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CAFR FY 2004-05CITY OF SCHERTZ, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT ]REP 1-35 �rTy I -1 C c� w _o\�R 7+0 Ti�� FISCAL YEAR ENDED SEPTEMBER 30, 2005 CITY OF SCHERTZ, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2005 OFFICIALS ISSUING REPORT Don E. Taylor City Manager Juan F. Santoya Director of Finance (This Page Intentionally Left Blank) CONTENTS INTRODUCTORY SECTION PAGE NUMBER Letter of Transmittal ix City Officials xv Organizational Chart xvi 2004 Certificate of Achievement xvii FINANCIAL SECTION Independent Auditor's Report 3 Management's Discussion and Analysis 7 Basic Financial Statements 38 Statement of Net Assets 24 Statement of Activities 27 Balance Sheet - Governmental Funds 28 Reconciliation of Balance Sheet - Governmental 56 Funds to Statement of Net Assets 29 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 30 Reconciliation of Change in Fund Balances - Governmental Funds to Change in Net Assets - Governmental Activities 31 Statement of Net Assets - Proprietary Funds 32 Statement of Revenues, Expenses, and Changes In Fund Net Assets - Proprietary Funds 34 Statement of Cash Flows - Proprietary Funds 35 Notes to Basic Financial Statements 38 Required Supplementary Information Schedule of Revenues, Expenditures, and Change in Fund Balances - Budget and Actual - General Fund 56 Notes to Required Supplementary Information 58 CONTENTS PAGE TABLE NUMBER Combining And Individual Fund Statements And Schedules Nonmajor Governmental Funds (Special Revenue Funds) Combining Balance Sheet 62 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 64 Park Special Revenue Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual 66 Recycling Special Revenue Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual 67 Hotel Occupancy Tax Special Revenue Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual 68 Debt Service Fund - Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual 69 Discretely Presented Component Units Combining Statement of Net Assets 72 Combining Statement of Activities 73 STATISTICAL SECTION Government -Wide Expenses, Last Three Fiscal Years 1 76 Government -Wide Revenues, Last Three Fiscal Years 2 77 General Governmental Expenditures by Function, Last Ten Fiscal Years 3 78 General Government Revenues by Source, Last Ten Fiscal Years 4 79 Property Tax Levies and Collections, Last Ten Fiscal Years 5 81 Assessed and Taxable Value of Property, Last Ten Fiscal Years 6 82 iv CONTENTS PAGE TABLE NUMBER Property Tax Rates - All Direct and Overlapping 12 89 Governments, Last Ten Fiscal Years 7 83 Ratio of Net General Obligation Bonded Debt to Assessed 13 90 Value and Net General Bonded Debt Per Capita 8 84 Computation of Direct and Overlapping Debt 9 85 Legal Debt Margin 10 86 Ratio of Annual Debt Service Expenditures for General 17 95 Obligation Bonded Debt to Total General Expenditures - Last Ten Fiscal Years 1 1 87 Revenue Bond Coverage - Utility System Bonds, Last Ten Fiscal Years 12 89 Waterworks and Sewer System Fund Revenue Bond Requirements 13 90 Demographic Statistics - Last Ten Fiscal Years 14 91 Property Value and New Construction - Last Ten Fiscal Years 15 93 Principal Taxpayers 16 94 Miscellaneous Statistics 17 95 SINGLE AUDIT SECTION Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 99 Report on Compliance with Requirements Applicable to each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A -133 103 Schedule of Expenditures of Federal Awards 106 Notes to Schedule of Expenditures of Federal Awards 107 Schedule of Findings and Questioned Costs 108 v (This Page Intentionally Left Blank) vi INTRODUCTORY SECTION vii (This Page Intentionally Left Blank) viii s� io 1400 SCHERTZ PARKWAY w P.O. DRAWER I SCHERTZ, TEXAS 78154 -0890 DON E. TAYLOR (210) 658 -7477 CITY MANAGER FAX (210) 659 -3204 March 28, 2006 To the Honorable Mayor, City Council, and the Citizens of City of Schertz: State law requires that local governments publish a complete set of financial statements presented in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and audited in accordance with generally accepted auditing standards in the United States of America by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the City of Schertz for the fiscal year ended September 30, 2005. This report consists of management's representations concerning the finances of the City of Schertz. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Schertz has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Schertz's financial statements in conformity with U.S. GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Schertz comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City of Schertz's financial statements have been audited by Thompson, Williams, Biediger, Kastor and Young, L.C., a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Schertz for the fiscal year ended September 30, 2005, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor ix concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City of Schertz's financial statements for the fiscal year ended September 30, 2005, are fairly presented in conformity with U.S. GAAP. The independent auditor's report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the City of Schertz was part of a broader, federally mandated "Single Audit" designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. U.S. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD &A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Schertz's MD &A can be found immediately following the report of the independent auditors. Profile of the Government The City of Schertz, incorporated in 1958, is located in the central part of Texas, which is considered to be a top growth area in the state, and one of the top growth areas in the country. The City of Schertz currently occupies a land area of 28 square miles and serves a population of 26,780. The City of Schertz is empowered to levy a property tax on both real and personal properties located within its boundaries. It also is empowered by state statue to extend its corporate limits by annexation, which occurs periodically when deemed appropriate by the governing body. The City of Schertz has operated under the council- manager form of government since November 30, 1972. Policymaking and legislative authority are vested in a city council consisting of the mayor and 5 other members. The city council is responsible, for establishing public policy on City matters by the passage of appropriate ordinances and resolutions. The city manager is responsible for overseeing the day -to -day operations of the government, implementing policy established by the city council, and for appointing the heads of the various departments. The council is elected on a non - partisan basis. Council members serve two -year staggered terms, with two council members elected every two years. The mayor is elected to serve a two -year term. The mayor and all five council members are elected at large. The City of Schertz provides a full range of services including police and fire protection, the construction and maintenance of streets, recreational activities, cultural events, water and sewer services, and EMS services. X The annual budget serves as the foundation for the City of Schertz's financial planning and control. All departments of the City of Schertz are required to submit requests for appropriation to the city manager in June of each year. The city manager uses these requests as the starting point for developing a proposed budget. The city manager then presents this proposed budget to the council for review prior to August 1. The council then holds public hearings on the proposed budget and to adopt a final budget by no later than September 30, the close of the City of Schertz's fiscal year. The appropriated budget is prepared by department, e.g., police. Department heads may make transfers of appropriations within a department. Transfers of appropriations between departments, however, require a special approval of the city council. Budget to actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on pages 56 through 58 as part of the required supplementary information. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City of Schertz operates. Local economy. The City of Schertz currently enjoys a favorable economic environment and local indicators point to continued stability. The region has a growing manufacturing and industrial base that adds to the relative stability of the unemployment rate. Major industries with headquarters or divisions located within the government's boundaries or in close proximity include Verizon, Sprint, Nabisco, Block Distributing, and WalMart. The region has a labor force of approximately 750,000 which is anticipated to grow at a rate of 2.3 percent each year for the next several years. Meanwhile, there continues to be a trend toward steady residential growth. Long -term financial planning. The city council plans to propose the issuance of several bonds, with voter approval. The first proposition is to construct and equip a new library and the purchase of land. The cost of the issuance is $6,000,000. The second proposition is to construct and equip a new recreation center and the purchase of land. The cost of this issuance is $7,000,000. The third proposition is to construct street, curb, and sidewalk improvements and incidental drainage. The cost of this issuance is $20,000,000. The fourth proposition is to construct drainage improvements and the land relating to it. The cost of this issuance is $4,000,000. The fifth proposition is the issuance of $1,500,000 to construct and equip new athletic fields and the related facilities. Xi Cash management policies and practices. Cash temporarily idle during the year was invested through state local investment pools. These funds are essentially liquid. The average yield on investments is about 4 percent (4 %). Active involvement in other investment vehicles was limited due to extremely competitive pool rates. Risk Management. During 2005, the City continued a risk management program