01/21/2020-CC-Agenda Packet-Work SessionAGENDA
CITY COUNCIL WORK SESSION
TUESDAY, JANUARY 21, 2020
6:00 PM
502 ELM STREET
SANGER, TEXAS
1.Call Meeting to Order
2.Presentation from Auditors
Overview of the Annual Financial Report and Related Audit by Brooks Watson & Co. for the Fiscal
Year Ending September 30, 2019.
3.Overview of Items on the Regular Agenda
4.Adjourn
I, the undersigned authority, do hereby certify that this Notice of Meeting was posted on the
City Website, and on the bulletin board, at the City Hall of the City of Sanger, Texas, a place
convenient and readily accessible to the general public at all times. Said notice was posted on the
following date and time, and remained posted continuously for at least 72 hours prior to the
scheduled time of said meeting and shall remain posted until meeting is adjourned.
January 17, 2020 at 10:30 a.m.
Cheryl Price City Secretary
City of Sanger, Texas
Date/Time Posted
This facility is wheelchair accessible and accessible parking spaces are available. Requests for additional
accommodations or interpretive services must be made 48 hours prior to this meeting. Please contact the City
Secretary's office at (940) 4587930 for further information.
Page 1
CITY COUNCIL AGENDA MEMO
AGENDA ITEM NO. 2.
AGENDA MEETING DATE: January 21, 2020
TO: Alina Ciocan, City Manager
FROM: Clayton Gray, Finance Director
ITEM/CAPTION:
Presentation from Auditors
Overview of the Annual Financial Report and Related Audit by Brooks Watson & Co. for the Fiscal Year Ending
September 30, 2019.
AGENDA TYPE: Work Session
ACTION REQUESTED: Presentation
BACKGROUND:
The City is required under the Texas Local Government Code and City Charter to have an audit of its financial
statements each year. This audit must be conducted by an independent Certified Public Accountant. The audit was
performed by Brooks Watson & Company.
The annual audit was conducted in accordance with governmental accounting standards and fulfills the requirements set
in state law. The audit resulted in an unmodified (“clean”) opinion indicating that the financial statements are presented
fairly, in all material aspects, in accordance with generally accepted financial principles.
LEGAL/BOARD COMMISSION RECOMMENDATIONS/CITIZEN NOTICE FEEDBACK:
N/A
FINANCIAL SUMMARY FUNDING/FISCAL IMPACT:
N/A
FUNDS:
N/A
STAFF RECOMMENDATION/ACTION DESIRED:
N/A
Page 2
ANNUAL FINANCIAL REPORT
of the
City of Sanger, Texas
For the Year Ended
September 30, 2019
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City of Sanger, Texas
TABLE OF CONTENTS
September 30, 2019
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
REQUIRED SUPPLEMENTARY INFORMATION
37
Schedule of Revenues, Expenditures, and Changes in Fund Balances -
Budget and Actual - General Fund 76
Schedule of Changes in Net Pension Liability and Related Ratios 78
Schedule of Employer Contributions to Pension Plan 80
Schedule of Changes in OPEB Liability and Related Ratios 82
COMBINING AND INDIVIDUAL FUND FINANCIAL SCHEDULES
Combining Schedule of Revenues, Expenses, and Changes
in Fund Net Position - Proprietary Funds — by Department 84
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Nk"1 Oldi I
CERTII-I ED PUBLIC ACC011NTAN'I S
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, 2019, and the related notes to the financial statements, which
collectively comprise the City's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Stateineiits
The City's management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance of internal control relevant
to the preparation and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity's internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
14950 Heathrow Forest Plavy I Suite 530 1 Houston, TX 77032 1 Tel: 281.907.8788 1 Fax: 888.875.0587 1 www.BrooksWatsonCo.com
1
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinions.
Opilzions
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, the business -type activities, the
discretely presented component units, each major fund, and the aggregate remaining fund
information of the City as of September 30, 2019, and the respective changes in financial position
and, where applicable, cash flows thereof for the year then ended in accordance with accounting
principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis, 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 respects in relation to the financial
statements as a whole.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise City of Sanger, Texas's basic financial statements. The combining 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
2
procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic
financial statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America. In our opinion, the combining
financial statements are fairly stated, in all material respects, in relation to the basic financial
statements as a whole.
bj6k"V/4,5k14 N.
BrooksWatson & Co.
Certified Public Accountants, PLLC
Houston, Texas
January 2, 2020
3
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MANAGEMENT'S DISCUSSION
AND ANALYSIS
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City of Sanger, Texas
MANAGEMENT'S DISCUSSIONAND ANALYSIS (MD&A)
September 30, 2019
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, 2019.
Financial Highlights
• The City's total combined net position is $44,388,787 at September 30, 2019. Of this, $15,418,850
(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 $8,542,678, an increase of $2,291,221.
• As of the end of the year, the unassigned fund balance of the general fund was $5,616,983 or
91% of total general fund expenditures.
• The City had an overall increase in net position of $4,162,945, 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-zvide 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
7
City of Sanger, Texas
MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued
September 30, 2019
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 ("413"), 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 ficnds 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 DISCUSSIONAND ANALYSIS, Continued
September 30, 2019
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 $44,388,787 as of September 30, 2019, in
the primary government.
I
City of Sanger, Texas
MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued
September 30, 2019
The largest portion of the City's net position, $26,075,110, 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, $2,894,827, represents resources that are subject to
external restrictions on how they may be used. The remaining balance of $15,418,850 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, 2019 and September 30, 2018 were
$9,264,673 and $7,224,081, respectively. The increase of $2,040,592 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, 2019 and September 30, 2018 were
$14,744,586 and $16,436,888, respectively. The decrease of $1,692,302 was primarily attributable to
funds being spent on capital asset improvements throughout the year and principal payments made on
outstanding debt.
Capital assets of business -type activities as of September 30, 2019 and September 30, 2018 were
$29,272,520 and $27,575,268, respectively. The increase of $1,697,252 was a primarily a result of the
continued sewer plant expansion.
Other liabilities of business -type as of September 30, 2019 and September 30, 2018 were $3,182,639 and
$3,801,444, respectively. The decrease of $618,805 was primarily a result of timing of payments to third
party vendors subsequent to the prior year end.
In
City of Sanger, Texas
MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued
September 30, 2019
Statement of Net Position:
The following table reflects the condensed Statement of Net Position:
2019
2018
Governmental
Business -Type
Governmental
Business -Type
Activities
Activities
Total
Activities
Activities
Total
Current and
other assets
$ 9,264,673
$ 14,744,586 $
24,009,259
$ 7,224,081
$ 16,436,888 $
23,660,969
Capital assets, net
18,949,169
29,272,520
48,221,689
19,178,754
27,575,268
46,754,022
Total Assets
28,213,842
44,017,106
72,230,948
26,402,835
44,012,156
70,414,991
Deferred Outflows
of Resources
596,634
197,169
793,803
228,061
96,605
324,666
Other liabilities
1,348,191
3,182,639
4,530,830
1,664,933
3,801,444
5,466,377
Long-term liabilities
4,082,353
20,014,674
24,097,027
4,022,808
20,726,451
24,749,259
Total Liabilities
5,430,544
23,197,313
28,627,857
5,687,741
24,527,895
30,215,636
Deferred Inflows
of Resources
6,237
1,870
8,107
229,125
69,054
298,179
Net Position:
Net investment
in capital assets
15,502,386
10,572,724
26,075,110
14,712,198
10,012,196
24,724,394
Restricted
2,894,827
-
2,894,827
1,518,760
-
1,518,760
Unrestricted
4,976,482
10,442,368
15,418,850
4,483,072
9,499,616
13,982,688
Total Net Position
$ 23,373,695
$ 21,015,092 $
44,388,787
$ 20,714,030
$ 19,511,812 $
40,225,842
11
City of Sanger, Texas
MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued
September 30, 2019
Statement of Activities:
The following table provides a summary
of the
City's changes in
net position:
For the Year Ended September 30, 2019
For the Year Ended September 30, 2018
Total
Total
Governmental
Business -Type
Primary
Governmental
Business -Type
Primary
Activities
Activities
Government
Activities
Activities
Government
Revenues
Program revenues:
Charges for services
$ 2,035,376
$ 12,594,574
$ 14,629,950 $
1,946,040
$ 12,722,292
$ 14,668,332
Grants and contributions
770,917
-
770,917
3,846,351
475,000
4,321,351
General revenues:
Property taxes
4,480,452
-
4,480,452
3,953,836
-
3,953,836
Sales taxes
914,748
-
914,748
872,250
-
872,250
Franchise and local taxes
283,573
-
283,573
261,611
-
261,611
Investment income
11,916
169,808
181,724
5,012
25,558
30,570
Other revenues
399,167
-
399,167
396,025
-
396,025
Total Revenues
8,896,149
12,764,382
21,660,531
11,281,125
13,222,850
24,503,975
Expenses
General government
2,186,197
-
2,186,197
1,808,163
-
1,808,loa
Public safety
2,759,901
-
2,759,901
2,517,223
-
2,517,223
Public works
1,070,180
-
1,070,180
1,061,776
-
1,061,776
Culture and recreation
719,658
-
719,658
737,343
-
737,343
Interest and fiscal charges
181,723
681,277
863,000
173,032
718,056
891,088
Water, sewer, & electric
-
9,898,650
9,898,650
-
9,981,037
9,981,037
Total Expenses
6,917,659
10,579,927
17,497,586
6,297,537
10,699,093
16,996,630
Change in Net Position
Before Transfers
1,978,490
2,184,455
4,162,945
4,983,588
2,523,757
7,507,345
Transfers
681,175
(681,175)
-
781,259
(781,259)
-
Total
681,175
(681,175)
-
781,259
(781,259)
-
Change in Net Position
2,659,665
1,503,280
4,162,945
5,764,847
1,742,498
7,507,345
Beginning Net Position
20,714,030
19,511,812
40,225,842
14,949,183
17,769,314
32,718,497
Ending Net Position
$ 23,373,695
$ 21,015,092
$ 44,388,787 $
20,714,030
$ 19,511,812
$ 40,225,842
12
City of Sanger, Texas
MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued
September 30, 2019
Graphic presentations of selected data from the summary tables are displayed below to assist in the
analysis of the City's activities.
