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2005 Annual Financial ReportCITY OF BANGER FINANCIAL STATEMENTS SEPTEMBER 30, 2005 TABLE OF CONTENTS PAG E # INDEPENDENT AUDITOR'S REPORT 1 CITY OFFICIALS 2 REQUIRED SUPPLEMENTARY INFORMATION: Management's Discussion and Analysis 3-8 BASIC FINANCIAL STATEMENTS: Government -wide Financial Statements: Statement of Net Assets 9 Statement of Activities 10 Fund Financial Statements: Balance Sheet -Governmental Funds 11 Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds 12 Statement of Net Assets - Proprietary Fund 13 Statement of Revenues, Expenditures and Changes in Fund Net Assets - Proprietary Fund 14 Statement of Cash Flows - Proprietary Fund 15 Notes to Financial Statements 16-29 REQUIRED SUPPLEMENTARY INFORMATION: Budgetary Comparison Schedule -General Fund 30 Budgetary Comparison Schedule -Special Revenue Fund 31 Schedule of Pension Plan Funding Progress 32 OTHER SUPPLEMENTARY INFORMATION: Comparative Schedule of Revenues, Expenditures and Changes in Fund Balance -General Fund 33 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance - Special Revenue Fund 34 Comparative Schedule of Revenues, Expenses, and Changes in Net Assets - Proprietary Fund 35 Combining Schedule of Revenues & Expenses - Proprietary Fund 36 Schedules of Future Debt Service Requirements: General Long -Term Debt 37 Proprietary Fund 38 Schedule of Restricted Cash Accounts 39 Schedule of Property Taxes 40 Home Grant Receipts & Expenditures 41 REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED UPON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAL AUDITING STANDARDS William C. Spore, P.C. Certified Public Accountants Independent Auditor's Report To the City Council City of Sanger, Texas I have audited the accompanying financial statements of the governmental activities, business -type activities and major funds of the City of Sanger, Texas as of September 30, 2005, and for the year then ended, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of City's management. My responsibility is to express an opinion on these general purpose financial statements based upon my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business -type activities and major funds of the City of Sanger, Texas at September 30, 2005 and the changes in financial position and cash flows, where applicable, of those activities for the year then ended in conformity with accounting principles generally accepted in the United States of America, In accordance with Government Auditing Standards, I have also issued my report dated March 15, 2006 on my consideration of the City of Sanger's internal control over financial reporting and my tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of the audit. The management's discussion and analysis, the budgetary comparison schedule for the general and special revenue funds and the pension plan funding progress are not a required part of the basic financial statements, but are supplementary information required by GASB. I have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, I did not audit the information and express no opinion on it. My audit was conducted for the purpose of forming an opinion on the City's basic financial statements. The other supplementary information schedules described in the accompanying table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements of the City of Sanger, Texas. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion is fairly presented in all material respects in relation to the basic financial statements taken as a whole. William C. Spot-e, P.C. March 15, 2006 3950 Highway 360, Suite 102 # Grapevine, TX 76051 # 817/421-6619 CITY OF SANGER CITY OFFICIALS September 30, 2005 ELECTED OFFICIALS MAYOR MAYOR PRO TEM COUNCILMEMBERS APPOINTED OFFICIALS C�i�=[�3��71�'//��I3>t1►�>[��i7►TLP►IL��:7 ►frPJPI� • _ __ • �73�11� CITY ATTORNEY Tommy Kincaid Glenn Ervin Joe Higgs Mike James Mike Lawler Robert Patton Jack Smith Rosalie Chavez Danny Spindle &Ken Hartless Nichols, Jackson, Dillard, Hager & Smith SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 2 CITY OF SANGER MANAGEMENT'S DISCUSSION AND ANALYSIS USING THIS ANNUAL REPORT As management of the City of Sanger, 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, 2005. The information provided here should be used in conjunction with the basic financial statements. This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: (1) government -wide financial statements, (2) fund financial statements and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Reporting the City as aWhole-Government-wide Financial Statements The Statement of Net Assets and the Statement of Activities The government -wide financial statements are designed to provide readers with a broad overview of the City's finances in a manner similar to a private -sector business. The Statement of Net Assets (page 8) presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities (page 9) presents information showing how the City's net assets changed during the fiscal year. All changes in net assets are reported when the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused compensated absences). Capital grant funds are reported as revenues in the Statement of Activities. The City provides two types of activities -Governmental type activities and Business type activities: • Governmental type activities -Most of the City's basic services are reported here, including police, municipal court, animal control, fire, library, community center, engineering, enforcement/inspection, parks, public works, sanitation, senior center, swimming pool and general administration. Property taxes, sales taxes, franchise fees, permit revenues and municipal court fines finance most of these activities. 3 • Business Type Activities - The City charges a fee to customers to help cover all or most of the cost of certain services it provides. The City's electric, water and sewer system is reported here. Reporting the City's Most Significant Funds Fund Financial Statements The Fund financial statements begin on page 11 and provide detailed information about the most significant funds -not the City as a whole. Some funds are required to be established by State law and by bond covenants. However, the City Council may establish other funds to help it control and manage money for particular purposes. The City's kinds of funds - governmental and proprietary - use different accounting approaches. • Governmental funds -Most of the City's basic services are reported in governmental funds, which focus on how money flows into and out of the funds and the balances left at the end of the year that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in a reconciliation at the bottom of the fund financial statements. • Proprietary funds -When the City charges customers for the services it provides, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Activities. In fact the City's water and sewer fund are the same as the business -type activities we report in the government -wide statements but we provide more detail and additional information, such as cash flows, for proprietary funds. Notes to Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The notes to the financial statements begin on page 16. GOVERNMENT -WIDE FINANCIAL ANALYSIS The City's net assets are as follows: Current &Other Assets Capital Assets Total Assets Long -Term Debt Other Liabilities Total Liabilities Invested In Capital Net of Debt Restricted Unrestricted Total Net Assets GOVERNMENT -WIDE NET ASSETS GOVERNMENTAL AC[ IVITIES BUSINESS -TYPE ACTIVITIES 2005 2004 2005 2004 $ 1,416,146 $ 1,719,008 $ 2,981,082 $ 2,779,118 $ 51420,706 51097,312 11,509,573 11,200,981 61836,852 61816,320 14,4901655 1319801099 31365,025 31787,260 31995,606 41194,978 730,744 779,478 19401,814 11309,123 41095,769 41566,738 51397,420 51504,101 TOTAL PRIMARY GOVERNMENT 2005 2004 4,397,228 16,9301279 21,327507 , 7,3601631 2,1321558 9,493,189 $ 4,498,126 16.298.293 20,796,419 71982,238 21088,601 101070, 839 2,257,550 1,941,592 7,182,077 6,794,332 9,439,627 8,735,924 663,067 592,786 507,779 418,564 11170,846 110119350 (179,534) (284,796) 1,4039379 11263,102 11223,845 978,306 $ 21741,083 $ 21249,582 $ 91093,235 $ 81475,998 $ 110834,318 $ 10,725,580 At September 30, 2005 the City's assets exceeded its liabilities by $11,834,318, an increase of $1)108)738 from the prior year. The largest portion of the City's net assets is its investment in capital assets, (land, building, equipment and infrastructure,) These capital assets represent 79% of the City's total assets. The City uses these capital assets to provide services to the City's citizens, consequently these assets are not available for future spending, Analysis of City's Operations The following table provides a summary of the City's operations for the year ended September 30, 2005, with comparative totals for the year ended September 30, 2004, REVENUES Program Revenues: Charges for Services Operating Grants Capital Grants & Donations General Revenues: Property Taxes Sales & Beverage Taxes Franchise Taxes Hotel/Motel Taxes Interest Income Transfers TOTALREVENUES PROGRAM EXPENSES General Government Public Safety Streets & Sanitation Culture & Recreation Interest Expense Water & Sewer TOTALEXPENSES CHANGE IN NET ASSETS CHANGES IN NET ASSETS TOTAL PRIMARY GOVERNMENTAL ACTIVITIES BUSINESS -TYPE ACTIVITIES GOVERNMENT 2005 2004 2005 2004 2005 2004 $ 784,836 $ 767,841 $ 81250,418 $ 71165,151 $ 91035,254 $ 71932,992 136,709 155,375 - 136,709 155,375 17,273 0 0 204,454 17,273 204,454 1,732,907 848,987 304,033 11,514 56,475 54,889 3,947,623 367,655 1,306,619 1,004,804 581,453 195,591 WM 3, 456,122 11479,031 -- 11732,907 11479,031 288,164 1,161,666 683,304 546,912 2139634 2,893,680 7,457,613 7,457,613 6,135,353 6,135,353 367 ,655 1,306,619 1,004,804 5811453 1951591 7,4571613 10,913,735 288164 , 1,161,666 683,304 546,912 213,634 6,135,353 9,029,033 $ 491,501 617,237 $ 11002,663 $ 1,1081738 $ 1,732,696 5 Total revenues increased by 11.72% from 2004 with governmental activity revenues increasing 3.94% and proprietary fund