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HomeMy WebLinkAbout2013-05-13 - Agendas - Final • A & P Commissioners will circulate among funding requestors from noon until 1 p.m. at the Visitors Bureau, 21 S. Block. At 1 o'clock, Commissioners will convene as a Committee of the Whole to decide on funding. Lunch will be served. AGENDA ADVERTISING AND PROMOTION COMMISSION May 13, 2013 approx.2:00 p.m. Fayetteville Town Center I. Call to Order — Ching Mong II. Welcome New Commissioners — Hannah Withers and Bobby Ferrell III. Special Project Funding Distribution IV. Old Business A.Attomey contract — John Burrow V. New Business A.Audit — Roxie Benicosa, Beall Barclay B.Resolution for issuance of bonds guaranteed by HMR revenue VI. Advertising Agency Report — Mike Sells • VII. Reports A. Approval of Minutes for March B. Financial Report 1 . HMR Revenues — Marilyn Heifner 2. Financial Statements — Jerri Kuburich 3 . Update from City Attorney re: delinquent tax collection efforts — Kit Williams C. Departmental Reports These are included in the packet, but will not be orally presented. VIII. Adjourn • . ADVERTISING AND PROMOTION COMMISSION REGULAR MEETING April 8, 2013 Commissioners Present: Matt Behrend, Bill Lyle, Ching Mong, Matthew Petty, Maudie Schmitt and Justin Tennant. Commissioner Absent: Bob Davis Staff Present: Marilyn Heifner, Sandra Bennett, Matt Clement CALL TO ORDER Ching Mong called the regular monthly meeting of the Fayetteville Advertising and Promotion Commission to order on April 8, 2013, at 2:00 p.m. REVIEW OF APPLICANTS FOR AT LARGE AND INDUSTRY POSITION EXPIRING 3/31/13 Seven nominations were received for the Industry position: Maudie Schmitt (Cafe Rue Orleans), Michael Andrews (Fresco Cafe & Pub), Serena Hattabaugh (Candlewood Suites), Jim Huson (Doe's Eat Place), Shellie Morrison (The Event Group), Hannah Withers (Little Bread Co.), and Denise Youngblood (Mojo's Pies). The City Nominating Committee interviewed Serena Munns, Hannah Withers, Shellie Morrison, and Maudie Schmitt. The Nominating Committee recommended Hannah • Withers. Petty moved to appoint Hannah Withers, second by Tennant. Petty said that Hannah represents a unique perspective. She started the Block Street Party which now has attendance of 15,000 and has recently purchased Maxine's Tap Room. She would encourage a sense of place. Mong said Hannah is a strong candidate. Tennant said it was tough from the nominating committee standpoint because Maudie Schmitt has served the commission so well. He liked the new ideas and fresh approach of Hannah to downtown and to Fayetteville as a whole. Schmitt said she had enjoyed the last 8 years serving on the Commission and she thought under her chairmanship, the Commission had accomplished some good things such as Botanical Garden of the Ozarks, the Square renovation, and many small festivals started by the A & P funding. She said she had been a good steward of the HMR money and had a perspective of experience and a level headed opinion. Lyle nominated Maudie Schmitt. He expressed a concern for Hannah and her negativity expressed on Facebook after she was nominated last time. Second by Mong. Hannah was selected in voting with Tennant, Behrend, and Petty voting for Withers and Lyle and Mong voting for Schmitt. • • Ten nominations were received for the At Large position: Roger Barrett (Nightbird Books), Terry Coberly (retired), Bobby Ferrell (retired), Julie McQuade Heyes (Fayetteville Underground), Eric Howerton (WhyteSpyder, Inc), Lewis B "Bucky" Jones (retired), Steven Kay (attorney), David Russell (First Security Bank), Terri Trotter (Walton Arts Center), and William H. (Bill) Waite (Dickson Street Liquor). Petty asked to eliminate Waite and Trotter because of pending business between the Walton Arts Center and the Commission. Waite is a board member of the WAC and Trotter is an employee. Tennant said the city nominating committee recommended Ferrell. Tennant moved to appoint Ferrell, second by Petty. Mong moved to recommend David Russell, second by Lyle. After discussion, Ferrell was elected with Tennant, Behrend, and Petty voting for Ferrell and Mong and Lyle voting for Russell. Petty recommended that the Commission interview all candidates in the future. REPORTS MINUTES Motion to approve the minutes of the March meeting by Petty, second by Tennant. Motion • carried. FINANCIAL REPORTS HMR Revenue - Marilyn reported that March revenue was $213,526, a 6.22% increase over March, 2012. Year to date increase is 4.61%, $612,226. Jerri Kuburich reviewed the Financial Reports for February, 2013. Petty asked for a report of cash unencumbered at each monthly meeting. Delinquent Tax Collection Efforts - City Attorney Kit Williams reported that the City Prosecutor collected $7,261.39 in March. No reports decreased from 10 to 4. Four cases were closed and there are now 5 with zero balances. The prosecutor will try and use the business license as a tool for getting reports submitted. Lyle asked about business owners being able to open new restaurants when taxes are owed on previously owned restaurants. The City attorney will check into that issue. DEPARTMENTAL REPORTS Clinton House Museum - Website traffic continues to grow with just under 6,000 visitors (89% of those were new visitors to the site). Iron gating on the west side and handrails on the rock stairway to the garden were • installed. Johnson attended the Arkansas Museums annual conference in Bentonville. • Convention and Visitors Bureau - Hospitality Hero program had 26 entries for the month. It is still well received by the managers and first line employees. Mandy Carrillo from the Quality Inn was the winner this month. Staff booked 11 meetings with total economic impact of $1,509,044. A sales blitz in Little Rock is being organized for April. Store sales continue declining revenue pace. Store items and sale items are being discussed as a method of regaining sales. Town Center Sandra Bennett reported a 21% increase in sales for March 13 over March 12. Year