2018 Annual Financial ReportANNUAL FINANCIAL REPORT
of the
City of Sanger, Texas
For the Year Ended
September 30, 2018
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City of Sanger, Texas
TABLE OF CONTENTS
September 30, 2018
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 34
Statement of Cash Flows 35
Notes to Financial Statements 37
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Revenues, Expenditures, and Changes in Fund Balances-
Budget and Actual -General Fund 78
Schedule of Changes in Net Pension Liability and Related Ratios 80
Schedule of Employer Contributions to Pension Plan 82
Schedule of Changes in OPEB Liability and Related Ratios 83
COMBINING AND INDIVIDUAL FUND FINANCIAL SCHEDULES
Combining Schedule of Revenues, Expenses, and Changes
in Fund Net Position -Proprietary Funds –by Department 86
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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, 2018 , 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, 2018, 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, due to the implementation of GASB No. 75,
the City restated its beginning net position within governmental activities and business -type
activities to properly reflect the total OPEB liability and related deferred outflows and inflows of
resources, as prescribed by this accounting standard. 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 employer contributions to pension plan, schedule of changes in other
postemployment benefits liability and related ratios, and general fund budgetary comparison
information 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 with
auditing standards generally accepted in the United States of America, which consisted of
inquiries of management about the methods of preparing the information and comparing the
information for consistency with management’s responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements.
In our opinion, the information is fairly stated in all material r espects 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 th e 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 Ameri ca. 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, PLLC
Houston, Texas
January 21, 2019
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4
MANAGEMENT'S DISCUSSION
AND ANALYSIS
5
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6
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)
September 30, 2018
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, 2018.
Financial Highlights
The City's total combined net position is $40,225,842 at September 30,2018.Of this, $19,212,573
(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 $6,251,457, an increase of $2,174,302.
As of the end of the year, the unassigned fund balance of the general fund was $4,420,906 or
76%of total general fund expenditures.
The City had an overall increase in net position of $7,507,345, which is due to revenues
exceeding expenses for both governmental and business-type activities.
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, 2018
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, 2018
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 services 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 $40,225,842 as of September 30, 2018,in
the primary government.
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2018
10
The largest portion of the City’s net position,$19,494,509,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, $1,518,760, represents resources that are subject to
external restrictions on how they may be used. The remaining balance of $19,212,573 is unrestricted
and may be used to meet the government’s ongoing obligations to its citizens and creditors.
Current assets of governmental activities as of September 30, 2018 and September 30, 2017 were
$7,224,081 and $5,153,316, respectively. The increase of $2,070,765 was primarily due to an increase in
cash on hand as a result of revenues exceeding expenses in the current year.
Current assets of business-type activities as of September 30, 2018 and September 30, 2017 were
$16,436,888 and $23,313,512, respectively. The decrease of $6,876,624 was primarily attributable to bond
proceeds being spent in the current year.
Capital assets of governmental activities as of September 30, 2018 and September 30, 2017 were
$19,178,754 and $16,264,468, respectively. The increase of $2,914,286 was a primarily a result of new
investments in infrastructure.
Capital assets of business-type activities as of September 30, 2018 and September 30, 2017 were
$27,575,268 and $18,881,652, respectively. The increase of $8,693,616 was a primarily a result of the
sewer plant expansion.
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2018
11
Statement of Net Position:
The following table reflects the condensed Statement of Net Position:
Current and
other assets $7,224,081 $16,436,888 $23,660,969 $5,153,316 $23,313,512 $28,466,828
Capital assets, net 19,178,754 27,575,268 46,754,022 16,264,468 18,881,652 35,146,120
Total Assets 26,402,835 44,012,156 70,414,991 21,417,784 42,195,164 63,612,948
of Resources 228,061 96,605 324,666 465,880 178,853 644,733
Other liabilities 1,664,933 3,801,444 5,466,377 1,716,929 2,788,037 4,504,966
Long-term liabilities 4,022,808 20,726,451 24,749,259 5,119,582 21,787,140 26,906,722
Total Liabilities 5,687,741 24,527,895 30,215,636 6,836,511 24,575,177 31,411,688
of Resources 229,125 69,054 298,179 97,970 29,526 127,496
Net Position:
Net investment
in capital assets 14,712,198 4,782,311 19,494,509 10,968,978 4,262,005 15,230,983
Restricted 1,518,760 - 1,518,760 855,795 - 855,795
Unrestricted 4,483,072 14,729,501 19,212,573 3,124,410 13,507,309 16,631,719
Total Net Position $20,714,030 $19,511,812 $40,225,842 $14,949,183 $17,769,314 $32,718,497
ActivitiesTotal
Governmental Business-Type
ActivitiesActivities Total
Deferred Outflows
Deferred Inflows
2018 2017
Governmental Business-Type
Activities
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2018
12
Statement of Activities:
The following table provides a summary of the City’s changes in net position:
Revenues
Program revenues:
Charges for services $1,946,040 $12,722,292 $14,668,332 $1,810,697 $12,180,291 $13,990,988
Grants and contributions 3,846,351 475,000 4,321,351 1,718,787 725,000 2,443,787
General revenues:
Property taxes 3,953,836 - 3,953,836 3,584,390 - 3,584,390
Sales taxes 872,250 - 872,250 883,562 - 883,562
Franchise and local taxes 261,611 - 261,611 236,082 - 236,082
Investment income 5,012 25,558 30,570 4,372 21,875 26,247
Other revenues 396,025 - 396,025 210,949 - 210,949
Total Revenues 11,281,125 13,222,850 24,503,975 8,448,839 12,927,166 21,376,005
Expenses
General government 1,808,163 - 1,808,163 1,800,480 - 1,800,480
Public safety 2,517,223 - 2,517,223 2,400,720 - 2,400,720
Public works 1,061,776 - 1,061,776 1,084,065 - 1,084,065
Culture and recreation 737,343 - 737,343 797,033 - 797,033
Interest and fiscal charges 173,032 718,056 891,088 186,772 741,243 928,015
Water, sewer, & electric - 9,981,037 9,981,037 - 9,780,833 9,780,833
Total Expenses 6,297,537 10,699,093 16,996,630 6,269,070 10,522,076 16,791,146
Change in Net Position
Before Transfers 4,983,588 2,523,757 7,507,345 2,179,769 2,405,090 4,584,859
Transfers 781,259 (781,259) - 865,224 (865,224)-
Total 781,259 (781,259) - 865,224 (865,224)-
Change in Net Position 5,764,847 1,742,498 7,507,345 3,044,993 1,539,866 4,584,859
Beginning Net Position 14,949,183 17,769,314 32,718,497 11,904,190 16,229,448 28,133,638
Ending Net Position $20,714,030 $19,511,812 $40,225,842 $14,949,183 $17,769,314 $32,718,497
Governmental
For the Year Ended September 30, 2018
Business-Type
Government
For the Year Ended September 30, 2017
Total
Activities
Business-Type Primary
Total
Primary Governmental
ActivitiesGovernmentActivitiesActivities
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2018
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, 2018, revenues from governmental activities totaled $11,281,125.
Property tax, charges for services, and grants and contributions are the City’s largest revenue sources.
