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Home My WebLink About2019 City of South Bend Popular Annual Financial ReportSouth Bendcity of Indiana 2019 PAFR (Popular Annual Financial Report) Report prepared by City of South Bend Department of Administration and Finance Fiscal Year Ending on December 31, 2019 d Finance 2019 PAFR 2 Letter From the Mayor June 30, 2020 Dear Neighbor, Two pillars of public service are transparency and accountability. That’s why it’s so important the City provide meaningful reports to summarize our financial condition to you, the taxpayer. As a result, I hope you’ll take some time to read through the City of South Bend’s fifth Popular Annual Financial Report (PAFR), which is a trimmed-down and easy-to-digest version of the 313-page Comprehensive Annual Financial Report (CAFR). This shorter report contains excerpts from the larger report and provides a strong summary of our overall position. I always encourage residents to dig into the details from the longer comprehensive report as well. We’re also proud to announce that the 2018 PAFR received an award for outstanding achievement in Popular Annual Financial Reporting from the Government Finance Officers Association. This was our fourth year in a row to receive the award, and we were once again the only city in Indiana to do so. This financial report paints a picture of a City that is ready to meet the substantial challenges we face from the COVID-19 pandemic and economic recovery ahead. While the strength of our financial resources will be tested over the next several years, strong fiscal management has put the City in the position to continue to protect the health and safety of our residents as well as to expand innovative programs to assist vulnerable individuals and businesses. Our commitment to ensuring that every resident is provided the opportunity to thrive has never been stronger, and I am convinced that our City will overcome our current challenges and be stronger than ever on the other side. The City of South Bend is interested in your feedback, so we may improve the PAFR in future years. I welcome your comments and suggestions on behalf of the Administration & Finance Department and encourage you to contact City Controller Daniel Parker at (574) 235-9822. With appreciation, James Mueller 2019 PAFR 3 The Popular Annual Financial Report City Government Finances: Overview ............... 4 Our Organization Chart ..................................... 5 We Are South Bend .......................................... 6 South Bend Education and Business ................ 7 South Bend Culture and Recreation ................. 8 South Bend Events ........................................... 9 The City’s Revenue ......................................... 10 The Cost of City Services ............................... 11 The City’s Net Position .................................... 12 Government-Wide Revenue/Expenses ........... 13 The City’s Debt Burden ................................... 14 Full-Time Employees ...................................... 15 Contact Information ......................................... 16 2019 PAFR 4 City Government Finances Overview The goal of a business venture is to provide income for its stakeholders. In contrast, the goal of government is to provide services to its citizens. The measurement of success in business is a positive “bottom line”: revenue exceeds expenses. But the measurement of success for a government is the ability to serve its population within its financial constraints. And unlike a business, the government is prohibited by law from allowing expenditures to exceed budgeted limitations. Like any city in the United States, South Bend uses “fund-based” accounting. A “fund” is a segregated group of resources that have been identified to meet a specific purpose. A fund is just like a checkbook: cash receipts and disbursements are recorded in it and, like a checkbook, the City strives to maintain a positive balance. Broadly speaking, there are two main types of funds: governmental funds and business-type funds. Governmental funds are used to account for basic services: police and fire protection, street maintenance as examples. We all pay for these services through our tax dollars so that they’ll be available to any of us who need them, whenever we need them. Business-type funds are run like a business. They charge only the people who use the service and are expected to have revenues cover their operating expenses as well as any loan payments. In South Bend, these funds include Water Works, Wastewater, Solid Waste, Century Center and the EMS system. Across all funds, there are inflows and outflows; revenue and expenses, or expenditures. Revenue is the sum of money coming into the City. The main sources, as noted above, are tax dollars and charges for services. Revenue also includes proceeds from new debt, such as a bond to finance a construction project. Each of these sources can be further broken down, as you’ll see in later pages. Expenditures are the costs of the City and are divided into three main types: operating, debt service and capital outlay. Operating expenditures are the costs for salaries and supplies needed to provide the services. These expenditures are ongoing, in that they will be incurred year after year as the City performs its services, but the amounts may change significantly based upon the level of services the City administration chooses to provide. Debt Service comprises the principal and interest payments made to repay the City’s debt obligations. Before the City can apply for any new debt, it must be able to prove that it will be able to repay that debt along with any prior debt still outstanding. These expenditures are ongoing as well, but the amounts are stable, based on the repayment schedules negotiated at the time the debt was incurred. Capital outlay expenditures can be either large, one-time expenditures, such as a new building, or smaller annual expenditures such as new vehicle purchases within a fleet maintenance program. These expenditures can vary widely year to year, based on current requirements. With these broad definitions in mind, we hope that you’ll find the foregoing reports meaningful and interesting. 