Bond Bank Financial Statement Audit 2017
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
December 31, 2017 and 2016
THE CITY OF CARMEL LOCAL PUBLIC
IMPROVEMENT BOND BANK
CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1-2
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) 3-7
FINANCIAL STATEMENTS
Statements of Net Position 8
Statements of Revenues, Expenses and Changes in Net Position 9
Statements of Cash Flows 10
Notes to Financial Statements 11-18
OTHER INFORMATION
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 19-20
Independent Auditors' Report
Board of Directors
The City of Carmel Local Public Improvement Bond Bank
Report on the Financial Statements
We have audited the accompanying financial statements of The City of Carmel Local Public
Improvement Bond Bank (Bond Bank), which comprise the statements of net position as of December
31, 2017 and 2016, and the related statements of revenues, expenses and changes in net position and
cash flows for the years then ended, and the related notes to the financial statements.
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.
Auditors’ Responsibility
Our responsibility is to express an opinion 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; the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States; and the Uniform ComplianceGuidelines for
Audit of State and Local Governments by Authorized Public Accountants, issued by the Indiana State
Board of Accounts. Those standards and guidelines require that we plan and perform the audits 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.
1
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the net
position of The City of Carmel Local Public Improvement Bond Bank as of December 31, 2017 and
2016, and the changes in its net position and its cash flows for the years then ended in accordance with
accounting principles generally accepted in the United States of America.
Report on Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis on pages 3 through 7 be presented to supplement the basic
financial statements. Such information, although not a 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 of the 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.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated April 24,
2018, on our consideration of The City of Carmel Local Public Improvement Bond Bank’s internal
control over financial reporting and on 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 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 City of Carmel Local Public Improvement Bond Bank’s internal
control over financial reporting and compliance.
Indianapolis, Indiana
April 24, 2018
2
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
THE CITY OF CARMEL LOCAL PUBLIC IMPROVEMENT BOND BANK
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
DECEMBER 31, 2017 and 2016
As management of The City of Carmel Local Public Improvement Bond Bank (the Bond Bank), we offer readers
of the Bond Bank’s financial statements this narrative overview and analysis of the financial activities of the Bond
Bank for the years ended December 31, 2017 and 2016. All amounts, unless otherwise indicated, are expressed
in thousands of dollars and are approximate.
Indiana Code § 5-1.4 establishes an individual bond bank for each city of second class stature within the State of
Indiana. The Common Council of the City of Carmel, Indiana (the "City") adopted an ordinance declaring the City
as a city of second class stature pursuant to Indiana Code §36-4-1-1.1 on January 4, 2016. The Bond Bank is a
body corporate and politic and an instrumentality of the City, but separate from the City in its corporate capacity
and not an agency of the City, established with the purpose of buying and selling securities of qualified entities.
To accomplish its purpose, the Bond Bank may issue bonds or notes. The Bond Bank also has general powers
which include the power to enter into, make and perform contracts of every lawful kind to accomplish its purpose.
The State pledges to and agrees with the holders of any bonds or notes issued by the Bond Bank that the State
will not limit or alter the rights vested in the Bond Bank to fulfill the terms of any agreement made with the holders
of its bonds or notes, or in any way impair the rights or remedies of the holders of such obligations until the bonds
or notes are fully repaid. The Bond Bank has no taxing power.
Qualified entities are defined in Indiana Code § 5-1.4 to include, but are not limited to, a city, a county, a special
taxing district located wholly within a county or any authority created under Indiana Code § 36 that leases land or
facilities to any of the foregoing qualified entities. The qualified entities are each a qualified entity as defined in
Indiana Code § 5-1.4. The Bond Bank is authorized to purchase securities offered by a qualified entity, with any
such securities required, upon their delivery to the Bond Bank, to be accompanied by all documentation required
by the Board of Directors and by Indiana Code § 5-1.4-8-2(b). Every qualified entity is authorized and
empowered to contract with the Bond Bank with respect to the purchase of its securities, and the contracts will
contain the terms and conditions of the purchase and may be in any form agreed to by the Bond Bank and the
qualified entity.
The Bond Bank is governed by a five-member Board of Directors, each appointed by the Mayor of the City. The
Mayor appoints an Executive Director and the Board of Directors elect a Chair and Vice-Chair. Each of the five
Directors serves for a term of three years, until a successor is appointed and qualified, and is eligible for
reappointment.
