budgetary purposes, but in the
year the supplies are received for financial reporting purposes.
Transfers to other funds are outflows of budgetary resources but are not
expenditures for financial reporting purposes.
Total expenditures as reported on the statement of revenues, expenditures
and changes in fund balances - governmental funds
The notes to the financial statements are an integral part of this statement.
D-11
$ 550,081
(7,406)
(6,366)
(568)
$ 535,741
$ 550,081
(17,039)
(41,165)
$ 491,877
CITY OF CHARLOTTE, NORTH CAROLINA
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
JUNE 30, 2012
(In Thousands)
Water and
Sewer
ASSETS
Current assets:
Cash and cash equivalents
Receivables, netAccounts
Other
Total receivables
Due from other governmental agencies
Due from other funds
Prepaid insurance
Inventories
Restricted assetsCash and cash equivalents
Investments
Total restricted assets
Total current assets
Noncurrent assets:
Deferred charges
Deferred outflow of resources
Other postemployment benefit assets
Capital assetsLand
Buildings
Improvements other than buildings:
Water and sewer systems
Storm water systems
Runways
Transit corridors
Other
Total improvements other than buildings
Intangibles
Machinery and equipment
Construction in progress
Total capital assets
Less accumulated depreciation
Total capital assets, net
Total noncurrent assets
Total assets
D-12
Business-type Activities Storm
Water
Airport
$ 218,084
$ 47,785
$
678,473
43,847
643
44,490
606
1,339
6,873
175
7,048
2,352
-
20,248
2,004
22,252
3,318
-
2,555
5,259
7,814
272,333
1,691
1,691
58,876
66,521
197,913
264,434
968,477
11,627
101,626
17,897
880
1,404
14,726
7,078
40,378
25,763
-
297,504
626,667
3,541,365
3,541,365
13,238
27,259
535,319
4,183,322
1,099,933
3,083,389
3,214,539
3,486,872
184,457
184,457
3,359
69
299,918
487,803
40,995
446,808
449,092
507,968
392,108
85,647
477,755
34,785
104,231
1,540,942
533,894
1,007,048
1,028,852
1,997,329
Enterprise Funds
Public
Transit
Total
$
Governmental
Activities Internal Service
Funds
102,106
$ 1,046,448
$
86,340
993
332
1,325
56,033
7,242
71,961
3,154
75,115
62,309
8,581
540
540
503
250
-
166,706
70,767
203,172
273,939
1,466,392
87,633
1,868
1,982
29,101
101,626
28,361
-
50,787
85,840
388,669
738,270
-
336,040
28,743
364,783
6,951
205,389
186,244
899,994
230,941
669,053
672,903
839,609
3,541,365
184,457
392,108
336,040
114,390
4,568,360
23,548
267,502
1,125,712
7,112,061
1,905,763
5,206,298
5,365,386
6,831,778
159
159
150
9
9
87,642
Continued on next page
D-13
CITY OF CHARLOTTE, NORTH CAROLINA
STATEMENT OF NET ASSETS-(Continued)
PROPRIETARY FUNDS
JUNE 30, 2012
(In Thousands)
Water and
Sewer
LIABILITIES
Current liabilities:
Accounts payable
Claims payable
Deposits and retainage payable
Accrued interest payable
Due to component unit
Current maturities of long-term liabilities
Current liabilities payable from
restricted assetsAccounts payable
Deposits and retainage payable
Accrued interest payable
Revenue bonds payable
Total current liabilities payable from
restricted assets
Total current liabilities
Noncurrent liabilities:
General obligation bonds payable - net of deferred
amount on refunding and unamortized premium
Revenue bonds payable - net of deferred
amount on refunding and unamortized premium
Other financing agreements - net of unamortized premium
Derivative instrument liability
Federal revolving loan payable
Refundable water and sewer construction deposits
Due to participants
Compensated absences payable
Net OPEB liability
Total noncurrent liabilities
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted for:
Debt service
Passenger facility charges
Contract facility charges
Working capital
Unrestricted
Total net assets
$
9,389
3,890
30,283
73,394
D-14
$
5,923
2,888
512
4,910
$
19,181
1,492
242
770
1,990
-
-
3,865
2,169
19,846
20,670
1,990
118,946
14,233
46,550
68,235
211,603
9,812
-
1,434,631
9,223
101,626
4,789
1,484
1,763,356
1,882,302
110,674
126
247
120,859
135,092
848,881
742
849,623
917,858
1,258,432
323,267
401,919
3,302
342,836
$ 1,604,570
1,691
47,918
$ 372,876
52,106
215,358
22,851
21,606
365,631
$ 1,079,471
Adjustment to reflect the consolidation of internal service fund activities related to
enterprise funds.
Net assets of business-type activities
The notes to the financial statements are an integral part of this statement.
Business-type Activities Storm
Water
Airport
Enterprise Funds
Public
Transit
Total
$
$
16,213
587
591
7,366
$
50,706
8,857
31,386
242
86,440
Governmental
Activities Internal Service
Funds
$
45,137
-
-
5,855
2,169
19,846
20,670
-
24,757
48,540
226,171
45,137
-
221,415
-
152,900
2,066
154,966
179,723
2,394,186
162,123
101,626
126
4,789
4,539
2,888,804
3,114,975
6,439
146
128
6,713
51,850
509,698
2,493,316
9
150,188
659,886
57,099
215,358
22,851
21,606
906,573
3,716,803
35,783
35,792
$
(3,003)
$ 3,713,800
D-15
CITY OF CHARLOTTE, NORTH CAROLINA
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30, 2012
(In Thousands)
Water and
Sewer
OPERATING REVENUES:
Charges for services
Availability fees
Capacity fees
Miscellaneous
Total operating revenues
OPERATING EXPENSES:
Administration
Operations and maintenance
Claims and insurance premiums
Other
Depreciation
Total operating expenses
Operating income (loss)
NONOPERATING REVENUES (EXPENSES):
Sales tax
Grant contributions
Passenger facility charges
Contract facility charges
Investment earnings
Interest expense and other charges
Non-airline terminal revenue distribution
Miscellaneous
Total nonoperating revenues (expenses)
Income (loss) before contributions and transfers
CAPITAL CONTRIBUTIONS
TRANSFERS IN
TRANSFERS OUT
Change in net assets
Total net assets - beginning
Total net assets - ending
$ 255,742
25,813
7,443
3,838
292,836
30,782
70,235
1,475
88,601
191,093
101,743
Business-type Activities Storm
Water
Airport
$
52,075
52,075
$ 132,144
1,792
10,288
3,087
15,167
36,908
13,320
46,741
19,289
37,935
117,285
40,704
25,845
157,989
16
53,094
8,907
1,316
328
4,217
(60,188)
(5,679)
(33,954)
(17,913)
(1,616)
2,015
(55)
(60,472)
(3,336)
14,296
41,271
33,572
55,000
12,741
1,962
5,396
54,012
35,534
60,396
1,550,558
337,342
1,019,075
$ 1,604,570 $ 372,876 $ 1,079,471
Adjustments to reflect the consolidation of internal service fund activities related to enterprise funds.
Change in net assets of business-type activities
The notes to the financial statements are an integral part of this statement.
D-16
Enterprise Funds
Public
Transit
Total
$
26,508
26,508
$
$ 466,469
25,813
7,443
29,683
529,408
Governmental
Activities Internal Service
Funds
$
102,003
102,003
11,640
102,602
40,380
154,622
(128,114)
57,534
229,866
20,764
170,003
478,167
51,241
6,854
83,817
2
90,673
11,330
65,754
12,570
600
(7,420)
916
72,420
(55,694)
53,801
18,402
(3)
16,506
643,380
659,886
65,754
12,586
53,094
8,907
6,461
(107,241)
(17,913)
1,260
22,908
74,149
73,900
18,402
(3)
166,448
589
589
11,919
11,919
23,873
35,792
$
3,679
$ 170,127
D-17
CITY OF CHARLOTTE, NORTH CAROLINA
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30, 2012
(In Thousands)
Business-type Activities Water and
Storm
Sewer
Water
Airport
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from customers
Receipts from participants
Payments to suppliers
Internal activity - (payments to) receipts from other funds
Receipts from trust
Payments to employees
Payments to airlines for non-airline
terminal revenue distribution
Payments for claims
Payments for premiums
Other receipts (payments)
Net cash provided (used) by operating activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Operating grants
Sales tax
Transfers
Net cash provided by noncapital financing activities
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:
Proceeds from capital debt
Water and sewer construction deposits
Passenger facility charges
Contract facility charges
Acquisition and construction of capital assets
Principal paid on capital debt
Interest and other charges paid on capital debt
Capital contributions
Net cash provided (used) by capital and
related financing activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments
Proceeds from sale and maturities of investments
Interest received
Net cash provided (used) by investing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents - beginning of year
Cash and cash equivalents - end of year
D-18
$ 287,634 $ 51,762 $ 165,747
(45,252)
(3,937)
(54,582)
(22,083)
(1,961)
(9,650)
(35,521)
(5,361)
(15,835)
(7,360)
177,418
238
238
951
41,454
-
(18,577)
31
67,134
-
1,515
24
(110,342)
(63,157)
(81,632)
268
(37,331)
(4,424)
(6,168)
-
205,387
52,933
8,744
(78,837)
(38,840)
(32,840)
23,258
(253,324)
(47,923)
139,805
(7,063)
- (279,582)
103,986
150,443
798
321
3,958
97,721
321 (125,181)
22,053
(6,148)
81,758
198,586
55,624
663,236
$ 220,639 $ 49,476 $ 744,994
Enterprise Funds
Public
Transit
Total
$
$
26,251 $
(47,726)
(9,236)
(58,183)
Governmental
Activities Internal Service
Funds
531,394 $
(151,497)
(42,930)
(114,900)
37,884
(5,376)
59,427
17,345
(1,530)
1,158
(87,736)
(18,577)
(5,220)
198,270
12,570
64,071
18,398
95,039
12,808
64,071
18,398
95,277
-
(40,562)
(6,122)
(7,415)
38,071
206,902
24
52,933
8,744
(267,072)
(112,543)
(128,055)
61,597
-
(16,028)
(177,470)
-
(286,645)
254,429
607
5,684
607
(26,532)
(8,118)
89,545
110,224
1,027,670
102,106 $ 1,117,215 $
(79,685)
(16,229)
11,836
597
597
12,433
73,907
86,340
Continued on next page
D-19
CITY OF CHARLOTTE, NORTH CAROLINA
STATEMENT OF CASH FLOWS-(Continued)
PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30, 2012
(In Thousands)
Business-type Activities Water and
Storm
Sewer
Water
Airport
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating income (loss)
Adjustments to reconcile operating income (loss)
to net cash provided (used) by operating activitiesDepreciation
Other receipts (payments)
Non-airline terminal revenue distribution
Change in assets and liabilities:
(Increase) decrease in receivables
(Increase) decrease in due from other governmental agencies
Decrease in due from other funds
(Increase) decrease in inventories
Decrease in prepaid insurance
Decrease in other postemployment benefit assets
Increase (decrease) in accounts payable
(Decrease) in claims payable
Increase in due to participants
Increase in deposits and retainage payable
Increase in due to component unit
Increase (decrease) in compensated absences payable
Increase in net OPEB liability
Total adjustments
Net cash provided (used) by operating activities
NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES:
Donated assets
Proceeds from refunding bonds
Payment to refunded bond escrow agent
Net noncash investing, capital and
financing activities
The notes to the financial statements are an integral part of this statement.
D-20
$ 101,743
$ 36,908
88,601
(7,360)
-
$ 40,704
3,087
951
-
37,935
31
(18,577)
(5,217)
(313)
7,758
5
(106)
19
43
53
41
(683)
736
(1,020)
15
153
135
252
32
80
75,675
4,546
26,430
$ 177,418 $ 41,454 $ 67,134
$ 12,454 $
93,390
(93,390)
2,045
-
$
-
$ 12,454
2,045
$
-
$
Enterprise Funds
Public
Transit
Total
$
(128,114) $
40,380
1,158
-
$
51,241
Governmental
Activities Internal Service
Funds
$
170,003
(5,220)
(18,577)
(257)
12
1
(905)
274
(462)
177
40,378
(87,736) $
$
-
$
$
-
$
2
-
1,971
(89)
1
(886)
411
(1,429)
168
135
541
147,029
198,270 $
14,499 $
93,390
(93,390)
14,499
11,330
$
605
298
65
(5,008)
4,517
(5)
32
506
11,836
-
D-21
CITY OF CHARLOTTE, NORTH CAROLINA
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30, 2012
(In Thousands)
Firefighters'
Retirement
Pension
Trust
ASSETS
Cash and cash equivalents
Receivables:
Employer contributions
Member contributions
Interest and dividends
Total receivables
Investments:
Equity securities - stocks
Fixed income securities - bonds
Mutual funds
Total investments
Capital assets, at cost, net of accumulated depreciation
of $284
Total assets
LIABILITIES
Deposits payable
NET ASSETS
Held in trust for pension/other postemployment benefits
$
$
6,209
$
9,203
145
143
366
654
393
71
464
133,794
41,347
181,122
356,263
37,459
37,459
311
363,437
47,126
1,045
139
362,392
The notes to the financial statements are an integral part of this statement.
D-22
Employee
Benefit Other Employee
Benefit Trust
$
46,987
CITY OF CHARLOTTE, NORTH CAROLINA
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2012
(In Thousands)
Firefighters'
Retirement
Pension
Trust
ADDITIONS:
ContributionsMember
Employer
Other
Total contributions
Investment income Net appreciation (depreciation) in fair value of investments
Interest
Dividends
Investment expense
Net investment income
Total additions
DEDUCTIONS:
Benefits
Refunds
Insurance premiums
Administration
Depreciation
Total deductions
Change in net assets
Net assets - beginning
Net assets - ending
$
8,374
7,720
16,094
$
(1,481)
1,449
4,326
4,294
1,860
2,434
18,528
$
21,135
505
517
49
22,206
(3,678)
366,070
362,392 $
The notes to the financial statements are an integral part of this statement.
D-23
Employee
Benefit Other Employee
Benefit Trust
6,140
15,375
263
21,778
1,631
445
2,076
187
1,889
23,667
11,803
5,141
401
17,345
6,322
40,665
46,987
CITY OF CHARLOTTE, NORTH CAROLINA
INDEX TO THE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012
Note
1.
Topic
Page
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reporting Entity .................................................................................................................................... D-26
Basis of Presentation ............................................................................................................................ D-27
Measurement Focus and Basis of Accounting ..................................................................................... D-29
Assets, Liabilities and Net Assets/Fund Balances
Cash and Investments ................................................................................................................... D-30
Receivables and Payables ............................................................................................................. D-30
Inventories ...................................................................................................................................... D-31
Capital Assets ................................................................................................................................ D-31
Compensated Absences ................................................................................................................ D-31
Long-term Liabilities ....................................................................................................................... D-32
Net Assets/Fund Balances ............................................................................................................. D-32
2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
Explanation of certain differences between the governmental funds balance sheet and the
government-wide statement of net assets………………… .................................................................. D-35
Explanation of certain differences between the governmental funds statement of revenues,
expenditures and changes in fund balances and the government-wide statement of activities .......... D-36
3.
STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Budgetary Information .......................................................................................................................... D-38
4.
DETAILED DISCLOSURES ON ALL FUNDS
Deposits ................................................................................................................................................ D-38
Investments .......................................................................................................................................... D-39
Receivables .......................................................................................................................................... D-43
Property Taxes ..................................................................................................................................... D-43
Restricted Assets .................................................................................................................................. D-44
Capital Assets ....................................................................................................................................... D-45
Interfund Receivables, Payables and Transfers................................................................................... D-47
Payables ............................................................................................................................................... D-49
Deferred Revenues .............................................................................................................................. D-50
Long-term Liabilities ............................................................................................................................. D-51
General Obligation Bonds .............................................................................................................. D-53
Special Obligation Bonds ............................................................................................................... D-55
D-24
CITY OF CHARLOTTE, NORTH CAROLINA
INDEX TO THE NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
Note
4.
Topic
Page
DETAILED DISCLOSURES ON ALL FUNDS-(Continued)
Revenue Bonds .............................................................................................................................. D-56
Installment Purchases .................................................................................................................... D-59
Commercial Paper ......................................................................................................................... D-60
Other Long-term Liabilities
Section 108 Loan Guarantee................................................................................................... D-61
Private Loan............................................................................................................................. D-62
Municipal Systems ................................................................................................................... D-62
Federal Revolving Loan ........................................................................................................... D-63
Derivative Instruments ................................................................................................................... D-64
Refundings ..................................................................................................................................... D-67
Other Debt Information................................................................................................................... D-67
Early Extinguishment ..................................................................................................................... D-68
Subsequent Events ........................................................................................................................ D-68
Fund Balance........................................................................................................................................ D-68
5.
