17 minute read
Management’s Discussion and Analysis
CITY OF SUFFOLK, VIRGINIA
TABLE OF CONTENTS (continued)
FINANCIAL SECTION(CONTINUED)
REQUIRED SUPPLEMENTARY INFORMATION (CONTINUED)
Exhibit 15: Schedule of Contributions, City and School Board Pension Plans ..........................................110 Notes to Required Supplementary Information Pension Plans ...................................................................111 Exhibit 16: Schedule of Changes in the City's Net OPEB Liability and Related Ratios – City Trust .......112 Exhibit 17: Schedule of Changes in the School Board's Net OPEB Liability (Asset) and Related Ratios – School OPEB Trust ................................................................................................................113 Exhibit 18: Schedule of Contributions – OPEB Plan – City and School Trust .........................................114 Exhibit 19: Schedule of Annual Money Weighted Rate of Return on OPEB Plan Investments – City and School Trust .......................................................................................114 Notes to Required Supplementary Information Plan City and School OPEB Trust ..................................115 Exhibit 20: Schedule of Employer's Proportionate Share of Net OPEB Liability – Line of Duty Act Program (LODA) for the City .................................................................................................116 Exhibit 21: Schedule of Employer's Proportionate Share of Net OPEB Liability – Group Life Insurance (GLI) for the City ....................................................................................................................116 Exhibit 22: Schedule of Employer's Proportionate Share of Net OPEB Liability – Group Life Insurance (GLI) for the School Board .....................................................................................................117 Exhibit 23: Schedule of Employer's Proportionate Share of Net OPEB Liability – Health Insurance Credit Plan (HIC) – School Board Teachers ...........................................................................117 Exhibit 24: Schedule of Employer's Proportionate Share of Net OPEB Liability – Virginia Local Disability Program (VLDP) – School Board Teachers ............................................................................118 Exhibit 25: Schedule of Contributions OPEB – City State VRS Plans .....................................................119 Exhibit 26: Schedule of Contributions OPEB – School Board State VRS Plans ......................................120 Notes to Required Supplementary Information OPEB City and School Board State VRS Plans ..............121 Exhibit 27: Schedule of Changes in the School Board's Net OPEB Liability and Related Ratios – School Board Non-Teacher HIC Single Employer Plan .........................................................122 Exhibit 28: Schedule of Contributions OPEB – School Board Non-Teacher HIC Single Employer Plan123 Notes to Required Supplementary Information OPEB School Board Non-Teacher HIC Plan ..................124
OTHER SUPPLEMENTARY INFORMATION
NON-MAJOR GOVERNMENTAL FUNDS
Exhibit 29: Combining Balance Sheet – Non Major Governmental Funds ...............................................125
CITY OF SUFFOLK, VIRGINIA
TABLE OF CONTENTS (continued)
FINANCIAL SECTION(CONTINUED)
OTHER SUPPLEMENTARY INFORMATION(CONTINUED)
NON-MAJOR GOVERNMENTAL FUNDS (CONTINUED)
NON-MAJOR PROPRIETARY FUNDS
INTERNAL SERVICE FUNDS
FIDUCIARY NET POSITION
DISCRETELY PRESENTED COMPONENT UNIT – CITY OF SUFFOLK SCHOOL BOARD
Exhibit 43: Budgetary Reconciliation Schedule – Governmental Funds ...................................................141
Exhibit 45: Statement of Net Position – OPEB Fund .................................................................................143
STATISTICAL SECTION
Table 1 Net Position by Component .......................................................................................................145 Table 2 Changes in Net Position ............................................................................................................146 Table 3 Fund Balances – Governmental Funds ......................................................................................148
CITY OF SUFFOLK, VIRGINIA
TABLE OF CONTENTS (continued)
STATISTICAL SECTION (CONTINUED)
Table 4 Changes in Fund Balances – Governmental Funds ...................................................................149 Table 5 Tax Revenues by Source – Governmental Funds ......................................................................150 Table 6 Assessed Value and Estimated Actual Value of Taxable Property ...........................................151 Table 7 Direct Property Tax Rates .........................................................................................................152 Table 8 Principal Property Tax Payers ...................................................................................................153 Table 9 Property Tax Levies and Collections.........................................................................................154 Table 10 Property Value and Construction ..............................................................................................155 Table 11 Principal Commercial/Industrial Water and Sewer Consumers ................................................156 Table 12 Water and Sewer Rate Schedule ................................................................................................157 Table 13 Outstanding Debt by Type .........................................................................................................158 Table 14 Legal Debt Margin ....................................................................................................................159 Table 15 Pledge-Revenue Coverage .........................................................................................................160 Table 16 Demographic and Economic Statistics ......................................................................................161 Table 17 Principal Employers ..................................................................................................................162 Table 18 Full-Time Equivalent City Government Employees by Function/Program ..............................163 Table 19 Operating Indicators by Function/Program ...............................................................................165 Table 20 Capital Asset Statistics by Function/Program ...........................................................................166