FINANCIAL HIGHLIGHTS
During 2017, the Bond Bank issued $81.3 million in new bonds, including bond premiums of $3.3 million.
The Bond Bank paid $3.5 million in principal payments on outstanding debt in 2017.
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OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis are intended to serve as an introduction to the Bond Bank’s basic financial
statements. The Bond Bank is an instrumentality of the City and is maintained as a Proprietary Fund. Proprietary
Funds are used to report any activities for which income fees are charged to external users for goods and
services. In addition, Proprietary Funds must be used in situations where debt is backed solely by fees and
charges. A Proprietary Fund is accounted for in a manner similar to a commercial enterprise on the accrual basis
of accounting.
The Bond Bank’s financial statements include a statement of net position, statement of revenues, expenses and
changes in net position, statement of cash flows, and the notes to the financial statements.
Thestatement of net position presents information on all of the Bond Bank’s assets and liabilities with the
difference reported as net position.
Thestatement of revenues, expenses and changes in net position presents information showing how the Bond
Bank’s net position changed during the year. All changes in net position are reported as soon as the underlying
event giving rise to the change occurs, regardless of the timing of related cash flows.
In contrast, the statement of cash flows is concerned solely with flows of cash and cash equivalents.
Transactions are recorded when cash is received or exchanged, without concern of when the underlying event
causing the transactions occurred.
These financial statements can be found on pages 8 to 10 of this report.
Thenotes to the financial statements provide additional information that is essential to a full understanding of the
data provided in the financial statements. The notes to the financial statements can be found on pages 11
through 18 of this report.
FINANCIAL ANALYSIS
Net position may serve over time as a useful indicator of an entity’s financial position. In the case of the Bond
Bank, assets exceeded liabilities by $329 thousand and $121 thousand for the years ended December 31, 2017
and 2016, respectively.
The City of Carmel Local Public Improvement Bond Bank’s
Condensed Statements of Net Position
(In Thousands of Dollars)
December 31, December 31,
2017 2016
Current assets $ 14,746 $ 22,533
Noncurrent assets 420,948 345,876
Total Assets 435,694 368,409
Current liabilities 14,310 22,269
Long-term liabilities 421,055 346,019
Total Liabilities 435,365 368,288
Net Position $ 329 $ 121
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FINANCIAL ANALYSIS (CONTINUED)
For the year ended December 31, 2017, the Bond Bank incurred the following changes:
The net change in capitalized interest funds is a decline of approximately $7.6 million. Current assets
and current liabilities decreased accordingly.
Loans receivable and bonds payable increased $76 million as a result of $81.3 million in new bond
issuances net of $3.5 million in debt payments.
During 2017 the Bond Bank had two bond issuances supporting funding to the following qualified entities:
Issuance #1 ($7,405,000) – The proceeds from the sale of the bonds were used for the following:
$7,405,000 of City of Carmel Redevelopment Authority Taxable Lease Rental Bonds, Series 2017A
(Midtown South Project) (the “Qualified Obligation”)
Issuance #2 ($73,910,000) – The proceeds from the sale of the bonds were used for the following:
$32,495,000 of City of Carmel Redevelopment Authority Lease Rental Bonds, Series 2017B-1 (LIT
Supported/SBT Back-Up) (“Qualified Obligation 1”)
$24,000,000 of City of Carmel Redevelopment Authority Lease Rental Bonds, Series 2017B-2 (LIT
Supported/SBT Back-Up) (“Qualified Obligation 2”)
$815,000 of City of Carmel Redevelopment Authority Taxable Lease Rental Bonds, Series 2017C-1 (LIT
Supported/SBT Back-Up) (“Qualified Obligation 3”)
$16,600,000 of City of Carmel Redevelopment Authority Taxable Lease Rental Bonds, Series 2017C-2
(TIF Supported/SBT Back-Up) (“Qualified Obligation 4”)
The City of Carmel Local Public Improvement Bond Bank’s
Statements of Revenue, Expenses and Changes in Net Position
(In Thousands of Dollars)
Year Ended Year Ended
December 31, 2017 December 31, 2016
Operating Revenues:
Interest $18,627 $9,806
Fees 49 89
Total Operating Revenues 18,676 9,895
Operating Expenses:
Interest 18,429 9,773
Administrative costs 39 1
Total Operating Expenses 18,468 9,774
Increase in Net Position 208 121
Net Position – Beginning of Year 121
Net Position – End of Year $ 329 $ 121
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FINANCIAL ANALYSIS (CONTINUED)
The Bond Bank had an increase in net position of approximately $208 thousand during the year ending
December 31, 2017. Key elements of this increase are as follows:
Interest income was greater than interest expense by approximately $198 thousand.
