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South Bend CAFR
Executive Summary
All-America City
1 I Fiscal Year ending
December 31 , 2011
Prepared By.
2011 Department of Administration and Finance
Mark Neal, City Controller
City of South Bend, Indiana
Comprehensive Annual Financial Report— Executive Summary
For The Year Ending December 31, 2011
Table of Contents
Introduction
Purpose of the Executive Summary............................................................................................1
Letterof Transmittal................................................................................................................2-13
Independent Auditor's Report on Financial Statements and
Supplementary Schedule of Expenditures of Federal Awards........................................... 14-15
Management's Discussion and Analysis .................................................................................. 16-36
Government-Wide Financial Statements:
Statementof Net Assets........................................................................................................... 37-38
Statementof Activities....................................................................................................................39
Fund Financial Statements:
Balance Sheet—Governmental Funds...........................................................................................40
Statement of Revenues, Expenditures and Other Changes in Fund
Balances—Governmental Funds.............................................................................................41
Statement of Net Assets—Proprietary Funds................................................................42-43
Statement of Revenues, Expenses and Other Changes in
Fund Net Assets—Proprietary Funds......................................................................................44
Statement of Fiduciary Net Assets — Fiduciary Funds....................................................................45
Statement of Changes in Fiduciary Net Assets—Fiduciary Funds.................................................46
Financial Trends
Net Assets by Component—Last Ten Years..................................................................................47
Changes in Net Assets—Last Ten Years.................................................................................48-50
Fund Balances, Governmental Funds—Last Ten Years................................................................51
Changes in Fund Balances, Governmental Funds— Last Ten Years ............................................52
Revenue Capacity
Property Tax Levies and Collections—Last Ten Years..................................................................53
Direct and Overlapping Property Tax Rates—Last Ten Years.......................................................54
Assessed Value and Actual Value of Taxable Property—Last Ten Years.....................................55
Property Tax Collections—Cash Basis—2003 to 2011 ................................................................56
Debt Capacity
Computation of Legal Debt Margin—December 31, 2011.....................................................57
Ratios of Outstanding Debt by Type—Last Ten Years ..................................................................58
Computation of Direct and Overlapping Debt—December 31, 2011 ..................::.........................59
Demographic and Economic Information
Demographic Statistics— Last Ten Years ................................................................................ 60-61
Operating and Other Information
Full-Time Equivalent City Government Employees by Department—Last Ten Years............. 62-63
Grant Compliance
Schedule of Expenditures of Federal Awards........................................................................... 64-66
City of South Bend, Indiana CAFR Executive Summary
Purpose of the Executive Summary
The City of South Bend has prepared a Comprehensive Annual Financial Report (CAFR) for the year
ending December 31, 2011. The 2011 CAFR totals 288 pages and meets all of the requirements set forth
by the Government Finance Officers Association for its Certificate of Achievement for Excellence in
Financial Reporting program. If the award is received for 2011, this will be the twenty second
consecutive year that the City of South Bend has received this prestigious award.
The purpose of this Executive Summary is to present the most essential schedules and summaries from
the 2011 CAFR, as determined by the City, to allow more ready access to them by the reader.The
schedules and summaries are presented in their original format and the order of presentation is the
same as in the full 2011 CAFR.The Executive Summary totals 66 pages.
The Executive Summary and full CAFR are available at:
http://docs.southbendin govlWebLink8/Browse aspx?
or by contacting:
Mark W. Neal, City Controller
City of South Bend
Department of Administration & Finance
227 W.Jefferson Boulevard
South Bend, Indiana 46601
Telephone—(574) 235-9935
Fax—(574) 235-9928
On the cover:
South Bend All-America City Award: Through the leadership of former Mayor Stephen Luecke, South
Bend received the All-America City Award from the National Civic League on June 17, 2011 in Kansas
City, Missouri. South Bend was one of only 10 cities honored in 2011. South Bend highlighted three
projects in its award-winning presentation: 1) Northeast Neighborhood revitalization, 2)Transformation
of the Engman Natatorium into a Civil Rights Heritage Center,and 3) 212 Degree STARS.
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CITY OF SOUTH BEND PETE BUTTIGIEG,MAYOR
DEPARTMENT OF ADMINISTRATION AND FINANCE
June 25, 2012
The Honorable Pete Buttigieg, Mayor of the City of South Bend
Members of the City of South Bend Common Council
Residents of the City of South Bend:
The comprehensive annual financial report of the City of South Bend,Indiana (the "City") for
the year ended December 31, 2011 is hereby submitted. Responsibility for both the accuracy of
the data and the completeness and fairness of the presentation, including all disclosures, rests
with management. To the best of our knowledge and belief, the enclosed data is accurate in all
material respects and is reported in a manner designed to present fairly the financial position and
results of operations of the various funds of the City. All disclosures necessary to enable the
reader to gain an understanding of the government's financial activities are included.
Generally Accepted Accounting Principles (GAAP) requires that management provide a
narrative introduction, overview and analysis to accompany the basic financial statements in the
form of the 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
South Bend's MD&A can be found immediately following the independent auditors report.
The comprehensive annual financial report is presented in four sections: introductory
infonnation, financial information, statistical information and federal awards supplemental
information. The introductory section includes this transmittal letter,the City's organizational
chart, a list of principal City officials and the Certificate of Achievement for Excellence in
Financial Reporting awarded to the City of South Bend for the year ended December 31, 2010.
The financial section begins with the independent auditors' report on the City's financial
statements and schedules, the City's management's discussion and analysis report, followed by
the City's basic financial statements and accompanying notes. The remaining portion of this
section includes the combining and individual fund and other financial statements and schedules.
The statistical section includes selected financial and demographic information generally
presented on a multi-year basis, which has been provided to give the reader a broader
understanding of the City. This document ends with the federal awards compliance section,
which includes the results of the supplemental audit of the City's federal awards and the internal
controls necessary for compliance.
The City is required to undergo an annual single audit in conformity with the provisions of the
U.S. Office of Management and Budget Circular A-133, Audits of States Local Governments
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and Non-Profit Organizations, the provisions of Indiana Code section 5-11-1-9 and the
requirements of the Indiana State Board of Accounts. Information related to the single audit,
including the schedule of federal financial assistance, findings and recommendations, and the
auditors' reports on the internal control structure and compliance with applicable laws and
regulations, is included in this document.
The following pages of this transmittal letter begin with a general overview of South Bend and
the surrounding area. Also summarized are the key financial, budgetary and property tax controls
with which the City is required to comply. The remainder includes a discussion of the prior
year's financial challenges and accomplishments, the City's goals and objectives for this year and
beyond and other key issues the City is facing along with the impact they may have on current
and future budgets.
GENERAL INFORMATION
The City of South Bend is the county seat of St. Joseph County, Indiana, and is the fourth largest
city in the state. The City of South Bend's 2010 U.S. Bureau of the Census population was
101,168. Accordingly, South Bend is classified as a "City of the Second Class" under Indiana
statutes (cities with a population of 35,000 to 250,000). The City of South Bend operates with a
mayor as chief executive and a nine-member City Common Council composed of six members
elected from districts and three members elected at-large.
The City provides a full range of traditional general governmental services to its citizens. These
services include police and fire protection; sanitation services; the construction and maintenance
of highways, streets and infrastructure; recreational activities and cultural events. In addition to
general governmental activities, the City exercises oversight over the South Bend Water Works,
the South Bend Wastewater Treatment Facility, the Century Center convention facility, the
College Football Hall of Fame, the Studebaker National Museum , the City of South Bend
Redevelopment Commission and Authority and several downtown parking facilities.
Location
St. Joseph County lies within the heartland of the manufacturing belt and metropolitan regions of
the Upper Midwest and Canada. The City of South Bend is located in the north central part of
Indiana, ten miles south of the Michigan state line, and is commonly known to be within the
"Michiana" area. The Michiana area is a vibrant and diverse area with a strong economy based
on a mix of health care, agricultural, service, manufacturing, education and other commercial and
tourism industries. This diverse economic mix creates varied employment opportunities for the
area's residents while providing insulation via diversification from future economic downturns.
The City is approximately 90 miles east of Chicago and 140 miles north of Indianapolis.
Accessibility to transportation, including Interstate 80/90, a regional airport (which is the second
busiest in the State of Indiana), the South Shore rail line and has supported economic growth
within the community. Proximity to Chicago, the largest rail and intermodal
(rail/truck/ocean/inland waterway) transfer point in the country, is a significant advantage to the
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City of South Bend as is proximity to the University of Notre Dame, with its scenic campus
located adjacent to the city limits.
St. Joseph County/South Bend - Economic Conditions and Outlook
St. Joseph County, with its 2010 U.S. Bureau of the Census population of 266,931,boasts a
strong history of manufacturing which continues today. As a complement to that, the service
industry and retail trade has also flourished, creating a balance that serves the community well.
The County experienced a net growth in population of 28,317 (11.8% increase) between 1960
and 2010. After experiencing a reduction of 2.6% during 1969 to 1983, at which time the entire
Midwest was at the depth of its economic restructuring and recess, the County's population
increased 4.0% between 1983 and 1990 and another 7.5%between 1990 and 2000. The
population of St. Joseph County has remained fairly flat during the past decade increasing by
only 1,372 residents from 2000 to 2010.
The total resident labor force in December 2011 of 129,438 in St. Joseph County is typical of the
Midwest: well trained with a strong work ethic. Approximately 86.4% of the area's adult
population are high school graduates or higher(as compared to the national average of 75%) with
an estimated 25.6% with a Bachelor's Degree or higher. There are eight colleges, universities
and technical schools within South Bend and the surrounding area including the University of
Notre Dame, Indiana University at South Bend, Saint Mary's College, Bethel College and Ivy
Tech State College. At the high school level, there are school-to-work transition programs that
help prepare students for the world of work. As of April 2012, St. Joseph County is experiencing
an unemployment rate of 8.9%, which is higher than the State of Indiana unemployment rate of
7.7%. The unemployment rate in St. Joseph County compares favorably with many of its
surrounding counties—Elkhart (8.7%), LaPorte (9.6%), and Marshall (8.1%) in Indiana and Cass
(6.3%) and Berrien (8.2%) in Michigan.
The employment profile for St. Joseph County provides a good overview of the economic make-
up of this community. Employment statistics for 2010 (2011 data was unavailable) of the
County's major economic sectors are as follows:
Economic Sector Number Employed % of Total
Construction 3,916 3.5%
Manufacturing 13,850 12.4%
Health Care/Social Services 17,676 15.9%
Wholesale Trade 5,624 5.1%
Retail Trade 13,620 12.2%
Professional/Technical Services 4,341 3.9%
Accommodations/Food Service 9,578 8.6%
Educational Services 15,712 14.1%
Other 26.981 24.3%
Total 111,298 100.00%
St. Joseph County presently has an estimated 103,069 households with an average per capita
personal income of$33,322, which compares to the State of Indiana average per capita income of
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$33,981 and the United States per capita income of$39,937. The per capita income in St. Joseph
County compares favorably with many of its surrounding counties—Elkhart ($29,846), La Porte
($30,440), and Marshall ($28,598) in Indiana and Cass ($22,698) and Berrien ($24,025)in
Michigan.
