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2004 Annual Financial Report
CITY OF BANGER FINANCIAL STATEMENTS SEPTEMBER 30, 2004 �ifl711IR"a Wolf-1►j�R PAGE # 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 To the City Council City of Sanger, Texas We 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, 2004, 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. Our responsibility is to express an opinion on these general purpose financial statements based upon our audit. 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. Those standards require that we 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. We believe that our audit provides a reasonable basis for our opinion. In our 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, 2004 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, we have also issued our report dated March 18, 2005 on our consideration of the City of Sanger's internal control over financial reporting and our 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. 3950 Highway 360, Suite 102 #Grapevine, TX 76051 # 817/421-6619 As described in Note 1, the City has implemented a new financial reporting model, as required by the provisions of GASB No. 34, Basic Financial Statements - and management's Discussion and Analysis - for State and Local Governments, for the year ended September 30, 2004. The management's discussion and analysis, the budgetary comparison schedule for the general fund and the pension plan funding progress are not a required part of the basic financial statements, but are supplementary information required by GASB, We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our 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 general purpose financial statement of the City of Sanger, Texas. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion is fairly presented in all material respects in relation to the basic financial statements taken as a whole. WA UJVPOV� (5? William C. Spore, P.C. March 18, 2005 CITY OF SANGER CITY OFFICIALS September 30, 2004 ELECTED OFFICIALS MAYOR Tommy Kincaid MAYOR PRO TEM Andy Garza COUNCILMEMBERS Glenn Ervin Jimmy Evans Joe Higgs Mike Lawler APPOINTED OFFICIALS CITY MANAGER is CITY SECRETARY/ASSISTANT CITY MANAGER MUNICIPAL COURT JUDGE CITY ATTORNEY 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 This annual report consists of a series of financial statements. The Statement of Net Assets and the Statement of Activities (pages 9 & 10) provide information about the activities of the City as a whole and present a longer -term view of the City's finances. Fund financial statements start on page 11. For governmental activities these statements tell how these services were financed in the short term as well as what remains for future spending, Fund financial statements also report the City's operations in more detail than the government -wide statements by providing information about the City's most significant funds. Reporting the City as a Whole The Statement of Net Assets and the Statement of Activities Our analysis of the City as a whole begins on page 9, One of the most important questions asked about the City's finances is, "is the City as a whole better off or worse off as a result of the year's activities?" The Statement of Net Assets and the Statement of Activities report information about the City as a whole and about its activities in a way that helps answer this question, These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private -sector companies. All of the current year's revenues and expenses are taken into account regardless of when the cash is received or paid. These two statements report the City's net assets and changes in them. You can think of the City's net assets -the difference between assets and liabilities -as one way to measure a the City's financial health, or financial position. Over time, increases or decreases in the City's net assets are one indicator of whether its financial health is improving or deteriorating. You will need to consider other nonfinancial factors, however, such as the condition of the City's roads, to assess the overall health of the City. In the Statement of Net Assets and the Statement of Activities, we divide the City into two kinds of activities: • Governmental type activities -Most of the City's basic services are reported here, including police, municipal court, animal control, fire, library, community center, 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. • 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 I l and provide detailed information about the most significant funds -not the City as a whole. Some funds are required to 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. GOVERNMENT -WIDE FINANCIAL ANALYSIS The City's net assets are as follows: GOVERNMENT -WIDE NET ASSETS TOTAL PRIMARY GOVERNMENTAL ACTIVITIES BUSINESS -TYPE ACTIVITIES GOVERNMENT 2004 2003 2004 2003 2004 2003 Current &Other Assets $ 11719,008 $ 21756,852 $ 21779,118 $ 317759731 $ 41498,126 $ 61532,583 Capital Assets 5,097,312 3,450,161 11,200,981 9,420,082 16,298,293 12,870,243 Total Assets 6,816,320 6,207,013 13,980,099 13,195,813 20,796,419 19,402,826 Long -Term Debt 31787,260 41235,711 41194,978 41607,293 71982,238 81843,004 Other Liabilities 779,478 451,753 11309,123 11115,185 21088,601 11566,938 Total Liabilities 41566,738 41687,464 51504,101 51722,478 10,070,839 10,409,942 Invested in Capital Net of Debt 11941,592 11111,747 61794,332 6,0431426 81735,924 71155,173 Restricted 592,786 403,620 418,564 414,035 1,011,350 817,655 Unrestricted (284,796) 41182 11263,102 11015,874 978,306 11020,056 Total Net Assets $ 21249,582 $ 11519,549 $ 81475,998 $ 71473,335 $ 10,725,580 $ 81992,884 As indicated earlier, net assets may serve over time as a useful indicator of the government's financial position. As of September 30, 2004 the City's assets exceeded liabilities by 11 $10,725,580; and the net assets increased by $1,732,696 from September 30, 2003. The City's capital assets increased by $3,428,050 as the City continued the infrastructure projects funded by the 2002 Bond programs. The largest portion of the City's net assets is its investment in capital assets, (land, building, equipment and infrastructure.) 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, 2004, with comparative totals for the year ended September 30, 2003. 