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2010 Annual Financial ReportCITY OF SANGER, TEXAS FINANCIAL REPORT SEPTEMBER 30, 2010 C O N T E N T S Page(s) INDEPENDENT AUDITOR’S REPORT ........................................................................................ 1 MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) 3-11 BASIC FINANCIAL STATEMENTS Government-wide Financial Statements Statement of Net Assets ................................................................................................. 12 Statement of Activities ..................................................................................................... 13 Fund Financial Statements Governmental Funds Balance Sheet ........................................................................................................... 14 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets ...................................................................................... 16 Statement of Revenues, Expenditures, and Changes in Fund Balances .................. 17 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ......................................................................................... 19 Proprietary Funds Statement of Net Assets ............................................................................................ 20 Statement of Revenues, Expenses, and Changes in Fund Net Assets .................... 21 Statement of Cash Flows .......................................................................................... 22 Notes to Basic Financial Statements ............................................................................... 24-43 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress for Participation for Texas Municipal Retirement System ............................................................................. 44 Budgetary Comparison Schedule – General Fund ............................................................... 45 SUPPLEMENTARY INFORMATION Combining Schedule of Revenues and Expenses – Proprietary Fund by Department ......... 46 Analysis of Property Taxes Receivable ................................................................................. 48 WEAVER AND TIDWELL LLP CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS WWW.WEAVERLLP.COM 1 AN INDEPENDENT MEMBER OF BAKER TILLY INTERNATIONAL FORT WORTH 2821 W SEVENTH STREET, SUITE 700, FORT WORTH, TX 76107 P: (817) 332 7905 F: (817) 429 5936 INDEPENDENT AUDITOR’S REPORT To the Honorable Mayor Thomas Muir and Members of the City Council City of Sanger, Texas We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Sanger, Texas (the City) as of and for the year ended September 30, 2010, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City’s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Sanger, Texas as of September 30, 2010, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The management’s discussion and analysis, the schedule of funding progress and budgetary comparison schedule on pages 3 through 11 and 44 through 45, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. 2 To the Honorable Mayor Thomas Muir and the Members of the City Council City of Sanger, Texas Page 2 Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The supplementary information on pages 46 through 48 is presented for purposes of additional analysis and is not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. WEAVER AND TIDWELL, L.L.P. Fort Worth, TX August 18, 2011 MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2010 3 The City of Sanger’s Management’s Discussion and Analysis is designed to provide a narrative overview of the City’s financial activity, and assist the reader in identifying changes in the City’s financial position. The information presented here should be considered in conjunction with the City’s financial statements and accompanying footnotes, which can be found on pages 24 through 43 of this report. FINANCIAL HIGHLIGHTS • The City’s total combined net assets were $19,141,779 at September 30, 2010. • The General Fund reported a fund balance of $739,010 at September 30, 2010. • The City’s combined governmental funds reported a fund balance of $5,726,234 at September 30, 2010. OVERVIEW OF THE FINANCIAL STATEMENTS The Management’s Discussion and Analysis is intended to serve as an introduction to the City of Sanger’s basic financial statements. This annual report consists of three components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. The basic financial statements include two types of statements that present different views of the City: • The first two statements are government-wide financial statements that provide both long-term and short-term information about the City’s overall financial status. • The two remaining sets of statements are fund financial statements that focus on individual parts of the government, reporting the City’s operations in more detail than the government-wide statements. o The governmental fund statements tell how general government services were financed in the short term as well as what remains for future spending. o Proprietary fund statements provide short and long-term financial information about the activities the government operates like businesses, such as utility services. The financial statements also include notes to the financial statements explaining information in the financial statements and providing more detailed data. The report also contains other supplementary information in addition to the basic financial statements themselves. 4 Government-wide Statements The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances in a manner similar to private-sector business. The statements report information about the City as a whole using accounting methods similar to those used by private-sector companies. The statement of net assets includes all of the government’s assets and liabilities, with the difference between the two being reported as net assets. Overtime, increases or decreases in net assets are an indicator as to whether the financial position of the City is improving or deteriorating. To assess the overall health of the City, additional non-financial factors (such as the City’s tax base) will need to be considered. The statement of activities presents information on how the City’s net assets changed during the fiscal year. All of the current year’s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. 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 not used vacation leave). Both the statement of net assets and the statement of activities are prepared using the accrual basis of accounting as opposed to the modified accrual basis of accounting. In its Statement of Net Assets and Statement of Activities, the City of Sanger is divided between two kinds of activities: • Governmental activities. Most of the City’s basic services are included here, such as general government, public safety, streets, sanitation, and culture and recreation. Property taxes, sales taxes, franchise fees, and charges for services finance most of these activities. • Business-type activities. A fee is charged to customers by the City to cover the cost of services it provides. The City’s utility systems (electric, water and wastewater) activities are reported here. 5 Fund Financial Statements The fund financial statements provide more detailed information about the City’s most significant funds and not the City as a whole. Funds are accounting devices that the City uses to keep track of specific sources of funding and spending for particular purposes. • Some funds are restricted by State law and by bond covenants. • The City Council establishes guidelines to control and manage money for particular purposes or to show that it is properly using certain revenue resources. Major Features of the City of Sanger's Government-wide and Fund Financial Statements Fund Statements Government-wide Governmental Funds Proprietary Funds Fiduciary Funds Scope Entire Agency's government (except fiduciary funds) and the Agency's component units The activities of the City that are not proprietary or fiduciary Activities the City operates similar to private business: electric, water, and wastewater utilities Instances in which the City is the trustee or agent for someone else's resources Required Financial Statements Statement of net assets Balance Sheet Statement of net assets Statement of fiduciary net assets Statement of activities Statement of revenues, expenditures and changes in fund balances Statement of revenues, expenses and changes in fund balances Statement of changes in fiduciary net assets Statement of cash flows Accounting basis and measurement focus Accrual accounting and economic resources focus Modified accrual accounting and current financial resources focus Accrual accounting and economic resources focus Accrual accounting and economic resources focus Type of asset/liability information All assets and liabilities, both financial and capital, short-term and long- term Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included All assets and liabilities, both financial and capital, and short- term and long-term All assets and liabilities, both short-term and long-term, the Agency's funds do not currently contain capital assets, although they can Type of inflow/outflow information All revenues and expenses during year, regardless of