Health and education lead the employment statistics for St. Joseph County. The largest
employers in St. Joseph County as of December 2011 were as follows: University of Notre Dame
(5,213); South Bend Community School Corporation (3,298); Memorial Health Systems
(3,000)); Saint Joseph Regional Medical Center(2,221); The Diocese of Fort Wayne/South Bend
(1,456); Indiana University at South Bend (1,445); AM General (1,349); 1" Source Bank (1,223);
the City of South Bend (1,133); St. Joseph County(1,049).
The following provides a profile of the residents of St Joseph County:
Gender: 48.5%male; 51.5% female
Age: 36.2% 0-24 years of age; 25.3% 25-44 years of age; 25.3%% 45-64
years of age; and 13.2% 65 years of age and older.
Race: 78.7%White; 12.4% Black/African American; 6.9%
Hispanic/Latino; 1.9% Asian; and .1% Other
Marital Status: 46.1% Married; 53.9% Single/Widowed/Divorced/Other
Home Ownership: 69.3% own; 30.7% rent/other
The cost of living continues to be one of the greatest advantages of living in this community. The
housing costs in South Bend are well below the national and regional averages. Per a report
compiled by the National Realtor's Association in the first quarter of 2012, the median sales
price for a single family home in the South Bend-Mishawaka Statistical Area was $69,400 as
compared to a median sales price of$157,200 in Chicago and $115,400 in Indianapolis. The
national median sales price is $158,000.
The City of South Bend continues to place high emphasis on a growing and diversified local
economy. It has been active in developing ten industrial parks, offering itself as a low-cost
alternative to the Chicago metropolitan area to companies engaged in light manufacturing,
distribution and services. More than 240 businesses operate in South Bend's industrial parks,
including companies engaged in metalworking, plastics, warehousing and distribution, and
professional services. In recent years, the City has developed Innovation and Ignition parks, the
first dual-site, state-certified technology park in the State of Indiana.
The South Bend Community School Corporation serves the entire City and some of the
surrounding area and has a current enrollment of approximately 20,134 students in grades
kindergarten through high school. An estimated 5,757 students attend private or parochial
schools within the City. The nine institutions of higher education and technical training located
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within the South Bend area have a total enrollment of approximately 31,166. Over the years, the
University of Notre Dame has provided a stabilizing influence on the economy with a very
significant positive economic impact upon the community.
In 1820, Pierre Navarre of the American Fur Trading Company was the first settler in the area to
become later known as South Bend. South Bend has continued to progress in its growth since
1842, when Father Edward Sorm named his rustic log chapel "Notre Dame du Lac" and began to
teach the local Indians. Today, the chapel has grown into the University of Notre Dame. In
1852, H.C. Studebaker started the industry of making wagons and horse drawn buggies that
evolved into the manufacturing of the Studebaker automobile. It made the name Studebaker
synonymous with the area of South Bend.
Another industrial firm that would later become the area's largest began in 1923 when Vincent
Bendix began manufacturing automotive brakes. In 1929, the company became the Bendix
Aviation Corporation, and now, as Honeywell (formerly AlliedSignal Inc.), is a leading
manufacturer of automotive and aerospace products.
Other special attractions within the South Bend area include the Olympic-class East Race
Waterway and the East Bank area; the renovated Morris Performing Arts Center, which provides
for the Broadway Theater League, the South Bend Symphony Orchestra with the Chamber and
Pops Orchestras and the Southold Dance Theater and Patchwork Dance Company; the award-
winning South Bend Civic Theater; the Studebaker National Museum; the South Bend Regional
Museum of Art; the Suite Museum of Art at Notre Dame; the Northern Indiana Center for
History; Copshaholm/The Oliver Mansion; the College Football Hall of Fame; Century Center;
Potawatomi Zoo; the Morris Conservatory/Muessel-Ellison Tropical Gardens; Healthworks!
Kids Museum; the Farmers' Market; and the Belleville Softball Complex. The Coveleski
Regional Baseball Stadium (named after South Bend native and Hall of Fame pitcher Stanley
Coveleski) is a 5,000-seat facility which opened in 1987 and is rated among the best in minor
league baseball. The stadium is home to the South Bend Silver Hawks, a minor league team
affiliated with the Arizona Diamondbacks. During 2011, the Silver Hawks were sold to Chicago
businessman, Andrew Berlin, who has forged a strong partnership with the City and plans to
keep the team in South Bend for many years to come.
Additional miscellaneous information about the City of South Bend can be found in the statistical
section of this report.
Financial, Budgetary and Property Tax Controls
The City's management team is responsible for establishing and maintaining an internal control
structure designed to ensure that the assets of the government are protected from loss, theft or
misuse and to ensure that adequate accounting data is compiled to allow for the preparation of
financial statements in conformity with generally accepted accounting principles. The internal
control structure is designed to provide reasonable, but not absolute, assurance that these
objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control
should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits
requires estimates and judgments by management.
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Single Audit. As a recipient of federal and state financial assistance, the City also is responsible
for ensuring that an adequate internal control structure is in place to ensure compliance with
applicable laws and regulations related to those programs. This internal control structure is
subject to periodic evaluation by management of the City. As part of the City's single audit
described earlier, tests are performed to determine the adequacy of the internal control structure,
including that portion related to federal financial assistance programs, as well as to determine
that the City has complied with applicable laws and regulations. The results of the City's single
audit for the year ended December 31, 2011 disclosed no instances of significant material
weaknesses in the internal control structure and no significant violations of applicable laws and
regulations.
Budgetary Controls. In accordance with Indiana statutes, the City maintains budgetary controls
integrated within the accounting system. The objective of these budgetary controls is to ensure
compliance with legal provisions embodied in the annual appropriated budget (prepared on a
cash basis) which is adopted by the City Common Council and then reviewed and approved by
the State of Indiana Department of Local Government and Finance. Activities of the general
fund, special revenue funds, capital project funds, enterprise funds, internal service funds,
pension trust funds and debt service funds are included in the annual budget. The level of
budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated
amount) is established by major budget classification within funds. The Mayor and Common
Council may transfer appropriations from one major budget classification to another within a
department by ordinance as long as the total appropriations for that fund are not exceeded.
Transfers from one department to another, or additional appropriations in excess of the original
budget, must be approved by the Mayor and Common Council and are also submitted to the
Department of Local Government and Finance for either approval or acknowledgement
(depending on the fund). Beginning in budget year 2009, the City must also submit its annual
budget to the St. Joseph County Common Council for a non-binding review and
recommendation.
The City maintains an encumbrance accounting system as one technique of accomplishing
budgetary control. Encumbered amounts do not lapse at year end and are carried over to the
following year as a part of the subsequent year's budget.
Property Tax Controls. In addition to budgetary and other controls established by Indiana
statute, the City must operate within specific and rigid controls governing the amount of property
tax it may levy. The property tax control program, which began in 1973, limits the amount of
property tax that may be levied by each unit of government in its legally budgeted funds. The
total amount of property tax levied by the unit may increase by the six year average annual
growth in Indiana personal non-farm income, as calculated by the U.S. Bureau of Economic
Analysis, with a 6% maximum.
During March 2008, the State of Indiana General Assembly enacted property tax reform
legislation which made significant changes in the property tax system by capping the amount of
property taxes at 1% of grossed assessed value for residential homesteads, 2% for
agricultural/rental properties and 3% for all other real and personal property. This legislation
was phased in over a two year period beginning in 2009. The loss of revenue to the City due to
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this legislation was significant but has been overcome by cost savings and the adoption of local
option income taxes to in order to continue providing essential City services, including police
and fire protection.
A historical view of the City's tax rate and its net assessed valuation has been included in the
statistical section of this document.
Citywide Goals and Objectives for 2012 and Beyond
The City has developed eight broad goals that focus on the following areas: economy, safety,
quality of life, trust, responsiveness, infrastructure, finance and workforce. The City has
identified various objectives that are tied directly to these goals which, if achieved, will result in
the attainment of these goals. The eight goals are listed below.
GOAL ONE: The Community's Economy
Improve South Bend's economy to ensure a vigorous local business climate; ample employment,
business and investment opportunities for all our customers; and a tax base that is sufficient to
meet the needs of the City, its residents and other customers.
GOAL TWO: The Community's Public Safety and Civility
Improve South Bend's public safety and civility to ensure that every resident and other customers
can live, work, play, run a business and raise a family in a humane, pleasant and safe
environment; have adequate, affordable and timely access to all forms of emergency services;
and can contribute and participate in a community where people of different backgrounds live in
mutual respect and harmony.
GOAL THREE: The Community's Quality of Life
Improve South Bend's quality of life to ensure that every resident and every family can earn an
adequate income; secure adequate housing; live in a safe, pleasant and humane neighborhood;
enjoy a wide range of social, cultural and recreational opportunities; and have access to quality
educational and medical services within an excellent natural and manmade environment.
GOAL FOUR: Trust in City Government
Improve residents' trust in City government to ensure that South Bend has a broad base of
consensus and support on which to build the future, a strong foundation for collaborative action
and community partnerships; and an increase in resident and customer participation in the daily
public life of the community.
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GOAL FIVE: The City's Responsiveness Efficiency, and Effectiveness
Improve the responsiveness, efficiency, and effectiveness of City government to ensure that the
City's customers get the value they expect and deserve.
GOAL SIX: The Citv's Infrastructure
Improve the City's infrastructure to ensure that South Bend can support physical growth and
economic development; and offer an excellent quality of life to all of its residents and other
customers.
GOAL SEVEN: The City's Financial Condition
Improve the financial condition of City government to ensure that South Bend has the financial
resources necessary to achieve all of its goals during the next five years.
GOAL EIGHT: The City's Workforce
Improve the City government's existing workforce, work environment and human development
systems to ensure that South Bend has the human resources necessary to achieve all its goals
during the next five years.
City Mission Statement and Department Purpose Statements
The City provides services to its customers through thirteen administrative departments. These
departments have unique purposes that are intended to support the citywide mission statement
which is "to be recognized as a model city." Each department has developed a purpose
statement which identifies their specific role.
Mayor's Office: Leading the community to become a model city through formulating
policy, directing operations and responding to customer concerns.
Common Council: Making certain that our City government is always responsive to the needs
of our residents and that the betterment of South Bend is always our
highest priority.
City Clerk's Office: Preserving all City Ordinances and Council meeting minutes for
generations yet to be, and providing fair and consistent treatment of our
Ordinance Violations Bureau customers.
Administration
and Finance: Providing financial and organizational stability for the City through sound
financial and human resources management while ensuring the existence
of a safe work environment, quality employee benefits and equal treatment
for all City employees.
s
Legal Department: Providing superior,professional and ethical legal services for our client,
the City of South Bend.
Police Department: Protecting the life, property and personal liberties of all individuals;
improving the overall quality of life by deterring criminal activity and
respecting cultural diversity; delivering fair and impartial law enforcement
services to all residents.
Fire Department: Providing the highest level of fire protection and emergency medical
services possible to all of our customers, saving lives and property, and
striving to become a model Fire Department for other cities in an efficient
and cost-effective manner.
Code Enforcement: Maintaining and improving the physical quality of life in our
neighborhoods.