Governmental Activities - Revenues
Property taxes
50%
Grants an
contvibti-H W
9%
Charges for services
23%
Sales taxes
10%
Franchise andlocal
taxes
3%
vuLCl lc vcXLLLeS
5%
For the year ended September 30, 2019, revenues from governmental activities totaled $8,896,149.
Property tax, charges for services, and sales taxes are the City's largest revenue sources. Property tax
increased by $526,616 or 13% due to rising property values. Sales taxes and franchise and local taxes
increased by $42,498 and $21,962, respectively, due to growth in the local economy. Charges for
services increased $89,336 or 5% primarily due to increases in engineering inspection service fees and
sanitation service revenue. Grants and contributions decreased by $3,075,434 due to nonrecurring
funds received from an interlocal agreement with Denton County for street construction in the prior
year. All other revenues remained relatively stable when compared to the previous year.
This graph shows the governmental function expenses of the City:
Governmental Activities - Expenses
Public safety
39%
Public works
4%
Culture and
recreation
11%
General
government Interest and fiscal
33% charges
3%
For the year ended September 30, 2019, expenses for governmental activities totaled $6,917,659. This
represents an increase of $620,122 from the prior year. The City's largest functional expense is public
safety of $2,759,901, which primarily includes costs for the police department, animal control, fire
13
City of Sanger, Texas
MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued
September 30, 2019
department, and EMS services. Public safety expenses increased by $242,678 or 10%, which is mainly a
result of increased personnel and professional services expenses. General government expenses
increased by $378,034 or 21% primarily due to increases in salaries and contract service expenditures.
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, 2019, charges for services by business -type activities totaled
$12,594,574. This is a decrease of $127,718 or 1% from the previous year, which is considered minimal.
Business -Type Activities - Revenues and Expenses
Expenses ® Charges for Services
Total expenses decreased by $119,166 or 1% 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 $6,437,779. Of this, $10,003 is
restricted for municipal court, $49,805 is restricted for tourism, $98,348 is restricted for library
improvements, $61,134 for public safety, $8,587 is restricted for parks, and $562,051 is restricted for
roadway impact fees. In addition, $30,868 is committed for employee benefits. Unassigned fund
balance totaled $5,616,983 as of yearend. The general fund increased by $1,509,042 primarily as a result
14
City of Sanger, Texas
MANAGEMENT'S DISCUSSION AND ANALYSIS, Continued
September 30, 2019
of planned expenditures exceeding current year actual expenditures and an overall increase in the
anticipated net change in fund balance.
The capital projects fund reflected an ending balance of $1,628,718, an increase of $761,933. 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 $2,291,221 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 $1,434,143 in the general fund. This is a combination of a
positive revenue variance of $465,979 a positive expenditure variance of $357,188, and a positive
variance of $610,976 in other financing sources and uses. The most significant revenue variances were
for property taxes, franchise and local taxes, licenses and permits, fire and rescue, intergovernmental;
and other revenues.
CAPITAL ASSETS
As of the end of the year, the City's governmental activities funds had invested $18,949,169 in a variety
of capital assets and infrastructure, net of accumulated depreciation. Depreciation is included with the
governmental capital assets as required by GASB Statement No. 34. The City's business -type activities
funds had invested $29,272,520 in a variety of capital assets and infrastructure, net of accumulated
depreciation.
Major capital asset events during the current year include the following:
• Investment in the McReynolds road construction in the amount of $158,085.
• Investments in street department infrastructure totaling $300,169.
• Investments in infrastructure for water department totaling $169,979.
• Investments in infrastructure for sewer department totaling $208,050.
• Investments in infrastructure and machinery and equipment for electric department totaling
$488,770.
• Sewer plant expansion for $1,673,200.
• Purchase of public safety equipment and vehicles for $137,810.
15
City of Sanger, Texas
MANAGEMENT'S DISCUSSIONAND ANALYSIS, Continued
September 30, 2019
a Acquisition of building and infrastructure improvements and machinery and equipment in the
parks department for $108,129.
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 $22,245,000 and capital leases of
$233,023. $1,575,000 of certificates of obligation bonds were refunded during the year. In addition, the
City made principal payments on bonds and capital leases of $1,613,282. 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.
16
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17
City of Sanger, Texas
STATEMENT OF NET POSITION (Page 1 of 2)
September 30, 2019
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Investments
Receivables, net
Inventory
Due from component unit
Internal balances
Total Current Assets
Capital assets:
Non -depreciable
Net depreciable capital assets
Total Assets
Deferred Outflows of Resources
Deferred charge on refunding
Pension contributions
OPEB contributions
Pension investment earnings
Pension (gains) losses
Pension assumption changes
Total Deferred Outflows of Resources
See Notes to Financial Statements.
Primary Government
Governmental
Business -Type
Activities
Activities
Total
$ 8,168,899
$ 9,373,086 $
17,541,985
-
2,540,582
2,540,582
540,374
722,526
1,262,900
511,844
1,566,982
2,078,826
-
450,150
450,150
134,816
-
134,816
(91,260)
91,260
-
9,264,673
14,744,586
24,009,259
7,840,413
13,874,077
21,714,490
11,108,756
15,398,443
26,507,199
18,949,169
29,272,520
48,221,689
28,213,842
44,017,106
72,230,948
12,037
20,977
33,014
188,265
56,739
245,004
239
71
310
352,271
106,168
458,439
30,549
9,214
39,763
13,273
4,000
17,273
596,634
197,169
793,803
10
Component Units
Sanger Industrial Sanger Texas
Dev. Corp. (4A) Dev. Corp. (4B)
$ 1,094,539 $
935,871
95,314
281,699
80,325
80,325
1,270,178
1,297,895
731,990
-
731,990
-
2,002,168
1,297,895
19
City of Sanger, Texas
STATEMENT OF NET POSITION (Page 2 of 2)
September 30, 2019
Liabilities
Current liabilities:
Accounts payable and
accrued liabilities
Accrued interest payable
Customer deposits
Due to primary government
Compensated absences - current
Long term debt due within one year
Total Current Liabilities
Noncurrent liabilities:
Debt due in more than one year
Compensated absences - noncurrent
OPEB liability
Net pension liability
Total Liabilities
Deferred Inflows of Resources
OPEB (gains) losses
OPEB assumption changes
Total Deferred Inflows of Resources
Net Position
Net investment in capital assets
Restricted for:
Debt service
Capital projects
Parks
Economic development
Roadway impact fees
Other purposes
Unrestricted
Primary Government
Governmental
Business -Type
Activities
Activities
Total
$ 433,299
$ 1,543,854 $
1,977,153
19,676
246,910
266,586
-
442,086
442,086
191,700
119,589
311,289
703,516
830,200
1,533,716
1,348,191
3,182,639
4,530,830
2,731,621
19,600,930
22,332,551
21,299
13,288
34,587
78,769
23,530
102,299
1,250,664
376,926
1,627,590
4,082,353
20,014,674
24,097,027
5,430,544
23,197,313
28,627,857
6,167
1,870
8,037
70
-
70
6,237
1,870
8,107
15,502,386
10,572,724 26,075,110
476,181
- 476,181
1,628,718
- 1,628,718
8,587
- 8,587
562,051
- 562,051
219,290
- 219,290
4,976,482
10,442,368 15,418, 850
Total Net Position $ 23,373,695 $ 21,015,092 $ 44,388,787
See Notes to Financial Statements.
