< Previous10 Fund Accounting 101 Separate FundsSeparate Funds Chesapeake records the majority of its financial transactions in governmental and proprietary funds. The governmental funds account for the City’s basic operations, such as street maintenance, public safety, and recreation. Most of these services are financed by the general revenues of the City, the majority of which are property taxes (real estate and personal property). Proprietary funds include enterprise and internal service funds. The enterprise funds account for the City’s water and sewer operations, stormwater utility, and toll roads. Internal services funds account for functions whose primary users are within the City organization. Proprietary funds are managed like private industry, where costs are funded by fees and charges. The City supports two types of spending: operating and capital. Operating accounts for the day-to- day costs to provide services to City residents. The capital improvement program (CIP) is a five-year investment plan that maps out how the City will replace, repair, or build new infrastructure. Several of the funds support both the operating and capital budgets. “Fund accounting” is at the heart of financial reporting in the public sector. It is a distinguishing feature that makes the public sector different from the private sector (business accounting). Separate funds show accountability and stewardship of public resources. For example, the City wants to ensure that all payments received from its water utility customers are spent to provide water and sewer services to those customers. As such, these payments and expenses are accounted for in their own fund. Types of City-Supported SpendingTypes of City-Supported Spending 11 PAFR FY 2023 The City’s Credit Ratings & Debt Cities borrow money to pay for capital projects such as buildings, roads, and water system expansions. Much like a home mortgage, bonds allow the City to borrow money and pay those funds back over many years. Similar to how people receive a credit score, credit rating agencies evaluate the risk a lender would incur when lending to an organization. There are three main bond rating agencies: Moody’s Investors Service, S&P Global Ratings, and Fitch Ratings. Chesapeake’s General Obligation credit has obtained the highest rating from all three agencies: AAA ratings from Fitch Ratings and S&P Global Ratings, and a Aaa rating from Moody’s Investors Service. The City’s Water/Sewer Revenue Bonds have also received AAA ratings from S&P Global Ratings and Fitch Ratings. These excellent credit ratings save taxpayers money through lower interest rates when the City borrows money. Two Types of Municipal Bonds General obligation bonds are backed by the City’s taxing authority (general revenue). Revenue bonds are paid from a specified source of revenue, such as user fees or tolls. Net Debt Per Capita Policy $3,000 FY 2023 $1,098 Net Debt to Assessed Value of Real Property Policy 3.5% FY 2023 0.77% Debt Payment as a % of Revenue Policy 10% FY 2023 6.64% Chesapeake’s total debt decreased by $34.4 million during the fiscal year to $616.7 million as of June 30, 2023. There are two main types of debt issued to fund major projects. The first is General Obligation (GO) Debt, which is backed by the “full faith and credit” of the City. This type of debt is backed by general tax revenues and is also known as tax-supported debt. The second type is Revenue Supported Debt, which is secured by specific revenues (ex. water and sewer or toll fees). Commonwealth of Virginia statutes limit the total amount of tax-supported municipal debt to 10% of the assessed valuation of real property, making Chesapeake’s current debt limitation $3.6 billion. Chesapeake’s applicable current debt of $259.0 million is significantly less than the amount allowed by the state. The City Council also has debt management policies (adopted in 2007 and 2015) that provide additional restrictions on borrowing. These limits apply to tax-supported debt and include: • Maximum $3,000 debt per capita (per citizen) • Maximum debt of 3.5% of assessed value of taxable real property • Maximum debt payments of 10% of budgeted general governmental revenues To comply with policy, the City must satisfy all three indicators. The City’s FY 2023 performance on these afford- ability indicators is illustrated below. 12 Project Spotlights This project is part of a water transmission system that runs from the existing water line on Battlefield Boulevard along Etheridge Manor Boulevard to Centerville Turnpike and then north to this current project. This will extend the transmission system to Elbow Road, providing a much-needed water system loop to all the customers on and near Elbow Road, Butts Station Road, and the surrounding areas. The project will also bring a significant volume of water into the Greenbrier area. As development has occurred in this area and buildings have become taller, water usage has increased significantly. The infrastructure installed in the 1970’s needs to be reinforced to accommodate this growing demand. This water transmission line on Centerville Turnpike is a key component of that water system reinforcement. This project is a joint effort between