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 Home Grant Expenditures 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 2004 2003 2004 2003 2004 2003 $ 767,841 $ 691,530 $ 71165,151 $ 61494,951 $ 71932,992 $ 71186,481 155,375 3931325 -- 1551375 393,325 0 204,454 656,300 204,454 656,300 1,479,031 787,949 283,619 11,058 38,535 1001305 3,623,713 286,164 2,000 1,161,666 683,304 546,912 2131634 1,315,183 638,426 267,362 11,058 53,203 IE� 15,450 96) 85,496 (100,305) (85,4 3,455,583 7,288,366 7,081,205 280,821 285,688 1,011,899 649,403 498,191 323,191 2,893,680 3,049,193 61285,703 61285,703 144,414 51480,217 51624,631 $ 730,033 $ 4061390 $ 1,0021663 $ 11456,574 $ 1,479,031 787,949 2831619 11,058 57,601 0 10,912,079 286,164 2,000 1,1611666 6831304 5461912 2131634 6,2851703 9,179,383 1,315,183 638,426 267,362 11,058 68,653 0 10,536,788 280,821 285,688 1,011,899 649,403 498,191 467,605 5,480,217 8,673,824 1,732,696 $ 1,862,964 Total revenues increased by 3.56% from 2003 with governmental activity revenues increasing 4.87% and proprietary fund user charges (revenues) increasing 10,32%. Developer contributions to the City's proprietary fund infrastructure (capital grants and donation revenues) were $204,454 in 2004 and $656,300 in 2003. CITY FUND ANALYSIS Governmental Funds -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 5 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/1VIotel tax funds are collected by the local motel are used by the City to promote tourism. At September 30, 2004 the special revenue fund had a restricted fund balance of $550,732, The fund balance of the general fund decreased by $1,425,751 primarily due to capital outlays related to 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 $1,420,674 of the 2002 Bond proceeds were used during 2004, with $735,195 of unspent bond proceeds still on hand at September 30, 2004. Property tax revenues increased by $165,095, an 12.51% increase. The assessed value of property in the City has increased 129% in the last four years to $256,310,962. This increase in value has allowed the City Council to only increase its property tax rate by .04 cents (less than a penny) per $100 of valuation since 2000. Historically the City has only transferred funds from the proprietary fund to the general fund as funds were needed by the general fund. During 2004 budgeted transfers were $371,530 but actual transfers were only $100,305. 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 at September 30, 2004 was $1,263,102, which was an increase of $247,228 from the prior year. General Fund Budgetary Highlights Budgeted revenues exceeded actual revenues by $104,658, however, budgeted revenues included $371,530 of transfers from the proprietary fund while actual transfers were only $100,305. After factoring out transfers, actual revenues exceeded budgeted revenues by $166,5670 Included in street capital outlay are street improvement projects funded by the 2002 Bond program. These improvements totaled $1,578,747 during the fiscal year. These items were not included in the original budget, which was amended in March 2005 to include the carryover of the 2002 bond funds along with the related capital outlays during 2004. Included in the fire department capital outlay is the purchase of a new fire truck and related equipment in the amount of $194,993, These equipment purchases were funded from the proceeds of two new notes payable. Neither of these items were included in the original budget. The special revenue 4A and 4B funds actual sales tax revenues exceeded budgeted revenues by $33,658 each due to increased sales tax collections. The 4B fund budgeted project expenditures totaled $160,950 for the fiscal year but actual project expenditures were only $24,544. 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 capitai.assets as of September 30, 2004 amounts to $1b,298,293 knet of depreciation). The investment in capital assets includes land, buildings, equipment and infrastructure. Infrastructure includes streets, water and sewer systems. The City'a capital assets are as follows: Land Construction in Process Infrastructure Buildings & Equipment TOTAL CAPITAL ASSETS AT YEAR-END (net of accumulated depreciation) GOVERNMENTAL ACTIVITIES 2004 2003 $ 376,840 0 31268,096 1,452,376 $ 376,840 0 11804,985 11268,336 BUSINESS -TYPE ACTIVITIES 2004 2003 $ 312,164 21177,224 81112,910 598,683 $ 23,868 707,792 81041,566 646,856 TOTALS 2004 2003 $ 689,004 21177,224 111381,006 21051,059 $ 400,708 707,792 918461551 1,915,192 $ 5,097,312 $ 3,450,161 $ 11,200,981 $ 9,420,082 $ 16,298,293 $ 12,870,243 Additional information on the City's capital assets can be found in Note 3. DEBT ADMINISTRATION The only long-term debt added during the current fiscal year were two notes payable related to the purchase of new a fire truck and related equipment. Outstanding long-term debts are as follows: Certificates of Obligation Revenue Bonds Notes Payable Capital Leases Yarbrough Settlement Pay TOTAL NMENTAL ACTIVITIES GOVER 2004 2003 BUSINESS -TYPE ACTIVITIES 2004 2003 TOTALS 2004 2003 $ 31130,000 $ 31350,000 $ 0 $ 0 $ 3,130,000 $ 39350,000 0 0 4,405,000 4,680,000 4,405,000 4,680,000 821,379 787,146 163,784 283,669 985,163 11070,815 39,536 77,016 301837 66,904 701373 143,920 239,320 280,120 0 0 2391320 280,120 $ 41230,235 $ 41494,282 $ 41599,621 $ 51030,573 $ 81829,856 $ 91524,855 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 2005 are $3,333,572, which is an increase of $104,792 from budgeted revenues for fiscal year 2004. The 2005 budgeted revenues includes transfers from the proprietary fund of $214,322 7 The tax rate used in the 2005 budgeted is .5926 cents per $100 of valuation, an increase of .0279 cents from 2004. Proprietary fund 2005 budgeted revenues are $6,470,678, which is an increase of $351,208 over 2004 budgeted revenues. Budgeted connection fees (water and sewer tap fees and other connection fees) for 2005 are $435,000 while actual tap fees revenues for 2004 and 2003 were $713,096 and $458,660 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. t CITY OF SANGER GOVERNMENT -WIDE STATEMENT OF NET ASSETS September 30, 2004 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 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 Parks Hotel/Motel and Economic Development Unrestricted TOTAL NET ASSETS GOVERNMENTAL ACTIVITIES $ 128,005 196,320 8,658 0 3322983 1,386,025 0 376,840 0 4,495,088 2,337,748 (2,112,364) 5,097,312 61483,331 61816,320 204,293 68,408 0 31975 59,827 2351000 1531781 12,578 41,616 779,478 2,895,000 667,598 26,958 197,704 31787,260 4,566,738 1,941,592 BUSINESS TYPE ACTIVITIES $ 3261513 $ 6851668 6,447 252,227 39,111 2,943 550,732 (284,796) $ 2,2491582 $ 1,270,855 1,364,153 1441110 312,164 2,177,224 13,709,763 1,5091572 (6,507,742) 11,200,981 121709,244 131980,099 539,116 106,800 217,579 (3,975) 44,960 285,000 88,806 30,837 0 1,309,123 4,120,000 74,978 0 0 41194,978 51504,101 6,794,332 418,564 0 0 1,263,102 81475,998 TOTAL 454,518 881,988 15,105 252,227 1,603,838 2,750,178 1441110 689,004 2,1771224 18,2041851 3,847,320 (8,6201106) 16,298,293 19,192,581 201796,419 743,409 175,208 217,579 0 104,787 520,000 242,587 43,415 41, 316 2,088,601 7,015,000 742,576 26,958 197,704 7,982,238 10,070,839 8,735,924 457,675 2,943 550,732 9781306 $ 10,725,580 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 9 FUNCTIONS/PROGRAMS GOVERNMENTAL ACTIVITIES: General Government Public Safety Streets & Sanitation Culture & Recreation Interest on Long -Term Debt TOTAL GOVERNMENTAL ACTIVITIES BUSINESS -TYPE ACTMTIES: Water, Sewer & Electric CITY OF SANGER GOVERNMENT -WIDE STATEMENT OF ACTIVITIES For the Year Ended September 30, 2004 FINES, FEES at OPERATING CAPITAL BUSINESS - CHARGES FOR GRANTS & GRANTS & GOVERNMENTAL TYPE EXPENSES SERVICES DONATIONS DONATIONS ACTIVITIES ACTIVITIES TOTAL $ (288,164) $ 201,836 $ 21000 $ 0 $ (84,328) $ - $ (84,328) (17161,666) 142,312 1287701 0 (890,653) - (890,653) (683,304) 413,843 0 0 (269,461) - (269,461) (5467912) 91850 242674 0 (512,388) - (512,388) (2132634) 0 0 0 (213,634) - (2137634) (21893,680) 767,841 155,375 0 (179703464) - - (61285,703) 711657151 0 204,454 - 