Property tax increased by $369,446 or 10%due to higher property values. Sales taxes decreased $11,312
or 1%due to a slowdown in the local economy.Charges for services increased $135,343 or 7%primarily
due to increases in EMS services and sanitation service revenue.Grants and contributions increased by
$2,127,564 due to funds received from an interlocal agreement with Denton County for street
construction.Other revenues increased by $185,076 or 88%mainly as a result of the recognition of
roadway impact fee revenue in the current year. 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, 2018, expenses for governmental activities totaled $6,297,537. This
represents an increase of $28,467 from the prior year. The City’s largest functional expense is public
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2018
14
safety of $2,517,223,which primarily includes costs for the police department, animal control, fire
department, and EMS services.Culture and recreation expenses decreased by $59,690 or 7%primarily
due to a reduction in contract services and professional fees.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, 2018, charges for services by business-type activities totaled
$12,722,292. This is an increase of $542,001, or 4%, from the previous year.The increase was due to the
increase in utility consumption in the current year.
Total expenses increased $177,017 or 2%compared to the prior year, which is considered minimal.
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 $4,928,737. Of this, $8,853 is
restricted for municipal court, $36,899 is restricted for tourism, $102,024 is restricted for library
improvements,$40,202 for public safety, $8,062 is restricted for parks, and $281,279 is restricted for
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2018
15
roadway impact fees.In addition, $30,512 is committed for employee benefits.Unassigned fund
balance totaled $4,420,906 as of yearend.The general fund increased by $1,551,813 mainly as a result of
revenues exceeding expenditures and other financing uses.
The capital projects fund reflected an ending balance of $866,785, an increase of $625,849.This increase
is attributed to greater intergovernmental revenues and transfers in compared to capital outlay
expenditures in the current year.
There was an increase in governmental fund balance of $2,174,302 over the prior year. The increase was
primarily due to revenues and other financing sources exceeding current year expenditures.
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 $1,499,410 in the general fund. This is a combination of a
positive revenue variance of $732,927 a positive expenditure variance of $739,260,and a positive
variance of $27,223 in other financing sources and uses.The most significant revenue variances were
for property taxes, licenses and permits,intergovernmental revenue,and other revenues.
CAPITAL ASSETS
As of the end of the year, the City’s governmental activities funds had invested $19,178,754 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 $27,575,268 in a variety of capital assets and infrastructure, net of accumulated
depreciation.Expenditures exceeded appropriations in the public works department. In addition, debt
service principal and interest and capital outlay expenditures exceeded the appropriated amount.
Major capital asset events during the current year include the following:
Investment in the McReynolds road construction in the amount of $3,299,713.
Investments in street department infrastructure totaling $100,122.
Investments in infrastructure for electric department totaling $140,788.
Sewer plant expansion for $7,645,875.
Purchase of public safety vehicles for $91,286.
Acquisition of building improvements and machinery and equipment for parks department for
$307,948.
City of Sanger, Texas
MANAGEMENT’S DISCUSSION AND ANALYSIS, Continued
September 30, 2018
16
More detailed information about the City’s capital assets is presented in note IV. D to the financial
statements.
LONG-TERM DEBT
At the end of the current year, the City had total bonds outstanding of $23,725,000 and capital leases of
$406,305. During the year, the City had principal payments on bonds and capital leases of $1,557,133.
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.
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17
Current assets:
Cash and cash equivalents $5,896,344 $5,383,382 $11,279,726
Restricted cash - 8,255,967 8,255,967
Investments 535,538 419,553 955,091
Restricted investments - 300,000 300,000
Receivables, net 890,289 1,541,732 2,432,021
Inventory - 438,164 438,164
Internal balances (98,090) 98,090 -
7,224,081 16,436,888 23,660,969
Capital assets:
Non-depreciable 7,678,570 12,042,358 19,720,928
Net depreciable capital assets 11,500,184 15,532,910 27,033,094
19,178,754 27,575,268 46,754,022
26,402,835 44,012,156 70,414,991
Deferred Outflows of Resources
Deferred charge on refunding 19,287 33,702 52,989
Pension contributions 168,737 50,854 219,591
OPEB contributions 217 65 282
OPEB gains (losses)6,197 1,851 8,048
Pension assumption changes 33,623 10,133 43,756
Total Deferred Outflows of Resources 228,061 96,605 324,666
See Notes to Financial Statements.
Business-Type
City of Sanger, Texas
STATEMENT OF NET POSITION (Page 1 of 2)
September 30, 2018
Activities Activities
Primary Government
Assets
Governmental
Total Assets
Total Current Assets
Total
18
$980,949 $726,120
- -
94,806 279,693
- -
68,595 68,595
- -
- -
1,144,350 1,074,408
- -
774,584 -
774,584 -
1,918,934 1,074,408
- -
- -
- -
- -
- -
- -
Component Units
Sanger Industrial
Dev. Corp. (4A)Dev. Corp. (4B)
Sanger Texas
19
Liabilities
Current liabilities:
Accounts payable and
accrued liabilities $684,544 $2,131,567 $2,816,111
Accrued interest payable 39,782 246,910 286,692
Customer deposits - 437,865 437,865
Long term debt due within one year 940,607 985,102 1,925,709
1,664,933 3,801,444 5,466,377
Noncurrent liabilities:
Debt due in more than one year 3,421,704 20,545,511 23,967,215
OPEB liability 82,518 24,648 107,166
Net pension liability 518,586 156,292 674,878
4,022,808 20,726,451 24,749,259
5,687,741 24,527,895 30,215,636
Deferred Inflows of Resources
Pension (gains) losses 52,854 15,929 68,783
Pension investment earnings 176,271 53,125 229,396
229,125 69,054 298,179
Net investment in capital assets 14,712,198 4,782,311 19,494,509
Restricted for:
Debt service 455,935 - 455,935
Capital projects 866,785 - 866,785
Parks 8,062 - 8,062
Economic development - - -
Other purposes 187,978 - 187,978
Unrestricted 4,483,072 14,729,501 19,212,573
$20,714,030 $19,511,812 $40,225,842
See Notes to Financial Statements.
City of Sanger, Texas
Total Current Liabilities
Governmental
Activities
Primary Government
Net Position
Total Net Position
Total Liabilities
Total
Total Deferred Inflows of Resources
September 30, 2018
Activities
Business-Type
STATEMENT OF NET POSITION (Page 2 of 2)
20
$3,865 $45,459
- -
- -
48,176 -
52,041 45,459
260,319 -
- -
- -
260,319 -
312,360 45,459
- -
- -
- -
466,089 -
- -
- -
- -
1,140,485 1,028,949
- -
- -
$1,606,574 $1,028,949
Sanger Texas
Component Units
Dev. Corp. (4A)Dev. Corp. (4B)
Sanger Industrial
21
Capital
Grants and
Contributions
Primary Government
Governmental Activities
General government $1,808,163 $1,221,002 $6,795 $9,023
Public safety 2,517,223 725,038 134,424 18,047
Public works 1,061,776 - - 3,465,562
Culture and recreation 737,343 - - -
Interest and fiscal charges 173,032 - 212,500 -
6,297,537 1,946,040 353,719 3,492,632
Business-Type Activities
Water 1,573,190 2,258,067 - 475,000
Sewer 1,057,399 2,163,664 - -
Electric 7,335,966 8,226,907 - -
Fleet services 219 - - -
Utility administration 732,319 73,654 - -
Total Business-Type Activities 10,699,093 12,722,292 - 475,000
Total Primary Government $16,996,630 $14,668,332 $353,719 3,967,632
Component Units
Sanger Ind. Dev. Corp. (4A)631,390 - - -
Sanger Texas Dev. Corp. (4B)479,760 - - -
$1,111,150 $- $- $-
General Revenues:
Taxes
Property taxes
Sales taxes
Franchise and local taxes
Investment income
Other revenues
Insurance recoveries
Transfers
Change in Net Position
Beginning Net Position
Ending Net Position
See Notes to Financial Statements.
