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2017 Annual Financial Report(This page intentionally left blank.) ANNUAL FINANCIAL REPORT of the City of Sanger, Texas For the Year Ended September 30, 2017 (This page intentionally left blank.) City of Sanger, Texas TABLE OF CONTENTS September 30, 2017 FINANCIAL SECTION Independent Auditor’s Report 1 Management’s Discussion and Analysis 7 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 18 Statement of Activities 22 Fund Financial Statements Governmental Funds: Balance Sheet 24 Reconciliation of the Balance Sheet to the Statement of Net Position- Governmental Funds 27 Statement of Revenues, Expenditures, and Changes in Fund Balance- Governmental Funds 28 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 31 Proprietary Funds: Statement of Net Position 32 Statement of Revenues, Expenses, and Changes in Fund Net Position 33 Statement of Cash Flows 34 Notes to Financial Statements 37 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual -General Fund 74 Schedule of Changes in Net Pension Liability and Related Ratios 76 Schedule of Employer Contributions to Plan 77 COMBINING AND INDIVIDUAL FUND FINANCIAL SCHEDULES Combining Schedule of Revenues, Expenses, and Changes in Fund Net Position -Proprietary Funds –by Department 80 (This page intentionally left blank.) 1 14950 Heathrow Forest Pkwy | Suite 530 | Houston, TX 77032 |Tel: 281.907.8788 |Fax: 888.875.0587 | www.BrooksWatsonCo.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,the discretely presented component units,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, 2017 , and the related notes to the financial statement s, 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 int ernal 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 state ments 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 asses sment 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 e valuating 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. 2 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 activit ies, the business-type activities,the discretely presented component units,each major fund, and the aggregate remaining fund information of the City as of September 30, 2017, 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. Emphasis of Matter As discussed in Note V.G. to the financial statements, the City restated the beginning net position of governmental activities and business -type activities, and the beginning fund balance of the general fund due to accounting error s occurring in the prior year and the change in the presentation of the City’s component units .Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, schedule of changes in net pension liability and related ratios, schedule of employee contributions to pension plan, and budgeta ry comparison information for the general fund be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance wit h 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. 3 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 schedule by department for the proprietary fund is presented for purposes of additional analysis and is not a required part of the basic financial statements. The combining schedule by department for the proprietary fund is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. BrooksWatson & Co. Certified Public Accountants Houston, Texas February 13, 2018 (This page intentionally left blank.) 4 MANAGEMENT'S DISCUSSION AND ANALYSIS 5 (This page intentionally left blank.) 6 City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) September 30, 2017 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, 2017. Financial Highlights The City's total combined net position is $32,788,027 at September 30,2017.Of this, $16,701,249 (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 $4,077,155, an increase of $138,149. As of the end of the year, the unassigned fund balance of the general fund was $3,190,939 or 57%of total general fund expenditures. The City had an overall increase in net position of $4,654,389, which is primarily due to strong general and utility revenues and increased investment in capital assets compared to the prior year. 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, 2017 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”) and the Sanger Texas Development Corporation (“4B”), for which the City is financially accountable. Financial information for these component units is reported separately from the financial information presented for the primary government itself. 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 three individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2017 9 revenues, expenditures, and changes in fund balances for the general,debt service, and capital projects funds. The general and capital projects funds 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 the general fund budget. Proprietary Funds The City maintains two different types of proprietary funds. Proprietary funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses a proprietary fund to account for its public utilities. All activities associated with providing such services are accounted for in these funds, including administration, operation, maintenance, debt service, capital improvements, meter maintenance, billing and collection. The City's intent is that costs of providing the services to the general public on a continuing basis is financed through user charges in a manner similar to a private enterprise. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses an internal service fund to account for administrative support servies to other funds of the City. Component Units The City maintains the accounting and financial statements for two component units. The 4A and the 4B are both discretely presented component units displayed on the government-wide financial statements. 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 is a budgetary comparison schedule for the general fund and schedules for the City’s Defined Pension Plan. 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 exceeded liabilities by $32,788,027 as of September 30, 2017,in the primary government. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2017 10 The largest portion of the City’s net position,$15,230,983,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. An additional portion of the City’s net position,$855,795, represents resources that are subject to external restrictions on how they may be used. The remaining balance of $16,701,249 is unrestricted and may be used to meet the government’s ongoing obligations to its citizens and creditors. Current assets of business-type activities as of September 30, 2017 and September 30, 2016 were $23,313,512 and $16,093,043, respectively. The increase of $7,220,469 was primarily attributable to unspent bond proceeds from a new bond issuance during the year. Long term liabilities of business-type activities as of September 30, 2017 and September 30, 2016 were $21,767,087 and $12,739,769, respectively. The increase of $9,027,318 was due to the aforementioned bond issuance during the year. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2017 11 Statement of Net Position: The following table reflects the condensed Statement of Net Position: Current and other assets $5,153,316 $23,313,512 $28,466,828 $4,401,941 $16,093,043 $20,494,984 Capital assets, net 16,264,468 18,881,652 35,146,120 14,036,819 15,045,344 29,082,163 Total Assets 21,417,784 42,195,164 63,612,948 18,438,760 31,138,387 49,577,147 of Resources 465,724 178,790 644,514 489,156 196,393 685,549 Other liabilities 1,716,929 2,788,037 4,504,966 1,288,848 2,365,563 3,654,411 Long-term liabilities 5,069,886 21,767,087 26,836,973 5,734,878 12,739,769 18,474,647 Total Liabilities 6,786,815 24,555,124 31,341,939 7,023,726 15,105,332 22,129,058 of Resources 97,970 29,526 127,496 - - - Net Position: Net investment net of related debtin capital assets 10,968,978 4,262,005 15,230,983 8,436,670 7,235,242 15,671,912 Restricted 855,795 - 855,795 1,555,196 - 1,555,196 Unrestricted 3,173,950 13,527,299 16,701,249 1,912,324 8,994,206 10,906,530 Total Net Position $14,998,723 $17,789,304 $32,788,027 $11,904,190 $16,229,448 $28,133,638 Deferred Outflows Deferred Inflows 2017 2016 Governmental Business-Type Activities Governmental Business-Type ActivitiesActivities TotalTotalActivities City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2017 12 Statement of Activities: The following table provides a summary of the City’s changes in net position: Revenues Program revenues: Charges for services $1,810,697 $12,180,291 $13,990,988 $1,663,963 $11,236,562 $12,900,525 Grants and contributions 1,718,787 725,000 2,443,787 185,385 472,500 657,885 General revenues: Property taxes 3,584,390 - 3,584,390 3,329,733 - 3,329,733 Sales taxes 883,562 - 883,562 815,547 - 815,547 Franchise and local taxes 236,082 - 236,082 240,206 - 240,206 Investment income 4,372 21,875 26,247 6,410 21,429 27,839 Other revenues 210,949 - 210,949 133,359 - 133,359 Total Revenues 8,448,839 12,927,166 21,376,005 6,374,603 11,730,491 18,105,094 Expenses General government 1,797,001 - 1,797,001 1,797,824 - 1,797,824 Public safety 2,369,510 - 2,369,510 2,421,517 - 2,421,517 Public works 1,074,157 - 1,074,157 998,940 - 998,940 Culture and recreation 792,090 - 792,090 731,562 - 731,562 Interest and fiscal charges 186,772 741,243 928,015 253,181 401,239 654,420 Water, sewer, & electric - 9,760,843 9,760,843 - 9,458,017 9,458,017 Total Expenses 6,219,530 10,502,086 16,721,616 6,203,024 9,859,256 16,062,280 Change in Net Position Before Transfers 2,229,309 2,425,080 4,654,389 171,579 1,871,235 2,042,814 Transfers 865,224 (865,224) - 1,257,423 (1,257,423)- Total 865,224 (865,224) - 1,257,423 (1,257,423)- Change in Net Position 3,094,533 1,559,856 4,654,389 1,429,002 613,812 2,042,814 Beginning Net Position 11,904,190 16,229,448 28,133,638 