Parks and
Recreation: Offering all residents and guests of South Bend the highest quality of
recreational and leisure activities, while providing well-managed parks and
recreational facilities with updated programming and friendly productive
service.
Community and
Economic
Development: Creating and expanding opportunities through partnerships in
neighborhood revitalization, commercial and industrial development and
community enhancement.
Public Works: Providing leadership in the development and delivery of engineering, fleet,
transportation, sanitation, wastewater, water and other services as called
upon by our customers.
Building
Department: Serving our customers by inspecting, informing and ensuring a safe place
to work, play and live.
Century Center: Providing a state-of-the-art facility with excellent services to customers
while generating maximum economic benefit to our community.
Building South Bend in 2012 and beyond
The City Administration's theme for the past several years has been "We're Building South
Bend." That theme has had a major influence on the development of the 2012 budget. There
were five areas of concentration that became or remained budget priorities for 2012.
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• Were Building Neighborhoods- The City continues with its strong commitment to
neighborhoods. The City will make a significant investment to fund or leverage state and
federal funding for housing assistance, development and home ownership programs,
neighborhood public works and parks, neighborhood development for social services and
organizations, and public safety initiatives. Committing these resources will help us
maintain, improve and support strong neighborhood development.
• We're Building a Safe City- Public safety is the foundation of all the City's efforts to build
South Bend. Through the targeted and creative use of available resources, the City is
working to provide quality police, fire and ambulance services for the community. The crime
rate has decreased in several significant categories over the past year. The City's Fire
Departments is rated one of the best in the State. The Mayor's top initiatives will focus on
community policing, youth violence, and placing more emphasis on training and recruitment
for the Police and Fire Departments.
• We're Building an Attractive City- We are working to enhance the natural and man-made
beauty of our city through effective City programs. The City has taken steps through its
Department of Code Enforcement and a Mayoral Task force to address the issue of vacant
and abandoned properties. The City is funding major programs to renovate the former
Studebaker Corridor area and other parts of the City. The City has been recognized as a
Bicycle Friendly Community by the League of American Bicyclists and has established
approximately 60 miles of bicycle routes to date.
• We're Building Opportunity - A key issue for any city is education and opportunity for
young people. The City is committed to keeping schools open in our neighborhoods and to
maximizing their use by the community. We are building partnerships with the South Bend
School Corporation and other key stakeholders that will create new strategies for enhancing
our formal educational systems. Working together with families, student groups, school
officials, neighborhoods, the faith community and civic organizations, we can support our
local schools and improve the level of individual student performance.
• We're Building a Strong Economy - Local government plays a key role in economic
development. By providing adequate infrastructure and offering targeted assistance, the City
can stimulate private investment, creating business opportunities and jobs. The City's
policies encourage new start-up businesses, strengthen existing business, attract new jobs,
increase assessed value and emphasize direct investment in hard-to-develop areas. Efforts
have been and will continue to focus on implementing the comprehensive plans for the areas
around the East Bank and Coveleski Stadium, including a new Veteran's Clinic across from
the stadium. The City has had many recent economic development projects including Eddy
Street Commons, a$220 million dollar mixed-use development south of Notre Dame, with
more than 20 stores and restaurants, office space and hundreds of town homes, apartments
and condominiums. In addition, the City has created Indiana's first dual-site, state-certified
technology park site known as Innovation Park and Ignition Park.
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Mayoral Leadership Transition
This past year was a period of transition in the leadership of the City of South Bend. Mayor
Stephen J. Luecke retired effective December 31, 2011. As South Bend's longest serving chief
executive (1997-2011), Mayor Luecke has had many significant accomplishments during his
tenure including the City's receipt of the All-America City Award fi-om the National Civic
League in 2011.
New Mayor Pete Buttigieg (a Harvard University graduate and Rhodes scholar) assumed office
on January 1, 2012 bringing with him a group of leaders with new ideas and energy to implement
transformational reform to City government. Elected at age 29, Mayor Buttigieg is the youngest
chief executive of a municipality exceeding 100,000 residents in the United States. Building on
the success of the previous administration, Mayor Buttigieg has launched six new initiatives to
improve city government:
1. New Economic Partnerships—to lay out a new economic vision for our community as
well as to agree on a smarter division of labor among various groups involved in
economic development. An Economic Summit was held in June to promote this initiative.
2. High Ethical Standards—on his first day in office, the Mayor issued an executive order
introducing a new ethics code for city employees.
3. Customer Service Mentality—design ways that city employees can track and resolve
citizens' issues efficiently by using more advanced technology. This effort will culminate
with the creation of a "311 line" for non-emergency municipal issues during 2012.
4. Strong Partnerships with Schools—the Mayor has improved dialogue with the South
Bend School Corporation and other stakeholders to ensure a strong educational system in
the City. Programs to increase school mentoring programs and curb youth violence are
being implemented.
5. Transparency and Accessibility— choosing not to serve from behind his desk, Mayor
Buttigieg has conducted a series of monthly "Mayor's Night Out" and "Mayor's Night ]n"
events around town to allow citizens to speak to him and his department heads directly
about concerns and ideas. Also, efforts to implement a first-class performance
management system have been initiated.
6. Empowering Volunteers to Help —work to create new opportunities for citizens who
want to campaign for the City and help rejuvenate its neighborhoods. A city-sponsored
volunteer`blearing house" is being developed to match able volunteers with
organizations in need of volunteer assistance.
Awards. The Government Finance Officers Association of the United States and Canada
(GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City
of South Bend for its comprehensive annual financial report for the fiscal year ended December
31, 2010. This was the twenty first consecutive year that the City has achieved this prestigious
award. In order to be awarded a Certificate of Achievement for Excellence in Financial
Reporting, a government unit must publish an easily readable and efficiently organized
comprehensive annual financial report. This report must satisfy both generally accepted
accounting principles and applicable legal requirements.
12
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement
Program's requirements, and we are submitting it to the GFOA to determine its eligibility for
another certificate.
Acknowledgments. The preparation of the comprehensive annual financial report was made
possible by the dedicated service of the City's departmental fiscal officers and the staff of the
Department of Administration and Finance. Each fiscal officer and member of the
Administration and Finance Department has my sincere appreciation for the contributions made
in the preparation of this report. In addition, I would like to thank the Field Examiners of the
Indiana State Board of Accounts (led by Doug Wiese and Bruce Snyder) for their hard work and
dedication in this effort.
In closing, without the leadership and support of former Mayor Stephen Luecke, current Mayor
Pete Buttigieg, City Department Heads, and members of the City of South Bend Common
Council, preparation of this report would not have been possible.
Sincerely,
Mark W. Neal, City Controller
City of South Bend
13
STATE OF INDIANA
AN EQUAL OPPORTUNITY EMPLOYER SPATE.BOARD OF ACCOUNTS
302 WEST WASHINGTON STREET
ROOM E418
INDIANAPOLIS,INDIANA 46204-2769
Telephone:(317)232-2513
Fax:(317)232-4711
Web Site:www.in.gov/sboa
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
AND SUPPLEMENTARY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
TO: THE OFFICIALS OF THE CITY OF SOUTH BEND, ST. JOSEPH COUNTY, INDIANA
We have audited the accompanying financial statements of the governmental activities,the business-
type activities, each major fund, and the aggregate remaining fund information of the City of South Bend
(City),as of and for the year ended December 31,2011,which collectively comprise the City's basic financial
statements as listed in the Table of Contents. These financial statements are the responsibility of the City's
management. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with 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. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management,as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects,the
financial position of the governmental activities, the business-type activities, each major fund and the
aggregate remaining fund information of the City as of December 31, 2011, and the respective changes in
financial position and cash flows, where applicable, thereof and for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
The Management's Discussion and Analysis, Schedules of Funding Progress, Schedules of Con-
tributions From the Employer and Other Contributing Entities, and Budgetary Comparison Schedules
(General and Major Special Revenue funds), as listed in the Table of Contents,are not required parts of the
basic financial statements but are supplementary information required by the Governmental Accounting
Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of
management regarding the methods of measurement and presentation of the required supplementary infor-
mation. However, we did not audit the information and express no opinion on it.
14
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
AND SUPPLEMENTARY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
(Continued)
Our audit was conducted for the purpose of forming opinions on the financial statements that col-
lectively comprise the City's basic financial statements. The introductory section, combining fund financial
statements, other budgetary comparison schedules, and statistical tables are presented for purposes of
additional analysis and are not a required part of the basic financial statements. The combining fund financial
statements and other budgetary comparison schedules have been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole. The introductory section and statistical
tables have not been subjected to the auditing procedures applied in the audit of the basic financial state-
ments and, accordingly, we express no opinion on them.
In accordance with Government Auditing Standards,we have also issued our report May 30,2012,
on our consideration of the City's internal control over financial reporting and our tests of its compliance with
certain provisions of laws, regulations, contracts, and grants. Our report on compliance and on internal
control over financial reporting should be read along with this report.
STATE BOARD OF ACCOUNTS
May 30, 2012
15
Management Discussion & Analysis
The Management of the City of South Bend, Indiana ("City") provides herewith, this Management
Discussion & Analysis ("MD&A") of the financial activities and condition of the City of South
Bend, Indiana for the fiscal year ended December 31, 2011.
Readers of the information contained within this Management Discussion & Analysis, and any
opinion derived therein, should be considered as a part of the greater whole of the financial
statements, notes to the financial statements, supplemental information and letter of transmittal,
as contained within this Comprehensive Annual Financial Report("CAFR").
The City of South Bend is the county seat of St. Joseph County, Indiana, and is the fourth largest
city in the State of Indiana. St. Joseph County is located within the heartland of the manufacturing
and metropolitan regions of the Upper Midwest. The City of South Bend is located in the north
central region of the State of Indiana, five (5) miles south of the Indiana / Michigan State
boundary line. The City is approximately ninety (90) miles east of the city of Chicago and one
hundred forty (140) miles north of the city of Indianapolis.
The year 2010 U.S. Bureau of the Census population for the City of South Bend was reported as
101,168, whereas the year 2010 Census population for St. Joseph County was reported as
266,931. Accordingly, South Bend is classified as a"City of Second Class"under State of Indiana
statutes, defined as cities with a population between 35,000 and 250,000 residents.
South Bend and St. Joseph County is a vibrant and diverse area with a strong local economy
based on a mix of agricultural, manufacturing and service, higher education and other commercial
and tourism based industries. The diverse economic mix creates varied employment
opportunities for residents while providing insulation via diversification from economic downturns.
The City of South Bend provides a full range of general governmental services to citizens.
Services include general government, public safety, street construction and maintenance,
infrastructure construction and maintenance, parks & recreation services, arts & culture, and
sanitation services. In addition, the City provides Water Utility and Wastewater Utility services to
commercial and residential properties within the city. City operations also include the Century
Center Convention venue, College Football Hall of Fame, Studebaker Museum, South Bend
Redevelopment Authority and Public Parking Garages within the city footprint.
The City of South Bend governmental structure includes elected officials as follows with defined
management and legislative authority in compliance with Indiana Statute.
Mayor Chief Executive Officer 4 year term
Common Council 9 member legislative body 4 year term
6 from defined districts within the City
3 at large members
City Clerk Secretary of the Common Council 4 year term
All elected official current terms of office expire on December 31, 2015.
