[[page 1]] City of Gallatin, Tennessee Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2023 Prepared by the City of Gallatin Finance Director [[page 2]] City of Gallatin, Tennessee Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2023 Contents Introductory Section Letter of Transmittal i Directory v Financial Section Independent Auditor's Report 1 Management's Discussion and Analysis (Unaudited) 4 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 12 Statement of Activities 14 Fund Financial Statements Balance Sheet - Governmental Funds 15 Reconciliation of Balance Sheet to Statement of Net Position - Governmental Funds 17 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 18 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 19 Statement of Fund Net Position - Proprietary Funds 20 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds 22 Statement of Cash Flows - Proprietary Funds 23 Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget (GAAP Basis) and Actual - General Fund 25 Statement of Fiduciary Net Position - Pension Trust Fund - Electric Department 35 Statement of Changes in Fiduciary Net Position - Pension Trust Fund - Electric Department 36 Notes to the Financial Statements 37 Required Supplementary Information Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Based on Participation in the Public Employee Hybrid Pension Plan of the TCRS 77 Schedule of Contributions Based on Participation in the Public Employee Hybrid Pension Plan of the TCRS 78 Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Based on Participation in the Gallatin Electric Department Employee Pension Plan 79 Schedule of Contributions Based on Participation in the Gallatin Electric Department Employee Pension Plan 80 Schedule of Investment Returns Based on Participation in the Gallatin Electric Department Employee Pension Plan 81 Schedule of Changes in Total OPEB Liability and Related Ratios - Electric Department 82 Schedule of Contributions Based on Participation and Schedule of Investment Returns in the Gallatin Electric Department OPEB Plan 83 Supplementary Information Combining Balance Sheet - Nonmajor Governmental Funds 84 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 85 Schedules of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual Special Services Fund 86 Drug Fund 87 Environmental Services Fund 88 Stormwater Utility Fund 89 Industrial Development Board 90 [[page 3]] City of Gallatin, Tennessee Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2023 Contents Financial Section Supplementary Information Supplementary Schedules Schedule of Expenditures of Federal Awards and State Financial Assistance 91 Schedule of Changes in Long-term Debt by Individual Issue 93 Schedule of Long-term Debt, Principal, and Interest Requirements - Governmental Activities, by Fiscal Year 94 Schedule of Long-term Debt, Principal, and Interest Requirements - Business-type Activities, by Fiscal Year 95 Schedule of Changes in Lease Obligations 96 Schedule of Lease Obligations, Principal, and Interest Requirements by Fiscal Year 97 Schedule of Electric Rates in Force - Unaudited 98 Schedule of Water and Sewer Rates in Force - Unaudited 100 Schedule of Gas Rates in Force - Unaudited 101 Statistical Section Financial Trends Information Net Position by Component - Last Ten Fiscal Years 102 Changes in Net Position - Last Ten Fiscal Years 103 Fund Balances of Governmental Funds - Last Ten Fiscal Years 105 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years 106 Revenue Capacity Information Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Tax Years 107 Principal Property Taxpayers - Current Year and Nine Years Ago 108 Property Tax Levies and Collections - Last Ten Fiscal Years 109 Debt Capacity Information Ratios of Outstanding Debt by Type - Last Ten Fiscal Years 110 Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years 111 Pledged Revenue Coverage - Last Ten Fiscal Years 112 Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years 113 Principal Employers - Current Year and Nine Years Ago 114 Operating Information Full-Time Equivalent City Government Employees by Function/Program - Last Ten Fiscal Years 115 Operating Indicators by Function/Program - Last Ten Fiscal Years 116 Capital Asset Statistics by Function/Program - Last Ten Fiscal Years 117 Internal Control and Compliance Section Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 118 Independent Auditor's Report on Compliance for Each Major Federal Program and on Internal Control over Compliance Required by the Uniform Guidance 120 Schedule of Findings and Questioned Costs 123 Summary Schedule of Prior Year Findings 124 [[page 4]] Introductory Section [[page 5]] City of Gallatin Finance Department December 18, 2023 Honorable Mayor, City Council, and Citizens of the City of Gallatin, State law requires that every general-purpose government publish a complete set of audited financial statements within six months of the close of each fiscal year. This report is published to fulfill that requirement for the fiscal year ended June 30, 2023. This report consists of management's representations concerning the finances of the City of Gallatin. To provide a reasonable basis for making these representations, management of the City of Gallatin has established a comprehensive internal control framework that is designed both to protect the city's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Gallatin's financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Gallatin's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. Management assumes full responsibility for the completeness and reliability of all the information presented in this report. The City of Gallatin’s financial statements have been audited by Blankenship CPA Group, PLLC, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Gallatin, for the fiscal year ended June 30, 2023, are presented fairly in all material aspects. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City of Gallatin’s financial statements, for the fiscal year ended June 30, 2023, are fairly presented in all material aspects in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Gallatin’s MD&A can be found beginning on page 3, immediately following the report of the independent auditors. PROFILE OF THE CITY OF GALLATIN The City of Gallatin, population of 51,653, is located in Sumner County, Tennessee and is the county seat for Sumner County. It is approximately 30 miles northeast of downtown Nashville, and is served by numerous major highways including U.S. 31-E, State Route 386, State Route 109, and State Route 25. The City of Gallatin was founded in 1802, incorporated in 1954, and operates under the City Mayor/City Council form of government. The Municipality’s legislative body is a seven-member City Council that is elected, one each for 5 council districts and two at-large 132 West Main Street, Room 106 Gallatin, TN 37066-3244 www.gallatinonthemove.com [[page 6]] members. Each Councilmember is elected to a four-year alternating term with elections conducted every two years. The Mayor is chief administrative officer of the Municipality and presides at meetings of the Council. The City of Gallatin provides a wide range of services which include police and fire protection, the construction and maintenance of highways, streets, and other infrastructure, sanitation services, recreational and cultural services, planning and zoning, and general administrative services. Additionally, the City owns and operates its water, wastewater, natural gas, and electric systems. For small, outlying populations, White House Utility District and Castalian Springs Bethpage Utility District provide water service. All of the City’s Governmental funds are annually appropriated. The City Council is required to adopt a final budget by no later than the close of the fiscal year. This annual budget serves as the foundation for the City’s financial planning and control. In February of each year, Department Heads submit their budget requests to the Mayor and Finance Director. The Mayor conducts departmental meetings in March of each year, and the Finance Director makes revenue estimates for the upcoming year. The budget is submitted to City Council in April. First reading of the Budget is usually in May, second reading is usually in May/June but no later than June 30, the close of the City’s fiscal year. The budget is prepared by fund (i.e. general) and department (i.e. police). Department heads are authorized to expend funds within total departmental appropriations. However, amendments to the budget that change departmental and/or total appropriations require the adoption of an ordinance by the City Council. Budget transfers between departments require approval of the City Council. Budget to actual comparisons are provided in this report for each governmental fund for which an appropriated annual budget has been adopted. LOCAL ECONOMY The City of Gallatin continues its strong growth trajectory in both the business and residential sectors, benefitting from our close proximity to Nashville. National realty groups ranked Gallatin in the top 20 “hottest zip codes” in the U.S. early this year because of maintaining “a small town feel while close to a bustling downtown”. The city’s population has now surpassed the 51,000 mark, and our trade area population exceeds 167,700. Household income averages $99,618 with median household income at $75,298. This growth has generated increased property tax and sales tax collections for the city with sales tax collections exceeding $1 million for 31 consecutive months. In the industrial sector, a Belgian company chose Gallatin for its first U.S. manufacturing facility, bringing additional foreign direct investment to Gallatin. Several other existing industries are expanding, adding jobs and more than $110 million in Capital Expenditures. In the commercial sector, Gallatin is adding retail and restaurants at a rapid pace to meet demands of the expanding population. ii [[page 7]] LONG-TERM FINANCIAL PLANNING In 2018, the City began developing a comprehensive long-range plan, Plan Gallatin, for future growth and development of the city. The city’s Planning Commission and City Council have formally adopted the plan. Additionally, a formalized Capital Improvement Plan was adopted during the 2022 fiscal year with department heads projecting major needs for the upcoming 10 years. The plan is updated at least annually, if not more frequently, with new information on previously submitted projects and the addition of new future projects. The CIP is used to plan for long-term capital funding, whether it be pay-as-you-go or debt issues. The City has numerous capital projects currently funded and under construction. Included are city-wide infrastructure projects such as roads, streets, sidewalks, greenways, water lines, sewer lines, and gas lines. Many of these projects are being funded wholly or in part by Federal and State grants. Capital projects underway include: regional collaborative water lines for north and northeast Sumner County residents; signal grant for synchronized signalization along major thoroughfares; various roadway improvements; purchase of heavy equipment for Streets and Environmental Services departments; miscellaneous roadway and drainage projects; new utility line installation and existing line rehabilitation; new park facilities and park upgrades; partnership with Sumner County government for a downtown parking structure; and numerous greenway and multimodal paths. FINANCIAL POLICIES The City is committed to protecting its taxpayers’ funds. Management continues to take a very conservative approach to budgeting and spending in order to lessen the chance of a revenue shortage and mid-year program cuts. This approach will help finance contingencies and unforeseen budget amendments. The City of Gallatin recognizes the importance of a diversified revenue system, and strives to not rely too heavily on one source. Currently the city general fund revenue sources are approximately one-third sales tax, one-third property tax, and one-third all other revenues. The City routinely reviews its various rates and fees and considers inflation and current market rates. The City Council has formally adopted Fund Balance Policies for the General Fund and for the enterprise funds which indicate that they will maintain a minimum unassigned fund balance of 25% of the operating expenditures in each of those funds. Additionally, the City has a formally adopted Capital Improvement Plan, Purchasing Policy, Internal Financial Controls Policy, Debt Management Policy, Investment Policy, Grant Policy, and Contract Administration Policy, all of which are updated periodically and which serve to further strengthen its overall fiduciary duties to the citizens of Gallatin. iii [[page 8]] AWARDS AND ACKNOWLEDGEMENTS The preparation of this report on a timely basis could not have been accomplished without the dedicated services of the Finance department staff of the City of Gallatin. Credit must also be given to the City Mayor and City Council for their support of excellence in financial reporting and fiscal integrity. Also, the City is grateful to the staffs of Blankenship CPA Group, PLLC for their invaluable guidance and assistance. Respectfully Submitted, Rachel Nichols Rachel Nichols Director of Finance City of Gallatin | 132 West Main Street | Gallatin, TN 37066 | 615.451.5963 iv [[page 9]] City of Gallatin, Tennessee Directory June 30, 2023 ELECTED OFFICIALS Paige Brown, Mayor Lynda Love, Council Member, Vice Mayor William C. Hayes, Council Member Steve Fann, Council Member Steven Carter, Council Member Pascal Jouvence, Council Member Eileen George, Council Member Shawn Fennell, Council Member Connie Kittrell, Recorder MANAGEMENT TEAM Rachel Nichols, Director of Finance, CMFO Richard Depriest, Superintendent of Public Works David Kellogg, Superintendent of Public Utilities Donald Bandy, Chief of Police Jeff Beaman, Fire Chief Charles Stuart, Director of Codes William McCord, Director of Planning David Brown, Director of Parks and Recreation Courtney Russell, Director of Human Resources James Fenton, Director of Economic Development Nick Tuttle, City Engineer Jennifer Lefevre, Director of Information Technology Jeff Hentschel, Communications Director Mark Kimbell, Electric Department Manager COUNSEL Susan High-McAuley City Attorney Gallatin, Tennessee v [[page 10]] Financial Section [[page 11]] Independent Auditor’s Report Honorable Paige Brown, Mayor, and Members of the City Council City of Gallatin, Tennessee Report on the Audit of the Financial Statements Opinions We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Gallatin, Tennessee (the City), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. In our opinion, based on our audit and the report of the other auditors, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2023, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparison for the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. We did not audit the financial statements of the Department of Electricity (Electric Department), which represent 25%, 24%, and 67%, respectively, of the assets, net position, and revenues of the business-type activities as of June 30, 2023. Those statements were audited by other auditors whose report has been furnished to us, and our opinions, insofar as they relate to the amounts included for the Electric Department, are based solely on the report of the other auditors. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Brentwood • Goodlettsville • Murfreesboro Nashville • Mt. Juliet • Dickson • Columbia TN www.bcpas.com [[page 12]] Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed, • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis on pages 4-11 and the pension and OPEB Information on pages 77-83 be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 2 [[page 13]] Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual nonmajor fund financial statements and schedules on pages 84-90 and the supplementary information on pages 91-97 (including the schedule of expenditures of federal awards and state financial assistance, as required by Title 2 US Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, on pages 91-92) are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the combining and individual nonmajor fund financial statements and schedules on pages 84-90 and the supplementary information on pages 91-97 are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the introductory section, and the statistical section, and other schedules on pages 98-101, but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists; we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 18, 2023 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City’s internal control over financial reporting and compliance. Blankenship CPA Group, PLLC Goodlettsville, Tennessee December 18, 2023 3 [[page 14]] City of Gallatin, Tennessee Management’s Discussion and Analysis (Unaudited) June 30, 2023 As management of the City of Gallatin, Tennessee, we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2023. The analysis focuses on significant financial position, budget changes and specific issues related to funds and economic factors affecting the City. It also focuses on current year activities and the resulting changes. FINANCIAL HIGHLIGHTS • The assets and deferred outflows of resources of the City exceed its liabilities and deferred inflows of resources at the close of the fiscal year by $442.64 million as compared to $414.65 million in the prior year. Of the amounts, $105.07 million (unrestricted net position) as compared to $103.59 million in the prior year may be used to meet the City’s ongoing obligations to citizens and creditors. • The government’s total net position increased by $27.99 million in 2023, compared to an increase of $52.34 million in 2022. • As of the close of the current fiscal year, the City’s governmental funds reported ending fund balances of $68.89 million, an increase of $11.72 million from the prior year. Approximately $53.75 million of that total is available for spending at the government’s discretion. • At the end of the current fiscal year, unassigned fund balance of the General Fund was $53.75 million, or 108.48% of the total general fund expenditures as compared to $43.46 million the prior year. • The City’s debt obligations decreased by approximately $5.18 million during the current fiscal year. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements are compromised of the following components: 1. Government-wide financial statements, 2. Fund financial statements, and 3. Notes to the financial statements. 4. This report also contains required supplementary information and supplementary and other information in addition to the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. • The Statement of Net Position presents information on all of the City’s assets, liabilities and deferred inflows/outflows of resources, with the net difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. • The Statement of Activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported when the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported 4 [[page 15]] City of Gallatin, Tennessee Management’s Discussion and Analysis (Unaudited) June 30, 2023 in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes, compensated absences, etc.). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, highways and streets, sanitation, economic development, and cultural and recreation. The business-type activities of the City are made up of Water and Sewer, Natural Gas, and Electric Power services. The government-wide financial statements can be found on pages 12-14 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, the focus is on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources at the end of the fiscal year. Such information may be useful in evaluating the government's near-term financing requirements. Because the focus of governmental funds is narrower than that of government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City's near-term financing decisions. Both the Balance Sheet - Governmental Funds and the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The governmental fund financial statements and reconciliations can be found on pages 15-19 of this report. The City maintains nine governmental funds. Information is presented separately in the Balance Sheet - Governmental Funds and in the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds for the General Fund and Capital Projects Fund, which are considered to be major funds. Data from the other seven governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements beginning on page 84. The City adopts an annual appropriated budget for the General Fund and the special revenue funds. Budgetary comparison statements have been provided on pages 25-34 and pages 86-90 of this report. 5 [[page 16]] City of Gallatin, Tennessee Management’s Discussion and Analysis (Unaudited) June 30, 2023 Proprietary Funds There are two different types of proprietary funds. • Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the Board of Public Utilities Electric, Water and Sewer, and Gas Funds. • Internal service funds are an accounting device used to accumulate and allocate costs internally among a government’s various functions. The City currently has no internal service funds. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Water and Sewer, Natural Gas, and Electric Power operations which are considered to be major funds of the City. The basic proprietary fund financial statements can be found on pages 20-24 of this report. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the City. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City of Gallatin’s own programs. The Fiduciary Fund reported is for the Electric Department Pension Trust Fund. The accounting used for fiduciary funds is much like that used for proprietary funds. Individual fund data for the fiduciary funds is provided in the form of combined statements which can be found on pages 35-36 of this report. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 37- 76 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s and Utility’s schedules of funding progress for their respective pension plans and other post-employment benefits. GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Position As noted earlier, net position may serve over time as a useful indicator of exceeded liabilities and deferred inflows of resources by $442.64 million at the close of the most recent fiscal year, as compared to $414.65 million at the close of the previous year. By far the largest portion of the City’s net position (73.15%) reflects its net investment in capital assets (e.g., land, buildings, machinery, equipment, and infrastructure). The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its 6 [[page 17]] City of Gallatin, Tennessee Management’s Discussion and Analysis (Unaudited) June 30, 2023 capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City’s net position $13.79 million (3.11%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of net position representing unrestricted net position $105.07 million (23.74%) may be used to meet the City’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net position, both for the City as a whole, as well as for its total governmental and total business-type activities. Comparisons with the prior year data are presented below. Primary Government (in thousands) Governmental Business-Type Activities Activities Total 2023 2022 2023 2022 2023 2022 Assets Current and other assets $ 91,933 $ 86,403 $ 74,350 $ 79,893 $ 166,283 $ 166,296 Capital assets 174,986 162,610 220,653 211,531 395,639 374,141 Total Assets 266,919 249,013 295,003 291,424 561,922 540,437 Deferred Outflows of Resources Deferred outflows 661 427 6,026 4,028 6,687 4,455 Liabilities Other liabilities 11,673 12,586 28,572 26,199 40,245 38,785 Long-term liabilities 24,735 26,343 45,743 48,519 70,478 74,862 Total Liabilities 36,408 38,929 74,315 74,718 110,723 113,647 Deferred Inflows of Resources Deferred inflows 15,015 14,663 228 1,934 15,243 16,597 Net Position Net investment in capital assets 148,607 133,282 175,182 161,498 323,789 294,780 Restricted 13,571 13,222 215 3,056 13,786 16,278 Unrestricted 53,979 49,344 51,089 54,246 105,068 103,590 Total Net Position $ 216,157 $ 195,848 $ 226,486 $ 218,800 $ 442,643 $ 414,648 The government’s total assets increased significantly due to the capital projects that were completed during the current fiscal year. Long-term liabilities decreased due to payments being made on debt for these projects during the current fiscal year. 7 [[page 18]] City of Gallatin, Tennessee Management’s Discussion and Analysis (Unaudited) June 30, 2023 Statement of Activities Expenses in the governmental activities exceeded program revenues by $23.90 million. In the business-type activities program revenues exceed expenses by $8.48 million. General government revenues and transfers of $44.21 million offset the governmental activities deficit resulting in a positive change of net position of $20.31 million. Other business-type revenues of $827 thousand and transfers of ($1.62) million reduced income in the business type activities leaving a positive change in net position of $7.69 million. Primary Government (in thousands) Governmental Business-Type Activities Activities Total 2023 2022 2023 2022 2023 2022 Program Revenues Charges for services $ 12,938 $ 12,276 $ 115,696 108,491 $ 128,634 $ 120,767 Operating grants and contributions 3,896 4,390 - - 3,896 4,390 Capital grants and contributions 8,346 15,384 6,412 8,438 14,758 23,822 General Revenues Property taxes 14,215 13,503 - - 14,215 13,503 Other taxes 26,304 24,592 - - 26,304 24,592 Other sources 2,062 10,771 827 352 2,889 11,123 Total Revenues 67,761 80,916 122,935 117,281 190,696 198,197 Expenses General Government 11,492 10,679 - - 11,492 10,679 Public Safety 21,446 19,887 - - 21,446 19,887 Engineering 3,045 2,112 - - 3,045 2,112 Environmental Services 3,500 3,265 - - 3,500 3,265 Public Works 816 827 - - 816 827 Highways and Streets 1,701 1,501 - - 1,701 1,501 Vehicle Maintenance 416 638 - - 416 638 Parks and Recreation 5,580 5,761 - - 5,580 5,761 Economic Development 478 556 - - 478 556 Interest on long-term debt 603 640 - - 603 640 Electric - - 77,786 67,412 77,786 67,412 Water and Sewer - - 16,837 15,121 16,837 15,121 Gas - - 19,001 17,460 19,001 17,460 Total Expenses 49,077 45,866 113,624 99,993 162,701 145,859 Increase (Decrease) in net position before transfers 18,684 35,050 9,311 17,288 27,995 52,338 Transfers 1,625 1,872 (1,625) (1,872) - - Increase (Decrease) in net position 20,309 36,922 7,686 15,416 27,995 52,338 Net Position - Beginning 195,848 158,926 218,800 203,384 414,648 362,310 Net Position - Ending $ 216,157 $ 195,848 $ 226,486 $ 218,800 $ 442,643 $ 414,648 In governmental activities, charges for services increased $662 thousand in 2023. Operating grants and contributions decreased by $494 thousand. Capital grants and contributions decreased $7.04 million. In the business type activities, charges for services increased by $7.21 million and costs of sales and service increased by $10.37 million due to increased sales during the year driven mainly by growth and a harsh cold snap in December 2022. 8 [[page 19]] City of Gallatin, Tennessee Management’s Discussion and Analysis (Unaudited) June 30, 2023 Governmental policy continues to recognize that local revenue sources must be the foundation for providing basic public services rather than depending on uncertain Federal and State sources. To this end, it is vitally important to continue efforts to seek balanced diversity, equity, and efficiency in local revenue systems to better accommodate future change. Overall expenses for 2023 were more than expenses in 2022 in the governmental activities by $3.21 million. For departments with increases, the increases were mainly due to capital projects and grant activities. All departments worked diligently to keep operational and capital spending to a minimum for the fiscal year due to continued uncertainties regarding potential negative economic impacts of supply chain issues and inflation concerns. FINANICIAL ANALYSIS OF THE GOVERNMENT’S FUNDS Governmental Funds The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Based on the statements and discussion, the overall financial position of the City has improved during the period. The General Fund is the chief operation fund of the City. At the end of the current fiscal year, the unassigned fund balance of the general fund was $53.75 million while total fund balance was $56.15 million. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 108.48% of the total general fund expenditures in 2023 as compared to 97.55% in 2022. The fund balance of the City’s general fund increased by $11.76 million during the current fiscal year. Key factors in this increase were the significant increase of local tax revenues and intergovernmental revenues and decreases of accounts payables. Proprietary Funds The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Proprietary funds are considered business-type activities and are operated similarly. Net position of the proprietary funds increased by $7.69 million in 2023 as compared to $15.42 million in 2022. Unrestricted net position of the proprietary funds amounted to $51.09 million as compared to $54.25 million in the prior year. The change in net position of the individual proprietary funds were as follows: • Water and Sewer Fund - $4.61 million in 2023 compared to $7.16 million in 2022 • Natural Gas Fund - $24 thousand in 2023 compared to $3.17 million in 2022 • Electric Fund - $3.06 million in 2023 compared to $5.09 million in 2022 9 [[page 20]] City of Gallatin, Tennessee Management’s Discussion and Analysis (Unaudited) June 30, 2023 General Fund Budgetary Highlights The City made revisions to the original appropriations approved by the City Council. Overall these changes resulted in a $29.21 million increase in budgeted expenditures and transfers out from the original budget. The increase of approximately 58.1% was mainly for new and ongoing capital expenditures. Budgeted revenues exceeded actual amounts by $5.83 million. The largest variances were related to intergovernmental revenues (delayed grant activities) and local taxes. Actual expenditures and transfers out were under budget by $19.14 million, partially due to department heads holding spending and partially due to large projects that were budgeted for this year that will continue into next year. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At the end of Fiscal Year 2023 the City had invested $395.64 million net of accumulated depreciation in land, buildings, improvements, machinery and equipment, park facilities, roads, highways, bridges, and utility systems. The total increase in the City’s investment in capital assets for the current fiscal year was 5.7%. Additional information on the City’s capital assets can be found in Note 1 on page 41 and Note 6, beginning on page 53 of this report. Long-term Debt At the end of the current fiscal year, the City had long-term debt outstanding of $73.63 million as compared to $78.81 million at the end of the prior fiscal year. Of this amount, $24.36 million represents debt backed by the full faith and credit of the City. The remainder of the City’s debt represents bonds secured by specific revenue sources (i.e. revenue and tax bonds) of the various enterprise funds. Information on the City’s long-term debt can be found in Note 7 beginning on page 56 of this report. The City of Gallatin maintains a “AA+” rating from Standards and Poors for general obligation debt. Also, the City rating from Moody’s has been recalibrated to “Aa2”. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET General Fund Revenue Most general revenue taxes and charges for services showed modest-to-moderate growth. Grants and contributions decreased in 2023 as did Other Revenue Sources with the biggest contributing factor being federal American Rescue Plan Act (ARPA) Revenue received in 2022. General Fund Expenditures and Capital Outlay Departments were encouraged to be prudent and frugal with spending due to uncertainty regarding supply chain issues and inflation concerns . Most capital funding was to complete existing, ongoing projects, to purchase critical equipment, or for grant funded projects. 10 [[page 21]] City of Gallatin, Tennessee Management’s Discussion and Analysis (Unaudited) June 30, 2023 General Fund Balance At the end of the current fiscal year, unassigned fund balance in the general fund was $53.75 million. The increase from the previous year was related to better than anticipated revenue collections, delayed capital expenditures and conservative operating expenditures. Departments city-wide are implementing various changes to function more efficiently and more economically. Next Year’s Budget and Rates The City has no plans to increase the property tax rate paid by citizens in the next fiscal year. While preparing the next budget in the midst of the inflation uncertainty, management took a conservative approach to revenue projections. Spending increases were focused on employee retention measures and new capital to keep pace with the needs and wants of a rapidly growing population. The City will continue to watch the national and world economic factors that could influence the local economy and will make any necessary mid- year adjustments to operate within available revenues. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City of Gallatin's finances for citizens, taxpayers, customers, investors, creditors and all others with an interest in the City's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Department of Finance, City of Gallatin, 132 West Main Street, Gallatin, TN, 37066. 11 [[page 22]] City of Gallatin, Tennessee Statement of Net Position June 30, 2023 Governmental Business-type Activities Activities Total Assets Cash and cash equivalents $ 54,379,311 $ 49,749,098 $ 104,128,409 Certificates of deposit 9,505,150 5,328,776 14,833,926 Investments 21,025 - 21,025 Receivables, net of allowance for uncollectibles 21,632,963 10,222,113 31,855,076 Inventories 68,043 8,038,260 8,106,303 Prepaid items and other assets 11,102 114,871 125,973 Restricted assets Cash and cash equivalents 5,229,345 641,155 5,870,500 TCRS Stabilization Fund 1,086,305 254,852 1,341,157 Capital assets Land and construction in progress 13,780,889 5,971,219 19,752,108 Other capital assets, net of accumulated depreciation 161,205,587 214,682,229 375,887,816 Total assets 266,919,720 295,002,573 561,922,293 Deferred Outflows of Resources Deferred charge on refunding - 2,444,656 2,444,656 Deferred outflows related to pensions 660,931 3,581,789 4,242,720 Deferred outflows related to OPEB - - - Total deferred outflows of resources 660,931 6,026,445 6,687,376 Total assets and deferred outflows of resources $ 267,580,651 $ 301,029,018 $ 568,609,669 Continued See notes to financial statements 12 [[page 23]] City of Gallatin, Tennessee Statement of Net Position June 30, 2023 Governmental Business-type Activities Activities Total Liabilities Accounts payable and accrued expenses $ 2,320,682 $ 13,686,006 $ 16,006,688 Unearned revenues 115,514 - 115,514 Accrued interest 419,827 - 419,827 Deposits held - 5,787,182 5,787,182 Other deposits 5,010,655 - 5,010,655 Aid to construction - 5,206,874 5,206,874 Other liabilities - 1,579 1,579 Long-term debt, current portion 2,093,501 3,198,478 5,291,979 Long-term lease liabilities, current portion - 1,299 1,299 Other long-term liabilities, current portion 1,712,715 690,768 2,403,483 Long-term debt, net of current portion 24,062,458 44,272,296 68,334,754 Other long- term liabilities, net of current portion 478,527 390,227 868,754 OPEB liability - 526,990 526,990 Net pension liability 194,396 553,494 747,890 Total liabilities 36,408,275 74,315,193 110,723,468 Deferred Inflows of Resources Deferred current property taxes 14,979,744 - 14,979,744 Deferred inflows related to pensions 35,235 228,120 263,355 Deferred inflows related to OPEB - - - Total deferred inflows of resources 15,014,979 228,120 15,243,099 Net Position Net investment in capital assets 148,606,993 175,181,523 323,788,516 Restricted for: Pension benefits 891,909 207,036 1,098,945 Capital projects 6,782,529 - 6,782,529 Funds held in trust 444,634 - 444,634 Environmental services 1,988,232 - 1,988,232 Drug enforcement 224,920 - 224,920 Stormwater 3,201,198 - 3,201,198 Other purposes - 7,810 7,810 Perpetual care Expendable 16,653 - 16,653 Nonexpendable 21,025 - 21,025 Unrestricted 53,979,304 51,089,336 105,068,640 Total net position 216,157,397 226,485,705 442,643,102 Total liabilities, deferred inflows of resources, and net position $ 267,580,651 $ 301,029,018 $ 568,609,669 See notes to financial statements 13 [[page 24]] City of Gallatin, Tennessee Statement of Activities For the Fiscal Year Ended June 30, 2023 Net (Expenses) Revenues Program Revenues and Changes in Net Position Operating Capital Primary Government Charges for Grants and Grants and Governmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Primary Government Governmental Activities Administrative and general $ 11,491,711 $ 6,252,744 $ 1,546,858 $ - $ (3,692,109) $ - $ (3,692,109) Public safety 21,445,885 823,041 571,070 - (20,051,774) - (20,051,774) Engineering 3,045,455 - 17,500 - (3,027,955) - (3,027,955) Environmental 3,499,967 3,269,469 45,203 - (185,295) - (185,295) Public works 815,980 - 9,375 - (806,605) - (806,605) Highways and streets 1,700,671 - 1,672,656 8,345,507 8,317,492 - 8,317,492 Vehicle maintenance 415,838 45,799 12,500 - (357,539) - (357,539) Recreation 5,579,699 2,547,386 13,000 - (3,019,313) - (3,019,313) Economic development 477,555 - 7,500 - (470,055) - (470,055) Interest on long-term debt 602,819 - - - (602,819) - (602,819) Total governmental activities 49,075,580 12,938,439 3,895,662 8,345,507 (23,895,972) - (23,895,972) Business-type Activities Electric 77,786,114 77,406,019 - 4,158,400 - 3,778,305 3,778,305 Water and sewer 16,836,539 19,126,293 - 2,253,812 - 4,543,566 4,543,566 Gas 19,001,406 19,163,841 - - - 162,435 162,435 Total business-type activities 113,624,059 115,696,153 - 6,412,212 - 8,484,306 8,484,306 Total primary government $ 162,699,639 $ 128,634,592 $ 3,895,662 $ 14,757,719 (23,895,972) 8,484,306 (15,411,666) General Revenues Taxes Property taxes, levied for general government 14,214,670 - 14,214,670 In lieu of taxes, other governments 716,406 - 716,406 Sales taxes 20,594,060 - 20,594,060 Franchise taxes 397,976 - 397,976 Alcoholic beverage taxes 2,137,608 - 2,137,608 Business taxes 2,315,524 - 2,315,524 Income taxes 755 - 755 Miscellaneous state taxes 141,567 - 141,567 Other sources 720,038 - 720,038 Unrestricted investment earnings 847,158 886,820 1,733,978 Gain (loss) on sales of assets 494,844 (60,207) 434,637 Transfers, net 1,624,804 (1,624,804) - Total general revenues, contributions, and transfers 44,205,410 (798,191) 43,407,219 Change in net position 20,309,438 7,686,115 27,995,553 Net position, beginning of year 195,847,959 218,799,590 414,647,549 Net position, end of year $ 216,157,397 $ 226,485,705 $ 442,643,102 See notes to financial statements 14 [[page 25]] City of Gallatin, Tennessee Balance Sheet Governmental Funds June 30, 2023 Other Total Capital Governmental Governmental General Fund Projects Fund Funds Funds Assets Cash and cash equivalents $ 41,845,952 $ 7,006,053 $ 5,527,306 $ 54,379,311 Certificates of deposit 9,505,150 - - 9,505,150 Investments - - 21,025 21,025 Receivables Interest 333,946 - - 333,946 Taxes (net of allowance of $273,992) 14,645,799 - - 14,645,799 Accounts (net of allowance of $20,937) 564,480 - 524,185 1,088,665 Fines (net of allowance of $2,231,602) 7,522 - - 7,522 Grants 841,155 - - 841,155 Intergovernmental 4,131,475 - - 4,131,475 Inventories 51,333 - 16,710 68,043 Prepaid expense - - 11,102 11,102 Restricted assets Cash and cash equivalents 5,229,345 - - 5,229,345 TCRS Stabilization Fund 1,031,697 - 54,608 1,086,305 Total assets $ 78,187,854 $ 7,006,053 $ 6,154,936 $ 91,348,843 Liabilities Accounts payable $ 1,238,721 $ 223,524 $ 132,265 $ 1,594,510 Retainage payable - - - - Accrued expenses 726,172 - - 726,172 Unearned revenues 77,520 - - 77,520 Unearned evidence funds - - 65,006 65,006 Performance deposits 5,010,655 - - 5,010,655 Total liabilities 7,053,068 223,524 197,271 7,473,863 Deferred Inflows of Resources Unavailable revenues, property tax 14,979,744 - - 14,979,744 Unavailable revenues, court fines 7,521 - - 7,521 Total deferred inflows of resources 14,987,265 - - 14,987,265 Continued See notes to financial statements 15 [[page 26]] City of Gallatin, Tennessee Balance Sheet Governmental Funds June 30, 2023 Other Total Capital Governmental Governmental General Fund Projects Fund Funds Funds Fund Balances Nonspendable Prepaid items - - 11,102 11,102 Funds held in trust - - 21,025 21,025 Inventories 51,333 - 16,710 68,043 Restricted for Capital projects - 6,782,529 - 6,782,529 Funds held in trust - - 444,634 444,634 Environmental services - - 1,988,232 1,988,232 Drug enforcement - - 160,170 160,170 Economic development - - - - Stormwater - - 3,201,198 3,201,198 Hybrid Retirement Stabilization Funds 1,031,697 - 54,608 1,086,305 Committed for Economic development 273,799 - - 273,799 Occupancy tax 1,041,177 1,041,177 Assigned for Capital projects - - - - Police special projects - - 43,333 43,333 Cemetery - - 16,653 16,653 Unassigned 53,749,515 - - 53,749,515 Total fund balances 56,147,521 6,782,529 5,957,665 68,887,715 Total liabilities, deferred inflows of resources, and fund balance $ 78,187,854 $ 7,006,053 $ 6,154,936 $ 91,348,843 See notes to financial statements 16 [[page 27]] City of Gallatin, Tennessee Reconciliation of Balance Sheet to Statement of Net Position Governmental Funds June 30, 2023 Amounts reported for fund balance, total governmental funds $ 68,887,715 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 174,986,476 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be amortized and recognized as components of the related expense in future years. 625,696 Net pension assets and liabilities are not due in the current period and, therefore, are not reported in the funds. (194,396) Receivables are not available to pay for current period expenditures and, therefore, are deferred or not reported in the funds. 618,935 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not recorded in the funds. (28,767,029) Net position of governmental activities $ 216,157,397 See notes to financial statements 17 [[page 28]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds For the Fiscal Year Ended June 30, 2023 Other Total Capital Governmental Governmental General Fund Projects Fund Funds Funds Revenues Local taxes $ 34,020,171 $ - $ - $ 34,020,171 Licenses and permits 3,694,996 - - 3,694,996 Intergovernmental revenues 16,130,376 916,536 - 17,046,912 Charges for services 3,148,588 - 5,271,814 8,420,402 Fines 748,936 - 74,105 823,041 Other 1,988,248 597,100 245,970 2,831,318 Total revenues 59,731,315 1,513,636 5,591,889 66,836,840 Expenditures Current General government 9,634,216 - - 9,634,216 Public safety 23,403,783 - 127,553 23,531,336 Engineering 2,857,815 - - 2,857,815 Environmental services - - 3,295,676 3,295,676 Public works 3,056,827 - - 3,056,827 Highways and streets 1,437,998 - - 1,437,998 Vehicle maintenance 429,544 - - 429,544 Parks and recreation 5,527,163 - - 5,527,163 Economic development 506,618 - - 506,618 Debt service Principal 1,780,000 - - 1,780,000 Interest 911,850 - - 911,850 Other debt service expense 1,253 - - 1,253 Capital outlay - 2,793,524 827,182 3,620,706 Total expenditures 49,547,067 2,793,524 4,250,411 56,591,002 Excess (deficiency) of revenues over expenditures 10,184,248 (1,279,888) 1,341,478 10,245,838 Other financing sources (uses) Transfers in, in lieu of taxes 1,824,463 - - 1,824,463 Transfers in/(out) (247,088) - (98,236) (345,324) Total other financing sources (uses) 1,577,375 - (98,236) 1,479,139 Change in fund balance 11,761,623 (1,279,888) 1,243,242 11,724,977 Fund balance, beginning of year 44,385,898 8,062,417 4,714,423 57,162,738 Fund balance, end of year $ 56,147,521 $ 6,782,529 $ 5,957,665 $ 68,887,715 See notes to financial statements 18 [[page 29]] City of Gallatin, Tennessee Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2023 Net change in fund balance, total governmental funds $ 11,724,977 Amounts reported for governmental activities in the statement of activities are 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. Depreciation expense 7,828,471 The net effect of various transactions involving capital assets (i.e., sales, trade-ins, and contributed assets) is to increase net position 6,777,589 Revenues in the statement of activities that do not provide current financial financial resources are not reported as revenues in the funds, and revenues received in the current year that were accrued in the statement of activities in prior years are reported as revenues in the funds. (5,708,550) The issuance of long-term debt 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, however, has any effect on net position. Also, governmental funds report the effects of premiums, discounts, losses on refunding's, and similar items when debt is first 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. 2,057,666 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. Other items such as contributions to pension funds are expensed in the funds while an actuarially determined expense amount is included in the statement of activities. (2,370,715) Change in net position of governmental activities $ 20,309,438 See notes to financial statements 19 [[page 30]] City of Gallatin, Tennessee Statement of Net Position Proprietary Funds June 30, 2023 Electric Water and Gas Department Sewer Dept Department Total Assets Current assets Cash and cash equivalents, general $ 17,520,849 $ 24,864,170 $ 7,364,079 $ 49,749,098 Cash and cash equivalents, restricted 7,810 510,359 122,986 641,155 Certificates of deposit 5,328,776 - - 5,328,776 Accounts receivable, trade, net of allowance for doubtful accounts 7,163,136 1,748,351 1,204,285 10,115,772 Prepayments and other current assets 114,871 - - 114,871 Materials and supplies 3,505,364 1,173,287 3,359,609 8,038,260 Non-current receivables, current portion 840 - - 840 Total current assets 33,641,646 28,296,167 12,050,959 73,988,772 Other assets Other receivables 104,915 - - 104,915 TCRS Stabilization Fund - 187,457 67,395 254,852 TVA contracts receivables, home weatherization 1,426 - - 1,426 Less: amount due within one year (840) - - (840) Total other assets 105,501 187,457 67,395 360,353 Capital assets Land 2,885,957 1,736,014 231,447 4,853,418 Construction in progress 1,117,801 - - 1,117,801 Other capital assets, net of depreciation Transmission plant 968,615 - - 968,615 Distribution plant 32,274,494 108,039,273 44,062,055 184,375,822 General plant 3,011,319 - - 3,011,319 General plant, right to use leased equipment 1,143 - - 1,143 Buildings - 23,832,769 1,527,971 25,360,740 Operating equipment - 428,857 103,442 532,299 Rolling stock - 338,439 72,009 410,448 Office furniture and equipment - (3,646) 25,489 21,843 Total capital assets 40,259,329 134,371,706 46,022,413 220,653,448 Total assets 74,006,476 162,855,330 58,140,767 295,002,573 Deferred Outflows of Resources Deferred charge on bond refunding - 2,444,656 - 2,444,656 Deferred outflows related to pensions 3,423,069 118,670 40,050 3,581,789 Deferred outflows related to OPEB - - - - Total deferred outflows of resources 3,423,069 2,563,326 40,050 6,026,445 Total assets and deferred outflows of resources $ 77,429,545 $ 165,418,656 $ 58,180,817 $ 301,029,018 Continued See notes to financial statements 20 [[page 31]] City of Gallatin, Tennessee Statement of Net Position Proprietary Funds June 30, 2023 Electric Water and Gas Department Sewer Dept Department Total Liabilities Current liabilities Accounts payable $ 11,480,556 $ 324,663 $ 881,756 $ 12,686,975 Retainage payable - 510,359 122,986 633,345 Other accrued expenses 363,510 370 1,806 365,686 Customers' deposits 4,977,876 527,514 281,792 5,787,182 Accrued leave 289,110 339,721 61,937 690,768 Lease liabilities, current portion 1,299 - - 1,299 Long-term debt, current portion 2,139 2,960,079 236,260 3,198,478 Total current liabilities 17,114,490 4,662,706 1,586,537 23,363,733 Long-term liabilities Bonds payable (less current maturities) - 36,605,000 4,515,000 41,120,000 Accrued leave 171,378 155,221 63,628 390,227 TVA advances payable, home weatherization 1,579 - - 1,579 Aid to construction 5,206,874 - - 5,206,874 Net pension liability 505,678 35,564 12,252 553,494 OPEB liability 526,990 - - 526,990 Bond premiums - 2,884,806 267,490 3,152,296 Total long-term liabilities 6,412,499 39,680,591 4,858,370 50,951,460 Total liabilities 23,526,989 44,343,297 6,444,907 74,315,193 Deferred Inflows of Resources Deferred inflows related to pensions 220,491 5,984 1,645 228,120 Total liabilities and deferred inflows of resources 23,747,480 44,349,281 6,446,552 74,543,313 Net Position Net investment in capital assets 40,258,030 94,258,677 40,664,816 175,181,523 Restricted for: Workers' compensation adjustment 7,810 - - 7,810 Pension benefits - 151,893 55,143 207,036 Unrestricted 13,416,225 26,658,805 11,014,306 51,089,336 Total net position 53,682,065 121,069,375 51,734,265 226,485,705 Total liabilities, deferred inflows of resources, and net position $ 77,429,545 $ 165,418,656 $ 58,180,817 $ 301,029,018 See notes to financial statements 21 [[page 32]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Net Position Proprietary Funds For the Fiscal Year Ended June 30, 2023 Electric Water and Gas Department Sewer Dept Department Total Operating Revenues Charges for sales and service $ 76,292,985 $ 18,723,929 $ 18,846,525 $ 113,863,439 Fines and forfeitures 292,406 128,457 - 420,863 Other operating revenue 820,628 273,907 317,316 1,411,851 Total operating revenues 77,406,019 19,126,293 19,163,841 115,696,153 Operating Expenses Cost of sales and service 64,561,537 - 15,627,368 80,188,905 Water treatment and pumping - 2,729,294 - 2,729,294 Transmission and distribution 5,771,380 2,477,257 630,964 8,879,601 Customer service and collection 956,731 779,212 734,945 2,470,888 General administration 2,549,194 1,444,118 519,245 4,512,557 Sewer collection - 1,216,513 - 1,216,513 Sewer system rehab - 521,631 - 521,631 Sewer treatment and disposal - 1,799,249 - 1,799,249 Sewer pretreatment - 101,138 - 101,138 Maintenance 1,654,192 - - 1,654,192 Customer deposit interest 46,751 - - 46,751 Amortization, acquisition adjustment 3,347 - - 3,347 Provision for depreciation 2,242,982 4,783,198 1,345,378 8,371,558 Total operating expenses 77,786,114 15,851,610 18,857,900 112,495,624 Operating income (loss) (380,095) 3,274,683 305,941 3,200,529 Non-operating revenues (expenses) Interest and other income 320,998 306,916 258,906 886,820 Tap fees - 722,672 - 722,672 Amortization of bond premiums - 365,733 - 365,733 Interest and other expense - (1,350,662) (143,506) (1,494,168) Other gains and losses - (60,591) 384 (60,207) Total non-operating revenues (expenses) 320,998 (15,932) 115,784 420,850 Income before contributions and transfers (59,097) 3,258,751 421,725 3,621,379 Capital contributions 4,158,400 1,531,140 - 5,689,540 Transfers in ARPA fund - 178,579 21,080 199,659 Transfers out, in lieu of taxes (1,043,191) (362,330) (418,942) (1,824,463) Change in net position 3,056,112 4,606,140 23,863 7,686,115 Net position, beginning of year 50,625,953 116,463,235 51,710,402 218,799,590 Net position, end of year $ 53,682,065 $ 121,069,375 $ 51,734,265 $ 226,485,705 See notes to financial statements 22 [[page 33]] City of Gallatin, Tennessee Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2023 Electric Water and Gas Department Sewer Dept Department Total Cash flows from operating activities Cash received from customers $ 78,191,430 $ 19,083,221 $ 19,268,066 $ 116,542,717 Cash payments to suppliers for goods and services (73,869,795) (5,900,263) (18,417,487) (98,187,545) Cash payments to employees for services (3,823,310) (4,904,613) (1,683,418) (10,411,341) Interest payments on customer deposits (25,385) - - (25,385) Net decrease in TVA loan funds receivable 3,931 - - 3,931 Net decrease in TVA loan funds payable (4,495) - - (4,495) Net cash provided (used) by operating activities 472,376 8,278,345 (832,839) 7,917,882 Cash flows from noncapital financing activities Transfers out (1,043,191) (362,330) (418,942) (1,824,463) Transfers in - 178,579 21,080 199,659 Net cash provided (used) by noncapital financing activities (1,043,191) (183,751) (397,862) (1,624,804) Cash flows from capital and related financing activities Capital contributions by customers and grants 4,158,400 - - 4,158,400 Proceeds from tap fees - 722,672 - 722,672 Principal paid on debt - (2,480,000) (210,000) (2,690,000) Interest paid on bonds, notes, and leases - (1,797,002) (316,335) (2,113,337) Construction and acquisition of plant (3,881,798) (3,432,116) (5,115,644) (12,429,558) Plant removal cost (122,237) - - (122,237) Salvage 581,788 - - 581,788 Other - (60,591) 384 (60,207) Net cash provided (used) by capital and related financing activities 736,153 (7,047,037) (5,641,595) (11,952,479) Cash flows from investing activities Purchase of certificates of deposit (564,600) - - (564,600) Interest and other income 316,019 306,916 258,906 881,841 Net cash provided (used) by investing activities (248,581) 306,916 258,906 317,241 Net change in cash and cash equivalents (83,243) 1,354,473 (6,613,390) (5,342,160) Cash and cash equivalents, beginning of year 17,611,902 24,020,056 14,100,455 55,732,413 Cash and cash equivalents, end of year $ 17,528,659 $ 25,374,529 $ 7,487,065 $ 50,390,253 Cash and Cash Equivalents Unrestricted cash and cash equivalents on deposit $ 17,520,849 $ 24,864,170 $ 7,364,079 $ 49,749,098 Restricted cash and cash equivalents on deposit 7,810 510,359 122,986 641,155 Total cash and cash equivalents $ 17,528,659 $ 25,374,529 $ 7,487,065 $ 50,390,253 See notes to financial statements 23 [[page 34]] City of Gallatin, Tennessee Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2023 Electric Water and Gas Department Sewer Dept Department Total Reconciliation of operating income to net cash provided (used) by operating activities Operating income (loss) $ (380,095) $ 3,274,683 $ 305,941 $ 3,200,529 Adjustments to reconcile operating income to net cash provided (used) by operating activities Depreciation and amortization of acquisition costs 2,430,468 4,783,198 1,345,378 8,559,044 Recovery of bad debt - 9,436 4,812 14,248 Change in: Accounts receivable 785,411 (58,846) 95,970 822,535 Materials and supplies (1,217,112) (205,548) (1,456,443) (2,879,103) Prepayments and other current assets (23,390) - 39,467 16,077 TVA contracts receivable 3,931 - - 3,931 Deferred outflows of resources (2,119,060) (40,617) (13,446) (2,173,123) TCRS stabilization fund - (37,454) (17,025) (54,479) Pension asset - 12,550 3,677 16,227 Accounts payable (587,836) 418,021 (1,167,718) (1,337,533) Other accrued expenses 78,414 - 16 78,430 Customers' deposits (129,540) 15,774 8,255 (105,511) Accrued leave 70,752 102,091 16,123 188,966 Lease liability (3,710) - - (3,710) TVA contracts payable (4,495) - - (4,495) Pension liability 3,336,689 35,564 12,252 3,384,505 OPEB liability (103,255) - - (103,255) Deferred inflows of resources (1,664,796) (30,507) (10,098) (1,705,401) Net cash provided (used) by operating activities $ 472,376 $ 8,278,345 $ (832,839) $ 7,917,882 Supplemental disclosure of noncash capital and related financing activities Utility plant additions financed accounts payable $ - $ 6,277 $ 383,919 $ 390,196 Utility plant additions financed by retainage payable - 510,359 122,986 633,345 Developer contributions of systems - 1,531,140 - 1,531,140 $ - $ 2,047,776 $ 506,905 $ 2,554,681 See notes to financial statements 24 [[page 35]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual General Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Revenues Local taxes Property taxes, current $ 13,512,000 $ 13,559,250 $ 13,948,371 389,121 Property taxes, delinquent 150,000 150,000 214,361 64,361 Property taxes, penalty and interest 60,000 60,000 51,938 (8,062) Local sales taxes 13,750,000 14,050,000 15,289,504 1,239,504 Local beer taxes 1,228,000 1,228,000 1,193,410 (34,590) Local liquor taxes 557,000 557,000 609,087 52,087 Business taxes 1,198,000 1,198,000 1,883,802 685,802 Privilege taxes 28,000 28,000 33,432 5,432 Cable taxes 465,000 465,000 397,976 (67,024) Occupancy taxes 309,000 309,000 393,171 84,171 Special assessments 5,000 5,000 5,119 119 Total local taxes 31,262,000 31,609,250 34,020,171 2,410,921 Licenses and permits Beer licenses 5,000 5,000 8,150 3,150 Building permits 875,000 875,000 1,087,640 212,640 Plumbing permits 225,000 225,000 304,539 79,539 Planning fees 325,000 325,000 442,793 117,793 Other mechanical permits 350,000 350,000 409,250 59,250 Other permits 1,290,000 1,290,000 1,442,624 152,624 Total licenses and permits 3,070,000 3,070,000 3,694,996 624,996 Fines and forfeitures Fines and forfeitures 334,250 434,250 553,687 119,437 ACES red light revenue 120,000 120,000 169,031 49,031 Drug fines 19,500 19,500 26,218 6,718 Total fines and forfeitures 473,750 573,750 748,936 175,186 Intergovernmental revenues In lieu of tax, housing authority 3,600 3,600 3,672 72 In lieu of tax, industry 161,000 161,000 178,528 17,528 State sales tax 4,884,000 4,884,000 5,304,556 420,556 State income tax - - 755 755 State beer tax 20,500 20,500 20,288 (212) State mixed drink tax 225,000 225,000 314,823 89,823 State gas and motor fuel tax 1,584,000 1,584,000 1,543,508 (40,492) State petroleum special 80,500 80,500 81,398 898 State telecomm - - 18 18 State TVA in lieu of tax 462,000 462,000 534,206 72,206 State excise tax 115,000 115,000 141,549 26,549 State salary supplements - 128,000 128,000 - Other federal grants 747,766 16,421,918 7,505,566 (8,916,352) Sidewalk grant - 1,255,947 75,519 (1,180,428) Government highway safety grant - - - - Other state grants 4,500 504,500 297,990 (206,510) Total intergovernmental revenues 8,287,866 25,845,965 16,130,376 (9,715,589) Continued See notes to financial statements 25 [[page 36]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual General Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Revenues Charges for services Admin and management services 180,000 180,000 245,001 65,001 Accounting and management services 95,766 95,766 95,766 - Personnel services 50,629 50,629 50,629 - Other legal services 108,361 108,361 108,361 - Miscellaneous 23,000 23,000 6,946 (16,054) Vehicle maintenance charges 220,000 220,000 45,799 (174,201) Rent 35,000 35,000 48,700 13,700 Golf course revenue 866,000 1,041,000 1,556,540 515,540 Civic center revenue 779,800 779,800 