17083,902 11083,902 TOTAL PRIMARY GOVERNMENT $ (9,179,383) $ 7,932,992 $ 155,375 $ GENERAL REVENUE Property Taxes Sales & BeverageTaxes Franchise Taxes Hotel/Motel Taxes Interest Income Gain (Loss) on Sale Of Assets Transfers TOTAL GENERAL REVENUE CHANGE IN NET ASSETS NET ASSETS -BEGINNING NET ASSETS -ENDING 204,454 (1,970,464) 1,083,902 1,479,031 7873949 2831619 11,058 38,535 0 100,305 2,700,497 730,033 1,519,549 19,066 (100,305) (81,239) 11002,663 774737335 (886,562) 1,479,031 787,949 283,619 11,058 57,601 0 0 2,619,258 1,732,696 8,992,884 $ 2,249,582 $ 814757998 $ 10,725,580 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 10 CITY OF SANGER BALANCE SHEET GOVERNMENTALFUNDS September 30, 2004 GENERAL FUND ASSETS Cash $ 995,186 $ Receivables: Sales & Beverage Taxes 27,733 Franchise Taxes 18,594 Denton County -Fire Runs 2%766 Property Taxes 92,495 Prepaid Expenses 81658 TOTAL ASSETS 11172,432 LIABILITIES TOTAL SPECIAL GOVERNMENTAL REVENUE FUNDS 518,844 $ 11514,030 27,732 0 0 0 0 55,465 18,594 29,766 92,495 8,658 546,576 1,719,008 Accounts Payable 204,293 0 204,293 Accrued Expenses 61406 0 61406 Due to Other Funds 81131 (41156) 3,975 Deferred Revenues 92,495 0 92,495 TOTAL LIABILITIES 311,325 (4,156) 307,169 FUND BALANCES Reserved For: Capital Outlay 735,195 0 Debt Service 39,111 0 Parks 21943 0 Prepaid Expenses 81658 0 Hotel/Motel Fund 18,796 Economic Development 5317936 Designated For: Capital Outlay 31,570 0 Parks 58,352 Unreserved, Reported In: General Fund (14,722) 0 TOTAL FUND BALANCES 861,107 550,732 TOTAL LIABILITIES &FUND BALANCES $ 11172,432 $ 546,576 $ 735,195 39,111 2,943 8,658 18,796 531,936 31,570 58,352 (14,722) 1,411,839 1,719,008 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page -11 C�3 CAD* iU1IkLrIAkq 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 1,411,839 5,097,312 92,495 (4,352,064) 2,249,582 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page -11 CITY OF SANGER STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS REVENUES Property Taxes Sales & Beverage Taxes Franchise Taxes Hotel/Motel Tax Intergovernmental Charges for Services Fines Licenses & Permits Donations Interest Income TOTAL REVENUES EXPENDITURES General Government Public Safety Streets & Sanitation Culture & Recreation Capital Outlay Debt Service: Principal Interest TOTAL EXPENDITURES EXCESS REVENUES OVER (UNDER) EXPENDITURES For the Year Ended September 30, 2004 GENERAL FUND $ 1,484,301 395,633 283,619 0 150,188 482,928 142,312 142,601 5,187 33,984 1120,753 OTHER FINANCING SOURCES (USES) Proceeds of Notes Payable Transfer to/from Economic Development Transfer from Proprietary Fund TOTAL OTHER FINANCING SOURCES (USES) EXCESS REVENUES OVER (UNDER) EXPENDITURES FUND BALANCE -BEGINNING FUND BALANCE -ENDING 270,263 1,065,060 505,569 487,488 1,987,776 390,875 196,842 41903,873 SPECIAL REVENUE $ 0 392,316 0 11,058 0 0 0 0 0 4,551 407,925 8,214 0 0 0 0 68,165 21,828 98,207 TOTAL GOVERNMENTAL FUNDS $ 1,484,301 787,949 283,619 11,058 150,188 482,928 142,312 142,601 5,187 38,535 3,528,678 278,477 1,0651060 5051569 4871488 1,9871776 459,040 218,670 51002,080 (1,783,120) 309,718 (1,473,402) 194,993 62,071 1001305 357,369 (1,425,751) 21286,858 $ 8611107 0 (62,071) 0 (62,071) 247,647 303,085 194,993 0 100,305 298 295, (1,178,104) 2,589,943 $ 5501732 $ 11411,839 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 $ (1,178,104) 1,987,776 (340,625) (194,993) 459,040 (5,270) 5,036 (2,827) $ 730,033 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE -12 C�3ICnW-J1 LM40 STATEMENT OF NET ASSETS PROPRIETARY FUND September 30, 2004 ASSETS CURRENT ASSETS Cash $ 3261513 Accounts Receivable (net) 661,509 Grant Funds Receivable 24,159 Prepaid Expenses 61447 Due from Other Funds 31975 Inventory 252,227 TOTAL CURRENT ASSETS 11274,830 NONCURRENT ASSETS Restricted Cash 11364,153 Bond Issue Costs (net) 144,110 Capital Assets: Land 312,164 Construction in Process 21177,224 Distribution & Collection Systems 13,709,763 Buildings & Equipment 11509,572 Less - Accumulated Depreciation (61507,742) Total Capital Assets, Net of Accum. Depr, 11,200,981 TOTAL NONCURRENT ASSETS 12,7091244 TOTAL ASSETS CURRENT LIABILITIES Accounts Payable Accrued Expenses Customer Deposits Compensated Absences Revenue Bonds Payable Notes Payable Capital Leases Payable TOTAL CURRENT LIABILITIES NONCURRENT LIABILITIES Revenue Bonds Payable Notes Payable TOTAL NONCURRENT LIABILITIES TOTAL LIABILITIES Invested in Capital Assets, net of Related Debt '' � Restricted for Debt Service Unrestricted TOTAL NET ASSETS 13,984,074 LIABILITIES 539,116 106,800 2171579 441960 2851000 88$806 30,837 1,313,098 4,120,000 74,978 4,194,978 5,508,076 NET ASSETS 6,794,332 418,564 1,263,102 $ 8,4751998 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, 2004 Charges for Services Connection Fees Miscellaneous TOTAL OPERATING REVENUES OPERATING EXPENSES Personnel Services Purchased Water/Electricity Supplies & Contract Services Repair & Maintenance Utilities Franchise Fees Depreciation WATER, SEWER & ELECTRIC $ 6,443,474 713,096 8,581 7,165,151 1,092,202 3,391,711 485,343 289,146 75,105 150,350 656,626 TOTAL OPERATING EXPENSES 6,140,483 OPERATING INCOME 11024,668 NONOPERATING REVENUES (EXPENSES) Interest Income 1 %066 Grants & Developer Contributions 204,454 Interest Expense (145,220) Transfers Out to General Fund (100,305) TOTAL NONOPERATING REVENUES (EXPENSES) (22,005) CHANGE IN NET ASSETS NET ASSETS -BEGINNING NET ASSETS -ENDING 1,002,663 7,473,335 $ 8,4751998 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page -14 CITY OF SANGER COMBINED STATEMENT OF CASH FLOWS - PROPRIETARY FUND For the Year Ended September 30, 2004 2004 CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received from Customers $ 71184,194 Cash Payments to Suppliers for Goods and Services (41390,654) Cash Payments for Employees Services (11099,027) NET CASH PROVIDED BY OPERATING ACTIVITIES 1,694,513 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Cash Transferred to Other Funds (126,563) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of Capital Assets Additions to Long -Term Debt Principal Paid on Bonds and Notes Interest Paid on Bonds and Notes Capital Contributed - Grants & Developers NET CASH USED FOR CAPITAL AND RELATED FINANCING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES: Interest on Investments NET INCREASE (DECREASE) IN CASH CASH -BEGINNING OF YEAR CASH -END OF YEAR CASH PER BALANCE SHEET: Current Assets -Cash Noncurrent Assets - Restricted Cash TOTAL CASH PER BALANCE SHEET Operating Income (2,056,130) 0 (430,952) (253,146) 180,295 (2,559,933) 33,358 (958,625) 2,649,291 $ 326,513 1,364,153 $ 11690,666 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Adjustment to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation (Increase) Decrease in Receivables (Increase) Decrease in Inventory/Prepaid Expense Increase (Decrease) in Accounts Payable Increase (Decrease) in Accrued Expenses Increase (Decrease) in Customer Deposits NET CASH PROVIDED BY OPERATING ACTIVITIES 1024668 $ ,, 656,626 (18,594) (869) (31383) (11572) 37,637 $ 11694,513 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE -15 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER ^ 2004 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The City of Sanger operates under a Council -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 servi Hces: 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, 1999 (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: In June 1999, the Governmental Accounting Standards Board unanimously approved GASB 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. Significant changes in the Statement include the following: • For the first time the financial statements include: A Management Discussion and Analysis (MD&A) section providing an analysis of the City's overall financial position and results of operations. Financial statements prepared using full accrual accounting for all of the City's activities, including infrastructure (roads, bridges, etc.). • A change in the fund financial statements to focus on the major funds. These and other changes are reflected in the accompanying financial statements (including the notes to the financial statements). The City has elected to implement retroactive infrastructure reporting in the current year. 