The City of South Bend was incorporated in 1865, compliant to Indiana Statute, and remains as
such through the period covered by this Management Discussion &Analysis report.
16
Management Discussion & Analysis
Financial Highlights
Governmental Business type Government wide
Activities Activities
Activities
S(whole) 2011 2010 2011 2010 2011 2010
Total Assets 517,651,245 520,908,273 275,840,661 250,583,137 793,491,906 771,491,410
Total Liabilities 224,587,699 228,756,515 111,439,332 95,891,883 336,027,031 324,648,398
Net assets
Capital net of debt 195,361,678 186,771,216 103,923,028 122,108,095 299,284,706 308,879,311
Restricted 9,354,772 8,840,610 12,937,988 13,320,967 22,292,760 22,161,577
Unrestricted 88,347,096 96,539,932 47,540,313 19,262,192 135,887,409 115,802,124
Total net assets 293,063,546 292,151,758 164,401 329 154,691,254 457,464,875 446,843,012
Change vs.pr.Year 911,788 17,965,301 9,710,075 8,411,134 10,621,863 26,376,435
Expenses 154,902,096 135,058,294 46,323,473 45,486,515 201,225,569 180,544,809
Revenues 152,772,708 153,672,418 59,074,724 53,248,826 211,847,432 206,921,244
• Government wide net assets (total assets less total liabilities) as of December 31, 2011
were $457,464,875.
• Government wide net assets increased by $10,621,863 or 2.4% during fiscal 2011.
Governmental activity net assets increased by $911,788 or .3% whereas business-type
activity net assets increased by$9,710,075 or 6.3% during fiscal 2011.
• Total assets as of December 31, 2011 of $793,491,906 increased by $22,000,496 or
2.9% as compared to total assets as of December 31, 2010.
• Total liabilities as of December 31, 2011 were $336,027,031, increased by $11,378,633
or 3.5% as compared to total liabilities as of December 31, 2010.
• As of December 31, 2011, government wide net assets of$299,284,706 were invested in
capital assets net of debt and are, therefore, not available for spending. Net assets of
$135,887,409 were classified as unrestricted net assets and may be used to meet
ongoing obligations to creditors. A total of $22,292,760 was classified as restricted for
debt service and capital outlay.
• Government wide revenue achieved in fiscal 2011 amounted to $211,847,432, an
increase of $4,926,188 or 2.3% versus government wide revenues achieved in fiscal
2010. Governmental activity revenue decreased by $899,710 or.5%, whereas business-
type activity revenue increased by$5,825,898 or 10.9%.
• Government wide expenses in 2011 amounted to $201,225,569, an increase of
$20,680,760 or 11.4% as compared to expenses of $180,544,809 in 2010. Government
activity expenses increased by $19,843,802 or 14.6%, while business-type activity
expenses increased by $836,958 or.2%, when compared to fiscal 2010.
• Explanatory commentary concerning the changes in assets, liabilities, revenue and
expenditures can be found in later sections of this MD&A.
17
Management Discussion & Analysis
Overview of the Financial Statements
The City of South Bend's financial statements are comprised of three components: 1)government
wide financial statements, 2) fund financial statements, and 3) notes to the financial statements.
This report also includes other supplementary 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 of South Bend's finances using "accrual based accounting," a method of accounting
used by private-sector businesses.
• Statement of net assets
This statement reports all assets and liabilities of the City of South Bend as of December
31, 2011. The difference between total assets and total liabilities is reported as "net
assets," and can generally be thought of as the net worth of the City. Increases in net
assets generally indicate an improvement in financial position while decreases in net
assets may indicate a deterioration of financial position.
• Statement of activities
This statement serves the purpose of the traditional income statement. It provides
consolidated reporting of the results of all activities of the City of South Bend for the year
ended December 31, 2011. Changes in net assets are recorded in the period in which
the underlying event takes place, which may differ from the period in which cash is
received or disbursed. The statement of activities displays the expense of the City's
various programs net of the related revenues, as well as a separate presentation of
revenue available for general purposes including property and county option income
taxes, fees for services and other revenue sources.
The government wide financial statements distinguish between functions of the City that are
principally supported by taxes and intergovernmental revenue (governmental activities) and other
functions that are intended to recover all or a significant portion of their costs through user fees
and charges (business type activities). The major governmental activities of the City of South
Bend include general government, public safety, street construction and maintenance,
infrastructure construction and maintenance, parks & recreation services, and arts & culture. The
major business-type activities of the City include the water utility, wastewater utility, solid waste
sanitation services, Century Center convention center, and Blackthorn golf course operations.
Fund Financial Statements
A fund is a group 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 of South Bend can be divided into three
categories: governmental funds, proprietary funds and fiduciary funds.
Governmental Funds
Governmental funds are used to account for the same functions reported as governmental
activities in the government wide financial statements. However, unlike government wide financial
statements, governmental fund financial statements focus on short-term inflows and outflows of
spendable resources, as well as on balances of spendable resources available at the end of the
fiscal year. Such information may be useful in evaluating a government's short-term financing
requirements. Governmental funds use the modified accrual accounting method. The City
18
Management Discussion $ Analysis
maintains six (6) major governmental funds (General, Parks and Recreation, Public Safety Local
Option Income Tax, TIF Airport, County Option Income Tax, and Economic Development Income
Tax) and sixty-nine (69) non-major governmental funds.
Proprietary funds
The City of South Bend maintains two types of proprietary funds: enterprise and internal service.
• Enterprise funds are used to report the same functions presented as business-type
activities in the government-wide financial statements. The City maintains seven (7)
enterprise funds. Information is presented separately in the proprietary statement of net
assets and the proprietary statement of revenues, expense and changes in fund net assets
for the Water Utility, Wastewater Utility and Century Center, which are considered major
enterprise funds. Data from the other four (4) non-major enterprise funds (Consolidated St.
Joseph County/South Bend Building Department, Parking Garage, Solid Waste and
Blackthorn Golf Course) are combined into a single, aggregated presentation. Individual fund
data for each of these non-major enterprise funds is provided in the form of combining
statements elsewhere in this report.
• Internal service funds are used to accumulate and allocate costs internally among the City's
various functions and funds. The City maintains five (5) internal service funds. The City of
South Bend uses internal service funds to account for its self-funded liability insurance
program, self-funded employee health benefits program, unemployment compensation
claims, police take home vehicle program and central services unit (a department that
accounts for expenses related to fuel, vehicle repairs, printing and other services provided to
City departments on a cost-reimbursement basis). Because these services predominantly
benefit governmental rather than business type functions, they have been included within
governmental activities in the government wide financial statements but are combined into a
single, aggregated presentation in the proprietary fund financial statements. Individual fund
data for the internal service funds is provided in the form of combining statements elsewhere
in the report.
Fiduciary funds
Fiduciary funds are used to account for resources held for the benefit of parties outside the City
government. Fiduciary funds are not reflected in the government wide financial statement
because the resources of those funds are not available to support City programs. The City
maintains five (5) fiduciary funds, which consist of two (2) pension trust funds (1925 Police
Pension and 1937 Firefighter's Pension), two (2) agency funds (Payroll and Morris/Palais Royale
Box Office), and one (1) private-purpose trust fund (Cemetery).
Pension Trust Fund Operations
City employees are covered by the Public Employees Retirement Fund ("PERF") and the 1977
Police Officers' and Firefighters' Pension Fund, both of which are administered by the State of
Indiana. However, certain police officers and firefighters hired before May 1, 1977, (who did not
opt into the 1977 fund) continue to be members of the 1925 Police Officer's Pension Fund or the
1937 Firefighters' Pension Fund. These two funds are administered by the City. The number of
police officers and firefighters in the City-managed pension trust funds will continue to decline in
the future as current participant's demise.
Effective in fiscal 2009, with the passage of State legislation, funding responsibility for the 1925
and 1937 Police and Firefighter's Pension Funds was assumed by the State of Indiana. These
funds no longer receive property tax revenue distributions beyond fiscal 2009. The transfer of
pension responsibility to the State of Indiana is on a reimbursement basis and will not provide
additional revenue to the City for use in other property tax funded areas. The administration of the
pension plans remains the responsibility of the City.
19
Management Discussion & Analysis
Notes to the financial statements
The notes to the financial statements provide additional information that is essential in order to
have a full understanding of the data provided in the government wide and fund financial
statements.
Other information
In addition to the basic financial statements and accompanying note & disclosures, this CAFR
report presents supplementary information. The combining statements referred to earlier in
connection with non-major governmental, enterprise, internal service and fiduciary funds are
presented immediately after the basic financial statements within the financial statement section
of the CAFR report.
Government wide financial statements
The following financial analysis will focus on the statement of net assets and statement of
changes in net assets of the City's governmental and business type activities.
Statement of Net Assets
Statement of Net Assets
Governmental Business type Government wide
Activities Activities Activities
$(whole) 2011 2010 2011 2010 2011 2010
Assets
Current&other 223,809,782 232,714,910 65,711,671 49,622,856 289,521,453 282,337,766
Capital assets(net) 293,841,463 288,193,363 210,128,990 200,960,281 503,970,453 489,153,644
Total Assets 517,651,245 520,908,273 275,840,661 250.583,137 793,491,906 771,491,410
Liabilities
Current 29,049,232 27,713,250 11,716,546 12,047,468 40,765,778 39,760,718
Long term 195,538,467 201,043,265 99,722,786 83,844,415 295,261,253 284,887,680
Total Liabilities 224,587,699 228,756,515 111,439,332 95,891,883 336,027,031 324,648,398
Net assets
Capital net of debt 195,361,678 186,771,216 103,923,028 122,108.095 299,284,706 308,879,311
Restricted 9,354,772 8,840,610 12,937,988 13,320,967 22,292,760 22,161,577
unrestricted 88,347,096 96,539,932 47,540,313 19,262,192 135,887,409 115,802,124
Total net assets 293,063,546 292,151,758 164,401,329 154,691,254 457,464,875 446,843,012
As of December 31, 2011, City assets exceeded liabilities by $457,464,875, an increase of
$10,621,863, or 2.4%, from the net asset level as of December 31, 2010.
Governmental net assets of $293,063,546 increased by $911,788 versus the level at December
31, 2010, an increase of.3%. Business type net assets of$164,401,329 increased by $9,710,075
versus the level at December 31, 2010, an increase of 6.3%.
20
Management Discussion & Analysis
Statement of Net Assets (continued)
Improvement in the net asset position of the City should be viewed as a favorable development
indicative of the conservative and responsible fiscal management policy maintained and followed
by City Management, especially in light of the revenue constraints due to state enacted property
tax reform in 2009 and soft economic conditions experienced in fiscal 2011. The increase in
business type net assets was due primarily to a 9% increase in sewer rates which will be used to
support long-term capital projects of the Wastewater utility.
Total assets increased $22,000,496 or 2.9% as compared to the asset level as of December 31,
2010. The increase in assets is largely attributed to an increase in capital assets net of
depreciation.
The increase in capital assets of$14,816,809 is the result of several major capital construction
projects capitalized or in process during the period. Major projects include the Eddy Street
Commons development, Coveleski Stadium improvements, several street and intersection road
improvement projects, several sewer rehabilitation projects, and water and wastewater utility
equipment projects.
