ML18023A275

Knox County-2016 - TN4929--Knox County Budget 2016

ML18023A275
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Site:	Clinch River
Issue date:	06/30/2016
From:	Knox County, Tennessee
To:	Office of New Reactors
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Download: ML18023A275 (327)

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KNOX COUNTY, TENNESSEE Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2016 Table of Contents INTRODUCTORY i-x Letter of Transmittal SECTION xi GFOA Certificate of Achievement xii Roster of Publicly Elected Officials/Organization Chart FINANCIAL xiii-xv Independent Auditor's Report SECTION xvi-xxx Management's Discussion and Analysis (Unaudited)

Basic Financial Statements:

Government-wide Financial Statements:

1 Statement of Net Position 2 Statement of Activities Fund Financial Statements 3 Balance Sheet - Governmental Funds 4 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 5 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 6 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 7 Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) General Fund 8 Statement of Net Position - Proprietary Funds 9 Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds 10 Statement of Cash Flows - Proprietary Funds 11 Statement of Fiduciary Net Position - Fiduciary Funds 12 Statement of Changes in Fiduciary Net Position 13-123 Notes to the Financial Statements REQUIRED SUPPLEMENTAL Required Supplementary Information:

INFORMATION SECTION 124 Schedule of Changes in County's Net Position Liability and Related Ratios 125 Schedule of County's and Board's Employer Pension Contributions 126 Schedule of Investment Returns 127 Schedule of Changes in Knox County Executive and Official's Net Pension Liability (Asset) and Related Ratios Based on Participation in the Knox County Executives and Official's Public Pension Plan of TCRS 128 Schedule of Knox County Executive and Official's Employer Contributions Based on Participation in the Public Employee Pension Plan of TCRS Knox County Executive and Official's 129 Schedule of Knox County Schools' Proportionate Share of the Net Pension Liability (Asset) Teacher Legacy Pension Plan of TCRS 130 Schedule of Knox County Schools' Employer Contributions Teacher Legacy Pension Plan of TCRS

KNOX COUNTY, TENNESSEE Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2016 Table of Contents (Continued)

REQUIRED SUPPLEMENTAL 131 Schedule of Knox County Schools' Proportionate Share of the Net Pension INFORMATION SECTION Liability (Asset) Teacher Retirement Plan of TCRS (Continued) 132 Schedule of Knox County Schools' Employer Contributions Teacher Retirement Plan of TCRS 133 Schedule of Funding Progress OPEB - Employee Disability Plan:

(Last Three Fiscal Years) 133 Schedule of Employer OPEB Contributions (Last Three Fiscal Years)

SUPPLEMENTAL SECTION Combining and Individual Fund Statements and Schedules:

134 Comparative Balance Sheets - General Fund 135 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - General Fund 136 Combining Balance Sheets - Constitutional Officers' Special Revenue Fund 137 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances - Constitutional Officers' Special Revenue Fund 138 Comparative Balance Sheets - Public Improvement Capital Projects Fund (Major) 139 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - Public Improvement Capital Projects Fund (Major) 140-142 Schedule of Construction Project Expenditures - Budget and Actual - Public Improvement Capital Projects Fund (Major) 143 Comparative Balance Sheets - Debt Service Fund (Major) 144 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - Debt Service Fund (Major) 145 Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) -

Debt Service Fund (Major) 146 Combining Balance Sheets - Nonmajor Governmental Funds 147 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds 148 Combining Balance Sheets - Nonmajor Special Revenue Funds 149 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Special Revenue Funds 150 Comparative Balance Sheets - Federal, State and Other Grants Fund 151 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - Federal, State and Other Grants Fund 152 Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) -

Federal, State and Other Grants Fund 153 Comparative Balance Sheets - Governmental Library Fund

KNOX COUNTY, TENNESSEE Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2016 Table of Contents (Continued)

SUPPLEMENTAL SECTION 154 Comparative Statements of Revenues, Expenditures and (Continued) Changes in Fund Balances - Governmental Library Fund 155 Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) -

Governmental Library Fund 156 Comparative Balance Sheets - Public Library Fund 157 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - Public Library Fund 158 Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) -

Public Library Fund 159 Comparative Balance Sheets - Solid Waste Fund 160 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - Solid Waste Fund 161 Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) -

Solid Waste Fund 162 Comparative Balance Sheets - Hotel/Motel Tax Fund 163 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - Hotel/Motel Tax Fund 164 Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) -

Hotel/Motel Tax Fund 165 Comparative Balance Sheets - Drug Control Fund 166 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - Drug Control Fund 167 Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) -

Drug Control Fund 168 Comparative Balance Sheets - Engineering & Public Works Fund 169 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - Engineering & Public Works Fund 170 Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) -

Engineering & Public Works Fund 171 Comparative Balance Sheets - ADA Construction Capital Projects Fund (Nonmajor) 172 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - ADA Construction Capital Projects Fund (Nonmajor) 173 Comparative Statements of Net Position - Three Ridges Golf Course Fund 174 Comparative Statements of Revenues, Expenses and Changes in Net Position -

Three Ridges Golf Course Fund 175 Comparative Statements of Cash Flows - Three Ridges Golf Course Fund

KNOX COUNTY, TENNESSEE Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2016 Table of Contents (Continued)

SUPPLEMENTAL SECTION 176 Combining Statement of Net Position - Internal Service Funds (Continued) 177 Combining Statement of Revenues, Expenses and Changes in Net Position - Internal Service Funds 178 Combining Statement of Cash Flows - Internal Service Funds 179 Comparative Statements of Net Position - Vehicle Service Center Fund 180 Comparative Statements of Revenues, Expenses and Changes in Net Position -

Vehicle Service Center Fund 181 Comparative Statements of Net Position - Mailroom Fund 182 Comparative Statements of Revenues, Expenses and Changes in Net Position -

Mailroom Fund 183 Comparative Statements of Net Position - Employee Benefits Fund 184 Comparative Statements of Revenues, Expenses and Changes in Net Position -

Employee Benefits Fund 185 Comparative Statements of Net Position - Self Insurance Fund 186 Comparative Statements of Revenues, Expenses and Changes in Net Position -

Self Insurance Fund 187 Comparative Statements of Net Position - Building Operations Fund 188 Comparative Statements of Revenues, Expenses and Changes in Net Position -

Building Operations Fund 189 Comparative Statements of Net Position - Technical Support Service Fund 190 Comparative Statements of Revenues, Expenses and Changes in Net Position -

Technical Support Service Fund 191 Comparative Statements of Net Position - Capital Leasing Fund 192 Comparative Statements of Revenues, Expenses and Changes in Net Position -

Capital Leasing Fund 193 Comparative Statements of Net Position - Self Insurance Healthcare Fund 194 Comparative Statements of Revenues, Expenses and Changes in Net Position -

Self Insurance Healthcare Fund 195 Combining Statement of Fiduciary Net Position - Pension and Other Employee Benefit Trust Funds 196 Combining Statement of Changes in Fiduciary Net Position -

Pension and Other Employee Benefit Trust Funds 197 Comparative Statements of Fiduciary Net Position - Pension Trust Fund -

Closed Defined Benefit Plan 198 Comparative Statements of Changes in Fiduciary Net Position - Pension Trust Fund - Closed Defined Benefit Plan 199 Comparative Statements of Fiduciary Net Position - Pension Trust Fund -

Asset Accumulation Plan 200 Comparative Statements of Changes in Fiduciary Net Position - Pension Trust Fund - Asset Accumulation Plan 201 Comparative Statements of Fiduciary Net Position - Pension Trust Fund -

Voluntary 457 Plan

KNOX COUNTY, TENNESSEE Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2016 Table of Contents (Continued)

SUPPLEMENTAL SECTION 202 Comparative Statements of Changes in Fiduciary Net Position - Pension (Continued) Trust Fund - Voluntary 457 Plan 203 Comparative Statements of Fiduciary Net Position - Pension Trust Fund -

Medical Expense Retirement Plan 204 Comparative Statements of Changes in Fiduciary Net Position - Pension Trust Fund - Medical Expense Retirement Plan 205 Comparative Statements of Fiduciary Net Position - Pension Trust Fund -

Uniformed Officers Pension Plan 206 Comparative Statements of Changes in Fiduciary Net Position - Pension Trust Fund - Uniformed Officers Pension Plan 207 Comparative Statements of Fiduciary Net Position - Pension Trust Fund -

Sheriff's Total Accumulation Retirement Plan 208 Comparative Statements of Changes in Fiduciary Net Position - Pension Trust Fund -

Sheriff's Total Accumulation Retirement Plan 209 Comparative Statements of Fiduciary Net Position - Other Employee Benefit Trust Fund -

Employee Disability Plan 210 Comparative Statements of Changes in Fiduciary Net Position - Other Employee Benefit Employee Disability Plan 211 Combining Statement of Fiduciary Assets and Liabilities - Agency Funds 212 Combining Statement of Changes in Fiduciary Assets and Liabilities -

Agency Funds 213 Combined Analysis of Fee and Commission Accounts - Trustee, Clerks, and Register 214 Combining Statement of Net Position - Nonmajor Component Units 215 Combining Statement of Activities - Nonmajor Component Units 216-217 Schedule of Debt Service Requirements - Primary Government and Board 218-219 Schedule of Debt Service Requirements - General Bonded Debt - Primary Government 220-221 Schedule of Debt Service Requirements - General Bonded Debt -

Discretely Presented Component Unit - Knox County Board of Education 222 Schedule of Salaries and Bonds of Principal Elected Officials COMPONENT UNIT - Discretely Presented Governmental Component Unit - Knox County BOARD OF EDUCATION Board of Education:

SECTION 223 Statement of Net Position 224 Statement of Activities 225 Balance Sheet - Governmental Funds 226 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 227 Statement of Revenues, Expenditures and Changes in Fund Balances -

Governmental Funds 228 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 229 Comparative Balance Sheets - General Fund - General Purpose School 230 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - General Fund - General Purpose School

KNOX COUNTY, TENNESSEE Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2016 Table of Contents (Continued)

COMPONENT UNIT - 231 Comparative Schedules of Revenues, Expenditures and Changes BOARD OF EDUCATION in Fund Balances - Budget and Actual (GAAP Basis) - General SECTION Fund - General Purpose School (Continued) 232 Comparative Balance Sheets - School Construction Capital Projects Fund 233 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - School Construction Capital Projects Fund 234 Schedule of Construction Project Expenditures - Budget and Actual -

School Construction Capital Projects Fund 235 Combining Balance Sheet - Nonmajor Governmental Funds 236 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds 237 Comparative Balance Sheets - School Federal Projects Fund 238 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - School Federal Projects Fund 239 Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) - School Federal Projects Fund 240 Comparative Balance Sheets - School General Projects Fund 241 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - School General Projects Fund 242 Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) - School General Projects Fund 243 Comparative Balance Sheets - Central Cafeteria Fund 244 Comparative Statements of Revenues, Expenditures and Changes in Fund Balances - Central Cafeteria Fund 245 Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis) - Central Cafeteria Fund 246 Statement of Fiduciary Net Position - Fiduciary Funds 247 Comparative Statements of Fiduciary Net Position - Pension Trust Fund -

Teacher's Plan (Defined Benefit Plan) 248 Comparative Statements of Changes in Fiduciary Net Position - Pension Trust Fund - Teacher's Plan (Defined Benefit Plan) 249 Comparative Statements of Changes in Fiduciary Assets and Liabilities -

Agency Fund - Internal School Funds

KNOX COUNTY, TENNESSEE Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2016 Table of Contents (Continued)

STATISTICAL SECTION Financial Trends Information:

(UNAUDITED) 250 Net Position by Component 251-253 Changes in Net Position 254 Primary Government Activities Tax Revenues by Source 255 Component Units Activities Tax Revenues by Source 256 Reporting Unit Activities Tax Revenues by Source 257 Fund Balances of Governmental Funds 258 Changes in Fund Balances of Governmental Funds Revenue Capacity Information:

259 Assessed Value and Estimated Actual Value of Taxable Property 260 Property Tax Rates 261 Principal Property Taxpayers 262 Property Tax Levies and Collections Debt Capacity Information:

263 Ratios of Outstanding Debt by Type 264 Ratios of General Bonded Debt Outstanding 265 Direct and Overlapping Governmental Activities Debt Demographic and Economic Information:

266 Demographic and Economic Statistics 267 Principal Employers Operating Information:

268 Full-time Equivalent County Government Employees by Function 269 Operating Indicators by Function 270 Capital Asset Statistics by Function

Introductory Section

Board of County Commissioners and the Citizens of Knox County, Tennessee Page ii The financial reporting entity (the government) includes all the funds of the primary government (i.e.,

the County) as well as its component units. Component units are legally separate entities for which the primary government is financially accountable. Component units are discretely presented in separate columns in the government-wide financial statements to emphasize they are legally separate from the primary government and to differentiate their financial position, results of operations, and cash flows from those of the primary government. The Knox County Board of Education (the Board), Knox County Emergency Communications District (the District), The Development Corporation of Knox County (the Corporation), and the Knox County Railroad Authority (KCRA) are reported as discretely presented component units. The County and its component units provide a full range of services including, but not limited to, the construction and maintenance of highways, streets and infrastructure, public health and welfare, police protection, emergency telephone services, elementary and secondary education, community services, sanitation services, and recreational and cultural events. Because of the close relationship between the County and the Board and the fact that the Board does not issue financial statements separate from those of the County, several of the supplemental schedules and other financial information have been consolidated to more properly reflect the joint activities of the County and the Board.

GOVERNMENTAL STRUCTURE The County has operated under a County Mayor/County Commission form of government since September 1, 1980, and has been under a Home Rule Charter (Charter) since September 1, 1990.

Policymaking and legislative authority are vested in the County Mayor (the executive branch of the County) and the County Commission (the legislative branch of the County). The County Commission is responsible for, among other things, passing ordinances, adopting the budget and appointing committees. The County Mayor, elected at-large for a four-year term, is responsible for carrying out the policies and ordinances of the County Commission, overseeing the day-to-day operations of the government and appointing the heads of many of the County's departments.

OFFICE OF THE COUNTY MAYOR Knox County Mayor Tim Burchett took office on Sept. 1, 2010, shortly after the start of the 2010-2011 fiscal year. Since taking office, Mayor Burchett continues to focus on providing high-quality, efficient service to our citizens at a savings to taxpayers. Some of the achievements of Mayor Burchetts tenure to date include:

• General Fund balance has increased by over $20 million from the beginning of FY 2011 to the FY 2016 end of year.

• Restored 177 hours0.00205 days <br />0.0492 hours <br />2.926587e-4 weeks <br />6.73485e-5 months <br /> of operation per week within our public library system with no additional impact on the budget.

• Increased purchasing transparency by implementing first-in-the-state online, searchable databases for E-commerce card and purchase order transactions.

• Ensured more than $2 million in savings over four years by utilizing public-private partnerships to provide pediatric care, as well as translation services for Knox County Health Department clients.

Board of County Commissioners and the Citizens of Knox County, Tennessee Page iii

• Implemented mileage reimbursement at the standard federal rate in lieu of monthly travel allowances, which saved approximately $78,000 annually.

• Sold unnecessary county vehicles, resulting in thousands of dollars in cost-avoidance savings through reduced maintenance, fuel and liability costs.

• Reduced Knox Countys debt obligations by over $76 million since taking office.

• Identified a funding mechanism to use one-time dollars to pay for the construction of a new Carter Elementary School, therefore eliminating a potential $8 million in traditional bond interest payments. The school opened on time for the 2013-2014 school year.

• Sold the Solway greenwaste facility property for $2 million; prior to the sale, the upkeep on the property cost taxpayers an average of $245,000 annually.

• Engaged a committee of private sector experts to help advise Mayor Burchett on how to address the growing cost of employee health benefits in an attempt to bring those benefits more in-line with the private market; many of the committees suggestions were implemented and the changes resulted in projected savings of $1.7 million.

• Supported the Halls and Northeast Knox greenway projects, as well as the Knox-Blount greenway project.

• Constructed and opened the Concord Pet Safe Dog Park.

• Restored the stream bank along Beaver Creek at Halls Community Park.

• Made parking improvements at the Knox County Sports Park.

• Saved the building that formerly was used for the Oakwood Elementary School. The condition of the building had deteriorated, and its future was uncertain. The County worked with developers and others in the private sector to make needed upgrades and repairs to the facility, which is now being used for senior housing. This provides additional services to the community and places the property back on the County tax roll.

• Saved Historic Knoxville High School, which is now being redeveloped for private use.

• Sold State Street properties, which are now under development as a mixed-use residential project known as Marble Alley.

• Opened the new Karns Senior Center, bringing the total number of Knox County senior centers to six.

• Helped launch a youth dental program in partnership with the Great Schools Partnership, Knox County Schools and the Elgin Childrens Foundation.

• Opened a larger, safer and more efficient Knox County Solid Waste convenience center in the Karns community.

• Opened the new Clayton Park in the Halls Community.

• Broke ground on the new Plumb Creek Park.

• Broke ground on two new Gibbs and Hardin Valley middle schools.

• Opened or expanded two disc golf courses at Powell Station Park and Tommy Schumpert Park.

• Completed 5.3MW solar project that will save taxpayers approximately $14 million over the next 30 years.

• Supported Zoo Knoxvilles master plan with a 5-year, $5 million capital commitment.

• Added 70 acres to I.C. King Park, which will lead to improved amenities and a new, safer entrance to the park.

• Led the Midway Business Park rezoning process through a series of public input sessions and public meetings.

Board of County Commissioners and the Citizens of Knox County, Tennessee Page iv Legislative Initiatives Impact of State Funding: Knox County, like the other 94 county governments in Tennessee, receives significant support from state-shared revenues -- mainly in the form of education and highway dollars. Because of this dependence, the legislative activities of the Tennessee General Assembly are carefully monitored. Thanks to the continuing leadership of our Governor, the State again passed a responsible, balanced budget. We at the local level are thankful for the fiscal responsibility demonstrated by the state budget. A healthy state budget means more stable and predictable revenues for all cities and counties.

Capital Improvement Initiatives As evidence of the Countys commitment to build the facilities necessary to serve the citizens of Knox County and promote economic development within the County and region, the County Commission adopted the Knox County Capital Improvement Plan. At the recommendation of the County Mayor, the five-year capital plan represents a road map of anticipated major capital projects. It does not represent appropriations and is subject to annual revisions or modifications. These individual projects will be primarily funded through general obligation bonded debt.

During the year, the County and the Board expended significant resources in the following major construction/renovation projects in accordance with the Countys Capital Plan:

General Construction/Renovation: Road Construction/Improvements:

General Project Management Parkside Drive Extension Dutchtown Convenience Center General Road Improvements City County Improvements/Developments Ebenezer/Gleason Intersection Various Maintenance Improvements Hardin Valley/Greenland School Construction/Renovation:

Physical Plant Upgrades Energy Management Project Security Camera System HVAC Upgrades Mooreland Heights Gibbs Middle Hardin Valley Middle

Board of County Commissioners and the Citizens of Knox County, Tennessee Page v The following summarizes the capital improvement plan net of estimated allocations for project schedule variances (amounts expressed in thousands):

Project Description FY 16-17 FY 17-18 FY 18-19 FY 19-20 FY 20-21 TOTAL Libraries $ 152 $ 0 $ 0 $ 0 $ 0 $ 152 Countywide Projects 18,519 2,200 300 300 300 21,619 Parks & Recreation 350 100 200 200 200 1,050 Engineering & Public Works 10,545 12,805 12,280 10,240 11,840 57,710 Building Improvements & Other 1,104 900 1,000 1,000 1,000 5,004 Schools 63,750 10,000 12,400 7,400 7,400 100,950 Total - Approved Projects $ 94,420 $ 26,005 $ 26,180 $ 19,140 $ 20,740 $ 186,485 Five Year Capital Plan (In Thousands of Dollars)

Public Library Parks & Recreation 70,000 Engineering/ Public Works 60,000 50,000 Countywide Projects 40,000 Schools 30,000 Other 20,000 10,000 0

FY 17 FY 18 FY 19 FY 20 FY 21 Note: The increase in FY 17 is due to the planned construction of two new middle schools in the Hardin Valley and Gibbs communities.

Board of County Commissioners and the Citizens of Knox County, Tennessee Page vi ABOUT KNOX COUNTY Knox County, TN The County is the third most populous county in the State of Tennessee. Located in Middle Eastern Tennessee at the headwaters of the Tennessee River, it is the hub of the areas of East Tennessee, Southeast Kentucky, Southwest Virginia and Western North Carolina. This area encompasses over two million people. The U.S. Census Bureaus 2015 census demographic population data reported that 451,324 citizens reside within the total land area of approximately 526 square miles that make up Knox County.

(See Knoxville-Knox County Metropolitan Planning Commission for additional information regarding population information, demographics, and other information about Knox County.) Knoxville, the County seat, is about 50 miles west of the North Carolina state line.

The City of Knoxvilles 2015 census data was reported at 185,291. It is the largest incorporated municipality in the County. Farragut, the only other municipality in the County, has an estimated population of 22,676. Knoxville has a land area of approximately 104 square miles within its corporate limits and is located on the Tennessee River near the geographic center of East Tennessee.

Manufacturing and Commerce Located in the northeastern portion of the State, Knox County, along with Anderson, Blount, Campbell, Grainger, Loudon, Morgan, Roane and Union counties, is part of the Knoxville Metropolitan Statistical Area (MSA). Because of its central location in the eastern United States, the County metropolitan area serves thousands of industrial and commercial customers in a concentrated eight-state area. It is within 600 miles of approximately 40 percent of the population of the United States. For many years the County has been known as one of the South's leading wholesale markets. Based on 2015 estimates, there were approximately 995 wholesale establishments, 1,615 retail establishments, and more than 5,924 service industries located in the County.

The area is the trade center for a 42-county region, located in East Tennessee, Kentucky, Virginia and North Carolina, which serves over two million people. It also is the cultural, tourist, and professional center for this region.

The MSA includes more than 780 manufacturing firms, which produce a large variety of items including medical devices, electronic components, chemicals, manufactured housing, apparel, and automobile parts.

Board of County Commissioners and the Citizens of Knox County, Tennessee Page vii Business Climate The County has a history of being a regional leader in economic activity. The County offers premier location opportunities for high-technology and precision manufacturing firms. The University of Tennessee, Tennessee Valley Authority and the Oak Ridge National Laboratory help to provide a stable, secure employment base. The Knoxville area is home to many medium-sized manufacturing and distribution operations as well as customer service centers. The Knoxville area boasts a strong and reliable workforce, and low union membership rates. These assets, combined with an excellent location at the intersections of Interstates 40, 75 and 81, make Knox County a great location for any business. The County is also well served by 125 truck lines, two railroads, six airlines, and three local river terminals that provide direct links to the Great Lakes and to the Gulf of Mexico. The Knoxville area continually receives recognition for high quality of life, combining an attractive natural setting with a moderate four-season climate. In addition, the Knoxville area ranks among the nations top markets for low cost of living. The Knoxville MSA ranks as one of the top southeastern urban areas with an index of 86.4 compared to the average of all participating cities of 100. The County has over 6,200 acres of park and recreation space, with approximately 177 miles of greenways and walking trails. The arts and culture are well served, with the Knoxville Symphony, Knoxville Opera Company, Knoxville Museum of Art, and several performing arts organizations, including the Clarence Brown Theater, providing numerous cultural opportunities. Live entertainment includes touring Broadway productions and many concerts at numerous venues throughout the area, including the historic, beautifully renovated Tennessee and Bijou theaters.

Industrial Investment The Knoxville MSA has been recognized nationally as a leading location to live and do business. In 2016, The Brookings Institution ranked the Knoxville metro area as the 54th best-performing in the country based on its showing in job growth, unemployment, output (gross product), and house prices.

Among metro areas in Tennessee, Knoxville was second only to Nashville (10th best nationally).

Commerce and industry vary from the media success of Scripps Television Networks (HGTV, DIY, Food, Cooking, GAC, and Travel), to Sysco Corporations (largest food service marketer and distributor in North America) regional warehouse and distribution center. In addition, many other local companies are recognized as national and global leaders, including Clayton Homes, Brunswick Corporation, Keurig Green Mountain, Bush Brothers, Pilot/Flying J Travel Centers, and Ruby Tuesday.

The area is also gaining a reputation as a prime location for corporate headquarters. High profile companies headquartered here in the MSA include the Tennessee Valley Authority, Jewelry Television, AC Entertainment, DeRoyal Industries, PetSafe/Radio Systems Corporation, and Regal Entertainment. Knox County has 7 business parks and a Technology Corridor to meet a wide range of corporate facility needs. In 2015, approximately 6,561 new jobs were created in Knox County among the more than 12,309 jobs created across the metro area.

Board of County Commissioners and the Citizens of Knox County, Tennessee Page viii Commercial Development Four regional shopping malls and over 200 shopping centers and factory outlets meet the retail needs of Knox County citizens and visitors. Knox County has traditionally been the regional hub of the MSA. The 2015 retail sales in the MSA grossed over $13.8 billion, with approximately 67% of that total generated in Knox County.

RETAIL SALES (in thousands)

$15,000,000

$12,500,000

$10,000,000 Knox County MSA

$7,500,000

$5,000,000

$2,500,000 2006 2008 2010 2012 2014 Tourism Although industry frequently is considered the core of an economic base, secondary and tertiary activities also make important contributions to economic development. The convention and tourism business contribute to the County's economic base by drawing income into the region, resulting in employment opportunities as well as investment opportunities in tourist-related facilities. The area draws thousands of enthusiasts every year for University of Tennessee sporting events, and minor league hockey and baseball are also available for sports fans. Opportunities for outdoor recreation are plentiful, with parks and recreation activities throughout the County and in the nearby Great Smoky Mountains National Park which had over 10 million guests in 2015.

Non-Agricultural Employment Services 5%

10% 12%

Government Knox County has demonstrated a Finance very healthy diversity in employment. Services and trade 20%

Trade & Utilities are the two largest employment sectors in the County 34%

Manufacturing metropolitan area, followed by Government.

5%

Construction 14%

Other

Board of County Commissioners and the Citizens of Knox County, Tennessee Page ix Unemployment Historically, Knox Countys unemployment rate has been low relative to the state and national rates. For the month of June 2016, the seasonally unadjusted unemployment rates for the County, state and nation stood at 4.3%, 4.1% and 4.9%, respectively. The Countys rate, while in line with the nations, reflects a full percentage decrease from the corresponding rate from June 2015, and the state and national rates reflect moderate reductions. These rates indicate improvements in economic conditions across the board.

Per Capita Income In 2015, Knox Countys per capita income was $44,849. This represents an increase of 4.3 percent compared to 2014.

FINANCIAL INFORMATION Mayor Tim Burchett assumed the office of Knox County Mayor on September 1, 2010. The Mayor, during his mayoral campaign and throughout his first term, has expressed that priorities of his administration include keeping taxes low, and reducing the Countys bonded debt levels. Therefore, the County has faced the challenge of maintaining essential services during the current difficult economy, while reducing the levels of debt. The approach taken has been based on careful budgeting and management of revenues and expenditures in both the annual budgets and the long-term budget for capital planning.

For the annual budget process, the FY 2016 adopted budget provided for a modest increase (6.1%) in General Fund expenditures. Most of the budgeted increase was for needed additional expenditures for public safety. Education funding, provided for in the General Purpose School Fund (the general fund for the Board of Education component unit) has also increased by more than $13 million. The increases in budgeted funds for public safety and education reflect the Mayors commitment to ensure that adequate funding is provided for these essential functions. By careful budgeting of expenditures in the overall budget, other essential services to Knox County citizens (road maintenance, parks and recreation, library services, etc.) have been maintained at appropriate levels. Revenues have been estimated conservatively, and actual results exceeded the budget. Much of this was due to local taxes, other local revenues and funding from the State that exceeded originally budgeted estimates.

The planned reduction in the Countys bonded debt levels are dependent on both the levels of debt service payments and the amounts of new debt added. Debt service expenditures are provided for in the Countys annual budgets, and the amounts of debt retirement have been provided for based on the required upcoming debt service. The amount of new debt to be added is dependent on the amount needed for projects approved in the Countys adopted Capital Improvement Plan, which covers the upcoming five-year period. This funding mechanism provides for a matching of debt service expenditures with the useful lives of the assets acquired with the bond proceeds. In order to reduce the overall levels of bonded debt, it has been necessary to reduce the approved projects to be funded from debt proceeds. This reduction is being accomplished. The total bonded debt as of June 30, 2016 of $614,988,642 is $76,197,826 less than fiscal year 2011. This change resulted from the payments of bonded debt in the current year exceeding new issuances. Additional reductions are planned in future years to accomplish the Mayors stated goal of reducing County bonded debt.

Financial Section KNOXVILLE OFFICE: OAK RIDGE OFFICE:

315 NORTH CEDAR BLUFF ROAD - SUITE 200 800 OAK RIDGE TURNPIKE - SUITE A404 KNOXVILLE, TENNESSEE 37923 OAK RIDGE, TENNESSEE 37830 TELEPHONE 865-769-0660 TELEPHONE 865-769-1657 PUGH & COMPANY, P.C.

www.pughcpas.com INDEPENDENT AUDITORS REPORT Honorable Mayor, County Commissioners and Audit Committee of Knox County, Tennessee Knoxville, Tennessee Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component units, each major fund, budgetary comparison statement of the general fund, and the aggregate remaining fund information of Knox County, Tennessee (the County) as of and for the year ended June 30, 2016 and the related notes to the financial statements, which collectively comprise the Countys basic financial statements as listed in the table of contents.

Managements 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 opinions on these financial statements based on our audit. We did not audit the financial statements of The Development Corporation of Knox County (TDC), a discretely presented Component Unit reported in the financial statements of the County. The TDC comprises 2.27% of total assets and deferred outflows, 8.64% of net position and .14% of revenues of the County. We did not audit the financial statements of the Great Schools Partnership Charitable Trust (the Partnership), a discretely presented Component Unit reported in the financial statements of the Knox County Board of Education (the BOE). The Partnership comprises 1.94%

of total assets and deferred outflows, .59% of net position and 1.21% of the revenues of the BOE. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the TDC and the Partnership is based solely on the reports of the other auditors.

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.

xiii TSCPA Members of the Tennessee Society Of Certified Public Accountants RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms.

Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International.

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 auditor considers internal control relevant to the Countys 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 Countys 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 opinions.

Opinions In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented Component Units, each major fund, and the aggregate remaining fund information of the County and the respective changes in financial position and, where applicable, cash flows thereof and the budgetary comparison statement of the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Managements Discussion and Analysis on pages xvi through xxx and the schedules of changes in net pension liabilities or assets, investment returns, employer contributions and schedule of funding progress of the various pension and other post-employment benefit plans on pages 124 through 133 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 and the other auditors 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 managements 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 Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Countys basic financial statements. The introductory section, supplemental section which includes the combining and individual non-major fund financial statements, Component Unit - Board of Education section and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The information included in the supplemental section and the Component Unit - Board of Education section, as listed in the table of contents, is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and the other auditors. In our opinion, based on our audit, the procedures performed as described above, and the reports of the other auditors, the supplemental information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The information included in the introductory section and the statistical section, as listed in the table of contents, has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.

xiv

Other Reporting Required by Government Auditing Standards and Uniform Guidance In accordance with Government Auditing Standards, we have also issued, in a separately bound document, our report dated December 22, 2016, on our consideration of the Countys 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 Countys internal control over financial reporting and compliance. In addition, we have also issued, in the same bound document, our report dated December 22, 2016, on the Countys compliance for each major federal program, internal control over compliance and the schedules of expenditures of federal and state awards as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the Tennessee Comptroller of the Treasury.

Pugh &Company, P.C.

Certified Public Accountants Knoxville, Tennessee December 22, 2016 xv

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 As management of the Knox County Government, we offer readers of the Knox County Governments financial statements this narrative overview and analysis of the financial activities of the Knox County Government for the fiscal year ended June 30, 2016. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages i-x of this report. All amounts, unless otherwise indicated, are expressed in dollars.

FINANCIAL HIGHLIGHTS

• The assets and deferred outflows of resources of the governmental activities of the Knox County Primary Government exceeded its liabilities and deferred inflows at the close of the most recent fiscal year by $17,177,880 (net position). This amount includes a negative

$259,493,264 of unrestricted net position. The negative unrestricted net position amount resulted from the process by which the Primary Government issues debt on behalf of the Board of Education component unit.

• The Primary Governments change in net position for its governmental activities was an increase of $3,140,665. Total net position for the Primary Government (governmental and business-type activities) increased by $3,065,794.

• The Primary Governments governmental funds reported total fund balances of $121,505,486, a decrease of $2,366,710 for the fiscal year.

• The Knox County Governments total bonded debt at the end of the year totaled $614,988,642, a decrease of 0.13 percent compared to the prior year total of $622,812,923. Of the current year total, $371,971,565 pertains to County general government activities and $243,017,077 pertains to the Knox County Board of Education component unit. Bond principal paid in the current year totaled $43,724,281 and debt issued totaled $35,900,000.

• The County Property Tax Rate was $2.32 for the fiscal year. There was no change from the prior year rate.

OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the Knox County Governments basic financial statements. The Knox County Governments basic financial statements are composed of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains required supplemental information and other supplementary information in addition to the basic financial statements themselves.

Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Knox County Governments finances, in a manner similar to a private-sector business.

xvi

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 The statement of net position presents information on all the Knox County Governments assets, liabilities, and deferred inflows/outflows of resources with the difference reported as net position.

Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Knox County Government is either improving or deteriorating. The statement of activities presents information showing how the governments net position changed during the most recent fiscal 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. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

Both of the government-wide financial statements distinguish functions of the Knox County Government that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Knox County Government include general government, public safety, highways and streets, sanitation, economic development, and culture and recreation. Knox County Government reports business-type activities for the operations of the Three Ridges Golf Course enterprise fund.

The government-wide financial statements include the Knox County Government itself (known as the primary government), and legally separate entities for which Knox County Government is financially accountable (component units): the school district - the Board of Education (The Board), a legally separate Emergency Communications District (The District), The Development Corporation (The Corporation), and the Knox County Railroad Authority (The Authority.)

Financial information for these component units is reported separately from the financial information presented for the primary government itself. The District and Corporation issue separate financial statements. The Board and the Authority do not issue separate financial statements. The government-wide financial statements can be found on pages 1 and 2 of this report.

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Knox County Government, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Knox County Government can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a governments near-term financing requirements.

xvii

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 Because the focus of the governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the governments near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide reconciliations to facilitate this comparison between governmental funds and governmental activities.

The Knox County Government maintains twelve individual governmental funds. Information is presented separately in the governmental fund balance sheets and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, the Constitutional Officers Special Revenue Fund, Capital Projects Public Improvement Fund and the Debt Service Fund, all of which are considered to be major funds. Data from the other eight governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report.

The Knox County Government adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund for information in the Basic Financial Statements section of the report. For a more detailed demonstration of budgetary compliance, the County also issues a separate Budget Report to Citizenry, which is available online at http://www.knoxcounty.org/finance/budget.php.

The basic governmental fund financial statements can be found on pages 3-7 of this report.

Proprietary funds. There are two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Knox County Government established an enterprise fund in 2009 to account for the operations of the Three Ridges Golf Course. Internal service funds are an accounting device used to accumulate and allocate costs internally among the Knox County Governments various functions. Knox County Government uses internal service funds to account for its fleet service operations, mailroom operations, employee benefits activities (including retirement), self-insurance activities, building operations, technical support operations, self-insurance healthcare activities, and fleet capital leasing activities. Because these services benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements.

Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The eight internal service funds are combined into a single, aggregated presentation in the basic proprietary fund financial statements, along with the presentation of the Three Ridges Golf Course enterprise fund. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report.

The basic proprietary fund financial statements can be found on pages 8-10 of this report.

xviii

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the Knox County Governments own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on pages 11-12 of this report.

Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages13-123 of this report.

Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Knox County Governments progress in funding its obligation to provide pension benefits to its employees.

Required supplementary information can be found on pages 124-133 of this report.

The combining statements referred to earlier in connection with nonmajor governmental funds and the individual fund statements are presented on pages 134-172. Combining and individual fund statements for proprietary funds can be found on pages 173-194 of this report.

GOVERNMENT-WIDE FINANCIAL ANALYSIS Net Position - Primary Government -- Governmental Activities June 30, 2016 2015 Current and Other Assets $ 351,878,840 $ 344,357,970 Capital Assets 609,534,524 605,696,376 Total Assets 961,413,364 950,054,346 Deferred Outflows of Resources 58,030,181 40,180,016 Long-term Liabilities Outstanding 729,273,514 712,511,484 Other Liabilities 100,426,148 93,868,153 Total Liabilities 829,699,662 806,379,637 Deferred Inflows of Resources 172,566,003 169,817,510 Net Position:

Invested in Capital Assets 267,670,250 267,497,791 Restricted 9,000,894 8,583,223 Unrestricted (Deficit) (259,493,264) (262,043,799)

Total Net Position $ 17,177,880 $ 14,037,215 xix

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 Governmental Net Position. Current and other assets consist primarily of receivables, mostly taxes, and cash and investments. By far the largest portion of the Knox County Governments net position reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment),

less any outstanding related debt used to acquire those assets. The Knox County Government uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Knox County Governments investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The reasons for changes in capital assets are discussed later in this section.

An additional portion of the Knox County Primary Governments governmental activities net position represents resources that are subject to external restriction on how they may be used.

These include restricted for Debt Service $83,528 (last year $83,728). Other restrictions include Public Health and Welfare $2,232,080, Public Safety $2,890,001, Social and Cultural Purposes

$2,219,077 and Other Purposes $1,576,208 (last year had a combined total of $8,499,495). The remaining balance of unrestricted net position deficit of $259,493,264 reflects a positive change of $2,550,535 compared to the prior year unrestricted net position deficit of $262,043,799. The reasons for the positive change in net position are discussed in the section describing governmental activities.

The unrestricted net position balance represents funds that would normally be available to be used to meet the governments ongoing obligations to citizens and creditors. The primary reason for the deficit balance of $259,493,264 as of June 30, 2016 results from the Countys recognition of long-term debt issued on behalf of the Knox County Board of Education. Because the Board cannot by law issue its own debt, the County issues debt on behalf of the Board, and pays the proceeds to the Board. The Board then uses these proceeds for its capital purposes, and records the capital assets on its own Statement of Net Position. Therefore, the assets are shown on the Boards Component Unit financial statements, whereas the related debt is shown on the Countys Primary Government financial statements. At June 30, 2016, the amount of bonds, capital leases and loans issued by the County on behalf of the Board still outstanding was $276,280,509, compared to the prior year amount of $288,581,780. If these liabilities were shown with the Boards amounts to match the capital assets, the County would have had positive unrestricted net position of its governmental activities of $16,787,245 in 2016 and $26,537,981 in 2015.

xx

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 At the end of the current fiscal year, positive balances in total net position are reported for the total reporting unit, for the primary government and for each of the separate component units. The same situation held true for the prior fiscal year. The total reporting units net position increased by

$26,097,646 during the current fiscal year, compared to an increase of $21,178,135 for the prior year. For the total reporting unit, the amount of the increase in net position is attributable to the underlying positive combined change in net position of the primary government and of the Board of Education component unit, totaling $25,212,336, combined with the positive change in net position of the nonmajor component units of $885,310 in the aggregate. The results for the Board, an overall positive change in net position of $22,146,542, resulted primarily from increases in state revenues for education purposes of $8,741,840, an increase in tax revenues of $9,599,117, an increase in charges for services of $4,334,598, net of an increase in expenses of $5,958,053. See the next section for discussion of factors driving the results of the primary governments change in net position.

Governmental activities. Governmental activities increased the Knox County Primary Governments net position by $3,140,665 in 2016. This amount results from the overall realization of certain revenues, primarily property taxes, state shared revenues and payments from component units.

The following table shows the changes in net position for the Primary Government-Governmental Activities for the fiscal years ended June 30, 2016 and 2015.

xxi

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 Knox County Primary Government Governmental Activities 2016 2015 Program Revenues:

Charges for Services $ 48,033,851 $ 41,655,326 Operating Grants and Contributions 21,710,980 27,833,755 General Revenues Local Taxes 216,391,798 210,754,601 Payments from Component Units 17,117,442 12,521,580 Intergovernmental Revenues 13,380,140 12,381,045 Other General Revenues 3,534,790 4,409,924 Total Revenues 320,169,001 309,556,231 Expenses:

Finance and Administration 36,885,718 36,112,276 Administration of Justice 25,571,043 24,414,379 Public Safety 88,917,847 82,717,157 Public Health and Welfare 34,280,078 33,739,935 Social and Cultural Services 21,782,470 20,521,029 Agricultural and Natural Resources 490,451 470,977 Other General Government 28,462,563 23,802,139 Engineering & Public Works 26,950,361 26,515,062 Debt Service - Interest and Fees 23,272,301 22,801,729 Payments to Component Units 30,215,504 31,918,017 Total Expenses 316,828,336 303,012,700 Excess of Revenues over Expenses before Transfers 3,340,665 6,543,531 Transfers to Business Type Activities (200,000) (250,000)

Change in Net Position 3,140,665 6,293,531 Net Position, July 1 14,037,215 7,743,684 Net Position, June 30 $ 17,177,880 $ 14,037,215 Program revenues include charges for services, which consist of various items such as fees for services, licenses, and fines. Charges for services relate to numerous and various government functions. These amounts increased by $6,378,525 compared to the prior year. These items represent an aggregation of numerous transactions, and there is not a concentration of revenues in any area. These tend, therefore, to be relatively stable from year to year. Program revenues also include operating grants, which consist largely of grants received from the federal and state governments. These amounts decreased by $6,122,775 compared to the prior year. The current xxii

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 year decrease in revenues is due to various amounts received for government functions. The decrease also includes amounts contributed from developers related to capital projects.

General Revenues include local taxes, payments from component units, intergovernmental revenues, and other general revenues. Local taxes increased by $5,637,197 compared to the prior year, a majority of this coming from property taxes and a relatively stable overall tax base.

Payments from component units primarily consist of the amounts received for the Boards portion of debt service related to the debt obligations that the Primary Government incurred on behalf of the Board. Intergovernmental revenues consisting of state shared revenues increased $999,095 in the current year. Other general revenues consist primarily of investment revenue and other miscellaneous. The decrease of $875,134 from 2015 to 2016 in this category was primarily attributable to decreased investment revenues. In 2016, investment revenue was $702,349. The 2015 corresponding total was $2,201,014, for a net decrease of $1,498,665. The largest component of investment revenue in each year is related to the change in fair value of an interest rate swap accounted for as an investment derivative instrument. In 2016, the change in fair value was a negative $2,551,555, whereas the corresponding amount in 2015 was a negative $395,203, resulting in a difference between the years of $2,156,352. Although generally accepted accounting principles require recognition of this amount in the statement of activities, it should be noted that the County intends to hold the interest rate swap until maturity, and therefore the County has not realized any gain or loss in financial assets related to this amount.

Expenses for the Primary Government are categorized into functional areas. Total expenses increased by $13,815,636 compared to the prior year. This change was largely attributable to the increase in the amounts paid to Public Safety of $6,200,690 and to Other General Government of

$4,660,424. The amounts paid to the Board are primarily the result of debt issued by the County on behalf of the Board. As previously noted, the County issues debt on behalf of the Board for capital purposes because the Board may not incur its own debt obligations. Therefore, the net proceeds of such debt issues are paid to the Board, thus resulting in an expense to the Primary Government. Expenses in other categories were in line with expectations. Increases totaling

$3,191,547 were experienced in the areas of finance and administration, administration of justice and social and cultural services, which reflected necessary increases in the cost of providing essential government services.

Proprietary Net Position and Activities-Business-type Activities. Proprietary activities included as business-type activities in the government-wide statements consist solely of the operations of the Countys Three Ridges Golf Course, an enterprise fund. These proprietary activities decreased the net position of the primary government by $74,871 in 2016, comprising 0.02% of the total change in net position of the primary government and 0.003% of the change in net position of the total reporting unit. The golf course is supported by user fees: greens fees, cart fees, pro shop and snack bar. In addition, in 2016 the Countys general fund transferred $200,000 for additional support. The results of operations for the golf course include the effects of depreciation, a noncash expense, totaling $59,099. If the effects of depreciation were removed from the results of operations, the golf course would have had a decrease in net position of $15,772.

Of the ending net position, $509,820 was invested in capital assets, with the remaining amount of

$2,719 unrestricted. These amounts reflect the results of ordinary business operations.

xxiii

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 Net Position-Primary Government-Business-type Activities June 30, 2016 2015 Current and Other Assets $ 99,293 $ 106,794 Capital Assets 509,820 568,919 Total Assets 609,113 675,713 Current Liabilities 69,201 52,073 Noncurrent Liabilities 27,373 36,230 Total Liabilities 96,574 88,303 Net Position:

Invested in Capital Assets 509,820 568,919 Unrestricted 2,719 18,491 Total Net Position $ 512,539 $ 587,410 Knox County, Tennessee Primary Government-Business-type Activities June 30, 2016 2015 Program Revenues:

Charges for Services $ 788,756 $ 798,212 Expenses:

Operating Expenses 1,063,627 1,000,090 Operating Income (Loss) before transfers (274,871) (201,878)

Transfers:

Transfer from Other Funds 200,000 250,000 Change in Net Position (74,871) 48,122 Net Position, July 1 587,410 539,288 Net Position, June 30 $ 512,539 $ 587,410 xxiv

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 FINANCIAL ANALYSIS OF THE FUNDS As noted earlier, the Knox County Government uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental funds. The focus of the Knox County Governments governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Knox County Governments financing requirements. In particular, unassigned fund balance may serve as a useful measure of a governments net resources available for spending at the end of the fiscal year and to help ensure future stability of governmental operations.

The categories of fund balance are:

Nonspendable fund balance relates to amounts that cannot be spent because they are in a form that is not expected to be converted to cash (e.g., inventories and prepaid items), as well as the Countys investment in joint venture.

Restricted fund balance includes amounts restricted for specific purposes by parties outside of the County (e.g., grantors, other governments) or imposed by law through constitutional provisions or enabling legislation.

Committed fund balance includes amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the County Commission.

Assigned fund balance consists of amounts constrained by the Countys intent to be used for specific purposes, but are not restricted or committed.

Unassigned fund balance is the residual balance in the General Fund.

Primary Government--Governmental Fund Balances June 30, 2016 2015 Nonspendable $ 6,076,686 $ 9,892,080 Restricted 14,978,362 21,234,543 Committed 33,651,153 31,832,805 Assigned 6,016,228 5,059,693 Unassigned 60,783,057 55,853,075 Total Fund Balances $ 121,505,486 $ 123,872,196 xxv

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 As of the end of the current fiscal year, the Knox County Governments governmental funds reported combined ending fund balances of $121,505,486, a decrease of $2,366,710 in comparison with the prior year total of $123,872,196. The majority of the overall decrease, $2,283,837, resulted from operations of the Countys four major governmental funds. Factors that affected the results for each of those individual funds are discussed below.

The General Fund is the chief operating fund of the Knox County Government. At the end of the current fiscal year, unassigned fund balance of the General Fund was $60,783,057 compared to

$55,853,075 last year, an increase of $4,929,982. Total fund balance increased by $2,533,005 resulting in total ending fund balance in 2016 of $72,281,942 compared to $69,748,937 in 2015.

Unassigned fund balance represents 35.0% of actual expenditures compared to 34.0% last year.

The County has adopted a formal fund balance policy calling for the maintenance of a minimum level of unassigned fund balance equivalent to three months (25%) of regular operating expenditures plus transfers out. The County strives to maintain levels exceeding that minimum level in order to provide for unanticipated needs. The actual results reflect the achievement of this goal. Factors that affected the results of operations of the major Governmental Funds are discussed further in the following sections.

The Debt Service Fund has a total fund balance of $24,270,960, which compares to $23,711,404 in 2015. The majority of the fund balance consists of amounts committed for debt service purposes by County Commission of $24,187,432, compared to the prior year amount of $23,627,676. The net increase in fund balance during the current year was $559,556, compared to a decrease of

$1,957,567 last year. The County had planned for a decrease in the Debt Service Fund, and had budgeted for $8,416,473 to be applied to the current year budget. As the current year result of operations was an actual increase in fund balance of $559,556, the fund experienced a positive variance of $8,976,029 of actual results compared to the original adopted budget. This resulted from the significant savings from conservatively budgeting for its expenses that the County experienced from its variable rate debt, combined with the Countys practice of issuing debt as close to the time of the anticipated cash needs as practicable in order to minimize total interest costs. The County plans to continue its conservative financial planning.

The Public Improvement Capital Projects Fund experienced a net decrease in fund balance of

$6,673,852 in 2016, compared to an increase in fund balance of $5,583,109 in 2015. Fund balance at June 30, 2016 totaled $5,977,468, compared to the June 30, 2015 balance of $12,651,320. This change results from the timing of the issuance of bonds for capital purposes compared to the expenditures made therefrom. The Countys practice is to issue debt for capital purposes generally on an annual basis, with the intent that debt proceeds be received as close as practicable to the timing of the planned expenditures. This is done to help keep interest charges as low as practicable.

During FY 2016, the County issued debt while also spending proceeds from debt. The remaining fund balance represents amounts available to be spent for future capital projects, a normal result for this fund.

xxvi

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 The Constitutional Officers Special Revenue Fund experienced an increase in the fund balance in the current year of $1,297,454, resulting in fund balance at June 30, 2016 totaling $5,226,787 compared to the June 30, 2015 total of $3,929,333. This fund is used to account for the operations of various County offices that receive fees for providing various services to the public. A portion of these fees are used to pay for certain operating expenses, and the remaining fees are transferred to the County General Fund. Amounts transferred to the General Fund in 2016 totaled

$10,741,900, an increase of $2,500,764 from the prior year total of $8,241,136. These results were in line with expectations.

Proprietary funds-Internal Service Funds. The Knox County Governments proprietary fund statements provide underlying detail information included in the government-wide financial statements.

Net position of all the internal service funds at year-end 2016 was $10,776,792 as compared to

$11,638,928 at year-end 2015 resulting in a decrease of $862,136 for FY 2016. This was due primarily to the self-insurance and self-insurance healthcare funds net position decrease of

$1,588,693 and 1,475,530, respectively. During FY 2016 the self-insurance fund experienced an increase in claims expense by $5,115,883 which was due to greater than expected claims activity for the year and an increased liability resulting from the actuary study. The self-insurance healthcare fund experienced an increase in claims expense by $811,049. The Internal Service Funds are used to accumulate and distribute costs as a planning tool, and are expected to break even over the long run. The total change in net position for all Internal Service Funds, a decrease of $862,136, represents -1.1% of total charges for services of $76,978,480. As the intent of these funds is to break even, these results are in line with expectations, and reflect the variability and uncertainty in predicting the activity for the year. Total net position at year-end of $10,776,792 reflects a modest accumulated net position for these funds over time, in line with expectations.

GENERAL FUND BUDGETARY HIGHLIGHTS The total fund balance of the Countys General Fund increased by $2,533,005 during 2016, compared to last years $3,660,414 increase. The General Funds original budget planned for a net use of fund balance for the year of $5,489,715. Therefore, the actual unassigned fund balance of

$60,783,057 was $8,022,720 greater than originally planned. Key factors in the outcomes for the General Fund are as follows:

• Revenues exceeded budget in eleven of twelve categories; total revenues of $170,308,332 totaled 105.6% of the total budget of $161,348,366. Local tax revenues, which include property and sales taxes (among others), exceeded the budget by $1,836,358. While the County has the ability to raise tax rates, the government has chosen to keep tax rates steady (adjusted only for the effects of reappraisal) to not further burden County taxpayers. Therefore, revenues were budgeted conservatively and in line with the previous year. Various other revenues exceeded the conservatively budgeted amounts, which also contributed to the General Fund positive budgetary outcome.

xxvii

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016

• The General Fund budget was adopted in amounts intended to provide funds for essential services while not providing for significant increases due to economic conditions.

Expenditures of $173,510,005 totaled 98.6% of the budget of $176,016,690, reflecting the close monitoring of the budget to achieve results as planned.

Differences between the original budget and the final amended budget were within the normal course of County business and totaled a net $4,647,825 increase in the total budgeted expenditures.

Included in the increase were normal carryover appropriations for projects not completed during the previous fiscal year and appropriations for additional expenditures related to numerous additional revenues received for specific purposes during the year that were in addition to the revenues estimated in the original budget.

CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets. The Knox County Government Total Reporting Unit reported a total balance of capital assets (net of accumulated depreciation) as of June 30, 2016, of $1,017,209,720, which compares to the prior year total of $1,017,530,727. This investment in capital assets includes land, buildings and system improvements, machinery and equipment, park facilities, roads, highways, and bridges. The net decrease in the investment in capital assets for the current fiscal year was

$321,007 (0.03 percent), which reflects the depreciation expense for the year in amounts more than capital additions.

Spending for major capital asset additions during the current fiscal year included the following:

energy management projects, security and HVAC upgrades and two new middle schools (Board),

Clayton Park Greenway Connector, Meads Quarry Recreational Center, County additions/renovations, City/County Building Improvements, various school upgrades, numerous road projects, and various other projects.

The County reported capital assets for its governmental activities as of June 30, 2016 totaling

$1,023,553,890, less accumulated depreciation of $414,019,366, leaving a net book value of

$609,534,524. The prior year net book value totaled $605,696,376. The net increase for the year was $3,838,148. Investment in capital assets includes land and land improvements, buildings, equipment, infrastructure, and construction in progress. Infrastructure assets are items that are normally immovable and of value only to the County, such as roads and streets, bridges, sidewalks, lighting systems, and similar items. The increase is due to the purchase of land and construction in progress. This was a planned result, reflecting the Countys commitment to reduce borrowing for capital purposes which results in an overall lower amount of capital asset additions compared to previous years. Although a certain level of long-term borrowing for capital purposes is both necessary and desirable to service the needs of County citizens, the County is committed to reducing its debt level in order to minimize the burden on County taxpayers resulting from additional debt issuances.

Additional information on the Knox County Governments capital assets can be found in Note III.C of this report.

xxviii

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016 Long-term debt. At the end of the current fiscal year, the Knox County Government had total bonded debt outstanding of $614,988,642, compared to $622,812,923 at the end of 2015. All of the bonded debt was backed by the full faith and credit of the County government. $243,017,077 of the total is outstanding debt which the government issued on behalf of the Board for school purposes. The remaining $371,971,565 of the Knox County Governments debt represents bonds issued for general government purposes. The following schedule shows the changes in bonded debt allocated to the entity responsible for payment thereof.

KNOX COUNTY GOVERNMENTS Bonded Debt Changes during FY 2016:

Primary Rollforward of Debt: Government Board Total Beginning Balance $ 376,815,961 $ 245,996,962 $ 622,812,923 Principal Paid (21,359,396) (22,364,885) (43,724,281)

Proceeds from Debt Issuances 16,515,000 19,385,000 35,900,000 Ending Balance - Bonds $371,971,565 $243,017,077 $614,988,642 Knox Countys total bonded debt decreased by $7,824,281 (1.3 percent) during the current fiscal year. The net change in bonded debt was planned, combined with reductions already achieved in previous years, as a result of the Mayors commitment to lower the overall bonded debt levels of the County.

Knox Countys debt is rated AA+ by Standard & Poors. In addition, the Countys debt is rated Aa1 by Moodys. These ratings were reaffirmed subsequent to June 30, 2016.

State statutes set no limit for the amount of general obligation debt a county may issue. Current bonded debt outstanding for the County Government is $614,988,642. This translates to approximately $1,309 per capita. This compares to the FY 2015 per capita amount of $1,336.

Additional information on the Knox Countys long-term debt can be found in the Note III.I to the Financial Statements of this report and on pages 216-221.

ECONOMIC FACTORS AND NEXT YEARS BUDGET AND RATES

• The unemployment rate for Knox County for June 2016 was 4.3%, which is a decrease from the final unemployment rate figure of 5.4% percent for June 2015. This was slightly higher compared to the states average rate of 4.1% percent for June 2016, and 5.7% for June 2015.

The national unemployment averages were 4.9% for June 2016 and 5.3% for June 2015.

• The General Fund budget adopted for 2017 reflects a budget totaling $176,170,991. The budget anticipates using $2.9 million from fund balance and a minor anticipated use of restricted resources.

xxix

Knox County, Tennessee Managements Discussion and Analysis (Unaudited)

June 30, 2016

• Additional information regarding the Countys budget may be found at http://www.knoxcounty.org/finance/pdfs/2016_2017_budget/adoptedBudget_detail.pdf REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the Knox County Governments finances for all those with an interest in the governments finances. The Countys CAFR and additional information regarding the County may be located online at:

http://www.knoxcounty.org/finance/annual_reports.php. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to:

Knox County Government Department of Finance Suite 630 City/County Building 400 Main Street Knoxville, TN 37902 xxx

Basic Financial Statements KNOX COUNTY, TENNESSEE Statement of Net Position June 30, 2016 Primary Government Component Units Knox County Nonmajor Total Governmental Business-type Board of Component Reporting Activities Activities Total Education Units Unit Assets Cash and Cash Equivalents $ 66,031,901 $ 5,461 $ 66,037,362 $ 58,755,809 $ 37,191,641 $ 161,984,812 Investments, at Fair Value 61,641,512 - 61,641,512 5,910,224 - 67,551,736 Accounts Receivable 18,363,286 6,745 18,370,031 37,448,359 266,594 56,084,984 Local Taxes Receivable, net 171,345,306 - 171,345,306 104,938,567 - 276,283,873 Notes Receivable 10,305,379 - 10,305,379 - - 10,305,379 Due from Component Units 13,685,671 - 13,685,671 - - 13,685,671 Due from Primary Government - - - 148,026 158,802 306,828 Advances to Other Governments 2,465,000 - 2,465,000 - - 2,465,000 Inventories 731,000 79,909 810,909 1,878,020 - 2,688,929 Land Held for Resale - - - - 19,126,258 19,126,258 Prepaid Items 421,669 7,178 428,847 653,439 92,750 1,175,036 Net Pension Asset - - - 280,487 - 280,487 Other Post-Employment Benefits Asset 1,550,766 - 1,550,766 - - 1,550,766 Equity Interest in Joint Venture 5,337,350 - 5,337,350 - - 5,337,350 Capital Assets:

Land and Construction in Process 147,646,824 880 147,647,704 35,179,976 106,939 182,934,619 Other Capital Assets, Net of Accumulated Depreciation 461,887,700 508,940 462,396,640 362,375,345 9,503,116 834,275,101 Total Assets 961,413,364 609,113 962,022,477 607,568,252 66,446,100 1,636,036,829 Deferred Outflows of Resources Deferred Outflows Related to Pensions 23,831,904 - 23,831,904 77,584,138 - 101,416,042 Deferred Outflows of Unamortized Amount on Refundings 5,513,072 - 5,513,072 - - 5,513,072 Deferred Outflows of Hedging Derivatives 28,685,205 - 28,685,205 - - 28,685,205 Total Deferred Outflows of Resources 58,030,181 - 58,030,181 77,584,138 - 135,614,319 Liabilities Accounts Payable 20,530,351 50,951 20,581,302 55,946,761 1,086,278 77,614,341 Due to Component Units 306,828 - 306,828 - - 306,828 Due to Primary Government - - - 13,685,410 261 13,685,671 Unearned Revenue 2,326,048 - 2,326,048 968,578 - 3,294,626 Accrued Interest 3,614,288 - 3,614,288 - - 3,614,288 Self-insurance Liability 17,822,547 - 17,822,547 3,686,570 - 21,509,117 Net Pension Liability 70,977,947 - 70,977,947 15,187,485 - 86,165,432 Long-term Obligations:

Other Post-Employment Benefits Obligation 1,300,238 - 1,300,238 - - 1,300,238 Fair Value of Interest Rate Swap Derivatives 38,599,015 - 38,599,015 - - 38,599,015 Other Long-term Obligations:

Due in Less than One Year 55,826,086 18,250 55,844,336 2,634,719 313,509 58,792,564 Due in More than One Year 618,396,314 27,373 618,423,687 15,348,570 - 633,772,257 Total Liabilities 829,699,662 96,574 829,796,236 107,458,093 1,400,048 938,654,377 Deferred Inflows of Resources Deferred Inflows Related to Pensions 257,190 - 257,190 102,884,581 - 103,141,771 Deferred Inflows of Property Taxes and Other Receivables 172,308,813 - 172,308,813 101,164,836 - 273,473,649 Total Deferred Inflows of Resources 172,566,003 - 172,566,003 204,049,417 - 376,615,420 Net Position Investment in Capital Assets - 509,820 509,820 397,555,321 9,610,055 407,675,196 Net Investment in Capital Assets (see note below) 267,670,250 - 267,670,250 - - (8,590,259)

Restricted for:

Debt Service 83,528 - 83,528 - - 83,528 Public Health and Welfare Purposes 2,232,080 - 2,232,080 - - 2,232,080 Public Safety Purposes 2,890,001 - 2,890,001 - - 2,890,001 Education Purposes - - - 8,476,946 - 8,476,946 Social and Cultural Purposes 2,219,077 - 2,219,077 - - 2,219,077 Other Purposes 1,576,208 - 1,576,208 - 26,966 1,603,174 Unrestricted (see note below) (259,493,264) 2,719 (259,490,545) (32,387,387) 55,409,031 39,791,608 Total Net Position $ 17,177,880 $ 512,539 $ 17,690,419 $ 373,644,880 $ 65,046,052 $ 456,381,351 The sum of the rows that report the net position categories for Net Investment in Capital Assets and Net Position-Unrestricted applicable to the primary government and the component units do not equal the related amounts shown in the Total Reporting Entity column. The difference of $276,280,509 results because the debt incurred by the Primary Government on behalf of the Board of Education Component Unit reduces the unrestricted net position of the Primary Government, whereas the related assets are reported in the Board Component Unit totals. For the Total Reporting Unit, the $276,280,509 is deducted from the amount shown for Net Investment in Capital Assets to show the matching of the total assets with the total debt.

The Notes to the Financial Statements are an integral part of this statement.