An administration fee of $49 thousand was also charged in 2017 for operating expenses which exceeded
administrative costs.
The Bond Bank had an increase in net position of approximately $121 thousand during the year ending
December 31, 2016. Key elements of this increase are as follows:
Interest income was greater than interest expense by approximately $33 thousand.
An administration fee of $89 thousand was also charged in 2016 for operating expenses.
DEBT ADMINISTRATION
Long-term Debt: At the end of the years ending December 31, 2017 and 2016, the Bond Bank had bonds
payable net of premium/discount of approximately $426 million and $350 million, respectively. The bonds
payable are secured by specified revenue sources.
The City of Carmel Local Public Improvement Bond Bank’s Outstanding Debt
(In Thousands of Dollars)
December 31, December 31,
2017 2016
Bonds payable $425,980 $349,525
During 2017, the Bond Bank issued $81.3 million in new bonds, including bond premiums of $3.3 million.
During 2016, the Bond Bank issued $297.9 million in new bonds, including bond premiums of $54.1 million.
Following is a summary of the bonds payable activity for 2017 and 2016 (In Thousands of Dollars).
Balance at Balance at
January 1, 2017 Increases Decreases December 31, 2017
Bonds payable $297,910 $81,315 $3,505 $375,720
Net premium on bonds 51,615 3,335 4,690 50,260
Total $349,525 $84,650 $8,195 $425,980
Balance at Balance at
January 1, 2016 Increases Decreases December 31, 2016
Bonds payable $ - $297,910 $ - $297,910
Net premium on bonds - 54,065 2,450 51,615
Total $ - $351,975 $2,450 $349,525
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DEBT ADMINISTRATION (CONTINUED)
Following is a summary of the new bonds issued for the year ended December 31, 2017.
Issuance #1 ($7,405,000) was used by the Bond Bank to purchase the Qualified Obligation and pay the
costs of issuance of the Bonds, together with certain related expenses. A portion of the purchase price of the
Qualified Obligation will be retained by the Bond Bank and applied to the payment of capitalized interest on
the bonds and costs of issuance and related expenses of the Qualified Obligation.
Issuance #2 ($73,910,000) was used by the Bond Bank to purchase the Qualified Obligations and pay the
costs of issuance of the Bonds, together with certain related expenses. A portion of the purchase price of the
Qualified Obligations will be retained by the Bond Bank and applied to the payment of capitalized interest on
the Bonds and costs of issuance and related expenses of the Qualified Obligations. The City of Carmel
Redevelopment Authority delivered its Qualified Obligations to the Bond Bank simultaneous with the Bond
Bank’s delivery of the Bonds and the 2017B-2 Bonds to the respective purchasers thereof.
More detailed information about the Bond Bank’s debt is presented in Note 5 to the financial statements.
REQUESTS OF INFORMATION
This financial report is designed to provide a general overview of the Bond Bank’s finances. Questions
concerning any of this information should be addressed to The City of Carmel Local Public Improvement Bond
Bank, One Civic Square, Carmel, IN 46032.
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FINANCIAL STATEMENTS
THE CITY OF CARMEL LOCAL PUBLIC IMPROVEMENT BOND BANK
STATEMENTS OF NET POSITION
December 31, 2017 and 2016
20172016
ASSETS
Current Assets:
Cash
$ 107,522 $ 89,096
Interest receivable
4,108,3887,355,207
Investments held by trustees, at fair value
5,935,69411,433,540
Loans receivable, current
4,594,4403,655,000
Total Current Assets
14,746,044 22,532,843
Noncurrent Assets:
Loans receivable, net
420,947,490345,876,326
Total Noncurrent Assets
420,947,490 345,876,326
Total Assets
435,693,534368,409,169
LIABILITIES
Current Liabilities:
Interest payable
5,473,6637,330,593
Funds held for qualified entities
3,911,08811,433,129
Bonds payable - current
4,925,0003,505,000
Total Current Liabilities
14,309,751 22,268,722
Noncurrent Liabilities:
Bonds payable, net
421,054,735346,019,547
Total Noncurrent Liabilities
421,054,735 346,019,547
Total Liabilities
435,364,486 368,288,269
NET POSITION
$ 329,048 $ 120,900
See accompanying notes.