user charges (revenues) increasing 13.12%. Total City-wide expenses increased by 20.87% from 2004 with governmental activity expenses increasing 19.44% and proprietary fund expenses increasing 21.55%. The City-wide revenues exceeded expenses by $1,108,738. GOVERNMENTAL FUND ANALYSIS The focus of the City's governmental fund is to provide information on 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 a measure of a government's net resources available for spending at the end of the fiscal year. The City's governmental funds include the general fund and the special revenue fund. The special revenue fund is used to account for the activities of the City's two blended component units; the Sanger Texas Industrial Development Corporation (4A) and the Sanger Texas Development Corporation (413) along with the Hotel/Motel tax funds received by the City. The 4A and 4B funds are controlled by the City Council of the City of Sanger and their revenues are restricted for economic development as described in its by-laws. The Hotel/Motel tax funds are collected by the local motel are used by the City to promote tourism. At September 30, 2005 the special revenue fund had a restricted fund balance of $849,850, The fund balance of the general fund decreased by $538,642 primarily due to capital outlays related to street projects included in the 2002 Bond package which were expended during the current fiscal year, The proceeds of the 2002 Bond program were included in fund revenues in fiscal year 2002 and are included in capital outlay each fiscal year as the funds are expended. A total of $629,713 of the 2002 Bond proceeds were used during 2005, with $43,857 of unspent bond proceeds still on hand at September 30, 2005. Property tax revenues increased by $234,334, a 15.79% increase. The assessed value of property in the City has increased 13.1570 from the prior year and has increased by $159,705,458 since 2002. Historically the City has only transferred funds from the proprietary fund to the general fund as funds were needed by the general fund. During 2005 budgeted transfers were $214,322 but actual transfers were only $54,889, Proprietary funds - The City's proprietary fund statements (electric, water and sewer fund) provide the same type of information found in the government -wide financial statements, but in more detail. The unrestricted balance of the proprietary fund increased by $140,277 to $1,403,379 at September 30, 2005. General Fund Budgetary Highlights The original budget for the general fund was amended by the City Council in March 2006. The amendments increased budgeted revenues and expenditures by $939,175, The amendments were made to more accurately reflect expenditures that were incurred during the fiscal year and paid from an increase in revenues over budgeted revenues and to reflect the carry over of $630,000 of 2002 Bond funds that were expended for street improvements in 2005. Actual revenues exceeded originally budgeted revenues by D265,496, Actual revenues included proceeds from new notes payable and capital leases of $75,869, which were not included in the original budget. Budgeted revenues included transfers from the proprietary fund of $214,322, The actual transfers from the proprietary fund were $54,889. Tax revenues (9.01%), charges for services (11.25%) police fines (0.41%) and license and permit (1.30%) revenues all exceeded the originally budgeted revenues. Total expenditures exceeded originally budgeted expenditures by $804,138 primarily due to street improvements of $629,713 made during the year which were paid from the 2002 Bond funds. As mentioned above, these expenditures were not included in the original budget. The special revenue 4A and 4B funds actual sales tax revenues exceeded budgeted revenues by $36,330 each due to increased sales tax collections. The 4B fund budgeted project expenditures totaled $152,050 for the fiscal year but actual project expenditures were only $42,436. These unspent funds have been added to the restricted fund balance and will be used in future years. CAPITAL ASSETS The City's investment in capital assets as of September 30, 2005 amounts to $16,930,278 (net of depreciation). The investment in capital assets includes land, buildings, equipment and infrastructure. Infrastructure includes streets, water and sewer systems. The City's capital assets are as follows: Land Construction in Process Infrastructure Buildings & Equipment TOTAL CAPITAL ASSETS AT YEAR-END (net of accumulated depreciation) GOVERNMENTAL ACTIVITIES 2005 2004 $ $ 3761840 BUSINESS -TYPE ACTIVITIES $ 312,164 $ 312,164 TOTALS 2005 2004 $ 6891004 689,004 $ 51420,705 $ 51097,312 $ 11,509,573 $ 11,200,981 $ 161930,278 $ 161298,293 Additional information on the City's capital assets can be found in Note 3. DEBT ADMINISTRATION The City added long-term debts during the year for the purchase of vehicles, electric department equipment and for accounting software upgrades. 7 Outstanding long-term debts are as follows: Certificates of Obligation Revenue Bonds Notes Payable Capital Leases Yarbrough Settlement Pay TOTAL OUTSTANDING DEBT AT YEAR-END GOVERNMENTAL ACTIVITIES BUSINESS -TYPE ACTIVITIES 2005 2004 2005 2004 TOTALS 2005 2004 $ 2,895,000 $ 3,130,000 $ 0 $ 0 $ 2,895,000 $ 3,130,000 0 0 41120,000 4,4051000 41120,000 41405,000 707,265 821,379 238,604 163,784 9459869 985,163 42,368 391536 96509 30,837 1389877 70,373 197,704 2391320 0 0 197,704 239,320 $ 3,842,337 $ 4,230,235 $ 4,455,113 $ 4,599,621 $ 8,297,450 $ 8,829,856 Additional information on the City's long-term debts can be found in Note 4. ECONOMIC FACTORS AND NEXT YEAR' S BUDGET Budgeted general fund revenues for fiscal year 2006 are $4,216,526, which is an increase of $882,954 from budgeted revenues for fiscal year 2005, The 2006 budgeted revenues includes transfers from the proprietary fund of $489,886, Proprietary fund 2006 budgeted revenues are $7,294,114, which is an increase of $823,436 over 2005 budgeted revenues. Budgeted connection fees (water and sewer tap fees and other connection fees) for 2005 are $825,000 while actual tap fees revenues for 2005 and 2004 were $740,417 and $713,096 respectively, The City historically has used tap fees for improvements to the water and sewer infrastructure systems, REQUEST FOR INFORMATION This financial report is designed to provide our citizens, customers, investors and creditors with a general overview of the City of Sanger, If you have questions about this report or need any additional information, contact the City Secretary at: 201 Bolivar Street, Sanger, TX. 76266 or at 940458-7930. CITY OF SANGER GOVERNMENT -WIDE STATEMENT OF NET ASSETS September 30, 2005 ASSETS CURRENT ASSETS Cash Accounts Receivable (net) Prepaid Expenses Inventory TOTAL CURRENT ASSETS NONCURRENT ASSETS Restricted Cash Bond Issue Costs (net) & Capitalized Interest Capital Assets: Land Construction in Process Infrastructure Buildings & Equipment Less - Accumulated Depreciation Total Capital Assets, Net of Accum. Depr. TOTAL NONCURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Accounts Payable & Accrued Expenses Deferred Revenues & Customer Deposits Interfund Payables Compensated Absences Revenue & Cert. of Obligation Bonds Payable Notes Payable Capital Leases Payable Yarbrough Settlement Payable TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES Revenue & Cert. of Obligation Bonds Payable Notes Payable Capital Leases Payable Yarbrough Settlement Payable TOTAL NONCURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS Invested in Capital Assets, net of Related Debt Restricted For: Debt Service Insurance Parks Hotel/Motel and Economic Development Unrestricted TOTAL NET ASSETS GOVERNMENTAL ACTIVITIES $ 13,927 $ 220,321 9,147 0 2431395 1,172,751 0 376,840 0 51124,801 2,614,431 (21695,366) 51420,706 61593,457 61836,852 193,683 9,943 (91961) 59,767 2501000 168,227 16,637 42,448 730,744 2,645,000 539,038 25,731 1551256 31365,025 41095,769 2,257,550 88,342 17,026 6,967 550,732 (179,534) $ 21741,083 BUSINESS TYPE ACTIVITIES 23,632 920,420 17,591 2701768 1,232,411 1,621,054 1271617 312,164 45,691 16,542,900 1,908,227 (7,299,409) 11,509,573 131258,244 141490,655 680,750 199,317 9,961 52,279 3001000 129,669 29,838 0 11401,814 3,820,000 108,935 66,671 0 3,995,606 5,397,420 7,182,077 507,779 0 0 0 1,403,379 $ 91093,235 TOTAL $ 37,559 11140,741 26,738 270,768 11475,806 2,793,805 127,617 ` 689,004 45,691 21,667,701 4,522,658 (9,994,775) 16,930,279 191851,701 21,327,507 874,433 209,260 0 112,046 550,000 297, 396 46,475 42,448 2,132,558 6,465,000 647,973 92,402 155,256 7,360,631 9,493,189 9,439,627 596,121 17,026 6,967 550,732 11223,845 $ 11,834,318 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 9 r 0 0000 d ! 