Expenses Contributions
Total Governmental Activities
Functions/Programs Services
Total General Revenues and Transfers
City of Sanger, Texas
STATEMENT OF ACTIVITIES
Operating
For the Year Ended September 30, 2018
Program Revenues
Charges for Grants and
22
$(571,343) $- $(571,343) $- $-
(1,639,714) - (1,639,714) - -
2,403,786 - 2,403,786 - -
(737,343) - (737,343) - -
39,468 - 39,468 - -
(505,146) - (505,146) - -
- 1,159,877 1,159,877 - -
- 1,106,265 1,106,265 - -
- 890,941 890,941 - -
- (219) (219) - -
- (658,665) (658,665) - -
- 2,498,199 2,498,199 - -
(505,146) 2,498,199 1,993,053 - -
(631,390)-
- (479,760)
(631,390) (479,760)
3,953,836 - 3,953,836 - -
872,250 - 872,250 433,193 433,193
261,611 - 261,611 - -
5,012 25,558 30,570 - 1,709
385,431 - 385,431 28,135 -
10,594 - 10,594 - -
781,259 (781,259) - - -
6,269,993 (755,701)5,514,292 461,328 434,902
5,764,847 1,742,498 7,507,345 (170,062)(44,858)
14,949,183 17,769,314 32,718,497 1,776,636 1,073,807
$20,714,030 $19,511,812 $40,225,842 $1,606,574 $1,028,949
Component Units
Net (Expense) Revenue and Changes in Net Position
Activities
Primary Government
Governmental
Dev. Corp. (4A)Dev. Corp. (4B)Total
Business-Type
Activities
Sanger Industrial Sanger Texas
23
Cash and cash equivalents $4,454,701 $791,390 $454,999
Investments 535,538 - -
Receivables, net 467,498 408,720 14,071
Due from other funds 0 - -
$5,457,737 $1,200,110 $469,070
Liabilities
Accounts payable and
accrued liabilities $287,276 $333,325 $-
Due to other funds 98,090 - -
385,366 333,325 -
Deferred Inflows of Resources
Unavailable revenue
Property taxes 49,826 - 13,135
EMS revenue 93,808 - -
Total Deferred Inflows of Resources 143,634 - 13,135
Restricted for:
Municipal court 8,853 - -
Tourism 36,899 - -
Library 102,024 - -
Public safety 40,202 - -
Debt service - - 455,935
Capital projects - 866,785 -
Parks 8,062 - -
Roadway impact fees 281,279 - -
Committed for:
Employee benefits 30,512 - -
Unassigned reported in:
General fund 4,420,906 - -
4,928,737 866,785 455,935
$5,457,737 $1,200,110 $469,070
See Notes to Financial Statements.
General
Nonmajor
Debt
Projects Fund
Total Fund Balances
Total Assets
Fund Balances
City of Sanger, Texas
BALANCE SHEET
GOVERNMENTAL FUNDS
September 30, 2018
Total Liabilities, Deferred Inflows, and Fund Balances
Assets
Service
Total Liabilities
Capital
24
$5,701,090
535,538
890,289
-
$7,126,917
$620,601
98,090
718,691
62,961
93,808
156,769
8,853
36,899
102,024
40,202
455,935
866,785
8,062
281,279
30,512
4,420,906
6,251,457
$7,126,917
Funds
Total
Governmental
25
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26
Fund Balances - Total Governmental Funds $6,251,457
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 7,678,570
Capital assets - net depreciable 11,459,507
Other long-term assets are not available to pay for current-period
expenditures and, therefore, are deferred in the governmental funds.
Property tax receivable 62,961
EMS receivable 93,808
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 19,287
Pension contributions 125,858
OPEB contributions 161
Pension investment earnings (131,478)
Pension gains (losses)(39,423)
Pension assumption changes 25,079
OPEB gains (losses)4,587
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 (30,704)
Some liabilities, including bonds payable and deferred charges, are not reported as
liabilities in the governmental funds.
Accrued interest (39,782)
Compensated absences (164,899)
Bond premium (94,410)
Net pension liability (386,805)
OPEB liability (61,085)
Non-current liabilities due in one year (752,289)
Non-current liabilities due in more than one year (3,306,370)
$20,714,030
See Notes to Financial Statements.
City of Sanger, Texas
RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION
GOVERNMENTAL FUNDS
September 30, 2018
Net Position of Governmental Activities
27
Revenues
Property tax $3,275,548 $- $675,212
Sales tax 872,250 - -
Franchise and local taxes 261,611 - -
License and permits 322,230 - -
Charges for services 898,772 - -
Fire and rescue 629,461 - -
Contributions and donations 6,795 - -
Intergovernmental 134,424 3,465,562 212,500
Fines and forfeitures 95,577 - -
Investment income 4,898 - 114
Other revenue 385,431 - -
6,886,997 3,465,562 887,826
Expenditures
Current:
General government 1,527,438 - 1,500
Police department 1,443,548 - -
Municipal court 170,058 - -
Fire and EMS 968,738 - -
Parks and recreation 566,197 - -
Public works 802,759 - -
Debt service:
Principal 114,356 - 606,900
Interest 14,995 - 174,787
Capital outlay 194,017 3,299,713 -
5,802,106 3,299,713 783,187
Excess of Revenues Over (Under) Expenditures 1,084,891 165,849 104,639
Other Financing Sources (Uses)
Transfers in 889,258 460,000 -
Transfers (out)(460,000) - (107,999)
Proceeds from sale of capital assets 27,070 - -
Insurance recoveries 10,594 - -
466,922 460,000 (107,999)
1,551,813 625,849 (3,360)
Beginning fund balances 3,376,924 240,936 459,295
$4,928,737 $866,785 $455,935
See Notes to Financial Statements.
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, 2018
Capital
Ending Fund Balances
Total Other Financing Sources (Uses)
Total Expenditures
Net Change in Fund Balances
28
$3,950,760
872,250
261,611
322,230
898,772
629,461
6,795
3,812,486
95,577
5,012
385,431
11,240,385
1,528,938
1,443,548
170,058
968,738
566,197
802,759
721,256
189,782
3,493,730
9,885,006
1,355,379
1,349,258
(567,999)
27,070
10,594
818,923
2,174,302
4,077,155
$6,251,457
Total
Funds
Governmental
29
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30
Amounts reported for governmental activities in the statement of activities are
different because:
Net changes in fund balances - total governmental funds $2,174,302
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 3,847,784
Depreciation expense (934,439)
Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the funds.