990,846 211,046 Total charges for services 2,358,556 2,533,556 3,148,588 615,032 Miscellaneous revenues Miscellaneous 71,000 1,050,920 160,474 (890,446) Sale of cemetery lots 500 500 - (500) Sale of materials 2,000 2,000 15,837 13,837 Sale of equipment 30,000 145,460 179,502 34,042 Donations 475,000 477,141 519,327 42,186 Insurance recoveries - 97,421 283,782 186,361 Interest 50,000 160,000 829,326 669,326 Total miscellaneous revenues 628,500 1,933,442 1,988,248 54,806 Total revenues 46,080,672 65,565,963 59,731,315 (5,834,648) Expenditures General government Mayor's office Salaries 290,939 290,939 286,162 4,777 Employee benefits and taxes 74,464 74,464 75,817 (1,353) Official fees 48,650 48,650 37,308 11,342 Printing and publications 8,800 8,800 11,276 (2,476) Membership fees 52,000 52,000 51,558 442 Utilities 3,000 3,000 828 2,172 Other professional services 115,000 115,000 318,237 (203,237) Travel and meals 17,500 17,500 13,114 4,386 Mayor's expenses 5,000 5,000 4,330 670 Council expenses 14,000 14,000 5,658 8,342 Office supplies 6,850 6,850 2,332 4,518 Repairs and maintenance 20,000 20,000 - 20,000 Payments in lieu of tax 209,000 209,000 208,638 362 County portion of liquor tax 120,000 120,000 184,702 (64,702) Discounts on taxes 14,000 14,000 12,368 1,632 Grants and donations 6,000 6,000 3,681 2,319 RTA program 55,597 55,597 55,597 - Prizes and awards 16,000 16,000 13,253 2,747 Miscellaneous 41,850 41,850 (189,605) 231,455 Capital outlay 109,500 3,075,925 23,466 3,052,459 Total mayor's office 1,228,150 4,194,575 1,118,720 3,075,855 Continued See notes to financial statements 26 [[page 37]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual General Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Expenditures General government Finance department Salaries 551,930 551,930 470,514 81,416 Employee benefits and taxes 148,956 148,956 119,760 29,196 Postage 4,000 4,000 2,210 1,790 Printing and publications 3,750 3,750 2,721 1,029 Membership fees 1,000 1,000 310 690 Utilities 870 870 700 170 Accounting services 80,000 80,000 80,750 (750) Repairs and maintenance 1,000 1,000 753 247 Training 2,000 2,000 790 1,210 Operating supplies 4,750 4,750 4,063 687 Miscellaneous 1,700 1,700 (7,411) 9,111 Capital outlay 3,500 69,500 - 69,500 Total finance department 803,456 869,456 675,160 194,296 City recorder Salaries 345,311 345,311 250,987 94,324 Employee benefits and taxes 128,865 128,865 88,007 40,858 Postage 16,000 16,000 16,188 (188) Printing and publications 600 600 765 (165) Membership fees 3,000 3,000 598 2,402 Utilities - - 452 (452) Data processing services 20,000 20,000 - 20,000 Other professional services 206,000 311,577 583 310,994 Travel 1,500 1,500 - 1,500 Other contractual services 5,000 5,000 3,457 1,543 Office supplies 4,000 4,000 3,783 217 Miscellaneous 12,250 12,250 16,543 (4,293) Capital outlay - - - - Total city recorder 742,526 848,103 381,363 466,740 Risk management HRA expense 200,000 200,000 170,939 29,061 Workers compensation 350,000 442,250 456,322 (14,072) ADA transition plan - - - - Building insurance 125,000 125,000 90,976 34,024 General liability 400,000 400,000 390,658 9,342 Total risk management 1,075,000 1,167,250 1,108,895 58,355 Continued See notes to financial statements 27 [[page 38]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual General Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Expenditures General government Attorney Salaries 389,448 390,685 382,970 7,715 Employee benefits and taxes 98,901 99,107 91,845 7,262 Printing and publications 2,800 2,800 2,444 356 Licenses 650 650 - 650 Tax law and other publications 11,000 11,000 12,426 (1,426) Membership fees 3,000 3,000 3,486 (486) Utilities 1,400 1,400 1,024 376 Legal services 35,000 70,000 93,951 (23,951) Other professional services 10,000 10,000 325 9,675 Travel and meals 4,250 4,250 4,814 (564) Training 3,500 3,500 3,212 288 Office supplies 650 650 256 394 Educational supplies 39,974 39,974 (4,182) 44,156 Miscellaneous 8,200 8,200 1,372 6,828 Capital outlay - 368 - 368 Total attorney 608,773 645,584 593,943 51,641 Information technology Salaries 590,223 590,223 577,308 12,915 Employee benefits and taxes 182,628 182,628 176,004 6,624 Copier expense 250 250 230 20 Membership fees 500 500 - 500 Utilities 5,000 5,000 4,441 559 Other professional services 635,886 660,886 123,038 537,848 Other contractual services 863,737 863,737 841,260 22,477 Office supplies 1,500 1,500 2,208 (708) Operating supplies 8,000 8,000 6,768 1,232 Miscellaneous 2,400 2,400 5,373 (2,973) Capital outlay 610,406 633,862 360,605 273,257 Total information technology 2,900,530 2,948,986 2,097,235 851,751 Personnel Salaries 313,185 313,185 294,048 19,137 Employee benefits and taxes 118,231 118,231 88,437 29,794 Printing and publications 3,000 3,000 1,717 1,283 Utilities 625 625 521 104 Physicals 500 500 88 412 Professional services 11,625 11,625 - 11,625 Training 4,000 4,000 2,200 1,800 Office supplies 2,900 2,900 1,853 1,047 Operating supplies 500 500 2,489 (1,989) Miscellaneous 7,650 7,650 5,913 1,737 Repairs and maintenance - - 1,970 (1,970) Capital outlay 1,000 1,000 1,371 (371) Total personnel 463,216 463,216 400,607 62,609 Continued See notes to financial statements 28 [[page 39]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual General Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Expenditures General government City planner Salaries 592,867 595,639 595,658 (19) Employee benefits and taxes 199,567 200,028 189,900 10,128 Planning commission 18,000 18,000 18,175 (175) Postage 1,000 1,000 271 729 Printing and publications 4,000 4,000 2,074 1,926 Membership fees 3,000 3,000 1,579 1,421 Utilities 4,000 4,000 2,781 1,219 Repairs and maintenance 1,700 1,700 79 1,621 Office supplies 4,300 4,300 2,128 2,172 Gas, oil, diesel, etc. 800 800 975 (175) Miscellaneous 28,150 28,150 9,620 18,530 Capital outlay 3,200 6,700 3,442 3,258 Total city planner 860,584 867,317 826,682 40,635 Buildings Salaries 280,714 283,485 253,927 29,558 Employee benefits and taxes 101,458 101,919 84,354 17,565 Utilities 80,456 80,456 72,811 7,645 Repairs and maintenance 27,500 27,500 27,797 (297) Other contractual services 18,000 18,000 43,904 (25,904) Small equipment 2,000 2,000 1,396 604 Operating supplies 3,000 3,000 2,307 693 Janitorial supplies 7,000 7,000 8,080 (1,080) Gas, oil, diesel, etc. 5,000 5,000 2,594 2,406 Miscellaneous 4,200 4,200 2,399 1,801 Capital outlay 15,000 116,670 11,817 104,853 Total buildings 544,328 649,230 511,386 137,844 Codes Salaries 1,164,661 1,164,661 1,070,924 93,737 Employee benefits and taxes 432,396 432,396 356,615 75,781 Postage 720 720 200 520 Printing and publications 10,800 10,800 2,829 7,971 Membership fees 5,000 5,000 3,201 1,799 Utilities 22,000 22,000 13,437 8,563 Repairs and maintenance 4,000 4,000 1,922 2,078 Other professional services 18,000 18,000 5,702 12,298 Office supplies 4,000 4,000 1,637 2,363 Gas, oil, diesel, etc. 15,500 15,500 17,883 (2,383) Miscellaneous 60,800 60,800 86,128 (25,328) Capital outlay 2,000 73,350 72,702 648 Total codes 1,739,877 1,811,227 1,633,180 178,047 Community services July 4th celebration 23,500 23,500 11,575 11,925 Appropriations to non-profits 275,470 275,470 275,470 - Total community services 298,970 298,970 287,045 11,925 Total general government 11,265,410 14,763,914 9,634,216 5,129,698 Continued See notes to financial statements 29 [[page 40]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual General Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Expenditures Public safety Police Salaries 6,190,005 6,244,405 6,126,575 117,830 Employee benefits and taxes 2,565,506 2,567,791 2,101,332 466,459 Postage 3,000 3,000 3,257 (257) Printing and publications 24,400 24,400 20,347 4,053 Membership fees 5,500 5,500 3,515 1,985 Public relations 1,500 1,500 1,356 144 Utilities 91,955 91,955 94,554 (2,599) Physicals 12,000 12,000 16,142 (4,142) Data processing services 25,000 25,000 20,658 4,342 Repairs and maintenance 148,500 148,500 221,819 (73,319) Travel 25,000 35,206 18,044 17,162 Other contractual services 90,000 542,927 333,138 209,789 Inmate crew expense 1,200 1,200 - 1,200 Reserve officers expense 15,000 330,000 40,563 289,437 Office supplies 5,100 16,135 4,769 11,366 Small office equipment 3,000 19,501 13,749 5,752 Operating supplies 32,000 272,000 37,996 234,004 Janitorial supplies 1,500 1,500 3,419 (1,919) Clothing and uniforms 45,000 45,000 82,029 (37,029) Fire arm supplies 35,000 35,305 30,268 5,037 Other operating supplies 3,000 3,000 2,876 124 Gas, oil, diesel, etc. 165,500 165,500 267,740 (102,240) Other supplies 3,000 3,000 1,680 1,320 Traffic light camera expense 110,000 110,000 86,934 23,066 Other grants and donations 1,025,462 1,025,462 1,410,484 (385,022) Professional Services - 26,410 26,410 - Capital outlay 630,000 767,275 752,629 14,646 Total police 11,257,128 12,523,472 11,722,283 801,189 Fire Salaries 6,006,732 6,114,146 5,956,422 157,724 Employee benefits and taxes 2,368,738 2,373,106 2,080,896 292,210 Printing and publications 2,000 2,000 710 1,290 Membership fees 8,000 8,000 6,142 1,858 Utilities 88,805 88,805 80,380 8,425 Physicals 50,500 50,500 57,575 (7,075) Repairs and maintenance 207,500 238,092 207,501 30,591 Travel 30,000 30,000 26,605 3,395 Other contractual services 49,000 49,000 32,655 16,345 Training 75,000 75,000 74,400 600 Office supplies 2,500 2,500 2,515 (15) Small office equipment 500 500 571 (71) Operating supplies 20,000 20,000 17,171 2,829 Janitorial supplies 12,000 12,000 11,374 626 Clothing and uniforms 50,000 50,000 47,520 2,480 Fire prevention supplies 8,000 8,000 7,853 147 Gas, oil, diesel, etc. 95,000 113,000 129,296 (16,296) Miscellaneous 29,150 29,150 23,730 5,420 Capital outlay 2,232,000 3,572,842 2,918,184 654,658 Total fire 11,335,425 12,836,641 11,681,500 1,155,141 Total public safety 22,592,553 25,360,113 23,403,783 1,956,330 Continued See notes to financial statements 30 [[page 41]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual General Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Expenditures Engineering Salaries 581,945 650,784 565,674 85,110 Employee benefits and taxes 202,120 213,581 183,261 30,320 Printing 3,000 3,000 2,487 513 Licenses 1,500 1,500 2,445 (945) Membership fees 1,785 1,785 680 1,105 Utilities 11,600 11,600 10,351 1,249 Professional services 325,000 370,158 26,138 344,020 Repairs and maintenance 24,000 24,000 19,846 4,154 Office supplies 2,000 2,000 1,604 396 Operating supplies 3,800 3,800 1,853 1,947 Gas, oil, diesel, etc. 4,000 4,000 3,757 243 Miscellaneous 4,750 4,750 1,417 3,333 Capital outlay 2,155,000 6,813,017 2,038,302 4,774,715 Total engineering 3,320,500 8,103,975 2,857,815 5,246,160 Public works Salaries 316,441 320,531 321,858 (1,327) Employee benefits and taxes 113,306 113,987 103,969 10,018 Utilities 1,800 1,800 1,850 (50) Repairs and maintenance 15,700 16,650 16,371 279 Gas, oil, diesel, etc. 24,000 24,000 18,887 5,113 Miscellaneous 413,950 435,548 354,691 80,857 Capital outlay 1,200,266 6,771,026 2,239,201 4,531,825 Total public works 2,085,463 7,683,542 3,056,827 4,626,715 Highways and streets Salaries 979,742 979,742 706,287 273,455 Employee benefits and taxes 547,322 547,322 261,352 285,970 Utilities 10,650 10,650 9,708 942 Physicals 1,000 1,000 2,653 (1,653) Repairs and maintenance 162,000 165,000 131,601 33,399 Travel 1,000 1,000 1,120 (120) Other contractual services 10,000 10,000 3,202 6,798 Operating supplies 2,500 2,500 2,320 180 Agricultural and horticultural supplies 4,000 4,000 7,906 (3,906) Janitorial supplies 800 800 507 293 Clothing and uniforms 7,000 7,000 4,311 2,689 Other operating supplies 1,500 1,500 2,017 (517) Gas, oil, diesel, etc. 63,000 63,000 61,284 1,716 Consumable tools 3,500 3,500 3,187 313 Sign parts and supplies 15,000 15,000 17,564 (2,564) Demolition and mowing 20,000 20,000 6,396 13,604 Other supplies 1,500 1,500 633 867 Salt 40,000 40,000 37,741 2,259 Drainage materials - - - - Inmate crew expense 10,000 10,000 6,472 3,528 Miscellaneous 16,800 35,800 10,465 25,335 Capital outlay 232,500 448,248 161,272 286,976 Total highways and streets 2,129,814 2,367,562 1,437,998 929,564 Continued See notes to financial statements 31 [[page 42]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual General Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Expenditures Vehicle maintenance Salaries 275,196 275,196 269,554 5,642 Employee benefits and taxes 121,299 121,299 91,667 29,632 Utilities 12,650 12,650 11,616 1,034 Repairs and maintenance 259,000 259,000 37,174 221,826 Operating supplies 1,500 1,500 2,247 (747) Clothing and uniforms 1,000 1,000 1,106 (106) Maintenance supplies 500 500 - 500 Gas, oil, diesel, etc. 4,500 4,500 3,366 1,134 Miscellaneous 4,100 4,100 620 3,480 Capital Outlay 15,500 17,380 12,194 5,186 Total vehicle maintenance 695,245 697,125 429,544 267,581 Parks and recreation Civic center Salaries 784,882 839,316 834,962 4,354 Employee benefits and taxes 166,507 175,570 173,057 2,513 Postage 1,500 1,500 1,500 - Printing and publications 4,500 4,500 4,543 (43) Utilities 213,500 213,500 253,417 (39,917) Employee physicals 1,500 1,500 2,501 (1,001) Repairs and maintenance 33,000 36,209 28,269 7,940 Other contractual services 125,000 125,000 116,635 8,365 Operating supplies 95,000 94,700 90,803 3,897 Food 60,000 60,000 58,957 1,043 Janitorial supplies 15,000 23,380 21,375 2,005 Miscellaneous 26,500 30,500 30,546 (46) Capital outlay 65,000 215,000 49,688 165,312 Total civic center 1,591,889 1,820,675 1,666,253 154,422 Golf course Salaries 584,401 599,290 603,884 (4,594) Employee benefits and taxes 186,867 189,346 170,943 18,403 Printing and publications 150 150 318 (168) Membership fees 1,400 1,400 2,040 (640) Utilities 44,200 44,200 42,750 1,450 Physicals 200 200 920 (720) Repairs and maintenance 10,000 18,676 9,256 9,420 Other contractual services 12,000 12,000 15,017 (3,017) Items for resale 10,000 75,000 45,173 29,827 Operating supplies 20,000 20,000 26,840 (6,840) Agricultural and horticultural supplies 55,000 55,000 54,235 765 Food 30,000 45,000 56,062 (11,062) Clothing and uniforms 1,200 1,200 182 1,018 Gas, oil, diesel, etc. 14,500 14,500 16,701 (2,201) Other equipment parts 25,000 25,000 26,783 (1,783) Repair parts for water/sewer lines 1,000 1,000 589 411 Beer for resale 15,000 25,000 23,399 1,601 Discount credit card 22,000 42,000 45,331 (3,331) Miscellaneous 7,050 7,050 9,138 (2,088) Capital outlay 353,000 470,150 335,318 134,832 Total golf course 1,392,968 1,646,162 1,484,879 161,283 Continued See notes to financial statements 32 [[page 43]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual General Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Expenditures Parks Salaries 882,079 884,680 895,553 (10,873) Employee benefits and taxes 568,562 568,995 492,236 76,759 Printing and publications 1,500 1,500 1,312 188 Memberships 2,000 2,000 5,221 (3,221) Public relations 10,000 10,000 6,419 3,581 Utilities 118,000 149,000 167,544 (18,544) Repairs and maintenance 70,000 91,709 86,002 5,707 Travel 4,000 4,000 1,508 2,492 Other contractual services 55,000 85,000 85,444 (444) Inmate crew meals 6,000 6,000 2,593 3,407 Small equipment 7,000 7,000 6,131 869 Operating supplies 75,000 96,734 81,031 15,703 Agricultural and horticultural supplies 25,000 25,000 16,320 8,680 Food - - 584 (584) Gas, oil, diesel, etc. 60,000 60,000 76,110 (16,110) Miscellaneous 3,400 3,400 4,504 (1,104) Capital outlay 125,000 513,520 447,519 66,001 Total parks 2,012,541 2,508,538 2,376,031 132,507 Total parks and recreation 4,997,398 5,975,375 5,527,163 448,212 Economic development Economic development agency Salaries 257,882 263,814 259,232 4,582 Employee benefits and taxes 90,548 91,536 74,892 16,644 Printing and publications 5,000 7,900 8,017 (117) Membership fees 13,000 13,000 31,043 (18,043) Public relations 27,000 27,000 32,750 (5,750) Utilities 1,800 1,800 1,443 357 Repairs and maintenance 500 1,500 2,156 (656) Professional services 17,000 21,200 26,463 (5,263) Travel 6,000 6,000 6,154 (154) Office supplies 2,250 2,250 4,236 (1,986) Gas, oil, diesel, etc. 1,250 1,250 647 603 Miscellaneous 20,600 30,600 20,182 10,418 Total economic development agency 442,830 467,850 467,215 635 Economic development utility Professional services 30,000 30,000 12,000 18,000 Repairs and maintenance 15,000 15,000 - 15,000 Grants and donations 7,500 7,500 - 7,500 Capital outlay 22,500 522,500 27,403 495,097 Total economic development utility 75,000 575,000 39,403 535,597 Total economic development 517,830 1,042,850 506,618 536,232 Continued See notes to financial statements 33 [[page 44]] City of Gallatin, Tennessee Statement of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual General Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Expenditures Debt service Principal 1,780,000 1,780,000 1,780,000 - Interest 911,850 911,850 911,850 - Bond fees 1,600 1,600 1,253 347 Total debt service 2,693,450 2,693,450 2,693,103 347 Total expenditures 50,297,663 68,687,906 49,547,067 19,140,839 Excess (deficiency) of revenues over (under) expenditures (4,216,991) (3,121,943) 10,184,248 13,306,191 Other financing sources (uses) In lieu of payment, utility 1,905,000 1,905,000 1,824,463 (80,537) Transfers from the other funds - - 10,576,303 10,576,303 Transfers to the other funds - (10,823,391) (10,823,391) - Total other financing sources (uses) 1,905,000 (8,918,391) 1,577,375 10,495,766 Net change in fund balance (2,311,991) (12,040,334) 11,761,623 23,801,957 Fund balance, beginning of year 44,385,898 44,385,898 44,385,898 - Fund balance, end of year of year $ 42,073,907 $ 32,345,564 $ 56,147,521 $ 23,801,957 See notes to financial statements 34 [[page 45]] City of Gallatin, Tennessee Statement of Fiduciary Net Position - Fiduciary Funds Electric Department June 30, 2023 Electric Dept Electric Dept Pension Trust OPEB Trust Assets Cash and cash equivalents $ 420,020 $ 58,239 Receivables Employee contributions 4,450 - Employer contributions - - Investment income 29,886 278 Investments Mutual funds 2,028,396 225,102 US government and municipal obligations 1,533,115 - Corporate bonds and debentures 4,021,205 - Common stocks 5,087,639 235,228 Preferred stocks 37,500 - Total assets $ 13,162,211 $ 518,847 Liabilities and Net Position Liabilities Payables Benefits payable to plan sponsor $ - $ 21,933 Trustee/Custody fees 766 33 Investment management fees 15,428 609 Total liabilities 16,194 22,575 Net position Restricted for pension and OPEB benefits 13,146,017 496,272 Total liabilities and net position $ 13,162,211 $ 518,847 See notes to financial statements 35 [[page 46]] City of Gallatin, Tennessee Statement of Changes in Fiduciary Net Position - Fiduciary Funds Electric Department For the Fiscal Year Ended June 30, 2023 Electric Dept Electric Dept Pension Trust OPEB Trust Additions Contributions Employees $ 59,943 $ - Employer 600,000 485,000 Total contributions 659,943 485,000 Investment income Net appreciation (depreciation) in fair value of investments (1,691,167) 25,952 Interest and dividends 275,580 9,523 (1,415,587) 35,475 Less: investment fees (77,848) (2,270) Net investment gain (1,493,435) 33,205 Total additions (833,492) 518,205 Deductions Benefit payments 627,700 21,933 Change in net position (1,461,192) 496,272 Net position, beginning of year 14,607,209 - Net position, end of year $ 13,146,017 $ 496,272 See notes to financial statements 36 [[page 47]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 1. Summary of Significant Account Policies The City of Gallatin’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). The more significant accounting policies established in GAAP and used by the City of Gallatin are discussed below. Reporting Entity The City of Gallatin, Tennessee (the City) operates under a Mayor-Alderman form of government and provides the following services as authorized by its charter: public safety (police and fire), street maintenance, sanitation collection and disposal, stormwater, recreation, water and sewer, electricity, gas, and general administrative services. As required by GAAP, these financial statements present the government and its component units, entities for which the City is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the City’s operations. Related Organizations The City’s officials are also responsible for appointing the members of the Board of Gallatin Housing Authority (the Housing Authority) and the Industrial Development Board of Gallatin, Tennessee (the IDB), but the City’s accountability for these organizations does not extend beyond making the appointments. Board members of the Housing Authority and the IDB are appointed by the Mayor, but the City does not provide funding, has no obligation for the debt issued by the Housing Authority and the IDB, and cannot impose its will upon the operations of the Housing Authority and the IDB. Accordingly, the Housing Authority have not been included in the reporting entity. Joint Venture The City is a participant in the Sumner County Resource Authority (the Resource Authority), a joint venture, in which it retains an ongoing financial interest. The Resource Authority is a joint venture of Sumner County and the Cities of Gallatin and Hendersonville, and operates a solid waste energy recovery plant. The City has no equity interest in the Resource Authority. Complete financial statements of the Resource Authority are available from the City Finance Director. Government-wide and Fund Financial Statements Government-wide Financial Statements The government-wide financial statements (the statement of net position and the statement of activities) report information on all of the activities of the City. As a rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu-of-taxes and other charges between the government’s utilities 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. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program, and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other items not included among program revenues are reported instead as general revenues. 37 [[page 48]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 1. Summary of Significant Account Policies Government-wide and Fund Financial Statements Government-wide Financial Statements Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Fund Financial Statements The government uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. The City has its funds classified into two categories: governmental and proprietary. Each category, in turn, is divided into separate “fund types.” Governmental funds are used to account for all or most of a government’s general activities including the collection and disbursement of earmarked monies (special revenue funds) and the acquisition or construction of general fixed assets (capital projects funds). The General Fund is used to account for all activities of the general government not accounted for in some other fund. Proprietary funds are used to account for activities similar to those found in the private sector, where the determination of net income is necessary or useful to sound financial administration. Goods or services from such activities can be provided either to outside parties (enterprise funds) or to other departments or agencies primarily within the government (internal service funds). The City reports the following major governmental funds: The General Fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The General Fund also includes the accounting for all solid waste revenues and expenditures. The Capital Projects Fund focuses on project-to-date costs for many projects within the City. It accounts for and reports financial resources that are restricted, committed, or assigned to expenditure for capital outlays of governmental fund types including the acquisition and construction of capital facilities and other capital assets. The City reports the following major proprietary funds: The Gallatin Department of Electricity (Electric Department Fund) accounts for the activities of the government’s electric distribution operations. The Water and Sewer Department Fund accounts for the activities associated with the water distribution system, the sewage treatment plant, sewage pumping stations, and sewage collection system. The Gas Department Fund accounts for the activities of the government’s gas distribution operations. 38 [[page 49]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 1. Summary of Significant Account Policies Government-wide and Fund Financial Statements Fund Financial Statements Additionally, the City reports the following fiduciary fund: The Electric Department’s pension trust fund is used to account for assets held for benefits related to the Gallatin Department of Electricity Employees’ Pension Plan. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are assessed. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers all revenues to be available in the period for which levied if they are collected within 60 days of the end of the current fiscal period. Those revenues susceptible to accrual are property taxes, franchise taxes, special assessments, licenses, interest income, and charges for services. Fines, permits, and parking meter revenues are not susceptible to accrual because, generally, they are not measurable until received in cash. Expenditures are recorded when the related fund liability is incurred. Principal and interest on long-term debt are recorded as fund liabilities when due or when amounts have been accumulated in the debt service fund for payments to be made early in the following year. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. Operating expenses for the proprietary funds include the necessary costs to provide the services including the cost of personal and contractual services, supplies, and depreciation on capital assets. Charges for sales and services are reported net of discounts and allowances of $8,069. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. Cash and Cash Equivalents The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with maturities of three months or less from the date of acquisition. State statutes authorize the City to invest in certificates of deposit, obligations of the US Treasury agencies and instrumentalities, obligations guaranteed by the US government or its agencies, repurchase agreements, and the state’s investment pool. 39 [[page 50]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 1. Summary of Significant Account Policies Cash and Cash Equivalents Investments for the City are reported at fair value. The State Local Government Investment Pool is operated in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool of shares. Receivables and Payables During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as “due from other funds” or “due to other funds” on the balance sheet. Property tax receivables are shown net of an allowance for uncollectibles. The allowance is recorded based on the past history of collections. Court fines receivable are also shown net of an allowance for uncollectibles. The allowance is recorded based on management’s estimate of what portion of the outstanding receivable will be collected in the future. The allowances for uncollectible customer accounts recorded in the proprietary funds are based on past history of uncollectible accounts and management’s analysis of current accounts. Property taxes are levied annually and notices are mailed on October 1. The taxes are due and payable from October through February of the next year. An unperfected lien attaches by statute to property on January 1 for unpaid taxes from the prior year’s levy. Taxes uncollected by March 1 the year after due may be submitted to the Chancery Court for collection. Tax liens become perfected at the time the court enters judgment. Inventories and Prepaid Items Inventories of the Water and Sewer, and Gas Funds are valued at average cost. Inventory of the Electric system is stated at average cost as determined by the moving average inventory method. Inventory of the General Fund consists of expendable supplies held for consumption. Governmental fund inventories are recorded at cost under the consumption method. Restricted Assets The City elects to use restricted assets before unrestricted assets when situations arise where either can be used. The TCRS Stabilization Fund consists of amounts held in a pension stabilization trust by the Tennessee Consolidated Retirement System (TCRS) for the benefit of the City’s TCRS Hybrid Plan. The purpose of this trust is to accumulate funds to provide stabilization (smoothing) of retirement costs to the City in times of fluctuating investment returns and market downturns. These funds are held and invested by TCRS pursuant to an irrevocable agreement and may only be used for the benefit of the City to fund retirement benefits upon approval of the TCRS Board of Directors. To date, the City has not withdrawn any funds from the trust to pay pension costs. Trust documents provide that the funds are not subject to the claims of general creditors of the City. 40 [[page 51]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 1. Summary of Significant Account Policies Capital Assets Capital assets, including property, plant, and equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial individual cost of more than $75,000 for buildings and improvements other than buildings, and $25,000 for the remaining capital assets categories, and estimated useful life in excess of two years. Land, construction in progress, and works of art are included in the thresholds. The electric fund uses a capitalization threshold of $2,000; water and sewer, and gas funds use a threshold of $25,000; and all three funds use an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend assets’ lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Capital assets of the City are depreciated using the straight-line method using the following useful lives: Buildings and improvements 25 – 50 years Transmission and distribution systems 10 – 50 years General plant 10 – 50 years Machinery, equipment, and rolling stock 3 – 10 years Office furniture and equipment 3 – 10 years Improvements other than buildings 50 years Leased assets include copier rentals. Amortization is provided over the lives of the leases, which are three years. Total depreciation expense for proprietary funds amounted to $8,371,558 for the year ended June 30, 2023. Some of this depreciation was charged to expense accounts other than the depreciation accounts in the Electric Fund. Depreciation accounted for in this manner results in a difference between depreciation reported in the accompanying statement of revenues, expenses, and changes in net position and the amount reported in the footnotes. A reconciliation of this difference is provided below: Total Proprietary funds Depreciation and amortization expense reported in note 6 $ 8,555,698 Provision for depreciation on statement of revenues, expenses, and changes in net position (8,371,558) Difference (depreciation charged to other operating expense accounts) $ 184,140 41 [[page 52]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 1. Summary of Significant Account Policies Compensated Absences Vacation leave is accumulated by classified full-time employees according to the following schedule: Years of Service Annual Vacation Leave 0 – 4 years 10 days 5 – 9 years 16 days 10 – 14 years 17 days 15 – 18 years 19 days 19 or more years 21 days Vacation leave for designated Department heads/Assistant DH, the City Attorney, the Executive Director of Economic Development, Mayor, and City Recorder shall be sixteen (16) business days each year for the first four (4) years of service, and thereafter increasing to twenty-one (21) business days. Sick leave is accumulated at the rate of one day per month. At retirement, an employee will be paid accumulated sick leave ranging from 20% - 50%, based on either their age or years of service on effective date of retirement. Long-term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business- type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed as incurred. 