PENSION PLANS AND OTHER BENEFITS
Local Governmental Employees’ Retirement System .......................................................................... D-69
Charlotte Firefighters’ Retirement System ........................................................................................... D-69
Law Enforcement Officers’ Separation Allowance ............................................................................... D-72
Supplemental Retirement Income Plan for Law Enforcement Officers ................................................ D-74
Death Benefit Plan ................................................................................................................................ D-75
Other Postemployment Benefits ........................................................................................................... D-75
Deferred Compensation Plan ............................................................................................................... D-78
6.
OTHER INFORMATION
Airport Leasing Arrangements with Tenants ........................................................................................ D-79
Passenger Facility Charges .................................................................................................................. D-80
Insurance
Employee Health and Life .............................................................................................................. D-80
Risk Management .......................................................................................................................... D-80
Commitments and Contingencies......................................................................................................... D-82
Arena…… ............................................................................................................................................. D-84
NASCAR Hall of Fame ......................................................................................................................... D-84
Cultural Arts Facilities ........................................................................................................................... D-85
US Airways ........................................................................................................................................... D-85
D-25
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012
(Dollar Amounts In Thousands)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Reporting Entity
The City of Charlotte (City) is a municipal corporation governed by an elected mayor and elevenmember council. The accompanying financial statements present the activities of the City and its
two component units, entities for which the City is financially accountable. The Charlotte Firefighters’
Retirement System (System) is so intertwined with the City that it is, in substance, the same as the
City. Accordingly, the System is blended and reported as if it was part of the City. The Charlotte
Regional Visitors Authority (Authority) is reported in a separate column in the government-wide
financial statements to emphasize that it is legally separate from the City.
describes the City’s component units:
Component
Unit
Reporting
Method
Criteria for Inclusion
System
provides
Blended
The following table
Separate Financial Statements
Charlotte
The
Charlotte Firefighters’ Retirement
Firefighters’
Retirement
retirement,
disability
and
death benefits to civil service
System
428 East Fourth Street, Suite 205
System
employees of the Charlotte
Fire Department.
These
Charlotte, North Carolina 28202
services are exclusively for
the City.
Charlotte
A “special district” as defined
Discrete
Charlotte Regional Visitors
Regional
Visitors
by state statutes. The City
Council
appoints
the
Authority
501 South College Street
Authority
governing board and the City
Charlotte, North Carolina 28202
pays outstanding general
obligation bonded debt. Net
operating proceeds are to be
used to pay principal and
interest on the bonded debt or
as otherwise directed by City
Council.
The Charlotte Housing Authority (Housing Authority), which is excluded from the City’s financial
statements, is considered a related organization. The City Council appoints the Housing Authority’s
governing board; however, the City is not financially accountable for the Housing Authority.
The Charlotte Transit Center, Inc. is a joint venture resulting from an agreement between the City
and Bank of America. The corporation was established to build and operate a public transportation
terminal known as the Charlotte Transit Center (Center). The Board of Directors is comprised of two
members appointed by the City and two members appointed by Bank of America. The City provided
D-26
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
the land and Bank of America constructed the building. The Center has two sections, transit and
retail. The City funds all expenses related to the transit section and common areas which benefit
transit riders and employees. Bank of America funds all expenses related to the retail area which is
available for lease to tenants. The City does not have an equity interest but does have an ongoing
financial responsibility because the Center’s existence depends on continued funding by the City.
The City’s expenditures related to the transit section are reflected in the Public Transit Enterprise
Fund. The financial statements of the Center, which has a December 31 year-end, may be obtained
from the following address:
Charlotte Transit Center, Inc
c/o Lincoln Harris, LLC
401 North Tryon Street, Suite 200
Charlotte, North Carolina 28202
b. Basis of Presentation
Government-wide Statements: The statement of net assets and the statement of activities display
information about the primary government (the City) and its component unit. These statements
include the financial activities of the overall government, except for fiduciary activities. Eliminations
have been made to minimize the double counting of internal activities. These statements distinguish
between the governmental and business-type activities of the City as well as the City and its
discretely presented component unit. Governmental activities generally are financed through taxes,
intergovernmental revenues, and other nonexchange transactions.
financed in whole or in part by fees charged to external parties.
Business-type activities are
The statement of activities presents a comparison between direct expenses and program revenues
for a given function or activity. Direct expenses are those that are clearly identifiable with a specific
program. Program revenues include (a) charges paid by recipients of goods or services offered by
the program and (b) grants and contributions that are restricted to meeting the operational or capital
requirements of a particular program. Taxes and other items not properly included as program
revenues are reported as general revenues.
As a general rule the effect of interfund activity has been eliminated from the government-wide
financial statements. Exceptions to this general rule are certain charges between the City’s
enterprise functions and various other functions of the government. Elimination of these charges
would distort the direct costs and program revenues reported for the various functions concerned.
Fund Financial Statements:
The fund financial statements provide information about the City’s
funds. Separate statements for each fund category – governmental, proprietary, and fiduciary – are
presented. The emphasis of fund financial statements is on major governmental and enterprise
funds, each displayed in a separate column. All remaining governmental funds are aggregated and
reported as nonmajor funds.
D-27
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Proprietary funds distinguish operating revenues and expenses from nonoperating 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
revenues of the enterprise funds, charges for services, result from exchange transactions associated
with the principal activity of the fund. Exchange transactions are those in which each party receives
and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment
earnings, result from nonexchange transactions or ancillary activities.
The City reports the following major governmental funds:
General fund.
This is the City’s primary operating fund.
It accounts for all financial
resources of the general government, except those required to be accounted for in another
fund.
Debt Service. This fund accounts for the resources accumulated and payments made for
principal and interest on debt of governmental activities.
Capital projects. This fund accounts for financial resources, primarily proceeds from bonds,
other financing agreements and taxes, used for the acquisition, construction and
improvement of capital equipment and facilities.
The City reports the following major enterprise funds:
Water and sewer. This fund accounts for the activities of Charlotte-Mecklenburg Utilities,
provider of water and sewer services.
Storm water. This fund accounts for the activities of Storm Water Services, administrator of
storm water programs and policies.
Airport. This fund accounts for the activities of the Charlotte/Douglas International Airport.
Public transit. This fund accounts for the activities of the Charlotte Area Transit System,
provider of public mass transportation.
The City reports the following fund types:
Internal service funds. These funds account for (a) the general insurance program of the
City, as well as risk management services provided, on a cost-reimbursement basis, to other
governmental units and agencies in Mecklenburg County, and (b) funds contributed by the
City and its employees for health and life benefits.
D-28
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Fiduciary funds. These funds account for (a) resources accumulated for the provision of
benefit payments to the Charlotte Firefighters’ Retirement System members and their
beneficiaries, and (b) resources accumulated for the provision of other postemployment
benefit payments for retirees and their beneficiaries.
c.
Measurement Focus and Basis of Accounting
Government-wide, Proprietary, and Fiduciary Fund Financial Statements: The government-wide,
proprietary fund, 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 at the time liabilities are incurred, regardless of when the related cash flows
take place. Nonexchange transactions, in which the City gives (or receives) value without directly
receiving (or giving) equal value in exchange, include property taxes, grants, and donations.
Revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue
from grants and donations is recognized in the fiscal year in which all requirements have been
satisfied.
Governmental Fund Financial Statements: Governmental fund financial statements are reported
using the current financial resources measurement focus and the modified accrual basis of
accounting. Under this method, revenues are recognized when measurable and available. The City
considers all revenues reported in the governmental funds to be available if the revenues are
collected within ninety days after the end of the current fiscal period except reimbursement grants
which are accrued based on expenditures. Primary sources of revenue susceptible to accrual
include occupancy tax, sales tax, Alcoholic Beverage Commission profits and federal and state
grants. Expenditures are recorded when a liability is incurred, except for principal and interest on
general debt, claims and judgments, and compensated absences, which are recognized as
expenditures when payment occurs. General capital asset acquisitions are reported as expenditures
in governmental funds. Proceeds of debt issues are reported as other financing sources.
The government-wide and proprietary funds financial statements follow Financial Accounting
Standards Board (FASB) Statements and Interpretations issued on or before November 30, 1989;
Accounting Principles Board (APB) Opinions; and Accounting Research Bulletins, unless those
pronouncements conflict with GASB pronouncements.
Under the terms of grant agreements, the City funds certain programs by a combination of specific
cost-reimbursement grants, categorical block grants, and general revenues. Thus, when program
expenses are incurred, there are both restricted and unrestricted net assets available to finance the
program. It is the City’s policy to first apply grant resources to such programs followed by general
revenues.
D-29
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
d. Assets, Liabilities and Net Assets/Fund Balances
(1) Cash and Investments
The City maintains a cash management pool to facilitate disbursement and investment and maximize
investment income. Earnings on the pooled funds are apportioned and credited to the funds monthly
based on the average daily balance of each fund. Since individual funds may deposit additional
amounts at any time and may withdraw funds at any time without prior notice or penalty, the pool is
used essentially as a demand deposit account and considered cash and cash equivalents. The pool
is used by all funds except the Firefighters’ Retirement System Fund. For arbitrage purposes, the
City also maintains separate pools for the proceeds of each bond sale subsequent to 1986 in
compliance with the Internal Revenue Code relative to yield restrictions and rebate requirements.
For funds not included in the pools described above, cash and cash equivalents consist of cash,
demand deposits and short-term, highly liquid investments. Short-term refers to investments with an
original maturity of three months or less at date of acquisition. Highly liquid investments are those
that are both readily convertible to known amounts of cash and so near their maturity that the risk of
changes in value because of changes in interest rates is insignificant.
The restricted cash and cash equivalents/investments are restricted pursuant to bond covenants and
other financing agreements. All restricted money market funds of the enterprise funds are
considered cash and cash equivalents. The remaining amount of restricted assets is considered
investments.
Investments, except for North Carolina Capital Management Trust (NCCMT) and Firefighters’
Retirement System Fund, are reported at fair value as determined by quoted market prices. The
securities of the NCCMT Cash Portfolio, a SEC registered money market mutual fund, are valued at
fair value, which is the NCCMT’s share price. The NCCMT Term Portfolio’s securities are valued at
fair value. Money market investments that have a remaining maturity at the time of purchase of one
year or less are reported at amortized cost. Non-participating interest earning investment contracts
are reported at cost. See Note 5.b., “Method Used to Value Investments,” for an explanation of
reporting the Firefighters’ Retirement System’s investments at fair value.
Component Unit: The authority considers investments with an original maturity of three months or
less to be cash equivalents.
(2) Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements outstanding at the
end of the fiscal year are referred to as “due to/from other funds.” Any residual balances outstanding
between the governmental activities and business-type activities are reported in the governmentwide financial statements as “internal balances.”
D-30
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Property tax and accounts receivables are shown net of an allowance for uncollectibles. Notes
receivable in governmental funds consist of housing rehabilitation and economic development loans
that are generally not expected or scheduled to be collected in the subsequent year.
(3) Inventories
Inventories are recorded as an expenditure/expense when consumed rather than when purchased.
Inventories are valued at cost, which approximates market, using the first-in, first-out (FIFO) method.
(4) Capital Assets
Purchased or constructed capital assets are reported at cost or estimated historical cost. Donated
capital assets are recorded at their estimated fair value at the date of donation. General
infrastructure assets include annexed streets that were acquired or received substantial
improvements subsequent to July 1, 1980 and are reported at estimated historical cost using
deflated replacement cost. The cost of normal maintenance and repairs that do not add value to the
assets or materially extend assets’ lives are not capitalized.
Capital assets are assets with an initial, individual cost of more than $5, except intangible assets
which have a minimum cost of $100. Capital assets are depreciated using the straight-line method
over the following estimated useful lives:
Buildings
20 - 40 years
Infrastructure
Improvements other than buildings
40 years
10 - 60 years
Intangible
5 - 10 years
Machinery and equipment
3 - 40 years
Net interest cost on debt issued to finance the construction of capital assets was capitalized during
the construction period in the Water and Sewer, Storm Water and Airport Enterprise Funds in the
amounts of $18,486, $510, and $1,972, respectively, for the year ended June 30, 2012.
(5) Compensated Absences
Employees earn vacation leave at the rate of 10 to 20 days per year and can accrue a maximum of
20 to 40 days, depending on length of service. Unused vacation days are payable upon termination,
resignation, retirement or death.
D-31
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Employees accumulate sick leave at the rate of one day per month and can accrue an unlimited
number of days. Sick leave can be taken for personal illness or illness of a member of the
immediate family. Sick leave is lost upon termination or resignation. However, twenty percent of
outstanding sick leave, with a maximum of 43.5 days, is payable upon retirement or death.
Compensated absences payable includes accumulated unpaid vacation leave and sick leave. This
liability is recorded in the government-wide and proprietary fund financial statements.
(6) Long-term Liabilities
In the government-wide financial statements and proprietary fund financial statements, long-term
debt and other long-term obligations are reported as liabilities in the applicable governmental
activities, business-type activities, or proprietary funds statement of net assets.
Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of
the bonds using the straight-line method. Bonds payable are reported net of the applicable premium
or discount.
Long-term liabilities are reported net of the deferred amounts on refunding. The deferred amount on
refunding is the difference between the reacquisition price and the net carrying amount of the old
debt. This amount is amortized as a component of interest expense, using the straight-line basis,
over the life of the old debt or new debt, whichever is shorter.
In the fund financial statements, governmental fund types recognize bond premiums and discounts,
as well as bond issuance costs, during the current period. The face amount of the 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. Issuance
costs, whether or not withheld from the actual debt proceeds received, are reported as debt service
expenditures.
The City enters into interest rate swap agreements to modify interest rates on outstanding debt. The
swaps are reported at fair market value in the government-wide financial statements and proprietary
fund financial statements using hedge accounting.
(7) Net Assets/Fund Balances
Net Assets. Net assets in government-wide and proprietary fund financial statements are classified
as invested in capital assets, net of related debt; restricted; and unrestricted. Restricted net assets
represent constraints on resources that are externally imposed by creditors, grantors, contributors,
bond covenants, regulations of other governments or by State statute.
D-32
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Fund Balances. In the governmental fund financial statements, fund balance is composed of five
classifications designed to disclose the hierarchy of constraints placed on how fund balance can be
spent.
North Carolina State law [G.S. 159-13(b)(16)] restricts appropriation of fund balance for the
subsequent year’s budget to an amount not to exceed the sum of cash and investments minus the
sum of liabilities, encumbrances, and deferred revenues arising from cash receipts as those amounts
stand at the close of the fiscal year preceding the budget year.
The governmental fund types classify fund balances as follows:
Nonspendable fund balance – This classification includes amounts that cannot be spent because
they are either (a) not in spendable form or (b) legally or contractually required to be maintained
intact.
Inventories – portion of fund balance that is not an available resource because it represents
the year-end balance of ending inventories, which are not spendable resources.
Perpetual care – portion of fund balance that is required to be retained in perpetuity for
maintenance of cemeteries.
Restricted fund balance – This classification includes amounts that are restricted to specific
purposes externally imposed by creditors or imposed by law.
Restricted for State statute – portion of fund balance that is not an available resource for
appropriation in accordance with State law [G.S. 159-8(a)].
Restricted for Special obligation debt service – portion of fund balance that is legally
restricted through financing agreements for future payment of debt service requirements.
Restricted for Public safety – portion of fund balance that is restricted by revenue source for
public safety expenditures.
Restricted for Streets and highways – Powell Bill and other portion of fund balance that is
restricted by revenue source for street construction and maintenance expenditures. For the
Special Revenue funds, this amount represents the balance of the total unexpended Powell
Bill and other grant funds.
Restricted for Culture and Recreation – portion of fund balance that is restricted by revenue
source for culture and recreation expenditures.
D-33
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Restricted for Community planning and development – portion of fund balance that is
restricted by revenue source for community planning and development expenditures.
Committed fund balance – This classification includes amounts that can only be used for specific
purposes imposed by ordinance approved by the City Council, the highest level of decision-making
authority. Any changes or removal of specific purposes requires action by the City Council.
Committed for Capital projects – portion of fund balance committed by the City Council for
capital projects.
Committed for Culture and recreation – portion of fund balance that is committed by
contractual obligation for culture and recreation expenditures.
Committed for Component unit – portion of fund balance committed by the City Council for
the Charlotte Regional Visitors Authority.
Assigned fund balance – This classification includes amounts that the City intends to use for specific
purposes.
Assigned for Debt service – portion of fund balance in the Debt Service fund that is not
nonspendable, restricted, nor committed that will be used for future payment of debt service
requirements.
Assigned for Capital projects – portion of fund balance in the General fund that is not
nonspendable, restricted, nor committed that will be used for low-income housing projects.
Assigned for Community planning and development – portion of fund balance in the General
fund that is not nonspendable, restricted, nor committed that will be used for business
incentive expenditures.