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THE CITY OF CARMEL LOCAL PUBLIC IMPROVEMENT BOND BANK
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
Years Ended December 31, 2017 and 2016
20172016
OPERATING REVENUES
Interest
$ 18,627,390 $ 9,805,934
Administrative fees
48,87989,331
Total Operating Revenues
18,676,2699,895,265
OPERATING EXPENSES
Interest
18,428,9769,773,891
Administrative costs
39,145474
Total Operating Expenses
18,468,121 9,774,365
INCREASE IN NET POSITION
208,148 120,900
NET POSITION
Beginning of Year
120,900 -
End of Year
$ 329,048 $ 120,900
See accompanying notes.
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THE CITY OF CARMEL LOCAL PUBLIC IMPROVEMENT BOND BANK
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2017 and 2016
20172016
OPERATING ACTIVITIES
Fees received
$ 48,879 $ 89,331
Cash payments for administrative and other expenses
(39,145) (474)
Net Cash Provided by Operating Activities
9,734 88,857
INVESTING ACTIVITIES
Maturities of loans to qualified entities
4,000,560 -
Issuance of loans to qualified entities
(80,011,164) (351,974,624)
(Increase) decrease in investments
9,461,000 (11,377,000)
Interest received on loans and investments
21,874,209 650
Net Cash Used by Investing Activities
(44,675,395) (363,350,974)
NON-CAPITAL FINANCING ACTIVITIES
Proceeds from debt issuance
79,960,188 351,974,624
Principal payments to reduce indebtedness
(3,505,000) -
Increase (decrease) in funds held for qualified entities
(7,522,041) 11,433,129
Interest paid on bonds
(20,285,906) -
Net Cash Provided by Non-Capital Financing Activities
48,647,241 363,407,753
NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS
3,981,580 145,636
CASH AND SHORT-TERM INVESTMENTS
Beginning of Year
145,636 -
End of Year
$ 4,127,216 $ 145,636
CASH AND SHORT-TERM INVESTMENTS
Cash
$ 107,522 $ 89,096
Short-term investments
4,019,694 56,540
$ 4,127,216 $ 145,636
RECONCILIATION OF INCREASE IN NET POSITION TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Increase in net position
$ 208,148 $ 120,900
Adjustments to reconcile increase in net position to net cash
provided by operating activities:
Interest income
(18,627,390) (9,805,934)
Interest expense
18,428,976 9,773,891
Net Cash Provided by Operating Activities
$ 9,734 $ 88,857
See accompanying notes.
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THE CITY OF CARMEL LOCAL PUBLIC IMPROVEMENT BOND BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 2017 and 2016
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations:The City of Carmel Local Public Improvement Bond Bank (the Bond Bank) was created
on January 4, 2016 under applicable State of Indiana statutes. The Bond Bank is an instrumentality of the City of
Carmel (the City) but is not a City agency and has no taxing power. It has separate corporate and sovereign
capacity and its board is composed of five directors appointed by the Mayor of the City.
The Bond Bank is authorized to buy and sell securities for the purpose of providing funds to the following:
City of Carmel, Indiana Carmel Redevelopment Authority
Carmel Redevelopment District Carmel Storm Water District
The Bond Bank enables the qualified entities to issue debt, in some circumstances, at a lower cost of borrowing
and on more favorable terms than would be possible by financing on their own. To accomplish its purpose, the
Bond Bank may issue its own bonds. It also has general powers to enter into, make, and perform contracts of
every lawful kind to accomplish its purpose. Bonds and notes are issued by the Bond Bank to provide funds to
loan to the qualified entities and are limited obligations of the Bond Bank. They are secured and payable solely
from principal and interest payments received by the Bond Bank on loans to qualified entities (evidenced by
bonds and notes issued by the qualified entities) that were made from proceeds of the issuance of particular
bonds or notes, and in certain issues, from designated funds and earnings held in trust. Owners of the Bond
Bank bonds and notes have a claim solely against the payments received on the respective loans to qualified
entities made by the Bond Bank with proceeds from the issuance of particular bonds or notes (and other funds
held in trust when applicable) and have no claims or rights against any other assets held by the Bond Bank.
