Capital City Convention Center Commission Independent Auditor's Reports and Financial Statements. September 30, 2015 and 2014 GPAs & AdvisorsCapital City Convention Center Commission September 30, 2015 and 2014 Contents Independent Auditor's Report. 1 Management's Discussion and Analysis 4 Financial Statements BBalasice SHO6tS erect ncn stra sso eters tances IO Statements of Activities, os see HL Statements of Cash Flows, Notes to Financial Statement ...nsnn ee ee 3 Supplementary Information Combining Balance She 22 Combining Statement of Activities ..ncnsnn ee et 23 Combining Statement of Cash FIOWS jon:snnnnnnnnnnnnnnnnen snc D4 Schedule of Operating Activites ofthe Jackson Convention Complex, as Managed by SMG sssesosensnnsnsne : — 25 Other Information Schedule of Surety Bonds, 26 Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards...BKD. 0. Capital Seat, Suite SDH Jackson, MS 37201-2190 PAs & Advisors (@ 601.948.4700 // ox 0 968 0001 com m Independent Auditor's Report Board of Commissioners Capital City Convention Center Commission Jackson, Mississippi Report on the Financial Statements, We have audited the accompanying basic financial statements of Capital City Convention Center Commission (the Commission), a component unit of the City of Jackson, Mississippi, which are comprised of balance sheets as of September 30, 2015 and 2014, and statements of activities and cash flows and the related notes to the basic financial statements for the years then ended as listed in the table of contents, Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted ‘our audits 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 from material misstatement. The financial statements of the Jackson Convention Complex, as managed by SMG, which is included in the Commission's reporting entity, were not audited in accordance with Government Auditing Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the finaneial statements. The procedures selected depend on the aucitor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. [In making those risk assessments, the auditor considers intemal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedutes that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates ‘made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for cour audit opinions.Board of Commissioners Capital City Convention Center Commission Page 2 Opinion {In our opinion, the financial statements referred t0 above present fairly, in all material respects, the financial position of Capital City Convention Center Commission as of September 30, 2013 and 2014, and the changes in its financial position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis listed in the table of contents be presented to supplement the basie fina statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context, ‘We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of ‘management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit ofthe basic financial statements, We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information ‘Our audit was conducted for the purpose of forming an opinion on the basic financial statements as @ whole. The combining schedules and schedule of operating activities ofthe Jackson Convention ‘Complex, as managed by SMG, listed in the table of contents are presented for the purpose of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates direetly to the underlying accounting and other records used to prepare the basic financial statements, The information has been subjected to the auditing procedures applied in the audit ofthe basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underiying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Information (Our audits were conducted for the purpose of forming an opinion on the basic financial statements as a whole, The schedule of surety bonds listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements, Such information has not beenBoard of Commissioners Capital City Convention Center Commi Page 3 jon subjected tothe auditing procedures applied in the audit ofthe basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 4, 2016, ‘on our consideration of the Commission’s internal control over financial reporting and our tests of its ‘compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an aualt performed in accordance with Government Auditing Standards in considering the Commission's internal control over financial reporting and compliance, BRD, eA Jackson, Mississippi March 4, 2016Capital City Convention Center Commission Management's Discussion and Analysis Years Ended September 30, 2015 and 2014 Introduction This management's discussion and analysis of the financial performance of Capital City Convention Center Commission (the Commission) provides an overview of the Commission’s financial activities for the years ended September 30, 2015 and 2014. It should be read in conjunction with the accompanying. financial statements of the Commission Using this Annual Report This annual report consists ofa series of financial statements ~ a balance sheet, a statement of activities and a statement of cash flows. These statements are designed to provide information about the activities of the Commission as a whole and presenta long-term view of the Commission's finances. These statements include all assets and liabilities using the acerual basis of accounting which is similar to accounting used by most private-sector companies. Financial Statement Analysis The Balance Sheet and the Statement of Activities One of the most important questions asked about any organization's finances is “Is the organization as a whole better or worse off as a result of the year’s activities?” The balance sheet and statement of activities report information about the Commission's resources and its activities in a way that helps answer this question. These statements include all restricted and unrestricted assets and all liabilities using the acerual basis of accounting. Using the accrual basis of accounting means that all