Unassigned fund balance – This classification includes amounts that have not been assigned to
another fund or is restricted, committed, or assigned to specific purposes within the general fund.
When expenditures are incurred for purposes for which both restricted and unrestricted fund balance
is available, the City considers restricted amounts to have been spent first. For purposes of fund
balance classification, expenditures are to be spent from restricted fund balance first, followed in
order by committed, assigned, and unassigned fund balance.
The City’s Capital Investment Plan Financial Policies which are approved annually by the City
Council include a policy to maintain the General fund balance at sixteen percent of the operating
budget. Any portion of the General fund balance in excess of sixteen percent of budgeted
expenditures is dedicated to capital expenses, unless otherwise directed by City Council.
D-34
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
2. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
a. Explanation of certain differences between the governmental fund balance sheet and the
government-wide statement of net assets
The governmental fund balance sheet includes a reconciliation between fund balance - total
government funds and net assets - governmental activities as reported in the government-wide
statement of net assets. One element of that reconciliation explains that “Long-term liabilities are not
due and payable in the current period and therefore are not reported in the funds.” The details of this
$1,566,623 difference are as follows:
Bonds and installment purchases payable
Net of deferred amounts on refunding, premiums and discounts
Commercial paper notes
Derivative instrument liability
Swaption borrowing payable
Compensated absences
Section 108 loan guarantee
Private Loan
Law enforcement officers' separation allowance
Unfunded OPEB liability
Accrued interest payable
$ 1,269,509
72,885
24,094
68,019
7,931
42,721
9,342
39,100
15,250
8,418
9,354
Net adjustment to reduce fund balance - total
governmental funds to arrive at net assets governmental activities
$ 1,566,623
D-35
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
b. Explanation of certain differences between the governmental funds statement of revenues,
expenditures and changes in fund balances and the government-wide statement of activities
The governmental fund statement of revenues, expenditures and changes in fund balances includes
a reconciliation between net changes in fund balances - total governmental funds and changes in net
assets of governmental activities as reported in the government-wide statement of activities. One
element of that reconciliation explains that “Governmental funds report capital outlays as
expenditures. However, in the statement of activities the cost of those assets is allocated over their
estimated useful lives and reported as depreciation expense.” The details of this $26,079 difference
are as follows:
Capital outlay
Depreciation expense
Net adjustment to increase net changes in fund
balances - total governmental funds to arrive at
changes in net assets of governmental activities
$ 126,483
(100,404)
$
26,079
Another element of that reconciliation states “The net effect of various miscellaneous transactions
involving capital assets (i.e., sales and donations) is to increase net assets.” The details of this
$107,885 difference are as follows:
In the statement of activities, only the loss on the sale of capital assets is
reported. However, in the governmental funds, the proceeds from the sale
increase financial resources. Thus, the change in net assets differs from
the change in fund balance by the cost of the capital assets sold.
Donations of capital assets increase net assets in the statement of
activities, but do not appear in the governmental funds because they are
not financial resources.
Net adjustment to increase net changes in fund balances - total
governmental funds to arrive at changes in net assets of governmental
activities
D-36
$
(230)
108,115
$
107,885
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Another element of that reconciliation states “The issuance of long-term debt (e.g., bonds and
installment purchases) provides current financial resources to governmental funds, while the
repayment of the principal of long-term debt consumes the current financial resources of
governmental funds. Neither transaction has any effect on net assets. Also, governmental funds
report the effect of issuance costs, premiums, discounts, and similar items when debt is issued,
whereas these amounts are deferred and amortized in the statement of activities.” The details of this
($48,439) difference are as follows:
Debt issued or incurred:
Issuance of installment purchase
Issuance of commercial paper notes
Private loan
Plus premium on debt issuance
Less deferred amount on refunding
Less issuance cost
Derivative instrument
Swaption borrowing
Principal repayments:
General obligation debt
Installment purchases
Commercial paper
Section 108 loan guarantee
Net adjustment to decrease net changes in fund
balances - total governmental funds to arrive at
changes in net assets of governmental activities
$
(33,155)
(64,846)
(270)
(36,025)
31
1,341
(20,838)
(344)
36,982
44,572
21,880
2,233
$
(48,439)
Another element of that reconciliation states, “Some expenses reported in the statement of activities
do not require the use of current financial resources and therefore are not reported as expenditures
in governmental funds.” The details of this ($1,468) difference are as follows:
Accrued interest
Amortization on deferred amount on refunding
Amortization of issuance costs
Amortization of debt premiums
Amortization of discounts
Compensated absences
Law enforcement officers' separation allowance
Unfunded OPEB liability
Change in pension assets
Net adjustment to increase net changes in fund
balances - total governmental funds to arrive at
changes in net assets of governmental activities
D-37
$
172
(860)
(579)
5,163
(32)
(2,157)
(1,929)
(670)
(576)
$ (1,468)
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
3. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Budgetary Information
As required by State statutes, prior to July 1 each year the City Council adopts an annual
appropriation ordinance for all funds except those for which expenditures are authorized by project
ordinance and the Internal Service and Fiduciary Funds. City funds budgeted by project ordinance
include the Capital Projects Fund, Democratic National Convention, Public Safety and Other Grants,
Neighborhood Development, Employment and Training, Stimulus Grants, and Emergency Telephone
System Special Revenue Funds and the Enterprise Funds capital projects.
The annual budgets are adopted at the fund level which is the legal level of budgetary control.
Supplemental appropriations at this level require approval of the City Council. During the year,
several amendments to the budget were necessary. Administrative control is maintained through the
establishment of more detailed line-item budgets. The budget is entered into the accounting records
and comparisons of actual to budget are made throughout the year. City administration has the
authority to amend line-item budgets. The final budgets shown in the statements are as amended at
June 30, 2012.
Annual budgets are adopted on the modified accrual basis except that they include encumbrances
for the current year.
Current year’s appropriations are charged for encumbrances when
commitments for the expenditures of monies are issued. Encumbrances outstanding at year-end are
reported as reservations of fund balances and do not constitute expenditures or liabilities because
the commitments will be reappropriated and honored during the subsequent year.
The accompanying Statement of Revenues, Expenditures and Changes in Fund Balance - Budget
and Actual (Non-GAAP Basis) - General Fund presents comparisons of the original and final budget
with actual data. Since the legally adopted budget is on a basis which differs from GAAP, the actual
data is similarly presented on a budgetary basis for comparison purposes. A reconciliation of the
non-GAAP basis to the GAAP basis is presented.
4. DETAILED DISCLOSURES ON ALL FUNDS
a. Deposits
As of June 30, 2012, the bank balances and carrying amounts of bank deposits were as follows:
Bank Balance
City - Governmental and Business-type Activities
City - Fiduciary Fund
Component unit - Authority
D-38
Carrying Amount
$152,232
$ 133,913
83
9,197
15,412
8,398
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
All deposits of the City are made in board-designated official depositories and are secured as
required by State statutes. The City may designate as an official depository any bank or savings and
loan association whose principal office is located in North Carolina. Also, the City may establish time
deposit accounts such as NOW and SuperNOW accounts, money market accounts, and certificates
of deposit.
All of the City’s deposits are either insured or collateralized by using the Pooling Method. Under the
Pooling Method, a collateral pool, all uninsured deposits are collateralized with securities held by the
State Treasurer’s agent in the name of the State Treasurer. Since the State Treasurer is acting in a
fiduciary capacity for the City, these deposits are considered to be held by the City’s agent in the
City’s name. The amount of the pledged collateral is based on an approved averaging method for
non-interest bearing deposits and the actual current balance for interest bearing deposits.
Depositories using the Pooling Method report to the State Treasurer the adequacy of their pooled
collateral covering uninsured deposits. The State Treasurer does not confirm this information with
the City or the escrow agent. Because of the inability to measure the exact amount of collateral
pledged for the City under the Pooling Method, the potential exists for under collateralization, and
this risk may increase in periods of high cash flows. However, the State Treasurer of North Carolina
enforces strict standards of financial stability for each depository that collateralizes public deposits
under the Pooling Method. The City has no policy regarding custodial credit risk for deposits. Of the
City’s bank balances, $151,965 was covered at the federal depository insurance coverage level and
$350 was covered by collateral held under the Pooling Method.
Component Unit: The Authority must comply with the requirements of the State statutes as
previously described for the City. Of the bank balances, $1,561 was covered by federal depository
insurance (including coverage by the Certificate of Deposit Account Registry Service Program). The
remaining balances were covered by collateral held under the Pooling Method.
b. Investments
State statute 159-30 authorizes the City and the Authority to invest in obligations of the United States
or obligations fully guaranteed both as to principal and interest by the United States; obligations of
the State of North Carolina; bonds and notes of any North Carolina local government or public
authority; obligations of certain non-guaranteed federal agencies; certain high quality issues of
commercial paper and bankers’ acceptances; repurchase agreements having third-party
safekeeping; and the North Carolina Capital Management Trust (NCCMT), an SEC registered mutual
fund. The City is not authorized to enter into reverse repurchase agreements. The investments of
the Charlotte Firefighters’ Retirement System (System) Pension Trust fund are governed by the
North Carolina Act (Act) establishing the System. This Act authorizes additional investment types
which include corporate bonds, common stock, guaranteed investment contracts and mutual funds.
The investments of the Employee Benefit Trust Plan (EBTP) are governed by state statute 14769.2(b)(1)-(6)&(8). This legislation authorizes additional investment types which include corporate
bonds, common stock, and mutual funds.
D-39
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
City - Governmental and Business-type Activities – The investments and maturities at June 30, 2012,
were as follows:
Investment type
U.S. Agencies
Commercial Paper
Mutual Funds
NCCMT Cash Portfolio
NCCMT Term Portfolio*
Total
Investment Maturities (in Years)
Less than 1
1-3
More than 3
Fair Value
$ 1,490,943
100,000
70,243
233,068
8,000
$ 1,902,254
$
$
434,525
100,000
N/A
N/A
8,000
542,525
$ 945,711
N/A
N/A
$ 945,711
$ 110,707
N/A
N/A
$ 110,707
* Because the NCCMT Term Portfolio had a weighted average maturity of 0.17 years,
it was presented as an investment with a maturity of 6-12 months.
Interest Rate Risk. Although the City does not have a formal investment policy, internal investment
guidelines prohibit maturities longer than five years which helps manage exposure to fair value
losses in rising interest rate environments.
Credit Risk. State law limits investments in commercial paper to the top rating issued by nationally
recognized statistical rating organizations (NSRO’s). Although the City had no formal policy on
managing credit risk, internal investment guidelines for commercial paper require at least two ratings
from either Standard & Poor’s (S&P), Fitch Ratings (Fitch), or Moody’s Investors Service (Moody’s).
As of June 30, 2012, the City’s investments in commercial paper carried at least S&P A1, Moody’s
P1 or Fitch F1 ratings. The City’s investments in the NCCMT Cash Portfolio carried a credit rating of
AAAm by S&P as of June 30, 2012. The City’s investment in the NCCMT Term Portfolio is unrated.
The Term Portfolio is authorized to invest in instruments permitted by State statute 159-30 described
above. The City’s investments in U.S. Agencies (Federal Home Loan Bank, Federal National
Mortgage Association, Federal Home Loan Mortgage Corporation and Federal Farm Credit Bank)
are rated AA+ by S&P and Aaa by Moody’s.
Custodial Credit Risk. For an investment, custodial credit risk is the risk that in the event of the
failure of the counterparty, the City will not be able to recover the value of its investments or
collateral securities that are in the possession of an outside party. At June 30, 2012, the City had no
investments subject to custodial credit risk. The City had no formal policy on custodial credit risk.
However, the City’s internal policy limits custodial credit risk by providing that security in the
collateral be delivered to a third party safekeeping bank designated by the City.
Concentration of Credit Risk. The City’s informal investment policy limits the amount of commercial
paper or bankers acceptances to a maximum of 25 percent of the portfolio. For commercial paper, a
maximum of $20 million may be invested in any one issuer. For bankers acceptances, the maximum
investment is limited to 10 percent of the portfolio for any one issuer.
D-40
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
City – Fiduciary Fund: Charlotte Firefighters’ Retirement System – The investments and maturities at
June 30, 2012 were as follows:
Investment type
U.S. Treasuries
U.S. Agencies
Corporate bonds
Common stocks
Mutual funds
Total
Fair Value
$
5,314
12,566
23,467
133,794
181,122
$ 356,263
Investment Maturities (in Years)
More than
1-5
6 - 10
10
$ 2,028
$ 1,432
$
1,854
12,566
10,099
5,876
6,664
N/A
N/A
N/A
N/A
N/A
N/A
$ 12,127
$ 7,308
$
21,084
Less than
1
$
828
N/A
N/A
$
828
Interest Rate Risk. The System does not have a formal investment policy that limits investment
maturities.
Credit Risk. The System is authorized to invest in bonds with a quality rating of no less than
investment grade and unrated U.S. Treasuries and Agencies. The quality ratings of investments in
fixed income securities as described by nationally recognized statistical rating organizations at June
30, 2012 are as follows:
Quality Rating
AAA
Baa > AA
Total credit risk debt securities
US Government fixed income securities:
Government National Mortgage Association
U.S. Treasury
Not rated
Total fixed income securities
Fair Value
$
11,532
17,177
28,709
Percentage
of Portfolio
27.89%
41.54%
69.43%
2,673
5,315
4,650
41,347
6.47%
12.85%
11.25%
100.00%
$
Concentration of Credit Risk. The System limits the amount of equity holdings in any one company
to 8 percent of the market value of the portfolio; the amount of equity holdings in any one sector to
30 percent of the market value of the portfolio; and the amount of fixed-income securities in any one
corporation to 5 percent of the market value of the portfolio. There is no limit on securities backed by
the full faith and credit of the U.S. Government or any of its instrumentalities.
In accordance with the Act, the System has invested in collateralized mortgage obligations (CMO)
and mortgage backed securities. CMO and mortgage backed securities are based on cash flows
from principal and interest payments on underlying mortgages. CMO rates trade in sympathy with
treasury rates. At year-end, the System held $913 of these securities.
D-41
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
City – Fiduciary Fund: Employee Benefit Trust Plan (EBTP) – At June 30, 2012, the EBTP had
investments of $37,459 in mutual funds.
Interest Rate Risk. The EBTP does not have a formal investment policy that limits investment
maturities.
Credit Risk. The EBTP adheres to state statutes which limit credit risk by limiting investments in
below investment grade securities and restricting the purchase of non-exchange traded investments.
Concentration of Credit Risk. The EBTP fund investments will be diversified by policy according to a
strategic asset allocation across a range of company capitalizations in domestic and international
equities as well as domestic and global bonds. The EBTP limits the amount of equity holdings in any
one company to 8 percent of the market value of the portfolio; the amount of equity holdings in any
one sector to 30 percent of the market value of the portfolio; and the amount of fixed-income
securities in any one corporation to 5 percent of the market value of the portfolio. There is no limit on
securities backed by the full faith and credit of the U.S. Government or any of its instrumentalities.
Component Unit – At June 30, 2012, the Authority had investments of $190 in the NCCMT’s Cash
Portfolio, which carried a credit rating of AAAm by Standard and Poor’s.
D-42
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
c.
Receivables
Accounts receivable are presented net of allowance for uncollectibles in the accompanying financial
statements. The receivables and applicable allowances for uncollectibles are as follows:
Governmental
General
Debt Service
Capital Projects
Nonmajor
Gross
Net
Receivable Allowance Receivable
$ 36,620
3,103
12,468
3,737
$ 27,192
2,961
6,440
3,485
55,928
40,078
15,850
52,752
9,382
22,499
1,700
540
8,262
2,334
247
375
-
44,490
7,048
22,252
1,325
540
86,873
11,218
75,655
654
464
-
654
464
$143,919
$ 51,296
$ 92,623
Total Governmental
Proprietary
Water and Sewer
Storm Water
Airport
Public Transit
Internal Service
Total Proprietary
Fiduciary
Firefighters' Retirement
Employee Benefit
Total
$
9,428
142
6,028
252
In February 2002, City Council approved an interest-free loan to the Authority for $5,000 for the
renovation of Ovens Auditorium. In May 2007, the Council approved a new repayment schedule for
the loan agreement. The term of the loan was extended by thirty years and established a $160 per
year repayment through fiscal year 2037. At June 30, 2012 the balance of the loan outstanding was
$3,758.
d. Property Taxes
Pursuant to State statutes, property taxes levied on July 1, the beginning of the fiscal year, are due
September 1; however, penalties do not accrue until January 6. The taxes levied effective July 1,
2011, were based on the assessed values listed as of January 1, 2011, which is the lien date.
D-43
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
The City and Mecklenburg County have a common tax base and overlapping bonded debt.