when cash is received or paid Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter All revenues and expenses during year, regardless of when cash is received or paid All revenues and expenses during year, regardless of when cash is received or paid 6 The City has two categories of funds: governmental funds and proprietary funds. • Governmental funds. The City’s basic services are included in governmental funds, which focus on cash and other financial assets that can readily be converted to cash flow, as well as the balances left at year-end that are available for spending. Consequently, the governmental fund statements provide a detailed short-term view that helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s programs. Because this information does not encompass the additional long-term focus of the government-wide statements, additional information is provided on the subsequent pages, explaining the relationship (or differences) between them. The relationship or differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is detailed in a reconciliation following the fund financial statements. • Proprietary funds (business-type funds). Services for which the City charges customers a fee are generally reported in proprietary funds. Proprietary funds, like government- wide statements, provide both short and long-term financial information. Proprietary funds are reported in the same manner that all activities are reported in the Statement of Net Assets and the Statement of Activities. The notes provide additional information that is essential to understanding the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 24 through 43 of this report. 7 GOVERNMENT-WIDE FINANCIAL ANALYSIS As of September 30, 2010, the City’s combined net assets were $19,141,779, of which $8,346,480 can be attributed to governmental activities and $10,795,299 attributed to business- type activities. This analysis focuses on the net assets (Table 1) and changes in net assets (Table 2) of the City’s governmental and business-type activities. Net Assets Net assets at September 30, 2009, were $18,411,459, representing an increase of $730,320 in total net assets of governmental and business-type activities. The largest portion of the City’s net assets (68%) reflects its investment in capital assets (e.g., land, building, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Table 1 – Net Assets 2010 2009 2010 2009 2010 2009 Assets Cash and cash equivalents (1)692,005$ 585,460$ 1,292,304$ 621,600$ 1,984,309$ 1,207,060$ Accounts receivable, net 311,885 554,332 1,142,592 1,079,401 1,454,477 1,633,733 Inventories - - 276,825 276,825 276,825 276,825 Prepaid expense 11,910 - - 6,653 11,910 6,653 Internal balances - (4,779) - 4,779 - - Restricted cash and cash equivalents (1)5,075,797 6,117,609 2,171,109 2,262,318 7,246,906 8,379,927 Bond issuance costs, net 316,292 337,415 123,161 146,747 439,453 484,162 Capital assets, net of accumulated depreciation 10,752,346 10,903,681 13,593,285 14,104,813 24,345,631 25,008,494 Total assets 17,160,235$ 18,493,718$ 18,599,276$ 18,503,136$ 35,759,511$ 36,996,854$ Liabilities Accounts payable 198,142$ 800,043$ 565,806$ 457,572$ 763,948$ 1,257,615$ Customer deposits - - 280,721 241,686 280,721 241,686 Other liabilities 97,238 129,982 125,929 327,210 223,167 457,192 Current portion long-term debt 575,710 547,176 746,494 714,216 1,322,204 1,261,392 Compensated absences 53,598 79,584 56,333 62,056 109,931 141,640 Long-term debt 7,889,067 8,478,791 6,028,694 6,747,079 13,917,761 15,225,870 Total liabilities 8,813,755$ 10,035,576$ 7,803,977$ 8,549,819$ 16,617,732$ 18,585,395$ Net assets Invested in capital assets 6,213,125$ 2,162,363$ 6,831,720$ 6,741,443$ 13,044,845$ 8,903,806$ Restricted for specific purpose 540,435 5,660,836 1,890,388 2,262,318 2,430,823 7,923,154 Unrestricted 1,592,920 634,943 2,073,191 949,556 3,666,111 1,584,499 Net assets 8,346,480$ 8,458,142$ 10,795,299$ 9,953,317$ 19,141,779$ 18,411,459$ (1) Approximately 57% and 78% of the City's cash equivalent balances at September 30, 2010 and 2009, respectively, were comprised of bank certificates of deposit which, in accordance with generally accepted accounting principles, are treated as cash for financial statement presentation purposes. Governmental Activities Business-Type Activities Total 8 Changes in Net Assets Governmental activities decreased the City’s net assets by $111,662 and business-type activities increased the City’s net assets by $841,982. The key elements of these changes are contained in Table 2. Table 2 – Changes in Net Assets 2010 2009 2010 2009 2010 2009 Revenues Program Revenues: Charges for services 1,127,202$ 1,732,063$ 9,458,927$ 9,490,083$ 10,586,129$ 11,222,146$ Grants and donations - 14,239 - - - 14,239 General Revenues: Taxes 3,759,621 3,889,376 - - 3,759,621 3,889,376 Licenses and permits 44,635 67,866 - - 44,635 67,866 Investment earnings 75,402 169,253 37,360 89,186 112,762 258,439 Transfers (231,245) (1,456,966) 231,245 1,456,966 - - Miscellaneous 102,288 - - - 102,288 - Gain (loss) on sale of assets (33,255) 32,322 11,814 2,500 (21,441) 34,822 Total revenues 4,844,648 4,448,153 9,739,346 11,038,735 14,583,994 15,486,888 Expenses General government 725,355 733,052 - - 725,355 733,052 Public safety 1,276,750 1,262,219 - - 1,276,750 1,262,219 Streets and sanitation 1,260,016 1,211,307 - - 1,260,016 1,211,307 Fire and rescue 655,874 619,715 - - 655,874 619,715 Court 194,526 194,052 - - 194,526 194,052 Culture and recreation 465,034 452,868 - - 465,034 452,868 Interest on long-term debt 378,755 289,449 403,065 322,886 781,820 612,335 Proprietry expenses - - 8,494,299 8,646,150 8,494,299 8,646,150 Total expenses 4,956,310 4,762,662 8,897,364 8,969,036 13,853,674 13,731,698 Change in net assets (111,662) (314,509) 841,982 2,069,699 730,320 1,755,190 Beginning net assets 8,458,142 5,006,725 9,953,317 11,530,821 18,411,459 16,537,546 Reclassifications - 3,647,203 - (3,647,203) - - Prior-period adjustment - 118,723 - - - 118,723 Ending net assets 8,346,480$ 8,458,142$ 10,795,299$ 9,953,317$ 19,141,779$ 18,411,459$ Governmental Business-Type Activities Activities Total 9 The City’s total revenues for the year ended September 30, 2010, was $14,583,994 with a significant portion, 72%, of the City’s total revenue coming from charges for services, 16% from property taxes, 6% from sales taxes, while 6% is obtained from the remaining revenue sources (see Figure 1). Because Sanger owns an electric utility, revenues from charges for services are a large percentage of overall revenues. Without the ownership of its electricity utility, the City’s property tax rate would be approximately ten cents higher per $100 valuation than its current rate in order to generate the same amount of operating revenue. Figure 1 Governmental activities revenues total $4,844,648 for the year ended September 30, 2010, of which $3,759,621 (78%) is attributed to taxes. Significant general governmental expenses include public safety (police and animal control), which incurred expenses of $1,276,750, and streets and sanitation, which incurred expenses of $1,260,016. Business-type activities increased the City’s net assets by $841,982, accounting for all positive growth in the government-wide net assets in fiscal year ended September 30, 2010. Compared to last year, business-type operating revenues decreased by $31,156 to $9,458,927 for the year ended September 30, 2010, as a result of minimal decreases in both water and electric revenues. Business-type expenses also decreased in fiscal year ending September 30, 2010 due to a decrease in water and electric expenses, resulting in total business-type activity expenses of $8,897,364. 10 FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS The City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of resources available to spend. This information is useful in assessing the financial requirements of the City. As of September 30, 2010, the City’s governmental funds reported a combined ending fund balance of $5,726,234, a reduction of $275,185 from the previous fiscal year’s balance of $6,001,419. The decline in fund balance is primarily due to expenditures for infrastructure improvements. Of this fund balance, $739,010 constitutes unreserved, undesignated fund balance, which is available for spending at the government’s discretion. The remainder of the fund balance is reserved to indicate that it is not available for new spending because it has already been committed to either purchase or construct capital assets ($3,910,024), pay debt service ($106,546), or enhance economic development ($970,654). General Fund. The General Fund is the chief operating fund of the City. At September 30, 2010, the unreserved and undesignated fund balance of the General Fund was $739,010, an increase of $193,355 over the prior year. The increase is primarily due to reductions in spending and not filling nonessential personnel vacancies. The City took a very conservative approach to purchasing and employment during 2010 because of the depressed economic conditions. Capital Projects Fund. The entire balance of the capital projects fund is reserved for capital construction and acquisition. At September 30, 2010, the capital projects fund has a fund balance of $3,910,024, a decrease of $486,258 from 2009. At the end of 2010, the City had invested $24,345,631 in a broad range of capital