COMPLIANCE SECTION
Report of Independent Auditor on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with
Governmental Auditing Standards ........................................................................................................167 Report of Independent Auditor on Compliance for Each Major Program and on Internal Control Over
Compliance Required by the Uniform Guidance ..................................................................................169 Schedule of Expenditures of Federal Awards ............................................................................................171 Schedule of Findings and Questioned Costs ..............................................................................................174
INTRODUCTORY SECTION
CITY MANAGER
CITY OF SUFFOLK
P.O. BOX 1858, SUFFOLK, VIRGINIA 23439-1858 PHONE: (757) 514-4012
November 23, 2022
The Honorable Council City of Suffolk, Virginia
Dear Council Members:
We are pleased to submit the Annual Comprehensive Financial Report (ACFR) for the period of July 1, 2021 through June 30, 2022. The code of the Commonwealth of Virginia and the charter of the City of Suffolk, Virginia (the City) require the City to publish, at the close of each fiscal year, a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America (GAAP) and audited in accordance with Government Auditing Standards by a firm of licensed certified public accountants. This report has been prepared by the Department of Finance and complies with state law and guidelines of the Auditor of Public Accounts of the Commonwealth of Virginia.
The City’s Management assumes full responsibility for the accuracy, completeness, and reliability of all information presented in this report. We believe the data, as presented, are accurate in all material respects and are presented in a manner designed to fairly set forth the financial position and results of operations of the City as measured by the financial activity of its various funds. All disclosures necessary to enable the reader to gain the maximum understanding of the City’s financial affairs have been included. In order to provide reasonable, but not absolute, assurance regarding the data, the management of the City has designed a framework of internal accounting controls to protect the City’s assets from loss through unauthorized use or disposition, provide reliability of financial records for preparing financial statements and maintain the accountability of assets.
The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and that the valuation of costs and benefits requires estimates and judgments by management. We assert to the best of our knowledge this ACFR is complete and reliable in all material aspects.
According to Section 8.08 of the City Charter and Section 15.2-2511 of the 1950 Code of Virginia, as amended, an annual audit by an independent auditor of the City is required. The City’s financial statements have been audited by Cherry Bekaert LLP. As a result of an audit of the City’s financial records and transactions of all funds, component units, and departments of the City, Cherry Bekaert LLP has concluded that the financial statements are in compliance with GAAP and has issued an unmodified opinion of the City’s financial statements, as of and for the year ended June 30, 2022. The report of the independent auditor is presented as the first component of the financial section of this report.
The audit included and was part of a broader federally mandated “Single Audit” designed to meet the special needs of federal grants. The standards governing single audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the City’s internal controls and compliance with legal requirements, with special emphasis on those involving the administration of federal awards. The analysis by the auditors will be a separately issued report.
GAAP requires management to provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of a 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’s MD&A can be found within the financial section immediately following the independent auditor’s opinion.
Profile of the City
The present City of Suffolk was formed January 1, 1974, from the consolidation of the City of Suffolk and the City of Nansemond (formerly Nansemond County). The City is Virginia’s largest city in land area and one of the top fifteen largest cities in land area in the nation with over 400 square miles of land mass and 30 square miles of waterways. The diverse landscape includes a mix of rural, suburban and urban development areas. The City is situated in the western portion of Hampton Roads, Virginia’s coastal plain area, and is bounded by the James River to the north, the Cities of Chesapeake and Portsmouth to the east, the State of North Carolina to the south, and the Counties of Southampton and Isle of Wight to the west. The City of Suffolk is one of seven major cities that form the Norfolk-Virginia Beach-Newport News metropolitan area with 1.7 million people. This region is also known as the Hampton Roads area.
The City’s government is organized under the Council-Manager form of government. The governing body, the City Council, is composed of seven members and a Mayor who develop policies for the administration of the City. The Mayor is elected at large and the Council members are elected by borough in a city-wide election every other year with terms of office being four years. The City Council appoints a City Manager to act as administrative head of the City. The City Manager serves at the pleasure of City Council and carries out the City Council’s policies and directs business procedures. The City Manager also appoints and removes the directors of all departments.
The School Board is elected by borough. Under Virginia law, all operations of the School Board are completely independent of the City Council and City Administration. City Council is required to make an annual appropriation to the School Board based upon an approved budget, but has no authority to direct how such appropriation is expended.