Total liabilities increased by $11,378,633 or 3.5% as compared to the liability level as of
December 31, 2010. The increase in liabilities is largely attributed to additional sewer bonding
and an increase in OPEB liabilities in connection with retiree health insurance benefits.
Government wide net assets of$299,284,706, are invested in capital assets net of debt and are
therefore, not available for spending. A total of $135,887,409 is classified as unrestricted net
assets and may be used to meet ongoing obligations to creditors. Net assets in the amount of
$22,292,760 are classified as restricted for debt service and capital outlay.
Statement of Changes in Net Assets
Governmental Business type Government wide
Activities Activities
Activities
$(whole) 2011 2010 2011 2010 2011 2010
Revenue
Program Revenue
Charge for services 10,853,623 17,187,806 54,576,584 51,212,835 65,430,207 68,400,641
Operating grants 32.091,246 29,467,573
Capital rants - - 32,091,246 29,461,573
9 2,328,468 1,472,233 4,291,731 1,889,165 6,620,199 3,361,398
General Revenue
Taxes
Property lax 76,445,349 77,315,641 - 76,445,349 77,315,641
Other tax 22,555,664 19,850,720 - - 22,555,864 19,850,720
Unrestricted grants 3,964,336 4,883,081 - 3,964,336 4,883,081
Investment earnings 1,050,768 868,023 206,409 146,826 1,257,177 1,014,849
Other revenue 3,483,054 2,627,341 3,483,054 2,627,341
Total Revenue 152,772,708 153,672,418 59,074,724 53,248,826 211,847,432 206,921,244
Expenses
General government 16,783,351 8,261,861
Public safety 73,530,442 63,150,142 - 16,783,351 8,261,861
Highways&streets 7,574,003 9,526,537 73,530,4442 2 63,150,142
Culture&recreation 15,566,794 16,036,194 ' 7,574,003 9,526,537
- 15,566,794 16,036,194
21
Management Discussion &Analysis
Economic development 34,648,975 30,744,012 - 34,648,975 30,744,072
Interest on long term debt 6,798,531 7,339,548 - - 6,798,531 7,339,548-
Wafer utility -
Wastewater utility _ 11,972,840 12,525,246 11,972,840 12,525,246
22,260,005 21,403,663 22,260,005 21,403,663
Building
Civic ding ter - - 3,100,484 2,989,586 3,100,484 2.989,586
department - - 871,299 930,120
871,299 930,120
Parking - - 1,467,646 1,438,288 1,467,646 1,438,288
Solid waste - - 4,962,157 4,204,056 4,962,157 4,204,056
Golf course - - 1,689,042 1,995,556 1,689,042 1,995,556
Total Expense 154,902,096 135,058,294 46,323,473 45,486,515 201,225,569 180,544,809
Change in net assets
Before transfers/special (2,129,388) 18,614,124 12,751,251 7,762,311 10,621,863 26,376,435
Transfers 3,041,176 (648,823) (3,041,176) 648,823 -
Change in net assets 911,788 17,965,301 9,710,075 8,411,134 10,621,863 26,376,435
Beginning net assets 292,151,758 274,186,457 154,691,254 146,280,120 446,843,012 420,466,577
(restated)
Ending net assets 293,063,546 292,151,758 164,401,329 154,691,254 457,464,875 446,843,012
Governmental Activities
Net assets for governmental activities increased by $911,788 during fiscal 2011. Revenue of
$152,772,708 decreased by $899,710, or .6%, Expenses were $154,902,096 during 2011, an
increase of$19,843,802, or 14.7% as compared to fiscal 2010.
The revenue decrease was due to lower revenue from charges for service and property taxes
primarily in the General Fund. The increase in expenses was due primarily to spending on capital
projects such as Coveleski Stadium, the Potawatomi Conservatory and land acquisition for a new
high school in the downtown area along with increased spending on public safety, as the police
and fire department staffing was restored to full strength.
Interest on long term debt of $6,798,531 decreased by $541,017 consistent with existing
repayment obligations.
Business Type Activities
Net assets from business type activities increased by $9,710,075 during fiscal 2011. During 2011,
revenue of $59,074,724 increased by $5,825,898 or 10.9% when compared to fiscal 2010.
During 2011, expenses of $46,323,473 increased by $836,958 or 1.8%% when compared to
fiscal 2010.
Revenue increased primarily as the result of a 9% increase in sewer rates for 2011 designed to
provide funding to cover long-term wastewater and sewer capital improvements. Additional
capital grant funding was received from the state revolving fund to cover sewer and wastewater
projects.
Expenses during 2011 were consistent with 2010 with slight increases in the wastewater utility to
cover spending on capital projects and in solid waste to cover higher landfill costs. Expenses for
the water utility, building department and Blackthorn golf course were lower in 2011 than in fiscal
2010 as these departments experienced stagnant or declining revenue and adjusted their
expenses accordingly.
22
Management Discussion & Analysis
Financial Analysis of Government Funds
The City of South Bend uses fund accounting to ensure and demonstrate compliance with
finance-related legal requirements. Funds of the City are divided into three categories:
governmental funds, proprietary funds and fiduciary funds.
Governmental funds
Condensed Balance Sheet,
Statement of Revenues, Expenditures, and Changes in Fund Balance
As of December 31, 2011
$(whole) General Park&Rec PS LOIT COIT EDIT TIF Airport Other Total
Total assets 31,371,631 4,990,005 2,228,508 18,592,068 9,994,625 34,081,655 113,966,380 215,224,872
Total liabilities 3,440,415 462,651 - 663,230 157,213 3,642,349 10,624,938 18,990,796
Fund Balances:
Non-spendable 1,115,025 64,231 3,395,837 449,831 11,322,131 21,804,809 38,151,864
Restricted 327,267 4,463,123 2,228,508 38,062,406 45,081,304
Committed - - - - - - 11,829,074 11,829,074
Assigned 255,287 - - 14,533,001 9,387,581 19,117,175 34,422,527 77,715,571
Unassigned 26,233,637 - - - - (2,777,374) 23.456,263
Total fund balance 27,931,216 4,527,354 2,228,508 17,928,838 9,837,412 30,439,306 103,341,442 196,234,076
Liability&fund balance 31,371,631 4,990,005 2,228,508 18,592,068 9,994,625 34,081,655 113,966,380 215,224,872
Revenues 64,592,024 11,392,823 5,846,861 8,020,602 8,580,213 11,376,299 43,068,350 152,877,172
Expenditures 73,636,507 11,661,404 - 5,746,390 5,787,571 19,397,279 56,168,528 172,397,679
Net surplus(deficit) (9,044,483) (268,581) 5,846,861 2,274,212 2,792,642 (8,020,980) (13,100,178) (19,520,507)
Other sources(uses) 8,238,557 395,425 (4,761,979) (1,263,386) (2,536,759) (352,446) 7,833,455 7,552,867
Change in fund balance (805,926) 126,844 1,084,882 1,010,826 255,883 (8,373,426) (5,266,723) (11,967,640)
Beginning fund balance 28,737,142 4,400,510 1,143,626 16,918,012 9,581,529 38,812,732 108,608,165 208,201,716
Ending fund balance 27 931,216 4,527,354 2 228 508 17,928,838 9,837,412 30 439 306 103,341,442 196,234,076
As of December 31, 2011, the City governmental funds reported a combined ending fund balance
of$196,234.076.
Non-spendable fund balance of $38,151,864 is sequestered for property held for resale,
inventory, non current loans receivable and advances to other funds and is, therefore, not
available for new spending. Restricted fund balance of $45,081,304 consists of monies in debt
service funds or other funds such as road funds that are limited by external parties as to their use.
Committed fund balance of $11,829,074 is designated by the Common Council of the City of
South Bend to be used for certain purposes such as for environmental projects. Assigned fund
balance of $77,715,571 includes balances in tax increment property tax funds and local option
income tax funds that have not been committed to certain projects and are available for spending
by the City. Unassigned fund balance of$23,456,263 consists of money primarily in the General
Fund that has not been obligated in any manner by the City.
23
Management Discussion & Analysis
The General Fund is the primary operating fund for City operations including general
government, public safety, code enforcement, certain highways & streets expenses, certain
culture & recreation expenses, and certain debt service obligations.
As of December 31, 2011, the General Fund balance of $27,931,216 represents a decrease of
$805,926 or 2.8%from the balance as of December 31, 2010.
The decrease in General Fund balance was due primarily to the collection of less property tax
revenue than originally budgeted due to circuit breaker property tax limitations in Indiana and
lower assessed property values.
As of December 31, 2011, the General Fund had unassigned fund balance of$26,233,637 which
is equal to 40.6%of 2011 General Fund Revenue.
The General Fund unassigned fund balance has traditionally been used by the City to fund
certain capital projects and emergency contingencies. In addition, the City will use the
unassigned fund balance in 2012 as a cash flow bridge to the receipt of property tax revenues
from the County collection authority which distributes property tax revenue two times per year
(June and December). General Fund unassigned balance will provide sufficient cash to cover City
operating obligations without incurring tax anticipation notes and resultant borrowing costs during
fiscal 2012.
As discussed in Governmental Accounting, Auditing, and Financial Reporting (GAAFR), a general
fund unassigned fund balance should be either 1) no less than 5 to 15 percent of regular general
fund operating revenues, or 2) no less than one to two months of regular general fund operating
expenditures. An unassigned fund balance may be higher if varying circumstances require such
as a delay in collection of a major revenue source.
The Parks and Recreation Fund experienced an increase in fund balance of $126,844 during
fiscal 2011. The increase in fund balance was due primarily to the receipt of payment-in-lieu of
taxes from the wastewater and water utilities in the amount of$580,875 beginning in 2011. Parks
Board and Parks Administration continued in 2011 with prudent management of expenditures and
commitments in light of current and future projected revenue streams.
As of December 31, 2011, the restricted fund balance in the Parks and Recreation Fund was
$4,463,123, or 39.2%of 2011 revenue.
The Public Safety Local Option Income Tax Fund ('Public Safety LOIT") was created in
October 2009, with the local legislative passage of an increase in local option income taxes of
0.95%, a part of which (0.25°/x) tax increase was established to fund public safety expenditures.
The City has established the Public Safety LOIT Fund as a major governmental fund, due solely
to its purpose of creating a funding source to sustain public safety staffing levels, which were
compromised by state implementation of property tax reform that has reduced property tax
revenues, which historically are the source of public safety funding. Operating transfers are made
quarterly from the Public Safety LOIT Fund to the General Fund to cover the personnel costs of
police officers and firefighters. Receipts of Public Safety LOIT tax revenue commenced in
January 2010. The revenue collected in fiscal 2011 of$5,846,861 exceeded original projections.
The resultant increase in fund balance in the amount of$1,084,882 is restricted and will be used
in future fiscal periods to fund full staffing levels for police and fire personnel.
Fund balances as of December 31, 2011 improved versus the fund balances as of December 31,
2010 in the COIT and EDIT funds as not all planned projects were completed and expended
during 2011.