for worker's compensation. Various control techniques, including employee accident prevention training, have been implemented during the year to minimize accident - related losses. Third -party coverage is currently maintained for individual worker's compensation claims and all other potential losses. Additional information on the City of Schertz's risk management activity can be found in the notes to the financial statements. Pension benefits. The City of Schertz sponsors an agent multiple - employer defined benefit pension plan for its employees. Each year, an independent actuary engaged by the pension plan calculates the amount of the annual contribution the City of Schertz must make to the pension plan to ensure that the plan will be able to fully meet its obligations to retired employees on a timely basis. As a matter of policy, the City of Schertz fully funds each year's annual required contribution to the pension plan as determined by the actuary. The remaining unfunded amount is being systematically funded as part of the annual required contribution calculated by the actuary. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Schertz, Texas for its comprehensive annual financial report for the fiscal year ended September 30, 2004. This was the 17th consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, the City must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles in the United States of America and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the finance department. We would like to express our appreciation to all members of the department who assisted and contributed to the preparation of this report. xii In addition, without the assistance of each and every department head on staff, we would have none of the successes we've enjoyed. Credit also must be given to the mayor and the city council for their unfailing support for the city manager and staff. Respectfully submitted, Don E. Taylor Juan F. San a City Manager Finance Dire or xiii (This Page Intentionally Left Blank) xiv MAYOR CITY COUNCIL CITY MANAGER DIRECTOR OF FINANCE CITY OF SCHERTZ, TEXAS CITY OFFICIALS INDEPENDENT AUDITORS HONORABLE HAL BALDWIN TONY WILENCHIK MAYOR PRO -TEM REGINNA AGEE CARL DOUGLAS MICHAEL CARPENTER JOHN TRAYHAN DON E. TAYLOR JUAN F. SANTOYA Thompson, Williams, Biediger, Kastor & Young, L.C. San Antonio, Texas xv As of 1 Oct 2004 Municipal Court Judge Asst. City Mgr. Public Works Dept General Svcs Purchasing ti r• City Council City Secretary City Manager EMS Dept Community Services Library Parks Pools Info Bus Tech Office H/R Fire Dept Municipal Court Opers Finance Dept Exec Svcs Police Dept Animal Control Econ Dev PIO Community Development Inspection /Code Enf Planning Certificate of Achievement for Excellence in Financial Reporting Presented to City of Schertz, Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2004 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. UNiIF0 S1AtE5 N �AMVIA i President 6 CURPU0.R710ti� n a ��O FroF.6I.� p�ti CH�{pN0 Executive Director xvii (This Page Intentionally Left Blank) xviii FINANCIAL SECTION (This Page Intentionally Left Blank) 4801 N AA LOOP 4 1 1 ) sI 0 1 L 725 's \N AV—rOVU TrA>s78»c) v i v\ 21O 41 2s8 cp,5ld twbh.\.com To the Honorable Mayor and Members of the City Council City of Schertz, Texas Thompson, Williams, Biediger, Kastor Yo ng, L.C. Independent Auditor's Report (ERTIIICU 1111NA ACCOIhVrAVT5 ULNIMP5 \N1FAR VV [V,) T[ i l l I I r Or CH ?IIFILI) PCRLIC ACCOIT %IAV "PS We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Schertz, Texas, as of and for the year ended September 30, 2005, which collectively comprise the City's basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the City of Schertz, Texas', management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Schertz, Texas, as of September 30, 2005, and the respective changes in financial position and cash flows, where applicable, thereof 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 January 25, 2006 on our consideration of City of Schertz, Texas', internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in conjunction with this report in considering the results of our audit. 3 I I10WISON. AA IL.LLA,Als. 131 PK&R. 11 .A51 OR '.Q 1'01 V, LC. (This Page Intentionally Left Blank) The management's discussion and analysis and budgetary comparison information on pages 7 through 21 and 56 through 58, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required 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 financial statements that collectively comprise the City of Schertz, Texas, basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, other schedules, and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A -1 33, Audits of States, Local Governments, and Non - Profit Organizations, and is also not a required part of the basic financial statements of the City of Schertz, Texas. The combining and individual nonmajor fund financial statements, other schedules, and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we express no opinion on them. (/ Certified Public Accountants San Antonio, Texas January 25, 2006 61 (This Page Intentionally Left Blank) MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Schertz, we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City of Schertz for the fiscal year ended September 30, 2005. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. Financial Highlights The assets of the City of Schertz exceeded its liabilities at the close of the most recent fiscal year by $60,248,122 (net assets). Of this amount, $12,335,141 (unrestricted net assets) may be used to meet the City's ongoing obligations to citizens and creditors. The City's total net assets increased by $8,095,981. Approximately 72% increase is attributable to capital contributions from developers. As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $1 1 ,261 ,210, a decrease of $3,125,802 in comparison with the prior year. The key factor in this decrease was the use of certificates of obligation for construction projects. At the end of the current fiscal year, unreserved fund balance for the general fund was $4,864,647, or 50.0% of total general fund expenditures, including capital outlay. The City's debt increased by $3,200,000 (6.2%) during the current fiscal year due to the issuance of revenue bonds. Overview of the 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 comprise 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 themselves. Government -wide financial statements. The government -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private - sector business. The statement of net assets 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 of Schertz is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving to the change occurs, regardless of the timing of 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 vacation leave). 7 Both of the government -wide financial statements distinguish functions of the City of Schertz that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the City of Schertz include general government, public safety, streets and parks, health, and culture and recreation. The business -type activities of the City of Schertz include a water and sewer department and an emergency medical services department. The government -wide financial statements include not only the City of Schertz itself (known as the primary government). but also legally separate component units for which the City is financially accountable. Financial information for these component units is reported separately from the primary government. The government -wide financial statements can be found on pages 24 through 36 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Schertz, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. The funds of the City of Schertz can be divided into two categories: governmental and proprietary. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near - term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term financing requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long -term impact of the government's near -term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Schertz maintains nine individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, the debt service fund, and the capital projects fund, all of which are considered to be major funds. Data from the other six governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non -major governmental funds is provided in the form of combining statements elsewhere in this report. The basic governmental fund financial statements can be found on pages 24 through 31 of this report. Proprietary funds. The City of Schertz maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City of Schertz uses enterprise funds to account for its water and sewer department and for its emergency medical services department. 1.1 Proprietary funds provide the same type of information as the government -wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water and sewer department and for the emergency medical services department, both of which are considered to be major funds of the City of Schertz. The basic proprietary fund financial statements can be found on pages 32 through 36 of this report. Notes to the 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 can be found on pages 38 through 54 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's general fund budgetary schedule. The City of Schertz adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with this budget. Required supplementary information can be found on pages 56 through 58 of this report. The combining statements referred to earlier in connection with non -major governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 62 through 69 of this report. Government -wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City of Schertz, assets exceeded liabilities by $60,248,122 at the close of the most recent fiscal year. By far the largest portion of the City's total net assets (71 %) reflects its investment in capital assets (e.g. land, buildings, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding. The City of Schertz uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The remainder of this page is left blank intentionally. 