1

KNOX COUNTY, TENNESSEE Statement of Activities For the Year Ended June 30, 2016 Net (Expense) Revenue and Program Revenues Changes in Net Position Operating Capital Primary Government Component Units Total Charges for Grants and Grants and Governmental Business-type The Nonmajor Reporting Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Board Component Units Unit Primary government:

Governmental activities:

Finance and Administration $ 36,885,718 $ 32,374,363 $ - $ - $ (4,511,355) $ (4,511,355) $ (4,511,355)

Finance and Administration-Payment to Component Unit 9,553,874 - - - (9,553,874) (9,553,874) (9,553,874)

Administration of Justice 25,571,043 2,908,229 227,070 - (22,435,744) (22,435,744) (22,435,744)

Public Safety 88,917,847 4,680,091 3,030,098 - (81,207,658) (81,207,658) (81,207,658)

Public Safety-Payment to Component Unit 485,002 - - - (485,002) (485,002) (485,002)

Public Health and Welfare 34,280,078 6,854,390 8,531,121 - (18,894,567) (18,894,567) (18,894,567)

Public Health and Welfare-Payment to Component Unit 166,628 - - - (166,628) (166,628) (166,628)

Social and Cultural Services 21,782,470 771,108 394,610 - (20,616,752) (20,616,752) (20,616,752)

Agricultural and Natural Resources 490,451 - - - (490,451) (490,451) (490,451)

Other General Government 28,462,563 303,569 1,207,371 - (26,951,623) (26,951,623) (26,951,623)

Other General Government-Payment to Component Unit 625,000 - - - (625,000) (625,000) (625,000)

Engineering and Public Works 26,950,361 142,101 8,320,710 - (18,487,550) (18,487,550) (18,487,550)

Education - Payment to Component Unit 19,385,000 - - - (19,385,000) (19,385,000) (19,385,000)

Debt Service - Interest and Fees 23,272,301 - - - (23,272,301) (23,272,301) (23,272,301)

Total governmental activities 316,828,336 48,033,851 21,710,980 - (247,083,505) (247,083,505) (247,083,505)

Total governmental activities 316,828,336 48,033,851 21,710,980 - (247,083,505) (247,083,505) (247,083,505)

Business-type activities:

Three Ridges Golf Course 1,063,627 788,756 - - - $ (274,871) (274,871) (274,871)

Total primary government $ 317,891,963 $ 48,822,607 $ 21,710,980 $ - (247,083,505) (274,871) (247,358,376) (247,358,376)

Component units:

Board of Education $ 529,205,667 $ 18,407,724 $ 71,824,933 $ - $ (438,973,010) (438,973,010)

Nonmajor Component Units 9,131,983 6,533,341 - - - $ (2,598,642) (2,598,642)

Total component units $ 538,337,650 $ 24,941,065 $ 71,824,933 $ - (438,973,010) (2,598,642) (441,571,652)

General Revenues:

Property Taxes 170,481,050 - 170,481,050 98,932,121 - 269,413,171 Sales Taxes 11,960,270 - 11,960,270 144,321,391 - 156,281,661 Lodging Taxes 7,993,988 - 7,993,988 - - 7,993,988 Business Taxes 9,301,725 - 9,301,725 - - 9,301,725 Wheel Taxes 11,552,326 - 11,552,326 1,600,726 - 13,153,052 Other Local Taxes 5,102,439 - 5,102,439 1,082,452 - 6,184,891 Investment Revenue 702,349 - 702,349 378,485 119,887 1,200,721 Payments from Component Units 17,117,442 - 17,117,442 - - 17,117,442 Payments from Primary Government - - - 28,938,874 1,276,630 30,215,504 Intergovernmental Revenues 13,380,140 - 13,380,140 2,309,611 - 15,689,751 Other Revenues 1,789,623 - 1,789,623 - - 1,789,623 Other Governments and Citizens Groups 296,117 - 296,117 - 368,295 664,412 Miscellaneous 746,701 - 746,701 88,892 - 835,593 Grants and Contributions Not Restricted for Specific Programs - - - - 1,719,140 1,719,140 State of Tennessee - Basic Education Program - - 183,467,000 - 183,467,000 Transfers (200,000) 200,000 - - - -

Total General Revenues and Transfers 250,224,170 200,000 250,424,170 461,119,552 3,483,952 715,027,674 Change in Net Position 3,140,665 (74,871) 3,065,794 22,146,542 885,310 26,097,646 Net Position, July 1 14,037,215 587,410 14,624,625 351,498,338 64,160,742 430,283,705 Net Position, June 30 $ 17,177,880 $ 512,539 $ 17,690,419 $ 373,644,880 $ 65,046,052 $ 456,381,351 2

KNOX COUNTY, TENNESSEE Balance Sheet Governmental Funds June 30, 2016 Special Capital Revenue Projects Other Total Constitutional Public Debt Governmental Governmental General Officers Improvement Service Funds Funds ASSETS Cash and Cash Equivalents $ 15,176,981 $ 5,767,965 $ 1,776,560 $ 6,997,571 $ 11,334,118 $ 41,053,195 Investments, at Fair Value 54,860,946 - 6,780,566 - - 61,641,512 Receivables:

Accounts, Net 9,697,254 - 1,052 - 7,550,158 17,248,464 Local Taxes 115,465,978 - - 55,879,328 - 171,345,306 Notes 892,000 - - 7,475,000 1,915,906 10,282,906 Due from Other Funds 956,895 - 378,598 - 1,141,608 2,477,101 Due from Component Units - - 1,351 13,022,088 - 13,023,439 Advances to Other Entity - - - 2,465,000 - 2,465,000 Inventories 427,863 - - - 69,985 497,848 Prepaid Items 196,792 - - - 44,696 241,488 Investment in Joint Venture 5,337,350 - - - - 5,337,350 TOTAL ASSETS $ 203,012,059 $ 5,767,965 $ 8,938,127 $ 85,838,987 $ 22,056,471 $ 325,613,609 LIABILITIES Accounts Payable and Accrued Liabilities $ 11,512,573 $ - $ 2,800,415 $ 6,761 $ 4,784,182 $ 19,103,931 Due to Other Funds 3,419,692 541,178 1,442 - 1,258,413 5,220,725 Due to Component Units 147,314 - 158,802 - - 306,116 Unearned Revenue 60,501 - - - 2,265,547 2,326,048 TOTAL LIABILITIES 15,140,080 541,178 2,960,659 6,761 8,308,142 26,956,820 DEFERRED INFLOWS OF RESOURCES Deferred Property Taxes and Notes Receivable 115,590,037 - - 61,561,266 - 177,151,303 FUND BALANCES Nonspendable 5,962,005 - - - 114,681 6,076,686 Restricted 2,450,091 - 5,977,468 83,528 6,467,275 14,978,362 Committed 2,297,348 - - 24,187,432 7,166,373 33,651,153 Assigned 789,441 5,226,787 - - - 6,016,228 Unassigned 60,783,057 - - - - 60,783,057 TOTAL FUND BALANCES 72,281,942 5,226,787 5,977,468 24,270,960 13,748,329 121,505,486 TOTAL LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES $ 203,012,059 $ 5,767,965 $ 8,938,127 $ 85,838,987 $ 22,056,471 $ 325,613,609 The Notes to the Financial Statements are an integral part of this statement. 3

KNOX COUNTY, TENNESSEE Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2016 Amounts reported for governmental activities in the statement of net position are different because:

Ending Fund Balance - Governmental Funds $ 121,505,486 Capital assets, net of accumulated depreciation, used in governmental activities are not financial resources and,therefore, are not reported in the funds. 609,255,252 The other post-employment benefits asset is not available to pay for current-period expenditures and, therefore, is not reported as an asset in the fund financial statements. 1,550,766 Internal service funds are used by management to charge certain costs (e.g., certain employee benefits, insurance, maintenance, and use of equipment) to individual funds.

The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. 10,776,792 Long-term liabilities, including bonds payable and related unamortized premium, loans payable, capital lease obligations, other post-employment benefit obligation, compensated absences, net pension liability, the fair value of interest rate swaps, and accrued interest are not due and payable in the current period and therefore are not reported in the funds.

Bonds Payable $ 614,988,642 Unamortized Bond Premium 8,127,194 Fair Value of Interest Rate Swaps, net 9,913,810 Loans Payable 4,912,794 Accrued Interest 3,614,288 Capital Lease Obligations 37,571,153 Net Pension Liability 70,977,947 Other Post-employment Benefit Obligation 1,300,238 Compensated Absences 8,434,626 (759,840,692)

Certain revenues will be collected after year-end but not within the period considered available to pay current period expenditures. Therefore, these amounts are recorded as deferred inflows of resources in the fund financial statements but have been recognized as revenues under the accrual basis in the statement of net position. 4,842,490 Deferred outflows of unamortized amounts on refundings ($5,513,072) and deferred outflows related to pensions ($23,831,904) increase the amount of net position reported in the statement of net position, but are not reported as assets in the funds. Similarly, deferred inflows related to pensions ($257,190) decrease the amount of net position reported in the statement of net position, but are not reported as liabilities in the funds. 29,087,786 Net Position of Governmental Activities $ 17,177,880 The Notes to the Financial Statements are an integral part of this statement.

4

KNOX COUNTY, TENNESSEE Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2016 Special Capital Revenue Projects Other Total Constitutional Public Debt Governmental Governmental General Officers Improvement Service Funds Funds Revenues County Property Taxes $ 118,263,054 $ - $ - $ 52,316,064 $ - $ 170,579,118 Local Option Sales Taxes 4,425,487 - - - 7,534,783 11,960,270 Lodging Taxes - - - - 7,993,988 7,993,988 Business Taxes 9,301,725 - - - - 9,301,725 Wheel Taxes 532,699 - - - 11,019,627 11,552,326 Other Local Taxes 2,991,976 - - - 2,110,463 5,102,439 Licenses and Permits 4,415,268 - - - - 4,415,268 Fines, Forfeitures and Penalties 2,716,773 - - - 813,993 3,530,766 Charges for Current Services 7,152,072 27,462,923 - - 1,104,509 35,719,504 Other Local Revenues 4,827,617 - 456,435 2,580,575 1,085,005 8,949,632 State of Tennessee 13,883,964 - 96,412 - 8,056,192 22,036,568 Federal Government 1,208,814 - - - 9,036,419 10,245,233 Other Governments and Citizen Groups 588,883 - 498,094 - 123,990 1,210,967 Payments from Component Units - - - 13,022,088 - 13,022,088 Investment Revenue - 16,512 1,609 - - 18,121 Total Revenues 170,308,332 27,479,435 1,052,550 67,918,727 48,878,969 315,638,013 Expenditures Current:

Finance and Administration 24,536,766 8,383,211 - - - 32,919,977 Finance and Administration - Payments to Component Unit 9,553,874 - - - - 9,553,874 Administration of Justice 17,389,378 7,056,870 - - 585,210 25,031,458 Public Safety 79,193,115 - - - 1,974,294 81,167,409 Public Safety - Payments to Component Unit 326,200 - 158,802 - - 485,002 Social and Cultural Services 20,242,281 - - - 13,264,310 33,506,591 Public Health and Welfare - Payments to Component Unit 166,628 - - - - 166,628 Social and Cultural Services 5,123,600 - - - 13,987,768 19,111,368 Agricultural and Natural Resources 490,451 - - - - 490,451 Other General Government 15,709,676 - 1,959 - 7,807,035 23,518,670 Other General Government - Payments to Component Unit 625,000 - - - - 625,000 Engineering and Public Works - - - - 13,454,304 13,454,304 Decrease in Equity Interest in Joint Venture 153,036 - - - - 153,036 Debt Proceeds Paid to Component Unit - - 19,385,000 - - 19,385,000 Debt Issuance Costs - - 196,957 - - 196,957 Capital Projects - - 26,501,590 - 92,536 26,594,126 Debt Service Other Debt Service - - - 1,533,600 - 1,533,600 Trustee's Commission - - - 1,074,820 - 1,074,820 Principal - - - 44,203,336 - 44,203,336 Interest - - - 20,742,805 - 20,742,805 Total Expenditures 173,510,005 15,440,081 46,244,308 67,554,561 51,165,457 353,914,412 Excess (Deficiency) of Revenues Over (Under) Expenditures (3,201,673) 12,039,354 (45,191,758) 364,166 (2,286,488) (38,276,399)

Other financing sources (uses)

Transfers from Other Funds 10,741,900 - 411,890 195,390 3,789,180 15,138,360 Transfers to Other Funds (5,007,222) (10,741,900) - - (1,585,565) (17,334,687)

Long-term Bonds Issued - - 35,900,000 - - 35,900,000 Premium on Long-term Debt Issued - - 2,206,016 - - 2,206,016 Total Other Financing Sources (Uses) 5,734,678 (10,741,900) 38,517,906 195,390 2,203,615 35,909,689 Net Change in Fund Balances 2,533,005 1,297,454 (6,673,852) 559,556 (82,873) (2,366,710)

Fund Balances, July 1 69,748,937 3,929,333 12,651,320 23,711,404 13,831,202 123,872,196 Fund Balances, June 30 $ 72,281,942 $ 5,226,787 $ 5,977,468 $ 24,270,960 $ 13,748,329 $ 121,505,486 The Notes to the Financial Statements are an integral part of this statement.

5

KNOX COUNTY, TENNESSEE Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2016 Amounts reported for governmental activities in the statement of activities are different because:

Net Change in Fund Balances - Total Governmental Funds $ (2,366,710)

Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays ($27,889,850) exceeded depreciation ($26,883,965) in the current period. 1,005,885 Capital assets contributed by developers are not recognized as revenues in the fund financial statements, but are recognized as revenues in the statement of activities.

2,852,052 Certain revenues will be collected after year-end but not within the period considered available to pay current period expenditures. Therefore, these amounts were recognized as revenues in the statement of activities but were not reported as revenues in the fund financial statements. 4,842,490 Amounts reported as fund revenues that met the criteria for revenue recognition under the full accrual method of accounting in the preceding fiscal year have been excluded from the current year statement of activities. (4,940,558)

Debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position. Repayment of debt principal is reflected as an expenditure in the governmental funds, whereas the repayment reduces long-term liabilities in the statement of net position. Debt principal payments ($46,983,837) exceeded proceeds ($35,900,000) by this amount. 11,083,837 Expenses reported in the statement of activities include amortization of the deferred amount on debt refunding

($1,006,838). In addition, the amortization of bond premium results in reduction of expenses of $1,777,761. These amounts do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. 770,923 Debt issued at a premium provides current financial resources to governmental funds, but increases long-term liabilities in the statement of net position. (2,206,016)

The increase in the balance of the net other post-employment asset of $632,050, plus the decrease in the liability for accrued interest of $323,560, decreased expenses reported in the statement of activities. In addition, the increase in the liability for other post-employment benefits of $213,345 and the increase in the compensated absences liability balance of $5,155 increased expenses. These amounts do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. 737,110 The increase in the net pension liability of $17,531,867 and the increase in the deferred inflows related to pensions of $144,924 increased expenses reported in the statement of activities. The increase in deferred outflows related to pensions of $12,218,930 reduced expenses reported in the statement of activities. (5,457,861)

The decrease in the fair value of an interest rate swap accounted for as an investment derivative instrument in the statement of activities did not use current resources in governmental funds. (2,318,351)

Internal service funds are used by management to charge certain costs (e.g., certain employee benefits, insurance, maintenance, and use of equipment) to individual funds. The net revenue (expense) amounts of the internal service funds are reported with governmental activities. (862,136)

Change in Net Position of Governmental Activities $ 3,140,665 The Notes to the Financial Statements are an integral part of this statement.

6

KNOX COUNTY, TENNESSEE Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (GAAP Basis) - General Fund For the Year Ended June 30, 2016 Variance With Final Budget Original Final Positive Budget Budget Actual (Negative)

Revenues County Property Taxes $ 117,353,000 $ 117,353,000 $ 118,263,054 $ 910,054 Local Option Sales Taxes 4,990,500 4,990,500 4,425,487 (565,013)

Business Taxes 8,000,000 8,000,000 9,301,725 1,301,725 Wheel Taxes 525,000 525,000 532,699 7,699 Other Local Taxes 2,707,650 2,810,083 2,991,976 181,893 Licenses and Permits 3,836,600 3,836,600 4,415,268 578,668 Fines, Forfeitures and Penalties 1,872,900 2,068,895 2,716,773 647,878 Charges for Current Services 5,900,650 5,947,550 7,152,072 1,204,522 Other Local Revenues 3,862,699 3,963,420 4,827,617 864,197 State of Tennessee 9,923,980 10,092,877 13,883,964 3,791,087 Federal Government 1,200,000 1,200,000 1,208,814 8,814 Other Governments and Citizen Groups 541,406 560,441 588,883 28,442 Total Revenues 160,714,385 161,348,366 170,308,332 8,959,966 Expenditures Current:

Finance and Administration 25,285,466 25,006,836 24,536,766 470,070 Finance and Administration - Payments to Component Unit 9,553,874 9,553,874 9,553,874 -

Administration of Justice 17,397,659 18,034,600 17,389,378 645,222 Public Safety 78,987,338 79,526,963 79,193,115 333,848 Public Safety - Payments to Component Unit 326,200 326,200 326,200 -

Public Health and Welfare 21,193,718 20,570,582 20,242,281 328,301 Public Health and Welfare - Payments to Component Unit 256,628 256,628 166,628 90,000 Social and Cultural Services 4,998,090 5,346,574 5,123,600 222,974 Agricultural and Natural Resources 526,768 525,365 490,451 34,914 Other General Government 12,218,124 16,091,032 15,709,676 381,356 Other General Government - Payments to Component Unit 625,000 625,000 625,000 -

Decrease in Equity Interest in Joint Venture - 153,036 153,036 -

Total Expenditures 171,368,865 176,016,690 173,510,005 2,506,685 Excess (Deficiency) of Revenues Over (Under) Expenditures (10,654,480) (14,668,324) (3,201,673) 11,466,651 Other Financing Sources (Uses)

Transfers from Other Funds 8,045,000 8,075,000 10,741,900 2,666,900 Transfers to Other Funds (2,880,235) (4,917,233) (5,007,222) (89,989)

Total Other Financing Sources 5,164,765 3,157,767 5,734,678 2,576,911 Net Change in Fund Balances $ (5,489,715) $ (11,510,557) 2,533,005 $ 14,043,562 Fund Balances, July 1 69,748,937 Fund Balances, June 30 $ 72,281,942 The Notes to the Financial Statements are an integral part of this statement.

7

KNOX COUNTY, TENNESSEE Statement of Net Position Proprietary Funds June 30, 2016 (Nonmajor) Internal Enterprise Service Fund Funds ASSETS Current Assets:

Cash and Cash Equivalents $ 5,461 $ 24,978,706 Receivables:

Accounts 6,745 1,114,822 Due from Other Funds - 2,929,187 Due from Component Units - 662,232 Notes - 22,473 Inventories 79,909 233,152 Prepaid Items 7,178 180,181 TOTAL CURRENT ASSETS 99,293 30,120,753 Capital Assets:

Land 880 -

Buildings 754,504 -

Machinery and Equipment 429,234 5,030,700 Computer Software 25,448 -

Land Improvements 66,463 -

Accumulated Depreciation (766,709) (4,751,428)

Capital Assets (Net of Accumulated Depreciation) 509,820 279,272 TOTAL ASSETS 609,113 30,400,025 LIABILITIES Current Liabilities:

Accounts Payable and Accrued Liabilities 50,951 1,426,420 Due to Other Funds - 185,563 Due to Component Units - 712 Claims Liability - 17,822,547 Compensated Absences Payable 18,250 169,192 TOTAL CURRENT LIABILITIES 69,201 19,604,434 Noncurrent Liabilities:

Compensated Absences Payable 27,373 18,799 TOTAL LIABILITIES 96,574 19,623,233 NET POSITION Investment in Capital Assets 509,820 279,272 Unrestricted 2,719 10,497,520 TOTAL NET POSITION $ 512,539 $ 10,776,792 The Notes to the Financial Statements are an integral part of this statement.

8

KNOX COUNTY, TENNESSEE Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2016 (Nonmajor) Internal Enterprise Service Fund Funds Operating Revenues Charges for Services $ 788,756 $ 76,978,480 Payments from Component Unit - 298,024 Total Operating Revenues 788,756 77,276,504 Operating Expenses Cost of Sales and Services 454,327 1,540,522 General and Administration 477,663 16,755,519 Depreciation and Amortization 59,099 87,933 Medical Claims - 27,163,947 Retirement Contributions - 28,178,853 Other Employee Benefits - 826,951 Worker's Compensation & Other Claims - 5,239,771 Other Expenses 72,538 341,471 Total Operating Expenses 1,063,627 80,134,967 Loss before Transfers (274,871) (2,858,463)

Transfers Transfers from Other Funds 200,000 1,996,327 Change in Net Position (74,871) (862,136)

Total Net Position, July 1 587,410 11,638,928 Total Net Position, June 30 $ 512,539 $ 10,776,792 The Notes to the Financial Statements are an integral part of this statement.

9

KNOX COUNTY, TENNESSEE Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2016 (Nonmajor) Internal Enterprise Service Fund Funds Operating Activities Cash Received from Customers $ 790,161 $ -

Cash Received from Interfund Services Provided - 76,272,022 Cash Received from Component Unit - 298,024 Cash Paid to Employees (472,429) (1,749,078)

Cash Paid for Goods and Services (534,073) (19,300,276)

Cash Paid on Behalf of Employees - (56,784,263)

Net Cash Used in Operating Activities (216,341) (1,263,571)

Noncapital Financing Activities Transfers from Other Funds - 1,996,327 Net Cash Provided by Noncapital Financing Activities - 1,996,327 Capital and Related Financing Activities Transfers from Other Funds for Capital Purposes 200,000 -

Acquisition and Construction of Capital Assets - (68,144)

Net Cash Provided by (Used in) Capital and Related Financing Activities 200,000 (68,144)

Net Increase (Decrease) in Cash and Cash Equivalents (16,341) 664,612 Cash and Cash Equivalents Beginning of Year 21,802 24,314,094 End of Year $ 5,461 $ 24,978,706 Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities Operating Loss $ (274,871) $ (2,858,463)

Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities:

Depreciation and Amortization 59,099 87,933 Change in Assets and Liabilities:

Decrease in Accounts Receivable 1,405 95,228 Increase in Due from Other Funds - (707,035)

Increase in Due from Component Units - (86,757)

Increase in Inventories (3,067) (6,894)

Increase in Prepaid Items (7,178) (29,727)

Increase in Accounts Payable and Accrued Liabilities 7,935 165,504 Decrease in Due to Other Funds - (911,113)

Increase in Due to Component Units - 712 Increase (Decrease) in Compensated Absences 336 (4,052)

Increase in Claims Liabilities - 2,998,987 Decrease in Unearned Revenue - (7,894)

Total Adjustments 58,530 1,594,892 Net Cash Used in Operating Activities $ (216,341) $ (1,263,571)

The Notes to the Financial Statements are an integral part of this statement.

10

KNOX COUNTY, TENNESSEE Statement of Fiduciary Net Position Fiduciary Funds June 30, 2016 Pension and Other Employee Benefit Agency Trust Funds Funds ASSETS Cash and Cash Equivalents $ 2,660,384 $ 27,992,573 Investments, at Fair Value:

Mutual Funds 242,824,473 -

Collective Investment Trusts 193,383,724 -

Interest-earning Investment Contracts 24,027,178 -

Corporate Bonds 2,893,747 -

U.S. Treasuries 13,092,948 -

Federal Agency Debt Securities 701,523 -

Federal Agency Mortgage Backed Securities 8,330,554 -

Total Investments 485,254,147 -

Receivables:

Accounts - 8,466,290 Employee Contributions 225,763 -

Employer Contributions 209,642 -

Receivable from Other Plans 185,398 -

Accrued Interest and Dividends 117,424 -

Total Receivables 738,227 8,466,290 Total Assets 488,652,758 $ 36,458,863 LIABILITIES Accounts Payable and Accrued Liabilities - $ 9,788,054 Accounts Payable - Administrative Expenses 357,037 -

Accounts Payable - Investments Purchased 158,583 -

Accounts Payable - To Other Plans 185,399 -

Due to Other Governments - 7,045,156 Due to Litigants, Heirs and Others - 19,625,653 Total Liabilities 701,019 $ 36,458,863 NET POSTION - RESTRICTED FOR PENSION, OPEB, AND RETIREMENT BENEFITS $ 487,951,739 The Notes to the Financial Statements are an integral part of this statement.

11

KNOX COUNTY, TENNESSEE Statement of Changes in Fiduciary Net Position Pension and Other Employee Benefit Trust Funds For the year ended June 30, 2016 ADDITIONS Contributions:

Employer $ 17,793,657 Employees 12,599,197 Rollovers 713,456 Total Contributions 31,106,310 Investment Income (Loss):

Interest and Dividend Income 4,585,493 Net Depreciation in Fair Value of Investments (6,007,225)

Total Investment Loss (1,421,732)

Less Investment Expenses (919,218)

Net Investment Loss (2,340,950)

Other:

Transfers from Other Plans 694,085 Total Additions 29,459,445 DEDUCTIONS Benefits and Refunds 33,496,328 Administrative Expenses 1,443,630 Transfers to Other Plans 694,085 Total Deductions 35,634,043 CHANGE IN NET POSITION (6,174,598)

NET POSITION - RESTRICTED FOR PENSION, OPEB, AND RETIREMENT BENEFITS, BEGINNING OF YEAR 494,126,337 NET POSITION - RESTRICTED FOR PENSION, OPEB, AND RETIREMENT BENEFITS, END OF YEAR $ 487,951,739 The Notes to Financial Statements are an integral part of this statement.

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Notes to Financial Statements

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 Index Note I -

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity 13-15 B. Government-wide and Fund Financial Statements 15-16 C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation 16-19 D. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Equity 20-26 E. Additional Information 26 Note II - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Data 27-30 Note III - DETAILED NOTES ON ALL FUNDS A. Deposits and Investments 31-39 B. Receivables 40-42 C. Capital Assets 42-44 D. Interfund and Component Unit Receivables and Payables 45-48 E. Transfers and Similar Transactions 49-51 F. Unearned Revenue 52 G. Deferred Inflows 53 H. Leases 54 I. Long-Term Liabilities 55-66 J. Fund Equity 67-69 K. Property Taxes 69-70 Note IV - OTHER INFORMATION A. Joint Ventures 71-72 B. Related Organizations 73 C. Risk Management 74-75 D. Other Post Employment Benefits 75-80 E. Commitments and Contingencies 81-82 F. Constitutional Officers 83-84 G. Accounting Pronouncements 84-85 H. Subsequent Events 85 Note V - EMPLOYEE RETIREMENT PLANS A. General Information 86-87 B. Single-Employer Defined Benefit Plans 87-97 C. Agent Multiple-Employer Defined Benefit Plan 98-104 D. Cost Sharing Multiple-Employer Defined Benefit Plans 105-119 E. Defined Contribution Plans 119-122 F. Multiple-Employer Defined Contribution Plans 122-123

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity Knox County (the County), founded in 1792, is a political subdivision of the State of Tennessee. The County operates under a County Mayor - County Commission form of government pursuant to the Knox County Home Rule Charter (the Charter) established under Tennessee Code Annotated, Section 5-1-208, effective September 1, 1990. The County Mayor serves an elected term of four years. The eleven County Commissioners serve four-year terms and are elected by voters within the County. As required by accounting principles generally accepted in the United States of America, these financial statements present the County and its Component Units. The County is considered to be the primary government.

Component Units are legally separate entities for which the County is considered to be financially accountable. These Component Units are discretely presented in separate columns in the government-wide financial statements to emphasize they are legally separate from the County.

Discretely Presented Component Units - the County The Knox County Board of Education (the Board) consists of nine members elected by voters of the County and one superintendent appointed by members of the Board. The Board is fiscally dependent on the County because the County levies taxes for the Board, issues debt on behalf of the Board and approves the Board's Budget. The Board is responsible for elementary and secondary education within the County's jurisdiction. The Board operates a total of 89 vocational and handicapped centers, primary, intermediate, middle and high schools. The full-time equivalent average daily membership during the 2015 - 2016 school year was 57,929 with a full time equivalent average daily attendance of 54,563.

During the previous year, the full time equivalent average daily membership was 57,581 with a full time equivalent average daily attendance of 55,082.

The Knox County Railroad Authority (KCRA) was established by Knox County in April 1999, to provide for the continuation of rail service within the County. KCRA is governed by a two-member Board consisting of the County Mayor and a member selected by the County Commission. KCRA is fiscally dependent on the County for approval of all debt issuances.

The Knox County Emergency Communications District (the District) is an emergency response agency operating a consolidated public safety answering point service and emergency radio dispatch service for the residents of the County. The District is governed by an eleven-member Board of Directors, of whom the majority are appointed by the County. Debt issuances or lease agreements exceeding five years require County approval. All fees are collected and remitted to the District through the State of Tennessee Emergency Communications Board (TECB). Revenues are recognized by the District in the period allocated by the TECB.

13

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

A. Reporting Entity (Continued)

Complete financial statements for the District may be obtained at the entity's administrative offices:

Knox County Emergency Communications District 605 Bernard Avenue Knoxville, TN 37921 The Development Corporation of Knox County (the Corporation) is a not-for-profit organization organized for the primary purpose of promoting and encouraging community and economic development within the boundaries of Knox County. The Corporation is governed by an eleven-member board: four members appointed by the County, two members appointed by the City of Knoxville, and five members who are citizens of Knox County. For those five citizen members, terms are staggered so that one members term ends each year. Appointments are made by nomination from the entire Corporation board, and presented to County Commission for approval. Commission may reject a board nomination; however, the Corporation boards nomination becomes effective upon the third nomination event. The County has agreed to provide a portion of the Corporations funding, and therefore the Corporation has imposed a financial burden on the County.

Complete financial statements for the Corporation may be obtained at the Corporations administrative office:

The Development Corporation of Knox County 17 Market Square, # 201 Knoxville, TN 37902-1405 The Board and KCRA do not issue separate financial statements from those of the County. Fund financial statements for the Board are, therefore, included in these financial statements. The activities of KCRA are accounted for in a single fund, and the information presented in the government-wide financial statements also constitutes the fund financial statements.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

A. Reporting Entity (Continued)

Discretely Presented Major Component Unit - the Board The Great Schools Partnership Charitable Trust (the Partnership) was established during the fiscal year ended June 30, 2005. Its purpose is to provide financial and other support to the Knox County Schools by expending funds in furtherance of specific programs and activities conducted by the Board, or by distributions of funds directly to the Board. The Partnership is a legally separate, tax-exempt organization governed by a board consisting of representatives of the Board, Knox County, the City of Knoxville, and various other governmental, educational, and not-for-profit organizations. Although the Board does not control the timing or amount of expenditures made by the Partnership, the majority of the resources, or income therefrom, that the Partnership holds are restricted to the exempt purposes of the Board by the donors. Therefore, the Partnership is considered a component unit of the Board and is discretely presented in the Boards financial statements. During fiscal year 2014, the Partnership entered into an agreement with a separate not-for-profit organization whereby that organization became a supporting organization of the Partnership. Amounts presented in the financial statements reflect this combined reporting presentation.

Complete financial statements for the Partnership may be obtained at the Partnerships administrative office:

Great Schools Partnership Charitable Trust 912 South Gay Street L-210 Knoxville, TN 37902 B. Government-wide and Fund Financial Statements The accompanying financial statements of the County have been prepared in conformity with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB).

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable.

15

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

B. Government-wide and Fund Financial Statements (Continued)

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Generally, the effect of interfund activity has been removed from the government-wide financial statements. Net interfund activity and balances between governmental activities and business-type activities are shown in the government-wide financial statements.

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements.

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and pension trust fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the flow of current financial resources measurement focus and employ the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when they are "measurable and available". "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The County considers property tax revenues available if they are collected within 60 days after the fiscal year end. All other revenues are considered available if collected within one year after the fiscal year end. Expenditures are recorded when the related fund liability is incurred, as under accrual accounting, except for debt and certain compensated absences which are recognized when the obligations are expected to be liquidated with expendable available financial resources.

16

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued)

Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are considered susceptible to accrual. Sales taxes collected and held by the state at year-end on behalf of the County are also recognized as revenue. Other receipts and taxes become measurable and available when cash is received by the County and are recognized as revenue at that time.

Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible-to-accrual criteria are met. Expenditure driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met.

Fund Accounting: The accounts of the County are organized, operated and presented on the basis of funds. Funds are independent fiscal and accounting entities with self-balancing sets of accounts. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds is maintained consistent with legal and managerial requirements.

Governmental Funds are used to account for the Countys general government activities. The County reports the following major governmental funds:

The General Fund is the County's primary operating fund. It accounts for all financial resources of the general government except those that are required to be accounted for in another fund. The major revenue sources are property taxes and local option sales tax.

The Constitutional Officers Fund accounts for activities associated with the administrative functions of the Countys Constitutional Officers. Revenues for this fund consist of user fees collected from the public for services performed by these offices. The major revenue source is fees collected by the elected officials.

The Public Improvement Fund accounts for the acquisition of capital assets or construction of major capital projects not being financed by proprietary funds, exclusive of construction activity related to the Americans with Disabilities Act. The major revenue source is proceeds from debt issuances.

The Debt Service Fund accounts for the servicing of general long-term debt not being financed by proprietary funds. The major revenue source is property tax collections.

17

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued)

Proprietary funds are used to account for governmental activities that are similar to activities that may be performed by a commercial enterprise.

Enterprise funds account for operations that provide services primarily to the general public on a user charge basis. During the fiscal year ended June 30, 2009, the County commenced the management and operation of the Three Ridges Golf Course. These operations are accounted for as an enterprise fund.

Internal service funds account for operations of the County that provide services to other departments, agencies, other governments, component units, and joint ventures on a cost reimbursement basis.

Activities accounted for in the internal service funds include: (1) provision of gasoline and maintenance services for County vehicles, (2) operation of a central mailroom, (3) payment of retiree medical premiums, employee retirement, life insurance and other payroll related expenses, and unemployment claims, (4) accounting for the payment of workers compensation and general liability claims, (5) provision of central maintenance for County buildings, (6) providing technical support for electronic data processing functions, (7) providing leased vehicles and equipment to County departments, and (8) accounting for the payment of employee health insurance claims.

Fiduciary funds account for assets held by the County in a trustee capacity or as an agent on behalf of others. Trust funds account for assets held by the government under the terms of a formal trust agreement. Fiduciary funds include the following:

The pension trust and other employee benefit trust funds are accounted for in essentially the same manner as the proprietary funds, using the same measurement focus and basis of accounting. The pension and other employee benefit trust funds account for the assets of the County's defined benefit pension plan, defined contribution pension plan, defined contribution medical retirement plan, the pension trust funds for Uniformed Officers, and the employee disability plan. Plan member contributions are recognized in the period when contributions are due and payable in accordance with the terms of the plan. Employer contributions are recognized when due and the County makes a formal commitment to provide the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan.

18

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued)

Fiduciary funds also include agency funds used to account for the receipt and disbursement of funds held for various third parties. Agency funds include transactions related to (1) local sales taxes collected by the State of Tennessee and remitted to the County for distribution to other municipalities, (2) funds held on behalf of subdivision developers pending completion of road and hydrology requirements, (3) cash held by the County on behalf of several external agencies and County joint ventures, and (4) funds held by various elected officials on behalf of state agencies and/or other funds.

Amounts reported as program revenues include (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary funds principal ongoing operations. Operating expenses for internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

When both restricted and unrestricted resources are available for use, it is generally the governments policy to use restricted resources first and then, unrestricted resources as they are needed.

Component Units The Board of Education uses two major governmental funds (general fund and school construction capital projects), three nonmajor governmental (special revenue) funds, and fiduciary funds (pension trust fund, agency). These fund types use the same measurement focus and basis of accounting as those of the County. KCRA follows the Countys governmental funds measurement focus and basis of accounting.

The District follows the County's proprietary funds measurement focus and basis of accounting. The Corporations separately issued financial statements also are accounted for as a proprietary fund. The Partnerships separately issued financial statements are prepared in accordance with the requirements of the Financial Accounting Standards Board (FASB). The financial data included for the Partnership in this Comprehensive Annual Financial Report has been formatted to comply with the classification and display requirements of the Governmental Accounting Standards Board (GASB).

19

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Equity Deposits and Investments The cash and cash equivalents of the County and its component units are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition.

The County maintains a pooled cash system through the Knox County Trustee. The fair value of purchased investments and investment income at fiscal year-end is allocated to major funds based on the total cash position of that fund at fiscal year-end. In accordance with County directive, the majority of interest earned during the year is allocated to the General Fund.

State statutes and local ordinances authorize the County and the Board to invest in certificates of deposit, the State Local Government Investment Pool, U.S. Treasury obligations, U.S. agency issues, corporate bonds, equity funds, short-term bond funds, and guaranteed investment contracts.

Investments are reported at their estimated fair value. Realized gains and (losses) from the sale of investments are calculated separately from the change in the fair value. Realized gains or (losses) in the current period include unrealized amounts from prior periods. Purchases and sales of securities are recorded on the trade-date basis. Interest income is recorded on the accrual basis.

Investments - Fiduciary Fund - The pension trust funds investments are stated at their estimated fair value. Investment income includes realized gains (losses) from the sale of investments, unrealized gains (losses) in the change in market values, and interest and dividend income earned during the year.

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis and dividends are recorded on the ex-dividend date.

Receivables, Payables, and Unearned Revenue In the Countys fund financial reporting, transactions between County funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "interfund receivables/payables" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds."

20

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Equity (Continued)

Transactions between the County and its component units that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "advances to/from Component Units." All other outstanding balances between the County and its component units are reported as "due to/from Component Units/Primary Government."

In the fund financial statements governmental funds report unearned revenue in connection with receivables for revenues that are not considered available to liquidate liabilities of the current accounting period. Governmental funds also defer recognition of revenues in connection with resources that have been received, but not yet earned. The County accrues additional assets (receivables) for certain nonexchange revenues in governmental funds. As governmental funds are subject to the modified accrual basis of accounting, any additional revenues recognized as receivable before the resources are available have been reported as deferred inflows of resources with no resulting effect on fund equity. Unearned revenue in the government-wide financial statements consists of resources received that have not yet been earned.

All trade receivables are shown net of an allowance for doubtful accounts. Property taxes receivable are recognized as of the date an enforceable legal claim to the taxable property arises. In Tennessee, this date is January 1st, and is referred to as the lien date. Revenues from property taxes, however, are recognized in the period for which the taxes are levied, which for the County is October 1st of the ensuing fiscal year.

Property tax payments are due by February 28 of the following year. Since the receivable for property taxes is recognized before the period of revenue recognition, the entire amount of the receivable, less an estimated amount for uncollectible taxes, is reported as deferred inflows in the fund financial statements and in the government-wide financial statements as of June 30th.

Property taxes receivable are also reported as of June 30th for the taxes that are levied and uncollected during the current fiscal year as well as the previous eight fiscal years. These property taxes receivable are presented on the fund balance sheet with offsetting deferred inflows to reflect amounts not available as of June 30th. Property taxes collected within 60 days of year-end are considered available and are accrued as revenue. Property taxes collected later than 60 days after year-end are not considered available and are accrued and reported as deferred inflows. An allowance for uncollectible taxes is also recorded representing the estimated amount of delinquent taxes receivable that will be filed with the court for collection. Delinquent taxes filed with the court for collection are considered uncollectible and are written off.

21

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Equity (Continued)

Inventories and Prepaid Assets The County maintains material inventory balances in its proprietary and governmental funds. Inventories in the proprietary funds are stated at the lower of cost or market. Inventories in the governmental funds are stated at cost. Inventories are accounted for under the consumption method. Supplies for resale and the cost of oil and gasoline in the internal service funds use the first-in, first-out (FIFO) flow assumption in determining cost. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid assets.

The Board values school supplies inventories using the specific identification method. The Board's Central Cafeteria Fund inventories are composed of food supplies. These inventories are stated at cost.

The County's general fund inventory consists of land held for resale. The land is recorded at cost excluding the cost of infrastructure (roads, utilities, etc.).

Derivative Instruments GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments (Statement No.

53) as amended by GASB Statement No. 72, Fair Value Measurement and Application, requires the County to recognize all its derivative instruments on the Statement of Net Position at fair value.

The County analyzes its derivative instruments into hedging derivative instruments and investment derivative instruments, as defined by Statement No. 53. If a derivative is classified as a hedging derivative instrument, changes in its fair value are deferred on the Statement of Net Position as either deferred inflows or deferred outflows. If the derivative is classified as an investment derivative instrument, changes in its fair value are reported on the Statement of Activities in the period in which they occur. Such changes are included in the Countys investment income (loss). See Note III. (I) for more detailed analysis. The County formally assesses the effectiveness of its hedging derivative instruments at each year-end.

22

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Equity (Continued)

Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the governmental activities column in the government-wide financial statements. The County defines capital assets as assets with an initial, individual cost of more than $10,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of an asset or materially extend asset lives are not capitalized.

All reported capital assets are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Useful lives for infrastructure were estimated based on the Countys historical records of necessary improvements and replacement. Public domain infrastructure includes long-lived assets, primarily roads; system infrastructure includes street lighting and other assets with shorter expected useful lives. Depreciation is computed using the straight-line method generally over the following useful lives:

Assets Years Buildings 45 Land Improvements 10 - 20 Public Domain Infrastructure 40 System Infrastructure 25 Vehicles 5 Machinery and Equipment 5 - 20 Intangibles 5 - 10 It is the Countys and the Districts policy to capitalize the cost of the rights to externally acquired software as an intangible asset.

23

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Equity (Continued)

Compensated Absences It is the policy of the County and its component units to permit employees to accumulate, in varying amounts, earned but unused vacation, compensatory time and sick pay benefits. In general, unpaid accumulated sick leave does not vest and is not recorded as a liability. During FY 2014, the County implemented a policy whereby retiring employees may be paid for unused sick leave in varying amounts up to a maximum of $10,000, and a liability has been recorded for these estimated termination payments.

Vacation, compensatory, and sick leave benefits from the County's and the Board's governmental funds are not reported in their respective fund financial statements because it is not expected that such amounts would be liquidated with expendable available financial resources. No expenditure is reported for these amounts. For the County and Component Unit governmental activities, compensated absences liabilities are generally liquidated by the respective general fund. The compensated absences liability and the related change in liability are reported in the government-wide and proprietary fund financial statements of the County and its component units.

Risk Financing Activities Knox County and its component units are exposed to various risks of loss associated with general liability claims. The County is self-insured for such risks. The majority of general liability claims are accounted for in the Self Insurance Fund, an internal service fund. The Countys policy is to utilize the Self Insurance Fund to account for claims that meet certain criteria. Claims that meet these criteria include those that are reasonably expected to occur from time to time as the result of normal recurring activities, claims that do not appear to result from gross negligence or intent, that are expected to be settled within a reasonable period of time and that are not expected to be in unusual amounts, and claims that have not resulted in death or catastrophic injury. On occasion, events occur giving rise to claims that do not meet the Countys criteria for recording in the Self Insurance Fund. Such claims are accounted for in the appropriate governmental fund.

Long-Term Obligations The County and the Board record long-term debt in the government-wide financial statements. Similarly, long-term debt and other obligations financed by the County's proprietary funds and the District are recorded as liabilities in the appropriate funds.

24

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Equity (Continued)

Bond premiums and discounts, as well as deferred amounts on refundings, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable unamortized bond premium or discount and deferred amounts on refundings.

Governmental fund types recognize bond premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses.

Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

Fund Equity In the governmental fund financial statements, fund balance is reported in classifications that comprise a hierarchy based primarily on the extent to which the County is bound to honor constraints related to the specific purposes for which amounts in the funds can be spent. The classifications are as follows:

Nonspendable fund balance includes amounts that cannot be spent because they are (a) not in spendable form, or (b) legally or contractually required to be maintained intact (e.g., endowments.) Fund balance not in spendable form includes items not expected to be converted to cash (e.g., inventories and prepaid items), as well as the Countys investment in joint venture. The County does not have any nonspendable fund balance that is legally or contractually required to be maintained intact.

Restricted fund balance includes amounts that are restricted for specific purposes. These amounts result from constraints placed on the use of resources (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or (b) imposed by law through constitutional provisions or enabling legislation.

Committed fund balance includes amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the governments highest level of decision-making authority, which for the County is the County Commission. Amounts are reported as committed pursuant to resolutions passed by Commission (legislative branch), which have also been approved by the County Mayor (executive branch.)

Assigned fund balance consists of amounts constrained by the Countys intent to be used for specific purposes, but are neither restricted nor committed. The County Mayor is the head of the County executive branch, and the Mayor is the Countys chief fiscal officer as set forth in the Knox County Charter. Therefore, assignments may be made upon the authority of the County Mayor or designee.

25

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE I:

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Equity (Continued)

Unassigned fund balance is the residual balance in the general fund (i.e., fund balance that is not nonspendable, and is not restricted, committed, or assigned.)

The County has adopted a policy requiring that a minimum level of unassigned fund balance in the General Fund equal to three months (25%) of regular, ongoing operating expenditures be maintained.

Generally, when expenditures are incurred for purposes for which both restricted and unrestricted fund balance is available, restricted amounts are expended first, and then unrestricted funds are used.

Generally, when expenditures are incurred utilizing unrestricted funds, unassigned amounts are expended first, then assigned amounts, then committed amounts. Net position in government-wide and proprietary fund financial statements are classified as investment in capital assets, restricted, and unrestricted.

Restricted net position represents constraints on resources that are externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or imposed by County law.

Deferred Outflows/Inflows of Resources In addition to assets, the Statement of Net Position reports a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to future period(s) and therefore, will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the Statement of Net Position reports a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of net position that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time.

E. Additional Information Comparative Data/Reclassifications Comparative total data for the prior year has been presented in selected sections of the accompanying financial statements to provide an understanding of the changes in the financial position and operations of the County and the Board. Comparative totals have not been included on statements where their inclusion would not provide enhanced understanding of the reporting entity's financial position and operations or would cause the statements to be unduly complex and difficult to understand.

Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from these estimates.

26

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary Data Budget Basis/Authority Annual budgets, as required by the County Charter and applicable County ordinances, are adopted on a basis consistent with accounting principles generally accepted in the United States of America for all governmental funds, except the Constitutional Officers Fund and the Capital Projects Funds.

The Constitutional Officers Special Revenue Fund is used to account for the transactions of the fee and commission accounts of the County Trustee, Register of Deeds, County Clerk, Criminal and Fourth Circuit Court Clerk, Circuit and General Sessions Court Clerk, and Clerk and Master. These separately elected officials pay salaries and related expenditures from fees and commissions earned by their offices.

Excess fees and commissions are transferred to other funds. In some instances, all fees and commissions earned are transferred to other funds. Transactions related to the Constitutional Officers Special Revenue Fund are not subject to the budgetary control of the County Commission. Therefore, this fund is presented as an unbudgeted special revenue fund.

The Drug Control Special Revenue Fund was established in the 1998 fiscal year pursuant to an amendment of Tennessee Code Annotated Section 39-17-420, stipulating drug control activities to be reported in a special revenue fund. The budget for this fund is a separately adopted budget proposed by the Sheriff and approved by the County Commission.

The Countys Public Improvement Capital Projects Fund, Americans with Disabilities Act (ADA)

Construction Capital Projects Fund, and the Boards School Construction Capital Projects Fund each adopt project-length budgets for major construction projects rather than annual budgets for these projects.

Budgets for portions of the Countys State, Federal and Other Grants Fund and all of the Boards School General Projects and School Federal Projects Funds are generally adopted at the time the grant or program has been approved by the grantor, so the Commission can fulfill any requirement to appropriate local matching funds at the time of adoption.

With the exception of project length budgets and grants, all appropriations lapse at fiscal year-end.

27

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued)

A. Budgetary Data (Continued)

Budgetary Process On or before April 15, heads of all County departments and agencies submit requests for appropriations to the County Department of Finance. The Board prepares a comprehensive budgetary request that is also sent to the Department of Finance. This budget has been approved by the members of the Board of Education and is sent to the County for adoption.

The Department of Finance in conjunction with the Office of the County Mayor compiles the requests, negotiates with the various departments and submits a comprehensive budget to the County Commission.

By July 1, the final County and Board budget is adopted by County Commissioners.

The appropriated County budget is prepared at the fund, department, and major category level. For the County, the legal level of budgetary control, that is, the level at which management cannot overspend funds without a budget amendment approved by the County Commission, is the major category level within departments. The major categories are Personal Services, Employee Benefits, Contracted Services, Supplies and Materials, Other Charges, Debt Service and Capital Outlay.

The budget adopted by the County for the Board is recommended by the County Mayor and adopted in total. The County does not exercise control over the Board at the department or major category level.

After the budget for the Board is approved, the Board of Education may modify it within the total appropriation granted by the County Commission.

The budget and actual schedules included herein are not intended to demonstrate compliance at the legal level of budgetary control. Such statements and schedules are included in the Countys separately issued Budget Report to Citizenry. Copies of the report may be obtained from the Knox County Department of Finance or online at: http://www.knoxcounty.org/finance/budget.php.

Knox County Department of Finance Room 630 City County Building 400 Main Avenue Knoxville, TN 37902 28

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued)

A. Budgetary Data (Continued)

Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of resources are recorded to reserve a portion of the applicable appropriation, is utilized for budgetary control purposes in the governmental funds. Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrances outstanding at year-end are included in the balances of assigned, committed, or restricted fund balance based on the purposes for which the resources that will be used to liquidate the encumbrances have been classified. Encumbrances are not treated as expenditures for financial reporting purposes. Outstanding encumbrances are reappropriated in the subsequent year.

Supplemental Appropriations The following schedule shows the annual budget originally adopted expenditures and transfers out for the County and the Board, and the revisions to that budget as authorized by the County Commission, for the year ended June 30, 2016:

Original Revised Fund Budget Revisions Budget Governmental Funds:

General Fund $ 174,249,100 $ 6,684,823 $ 180,933,923 Special Revenue Funds:

State, Federal and Other Grants 160,000 1,466,631 1,626,631 Governmental Library 119,600 109 119,709 Public Library 13,278,900 82,621 13,361,521 Solid Waste 4,105,000 8,559 4,113,559 Hotel/Motel Tax 6,110,000 1,244,395 7,354,395 Drug Control 774,520 117,383 891,903 Engineering & Public Works 13,638,946 943,904 14,582,850 Total Special Revenue Funds 38,186,966 3,863,602 42,050,568 Debt Service Fund 75,500,000 - 75,500,000 Total - Governmental Funds $ 287,936,066 $ 10,548,425 $ 298,484,491 29

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued)

A. Budgetary Data (Continued)

Original Revised Fund Budget Revisions Budget Component Unit - the Board:

General Fund:

General Purpose School $ 438,000,000 $ 5,586,252 $ 443,586,252 Special Revenue Fund:

Central Cafeteria 28,028,000 287,675 28,315,675 Total - the Board $ 466,028,000 $ 5,873,927 $ 471,901,927 Remaining supplemental appropriations primarily represent funds designated during the previous fiscal year, encumbrances outstanding at June 30, 2015 reappropriated during fiscal year 2016, and grant awards appropriated at the time the award is received.

A local ordinance requires a two-thirds approval of the County Commission before reducing any County fund balance below an amount equal to five percent of the total amount budgeted in the fund. State law stipulates that the Boards General Purpose School Fund balance in excess of three percent of the budgeted annual operating expenses for the current fiscal year may be budgeted and expended for nonrecurring purposes but shall not be used for recurring annual operating expenses.

30

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS A. Deposits and Investments The County, the Board and the District maintain a cash and investment pool through the County Trustee's office. The County Trustee is the treasurer of the County and in this capacity is responsible for receiving, disbursing, depositing and investing most funds.

The Trustee of Knox County utilizes a negotiated sweep agreement for a portion of funds held by the Trustee. These funds are invested each night in various instruments, but under the Countys policy these funds are classified as Cash and Cash Equivalents.

Other investments are held in the State of Tennessees Local Government Investment Pool (LGIP) and are not subject to categorization. LGIP investments are reported at amortized cost.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. As a means of limiting its exposure to fair value losses arising from rising interest rates, the Countys governmental activities investments follow their adopted investment policy and are monitored and managed by an Investment Committee, whose objectives are to maximize earnings while reducing the exposure to interest rate risks to a low level by utilizing a mixture of short and long-term maturity investments so that the changing interest rates will cause only minimal deviations in the net asset value.

Investment maturities shall not exceed three years without the approval of the Investment Committee or greater than five years without the approval from the Director of State and Local Finance or as otherwise provided by State Statute. Investments of bond proceeds shall not exceed two years without the approval of the Investment Committee. The Countys investments are primarily in U.S. Government Securities and securities issued by agencies of the U.S. Government. The Countys and Boards Pension Trust fund activities are managed by the Knox County Retirement Board (see separately issued Pension Trust Fund Statements), whose objectives are to maximize earnings while reducing the exposure to interest rate risks to an appropriate level by using a mixture of long-term and short-term investments in various debt and equity securities. The investments of the Countys defined benefit plan and the Boards defined benefit plan are included in a single trust account. The following represents the Countys and the Boards governmental activities investments and the activities of the Countys and the Boards Pension Trust funds:

31

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

A. Deposits and Investments (Continued)

Primary Government Governmental Pension Board Activities Fiduciary Activities Fair Weighted Fair Weighted Value or Average Value or Average Carrying Maturity Carrying Maturity Amount (Years) Amount (Years)

Cash Equivalents Classified as Investments $ 23,118 $ 2,749,271 Certificate of Deposits held greater than 90 days 3,252,788 -

Collective Investment Trusts - 240,455,949 Interest-earning Investment Contracts - 24,027,178 Mutual Funds - 245,848,936 Fixed Income Securities:

U.S. Treasuries 1,003,130 0.880 17,175,559 9.770 Federal Agency Mortgage Backed Securities 5,982,226 0.410 10,979,133 25.300 Federal Agency Debt Securities 15,933,576 0.790 922,580 3.000 Corporate Bonds - 3,898,758 5.000 Municipal Bonds 35,446,674 0.650 -

Total Fixed Income Securities 58,365,606 32,976,030 Total Investments: $ 61,641,512 $ 546,057,364 The Pension Board investments are allocated to the Countys and Boards pension trust funds of

$487,914,531 and $58,142,833, respectively.

Custodial credit risk The Countys policies limit deposits and investments to those instruments allowed by applicable state laws. Tennessee State Law requires financial institutions to secure a local government's deposits by pledging governmental securities as collateral. The market value of pledged securities must equal at least 105% of the average daily balance of deposits. Alternatively, financial institutions that hold public deposits may participate in the States collateral pool.

A portion of the Countys, the Boards and the Districts deposits at June 30, 2016 were covered by the bank collateral pool administered by the Treasurer of the State of Tennessee (the State). Banks participating in the pool report the aggregate balance of their public fund accounts to the State. Collateral to secure these deposits must equal between 90 - 115 percent of the average daily balance of public deposits held and must be pledged to the State Treasurer on behalf of the bank collateral pool. The securities pledged to protect these accounts are pledged in aggregate rather than against each individual account. The members of the pool may be required to pay an assessment to cover any deficiency.

32

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

A. Deposits and Investments (Continued)

Credit risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Countys adopted investment policy is designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of least importance compared to the safety and preservation of principal and liquidity. The County will limit credit risk, the risk of loss due to the failure of the security issuer or backer, by limiting investments to the types of securities listed in the investment policy and as allowed under Title 5, Chapter 8 of the Tennessee Code Annotated and by diversifying the investment portfolio so that potential losses from any type of security or from any individual securities will be minimized and by limiting investments to specified credit ratings.

The Countys policies are designed to maximize investment earnings, while protecting the security of principal and providing adequate liquidity, in accordance with all applicable laws. The Countys and Boards Pension Trust funds are managed with long-term objectives that include maximizing total investment earnings. State statutes and County policies allow the Pension Trust funds a broader range of investments than those available to the governmental activities. The credit risk of the investments of the Countys and Boards governmental activities and the Countys and Boards Pension Trust funds investments in fixed-income securities is as follows:

33

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

A. Deposits and Investments (Continued)

Primary Government Pension Board Governmental Activities Fiduciary Activities Fair Fair Standard & Poor's and Value Value Moody's Credit Ratings U.S. Treasuries $ 1,003,130 $ - Aaa Moody's U.S. Treasuries - 17,175,559 AA+ S&P Federal Agency Mortgage Backed Securities 5,982,226 10,979,133 AA+ S&P Federal Agency Debt Securities 8,083,140 922,580 AA+ S&P Federal Agency Debt Securities 4,303,203 - NR Not Rated Federal Agency Debt Securities 3,547,233 - Aaa Moody's Corporate Bonds:

Corporate Bonds - 149,655 AAA S&P Corporate Bonds - 426,301 AA+ S&P Corporate Bonds - 149,923 AA S&P Corporate Bonds - 259,735 AA- S&P Corporate Bonds - 300,998 A+ S&P Corporate Bonds - 1,193,448 A S&P Corporate Bonds - 832,277 A- S&P Corporate Bonds - 460,432 BBB+ S&P Corporate Bonds - 125,989 BBB S&P Municipal Bonds 5,258,491 - AAA S&P Municipal Bonds 351,285 - Aaa Moody's Municipal Bonds 250,228 - Aa3 Moody's Municipal Bonds 2,310,146 - Aa2 Moody's Municipal Bonds 591,752 - Aa1 Moody's Municipal Bonds 5,534,228 - AA+ S&P Municipal Bonds 9,644,166 - AA- S&P Municipal Bonds 8,486,641 - AA S&P Municipal Bonds 308,050 - A1 Moody's Municipal Bonds 1,983,477 - A+ S&P Municipal Bonds 728,210 - A S&P Total Fixed Income Securities $ 58,365,606 $ 32,976,030 The Countys and Boards governmental activities investments and the Countys and the Boards pension trust investments have no investments in any single issuer of fixed income securities other than U.S. Treasuries that represent 5 percent or more of total investments.

34

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

A. Deposits and Investments (Continued)

Concentration of Credit Risk The Countys governmental investment activities will diversify the overall portfolio to eliminate the risk of loss from an over concentration of assets in a specific class of security, a specific maturity, and/or a specific issuer. According to the Countys investment policies, the maximum percentage of the portfolio (book value at the date of acquisition) permitted in each eligible security is as follows:

U.S. Treasury 100% maximum Federal Agency/Instrumentalities 100% maximum Tennessee LGIP 50% maximum Repurchase Agreements 20% maximum Commercial Paper 30% maximum Bankers' Acceptances 10% maximum Insured/Collateralized Certificates of Deposit 100% maximum State. County and Municipal Obligations 50% maximum The combined amount of bankers acceptances and commercial paper shall not exceed forty percent (40%) of the total book value of the portfolio at the date of acquisition.

The Countys Portfolio will be further diversified to limit the exposure to any one issuer. No more than three (3%) or five million dollars, whichever is less, of the Countys portfolio will be invested in the securities of any single issuer.

Investments Measured at Fair Value GASB Statement No. 72 (see Note IV.G) generally requires that investments be measured at fair value and establishes a hierarchy of inputs to valuation techniques used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.

The three levels of inputs used to measure fair value are as follows:

35

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

A. Deposits and Investments (Continued)

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, primarily include certain U.S. Government obligations, common stock and preferred stock equities. These investments are traded daily in public markets in the United States and other foreign countries. The fair value of these investments is based on the last reported sales price on the last day of the fiscal year.

Investments that trade in markets that are not considered to be actively traded on a daily basis, but are valued based on quoted market prices, dealer and broker quotations, bid prices, or alternative pricing sources using observable inputs, are classified within Level 2. These include certain U.S. Government and foreign obligations, interest-earning investment contracts - certificates of deposit (participating),

investment grade corporate bonds and bank loans, certain mortgage and asset backed securities, less-liquid listed securities, certain government agency securities, and foreign currency exchange purchase and sales contracts. Common and collective trust funds, investment entities and short-term investment funds, whose underlying assets are primarily invested in securities that are actively traded, are measured based upon the redemption value of each unit on the last business day of the plan year.

Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently or not at all. Level 3 investments include private equity funds, real estate investment, limited partnerships, certain mortgage and asset backed and common and collective trust funds that are primarily invested in real estate. The fair value of these investments is determined by estimates provided by independent pricing sources in asset classes, non-binding bid prices from industry vendors and managers, and the net asset value on the last day of plan year.

36

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

A. Deposits and Investments (Continued)

The fair value measurements of the County and the Boards investments at June 30, 2016 are as follows:

Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Primary Government - Governmental Activities Total (Level 1) (Level 2) (Level 3)

Investments by Fair Value Level Debt Securities:

US Treasury $ 1,003,130 $ 1,003,130 $ - $ -

Fixed Government Agency 21,915,802 - 21,915,802 -

Tax-Free Municipal Securities 35,446,674 - 35,446,674 -

Total Debt Securities by Fair Value Level 58,365,606 1,003,130 57,362,476 -

Interest-earning Investment Contracts - Certificates of Deposit 3,252,788 - 3,252,788 -

Total Investment by Fair Value Level $ 61,618,394 $ 1,003,130 $ 60,615,264 $ -

Debt securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Debt securities and certificates of deposit are classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. The certificates of deposit are participating as defined by GASB and meet the criteria for fair value reporting. Matrix pricing is used to value securities based on the securities relationship to benchmark quoted prices.

Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Fiduciary Activities - Primary Government and Board Total (Level 1) (Level 2) (Level 3)

Debt Securities:

Corporate Bonds $ 3,898,758 $ - $ 3,898,758 $ -

U.S. Treasuries 17,175,559 - 17,175,559 -

Federal Agency Debt Securities 922,580 - 922,580 -

Federal Agency Mortgage Backed Securities 10,979,133 - 10,979,133 -

Total Debt Investments by Fair Value Level 32,976,030 - 32,976,030 -

Equity Investments:

Mutual Funds 245,848,936 245,848,936 - -

Interest-earning Investment Contracts - Insurance Companies 24,027,178 - - 24,027,178 Total Investments Measured at Fair Value $ 302,852,144 $ 245,848,936 $ 32,976,030 $ 24,027,178 37

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

A. Deposits and Investments (Continued)

The following is a description of the valuation techniques used to measure investments at fair value for the Fiduciary Activities:

Interest-Bearing Deposits and Money Market Funds: Valued at purchase price, which approximates fair value.