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(9ILU05F- UdUtLf- F- 0 z Z CITY OF SANGER BALANCE SHEET GOVERNMENTALFUNDS September 30, 2005 GENERAL FUND ASSETS TOTAL SPECIAL GOVERNMENTAL REVENUE FUNDS Cash $ 372,236 $ 814,442 $ 1,186,678 Receivables: Sales & Beverage Taxes 35,412 35,408 70,820 Franchise Taxes 22,243 0 221243 Denton County -Fire Runs 16,565 0 16,565 Interest 21061 0 21061 Vendor Refunds 11865 0 11865 Due from Other Funds 91961 0 %961 Property Taxes 106,767 0 106,767 Prepaid Expenses 91147 0 91147 TOTAL ASSETS 576,257 8491850 11426,107 LIABILITIES Accounts Payable 1191620 0 1191620 Accrued Expenses 17,462 0 17,462 Deferred Revenues 116,710 0 116,710 TOTAL LIABILITIES 253,792 0 253,792 FUND BALANCES Reserved For: Capital Outlay 43,857 0 43,857 Debt Service 44,485 0 44,485 Insurance 17,026 17,026 Parks 61967 0 6,967 Prepaid Expenses 91147 0 91147 Hotel/Motel Fund 22,333 22,333 Economic Development 827,517 827,517 Designated For: Capital Outlay 185,064 0 185,064 Libarary 41938 41938 Parks 551972 55,972 Unreserved, Reported In: General Fund (44,991) 0 (44,991) TOTAL FUND BALANCES TOTAL LIABILITIES &FUND BALANCES 322,465 $ 576,257 $ 849,850 849,850 12172,315 $ 11426,107 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page -11 CITY OF SANGER RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET ASSETS September 30, 2004 Fund Balance Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the Fund Balance Sheet Property Taxes receivable are not available to pay for current period expenditures and therefore are deferred in the fund balance sheet Long term liabilities and not due and payable in the current period and therefore are not reported in the Fund Balance Sheet NET ASSETS OF GOVERNMENTAL ACTIVITIES 0 1,172,315 5,420,706 106,767 (3,958,705) 2,741,083 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page -11 CITY OF SANGER STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE = GOVERNMENTAL FUNDS For the Year Ended September 30, 2005 TOTAL GENERAL SPECIAL GOVERNMENTAL FUND REVENUE FUNDS REVENUES Property Taxes $ 11718,635 $ 0 $ 11718,635 Sales & Beverage Taxes 426,327 422,660 848,987 Franchise Taxes 304,033 0 304,033 Hotel/Motel Tax 0 11,514 11,514 Intergovernmental 148,015 0 148,015 Charges for Services 512,525 0 512,525 Fines 124,012 0 124,012 Licenses & Permits 148,299 0 148,299 Donations 51967 0 51967 Interest Income 38,061 18,414 56,475 TOTAL REVENUES 3,425,874 452,588 31878,462 EXPENDITURES General Government 3251528 21,041 346,569 Public Safety 11188,066 0 11188,066 Streets & Sanitation 625,573 0 625,573 Culture & Recreation 517,382 0 517,382 Capital Outlay 906,395 0 906,395 Debt Service: Principal 392,825 70,942 463,767 Interest 181,941 191051 200,992 TOTAL EXPENDITURES 41137,710 111,034 41248,744 EXCESS REVENUES OVER (UNDER) EXPENDITURES (711,836) 341,554 (370,282) OTHER FINANCING SOURCES (USES) Proceeds of Notes Payable 751869 0 751869 Transfer to/from Economic Development 42,436 (42,436) 0 Transfer from Proprietary Fund 54,889 0 54,889 TOTAL OTHER FINANCING SOURCES (USES) 173,194 (42,436) 130,758 EXCESS REVENUES OVER (UNDER) EXPENDITURES (538,642) 299,118 (239,524) FUND BALANCE - BEGINNING 861,107 550,732 11411,839 FUND BALANCE - ENDING $ 322,465 $ 849,850 $ 11172,315 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 12 CITY OF SANGER RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO STATEMENT OF ACTIVITIES For the Year Ended September 30, 2004 Net Change in Fund Balance -Governmental Funds Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlay as expenditures. However in the statement of activities the cost of these assets is allocated over the estimated useful lives as depreciation expense: Capital assets recorded in the current period Depreciation expense on capital assets Note Payable proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets, Repayment on debt principle is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds: Deferred Revenues -Property Taxes Some expenses in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds: Accrued Interest Expense Compensated absences CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ (239,524) 906,395 (583,002) (75,869) 463,767 14,272 5,401 61 $ 491,501 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 12 CITY OF SANGER STATEMENT OF NET ASSETS PROPRIETARY FUND September 30, 2005 CURRENT ASSETS Cash Accounts Receivable (net) Interest Receivable Prepaid Expenses Inventory TOTAL CURRENT ASSETS NONCURRENT ASSETS Restricted Cash Bond Issue Costs (net) Capital Assets: Land Construction in Process Distribution & Collection Systems Buildings & Equipment Less - Accumulated Depreciation Total Capital Assets, Net of Accum. Depr. TOTAL NONCURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Accounts Payable Accrued Expenses Customer Deposits Due to Other Funds Compensated Absences Revenue Bonds Payable Notes Payable Capital Leases Payable TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES Revenue Bonds Payable Notes Payable Capital Leases Payable TOTAL NONCURRENT LIABILITIES TOTAL LIABILITIES Invested in Capital Assets, net of Related Debt Restricted for Debt Service Unrestricted TOTAL NET ASSETS ASSETS $ 23,632 905,819 14,601 17,591 270,768 11232,411 LIABILITIES 1,621,054 127,617 312,164 45,691 16,542,900 11908,227 (7,29%409) 11,509,573 13,258,244 14,490,655 570,432 110,318 199,317 9,961 52,279 300,000 1291669 29,838 11401,814 31820,000 1081935 66,671 31995,606 51397,420 NET ASSETS 7,182,077 507,779 11403,379 $ 910931235 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page -13 CITY OF SANGER STATEMENT OF REVENUES, EXPENSES & CHANGES IN FUND NET ASSETS PROPRIETARY FUND For the Year Ended September 30, 2005 OPERATING REVENUES Charges for Services $ 7,493,933 Connection Fees 29,317 Miscellaneous 16,068 TOTAL OPERATING REVENUES 71539,318 OPERATING EXPENSES Personnel Services 11180,164 Purchased Water/Electricity 41218,948 Supplies & Contract Services 618,335 Repair & Maintenance 321,272 Utilities 85,882 Franchise Fees 174,616 Depreciation 791,667 TOTAL OPERATING EXPENSES 71390,884 OPERATING INCOME 148,434 NONOPERATING REVENUES (EXPENSES) Interest Income 53,937 Tap Fees 711,100 Interest Expense (241,345) Transfers Out to General Fund (54,889) TOTAL NONOPERATING REVENUES (EXPENSES) 468,803 CHANGE IN NET ASSETS NET ASSETS -BEGINNING NET ASSETS -ENDING 617,237 8,475,998 $ 91093,235 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page -14 CITY OF SANGER COMBINED STATEMENT OF CASH FLOWS - PROPRIETARY FUND For the Year Ended September 30, 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received from Customers $ 71274,728 Cash Payments to Suppliers for Goods and Services (51224,245) Cash Payments for Employees Services (11183,806) NET CASH PROVIDED BY OPERATING ACTIVITIES 866,677 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Cash Transferred to Other Funds (40,953) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES, Acquisition of Capital Assets (11268,871) Additions to Long -Term Debt 286,014 Principal Paid on Bonds and Notes (430,521) Interest Paid on Bonds and Notes (234,939) Tap Fees Collected 711,100 Capital Contributed - Grants & Developers 24,159 NET CASH USED FOR CAPITAL AND RELATED FINANCING ACTIVITIES (913,058) CASH FLOWS FROM INVESTING ACTIVITIES: Interest on Investments 41,354 NET INCREASE (DECREASE) IN CASH (45,980) CASH -BEGINNING OF YEAR 1,690,666 CASH -END OF YEAR $ 1,644,686 CASH PER BALANCE SHEET: Current Assets -Cash $ 23,632 Noncurrent Assets - Restricted Cash 11621,054 TOTAL CASH PER BALANCE SHEET $ 1,644,686 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating Income $ 148,434 Adjustment to Reconcile Operating Income to Net Cash Provided by Operating Activities, Depreciation 791,667 (Increase) Decrease in Receivables (246,328) (Increase) Decrease in Inventory/Prepaid Expense (29,685) Increase (Decrease) in Accounts Payable 1991927 Increase (Decrease) in Accrued Expenses 20,924 Increase (Decrease) in Customer Deposits (18,262) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 866,677 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE -15 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 3u, 2005 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The City of Sanger operates under aCouncil-Mayor form of government, following the laws of a Home Rule Charter City as defined by the State of Texas. The City provides the following services: ambulance, animal control, community center, fire, library, enforcement/inspection, municipal court, parks, police, public works, sanitation, senior center, swimming pool and general administrative services. In addition the City owns and operates the City's electric, water and sewer systems. The City's financial statements are prepared in accordance with generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). Governments are also required to follow the pronouncements of the Financial Accounting Standards Board (FASB) issued through November 30, 1989 (when applicable) that do not conflict with or contradict GASB pronouncements. The more significant accounting policies established in GAAP and used by the City are discussed below: A, REPORTING ENTITY As required by generally accepted accounting principles, the financial statements of the reporting entity include those of the City of Sanger (the primary government) and its component units. The following component units are included in the City's reporting entity because of its operational and financial relationship with the City. Blended Component Unit - (4A); The Sanger Texas Industrial Development Corporation (S.T.I.D.C.) is governed by aboard %J 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 S.T.I.D.C. 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 S.T.I.D.C. is to promote economic development within the City of Sanger, Separate financial statements of the component unit can be obtained from the City's administrative offices. Blended Component Unit - (4B); The Sanger Texas Development Corporation (S.T.D.C,) is governed by a board of seven 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 S.T.D.C. was incorporated in the state of Texas as a non-profit industrial development corporation under Section 4B of the Development Corporation Act of 1979. The purpose of the S.T.D.C. is to promote economic and community development within the City of Sanger. Separate financial statements of the component unit can be obtained from the City's administrative offices . Page - 16 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER au, LOOS B. BASIC FINANCIAL STATEMENTS -GOVERNMENT -WIDE STATEMENTS: The City's basic financial statements include both government -wide (reporting the City as a whole) and fund financial statements (reporting the City's major funds). Both the government -wide and fund financial statements categorize primary activities as either governmental or business type, The City's ambulance, animal control, community center, fire, library, enforcement/inspection, municipal court, parks, police, public works, sanitation, senior center, swimming pool and general administrative services departments and the hotel/motel, 4A and 4B special revenue funds are classified as governmental activities. The City's electric, water and sewer services are classified as business -type activities. In the government -wide Statement of Net Assets governmental activities are presented on a consolidated basis and are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The City's net assets are reported