20
Component Units
Sanger Industrial Sanger Texas
Dev. Corp. (4A) Dev. Corp. (413)
$ 4,386 $ -
67,408 67,408
71,794 67,408
71,794 67,408
731,990 -
1,198,384 1,230,487
$ 1,930,374 $ 1,230,487
21
City of Sanger, Texas
STATEMENT OF ACTIVITIES
For the Year Ended September 30, 2019
Program Revenues
Operating
Capital
Charges for
Grants and
Grants and
Functions/Programs
Expenses
Services
Contributions
Contributions
Primary Government
Governmental Activities
General government
$ 2,186,197
$ 1,292,146
$ 1,019
$ -
Public safety
2,759,901
743,230
122,962
-
Public works
1,070,180
-
-
434,436
Culture and recreation
719,658
-
-
-
Interest and fiscal charges
181,723
-
212,500
-
Total Governmental Activities
6,917,659
2,035,376
336,481
434,436
Business -Type Activities
Water
1,530,085
2,277,432
-
-
Sewer
1,066,304
2,257,858
-
-
Electric
7,287,932
7,846,733
-
Fleet services
66
-
-
-
Utility administration
695,540
212,551
-
-
Total Business -Type Activities
10,579,927
12,594,574
-
-
Total Primary Government
$ 17,497,586
$ 14,629,950
$ 336,481
434,436
Component Units
Sanger Ind. Dev. Corp. (4A)
176,190
-
-
-
Sanger Texas Dev. Corp. (413)
256,114
-
-
-
$ 432,304
$ -
$ -
$ -
See Notes to Financial Statements.
General Revenues:
Taxes
Property taxes
Sales taxes
Franchise and local taxes
Investment income
Other revenues
Insurance recoveries
Transfers
Total General Revenues and Transfers
Change in Net Position
Beginning Net Position
Ending Net Position
22
i
Net (Expense) Revenue and Changes in Net Position
Primary Government
Component Units
Governmental
Business -Type
Sanger Industrial
Sanger Texas
Activities
Activities
Total
Dev. Corp. (4A)
Dev. Corp. (4B)
$ (893,032)
$ - $
(893,032)
$ -
$ -
(1,893,709)
-
(1,893,709)
-
-
(635,744)
-
(635,744)
-
-
(719,658)
-
(719,658)
-
-
30,777
-
30,777
-
-
(4,111,366)
-
(4,111,366)
-
-
-
747,347
747,347
-
-
-
1,191,554
1,191,554
-
-
-
558,801
558,801
-
-
-
(66)
(66)
-
-
-
(482,989)
(482,989)
-
-
-
2,014,647
2,014,647
-
-
(4,111,366)
2,014,647
(2,096,719)
-
-
(176,190)
-
-
(256,114)
(176,190)
(256,114)
4,480,452
-
4,480,452
-
-
914,748
-
914,748
454,236
454,236
283,573
-
283,573
-
-
11,916
169,808
181,724
5,754
3,416
377,018
-
377,018
40,000
-
22,149
-
22,149
-
-
681,175
(681,175)
-
-
-
6,771,031
(511,367)
6,259,664
499,990
457,652
2,659,665
1,503,280
4,162,945
323,800
201,538
20,714,030
19,511,812
40,225,842
1,606,574
1,028,949
$ 23,373,695
$ 21,015,092 $
44,388,787
$ 1,930,374
$ 1,230,487
23
City of Sanger, Texas
BALANCE SHEET
GOVERNMENTAL FUNDS
September 30, 2019
Nonmaj or
Capital
Debt
General
Projects Fund
Service
Assets
Cash and cash equivalents
$
5,834,125
$ 1,636,792
$
476,066
Investments
540,374
-
-
Receivables, net
498,594
-
13,250
Due from component unit
134,816
-
-
Total Assets
$
7,007,909
$ 1,636,792
$
489,316
Liabilities
Accounts payable and
accrued liabilities
$
328,691
$ 8,074
$
-
Due to other funds
91,260
-
-
Total Liabilities
419,951
8,074
-
Deferred Inflows of Resources
Unavailable revenue
Property taxes
49,826
-
13,135
EMS revenue
100,353
-
-
Total Deferred Inflows of Resources
150,179
-
13,135
Fund Balances
Restricted for:
Municipal court
10,003
-
-
Tourism
49,805
-
-
Library
98,348
-
-
Public safety
61,134
-
-
Debt service
-
-
476,181
Capital projects
-
1,628,718
-
Parks
8,587
-
-
Roadway impact fees
562,051
-
-
Committed for:
Employee benefits
30,868
-
-
Unassigned reported in:
General fund
5,616,983
-
-
Total Fund Balances
6,437,779
1,628,718
476,181
Total Liabilities, Deferred Inflows, and Fund Balances
$
7,007,909
$ 1,636,792
$
489,316
See Notes to Financial Statements.
24
Total
Governmental
Funds
$ 7,946,983
540,374
511,844
134,816
$ 9,134, 017
$ 336,765
91,260
428,025
62,961
100,353
163,314
10,003
49,805
98,348
61,134
476,181
1,628,718
8,587
562,051
30,868
5,616,983
8,542,678
$ 9,134,017
25
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M
City of Sanger, Texas
RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION
GOVERNMENTAL FUNDS
September 30, 2019
Fund Balances - Total Governmental Funds
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
Capital assets - net depreciable
Other long-term assets are not available to pay for current -period
expenditures and, therefore, are deferred in the governmental funds.
Property tax receivable
EMS receivable
Deferred outflows (inflows) of resources, represent a consumption (acquisition) of net position that
applies to a future period(s) and is not recognized as an outflow (inflow) of resources
(expense/ expenditure) (revenue) until then.
Deferred charge on refunding
Pension contributions
OPEB contributions
Pension investment earnings
Pension gains (losses)
Pension assumption changes
OPEB assumption changes
OPEB gains (losses)
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
Net position - governmental activities
Some liabilities, including bonds payable and deferred charges, are not reported as
liabilities in the governmental funds.
Accrued interest
Compensated absences
Bond premium
Net pension liability
OPEB liability
Non -current liabilities due in one year
Non -current liabilities due in more than one year
Net Position of Governmental Activities
See Notes to Financial Statements.
$ 8,542,678
7,840,413
11,062,716
62,961
100,353
12,037
140,424
177
262,753
22,804
9,900
(70)
(4,565)
(53,839)
(19,676)
(179,074)
(168,814)
(932,850)
(58,310)
(703,516)
(2,562,807)
$ 23,373,695
27
City of Sanger, Texas
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
GOVERNMENTAL FUNDS
For the Year Ended September 30, 2019
Nonmaj or
Capital
Debt
General
Projects Fund
Service
Revenues
Property tax $
3,752,626
$ -
$ 721,281
Sales tax
914,748
-
-
Franchise and local taxes
283,573
-
-
License and permits
285,699
-
-
Charges for services
1,006,447
-
-
Fire and rescue
662,905
-
-
Contributions and donations
1,019
-
-
Intergovernmental
122,962
434,436
212,500
Fines and forfeitures
80,325
-
-
hlvestment income
11,441
-
475
Other revenue
410,313
-
-
Total Revenues
7,532,058
434,436
934,256
Expenditures
Current:
General government
1,677,483
-
1,500
Police department
1,509,652
-
-
Municipal court
180,179
-
-
Fire and EMS
1,032,738
-
-
Parl<s and recreation
534,881
-
-
Public worl<s
888,382
-
-
Debt service:
Principal
117,936
-
634,400
Interest
11,417
-
152,102
Bond issuance costs
-
-
57,213
Capital outlay
228,024
347,503
-
Total Expenditures
6,180,692
347,503
845,215
Excess of Revenues Over (Under) Expenditures
1,351,366
86,933
89,041
Other Financing Sources (Uses)
Transfers in
810,527
675,000
-
Transfers (out)
(675,000)
-
(129,352)
Proceeds from issuance of debt
-
-
1,635,753
Payment to escrow agent for refunding
-
-
(1,575,196)
Insurance recoveries
22,149
-
-
Total Other Financing Sources (Uses)
157,676
675,000
(68,795)
Net Change in Fund Balances
1,509,042
761,933
20,246
Beginning fund balances
4,928,737
866,785
455,935
Ending Fund Balances $
6,437,779
$ 1,628,718
$ 476,181
See Notes to Financial Statements.