Debt Securities: Typically this category includes corporate bonds, U.S. Treasuries, Federal agency debt securities and Federal agency mortgage backed securities. Values are based upon quotes obtained from national or international exchanges and classified as level 2 of the fair value hierarchy.

Mutual Funds: Valued at quoted market prices which represent the net asset value of shares held by the plans at year end and classified as level 1 of the fair value hierarchy.

Collective Investment Trusts (Investments Measured at the NAV): Fair value for these investments are not readily determinable and instead, as a practical expedient, fair value is determined based on the Net Asset Value (NAV) per share. Fair value is determined based on the collective trusts share price multiplied by the number of shares owned, as based on information reported by the investment advisor using the audited financial statements of the collective trust at year-end.

Investments measured at the NAV are excluded from the fair value hierarchy. These collective investment trusts are external investment pools not registered with the SEC and are, instead, regulated primarily by the Office of the Comptroller of the Currency (OCC) as well as various, DOL, FDIC and state banking laws.

Interest Earning Investment Contracts: The stable value investments held inside the contracts with an insurance company are not actively traded and significant other observable inputs are not available. The contracts are included in the financial statements at fair value, as reported by the insurance company, and classified as Level 3 of the fair value hierarchy.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the plan administrator believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the valuation techniques used in the fair value measurements from the prior year.

38

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

A. Deposits and Investments (Continued)

Redemption Redemption Investments Measured at the Net Asset Value (NAV) Total Frequency Notice Period Collective Investment Trusts:

Domestic Equity Funds $ 56,342,087 Daily 2 days Domestic Bond Funds 38,988,209 Daily 0-3 days International Equity Funds 72,760,449 Daily, Semi-monthly 2-5 days Real Estate Funds 35,024,922 Monthly, Quarterly 30-90 days Stable Value Funds 37,340,282 Daily 0 days Total Investments Measured at the NAV $ 240,455,949 The following is a description of the valuation technique used to measure investments at the net asset value (NAV) per share:

1. Domestic Equity Funds: This type includes investments in one collective investment trust that invests mainly in large capitalization U.S. common stocks. The fair value of the investment in this type has been determined using the NAV per share of the investments.

2. Domestic Bond Funds: This type includes investments in two collective investment trusts that invest mainly in U.S. Treasury Inflation Protected Securities (TIPS) and U.S. corporate high yield bonds. The fair value of the investment in this type has been determined using the NAV per share of the investments.

3. International Equity Funds: This type includes investments in three collective investment trusts that hold approximately 90 percent of the funds investments in non-U.S. common stocks and preferred and approximately 10 percent of the funds investments in foreign cash and other assets.

The fair values of the investments in this type have been determined using the NAV per share of the investments.

4. Real Estate Funds: This type includes two collective investment funds that invest primarily in securities of real estate investment trusts, other companies in the real estate industry, and direct ownership of real estate. The fair values of the investments in this type have been determined using the NAV per share (or its equivalent) of the investments.

5. Stable Value Funds: This type includes two collective investment funds that invest primarily in high quality stable value investment contracts such as guaranteed investment contracts (GICs),

synthetic GICs, and separate account contracts. Fair values of the investments in this type have been determined using the NAV per share (or its equivalent) of the investments.

39

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

B. Receivables Receivables for the Countys individual major funds and nonmajor governmental, internal service, and fiduciary funds in the aggregate, as of year-end, including allowances for uncollectible accounts are:

Primary Government Major Governmental Funds Capital Projects Nonmajor Total Debt Public Governmental Internal Enterprise Primary Trust and General Service Improvement Funds Service Fund Government Agency Receivables:

Taxes $ 117,593,831 $ 56,777,953 $ - $ - $ - $ 174,371,784 $ -

Accounts 9,697,254 - 1,052 7,550,158 1,114,822 6,745 18,370,031 8,769,112 Contributions - - - - - - - 435,405 Gross Receivables 127,291,085 56,777,953 1,052 7,550,158 1,114,822 6,745 192,741,815 9,204,517 Less: Allowances for Uncollectibles (2,127,853) (898,625) - - - - (3,026,478) -

Net Total Receivables $ 125,163,232 $ 55,879,328 $ 1,052 $ 7,550,158 $ 1,114,822 $ 6,745 $ 189,715,337 $ 9,204,517 Receivables for the County's component units as of year-end, including the allowances for uncollectible accounts are:

Component Units: Government-wide Totals The Board The Partnership The District The Corporation Receivables:

Taxes $ 107,039,114 $ - $ - $ -

Accounts 36,718,096 751,260 3,811 262,783 Gross Receivables 143,757,210 751,260 3,811 262,783 Less: Allowances for Uncollectibles (2,100,547) (20,997) - -

Net Total Receivables $ 141,656,663 $ 730,263 $ 3,811 $ 262,783 40

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

B. Receivables (Continued)

The General Fund has the following note receivable at June 30, 2016:

(1) A note receivable from the Knoxville-Knox County Community Action Committee (CAC) with an initial balance of $2,300,000 was originated during the fiscal year ended June 30, 2004. The note resulted from an arrangement between the County and CAC whereby certain proceeds from debt issued by the County were used to construct a facility on CACs behalf. CAC agreed to reimburse the County by repaying the annual amounts of the Countys related debt service requirements. The resulting note receivable is due in varying principal installments, plus interest, through 2022. As of June 30, 2016, $892,000 remained outstanding.

The Countys Debt Service Fund has the following note and loan receivable at June 30, 2016:

(1) Note receivable from the West Knox Utility District of Knox County (WKUD) has a current balance of $1,455,000. The basis of this note is an agreement made by the County to participate with the district to expedite utility relocation and upgrading necessary for construction of improved roadways within the northwest portion of the County. The district was advanced up to

$2,000,000, which was disbursed by the County in installments upon receipt of draw notices.

The note is non-interest bearing and is payable in four varying installments every five years.

The amount to be repaid also includes $140,000, recognized as revenue when received, that the district must pay to cover the County's administrative, accounting and financial costs associated with the agreement. The final installment of this note receivable is due August 11, 2018.

(2) A loan receivable from the Industrial Development Board of Blount County (IDBBC) was made for the purpose of providing financial assistance for the acquisition and development of property as a business and industrial park. The loan initially bore interest at 5% annually and is to be repaid from amounts to be received by the IDBBC from land sales and other revenues related to the park. Interest on the loan is not currently being accrued. At June 30, 2016, the loan balance was $6,020,000.

The State, Federal and Other Grants Special Revenue Fund had $1,915,906 of notes receivable at June 30, 2016. These note agreements are from eligible County citizens participating in various state and federal low-income housing projects. These notes are executed with a range of below market interest rates and varying repayment terms.

41

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

B. Receivables (Continued)

Advances to Other Entity During the fiscal year ended June 30, 2006, the County advanced $2,500,000 to the Knoxville-Knox County Community Action Committee (CAC). An additional advance during the fiscal year ended June 30, 2009 for $3,500,000 was made to CAC from Knox County. These advances were made to provide funding for operations and are to be repaid from grant monies and other funding received by CAC.

During the fiscal year ended June 30, 2011, CAC paid the County $3,500,000 and $35,000 in fiscal year 2014 towards the advances leaving a balance due to the County of $2,465,000. CAC made no payments to the County during the fiscal year ended 2016.

C. Capital Assets Activity in the Countys and the Component Units capital assets for the fiscal year ended June 30, 2016, was the following:

Primary Government Beginning Ending Balance Increases Decreases Balance Governmental Activities:

Capital Assets, not being depreciated:

Land $ 100,908,462 $ 2,207,768 $ - $ 103,116,230 Construction in Progress 25,714,649 20,415,505 1,599,560 44,530,594 Total Capital Assets, not being depreciated 126,623,111 22,623,273 1,599,560 147,646,824 Capital Assets being depreciated:

Buildings 213,930,864 1,131,443 15,459 215,046,848 Land Improvements 24,125,305 614,006 - 24,739,311 Machinery and Equipment 46,270,432 5,045,413 1,275,289 50,040,556 Intangible Assets 16,240,051 82,375 - 16,322,426 Infrastructure 566,843,382 2,914,543 - 569,757,925 Total Capital Assets being depreciated 867,410,034 9,787,780 1,290,748 875,907,066 Less Accumulated Depreciation for:

Buildings 91,224,405 8,053,065 15,459 99,262,011 Land Improvements 15,438,789 919,325 - 16,358,114 Machinery and Equipment 36,037,925 3,402,972 1,273,842 38,167,055 Intangible Assets 12,502,793 464,240 - 12,967,033 Infrastructure 233,132,857 14,132,296 - 247,265,153 Total Accumulated Depreciation 388,336,769 26,971,898 1,289,301 414,019,366 Total Capital Assets being depreciated, net 479,073,265 (17,184,118) 1,447 461,887,700 Governmental Activities Capital Assets, net $ 605,696,376 $ 5,439,155 $ 1,601,007 $ 609,534,524 42

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

C. Capital Assets (Continued)

Primary Government Beginning Ending Balance Increases Decreases Balance Business-type Activities:

Three Ridges Golf Course:

Land and Construction in Progress $ 880 $ - $ - $ 880 Buildings 754,504 - - 754,504 Machinery and Equipment 429,234 - - 429,234 Computer Software 25,448 - - 25,448 Land Improvements 66,463 - - 66,463 Less: Accumulated Depreciation (707,610) (59,099) - (766,709)

Total $ 568,919 $ (59,099) $ - $ 509,820 Depreciation expense was charged to primary government governmental activities functions as follows:

Finance and Administration $ 3,965,741 Administration of Justice 539,584 Public Safety 3,192,637 Public Health and Welfare 773,487 Social and Cultural Services 2,671,102 Other General Government 1,037,569 Engineering & Public Works 14,791,778 Total Depreciation Expense - Governmental Activities $ 26,971,898 43

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

C. Capital Assets (Continued)

Component Unit - the Board Beginning Ending Balance Increases Decreases Balance Governmental Activities:

Capital Assets, not being depreciated:

Land $ 22,837,977 $ - $ 1,632 $ 22,836,345 Construction in Progress 2,260,101 14,320,424 4,236,894 12,343,631 Total Capital Assets, not being depreciated 25,098,078 14,320,424 4,238,526 35,179,976 Capital Assets being depreciated:

Buildings 535,875,619 3,103,127 - 538,978,746 Land Improvements 3,342,065 1,367,780 - 4,709,845 Machinery and Equipment 95,765,936 3,876,057 432,534 99,209,459 Intangible Assets 2,002,779 - - 2,002,779 Total Capital Assets being depreciated 636,986,399 8,346,964 432,534 644,900,829 Less Accumulated Depreciation for:

Buildings 210,568,283 13,210,979 - 223,779,262 Land Improvements 1,465,237 289,064 - 1,754,301 Machinery and Equipment 46,671,148 9,704,543 432,534 55,943,157 Intangible Assets 832,401 298,820 - 1,131,221 Total Accumulated Depreciation 259,537,069 23,503,406 432,534 282,607,941 Total Capital Assets being depreciated, net 377,449,330 (15,156,442) - 362,292,888 Governmental Activities Capital Assets, net $ 402,547,408 $ (836,018) $ 4,238,526 $ 397,472,864 44

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

D. Interfund and Component Unit Receivables and Payables Interfund balances result from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. The composition of the County and component unit interfund receivables and payables as of June 30, 2016, is as follows:

Due to/from Other Funds - Primary Government:

Receivable Fund Payable Fund Amount Major Funds:

General Constitutional Officers' Special Revenue Fund $ 541,178 State, Federal and Other Grants 249,769 Vehicle Service Center 165,948 956,895 Public Improvement ADA Construction 359,581 Building Operations 19,017 378,598 Total Major Governmental Funds 1,335,493 Nonmajor Special Revenue Funds:

State, Federal and Other Grants General 530,929 Drug Control 127 531,056 Engineering & Public Works Public Improvement 1,442 Governmental Library General 6,000 Solid Waste General 3,110 Engineering & Public Works 600,000 603,110 Total Nonmajor Governmental Funds 1,141,608 Total Governmental Funds $ 2,477,101 45

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

D. Interfund and Component Unit Receivables and Payables (Continued):

Receivable Fund Payable Fund Amount Internal Service Funds:

Vehicle Service Center General $ 66,924 State, Federal and Other Grants 1,733 Public Library 2,455 Solid Waste 4,448 Engineering & Public Works 38,320 Self Insurance 49 113,929 Mailroom Services General 18,795 State, Federal and Other Grants 4 Engineering & Public Works 520 Employee Benefits 474 Self Insurance 75 19,868 Employee Benefits General 1,304,522 State, Federal and Other Grants 356 Public Library 1,100 1,305,978 Self Insurance Healthcare General 1,489,412 Total Internal Service Funds $ 2,929,187 46

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

D. Interfund and Component Unit Receivables and Payables (Continued)

Due to/from Primary Government and Component Units:

Receivable Fund Payable Fund Amount Primary Government - Major Funds:

Debt Service Component Unit - the Board, General Purpose School $ 13,022,088 Public Improvement Component Unit - the Board, School Construction 1,351 Total Primary Government - Major Funds 13,023,439 Primary Government - Internal Service Funds:

Vehicle Service Center Component Unit - the Board, General Purpose School 10 Component Unit - the District 261 271 Employee Benefits Component Unit - the Board, General Purpose School 223,550 Component Unit - the Board, School Federal Projects 41,012 Component Unit - the Board, School General Projects 7,351 271,913 Self Insurance Component Unit - the Board, General Purpose School 390,048 Total Primary Government - Internal Service Funds 662,232 Total Primary Government $ 13,685,671 47

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

D. Interfund and Component Unit Receivables and Payables (Continued)

Receivable Fund Payable Fund Amount Component Unit - the Board, General Purpose School Primary Government - General $ 147,314 Primary Government - Building Operations 712 148,026 Component Unit - the District Primary Government - Public Improvement 158,802 Total Component Unit - the Board $ 306,828 Due to/from Other Funds - The Board:

Receivable Fund Payable Fund Amount Major Funds:

General - General Purpose School School Federal Projects $ 5,661,141 School General Projects 672,446 School Construction 8,180,591 Central Cafeteria 20,421 14,534,599 Nonmajor Special Revenue Funds:

School Federal Projects General Purpose School 81,533 School General Projects General Purpose School 794,885 School Federal Projects 475,206 1,270,091 Total Board of Education $ 15,886,223 48

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

E. Transfers and Similar Transactions Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, and (3) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. The composition of primary government transfers for the year ended June 30, 2016, is as follows:

Primary Government:

Transfers - In Transfers - Out Amount Major Funds:

General Constitutional Officers - Special Revenue $ 10,741,900 Debt Service General 195,390 Public Improvement General 26,325 ADA Construction 359,581 Engineering & Public Works 25,984 411,890 Total Major Governmental Funds 11,349,180 Nonmajor Governmental Funds:

Special Revenue Funds:

State, Federal and Other Grants General 453,180 Governmental Library General 6,000 Public Library General 1,130,000 Hotel/Motel 600,000 1,730,000 Solid Waste Engineering & Public Works 600,000 Engineering & Public Works General 1,000,000 Total Nonmajor Governmental Funds 3,789,180 Total Governmental Funds $ 15,138,360 49

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

E. Transfers and Similar Transactions (Continued)

Transfers - In Transfers - Out Amount Internal Service Funds:

Vehicle Service Center General $ 696,327 Employee Benefits General 1,300,000 Total Internal Service Funds $ 1,996,327 Enterprise Fund:

Three Ridges Golf Course General $ 200,000 In addition, payments of $1,443,630 were made from the Pension Trust - Defined Benefit Plans to the General Fund for the County Retirement Board administrative expenses.

Transfers Within Component Unit - the Board:

Transfers - In Transfers - Out Amount Special Revenue Funds (Nonmajor):

General Purpose School Central Cafeteria $ 875,008 School Federal Projects 12,379 School General Projects 274,590 1,161,977 School General Projects General Purpose School 8,267,846 School Federal Projects 581,063 8,848,909 School Federal Projects General Purpose School 39,878 Total Board of Education $ 10,050,764 50

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

E. Transfers and Similar Transactions (Continued)

Transactions between Primary Government and Component Units:

Revenues and Other Sources Expenses/Expenditures and Other Uses Amount Primary Government - Debt Component Unit - the Board, Service (Major Fund) General Purpose School $ 13,022,088 Primary Government - Self Component Unit - the Board, Insurance Fund General Purpose School 298,024 Total Primary Government $ 13,320,112 Component Unit - General Purpose School Primary Government - General $ 7,052,000 Component Unit - School Construction Primary Government - Public Improvement 19,385,000 Component Unit - Great Schools Partnership Primary Government - General 2,501,874 Component Unit - The District Primary Government - Public Improvement 158,802 Total Component Units $ 29,097,676 Transactions between the Board and its Component Unit:

The Board, School General Projects Component Unit, Great Schools Partnership $ 951,982 51

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

F. Unearned Revenues Amounts reported as unearned revenue in the fund financial statements consist of the following:

Fund Financial Statements Primary Government - Major Funds:

General Fund:

Unearned revenue $ 60,501 Primary Government - Nonmajor Funds:

General Grants Fund:

Unexpended grant funds 2,265,547 Total - Primary Government $ 2,326,048 Component Unit - the Board - Nonmajor Funds:

School General Projects:

Unexpended grant funds $ 679,168 Central Cafeteria:

Unearned revenue 289,410 Total Component Unit - the Board $ 968,578 52

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

G. Deferred Inflows Amounts reported as deferred inflows in the fund financial statements and the government-wide financial statements consist of the following:

Fund Financial Government-wide Statements Financial Statements Primary Government - Major Funds:

General Fund:

Taxes receivable, delinquent $ 3,284,901 $ -

Taxes receivable, applicable to subsequent fiscal year 111,413,121 111,413,121 Notes receivable, applicable to subsequent fiscal year 892,015 892,015 115,590,037 112,305,136 Debt Service Fund:

Taxes receivable, delinquent 1,557,589 -

Taxes receivable, applicable to subsequent fiscal year 53,983,677 53,983,677 Notes receivable, applicable to subsequent fiscal year 6,020,000 6,020,000 61,561,266 60,003,677 Total - Primary Government $ 177,151,303 $ 172,308,813 Component Unit - the Board - Major Fund General Purpose School:

Taxes receivable, delinquent $ 3,036,945 $ -

Taxes receivable, applicable to subsequent fiscal year 101,075,821 101,075,821 Accounts receivable, applicable to subsequent fiscal year 89,015 89,015 Total Component Unit - the Board $ 104,201,781 $ 101,164,836 53

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

H. Leases Capital Leases All capital leases pertain to governmental activities.

The Primary Government and the Board lease various land, buildings and equipment through capital leasing arrangements. The Primary Governments and the Boards capital lease obligations are reflected as liabilities in the Statement of Net Position.

The future minimum lease obligations are as follows:

Component Unit -

Year Ending June 30, Primary Government The Board 2017 $ 2,882,200 $ 425,004 2018 2,925,023 425,004 2019 2,968,886 425,004 2020 3,013,820 425,004 2021 3,059,849 425,004 2022 - 2026 16,030,229 2,125,020 2027 - 2031 13,486,376 1,912,518 2032 - 2036 5,263,195 -

2037 539,557 -

Total Minimum Lease Payments $ 50,169,135 $ 6,162,558 Less: Amounts Representing Interest (12,597,981) (1,492,175)

Present Value of Minimum Lease Payments $ 37,571,154 $ 4,670,383 As of June 30, 2016, assets recorded under capital leases totaled $91,183,693 ($85,319,632 equipment,

$879,609 land, and $4,984,452 buildings). Related accumulated amortization totaled $41,203,023.

Amortization of assets recorded under capital leases is included with depreciation expense.

54

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities Loans Payable All loans payable pertain to governmental activities.

In November 2011, the County entered into a loan agreement whereby the County borrowed funds for Knox County Board of Education capital purposes. The original proceeds of $5 million, plus $7,192 accrued interest added to principal, are payable in monthly payments including interest at .75% through July 1, 2024. Debt service requirements to maturity are as follows:

Fiscal Year Ending June 30, Principal Interest Total 2017 $ 412,201 $ 24,251 $ 436,452 2018 415,303 21,149 436,452 2019 418,428 18,024 436,452 2020 421,576 14,876 436,452 2021 424,750 11,702 436,452 2022 - 2025 1,329,911 15,852 1,345,763 Total $ 3,422,169 $ 105,854 $ 3,528,023 In addition, in August 2013, the County entered into a loan agreement whereby the County borrowed funds for the Board of Education, which acquired computer equipment for instructional purposes in various schools. The total borrowed of $5,962,500 is to be repaid in four equal annual installments of

$1,490,625 ending in 2016. As of June 30, 2016, the remaining balance was $1,490,625.

The Partnership has reported non-capital related loans payable of $10,655,000, due in more than one year.

55

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities (Continued)

General Obligation and Public Improvement Bonds The County issues general obligation and public improvement bonds to provide funds for the acquisition and construction of major capital facilities. Except for the Countys General Obligation Series 2007 (Taxable) pension obligation bonds issued pursuant to the establishment of the Uniformed Officers Pension Plan, all County bonded debt was issued for capital purposes. All bonded debt pertains to governmental activities.

For financial reporting purposes, the portion of those bond issues related to the Board are recorded as payments from the primary government in the Boards Capital Projects Fund. The County issues all the debt on behalf of the Board, in the Countys name and with a full faith and credit pledge from the County. Therefore, from a legal perspective, the debt is County debt. In practice, the Countys Five-Year Capital Plan, its Debt Service Fund and its Operating Budget are all developed with the Board providing funds from its operations to make the debt payments related to County debt issued on behalf of the Board. However, as all bonded indebtedness is County debt, the entire balance is recorded as a liability of the primary government in the government-wide financial statements.

As all bonded indebtedness is County debt, the portion issued on behalf of the Board is not considered capital-related debt in the primary governments statement of net position. However, the total amount of the Countys bonded indebtedness is considered capital-related in the total reporting entity column of the statement of net position.

Bond indebtedness for the County is backed by the full faith and credit of the County.

Bonds payable to be repaid from resources of the County and the Board currently outstanding are as follows:

56

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities (Continued)

Last Interest Maturity Principal Rate Date Balance Governmental Activities:

General Obligation - Refunding Bonds, Series 2003A 5.00% 2/1/2017 $ 1,815,180 General Obligation - Series 2003 Variable Rate Swap to 3.95% 6/1/2029 27,126,816 General Obligation - Refunding Series 2004 4.00-5.25% 4/1/2020 8,513,409 General Obligation - Series 2004 Variable Rate Swap to 3.40% 6/1/2029 39,099,999 General Obligation - Refunding Series 2005A 3.569-5.00% 5/1/2021 16,866,485 General Obligation - Series 2005 Variable Rate Swap to 3.89% 6/1/2034 40,811,690 General Obligation - Series 2007 Variable Rate (.757% at 6/30/16) 6/1/2034 50,450,000 General Obligation - Series 2008 Variable Rate (.43% at 6/30/16) 6/1/2029 19,597,500 General Obligation - Series 2009 3.00-4.00% 6/1/2018 1,260,000 General Obligation - Series 2010A (Federally Taxable Build America Bonds) 1.10-5.75% (1) 6/1/2035 990,622 General Obligation - Refunding Bonds, Series 2010B 2.00-5.00% 4/1/2035 29,365,000 General Obligation - Refunding Bonds, Series 2010C 2.00-4.00% 4/1/2024 7,270,000 General Obligation - Series 2010D (Federally Taxable Build America Bonds) 1.125-6.00% (1) 6/1/2035 16,825,000 General Obligation - Series 2012 2.0 - 4.0% 4/1/2032 5,300,000 General Obligation - Series 2013 2.0 - 4.35% 6/1/2035 20,069,669 General Obligation - Series 2014A 2.125 - 5.00% 6/1/2036 14,755,000 General Obligation - Refunding Series 2014B 0.25 - 3.23% 6/1/2027 50,600,000 General Obligation - Refunding Series 2015 5.00% 4/1/2019 4,740,195 General Obligation - Series 2016 1.0 - 5.0% 6/1/2036 16,515,000 Total Bonded Debt to be repaid by Governmental Activities 371,971,565 The Board:

General Obligation - Refunding Series 2003A 5.00% 2/1/2017 4,134,820 General Obligation - Series 2003 Variable Rate Swap to 3.95% 6/1/2029 25,948,184 General Obligation - Refunding Series 2004 4.00-5.25% 4/1/2020 12,001,591 General Obligation - Series 2004 Variable Rate Swap to 3.40% 6/1/2029 20,400,001 General Obligation - Refunding Series 2005A 3.569-5.00% 5/1/2021 10,048,515 General Obligation - Series 2005 Variable Rate Swap to 3.89% 6/1/2034 22,038,310 General Obligation - Series 2007 Variable Rate (.757% at 6/30/16) 6/1/2034 18,550,000 General Obligation - Series 2008 Variable Rate (.43% at 6/30/16) 6/1/2029 10,552,500 General Obligation - Series 2010A (Federally Taxable Build America Bonds) 1.10-5.75% (1) 6/1/2035 14,859,378 General Obligation - Refunding Bonds, Series 2010C 2.00-4.00% 4/1/2024 14,210,000 General Obligation - Qualified School Construction Bonds .0% (2) 7/1/2027 20,418,642 General Obligation - Series 2012 2.0 - 4.0% 4/1/2032 8,400,000 General Obligation - Series 2013 2.0 - 4.35% 6/1/2035 17,340,331 General Obligation - Series 2014A 2.125 - 5.00% 6/1/2036 14,510,000 General Obligation - Refunding Series 2014B 0.25 - 3.23% 6/1/2027 2,635,000 General Obligation - Refunding Series 2015 5.00% 4/1/2019 7,584,805 General Obligation - Series 2016 1.0 - 5.0% 6/1/2036 19,385,000 Total Bonded Debt to be repaid by the Board 243,017,077 Total Bonded Debt $ 614,988,642 (1) Stated interest rates on the Build America Bonds do not include the effects of the interest subsidy expected to be received from the federal government pursuant to the federal Build America Bonds program. The interest rate subsidy, 35% at issuance of the bonds, is being reduced due to sequestration by the federal government. At June 30, 2016, the sequestration rate was 6.8%.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities (Continued)

(2) Stated interest rate is net of the interest rate subsidy to be received from the federal government pursuant to the federal Qualified School Construction Bonds program.

Annual debt service requirements to maturity for bonds to be repaid by the County and the Board are as follows:

Fiscal Year Primary Government Debt To be Repaid By:

Ending June 30, Principal Interest Total County Board Total 2017 $ 42,774,281 $ 26,280,265 $ 69,054,546 $ 37,250,891 $ 31,803,655 $ 69,054,546 2018 39,684,281 24,382,086 64,066,367 35,945,985 28,120,382 64,066,367 2019 40,264,281 22,854,171 63,118,452 35,917,483 27,200,969 63,118,452 2020 38,179,281 21,278,080 59,457,361 34,848,788 24,608,573 59,457,361 2021 35,979,281 19,717,889 55,697,170 33,987,512 21,709,658 55,697,170 2022 - 2026 153,216,405 81,759,928 234,976,333 143,978,871 90,997,462 234,976,333 2027 - 2031 155,010,832 46,190,033 201,200,865 126,902,462 74,298,403 201,200,865 2032 - 2036 109,880,000 11,783,978 121,663,978 76,434,329 45,229,649 121,663,978 Total $ 614,988,642 $ 254,246,430 $ 869,235,072 $ 525,266,321 $ 343,968,751 $ 869,235,072 The total bonded debt service requirements to be repaid by the County and the Board include interest of

$153,294,756 and $100,951,674, respectively, for a total of $254,246,430.

Changes in General Long-Term Liabilities The following represents the changes in long-term liabilities for the County, the Board, and the District for the year ended June 30, 2016:

Balance Balance Current July 1 Additions Deductions June 30 Portion Primary Government Bonded Debt $ 622,812,923 $ 35,900,000 $ (43,724,281) $ 614,988,642 $ 42,774,281 Unamortized Bond Premium 7,698,939 2,206,016 (1,777,761) 8,127,194 1,718,836 Loans Payable 6,812,540 - (1,899,746) 4,912,794 1,902,826 Capital Leases 38,930,963 - (1,359,810) 37,571,153 1,649,788 Compensated Absences 8,666,801 6,859,182 (6,857,744) 8,668,239 7,798,604 Total - Primary Government $ 684,922,166 $ 44,965,198 $ (55,619,342) $ 674,268,022 $ 55,844,335 Component Unit - the Board Compensated Absences $ 2,894,964 $ 2,795,627 $ (3,032,685) $ 2,657,906 $ 2,392,115 Capital Lease 4,903,489 - (233,106) 4,670,383 242,604 Total Component Unit - the Board $ 7,798,453 $ 2,795,627 $ (3,265,791) $ 7,328,289 $ 2,634,719 Component Unit - the District Compensated Absences $ 303,046 $ 367,519 $ (357,056) $ 313,509 $ 313,509 Total - the District $ 303,046 $ 367,519 $ (357,056) $ 313,509 $ 313,509 58

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities (Continued)

Changes in General Long-Term Liabilities (Continued)

For the primary government, compensated absences totaling $45,623 pertains to the non-major enterprise fund, with the remaining long-term liabilities related to governmental activities.

Interest Rate Swaps The Countys Statement of Net Position includes interest rate swap derivatives with a fair value totaling $38,599,015. The fair value of these derivatives was measured using Level 2 inputs, which were valued using a market approach that considers benchmark interest rates and foreign exchange rates.

Series C-1-A Under its loan agreement, the Public Building Authority of Blount County, TN (the Authority), at the request of the County, has entered into an interest rate swap agreement for all of the outstanding Local Government Improvement Bonds, Series C-1-A.

Objective of the interest rate swap. In order to protect against the potential of rising interest rates and to balance its mixture of variable and fixed rate debt, the County requested the Authority, on its behalf, to enter into an interest rate swap in connection with its $72 million Series C-1-A variable-rate bonds.

The intention of the swap was to effectively change the Countys variable interest rate on the bonds to a synthetic fixed rate. The swap agreement has been determined to be an effective hedge, and is therefore accounted for as a hedging derivative instrument. The fair value of the hedging derivative instrument is reported in the Statement of Net Position as a long-term obligation. Accumulated changes in fair values are reported as deferred outflows in the Statement of Net Position.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities (Continued)

Terms. Under the swap, the Authority pays the counterparty a fixed payment of 3.95 percent and receives a variable payment computed as 63.2 percent of the five-year London Interbank Offered Rate (LIBOR). At inception, the swap had a notional amount of $72 million and the associated variable-rate bond had a $72 million principal amount. The interest rate swap agreement is based on the same amortization schedule as the outstanding principal of the Series C-1-A Bonds. The bonds variable-rates have historically approximated the Securities Industry and Financial Markets Association lndex (the SIFMA). The bonds and the related swap agreement mature on June 1, 2029. As of June 30, 2016, rates were as follows:

Terms Rates Interest rate swap:

Fixed payment by Authority Fixed 3.95%

Variable payment to Authority  % of LIBOR -0.62%

Net interest rate swap payments 3.33%

Variable-rate bond coupon payments 0.43%

Synthetic interest rate on bonds 3.76%

Fair value. As of June 30, 2016, the swap had a negative fair value of ($10,747,564), a change of

($2,126,397) compared to the June 30, 2015 balance of ($8,621,167). The negative fair value of the swap may be countered by reductions in total interest payments required under the variable-rate bond, creating lower synthetic rates. Because the rates on the governments variable-rate bonds adjust to changing interest rates, the bonds do not have a corresponding fair value increase. The fair value model calculates future cash flows by projecting forward rates, and then discounts those cash flows at their present value.

Credit risk. As of June 30, 2016, the County was not exposed to credit risk because the swap had a negative fair value. However, should interest rates change and the fair value of the swap becomes positive, the County would be exposed to credit risk in the amount of the swaps fair value. The swap counterparty, Morgan Keegan Financial Products (MKFP) was rated A+ by Standard and Poors as of June 30, 2016, with its Credit Support Provider, Deutsche Bank, rated Baa2/BBB+/BBB+ by Moodys, Standard & Poors and Fitch, respectively.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities (Continued)

Basis risk. As noted above, the swap exposes the County to basis risk should the rate on the bonds increase to above 63.2% of LIBOR, thus increasing the synthetic rate on the bonds. If a change occurs that results in the rate on the bonds to be below 63.2% of LIBOR, then the synthetic rate on the bonds will decrease.

Termination risk. The derivative contract uses the International Swap Dealers Association Master Agreement, which includes standard termination events, such as failure to pay and bankruptcy. The Schedule to the Master Agreement includes an additional termination provision. The Authority or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. If the swap is terminated, the variable-rate bond would no longer carry a synthetic interest rate. Also, if at the time of termination the swap has a negative fair value, the Authority would be liable to the counterparty for a payment equal to the swaps fair value. Likewise, if the swap has a positive fair value at termination, the counterparty would be liable to the Authority for a payment equal to the swaps fair value.

Swap payments and associated debt. As of June 30, 2016, debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates remain the same, for their term were as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary.

Variable Rate Bonds Fiscal Year Net Interest Rate Ending June 30 Principal Interest Swap Payment Total 2017 2,775,000 228,223 1,765,614 4,768,837 2018 2,950,000 216,290 1,673,300 4,839,590 2019 3,125,000 203,605 1,575,164 4,903,769 2020 3,300,000 190,168 1,471,207 4,961,375 2021 3,525,000 175,978 1,361,427 5,062,405 2022-2026 21,225,000 632,638 4,894,319 26,751,957 2027-2029 16,175,000 141,900 1,097,791 17,414,691

$ 53,075,000 $ 1,788,802 $ 13,838,822 $ 68,702,624 Series VI-A-1 Under its loan agreement, the Public Building Authority of Sevier County, TN (the Authority), at the request of the County, has entered into an interest rate swap agreement for all of the outstanding Local Government Improvement Bonds, Series VI-A-1.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities (Continued)

Objective of the interest rate swap. In order to protect against the potential of rising interest rates and to balance its mixture of variable and fixed rate debt, the County requested the Authority, on its behalf, to enter into an interest rate swap in connection with its $70 million Series VI-A-1 variable-rate bonds.

The intention of the swap was to effectively change the Countys variable interest rate on the bonds to a synthetic fixed rate. The swap agreement has been determined to be an ineffective hedge, and is therefore accounted for as an investment derivative instrument. The fair value of the investment derivative instrument is reported in the Statement of Net Position as a long-term obligation. Changes in the fair value of the derivative instrument are reported within the investment revenue classifications in the Statement of Activities.

Terms. Under the swap, the Authority pays a fixed payment of 3.40 percent and receives a variable payment computed as 59 percent of the five-year London Interbank Offered Rate (LIBOR). At inception, the swap had a notional amount of $70 million and the associated variable-rate bond had a

$70 million original principal amount. The interest rate swap agreement is based on the same amortization schedule as the outstanding principal of the Series VI-A-1 Bonds. The bonds variable-rates have historically approximated the Securities Industry and Financial Markets Association lndex (the SIFMA). The bonds and the related swap agreement mature on June 1, 2029. As of June 30, 2016, rates were as follows:

Terms Rates Interest rate swap:

Fixed payment by Authority Fixed 3.40%

Variable payment to Authority  % of LIBOR -0.58%

Net interest rate swap payments 2.82%

Variable-rate bond coupon payments 0.43%

Synthetic interest rate on bonds 3.25%

Fair value. As of June 30, 2016, the swap had a negative fair value of ($9,913,810), a change of

($2,318,351) compared to the June 30, 2015 balance of ($7,595,459). The negative fair value of the swap may be countered by reductions in total interest payments required under the variable-rate bond, creating lower synthetic rates. Because the rates on the governments variable-rate bonds adjust to changing interest rates, the bonds do not have a corresponding fair value increase. The fair value model calculates future cash flows by projecting forward rates, and then discounts those cash flows at their present value.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities (Continued)

Credit risk. As of June 30, 2016, the County was not exposed to credit risk because the swap had a negative fair value. However, should interest rates change and the fair value of the swap becomes positive, the County would be exposed to credit risk in the amount of the swaps fair value. The swap counterparty, Morgan Keegan Financial Products (MKFP) was rated A+ by Standard and Poors as of June 30, 2016, with its Credit Support Provider, Deutsche Bank, rated Baa2/BBB+/BBB+ by Moodys, Standard & Poors and Fitch, respectively.

Basis risk. As noted above, the swap exposes the County to basis risk should the rate on the bonds increase to above 59% of LIBOR, thus increasing the synthetic rate on the bonds. If a change occurs that results in the rate on the bonds to be below 59% of LIBOR, then the synthetic rate on the bonds will decrease.

Termination risk. The derivative contract uses the International Swap Dealers Association Master Agreement, which includes standard termination events, such as failure to pay and bankruptcy. The Schedule to the Master Agreement includes an additional termination provision. The Authority or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. If the swap is terminated, the variable-rate bond would no longer carry a synthetic fixed interest rate. Also, if at the time of termination the swap has a negative fair value, the Authority would be liable to the counterparty for a payment equal to the swaps fair value. Likewise, if the swap has a positive fair value at termination, the counterparty would be liable to the Authority for a payment equal to the swaps fair value.

Swap payments and associated debt. As of June 30, 2016, debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates remain the same, for their term were as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary.

Variable Rate Bonds Fiscal Year Net Interest Rate Ending June 30 Principal Interest Swap Payment Total 2017 $ 3,200,000 $ 255,850 $ 1,675,996 $ 5,131,846 2018 3,400,000 242,090 1,585,858 5,227,948 2019 3,600,000 227,470 1,490,087 5,317,557 2020 3,810,000 211,990 1,388,682 5,410,672 2021 4,030,000 195,607 1,281,362 5,506,969 2022-2026 23,840,000 697,546 4,569,413 29,106,959 2027-2029 17,620,000 154,069 1,009,259 18,783,328

$ 59,500,000 $ 1,984,622 $ 13,000,657 $ 74,485,279 63

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities (Continued)

Series D-3-A Under its loan agreement, the Public Building Authority of Blount County, TN (the Authority), at the request of the County, has entered into an interest rate swap agreement for all of the outstanding Local Government Improvement Bonds, Series D-3-A.

Objective of the interest rate swap. In order to protect against the potential of rising interest rates and to balance its mixture of variable and fixed rate debt, the County requested the Authority, on its behalf, to enter into an interest rate swap in connection with its $77 million Series D-3-A variable-rate bonds. The intention of the swap was to effectively change the Countys variable interest rate on the bonds to a synthetic fixed rate. The swap agreement has been determined to be an effective hedge, and is therefore accounted for as a hedging derivative instrument. The fair value of the hedging derivative instrument is reported in the Statement of Net Position as a long-term obligation. Accumulated changes in fair values are reported as deferred outflows in the Statement of Net Position.

Terms. Under the swap, the Authority pays the counterparty a fixed payment of 3.89 percent and receives a variable payment computed as 63.2 percent of the five-year London Interbank Offered Rate (LIBOR).

At inception, the swap had a notional amount of $77 million and the associated variable-rate bond had a

$77 million principal amount. The interest rate swap agreement is based on the same amortization schedule as the outstanding principal of the Series D-3-A Bonds. The bonds variable-rates have historically approximated the Securities Industry and Financial Markets Association Index (the SIFMA). The bonds and the related swap agreement mature on June 1, 2034. As of June 30, 2016, rates were as follows:

Terms Rates Interest rate swap:

Fixed payment by Authority Fixed 3.89%

Variable payment to Authority  % of LIBOR -0.62%

Net interest rate swap payments 3.27%

Variable-rate bond coupon payments 0.90%

Synthetic interest rate on bonds 4.17%

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities (Continued)

Fair value. As of June 30, 2016, the swap had a negative fair value of ($17,937,641), a change of

($4,511,676) compared to the June 30, 2015 balance of ($13,425,965). The negative fair value of the swap may be countered by reductions in total interest payments required under the variable-rate bond, creating lower synthetic rates. Because the rates on the governments variable-rate bonds adjust to changing interest rates, the bonds do not have a corresponding fair value increase. The fair value model calculates future cash flows by projecting forward rates, and then discounts those cash flows at their present value.

Credit risk. As of June 30, 2016, the County was not exposed to credit risk because the swap had a negative fair value. However, should interest rates change and the fair value of the swap becomes positive, the County would be exposed to credit risk in the amount of the swaps fair value. The swap counterparty, Morgan Keegan Financial Products (MKFP) was rated A+ by Standard and Poors as of June 30, 2016, with its Credit Support Provider, Deutsche Bank, rated Baaa2/BBB+/BBB+ by Moodys, Standard & Poors and Fitch, respectively.

Basis risk. As noted above, the swap exposes the County to basis risk should the rate on the bonds increase to above 63.2 percent of LIBOR, thus increasing the synthetic rate on the bonds. If a change occurs that results in the rate on the bonds to be below 63.2 percent of LIBOR, then the synthetic rate on the bonds will decrease.

Termination risk. The derivative contract uses the International Swap Dealers Association Master Agreement, which includes standard termination events, such as failure to pay and bankruptcy. The Schedule to the Master Agreement includes an additional termination provision. The Authority or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. If the swap is terminated, the variable-rate bond would no longer carry a synthetic interest rate. Also, if at the time of termination the swap has a negative fair value, the Authority would be liable to the counterparty for a payment equal to the swaps fair value. Likewise, if the swap has a positive fair value at termination, the counterparty would be liable to the Authority for a payment equal to the swaps fair value.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

I. Long-Term Liabilities (Continued)

Swap payments and associated debt. As of June 30, 2016, debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates remain the same, for their term were as follows. As rates vary, variable-rate bond interest payments and net swap payments will vary.

Variable Rate Bonds Fiscal Year Net Interest Rate Ending June 30 Principal Interest Swap Payment Total 2017 $ 2,100,000 $ 565,595 $ 2,055,597 $ 4,721,192 2018 2,250,000 546,697 1,986,914 4,783,611 2019 2,375,000 526,449 1,913,324 4,814,773 2020 2,500,000 505,076 1,835,647 4,840,723 2021 2,625,000 482,578 1,753,881 4,861,459 2022-2026 5,375,000 2,200,286 7,996,715 15,572,001 2027-2031 19,475,000 1,884,867 6,850,355 28,210,222 2032-2034 26,150,000 476,954 1,733,439 28,360,393

$ 62,850,000 $ 7,188,502 $ 26,125,872 $ 96,164,374 66

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

J. Fund Equity The amounts reported on the balance sheets as fund balances for the County are comprised of the following:

Major Funds Capital Projects Constitutional Public Debt General Officers Improvement Service Total Fund balances:

Nonspendable:

Inventories $ 427,863 $ - $ - $ - $ 427,863 Prepaids 196,792 - - - 196,792 Investment in Joint Venture 5,337,350 - - - 5,337,350 5,962,005 - - - 5,962,005 Restricted for:

Finance and Administration 304,416 - - - 304,416 Administration of Justice 623,031 - - - 623,031 Public Safety 281,338 - - - 281,338 Public Health & Welfare 1,033,195 - - - 1,033,195 Social and Cultural 208,111 - - - 208,111 Debt Service - - - 83,528 83,528 Capital Projects - - 5,977,468 - 5,977,468 2,450,091 - 5,977,468 83,528 8,511,087 Committed to:

Finance and Administration 57,448 - - - 57,448 Administration of Justice 99,000 - - - 99,000 Public Safety 165,000 - - - 165,000 Public Health & Welfare 410,000 - - - 410,000 Social and Cultural 13,900 - - - 13,900 Other General Government 1,552,000 - - - 1,552,000 Debt Service - - - 24,187,432 24,187,432 2,297,348 - - 24,187,432 26,484,780 Assigned to:

Finance and Administration 52,124 1,890,805 - - 1,942,929 Administration of Justice 105,398 3,335,982 - - 3,441,380 Public Safety 148,918 - - - 148,918 Public Health & Welfare 7,592 - - - 7,592 Social and Cultural 109,373 - - - 109,373 Other General Government 366,036 - - - 366,036 789,441 5,226,787 - - 6,016,228 Unassigned: 60,783,057 - - - 60,783,057 Total fund balances $ 72,281,942 $ 5,226,787 $ 5,977,468 $ 24,270,960 $ 107,757,157 67

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

J. Fund Equity (Continued)

Nonmajor Governmental Funds State, Federal Governmental Public Solid Hotel/Motel Drug Engineering & ADA and Other Grants Library Library Waste Tax Control Public Works Construction Total Fund balances:

Nonspendable:

Inventories $ 69,985 $ - $ - $ - $ - $ - $ - $ - $ 69,985 Prepaids 20,185 - 12,011 - 12,500 - - - 44,696 90,170 - 12,011 - 12,500 - - - 114,681 Restricted for:

Finance and Administration 77,010 - - - - - - - 77,010 Administration of Justice 96,787 - - - - - - - 96,787 Public Safety 195,439 - - - - 2,413,224 - - 2,608,663 Public Health & Welfare 1,198,885 - - - - - - - 1,198,885 Social and Cultural 35,962 - - - 1,975,004 - - - 2,010,966 Other General Government 196,296 - - - - - - - 196,296 Highway Grants 278,668 278,668 2,079,047 - - - 1,975,004 2,413,224 - - 6,467,275 Committed to:

Public Health & Welfare - - - 1,284,362 - - - - 1,284,362 Social and Cultural - 48,896 1,676,141 - - - - - 1,725,037 Engineering & Public Works - - - - - - 3,888,391 - 3,888,391 Capital Projects - - - - - - - 268,583 268,583

- 48,896 1,676,141 1,284,362 - - 3,888,391 268,583 7,166,373 Total fund balances $ 2,169,217 $ 48,896 $ 1,688,152 $ 1,284,362 $ 1,987,504 $ 2,413,224 $ 3,888,391 $ 268,583 $ 13,748,329 68

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

J. Fund Equity (Continued)

The amounts reported on the balance sheets as fund balances for the Board are comprised of the following:

School General Construction School School Purpose Capital Federal General Central Schools Projects Projects Projects Cafeteria Total Fund balances:

Nonspendable:

Inventories $ 1,044,579 $ - $ - $ 633,136 $ 200,305 $ 1,878,020 Prepaids 588,679 - 11,983 43,456 - 644,118 1,633,258 - 11,983 676,592 200,305 2,522,138 Restricted for:

Education - - - - 8,288,339 8,288,339 Committed to:

Education - - - 2,365,587 - 2,365,587 Assigned to:

Education 396,527 - - - - 396,527 Unassigned: 18,325,000 (9,719,404) (11,983) - - 8,593,613 Total fund balances $ 20,354,785 $ (9,719,404) $ - $ 3,042,179 $ 8,488,644 $ 22,166,204 The School Construction Capital Projects Fund had a deficit balance of $9,719,404 at June 30, 2016.

The deficit balance was caused by the timing of the recognition of various expenditures and the related debt issuances. Expenditures for this fund are funded primarily by debt proceeds. The adopted Capital Improvement Plan includes planned debt issuance for the Board of $63,750,000. In addition, future Capital Improvement Plans will include planned debt issuance in amounts sufficient to cover all approved expenditures. The funds to be received upon issuance will eliminate the deficit.

K. Property Taxes Property taxes levied by the County Commission are the primary source of revenue for the County and the Board. Assessed values are established by the State of Tennessee at the following rates of assumed market value:

Personal Property 30 %

Railroads, Industrial and Commercial Property 40 %

Public Utility 55 %

Residential and Farm Real Property 25 %

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE III. DETAILED NOTES ON ALL FUNDS (Continued)

K. Property Taxes (Continued)

Taxes were levied at a rate of $2.32 per $100 of assessed values. Tax collections of $252,882,970 for fiscal year 2016 were approximately 97.5 percent of the total tax levy.

The 2016 fiscal year property tax rate of $2.32 was divided between the County and the Board as follows:

Percent of Amount Total Primary Government:

General Fund $ 0.97 41.81%

Debt Service Fund 0.47 20.26%

Total - Primary Government 1.44 62.07%

Component Unit - the Board:

General Fund - General Purpose School Fund 0.88 37.93%

Total Tax Levy $ 2.32 100.00%

The 2017 fiscal year property tax rate of $2.32 is divided between the County and the Board as follows:

Percent of Amount Total Primary Government:

General Fund $ 0.97 41.81%

Debt Service Fund 0.47 20.26%

Total - Primary Government 1.44 62.07%

Component Unit - the Board:

General Fund - General Purpose School Fund 0.88 37.93%

Total Tax Levy $ 2.32 100.00%

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION A. Joint Ventures The County is a participant in a joint venture with the City of Knoxville and the Knoxville Utilities Board in the operation of the Geographic Information Systems (GIS). The Geographic Information Systems was established to create and maintain a digitized mapping system of Knox County. Each of the participants appoints one of the three board members who oversee the operations. In March 1987, the County issued public improvement bonds, which included $5,500,000 used to install the geographic information system. In accordance with the terms of the joint venture agreement, payments are shared between the County, the City of Knoxville and the Knoxville Utilities Board. In the 2016 fiscal year, the joint venture received 91 percent of its revenues from the participants in the joint venture. The Geographic Information Systems charged the County $430,190 for the year ended June 30, 2016. The County does not retain an equity interest in the joint venture. The financial results of Geographic Information Systems have maintained adequate levels. Since the support for Geographic Information Systems is shared with two other entities, the County considers its involvement to be low risk. Complete separate financial statements for the Geographic Information Systems may be obtained at 606 Main Street, Suite 150, Main Place, Knoxville, TN 37902.

The County is a participant in a joint venture with the City of Knoxville in the operation of the Public Building Authority of the County of Knox and the City of Knoxville, Tennessee (PBA). The Authority was created to purchase, construct, refurbish, maintain and operate certain public building complexes to house the governments of the County and the City of Knoxville. The County appoints six of an eleven-member board of directors, which oversee the operations of PBA. The fact that the County appoints a majority of the board is negated by the participants' agreements calling for joint control of PBA. The County retains an equity interest in the joint venture. The County contributed $6,744,383 to the PBA for development, management, and maintenance of County projects during 2016. Complete separate financial statements for PBA may be obtained at Room M-22, City County Building, 400 Main Street, Knoxville, TN 37902.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION A. Joint Ventures (Continued)

Condensed financial information for GIS and PBA as of June 30, 2016 and for the year then ended, is as follows:

ASSETS GIS PBA Cash and Cash Equivalents $ 463,918 $ 5,124,722 Receivables 25,285 2,669,749 Inventory - 12,235 Prepaids 67,697 85,052 Capital Assets - Net 245,212 7,987,860 Total Assets 802,112 15,879,618 LIABILITIES AND NET POSITION Liabilities Accounts Payable and Accrued Liabilities 81,173 3,068,515 Due To Others - 1,089,007 Customer Deposits - 18,719 Compensated Absences 42,600 476,796 Total Liabilities 123,773 4,653,037 Net Position Investment in Capital Assets 245,212 7,987,860 Unrestricted 433,127 3,238,721 Total Net Position $ 678,339 $ 11,226,581 SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION Total Operating Revenues $ 1,529,569 $ 15,155,459 Total Operating Expenses (1,396,226) (14,563,259)

Operating Income (Loss) 133,343 592,200 Non-Operating Revenues 186,094 21,844 Non-Operating Expenses - (1,930,651)

Capital Contributions - 1,298,538 Increase (Decrease) in Net Position 319,437 (18,069)

Net Position, Beginning of Year 358,902 11,244,650 Net Position, End of Year $ 678,339 $ 11,226,581 72

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

B. Related Organizations The County is responsible for all of the board appointments of the Knox County Industrial Development Board. However, the County has no further accountability for the organization.

The County is responsible for a minority of the board appointments for the Knoxville-Knox County Community Action Committee. During the year ended June 30, 2016, the County appropriated operating subsidies of $1,500,919 to the Community Action Committee.

In FY 2016, the County and the Hall of Fame Management, Inc., dba the Womens Basketball Hall of Fame (the Hall) were parties to a contract for the operations management of the Womens Basketball Hall of Fame. The County paid the Hall a management fee. Pursuant to that contract, the Hall managed the day-to-day operations and events at the facility, collected revenues for the County, and paid the operating expenses from these revenues. All revenues collected by the Hall were the property of the County and held by the Hall in trust as public funds and applied to pay operating expenses in accordance with the budget. To the extent revenues were insufficient, the Hall was to pay operating expenses out of its management fee.

In 2016, the County and the Knoxville Convention & Visitors Bureau, Inc., dba Visit Knoxville were parties to a contract whereby Visit Knoxville performed tourism marketing services for Knox County.

Visit Knoxville received a percentage of hotel-motel tax collections as compensation for these services.

The County appoints certain board members of Visit Knoxville.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

C. Risk Management The County has established the Self Insurance Healthcare Fund for risks associated with employees health plan and the Self Insurance Fund for the majority of risks associated with the general liability and workers compensation claim settlements. In the Self Insurance Fund, each participating fund with eligible employees is charged a premium calculated using trends in actual claims experience. The Board and the District (component units), the Geographic Information Systems (joint venture between the County and the City of Knoxville), and the Knox County-City of Knoxville Metropolitan Planning Commission (a separate governmental organization) also participate in one or both of the plans. The Self Insurance Healthcare and the Self Insurance Fund are accounted for as internal service funds where assets are set aside for claim settlements. The County retains the risk of loss to a limit of

$450,000 for each employee in any plan year for health coverage and $750,000 for each employee (except the Sheriffs Department which is $1,250,000 per employee) in any plan year for workers compensation coverage by obtaining stop/loss commercial insurance policies that covers claims beyond these limits.

At June 30, 2016, Humana and Catamaran OptumRx are the third-party administrators of the Countys self-insured healthcare plans. In the Self Insurance Healthcare Fund, a premium is charged to the participating fund, component unit, joint venture, or outside entity that accounts for eligible employees.

The total charges for the funds are calculated using trends in actual claims experience. In instances where medical claims materially exceed premiums received, each participating entity is charged a pro-rata basis for any fund deficits incurred.

Liabilities of the funds are recorded when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). Claim liabilities are calculated considering the effects of inflation and recent claim settlements. The County has an independent actuary develop the estimates for claims liabilities including IBNR on an annual basis. Changes in the balances of claims during the past two fiscal years are as follows:

Self Insurance Healthcare Fund - Self Insurance Fund - General Liability, Medical Claims and Workers' Compensation Fiscal Year 2016 Fiscal Year 2015 Fiscal Year 2016 Fiscal Year 2015 Unpaid Claims - Beginning Balance $ 1,780,523 $ 1,190,451 $ 13,043,037 $ 15,027,569 Incurred Claims (Including IBNR's) 26,815,077 26,004,027 5,239,771 123,888 Claim Payments (26,686,011) (25,413,955) (2,369,850) (2,108,420)

Unpaid Claims - Ending Balance $ 1,909,589 $ 1,780,523 $ 15,912,958 $ 13,043,037 74

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

C. Risk Management (Continued)

The Self Insurance Fund had a deficit net position balance of $3,596,588 at June 30, 2016.

Management plans to eliminate the deficit by increasing charges for services and by implementing additional procedures designed to reduce claims costs by additional monitoring and settlement procedures.

The County and the Board purchase insurance coverage for personal and real property. The District purchases insurance coverage for personal and real property, general liability and workers compensation coverage. The County and its component units have had no significant reduction in insurance coverage over the last three years. Settlements have not exceeded insurance coverage in the past three fiscal years.

The Board maintains workers compensation and employers liability insurance for approximately 3,226 non-certified employees (i.e. security officers, educational assistants, nutrition services, and operations) through the Tennessee Risk Management Trust (TNRMT), a public entity risk pool operated as a risk-sharing program by the Tennessee School Board Association (TSBA). This pool is sustained by member premiums, and, because the pool has excess aggregate and individual claim loss reinsurance coverage, management considers any related credit risk to be insignificant.

Certain self insurance liabilities of the Board that are for unexpected and unusual claims are reported directly in the Board of Educations Statement of Net Position. As of June 30, 2016, the liabilities were $3,686,570.

D. Other Post Employment Benefits Retiree Healthcare Plan Description As authorized by County Resolution, the County provides post-retirement health care benefits for County retirees and their dependents. Retirees may participate only until they reach age 65 (except for a few grandfathered retirees who still have active medical insurance). The retiree is responsible for paying 100 percent of the related premium. The retirees who have chosen to participate in the County's medical insurance plan have not been evaluated on a separate experience rating from those of existing County and Board employees. Therefore, participating retirees contribute the same premium as existing employees, plus the amount the employer contributes for existing employees. Under this arrangement the retiree contributions are expected to be less than their expected health care cost, and a portion of the premiums the County pays on behalf of its active employees is deemed to subsidize the retirees costs. This implicit subsidy is an Other Post-employment Benefit (OPEB) as defined by GASB Statement No. 45. The Countys medical insurance plan, a single-employer defined benefit plan, does not issue a separate financial report.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

D. Other Post Employment Benefits (Continued)

Retiree Healthcare (Continued)

Funding Policies The contribution requirements of the County healthcare plan members and the County are established in the annual budget approved by County Commission. The required contribution is based on the annual premiums for the healthcare plan. The active employees pay a portion of the premium cost and the County pays the remaining premiums. For health insurance, the retiree contributes 100% of all premium payments. For the fiscal year ended June 30, 2016, the retirees contributed $348,300 to the active Humana medical plans. Retirees contributed 100% of the cost of the Medicare Advantage premium totaling $176,286. Effective January 1, 2016, the Medicare Advantage Plan was no longer offered through Knox County for retirees.

Annual OPEB Cost and Net OPEB Obligation The Countys annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liability over a period not to exceed thirty years.

The plan contains both active employees and retirees. Although the Countys annual contribution is 36.70% of premium payments for the combined participants, the share of claims related to retirees represents a higher percentage of the total claims. Accordingly, contributions reflected in the OPEB calculations have been adjusted to reflect that a portion of contributions for active employees are subsidizing the retiree claims.

As the OPEB consists solely of the implicit subsidy of retiree healthcare contributions, the County has elected to have actuarial valuations performed biennially.

The following table shows the components of the Countys annual OPEB cost, the amounts contributed to the plan, and changes in the Countys net OPEB obligation:

Annual Required Contribution $ 353,450 Interest on net OPEB obligation 43,476 Adjustment to annual required contribution (60,118)

Annual OPEB Cost 336,808 Contribution made (123,463)

Increase (decrease) in net OPEB obligation 213,345 Net OPEB obligation July 1, 2015 1,086,893 Net OPEB obligation June 30, 2016 $ 1,300,238 76

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

D. Other Post Employment Benefits (Continued)

Retiree Healthcare (Continued)

Annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation were as follows:

Percentage Fiscal Year Annual of Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation June 30, 2013 $ 278,805 51.62% $ 782,362 June 30, 2014 294,662 47.30% 937,656 June 30, 2015 305,965 51.22% 1,086,893 June 30, 2016 336,808 36.70% 1,300,238 Funded Status and Funding Progress As of July 1, 2015, the most recent actuarial valuation date, the County healthcare plan was 0% funded.

The actuarial accrued liability for benefits for June 30, 2016 was $2,749,997, resulting in an unfunded actuarial accrued liability (UAAL) of $2,749,997. The schedule of funding progress immediately following the notes to financial statements presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.

Actuarial Valuations Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the Plan and the annual required contributions of the County Plan members are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress, presented as required supplementary information following these notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

D. Other Post Employment Benefits (Continued)

Retiree Healthcare (Continued)

Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive Plan (the Plan as understood by the employer and the Plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the County and Plan members at that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the July 1, 2015 valuation, the projected unit credit cost method was used. The actuarial assumptions included a funded interest rate of 4.0% and a participation rate of 10%. Annual health care costs are assumed to increase 9% in the first year of valuation. Future annual increases are assumed to grade uniformly to 5% by the year 2023. The UAAL is being amortized as a level percentage of projected payrolls on a closed basis. The remaining amortization period at June 30, 2016 was 20.77 years.

Disability Plan Plan Description As authorized by County Resolution, the County provides disability benefits for eligible employees of the County who are participants in the UOPP, STAR, Closed Defined Benefit, or Asset Accumulation Plans and who become disabled after January 1, 2014. The Plan, a single-employer OPEB plan, is administered by the Knox County Retirement and Pension Board. Participating employees become eligible after five years of credited service, unless the disability occurs as a result of an act required to perform duties in the course of employment, in which case there is no service requirement. The employer pays 100 percent of the related premium. In the event of disability, eligible employees receive benefits equal to 60% of pre-disability compensation as of the date of the disability, subject to offset by Social Security, workers compensation, and adjustments for earned income. Benefits continue until the employee is no longer disabled, reaches Social Security normal retirement age, or begins receiving benefits from a County-funded retirement plan, whichever is earliest. The Plan issues a stand-alone report, which may be obtained at Suite 371, City County Building, 400 Main Street, Knoxville, TN 17902.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

D. Other Post Employment Benefits (Continued)

Disability Plan (Continued)

Funding Policies Annual required contributions to the Plan are determined each year as part of the actuarial valuation process. The annual required contributions for the current year were determined using the following significant assumptions:

Actuarial Measurement Date June 30, 2016 Actuarial Cost Method Individual Entry Age Normal Amortization Method Level % of Payroll, Closed Remaining Amortization Period 18 years Actuarial Valuation of Assets Smoothed Market Value Over 5 Years Inflation Rate 1.45%

Investment Return 7.00%

Projected Salary Increases 3.00%

Post Retirement Increases (Cost of Living Adjustments) None Annual OPEB Cost and Net OPEB Obligation The following table shows the components of the Countys annual OPEB cost, the amounts contributed to the plan, and changes in the Countys net OPEB obligation.

Annual Required Contribution $ 530,426 Interest on net OPEB Obligation (64,310)

Adjustment to annual required contribution 85,357 Annual OPEB Cost 551,473 Contribution made (1,183,523)

Increase (decrease) in net OPEB obligation (632,050)

Net OPEB obligation July 1, 2015 (918,716)

Net OPEB (asset) obligation June 30, 2016 $ (1,550,766) 79

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

D. Other Post Employment Benefits (Continued)

Disability Plan (Continued)

Annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation were as follows:

Percentage Fiscal Year Annual of Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation (Asset)

June 30, 2014 $ - N/A $ (354,018)

June 30, 2015 534,678 208.43% (918,716)

June 30, 2016 551,473 223.13% (1,550,766)

Funded Status and Funding Progress As of July 1, 2016, the most recent actuarial valuation date, the County plan was 47.81% funded. The actuarial accrued liability for benefits for June 30, 2016 was $3,036,796, resulting in an unfunded actuarial accrued liability (UAAL) of $1,584,894. The market value of plan assets was $1,451,902.