of the current ‘year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the Commission’s net position and changes in it. The Commission's total net position - the difference between assets and liabilities - is one measure of the Commission’s financial health or financial position. Over time, increases or decreases in the Commission’ net position may be ‘an indicator of whether its financial health is improving or deteriorating. Other nonfinancial factors, including changes in legislation and regulations, should also be considered to assess the overall financial health of the Commission. The Statement of Cash Flows ‘The statement of cash flows reports cash receipts, cash payments and net changes in cash resulting from four defined types of activities. It provides answers to such questions as where did cash come from, what was cash used for and what was the change in cash during the reporting period.Capital City Convention Center Commission Management’s Discussion and Analysis Years Ended September 30, 2015 and 2014 Condensed Balance Sheets Variance 2013 - 2014 (1,457,179) 2,206,954) $.5.668.153) 3 (143,408) 15,027) 4.030.080) Variance 2015 2014 2013 2014-2015 Assets ‘Current assets § 4,007,593 $5,257,827 $ 6,715,006 $ (1.280.234) Capital assets, net 74,152,666 __76.440.486 40 Total assets § 78,160,259 Liabilities Accounts payable S 338761 S$ 411624 § $55,032 $ (72.863) Other current liabilities 397.624 39.739) Total liabilities 952,658 _(112.602} Net Position Net investment in capital assets 74,152,666 76,440,486 78,647.440 (2.287.820) Restricted 1,991,904 2,000,000 2,315,627 (8.096) Unvestricted 1,287,105 2.416.641 __3.446,721___(1,129.536), Total net position TTASILGTS_ _80,857.127_ _84.409.788_ (3.425.452) Total liabilities and net position $78,160,259 $81,698,313 S85362446 $G.538.054) $.6.664.133)Capital City Convention Center Commission Management's Discussion and Analysis Years Ended September 30, 2015 and 2014 Condensed Statements of Activities Variance Variance 2018 2014 2013 2014-2015 2013-2014 Operating Revenues $2,094,815 (44.955) $152,818 Operating Expenses Salaries and employee benefits ‘1,891,265 1,925,333.—_1,968.672 (34.068) 43.339) Purchased services, professional fees and ‘marketing and promotion 207.187 242,831 35.644) (25.102) Depreciation 2546888 2.517516 29,372 19.327 Other S77S88_ __1,739.010 61.452 870 ‘Total operating expenses 928 __ 624,720 39.764 (101,792) 134,956 Operating Loss (4.120.250) (4,177,087) 4,194,949) 56,837 17.862 Net Nonoperating Revenues 694.798 sé 037: 1,920,830) ‘Change in Net Position $.3.425,452) _$ 6.552.661) _$ (1,649,693) S$ 127209, $_(1.902.968) Revenues ‘The main source of revenues is restaurant, hotel and motel taxes collected from applicable businesses \within the City of Jackson, Mississippi by the Mississippi Department of Revenue, which must be used first for debt service of the bonds issued to finance construction of and equipping the Capital City Convention Center, funding a reserve for that debt service, funding a reserve for capital improvements and, thereafter, for operating, promotional and maintenance expenses in accordance with House Bill 1832 of the 2004 Regular Session of the Mississippi State Legislature and the Commission's Agreement with the City of Jackson. In accordance with the Commission’s policy, the restaurant, hotel and motel tax revenue is reported in the statement of activities as nonoperating revenues. House Bill 1832 of the 2004 Regular Session of the Mississippi State Legislature authorized sales tax to be collected within the City of Jackson as follows: (1) 1% of the gross proceeds of sales of restaurant: food and beverages in hotels and motels: (2) 3% of sales of hotels or motels and room and lodging; and (3) 3% of sales at the Capital City Convention Center (the Convention Center) by caterers. Total revenues from restaurant, hotel and motel taxes were $4,631,640 for the year ended September 30, 2015, ‘$4,456,202 for the year ended September 30, 2014, and $4,147,810 for the year ended September 30, 2013. This resulted in an increase of $175,438 from 2014 to 2015, and an increase of $308,392 fromCapital City Convention Center Commission Management's Discussion and Analysis Years Ended September 30, 2015 and 2014 2013 to 2014, These changes in tax revenue are generally driven by the economy. Management is ‘optimistic we will see future increases in tax revenues. Revenues derived from the operations of the Convention Center Complex, including fees for space rental, food services and auxiliary services, are reported as operating revenues. These revenues were $2,202,678 for the year ended September 30, 2015, $2,247,633 for the year ended September 30, 2014 and $2,094,815 for the year ended September 30, 2013. ‘The decrease of $44.955 from 2014 to 2015 and the increase of $152,818 from 2013 to 2014 were consistent with changes in rentals and pricing strategies and were consistent with management's expectations. Management is optimistic the potential for a connecting hotel as discussed below will provide increases in future revenues. Nonoperating revenues in 2015, 2014 and 2013 include an accrued contribution of $150,000 in each year from the Jackson Convention and Visitors Bureau based upon Contribution Agreements entered into by the Jackson Convention and Visitors Bureau with the City of Jackson, the Jackson Redevelopment ‘Authority and the predecessor in interest to the Capital City Convention Center Commission, related to deficits incurred from operations associated with the TelCom Center portion of the Convention Complex. In addition during 2013, the City of Jackson refinanced bonds related to the construction of the Convention Center, Proceeds from cash flow savings from the refinancing were transferred to the ‘Commission for future cash flow needs. This transferred amount is reported as nonoperating revenue in 2013, Operating Expenses Operating expenses were $6,322,928 and $6,424,720 for the years ended September 30, 2015 and 2014, respectively. This amount represents a