10,475,188 15,615,636 26,090,824 Ending Net Position $14,998,723 $17,789,304 $32,788,027 $11,904,190 $16,229,448 $28,133,638 Activities Activities Business-Type Primary Total Primary Governmental ActivitiesGovernment Governmental For the Year Ended September 30, 2017 Business-Type Government For the Year Ended September 30, 2016 Total Activities City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2017 13 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, 2017, revenues from governmental activities totaled $8,448,839. Property tax, sales tax and charges for services are the City’s largest revenue sources. Property tax increased by $254,657 or 8%due to higher property values.Sales taxes increased $68,015 or 8%due to economic growth within the city limits. Charges for services increased $146,734 or 9%primarily due to increases in EMS services and building permit revenue.Grants and contributions increased by $1,533,402 funds received from an interlocal agreement with Denton County for street construction.All other revenues remained relatively stable when compared to the previous year. This graph shows the governmental function expenses of the City: For the year ended September 30, 2017, expenses for governmental activities totaled $6,219,530. This represents an increase of $16,506 or < 1%from the prior year. The City’s largest functional expense is general government of $1,797,001,which primarily includes contractual costs for garbage removal, salaries for finance and city administration,plus depreciation of related capital assets.Interest and City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2017 14 fiscal charges decreased $66,409 or 26%due to the recognition of bond issuance costs in the prior year. All other 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, 2017, charges for services by business-type activities totaled $12,180,291. This is an increase of $943,729, or 8%,from the previous year.The increase was due to the increase in water and sewer billing rates and consumption in the current year. Total expenses increased $642,830 primarily due to increases in interest and amortization expenses, and increases in repairs and maintenance expense. 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 $3,376,924. Of this, $8,131 is restricted for municipal court, $21,744 is restricted for tourism, $88,436 is restricted for library improvements,$29,191 for public safety, and $8,062 is restricted for parks.In addition, $30,421 is committed for employee benefits.Unassigned fund balance totaled $3,190,939 as of yearend. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2017 15 The capital projects fund reflected an ending balance of $240,936, a decrease of $789,935.This decrease is attributed to greater capital outlay expenditures compared to intergovernmental funds received. There was an increase in governmental fund balance of $138,149 over the prior year. The increase was primarily due to transfers received from the proprietary fund. 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 $812,045 in the general fund. This is a combination of a positive revenue variance of $421,097, a positive expenditure variance of $453,992,and a negative variance of $63,044 in other financing sources and uses. The most significant variances were for property taxes, sales taxes, licenses and permits, charges for services, capital outlay, and the police department, which all had positive variances for the City. CAPITAL ASSETS As of the end of the year, the City’s governmental activities funds had invested $16,264,468 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 $18,881,652 in a variety of capital assets and infrastructure, net of accumulated depreciation. Major capital asset events during the current year include the following: McReynolds road construction in the amount of $2,789,579 Waste water line improvements to Smith, Sims, Kirkland, Jones & Lois for $1,828,315 New water well for $381,307 Sewer plant expansion for $1,816,933 Waste water treatment plant pipeline and a new lift station totaling $384,619 Acquisition of machinery and equipment for water department for $140,074 Purchase of public safety vehicles for $153,905 More detailed information about the City’s capital assets is presented in note IV. D to the financial statements. City of Sanger, Texas MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued September 30, 2017 16 LONG-TERM DEBT At the end of the current year, the City had total bonds outstanding of $25,115,000 and capital leases of $573,438. During the year, the City had principal payments on bonds and capital leases of $1,559,098. During the year, the City had a $9,240,000 bond issuance for the water, sewer, and electric fund. More detailed information about the City’s long-term liabilities is presented in note IV. E to the financial statements. 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. (This page intentionally left blank.) 17 Current assets: Cash and cash equivalents $3,609,746 $12,227,941 $15,837,687 Restricted cash - 8,255,967 8,255,967 Investments 532,221 417,201 949,422 Restricted investments - 300,000 300,000 Receivables, net 1,114,924 1,622,297 2,737,221 Inventory - 386,531 386,531 Internal balances (103,575) 103,575 - 5,153,316 23,313,512 28,466,828 Capital assets: Non-depreciable 4,378,857 8,391,661 12,770,518 Net depreciable capital assets 11,885,611 10,489,991 22,375,602 16,264,468 18,881,652 35,146,120 21,417,784 42,195,164 63,612,948 Deferred Outflows of Resources Deferred charge on refunding 26,537 46,428 72,965 Pension contributions 160,147 48,265 208,412 Pension investment earnings 234,017 70,528 304,545 Pension assumption changes 45,023 13,569 58,592 Total Deferred Outflows of Resources 465,724 178,790 644,514 See Notes to Financial Statements. Assets Governmental Total Assets Total Current Assets Total City of Sanger, Texas STATEMENT OF NET POSITION (Page 1 of 2) September 30, 2017 Activities Activities Primary Government Business-Type 18 $1,154,579 $724,225 94,483 278,079 - - 71,503 71,503 - - - - 1,320,565 1,073,807 - - 817,307 - 817,307 - 2,137,872 1,073,807 - - - - - - - - - - Component Units Sanger Industrial Dev. Corp. (4A)Dev. Corp. (4B) Sanger Texas 19 Liabilities Current liabilities: Accounts payable and accrued liabilities $793,485 $1,185,534 $1,979,019 Accrued interest payable 37,433 233,321 270,754 Customer deposits - 438,426 438,426 Long term debt due within one year 886,011 930,756 1,816,767 1,716,929 2,788,037 4,504,966 Noncurrent liabilities: Debt due in more than one year 4,197,725 21,504,235 25,701,960 Net pension liability 872,161 262,852 1,135,013 5,069,886 21,767,087 26,836,973 6,786,815 24,555,124 31,341,939 Deferred Inflows of Resources Pension (gains) losses 97,970 29,526 127,496 Net investment in capital assets 10,968,978 4,262,005 15,230,983 Restricted for: Debt service 459,295 - 459,295 Capital projects 240,936 - 240,936 Parks 8,062 - 8,062 Economic development - - - Other purposes 147,502 - 147,502 Unrestricted 3,173,950 13,527,299 16,701,249 $14,998,723 $17,789,304 $32,788,027 See Notes to Financial Statements. September 30, 2017 Activities Business-Type STATEMENT OF NET POSITION (Page 2 of 2) Net Position Total Net Position Total Liabilities Total City of Sanger, Texas Total Current Liabilities Governmental Activities Primary Government 20 $3,216 $- - - - - 50,699 - 53,915 - 307,321 - - - 307,321 - 361,236 - - 464,493 - - - - - - - 1,312,143 1,073,807 - - - - $1,776,636 $1,073,807 Dev. Corp. (4A)Dev. Corp. (4B) Sanger Industrial Sanger Texas Component Units 21 Capital Grants and Contributions Primary Government Governmental Activities General government $1,797,001 $1,119,153 $300 $- Public safety 2,369,510 691,544 53,743 - Public works 1,074,157 - - 1,452,244 Culture and recreation 792,090 - - - Interest and fiscal charges 186,772 - 212,500 - 6,219,530 1,810,697 266,543 1,452,244 Business-Type Activities Water 1,474,412 2,133,938 - 725,000 Sewer 1,015,563 2,204,011 - - Electric 7,256,080 7,788,610 - - Fleet services 525 - - - Utility administration 755,506 53,732 - - Total Business-Type Activities 10,502,086 12,180,291 - 725,000 Total Primary Government $16,721,616 $13,990,988 $266,543 2,177,244 Component Units 4A 918,183 - - 30,000 4B 237,500 - - - $1,155,683 $- $- $30,000 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. Grants and Total General Revenues and Transfers City of Sanger, Texas STATEMENT OF ACTIVITIES Operating For the Year Ended September 30, 2017 Program Revenues Charges for Expenses Contributions Total Governmental Activities Functions/Programs Services 22 $(677,548) $- $(677,548) $- $- (1,624,223) - (1,624,223) - - 378,087 - 378,087 - - (792,090) - (792,090) - - 25,728 - 25,728 - - (2,690,046) - (2,690,046) - - - 1,384,526 1,384,526 - - - 1,188,448 1,188,448 - - - 532,530 532,530 - - - (525) (525) - - - (701,774) (701,774) - - - 2,403,205 2,403,205 - - (2,690,046) 2,403,205 (286,841) - - (888,183)- - (237,500) (888,183) (237,500) 3,584,390 - 3,584,390 - - 883,562 - 883,562 439,500 439,500 236,082 - 236,082 - - 4,372 21,875 26,247 - 1,346 85,990 - 85,990 8,409 - 10,834 - 10,834 - - 114,125 - 114,125 - - 865,224 (865,224) - - - 5,784,579 (843,349)4,941,230 447,909 440,846 3,094,533 1,559,856 4,654,389 (440,274)203,346 11,904,190 16,229,448 28,133,638 2,216,910 870,461 $14,998,723 $17,789,304 $32,788,027 $1,776,636 $1,073,807 Dev. Corp. (4A)Dev. Corp. (4B)Total Business-Type Activities Sanger Industrial Sanger Texas Primary Government Governmental Component Units Net (Expense) Revenue and Changes in Net Position Activities 23 Cash and cash equivalents $2,916,475 $60,156 $459,191 Investments 532,221 - - Receivables, net 485,660 609,231 20,033 $3,934,356 $669,387 $479,224 Liabilities Accounts payable and accrued liabilities $320,093 $428,451 $- Due to other funds 103,575 - - 423,668 428,451 - Deferred Inflows of Resources Unavailable revenue Property taxes 43,237 - 19,929 EMS revenue 90,527 - - Total Deferred Inflows of Resources 133,764 - 19,929 Restricted for: Municipal court 8,131 - - Tourism 21,744 - - Library 88,436 - - Public safety 29,191 - - Debt service - - 459,295 Capital projects - 240,936 - Parks 8,062 - - Committed for: Employee benefits 30,421 - - Unassigned reported in: General fund 3,190,939 - - 3,376,924 240,936 459,295 $3,934,356 $669,387 $479,224 See Notes to Financial Statements. City of Sanger, Texas BALANCE SHEET GOVERNMENTAL FUNDS September 30, 2017 Total Liabilities, Deferred Inflows, and Fund Balances Total Fund Balances Total Assets Fund Balances Assets Service Total Liabilities Capital Projects FundGeneral Nonmajor Debt 24 $3,435,822 532,221 1,114,924 $5,082,967 $748,544 103,575 852,119 63,166 90,527 153,693 8,131 21,744 88,436 29,191 459,295 240,936 8,062 30,421 3,190,939 4,077,155 $5,082,967 Funds Total Governmental 25 (Page intentionally left blank.) 