9 NET ASSETS Table A -1 An additional portion of the City's total net assets (8.7 %) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, ($12,335,141) may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Schertz is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business -type activities. The same situation held true for the prior fiscal year. There was a decrease of $2,224,1 1 1 in restricted net assets reported in connection with the City's governmental activities. This decrease is due to spent bond proceeds from the prior year issue of certificates of obligations. The government's net assets increased by $8,095,981 during the current fiscal year. About 72% of this increase represents capital contributions from developers. The remainder of this page is left blank intentionally. 10 GOVERNMENTAL BUSINESS -TYPE ACTIVITIES ACTIVITIES TOTAL 2005 2004 2005 2004 2005 2004 Current and Other Assets $12,912,816 $16,208,533 510,021,346 $ 5,885,959 522,934,162 $22,094,492 Capital Assets 36,279,821 29 303,054 29 286 1 94 27.503.753 65,566,015 56.806.807 TOTAL ASSETS 49.192.637 45 511 39.307 540 3.3,389,712 88.500.1 77 78,901,299 ,587 Long -Term Liabilities Outstanding 17,653,279 18,745,328 7,1 50,962 4,359,562 24,804,241 23,104,890 Other Liabilities 2.068 892 2,514,768 1 378.922 1,129,S00 3.447 814 3.644.268 TOTAL LIABILITIES 19 722.1 71 21 260.096 8,529,884 S,489.062 28.252,055 26.749.1 58 Net Assets Invested in Capital Assets, Net of Related Debt 17,699,797 16,228,134 24,970,976 22,901,982 42,670,773 39,130,116 Restricted 4,813,496 7,037,607 428,712 1,010,662 5,242,208 8,048,269 Unrestricted 6,957,173, 985,750 5377,968 3.988.006 12.335,141 4.973 756 Table A -1 An additional portion of the City's total net assets (8.7 %) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, ($12,335,141) may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Schertz is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business -type activities. The same situation held true for the prior fiscal year. There was a decrease of $2,224,1 1 1 in restricted net assets reported in connection with the City's governmental activities. This decrease is due to spent bond proceeds from the prior year issue of certificates of obligations. The government's net assets increased by $8,095,981 during the current fiscal year. About 72% of this increase represents capital contributions from developers. The remainder of this page is left blank intentionally. 10 The following table indicates changes in net assets for governmental and business -type activities: CHANGES IN NET ASSETS Expenses General Government GOVERNMENTAL BUSINESS -TYPE 3,612,084 ACTIVITIES ACTIVITIES TOTAL 4,586,498 2005 2004 2005 2004 2005 2004 Revenues 1,134,281 1,019,101 Health 221,950 Program Revenues 221,950 192,506 Culture and Recreation 339,124 Charges for Services S 3,383,417 S 2,920,424 $12,751,791 $9,258,452 516,135,208 512,178,876 Operating Grants and 862,744 707,090 Water and Sewer Contributions 1,789,763 2,280,629 8,937,553 8,302,505 1,789,763 2,280,629 Capital Grants and 3.789.791 2.509.858 3.789.791 2.509.858 Total Expenses 11,728,779 Contributions 3,808,133 2,153,213 2,055,366 1,045,334 5,863,499 3,198,547 General Revenues Increase (Decrease) in Net Property Taxes 4,908,108 4,410,567 Assets before Special Item 4,908,108 4,410,567 Other Taxes 3,067,945 2,41 1,342 and Transfers 3,067,945 2,41 1,342 Unrestricted Investment (327,509) 8,095,981 4,332,978 Special Item Earnings 356,080 114,323 170,610 61,025 526,690 175,348 Other 83.337 58.770 177.554 120.043 260,891 178.813 Total Revenues 17.396.783 14.349.268 15.155.321 10.484.854 32.552.104 24- 834.122 Expenses General Government 3,612,084 2,873,573 3,612,084 2,873,573 Public Safety 5,558,596 4,586,498 5,558,596 4,586,498 Streets and Parks 1,134,281 1,019,101 1,134,281 1,019,101 Health 221,950 192,506 221,950 192,506 Culture and Recreation 339,124 310,013 339,124 310,013 Interest and Other Fees 862,744 707,090 862,744 707,090 Water and Sewer 8,937,553 8,302,505 8,937,553 8,302,505 EMS 3.789.791 2.509.858 3.789.791 2.509.858 Total Expenses 11,728,779 9.688,781 12.727.344 10.812.363 24.456,123 20.501.144 Increase (Decrease) in Net Assets before Special Item and Transfers 5,668,004 4,660,487 2,427,977 (327,509) 8,095,981 4,332,978 Special Item 327,900 327,900 Transfers 199,123 584,733 (199.123) (584.733) - Change in Net Assets 5.867.127 5,245.220 2.228.854 (584.342) 8.095.981 4.660.878 Net Assets, as Previously Reported 24,251 ,491 19,319,547 27.,900,650 28,484,992 52,152,141 47,804,539 Restatement of Net Assets (648.1 52) (313.276) 648.152 (313.276) Net Assets - Beginning as Restated 23 603.339 19.006.271 28,548,802 28.484,992 52.1 52.141 47.491.263 NET ASSETS - ENDING 329 470 466 524 251 491 g30 777 65� 527 900 650 560.248 1 22 152152 14] Table A -2 (This Page Intentionally Left Blank) 12 Below is a graph showing total revenues by source for the City: Total Revenues - Government -Wide 18.000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 Cnarges tot Operating Capital Grant Property Tax Other Taxes Unrestricted Other Services Grants & & Revenues Investment Contributions Contributions Earnings ■ 2005 ■ 2004 Governmental Activities. Governmental activities accounted for 72% of the growth in the net assets of the City of Schertz. Most of this increase is the result of capital contributions from developers. For the most part, increases in expenses closely paralleled inflation and growth in the demand for services. 