Covered payroll totaled $156,080,523, and the UAAL as a percentage of covered payroll was 1.02%.

Actuarial Valuations Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about probability of occurrence of events far into the future. Examples include assumptions regarding future employment and mortality trends. Amounts determined regarding the funded status of the Plan and the annual required contributions of the County Plan members are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress, presented as required supplementary information following these notes to the financial statement, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities.

Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive Plan (the Plan as understood by the employer and the Plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the County and Plan members at that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

E. Commitments and Contingencies The County and its component units are parties to various legal proceedings, a number of which normally occur in governmental operations. As discussed in Note IV.C., amounts have been accrued in the Countys Self Insurance Fund for the estimated amounts of claims liabilities.

The County receives significant financial assistance from the Federal and State governments in the form of grants and entitlements. These programs are subject to various terms and conditions, compliance with which is the responsibility of the County. These programs are subject to financial and compliance audits by the grantor agencies. Any costs disallowed as a result of such audits could become a liability of the County. As of June 30, 2016, the amount of any liabilities that could result from such audits cannot be determined. However, the County believes that any such amounts would not have a material adverse effect on the Countys financial position.

The County and the Board have several outstanding construction projects as of June 30, 2016. The County also has a five-year Capital Improvement Plan which addresses major capital needs for the County and the Board. Although the Capital Improvement Plan does not represent legal appropriations or contractual commitments, it does represent priorities as determined by the County and the Board.

Funding for the first year of the adopted Capital Improvement Plan has been appropriated by action of the County Commission.

The following represents capital projects funds spent to date, current contractual obligations, and appropriations for future projects as adopted in the Capital Improvement Plan for the fiscal year beginning July 1, 2016:

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

E. Commitments and Contingencies (Continued)

Capital Contractual Improvement Commitment Plan Remaining at July 1, 2016 -

Spent to Date June 30, 2016 June 30, 2017 Primary Government:

Ebenezer/Gleason Intersection $ 556,277 $ 2,688,374 $ -

Schaad Road 735,561 1,274,413 4,450,000 Hardin Valley/Greenland 437,460 59,988 -

Stormwater Management Plan 12,924,461 - 645,000 Parkside Drive Extension 13,064,394 2,949,614 -

Other Projects 221,479,645 1,913,543 29,375,000 Total - Primary Government $ 249,197,798 $ 8,885,932 $ 34,470,000 Component Unit - the Board:

Physical Plant Upgrades $ 3,910,274 $ 1,844,608 $ 2,500,000 Gibbs Middle School 1,123,608 - 18,000,000 Hardin Valley Middle School 967,126 966,573 31,000,000 Pond Gap Elementary 556,419 8,172,961 1,750,000 Security Upgrades 4,657,951 377,827 2,000,000 Other Projects 231,316,905 1,755,038 8,500,000 Total - the Board $ 242,532,283 $ 13,117,007 $ 63,750,000 Construction projects for both the County and the Board are primarily funded by general obligation bonds.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

F. Constitutional Officers The Constitutional Officers Special Revenue Fund includes the operations of the following elected officials:

Trustee - serves as the treasurer and primary investment manager of the Countys funds and manages property tax collection efforts.

Knox County Clerk - serves as the Clerk of the County Commission. Principally engaged in the sale of motor vehicle licenses and acceptance of applications of motor vehicle registrations of the State of Tennessee.

Circuit and General Sessions, Criminal and Fourth Circuit Courts Clerks and Clerk and Master - serve as the clerical and support staff for the various courts for both civil and criminal proceedings.

Register of Deeds - collects various fees for the recording of conveyances, trust deeds, chattels, charters, plats and other legal instruments.

These officials, responsible for the collection and remittance of State, County and other funds, earn fees and commissions for their services.

The operations of the Constitutional Officers are operated under the provisions of Section 8-22-104, Tennessee Code Annotated (TCA). Salaries and related benefits of the officials and staff are paid from fees and commissions earned. Fees earned in excess of these costs are remitted to the Countys General Fund, less an allowance of three months of anticipated operating expenses retained in the respective fee account. Salaries for clerical assistance were supported by chancery court decrees that were obtained under provisions of Section 8-20-101, et seq., TCA. These activities are accounted for in the Countys Constitutional Officers Special Revenue Fund.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

F. Constitutional Officers (Continued)

Collections and payments for litigants, heirs and others are accounted for in the Countys Constitutional Officers Agency Fund.

Other operating costs of these offices (excluding salaries and benefits) are accounted for in the Countys General Fund. These budgeted amounts are approved by the County Commission in accordance with the County Charter. Fees remitted by the officials in excess of salaries and benefits are used to offset the cost to the General Fund.

Included in the Supplementary Schedules of the Countys Comprehensive Annual Financial Report is the schedule of Combined Analysis of Fee and Commission Accounts (reported on the cash basis of accounting) for the year ended June 30, 2016.

G. Accounting Pronouncements The County adopted GASB Statement No. 72, Fair Value Measurement and Application, required for fiscal periods beginning after June 15, 2015, in fiscal 2016. This Statement addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement provides guidance for determining a fair value measurement for financial reporting purposes. This Statement also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements (see Note III-A).

The County adopted portions of GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, in fiscal 2016. This Statement establishes requirements for defined benefit pensions that are not within the scope of Statement No. 68, Accounting and Financial Reporting for Pensions, as well as for the assets accumulated for purposes of providing those pensions. In addition, it establishes requirements for defined contribution pensions that are not within the scope of Statement 68. It also amends certain provisions of Statement No. 67, Financial Reporting for Pension Plans, and Statement 68 for pension plans and pensions that are within their respective scopes.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE IV. OTHER INFORMATION (Continued)

G. Accounting Pronouncements (Continued)

The County adopted GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments, required for fiscal periods beginning after June 15, 2015, in fiscal 2016. The Statement identifies, in the context of the current governmental financial reporting environment, the hierarchy of generally accepted accounting principles (GAAP). The GAAP hierarchy consists of the sources of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP.

The County adopted GASB Statement No. 79, Certain External Investment Pools and Pool Participants, required for fiscal periods beginning after June 15, 2015, in fiscal 2016. This Statement addresses accounting and financial reporting for certain external investment pools and pool participants. The Statement establishes measurement criteria for investments held by pools and pool participants, and establishes additional note disclosure requirements regarding limitations or restrictions on participant withdrawals.

H. Subsequent Events Subsequent to the end of the fiscal year ended June 30, 2016, the County established a new post-retirement medical plan for County retirees. The plan, which became effective October 1, 2016, provides that eligible retirees will be able to remain on the Countys medical plan until age 65. The County will contribute 35% of the premium cost, with the remaining 65% to be contributed by the retiree. The Countys portion will be based on the premiums for individual coverage only.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS A. General Information County and Board employees are covered by a variety of retirement plans. These plans fall into three categories - defined benefit, defined contribution and OPEB plans. The majority of County and Board employees participate in defined contribution plans. Those not included in the defined contribution plans are certified teachers covered under the Board's Article IX Defined Benefit Plan for former Knoxville City School teachers, all certified County school teachers, certain non-certified employees who elected not to transfer to the primary defined contribution plan or sworn officers in the Sheriffs Department who elected to transfer to the Uniformed Officers Pension Plan (UOPP) effective July 1, 2007, or were hired as a sworn officer on or after June 1, 2007. County certified school teachers participate in the State Retirement Plan for Teachers as administered by the Tennessee Consolidated Retirement System (TCRS). Certain County Officials also participate in TCRS.

The County participates in the Tennessee Consolidated Retirement System (TCRS), an agent multiple-employer retirement system (PERS). The Countys plan in TCRS is titled the Knox County Executive And Officials Plan. A single actuarial evaluation is computed for the Knox County Executive And Officials plan by TCRS. TCRS prepares a separate financial report for the operations and activities of this plan, which are not included in the Countys reporting entity and are not included in the accompanied financial statements.

The Board participates in the TCRS through two different plans, the Teacher Legacy Pension Plan and the Teacher Retirement Plan. These two plans are cost sharing multiple-employer pension plans administered by TCRS. The Knox County Schools contribute to the State Employees, Teachers, and Higher Education Employees Pension Plan (SETHEEPP). The Board also allows certified teachers and administrators to participate in one of two multiple-employer defined contribution plans as administered by the Tennessee Department of Treasury (see Note V-F).

The four defined contribution plans, the three single-employer defined benefit plans and the one OPEB (employee disability) plan are part of the Countys financial reporting entity and are included in the accompanying financial statements. The operations of the Knox County Closed Defined Benefit Plan (County DB Plan), the Countys Asset Accumulation Plan (County DC Plan), the Sheriffs Total Accumulation Retirement Plan (STAR DC Plan), the Employee Disability Plan (OPEB) Plan), the Countys Uniformed Officers Pension Plan (UOPP DB Plan), Voluntary 457 Plan (DC Plan) and the Countys Medical Expense Retirement Defined Contribution Plan (MERP DC Plan) are recorded as County pension and other employee benefit trust funds. The operations of the Boards Teachers Defined Benefit Plan (Teachers DB Plan) are recorded in the Boards pension trust fund. Complete separate financial statements for the four defined contribution plans, the three defined benefit plans, and the OPEB plan may be obtained by contacting the Knox County Retirement and Pension Board at Suite 371, City County Building, 400 Main Street, Knoxville, TN 37902.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

A. General Information (Continued)

Since the Countys and Boards Plans are sponsored by a governmental entity, these Plans are not subject to the statutory provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

In addition, none of the accompanying governmental defined benefit plans are insured by the U.S.

Pension Benefit Guaranty Corporation.

B. Single-Employer Defined Benefit Plans Summary of Significant Accounting Policies Pensions - For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of Knox Countys (County) Plans (the County DB Plan, the Uniformed Officers Pension Plan (UOPP), and the Knox County Board of Education (Board) Plan (the Teachers DB Plan) and additions to or deductions from the County, UOPP, and Teachers DB Plans fiduciary net position have been determined on the same basis as they are reported by Knox County, and the Knox County Board of Education for the Plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

General Information about the Defined Benefit Pension Plans Plan Description - The Countys defined benefit pension plans, (County and UOPP DB Plans), and the Boards defined benefit pension plan (Teachers DB Plan) provides pensions to plan members and their beneficiaries. The County DB Plan was established by the County Commission pursuant to House Bill Number 886 of Chapter 246 of the 1967 Private Acts of the State of Tennessee as amended and continued by the Countys charter. The County DB Plan was closed to new participants effective September 30, 1991. The UOPP DB Plan was approved by the voters of Knox County during the November 2006 elections. The Plan was established July 1, 2007 with approximately 600 sworn Sheriffs Office employees electing to transfer their retirement balance from the County DC Plan to the UOPP DB Plan. The amount transferred from the participants accounts totaled $39,429,351. In addition, during FY 2007, Knox County issued $57 million of pension obligation bonds, and transferred the proceeds (net of issuance costs) totaling $56,510,846 to the plan. During the November 2012 elections, voters approved to close the UOPP DB Plan to new hires or rehires effective January 1, 2014. The Teachers DB Plan was established under Article IX of the Knox County Employee Benefit System. The Teachers DB Plan is closed to new plan members. The County, UOPP, and the Teachers DB Plans are single-employer defined benefit pension plans administered by the Knox County Retirement and Pension Board.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

B. Single-Employer Defined Benefit Plans (Continued)

General Information about the Defined Benefit Pension Plans (Continued)

Benefits Provided - The County DB Plan provides pensions to any person who is an active employee hired before the close date of September 30, 1991. The plan also provides death and disability benefits to participants and their beneficiaries. Normal retirement monthly benefits for County DB Plan participants are equal to credited service multiplied by the greater of 1.75% of average monthly compensation or $30. The average monthly compensation is calculated using the employees 60 consecutive months of highest compensation prior to retirement, or such lesser number of months of credited service actually completed. Credited service is equal to all contributions, uninterrupted service expressed in years and decimal fraction of a year based on completed calendar months. The normal retirement date for participants is the first day of the month coinciding with or next following attainment of age 65 or, if later, 5 years of credited service, or, if an elected official, the later of his 55th birthday and completion of 5 years of credited service. Employees may retire at age 55 after 5 years of service but accrued benefits are reduced by 5/12% for each month that the early retirement precedes normal retirement. All participants are eligible for non-duty disability benefits after 5 years of credited service and for duty-related disability benefits upon hire. Disability retirement benefits are payable immediately to age 65 and equal to 50% of average monthly compensation plus 10% of average monthly compensation if there is at least one dependent child minus the sum of monthly primary social security at time of disability, monthly workers compensation benefits, and monthly disability pension reduction, but not less than $150. Pre-retirement death benefits (in the line of duty) are payable in the amount of 37.5% of the average monthly compensation at date of death minus 75% of all social security benefits payable. Pre-retirement death benefits (not in the line of duty) requires participants to have reached age 55 and have a minimum service of 5 years. Benefits are payable at 100% joint and survivor benefit accrued to date of death. If the participant completed 5 years of service, but had not yet attained age 55, the benefit payable to the beneficiary is equal to the participants contributions plus a 100% match by the employer, both of which accumulate at 3% interest compounded annually. Post-retirement death benefits equal to $300 multiplied by years of service up to 30 years are paid in a lump sum. The County DB Plan includes a Cost of Living increase of 3% per annum of the participants original benefit.

The UOPP DB Plan provides pensions to officers employed by the Sheriffs Office on or after June 1, 2007, and most recently employed or reemployed before January 1, 2014. Normal monthly retirement benefits are equal to the greater of 2.5% of average monthly compensation multiplied by service up to a maximum of 30 years or $10 multiplied by service up to a maximum of 25 years. The normal retirement date is the first day of the month coinciding with or next following attainment of age 50 or, if later, the date the participant completes (or would have completed if the participant remained continuously employed until then) 25 years of service. A participant with 5 or more years of service 88

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

B. Single-Employer Defined Benefit Plans (Continued)

General Information about the Defined Benefit Pension Plans (Continued) who retires prior to his normal retirement date shall be entitled to the greater of 2% of average monthly compensation multiplied by the participants projected service (maximum of 25 years), multiplied by the participants actual service, and divided by the participants projected service or $10 multiplied by service up to a maximum of 25 years. The average monthly compensation of a participant is averaged over any 2 twelve month periods, whether or not consecutive but which do not overlap, from date of employment, including periods prior to the effective date of the plan, which produce the highest monthly average. A participant may receive early retirement benefits of the greater of the actuarial equivalent of 2% average monthly compensation multiplied by the participants projected service (maximum of 25 years), multiplied by the participants actual service, and divided by the participants projected service or $10 multiplied by service up to a maximum of 25 years. Disability benefits are payable to participants (in the line of duty) equal to 50% of average monthly compensation. A participant (not in the line of duty) is eligible to receive the greater of 2% of average monthly compensation multiplied by the participants service (maximum of 25 years) multiplied by the participants actual service and divided by the participants projected service or $10 multiplied by service up to a maximum of 25 years. All participants who become disabled prior to January 1, 2014 are eligible to receive this benefit. Pre-retirement death benefits (in the line of duty) for the participants surviving spouse are payable monthly for life in the amount of the greater of 2% of average monthly compensation multiplied by the participants service (maximum of 25 years) or $250.

Pre-retirement death benefits (not in the line of duty) for the participants surviving spouse are payable monthly for life in the amount of the greater of 1% of average monthly compensation multiplied by the participants service (maximum of 25 years) or $10 multiplied by service up to a maximum of 25 years.

Participants must have completed 5 years of service. Post-retirement death benefits are payable to the participants surviving spouse in the greater of 50% of the participants normal retirement benefit immediately prior to death or $10 multiplied by service up to a maximum of 25 years. The UOPP DB Plan includes a Cost of Living adjustment annually of 3% plus (if a participant is over 62 years old) one half of the amount by which the percentage increase in the Consumer Price Index for the 12 months ending September 30 preceding the year of adjustment exceeds 3%, not to exceed 1%.

89

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

B. Single-Employer Defined Benefit Plans (Continued)

General Information about the Defined Benefit Pension Plans (Continued)

The Teachers DB Plan provides pensions to any person who is a teacher as defined by the Court of Appeals in its opinion of December 30, 1987 in the case of Knox County v. the City of Knoxville, et al, and who is entitled to maintain membership in a local pension system as a result of their membership in any applicable plan of the City of Knoxville Pension System on June 30, 1987, and who thereafter is employed as a result of the City of Knoxville ceasing to operate a separate school system and is so regularly employed by the Knox County Board of Education. Each participant shall be eligible to retire at age 62, the normal retirement date or on the first day of any of the thirty-five months next following age 62. The normal retirement benefit, a monthly benefit payable for life, computed as of normal retirement date as 1/12th of credited service multiplied by the sum of Benefit Rate A times average base earnings and Benefit Rate B times average excess earnings. Benefit Rate A and Benefit Rate B shall vary according to the participants last birthday at the time benefit payments are to commence, as follows:

Benefit Benefit Age Rate A Rate B 62 or earlier 0.75% 1.50%

63 0.78% 1.58%

64 0.84% 1.66%

65 or later 0.88% 1.76%

This amount is then reduced by the benefit accrued under the applicable City of Knoxville retirement plan as of June 30, 1987. The monthly benefit, including 50% of the primary Social Security benefit, shall not be less than $10 per year of credited service, with a maximum of $250. After completing 25 years of credited service, participants are eligible for early retirement benefits. Upon early retirement, a participant may elect to receive either a deferred monthly benefit equal to his accrued benefit commencing at normal retirement date or a reduced benefit equal to the actuarially equivalent benefit commencing immediately. Participants are eligible for Disability (not in the line of duty) after completing 15 years of credited service. Accrued benefits are based on credited service at time of disablement, payable immediately, plus a lump sum equal to six times the accrued monthly benefit.

Participants who are disabled in the course of performance of duty are eligible for disability. The accrued benefit is based on credited service projected to age 62, payable immediately and reduced by any workers compensation benefits paid. A participant must complete 15 years of credited service to be eligible for death benefits. Death benefits are payable as 50% of the monthly benefit that the participant would have been entitled to if he/she had elected the 50% joint and survivor form of payment, payable at the earliest time benefits could have commenced to the participant. The Teachers DB Plan includes a Cost of Living adjustment of 3% per annum of the participants original benefit.

90

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

B. Single-Employer Defined Benefit Plans (Continued)

General Information about the Defined Benefit Pension Plans (Continued)

Employees Covered by Benefit Terms - At January 1, 2016, the valuation date, the following participants were covered by the benefit terms:

County UOPP Teacher's DB Plan DB Plan DB Plan Inactive employees or beneficiaries currently receiving benefits 831 122 440 Inactive employees entitled to, but not yet receiving benefits 24 21 -

Active employees 61 630 1 916 773 441 Contributions - Provisions and contribution requirements in the County and the Teachers DB Plans are established and may be amended by the Knox County Retirement and Pension Board in compliance with state law. For the UOPP DB Plan, some provisions and employee changes are limited based on wording in the Knox County Charter (Article VII, Section 7.05) while other provisions and employer contributions can be determined by the Knox County Retirement and Pension Board in compliance with state law. The Knox County Retirement and Pension Board establishes rates based on an actuarially determined rate recommended by an independent actuary. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by participants during the year, with an additional amount to finance net pension liabilities. Prior to July 1, 1991, County DB Plan participants contributed 5% of annual earnings. Effective July 1, 1991, all participant contributions were assumed by the County under Section 414(h) of the Internal Revenue Code. In the UOPP DB Plan, each participant shall contribute to the fund an amount equal to 6% of annual earnings. The employee accumulation will receive 4% simple interest. No participant contributions shall be required after a participant has completed 30 years of service. Each participant in the Teachers DB Plan shall contribute an amount equal to 3% of base earnings (that part of earnings in any calendar year which does not exceed $4,800 per annum) plus 5% of excess earnings (that part of earnings in any calendar year which are in excess of base earnings). For FY 2016, the employer contributions for the County, UOPP, and the Teachers DB Plans were approximately 161.82%, 12.94%, and N/A, respectively, of annual covered-employee payroll.

91

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

B. Single-Employer Defined Benefit Plans (Continued)

Net Pension Liability The County, UOPP, and Teachers DB Plans net pension liabilities were measured as of June 30, 2016, and the total pension liabilities used to calculate the net pension liabilities were determined by actuarial valuations as of January 1, 2016.

Actuarial Assumptions - The total pension liability in the June 30, 2016 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement for the County, UOPP, and Teachers DB Plans.

County UOPP Teacher's DB Plan DB Plan DB Plan Actuarial Cost Method: Individual Entry Age Individual Entry Age Individual Entry Age Normal Cost Normal Cost Normal Cost Amortization Method: Level Percent of Payroll, Closed Level Percent of Payroll, Closed Level Percent of Payroll, Closed Remaining Amortization Period: 17 Years 27 Years 17 Years Asset Valuation Method for 5-year smoothed subject to a 5-year smoothed subject to a 5-year smoothed subject to a Actuarial Determined 10% corridor around the market 20% corridor around the market 10% corridor around the market Contributions: value of assets value of assets value of assets Discount and Investment Rate of Return: 7.00% 7.00% 7.00%

Salary Increases: 3.00% 3.00% N/A Cost of Living Increase 3.00% 3.25% 3.00%

Inflation 1.45% 1.45% 1.45%

Age at Retirement: 65 and five years of service Participants hired before age 40, 60 or immediately if older (25 age 57 and 30 years of credited years of service or greater), 62 service. Participants hired after or immediately if older (less age 40, age 50 and 25 years than 25 years of service) credited service.

Mortality Table: 1983 Group Annuity 1984 Unisex 1983 Group Annuity (Male and Female) (Male and Female)

Disability Table: RR 96-7 Post 94 RR 96-7 Post 94 N/A Experience Study: January 1, 2002 to January 1, 2008 to January 1, 2002 to December 31, 2011 December 31, 2011 December 31, 2011 92

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

B. Single-Employer Defined Benefit Plans (Continued)

Net Pension Liability (Continued)

Expected Investment Rate of Return and Asset Allocation - The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimates ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The actual exposure and target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

County and Teacher's Actual Target DB Plans Exposure Allocation Investment Type:

U.S. Equities 27% 22% - 33%

Non - U.S. Equities 29% 22% - 33%

Core Fixed Income 14% 12% - 18%

High Yield Fixed Income 12% 12% - 18%

U.S. Treasury Inflation Protected Securities 5% 3% - 7%

Private Real Estate 7% 5% - 9%

U.S. Real Estate (REITS) 6% 1% - 5%

Total 100%

UOPP DB Plan Investment Type:

U.S. Equities 28% 24% - 36%

Non - U.S. Equities 29% 24% - 36%

Core Fixed Income 13% 10% - 16%

High Yield Fixed Income 10% 9% - 14%

U.S. Treasury Inflation Protected Securities 5% 3% - 7%

Private Real Estate 8% 6% - 10%

U.S. Real Estate (REITS) 6% 1% - 5%

Short-term and Cash Equivalents 1% 0% - 5%

Total 100%

93

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

B. Single-Employer Defined Benefit Plans (Continued)

Net Pension Liability (Continued)

Best estimates of arithmetic real rates of return, net of assumed inflation rate, for each major investment classification included in the pension plans target asset allocation as of June 30, 2016 are as follows:

Defined Benefit Plans (All Plans)

June 30, 2016 Long-Term Expected Real Investment Type Rate of Return U.S. Equities 6.25%

Non - U.S. Equities 6.45%

Core Fixed Income 2.75%

High Yield Fixed Income 5.65%

U.S. Treasury Inflation Protected Securities 2.35%

Private Real Estate 5.85%

U.S. Real Estate (REITS) 4.70%

The assumed inflation rate is 1.45% per annum.

Rates of Return - The annual money-weighted rates of returns on defined benefit pension plan investments, net of pension plan expenses for the year ended June 30, 2016 were as follows:

Defined Benefit Plans: 2016 County DB Plan -0.90%

UOPP DB Plan -0.14%

Teacher's DB Plan -0.70%

The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amount actually invested.

Discount Rate - The discount rate used to measure the total pension liability for each DB Plan was 7%.

The projections of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that the County, UOPP, and Teachers DB Plans contributions will be made at rates equal to the difference between actuarially determined contribution rates and the employee rate. Based on those assumptions, each pension plans fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

94

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

B. Single-Employer Defined Benefit Plans (Continued)

Net Pension Liability (Continued)

Tennessee State Law for Local Government Sponsored Defined Benefit Plans - In May 2014, the Tennessee General Assembly passed The Public Employee Defined Benefit Financial Security Act of 2014, Tennessee Code Section 9-3-501, which will require Knox County and the Knox County Board of Education to make annual employer contributions equal to 100% of its actuarially determined contributions (ADC), use the entry age normal cost method, limit future pension benefit improvements if the net pension plan funded ratio is less than 60% and other requirements beginning in fiscal year 2016 with various provisions phased in through FY 2020. As of June 30, 2016, the County DB Plans funded ratio was 50.65%. State law provides for penalties in the event that the funding level is below 60%, if the entity additionally provides benefit enhancements and fails to make contributions equal to the ADC. As the County made the required contributions and did not enhance benefits, there were no penalties.

Changes in the Net Pension Liability The changes in the net pension liability for the plans for the fiscal year ended June 30, 2016 are as follows (dollar amounts in thousands):

County DB Plan UOPP DB Plan Teachers' DB Plan Increase (Decrease) Increase (Decrease) Increase (Decrease)

Total Pension Plan Fiduciary Net Position Total Pension Plan Fiduciary Net Position Total Pension Plan Fiduciary Net Position Liability Net Position Liability Liability Net Position Liability Liability Net Position Liability (a) (b) (a) - (b) (a) (b) (a) - (b) (a) (b) (a) - (b)

Balance at June 30, 2015 $ 77,035 $ 47,178 $ 29,857 $ 175,912 $ 152,395 $ 23,517 $ 73,356 $ 64,425 $ 8,931 Changes for the Year:

Service Cost 176 - 176 3,387 - 3,387 - - -

Interest 5,150 - 5,150 12,354 - 12,354 4,906 - 4,906 Difference between Expected and Actual Expense (225) - (225) 1,812 - 1,812 (937) - (937)

Change of Assumptions - - - 1,900 - 1,900 - - -

Contribution - Employer - 3,160 (3,160) - 3,553 (3,553) - 832 (832)

Contribution - Employee - 94 (94) - 1,620 (1,620) - 4 (4)

Net Investment Income (Loss) - (419) 419 - (214) 214 - (437) 437 Benefit Payments including Refunds of Employee -

Contributions (7,425) (7,425) - (5,723) (5,723) - (6,655) (6,655) -

Administrative Expense - (229) 229 - (439) 439 - (122) 122 Other Changes - (38) 38 - - - - - -

Net Changes (2,324) (4,857) 2,533 13,730 (1,203) 14,933 (2,686) (6,378) 3,692 Balance at June 30, 2016 $ 74,711 $ 42,321 $ 32,390 $ 189,642 $ 151,192 $ 38,450 $ 70,670 $ 58,047 $ 12,623 95

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

B. Single-Employer Defined Benefit Plans (Continued)

Changes in the Net Pension Liability (Continued)

Sensitivity of the Net Pension Liability to Changes in the Discount Rate - The following presents the net pension liability of the County, UOPP, and Teachers DB Plans, calculated using the discount rate of 7%, as well as what the net pension liability (asset) would be for each plan if it were calculated using a discount rate that is 1 percentage point lower (6%) or 1 percentage point higher (8%) than the current rate as of June 30, 2016:

1% Decrease Current Discount 1% Increase (6.00%) Rate (7.00%) (8.00%)

County DB Plan Net Pension Liability $ 38,709,571 $ 32,389,964 $ 26,932,262 UOPP DB Plan Net Pension Liability $ 66,598,963 $ 38,450,173 $ 15,229,770 Teachers' DB Plan Net Pension Liability $ 18,340,154 $ 12,622,675 $ 7,629,640 Pension Plan Fiduciary Net Position - Detailed information about the pension plans fiduciary net position is available in the separately issued financial reports (or in the County, UOPP, and Teachers DB Plans accompanying Pension Trust Fund financial statements).

Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions For the year ended June 30, 2016, the County and the Board recognized pension expense of

$4,149,815, $8,111,112, and $1,281,803, for the County, UOPP, and Teachers Plans, respectively. At June 30, 2016, the County, UOPP, and Teachers Plans reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

County DB Plan UOPP DB Plan Teachers' DB Plan Deferred Outflows Deferred Inflows Deferred Outflows Deferred Inflows Deferred Outflows Deferred Inflows of Resources of Resources of Resources of Resources of Resources of Resources Differences between expected and actual experience $ 205,462 $ 172,991 $ 3,702,129 $ - $ - $ -

Changes of assumptions 1,017,256 - 1,706,192 - - -

Net difference between projected and actual earnings on pension plan investments 4,118,720 - 12,845,140 - 5,543,202 -

Total $ 5,341,438 $ 172,991 $ 18,253,461 $ - $ 5,543,202 $ -

96

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

B. Single-Employer Defined Benefit Plans (Continued)

Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions (Continued)

Amounts reported as deferred outflows of resources and deferred inflows of resources to pensions will be recognized in pension expense as follows:

Years ended June 30, County DB Plan UOPP DB Plan Teachers' DB Plan 2017 $ 1,801,717 $ 4,184,380 $ 1,529,620 2018 1,585,943 4,184,380 1,529,620 2019 1,082,471 4,184,382 1,529,618 2020 698,316 2,795,238 954,344 2021 - 625,810 -

Thereafter - 2,279,271 -

Total $ 5,168,447 $ 18,253,461 $ 5,543,202 Payable to Pension Plans At June 30, 2016, the County and the Board did not report a payable for any outstanding amount of employer contributions to the Plans required for the year ended June 30, 2016.

Trend Information The schedules of changes in the County, UOPP, and Teachers DB Plans net pension liabilities and related ratios, the schedule of County and Boards employer contributions, and schedule of investment returns are presented in required supplementary information (RSI) following the notes to financial statements, and present multiyear trend information about whether each Plans fiduciary net position is increasing or decreasing over time relative to the total pension liability and net pension liability and whether the Countys and the Boards contributions are in accordance with the actuarially determined amounts.

97

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

C. Agent Multiple-Employer Defined Benefit Plan Summary of Significant Accounting Policies Pensions - For purposes of measuring the net pension liability (asset), deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of Knox County Executive And Officials participation in the Public Employee Retirement Plan of the Tennessee Consolidated Retirement System (TCRS), and additions to/deductions from Knox County Executive And Officials fiduciary net position have been determined on the same basis as they are reported by the TCRS for the Public Employee Retirement Plan. For this purpose, benefits (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms of the Public Employee Retirement Plan of TCRS. Investments are reported at fair value.

General Information about the Pension Plan Plan Description - Certain elected officials (employees) of Knox County are provided a defined benefit pension plan through the Public Employee Retirement Plan, an agent multiple-employer pension plan administered by the TCRS. The TCRS was created by state statute under Tennessee Code Annotated Title 8, Chapters 34-37. The TCRS Board of Trustees is responsible for the proper operation and administration of the TCRS. The Tennessee Treasury Department, an agency in the legislative branch of state government, administers the plans of the TCRS. The TCRS issues a publicly available financial report that can be obtained at www.treasury.tn.gov/tcrs.

Benefits Provided - Tennessee Code Annotated Title 8, Chapters 34-37 establishes the benefit terms and can be amended only by the Tennessee General Assembly. The chief legislative body may adopt the benefit terms permitted by statute. Members are eligible to retire with an unreduced benefit at age 60 with 5 years of service credit or after 30 years of service credit regardless of age. Benefits are determined by a formula using the members highest five consecutive year average compensation and the members years of service credit. Reduced benefits for early retirement are available at age 55 and vested. Members vest with five years of service credit. Service related disability benefits are provided regardless of length of service. Five years of service is required for non-service related disability eligibility. The service related and non-service related disability benefits are determined in the same manner as a service retirement benefit but are reduced 10% and include projected service credits. A variety of death benefits are available under various eligibility criteria.

98

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

C. Agent Multiple-Employer Defined Benefit Plan (Continued)

General Information about the Pension Plan (Continued)

Member and beneficiary annuitants are entitled to automatic cost of living adjustments (COLAs) after retirement. A COLA is granted each July for annuitants retired prior to the 2nd of July of the previous year. The COLA is based on the change in the consumer price index (CPI) during the prior calendar year, capped at 3%, and applied to the current benefit. No COLA is granted if the change in the CPI is less than 1/2%. A 1% COLA is granted if the CPI change is between 1/2% and 1%. Members who leave employment may withdraw their employee contributions, plus any accumulated interest.

Employees Covered by Benefit Terms - At the measurement date of June 30, 2015, the following employees were covered by the benefit terms:

Inactive employees or beneficiaries currently receiving benefits 3 Inactive employees entitled to but not yet receiving benefits 1 Active employees 6 Total 10 Contributions - Contributions for employees are established in the statutes governing the TCRS and may only be changed by the Tennessee General Assembly. Employees contribute 5% of salary and Knox County makes employer contributions at the rate set by the TCRS Board of Trustees as determined by an actuarial valuation. For the year ended June 30, 2016, employer contributions made by Knox County were $105,298 based on a rate of 10.87% of covered payroll. By law, employer contributions are required to be paid. The TCRS may intercept Knox County state shared taxes if required employer contributions are not remitted. The employers actuarially determined contribution (ADC) and member contributions are expected to finance the costs of benefits earned by members during the year, the cost of administration, as well as an amortized portion of any unfunded liability.

99

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

C. Agent Multiple-Employer Defined Benefit Plan (Continued)

Net Pension Liability (Asset)

Knox County Executive And Officials net pension liability (asset) was measured as of June 30, 2015, and the total pension liability used to calculate net pension liability (asset) was determined by an actuarial valuation as of that date.

Actuarial Assumptions - The total pension liability as of the June 30, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

Reporting Date June 30, 2016 Measurement Date June 30, 2015 Actuarial Valuation Date June 30, 2015 Actuarial Cost Method Entry Age Normal Amortization Method Level Dollar Asset Valuation Method Fair Market Value Inflation 3.00%

Salary Increases Graded salary ranges from 8.97% to 3.71% based on age, including inflation, averaging 4.25%.

Investment Rate of Return 7.5%, net of investment expense, including inflation Discount Rate 7.5% per annum, compounded annually Cost of Living Adjustments 2.50%

Retirement Age Pattern of retirement determined by experience study.

Mortality Customized table based on actual experience including an adjustment for some anticipated improvement.

Mortality rates were based on actual experience from the June 30, 2012 actuarial experience study adjusted for some of the expected future improvement in life expectancy.

The actuarial assumptions used in the June 30, 2015 actuarial valuation were based on the results of an actuarial experience study performed for the period July 1, 2008 through June 30, 2012. The demographic assumptions were adjusted to more closely reflect actual and expected future experience.

100

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

C. Agent Multiple-Employer Defined Benefit Plan (Continued)

Net Pension Liability (Asset) (Continued)

The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees in conjunction with the June 30, 2012 actuarial experience study by considering the following three techniques: (1) the 25-year historical return of the TCRS at June 30, 2012, (2) the historical market returns of asset classes from 1926 to 2012 using the TCRS investment policy asset allocation, and (3) capital market projections that were utilized as a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. Four sources of capital market projections were blended and utilized in the third technique. The blended capital market projection established the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding inflation of 3%. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Long-Term Expected Asset Class Real Rate of Return Target Allocation U.S. Equity 6.46% 33%

Developed Market International Equity 6.26% 17%

Emerging Market International Equity 6.40% 5%

Private Equity and Strategic Lending 4.61% 8%

U.S. Fixed Income 0.98% 29%

Real Estate 4.73% 7%

Short-term Securities 0.00% 1%

Total 100%

The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees as 7.5% based on a blending of the three factors described above.

101

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

C. Agent Multiple-Employer Defined Benefit Plan (Continued)

Net Pension Liability (Asset) (Continued)

Discount Rate - The discount rate used to measure the total pension liability was 7.5%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current rate and that contributions from Knox County will be made at the actuarially determined contribution rate pursuant to an actuarial valuation in accordance with the funding policy of the TCRS Board of Trustees and as required to be paid by state statute. Based on those assumptions, the pension plans fiduciary net position was projected to be available to make projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Changes in the Net Pension Liability (Asset)

Increase (Decrease)

Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (Asset)

Balance at June 30, 2014 $ 1,900,933 $ 1,829,313 $ 71,620 Changes for the Year:

Service Cost 38,325 - 38,325 Interest 142,449 - 142,449 Differences between expected and actual experience 91,692 - 91,692 Contributions - Employer - 102,177 (102,177)

Contributions - Employees - 47,000 (47,000)

Net Investment Income - 57,404 (57,404)

Benefit Payments, including refunds of employee contributions (79,872) (79,872) -

Administrative Expense - (305) 305 Net Change 192,594 126,404 66,190 Balance at June 30, 2015 $ 2,093,527 $ 1,955,717 $ 137,810 102

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

C. Agent Multiple-Employer Defined Benefit Plan (Continued)

Net Pension Liability (Asset) (Continued)

Sensitivity of the Net Pension Liability (Asset) to Changes in the Discount Rate - The following presents the net pension liability (asset) of Knox County Executive And Officials calculated using the discount rate of 7.5%, as well as what the net pension liability (asset) would be if it were calculated using a discount rate that is 1 percentage point lower (6.5%) or 1 percentage point higher (8.5%) than the current rate:

Current 1% Decrease Discount Rate 1% Increase (6.5%) (7.5%) (8.5%)

Knox County Executive And Official's Net Pension Liability (Asset) $ 384,267 $ 137,810 $ (71,247)

Pension Expense (Income) and Deferred Outflows of Resources and Deferred Inflows of Resources Pension Expense - For the year ended June 30, 2016, Knox County recognized a pension expense of

$15,602.

Deferred Outflows of Resources and Deferred Inflows of Resources - For the year ended June 30, 2016, Knox County Executive And Officials reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources Difference between Expected and Actual Experience $ 65,801 $ -

Net Difference between Projected and Actual Earnings on Pension Plan Investments 65,906 84,199 Contributions Subsequent to the Measurement date of June 30, 2015 105,298 -

Total $ 237,005 $ 84,199 103

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

C. Agent Multiple-Employer Defined Benefit Plan (Continued)

Pension Expense (Income) and Deferred Outflows of Resources and Deferred Inflows of Resources (Continued)

The amount shown above for Contributions subsequent to the measurement date of June 30, 2015, will be recognized as a reduction (increase) to net pension liability (asset) in the following measurement period.

Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Years Ended June 30: Amounts 2017 $ 21,309 2018 21,309 2019 (11,591) 2020 16,476 In the table above, positive amounts will increase pension expense while negative amounts will decrease pension expense.

Payable to the Pension Plan At June 30, 2016, Knox County did not report a payable outstanding. Contributions were paid to the pension plan as required for the year ended June 30, 2016.

Trend Information The schedule of changes in the Knox County Executive And Officials Plans net position liability and related ratios and the schedule of Knox County Executive And Officials Plans contributions are presented in required supplementary information (RSI) following the notes to financial statements,and present multiyear trend information about whether the Plans fiduciary net position is increasing or decreasing over time relative to the total pension liability and net pension liability and whether Knox Countys contributions are in accordance with the actuarially determined amounts.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans Teachers Legacy Plan Summary of Significant Accounting Policies Pensions - For purposes of measuring the net pension liability (assets), deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Teacher Legacy Pension Plan in the Tennessee Consolidated Retirement System (TCRS) and additions to/deductions from the plans fiduciary net position have been determined on the same basis as they are reported by the TCRS. For this purpose, benefits (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms of the Teacher Legacy Pension Plan. Investments are reported at fair value.

General Information about the Pension Plan Plan Description - Teachers with membership in the Tennessee Consolidated Retirement System (TCRS) before July 1, 2014 of Knox County Schools are provided with pensions through the Teacher Legacy Pension Plan, a cost sharing multiple-employer pension plan administered by the TCRS. The Teacher Legacy Pension Plan was closed to new membership on June 30, 2014, but will continue providing benefits to existing members and retirees. Beginning July 1, 2014, the Teacher Retirement Plan became effective for teachers employed by Local Boards of Education (LEAs) after June 30, 2014. The Teacher Retirement Plan is a separate cost-sharing, multiple-employer defined benefit plan.

The TCRS was created by state statute under Tennessee Code Annotated Title 8, Chapters 34-37. The TCRS Board of Trustees is responsible for the proper operation and administration of all employer pension plans in the TCRS. The Tennessee Treasury Department, an agency in the legislative branch of state government, administers the plans of the TCRS. The TCRS issues a publicly available financial report that can be obtained at www.treasury.tn.gov/tcrs.

105

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teachers Legacy Plan (Continued)

General Information about the Pension Plan (Continued)

Benefits Provided - Tennessee Code Annotated Title 8, Chapters 34-37 establishes the benefit terms and can be amended only by the Tennessee General Assembly. Members of the Teacher Legacy Pension Plan are eligible to retire with an unreduced benefit at age 60 with 5 years of service credit or after 30 years of service credit regardless of age. Benefits are determined by a formula using the members highest 5 consecutive year average compensation and the members years of service credit.

A reduced early retirement benefit is available at age 55 and vested. Members are vested with 5 years of service credit. Service related disability benefits are provided regardless of length of service. Five years of service is required for non-service related disability eligibility. The service related and non-service related disability benefits are determined in the same manner as a service retirement benefit but are reduced 10% and include projected service credits. A variety of death benefits are available under various eligibility criteria. Member and beneficiary annuitants are entitled to automatic cost of livings adjustments (COLAs) after retirement. A COLA is granted each July for annuitants retired prior to the 2nd of July of the previous year. The COLA is based on the change in the consumer price index (CPI) during the prior calendar year, capped at 3%, and applied to the current benefit. No COLA is granted if the change in the CPI is less than 1/2%. A 1% COLA is granted if the CPI change is between 1/2%

and 1%. A member who leaves employment may withdraw their employee contributions, plus any accumulated interest.

Contributions - Contributions for teachers are established in the statutes governing the TCRS and may only be changed by the Tennessee General Assembly. Teachers contribute 5% of salary and the LEAs make employer contributions at the rate set by the Board of Trustees of TCRS as determined by an actuarial valuation. By law, employer contributions for the Teacher Legacy Pension are required to be paid. The TCRS may intercept the state shared taxes of the sponsoring governmental entity of the LEA if the required employer contributions are not remitted. Employer contributions by Knox County Schools for the year ended June 30, 2016 to the Teacher Legacy Pension Plan were $20,249,092 which is 9.04% of covered payroll. At June 30, 2106, there were 4,229 active Board participants. The employer rate, when combined with member contributions, is expected to finance the costs of benefits earned by members during the year, the cost of administration, as well as an amortized portion of any unfunded liability.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teachers Legacy Plan (Continued)

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions Pension Liabilities (Assets) - At June 30, 2016, Knox County Schools reported a liability of $2,564,810 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Knox County Schools proportion of the net pension liability was based on Knox County Schools share of contributions to the pension plan relative to the contributions of all participating LEAs. At the measurement date of June 30, 2015, Knox County Schools proportion was 6.26%. The proportion measured as of June 30, 2014 was 6.25%.

Negative Pension Expense - For the year ended June 30, 2016, Knox County Schools recognized negative pension expense of $1,871,781.

Deferred Outflows of Resources and Deferred Inflows of Resources - For the year ended June 30, 2016, Knox County Schools reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources Difference between Expected and Actual Experience $ 2,058,367 $ 39,921,641 Net Difference between Projected and Actual Earnings on Pension Plan Investments 46,312,430 62,871,646 Changes in Proportion of Net Pension Liability (Asset) 2,269,093 -

Board's Contributions Subsequent to the Measurement date of June 30, 2015 20,249,092 -

Total $ 70,888,982 $ 102,793,287 107

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teachers Legacy Plan (Continued)

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

Knox County Schools employer contributions of $20,249,092, reported as pension related deferred outflows of resources subsequent to the measurement date of June 30, 2015, will be recognized as an increase of net pension liability (asset) in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Years Ended June 30: Amounts 2017 $ (16,497,944) 2018 (16,497,944) 2019 (16,497,944) 2020 4,459,271 2021 (7,118,836)

In the table above, positive amounts will increase pension expense, while negative amounts will decrease pension expense.

Actuarial Assumptions - The total pension liability in the June 30, 2015 actuarial valuation was determined using the following assumptions applied to all periods included the measurement:

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teachers Legacy Plan (Continued)

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

Reporting Date June 30, 2016 Measurement Date June 30, 2015 Actuarial Valuation Date June 30, 2015 Actuarial Cost Method Entry Age Normal Amortization Method Level Dollar Asset Valuation Method Fair Market Value Inflation 3.00%

Salary Increases Graded salary ranges from 8.97% to 3.71% based on age, including inflation, averaging 4.25%.

Investment Rate of Return 7.5%, net of investment expense, including inflation Discount Rate 7.5% per annum, compounded annually Cost of Living Adjustments 2.50%

Retirement Age Pattern of retirement determined by experience study.

Mortality Customized table based on actual experience including an adjustment for some anticipated improvement.

Mortality rates are customized based on the June 30, 2012 actuarial experience study and included some adjustment for expected future improvement in life expectancy.

The actuarial assumptions used in the June 30, 2015 actuarial valuation were based on the results of an actuarial experience study performed for the period July 1, 2008 through June 30, 2012. The demographic assumptions were adjusted to more closely reflect actual and expected future experience.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teachers Legacy Plan (Continued)

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees in conjunction with the June 30, 2012 actuarial experience study by considering the following three techniques: (1) the 25-year historical return of the TCRS at June 30, 2012, (2) the historical market returns of asset classes from 1926 to 2012 using the TCRS investment policy asset allocation, and (3) capital market projections that were utilized as a building-block method in which best- estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. Four sources of capital market projections were blended and utilized in the third technique. The blended capital market projection the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding inflation of 3%. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Long-Term Expected Asset Class Real Rate of Return Target Allocation U.S. Equity 6.46% 33%

Developed Market International Equity 6.26% 17%

Emerging Market International Equity 6.40% 5%

Private Equity and Strategic Lending 4.61% 8%

U.S. Fixed Income 0.98% 29%

Real Estate 4.73% 7%

Short-term Securities 0.00% 1%

Total 100%

The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees as 7.5% based on a blending of the three factors described above.

110

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teachers Legacy Plan (Continued)

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

Discount Rate - The discount rate used to measure the total pension liability was 7.5%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current rate and that contributions from Knox County Schools will be made at the actuarially determined contribution rate pursuant to an actuarial valuation in accordance with the funding policy of the TCRS Board of Trustees and as required to be paid by state statute. Based on those assumptions, the pension plans fiduciary net position was projected to be available to make projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the Proportionate Share of Net Pension Liability (Asset) to Changes in the Discount Rate.

The following presents Knox County Schools proportionate share of the net pension liability (asset) calculated using the discount rate of 7.5%, as well as what Knox County Schools proportionate share of the net pension liability (asset) would be if it were calculated using a discount rate that is 1 percentage point lower (6.5%) or 1 percentage point higher (8.5%) than the current rate:

Current 1% Decrease Discount Rate 1% Increase (6.5%) (7.5%) (8.5%)

Knox County Schools' Proportionate Share of the Net Pension Liability (Asset) $ 174,860,078 $ 2,564,810 $ (140,075,355)

Pension Plan Fiduciary Net Position - Detailed information about the pension plans fiduciary net position is available in a separately issued TCRS financial report.

Payable to the Pension Plan At June 30, 2016, Knox County Schools did not report a payable since all required employer contributions were made to the pension plan before the year ended June 30, 2016.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teachers Legacy Plan (Continued)

Trend Information The schedule of Knox County Schools proportionate share of the net pension liability (asset) in the Teacher Legacy Pension Plan and related ratios and the schedule of contributions are presented in required supplementary information (RSI) following the notes to financial statements, and present multiyear trend information about whether the Plans fiduciary net position is increasing or decreasing over time relative to the total pension liability and net pension liability (asset) and whether the Knox County Schools contributions are in accordance with the actuarially determined amounts.

Teacher Retirement Plan Summary of Significant Accounting Policies Pensions - For purposes of measuring the net pension liability (asset), deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Teacher Retirement Plan in the Tennessee Consolidated Retirement System (TCRS) and additions to/deductions from the plans fiduciary net position have been determined on the same basis as they are reported by the TCRS. For this purpose, benefits (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms of the Teacher Retirement Plan. Investments are reported at fair value.

General Information about the Pension Plan Plan Description - Teachers with membership in the Tennessee Consolidated Retirement System (TCRS) before July 1, 2014 of Knox County Schools are provided with pensions through the Teacher Legacy Pension Plan, a cost sharing multiple-employer pension plan administered by the TCRS. The Teacher Legacy Pension Plan closed to new membership on June 30, 2014, but will continue providing benefits to existing members and retirees. Teachers with membership in the TCRS after June 30, 2014 are provided with pensions through a legally separate plan referred to as the Teacher Retirement Plan, a cost sharing multiple-employer pension plan administered by the TCRS. The TCRS was created by state statute under Tennessee Code Annotated Title 8, Chapters 34-37. The TCRS Board of Trustees is responsible for the proper operation and administration of all employer pension plans in the TCRS.

The Tennessee Treasury Department, an agency in the legislative branch of state government, administers the plans of the TCRS. The TCRS issues a publicly available financial report that can be obtained at www.treasury.tn.gov/tcrs.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teacher Retirement Plan (Continued)

General Information about the Pension Plan (Continued)

Benefits Provided - Tennessee Code Annotated Title 8, Chapters 34-37 establishes the benefit terms and can be amended only by the Tennessee General Assembly. Members of the Teacher Retirement Plan are eligible to retire at age 65 with 5 years of service credit or pursuant to the rule of 90 in which the members age and service credit total 90. Members are entitled to receive unreduced service retirement benefits, which are determined by a formula using the members highest five consecutive year average compensation and members years of service credit. A reduced early retirement benefit is available at age 60 and vested or pursuant to the rule of 80. Members are vested with 5 years of service credit. Service related disability benefits are provided regardless of length of service. Five years of service is required for non-service related disability eligibility. The service-related and non-service related disability benefits are determined in the same manner as a service retirement benefit but are reduced 10% and include projected service credits. A variety of death benefits are available under various eligibility criteria. Member and beneficiary annuitants are entitled to automatic cost of living adjustments (COLAs) after retirement. A COLA is granted each July for annuitants retired prior to the 2nd of July of the previous year. The COLA is based on the change in the consumer price index (CPI) during the prior calendar, capped at 3%, and applied to the current benefit. No COLA is granted if the change in the CPI is less than 1/2%. A 1% COLA is granted if the CPI change is between 1/2% and 1%. Members who leave employment may withdraw their employee contributions, plus any accumulated interest. Under the Teacher Retirement Plan, benefit terms and conditions, including COLAs, can be adjusted on a prospective basis. Moreover, there are defined cost controls and unfunded liability controls that provide for the adjustment of benefit terms and conditions on an automatic basis.

Contributions - Contributions for teachers are established in the statutes governing the TCRS and may only be changed by the Tennessee General Assembly or by automatic cost controls set out in law.

Teachers contribute 5% of salary and the LEAs make employer contributions at the rate set by the Board of Trustees as determined by an actuarial valuation. Per the statutory provisions governing the TCRS, the employer contribution rate cannot be less than 4%, unless the maximum funded level, approved by the TCRS Board of Trustees, is reached. By law, employer contributions for the Teacher Retirement Plan are required to be paid. The TCRS may intercept the state shared taxes of the sponsoring governmental entity of the LEA if the required employer contributions are not remitted.

Employer contributions for the year ended June 30, 2016 to the Teacher Retirement Plan were

$1,129,281, which is 4.0% of covered payroll. At June 30, 2016, there were 888 active Board participants. The employer rate, when combined with member contributions, is expected to finance the 113

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teacher Retirement Plan (Continued)

General Information about the Pension Plan (Continued) costs of benefits earned by members during the year, the cost of administration, as well as an amortized portion of any unfunded liability.

Mandatory Defined Contribution Plan As part of this plan, teachers hired after July 1, 2014 are required to participate in the State of Tennessee 401(k) Plan (see Note V - F) which requires the Board to make mandatory employer contributions of 5.0% of the participants compensation.

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions Pension Liabilities (Assets) - At June 30, 2016, Knox County Schools reported an asset of $280,487 for its proportionate share of the net pension asset. The net pension asset was measured as of June 30, 2015, and the total pension asset used to calculate the net pension asset was determined by an actuarial valuation as of that date. Knox County Schools proportion of the net pension asset was based on Knox County Schools share of contributions to the pension plan relative to the contributions of all participating LEAs. At the measurement date of June 30, 2015, Knox County Schools proportion was 6.97%.

Pension Expense - For the year ended June 30, 2016, Knox County Schools recognized pension expense of $1,232,324.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teacher Retirement Plan (Continued)

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

Deferred Outflows of Resources and Deferred Inflows of Resources - For the year ended June 30, 2016, Knox County Schools reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources Difference between Expected and Actual Experience $ - $ 91,294 Net Difference between Projected and Actual Earnings on Pension Plan Investments 22,673 -

Board's Contributions Subsequent to the Measurement date of June 30, 2015 1,129,281 -

Total $ 1,151,954 $ 91,294 Knox County Schools employer contributions of $1,129,281 reported as pension related deferred outflows of resources, subsequent to the measurement date of June 30, 2015, will be recognized as an increase of net pension liability (asset) in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Years Ended June 30: Amounts 2017 $ (1,940) 2018 (1,940) 2019 (1,940) 2020 (1,940) 2021 (7,608)

Thereafter (53,257)

In the table above, positive amounts will increase pension expense, while negative amounts will decrease pension expense.

Actuarial Assumptions - The total pension liability in the June 30, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

115

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teacher Retirement Plan (Continued)

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

Reporting Date June 30, 2016 Measurement Date June 30, 2015 Actuarial Valuation Date June 30, 2015 Actuarial Cost Method Entry Age Normal Amortization Method Level Dollar Asset Valuation Method Fair Market Value Inflation 3.00%

Salary Increases Graded salary ranges from 8.97% to 3.71% based on age, including inflation, averaging 4.25%.

Investment Rate of Return 7.5%, net of investment expense, including inflation Discount Rate 7.5% per annum, compounded annually Cost of Living Adjustments 2.50%

Retirement Age Pattern of retirement determined by experience study.

Mortality Customized table based on actual experience including an adjustment for some anticipated improvement.

Mortality rates are customized based on the June 30, 2012 actuarial experience study and included some adjustment for expected future improvement in life expectancy.

The actuarial assumptions used in the June 30, 2015 actuarial valuation were based on the results of an actuarial experience study performed for the period July 1, 2008 through June 30, 2012. The demographic assumptions were adjusted to more closely reflect actual and expected future experience.

116

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teacher Retirement Plan (Continued)

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees in conjunction with the June 30, 2012 actuarial experience study by considering the following three techniques: (1) the 25-year historical return of the TCRS at June 30, 2012, (2) the historical market returns of asset classes from 1926 to 2012 using the TCRS investment policy asset allocation, and (3) capital market projections that were utilized as a building-block method in which best- estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. Four sources of capital market projections were blended and utilized in the third technique. The blended capital market technique projects the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding inflation of 3%. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Long-Term Expected Asset Class Real Rate of Return Target Allocation U.S. Equity 6.46% 33%

Developed Market International Equity 6.26% 17%

Emerging Market International Equity 6.40% 5%

Private Equity and Strategic Lending 4.61% 8%

U.S. Fixed Income 0.98% 29%

Real Estate 4.73% 7%

Short-term Securities 0.00% 1%

Total 100%

The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees as 7.5% based on a blending of the three factors described above.

117

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teacher Retirement Plan (Continued)

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

Discount Rate - The discount rate used to measure the total pension liability was 7.5%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current rate and that contributions from Knox County Schools will be made at the actuarially determined contribution rate pursuant to an actuarial valuation in accordance with the funding policy of the TCRS Board of Trustees and as required to be paid by state statute. Based on those assumptions, the pension plans fiduciary net position was projected to be available to make projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the Proportionate Share of Net Pension Liability (Asset) to Changes in the Discount Rate.

The following presents Knox County Schools proportionate share of the net pension liability (asset) calculated using the discount rate of 7.5%, as well as what Knox County Schools proportionate share of the net pension liability (asset) would be if it were calculated using a discount rate that is 1 percentage point lower (6.5%) or 1 percentage point higher (8.5%) than the current rate:

Current 1% Decrease Discount Rate 1% Increase (6.5%) (7.5%) (8.5%)

Knox County Schools' Proportionate Share of the Net Pension Liability (Asset) $ 49,737 $ (280,487) $ (522,678)

Pension Plan Fiduciary Net Position - Detailed information about the pension plans fiduciary net position is available in a separately issued TCRS financial report.

Payable to the Pension Plan At June 30, 2016, Knox County Schools did not report a payable since all required employer contributions were made to the pension plan before the year ended June 30, 2016.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

D. Cost Sharing Multiple-Employer Defined Benefit Plans (Continued)

Teacher Retirement Plan (Continued)

Trend Information The schedule of Knox County Schools proportionate share of net pension liability (asset) in the Teacher Retirement Plans and related ratios and the schedule of contributions are presented in required supplementary information (RSI) following the notes to financial statements, and present multiyear trend information about whether the Plans fiduciary net position is increasing or decreasing over time relative to the total pension liability and net pension liability whether the Knox County Schools contributions are in accordance with the actuarially determined amounts.

E. Defined Contribution Plans Plan provisions and contribution requirements for the defined contribution plans are established and may be amended by the Knox County Retirement and Pension Board. Administrative costs of the plans are paid with plan assets in the DB Plans and the Disability (OPEB) Plan.

Asset Accumulation Plan The Asset Accumulation Plan is a defined contribution plan established by Knox County under Section 401(a)(9) of the Internal Revenue Code. The plan covers a majority of the full time employees of the County and classified employees of the School Board. Plan benefits depend solely on amounts contributed to the plan plus investment earnings. Participation begins on the first day of employment and all eligible employees not participating in another County, Board or state retirement plan are required to participate. The plan requires all participants to contribute a minimum of 6% of compensation and the employer matching contribution is 6%. Participants are 100% vested in the employer contributions after completing five years of credited service.

At June 30, 2016, there were 4,160 active plan members. During the year, the Countys and Boards employer and member contributions amounted to $8,304,376 and $8,304,376 respectively.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

E. Defined Contribution Plans (Continued)

Voluntary 457 Plan The Asset Accumulation Program incorporated both a 401(a) Plan and a 457(b) Plan in the Defined Contribution Plan for Knox County participants and classified Board participants. The Knox County Voluntary 457 Plan incorporates voluntary pre-tax contributions by the participant with an employer match based on length of service with the County and/or Board. The employer will match:

Years of Service Maximum % Match 0-5 0%

5-9 2%

10 - 14 4%

15 or more 6%

The employer matching contributions for the 457 Plan are deposited into the participants 401(a) account.

In January 2008, the Pension Board added two additional outside 457 vendors as investment alternatives. Knoxville Teachers Credit Union (Board employees only) and Security Benefit were added January 1, 2008 and volunteer contributions made by participants in the Asset Accumulation Plan would also be eligible for the match offered by the employer. In September 2008, Nationwide, a third 457 vendor was added to the Program. Security Benefit was terminated as a 457(b) provider as of November 2015. Each vendor prepares separate financial reports and is not included in the Knox County Voluntary 457 Plan Trust.

Effective July 1, 2008 the option of contributing to a 457(b) Plan was expanded to those active participants in the closed Defined Benefit (DB) Plan. The employer match for the closed DB Plan participants is a maximum of 3% of pay. Closed DB participants are eligible for the same 457 Plans/Vendors that are offered under the Asset Accumulation Plan. Beginning July 2015, participants in UOPP and STAR were allowed to make contributions to the Countys 457(b), but the County makes no matching contributions.

As of June 30, 2016, there were 991 Plan members in the Knox County Voluntary 457(b) Plan. During the year, member contributions amounted to $2,094,590 and the County and Board contributed

$1,608,252.

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KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

E. Defined Contribution Plans (Continued)

Medical Expense Retirement Plan (MERP)

The Medical Expense Retirement Plan, a voluntary defined contribution plan, was established by the County under Section 401(a)(9) of the Internal Revenue Code. Plan benefits depend solely on amounts contributed to the plan plus investment earnings. Voluntary participation begins upon enrollment; eligible employees may begin participation on the first day of employment. The Plan was specifically created to assist employees in planning and investing for anticipated medical expenses upon retirement.

Plan provisions and contribution requirements are established and may be amended by the Knox County Retirement and Pension Board.

The main features of the Plan are as follows:

(1) A participant reaching age 40 and completing at least five years of credited service received a one-time lump sum distribution for each year of eligible service from the Knox County Retirement & Pension Board, and (2) A participant making contributions through payroll deductions to the Medical Expense Retirement Plan would be eligible for a percent match contribution from the Knox County Retirement & Pension Board based on the percent approved by the Board for the year in question.

(3) Beginning in FY 2015, the employer match for active employees of 50% up to a calendar year employer maximum of $208. The Pension Board committed to this funding for five years.

At June 30, 2016, the Medical Expense Retirement Plan had 1,403 members and 678 of them contributed funds to the plan. During the year employer and member contributions amounted to

$105,251 and $220,302, respectively.

121

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

E. Defined Contribution Plans (Continued)

Sheriffs Total Accumulation Retirement Plan (STAR)

In November 2012, the Knox County voters approved the closing of the Uniform Officers Pension Plan (UOPP) to all new officers and to have the Pension Board design another plan for officers employed by the Knox County Sheriffs Department. Effective January 1, 2014, the UOPP Plan was closed to all new-hires or re-hires. The new officer plan is called the Sheriffs Total Accumulation Retirement Plan (STAR). STAR is a Defined Contribution Plan where the officer contributes 6% of pay and the County contributes a total of 12% of pay. Vesting by the officer is 10 year cliff vesting on the first 10%

employer contribution and 15 year cliff vesting on the remaining 2% employer contribution.

