2014 Annual Financial ReportANNUAL FINANCIAL REPORT
of the
City of Sanger, Texas
For the Year Ended
September 30, 2014
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City of Sanger, Texas
TABLE OF CONTENTS
September 30, 2014
FINANCIAL SECTION
Independent Auditor’s Report 1
Management’s Discussion and Analysis 7
Basic Financial Statements
Government-Wide Financial Statements
Statement of Net Position 19
Statement of Activities 20
Fund Financial Statements
Governmental Funds:
Balance Sheet 22
Reconciliation of the Balance Sheet to the Statement of Net Position-
Governmental Funds 23
Statement of Revenues, Expenditures, and Changes in Fund Balance-
Governmental Funds 24
Reconciliation of the Statement of Revenues, Expenditures, and
Changes in Fund Balances of Governmental Funds to the Statement
of Activities 25
Proprietary Funds:
Statement of Net Position 26
Statement of Revenues, Expenses, and Changes in Fund Net Position 27
Statement of Cash Flows 28
Notes to Financial Statements 31
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Revenues, Expenditures, and Changes in Fund Balances-
Budget and Actual -General Fund 59
Schedule of Funding Progress-Texas Municipal Retirement System 61
COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS
Combining Balance Sheet -Nonmajor Governmental Funds 62
Combining Statement of Revenues, Expenditures, and Changes
in Fund Balances -Nonmajor Governmental Funds 63
Combining Statement of Revenues, Expenses, and Changes
in Fund Net Position -Proprietary Funds –by Department 64
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Bro oksCardiel,PLLC
Certified Public Accountants
1095 Evergreen Circle | Suite 200 | The Woodlands, TX 77380 |Tel: 281.907.8788 | Fax: 888.875.0587 | www.BrooksCardiel.com
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and
Members of the City Council
City of Sanger, Texas:
Report on the Financial Statements
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, 2014, and the
related notes to the financial statements, which collectively comprise the City’s basic financial
statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
The City’s 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.
Auditor’s Responsibility
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 from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
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 entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. Accordingly, we express no such opinion. An audit also includes
2
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, 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 as of September 30, 2014,
and the respective changes in financial position and, where applicable, cash flows thereof 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
management’s discussion and analysis and schedules of funding progress presented to
supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board, who
considers it to be an essential part of financial reporting for placing the basic financial
statements in an appropriate operational, economic, or historical context. We have applied
certain limited procedures to the required supplementary information in accordance with
auditing standards generally accepted in the United States of America, which consisted of
inquiries of management about the methods of preparing the information and comparing the
information for consistency with management’s responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial
statements. In our opinion, the information is fairly stated in all material respects in relation to
the financial statements as a whole.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise City of Sanger, Texas’s basic financial statements. The combining and
individual nonmajor fund financial statements are presented for purposes of additional analysis
and are not a required part of the basic financial statements.
The combining and individual nonmajor fund financial statements are the responsibility of
management and were derived from and relate directly to the underlying accounting and other
3
records used to prepare the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit o f 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. In our opinion, the
combining and individual nonma jor fund financial statements are fairly stated, in all material
respects, in relation to the basic financial statements as a whole.
BrooksCardiel, PLLC
Certified Public Accountants
The Woodlands, Texas
February 26, 2015
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MANAGEMENT'S DISCUSSION
AND ANALYSIS
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City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)
September 30, 2014
7
As management of the City of Sanger, Texas (the “City”), we offer readers of the City’s financial
statements this narrative overview and analysis of the financial activities of the City for the fiscal year
ended September 30, 2014.
Financial Highlights
The City's total combined net position is $26,300,291 at September 30,2014.Of this, $7,524,908
(unrestricted net position) may be used to meet the City’s ongoing obligations to its citizens and
creditors.
At the close of the current fiscal year, the City’s governmental funds reported combined fund
balances of $4,090,197, an increase of $139,442.
As of the end of the year, the unassigned fund balance of the general fund was $1,100,802 or
20%of total general fund expenditures.
The City had an overall increase in net position of $1,995,064, which is primarily due to strong
general and utility revenues.
Overview of the Financial Statements
The discussion and analysis provided here are intended to serve as an introduction to the City’s basic
financial statements. The City’s basic financial statements consist of three components: 1) government-
wide financial statements, 2) fund financial statements, and 3) the notes to financial statements. This
report also includes supplementary information intended to furnish additional detail to support the
basic financial statements themselves.
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 a private-sector business.
The statement of net position presents information on all of the City’s assets, liabilities, and deferred
inflows/outflows 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 City is improving or
deteriorating. Other non-financial factors, such as the City’s property tax base and the condition of the
City’s infrastructure, need to be considered in order to assess the overall health of the City.
The statement of activities presents information showing how the City’s 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
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2014
8
are reported 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 City 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 City include general government, public safety, public
works, and culture and recreation. The business-type activities of the City include water, sewer and
electric operations.
The government-wide financial statements include not only the City itself (known as the primary
government), but also the legally separate Sanger Industrial Development Corporation (“4A fund”) and
the Sanger Texas Development Corporation (“4B fund”), for which the City is financially accountable.
Both corporations, although legally separate, function for all practical purposes as a department of the
City and therefore have been included as an integral part of the primary government.
FUND FINANCIAL STATEMENTS
Funds may be considered as operating companies of the parent corporation,which is the City of
Sanger. They are usually segregated for specific activities or objectives. The City of Sanger uses fund
accounting to ensure and demonstrate compliance with finance-related legal reporting requirements.
The two categories of City funds are governmental and proprietary.
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 year. Such
information may be useful in evaluating the City’s near-term financing requirements.
Because the focus of 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 government’s near-term financing
decisions. Both the governmental fund balance sheet and the governmental fund statement of
revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this
comparison between governmental funds and governmental activities.
The City of Sanger maintains five individual governmental funds. Information is presented separately
in the governmental fund balance sheet and in the governmental fund statement of revenues,
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2014
9
expenditures, and changes in fund balances for the general and capital projects funds which are
considered to be major funds.
The City of Sanger adopts an annual appropriated budget for all funds. A budgetary comparison
schedule has been provided to demonstrate compliance with general fund budget.
Proprietary Funds
The City maintains one type of proprietary fund which is considered an enterprise fund. Enterprise
funds are used to report the same functions presented as business-type activities in the government-
wide financial statements. The City uses enterprise funds to account for its water distribution,
wastewater collection/treatment, water and wastewater construction operations and electric services.
The proprietary fund financial statements provide separate information for the water distribution,
wastewater collection/treatment fund,and electric funds. The basic proprietary fund financial
statements can be found in the basic financial statements of this report.
Notes to Financial Statements
The notes to the financial statements provide additional information that is essential to a full
understanding of the data provided in the government-wide and fund financial statements. The notes
are the last section of the basic financial statements.
Other Information
In addition to the basic financial statements, MD&A, and accompanying notes, this report also presents
certain Required Supplementary Information (RSI). The RSI that GASB Statement No. 34 requires
includes a budgetary comparison schedule for the general fund and schedule of funding progress for
Texas Municipal Retirement System. RSI can be found after the basic financial statements.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted previously, net position may serve over time as a useful indicator of the City’s financial
position. For the City of Sanger, assets exceed liabilities by $26,300,291 as of September 30, 2014,in the
primary government.
The largest portion of the City’s net position,$15,816,158,reflects its investments in capital assets (e.g.,
land, city hall, police station, streets, and drainage systems, as well as the public works facilities),less
any debt used to acquire those assets that are 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 assets themselves
cannot be used to liquidate these liabilities.
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2014
10
An additional portion of the City’s net position,$2,959,225, represents resources that are subject to
external restrictions on how they may be used. The remaining balance of $7,524,908 is unrestricted and
may be used to meet the government’s ongoing obligations to its citizens and creditors.
Statement of Net Position:
The following table reflects the condensed Statement of Net Position:
Current and
other assets $4,717,408 $11,671,252 $16,388,660 $4,584,966 $11,606,584 $16,191,550
Capital assets, net 15,020,169 12,430,202 27,450,371 14,290,588 12,214,647 26,505,235
Total Assets 19,737,577 24,101,454 43,839,031 18,875,554 23,821,231 42,696,785
of Resources 25,919 58,344 84,263 29,831 67,151 96,982
Other liabilities 515,587 1,245,675 1,761,262 537,988 1,214,889 1,752,877
Long-term liabilities 7,406,622 8,455,119 15,861,741 7,671,899 9,063,764 16,735,663
Total Liabilities 7,922,209 9,700,794 17,623,003 8,209,887 10,278,653 18,488,540
Net Position:
Net investment
net of related debtin capital assets 7,753,708 8,062,450 15,816,158 7,296,541 7,230,125 14,526,666
Restricted 2,959,225 - 2,959,225 2,875,890 - 2,875,890
Unrestricted 1,128,354 6,396,554 7,524,908 523,067 6,379,604 6,902,671
Total Net Position $11,841,287 $14,459,004 $26,300,291 $10,695,498 $13,609,729 $24,305,227
2014 2013
Governmental Business-Type
Activities Activities
Governmental Business-Type
ActivitiesActivities Total
Deferred Outflows
Total
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2014
11
Statement of Activities:
The following table provides a summary of the City’s changes in net position:
Revenues
Program revenues:
Charges for services $1,572,344 $10,565,602 $12,137,946 $1,564,364 $10,553,808 $12,118,172
Grants and contributions 364,763 260,250 625,013 219,727 - 219,727
General revenues:
Property taxes 2,816,275 - 2,816,275 2,495,024 - 2,495,024
Sales taxes 1,361,774 - 1,361,774 1,265,031 - 1,265,031
Franchise and local taxes 229,018 - 229,018 167,494 - 167,494
Investment income 4,316 14,047 18,363 4,013 15,630 19,643
Other revenues 255,348 31,240 286,588 168,618 - 168,618
Total Revenues 6,603,838 10,871,139 17,474,977 5,884,271 10,569,438 16,453,709
Expenses
General government 1,523,127 - 1,523,127 1,483,872 - 1,483,872
Public safety 2,396,415 - 2,396,415 2,260,904 - 2,260,904
Public works 1,235,621 - 1,235,621 1,351,685 - 1,351,685
Culture and recreation 714,581 - 714,581 681,730 - 681,730
Interest and fiscal charges 287,657 341,421 629,078 308,171 177,384 485,555
Water, sewer, & electric - 8,981,091 8,981,091 - 8,933,392 8,933,392
Total Expenses 6,157,401 9,322,512 15,479,913 6,086,362 9,110,776 15,197,138
Change in Net Position
Before Transfers 446,437 1,548,627 1,995,064 (202,091)1,458,662 1,256,571
Transfers 699,352 (699,352) - 911,278 (911,278)-
Total 699,352 (699,352) - 911,278 (911,278)-
Change in Net Position 1,145,789 849,275 1,995,064 709,187 547,384 1,256,571
Beginning Net Position 10,695,498 13,609,729 24,305,227 9,986,311 13,062,345 23,048,656
Ending Net Position $11,841,287 $14,459,004 $26,300,291 $10,695,498 $13,609,729 $24,305,227
Primary
Total
Primary Governmental
ActivitiesGovernment
For the Year Ended September 30, 2014
Business-Type
Government
For the Year Ended September 30, 2013
Total
Activities
Business-TypeGovernmental
Activities Activities
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2014
12
Graphic presentations of selected data from the summary tables are displayed below to assist in the
analysis of the City’s activities.