decrease of $101,792 from 2014 to 2015, which was achieved through budgeting and management of resources. One of the largest components of operating expenses ‘was depreciation expense, which was $2,546,888 and $2,517,516 for the years ended September 30, 2015 and 2014, respectively. Operating expenses exclusive of depreciation were $3,776,040 and $3,907,204 for the years ended September 30, 2015 and 2014, respectively Operating expenses were $6,427,720 and $6,289,764 for the years ended September 30, 2014 and 2013, respectively. This amount represented an increase of $134,956 from 2013 t0 2014, and was generally driven by overall cost increases, One of the largest components of operating expenses was depreciation ‘expense, which was $2,517,516 and $2,497,989 for the years ended September 30, 2014 and 2013, respectively. Operating expenses exclusive of depreciation were $3,907,204 and $3,791,775 for the years ended September 30, 2014 and 2013, respectively Results of Operations As discussed above, the Commission activities include operating revenues of $2,202,678, $2,247,633 and $2,094,815 for the years ended September 30, 2015, 2014 and 2013, respectively. The Commission also incurred operating expenses of $6,322,928, $6,424,720 and $6,289,764 for the years ended September 30, 2015, 2014 and 2013, respectively. ‘This produced operating losses of $4,120,250, $4,177,087 and $4,194,949 for the years ended September 30, 2015, 2014 and 2013, respectivelyCapital City Convention Center Commission Management's Discussion and Analysis Years Ended September 30, 2015 and 2014 ‘One of the key assumptions in the pro forma associated with the construction of the Convention Center ‘was the presence of a Convention Hotel connected to the Convention Center. The Commission is not authorized to develop the hotel. To date, for a number of reasons, including the state of the economy, no Convention Hotel has been built. The absence of the Convention Hotel has a significant negative impact ‘on the Convention Center as it results in both lower than expected restaurant, hotel and motel taxes, as ‘well as reduced rental income and food and beverage income in the Convention Center. ‘The construction ofa Convention Hotel is vital to the Convention Center realizing its maximum revenue and mitigating future operating deficits, Capital Assets ‘The capital assets activity for the years ended September 30, 2015 and 2014 consisted of: 2015 Boginning Ending Balance Additions _Disposals__Balance Land and land improvement §_ 5.852.683 $16,702 $_ (50,000) $5,819,385 Buildings and improvements 80,033,199 79,564 = 80,112,763 Equipment 4.837.034 212,802 = __ 5,049,836 90.722.916 309,068 (50000) 90,981,984 Less accumulated depreciation (14,282,430) _2.546.888) = (16829318) Cs STHOBE, SC257820. $50.00) STEIIOO 2014 Beginning Ending Balance __Additions_Disposals_Balance Land and land improvement. $5,792,683 $60,000 S = 8 5,852,683 Buildings and improvements 79,996,179 37.020 = 80,033,199 Equipment 4.623.492 213,542 ~ __4837.034 90.412.354 310,562 > 90,722,916 Less accumulated depreciation * (11,764914) 2.517.516) = _(14282.430) Capital assets, net $.78,647.440__$ 2.206954) 8 = _376.440.486Capital City Convention Center Commission Management's Discussion and Analysis Years Ended September 30, 2015 and 2014 Accumulated depreciation increased by $2,546,888 and $2,517,516 in the years ended September 30, 2015 and 2014, respectively. as a resuit of annual depreciation. Management would expect that ‘accumulated depreciation would continue to grow at these levels in future years, and, as a result, the capital assets of the Convention Center would continue to decline. This decline in capital assets will negatively impact the net position of the Convention Center. Net Position ‘The Commission's net position is the difference between its assets and liabilities reported in the balance sheets 2015 2014 2013 Net Position Net investment in capital assets $74,152,666 $76,440,486 $ 78,647,440 Restricted 1,991,904 2,000,000 2,315,627 Unrestricted 1,287,105 L 46, Total net position $77,431,675 $ 84,409,788. ‘The Commission's net position decreased from 2015 to 2014 by $3,425,452, or approximately 4%, and from 2014 10 2013 by $3,552,661, or approximately 4%, due primarily to operating losses. Annual ‘decreases in net postion were attributable to depreciation expense of approximately 74%, 71% and 151% of net decrease totals for 2015, 2014 and 2013, respectively Contacting the Commission's Financial Management This financial report is designed to provide the citizens and taxpayers of the City of Jackson, Mississippi, as well as creditors and investors, with a general overview of the Commission's finances and to show the Commission’s accountability for funds received. If you have any questions about this report or need additional financial information, contact Rosemary Maxey, Office Manager, at 601.960.2321 or Capital City Convention Center Commission, P. 0. Box 3563, Jackson, Mississippi 39207.Capital City Convention Center Commission Balance Sheets ‘September 30, 2015 and 2014 2015 Assets Current Assets Cash 8 717,947 Cash - restricted 1,500,000 Short-term investments - restricted 500,000 Accounts receivable Restaurant, hotel and motel taxes receivable 766,129 Contribution receivable, net 300,000 Trade receivable 139,373 Inventories 54,477 Prepaid expenses 29.667 Total current assets 4,007,593 Capital Assets, Net 74,152,666 Total assets $7 Liabilities and Net Positi Current Li Accounts payable S 338,761 Other acerued liabilities 177,182 Advance deposits 193,141 Uneared revenue 19,500. Total current liabilities 728,584 Net Position Net investment in capital assets, 74,152,666 Restricted 1,991,904 Unrestricted 287,105 Total net position T1A31,675 ‘Total liabilities and net position $78,160,259 ‘See Notes fo Financial Statements 2014 S 1,864,390 1,500,000 500,000 740,924 300,000 277,604 49,134 25,715 5,257,827 76,440,486 S$ 81,698,313, 8 411,624 146,996 250,466 00 841,186 76440486 2,000,000 16,641 80,857,127 $81,698,313 10Capital City Convention Center Commission Statements of Activities Years Ended September 30, 2015 and 2014 Operating Revenues Event revenues, net Ancillary revenues, net Sponsorship income Other income Total operating revenues Operating Expenses Salaries and employee benefits Purchased services and professional fees Marketing and promotion Rent Insurance Uiilities General ‘SMG management fees Depreciation Total operating expenses Nonoperating Revenues (Expenses) Investment return Restaurant, hotel and motel tax revenue Debt service allocation payments Transfer from SMG Corporate Net nonoperating revenues ‘Change in Net Position Net Position, Beginning of Year Net Position, End of Year ‘S20 Notes to Financial Statements 2015 2014 S 463,419 $583,935 1,664,349 1,552,093 62,000 67.067 12,910 44,538 678. 