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 debt issued is reported as other financial 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. Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. The separate financial statement element “deferred outflows of resources” represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element “deferred inflows of resources” represents acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The City reports unavailable property taxes, unavailable court fines revenues, and public safety revenues as deferred inflows of resources in the governmental fund balance sheet. In the statement of net position, unavailable property taxes related to the subsequent tax year and held evidence funds are reported. The City reports loss on bond refunding as a deferred inflow of resources in the statement of net position as well. 42 [[page 53]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 1. Summary of Significant Account Policies Regulatory Accounting The City’s proprietary fund follows the principles of proprietary fund accounting in accordance with Government Accounting Standards Board (GASB) pronouncements. Proprietary fund accounting is used to report business-type activities, as contrasted with tax-supported governmental activities. The City’s proprietary fund also complies with policies and practices prescribed by the City’s governing body and with practices common in the utility industry. As the City’s governing body has the authority to set rates, the City’s proprietary fund follows the regulatory accounting guidance of GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which provides for the reporting of assets and liabilities consistent with the economic effect of the rate structure. Regulatory assets are recorded to reflect probable future revenues associated with certain costs that are expected to be recovered from customers through the rate-making process. Regulatory liabilities are recorded to reflect probable future reduction in revenues associated with amounts that are expected to be credited to customers in the rate-making process. Fund Balance As prescribed by GASB Statement No. 54, governmental funds report fund balance in classifications based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. Fund balance for governmental funds can consist of the following: Nonspendable Fund Balance This classification includes amounts that are restricted for specific purposes stipulated by external resource providers, constitutionally, or through enabling legislation. Restrictions may effectively be changed or lifted with the consent of resource providers. This classification also includes amounts that cannot be spent because they are not in spendable form (such as inventory or prepaid items). Restricted Fund Balance This classification includes amounts that are: (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The “not in spendable form” criterion includes terms that are not expected to be converted to cash, for example: inventories, prepaid amounts, and long-term notes receivable. Committed Fund Balance This classification includes amounts that can only be used for the specific purposes determined by the City’s highest level of decision-making authority (the City Council) and the highest form of authority (ordinances). Commitments may be changed or lifted only by the City taking the same formal action that imposed the constraint originally (for example: ordinance). The ordinance must be either approved or rescinded, as applicable, prior to the last day of the fiscal year for which the commitment is made. If the actual amount of the commitment is not available by June 30th, the ordinance must state the process of formula necessary to calculate the actual amount as soon as information is available. 43 [[page 54]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 1. Summary of Significant Account Policies Fund Balance Assigned Fund Balance This classification includes amounts intended to be used by the City for specific purposes that are neither restricted nor committed. The City Council and its designee, the Finance Director, have the authority to assign amounts to be used for specific purposes. Assigned amounts also include all residual amounts in governmental funds (except for the General Fund and also negative amounts) that are not classified as nonspendable, restricted, or committed. Any funds assigned must be reported to the Council at the next regular meeting and recorded in the minutes. The Council has the authority to assign funds or to remove or change the assignments of the Finance Director with a simple majority vote. Upon passage of a budget ordinance where fund balance is used as the source to balance the budget, the Finance Director shall record the amount as assigned fund balance. Unassigned Fund Balance This fund balance is the residual classification for the General Fund. It is also used to report negative fund balances in other governmental funds. The City will maintain a minimum unassigned fund balance in the General Fund equivalent to 25% of that fiscal year’s operating expenses, excluding any capital purchases. The minimum unassigned fund balance is established to protect against cash flow shortfalls related to timing of project revenue receipts and to maintain a budget stabilization commitment. In any fiscal year, it shall take the affirmative action of five or more City Council members to approve an appropriation of funds that result in the minimum unassigned general fund balance to drop below 25%. In the event the balance drops below the minimum level, the City Council will develop a plan to replenish the fund balance to the minimum level within two years. The deficiency will be funded by reducing recurring expenditures, increasing revenues, or pursuing other fund sources, or a combination of the two. Fund Balance Flow Assumptions Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. Net Position Restricted net position is net position less related liabilities reported in the government-wide statement of net position that have limitations imposed on their use through constitutional provisions, enabling legislation or external restrictions imposed by creditors, grantors, contributors, legislation, or other governments. When both restricted and unrestricted funds are available for expenditure, restricted funds should be spent first unless legal requirements disallow it. Net investment in capital assets consists of capital assets, net of accumulated depreciation, and reduced by outstanding balances of debt issued to finance the acquisition, improvement, or construction of those assets. 44 [[page 55]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 1. Summary of Significant Account Policies Net Position Flow Assumption Sometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Leases The City determines if an arrangement is or contains a lease at contract inception and recognizes an intangible right of use asset and a lease liability at the lease commencement date. Subsequently, the intangible right of use asset is amortized on a straight-line basis over its useful life. The City also enters into agreements, as lessor, to lease office space or property, recognizing a lease receivable and a deferred inflow of resources. The lease term includes the noncancelable period of the lease plus an additional period covered by either an option to extend or not to terminate the lease that the lessee is reasonably certain to exercise, or an option to extend or not to terminate the lease controlled by the lessor. The City uses its estimated incremental borrowing rate as the discount rate for leases. The City monitors for events or changes in circumstances that require a reassessment of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the intangible right of use asset. Pensions City Funds For purposes of measuring the net pension liability (asset), deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City’s participation in the Public Employee Retirement Plan of the Tennessee Consolidated Retirement System (TCRS), and additions to/deductions from the City’s fiduciary net position have been determined on the same basis as they are reported by the TCRS for the Public Employee Retirement Plan. For this purpose, benefits (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms of the Public Employee Retirement Plan of the TCRS. Investments are reported at fair value. Gallatin Department of Electricity The net pension liability (asset) for the department was measured as of June 30, 2022 pursuant to GASB 68, which allows for a measurement date no earlier than the end of the employer's prior fiscal year, consistently applied from period to period. The requirement establishes standards for calculating and reporting the net pension liability (asset) and pension expense in the financial statements of the employer. The data necessary to comply with the new standards presents challenges to reporting the net pension liability (asset) and pension expense on a current basis while still adhering to the deadlines for financial reporting to different agencies. The net pension liability (asset) reported at June 30, 2023 is the net pension liability (asset) determined at June 30, 2022 and the pension expense reflects the activity for fiscal year 2022. 45 [[page 56]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 1. Summary of Significant Account Policies Other Post-employment Benefit (OPEB) Plan Gallatin Department of Electricity The net OPEB (Other Post-employment Benefit) liability for the department was measured as of June 30, 2022 pursuant to GASB 75, which allows for a measurement date no earlier than the end of the employer's prior fiscal year, consistently applied from period to period. The requirement establishes standards for calculating and reporting the net OPEB liability and OPEB expense in the financial statements of the employer. The data necessary to comply with the new standards presents challenges to reporting the net OPEB liability and OPEB expense on a current basis while still adhering to the deadlines for financial reporting to different agencies. Accordingly, with this implementation, the net OPEB liability reported at June 30, 2023 is the net OPEB liability determined at June 30, 2022 and the OPEB expense reflects the activity for fiscal year 2022. Reclassifications Certain reclassifications have been made in the 2022 financial statements to make them comparable to the 2023 financial statement presentation. Note 2. Reconciliation of Government-wide and Fund Financial Statements Explanation of Certain Differences Between the Balance Sheet of Governmental Funds and the Government-wide Statement of Net Position The governmental fund balance sheet includes a reconciliation between fund balance – total governmental funds and net position – governmental activities as reported in the government-wide statement of net position. One element of the reconciliation explains that “receivables are not available to pay for current expenditures and, therefore, are deferred in the funds.” The details of the difference are as follows: Unavailable property taxes $ 611,414 Unavailable court fines 7,521 Net adjustments $ 618,935 The reconciliation of the statement of revenues, expenditures, and changes in fund balances of governmental funds to the statement of activities includes reconciliation between net changes in fund balances – total government funds and changes in net position 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 in the current period.” The details of the difference are as follows: Capital outlay $ 13,075,819 Depreciation expense (5,247,348) Net adjustment $ 7,828,471 46 [[page 57]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 3. Stewardship, Compliance, and Accountability Budgetary Information Annual budgets are adopted on a basis consistent with GAAP for the General Fund and special revenue funds, excluding the Capital Projects fund. The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. Prior to year-end, the Director of Finance and the Mayor submit to the City Council a proposed operating budget for the fiscal year commencing the following July 1st. The operating budget includes proposed expenditures and the means of financing them. 2. Public meetings are conducted to obtain taxpayer comments on the budget. 3. Prior to June 30, the budget is legally enacted through passage of an ordinance. 4. The Department Heads are authorized to transfer budgeted amounts within their departments; however, any revisions that alter the total expenditures of any department function or fund must be approved by the City Council. 5. Formal budgetary integration is employed as a management control device during the year for all funds excluding the Electric fund. 6. Budgeted amounts are as originally adopted, or as amended by the City Council. Budget appropriations lapse at year-end. As an extension of the formal budgetary process, the City Council may transfer or appropriate additional funds for expenditures not anticipated at the time of budget adoption. The City’s policy is to not allow expenditures to exceed budgetary amounts at the total fund expenditure level without obtaining additional appropriation approval from the Council. Note 4. Deposits and Investments General Information As of June 30, 2023, the City of Gallatin, Tennessee’s Electric Department had $5,328,776 and the General Fund had $9,505,150 in certificates of deposit with local financial institutions. As of June 30, 2023, the cemetery trust fund had $21,025 in unrated stock investments with no maturities. These investments are reported at fair value and are categorized for fair value measurement within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation inputs used to measure the fair value of the asset and give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Level 1 - Unadjusted quoted prices for identical assets or liabilities in active markets that can be accessed at the measurement date. Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; assets or liabilities that have a bid-ask spread price in an inactive dealer market, brokered market, or principal-to-principal market; and Level 1 assets or liabilities that are adjusted. Level 3 - Valuations derived from valuation techniques in which significant inputs are unobservable. The investments of the cemetery trust fund have been classified as Level 1. 47 [[page 58]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 4. Deposits and Investments General Information Deposits and Investments In accordance with its formal investment policy, the City manages its exposure to declines in fair values by limiting its investments to certificates of deposit with local financial institutions. Custodial Credit Risk The City’s policies limit deposits and investments to those instruments allowed by applicable state laws and described in note 1. State statutes require that all deposits with financial institutions must be collateralized by securities whose market value is equal to 105% of the value of uninsured deposits. The deposits must be collateralized by federal depository insurance, by the Tennessee Bank Collateral Pool, by collateral held by the City’s agent in the City’s name, or by the Federal Reserve Banks acting as third party agents. State statutes also authorize the City to invest in bonds, notes, or treasury bills of the United States or any of its agencies, certificates of deposit at Tennessee state chartered banks and savings and loan associations, repurchase agreements utilizing obligations of the United States or its agencies as the underlying securities, and the state pooled investment fund. Statutes also require that securities underlying repurchase agreements must have a market value of at least equal to the amount of funds invested in the repurchase transaction. As of June 30, 2023, all bank deposits were fully collateralized or insured. TCRS Stabilization Trust, City Funds Legal Provisions The City is a member of the TCRS Stabilization Reserve Trust (the Trust). The City has placed funds into the irrevocable trust as authorized by statute under Tennessee Code Annotated (TCA), Title 8, Chapters 34-37. The TCRS Board of Trustees is responsible for the proper operation and administration of the trust. Funds of trust members are held by and invested in the name of the trust for the benefit of each member. Each member’s funds are restricted for the payment of retirement benefits of that member’s employees. Trust funds are not subject to the claims of general creditors of the City. The trust is authorized to make investments as directed by the TCRS Board of Trustees. The City may not impose any restrictions on investments placed by the trust on its behalf. It is the intent of the plan trustees to allocate these funds in the future to offset pension costs. Investment Balances Assets of the TCRS, including the Stabilization Reserve Trust, are invested in the Tennessee Retiree Group Trust (TRGT). The TRGT is not registered with the Securities and Exchange Commission (SEC) as an investment company. The State of Tennessee has not obtained a credit quality rating for the TRGT from a nationally recognized credit rating agency. The fair value of investment positions in the TRGT is determined daily, based on the fair value of the pool’s underlying portfolio. Furthermore, TCRS had not obtained or provided any legally binding guarantees to support the value of participant shares during the fiscal year. There are no restrictions on the sale or redemption of shares. 48 [[page 59]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 4. Deposits and Investments TCRS Stabilization Trust, City Funds Investment Balances Investments are reported at fair value. Securities traded on a national exchange are valued at the last reported sales price. Investment income consists of realized and unrealized appreciation (depreciation) in the fair value of investments and interest and dividend income. Interest income is recognized when earned. Securities and securities transactions are recorded in the financial statements on a trade-date basis. The fair value of assets of the TRGT held at June 30, 2023 represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Assets held are categorized for fair value measurement within the fair value hierarchy established by GAAP as described above. Investments using the Net Asset Value (NAV) per share have no readily determinable fair value and have been determined using amortized cost, which approximates fair value. Where inputs used in the measurement of fair value fall into different levels of the hierarchy, fair value of the instrument in its entirety is categorized based on the lowest level input that is significant to the valuation. This assessment requires professional judgment and, as such, management of the TRGT has developed a fair value committee that worked in conjunction with the plan’s custodian and investment professionals to make these valuations. All assets held were valued individually and aggregated into classes to be represented in the following tables. Short-term securities generally include investments in money market-type securities, reported at cost plus accrued interest. Equity and equity derivative securities classified in Level 1 are valued using last reported sales prices quoted in active markets that can be accessed at the measurement date. Equity and equity derivative securities classified in Level 2 are securities whose values are derived daily from associated traded securities. Equity securities classified in Level 3 are valued with the last trade data, having limited trading volume. US Treasury bills, bonds, notes, and futures classified in Level 1 are valued using last reported sales prices quoted in active markets that can be accessed at the measurement date. Debt and debt derivative securities classified in Level 2 are valued using a bid-ask spread price from multiple independent brokers, dealers, or market principals, which are known to be actively involved in the market. Level 3 debt securities are valued using proprietary information, a single pricing source, or other unobservable inputs related to similar assets or liabilities. Real estate investments classified in Level 3 are valued using the last valuations provided by external investment advisors or independent external appraisers. Generally, all direct real estate investments are appraised by a qualified independent appraiser(s) with the professional designation of Member of the Appraisal Institute (MAI), or its equivalent, every three years beginning from the acquisition date of the property. The appraisals are performed using generally accepted valuation approaches applicable to the property type. For investments in private mutual funds, traditional private equity funds, strategic lending funds, and real estate funds that report using GAAP, the fair values, as well as the unfunded commitments, were determined using the prior quarter’s NAV, as reported by the fund managers, plus the current cash flows. These assets were then categorized by investment strategy. In instances where the fund investment reported using non-GAAP standards, the investment was valued using the same method, but was classified in Level 3. 49 [[page 60]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 4. Deposits and Investments TCRS Stabilization Trust, City Funds Investment Balances At June 30, 2023, the City had the following investments held by the Trust on its behalf. These funds are recognized as restricted assets in the General Fund, Other Governmental Funds, the Water and Sewer Fund, and the Gas Fund of the City. Weighted average days to maturity Maturities Fair value Investments at fair value US equity N/A N/A $ 415,758 Developed market international equity N/A N/A 187,762 Emerging market international equity N/A N/A 53,644 US fixed income N/A N/A 268,231 Real estate N/A N/A 134,115 Short-term securities N/A N/A 13,416 NAV, private equity, and strategic lending N/A N/A 268,231 $ 1,341,157 A summary of investment values by fair value level at June 30, 2023 is as follows: Fair Value June 30, 2023 Level 1 Level 2 Level 3 NAV US equity $ 415,758 $ 415,758 $ - $ - $ - Developed market international equity 187,762 187,762 - - - Emerging market international equity 53,644 53,644 - - - US fixed income 268,231 - 268,231 - - Real estate 134,115 - - 134,115 - Short-term securities 13,416 - 13,416 - - NAV, private equity, and strategic lending 268,231 - - - 268,231 $ 1,341,157 $ 657,164 $ 281,647 $ 134,115 $ 268,231 50 [[page 61]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 4. Deposits and Investments TCRS Stabilization Trust, City Funds Risks and Uncertainties The Trust’s investments include various types of investment funds, which in turn invest in any combination of stock, bonds, and other investments exposed to various risks, such as interest rate, credit, and market risk. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported for Trust investments. Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City does not have the ability to limit trust investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The City does not have the ability to limit the credit ratings of individual investments made by the Trust. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the City’s investment in a single issuer. The City places no limit on the amount that may be invested in one issuer. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, 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. Pursuant to the Trust agreement, investments are held in the name of the Trust for the benefit of the City to pay retirement benefits of its employees. For further information concerning the legal provisions, investment policies, investment types, and credit risks of the City’s investments with the TCRS Stabilization Reserve Trust, audited financial statements of the TCRS may be obtained at https://comptroller.tn.gov/content/dam/cot/sa/advanced-search/disclaimer/2022/ag21066.pdf Electric Department Pension Investments Information regarding investments of the Gallatin Department of Electricity Employee’s Pension Plan may be obtained from a separate financial report. The report may be obtained by contacting the City’s Finance Director. 51 [[page 62]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 5. Receivables Receivables as of the year-end for the government’s individual major funds and non-major and fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Non-major Water and and other General Fund Electric Fund Sewer Fund Gas Fund Funds Total Receivables Property taxes $ 14,919,791 $ - $ - $ - $ - $14,919,791 Interest 333,946 - - - - 333,946 Accounts 566,803 7,163,136 1,788,800 1,388,876 542,799 11,450,414 Fines 2,239,124 - - - - 2,239,124 Grants 841,155 - - - - 841,155 Intergovernmental 4,131,475 - - - - 4,131,475 Other - 106,341 - - - 106,341 Less allowance for doubtful accounts (2,507,917) - (40,449) (184,591) (18,614) ($2,751,571) Receivables, net $ 20,524,377 $ 7,163,136 $ 1,748,351 $ 1,204,285 $ 524,185 $ 31,270,675 Governmental funds report unavailable revenues 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 that have been received but not yet earned (unearned revenues). At the end of the current fiscal year, various components of unavailable revenues reported in the governmental funds were as follows: Unavailable Unearned Interest and penalty on property taxes receivable $ 300,551 $ - 2023 property tax assessment 14,679,193 - Other revenues collected in advance - 77,520 Drug fund revenues held - 65,006 Court fines 7,521 - Total unavailable revenues for fund financial statements $ 14,987,265 $ 142,526 52 [[page 63]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 6. Capital Assets Capital assets activity for the year ended June 30, 2023 was as follows: Balance Balance June 30, 2022 Additions Disposals Transfers June 30, 2023 Governmental activities Capital assets not being depreciated Land $ 13,409,022 $ 57,940 $ - $ - $ 13,466,962 Construction in progress 21,711 292,216 - - 313,927 Total capital assets not being depreciated 13,430,733 350,156 - - 13,780,889 Capital assets being depreciated Buildings 24,257,729 1,206,522 - - 25,464,251 Improvements other than buildings 150,912,098 9,729,531 - - 160,641,629 Vehicles 17,705,161 4,628,347 (70,474) - 22,263,034 Office equipment 2,858,993 98,352 - - 2,957,345 Equipment 9,463,085 1,610,781 - - 11,073,866 Total capital assets being depreciated 205,197,066 17,273,533 (70,474) - 222,400,125 Accumulated depreciation Buildings 9,894,199 565,902 - - 10,460,101 Improvements other than buildings 22,132,485 2,451,136 - - 24,583,621 Vehicles 16,067,384 1,585,213 (70,474) - 17,582,123 Office equipment 2,697,978 76,467 - - 2,774,445 Equipment 5,225,618 568,630 - - 5,794,248 Total accumulated depreciation 56,017,664 5,247,348 (70,474) - 61,194,538 Total capital assets being depreciated, net 149,179,402 12,026,185 - - 161,205,587 Total governmental capital assets, net $162,610,135 $ 12,376,341 $ - $ - $174,986,476 53 [[page 64]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 6. Capital Assets Balance Balance June 30, 2022 Additions Disposals Transfers June 30, 2023 Business-type activities Capital assets not being depreciated Land $ 4,284,181 $ 569,237 $ - $ - 4,853,418 Construction in progress (435,965) 3,652,235 - (2,098,469) 1,117,801 Total capital assets not being depreciated 3,848,216 4,221,472 - (2,098,469) 5,971,219 Capital assets being depreciated Transmission plant 1,437,843 - - - 1,437,843 Distribution plant 282,983,121 11,826,281 (163,401) 2,098,469 296,744,470 General plant 5,555,475 1,079,613 - - 6,635,088 Buildings 43,109,224 1,013,706 - - 44,122,930 Operating equipment 3,242,993 - - - 3,242,993 Rolling stock 4,248,550 - - - 4,248,550 Office furniture and equipment 705,929 - - - 705,929 Total capital assets being depreciated 341,283,135 13,919,600 (163,401) 2,098,469 357,137,803 Accumulated depreciation Transmission plant 424,524 44,704 - - 469,228 Distribution plant 105,288,001 7,366,285 (285,638) - 112,368,648 General plant 3,272,384 350,242 - - 3,622,626 Buildings 17,737,269 1,024,921 - - 18,762,190 Operating equipment 2,448,356 262,338 - - 2,710,694 Rolling stock 3,756,381 81,721 - - 3,838,102 Office furniture and equipment 673,466 10,620 - - 684,086 Total accumulated depreciation 133,600,381 9,140,831 (285,638) - 142,455,574 Total capital assets being depreciated net 207,682,754 4,778,769 122,237 2,098,469 214,682,229 Total business-type capital assets, net $211,530,970 $ 9,000,241 $ 122,237 $ - $220,653,448 54 [[page 65]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 6. Capital Assets Included in the additions for the governmental activities is $9,040,398 in donated infrastructure from developers. Included in the additions for the business-type activities is $1,531,140 in donated utility lines from developers. For the year ended June 30, 2023, increases to accumulated depreciation totaled $14,388,179. This amount includes depreciation and amortization of $14,388,179, and an increase of $581,786 for salvage value of depreciable utility plant. Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities General government $ 2,178,157 Public safety 1,386,123 Environmental services 202,648 Stormwater 156,218 Highways and streets 428,233 Parks and recreation 895,969 Total depreciation expense, governmental activities $ 5,247,348 Business-type Activities Electric (see note 1) $ 2,427,122 Water and sewer 4,783,198 Gas 1,345,378 Total depreciation expense 8,555,698 Amortization of right-to-use assets 3,347 Total depreciation and amortization expenses business-type activities $ 8,559,045 Gallatin Department of Electricity Construction Work in Progress: The policy for the department has been to collect as Aid-to-Construction a portion of the costs to be incurred during the new construction process. Due to the volume of requests for new construction, the length of time to acquire the necessary materials once ordered, and the labor/time required to complete the projects, the Department had a negative balance in construction work in progress at June 30, 2022, due to advance payments being credited to the work order process upon receipt. The Department follows this method of accounting for Construction Work in Progress based on FERC guidance as well as from the Electric Department’s regulator, the Tennessee Valley Authority (TVA). For the Electric department, right to use tangible lease activity for the year ended June 30, 2023 is as follows: July 1, 2022 Additions Reductions June 30, 2023 Leased equipment $ 20,468 $ - $ - $ 20,468 Less: accumulated amortization 15,978 3,347 - 19,325 $ 4,490 $ (3,347) $ - $ 1,143 Amortization expense for the year was charged to the business-type function in the amount of $3,347. 55 [[page 66]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 7. Long-term Debt Governmental activities debt at June 30, 2023 is comprised of the following: General Obligation Improvement Bonds, Series 2014, due in annual installments from $375,000 to $1,090,000, through January 2034, interest at 2.00% to 5.00% $ 7,575,000 General Obligation Improvement Bonds, Series 2016, due in annual installments from $430,000 to $700,000, through January 2036, interest at 2.00% to 5.00% 7,710,000 General Obligation Improvement Bonds, Series 2021, due in annual installments from $325,000 to $630,000, through January 2041, interest at 2.00% to 5.00% 9,070,000 Total bonds payable $ 24,355,000 The aforementioned bonds are secured by the full faith and credit of the City. During 2023, debt service for the aforementioned debt was provided by the City’s General Fund. Business-type activities debt at June 30, 2023 is comprised of the following: Water and Sewer Revenue Bonds, Series 2015, due in annual installments from $500,000 to $1,825,000, through July 2040, interest at 3.00% to 5.00% $ 4,500,000 Water and Sewer Revenue Refunding and Improvement Bonds, Series 2014, due in annual installments from $265,000 to $570,000, through July 2029, interest at 2.00% to 5.00% 2,405,000 Water and Sewer Revenue Refunding and Improvement Bonds, Series 2011, due in annual installments from $25,000 to $635,000, through July 2032, interest at 2.00% to 3.625% 5,475,000 Gas Revenue Bonds, Series 2019, due in annual installments from $190,000 to $380,000, through January 2039, interest at 3.00% to 5.00% 4,730,000 Water and Sewer Revenue Improvement Bonds, Series 2021A, due in annual installments from $325,000 to $775,000, through July 2046, interest at 3.00% to 4.00% 13,075,000 Water and Sewer Revenue Refunding Bonds, Series 2021B, due in annual installments from $125,000 to $1,840,000, through July 2038, interest at 0.51% to 2.75% 13,745,000 Total bonds payable $ 43,930,000 56 [[page 67]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 7. Long-term Debt The aforementioned bonds are secured by revenue streams of the Gas and Water and Sewer funds. During 2023, debt service for the aforementioned debt was provided solely by the City’s Proprietary Funds. The annual requirements, by type of issue, to amortize all long-term debt outstanding at June 30, 2023 are as follows: Governmental Activities Business-type Activities Year Ended June 30, General Obligation Bonds Revenue Bonds Totals Principal Interest Principal Interest Principal Interest 2024 $ 1,835,000 $ 846,600 $ 2,810,000 $ 1,304,311 $ 4,645,000 $ 2,150,911 2025 1,895,000 754,850 2,925,000 1,201,666 4,820,000 1,956,516 2026 1,965,000 670,200 3,010,000 1,096,530 4,975,000 1,766,730 2027 2,035,000 582,450 3,125,000 982,418 5,160,000 1,564,868 2028 1,430,000 507,900 3,215,000 901,639 4,645,000 1,409,539 2029 – 2033 7,920,000 1,667,269 16,250,000 3,177,044 24,170,000 4,844,313 2034 – 2038 5,425,000 499,013 5,405,000 1,582,048 10,830,000 2,081,061 2039 – 2043 1,850,000 74,500 4,220,000 739,387 6,070,000 813,887 2044 – 2047 - - 2,970,000 181,500 2,970,000 181,500 $ 24,355,000 $ 5,602,782 $ 43,930,000 $ 11,166,453 $ 68,285,000 $ 16,769,325 The City complied with all significant debt covenants and restrictions as set forth in the bond agreements. The above bonds and notes payable contain provisions that in the event of default, the lenders can exercise one or more of the following options: 1) make the outstanding bond and/or note payable with accrued interest due and payable, 2) use remedies allowed by state or federal law. Governmental Activities Long-term liability activity for the year ended June 30, 2023 was as follows: Beginning Ending Due within balance Additions Reductions balance one year General obligation bonds $26,135,000 $ - $ (1,780,000) $ 24,355,000 $ 1,835,000 Premium on bond issue 2,078,000 - (277,666) 1,800,959 258,501 Total long-term debt $ 28,213,000 $ - $ (2,057,666) $ 26,155,959 $ 2,093,501 57 [[page 68]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 7. Long-term Debt Governmental Activities Other long-term obligations activity for the year ended June 30, 2023 was as follows: Beginning Ending Due within balance Additions Reductions balance one year Compensated absences $ 1,885,189 $ 1,712,715 $ (1,406,662) $ 2,191,242 $ 1,712,715 Net pension liability - 194,396 - 194,396 - Total other long-term obligations $ 1,885,189 $ 1,907,111 $ (1,406,662) $ 2,385,638 $ 1,712,715 Business-type Activities Long-term liability activity for the year ended June 30, 2023 was as follows: Beginning Ending Due within balance Additions Reductions balance one year Revenue and tax bonds $ 46,620,000 $ - $ (2,690,000) $ 43,930,000 $ 2,810,000 Premium on bond issue 3,977,028 - (438,394) 3,538,635 386,339 TVA Winterization Contracts 6,074 - (4,495) 1,579 864 Lease liability 5,009 - (3,710) 1,299 1,299 Total long-term debt $50,608,111 $ - $ (3,136,599) $ 47,471,513 $ 3,198,502 Other long-term obligations activity for the year ended June 30, 2023 was as follows: Beginning Ending Due within balance Additions Reductions balance one year Compensated absences $ 894,168 $ 659,388 $ (472,561) $ 1,080,995 $ 690,768 Net pension liability - 553,494 - 553,494 - OPEB liability 630,245 - (103,255) 526,990 - Total other long-term obligations $ 1,524,413 $ 1,212,882 $ (575,816) $ 2,161,479 $ 690,768 Within the City’s governmental activities, compensated absences are generally liquidated by the General Fund. The City complied with all significant debt covenants and restrictions as set forth in the bond agreements across all systems. 58 [[page 69]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 7. Long-term Debt Business-type Activities The water and sewer department and gas department funds issue revenue bonds, which are collateralized by the revenues of the respective departments. The bonds payable for all systems contain provisions that, in the event of default, the lender can exercise one or more of the following options: (1) Make all or any of the outstanding bonds payable balance immediately due and accrued interest at highest post maturity interest rate, (2) Use any remedy allowed by state or federal law. Issuance of Long-term Debt In November 2021, the City issued $13,400,000 in Water and Sewer Revenue Improvement Bonds, Series 2021A (Series 2021A Bonds) for the purpose of providing funds to (i) finance extensions and improvements to the System and (ii) pay costs of issuance. The Series 2021A bonds are issued as fully registered bonds, in denominations of $5,000, and are payable solely from and secured by a lien on the revenues of the City’s water and sewer system (the System), after payment of operating expenses, on a parity of lien with the City’s outstanding Water and Sewer Revenue Refunding and Improvement Bonds, Series 2011, its Water and Sewer Revenue Refunding and Improvement Bonds, Series 2014 and Water and Sewer Revenue Refunding and Improvement Bonds, Series 2015 and any obligations hereafter issued on parity therewith. The Series 2021A bonds carry fixed interest rates ranging from 3.0% to 4.0% and mature between July 1, 2022 and July 1, 2046. Interest is payable semi-annually on July 1 and January 1. Series 2021A bonds maturing on July 1, 2032, and thereafter, are subject to redemption prior to maturity at the option of the City, on or after July 1, 2031, as a whole or in part, at a redemption price equal to 100% of the principal amount plus accrued interest to the redemption date. In November 2021, the City issued $13,965,000 in Water and Sewer Revenue Refunding Bonds, Series 2021B (Series 2021B) to refund $12,435,000 of its outstanding Water and Sewer System Revenue and Improvement Bonds, Series 2015, dated May 19, 2015, (the Outstanding Bonds). The Outstanding Bonds were called for redemption in November 2021, and were redeemed at a redemption price of par plus accrued interest. The estimated economic gain from the refunding was approximately $1.2 million. The Series 2021B bonds are issued as fully registered bonds, in denominations of $5,000, and are payable solely from and secured by a lien on the revenues of the System, after payment of operating expenses, on a parity of lien with the City’s outstanding Water and Sewer Revenue Refunding and Improvement Bonds, Series 2011, its Water and Sewer Revenue Refunding and Improvement Bonds, Series 2014 and Water and Sewer Revenue Refunding and Improvement Bonds, Series 2015 and any obligations hereafter issued on parity therewith. The Series 2021B bonds carry fixed interest rates ranging from 0.51% to 2.75% and mature between July 1, 2022 and July 1, 2037. Interest is payable semi-annually on July 1 and January 1. Series 2021B bonds maturing on July 1, 2032 and thereafter are subject to redemption prior to maturity at the option of the City, on or after July 1, 2031, as a whole or in part, at a redemption price equal to 100% of the principal amount plus accrued interest to the redemption date. 59 [[page 70]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 7. Long-term Debt Advance Refunding of Bonds In prior years, the City has defeased certain bonds by placing the proceeds of new bonds in irrevocable trusts to provide for all future debt service requirements on the retired bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City’s financial statements. As of June 30, 2023, outstanding bonds considered as defeased were as follows: General Obligation Public Improvements Bonds – Series 2007 $ 2,510,000 Water and Sewer Revenue and Tax Bonds – Series 2008 14,835,000 $ 17,345,000 Note 8. Lease Liabilities The Electric Department entered into a 61-month lease agreement in March 2018 for 3 copy machines. The Electric Department entered into a 60-month lease agreement in June of 2019 for a large engineering printer. At the time of the initial agreements, there was no interest rate specified in the lease agreement, nor were there any values assigned to the equipment. The Department used a borrowing rate of 2.2672%, which was available during the year of implementation through the issuance of a bond, to calculate the present value to place on the equipment, and to establish the lease liability. The amount of payments made during the year applied to the lease liabilities totaled $3,710. Principal and interest requirements on these leases are as follows: Year ending June 30, Principal Interest Total 2024 $ 1,299 $ 16 $ 1,315 Note 9. Interfund Balances and Transfers There were no interfund balances at June 30, 2023. The following is a summary of transfers during the year ended June 30, 2023: Transfers from Transfers to Amount Electric fund General fund $ 1,043,191 Water and sewer fund General fund 362,330 Gas fund General fund 418,942 1,824,463 Less: governmental fund activities eliminated ( $1,824,463) Total government-wide transfers $ - The transfers between the proprietary funds and the general fund are for the purpose of transferring in-lieu-of-tax payments. 60 [[page 71]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 10. Pension Plans – City Funds General Information about the Pension Plan Plan Description Employees of the City are provided a defined benefit hybrid pension plan through the Public Employee Retirement Plan, an agent multiple-employer pension plan administered by the TCRS. The TCRS was created by state statute under Tennessee Code Annotated (TCA), Title 8, Chapters 34-37. The TCRS Board of Trustees is responsible for the proper operation and administration of the TCRS. The Tennessee Treasury Department, an agency in the legislative branch of state government, administers the plans of the TCRS. The TCRS issues a publicly available financial report that can be obtained at https://treasury.tn.gov/Retirement/Boards-and-Governance/Reporting-and-Investment- Policies. Benefits Provided Tennessee Code Annotated, Title 8, Chapters 34-37, establishes the benefit terms and can be amended only by the Tennessee General Assembly. The chief legislative body may adopt the benefit terms permitted by statute. Members are eligible to retire with an unreduced benefit at age 65 with 5 years of service credit or pursuant to the rule of 90 in which the member’s age and service credit total 90. Benefits are determined by a formula using the member’s highest five consecutive years average compensation and the member’s service credit. Reduced benefits for early retirement are available at age 60 and vested or pursuant to the rule of 80 in which the member’s age and service credit total 80. Members vest with five years of years of service credit. Service-related disability benefits are provided regardless of length of service. Five years of service is required for nonservice-related disability eligibility. The service-related and nonservice-related disability benefits are determined in the same manner as a service retirement benefit but are reduced 10% and include projected service credits. A variety of death benefits are available under various eligibility criteria. Member and beneficiary annuitants are entitled to automatic cost of living adjustments (COLAs) after retirement. A COLA is granted each July for annuitants retired prior to the 2nd of July of the previous year. The COLA is based on the change in the consumer price index (CPI) during the prior calendar year, capped at 3%, and applied to the current benefit. No COLA is granted if the change in the CPI is less than 0.5%. A 1% percent COLA is granted if the CPI change is between 0.5% and 1%. A member who leaves employment may withdraw their employee contributions, plus any accumulated interest. Moreover, there are defined cost controls and unfunded liability controls that provide for the adjustment of benefit terms and conditions on an automatic basis. 61 [[page 72]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 10. Pension Plans – City Funds General Information about the Pension Plan Employees Covered by Benefit Terms At the measurement date of June 30, 2022, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits - Inactive employees entitled to but not yet receiving benefits 119 Active employees 262 381 Contributions Contributions for employees are established in the statutes governing the TCRS and may only be changed by the Tennessee General Assembly. Employees contribute 5% of salary. The City makes employer contributions at the rate set by the Board of Trustees as determined by an actuarial valuation. For the year ended June 30, 2023, the employer contributions by the City were $374,974, based on a rate of 4% of covered payroll. By law, employer contributions are required to be paid. The TCRS may intercept the City’s state shared taxes if required employer contributions are not remitted. The employer’s actuarially determined contribution (ADC) and member contributions are expected to finance the costs of benefits earned by members during the year, the cost of administration, as well as an amortized portion of any unfunded liability. Net Pension Liability (Asset) Pension Liabilities (Assets) The City’s net pension liability (asset) was measured as of June 30, 2022, and the total pension liability used to calculate net pension liability (asset) was determined by an actuarial valuation as of that date. Actuarial Assumptions The total pension liability as of the June 30, 2022 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.25% Salary increases Graded salary ranges from 8.72% to 3.44% based on age, including inflation, averaging 4.00% Investment rate of return 6.75%, net of pension plan investment expenses, including inflation Cost-of-living adjustment 2.125%, Mortality rates were based on actual experience including an adjustment for some anticipated improvement. The actuarial assumptions used in the June 30, 2022 actuarial valuation were based on the results of an actuarial experience study performed for the period July 1, 2016 through June 30, 2020. The demographic assumptions were adjusted to more closely reflect actual and expected future experience. 62 [[page 73]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 10. Pension Plans – City Funds Net Pension Liability (Asset) Actuarial Assumptions The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees in conjunction with the June 30, 2020 actuarial experience study. A blend of future capital market projections and historical market returns was used in a building-block method in which a best estimate of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) is developed for each major asset class. These best estimates are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation of 2.25%. The best estimates of geometric real rates of return and the TCRS investment policy target asset allocation for each major asset class are summarized in the following table: Long-term expected real Asset class rate of return Target allocation US equity 4.88% 31% Developed market international equity 5.37% 14% Emerging market international equity 6.09% 4% Private equity and strategic lending 6.57% 20% US fixed income 1.20% 20% Real estate 4.38% 10% Short-term securities 0.00% 1% 100% The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees as 6.75% based on a blending of the factors described above. Discount Rate The discount rate used to measure the total pension liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current rate and that contributions from the City will be made at the actuarially determined contribution rate pursuant to an actuarial valuation in accordance with the funding policy of the TCRS Board of Trustees and as required to be paid by state statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 63 [[page 74]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 10. Pension Plans – City Funds Changes in the Net Pension Liability (Asset) Total pension Plan fiduciary Net pension liability net position liability (asset) (a) (b) (a)-(b) Balance, June 30, 2021 $ 2,140,677 $ 2,239,470 $ (98,793) Service cost 778,219 - 778,219 Interest 195,733 - 195,733 Changes of benefit terms - - - Differences between expected and actual experience 136,142 - 136,142 Changes in assumptions - - - Contributions, employer - 247,676 (247,676) Contributions, employees - 648,370 (648,370) Net investment income - (101,596) 101,596 Benefit payments, including refunds of employee contributions (38,297) (38,297) - Administrative expenses - (25,361) 25,361 Other changes - - - Net change 1,071,797 730,792 341,005 Balance, June 30, 2022 $ 3,212,474 $ 2,970,262 $ 242,212 Sensitivity of the Net Pension Liability (Asset) to Changes in the Discount Rate The following presents the net pension liability (asset) of the City calculated using the discount rate of 6.75%, as well as what the net pension liability (asset) would be if it were calculated using a discount rate that is 1-percentage- point lower (5.75%) or 1-percentage-point higher (7.75%) than the current rate: 1% Decrease Current rate 1% Increase (5.75%) (6.75%) (7.75%) Net pension liability (asset) $ 1,027,978 $ 242,212 $ (357,152) Pension Expense (Negative Pension Expense) and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions Pension Expense (Negative Pension Expense) For the year ended June 30, 2023, the City recognized pension expense (negative pension expense) of $211,913. 64 [[page 75]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 10. Pension Plans – City Funds Pension Expense (Negative Pension Expense) and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions Deferred Outflows of Resources and Deferred Inflows of Resources For the year ended June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred outflows of inflows of resources resources Difference between expected and actual experience $ 240,660 $ 42,864 Net difference between expected and actual earnings on pension plan investments 65,265 - Changes in assumptions 138,752 - Contributions made subsequent to measurement date of June 30, 2023 374,974 - $ 819,651 $ 42,864 The amount shown above for “Contributions subsequent to the measurement date of June 30, 2023” will be recognized as a reduction (increase) to net pension liability (asset) in the following measurement period. Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ending June 30, 2024 $ 40,227 2025 40,309 2026 36,804 2027 92,252 2028 36,081 Thereafter 156,137 In the table shown above, positive amounts will increase pension expense while negative amounts will decrease pension expense. Payable to the Pension Plan At June 30, 2023, City of Gallatin reported a payable of $164,861 for the outstanding amount of contributions to the pension plan required at the year ended June 30, 2023. Defined Contribution Plans The City has two defined contribution plans. One is the State of Tennessee Deferred Compensation Plan II – 401(k) (the Hybrid Plan) which was adopted by the City in 2018. The other plan is the State of Tennessee 401(k) plan (the former plan), which was in existence prior to 2018. When the City joined the Hybrid Plan, existing employees were given the option to stay on the former plan or move to the Hybrid plan. 65 [[page 76]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 10. Pension Plans – City Funds Defined Contribution Plans Several employees chose to stay on the former plan. The City has determined that none of its defined contribution pension plans are fiduciary component units or fiduciary activities of the government. State of Tennessee 401(k) Plan Plan Description The City (exclusive of the electric utility) participates in the State of Tennessee 401(k) plan (the Plan) with a Roth option. Employees of the City’s Municipal Service departments, Water and Sewer Utility Fund, and Natural Gas Utility Fund are eligible to participate in the Plan. The Plan assets are not held by the City and the City does not exercise a trustee responsibility over such assets nor does the City actively participate in the Plan’s management or administration, which is delegated to the City of Gallatin Pension Committee. The Pension Committee has designated Retire Ready TN as a third-party administrator. Accordingly, the City does not meet the criteria necessary for presentation of the Plan as a fiduciary fund of the City. Funding Policy The City’s Plan allows employees to make tax deferred contributions into self-directed investments of as much as allowable under the Internal Revenue Code. During the fiscal year, the City contributed 5% of the employees’ annual compensation and matched up to an additional 4% of the employees’ contributions. The plan is closed to new entrants. The vesting of employer contributions increases from 20% in year one, with 20% annual increases until contributions are 100% vested after 5 years in the plan. If an employee leaves employment before the vesting period is complete, the forfeiture is put into a forfeiture account that can be used to pay expenses related to the plan. The City had no forfeitures in 2023. At calendar year-end, any unused forfeitures are held and can be used to offset future employer match requirements. Annual Contributions The City’s maximum contribution to the Plan is defined as up to 9% of an eligible employee’s annual compensation. The City contributed $890,632 on behalf of the employees for the fiscal year ended June 30, 2023. State of Tennessee Deferred Compensation Plan II – 401(k) Plan Description The Hybrid Plan is a combination of the defined benefit plan (Public Employment Retirement Plan described in General Information about the Pension Plan above) and a defined contribution plan (a 401(k) plan). Employees of the City hired after October 1, 2018 working more than 30 hours per week, and any existing City employee working more than 30 hours per week who chooses to join the TCRS Hybrid Plan are eligible for the plan. The Chair of the TCRS may amend the Hybrid Plan on behalf of all employers. The Chair also has the sole and exclusive authority to interpret the Hybrid Plan and decide all claims and appeals for the Hybrid Plan benefits. 66 [[page 77]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 10. Pension Plans – City Funds State of Tennessee Deferred Compensation Plan II – 401(k) Funding Policy Employers contribute 4% of payroll to the defined benefit component (as noted in General Information about the Pension Plan above), and 5% of payroll to the defined contribution component, for an aggregate employer contribution of 9%. Employees may elect to defer a percentage of their salary into the plan. Defined contribution plan amounts are deposited into the State’s 401(k) plan with Great West Financial, where the employee manages the investments. Employees immediately vest in both the employee and employer contributions to the defined contribution plan. Annual Contributions The City contributed $776,984 on behalf of the employees for the fiscal year ended June 30, 2023. Note 11. Pension Plan – Gallatin Department of Electricity General Information about the Pension Plan Plan Description The Gallatin Department of Electricity Employee’s Pension Plan (the Electric Plan) is a single-employer defined benefit pension plan administered by the Gallatin Electric Power Board. The Electric Plan provides retirement, disability, and death benefits to the Electric Plan members and their beneficiaries. While the Electric Plan covers substantially all Department employees, it was closed to new entrants effective March 1, 2016. The authority to establish and amend benefit provisions of the Electric Plan is assigned to the Gallatin Electric Power Board. The Electric Plan issues a separate financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Gallatin Department of Electricity, P.O. Box 1555, Gallatin, TN 37066 or by calling 615-452-5152. For pension benefits, employees with 20 or more years of credited service are entitled to monthly pension benefits upon attainment of early retirement at age 55. The plan’s normal retirement age is 65. Inactive employees or beneficiaries currently receiving benefits 21 Inactive employees entitled to but not yet receiving benefits 3 Active employees 19 43 Contribution Requirements The contribution requirements of the Electric Plan members and the department are established and may be amended by the Gallatin Electric Power Board. Electric Plan members are required to contribute 3% of their annual covered salary. The Department is required to contribute at an actuarially determined rate. The rate used in FY 2023 was 10.01% of annual covered payroll. The Department contributed $600,000 for the year ended June 30, 2023. 