assets, including land, equipment, buildings, and vehicles (see Table 3). Table 3 – Capital Assets 2010 2009 2010 2009 2010 2009 Land 600,351$ 600,351$ 323,164$ 312,164$ 923,515$ 912,515$ Construction in progress 3,039,158 3,975,123 - 2,028,744 3,039,158 6,003,867 Infrastructure 6,131,964 6,433,265 21,653,018 20,039,369 27,784,982 26,472,634 Buildings and equipment 5,588,158 5,241,731 2,265,559 2,287,450 7,853,717 7,529,181 Total historical cost 15,359,631 16,250,470 24,241,741 24,667,727 39,601,372 40,918,197 Total accumulated depreciation (4,607,285) (5,346,789) (10,648,456) (10,562,915) (15,255,741) (15,909,704) Net capital assets 10,752,346$ 10,903,681$ 13,593,285$ 14,104,812$ 24,345,631$ 25,008,493$ Governmental Business-Type Activities Activities Total 11 Debt Service Fund. The debt service fund has a total fund balance of $106,546 at September 30, 2010, an increase of $10,165 over 2009. As of September 30, 2010, the City had $15,239,965 in long-term debt (see Table 4). Table 4 – Long-term Debt 2010 2009 2010 2009 2010 2009 Notes payable 646,881$ 695,108$ -$ 6,654$ 646,881$ 701,762$ Capital leases 148,196 222,777 494,888 592,723 643,084 815,500 Bonds payable 7,669,700 8,108,082 6,280,300 6,861,918 13,950,000 14,970,000 Total long-term debt 8,464,777$ 9,025,967$ 6,775,188$ 7,461,295$ 15,239,965$ 16,487,262$ Governmental Business-Type Activities Activities Total Proprietary Fund. The City’s proprietary fund provides the same type of information found in the government-wide financial statements, but in more detail. Table 5 represents the cost of each of the City’s business-type activities as well as each function’s net cost (total cost less fees generated by the activities and intergovernmental aid). The cost of business-type activities for fiscal year ended September 30, 2010 was $8,897,364. The amount for charges for services that the City’s tax payers paid for these activities was $9,458,927. Excess funds are used by the City to help support the general fund, keeping the property tax rate from increasing. Excess funds are also used to fund capital improvements. Table 5 – Proprietary Fund Activities % Change % Change 2010 2009 2010 2009 Water 998,059$ 1,114,181$ -10.42% 127,849$ 102,185$ 25.12% Sewer 714,895 646,543 10.57% 215,085 272,236 -20.99% Electric 6,202,332 6,255,536 -0.85% 1,155,642 1,086,223 6.39% Other 982,078 952,776 3.08% (937,013) (939,597) -0.28% Total 8,897,364$ 8,969,036$ -0.80% 561,563$ 521,047$ 7.78% Total Cost of Services Total Operating Income ECONOMIC FACTORS AND FISCAL YEAR BUDGET AND RATES Certified appraised values used for the fiscal year 2011 budget preparation are consistent with the amounts budgeted in the 2010 fiscal year. If revenues projected in the 2011 budget are realized, the City will be able to continue operations and absorb inflationary costs without a decrease in its fund balance. REQUESTS FOR INFORMATION This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City’s finances and to demonstrate the City’s accountability for the funds it receives. If you have questions about this report or would like additional information, please contact the City Manager at the City of Sanger City Hall at 502 Elm Street, Sanger, Texas 76266. CITY OF SANGER, TEXAS GOVERNMENT-WIDE STATEMENT OF NET ASSETS SEPTEMBER 30, 2010 The Notes to Basic Financial Statements are an integral part of this statement. 12 Governmental Business-type Activities Activities Total Cash and cash equivalents 692,005$ 1,292,304$ 1,984,309$ Accounts receivable, net Property taxes 69,179 - 69,179 Sales taxes 143,111 - 143,111 Emergency medical services, net of allowance of $1,470,493 36,428 - 36,428 Utility accounts, net of allowance of $12,187 - 1,128,152 1,128,152 Other 63,167 14,440 77,607 Inventories - 276,825 276,825 Prepaid expenses 11,910 - 11,910 Restricted cash and cash equivalents 5,075,797 2,171,109 7,246,906 Bond issue costs, net 316,292 123,161 439,453 Capital assets Capital assets not being depreciated 3,639,509 323,164 3,962,673 Capital assets being depreciated, net 7,112,837 13,270,121 20,382,958 TOTAL ASSETS 17,160,235$ 18,599,276$ 35,759,511$ Accounts payable and accrued liabilities 198,142$ 565,806$ 763,948$ Customer deposits - 280,721 280,721 Accrued interest payable 35,624 61,188 96,812 Bonds payable, due within one year 446,900 628,100 1,075,000 Notes payable, due within one year 50,775 - 50,775 Capital leases, due within one year 78,035 118,394 196,429 Other 61,614 64,741 126,355 Noncurrent liabilities Compensated absences 53,598 56,333 109,931 Bonds payable, due in more than one year 7,222,800 5,652,200 12,875,000 Notes payable, due in more than one year 596,106 - 596,106 Capital leases, due in more than one year 70,161 376,494 446,655 TOTAL LIABILITIES 8,813,755 7,803,977 16,617,732 Invested in capital assets, net of related debt 6,213,125 6,831,720 13,044,845 Restricted Debt service 429,091 566,042 995,133 Capital improvements 111,344 1,324,346 1,435,690 Unrestricted 1,592,920 2,073,191 3,666,111 TOTAL NET ASSETS 8,346,480$ 10,795,299$ 19,141,779$ LIABILITIES Primary Government ASSETS NET ASSETS CITY OF SANGER, TEXAS GOVERNMENT – WIDE STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2010 The Notes to Basic Financial Statements are an integral part of this statement. 13 Program Revenues Fees, Fines and Charges for Governmental Business- type Expenses Services Activities Activities Total Governmental activities General government 725,355$ 723,374$ (1,981)$ -$ (1,981)$ Public safety 1,276,750 - (1,276,750) - (1,276,750) Streets and sanitation 1,260,016 - (1,260,016) - (1,260,016) Fire and rescue 655,874 192,863 (463,011) - (463,011) Court 194,526 210,965 16,439 - 16,439 Culture and recreation 465,034 - (465,034) - (465,034) Interest on long term debt 378,755 - (378,755) - (378,755) Total governmental activities 4,956,310 1,127,202 (3,829,108) - (3,829,108) Business-type activities Water 998,059 1,125,908 - 127,849 127,849 Sewer 714,895 929,980 - 215,085 215,085 Electric 6,202,332 7,357,974 - 1,155,642 1,155,642 Interest on long-term debt 403,065 - - (403,065) (403,065) Other 579,013 45,065 - (533,948) (533,948) Total business-type activities 8,897,364 9,458,927 - 561,563 561,563 Total primary government 13,853,674$ 10,586,129$ (3,829,108)$ 561,563$ (3,267,545)$ General revenues Taxes Ad valorem 2,284,379$ -$ 2,284,379$ Sales 947,370 - 947,370 Franchise taxes 527,872 - 527,872 Licenses and permits 44,635 - 44,635 Interest income 75,402 37,360 112,762 Gain (loss) on sale of assets (33,255) 11,814 (21,441) Miscellaneous revenues 102,288 - 102,288 Transfers (231,245) 231,245 - Total general revenues and transfers 3,717,446 280,419 3,997,865 Change in net assets (111,662) 841,982 730,320 NET ASSETS, beginning of year 8,458,142 9,953,317 18,411,459 NET ASSETS, end of year 8,346,480$ 10,795,299$ 19,141,779$ Changes in Net Assets Net (Expenses) Revenue and Program Activities CITY OF SANGER, TEXAS BALANCE SHEET – GOVERNMENTAL FUNDS SEPTEMBER 30, 2010 The Notes to Basic Financial Statements are an integral part of this statement. 14 Debt Capital General Service Projects Cash and investments 668,434$ 23,571$ -$ Accounts receivable, net Property taxes, net of allowance of $51,490 48,425 20,754 - Sales taxes 71,555 - - Emergency medical services, net of allowance of $1,470,493 36,428 - - Other 57,443 - 3,030 Prepaid expenses 11,910 - - Restricted cash and investments 160,239 82,975 3,925,554 Total assets 1,054,434$ 127,300$ 3,928,584$ Liabilities Accounts payable 168,957$ -$ 18,560$ Deferred revenue 84,853 20,754 - Other current liabilities 61,614 - - Total liabilities 315,424 20,754 18,560 Fund balances Reserved - construction - - 3,910,024 Reserved - debt service - 106,546 - Reserved - economic development - - - Unreserved 739,010 - - Total fund balances 739,010 106,546 3,910,024 TOTAL LIABILITIES AND FUND BALANCES 1,054,434$ 127,300$ 3,928,584$ LIABILITIES AND FUND BALANCES ASSETS 15 Total Governmental 4A Fund 4B Fund Funds -$ -$ 692,005$ - - 69,179 35,778 35,778 143,111 - - 36,428 548 2,146 63,167 - - 11,910 339,225 567,804 5,075,797 375,551$ 605,728$ 6,091,597$ 10,625$ -$ 198,142$ - - 105,607 - - 61,614 10,625 - 365,363 - - 3,910,024 - - 106,546 364,926 605,728 970,654 - - 739,010 364,926 605,728 5,726,234 375,551$ 605,728$ 6,091,597$ CITY OF SANGER, TEXAS RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS SEPTEMBER 30, 2010 The Notes to Basic Financial Statements are an integral part of this statement. 16 Total fund balances - governmental funds 5,726,234$ Net assets of governmental activities 8,346,480$ Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the governmental funds balance Costs associated with the issuance of governmental long term debt are expensed when incurred in the fund statements and capitalized and amortized over the life of the debt in the government-wide financial statements. Interest payable on long term debt does not require current financial resources, therefore interest payable is not reported as a liability in the governmental funds balance sheet. Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements. (8,518,375) 10,752,346 316,292 (35,624) 105,607 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the fund financial statements. CITY OF SANGER, TEXAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2010 The Notes to Basic Financial Statements are an integral part of this statement. 