47, 1,891,265 1,925,333 198,690 230,788 8.497 12,083 31,088 23,852 107,087 100,938 569,737 603,465 727,677 782,659 242,039 228,126 888, 17516 6,424,720 (4,177,087) 10.292 4,180 4,623,544 4,456,202 (3,939,141) (4,080,956) 103 245,000 694,798 6 (3.425.452) 3,552,661) 80,857,127 84,409,788. S77431,675__$ 80,857,127 "Capital City Convention Center Commission Statements of Cash Flows Years Ended September 30, 2015 and 2014 2015 2014 Operating Activities ‘Cash paid to supplies and employees S$ G.827,952) $ (4.076346) Cash received from event, ancillary and other operating revenues 2.270.984, 2.297.449 Net cash used in operating activities (1,556,968) (1,848,897) Cash received for hotel, motel and restaurant tax 4,598,339 4.445.023, Debs service allocation payments 6.939.141) (4.080.956) Net cash provided by noncapital financing activities 659.198 364.067 Capital and Related Financing Activities Acquisition of capital asses, net of contributed property (259,068) (310,562) fe Net cash used in capital and related financing activities. Investing Acti Interest on investments 4,180 Purchase of investments (500,000), 500,000), Proceeds from sales and maturities of investments 300,000 500,000 other, net, 103. 245,000 Net cash provided by investing activities 10,395 249.180 Decrease in Cash (1,146,443) (1,546,212) Cash, Beginning of Vear 3.364.300 Cash, End of Year s_2217937 8 Reconciliation of Operating Loss to Net Cash Used in ‘Operating Activities Operating loss S (4.120.250) $ (4,177,087) Ajustments to reconeile net loss to net cash provided by ‘operating activities Depreciation 517.516 (Changes in Accounts receivable (68,642) Inventories (3.060) Prepaid expenses G82) (6.152) ‘Accounts payable (72,863) (143.408) Other current liabilities os 31,936 [Net cash used in operating activities s S_(1.848:897) ‘See Notes fo Financial Statements 2Capital City Convention Center Commission Notes to Financial Statements September 30, 2015 and 2014 Note 1: Nature of Operations and Summary of Significant Accounting Policies Nature of Operations Capital City Convention Center Commission (the Commission) is a component unit ofthe City of Jackson, Mississippi, A component unit is a legally separate organization for which the primary ‘government (the City of Jackson) is financially accountable, or for which the nature of its relationship with the primary government is such that exclusion would cause the financial statements to be misleading or incomplete. The Commission was authorized to be created by House Bill 1832 during the 2004 Regular Session of the Mississippi State Legislature (HB 1832) as a quasi-governmental agency. A quasi-governmental agency isa hybrid organization that has been assigned by law and has some of the egal characteristics of both the government and private sectors. ‘The Commission has jurisdiction and authority over all matters relating to the acquisition, construction, furnishing, equipping, erection, operation, maintenance and promoting of the Jackson Convention Complex (the Complex). The Commission is governed by nine commissioners. The ‘Commissioners serve for five-year terms. The Mayor of the City of Jackson appoints two hotel/motel members, two restaurant members and two members from the business community from nominees submitted by the hotel owners association, the restaurant owners association and the Chamber of Commerce, respectively. The Mayor also appoints two members at large. One member is appointed by the Governor of Mississippi. ‘The Commission has entered into a management agreement (the Agreement) with SMG to manage the operations of the Complex, which expires on September 30, 2016. Under the Agreement, the Commission is contractually obligated to provide operational funding as needed for management of the Complex. Basis of Accounting and Presentation ‘The accounting records of the Commission are maintained in accordance with accounting principles generally accepted in the United States of America (GAAP), issued by the Governmental ‘Accounting Standards Board (GASB), applicable to governmental entities that use proprietary fund accounting, ‘The proprietary fund (operating fund of the Commission) is accounted for on a flow of economic resources measurement focus; all assets and liabilities associated with the operation of this Fund are included on the balance sheets. This operating fund uses the accrual basis of accounting. Revenues are recognized when earned, and expenses are recognized at the time liabilities are incurred, regardless of the timing of the related cash flows ‘These financial statements comprise all accounts of the Commission, a subset of which are the accounts of the operations of the Complex, as managed by SMG. To facilitate compliance with the ‘Agreement, the Commission maintains separate records for the operations of the Complex, as 13Capital City Convention Center Commission Notes to Financial Statements September 30, 2015 and 2014 managed by SMG. Pursuant to the Agreement with SMG, all operating revenues, net of operating expenses, are the sole properties of the Commission held in trust by SMG. Upon termination of the ‘Agreement, for any reason, any amounts remaining shall be promptly paid by SMG to the Commission. All significant