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. CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER OU, AUU4 Blended Component Unit - (4A); The Sanger Texas Industrial Development Corporation (S.T.I.D.C.) 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 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. 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. Page - 17 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2004 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. 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 aII 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/Motel 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. Page - 18 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2004 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. 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 Page - 19 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 305 2004 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. Infrastructure includes roads, bridges and drainage systems. These infrastructure assets are likely to be the largest asset class of the City. Neither their historical cost nor related depreciation has historically been reported in the financial statements. The City has elected to implement the retroactive infrastructure provisions of GASB #34 in the fiscal year beginning October 1, 2003. 3. Revenues: ',jj ! 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. � Page - 20 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 3092004 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 y (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." Fund Statements Governmental fund equity is classified 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, 2004 is $37,462. 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. Interest paid of $129,700 related to the 2002 bonds was capitalized during the fiscal year. This amount was reduced by interest income earned by the unpsent bond proceeds of $14,192. OTE 2: CASH: N At September 30, 2004 the City's cash accounts totaled $3,204,696 of which $3,204,596 was held in checking accounts at a local financial institution. $104,286 of the bank balances were covered by federal depository insurance (risk category 1), and the remaining $3,100,310 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. Page - 21 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 3092004 The securities pledged by the City's depository institution are as follows: Par $ 350,000 $1,000,000 $ 650,000 $2,000,000 $1,000,000 $ 400,000 $ 366,188 $1,046,250 $ 679>453 $2,010,625 $1,010,312 $ 410,262 Cash and cash equivalents on the balance sheet consist of the following: Petty Cash $ 100 Checking, Savings and CD's 39204,596 $ 39204,696 NOTE 3: CAPITAL ASSETS: Capital asset activity for the fiscal year ended September 30, 2004 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 BEGINNING BALANCE $ 376,840 2,878,814 8531344 2631645 11238,723 5,611,366 0 1,073,829 200,271 2161756 6701349 ADDITIONS $ 0 1,616,274 35,012 6,216 330t274 DELETIONS $ 0 0 0 163,041 226,425 ENDING BALANCE $ 376,840 4,495,088 8881356 1061820 11342,572 11987,776 389,466 71209,676 0 153,163 32,282 21,013 134,167 0 0 163,041 226,425 0 1,226,992 232,553 74,728 578,091 2,1611205 340,625 389,466 21112,364 $ 3,450,161 $ 1,647,151 $ 0 $ 5,097,312 CITY OF SANGER CAPITAL ASSETS PROPRIETARY FUND NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2004 BEGINNING ENDING BALANCE ADDITIONS DELETIONS BALANCE Land $ 23,868 $ 288,296 $ 0 $ 312,164 Buildings 328,960 451355 0 374,315 Equipment 11095,854 39,403 0 11135,257 Water System 41605,602 52,815 0 41658,417 Sewer System 4,389,167 1701389 0 4,559,556 Electric System 41119,955 371,835 0 41491,790 TOTAL AT HISTORICAL COST 14,563,406 968,093 0 15,531,499 ACCUMULATED DEPRECIATION Land 0 0 0 0 Buildings 58,235 11,791 0 70,026 Equipment 719,723 121,140 0 840,863 Water System 11488,560 151,079 0 1,639,639 Sewer System 11389,326 138,676 0 1,528,002 Electric System 21195,272 233,940 0 21429,212 TOTAL ACCUMULATED DEPRECIATION TOTAL CAPITAL ASSETS, NET 5,851,116 656,626 0 6,507,742 $ 8,712,290 4t 311,467 $ 0 $ 9,023,757 DEPRECIATION EXPENSE WAS CHARGED TO GOVERNMENTAL ACTIVITIES AS FOLLOWS: Administration $ 5,304 Police 36,123 Municipal Court 31740 Animal Control 41801 Fire 46,529 Enforcement/I nspection 3,689 Parks & Recreation 26,554 Streets 177,422 Swimming Pool 13,219 Vehicle Maintenance 41051 Sullivan & Community Centers 11858 Library 17,335 TOTAL DEPRECIATION EXPENSE $ 3402625 DEPRECIATION EXPENSE WAS CHARGED TO BUSINESS -TYPE ACTIVITIES AS FOLLOWS: Water 1951389 Sewer 182,987 Electric 278,250 $ 6565626 Page - 23 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER Jug 2004 NOTE 4: LONGTERM DEBT: The following Loa summary %J 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. The Bond Obligations require that certain cash reserve accounts be maintained. At September 30, 2004 the City had established and maintained the proper reserve accounts. Notes payable: Note Payable -Guaranty National Bank - Original amount of $150,000, the note requires one hundred twenty monthly installments of $1,591, with the final installment due January 2012. The note bears interest at 2.80 percent under prime rate and has eighty eight installments remaining at September 30, 2004. 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 -Guaranty National Bank - Original amount of $49,775, the note requires thirty six monthly installments of $1,492, with the final installment due April 2006. The note bears interest at five percent and has nineteen installments remaining at September 30, 2004. The note proceeds were used to purchase parks equipment, which also serves as collateral for the note. ' Note Payable -Guaranty National Bank - Original amount of $15,113, the note requires thirty six monthly installments of $452, with the final installment due June 2006. The note bears interest at five percent and has twenty one installments remaining at September 30, 2004. The note proceeds were used to purchase a vehicle for the street department, which also serves as collateral for the note. Note Payable -Guaranty National Bank - Original amount of $74,993, the note requires thirty six monthly installments of $2,250, with the final installment due November 2006. The note bears CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2004 interest at five percent and has twenty six installments remaining at September 30, 2004. The note proceeds were used to purchase a fire truck, which also serves as collateral for the note. Note Payable -Guaranty National Bank - Original amount of $120,000, the note requires sixty monthly installments of $2,265, with the final installment due December 2009. The note bears interest at 2.00 percent under prime rate and has fifty one installments remaining at September 30, 2004. The note proceeds were used to purchase a fire truck, 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 seventy eight installments remaining at September 30, 2004. 