:
Total
Governmental
Funds
$ 4,473,907
914,748
283,573
285,699
1,006,447
662,905
1,019
769,898
80,325
11,916
410,313
8,900,750
1,678,983
1,509,652
180,179
1,032,738
534,881
888,382
752,336
163,519
57,213
575,527
7,373,410
1,527,340
1,485,527
(804,352)
1,635,753
(1,575,196)
22,149
763,881
2,291,221
6,251,457
$ 8,542,678
29
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30
City of Sanger, Texas
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,
AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE
STATEMENT OF ACTIVITIES
For the Year Ended September 30, 2019
Amounts reported for governmental activities in the statement of activities are
different because:
Net changes in fund balances - total governmental funds
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
Depreciation expense
Adjustment for disposal of assets
Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the funds.
EMS receivable
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
Accrued interest
Pension expense
OPEB expense
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
Premium on debt
Principal payments
Debt refunding
Debt issuance
Amortization of bond premium
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.
Change in Net Position of Governmental Activities
See Notes to Financial Statements.
$ 2,291,221
714,946
(916,599)
(33,295)
6,545
(14,175)
20,106
(90,200)
(6,431)
(7,250)
(100,753)
752,336
1,575,000
(1,535,000)
26,349
(23,135)
$ 2,659,665
31
City of Sanger, Texas
STATEMENT OF NET POSITION (Page 1 of 2)
PROPRIETARY FUND
September 30, 2019
Assets
Current Assets
Cash and cash equivalents
Restricted cash
Investments
Receivables, net
Inventory
Due from other funds
Noncurrent Assets
Capital assets:
Non -depreciable
Net depreciable capital assets
Total Current Assets
Total Noncurrent Assets
Total Assets
Deferred Outflows of Resources
Deferred charge on refunding
Pension contributions
OPEB contributions
Pension assumption changes
Pension investment earnings
Pension (gains) losses
Total Deferred Outflows of Resources
Governmental
Activities
Water, Sewer
Internal
& Electric
Service
$ 9,373,086
$ 221,916
2,540,582
-
722,526
-
1,566,982
-
450,150
-
91,260
-
14,744,586
221,916
13,874,077
-
15,398,443
46,040
29,272,520
46,040
44,017,106
267,956
20,977
-
56,739
47,841
71
62
4,000
3,373
106,168
89,518
9,214
7,745
197,169
148,539
32
City of Sanger, Texas
STATEMENT OF NET POSITION (Page 2 of 2)
PROPRIETARY FUND
September 30, 2019
Liabilities
Current Liabilities
Accounts payable and accrued liabilities
Accrued interest
Customer deposits
Compensated absences - current
Bonds and capital leases payable -current
Total Current Liabilities
Noncurrent Liabilities
Compensated absences - noncurrent
Net pension liability
OPEB liability
Bonds and capital leases payable
Total Liabilities
Deferred Inflows of Resources
OPEB (gains) losses
Total Deferred Inflow of Resources
Net Position
Net investment in capital assets
Unrestricted
See Notes to Financial Statements.
Governmental
Activities
Water, Sewer
Internal
& Electric
Service
1,543,854
96,534
246,910
-
442,086
-
119,589
30,533
830,200
-
3,182,639
127,067
13,288
3,392
376,926
317,814
23,530
20,459
19,600,930
-
23,197,313
468,732
1,870
1,602
1,870
1,602
10,572,724
46,040
10,442,368
(99,879)
Total Net Position $ 21,015,092 $ (53,839)
33
City of Sanger, Texas
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION
PROPRIETARY FUND
For the Year Ended September 30, 2019
Governmental
Activities
Water, Sewer
Internal
& Electric
Service
Operating Revenues
Charges for services
$ 11,824,963
$ 1,768,731
Connection fees
62,510
-
Tap fees
494,550
-
Other revenue
212,551
-
Total Operating Revenues
12,594,574
1,768,731
Operating Expenses
Salaries and wages
2,077,358
1,194,615
Contracted services
321,324
327,555
Utilities
303,957
99,024
Materials and supplies
151,351
77,518
Water and electric purchases
5,487,353
-
Repairs and maintenance
556,052
84,260
Depreciation
1,001,255
5,437
Total Operating Expenses
9,898,650
1,788,409
Operating Income (Loss)
2,695,924
(19,678)
Nonoperating Revenues (Expenses)
Investment income
169,808
-
Interest expense
(681,277)
(3,457)
Total Nonoperating Revenues (Expenses)
(511,469)
(3,457)
Income (Loss) Before Transfers
2,184,455
(23,135)
Transfers (out)
(681,175)
-
Change in Net Position
1,503,280
(23,135)
Beginning net
position
19,511,812
(30,704)
Ending Net Position
$ 21,015,092
$ (53,839)
See Notes to Financial Statements.
34
City of Sanger, Texas
STATEMENT OF CASH FLOWS
PROPRIETARY FUND (Page 1 of 2)
For the Year Ended September 30, 2019
Governmental
Activities
Water, Sewer
Internal
& Electric
Service
Cash Flows from Operating Activities
Receipts from customers
$ 12,573,545
$ -
Receipts from interfund charges for administrative services
-
1,768,731
Payments to suppliers
(7,419,736)
(555,766)
Payments to employees
(2,043,389)
(1,172,046)
Payments/receipts for other
6,830
-
Net Cash Provided by (Used) by Operating Activities
3,117,250
40,919
Cash Flows from Noncapital Financing Activities
Operating transfers (out)
(681,175)
-
Net Cash Provided by (Used) by Noncapital Financing Activities
(681,175)
-
Cash Flows from Capital and Related Financing Activities
Capital purchases
(2,698,507)
(10,800)
Principal paid on debt
(860,946)
-
Interest paid on debt
(769,138)
(3,457)
Net Cash (Used) by Capital and Related Financing Activities
(4,328,591)
(14,257)
Cash Flows from Investing Activities
Purchases of investments, net
(2,973)
-
Interest on investments
169,808
Net Cash Provided by Investing Activities
166,835
Net Increase (Decrease) in Cash and Cash Equivalents
(1,725,681)
26,662
Beginning cash and cash equivalents
13,639,349
195,254
Ending Cash and Cash Equivalents
$ 11,913,668
$ 221,916
See Notes to Financial Statements.
35
City of Sanger, Texas
STATEMENT OF CASH FLOWS
PROPRIETARY FUND (Page 2 of 2)
For the Year Ended September 30, 2019
Reconciliation of Operating Income
to Net Cash Provided by Operating Activities
Operating Income / (Loss) $
Adjustments to reconcile operating
income / (loss) to net cash provided / (used):
Depreciation
Changes in Operating Assets and Liabilities:
(Increase) Decrease in:
Accounts receivable
Inventory
Due from/to other funds
Deferred outflows of resources - pension contributions
Deferred outflows of resources - OPEB contributions
Deferred inflows of resources - pension investment earnings
Deferred inflows of resources - pension (gains) losses
Deferred inflows of resources - OPEB (gains) losses
Deferred outflows of resources - pension assumption changes
Increase (Decrease) in:
Accounts payable and accrued liabilities
Compensated absences
Customer deposits
Net pension liability
OPEB liability
Net Cash Provided (Used) by Operating Activities $
See Notes to Financial Statements.