17 Debt Capital General Service Projects REVENUES Property taxes 1,587,954$ 706,281$ -$ Sales taxes 472,352 Licenses and permits 44,635 - - Charges for services 723,374 - - Fire and rescue 451,346 - - Court 210,965 - - Franchise taxes 527,872 - - Interest 17,982 1,011 44,816 Miscellaneous 99,955 - - Total revenues 4,136,435 707,292 44,816 EXPENDITURES Current General government 555,668 2,428 122,376 Public safety 1,206,731 - - Streets and sanitation 762,615 - - Fire and rescue 559,344 - - Court 193,877 - - Culture and recreation 387,810 - - Capital outlay 349,030 - 162,773 Debt service Principal retirement 90,877 438,382 - Interest charges 13,238 332,202 - Total expenditures 4,119,190 773,012 285,149 Excess (deficiency) of revenues over expenditures 17,245 (65,720) (240,333) Other financing sources (uses) Proceeds on sale of assets 17,315 - - Transfers in 158,795 180,000 - Transfers out - (104,115) (245,925) Total other financing sources (uses)176,110 75,885 (245,925) Net change in fund balances 193,355 10,165 (486,258) FUND BALANCES, beginning of year 545,655 96,381 4,396,282 FUND BALANCES, end of year 739,010$ 106,546$ 3,910,024$ 18 Total Governmental 4A Fund 4B Fund Funds -$ -$ 2,294,235$ 237,509 237,509 947,370 - - 44,635 - - 723,374 - - 451,346 - - 210,965 - - 527,872 2,871 8,722 75,402 2,333 - 102,288 242,713 246,231 5,377,487 11,964 898 693,334 - - 1,206,731 - - 762,615 - - 559,344 - - 193,877 - - 387,810 187,262 - 699,065 31,931 - 561,190 29,336 - 374,776 260,493 898 5,438,742 (17,780) 245,333 (61,255) - - 17,315 - - 338,795 (20,000) (200,000) (570,040) (20,000) (200,000) (213,930) (37,780) 45,333 (275,185) 402,706 560,395 6,001,419 364,926$ 605,728$ 5,726,234$ CITY OF SANGER, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2010 The Notes to Basic Financial Statements are an integral part of this statement. 19 Net change in fund balances - total governmental funds (275,185)$ 699,065 (799,830) (50,570) 566,053 17,142 (268,337) Change in net assets of governmental activities (111,662)$ The issuance of long term debt (e.g. bonds) provides current financial resources to governmental funds, while the repayment of the principal of long- term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas the amounts are deferred and amortized in the statement of activities. This amount consists of proceeds of $0 less repayments of $561,190 plus amortization of debt issuance costs of $21,123 plus a change in long-term compensated absences payable of $25,986, which is the net effect of these differences in the treatment of long- term debt and related items. Current year changes in accrued interest payable do not require the use of current financial resources; therefore, are not reported as expenditures in governmental funds. Certain revenues in the government-wide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds. Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount of capital assets recorded in the current period. Depreciation expense on capital assets is reported in the statement of activities and does not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in the governmental funds. Governmental funds recognize all amounts received on the sale of fixed assets as a gain. However, in the statement of activities, the gain or loss is offset by the remaining net book value of the asset. CITY OF SANGER, TEXAS STATEMENT OF NET ASSETS – PROPRIETARY FUNDS SEPTEMBER 30, 2010 The Notes to Basic Financial Statements are an integral part of this statement. 20 Water, Sewer, and Electric Fund CURRENT ASSETS Cash and investments 1,292,304$ Receivables Utility accounts receivable, net of allowance of $12,187 1,128,152 Other 14,440 Inventories 276,825 Restricted cash and cash equivalents 2,171,109 Total current assets 4,882,830 NONCURRENT ASSETS Capital assets, at cost Land and land improvements 323,164 Buildings and equipment 2,265,559 Infrastructure 21,653,018 Accumulated depreciation (10,648,456) Total capital assets, net of accumulated depreciation 13,593,285 Bond issue costs 123,161 Total noncurrent assets 13,716,446 TOTAL ASSETS 18,599,276$ CURRENT LIABILITIES Accounts payable and accrued expenses 565,806$ Accrued interest payable 61,188 Bonds payable, due within one year 628,100 Capital lease obligation, due within one year 118,394 Other 64,741 Total current liabilities 1,438,229 NONCURRENT LIABILITIES Compensated absences 56,333 Bonds payable, due in more than one year 5,652,200 Capital lease obligation, due in more than one year 376,494 Customer deposits 280,721 Total liabilities 7,803,977 NET ASSETS Invested in capital assets, net of related debt 6,831,720 Restricted Revenue bond retirement 566,042 Capital improvements 1,324,346 Unrestricted 2,073,191 TOTAL NET ASSETS 10,795,299$ LIABILITIES AND NET ASSETS ASSETS CITY OF SANGER, TEXAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS – PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2010 The Notes to Basic Financial Statements are an integral part of this statement. 21 Water, Sewer, and Electric Fund OPERATING REVENUES Charges for services 9,301,619$ Connection fees 62,532 Tap fees 52,500 Miscellaneous 42,276 Total operating revenue 9,458,927 OPERATING EXPENSES Salaries and wages 1,282,370 Purchased professional and technical services 108,606 Utilities 340,594 Materials and supplies 106,931 Water and electric purchases 4,953,579 Franchise fees 354,842 Depreciation 814,083 Repairs and maintenance 377,401 Bad debt expense 155,893 Total operating expenses 8,494,299 Operating income 964,628 NONOPERATING REVENUES (EXPENSES) Interest and investment income 37,360 Interest and amortization expense (403,065) Gain on sale of asset 11,814 Total nonoperating expenses (353,891) Income before transfers 610,737 Transfers in 231,245 Change in net assets 841,982 NET ASSETS, beginning of year 9,953,317 NET ASSETS, end of year 10,795,299$ CITY OF SANGER, TEXAS STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2010 The Notes to Basic Financial Statements are an integral part of this statement. 22 Water, Sewer, and Electric Fund CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers 9,434,771$ Cash paid to employees (1,303,626) Cash paid to suppliers (6,452,708) Net cash provided by operating activities 1,678,437 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers from other funds 231,245 Net cash provided by noncapital financing activities 231,245 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid on long-term debt (686,107) Capital expenditures (320,639) Interest paid on long-term debt (390,698) Proceeds from sale of assets 29,897 Net cash used in capital and related financing activities (1,367,547) CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 37,360 Net cash provided by investing activities 37,360 Net change in cash 579,495 CASH AND CASH EQUIVALENTS, beginning of the year 2,883,918 CASH AND CASH EQUIVALENTS, end of the year 3,463,413$ CITY OF SANGER, TEXAS STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2010 (CONTINUED) The Notes to Basic Financial Statements are an integral part of this statement. 23 Water, Sewer, and Electric Fund RECONCILIATION OF CASH AND CASH EQUIVALENTS PER STATEMENT OF CASH FLOWS TO THE STATEMENT OF NET ASSETS Cash and investments 1,292,304$ Restricted cash and cash equivalents 2,171,109 Cash and cash equivalents - ending 3,463,413$ RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income 964,628$ Adjustments to reconcile operating income to net cash provided by operating activities Depreciation 814,083 Amortization of bond issue costs 23,586 Increase in accounts receivable (63,191) Decrease in internal balances 4,780 Decrease in prepaid expenses 6,653 Increase in accounts payable and accrued expenses 108,234 Decrease in other liabilities (219,371) Increase in customer deposits 39,035 Net cash provided by operating activities 1,678,437$ CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 24 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Sanger (the City) was incorporated in 1886. The City operates under a Council- Manager form of government and provides the following services as authorized by its charter: general government, police and fire protection, emergency ambulance services, highways and streets, water and wastewater operations, electricity operations, and public improvements. The accounting and reporting policies of the City relating to the funds included in the accompanying basic financial statements conform to accounting principles generally accepted in the United States of America applicable to state and local governments. Generally accepted accounting principles for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB), the American Institute of Certified Public Accountants in the publication entitled Audits of State and Local Governmental Units and by the Financial Accounting Standards Board (when applicable). As allowed in Section P80 of GASB’s Codification of Governmental Accounting and Financial Reporting Standards, the City has elected not to apply Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the Committee of Accounting Procedure issued after November 30, 1989. The more significant accounting policies of the City are described below. Financial Reporting Entity As required by accounting principles generally accepted in the United States of America, these financial statements include the primary government and organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The