Employees have the responsibility of investing their contribution plus the 10% employer contribution from an array of investment options. The Pension Board manages the investment of the additional 2%

of the employer contributions.

At June 30, 2016, the STAR Plan had 203 members. During the year employees contributed $265,285 and the employer contributed $442,155 for the basic 10% contribution and $88,424 for the 2%

supplemental contribution.

F. Multiple-Employer Defined Contribution Plans State of Tennessee 401(k) Plan - Teachers Hired Before July 1, 2014 The TCRS Teacher Legacy Defined Benefit Plan (see Note V-D) allows Knox County Board of Education (Board) teachers and other certified personnel hired before July 1, 2014, to participate in the State of Tennessee 401(k) Plan as administered by the Tennessee Department of Treasury.

Participation in this plan is optional and is 100% funded by participants elective contributions. The Board does not make employer contributions to this plan. Plan benefits are dependent solely on amounts contributed by participants plus investment earnings. Employees are eligible to participate on the first day of employment.

At June 30, 2016 there were 17 active participants. During the year participant contributions amounted to $13,389.

122

KNOX COUNTY, TENNESSEE Notes to Financial Statements June 30, 2016 NOTE V: EMPLOYEE RETIREMENT PLANS (Continued)

F. Multiple-Employer Defined Contribution Plans (Continued)

State of Tennessee 401(k) Plan - Teachers Hired After July 1, 2014 The TCRS Teacher Retirement Defined Benefit Plan (see Note V-D) requires all Knox County Board of Education (Board) teachers and other certified personnel hired after July 1, 2014, to participate in the State of Tennessee 401(k) Plan as administered by the Tennessee Department of Treasury.

Participation is mandatory and begins on the first day of employment. The Board is required to make mandatory employer contributions of 5.0% of the participants compensation. Elective employee deferrals are optional but can be up to the annual maximum amount permitted by the Internal Revenue Service. Participants are 100% immediately vested in the employer contributions. Plan benefits depend solely on amounts contributed to the plan plus investment earnings.

At June 30, 2016 there were 888 active participants. During the year the Board employer and participant contributions amounted to $1,411,491 and $231,034, respectively.

123

Required Supplemental Information Section

KNOX COUNTY, TENNESSEE Required Supplementary Information June 30, 2016 KNOX COUNTY RETIREMENT AND PENSION BOARD AND SYSTEM PENSION TRUST FUNDS OF KNOX COUNTY, TENNNESSEE SCHEDULE OF CHANGES IN COUNTY'S NET PENSION LIABILITY AND RELATED RATIOS Last Two Fiscal Years Ending June 30 (Dollar Amounts in Thousands) 2016 2015 Closed Defined Teacher's Closed Defined Teacher's Single-Employer Defined Benefit Plans Benefit Plan UOPP Plan Benefit Plan UOPP Plan Total Pension Liability Service Cost $ 176 $ 3,387 $ - $ 164 $ 3,605 $ -

Interest 5,149 12,354 4,906 5,126 11,498 5,073 Differences between Expected and Actual Experience (225) 1,812 (937) 447 2,569 (821)

Changes of Assumptions - 1,900 - 2,214 - -

Benefits Payment, including Refunds of Employee Contributions (7,425) (5,723) (6,655) (7,817) (4,757) (6,617)

Net Change in Total Pension Liability (2,325) 13,730 (2,686) 134 12,915 (2,365)

Total Pension Liability - Beginning of Year

• 77,035 175,912 73,356 76,901 162,997 75,721 Total Pension Liability - End of Year (a) $ 74,710 $ 189,642 $ 70,670 $ 77,035 $ 175,912 $ 73,356 Plan Fiduciary Net Position Contributions - Employer $ 3,160 $ 3,553 $ 832 $ 2,695 $ 3,449 $ 1,134 Contributions - Employees 94 1,620 4 109 1,654 9 Net Investment Income (Loss) (419) (214) (437) 1,288 3,493 1,733 Other - - - 6 - -

Benefits Paid, including Refunds of Employee Contributions (7,425) (5,723) (6,655) (7,817) (4,757) (6,617)

Administrative Expenses (229) (439) (122) (355) (788) (274)

Transfers to Other DC Plans for Disability Benefits (39) - - (45) - -

Net Change in Plan Fiduciary Net Position (4,858) (1,203) (6,378) (4,119) 3,051 (4,015)

Plan Fiduciary Net Position, Beginning of Year 47,178 152,395 64,425 51,297 149,344 68,440 Plan Fiduciary Net Position, End of Year (b) $ 42,320 $ 151,192 $ 58,047 $ 47,178 $ 152,395 $ 64,425 County's Net Pension Liability - Ending (a)-(b) $ 32,390 $ 38,450 $ 12,623 $ 29,857 $ 23,517 $ 8,931 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 56.65% 79.72% 82.13% 61.24% 86.63% 87.82%

Covered-Employee Payroll ** $ 1,953 $ 27,464 $ - $ 2,038 $ 29,171 $ -

County's Net Pension Liability as a Percentage of Covered-Employee Payroll 1659.59% 140.00% N/A 1465.01% 80.62% N/A Note: Fiscal year 2015 was the first year that GASB 68 was adopted. Additional years will be added in the future.

• The liability values the January 1 data is rolled forward to June 30 using a 7.0% discounted rate.

• • The covered -employee payroll is for the twelve month period ended January 1 of each year and covered employee payroll for the Teacher's Plan is $0 since all active employees are over Normal Retirement Age.

Notes:

Benefit Changes: During 2014 the UOPP removed its disability benefit provision which resulted in an increase in the pension liability.

Changes of Assumptions: During FY 2016 and FY 2015, the inflation assumption decreased from 1.95% to 1.45% and from 2.35% to 1.95%.

During FY 2016 the UOPP projected benefits were increased due to increased compensation in the final year of employment. The Closed DB plan started using the 1983 Group Annuity Mortality Table in fiscal year 2016.

124

KNOX COUNTY, TENNESSEE Required Supplementary Information June 30, 2016 KNOX COUNTY RETIREMENT AND PENSION BOARD AND SYSTEM PENSION TRUST FUNDS OF KNOX COUNTY, TENNNESSEE SCHEDULE OF COUNTY'S AND BOARD'S EMPLOYER PENSION CONTRIBUTIONS Last Two Fiscal Years Ending June 30 (Dollar Amounts in Thousands) 2016 2015 Closed Defined Teacher's Closed Defined Teacher's Single-Employer Defined Benefit Plans Benefit Plan UOPP Plan Benefit Plan UOPP Plan Actuarially Determined Contribution (ADC) $ 3,111 $ 3,547 $ 832 $ 2,660 $ 3,434 $ 1,134 Contributions in Relation to the Actuarially Determined Contribution 3,160 3,553 832 2,695 3,449 1,134 Contribution Deficiency (Excess) $ (49) $ (6) $ - $ (35) $ (15) $ -

Covered-Employee Payroll * $ 1,953 $ 27,469 $ - $ 2,038 $ 29,171 $ -

Contributions as a Percentage of Covered-Employee Payroll 161.82% 12.94% N/A 132.22% 11.82% N/A Notes:

• Covered-employee payroll is for the 12 month period ended January 1. The covered-employee payroll for the Teacher's Plan is $0 since all active employees are over Normal Retirement Age.

A. 2015 was the first year that GASB 68 was adopted. Additional years will be added in the future.

B. Valuation Dates: January 1.

Measurement Dates: July 1 to June 30.

Actuarial determined contribution rates are calculated as of June 30, one year prior to the end of the fiscal year in which contributions are reported.

Methods and Assumptions used to Determine Contribution Rates:

Actuarial Cost Method Individual Entry Age, Normal Cost (All Plans)

Amortization Method Level Dollar, Closed Period (All Plans)

Remaining Amortization Period 17 Years (Closed DB, Teacher's Plan) and 27 Years (UOPP)

Asset Valuation Method Closed DB and Teacher's Plan: 5-year smoothed subject to a 10% corridor around the market value of assets.

UOPP: 5-year smoothed subject to a 20% corridor around the market value of assets.

Salary Increases 3% (Closed DB and UOPP), N/A for Teacher's Plan Cost of Living Increases 3% (Closed DB and Teacher's Plan) and 3.25% (UOPP)

Investment Rate of Return 7%, Net of Pension Plan Investment Expense, including inflation (All Plans)

Retirement Age Closed DB: 65 Years and 5 Years of Service Teacher's: 60 Years UOPP: Participants hired before age 40, age 57 and 30 years of credited service.

Participants hired after 40, age 50 and 25 years of credited service.

Mortality Table 1983 Group Annuity Mortality Table for males and females (Closed DB and Teacher's Plan) and 1984 Unisex (UOPP)

Disability Table RR 96-7 Post 94 (Closed DB and UOPP), N/A for Teacher's Plan Distribution 100% Annuity 125

KNOX COUNTY, TENNESSEE Required Supplementary Information June 30, 2016 KNOX COUNTY RETIREMENT AND PENSION BOARD AND SYSTEM PENSION TRUST FUNDS OF KNOX COUNTY, TENNNESSEE SCHEDULE OF INVESTMENT RETURNS Last Two Fiscal Years Ending June 30 2016 2015 Closed Defined Teacher's Closed Defined Teacher's Single-Employer Defined Benefit Plans Benefit Plan UOPP Plan Benefit Plan UOPP Plan Annual Money-Weight Rate of Return (Loss) Net of Investment Expenses (0.90%) (0.14%) (0.70%) 2.59% 2.34% 2.62%

NOTES:

2015 was the first year that GASB 68 was adopted and additional years will be added in the future.

126

KNOX COUNTY, TENNESSEE Required Supplementary Information June 30, 2016 SCHEDULE OF CHANGES IN KNOX COUNTY EXECUTIVE AND OFFICIAL'S NET PENSION LIABILITY (ASSET) AND RELATED RATIOS BASED ON PARTICIPATION IN THE KNOX COUNTY EXECUTIVES AND OFFICIAL'S PUBLIC PENSION PLAN OF TCRS Last Two Fiscal Years Ending June 30*

Agent Multiple-Employer Defined Benefit Plan - TCRS 2016* 2015*

Total Pension Liability Service Cost $ 38,325 $ 52,980 Interest 142,449 134,723 Differences between Expected and Actual Experience 91,692 9,345 Benefits Payment, including Refunds of Employee Contributions (79,872) (78,871)

Net Change in Total Pension Liability 192,594 118,177 Total Pension Liability - Beginning of Year 1,900,933 1,782,756 Total Pension Liability - End of Year (a) $ 2,093,527 $ 1,900,933 Plan Fiduciary Net Position Contributions - Employer $ 102,177 $ 90,961 Contributions - Employees 47,000 42,505 Net Investment Income 57,404 256,275 Benefits Paid, including Refunds of Employee Contributions (79,872) (78,871)

Administrative Expenses (305) (313)

Net Change in Plan Fiduciary Net Position 126,404 310,557 Plan Fiduciary Net Position, Beginning of Year 1,829,313 1,518,756 Plan Fiduciary Net Position, End of Year (b) $ 1,955,717 $ 1,829,313 Net Pension Liability (asset) - Ending (a)-(b) $ 137,810 $ 71,620 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 93.42% 96.23%

Covered-Employee Payroll $ 939,994 $ 850,101 Net Pension Liability (asset) as a Percentage of Covered-Employee Payroll 14.66% 8.42%

Note:

• The amounts presented were determined as of June 30 of the prior year (measurement date).

This is a 10-year schedule; however, the information in this schedule is not required to be presented retroactively. Years will be added to this schedule in future fiscal years until 10 years of information is available.

127

KNOX COUNTY, TENNESSEE Required Supplementary Information June 30, 2016 SCHEDULE OF KNOX COUNTY EXECUTIVE AND OFFICIAL'S EMPLOYER CONTRIBUTIONS BASED ON PARTICIPATION IN THE PUBLIC EMPLOYEE PENSION PLAN OF TCRS KNOX COUNTY EXECUTIVE AND OFFICIAL'S Last Three Fiscal Years Ending June 30 Agent Multiple-Employer Defined Benefit Plan - TCRS 2016 2015 2014 Actuarially Determined Contribution (ADC) $ 105,298 $ 102,177 $ 90,961 Contributions in Relation to the Actuarially Determined Contribution 105,298 102,177 90,961 Contribution Deficiency (Excess) $ - $ - $ -

Covered-Employee Payroll $ 968,701 $ 939,994 $ 850,101 Contributions as a Percentage of Covered-Employee Payroll 10.87% 10.87% 10.70%

This is a 10-year schedule; however, the information in this schedule is not required to be presented retroactively.

Years will be added to this schedule in future fiscal years until 10 years of information is available.

NOTES:

Valuation Date: Actuarially determined contribution rates for 2016 and 2015 were calculated based on the July 1, 2013 valuation.

Methods and Assumptions used to Determine Contribution Rates:

Actuarial Cost Method Frozen Initial Liability Amortization Method Level dollar, closed (not to exceed 20 years)

Remaining Amortization Period 8 years Asset Valuation Method 10-year smoothed within a 20% corridor to market value Inflation 3%

Salary Increases Graded salary ranges from 8.97 to 3.71% based on age, including inflation, averaging 4.25%

Investment Rate of Return 7.5%, net of investment expense, including inflation Retirement Age Pattern of retirement determined by experience study Mortality Customized table based on actual experience including an adjustment for some anticipated improvement Cost of Living Adjustments 2.50%

128

KNOX COUNTY, TENNESSEE Required Supplementary Information June 30, 2016 SCHEDULE OF KNOX COUNTY SCHOOLS' PROPORTIONATE SHARE OF THE NET PENSION LIABILITY (ASSET)

TEACHER LEGACY PENSION PLAN OF TCRS Last Two Fiscal Years Ending June 30*

Cost Sharing Multiple-Employer Defined Benefit Plan - TCRS 2016* 2015*

Knox County School's Proportion of the Net Pension Asset 6.26% 6.25%

Knox County School's Proportionate Share of the Net Pension Liability (Asset) $ 2,564,810 $ (1,016,013)

Knox County School's Covered-Employee Payroll $ 234,393,501 $ 245,412,756 Knox County School's Proportionate Share of the Net Pension Liability (Asset) as a Percentage of its Covered-Employee Payroll 1.09% (0.41%)

Plan Fiduciary Net Position as a Percentage of the Total Pension 99.81% 100.08%

Liability

• The amounts presented were determined as of June 30 of the prior year (measurement date).

This is a 10-year schedule. However, the information in this schedule is not required to be presented retroactively. Years will be added to this schedule in future fiscal years until 10 years of information is available.

129

KNOX COUNTY, TENNESSEE Required Supplementary Information June 30, 2016 SCHEDULE OF KNOX COUNTY SCHOOLS' EMPLOYER CONTRIBUTIONS TEACHER LEGACY PENSION PLAN OF TCRS Last Three Fiscal Years Ending June 30 Cost Sharing Multiple-Employer Defined Benefit Plan - TCRS 2016 2015 2014 Actuarially Determined Contribution (ADC) $ 20,249,092 $ 21,188,757 $ 21,792,648 Contributions in Relation to the Actuarially Determined Contribution 20,249,092 21,188,757 21,792,648 Contribution Deficiency (Excess) $ - $ - $ -

Knox County School's Covered-Employee Payroll $ 224,003,222 $ 234,393,501 $ 245,412,706 Contributions as a Percentage of Knox County School's Covered-Employee Payroll 9.04% 9.04% 8.88%

This is a 10-year schedule; however, the information in this schedule is not required to be presented retroactively.

Years will be added to this schedule in future fiscal years until 10 years of information is available.

NOTES:

Valuation Date: Actuarially determined contribution rates for 2016 and 2015 were calculated based on the July 1, 2013 valuation.

Methods and Assumptions used to Determine Contribution Rates:

Actuarial Cost Method Frozen Initial Liability Amortization Method Level dollar, closed (not to exceed 20 years)

Remaining Amortization Period 8 years Asset Valuation Method 10-year smoothed within a 20% corridor to market value Inflation 3%

Salary Increases Graded salary ranges from 8.97 to 3.71% based on age, including inflation, averaging 4.25%

Investment Rate of Return 7.5%, net of investment expense, including inflation Retirement Age Pattern of retirement determined by experience study Mortality Customized table based on actual experience including an adjustment for some anticipated improvement Cost of Living Adjustments 2.50%

130

KNOX COUNTY, TENNESSEE Required Supplementary Information June 30, 2016 SCHEDULE OF KNOX COUNTY SCHOOLS' PROPORTIONATE SHARE OF THE NET PENSION LIABILITY (ASSET)

TEACHER RETIREMENT PLAN OF TCRS For the Fiscal Year Ended June 30*

Cost Sharing Multiple-Employer Defined Benefit Plan - TCRS 2016*

Knox County School's Proportion of the Net Pension Liability (Asset) 6.97%

Knox County School's Proportionate Share of the Net Pension Liability (Asset) $ (280,487)

Knox County School's Covered-Employee Payroll $ 14,486,226 Knox County School's Proportionate Share of the Net Pension Liability (Asset) as a Percentage of its Covered-Employee Payroll (1.94)%

Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 127.46%

• The amounts presented were determined as of June 30 of the prior fiscal year.

This is a 10-year schedule. However, the information in this schedule is not required to be presented retroactively. Years will be added to this schedule in future fiscal years until 10 years of information is available.

NOTES:

Valuation Date: Actuarially determined contribution rates for 2016 were calculated based on a July 1, 2013 valuation.

131

KNOX COUNTY, TENNESSEE Required Supplementary Information June 30, 2016 SCHEDULE OF KNOX COUNTY SCHOOLS' EMPLOYER CONTRIBUTIONS TEACHER RETIREMENT PLAN OF TCRS Last Two Fiscal Years Ending June 30 Cost Sharing Multiple-Employer Defined Benefit Plan - TCRS 2016 2015*

Actuarially Determined Contribution (ADC) $ 1,129,281 $ 362,156 Contributions in Relation to the Actuarially Determined Contribution 1,129,281 579,452 Contribution Deficiency (Excess) $ - $ (217,296)

Knox County School's Covered-Employee Payroll $ 28,231,895 $ 14,486,226 Contributions as a Percentage of Knox County School's Covered-Employee Payroll 4.00% 4.00%

Note:

• This plan started July 1, 2014.

This is a 10-year schedule; however, the information in this schedule is not required to be presented retroactively.

Years will be added to this schedule in future fiscal years until 10 years of information is available.

Methods and Assumptions used to Determine Contribution Rates:

Actuarial Cost Method Frozen Initial Liability Amortization Method Level dollar, closed (not to exceed 20 years)

Remaining Amortization Period 8 years Asset Valuation Method 10-year smoothed within a 20% corridor to market value Inflation 3%

Salary Increases Graded salary ranges from 8.97 to 3.71% based on age, including inflation, averaging 4.25%

Investment Rate of Return 7.5%, net of investment expense, including inflation Retirement Age Pattern of retirement determined by experience study Mortality Customized table based on actual experience including an adjustment for some anticipated improvement Cost of Living Adjustments 2.50%

132

KNOX COUNTY, TENNESSEE Required Supplementary Information June 30, 2016 Schedule of Funding Progress OPEB - Employee Disability Plan:

(Last Three Fiscal Years)

Actuarial Accrued UAAL as a Market Actuarial Accrued Unfunded Percentage of Actuarial Value of Liability (AAL) AAL Funded Covered Covered Valuation Assets - EAN (UAAL) Ratio Payroll ** Payroll Date (a) (b) (b - a) (a/b) (c) ((b - a)/c)

OPEB - Employee Disability Plan:

6/30/2016 $ 1,451,902 $ 3,036,796 $ 1,584,894 47.81% $ 156,080,523 1.02%

6/30/2015 1,247,594 2,309,559 1,061,965 54.02% 160,261,808 0.66%

6/30/2014 367,920 1,983,227 1,615,307 18.55% 152,946,739 1.06%

• • Includes payroll for all employees eligible for a disability benefit under the Closed DB, Asset Accumulation, UOPP and STAR plans.

Schedule of Employer OPEB Contributions (Last Three Fiscal Years)

OPEB - Employee Disability Plan Year Annual Net OPEB Ended Required Actual Percentage Obligation June 30, Contribution Contribution Contributed (Asset) 2016 $ 530,426 $ 1,183,523 223% $ (1,550,766) 2015 527,447 1,099,376 208% (918,716) 2014 N/A 354,018 N/A (354,018)

Note: (A) The effective date of this Plan is January 1, 2014, therefore there was no actuarial required contribution for FY 2014. Additional years will be added in the future.

133

Supplemental Section GENERAL FUND The General Fund is used to account for resources traditionally associated with government that are not required legally or by sound financial management to be accounted for in another fund. The General Fund accounts for the normal recurring activities of the County (i.e., public safety, recreation, health and welfare, general government, etc.). These activities are funded principally by property taxes on individuals and businesses.

KNOX COUNTY, TENNESSEE General Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 15,176,981 $ 18,080,248 Investments, at Fair Value 54,860,946 44,217,769 Receivables (Net of Allowances for Uncollectibles):

Accounts 9,697,254 10,768,755 Local Taxes 115,465,978 114,020,843 Notes 892,000 1,024,000 Due from Other Funds 956,895 1,201,602 Inventories 427,863 115,159 Prepaid Items 196,792 328,020 Investment in Joint Venture 5,337,350 5,490,386 TOTAL ASSETS $ 203,012,059 $ 195,246,782 LIABILITIES Accounts Payable and Accrued Liabilities $ 11,512,573 $ 7,827,733 Due to Other Funds 3,419,692 3,483,010 Due to Component Units 147,314 112,997 Unearned Revenue 60,501 54,344 TOTAL LIABILITIES 15,140,080 11,478,084 DEFERRED INFLOWS OF RESOURCES Deferred Property Taxes and Notes Receivable 115,590,037 114,019,761 FUND BALANCES Nonspendable 5,962,005 5,933,564 Restricted 2,450,091 2,426,638 Committed 2,297,348 4,405,300 Assigned 789,441 1,130,360 Unassigned 60,783,057 55,853,075 TOTAL FUND BALANCES 72,281,942 69,748,937 TOTAL LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES $ 203,012,059 $ 195,246,782 134

KNOX COUNTY, TENNESSEE General Fund Comparative Statements of Revenues, Expenditures And Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues County Property Taxes $ 118,263,054 $ 114,595,419 Local Option Sales Taxes 4,425,487 4,923,911 Business Taxes 9,301,725 8,210,298 Wheel Taxes 532,699 534,818 Other Local Taxes 2,991,976 2,926,117 Licenses and Permits 4,415,268 4,214,130 Fines, Forfeitures and Penalties 2,716,773 2,307,617 Charges for Current Services 7,152,072 6,851,745 Other Local Revenues 4,827,617 4,744,620 State of Tennessee 13,883,964 12,381,044 Federal Government 1,208,814 1,169,552 Other Governments and Citizen Groups 588,883 356,251 Total Revenues 170,308,332 163,215,522 Expenditures Current:

General Government:

Finance and Administration 24,536,766 23,474,338 Finance and Administration - Payments to Component Unit 9,553,874 6,553,874 Administration of Justice 17,389,378 16,639,890 Public Safety 79,193,115 75,095,224 Public Safety - Payments to Component Unit 326,200 326,200 Public Health and Welfare 20,242,281 19,871,158 Public Health and Welfare - Payments to Component Unit 166,628 166,628 Social and Cultural Services 5,123,600 4,769,053 Agricultural and Natural Resources 490,451 470,977 Other General Government 15,709,676 15,326,762 Other General Government - Payments to Component Unit 625,000 600,000 Decrease in Equity Interest in Joint Venture 153,036 931,800 Total Expenditures 173,510,005 164,225,904 Deficiency of Revenues Under Expenditures (3,201,673) (1,010,382)

Other Financing Sources (Uses)

Transfers from Other Funds 10,741,900 8,241,136 Transfers to Other Funds (5,007,222) (3,570,340)

Total Other Financing Sources 5,734,678 4,670,796 Net Change in Fund Balances 2,533,005 3,660,414 Fund Balances, July 1 69,748,937 66,088,523 Fund Balances, June 30 $ 72,281,942 $ 69,748,937 135

SPECIAL REVENUE FUNDS - MAJOR Constitutional Officers Fund: This fund is used to account for revenues and expenditures associated with the administrative functions of the Constitutional Officers.

KNOX COUNTY, TENNESSEE Constitutional Officers' Special Revenue Fund Combining Balance Sheets June 30, 2016 (With Comparative Totals for June 30, 2015)

Totals Circuit and Criminal and County General Sessions Fourth Circuit Clerk and Register Trustee Clerk Court Clerk Court Clerk Master of Deeds 2016 2015 ASSETS Cash and Cash Equivalents $ 539,237 $ 1,220,595 $ 367,105 $ 2,571,877 $ 497,000 $ 572,151 $ 5,767,965 $ 4,333,80 TOTAL ASSETS $ 539,237 $ 1,220,595 $ 367,105 $ 2,571,877 $ 497,000 $ 572,151 $ 5,767,965 $ 4,333,80 LIABILITIES AND FUND BALANCES Liabilities:

Due to Other Funds $ 157,880 $ - $ - $ 100,000 $ - $ 283,298 $ 541,178 $ 404,47 Fund Balances:

Assigned 381,357 1,220,595 367,105 2,471,877 497,000 288,853 5,226,787 3,929,33 TOTAL LIABILITIES AND FUND BALANCES $ 539,237 $ 1,220,595 $ 367,105 $ 2,571,877 $ 497,000 $ 572,151 $ 5,767,965 $ 4,333,80 136

KNOX COUNTY, TENNESSEE Constitutional Officers' Special Revenue Fund Combining Schedule of Revenues, Expenditures And Changes in Fund Balances For the year ended June 30, 2016 (With comparative totals for the year ended June 30, 2015)

Circuit and Criminal and Totals County General Sessions Fourth Circuit Clerk and Register of Trustee Clerk Court Clerk Court Clerk Master Deeds 2016 2015 Revenues Charges for Services $ 9,170,182 $ 5,752,141 $ 1,604,726 $ 6,960,941 $ 1,343,455 $ 2,631,478 $ 27,462,923 $ 23,457,118 Investment Revenue 1,658 8,356 - - - 6,498 16,512 16,118 Total Revenues 9,171,840 5,760,497 1,604,726 6,960,941 1,343,455 2,637,976 27,479,435 23,473,236 Expenditures Current:

General Government:

Salaries - County Officials 151,982 121,970 83,496 134,168 129,198 117,453 738,267 736,492 Salaries - Staff 1,639,786 2,865,645 1,020,818 3,206,837 698,816 1,215,876 10,647,778 10,404,176 Employee Benefits and Payroll Taxes 573,630 1,036,685 371,485 1,124,213 278,083 444,538 3,828,634 3,882,957 Travel - 8,723 5,220 - - 8,400 22,343 22,020 Other - 44,416 - - 4,536 154,107 203,059 244,046 Total Expenditures 2,365,398 4,077,439 1,481,019 4,465,218 1,110,633 1,940,374 15,440,081 15,289,691 Excess of Revenues Over Expenditures 6,806,442 1,683,058 123,707 2,495,723 232,822 697,602 12,039,354 8,183,545 Other Financing Uses Transfers to Other Funds (6,840,739) (1,649,191) - (1,315,545) (232,827) (703,598) (10,741,900) (8,241,136)

Net Change in Fund Balances (34,297) 33,867 123,707 1,180,178 (5) (5,996) 1,297,454 (57,591)

Fund Balances, July 1 415,654 1,186,728 243,398 1,291,699 497,005 294,849 3,929,333 3,986,924 Fund Balances, June 30 $ 381,357 $ 1,220,595 $ 367,105 $ 2,471,877 $ 497,000 $ 288,853 $ 5,226,787 $ 3,929,333 137

CAPITAL PROJECTS FUNDS - MAJOR Capital Projects Funds are used to account for the acquisition and construction of major facilities other than those financed by proprietary or trust funds.

Public Improvement Fund: This fund is used to account for the County construction projects in process. These public improvement construction projects include, but are not limited to, highway projects, sewer lines, recreation facilities, public library facilities, City-County Building renovations, Knox Central facilities, and golf course improvements.

KNOX COUNTY, TENNESSEE Public Improvement Capital Projects Fund (Major)

Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 1,776,560 $ 4,065,823 Investments, at Fair Value 6,780,566 9,950,759 Accounts Receivable (Net of Allowances for Uncollectibles) 1,052 842,678 Due from Other Funds 378,598 3,210 Due from Component Units 1,351 -

TOTAL ASSETS $ 8,938,127 $ 14,862,470 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 2,800,415 $ 2,211,119 Due to Other Funds 1,442 31 Due to Component Units 158,802 -

TOTAL LIABILITIES 2,960,659 2,211,150 Fund Balances:

Restricted 5,977,468 12,651,320 TOTAL FUND BALANCES 5,977,468 12,651,320 TOTAL LIABILITIES AND FUND BALANCES $ 8,938,127 $ 14,862,470 138

KNOX COUNTY, TENNESSEE Public Improvement Capital Projects Fund (Major)

Comparative Statements of Revenues, Expenditures And Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Investment Earnings $ 1,609 $ (432)

Other Local Revenues 456,435 55,964 State of Tennessee 96,412 4,153,588 Other Governments and Citizen Groups 498,094 -

Total Revenues 1,052,550 4,209,120 Expenditures Capital Projects 26,501,590 18,245,016 Debt Proceeds Paid to Component Unit 19,385,000 24,271,315 Public Safety-Payments to Component Unit 158,802 -

Debt Issuance Costs 196,957 209,442 Other 1,959 -

Total Expenditures 46,244,308 42,725,773 Deficiency of Revenues Under Expenditures (45,191,758) (38,516,653)

Other Financing Sources Long-term Bonds Issued 35,900,000 30,040,000 Long-term Note Issued Premium on Long-term Debt Issued 2,206,016 1,484,442 Capital Lease Proceeds - 12,450,000 Loan Proceeds - -

Transfers from Other Funds 411,890 125,320 Total Other Financing Sources 38,517,906 44,099,762 Net Change in Fund Balances (6,673,852) 5,583,109 Fund Balances, July 1 12,651,320 7,068,211 Fund Balances, June 30 $ 5,977,468 $ 12,651,320 139

KNOX COUNTY, TENNESSEE Public Improvement Capital Projects Fund (Major)

Schedule of Construction Project Expenditures-Budget And Actual For the year ended June 30, 2016 Expenditures Project Prior Budget Years Current Total Available Expenditures Capital Projects:

Road Construction:

Knob Creek Bridge $ 578,925 $ 313,968 $ - $ 313,968 $ 264,957 Bob Gray Roundabouts 1,417,067 1,301,919 (131,634) 1,170,285 246,782 Bridge Replacement 7,431,782 6,083,307 70,844 6,154,151 1,277,631 Ballcamp Improvements 17,228,419 17,217,670 9,448 17,227,118 1,301 Lovell Road 2,997,627 2,609,258 - 2,609,258 388,369 Dry Gap Pike 6,283,367 6,199,192 - 6,199,192 84,175 Maynardville/Norris/Emory 1,828,430 1,818,110 2,599 1,820,709 7,721 Parkside Drive Extension 16,364,572 10,347,117 2,717,277 13,064,394 3,300,178 Dutchtown Road Functional Plan 13,309,464 13,309,232 232 13,309,464 -

Karns Connector 4,368,249 697,077 51,371 748,448 3,619,801 National Drive-John Sevier Highway 958,838 389,492 478,115 867,607 91,231 General Road Improvements 1,900,000 25,874 410,359 436,233 1,463,767 State Aid 5,416,000 4,098,729 - 4,098,729 1,317,271 Schaeffer Road Relocation 555,000 - 93,734 93,734 461,266 Fox Lonas Drive Improvement 315,000 - - - 315,000 Gray Hendrix and Garrison 333,837 248,351 85,087 333,438 399 Lakefront Drive 77,234 77,234 - 77,234 -

General Culvert Maintenance 294,884 9,980 269,904 279,884 15,000 Ebenezer/Gleason Intersection 1,100,000 14,555 541,722 556,277 543,723 Hardin Valley /Greenland 497,448 6,430 431,030 437,460 59,988 Schaad Road Phase II 11,931,897 452,186 283,375 735,561 11,196,336 95,188,040 65,219,681 5,313,463 70,533,144 24,654,896 Total Road Construction Building Renovations:

Juvenile Court/ Detention 14,390,588 14,270,829 300,466 14,571,295 (180,707)

County Wide Renovations 200,000 - - - 200,000 Knox Central 1,820,037 2,643,409 62,090 2,705,499 (885,462)

Knox Central CIP '11 78,632 225 - 225 78,407 Fairview Technical Center 73,500 37,661 14,151 51,812 21,688 John Tarleton 159,134 138,085 10,000 148,085 11,049 John Tarleton Admin. Building 750,000 113,342 140,139 253,481 496,519 AJ/ Dwight Kessel Garage 3,164,573 1,925,202 28,260 1,953,462 1,211,111 City/County Improvement 15,296,019 13,698,754 499,100 14,197,854 1,098,165 Knox County Health Renovations 11,628,466 11,331,992 107,964 11,439,956 188,510 Old Courthouse Renovation 3,948,040 3,077,845 109,098 3,186,943 761,097 Detention Facility 1,535,668 1,552,017 - 1,552,017 (16,349)

Detention Facility Expansion 2006 13,999,827 13,996,324 - 13,996,324 3,503 Jail Improvements 1,046,550 794,481 36,367 830,848 215,702 Juvenile Justice Center Phases II 3,102,190 3,832,703 17,762 3,850,465 (748,275)

ADA Improvements 365,000 840 359,581 360,421 4,579 Family Justice Center 218,700 70,624 53,875 124,499 94,201 E-911 Center 544,855 100,692 22,621 123,313 421,542 Health Department CDC/Lab Renovation 134,500 79,048 - 79,048 55,452 Northshore Drive & Choto Road 753,321 598,442 23,483 621,925 131,396 Courtroom Improvement 6,500 - - - 6,500 Total Building Renovations 73,216,100 68,262,515 1,784,957 70,047,472 3,168,628 140 continued

KNOX COUNTY, TENNESSEE Public Improvement Capital Projects Fund (Major)

Schedule of Construction Project Expenditures-Budget And Actual (Continued)

For the year ended June 30, 2016 Expenditures Project Prior Budget Years Current Total Available Expenditures Building Construction:

South Sportsplex 107,000 - - - 107,000 Lawson McGhee Library 1,248,784 972,797 131,267 1,104,064 144,720 Various Library Branches 661,061 654,731 - 654,731 6,330 Carter Branch Library 40,000 - - - 40,000 Senior Centers 81,800 39,984 - 39,984 41,816 Carter Senior Center 1,289,632 1,296,360 - 1,296,360 (6,728)

Frank Strang Center - 10,256 - 10,256 (10,256)

Medical Examiner 4,250,000 5,490,230 178,661 5,668,891 (1,418,891)

Karns Senior Center 1,500,000 1,256,211 137,187 1,393,398 106,602 Safety Center 1,000,000 - - - 1,000,000 Total Building Construction: 10,178,277 9,720,569 447,115 10,167,684 10,593 Other:

Halls Greenway 154,903 155,067 - 155,067 (164)

Knox-Blount Greenway-Phase I 360,198 13,195 - 13,195 347,003 Halls Park - School Link Phase II 202,660 119,786 214,005 333,791 (131,131)

Knox-Blount Greenway-Phase II 145,198 49,247 - 49,247 95,951 Park Facility Improvement 936,766 667,742 173,060 840,802 95,964 Playgrounds Improvements 207,500 - 207,500 207,500 -

Tennis/Basketball Court Improvements 117,000 - 117,000 117,000 -

Rifle Range Road Park 3,813,027 3,813,027 - 3,813,027 -

Greenways 33,253 17,856 - 17,856 15,397 East TN Historical Renovations 150,000 - 148,522 148,522 1,478 Technology Upgrade - Libraries 1,250,000 459,368 72,610 531,978 718,022 Finance Software Upgrade 1,569,308 1,389,346 38,244 1,427,590 141,718 PBA Project Management 6,120,194 4,452,900 89,095 4,541,995 1,578,199 Public Defender 87,000 - - - 87,000 Telecommunications Upgrades 105,100 - 85,349 85,349 19,751 Energy Management Project - County 16,176,571 14,004,728 5,487,054 19,491,782 (3,315,211)

Major Equipment - Engineering & Public Works 771,000 - 615,024 615,024 155,976 Major Equipment - Information Technology 250,138 - 236,301 236,301 13,837 Major Equipment - Sheriff's Department 1,994,459 - 1,764,276 1,764,276 230,183 Major Equipment - Parks & Recreation 217,500 - 169,338 169,338 48,162 Major Equipment - Fire Prevention 26,000 - 26,000 26,000 -

Major Equipment - Public Library 36,000 - 35,906 35,906 94 Major Equipment - Codes Administration 25,000 - 25,000 25,000 -

Major Equipment - Solid Waste 30,262 - 28,390 28,390 1,872 Major Equipment - Circuit Court 80,000 - 79,804 79,804 196 Major Equipment - Juvenile Court 32,000 - 30,032 30,032 1,968 Major Equipment - Criminal Court 80,000 - 78,821 78,821 1,179 Major Equipment - Medical Examiner 60,000 - 58,698 58,698 1,302 Major Equipment - Animal Center 100,000 - 25,504 25,504 74,496 Solway Yard Waste Facility 1,386,400 1,363,255 - 1,363,255 23,145 Stormwater Management 13,237,620 9,673,325 3,251,136 12,924,461 313,159 Karns Convenience Center 1,329,491 1,318,488 10,036 1,328,524 967 Geometric Improvements 3,730,374 2,340,835 563,211 2,904,046 826,328 County Sidewalk 1,157,831 623,988 216,788 840,776 317,055 Major Equipment - Engineering & Public Works 2,856,195 2,452,559 395,043 2,847,602 8,593 Major Equipment - Sheriff Detention 5,731,890 4,104,446 268,257 4,372,703 1,359,187 Powell Middle School 15,358,025 15,388,363 14,823 15,403,186 (45,161)

New Carter Elementary 15,390,368 15,391,581 - 15,391,581 (1,213)

Family Investment - Renovation 130,000 112,447 - 112,447 17,553 Election Commission 184,298 - - - 184,298 141

KNOX COUNTY, TENNESSEE Public Improvement Capital Projects Fund (Major)

Schedule of Construction Project Expenditures-Budget And Actual (Continued)

For the year ended June 30, 2016 Expenditures Project Prior Budget Years Current Total Available Expenditures East Bridge 50,000 - - - 50,000 Meads Quarry 100,000 25,381 74,619 100,000 -

Info Tech Equipment 1,244,305 1,015,646 143,137 1,158,783 85,522 Safety Projects 180,000 - - - 180,000 Powell Center Office Addition 25,000 - - - 25,000 Plumb Creek 300,000 - 10,250 10,250 289,750 Facility Improvements 354,221 - 354,221 354,221 -

Carter Conv. Center Expansion 750,000 - - - 750,000 Major Equipment - Parks & Rec. 131,500 77,390 21,465 98,855 32,645 Major Equipment - Fire Prevention 26,000 25,274 - 25,274 726 Major Equipment - Public Library 92,500 92,493 - 92,493 7 Major Equipment - Election Comm. 81,300 78,970 - 78,970 2,330 Major Equipment - Juvenile Service Ctr. 23,000 8,923 - 8,923 14,077 Major Equipment - Fleet Service 24,200 - - - 24,200 Major Equipment - Record Mgmt. 25,000 24,874 - 24,874 126 Major Equipment - Health Dept. 35,000 37,500 - 37,500 (2,500)

Major Equipment - Animal Center 400,000 36,639 236,641 273,280 126,720 Ameresco Solar Project - County 3,158,685 - 2,865,895 2,865,895 292,790 I.C. King Park Expansion 725,000 - 725,000 725,000 -

Public Access to Beaver Creek 50,000 - - - 50,000 Total Other 103,399,240 79,334,639 18,956,055 98,290,694 5,108,546 Total Capital Projects $ 281,981,657 $ 222,537,404 $ 26,501,590 $ 249,038,994 $ 32,942,663 142

DEBT SERVICE FUND - MAJOR The Debt Service Fund is used to account for the accumulation of resources for, and related payments of, principal and interest on general long-term debt for the County and for the Knox County Board of Education, a discretely presented component unit.

KNOX COUNTY, TENNESSEE Debt Service Fund (Major)

Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 6,997,571 $ 8,625,335 Receivables (Net of Allowance for Uncollectibles):

Property Taxes 55,879,328 55,081,622 Notes 7,475,000 7,475,000 Due from Other Funds - 700,000 Due from Component Units 13,022,088 10,000,000 Advance to Other Entity 2,465,000 2,465,000 TOTAL ASSETS $ 85,838,987 $ 84,346,957 LIABILITIES Accounts Payable and Accrued Liabilities $ 6,761 $ 9,512 TOTAL LIABILITIES 6,761 9,512 DEFERRED INFLOWS OF RESOURCES Deferred Property Taxes and Notes Receivable 61,561,266 60,626,041 FUND BALANCES Restricted 83,528 83,728 Committed 24,187,432 23,627,676 TOTAL FUND BALANCES 24,270,960 23,711,404 TOTAL LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES $ 85,838,987 $ 84,346,957 143

KNOX COUNTY, TENNESSEE Debt Service Fund (Major)

Comparative Statements of Revenues, Expenditures And Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Property Taxes $ 52,316,064 $ 52,224,314 Other Local Revenues 2,580,575 2,208,630 Payments from Component Units 13,022,088 10,000,000 Total Revenues 67,918,727 64,432,944 Expenditures Debt Service:

Trustee's Commission 1,074,820 1,058,983 Principal 44,203,336 43,975,347 Interest 20,742,805 20,716,774 Other Debt Service 1,533,600 1,533,801 Refunding Bonds Issuance Costs - 395,053 Total Expenditures 67,554,561 67,679,958 Excess (Deficiency) of Revenues Over (Under) Expenditures 364,166 (3,247,014)

Other Financing Sources Transfers from Other Funds 195,390 894,394 Refunding Bonds Issued - 72,860,000 Premium on Refunding Bonds - 1,716,531 Payment to Holders of Refunded Debt - (74,181,478)

Total Other Financing Sources 195,390 1,289,447 Net Change in Fund Balances 559,556 (1,957,567)

Fund Balances, July 1 23,711,404 25,668,971 Fund Balances, June 30 $ 24,270,960 $ 23,711,404 144

KNOX COUNTY, TENNESSEE Debt Service Fund (Major)

Comparative Schedules of Revenues, Expenditures And Changes in Fund Balances - Budget And Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues Property Taxes $ 51,974,000 $ 51,974,000 $ 52,316,064 $ 342,064 $ 52,480,000 $ 52,224,314 $ (255,686)

Other Local Revenues 1,892,052 1,892,052 2,580,575 688,523 1,892,668 2,208,630 315,962 Payments from Component Units 13,022,088 13,022,088 13,022,088 - 14,658,427 10,000,000 (4,658,427)

Total Revenues 66,888,140 66,888,140 67,918,727 1,030,587 69,031,095 64,432,944 (4,598,151)

Expenditures Debt Service:

Trustee's Commission 1,100,000 1,100,000 1,074,820 25,180 1,100,000 1,058,983 41,017 Principal 44,744,716 44,744,716 44,203,336 541,380 42,804,868 43,975,347 (1,170,479)

Interest 27,655,284 27,655,284 20,742,805 6,912,479 29,595,132 20,716,774 8,878,358 Other Debt Service 2,000,000 2,000,000 1,533,600 466,400 2,000,000 1,533,801 466,199 Refunding Bonds Issuance Costs - - - - - 395,053 (395,053)

Total Expenditures 75,500,000 75,500,000 67,554,561 7,945,439 75,500,000 67,679,958 7,820,042 Excess (Deficiency) of Revenues Over (Under) Expenditures (8,611,860) (8,611,860) 364,166 8,976,026 (6,468,905) (3,247,014) 3,221,891 Other Financing Sources (Uses)

Transfers from Other Funds 195,387 195,387 195,390 3 194,394 894,394 700,000 Refunding Bonds Issued - - - - - 72,860,000 72,860,000 Premium on Refunding Bonds - - - - - 1,716,531 1,716,531 Payment to Holders of Refunded Debt - - - - - (74,181,478) (74,181,478)

Total Other Financing Sources (Uses) 195,387 195,387 195,390 3 194,394 1,289,447 1,095,053 Net Change in Fund Balances (8,416,473) (8,416,473) 559,556 8,976,029 (6,274,511) (1,957,567) 4,316,944 Fund Balances, July 1 23,711,404 23,711,404 23,711,404 - 25,668,971 25,668,971 -

Fund Balances, June 30 $ 15,294,931 $ 15,294,931 $ 24,270,960 $ 8,976,029 $ 19,394,460 $ 23,711,404 $ 4,316,944 145

NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS State, Federal and Other Grants Fund: This fund is used to account for most State and Federal grant revenues.

Governmental Library Fund: This fund accounts for the operation of the law library that is available to the public but is used primarily by attorneys practicing in the courts.

User fees are charged by the Governmental Library.

Public Library Fund: This fund is used to account for the operation of the County-wide public library system.

Solid Waste Fund: This fund is used to account for solid waste and recycling activities.

Hotel/Motel Tax Fund: This fund accounts for the collection and use of the amusement tax to promote tourism and related economic activity in the County.

Drug Control Fund: This fund was established pursuant to an amendment of Tennessee Code Annotated Section 39-17-420. This fund is used to account for drug control activities restricted for drug enforcement, drug education and non-recurring general law enforcement expenditures. This fund is primarily funded from the receipt of fines and costs related to drug enforcement cases.

Engineering and Public Works Fund: This fund is used to account for the Countys share of the State gasoline and motor fuel taxes that are utilized to maintain non-state roads within the county.

CAPITAL PROJECTS FUND ADA Construction Fund: This fund is used to account for construction activity related to the Americans with Disabilities Act.

KNOX COUNTY, TENNESSEE Combining Balance Sheet Nonmajor Governmental Funds June 30, 2016 Special ADA Construction Total Nonmajor Revenue Capital Project Governmental Funds Fund Funds ASSETS Cash and Cash Equivalents $ 10,705,954 $ 628,164 $ 11,334,118 Receivables (Net of Allowance for Uncollectibles):

Accounts 7,550,158 - 7,550,158 Notes 1,915,906 - 1,915,906 Due from Other Funds 1,141,608 - 1,141,608 Inventories 69,985 - 69,985 Prepaid Items 44,696 - 44,696 TOTAL ASSETS $ 21,428,307 $ 628,164 $ 22,056,471 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 4,784,182 $ - $ 4,784,182 Due to Other Funds 898,832 359,581 1,258,413 Unearned Revenue 2,265,547 - 2,265,547 TOTAL LIABILITIES 7,948,561 359,581 8,308,142 Fund Balances:

Nonspendable 114,681 - 114,681 Restricted 6,467,275 - 6,467,275 Committed 6,897,790 268,583 7,166,373 TOTAL FUND BALANCES 13,479,746 268,583 13,748,329 TOTAL LIABILITIES AND FUND BALANCES $ 21,428,307 $ 628,164 $ 22,056,471 146

KNOX COUNTY, TENNESSEE Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2016 Special ADA Construction Total Nonmajor Revenue Capital Project Governmental Funds Fund Funds Revenues Local Option Sales Taxes $ 7,534,783 $ - $ 7,534,783 Lodging Taxes 7,993,988 - 7,993,988 Wheel Taxes 11,019,627 - 11,019,627 Other Local Taxes 2,110,463 - 2,110,463 Fines, Forfeitures and Penalties 813,993 - 813,993 Charges for Current Services 1,104,509 - 1,104,509 Other Local Revenues 1,085,005 - 1,085,005 State of Tennessee 8,056,192 - 8,056,192 Federal Government 9,036,419 - 9,036,419 Other Governments and Citizen Groups 123,990 - 123,990 Total Revenues 48,878,969 - 48,878,969 Expenditures Current:

Administration of Justice 585,210 - 585,210 Public Safety 1,974,294 - 1,974,294 Public Health and Welfare 13,264,310 - 13,264,310 Social and Cultural Services 13,987,768 - 13,987,768 Other General Government 7,807,035 - 7,807,035 Engineering and Public Works 13,454,304 - 13,454,304 Capital Projects - 92,536 92,536 Total Expenditures 51,072,921 92,536 51,165,457 Excess (Deficiency) of Revenues Over (Under) Expenditures (2,193,952) (92,536) (2,286,488)

Other Financing Sources (Uses)

Transfers from Other Funds 3,789,180 - 3,789,180 Transfers to Other Funds (1,225,984) (359,581) (1,585,565)

Total Other Financing Sources (Uses) 2,563,196 (359,581) 2,203,615 Net Change in Fund Balances 369,244 (452,117) (82,873)

Fund Balances, July 1 13,110,502 720,700 13,831,202 Fund Balances, June 30 $ 13,479,746 $ 268,583 $ 13,748,329 147

KNOX COUNTY, TENNESSEE Combining Balance Sheet Nonmajor Special Revenue Funds June 30, 2016 Federal, State Total Nonmajor And Other Governmental Public Solid Hotel/Motel Drug Engineering & Special Revenue Grants Library Library Waste Tax Control Public Works Funds ASSETS Cash and Cash Equivalents $ - $ 17,449 $ 1,176,626 $ 612,334 $ 3,064,748 $ 2,466,069 $ 3,368,728 $ 10,705,954 Receivables (Net of Allowance for Uncollectibles):

Accounts 2,671,793 31,994 1,024,207 149,794 1,414,845 9,066 2,248,459 7,550,158 Notes 1,915,906 - - - - - - 1,915,906 Due from Other Funds 531,056 6,000 - 603,110 - - 1,442 1,141,608 Inventories 69,985 - - - - - - 69,985 Prepaid Items 20,185 - 12,011 - 12,500 - - 44,696 TOTAL ASSETS $ 5,208,925 $ 55,443 $ 2,212,844 $ 1,365,238 $ 4,492,093 $ 2,475,135 $ 5,618,629 $ 21,428,307 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 522,299 $ 6,547 $ 521,137 $ 76,428 $ 2,504,589 $ 61,784 $ 1,091,398 $ 4,784,182 Due to Other Funds 251,862 - 3,555 4,448 - 127 638,840 898,832 Unearned Revenue 2,265,547 - - - - - - 2,265,547 TOTAL LIABILITIES 3,039,708 6,547 524,692 80,876 2,504,589 61,911 1,730,238 7,948,561 Fund Balances:

Nonspendable 90,170 - 12,011 - 12,500 - - 114,681 Restricted 2,079,047 - - - 1,975,004 2,413,224 - 6,467,275 Committed - 48,896 1,676,141 1,284,362 - - 3,888,391 6,897,790 TOTAL FUND BALANCES 2,169,217 48,896 1,688,152 1,284,362 1,987,504 2,413,224 3,888,391 13,479,746 TOTAL LIABILITIES AND FUND BALANCES $ 5,208,925 $ 55,443 $ 2,212,844 $ 1,365,238 $ 4,492,093 $ 2,475,135 $ 5,618,629 $ 21,428,307 148

KNOX COUNTY, TENNESSEE Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Special Revenue Funds For the Year Ended June 30, 2016 Federal, State Total Nonmajor And Other Governmental Public Solid Hotel/Motel Drug Engineering & Special Revenue Grants Library Library Waste Tax Control Public Works Funds Revenues Local Option Sales Taxes $ - $ - $ - $ 2,500,000 $ - $ - $ 5,034,783 $ 7,534,783 Lodging Taxes - - - - 7,993,988 - - 7,993,988 Wheel Taxes - - 11,019,627 - - - - 11,019,627 Other Local Taxes - 63,232 - - - - 2,047,231 2,110,463 Fines, Forfeitures and Penalties 51,615 - - 62,899 - 694,329 5,150 813,993 Charges for Current Services 797,530 3,733 302,695 - - - 551 1,104,509 Other Local Revenues 327,192 151 145,065 320,683 - 155,514 136,400 1,085,005 State of Tennessee 2,182,206 - 51,900 488,098 - - 5,333,988 8,056,192 Federal Government 8,971,224 - - - - 65,195 - 9,036,419 Other Governments and Citizen Groups 69,878 30,000 24,112 - - - - 123,990 Total Revenues 12,399,645 97,116 11,543,399 3,371,680 7,993,988 915,038 12,558,103 48,878,969 Expenditures Current:

Administration of Justice 585,210 - - - - - - 585,210 Public Safety 1,294,842 - - - - 679,452 - 1,974,294 Public Health and Welfare 9,234,021 - - 4,030,289 - - - 13,264,310 Social and Cultural Services 953,536 101,990 12,932,242 - - - - 13,987,768 Other General Government 1,235,071 - - - 6,571,964 - - 7,807,035 Engineering and Public Works 134,670 - - - - - 13,319,634 13,454,304 Total Expenditures 13,437,350 101,990 12,932,242 4,030,289 6,571,964 679,452 13,319,634 51,072,921 Excess (Deficiency) of Revenues Over (Under) Expenditures (1,037,705) (4,874) (1,388,843) (658,609) 1,422,024 235,586 (761,531) (2,193,952)

Other Financing Sources (Uses)

Transfers from Other Funds 453,180 6,000 1,730,000 600,000 - - 1,000,000 3,789,180 Transfers to Other Funds - - - - (600,000) - (625,984) (1,225,984)

Total Other Financing Sources (Uses) 453,180 6,000 1,730,000 600,000 (600,000) - 374,016 2,563,196 Net Change in Fund Balances (584,525) 1,126 341,157 (58,609) 822,024 235,586 (387,515) 369,244 Fund Balances, July 1 2,753,742 47,770 1,346,995 1,342,971 1,165,480 2,177,638 4,275,906 13,110,502 Fund Balances, June 30 $ 2,169,217 $ 48,896 $ 1,688,152 $ 1,284,362 $ 1,987,504 $ 2,413,224 $ 3,888,391 $ 13,479,746 149

KNOX COUNTY, TENNESSEE Federal, State and Other Grants Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ - $ 550,046 Receivables (Net of Allowances for Uncollectibles):

Accounts 2,671,793 2,909,721 Notes 1,915,906 2,214,159 Due from Other Funds 531,056 951,523 Inventories 69,985 4,994 Prepaid Items 20,185 19,009 TOTAL ASSETS $ 5,208,925 $ 6,649,452 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 522,299 $ 550,396 Due to Other Funds 251,862 529,655 Unearned Revenue 2,265,547 2,815,659 TOTAL LIABILITIES 3,039,708 3,895,710 Fund Balances:

Nonspendable 90,170 24,003 Restricted 2,079,047 2,729,739 TOTAL FUND BALANCES 2,169,217 2,753,742 TOTAL LIABILITIES AND FUND BALANCES $ 5,208,925 $ 6,649,452 150

KNOX COUNTY, TENNESSEE Federal, State and Other Grants Fund Comparative Statements of Revenues, Expenditures And Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Fines, Forfeitures, and Penalties $ 51,615 $ 48,967 Charges for Current Services 797,530 571,641 Other Local Revenues 327,192 200,527 State of Tennessee 2,182,206 1,512,892 Federal Government 8,971,224 10,604,350 Other Governmental and Citizen Groups 69,878 238,084 Total Revenues 12,399,645 13,176,461 Expenditures Current:

General Government:

Finance and Administration - 450,000 Administration of Justice 585,210 761,397 Public Safety 1,294,842 1,272,821 Public Health and Welfare 9,234,021 9,174,098 Social and Cultural Services 953,536 324,812 Other General Government 1,235,071 2,035,956 Engineering and Public Works 134,670 146,987 Total Expenditures 13,437,350 14,166,071 Deficiency of Revenues Under Expenditures (1,037,705) (989,610)

Other Financing Sources Transfers from Other Funds 453,180 802,631 Net Change in Fund Balances (584,525) (186,979)

Fund Balances, July 1 2,753,742 2,940,721 Fund Balances, June 30 $ 2,169,217 $ 2,753,742 151

KNOX COUNTY, TENNESSEE Federal, State and Other Grants Fund Comparative Schedules of Revenues, Expenditures And Changes in Fund Balances - Budget And Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues Charges for Current Services $ 160,000 $ 391,524 $ 392,774 $ 1,250 $ 308,427 $ 298,971 $ (9,456)

Other Local Revenues - 78,786 81,458 2,672 78,786 63,228 (15,558)

Federal Government - 487,283 413,219 (74,064) 577,181 495,039 (82,142)

Total Revenues 160,000 957,593 887,451 (70,142) 964,394 857,238 (107,156)

Expenditures Current:

General Government:

Personal Services - 805,382 638,669 166,713 829,441 590,729 238,712 Employee Benefits - 282,928 228,642 54,286 324,472 226,379 98,093 Contracted Services 145,334 262,564 181,080 81,484 303,644 146,096 157,548 Supplies and Materials - 140,632 66,830 73,802 141,065 64,458 76,607 Other Charges 14,666 96,125 96,124 1 92,462 76,904 15,558 Capital Outlay - 39,000 - 39,000 57,000 16,817 40,183 Total Expenditures 160,000 1,626,631 1,211,345 415,286 1,748,084 1,121,383 626,701 Excess (Deficiency) of Revenues Over (Under) Expenditures - (669,038) (323,894) 345,144 (783,690) (264,145) 519,545 Other Financing Sources Transfers from Other Funds - - 300,000 300,000 200,000 200,000 -

Net Change in Fund Balances - (669,038) (23,894) 645,144 (583,690) (64,145) 519,545 Fund Balances, July 1 183,389 183,389 183,389 - 247,534 247,534 -

Fund Balances, June 30 $ 183,389 $ (485,649) $ 159,495 $ 645,144 $ (336,156) $ 183,389 $ 519,545 Reconciliation of Fund Balances (Budget Basis) to Fund Balances (GAAP Basis):

Fund Balances (Budget Basis) $ 159,495 $ 183,389 Entity Difference:

Unbudgeted Funds 2,009,722 2,570,353 Fund Balances (GAAP Basis) $ 2,169,217 $ 2,753,742 152

KNOX COUNTY, TENNESSEE Governmental Library Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 17,449 $ 13,361 Receivables (Net of Allowances for Uncollectibles):

Accounts Receivable 31,994 33,127 Due from Other Funds 6,000 10,000 TOTAL ASSETS $ 55,443 $ 56,488 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 6,547 $ 7,678 Unearned Revenue - 1,040 TOTAL LIABILITIES 6,547 8,718 Fund Balances:

Committed 48,896 47,770 TOTAL FUND BALANCES 48,896 47,770 TOTAL LIABILITIES AND FUND BALANCES $ 55,443 $ 56,488 153

KNOX COUNTY, TENNESSEE Governmental Library Fund Comparative Statements of Revenues, Expenditures And Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Litigation Tax $ 63,232 $ 58,518 Charges for Current Services 3,733 4,460 Other Local Revenues 151 1,163 Other Governments and Citizens Groups 30,000 30,000 Total Revenues 97,116 94,141 Expenditures Current:

General Government:

Social and Cultural Services 101,990 103,077 Deficiency of Revenues Under Expenditures (4,874) (8,936)

Other Financing Sources Transfers from Other Funds 6,000 10,000 Net Change in Fund Balances 1,126 1,064 Fund Balances, July 1 47,770 46,706 Fund Balances, June 30 $ 48,896 $ 47,770 154

KNOX COUNTY, TENNESSEE Governmental Library Fund Comparative Schedules of Revenues, Expenditures And Changes in Fund Balances - Budget and Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues Litigation Tax $ 61,000 $ 61,000 $ 63,232 $ 2,232 $ 61,400 $ 58,518 $ (2,882)

Charges for Current Services 6,000 6,000 3,733 (2,267) 7,000 4,460 (2,540)

Other Local Revenues 1,600 1,600 151 (1,449) 1,800 1,163 (637)

Other Governments and Citizens Groups 31,000 31,000 30,000 (1,000) 31,000 30,000 (1,000)

Total Revenues 99,600 99,600 97,116 (2,484) 101,200 94,141 (7,059)

Expenditures Current:

General Government:

Social and Cultural Services:

Personal Services 23,175 23,175 22,676 499 49,104 31,616 17,488 Employee Benefits 20,094 18,764 3,094 15,670 16,163 7,616 8,547 Contracted Services 8,550 8,659 7,168 1,491 9,450 7,833 1,617 Supplies and Materials 66,000 67,100 67,071 29 54,098 54,098 -

Other Charges 1,781 2,011 1,981 30 2,385 1,914 471 Total Expenditures 119,600 119,709 101,990 17,719 131,200 103,077 28,123 Excess (Deficiency) of Revenues Over (Under) Expenditures (20,000) (20,109) (4,874) 15,235 (30,000) (8,936) 21,064 Other Financing Sources Transfers from Other Funds 20,000 20,000 6,000 (14,000) 30,000 10,000 (20,000)

Net Change in Fund Balances - (109) 1,126 1,235 - 1,064 1,064 Fund Balances, July 1 47,770 47,770 47,770 - 46,706 46,706 -

Fund Balances, June 30 $ 47,770 $ 47,661 $ 48,896 $ 1,235 $ 46,706 $ 47,770 $ 1,064 155

KNOX COUNTY, TENNESSEE Public Library Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 1,176,626 $ 872,070 Receivables (Net of Allowances for Uncollectibles):

Accounts Receivable 1,024,207 1,121,134 Prepaid Items 12,011 14,513 TOTAL ASSETS $ 2,212,844 $ 2,007,717 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 521,137 $ 459,492 Due to Other Funds 3,555 201,230 TOTAL LIABILITIES 524,692 660,722 Fund Balances:

Nonspendable 12,011 14,513 Committed 1,676,141 1,332,482 TOTAL FUND BALANCES 1,688,152 1,346,995 TOTAL LIABILITIES AND FUND BALANCES $ 2,212,844 $ 2,007,717 156