67 [[page 78]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 11. Pension Plan – Gallatin Department of Electricity Net Pension Liability The Electric Department’s net pension liability was measured as of June 30, 2022, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2021. Actuarial Assumptions The total pension liability as of the June 30, 2022 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Salary increases 4.00% per year Investment rate of return 6.00%, compounded annually Cost-of-living adjustment 1.50% per year of original benefit amount Mortality rates were based on the SOA RP-2014 Total Data Set Mortality with Scale MP-2021. Actuarial Assumptions The long-term expected rate of return on pension plan investment was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-term expected real Asset class rate of return Target allocation US equity – large cap 5.24% 57.00% US equity – small/mid cap 6.37% 3.00% Fixed income 6.07% 40.00% 100% Discount Rate The discount rate used to measure the total pension liability was 6.00%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that the Department contributions will be made at rates equal to the difference between actuarially determined contribution rates and the employee rate. Based on these assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 68 [[page 79]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 11. Pension Plan – Gallatin Department of Electricity Changes in Net Pension Liability Total pension Plan fiduciary Net pension liability net position liability (asset) (a) (b) (a)-(b) Balance, June 30, 2021 $ 11,776,198 $ 14,607,209 $ (2,831,011) Service cost 217,805 - 217,805 Interest 817,982 - 817,982 Differences between expected and actual experience - - - Contributions, employer - 600,000 (600,000) Contributions, employees - 59,943 (59,943) Net investment income - (1,415,589) 1,415,589 Benefits paid, including refunds and contributions (627,700) (627,700) - Changes in assumptions 1,467,410 - 1,467,410 Administrative expenses - (77,846) 77,846 Net change 1,875,497 (1,461,192) 3,336,689 Balance, June 30, 2022 $ 13,651,695 $ 13,146,017 $ 505,678 Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the Department, calculated using the discount rate of 6.00%, as well as what the Department’s net pension liability would be if it were calculated using a discount rate that is 1% lower (5.00%) or 1% higher (7.00%) than the current rate: 1% Decrease Current rate 1% Increase (5.00%) (6.00%) (7.00%) Total pension liability $ 15,405,145 $ 13,651,695 $ 12,184,285 Plan fiduciary net pension 13,146,017 13,146,017 13,146,017 Net pension liability (asset) $ 2,259,128 $ 505,678 $ (961,732) For the year ended June 30, 2023, the Department recognized pension expense as follows: Components of pension expense Service cost $ 217,805 Interest on total pension liability 817,982 Differences between expected and actual experience 30,313 Changes in assumptions 377,392 Employee contributions (59,943) Projected earnings on assets (1,020,936) Differences between expected and actual earnings 98,074 Pension plan administrative expense 77,846 Total expense $ 538,533 69 [[page 80]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 11. Pension Plan – Gallatin Department of Electricity Deferred Outflows of Resources and Deferred Inflows of Resources For the year ended June 30, 2023, the Department reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred outflows of inflows of resources resources Differences between expected and actual experience $ 180,253 $ 43,005 Changes in assumptions 1,324,924 71,732 Net difference between expected and actual earnings on pension plan investments 724,068 - Contributions made subsequent to measurement date of June 30, 2023 600,000 - $ 2,829,245 $ 114,737 Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ending June 30, 2024 $ 564,921 2025 606,562 2026 461,160 2027 481,865 2028 - Thereafter - 70 [[page 81]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 12. Pension Plan Reconciliation Reconciliation of both pension plans to the amounts presented on the Statement of Net Position: Governmental Business-type activities activities Total Net pension liability Public employee retirement plan $ 194,396 $ 47,816 $ 242,212 Gallatin Department of Electricity Employee pension plan - 505,678 505,678 Total net pension liability $ 194,396 $ 553,494 $ 747,890 Deferred outflows related to pensions Public employee retirement plan $ 660,931 $ 158,720 $ 819,651 Gallatin Department of Electricity Employee pension plan - 3,423,069 3,423,069 Total deferred outflows related to pensions $ 660,931 $ 3,581,789 $ 4,242,720 Deferred inflows related to pension Public employee retirement plan $ 35,235 $ 7,629 $ 42,864 Gallatin Department of Electricity Employee pension plan - 220,491 220,491 Total deferred inflows related to pensions $ 35,235 $ 228,120 $ 263,355 Pension expense Public employee retirement plan $ 172,114 $ 39,799 $ 211,913 Gallatin Department of Electricity Employee pension plan - 538,533 538,533 Total pension expense $ 172,144 $ 578,332 $ 750,446 Note 13. Other Post-Employment Benefits – Gallatin Department of Electricity General Information about the OPEB Plan Plan Description The Electric Department Post-Retirement Medical Plan (PRMP) is a single-employer defined benefit plan administered by the Gallatin Electric Power Board. There are no assets accumulating in a trust that meet the requirements of GASB Statement No. 75, as amended. The Plan provides supplemental health insurance premium reimbursements to eligible retirees. The criteria to determine eligibility includes years of services and employee age at date of retirement. Eligible retirees may receive up to $150 per month for reimbursement of their supplemental health insurance premiums. The plan was closed to new entrants effective March 1, 2016. Authority to establish and amend benefit provisions is assigned to the Gallatin Electric Power Board. 71 [[page 82]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 13. Other Post-Employment Benefits – Gallatin Department of Electricity General Information about the OPEB Plan Employees Covered by Benefit Terms At the measurement date of June 30, 2022, the following participants were covered by the benefit terms: Inactive employees currently receiving benefits 16 Active employees 19 35 Total OPEB Liability The Electric Department’s total OPEB liability of $526,990 was measured as of June 30, 2022. Actuarial Assumptions The total OPEB liability in the July 1, 2022 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Inflation 2.00% Salary increases 2.50% Discount rate 3.54% as of June 30, 2022 Healthcare cost trend rate None assumed Participation rate 100% assumed The discount rate was based on the Bond Buyer’s 20-year Bond Index. Mortality rates were based on the RPH-2014 headcount-weighted total dataset fully generational table with projection scale MP-2020. Changes in Total OPEB Liability Liability Balance, June 30, 2021 $ 630,245 Service cost 6,359 Interest 13,500 Differences between expected and actual experience (1,985) Changes in assumptions and other inputs (98,281) Benefit payments (22,848) Net change (103,255) Balance, June 30, 2022 $ 526,990 72 [[page 83]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 13. Other Post-Employment Benefits – Gallatin Department of Electricity Changes in Total OPEB Liability Changes in assumptions and other inputs reflect a change in the discount rate from 2.16% as of June 30, 2021 to 3.54% as of June 30, 2022. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the Department, as well as what the Department’s total OPEB liability would be if it were calculated using a discount rate that is 1% lower (2.54%) or 1% higher (4.54%) than the current discount rate: 1% Decrease Current rate 1% Increase (2.54%) (3.54%) (4.54%) Total OPEB liability $ 595,528 $ 526,990 $ 470,187 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources OPEB Expense For the year ended June 30, 2022, the Department recognized OPEB expense of $17,977. Deferred Outflows of Resources and Deferred Inflows of Resources At June 30, 2023, the Department reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred outflows of inflows of resources resources Differences between expected and actual experience $ 23,289 $ 4,964 Changes in assumptions 63,602 100,790 Total to be amortized 86,891 105,754 Contributions made subsequent to measurement date 506,933 - $ 593,824 $ 105,754 Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year ending June 30, 2024 $ (1,882) 2025 (1,882) 2026 2,733 2027 1,461 2028 (16,221) Thereafter (3,072) 73 [[page 84]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 14. Defined Contribution Plan – Gallatin Department of Electricity General Information about the Defined Contribution Plan Plan Description The Electric Department entered into an agreement with the State of Tennessee to participate in the State of Tennessee Deferred Compensation Plan II – 401(k) Defined Contribution Plan with a Roth option, effective March 1, 2016. The Plan will be administered by the Treasurer for the State of Tennessee, which has an agreement with Empower Retirement for the enrollment, deferrals, advisory services, and many other administrative aspects. The Plan assets are not held by the Department and the Department does not exercise a trustee responsibility over such assets. This will be the only plan offered to employees of the Department hired after March 1, 2016 and will also be available to those employees hired before March 1, 2016 on a voluntary basis. Funding Policy The Plan allows employees to make tax deferred contributions into self-directed investments as much as allowable under the Internal Revenue Code. For employees hired after March 1, 2016, the Department will match 200% of participant elective deferrals of up to 5% of compensation. The vested interest of each participant, with respect to matching contributions, will be as follows: Percentage Years of service vested 1 20% 2 40% 3 60% 4 80% 5 100% Any forfeitures will be used first to reduce the employer’s matching contributions and then to offset Plan expenses. As of June 30, 2022, there has been one forfeiture in the amount of $2,076. For employees hired before March 1, 2016, they can make elective deferrals into the plan with no matching contribution from the Department. Annual Cost The Department’s maximum contribution to the Plan is defined as up to 10% of an eligible employee’s annual compensation. The Department contributed $153,374 on behalf of the eligible employees during the fiscal year ended June 30, 2023. There were no outstanding contributions at June 30, 2023. 74 [[page 85]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 15. Other Information Risk Management City of Gallatin The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City decided it was more economically feasible to join a public entity risk pool than purchase commercial insurance for certain general liability, auto liability, errors and omissions, workers’ compensation, and physical damage coverages. The City joined the Tennessee Municipal League Risk Pool (the Pool), which is a public entity risk pool established in 1979 by the Tennessee Municipal League. The City pays annual premiums to the Pool for its general, auto, and errors and omissions policies. The Pool provides the specified coverage and pays all claims from its member premiums charged or through its reinsurance policies. The City’s premiums are calculated based on its prior claims history. It is the policy of the City to purchase commercial insurance for the risk of employee dishonesty and law enforcement professional liability. Settled claims have not exceeded the commercial coverage or the coverage provided by the Pool in any of the past three years. Gallatin Department of Electricity It is the policy of the Gallatin Electric Department to purchase commercial insurance for the risks of loss to which it is exposed. These risks include general liability, property and casualty, worker’s compensation, employee health, and accident. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years and there has been no significant reduction in the amount of coverage. Commitments The City purchases natural gas under various contracts requiring the purchase of minimum quantities of natural gas from suppliers at cost based upon national index prices. Natural gas purchases exceeding the specified minimum quantities are made at the going market value. City management believes any risk associated with the minimum purchase quantities as specified in the aforementioned contracts to be minimal. Further, the City is committed under various natural gas transportation agreements requiring specified minimum transmission capacities. As of June 30, 2023, the City entered into multiple construction contracts related to road, water, and sewer construction projects of approximately $23,700,000 and has spent approximately $23,600,000 of committed funds, with a remaining balance of approximately $100,000 in outstanding commitments at June 30, 2023. The City has entered into an agreement with the Sumner County Resource Authority (the Resource Authority), a joint venture between the City, Sumner County, and the City of Hendersonville, TN, which provides that, in the event the Resource Authority’s revenues are insufficient to cover the costs of operation and debt retirement, the County and Cities shall pay such deficit in the proportions of 3/7, 2/7, and 2/7, respectively. These same entities have executed a “contract in Lieu of Performance Bond” with the State of Tennessee for financial assurance of the closure and post-closure costs of the landfill, should the Resource Authority be unable to do so. The Resource Authority operates primarily as a solid waste transfer station. The City utilizes the Resource Authority for solid waste disposal purposes at essentially the same cost per ton as in prior years. There is uncertainty as to the future operations of the Resource Authority, as well as the costs relative to the change in operations or possible dissolution. 75 [[page 86]] City of Gallatin, Tennessee Notes to Financial Statements For the Fiscal Year Ended June 30, 2023 Note 15. Other Information Commitments The Resource Authority, as of June 30, 2023, which is the latest available financial statement date, has net investment in capital assets in the amount of $2,524,886 and an unrestricted net position of $5,716,940, as compared to 2,198,393 and $3,870,287, respectively, for 2022. During 2023, the City paid the Resource Authority $880,683 in tipping fees for solid waste. Contingent Liabilities Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal and state governments. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantors cannot be determined at this time; however, the City’s management expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits; however, the outcome of these lawsuits is not presently determinable, though legal counsel does not expect any possible liability to exceed the City’s limits of insurance. Power Contract The Utility has a power contract with the TVA whereby the electric system purchases all of its electric power from the TVA and is subject to certain restrictions and conditions as provided for in the power contract. Such restrictions include, but are not limited to, prohibitions against furnishing, advancing, lending, pledging, or otherwise diverting System funds, revenues, or property to other operations of the County and the purchase or payment of or providing security for indebtedness on other obligations applicable to such other operations. Note 16. TVA Advances Payable Advances payable are made up of advances to the Electric Department from TVA for home weatherization loans and interest. The TVA loans are paid in monthly installments as the Electric Department is paid by the customers. These advances bear interest at either 6% or 8%. They are secured by UCC-1s on the customer’s heating and air units. At June 30, 2023, outstanding funds advanced by TVA totaled $1,579. Note 17. Subsequent Events Management has evaluated subsequent events through December 18, 2023, the date on which the financial statements were available for issuance. 76 [[page 87]] Required Supplementary Information [[page 88]] City of Gallatin, Tennessee Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Based on Participation in the Public Employee Hybrid Pension Plan of the TCRS Last Ten Fiscal Years 2022 2021 2020 2019 Total Pension Liability Service cost $ 778,219 $ 666,354 $ 575,836 $ - Interest 195,733 137,048 72,620 - Changes in benefit terms - - - 426,349 Differences between actual and expected experience 136,142 (52,390) 153,571 - Changes of assumptions - 169,586 - - Benefit payments, including refunds of employee contributions (38,297) (7,761) - (536) Net change in total OPEB liability 1,071,797 912,837 802,027 425,813 Total pension liability, beginning of year 2,140,677 1,227,840 425,813 - Total pension liability, end of year (a) 3,212,474 2,140,677 1,227,840 425,813 Plan Fiduciary Net Position Contributions, employer 247,676 190,332 170,527 107,409 Contributions, employee 648,370 556,528 513,637 323,520 Net investment income (101,596) 385,616 37,963 15,540 Benefit payments, including refunds of employee contributions (38,297) (7,761) - (536) Administrative expenses (25,361) (21,022) (19,265) (13,018) Other - - - - Net change in plan fiduciary net position 730,792 1,103,693 702,862 432,915 Plan fiduciary net position, beginning 2,239,470 1,135,777 432,915 - Plan fiduciary net position, ending (b) 2,970,262 2,239,470 1,135,777 432,915 Net pension liability (asset), ending (a)-(b) $ 242,212 $ (98,793) $ 92,063 $ (7,102) Plan fiduciary net position as a percentage of total pension liability 92.46% 104.62% 92.50% 101.67% Covered payroll $ 12,967,349 $ 11,130,541 $ 10,274,439 $ 6,470,377 Net pension liability (asset) as a percentage of covered payroll 1.87% -0.89% 0.90% -0.11% Notes to Schedule Changes of Assumptions In 2021, amounts reported as changes of assumptions resulted from changes to the inflation rate, investment rate of return, cost-of-living adjustment, and mortality improvements. In 2017, amounts reported as changes of assumptions resulted from changes to the inflation rate, investment rate of return, cost-of-living adjustment, salary growth, and mortality improvements. GASB 68 requires a 10-year schedule for this data to be presented starting with the implementation of GASB 68 . The information in this schedule is not required to be presented retroactively prior to the implementation date. Please refer to previously supplied data from TCRS GASB website for prior years’ data, if needed. See independent auditor's report 77 [[page 89]] City of Gallatin, Tennessee Schedule of Contributions Based on Participation in the Public Employee Hybrid Pension Plan of the TCRS Last Ten Fiscal Years 2023 2022 2021 2020 2019 Actuarially determined contribution $ 374,974 $ 247,676 $ 190,332 $ 170,527 $ 107,409 Contributions in relation to the actuarially determined contribution 374,974 247,676 190,332 170,527 107,409 Contribution deficiency (excess) $ - $ - $ - $ - $ - Covered-employee payroll $ 15,488,930 $ 12,962,273 $ 11,130,541 $ 10,274,439 $ 6,470,377 Contributions as a percentage of covered-employee payroll 2.42% 1.91% 1.71% 1.66% 1.66% Notes to Schedule GASB 68 requires a 10-year schedule for this data to be presented starting with the implementation of GASB 68 . The information in this schedule is not required to be presented retroactively prior to the implementation date. Please refer to previously supplied data from TCRS GASB website for prior years’ data, if Beginning in FY 2019, the City placed the actuarially determined contribution rate of covered payroll in the pension plan and placed the remainder of the 4% contractually required contribution into the Pension Stabilization Reserve Trust (SRT). 2019: Pension - 1.66%, SRT - 2.34% 2020: Pension - 1.66%, SRT - 2.34% 2021: Pension - 1.71%, SRT - 2.29% 2022: Pension - 1.91%, SRT - 2.09% 2023: Pension - 2.42%, SRT - 1.58% Valuation Date Actuarially determined contribution rates for fiscal year 2023 were calculated based on the June 30, 2021 actuarial valuation. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age normal Amortization method Level dollar, closed (not to exceed 20 years) Amortization period Varies by year Asset valuation 10-year smoothed within a 20% corridor to market value Inflation 2.25% Salary increases Graded salary ranges from 8.72 to 3.44% based on age, inflation, averaging 4.00% Investment rate of return 6.75%, net of investment expense, including inflation Retirement age Pattern of retirement determined by experience study Mortality Customized table based on actual experience including an adjustment for some anticpated improvement Cost of living adjustment 2.13% Changes of Assumptions In 2021, the following assumptions were changed: decreased inflation rate from 2.50% to 2.25%; decreased the investment rate of return from 7.25% to 6.75%; decreased the cost-of-living adjustment from 2.25% to 2.125%; and modified mortality assumptions. In 2017, the following assumptions were changed: decreased inflation rate from 3.00% to 2.50%; decreased the investment rate of return from 7.50% to 7.25%; decreased the cost-of-living adjustment from 2.50% to 2.25%; and decreased salary growth graded ranges from an average of 4.25% to an average of 4.00%. See independent auditor's report 78 [[page 90]] City of Gallatin, Tennessee Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Based on Participation in the Gallatin Electric Department Employee Pension Plan Last 10 Fiscal Years 2022 2021 2020 2019 2018 2017 2016 2015 2014 Total Pension Liability Service cost $ 217,805 $ 254,942 $ 255,677 $ 183,037 $ 185,023 $ 177,907 $ 165,004 $ 160,612 $ 136,831 Interest 817,982 794,550 771,299 723,598 691,268 685,170 659,028 652,294 559,812 Changes in benefit terms - - - - - - - - - Differences between expected and actual experience - 26,471 (1) 324,343 115,214 (295,965) - - 22,888 Changes in assumptions 1,467,410 (45,689) (38,813) (28,647) - - (468,590) - 989,264 Benefit payments, including refunds of employee contributions (627,700) (688,070) (623,543) (564,525) (492,024) (482,369) (445,233) (403,705) (496,184) Net change in total pension liability 1,875,497 342,204 364,619 637,806 499,481 84,743 (89,791) 409,201 1,212,611 Total pension liability, beginning 11,776,198 11,433,994 11,069,375 10,431,569 9,932,088 9,847,345 9,937,136 9,527,935 8,315,324 Total pension liability, ending (a) 13,651,695 11,776,198 11,433,994 11,069,375 10,431,569 9,932,088 9,847,345 9,937,136 9,527,935 Plan Fiduciary Net Position Contributions, employer 600,000 750,000 1,050,000 1,200,000 800,000 1,040,000 666,994 385,256 257,050 Contributions, employee 59,943 59,095 59,546 61,115 62,396 62,487 65,855 61,065 57,685 Net investment income (1,415,589) 3,077,505 408,674 685,759 610,970 663,332 185,887 118,498 644,573 Benefit payments, including refunds of employee contributions (627,700) (688,070) (623,543) (564,525) (492,024) (482,369) (445,233) (403,705) (496,184) Administrative expenses (77,846) (72,959) (57,274) (49,663) (45,318) (39,030) (34,134) (32,684) (31,671) Other - - - - - - - - - Net change in plan fiduciary net position (1,461,192) 3,125,571 837,403 1,332,686 936,024 1,244,420 439,369 128,430 431,453 Plan fiduciary net position, beginning 14,607,209 11,481,638 10,644,235 9,311,549 8,375,525 7,131,105 6,691,736 6,563,306 6,131,853 Plan fiduciary net position, ending (b) 13,146,017 14,607,209 11,481,638 10,644,235 9,311,549 8,375,525 7,131,105 6,691,736 6,563,306 Net pension liability (asset), ending (a - b) $ 505,678 $ (2,831,011) $ (47,644) $ 425,140 $ 1,120,020 $ 1,556,563 $ 2,716,240 $ 3,245,400 $ 2,964,629 Plan fiduciary net position as a percentage of total pension liability 96.30% 124.04% 100.42% 96.16% 89.26% 84.33% 72.42% 67.34% 68.88% Covered payroll $ 1,991,942 $ 1,991,942 $ 2,085,475 $ 2,085,475 $ 1,958,148 $ 2,043,550 $ 2,030,845 $ 1,952,736 $ 1,934,194 Net pension liability (asset) as a percentage of covered payroll 25.39% -142.12% -2.28% 20.39% 57.20% 76.17% 133.75% 166.20% 153.27% Notes to Schedule GASB 68 requires a 10-year schedule for this data to be presented starting with the implementation of GASB 68 . The information in this schedule is not required to be presented retroactively prior to the implementation date. Please refer to previously supplied data from TCRS GASB website for prior years’ data, if needed. 