Mecklenburg County is the City’s agent for listing and collecting property taxes levied.
distribution of the City’s levy for 2012 (tax rate per $100 valuation) to its funds is shown below:
General
Debt Service
Capital Projects
Total
The
$ 0.3600
0.0650
0.0120
$ 0.4370
In addition, special taxes are levied on areas referred to as Municipal Services Districts.
The
purpose of these taxes is to aid the revitalization of these areas. The tax rates for 2012 for Districts
1, 2, 3, 4 and 5 were $.0168, $.0233, $.0358, $.0668 and $.0279, respectively.
e. Restricted Assets
Cash, cash equivalents and investments are restricted in the accompanying statements as follows by
fund:
GovernmentalDebt Service
Capital Projects
Total Governmental
EnterpriseWater and Sewer
Storm Water
Airport
Total Enterprise
Total
$
7
23,586
23,593
7,814
1,691
264,434
273,939
$ 297,532
These fund assets are restricted pursuant to bond orders and other financing agreements.
D-44
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
f.
Capital Assets
Capital asset activity for governmental activities for the year ended June 30, 2012 was as follows:
Beginning
Balance
Governmental activitiesCapital assets, not being depreciated:
Land
Construction in progress
Total capital assets,
not being depreciated
Ending
Increases Decreases
Balance
$ 3,045,512 $ 64,875 $
24 $3,110,363
322,745
121,823
41,169
403,399
3,368,257
186,698
41,193
3,513,762
1,051,832
2,344,308
12,963
157,460
12,962
57,933
620
17,632
78
5,594
1,064,794
2,402,163
13,583
169,498
3,566,563
89,147
5,672
3,650,038
229,685
690,753
11,398
116,287
26,011
59,248
473
14,674
5,388
255,696
750,001
11,871
125,573
Total accumulated depreciation
1,048,123
100,406
5,388
1,143,141
Total capital assets,
being depreciated, net
2,518,440
(11,259)
284
2,506,897
Capital assets, being depreciated:
Buildings
Infrastructure
Intangibles
Machinery and equipment
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings
Infrastructure
Intangibles
Machinery and equipment
Governmental activities capital assets, net
$ 5,886,697 $ 175,439 $ 41,477 $6,020,659
Depreciation expense was charged to activities as follows:
Governmental activities:
Public safety
Sanitation
General administration
Support services
Engineering and property management
Streets and highways
Community planning and development
Culture and recreation
Capital assets held by the City's internal
service funds are charged to the various
functions based on the usage of assets
Total depreciation expense - governmental activities
D-45
$
$
11,767
3,271
1,581
1,330
3,094
56,696
9,737
12,928
2
100,406
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Capital asset activity for business-type activities for the year ended June 30, 2012 was as follows:
Beginning
Balance
Business-type activitiesWater and Sewer:
Capital assets, not being depreciated:
Land
Construction in progress
Total capital assets,
not being depreciated
$
40,379
468,456
Ending
Increases Decreases
$
124,142
$
1
57,279
Balance
$
40,378
535,319
508,835
124,142
57,280
575,697
25,704
59
-
25,763
3,476,396
13,238
26,140
68,738
1,904
3,769
785
3,541,365
13,238
27,259
3,541,478
70,701
4,554
3,607,625
5,471
634
-
6,105
975,963
11,167
19,559
84,968
777
2,222
48
780
1,060,883
11,944
21,001
Total accumulated depreciation
1,012,160
88,601
828
1,099,933
Total capital assets,
being depreciated, net
2,529,318
(17,900)
3,726
2,507,692
3,038,153
106,242
61,006
3,083,389
Storm Water:
Capital assets, not being depreciated:
Construction in progress
265,499
38,035
3,616
299,918
Capital assets, being depreciated:
Improvements other than buildings:
Storm water systems
Intangibles
Machinery and equipment
178,825
3,359
33
5,632
36
-
184,457
3,359
69
182,217
5,668
-
187,885
34,517
3,359
32
3,083
4
-
37,600
3,359
36
37,908
3,087
-
40,995
Total capital assets,
being depreciated, net
144,309
2,581
-
146,890
Storm Water capital assets, net
409,808
40,616
3,616
446,808
Capital assets, being depreciated:
Buildings
Improvements other than buildings:
Water and sewer systems
Intangibles
Machinery and equipment
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings
Improvements other than buildings:
Water and sewer systems
Intangibles
Machinery and equipment
Water and Sewer capital assets, net
Total capital assets being depreciated
Less accumulated depreciation for:
Improvements other than buildings:
Storm water systems
Intangibles
Machinery and equipment
Total accumulated depreciation
continued on next page
D-46
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Beginning
Balance
Airport:
Capital assets, not being depreciated:
Land
Construction in progress
$
Total capital assets,
not being depreciated
291,994
80,607
Ending
Increases Decreases
$
5,510
78,503
$
54,879
Balance
$
297,504
104,231
372,601
84,013
54,879
401,735
618,045
8,622
-
626,667
356,693
80,318
33,234
35,415
5,329
1,812
261
392,108
85,647
34,785
1,088,290
51,178
261
1,139,207
353,461
21,040
-
374,501
100,698
27,313
14,664
10,963
3,302
2,630
177
111,661
30,615
17,117
Total accumulated depreciation
496,136
37,935
177
533,894
Total capital assets,
being depreciated, net
Capital assets, being depreciated:
Buildings
Improvements other than buildings:
Runways
Other
Machinery and equipment
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings
Improvements other than buildings:
Runways
Other
Machinery and equipment
592,154
13,243
84
605,313
Airport capital assets, net
964,755
97,256
54,963
1,007,048
Public Transit:
Capital assets, not being depreciated:
Land
Construction in progress
49,964
171,545
823
46,292
31,593
50,787
186,244
221,509
47,115
31,593
237,031
85,242
598
-
85,840
335,994
24,090
5,885
184,437
46
4,653
1,066
24,407
3,455
336,040
28,743
6,951
205,389
635,648
30,770
3,455
662,963
28,200
3,894
-
32,094
65,019
12,177
4,147
84,231
18,859
2,502
669
14,456
3,213
83,878
14,679
4,816
95,474
Total accumulated depreciation
193,774
40,380
3,213
230,941
Total capital assets,
being depreciated, net
441,874
(9,610)
242
432,022
663,383
37,505
31,835
669,053
$ 5,076,099
$ 281,619
$ 151,420
$ 5,206,298
Total capital assets,
not being depreciated
Capital assets, being depreciated:
Buildings
Improvements other than buildings:
Transit corridors
Other
Intangibles
Machinery and equipment
Total capital assets being depreciated
Less accumulated depreciation for:
Buildings
Improvements other than buildings:
Transit corridors
Other
Intangibles
Machinery and equipment
Public Transit capital assets, net
Business-type capital assets, net
D-47
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
g. Interfund Receivables, Payables and Transfers
The following is a summary of interfund receivables and payables at June 30, 2012, by fund:
Interfund
Interfund
Due to/from other funds:
Receivables
General
Nonmajor governmental
Employee Health and Life
$
3,585
503
$
503
3,585
-
$
4,088
$
4,088
Total
Payables
The balances are for reimbursable expenditures and will be paid within 30 days.
Due to/from primary government and component unit for reimbursable expenditures:
Receivable
Entity
Primary Government:
Debt Service
Capital Projects
Nonmajor governmental
Enterprise - Airport
Component Unit - Authority
Total
$
$
Payable
Entity
7,109 $
298
1,223
8,630 $
200
781
242
7,407
8,630
Interfund transfers:
Transfer out:
General
Debt
Service
Transfers In:
Capital
Nonmajor
Enterprise Projects Governmental Public Transit
General
$
Debt Service
3,425
Capital Projects
446
Nonmajor governmental
2,495
Enterprise Public Transit
-
$ 17,881
52,113
-
3
Total
$ 69,994
$ 18,134
$ 6,366
$ 16,830
42
1,259
$
6,454
243
8,025
1,988
$
16,710
Total
$
2
18,400
-
3
$
18,402
$ 129,606
-
$ 41,165
3,712
26,871
57,855
The transfers consist primarily of the following: (a) $69,994 to Debt Service from General and
nonmajor governmental to cover debt service costs, (b) $18,400 to Enterprise - Public Transit from
Capital Projects pursuant to an interlocal agreement for regional mass transit, (c) $14,722 to
nonmajor governmental from General, Debt Service and Capital Projects.
D-48
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
h. Payables
Payables at June 30, 2012 were as follows:
Vendors
Governmental
General
Debt Service
Capital Projects
Nonmajor governmental
$
Total Governmental
Proprietary
Water and Sewer
Storm Water
Airport
Public Transit
Internal Service
Total Business-type
Total
$
Salaries
Other
Total
37,242 $
2,551
13,361
10,846
5,147 $
13
632 $
-
43,021
2,551
13,361
10,859
64,000
5,160
632
69,792
9,560
5,756
22,531
11,853
45,089
1,134
167
515
578
48
685
3,782
-
11,379
5,923
23,046
16,213
45,137
94,789
2,442
4,467
101,698
7,602 $
5,099 $
171,490
158,789 $
D-49
D-47
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
i.
Deferred Revenues
Governmental funds report deferred revenue in connection with receivables for revenues that are not
considered to be available to liquidate liabilities of the current period. Governmental funds also defer
revenue recognition in connection with resources received but not yet earned. At the end of the
current fiscal year, the components of deferred revenue and unearned revenue reported in the
governmental funds were as follows:
Unavailable
Property taxes receivable:
General
Debt Service
Capital Projects
Nonmajor governmental
Notes receivable:
General
Capital Projects
Nonmajor governmental
Accounts receivable:
General
Capital Projects
Nonmajor governmental
Due from component unit:
Debt Service
Capital Projects
Grant advances:
Capital Projects
Nonmajor governmental
$
7,156
142
901
191
$
961
-
46
44,862
52,473
-
3,363
5,127
12
-
5,460
298
-
12
2,185
12
2,185
$ 122,228
D-50
Unearned
$
3,158
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
j.
Long-term Liabilities
A summary of changes in long-term liabilities for governmental activities for the year ended June 30,
2012 follows:
Beginning
Balance
Additions
Reductions
Ending
Balance
Due Within
One Year
$ 456,009
$ 175,495
$ 84,357
$ 547,147
$ 25,124
Governmental Activities
General obligation bonds
Less unamortized deferred on
refundings
Plus unamortized premiums
Total bonds payable
(5,955)
29,324
479,378
32,706
208,201
(504)
2,973
86,826
(5,451)
59,057
600,753
(505)
3,648
28,267
Special obligation bonds
Installment purchases
Less unamortized deferred on
refundings
Plus unamortized premiums
Less unamortized discounts
Total installment purchases
10,970
722,809
35,145
850
45,712
10,120
712,242
900
39,019
(3,510)
22,185
(882)
740,602
(31)
3,319
38,433
(356)
2,190
(32)
47,514
(3,185)
23,314
(850)
731,521
(301)
2,286
(32)
40,972
Commercial paper notes payable
Derivative instrument liability
Swaption borrowing payable
Compensated absences
Section 108 loan guarantee
Private loan
Due to participants
Law enforcement officers'
separation allowance
Unfunded OPEB liability
109,248
28,322
7,587
40,715
11,575
38,830
1,842
64,846
39,697
344
33,535
270
4,597
150,000
31,383
2,233
-
24,094
68,019
7,931
42,867
9,342
39,100
6,439
25,572
440
-
13,321
7,844
1,929
4,029
3,327
15,250
8,546
-
Total governmental activities
$ 1,490,234
$ 395,881
$ 322,133
$ 1,563,982
$ 96,151
For governmental activities, compensated absences, law enforcement officers’ separation allowance,
and the unfunded OPEB liability are primarily liquidated by the General Fund. Payments due to
participants are made by Internal Service Funds.
D-51
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
A summary of changes in long-term liabilities for business-type activities for the year ended June 30,
2012 follows:
Beginning
Balance
Additions
Reductions
Ending
Due Within
Balance
One Year
Business-type Activities
Water and Sewer:
General obligation bonds
$
255,150
$
-
$
24,287
$
230,863
$ 24,962
Less unamortized deferred on
refundings
Plus unamortized premiums
Revenue bonds
(12,287)
-
(1,594)
(10,693)
(1,291)
18,686
-
1,791
16,895
1,791
1,485,035
93,390
147,045
1,431,380
39,560
Less unamortized deferred on
refundings
Plus unamortized premiums
Total bonds payable
Installment purchases
Plus unamortized premiums
Total installment purchases
(9,776)
(1,149)
44,920
12,239
(1,023)
2,522
54,637
(9,902)
(1,068)
2,992
1,781,728
104,480
173,028
1,713,180
66,946
10,646
1,365
4,898
7,113
2,746
523
150
227
446
200
11,169
1,515
5,125
7,559
2,946
6,275
-
835
5,440
830
Other financing agreements Municipal systems
Derivative instrument liablity
57,426
44,200
-
101,626
-
Refundable construction deposits
6,501
24
1,041
5,484
695
Compensated absences
3,209
3,027
2,775
3,461
1,977
662
-
662
-
-
1,866,970
153,246
183,466
1,836,750
73,394
11,414
-
859
10,555
914
(547)
-
(49)
(498)
(48)
750
-
65
685
64
116,965
-
3,550
113,415
3,690
Arbitrage
Total Water and Sewer
Storm Water:
General obligation bonds
Less unamortized deferred on
refundings
Plus unamortized premiums
Revenue bonds
Less unamortized deferred on
refundings
Plus unamortized premiums
Total bonds payable
Federal revolving loan
Compensated absences
Total Storm Water
(1,459)
-
(108)
(1,351)
(108)
2,394
-
101
2,293
101
129,517
-
4,418
125,099
4,613
-
148
15
133
7
506
423
392
537
290
130,023
571
4,825
125,769
4,910
continued on next page
D-52
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Beginning
Balance
Additions
Reductions
Ending
Due Within
Balance
One Year
Airport:
Revenue bonds
$
697,370
$ 201,565
$
38,840
$
860,095
$ 20,145
Less unamortized deferred on
refundings
Plus unamortized premiums
Total bonds payable
Compensated absences
Total Airport
(2,414)
-
(269)
(2,145)
(269)
8,510
3,822
731
11,601
794
703,466
205,387
39,302
869,551
20,670
1,432
1,100
1,020
1,512
770
704,898
206,487
40,322
871,063
21,440
2
-
2
-
-
162,770
-
6,120
156,650
6,350
Public Transit:
General obligation bonds
Installment purchases
Less unamortized deferred on
refundings
Plus unamortized premiums
Total installment purchases
Compensated absences
Total Public Transit
Total business-type activities
(250)
-
(29)
-
134
2,926
134
165,580
-
6,225
159,355
6,455
2,800
1,573
1,396
2,977
911
168,382
1,573
7,623
162,332
7,366
$ 2,870,273
$ 361,877
$ 236,236
$ 2,995,914
$ 107,110
3,060
(221)
(29)
The government-wide statement of net assets includes $20,670 of long-term liabilities due within one
year for business-type activities in the liabilities payable from restricted assets. The remaining
amount of $86,440 is displayed as noncurrent liabilities, due within one year on that same statement.
(1) General Obligation Bonds
The City issues general obligation bonds to finance acquisition or construction of major capital
facilities and the purchase of other major capital items. Bonded indebtedness has also been issued
to advance refund several general obligation bonds. Interest rates on fixed rate general obligation
bonds outstanding range from 2.00 to 5.25 percent with final maturity in the year 2033.
D-53
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Debt service requirements to maturity for general obligation bonds are as follows:
Governmental Activities
Year Ended
June 30
Principal
2013
$
25,124
2014
30,533
2015
31,187
2016
30,763
2017
32,300
2018-2022
164,627
2023-2027
158,083
2028-2032
68,125
2033
6,405
$ 547,147
Interest
$ 23,692
24,747
23,349
21,781
20,312
77,920
37,940
7,686
160
$ 237,587
Business-type Activities
Year Ended
Water and Sewer
June 30
Principal
Interest
2013
$
24,962
$ 10,733
2014
26,087
9,508
2015
26,453
8,231
2016
27,513
6,913
2017
28,072
5,578
2018-2022
89,330
10,715
2023-2024
8,446
353
$ 230,863
$ 52,031
Storm Water
Principal
Interest
$
914
$
508
960
463
1,000
415
969
364
1,013
316
4,738
847
961
40
$ 10,555
$ 2,953
D-54
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
(2) Special Obligation Bonds
In November 2004, the City issued taxable variable rate special obligation bonds to acquire property
for purposes of revitalizing the uptown area. Interest on the variable-rate bonds is determined by a
remarketing agent based upon market conditions. These bonds are solely secured by and payable
from a portion of the sales and use tax distributed revenues and are non-general obligation
financings. These revenues are not pledged by the City, directly or indirectly, as collateral, and no
lien or claim can be made against such revenues. In accordance with State statutes, no deficiency
judgment may be rendered against the City for amounts owed and the taxing power of the City may
not be pledged directly or indirectly to collateralize amounts due pursuant to these bonds.