Indiana statutes permit the Bond Bank to invest in securities authorized by its respective fiduciary documents.
These investments include obligations of the U.S. Treasury and U.S. agencies, commercial paper, certificates of
deposit, repurchase agreements, passbook savings, money market deposit accounts, guaranteed investment
contracts and negotiable order of withdrawal accounts. Repurchase agreements are required to be fully
collateralized by interest-bearing obligations as determined by the current market value computed on the day the
agreement is effective.
The Bond Bank was established to develop infrastructure, and assist in the economic development of the City of
Carmel. Accordingly, financial support is provided to certain city initiatives and properties. Such support
indirectly maintains the credit rating of the Bond Bank, and helps it achieve its statutory purpose. Board approved
financial support expenditures represent support of historical city properties and economic development
initiatives.
Basis of Presentation: The Bond Bank is accounted for as a Proprietary Fund. The financial statements of the
Bond Bank have been prepared on the accrual basis of accounting and using the economic resources
measurement focus. Accordingly, the Bond Bank recognizes revenue in the period earned and expenses in the
period incurred. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body
for establishing accounting and financial reporting principles. The financial statements reflect the activity of the
Bond Bank from its inception on January 4, 2016 through December 31, 2017.
Estimates: Management uses estimates and assumptions in preparing financial statements in accordance with
accounting principles generally accepted in the United States of America. Those estimates and assumptions
affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the estimates that were used.
Cash and Equivalents include deposits in financial institutions and short-term investments with original
maturities of three months or less. Short-term investments held in trust accounts are included as investments.
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investments:All investments are reflected at fair value in accordance with GASB pronouncements, which is the
price that would be received to sell an asset or transfer a liability in an orderly transaction. Changes in the fair
value of investments are included in the statement of revenues, expenses and changes in net position. See
Note 3.
Loans Receivable: Loans to qualified entities are recorded at cost and adjusted for amortization of
discounts/premiums on a basis approximating a constant return rate over the remaining life of the loan. Because
there are a small number of significant loans outstanding, management estimates the allowance for loan loss by
identifying specific troubled loans. The determination of the adequacy of the allowance for loan losses is based
on estimates that are particularly susceptible to significant changes in the economic environment and market
conditions. Management does not believe an allowance is necessary as of December 31, 2017 and 2016.
Original Issue Premiums and Discounts:Original issue premiums and discounts on bonds are amortized
using a method that approximates the effective interest method over the life of the bonds to which they relate.
Bond Issuance Costs: Bond issuance costs are passed through to the qualified entities.
Income Taxes: The Bond Bank is exempt from federal and state income taxes.
Reclassifications: Certain amounts in the 2016 financial statements have been reclassified to conform with the
presentation of the 2017 financial statements.
Subsequent Events: The Bond Bank has evaluated the financial statements for subsequent events occurring
through April 24, 2018, the date the financial statements were available to be issued.
NOTE 2 - DEPOSITS AND INVESTMENTS
Proceeds of certain bond issues are invested with various banks in their capacity as trustees under trust
agreements executed concurrently with the indentures and are pledged to the repayment of certain bonds
payable. The Bond Bank Act permits funds to be invested as provided in trust indentures executed by the Bond
Bank and based on resolutions of its Board of Directors.
The Bond Bank’s deposits and investments at December 31, 2017, are summarized as follows:
Cost Fair Value
Cash $ 107,522 $ 107,522
Investments:
Money market funds 4,019,694 4,019,694
Certificates of deposit 1,916,000 1,916,000
Total Deposits and Investments $6,043,216 $6,043,216
The Bond Bank’s deposits and investments at December 31, 2016, are summarized as follows:
Cost Fair Value
Cash $ 89,096 $ 89,096
Investments:
Money market funds 56,540 56,540
Certificates of deposit 11,377,000 11,377,000
Total Deposits and Investments $11,522,636 $11,522,636
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NOTE 2 - DEPOSITS AND INVESTMENTS (CONTINUED)
Deposits with Financial Institutions
Custodial risk is the risk that in the event of bank failure, the Bond Bank’s deposits may not be returned to it.
Cash deposits up to $250,000 per financial institution are insured by Federal Deposit Insurance Corporation
(FDIC). Balances that exceed $250,000 are covered by the Public Deposit Insurance Fund.
Investments
Investments are restricted for repayment of bonds payable issued under the respective programs (see Note 5).