Governmental
Activities
Water, Sewer
Internal
& Electric
Service
2,695,924
$ (19,678)
1,001,255
5,437
(25,250)
(11,986)
6,830
(5,885)
(6)
(159,293)
(25,143)
3,721
6,133
(587,713)
(5,074)
4,221
220,634
(1,118)
3,117,250 $
(4,962)
(6)
(134,311)
(21,176)
3,212
5,171
32,591
(10,418)
186,033
(974)
40,919
'9101
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS
September 30, 2019
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 City's financial
reporting entity. The Sanger Industrial Development Corporation ("4A fund") and
the Sanger Texas Development Corporation ("413 fund"), although legally separate,
are considered part of the reporting entity. No other entities have been included in
the City's reporting entity. Additionally, as the City is considered a primary
government for financial reporting purposes, its activities are not considered a part
of any other governmental or other type of reporting entity.
Considerations regarding the potential for inclusion of other entities, organizations
or functions in the City's financial reporting entity are based on criteria prescribed
by generally accepted accounting principles. These same criteria are evaluated in
considering whether the City is a part of any other governmental or other type of
reporting entity. The overriding elements associated with prescribed criteria
considered in determining that the City's financial reporting entity status is that of a
primary government are that it has a separately elected governing body; it is legally
separate; and is fiscally independent of other state and local governments.
37
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
Additionally, prescribed criteria under generally accepted accounting principles
include considerations pertaining to organizations for which the primary
government is financially accountable, and considerations pertaining to
organizations for which the nature and significance of their relationship with the
primary government are such that exclusion would cause the reporting entity's
financial statements to be misleading or incomplete.
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 ("0") 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, 2019
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.
39
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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 City's 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
Ito]
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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 govermnent-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
41
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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.
42
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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.
43
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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.
44
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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.
Estimated
Asset Description 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
45
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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, 2019
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 City's policy to liquidate compensated absences with future revenues rather
than with currently available expendable resources. Accordingly, the City's
governmental funds recognize accrued compensated absences when it is paid.
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
CA VA
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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, 2019
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 ficnd 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
49
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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, 2019, the primary government had the following investments:
Average Maturity
Investment Type Carrying Value (Years)
Certificates of deposit
$ 1,262,900
0.52
Total fair value
$ 1,262,900
Portfolio weighted average maturity
0.52
As of September 30, 2019, the 4A Component Unit had the following investments:
Average Maturity
Investment Type
Carrying Value
(Years)
Certificates of deposit
$ 95,314
0.01
Total fair value
$ 95,314
Portfolio weighted average maturity
0.01
As of September 30, 2019, the 4B Component Unit had the following
investments:
Average Maturity
Investment Type
Carrying Value
(Years)
Certificates of deposit
$ 281,699
0.42
Total fair value
$ 281,699
Portfolio weighted average maturity 0.42
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.
50
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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, 2019, 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:
General
Property taxes
$ 82,143
Sales tax
160,650
Franchise & local taxes
42,910
EMS
338,601
Accounts
118,353
Other
1,600
Allowance
(245,663)
Debt Water, Sewer
Service & Electric Total
$ 24,395 $
1,775,895
(11,145) (208,913)
$ 498,594 $ 13,250 $ 1,566,982
$ 106,538
160,650
42,910
338,601
1,894,248
1,600
(465,721)
$ 2,078,826
51
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
The following comprise receivable balances of the component units at year end:
Sales tax $ 80,325 $ 80,325 $ 160,650
C. Inventory
The following comprise the inventory balances of the primary government at year
end:
Inventory type _
Electric Department $
Water Department
Total $
Cost
375,213
74,937
450,150
52
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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
Construction in progress
Total capital assets not being depreciated
Capital assets, being depreciated:
Infrastructure
Buildings and improvements
Machinery and equipment
Total capital assets being depreciated
Less accumulated depreciation
Infrastructure
Buildings and improvements
Machinery and equipment
Total accumulated depreciation
Net capital assets being depreciated
Total Capital Assets
Beginning
Disposals /
Ending
Balances
Increases
Reclassifications
Balances
$ 1,044,933
$ -
$ -
$ 1,044,933
6,633,637
161,843
-
6,795,480
7,678,570
161,843
-
7,840,413
12,087,810
336,400
-
12,424,210
6,798,040
29,414
-
6,827,454
4,010,518
198,089
(49,481)
4,159,126
22,896,368
563,903
(49,481)
23,410,790
6,460,660
336,334
-
6,796,994
2,275,201
292,651
-
2,567,852
2,660,323
293,051
(16,186)
2,937,188
11,396,184
922,036
(16,186)
12,302,034
11,500,184
(358,133)
(33,295)
11,108,756
$ 19,178,754
$ (196,290)
$ (33,295)
$ 18,949,169
Depreciation was charged to governmental functions as follows:
General government $ 73,932
Public safety 103,607
Public works 373,469
Culture and recreation 281,984
Fire and rescue 83,607
Internal service 5,437
Total Governmental Activities Depreciation Expense $ 922,036
53
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
A summary of changes in business -type activities capital assets for the year end
was as follows:
Beginning
Disposals /
Ending
Balances
Increases
Reclassifications
Balances
Capital assets, not being depreciated:
Land
$ 496,857
$ 10
$ - $
496,867
Construction in progress
11,545,501
1,831,709
-
13,377,210
Total capital assets not being depreciated
12,042,358
1,831,719
-
13,874,077
Capital assets, being depreciated:
Infrastructure
29,561,571
717,718
-
30,279,289
Buildings and improvements
865,245
-
-
865,245
Machinery and equipment
2,169,446
149,070
-
2,318,516
Total capital assets being depreciated
32,596,262
866,788
-
33,463,050
Less accumulated depreciation
Infrastructure
14,989,534
816,299
-
15,805,833
Buildings and improvements
523,160
51,855
-
575,015
Machinery and equipment
1,550,658
133,101
-
1,683,759
Total accumulated depreciation
17,063,352
1,001,255
-
18,064,607
Net capital assets being depreciated
15,532,910
(134,467)
-
15,398,443
Total Capital Assets
$ 27,575,268
$ 1,697,252
$ - $
29,272,520
Depreciation was
charged to business -type activities as follows:
Water
$ 380,564
Sewer
382,003
Electric
224,359
Other
14,329
Total Business
-type Activities Depreciation
Expense
$ 1,001,255
54
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Contintled
September 30, 2019
A summary of changes in component unit (4A Component Unit) capital assets for
the year end was as follows:
Beginning
Retirements/ Ending
Balances
Additions
Reclassifications Balances
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
329,865
38,231
- 368,096
Furniture and fixtures
17,298
4,363
- 21,661
Total accumulated depreciation
347,163
42,594
- 389,757
Net capital assets being depreciated
774,584
(42,594)
- 731,990
Total Capital Assets
$ 774,584
$ (42,594)
$ - $ 731,990
The 4A Component Unit recognized depreciation expense of $42,594 during the
year ended September 30, 2019.
55
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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.