26 Fund Balances - Total Governmental Funds $4,077,155 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 4,378,857 Capital assets - net depreciable 11,845,875 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 90,527 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 26,537 Pension contributions 119,451 Pension investment earnings 174,549 Pension gains (losses)(73,074) Pension assumption changes 33,582 Internal service funds are used by management to charge the cost of internal services to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. Net position - governmental activities (4,913) Some liabilities, including bonds payable and deferred charges, are not reported as liabilities in the governmental funds. Accrued interest (37,433) Compensated absences (144,352) Bond premium (120,759) Net pension liability (650,530) Non-current liabilities due in one year (721,255) Non-current liabilities due in more than one year (4,058,660) $14,998,723 See Notes to Financial Statements. City of Sanger, Texas RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION GOVERNMENTAL FUNDS September 30, 2017 27 Revenues Property tax $2,950,887 $- $684,262 Sales tax 883,562 - - Franchise and local taxes 236,082 - - License and permits 289,775 - - Charges for services 829,378 - - Fire and rescue 588,124 - - Contributions and donations 300 - - Intergovernmental 53,743 1,452,244 212,500 Fines and forfeitures 103,420 - - Investment income 4,258 - 114 Other revenue 85,990 - - 6,025,519 1,452,244 896,876 Expenditures Current: General government 1,502,906 - 875 Police department 1,339,076 - - Municipal court 184,528 - - Fire and EMS 991,227 - - Parks and recreation 597,346 - - Public works 730,096 - - Debt service: Principal 111,095 - 596,800 Interest 18,257 - 192,466 Capital outlay 169,822 2,792,179 - 5,644,353 2,792,179 790,141 Excess of Revenues Over (Under) Expenditures 381,166 (1,339,935) 106,735 Other Financing Sources (Uses) Transfers in 916,760 550,000 - Transfers (out)(550,000) - (51,536) Proceeds from sale of capital assets 10,834 - - Insurance recoveries 114,125 - - 491,719 550,000 (51,536) 872,885 (789,935) 55,199 Beginning fund balances 2,504,039 1,030,871 404,096 $3,376,924 $240,936 $459,295 See Notes to Financial Statements. Capital Ending Fund Balances Total Other Financing Sources (Uses) Total Expenditures Net Change in Fund Balances General Total Revenues ServiceProjects Fund City of Sanger, Texas STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE Nonmajor Debt GOVERNMENTAL FUNDS For the Year Ended September 30, 2017 28 $3,635,149 883,562 236,082 289,775 829,378 588,124 300 1,718,487 103,420 4,372 85,990 8,374,639 1,503,781 1,339,076 184,528 991,227 597,346 730,096 707,895 210,723 2,962,001 9,226,673 (852,034) 1,466,760 (601,536) 10,834 114,125 990,183 138,149 3,939,006 $4,077,155 Total Funds Governmental 29 (This page intentionally left blank.) 30 Amounts reported for governmental activities in the statement of activities are different because: Net changes in fund balances - total governmental funds $138,149 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 3,163,870 Depreciation expense (942,156) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. EMS receivable (50,759) 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 (9,675) Accrued interest 4,852 Pension expense (71,967) 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. Deferred charges on refunding (7,250) Premium on debt 26,349 Principal payments 707,895 Internal service funds are used by management to charge the cost of internal services to individual funds. The City reports the net gain (loss) of internal service funds within governmental activities.135,225 $3,094,533 See Notes to Financial Statements. Change in Net Position of Governmental Activities For the Year Ended September 30, 2017 City of Sanger, Texas RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES 31 Current Assets Cash and cash equivalents $12,227,941 $173,924 Restricted cash 8,255,967 - Investments 417,201 - Restricted investments 300,000 - Receivables, net 1,622,297 - Inventory 386,531 - Due from other funds 103,575 - 23,313,512 173,924 Noncurrent Assets Capital assets: Non-depreciable 8,391,661 - Net depreciable capital assets 10,489,991 39,736 18,881,652 39,736 42,195,164 213,660 Pension contributions 48,265 40,696 Pension investment earnings 70,528 59,468 Pension assumption changes 13,569 11,441 Deferred charge on refunding 46,428 - Total Deferred Outflows of Resources 178,790 111,605 Current Liabilities Accounts payable and accrued liabilities 1,185,534 44,941 Accrued interest 233,321 - Customer deposits 438,426 - Compensated absences - current 94,379 34,839 Bonds and capital leases payable-current 836,377 - 2,788,037 79,780 Noncurrent Liabilities Compensated absences 10,487 3,871 Net pension liability 262,852 221,631 Bonds and capital leases payable 21,493,748 - 24,555,124 305,282 Pension (gains) losses 29,526 24,896 Net investment in capital assets 4,370,129 39,736 Unrestricted 13,419,175 (44,649) $17,789,304 $(4,913) See Notes to Financial Statements. Total Net Position Net Position Total Noncurrent Assets Total Assets Liabilities Total Liabilities Total Current Liabilities Water, Sewer Assets Service Deferred Outflows of Resources Deferred Inflows of Resources Internal & Electric Total Current Assets City of Sanger, Texas STATEMENT OF NET POSITION PROPRIETARY FUND September 30, 2017 Activities Governmental 32 Operating Revenues Charges for services $11,144,839 $1,676,148 Connection fees 57,720 - Tap fees 924,000 - Other revenue 53,732 - 12,180,291 1,676,148 Operating Expenses Salaries and wages 1,935,540 1,057,951 Contracted services 324,471 293,394 Utilities 315,524 34,476 Materials and supplies 200,241 129,942 Water and electric purchases 5,483,292 - Repairs and maintenance 685,346 17,801 Depreciation 816,429 7,359 9,760,843 1,540,923 2,419,448 135,225 Nonoperating Revenues (Expenses) Investment income 21,875 - Intergovernmental 725,000 - Interest expense (741,243) - 5,632 - 2,425,080 135,225 Transfers (out)(865,224)- 1,559,856 135,225 16,229,448 (140,138) $17,789,304 $(4,913) See Notes to Financial Statements. Internal Service Governmental Activities City of Sanger, Texas STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUND For the Year Ended September 30, 2017 Water, Sewer & Electric Ending Net Position Total Operating Revenues Total Operating Expenses Change in Net Position Operating Income (Loss) Total Nonoperating Revenues (Expenses) Income (Loss) Before Transfers Beginning net position 33 Cash Flows from Operating Activities Receipts from customers $12,315,664 $1,676,148 Payments to suppliers (6,691,173) (467,273) Payments to employees (1,883,865) (1,021,659) Payments/receipts for other (20,420) - 3,720,206 187,216 Cash Flows from Noncapital Financing Activities Operating transfers out (865,224) - (865,224) - Cash Flows from Capital and Related Financing Activities Capital purchases (4,652,737) (13,292) Capital contributions 725,000 - Proceeds from bond issuance 9,997,697 - Principal paid on debt (851,203) - Interest paid on debt (692,956) - 4,525,801 (13,292) Cash Flows from Investing Activities Purchases of investments, net (1,871) - Interest on investments 21,875 - 20,004 - 7,400,787 173,924 13,083,121 - $20,483,908 $173,924 See Notes to Financial Statements. Governmental Activities Internal Service Beginning cash and cash equivalents Net Cash Provided by Noncapital Financing Activities Net Cash (Used) by Capital and Related Financing Activities Ending Cash and Cash Equivalents Net Increase (Decrease) in Cash and Cash Equivalents Net Cash Provided by Investing Activities City of Sanger, Texas STATEMENT OF CASH FLOWS PROPRIETARY FUND (Page 1 of 2) For the Year Ended September 30, 2017 Net Cash Provided by Operating Activities & Electric Water, Sewer 34 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income $2,419,448 $135,225 Adjustments to reconcile operating income to net cash provided: Depreciation 816,429 7,359 Changes in Operating Assets and Liabilities: (Increase) Decrease in: Accounts receivable 94,514 - Inventory 108,095 - Due from/to other funds (20,420) - Deferred outflows of resources - pension contributions (6,229) (5,252) Deferred outflows of resources - pension investment earnings 24,920 16,681 Deferred inflows of resources - pension (gains) losses 12,050 24,896 Deferred outflows of resources - pension assumption changes 3,663 (7,317) Increase (Decrease) in: Accounts payable and accrued liabilities 209,606 8,340 Compensated absences 22,596 11,773 Customer deposits 40,859 - Net pension liability (5,325) (4,489) $3,720,206 $187,216 See Notes to Financial Statements. Service& Electric Water, Sewer Governmental Activities Net Cash Provided by Operating Activities Internal City of Sanger, Texas STATEMENT OF CASH FLOWS PROPRIETARY FUND (Page 2 of 2) For the Year Ended September 30, 2017 35 (This page intentionally left blank.) 