Investments are also restricted to authorized investments per the applicable trust indentures.
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment.
As of December 31, 2017, the Bond Bank had the following investments and maturities:
Investment Maturities (in Years)
More
Than
Investment Type Fair Value Less Than 1 1-5 6-10 10
Money market funds $4,019,694 $4,019,694
Certificates of deposit 1,916,000 958,000 $958,000
$5,935,694 $4,977,694 $958,000
Custodial Credit Risk of Investments
Custodial credit risk is the risk that the Bond Bank will not be able to recover the value of its deposits, investments
or collateral securities that are in the possession of an outside party if the counterparty fails. Investment
securities are exposed to risk if the securities are uninsured, are not registered in the name of the Bond Bank,
and are held by either the counterparty or the counterparty’s trust department or agent but not in the Bond Bank’s
name. The Bond Bank has no custodial risk on investments.
Credit Risk Disclosure
The following table provides information on the credit ratings associated with the Bond Bank’s investments at
December 31, 2017:
Credit Ratings S&P Fitch Moody’s Fair Value
Money market funds AAAm AAAmf Aaa-mf $4,019,694
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NOTE 2 - DEPOSITS AND INVESTMENTS (CONTINUED)
Concentration of Credit Risk
There are no limits on the amount that may be invested in any one issuer. The following shows an investment in
an issuer that represents 5% or more of the total investments at December 31, 2017:
Huntington Conservative Deposit Account 68%
Lake City Bank Public Funds CD 24%
First Financial Bank Public Funds CD 8%
NOTE 3 - FAIR VALUE MEASUREMENTS
The Bond Bank has categorized its assets and liabilities that are measured at fair value into a three-level fair
value hierarchy. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). The asset or liability’s fair value measurement
level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value
measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use
of unobservable inputs.
The three levels of the fair value hierarchy are described as follows:
Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in
active markets that the Bond Bank has the ability to access.
Level 2 – Inputs to the valuation methodology may include: quoted prices for similar assets or liabilities in
active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than
quoted prices that are observable for the asset or liability; and/or inputs that are derived principally from or
corroborated by observable market data by correlation or other means. If the asset or liability has a specified
(contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
In situations where there is little or no market activity for the asset or liability, the Bond Bank makes estimates
and assumptions related to the pricing of the asset or liability including assumptions regarding risk. Also
included in Level 3 are assets measured using a practical expedient that can never be redeemed at the
practical expedient.
Following is a description of the valuation methodologies used by the Bond Bank for assets that are measured at
fair value on a recurring basis. There have been no changes in the methodologies used at December 31, 2017
and 2016.
Money Market Fund Shares: Valued at the daily closing price as reported by the funds. These funds are
required to publish their daily net asset value (NAV) and to transact at that price. These funds are deemed to
be actively traded.
Certificates of Deposit:Determined by discounting the related cash flows on current yields of similar
investments with comparable durations considering the credit-worthiness of the issuer.
For those assets and liabilities measured at fair value, management determines the fair value measurement
policies and procedures in consultation with the Bond Bank’s Board of Directors. Those policies and procedures
are reassessed at least annually to determine if the current valuation techniques are still appropriate. At that
time, the unobservable inputs used in the fair value measurements are evaluated and adjusted, as necessary,
based on current market conditions and other third-party information.
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NOTE 3 - FAIR VALUE MEASUREMENTS (CONTINUED)
The preceding methods may produce a fair value calculation that may not be indicative of net realizable value or
reflective of future fair values. Furthermore, although the Bond Bank’s management believes its valuation
methods are appropriate and consistent with other market participants, the use of different methodologies or
assumptions to determine the fair value of certain assets could result in a different fair value measurement at the
reporting date.
Following is a summary, within each level of the fair value hierarchy, of the Bond Bank’s assets that are
measured at fair value on a recurring basis as of December 31, 2017 and 2016:
2017 Level 1 Level 2 Total
Assets
Investments:
Money market fund shares $4,019,694 $ 4,019,694
Certificates of deposit $1,916,000 1,916,000
Total Assets at Fair Value $4,019,694 $1,916,000 $ 5,935,694
2016
Assets
Investments:
Money market fund shares $ 56,540 $ 56,540
Certificates of deposit $11,377,000 11,377,000
Total Assets at Fair Value $ 56,540 $11,377,000 $11,433,540
At December 31, 2017 and 2016, the Bond Bank had no other assets and no liabilities that are measured at fair
value on a recurring basis.