KNOX COUNTY, TENNESSEE Public Library Fund Comparative Statements of Revenues, Expenditures And Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Wheel Taxes $ 11,019,627 $ 10,886,910 Charges for Current Services 302,695 327,752 Other Local Revenues 145,065 7,267 State of Tennessee 51,900 51,900 Other Governments and Citizens Groups 24,112 21,884 Total Revenues 11,543,399 11,295,713 Expenditures Current:

General Government:

Social and Cultural Services 12,932,242 12,566,308 Deficiency of Revenues Under Expenditures (1,388,843) (1,270,595)

Other Financing Sources (Uses)

Transfers from Other Funds 1,730,000 1,470,000 Total Other Financing Sources 1,730,000 1,470,000 Net Change in Fund Balances 341,157 199,405 Fund Balances, July 1 1,346,995 1,147,590 Fund Balances, June 30 $ 1,688,152 $ 1,346,995 157

KNOX COUNTY, TENNESSEE Public Library Fund Comparative Schedules of Revenues, Expenditures And Changes in Fund Balances - Budget And Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues Wheel Taxes $ 11,025,000 $ 11,025,000 $ 11,019,627 $ (5,373) $ 10,635,000 $ 10,886,910 $ 251,910 Charges for Current Services 340,000 340,000 302,695 (37,305) 345,000 327,752 (17,248)

Other Local Revenues 132,000 132,000 145,065 13,065 9,000 7,267 (1,733)

State of Tennessee 51,900 51,900 51,900 - 51,900 51,900 -

Other Governments and Citizens Groups - - 24,112 24,112 - 21,884 21,884 Total Revenues 11,548,900 11,548,900 11,543,399 (5,501) 11,040,900 11,295,713 254,813 Expenditures Current:

General Government:

Social and Cultural Services:

Personal Services 6,824,174 6,853,885 6,707,014 146,871 6,606,022 6,588,852 17,170 Employee Benefits 2,222,241 2,222,241 2,102,132 120,109 2,106,163 2,089,384 16,779 Contracted Services 1,253,575 1,280,020 1,232,969 47,051 1,210,945 1,149,273 61,672 Supplies and Materials 1,910,600 1,929,565 1,814,346 115,219 1,935,913 1,815,795 120,118 Other Charges 921,828 929,328 929,299 29 1,654,000 923,004 730,996 Capital Outlay 146,482 146,482 146,482 - - - -

Total Expenditures 13,278,900 13,361,521 12,932,242 429,279 13,513,043 12,566,308 946,735 Excess (Deficiency) of Revenues Over (Under) Expenditures (1,730,000) (1,812,621) (1,388,843) 423,778 (2,472,143) (1,270,595) 1,201,548 Other Financing Sources (Uses)

Transfers from Other Funds 1,730,000 1,730,000 1,730,000 - 1,670,000 1,470,000 (200,000)

Net Change in Fund Balances - (82,621) 341,157 423,778 (802,143) 199,405 1,001,548 Fund Balances, July 1 1,346,995 1,346,995 1,346,995 - 1,147,590 1,147,590 -

Fund Balances, June 30 $ 1,346,995 $ 1,264,374 $ 1,688,152 $ 423,778 $ 345,447 $ 1,346,995 $ 1,001,548 158

KNOX COUNTY, TENNESSEE Solid Waste Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 612,334 $ 450,682 Receivables (Net of Allowances for Uncollectibles):

Accounts Receivable 149,794 155,855 Due from Other Funds 603,110 878,608 TOTAL ASSETS $ 1,365,238 $ 1,485,145 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 76,428 $ 134,601 Due to Other Funds 4,448 7,573 TOTAL LIABILITIES 80,876 142,174 Fund Balances:

Committed 1,284,362 1,342,971 TOTAL FUND BALANCES 1,284,362 1,342,971 TOTAL LIABILITIES AND FUND BALANCES $ 1,365,238 $ 1,485,145 159

KNOX COUNTY, TENNESSEE Solid Waste Fund Comparative Statements of Revenues, Expenditures And Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Local Option Sales Taxes $ 2,500,000 $ 2,400,000 Fines, Forfeitures, and Penalties 62,899 45,948 Other Local Revenues 320,683 447,923 State of Tennessee 488,098 532,798 Total Revenues 3,371,680 3,426,669 Expenditures Current:

General Government:

Public Health and Welfare 4,030,289 3,891,620 Deficiency of Revenues Under Expenditures (658,609) (464,951)

Other Financing Sources (Uses)

Transfers from Other Funds 600,000 550,000 Total Other Financing Sources 600,000 550,000 Net Change in Fund Balances (58,609) 85,049 Fund Balances, July 1 1,342,971 1,257,922 Fund Balances, June 30 $ 1,284,362 $ 1,342,971 160

KNOX COUNTY, TENNESSEE Solid Waste Fund Comparative Schedules of Revenues, Expenditures And Changes in Fund Balances - Budget And Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues Local Option Sales Taxes $ 2,500,000 $ 2,500,000 $ 2,500,000 $ - $ 2,400,000 $ 2,400,000 $ -

Fines, Forfeitures, and Penalties 55,000 55,000 62,899 7,899 55,000 45,948 (9,052)

Other Local Revenues 550,000 550,000 320,683 (229,317) 645,000 447,923 (197,077)

State of Tennessee 465,000 465,000 488,098 23,098 425,000 532,798 107,798 Total Revenues 3,570,000 3,570,000 3,371,680 (198,320) 3,525,000 3,426,669 (98,331)

Expenditures Current:

General Government:

Public Health and Welfare:

Personal Services 837,638 827,682 827,682 - 817,701 817,701 -

Employee Benefits 342,682 323,490 309,896 13,594 320,400 320,400 -

Contracted Services 2,483,686 2,416,211 2,387,649 28,562 2,353,414 2,284,301 69,113 Supplies and Materials 93,131 72,377 60,292 12,085 101,964 99,963 2,001 Other Charges 262,877 286,617 286,594 23 278,930 278,697 233 Litter and Trash Collection:

Personal Services 45,615 37,371 25,017 12,354 42,954 42,954 -

Employee Benefits 19,621 19,621 10,008 9,613 19,122 19,122 -

Contracted Services 6,250 6,250 3,282 2,968 8,733 8,733 -

Supplies and Materials 13,500 15,000 10,929 4,071 19,749 19,749 -

Capital Outlay - 108,940 108,940 - 83,357 - 83,357 Total Expenditures 4,105,000 4,113,559 4,030,289 83,270 4,046,324 3,891,620 154,704 Excess (Deficiency) of Revenues Over (Under) Expenditures (535,000) (543,559) (658,609) (115,050) (521,324) (464,951) 56,373 Other Financing Sources (Uses)

Unassigned 475,000 475,000 600,000 125,000 475,000 550,000 75,000 Total Other Financing Sources (Uses) 475,000 475,000 600,000 125,000 475,000 550,000 75,000 Net Change in Fund Balances (60,000) (68,559) (58,609) 9,950 (46,324) 85,049 131,373 Fund Balances, July 1 1,342,971 1,342,971 1,342,971 - 1,257,922 1,257,922 -

Fund Balances, June 30 $ 1,282,971 $ 1,274,412 $ 1,284,362 $ 9,950 $ 1,211,598 $ 1,342,971 $ 131,373 161

KNOX COUNTY, TENNESSEE Hotel/Motel Tax Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 3,064,748 $ 2,535,343 Receivables (Net of Allowances for Uncollectibles):

Accounts Receivable 1,414,845 1,209,324 Prepaid Items 12,500 -

TOTAL ASSETS $ 4,492,093 $ 3,744,667 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 2,504,589 $ 2,579,187 TOTAL LIABILITIES 2,504,589 2,579,187 Fund Balances:

Nonspendable 12,500 -

Restricted 1,975,004 1,165,480 TOTAL FUND BALANCES 1,987,504 1,165,480 TOTAL LIABILITIES AND FUND BALANCES $ 4,492,093 $ 3,744,667 162

KNOX COUNTY, TENNESSEE Hotel/Motel Tax Fund Comparative Statements of Revenues, Expenditures And Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Lodging Taxes $ 7,993,988 $ 6,602,861 Expenditures Current:

General Government:

Other General Government 6,571,964 5,516,447 Excess of Revenues Over Expenditures 1,422,024 1,086,414 Other Financing Uses Transfers to Other Funds (600,000) (540,000)

Net Change in Fund Balances 822,024 546,414 Fund Balances, July 1 1,165,480 619,066 Fund Balances, June 30 $ 1,987,504 $ 1,165,480 163

KNOX COUNTY, TENNESSEE Hotel/Motel Tax Fund Comparative Schedules of Revenues, Expenditures And Changes in Fund Balances - Budget and Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues Lodging Taxes $ 6,000,000 $ 7,159,395 $ 7,993,988 $ 834,593 $ 6,104,470 $ 6,602,861 $ 498,391 Expenditures Current:

General Government:

Other General Government: 5,510,000 6,754,395 6,571,964 182,431 5,684,470 5,516,447 168,023 Excess of Revenues Over Expenditures 490,000 405,000 1,422,024 1,017,024 420,000 1,086,414 666,414 Other Financing Uses Transfers to Other Funds (600,000) (600,000) (600,000) - (540,000) (540,000) -

Net Change in Fund Balances (110,000) (195,000) 822,024 1,017,024 (120,000) 546,414 666,414 Fund Balances, July 1 1,165,480 1,165,480 1,165,480 - 619,066 619,066 -

Fund Balances, June 30 $ 1,055,480 $ 970,480 $ 1,987,504 $ 1,017,024 $ 499,066 $ 1,165,480 $ 666,414 164

KNOX COUNTY, TENNESSEE Drug Control Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 2,466,069 $ 2,205,056 Receivables (Net of Allowances for Uncollectibles):

Accounts Receivable 9,066 29,876 TOTAL ASSETS $ 2,475,135 $ 2,234,932 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 61,784 $ 56,599 Due to Other Funds 127 695 TOTAL LIABILITIES 61,911 57,294 Fund Balances:

Restricted 2,413,224 2,177,638 TOTAL LIABILITIES AND FUND BALANCES $ 2,475,135 $ 2,234,932 165

KNOX COUNTY, TENNESSEE Drug Control Fund Comparative Statements of Revenues, Expenditures And Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Fines, Forfeitures, and Penalties $ 694,329 $ 800,806 Other Local Revenues 155,514 115,450 Federal Government 65,195 23,300 Total Revenues 915,038 939,556 Expenditures Current:

General Government:

Public Safety 679,452 862,082 Total Expenditures 679,452 862,082 Excess (Deficiency) of Revenues Over (Under) Expenditures 235,586 77,474 Other Financing Sources:

Transfers from Other Funds - 72,995 Net Change in Fund Balance 235,586 150,469 Fund Balances, July 1 2,177,638 2,027,169 Fund Balances, June 30 $ 2,413,224 $ 2,177,638 166

KNOX COUNTY, TENNESSEE Drug Control Fund Comparative Schedules of Revenues, Expenditures And Changes in Fund Balances - Budget And Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues Fines, Forfeitures, and Penalties $ 649,520 $ 649,520 $ 694,329 $ 44,809 $ 807,636 $ 800,806 $ (6,830)

Other Local Revenues 125,000 125,000 155,514 30,514 125,000 115,450 (9,550)

Federal Government - - 65,195 65,195 - 23,300 23,300 Total Revenues 774,520 774,520 915,038 140,518 932,636 939,556 6,920 Expenditures Current:

General Government:

Public Safety:

Contracted Services 269,500 386,650 260,886 125,764 421,286 295,349 125,937 Supplies and Materials 183,000 183,233 153,063 30,170 172,669 140,983 31,686 Other Charges 62,020 62,020 16,699 45,321 61,520 16,895 44,625 Capital Outlay 260,000 260,000 248,804 11,196 409,116 408,855 261 Total Expenditures 774,520 891,903 679,452 212,451 1,064,591 862,082 202,509 Excess (Deficiency) of Revenues Over (Under) Expenditures - (117,383) 235,586 352,969 (131,955) 77,474 209,429 Other Financing Sources Transfers from Other Funds - - - - - 72,995 72,995 Net Change in Fund Balance - (117,383) 235,586 352,969 (131,955) 150,469 282,424 Fund Balances, July 1 2,177,638 2,177,638 2,177,638 - 2,027,169 2,027,169 -

Fund Balances, June 30 $ 2,177,638 $ 2,060,255 $ 2,413,224 $ 352,969 $ 1,895,214 $ 2,177,638 $ 282,424 167

KNOX COUNTY, TENNESSEE Engineering & Public Works Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 3,368,728 $ 2,736,955 Receivables (Net of Allowances for Uncollectibles):

Accounts Receivable 2,248,459 2,259,323 Due from Other Funds 1,442 -

TOTAL ASSETS $ 5,618,629 $ 4,996,278 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 1,091,398 $ 476,619 Due to Other Funds 638,840 243,753 TOTAL LIABILITIES 1,730,238 720,372 Fund Balances:

Committed 3,888,391 4,275,906 TOTAL LIABILITIES AND FUND BALANCES $ 5,618,629 $ 4,996,278 168

KNOX COUNTY, TENNESSEE Engineering & Public Works Fund Comparative Statements of Revenues, Expenditures And Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Local Option Sales Taxes $ 5,034,783 $ 5,326,299 Other Local Taxes 2,047,231 2,015,610 Fines, Forfeitures, and Penalties 5,150 6,550 Charges for Current Services 551 109 Other Local Revenues 136,400 115,600 State of Tennessee 5,333,988 5,121,250 Total Revenues 12,558,103 12,585,418 Expenditures Current:

Engineering & Public Works 13,319,634 12,056,521 Excess (Deficiency) of Revenues Over Expenditures Over (Under) Expenditures (761,531) 528,897 Other Financing Uses:

Transfers from Other Funds 1,000,000 -

Transfers to Other Funds (625,984) (458,763)

Total Other Financing Sources (Uses) 374,016 (458,763)

Net Change in Fund Balances (387,515) 70,134 Fund Balances, July 1 4,275,906 4,205,772 Fund Balances, June 30 $ 3,888,391 $ 4,275,906 169

KNOX COUNTY, TENNESSEE Engineering & Public Works Fund Comparative Schedules of Revenues, Expenditures And Changes in Fund Balances - Budget And Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues Local Option Sales Taxes $ 5,330,946 $ 5,330,946 $ 5,034,783 $ (296,163) $ 4,828,619 $ 5,326,299 $ 497,680 Other Local Taxes 2,025,000 2,025,000 2,047,231 22,231 2,100,000 2,015,610 (84,390)

Fines, Forfeitures and Penalties 5,000 5,000 5,150 150 7,500 6,550 (950)

Charges for Current Services - - 551 551 - 109 109 Other Local Revenues 17,000 17,000 136,400 119,400 14,000 115,600 101,600 State of Tennessee 5,261,000 5,261,000 5,333,988 72,988 4,961,000 5,121,250 160,250 Total Revenues 12,638,946 12,638,946 12,558,103 (80,843) 11,911,119 12,585,418 674,299 Expenditures Current:

Engineering & Public Works:

Administration:

Personal Services 1,429,302 1,382,870 1,382,870 - 1,336,411 1,336,411 -

Employee Benefits 500,047 457,761 457,735 26 453,374 453,374 -

Contracted Services 79,503 108,241 107,116 1,125 96,051 96,051 -

Supplies and Materials 55,750 43,197 41,505 1,692 63,939 45,028 18,911 Other Charges 269,500 280,446 280,120 326 275,197 274,795 402 Capital Outlay - - - - 17,639 17,639 -

Highways and Bridge Maintenance:

Personal Services 2,933,205 3,040,652 3,040,652 - 3,031,205 3,031,205 -

Employee Benefits 1,228,567 1,176,690 1,176,690 - 1,194,359 1,194,359 -

Contracted Services 1,098,550 971,008 939,216 31,792 1,054,564 1,031,577 22,987 Supplies and Materials 3,838,500 3,963,286 3,963,246 40 2,552,883 2,552,883 -

Other Charges 515,000 515,346 515,346 - 485,522 485,522 -

Various Highway:

Personal Services 596,011 603,508 598,427 5,081 577,317 577,317 -

Employee Benefits 209,321 210,411 209,592 819 205,067 205,067 -

Contracted Services 184,314 210,247 193,494 16,753 182,033 168,853 13,180 Supplies and Materials 147,150 699,794 203,505 496,289 863,121 362,363 500,758 Other Charges 79,226 79,226 79,226 - 78,825 78,825 -

Capital Outlay - 205,261 130,894 74,367 399,150 145,252 253,898 Total Expenditures 13,163,946 13,947,944 13,319,634 628,310 12,866,657 12,056,521 810,136 Excess (Deficiency) of Revenues Over (Under) Expenditures (525,000) (1,308,998) (761,531) 547,467 (955,538) 528,897 1,484,435 Other Financing Sources (Uses)

Transfer From Other Funds 1,000,000 1,000,000 1,000,000 - - - -

Transfer To Other Funds (475,000) (634,906) (625,984) 8,922 (458,763) (458,763) -

Total Other Financing Sources (Uses) 525,000 365,094 374,016 8,922 (458,763) (458,763) -

Net Change in Fund Balances - (943,904) (387,515) 556,389 (1,414,301) 70,134 1,484,435 Fund Balances, July 1 4,275,906 4,275,906 4,275,906 - 4,205,772 4,205,772 -

Fund Balances, June 30 $ 4,275,906 $ 3,332,002 $ 3,888,391 $ 556,389 $ 2,791,471 $ 4,275,906 $ 1,484,435 170

KNOX COUNTY, TENNESSEE ADA Construction Capital Projects Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 628,164 $ 720,700 TOTAL ASSETS $ 628,164 $ 720,700 LIABILITIES AND FUND BALANCES Due to Other Funds $ 359,581 $ -

Fund Balances:

Committed 268,583 720,700 TOTAL FUND BALANCE 268,583 720,700 TOTAL LIABILITIES AND FUND BALANCES $ 628,164 $ 720,700 171

KNOX COUNTY, TENNESSEE ADA Construction Capital Projects Fund Comparative Statements of Revenues, Expenditures And Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Local Taxes $ - $ -

Expenditures Capital Projects 92,536 6,839 Deficiency of Revenues Under Expenditures (92,536) (6,839)

Other Financing Uses:

Transfers to Other Funds (359,581) -

Net Change in Fund Balances (452,117) (6,839)

Fund Balances, July 1 720,700 727,539 Fund Balances, June 30 $ 268,583 $ 720,700 172

ENTERPRISE FUND Enterprise Funds account for operations that provide services primarily to the general public on a user charge basis.

Three Ridges Golf Course Fund: This fund accounts for the operations of the Three Ridges Golf Course.

KNOX COUNTY, TENNESSEE Three Ridges Golf Course Fund Comparative Statements of Net Position June 30, 2016 and 2015 2016 2015 ASSETS Current Assets:

Cash and Cash Equivalents $ 5,461 $ 21,802 Accounts Receivable 6,745 8,150 Inventories 79,909 76,842 Prepaid Items 7,178 -

TOTAL CURRENT ASSETS 99,293 106,794 Capital Assets:

Land 880 880 Buildings 754,504 754,504 Machinery and Equipment 429,234 429,234 Computer Software 25,448 25,448 Land Improvements 66,463 66,463 Accumulated Depreciation (766,709) (707,610)

Capital Assets (Net of Accumulated Depreciation) 509,820 568,919 TOTAL ASSETS 609,113 675,713 LIABILITIES Current Liabilities:

Accounts Payable and Accrued Liabilities 50,951 43,016 Compensated Absences 18,250 9,057 TOTAL CURRENT LIABILITIES 69,201 52,073 Noncurrent Liabilities:

Compensated Absences 27,373 36,230 TOTAL LIABILITIES 96,574 88,303 NET POSITION Investment in Capital Assets 509,820 568,919 Unrestricted 2,719 18,491 TOTAL NET POSITION $ 512,539 $ 587,410 173

KNOX COUNTY, TENNESSEE Three Ridges Golf Course Fund Comparative Statements of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2016 and 2015 2016 2015 Operating Revenues Golf Fees $ 403,844 $ 405,308 Cart and Range Fees 210,411 213,574 Pro Shop 90,157 97,516 Snack Bar 84,344 81,814 Total Operating Revenues 788,756 798,212 Operating Expenses Personal Services 380,323 359,268 Employee Benefits 97,340 81,720 Contracted Services 137,526 111,757 Supplies and Materials 316,801 309,100 Other Charges 72,538 78,925 Depreciation 59,099 59,320 Total Operating Expenses 1,063,627 1,000,090 Operating Loss (274,871) (201,878)

Transfers Transfers from Other Funds 200,000 250,000 Change in Net Position (74,871) 48,122 Net Position, July 1 587,410 539,288 Net Position, June 30 $ 512,539 $ 587,410 174

KNOX COUNTY, TENNESSEE Three Ridges Golf Course Fund Comparative Statements of Cash Flows For the Years Ended June 30, 2016 and 2015 2016 2015 Cash Flows from Operating Activities Receipts from Customers and Users $ 790,161 $ 797,408 Payments to Vendors (534,073) (524,922)

Payments to Employees (472,429) (422,477)

Net Cash Provided (Used) by Operating Activities (216,341) (149,991)

Cash Flows Used by Capital and Related Financing Activities Transfers from Other Funds 200,000 250,000 Acquisition and Construction of Capital Assets - (174,293)

Net Cash Used by Capital and Related Financing Activities 200,000 75,707 Net Increase (Decrease) in Cash and Cash Equivalents (16,341) (74,284)

Cash and Cash Equivalents - Beginning of Year 21,802 96,086 Cash and Cash Equivalents - End of Year $ 5,461 $ 21,802 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating Income (Loss) $ (274,871) $ (201,878)

Adjustments to Reconcile Operating Loss to Net Cash Provided (Used) by Operating Activities:

Depreciation 59,099 59,320 Changes in Assets and Liabilities:

(Increase) Decrease in Accounts Receivable 1,405 (804)

(Increase) in Inventory (3,067) (1,544)

Decrease in Prepaid Items (7,178) 210 Increase (Decrease) in Accounts Payable and Accrued Liabilities 7,935 (5,722)

Increase (Decrease) in Due to Other Funds - (14,436)

Increase in Compensated Absences Payable 336 14,863 Net Cash Provided (Used) by Operating Activities $ (216,341) $ (149,991) 175

INTERNAL SERVICE FUNDS Internal Service Funds are used to account for the financing of goods or services provided by one of the Countys departments or agencies to other departments or agencies and to the Countys various discretely presented component units and joint ventures.

Vehicle Service Center Fund: This fund is used to account for gasoline and maintenance services for County vehicles.

Mailroom Fund: This fund is used to account for central mailroom services for the County.

Employee Benefits Fund: This fund is used to account for the payment of retiree medical premiums, employee retirement, life insurance, other payroll related expenses, and unemployment claims.

Self Insurance Fund: This fund is used to account for the payment of workers compensation and general liability claims against the County.

Building Operations Fund: This fund is used to account for all maintenance services for Knox Central buildings.

Technical Support Service Fund: This fund accounts for technical support and technical repairs associated with electronic data processing.

Capital Leasing Fund: This fund is used for lease/purchase transactions to other departments. The fund also serves as a leasing entity for a fleet of vehicles or other equipment.

Self Insurance Healthcare: This fund is used to account for the payment of health insurance claims.

KNOX COUNTY, TENNESSEE Combining Statement of Net Position Internal Service Funds June 30, 2016 Vehicle Technical Self Service Employee Self Building Support Capital Insurance Center Mailroom Benefits Insurance Operations Service Leasing Healthcare Total ASSETS Current Assets:

Cash and Cash Equivalents $ - $ 304,275 $ 1,803,251 $ 11,998,230 $ 5,835,978 $ 813,582 $ 141,420 $ 4,081,970 $ 24,978,706 Receivables:

Accounts 99,200 497 474,631 - 361,575 - - 178,919 1,114,822 Due from Other Funds 113,929 19,868 1,305,978 - - - - 1,489,412 2,929,187 Due from Component Units 271 - 271,913 390,048 - - - - 662,232 Notes Receivable - - - 22,473 - - - - 22,473 Inventories 190,669 42,483 - - - - - - 233,152 Prepaid Items 2,095 - 14,857 - - - - 163,229 180,181 TOTAL CURRENT ASSETS 406,164 367,123 3,870,630 12,410,751 6,197,553 813,582 141,420 5,913,530 30,120,753 Capital Assets:

Machinery and Equipment 213,206 - - - - 585,936 4,231,558 - 5,030,700 Accumulated Depreciation (116,363) - - - - (403,507) (4,231,558) - (4,751,428)

Capital Assets (Net of Accumulated Depreciation) 96,843 - - - - 182,429 - - 279,272 TOTAL ASSETS 503,007 367,123 3,870,630 12,410,751 6,197,553 996,011 141,420 5,913,530 30,400,025 LIABILITIES Current liabilities:

Accounts Payable and Accrued Liabilities 132,603 1,920 944,936 49,045 203,269 73,631 - 21,016 1,426,420 Due to Other Funds 165,948 - 474 124 19,017 - - - 185,563 Due to Component Units - - - - 712 - - - 712 Claims Liabilities - - - 15,912,958 - - - 1,909,589 17,822,547 Compensated Absences Payable 92,165 - 36,336 40,691 - - - - 169,192 TOTAL CURRENT LIABILITIES 390,716 1,920 981,746 16,002,818 222,998 73,631 - 1,930,605 19,604,434 Noncurrent Liabilities:

Compensated Absences Payable 10,241 - 4,037 4,521 - - - - 18,799 TOTAL LIABILITIES 400,957 1,920 985,783 16,007,339 222,998 73,631 - 1,930,605 19,623,233 NET POSITION Investment in Capital Assets 96,843 - - - - 182,429 - - 279,272 Unrestricted 5,207 365,203 2,884,847 (3,596,588) 5,974,555 739,951 141,420 3,982,925 10,497,520 TOTAL NET POSITION (DEFICIT) $ 102,050 $ 365,203 $ 2,884,847 $ (3,596,588) $ 5,974,555 $ 922,380 $ 141,420 $ 3,982,925 $ 10,776,792 176

KNOX COUNTY, TENNESSEE Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds For the Year Ended June 30, 2016 Vehicle Technical Self Service Employee Self Building Support Capital Insurance Center Mailroom Benefits Insurance Operations Service Leasing Healthcare Total Operating Revenues Charges for Services $ 2,201,318 $ 258,712 $ 30,798,062 $ 4,449,740 $ 11,084,964 $ 384,220 $ - $ 27,801,464 $ 76,978,48 Payments from Component Unit - - - 298,024 - - - - 298,02 Total Operating Revenues 2,201,318 258,712 30,798,062 4,747,764 11,084,964 384,220 - 27,801,464 77,276,50 Operating Expenses Cost of Sales and Services 1,302,877 237,645 - - - - - - 1,540,52 General and Administration 1,316,155 - 1,910,224 919,437 9,954,479 193,306 - 2,461,918 16,755,51 Depreciation and Amortization 13,452 - - - - 69,916 4,565 - 87,93 Medical Claims - - 348,871 - - - - 26,815,076 27,163,94 Retirement Contributions - - 28,178,853 - - - - - 28,178,85 Other Employee Benefits - - 826,951 - - - - - 826,95 Worker's Compensation & Other Claims - - - 5,239,771 - - - - 5,239,77 Other Expenses 163,868 - - 177,249 - 354 - - 341,47 Total Operating Expenses 2,796,352 237,645 31,264,899 6,336,457 9,954,479 263,576 4,565 29,276,994 80,134,96 Income (Loss) before Transfers (595,034) 21,067 (466,837) (1,588,693) 1,130,485 120,644 (4,565) (1,475,530) (2,858,46 Transfers Transfers from Other Funds 696,327 - 1,300,000 - - - - - 1,996,32 Change in Net Position 101,293 21,067 833,163 (1,588,693) 1,130,485 120,644 (4,565) (1,475,530) (862,13 Total Net Position (Deficit), July 1 757 344,136 2,051,684 (2,007,895) 4,844,070 801,736 145,985 5,458,455 11,638,92 Total Net Position (Deficit), June 30 $ 102,050 $ 365,203 $ 2,884,847 $ (3,596,588) $ 5,974,555 $ 922,380 $ 141,420 $ 3,982,925 $ 10,776,79 177

KNOX COUNTY, TENNESSEE Combining Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2016 Vehicle Technical Self Service Employee Self Building Support Capital Insurance Center Mailroom Benefits Insurance Operations Service Leasing Healthcare Total Operating Activities Cash Received from Interfund Services Provided $ 2,295,637 $ 260,279 $ 29,406,348 $ 4,616,239 $ 10,905,161 $ 384,220 $ - $ 28,404,138 $ 76,272,022 Cash Received from Component Unit - - - 298,024 - - - - 298,024 Cash Paid to Employees (889,383) - (465,026) (394,669) - - - - (1,749,078)

Cash Paid for Goods and Services (1,727,156) (247,679) (1,302,098) (2,952,093) (10,713,842) (173,090) - (2,184,318) (19,300,276)

Cash Paid on Behalf of Employees (337,224) - (29,333,791) (130,258) - - - (26,982,990) (56,784,263)

Net Cash Provided by (Used in)

Operating Activities (658,126) 12,600 (1,694,567) 1,437,243 191,319 211,130 - (763,170) (1,263,571)

Noncapital Financing Activities Transfers from Other Funds 696,327 - 1,300,000 - - - - - 1,996,327 Net Cash Provided by Noncapital Financing Activities 696,327 - 1,300,000 - - - - - 1,996,327 Capital and Related Financing Activities Acquisition and Construction of Capital Assets (38,201) - - - - (29,943) - - (68,144)

Net Cash Used in Capital and Related Financing Activities (38,201) - - - - (29,943) - - (68,144)

Net Increase (Decrease) in Cash and Cash Equivalents - 12,600 (394,567) 1,437,243 191,319 181,187 - (763,170) 664,612 Cash and Cash Equivalents Beginning of Year - 291,675 2,197,818 10,560,987 5,644,659 632,395 141,420 4,845,140 24,314,094 End of Year $ - $ 304,275 $ 1,803,251 $ 11,998,230 $ 5,835,978 $ 813,582 $ 141,420 $ 4,081,970 $ 24,978,706 Reconciliation of Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities Operating Income (Loss) $ (595,034) $ 21,067 $ (466,837) $ (1,588,693) $ 1,130,485 $ 120,644 $ (4,565) $ (1,475,530) $ (2,858,463)

Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities:

Depreciation and Amortization 13,452 - - - - 69,916 4,565 - 87,933 Change in Assets and Liabilities:

(Increase) Decrease in Accounts Receivable (2,566) 1,259 (87,818) - (171,909) - - 356,262 95,228 (Increase) Decrease in Due from Other Funds 96,363 308 (1,300,118) 250,000 - - - 246,412 (707,035)

(Increase) Decrease in Due from Component Units 522 - (3,778) (83,501) - - - - (86,757)

(Increase) Decrease in Inventories 2,739 (9,633) - - - - - - (6,894)

Increase in Prepaid Items (2,095) - (1,313) - - - - (26,319) (29,727)

Increase (Decrease) in Accounts Payable and Accrued Liabilities 10,352 (401) 161,867 (7,724) (79,092) 73,563 - 6,939 165,504 Increase (Decrease) in Due to Other Funds (177,128) - (50) 41 (680,983) (52,993) - - (911,113)

Increase in Due to Component Units - - - - 712 - - - 712 Increase (Decrease) in Compensated Absences (4,731) - 3,480 (2,801) - - - - (4,052)

Increase in Claims Liabilities - - - 2,869,921 - - - 129,066 2,998,987 Decrease in Unearned Revenues - - - - (7,894) - - - (7,894)

Total Adjustments (63,092) (8,467) (1,227,730) 3,025,936 (939,166) 90,486 4,565 712,360 1,594,892 Net Cash Provided by (Used in) Operating Activities $ (658,126) $ 12,600 $ (1,694,567) $ 1,437,243 $ 191,319 $ 211,130 $ - $ (763,170) $ (1,263,571) 178

KNOX COUNTY, TENNESSEE Vehicle Service Center Fund Comparative Statements of Net Position June 30, 2016 and 2015 2016 2015 ASSETS Current Assets:

Accounts Receivable $ 99,200 $ 96,634 Due from Other Funds 113,929 210,292 Due from Component Units 271 793 Inventories 190,669 193,408 Prepaid Items 2,095 -

TOTAL CURRENT ASSETS 406,164 501,127 Capital Assets:

Machinery and Equipment 213,206 220,301 Accumulated Depreciation (116,363) (148,207)

Capital Assets (Net of Accumulated Depreciation) 96,843 72,094 TOTAL ASSETS 503,007 573,221 LIABILITIES Current Liabilities:

Accounts Payable and Accrued Liabilities 132,603 122,251 Due to Other Funds 165,948 343,076 Compensated Absences 92,165 96,423 TOTAL CURRENT LIABILITIES 390,716 561,750 Noncurrent Liabilities:

Compensated Absences 10,241 10,714 TOTAL LIABILITIES 400,957 572,464 NET POSITION Investment in Capital Assets 96,843 72,094 Unrestricted 5,207 (71,337)

TOTAL NET POSITION $ 102,050 $ 757 179

KNOX COUNTY, TENNESSEE Vehicle Service Center Fund Comparative Statements of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2016 and 2015 2016 2015 Operating Revenues Charges for Sales and Services $ 2,201,318 $ 2,720,519 Operating Expenses Costs of Sales and Services 1,302,877 1,760,787 General and Administrative 1,316,155 1,288,900 Depreciation and Amortization 13,452 10,862 Other Expenses 163,868 154,665 Total Operating Expenses 2,796,352 3,215,214 Loss before Transfers (595,034) (494,695)

Transfers Transfers from Other Funds 696,327 343,763 Change in Net Position 101,293 (150,932)

Net Position, July 1 757 151,689 Net Position, June 30 $ 102,050 $ 757 180

KNOX COUNTY, TENNESSEE Mailroom Fund Comparative Statements of Net Position June 30, 2016 and 2015 2016 2015 ASSETS Current Assets:

Cash and Cash Equivalents $ 304,275 $ 291,675 Accounts Receivable 497 1,756 Due from Other Funds 19,868 20,176 Inventories 42,483 32,850 TOTAL ASSETS 367,123 346,457 LIABILITIES Liabilities:

Accounts Payable and Accrued Liabilities 1,920 2,321 TOTAL LIABILITIES 1,920 2,321 NET POSITION Unrestricted $ 365,203 $ 344,136 181

KNOX COUNTY, TENNESSEE Mailroom Fund Comparative Statements of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2016 and 2015 2016 2015 Operating Revenues Charges for Sales and Services $ 258,712 $ 226,225 Operating Expenses Costs of Sales and Services 237,645 211,850 Change in Net Position 21,067 14,375 Net Position, July 1 344,136 329,761 Net Position, June 30 $ 365,203 $ 344,136 182

KNOX COUNTY, TENNESSEE Employee Benefits Fund Comparative Statements of Net Position June 30, 2016 and 2015 2016 2015 ASSETS Current Assets:

Cash and Cash Equivalents $ 1,803,251 $ 2,197,818 Accounts Receivable 474,631 386,813 Due from Other Funds 1,305,978 5,860 Due from Component Units 271,913 268,135 Prepaid Items 14,857 13,544 TOTAL ASSETS 3,870,630 2,872,170 LIABILITIES Liabilities:

Accounts Payable and Accrued Liabilities 944,936 783,069 Due to Other Funds 474 524 Compensated Absences 36,336 33,204 TOTAL CURRENT LIABILITIES 981,746 816,797 Noncurrent Liabilities:

Compensated Absences 4,037 3,689 TOTAL LIABILITIES 985,783 820,486 NET POSITION Unrestricted $ 2,884,847 $ 2,051,684 183

KNOX COUNTY, TENNESSEE Employee Benefits Fund Comparative Statements of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2016 and 2015 2016 2015 Operating Revenues Charges for Sales and Services $ 30,798,062 $ 29,519,266 Operating Expenses Finance and Administration:

General and Administrative 1,910,224 1,260,546 Medical Claims 348,871 509,842 Retirement Contributions 28,178,853 26,929,292 Other Employee Benefits 826,951 831,854 Total Operating Expenses 31,264,899 29,531,534 Income (Loss) before Transfers (466,837) (12,268)

Transfers Transfers from Other Funds 1,300,000 -

Total Transfers 1,300,000 -

Change in Net Position 833,163 (12,268)

Net Position, July 1 2,051,684 2,063,952 Net Position, June 30 $ 2,884,847 $ 2,051,684 184

KNOX COUNTY, TENNESSEE Self Insurance Fund Comparative Statements of Net Position June 30, 2016 and 2015 2016 2015 ASSETS Current Assets:

Cash and Cash Equivalents $ 11,998,230 $ 10,560,987 Notes Receivable 22,473 22,473 Due from Other Funds - 250,000 Due from Component Units 390,048 306,547 TOTAL CURRENT ASSETS 12,410,751 11,140,007 Capital Assets:

Machinery and Equipment - 33,352 Accumulated Depreciation - (33,352)

Capital Assets (Net of Accumulated Depreciation) - -

TOTAL ASSETS 12,410,751 11,140,007 LIABILITIES Liabilities:

Accounts Payable and Accrued Liabilities 49,045 56,769 Due to Other Funds 124 83 Claims Liability 15,912,958 13,043,037 Compensated Absences 40,691 43,212 TOTAL CURRENT LIABILITIES 16,002,818 13,143,101 Noncurrent Liabilities:

Compensated Absences 4,521 4,801 TOTAL LIABILITIES 16,007,339 13,147,902 NET POSITION (DEFICIT)

Unrestricted $ (3,596,588) $ (2,007,895) 185

KNOX COUNTY, TENNESSEE Self Insurance Fund Comparative Statements of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2016 and 2015 2016 2015 Operating Revenues Charges for Sales and Services $ 4,449,740 $ 3,797,543 Payments From Component Unit 298,024 -

Total Operating Revenues 4,747,764 3,797,543 Operating Expenses General and Administrative 919,437 867,132 Workers' Compensation & Other Claims 5,239,771 123,888 Other Expenses 177,249 230,415 Total Operating Expenses 6,336,457 1,221,435 Income (Loss) before Transfers (1,588,693) 2,576,108 Transfers Transfers From Other Funds - 250,000 Change in Net Position (1,588,693) 2,826,108 Net Position (Deficit), July 1 (2,007,895) (4,834,003)

Net Position (Deficit), June 30 $ (3,596,588) $ (2,007,895) 186

KNOX COUNTY, TENNESSEE Building Operations Fund Comparative Statements of Net Position June 30, 2016 and 2015 2016 2015 ASSETS Current Assets:

Cash and Cash Equivalents $ 5,835,978 $ 5,644,659 Accounts Receivable 361,575 189,666 TOTAL CURRENT ASSETS 6,197,553 5,834,325 Capital Assets:

Machinery and Equipment - 72,217 Accumulated Depreciation - (72,217)

Capital Assets (Net of Accumulated Depreciation) - -

TOTAL ASSETS 6,197,553 5,834,325 LIABILITIES Liabilities:

Accounts Payable and Accrued Liabilities 203,269 282,361 Due to Other Funds 19,017 700,000 Unearned Revenue - 7,894 Due to Component Units 712 -

TOTAL CURRENT LIABILITIES 222,998 990,255 NET POSITION Unrestricted 5,974,555 4,844,070 TOTAL NET POSITION $ 5,974,555 $ 4,844,070 187

KNOX COUNTY, TENNESSEE Building Operations Fund Comparative Statements of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2016 and 2015 2016 2015 Operating Revenues Charges for Sales and Services $ 11,084,964 $ 10,702,724 Operating Expenses General and Administrative 9,954,479 9,721,560 Total Operating Expenses 9,954,479 9,721,560 Income before Transfers 1,130,485 981,164 Transfers Transfers to Other Funds - (700,000)

Total Transfers - (700,000)

Change in Net Position 1,130,485 281,164 Net Position, July 1 4,844,070 4,562,906 Net Position, June 30 $ 5,974,555 $ 4,844,070 188

KNOX COUNTY, TENNESSEE Technical Support Service Fund Comparative Statements of Net Position June 30, 2016 and 2015 2016 2015 ASSETS Current Assets:

Cash and Cash Equivalents $ 813,582 $ 632,395 TOTAL CURRENT ASSETS 813,582 632,395 Capital Assets:

Machinery and Equipment 585,936 564,412 Accumulated Depreciation (403,507) (342,010)

Capital Assets (Net of Accumulated Depreciation) 182,429 222,402 TOTAL ASSETS 996,011 854,797 LIABILITIES Liabilities:

Accounts Payable and Accrued Liabilities 73,631 68 Due to Other Funds - 52,993 TOTAL LIABILITIES 73,631 53,061 NET POSITION Investment in Capital Assets 182,429 222,402 Unrestricted 739,951 579,334 TOTAL NET POSITION $ 922,380 $ 801,736 189

KNOX COUNTY, TENNESSEE Technical Support Service Fund Comparative Statements of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2016 and 2015 2016 2015 Operating Revenues Charges for Sales and Services $ 384,220 $ 373,970 Operating Expenses General and Administrative 193,306 242,445 Depreciation and Amortization 69,916 74,900 Other Expense 354 330 Total Operating Expenses 263,576 317,675 Change in Net Position 120,644 56,295 Net Position, July 1 801,736 745,441 Net Position, June 30 $ 922,380 $ 801,736 190

KNOX COUNTY, TENNESSEE Capital Leasing Fund Comparative Statements of Net Position June 30, 2016 and 2015 2016 2015 ASSETS Current Assets:

Cash and Cash Equivalents $ 141,420 $ 141,420 Capital Assets:

Machinery and Equipment 4,231,558 4,711,938 Accumulated Depreciation (4,231,558) (4,707,373)

Capital Assets (Net of Accumulated Depreciation) - 4,565 TOTAL ASSETS 141,420 145,985 NET POSITION Investment in Capital Assets - 4,565 Unrestricted 141,420 141,420 TOTAL NET POSITION $ 141,420 $ 145,985 191

KNOX COUNTY, TENNESSEE Capital Leasing Fund Comparative Statements of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2016 and 2015 2016 2015 Operating Revenues Charges for Sales and Services $ - $ -

Operating Expenses Depreciation and Amortization 4,565 7,889 Change in Net Position (4,565) (7,889)

Net Position, July 1 145,985 153,874 Net Position, June 30 $ 141,420 $ 145,985 192

KNOX COUNTY, TENNESSEE Self Insurance Healthcare Fund Comparative Statements of Net Position June 30, 2016 and 2015 2016 2015 ASSETS Current Assets:

Cash and Cash Equivalents $ 4,081,970 $ 4,845,140 Accounts Receivable 178,919 535,181 Due from Other Funds 1,489,412 1,735,824 Prepaid Items 163,229 136,910 TOTAL ASSETS 5,913,530 7,253,055 LIABILITIES Liabilities:

Accounts Payable and Accrued Liabilities 21,016 14,077 Claims Liability 1,909,589 1,780,523 TOTAL LIABILITIES 1,930,605 1,794,600 NET POSITION Unrestricted 3,982,925 5,458,455 TOTAL NET POSITION $ 3,982,925 $ 5,458,455 193

KNOX COUNTY, TENNESSEE Self Insurance Healthcare Fund Comparative Statements of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2016 and 2015 2016 2015 Operating Revenues Charges for Sales and Services $ 27,801,464 $ 28,170,929 Operating Expenses General and Administrative 2,461,918 2,489,014 Medical Claims 26,815,076 26,004,027 Total Operating Expenses 29,276,994 28,493,041 Income (Loss) before Transfers (1,475,530) (322,112)

Transfers Transfers from Other Funds - 500,000 Change in Net Position (1,475,530) 177,888 Net Position, July 1 5,458,455 5,280,567 Net Position, June 30 $ 3,982,925 $ 5,458,455 194

FIDUCIARY FUNDS Trust funds are used to account for assets held by the County in a trustee capacity. Agency funds are used to account for assets held by the County as an agent for individuals, private organizations, other governments and/or other funds.

PENSION AND OTHER EMPLOYEE BENEFIT TRUST FUNDS Pension Trust Fund Closed Defined Benefit Plan: This fund is used to account for the accumulation of resources for pension benefit payments to qualified employees covered under the Countys defined benefit plan.

Pension Trust Fund Defined Contribution Asset Accumulation Plan: This fund is used to account for the accumulation of resources for retirement benefit payments to qualified employees covered under the Countys defined contribution (asset accumulation) plan.

Pension Trust Fund Defined Contribution Voluntary 457 Plan: This fund is used to account for the accumulation of resources for pension benefit payments to qualified employees who have chosen to participate in the Countys defined contribution plan.

Pension Trust Fund Defined Contribution Medical Expense Retirement Plan: This fund is used to account for the accumulation of resources for pension benefit payments to qualified employees covered under the Countys defined contribution (asset accumulation) plan. This plan assists employees in planning and investing for anticipated medical expenses upon retirement.

Pension Trust Fund for Uniformed Officers Pension Plan: This fund is used to account for the accumulation of resources for pension benefit payments to qualified employees covered under the Countys Uniformed Officers Pension Plan (defined benefit plan).

Pension Trust Fund for Sheriffs Total Accumulation Retirement Plan: This fund is used to account for the accumulation of resources for pension benefit payments to qualified employees covered under the County Sheriffs Total Accumulation Retirement Plan (defined contribution plan).

Employee Disability Plan (Other Postemployment Benefit Plan): This fund is used to provide resources should an employee become disabled prior to retirement. Eligible employees must also be participants in one of the defined benefit or defined contribution plans.

AGENCY FUNDS Municipal Sales Tax Fund: This fund accounts for the local sales tax levied by local municipalities. These funds are collected by the State of Tennessee and remitted to the County for distribution to the municipalities.

Subdivision Bonds: This fund accounts for the receipt and distribution of funds held by the County from subdivision developers pending completion of road and hydrology requirements.

External Agencies Fund: This fund accounts for the cash of several external agencies and County joint ventures held by the County Trustee on their behalf.

Constitutional Officers: The various elected officials use this fund to account for the receipt and disbursement of funds on behalf of state agencies and/or other funds.

KNOX COUNTY, TENNESSEE Combining Statement of Fiduciary Net Position Pension and Other Employee Benefit Trust Funds June 30, 2016 Closed Defined Asset Voluntary Medical Expense Uniformed Sheriff's Total Employee Benefit Accumulation 457 Retirement Officers Pension Accumulation Retirement Disability Plan Plan Plan Plan Plan Plan Plan Total ASSETS Cash and Cash equivalents $ 65,089 $ 644,831 $ - $ - $ 1,940,122 $ 10,342 $ - $ 2,660,384 Investments, at Fair Value:

Mutual Funds 2,206,193 213,501,514 12,913,144 3,615,765 8,546,294 1,076,557 965,006 242,824,473 Collective Investment Trusts 34,336,808 33,689,709 2,132,242 1,121,137 121,706,634 98,325 298,869 193,383,724 Interest-earning Investment Contracts - 22,709,536 849,421 345,153 - 31,414 91,654 24,027,178 Corporate Bonds 733,104 - - - 2,160,643 - - 2,893,747 U.S. Treasuries 2,978,058 - - - 10,114,890 - - 13,092,948 Federal Agency Debt Securities 161,250 - - - 540,273 - - 701,523 Federal Agency Mortgage Backed Securities 1,932,004 - - - 6,398,550 - - 8,330,554 Total Investments 42,347,417 269,900,759 15,894,807 5,082,055 149,467,284 1,206,296 1,355,529 485,254,147 Receivables:

Employee Contributions 2,535 191,760 29,367 2,101 - - - 225,763 Employer Contributions - 208,641 - 1,001 - - - 209,642 Receivable from Other Plans - - - - - - 185,398 185,398 Accrued Interest and Dividends 27,889 - - - 89,535 - - 117,424 Total Receivables 30,424 400,401 29,367 3,102 89,535 - 185,398 738,227 Total Assets 42,442,930 270,945,991 15,924,174 5,085,157 151,496,941 1,216,638 1,540,927 488,652,758 LIABILITIES Accounts Payable - Administrative Expenses 80,927 - - - 187,085 - 89,025 357,037 Accounts Payable - Investments Purchased 40,686 - - - 117,897 - - 158,583 Accounts Payable - To Other Plans - 175,057 - - - 10,342 - 185,399 Total Liabilities 121,613 175,057 - - 304,982 10,342 89,025 701,019 NET POSITION - RESTRICTED FOR PENSION, OPEB, AND RETIREMENT BENEFITS $ 42,321,317 $ 270,770,934 $ 15,924,174 $ 5,085,157 $ 151,191,959 $ 1,206,296 $ 1,451,902 $ 487,951,739 195

KNOX COUNTY, TENNESSEE Combining Statement of Changes in Fiduciary Net Position Pension and Other Employee Benefit Trust Funds For the year ended June 30, 2016 Closed Defined Asset Voluntary Medical Expense Uniformed Sheriff's Total Employee Benefit Accumulation 457 Retirement Officers Pension Accumulation Retirement Disability Plan Plan Plan Plan Plan Plan Plan Total ADDITIONS Contributions:

Employer $ 3,160,060 $ 9,914,030 $ - $ 105,251 $ 3,553,311 $ 530,579 $ 530,426 $ 17,793,657 Employees 93,544 8,305,970 2,094,590 220,302 1,619,506 265,285 - 12,599,197 Rollovers - 432,597 278,581 - - 2,278 - 713,456 Total Contributions 3,253,604 18,652,597 2,373,171 325,553 5,172,817 798,142 530,426 31,106,310 Investment Income (Loss):

Interest and Dividend Income 286,433 3,000,424 167,034 83,283 975,508 11,484 61,327 4,585,493 Net Appreciation (Depreciation) in Fair Value of Investments (439,916) (4,436,701) (265,205) (221,795) (535,422) 13,889 (122,075) (6,007,225)

Total Investment Income (Loss) (153,483) (1,436,277) (98,171) (138,512) 440,086 25,373 (60,748) (1,421,732)

Less Investment Expenses (265,586) - - - (653,632) - - (919,218)

Net Investment Income (Loss) (419,069) (1,436,277) (98,171) (138,512) (213,546) 25,373 (60,748) (2,340,950)

Other:

Transfers from Other Plans - 40,988 - - - - 653,097 694,085 Total Additions 2,834,535 17,257,308 2,275,000 187,041 4,959,271 823,515 1,122,775 29,459,445 DEDUCTIONS Benefits and Refunds 7,424,676 18,798,198 874,085 501,993 5,722,723 32,865 141,788 33,496,328 Administrative Expenses 228,654 1,000 - - 439,588 - 774,388 1,443,630 Transfers to Other Plans 38,696 559,242 - 2,963 - 90,893 2,291 694,085 Total Deductions 7,692,026 19,358,440 874,085 504,956 6,162,311 123,758 918,467 35,634,043 CHANGE IN NET POSITION (4,857,491) (2,101,132) 1,400,915 (317,915) (1,203,040) 699,757 204,308 (6,174,598)

NET POSITION - RESTRICTED FOR PENSION, OPEB, AND RETIREMENT BENEFITS, BEGINNING OF YEAR 47,178,808 272,872,066 14,523,259 5,403,072 152,394,999 506,539 1,247,594 494,126,337 NET POSITION - RESTRICTED FOR PENSION, OPEB, AND RETIREMENT BENEFITS, END OF YEAR $ 42,321,317 $ 270,770,934 $ 15,924,174 $ 5,085,157 $ 151,191,959 $ 1,206,296 $ 1,451,902 $ 487,951,739 196

KNOX COUNTY, TENNESSEE Comparative Statements of Fiduciary Net Position Pension Trust Fund - Closed Defined Benefit Plan June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 65,089 $ 1,455,087 Investments, at Fair Value:

Mutual Funds 2,206,193 2,311,537 Collective Investment Trusts 34,336,808 37,764,028 Corporate Bonds 733,104 580,577 U.S. Treasuries 2,978,058 2,905,907 Federal Agency Debt Securities 161,250 188,763 Federal Agency Mortgage Backed Securities 1,932,004 2,014,943 Total Investments 42,347,417 45,765,755 Receivables:

Accrued Interest and Dividends 27,889 27,855 Employee Contributions 2,535 2,970 Total Receivable 30,424 30,825 Total Assets 42,442,930 47,251,667 LIABILITIES Accounts Payable - Administrative Expenses 80,927 72,859 Accounts Payable - Investments Purchased 40,686 -

Total Liabilities 121,613 72,859 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS $ 42,321,317 $ 47,178,808 197

KNOX COUNTY, TENNESSEE Comparative Statements of Changes in Fiduciary Net Position Pension Trust Fund - Closed Defined Benefit Plan For the years ended June 30, 2016 and 2015 2016 2015 ADDITIONS Contributions:

Employer $ 3,160,060 $ 2,694,979 Employees 93,544 109,274 Total Contributions 3,253,604 2,804,253 Investment Income (Loss):

Interest and Dividend Income 286,433 305,081 Net Appreciation (Depreciation) in Fair Value of Investments (439,916) 1,215,437 Total Investment Income (Loss) (153,483) 1,520,518 Less Investment Expenses (265,586) (231,969)

Net Investment Income (Loss) (419,069) 1,288,549 Other:

Other Additions - 5,200 Total Additions 2,834,535 4,098,002 DEDUCTIONS Benefits and Refunds 7,424,676 7,816,544 Administrative Expenses 228,654 354,648 Transfers to Other Plans 38,696 45,461 Total Deductions 7,692,026 8,216,653 CHANGE IN NET POSITION (4,857,491) (4,118,651)

NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, BEGINNING OF YEAR 47,178,808 51,297,459 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, END OF YEAR $ 42,321,317 $ 47,178,808 198

KNOX COUNTY, TENNESSEE Comparative Statements of Fiduciary Net Position Pension Trust Fund - Asset Accumulation Plan June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 644,831 $ -

Investments, at Fair Value:

Mutual Funds 213,501,514 216,240,304 Collective Investment Trusts 33,689,709 35,164,360 Interest-earning Investment Contracts 22,709,536 21,206,654 Total Investments 269,900,759 272,611,318 Receivables:

Employee Contributions 191,760 188,414 Employer Contributions 208,641 206,419 Total Receivables 400,401 394,833 Total Assets 270,945,991 273,006,151 LIABILITIES Accounts Payable - To Other Plans 175,057 134,085 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS $ 270,770,934 $ 272,872,066 199

KNOX COUNTY, TENNESSEE Comparative Statements of Changes in Fiduciary Net Position Pension Trust Fund - Asset Accumulation Plan For the years ended June 30, 2016 and 2015 2016 2015 ADDITIONS Contributions:

Employer $ 9,914,030 $ 9,716,779 Employees 8,305,970 8,190,952 Rollovers 432,597 147,179 Total Contributions 18,652,597 18,054,910 Investment Income (Loss):

Interest and Dividend Income 3,000,424 2,732,230 Net Appreciation (Depreciation) in Fair Value of Investments (4,436,701) 6,207,850 Net Investment Income (Loss) (1,436,277) 8,940,080 Other Additions:

Transfers from Other Plans 40,988 45,461 Total Additions 17,257,308 27,040,451 DEDUCTIONS Benefits and Refunds 18,798,198 24,521,646 Administrative Expenses 1,000 -

Transfer to Other Plans 559,242 571,899 Total Deductions 19,358,440 25,093,545 CHANGE IN NET POSITION (2,101,132) 1,946,906 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, BEGINNING OF YEAR 272,872,066 270,925,160 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, END OF YEAR $ 270,770,934 $ 272,872,066 200

KNOX COUNTY, TENNESSEE Comparative Statements of Fiduciary Net Position Pension Trust Fund - Voluntary 457 Plan June 30, 2016 and 2015 2016 2015 ASSETS Investments, at Fair Value:

Mutual Funds $ 12,913,144 $ 11,870,961 Collective Investment Trusts 2,132,242 1,921,958 Interest-earning Investment Contracts 849,421 704,831 Total Investments 15,894,807 14,497,750 Receivables:

Employee Contributions 29,367 25,509 Total Assets 15,924,174 14,523,259 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS $ 15,924,174 $ 14,523,259 201

KNOX COUNTY, TENNESSEE Comparative Statements of Changes in Fiduciary Net Position Pension Trust Fund - Voluntary 457 Plan For the years ended June 30, 2016 and 2015 2016 2015 ADDITIONS Contributions:

Employee $ 2,094,590 $ 1,783,689 Rollovers 278,581 129 Total Contributions 2,373,171 1,783,818 Investment Income (Loss):

Interest and Dividend Income 167,034 141,245 Net Appreciation (Depreciation) in Fair Value of Investments (265,205) 352,450 Net Investment Income (Loss) (98,171) 493,695 Total Additions 2,275,000 2,277,513 DEDUCTIONS Benefits and Refunds 874,085 1,303,448 CHANGE IN NET POSITION 1,400,915 974,065 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, BEGINNING OF YEAR 14,523,259 13,549,194 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, END OF YEAR $ 15,924,174 $ 14,523,259 202

KNOX COUNTY, TENNESSEE Comparative Statements of Fiduciary Net Position Pension Trust Fund - Medical Expense Retirement Plan June 30, 2016 and 2015 2016 2015 ASSETS Investments, at Fair Value:

Mutual Funds $ 3,615,765 $ 3,823,446 Collective Investment Trusts 1,121,137 1,203,857 Interest-earning Investment Contracts 345,153 372,462 Total Investments 5,082,055 5,399,765 Receivables:

Employee Contributions 2,101 2,238 Employer Contributions 1,001 1,069 Total Receivables 3,102 3,307 Total Assets 5,085,157 5,403,072 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS $ 5,085,157 $ 5,403,072 203

KNOX COUNTY, TENNESSEE Comparative Statements of Changes in Fiduciary Net Position Pension Trust Fund - Medical Expense Retirement Plan For the years ended June 30, 2016 and 2015 2016 2015 ADDITIONS Contributions:

Employer $ 105,251 $ 70,036 Employees 220,302 190,437 Total Contributions 325,553 260,473 Investment Income (Loss):

Interest and Dividend Income 83,283 41,828 Net Appreciation (Depreciation) in Fair Value of Investments (221,795) 124,490 Net Investment Income (Loss) (138,512) 166,318 Total Additions 187,041 426,791 DEDUCTIONS Benefits and Refunds 501,993 571,553 Transfers to Other Plans 2,963 -

Total Deductions 504,956 571,553 CHANGE IN NET POSITION (317,915) (144,762)

NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, BEGINNING OF YEAR 5,403,072 5,547,834 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, END OF YEAR $ 5,085,157 $ 5,403,072 204

KNOX COUNTY, TENNESSEE Comparative Statements of Fiduciary Net Position Pension Trust Fund - Uniformed Officers Pension Plan June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 1,940,122 $ 2,385,121 Investments, at Fair Value:

Mutual Funds 8,546,294 8,207,041 Collective Investment Trusts 121,706,634 123,894,793 Corporate Bonds 2,160,643 1,583,627 U.S. Treasuries 10,114,890 9,586,357 Federal Agency Debt Securities 540,273 597,078 Federal Agency Mortgage Backed Securities 6,398,550 6,236,580 Total Investments 149,467,284 150,105,476 Receivables:

Accrued Interest and Dividends 89,535 76,107 Total Assets 151,496,941 152,566,704 LIABILITIES Accounts Payable - Administrative Expenses 187,085 171,705 Accounts Payable - Investments Purchased 117,897 -

Total Liabilities 304,982 171,705 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS $ 151,191,959 $ 152,394,999 205

KNOX COUNTY, TENNESSEE Comparative Statements of Changes in Fiduciary Net Position Pension Trust Fund - Uniformed Officers Pension Plan For the years ended June 30, 2016 and 2015 2016 2015 ADDITIONS Contributions:

Employer $ 3,553,311 $ 3,449,320 Employees 1,619,506 1,654,366 Total Contributions 5,172,817 5,103,686 Investment Income (Loss):

Interest and Dividend Income 975,508 934,074 Net Appreciation (Depreciation) in Fair Value of Investments (535,422) 3,052,983 Total Investment Income 440,086 3,987,057 Less Investment Expenses (653,632) (493,903)

Net Investment Income (Loss) (213,546) 3,493,154 Total Additions 4,959,271 8,596,840 DEDUCTIONS Benefits and Refunds 5,722,723 4,757,150 Administrative Expenses 439,588 788,374 Total Deductions 6,162,311 5,545,524 CHANGE IN NET POSITION (1,203,040) 3,051,316 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, BEGINNING OF YEAR 152,394,999 149,343,683 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, END OF YEAR $ 151,191,959 $ 152,394,999 206

KNOX COUNTY, TENNESSEE Comparative Statements of Fiduciary Net Position Pension Trust Fund - Sheriff's Total Accumulation Retirement Plan June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 10,342 $ -

Investments, at Fair Value:

Mutual Funds 1,076,557 456,712 Collective Investment Trusts 98,325 12,485 Interest-earning Investment Contract 31,414 37,342 Total Investments 1,206,296 506,539 Total Assets 1,216,638 506,539 LIABILITIES Accounts Payable - to Other Plans 10,342 -

NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS $ 1,206,296 $ 506,539 207

KNOX COUNTY, TENNESSEE Comparative Statements of Changes in Fiduciary Net Position Pension Trust Fund - Sheriff's Total Accumulation Retirement Plan For the years ended June 30, 2016 and 2015 2016 2015 ADDITIONS Contributions:

Employer $ 530,579 $ 303,324 Employees 265,285 151,660 Rollovers 2,278 1,523 Total Contributions 798,142 456,507 Investment Income:

Interest and Dividend Income 11,484 3,067 Net Appreciation in Fair Value of Investments 13,889 3,253 Net Investment Income 25,373 6,320 Total Additions 823,515 462,827 DEDUCTIONS Benefits and Refunds 32,865 12,586 Transfers to Other Plans 90,893 -

Total Deductions 123,758 12,586 CHANGE IN NET POSITION 699,757 450,241 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, BEGINNING OF YEAR 506,539 56,298 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, END OF YEAR $ 1,206,296 $ 506,539 208

KNOX COUNTY, TENNESSEE Comparative Statements of Fiduciary Net Position Other Employee Benefit Trust Fund - Employee Disability Plan June 30, 2016 and 2015 2016 2015 ASSETS Investments, at Fair Value:

Mutual Funds $ 965,006 $ 804,695 Collective Investment Trusts 298,869 252,265 Interest-earning Investment Contract 91,654 78,648 Total Investments 1,355,529 1,135,608 Receivables:

Receivable from Other Plans 185,398 134,085 Total Receivables 185,398 134,085 Total Assets 1,540,927 1,269,693 LIABILITIES Accounts Payable - Administrative Expenses 89,025 22,099 NET POSITION - RESTRICTED FOR OPEB BENEFITS $ 1,451,902 $ 1,247,594 209

KNOX COUNTY, TENNESSEE Comparative Statements of Changes in Fiduciary Net Position Other Employee Benefit Trust Fund - Employee Disability Plan For the years ended June 30, 2016 and 2015 2016 2015 ADDITIONS Contributions:

Employer $ 530,426 $ 527,477 Investment Income (Loss):

Interest and Dividend Income 61,327 56,508 Net Depreciation in Fair Value of Investments (122,075) (32,116)

Net Investment Income (Loss) (60,748) 24,392 Other Additions:

Transfers From Other Plans 653,097 571,899 Total Additions 1,122,775 1,123,768 DEDUCTIONS Benefits and Refunds 141,788 57,133 Administrative Expenses 774,388 186,960 Transfers to Other Plans 2,291 -

Total Deductions 918,467 244,093 CHANGE IN NET POSITION 204,308 879,675 NET POSITION - RESTRICTED FOR OPEB BENEFITS, BEGINNING OF YEAR 1,247,594 367,919 NET POSITION - RESTRICTED FOR OPEB BENEFITS, END OF YEAR $ 1,451,902 $ 1,247,594 210

KNOX COUNTY, TENNESSEE Combining Statement of Fiduciary Assets and Liabilities Agency Funds June 30, 2016 (With comparative totals for June 30, 2015)

Totals Municipal Subdivision External Constitutional Sales Tax Bonds Agencies Officers 2016 2015 ASSETS Cash and Cash Equivalents $ - $ 574,446 $ 1,369,432 $ 26,048,695 $ 27,992,573 $ 27,950,452 Receivables:

Accounts 7,844,176 - - 622,114 8,466,290 8,179,725 TOTAL ASSETS $ 7,844,176 $ 574,446 $ 1,369,432 $ 26,670,809 $ 36,458,863 $ 36,130,177 LIABILITIES Accounts Payable and Accrued Liabilities $ 7,844,176 $ 574,446 $ 1,369,432 $ - $ 9,788,054 $ 9,242,607 Due to Other Governments - - - 7,045,156 7,045,156 7,904,827 Due to Litigants, Heirs and Others - - - 19,625,653 19,625,653 18,982,743 TOTAL LIABILITIES $ 7,844,176 $ 574,446 $ 1,369,432 $ 26,670,809 $ 36,458,863 $ 36,130,177 211

KNOX COUNTY, TENNESSEE Combining Statement of Changes in Fiduciary Assets and Liabilities Agency Funds For the year ended June 30, 2016 (With comparative totals for the year ended June 30, 2015)

June 30, 2015 Additions Deductions June 30, 2016 Municipal Sales Tax Fund Assets:

Accounts Receivable $ 7,464,112 $ 48,139,879 $ 47,759,815 $ 7,844,176 Liabilities:

Accounts Payable and Accrued Liabilities $ 7,464,112 $ 48,139,879 $ 47,759,815 $ 7,844,176 Subdivision Bonds Assets:

Cash and Cash Equivalents $ 531,446 $ 223,000 $ 180,000 $ 574,446 Liabilities:

Accounts Payable and Accrued Liabilities $ 531,446 $ 223,000 $ 180,000 $ 574,446 External Agencies Fund Assets:

Cash and Cash Equivalents $ 1,247,049 $ 5,258,859 $ 5,136,476 $ 1,369,432 Liabilities:

Accounts Payable and Accrued Liabilities $ 1,247,049 $ 5,258,859 $ 5,136,476 $ 1,369,432 Constitutional Officers Fund Assets:

Cash and Cash Equivalents $ 26,171,957 $ 101,640,187 $ 101,763,449 $ 26,048,695 Accounts Receivable 715,613 622,114 715,613 622,114 Total Assets $ 26,887,570 $ 102,262,301 $ 102,479,062 $ 26,670,809 Liabilities:

Due to Others $ 26,887,570 $ 102,262,301 $ 102,479,062 $ 26,670,809 Totals - All Agency Funds Assets:

Cash and Cash Equivalents $ 27,950,452 $ 107,122,046 $ 107,079,925 $ 27,992,573 Accounts Receivable 8,179,725 48,761,993 48,475,428 8,466,290 Total Assets $ 36,130,177 $ 155,884,039 $ 155,555,353 $ 36,458,863 Liabilities:

Accounts Payable and Accrued Liabilities $ 9,242,607 $ 53,621,738 $ 53,076,291 $ 9,788,054 Due to Others 26,887,570 102,262,301 102,479,062 26,670,809 Total Liabilities $ 36,130,177 $ 155,884,039 $ 155,555,353 $ 36,458,863 212

KNOX COUNTY, TENNESSEE Trustee, Clerks, and Register Combined Analysis of Fee and Commission Accounts For the Year Ended June 30, 2016 Circuit and Criminal and General Fourth County Sessions Circuit Clerk and Register Trustee Clerk Court Clerk Court Clerk Master of Deeds Total Revenues Fees and Commissions $ 9,170,182 $ 5,752,141 $ 1,604,726 $ 6,960,941 $ 1,343,455 $ 2,631,478 $ 27,462,923 Interest Earned 1,658 8,356 - - - 6,498 16,512 Total Revenues 9,171,840 5,760,497 1,604,726 6,960,941 1,343,455 2,637,976 27,479,435 Expenditures Salaries-Staff 1,639,786 2,865,645 1,020,818 3,206,837 698,816 1,215,876 10,647,778 Payroll Taxes/Benefits 573,630 1,036,685 371,485 1,124,213 278,083 444,538 3,828,634 County Official/Administrative Officer 151,982 121,970 83,496 134,168 129,198 117,453 738,267 Travel - 8,723 5,220 - - 8,400 22,343 Other Expenditures - 44,416 - - 4,536 154,107 203,059 Total Expenditures 2,365,398 4,077,439 1,481,019 4,465,218 1,110,633 1,940,374 15,440,081 Other (Sources) Uses Fees and Commissions to County (General Fund) 6,725,260 1,827,262 - 1,215,545 232,827 604,300 10,605,194 Total Expenditures and Other Uses 9,090,658 5,904,701 1,481,019 5,680,763 1,343,460 2,544,674 26,045,275 Excess (Deficiency) of Revenues and Other Sources Over (Under) Expenditures and Other Uses 81,182 (144,204) 123,707 1,280,178 (5) 93,302 1,434,160 Balances, July 1, 2015 458,055 1,364,799 243,398 1,291,699 497,005 478,849 4,333,805 Balances, June 30, 2016 $ 539,237 $ 1,220,595 $ 367,105 $ 2,571,877 $ 497,000 $ 572,151 $ 5,767,965 213

KNOX COUNTY, TENNESSEE Combining Statement of Net Position Nonmajor Component Units June 30, 2016 Nonmajor Component Units Knox County Total Emergency Knox County Knox County Nonmajor Communications Development Railroad Component District Corporation Authority Units Assets Cash and Cash Equivalents $ 16,334,247 $ 20,844,114 $ 13,280 $ 37,191,641 Accounts Receivable 3,811 262,783 - 266,594 Due from Primary Government 158,802 - - 158,802 Land Held for Resale - 19,126,258 - 19,126,258 Prepaid Items 72,608 20,142 - 92,750 Capital Assets:

Land and Construction in Process 106,939 - - 106,939 Other Capital Assets, Net of Accumulated Depreciation 9,502,097 1,019 - 9,503,116 Total Assets 26,178,504 40,254,316 13,280 66,446,100 Liabilities Accounts Payable and Accrued Liabilities 268,250 818,028 - 1,086,278 Due to Primary Government 261 - - 261 Other Long-term Obligations:

Due in Less than One Year 313,509 - - 313,509 Total Liabilities 582,020 818,028 - 1,400,048 Net Position Investment in Capital Assets 9,609,036 1,019 - 9,610,055 Restricted for:

Other Purposes - 26,966 - 26,966 Unrestricted 15,987,448 39,408,303 13,280 55,409,031 Total Net Position $ 25,596,484 $ 39,436,288 $ 13,280 $ 65,046,052 214

KNOX COUNTY, TENNESSEE Combining Statement of Activities Nonmajor Component Units For the Year Ended June 30, 2016 Program Revenues Component Units Operating Capital Total Charges for Grants and Grants and The The Nonmajor Functions/Programs Expenses Services Contributions Contributions District Corporation KCRA Component Units Knox County Emergency Communications District $ 7,611,737 $ 6,410,867 $ - $ - $ (1,200,870) $ - $ - (1,200,870)

Knox County Development Corporation 1,520,246 122,474 - - - (1,397,772) - (1,397,772)

Knox County Railroad Authority - - - - - - - -

Total component units $ 9,131,983 $ 6,533,341 $ - $ - (1,200,870) (1,397,772) - (2,598,642)

General Revenues:

Investment Revenue 28,999 90,888 - 119,887 Payments from Primary Government 651,630 625,000 - 1,276,630 Other Governments and Citizens Groups - 368,295 - 368,295 Grants and Contributions Not Restricted for Specific Programs 1,719,140 - - 1,719,140 Total General Revenues 2,399,769 1,084,183 - 3,483,952 Change in Net Position 1,198,899 (313,589) - 885,310 Net Position, July 1 24,397,585 39,749,877 13,280 64,160,742 Net Position, June 30 $ 25,596,484 $ 39,436,288 $ 13,280 $ 65,046,052 215

KNOX COUNTY, TENNESSEE Knox County Primary Government and Board of Education Schedule of Debt Service Requirements General Bonded Debt June 30, 2016 Fiscal Year $17,445,000 $72,000,000 $34,550,000 $70,000,000 $47,610,000 $77,000,000 $69,000,000 $40,000,000 $4,550,000 $16,000,000 $30,115,000 Ending General Obligation General Obligation General Obligation General Obligation General Obligation General Obligation General Obligation General Obligation Women's Basketball Build America Bonds Refunding Bonds June 30, Refunding Bonds Series 2003A Series 2003 Refunding Series 2004 Series 2004 Refunding Series 2005A Series 2005 Series 2007 Series 2008 Hall of Fame Series 2010A Series 2010B Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest 2017 $ 5,950,000 $ 297,500 $ 2,775,000 $ 2,388,375 $ 5,000,000 $ 1,025,750 $ 3,200,000 $ 2,380,000 $ 4,885,000 $ 1,345,750 $ 2,100,000 $ 2,828,250 $ - $ 3,450,000 $ 1,700,000 $ 1,507,500 $ 620,000 $ 46,400 $ 25,000 $ 846,212 $ 400,000 $ 1,105,750 2018 - - 2,950,000 2,263,500 5,115,000 775,750 3,400,000 2,252,000 5,115,000 1,101,500 2,250,000 2,733,750 - 3,450,000 1,790,000 1,422,500 640,000 21,600 275,000 845,262 515,000 1,095,750 2019 - - 3,125,000 2,130,750 5,400,000 520,000 3,600,000 2,116,000 5,365,000 845,750 2,375,000 2,632,500 - 3,450,000 1,875,000 1,333,000 - - 275,000 834,262 700,000 1,082,875 2020 - - 3,300,000 1,990,125 5,000,000 250,000 3,810,000 1,972,000 5,630,000 577,500 2,500,000 2,525,625 - 3,450,000 1,970,000 1,239,250 - - 525,000 821,888 1,100,000 1,063,625 2021 - - 3,525,000 1,841,625 - - 4,030,000 1,819,600 5,920,000 296,000 2,625,000 2,413,125 - 3,450,000 2,070,000 1,140,750 - - 625,000 798,000 450,000 1,008,625 2022 - - 3,750,000 1,683,000 - - 4,260,000 1,658,400 - - 1,075,000 2,295,000 - 3,450,000 2,175,000 1,037,250 - - 725,000 769,563 1,400,000 995,125 2023 - - 3,975,000 1,514,250 - - 4,500,000 1,488,000 - - 1,000,000 2,246,625 - 3,450,000 2,280,000 928,500 - - 725,000 736,575 1,450,000 953,125 2024 - - 4,225,000 1,335,375 - - 4,760,000 1,308,000 - - 1,050,000 2,201,625 - 3,450,000 2,395,000 814,500 - - 700,000 703,588 1,500,000 909,625 2025 - - 4,500,000 1,145,250 - - 5,020,000 1,117,600 - - 1,100,000 2,154,375 - 3,450,000 2,515,000 694,750 - - 650,000 671,738 1,500,000 862,750 2026 - - 4,775,000 942,750 - - 5,300,000 916,800 - - 1,150,000 2,104,875 - 3,450,000 2,640,000 569,000 - - 1,225,000 642,163 1,500,000 814,000 2027 - - 5,075,000 727,875 - - 5,580,000 704,800 - - 1,175,000 2,053,125 6,475,000 3,450,000 2,775,000 437,000 - - 100,000 575,400 1,700,000 754,000 2028 - - 5,375,000 499,500 - - 5,870,000 481,600 - - 1,225,000 2,000,250 7,675,000 3,126,250 2,910,000 298,250 - - 100,000 569,850 1,800,000 686,000 2029 - - 5,725,000 257,625 - - 6,170,000 246,800 - - 1,275,000 1,945,125 8,075,000 2,742,500 3,055,000 152,750 - - 100,000 564,300 1,750,000 614,000 2030 - - - - - - - - - - 7,750,000 1,887,750 8,450,000 2,338,750 - - - - 1,075,000 558,750 2,000,000 544,000 2031 - - - - - - - - - - 8,050,000 1,539,000 8,900,000 1,916,250 - - - - 1,075,000 499,088 2,100,000 464,000 2032 - - - - - - - - - - 8,375,000 1,176,750 9,325,000 1,471,250 - - - - 1,175,000 437,275 2,200,000 380,000 2033 - - - - - - - - - - 8,700,000 799,875 9,800,000 1,005,000 - - - - 1,275,000 369,713 2,300,000 292,000 2034 - - - - - - - - - - 9,075,000 408,375 10,300,000 515,000 - - - - 1,375,000 296,400 2,400,000 200,000 2035 - - - - - - - - - - - - - - - - - - 3,825,000 218,025 2,600,000 104,000 2036 - - - - - - - - - - - - - - - - - - - - - -

Totals $ 5,950,000 $ 297,500 $ 53,075,000 $ 18,720,000 $ 20,515,000 $ 2,571,500 $ 59,500,000 $ 18,461,600 $ 26,915,000 $ 4,166,500 $ 62,850,000 $ 35,946,000 $ 69,000,000 $ 51,065,000 $ 30,150,000 $ 11,575,000 $ 1,260,000 $ 68,000 $ 15,850,000 $ 11,758,052 $ 29,365,000 $ 13,929,250 continued 216

KNOX COUNTY, TENNESSEE Knox County Primary Government and Board of Education Schedule of Debt Service Requirements General Bonded Debt (Continued)

June 30, 2016 Fiscal Year $32,560,000 $17,000,000 $29,236,000 $35,905,000 $39,075,000 $30,040,000 $56,840,000 $16,020,000 $35,900,000 Ending Refunding Bonds Build America Bonds Qualified School Construction Bonds General Obligation Bonds General Obligation Bonds General Obligation Bonds Refunding Bonds Refunding Bonds General Obligation Bonds June 30, Series 2010C Series 2010D Series 2010 Series 2012 Series 2013 Series 2014A Series 2014B Series 2015 Series 2016 Totals Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest 2017 $ 2,370,000 $ 693,100 $ 50,000 $ 927,275 $ 1,824,281 $ 1,417,361 $ 700,000 $ 383,600 $ 875,000 $ 1,370,656 $ 795,000 $ 1,032,412 $ 4,410,000 $ 1,298,483 $ 3,895,000 $ 616,250 $ 1,200,000 $ 1,319,641 $ 42,774,281 $ 26,280,265 2018 2,500,000 598,300 50,000 925,713 1,824,281 1,417,361 700,000 355,600 1,510,000 1,346,594 1,080,000 992,662 4,390,000 1,252,618 4,105,000 421,500 1,475,000 1,110,126 39,684,281 24,382,086 2019 2,635,000 498,300 50,000 923,963 1,824,281 1,417,361 720,000 341,600 1,575,000 1,305,068 1,830,000 938,662 3,090,000 1,187,204 4,325,000 216,250 1,500,000 1,080,626 40,264,281 22,854,171 2020 2,750,000 419,250 250,000 922,063 1,824,281 1,417,361 735,000 327,200 1,625,000 1,257,819 1,920,000 847,162 3,140,000 1,131,586 - - 2,100,000 1,065,626 38,179,281 21,278,080 2021 2,870,000 336,750 250,000 911,750 1,824,281 1,417,361 750,000 297,800 1,700,000 1,209,069 1,170,000 751,162 5,995,000 1,065,646 - - 2,175,000 960,626 35,979,281 19,717,889 2022 2,995,000 250,650 500,000 900,500 1,824,281 1,417,361 780,000 282,800 1,750,000 1,158,069 1,230,000 692,662 6,105,000 925,364 - - 1,425,000 922,563 29,994,281 18,438,307 2023 3,120,000 160,800 500,000 878,000 1,824,281 1,417,361 800,000 267,200 1,825,000 1,105,569 1,260,000 661,912 6,245,000 770,296 - - 1,475,000 851,313 30,979,281 17,429,526 2024 2,240,000 67,200 500,000 855,500 1,824,281 1,417,361 825,000 249,200 1,875,000 1,050,818 1,285,000 635,138 6,340,000 602,930 - - 1,525,000 777,563 31,044,281 16,378,423 2025 - - 500,000 833,000 1,824,281 1,417,361 850,000 228,575 1,925,000 992,224 1,315,000 603,013 6,510,000 420,338 - - 1,575,000 701,313 29,784,281 15,292,287 2026 - - 500,000 810,500 1,824,281 1,417,361 875,000 205,200 1,975,000 929,662 1,350,000 573,425 6,675,000 223,086 - - 1,625,000 622,563 31,414,281 14,221,385 2027 - - 1,300,000 785,500 2,003,856 1,417,361 900,000 178,950 2,050,000 860,538 1,380,000 539,675 335,000 10,820 - - 1,675,000 590,063 32,523,856 13,085,107 2028 - - 1,350,000 714,000 171,976 139,589 950,000 151,950 2,100,000 778,538 1,425,000 498,275 - - - - 1,750,000 544,000 32,701,976 10,488,052 2029 - - 1,400,000 639,750 - - 1,000,000 123,450 2,150,000 694,538 1,470,000 455,525 - - - - 1,800,000 495,874 33,970,000 8,932,237 2030 - - 1,450,000 562,750 - - 1,000,000 93,450 2,225,000 608,538 1,515,000 411,425 - - - - 1,875,000 446,374 27,340,000 7,451,787 2031 - - 1,500,000 483,000 - - 1,040,000 63,450 2,300,000 519,538 1,560,000 358,400 - - - - 1,950,000 390,124 28,475,000 6,232,850 2032 - - 1,575,000 400,500 - - 1,075,000 32,250 2,350,000 427,538 1,615,000 303,800 - - - - 2,000,000 331,624 29,690,000 4,960,987 2033 - - 1,625,000 306,000 - - - - 2,450,000 330,600 1,675,000 247,275 - - - - 2,075,000 271,624 29,900,000 3,622,087 2034 - - 1,700,000 208,500 - - - - 2,525,000 224,024 1,735,000 188,650 - - - - 2,150,000 209,374 31,260,000 2,250,323 2035 - - 1,775,000 106,500 - - - - 2,625,000 114,188 1,795,000 127,925 - - - - 2,225,000 142,187 14,845,000 812,825 2036 - - - - - - - - - - 1,860,000 65,100 - - - - 2,325,000 72,656 4,185,000 137,756 Totals $ 21,480,000 $ 3,024,350 $ 16,825,000 $ 13,094,764 $ 20,418,642 $ 15,730,560 $ 13,700,000 $ 3,582,275 $ 37,410,000 $ 16,283,588 $ 29,265,000 $ 10,924,260 $ 53,235,000 $ 8,888,371 $ 12,325,000 $ 1,254,000 $ 35,900,000 $ 12,905,860 $ 614,988,642 $ 254,246,430 217

KNOX COUNTY, TENNESSEE Knox County Primary Government Schedule of Debt Service Requirements General Bonded Debt June 30, 2016 Fiscal Year $5,321,983 $40,000,000 $14,337,717 $46,000,000 $29,083,377 $50,000,000 $50,450,000 $26,000,000 $4,550,000 $1,000,000 Ending General Obligation General Obligation General Obligation General Obligation General Obligation General Obligation General Obligation General Obligation Women's Basketball Build America Bonds June 30, Refunding Bonds Series 2003A Series 2003 Refunding Series 2004 Series 2004 Refunding Series 2005A Series 2005 Series 2007 Series 2008 Hall of Fame Series 2010A Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest 2017 $ 1,815,180 $ 90,759 $ 1,577,600 $ 1,324,128 $ 2,074,923 $ 422,540 $ 2,102,857 $ 1,564,000 $ 3,069,085 $ 834,511 $ 1,363,636 $ 1,836,526 $ - $ 2,522,500 $ 1,105,000 $ 979,875 $ 620,000 $ 46,400 $ 1,563 $ 52,888 2018 - - 1,665,617 1,254,896 2,122,646 319,557 2,234,286 1,479,886 3,209,585 683,049 1,461,039 1,775,162 - 2,522,500 1,163,500 924,625 640,000 21,600 17,188 52,828 2019 - - 1,752,933 1,181,299 2,240,917 214,205 2,365,714 1,390,514 3,362,301 524,457 1,542,208 1,709,416 - 2,522,500 1,218,750 866,450 - - 17,188 52,141 2020 - - 1,843,733 1,103,336 2,074,923 102,983 2,503,714 1,295,886 3,524,181 358,113 1,623,377 1,640,016 - 2,522,500 1,280,500 805,512 - - 32,813 51,368 2021 - - 1,953,000 1,021,007 - - 2,648,286 1,195,737 3,701,333 183,552 1,704,545 1,566,964 - 2,522,500 1,345,500 741,487 - - 39,062 49,876 2022 - - 2,064,367 933,064 - - 2,799,429 1,089,806 - - 698,052 1,490,260 - 2,522,500 1,413,750 674,212 - - 45,312 48,098 2023 - - 1,978,567 839,508 - - 2,957,143 977,829 - - 649,351 1,458,847 - 2,522,500 1,482,000 603,525 - - 45,312 46,036 2024 - - 2,097,367 740,339 - - 3,128,000 859,543 - - 681,818 1,429,627 - 2,522,500 1,556,750 529,425 - - 43,750 43,974 2025 - - 2,225,050 634,933 - - 3,298,857 734,423 - - 714,286 1,398,945 - 2,522,500 1,634,750 451,587 - - 40,625 41,984 2026 - - 2,353,433 522,666 - - 3,482,857 602,469 - - 746,753 1,366,802 - 2,522,500 1,716,000 369,850 - - 76,562 40,135 2027 - - 2,489,317 403,538 - - 3,666,857 463,154 - - 762,987 1,333,198 4,734,257 2,522,500 1,803,750 284,050 - - 6,250 35,963 2028 - - 2,487,500 276,925 - - 3,857,429 316,480 - - 795,455 1,298,864 5,611,649 2,285,787 1,891,500 193,862 - - 6,250 35,616 2029 - - 2,638,332 142,829 - - 4,054,570 162,183 - - 827,922 1,263,068 5,904,112 2,005,205 1,985,750 99,287 - - 6,250 35,269 2030 - - - - - - - - - - 5,032,468 1,225,812 6,178,297 1,709,999 - - - - 67,187 34,922 2031 - - - - - - - - - - 5,227,273 999,351 6,507,319 1,401,084 - - - - 67,187 31,194 2032 - - - - - - - - - - 5,438,312 764,123 6,818,062 1,075,718 - - - - 73,437 27,330 2033 - - - - - - - - - - 5,649,351 519,399 7,165,362 734,815 - - - - 79,687 23,108 2034 - - - - - - - - - - 5,892,857 265,179 7,530,942 376,547 - - - - 85,937 18,525 2035 - - - - - - - - - - - - - - - - - - 239,062 13,626 2036 - - - - - - - - - - - - - - - - - - - -

Totals $ 1,815,180 $ 90,759 $ 27,126,816 $ 10,378,468 $ 8,513,409 $ 1,059,285 $ 39,099,999 $ 12,131,910 $ 16,866,485 $ 2,583,682 $ 40,811,690 $ 23,341,559 $ 50,450,000 $ 37,336,655 $ 19,597,500 $ 7,523,747 $ 1,260,000 $ 68,000 $ 990,622 $ 734,881 continued 218

KNOX COUNTY, TENNESSEE Knox County Primary Government Schedule of Debt Service Requirements General Bonded Debt (Continued)

June 30, 2016 Fiscal Year $30,115,000 $11,120,000 $17,000,000 $17,090,000 $20,962,906 $15,505,000 $52,810,000 $6,161,292 $16,515,000 Ending Refunding Bonds Refunding Bonds Build America Bonds General Obligation Bonds General Obligation Bonds General Obligation Bonds Refunding Bonds Refunding Bonds General Obligation Bonds June 30, Series 2010B Series 2010C Series 2010D Series 2012 Series 2013 Series 2014A Series 2014B Series 2015 Series 2016 Totals Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest 2017 $ 400,000 $ 1,105,750 $ 795,000 $ 234,350 $ 50,000 $ 927,275 $ 270,000 $ 148,350 $ 469,419 $ 735,328 $ 770,000 $ 544,506 $ 3,100,000 $ 1,265,116 $ 1,498,017 $ 237,010 $ 700,000 $ 596,799 $ 21,782,280 $ 15,468,611 2018 515,000 1,095,750 830,000 202,550 50,000 925,713 270,000 137,550 810,083 722,419 830,000 506,006 3,065,000 1,232,876 1,578,783 162,109 970,000 494,182 21,432,727 14,513,258 2019 700,000 1,082,875 865,000 169,350 50,000 923,963 280,000 132,150 844,954 700,141 1,245,000 464,506 3,090,000 1,187,204 1,663,395 83,170 1,000,000 474,782 22,238,360 13,679,123 2020 1,100,000 1,063,625 895,000 143,400 250,000 922,063 285,000 126,550 871,778 674,793 1,305,000 402,256 3,140,000 1,131,586 - - 1,310,000 464,782 22,040,019 12,808,769 2021 450,000 1,008,625 925,000 116,550 250,000 911,750 295,000 115,150 912,014 648,640 525,000 337,006 5,995,000 1,065,646 - - 1,360,000 399,282 22,103,740 11,883,772 2022 1,400,000 995,125 955,000 88,800 500,000 900,500 300,000 109,250 938,838 621,279 550,000 310,756 6,105,000 925,364 - - 580,000 375,481 18,349,748 11,084,495 2023 1,450,000 953,125 985,000 60,150 500,000 878,000 310,000 103,250 979,074 593,114 565,000 297,006 6,245,000 770,296 - - 600,000 346,481 18,746,447 10,449,667 2024 1,500,000 909,625 1,020,000 30,600 500,000 855,500 320,000 96,275 1,005,898 563,741 575,000 285,000 6,340,000 602,930 - - 620,000 316,481 19,388,583 9,785,560 2025 1,500,000 862,750 - - 500,000 833,000 330,000 88,275 1,032,722 532,307 590,000 270,625 6,510,000 420,338 - - 640,000 285,481 19,016,290 9,077,148 2026 1,500,000 814,000 - - 500,000 810,500 340,000 79,200 1,059,545 498,744 605,000 257,350 6,675,000 223,086 - - 665,000 253,481 19,720,150 8,360,783 2027 1,700,000 754,000 - - 1,300,000 785,500 345,000 69,000 1,099,780 461,661 620,000 242,225 335,000 10,820 - - 685,000 240,181 19,548,198 7,605,790 2028 1,800,000 686,000 - - 1,350,000 714,000 365,000 58,650 1,126,605 417,669 640,000 223,625 - - - - 710,000 221,344 20,641,388 6,728,822 2029 1,750,000 614,000 - - 1,400,000 639,750 390,000 47,700 1,153,429 372,605 660,000 204,425 - - - - 735,000 201,818 21,505,365 5,788,139 2030 2,000,000 544,000 - - 1,450,000 562,750 390,000 36,000 1,193,665 326,468 680,000 184,625 - - - - 760,000 181,606 17,751,617 4,806,182 2031 2,100,000 464,000 - - 1,500,000 483,000 400,000 24,300 1,233,901 278,721 700,000 160,825 - - - - 790,000 158,806 18,525,680 4,001,281 2032 2,200,000 380,000 - - 1,575,000 400,500 410,000 12,300 1,260,725 229,365 725,000 136,325 - - - - 815,000 135,106 19,315,536 3,160,767 2033 2,300,000 292,000 - - 1,625,000 306,000 - - 1,314,373 177,360 750,000 110,950 - - - - 850,000 110,656 19,733,773 2,274,288 2034 2,400,000 200,000 - - 1,700,000 208,500 - - 1,354,609 120,184 780,000 84,700 - - - - 875,000 85,156 20,619,345 1,358,791 2035 2,600,000 104,000 - - 1,775,000 106,500 - - 1,408,257 61,259 805,000 57,400 - - - - 900,000 57,812 7,727,319 400,597 2036 - - - - - - - - - - 835,000 29,225 - - - - 950,000 29,688 1,785,000 58,913 Totals $ 29,365,000 $ 13,929,250 $ 7,270,000 $ 1,045,750 $ 16,825,000 $ 13,094,764 $ 5,300,000 $ 1,383,950 $ 20,069,669 $ 8,735,798 $ 14,755,000 $ 5,109,342 $ 50,600,000 $ 8,835,262 $ 4,740,195 $ 482,289 $ 16,515,000 $ 5,429,405 $ 371,971,565 $ 153,294,756 219

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education Schedule of Debt Service Requirements General Bonded Debt June 30, 2016 Fiscal Year $12,123,017 $32,000,000 $20,212,283 $24,000,000 $18,526,623 $27,000,000 $18,550,000 $14,000,000 $15,000,000 Ending General Obligation General Obligation General Obligation General Obligation General Obligation General Obligation General Obligation General Obligation Build America Bonds June 30, Refunding Bonds Series 2003A Series 2003 Refunding Series 2004 Series 2004 Refunding Series 2005A Series 2005 Series 2007 Series 2008 Series 2010A Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest 2017 $ 4,134,820 $ 206,741 $ 1,197,400 $ 1,064,247 $ 2,925,077 $ 603,210 $ 1,097,143 $ 816,000 $ 1,815,915 $ 511,239 $ 736,364 $ 991,724 $ - $ 927,500 $ 595,000 $ 527,625 $ 23,437 $ 793,324 2018 - - 1,284,383 1,008,604 2,992,354 456,193 1,165,714 772,114 1,905,415 418,451 788,961 958,588 - 927,500 626,500 497,875 257,812 792,434 2019 - - 1,372,067 949,451 3,159,083 305,795 1,234,286 725,486 2,002,699 321,293 832,792 923,084 - 927,500 656,250 466,550 257,812 782,121 2020 - - 1,456,267 886,789 2,925,077 147,017 1,306,286 676,114 2,105,819 219,387 876,623 885,609 - 927,500 689,500 433,738 492,187 770,520 2021 - - 1,572,000 820,618 - - 1,381,714 623,863 2,218,667 112,448 920,455 846,161 - 927,500 724,500 399,263 585,938 748,124 2022 - - 1,685,633 749,936 - - 1,460,571 568,594 - - 376,948 804,740 - 927,500 761,250 363,038 679,688 721,465 2023 - - 1,996,433 674,742 - - 1,542,857 510,171 - - 350,649 787,778 - 927,500 798,000 324,975 679,688 690,539 2024 - - 2,127,633 595,036 - - 1,632,000 448,457 - - 368,182 771,998 - 927,500 838,250 285,075 656,250 659,614 2025 - - 2,274,950 510,317 - - 1,721,143 383,177 - - 385,714 755,430 - 927,500 880,250 243,163 609,375 629,754 2026 - - 2,421,567 420,084 - - 1,817,143 314,331 - - 403,247 738,073 - 927,500 924,000 199,150 1,148,438 602,028 2027 - - 2,585,683 324,337 - - 1,913,143 241,646 - - 412,013 719,927 1,740,743 927,500 971,250 152,950 93,750 539,437 2028 - - 2,887,500 222,575 - - 2,012,571 165,120 - - 429,545 701,386 2,063,351 840,463 1,018,500 104,388 93,750 534,234 2029 - - 3,086,668 114,796 - - 2,115,430 84,617 - - 447,078 682,057 2,170,888 737,295 1,069,250 53,463 93,750 529,031 2030 - - - - - - - - - - 2,717,532 661,938 2,271,703 628,751 - - 1,007,813 523,828 2031 - - - - - - - - - - 2,822,727 539,649 2,392,681 515,166 - - 1,007,813 467,894 2032 - - - - - - - - - - 2,936,688 412,627 2,506,938 395,532 - - 1,101,563 409,945 2033 - - - - - - - - - - 3,050,649 280,476 2,634,638 270,185 - - 1,195,313 346,605 2034 - - - - - - - - - - 3,182,143 143,196 2,769,058 138,453 - - 1,289,063 277,875 2035 - - - - - - - - - - - - - - - - 3,585,938 204,399 2036 - - - - - - - - - - - - - - - - - -

Totals $ 4,134,820 $ 206,741 $ 25,948,184 $ 8,341,532 $ 12,001,591 $ 1,512,215 $ 20,400,001 $ 6,329,690 $ 10,048,515 $ 1,582,818 $ 22,038,310 $ 12,604,441 $ 18,550,000 $ 13,728,345 $ 10,552,500 $ 4,051,253 $ 14,859,378 $ 11,023,171 continued 220

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education Schedule of Debt Service Requirements General Bonded Debt (Continued)

June 30, 2016 Fiscal Year $21,440,000 $29,236,000 $18,815,000 $18,112,094 $14,535,000 $4,030,000 $9,858,708 $19,385,000 Ending Refunding Bonds Qualified School Construction Bonds General Obligation Bonds General Obligation Bonds General Obligation Bonds Refunding Bonds Refunding Bonds General Obligation Bonds June 30, Series 2010C Series 2010 Series 2012 Series 2013 Series 2014A Series 2014B Series 2015 Series 2016 Totals Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest 2017 $ 1,575,000 $ 458,750 $ 1,824,281 $ 1,417,361 $ 430,000 $ 235,250 $ 405,581 $ 635,328 $ 25,000 $ 487,906 $ 1,310,000 $ 33,367 $ 2,396,983 $ 379,240 $ 500,000 $ 722,842 $ 20,992,001 $ 10,811,654 2018 1,670,000 395,750 1,824,281 1,417,361 430,000 218,050 699,917 624,175 250,000 486,656 1,325,000 19,742 2,526,217 259,391 505,000 615,944 18,251,554 9,868,828 2019 1,770,000 328,950 1,824,281 1,417,361 440,000 209,450 730,046 604,927 585,000 474,156 - - 2,661,605 133,080 500,000 605,844 18,025,921 9,175,048 2020 1,855,000 275,850 1,824,281 1,417,361 450,000 200,650 753,222 583,026 615,000 444,906 - - - - 790,000 600,844 16,139,262 8,469,311 2021 1,945,000 220,200 1,824,281 1,417,361 455,000 182,650 787,986 560,429 645,000 414,156 - - - - 815,000 561,344 13,875,541 7,834,117 2022 2,040,000 161,850 1,824,281 1,417,361 480,000 173,550 811,162 536,790 680,000 381,906 - - - - 845,000 547,082 11,644,533 7,353,812 2023 2,135,000 100,650 1,824,281 1,417,361 490,000 163,950 845,926 512,455 695,000 364,906 - - - - 875,000 504,832 12,232,834 6,979,859 2024 1,220,000 36,600 1,824,281 1,417,361 505,000 152,925 869,102 487,077 710,000 350,138 - - - - 905,000 461,082 11,655,698 6,592,863 2025 - - 1,824,281 1,417,361 520,000 140,300 892,278 459,917 725,000 332,388 - - - - 935,000 415,832 10,767,991 6,215,139 2026 - - 1,824,281 1,417,361 535,000 126,000 915,455 430,918 745,000 316,075 - - - - 960,000 369,082 11,694,131 5,860,602 2027 - - 2,003,856 1,417,361 555,000 109,950 950,220 398,877 760,000 297,450 - - - - 990,000 349,882 12,975,658 5,479,317 2028 - - 171,976 139,589 585,000 93,300 973,395 360,869 785,000 274,650 - - - - 1,040,000 322,656 12,060,588 3,759,230 2029 - - - - 610,000 75,750 996,571 321,933 810,000 251,100 - - - - 1,065,000 294,056 12,464,635 3,144,098 2030 - - - - 610,000 57,450 1,031,335 282,070 835,000 226,800 - - - - 1,115,000 264,768 9,588,383 2,645,605 2031 - - - - 640,000 39,150 1,066,099 240,817 860,000 197,575 - - - - 1,160,000 231,318 9,949,320 2,231,569 2032 - - - - 665,000 19,950 1,089,275 198,173 890,000 167,475 - - - - 1,185,000 196,518 10,374,464 1,800,220 2033 - - - - - - 1,135,627 153,240 925,000 136,325 - - - - 1,225,000 160,968 10,166,227 1,347,799 2034 - - - - - - 1,170,391 103,840 955,000 103,950 - - - - 1,275,000 124,218 10,640,655 891,532 2035 - - - - - - 1,216,743 52,929 990,000 70,525 - - - - 1,325,000 84,375 7,117,681 412,228 2036 - - - - - - - - 1,025,000 35,875 - - - - 1,375,000 42,968 2,400,000 78,843 Totals $ 14,210,000 $ 1,978,600 $ 20,418,642 $ 15,730,560 $ 8,400,000 $ 2,198,325 $ 17,340,331 $ 7,547,790 $ 14,510,000 $ 5,814,918 $ 2,635,000 $ 53,109 $ 7,584,805 $ 771,711 $ 19,385,000 $ 7,476,455 $ 243,017,077 $ 100,951,674 221

KNOX COUNTY, TENNESSEE Schedule of Salaries and Bonds of Principal Elected Officials For the year ended June 30, 2016 AUTHORIZATION SALARY PAID BOND OFFICIAL FOR SALARY DURING YEAR AMOUNT SURETY Assessor of Property Section 8-24-102 (k), T.C.A. $ 135,071 $ 50,000 Hartford Fire Insurance Attorney General Section 8-6-104, T.C.A. $ 9,500 $ -

Circuit and Civil Sessions Court Clerk Section 8-24-102 (k), T.C.A. $ 129,198 $ 400,000 Hartford Fire Insurance County Clerk Section 8-24-102 (k), T.C.A. $ 117,453 $ 110,000 Hartford Fire Insurance County Mayor Section 8-24-102, T.C.A. $ 170,353 $ 100,000 Hartford Fire Insurance Criminal and Fourth Circuit Court Clerk Section 8-24-102 (k), T.C.A. $ 129,198 $ 250,000 Hartford Fire Insurance Law Director Section 3.08, Knox County Charter $ 170,352 $ -

Register of Deeds Section 8-24-102 (k), T.C.A. $ 117,453 $ 100,000 Hartford Fire Insurance Sheriff Section 8-24-102 (j), T.C.A. $ 148,578 $ 100,000 Hartford Fire Insurance Trustee Section 8-24-102 (k), T.C.A. $ 117,453 $ 17,431,456 Hartford Fire Insurance 222

Component Unit -

Board of Education

DISCRETELY PRESENTED COMPONENT UNIT KNOX COUNTY BOARD OF EDUCATION This section presents combining and individual fund financial statements for the Knox County Board of Education (the Board), a discretely presented component unit. The Board uses a general fund, a capital projects fund, three special revenue funds, a pension trust fund, and an agency fund. This section also includes the Statement of Net Position and Statement of Activities for the Board and its discretely presented component unit, the Great Schools Partnership.

MAJOR FUNDS GENERAL FUND General Purpose School Fund: This fund is used to account for general operations of the Board. Major funding is provided through local tax levies and state education funds.

CAPITAL PROJECTS FUND School Construction Fund: This fund is used to account for building construction and renovations of the Board.

NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS School Federal Projects Fund: This fund is used to account for restricted federal revenues that must be expended on specific education programs.

School General Projects Fund: This fund is used to account for state, local and federal pass-through revenues which must be expended on specific education programs.

Central Cafeteria Fund: This fund is used to account for the cafeteria operations in each of the individual schools. The primary sources of funding are federal and state revenues for the school lunch program and sales to students and adults.

FIDUCIARY FUND Pension Trust Fund - Teachers Plan: This fund is used to account for the accumulation of resources for pension benefit payments to qualified employees covered under the Boards defined benefit plan for certificated teachers.

AGENCY FUND School Activity Fund: This fund accounts for the activity related to individual public school funds held in an agency capacity since these funds legally belong to students.

Knox County Board of Education Statement of Net Position June 30, 2016 Board of Education Component Unit Total -- Great Total Governmental Schools Component Activities Partnership Unit Assets Cash and Cash Equivalents $ 52,222,469 $ 6,533,340 $ 58,755,809 Investments - 5,910,224 5,910,224 Accounts Receivable 36,718,096 730,263 37,448,359 Local Taxes Receivable, net 104,938,567 - 104,938,567 Due from Primary Government 148,026 - 148,026 Inventories 1,878,020 - 1,878,020 Prepaid Items 644,118 9,321 653,439 Net Pension Asset 280,487 - 280,487 Capital Assets:

Land and Construction in Process 35,179,976 - 35,179,976 Other Capital Assets, Net of Accumulated Depreciation 362,292,888 82,457 362,375,345 Total Assets 594,302,647 13,265,605 607,568,252 Deferred Outflows of Resources Deferred Outflows Related to Pensions 77,584,138 - 77,584,138 Liabilities Accounts Payable 55,527,323 419,438 55,946,761 Due to Knox County Primary Government 13,685,410 - 13,685,410 Unearned Revenue 968,578 - 968,578 Self-insurance Liability 3,686,570 - 3,686,570 Net Pension Liability 15,187,485 - 15,187,485 Other Long-term Obligations:

Due in Less than One Year 2,634,719 - 2,634,719 Due in More than One Year 4,693,570 10,655,000 15,348,570 Total Liabilities 96,383,655 11,074,438 107,458,093 Deferred Inflows of Resources Deferred Inflows Related to Pensions 102,884,581 - 102,884,581 Deferred Inflows of Property Taxes 101,164,836 - 101,164,836 Total Deferred Outflows of Resources 204,049,417 - 204,049,417 Net Position (Deficit)

Investment in Capital Assets 397,472,864 82,457 397,555,321 Restricted for:

Education Purposes 8,288,339 188,607 8,476,946 Unrestricted (Deficit) (34,307,490) 1,920,103 (32,387,387)

Total Net Position $ 371,453,713 $ 2,191,167 $ 373,644,880 223

Knox County Board of Education Statement of Activities For the Year Ended June 30, 2016 Program Revenues Net (Expense) Revenue and Changes in Net Position Operating Capital Board of Education Component Unit Total Charges for Grants and Grants and Governmental The Component Functions/Programs Expenses Services Contributions Contributions Activities Partnership Unit Knox County Board of Education:

Governmental activities:

Education $ 507,146,759 $ 18,407,724 $ 67,912,105 $ - $ (420,826,930) $ (420,826,930)

Education - Payment to Primary Government 17,117,442 - - - (17,117,442) (17,117,442)

Total primary government $ 524,264,201 $ 18,407,724 $ 67,912,105 $ - (437,944,372) (437,944,372)

Component unit:

Great Schools Partnership $ 4,941,466 $ - $ 3,912,828 $ - $ (1,028,638) (1,028,638)

Great Schools Partnership -

Payment to Knox County Board of Education 951,982 - - - (951,982) (951,982)

Total component unit $ 5,893,448 $ - $ 3,912,828 $ - (1,980,620) (1,980,620)

General Revenues:

Property Taxes 98,932,121 - 98,932,121 Sales Taxes 144,321,391 - 144,321,391 Wheel Taxes 1,600,726 - 1,600,726 Other Local Taxes 1,082,452 - 1,082,452 Interest Income 119,620 258,865 378,485 Miscellaneous 82,267 6,625 88,892 State of Tennessee Basic Education Program 183,467,000 - 183,467,000 Payments from Knox County Primary Government 26,437,000 2,501,874 28,938,874 Intergovernmental Revenues 2,309,611 - 2,309,611 Payments from Component Unit 951,982 - 951,982 Total General Revenues 459,304,170 2,767,364 462,071,534 Change in Net Position 21,359,798 786,744 22,146,542 Net Position, July 1 350,093,915 1,404,423 351,498,338 Net Position, June 30 $ 371,453,713 $ 2,191,167 $ 373,644,880 224

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit Knox County Board of Education Balance Sheet Governmental Funds June 30, 2016 School General Construction Nonmajor Total Purpose Capital Governmental Governmental School Projects Funds Funds ASSETS Cash and Cash Equivalents $ 42,507,804 $ - $ 9,714,665 $ 52,222,469 Receivables (Net of Allowance for Uncollectibles):

Accounts 27,254,673 3,367 9,460,056 36,718,096 Local Taxes 104,938,567 - - 104,938,567 Due from Other Funds 14,534,599 - 1,351,624 15,886,223 Due from Primary Government 148,026 - - 148,026 Inventories 1,044,579 - 833,441 1,878,020 Prepaid Items 588,679 - 55,439 644,118 TOTAL ASSETS $ 191,016,927 $ 3,367 $ 21,415,225 $ 212,435,519 LIABILITIES Accounts Payable and Accrued Liabilities $ 51,948,247 $ 1,540,829 $ 2,038,247 $ 55,527,323 Due to Other Funds 876,418 8,180,591 6,829,214 15,886,223 Due to Primary Government 13,635,696 1,351 48,363 13,685,410 Unearned Revenue - - 968,578 968,578 TOTAL LIABILITIES 66,460,361 9,722,771 9,884,402 86,067,534 DEFERRED INFLOWS OF RESOURCES Deferred Property Taxes and Other Receivable 104,201,781 - - 104,201,781 FUND BALANCES (DEFICIT)

Nonspendable 1,633,258 - 888,880 2,522,138 Restricted - - 8,288,339 8,288,339 Committed - - 2,365,587 2,365,587 Assigned 396,527 - - 396,527 Unassigned 18,325,000 (9,719,404) (11,983) 8,593,613 TOTAL FUND BALANCES (DEFICIT) 20,354,785 (9,719,404) 11,530,823 22,166,204 TOTAL LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES $ 191,016,927 $ 3,367 $ 21,415,225 $ 212,435,519 225

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit Knox County Board of Education Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2016 Amounts reported for governmental activities in the statement of net position are different because:

Ending Fund Balance - Governmental Funds $ 22,166,204 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 397,472,864 The net pension asset is not available to pay for current-period expenditures and, therefore, is not reported as an asset in the fund financial statements. 280,487 Deferred outflows related to pensions ($77,584,138) increase the amount of net position reported in the statement of net position, but are not reported as assets in the funds. Similarly, deferred inflows related to pensions ($102,884,581) decrease the amount of net position reported in the statements of net position, but are not reported as liabilities in the funds. (25,300,443)

Certain revenues will be collected after year-end but not within the period considered available to pay current period expenditures. Therefore, these amounts were deferred in the fund financial statements but have been recognized under the accrual basis. 3,036,945 Long-term liabilities, consisting of compensated absences ($2,657,906), capital lease obligation

($4,670,383), self-insurance liability ($3,686,570), and net pension liability ($15,187,485), are not due and payable in the current period and therefore are not reported in the funds. (26,202,344)

Net Position of Governmental Activities $ 371,453,713 226

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit Knox County Board of Education Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2016 School General Construction Nonmajor Total Purpose Capital Governmental Governmental School Projects Funds Funds Revenues Property Taxes $ 99,237,175 $ - $ - $ 99,237,175 Local Option Sales Taxes 144,321,391 - - 144,321,391 Wheel Tax 1,600,726 - - 1,600,726 Other Local Taxes 1,082,452 - - 1,082,452 Licenses and Permits 35,872 - 1,805 37,677 Charges for Current Services 453,501 - 6,426,245 6,879,746 Other Local Revenues 2,635,837 9,037 10,574,426 13,219,300 State of Tennessee 187,133,432 - 3,256,869 190,390,301 Federal Government 528,049 - 57,086,072 57,614,121 Other Governments and Citizen Groups 95,185 - 4,032,069 4,127,254 Interest Earned - 29,928 - 29,928 Payments from Primary Government 7,052,000 19,385,000 - 26,437,000 Payment from Component Unit - - 951,982 951,982 Total Revenues 444,175,620 19,423,965 82,329,468 545,929,053 Expenditures Current:

Education 419,378,983 - 86,955,431 506,334,414 Capital Outlay - 21,557,739 - 21,557,739 Payments to Primary Government 13,320,112 - - 13,320,112 Total Expenditures 432,699,095 21,557,739 86,955,431 541,212,265 Excess (Deficiency) of Revenues Over (Under) Expenditures 11,476,525 (2,133,774) (4,625,963) 4,716,788 Other Financing Sources (Uses)

Transfers from Other Funds 1,161,977 - 8,888,787 10,050,764 Transfers to Other Funds (8,307,724) - (1,743,040) (10,050,764)

Total Other Financing Sources (Uses) (7,145,747) - 7,145,747 -

Net Change in Fund Balances 4,330,778 (2,133,774) 2,519,784 4,716,788 Fund Balances (Deficit), July 1 16,024,007 (7,585,630) 9,011,039 17,449,416 Fund Balances (Deficit), June 30 $ 20,354,785 $ (9,719,404) $ 11,530,823 $ 22,166,204 227

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit Knox County Board of Education Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2016 Amounts reported for governmental activities in the statement of activities are different because:

Net Change in Fund Balances - Total Governmental Funds $ 4,716,788 Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation

($23,503,406) exceeded capital outlays ($18,428,862) in the current period. (5,074,544)

Certain revenues will be collected after year-end but not within the period considered available to pay current period expenditures. Therefore, these amounts were recognized as revenues in the statement of activities but were not reported as revenues in the fund financial statements. 3,036,945 Amounts reported as fund revenues that met the criteria for revenue recognition under the full accrual method of accounting in the preceding fiscal year have been excluded from the current year statement of activities. (3,341,999)

The increase in the self-insurance liability of $15,986, the decrease in the net pension asset of $735,526, the increase in the net pension liability of $6,256,308, and the increase in deferred inflows of resources related to pensions of $19,171,571 resulted in additional expenses, whereas the increase in deferred outflows related to pensions of $47,731,835, the reduction of the compensated absences liability of $237,058 and the reduction of the capital lease liability of $233,106 resulted in the reduction of expenses. These amounts do not require the use of current financial resources and, therefore, are not reflected in the expenditures of governmental funds. 22,022,608 Change in Net Position of Governmental Activities $ 21,359,798 228

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education General Fund - General Purpose School Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 42,507,804 $ 26,168,987 Receivables (Net of Allowance for Uncollectibles):

Accounts 27,254,673 26,972,196 Local Taxes 104,938,567 103,807,637 Due from Primary Government 148,026 112,997 Due from Other Funds 14,534,599 23,643,461 Prepaid Items 588,679 1,597,267 Inventories 1,044,579 821,366 TOTAL ASSETS $ 191,016,927 $ 183,123,911 LIABILITIES Accounts Payable and Accrued Liabilities $ 51,948,247 $ 49,721,666 Due to Other Funds 876,418 3,736,875 Due to Primary Government 13,635,696 10,526,947 TOTAL LIABILITIES 66,460,361 63,985,488 DEFERRED INFLOWS OF RESOURCES Deferred Property Taxes and Other Receivable 104,201,781 103,114,416 FUND BALANCES Nonspendable 1,633,258 2,418,633 Assigned 396,527 240,628 Unassigned 18,325,000 13,364,746 TOTAL FUND BALANCES 20,354,785 16,024,007 TOTAL LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES $ 191,016,927 $ 183,123,911 229

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education General Fund - General Purpose School Comparative Statements of Revenues, Expenditures and Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Property Taxes $ 99,237,175 $ 98,004,247 Local Option Sales Taxes 144,321,391 136,469,187 Wheel Tax 1,600,726 1,607,094 Other Local Taxes 1,082,452 1,033,373 Licenses and Permits 35,872 31,435 Charges for Current Services 453,501 549,415 Other Local Revenues 2,635,837 1,662,577 State of Tennessee 187,133,432 178,609,730 Federal Government 528,049 546,301 Other Governments and Citizen Groups 95,185 300 Payment from Primary Government 7,052,000 4,052,000 Total Revenues 444,175,620 422,565,659 Expenditures Current:

Education 419,378,983 411,153,191 Payments to Primary Government 13,320,112 10,000,000 Total Expenditures 432,699,095 421,153,191 Excess of Revenues Over Expenditures 11,476,525 1,412,468 Other Financing Sources (Uses)

Transfers from Other Funds 1,161,977 745,008 Transfers to Other Funds (8,307,724) (4,711,603)

Total Other Financing Sources (Uses) (7,145,747) (3,966,595)

Net Change in Fund Balances 4,330,778 (2,554,127)

Fund Balances, July 1 16,024,007 18,578,134 Fund Balances, June 30 $ 20,354,785 $ 16,024,007 230

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education General Fund - General Purpose School Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues Property Taxes $ 100,024,000 $ 100,024,000 $ 99,237,175 $ (786,825) $ 98,968,000 $ 98,004,247 $ (963,753)

Local Option Sales Taxes 137,970,000 143,329,000 144,321,391 992,391 130,788,000 136,469,187 5,681,187 Wheel Tax 1,525,000 1,525,000 1,600,726 75,726 1,525,000 1,607,094 82,094 Other Local Taxes 1,090,000 1,090,000 1,082,452 (7,548) 1,090,000 1,033,373 (56,627)

Licenses and Permits 30,000 30,000 35,872 5,872 36,000 31,435 (4,565)

Charges for Current Services 700,000 700,000 453,501 (246,499) 695,000 549,415 (145,585)

Other Local Revenues 1,407,000 1,407,000 2,635,837 1,228,837 1,587,000 1,662,577 75,577 State of Tennessee 186,267,000 186,267,000 187,133,432 866,432 180,069,000 178,609,730 (1,459,270)

Federal Government 475,000 475,000 528,049 53,049 475,000 546,301 71,301 Other Governments and Citizen Groups - - 95,185 95,185 - 300 300 Payments from Primary Government 7,052,000 7,052,000 7,052,000 - 4,052,000 4,052,000 -

Total Revenues 436,540,000 441,899,000 444,175,620 2,276,620 419,285,000 422,565,659 3,280,659 Expenditures Current:

Education:

Personal Services 280,857,509 285,315,479 285,265,390 50,089 275,031,753 274,932,297 99,456 Employee Benefits 75,084,367 75,166,397 75,165,172 1,225 76,678,145 76,641,206 36,939 Contracted Services 26,220,564 26,397,747 25,489,543 908,204 26,285,623 26,055,680 229,943 Supplies and Materials 23,321,129 23,414,569 22,273,648 1,140,921 23,510,863 23,399,295 111,568 Other Charges 8,232,816 11,134,150 10,797,782 336,368 9,362,690 9,345,750 16,940 Capital Outlay 436,467 436,467 387,448 49,019 779,234 778,963 271 Payments to Primary Government 13,022,088 13,022,088 13,320,112 (298,024) 10,019,623 10,000,000 19,623 Total Expenditures 427,174,940 434,886,897 432,699,095 2,187,802 421,667,931 421,153,191 514,740 Excess (Deficiency) of Revenues Over (Under) Expenditures 9,365,060 7,012,103 11,476,525 4,464,422 (2,382,931) 1,412,468 3,795,399 Other Financing Sources (Uses)

Transfers from Other Funds 1,460,000 1,460,000 1,161,977 (298,023) 1,330,000 745,008 (584,992)

Transfers to Other Funds (10,825,060) (8,699,355) (8,307,724) 391,631 (4,711,603) (4,711,603) -

Total Other Financing Sources (Uses) (9,365,060) (7,239,355) (7,145,747) 93,608 (3,381,603) (3,966,595) (584,992)

Net Change in Fund Balances - (227,252) 4,330,778 4,558,030 (5,764,534) (2,554,127) 3,210,407 Fund Balances, July 1 16,024,007 16,024,007 16,024,007 - 18,578,134 18,578,134 -

Fund Balances, June 30 $ 16,024,007 $ 15,796,755 $ 20,354,785 $ 4,558,030 $ 12,813,600 $ 16,024,007 $ 3,210,407 231

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education School Construction Capital Projects Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Receivables (Net of Allowance for Uncollectibles):

Accounts $ 3,367 $ -

TOTAL ASSETS $ 3,367 $ -

LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 1,540,829 $ 2,244,679 Due to Other Funds 8,180,591 5,340,951 Due to Primary Government 1,351 -

TOTAL LIABILITIES 9,722,771 7,585,630 Fund Balances (Deficit):

Unassigned (9,719,404) (7,585,630)

TOTAL FUND BALANCES (DEFICIT) (9,719,404) (7,585,630)

TOTAL LIABILITIES AND FUND BALANCES $ 3,367 $ -

232

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education School Construction Capital Projects Fund Comparative Statements of Revenues, Expenditures and Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Other Local Revenues $ 9,037 $ -

Interest Earned 29,928 25,092 Debt Proceeds Received from Primary Government 19,385,000 24,271,315 Total Revenues 19,423,965 24,296,407 Expenditures Capital Projects 21,557,739 25,734,552 Total Expenditures 21,557,739 25,734,552 Deficiency of Revenues Under Expenditures (2,133,774) (1,438,145)

Net Change in Fund Balance (2,133,774) (1,438,145)

Fund Balances (Deficit), July 1 (7,585,630) (6,147,485)

Fund Balances (Deficit), June 30 $ (9,719,404) $ (7,585,630) 233

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education School Construction Capital Projects Fund Schedule of Construction Project Expenditures -

Budget and Actual For the year ended June 30, 2016 Expenditures Project Prior Budget Years Current Total Available Expenditures Capital Projects:

School Renovation:

Physical Plant Upgrades $ 11,219,078 $ - $ 3,913,132 $ 3,913,132 $ 7,305,946 Hardin Valley High School 50,000,000 49,982,267 - 49,982,267 17,733 Pond Gap Elementary 7,550,000 32,614 523,805 556,419 6,993,581 Shannondale Elementary 4,015,000 3,743,907 30,139 3,774,046 240,954 Energy Management Project IIIB 13,182,024 13,107,164 - 13,107,164 74,860 CTE Magnet High 3,785,000 3,415,214 195,581 3,610,795 174,205 Energy Management Project IIIC 14,872,404 14,939,037 95,888 15,034,925 (162,521)

Mooreland Heights Addition/Renovation 1,300,000 510,368 785,586 1,295,954 4,046 Security Upgrades 5,875,000 2,456,366 2,201,585 4,657,951 1,217,049 Tech Upgrades Systemwide 535,000 - 145,746 145,746 389,254 HVAC Upgrades 3,390,000 985,681 1,797,825 2,783,506 606,494 Roofing Upgrades 2,610,000 285,623 415,583 701,206 1,908,794 Rule Warehouse Construction 132,231 123,741 551 124,292 7,939 Land Acquisition 400,000 - 339,802 339,802 60,198 BEP Growth Mod Class Relocation 610,241 - 103,115 103,115 507,126 Drive Parking Upgrades 500,000 - 95,980 95,980 404,020 Hardin Valley Middle School 1,500,000 - 967,126 967,126 532,874 Gibbs Middle School 1,500,000 - 1,123,608 1,123,608 376,392 Karns High Remedial Upgrades 750,000 232,200 499,974 732,174 17,826 Ameresco Solar Project 9,291,315 - 8,322,713 8,322,713 968,602 Total Capital Projects: $ 133,017,293 $ 89,814,182 $ 21,557,739 $ 111,371,921 $ 21,645,372 234

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit Knox County Board of Education Combining Balance Sheet Nonmajor Governmental Funds June 30, 2016 School School Total Nonmajor Federal General Central Governmental Projects Projects Cafeteria Funds ASSETS Cash and Cash Equivalents $ - $ 1,820,031 $ 7,894,634 $ 9,714,665 Receivables (Net of Allowance for Uncollectibles):

Accounts 6,665,776 947,730 1,846,550 9,460,056 Due from Other Funds 81,533 1,270,091 - 1,351,624 Inventories - 633,136 200,305 833,441 Prepaid Items 11,983 43,456 - 55,439 TOTAL ASSETS $ 6,759,292 $ 4,714,444 $ 9,941,489 $ 21,415,225 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 581,933 $ 313,300 $ 1,143,014 $ 2,038,247 Due to Other Funds 6,136,347 672,446 20,421 6,829,214 Due to Primary Government 41,012 7,351 - 48,363 Unearned Revenue - 679,168 289,410 968,578 TOTAL LIABILITIES 6,759,292 1,672,265 1,452,845 9,884,402 Fund Balances:

Nonspendable 11,983 676,592 200,305 888,880 Restricted - - 8,288,339 8,288,339 Committed - 2,365,587 - 2,365,587 Unassigned (11,983) - - (11,983)

TOTAL FUND BALANCES - 3,042,179 8,488,644 11,530,823 TOTAL LIABILITIES AND FUND BALANCES $ 6,759,292 $ 4,714,444 $ 9,941,489 $ 21,415,225 235

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit Knox County Board of Education Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2016 School School Total Nonmajor Federal General Central Governmental Projects Projects Cafeteria Funds Revenues Licenses and Permits $ - $ 1,805 $ - $ 1,805 Charges for Current Services - 965,175 5,461,070 6,426,245 Other Local Revenues - 9,946,534 627,892 10,574,426 State of Tennessee 86,737 2,920,445 249,687 3,256,869 Federal Government 35,973,298 - 21,112,774 57,086,072 Other Governments and Citizen Groups 3,302,928 729,141 - 4,032,069 Payment from Component Unit - 951,982 - 951,982 Total Revenues 39,362,963 15,515,082 27,451,423 82,329,468 Expenditures Education 38,821,777 21,938,863 26,194,791 86,955,431 Total Expenditures 38,821,777 21,938,863 26,194,791 86,955,431 Excess (Deficiency) of Revenues Over (Under) Expenditures 541,186 (6,423,781) 1,256,632 (4,625,963)

Other Financing Sources (Uses)

Transfers from Other Funds 39,878 8,848,909 - 8,888,787 Transfers to Other Funds (593,442) (274,590) (875,008) (1,743,040)

Total Other Financing Sources (Uses) (553,564) 8,574,319 (875,008) 7,145,747 Net Change in Fund Balances (12,378) 2,150,538 381,624 2,519,784 Fund Balances, July 1 12,378 891,641 8,107,020 9,011,039 Fund Balances, June 30 $ - $ 3,042,179 $ 8,488,644 $ 11,530,823 236

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education School Federal Projects Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Receivables (Net of Allowance for Uncollectibles):

Accounts $ 6,665,776 $ 14,227,417 Due From Other Funds 81,533 57,990 Prepaid Items 11,983 25,577 TOTAL ASSETS $ 6,759,292 $ 14,310,984 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 581,933 $ 1,034,955 Due to Other Funds 6,136,347 13,131,487 Due to Primary Government 41,012 38,525 Unearned Revenue - 93,639 TOTAL LIABILITIES 6,759,292 14,298,606 Fund Balances:

Nonspendable 11,983 25,577 Unassigned (11,983) (13,199)

TOTAL FUND BALANCES - 12,378 TOTAL LIABILITIES AND FUND BALANCES $ 6,759,292 $ 14,310,984 237

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education School Federal Projects Fund Comparative Statements of Revenues, Expenditures and Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues State of Tennessee $ 86,737 $ 115,489 Federal Government 35,973,298 34,912,984 Other Governments and Citizen Groups 3,302,928 4,719,294 Total Revenues 39,362,963 39,747,767 Expenditures Current:

Education 38,821,777 39,246,578 Total Expenditures 38,821,777 39,246,578 Excess of Revenues Over Expenditures 541,186 501,189 Other Financing Sources (Uses)

Transfers from Other Funds 39,878 62,089 Transfers to Other Funds (593,442) (563,278)

Total Other Financing Uses (553,564) (501,189)

Net Change in Fund Balances (12,378) -

Fund Balances, July 1 12,378 12,378 Fund Balances, June 30 $ - $ 12,378 238

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education School Federal Projects Fund Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues State of Tennessee $ - $ 124,174 $ 86,737 $ (37,437) $ 144,258 $ 115,489 $ (28,769)

Federal Government - 41,663,750 35,973,298 (5,690,452) 42,329,984 34,912,984 (7,417,000)

Other Governments and Citizen Groups - 4,313,526 3,302,928 (1,010,598) 7,318,775 4,719,294 (2,599,481)

Total Revenues - 46,101,450 39,362,963 (6,738,487) 49,793,017 39,747,767 (10,045,250)

Expenditures Current:

Education:

Personal Services - 25,888,691 24,293,641 1,595,050 30,520,839 25,495,508 5,025,331 Employee Benefits - 6,527,401 5,887,918 639,483 7,317,784 6,050,059 1,267,725 Contracted Services - 1,967,404 1,389,122 578,282 2,601,311 1,958,351 642,960 Supplies and Materials - 2,508,474 1,970,098 538,376 3,105,150 1,646,403 1,458,747 Other Charges - 4,361,388 2,047,084 2,314,304 1,987,688 1,193,036 794,652 Capital Outlay - 4,341,755 3,233,914 1,107,841 3,633,881 2,903,221 730,660 Total Expenditures - 45,595,113 38,821,777 6,773,336 49,166,653 39,246,578 9,920,075 Excess (Deficiency) of Revenues Over (Under) Expenditures - 506,337 541,186 34,849 626,364 501,189 (125,175)

Other Financing Sources (Uses)

Transfer from Other Funds - 36,734 39,878 3,144 38,056 62,089 24,033 Transfer to Other Funds - (543,071) (593,442) (50,371) (664,420) (563,278) 101,142 Total Other Financing Sources (Uses) - (506,337) (553,564) (47,227) (626,364) (501,189) 125,175 Net Change in Fund Balances - - (12,378) (12,378) - - -

Fund Balances, July 1 12,378 12,378 12,378 - 12,378 12,378 -

Fund Balances, June 30 $ 12,378 $ 12,378 $ - $ (12,378) $ 12,378 $ 12,378 $ -

Note - Budgets are adopted throughout the year as grants are approved. See Note II. A.