36 City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS  September 30, 2017    37    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 in 1886 and operates under  a Council‐Manager form of government. The City provides: general government,  public safety, public works, culture and recreation, water, sewer, 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 Cityʹs 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 Cityʹs 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 Cityʹs 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 Cityʹs 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.   City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  38  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 entityʹs  financial statements to be misleading or incomplete.    Discretely Presented Component Units    Sanger Industrial Development Corporation (4A)     The Sanger Texas Industrial Development Corporation (“4A”) 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. Discrete presentation is appropriate because the District’s Board is  not substantially the same as the City.    Sanger Texas Development Corporation (4B)    The Sanger Texas Development Corporation (“4B”) 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. Discrete presentation is appropriate because the District’s Board is not  substantially the same as the City.    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  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  39  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.  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.     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 capital asset activities for  governmental fund types.    The government reports the following nonmajor governmental fund:    Debt Service Fund     The debt service fund is used to account for debt service activities for  governmental fund types.      City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  40  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.    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.    Additionally, the government reports the following fund type:    Internal Service Fund    Revenues and expenses related to services provided to organizations inside the  City on a cost reimbursement basis are accounted for in an internal service fund.  The Cityʹs internal service fund was set up to provide administrative support  services to other funds of the City.    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  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  41  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. 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  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  42  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 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.    City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  43  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. Fair Value    The City has applied Governmental Accounting Standards Board (“GASB”)  Statement No. 72, Fair Value Measurement and Application. GASB Statement No.  72 provides guidance for determining a fair value measurement for reporting  purposes and applying fair value to certain investments and disclosures related to  all fair value measurements.    3. 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.    4. 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.  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  44  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.    5. 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 average cost method. Certain  payments to vendors reflect costs applicable to future accounting periods (prepaid  expenditures) are recognized as expenditures when utilized.     6. 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.              City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  45  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      7. 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 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.    8. 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  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  46  flow assumption must be made about the order in which the resources are  considered to be applied.    9. 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.    10. 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).    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.  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  47  11. 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 Cityʹs policy to liquidate compensated absences with future revenues rather  than with currently available expendable resources. Accordingly, the Cityʹs  governmental funds recognize accrued compensated absences when it is paid.    12. 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 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  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  48  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.    13. 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.    14. Pensions    For purposes of measuring the net pension liability, deferred outflows of resources  and deferred inflows of resources related to pensions, and pension expense,  information about the Fiduciary Net Position of the Texas Municipal Retirement  System (TMRS) and additions to/deductions from TMRS’s Fiduciary Net Position  have been determined on the same basis as they are reported by TMRS. For this  purpose, plan contributions are recognized in the period that compensation is  reported for the employee, which is when contributions are legally due. Benefit  payments and refunds are recognized when due and payable in accordance with  the benefit terms. Investments are reported at fair value.    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, 2017  49  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. Budget amendments were only re‐classes at the function level and below and  there was no increase in budgeted revenues or expenses by function from  amendments.     IV.  DETAILED NOTES ON ALL FUNDS     A. Deposits and Investments    As of September 30, 2017, the primary government had the following investments:    Investment Type Certificates of deposit $ 1,249,422 0.51 Total fair value $ 1,249,422 Portfolio weighted average maturity 0.51 Average Maturity Fair Value  (Years)   City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  50  As of September 30, 2017, the 4A Component Unit had the following investments:    Investment Type Certificates of deposit $ 94,483 0.01 Total fair value $ 94,483 Portfolio weighted average maturity 0.01 Average Maturity Fair Value  (Years)     As of September 30, 2017, the 4B Component Unit had the following investments:    Investment Type Certificates of deposit $ 278,079 0.46 Total fair value $ 278,079 Portfolio weighted average maturity 0.46 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.    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, 2017, the market values of  pledged securities and FDIC exceeded bank balances.   City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  51  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 $ 75,400 $ 31,177 $‐              $‐                  $ 106,577     Sales tax 143,005 ‐               ‐               ‐                  143,005     Franchise & local taxes 35,236 ‐               ‐               ‐                  35,236       Intergovernmental ‐                ‐              609,231   ‐                  609,231     EMS 292,017 ‐               ‐               ‐                  292,017     Accounts 118,785 ‐               ‐              1,738,586 1,857,371  Other 38,930 ‐               ‐               ‐                  38,930       Allowance (217,713)   (11,144)    ‐              (116,289)     (345,146)    $ 485,660    $ 20,033    $ 609,231  $ 1,622,297   $ 2,737,221  Water, Sewer General Service Capital Projects Debt Total& Electric   The following comprise receivable balances of the component units at year end:    Sales tax $ 71,503    $ 71,503        $ 143,006     $ 71,503    $ 71,503        $ 143,006     Total4A 4B                         City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  52  C. Inventory    The following comprise the inventory balances of the primary government at year  end:    Inventory type Electric Department $ 334,969 Water Department 51,562 Total $ 386,531 Cost     D. Capital Assets    A summary of changes in governmental activities capital assets for the year end  was as follows:    Capital assets, not being depreciated: Land $ 1,044,933             $‐                        $‐                         $ 1,044,933        Construction in progress 1,010,993             2,798,410         (475,479)            3,333,924        2,055,926 2,798,410 (475,479) 4,378,857 Capital assets, being depreciated: Infrastructure 11,958,388           17,800              11,500                11,987,688      Buildings and improvements 6,037,026             67,904              463,979              6,568,909        Machinery and equipment 3,616,608             293,049            (69,322)              3,840,335        21,612,022 378,753 406,157 22,396,932 Less accumulated depreciation Infrastructure 5,816,900             320,717             ‐                         6,137,617        Buildings and improvements 1,682,788             295,941             ‐                         1,978,729        Machinery and equipment 2,131,440             332,857            (69,322)              2,394,975        Total accumulated depreciation 9,631,128 949,515 (69,322)              10,511,321 Net capital assets being depreciated 11,980,894           (570,762)           475,479              11,885,611      $ 14,036,820           $ 2,227,648         $‐                         $ 16,264,468      Beginning Disposals / Ending Balances Increases Total Capital