Debt service requirements to maturity for special obligation bonds are as follows:
Governmental Activities
Year Ended
June 30
Principal
2013
$
900
2014
950
2015
1,000
2016
1,055
2017
1,115
2018-2021
5,100
$ 10,120
Interest
$
21
20
17
15
13
28
$
114
D-55
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
(3) Revenue Bonds
The following table summarizes the City’s revenue bonds for Business-type activities:
Purpose
Interest Rates
Date Issued
Final
Maturity
Water and Sewer, Series 2002A
Water and Sewer, Series 2002B
Water and Sewer, Series 2002C
Water and Sewer, Refunding Series 2005A
Water and Sewer, Refunding Series 2005B
Water and Sewer, Series 2006A
Water and Sewer, Series 2006B
Water and Sewer, Series 2008
Water and Sewer, Refunding Series 2009
Water and Sewer, Series 2009B
Water and Sewer, Refunding Series 2011
3.50% - 5.50%
Variable
Variable
3.00% - 5.00%
5.00%
4.00% - 5.00%
Variable
3.50% - 5.00%
3.00% - 5.25%
3.50% - 5.00%
1.50% - 5.00%
02/15/2002
03/13/2002
08/08/2002
03/03/2005
03/03/2005
07/26/2006
07/26/2006
09/10/2008
08/25/2009
12/09/2009
08/03/2011
2016
2028
2025
2022
2015
2037
2037
2039
2036
2040
2025
Original
Issue
$ 61,035
114,430
108,390
33,115
35,675
100,290
300,000
342,715
93,765
366,380
93,390
Total Water and Sewer
Storm Water, Refunding Series 2002
Storm Water, Series 2004
Storm Water, Series 2006
$
25,900
114,430
101,890
23,685
20,970
91,360
174,755
329,995
91,945
366,380
90,070
1,431,380
3.00% - 5.25%
3.00% - 5.00%
4.00% - 5.00%
01/15/2002
10/27/2004
10/25/2006
2025
2034
2036
29,840
54,265
43,675
Total Storm Water
Airport, Series 2004A
Airport, Series 2004B
Airport, Refunding Series 2007A
Airport, Series 2007B
Airport, Refunding Series 2008D
Airport, Refunding Series 2009B
Airport, Series 2010A
Airport, Refunding Series 2010B
Airport, Series 2010C
Airport, Series 2011A
Airport, Series 2011B
Airport, Series 2011C
Airport Special Facility, Refunding Series 1998
Airport Special Facility, Series 2000
Airport Special Facility, Series 2011 CONRAC
Balance
June 30, 2012
25,775
47,400
40,240
113,415
4.75% - 5.25%
4.75% - 5.25%
4.00% - 5.00%
Variable
Variable
2.50% - 5.00%
2.00% - 5.50%
1.25% - 5.50%
Variable
2.00% - 5.00%
2.00% - 5.00%
Variable
5.60%
7.75%
2.48% - 6.06%
09/15/2004
09/15/2004
08/16/2007
08/16/2007
11/05/2008
02/17/2009
02/10/2010
02/10/2010
02/10/2010
11/09/2011
11/09/2011
11/09/2011
03/01/1998
08/15/2000
11/09/2011
Total Airport
2035
2024
2038
2038
2035
2017
2040
2029
2040
2042
2042
2042
2028
2028
2042
87,095
48,465
99,995
47,570
40,585
51,180
130,100
67,770
31,145
76,100
34,250
30,920
86,000
34,700
60,295
87,095
45,485
93,070
27,380
39,565
37,865
127,860
62,335
22,965
76,100
34,250
30,920
86,000
28,910
60,295
860,095
Total business-type activities
$2,404,890
Interest on the variable-rate bonds is determined by a remarketing agent based upon market
conditions. The City entered into interest rate swap agreements for the variable rate Water and
Sewer Revenue Bonds Series 2002B, 2002C, and 2006B. See note 4.j.7 for additional information
concerning derivative instruments.
The principal and interest on the Airport Revenue bonds are payable from net revenues of the
Airport. Pursuant to the Revenue Bond Order, the City has covenanted to charge rates which
produce revenues sufficient to cover principal and interest payments.
D-56
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
The Airport Special Facility Revenue Bonds are payable solely from and secured solely by a pledge
of debt service rentals pursuant to a Special Facility Lease (Lease) agreement with US Airways
Group, Inc.
The principal and interest on the Water and Sewer and Storm Water Revenue Bonds are payable
from net revenues of the water and sewer and storm water systems, respectively. Pursuant to the
general trust indentures, the City has covenanted to charge rates that produce net revenues which
(1) including 50 percent of the surplus fund, after providing for a two-month operating reserve, are at
least 120 percent of the principal and interest requirements plus 100 percent of non-revenue bond
debt service requirements and (2) are at least 110 percent of the principal and interest requirements
plus 100 percent of non-revenue bond debt service requirements. Based on the 2012 Water and
Sewer Fund budgets, revenue bond debt service coverage was at least 128 percent. Based on the
2012 Storm Water Fund budgets, revenue bond debt service coverage was at least 423 percent.
The Revenue and Special Facility Revenue Bonds do not constitute a legal or equitable pledge,
charge, lien or encumbrance upon any of the City’s property or upon any of its income, receipts or
revenues, except as provided in the Revenue Bond Orders or Lease. Neither the credit nor the
taxing power of the City is pledged for the payment of the principal or interest, and no owner has the
right to compel the exercise of the taxing power of the City or the forfeiture of any of its property in
connection with any default under the Revenue Bond Orders or Lease.
The Revenue Bond Orders provide for the establishment of reserves for working capital and debt
service. The reserves in the Airport Enterprise Fund at June 30, 2012 are $21,606 for working
capital and $52,106 for debt service. The reserve requirements for the Water and Sewer Revenue
Bonds, except for Series 2002A, were satisfied with the purchase of surety bonds or insurance
policies. For the Water and Sewer Series 2002A and the Storm Water Revenue bonds, the reserve
for debt service in the Water and Sewer and Storm Water Enterprise Funds is $3,143 and $1,691,
respectively, at June 30, 2012.
D-57
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Revenue bond debt service requirements to maturity are as follows:
Business-type Activities
Year Ended
Water and Sewer
June 30
Principal
Interest
2013
$
39,560
$
50,131
2014
43,770
48,483
2015
45,185
46,662
2016
47,290
44,758
2017
50,200
43,273
2018-2022
284,450
193,944
2023-2027
287,605
150,747
2028-2032
237,860
107,538
2033-2037
286,575
55,450
2038-2042
108,885
6,981
$ 1,431,380
$ 747,967
Storm Water
Principal
Interest
$ 3,690
$ 5,463
3,845
5,310
4,025
5,128
4,220
4,933
4,435
4,718
25,550
20,206
26,635
13,618
24,225
7,752
16,790
1,736
$ 113,415
$ 68,864
D-58
Airport
Principal
Interest
$ 20,145
$ 38,463
21,910
36,687
23,745
35,864
24,745
34,912
25,825
33,910
100,435
157,098
138,375
132,826
268,465
72,151
144,600
35,551
91,850
8,882
$ 860,095
$ 586,344
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
(4) Installment Purchases
The following table summarizes the City’s installment purchases:
Purpose
Interest Rates
Date Issued
Final
Maturity
Governmental activities:
Convention Center, Refunding Series 2003A
Convention Center, Refunding Series 2003B
Convention Center, Refunding Series 2005C
Convention Center, Series 2009B
Tourism, Series 2003F
Tourism, Series 2003
Tourism, Series 2003G
Hall of Fame, Series 2009C
Hall of Fame, Series 2009D
Cultural Facilities, Series 2009E
Public Safety, Refunding Series 2001
Public Safety, Refunding Series 2003E
Public Safety, Series 2005A
Public Safety, Refunding Series 2005D
Public Safety, Series 2009A
Public Safety, Series 2010A
Public Safety, Series 2012A
Public Safety, Refunding Series 2012A
Public Safety Equipment, Series 2009A
Equipment, Series 2009A
Equipment, Series 2010A
Equipment, Series 2012A
5.00% - 5.50%
Variable
3.00% - 5.00%
2.00% - 5.00%
Variable
2.00%
4.00% - 5.38%
5.00%
Variable
3.00% - 5.00%
3.50% - 4.50%
2.00% - 4.00%
Variable
3.00% - 5.00%
3.00% - 5.00%
3.63% - 5.00%
1.25% - 5.00%
1.25% - 5.00%
3.00% - 5.00%
3.00% - 5.00%
4.00% - 5.00%
3.00% - 5.00%
09/01/2003
09/10/2003
05/04/2005
06/25/2009
05/29/2003
07/25/2003
08/28/2003
06/25/2009
07/30/2009
09/30/2009
10/15/2001
05/15/2003
04/06/2005
05/04/2005
06/25/2009
05/27/2010
01/04/2012
01/04/2012
06/25/2009
06/25/2009
05/27/2010
01/04/2012
2020
2022
2026
2034
2034
2015
2033
2039
2035
2039
2016
2013
2025
2025
2029
2024
2032
2021
2019
2014
2016
2017
Original
Issue
$102,245
24,335
33,665
30,620
41,000
16,800
136,850
37,295
100,000
139,135
7,680
8,810
15,725
16,805
28,470
13,685
23,195
1,990
13,205
27,002
20,174
9,960
Total governmental activities
Business-type activities:
Water and Sewer:
Equipment, Series 2009A
Equipment, Series 2010A
Equipment, Series 2012A
$
77,370
19,490
19,160
29,035
19,785
3,540
132,635
37,295
95,850
136,565
3,065
1,000
11,395
14,930
25,680
12,630
23,195
1,990
9,885
11,648
16,139
9,960
$712,242
3.00% - 5.00%
4.00% - 5.00%
3.00% - 5.00%
06/25/2009
05/27/2010
01/04/2012
2014
2016
2017
10,078
1,751
1,365
Total Water and Sewer
Public Transit:
Equipment and Facilities, Series 2004A
Equipment and Facilities, Series 2004B
Equipment and Facilities, Series 2005E
Equipment and Facilities, Series 2008A
Balance
June 30, 2012
$
4,347
1,401
1,365
7,113
2.00% - 5.00%
Variable
3.00% - 5.00%
3.50% - 5.00%
Total Public Transit
12/01/2003
01/08/2004
08/31/2005
06/04/2008
2033
2014
2035
2035
58,440
28,595
74,400
34,965
53,580
6,440
64,595
32,035
156,650
Total business-type activities
$163,763
Interest on the variable-rate installment purchases is determined by a remarketing agent based upon
market conditions.
D-59
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
These installment purchase contracts are non-general obligation financings. In accordance with
State statutes, no deficiency judgment may be rendered against the City for amounts owed and the
taxing power of the City may not be pledged directly or indirectly to collateralize amounts due
pursuant to these contracts.
The City enters into installment purchase contracts annually for the purchase of capital equipment.
These financings are payable over five years.
Installment purchases debt service requirements to maturity are as follows:
Governmental Activities
Year Ended
June 30
Principal
2013
$ 39,019
2014
39,342
2015
34,562
2016
34,587
2017
31,002
2018-2022
163,400
2023-2027
125,895
2028-2032
110,105
2033-2037
99,915
2038-2039
34,415
$ 712,242
Interest
$ 27,500
25,887
24,110
22,603
21,163
86,224
59,333
35,788
18,866
2,558
$ 324,032
Business-type Activities
Year Ended
Water and Sewer
June 30
Principal
Interest
2013
$ 2,746
$
331
2014
2,848
203
2015
623
61
2016
623
29
2017
273
7
2018-2022
2023-2027
2028-2032
2033-2035
$ 7,113
$
631
Public Transit
Principal
Interest
$ 6,350
$ 7,217
6,570
7,089
4,415
6,951
4,600
6,766
4,805
6,560
27,590
29,241
34,740
22,079
44,225
12,601
23,355
2,119
$ 156,650
$ 100,623
(5) Commercial Paper
The City has available a general obligation commercial paper bond program to finance street
improvements, neighborhood improvements, public improvements and housing projects. The City
has authorized the issuance of bonds up to the amount of $150,000 outstanding at any time. The
bonds are general obligations of the City, and the City has pledged its faith and credit to the payment
D-60
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
of principal of and interest on the bonds.
In addition, the City has entered into a Standby Bond
Purchase Agreement which will expire in April 2015. The bonds will mature no later than 270 days
after the date of issuance or October 1, 2034. The bonds will be replaced by general obligation
bonds. The City had general obligation commercial paper bonds payable of $24,094 outstanding at
June 30, 2012. Interest rates are based upon market conditions.
Commercial paper debt service requirements to maturity are as follows:
Governmental Activities
Year Ended
June 30
Principal
2013
$
2014
2015
24,094
$ 24,094
Interest
$
48
48
39
$
135
(6) Other Long-term Liabilities
(a) Section 108 Loan Guarantee
This is the loan guarantee provision of the Community Development Block Grant (CDGB) program
that provides communities with a source of financing for economic development, housing
rehabilitation, public facilities, and large-scale physical development projects. Local governments
borrowing funds guaranteed by Section 108 loans must pledge their current and future CDBG
allocations to cover the loan amount as security for the loan. Debt service requirements to maturity
are as follows:
Governmental Activities
Year Ended
June 30
Principal
2013
$
440
2014
458
2015
501
2016
405
2017
426
2018-2022
2,469
2023-2027
3,151
2028-2029
1,492
$ 9,342
Interest
$
320
312
300
289
279
1,180
658
65
$ 3,403
D-61
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
(b) Private Loan
The City has entered into a private loan agreement for up to $41.5 million dollars to finance preopening expenses for the NASCAR Hall of Fame project, construction of additional parking and
construction of the facility. The interest rate is 4.00 percent and will be due in June 2014. As of
June 30, 2012, $39,100 had been advanced under this agreement.
Debt service requirements to maturity are as follows:
Governmental Activities
Year Ended
June 30
Principal
2013
$
2014
39,100
$ 39,100
Interest
$ 1,564
1,564
$ 3,128
(c) Municipal Systems
Pursuant to agreements, the City is leasing water and sewer facilities owned by municipalities within
Mecklenburg County. These lease agreements continue until the outstanding bonds on these
facilities have been retired, at which time title to the facilities will be conveyed to the City. Debt
service requirements to maturity are as follows:
Business-type Activities
Year Ended
June 30
Principal
2013
$
830
2014
835
2015
825
2016
820
2017
810
2018-2020
1,320
$ 5,440
Interest
$
246
210
175
139
103
115
$
988
Certain developers have contracted with the City for construction of water and sewer lines. Under
terms of these contracts, the developers are required to deposit with the City an amount equal to the
estimated cost of constructing the lines. The lines become the property of the City upon completion
and acceptance. Refunds of deposits may be either wholly or partially refundable depending upon
terms of the contracts. They will be paid over periods of five to twenty years. There are no stated
interest requirements for these deposits.
D-62
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
(d) Federal Revolving Loan
Pursuant to the North Carolina Clean Water Revolving Loan & Grant Act of 1987 and the Federal
Clean Water Act Amendments of 1987 and American Recovery and Reinvestment Act of 2009, the
City utilized loan proceeds to construct wastewater treatment works projects. The loans to be repaid
are one-half of the total project costs reimbursed. Principal is forgiven for one-half of the total project
costs reimbursed. Debt service requirements to maturity are as follows:
Business-type Activities
Year Ended
June 30
Principal
2013
$
7
2014
8
2015
7
2016
8
2017
7
2018-2022
37
2023-2027
37
2028-2030
22
$
133
In accordance with Section 148 of the Internal Revenue Code of 1986, as amended, and Sections
1.103-13 to 1.103-15 of the related Treasury Regulations, the City must rebate to the federal
government “arbitrage profits” earned on governmental bonds issued after August 31, 1986.
Arbitrage profits are the excess of the amount earned on investments over the interest paid on the
borrowings. At June 30, 2012, the City had no liability for estimated arbitrage profits payable.