For the year ended September 30, 2014, revenues from governmental activities totaled $6,603,838.
Property tax, sales tax and charges for services are the City’s largest revenue sources. Property tax
increased by $321,251 or 13%due to higher property values and an increase in the property tax rate.
Sales tax increased $96,743 or 8%due to an overall increase in the economy and spending within the
City limits. Grants and contributions increased by $145,036 due to grant revenue received from Denton
County for the repair and construction of McReynolds road. All other revenues remained relatively
stable when compared to the previous year.
This graph shows the governmental function expenses of the City:
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2014
13
For the year ended Se ptember 30, 2014, expenses for governmental activities totaled $6,157,401. This
represents an increase of $71,039 or 1% from the prior year. The City’s largest functional expense is
public safety of $2,396,415 which includes police, fire and EMS services plus depreciation of related
capital assets.All expenditures remained relatively consistent with the previous year.
Business-type activities are shown comparing operating costs to revenues generated by related
services.
For the year ended September 30, 2014, charges for services by business-type activities totaled
$10,565,602. This is an increase of $11,794, or less than 1%, from the previous year.Grants increased by
$260,250 due to a CDBG grant project for sanitary sewer improvements.
Total expenses increased $211,736 due primarily to an increase in interest expense on bonds and long-
term debt. All other expenses remained relatively consistent.
FINANCIAL ANALYSIS OF THE CITY’S FUNDS
As noted earlier, fund accounting is used to demonstrate and ensure compliance with finance-related
legal requirements.
Governmental Funds -The focus of the City’s governmental funds is to provide information of near-
term inflows, outflows and balances of spendable resources. Such information is useful in assessing
the City’s financing requirements. In particular, unreserved fund balance may serve as a useful
measure of the City’s net resources available for spending at the end of the year.
As of the end of the year the general fund reflected a total fund balance of $1,236,078. Of this, $7,513 is
restricted for municipal court, $24,648 is restricted for tourism and $72,945 is restricted for library
improvements.Unassigned fund balance totaled $1,100,802 as of year end.
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2014
14
There was an increase in governmental fund balance of $139,442 over the prior year. The increase was
primarily related to the increase in property and sales tax previously discussed. The City also had a
combination of higher than budgeted revenues and an overall positive budget variance for the year.
Proprietary Funds -The City’s proprietary funds provide the same type of information found in the
government-wide financial statements, but in more detail.
GENERAL FUND BUDGETARY HIGHLIGHTS
There was a total positive budget variance of $148,320 in the general fund. This is a combination of a
positive a revenue variance of $93,985, a positive expenditure variance of $91,025,and a negative
variance of $36,690 in other financing sources and uses.
CAPITAL ASSETS
As of the end of the year, the City’s governmental activities funds had invested $15,020,169 in a variety
of capital assets and infrastructure, net of accumulated depreciation. Depreciation is included with the
governmental capital assets as required by GASB Statement No. 34.The City’s business-type activities
funds had invested $12,430,202 in a variety of capital assets and infrastructure, net of accumulated
depreciation.
Major capital asset events during the current year include the following:
Construction additions to a splash park totaling of $538,973
McReynolds road construction in the amount of $310,300
Freese sidewalk repair and improvements of $230,479
Machinery and equipment additions for the streets department $530,573
Jones & Willow Trunk Line construction of $496,063
International Digger Truck addition for the electric department of $190,309
More detailed information about the City’s capital assets is presented in note IV. C to the financial
statements.
LONG-TERM DEBT
At the end of the current year, the City had total bonds outstanding of $14,010,000, notes payable of
$479,210 and capital leases of $779,105. During the year, the City had principal payments on bonds,
notes payable and capital leases of $1,503,041. During the year, the City entered into new capital lease
agreements totaling $625,309. More detailed information about the City’s long-term liabilities is
presented in note IV. D to the financial statements.
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2014
15
ECONOMIC FACTORS AND NEXT YEAR’S BUDGET
The Mayor and City Council are committed to maintaining and improving the overall wellbeing of the
City of Sanger and improving services provided to their public citizens. The City is budgeting for
growth in the upcoming year.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide a general overview of the City of Sanger’s finances for all
those with an interest in the City’s finances. Questions concerning this report or requests for additional
financial information should be directed to the City Manager at the City of Sanger City Hall at 502 Elm
Street, Sanger, Texas 76266.
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FINANCIAL STATEMENTS
17
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Cash and cash equivalents $1,379,603 $1,657,137 $3,036,740
Investments 410,369 410,852 821,221
Restricted cash 1,676,914 7,044,030 8,720,944
Restricted investments 480,916 579,429 1,060,345
Receivables, net 769,606 1,550,473 2,320,079
Inventory - 429,331 429,331
Capital assets:
Non-depreciable 1,323,422 1,135,765 2,459,187
Net depreciable capital assets 13,696,747 11,294,437 24,991,184
15,020,169 12,430,202 27,450,371
19,737,577 24,101,454 43,839,031
Deferred Outflows of Resources
Deferred charge on refunding 25,919 58,344 84,263
Total Deferred Outflows of Resources 25,919 58,344 84,263
Liabilities
Accounts payable and
accrued liabilities 418,431 840,147 1,258,578
Unearned revenue 34,920 - 34,920
Deferred rental revenue 9,034 - 9,034
Accrued interest payable 53,202 54,034 107,236
Customer deposits - 351,494 351,494
Noncurrent liabilities:
Due within one year 880,780 852,856 1,733,636
Due in more than one year 6,525,842 7,602,263 14,128,105
7,406,622 8,455,119 15,861,741
7,922,209 9,700,794 17,623,003
Net investment in capital assets 7,753,708 8,062,450 15,816,158
Restricted for:
Debt service 372,961 - 372,961
Capital projects 550,117 - 550,117
Economic development 1,931,041 - 1,931,041
Other purposes 105,106 - 105,106
Unrestricted 1,128,354 6,396,554 7,524,908
$11,841,287 $14,459,004 $26,300,291
See Notes to Financial Statements.
Primary Government
Business-Type
Total Assets
City of Sanger, Texas
STATEMENT OF NET POSITION
September 30, 2014
Activities Activities Total
Governmental
Net Position
Total Net Position
Total Liabilities
Assets
19
Capital
Grants and
Contributions
Primary Government
Governmental Activities
General government $1,523,127 $856,457 $6,634 $-
Public safety 2,396,415 715,887 76,338 281,791
Public works 1,235,621 - - -
Culture and recreation 714,581 - - -
Interest and fiscal charges 287,657 - - -
6,157,401 1,572,344 82,972 281,791
Business-Type Activities
Water 927,386 1,374,672 - -
Sewer 669,601 1,253,143 - 260,250
Electric 6,581,113 7,937,787 - -
Fleet services 101,102 - - -
Utility administration 1,043,310 - - -
Total Business-Type Activities 9,322,512 10,565,602 - 260,250
Total Primary Government $15,479,913 $12,137,946 $82,972 542,041
General Revenues:
Taxes
Property taxes
Sales taxes
Franchise and local taxes
Investment income
Other revenues
Gain on sale of assets
Insurance recoveries
Transfers
Change in Net Position
Beginning Net Position
Ending Net Position
See Notes to Financial Statements.