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,OD0,000 500,000 Revenues - Governmental Activities cnarges Tor Uperanng Capital Grant & Property Tax Other Taxes Unrestricted Other Services Grants& Contributions Revenues Investment Contributions Earnings 2005 ■ 2004 13 (This Page Intentionally Left Blank) W, 6.000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 Expenses - Governmental Activities General Public Safety Streets & Parks Health Culture & Interest & Other Government Recreation Fees ® 2005 ® 2004 Business -type activities. Charges for services increased by $3,493,339. This increase was due to a water rate increase. Capital grants and contributions increased by $1,010,032. This increase was due to increased capital contributions from developers. Revenues - Business -Type Activities 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 Charges for Services Capital Grant & Unrestricted Other Contributions Investment Earnings ❑ 2005 ❑ 2004 is (This Page Intentionally Left Blank) 0 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 Expenses- Business -Type Activities Water & Sewer EMS Financial Analysis of the Government's Funds ■ 2005 M 2004 As noted earlier, the City of Schertz uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. The remainder of this page is left blank intentionally. 17 (This Page Intentionally Left Blank) Governmental funds. The focus of the City's governmental funds 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 as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $11,261,210. Of this total amount, $5,524,798 constitutes unreserved fund balance, which is available for spending at the government's discretion. The remainder of fund balances is reserved or designated to indicate that it is not available for new spending because it has already been committed to pay debt service, for capital improvement projects, and other restricted purposes. The general fund is the chief operating fund of the City of Schertz. At the end of the current fiscal year, unreserved fund balance of the general fund was $4,864,647, while total fund balance reached $4,875,218. As a measure of the general fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 50.0% of total general fund expenditures, including capital, while total fund balance represents 50.1% of that same amount. The debt service fund has a total fund balance of $263,740, all of which is reserved for the payment of debt service. The net increase in fund balance during the current year in the debt service fund was minimal. Proprietary funds. The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. Unrestricted net assets of the water and sewer fund at the end of the year amounted to $5,473,160 and those for the Schertz EMS fund amounted to a deficit of ($95,192). General Fund Budgetary Highlights Differences between the original budget and the final amended budget and the final budget and actual expenditures can be briefly summarized as follows: Several departments experienced shortfalls. This was due to a significant midyear salary increase. Police and Fire Departments had the more significant increases. Another contributing factor to the Police and Fire Department's shortfall resulted from the increasing cost of fuel. The shortfall in the legal department resulted from a special election called by council on property tax exemptions. During the year, revenues exceeded budgetary estimates and funded the overexpenditures in various departments. Capital Asset and Debt Administration Capital assets. The City's investment in capital assets for its governmental and business -type activities as of September 30, 2005, amounts to $65,566,015 (net of accumulated depreciation). We Major capital asset events during the current fiscal year included the following The City started construction on the new Council Chambers and Civic Center on the property adjacent to the city hall. The new fire sub - station on IH -35 was completed. It will serve citizens in the northern section of the City as well as the growing Tri- County Industrial Park. Maske Road bridge and drainage expansion project started and is scheduled to be completed 2005 -06. CAPITAL ASSETS (NET OF DEPRECIATION) Table A -3 Additional information on the City's capital assets can be found in Note 5 on pages 45 through 47 of this report. Long -Term debt. At the end of the current fiscal year, the City of Schertz had total bonded debt outstanding of $25,934,000. Of this amount, $18,455,000 