in three parts- invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. The City first utilizes restricted resources to finance qualifying activities. The government -wide Statement of Activities reports both the gross and net costs of each of the City's Functions (general government, public safety, public works, culture and recreation). The functions are also supported by general government revenues (property, sales and franchise taxes). The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. Program revenues must be directly associated with the function (police, inspection). Operating grants include operating -specific and discretionary grants while capital grants reflect capital specific grants. Developer contributions for public works infrastructure are included in capital grants. The net costs (by function) are normally covered by general revenue (property, sales, franchise taxes). The City does not allocate indirect costs. This government -wide focus is more on the sustainability of the City as an entity and the change in the City's net assets resulting from the current year's activities. C: BASIC FINANCIAL STATEMENTS -FUND FINANCIAL STATEMENTS: The financial transactions of the City are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures/expenses. The various funds are reported by generic classification within the financial statements. The following fund types are used by the City. Page - 17 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER Jug 2005 1. Governmental Funds: The focus of the governmental funds' measurement (in the fund statements) is upon determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income. The following is a description of the governmental funds of the City: General Fund -The General Fund is the general operating fund of the City. It is used to account for all financial resources not accounted for in other funds. Special Revenue - The Special Revenue Fund is used to account for the proceeds of the Sanger Texas Industrial Development Corporation and the Sanger Economic Development Corporation sales tax revenues and the Hotel/NVlotel tax revenues. The fund balance is reserved to signify amounts that are restricted to be used for economic development and promotion within the City. 2. Proprietary Funds: The focus of proprietary funds' measurement is upon determination of operating income, changes in net assets, financial position, and cash flows. The generally accepted accounting principles applicable are those similar to business in the private sector. The following is a description of the proprietary funds of the City: Electric, Water and Sewer - The Electric, Water and Sewer Fund is used to account for the operation of the City's electric, water and sewer systems for which a fee is charged to external customers for goods and services and the activity is (a) financed with debt secured by a pledge of the net revenues and (b) has the requirement that the cost of providing services, including capital costs, be recovered by user fees and charges, The City does not have any fiduciary funds. D: BASIS OF ACCOUNTING: Basis of accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. It related primarily to the timing of the measurements made regardless of the measurement focus applied. 1. Accrual: Both governmental activities and business type activities in the government -wide financial statements and the proprietary fund statements are presented on the accrual basis of accounting. Revenues are recognized when earned and expensed are recognized when incurred. CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 3u, 2005 2. Modified Accrual: The governmental fund financial statements are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e. both measurable and available. "Measurable" means knowing or being able to reasonably estimate the amount. "Available" means collectible within the current period or within 60 days after year end, Expenditures are generally recognized under the modified accrual basis of accounting when the related liability is incurred. The exception to this general rule is that principle and interest on general obligation long-term debt, if any, is recognized when due. 3. Revenue Recognition: The City considers property, sales and franchise taxes as available if collected within 60 days after year end. All other governmental revenues are recognized when received. 4. Restricted Resources: When an expense is incurred for purposes for which both restricted and unrestricted resources are available the City first applies restricted resources. E. FINANCIAL STATEMENT AMOUNTS: 1. Cash and Cash Equivalents: The City has defined cash and cash equivalents to include cash on hand and demand deposits. 2. Capital Assets: Capital assets purchased or acquired with an original cost of $1,000 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, or improvements and other capital outlays that significantly extend the useful lives of an assets are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation is provided on the straight-line basis over the following estimated useful lives; Buildings 5 - 50 years Equipment 3 - 20 years Electric, Water & Sewer Systems 10 - 50 years Infrastructure - Streets 10 years GASB No. 34 requires the City to report and depreciate new infrastructure assets effective with the with the fiscal year beginning October 1, 2003 and the City has elected to implement the retroactive infrastructure provisions at the same time. These infrastructure assets are likely to be the largest asset class of the City. Page - 19 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 3u, 2uu5 3. Revenues: Substantially all governmental fund revenues are accrued. Property taxes are billed and collected within the same period in which the taxes are levied. Subsidies, grants and developer contributions to proprietary funds, which finance either capital or current operations, are reported as nonoperating revenues based upon GASB, No.33, 4. Expenditures: Expenditures are recognized when the related fund liability is incurred. 5. Compensated Absences: The City accrues accumulated unpaid vacation time when earned by the employee. The noncurrent portion (the amount estimated to be used in subsequent years) is maintained separately and represents a reconciling item between the fund and government -wide presentations. 6. Interfund Activity: Interfund activity is reported as either loans or transfers. Loans are reported as interfund receivables and payable as appropriate and are subject to elimination upon consolidation. Transfers between governmental or proprietary funds are netted as part of the reconcilement to the government -wide financial statements. 7. Equity Classifications: Government -wide Statements Equity is classified as net assets and displayed in three components: a: Invested in capital assets, net of related debt - Consists of capital assets net of accumulated depreciation and reduced by outstanding balances of any bonds, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Any outstanding debt is reduced by any unspent debt proceeds at the end of the fiscal year before the reduction discussed above. b. Restricted net assets - Consists of net assets with constraints placed on the use either (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. c. Unrestricted net assets - All other net assets that do not meet the criteria of "restricted" or "invested in capital assets, net of related debt." CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 3u, 2005 Fund Statements Governmental fund equity is classed as fund balance. Fund balance is further classified as reserved and unreserved, with reserved further split between designated and undesignated. Proprietary fund equity is classified the same as in the government -wide statements. 8. Bad Debts: Allowance for uncollectable accounts receivable in the Proprietary Fund at September 30, 2005 is $44,1624 The allowance for delinquent property taxes is not provided as it is considered to be immaterial. 9. Capitalized Interest: For proprietary fund reporting the City capitalizes construction period interest costs when incurred. For government -wide reporting, the general fund capitalizes construction period interest costs when incurred. NOTE 2: CASH; At September 30, 2005 the City's cash accounts totaled $2,831,364 of which $2,831,264 was held in checking accounts at a local financial institution. 5100,015 of the bank balances were covered by federal depository insurance (risk category 1), and the remaining $2,731,249 was covered by collateral held by the pledging Bank's agent in the name of the City (risk category 2). There were no uncollateralized cash accounts. The securities pledged by the City's depository institution are as follows: SECURITY PAR FFCB FMV $ 490,856 1,885,969 11336,768 692,063 3951375 $ 41801,031 Cash and cash equivalents on the balance sheet consist of the following: Petty Cash $ 100 Checking, Savings and CD's 2 8�31 2�64 $ 298319364 Page - 21 CITY OF SANGER NOTE 3: NOTES TO THE FINANCIAL STATEMENTS CAPITAL ASSETS: SEPTEMBER 30, 2005 Capital asset activity for the fiscal year ended September 30, 2005 is as follows: CAPITAL ASSETS GOVERNMENTAL ACTIVITIES Land &Easements Infrastructure Buildings & Improvements Office Equipment Equipment TOTAL AT HISTORICAL COST LESS ACCUMULATED DEPRECIATION Land &Easements Infrastructure Buildings & Improvements Office Equipment Equipment TOTAL ACCUMULATED DEPRECIATION TOTAL CAPITAL ASSETS, NET CAPITAL ASSETS PROPRIETARY FUND Land Construction in Process Buildings Equipment Water System Sewer System Electric System TOTAL AT HISTORICAL COST ACCUMULATED DEPRECIATION Land Buildings Equipment Water System Sewer System Electric System TOTAL ACCUMULATED DEPRECIATION TOTAL CAPITAL ASSETS, NET BEGINNING BALANCE $ 376,840 41495,088 8881356 1061820 11342,572 7,209,676 0 11226,992 232,553 74,728 578,091 21112,364 ADDITIONS $ 0 $ 629,713 54,725 34,227 187,730 906,395 0 348,810 34,103 22,659 177,430 583,002 $ 5,097,312 $ 323,393 $ BEGINNING BALANCE $ 312,164 $ 0 374,315 11112,891 41680,783 41559,556 41491,790 151531,499 0 70,026 