Charges for Grants and
City of Sanger, Texas
STATEMENT OF ACTIVITIES
Operating
For the Year Ended September 30, 2014
Program Revenues
Expenses Contributions
Total Governmental Activities
Functions/Programs Services
Total General Revenues and Transfers
20
$(660,036) $- $(660,036)
(1,322,399) - (1,322,399)
(1,235,621) - (1,235,621)
(714,581) - (714,581)
(287,657) - (287,657)
(4,220,294) - (4,220,294)
- 447,286 447,286
- 843,792 843,792
- 1,356,674 1,356,674
- (101,102) (101,102)
- (1,043,310) (1,043,310)
- 1,503,340 1,503,340
(4,220,294) 1,503,340 (2,716,954)
2,816,275 - 2,816,275
1,361,774 - 1,361,774
229,018 - 229,018
4,316 14,047 18,363
114,695 31,240 145,935
21,862 - 21,862
118,791 - 118,791
699,352 (699,352) -
5,366,083 (654,065)4,712,018
1,145,789 849,275 1,995,064
10,695,498 13,609,729 24,305,227
$11,841,287 $14,459,004 $26,300,291
Governmental
Total
Business-Type
Activities
Net (Expense) Revenue and Changes in Net Position
Primary Government
Activities
21
Cash and cash equivalents $789,668 $419,901 $170,034 $1,379,603
Investments 410,369 - - 410,369
Restricted cash 35,071 - 1,641,843 1,676,914
Restricted investments 112,731 - 368,185 480,916
Receivables, net 459,377 166,342 143,887 769,606
Due from other funds - - 212,500 212,500
$1,807,216 $586,243 $2,536,449 $4,929,908
Liabilities
Accounts payable and
accrued liabilities $382,287 $36,126 $18 $418,431
Due to other funds - - 212,500 212,500
Unearned revenue 34,920 - - 34,920
417,207 36,126 212,518 665,851
Deferred Inflows of Resources
Unavailable revenue
Property taxes 43,237 - 19,929 63,166
EMS revenue 110,694 - - 110,694
Total Deferred Inflows of Resources 153,931 - 19,929 173,860
Restricted for:
Municipal court 7,513 - - 7,513
Tourism 24,648 - - 24,648
Library 72,945 - - 72,945
Debt service - - 372,961 372,961
Capital projects - 550,117 - 550,117
Economic development - - 1,931,041 1,931,041
Committed for:
Employee benefits 30,170 - - 30,170
Unassigned reported in:
General fund 1,100,802 - - 1,100,802
1,236,078 550,117 2,304,002 4,090,197
$1,763,979 $586,243 $2,516,520 $4,692,882
See Notes to Financial Statements.
Governmental
City of Sanger, Texas
BALANCE SHEET
GOVERNMENTAL FUNDS
September 30, 2014
Total
Total Liabilities and Fund Balances
Total Fund Balances
Total Assets
Fund Balances
Nonmajor
Total Liabilities
Assets
Governmental
Capital
Projects FundsGeneral
22
Fund Balances - Total Governmental Funds $4,090,197
Adjustments for the Statement of Net Position:
Capital assets used in governmental activities are not current financial
resources and, therefore, not reported in the governmental funds.
Capital assets - non-depreciable 1,323,422
Capital assets - net depreciable 13,696,747
Other long-term assets are not available to pay for current-period
expenditures and, therefore, are deferred in the governmental funds.
Property tax receivable 63,166
EMS receivable 110,694
Deferred outflows of resources, represent a consumption of net position that
applies to a future period(s) and is not recognized as an outflow of resources
(expense/ expenditure) until then.
Deferred charge on refunding 25,919
Escalating payments for rent income are recorded when received as current
financial resources in the fund financial statements whereas they are
deferred and recorded ratably over the life of the lease in the government-wide
financial statements.(9,034)
Some liabilities, including bonds payable and deferred charges, are not reported as
liabilities in the governmental funds.
Accrued interest (53,202)
Bond premium (76,025)
Non-current liabilities due in one year (880,780)
Non-current liabilities due in more than one year (6,449,817)
$11,841,287
See Notes to Financial Statements.
Net Position of Governmental Activities
City of Sanger, Texas
RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION
GOVERNMENTAL FUNDS
September 30, 2014
23
Revenues
Property tax $2,072,522 $- $745,007 $2,817,529
Sales tax 682,502 - 679,272 1,361,774
Franchise and local taxes 229,018 - - 229,018
License and permits 85,887 - - 85,887
Charges for services 770,570 - - 770,570
Fire and rescue 535,916 - - 535,916
Contributions and donations 6,634 - - 6,634
Intergovernmental 76,338 281,791 - 358,129
Fines and forfeitures 178,884 - 1,087 179,971
Investment income 2,681 250 1,385 4,316
Other revenue 5,528 - 93,680 99,208
4,646,480 282,041 1,520,431 6,448,952
Expenditures
Current:
General government 1,219,171 - 1,153 1,220,324
Police department 1,370,481 - - 1,370,481
Municipal court 224,283 - - 224,283
Fire and EMS 802,456 - - 802,456
Parks and recreation 444,774 - - 444,774
Public works 627,055 - - 627,055
Debt service:
Principal 99,019 - 612,606 711,625
Interest 7,977 - 284,762 292,739
Capital outlay 675,757 1,225,392 - 1,901,149
5,470,973 1,225,392 898,521 7,594,886
(824,493) (943,351) 621,910 (1,145,934)
Other Financing Sources (Uses)
Transfers in 836,752 437,100 212,500 1,486,352
Transfers (out)(437,100) - (349,900)(787,000)
Capital lease 435,000 - - 435,000
Proceeds from sale of capital assets 21,862 - - 21,862
Insurance recoveries 129,162 - - 129,162
985,676 437,100 (137,400)1,285,376
161,183 (506,251)484,510 139,442
Beginning fund balances 1,074,895 1,056,368 1,819,492 3,950,755
$1,236,078 $550,117 $2,304,002 $4,090,197
See Notes to Financial Statements.
Total
Capital
General
Total Revenues
Excess of Revenues Over (Under)
Expenditures
City of Sanger, Texas
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
GOVERNMENTAL FUNDS
For the Year Ended September 30, 2014
Funds
GovernmentalNonmajor
Projects
Ending Fund Balances
Total Other Financing Sources (Uses)
Total Expenditures
Net Change in Fund Balances
Governmental
24
Amounts reported for governmental activities in the statement of activities are
different because:
Net changes in fund balances - total governmental funds $139,442
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.
Capital outlay 1,901,757
Capital disposals, net (10,371)
Depreciation expense (1,161,805)
Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the funds.
Property tax receivable (20,427)
EMS receivable 19,173
Governmental funds recognize escalating rental income as received. However,
in the statement of activities, the rent is deferred and recognized ratably over the
term of the lease agreement.15,487
Some expenses reported in the statement of activities do not require the use of
current financial resources and, therefore, are not reported as expenditures
in governmental funds.
Compensated absences (19,174)
Accrued interest 1,168
The issuance of long-term debt (e.g., bonds, leases, certificates of obligation)
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 position. Also, governmental funds report the effect of issuance
costs, premiums, discounts, and similar items when they are first issued; whereas,
these amounts are deferred and amortized in the statement of activities.
This amount is the net effect of these differences in the treatment of long-term
debt and related items.
Amortization of deferred charges on refunding (3,912)
Amortization of premium 7,826
Debt issued (435,000)
Principal payments 711,625
$1,145,789
See Notes to Financial Statements.
Change in Net Position of Governmental Activities
For the Year Ended September 30, 2014
City of Sanger, Texas
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE
STATEMENT OF ACTIVITIES
25
Current Assets
Cash and cash equivalents $1,657,137
Investments 410,852
Restricted cash 7,044,030
Restricted investments 579,429
Receivables, net 1,550,473
Inventory 429,331
11,671,252
Noncurrent Assets
Capital assets:
Non-depreciable 1,135,765
Net depreciable capital assets 11,294,437
12,430,202
24,101,454
Deferred charge on refunding 58,344
Total Deferred Outflows of Resources 58,344
Current Liabilities
Accounts payable and accrued liabilities 840,147
Accrued interest 54,034
Customer deposits 351,494
Compensated absences-current 71,544
Bonds and capital leases payable-current 781,312
2,098,531
Noncurrent Liabilities
Compensated absences 7,949
Bonds and capital leases payable 7,594,314
9,700,794
Net investment in capital assets 8,062,450
Unrestricted 6,396,554
$14,459,004
See Notes to Financial Statements.
Total Net Position
Net Position
Total Noncurrent Assets
Total Assets
Liabilities
Total Current Liabilities
Total Liabilities
Deferred Outflows of Resources
City of Sanger, Texas
STATEMENT OF NET POSITION
PROPRIETARY FUND
September 30, 2014
Assets
Total Current Assets
Water, Sewer
& Electric
26
Operating Revenues
Charges for services $10,336,161
Connection fees 50,491
Tap fees 178,950
Other revenue 31,240
10,596,842
Operating Expenses
Salaries and wages 1,577,363
Contracted services 197,793
Utilities 317,835
Materials and supplies 105,904
Water and electric purchases 5,500,970
Repairs and maintenance 406,955
Depreciation 874,271
8,981,091
1,615,751
Nonoperating Revenues (Expenses)
Intergovernmental 260,250
Investment income 14,047
Interest expense (341,421)
(67,124)
1,548,627
Transfers (out)(699,352)
849,275
13,609,729
$14,459,004
See Notes to Financial Statements.
Ending Net Position
Total Operating Revenues
Total Operating Expenses
Change in Net Position
Operating Income
Total Nonoperating Revenues (Expenses)
Income Before Transfers
Beginning net position
City of Sanger, Texas
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION
For the Year Ended September 30, 2014
PROPRIETARY FUND
Water, Sewer
& Electric
27
Cash Flows from Operating Activities
Receipts from customers $10,531,006
Payments to suppliers and employees (6,535,623)
Payments to employees (1,548,514)
2,446,869
Cash Flows from Capital and Related Financing Activities
Capital purchases (899,517)
Capital grant 260,250
Principal paid on debt (791,416)
Interest paid on debt (332,049)
(1,762,732)
Cash Flows from Investing Activities
Proceeds from sales and maturities of investments 584,938
Interest on investments 14,047
598,985
583,770
8,117,397
$8,701,167
See Notes to Financial Statements.
Net Cash (Used) by Capital and Related Financing Activities
Ending Cash and Cash Equivalents
Net Cash Provided by Investing Activities
Beginning cash and cash equivalents
City of Sanger, Texas
STATEMENT OF CASH FLOWS
PROPRIETARY FUND (Page 1 of 2)
For the Year Ended September 30, 2014
Net Increase (Decrease) in Cash and Cash Equivalents
Net Cash Provided by Operating Activities
& Electric
Water, Sewer
28
Reconciliation of Operating Income
to Net Cash Provided by Operating Activities
Operating Income $1,615,751
Adjustments to reconcile operating
income to net cash provided:
Depreciation 874,271
Changes in Operating Assets and Liabilities:
(Increase) Decrease in:
Accounts receivable (83,474)
Inventory 17,638
Increase (Decrease) in:
Accounts payable and accrued liabilities (6,166)
Customer deposits 13,891
Compensated absences 14,958
$2,446,869
Schedule of Non-Cash Capital and Related Financing Activities
Capital lease $190,309
See Notes to Financial Statements.