Assets Total capital assets not being depreciated Total capital assets being depreciated BalancesReclassifications           City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  53  Depreciation was charged to governmental functions as follows:    General government $ 106,752                Public safety 117,555                Public works 359,369                Culture and recreation 240,696                Fire and rescue 117,784                Internal service 7,359                    $ 949,515               Total Governmental Activities Depreciation Expense     A summary of changes in business‐type activities capital assets for the year end  was as follows:    Capital assets, not being depreciated: Land $ 496,857             $‐                        $‐                         $ 496,857             Construction in progress 3,449,956          4,444,848          ‐                         7,894,804          Total capital assets not being depreciated 3,946,813          4,444,848          ‐                         8,391,661          Capital assets, being depreciated: Infrastructure 23,566,545        89,185               ‐                         23,655,730        Buildings and improvements 865,245              ‐                         ‐                         865,245             Machinery and equipment 2,082,611          118,704            (24,700)              2,176,615          Total capital assets being depreciated 26,514,401        207,889            (24,700)              26,697,590        Less accumulated depreciation Infrastructure 13,617,158        634,126             ‐                         14,251,284        Buildings and improvements 419,568             51,855               ‐                         471,423             Machinery and equipment 1,379,144          130,448            (24,700)              1,484,892          Total accumulated depreciation 15,415,870        816,429            (24,700)              16,207,599        Net capital assets being depreciated 11,098,531        (608,540)            ‐                         10,489,991        $ 15,045,344        $ 3,836,308         $‐                         $ 18,881,652       Total Capital Assets Beginning Disposals /Ending Balances Increases Reclassifications Balances                 City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  54  Depreciation was charged to business‐type activities as follows:    Water $ 292,183 Sewer 272,292 Electric 237,166 Other 14,788 $ 816,429              Total Business‐type Activities Depreciation Expense     A summary of changes in component unit (4A Component Unit) capital assets for  the year end was as follows:    Capital assets, being depreciated: Buildings and improvements $ 1,080,797   $‐                  $‐                     $ 1,080,797    Furniture and fixtures 40,950         ‐                   ‐                     40,950         Total capital assets being depreciated 1,121,747    ‐                   ‐                     1,121,747    Less accumulated depreciation Buildings and improvements 253,145      38,360         ‐                     291,505       Furniture and fixtures 8,572          4,363           ‐                     12,935         Total accumulated depreciation 261,717      42,723         ‐                     304,440       Net capital assets being depreciated 860,030      (42,723)        ‐                     817,307       $ 860,030      $ (42,723)       $‐                     $ 817,307       Beginning Retirements/ Ending Balances Additions Reclassifications Balances Total Capital Assets   The 4A Component Unit recognized depreciation expense of $42,723 during the year ended  September 30, 2017.                            City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  55  E.   Long‐term Debt    The following is a summary of changes in the City’s total governmental long‐term  liabilities for the year ended. The City uses the debt service fund to liquidate  governmental activities debts.  Governmental Activities: Bonds, notes and other payables: General Obligation Bonds $ 1,946,800      $‐                 $ (372,500)    $ 1,574,300     $ 377,000     Certificates of Obligation 2,964,600       ‐                 (224,300)    2,740,300     229,900     Less deferred amounts: For issuance premiums 147,108          ‐                 (26,349)      120,759         ‐                 5,058,508       ‐                 (623,149)    4,435,359     606,900     Other liabilities: Capital leases payable 576,410          ‐                   (111,095)      465,315         114,355      Compensated absences 161,614         135,798      (114,350)    183,062        164,756     $ 5,796,532      $ 135,798        $ (848,594)      $ 5,083,736      $ 886,011      Long‐term liabilities due in more than one year $ 4,197,725      Business‐Type Activities: General Obligation Bonds $ 2,363,200      $‐                 $ (452,500)    $ 1,910,700     $ 458,000     Certificates of Obligation 9,955,400      9,240,000   (305,700)    18,889,700  325,100     Less deferred amounts: For issuance premiums 743,091         757,697      (79,186)      1,421,602      ‐                 13,061,691    9,997,697   (837,386)    22,222,002  783,100     Other liabilities: Capital leases payable 201,126          ‐                 (93,003)      108,123        53,277       Compensated absences 79,493           78,226        (52,853)      104,866        94,379       $ 13,342,310    $ 10,075,923   $ (983,242)      $ 22,434,991    $ 930,756      Long‐term liabilities due in more than one year $ 21,504,235   Component Units (4A Fund) Notes payable $ 396,451         $‐                 $ (43,637)      $ 352,814        $ 46,014       Compensated absences 2,888             3,860          (1,542)        5,206            4,685         $ 399,339         $ 3,860          $ (45,179)      $ 358,020        $ 50,699       Long‐term liabilities due in more than one year $ 307,321         One Year Total Governmental  Activities Beginning Amortization/ Ending Due within Balance Additions Payments Balance Total Business‐Type  Activities   City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  56  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% $ 633,600     $ 806,400       $‐                    $ 1,440,000     $2,535,000 General Obligation Refunding Bond, Series 2016, due in   installments through 2021, interest at 2% to 4% 940,700     1,104,300     ‐                    2,045,000     $ 1,574,300  $ 1,910,700    $‐                    $ 3,485,000     Certificates of Obligation: $1,750,000 Certificates of Obligation, Series 2007,  due in annual installments through 2027, interest at 4.4% $ 362,100     $ 702,900       $‐                    $ 1,065,000     $3,200,000 Certificates of Obligation, Series 2009,  due in annual installments through 2026, interest at 3% to 4.75% 1,945,000   ‐                     ‐                    1,945,000     $4,260,000 Certificates of Obligation, Series 2013,  due in annual installments through 2033, interest at 2% to 3.7% 433,200     3,176,800     ‐                    3,610,000     $5,870,000 Certificates of Obligation, Series 2015,  due in annual installments through 2035, interest at 3.4% to 5.5%‐                 5,770,000     ‐                    5,770,000     $9,240,000 Certificates of Obligation, Series 2017,  due in annual installments through 2035, interest at 3% to 4%‐                 9,240,000     ‐                    9,240,000     $ 2,740,300  $ 18,889,700  $‐                    $ 21,630,000   Less deferred amounts: Issuance premium $ 120,759     $ 1,421,602    $‐                    $ 1,542,361     $ 120,759     $ 1,421,602    $‐                    $ 1,542,361     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% $‐                 $‐                    $ 352,814        $352,814        $‐                 $‐                    $ 352,814        $352,814        Capital Leases Payable: $435,000 Capital lease payable to financial institution, due in annual installments of $51,535 through 2024, interest at 3.346% $ 316,303     $‐                    $‐                    $316,303        $500,000 Capital lease payable to financial institution, due in annual installments of $134,279 through 2019, interest at 2.947% 149,012     108,123        ‐                    257,135        $ 465,315     $ 108,123       $‐                    $573,438        Compensated Absences 183,062     104,866       5,206            293,134        $ 5,083,736  $ 22,434,991  $ 358,020        $ 27,876,747   4A Fund 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  Component  Unit          City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  57  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.    The City issued $9,240,000 of Series 2017 Certificates of Obligation in the current  year. The City received proceeds of $9,997,697 from this issuance resulting in  premium recorded of $757,697. The City also recognized debt issuance costs to  interest expense of $242,289 from this issuance. Principal payments are due  annually in May, beginning May 2022. The bonds bear an interest rate ranging  from 3% to 4%. Interest payments are due semi‐annually on November 15th and  May 15th through 2037.    