to date collections are 9% higher that 2012 at $104,212.40. Bennett attended leadership conference this month. Executive Director Tanner Montgomery, visitor services manager, resigned. A search is on for his replacement. We have finished updating the Fayetteville Insider's Guide. It is now at the printers. A pocket trail z-card design work has been started. We will have a page featuring Fayetteville in a coffee table guide called Arkansas. • The Northwest Arkansas area will be featured in the July issue of U. S. Airways in-flight magazine. It has a printing of 315,000 with each issue being read 6-10 times. The experiencefayetteville.com website is being updated. We anticipate it going live within the month. Wayfinding and signage project has been bid and the signs should be installed in July as part of phase 1 of the project. The server for the CVB crashed last week. A new server is up and running and no information was lost. Auditors completed their in-house portion of the audit. We had a problem with the materials that Keith Glass submitted and he refused to provide a final financial statement and write the management letter. Jerri recreated the documents and made adjustments to have the report reflect the actuals (with auditor approval). The preliminary report should be back to Heifner by the end of this week. A sales blitz is scheduled in Little Rock on April 16-17. All directors are required to file a statement of financial interest because of state • legislation passed in this session. • AD AGENCY REPORT Mike Sells said the Insider Guide will have several new sections which are designed to help visitors and residents as well. It is scheduled for delivery for the end of the month. OLD BUSINESS ATTORNEY FOR THE A & P COMMISSION RFQ's were received from the Asa Hutchinson Law Group and from John Logan Burrow. After interviewing both firms, it was moved by Petty, second by Schmitt to go into Executive Session to discuss hiring because it was deemed a personnel issue. Motion carried. After the Executive Session, Mong called the meeting back to order, moved by Petty to enter into negotiations with John Burrow, second by Mong. Motion carried. NEW BUSINESS DMAP DMAP materials will be submitted at the end of April. If Commissioners have questions regarding any sections, they should contact Matt Clement. MOBILE TOURIST INFORMATION CENTER Commissioners gave Marilyn authority to investigate a mobile tourist information center. There being no further business, the meeting was adjourned. • Respectfully submitted, Marilyn Heifner Executive Director Fayetteville A & P Commission • Date of Event Funding Request Attendance Amt of Request 2012 received Exec. Dir. Recom Commission Alp 6/24/2013 Texas League Gala 300 $ 20000.00 $ $ 2,000.00 10/5/2013 Battle of the Beers 500 $ 15,000.00 $ - $ 31000.00 10/5/2013 Puppets in the Park 400 $ 71000.00 $ 1,000.00 $ 20500.00 11/1/2013 Theatre5quared 350 $ 15,000.00 $ 20,000.00 no recom. 12/31/2013 Last Night Fayetteville 1400 $ 220000.00 $ 7,000.00 $ 7,000.00 Aug 22-25 Fayetteville Roots Festival 3500 $ 40,000.00 $ 20,000.00 $ 20,000.00 Dec 14 & 15 Fayetteville Half Marathon 2250 . $ 20,000.00 $ 4,000.00 $ 4,000.00 Dec 7-Jan 5 Merry Little Christmas at Mt. Sequoyah ? $ 20,000.00 $ - no recom. Dec 7-Jan 5 Little Craft Show 3400 $ 31700.00 $ 1,500.00 $ 3,700.00 Dec. 7 Bulldog Classic 18000 $ 12,500.00 $ - $ 12,500.00 May 30-June 2 NCAA Baseball Regional & Superregional 38000 $ 10,000.00 $ 10,000.00 $ 10,000.00 Nov. 23-Dec 31 Lights of the Ozarks 300000 $ 25,000.00 $ 15,000.00 $ 25,000.00 Oct 25-27 Regional Flag Football tournament 400 $ 6,000.00 $ 1,000.00 $ 1,000.00 Sept 18-21 Bikes, Blues and BBQ 400000 $ 23,661.00 $ $ 20,000.00 SoNA 8242 $ 25,000.00 $ $ 25,000.00 Arkansas Entertainers Walk of Fame ? $ 15,000.00 $ no recom. $ 261,861.00 $ 135,700.00 Available for special project funding - $188,462 • EMPLOYMENT AGREEMENT THIS AGREEMENT entered into this day and by and between the City of Fayetteville, Arkansas, Advertising and Promotion Commission (COMMISSION) and John Logan Burrow, Attorney at Law (ATTORNEY): For and in consideration of the faithful performance of the mutual promises, covenants, and conditions set forth herein the parties agree as follows: 1 . EMPLOYMENT. COMMISSION agrees to employ and ATTORNEY agrees to accept employment as attorney for the COMMISSION. 2. TERM. The term of this Agreement shall be "at will' and either party may declare the same to be void at any time, for any reason, or for no reason at all. PROVIDED HOWEVER, unless terminated for cause, either pa rty shall • be provided sixty (60) days written notice of such termination. For purposes of this Agreement "cause" as applied to termination of the agreement by the COMMISSION shall be "cause" as the term is ordinarily applied in Unemployment Security Division cases as well as default by the ATTORNEY under this AGREEMENT. "Cause" as applied to termination of the Agreement by the ATTORNEY I shall include disability substantially interfering with his performance, refusal to engage in unethical practices, refusal to engage in matters outside his competency, and refusal to engage in matters that subject the ATTORNEY to risk of personal liability as well as default by the COMMISSION under this AGREEMENT. PROVIDED HOWEVER, even in the event of termination of the ATTORNEY for cause, the ATTORNEY shall cooperate and provide reasonable efforts to effect • transition of all matters to any other attorney the COMMISSION shall designate. • 3. SCOPE OF WORK. The ATTORNEY shall be reasonably available to handle all routine legal matters of the COMMISSION including, but not limited to: contract formation, interpretation, and enforcement; court cases wherein the COMMISSION is a party; general consultation; and substantial attendance at monthly meetings of the COMMISSION and any special meetings wherein his presence is requested. PROVIDED HOWEVER, it is mutually agreed and acknowledged that ATTORNEY is also a private practitioner and that he is precluded from participating in matters that constitute a conflict of interest; certain insured matters are defended by attorneys chosen by the carrier; certain matters, including, but not limited to, bonds, are beyond his area of competence; certain matters reasonably require the efforts of more • than one attorney; and other matters may arise whereby it is in the best interests of the parties that the ATTORNEY not represent the COMMISSION or that the ATTORNEY receive assistance from additional counsel. In such event, the COMMISSION will be responsible for the compensation of new or additional counsel. 