79 [[page 91]] City of Gallatin, Tennessee Schedule of Contributions Based on Participation in the Gallatin Electric Department Employee Pension Plan Last Ten Fiscal Years 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Actuarially determined contribution $ 211,462 $ 200,921 $ 332,078 $ 342,422 $ 342,422 $ 417,159 $ 417,159 $ 385,256 $ 385,256 $ 253,122 Contributions in relation to the actuarially determined contribution 600,000 600,000 750,000 1,050,000 1,200,000 800,000 1,040,000 666,994 381,950 459,410 Contribution deficiency (excess) $ (388,538) $ (399,079) $ (417,922) $ (707,578) $ (857,578) $ (382,841) $ (622,841) $ (281,738) $ 3,306 $ (206,288) Covered-employee payroll $ 1,945,783 $ 1,991,942 $ 1,991,942 $ 2,085,475 $ 2,085,475 $ 1,958,148 $ 2,043,550 $ 2,030,845 $ 1,952,736 $ 1,934,194 Contributions as a percentage of covered-employee payroll 30.84% 30.12% 37.65% 50.35% 57.54% 40.85% 50.89% 32.84% 19.56% 23.75% Notes to Schedule GASB 68 requires a 10-year schedule for this data to be presented starting with the implementation of GASB 68 . The information in this schedule is not required to be presented retroactively prior to the implementation date. Please refer to previously supplied data from TCRS GASB website for prior years’ data, if needed. Methods and assumptions used to determine contribution rates: Valuation date Actuarially determined contribution rates for the year ended June 30, 2023 were calculated based on the June 30, 2021 actuarial valuation. Actuarial cost method Entry age normal, level percentage of pay Amortization method Level dollar Remaining amortization period Initial amortization period: 30 years as of 2014 Asset valuation Market value of plan assets Cost-of-living adjustments 1.50% Salary increases 4.00% Investment rate of return 6.00% Retirement age 65 Mortality SOA RP-2014 Total Dataset Mortality Scale MP-2021 Disabled mortality 1965 Railroad Board Disability Annuity Mortality See independent auditor's report 80 [[page 92]] City of Gallatin, Tennessee Schedule of Investment Returns Based on Participation in the Gallatin Electric Department Employee Pension Plan Last Ten Fiscal Years 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Annual money-weighted rate of return, net of investment expense 9.97% -10.54% 26.42% 3.84% 7.09% 7.11% 9.04% 1.75% 1.82% 11.00% Notes to Schedule GASB 68 requires a 10-year schedule for this data to be presented starting with the implementation of GASB 68 . The information in this schedule is not required to be presented retroactively prior to the implementation date. Please refer to previously supplied data from TCRS GASB website for prior years’ data, if needed. See independent auditor's report 81 [[page 93]] City of Gallatin, Tennessee Schedule of Changes in Total OPEB Liability and Related Ratios - Electric Department Last Ten Fiscal Years 2023 2022 2021 2020 2019 2018 2017 Total OPEB Liability Service cost $ 10,377 $ 6,359 $ 9,116 $ 6,250 $ 6,485 $ 7,587 $ 9,220 Interest 18,974 13,500 13,904 18,985 18,085 16,911 14,641 Changes of benefit terms 11,914 - - - - - - Differences between actual and expected experience (10,450) (1,985) (4,878) 34,352 - 7,940 3,563 Changes in assumptions (135,116) (98,281) 4,124 89,394 22,113 (16,731) (46,674) Benefit payments, net (21,933) (22,848) (23,975) (20,354) (15,783) (15,914) (25,113) Net change in total OPEB liability (126,234) (103,255) (1,709) 128,627 30,900 (207) (44,363) Total OPEB liability, beginning of year 526,990 630,245 631,954 503,327 472,427 472,634 516,997 Total OPEB liability, end of year (a) $ 400,756 $ 526,990 $ 630,245 $ 631,954 $ 503,327 $ 472,427 $ 472,634 Covered-employee payroll $ 2,165,686 $ 2,165,686 $ 2,165,686 $ 2,085,475 $ 2,005,264 $ 1,958,148 $ 2,043,550 Net OPEB liability as a percentage of covered-employee payroll 18.50% 24.33% 29.10% 30.30% 25.10% 24.13% 23.13% Notes to Schedule GASB 75 requires a 10-year schedule for this data to be presented starting with the implementation of GASB 75 . The information in this schedule is not required to be presented retroactively prior to the implementation date. There are no assets accumulating in a trust related to this OPEB plan that meet the criteria in paragraph 4 of GASB 75. Changes in assumptions and other inputs reflect the effects of changes in the discount rate each period. The following are the discount rates used in each period: 2017 3.58% 2018 3.87% 2019 3.50% 2020 2.21% 2021 2.16% 2022 3.54% 2023 6.17% There were no benefit changes during the measurement period. See independent auditor's report 82 [[page 94]] City of Gallatin, Tennessee Schedule of Contributions Based on Participation and Schedule of Investment Returns in the Gallatin Electric Department OPEB Plan Last Ten Fiscal Years Schedule of Contributions 2023 Actuarially determined contribution $ 27,266 Contributions in relation to the actuarially determined contribution 485,000 Contribution deficiency (excess) $ (457,734) Covered-employee payroll Not available Contributions as a percentage of covered-employee payroll Not available Notes to Schedule Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which Methods and assumptions used to determine contribution rates: Actuarial cost method Individual entry age normal Amortization method Level dollar Amortization period 30 years Asset valuation method Market value of plan assets Salary increases 2.50% Inflation rate 2.00% Discount rate 6.17% Retirement age 65 Mortality RPH-2014 Headcount-weighted total dataset table with projection scale MP-2020 Disabled mortality 1965 Railroad Board Disability Annuity Mortality Schedule of Investment Returns 2023 Annual money-weighted rate of return, net of investment expense 6.56% See independent auditor's report 83 [[page 95]] Supplementary Information [[page 96]] Nonmajor Governmental Funds Special Revenue Funds: Special Revenue Funds account for specific revenues that are legally restricted to specific expenditure purposes. The Special Revenue Funds are: Special Services Fund – To account for sex offender registry payments that are used for specific purposes and private donations to be used for the “Shop with a Cop” Christmas program. Drug Fund – To account for the resources used in the City’s drug enforcement and education programs. Environmental Services Fund – To account for the resources used for the City’s garbage collection activities. Stormwater Fund – To account for the stormwater fee that is used for stormwater maintenance and repairs throughout the City. Industrial Development Board – To account for activities by the City to encourage economic development. Permanent Funds: Permanent Funds account for specific revenues for which the corpus of the donation is restricted by external donors. The Permanent Funds are: Witherspoon Loan Fund – To account for a donation that was received for the purpose of making loans to graduating seniors to be used for college expenses. Cemetery Trust Fund – To account for donations that have been received to maintain the cemetery in perpetuity. [[page 97]] City of Gallatin, Tennessee Combining Balance Sheet Nonmajor Governmental Funds June 30, 2023 Special Revenue Funds Permanent Funds Industrial Total Total Nonmajor Special Drug Environmental Stormwater Development Total Special Witherspoon Cemetery Permanent Governmental Services Fund Fund Services Fund Utility Fund Fund Revenue Funds Loan Fund Trust Fund Funds Funds Assets Cash $ 109,324 $ 160,170 $ 1,831,943 $ 3,099,103 $ - $ 5,200,540 $ 310,113 $ 16,653 $ 326,766 $ 5,527,306 Investments - - - - - - - 21,025 21,025 21,025 Receivables, net - - 264,513 125,151 - 389,664 134,521 - 134,521 524,185 Inventory - - 16,710 - - 16,710 - - - 16,710 Other assets - - - - - - 11,102 - 11,102 11,102 Restricted assets, - TCRS Stabilization Fund - - 32,373 22,235 - 54,608 - - - 54,608 Total assets $ 109,324 $ 160,170 $ 2,145,539 $ 3,246,489 $ - $ 5,661,522 $ 455,736 $ 37,678 $ 493,414 $ 6,154,936 Liabilities and Fund Balances Liabilities Accounts payable $ 985 $ - $ 108,224 $ 23,056 $ - $ 132,265 $ - $ - $ - $ 132,265 Performance deposits - - - - - - - - - - Unearned Evidence Funds 65,006 - - - - 65,006 - - - 65,006 Total liabilities 65,991 - 108,224 23,056 - 197,271 - - - 197,271 Fund balances Nonspendable Prepaid Items - - - - - - 11,102 - 11,102 11,102 Perpetual Care - - - - - - - 21,025 21,025 21,025 Inventory - - 16,710 - - 16,710 - - - 16,710 Restricted for Funds held in trust - - - - - - 444,634 - 444,634 444,634 Environmental services - - 1,988,232 - - 1,988,232 - - - 1,988,232 Drug enforcement - 160,170 - - - 160,170 - - - 160,170 Stormwater - - - 3,201,198 - 3,201,198 - - - 3,201,198 Hybrid Retirement Stabilization Funds - - 32,373 22,235 - 54,608 - - - 54,608 Assigned to Police Special Projects 43,333 - - - - 43,333 - - - 43,333 Cemetery Use - - - - - - - 16,653 16,653 16,653 Total fund balances 43,333 160,170 2,037,315 3,223,433 - 5,464,251 455,736 37,678 493,414 5,957,665 Total liabilities and fund balances $ 109,324 $ 160,170 $ 2,145,539 $ 3,246,489 $ - $ 5,661,522 $ 455,736 $ 37,678 $ 493,414 $ 6,154,936 84 [[page 98]] City of Gallatin, Tennessee Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Fiscal Year Ended June 30, 2023 Special Revenue Funds Permanent Funds Industrial Total Total Nonmajor Special Drug Environmental Stormwater Development Total Special Witherspoon Cemetery Permanent Governmental Services Fund Fund Services Fund Utility Fund Fund Revenue Funds Loan Fund Trust Fund Funds Funds Revenues Charges for services $ - $ - $ 3,269,469 $ 2,002,345 $ - $ 5,271,814 $ - $ - $ - $ 5,271,814 Fines and forfeitures 5,400 68,705 - - - 74,105 - - - 74,105 Other revenue 56,597 28,987 104,496 47,736 - 237,816 6,777 1,377 8,154 245,970 Total revenues 61,997 97,692 3,373,965 2,050,081 - 5,583,735 6,777 1,377 8,154 5,591,889 Expenditures Current Public safety 74,140 53,413 - - - 127,553 - - - 127,553 Environmental services - - 2,426,279 869,397 - 3,295,676 - - - 3,295,676 Economic development - - - - - - - - - - Capital outlay - 64,750 684,847 77,585 - 827,182 - - - 827,182 Total expenditures 74,140 118,163 3,111,126 946,982 - 4,250,411 - - - 4,250,411 Excess of revenues over expenditures (12,143) (20,471) 262,839 1,103,099 - 1,333,324 6,777 1,377 8,154 1,341,478 Other financing sources Transfers in - - 31,088 16,340 47,428 - - - 47,428 Transfer to other funds - - - - (145,664) (145,664) - - - (145,664) Fund balances, beginning of year 55,476 180,641 1,743,388 2,103,994 145,664 4,229,163 448,959 36,301 485,260 4,714,423 Fund balances, end of year $ 43,333 $ 160,170 $ 2,037,315 $ 3,223,433 $ - $ 5,464,251 $ 455,736 $ 37,678 $ 493,414 $ 5,957,665 85 [[page 99]] City of Gallatin, Tennessee Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual Special Services Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Revenues Fines and forfeitures Sex offender registry $ 5,000 $ 5,000 $ 5,400 $ 400 Other Donations 50,000 50,000 56,550 6,550 Interest - - 47 47 Total revenues 55,000 55,000 61,997 6,997 Expenditures Current Public Safety, Police Office supplies 5,000 5,000 99 4,901 Grants and donation 50,000 85,000 74,041 10,959 Total expenditures 55,000 90,000 74,140 15,860 Excess of revenues over (under) expenditures - (35,000) (12,143) 22,857 Fund balance, beginning of year 55,476 55,476 55,476 - Fund balance, end of year $ 55,476 $ 20,476 $ 43,333 $ 22,857 86 [[page 100]] City of Gallatin, Tennessee Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual Drug Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Revenues Fines and forfeitures $ 90,000 $ 90,000 $ 68,705 $ (21,295) Sale of equipment - 24,285 28,987 4,702 Total revenues 90,000 114,285 97,692 (16,593) Expenditures Current Public Safety, Police Office supplies 25,000 54,285 53,413 872 Capital outlay 65,000 65,000 64,750 250 Total expenditures 90,000 119,285 118,163 1,122 Excess of revenues over (under) expenditures - (5,000) (20,471) (15,471) Fund balance, beginning of year 180,641 180,641 180,641 - Fund balance, end of year $ 180,641 $ 175,641 $ 160,170 $ (15,471) 87 [[page 101]] City of Gallatin, Tennessee Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual Environmental Services Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Revenues Charges for services $ 3,072,000 $ 3,072,000 $ 3,269,469 $ 197,469 Other Sale of supplies 60,000 60,000 98,470 38,470 Miscellaneous - - 6,026 6,026 Total revenues 3,132,000 3,132,000 3,373,965 241,965 Expenditures Current Environmental services Salaries 803,356 803,356 769,511 33,845 Employee benefit and taxes 351,793 351,793 297,186 54,607 Insurance 38,000 38,000 37,338 662 Utilities 19,931 19,931 16,672 3,259 Repairs and maintenance 85,000 85,000 79,339 5,661 Other contractual services 1,015,000 1,017,141 857,589 159,552 Supplies 9,000 9,000 8,398 602 Gas, oil, diesel, etc. 130,000 130,000 158,262 (28,262) Supplies for resale 80,000 80,000 80,005 (5) Natural materials 100,000 100,000 55,664 44,336 Professional services 65,826 65,826 65,826 - Miscellaneous 3,450 3,450 489 2,961 Capital outlay 516,000 1,046,956 684,847 362,109 Total expenditures 3,217,356 3,750,453 3,111,126 639,327 Excess of revenues over (under) expenditures (85,356) (618,453) 262,839 (881,292) Other financing sources Transfers in - - 31,088 (31,088) Excess of revenues and other sources over expenditures and other uses (85,356) (618,453) 293,927 (912,380) Fund balance, beginning of year 1,743,388 1,743,388 1,743,388 - Fund balance, end of year $ 1,658,032 $ 1,124,935 $ 2,037,315 $ (912,380) 88 [[page 102]] City of Gallatin, Tennessee Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual Stormwater Utility Fund For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Revenues Charges for services $ 1,900,000 $ 1,900,000 $ 2,002,345 $ 102,345 Other Donations - 47,736 47,736 - Total revenues 1,900,000 1,947,736 2,050,081 102,345 Expenditures Current Environmental services Salaries 656,352 656,352 482,804 173,548 Employee benefit and taxes 301,006 301,006 169,958 131,048 Insurance - - 23,112 (23,112) Printing and publications - - 110 (110) Utilities 6,800 6,800 5,474 1,326 Repairs and maintenance 15,000 15,000 15,997 (997) Supplies 4,900 7,400 2,879 4,521 Gas, oil, diesel, etc. 19,500 19,500 23,848 (4,348) Professional services 539,279 673,542 85,075 588,467 Miscellaneous 176,820 176,820 60,140 116,680 Capital outlay 705,500 1,397,236 77,585 1,319,651 Total expenditures 2,425,157 3,253,656 946,982 2,306,674 Excess of revenues over (under) expenditures (525,157) (1,305,920) 1,103,099 (2,409,019) Other financing sources Transfers in - - 16,340 (16,340) Excess of revenues and other sources over expenditures and other uses (525,157) (1,305,920) 1,119,439 (2,425,359) Fund balance, beginning of year 2,103,994 2,103,994 2,103,994 - Fund balance, end of year $ 1,578,837 $ 798,074 $ 3,223,433 $ (2,425,359) 89 [[page 103]] City of Gallatin, Tennessee Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget (GAAP Basis) and Actual Industrial Development Board For the Fiscal Year Ended June 30, 2023 Budgeted amounts Actual Variance with Original Final amounts final budget Revenues Other Payment in lieu from industry $ - $ - $ - $ - Application fee - - - - Interest - - - - Total revenues - - - - Expenditures Current Economic Development - - - - Excess of revenues over (under) expenditures - - - - Other financing sources Transfers to other funds - - (145,664) 145,664 Fund balance, beginning of year 145,664 145,664 145,664 - Fund balance, end of year $ 145,664 $ 145,664 $ - $ 145,664 90 [[page 104]] City of Gallatin, Tennessee Schedule of Expenditures of Federal Awards and State Financial Assistance For the Fiscal Year Ended June 30, 2023 Passed Assistance Contract through to Grantor / Pass-through Grantor Program name listing number Expenditures subrecipients Federal Awards US Department of Homeland Security, TN Highway Safey Office Police Traffic Services State & Community Highway Safety Projects (THSO) 20.600 Z23THS103 $ 19,136 $ - Total US Department of Safety and Homeland Security 19,136 - US Department of Justice, Bureau of Justice Assistance Federal Bureau of Investigation FBI Violent Crimes Task Force Reimbursement 16.U01 MOU 10,786 - Office of Justice Programs Bulletproof Vest Program, Justice Assistance Grants 16.607 2020-BUBX-2002-3062 3,040 - Justice Mental Health Collaboration Program, Embedded Clinician 16.745 2020-MO-BX-0030 41,545 - Comprehensive Opioid, Stimulant, and Substance Abuse Program 16.838 2020-AR-BX-0053 82,880 - Total US Department of Justice - BJA 138,251 - US Department of Transportation TN Department of Transportation Highway Planning and Construction Cluster Highway Planning and Construction (Federal-Aid Highway Program) 20.205 STP-M-8300(70) 444,048 - Highway Planning and Construction (Federal-Aid Highway Program) 20.205 EM-NH-6(130)/ 83LPLM-F3-122 727,172 - Highway Planning and Construction (Federal-Aid Highway Program) 20.205 SRTS-4569(10)/83LPLM 14,593 - Highway Planning and Construction (Federal-Aid Highway Program) 20.205 83PLM-F3-110/ CM-9306(21) 868,824 - Total Highway Planning and Construction Cluster 2,054,637 - Total US Department of Transportation 2,054,637 - US Department of Treasury TN Department of Finance and Administration COVID-19 - Coronavirus State and Local Fiscal Recovery Funds 21.027 N/A 30,000 - Total US Department of The Treasury 30,000 Total federal awards 2,242,024 - Continued 91 [[page 105]] City of Gallatin, Tennessee Schedule of Expenditures of Federal Awards and State Financial Assistance For the Fiscal Year Ended June 30, 2023 Passed Assistance Contract through to Grantor / Pass-through Grantor Program name listing number Expenditures subrecipients State Financial Assistance Total state financial assistance - - Total federal awards and state financial assistance $ 2,242,024 $ - Note 1. Basis of Presentation This schedule of expenditures of federal awards and state financial assistance summarizes the expenditures of the City under programs of the federal and state governments for the year ended June 30, 2023. The information in this schedule is presented in accordance with the requirements of Title 2 US Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the schedule presents only a selected portion of the operations of the City, it is not intended to and does not present the financial position, change in net position, or cash flows of the City. Expenditures reported on the schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Note 2. Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. The City has elected to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. Note 3. Indirect Cost Rate The City has not elected to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. 92 [[page 106]] City of Gallatin, Tennessee Schedule of Changes in Long-term Debt by Individual Issue For the Fiscal Year Ended June 30, 2023 Paid and/or Original Date Last Issued matured Refunded amount Interest of maturity Outstanding during during during Outstanding Description of Indebtedness of issue rate issue date July 1, 2022 period period period June 30, 2023 Governmental Activities Bonds payable Payable through General Fund GO improvement bonds, Series 2014 $ 14,185,000 2.00%-5.00% 8/18/14 1/1/34 $ 8,525,000 $ - $ 950,000 $ - $ 7,575,000 GO bonds, Series 2016 $ 11,040,000 2.00%-5.00% 1/20/16 1/1/36 8,210,000 - 500,000 - 7,710,000 GO bonds, Series 2021 $ 9,725,000 2.00%-5.00% 9/28/11 1/1/41 9,400,000 - 330,000 - 9,070,000 Total long-term debt of governmental activities $ 26,135,000 $ - $ 1,780,000 $ - $ 24,355,000 Business-type Activities Bonds payable Payable through Water and Sewer Department Water and Sewer Revenue Bonds, Series 2015 $ 25,000,000 3.00%-5.00% 5/19/15 7/1/40 $ 5,700,000 $ - $ 1,200,000 $ - $ 4,500,000 Water and Sewer Revenue Bonds, Series 2014 $ 14,185,000 2.00%-5.00% 8/20/14 7/1/29 2,690,000 - 285,000 - 2,405,000 Water and Sewer Revenue Bonds, Series 2011 $ 8,955,000 2.00%-3.625% 12/28/11 7/1/32 5,925,000 - 450,000 - 5,475,000 Gas System Revenue Bonds, Series 2019 $ 5,570,000 3.00%-5.00% 4/9/19 1/1/39 4,940,000 - 210,000 - 4,730,000 Water and Sewer Revenue Improvement Bonds, Series 2021A $ 13,400,000 3.00%-4.00% 11/17/21 7/1/46 13,400,000 - 325,000 13,075,000 Water and Sewer Revenue Refunding Bonds, Series 2021B $ 13,965,000 0.510%-2.750% 11/17/21 7/1/37 13,965,000 - 220,000 - 13,745,000 Total long-term debt of business type activities $ 46,620,000 $ - $ 2,690,000 $ - $ 43,930,000 93 [[page 107]] City of Gallatin, Tennessee Schedule of Long-term Debt, Principal, and Interest Requirements Governmental Activities, by Fiscal Year June 30, 2023 General Obligation Fiscal year Improvement Bonds, General Obligation General Obligation ending Series 2014 Bonds, Series 2016 Bonds, Series 2021 Total June 30, Principal Interest Principal Interest Principal Interest Principal Interest 2024 $ 975,000 $ 270,000 $ 510,000 $ 285,000 $ 350,000 $ 291,600 $ 1,835,000 $ 846,600 2025 1,010,000 221,250 520,000 259,500 365,000 274,100 1,895,000 754,850 2026 1,050,000 180,850 530,000 233,500 385,000 255,850 1,965,000 670,200 2027 1,090,000 138,850 540,000 207,000 405,000 236,600 2,035,000 582,450 2028 450,000 106,150 555,000 185,400 425,000 216,350 1,430,000 507,900 2029 460,000 92,650 570,000 163,200 445,000 195,100 1,475,000 450,950 2030 475,000 78,850 585,000 140,400 465,000 172,850 1,525,000 392,100 2031 490,000 64,600 600,000 117,000 490,000 149,600 1,580,000 331,200 2032 505,000 49,900 620,000 99,000 515,000 125,100 1,640,000 274,000 2033 525,000 34,119 640,000 80,400 535,000 104,500 1,700,000 219,019 2034 545,000 17,713 660,000 61,200 545,000 93,800 1,750,000 172,713 2035 - - 680,000 41,400 555,000 82,900 1,235,000 124,300 2036 - - 700,000 21,000 570,000 71,800 1,270,000 92,800 2037 - - - - 580,000 60,400 580,000 60,400 2038 - - - - 590,000 48,800 590,000 48,800 2039 - - - - 605,000 37,000 605,000 37,000 2040 - - - - 615,000 24,900 615,000 24,900 2041 - - - - 630,000 12,600 630,000 12,600 Total $ 7,575,000 $ 1,254,932 $ 7,710,000 $ 1,894,000 $ 9,070,000 $ 2,453,850 $ 24,355,000 $ 5,602,782 94 [[page 108]] City of Gallatin, Tennessee Schedule of Long-term Debt, Principal, and Interest Requirements Business-type Activities, by Fiscal Year June 30, 2023 Water and Sewer Water and Sewer Fiscal year Water and Sewer Water and Sewer Water and Sewer Gas System Revenue Improvement Revenue Refunding ending Revenue Bonds, Series 2011 Revenue Bonds, Series 2014 Revenue Bonds, Series 2015 Revenue Bonds, Series 2019 Bonds, Series 2021A Bonds, Series 2021B Total June 30, Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest 2024 $ 460,000 $ 169,848 $ 315,000 $ 80,375 $ 1,255,000 $ 171,038 $ 215,000 $ 174,538 $ 340,000 $ 448,100 $ 225,000 $ 260,412 $ 2,810,000 $ 1,304,311 2025 490,000 155,598 325,000 64,375 1,305,000 120,838 225,000 168,088 355,000 434,200 225,000 258,567 2,925,000 1,201,666 2026 505,000 141,304 330,000 49,650 1,350,000 68,638 230,000 161,338 370,000 419,700 225,000 255,900 3,010,000 1,096,530 2027 520,000 126,560 340,000 37,950 - 21,388 240,000 149,838 385,000 404,600 1,640,000 242,082 3,125,000 982,418 2028 535,000 110,401 355,000 27,525 - 21,388 255,000 137,838 400,000 388,900 1,670,000 215,587 3,215,000 901,639 2029 555,000 93,023 365,000 16,725 - 21,388 265,000 125,088 415,000 372,600 1,700,000 186,092 3,300,000 814,916 2030 570,000 74,599 375,000 5,625 - 21,388 280,000 111,838 430,000 355,700 1,730,000 154,357 3,385,000 723,507 2031 590,000 54,869 - - - 21,388 290,000 100,638 450,000 338,100 1,765,000 120,272 3,095,000 635,267 2032 615,000 33,781 - - - 21,388 305,000 89,038 470,000 319,700 1,800,000 83,902 3,190,000 547,809 2033 635,000 11,509 - - - 21,388 315,000 76,838 490,000 300,500 1,840,000 45,310 3,280,000 455,545 2034 - - - - - 21,388 325,000 64,238 510,000 280,500 175,000 23,031 1,010,000 389,157 2035 - - - - - 21,388 335,000 54,488 530,000 259,700 180,000 18,150 1,045,000 353,726 2036 - - - - - 21,388 345,000 44,438 550,000 238,100 185,000 13,131 1,080,000 317,057 2037 - - - - - 21,388 355,000 34,088 570,000 215,700 190,000 7,975 1,115,000 279,151 2038 - - - - - 21,388 370,000 23,438 590,000 195,450 195,000 2,681 1,155,000 242,957 2039 - - - - 290,000 21,387 380,000 11,875 610,000 177,450 - - 1,280,000 210,712 2040 - - - - 300,000 10,875 - - 630,000 158,850 - - 930,000 169,725 2041 - - - - - - - - 650,000 139,650 - - 650,000 139,650 2042 - - - - - - - - 670,000 119,850 - - 670,000 119,850 2043 - - - - - - - - 690,000 99,450 - - 690,000 99,450 2044 - - - - - - - - 710,000 78,450 - - 710,000 78,450 2045 - - - - - - - - 730,000 56,850 - - 730,000 56,850 2046 - - - - - - - - 755,000 34,575 - - 755,000 34,575 2047 - - - - - - - - 775,000 11,625 - - 775,000 11,625 Total $ 5,475,000 $ 971,492 $ 2,405,000 $ 282,225 $ 4,500,000 $ 649,432 $ 4,730,000 $ 1,527,645 $ 13,075,000 $ 5,848,300 $ 13,745,000 $ 1,887,449 $ 43,930,000 $ 11,166,543 95 [[page 109]] City of Gallatin, Tennessee Schedule of Changes in Lease Obligations For the Fiscal Year Ended June 30, 2023 Paid and/or Original Date Issued matured amount Interest of Maturity Outstanding during during Remeasure- Outstanding Description of Indebtedness of issue rate issue date July 1, 2022 period period ments June 30, 2023 Business-type Activities Leases Payable Through Electric Fund RJ Young - Copiers $ 14,233 2.26% 3/15/18 4/15/23 $ 2,435 $ - $ 2,435 $ - $ - RJ Young - Printer $ 6,235 2.26% 6/17/19 6/17/24 2,574 - 1,275 - 1,299 Total leases payable - Business-type Activities $ 5,009 $ - $ 3,710 $ - $ 1,299 96 [[page 110]] City of Gallatin, Tennessee Schedule of Lease Obligations, Principal, and Interest Requirements by Fiscal Year June 30, 2023 Fiscal year Equipment Lease ending RJ Young - Printer June 30, Principal Interest Total 2024 1,299 16 1,315 Total $ 1,299 $ 16 $ 1,315 97 [[page 111]] City of Gallatin, Tennessee Schedule of Electric Rates in Force (Unaudited) June 30, 2023 Residential Rate Customer charge per month $ 16.55 Energy charge Per KwH per month 0.09772 General Power Rate GSA (Demand 0 - 5,000 kW) Customer charge per month $ 19.60 Less than 50 kW and not more than 1500 kWh All kWh per kWh 0.11029 Between 51 and 1,000 kW with energy usage over 15000 kWh Customer charge per month $ 60.00 0 to 50 kW No charge More than 50 to 1,000 kW $ 10.65 First 15,000 kWh per month 0.10287 Additional kWh per month 0.07206 Between 1,001 and 5,000 kW Customer charge per month $ 200.00 0 to 1,000 kW $ 10.70 More than 1,000 kW $ 14.87 All kWh per kWh 0.07199 GSB (Demand from 5,001 to 15,000 kW) Customer charge per month $ 1,500 Demand charge Onpeak demand $10.87 per kW Max demand $5.21 per kW Offpeak excess of contract demand $10.87 per kW Energy charge Onpeak kWh 0.08891 Offpeak kWh first 200 HUD 0.06400 Offpeak kWh next 200 HUD 0.02942 Additional HUD 0.02601 MSB Customer charge per month $ 1,500 Demand charge Onpeak demand $10.24 per kW Max demand $2.26 per kW Offpeak excess of contract demand $10.24 per kW Energy charge Onpeak kWh 0.08139 Offpeak kWh first 200 HUD 0.05639 Offpeak kWh next 200 HUD 0.02670 Additional HUD 0.02415 Continued See independent auditor's report 98 [[page 112]] City of Gallatin, Tennessee Schedule of Electric Rates in Force (Unaudited) June 30, 2023 General Power Rate MSD (Demand over 25,000 kW) Customer charge per month $ 1,500 Demand charge Onpeak demand $10.24 per kW Max demand $1.64 per kW Offpeak excess of contract demand $10.24 per kW Energy charge Onpeak kWh 0.07800 Offpeak kWh first 200 HUD 0.05299 Offpeak kWh next 200 HUD 0.02642 Additional HUD 0.02583 Outdoor lighting (including pole) 73 LED $ 10.97 113 LED $ 15.99 100 Watt HPS $ 9.36 150 Watt HPS $ 12.45 175 Watt HPS $ 9.95 250 Watt HPS $ 15.73 400 Watt HPS $ 20.19 Outdoor lighting kWh 0.07425 Number of Customers at Year End Residential 21,549 Commercial 3,238 Street and athletic fields 59 Individually billed outdoor lighting 29 24,875 See independent auditor's report 99 [[page 113]] City of Gallatin, Tennessee Schedule of Water and Sewer Rates in Force (Unaudited) June 30, 2023 Water Department Inside city limits All customers $11.92 for first 250 cubic feet $3.25 per 100 cubic feet in excess of 250 cubic feet Outside city limits All customers $17.80 for first 250 cubic feet $4.88 per 100 cubic feet in excess of 250 cubic feet Sewer Department Inside city limits All customers $11.92 for first 250 cubic feet $3.25 per 100 cubic feet in excess of 250 cubic feet Outside city limits All customers $17.80 for first 250 cubic feet $4.88 per 100 cubic feet in excess of 250 cubic feet Water and Sewer Number of customers 17,055 See independent auditor's report 100 [[page 114]] City of Gallatin, Tennessee Schedule of Gas Rates in Force (Unaudited) June 30, 2023 Residential and Commercial, Inside City First 200 cubic $ 3.50 All usage over 200 cubic feet, per ccf 0.79 Residential and Commercial, Outside City First 200 cubic $ 3.85 All usage over 200 cubic feet, per ccf 0.87 Industrial All usage, per ccf $ 0.79 Preferred interruptible All usage, per ccf $ 0.49 Interruptible First 100,000 cubic feet $ 0.40 All usage over 100,000 cubic, per ccf 0.35 Number of Customers Residential 13,059 Commercial 798 Industrial 29 Interruptible 4 13,890 See independent auditor's report 101 [[page 115]] Statistical Section [[page 116]] City of Gallatin, Tennessee Statistical Section Summary Page June 30, 2023 This part of the City of Gallatin, Tennessee’s Annual Comprehensive Financial Report presents detailed information as a context for understanding what the information in the financial statements, the note disclosures, and the required supplementary information says about the City’s overall financial health. Page Financial Trends Information 102-106 These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over time. Revenue Capacity Information 107-109 These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax. Debt Capacity Information These schedules present information to help the reader assess the affordability of the 110-112 government's current level of outstanding debt and the government's ability to issue additional debt in the future. Demographic and Economic Information 113-114 These schedules present information to help the reader understand the environment within which the government's financial activities take place. Operating Information 115-117 These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government provides and the activities it performs. Sources: Except where noted, the information in these schedules is derived from the City’s Annual Comprehensive Financial Reports for the relevant years. [[page 117]] City of Gallatin, Tennessee Financial Trends Information Net Position by Component - Last Ten Fiscal Years 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Governmental Activities Net investment in capital assets 148,606,993 $ 133,281,647 $ 106,414,737 $ 108,846,455 $ 89,932,089 $ 75,402,931 $ 67,569,997 $ 58,836,309 $ 54,468,094 $ 48,317,805 Restricted 13,571,100 13,222,353 12,609,720 1,512,468 1,325,054 1,298,730 1,205,180 593,324 535,180 615,631 Unrestricted 53,979,304 49,343,959 39,901,584 24,032,975 17,563,265 17,336,772 17,025,218 15,409,177 13,898,373 14,232,475 Total net position $ 216,157,397 $ 195,847,959 $ 158,926,041 $ 134,391,898 $ 108,820,408 94,038,433 85,800,395 $ 74,838,810 $ 68,901,647 $ 63,165,911 Business-type Activities Net investment in capital assets $ 175,181,523 $ 161,498,167 157,292,864 $ 142,206,982 $ 136,551,453 $ 127,605,680 $ 120,808,485 $ 119,097,460 $ 112,025,506 $ 107,506,931 Restricted 214,846 3,055,394 195,257 7,729 7,702 7,675 7,648 7,621 7,572 7,522 Unrestricted 51,089,336 54,246,029 45,895,729 47,714,045 37,092,490 35,652,720 37,926,071 31,826,566 35,009,804 32,232,921 Total net position $ 226,485,705 $ 218,799,590 $ 203,383,850 $ 189,928,756 $ 173,651,645 $ 163,266,075 $ 158,742,204 $ 150,931,647 $ 147,042,882 $ 139,747,374 Primary Government Net investment in capital assets $ 323,788,516 $ 294,779,814 $ 263,707,601 $ 251,053,437 $ 226,483,542 $ 203,008,611 $ 188,378,482 $ 177,933,769 $ 166,493,600 $ 155,824,736 Restricted 13,785,946 16,277,747 12,804,977 1,520,197 1,332,756 1,306,405 1,212,828 600,945 542,752 623,153 Unrestricted 105,068,640 103,589,988 85,797,313 71,747,020 54,655,755 52,989,492 54,951,289 47,235,743 48,908,177 46,465,396 Total net position $ 442,643,102 $ 414,647,549 $ 362,309,891 $ 324,320,654 $ 282,472,053 $ 257,304,508 $ 244,542,599 $ 225,770,457 $ 215,944,529 $ 202,913,285 See independent auditor's report 102 [[page 118]] City of Gallatin, Tennessee Financial Trend Information Change in Net Position - Last Ten Fiscal Years (Prepared using the accrual basis of accounting) Governmental activities: 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Revenues: Program revenues: Charges for services $ 12,938,439 $ 12,275,819 $ 10,289,687 $ 8,977,852 $ 8,356,873 $ 7,863,631 $ 7,418,973 $ 6,069,552 $ 5,538,642 $ 6,526,770 Operating grants & contributions 3,895,662 4,389,561 2,421,030 2,923,203 2,616,883 1,865,673 1,275,976 1,064,123 1,234,427 1,527,429 Capital grants & contributions 8,345,507 15,384,481 12,482,796 20,335,480 12,308,868 6,010,371 8,921,557 4,790,834 10,285,239 3,533,738 General revenues: Property taxes 14,214,670 13,503,462 12,917,220 12,215,190 11,906,890 11,235,726 11,367,951 10,878,306 10,273,533 9,930,089 Sales taxes 20,594,060 19,014,773 15,317,664 12,826,752 12,145,080 11,516,561 11,064,266 10,074,289 9,330,486 8,661,499 Franchise taxes 397,976 451,706 507,514 465,305 487,103 468,690 466,766 448,730 421,534 385,802 Alcoholic beverage taxes 2,137,608 2,099,402 1,965,642 1,766,980 1,563,354 1,522,812 1,509,842 1,260,296 1,251,420 1,165,299 Business taxes 