Beginning
Balance
Governmental Activities:
Bonds, notes and other
payables:
General Obligation Bonds
$ 1,197,300 $
Certificates of Obligation
2,510,400
Less deferred amounts:
For issuance premiums
94,410
Amortization/
Additions Payments Refunding-
- $ (392,800) $ - $
1,535,000 (241,600) (1,575,000)
100,753 (26,349) 1635 753 (660 749) (1575 000)
Amounts
Ending
Due within
Balance
One Year
804,500
$ 410,900
2,228,800
248,900
168,814 -
Other liabilities:
Capital leases payable 350,959 - (117,936) - 233,023 43,716
Total Governmental
Activities $ 4,153,069 $ 1,635,753 $ (778,685) $ (1,575,000) $ 3,435,137 $ 703,516
Long-term liabilities due in more than one year $ 2,731,621
Business -Type Activities:
General Obligation Bonds $
1,452,700 $
- $
(477,200)
$
- $
975,500
$
499,100
Certificates of Obligation
18,564,600
-
(328,400)
-
18,236,200
331,100
Less deferred amounts:
For issuance premiums
1,320,016
-
(100,586)
-
1,219,430
-
21,337,316
-
(906,186)
-
20,431,130
830,200
Other liabilities:
Capital leases payable
55,346
-
(55,346)
-
-
-
Total Business -Type
Activities $
21,392,662 $
- $
(961,532)
$
- $
20,431,130
$
830,200
Long-term liabilities due in
more than one year
$
19,600,930
Component Units (4A Fund)
Notes payable $
308,495 $
- $
(308,495)
$
- $
-
$
-
$
308,495 $
- $
(308,495)
$
- $
-
$
-
Long-term liabilities due in
more than one year
$
-
56
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
Long-term debt at year end was comprised of the following debt issues:
Governmental
Activities
General Obligation Bonds:
$3,495,000 General Obligation Refunding Bond, Series 2012, due in
installments through 2021, interest at 2% to 3% $ 314,600 $
$2,535,000 General Obligation Refunding Bond, Series 2016, due in
installments through 2021, interest at 2% to 4% 489,900
Total General Obligation Bonds $ 804,500 $
Certificates of Obligation:
$1,750,000 Certificates of Obligation, Series 2007,
Business -
Type
400,400 $ 715,000
575,100 1,065,000
975,500 $ 1,780,000
due in annual installments through 2027, interest at 4.4%
$
302,600
$
587,400
$
890,000
$4,260,000 Certificates of Obligation, Series 2013,
due in annual installments through 2033, interest at 2% to 3.7%
391,200
2,868,800
3,260,000
$5,870,000 Certificates of Obligation, Series 2015,
due in annual installments through 2035, interest at 3.4% to 5.5%
-
5,540,000
5,540,000
$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
$1,535,000 Certificates of Obligation, Series 2019,
due in annual installments through 2026, interest at 3% to 4.75%
1,535,000
-
1,535,000
Total Certificates of Obligation
$
2,228,800
$
18,236,200
$
20,465,000
Plus deferred amounts:
Issuance premium
$
168,814
$
1,219,430
$
1,388,244
Total Deferred Amounts
$
168,814
$
1,219,430
$
1,388,244
Capital Leases Payable:
$435,000 Capital lease payable to financial institution, due in annual
installments of $51,535 through 2024, interest at 3.346% $ 233,023 $ - $ 233,023
Total Capital Leases Payable $ 233,023 $ - $ 233,023
Total Long-term Liabilities $ 3,435,137 $ 20,431,130 $ 23,866,267
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.
6YA
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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,
2020
2021
Governmental Activities
Principal Interest
$ 410,900 $ 27,824
393,600 13,929
Business -Type Activities
Principal Interest
$ 499,100 $ 33,476
476/400 16,746
$ 804,500 $ 41,753 $ 975,500 $ 50,222
Combination Tax and Revenue Certificates of Obligations
Year ending
Governmental Activities
September 30,
Principal
Interest
2020
$ 248,900
$ 82,794
2021
256,200
76,725
2022
268,500
66,563
2023
281,400
55,908
2024
287,000
44,743
2025
299,300
33,236
2026
313,900
20,982
2027
76,800
13,024
2028
28,800
9,768
2029
30,600
8,400
2030
31,800
6,870
2031
33,600
5,280
2032
35,400
3,600
2033
36,600
1,830
2034
-
-
2035
-
-
2036
-
-
2037
-
-
$
2,228,800 $
Business -Type Activities
Principal Interest
331,100
408,800
616,500
633,600
658,000
675,700
701,100
998,200
1,086,200
1,124,400
1,173,200
1,221,400
1,269,600
1,323,400
1,420,000
1,475,000
1,535,000
1,585,000
706,516
694,655
679,742
660,427
640,327
618,519
593,113
566,321
526,357
482,800
436,574
387,920
337,338
284,626
229,713
173,656
115,344
63,400
429,724 $ 18,236,200 $ 8,197,346
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, 2019
Capital Leases
Year ending
Governmental Activities
September 30,
Principal
Interest
2020
$ 43,716
$ 7,819
2021
45,179
6,357
2022
46,690
4,845
2023
48,252
3,283
2024
49,186
1,668
$ 233,023
$ 23,972
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 $379,697
and $390,840, respectively.
F. Other Long-term Liabilities
The following is a summary of changes in the City's other long-term liabilities for
the year ended. In general, the City uses the general fund to liquidate
governmental activities compensated absences.
Amounts
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental Activities:
Compensated Absences $ 164,899 $ 14,175 $ - $ 179,074 $ 161,167
Compensated Absences in internal service funds 44,343 - (10,418) 33,925 30,533
Total Governmental Activities $ 209,242 $ 14,175 $ (10,418) $ 212,999 $ 191,700
Business -Type Activities:
Compensated Absences $ 137,951 $ - $ (5,074) $ 132,877 $ 119,589
Total Business -Type Activities $ 137,951 $ - $ (5,074) $ 132,877 $ 119,589
G. 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
59
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
borrowers. Accordingly, the bonds are not reported as liabilities in the City's
financial statements.
H. Advance Refunding
On July 1, 2019, the City issued $1,535,000 in general obligation refunding bonds
with an interest rate of 2 - 4%. The proceeds were used to advance refund $1,575,000
of an outstanding 2009 Combination Tax and Revenue Certificate of Obligation
which had an interest rate of 4% - 4.75%%. The net proceeds of $1,575,196 (after
payment of $57,213 in issuance costs and $3,344 deposited into the debt service
fund) were deposited with an escrow agent to provide funds for the future debt
service payment on the refunded bonds. As a result, the former 2009 obligations are
considered defeased, and the liability for those certificates have been removed from
the statement of net position.
The reacquisition price exceeded the net carrying amount of the old debt by $196.
This amount was considered immaterial, and was therefore expensed rather than
deferred and amortized. This advance refunding reduced the City's total debt
service payments by $126,040 and resulted in an economic gain (difference between
the present values of the debt service payments on the old and new debt) of
$117,778.
I. 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 $12,037 and $20,977, respectively. Current year amortization
expense for governmental and business -type activities totaled $7,250 and $12,725,
respectively.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
J. Interfund Transactions
Amounts transferred between funds relate to amounts collected, various capital
expenditures, annual funding, and debt payments.
Transfer out:
General
Debt Service
Water, sewer, & electric
Transfer In
Capital Internal
General Projects Service Fund
$ - $ 675,000 $ 530,619
129,352 - -
681,175 - 1,238,112
Tnfa1
l;LUS,bly
129,352
1,919,287
$ 810,527 $ 675,000 $ 1,768,731 $ 3,254,258
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, 2019:
Paid by:
General
Enterprise
Received by:
Internal Service
$ 530,619
1,238,112
$ 1,768,731
The compositions of interfund due to/from balances as of the year ended September
30, 2019 were as follows:
Receivable fund:
Payable fund: Enterprise
General $ 91,260
$ 91,260
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.
61
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
K. 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
Tourism
Library
Public safety
Debt service
Capital projects
Parks
Streets
Employee benefits
Restricted
$ 10,003 * $
49,805 *
98,348
61,134 *
476,181
1,628,718
8,587
562,051
Committed
- 30,868
$ 2,894,827 $ 30,868
* Restricted by enabling legislation
V. OTHER INFORMATION
A. Risk Management
The City is exposed to various risks of loss related to torts; theft of, damage to and
destruction of assets, errors and omissions; and natural disasters for which the City
participates along with 2,800 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
62
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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.
The State of Texas' environmental agency (TCEQ) is pursuing an enforcement
action against the City of Sanger to address wastewater compliance issues related to
the City of Sanger's discharge permit. Sanger has provided TCEQ with
counterproposal language that seeks credit for the City's proactive response to
previous wastewater compliance issues, and TCEQ is expected to respond in the
coming months to bring the enforcement matter to a close. The City anticipates
resolution of the enforcement action without significant burden in light of the City's
ongoing commitment to compliance efforts and its substantial investments to date
to improve and maintain the City's wastewater infrastructure. The estimated range
of potential liability to the City for related TCEQ penalties is between $0 to $64,500.
C. Construction commitments
The government has active construction projects as of September 30, 2019. The
projects include street construction and improvements, sewer plant and the
construction of additional water lines and repairs.
63
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
At year end the government's commitments with contractors are as follows:
Project
McReynolds Road Reconstruction
McReynolds Road Reconstruction
Server Consolidation
FM 455 Relocation of Utilities
Sewer 455/Lois
New Sewer Plant
New Sewer Plant
Railroad lift station
Railroad lift station
D. Arbitrage
Remaining
Vendor
Commitment
Pacheco Koch, LLC
$ 4,675
HRM Land Acquisition
397
Project Total
5,072
Austin Lane Technology
15,650
Dannenbaum Engineering
152,016
D&S Engineering
4,630
Alan Plummer Associates
23,073
Felix Construction
524,434
Anixter Inc.