840,863 11639,639 11528,002 21429,212 61507,742 ADDITIONS 0 45,691 21,516 3991505 564,697 999,502 2461572 3,277,483 0 14,077 133,435 189,404 169,965 284,786 791,667 DELETIONS 0 0 0 0 0 0 0 0 0 0 0 0 C�7 DELETIONS ENDING BALANCE $ 376,840 5,124,801 943,081 141,047 11530,302 81116,071 0 1,575,802 2661656 97,387 755,521 21695,366 $ 5,420,705 $ 0 $ 0 0 0 0 $ 9,023,757 $ 2,485,816 $ 0 0 0 0 0 0 0 0 0 0 ENDING BALANCE 12164 3, 45,691 3951831 1,512,396 5,2451480 6,5591058 4,7381362 fE:1�:ZiY�'I3►� 0 84,103 974,298 11829,043 11697,967 21713,998 71299,409 0 $ 11,509,573 Page - 22 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2005 DEPRECIATION EXPENSE WAS CHARGED TO GOVERNMENTAL ACTIVITIES AS FOLLOWS: Administration Police Municipal Court Animal Control Fire Enforcement/Inspection Parks & Recreation Engineering Streets Swimming Pool Vehicle Maintenance Sullivan & Community Centers Library TOTAL DEPRECIATION EXPENSE $ 11,972 67,421 1,602 7,501 38,835 5,013 579 35,892 379,598 12,799 5,044 2,273 14,473 $ 5831002 DEPRECIATION EXPENSE WAS CHARGED TO BUSINESS -TYPE ACTIVITIES AS FOLLOWS: Water 221,988 Sewer 213,332 Electric 356,347 $ 791,667 NOTE 4: LONG-TERM DEBT: The following is a summary of the City's Long -Term Debt. General Long Term Debt: Bond Obligations: Certificates of Obligation, Series 1994 -Original amount of $1,900,000; principal paid annually starting September 1, 1995; Interest paid semi-annually on March 1, and September 1, at rates ranging from 5.60 to 7.50%. The Bonds were issued for street improvements and library building construction and are to be repaid from property tax revenues and are further secured by a pledge of Enterprise Fund Net Revenues, Texas Tax and Revenue Certificates of Obligation, Series 2002 -Original amount of $2,360,000; principal paid annually starting September 1, 2003; Interest paid semi-annually on March 1, and September 1, at rates ranging from 4.20 to 5.70%. The Bonds were issued for the purpose of constructing and improving City streets and are to be repaid from property tax revenues and are additionally secured by a pledge of Enterprise Fund Net Revenues. Page - 23 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2005 The Bond Obligations require that certain cash reserve accounts be maintained. At September 30, 2005 the City had established and maintained the proper reserve accounts. Notes payable: Note Payable -Sanger Bank -Original amount of $150,000, the note requires one hundred twenty monthly installments of $1,615, with the final installment due January 2012, The note bears interest at 5.25% and has seventy six installments remaining at September 30, 2005. The note proceeds were used to purchase and remodel a building to be used by the police department, which also serves as collateral for the note. Note Payable -Sanger Bank - Original amount of $49,775, the note requires thirty six monthly installments of $1,488, with the final installment due April 2006. The note bears interest at 4.25% and has seven installments remaining at September 30, 2005. The note proceeds were used to purchase parks equipment, which also serves as collateral for the note. Note Payable -Sanger Bank - Original amount of $74,993, the note requires thirty six monthly installments of $2,353, with the final installment due September 2006. The note bears interest at 4.25% and has twelve installments remaining at September 30, 2005. The note proceeds were used to purchase a fire truck, which also serves as collateral for the note. Note Payable -Sanger Bank - Original amount of $120,000, the note requires sixty monthly installments of $2,234, with the final installment due December 2008. The note bears interest at 4.25% and has thirty nine installments remaining at September 30, 2005. The note proceeds were used to purchase a fire truck, which also serves as collateral for the note. Note Payable -Sanger Bank - Original amount of $39,295, the note requires thirty six monthly installments %J $1,165, with the final installment due February 2008.. The note bears interest at 4.25% and has twenty nine installments remaining at September 30, 2005. The note proceeds were used to purchase two vehicles which also serve as collateral for the note. Note Payable -Sanger Bank - Original amount of $177,715, the note requires thirty six monthly installments of $525, with the final installment due February 2008,. The note bears interest at 4.25% and has twenty nine installments remaining at September 30, 2005. The note proceeds were used to purchase a vehicle which also serves as collateral for the note. Note Payable -Guaranty National Bank - Original amount of $850,000, the note requires one hundred eighty monthly installments of $7,499, with the final installment due March 2011. The note bears interest at 2.80 percent under prime rate and has sixty five installments remaining at September 30, 2005. The note proceeds were used to purchase land for a development project between the Sanger Texas Industrial Development Corporation and Walmart Stores East, Inc. The loan will be repaid from the 4A sales tax proceeds to be collected by the Sanger Texas Industrial Development Corporation. As funds are available additional principal have been made on the note. Page - 24 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER Jul 2005 Capital Leases: Capital Lease -Capital City Leasing - Original balance of $65,986. The lease requires a down payment plus four annual rental payments of $14,436 with two annual payments remaining at September 30, 2005, The City has a purchase option during the term of the lease to purchase the equipment at a designated purchase option price. The City intends to exercise this option at the end of the lease term. The proceeds of the lease were used to purchase parks equipment which also serves as security for the lease, Capital Lease -Diversified Lending, Inc. - Original balance of $18,860. The lease requires a down payment plus fifty eight monthly rental payments of $368 with forty eight payments remaining at September 30, 2005. The City has a purchase option during the term of the lease to purchase the equipment at a designated purchase option price. The City intends to exercise this option at the end of the lease term. The proceeds of the lease were used to purchase upgraded accounting software which also serves as security for the lease. Lawsuit Judgment Payable: In July 2002 the City was issued the order of final judgment in the lawsuit Richard Yarbrough vs. the City of Sanger. The lawsuit related to the termination of Richard Yarbrough, a former police officer with the City. The City was ordered to pay Mr. Yarbrough a total of $320,120 in annual installments beginning on October 1, 2002 with the final installment due April 1, 2009. Proprietary Fund: Bond Obligations: Texas Utility System Revenue Bonds, Series 1996 - Original amount of $1,0600,000, principal paid annually on May 15; Interest paid semi-annually on May 15 and November 15, at rates ranging from 4.2% to 4.75%. The bonds were issued to provide funds for improving and extending the City's Sewer System. The Bonds are to be repaid from and are secured by the Enterprise Fund Net Revenues. Texas Utility System Refunding Revenue Bonds, Series 1999 - Original amount of $1,735,000, principal paid annually on May 15; Interest paid semi-annually on May 15 and November 15, at rates ranging from 4.25% to 4.40%. The bonds were issued to provide funds sufficient to advance refund maturities 2000 through 2011 of the City's outstanding Series 1991 Bonds, The Bonds are to be repaid from and are secured by the Enterprise Fund Net Revenues, Utility System Revenue Bonds, Series 2002 -Original amount of $2,540,000, principal paid annually on May 15; Interest paid semi-annually on May 15 and November 15, at rates ranging from 4.5% to Page - 25 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER Jul 2005 bonds were issued to provide funds for improving and enlarging the City's wastewater treatment plant and replacing various water and sewer lines. The Bonds are to be repaid from and are secured by the Enterprise Fund Net Revenues. The Bond Obligations require that certain cash reserve accounts be maintained. At September 30, 2005 the City had established and maintained the proper reserve accounts. Notes Payable: Note Payable -Sanger Bank - Original amount of $400,744, the note is due on demand, if no demand is made then the note requires five annual principal payments of $80,149 beginning in October 2002. The note bears 4.25% with one annual payment remaining at September 30, 2005. The note proceeds were used for water system improvements. Note Payable -Sanger Bank - Original amount of $60,401, installments of $1,120, with the final installment due March 2010. and has fifty four installments remaining at September 30, 2005. purchase a backhoe, which also serves as collateral for the note. the note requires sixty monthly The note bears interest at 4.25% The note proceeds were used to Note Payable -Sanger Bank - Original amount of $120,253, the note requires thirty six monthly installments of $3,598, with the final installment due April 2008. The note bears interest at 4.25% and has thirty one installments remaining at September 30, 2005. The note proceeds were used to purchase a digger truck, which also serves as collateral for the note. Capital Leases: Capital Lease - ALTEC - Original balance of $86,500. The lease requires thirty six monthly rental payments of $2,701 with thirty four payments remaining at September 30, 2005. The City has a purchase option during the term of the lease to purchase the equipment at a designated purchase option price. The City intends to exercise this option at the end of the lease term. The proceeds of the lease were used to purchase a Hydraulic Derrick Truck used by the electric department. The vehicle is security for the lease. Capital Lease -Diversified Lending, Inc. - Original balance of $18,860. The lease requires a down payment plus fifty eight monthly rental payments of $368 with forty eight payments remaining at September 30, 2005. The City has a purchase