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. 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 three annual payments remaining at September 30, 2004. 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. 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. i CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 3u, 2004 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 6.0%. The 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, 2004 the City had established and maintained the proper reserve accounts. Notes Payable: Note Payable - Guaranty National 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 interest at 2.8 percent under prime rate with annual interest payments also due each October until the note is paid in full. The note proceeds were used for water system improvements. Note Payable -Guaranty National Bank -Original amount of $25,461, the note requires thirty six monthly installments of $763 with the final installment due April 2006. The note bears interest at five percent and has nineteen installments remaining at September 30, 2004. The note proceeds were used to purchase a Ford cab and chassis, which also serves as collateral for the note. Capital Leases: Capital Lease - ALTEC - Original balance of $116,344. The lease requires thirty six monthly rental payments of $3,502 with nine payments remaining at September 30, 2004. 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 2002 Freightliner used by the electric department. The vehicle is security for the lease. CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 309 2004 Long-term debt activity for the fiscal year is as follows: 0 0 0 0 CURRENT- BEGINNING ADDITIONS DELETIONS ENDING PORTION GOVERNEMNTAL ACTIVITIES: BOND OBLIGATIONS Series 1994 Certificates of Obligation $ 11030,000 $ 0 $ 1451000 $ 8851000 $ 155,000 Series 2002 Certificates of Obligation 21320,000 0 75,000 0 21245,000 80,000 $ 3,350,000 $ 0 $ 220,000 $ 31130,000 $ 235,000 NOTES PAYABLE Guaranty National Bank 10,444 0 10,444 0 0 Guaranty National Bank 81424 0 81424 0 0 Guaranty National Bank 41271 0 41271 0 0 Guaranty National Bank 1301062 0 12,618 117,444 131526 Guaranty National Bank 431297 0 161080 27,217 161923 Guaranty National Bank 131922 0 41835 91087 51089 Guaranty National Bank 0 741993 191865 55,128 24,809 Guaranty National Bank 0 120,000 16,058 1031942 22,492 Guaranty National Bank-4A Fund 576,726 0 681165 5081561 70,942 TOTAL NOTES PAYABLE $ 787,146 $ 194,993 $ 160,760 $ 821,379 $ 153,781 CAPITAL LEASES Midwest Bankers Diversified Capital City Lease TOTAL CAPITAL LEASES LAWSUIT JUDGEMENT PAYABLE Yarbrough Payable 21878 0 2,878 0 0 511550 0 121014 391536 12,578 $ 77,016 $ 0 $ 37,480 $ 39,536 $ 121578 $ 280,120 $ 0 $ 40,800 $ 239,320 $ 41,616 ACCRUED COMPENSATED ABSENCES Accrued Vacation Pay $ 40,000 $ 2,332 $ 0 $ 42,332 $ 42,332 Accrued Sick Pay 17,000 495 0 17,495 17,495 TOTAL ACCRUED COMPEN. ABSEN. $ 57,000 $ 2,827 $ 0 $ 59,827 $ 59,827 TOTAL GOVERNMENTAL ACTIVITIES BUSINESS -TYPE ACTIVITIES: REVENUE BOND OBLIGATIONS Series 1996 Series 1999 Series 2002 TOTAL REVENUE BONDS NOTES PAYABLE Guaranty National Bank Guaranty National Bank Guaranty National Bank TOTAL NOTES PAYABLE CAPITAL LEASES Altec TOTAL CAPITAL LEASES 41551,282 197,820 459,040 4290,062 502802 $ 810,000 $ 0 $ 45,000 $ 765,000 $ 45,000 1,410,000 0 150,000 1,260,000 155,000 21460,000 0 801000 21380,000 851000 $ 416801000 $ 0 $ 275,000 $ 4,405,000 $ 285,000 $ 237,694 $ 0 $ 87,832 $ 149,862 $ 80,149 23,828 0 23,828 0 0 22,147 0 8,225 13,922 8,657 $ 283,669 $ 0 $ 119,885 $ 163,784 $ 88,806 $ 66,904 $ 0 $ 36,067 $ 30,837 $ 30,837 $ 66,904 $ 0 $ 36,067 $ 30,837 $ 30,837 TOTAL BUSINESS -TYPE ACTIVITIES $ 51030,573 $ Page - 27 0 $ 4301952 $ 41599,621 $ 404,643 CITY OF SANGER NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2004 Future debt maturities are as follows: Governmental Type Activities: Business -Type Activities: Year Principal Interest Principal 2005 $ 442,975 $ 197,323 $ 404,643 2006 457,680 176,122 374>978 2007 437>964 154>823 310,000 2008 445>968 133,637 330,000 2009 446,623 112,048 350,000 2010-2014 749,025 385,203 1,330,000 2015-2019 720,000 238,915 935,000 2020-2022 5309000 5_� 565,000 Total $4 2300235 $1 45} 1� $4 599,621 NOTE 5: RETIl2EMENT PLAN: Interest $ 224,578 206,885 188,252 173,443 157,610 554,739 288,259 61.830 $1 855,596 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 4.81% 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 �[171 Il x.�1 D 1� :�►C�/:�if` II�V: D �l D � `� SEPTEMBER 30, 2004 The schedule of Actuarial Liabilities and Funding Progress for the year ended September 30, 2004 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 or coverea payroii Net pension obligation - beginning Annual required contributions Contributions made Net pension obligation - ending 12/31/03 Unit Cost Level Percent of Payroll Amortized Cost $1,710,290 $1,851,297 92.4% , $1,711,143 8.2% $ 141007 The prior two fiscal years were 100% funded, the net pension obligation was zero and the annual contributions were $69,056 and $51,097, The City of Sanger is one of 794 municipalities having the benefit plan administered by TMRS. Each of the 794 Municipalities have an annual, individual actuarial valuation performed. All assumptions for the 12-31-03 valuations are contained in the 2003 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153. NOTE 6: PROPERTY TAX: 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. REQUIRED SUPPLEMENTARY INFORMATION CITY OF SANGER BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For the Year Ended September 30, 2004 VARIANCE WITH FINAL BUDGET ORIGINAL FINAL ACTUAL FAVORABLE BUDGET BUDGET AMOUNTS (UNFAVORABLE) Beginning Budgetary Fund Balance $ 0 $ 11600,000 $ 11600,000 $ 0 RESOURCES: TAXES: Property Taxes 11443,000 11443,000 11484,301 41,301 Sales & Beverage Taxes 3181000 318,000 3951633 77,633 Franchise Taxes 262,650 294,650 2831619 (11,031) { TOTAL TAXES 21023,650 2,0551650 21163,553 107,903 1 INTERGOVERNMENTAL: Library County Funding 0 0 17,501 17,501 Fire County Funding 95,000 95,000 128,701 33,701 Grant Revenues 0 0 3,986 31986 TOTAL INTERGOVERNMENTAL 95,000 95,000 150,188 55,188 CHARGES FOR SERVICES: Variances & Plats 45,000 45,000 331940 (11,060) Swimming Pool 11,000 11,000 51606 (51394) Sanitation Collection 3501000 414,000 413,843 (157) Rental Fees 3,500 31500 21812 (688) Library Fees 41000 41000 11432 (21568) Other Fees 41200 41200 61335 21135 Misc. Income 40,000 40,000 