& Electric
Water, Sewer
STATEMENT OF CASH FLOWS
PROPRIETARY FUND (Page 2 of 2)
For the Year Ended September 30, 2014
City of Sanger, Texas
Net Cash Provided by Operating Activities
29
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30
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS
September 30, 2014
31
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.Description of Government-Wide Financial Statements
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. Governmental activities, which normally are supported
by taxes, intergovernmental revenues, and other nonexchange transactions, are reported
separately from business-type activities, which rely to a significant extent on fees and charges
to external customers for support. Likewise, the primary government is reported separately
from certain legally separate component units for which the primary government is
financially accountable.
B.Reporting Entity
The City of Sanger, Texas (the “City”)was incorporated 1886 and operates under a Council-
Manager form of government. The City provides: general government, public safety, public
works, culture and recreation, water and sewer operations and electricity operations.
The City is an independent political subdivision of the State of Texas governed by an elected
council and a mayor and is considered a primary government. As required by generally
accepted accounting principles, these basic financial statements have been prepared based
on considerations regarding the potential for inclusion of other entities, organizations, or
functions as part of the City's financial reporting entity. The Sanger Industrial Development
Corporation (“4A fund”) and the Sanger Texas Development Corporation (“4B fund”),
although legally separate, are considered part of the reporting entity. No other entities have
been included in the City's reporting entity. Additionally, as the City is considered a
primary government for financial reporting purposes, its activities are not considered a part
of any other governmental or other type of reporting entity.
Considerations regarding the potential for inclusion of other entities, organizations or
functions in the City's financial reporting entity are based on criteria prescribed by generally
accepted accounting principles. These same criteria are evaluated in considering whether
the City is a part of any other governmental or other type of reporting entity. The
overriding elements associated with prescribed criteria considered in determining that the
City's financial reporting entity status is that of a primary government are that it has a
separately elected governing body; it is legally separate; and is fiscally independent of other
state and local governments. Additionally prescribed criteria under generally accepted
accounting principles include considerations pertaining to organizations for which the
primary government is financially accountable,and considerations pertaining to
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.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
32
Blended Component Units
Sanger Industrial Development Corporation (4A)
The Sanger Texas Industrial Development Corporation (“4A fund”) 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 4A fund was
incorporated in the state of Texas as a non-profit industrial development corporation under
Section 4A of the Development Corporation Act of 1979. The purpose of the 4A fund is to
promote economic development within the City of Sanger.
Sanger Texas Development Corporation (4B)
The Sanger Texas Development Corporation (“4B fund”) is governed by a board of seven
directors, all of whom are appointed by the City Council at its will. The 4B fund was
incorporated in the state of Texas as a nonprofit industrial development corporation under
Section 4B of the Development Corporation Act of 1979. The purpose of the 4B fund is to
promote economic and community development within the City of Sanger.
C.Basis of Presentation Government-Wide and Fund Financial Statements
While separate government-wide and fund financial statements are presented, they are
interrelated. The governmental activities column incorporates data from governmental
funds while business-type activities incorporate data from the government’s enterprise
funds. Separate financial statements are provided for governmental funds and the
proprietary funds.
As a general rule, the effect of interfund activity has been eliminated from the government-
wide financial statements. Exceptions to this general rule are payments in lieu of taxes
where the amounts are reasonably equivalent in value to the interfund services provided
and other charges between the government’s water and transit functions and various other
functions of the government. Elimination of these charges would distort the direct costs and
program revenues reported for the various functions concerned.
The fund financial statements provide information about the government’s funds, including
its blended component units. Separate statements for each fund category—governmental
and proprietary are presented. The emphasis of fund financial statements is on major
governmental and enterprise funds, each displayed in a separate column. All remaining
governmental and enterprise funds are aggregated and reported as nonmajor funds. Major
individual governmental and enterprise funds are reported as separate columns in the fund
financial statements.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
33
The government reports the following major governmental funds:
Governmental Funds
Governmental funds are those funds through which most governmental functions are
typically financed.
General Fund
The general fund is used to account for all financial transactions not properly includable
in other funds. The principal sources of revenues include local property taxes, sales and
franchise taxes, licenses and permits, fines and forfeitures, and charges for services.
Expenditures include general government, public safety, parks and recreation and public
works.
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.
Proprietary Fund Types
Proprietary funds are used to account for activities that are similar to those often found in
the private sector. All assets, liabilities, equities, revenues, expenses, and transfers relating
to the government’s business activities are accounted for through proprietary funds. The
measurement focus is on determination of net income, financial position, and cash flows.
Proprietary funds distinguish operating revenues and expenses from non-operating items.
Operating revenues include charges for services. Operating expenses include costs of
materials, contracts, personnel, and depreciation. All revenues and expenses not meeting
this definition are reported as non-operating revenues and expenses. Proprietary fund
types follow GAAP prescribed by the Governmental Accounting Standards Board (GASB)
and all financial Accounting Standards Board’s standards issued prior to November 30,
1989. Subsequent to this date, the City accounts for its enterprise funds as presented by
GASB.The proprietary fund types used by the City include enterprise funds.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
34
The government reports the following major enterprise fund:
Water, Sewer, & Electric Fund
This fund is used to account for the provision of water, sewer and electric services to the
residents of the City. Activities of the fund include administration, operations and
maintenance of the water production and distribution system, water collection and
treatment systems, and electric services. The fund also accounts for the accumulation of
resources for and the payment of long-term debt. All costs are financed through charges
to utility customers.
During the course of operations the government has activity between funds for various
purposes. Any residual balances outstanding at year end are reported as due from/to other
funds and advances to/from other funds. While these balances are reported in fund financial
statements, certain eliminations are made in the preparation of the government-wide
financial statements. Balances between the funds included in governmental activities (i.e.,
the governmental and internal service funds) are eliminated so that only the net amount is
included as internal balances in the governmental activities column. Similarly, balances
between the funds included in business-type activities (i.e., the enterprise funds) are
eliminated so that only the net amount is included as internal balances in the business-type
activities column.
Further, certain activity occurs during the year involving transfers of resources between
funds. In fund financial statements these amounts are reported at gross amounts as transfers
in/out. While reported in fund financial statements, certain eliminations are made in the
preparation of the government-wide financial statements. Transfers between the funds
included in governmental activities are eliminated so that only the net amount is included
as transfers in the governmental activities column. Similarly, balances between the funds
included in business-type activities are eliminated so that only the net amount is included as
transfers in the business-type activities column.
D.Measurement Focus and Basis of Accounting
The accounting and financial reporting treatment is determined by the applicable
measurement focus and basis of accounting. Measurement focus indicates the type of
resources being measured such as current financial resources or economic resources. The basis
of accounting indicates the timing of transactions or events for recognition in the financial
statements.
The government-wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. 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.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
35
Grants and similar items are recognized as revenue as soon as all eligibility requirements
imposed by the provider have been met.
The governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized as
soon as they are both measurable and available. Revenues are considered to be available
when they are collectible within the current period or soon enough thereafter to pay
liabilities of the current period. For this purpose, the government considers revenues to be
available if they are collected within 60 days of the end of the current fiscal period.
Expenditures generally are recorded when a liability is incurred, as under accrual
accounting. However, debt service expenditures, as well as expenditures related to
compensated absences, and claims and judgments, are recorded only when payment is due.
General capital asset acquisitions are reported as expenditures in governmental funds.
Issuance of long-term debt and acquisitions under capital leases are reported as other
financing sources.
Property taxes, sales taxes, franchise taxes, licenses, and interest associated with the current
fiscal period are all considered to be susceptible to accrual and so have been recognized as
revenues of the current fiscal period. Entitlements are recorded as revenues when all
eligibility requirements are met, including any time requirements, and the amount is
received during the period or within the availability period for this revenue source (within
60 days of year end). Expenditure-driven grants are recognized as revenue when the
qualifying expenditures have been incurred and all other eligibility requirements have been
met, and the amount is received during the period or within the availability period for this
revenue source (within 60 days of year end). All other revenue items are considered to be
measurable and available only when cash is received by the government.
E.Assets, Liabilities, Deferred Outflows/Inflows of Resources and Net Position/Fund
Balance
1.Deposits and Investments
The City’s cash and cash equivalents 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. For the purpose of the statement of cash flows, the proprietary fund types
consider temporary investments with maturity of three months or less when purchased to
be cash equivalents.
In accordance with GASB Statement No. 31,Accounting and Reporting for Certain Investments
and External Investment Pools, the City reports all investments at fair value, except for
“money market investments” and “2a7-like pools.” Money market investments, which are
short-term highly liquid debt instruments that may include U.S. Treasury and agency
obligations, are reported at amortized costs. Investment positions in external investment
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
36
pools that are operated in a manner consistent with the SEC’s Rule 2a7 of the Investment
Company Act of 1940, such as TexPool,are reported using the pools’ share price.
The City has adopted a written investment policy regarding the investment of its funds as
defined in the Public Funds Investment Act, Chapter 2256, of the Texas Governmental Code.
In summary, the City is authorized to invest in the following:
Direct obligations of the U.S. Government
Fully collateralized certificates of deposit and money market accounts
Statewide investment pools
2.Receivables and Interfund Transactions
Transactions between funds that are representative of lending/borrowing arrangements
outstanding at the end of the 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” in the fund financial statements. If the transactions
are between the primary government and its component unit, these receivables and
payables are classified as “due to/from component unit/primary government.” Any residual
balances outstanding between the governmental activities and business-type activities are
reported in the government-wide financial statements as “internal balances.”
Advances between funds are offset by a fund balance reserve account in the applicable
governmental fund to indicate they are not available for appropriation and are not
expendable available financial resources.