285
Project Total
547,792
Perkins Engineering
9,332
Alan Plummer Associates
135,850
Project Total
145,182
Total
$ 870,342
The Tax Reform Act of 1986 instituted certain arbitrage consisting of complex
regulations with respect to issuance of tax-exempt bonds after August 31, 1986.
Arbitrage regulations deal with the investment of tax-exempt bond proceeds at an
interest yield greater than the interest yield paid to bondholders. Generally, all
interest paid to bondholders can be retroactively rendered taxable if applicable
rebates are not reported and paid to the Internal Revenue Service at least every five
years for applicable bond issues. Accordingly, there is the risk that if such
calculations are not performed correctly, a substantial liability to the City could
result. The City does anticipate that it will have an arbitrage liability and performs
annual calculations to estimate this potential liability. The City will also engage an
arbitrage consultant to perform the calculations in accordance with Internal
Revenue Service's rules and regulations if indicated.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
E. Defined Benefit Pension Plans
1. Plan Description
The City of Sanger, Texas participates as one of 887 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.
Nee
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
Plan provisions for the City were as follows:
Employee deposit rate
Matching ratio (city to
employee)
Years required for vesting
Service retirement eligibility
(expressed as age / years of
service)
Updated service credit
Annuity increase (to retirees)
Plan Year 2018
6.0%
2 to 1
5
60/5, 0/20
100% Repeating Transfers
0% of CPI
Employees covered by benefit terms
Plan Year 2017
6.0%
2 to 1
5
60/5, 0/20
100% Repeating Transfers
0% of CPI
At the December 31, 2018 valuation and measurement date, the following
employees were covered by the benefit terms:
Inactive employees or beneficiaries currently receiving benefits
19
Inactive employees entitled to but not yet receiving benefits
28
Active employees
70
Total
117
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 7.79% and 7.91% in calendar years 2018 and 2019, respectively. The City's
contributions to TMRS for the year ended September 30, 2019, were $320,019, and
were equal to the required contributions.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
4. Net Pension Liability
The City's Net Pension Liability (NPL) was measured as of December 31, 2018, 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, 2018 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 and 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.
Gy7
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
Plan assets are managed on a total return basis with an emphasis on both capital
appreciation as well as the production of income in order to satisfy the short-term
and long-term funding needs of TMRS.
The long-term expected rate of return on pension plan investments was determined
using a building-block method in which best estimate ranges of expected future real
rates of return (expected returns, net of pension plan investment expense and
inflation) are developed for each major asset class. These ranges are combined to
produce the long-term expected rate of return by weighting the expected future real
rates of return by the target asset allocation percentage and by adding expected
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 2019 are summarized in the following table:
Asset Class
Target Allocation
Long -Term Expected Real
Rate of Return (Arithmetic)
Domestic Equity
17.5%
4.30%
International Equity
17.5%
6.10%
Core Fixed Income
10.0%
1.00%
Non -Core Fixed Income
20.0%
3.39%
Real Return
10.0%
3.78%
Real Estate
10.0%
4.44%
Absolute Return
10.0%
3.56%
Private Equity
5.0%
7.75%
Total
100.0%
Discount Rate:
The discount rate used to measure the Total Pension Liability was 6.75%. The
projection of cash flows used to determine the discount rate assumed that employee
and employer contributions will be made at the rates specified in statute. Based on
that assumption, the pension plan's Fiduciary Net Position was projected to be
available to make all projected future benefit payments of current active and
inactive employees. Therefore, the long-term expected rate of return on pension
plan investments was applied to all periods of projected benefit payments to
determine the Total Pension Liability.
M.
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
Changes in the Net Pension Liability:
Balance at 12/31/17
Changes for the year:
Service Cost
Interest (on the Total Pension Liab.)
Difference between expected and
actual experience
Contributions — employer
Contributions — employee
Net investment income
Benefit payments, including
refunds of emp. contributions
Administrative expense
Other changes
Net changes
Balance at 12/31/18
Total Pension
Liability (a)
$ 9,494,473
462,521
648,013
93,857
(251,071)
953,320
Plan Fiduciary Net
Position (b)
$ 8,819,595
294,606
226,912
(264,466)
(251,071)
(5,106)
(267)
608
$ 10,447,793 $ 8,820,203
Net Pension
Liability (a) — (b)
$ 674,878
462,521
648,013
93,857
(294,606)
(226,912)
264,466
5,106
267
952,712
$ 1,627,590
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
5.75%
Current Single Rate
Assumption 6.75%
1% Increase
7.75%
$ 3,289,872
$ 1,627,590
$ 270,354
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.
5. Pension Expense and Deferred Outflows of Resources Related to Pensions
For the year ended September 30, 2019, the City recognized pension expense of
$477,395.
M
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
At September 30, 2019, the City reported deferred outflows and deferred inflows of
resources related to pensions from the following sources:
Difference between projected and
investment earnings
Changes in actuarial assumptions
Differences between expected and actual
economic experience
Contributions subsequent to the
measurement date
Total
Deferred Outflows
of Resources
$ 458,439
17,273
39,763
245,004
$ 760,479
The City reported $245,004 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, 2020.
Other amounts reported as deferred outflows of resources related to pensions will
be recognized in pension expense as follows:
Year ended December 31:
2019
$ 168,074
2020
74,041
2021
74,706
2022
189,075
2023
9,579
Thereafter
-
$ 515,475
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,
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.
70
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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, 2018 valuation and measurement date, the following
employees were covered by the benefit terms:
Inactive employees or beneficiaries currently receiving benefits
10
Inactive employees entitled to but not yet receiving benefits
7
Active employees
70
Total
87
The City's retiree contribution rates to the TMRS SDBF for the years ended 2019,
2018 and 2017 are as follows:
Annual
Actual
Required
Contribution
Percentage of
Plan/
Contribution
Made
ARC
Calendar Year
(Rate)
(Rate)
Contributed
2016
0.01%
0.01%
100.0%
2017
0.01%
0.01%
100.0%
2018
0.01%
0.01%
100.0%
The City's contributions to the TMRS SDBF for the years ended 2019, 2018, and 2017
were $406, $371 and $355, respectively, which equaled the required contributions
each year.
71
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
Total OPEB Liability
The City's Postemployment Benefits Other Than Pensions Liability (OPEB) was
measured as of December 31, 2018, 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, 2018 actuarial valuation was
determined using the following actuarial assumptions:
Inflation
Overall payroll growth
Discount rate
Retirees' share of benefit -related costs
Administrative expenses
2.5% per year
3.5% to 10.5%, including inflation per
year
3.71 %
$0
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.
Discount Rate:
The discount rate used to measure the Total OPEB Liability was 3.71%. The
discount rate was based on the Fidelity Index's "20-Year Municipal GO AA Index'
rate as of December 31, 2018.
72
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
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 3.71%, 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
(2.71%) or 1-percentage-point higher (4.71%) than the current rate:
1% Decrease
(2.71%)
$ 123,820
Current Single Rate 1% Increase
Assumption 3.71% (4.71%)
$ 102,299 $ 85,333
Changes in the Total OPEB Liability:
Total OPEB
Liability
Balance at 12/31/17
$ 107,167
Changes for the year:
Service Cost
9,076
Interest
3,691
Change in benefit terms
-
Difference between expected and
actual experience
(9,264)
Changes of assumptions
(7,993)
Benefit payments
(378)
Net changes
(4,868)
Balance at 12/31/18
$ 102,299
Pension Expense and Deferred Outflows of Resources and Deferred Inflows of
Resources Related to Pensions
For the year ended September 30, 2019, the City recognized OPEB expense of
$11,691.
73
City of Sanger, Texas
NOTES TO FINANCIAL STATEMENTS, Continued
September 30, 2019
At September 30, 2019, 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
Changes in assumptions
Contributions subsequent to
measurement date
Total
Deferred Outflows Deferred Inflows
of Resources of Resources
$ - (8,037)
- (70)
310 -
$ 310 $ (8,107)
The City reported $310 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, 2020.
Other amounts reported as deferred outflows of resources related to pensions will
be recognized in pension expense as follows:
Year ended December 31:
2019
2020
2021
2022
2023
Thereafter
G. Subsequent Events
$ (1,076)
(1,076)
(1,076)
(1,076)
(1,076)
(2,727)
$ (8,107)
There were no material subsequent events through January 2, 2020, the date the
financial statements were available to be issued.