the Public Works and Public Utilities Departments to replace and/or upgrade existing drainage, sanitary sewer, and water infrastructure within the historic district of South Norfolk. This will provide much-needed infrastructure replacement to alleviate area flooding, reduce maintenance, and ensure reliable service. Existing surface features disturbed by the project will be returned to their initial state where possible, but the project will also result in some right-of-way surface improvements, including curbs, gutters, sidewalks, and entrances. Americans with Disabilities Act (ADA)-compliant curb ramps will be installed at corners affected by the project. Centerville Turnpike Water Transmission LoopCenterville Turnpike Water Transmission Loop Chesapeake Area Drainage Chesapeake Area Drainage and Utility Improvement Project and Utility Improvement Project 13 PAFR FY 2023 Careers in City Water/Sewer & Stormwater Many City employees work hard to ensure citizens have clean water, safe sewage disposal, and clear pathways for stormwater flow to prevent flooding. Below are highlights of just some of these career fields. Additional information on opportunities in these positions, as well as the hundreds of other roles played by City employees, can be found online at 14 Chesapeake’s Net Position The City’s FY 2023 overall net position increased by $160.0 million to $2.4 billion. The exhibit shows net position trends for the past six years. Net position has been steadily improving. This means the City’s financial health is strong and continues to grow stronger. “Change in net position” is the difference between total revenues and total expenses for the year in an organization and can be seen as an organization-wide operating surplus (or deficit). A positive figure indicates an increase in total net assets. A negative number means the asset reserve has declined. Net position is an important indicator of financial health. It represents total assets minus total liabilities on an organization- wide basis. An unrestricted asset reserve can be used to measure an organization’s ability to withstand a financial emergency. General Government - $34.8 million Public Utilities - $24.6 million Public Works - $23.9 million Public Safety - $5.3 million Parks, Rec. & Tourism - $2.8 million Public Welfare - $1.0 million Libraries - $0.7 million CapitCapital Pral Proojecject Expenditurt Expenditurees - $93.1 Millions - $93.1 Million 0.8% 26.4% 37.4% 25.7% 5.7% 2.8% 1.0% This exhibit represents total capital spending for FY23. Capital projects are funded by a combination of cash and debt, with a portion of the cash funding from the state and federal government. Capital expenditures from the Department of Public Works, Chesapeake Transportation System, and Stormwater Management have been combined into the general Public Works category. For more information on Chesapeake’s capital expenditures, 15 PAFR FY 2023 Award-Winning Financial Documents The City of Chesapeake has a long tradition of producing financial documents that receive recognition by the Government Finance Officers Association (GFOA). These awards recognize excellence in government finance, which includes documents supporting transparency and accountability. To be an award winner, documents must be both easily readable and efficiently organized, as well as timely and accurate. The City is extremely proud of the many recognitions it has received, as they are a tangible acknowledgment of Chesapeake’s commitment to being both fiscally responsible and sustainable. Government Finance Officers Association Award for Outstanding Achievement in Popular Annual Financial Reporting Presented to City of Chesapeake Virginia For its Annual Financial Report For the Fiscal Year Ended June 30, 2022 Executive Director/CEO The GFOA presented the Distinguished Budget Presentation Award to the City for its annual budget for the fiscal year beginning July 1, 2022. The City’s budget documents has achieved this important recognition thirty-one times since 1989, including consecutive annual recognition since 2003. The GFOA awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2022. This was the forty-first consecutive year that the City has received this prestigious award. The City published its first Popular Annual Financial Report (PAFR) for fiscal year 2022 and recently received the Government Finance Officers Association’s (GFOA) Award for Outstanding Achievement in Popular Annual Financial Reporting. The Newest AwardThe Newest Award A Tradition of ExcellenceA Tradition of Excellence BudgetBudget ACFRACFR Chesapeake now has the designation of being a “GFOA Triple Crown Winner” in recognition of the City’s receipt of excellence awards for financial reporting, popular financial reporting, and the budget document. Fourteen other local governments in Virginia have this designation, including three cities in the Hampton Roads region. 16 CONNECT WITH US 757-382-2489 City Hall 306 Cedar Rd Chesapeake, VA 23322 The Popular Annual Financial Report is a publication of the Chesapeake City Manager’s Office. December 2023 BEFORE YOU DIG Be sure to contact Miss Utility to have water, sewer and other utility lines marked. Dial 811 or visit Next >