inter-entity items have been eliminated. Use of Estimates ‘The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure ‘of contingent assets and liabilities at the date of the financial statements and the reported amounts ‘of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fund Accounting ‘The Commission is organized and operated on a fund basis, whereby a set of accounts is ‘maintained that comprises its assets, liabilities, net position, revenues and expenses. The operations are financed and operated in a manner similar to a private business enterprise, where (a) the intent of the governing body is that the cost (expense, including depreciation) of providing services on a continuing basis be financed or recovered primarily through users" charges, or (b) the governing body has decided the periodic determination of revenues earned, expenses incurred and/or changes in net position are appropriate for capital maintenance, public p\ ‘management control, accountability or other purposes. Cash Cash consists of demand deposits with financial institutions. For purposes of the statements of cash flows, the Commission considers all highly liquid investments and certificates of deposit to be cash equivalents if they have a maturity of three months or less when acquired. Cash and other deposits are valued at cost. Investments and Investment Return The Commission is allowed, by statue, to invest in demand deposits and interest-bearing time deposits such as savings accounts, certificates of deposit, money market funds, U.S. Treasury bills and notes, and repurchase agreements, Investments are valued at fair value. Certificates of deposit are valued at cost plus accrued interest, which approximates fair value. Investment return consists of interest income and the net change in fair value of investments. 14Capital City Convention Center Commission Notes to Financial Statements September 30, 2015 and 2014 Restricted Assets Restricted assets include funds to pay debt service on the 2013 General Obligation Bonds, should ‘amounts on deposit in the City of Jackson’s Bond Fund be insufficient to pay debt service, and to pay for operating deficits. Accounts Receivable Receivables by the Commission are classified into the following categories: (1) receivables due from the City of Jackson for restaurant, hotel and motel taxes collected in the City of Jackson by the Mississippi Department of Revenue and remitted to the City of Jackson for transference to the Commission; (2) receivables due from contributions pledged from the Jackson Convention and Visitors Bureau; and (3) trade receivables due from customers for the rental of meeting space, catering services or other services offered by the Commission through normal operations. ‘Trade accounts receivable are stated atthe amount billed to customers, plus any earned but unbilled amounts, The Commission generally does not require collateral or other security to support accounts receivable, Credit risk associated with receivables is periodically reviewed by management, and an allowance for doubtful accounts, if required, is established. As of September 30, 2015 and 2014, an allowance was recorded in the amount of $300,000 and $150,000, respectively, for contributions receivable. There was no allowance considered necessary at September 30, 2015 or 2014 for trade receivables. Accounts are written off when collection is determined to be unlikely. Accounts receivable are ordinarily due 30 days after the issuance of the invoices. Accounts outstanding longer than the contractual payment terms are considered past due. As of September 30, 2015 and 2014, accounts receivable included no unbilled amour, Inventory Pricing Inventories consist of food and beverage items and other supplies. Inventories are stated at the lower of cost, or market, Cost is determined using the first-in, first-out (FIFO) method, Capital Assets Property and equipment transactions are stated at cost, or fair value for contributed assets, less accumulated depreciation. Depreciation is charged to expense on the straight-line basis over the estimated useful life of each asset. The estimated useful lives for each major depreciable classification of property and equipment are a follows Land improvements 7-20 years. Buildings and improvements, 35-40 years Equipment 3-5 years. 15Capital City Convention Center Commission Notes to Financial Statements September 30, 2015 and 2014 Advance Deposits A liability is recorded for cash received from event sales in advance of an event. Event revenues are recognized upon completion of an event. Unearned Revenue Unearned revenue is comprised primarily of advance billings and unearned revenue related to sponsorship or advertising contracts. Revenue is recognized upon completion of an event o ratably over the contract term. Net Position Net position of the Commission is classified into three components, Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of borrowings used to finance the purchase or construction of those assets, Net position is, reported as restricted when there are limitations imposed on its use either through external restrictions imposed by contracts, creditors, grantors, or laws or regulations of other governments. Unrestricted net position is remaining assets less remaining liabilities that do not meet the definition of net investment in capital assets or restricted expendable. Classification of Revenues ‘The Commission has classified its revenues as ether operating or nonoperating revenues according to the following criteria Operating revenues - Operating revenues event and ancillary revenues (e.g., om rental, related catered services, etc.) eared during the regular operations ofthe Jackson Convention Complex, as managed by SMG. Nonoperating revenues ~ Nonoperating revenues include restaurant, hotel and motel tax: revenues and other revenues that have the characteristies of nonexchange transactions. Tax Revenues Tax revenues are recognized in the period in which they are earned and become measurable. Event Revenues