181960 (21,040) TOTAL CHARGES FOR SERVICES 457,700 521,700 482,928 (38,772) FINES, Police Fines 1231500 123,500 142,312 18,812 LICENSES & PERMITS: Permits & Inspections 146,400 146,400 142,601 (31799) DONATION REVENUES: Beautification Board 0 0 4,937 42937 Parks 0 0 250 250 TOTAL DONATION REVENUES 0 0 51187 51187 INVESTMENT INCOME 11,000 11,000 33,984 221984 OTHER SOURCES: Proceeds of Notes Payable/Capital Lease 0 1951000 194,993 (7) Transfers from 4A Fund 0 38,000 37,527 (473) Transfers from 4B Fund 0 251000 24,544 (456) Transfers from Proprietary Fund 371,530 371$30 1001305 (271,225) TOTAL OTHER SOURCES 371,530 629,530 357,369 (272,161) TOTAL RESOURCES AVAILABLE 31228,780 51182,780 5,078,122 (104,658) SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 30 ©ti'IIII �1T1:�3�1 BUDGETARY COMPARISON SCHEDULE - GENERAL FUND CHARGES TO APPROPRIATIONS: ADMINISTRATION: Personnel Services Insurance Professional Fees Supplies & Contract Service Repair & Maintenance Utilities & Telephone 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 Debt Service TOTAL MUNICIPAL COURT ANIMAL CONTROL: ,, � Personnel Services Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay TOTAL ANIMAL CONTROL For the Year Ended September 30, 2004 ORIGINAL BUDGET 73,099 36,991 7,800 85,293 5,300 9,600 1,000 40)800 259,883 481,468 500 11,000 61,443 15,000 23,200 31,000 19,092 642,703 69,968 7,000 1,700 23,100 800 200 0 102,768 40,383 8,650 3,000 500 10,000 62,533 FINAL BUDGET 73,099 36,991 7,800 85,293 5,300 9,600 1,000 40,800 259.883 481,468 500 11,000 61,443 15,000 231200 31,000 19,092 642,703 69,968 7,000 1,700 23,100 800 200 0 102,768 40,383 8,650 3,000 500 10,000 62,533 ACTUAL AMOUNTS 77,920 37,903 7,621 86,963 5,666 8,347 2,226 40,800 267,446 511,934 144 2,431 39,439 11,552 20,231 47,452 23,574 656,757 70,509 8,250 3,243 24,183 464 3,850 2,933 113,432 37,791 6,718 2,482 1,686 10,000 58,677 VARIANCE WITH FINAL BUDGET FAVORABLE (UNFAVORABLE) (4,821) (912) 179 (11670) (366) 1,253 (1,226) 0 (71563) (30,466) 356 8,569 22,004 3,448 2,969 (16,452) (41482) (14,054) (541) (1,250) (11543) (1,083) 336 (31650) (21933) (10,664) 2,592 1,932 518 (11186) 0 3,856 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 30 CITY OF SANGER BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For the Year Ended September 30, 2004 FIRE: Personnel Services Ambulance Service Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Debt Service Capital Outlay TOTAL FIRE ENFORCEMENT/INSPECTION Personnel Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay TOTAL ENFORCEMENT/INSPECTION PARKS & RECREATION: Personnel Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay TOTAL PARKS &RECREATION STREETS: Personnel Services Repair & Maintenance Solid Waste Collection Supplies & Contract Service Utilities & Telephone Vehicle Capital Outlay Debt Service TOTAL STREETS SWIMMING POOL: Personnel Services Repair & Maintenance Supplies & Contract Service Utilities & Telephone Capital Outlay TOTAL SWIMMING POOL ORIGINAL BUDGET 87,189 90,240 10,000 86,092 8,000 11,000 49,106 10,000 351,627 73,404 2,000 231200 2$000 31200 1,750 105,554 291,496 11,000 32,250 1,300 13,000 55,700 MA 28,749 10,600 2521900 1001300 43,000 17,000 41,000 4211271 914,820 21,914 16,000 15,210 3,500 8,000 64,624 FINAL BUDGET 87,189 90,240 10,000 86,092 8,000 11,000 49,106 2051000 546,627 73,404 2,000 23,200 2,000 3,200 1,750 1051554 291,496 11,000 32,250 1,300 13,000 80,700 429,746 28,749 10,600 348,900 1001300 43,000 17,000 1,679,000 421,271 2,648,820 21,914 16,000 15,210 3,500 8,000 64,624 ACTUAL AMOUNTS 74,881 81,600 2,227 43,830 5,045 6,378 66,990 223,897 504,848 73,550 998 33,082 1,406 1,006 0 1101042 301,286 6,095 17,330 1,858 6,886 34,230 367,685 39,118 1,103 3771797 54,119 19,094 14,338 1,64%174 4161233 2,570,976 21,562 3,485 10,028 3,374 0 38,449 VARIANCE WITH FINAL BUDGET FAVORABLE (UNFAVORABLE) 12,308 8,640 7,773 42,262 2,955 4,622 (173884) (18,897) 41,779 (146) 1,002 (%882) 594 2,194 1,750 (41488) (9,790) 4,905 14,920 (558) 6,114 46,470 62,061 (10,369) 9,497 (28,897) 46,181 23,906 2,662 29,826 5,038 77,844 352 12,515 5,182 126 8,000 26,175 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 30 CITY OF SANGER BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For the Year Ended September 30, 2004 ORIGINAL BUDGET VEHICLE MAINTENANCE: Personnel Services 35,747 Repair & Maintenance 21200 Supplies & Contract Service 11,400 Utilities & Telephone 31350 Vehicle 1,650 Capital Outlay 2,500 TOTAL VEHICLE MAINTENANCE 56,847 SULLIVAN &COMMUNITY CENTERS Repair & Maintenance 31450 Supplies & Contract Service 11,250 Utilities & Telephone 51200 Capital Outlay 11900 TOTAL SULIVAN & COMMUNITY CTRS 21,800 LIBRARY: Personnel Services 77,856 Repair & Maintenance 31200 Supplies & Contract Service 71862 Utilities & Telephone 9,170 Capital Outlay 91830 Debt Service 37,199 TOTAL LIBRARY 145,117 TOTAL CHARGES TO APPROPRIATIONS 31133,022 ENDING BUDGETARY FUND BALANCE $ 95,758 $ FINAL BUDGET 35,747 2,200 11,400 3,350 1,650 2,500 56,847 3,450 11,250 5,200 1,900 21,800 ACTUAL AMOUNTS 37,024 1,320 2,202 3,173 2,124 8,001 53,844 4,708 8,351 2,450 0 15,509 81,411 3,867 7,035 7,762 8,946 37,187 VARIANCE WITH FINAL BUDGET FAVORABLE (UNFAVORABLE) (1,277) 880 9,198 177 (474) (51501) 3,003 (1,258) 2,899 2,750 1,900 6,291 (3,555) (667) 827 1,408 884 12 146,208 (1,091) 5,087,022 4,903,873 183,149 95,758 $ 174,249 $ 78,491 77,856 3,200 7,862 9,170 9,830 37,199 145,117 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 30 CITY OF SANGER BUDGETARY COMPARISON SCHEDULE - SPECIAL REVENUE FUNDS For the Year Ended September 30, 2004 ng Budgetary Fund tta�ance RESOURCES: Sales Taxes Investment Income TOTAL RESOURCES AVAILABLE CHARGES TO APPROPRIATIONS: ADMINISTRATION Supplies & Contract Services Debt Service: Principal Interest Transfer to General Fund for Streets TOTAL CHARGES TO APPROPRIATIONS ENDING BUDGETARY FUND BALANCE � 4B FUND � Beginning Budgetary Fund Balance EP 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 ORIGINAL BUDGET 162,500 1,000 163,500 FINAL BUDGET 162,500 1,000 163,500 ACTUAL AMOUNTS 196,158 1,930 1981088 VARIANCE WITH FINAL BUDGET FAVORABLE (UNFAVORABLE) 0 33,658 930 34,588 3,550 3,550 1,322 2,228 130,000 92,000 68,165 23,835 0 0 21,828 (212828) 0 381000 37,527 473 133,550 1331550 128,842 41708 $ 29,950 $ 29,950 $ 6%246 $ 39,296 162,500 1,000 162,500 1,000 196,158 2,598 n 33,658 1,598 1631500 1631500 198,756 35,256 2,550 2,550 1,314 1,236 160,950 160,950 24,544 136,406 1631500 163,500 25,858 137,642 $ 0 $ 0 $ 172,898 $ 172,898 HOTEL/MOTEL FUND Kin nning Budgetary Fund Balance $ RESOURCES: Alcoholic Beverage Taxes Investment Income TOTAL RESOURCES AVAILABLE CHARGES TO APPROPRIATIONS: ADMINISTRATION Promotion ENDING BUDGETARY FUND BALANCE $ 0 0 0 6,000 0 6,000 11,058 23 11,081 C�7 5,081 0 6,000 5,578 422 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 31 CITY OF SANGER SCHEDULE OF PENSION PLAN FUNDING PROGRESS For the Year Ended September 30, 2004 DEFINED BENEFIT RETIREMENT PLAN Actuarial Valuation Date 12-31-03 12-31-02 12-31-01 Actuarial Value of Assets $ 11710,290 $ 11460,890 $ 1,248,221 Actuarial Accrued Liabilities (AAL) 11851,297 11499,967 1,235,216 Unfunded (Overfunded) AAL (UAAL) 141,007 39,077 (13,005) Funded Ratio 92.4% 97.4% 101.1 % Covered