definition of the reporting entity is based primarily on the notion of financial accountability. A primary government is financially accountable for the organizations that make up its legal entity. It is also financially accountable for legally separate organizations if its officials appoint a voting majority of an organization's governing body and either it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or to impose specific financial burdens on, the primary government. A primary government may also be financially accountable for governmental organizations that are fiscally dependent on it. A primary government has the ability to impose its will on an organization if it can significantly influence the programs, projects, or activities of, or the level of services performed or provided by, the organization. A financial benefit or burden relationship exists if the primary government (a) is entitled to the organization's resources; (b) is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide financial support to, the organization; or (c) is obligated in some manner for the debt of the organization. Some organizations are included as component units because of their fiscal dependency on the primary government. CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 25 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Financial Reporting Entity – Continued An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval by the primary government. Complete financial statements for the individual component units may be obtained at the City’s office. The following entities were found to be component units of the City and are included in the accompanying financial statements: Blended Component Unit (4A) - The Sanger Texas Industrial Development Corporation (STIDC) is governed by a board of five directors, all of whom are appointed by the City Council of the City of Sanger and any of whom can be removed from office by the City Council at its will. The STIDC was incorporated in the state of Texas a non-profit industrial development corporation under Section 4A of the Development Corporation Act of 1979. The purpose of the STIDC is to promote economic development within the City of Sanger. Blended Component Unit (4B) - The Sanger Texas Development Corporation (STDC) is governed by a board of seven directors, all of whom are appointed by the City Council at its will. The STDC was incorporated in the state of Texas as a non- profit industrial development corporation under Section 4B of the Development Corporation Act of 1979. The purpose of the STDC is to promote economic and community development within the City of Sanger. Basis of Presentation The government-wide financial statements (the statement of net assets and the statement of activities) report information on all of the activities of the City. The effect of interfund activity within the governmental and business-type activities columns 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. The statement of activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other items not properly included among program revenues are reported instead as general revenues. CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 26 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Fund Financial Statements The City segregates transactions related to certain functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Separate statements are presented for governmental and proprietary activities. These statements present each major fund as a separate column on the fund financial statements; all non-major funds are aggregated and presented in a single column. Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balance of current financial resources. The City has presented the following major governmental funds: General Fund The General Fund is the main operating fund of the City. This fund is used to account for all financial resources not accounted for in other funds. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are paid from the General Fund. Debt Service Fund The Debt Service Fund is used to account for the accumulation of financial resources for the payment of principal, interest and related costs on general long-term debt paid primarily from taxes levied by the City. The fund balance of the Debt Service Fund is reserved to signify the amounts that are restricted exclusively for debt service expenditures. Capital Projects Fund The Capital Projects Fund is used to account for funds received and expended for the construction and renovation of thoroughfares, arterial streets and drainage improvements in the City and construction, renovation, expansion and major improvement of various City facilities, acquisition of land and other large nonrecurring projects. 4A and 4B Funds The 4A and 4B Funds are to account for sales tax revenues collected for the purposes set forth by the Sanger Economic Development Corporation. CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 27 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Fund Financial Statements – Continued Proprietary Funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. The accounting objectives are determinations of net income, financial position and cash flow. All assets and liabilities are included on the Statement of Net Assets. The City has presented the following major proprietary fund: Water, Sewer and Electric Fund The Water, Sewer and Electric Fund is the primary operating fund for water, sewer distribution and electric. It also accounts for all financial resources of the City concerning water, sewer and electric sales. Its activity is financed with debt secured by a pledge of the net revenues and has the requirement that the cost of providing services, including capital costs, be recovered by user fees and charges. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. Operating expenses for the proprietary funds include the cost of personal and contractual services, supplies and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. Measurement Focus and Basis of Accounting Measurement focus refers to what is being measured; basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government-wide statements and fund financial statements for proprietary funds are reported using the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus means all assets and liabilities (whether current or non-current) are included on the statement of net assets and the operating statements present increases (revenues) and decreases (expenses) in net total assets. Under the accrual basis of accounting, revenues are recognized when earned, including unbilled water and wastewater services which are accrued. Expenses are recognized at the time the liability is incurred. Governmental fund financial statements are reported using the current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual; i.e., when they become both 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 be used to pay liabilities of the current period. The City considers receivables collected within sixty days after year-end to be available and recognizes them as revenues of the current year. Expenditures are recorded when the related fund liability is incurred. CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 28 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Measurement Focus and Basis of Accounting – Continued However, debt service expenditures are recorded only when payment is due. The revenues susceptible to accrual are property taxes, franchise fees, licenses, charges for service, interest income and intergovernmental revenues. Sales taxes collected and held by the state at year end on behalf of the government are also recognized as revenue. All other governmental fund revenues are recognized when received. Cash and Investments Cash of all funds, including restricted cash, are pooled into common pooled accounts in order to maximize investment opportunities. Each fund whose monies are deposited in the pooled cash accounts has equity therein, and interest earned on the investment of these monies is allocated based upon relative equity at month end. An individual fund’s pooled Cash and Investments are available upon demand and are considered to be “cash equivalents” when preparing these financial statements. In addition, any marketable securities not included in the common pooled accounts that are purchased with a maturity of ninety days or less are also considered cash equivalents. All investments are recorded at fair value based on quoted market prices. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties. State statutes authorize the City to invest in obligations of the U.S. Government or its agencies; obligations of the State of Texas or its agencies; and contain other obligations, repurchase agreements, money market mutual funds and certificates of deposits within established criterion. Restricted Resources If both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first and unrestricted resources as needed. Property Taxes Property taxes are levied by October 1 on the assessed value listed, as of the prior January 1 for all real and business person property in conformity with Subtitle E, Texas Property Tax Code. Taxes are due on receipt of the tax bill and are delinquent if not paid before February 1 of the year following the year in which imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed. Property tax revenues are considered available when they become due or past due and receivable within the current period. Personal property taxes not collected by April 1 are forwarded for collection proceedings. Real property taxes not collected by July 1 are forwarded for collection proceedings. CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 29 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Inventories and Prepaid Items Inventories, which are recognized as expenses as consumed, are stated at cost (first-in, first-out method). Inventories consist primarily of expendable supplies for the Proprietary Fund. Prepaid balances are for payments made by the City in the current year to provide services occurring in the subsequent fiscal year. Interfund Receivables and Payables Any residual balances outstanding between the governmental activities and business- type activities are reported in the government-wide financial statements as internal balances. Transactions between Funds Interfund services provided and used are accounted for as revenues and expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures or expenses initially made from it that are properly applicable to another fund, are recorded as expenditures or expenses in the reimbursing fund and as a reduction of expenditures or expenses in the fund reimbursed. All other interfund transactions are recorded as transfers. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and in the fund financial statements for proprietary funds. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at their fair market value on the date donated. Repairs and maintenance are recorded as expenses. Renewals and betterments are capitalized. Assets capitalized, not including infrastructure assets, have an original cost of $5,000 or more and over one year of useful life. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Buildings and improvements 5-50 years Machinery and equipment 3-20 years Infrastructure 10-30 years CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 30 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Accumulated Vacation, Compensatory Time and Sick Leave The amounts owed to employees for unpaid vacation and sick leave liabilities, including the City’s share of employment-related taxes, are reported on the accrual basis of accounting in the applicable governmental or business-type activity columns of the government-wide statements and in the enterprise activities of the fund financial statements. The liabilities and expenditures are reported on the modified accrual basis in the governmental fund financial statements. Nature and Purpose of Reservations and Designations of Fund Equity Reservations of fund balances of the governmental funds indicate the portion of fund equity that is not available for appropriation for expenditure or is legally restricted by outside parties for use for a specific purpose. Designations of fund balance are the representations of management for utilization of resources in future periods. Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net assets are reported as restricted when there are limitations imposed on their use either through the enabling legislations adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. Reclassifications Certain beginning balances have been reclassified to conform with the presentation in the current-year financial statements. NOTE 2. CASH AND INVESTMENTS Cash and investments as of September 30, 2010 consist of the following: Deposits with financial institutions 3,962,744$ Investments 5,268,471 9,231,215$ CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 31 NOTE 2. CASH AND INVESTMENTS – CONTINUED Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by investing mainly in certificates of deposit which purchase a combination of shorter term investments with an average maturity of less than 30 days thus reducing the interest rate risk. The City monitors the interest rate risk inherent in its portfolio by measuring the weighted average maturity of its portfolio. The City has no specific limitations with respect to this metric. As of September 30, 2010, the City had the following investments: Amount Certificate of deposit 5,268,471$ 95 days Investment Type Weighted Average Maturity As of September 30, 2010 the City did not invest in any securities which are highly sensitive to interest rate fluctuations. Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the Public Funds Investment Act, the City’s investment policy, or debt agreements, and the actual rating as of year-end for each investment type. Amount Certificate of deposit 5,268,471$ N/A N/A Investment Type Minimum Legal Rating Rating as of September 30, 2010 Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer. As of September 30, 2010, other than certificates of deposit, the City did not have 5% or more of its investments with one issuer. CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 32 NOTE 2. CASH AND INVESTMENTS – CONTINUED Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The Public Funds Investment Act requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least the bank balance less the FDIC insurance at all times. At September 30, 2010, the carrying amount of the City’s cash on hand and deposits were $3,962,744 and the bank balance was $4,169,438. Of the bank balance, $250,000 was covered by federal depository insurance while the remaining $3,919,438 was secured with securities held by the pledging financial institution's trust department or agent in the City’s name. NOTE 3. RESTRICTED ASSETS Restricted assets are held for the following purposes in accordance with bond ordinances or other legal restrictions for the Enterprise Fund as follows: Debt service - interest and sinking fund 566,042$ Capital improvements 1,324,346 Refundable utility deposits 280,721 2,171,109$ Restricted assets are held for the following purposes in accordance with bond ordinances or other legal restrictions for the Governmental Funds as follows: Debt service 82,975$ Capital improvements 4,036,988 Economic and community development 955,834 5,075,797$ NOTE 4. CAPITAL ASSETS CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 33 Capital asset activity for the year ended September 30, 2010, was as follows: Balance Balance October 1, Additions/ Retirements/ September 30, 2009 Completions Adjustments 2010 Governmental activities Capital assets not being depreciated Land 600,351$ -$ -$ 600,351$ Construction in progress 3,975,123 229,518 (1,165,483) 3,039,158 Total capital assets not being depreciated 4,575,474 229,518 (1,165,483) 3,639,509 Capital assets being depreciated Infrastructure 6,433,265 601,493 (902,794) 6,131,964 Buildings and improvements 2,093,513 859,319 (14,573) 2,938,259 Machinery and equipment 3,148,218 174,218 (672,537) 2,649,899 Total capital assets being depreciated 11,674,996 1,635,030 (1,589,904) 11,720,122 Less accumulated depreciation Infrastructure 3,294,227 437,434 (902,794) 2,828,867 Buildings and improvements 515,795 138,566 - 654,361 Machinery and equipment 1,536,767 223,830 (636,540) 1,124,057 Total accumulated depreciation 5,346,789 799,830 (1,539,334) 4,607,285 Total capital assets being depreciated, net 6,328,207 835,200 (50,570) 7,112,837 Net governmental activities capital assets 10,903,681$ 1,064,718$ (1,216,053)$ 10,752,346$ CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 34 NOTE 4. CAPITAL ASSETS – CONTINUED Balance Balance October 1, Additions/ Retirements/ September 30, 2009 Completions Adjustments 2010 Business-type activities Capital assets not being depreciated Land 312,164$ 11,000$ -$ 323,164$ Construction in progress 2,028,744 151,014 (2,179,758) - Total capital assets not being depreciated 2,340,908 162,014 (2,179,758) 323,164 Capital assets being depreciated Infrastructure 20,039,369 1,748,296 (134,647) 21,653,018 Buildings and improvements 371,856 528,204 (39,928) 860,132 Machinery and equipment 1,915,594 61,883 (572,050) 1,405,427 Total capital assets being depreciated 22,326,819 2,338,383 (746,625) 23,918,577 Less accumulated depreciation Infrastructure 8,982,950 680,524 (141,450) 9,522,024 Buildings and improvements 140,399 11,960 (40,033) 112,326 Machinery and equipment 1,439,566 121,599 (547,059) 1,014,106 Total accumulated depreciation 10,562,915 814,083 (728,542) 10,648,456 Total capital assets being depreciated, net 11,763,904 1,524,300 (18,083) 13,270,121 Net business-type activities capital assets 14,104,812$ 1,686,314$ (2,197,841)$ 13,593,285$ CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 35 NOTE 4. CAPITAL ASSETS – CONTINUED Depreciation expense was charged as direct expense to programs of the primary government as follows: Governmental activities General government 58,007$ Public safety 70,019 Streets and sanitation 497,401 Fire and rescue 96,530 Court 649 Culture and recreation 77,224 Total governmental activities 799,830$ Business-type activities Water 203,188$ Sewer 237,065 Electric 356,182 Other 17,648 Total business-type activities 814,083$ CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 36 NOTE 5. LONG-TERM DEBT At September 30, 2010, the City's bonds and notes payable consisted of the following: Governmental Business-type $1,060,000 Series 1996, Utility System Revenue Bonds, dated May 15, 1996, due in annual installments through 2016, bearing interest rates of 2.85% to 4.75%.