4. COMPENSATION. The COMMISSION shall pay the attorney at the rate of $200.00 per hour, with the expectation that monthly billings shall not exceed $ 1 ,000.00, or 5 hours of work. The ATTORNEY shall give notice to the COMMISSION whenever billable hours are expected to exceed 5 hours. The ATTORNEY shall be responsible for providing an itemized statement for services and the COMMISSION shall remit payment within thirty days of receipt. The COMMISSION, through its Executive Director, or at its regular monthly meeting, may authorize payment for additional billable • hours. • 5. COSTS. The COMMISSION shall be responsible for all costs directly associated with the ATTORNEY'S representation of the COMMISSION including, but not limited to, court costs, trial preparation to include discovery and exhibits, travel expenses, expert witness fees, investigation costs, and other costs uniquely associated with ATTORNEY'S representation of the COMMISSION. Said costs shall not include costs associated with ATTORNEY'S use of his own office premises, or automobile costs not associated with long distance travel associated with legal services for the COMMISSION. PROVIDED HOWEVER, the ATTORNEY shall not incur any single cost in excess of $250.00 without the prior approval of the COMMISSION. IN WITNESS WHEREOF, the parties set their hands and seals this _ day of • May, 2013 . John Logan Burrow Authorized Representative Attorney at Law City of Fayetteville, Arkansas Advertising and Promotion Commission • FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION FINANCIAL STATEMENTS DECEMBER 31 , 2012 FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION DECEMBER 31 , 2012 CONTENTS Page INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . .. . . 1 FINANCIAL STATEMENTS Statement of Assets, Liabilities, and Fund Balance — Modified Accrual Basis.. . .. . . .. ... . .. ... .... . .. .. . 3 • Statement of Revenues, Expenditures, and Changes in Fund Balance — ModifiedAccrual Basis ... . . . . . . . . . .. . .. . .. . . . .. . . .. ... .. . . . . . . .. .. . .. . . . . .. ... .. .. . . . . . . .. .. . . . . ... . . . . . . . .. . .. . . . . .. .. . .. . . . . 4 Statement of Revenues and Expenditures — Modified Accrual Basis — Budgetto Actual . . . .. . . . . .. . .. ... . .. . . . . .. . .. . . . .. . . . . . . . . .. .. . .. . .. . . . . . . . . . . . . . . .. .. . . . .. . . . . . . .. . .. . . .. .. . . . .... ... ... .. .. . .. . . . 6 Notes to Financial Statements . .. . .. . . .. .. . . .. . . . . . . .. . . .. .. . .. . .. ... . . . . . ... .. ... . . . .. .. . . . . . . .. . . . . . .. .. . . . .. . . . .. ... . . ... .. . . . . 7 INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS .. .. . . .. . . .. . . . . . . . .. . . . . . . .. . .. .. . .. .. . . . . . . .. . . .. .. ... .. ... . . ... .. . .... . .. .. 15 • BEALU BARCLAY CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT Board of Commissioners Fayetteville Advertising and Promotion Commission Fayetteville, Arkansas Report on the Financial Statements We have audited the accompanying financial statements of the Fayetteville Advertising and Promotion Commission (the "A&PC") as of and for the year ended December 31 , 2012, and the related notes to the financial statements which collectively comprise A&PC's basic financial statements 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 financial reporting provisions prescribed or permitted by the State of Arkansas (the "State') to demonstrate compliance with the State's regulatory basis of accounting and budget laws. Management is also responsible for 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. Auditors' Responsibility Our responsibility is to express an opinion 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The .procedures selected depend on the auditors' 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 auditors consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures 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 our audit opinion. • Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles As described in Note 1 of the financial statements, the financial statements are prepared by the A&PC on the basis of the financial reporting provisions prescribed or permitted by the State to demonstrate compliance with the State's regulatory basis of accounting and budget laws, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to meet the requirements of the State. The effects on the financial statements of the variances between the regulatory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America , although not reasonably determinable, are presumed to be material. Adverse Opinion on U.S. Generally Accepted Accounting Principles In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion on U. S. Generally Accepted Accounting Principles paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the A&PC as of December 31 , 2012, or changes in financial position thereof for the year then ended. Opinion on Regulatory Basis of Accounting . In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities, and fund balance of the A&PC as of December 31 , 2012, and its respective revenues, expenditures, and the changes in fund balance and budgetary results for the year then ended, in accordance with the financial reporting provisions prescribed or permitted by the State described in Note 1 . Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have issued our report dated May 1 , 2013 on our consideration of A&PC'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 audit performed in accordance with Government Auditing Standards in considering the entity's internal control over financial reporting and compliance. i B LL BARCLA4& MP ANY, PLC Certified Public Accountants • Rogers, Arkansas May 1 , 2013 FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION STATEMENT OF ASSETS, LIABILITIES, AND FUND BALANCE - MODIFIED ACCRUAL BASIS • DECEMBER 31 , 2012 ASSETS CURRENT ASSETS Cash $ 11177,311 Due from City of Fayetteville 11188 Investments 1 ,811 , 938 Prepaid expenses 31505 Total Current Assets $ 2,993,942 PROPERTY Building 113691316 Furniture and fixtures 34,550 Land 1980621 Office equipment 98,996 1 ,701 ,483 Less accumulated depreciation 389,770 • 1 ,311 ,713 OTHER ASSETS Deposits 11905 Total Assets $ 4,307,560 LIABILITIES AND FUND BALANCE CURRENT LIABILITIES Accounts payable $ 22,638 Payroll taxes and benefits withheld and payable 9,038 Due to City of Fayetteville 3,287 Total Current Liabilities $ 34, 963 FUND BALANCE 412729597 Total Liabilities and Fund Balance $ 4,307,560 • See Independent Auditors' Report and Notes to Financial Statements. - 3 - FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION STATEMENT OF REVENUES, EXPENDITURES, AND • CHANGES IN FUND BALANCE - MODIFIED ACCRUAL BASIS YEAR ENDED DECEMBER 31 , 2012 REVENUES Hotels, motels and restaurant tax $ 2,521 , 143 Rent income 416,495 Visitors center store 63,817 Visitors guide advertising income 36,650 Parking income 50,484 Special event income 59466 Investment income 9,970 Interest income 5,364 Miscellaneous income 52,975 $ 311621364 EXPENDITURES Advertising 573,286 Automobile expense 3,600 Bank charges 71252 Bond payments 673,892 Contract labor 65,990 Convention development 86,291 • Collection expense 50,423 Depreciation 49,542 Dues and subscriptions 5,563 Employee benefits 12, 121 Insurance 60,715 Repairs and maintenance 169,880 Miscellaneous 23,302 Office supplies/expense 17,420 Payroll taxes 40,882 Postage 18, 107 Printing 820 Professional services 15,458 Rent 12,000 Salaries and wages 456,214 Security 5,072 Special projects 365,844 Supplies 30,420 Taxes and licenses 41008 Training and meetings 461405 Utilities 991127 Visitor store expense 43,268 • 219369902 See Independent Auditors' Report and Notes to Financial Statements. - 4 . EXCESS OF REVENUES OVER EXPENDITURES 225,462 FUND BALANCE, BEGINNING OF YEAR 41047, 135 FUND BALANCE, END OF YEAR $ 4,272,597 • • See Independent Auditors' Report and Notes to Financial Statements. - 5 - FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION STATEMENT OF REVENUES AND EXPENDITURES - MODIFIED ACCRUAL BASIS BUDGET TO ACTUAL • YEAR ENDED DECEMBER 31 , 2012 Variance Original Favorable Budget Final Budget Actual (Unfavorable) REVENUES Hotels, motels and restaurant tax $ 21282,246 $ 21389,035 $ 215219143 $ 132,108 Rent income 445,957 445,957 4169495 (29,462) Visitors center store 65,000 65,000 63,817 (19183) Visitors guide advertising income 15,000 38,600 36,650 (19950) Parking income 15, 152 15, 152 50,484 359332 Special event income 32,500 293500 51466 (240034) Investment income 15,106 15,106 91970 5,136 Interest income 21125 2,125 51364 (3,239) Miscellaneous income 16,628 119628 52,975 410347 21889,714 31012,103 31162,364 154,055 EXPENDITURES Advertising 575,200 575,200 573,286 11914 Automobile expense 3,600 .3,600 3,600 - Bank charges 7,009 71009 7,252 (243) Bond payments 679,922 679,922 673,892 61030 Contract labor 19,899 19,900 65,990 (46,090) Convention development 89, 183 74,283 86,291 (12,008) • Collection expense 45,646 47,780 50,423 (2,643) Depreciation 20,000 20,000 49,542 (29,542) Dues and subscriptions 12,245 12,245 51563 6,682 Employee benefits 15,383 14,356 12,121 21235 Insurance 80,763 79,028 60,715 18,313 Repairs and maintenance 234,746 229,745 1699880 59,865 Miscellaneous 17, 172 1590197 239302 135,895 Office supplies/expense 35,693 350693 17,420 18,273 Payroll taxes 47,272 48,091 40,882 71209 Postage 20, 150 20,150 189107 21043 Printing - 820 (820) Professional services 11 ,500 11 ,500 15,458 (39958) Rent 12,000 12,000 12,000 Salaries and wages 5129739 521 ,831 456,214 659617 Security 6,275 61275 5,072 1 ,203 Special projects 218,328 216,828 365,844 (149,016) Supplies 34,396 34,396 30,420 31976 Taxes and licenses 61400 6,400 41008 21392 Training and meetings 42,945 35,426 46,405 (10,979) Utilities 112,248 112,248 99,127 139121 Visitor store expense 30,000 300000 43,268 (13,268) 21890,714 3,013,103 21936,902 76,201 EXCESS (DEFICIT) OF REVENUES OVER EXPENDITURES $ (1 ,000) $ (1 ,000) $ 225,462 $ 2309256 See Independent Auditors' Report and Notes to Financial Statements. - 6 - FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31 , 2012 • NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES As discussed further below, these financial statements are presented in accordance with the regulatory basis of presentation as prescribed by Arkansas state law. The Fayetteville Advertising and Promotion Commission (the "A&PC") maintains it records on a modified accrual basis of accounting, as discussed below. The regulatory basis of presentation and the modified accrual basis of accounting differ from accounting principles generally accepted in the United States of America. The significant accounting policies of the A&PC are as follows: Regulatory Accounting The Arkansas Legislature enacted a law in 2005 that requires municipalities to present their financial statements in a prescribed format and also restricts the basis of accounting for this format to one of three methods. The entity's governing body, however, can adopt a resolution annually to adopt GASB Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments (GASB No. 34) as their reporting model in lieu of reporting on this regulatory basis established by Arkansas Code 10-4-412. The Board of Commissioners did not adopt such a resolution for 2012. The regulatory