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, 2018 $ 377,000            $ 55,426            $ 458,000          $ 66,824              2019 392,800            41,908            477,200          50,492              2020 410,900            27,824            499,100          33,476              2021 393,600            13,929            476,400          16,746              $ 1,574,300         $ 139,087          $ 1,910,700       $ 167,538            Principal Interest Principal Interest Governmental Activities Business‐Type Activities                             City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  58  Combination Tax and Revenue Certificates of Obligations    Year ending September 30, 2018 $ 229,900            $ 119,387            $ 325,100            $ 721,343             2019 241,600            110,391          328,400          715,779            2020 248,900            100,919          331,100          706,516            2021 261,200            91,050            408,800          694,655            2022 273,500            79,919            616,500          679,742            2023 286,400            68,258            633,600          660,427            2024 297,000            55,768            658,000          640,327            2025 309,300            42,686            675,700          618,519            2026 323,900            28,194            701,100          593,113            2027 71,800              13,024              998,200            566,321             2028 28,800              9,768              1,086,200       526,357            2029 30,600              8,400                1,124,400         482,800             2030 31,800              6,870              1,173,200       436,574            2031 33,600              5,280              1,221,400       387,920            2032 35,400              3,600              1,269,600       337,338            2033 36,600              1,830              1,323,400       284,626            2034 ‐                        ‐                      1,420,000       229,713            2035 ‐                        ‐                      1,475,000       173,656            2036 ‐                        ‐                      1,535,000       115,344            2037 ‐                        ‐                      1,585,000       63,400              $ 2,740,300         $ 745,345          $ 18,889,700     $ 9,634,468         Governmental Activities Business‐Type Activities Principal Interest Principal Interest   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.                      City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  59  Capital Leases    Year ending September 30, 2018 $ 114,355            $ 14,995            $ 53,277            $ 3,186                2019 117,889            11,463            54,846            1,616                2020 43,716              7,819               ‐                       ‐                       2021 45,179              6,357               ‐                       ‐                       2022 46,690              4,845               ‐                       ‐                       2023 48,252              3,283               ‐                       ‐                       2024 49,234              1,668               ‐                       ‐                       $ 465,315            $ 50,430            $ 108,123          $ 4,802                Business‐Type Activities Principal Interest Governmental 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 carrying value  as of yearend for governmental activities and business type activities of $506,762  and $178,737, respectively.    Note Payable for Component Unit – 4A    Year ending September 30, 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 42,199            3,063                $ 352,814          $ 60,050              Principal Interest Component Unit ‐ 4A Fund     F. Conduit Debt    Before the current year, 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. The 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.  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  60  G. Deferred Charge on Refunding    Deferred charges resulting from the issuance of the 2012 and 2016 general  obligation refunding bonds have been recorded as a deferred outflow of resources  and are being amortized to interest expense over the terms of the respective  refunded debts. Current year balances for governmental and business‐type  activities totaled $26,537 and $46,428, respectively. Current year amortization  expense for governmental and business‐type activities totaled $7,250 and $12,725,  respectively.    H. Interfund Transactions     Amounts transferred between funds relate to amounts collected, various capital  expenditures, annual funding, and debt payments.    Transfer out: General $‐                  $ 550,000         $ 550,000       Debt Service 51,536         ‐                    51,536         Enterprise 865,224       ‐                    865,224       $ 916,760      $ 550,000         $ 1,466,760    General Total Transfer In  Capital  Projects      The internal service fund provides administrative services to the general and water,  sewer, & electric funds. Below is a summary of the amounts paid from these funds  to the internal service fund for the year ended September 30, 2017:    Paid by: General $ 502,845                     Enterprise 1,173,303                  $ 1,676,148                   Internal Service  Received by:                   City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  61  The compositions of interfund due to/from balances as of the year ended September  30, 2017 were as follows:      Payable Fund General $ 103,575 $ 103,575        Total $ 103,575             $ 103,575        Total Water, Sewer, &  Electric Receivable Fund      Interfund balances resulted from the timing difference between the dates that (1)  interfund goods and services are provided or reimbursable expenditures occur, (2)  transactions are recorded in the accounting system, and (3) payments between  funds are made. All balances are expected to be paid in the subsequent year.    I.  Fund Equity     The City records fund balance restrictions on the fund level to indicate that a  portion of the fund balance is legally restricted for a specific future use or to  indicate that a portion of the fund balance is not available for expenditures.     The following is a list of fund balances restricted/committed by the City:    Municipal court $ 8,131              $‐                       Tourism 21,744             ‐                       Library 88,436             ‐                       Public safety 29,191             ‐                       Debt service 459,295           ‐                       Capital projects 240,936           ‐                       Parks 8,062               ‐                       Employee benefits ‐                      30,421             $ 855,795          $ 30,421             Restricted Committed     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 2,800 other entities in the Texas Municipal League’s  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  62  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, 2017  63  C. Construction commitments    The government has active construction projects as of September 30, 2017. 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 McReynolds Road Reconstruction Pacheco Koch, LLC $ 9,027             McReynolds Road Reconstruction HRM Land Acquisition 397                McReynolds Road Reconstruction Pavecon 3,889,379      McReynolds Road Reconstruction D&S Engineering 38,141           3,936,944      Server Consolidation Austin Lane Technology 20,166           15ʺ Water Line Chapman to Belz Pacheco Koch 3,833             Water Line Lois to View Pacheco Koch 19,542           Water Well and Ground Storage Perkins Engineering 54,327           Water Well and Ground Storage Cory Miller Drilling 32,052           86,379 12ʺ Line Chapman to Belz Pacheco Koch 18,794           E35 WWL to Lois Pacheco Koch LLC 35,490           E35 WWL to Lois Dickerson Construction 202,498         E35 WWL to Lois HRM Land Acquisition 5,835             243,823         12ʺ Line Lois to View Pacheco Koch 21,333           New Sewer Line Alan Plummer Associates 82,550           New Sewer Plant Perkins Engineering 9,749,495      9,832,045 $ 14,182,859 Remaining  CommitmentVendor Total Project Total Project Total Project Total Project Total   City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  64  D. Related Party Activity    On March 1, 2012, the City entered into a non‐cancelable lease agreement with a  corporation of which a former city council member is a principal member of  management. The leased property is owned by the 4A Component Unit and has a  cost of $1,080,797 with accumulated depreciation of $291,505 as of September 30,  2017. The lease provides for a base rent and an adjustment each year related to  excess operating expenses (if any) incurred annually. The lease was continued on a  month to month basis beginning in July 2015. On January 6, 2017, the City  terminated the lease agreement.    During the year ended September 30, 2017, the City recognized $6,556 in rental  revenue and collected $32,777 from this lease. As of September 30, 2017, the City  had no receivables from this lease.    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. Defined Benefit Pension Plans    1.   Plan Description    The City of Sanger, Texas participates as one of 872 plans in the nontraditional, joint  contributory, hybrid defined benefit pension plan administered by the Texas  Municipal Retirement System (TMRS). TMRS is an agency created by the State of  Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas  Government Code (the TMRS Act) as an agent multiple‐employer retirement  system for municipal employees in the State of Texas. The TMRS Act places the  general administration and management of the System with a six‐member Board of  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  65  Trustees. Although the Governor, with the advice and consent of the Senate,  appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS’s  defined benefit pension plan is a tax‐qualified plan under Section 401 (a) of the  Internal Revenue Code. TMRS issues a publicly available comprehensive annual  financial report (CAFR) that can be obtained at www.tmrs.com.    All eligible employees of the city are required to participate in TMRS.    2.  Benefits Provided    TMRS provides retirement, disability, and death benefits. Benefit provisions are  adopted by the governing body of the city, within the options available in the state  statutes governing TMRS.    