2019 PAFR 5 Our Organization The Residents of South Bend Common Council Mayor City Clerk Fire Department Police Department Innovation & Technology Public Works Building Department Legal Department Community Investment Administration & Finance Venues, Parks & Arts Code Enforcement Mayor James Mueller Chief Executive Officer, 4 year term City Clerk Dawn M. Jones Maintain Council records, ordinance violation collections, 4 year term Common Council Legislative Authority, 4 year term Sharon McBride 3rd District Canneth Lee 1st District Henry Davis, Jr. 2nd District Troy Warner 4th District Sheila Niezgodski 6th District Jake Teshka 5th District Karen White Council Member at Large Lori K. Hamann Council Member at Large Rachel Tomas Morgan Council Member at Large 2019 PAFR 6 Population Statistics Population Estimate .................. 102,233 % Female ..................................... 52.2% % Male ......................................... 47.8% Average Persons Per Household .... 2.57 Median Household Income ........ $40,315 Median Housing Value .............. $82,500 Median Gross Rent ........................ $767 Persons Below Poverty Level ....... 23.8% Educational Attainment High school graduate or higher up to an associate’s degree ..... 52.3% Bachelor’s degree or higher ......... 15.4% Population Demographics White ............................................ 52.8% Black or African American ............ 26.0% Hispanic or Latino ......................... 15.3% Asian .............................................. 1.5% American Indian/Alaska Native ...... 0.3% Native Hawaiian and Other Pacific Islander ................ 0.1% Other Race ..................................... 0.2% Two or more races ......................... 3.8% Veterans ........................................ 4,564 Source: U.S. Census Bureau (data.census.gov/) 2018 American Community Survey 5-Year Estimates The City Administration’s Priorities Reform Public Safety Systems - Institute comprehensive mandatory training on best practices for community policing - Continue focus on improving diversity in SBPD and SBFD - Expand violence intervention initiatives Build Reliable Infrastructure - Invest in a multiyear road improvement plan - Maintain and improve safe, reliable water and wastewater utility - Expand reliable, high-speed internet access - Invest in sustainable, green infrastructure improvements Support Economic Recovery - Support small businesses as they rebuild from economic downturn - Develop an opportunity fund for underrepresented local businesses - Expand programming for the Office of Diversity & Inclusion to increase the utilization of MWBE businesses for City contracts - Incentivize public-private partnerships to invest in South Bend and create jobs Rebuild Vibrant Neighborhoods - Align code enforcement with community incentives to improve our neighborhoods - Continue work to revamp parks and trails - Expand access to affordable housing - Invest in improvements to our major corridors Expand Access to Opportunity - Expand economic empowerment programs like Love Your Block, financial literacy training, and an eviction legal defense fund - Continue to fund workforce development programs like Pathways for residents who want to build their skills and advance their career - Partner with the South Bend Community School Corporation to develop a new way forward for our public schools Protect the Vulnerable - Pursue a housing-first approach to homelessness, supported by an intake center, coordinated care among service agencies, and scattered site permanent supportive housing - Partner with public health experts to reduce infant mortality and other health disparities - Incentivize grocers to fill in food deserts - Support programs and policies that encourage immigration and engage new residents 2019 PAFR 7 Colleges and Universities University of Notre Dame Indiana University South Bend Holy Cross College Saint Mary’s College Ivy Tech Community College Local Business Headquarters 1st Source Bank (Financial Institution) Tire Rack (Automotive Parts Supplier) Fulton Industries (Custom Component Manufacturing) ABRO Industries (Automotive & Household Chemical Products) Data Realty (Digital Information Management) Crowe LLP (CPA Firm) Press Ganey (Health Care Management) Largest Employers Beacon Health System (Health Care) .......................................... 7,088 University of Notre Dame (Higher Education) .............................. 6,535 South Bend Community School Corp (K-12 Public Schools) ....... 3,432 Indiana University South Bend (Higher Education) ...................... 1,400 City of South Bend (Government) ................................................ 1,285 Four Winds Casino (Casino and restaurants) .............................. 1,200 AM General Corporation (Manufacturing/Assembly) ...................... 873 Honeywell Aerospace (Aerospace Manufacturing) ......................... 