comprises debt backed by the full faith and credit of the government. The remainder of the City's debt represents bonds secured solely by specified revenue sources, i.e., revenue bonds. OUTSTANDING DEBT GENERAL OBLIGATION AND REVENUE BONDS GOVERNMENTAL BUSINESS -TYPE ACTIVITIES ACTIVITIES TOTAL 2005 2004 2005 2004 2005 2004 $ $ 64,000 $ 4,045,000 $ 4,520,000 Land S 3,676,634 $ 3,521,509 $ 301,170 $ 301,170 $ 3,977,804 $ 3,822,679 Buildings and Improvements 6,259,157 6,385,945 27,590,650 26,236,398 33,849,807 32,622,343 Machinery, Equipment, Other Debt 34.000 40.000 34.000 40.000 TOTALS and Vehicles 1,160,814 1,054,852 548,198 822,187 1,709,012 1,877,039 Infrastructure 20,752,609 11,533,334 - 20,752,609 11,533,334 Construction in Progress 4,430,607 6.807.414 846.176 143.998 5,276,783 6.951.412 TOTALS $3-6 274_.82.1_ $29 X054 $29 ?86 194 $27 503 753 $65.566.01 5 856 806 8QZ Table A -3 Additional information on the City's capital assets can be found in Note 5 on pages 45 through 47 of this report. Long -Term debt. At the end of the current fiscal year, the City of Schertz had total bonded debt outstanding of $25,934,000. Of this amount, $18,455,000 comprises debt backed by the full faith and credit of the government. The remainder of the City's debt represents bonds secured solely by specified revenue sources, i.e., revenue bonds. OUTSTANDING DEBT GENERAL OBLIGATION AND REVENUE BONDS Table A -4 101 GOVERNMENTAL BUSINESS -TYPE ACTIVITIES ACTIVITIES TOTAL 2005 2004 2005 2004 2005 2004 General Obligation Bonds $ 4,045,000 S 4,456,000 $ $ 64,000 $ 4,045,000 $ 4,520,000 Certificates of Obligation 14,250,000 14,785,000 14,250,000 14,785,000 Tax Notes 160,000 450,000 - 160,000 450,000 Revenue Bonds - 7,445,000 4,625,000 7,445,000 4,625,000 Other Debt 34.000 40.000 34.000 40.000 TOTALS 818 455,0 ktR 000 $Z 479 OQQ 4.729,040 $25 934000 824 420 000 Table A -4 101 The City's total debt increased by 6.2% during the current fiscal year. The key factor in the increase is the City of Schertz issued revenue bonds in the amount of $3,200,000 for the major capital projects in the water and sewer fund. The City of Schertz and its water and sewer department both maintain a "AA" rating from Standard and Poor's and Fitch and a "AA" rating from Moody's for general obligation debt. The revenue bonds of the water and sewer department have been rated "A" by all three of these rating agencies. State statues limit the amount of general obligation debt a governmental entity may issue to 10 percent of its total assessed valuation. The current debt limitation for the City of Schertz is approximately $129,215,638 which is significantly in excess of the City's outstanding general obligation debt. Additional information on the City's long -term debt can be found in Note 8 on pages 49 through 51 of this report. Economic Factors and Next Year's Budgets and Rates During the current fiscal year, unreserved fund balance in the general fund increased to $4,864,647. The City of Schertz has not appropriated any of this amount for spending in the 2006 fiscal year budget. It is intended that the available fund balance can be utilized to avoid the need to raise taxes or charges during the 2006 fiscal year. Water and sewer rates are expected to remain stable. A portion of the debt service fund balance will be used to offset the debt service ad valorem rate. Requests for Information This financial report is designed to provide a general overview of the City's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Finance Director, City of Schertz, 1400 Schertz Parkway, Schertz, Texas 78154. 4 (This Page Intentionally Left Blank) 22 BASIC FINANCIAL STATEMENTS 23 CITY OF SCHERTZ TEXAS STATEMENT OF NET ASSETS SEPTEMBER 30 2005 (The Accompanying Notes are an Integral Part of these Financial Statements) 24 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS -TYPE COMPONENT ACTIVITIES ACTIVITIES TOTAL UNITS ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 314,812 $ 39,091 $ 353,903 $ 177,356 Investments 10,785,021 90,130 10,875,1 51 798,875 Receivables: Delinquent Taxes, Net of Allowance for Uncollectible Accounts 157,535 157,535 - Accounts and Other 1,462,316 1,293,368 2,755,684 104,664 Inventories 10,571 124,954 135,525 Capital Lease Receivable - 51,961 51,961 Deferred Charges 8,675 10,327 19,002 Investments - Restricted 8,119,733 8,119,733 Internal Balances 43,382 (43,382 Total Current Assets 12,782,312 9.686.1 82 22.468.494 1,080,895 NONCURRENT ASSETS Capital Lease Receivable 170,346 170,346 - Deferred Charges 130.504 164,818 295322 Total 130.504 335.164 465.668 Capital Assets: Land 3,676,634 301,170 3,977,804 Buildings and Improvements 8,640,719 37,748,601 46,389,320 Machinery, Equipment, and Vehicles 2,216,174 2,562,417 4,778,591 Infrastructure 25,929,402 - 25,929,402 Construction in Progress 4,430,607 846,176 5,276,783 Accumulated Depreciation (8,613,715 (12.172.1 70) (20.785.8851 Total Capital Assets 36.279.821 29 286.194 65,566,015 Total Noncurrent Assets 36 410.325 29.621 .358 66 031 .683 TOTAL ASSETS 49,192,637 39.307.540 