As a full-service city, Suffolk provides a broad range of municipal services authorized by statute or charter. Those services include education, public safety, highways and streets, parks and recreation, sanitation, health and social services, public improvements, planning and zoning, public utilities, storm water management and general administrative services.
The funds and entities included in the City’s ACFR are those controlled by, or dependent on, the City. This determination is explained in Note 1A within the Notes to Financial Statements tab. Consequently, this report includes the public School System and the Economic Development Authority as component units and excludes related organizations such as the Suffolk Redevelopment and Housing Authority, the Western Tidewater Regional Jail Authority, and the Western Tidewater Water Authority.
The City maintains budgetary controls, the objective of which is to ensure compliance with the legal provisions embodied in the annual appropriated budget approved by City Council. Budgetary control is maintained at the expenditure level of each department using an encumbrance accounting system. Open encumbrances are reported within the appropriate classification of fund balance at June 30, 2022. A description of the procedures utilized to establish budgetary data is presented in Note 1D within the Notes to Financial Statements tab.
Economic Activity – Calendar Year 2021
The City of Suffolk experienced another strong year of economic growth in 2021. New and existing retailers grew, relocated, and improved their operations, while animal clinics expanded, and the construction industry was in high demand. Local businesses benefitted directly from innovative workforce development programs, and the expansion of multiple child care facilities allowed parents to return to the workforce.
With a growing population, the demand for medical services has continued to increase in Suffolk as well. One of the many new additions in 2021 included a new medical office building in the Harbour View area of Suffolk. The TPMG ENT (ear, nose, and throat) Specialist group constructed a 7,000 square foot building for their practice. Regional healthcare leader Sentara Healthcare also continued to invest in their existing medical campuses, including Sentara Obici Hospital and Sentara Belleharbour, spending $9 million in the process. Bayview Physicians and Bon Secours also invested heavily into improving their medical services.
Several veterinarian businesses also improved facilities over the last year. Academy Animal Care added 1,500 square feet to their veterinary clinic. The COVE (Center of Veterinary Expertise) leased an additional 8,100 square feet and added new positions to their staff. Tidewater Animal Clinic designed and built a new 6,000 square foot facility with a modern surgery suite, dental suite, and ultrasound/radiograph room.
More than five million square feet of real estate is expected to come online in the coming years due to abundant e-commerce demand boosting Suffolk’s warehousing and industrial market. The rapid increase in e-commerce activity has boosted demand for distribution space in Suffolk due to the City’s close proximity to the port and convenient access to interstate highways and railroads. Most notably, the Amazon robotics fulfillment center, located in Northgate Commerce Park, opened in the summer of 2022. The 3,800,000 square foot building will create roughly 1,700 jobs for the area.
Growing construction demand allowed three large firms in construction and site development to expand their footprint in the area. VirginiaCarolina Civil, which specializes in pre-construction planning, budgeting, estimating, general contracting, subcontracting, and site development, added 25 new jobs impacting 9,200 square feet, and invested $4,000,000 with a newly constructed headquarters building. Branch Civil, an employee owned company specializing in site development, highway construction, and design-build operations, added 18 new jobs and built a 9,600 square foot operations center, an investment of $2,100,000. Atlantic Constructors, Inc. (ACI), a leader in services including structural steel, HVAC, plumbing, fire alarm and protection, and more, retrofitted an existing facility in Suffolk Industrial Park, adding 22 new jobs, and impacting 39,000 square feet, a $400,000 investment.
The need for a dedicated, skilled workforce is a key component in the success of businesses across every industry sector. To support the local workforce, the City of Suffolk’s Suffolk Workforce Development Center provides workforce assistance to Suffolk businesses. Several local employers have adopted creative and innovative workforce programs in order to develop their future pipelines of talent. Allfirst, an
industrial general contractor, continues to manage an in-house apprenticeship program which teaches skills such as welding and pipefitting. Companies including Solenis and Amadas have worked with Suffolk Public Schools’ CTE (Careers and Technical Education) and Camp Community College to place interns in positions that are suited to their interests, and upon completion of the internship are able to offer them permanent full-time employment.
Suffolk has seen a recent influx of mixed-use developments (MUD), including Bridgeport, Peanut Crossing, Obici Place, and The Point at Harbour View. These developments offer a central location to live, work, eat, and play. With apartment homes often built above office space, medical facilities, retail and dining options, mixed-use developments can be a one-stop shop in driving the economy in Suffolk. These developments also serve as a safe place for recreation, commonly providing walking paths, dog parks, and space for nature appreciation, such as gardens.