All trade receivables are shown net of any allowance for uncollectible amounts.
3.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 personal 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. Penalties are calculated after February 1
up to the date collected by the government at the rate of 6% for the first month and
increased 1% per month up to a total of 12%. Interest is calculated after February 1 at the
rate of 1% per month up to the date collected by the government. Under state law, property
taxes levied on real property constitute a lien on the real property which cannot be forgiven
without specific approval of the State Legislature. The lien expires at the end of twenty
years. Taxes levied on personal property can be deemed uncollectible by the City.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
37
4.Inventories and Prepaid Items
The costs of governmental fund type inventories are recorded as expenditures when the
related liability is incurred, (i.e., the purchase method). The inventories are valued at the
lower of cost or market using the first-in/first-out method. Certain payments to vendors
reflect costs applicable to future accounting periods (prepaid expenditures) are recognized
as expenditures when utilized.
5.Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g.,
roads, bridges, sidewalks, and similar items) are reported in the applicable governmental or
business-type activities columns in the government-wide financial statements. Capital
assets are defined by the government, as assets with an initial individual cost of more than
$5,000 and an estimated useful life in excess of one year. 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. Major outlays for
capital assets and improvements are capitalized as projects are constructed.
Interest costs incurred in connection with construction of enterprise fund capital assets are
capitalized when the effects of capitalization materially impact the financial statements.
The costs of normal maintenance and repairs that do not add to the value of the asset or
materially extend assets’lives are not capitalized.
Property, plant, and equipment of the primary government, as well as the component units,
are depreciated using the straight-line method over the following estimated useful years.
Asset Description
Estimated
Useful Life
Vehicles 5-10 years
Furniture and equipment 5 to 10 years
Infrastructure 10-30 years
Water and sewer system 10-30 years
Buildings and improvements 5-40 years
6.Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position will sometimes report a separate
section for deferred outflows of resources. This separate financial statement element,
deferred outflows of resources, represents a consumption of net position that applies to a future
period(s) and so will not be recognized as an outflow of resources (expense/ expenditure)
until then. An example is a deferred charge on refunding reported in the government-wide
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
38
statement of net position. A deferred charge on refunding results from the difference in the
carrying value of refunded debt and its reacquisition price. This amount is deferred and
amortized over the shorter of the life of the refunded or refunding debt.
In addition to liabilities, the statement of financial position will sometimes report a separate
section for deferred inflows of resources. This separate financial statement element, deferred
inflows of resources, represents an acquisition of net position that applies to a future period(s)
and so will not be recognized as an inflow of resources (revenue) until that time. The
government has only one type of item, which arises only under a modified accrual basis of
accounting, which qualifies for reporting in this category. Accordingly, the item, unavailable
revenue, is reported only in the governmental funds balance sheet. The governmental funds
report unavailable revenues from two sources: property taxes and EMS revenues. These
amounts are deferred and recognized as an inflow of resources in the period that the
amounts become available.
7.Net Position Flow Assumption
Sometimes the government will fund outlays for a particular purpose from both restricted
(e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the
amounts to report as restricted –net position and unrestricted –net position in the
government-wide and proprietary fund financial statements, a flow assumption must be
made about the order in which the resources are considered to be applied.
8.Fund Balance Flow Assumptions
Sometimes the government will fund outlays for a particular purpose from both restricted
and unrestricted resources (the total of committed, assigned, and unassigned fund balance).
In order to calculate the amounts to report as restricted, committed, assigned, and
unassigned fund balance in the governmental fund financial statements a flow assumption
must be made about the order in which the resources are considered to be applied. It is the
government’s policy to consider restricted fund balance to have been depleted before using
any of the components of unrestricted fund balance. Further, when the components of
unrestricted fund balance can be used for the same purpose, committed fund balance is
depleted first, followed by assigned fund balance. Unassigned fund balance is applied last.
9.Fund Balance Policies
Fund balance of governmental funds is reported in various categories based on the nature
of any limitations requiring the use of resources for specific purposes. The government itself
can establish limitations on the use of resources through either a commitment (committed
fund balance) or an assignment (assigned fund balance).
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
39
The committed fund balance classification includes amounts that can be used only for the
specific purposes determined by a formal action of the government’s highest level of
decision-making authority. The governing council is the highest level of decision-making
authority for the government that can, by adoption of an ordinance prior to the end of the
fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance
remains in place until a similar action is taken (the adoption of another ordinance) to
remove or revise the limitation.
Amounts in the assigned fund balance classification are intended to be used by the
government for specific purposes but do not meet the criteria to be classified as committed.
The governing body (council) has by resolution authorized the City Manager to assign fund
balance. The Council may also assign fund balance as it does when appropriating fund
balance to cover a gap between estimated revenue and appropriations in the subsequent
year’s appropriated budget. Unlike commitments, assignments generally only exist
temporarily. In other words, an additional action does not normally have to be taken for the
removal of an assignment. Conversely, as discussed above, an additional action is essential
to either remove or revise a commitment.
10.Compensated Absences
The liability for compensated absences reported in the government-wide and proprietary
fund statements consist of unpaid, accumulated vacation balances. The liability has been
calculated using the vesting method, in which leave amounts for both employees who
currently are eligible to receive termination payments and other employees who are
expected to become eligible in the future to receive such payments upon termination are
included. Vested or accumulated vacation leave and compensated leave of government-
wide and proprietary funds are recognized as an expense and liability of those funds as the
benefits accrue to employees.
It is the City's policy to liquidate compensated absences with future revenues rather than
with currently available expendable resources. Accordingly, the City's governmental funds
recognize accrued compensated absences when it is paid.
11.Long-Term Obligations
In the government-wide financial statements, long-term debt and other long-term
obligations are reported as liabilities in the applicable governmental activities statement of
net position. The long-term debt consists primarily of bonds payable and accrued
compensated absences.
Long-term debt for governmental funds is not reported as liabilities in the fund financial
statements until due. The debt proceeds are reported as other financing sources, net of the
applicable premium or discount and payments of principal and interest reported as
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
40
expenditures. In the governmental fund types, issuance costs, even if withheld from the
actual net proceeds received, are reported as debt service expenditures. However, claims
and judgments paid from governmental funds are reported as a liability in the fund
financial statements only for the portion expected to be financed from expendable available
financial resources.
Long-term debt and other obligations, financed by proprietary funds, are reported as
liabilities in the appropriate funds. For proprietary fund types, bond premiums, and
discounts are deferred and amortized over the life of the bonds using the effective interest
method, if material. Bonds payable are reported net of the applicable bond premium or
discount. Issuance costs are expensed as incurred in accordance with GASB statement no.
65.
Assets acquired under the terms of capital leases are recorded as liabilities and capitalized
in the government-wide financial statements at the present value of net minimum lease
payments at inception of the lease. In the year of acquisition, capital lease transactions are
recorded as other financing sources and as capital outlay expenditures in the general fund.
Lease payments representing both principal and interest are recorded as expenditures in the
general fund upon payment with an appropriate reduction of principal recorded in the
government-wide financial statements.
12.Estimates
The preparation of financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenditures/expenses during the reporting period. Actual results could differ from those
estimates.
II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
A.Explanation of certain differences between the governmental fund balance sheet and the
government-wide statement of net position.
The governmental fund balance sheet includes reconciliation between fund balance-total
governmental funds and net position-governmental activities as reported in the government-
wide statement of net position. One element of that reconciliation explains that long-term
liabilities, including bonds, are not due and payable in the current period and,therefore,are
not reported in the funds.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
41
B.Explanation of certain differences between the governmental fund statement of revenues,
expenditures, and changes in fund balances and the government-wide statement of
activities.
The governmental fund statement of revenues, expenditures, and changes in fund balances
includes a reconciliation between net changes in fund balances –total governmental funds
and changes in net position of governmental states that,“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. Also, governmental funds report the effect of premiums, discounts,
and similar items when debt is first issued, whereas these amounts are deferred and
amortized in the statement of activities.”
III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
Annual budgets are adopted on a basis consistent with generally accepted accounting
principles for all governmental and enterprise funds.
The appropriated budget is prepared by fund, function, and department. The legal level of
control is the fund level. No funds can be transferred or added to a budgeted item without
Council approval. Appropriations lapse at the end of the year. Several supplemental
budget appropriations were made during the year.
IV. DETAILED NOTES ON ALL FUNDS
A. Deposits and Investments
As of September 30, 2014, the primary government had the following investments:
Investment Type
Certificates of deposit $1,881,566 0.41
Total fair value $1,881,566
Portfolio weighted average maturity 0.41
Average Maturity
Fair Value (Years)
Interest rate risk –In accordance with its investment policy, the City manages its exposure to
declines in fair values by limiting the weighted average of maturity not to exceed five years;
structuring the investment portfolio so that securities mature to meet cash requirements for
ongoing operations; monitoring credit ratings of portfolio position to assure compliance
with rating requirements imposed by the Public Funds Investment Act; and invest
operating funds primarily in short-term securities or similar government investment pools.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
42
Credit risk –The City’s investment policy limits investments to obligations of the United
States, State of Texas, or their agencies and instrumentalities with an investment quality
rating of not less than “A” or its equivalent, by a nationally recognized investment rating
firm. Other obligations must be unconditionally guaranteed (either express or implied) by
the full faith and credit of the United States Government or the issuing U.S. agency and
investment pools with an investment quality not less than AAA or AAA-m, or equivalent,
by at least one nationally recognized rating service.
Custodial credit risk –deposits In the case of deposits, this is the risk that in the event of a bank
failure, the City’s deposits may not be returned to it. State statutes require that all deposits
in financial institutions be insured or fully collateralized by U.S. government obligations or
its agencies and instrumentalities or direct obligations of Texas or its agencies and
instrumentalities that have a market value of not less than the principal amount of the
deposits. As of September 30, 2014, the market values of pledged securities and FDIC
exceeded bank balances.