The County Option Income Tax Fund ("COIT") and Economic Development Income Tax
Fund ("EDIT") funds are used to fund major capital and construction projects, economic
development initiatives, certain subsidies and support to organizations and units that benefit city
24
Management Discussion & Analysis
economic development and cultural venues, certain city-wide expenditures such as telephone
costs, and certain debt service payments.
The COIT fund increased by $1,010,826 during 2011 due to higher income tax receipts than
originally estimated and conservative commitment of expenses to initiatives of the highest priority.
The City has operationally sequestered COIT funds for use in major capital and construction
funding initiatives, certain subsidies and support to organizations and units that benefit city
economic development and cultural venues, information technology costs, city-wide expenditures
like telephone costs, and certain debt service payments.
As of December 31, 2011, the COIT Fund balance of $17,928,838 included assigned fund
balance of $14,533,001 and non-spendable fund balance of $3,395,837, primarily for property
held for resale and advances to other funds.
The EDIT fund increased by $255,883 during 2011 due to higher income tax receipts than
originally estimated and conservative commitment of expenses to initiatives of the highest priority.
The City has operationally sequestered EDIT funds for use in major economic development
initiatives, certain subsidies and support to organizations and units that benefit city economic
development and cultural venues, and certain debt service payments.
As of December 31, 2011, the EDIT Fund balance of$9,837,412 included assigned fund balance
of $9,387,581 and non-spendable fund balance of $449,831, consisting of property held for
resale.
The fund balance in the TIF Airport Fund decreased by $8,373,426 during 2011 due to planned
spending for capital projects including a new Animal Control facility, improvements at Ignition
Park (industrial park), Oliver Plow Memorial, continued demolition of the historical Studebaker
automobile factory buildings, the extension of Mayflower Road and other economic development
initiatives.
As of December 31, 2011 the TIF Airport Fund fund balance of$30,439,306 included $9,562,208
in property held for resale, $1,759,923 advances to other funds (primarily to the Blackthorn golf
course) and $19,117,175 in assigned fund balance.
The TIF Airport Fund continues to be a major success for the City of South Bend and has
generated in excess of$500 million dollars in private investment since its inception.
During 2011, the fund balances in Other Governmental funds decreased by $5,266,723. This
decrease in fund balance was primarily the result of planned spending of $4.418,858 in the
Coveleski Stadium Bond construction fund, a fund established in late 2010 with bond financing.
These fund balances provide available resources that the City requires to meet future capital
construction needs, ongoing debt service obligations, and economic development project
initiatives in concert with the City vision for economic development within the City footprint.
Individual fund data for each of the non-major governmental funds is provided in the form of the
combining statements in the Supplemental Information section of the CAFR report.
Governmental Fund Revenue
The following schedule presents a summary of governmental fund revenue for the year ended
December 31, 2011 with comparison to the prior year:
25
Management Discussion & Analysis
Governmental Fund Revenue
$(whole) 2011 %of 2010 %of
Tax Based Actual Total Actual Total
General properly 76,445,349 50.0% 77,315,641 48,8%
County option income 13,219,723 8.6% 14,366,154 9.1%
County economic development 8,044,773 5.3% 9,090,415 °
Professional sports development 5.7/°
558,268 0.4% 597.406 0.4%
Community revitalization district 733,100 0.5% 416,149 0,3%
Total Tax 99,001,213 64.8% 101,785,765 64.3%
Non Tax Based
Licenses and permits 190,943 0.1% 192 397 °
Intergovernmental ° 0.1/°
34,419,714 22.5/ 35,822,886 22.6%
Charge for services 13,990,267 9.2% 16,585,634 10,5%
Fines and forfeitures 636,749 0,4% 409,775 0.3%
Interest income 1,050,768 0.7% 868,023 0.5%
Donations 305,670 0.2% 300,337 0.2%
Other 3,281,848 21°� 2,377,459 1.5%
Total Non-Tax Based 53,875,959 35.2% 56,556,511 35.7%
Total Revenue 152,877,172 100.0% 158,342,276 100.0%
Tax revenue continues to represent the most significant source of revenue required to support
services provided by the City. Property tax revenue is the primary source of funding for
governmental expenditures. Property tax revenue is based on a relationship between two
variables. The first variable is the assessed property valuation of industrial, commercial and
residential parcels for both real and personal property. The second variable is the application of a
tax rate to arrive at the total tax levy. Taxable property is assessed at 100% of the true tax value.
The amount of property tax levied (billed to property owners) is further restricted by State of
Indiana enacted property tax legislative reform, or so-called "circuit breaker" property tax caps in
2009 of 1.0% (homestead), 2.0% (other residential/rental) and 3.0% (commercial/industrial) of
gross assessed valuation. Property tax revenue includes taxes collected on behalf of the
following funds: General Fund, Parks and Recreation Fund, Cumulative Capital Development
Fund, Redevelopment Tax Incremental Financing ("TIF") Funds, and a special levy to cover debt
service of the College Football Hall of Fame.
The City recognizes the need to further diversify the revenue stream, and to reduce its
dependency on general property taxes to ensure that a broad base of users of city services,
including nonresidents who work in the City, share in the funding of basic City services. As a
result of the need to diversify the revenue stream, the City of South Bend Common Council and
Saint Joseph County Council adopted an additional local option income tax of 0.95%during 2009,
increasing the tax rate from 0.8% to 1.75%. The local option income tax increase consisted of
three components: 0.2% increase in the economic development income tax, a new 0.25% public
safety local option income tax and a new 0.5% property tax relief local option income tax.
The City continues to seek diversified sources of revenue that will reduce its reliance on property
and income taxes. The City has supported efforts of the Indiana Association of Cities and Towns
("IACT") "Hometown Matters" to lobby the state legislature to legislatively enable alternative
revenue sources that best fit the needs of the community. A viable source of revenue is from
user fees and/or charges for services currently being performed. City performed services are
priced based at levels representing the full cost of service, taking into consideration fees charged
by providers of similar services. The City performs ongoing reviews of user fee costs incurred and
revises service fee prices as required.
26
Management Discussion & Analysis
Government Fund Expenditures
The City accounts for government fund expenditures in seven categories as follows: 1) general
government, 2) public safety, 3) highways and streets, 4) economic development, 5) culture and
recreation, 6) debt service and 7) capital outlay.
The following schedule presents a summary of governmental fund expenditures for the year
ended December 31, 2011 with comparison to the prior year.
Governmental Fund Expenditures
$(whole) 2011 °%of 2010 %of
Actual Total Actual Total
General government 6,680,855 3.9°% 5,214,424 3.5%
Public safety 69,612,754 40.4% 60,990,129 40.5°%
Highways&streets 5,079,041 2.9% 12,298,603 8.1%
Economic development 9,698,611 5.6% 17,408,376 11.5°%
Culture&recreation 13,816,699 8.0% 12,841,596 8.5%
Debt service 20,818,689 12.1°% 20,052,364 13.3%
Capital outlay 46,691,030 27.1% 21,952,522 14.6%
Total Expenditures 172,397,679 100.0% 150,758,014 100.0%
Government fund expenditures in fiscal 2011 of $172,397,679 increased by $21,639,665 or
14.4%, in comparison to government fund expenditures in fiscal 2010.
Capital outlay expenditures increased by $24,738,508 during 2011 due primarily to an increase in
spending on economic development projects from local option income tax funds and tax
increment financing (TIF) funds. These projects include improvements at Ignition Park, the
Triangle housing development, LaSalle Square improvements, the Oliver Chilled Plow Memorial,
an extension of Mayflower Road, continued demolition of the Studebaker automobile factory
buildings, Coveleski Stadium improvements and other economic development initiatives.
Public Safety expenditures increased $8,622,625 or 14.1% as the initiative to increase the
employment force of sworn police and fire personnel commenced according to City plans outlined
in the tax increase legislation passed by the Common Council in 2009. In addition, higher police
and fire pension payments were made during 2011 and this cost was allocated to public safety.
Highways and Street expenditures decreased by $7,219,562 as the costs of the Engineering
department were reclassified to General Government. In addition, certain street construction
projects in the City were paid from economic development funds and were classified as capital
outlay.
Public Safety expenditure continues to be the primary use of government fund resources with
40.4% of expenditures used for this purpose in fiscal 2011. Public safety spending is followed by
capital project expenditures (27.1%), debt service (12.1%), culture and recreation (8.0%),
economic development operating (5.6%), general government (3.9%) and highways & streets
(2.9%). General government spending is comprised of the executive offices of the Mayor,
Common Council, City Clerk, City Attorney, Controller, Engineering and other administrative
offices.
27
Management Discussion & Analysis
Proprietary funds
Condensed Statement of Net Assets,
Revenues, Expenses, and Changes in Fund Net Assets
As of December 31, 2011
$(whole) Water Utility Wastewater Century Center Other Total Enterprise Internal Service
Utility
Total assets 71,030,220 172,819,449 18,679,478 15,266,825 277,795,972 17,682,256
Total liabilities 17,036,435 91,481,057 336,231 4,540,920 113,394,643 3,820,779
Net assets:
Capital assets net of debt 47,165,632 33,501,672 16,641,420 6,614,304 103,923,028 1,305,486
Restricted for:
Debt service - - - 708,678 708,678
Capital outlay 505,712 10,318,594 1,344,057 60,947 12,229,310
Unrestricted 6,322,441 37,518,126 357,770 3,341,976 47,540,313 12,555,991
Total net assets 53,993,785 81,338,392 18,343,247 10,725,905 164,401,329 13,861,477
Operating revenues 13,327,404 28,867,423 1,491,634 8,190,044 51,876,505 17,985,280
_Operating expenses 11,066,326 18,717,052 2,993,165 8 258 990 41,035,533 17,396,743
Operating income(loss) 2,261 078 10,150,371 (1,501,531) (68,946) 10,840,972 588,537
Non operating rev(exp) (117,572) (2,846,989) 1,297,735 (714,626) (2,381,452) 57,446
Income (loss) before 2,143,506 7.303.382 (203,796) (783,572) 8,459,520 645,983
contributions 8 Iransfers
Capital conlrlbutions 377,308 3.300,000 614,423 - 4,291,731 2 784
Transfers in - - - 651,500 651,500
Transfers out _ (1,398 419) (2,290,752) (3,505) (3,692,676)
Change in net assets 1,122,395 8,312,630 410 627 (135,577) 9,710,075 648 767
Net assets beginning 52,871,390 73,025,762 17,932,620 10,861,482 154,691,254 13,212,710
Net assets ending 53,993,785 81,338,392 18,343.247 10,725,905 164 401 329 13,861,477
The City of South Bend maintains two types of proprietary funds; enterprise and internal service.
The City maintains seven (7) enterprise funds. Information is presented separately in the
proprietary statement of net assets and the proprietary statement of revenues, expense and
changes in fund net assets for the Water Utility, Wastewater Utility and Century Center, which are
considered major enterprise funds. Data from the other four (4) non-major enterprise funds
(Consolidated St. Joseph County/South Bend Building Department, Parking Garage, Solid Waste
and Blackthorn Golf Course) are combined into a single, aggregated presentation.