2,315,524 2,008,558 1,404,790 1,127,484 1,014,325 949,546 936,708 818,811 756,560 680,446 Income taxes 755 355,086 414,371 778,118 565,252 439,386 662,104 946,308 913,636 793,306 Other sources 1,356,449 10,807,740 3,512,304 375,946 1,354,312 540,551 480,686 226,818 230,319 240,216 Unrestricted interest income 847,158 81,819 240,425 313,968 298,873 303,527 246,354 115,184 68,994 79,958 In lieu of taxes and transfers 2,341,210 2,416,007 2,505,134 1,971,409 1,610,234 1,635,255 1,699,195 1,640,386 1,545,670 1,448,787 Total revenues 69,385,018 82,788,414 63,978,577 64,077,687 54,228,047 44,351,729 46,050,378 38,333,637 41,850,460 34,973,339 Expenses: General government 11,491,711 10,679,488 9,568,230 12,362,858 10,194,485 8,545,515 7,930,678 7,186,551 6,432,191 5,147,411 Public safety 21,445,885 19,887,020 17,489,772 15,280,509 15,685,627 14,939,109 14,842,150 12,701,861 12,139,618 11,778,255 Engineering 3,045,455 2,112,141 638,392 622,525 2,300,750 1,907,119 2,224,831 1,643,277 1,611,956 1,412,832 Environmental services 3,499,967 3,264,572 3,125,244 2,796,681 2,194,040 2,109,615 1,788,412 1,701,497 1,682,507 1,779,918 Animal control - - - - - - - - 123,665 113,487 Public works 815,980 826,884 774,681 674,693 585,600 705,505 568,139 552,190 362,748 1,163,412 Highways, streets, and roadways 1,700,671 1,500,643 1,405,170 1,136,264 1,252,628 1,556,403 1,174,314 1,359,004 1,457,922 1,403,207 Vehicle maintenance 415,838 638,291 589,459 617,315 612,519 562,563 549,748 459,858 418,068 420,964 Parks and recreation 5,579,699 5,760,606 4,950,915 3,787,643 4,286,418 4,302,313 4,639,151 4,361,499 4,265,685 4,043,815 Economic development 477,555 556,451 528,172 572,306 816,593 615,343 448,174 1,622,199 6,770,860 444,972 Tourism - - - 57,039 123,052 - - - - - Interest on debt 602,819 640,400 374,399 598,364 702,384 765,919 923,196 808,538 653,094 481,455 Total expenses 49,075,580 45,866,496 39,444,434 38,506,197 38,754,096 36,009,404 35,088,793 32,396,474 35,918,314 28,189,728 Change in net position $ 20,309,438 $ 36,921,918 $ 24,534,143 $ 25,571,490 $ 15,473,951 $ 8,342,325 $ 10,961,585 $ 5,937,163 $ 5,932,146 $ 6,783,611 See independent auditor's report 103 [[page 119]] City of Gallatin, Tennessee Financial Trend Information Change in Net Position - Last Ten Fiscal Years (Prepared using the accrual basis of accounting) Business-type activities: 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Revenues: Program revenues: Charges for services $ 115,696,153 $ 108,490,786 $ 95,741,011 $ 96,304,597 $ 104,274,429 $ 102,309,298 $ 99,131,412 $ 94,763,804 $ 98,670,740 $ 100,225,082 Capital grants & contributions 6,412,212 8,438,231 6,341,397 10,898,190 4,907,752 5,623,904 3,508,042 2,490,314 1,485,205 2,317,854 General revenues: Other sources 384 171,323 105,925 - - - 147 10,000 - 487 Unrestricted interest income 886,820 180,733 316,711 328,769 229,021 197,243 134,055 142,192 108,911 95,539 Total revenues 122,995,569 117,281,073 102,505,044 107,531,556 109,411,202 108,130,445 102,773,656 97,406,310 100,264,856 102,638,962 Expenses: Electric 77,786,114 67,411,765 61,466,937 64,715,592 70,565,030 68,464,520 68,658,346 66,077,111 65,953,465 65,344,259 Gas 19,001,406 17,460,412 12,390,484 14,208,176 13,612,534 13,482,880 12,817,606 12,360,729 14,620,277 16,443,781 Water & Sewer 16,897,130 15,120,466 13,300,552 10,525,253 13,321,850 13,115,652 11,787,952 12,582,400 10,769,977 11,170,248 In lieu of taxes - transfer 1,624,804 1,872,093 1,891,977 1,805,424 1,610,234 1,635,255 1,699,195 1,640,386 1,545,670 1,448,787 Total expenses 115,309,454 101,864,736 89,049,950 91,254,445 99,109,648 96,698,307 94,963,099 92,660,626 92,889,389 94,407,075 Change in net position 7,686,115 15,416,337 13,455,094 16,277,111 10,301,554 11,432,138 7,810,557 4,745,684 7,375,467 8,231,887 Total change in net position $ 27,995,553 $ 52,338,255 $ 37,989,237 $ 41,848,601 $ 25,775,505 $ 19,774,463 $ 18,772,142 $ 10,682,847 $ 13,307,613 $ 15,015,498 See independent auditor's report 104 [[page 120]] City of Gallatin, Tennessee Financial Trend Information Fund Balances of Governmental Funds - Last Ten Fiscal Years (Prepared using the accrual basis of accounting) 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Governmental Funds (Post-GASB 54) Nonspendable $ 100,170 $ 99,135 $ 85,469 $ 82,177 $ 674,250 $ 1,169,853 $ 1,612,302 $ 1,065,869 $ 173,269 $ 86,851 Restricted 13,663,068 13,103,487 12,647,277 6,877,193 1,289,029 1,366,992 1,176,985 583,621 531,907 579,606 Committed 1,314,976 98,506 89,508 103,873 156,408 156,408 284,987 209,987 205,085 205,085 Assigned 59,986 400,089 2,810,969 58,712 7,400,387 11,899,028 12,626,737 16,335,657 8,011,003 2,734,115 Unassigned 53,749,515 43,461,521 29,343,786 18,722,398 16,287,472 17,248,650 17,730,397 16,180,042 13,232,920 11,455,850 $ 68,887,715 $ 57,162,738 $ 44,977,009 $ 25,844,353 $ 25,807,546 $ 31,840,931 $ 33,431,408 $ 34,375,176 $ 22,154,184 $ 15,061,507 See independent auditor's report 105 [[page 121]] City of Gallatin, Tennessee Financial Trend Information Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years (Prepared using the accrual basis of accounting) 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Revenues Taxes $ 34,020,171 $ 31,828,287 $ 28,148,675 $ 24,907,697 $ 23,082,274 $ 22,304,176 $ 21,677,227 $ 20,117,243 $ 18,988,744 $ 18,393,292 Licenses and permits 3,694,996 3,633,533 3,247,237 2,279,208 2,146,030 2,542,185 2,187,478 1,093,853 760,459 467,638 Fines and penalties 823,041 658,741 673,966 691,541 737,197 785,160 922,423 983,427 1,051,142 2,556,501 Charges for services 8,420,402 7,978,910 6,285,822 6,005,756 5,476,634 4,534,678 4,302,069 3,984,098 3,739,436 3,481,559 Intergovernmental 17,046,912 19,963,272 16,201,370 14,437,262 10,628,819 6,717,563 6,616,702 10,457,840 14,007,953 8,668,804 Other 2,831,318 3,288,678 4,479,403 2,683,304 2,371,227 1,315,537 884,022 414,025 575,308 708,339 Total revenues 66,836,840 67,351,421 59,036,473 51,004,768 44,442,181 38,199,299 36,589,921 37,050,486 39,123,042 34,276,133 Expenditures General government 9,634,216 8,648,829 7,717,866 7,687,329 8,486,465 7,609,102 6,723,566 5,932,888 5,471,142 4,825,287 Public safety 23,531,336 18,697,042 15,764,227 15,439,576 15,118,065 14,447,340 14,122,444 12,181,199 11,707,728 11,452,818 Engineering 2,857,815 2,114,553 638,392 621,511 2,140,367 1,902,729 2,219,984 1,643,528 1,611,956 1,353,632 Environmental Services 3,295,676 3,087,746 2,819,961 2,783,382 1,993,528 1,921,514 1,788,412 1,707,426 1,704,725 1,641,126 Animal control - - - - - - - - 123,665 113,487 Public Works 3,056,827 827,963 765,125 670,407 358,438 429,269 330,388 294,737 360,112 453,374 Highway and streets 1,437,998 1,127,266 1,045,433 1,137,622 1,248,681 1,559,615 1,168,778 1,227,048 1,254,942 1,374,830 Vehicle maintenance 429,544 639,633 585,193 614,540 558,341 558,653 551,334 496,426 418,068 418,626 Parks and recreation 5,527,163 4,982,212 4,188,436 3,786,654 4,258,583 4,292,539 4,309,104 4,014,097 3,936,723 3,763,086 Economic development agency 506,618 557,630 521,733 557,726 813,666 743,864 445,448 1,622,169 6,769,860 444,972 Tourism - - - 57,039 123,052 - - - - - Debt Service: Principal 1,780,000 1,745,000 1,395,000 1,355,000 1,795,000 1,839,745 1,754,475 1,205,000 1,385,000 860,000 Interest 911,850 970,589 796,360 738,850 808,775 862,768 892,232 572,156 245,373 403,564 Other 1,253 1,400 - - - - - - - - Capital outlay 3,620,706 13,637,922 16,670,921 17,324,244 13,586,576 5,257,893 4,926,719 7,385,042 7,610,707 4,787,847 Total expenditures 56,591,002 57,037,785 52,908,647 52,773,880 51,289,537 41,425,031 39,232,884 38,281,716 42,600,001 31,892,649 Excess(deficiency) of revenues over (under) expenditures 10,245,838 10,313,636 6,127,826 (1,769,112) (6,847,356) (3,225,732) (2,642,963) (1,231,230) (3,476,959) 2,383,484 Other financing sources (uses) Premiums on bonds issued - - 1,387,853 - - - - 1,163,285 884,045 - Proceeds of long-term debt - - 9,725,000 - - - - 11,040,000 14,185,000 - Bond issuance cost - - - - - - - (121,358) (155,986) - Repayment from debt refunding - - - - - - - - (6,098,495) - In lieu of tax payments from utility 1,824,463 1,872,093 1,891,977 1,805,919 1,610,234 1,635,255 1,699,195 1,640,386 1,545,670 1,448,787 Operating transfers in - - - - - - - - - 2,183,420 Operating transfers out (345,324) - - - - - - - - (2,183,420) Total other financing sources (uses) 1,479,139 1,872,093 13,004,830 1,805,919 1,610,234 1,635,255 1,699,195 13,722,313 10,360,234 1,448,787 Net changes in fund balances $ 11,724,977 12,185,729 $ 19,132,656 $ 36,807 $ (5,237,122) $ (1,590,477) $ (943,768) $ 12,491,083 $ 6,883,275 $ 3,832,271 Debt service as a percentage of non-capital expenditures 5.35% 6.67% 6.44% 6.28% 7.42% 8.08% 8.36% 6.10% 4.89% 4.89% See independent auditor's report 106 [[page 122]] City of Gallatin, Tennessee Revenue Capacity Information Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Tax Years Appraised Value Assessed Total Total Taxable Value as a Direct Tax Assessed Estimated Actual Percentage of Tax Year Value Taxable Value Actual Value Rate* 2023 $ 1,835,956,847 $ 6,536,211,546 28.09% $ 0.80 2022 $ 1,749,990,933 $ 6,184,000,396 28.30% $ 0.80 2021 $ 1,639,821,560 $ 5,804,981,995 28.25% $ 0.80 2020 $ 1,568,403,152 $ 5,505,851,345 28.49% $ 0.80 2019 $ 1,379,876,000 $ 5,345,047,430 25.82% $ 0.80 2018 $ 1,085,548,889 $ 3,758,217,774 28.88% $ 0.99 2017 $ 1,063,378,081 $ 3,688,978,706 28.83% $ 0.99 2016 $ 1,030,640,007 $ 3,498,839,903 29.46% $ 0.99 2015 $ 970,755,253 $ 3,050,696,936 31.82% $ 0.99 2014 $ 973,251,111 $ 3,032,204,783 32.10% $ 0.99 * Per $100 of assessed valuation. Note - Property of the City is reappraised periodically. For this reason, appraised value is considered All information was pulled from the tax levies by the year noted. See independent auditor's report 107 [[page 123]] City of Gallatin, Tennessee Revenue Capacity Information Principal Property Tax Payers - Current Year and Nine Years Ago 2023 2014 Percent Percent Assessed of Total Assessed of Total Taxpayer Valuation Valuation Valuation Valuation Sumner Regional Medical Ctr $ 89,320,700 4.87% $ 83,926,200 8.62% Revere At Hidden Creek LLC $ 62,333,700 3.40% $ - 0.00% GAP INC $ 52,583,300 2.86% $ 7,541,448 0.77% Green Lea Prop LLC $ 42,608,700 2.32% $ - 0.00% Wellington Farms Holdings DE LLC $ 37,142,900 2.02% $ 31,800,000 3.27% SP RGA Stoneridge LP $ 36,696,400 2.00% $ - 0.00% KJPL Gallatin LLC $ 33,376,500 1.82% $ - 0.00% Vintage Foxland Harbor LLC $ 28,994,900 1.58% $ - 0.00% WMCI Nasvhille VI LLC $ 28,079,300 1.53% $ - 0.00% Salga Plastics INC $ 11,206,269 0.61% $ - 0.00% Sumner Regional Medical Center $ 20,565,714 1.12% $ 5,106,627 0.52% MAA Brik LLC $ 25,523,900 1.39% $ 23,513,500 2.42% Trails at Hunter Point LLC $ 25,221,700 1.37% $ - 0.00% Foxland Crossing LLC $ 24,956,300 1.36% $ - 0.00% Hoeganes Corp $ 9,686,734 0.53% $ 15,181,627 1.56% Total $ 528,297,017 28.78% $ 167,069,402 17.17% Information was obtained from the property tax rolls for the years noted. See independent auditor's report 108 [[page 124]] City of Gallatin, Tennessee Revenue Capacity Information Property Tax Levies and Collections - Last Ten Fiscal Years Total Collections Collections as Fiscal Assessed Total Tax Percentage in Subsequent Total Percentage of Year Valuation Levy Amount of Levy Years Collections Total Levy 2023 $ 1,835,956,847 $ 14,679,193 $ 13,940,753 94.97% $ 78,915 $ 14,019,668 95.51% 2022 $ 1,835,956,847 $ 14,038,125 $ 13,127,681 93.51% $ 100,687 $ 13,228,368 94.23% 2021 $ 1,749,990,933 $ 12,917,234 $ 12,578,223 97.38% $ 196,398 $ 12,774,621 98.90% 2020 $ 1,639,821,560 $ 12,158,928 $ 12,061,074 99.20% $ - $ 12,061,074 99.20% 2019 $ 1,568,403,152 $ 11,039,008 $ 10,962,352 99.31% $ 62,482 $ 11,024,834 99.87% 2018 $ 1,379,876,000 $ 10,746,934 $ 10,482,842 97.54% $ 104,110 $ 10,586,952 98.51% 2017 $ 1,085,548,889 $ 10,527,443 $ 10,151,671 96.43% $ 892,798 $ 11,044,469 104.91% 2016 $ 1,063,378,081 $ 10,203,336 $ 9,756,265 95.62% $ 368,379 $ 10,124,644 99.23% 2015 $ 1,030,640,007 $ 9,610,477 $ 9,447,813 98.31% $ 257,653 $ 9,705,466 100.99% 2014 $ 970,755,253 $ 9,635,186 $ 9,401,063 97.57% $ 343,744 $ 9,744,807 101.14% Assessed valuation amount was taken from the property tax levy for the year noted. See independent auditor's report 109 [[page 125]] City of Gallatin, Tennessee Debt Capacity Information Ratios of Outstanding Debt by Type - Last Ten Fiscal Years Governmental Activities Business-type Activities Per Capita General Total Total Percentage Fiscal Personal Obligation Total Revenue & Business- type Primary Debt Per of personal Year Population* Income** Bonds Notes Governmental Tax Bonds Notes Activities Government Capita income 2023 51,653 $ 34,822 $ 24,355,000 $ - $ 24,355,000 $ 43,930,000 $ - $ 43,930,000 $ 68,285,000 1,321.99 3.80% 2022 50,160 $ 32,912 $ 26,135,000 $ - $ 26,135,000 $ 46,620,000 $ - $ 46,620,000 $ 72,755,000 1,450.46 4.41% 2021 44,431 $ 32,996 $ 27,880,000 $ - $ 27,880,000 $ 33,765,000 $ - $ 33,765,000 $ 61,645,000 1,387.43 4.20% 2020 42,918 $ 30,203 $ 19,550,000 $ - $ 19,550,000 $ 35,780,000 $ - $ 35,780,000 $ 55,330,000 1,289.20 4.27% 2019 40,457 $ 28,945 $ 20,905,000 $ - $ 20,905,000 $ 37,795,000 $ - $ 37,795,000 $ 58,700,000 1,450.92 5.01% 2018 37,351 $ 26,544 $ 22,240,000 $ 549,745 $ 22,789,745 $ 33,955,000 $ - $ 33,955,000 $ 56,744,745 1,519.23 5.72% 2017 35,734 $ 26,450 $ 24,805,000 $ 1,310,000 $ 26,115,000 $ 37,560,000 $ 57,667 $ 37,617,667 $ 63,732,667 1,783.53 6.74% 2016 34,473 $ 26,708 $ 14,570,000 $ 1,710,000 $ 16,280,000 $ 38,890,000 $ 219,944 $ 39,109,944 $ 55,389,944 1,606.76 6.02% 2015 33,347 $ 26,596 $ 6,985,000 $ 2,090,000 $ 9,075,000 $ 33,185,000 $ 382,221 $ 33,567,221 $ 42,642,221 1,278.74 4.81% 2014 32,307 $ 25,534 $ 7,480,000 $ 2,455,000 $ 9,935,000 $ 34,465,000 $ 544,498 $ 35,009,498 $ 44,944,498 1,391.17 5.45% * Source for population: U.S. Census Bureau ** Personal income amounts were obtained from State estimates. See independent auditor's report 110 [[page 126]] City of Gallatin, Tennessee Debt Capacity Information Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years Governmental Activities Ratio of General Obligation Net General General Business-type Total Debt to Obligation Fiscal Obligation Total Activities Primary Appraised Debt per Year Population* Bonds Notes Governmental Notes Government Assessed Value Value Capita 2023 51,653 $ 24,355,000 $ - $ 24,355,000 $ - $ 24,355,000 $ 1,835,956,847 1.33% $ 471.51 2022 50,160 $ 26,135,000 $ - $ 26,135,000 $ - $ 26,135,000 $ 1,749,990,933 1.49% $ 521.03 2021 44,431 $ 27,880,000 $ - $ 27,880,000 $ - $ 27,880,000 $ 1,639,821,560 1.70% $ 627.49 2020 42,918 $ 19,550,000 $ - $ 19,550,000 $ - $ 19,550,000 $ 1,568,403,152 1.25% $ 455.52 2019 40,457 $ 20,905,000 $ - $ 20,905,000 $ - $ 20,905,000 $ 1,379,876,000 1.51% $ 516.72 2018 37,351 $ 22,240,000 $ 549,745 $ 22,789,745 $ - $ 22,789,745 $ 1,085,548,889 2.10% $ 610.15 2017 35,734 $ 24,805,000 $ 1,310,000 $ 26,115,000 $ 57,667 $ 26,172,667 $ 1,063,378,081 2.46% $ 732.43 2016 34,473 $ 14,570,000 $ 1,710,000 $ 16,280,000 $ 219,944 $ 16,499,944 $ 1,030,640,007 1.60% $ 478.63 2015 33,347 $ 6,985,000 $ 2,090,000 $ 9,075,000 $ 382,221 $ 9,457,221 $ 970,755,253 0.97% $ 283.60 2014 32,307 $ 7,480,000 $ 2,455,000 $ 9,935,000 $ 544,498 $ 10,479,498 $ 973,251,111 1.08% $ 324.37 * Source for population: U.S. Census Bureau ** Personal income amounts were obtained from State estimates. See independent auditor's report 111 [[page 127]] City of Gallatin, Tennessee Debt Capacity Information Pledged Revenue Coverage - Last Ten Fiscal Years Net Revenue Utility Less: Available Service Operating For Debt Percent of Fiscal Year Charges Expenses Service Principal Interest Total Coverage 2023 $ 38,290,134 $ 34,709,510 $ 3,580,624 $ 2,690,000 $ 1,494,168 $ 4,184,168 85.58% 2022 $ 38,560,935 $ 31,115,155 $ 7,445,780 $ 2,075,000 $ 1,340,498 $ 3,415,498 218.00% 2021 $ 31,047,874 $ 19,860,727 $ 11,187,147 $ 2,015,000 $ 1,410,424 $ 3,425,424 326.59% 2020 $ 28,473,862 $ 17,853,481 $ 10,620,381 $ 1,775,000 $ 1,268,910 $ 3,043,910 348.91% 2019 $ 30,554,008 $ 20,257,578 $ 10,296,430 $ 2,015,000 $ 1,418,722 $ 3,433,722 299.86% 2018 $ 14,593,834 $ 8,546,734 $ 6,047,100 $ 1,730,000 $ 1,326,336 $ 3,056,336 197.85% 2017 $ 14,190,626 $ 7,221,685 $ 6,968,941 $ 1,830,000 $ 1,403,935 $ 3,233,935 215.49% 2016 $ 13,525,181 $ 7,389,032 $ 6,136,149 $ 1,775,000 $ 1,460,061 $ 3,235,061 189.68% 2015 $ 12,112,544 $ 6,651,379 $ 5,461,165 $ 1,330,000 $ 1,101,320 $ 2,431,320 224.62% 2014 $ 12,259,008 $ 6,548,582 $ 5,710,426 $ 1,280,000 $ 1,420,441 $ 2,700,441 211.46% Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. Operating expenses do not include interest, depreciation, or amortization expenses. Sales tax increment bonds are backed by the sales tax revenue produced by the sales tax rate in effect when the bonds were issued (2.5%) applied to the increase in retail sales in the Commons shopping area since the time. See independent auditor's report 112 [[page 128]] City of Gallatin, Tennessee Demographic and Economic Information Demographic and Economic Statistics - Last Ten Fiscal Years Per Capita County County Fiscal City County Personal Personal Median School Unemployment Year Population* Population* Income** Income** Age* Enrollment*** Rate**** 2023 51,653 203,858 $ 62,881 $ 34,822 38.4 30,685 2.90% 2022 50,160 200,557 $ 60,930 $ 32,912 38.4 30,512 3.00% 2021 44,431 196,281 $ 59,745 $ 32,996 39.1 30,425 4.50% 2020 42,918 191,283 $ 55,825 $ 30,203 37.9 29,540 7.50% 2019 40,457 187,149 $ 53,794 $ 28,945 37.6 29,400 3.20% 2018 37,351 183,545 $ 49,041 $ 26,544 37.2 29,196 2.80% 2017 35,734 180,063 $ 47,957 $ 26,450 36.0 29,059 2.30% 2016 34,473 175,989 $ 46,441 $ 26,708 37.0 29,060 4.10% 2015 33,347 172,706 $ 46,102 $ 26,596 37.0 28,715 4.70% 2014 32,307 168,888 $ 45,603 $ 25,534 37.4 28,361 5.60% * U.S. Census Bureau ** State Estimate *** Sumner County School Board **** Tennessee State Department of Labor, Statistical Services Note: Population, median age, and education level information are based on surveys conducted during the last quarter of the calendar year. Personal income information is a total for the year. Unemployment rate information is an adjusted yearly average. School enrollment is based on the census at the start of the school year. See independent auditor's report 113 [[page 129]] City of Gallatin, Tennessee Demographic and Economic Information Principal Employers - Current Year and Nine Years Ago 2023 2014 Percentage Percentage of Total City of Total City Employer Employees Rank Employment Employees Rank Employment Sumner County Government & Schools 4,675 1 21.25% 3,980 1 35.19% Gap, Inc. 2,388 2 10.85% 850 3 7.52% Sumner Regional Medical Center 1,075 3 4.89% 1,090 2 9.64% ABC Technologies 785 4 3.57% 211 10 1.87% Volunteer State Community College 753 5 3.42% N/A N/A N/A City of Gallatin 587 6 2.67% 380 6 3.36% Servpro Corporate Headquarters 438 7 1.99% 432 5 3.82% YAPP USA 378 8 1.72% N/A N/A N/A NIC Global 303 9 1.38% N/A N/A N/A Simpson Storng Tie 240 10 1.09% N/A N/A N/A Walmart N/A N/A N/A 450 4 3.98% YSF Automotive Systems N/A N/A N/A 353 7 3.12% Hoeganaes N/A N/A N/A 243 8 2.15% R.R. Donnelley & Sons N/A N/A N/A 225 9 1.99% Source: Tennessee Department of Labor Workforce & Development and City of Gallatin's Economic Development See independent auditor's report 114 [[page 130]] City of Gallatin, Tennessee Operating Information Full-Time Equivalent City Government Employees by Function/Program - Last Ten Fiscal Years Function/Program 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 General Government Mayor's Office 3 3 3 3 3 3 3 3 3 3 Planning 9 8 8 8 9 9 7 7 6 6 Finance 6 6 7 7 6 6 6 5 5 8 City Attorney 4 4 4 4 4 4 4 3 3 3 Recorder 6 7 6 6 6 7 6 6 6 7 Personnel 5 5 5 4 4 3 3 3 2 2 Codes 17 17 18 15 15 15 12 9 10 7 Economic Development Agency 3 3 3 3 3 3 3 3 2 2 Information Technology 8 8 8 8 7 7 7 6 5 0 Public Safety Police 91 97 97 97 99 99 99 98 93 94 Fire 95 98 97 97 96 98 85 68 72 72 Public Works 50 52 49 52 48 50 47 48 47 49 Leisure Services 29 30 30 29 26 29 29 31 31 31 Engineering 15 10 10 9 9 8 7 6 7 6 Public Utilities 86 84 88 92 93 95 86 88 87 82 Golf Course - - - - - - - - - - Total 427 432 433 434 428 436 404 384 379 372 Sources: PERSONNEL OFFICIAL *AUDITS PRIOR YEARS 2013 numbers include 3 PPT employees. It does not include 11 unfilled positions (total authorized manning 377 as 6/30/13). 2016 numbers include 4 PPT employees. It does not include 12 unfilled positions (total authorized manning 396 as 6/30/16). 2017 numbers include 4 PPT employees. It does not include 15 unfilled positions (total authorized manning as 06/30/17). See independent auditor's report 115 [[page 131]] City of Gallatin, Tennessee Operating Information Operating Indicators by Function/Program - Last Ten Fiscal Years Function/Program 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Police Physical arrests 3,915 3,419 2,985 3,571 3,802 3,718 3,805 3,803 3,575 3,772 Parking violations 276 188 169 219 407 308 279 458 722 420 Traffic violations 13,826 14,847 11,720 17,065 15,334 13,436 13,824 17,393 22,643 13,231 * Red light camera citations 5,519 5,598 5,109 3,828 6,345 6,211 7,386 9,054 7,751 7,029 Fire Emergency responses 8,114 7,729 6,854 6,228 6,048 5,636 4,192 3,917 3,390 3,120 Fires extinguished 157 148 132 115 122 113 133 144 94 120 Inspections 8,132 4,552 3,296 2,530 2,526 2,423 1,658 1,664 1,413 829 Animal Control * * Animals Restrained 296 317 288 346 519 487 576 622 N/A 388 Highways and Streets Street resurfacing (miles) 6.42 8.11 5.16 6.64 5.20 6.00 3.31 4.60 5.75 4.50 Potholes repaired 1,529 2,465 259 363 315 356 314 403 324 546 Other Public Works Utility cuts repaired N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Parks and Recreation Athletic field permits issued N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Community center admissions 150,000 150,000 150,000 150,000 270,000 270,000 270,000 240,000 240,000 230,000 Community Service Number of organization benefited 17 17 17 21 18 14 10 12 16 16 Number of services benefited 3 3 3 3 3 3 5 6 4 4 Environmental Services Tons hauled 18,629 20,506 18,599 17,625 16,432 16,171 16,142 12,224 11,413 11,376 Water New connections 530 754 715 441 406 425 380 316 330 272 Water main breaks 53 58 31 45 46 37 37 37 38 40 Utility cuts repaired 78 79 54 123 83 145 100 139 138 175 Average daily consumption 8,625 7,805 7,293 7,774 7,110 7,316 6,052 6,171 5,865 5,944 (thousands of gallons) Peak daily consumption 12,047 12,562 8,797 9,347 10,523 8,451 7,072 8,287 7,873 9,277 (thousands of gallons) Sewer Average daily treatment 7,556 8,077 7,785 8,911 7,010 6,282 5,902 5,808 6,435 6,992 (thousands of gallons) Electric Average daily consumption 2,145 2,147 2,163 2,020 2,237 2,254 2,244 2,194 2,186 2,184 (thousands of kilowatt hours) Natural Gas Average daily consumption: Summer -April/October 4,064 4,059 3,587 3,623 4,920 4,810 4,656 4,937 5,550 5,117 (thousands of cubic feet) Winter-November/March 9,029 8,335 9,124 8,211 8,507 10,445 7,454 7,644 9,078 9,660 (thousands of cubic feet) Golf Rounds played 45,000 44,145 44,145 44,145 45,000 45,000 45,000 45,000 35,000 45,000 Sources: Various city departments Notes: Indicators are not available for the general government function. See independent auditor's report 116 [[page 132]] City of Gallatin, Tennessee Operating Information Capital Asset Statistics by Function/Program - Last Ten Fiscal Years Function/Program 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Police Stations 1 1 1 1 1 1 1 1 1 1 Zone offices 4 4 4 4 4 1 1 1 1 1 Patrol units 97 80 80 96 96 91 79 78 76 73 Fire Stations 5 5 5 5 5 4 4 4 4 4 Fire trucks 12 11 11 11 11 9 9 9 8 8 Animal Control Trucks 2 2 2 2 2 2 2 2 2 2 Highways and Streets Streets (miles) 224.6 221.0 217.5 215.8 210.0 204.4 200.1 195.6 195.3 195.0 Streetlights 4,337 4,278 4,254 3,931 3,874 3,892 3,811 3,720 3,621 3,678 Traffic signals 417 438 411 411 388 380 370 362 362 354 Sidewalks (miles) 107.2 99.7 93.0 89.7 78.0 66.8 57.5 46.5 46.0 45.0 Parks and Recreation Acreage 610 610 598 598 598 532 532 532 532 532 Playgrounds 5 5 5 5 5 5 5 4 4 4 Baseball/softball diamonds 23 23 23 23 23 23 23 23 23 23 Soccer/football fields 8 8 8 8 8 8 8 8 8 8 Community centers 2 2 2 2 2 2 2 2 2 2 Volleyball Courts 4 4 4 4 4 4 4 4 4 4 Basketball Courts 6 6 6 6 6 6 6 6 6 6 Picnic Shelters 13 13 13 13 13 13 13 13 13 13 Tennis Courts 6 6 6 6 6 6 6 6 6 6 Horseshoe Pits 5 5 5 5 5 5 5 9 9 9 Fishing Piers 2 2 2 2 2 2 2 2 2 2 Swimming Pools 2 2 2 2 1 1 1 1 1 1 Walking Trail (miles) 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 Disc Golf (holes) 18 18 18 18 18 18 18 18 18 18 Model Airplane Strip 1 1 1 1 1 1 1 1 1 1 Skate Park 1 1 1 1 1 1 1 1 1 1 Environmental Services Refuse Trucks 28 25 24 24 24 23 22 22 20 21 Water Water mains (miles) 345.0 342.0 337.0 335.0 331.0 320.0 316.0 313.0 312.0 311.0 Fire hydrants 2,317 2,273 2,212 2,173 2,113 2,075 2,025 1,986 1,920 1,902 Storage capacity (thousands of gallons) 15,300 15,000 15,000 13,000 13,000 13,000 13,000 13,000 13,000 13,000 Percent of Water Loss in System 31 35 32 25 16 16 12 13 12 15 Sewer Sewer mains (miles) 273.0 270.0 264.0 257.0 254.0 244.0 240.0 236.0 234.0 233.0 Pump Stations 43 44 43 41 41 41 41 41 41 40 Natural Gas Gas lines (miles) 416.0 405.0 398.0 394.0 389.0 385.0 382.0 380.0 376.0 368.0 Golf Acres 136 136 136 136 136 136 136 136 136 136 Holes 18 18 18 18 18 18 18 18 18 18 Driving Range 1 1 1 1 1 1 1 1 1 1 Sources: Various city departments Note: No capital asset indicators are available for the general government. See independent auditor's report 117 [[page 133]] Internal Control and Compliance [[page 134]] Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Honorable Mayor and Members of the City Council City of Gallatin, Tennessee We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards), the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Gallatin, Tennessee (the City), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents, and have issued our report thereon dated December 18, 2023. Our report includes a reference to other auditors who audited the financial statements of the Electric Department, as described in our report on the City’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. Brentwood • Goodlettsville • Murfreesboro Nashville • Mt. Juliet • Dickson • Columbia TN www.bcpas.com [[page 135]] Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of This Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Blankenship CPA Group, PLLC Goodlettsville, Tennessee December 18, 2023 119 [[page 136]] Independent Auditor’s Report on Compliance for Each Major Federal Program and on Internal Control over Compliance Required by the Uniform Guidance Honorable Mayor and Members of the City Council City of Gallatin, Tennessee Report on Compliance for Each Major Federal Program Opinion on Each Major Federal Program We have audited the City of Gallatin, Tennessee’s (the City) compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended June 30, 2023. The City’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2023. Basis for Opinion on Each Major Federal Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (GAAS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); and the audit requirements of Title 2 US Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above. Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the City’s federal programs. Brentwood • Goodlettsville • Murfreesboro Nashville • Mt. Juliet • Dickson • Columbia TN www.bcpas.com [[page 137]] Auditor’s Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material, if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City’s compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the City’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. • Obtain an understanding of the City’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Report on Internal Control Over Compliance A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. 121 [[page 138]] Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Blankenship CPA Group, PLLC Goodlettsville, Tennessee December 18, 2023 122 [[page 139]] City of Gallatin, Tennessee Schedule of Findings and Questioned Costs For the Fiscal Year Ended June 30, 2023 Section I. Summary of Auditor’s Results Financial Statements Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP Unmodified Internal control over financial reporting: Material weakness identified? Yes X No Significant deficiency(ies) identified? Yes X None Reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs: Material weakness identified? Yes X No Significant deficiency(ies) identified? Yes X None Reported Type of auditor’s report issued on compliance for major federal programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with section 2 CFR 200.516(a)? Yes X No Identification of major programs: Assistance Listing Number Name of Federal Program or Cluster 20.205 U.S. Department of Transportation/ Highway Planning and Construction Cluster Dollar threshold used to distinguish between type A and type B programs $ 750,000 Auditee qualified as low-risk auditee? X Yes No 123 [[page 140]] City of Gallatin, Tennessee Summary Schedule of Prior Year Findings For the Fiscal Year Ended June 30, 2023 Financial Statement Findings Finding Number Finding Title Status 2022-001 Internal Controls over City assets Corrected Federal Award Findings and Questioned Costs Finding Number Finding Title Status N/A There were no prior findings reported. N/A Compliance and Other Matters Finding Number Finding Title Status N/A There were no prior findings reported. N/A 124