239

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education School General Projects Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 1,820,031 $ 3,635,062 Receivables (Net of Allowance for Uncollectibles):

Accounts 947,730 1,545,332 Due from Other Funds 1,270,091 4,417,496 Prepaid Items 43,456 999 Inventories 633,136 761,404 TOTAL ASSETS $ 4,714,444 $ 10,360,293 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 313,300 $ 276,465 Due to Primary Government 7,351 8,377 Due to Other Funds 672,446 5,909,634 Unearned Revenue 679,168 3,274,176 TOTAL LIABILITIES 1,672,265 9,468,652 Fund Balances:

Nonspendable 676,592 762,403 Committed 2,365,587 129,238 TOTAL FUND BALANCES 3,042,179 891,641 TOTAL LIABILITIES AND FUND BALANCES $ 4,714,444 $ 10,360,293 240

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education School General Projects Fund Comparative Statements of Revenues, Expenditures and Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Licenses and Permits $ 1,805 $ 2,333 Charges for Current Services 965,175 707,175 Other Local Revenues 9,946,534 6,060,698 State of Tennessee 2,920,445 4,311,532 Other Governments and Citizens Groups 729,141 992,790 Payments from Component Unit 951,982 2,162,546 Total Revenues 15,515,082 14,237,074 Expenditures Current:

Education 21,938,863 21,997,417 Deficiency of Revenues Under Expenditures (6,423,781) (7,760,343)

Other Financing Sources (Uses)

Transfers from Other Funds 8,848,909 5,212,792 Transfers to Other Funds (274,590) -

Total Other Financing Sources 8,574,319 5,212,792 Net Change in Fund Balances 2,150,538 (2,547,551)

Fund Balances, July 1 891,641 3,439,192 Fund Balances, June 30 $ 3,042,179 $ 891,641 241

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education School General Projects Fund Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues Licenses and Permits $ - $ 2,300 $ 1,805 $ (495) $ - $ 2,333 $ 2,333 Charges for Current Services - 904,027 965,175 61,148 945,966 707,175 (238,791)

Other Local Revenues - 10,880,858 9,946,534 (934,324) 10,560,067 6,060,698 (4,499,369)

State of Tennessee - 3,735,477 2,920,445 (815,032) 4,629,116 4,311,532 (317,584)

Payments from Component Unit - - 951,982 951,982 1,376,368 2,162,546 786,178 Payments from Primary Government - - - - 2,039,427 - (2,039,427)

Other Governments and Citizens Groups - 1,791,522 729,141 (1,062,381) 1,231,823 992,790 (239,033)

Total Revenues - 17,314,184 15,515,082 (1,799,102) 20,782,767 14,237,074 (6,545,693)

Expenditures Current:

Education:

Personal Services - 7,302,068 6,733,663 568,405 8,181,503 6,330,370 1,851,133 Employee Benefits - 1,761,283 1,612,044 149,239 1,917,267 1,585,985 331,282 Contracted Services - 4,343,024 3,823,930 519,094 2,194,053 1,503,862 690,191 Supplies and Materials - 11,464,809 9,521,161 1,943,648 14,121,496 12,129,677 1,991,819 Other Charges - 316,266 227,107 89,159 583,699 333,594 250,105 Capital Outlay - 1,166,545 20,958 1,145,587 1,258,330 113,929 1,144,401 Total Expenditures - 26,353,995 21,938,863 4,415,132 28,256,348 21,997,417 6,258,931 Excess (Deficiency) of Revenues Over (Under) Expenditures - (9,039,811) (6,423,781) 2,616,030 (7,473,581) (7,760,343) (286,762)

Other Financing Sources (Uses)

Transfers from Other Funds - 8,926,442 8,848,909 (77,533) 7,473,581 5,212,792 (2,260,789)

Transfers to Other Funds - - (274,590) (274,590) - - -

Total Other Financing Sources (Uses) - 8,926,442 8,574,319 (352,123) 7,473,581 5,212,792 (2,260,789)

Net Change in Fund Balances - (113,369) 2,150,538 2,263,907 - (2,547,551) (2,547,551)

Fund Balances, July 1 891,641 891,641 891,641 - 3,439,192 3,439,192 -

Fund Balances, June 30 $ 891,641 $ 778,272 $ 3,042,179 $ 2,263,907 $ 3,439,192 $ 891,641 $ (2,547,551)

Note - Budgets are adopted throughout the year as grants are approved. See Note II. A.

242

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education Central Cafeteria Fund Comparative Balance Sheets June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 7,894,634 $ 6,487,022 Receivables (Net of Allowance for Uncollectibles):

Accounts 1,846,550 1,888,138 Inventories 200,305 342,006 TOTAL ASSETS $ 9,941,489 $ 8,717,166 LIABILITIES AND FUND BALANCES Liabilities:

Accounts Payable and Accrued Liabilities $ 1,143,014 $ 316,882 Due to Other Funds 20,421 -

Unearned Revenue 289,410 293,264 TOTAL LIABILITIES 1,452,845 610,146 Fund Balances:

Nonspendable 200,305 342,006 Restricted 8,288,339 7,765,014 TOTAL FUND BALANCES 8,488,644 8,107,020 TOTAL LIABILITIES AND FUND BALANCES $ 9,941,489 $ 8,717,166 243

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education Central Cafeteria Fund Comparative Statements of Revenues, Expenditures and Changes in Fund Balances For the Years Ended June 30, 2016 and 2015 2016 2015 Revenues Charges for Current Services $ 5,461,070 $ 5,549,635 Other Local Revenues 627,892 894,004 State of Tennessee 249,687 236,837 Federal Government 21,112,774 19,557,136 Total Revenues 27,451,423 26,237,612 Expenditures Current:

Education:

Food Service 26,194,791 25,319,476 Excess of Revenues Over Expenditures 1,256,632 918,136 Other Financing Uses Transfers to Other Funds (875,008) (745,008)

Net Change in Fund Balances 381,624 173,128 Fund Balances, July 1 8,107,020 7,933,892 Fund Balances, June 30 $ 8,488,644 $ 8,107,020 244

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education Central Cafeteria Fund Comparative Schedules of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (GAAP Basis)

For the Years Ended June 30, 2016 and 2015 2016 2015 Variance Variance Original Final Positive Final Positive Budget Budget Actual (Negative) Budget Actual (Negative)

Revenues Charges for Current Services $ 6,713,938 $ 6,713,938 $ 5,461,070 $ (1,252,868) $ 7,992,672 $ 5,549,635 $ (2,443,037)

Other Local Revenues 680,000 680,000 627,892 (52,108) 652,713 894,004 241,291 State of Tennessee 263,062 263,062 249,687 (13,375) 545,419 236,837 (308,582)

Federal Government 20,371,000 20,371,000 21,112,774 741,774 18,317,461 19,557,136 1,239,675 Total Revenues 28,028,000 28,028,000 27,451,423 (576,577) 27,508,265 26,237,612 (1,270,653)

Expenditures Current:

Education:

Food Service:

Personal Services 8,500,000 8,500,000 8,233,568 266,432 8,411,500 8,411,478 22 Employee Benefits 2,621,000 2,621,000 2,396,016 224,984 2,778,128 2,378,114 400,014 Contracted Services 1,066,000 1,066,000 717,421 348,579 1,246,031 812,541 433,490 Supplies & Materials 13,885,000 13,934,257 13,172,235 762,022 13,226,022 12,586,508 639,514 Other Charges 881,000 881,000 791,003 89,997 915,500 836,235 79,265 Capital Outlay 200,000 438,418 884,548 (446,130) 323,500 294,600 28,900 Total Expenditures 27,153,000 27,440,675 26,194,791 1,245,884 26,900,681 25,319,476 1,581,205 Excess (Deficiency) of Revenues Over (Under) Expenditures 875,000 587,325 1,256,632 669,307 607,584 918,136 310,552 Other Financing Uses Transfers to Other Funds (875,000) (875,000) (875,008) (8) (745,000) (745,008) (8)

Net Change in Fund Balances - (287,675) 381,624 669,299 (137,416) 173,128 310,544 Fund Balances, July 1 8,107,020 8,107,020 8,107,020 - 7,933,892 7,933,892 -

Fund Balances, June 30 $ 8,107,020 $ 7,819,345 $ 8,488,644 $ 669,299 $ 7,796,476 $ 8,107,020 $ 310,544 245

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit Knox County Board of Education Statement of Fiduciary Net Position Fiduciary Funds June 30, 2016 Pension Agency Trust Funds Funds ASSETS Cash and Cash Equivalents $ 88,887 $ 10,230,671 Investments, at Fair Value:

Mutual Funds 3,024,464 -

Collective Investment Trusts 47,072,225 -

Corporate Bonds 1,005,011 -

U.S. Treasuries 4,082,611 -

Federal Agency Debt Securities 221,057 -

Federal Agency Mortgage Backed Securities 2,648,578 -

Total Investments 58,053,946 -

Receivables:

Employee Contributions 247 -

Accrued Interest and Dividends 38,234 -

Other Assets - 40,575 Total Receivables 38,481 40,575 Total Assets 58,181,314 10,271,246 LIABILITIES Accounts Payable and Accrued Liabilities - 28,411 Accounts Payable - Administrative Expenses 77,796 -

Accounts Payable - Investments Purchased 55,776 -

Liability for Student Activities - 10,242,835 Total Liabilities 133,572 $ 10,271,246 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS $ 58,047,742 246

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education Comparative Statements of Fiduciary Net Position Pension Trust Fund - Teacher's Plan (Defined Benefit Plan)

June 30, 2016 and 2015 2016 2015 ASSETS Cash and Cash Equivalents $ 88,887 $ 1,986,433 Investments, at Fair Value:

Mutual Funds 3,024,464 3,156,170 Collective Investment Trusts 47,072,225 51,562,975 Corporate Bonds 1,005,011 792,719 U.S. Treasuries 4,082,611 3,967,724 Federal Agency Debt Securities 221,057 257,737 Federal Agency Mortgage Backed Securities 2,648,578 2,751,202 Total Investments 58,053,946 62,488,527 Receivables:

Employee Contributions 247 789 Accrued Interest and Dividends 38,234 38,467 Total Receivables 38,481 39,256 Total Assets 58,181,314 64,514,216 LIABILITIES Accounts Payable - Administrative Expenses 77,796 89,552 Accounts Payable - Investments Purchased 55,776 -

Total Liabilities 133,572 89,552 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS $ 58,047,742 $ 64,424,664 247

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education Comparative Statements of Changes in Fiduciary Net Position Pension Trust Fund - Teacher's Plan (Defined Benefit Plan)

For the Years Ended June 30, 2016 and 2015 2016 2015 ADDITIONS Contributions:

Employer $ 832,401 $ 1,134,241 Employee 3,718 9,276 Total Contributions 836,119 1,143,517 Investment Income (Loss):

Interest and Dividend Income 387,093 411,072 Net Appreciation (Depreciation) in Fair Value of Investments (483,914) 1,595,724 Total Investment Income (Loss) (96,821) 2,006,796 Less Investment Expense (339,930) (274,597)

Net Investment Income (Loss) (436,751) 1,732,199 Total Additions 399,368 2,875,716 DEDUCTIONS Benefits and Refunds 6,654,509 6,617,276 Administrative Expenses 121,781 274,678 Total Deductions 6,776,290 6,891,954 CHANGE IN NET POSITION (6,376,922) (4,016,238)

NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, BEGINNING OF YEAR 64,424,664 68,440,902 NET POSITION - RESTRICTED FOR PENSION AND RETIREMENT BENEFITS, END OF YEAR $ 58,047,742 $ 64,424,664 248

KNOX COUNTY, TENNESSEE Discretely Presented Component Unit -

Knox County Board of Education Internal School Funds Comparative Statements of Changes in Fiduciary Assets and Liabilities For the Years Ended June 30, 2016 and 2015 2016 2015 Assets and Liabilities, July 1 $ 8,886,223 $ 8,627,720 Additions 21,553,248 19,878,672 Deductions (20,196,636) (19,620,169)

Assets and Liabilities, June 30 $ 10,242,835 $ 8,886,223 249

Statistical Section STATISTICAL SECTION (Unaudited)

This part of Knox County Governments comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about Knox Countys overall financial health.

Contents Page Financial Trends 250-258 These schedules contain trend information to help the reader understand how Knox County Governments financial performance and well-being have changed over time.

Revenue Capacity 259-262 These schedules contain information to help the reader assess Knox County Governments most significant local revenue source, the property tax.

Debt Capacity 263-265 These schedules present information to help the reader assess the afford-ability of Knox County Governments current levels of outstanding debt and the governments ability to issue additional debt in the future.

Demographic and Economic Information 266-267 These schedules offer demographic and economic indicators to help the reader understand the environment within which Knox County Govern-ments financial activities take place.

Operating Information 268-270 These schedules contain service and infrastructure data to help the reader understand how the information in Knox County Governments financial report relates to the services the government provides and the activities it performs.

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year.

KNOX COUNTY, TENNESSEE Net Position by Component Last Ten Fiscal Years (accrual basis of accounting)

(Unaudited)

Restated 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Primary government Governmental activities Net investment in capital assets $ 333,733,504 $ 349,499,226 $ 298,546,888 $ 292,183,224 $ 281,020,672 $ 276,642,614 $ 290,649,727 $ 284,908,028 $ 267,497,791 $ 267,670,250 Restricted 68,165,803 33,687,672 38,289,171 27,202,060 23,180,877 30,030,542 9,075,310 15,250,562 8,583,223 9,000,894 Unrestricted (205,476,472) (244,843,510) (216,381,847) (234,271,029) (252,750,590) (243,862,381) (224,499,180) (247,035,437) (262,043,799) (259,493,264)

Total primary governmental activities net position $ 196,422,835 $ 138,343,388 $ 120,454,212 $ 85,114,255 $ 51,450,959 $ 62,810,775 $ 75,225,857 $ 53,123,153 $ 14,037,215 $ 17,177,880 Business-type activities Three Ridges Golf Course Investment in capital assets $ - $ - $ 893,709 $ 832,590 $ 718,674 $ 634,436 $ 503,880 $ 453,946 $ 568,919 $ 509,820 Unrestricted - - 286,781 304,278 301,122 215,757 99,523 73,842 18,491 2,719 Total business-type activities net position $ - $ - $ 1,180,490 $ 1,136,868 $ 1,019,796 $ 850,193 $ 603,403 $ 527,788 $ 587,410 $ 512,539 Component units Investment in capital assets $ 287,591,285 $ 308,057,666 $ 317,191,247 $ 316,329,152 $ 340,624,791 $ 356,215,731 $ 397,859,173 $ 412,116,052 $ 411,265,432 $ 407,165,376 Restricted 16,556,546 4,118,075 16,585,893 13,121,345 26,094,913 16,457,515 32,705,925 19,608,463 7,845,805 8,503,912 Unrestricted 79,856,696 58,586,611 29,308,255 44,027,622 62,159,294 103,278,242 59,856,270 51,357,504 (3,452,157) 23,021,644 Total component units activities net position $ 384,004,527 $ 370,762,352 $ 363,085,395 $ 373,478,119 $ 428,878,998 $ 475,951,488 $ 490,421,368 $ 483,082,019 $ 415,659,080 $ 438,690,932 Total reporting unit activities net position $ 580,427,362 $ 509,105,740 $ 484,720,097 $ 459,729,242 $ 481,349,753 $ 539,612,456 $ 566,250,628 $ 536,732,960 $ 430,283,705 $ 456,381,351 Note: 2012 balances have been restated to reflect prior period adjustments for the primary government and the Board of Education component unit, and to reflect the inclusion beginning in FY2013 of the Development Corporation of Knox County component unit.

Knox County implemented GASB Statement Number 68 in fiscal year 2015.

250

KNOX COUNTY, TENNESSEE Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting)

(Unaudited) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Expenses Primary government:

Governmental activities:

Finance and Administration $ 41,307,625 $ 45,573,546 $ 41,738,286 $ 42,195,745 $ 35,025,924 $ 31,753,114 $ 30,903,236 $ 30,943,555 $ 36,112,276 $ 36,885,718 Finance and Administration - payment to component unit 4,148,000 6,385,000 4,018,649 3,823,874 3,823,874 3,823,874 6,653,874 6,753,874 6,553,874 9,553,874 Administration of Justice 15,277,291 16,211,461 15,651,510 15,691,782 24,277,040 22,434,728 22,734,428 23,299,693 24,414,379 25,571,043 Public Safety 66,374,696 68,125,715 71,388,947 74,109,826 72,135,474 72,565,353 73,855,455 77,888,346 82,717,157 88,917,847 Public Safety - payment to component unit 326,200 326,200 326,200 326,200 326,200 326,200 326,200 326,200 326,200 485,002 Public Health and Welfare 40,902,596 40,356,191 38,463,931 38,366,594 33,731,246 32,546,227 32,492,041 33,693,888 33,739,935 34,280,078 Public Health and Welfare - payment to component unit 256,628 166,628 166,628 256,628 256,628 256,628 256,628 211,628 166,628 166,628 Social and Cultural Services 22,529,501 21,148,707 21,651,989 21,594,069 21,140,636 19,036,194 19,130,136 19,921,048 20,521,029 21,782,470 Agricultural and Natural Resources 425,395 461,142 433,295 413,675 380,453 365,774 435,231 519,433 470,977 490,451 Other General Government 29,449,900 13,151,278 21,017,395 16,893,864 20,252,535 24,717,611 22,832,602 23,803,616 23,802,139 28,462,563 Other General Government - payment to component unit - 675,000 600,000 600,000 625,000 Engineering & Public Works 24,647,845 22,815,377 23,605,027 24,009,373 24,045,860 21,964,447 23,555,325 25,155,488 26,515,062 26,950,361 Engineering & Public Works - payment to component unit - - 25,872 - - - - - - -

Education - payment to component unit 29,174,787 5,000,000 14,853,832 29,586,094 50,924,958 13,578,202 28,092,391 38,763,934 24,271,315 19,385,000 Debt Service - interest and fees 25,920,605 28,915,724 30,093,010 25,524,229 28,885,417 28,193,240 26,688,921 25,205,819 22,801,729 23,272,301 Debt Service - other - - - - - - - 745,863 - -

Total governmental activities 300,741,069 268,636,969 283,434,571 292,791,953 315,206,245 271,561,592 288,631,468 307,832,385 303,012,700 316,828,336 Business-type activities:

Three Ridges Golf Course - - 464,137 961,678 1,044,409 1,147,603 1,124,565 937,604 1,000,090 1,063,627 Total primary government expenses $ 300,741,069 $ 268,636,969 $ 283,898,708 $ 293,753,631 $ 316,250,654 $ 272,709,195 $ 289,756,033 $ 308,769,989 $ 304,012,790 $ 317,891,963 Component units:

Board of Education $ 429,883,031 $ 462,569,748 $ 470,348,600 $ 480,162,339 $ 481,991,842 $ 503,634,777 $ 526,960,365 $ 560,610,890 $ 525,410,160 $ 529,205,667 Nonmajor Component Units 6,600,806 6,777,287 6,986,393 6,708,481 6,656,575 6,461,195 7,194,181 7,397,708 7,538,326 9,131,983 Total component units expenses $ 436,483,837 $ 469,347,035 $ 477,334,993 $ 486,870,820 $ 488,648,417 $ 510,095,972 $ 534,154,546 $ 568,008,598 $ 532,948,486 $ 538,337,650 Total reporting unit expenses $ 737,224,906 $ 737,984,004 $ 761,233,701 $ 780,624,451 $ 804,899,071 $ 782,805,167 $ 823,910,579 $ 876,778,587 $ 836,961,276 $ 856,229,613 Note: Knox County implemented GASB Statement Number 68 in fiscal year 2015. Continued 251

KNOX COUNTY, TENNESSEE Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting)

(Unaudited) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Program Revenues Primary government:

Governmental activities:

Charges for Services:

Finance and Administration $ 20,508,747 $ 23,475,489 $ 18,291,849 $ 19,541,913 $ 19,359,362 $ 21,247,575 $ 21,290,699 $ 20,581,958 $ 20,505,947 $ 32,374,363 Administration of Justice 11,190,419 12,348,218 10,535,989 9,990,310 10,101,442 10,129,539 10,382,380 10,042,760 9,774,864 2,908,229 Public Safety 499,320 983,881 1,333,523 1,330,976 1,439,718 4,478,725 2,759,919 3,305,146 4,012,396 4,680,091 Public Health and Welfare 5,182,137 4,283,390 4,252,529 4,050,480 4,244,236 4,705,246 4,997,021 5,834,345 6,163,000 6,854,390 Social and Cultural Services 1,193,157 1,327,729 1,324,927 1,117,171 880,631 949,557 950,683 885,537 778,733 771,108 Other General Government 1,984,775 88,337 249,935 85,295 689,972 592,251 290,846 282,845 298,127 303,569 Engineering & Public Works - 20,105 214,851 652,250 436,570 758,766 883,998 267,125 122,259 142,101 Operating grants and contributions 20,535,731 15,232,355 13,162,718 16,546,478 18,111,952 13,941,943 14,465,074 15,068,332 22,712,505 21,710,980 Total governmental activities 61,094,286 57,759,504 49,366,321 53,314,873 55,263,883 56,803,602 56,020,620 56,268,048 64,367,831 69,744,831 Business-type activities:

Three Ridges Golf Course - - 462,055 918,056 927,337 978,000 877,775 861,989 798,212 788,756 Total primary government program revenues $ 61,094,286 $ 57,759,504 $ 49,828,376 $ 54,232,929 $ 56,191,220 $ 57,781,602 $ 56,898,395 $ 57,130,037 $ 65,166,043 $ 70,533,587 Component units:

Charges for Services:

Board of Education $ 13,452,161 $ 13,744,165 $ 12,545,538 $ 14,558,045 $ 16,621,446 $ 15,778,275 $ 16,681,836 $ 15,155,847 $ 14,073,126 $ 18,407,724 Nonmajor Component Units 3,562,338 5,605,505 6,215,901 6,209,957 6,132,513 6,457,347 6,499,035 6,078,468 6,035,939 6,533,341 Operating grants and contributions 174,417,041 50,968,461 55,064,528 75,166,748 82,127,060 75,304,345 70,894,629 68,863,832 71,924,758 71,824,933 Capital grants and contributions - - - - - - 747,638 883,814 - -

Total component units program revenues $ 191,431,540 $ 70,318,131 $ 73,825,967 $ 95,934,750 $ 104,881,019 $ 97,539,967 $ 94,823,138 $ 90,981,961 $ 92,033,823 $ 96,765,998 Total reporting unit program revenues $ 252,525,826 $ 128,077,635 $ 123,654,343 $ 150,167,679 $ 161,072,239 $ 155,321,569 $ 151,721,533 $ 148,111,998 $ 157,199,866 $ 167,299,585 Net (expenses)/revenues Primary government activities $ (239,646,783) $ (210,877,465) $ (234,070,332) $ (239,520,702) $ (260,059,434) $ (214,927,593) $ (232,857,638) $ (251,639,952) $ (238,846,747) $ (247,358,376)

Component units (245,052,297) (399,028,904) (403,509,026) (390,936,070) (383,767,398) (412,556,005) (439,331,408) (477,026,637) (440,914,663) (441,571,652)

Total net (expenses) revenues for reporting unit $ (484,699,080) $ (609,906,369) $ (637,579,358) $ (630,456,772) $ (643,826,832) $ (627,483,598) $ (672,189,046) $ (728,666,589) $ (679,761,410) $ (688,930,028)

Note: Knox County implemented GASB Statement Number 68 in fiscal year 2015. Continued 252

KNOX COUNTY, TENNESSEE Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting)

(Unaudited) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General Revenues and Other Changes in Net Position Primary government:

Governmental activities:

Taxes Property taxes $ 128,874,750 $ 140,608,170 $ 134,655,757 $ 142,138,781 $ 139,862,073 $ 144,007,522 $ 144,007,522 $ 145,415,011 $ 166,869,259 $ 170,481,050 Sales taxes 9,952,384 8,987,868 9,708,315 10,433,188 11,076,254 11,815,046 11,815,046 11,133,979 12,650,210 11,960,270 Lodging taxes 5,382,819 4,815,765 4,830,079 5,152,412 5,696,181 5,547,738 5,547,738 5,860,554 6,602,861 7,993,988 Business taxes 6,629,276 7,440,271 6,332,408 7,347,327 7,782,614 8,709,692 8,709,692 7,566,636 8,210,298 9,301,725 Wheel taxes 10,636,138 10,570,144 10,471,856 10,937,485 10,835,470 10,936,500 10,936,500 11,448,102 11,421,728 11,552,326 Other local taxes 3,793,818 4,317,993 4,669,629 4,620,907 2,935,940 4,942,341 4,942,341 4,970,986 5,000,245 5,102,439 Investment revenue 5,641,188 2,936,051 (1,678,577) 3,204,476 (4,260,317) 7,779,556 7,779,556 2,248,955 2,201,014 702,349 Other revenues 36,856,107 36,821,934 38,280,459 38,088,691 54,072,973 50,760,348 50,760,348 47,499,852 31,022,620 32,287,205 Contracts - other governments and citizens 419,470 851,750 294,120 1,236,916 96,628 264,452 264,452 728,102 381,842 296,117 Miscellaneous 1,122,914 11,700 517,094 3,118,883 667,645 262,735 262,735 966,103 828,323 746,701 Transfers - (1,182,572) - - - - - - (250,000) (200,000)

Total governmental activities 209,308,864 216,179,074 208,081,140 226,279,066 228,765,461 245,025,930 245,025,930 237,838,280 244,938,400 250,224,170 Business-type activities:

Transfers - 1,182,572 - - - - - - 250,000 200,000 Total primary government $ 209,308,864 $ 217,361,646 $ 208,081,140 $ 226,279,066 $ 228,765,461 $ 245,025,930 $ 245,025,930 $ 237,838,280 $ 245,188,400 $ 250,424,170 Component units:

Taxes Property taxes $ 102,342,297 $ 107,324,525 $ 106,737,074 $ 112,371,639 $ 110,866,194 $ 113,862,764 $ 113,862,764 $ 115,339,172 $ 97,227,919 $ 98,932,121 Sales taxes 125,522,010 116,296,501 114,769,928 119,973,142 128,588,400 127,612,963 127,612,963 128,518,755 136,469,187 144,321,391 Wheel taxes 1,500,030 1,490,723 1,494,272 1,525,119 1,501,397 1,515,396 1,515,396 1,561,822 1,607,094 1,600,726 Other local taxes 1,352,978 554,495 1,065,154 1,006,769 1,039,271 1,019,405 1,019,405 1,073,324 1,033,373 1,082,452 Investment revenue 1,739,023 418,377 120,512 132,360 42,669 166,662 166,662 229,295 286,000 498,372 Payments from component units - - - - - - - - 2,162,546 -

Payments from primary government 11,877,828 19,391,181 33,992,796 55,331,660 17,984,904 36,044,093 36,044,093 46,655,636 31,918,017 30,215,504 Other revenues - 4,525,727 1,420,641 1,372,773 1,475,328 1,913,690 1,913,690 1,369,610 2,822,218 2,309,611 Contracts - other governments and citizens 1,719,140 1,719,140 1,719,140 1,719,140 1,719,140 78,725 78,725 90,080 5,658,174 368,295 Miscellaneous - - 109,577 4 503,211 377,361 377,361 219,340 122,317 88,892 Grants and Contributions Not Restricted for Specific Programs 142,038,000 144,111,400 139,899,700 145,735,671 161,206,791 171,210,229 171,210,229 175,368,140 176,444,300 185,186,140 Total component units $ 388,091,306 $ 395,832,069 $ 401,328,794 $ 439,168,277 $ 424,927,305 $ 453,801,288 $ 453,801,288 $ 470,425,174 $ 455,751,145 $ 464,603,504 Total reporting unit $ 597,400,170 $ 613,193,715 $ 609,409,934 $ 665,447,343 $ 653,692,766 $ 698,827,218 $ 698,827,218 $ 708,263,454 $ 700,939,545 $ 715,027,674 Change in Net Position Primary government activities $ (30,337,919) $ 6,484,181 $ (25,989,192) $ (13,241,636) $ (31,293,973) $ 30,098,337 $ 12,168,292 $ (13,801,672) $ 6,341,653 $ 3,065,794 Component units activities 143,039,009 (3,196,835) (2,180,232) 48,232,207 41,159,907 41,245,283 14,469,880 (6,601,463) 14,836,482 23,031,852 Total reporting unit $ 112,701,090 $ 3,287,346 $ (28,169,424) $ 34,990,571 $ 9,865,934 $ 71,343,620 $ 26,638,172 $ (20,403,135) $ 21,178,135 $ 26,097,646 Note: Knox County implemented GASB Statement Number 68 in fiscal year 2015.

253

KNOX COUNTY, TENNESSEE Primary Government Activities Tax Revenues By Source Last Ten Fiscal Years (accrual basis of accounting)

(Unaudited)

Other Fiscal Property Sales Lodging Business Wheel Local Year Tax Tax Tax Tax Tax Tax Total 2007 124,861,193 10,031,562 5,286,419 6,651,425 10,347,460 3,667,617 160,845,67 2008 128,874,750 9,952,384 5,382,819 6,629,276 10,636,138 3,793,818 165,269,18 2009 140,608,170 8,987,868 4,815,765 7,440,271 10,570,144 4,317,993 176,740,21 2010 134,655,757 9,708,315 4,830,079 6,332,408 10,471,856 4,669,629 170,668,04 2011 142,138,781 10,433,188 5,152,412 7,347,327 10,937,485 4,620,907 180,630,10 2012 139,862,073 11,076,254 5,696,181 7,782,614 10,835,470 2,935,940 178,188,53 2013 144,007,522 11,815,046 5,547,738 8,709,692 10,936,500 4,942,341 185,958,83 2014 145,415,011 11,133,979 5,860,554 7,566,636 11,448,102 4,970,986 186,395,26 2015 166,869,259 12,650,210 6,602,861 8,210,298 11,421,728 5,000,245 210,754,60 2016 170,481,050 11,960,270 7,993,988 9,301,725 11,552,326 5,102,439 216,391,79 254

KNOX COUNTY, TENNESSEE Component Units Activities Tax Revenues By Source Last Ten Fiscal Years (accrual basis of accounting)

(Unaudited)

Other Fiscal Property Sales Wheel Local Year Tax Tax Tax Tax Total 2007 97,724,691 125,062,455 1,459,461 1,276,897 225,523,504 2008 102,342,297 125,522,010 1,500,030 1,352,978 230,717,315 2009 107,324,525 116,296,501 1,490,723 554,495 225,666,244 2010 106,737,074 114,769,928 1,494,272 1,065,154 224,066,428 2011 112,371,639 119,973,142 1,525,119 1,006,769 234,876,669 2012 110,866,194 128,588,400 1,501,397 1,039,271 241,995,262 2013 113,862,764 127,612,963 1,515,396 1,019,405 244,010,528 2014 115,339,172 128,518,755 1,561,822 1,073,324 246,493,073 2015 97,227,919 136,469,187 1,607,094 1,033,373 236,337,573 2016 98,932,121 144,321,391 1,600,726 1,082,452 245,936,690 255

KNOX COUNTY, TENNESSEE Reporting Unit Activities Tax Revenues By Source Last Ten Fiscal Years (accrual basis of accounting)

(Unaudited)

Other Fiscal Property Sales Lodging Business Wheel Local Year Tax Tax Tax Tax Tax Tax Total 2007 222,585,884 135,094,017 5,286,419 6,651,425 11,806,921 4,944,514 386,369,18 2008 231,217,047 135,474,394 5,382,819 6,629,276 12,136,168 5,146,796 395,986,50 2009 247,932,695 125,284,369 4,815,765 7,440,271 12,060,867 4,872,488 402,406,45 2010 241,392,831 124,478,243 4,830,079 6,332,408 11,966,128 5,734,783 394,734,47 2011 254,510,420 130,406,330 5,152,412 7,347,327 12,462,604 5,627,676 415,506,76 2012 250,728,267 139,664,654 5,696,181 7,782,614 12,336,867 3,975,211 420,183,79 2013 257,870,286 139,428,009 5,547,738 8,709,692 12,451,896 5,961,746 429,969,36 2014 260,754,183 139,652,734 5,860,554 7,566,636 13,009,924 6,044,310 432,888,34 2015 264,097,178 149,119,397 6,602,861 8,210,298 13,028,822 6,033,618 447,092,17 2016 269,413,171 156,281,661 7,993,988 9,301,725 13,153,052 6,184,891 462,328,48 256

KNOX COUNTY, TENNESSEE Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting)

(Unaudited)

Fiscal Year Restated 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 General fund Reserved $ 9,306,651 $ 11,024,655 $ 9,080,512 $ 8,382,154 $ - $ - $ - $ - $ - $ -

Unreserved 46,495,324 48,348,469 44,197,261 43,415,759 - - - - - -

Nonspendable - - - - 5,880,449 6,182,114 7,249,342 6,760,134 5,933,564 5,962,005 Restricted - - - - 2,212,749 2,787,302 2,798,061 2,557,432 2,426,638 2,450,091 Committed - - - - 9,294 5,596,444 3,675,473 2,342,583 4,405,300 2,297,348 Assigned - - - - 957,967 465,211 1,089,640 1,401,378 1,130,360 789,441 Unassigned - - - - 43,521,876 44,259,130 51,452,742 53,026,996 55,853,075 60,783,057 Total general fund $ 55,801,975 $ 59,373,124 $ 53,277,773 $ 51,797,913 $ 52,582,335 $ 59,290,201 $ 66,265,258 $ 66,088,523 $ 69,748,937 $ 72,281,942 All other governmental funds Reserved $ 21,463,450 $ 10,173,788 $ 13,950,926 $ 22,514,296 $ - $ - $ - $ - $ - $ -

Unreserved, reported in:

Special revenue constitutional officers 3,826,048 5,405,844 3,831,682 2,387,038 - - - - - -

Capital projects public improvement (9,257,333) (28,415,905) 12,367,955 (4,050,370) - - - - - -

Debt service 26,617,102 24,383,887 17,757,274 15,753,733 - - - - - -

Other governmental funds 12,742,029 13,448,644 9,879,284 6,658,756 - - - - - -

Nonspendable - - - - 5,910,592 5,776,505 5,762,434 3,953,715 3,958,516 114,681 Restricted - - - - 20,968,128 27,243,240 6,277,249 12,693,130 18,807,905 12,528,271 Committed - - - - 22,133,322 23,331,278 25,942,402 29,062,822 27,427,505 31,353,805 Assigned - - - - - 2,199,988 3,657,378 3,986,924 3,929,333 5,226,787 Total all other governmental funds $ 55,391,296 $ 24,996,258 $ 57,787,121 $ 43,263,453 $ 49,012,042 $ 58,551,011 $ 41,639,463 $ 49,696,591 $ 54,123,259 $ 49,223,544 Note: 2012 General Fund and Debt Service Fund have been restated to reflect prior period adjustments.

GASB Statement Number 54 implemented in fiscal year 2011.

257

KNOX COUNTY, TENNESSEE Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting)

(Unaudited)

Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Revenues Taxes $ 161,129,442 $ 165,894,884 $ 169,892,631 $ 171,522,503 $ 178,306,446 $ 182,423,476 $ 186,718,795 $ 187,406,586 $ 210,705,075 $ 216,489,866 Licenses and permits 3,623,663 3,696,245 3,415,502 3,252,786 3,342,613 3,586,182 3,701,844 3,827,598 4,214,130 4,415,268 Fines, forfeitures and penalties 4,126,768 4,366,159 4,114,621 3,428,205 2,247,102 2,814,573 3,635,407 2,949,034 3,209,888 3,530,766 Charges for current services 27,931,145 30,467,122 25,843,423 26,838,941 26,977,222 27,430,317 30,445,612 31,070,318 31,212,825 35,719,504 Other local revenues 2,590,971 10,018,778 5,049,121 4,787,595 8,660,028 8,570,876 10,503,513 8,535,982 7,897,144 8,949,632 State of Tennessee 21,319,794 19,645,086 17,799,336 18,913,035 16,997,956 18,284,332 19,339,165 18,137,895 23,753,472 22,036,568 Federal government 8,635,219 7,834,280 6,534,996 9,290,911 12,117,880 11,120,469 10,233,153 11,238,152 11,797,202 10,245,233 Other governments and citizen groups 3,830,345 1,738,118 1,347,906 640,110 1,669,274 1,454,345 1,103,013 723,019 646,219 1,210,967 Investment earnings 8,180,389 173,206 794,846 174,952 1,037,903 2,111,750 2,214,606 2,023,800 15,686 18,121 Payments from component units 23,229,518 23,614,046 24,914,174 26,432,876 26,227,344 36,728,191 32,601,668 31,929,023 10,000,000 13,022,088 Increase in equity interest in joint venture 713,764 46,412 - - 349,085 331,142 918,162 - - -

Total revenues 265,484,393 267,694,033 259,880,386 265,281,914 277,932,853 294,855,653 301,414,938 297,841,407 303,451,641 315,638,013 Expenditures Finance and administration 41,092,636 42,994,827 40,263,423 40,628,916 33,375,623 31,446,206 30,320,994 30,536,305 32,274,270 32,919,977 Finance and administration - payments to component unit 4,148,000 6,385,000 4,018,649 3,823,874 3,823,874 3,823,874 6,653,874 6,753,874 6,553,874 9,553,874 Administration of justice 12,477,574 13,635,809 13,141,252 13,060,783 23,761,351 21,973,316 22,221,820 22,787,276 23,901,527 25,031,458 Public safety 64,460,665 66,148,272 69,556,725 72,519,183 72,338,730 71,190,474 72,956,418 74,958,904 77,669,646 81,167,409 Public safety - payments to component unit 326,200 326,200 326,200 326,200 326,200 326,200 326,200 326,200 326,200 485,002 Public health and welfare 39,407,838 39,351,120 37,443,749 37,113,902 32,481,343 31,426,565 31,366,064 32,819,696 32,936,876 33,506,591 Public health and welfare - payments to component unit 256,628 166,628 166,628 256,628 256,628 256,628 256,628 211,628 166,628 166,628 Social and cultural services 17,697,777 17,868,031 19,224,930 18,490,914 18,082,432 16,594,500 16,367,637 17,294,876 17,763,250 19,111,368 Agricultural and natural resources 425,395 461,142 433,295 413,675 380,453 365,774 435,231 519,433 470,977 490,451 Other general government 14,173,623 13,878,441 14,588,454 14,871,749 19,777,716 18,887,075 20,439,302 21,365,998 22,879,165 23,518,670 Other general government - payments to component unit - - - - - - - 600,000 600,000 625,000 Engineering & Public Works 11,228,081 11,096,021 12,130,049 11,875,623 11,736,732 10,498,407 10,873,216 11,782,056 12,203,508 13,454,304 Decrease in equity interest in joint venture - - 20,682 528,848 - - - 493,210 931,800 153,036 Debt proceeds paid to component unit 18,550,000 - 14,000,000 14,822,428 29,004,906 13,578,202 13,182,024 38,763,934 24,271,315 19,385,000 Debt issuance cost 340,537 489,154 368,000 247,856 441,307 106,387 - 745,863 209,442 196,957 Capital Outlay 47,004,907 26,612,521 18,427,009 22,814,409 8,975,940 8,146,618 29,757,038 18,415,728 18,251,855 26,594,126 Debt Service:

Principal 22,980,467 24,185,467 28,550,620 31,080,467 34,695,467 35,615,702 37,766,083 40,630,308 43,975,347 44,203,336 Interest 25,102,520 27,307,441 29,218,581 22,292,340 25,297,513 25,888,063 24,982,926 23,577,780 20,716,774 20,742,805 Other charges 1,309,719 2,064,509 1,965,036 3,691,792 3,955,168 3,399,500 2,517,892 2,308,689 2,987,837 2,608,420 Total expenditures 331,732,567 297,970,583 303,869,154 308,859,587 318,711,383 293,523,491 320,423,347 344,891,758 339,090,291 353,914,412 Excess (deficiency) of revenues over (under) expenditures (66,248,174) (30,276,550) (43,988,768) (43,577,673) (40,778,530) 1,332,162 (19,008,409) (47,050,351) (35,638,650) (38,276,399)

Other financing sources (uses)

Transfers in 26,009,546 23,608,526 25,711,520 25,795,690 9,942,342 16,198,023 17,216,767 15,910,827 12,166,476 15,138,360 Transfers out (27,309,546) (80,419,372) (28,898,609) (26,010,479) (9,882,229) (18,439,226) (21,326,873) (21,240,907) (12,810,239) (17,334,687)

Capital lease proceeds - - - 11,651,171 - - 13,182,024 14,872,404 12,450,000 -

Refunding bonds issued - - - 4,550,000 62,675,000 21,505,000 - - 72,860,000 -

Bonds issued 69,000,000 57,000,000 40,000,000 16,000,000 46,236,000 14,400,000 - 39,075,000 30,040,000 35,900,000 Loan issued - - - - - - - 5,962,500 - -

Premium on debt issued - - 332,400 207,763 2,458,913 1,367,889 - 350,920 1,484,442 2,206,016 Premium on refunding bonds - - - - - - - - 1,716,531 -

Payments to holders of refunded debt - - - (4,620,000) (64,118,485) (22,469,358) - - (74,181,478) -

Notes issued - 3,263,507 33,538,969 - - 5,000,000 - - - -

Total other financing sources (uses) 67,700,000 3,452,661 70,684,280 27,574,145 47,311,541 17,562,328 9,071,918 54,930,744 43,725,732 35,909,689 Net change in fund balances $ 1,451,826 $ (26,823,889) $ 26,695,512 $ (16,003,528) $ 6,533,011 $ 18,894,490 $ (9,936,491) $ 7,880,393 $ 8,087,082 $ (2,366,710)

Debt service as a percentage of noncapital expenditures 15.94% 19.07% 20.37% 18.71% 19.74% 21.93% 20.75% 19.67% 20.16% 19.92%

258

KNOX COUNTY, TENNESSEE Assessed Value and Estimated Actual Value of Taxable Property Last Ten Tax Years (Unaudited)

Total Estimated Assessed Lien Date Real Property Total Direct Actual Value as a January 1 Residential Commercial Personal Public Taxable Tax Taxable Percentage of (See Note) Property Property Property Utilities Assessed Value Rate Value Actual Value 2006 4,795,547,769 2,401,268,570 546,690,987 256,025,735 7,999,533,061 2.69 27,150,758,168 29.46%

2007 5,053,616,147 2,505,298,728 502,485,204 244,990,311 8,306,390,390 2.69 28,594,498,618 29.05%

2008 5,264,657,656 2,612,533,383 516,452,576 254,125,962 8,647,769,577 2.69 29,773,941,112 29.04%

2009 6,358,249,122 2,886,901,400 555,839,420 278,517,456 10,079,507,398 2.36 34,787,993,565 28.97%

2010 6,293,115,819 3,098,030,754 530,130,578 263,158,114 10,184,435,265 2.36 35,165,465,471 28.96%

2011 6,337,198,159 3,191,939,572 536,664,800 272,395,481 10,338,198,012 2.36 35,615,443,029 29.03%

2012 6,399,640,948 3,282,240,042 586,781,514 269,579,260 10,538,241,764 2.36 36,758,399,385 28.67%

2013 6,451,467,630 3,493,787,892 614,675,259 271,557,298 10,831,488,079 2.32 37,593,555,267 28.81%

2014 6,521,883,965 3,566,416,256 630,293,508 277,646,472 10,996,240,201 2.32 38,196,474,846 28.79%

2015 6,599,578,484 3,684,495,581 619,342,704 281,892,638 11,185,309,407 2.32 38,720,123,301 28.89%

Source: Knox County, Tennessee Trustee Department.

Notes: Assessment rates are set by Tennessee State Law as follows:

Real Property: Residential and Farm at 25% of value Commercial and Industrial at 40% of value Personal property at 30% of value Public Utilities at 55% of value (Railroads 40%)

The lien date of January 1 represents the date that the legal claim to the taxable property is recognized. The related property tax revenue is levied for the subsequent fiscal year.

259

KNOX COUNTY, TENNESSEE Property Tax Rates Direct and Overlapping Governments Last Ten Fiscal Years (Unaudited)

Year Taxes Are Payable 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Knox County Direct Rates General $ 1.24 $ 1.13 $ 1.10 $ 0.97 $ 0.97 $ 0.97 $ 0.97 $ 0.96 $ 0.96 $ 0.97 Public Library - - - - - - - - - -

Solid Waste - - - - - - - - - -

Debt Service 0.22 0.33 0.36 0.31 0.31 0.31 0.31 0.30 0.48 0.47 ADA Construction - - - - - - - - - -

Schools 1.23 1.23 1.23 1.08 1.08 1.08 1.08 1.06 0.88 0.88 Total direct rate 2.69 2.69 2.69 2.36 2.36 2.36 2.36 2.32 2.32 2.32 City of Knoxville Rates 2.81 2.81 2.81 2.46 2.46 2.46 2.46 2.39 2.73 2.73 Total direct & overlapping rates $ 5.50 $ 5.50 $ 5.50 $ 4.82 $ 4.82 $ 4.82 $ 4.82 $ 4.71 $ 5.05 $ 5.05 Sources: Knox County, Tennessee.

City of Knoxville, Tennessee.

260

KNOX COUNTY, TENNESSEE Principal Property Taxpayers Tax Year 2015 and Nine Years Ago (Unaudited)

Tax Year 2015 Tax Year 2006 Percentage of Percentage of Taxable Total Taxable Taxable Total Taxable Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Metro Knoxville $ 62,023,720 1 0.55% $ - -

Bellsouth Telecommunications 57,971,024 2 0.52% 78,974,107 1 0.99%

Verion Wireless 32,699,211 3 0.29% - -

AT&T Mobility 29,611,896 4 0.26% - -

West Town Mall 27,749,840 5 0.25% 37,718,880 2 0.47%

Exedy America Corp 16,889,854 6 0.15% - -

Tennessee Holding 14,800,000 7 0.13% - -

Hart 14,578,840 8 0.13% - -

UPS, Inc. 14,345,446 9 0.13% - -

Norfolk Southern 12,720,951 10 0.11% 18,980,883 4 0.24%

Knoxville Center - - 22,415,540 3 0.28%

Parkway Properties - - 13,274,480 5 0.17%

Harvard Behringer - - 12,751,840 6 0.16%

Fort Sanders Alliance - - 11,581,560 7 0.15%

Concord Telephone Exchange - - 10,929,719 8 0.14%

East Tennessee Baptist Hospital - - 7,603,480 9 0.10%

U Dean Hall (Walkers Crossing) - - 7,587,080 10 0.10%

Totals $ 283,390,782 2.52% $ 221,817,569 2.80%

Source: Knox County, Tennessee Trustee Department. 261

KNOX COUNTY, TENNESSEE Property Tax Levies and Collections Last Ten Fiscal Years (amounts expressed in thousands)

(Unaudited)

Fiscal Year Total Tax Collected within the Ended Levy for Fiscal Year of the Levy Collections in Total Collections to Date June 30 Fiscal Year Amount Percentage of Levy Subsequent Years Amount Percentage of Levy 2007 214,463 207,118 96.6% 7,201 214,319 99.9%

2008 223,238 215,195 96.4% 7,864 223,059 99.9%

2009 232,350 221,475 95.3% 10,566 232,041 99.9%

2010 237,445 227,064 95.6% 9,939 237,003 99.8%

2011 240,039 230,908 96.2% 8,558 239,466 99.8%

2012 243,770 234,803 96.3% 8,167 242,970 99.7%

2013 248,554 240,734 96.9% 6,756 247,490 99.6%

2014 251,171 244,964 97.5% 4,651 249,615 99.4%

2015 255,032 248,448 97.4% 4,021 252,469 99.0%

2016 259,457 251,951 97.1% 932 252,883 97.5%

Source: Knox County, Tennessee Trustee Department.

262

KNOX COUNTY, TENNESSEE Ratios of Outstanding Debt by Type Last Ten Fiscal Years (amounts expressed in thousands, except per capita amount)

(Unaudited)

Primary Government Component Units General Total Percentage Fiscal Obligation Capital Capital Reporting of Personal Per Year Bonds and Loans Leases Leases Unit Income (1) Capita (1) 2007 585,591 - 3,409 589,000 3.92% 1,389 2008 620,932 - 12,930 633,862 4.05% 1,474 2009 666,104 - 11,767 677,871 4.41% 1,558 2010 650,194 11,651 23,124 684,969 4.26% 1,582 2011 696,097 - - 696,097 4.10% 1,593 2012 679,172 - - 679,172 3.74% 1,540 2013 640,593 13,182 - 653,775 3.54% 1,472 2014 647,604 27,245 - 674,849 3.50% 1,503 2015 637,325 38,931 4,903 681,159 3.53% (2) 1,510 2016 628,029 37,571 4,670 670,270 3.47% (2) 1,486 (2)

Note: Details regarding the county's outstanding debt can be found in the notes to the financial statements.

(1) See the Schedule of Demographic and Economic Statistics on page 266 for personal income and population data.

(2) Estimated, schedule will be updated when the information becomes available.

263

KNOX COUNTY, TENNESSEE Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years (amounts expressed in thousands, except per capita amount)

(Unaudited)

Percentage of Estimated General Less: Amounts Actual Taxable Fiscal Obligation Available in Debt Value (1) of Per Year Bonds Service Fund Total Property Capita (2) 2007 $ 580,517 $ 26,613 $ 553,904 1.94% $ 1,306 2008 613,332 24,384 588,948 1.98% 1,368 2009 627,121 17,757 609,364 1.75% 1,402 2010 613,971 15,754 598,217 1.70% 1,381 2011 691,186 16,296 674,890 1.89% 1,546 2012 669,016 17,147 651,869 1.77% 1,478 2013 631,616 18,877 612,739 1.63% 1,380 2014 632,397 21,749 610,648 1.60% 1,361 2015 622,813 19,791 603,022 1.56% 1,336 2016 614,989 24,271 590,718 1.53% (3) 1,309 (3)

Note: Details regarding the county's outstanding debt can be found in the notes to the financial statements.

(1) See the Schedule of Assessed Value and Estimated Actual Value of Taxable Property on page 259 for property value data.

(2) Population data can be found in the Schedule of Demographic and Economic Statistics on page 266.

(3) Estimated, schedule will be updated when the information becomes available.

264

KNOX COUNTY, TENNESSEE Direct and Overlapping Governmental Activities Debt As of June 30, 2016 (amounts expressed in thousands)

(Unaudited)

Estimated Estimated Share of Debt Percentage Overlapping Governmental Unit Outstanding Applicable Debt Debt repaid with property taxes: County $ 665,600 100.00% $ 665,600 Subtotal, direct debt 665,600 665,600 City of Knoxville overlapping debt 170,120 100.00% 170,120 Town of Farragut overlapping debt 250 100.00% 250 Subtotal, overlapping debt 170,370 170,370 Total direct and overlapping debt $ 835,970 $ 835,970 Note: Percentage of overlap based on assessed property values.

265

KNOX COUNTY, TENNESSEE Demographic and Economic Statistics Last Ten Fiscal Years (Unaudited)

Personal Per Income Capita Fiscal (amounts expressed Personal Median School Unemployment Year Population (3) in thousands) (1) Income (1) Age (3) Enrollment (3) Rate (2) 2007 424,257 $ 15,033,901 $ 35,491 37.3 107,039 3.3%

2008 430,444 15,666,206 36,342 37.6 110,198 3.8%

2009 434,617 15,371,687 35,278 37.1 112,688 8.5%

2010 433,035 16,089,189 37,148 37.2 113,848 7.8%

2011 436,530 16,994,073 38,894 37.2 108,109 7.6%

2012 441,097 18,149,825 41,127 37.2 111,190 6.7%

2013 444,170 18,466,333 41,533 37.3 111,661 7.3%

2014 448,617 19,297,076 43,012 37.3 112,176 6.3%

2015 451,324 20,241,530 44,849 37.3 (4) 112,176 (4) 5.3%

2016 451,324 (4) 20,241,530 (4) 44,849 (4) 37.3 (4) 112,176 (4) 4.3%

Data sources:

(1) Bureau of Economic Analysis, Regional Economic Accounts, Bearfacts.

(2) Tennessee Department of Labor and Workforce Development.

(3) US Census Bureau/American FactFinders.

(4) Estimated, schedule will be updated when the information becomes available.

266

KNOX COUNTY, TENNESSEE Principal Employers Calendar Year 2015 and Nine Years Ago (Unaudited) 2015 2006 Percentage Percentage of Total Knoxville of Total Knoxville Employer (1) Employees (2) Rank MSA Employment (3) Employees (2) Rank MSA Employment (3 U.S. Department of Energy, Oak Ridge Operations 11,986 1 3.06% 11,943 1 3.58%

Covenant Health 10,304 2 2.63% 8,664 2 2.60%

Knox County Public Schools 7,241 3 1.85% 7,860 4 2.35%

The University of Tennessee 6,609 4 1.69% 8,447 3 2.53%

Wal-Mart Stores 5,951 5 1.52% 4,472 5 1.34%

University Health System 4,941 6 1.26% 3,367 9 1.01%

Tennova Healthcare 3,997 7 1.02% -

K-VA-T Food Stores 3,913 8 1.00% 3,416 8 1.02%

DENSO Mfg 3,800 9 0.97% -

State of Tennessee, Regional Office 3,153 10 0.80% 3,733 6 1.12%

St. Mary's Medical Center - 3,529 7 1.06%

Knox County Government - 2,974 10 0.89%

Total 61,895 15.80% 58,405 17.50%

(1)Based on employers in the Knoxville metropolitan area which includes Anderson, Blount, Campbell, Grainger, Knox, Loudon, Morgan, Roane, and Union Counties.

(2) Greater Knoxville Chamber of Commerce.

(3) Tennessee Department of Labor and Workforce Development.

267

KNOX COUNTY, TENNESSEE Full-time Equivalent County Government Employees by Function Last Ten Fiscal Years (Unaudited)

Full-time Equivalent Employees by Function 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Function General government 566 529 541 534 521 503 504 508 529 54 Public safety 938 979 969 975 1013 1025 1037 1038 1041 105 Public health and welfare 377 340 343 324 320 310 291 283 286 29 Highways 112 117 120 117 114 114 116 113 115 11 Social, cultural, and recreation 201 191 196 190 203 194 197 197 200 20 Total 2,194 2,156 2,169 2,140 2,171 2,146 2,145 2,139 2,171 2,216 Source: Knox County Budget.

268

KNOX COUNTY, TENNESSEE Operating Indicators by Function Last Ten Fiscal Years (Unaudited) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Function Sheriff (1)

Arrests 33,233 32,054 33,548 29,833 29,557 25,571 25,533 24,969 23,400

• Accidents 5,972 4,321 4,500 3,441 3,190 3,080 2,793 2,903 2,861

• Incidents 30,302 29,873 38,388 32,258 32,319 32,414 30,949 30,707 29,653

• Health services (2)

Clinical services Pediatric cases 9,947 8,254 7,570 8,542 3,558 - - - -

Preventive health cases 12,502 12,725 11,812 33,630 24,902 22,958 10,254 9,851 20,417 27,61 WIC services 29,892 32,198 34,085 33,583 33,242 34,625 35,568 36,446 36,050 34,05 Communicable diseases treated 16,497 14,087 16,434 16,207 17,437 17,941 17,615 9,452 16,098 13,16 New prescriptions filled 33,913 6,839 9,837 8,653 7,459 3,413 1,241 1,037 -

Women's health visits - - - 10,687 12,285 11,070 12,328 7,838 10,895 8,01 Social Services visits - - - 10,923 13,103 11,186 10,385 10,523 9,954 6,41 Other health related visits - - - 16,203 11,555 6,694 7,853 11,501 4,380 9,61 Engineering & public works (2)

Street resurfacing (miles) 34 20 28 44 13 17 22 21 12 2 Road maintenance service orders processed 1,306 2,726 1,869 2,687 2,829 1,973 2,876 2,563 2,302 2,65 Litter reduction from right of way (miles) 817 238 720 830 1,046 637 839 1,035 906 1,04 Parks & recreation (2)

Number of park shelter reservations 931 995 1,500 3,000 3,500 3,800 4,500 5,500 6,000 7,00 Total all participants on all teams 30,345 30,402 44,450 30,000 30,000 37,000 37,000 40,000 60,000 163,42 Total number of attendees at events 16,757 16,792 90,000 20,500 21,500 90,000 125,084 160,000 170,000 443,46

• Information not yet available.

(1) Information kept by calendar year.

(2) Information kept by fiscal year.

Source: Knox County, Tennessee Sheriff, Health, Engineering & Public Works and the Parks & Recreation Departments.

269

KNOX COUNTY, TENNESSEE Capital Asset Statistics by Function Last Ten Fiscal Years (Unaudited)

Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Function Public Safety Sheriff Detention Facility 1 1 1 1 1 1 1 1 1 DUI Facility 1 1 1 1 1 1 1 1 1 Penal Farm 1 1 1 1 1 1 1 1 1 Fleet Services 1 1 1 1 1 1 1 1 1 Training Facility 1 1 1 1 1 1 1 1 1 Patrol units 10 10 8 10 10 9 9 9 9 Engineering & Public Works Streets (lane miles) 2,033 2,033 2,033 2,033 2,089 2,107 2,107 2,230 2,236 2,24 Bridges 138 138 142 142 142 142 142 143 143 14 Traffic signals 53 55 58 59 64 65 68 70 73 7 Parks & Recreation Parks acreage 3,051 3,076 3,122 3,296 3,296 3,347 3,347 2,600 2,025 2,16 Parks 46 47 47 49 49 50 51 49 48 4 Spray pools 3 3 3 3 3 3 3 3 3 Tennis courts 7 7 7 7 7 7 7 13 13 1 Source: Knox County, Tennessee Public Safety, Engineering & Public Works and the Parks & Recreation Departments.

270