presentation is on a fund basis with no distinction being made as to the type of funds (Proprietary, Governmental, etc.) being presented . The required financial statements consist of a balance sheet (or statement of assets, liabilities, and fund • balance), statement of revenues, expenditures, and changes in fund balance, and statement of revenues and expenditures - budget to actual. The basis of accounting is limited to cash basis, modified cash basis or modified accrual basis. The A&PC has elected to utilize the modified accrual basis of accounting. Reporting Entity The A&PC is a component unit of the City of Fayetteville, Arkansas (the `City'), established by Ordinance Number 2310 of the City for the purpose of promoting and advertising the City and its environs. The A&PC is presented in the City of Fayetteville's Comprehensive Annual Financial Report as a discretely presented component unit. A commission consisting of seven members governs the A&PC. Four members are owners or managers of hotels, motels or restaurants, and serve for staggered terms of four years. Two members must be members of the governing body of the City, are selected by the council and serve at the will of the council. One member is from the public at large and is nominated by the Commission and approved by the council. All members must reside in the city. Members are voted on by the existing Commissioners and approved by the City Council. The financial statements present only the A&PC, and are not intended to present the financial position and results of operations of the City of Fayetteville, Arkansas, in conformity with accounting principles generally accepted in the United States of America. Operations of the A&PC include the Fayetteville Convention and Visitors Bureau , the Fayetteville Town Center and the Clinton House Museum. FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31 , 2012 • NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Use of Estimates 1 . Management used estimates and assumptions in preparing these financial statements. Those estimates and assumptions 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 expenditures during the reporting period. Actual results could differ from those estimates. Basis of Accounting The financial statements are prepared on the modified accrual basis of accounting. As such, revenues are recognized when the underlying exchange takes place and in the accounting period in which the revenue is both measurable and available to finance expenditures of the fiscal period. The A&PC considers all tax revenues measurable and available when collected and exchange revenue when the transaction occurs. Expenditures are recorded when the related liability is incurred. Budgets The A&PC adheres to the following procedures in establishing the budgets reflected in the accompanying financial statements: Prior to December 1 , the budget committee proposes an operating budget for the fiscal • year commencing the following January 1 . The operating budget includes proposed expenditures and the means of financing them. Prior to January 1 , the A&PC legally enacts the budget through approval of the commissioners. I Budgets are adopted on a basis consistent with accounting practices prescribed or permitted by the State of Arkansas, which practices differ from accounting principles generally accepted in the United States of America. Budgeted revenues and expenditures represent the formal operating budget adopted by the A&PC. Budgetary control is maintained at the operations level. Budgeted amounts not spent by year end lapse. Income Taxes The A&PC is a tax-exempt organization under Section 115 of the Internal Revenue Code. Property Property is carried at historical cost or fair market value at date of donation if the asset was contributed. The A&PC's capitalization policy states that assets with an initial value or cost greater than or equal to $5,000 and an estimated useful fife of greater than one year will be capitalized. Depreciation is provided on the straight-line method over the estimated useful lives of the respective assets, which range from 5 to 39 years. • - 8 - FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31 , 2012 • NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Advertising The A&PC expenses advertising, marketing, and promotion costs as incurred. Subsequent Events Subsequent events are evaluated through the date the financial statements were available to be issued, which is the date of the Independent Auditors' Report. Funding The A&PC is funded by a 1 % hotel, motel and restaurant tax on all revenue from the renting, leasing, or otherwise furnishing of hotel or motel accommodations for profit in the City. The tax also applies to the gross receipts or gross proceeds received by restaurants, cafes, cafeterias, delis, drive-in restaurants, carry-out restaurants, concession stands, convenience stores, grocery store restaurants, caterers and similar businesses as may be defined from time to time by ordinance from the sale of prepared foods and beverages for on or off premises consumption. The tax does not apply to such gross receipts or proceeds of Organizations qualified under Section 501 (c)(3) of the Federal Internal Revenue Code. The taxes are due the 20th day of the month following the month in which the taxes were collected. If taxes become delinquent, the City Prosecutor seeks to collect the taxes. Delinquent taxes totaled $24,358 at December 31 , 2012. • Revenues collected from the taxes are to be used for advertising and promotion in the City and its environs. Revenues are also to be used for the construction, reconstruction, equipment, improvement, maintenance, repair, and operation of a convention center, for the operation of tourist promotion facilities in the city, and for personnel and agencies necessary to conduct the business of the A & P commission. Investments Investments of the A&PC represent the portion of a combined investment pool managed by the City allocable to the