NOTE 4 - LOANS RECEIVABLE
All purchases of qualified obligations are authorized by the Board of Directors of the Bond Bank. Prior to being
presented to the Board of Directors, an evaluation of each purchase is made by the Bond Bank’s management
and independent consultants. Repayment of these obligations by the qualified entities is funded by many
sources, including property tax revenues and user fees.
The Bond Bank's loans receivable from qualified entities at December 31, 2017 and 2016, are as follows:
2017 2016
Carmel Redevelopment District, Carmel Redevelopment Authority,
and Carmel Storm Water District, Multipurpose Bonds, Series 2016,
maturing January 15, 2017 to 2036, with interest ranging from
2% to 5%. $211,504,440 $214,455,000
Carmel Redevelopment District and Carmel Redevelopment
Authority, Taxable Special Program Bonds, 2016 (City
Center II and Midtown Phase 1A), maturing January 15, 2020
to 2041, with interest ranging from 1.576% to 3.762%. 29,720,000 29,720,000
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NOTE 4 - LOANS RECEIVABLE (CONTINUED)
2017 2016
City of Carmel, Program Bonds, Series 2016 (Waterworks Revenue
Bonds), maturing May 1, 2017 to 2028, with interest ranging from
4.125% to 5%. $ 53,115,000 $ 54,165,000
Carmel Redevelopment Authority Taxable Special Program Bonds,
Series 2017 (Midtown South Project) maturing July 15, 2020 to
2042, with interest ranging from 1.973% to 3.864%. 7,405,000
Carmel Redevelopment Authority Special and Taxable Special
Program Bonds, Series 2017 (LIT and TIF Supported) maturing
July 15, 2018 to 2037, with interest ranging from 2.006% to 5.000%. 73,910,000
375,654,440 298,340,000
Plus: Unamortized premium 49,887,490 51,191,326
425,541,930 349,531,326
Less: Current portion of loans receivable (4,594,440) (3,655,000)
Long-term Portion of Loans Receivable, net $420,947,490 $345,876,326
Loans receivable from qualified entities, registered to the Bond Bank, are either serial, term, or serial and term
maturities.
NOTE 5 - BONDS AND NOTES PAYABLE
The Bond Bank's bonds payable at December 31, 2017 and 2016, are summarized as follows:
2017 2016
Multipurpose Bonds, Series 2016, maturing January 15, 2017 to
2036, with interest ranging from 2% to 5%. $211,850,000 $214,455,000
Taxable Special Program Bonds, Series 2016, maturing January 15,
2020 to 2041, with interest ranging from 1.576% to 3.762%. 29,720,000 29,720,000
Special Program Bonds, Series 2016, maturing June 1, 2017 to 2028,
with interest ranging from 3% to 5%. 52,835,000 53,735,000
Taxable Special Program Bonds, Series 2017, maturing July 15,
2020 to 2042, with interest ranging from 1.973% to 3.864%. 7,405,000
Special and Taxable Special Program Bonds, Series 2017, maturing
July 15, 2020 to 2042, with interest ranging from 1.973% to 3.864%. 73,910,000
375,720,000 297,910,000
Plus: Unamortized premium 50,259,735 51,614,547
425,979,735 349,524,547
Less: Current portion of bonds payable (4,925,000) (3,505,000)
Long-term Portion of Bonds Payable, net $421,054,735 $346,019,547
All of the bond issues listed above are either serial or serial and term maturities.
The faith, credit and taxing power of the City of Carmel or any political subdivision thereof are not pledged to the
payment of principal and interest on these obligations.