D-63
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
(7) Derivative Instruments
The fair value balances and notional amounts of derivative instruments outstanding at June 30, 2012
classified by type, and the changes in fair value of such derivative instruments for the year then
ended are as follows:
Changes in Fair Value
Classification
Fair Value at June 30
Amount
Classification
Amount
Notional
Governmental activities
Cash flow hedges:
Pay-fixed interest rate sw ap
Deferred outflow
$ (18,859)
Debt
$ (31,793) $
95,850
Pay-fixed interest rate sw aption
Investment revenue $ (20,838)
Debt
$ (36,226) $ 128,245
Deferred outflow
Debt
$ (101,626) $ 391,075
Business-type activities
Cash flow hedges:
Pay-fixed interest rate sw ap
$ (44,200)
The following table displays the objective and terms of the City’s hedging derivative instruments
outstanding at June 30, along with the credit rating of the associated counterparty:
Type
Objective
Notional
Effective
Maturity
Amount
Date
Date
Pay-fixed interest
rate sw ap
Hedge of changes in
cash flow s on the 2002B
Water and Sew er
Revenue Bonds
$ 114,430
3/13/2002
Pay-fixed interest
rate sw ap
Hedge of changes in
cash flow s on the 2002C
Water and Sew er
Revenue Bonds
$ 101,890
Pay-fixed interest
rate sw ap
Hedge of changes in
cash flow s on the 2006B
Water and Sew er
Revenue Bonds
$ 174,755
Pay-fixed interest
rate sw ap
Hedge of changes in
cash flow s on the 2009D
Hall of Fame Certificates
of Participation
$
Pay-fixed interest
rate sw aption
Hedge of changes in
cash flow s in the 2003G
Tourism Certificates of
Participation
Counterparty
Terms
Credit Rating
7/1/2027 Pay 4.03%; receive 67%
of LIBOR
Baa2/A-
8/8/2002
6/1/2025 Pay 3.79%; receive lesser
of the bond floating rate
or 67% of LIBOR not to
exceed 12.00%
Baa2/A-
8/1/2006
7/1/2036 Pay 4.04%; receive
SIFMA sw ap index
Aa3/AA-
95,850
8/18/2009
6/1/2035 Pay 4.725%; receive
LIBOR
Aa3/AA-
$ 128,245
6/1/2013
6/1/2033 Pay 5.10%; receive
SIFMA sw ap index
Aa3/AA-
D-64
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Interest rate risk. The City is exposed to interest rate risk on its interest rate swaps. On its payfixed, receive-variable interest rate swaps, as LIBOR, the bond floating rate swap index, or the
SIFMA swap index decreases, the City’s net payment on the swaps increases.
Basis risk. The City’s hedging derivative instruments expose the City to basis risk since the variable
payment received from the counterparty is determined on a basis different from that used to
calculate the bond floating rate for the associated bonds. As of June 30 the rate received by the City
for the 2002B and 2002C agreements was 67 percent of LIBOR or 0.16 percent, whereas the bond
floating rates paid by the City were 0.15 percent for Series 2002B and 0.21 percent for Series
2002C. As of June 30 the rate received by the City for the 2006B agreement was 0.16 percent,
whereas the bond floating rate paid by the City was 0.15 percent. As of June 30 the rate received by
the City for the 2009D agreement was 0.24 percent, whereas the bond floating rate paid by the City
was 0.28 percent.
Termination risk.
Either the City or its counterparties may terminate the hedging derivative
instruments if the other party fails to perform under the terms of the contract. Termination could
result in the City being required to make a termination payment.
Rollover risk. The City is exposed to rollover risk on hedging derivative instruments that are hedges
of debt that may be terminated prior to the maturity of the hedged debt. If the option to terminate the
hedging derivative instrument is exercised, then the City will be re-exposed to the risks being hedged
by the hedging derivative instrument.
D-65
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Hedging derivative instrument payments and hedged debt. As of June 30, aggregate debt service
requirements of the City’s variable-rate debt and net receipts/payments on associated hedging
derivative instruments are as follows. These amounts assume that current interest rates on variablerate bonds and the current reference rates of hedging derivative instruments will remain the same for
their term. As these rates vary, interest payments on variable-rate bonds and net receipts/payments
on the hedging derivative instruments will vary.
Governmental Activities
Year Ended
June 30
2013
Variable Rate Bonds
Principal
$
2014
2,255
Interest
$
2,380
268
262
Hedging
Derivatives, Net
$
4,268
4,160
Total
$
6,791
6,802
2015
2,510
256
4,054
6,820
2016
2,640
248
3,943
6,831
2017
2,795
241
3,826
6,862
2018-2022
16,490
1,079
17,120
34,689
2023-2027
21,625
820
13,024
35,469
2028-2032
28,335
482
7,653
36,470
2033-2035
16,820
84
1,340
18,244
3,740
$ 59,388
$ 158,978
$ 95,850
$
Business-type Activities
Year Ended
June 30
2013
Variable Rate Bonds
Principal
$ 14,818
$ 20,231
637
14,619
20,211
2015
5,145
629
14,426
20,200
2016
13,270
621
14,226
28,117
2017
21,335
585
13,463
35,383
2018-2022
120,255
2,323
54,410
176,988
2023-2027
114,615
1,212
30,342
146,169
2028-2032
49,640
575
14,912
65,127
2033-2037
57,080
248
6,438
63,766
7,463
$ 177,654
$ 576,192
$ 391,075
$
Total
633
Total
4,780
Hedging
Derivatives, Net
4,955
2014
$
Interest
$
Commitments. The City’s derivative instruments include provisions that require the City to post
collateral in the event its credit rating falls below A3 by Moody’s and A- by S&P. The hedging
derivative instruments will be collateralized at fair value with cash and/or U.S. government securities.
Collateral will be posted with the City or its agent. At June 30, the aggregate fair value of all hedging
derivative instruments with these collateral posting provisions is ($169,645). If the collateral posting
requirements were triggered at June 30, the City would not be required to post collateral to its
counterparties because they had negative fair values. The City’s credit rating is Aaa/AAA, therefore,
no collateral has been posted at June 30.
D-66
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
(8) Refundings
In August 2011, the City issued $93,390 in fixed rate Water Sewer Revenue Refunding Bonds with
interest rates ranging from 1.50 to 5.00 percent. The net proceeds of $104,910 (after payment of
$719 in underwriting fees, insurance and other issue costs) were used to refund $114,930 of
outstanding fixed rate Water and Sewer System Revenue Bonds, Series 2001. The refunding
resulted in a difference between the reacquisition price and the net carrying amount of the old debt of
$1,149. This difference, reported in the accompanying financial statements as a deduction from
revenue bonds payable, is being charged to operations through the year 2025 using the effectiveinterest method. The City completed the refunding to reduce its total debt service payments over a
period of 15 years by $23,160 and to obtain an economic gain (difference between the present
values of the old and new debt service payments) of $18,896.
In January 2012, the City issued $1,990 in fixed rate installment purchase contracts, series 2012A.
The net proceeds of $2,213 (after payment of $22 in underwriting fees, insurance and other issue
costs) were used to refund $2,190 of outstanding fixed rate installment purchase contracts, series
2001B. The refunding resulted in a difference between the reacquisition price and the net carrying
amount of the old debt of $31. This difference, reported in the accompanying financial statements as
a deduction from installment contracts payable, is being charged to operations through the year 2021
using the effective-interest method. The City completed the refunding to reduce its total debt service
payments over a period of 10 years by $328 and to obtain an economic gain (difference between the
present values of the old and new debt service payments) of $285.
In April 2012, the City issued $175,495 fixed rate general obligation refunding bonds. The net
proceeds of $207,246 (after payment of $955 in underwriting fees, insurance and other issue costs)
were used to refund $30,615 and $25,265 of outstanding general obligation bonds, series 2002A
and 2002C, respectively, and to refund $150,000 of outstanding commercial paper certificates of
participation. The 2002A and 2002C series net proceeds were used to purchase U.S. government
securities. The fixed rate general obligation bonds have interest rates ranging from 1.25 to 5.00
percent with a final maturity in 2033. See note 4.j.5 for additional information on the general
obligation commercial paper bond program.
(9) Other Debt Information
In prior years, the City defeased various general obligation bonds, revenue bonds and installment
purchases by placing the proceeds of the new debt in an irrevocable trust to provide for all future
debt service payments on the old debt. Accordingly, the trust account assets and the liability for the
defeased debt are not included in the City’s financial statements. At June 30, 2012, $12,285 of
general government debt outstanding is considered defeased.
As of June 30, 2012, the City has authorized but unissued bonds of $428,186 consisting of $334,138
for street improvements, $34,373 for housing and $59,675 for neighborhood improvements.
D-67
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Pursuant to the North Carolina General Statutes, the City’s outstanding general obligation debt is
subject to a legal limitation based on 8 percent of the total assessed value of real and personal
property. As of June 30, 2012, the City’s legal debt limit was $7,229,929. The outstanding debt
subject to this limit was $2,081,308, leaving a net legal debt margin of $5,148,621.
(10)Early Extinguishment
On October 3, 2011, the City early extinguished $9,405 of variable rate Airport Revenue Bonds,
Series 2007B.
On October 3, 2011, the City early extinguished $7,395 of variable rate Airport Revenue Bonds,
Series 2010C.
On December 1, 2011, the City early extinguished $3,695 of variable rate Airport Revenue Bonds,
Series 2007B.
(11)Subsequent Events
On August 1, 2012, the City early extinguished $1,745 of variable rate Airport Revenue Bonds,
Series 2007B.
k.
Fund Balance
The following schedule provides information on the portion of General fund balance that is available
for appropriation:
Total fund balance - General Fund
$
159,150
Less:
Inventories
1,004
Restricted by State statute
61,679
Committed for Capital projects
5,674
Commited for Component unit
1,100
Assigned for Capital projects
395
Assigned for Community planning and development
875
Fund balance policy
88,423
Remaining fund balance
$
D-68
-
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
5. PENSION PLANS AND OTHER BENEFITS
Primary Government: The City participates in the North Carolina Local Governmental Employees’
Retirement System (LGERS), administered by the State of North Carolina; the Charlotte Firefighters’
Retirement System, administered through a board of trustees; and the Law Enforcement Officers’
Separation Allowance (LEO Separation). The City also participates in a Supplemental Retirement
Income Plan for Law Enforcement Officers.
Component Unit: The Authority participates in the North Carolina LGERS which is described in Note
5.a. The Authority’s contribution to the LGERS for the year ended June 30, 2012 was $804, which
was 6.88 percent of annual covered payroll.
a. LGERS
Description: The City of Charlotte contributes to the statewide LGERS, a cost-sharing multipleemployer defined benefit pension plan. All employees of the City, except members of the Charlotte
Firefighters’ Retirement System, participate in LGERS which provides retirement and disability
benefits to plan members and beneficiaries. Article 3 of G.S. Chapter 128 assigns the authority to
establish and amend benefit provisions to the North Carolina General Assembly. The Local
Governmental Employees Retirement System is included in the Comprehensive Annual Financial
Report (CAFR) for the State of North Carolina. The State’s CAFR includes financial statements and
required supplementary information for LGERS. That report may be obtained by writing to the North
Carolina Office of the State Controller, Accounting and Financial Reporting Section, 1410 Mail
Service Center, Raleigh, North Carolina 27699-1410.
Funding Policy: Plan members are required to contribute 6.0 percent of their annual covered salary.
The City is required to contribute at an actuarially determined rate. For the City, the current rate for
employees not engaged in law enforcement and for law enforcement officers is 6.88 percent and
7.05 percent, respectively, of annual covered payroll. The contribution requirements of members
and of the City are established and may be amended by the North Carolina General Assembly. The
City’s contributions to LGERS for the years ended June 30, 2012, 2011, and 2010, were $21.4
million, $18.8 million, and $14.0 million, respectively. The contributions made by the City equaled
the required contributions for each year.
b. Charlotte Firefighters’ Retirement System
Description: The Charlotte Firefighters’ Retirement System (System), a single-employer defined
benefit plan, provides retirement, disability and death benefits to civil service employees of the
Charlotte Fire Department. The System issues a publicly available financial report that includes
financial statements and required supplementary information.
D-69
That report may be obtained by
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
writing to Charlotte Firefighters’ Retirement System, 428 East Fourth Street, Suite 205, Charlotte,
North Carolina 28202.
Basis of Accounting: The financial statements of the System are presented on the accrual basis of
accounting.
Plan member and City contributions are recognized in the period in which the
contributions are due. Benefits and refunds are recognized when due and payable in accordance
with the terms of the plan. Interest and dividend income are reported as earned. The net
appreciation (depreciation) in the fair value of investments includes realized gains and losses on
investments that were both bought and sold during the year.
Method Used to Value Investments: The investments of the System are reported at fair value.
Short-term investments are reported at cost, which approximates fair value. Securities traded on a
national or international exchange are valued at the last reported sales price at current exchange
rates. Mortgages are valued on the basis of future principal and interest payments and are
discounted at prevailing interest rates for similar instruments.
investments is based on independent appraisals.
market are reported at estimated fair values.
The fair value of real estate
Investments that do not have an established
Contributions: Pursuant to the North Carolina Act (Act) which established the System, the City is
required to match the member’s contribution. The Act establishes the contribution rate pursuant to
the Board of Trustees’ recommendation and approval by the City Council. The current rate is 12.65
percent. The Act was established and may be amended by the North Carolina General Assembly.
Annual Pension Cost and Net Pension Obligation: The City’s annual pension cost and net pension
obligation to the System for the current year were as follows:
Annual required contribution
Interest on net pension obligation
Adjustment to annual required contribution
$
8,409
(512)
399
Annual pension cost
Contributions made
8,296
(7,720)
Increase in net pension obligation
Net pension obligation, beginning of year
576
(6,609)
Net pension obligation, end of year
$
D-70
(6,033)
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Trend Information
Year
Ended
June 30
2010
2011
2012
Annual
Pension
Cost (APC)
$
8,205
7,988
8,296
Percentage
of APC
Contributed
90.68%
96.02
93.06
Net
Pension
Obligation
$
(6,927)
(6,609)
(6,033)
Schedule of Funding Progress
Actuarial
Valuation
Date
Actuarial
Value of
Assets
(a)
Actuarial
Accrued
Liability
(AAL)Entry Age
(b)
Unfunded
AAL
(UAAL)
(b-a)
7/1/2010
$ 357,652
$ 395,393
$
37,741
90.45%
59,080
63.88%
7/1/2011
366,147
408,999
42,852
89.52
59,086
72.52
7/1/2012
367,183
431,942
64,759
85.01
61,158
105.89
Funded
Ratio
(a/b)
Covered
Payroll
(c)
$
UAAL as a
Percentage
of Covered
Payroll
[(b-a)/c]
The information presented in the schedule of funding progress was determined as part of the
actuarial valuation. Additional information follows:
Actuarial valuation date
Actuarial cost method
7/01/12
Entry age
Amortization method
Level Percent of Pay, Open
Remaining amortization period
Asset valuation method
30 years
5-year smoothed market value
Actuarial assumptions:
Investment rate of return
7.75%
Projected salary increases
Includes inflation at
4.25 to 11.25%
3.25%
Cost of living adjustments
None
D-71
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Concentrations: The System had individual fixed income or equity investments at June 30, 2012
managed by the following organizations that represented five percent or more of the System’s net
assets:
State Street Global Advisors
Morgan Stanley
16%
12
Barrow, Hanley, Mewhinney & Strauss
12
Winslow Capital Management
Aronson + Johnson + Oritz
10
10
Robeco Boston Partners
DE Shaw Investment Management
6
6
Cadence Capital Management
Investment Counselors of Maryland
6
6
Eagle Asset Management
5
c.
LEO Separation
Description:
The City of Charlotte administers a public employee retirement system (LEO
Separation), a single-employer defined benefit pension plan that provides retirement benefits to the
City’s qualified sworn law enforcement officers. The LEO Separation is equal to .85 percent of the
annual equivalent of the base rate of compensation most recently applicable to the officer for each
year of creditable service. The retirement benefits are not subject to any increases in salary or
retirement allowances that may be authorized by the General Assembly. Article 12D of G.S. Chapter
143 assigns the authority to establish and amend benefit provisions to the North Carolina General
Assembly. A stand-alone financial report is not issued for the LEO Separation.
All full-time law enforcement officers of the City are covered by the LEO Separation. At December
31, 2011, the LEO Separation’s membership consisted of:
Retirees receiving benefits
Active plan members
Total
193
1,819
2,012
Basis of Accounting: The City has chosen to fund the LEO Separation on a pay-as-you-go basis.
Pension expenditures are made from the General Fund, which is maintained on the modified accrual
basis of accounting.
Method Used to Value Investments: No funds are set aside to pay benefits and administration costs.
These expenditures are paid as they become due.
D-72
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Contributions: The City is required by Article 12D of G.S. Chapter 143 to provide these retirement
benefits and has chosen to fund the benefit payments on a pay-as-you-go basis through
appropriations made in the General Fund operating budget. The City’s obligation to contribute to this
plan is established and may be amended by the North Carolina General Assembly. There were no
contributions made by employees.