At retirement, the benefit is calculated as if the sum of the employee’s contributions,  with interest, and the city‐financed monetary credits with interest were used to  purchase an annuity. Members may choose to receive their retirement benefit in one  of seven payments options. Members may also choose to receive a portion of their  benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36  monthly payments, which cannot exceed 75% of the member’s deposits and  interest.    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 2016 Plan Year 2015  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             City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  66  Employees covered by benefit terms    At the December 31, 2016 valuation and measurement date, the following  employees were covered by the benefit terms:    Inactive employees or beneficiaries currently receiving benefits 13  Inactive employees entitled to but not yet receiving benefits 26  Active employees 64  Total 103     3.  Contributions    The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee  gross earnings, and the city matching percentages are either 100%, 150%, or 200%,  both as adopted by the governing body of the City. Under the state law governing  TMRS, the contribution rate for each city is determined annually by the actuary,  using the Entry Age Normal (EAN) actuarial cost method. The actuarially  determined rate is the estimated amount necessary to finance the cost of benefits  earned by employees during the year, with an additional amount to finance any  unfunded accrued liability.    Employees for the City of Sanger were required to contribute 6% of their annual  gross earnings during the fiscal year. The contribution rates for the City of Sanger  were 7.13% and 7.63% in calendar years 2016 and 2017, respectively. The City’s  contributions to TMRS for the year ended September 30, 2017, were $266,753, and  were equal to the required contributions.    4.  Net Pension Liability    The City’s Net Pension Liability (NPL) was measured as of December 31, 2016, and  the Total Pension Liability (TPL) used to calculate the Net Pension Liability was  determined by an actuarial valuation as of that date.                    City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  67  Actuarial assumptions:    The Total Pension Liability in the December 31, 2016 actuarial valuation was  determined using the following actuarial assumptions:    Inflation         2.5% per year  Overall payroll growth      3.0% per year    Investment Rate of Return    6.75%, net of pension plan investment expense,    including inflation        Salary increases were based on a service‐related table. Mortality rates for active  members, retirees, and beneficiaries were based on the gender‐distinct RP2000  Combined Healthy Mortality Tables with Blue Collar Adjustment, with male rates  multiplied by 109% and female rates multiplied by 103%.The rates are projected on  a fully generational basis by scale BB to account for future mortality improvements.  For disabled annuitants, the gender‐distinct RP2000 Combined Healthy Mortality  Tables with Blue Collar Adjustment are used with males rates multiplied by 109%  and female rates multiplied by 103% with a 3‐year set‐forward for both males and  females. In addition, a 3% minimum mortality rate is applied to reflect the  impairment for younger members who become disabled. The rates are projected on  a fully generational basis by scale BB to account for future mortality improvements  subject to the 3% floor.    Actuarial assumptions used in the December 31, 2016, valuation were based on the  results of actuarial experience studies. The experience study in TMRS was for the  period December 31, 2010 through December 31, 2014. Healthy post‐retirement  mortality rates and annuity purchase rates were updated based on a Mortality  Experience Investigation Study covering 2009 through 2011, and dated December  31, 2013. These assumptions were first used in the December 31, 2013 valuation,  along with a change to the Entry Age Normal (EAN) actuarial cost method.  Assumptions are reviewed annually. Plan assets are managed on a total return basis  with an emphasis on both capital appreciation as well as the production of income,  in order to satisfy the short‐term and long‐term funding needs of TMRS.    The long‐term expected rate of return on pension plan investments was determined  using a building‐block method in which best estimate ranges of expected future real  rates of return (expected returns, net of pension plan investment expense and  inflation) are developed for each major asset class. These ranges are combined to  produce the long‐term expected rate of return by weighting the expected future real  rates of return by the target asset allocation percentage and by adding expected  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  68  inflation. In determining their best estimate of a recommended investment return  assumption under the various alternative asset allocation portfolios, GRS focused  on the area between (1) arithmetic mean (aggressive) without an adjustment for  time (conservative) and  (2) the geometric mean (conservative) with an adjustment  for time (aggressive).     The target allocation and best estimates of real rates of return for each major asset  class in fiscal year 2017 are summarized in the following table:    Asset Class Target Allocation Long‐Term Expected Real  Rate of Return  (Arithmetic)  Domestic Equity 17.5% 4.55%  International Equity 17.5% 6.35%  Core Fixed Income 10.0% 1.00%  Non‐Core Fixed Income 20.0% 4.15%  Real Return 10.0% 4.15%  Real Estate 10.0% 4.75%  Absolute Return 10.0% 4.00%  Private Equity 5.0% 7.75%     Total 100.0%     Discount Rate:    The discount rate used to measure the Total Pension Liability was 6.75%. The  projection of cash flows used to determine the discount rate assumed that employee  and employer contributions will be made at the rates specified in statute. Based on  that assumption, the pension plan’s Fiduciary Net Position was projected to be  available to make all projected future benefit payments of current active and  inactive employees. Therefore, the long‐term expected rate of return on pension  plan investments was applied to all periods of projected benefit payments to  determine the Total Pension Liability.                    City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  69  Changes in the Net Pension Liability:    Total Pension  Liability (a) Plan Fiduciary Net  Position (b) Net Pension  Liability (a) – (b) Balance at 12/31/15 $             7,989,659 $                 6,831,656 $                    1,158,003  Changes for the year:    Service Cost                 408,943                               ‐                           408,943     Interest (on the Total Pension Liab.)                545,333                               ‐                           545,333     Difference between expected and         actual experience                 (78,516)                             ‐                            (78,516)    Contributions – employer                          ‐                        240,177                        (240,177)    Contributions – employee                          ‐                        202,113                        (202,113)    Net investment income                          ‐                        461,955                        (461,955)    Benefit payments, including     refunds of emp. contributions               (230,245)                  (230,245)                                 ‐       Administrative expense                          ‐                          (5,214)                           5,214     Other changes                          ‐                             (281)                              281       Net changes                 645,515                      668,505                          (22,990) Balance at 12/31/16 $              8,635,174 $                  7,500,161 $                    1,135,013    Sensitivity of the net pension liability to changes in the discount rate    The following presents the net pension liability of the City, calculated using the  discount rate of 6.75%, as well as what the City’s net pension liability would be if it  were calculated using a discount rate that is 1‐percentage‐point lower (5.75%) or 1‐ percentage‐point higher (7.75%) than the current rate:    1% Decrease Current Single Rate 1% Increase 5.75% Assumption 6.75% 7.75%  $ 2,559,316                           $ 1,135,013                         $ (23,988)                                Pension Plan Fiduciary Net Position:    Detailed information about the pension plan’s Fiduciary Net Position is available in  a separately‐issued TMRS financial report. That report may be obtained on the  internet at www.tmrs.com.          City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  70  5.  Pension Expense and Deferred Outflows of Resources Related to Pensions    For the year ended September 30, 2017, the City recognized pension expense of  $391,339.    