A&PC. Investments include money market mutual funds, U.S. Treasury obligations, corporate bonds and U.S. Government agency obligations. Money market mutual funds, governmental securities and corporate bonds are recorded at fair market value based on quoted market prices. Income related to investments is recorded when earned. Income earned in the pool is allocated to the various funds and component units weekly. At December 31 , 2012, the A&PC's proportionate share of the investment pool was approximately 2.41 %. I i s i FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31 , 2012 • NOTE 2: COMMITMENTS The A&PC has an agreement with the City to pay $673,000 per year, plus fees, for The Hotel and Restaurant Gross Receipts Tax Bonds, Series 2003, issued to by the City to construct and equip the Town Center, a multi-purpose civic center and the related parking facilities. The bonds are secured by a 1 % gross receipts tax and the revenues from the operations of the Town Center. The bonds bear interest at coupon rates ranging from 3.2% to 3.55% and are set to mature in 2015. (See Note 9.) In December of 2012, the A&PC committed to pay the University of Arkansas $500,000 to remodel the University field house into a performance hall. The hall is expected to seat 700 and be used for local theatre and arts. The commitment will be paid in two equal installments, one payable upon ground breaking and the other in December of 2013. In November of 2012, the A&PC committed to pay up to $142,328 in funding requests from various Fayetteville, Arkansas organizations for events to be hosted within the City in 2013. NOTE 3: DEPOSITS IN FINANCIAL INSTITUTIONS State law requires that municipal funds be deposited in federally insured banks located in the state of Arkansas. The municipal deposits may be in the form of checking accounts, savings accounts, and time deposits. Public funds may also be invested in direct obligations of the • United States of America and obligations, the principal and interest of which, are fully guaranteed by the United States of America. The A&PC maintains separate bank accounts in two banks. Deposits with banks at December 31 , 2012 amounted to $1 ,226,289, of which $334,468 was insured and the remaining amount was collateralized by securities held in the A&PC's name. The A&PC's portion of investments held by the City amounted to $ 1 ,811 ,938 and is held at one financial institution in the name of the City. Approximately .30% of the pool is insured, 9.7% is collateralized by securities held in the City's name and the remaining balance is invested in direct obligations of the United States of America. NOTE 4: EMPLOYEE BENEFIT PLAN The AVC offers a Simple IRA plan to all employees who meet the eligibility requirements. The A&PC matches employee contributions up to 3% of compensation, while the employee may contribute up to 10% of their salary. The commission of the A&PC has the authority to amend the plan and contribution rate. The A&PC made contributions in the amount of $ 12, 121 for the year ended December 31 , 2012. • - 10 - FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31 , 2012 • NOTE 5: CONCENTRATIONS AND RISK OF ACCOUNTING LOSS Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the A&PC's investment policy is to attempt to match investment maturities with cash flow requirements. The A&PC's investments are money market mutual funds, U.S. Treasury obligations, corporate bonds and U.S. Government agency obligations. Credit Risk - Credit risk is the risk that the issuer or other counterparty to an investment will not fulfill its obligations. It is the A&PC's policy to minimize credit risk losses due to default of security issuers or backers by limiting investments to the safest types of securities in accordance with the City's investment policies. It is the City's policy to invest no more than 20% in corporate debt and securities of a management type investment company or investment trust. The corporate bonds must be rated as Single A minus or better by both Moody's Investor Service and Standard and Poor's at the time of purchase. Investment in commercial paper will be rated A-1 /13-1 . Investment in management type investment companies or investment trusts is limited to companies with portfolios who are limited to U.S. Government obligations and repurchase agreements with approved collateralization. The City's investments in corporate bonds ranged between A and BBB and the government agencies were ranked AA+ by Standard & Poor's at December 31 , 2012. Custodial Credit Risk - Custodial credit risk is the risk that, in the event of the failure of the counterparty, the A&PC will not be able to recover the value of its investment or collateral • securities that are in the possession of an outside party. (See Note 3). Concentration of Credit Risk- The A&PC's investment policy, in accordance with the City's investment policies, limits investment in any one issuer to 5% of the cost basis of the portfolio and limits concentration in any one business sector to 15% of the cost basis of the portfolio excluding U.S. Treasury securities and collateralized certificates of deposits. The A&PC had no concentration risk as of December 31 , 2012. Foreign Currency Risk- This risk relates to adverse affects on the fair value of an investment from changes in exchange rates. The City's investment policy doesn't directly address foreign currency risk. The City's investment manager only buys U.S. dollar pay securities. The AVC had no investments that were denominated in foreign currency at December 31 , 2012. • - 11 - FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31 , 2012 • NOTE 6: PROPERTY A summary of changes in property is as follows: December 31 , December 31 , 2011 Additions Disposals 2012 Building $ 11340,856 $ 28,460 $ - $ 1 ,3691316 Furniture and Fixtures 34,550 - 343550 Land 198,621 - - 198,621 Equipment 92.310 6.686 98.996 11666,337 35, 146 - 19701 ,483 Less accumulated depreciation 340.228 49.542 . 389770 i _ i $ 1 .326. 