EMS receivable 3,281
Property tax receivable (205)
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 (20,547)
Accrued interest (2,349)
Pension expense (10,747)
OPEB expense (6,797)
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 721,256
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.(25,791)
$5,764,847
See Notes to Financial Statements.
Change in Net Position of Governmental Activities
For the Year Ended September 30, 2018
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 $5,383,382 $195,254
Restricted cash 8,255,967 -
Investments 419,553 -
Restricted investments 300,000 -
Receivables, net 1,541,732 -
Inventory 438,164 -
Due from other funds 98,090 -
16,436,888 195,254
Noncurrent Assets
Capital assets:
Non-depreciable 12,042,358 -
Net depreciable capital assets 15,532,910 40,677
27,575,268 40,677
44,012,156 235,931
Pension contributions 50,854 42,879
OPEB contributions 65 56
Pension assumption changes 10,133 8,544
OPEB (gains) losses 1,851 1,610
Deferred charge on refunding 33,702 -
Total Deferred Outflows of Resources 96,605 53,089
City of Sanger, Texas
STATEMENT OF NET POSITION (Page 1 of 2)
PROPRIETARY FUND
September 30, 2018
Activities
Governmental
Water, Sewer
Assets
Service
Deferred Outflows of Resources
Internal
& Electric
Total Current Assets
Total Noncurrent Assets
Total Assets
32
Current Liabilities
Accounts payable and accrued liabilities 2,131,567 63,943
Accrued interest 246,910 -
Customer deposits 437,865 -
Compensated absences - current 124,156 39,909
Bonds and capital leases payable-current 860,946 -
3,801,444 103,852
Noncurrent Liabilities
Compensated absences 13,795 4,434
Net pension liability 156,292 131,781
OPEB liability 24,648 21,433
Bonds and capital leases payable 20,531,716 -
24,527,895 261,500
Pension (gains) losses 15,929 13,431
Pension investment earnings 53,125 44,793
69,054 58,224
Net investment in capital assets 4,782,311 40,677
Unrestricted 14,729,501 (71,381)
$19,511,812 $(30,704)
See Notes to Financial Statements.
Governmental
Activities
Water, Sewer Internal
& Electric Service
Deferred Inflows of Resources
City of Sanger, Texas
STATEMENT OF NET POSITION (Page 2 of 2)
Total Net Position
Net Position
Liabilities
Total Liabilities
Total Current Liabilities
Total Deferred Inflow of Resources
PROPRIETARY FUND
September 30, 2018
33
Operating Revenues
Charges for services $12,135,488 $1,680,861
Connection fees 59,000 -
Tap fees 454,150 -
Other revenue 73,654 3,548
12,722,292 1,684,409
Operating Expenses
Salaries and wages 1,929,946 1,043,489
Contracted services 364,923 364,958
Utilities 326,977 101,449
Materials and supplies 117,506 70,999
Water and electric purchases 5,613,500 -
Repairs and maintenance 733,663 107,788
Depreciation 894,522 4,134
9,981,037 1,692,817
2,741,255 (8,408)
Nonoperating Revenues (Expenses)
Investment income 25,558 -
Intergovernmental 475,000 -
Interest expense (718,056) -
(217,498)-
2,523,757 (8,408)
Transfers (out)(781,259)-
1,742,498 (8,408)
17,769,314 (22,296)
$19,511,812 $(30,704)
See Notes to Financial Statements.
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
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, 2018
Water, Sewer
& Electric
34
Cash Flows from Operating Activities
Receipts from customers $12,802,296 $-
Receipts from interfund charges for administrative services - 1,684,409
Payments to suppliers (6,262,169) (626,192)
Payments to employees (1,889,776) (1,031,812)
Payments/receipts for other 5,485 -
4,655,836 26,405
Cash Flows from Noncapital Financing Activities
Operating transfers in - -
Operating transfers (out)(781,259) -
(781,259) -
Cash Flows from Capital and Related Financing Activities
Capital purchases (9,588,138) (5,075)
Capital contributions 475,000 -
Principal paid on debt (835,877) -
Interest paid on debt (793,327) -
(10,742,342) (5,075)
Cash Flows from Investing Activities
Purchases of investments, net (2,352) -
Interest on investments 25,558 -
23,206 -
(6,844,559) 21,330
20,483,908 173,924
$13,639,349 $195,254
See Notes to Financial Statements.
City of Sanger, Texas
STATEMENT OF CASH FLOWS
PROPRIETARY FUND (Page 1 of 2)
For the Year Ended September 30, 2018
Net Cash Provided by (Used) by Operating Activities
& Electric
Water, Sewer
Net Cash Provided by Investing Activities
Net Cash Provided by (Used) 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
Governmental
Activities
Internal
Service
Beginning cash and cash equivalents
35
Reconciliation of Operating Income
to Net Cash Provided by Operating Activities
Operating Income / (Loss)$2,741,255 $(8,408)
Adjustments to reconcile operating
income / (loss) to net cash provided / (used):
Depreciation 894,522 4,134
Changes in Operating Assets and Liabilities:
(Increase) Decrease in:
Accounts receivable 80,565 -
Inventory (51,633) -
Due from/to other funds 5,485 -
Deferred outflows of resources - pension contributions (2,589) (2,183)
Deferred outflows of resources - OPEB contributions (2) (2)
Deferred inflows of resources - pension investment earnings 123,653 104,261
Deferred inflows of resources - pension (gains) losses (13,597) (11,465)
Deferred inflows of resources - OPEB (gains) losses (1,851) (1,610)
Deferred outflows of resources - pension assumption changes 3,436 2,897
Increase (Decrease) in:
Accounts payable and accrued liabilities 946,033 19,002
Compensated absences 33,085 5,633
Customer deposits (561) -
Net pension liability (106,560) (89,850)
OPEB liability 4,595 3,996
$4,655,836 $26,405
See Notes to Financial Statements.
Internal
City of Sanger, Texas
STATEMENT OF CASH FLOWS
PROPRIETARY FUND (Page 2 of 2)
For the Year Ended September 30, 2018
Net Cash Provided (Used) by Operating Activities
Service& Electric
Water, Sewer
Governmental
Activities
36
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS
September 30, 2018
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, 2018
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, 2018
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, 2018
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, 2018
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, 2018
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, 2018
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, 2018
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, 2018
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, 2018
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, 2018
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, 2018
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.
15. Other Postemployment Benefits (OPEB”)
The City has implemented GASB Statement No. 75, Accounting and Financial
Reporting for Postemployment Benefits Other Than Pensions. This statement
applies to the individual employers (TMRS cities) in the TMRS Supplemental Death
Benefits (SDB) plan, with retiree coverage. The TMRS SDBF covers both active and
retiree benefits with no segregation of assets, and therefore doesn’t meet the
definition of a trust under GASB No. 75 (i.e., no assets are accumulated for OPEB)
and as such the SDBF is considered to be an unfunded OPEB plan. For purposes of
reporting under GASB 75, the retiree portion of the SDBF is not considered a cost
sharing plan and is instead considered a single employer, defined benefit OPEB
plan. 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 on which TMRS deposits are made, for the 12‐month
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
49
period preceding the month of death. The death benefit amount for retirees is
$7,500. GASB No. 75 requires the liability of employers and nonemployer
contributing entities to employees for defined benefit OPEB (net OPEB liability) to
be measured as the portion of the present value of projected benefit payments to be
provided to current active and inactive employees that is attributed to those
employees’ past periods of service (total OPEB liability), less the amount of the
OPEB plan’s fiduciary net position.