Event revenues are recorded, net of direct event expenses, upon the completion of the event Accordingly, amounts received for advance event sales or deposits by customers are recorded as advance deposits until that ime. Revenues are presented net of any sales taxes collected from customers and remitted to governmental authorities, 16Capital City Convention Center Commission Notes to Financial Statements September 30, 2015 and 2014 Ancillary Revenues ‘Ancillary revenues include services offered to Complex customers in addition to room rental. They include catering, concessions, parking, telephone, audio visual, internet and other. Ancillary revenues are recorded, net of direct ancillary expenses, upon completion of the event. ‘Accordingly, amounts received for advance ancillary sales or deposits by customers are recorded as ‘advance deposits until that time. Revenues are presented net of any sales taxes collected from customers and remitted to governmental authorities. Exchange of Goods and Services In the normal course of operations and in accordance with industry custom, the Complex trades ‘event, advertising and other services for goods and services from some of its suppliers. These transactions are recorded at estimated fair values when the goods and services are received, Note 2: City of Jackson General Obligation Bonds ‘On November 8, 2006, the City of Jackson issued $65,000,000 of General Obligation Bonds - Series 2006 pursuant to HB 1832 of the 2004 Regular Session of the Mississippi State Legislature and Miss. Code Ann, (1972), Section 21-33-301, et. seq. During 2013, the 2006 General Obligation Bonds were refinanced to a lower interest rate. ‘The proceeds of this bond issue have been and are being disbursed in accordance with the Agreement between the Commission and the City of Jackson. The Agreement outlines the responsibilities of both parties as it relates to approval of expenditures, bond repayments and the continuing operations of the Commission once construction has been completed. Proceeds from the 2006 bonds served as the funding source for the land and constructed buildings reported on the balance sheets, ‘These bonds are to be repaid from the proceeds of a special sales tax, referred to as the restaurant, hotel and motel tax. Those sales taxes are collected for the acquisition, construction, furnishing, ‘equipping, erection, operation, maintenance and promoting of the Complex. HB 1832 authorized the following taxes to be collected from every person engaging in or doing business in the City of Jackson: (1) 1% of the gross proceeds of sales of restaurants, food and beverages in hotels and motels; (2) 3% of sales of hotels or motels and room and lodging; and (3) 3% of sales at the Capital City Convention Center by caterers. These taxes are collected by the Mississippi Department of Revenue and remitted to the City of Jackson, who, in turn, remits the sales tax to the Commission ‘on a monthly basis after withholding an amount required for debt service on the bonds by the City of Jackson, Debt service allocation payments are remitted to the City of Jackson for upcoming principal and interest ratably during the year. Transfers for the years ended September 30, 2015 and 2014 were $3,939,141 and $4,080,956, respectively 7Capital City Convention Center Commission Notes to Financial Statements September 30, 2015 and 2014 Note 3: Deposits and Investments Deposits Custodial credit risk is defined as the risk that, in the event of a financial institution's failure, the Commission will not be able to recover deposits or collateral securities that are in the possession of aan outside party. The Commission does not have a deposit policy for custodial eredit risk. However, the Mississippi State Treasurer manages that risk on behalf of the Commission, ‘The collateral for public entities’ deposits in financial institutions are held in the name of the State Treasurer under a program established by the Mississippi State Legislature and is governed by Section 27-105-5, Miss. Code Ann. (1972). Under this program, the Commission's funds are protected through a collateral pool administered by the State Treasurer. Financial institutions holding deposits of public funds must pledge securities as collateral against those deposits. In the event of failure of a financial institution, securities pledged by that institution would be liquidated by the State Treasurer to replace the public deposits not covered by the Federal Deposit Insurance Corporation (FDIC). As of September 30, 2015 and 2014, none of the Commission’s deposits were exposed to custodial credit risk. Investments Investment policies, as set forth by policy and state statute, authorize the Commission to invest in demand deposits and interest-bearing time deposits such as savings aecounts, certificates of deposit, money market funds, U.S. Treasury bills and notes, and repurchase agreement. 18Capital City Convention Center Commission Notes to Financial Statements September 30, 2015 and 2014 ‘Summary of Carrying Values ‘The carrying value of deposits as of September 30, 2015 and 2014, respectively, are included in the balance Sheets as follows: 2015 2014 Carrying value Deposits $2,717,947 _S_3,864,390 Included in the following balance sheet captions Cash S$ 717947 $1,864,390 Cash - restricted 1,500,000 1,500,000 Short-term investments - restricted 500,000 300,000 $2,717,947 _S_3,864,390 Note 4: Capital Assets ‘The capital assets for the years ended September 30, 2015 and 2014, consisted of the items shown below. 