109 14 396 $ - $ 1 .311 .713 The original cost of fully depreciated property still in use by the ABPC at December 31 , 2012 amounted to approximately $82,000. NOTE 7: INVESTMENTS • Investments are stated at fair value. Fair value and unrealized appreciation (depreciation) at December 31 , 2012 are summarized as follows: Unrealized Appreciation Cost Fair Value (Depreciation) Treasuries and U.S. Agency Obligations $ 1 ,540,582 $ 1 ,542, 105 $ 17523 Corporate Bonds 48,381 49,683 11302 Money Market 220. 150 220. 150 $ 1 .809. 113 $ 1 .811 .938 $ 2.825 The following schedule summarizes the investment return and its classification in the Statement of Revenues, Expenditures and Changes in Fund Balance for the year ended December 31 , 2012: Interest and dividend income $ 111466 Net unrealized gain (loss) on investments (1 ,496) Total investment income • - 12 - FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31 , 2012 • NOTE 8: FAIR VALUE MEASUREMENTS Financial Accounting Standards Board (FASB) Codification Topic Fair Value Measurements and Disclosures establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 ) , and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the investments fall within different levels of the hierarchy, the categorization is based on the lowest level of input that is significant to the fair value measurement of the investment. Investments recorded in the Statement of Assets, Liabilities and Fund Balance based on the inputs to valuation techniques are as follows: Level 1 - These are investments where values are based on unadjusted quoted prices for identical assets in an active market that the A&PC has the ability to access. These investments are comprised of money market mutual funds, corporate bonds, U.S Agency obligations and U .S Treasuries. Level 2 - These are investments where values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the investments. • Level 3 - These are investments where values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect assumptions of management about assumptions market participants would use in pricing the investments. The following table presents the A&PC's hierarchy for the investments measured at fair value on a recurring basis as of December 31 , 2012: Quoted Market Other Prices in Active Observable Unobservable Markets Inputs Inputs Level i Level 2 Level 3 Marketable securities Treasuries and U.S. i Agency Obligations $ 19542, 105 $ $ Corporate Bonds 49,683 Money Market 220. 150 • - 13 - FAYETTEVILLE ADVERTISING AND PROMOTION COMMISSION NOTES TO FINANCIAL STATEMENTS DECEMBER 31 , 2012 • NOTE 9: RELATED PARTY TRANSACTIONS As stated in Ordinance Number 95-1 , the commission of the A&PC consists of seven members, four of which are owners or managers of businesses in the tourism industry which collect the hotel or restaurant taxes levied. Thus, four members of the commission are employed by restaurants or hotels that pay the tax which is the primary funding for the A&PC. During the year ended December 31 , 2012, the A&PC paid approximately $33,000 for expenses related to operational services performed by the City for the lease of parking spaces. The A&PC had a receivable from the City for $1 , 188 at December 31 , 2012, for a refund of fees related to the bond issue in excess of the required amount held out of tax proceeds by the City. The A&PC had a payable to the City of $3,287 at December 31 , 2012 for net interfund transactions recorded during the year. The A&PC has an agreement to pay the City a collection fee of 2% of the taxes collected. During the year ended December 31 , 2012, the A&PC paid collection expenses of $50,423 to the City in exchange for the City collecting tax revenue on behalf of the A&PC. The A&PC has an agreement with the City to pay $673,000 per year, plus fees, for bonds secured by a 1 % gross receipts tax. (See Note 2.) • NOTE 10: SUBSEQUENT EVENT Subsequent to year end, the A&PC committed to give the Walton Arts Center $600,000 to assist in the design, pre-construction, and construction costs of the expansion of the Walton Arts Center's Fayetteville facility. • - 74 - • BEALL BARCLAY CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Commissioners Fayetteville Advertising and Promotion Commission Fayetteville, Arkansas 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 financial statements of Fayetteville Advertising and Promotion Commission ("A&PC") as of and for the year ended December 31 , 2012 and have issued our report thereon dated May 1 , 2013. In our report we expressed an adverse opinion on accounting principles generally accepted in the United States of America because the financial statements are prepared on the basis of the financial reporting provisions prescribed or permitted by the State of Arkansas (regulatory basis) and not in accordance with accounting principles generally accepted in the United States of America. In our report we expressed an unqualified opinion on the regulatory basis of accounting, which is a basis of accounting other • than principles generally accepted in the United States of America. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered A&PC's internal control over financial reporting (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 entity's internal control. Accordingly, we do not express an opinion on the effectiveness of the entity's internal control. A deficiency in internal 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 possibility that a material misstatement of the entity'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 for the 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 or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified . Compliance and Other Matters As part of obtaining reasonable assurance about whether A&PC's 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. This report is intended solely for the information and use of management, the Board of Commissioners, and the Arkansas Division of Legislative Audit, and is not intended to be and