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.
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
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
50
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, 2018, the primary government had the following investments:
Investment Type
Certificates of deposit $ 1,255,091 0.51
Total fair value $ 1,255,091
Portfolio weighted average maturity 0.51
Average Maturity
Carrying Value (Years)
As of September 30, 2018, the 4A Component Unit had the following investments:
Investment Type
Certificates of deposit $ 94,806 0.01
Total fair value $ 94,806
Portfolio weighted average maturity 0.01
Average Maturity
Carrying Value (Years)
As of September 30, 2018, the 4B Component Unit had the following investments:
Investment Type
Certificates of deposit $ 279,693 0.42
Total fair value $ 279,693
Portfolio weighted average maturity 0.42
Average Maturity
Carrying Value (Years)
Interest rate risk – In accordance with its investment policy, the City manages its
exposure to declines in fair values by limiting the weighted average of maturity not
to exceed five years; structuring the investment portfolio so that securities mature to
meet cash requirements for ongoing operations; monitoring credit ratings of
portfolio position to assure compliance with rating requirements imposed by the
Public Funds Investment Act; and invest operating funds primarily in short‐term
securities or similar government investment pools.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
51
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, 2018, the market values of
pledged securities and FDIC exceeded bank balances.
Custodial credit risk – investments For an investment, this is the risk that, in the event
of the failure of the counterparty, the City will not be able to recover the value of its
investments or collateral securities that are in the possession of an outside party.
The City’s investment policy requires that it will seek to safekeeping securities at
financial institutions, avoiding physical possession. Further, all trades, where
applicable, are executed by delivery versus payment to ensure that securities are
deposited in the City’s safekeeping account prior to the release of funds.
B. Receivables
The following comprise receivable balances of the primary government at year end:
Property taxes $ 86,107 $ 25,216 $‐ $‐ $ 111,323
Sales tax 137,190 ‐ ‐ ‐ 137,190
Franchise & local taxes 38,982 ‐ ‐ ‐ 38,982
Intergovernmental ‐ ‐ 408,720 ‐ 408,720
EMS 321,491 ‐ ‐ ‐ 321,491
Accounts 112,842 ‐ ‐ 1,702,307 1,815,149
Other 6,283 ‐ ‐ 352 6,635
Allowance (235,397) (11,145) ‐ (160,927) (407,469)
$ 467,498 $ 14,071 $ 408,720 $ 1,541,732 $ 2,432,021
Capital
Projects
Debt
Total& Electric
Water, Sewer
General Service
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
52
The following comprise receivable balances of the component units at year end:
Sales tax $ 68,595 $ 68,595 $ 137,190
$68,595 $ 68,595 $ 137,190
Total4A 4B
C. Inventory
The following comprise the inventory balances of the primary government at year
end:
Inventory type
Electric Department $ 379,553
Water Department 58,611
Total $ 438,164
Cost
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
53
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 3,333,924 3,299,713 ‐ 6,633,637
4,378,857 3,299,713 ‐ 7,678,570
Capital assets, being depreciated:
Infrastructure 11,987,688 100,122 ‐ 12,087,810
Buildings and improvements 6,568,909 229,131 ‐ 6,798,040
Machinery and equipment 3,840,335 223,893 (53,710) 4,010,518
22,396,932 553,146 (53,710) 22,896,368
Less accumulated depreciation
Infrastructure 6,137,617 323,043 ‐ 6,460,660
Buildings and improvements 1,978,729 296,472 ‐ 2,275,201
Machinery and equipment 2,394,975 319,058 (53,710) 2,660,323
Total accumulated depreciation 10,511,321 938,573 (53,710) 11,396,184
Net capital assets being depreciated 11,885,611 (385,427) ‐ 11,500,184
$ 16,264,468 $ 2,914,286 $‐ $ 19,178,754
Beginning Disposals /Ending
Balances Increases
Total Capital Assets
Total capital assets not being depreciated
Total capital assets being depreciated
BalancesReclassifications
Depreciation was charged to governmental functions as follows:
General government $ 72,767
Public safety 117,797
Public works 362,387
Culture and recreation 281,721
Fire and rescue 99,767
Internal service 4,134
$ 938,573 Total Governmental Activities Depreciation Expense
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
54
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 7,894,804 9,348,068 (5,697,371) 11,545,501
Total capital assets not being depreciated 8,391,661 9,348,068 (5,697,371) 12,042,358
Capital assets, being depreciated:
Infrastructure 23,655,730 208,470 5,697,371 29,561,571
Buildings and improvements 865,245 ‐ ‐ 865,245
Machinery and equipment 2,176,615 31,600 (38,769) 2,169,446
Total capital assets being depreciated 26,697,590 240,070 5,658,602 32,596,262
Less accumulated depreciation
Infrastructure 14,251,284 738,250 ‐ 14,989,534
Buildings and improvements 471,423 51,737 ‐ 523,160
Machinery and equipment 1,484,892 104,535 (38,769) 1,550,658
Total accumulated depreciation 16,207,599 894,522 (38,769) 17,063,352
Net capital assets being depreciated 10,489,991 (654,452) 5,697,371 15,532,910
$ 18,881,652 $ 8,693,616 $‐ $ 27,575,268 Total Capital Assets
Beginning Disposals /Ending
Balances Increases Reclassifications Balances
Depreciation was charged to business‐type activities as follows:
Water $ 371,775
Sewer 309,642
Electric 198,623
Other 14,482
$ 894,522 Total Business‐type Activities Depreciation Expense
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
55
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 291,505 38,360 ‐ 329,865
Furniture and fixtures 12,935 4,363 ‐ 17,298
Total accumulated depreciation 304,440 42,723 ‐ 347,163
Net capital assets being depreciated 817,307 (42,723) ‐ 774,584
$ 817,307 $ (42,723) $‐ $ 774,584 Total Capital Assets
Beginning Retirements/ Ending
Balances Additions Reclassifications Balances
The 4A Component Unit recognized depreciation expense of $42,723 during the year ended
September 30, 2018.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
56
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 $ 1,574,300 $‐ $ (377,000) $ 1,197,300 $ 392,800
Certificates of Obligation 2,740,300 ‐ (229,900) 2,510,400 241,600
Less deferred amounts:
For issuance premiums 120,759 ‐ (26,349) 94,410 ‐
4,435,359 ‐ (633,249) 3,802,110 634,400
Other liabilities:
Capital leases payable 465,315 ‐ (114,356) 350,959 117,889
Compensated absences 183,062 209,242 (183,062) 209,242 188,318
$ 5,083,736 $ 209,242 $ (930,667) $ 4,362,311 $ 940,607
Long‐term liabilities due in more than one year $ 3,421,704
Business‐Type Activities:
General Obligation Bonds $ 1,910,700 $‐ $ (458,000) $ 1,452,700 $ 477,200
Certificates of Obligation 18,889,700 ‐ (325,100) 18,564,600 328,400
Less deferred amounts:
For issuance premiums 1,421,602 ‐ (101,586) 1,320,016 ‐
22,222,002 ‐ (884,686) 21,337,316 805,600
Other liabilities:
Capital leases payable 108,123 ‐ (52,777) 55,346 55,346
