athens tn acfr fy2020

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CITY OF ATHENS, TENNESSEE
NOTES TO FINANCIAL STATEMENTS
June 30, 2020

Commitments and Contingencies (continued)

The City has arranged short term construction financing through Regions Capital Advantage, Inc.
through a Non-Bank Qualified Tax Exempt General Obligation Draw Down Loan. The Loan will
be disbursed on a monthly basis with variable interest based on a LIBOR or Prime Index calculation.
At the date of the agreement, the calculation yielded interest rates from 1.11% - 1.19%. Interest will

be due semi-monthly with principal due when permanent financing is utilized. Permanent financing

will be through a $35,000,000 USDA Community Facilities Loan. The 40 year loan will bear
interest at 2.125%,

The Athens Utilities Board has debt issues with outstanding balances totaling $22,507,834,
representing debt issued by the City where the Utilities Board has assumed all responsibility through
resolution. This long-term debt is reported in the Athens Utilities Board financial statements. The
debt service is to be paid through user fees and Board funds, but the City is required to establish ad
valorem taxes under each debt issue if Utilities Board funds are not sufficient to service the debts.

The City is subject to lawsuits and claims arising out of its business nature. Management, after
review and consultation with counsel, believes that any liability, not covered by insurance, from
these lawsuits would not materially affect the financial position of the City.

The City has received several federal and state grants for specific purposes which are subject to
review by the grantor agencies. Such reviews could lead to a request for reimbursement to the
grantor agencies for any expenditures disallowed under the terms of the grants. Management
believes that such disallowed costs, if any, would be immaterial.

Risk Management

In March 2020, the World Health Organization declared a pandemic related to the rapidly
spreading coronavirus (COVID-19) outbreak, which has led to a global health emergency. Events
that unfold as a part of the COVID-19 pandemic could materially impact the City’s net position,
however, the ultimate impact, if any, cannot be reasonably estimated at this time.

The City is exposed to various risks of loss to torts; theft of, damage to and destruction of assets;
errors and omissions; injuries to employees; and natural disasters for which the government carries
commercial insurance or participates in the Public Entity Partners Risk Management Pool. The
Public Entity Partners Risk Management Pool is a public entity risk pool which provides coverage
for a variety of risks to Tennessee governments. The City does not retain the risk of loss under
coverages with the pool. There have been no significant reductions in insurance coverage and
settlement amounts have not exceeded insurance coverage for the current year or the three prior
years,

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