Payroll 11711,143 11567,373 11504,891 UAAL as a Percentage of Covered Payroll 822% 265% -0.9% 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, 2004 & 2003 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 2004 2003 $ 1,484,301 $ 1,319,206 395,633 320,795 283,619 267,362 150,188 3881096 482,928 429,783 142,312 137,488 1421601 124,259 51187 51229 33,984 501993 3,120,753 31043,211 270,263 237,942 11065,060 903,358 0 285,688 505,569 478,851 487,488 445,467 11987,776 588,145 390,875 337,574 196,842 230,843 41903,873 31507,868 (1,783,120) (464,657) 194,993 130,874 62,071 61,841 1001305 85,496 3571369 2781211 (1,425,751) 286,858 2, $ 861,107 (186,446) 2,473,304 $ 21286,858 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 301 2004 With a Comparative Total for the Year Ended September 30, 2003 HOTEL/ MOTEL REVENUES Sales Taxes $ 0 Hotel/Motel Tax 11,058 Interest Income 23 TOTAL REVENUES 11,081 EXPENDITURES Promotion 51578 Supplies & Contract Services 0 Debt Service: Principal 0 Interest 0 TOTAL EXPENDITURES 51578 EXCESS REVENUES OVER (UNDER) EXPENDITURES 51503 OTHER FINANCING SOURCES (USES) Transfer to General Fund for Streets 0 Transfer to General Fund for Parks 0 TOTAL OTHER FINANCING SOURCES (USES) 0 4A FUND $ 196,158 0 1,930 198,088 0 1,322 68,165 21,828 91,315 106,773 (37,527) 0 4B FUND $ 196,158 $ 0 2,598 198,756 0 1,314 0 0 1,314 197,442 0 (24,544) TOTAL TOTAL 2004 2003 3921316 $ 317,384 11,058 11,305 41551 21210 407,925 3301899 5,578 2,636 68,165 21,828 98,207 309,718 (37,527) (24,544) 16,678 2,400 104,077 25,310 148,465 182,434 0 (61,841) (37,527) (24,544) (62,071) (61,841) EXCESS REVENUES OVER (UNDER) EXPENDITURES 51503 69,246 1721898 2471647 1201593 FUND BALANCE - BEGINNING 13,293 1351530 154,262 303,085 182,492 FUND BALANCE - ENDING $ 18,796 $ 204,776 $ 327,160 $ 550,732 $ 303,085 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, 2004 & 2003 2004 OPERATING REVENUES 2003 Charges for Services $ 6,443,474 $ 5,944,097 Connection Fees 713,096 4581660 Miscellaneous 81581 92,194 TOTAL OPERATING REVENUES 71165,151 6,494,951 OPERATING EXPENSES Personnel Services 11092,202 11015,469 Purchased Water/Electricity 31391,711 2,9881296 Supplies & Contract Services 485,343 377,308 Repair & Maintenance 289,146 234,200 Utilities 75,105 63,958 Franchise Fees 150,350 140,315 Depreciation 656,626 6601671 TOTAL OPERATING EXPENSES 6,1401483 51480,217 OPERATING INCOME 1 t024)668 11014,734 NONOPERATING REVENUES (EXPENSES) Interest Income 191066 15,450 Grants & Developer Contributions 204,454 6561300 Interest Expense (145,220) (144,414) Transfers Out to General Fund (100,305) (85,496) TOTAL NONOPERATING REVENUES (EXPENSES) (22,005) 441,840 CHANGE IN NET ASSETS 11002,663 11456,574 NET ASSETS = BEGINNING 71473,335 61016,761 NET ASSETS - ENDING $ 81475,998 $ 7,473,335 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS Page - 35 OPERATING REVENUES Charges and Connection Fees OPERATING EXPENSES CITY OF SANGER COMBINING SCHEDULE OF REVENUES & EXPENSES, PROPRIETARY FUND For the Year Ended September 30, 2004 WATER SEWER ELECTRIC ADMIN. $ 1,174,638 $ 883,343 $ 5,098,589 $ 8,581 DATA VEHICLE PROCESS. MAINTENANCE $ 0 $ 0 TOTAL $ 7165,151 Personnel Services 311,871 81,407 390,057 78,303 193,347 37,217 1,092,202 Purchased Water/Electricity 55,004 0 31336,707 0 0 0 31391,711 Supplies & Contract Service 149,272 1017895 737890 1387941 14,448 61897 485,343 Repair & Maintenance 1107834 1027630 52,874 41265 167419 23124 2897146 Utilities 227034 40,597 61883 21477 0 37114 75,105 Depreciation 195,389 182,987 2783250 0 0 0 656,626 Franchise Fees 0 0 1501350 0 0 0 150,350 TOTAL OPERATING EXPENSES 844,404 509,516 4,289,011 223,986 224,214 49,352 6,140,483 OPERATING INCOME 330,234 373,827 8097578 (215,405) (224,214) (497352) 17024,668 NONOPERATING REVENUES (EXPENSES) Interest Income 0 0 0 19,066 0 0 19,066 Grants & Developer Contributions (8,582) 0 213,036 0 0 0 204,454 Debt Service Interest, Fees & Discounts (30,807) (111,024) (37389) 0 0 0 (145,220) Transfers Out 0 0 (100,305) 0 0 0 (100,305) TOTAL NONOPERATING REVENUES (EXPENSES) (39,389) (111,024) 1091342 19,066 0 0 (22,005) NET INCOME $ 290,845 $ 262,803 $ 918,920 $ (196,339) $ (224,214) $ (49,352) $ 1,002,663 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 36 CITY OF SANGER DEBT SERVICE REQUIREMENTS -GENERAL LONG-TERM DEBT Series 1994 Certificates of Obligation Year Ending September 30, 2005 2006 2007 2008 2009 PRINCIPAL $ 155,000 165,000 175,000 190,000 200,000 $ 885,000 Series 2002 Certificates of Obligation Year Ending September 30, 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 PRINCIPAL $ 80,000 85,000 85,000 90,000 95,000 100,000 1051000 110,000 120,000 125,000 130,000 1351000 1451000 1501000 160,000 170,000 1751000 185,000 $ 2,245,000 September 30, 2004 INTEREST $ 52,625 43,635 33,900 23,400 12,000 $ 165,560 INTEREST $ 110,030 105,470 100,625 95,780 90,650 85,235 80,385 75,975 71,245 65,965 60,340 54,490 48,280 41,465 34,340 26,500 18,000 9,250 $ 111747025 NOTE PAYABLE -GUARANTY NATIONAL BAN Year Ending September 30, 2005 2006 2007 2008 2009 2010 2011 2012 PRINCIPAL $ 13,526 14,218 14,946 15,711 16,514 17,359 18,248 6,922 $ 117,444 INTEREST $ 5,565 4,873 4,145 3,380 2,577 1,732 843 76 $ 23,191 TOTAL REQUIREMENTS $ 207,625 2081635 2081900 213,400 212,000 $ 11050,560 EMENTS REQUIR $ 190,030 190,470 185,625 185,780 1851650 185,235 185,385 1851975 191,245 190,965 1901340 189,490 193,280 191,465 194,340 196,500 193,000 194,250 $ 31419,025 TOTAL REQUIREMENTS $ 19,091 19,091 1 %091 19,091 19,091 19,091 19,091 6,998 $ 140,635 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 37 CITY OF SANGER DEBT SERVICE REQUIREMENTS - GENERAL LONG-TERM DEBT September 30, 2004 NOTE PAYABLE - GUARANTY NATIONAL BAN Year Ending September 30, 2005 2006 PRINCIPAL $ 16,923 10,294 $ 27,217 INTEREST $ 976 172 $ 1,148 NOTE PAYABLE -GUARANTY NATIONAL BAN Year Ending September 30, 2005 2006 PRINCIPAL $ 5,089 3,998 $ 9,087 INTEREST $ 339 84 $ 423 NOTE PAYABLE -GUARANTY NATIONAL BAN Year Ending September 30, 2005 2006 2007 PRINCIPAL $ 24,809 26,078 4,241 $ 55,128 INTEREST $ 2,193 924 26 $ 3,143 NOTE PAYABLE -GUARANTY NATIONAL BAN Year Ending September 30, 2005 2006 2007 2008 2009 PRINCIPAL $ 22,492 23,642 24,852 26,123 6,833 $ 103,942 INTEREST $ 4,686 3,536 2,326 1,055 57 $ 11,660 NOTE PAYABLE -GUARANTY NATIONAL BANK - 4A FUND Year Ending September 30, 2005 2006 2007 2008 2009 2010 2011 PRINCIPAL $ 70,942 73,832 76,840 79,971 83,229 86,619 37,128 $ 5082561 INTEREST $ 19,051 16,161 13,153 10,022 6,764 3,374 373 $ 68,898 TOTAL REQUIREMENTS $ 17,899 10,466 $ 28,365 EMENTS REQUIR $ 5,428 4,082 $ 9,510 EMENTS REQUIR $ 27,002 27,002 4,267 $ 58,271 TOTAL REQUIREMENTS $ 27,178 27,178 27,178 27,178 6,890 $ 115,602 89,993 REQUIREMENTS $ 89,993 89,993 89,993 89,993 89,993 37,501 $ 577,459 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE-37 CITY OF SANGER DEBT SERVICE REQUIREMENTS - GENERAL LONG-TERM DEBT Capital Lease - CAPITAL CITY LEASING Year Ending September 30, 2005 2006 2007 PRINCIPAL $ 12,578 13,170 13,788 $ 39,536 Lawsuit Judgment Payable -Yarbrough Year Ending September 30, 2005 2006 2007 2008 2009 2010 TOTALS Year Ending September 30, 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 PRINCIPAL $ 41,616 42,448 43,297 44,163 45,047 