Compensated absences 104,866 104,866 (71,781) 137,951 124,156
$ 22,434,991 $ 104,866 $ (1,009,244) $ 21,530,613 $ 985,102
Long‐term liabilities due in more than one year $ 20,545,511
Component Units (4A Fund)
Notes payable $ 352,814 $‐ $ (44,319) $ 308,495 $ 48,176
Compensated absences 5,206 ‐ (5,206) ‐ ‐
$ 358,020 $‐ $ (49,525) $ 308,495 $ 48,176
Long‐term liabilities due in more than one year $ 260,319
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, 2018
57
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% $ 477,400 $ 607,600 $‐ $ 1,085,000
$2,535,000 General Obligation Refunding Bond, Series 2016, due in
installments through 2021, interest at 2% to 4% 719,900 845,100 ‐ 1,565,000
$ 1,197,300 $ 1,452,700 $‐ $ 2,650,000
Certificates of Obligation:
$1,750,000 Certificates of Obligation, Series 2007,
due in annual installments through 2027, interest at 4.4% $ 333,200 $ 646,800 $‐ $980,000
$3,200,000 Certificates of Obligation, Series 2009,
due in annual installments through 2026, interest at 3% to 4.75% 1,765,000 ‐ ‐ 1,765,000
$4,260,000 Certificates of Obligation, Series 2013,
due in annual installments through 2033, interest at 2% to 3.7% 412,200 3,022,800 ‐ 3,435,000
$5,870,000 Certificates of Obligation, Series 2015,
due in annual installments through 2035, interest at 3.4% to 5.5%‐ 5,655,000 ‐ 5,655,000
$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
$ 2,510,400 $ 18,564,600 $‐ $ 21,075,000
Plus deferred amounts:
Issuance premium $ 94,410 $ 1,320,016 $‐ $ 1,414,426
$ 94,410 $ 1,320,016 $‐ $ 1,414,426
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% $‐ $‐ $ 308,495 $308,495
$‐ $‐ $ 308,495 $308,495
Capital Leases Payable:
$435,000 Capital lease payable to financial institution, due in annual
installments of $51,535 through 2024, interest at 3.346% $ 275,370 $‐ $‐ $275,370
$500,000 Capital lease payable to financial institution, due in annual
installments of $134,279 through 2019, interest at 2.947% 75,589 55,346 ‐ 130,935
$ 350,959 $ 55,346 $‐ $406,305
Compensated Absences 209,242 137,951 ‐ 347,193
$ 4,362,311 $ 21,530,613 $ 308,495 $ 26,201,419
Unit
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
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
58
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 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,
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
$ 1,197,300 $ 83,661 $ 1,452,700 $ 100,714
Principal Interest Principal Interest
Governmental Activities Business‐Type Activities
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
59
Combination Tax and Revenue Certificates of Obligations
Year ending
September 30,
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
$ 2,510,400 $ 625,958 $ 18,564,600 $ 8,913,125
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, 2018
60
Capital Leases
Year ending
September 30,
2019 $ 117,889 $ 11,463 $ 55,346 $ 1,616
2020 43,716 7,819 ‐ ‐
2021 45,179 6,357 ‐ ‐
2022 46,690 4,845 ‐ ‐
2023 48,252 3,283 ‐ ‐
2024 49,233 1,668 ‐ ‐
$ 350,959 $ 35,435 $ 55,346 $ 1,616
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 $443,230
and $441,014, respectively.
Note Payable for Component Unit – 4A
Year ending
September 30,
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 43,894 3,063
$ 308,495 $ 44,797
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 2019
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, 2018
61
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 $19,287 and $33,702, respectively. Current year amortization
expense for governmental and business‐type activities totaled $7,250 and $12,726,
respectively.
H. Interfund Transactions
Amounts transferred between funds relate to amounts collected, various capital
expenditures, annual funding, and debt payments.
Transfer out:
General $‐ $ 460,000 $ 504,258 $ 964,258
Debt Service 107,999 ‐ ‐ 107,999
Enterprise 781,259 ‐ 1,176,603 1,957,862
$ 889,258 $ 460,000 $ 1,680,861 $ 3,030,119
General Total
Capital
Projects
Transfer In
Internal
Service Fund
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, 2018:
Paid by:
General $ 504,258
Enterprise 1,176,603
$ 1,680,861
Internal Service
Received by:
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
62
The compositions of interfund due to/from balances as of the year ended September
30, 2018were as follows:
Payable fund:
General $ 98,090
$ 98,090
Enterprise
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 $ 8,853 $‐
Tourism 36,899 ‐
Library 102,024 ‐
Public safety 40,202 *‐
Debt service 455,935 ‐
Capital projects 866,785 ‐
Parks 8,062 ‐
Streets 281,279 ‐
Employee benefits ‐ 30,512
$ 1,800,039 $ 30,512
* Restricted by enabling legislation.
Restricted Committed
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
63
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
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, 2018
64
C. Construction commitments
The government has active construction projects as of September 30, 2018. 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 $ 4,735
McReynolds Road Reconstruction HRM Land Acquisition 397
McReynolds Road Reconstruction Pavecon 205,686
McReynolds Road Reconstruction D&S Engineering 4,110
214,928
Server Consolidation Austin Lane Technology 20,166
Railroad Lift Station Perkins Engineering 19,332
E35 WWL to Lois Pacheco Koch LLC 25,790
E35 WWL to Lois D&S Engineering 4,630
30,420
New Sewer Plant Alan Plummer Associates 32,791
New Sewer Plant Felix Construction 2,807,957
Anixter, Inc. 285
2,841,033
$ 3,125,879
Remaining
CommitmentVendor
Total
Project Total
Project Total
Project Total
D. 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
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
65
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.
E. Defined Benefit Pension Plans
1. Plan Description
The City of Sanger, Texas participates as one of 883 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
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:
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
66
Plan Year 2017 Plan Year 2016
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
Employees covered by benefit terms
At the December 31, 2017 valuation and measurement date, the following
employees were covered by the benefit terms:
Inactive employees or beneficiaries currently receiving benefits 18
Inactive employees entitled to but not yet receiving benefits 27
Active employees 65
Total 110
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 7.63% and 7.79% in calendar years 2017 and 2018, respectively. The City’s
contributions to TMRS for the year ended September 30, 2018, were $287,348, and
were equal to the required contributions.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
67
4. Net Pension Liability
The City’s Net Pension Liability (NPL) was measured as of December 31, 2017, and
the Total Pension Liability (TPL) used to calculate the Net Pension Liability was
determined by an actuarial valuation as of that date.
Actuarial assumptions:
The Total Pension Liability in the December 31, 2017 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.