The City maintains five (5) internal service funds. The City of South Bend uses internal service
funds to account for its business insurance and self-funded liability insurance program, self-
funded employee health benefits program, police take home vehicle program, unemployment
compensation claims and central services unit (a department that accounts for expenses related
to fuel, vehicle repairs, printing and other services provided to City departments on a cost-
reimbursement basis). The internal service funds have been combined into a single, aggregated
presentation.
28
Management Discussion & Analysis
As of December 31, 2011, City enterprise funds reported a net asset position of$164,401,329, an
increase of$9,710,075 or 6.3%versus the level as of December 31, 2010.
At December 31, 2011, net asset Position includes capital assets, net of related debt of
$103,923,028, restricted net assets of$12,937,988 and unrestricted net assets of$47,540,313.
The Water and Wastewater utilities reported an increase in net assets of $1,122,395 and
$8,312,630, respectively, during 2011. During 2011, the Wastewater utility benefitted from a 9%
increase in sewer rates and from a $3.3 million capital contribution from the EDIT fund for capital
projects in connection with the combined sewer overflow program. The rates for the Water utility
did not increase but it did receive a $377,308 capital contribution during 2011.
During 2011, Century Center experienced an increase in net assets of$410,627 as the result of
capital contributions in the amount of $614,423 from capital improvements at the facility paid for
from tax increment financing and other funding sources.
Other Enterprise Funds experienced a decrease in net assets of$135,577 as total revenue was
flat and expenses increased modestly, especially in the Solid Waste Fund that had higher landfill
costs in 2011 as compared to 2010.
As of December 31, 2011, City internal service funds reported a net asset position of
$13,861,477, an increase of$648,767 or 4.9% as compared to 2010. The Liability Insurance fund
and Central Services fund reported increases in net assets of $718,068 and $302,260,
respectively. The Self-Funded Employee Benefits fund reported a decrease in net assets
$423,178 due to higher health insurance claims paid by Anthem, the City's insurance provider.
Fiduciary funds
Fiduciary funds are used to account for resources held for the benefit of parties outside the
government. The City maintains five fiduciary funds, which consist of two pension trust funds
(1925 Police Pension and 1937 Firefighter's Pension), one private-purpose trust fund (Cemetery)
and two agency funds(Payroll and Morris/Palais Royale Box Office).
$(whole) Pension Trust Private Purpose Trust
Agency
Total assets 3,885,775
40,965 2,152,566
Total liabilities 850
2,152,566
Net assets 3,884,925
40,965 ,
The net assets in the pension trust fund decreased by $297,151 during 2011. The net assets in
the private purpose trust fund (Cemetery) increased by $160 due to interest earnings.
Effective in fiscal 2009, with the passage of State legislation, funding responsibility for the 1925
Police and 1937 Firefighter's Pension Funds was assumed by the State of Indiana. These
funds no longer receive property tax revenue distributions beyond fiscal 2009. The transfer of
pension responsibility to the State of Indiana is on a reimbursement basis and will not provide
additional revenue to the City for use in other property tax funded areas. The administration of the
pension plans remains the responsibility of the City.
The State of Indiana reimbursement is on a year delayed basis whereas, reimbursement in fiscal
2011 from the State of Indiana included reimbursement for pension benefits paid by the City in
fiscal 2010. In addition, State reimbursement excludes healthcare benefit coverage to pension
plan members, which is covered under the City of South Bend pension benefit program and
which is paid from the pension trust funds.
29
Management Discussion & Analysis
The decline in the net asset position of the pension trust is the result of timing differences in the
payment of pension benefits and the reimbursement of same from the State of Indiana, as well as
the cost of healthcare benefits to pension members, not covered by the state reimbursement
program.
General Fund Budgetary Highlights
The City prepares an annual budget for general fund expenditures, which is subject to City of
South Bend Common Council approval for adoption, before November 15t of the year preceding,
the budget period, according to state statute concerning the annual budget of second class cities
and towns.
The general fund budget applicable for fiscal 2011 is reported as follows:
Actual Budgetary
$(whole)
Original Final Basis
Variance
Revenue 63,306,324 63,529,220 60,696,679 (2,832,541)
Expenditures 63,386,324 64,844,690 62,224,384 2,620,306
Surplus(deficit) (80,000) (1,315,470) (1,527,705) (212,235
General Fund revenue was originally budgeted at $63,306,324 for fiscal 2011 with Common
Council adoption of the 2011 general fund budget on October 25, 2010. During 2011, the General
Fund revenue budget was increased by $222,896 resulting in an ending revenue budget of
$63,529,220. The revenue budget may be increased at any time based on updated revenue
projections and includes an adjustment in the amount of $142,428 for a federal energy
conservation grant received during 2011.
During 2011, General Fund revenue achieved amounted to $60,696,679, a deficiency from the
final budget level of $2,832,541. The primary reason for the revenue shortfall was reduced
property tax collections due to circuit breaker tax legislation ($1,985,450 less than budgeted)
along with lower interest earnings on investments, E-911 grant revenue and forfeitures.
General Fund expenditures were originally budgeted at$63,386,324 for fiscal 2011 with Common
Council adoption of the 2011 general fund budget on October 25 2010. During 2011, the General
Fund expenditure budget was increased $1,458,366 resulting in an ending expenditure budget of
$64,844,690. The expenditure budget increase resulted from an encumbrance roll over at year
end 2010 to 2011 of$860,993 and additional appropriations of$597,373 (police cars and energy
grant).
General Fund spending is reviewed on a monthly basis under the direction of the City Controller
to ensure spending remains within budgetary constraints. Quarterly reviews are conducted as
required with general fund department management to review spending projections to ensure that
annual expenditures remain within the budgetary levels. Budget amendments for cost neutral
redistribution between expense categories (i.e. personnel, supplies, services, capital) are
submitted to Common Council at mid year and year end, as required to adjust the budget as
necessary to prevent any budget overruns in any expense category.
Additional appropriations for projects, initiatives, or unbudgeted spending requirements within the
general fund are presented to the Common Council for adoption as deemed necessary by the
Mayor.
General Fund expenditures incurred on a budgetary basis, including cash expended and
outstanding encumbrances as of year end December 31, 2011 amounted to $62,224,384. The
expenditures and commitments as of year end December 31, 2011 are less than the 2011
30
Management Discussion & Analysis
General Fund expenditure budget by $2,620,306 or 4.2%. The largest savings were in the police
and fire department budgets as personal and other costs spent were less than budgeted.
Capital Assets and Debt Administration
Capital assets
Statement of Capital Assets
Governmental Business type Government wide
Activities Activities
Activities
$(whole) 2011 2010 2011 2010 2011
2010
Assets not depreciated
Land 13,285,449 12,435,772 3,024,582 3,020,576 16,310,031 15,456,348
Construction in progress 13,150,305 49,034,174 12,217,249 16.404,487 25,367,554 65,438,661
Total 26,435,754 61,469,946 15,241,831 19,425,063 41,677,585 80,895,009
Assets depreciated
Buildings 116,244,771 97,928,133 88,915,505 88,941,215 205.160,276 186,869,348
Non-building improvements 43,335,206 22,970,590 160,004,338 143,262,590 203,339,544 166,233,180
Machinery&equipment 47,218,930 42,320,643 54,800,866 51,262,296 102,019,796 93,582,939
Roads 380,500,515 370,055,466
- - 380,500,515 370,055,466
Total Cost 587,299,422 533,274,832 303,720,709 283,466,101 891,020,131 816,740,933
Accumulated depreciation
Buildings 33,761,990 31,401,511 44,092,151 42,206,773 77,854,141 73,608,284
Non-building improvements 8,163,538 7,226,570 26,213,770 24,547,762 34,377,308 31,774,332
Machinery&equipment 31,953,062 31,249,330 38,527,629 35,176,348 70,480,691 66,425,678
Roads 246,015,123 236,674,004
- - 246,015,123 236,674,004
Total 319,893,713 306,551,415 108,833,550 101,930,883 428,727,263 408,482,298
Net Depreciated Assets 267,405,709 226,723,417 194,887,159 181,535,218 462,292,868 408,258,635
Net Assets 293,841,463 288,193,363 210,128,990 200,960,281 503,970,453 489,153,644
City investment in capital assets for governmental and business type activities was $503,970,453
(net of depreciation) at December 31, 2011.
The investment in capital assets includes land and land improvements, buildings and building
improvements, vehicles, information technology computers, machinery and equipment, and
construction in progress. A detailed explanation of these capital assets can be found in the Notes
to the Basic Financial Statements.
Under the category of roads, the current cost amount of $380,500,515 includes estimated costs
derived primarily from the City's 2006 implementation of GASB Statement No. 34, which required
the retroactive reporting of infrastructure capital assets. All other assets are recorded at historical
cost.
31
Management Discussion & Analysis
Major Capital Asset Project Spending in 2011
Buildings
Morris Civic Center Renovations 506,935 New project
Animal Shelter for code enforcement 647,711 New project
Polawalomi Conservatory 163,918 New project
Improvements
Northside Trail 513,515 New project
Edison/Gordon Turn Lane 78,400 New project
Main/Jefferson Slreelscape Improvements 66,294 New project
Diamond Avenue Storm Sewer 3,983,387 Continued project
East Bank Sewer Separation 2,554,488 Continued project
Ironwood/Aulen Water Main 22,849 New project
M&E Ewing Avenue improvements 412,597 Continued project
Digester upgrade 486,360 New project
Michigan St Lift Station Replacement 79,863 New project
Wastewater Blowers to and 1B Replacement 330,940 Continued project
Roads
Portage Avenue improvements 1,138,752 Continued project
Colter Street Construction 571,899 New project
Western&Walnut Intersection 818,877 Continued project
Mayflower Boulevard Construction 2,002,336 New project
Capital Assets Analysis
Government wide capital assets, net of accumulated depreciation as of December 31, 2011 of
$503,970,453 increased by$14,816,809 or 3.0%when compared to the level as of December 31,
2010. Construction in progress capital assets decreased by $40,071,107, whereas, capitalized
assets in land, buildings, improvements, machinery and equipment, and roads, net of
depreciation, increased by$54,887,916, when compared to December 31, 2010.
Several major capital projects were completed in fiscal 2011, as identified in the chart above, and
included capital investments in buildings, improvements, machinery & equipment and roads.
At December 31, 2011, the cost of Roads ($380,500,515) was the major asset class followed by
Buildings ($205,160,276)and Non-Building Improvements ($203,339,544).
Total depreciation expense for 2011 was$22,509,969 as compared to$19,365,078 for 2010.
Additional information on capital assets can be found in the notes to the financial statements in
statement note I.D.6, capital asset capitalization policy, statement note III.C, capital asset activity,
and statement note III.D, construction commitments.
Debt Administration
Outstanding debt principal as of December 31, 2011 was $239,076,065, an increase of
$3,898,754 or 1.7%. City outstanding debt includes revenue bonds, mortgage bonds, notes &
loans payable and capital leases.
Type Beginning Additions Retirements Ending
Revenue bonds 184,165,000 59,807,431 53,845,000 190,127,431
Mortgage bonds 21,835,000 - 1,450,000 20,385,000
Notes&loans 23,078,568 647,505 3,751,830 19,974,243
Capital leases 6,098,743 4,057,635 1,567,987 8,588,391
Total Debt 235,177,311 64,512,571 60,614,817 239,075,065
32
Management Discussion & Analysis
The new revenue bond issued in fiscal 2011 was the 2011 Sewage Works Revenue Bond in the
amount of$21,500,000 for the purpose of funding improvements for the combined sewer overflow
("CSO") initiative.