22,749 $ 23%320 PRINCIPAL $ 442,975 457,680 437,964 445,968 4461623 21231,210 226,727 1601376 116,922 120,000 125,000 7491025 130,000 135,000 1451000 1501000 160,000 720,000 170,000 175,000 185,000 5301000 $ 4,2301235 September 30, 2004 INTEREST $ 1,858 1,267 648 $ 3,773 INTEREST $ 0 0 0 0 0 0 $ 0 INTEREST $ 197,323 176,122 154,823 133,637 112,048 773,953 90,341 81,601 76,051 71,245 65,965 385,203 60,340 54,490 48,280 41,465 34,340 238,915 26,500 18,000 9,250 53,750 $ 11451,821 TOTAL REQUIREMENTS $ 14,436 14,437 14,436 $ 43,309 TOTAL EMENTS REQUIR $ 41,616 42,448 43,297 44,163 45,047 22,749 $ 239,320 MENTS REQUIRE $ 640,298 633,802 592,787 579,605 5581671 31005,163 317,068 241,977 192,973 191,245 190,965 11134,228 190,340 189,490 1931280 191,465 194,340 �958,915 196,500 193,000 194,250 583,750 $ 5a682,056 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 37 CITY OF SANGER DEBT SERVICE REQUIREMENTS - ENTERPRISE FUND Series 1996 Revenue Bonds Year Ending September 30, PRINCIPAL 2005 $ 451000 2006 501000 2007 501000 2008 55,000 2009 601000 2010 60,000 2011 65,000 2012 701000 2013 70,000 2014 75,000 2015 80,000 2016 85,000 $ 765,000 Series 1999 Revenue Year tnamg September 30, PRINCIPAL 2005 $ 155,000 2006 1651000 2007 170,000 2008 1801000 2009 1901000 2010 195,000 2011 205,000 $ 11260,000 September au, 2004 TOTAL INTEREST REQUIREMENTS $ 34,640 $ 791640 32,840 82,840 30,790 80,790 28,690 83,690 26,297 86,297 23,628 831628 20,898 85,898 17,908 87,908 14,652 84,652 11,363 861363 7,837 87,837 41037 891037 $ 253,580 $ 1,018,580 TOTAL INTEREST REQUIREMENTS $ 54,562 $ 209,562 471975 212,975 401962 210,962 331653 213,653 251913 215,913 17,600 212,600 91020 214,020 $ 229,685 $ 11489,685 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 38 CITY OF SANGER DEBT SERVICE REQUIREMENTS - ENTERPRISE FUND Series 2002 Revenue Bonds Year Ending September 30, PRINCIPAL 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 $ 85,000 85,000 90,000 95,000 100,000 105,000 110,000 120,000 1251000 130,000 140,000 1451000 155,000 160,000 1701000 1801000 190,000 195,000 $ 213802000 September 30, 2004 INTEREST $ 126,700 121,600 116,500 111,100 105,400 99,400 93,100 88,150 82,510 76,510 70,140 63,140 55,745 47,840 39,520 30,510 20,790 10,530 $ 11359,185 NOTE PAYABLE -GUARANTY NATIONAL BANK Year Ending September 30, 2005 2006 PRINCIPAL $ 80,149 69,713 $ 149,862 INTEREST $ 7,493 4,382 $ 11,875 NOTE PAYABLE -GUARANTY NATIONAL BANK Year Ending j September 30, 2005 2006 Capital Lease - ALTEC Year Ending September 30, 2005 PRINCIPAL $ 8,657 5,265 $ 13,922 PRINCIPAL $ 30,837 $ 30,837 INTEREST $ 499 88 $ 587 TOTAL REQUIREMENTS $ 211,700 2061600 2061500 206,100 205,400 204,400 203,100 208,150 207,510 206,510 210,140 208,140 210,745 207,840 2091520 2101510 210,790 205,530 $ 31739/185 TOTAL REQUIREMENTS $ 87,642 74,095 $ 161,737 1 • G 9156 REQUIREMENTS $ , 5,353 $ 14,509 TOTAL REQUIREMENTS $ 31,521 $ 31,521 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 38 CITY OF SANGER DEBT SERVICE REQUIREMENTS - ENTERPRISE FUND TOTALS Year Ending September 30, 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 PRINCIPAL $ 404,643 374,978 3101000 330,000 350,000 117691621 l 3601000 3801000 1901000 195,000 205,000 1,330,000 1 2201000 230,000 155,000 160,000 170,000 93510001 1801000 190,000 195,000 565,000 $ 41599,621 September 30, 2004 INTEREST $ 224,578 2061885 188,252 173,443 157,610 950,768 140,628 1231018 106,058 97,162 87,873 554,739 77,977 67,177 55,745 47,840 39,520 288,259 30,510 20,790 10,530 61,830 $ 1,855,596 TOTAL REQUIREMENTS $ 629,221 581,863 498,252 503,443 507,610 21720,389 5001628 503,018 296,058 292,162 292,873 1,884,739 297,977 297,177 210,745 207,840 209,520 11223,259 210,510 210,790 205,530 626,830 $ 61455,217 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 38 CITY OF SANGER GOVERNMENTAL AND PROPRIETARY FUNDS SCHEDULE OF RESTRICTED CASH September 30, 2004 GENERALFUND Equipment Replacement Funds Beautification Board Funds Park Department Fund Unspent 2002 Bond Funds Certificate of Obligation Reserve and I & S Funds TOTAL GENERAL FUND SPECIAL REVENUE FUND Hotel/Motel Economic Development -Section 4A Economic Development -Section 4B TOTAL SPECIAL REVENUE FUND ENTERPRISE FUND Revenue Bond I A. 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 and Incentive Funds TOTAL ENTERPRISE FUND $ 31,580 2,943 58,352 735,195 39,111 $ 867,181 $ 18,796 1881832 311,216 $ 518,844 $ 111,853 290,499 16,212 181,806 48,862 714,671 121 129 $ 11364,153 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 39 CITY OF SANGER ANALYSIS OF TAXES RECEIVABLE For the Year Ended September 30, 2004 2004 2003 2002 2001 ADJUSTED TAX ROLL $ 11449,712 $ 1,296,134 $ 860,357 $ 681,486 Less: Collections and Adjustments 11411,753 1,257,647 809,649 655,189 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 37,959 38,487 50,708 26,297 54,536 59,278 51,079 48,679 $ 92,495 $ 97,765 $ 101,787 $ 74,976 $ 256,310,962 $ 224,729,064 $ 130,306,503 $ 111,724,586 $ 0.565470 $ 0.565470 $ 09522840 $ M22840 97.38% 97.03% 94.11% W14% SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE - 40 RECEIPTS: Federal Local TOTAL RECEIPTS EXPENDITURES: FEDERAL Rehabilitation/Reconstruction Project Soft Costs Administrative LOCAL Rehabilitation/Reconstruction Project Soft Costs Administrative EXCESS REVENUES OVER EXPENDITURES CITY OF SANGER OWNER OCCUPIED ASSISTANCE - HOME PROGRAM - CONTRACT #1000127 TEXAS DEPARTMENT OF HOUSING & COMMUNITY AFFAIRS SCHEDULE OF GRANT RECEIPTS & EXPENDITURES For the Year Ending September 30, 2004 CONTRACT PERIOD September 1, 2003 through August 31, 2005 PRIOR FEDERAL LOCAL YEARS 0 0 2,000 0 0 TOTAL $ 2,000 0 2,000 BUDGET $ 520,000 62,500 5827500 (518,000) (62,500) (5803500) 0 — 0 0 446,430 446,430 0 — 0 0 537570 53,570 2,000 — 0 27000 20,000 187000 — 0 0 0 — 0 0 0 2,000 0 0 $ 0 $ 0 $ 0 $ 2,000 49,900 12,600 0 582,500 49,900 12,600 0 580,500 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS PAGE 41 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, 2004, which collectively comprise the City's basic financial statements and have issued our report thereon dated March 18, 2005. 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, Compliance 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 thesee,sprecified parties. W William C. Spore, P.C. March 18, 2005 WILLIAM C. SPORE, P.C. Certified Public Accountants 3950 Hwy 360, Ste 102, Grapevine, Texas 76059 817421-6619 To the City Council City of Sanger, Texas In planning and performing our audit of the general purpose financial statements of the City of Sanger, Texas, for the year ended September 30, 2004, we considered its internal control structure 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. In accordance with Government Auditing Standards, we have issued our report dated March 18, 2005 on our consideration of the City of Sanger's internal control over financial reporting. However, during our audit we became aware of matters that are opportunities for strengthening internal controls and operating efficiency. All of these matters were considered immaterial and have been reviewed with the City's management. We will review the status of these comments during our next audit engagement. Sincerely, Wi 040William C. Spore, P.C. March 18, 2005