The actuarial assumptions were developed primarily from the actuarial
investigation of the experience of TMRS over the four year period from December
31, 2010 to December 31, 2014. They were adopted in 2015 and first used in the
December 31, 2015 actuarial valuation. The post‐retirement mortality assumption
for healthy annuitants and Annuity Purchase Rate (APRs) are based on the
Mortality Experience Investigation Study covering 2009 through 2011 dated
December 31, 2013. In conjunction with these changes first used in the December 31,
2013 valuation, the System adopted the Entry Age Normal actuarial cost method
and a one‐time change to the amortization policy. Plan assets are managed on a
total return basis with an emphasis on both capital appreciation as well as the
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
68
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
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 2018 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% 3.90%
Real Return 10.0% 3.80%
Real Estate 10.0% 4.50%
Absolute Return 10.0% 3.75%
Private Equity 5.0% 7.50%
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, 2018
69
Changes in the Net Pension Liability:
Total Pension
Liability (a)
Plan Fiduciary Net
Position (b)
Net Pension
Liability (a) – (b)
Balance at 12/31/16 $ 8,635,174 $ 7,500,161 $ 1,135,013
Changes for the year:
Service Cost 438,324 ‐ 438,324
Interest (on the Total Pension Liab.) 590,632 ‐ 590,632
Difference between expected and
actual experience 38,794 ‐ 38,794
Contributions – employer ‐ 276,169 (276,169)
Contributions – employee ‐ 217,171 (217,171)
Net investment income ‐ 1,040,205 (1,040,205)
Benefit payments, including
refunds of emp. contributions (208,451) (208,451) ‐
Administrative expense ‐ (5,387) 5,387
Other changes ‐ (273) 273
Net changes 859,299 1,319,434 (460,135)
Balance at 12/31/17 $ 9,494,473 $ 8,819,595 $ 674,878
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%
$ 2,206,315 $ 674,878 $ (572,864)
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, 2018
70
5. Pension Expense and Deferred Outflows of Resources Related to Pensions
For the year ended September 30, 2018, the City recognized pension expense of
$306,098.
At September 30, 2018, the City reported deferred outflows and deferred inflows of
resources related to pensions from the following sources:
Difference between projected and
investment earnings $‐ $ (229,396)
Changes in actuarial assumptions 43,756 ‐
Differences between expected and actual
economic experience ‐ (68,783)
Contributions subsequent to the
measurement date 219,591 ‐
Total $ 263,347 $ (298,179)
Deferred Outflows
of Resources
Deferred
(Inflows) of Resources
The City reported $219,591 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, 2019. Other amounts reported as deferred outflows of resources related to
pensions will be recognized in pension expense as follows:
Year ended December 31:
2018 $ (5,085)
2019 (20,734)
2020 (114,767)
2021 (114,102)
2022 265
Thereafter ‐
$ (254,423)
F. Postemployment Benefits Other Than Pensions
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,
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
71
by ordinance, to provide group‐term life insurance coverage to both current and
retired employees. The City may terminate coverage under and discontinue
participation in the SDBF by adopting an ordinance before November 1 of any year
to be effective the following January 1.
The death benefit for active employees provides a lump‐sum payment
approximately equal to the employee’s annual salary (calculated based on the
employee’s actual earnings, for the 12‐month period preceding the month of death);
retired employees are insured for $7,500; this coverage is an “other
postemployment benefit,” or OPEB.
The City contributes to the SDBF at a contractually required rate as determined by
an annual actuarial valuation. The rate is equal to the cost of providing one‐year
term life insurance. The funding policy for the SDBF program is to assure that
adequate resources are available to meet all death benefit payments for the
upcoming year; the intent is not to pre‐fund retiree term life insurance during
employees’ entire careers.
Employees covered by benefit terms
At the December 31, 2017 valuation and measurement date, the following
employees were covered by the benefit terms:
Inactive employees or beneficiaries currently receiving benefits 11
Inactive employees entitled to but not yet receiving benefits 7
Active employees 65
Total 83
The City’s retiree contribution rates to the TMRS SDBF for the years ended 2018,
2017 and 2016 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%
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
72
The City’s contributions to the TMRS SDBF for the years ended 2018, 2017, and 2016
were $371, $355 and $322, respectively, which equaled the required contributions
each year.
Total OPEB Liability
The City’s Postemployment Benefits Other Than Pensions Liability (OPEB) was
measured as of December 31, 2017, and the Total OPEB Liability was determined by
an actuarial valuation as of that date.
Actuarial assumptions:
The Total OPEB Liability in the December 31, 2017 actuarial valuation was
determined using the following actuarial assumptions:
Inflation 2.5% per year
Overall payroll growth 3.5% to 10.5%, including inflation per
year
Discount rate 3.31%
Retirees’ share of benefit‐related costs $0
Administrative expenses All administrative expenses are paid
through the Pension Trust and
accounted for under reporting
requirements under GASB Statement
No. 68
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.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
73
Discount Rate:
The discount rate used to measure the Total OPEB Liability was 3.31%. The
discount rate was based on the Fidelity Index’s “20‐Year Municipal GO AA Index”
rate as of December 31, 2017.
Sensitivity of the Total OPEB Liability to Changes in the Discount Rate
The following presents the total OPEB liability of the City, calculated using the
discount rate of 3.31%, as well as what the City’s total OPEB liability (asset) would
be if it were calculated using a discount rate that is 1‐percentage‐point lower
(2.31%) or 1‐percentage‐point higher (4.31%) than the current rate:
$ 130,438 $ 107,166 $88,684
1% Decrease
(2.31%)
Current Single Rate
Assumption 3.31%
1% Increase
(4.31%)
Changes in the Total OPEB Liability:
Total OPEB
Liability
Balance at 12/31/16 $ 87,186
Changes for the year:
Service Cost 7,601
Interest 3,432
Changes of assumptions 9,310
Benefit payments (363)
Net changes 19,980
Balance at 12/31/17 $ 107,166
Pension Expense and Deferred Outflows of Resources and Deferred Inflows of
Resources Related to Pensions
For the year ended September 30, 2018, the City recognized OPEB expense of
$12,295.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
74
At September 30, 2018, the City reported deferred outflows of resources and
deferred inflows of resources related to the OPEB liability from the following
sources:
Differences between expected and
actual economic experience $ 8,048
Contributions subsequent to
measurement date 282
Total $ 8,330
Deferred Outflows
of Resources
The City reported $282 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, 2019.
Other amounts reported as deferred outflows of resources related to pensions will
be recognized in pension expense as follows:
Year ended December 31:
2018 $ 1,262
2019 1,262
2020 1,262
2021 1,262
2022 1,262
Thereafter 1,738
$ 8,048
G. Restatement
Due to the implementation of GASB No. 75, the City restated its beginning net
position within governmental activities and business‐type activities to properly
reflect the total OPEB liability and related deferred outflows and inflows of
resources, as prescribed by this accounting standard. This adjustment was
recorded at the fund level for proprietary funds only, and recorded at the
government‐wide level for both governmental and business‐type activities.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2018
75
The City has restated net position as follows:
Proprietary Fund
Prior year ending net position, as reported $ 17,789,304
Impact of implementation of GASB 75 (19,990)
$ 17,769,314 Restated beginning net position
Water, Sewer
& Electric
Prior year ending net position, as reported $ 14,998,723 $ (4,913)
Impact of implementation of GASB 75 (49,540) (17,383)
$ 14,949,183 $ (22,296)
Fund
Governmental
Activities
Restated beginning net position
Activities
Governmental
Internal Service
H. Subsequent Events
There were no material subsequent events through January 21, 2019, the date the
financial statements were available to be issued.