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NOTE 5 - BONDS AND NOTES PAYABLE (CONTINUED)
Scheduled principal payments due on bonds payable outstanding at December 31, 2017, are summarized as
follows:
Payable In Principal Interest Debt Service
2018 $ 4,925,000 $ 15,299,211 $ 20,224,211
2019 7,910,000 16,187,577 24,097,577
2020 10,455,000 15,800,357 26,255,357
2021 11,595,000 15,366,148 26,961,148
2022 12,570,000 14,965,549 27,535,549
2023-2027 89,815,000 64,677,479 154,492,479
2028-2032 118,100,000 41,005,700 159,105,700
2033-2037 111,805,000 13,004,675 124,809,675
2038-2042 8,545,000 701,551 9,246,551
375,720,000 197,008,247 572,728,247
Plus: Unamortized premium on bonds 50,259,735 50,259,735
$425,979,735 $197,008,247 $622,987,982
Changes in long-term liabilities were as follows:
Balance at Balance at
January 1, 2017 Increases Decreases December 31, 2017
Bonds payable $297,910,000 $ 81,315,000 $3,505,000 $375,720,000
Net premium on bonds 51,614,547 3,334,569 4,689,381 50,259,735
Total $349,524,547 $ 84,649,569 $8,194,381 $425,979,735
Balance at Balance at
January 1, 2016 Increases Decreases December 31, 2016
Bonds payable $ - $297,910,000 $ - $297,910,000
Net premium on bonds - 54,064,624 2,450,077 51,614,547
Total $ - $351,974,624 $2,450,077 $349,524,547
Bond Series 2017 – Issuance #1 ($7,405,000) was used by the Bond Bank to purchase the Qualified Obligation
and pay the costs of issuance of the Bonds, together with certain related expenses. A portion of the purchase
price of the Qualified Obligation will be retained by the Bond Bank and applied to the payment of capitalized
interest on the bonds and costs of issuance and related expenses of the Qualified Obligation.
Bond Series 2017 – Issuance #2 ($49,910,000) was used by the Bond Bank to purchase the Qualified
Obligations and pay the costs of issuance of the Bonds, together with certain related expenses. A portion of the
purchase price of the Qualified Obligations will be retained by the Bond Bank and applied to the payment of
capitalized interest on the Bonds and costs of issuance and related expenses of the Qualified Obligations. The
City of Carmel Redevelopment Authority delivered its Qualified Obligations to the Bond Bank simultaneous with
the Bond Bank’s delivery of the Bonds and the 2017B-2 Bonds to the respective purchasers thereof.
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NOTE 5 - BONDS AND NOTES PAYABLE (CONTINUED)
Bond Series 2016 – Issuance #1 ($214,455,000) was used to acquire qualified obligations of the City of Carmel in
the amount of $18,362,000, acquire qualified obligations of City of Carmel Redevelopment Authority in the
amount of $165,373,000, and acquire qualified obligations of the City of Carmel Storm Water District in the
amount of $30,720,000. A portion of the purchase price of the Qualified Obligations was applied to payment of
capitalized interest on the bonds, together with the cost of issuance of the Qualified Obligations and certain
related expenses.
Bond Series 2016 – Issuance #2 ($29,720,000) was used to acquire qualified obligations of the City of Carmel
Redevelopment District in the amount of $18,830,000 for City Center II Projects and acquire qualified obligations
of the City of Carmel Redevelopment Authority in the amount of $10,890,000 for Midtown Phase 1A Projects. A
portion of the purchase price of the Qualified Obligations was applied to payment of capitalized interest on the
bonds, together with the cost of issuance of the Qualified Obligations and certain related expenses.
Bond Series 2016 – Issuance #3 ($53,735,000) was used to purchase the City of Carmel, Indiana, Junior
Waterworks Revenue Bonds of 2008, fund the Bond Bank Reserve Requirement of the Bond Bank Reserve
Account, and pay the costs of issuance of the Series 2016 Bonds, together with the related expenses.
NOTE 6 - CONCENTRATION OF CREDIT RISK
The Bond Bank has loans to qualified entities, all of whom are located in Carmel, Indiana.
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OTHER INFORMATION
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 Directors
The City of Carmel Local Public Improvement Bond Bank
We have audited, in accordance with the auditing standards generally accepted in the United States of
America, the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States; and the Uniform ComplianceGuidelines for
Audit of State and Local Governments by Authorized Public Accountants, issued by the Indiana State
Board of Accounts. the financial statements of The City of Carmel Local Public Improvement Bond
Bank (the Bond Bank), which comprise the statement of net position as of December 31, 2017, and the
related statements of revenues, expenses and changes in net position and cash flows for the year then
ended, and the related notes to the financial statements, and have issued our report thereon dated
April 24, 2018.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Bond Bank’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 Bond Bank’s internal
control. Accordingly, we do not express an opinion on the effectiveness of the Bond Bank’s internal
control.
Adeficiency 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.
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Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Bond Bank’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.
Purpose of this Report
The purpose of this report is solelyto describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
entity’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 entity’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
Indianapolis, Indiana
April 24, 2018
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