74
REQUIRED SUPPLEMENTARY INFORMATION
75
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, 2019
Revenues
Property tax
Sales tax
Franchise and local taxes
License and permits
Charges for services
Fire and rescue
Contributions and donations
Intergovernmental
Fines and forfeitures
Investment income
Other revenue
Total Revenues
Expenditures
Current:
General government
Police department
Municipal court
Fire and EMS
Parks and recreation
Public works
Debt service:
Principal
Interest
Capital outlay
Original
Budget
Variance with
Final Budget Actual Final Budget
$ 3,631,116 $
3,631,116
$ 3,752,626 $
121,510
905,000
905,000
914,748
9,748
235,000
235,000
283,573
48,573
363,070
363,070
285,699
(77,371)
961,516
961,516
1,006,447
44,931
776,877
776,877
662,905
(113,972)
-
-
1,019
1,019
-
-
122,962
122,962
112,000
112,000
80,325
(31,675)
4,000
4,000
11,441
7,441
77,500
77,500
410,313
332,813
7,066,079
7,066,079
7,532,058
465,979
1,193,472
1,193,472
1,677,483
(484,011)
1,516,658
1,516,658
1,509,652
7,006
199,095
199,095
180,179
18,916
1,496,017
1,496,017
1,0132,738
463,279
631,058
621,664
534,881
86,783
1,048,005
1,048,005
888,382
159,623
117,890
117,890
117,936
(46)
11,463
11,463
11,417
46
324,222
333,616
228,024
105,592
Total Expenditures
Revenues Over (Under) Expenditures $
6,537,880
528,199 $
6,537,880
6,180, 692
528,199 $ 1,351,366 $
357,188
823,167
AN
City of Sanger, Texas
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCE - BUDGET AND ACTUAL- GENERAL FUND (Page 2 of 2)
For the Year Ended September 30, 2019
Original
Variance with
Budget
Final Budget
Actual
Final Budget
Other Financing Sources (Uses)
Transfers in
$ 831,020
$ 831,020
$ 810,527
$ (20,493)
Transfers (out)
(1,284,320)
(1,284,320)
(675,000)
609,320
Insurance recoveries
-
-
22,149
22,149
Total Other Financing Sources (Uses)
(453,300)
(453,300)
157,676
610,976
Net Change in Fund Balance
$ 74,899
$ 74,899
1,509,042
$ 1,434,143
Beginning fund balance
4,928,737
Ending Fund Balance
$ 6,437,779
Notes to Required Supplementary Information
1. Annual budgets are adopted on a basis
consistent with
generally accepted
accounting principles (GAAP).
77
City of Sanger, Texas
SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS
Years ended December 31,
Total pension liability
Service cost
Interest (on the Total Pension Liability)
Changes in benefit terms
Differences between expected and actual
experience
Changes of assumptions
Benefit payments, including refunds of
participant contributions
Net change in total pension liability
Total pension liability - beginning
Total pension liability - ending (a)
Plan fiduciary net position
Contributions - employer
Contributions - members
Net investment income
2018 2017 2016
$ 462,521 $ 438,324 $ 408,943 $
648,013 590,632 545,333
93,857 38,794 (78,516)
(251,071) (208,451) (230,245)
953,320 859,299 645,515
�►�IIiN
369,950
521,853
(89,808)
47,847
(260,514)
$ 10,447,793 $ 9,494,473 $ 8,635,174 $ 7,989,659
$ 294,606
$ 276,169 $
240,177 $
231,097
226,912
217,171
202,113
195,568
(264,466)
1,040,205
461,955
9,831
Benefit payments, including refunds of
participant contributions
(251,071)
(208,451)
(230,245)
(260,514)
Administrative expenses
(5,106)
(5,387)
(5,214)
(5,988)
Other
(267)
(273)
(281)
(296)
Net change in plan fiduciary net position
608
1,319,434
668,505
169,698
Plan fiduciary net position - beginning
8,819,595
7,500,161
6,831,656
6,661,957
Plan fiduciary net position - ending (b) $ 8,820,203 $ 8,819,595 $ 7,500,161 $ 6,831,655
Fund's net pension liability - ending (a) - (b) $ 1,627,590 $ 674,878 $ 1,135,013 $ 1,158,004
Plan fiduciary net position as a percentage
of the total pension liability 84.42% 92.89% 86.86% 85.51%
Covered payroll $ 3,781,589 $ 3,619,524 $ 3,368,554 $ 3,259,471
Fund's net position as a percentage of
covered payroll 43.04% 18.65% 33.69% 35.53%
Notes to schedule:
1) This schedule is presented to illustrate the requirement to show information for ten years. However, until a
full ten-year trend is compiled, only available information is shown.
2014 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%
79
City of Sanger, Texas
SCHEDULE OF EMPLOYER CONTRIBUTIONS TO PENSION PLAN
Years Ended:
9/30/2019 9/30/2018 9/30/2017 9/30/2016
Actuarially determined employer
contributions
$ 320,019
$
287,348
$
266,753
$
247,432
Contributions in relation to the
actuarially determined contribution
$ 320,019
$
287,348
$
266,753
$
247,432
Contribution deficiency (excess)
$ -
$
-
$
-
$
-
Annual covered payroll
$ 4,060,365
$
3,706,912
$
3,549,724
$
3,475,512
Employer contributions as a percentage
7.88%
7.75%
7.51%
7.12%
of covered 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.
NOTES TO SCHEDULE OF EMPLOYER CONTRIBUTIONS TO PENSION PLAN
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
25 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.
9/30/2015 i
$ 225,111
$ 225,111
$ 3,130,346
7.19%
City of Sanger, Texas
SCHEDULE OF CHANGES IN POSTEMPLOYMENT BENEFITS OTHER THAN
PENSION (OPEB) LIABILITYAND RELATED RATIOS
TEXAS MUNICIPAL RETIREMENT SYSTEM
Years ended December 31,
Total OPEB liability
Service cost
Interest (on the Total Pension Liability)
Changes in benefit terms
Differences between expected and actual experience
Changes of assumptions
Benefit payments, including refunds of participant contributions
Net changes
Total OPEB liability - beginning
Total OPEB liability - ending (a)
2018
2017 1
$ 9,076 $
7,601
3,691
3,432
(9,264)
-
(7,993)
9,310
(377)
(363)
(4,867)
19,980
107/166
87,186
$ 102,299 $
107,166 2
Covered payroll $ 3,781,859 $ 3,619,524
Total OPEB Liability as a percentage of covered payroll 2.70% 2.96%
Notes to schedule:
1 This schedule is presented to illustrate the requirement to show information for ten years. However,
until a full ten-year trend is compiled, only available information is shown.
2 No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB statement No. 75 to
pay related benefits.
OTHER SUPPLEMENTARY INFORMATION
IM
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, 2019
Water
Sewer
Electric
Fleet Services
Operating Revenues
Charges for services $
2,067,382 $
1,973,358
$ 7,784,223
$ -
Connection fees
-
-
62,510
-
Tap fees
210,050
284,500
-
-
Other revenue
-
-
-
-
Total Operating Revenues
2,277,432
2,257,858
7,846,733
-
Operating Expenses
Salaries and wages
647,152
317,640
1/112,566
-
Contracted services
35,268
26,333
259,723
-
Utilities
153,118
148,495
2,344
-
Materials and supplies
33,719
50,096
67,536
-
Water and electric purchases
68,276
-
5,419,077
-
Repairs and maintenance
211,988
141,737
202,327
-
Depreciation
380,564
382,003
224,359
66
Total Operating Expenses
1,530,085
1,066,304
7,287,932
66
Operating Income (loss)
747,347
1,191,554
558,801
(66)
Nonoperating Revenues (Expenses)
Investment income
-
-
-
-
Interest expense
-
-
-
-
Nonoperating Revenues (Expenses)
-
-
-
-
Income Before Transfers
747,347
1,191,554
558,801
(66)
Transfers (out)
-
-
(65,556)
-
Change in Net Position $
747,347 $
1,191,554
$ 493,245
$ (66)
ME
Administration Total
$ -
-
-
212,551
$ 11,824,963
62,510
494,550
212,551
212,551
12,594,574
-
2,077,358
-
321,324
-
303,957
-
151,351
-
5,487,353
-
556,052
14,263
1,001,255
14,263
9,898,650
198,288
2,695,924
169,808
169,808
(681,277)
(681,277)
(511,469)
(511,469)
(313,181) 2,184,455
(615,619) (681,175)
$ (928,800) $ 1,503,280
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