Custodial credit risk –investments For an investment, this is the risk that, in the event of the
failure of the counterparty, the City will not be able to recover the value of its investments
or collateral securities that are in the possession of an outside party. The City’s investment
policy requires that it will seek to safekeeping securities at financial institutions, avoiding
physical possession. Further, all trades, where applicable, are executed by delivery versus
payment to ensure that securities are deposited in the City’s safekeeping account prior to
the release of funds.
B.Receivables
The following comprise receivable balances of the primary government at year end:
Property taxes $76,788 $- $31,831 $- $108,619
Sales tax 103,535 - 123,201 - 226,736
Franchise & local taxes 35,780 - - - 35,780
EMS 316,269 - - - 316,269
Accounts 97,366 - - 1,500,809 1,598,175
Other 74,826 166,342 - 156,759 397,927
Allowance (245,187) - (11,145) (107,095) (363,427)
$459,377 $166,342 $143,887 $1,550,473 $2,320,079
Nonmajor
Governmental
Capital
General Projects Total
Water, Sewer
& Electric
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
43
C.Capital Assets
A summary of changes in governmental activities capital assets for the year end was as
follows:
Capital assets, not being depreciated:
Land $906,307 $- $- $906,307
Construction in progress 42,771 1,225,392 (851,048) 417,115
949,078 1,225,392 (851,048)1,323,422
Capital assets, being depreciated:
Infrastructure 10,919,425 43,800 851,048 11,814,273
Buildings and improvements 7,074,483 37,598 (67,184) 7,044,897
Machinery and equipment 2,510,199 594,967 (290,189) 2,814,977
20,504,107 676,365 493,675 21,674,147
Less accumulated depreciation
Infrastructure 4,509,453 553,897 - 5,063,350
Buildings and improvements 1,040,663 317,800 (58,384) 1,300,079
Machinery and equipment 1,612,481 290,108 (288,618) 1,613,971
Total accumulated depreciation 7,162,597 1,161,805 (347,002)7,977,400
Net capital assets being depreciated 13,341,510 (485,440) 840,677 13,696,747
$14,290,588 $739,952 $(10,371) $15,020,169
Beginning Decreases/Ending
Balances Increases
Total Capital Assets
Total capital assets not being depreciated
Total capital assets being depreciated
BalancesReclassifications
Depreciation was charged to governmental functions as follows:
General government $74,818
Public safety 95,050
Streets and sanitation 603,318
Fire and rescue 116,452
Culture and recreation 272,167
$1,161,805 Total Governmental Activities Depreciation Expense
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
44
A summary of changes in business-type activities capital assets for the year end was as
follows:
Capital assets, not being depreciated:
Land $323,164 $- $- $323,164
Construction in progress 132,305 763,214 (82,918) 812,601
Total capital assets not being depreciated 455,469 763,214 (82,918) 1,135,765
Capital assets, being depreciated:
Infrastructure 22,458,123 58,100 28,448 22,544,671
Buildings and improvements 860,133 13,524 (8,412) 865,245
Machinery and equipment 1,664,835 254,988 (231,337) 1,688,486
Total capital assets being depreciated 24,983,091 326,612 (211,301) 25,098,402
Less accumulated depreciation
Infrastructure 11,663,158 695,765 (54,470) 12,304,453
Buildings and improvements 269,043 55,227 (8,412) 315,858
Machinery and equipment 1,291,712 123,279 (231,337) 1,183,654
Total accumulated depreciation 13,223,913 874,271 (294,219) 13,803,965
Net capital assets being depreciated 11,759,178 (547,659) 82,918 11,294,437
$12,214,647 $215,555 $- $12,430,202 Total Capital Assets
Beginning Decreases/Ending
Balances Increases Reclassifications Balances
Depreciation was charged to business-type activities as follows:
Water $280,161
Sewer 237,716
Electric 338,542
Other 17,852
$874,271 Total Business-type Activities Depreciation Expense
D.Long-term Debt
The following is a summary of changes in the City’s total governmental long-term
liabilities for the year ended. In general, the City uses the debt service fund to liquidate
governmental long-term liabilities.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
45
Governmental Activities:
Bonds, notes and other
payables:
General Obligation Bonds $1,331,000 $- $(176,000) $1,155,000 $182,600
Certificates of Obligation 5,407,800 - (399,000) 5,008,800 412,700
Less deferred amounts:
For issuance premiums 83,851 - (7,826) 76,025 -
6,822,651 - (582,826) 6,239,825 595,300
Other liabilities:
Notes payable 516,816 - (37,606) 479,210 40,093
Capital leases payable 237,364 435,000 (99,019) 573,345 142,569
Compensated absences 95,068 103,202 (84,028) 114,242 102,818
$7,671,899 $538,202 $(803,479) $7,406,622 $880,780
Long-term liabilities due in more than one year $6,525,842
Business-Type Activities:
General Obligation Bonds $1,694,000 $- $(224,000) $1,470,000 $232,400
Certificates of Obligation 6,787,200 - (411,000) 6,376,200 432,300
Less deferred amounts:
For issuance premiums 346,162 - (22,496) 323,666 -
8,827,362 - (657,496) 8,169,866 664,700
Other liabilities:
Capital leases payable 171,867 190,309 (156,416) 205,760 116,612
Compensated absences 64,535 76,134 (61,176) 79,493 71,544
Total Business-Type Activities $9,063,764 $266,443 $(875,088) $8,455,119 $852,856
Long-term liabilities due in more than one year $7,602,263
Amounts
Beginning Ending Due within
Balance Additions Reductions Balance One Year
Total Governmental Activities
Long-term liabilities applicable to the City’s governmental activities are not due and
payable in the current period and accordingly, are not reported as fund liabilities in the
governmental funds. Interest on long-term debt is not accrued in governmental funds, but
rather is recognized as an expenditure when due.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
46
Long-term debt at year end was comprised of the following debt issues:
General Obligation Bonds:
$3,495,000 General Obligation Refunding Bond, Series 2012, due in
installments through 2021, interest at 2% to 3%$1,155,000 $1,470,000 $2,625,000
$1,155,000 $1,470,000 $2,625,000
Certificates of Obligation:
$6,500,000 Certificates of Obligation, Series 2006,
due in annual installments through 2021, interest at 4% to 5%$1,616,900 $1,898,100 $3,515,000
$1,750,000 Certificates of Obligation, Series 2007,
due in annual installments through 2027, interest at 4.4%443,700 861,300 1,305,000
$3,200,000 Certificates of Obligation, Series 2009,
due in annual installments through 2026, interest at 3% to 4.75%2,455,000 - 2,455,000
$4,260,000 Certificates of Obligation, Series 2013,
due in annual installments through 2033, interest at 2% to 3.7%493,200 3,616,800 4,110,000
$5,008,800 $6,376,200 $11,385,000
Less deferred amounts:
Issuance premium $76,025 $323,666 $399,691
$76,025 $323,666 $399,691
Notes Payable:
$660,000 Notes payable to a financial institution, due in monthly
installments of $5,106 through June 2024, including interest at 4.6%$479,210 $- $479,210
$479,210 $- $479,210
Capital Leases Payable:
$807,573 Capital lease payable to financial institution, due in annual
installments of $104,454 through 2015, interest at 1.77%$- $70,492 $70,492
$340,119 Capital lease payable to financial institution, due in annual
installments of $106,996 through 2016, interest at 3.3%138,345 - 138,345
$190,309 Capital lease payable to financial institution, due in annual
installments of $50,235 through 2017, interest at 2.89%- 135,268 135,268
$435,000 Capital lease payable to financial institution, due in annual
installments of $51,535 through 2024, interest at 3.346%435,000 - 435,000
$573,345 $205,760 $779,105
Compensated Absences 114,242 79,493 193,735
$7,406,622 $8,455,119 $15,861,741 Total Long-term Liabilities
Total
Business -
Total General Obligation Bonds
Total Certificates of Obligation
Governmental Type
Activities Activities
Total Deferred Amounts
Total Notes Payable
Total Capital Leases Payable
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
47
The annual requirements to amortize governmental and business-type activities debt issues
outstanding at year ending were as follows:
General Obligation Bonds
Year ending
September 30,
2015 $182,600 $31,614 $232,400 $40,236
2016 184,800 27,962 235,200 35,588
2017 154,000 22,418 196,000 28,532
2018 156,200 17,798 198,800 22,652
2019 162,800 13,112 207,200 16,688
2020 169,400 8,228 215,600 10,472
2021 145,200 3,993 184,800 5,082
$1,155,000 $125,125 $1,470,000 $159,250
Principal Interest Principal Interest
Governmental Activities Business-Type Activities
Combination Tax and Revenue Certificates of Obligations
Year ending
September 30,
2015 $412,700 $210,315 $432,300 $258,053
2016 428,600 194,926 446,400 243,467
2017 447,400 176,803 467,600 225,820
2018 459,900 159,199 480,100 209,883
2019 480,800 140,888 494,200 192,630
2020 499,600 121,729 515,400 174,794
2021 521,100 101,706 533,900 155,364
2022 273,500 79,919 236,500 135,067
2023 286,400 68,258 248,600 127,002
2024 297,000 55,768 253,000 118,527
2025 309,300 42,686 260,700 109,019
2026 323,900 28,194 276,100 97,363
2027 71,800 13,024 288,200 85,021
2028 28,800 9,768 211,200 71,632
2029 30,600 8,400 224,400 61,600
2030 31,800 6,870 233,200 50,380
2031 33,600 5,280 246,400 38,720
2032 35,400 3,600 259,600 26,400
2033 36,600 1,830 268,400 13,420
$5,008,800 $1,429,162 $6,376,200 $2,394,161
Governmental Activities Business-Type Activities
Principal Interest Principal Interest
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
48
General obligation bonds are direct obligations of the City for which its full faith and credit
are pledged. Repayment of general obligation bonds are from taxes levied on all taxable
property located within the City. The City is not obligated in any manner for special
assessment debt.