option during the term of the lease to purchase the equipment at a designated purchase option price. The City intends to exercise this option at the end of the lease term. The proceeds of the lease were used to purchase upgraded accounting software which also serves as security for the lease. Page - 26 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2005 Tong -term debt activity for the fiscal year is as follows: GOVERNMENTAL ACTIVITIES BOND OBLIGATIONS Series 1994 Certificates of Obligation Series 2002 Certificates of Obligation NOTES PAYABLE Sanger Bank Sanger Bank Sanger Bank Sanger Bank Sanger Bank Sanger Bank Sanger Bank Guaranty National Bank - 4A Fund TOTAL NOTES PAYABLE CAPITAL LEASES Capital City Lease Diversified TOTAL CAPITAL LEASES LAWSUIT JUDGEMENT PAYABLE Yarbrough Payable ACCRUED COMPENSATED ABSENCES Accrued Vacation Pay Accrued Sick Pay TOTAL ACCRUED COMPEN, ABSEN, TOTAL GOVERNMENTAL ACTIVITIES BUSINESS -TYPE ACTIVITIES REVENUE BOND OBLIGATIONS Series 1996 Series 1999 Series 2002 TOTAL REVENUE BONDS NOTES PAYABLE Sanger Bank Sanger Bank Sanger Bank Sanger Bank TOTAL NOTES PAYABLE CAPITAL LEASES Altec Diversified Lenders, Inc. Altec TOTAL CAPITAL LEASES TOTAL BUSINESS -TYPE ACTIVITIES $ 885,000 $ 21245,000 $ 31130,000 $ CURRENT - ADDITIONS DELETIONS ENDING PORTION 0 $ 155,000 $ 730,000 $ 165,000 0 801000 21165,000 851000 0 $ 235,000 $ 4 21895,000 $ 2509000 117,444 0 27,216 0 9,087 0 55,127 0 1031943 0 0 39,295 0 17,715 508,561 0 $ 8219378 $ 57,010 $ 13,179 104,265 14,251 16,953 10,263 10,263 9,087 0 0 27,725 27,402 279402 22,733 81,210 23,815 71232 32,063 12,868 31273 14,442 51796 70,941 437,620 73,832 171,123 $ 707,265 $ 168,227 $ 39,536 $ 0 $ 12,578 $ 26,958 $ 13,170 0 18,860 3,450 15,410 3,467 $ 39,536 $ 181860 $ 16,028 $ 42,368 $ 161637 $ 239,320 $ 0 $ 41,616 $ 197,704 $ 42,448 42,332 $ 0 $ 1,215 $ 41,117 $ 41,117 17,495 1,155 0 18,650 18,650 $ 59,827 $ 11155 $ 11215 $ 59,767 $ 599767 $ 41290,061 $ 77,025 $ 464,982 $ 3,902,104 $ 537,079 $ 765,000 $ 0 $ 451000 $ 7201000 $ 501000 1,260, 000 0 155,000 1,1051000 165,000 21380,000 0 85,000 21295,000 85,000 $ 41405,000 $ 0 $ 285,000 $ 41120,000 $ 300,000 $ 149,861 $ 13,922 0 0 $ 163, 783 $ 0 $ 70,999 $ 78,862 $ 78,862 0 13,922 0 0 609401 51438 541963 111323 1201253 151474 104,779 39,484 180,654 $ 105,833 $ 238,604 $ 129,669 0 18,860 3,449 15,411 3,467 0 86,500 5,402 81,098 26,371 $ 30,837 $ 105,360 $ 391688 $ 96,509 $ 29,838 $ 41599,620 $ 2861014 $ 430521 $ 41455,113 $ 459,507 Page - 27 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER Jul 2005 Future debt maturities are as follows; Governmental Type Activities Year 2006 2007 2008 2009 2010 2011-2015 2016-2020 2021-2022 Total Principal $ 477,312 456,974 458,226 450,833 2263941 652,051 760)000 360,000 $3 08429337 NOTE 5: PROPERTY TAX: Interest $ 178,000 156,164 134,174 1123330 90,421 3 5 5,220 205,075 27,250 $125� 8,634 Business -Type Activities; Principal $ 459,507 395,488 396,361 367,117 3 66, 640 1,190,000 895,000 3859000 $4 4550113 Interest $ 216,893 196,206 176,383 158,350 140,711 492,088 240,792 3— 1,320 $1 65} 2,743 Property tax is levied each October 1 on the assessed (appraised) value as of the prior January 1 for all real and personal property located in the City, Taxes are due October 1, the levy date, and are delinquent after the following January 31, At the fund level property taxes are recorded as receivables and deferred revenues at the time the taxes are assessed. Revenues are then recognized as the taxes are collected. NOTE 6: RETIREMENT PLAN: The City provides pension benefits for all of its full-time employees through anon -traditional, joint contributory, defined benefit plan in the state-wide Texas Municipal Retirement System (TMRS), an agent multiple -employer public retirement system. Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City -financed monetary credits, with interest. Members can retire at ages sixty and above with ten or more years of service or with twenty five years of service regardless of age. A member is vested after ten years. The contribution rate for the employees is 5% of gross earning and the City provides a monthly contribution of 5.51% of gross earnings. This rate consists of the normal cost contribution and the prior service contribution rate. The normal cost contribution rate finances the currently accruing monetary credits and the prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the plan's twenty five year amortization period. The City's contributions for the fiscal year totaled $86,672. CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS The schedule of Actuarial Liabilities and Funding Progress for the year ended September 30, 2005 is as follows: Actuarial valuation date Actuarial Cost Method Amortization method Asset valuation method Actuarial valuation of assets Actuarial Accrued Liability Percentage funded Unfunded actuarial accrued liability (UAAL) Annual covered payroll UAAL as percentage of covered payroll Net pension obligation -beginning Annual required contributions Contributions made Net pension obligation - ending 12/31/034 Unit Cost Level Percent of Payroll Amortized Cost $1,805,541 $1,966>474 91.8% $ 160,933 $1,792,164 9.0% $ 0 $ 104,353 $ 104 353) $ 0 The prior two fiscal years were 100% funded, the net pension obligation was zero and the annual contributions were $86,672 and $69,056. The City of Sanger is one of 801 municipalities having the benefit plan administered by TMRS. Each of the 801 Municipalities have an annual, individual actuarial valuation performed. All assumptions for the 12-31-04 valuations are contained in the 2004 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153. REQUIRED SUPPLEMENTARY INFORMATION CITY OF SANGER -I119ZC3;41_ : • lril7Wiftaw-WIFa3:LRgig] IN01cat1 VIIAiW A111011�; For the Year Ended September 30, 2005 Beginning Budgetary Fund Balance RESOURCES, TAXES: Property Taxes Sales & Beverage Taxes Franchise Taxes TOTAL TAXES INTERGOVERNMENTAL: Library County Funding Fire County Funding Grant Revenues TOTAL INTERGOVERNMENTAL CHARGES FOR SERVICES: Variances & Plats Swimming Pool Sanitation Collection Rental Fees Library Fees Other Fees Misc. Income TOTAL CHARGES FOR SERVICES FINES: Police Fines LICENSES &PERMITS: Permits &Inspections DONATION REVENUES: Beautification Board Parks TOTAL DONATION REVENUES INVESTMENT INCOME OTHER SOURCES: Proceeds of Notes Payable/Capital Lease Transfers from 4A Fund Transfers from 4B Fund Transfers from Proprietary Fund TOTAL OTHER SOURCES 3,333,572 41272,747 31599,068 TOTAL RESOURCES AVAILABLE SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 1,618,000 1,630,000 3531000 422,400 275,650 2991650 21246,650 21352,050 ACTUAL AMOUNTS 0 $ 1,718,635 4261327 3041033 2,448,995 VARIANCE WITH FINAL BUDGET FAVORABLE (UNFAVORABLE) (630,000) 88,635 3,927 4,383 96,945 17,000 17,000 17,356 356 99,000 991000 119,353 20,353 0 0 11,306 11,306 116,000 116,000 148,015 32,015 451000 451000 38,450 (6,550) 11,000 11,000 41345 (61655) 3501000 453,000 453,777 777 31500 3,500 21555 (945) 41000 41000 81595 41595 71200 71200 11936 (51264) 401000 40,000 21867 (37,133) 460,700 563,700 5121525 (51,175) 123,500 123,500 124,012 512 146,400 146,400 148,299 11899 0 0 51967 51967 0 0 0 0 0 0 51967 51967 26,000 261000 38,061 12,061 0 58,375 751869 17,494 0 42,400 0 (42,400) 0 0 42,436 42,436 214,322 214,322 54,889 (159,433) 214,322 315,097 173,194 (141,903) (673,679) Page - 30 CITY OF SANGER BUDGETARY COMPARISON SCHEDULE = GENERAL FUND CHARGES TO APPROPRIATIONS: ADMINISTRATION: Personnel Services Insurance Professional Fees Supplies & Contract Service Repair & Maintenance Utilities & Telephone Vehicle Capital Outlay Debt Service TOTAL ADMINISTRATION POLICE: Personnel Services Professional Fees Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay Debt Service TOTAL POLICE MUNICIPAL COURT: Personnel Services Professional Fees Repairs & Maintenance Supplies & Contract Service Utilities & Telephone Capital Outlay TOTAL MUNICIPAL COURT ANIMAL CONTROL: Personnel Services Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay TOTAL ANIMAL CONTROL For the Year Ended September 30, 2005 ORIGINAL BUDGET 76,153 39,802 5,200 53,038 1,500 8,300 550 12,416 41,616 238,575 527,184 500 11,000 70,011 14,045 26,000 29,000 23,740 701,480 74,928 9,000 1,415 24,850 2,300 1,750 114,243 38,088 12,350 3,000 500 10,000 63,938 FINAL BUDGET 76,153 39,802 5,200 53,038 1,500 8,300 550 48,991 41,616 275,150 527,184 500 11,000 70,011 14,045 26,000 29,000 23,740 701,480 74,928 9,000 1,415 24,850 2,300 1,750 114,243 38,088 12,350 3,000 500 10,000 63,938 ACTUAL AMOUNTS 79,823 32,530 10,746 58,555 3,510 6,327 106 42,782 49,856 284,235 542,068 570 2,656 43,437 11,883 26,751 40,767 19,074 6871206 74,926 7,500 2,782 21,622 746 0 107,576 35,942 10,467 2,295 1,406 4,000 54,110 VARIANCE WITH FINAL BUDGET FAVORABLE (UNFAVORABLE) (3,670) 7,272 (51546) (51517) (21010) 1,973 444 6,209 (81240) (91085) (14,884) (70) 8,344 26,574 2,162 (751) (11,767) 4,666 14,274 2 1,500 (11367) 3,228 1,554 1,750 6,667 2,146 1,883 705 (906) 6,000 9,828 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 30 CITY OF SANGER BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For the Year Ended September 30, 2005 FIRE: Personnel Services Ambulance Service Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Debt Service Capital Outlay TOTAL FIRE ENFORCEMENTIINSPECTION Personnel Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay TOTAL ENFORCEMENT/INSPECTION ENGINEERING Personnel Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Capital Outlay TOTAL ENGINEERING PARKS &RECREATION: Personnel Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay Debt Service TOTAL PARKS & RECREATION STREETS: Personnel Services Repair & Maintenance Solid Waste Collection Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay Debt Service TOTAL STREETS ORIGINAL BUDGET 104,937 86,400 17,000 94,432 10,100 4,000 64,180 0 381,049 FINAL BUDGET 104,937 86,400 17,000 94,432 10,100 4,000 64,180 0 381,049 77,769 31,169 31000 31000 431100 117,100 21000 21000 41200 11200 750 750 301819 155,219 0 0 30,750 0 0 30,750 323,917 31,000 