Small businesses in Suffolk have rebounded from the effects of the pandemic, with citizens supporting the “Love Local, Buy Suffolk” motto. Local retail establishments have added over 160 new jobs, and impacted nearly 104,000 square feet in the past year, totaling a capital investment of $18,680,000. Downtown Suffolk has been catching the attention of small businesses. With new marketing efforts, a trendy new logo available for businesses to use, and frequent, successful events, Downtown Suffolk has seen recent growth in population and businesses, alike. The Downtown area has been abuzz with new construction, new businesses filling available space, and existing businesses completing façade improvements and restoration. Peanut Crossing, a new housing development in Downtown, came online in 2021, offering upscale living options, creative workspaces, and flexible storage. The plan for a new Downtown Festival Event Space, funded through the city’s Capital Improvement Plan, was unveiled to serve as a catalyst to support more activity Downtown. Plans are also in the works to build a new Central Library Downtown.
Altogether, 2021 proved to be a year of success for Suffolk businesses. Capital investments totaled over $185.6 million, 1,086 jobs were created, and more than 2.85 million square feet were impacted in Suffolk throughout the year.
New and Expanding Industry (Calendar Year 2021)
Number of Jobs Square Feet
Approximate Capital Investment
Advanced Manufacturing 110 186,620 $15,950,000 Warehousing & Distribution 475 2,479,552 130,004,000 Medical 308 54,946 14,410,000 Retail 162 103,994 18,680,000 Office & Administration 26 14,790 2,018,000 Modeling & Simulation 5 10,233 4,075,000 Hospitality & Other - - 520,000
TOTAL 1,086 2,850,135 $185,657,000
_________________ Source: City of Suffolk, Virginia, Department of Economic Development.
In addition to the growth of new and expanding businesses, Suffolk has continued to experience sustained population growth. Suffolk’s population increased to 96,130 residents in 2021, a 13.6% increase since 2010. The City leads the region in population growth among the seven major cities in Hampton Roads. This positive trend is anticipated to continue in the years ahead with the City reaching 112,920 residents by 2030, according to projections by the Weldon Cooper Center at the University of Virginia.
City 2010 Census 2021
Chesapeake 222,209 250,256 12.6% Virginia Beach 437,994 458,028 4.6% Portsmouth 95,535 97,883 2.5% Newport News 180,966 185,082 2.3% Hampton 137,467 136,581 -0.6% Norfolk 242,803 238,102 -1.9%
Source: Weldon Cooper Center for Public Service, Population Estimates.
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
Hampton Roads Population by City 2010 - 2021
Suffolk Chesapeake Virginia Beach Portsmouth Newport News
Hampton
Norfolk
Source: Weldon Cooper Center for Public Service, Population Estimates.
Suffolk Population Growth and Projections
130,000
120,000
110,000
100,000
90,000
80,000
2010 2020 2030 2040
The City of Suffolk also has the second highest median household income (MHI) in the region ($79,899) and higher than the state ($76,398) and national ($64,994) MHI.
Strategic planning, key location, a highly-trained workforce and business-friendly environment once again catapulted Suffolk to the enviable position of one of the fastest growing cities in Virginia and a top pick for business development. The residential growth and change in Suffolk require the City to be proactive in planning for its future to insure efficient and effective delivery of services and a high quality of life for its citizens. Through the proficient management of residential and commercial development, the City continues to offer families and businesses plenty of room to live, work and play.
Long-term Financial Planning
City Council and City Management maintain their visionary process in their commitment to planning for the future of the City. Through a series of retreats and work sessions, City Council has established priorities as the guiding principles to move the City into the twenty-first century and to develop partnerships to further the City’s objectives. Financial planning is further extended with the aid of financial advisors for bond issues and rate consultants for utility rate analysis.
In planning for the specific initiatives under these priorities, the City’s adopted ten-year Capital Improvements Plan represents a planned schedule of the City’s needed expenditures for physical improvements over the next decade. The Capital Improvements Plan, which covers the ten-year period from fiscal year 2023 through fiscal year 2032, totals approximately $975.1 million. Of this amount, utilities, stormwater, fleet, and information technology projects are estimated at $211.0 million while general government projects are estimated at $764.0 million.
Financial policies are vital in maintaining consistency and focus. One of the financial policies continually reviewed is that of fund balance levels. The ratio of unassigned General Fund balance as a percentage of budgeted governmental funds expenditures (net of the general fund contribution to the Schools, transfers to other governmental funds, and Capital Projects fund expenditures), plus the budgeted expenditures in the School Operating and Food Service Funds, indicates the ability of the City to cope with unexpected financial challenges or emergencies. The policy also states that any surplus amounts over 20% will be put into a budget stabilization fund until it reaches 2.5% based on the same ratio and the remaining will go to