Capital Lease
Year ending
September 30,
2015 $142,569 $15,962 $116,612 $9,088
2016 74,090 14,392 47,452 2,783
2017 39,606 11,930 41,696 1,411
2018 40,931 10,604 - -
2019 42,301 9,235 - -
2020 43,716 7,819 - -
2021 45,179 6,357 - -
2022 46,690 4,845 - -
2023 48,252 3,283 - -
2024 50,011 1,668 - -
$573,345 $86,095 $205,760 $13,282
Governmental Activities
Principal Interest
Business-Type Activities
Principal Interest
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 $1,773,001 as of year end.
Note Payable
Year ending
September 30,
2015 $40,093 $21,174
2016 41,977 19,290
2017 43,949 17,318
2018 46,014 15,253
2019 48,176 13,091
2020 50,439 10,828
2021 52,809 8,458
2022 55,290 5,977
2023 57,887 3,380
2024 42,576 4,063
$479,210 $118,832
Governmental Activities
Principal Interest
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
49
E.Conduit Debt
The City issued notes payable totaling $230,461,407 for the purpose of assisting with
financing needed by not-for-profit organizations to promote their cause. Final maturities on
notes payable range from March 2017 through December 2041. The notes are secured by
various assets of the borrower.
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.
F.Deferred Charge on Refunding
A deferred charge resulting from the issuance of the 2012 general obligation refunding
bonds has been recorded as a deferred outflow of resources and is being amortized to
interest expense over the term of the refunded debt. Current year balances for
governmental and business-type activities totaled $25,919 and $58,344, respectively. Current
year amortization expense for governmental and business-type activities totaled $3,912 and
$8,807, respectively.
G.Interfund Transactions
The compositions of interfund balances as of year end were as follows:
Debt Service:
4B Fund $212,500 $-
4B Fund
Debt Service - 212,500
$212,500 $212,500
Due from Due toFunds
Amounts recorded as “due to/from”are considered to be temporary loans and will be
repaid during the following year.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
50
Transfer out:
General $- $437,100 $- $437,100
Nonmajor Governmental 137,400 - 212,500 349,900
Water, Sewer & Electric 699,352 - - 699,352
$836,752 $437,100 $212,500 $1,486,352
Transfer In
General Capital Projects
Nonmajor
Governmental Total
Amounts transferred between funds relate to amounts collected, various capital
expenditures, annual funding, and debt payments.
H.Fund Equity
The City records restricted net position on amounts with externally imposed restrictions
(e.g., through debt covenants or by grantors) or restrictions imposed by law through
constitutional provisions or enabling legislation. Total restricted net position for the primary
government was $2,959,225. Of which, $32,161 is restricted by enabling legislation.
V. OTHER INFORMATION
A.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; and natural disasters for which the City
participates along with 2,617 other entities in the Texas Municipal League’s
Intergovernmental Risk Pools. The Pool purchases commercial insurance at group rates for
participants in the Pool. The City has no additional risk or responsibility to the Pool outside
of the payment of insurance premiums. The City has not significantly reduced insurance
coverage or had settlements which exceeded coverage amounts for the past three years.
B.Contingent Liabilities
Amounts received or receivable from granting agencies are subject to audit and adjustment
by grantor agencies, principally the federal government. Any disallowed claims, including
amounts already collected, may constitute a liability of the applicable funds. The amounts
of expenditures which may be disallowed by the grantor cannot be determined at this time
although the City expects such amounts, if any, to be immaterial.
Liabilities are reported 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. Claim liabilities are calculated considering the effects of
inflation, recent claim settlement trends, including frequency and amount of payouts, and
other economic and social factors.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
51
C.Construction commitments
The government has active construction projects as of September 30, 2014. The projects
include street construction and improvements, sewer plant and the construction of
additional water lines and repairs. At year end the government’s commitments with
contractors are as follows:
Project
Sewer Line 15" Chapman to Belz Pacheco Koch $16,642
West Side I35 WL Ext-Chapman to Belz Pacheco Koch 1,694
Sewer Line 18" South of Utility Pacheco Koch 34,668
Sewer Line 15" Utility to Lois Pacheco Koch 32,278
Sewer Line 12" Lois to View Pacheco Koch 19,780
WL Lois to View Pacheco Koch 23,416
128,478
McReynolds Road Pacheco Koch 127,619
New Sewer Plant Alan Plummer 867,777
Server Consolidation Austin Lane 26,063
Jones & Willow Truck Line - CDBG Teague Nall & Perkins 9,637
Jones & Willow Truck Line - CDBG Grantworks 2,950
1,034,046
$1,162,523
Remaining
CommitmentVendor
Total
Total Water/WW Lines
Total CDBG
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
52
D.Rental Income
On March 1, 2012, the City entered into a non-cancelable lease agreement with a corporation
of which a city council member is a principal member of management. The leased property
is owned by the 4A Fund and has a cost $1,083,797 with accumulated depreciation of
$176,425 as of September 30, 2014. The lease provides for a base rent and an adjustment each
year related to excess operating expenses (if any) incurred annually.
During the year ended September 30, 2014, the City received $78,667 in rental revenue.
Minimum future rentals on non-cancelable tenant operating leases at September 30, 2014 are
$45,889. This represents the total rentals for the 2015 fiscal year, which is the final year of the
lease agreement.
E.Arbitrage
The Tax Reform Act of 1986 instituted certain arbitrage consisting of complex regulations
with respect to issuance of tax-exempt bonds after August 31, 1986. Arbitrage regulations
deal with the investment of tax-exempt bond proceeds at an interest yield greater than the
interest yield paid to bondholders. Generally, all interest paid to bondholders can be
retroactively rendered taxable if applicable rebates are not reported and paid to the Internal
Revenue Service at least every five years for applicable bond issues. Accordingly,there is
the risk that if such calculations are not performed correctly, a substantial liability to the
City could result. The City does anticipate that it will have an arbitrage liability and
performs annual calculations to estimate this potential liability. The City will also engage
an arbitrage consultant to perform the calculations in accordance with Internal Revenue
Service’s rules and regulations if indicated.
F.Pension Plans
1. Texas Municipal Retirement Systems
Plan Description
The City provides pension benefits for all of its eligible employees through a non-
traditional, joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal
Retirement System (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.
TMRS issues a publicly available comprehensive annual financial report that includes
financial statements and required supplementary information (RSI) for TMRS; the report
also provides detailed explanations of the contributions, benefits and actuarial methods and
assumptions used by the System. This report may be obtained by writing to TMRS, P.O. Box
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
53
149153, Austin, TX 78714-9153 or by calling 800-924-8677; in addition, the report is available
on TMRS’ website at www.TMRS.com.
The plan provisions are adopted by the governing body of the City, within the options
available in the state statutes governing TMRS. Plan provisions for the City were as follows:
Plan Year 2013 Plan Year 2014
Employee deposit rate 6.0%6.0%
Matching ratio (city to
employee)
2 to 1 2 to 1
Years required for vesting 5 5
Service retirement eligibility
(expressed as age /years of
service)
60/5, 0/20 60/5, 0/20
Updated service credit 100% Repeating Transfers 100% Repeating Transfers
Annuity increase (to retirees)0% of CPI 0% of CPI
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 that 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. The annual pension cost and net pension obligation/ (asset) are as follows:
Three-Year Contribution Information
2014 2013 2012
Annual Pension Cost (ARC)$210,201 $196,672 $191,163
Actual Contributions Made $210,201 $196,672 $191,163
Percentage of APC Contributed 100%100%100%
Net Pension Obligation/Asset - - -
NPO at the End of Period $ -$ -$ -
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
54
The required contribution rates for fiscal year 2014 were determined as part of the
December 31, 2011 and 2012 actuarial valuations. Additional information as of the latest
actuarial valuation, December 31, 2013, also follows:
Valuation Date 12/31/2011 12/31/2012 12/31/2013
Actuarial Cost Method Projected Unit
Credit
Projected Unit
Credit
Entry Age
Normal
Amortization Method Level Percent of
Payroll
Level Percent of
Payroll
Level Percent of
Payroll
GASB 25 Equivalent Single
Amortization Period
21.8 years; closed
period
21.1 years; closed
period
30 years; closed
period
Amortization Period for new
Gains/Losses
25 years 25 years 25 years
Asset Valuation Method 10-year Smoothed
Market
10-year Smoothed
Market
10-year Smoothed
Market
Actuarial Assumptions:
Investment Rate of Return *7.0%7.0%7.0%
Projected Salary Increases *Varies by age and
service
Varies by age and
service
Varies by age and
service
* Includes Inflation at 3.00%3.00%3.00%
Cost-of-Living Adjustments 0.0%0.0%0.0%
The funded status as of December 31, 2013, the most recent actuarial valuation date, is as
follows:
Actuarial Valuation Date 12/31/2013
Actuarial Value of Assets $5,783,587
Actuarial Accrued Liability $6,740,172
Percentage Funded 85.8%
Annual Covered Payroll $2,928,323
Unfunded Actuarial Accrued Liability$(956,585)
(UAAL) % of Covered Payroll (32.7)%
Actuarial valuations involve estimates of the value of reported amounts and assumptions
about the probability of events far into the future. Actuarially determined amounts are
subject to continual revision as actual results are compared to past expectations and new
estimates are made about the future.
Actuarial calculations are based on the benefits provided under the terms of the substantive
plan in effect at the time of each valuation, and reflect a long-term perspective. Consistent
with that perspective, actuarial methods and assumptions used include techniques that are
designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
55
value of assets. The schedule of funding progress, presented as Required Supplementary
Information following the notes to the 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.
Supplemental Death Benefits Plan
The City also participates in the cost sharing multiple-employer defined benefit group-term
life insurance plan operated by the Texas Municipal Retirement System (TMRS) known as
the Supplemental Death Benefits Fund (SDBF). The City elected, by ordinance, to provide
group-term life insurance coverage to both current and retired employees. The City may
terminate coverage under and discontinue participation in the SDBF by adopting an
ordinance before November 1 of any year to be effective the following January 1.