Annual Pension Cost and Net Pension Obligation: The City’s annual pension cost and net pension
obligation to the LEO Separation for the current year were as follows:
Annual required contribution
Interest on net pension obligation
Adjustment to annual required contribution
$
5,635
666
(795)
Annual pension cost
Contributions made
5,506
(3,577)
Increase in net pension obligation
Net pension obligation, beginning of year
1,929
13,321
Net pension obligation, end of year
$
15,250
Trend Information
Year
Ended
June 30
2010
2011
2012
Annual
Pension
Cost (APC)
$
4,629
5,856
5,506
Percentage
Net
of APC
Pension
Contributed
Obligation
70.85% $
10,915
58.91
13,321
64.96
15,250
Schedule of Funding Progress
Actuarial
Valuation
Date
12/31/2006
Actuarial
Value of
Assets
(a)
$
-
Actuarial Accrued
Liability (AAL)Project Unit Credit
(b)
$
Unfunded
AAL
(UAAL)
(b-a)
Funded
Ratio
(a/b)
Covered
Payroll
(c)
UAAL as a
Percentage
of Covered
Payroll
[(b-a)/c]
38.70%
34,026
$ 34,026
-
$ 87,917
12/31/2007
-
39,453
39,453
-
93,043
42.40
12/31/2008
-
42,984
42,984
-
100,289
42.86
12/31/2009
-
58,656
58,656
-
105,765
55.46
12/31/2010
-
54,478
54,478
-
106,419
51.19
12/31/2011
-
58,552
58,552
-
110,146
53.16
D-73
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Schedule of Employer Contributions
Year Ended
June 30
2007
Annual
Required
Contribution
$
Percentage
Contributed
3,268
82.83%
2008
3,538
85.30
2009
4,079
74.28
2010
4,538
72.27
2011
5,894
58.53
2012
5,635
63.48
The information presented in the previous schedules was determined as part of the actuarial
valuation. Additional information follows:
Actuarial valuation date
Actuarial cost method
12/31/11
Projected unit credit
Amortization method
Level percent of pay closed
Remaining amortization period
Asset valuation method
19 years
Market value
Actuarial assumptions:
Investment rate of return
5.00%
Projected salary increases
Includes inflation at
4.25 to 7.85%
3.00%
Cost of living adjustments
None
d. Supplemental Retirement Income Plan for Law Enforcement Officers
Description: The City contributes to the Supplemental Retirement Income Plan (Plan), a defined
contribution pension plan administered by the Department of State Treasurer and a Board of
Trustees. The Plan provides retirement benefits to law enforcement officers employed by the City.
Article 5 of G.S. Chapter 135 assigns the authority to establish and amend benefit provisions to the
North Carolina General Assembly.
Funding Policy: Article 12E of G.S. Chapter 143 requires the City to contribute each month an
amount equal to 5.0 percent of each officer’s salary, and all amounts contributed are vested
immediately. Also, the law enforcement officers may make voluntary contributions to the plan. The
City is currently making contributions for 1,788 law enforcement officers. Contributions for the year
ended June 30, 2012 were $8,782, which consisted of $5,554 from the City and $3,228 from the law
enforcement officers.
D-74
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
e. Death Benefit Plan
The City provides death benefits to law enforcement officers through the Death Benefit Plan for
members of the Local Governmental Employees’ Retirement System (LGERS), a multiple-employer,
State-administered, cost-sharing plan funded on a one-year term cost basis. The beneficiaries of
those employees who die in active service after one year of contributing membership in the LGERS,
or who die within 180 days after retirement of termination of service and have at least one year of
contributing membership service in the System at the time of death are eligible for death benefits.
Lump sum death benefit payments to beneficiaries are equal to the employee’s 12 highest months’
salary in a row during the 24 months prior to the employee’s death, but the benefit may not exceed
$50 or be less than $25. All death benefit payments are made from the Death Benefit Plan. The
City has no liability beyond the payment of monthly contributions. Contributions are determined as a
percentage of monthly payroll, based upon rates established annually by the State. Because the
benefit payments are made by the Death Benefit Plan and not by the City, the City does not
determine the number of eligible participants. For the fiscal year ended June 30, 2012, the City
made contributions of $154 to the State for death benefits. The City’s contributions for employees
engaged in law enforcement represented .14 percent of covered payroll.
f.
Other Postemployment Benefits
Description: The City of Charlotte Employee Benefit Trust Plan (EBTP) is a single-employer defined
benefit healthcare plan administered by the City of Charlotte. The EBTP provides health and welfare
benefit plans for the benefit of eligible retired employees of the City. Section 4.05 of the Charlotte
City Code assigns the authority to establish benefit provisions for EBTP to the City Council. A standalone financial report is not issued.
Membership of the EBTP consisted of the following at July 1, 2011, the date of the latest actuarial
valuation:
Retirees and beneficiaries receiving benefits
Active plan members
2,673
5,361
8,034
Funding Policy. The contribution requirements of plan members and the City are established and
may be amended by the City Council. The City Council set the employer contribution rate based on
the annual required contribution (ARC), an amount actuarially determined in accordance with the
parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an
ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial
liabilities (or fund excess) of the plan over a period not to exceed thirty years.
D-75
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
For the current year, the City contributed $15,375 to the plan. Plan members receiving benefits
contributed $6,140 through their required contribution. The required contribution rates for plan
members were dependent on the years of service and the coverage selected. Monthly rates ranged
from $152 to $1,281 per retiree.
Summary of Significant Accounting Policies. The City’s financial statements are prepared using the
accrual basis of accounting. Plan member contributions are recognized in the period in which the
contributions are due. Employer contributions to the plan are recognized when due and the employer
has made a formal commitment to provide the contributions. Benefits and refunds are recognized
when due and payable in accordance with the terms of the plan. The actuarial methods and
assumptions used include techniques that are designed to reduce the effects of short-term volatility
in actuarial accrued liabilities and the actuarial value assets, consistent with the long-term
perspective of the calculations. Short-term money market debt instruments, and deposits, are
reported at cost or amortized cost, which approximates fair value. Certain longer term United States
Government and United States Agency securities are valued at the last reported sales price.
Administration costs of the plan are financed through contributions and investment earnings.
Annual OPEB Cost and Net OPEB Obligation: The City’s annual other postemployment benefit
(OPEB) cost (expense) and net OPEB Obligation for the current year were as follows:
Annual required contribution
$ 15,656
Interest on net OPEB obligation
(382)
Adjustment to annual required contribution
Annual OPEB cost (expense)
1,214
16,488
Contributions made
(15,375)
Increase in net OPEB obligation
1,113
Net OPEB obligation, beginning of year
(20,928)
Net OPEB obligation, end of year
$ (19,815)
Trend Information
Year
Annual
Percentage of
Net
Ended
OPEB
Annual OPEB Cost
OPEB
June 30
Cost
Contributed
Obligation
2010
$ 15,009
2011
15,042
77.51
(20,928)
2012
16,488
93.25
(19,815)
99.72% $ (24,311)
D-76
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Funded Status and Funding Progress: As of July 1, 2012, the most recent actuarial valuation date,
the plan was 18 percent funded. The actuarial accrued liability for benefits was $224,184. The
actuarial value of assets was $40,742, resulting in an unfunded actuarial accrued liability (UAAL) of
$183,442. The covered payroll (annual payroll of active employees covered by the plan) was
$294,793 and the ratio of the UAAL to the covered payroll was 62.23 percent.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined
regarding the funded status of the plan and the annual required contributions of the employer are
subject to continual revision as actual results are compared with past expectations and new
estimates are made about the future.
The schedule of funding progress, presented below, presents multiyear trend information about
whether the actuarial value of plan assets is increasing or decreasing over time relative to the
actuarial accrued liabilities for benefits.
Schedule of Funding Progress
UAAL as a
Actuarial Accrued
Percentage of
Actuarial
Actuarial
Liability (AAL) -
Valuation
Value of
Projected Unit
Unfunded AAL
Ratio (a /
Covered
Payroll ([b - a]
Date
Assets (a)
Credit (b)
(UAAL) (b - a)
b)
Payroll ( c)
/ c)
01/01/07
07/01/09
07/01/11
$
- $
33,006
40,742
Funded
229,764 $
207,301
224,184
Schedule of Employer Contributions
Annual
Year Ended
Required
Percentage
June 30
Contribution
Contributed
2008
$
17,041
166.49%
2009
14,405
195.06
2010
14,405
103.90
2011
14,405
80.94
2012
15,656
98.21
D-77
229,764
174,295
183,442
Covered
-% $ 275,955
15.92
322,162
18.17
294,793
83.26%
54.10
62.23
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Actuarial Methods and Assumptions: Projections of benefits for financial reporting purposes are
based on the substantive plan (the plan as understood by the employer and the plan members) and
include the types of benefits provided at the time of each valuation and the historical pattern of
sharing of benefit costs between the employer and plan members to that point. The actuarial
methods and assumptions used include techniques that are designed to reduce the effects of shortterm volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the
long-term perspective of the calculations.
Additional information follows:
Actuarial valuation date
07/01/11
Actuarial cost method
Projected unit credit
Asset valuation method
Actuarial assumptions:
Market value
Investment rate of return
7.75%
Projected salary increases
Annual healthcare cost trend rate
4.50%
7.00 to 5.00% (year of ultimate trend rate 2016)
Includes inflation at
Amortization method
4.50%
Level percentage of projected payroll, closed
Remaining amortization period
26 years
g. Deferred Compensation Plan
The City offers its employees a deferred compensation plan created in accordance with Internal
Revenue Code Section 457. The plan, which is available to all City employees, permits them to
defer a portion of their salary until future years. The deferred compensation is not available to
employees until termination, retirement, death, or unforeseeable emergency. The plan assets are
placed in trust for the exclusive benefit of the participants and their beneficiaries and therefore are
not included in the City’s financial statements.
D-78
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
6. OTHER INFORMATION
a. Airport Leasing Arrangements with Tenants
A major portion of the Airport’s assets are leased under operating agreements with airlines and other
tenants. The total cost and accumulated depreciation of the assets at June 30, 2012 follows:
Land
Buildings
Runways
Improvements other than buildings
Machinery and equipment
$
Total
Less accumulated depreciation
297,504
626,667
392,108
85,647
34,785
1,436,711
533,894
Total
$
902,817
The following is a schedule of minimum future rental income on noncancelable operating leases
subsequent to June 30, 2012:
2013
2014
2015
2016
2017
2018-2022
2023-2027
2028
Total minumum future rental income
$
$
35,734
35,854
35,975
30,363
7,056
35,283
35,283
119,558
335,106
Of the $335,106 minimum future rental income on noncancelable operating leases, $266,154 relates
to agreements with US Airways, Inc. See Note 6.h. for additional information related to US Airways,
Inc.
Contingent rentals that may be received under certain leases based on the tenant’s revenues, fuel
flow or usage are not included above. Contingent rentals of approximately $57,121 were received
during the year ended June 30, 2012.
D-79
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
b. Passenger Facility Charges
The Federal Aviation Administration (FAA) authorized the Airport to collect Passenger Facility
Charges (PFC) of $3 per qualifying enplaned passenger commencing November 1, 2004. The net
receipts from PFC are accounted for on the accrual basis of accounting and are restricted to use on
FAA approved projects. The Airport has been authorized to collect PFC in the aggregate amount of
$1,039,776. Collections during fiscal year 2012 were $53,094 and aggregate collections from
inception through June 30, 2012 were $356,153.
c.
Insurance
(1) Employee Health and Life
The City provides health and life benefits to employees and retirees. Private companies administer
these benefits pursuant to administrative services agreements.
The City maintains insurance
coverage with private carriers for life claims, vision claims, and excess coverage for health claims in
excess of $350 per year per person. The City has an Employee Health and Life Insurance Fund
(EHLIF), an internal service fund, to account for and finance its health and life insurance program.
All City funds participate in the program and make payments to the EHLIF for both an amount per
employee and a proportionate share of the administrative cost. The amount per employee is based
on actuarial estimates of amounts needed to pay prior and current year claims. The employees and
retirees contribute a portion of the cost for health coverage. The City provides life insurance for
employees in the amount of two times the employees’ salary up to a maximum of $100. Employees
may purchase additional life insurance up to a maximum of four times their salary.
Liabilities include amounts for both reported and incurred but not reported claims. The changes in
the fund’s liabilities follow:
Claims and
Beginning
Changes in
Claims
Of Year
Estimates
Payments End of Year
2012 $
8,104 $
64,196 $ (64,383) $
7,917
2011
7,499
59,404
(58,799)
8,104
At June 30, 2012, the EHLIF held $20,902 in cash and equivalents for payments of these claims.
(2) Risk Management
The City is exposed to various risks of loss related to torts; thefts of, damage to, and destruction of
assets; errors and omissions; injuries to employees; and natural disasters.
D-80
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
The City has a Risk Management Fund (RMF), an internal service fund, to account for and finance
its insured and uninsured risks of loss. Currently, insurance coverage is purchased for excess
property damage for buildings, contents and City buses; excess workers’ compensation; excess
vehicle and general liability; police professional liability; police helicopter hull liability and airport
liability, City bus liability, railroad protective liability, passenger railway liability for the light rail train
operations and property insurance on the light rail vehicles. Insurance coverage includes vehicle
and general liability claims in excess of $2,000 but less than $22,000 per occurrence, workers’
compensation claims in excess of $2,000, property damage claims in excess of $100 and flood
insurance $100,000 in all flood zones, except $10,000 in flood zone A in excess of federal flood
program maximums. The finance officer is bonded for $100. Employees who handle funds or have
access to inventories are bonded under a blanket bond for $250. Settled claims have not exceeded
insurance coverage in the past three years. The actuarially determined losses for the remaining
risks and deductible amounts are funded in the RMF. All funds of the City participate in the risk
management program and make payments to the RMF based on historical cost information or
actuarial estimates of the amounts needed to pay prior and current year claims and establish a
reserve for catastrophic losses.
Pursuant to administrative agreements, the City provides risk management services to Mecklenburg
County and the Charlotte-Mecklenburg Board of Education. There is no transfer or pooling of risks
among entities. Amounts collected or due and amounts paid or to be paid to settle claims for
Mecklenburg County and the Charlotte-Mecklenburg Board of Education are reported as a net
liability on an accrual basis. At June 30, 2012, $6,439 was held as deposits for these entities. This
amount is reflected as a long-term liability, Due to Participants, in the RMF.
The claims liability of $37,220 reported in the RMF at June 30, 2012, is based on GASB Statement
No. 10, which requires that a liability for claims be reported if information prior to the issuance of the
financial statements indicates that it is probable that a liability has been incurred at the date of the
financial statements and the amount of the loss can be reasonably estimated. Claims liabilities are
based on the estimated ultimate cost of settling the claims, which includes incremental claim
adjustment expenditures/expenses (i.e., outside legal assistance) and estimated recoveries on
unsettled claims as required by GASB Statement No. 30. The changes in the fund’s liabilities follow:
Claims and
Beginning
Changes in
Claims
Of Year
Estimates
Payments End of Year
2012 $
42,041 $
10,481 $ (15,302) $
37,220
2011
39,355
19,401
(16,715)
42,041
At June 30, 2012, the RMF held $65,438 in cash and cash equivalents for payments of these claims.
D-81
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
d. Commitments and Contingencies
Noise litigation suits have been filed against the City in connection with the operation of the
Charlotte/Douglas International Airport. In the opinion of the City’s attorney and management, the
ultimate outcome of the suits is not expected to have a significant impact upon the financial position
or results of operations of the Airport Fund.
The City is also party to a number of other civil injustice lawsuits and legal actions. In the opinion of
the City’s attorney and management, the ultimate outcome of these legal matters is not expected to
have a significant impact upon the City’s financial position.
The City is currently evaluating a number of environmental issues including two former landfill sites.
Until site assessments and further studies are completed, the cleanup costs can only be estimated.
During the current fiscal year a provision for cleanup costs of $592 has been provided within the
financial statements. In the opinion of City management, costs ultimately incurred are not expected
to have a material effect on the City’s financial position after giving effect to the provision for clean-up
costs.
The City manages a Brownfield Assessment Grant Program which assists property and business
owners and infill developers in overcoming barriers that contamination presents for the
redevelopment of underutilized brownfield sites in distressed business districts and neighborhoods.
The Program provides fifty percent matching funds, up to $20 per site, to property owners for site
assessment, design of remediation activities, and legal expenses for redevelopment sites suspected
of contamination. When the City enters into the agreements, it legally obligates itself to participate
in the cleanup activities of the remediation effort. The amount of the liability is derived from the grant
agreements and assumes no unexpected change orders.
The City has received a number of federal and state grants for specific purposes that are subject to
review by the grantor agencies. Such reviews could lead to requests for reimbursement to the
grantor agencies for expenditures disallowed under terms of the grants. The City management
believes that such disallowances, if any, would not be significant.
D-82
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Authorized capital projects at June 30, 2012, are comprised of the following by fund:
Project
Authorization
GovernmentalCapital Projects
EnterpriseWater and Sewer
Storm Water
Airport
Public Transit
Expended
Unexpended
$ 1,853,438 $ 1,295,260 $
Total Enterprise
Total
558,178
2,374,614
420,073
1,087,437
908,537
1,576,406
302,265
787,494
815,707
798,208
117,808
299,943
92,830
4,790,661
3,481,872
1,308,789
$ 6,644,099 $ 4,777,132 $ 1,866,967
Financial resources are available to fund the total amount of unexpended authorizations.