850 Education and Business 2019 PAFR 8 South Bend Culture and Recreation Byers Softball Complex at St. Clair Park South Bend Symphony Orchestra at the Morris Performing Arts Center Potawatomi Zoo Tippecanoe Place Studebaker National Museum 2019 PAFR 9 Fridays by the Fountain South Bend Cubs East Race Rafting Events Year Round First Fridays, Downtown Spring St. Patrick’s Day Parade and “Greening of the East Race” Egg Stravaganza River Lights Music Festival Mayors’ Ride Bike to Work Week Best. Week. Ever. Sunburst Race Summer South Bend Cubs Baseball Summer Concert Series: Various Parks West Side Memorial Day Parade Leeper Park Art Fair Art Beat Red Table Plaza Concert Series Fridays by the Fountain (above) Restaurant Week East Race Waterway Rafting DTSB Outdoor Film Series DTSB Summer Fitness Series Fall/Winter Notre Dame Football Games Downtown for the Holidays Restaurant Week RV & Camping Show South Bend BrewFest Howard Park Ice Skating Rink For more information, visit www.visitsouthbend.com Howard Park Ice Skating Rink 2019 PAFR 10 General Property Tax $82.5 Local Income Tax $35.5 Operating Grants $14.7 State-shared revenue $13.7 Charges for Services $5.7 Investment Income $5.1 Other $21.2 Governmental Activities Revenue, 2019 (millions) Wastewater $41.3 Water Works $20.6 EMS $5.7 Solid Waste $5.5 Century Center $5.2 Other Enterprises $5.7 Business-Type Activities Revenue, 2019 (millions) The City’s Revenue Revenue from Governmental Activities totaled $178.4 million in 2019. The largest revenue sources were property taxes and local income taxes. Property taxes are capped at approximately 1% of property values for homeowners. Revenue from Business-Type Activities totaled $84.0 million in 2019. The Wastewater and Water Utilities were the largest Business-Type funds and provide essential services to residents. Solid Waste provides trash collection services on a weekly basis and EMS provides emergency ambulance services to residents in need. 2019 PAFR 11 The Cost of City Services Total Expenses for Governmental Activities was $205.1 million in 2019. The largest category was Public Safety (police and fire) followed by Economic Development, Culture & Recreation, and Streets. Wastewater $32.5 Water Works $16.3 EMS $7.9 Solid Waste $5.5 Century Center $5.4 Consolidated Building $4.3 Parking Garages $1.2 Business-Type Expenses, 2019 (millions) Public Safety $92.0 Economic Development $44.7 Highways & Streets $27.1 Culture & Recreation $24.6 General Government $11.0 Interest on Debt $5.7 Government-Type Expenses, 2019 (millions) Total Expenses for Business-Type Activities was $73.1 million in 2019. The largest Business-Type activities are the Wastewater and Water Works operations, which charge fees for services rendered. Solid Waste provides trash collection services that are essential to City residents. The City also manages three downtown parking garages and owns the Century Center convention venue located on the Saint Joseph River. 2019 PAFR 12 Governmental Activities $134.6 Wastewater $130.6 Water Works $53.2 Century Center $19.1 Parking Garages $7.0 EMS $4.7 Consolidated Bldg $3.6 Solid Waste $1.8 Net Position, 2019 (millions) The City’s Net Position For 2019, the City’s Net Position was $354.6 million. “Net Position” is the difference between the City’s assets and its liabilities. It represents resources currently available to the City for future services and economic safety buffers. The majority of Net Position consists of investment in capital assets. Government-wide net position decreased by $15,788,077 or 4.3% during fiscal 2019. The decrease in net position is primarily driven by two factors:  First, the City had several large, debt-financed expenditures that were not spent on City-owned assets and thus were recognized as expenses and were not capitalized. These expenditures included $9,125,000 for the South Shore Double Tracking Project and $4,602,119 for the Eddy Street Commons project.  Second, the City saw a substantial increase in net pension liability, which reduced governmental activities net position by $11,452,715. $292 $288 $283 $290 $158 $141 $163 $149 $158 $135 $155 $162 $169 $171 $186 $195 $202 $203 $211 $220 $447 $450 $452 $461 $344 $336 $365 $352 $369 $355 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net Position by Component (millions) Governmental Activities Business-Type Activities 2019 PAFR 13 Government-Wide Revenue and Expenses Government-Wide Revenue Changes 2018 to 2019 Government-wide revenue increased by 5.9% from 2018 to 2019. The governmental activities revenue increases were due primarily to higher property tax and income tax revenue during 2019 resulting from an increase in assessed property values and an improving local economy. Additionally, investment revenues increased dramatically in 2019, spurred by a larger asset pool in the investment portfolio and strong market performances. Government-Wide Expense Changes 2018 to 2019 Government-wide expenses increased by 20.6% from 2018 to 2019. Governmental activities expenses increased significantly in 2019, due primarily to several large debt-funded expenditures that were not recognized as capital assets. Additionally, pension and OPEB expense increased significantly in 2019. $139.9 $164.3 $134.5 $160.3 $164.7 $205.1 $55.9 $61.9 $64.1 $71.2 $66.0 $73.1 $195.8 $226.2 $198.6 $231.5 $230.7 $278.2 2014 2015 2016 2017 2018 2019 Government-Wide Expenses, 2014-2019 (millions) Business-Type Activities Governmental Activities $144.5 $143.9 $152.7 $155.7 $169.1 $178.4 $61.6 $75.0 $75.5 $76.1 $78.6 $84.0 $206.1 $218.9 $228.2 $231.8 $247.7 $262.4 2014 2015 2016 2017 2018 2019 Government-Wide Revenues, 2014-2019 (millions) Business-Type Activities Governmental Activities 2019 PAFR 14 The City’s Debt Burden The City’s total debt obligation at the end of 2019 was $447.0 million. The City’s use of debt allows it to leverage current resources to buy or construct assets to be used in the future, such as the lease of police cars or the construction of infrastructure. These arrangements allow the City to pay for the vehicles or infrastructure during the periods in which the residents receive the benefits of the services. The largest segment of the City’s debt is its pension and other employment liability. At the end of 2019, the City’s Net Pension Liability was $172.0 million. The City is required to contribute 11.2% of annual payroll for nonbargaining and Teamster employees, and 17.5% for Police and Fire department employees. Pension liabilities are funded over a long-term time period. Most Capital Leases require a 5-year repayment schedule. The goal is to pay off the lease in less time than the expected useful life of the asset being leased. Bonds and other loans have a longer repayment period, typically 20 years; this is appropriate since they are used to pay for longer-lasting assets such as buildings, roads, and other infrastructure. In 2019, the City’s expenditures toward debt repayment were $39.2 million, 14.1% of government-wide expenses. During 2019, the City initiated the following debt transactions:  Entered into capital lease agreements in the amount of $2,431,368 to purchase certain vehicles, copiers, and equipment.  Issued revenue bonds in the amount of $9,447,841 to fund the Northern Indiana Commuter Transportation District Main Line Double-Tracking Project (South Shore). Sources: Management’s Discussion and Analysis - Debt Administration, CAFR Note 9 - Long-term Debt Great Bond Rating The City of South Bend has a strong AA bond rating. The bond or credit rating is a measure of the City’s financial reputation. A good credit rating enables the City to borrow money for construction projects and other needs at the most competitive interest rates available. This saves thousands of taxpayer dollars in interest payments. S&P Global ratings assigned a AA bond rating to the City of South Bend due to several factors: Strong management, adequate budgetary performance, very strong budgetary flexibility, very strong liquidity, strong institutional framework, weak but growing economy. Pensions and other employment- related $202.7 Govt Revenue Bonds $122.4 Wastewater Bonds $58.7 Govt General Oblig Bonds $17.8 Capital Leases $16.7 Water Works Bonds $12.0 Govt Mortgage Bonds $6.3 Other notes and loans $5.8 Business Mortgage Bonds $4.6 Long-Term Debt, 2019 (millions) 2019 PAFR 15 Full-Time Employees General Government Mayor’s Office ..................................................... 7 City Clerk’s Office ............................................... 4 Common Council (elected officials, part-time) ..... 9 Administration & Finance .................................. 23 Legal Department ............................................. 10 Code Enforcement .............................................. 4 Engineering & Sustainability ............................. 23 Safety & Risk ...................................................... 2 Human Rights ..................................................... 5 Public Safety Police Department .......................................... 270 Fire Department .............................................. 265 Culture & Recreation Parks & Recreation ........................................... 94 Convention and Events Management ............... 17 Community Investment Department of Community Investment .............. 28 Highways & Streets Streets .............................................................. 56 Enterprise Funds Water Works ..................................................... 63 Wastewater ....................................................... 43 Organic Resources ............................................. 6 Sewers .............................................................. 41 Solid Waste ....................................................... 23 Building Department ......................................... 13 Internal Services Central Services ................................................ 37 311 Call Center ................................................... 7 Innovation & Technology .................................. 21 1,132 1,133 1,122 1,131 1,098 1,060 1,079 1,099 1,099 1,098 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 FULL-TIME POSITIONS, 10 YEAR TREND (DEC 31ST ACTUAL) In 2014, 33 Parks & Recreation employees working at the Zoo began working for the Potawatomi Zoological Society and were no longer City employees. In 2015, 34 central dispatch employees began working for St Joseph County due to consolidation of 911 operations. Public Safety 49% Enterprise Funds 17% Culture & Recreation 10% General Government 10% Internal Services 6% Highways and Streets 5% Community Investment 3% Full-Time Employees By Category December 31, 2019 2019 PAFR 16 We hope you found this report useful. We also hope to continually improve this report and look forward to your participation in doing so. Please feel free to contact us: Department of Administration & Finance City of South Bend 227 W. Jefferson Blvd., Suite 1200 N South Bend, IN 46601 (574) 235-9216 For more information regarding financial data, please refer to the 2019 Comprehensive Annual Financial Report (CAFR), found at www.southbendin.gov/2019_CAFR