32,700 2,400 8,000 31,470 0 429,487 20,136 57,000 2531200 59,800 12,800 20,000 1091200 3851908 918,044 0 0 75,750 0 0 75,750 323,917 31,000 32,700 2,400 8,000 95,670 0 493,687 20,136 57,000 380,200 59,800 12,800 20,000 7391200 3851908 1,675,044 ACTUAL M AOUNTS 83,051 86,400 11,720 62,314 8,266 4,577 57,197 10,620 324.145 30,259 1,244 114,859 298 27 0 146,687 VARIANCE WITH FINAL BUDGET FAVORABLE (UNFAVORABLE) 21,886 0 5,280 32,118 1,834 (577) 6,983 (10,620) 56,904 8,532 0 0 70 (70) 79,332 (31582) 150 (150) 3,475 (31475) 83,027 (71277) 326,289 19,706 29,551 2,188 9,672 97,542 4,078 489,026 40,164 44,035 409,027 34,134 40,025 18,310 6591427 4071072 1,652,194 (2,372) 11,294 3,149 212 (11672) (11872) (41078) 4,661 (20,028) 12,965 (28,827) 25,666 (27,225) 1,690 79,773 (21,164) 22,850 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 30 CITY OF SANGER BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For the Year Ended September 30, 2005 SWIMMING POOL: Personnel Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Capital Outlay TOTAL SWIMMING POOL VEHICLE MAINTENANCE: Personnel Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay TOTAL VEHICLE MAINTENANCE SULLIVAN &COMMUNITY CENTERS Repair & Maintenance Supplies & Contract Service Utilities & Telephone Capital Outlay TOTAL SULLIVAN & COMMUNITY CTRS LIBRARY: Personnel Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Capital Outlay Debt Service TOTAL LIBRARY TOTAL CHARGES TO APPROPRIATIONS ENDING BUDGETARY FUND BALANCE E ORIGINAL BUDGET 21,914 16,000 15,210 3,500 8,000 64,624 41,705 3,200 11,400 3,600 1,000 12,350 73,255 9,250 11,450 4,700 3,400 91,399 4,800 9,210 8,500 7,100 37,499 158,508 3,333,572 0 $ 21,914 16,000 15,210 3,500 8,000 64,624 41,705 3,200 11,400 3,600 1,000 12,350 73,255 9,250 11,450 4,700 15,400 40,800 91,399 4,800 9,210 8,500 7,100 37,499 158,508 4,272,747 ACTUAL AMOUNTS 24,092 2,125 9,055 4,606 0 39,878 44,104 2,769 3,409 3,069 1,028 18,698 73,077 6,379 8,321 2,515 19,755 36,970 90,748 5,775 7,438 8,800 9,329 37,489 159,579 4,137,710 VARIANCE WITH FINAL BUDGET FAVORABLE (UNFAVORABLE) (2,178) 13,875 6,155 (11106) 8,000 24,746 (2,399) 431 7,991 531 (28) (61348) 178 2,871 3,129 2,185 (41355) 3,830 651 (975) 1,772 (300) (2,229) 10 (11071) 135,037 0 $ (538,642) $ (538,642) SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 30 CITY OF SANGER BUDGETARY COMPARISON SCHEDULE - SPECIAL REVENUE FUNDS For the Year Ended September 30, 2005 � 4A FUND � Beginning Budgetary Fund Balance RESOURCES: Sales Taxes Investment Income TOTAL RESOURCES AVAILABLE CHARGES TO APPROPRIATIONS: ADMINISTRATION Supplies & Contract Services Professional Fees Debt Service Transfer to General Fund for Streets TOTAL CHARGES TO APPROPRIATIONS ENDING BUDGETARY FUND BALANCE 4B FUND Beginning Budgetary Fund Balance RESOURCES: Sales Taxes Investment Income TOTAL RESOURCES AVAILABLE CHARGES TO APPROPRIATIONS: ADMINISTRATION Supplies & Contract Services Transfer to General Fund for Parks TOTAL CHARGES TO APPROPRIATIONS ENDING BUDGETARY FUND BALANCE HOTEL/MOTEL FUND Beginning Budgetary Fund Balance RESOURCES: Alcoholic Beverage Taxes Investment Income TOTAL RESOURCES AVAILABLE CHARGES TO APPROPRIATIONS: ADMINISTRATION Promotion ENDING BUDGETARY FUND BALANCE 0 ORIGINAL BUDGET 175,000 0 FINAL BUDGET 175,000 0 ACTUAL AMOUNTS 211,330 4,683 36,330 4,683 175,000 175,000 216,013 41,013 2,450 2,450 1,420 1,030 11000 11000 10,149 (91149) 154,050 154,050 89,993 64,057 0 0 0 0 157,500 157,500 101,562 551938 $ 17,500 $ 17,500 $ 114,451 $ 96,951 $ 0 $ 0 $ 0 $ 0 1751000 1751000 211,330 36,330 0 0 13,456 13,456 175,000 175,000 224,786 49,786 21450 21450 11220 11230 1521050 152,050 42,436 109,614 154,500 154,500 43,656 110,844 $ 20,500 $ 20,500 $ 181,130 $ 160,630 $ 0 $ 0 $ 0 $ 0 0 81200 11,514 31314 0 0 275 275 0 81200 11,789 31589 0 81200 81252 (52) $ 0 $ 0 $ 31537 $ 31537 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 31 CITY OF SANGER SCHEDULE OF PENSION PLAN FUNDING PROGRESS For the Year Ended September 30, 2005 DEFINED BENEFIT RETIREMENT PLAN Actuarial Valuation Date 12-31-04 12-31-03 12-31-02 Actuarial Value of Assets $ 11805,541 $ 11710,290 $ 11460,890 Actuarial Accrued Liabilities (AAL) 11966,474 11851,297 11499,967 Unfunded (Overfunded) AAL (UAAL) 160,933 141,007 39,077 Funded Ratio 91.8% 9244% 97.4% Covered Payroll 11792,164 11711,143 11567,373 UAAL as a Percentage of Covered Payroll 960% 842% 205% SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 32 OTHER SUPPLEMENTARY INFORMATION CITY OF SANGER COMPARATIVE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - GENERAL FUND For the Year Ended September 30, 2005 & 2004 REVENUES Property Taxes Sales & Beverage Taxes Franchise Taxes Intergovernmental Charges for Services Fines Licenses & Permits Donations Interest Income TOTAL REVENUES EXPENDITURES General Government Public Safety Home Grant Expenditures Streets & Sanitation Culture & Recreation Capital Outlay Debt Service: Principal Interest TOTAL EXPENDITURES EXCESS REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Proceeds of Notes Payable/Capital Leases Transfer from Economic Development Transfer from Proprietary Fund TOTAL OTHER FINANCING SOURCES (USES) EXCESS REVENUES OVER (UNDER) EXPENDITURES FUND BALANCE -BEGINNING FUND BALANCE -ENDING 2005 $ 1,718,635 426,327 304,033 148,015 512,525 124,012 148,299 5,967 38,061 3,425,874 325,528 1,188,066 0 625,573 517,382 906,395 392,825 181,941 41137,710 2004 $ 1,484,301 395,633 283,619 150,188 482,928 142,312 142,601 5,187 33,984 3,120,753 270,263 1,0651060 0 505,569 4 37,488 1,9 37,776 390,875 196,842 4,903,873 (711,836) (1,783,120) 75,869 42,436 54,889 173,194 (538,642) 861,107 194,993 62,071 100,305 357.369 (1,425,751) 2,286,858 $ 3221465 $ 861,107 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 33 CITY OF SANGER COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - SPECIAL REVENUE FUNDS For the Year Ended September 30, 2005 With a Comparative Total for the Year Ended September 30, 2004 REVENUES Sales Taxes Hotel/Motel Tax Interest Income TOTAL REVENUES EXPENDITURES Promotion Supplies & Contract Services Professional Fees Debt Service TOTAL EXPENDITURES EXCESS REVENUES OVER (UNDER) EXPENDITURES HOTEL/ 4A 4B TOTAL MOTEL FUND FUND 2005 $ 0 $ 211,330 $ 211,330 $ 422,660 11,514 0 0 11,514 275 4,683 13,456 18,414 11,789 216,013 224,786 452,588 OTHER FINANCING SOURCES (USES) Transfer to General Fund for Streets Transfer to General Fund for Parks TOTAL OTHER FINANCING SOURCES (USES) EXCESS REVENUES OVER (UNDER) EXPENDITURES FUND BALANCE -BEGINNING FUND BALANCE -ENDING 8,252 0 0 0 8,252 0 1,420 10,149 89,993 101,562 3,537 114,451 3,537 114,451 181796 204,776 0 1,220 0 0 1,220 223,566 0 (42,436) 8,252 2,640 10,149 89,993 111,034 341,554 0 (42,436) TOTAL 2004 $ 392,316 11,058 4,551 407,925 5,578 2,636 0 89,993 98,207 309,718 (37,527) (24,544) (42,436) (42,436) (62,071) 181,130 299,118 247,647 327,160 550,732 303,085 $ 221333 $ 319,227 $ 508,290 $ 849,850 $ 550,732 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 34 CITY OF SANGER COMPARATIVE SCHEDULE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - PROPRIETARY FUND For the Year Ended September 30, 2005 & 2004 2005 OPERATING REVENUES 11 l Charges for Services $ 7,493,933 $ 6,443,474 Connection Fees 29,317 28,215 Miscellaneous 16,068 81581 TOTAL OPERATING REVENUES 71539,318 6,480,270 OPERATING EXPENSES Personnel Services Purchased Water/Electricity Supplies & Contract Services Repair & Maintenance Utilities Franchise Fees Depreciation TOTAL OPERATING EXPENSES OPERATING INCOME NONOPERATING REVENUES (EXPENSES) Interest Income Tap Fees Grants & Developer Contributions Interest Expense Transfers Out to General Fund 1,180,164 4,2181948 618,335 321,272 85,882 174,616 791,667 7,390,884 148,434 53,937 711,100 0 (2411345) (541889) 1,092,202 3,3911711 4851343 2891146 75,105 1501350 6561626 6,140,483 339,787 19,066 684,881 2041454 (1451220) (1001305) TOTAL NONOPERATING REVENUES (EXPENSES) 468,803 662,876 NET ASSETS -BEGINNING NET ASSETS -ENDING 617,237 11002,663 8,475,998 71473,335 $ 91093,235 $ 81475,998 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 35 N w U) z W a K W Wp A,O p Z Z W U. > U) Q LL 0Ow � IY H a UWCL =a U U) 0 Z z m O U 0 Q W aL) p w a d 00 Ln N N 1� t0 rt �t 1� O Lf rn M CO it M f%� 00 (D � co M co O "t 00 O r- m m N co co 0 00 Nt M G M 00 00 0 CO 00 �- Lf) �- rt O 00 M .- .- d 00 N CO O ti m rt Lo .- lot Lo O �- N O M 1� �- M �- 1� nip OOOM�0000 O 1` Lo O �- (O N O M mt N M d• Ln 00 " (O O 1� N N � 00'd Nti00 (0 0o O "I �t m 0 C•7 U ct 001�r�0 M �- 0000) N 0 'd• (O •d• �- 00 O O 00 O (0 O W 1` qt qt co (O N M Ln 00 Cl) V ti Ln Lo 00 00 O (0 d• O 00 O � � 44t CO � (M LO `. v JLo � Lo W 00000 tiONd'MMO o N d7 00 0 0 % N M N M LO N M I� r- r- N Lo 0000 0000 N 41 000000000 N Lf W0) � M M O d) CD M Q rn M�.