Outstanding encumbrances are amounts needed to pay any commitments related to purchase
orders and contracts that remain unperformed at year-end. For governmental funds, encumbrances
are included within the restricted, committed, or assigned fund balances, as appropriate and are
established in the funds as follows:
General
$
Capital Projects
Nonmajor governmental
Total
17,039
118,131
41,298
$
176,468
The City has construction and other contractual commitments at June 30, 2012, as follows by fund:
GovernmentalCapital Projects
Nonmajor governmental
$
Total Governmental
6,349
4,729
11,078
EnterpriseWater and Sewer
Storm Water
Airport
Public Transit
139,481
46,464
183,852
29,311
Total Enterprise
399,108
Total
$
410,186
D-83
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
The City has operating lease commitments for land and office space with future rentals under these
leases at June 30, 2012, as shown below:
Year
2013
2014
2015
2016
2017
2018-2030
Amount
$ 2,668
1,830
1,287
1,027
496
1,972
$
9,280
Related lease expense was approximately $2,874 in 2012.
e. Arena
Time Warner Cable Arena was constructed and financed by the City of Charlotte and opened in
October 2005. The primary tenant of the arena is the National Basketball Association’s Charlotte
Bobcats. Terms of a twenty-five year lease entitle the team to all operating revenues and the team is
responsible for all operating expense, including non-basketball related events. The City and the
Team each contribute $250 annually (escalating at five percent per year to a maximum of $500) to a
capital reserve fund. Any capital expenses in excess of the reserve are the responsibility of the City.
While the City of Charlotte retains ownership of the facility, the Charlotte Regional Visitors Authority
provides operation support for the Arena. The $200 million project was funded primarily through a
combination of installment financing obligations supported by a portion of an occupancy tax and a
dedicated rental car tax, private contributions and the sale of City assets. The City is entitled to
damages based on the number of years remaining on the lease if the team violates the agreement.
f.
NASCAR Hall of Fame
NASCAR Hall of Fame was constructed and financed by the City of Charlotte and opened in May
2010. The $140 million project was funded through a combination of installment financing obligations
supported by a dedicated two percent occupancy tax and private loans repaid through land sales
and private contributions. The City also receives a portion of sponsorship money and deferred
NASCAR royalty payments to help service the debt. The City of Charlotte owns the facility and the
Charlotte Regional Visitors Authority is fully responsible for Hall operations. However, the City can
supplement capital maintenance and repair costs through the dedicated revenues if funds are
available. The City is responsible for any capital costs for the facility.
D-84
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
g. Cultural Arts Facilities
The Cultural Arts Facilities consist of the Harvey B. Gantt Center for African-American Arts &
Culture, the Bechtler Museum of Modern Art, the Mint Museum, and the Knight Theater, and are
known collectively as the Levine Center for the Arts. All four facilities opened in fiscal year 2010 and
are owned by the City, with Mecklenburg County entitled to a 30 percent share when the debt is
retired. The $120 million project is part of a $600 million mixed-use development project, including
the 50 story Duke Energy Center. The projects were funded through a combination of installment
financing obligations supported by City revenues and ongoing City and County contributions derived
from a synthetic tax increment finance payment of $1,650 (divided proportionally between the City
and County) annually through 2026. In addition, Wells Fargo Corporation is under contract to pay
the difference between actual tax collections and $1,650 annually. All four sites are leased by the
City to non-profits, which are responsible for operating the facilities. The City and County (70/30
share) are responsible for capital repairs and major maintenance.
h. US Airways
US Airways, Inc. (US Airways), a wholly owned subsidiary of US Airways Group, Inc., is the major
passenger airline serving Charlotte/Douglas International Airport (Airport). For the fiscal year ended
June 30, 2012, US Airways and its affiliates provided 23.67 percent of the Airport’s operating
revenues.
US Airways conducts its passenger air carrier operations at the Airport pursuant to several
agreements, the most significant of which is the City of Charlotte’s 1985 Airport Agreements and
Lease (Airport Agreement), which has also been executed by American Airlines, Continental Airlines,
Delta Air Lines, Northwest Airlines, and United Airline (collectively, the Signatory Airlines). Pursuant
to the Airport Agreement, the Signatory Airlines lease certain premises in the passenger terminal
building (terminal) and are obligated to pay landing fees and terminal rentals which, in the aggregate,
are sufficient to enable the City to pay the annual operating expenses of the airfield and terminal,
and the annual debt service on General Airport Revenue Bonds (GARBS) issued by the City to fund
airfield and terminal improvements.
As of June 30, 2012, the City had $684,890 of GARBS outstanding, the proceeds of which were
used for airfield and terminal improvements. The GARBS are not general obligations of the City and
are payable solely from revenues generated by the City in the airfield and terminal. The City has
$35,451 in reserve to pay principal and interest on GARBS.
In addition to the GARBS, the City has also issued Special Facility Revenue Bonds to finance the
construction of crew training, airfield maintenance and other Airport facilities (Special Facilities) that
are leased to US Airways by the City. As rental for the Special Facilities, US Airways is obligated to
pay directly to the City a Ground Rental and an Airport Service Fee Rental. In addition, US Airways
is obligated to pay directly to a Trustee for the benefit of bondholders a facility rental (Special
D-85
CITY OF CHARLOTTE, NORTH CAROLINA
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
JUNE 30, 2012
(Dollar Amounts In Thousands)
Facilities Debt Service Rental) in an amount equal to the annual installments of principal and interest
on the Special Facility Revenue Bonds. The Special Facilities Debt Service Rental is not a general
obligation of the City. If US Airways fails to pay the Special Facilities Debt Service Rentals, the City
is obligated to use reasonable efforts to re-let the Special Facilities to another tenant and apply the
debt service rentals from such re-letting to the payment of the principal and interest on the Special
Facility Revenue Bonds. The City is not obligated to make any payments relating to the Special
Facilities or the Special Facility Revenue Bonds except for such debt service rentals as it receives
from the tenant of the Special Facilities. As of June 30, 2012, there was $114,910 of Special Facility
Revenue Bonds outstanding. The Special Facility Revenue Bonds provide for the semi-annual
payment of interest with a lump-sum payment of principal on the maturity date of the bonds. The
Special Facility Revenue Bonds mature on July 1, 2027 and February 1, 2028.
D-86
APPENDIX E
PROPOSED FORM OF LEGAL OPINION
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APPENDIX E
PROPOSED FORM OF LEGAL OPINION
September __, 2013
City of Charlotte, North Carolina
Charlotte, North Carolina
$___________
City of Charlotte, North Carolina
General Obligation Refunding Bonds, Series 2013B
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance and sale by the City of Charlotte,
North Carolina (the “City”) of $___________ General Obligation Refunding Bonds, Series 2013B
(the “Bonds”).
The Bonds are issuable as fully registered obligations and will mature and bear interest at the
rates and at the times established in a bond resolution adopted by the City Council of the City (the “City
Council”) on July 22, 2013 (the “Bond Resolution”) and in the Pricing Certificate (as defined in the Bond
Resolution).
In connection with the issuance of the Bonds, we have examined the following, and we have
assumed the truth and accuracy of the representations, covenants and warranties set forth therein:
a.
Certified copies of the Bond Resolution and the Bond Order (as defined
in the Bond Resolution);
b.
c.
this opinion.
A specimen Bond; and
Such other documents as we deemed relevant and necessary in rendering
From such examination we are of the opinion, under existing law, that:
1.
The Bonds have been duly authorized under the provisions of the Constitution and laws
of the State of North Carolina (the “State”), including The Local Government Bond Act, Section 159-43
et seq., of the General Statutes of North Carolina.
2.
The Bonds are legal, valid and binding general obligations of the City. The rights of the
owners of the Bonds and the enforceability of the Bonds may be subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter
enacted to the extent constitutionally applicable, and their enforcement may also be subject to the exercise
of judicial discretion in appropriate cases.
3.
The City has pledged its faith and credit for the payment of the principal of and the
interest on the Bonds, and the City is authorized to levy on all real property taxable by the City such ad
City of Charlotte, North Carolina
September __, 2013
Page 2
valorem taxes as may be necessary to pay the Bonds and the interest thereon without limitation as to rate
or amount.
4.
Interest on the Bonds is excludable from gross income for federal income tax purposes
and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on
individuals and corporations; however, such interest is taken into account in determining adjusted current
earnings for the purpose of computing federal alternative minimum tax imposed on certain corporations.
The opinion set forth in the preceding sentence is subject to the condition that the City comply with all
requirements of the Internal Revenue Code of 1986, as amended, that must be satisfied subsequent to the
issuance of the Bonds in order that the interest on the Bonds be, or continue to be, excludable from gross
income for federal income tax purposes. The City has covenanted to comply with all such requirements.
Failure to comply with certain of such requirements may cause interest on the Bonds to be included in
gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. We
express no opinion regarding other federal tax consequences arising with respect to the Bonds.
5.
The interest on the Bonds is exempt from State of North Carolina income taxation.
Our services as bond counsel have been limited to rendering the foregoing opinion based on our
review of such proceedings and documents as we deem necessary to approve the validity of the Bonds
and the tax status of interest thereon. In rendering the foregoing opinions, we have assumed the accuracy
and truthfulness of all public records and of all certifications, documents and other proceedings examined
by us that have been executed or certified by public officials acting within the scope of their official
capacities and have not verified the accuracy or truthfulness thereof. We have also assumed the
genuineness of the signatures appearing upon such public records, certifications, and documents and
proceedings. We express no opinion herein as to the financial resources of the City, the ability of the City
to make payments of the principal of or interest on the Bonds, or the accuracy or completeness of any
information, including the Preliminary Official Statement or the Official Statement relating to the Bonds,
that may have been relied on by anyone in making the decision to purchase the Bonds.
Respectfully submitted,
PARKER POE ADAMS & BERNSTEIN LLP
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APPENDIX F
BOOK ENTRY SYSTEM
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APPENDIX F
THE FOLLOWING DESCRIPTION OF DTC, OF PROCEDURES AND RECORD KEEPING ON BENEFICIAL
OWNERSHIP INTERESTS IN THE 2013B BONDS, PAYMENT OF INTEREST AND OTHER PAYMENTS WITH
RESPECT TO THE 2013B BONDS TO DTC PARTICIPANTS OR TO BENEFICIAL OWNERS, CONFIRMATION AND
TRANSFER OF BENEFICIAL OWNERSHIP INTERESTS IN THE 2013B BONDS, AND OR OTHER TRANSACTIONS
BY AND BETWEEN DTC, DTC PARTICIPANTS AND BENEFICIAL OWNERS IS BASED ON INFORMATION
FURNISHED BY DTC.
The Depository Trust Company
a subsidiary of The Depository Trust & Clearing Corporation
1.
The Depository Trust Company ("DTC"), New York, NY, will act as securities
depository for the 2013B Bonds. The 2013B Bonds will be issued as fully-registered securities registered
in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered bond will be issued for each maturity of the
2013B Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC. SO
LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE 2013B BONDS, AS DTC'S PARTNERSHIP
NOMINEE, REFERENCE HEREIN TO THE OWNERS OR REGISTERED OWNERS OF THE 2013B BONDS WILL
MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS OF THE 2013B BONDS.
2.
DTC, the world's largest securities depository, is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset
servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt
issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct
Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct
Participants of sales and other securities transactions in deposited securities, through electronic
computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the
need for physical movement of the 2013B Bonds. Direct Participants include both U.S. and non-U.S.
securities brokers and dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation
("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed
Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users
of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and
non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear
through or maintain a custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC rules applicable to its
Participants are on file with the Securities and Exchange Commission. More information about DTC can
be found at www.dtcc.com.
3.
Purchases of 2013B Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the 2013B Bonds on DTC's records. The ownership interest
of each actual purchaser of the 2013B Bonds ("Beneficial Owner") is in turn to be recorded on the Direct
and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of
their purchase. Beneficial Owners are, however, expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership
interests with respect to the 2013B Bonds are to be accomplished by entries made on the books of Direct
and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive
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certificates representing their ownership interests in 2013B Bonds, except in the event that use of the
book-entry system for the 2013B Bonds is discontinued.
4.
To facilitate subsequent transfers, all 2013B Bonds deposited by Direct Participants with
DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may
be requested by an authorized representative of DTC. The deposit of 2013B Bonds with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the 2013B Bonds; DTC's records
reflect only the identity of the Direct Participants to whose accounts such 2013B Bonds arc credited,
which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
5.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of 2013B Bonds may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the
2013B Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security
documents. For example, Beneficial Owners of 2013B Bonds may wish to ascertain that the nominee
holding the 2013B Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners.
In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and
request that copies of notices be provided directly to them.
6.
Prepayment notices will be sent to DTC. If less than all of the 2013B Bonds within a
maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each
Direct Participant in such maturity to be redeemed.
7.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to 2013B Bonds unless authorized by a Direct Participant in accordance with DTC's MMI
Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts 2013B Bonds are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
BECAUSE DTC IS TREATED AS THE OWNER OF THE 2013B BONDS FOR SUBSTANTIALLY ALL
PURPOSES UNDER THE BOND RESOLUTION, BENEFICIAL OWNERS MAY HAVE A RESTRICTED ABILITY TO
INFLUENCE IN A TIMELY FASHION REMEDIAL ACTION OR THE GIVING OR WITHHOLDING OF REQUESTED
CONSENTS OR OTHER DIRECTIONS. IN ADDITION, BECAUSE THE IDENTITY OF BENEFICIAL OWNERS IS
UNKNOWN TO THE COMMISSION, TO THE CITY OR TO DTC, IT MAY BE DIFFICULT TO TRANSMIT
INFORMATION OF POTENTIAL INTEREST TO BENEFICIAL OWNERS IN AN EFFECTIVE AND TIMELY MANNER.
BENEFICIAL OWNERS SHOULD MAKE APPROPRIATE ARRANGEMENTS WITH THEIR BROKER OR DEALER
REGARDING DISTRIBUTION OF INFORMATION REGARDING THE 2013B BONDS THAT MAY BE TRANSMITTED
BY OR THROUGH DTC.
8.
Prepayment proceeds, distributions, and dividend payments on the 2013B Bonds will be
made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC.
DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding
detail information from the City, on the payable date in accordance with their respective holdings shown
on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of such Participant and not of
DTC, the City or the Commission, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of prepayment proceeds, distributions, and dividend payments to Cede & Co.
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(or such other nominee as may be requested by an authorized representative of DTC) is the responsibility
of the City or the Commission, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the
responsibility of Direct and Indirect Participants. T HE CITY AND THE COMMISSION CANNOT AND DO NOT
GIVE ASSURANCE THAT DIRECT AND INDIRECT PARTICIPANTS WILL PROMPTLY TRANSFER PAYMENTS TO
BENEFICIAL OWNERS.
9.
DTC may discontinue providing its services as depository with respect to the 2013B
Bonds at any time by giving reasonable notice to the Commission and the City. Under such
circumstances, in the event that a successor depository is not obtained, physical certificates are required to
be printed and delivered.
10.
The Commission or the City may decide to discontinue use of the system of book-entryonly transfers through DTC (or a successor securities depository). In that event, certificates will be
printed and delivered to DTC.
11.
The information in this section concerning DTC and DTC's book-entry system has been
obtained from sources the Commission and the City believe to be reliable, but the Commission and the
City take no responsibility for the accuracy thereof.
THE COMMISSION AND THE CITY HAVE NO RESPONSIBILITY OR OBLIGATION TO DTC, THE
DIRECT PARTICIPANTS, THE INDIRECT PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (1)
THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT, OR THE MAINTENANCE OF
ANY RECORDS; (2) THE PAYMENT BY DTC OR ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY
BENEFICIAL OWNER IN RESPECT OF THE 2013B BONDS, OR THE SENDING OF ANY TRANSACTION
STATEMENTS; (3) THE DELIVERY OR TIMELINESS OF DELIVERY BY DTC OR ANY PARTICIPANT OF ANY
NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE BOND RESOLUTION
TO BE GIVEN TO OWNERS; (4) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENTS UPON
ANY PARTIAL PREPAYMENT OF THE 2013B BONDS; OR (5) ANY CONSENT GIVEN OR OTHER ACTION TAKEN
BY DTC OR ITS NOMINEE AS THE REGISTERED OWNER OF THE 2013B BONDS, INCLUDING ANY ACTION
TAKEN PURSUANT TO AN OMNIBUS PROXY.
The information in this section concerning DTC and DTC's book-entry system has been obtained
from sources the Commission and the City believe to be reliable, but the Commission and the City take
no responsibility for the accuracy thereof.
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