At September 30, 2017, the City reported deferred outflows of resources related to  pensions from the following sources:    Difference between projected and  investment earnings $ 304,545                                   Changes in actuarial assumptions 58,592                                     Differences between expected and actual  economic experience (127,496)                                  Contributions subsequent to the  measurement date 208,412                                      Total $ 444,053                                   Deferred Outflows (Inflows) of Resources   The City reported $208,412 as deferred outflows of resources related to pensions  resulting from contributions subsequent to the measurement date that will be  recognized as a reduction of the net pension liability for the year ending September  30, 2018. Other amounts reported as deferred outflows of resources related to  pensions will be recognized in pension expense as follows:    Year ended December 31: 2017 $ 95,140                2018 95,140                2019 79,491                2020 (14,547)              2021 (13,878)              Thereafter (5,705)                $ 235,641                  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  City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  71  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 2017,  2016 and 2015 are as follows:    Plan/  Calendar Year  Annual  Required  Contribution  (Rate)  Actual  Contribution  Made  (Rate)  Percentage of  ARC  Contributed  2015 0.01% 0.01% 100.0%  2016 0.01% 0.01% 100.0%  2017 0.01% 0.01% 100.0%    The City’s contributions to the TMRS SDBF for the years ended 2017, 2016, and 2015  were $355, $348, and $322, respectively, which equaled the required contributions  each year.                      City of Sanger, Texas  NOTES TO FINANCIAL STATEMENTS, Continued  September 30, 2017  72  G. Restatement    The City restated the beginning net position of governmental activities and  business‐type activities, and the beginning fund balance of the general fund due to  accounting errors related to capital assets, interfund borrowings, reallocation of  debt between governmental and business‐type activities, and the change in the  presentation of the City’s component units (4A & 4B) to be discretely presented  rather than blended with governmental activities. The City has restated net  position and fund balance as follows:    Proprietary Fund Prior year ending net position/ fund balance as reported $ 16,307,150        $ 2,548,000  $ 1,756,219    $ 870,461      Correction for interfund borrowing 83,155               (83,155)       ‐                   ‐                  Correction to prior year EMS deferred inflow ‐                        39,194        ‐                   ‐                  Reallocation of debt to business‐type activities (160,857)            ‐                  ‐                   ‐                  Discrete presentation of component units ‐                         ‐                 (1,756,219)   (870,461)     $ 16,229,448        $ 2,504,039  $‐                  $‐                  Governmental Funds 4B Restated beginning net position/fund balance Water, Sewer & Electric General Fund 4A   Prior year ending net position $ 16,307,150     $ 14,790,448 $‐                    $‐                   Correction for interfund borrowing 83,155            (83,155)        ‐                     ‐                   Correction to capital assets ‐                      123,411       ‐                     ‐                   Reallocation of debt to business‐type activities (160,857)         160,857       ‐                     ‐                   Discrete presentation of component units ‐                      (3,087,371)  2,216,910     870,461       $ 16,229,448     $ 11,904,190 $ 2,216,910     $ 870,461       4B Component Units Restated beginning net position Business‐Type Activities Governmental Activities 4A   H. Subsequent Events    There were no material subsequent events through February 13, 2018, the date the  financial statements were available to be issued.          REQUIRED SUPPLEMENTARY INFORMATION 73 Revenues Property tax $2,844,518 $2,950,887 $106,369 Sales tax 805,000 883,562 78,562 Franchise and local taxes 218,600 236,082 17,482 License and permits 130,100 289,775 159,675 Charges for services 748,500 829,378 80,878 Fire and rescue 585,000 588,124 3,124 Contributions and donations - 300 300 Intergovernmental - 53,743 53,743 Fines and forfeitures 140,000 103,420 (36,580) Investment income 4,000 4,258 258 Other revenue 128,704 85,990 (42,714) 5,604,422 6,025,519 421,097 Expenditures Current: General government 1,475,294 1,502,906 (27,612) Police department 1,506,743 1,339,076 167,667 Municipal court 241,728 184,528 57,200 Fire and EMS 1,064,065 991,227 72,838 Parks and recreation 608,376 597,346 11,030 Public works 759,018 730,096 28,922 Debt service: Principal 91,358 111,095 (19,737) Interest 16,642 18,257 (1,615) Capital outlay 335,121 169,822 165,299 6,098,345 5,644,353 453,992 Revenues Over (Under) Expenditures $(493,923) $381,166 $875,089 Original & Final Budget Total Expenditures Actual Final Budget Total Revenues Variance with City of Sanger, Texas SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL- GENERAL FUND (Page 1 of 2) For the Year Ended September 30, 2017 74 Transfers in $1,025,964 $916,760 $(109,204) Transfers (out)(509,201) (550,000) (40,799) Sale of capital assets 25,000 10,834 (14,166) Insurance recoveries 13,000 114,125 101,125 554,763 491,719 (63,044) Net Change in Fund Balance $60,840 872,885 $812,045 Beginning fund balance 2,504,039 $3,376,924 Notes to Required Supplementary Information 1. Annual budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). Ending Fund Balance Total Other Financing Sources (Uses) Other Financing Sources (Uses) City of Sanger, Texas SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES Variance with Actual Final Budget IN FUND BALANCE - BUDGET AND ACTUAL- GENERAL FUND (Page 2 of 2) For the Year Ended September 30, 2017 Original & Final Budget 75 1 Total pension liability Service cost $408,943 $369,950 $340,004 Interest (on the Total Pension Liability)545,333 521,853 476,571 Changes in benefit terms - - - Differences between expected and actual experience (78,516) (89,808) 47,610 Changes of assumptions - 47,847 - Benefit payments, including refunds of participant contributions (230,245) (260,514) (204,026) Net change in total pension liability 645,515 589,328 660,159 Total pension liability - beginning 7,989,659 7,400,331 6,740,172 Total pension liability - ending (a)$8,635,174 $7,989,659 $7,400,331 Plan fiduciary net position Contributions - employer $240,177 $231,097 $211,283 Contributions - members 202,113 195,568 187,821 Net investment income 461,955 9,831 350,203 Benefit payments, including refunds of participant contributions (230,245) (260,514) (204,026) Administrative expenses (5,214) (5,988) (3,656) Other (281) (296) (301) Net change in plan fiduciary net position 668,505 169,698 541,324 Plan fiduciary net position - beginning 6,831,656 6,661,957 6,120,633 Plan fiduciary net position - ending (b)$7,500,161 $6,831,655 $6,661,957 Fund's net pension liability - ending (a) - (b)$1,135,013 $1,158,004 $738,374 86.86%85.51%90.02% Covered employee payroll $3,368,554 $3,259,471 $3,130,346 33.69%35.53%23.59% Notes to schedule: 1) This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, only available information is shown. 2015 Plan fiduciary net position as a percentage of the total pension liability City of Sanger, Texas Years ended December 31, Fund's net position as a percentage of covered employee payroll 20142016 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS 76 9/30/2017 9/30/2016 9/30/2015 1 Actuarially determined employer contributions $266,753 $247,432 $225,111 $266,753 $247,432 $225,111 Contribution deficiency (excess)$- $- $- Annual covered employee payroll $3,549,724 $3,475,512 $3,130,346 7.51%7.12%7.19% Valuation Date: Notes Actuarially determined contribution rates are calculated as of December 31 and become effective in January 13 months later. Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll, Closed Remaining Amortization Period 27 years Asset Valuation Method 10 Year smoothed market; 15% soft corridor Inflation 2.5% Salary Increases 3.0% to 10.5% including inflation Investment Rate of Return 6.75% Retirement Age Experience-based table of rates that are specific to the City's plan of benefits. Last updated for the 2015 valuation pursuant to an experience study of the period 2010 - 2014 Mortality RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% and female rates multiplied by 103% and projected on a fully generational basis with scale BB Other Information: Notes There were no benefit changes during the year. NOTES TO SCHEDULE OF EMPLOYER CONTRIBUTIONS TO PENSION PLAN City of Sanger, Texas SCHEDULE OF EMPLOYER CONTRIBUTIONS TO PENSION PLAN Years Ended: Contributions in relation to the actuarially determined contribution Employer contributions as a percentage of covered employee payroll 1) This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, only available information is shown. 77 (This page intentionally left blank.) 78 OTHER SUPPLEMENTARY INFORMATION 79 Operating Revenues Charges for services $1,737,938 $1,676,011 $7,730,890 $- Connection fees - - 57,720 - Tap fees 396,000 528,000 - - Other revenue - - - 2,133,938 2,204,011 7,788,610 - Operating Expenses Salaries and wages 626,294 283,104 1,026,142 - Contracted services 44,203 36,240 244,028 - Utilities 120,226 185,720 9,578 - Materials and supplies 29,860 78,676 91,705 - Water and electric purchases 87,128 - 5,396,164 - Repairs and maintenance 274,518 159,531 251,297 - Depreciation 292,183 272,292 237,166 525 1,474,412 1,015,563 7,256,080 525 659,526 1,188,448 532,530 (525) Nonoperating Revenues (Expenses) Investment income - - - - Intergovernmental 725,000 - - - Interest expense - - - - 725,000 - - - Income Before Transfers 1,384,526 1,188,448 532,530 (525) Transfers (out)- - (76,074) - $1,384,526 $1,188,448 $456,456 $(525) Water Total Operating Revenues Total Operating Expenses Operating Income (loss) 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, 2017 Sewer Electric Fleet Services 80 $- $11,144,839 - 57,720 - 924,000 53,732 53,732 53,732 12,180,291 - 1,935,540 - 324,471 - 315,524 - 200,241 - 5,483,292 - 685,346 14,263 816,429 14,263 9,760,843 39,469 2,419,448 21,875 21,875 - 725,000 (741,243) (741,243) (719,368) 5,632 (679,899) 2,425,080 (789,150) (865,224) $(1,469,049) $1,559,856 Administration Total 81 (This page intentionally left blank.) 82