The 2011 Sewage Works Bond is a twenty (20) year issue with maturity in 2031 with debt service
coverage from the Sewage Works Bond Sinking fund. The bond issue will finance capital
improvements addressing combined sewer overflow issues improving sewage discharge into the
St. Joseph River, in compliance with the Environmental Protection Agency ("EPA") consent
decree. It is a part of a twenty year long-term control plan which will require additional bonding
and sewer rate increases.
During 2011 the City entered into capital lease agreements in the amount of $4,057,635 to
purchase certain vehicles, copiers, telephones and equipment. The lease terms are typically for
five years with quarterly or semi-annual debt service paid from the operating budgets of the user
departments. The 2011 capital leases were for solid waste ($529,285), building department
($39,600), parks & recreation department ($948,067), police department ($1,081,066),
information technology ($1,444,996)and other($14,621).
The 2011 additions in notes & loans is for Water and Wastewater Utility borrowing in 2011
against the State Revolving Loan (SRF) program in the amount of$648,505 for water and sewer
improvements.
During 2011 the City refunded four bond issuances in order to take advantage of a more
favorable interest rate environment. In August, the City refunded the 2000 Hall of Fame and 2001
Century Center bonds and realized present value interest savings of approximately $1,036,701
over the remaining life of the bonds. In December, the City refunded the 2003 Airport TIF and
2003 SBCDA (Downtown) TIF bonds with the Indiana Bond Bank and received an up-front cash
payment of$1,914,501 which was deposited into the respective TIF funds.
Under the Indiana Constitution and State statute, the City's general obligation bonded debt and
certain other debt is subject to a legal limitation based upon 2% of total assessed value of real
and personal property. The City had no general obligation bonded debt outstanding at December
31, 2011 and none of the above debt issuance amounts are subject to this debt limitation.
In 2012, the City anticipates issuing additional debt including a 2012 Water Revenue bond in the
amount of$8,300,000 and a 2012 Sewage Works Revenue bond in the amount of$21,200,000.
New capital leases will also be needed for the customary replacement of police department,
public works and other city vehicles and equipment.
Additional information on debt can be found in the notes to the financial statements in statement
note I.D.8, long-term obligation accounting, statement note III.F.2, capital lease obligations,
statement note III.G, long-term liabilities, and statement note IV.D, conduit debt.
A calculation of the City's legal debt limitation can be found in the statistical debt capacity section
of this document.
Economic Factor; and 2013 Budget
Economic Factors
Property tax revenue, historically and at present, is the principal source of revenue for funding of
governmental activities within the City of South Bend.
The State of Indiana General Assembly enacted property tax reform legislation in March of 2008.
House Enrolled Act 1001 (HEA 1001) which limits property taxes paid to 1% of gross assessed
33
Management Discussion & Analysis
value for residential homesteads, 2% for agricultural/rental properties, and 3% for all other real
and personal property.
Under current legislation, all Indiana localities assess properties based on market values. Each
year properties are trended. This process involves comparing property values to sales activity in
the neighborhood and adjusting the current assessed values up or down according to the trended
data.
This legislation (known as "circuit breaker' legislation) was phased in commencing in fiscal 2009
and has lead to significant reductions in property tax revenues available to fund city governmental
operations over the period From 2009 to the present.
In 2011, the primary funds supported by property taxes (General Fund, Parks and Recreation
Fund, and Cumulative Capital Development Fund) lost approximately $11.5 million dollars due to
the circuit breaker caps.
As a consequence of the state enacted legislation in 2008, the City enacted a .95% local option
income tax increase to partially offset the property tax revenue loss. The local option tax increase
became effective in October, 2009, and has resulted in an increase in local income taxes
available to the City to fund ongoing governmental operations of public safety, parks & recreation,
code enforcement and general government.
Management of the City of South Bend will continue to manage the financial affairs from a
posture of fiscal conservatism similar to the management practices engaged during fiscal 2011.
City Management believes that the national economic recovery will continue according to the
predictions of governmental economists, with low to no inflation over the next fiscal period. In
addition,job creation is the primary engine to drive economic recovery.
2013 Budget
The City will engage to ensure effective delivery of required services to taxpayers and citizens
within the constraints of available financial resources. The City will continue to provide required
services within the constraints of a balanced general fund budget.
The City has completed certain reengineering projects during f scat 2011 targeted to create
efficiency and cost improvements within City operations. Completed projects include payroll
system reengineering, water utility customer service improvements, information technology server
virtualization efforts and substantial implementation of a new telephone system.
The City continues to pursue reengineering programs targeted to create efficiency and cost
improvements within City operations. These include purchasing process reengineering, back
office process improvements for human resources and other customer service operations, and
state of the art customer service functionality with a centralized 311 telephone call center.
These initiatives, upon successful deployment completion, will achieve the desired results to
create efficiency gains in the delivery of services to taxpayers.
The City is committed to creating a budget for fiscal 2013 that will remain fiscally responsible to
the effective delivery of required services to city citizens and stakeholders within the revenue
constraints available.
34
Management Discussion & Analysis
Current Economic Development Projects
Executive management of the City of South Bend continues to pursue economic development
and public works opportunities that will have long term favorable impact on the economic
prospects for the community as a whole. These projects include:
• Eddy Street Commons — continued expansion of the currently existing $220 million
dollar mixed-use development completed for occupancy in 2009. The current
configuration includes a 119-room hotel, 25 new City homes with 100% occupancy, more
than 20 stores and restaurants, office space and 266 town homes, apartments and
condominiums, which are 85% occupied. This is the region's largest single development
in decades. Plans include further expansion of residential living space and the occupancy
completion of commercial tenants.
• Innovation Park & Ignition Park— Indiana's first dual-site, state-certified technology
park, which is a collaborative effort between the City, the University of Notre Dame and
Project Future. In the first year of operation, Innovation Park is home to in excess of 30
client ventures with occupied building space in excess of 60% of the building footprint.
Concepts under development include, but are not limited to, solar-powered cases for
electronic devices, improved wind turbine technology and diagnostic tools for detecting
substances like ecoli bacteria.
The first tenant in Ignition Park, the county public transportation authority, Transpo,
dedicated its new facility in early 2010. Discussions are under way to secure the first
private sector commercial / industrial tenant in Ignition Park, an information technology
data storage company, with announcement in 2010 to construct a new facility.
• Animal Care and Control Facility— a new $1.94 million dollar Animal Care and Control
facility was under construction during 2011 (with completion scheduled for June, 2012)
with funding provided by tax increment financing revenue.
• Coveleski Stadium improvements — Construction was completed in 2011 of building
enhancements to the City owner minor league baseball stadium including improved
lighting, outfield walls and restrooms, a new artificial playing surface, new or upgraded
fan amenities, and venue entrance tie-in to the central downtown footprint as phase one
of an overall strategy to develop the stadium and surrounding area in order to attract
more commercial development to the downtown. During 2011, a new owner purchased
the team and a public/private partnership was forged to make additional improvements to
the stadium.
• Kroc Center—Completion of the $30 million dollar world-class youth and family center to
on the corner of Western Avenue and Chapin Streets in South Bend occurred during
2011. The Center was funded by a grant from the Ray and Joan Kroc Foundation as well
as other private donations. This is currently the only center of its kind in the State of
Indiana. Groundbreaking occurred in May, 2010 and will result in the infusion of more
than $50 million dollars in outside resources into the City. Construction was completed in
2011 with dedication and facility opening in January 2012.
• Triangle Development — planned construction of 52 new single family residential
properties in the Triangle area adjacent to the existing new Eddy Street Commons
commercial development, creating a diverse new neighborhood in the City's northeast
sector. A total of 45 lots have been sold to date. Seventy percent of the lots are being
sold at market rate and thirty percent are reserved for income-eligible buyers.
• St. Joseph's High School — Groundbreaking began in June, 2011 for a new $35 million
downtown campus for the school, on the site of the former St. Joseph Regional Medical
Center, which relocated from the site in 2009. The school will relocate from a site
35
Management Discussion & Analysis
adjacent to the University of Notre Dame campus, just outside of the City limits, and is
expected to be open in time for the 2012/2013 academic year.
• Bike The Bend — Continuation of the 'Bike the Bend" non-competitive event, 30 mile
bicycle race occurred on May 20, 2012 in downtown South Bend. The race highlights
over 60 miles of bicycle lanes established in the City since 2007.
• East Bank Townhouses—the development of 12 townhouse-style condominiums along
the East Bank of the Saint Joseph River was completed in 2011.
• Energy Efficiency and Conservation — supported by a $1.046 million federal stimulus
grant, the City has unveiled a new energy efficiency and conservation strategy which
included the energy audit of 30 municipal buildings, synchronized timing of traffic signals
at the 100 busiest intersections in the City and a feasibility study for generating
hydroelectric power from the Saint Joseph River at the Century Center dam. A Municipal
Energy Office was established in the Central Services Fund and a source of funding was
identified to allow for continuing energy projects.
• Memorial Hospital — a variety of City infrastructure and streetscape improvements
totaling more than $3 million, in connection with hospital investment, including a new
fagade for the Bartlett Street parking garage and reconstruction of four streets on the
hospital campus.
+ Existing Business Expansions — the City continues to work with private sector
business concerns to enable expansion of their business operations in the City, adding
new employment opportunities and tax base to the City. Several local private sector
business concerns have announced facility expansion plans, upon success will create
new employment and tax base opportunities for the City.
Requests for Information
This Management Discussion & Analysis as contained within the City of South Bend
Comprehensive Annual Financial Report is intended to provide readers with a general overview
of the financial condition of the City of South Bend as of December 31, 2011. Questions
concerning any of the information provided in this report, or requests for additional information,
should be addressed to:
Mark W. Neal, Controller
City of South Bend
Department of Administration and Finance
227 W. Jefferson Boulevard, 12`" Floor
South Bend, Indiana 46601
Telephone 574-235-9216
Facsimile 574-235-9928
Email mneal@southbendin.gov
City of South Bend
May 25, 2012
36
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All-America City Award 2011
National Civic League, 2011
.r.®er®®
West Washington Neighborhood: 2012 Best Places
to Live list
m.�
�..� This Old House Magazine, 2012
Morris Performing Arts Center: Top 100 Venues
worldwide
Pollstar Magazine, 2012
National League of Cities Gold Award for
Municipal Excellence
Northeast Neighborhood Revitalization
y
Local Government Cooperation Award—
Bike the Bend event
Indiana Association of Cities and Towns
Photo courtesy of City of South Bend Archives
South Bend has impact.!
Blackthorn Golf Club: 39th Best
Municipal Course in U.S.
Golf Week Magazine, 2008-09
Bicycle Friendly community
(bronze designation) -
League of American Bicyclist, 2010
Tree City USA Community
Department of Natural Resources, 2010
At,
Potawatomi Zoo: 20 Best Zoos for
Kids
www.child.com
,�souru pory
M "+q±: Photo courtesy of Matt Cashore
L :1
www.SouthbendIN.gov
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