-$ 445,000$ $1,735,000 Series 1999, Utility System Revenue Refunding Bonds, dated May 15, 1999, due in annual installments through 2016, bearing interest rates of 4.25% to 4.4%.- 205,000 $2,540,000 Series 2002, Utility System Revenue Bonds, dated June 1, 2002, due in annual installments through 2019, bearing interest rates of 4.5% to 6.0%.- 1,820,000 $2,360,000 Series 2002, Combination Tax and Revenue Certificates of Obligation, dated June 1, 2002, due in annual installments through 2020, bearing interest rates of 4.2% to 5.7%.1,710,000 - $6,500,000 Series 2006, Combination Tax and Revenue Ceritifcates of Obligation, dated August 7, 2006, due in annual installments through 2022, bearing interest rates of 4% to 5%.2,357,500 2,767,500 $1,750,000 Series 2007, Combination Tax and Revenue Certificates of Obligation, dated December 18, 2007, due in annual installments through 2027, bearing interest at 4.4%.537,200 1,042,800 $3,200,000 Series 2009, Combination Tax and Revenue Certificates of Obligation, dated July 30, 2009, due in annual installments through 2026, bearing interest rates of 3% to 4.75%.3,065,000 - Note payable to a financial institution in monthly installments of $1,542 including interest at 6.25%, due January 15, 2012, secured by property financed.26,396 - Note payable to a financial institution in monthly installments of $5,106 including interest at 4.6%, due June 5, 2024, secured by property financed.620,485 - 8,316,581$ 6,280,300$ CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 37 NOTE 5. LONG-TERM DEBT – CONTINUED The following is a summary of long-term debt transactions of the City for the year ended September 30, 2010: Balance Balance Due Beginning End within of Year Increases Decreases of Year One Year Governmental activities Compensated absences 79,584$ 142,608$ (168,594)$ 53,598$ -$ Notes payable 695,108 - (48,227) 646,881 50,775 Certificates of obligation 8,108,082 - (438,382) 7,669,700 446,900 Capital leases 222,777 - (74,581) 148,196 78,035 Total governmental activities 9,105,551 142,608 (729,784) 8,518,375 575,710 Business-type activities Compensated absences 62,056 100,250 (105,973) 56,333 - Notes payable 6,654 - (6,654) - - Revenue bonds 6,861,918 - (581,618) 6,280,300 628,100 Capital leases 592,723 - (97,835) 494,888 118,394 Total business-type activities 7,523,351 100,250 (792,080) 6,831,521 746,494 Total primary government 16,628,902$ 242,858$ (1,521,864)$ 15,349,896$ 1,322,204$ The City issues general obligation bonds, which are direct obligations of the City and pledge the full faith and credit of the City. In prior years, the City issued $1,735,000 in Revenue Refunding Bonds to defease $1,580,000 in Revenue Bonds. Of the $1,580,000 originally defeased, $205,000 remains outstanding at September 30, 2010. For the governmental activities, compensated absences are generally liquidated with resources of the General Fund. General obligation bonds issued for governmental activity purposes are liquidated by the debt service fund. Notes payable issued for governmental activity purposes are liquated by the General Fund. Revenue bonds and notes payable issued for business-type activities are repaid from those activities. CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 38 NOTE 5. LONG-TERM DEBT – CONTINUED The annual requirements to amortize all debts outstanding as of September 30, 2010, are as follows: Revenue Bonds Due Fiscal Year Ending September 30 Principal Interest Total 2011 628,100$ 282,813$ 910,913$ 2012 446,200 255,757 701,957 2013 462,600 236,442 699,042 2014 484,000 216,264 700,264 2015 507,100 195,010 702,110 2016-2020 2,537,500 628,947 3,166,447 2021-2025 1,046,500 128,916 1,175,416 2026-2030 168,300 11,180 179,480 6,280,300$ 1,955,329$ 8,235,629$ Certificates of Obligation Due Fiscal Year Ending September 30 Principal Interest Total 2011 446,900$ 325,083$ 771,983$ 2012 463,800 308,358 772,158 2013 487,400 290,888 778,288 2014 506,000 271,592 777,592 2015 522,900 251,425 774,325 2016-2020 2,972,500 908,832 3,881,332 2021-2025 1,928,500 300,945 2,229,445 2026-2030 341,700 17,872 359,572 7,669,700$ 2,674,995$ 10,344,695$ Notes Payable Due Fiscal Year Ending September 30 Principal Interest Total 2011 50,775$ 28,996$ 79,771$ 2012 44,053 26,466 70,519 2013 36,647 24,620 61,267 2014 38,368 22,898 61,266 2015 40,171 21,096 61,267 2016-2020 231,001 75,332 306,333 2021-2025 205,866 18,164 224,030 646,881$ 217,572$ 864,453$ Business-Type Activities Governmental Activities Governmental Activities CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 39 NOTE 6. CAPITAL LEASE OBLIGATIONS The City has entered into capital lease agreements. The leased property under capital leases is classified as machinery and equipment with a total capitalized cost of approximately $1,248,652 and an amortized value of approximately $878,539 at September 30, 2010. Amortization expense has been included in depreciation expense for the year ended September 30, 2010. The following is a schedule of future minimum payments under the capital leases together with the present value of the net minimum lease payments as of September 30, 2010: 2011 221,712$ 2012 178,156 2013 104,455 2014 104,455 2015 104,453 713,231 Less amount representing interest 70,147 Present value of net minimum lease payments 643,084$ NOTE 7. PENSION PLAN Plan Description The City of Sanger provides pension benefits for all of its full-time employees through a non-traditional, joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement System (TMRS), one of 833 administered by TMRS, an agent multiple-employer public employee retirement system. The plan provisions that have been adopted by the City are within the options available in the governing state statutes of TMRS. Benefits Benefits depend upon the sum of the employee’s contributions to the plan, with interest, and City-financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount equal to two times what would have been contributed by the employee with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent (100%, 150%, 200%) of the employee’s accumulated contributions. In addition, the City can grant as often as annually another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee’s accumulated contributions and the monetary credits for service CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 40 NOTE 7. PENSION PLAN – CONTINUED Benefits – Continued since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and the City matching percent had always been in existence and if the employee’s salary had always been the average of his salary in the last three years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee’s accumulated contributions with interest and the employer-financed monetary credits with interest were used to purchase an annuity. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Plan provisions for the City are as follows: Deposit rate 6% Matching ratio (City to employee) 2-1 A member is vested after 5 years Updated service credit 100% repeating, transfers Annuity increase (to retirees) 0% of CPI repeating Members can retire at certain ages, based on the years of service with the City. The Service Retirement Eligibilities for the City are 5 years at 60 years of age or 20 years at any age. Contributions Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Projected Unit Credit actuarial cost method. This rate consists of the normal cost contribution rate and the prior service cost contribution rate, which is calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the portion of an active member's projected benefit allocated annually; the prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the applicable period for the City. Both the normal cost and prior service contribution rates include recognition of the projected impact of annually repeating benefits, such as Updated Service Credits and Annuity Increases. The City contributes to the TMRS Plan at an actuarially determined rate. Both the employees and the City make contributions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect (i.e., December 31, 2009 valuation is effective for rates beginning January 2011). The annual pension cost is $187,668 for the year ended September 30, 2010, and there is no net pension obligation as of September 30, 2010. CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 41 NOTE 7. PENSION PLAN – CONTINUED Contributions – Continued The required contribution rates for fiscal year 2010 were determined as part of the December 31, 2007 and 2008 actuarial valuations. Additional information as of the latest actuarial valuation, December 31, 2009, also follows: Valuation Date 12/31/07 12/31/08 12/31/09 Actuarial Cost Method Projected Unit Credit Projected Unit Credit Projected Unit Credit Amortization Method Level Percent Level Percent Level Percent of Payroll of Payroll of Payroll Remaining Amortization Period 25 years; 24 years; 23 years; closed period closed period closed period Asset Valuation Method Amortized Cost Amortized Cost 10-Year Smoothed Market Actuarial Assumptions: Investment Rate of Return* 7.0% 7.5% 7.5% Projected Salary Increases* Varies by Varies by Varies by age and service age and service age and service * Includes inflation at 3.0% 3.0% 3.0% Cost of Living Adjustments 0.0% 0.0% 0.0% The funded status as of December 31, 2009, the most recent actuarial valuation date, is as follows: Actuarial Actuarial