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76
REQUIRED SUPPLEMENTARY INFORMATION
77
Revenues
Property tax $3,181,000 $3,181,000 $3,275,548 $94,548
Sales tax 905,000 905,000 872,250 (32,750)
Franchise and local taxes 221,100 221,100 261,611 40,511
License and permits 206,070 206,070 322,230 116,160
Charges for services 843,600 843,600 898,772 55,172
Fire and rescue 585,000 585,000 629,461 44,461
Contributions and donations - - 6,795 6,795
Intergovernmental - - 134,424 134,424
Fines and forfeitures 112,000 112,000 95,577 (16,423)
Investment income 4,000 4,000 4,898 898
Other revenue 96,300 96,300 385,431 289,131
6,154,070 6,154,070 6,886,997 732,927
Expenditures
Current:
General government 1,672,736 1,604,944 1,527,438 77,506
Police department 1,601,752 1,624,442 1,443,548 180,894
Municipal court 223,715 227,155 170,058 57,097
Fire and EMS 1,143,961 1,152,701 968,738 183,963
Parks and recreation 609,977 588,008 566,197 21,811
Public works 838,590 876,003 802,759 73,244
Debt service:
Principal 94,208 94,208 114,356 (20,148)
Interest 13,790 13,790 14,995 (1,205)
Capital outlay 345,304 360,115 194,017 166,098
6,544,033 6,541,366 5,802,106 739,260
Revenues Over (Under) Expenditures (389,963) $(387,296) $1,084,891 $1,472,187
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, 2018
Original
Budget Final Budget
Total Expenditures
Actual Final Budget
78
Transfers in 899,699 $899,699 $889,258 $(10,441)
Transfers (out)(460,000) (460,000) (460,000) -
Sale of capital assets - - 27,070 27,070
Insurance recoveries - - 10,594 10,594
439,699 439,699 466,922 27,223
Net Change in Fund Balance 49,736 $52,403 1,551,813 $1,499,410
Beginning fund balance 3,376,924
$4,928,737
Notes to Required Supplementary Information
1. Annual budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP).
Variance with
Actual Final Budget
IN FUND BALANCE - BUDGET AND ACTUAL- GENERAL FUND (Page 2 of 2)
For the Year Ended September 30, 2018
Final Budget
Original
Budget
Ending Fund Balance
Total Other Financing Sources (Uses)
Other Financing Sources (Uses)
City of Sanger, Texas
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES
79
Total pension liability
Service cost $438,324 $408,943 $369,950
Interest (on the Total Pension Liability)590,632 545,333 521,853
Changes in benefit terms - - -
Differences between expected and actual
experience 38,794 (78,516) (89,808)
Changes of assumptions - - 47,847
Benefit payments, including refunds of
participant contributions (208,451) (230,245) (260,514)
Net change in total pension liability 859,299 645,515 589,328
Total pension liability - beginning 8,635,174 7,989,659 7,400,331
Total pension liability - ending (a)$9,494,473 $8,635,174 $7,989,659
Plan fiduciary net position
Contributions - employer $276,169 $240,177 $231,097
Contributions - members 217,171 202,113 195,568
Net investment income 1,040,205 461,955 9,831
Benefit payments, including refunds of
participant contributions (208,451) (230,245) (260,514)
Administrative expenses (5,387) (5,214) (5,988)
Other (273) (281) (296)
Net change in plan fiduciary net position 1,319,434 668,505 169,698
Plan fiduciary net position - beginning 7,500,161 6,831,656 6,661,957
Plan fiduciary net position - ending (b)$8,819,595 $7,500,161 $6,831,655
Fund's net pension liability - ending (a) - (b)$674,878 $1,135,013 $1,158,004
92.89%86.86%85.51%
Covered employee payroll $3,619,524 $3,368,554 $3,259,471
18.65%33.69%35.53%
Notes to schedule:
20162017
City of Sanger, Texas
SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS
Years ended December 31,
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
Fund's net position as a percentage of covered
employee payroll
80
1
$340,004
476,571
-
47,610
-
(204,026)
660,159
6,740,172
$7,400,331
$211,283
187,821
350,203
(204,026)
(3,656)
(301)
541,324
6,120,633
$6,661,957
$738,374
90.02%
$3,130,346
23.59%
2014
81
9/30/2018 9/30/2017 9/30/2016 9/30/2015 1
$287,348 $266,753 $247,432 $225,111
$287,348 $266,753 $247,432 $225,111
Contribution deficiency (excess)$- $- $- $-
Annual covered employee payroll $3,706,912 $3,549,724 $3,475,512 $3,130,346
7.75%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 26 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.
Actuarially determined employer
contributions
82
1
Total OPEB liability
Service cost $7,601
Interest (on the Total Pension Liability)3,432
Changes in benefit terms -
Differences between expected and actual experience -
Changes of assumptions 9,310
Benefit payments, including refunds of participant contributions (363)
Net changes 19,980
Total OPEB liability - beginning 87,186
Total OPEB liability - ending (a)$107,166 2
Covered employee payroll $3,619,524
2.96%
Notes to schedule:
1
2
TEXAS MUNICIPAL RETIREMENT SYSTEM
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.
2017
City of Sanger, Texas
No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB statement
No. 75 to pay related benefits.
Total OPEB Liability as a percentage of covered employee payroll
Years ended December 31,
SCHEDULE OF CHANGES IN POSTEMPLOYMENT BENEFITS OTHER THAN
PENSION (OPEB) LIABILITY AND RELATED RATIOS
83
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84
OTHER SUPPLEMENTARY INFORMATION
85
Operating Revenues
Charges for services $2,059,917 $1,907,664 $8,167,907 $-
Connection fees - - 59,000 -
Tap fees 198,150 256,000 - -
Other revenue - - - -
2,258,067 2,163,664 8,226,907 -
Operating Expenses
Salaries and wages 598,666 282,088 1,049,192 -
Contracted services 41,151 42,991 280,781 -
Utilities 177,536 147,011 2,430 -
Materials and supplies 24,517 33,723 59,266 -
Water and electric purchases 84,752 - 5,528,748 -
Repairs and maintenance 274,793 241,944 216,926 -
Depreciation 371,775 309,642 198,623 219
1,573,190 1,057,399 7,335,966 219
684,877 1,106,265 890,941 (219)
Nonoperating Revenues (Expenses)
Investment income - - - -
Intergovernmental 475,000 - - -
Interest expense - - - -
475,000 - - -
Income Before Transfers 1,159,877 1,106,265 890,941 (219)
Transfers (out)- - (92,000) -
$1,159,877 $1,106,265 $798,941 $(219)
Sewer Electric Fleet Services
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, 2018
Water
Total Operating Revenues
Total Operating Expenses
Operating Income (loss)
Total Nonoperating Revenues (Expenses)
Change in Net Position
86
$- $12,135,488
- 59,000
- 454,150
73,654 73,654
73,654 12,722,292
- 1,929,946
- 364,923
- 326,977
- 117,506
- 5,613,500
- 733,663
14,263 894,522
14,263 9,981,037
59,391 2,741,255
25,558 25,558
- 475,000
(718,056) (718,056)
(692,498) (217,498)
(633,107) 2,523,757
(689,259) (781,259)
$(1,322,366) $1,742,498
Administration Total
87
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88