2015 Ending Balance _Additions__Disposals__Balance Land and land improvement $5,852,683 $16,702 S_ (50,000) $5,819,385 Buildings and improvements 80,033,199 79,564 = 80,112,763, Equipment 212,802, E 149,836 309,068 (50,000) ~ 90,981,984 Less accumulated 2,546,888) depreciation Capital assets, net S$ (50,000) _$.74.152.666, 19Capital City Convention Center Commission Notes to Financial Statements ‘September 30, 2015 and 2014 2014 Beginning Ending Balance __Additions__Disposals_ Balance Land and land improvement $5,792,683 $60,000 = $5,852,683, Buildings and improvements 79,996,179 37,020 = 80,033,199 Equipment 2 4,837,034 310,562 99,722,916 Less accumulated depreciation. (1764919) _2,517,516) a4, Capital assets, net $78,647.40 _$ (2.206.954) _S $76,440,486 Note 5: Restricted Net Position and Contingent Liability The restricted net position as of September 30, 2015 and 2014, consisted of 2015 2014 Restricted for operating deficit $500,000 $500,000 Restricted for debt service 1,500,000 Total net restricted net position $_ 2,000,000 Pursuant to the Agreement between the Commission and the City of Jackson, three separate funds are to be established and maintained. These are as follows: Operations Trust Fund The Agreement requires the Commission to maintain an operations trust fund as a segregated interest-bearing fund and maintain the fund at not less than $500,000. This fund may be used only in the event the Commission incurs operational deficits. Should funds be used, the Commission ‘must undertake to replenish the fund in 12 equal monthly installments, Debt Service Account As of the date of the issuance of the City of Jackson's 2006 General Obligation Bonds, the Commission deposited $500,000 into the debt service account that is being held by the City of Jackson, The Agreement requires the Commission to fund the account at the rate of not less than 20Capital City Convention Center Commission Notes to Financial Statements ‘September 30, 2015 and 2014 5% of the net monthly restaurant, hotel and motel tax proceeds to the Commission, ‘The ‘Commission isto fund this account until it reaches $1,500,000. At such time as the City of Jackson's bonds are repaid, any balance in the account is to be transferred to the Commission. ‘The purpose of this account is to provide funds in the event of a shortfall in tax collections below amounts required to meet debt service requirements of the bonds. In the event draws are required from the account, the Commission shall undertake to replenish the aecount in 24 equal monthly installments. Capital Improvements Account ‘The Commission has agreed to establish an interest-bearing account to be funded at a rate of not less than 3% of the net monthly restaurant, hotel and motel tax proceeds to the Commission. Amounts in the account shall be used for capital improvements expenses of the Commission. Though this account is limited to capital improvements, such improvements are the sole di of the Commission. As such, this account is not considered restricted for financial statement reporting purpose and is included as cash in the balance sheets, retion Note 6: Management Agreements and Fees Under the Agreement, SMG earns an annual base management fee paid by the Commission. The ‘maximum annual base management fee allowed for any year was $119,394 for 2015 and $117,398 for 2014, SMG eared the maximum in base management fees for the years ended September 30, 2015 and 2014, ‘These amounts are paid in monthly installments and are reported as SMG management fees, ‘SMG also assumes responsibilities for food service at the Complex. Asa result, they received {$122,645 and $110,728 for the years ended September 30, 2015 and 2014, respectively, which the Commission also reports as SMG management fees. This fee is calculated at 5%, net of tax of catering and concession revenues, which are subject to fluctuations from year to year. Note 7: Risk Management ‘The Commission is exposed to various risks of loss related to torts, errors and omissions, injuries to ‘employees and natural disasters. The Commission carries commercial insurance for these risks, There have been no settled claims resulting from these insurance tisk. atSupplementary InformationCapital City Convention Center Commission Combining Balance Sheet September 30, 2015 Jackson Capital City Convention Convention Complex, Center as Managed Commission by SMG Assets ‘Current Assets Cash S768 Cash - restricted 1,500,000 < Short-term investments - restricted 00,000 : Accounts receivable Restaurant, hotel and motel taxes receivable 166,129 Contribution receivuble, net 300,000 : Trade receivable . Inventories 5 Prepaid expenses Total current assets Capital Assets, Net Total assets $_77826423 abilities and Net Position ‘Current Liab Accounts payable S 60.832 8 Other accrued liabilities Advanee deposits : Uneamed revenue Total current liabilities 60. Net Position Net investment in capital assets 74,152,666 Restricted 1,991,908 Unrestricted 16 Total net postion 77.768, Total liabilities and net position $77,826,423. 333,836 333,836 277,929 177.182 193.141 333.836 Eliminations and Adjustments Combined ‘ $s 717987 1,500,000 : 500,000 766,129 : 300,000 : 130,373 : 34477 (667 + 4,007,593 14,152,666 s = S_78.160259 s $338,761 : 177.182 Z 193,141 19.500 78s 74,152,666 : 1,991,908 1.287.105, Tra 675 s = 878,160,259 22Capital City Convention Center Commission Combining Statement of Activities Year Ended September 30, 2015 Jackson Capital City Convention Convention Complex, _Eliminations Center as Managed and Commission _bySMG___Adjustments__ Combined Operating Revenues Event revenues, net s - $ 43490 $ = $463,419 Ancillary sevens, net = 1,664.49 = 1668349 Sponsorship incon . 