should not be used by anyone other than these specified parties. BALL / OMP ANY, PLC Certified Public Accountants • Rogers, Arkansas May 1 , 2013 • I - 16 - CITY OF FAYETTEVILLE, ARKANSAS ADVERTISING AND PROMOTION COMMISSION A RESOLUTION RECOMMENDING TO THE CITY THE ISSUANCE AND SALE OF (1) APPROXIMATELY $1,500,000 OF HOTEL AND RESTAURANT GROSS RECEIPTS TAX REFUNDING BONDS FOR THE PURPOSE OF REFUNDING THE CITY'S OUTSTANDING HOTEL AND RESTAURANT GROSS RECEIPTS TAX REFUNDING BONDS, SERIES 20039 (2) APPROXIMATELY $6,900,000 OF HOTEL AND RESTAURANT GROSS RECEIPTS TAX AND TOURISM REVENUE CAPITAL IMPROVEMENT BONDS FOR THE PURPOSE OF FINANCING CERTAIN CAPITAL IMPROVEMENTS IN CONNECTION WITH THE PROPOSED WALTON ARTS CENTER EXPANSION AND RENOVATION, AND (3) APPROXIMATELY $3,500,000 OF HOTEL AND RESTAURANT GROSS RECEIPTS TAX AND TOURISM REVENUE CAPITAL IMPROVEMENT BONDS FOR THE PURPOSE OF FINANCING CERTAIN CAPITAL IMPROVEMENTS IN CONNECTION WITH A PROPOSED REGIONAL PARK; AND PRESCRIBING OTHER MATTERS RELATING THERETO. WHEREAS, the Advertising and Promotion Commission (the "Commission") of the • City of Fayetteville, Arkansas (the "City") was established under the provisions of the Advertising and Promotion Commission Act, Arkansas Code Annotated (2008 Repl.) § §26-75-601 et seq. (as from time to time amended, the "Act"); and WHEREAS, pursuant to the Act and following the recommendation of the Commission, the City has previously issued its City of Fayetteville, Arkansas Hotel and Restaurant Gross Receipts Tax Refunding Bonds, Series 2003, dated July 1 , 2003 (the "Series 2003 Bonds"), for the purpose of refinancing a portion of the costs of constructing the Fayetteville Town Center; and WHEREAS, the Series 2003 Bonds were originally issued in the aggregate principal amount of $6,335,000, of which $ 1 ,885,000 presently remains outstanding; and WHEREAS, the Commission finds that the Walton Arts Center is a cultural arts and entertainment facility and its expansion and renovation will constitute a "tourism project" within the meaning of Arkansas Code Annotated ( 1998 Repl.) § 14- 170-205 which will secure and develop tourism and thereby stimulate and enhance the economic growth and well-being of the City and its people; and WHEREAS, the Commission recommends that the City assist in the completion of the proposed Walton Arts Center expansion and renovation (the "Walton Arts Center Improvements") through the issuance of its capital improvement bonds under the authority of the Act and Arkansas Code Annotated ( 1998 Repl.) § 14- 170-201 et seq. ; and • 4843-6717-3376.4 • WHEREAS, the Commission finds that the City' s proposed regional park will constitute a "public recreation facility" and "city park" within the meaning of Arkansas Code Annotated (2008 Repl.) §26-75-606 and a "tourism project" within the meaning of Arkansas Code Annotated ( 1998 Repl.) § 14- 170-205 which will secure and develop tourism and thereby stimulate and enhance the economic growth and well-being of the City and its people; and WHEREAS, the Commission recommends that the City assist in the financing of the acquisition, construction and equipping of a regional park (the "Park Improvements") through the issuance of its capital improvement bonds under the authority of the Act and Arkansas Code Annotated ( 1998 Repl.) § 14- 170-201 et seq. ; and WHEREAS, in order to accomplish the financing of the Walton Arts Center Improvements and/or the Parks Improvements, it is desirable to restructure the City's existing debt service obligations with respect to the Series 2003 Bonds by refunding such bonds; and NOW, THEREFORE, BE IT RESOLVED by the Advertising and Promotion Commission of the City of Fayetteville, Arkansas that: Section 1 . The issuance and sale of Hotel and Restaurant Gross Receipts Tax Refunding Bonds (the "Refunding Bonds") in the approximate principal amount of $ 1 ,500,000 is hereby recommended to the City in order to provide a portion of the funds needed to redeem the Series 2003 Bonds, to establish a debt service reserve, and to pay the costs of issuing the Refunding Bonds, including the procurement of bond insurance if deemed economically feasible. • Section 2. The issuance and sale of Hotel and Restaurant Gross Receipts Tax and Tourism Revenue Capital Improvement Bonds (the "Walton Arts Center Bonds") in the approximate principal amount of $6,900,000 is hereby recommended to the City in order to provide a portion of the funds needed to finance the Walton Arts Center Improvements, to establish a debt service reserve, and to pay the costs of issuing the Walton Arts Center Bonds, including the procurement of bond insurance if deemed economically feasible. Section 3. The issuance and sale of Hotel and Restaurant Gross Receipts Tax and Tourism Revenue Capital Improvement Bonds (the "Parks Bonds") in the approximate principal amount of $3 ,500,000 is hereby recommended to the City in order to provide a portion of the funds needed to finance the Parks Improvements, to establish a debt service reserve, and to pay the costs of issuing the Parks Bonds, including the procurement of bond insurance if deemed economically feasible. Section 4. The Chairman is hereby authorized and directed to do any and all things necessary to effect the issuance, sale, execution and delivery of the Refunding Bonds, the Walton Arts Center Bonds and the Parks Bonds and the performance of all acts of whatever nature necessary to effect and carry out the authority conferred by this Resolution. Section 5. The provisions of this Resolution are hereby declared to be severable, and if any section, phrase or provision shall for any reason be declared to be illegal or invalid, such declaration shall not affect the validity of the remainder of the sections, phrases or provisions of • this Resolution. 2 4843-6717-3376.4 • Section 6. All resolutions and parts thereof in conflict herewith are hereby repealed to the extent of such conflict. ADOPTED AND APPROVED THIS DAY OF 2013 . Chairman • • 3 4843-6717-3376.4