Actuarial UAAL as a Valuation Value of Accrued Funded Unfunded AAL Covered percentage of Date Assets Liability (AAL)Ratio (UAAL)Payroll Covered Payroll 12/31/09 3,419,092$ 3,973,365$ 86.1% 554,273$ 2,503,067$ 22.1% The schedule of funding progress, presented as Required Supplementary Information following the notes to basic 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 of benefits. The City is one of 833 municipalities having the benefit plan administered by TMRS. Each of the 833 municipalities has an annual, individual actuarial valuation performed. All assumptions for the December 31, 2009 valuations are contained in the 2009 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153 or by calling 800-924-8677; in addition, the report is available on TMRS' website at www.TMRS.com. CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 42 NOTE 8. COMMITMENTS The City entered into a three (3) year contract in 2009 with the AEP Energy Partners, Inc. for the delivery of electricity. Payments under this contract are based on meter readings charged per month. The City had outstanding encumbrances totaling $40,887 as of September 30, 2010. In January 2011, the City entered into a contract totaling $2,958,566 for the construction of a sports complex. NOTE 9. INTERFUND TRANSFERS All interfund transfers between the various funds are approved supplements to the operations of those funds. Transfers In Transfers Out Amount General fund 4A fund 20,000$ General fund 4B fund 20,000 General fund Capital projects fund 14,680 General fund Debt service fund 104,115 Debt service fund 4B fund 180,000 Enterprise fund Capital projects fund 231,245 570,040$ Transfers are primarily used to move funds from: − The 4A and 4B funds to the general fund for payment of administrative costs. − The capital projects fund to the general fund for security cameras purchased through the general fund. − The debt service fund to the general fund to pay the debt paid for from the general fund. − 4B fund to the debt service fund to service the debt related to the 4B fund. − Capital projects fund to the enterprise fund for completed assets transferred to the enterprise fund. CITY OF SANGER, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS 43 NOTE 10. RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City insures its buildings and contents, law enforcement liability, public officials' liability, general liability and auto liability under a renewable one year policy with the Texas Municipal League. The City insures its workers compensation risk by participating in the Texas Municipal League Intergovernmental Risk Pool which is a self-insurance policy mechanism for political subdivisions in Texas. Rates are set by the State Insurance Board. Each participant's contribution to the pool is adjusted based on its workers' compensation history. The City is responsible only to the extent of premiums paid and contributions made to Texas Municipal League and the Intergovernmental Risk Pool. There have been no significant changes in insurance coverage as compared to last year and settlements have not exceeded coverage in each of the past three fiscal years. NOTE 11. CONDUIT DEBT The City issued notes payable totaling $34,626,407 for the purpose of assisting with financing needed by not-for-profit organizations to promote their cause. Final maturities on the notes payable range from March 2017 through July 2040. The notes are secured by various assets of the borrower. The total amount outstanding on all of the notes payable is $34,151,507 as of September 30, 2010. The City has no liability for the notes payable in the event of default by the borrowers. Accordingly, the bonds are not reported as liabilities in the City’s financial statements. NOTE 12. PLEDGED REVENUES The City has pledged revenues derived from the operation of the utility system, net of operating and maintenance expenses, to repay $9,995,000 in utility revenue bonds. The total amount of outstanding principal as of September 30, 2010 was $6,280,300. Proceeds from the bonds provided financing for improvements to the utility system, as well as refunding a $1,735,000 bond. The bonds are payable solely from the net earnings of the utility system and are payable through 2022. The total principal and interest remaining to be paid on the bonds is $8,235,630. Principal and interest paid for the current year and net utility system revenues were $906,739 and $964,628, respectively. REQUIRED SUPPLEMENTARY INFORMATION CITY OF SANGER, TEXAS SCHEDULE OF FUNDING PROGRESS FOR PARTICIPATION IN TEXAS MUNICIPAL RETIREMENT SYSTEM YEAR ENDED SEPTEMBER 30, 2010 44 Unfunded Actuarial Unfunded Accrued Liability Actuarial Actuarial Actuarial Actuarial Annual as a Valuation Value of Accrued Percentage Accrued Covered Percentage of Date Assets Liability Funded Liability Payroll Covered Payroll 12/31/07 2,594,197$ 3,268,266$ 79.4% 674,069$ 2,420,270$ 27.9% 12/31/08 2,981,655 3,457,019 86.2% 475,364 2,495,573 19.0% 12/31/09 3,419,092 3,973,365 86.1% 554,273 2,503,067 22.1% CITY OF SANGER, TEXAS BUDGETARY COMPARISON SCHEDULE – GENERAL FUND YEAR ENDED SEPTEMBER 30, 2010 45 Variance with Actual Final Budget Original Final Amount Over / (Under) Revenues Property taxes 1,501,390$ 1,501,390$ 1,587,954$ 86,564$ Sales taxes 500,000 500,000 472,352 (27,648) Licenses and permits 88,525 88,525 44,635 (43,890) Charges for services 652,377 652,377 723,374 70,997 Fire and rescue 775,000 775,000 451,346 (323,654) Court 215,925 215,925 210,965 (4,960) Franchise taxes 559,500 559,500 527,872 (31,628) Interest 40,000 40,000 17,982 (22,018) Miscellaneous revenues 108,600 108,600 99,955 (8,645) Total revenues 4,441,317 4,441,317 4,136,435 (304,882) Expenditures Current General government 751,145 751,145 555,668 (195,477) Public safety 1,159,319 1,194,319 1,206,731 12,412 Streets and sanitation 1,013,147 1,013,147 762,615 (250,532) Fire and rescue 890,114 890,114 559,344 (330,770) Court 244,311 244,311 193,877 (50,434) Culture and recreation 776,909 776,909 387,810 (389,099) Principal - - 90,877 90,877 Interest and other - - 13,238 13,238 Capital outlay - - 349,030 349,030 Total expenditures 4,834,945 4,869,945 4,119,190 (750,755) Excess (deficiency) of revenues over expenditures (393,628) (428,628) 17,245 445,873 Other financing sources (uses) Proceeds on sale of assets - - 17,315 17,315 Operating transfers in 225,000 369,115 158,795 (210,320) Total other financing sources (uses)225,000 369,115 176,110 (193,005) Excess (deficiency) of revenues and other financing sources over expenditures and other financing uses (168,628) (59,513) 193,355 252,868 FUND BALANCE, beginning of year 545,655 545,655 545,655 - FUND BALANCES, end of year 377,027$ 486,142$ 739,010$ 252,868$ Budgeted Amounts SUPPLEMENTARY INFORMATION CITY OF SANGER, TEXAS COMBINING SCHEDULE OF REVENUES AND EXPENSES PROPRIETARY FUND BY DEPARTMENT YEAR ENDED SEPTEMBER 30, 2010 46 Water Sewer Electric OPERATING REVENUES Charges for services 1,095,408$ 907,980$ 7,295,442$ Connection fees - - 62,532 Tap fees 30,500 22,000 - Miscellaneous - - - Total operating revenue 1,125,908 929,980 7,357,974 OPERATING EXPENSES Salaries and wages 249,302 148,454 475,068 Purchased professional and technical services 2,682 5,001 4,231 Utilities 141,572 171,921 11,894 Materials and supplies 15,068 12,314 37,095 Water and electric purchases 230,080 - 4,723,499 Franchise fees - - 354,842 Depreciation 220,836 237,065 356,182 Repairs and maintenance 102,665 131,177 128,445 Bad debt expense 35,854 8,963 111,076 Total operating expenses 998,059 714,895 6,202,332 Operating income (loss) 127,849 215,085 1,155,642 NONOPERATING REVENUES (EXPENSES) Interest and investment income - - - Interest and amortization expense (168,148) (96,561) (138,356) Gain/loss on sale of asset - - - Total nonoperating revenues (expenses)(168,148) (96,561) (138,356) Income (loss) before transfers (40,299) 118,524 1,017,286 Transfers in - - 231,245 CHANGE IN NET ASSETS (40,299)$ 118,524$ 1,248,531$ 47 Fleet Data Services Administration Processing Total -$ 2,789$ -$ 9,301,619$ - - - 62,532 - - - 52,500 - 42,276 - 42,276 - 45,065 - 9,458,927 30,442 220,217 158,887 1,282,370 12 65,409 31,271 108,606 4,469 6,006 4,732 340,594 6,767 22,198 13,489 106,931 - - - 4,953,579 - - - 354,842 - - - 814,083 3,442 4,066 7,606 377,401 - - - 155,893 45,132 317,896 215,985 8,494,299 (45,132) (272,831) (215,985) 964,628 - 37,360 - 37,360 - - - (403,065) - 11,814 - 11,814 - 49,174 - (353,891) (45,132) (223,657) (215,985) 610,737 - - - 231,245 (45,132)$ (223,657)$ (215,985)$ 841,982$ CITY OF SANGER, TEXAS ANALYSIS OF PROPERTY TAXES RECEIVABLE YEAR ENDED SEPTEMBER 30, 2010 WITH COMPARATIVE TOTALS FOR FOUR YEARS PRIOR 48 2010 2009 2008 2007 2006 Adjusted tax roll 2,256,987$ 2,308,903$ 2,118,117$ 2,014,381$ 1,785,686$ Less collections 2,216,114 2,256,275 2,078,588 1,961,241 1,752,921 Current year property taxes receivable 40,873 52,628 39,529 53,140 32,765 Prior year property taxes receivable 79,796 74,407 71,283 66,629 61,995 Total property taxes receivable, gross (1) 120,669$ 127,035$ 110,812$ 119,769$ 94,760$ Total assessed property value 364,030,183$ 341,028,251$ 336,831,151$ 341,154,524$ 312,822,804$ Tax rate per $100 0.62000$ 0.62000$ 0.59960$ 0.59046$ 0.59083$ Percent of current taxes collected to billed 98.19% 97.72% 98.13% 97.36% 98.17% (1) before deducting allowance for doubtful accounts Fiscal Year