�-ONN 0000 _ N W N (s� Z W IL x N w w z w cn v) o CL w z z 92 w o Z O O W a: K N a� i s U w 0)� m e Z H C9 o C9 °� c a; w C9 z z °Z'�ci o a o z Lu p,d� a J Q a N a) N Q7 O W aa) W c coNa� � 'v C H w Z IL m a o r a ro a� a) V O (L O O m O D. a a i- O Z LL O I� d� ct 0 v M M v M M N O M M d) O 00 N 0 M M O 0) O) co d• d• 'mot N O_ M H w Z W a d CITY OF SANGER DEBT SERVICE REQUIREMENTS - GENERAL LONG-TERM DEBT September 30, 2005 Series 1994 Certificates of Obligation Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 1651000 $ 43,635 $ 2081635 2007 1751000 33,900 2081900 2008 1901000 23,400 213,400 2009 200,000 12,000 212,000 $ 730,000 $ 1121935 $ 842,935 Series 2002 Certificates of Obligation Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 85,000 $ 105,470 $ 190,470 2007 85,000 100,625 1851625 2008 90,000 95,780 185,780 2009 95,000 90,650 185,650 2010 1001000 85,235 1851235 2011 105,000 80,385 1851385 2012 110,000 75,975 1851975 2013 1201000 71,245 191,245 2014 1251000 65,965 1901965 2015 1301000 60,340 1901340 2016 135,000 54,490 189,490 2017 145,000 481280 193,280 2018 1501000 41,465 191,465 2019 160,000 34,340 194,340 2020 170,000 261500 1961500 2021 175,000 181000 1931000 2022 185,000 91250 194,250 $ 2,165,000 $ 1,063,995 $ 31228,995 NOTE PAYABLE - SANGER BANK Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 14,251 $ 51134 $ 191091 2007 151018 41368 191091 2008 15,825 31560 19,091 2009 16,676 21709 19,091 2010 17,573 11812 19,091 2011 18,518 867 19,091 2012 6,404 70 61998 $ 104,265 $ 18,520 $ 121,544 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 37 CITY OF SANGER DEBT SERVICE REQUIREMENTS - GENERAL LONG-TERM DEBT September 30, 2005 NOTE PAYABLE - SANGER BANK Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 10,263 $ 146 $ 10,409 $ 146 $ 10,409 NOTE PAYABLE -SANGER BANK Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 27,402 $ 631 $ 28,033 $ 27,402 $ 631 $ 28,033 NOTE PAYABLE -SANGER BANK Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 23,815 $ 21991 $ 26,806 2007 24,846 11959 261805 2008 251924 882 261806 2009 61625 47 61672 $ 81,210 $ 51879 $ 87,089 NOTE PAYABLE - SANGER BANK Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 12,868 $ 1,114 $ 13,982 2007 13,425 557 13,982 2008 51770 61 51831 $ 32,063 $ 11732 $ 33,795 NOTE PAYABLE - SANGER BANK Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 51796 $ 502 $ 61298 2007 61048 250 61298 2008 21598 28 21626 $ 14,442 $ 780 $ 15,222 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 37 CITY OF SANGER DEBT SERVICE REQUIREMENTS - GENERAL LONG-TERM DEBT September 30, 2005 NOTE PAYABLE - GUARANTY NATIONAL BANK - 4A FUND Year Ending September 30, 2006 2007 2008 2009 2010 2011 PRINCIPAL $ 73,832 76,840 79,971 83,229 86,619 37,129 $ 437,620 Capital Lease -CAPITAL CITY LEASING Year Ending September 30, 2006 2007 PRINCIPAL $ 13,170 13,788 $ 26,958 Capital Lease -DIVERSIFIED LENDERS, INC. Year Ending September 301 2006 2007 2008 2009 PRINCIPAL $ 3,467 3,712 3,975 4,256 $ 15,410 Lawsuit Judgment Payable -Yarbrough Year Ending September 30, 2006 2007 2008 2009 2010 PRINCIPAL $ 42,448 43,297 44,163 45,047 22,749 $ 197,704 INTEREST $ 16,161 $ 13,153 10,022 6,764 3,374 373 INTEREST $ 1,267 648 $ 1,915 INTEREST $ 949 704 441 160 $ 2,254 0 INTEREST 0 0 0 0 0 TOTAL REQUIREMENTS 89,993 89,993 89,993 89,993 89,993 37,502 487,467 TOTAL REQUIREMENTS $ 14,437 14,436 $ 28,873 TOTAL REQUIREMENTS $ 4,416 4,416 4,416 4,416 $ 17,664 TOTAL REQUIREMENTS $ 42,448 43,297 44,163 45,047 22,749 $ 197,704 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 37 CITY OF SANGER DEBT SERVICE REQUIREMENTS - GENERAL LONG-TERM DEBT TOTALS Year Ending September 30, 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 September 30, 2005 PRINCIPAL $ 477,312 $ 456,974 458,226 450,833 226,941 ( 21070,286 1601647 116,404 1201000 125,000 130,000 652,051 135,000 145,000 150,000 160,000 170,000 760,000 175,000 185,000 360,000 INTEREST 178,000 156,164 134,174 112,330 90,421 671,089 81,625 76,045 71,245 65,965 60,340 355,220 54,490 48,280 41,465 34,340 26,500 205,075 18,000 9,250 27,250 TOTAL REQUIREMENTS $ 6551312 613,138 592,400 563,163 317,362 21741,375 242,272 192,449 191,245 190,965 190,340 11007,271 189,490 193,280 191,465 194,340 196,500 965,075 193,000 194,250 387,250 $ 3,842,337 $ 1,258,634 $ 5,100,971 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE-37 CITY OF SANGER DEBT SERVICE REQUIREMENTS = ENTERPRISE FUND September 30, 2005 Series 1996 Revenue Bonds Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 50,000 $ 32,840 $ 82,840 2007 50,000 30,790 80,790 2008 55,000 281690 83,690 2009 60,000 261297 86,297 2010 60,000 231628 83,628 2011 65,000 201898 85,898 2012 70,000 17,908 87,908 2013 70,000 14,652 84,652 2014 751000 11,363 86,363 2015 801000 7,837 87,837 2016 85,000 41037 891037 $ 720,000 $ 218,940 $ 938,940 Series 1999 Revenue Refunding Bonds Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 165,000 $ 47,975 $ 212,975 2007 170,000 40,962 2101962 2008 1801000 33,653 2131653 2009 190,000 25,913 2151913 2010 195,000 17,600 212,600 2011 205,000 91020 214,020 $ 11105,000 $ 175,123 $ 11280,123 Series 2002 Revenue Bonds Year Ending TOTAL September 30, PRINCIPAL INTEREST REQUIREMENTS 2006 $ 85,000 $ 121,600 $ 206,600 2007 901000 116,500 2061500 2008 951000 111,.100 206,100 2009 1001000 105,400 205,400 2010 105,000 99,400 204,400 2011 1101000 93,100 203,100 2012 1201000 88,150 208,150 2013 125,000 82,510 207,510 2014 130,000 76,510 2061510 2015 140,000 70,140 210,140 2016 1451000 63,140 208,140 2017 1551000 55,745 210,745 2018 160,000 47,840 207,840 2019 170,000 39,520 2091520 2020 180,000 30510 210,510 2021 190,000 20,790 210,790 2022 195,000 10,530 2051530 $ 212951000 $ 1,2321485 $ 31527,485 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 38 CITY OF SANGER DEBT SERVICE REQUIREMENTS - ENTERPRISE FUND NOTE PAYABLE - SANGER BANK Year Ending September 30, 2006 PRINCIPAL $ 78,862 NOTE PAYABLE -SANGER BANK Year Ending September 30, 2006 2007 2008 2009 2010 PRINCIPAL $ 11,323 11,814 12,326 12,860 6,640 $ 54,963 NOTE PAYABLE -SANGER BANK Year Ending September 30, 2006 2007 2008 PRINCIPAL $ 39,484 41,195 24,100 $ 104,779 Capital Lease -DIVERSIFIED LENDERS, INC. Year Ending September 30, 2006 2007 2008 2009 Capital Lease - ALTEC Year Ending September 30, 2006 2007 2008 PRINCIPAL $ 3,467 3,712 3,975 4,257 $ 15,411 PRINCIPAL $ 26,371 28,767 25,960 $ 81,098 September 30, 2005 INTEREST $ 1,681 INTEREST $ 2,117 1,626 1,114 580 83 $ 5,520 INTEREST $ 3,690 1,979 335 $ 6,004 INTEREST $ 949 704 441 160 $ 2,254 INTEREST $ 6,041 3,645 1,050 $ 10,736 TOTAL REQUIREMENTS $ 80,543 TOTAL EMENTS REQUIR $ 13,440 13,440 13,440 13,440 6,723 $ 60,483 TOTAL EMENTS REQUIR $ 43,174 43,174 24,435 $ 110,783 TOTAL REQUIREMENTS $ 4,416 4,416 4,416 4,417 $ 17,665 TOTAL 32,412 REQUIREMENTS $ 32,412 27,010 $ 91,834 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 38 CITY OF SANGER DEBT SERVICE REQUIREMENTS - ENTERPRISE FUND TOTALS Year Ending September 30, 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 PRINCIPAL $ 459,507 395,488 396,361 367,117 3661640 11985,113 3801000 190,000 195,000 205,000 220,000 11190,000 2301000 1551000 160,000 170,000 180,000 895,000 190,000 195,000 385,000 $ 41455,113 September 30, 2005 INTEREST $ 216,893 1961206 1761383 1581350 140,711 88815431 1231018 1061058 97,162 87,873 77,977 492,088 67,177 55,745 47,840 39,520 30,510 [- 240,792 20,790 10,530 31,320 $ 11652,743 TOTAL REQUIREMENTS $ 676,400 591,694 572,744 525,467 507,351 2,873,656 5031018 2961058 292,162 292,873 297,977 1,682,088 297,177 210,745 207,840 209,520 210,510 11135,792 210,790 205,530 416,320 $ 61107,856 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 38 CITY OF SANGER GOVERNMENTAL AND PROPRIETARY FUNDS SCHEDULE OF RESTRICTED CASH September 30, 2005 GENERAL FUND Equipment Replacement Funds $ 28,812 Insurance Fund 17,026 Beautification Board Funds 6,967 Library Savings 4,938 Sidewalk Fund 50,000 Ambulance Fund 106,252 Park Department Fund 55,972 Unspent 2002 Bond Funds 43,857 Certificate of Obligation Reserve and I & S Funds 44,485 TOTAL GENERAL FUND $ 358,309 SPECIAL REVENUE FUND Hotel/Motel $ 22,333 Economic Development -Section 4A 301,523 Economic Development -Section 4B 490,586 TOTAL SPECIAL REVENUE FUND $ 814,442 ENTERPRISE FUND Revenue Bond I & S Funds Revenue Bond Reserve Funds Revenue Bond Emergency Fund Customer Utility Deposits Unspent 2002 Revenue Bond Funds Water &Sewer Improvement Funds One Plus Program &Safety &Incentive Funds TOTAL ENTERPRISE FUND $ 168,639 3221923 16,212 2001216 5 911,928 1,131 $ 11621,054 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 39 CITY OF SANGER ANALYSIS OF TAXES RECEIVABLE For the Year Ended September 30, 2005 2005 2004 2003 2002 ADJUSTED TAX ROLL $ 11718,611 $ 11449,712 $ 11296,134 $ 860,357 Less: Collections and Adjustments 11674,032 11411,753 11257 647 809,649 CURRENT YEAR TAXES RECEIVABLE - END OF YEAR PRIOR YEAR TAXES RECEIVABLE - END OF YEAR TOTAL TAXES RECEIVABLE - END OF YEAR Assessed Value Tax Rate per $100 Percent of Current Taxes Collected to Billed 44,579 37,959 38,487 50,708 62,188 54,536 59,278 51,079 $ 106,767 $ 92,495 $ 97,765 $ 101,787 $ 290,011,961 $ 256,310,962 $ 224,729,064 $ 130,306,503 $ 0.592600 $ 0.565470 $ 0.565470 $ 0.522840 97.41 % 97.38% 97.03% 94611 % SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 40 ti N O O O LL � Ww 0 Imo_- 0 U Z Z 5:Ea 0 W a.O V *a W008(n O CL (D (L, aw?w U,0Mw O=Ow = F. womma UVO� ¢z(D UFO Lou Q J Q = wWMENEM w am x L) Uw O� w to Z O ea 0 0 0 0 O N N VON M Low � 0 � E O Q +; W -� Q- a am 0 I- o tm moll W Z o O N � V � >- `' .°c E r L4J. �, O Q, W w co 000 000 000 0 0 V C vLQL �No rnCD ((0 N Z CO cNo qt LO co d � o c coo o LO un 60> O O O M H O 0 0 0 O 0 0 0 LO � LO 0 0) (O LO w ONN (OMO ON N LO Ln qt LO to (A J U 0 0 00 0 0 0 O o O 0 O O O 00 O 0 N 000 00 0 0 (V 00o O O O I I I 0 c c w W fn U) N f' N C~. y c 0 o Z w LU W a�i N a�i W am W W FOR �c0 O cU O x �0 H p J o Z ;a O$ ;p W U) W J Z O w Jz� o a W w V c_ H (L w a c V n c ~ V a X �� W w� o E O *6E O� Ww LL J W W¢ W d Q WILLIAM C. SPORE, P.C. Certified Public Accountants 3950 Hwy 360, Grapevine, TX 76051 817421-6619 REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED UPON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAL AUDITING STANDARDS To the City Council City of Sanger, Texas We have audited the financial statements of the governmental activities, the business -type activities and major funds of the City of Sanger, Texas as of and for the year ended September 30, 2005, which collectively comprise the City's basic financial statements and have issued our report thereon dated March 15, 2006, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Com lip ance As part of obtaining reasonable assurance about whether City of Sanger's financial statements are free of material misstatement, we performed tests of its compliance with certain provision of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion, The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards, Internal Control Over Financial Reporting In planning and performing our audit, we considered City of Sanger's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. This report is intended for the information and use of management, Honorable Mayor and City Council of the City of Sanger, Texas, and is not intended to be and should not be used by anyone other than these specified parties. Wi//iom C. Spot-e, P.C. March 15,2006