62.000 62.000 10 12910 2,202,678 12.678 : Operating Expenses Salaries and employee benefits 68619 1.822.616 = L891.265 Purchased services and professional fees 189.142, 9.548 : 198,690 Marketing and promotion 8.497 : 8497 Rent S048 : : 31,088 Insurance 107.087 7 : 107.087 Utilities 6877 362.860 : 569.737 General es 716,095 : RI6T SMG management foes : 242,039 E 242,039 Depreciation 2.516.888 546.888, Total operating expenses 2.969.770 _3,353.158 6,322,928 Operating Loss (2.969.770) (1.150.480) (4.20, Nonoperating Revenues (Expenses) Investment return 10.292 e : 10,292 Restaurant, hotel and motel tax revenue 4,623,548 : 5 423.544 Debt service allocation payments (3.939.141) : + 939.141) Transfer feom SMG Corporate 103 é A 103 Net nonoperating revenues 69, ‘Change in Net Position (2.274972) (1,150,480) = 425,452) Net Position, Beginning of Year 81202563 348.436) = 808s7,127 Operating Contribution from Capital City Convention Center Commission to Jackson Convention Complex Operations (1.162.000) 162.000, Net Position, End of Year $_77,765.591_ $ (333916) = S_77.431.675, 23Capital City Convention Center Commission Schedule of Operating Activities of the Jackson Convention Complex, as Managed by SMG Year Ended September 30, 2015 Operating Revenues Event revenues, ne Ancillary revenues, net Sponsorship income Other income Total operating revenues Operating Expenses Salaries and employee benk Purchased services and profe Utilities General ‘SMG management fees Total operating expenses Net Operating Loss Ss 356,833, 1,281,549 47.740 9.941 1,696,063 1.403.414 433,402 551,393 186,370 2,581,931 (885,868) TelCom Center S 106,586 382,800 m227 $ (264,612) Jackson Convention Complex, as Managed by SMG Ss 463,419 1,664,349 62,000 12.910 78 1,822,616 9,548 362,860 716.095 2 9 53,158 4.150.480) 25Capital City Convention Center Commission Combining Statement of Cash Flows Year Ended September 30, 2015 Operating Activities ‘Cash paid to supplies and employees Cash received from event, ancillary’ and other ‘operating revenues Net eas used in operating activities Noncapital Financing Activities ‘Cash received for hotel, motel and restaurant 1a Debit service allocation payments “Transfers from Commission 1 the Comples ‘Net cash provided by (used in) noncaptal financing activities Capital and Related Financing Activities Acquisition of capital asets, net of contributed property ‘Net cash used in capital and related Financing activites Investing Activities Interest on investments Purchase of investments Proceeds fiom sales and maturities of investments Other, net [Net cash provided by investing activities Increase (Decrease) in Cash Cash, Beginning of Year Cash End of Year Reconciliation of Operating Loss to Net Cash Used in Operating Activites ‘Operating loss ‘Aajustments to recon by operating activites ‘Depreciation Changes in Accounts receivable Tnvemories Prepaid expenses Accounts payable (thee eurent ibis not loss to net eash provided Not eash used in operating activities 71826) _ 4.079.149) Jackson Capital City Convention Convention Complex, Conter as Managed Commission by SMG S$ 7826) $ 6.350.126) 2.270984 4.598.339 6.939.141) 162,000) 1.162.000 «s02 1,162,000 29.008) (259068) 10292 : (500,000) : 500.000 : 103, (122920) 2888 or 27463 $2,107,626 $110321 $2,969,770) $ (1,150,480) 2.546.888, . (85.130) 30.186, S__ 77826) $1079.12) Elimination s s s = $13,827,982) 2.270.984 1.856.968) = 4598330 2 Gost 6s 259.068) = 1259068) m2 {s00.000) 500,000 13, 10,395 (4648) 3,361,390 §2217907 (4,12 = 2st6K88 = 138231 : (633) : 3.892) > 263) = 39339), su 968) 24Other InformationCapital City Convention Center Commission Schedule of Surety Bonds Year Ended September 30, 2015 Name Amount Company Fred L. Banks, Jr, Chairman 000 Brierfield Insurance Company Mavis James 25,000 _ Brierfield Insurance Company Duane A. O°Neill 000 Brierfield Insurance Company Alan Walters 25,000 _ Brierfield Insurance Company Rosemary Maxey 25,000 Brierfield Insurance Company ‘Alex Thomas 25,000 Brierfield Insurance Company Mende Alford 25,000 Brierfield Insurance Company James Wesley Scrape 25,000 Brierfield Insurance Company Dian Alford 25,000 EMC Insurance Companyct Suite $00 Joc £01 948.6700 0 98, GPAs & Advisors m0 Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance With Government Auditing Standards Board of Commissioners Capital City Convention Center Com Jackson, Mississippi We have audited, 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, the basic financial statements of Capital City Convention Center Commission (the Commission), @ component unit ofthe City of Jackson, Mississippi, which comprise the balance sheet as of September 30, 2015, and the elated statements of activities and cash flows for the year then ended, and the related notes to the basic financial statements, and have issued ‘our report thereon dated March 4, 2016. The financial statements of the Jackson Convention Complex, as ‘managed by SMG, which are included in the Commission's reporting entity, were not audited in accordance with Government Auditing Standards Internal Control Over Financial Reporting Management of the Commission is responsible for establishing and maintaining effective internal control over financial reporting (internal control). In planning and performing our audit, we considered the ‘Commission’s internal control to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Commission's internal control. Accordingly, we do not express an opinion on the effectiveness of the Commission's intemal control. A deficiency in intemal control exists when the design or operation of a control does not allow ‘management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibilty that a material misstatement of the Commission’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was forthe limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses. Given these limitations, during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses as defined above. However, material weaknesses may exist that have not been identified. PraxityBoard of Commissioners Capital City Convention Center Commission Page 28 Compliance As part of obtaining reasonable assurance about whether the Commissions financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results ofthat testing, and not to provide an opinion on the effectiveness of the Commission’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Commission’s intemal control and compliance. Accordingly, this communication is not suitable for any other purpose. BRD ep Jackson, Mississippi March 4, 2016Invoice Date: June 3, 2018, Invoice #002 To: Jimmy Hendeix Job ee ed Due on receipt em Description Unit Price Ce (Open Records Request CCCCC Audit fr 9-30-15 & '50)per page 214 as) $8.00 Horne Financial Report as of March 31,2016 $.50/per page () S400 Total 1200 Subtotal Sales Tax Total $12.00 ‘Thank you for your business!