The death benefit for active employees provides a lump-sum payment approximately equal
to the employee’s annual salary (calculated based on the employee’s actual earnings, for the
12-month period preceding the month of death); retired employees are insured for $7,500;
this coverage is an “other postemployment benefit,” or OPEB.
The City contributes to the SDBF at a contractually required rate as determined by an
annual actuarial valuation. The rate is equal to the cost of providing one-year term life
insurance. The funding policy for the SDBF program is to assure that adequate resources are
available to meet all death benefit payments for the upcoming year; the intent is not to pre-
fund retiree term life insurance during employees’ entire careers.
The City’s retiree contribution rates to the TMRS SDBF for the years ended 2013, 2012 and
2011 are as follows:
Plan/
Calendar Year
Annual
Required
Contribution
(Rate)
Actual
Contribution
Made
(Rate)
Percentage of
ARC
Contributed
2012 0.01%0.01%100.0%
2013 0.01%0.01%100.0%
2014 0.01%0.01%100.0%
The City’s contributions to the TMRS SDBF for the years ended 2014, 2013 and 2012 were
$306, $293 and $263, respectively, which equaled the required contributions each year.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2014
56
G.Restatement
The City has restated beginning net position within governmental activities, business-type
activities, and water/sewer/electric funds due to a change in the amortization of bond
discounts and premiums. The restatement of beginning net position is as follows:
Prior year ending net position
as reported $10,725,976
Change in bond discount and premium amortization (30,478)
$10,695,498
Prior year ending net position
as reported $13,641,820 $13,641,820
Change in bond discount and premium amortization (32,091) (32,091)
Restated beginning net position $13,609,729 $13,609,729
Restated beginning net position
Governmental
Activities
Business-Type Water, Sewer &
ElectricActivities
H.Subsequent Events
There were no material subsequent events through February 26, 2015,the date the financial
statements were issued.
REQUIRED SUPPLEMENTARY INFORMATION
57
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58
Revenues
Property tax $ 2,085,500 $ 2,085,500 $ 2,072,522 $ (12,978)
Sales tax 653,000 653,000 682,502 29,502
Franchise and local taxes 184,600 184,600 229,018 44,418
License and permits 107,900 107,900 85,887 (22,013)
Charges for services 808,000 808,000 770,570 (37,430)
Fire and rescue 460,000 460,000 535,916 75,916
Contributions and donations ‐ ‐ 6,634 6,634
Intergovernmental 36,000 85,995 76,338 (9,657)
Fines and forfeitures 165,000 165,000 178,884 13,884
Investment income 2,500 2,500 2,681 181
Other revenue ‐ ‐ 5,528 5,528
4,502,500 4,552,495 4,646,480 93,985
Expenditures
Current:
General government 1,236,719 1,223,948 1,219,171 4,777
Police department 1,307,651 1,375,173 1,370,481 4,692
Municipal court 213,384 224,693 224,283 410
Fire and EMS 841,652 814,810 802,456 12,354
Parks and recreation 575,383 493,974 444,774 49,200
Public works 912,421 631,766 627,055 4,711
Debt service:
Principal 99,020 99,020 99,019 1
Interest 7,980 7,980 7,977 3
Capital outlay 161,650 690,634 675,757 14,877
5,355,860 5,561,998 5,470,973 91,025
(853,360) (1,009,503) (824,493) 185,010
Transfers in 873,400 873,400 836,752 (36,648)
Transfers (out)‐ (387,100) (437,100) (50,000)
Capital lease ‐ 435,000 435,000 ‐
Proceeds from sale of capital assets ‐ ‐ 21,862 21,862
Insurance recoveries ‐ 101,066 129,162 28,096
873,400 1,022,366 985,676 (36,690)
Net Change in Fund Balance $ 20,040 $ 12,863 161,183 $ 148,320
Beginning fund balance 1,074,895
$ 1,236,078
Notes to Required Supplementary Information
Actual (Negative)
Total Revenues
Positive
City of Sanger, Texas
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCE ‐ BUDGET AND ACTUAL‐ GENERAL FUND
Variance with
For the Year Ended September 30, 2014
Ending Fund Balance
Final Budget
Original
Budget
Revenues Over (Under)
Expenditures
1. Annual budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP).
Final Budget
Total Expenditures
Total Other Financing Sources
Other Financing Sources (Uses)
59
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Actuarial Valuation Date 12/31/2013 12/31/2012 12/31/2011
Actuarial Value of Assets $5,783,587 $5,179,812 $4,691,607
Actuarial Accrued Liability $6,740,172 $5,465,145 $5,122,534
Percentage Funded 85.8%94.8%91.6%
Unfunded Actuarial
Accrued Liability $956,585 $285,333 $430,927
Annual Covered Payroll $2,928,323 $2,626,335 $2,662,684
Unfunded Actuarial Accrued Liability
(UAAL) % of Covered Payroll 32.7%10.9%16.2%
Net Pension Obligation (NPO)
at the Beginning of Period $- $- $-
Annual Req. Contrib. (ARC)$210,201 $196,672 $191,163
Contributions Made $210,201 $196,672 $191,163
$- $- $-
TEXAS MUNICIPAL RETIREMENT SYSTEM
NPO at the End of Period
The City's annual covered payroll and pension costs are actuarially valued on a calendar year basis.Because
the City makes all the annually required contributions,no net pension obligation (NPO)exists.The
information presented below represents the City's Schedule of Funding Progress.
City of Sanger, Texas
SCHEDULE OF FUNDING PROGRESS-
61
Cash and cash equivalents $103,024 $52,367 $14,643 $170,034
Restricted cash 56,680 1,028,976 556,187 1,641,843
Restricted investments - 93,765 274,420 368,185
Receivables, net 20,686 71,434 51,767 143,887
Due from other funds 212,500 - - 212,500
$392,890 $1,246,542 $897,017 $2,536,449
Liabilities
Accounts payable and
accrued liabilities $- $18 $- $18
Due to other funds - - 212,500 212,500
- 18 212,500 212,518
Deferred Inflows of Resources
Unavailable revenue
Property taxes 19,929 - - 19,929
Total Deferred Inflows of Resources 19,929 - - 19,929
Restricted for:
Debt service 372,961 - - 372,961
Economic development - 1,246,524 684,517 1,931,041
372,961 1,246,524 684,517 2,304,002
$392,890 $1,246,542 $897,017 $2,536,449
Assets
Total Assets
Total Liabilities
Fund Balances
Total Fund Balances
Total Liabilities and Fund Balances
Debt Service 4A Fund 4B Fund
Total
Nonmajor
Governmental
City of Sanger, Texas
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
September 30, 2014
62
Revenues
Property tax $745,007 $- $- $745,007
Sales tax - 339,636 339,636 679,272
Fines and forfeitures - 1,087 - 1,087
Investment income 113 - 1,272 1,385
Other revenue 13 88,667 5,000 93,680
745,133 429,390 345,908 1,520,431
Expenditures
Current:
General government 1,135 18 - 1,153
Debt service:
Principal 575,000 37,606 - 612,606
Interest 261,101 23,661 - 284,762
837,236 61,285 898,521
(92,103)368,105 345,908 621,910
Other Financing Sources (Uses)
Transfers in 212,500 - - 212,500
Transfers (out)(107,000) (15,200) (227,700) (349,900)
105,500 (15,200)(227,700)(137,400)
13,397 352,905 118,208 484,510
Beginning fund balances 359,564 893,619 566,309 1,819,492
$372,961 $1,246,524 $684,517 $2,304,002Ending Fund Balances
NONMAJOR GOVERNMENTAL FUNDS
Total Revenues
Total Expenditures
Excess of Revenues Over (Under)
Expenditures
Total Other Financing Sources
(Uses)
Net Change in Fund Balances
Nonmajor
Debt Service 4A Fund 4B Fund Governmental
City of Sanger, Texas
COMBINING STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES
For the Year Ended September 30, 2014
Total
63
Operating Revenues
Charges for services $1,294,722 $1,154,143 $7,887,296 $-
Connection fees - - 50,491 -
Tap fees 79,950 99,000 - -
Other revenue - - - -
1,374,672 1,253,143 7,937,787 -
Operating Expenses
Salaries and wages 286,529 145,542 529,171 74,420
Contracted services 12,669 28,739 43,178 4,121
Utilities 126,025 163,590 9,386 7,796
Materials and supplies 22,705 15,254 40,892 6,930
Water and electric purchases 53,243 - 5,447,727 -
Repairs and maintenance 146,054 78,760 172,217 6,623
Depreciation 280,161 237,716 338,542 1,212
927,386 669,601 6,581,113 101,102
447,286 583,542 1,356,674 (101,102)
Nonoperating Revenues (Expenses)
Intergovernmental - 260,250 - -
Investment income - - - -
Interest expense - - - -
- 260,250 - -
Income Before Transfers 447,286 843,792 1,356,674 (101,102)
Transfers (out)- - (393,352) -
$447,286 $843,792 $963,322 $(101,102)
Water
Total Operating Revenues
Total Operating Expenses
Operating Income
Total Nonoperating Revenues (Expenses)
Change in Net Position
City of Sanger, Texas
COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN FUND NET
POSITION
PROPRIETARY FUNDS - BY DEPARTMENT
For the Year Ended September 30, 2014
Sewer Electric Fleet Services
64
$- $10,336,161
- 50,491
- 178,950
31,240 31,240
31,240 10,596,842
541,701 1,577,363
109,086 197,793
11,038 317,835
20,123 105,904
- 5,500,970
3,301 406,955
16,640 874,271
701,889 8,981,091
(670,649) 1,615,751
- 260,250
14,047 14,047
(341,421) (341,421)
(327,374) (67,124)
(998,023) 1,548,627
(306,000) (699,352)
$(1,304,023) $849,275
Administration Total
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66