88.500.1 77 1,080,895 (The Accompanying Notes are an Integral Part of these Financial Statements) 24 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS SEPTEMBER 30, 2005 (The Accompanying Notes are an Integral Part of these Financial Statements) 25 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS -TYPE COMPONENT ACTIVITIES ACTIVITIES TOTAL UNITS LIABILITIES CURRENT LIABILITIES PAYABLE FROM UNRESTRICTED ASSETS Accounts Payable and Accrued Liabilities S 650,855 $ 695,980 $ 1,346,835 S 23,494 Compensated Absences and Salary Reserves 122,823 32,828 155,651 Accrued Interest Payable 141,107 141,107 Current Portion of Long -Term Debt 1,154.107 1.154,107 Total Current Liabilities Payable from Unrestricted Assets 2.068.892 728,808 2.797.700 23,494 CURRENT LIABILITIES PAYABLE FROM RESTRICTED ASSETS Customer Deposits 247,335 247,335 - Accrued Interest Payable 17,688 17,688 - Current Portion of Long -Term Debt 385.091 385.091 - Total Current Liabilities Payable from Restricted Assets 650,114 650,114 - Total Liabilities 2.068,892 1.378.922 3.447.814 23.494 NONCURRENT LIABILITIES Long -Term Debt 17,284,810 7,052,480 24,337,290 - Compensated Absences and Salary Reserves 368.469 98.482 466.951 Total Noncurrent Liabilities 17.6S3,279 7,1 50.962 24.804.241 - TOTAL LIABILITIES 19.722,171 8.529.884 28.252.055 23.494 NET ASSETS Invested in Capital Assets, Net of Related Debt 17,699,797 24,970,976 42,670,773 - Restricted for: Construction 4,223,489 - 4,223,489 Debt Service 263,740 428,712 692,452 Tree Mitigation 326,267 - 326,267 Unrestricted 6,957,173 5.377.968 12.335.141 1.057.401 TOTAL NET ASSETS $22470.466 534.777.656 560 248 122 1 .057.401_ (The Accompanying Notes are an Integral Part of these Financial Statements) 25 (This Page Intentionally Left Blank) 26 CITY OF SCHERTZ, TEXAS STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30. 2005 (The Accompanying Notes are an Integral Part of these Financial Statements) NET (EXPENSE) REVENUE AND CHANGES IN NET ASSETS PROGRAM REVENUES PRIMARY GOVERNMENT CHARGES OPERATING CAPITAL BUSINESS - FOR GRANTS AND GRANTS AND GOVERNMENTAL TYPE COMPONENT FUNCTIONS /PROGRAMS EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS ACTIVITIES ACTIVITIES TOTAL UNITS Primary Government Governmental Activities General Government S 3,612,084 S 1,575,236 S 585,983 S S (1,450,865) S S (1,450,865) Public Safety 5,558,596 1,475,618 324,344 (3,758,634) (3,758,634) Streets and Parks 1,134,281 141,523 873,224 3,808,133 3,688,599 3,688,S99 Health 221,950 44,611 - (177,339) (177,339) Culture and Recreation 339,124 146,429 6,212 (186,483) (186,483) Interest and Other Fees 862,744 - - (862,744) X62.744) Total Governmental Activities 11 .728.779 3,383,417 1,789,763 3.808.133 (2.747.466) (2.747.466) Business -Type Activities Water and Sewer 8,937,SS3 9,308,362 - 2,055,366 2,426,17S 2,426,175 EMS 3,789,791 3.443.429 (346.362) (346,362) Total Business -Type Activities 12,727,344 12.751 .791 2.055.366 2.079.813 2,079,813 Total Primary Government S 4 456.1 Sl6 1 35 208 1 .789.763 5.86 .49 (2,747,466) 2.079.813 (667,653) Component Units 1 S 1 761 S 4 723 S - V1.047.05 8) General Revenues Taxes Ad Valorem 4,908,108 - 4,908,108 Sales 2,227,282 - 2,227,282 1,113,193 Utility Franchise 786,298 786,298 - Hotel /Motel 42,982 42,982 - Bingo 4,946 4,946 - Mixed Drink 6,437 - 6,437 - Unrestricted Investment Earnings 356,080 170,610 526,690 21.710 Miscellaneous 83,337 177,554 260,891 Transfers between Governmental Activities and Business -Type Activities 199,123 (199,123) Total General Revenues and Transfers 8,614,593 149.041 8.763 634 1134,903 Change in Net Assets 5.867.1 27 2.228.854 8.095.981 87.845 Net Assets- As Previously Reported 24,251,491 27,900,650 52,152,141 969,556 Restatement of Net Assets (648,1 52) 648.1 52 - - Net Assets - Beginning, as Restated 23.603.339 28.548.802 52.152,141 969.556 NETASSETS - ENDING 5Q,470 466 530.777 F5FS $6() 2A&J=4 S 1 (lSZ,4ot (The Accompanying Notes are an Integral Part of these Financial Statements) CITY OF SCHERTZ TEXAS BALANCE SHEET - GOVERNMENTAL FUNDS SEPTEMBER 30. 2005 _ TOTAL ASSETS $E 767.01 6 $22 $512 -A-A X98 4 $13- ,2�4�650. LIABILITIES MAJOR FUNDS Accounts Payable $ 304,565 $ - $ 95,555 OTHER TOTAL Accrued Salaries and DEBT CAPITAL GOVERNMENTAL GOVERNMENTAL Benefits GENERAL SERVICE PROIECTS FUNDS FUNDS Due to Other Funds 507,716 - 13,297 ASSETS Deferred Revenue 829,613 31.959 - Cash and Cash Total Liabilities 1.891.798 31.959 108.852 831 Equivalents $ 140,023 $ 5,706 $ 119,869 $ 49,214 $ 314,812 Investments 5,355,443 .258,034 4,233,509 938,035 10,785,021 Receivables: Inventory 10,571 - - - Taxes, Net 125,576 31,959 263,740 - 157,535 Accounts and Other 11122,106 - 340,210 - 1,462,316 Due from Other Funds 13,297 - 551,098 - 564,395 Inventory 10,571 - 10,571 TOTAL ASSETS $E 767.01 6 $22 $512 -A-A X98 4 $13- ,2�4�650. LIABILITIES Accounts Payable $ 304,565 $ - $ 95,555 $ 831 S 400,951 Accrued Salaries and Benefits 249,904 - - 249,904 Due to Other Funds 507,716 - 13,297 521,013 Deferred Revenue 829,613 31.959 - 861.572 Total Liabilities 1.891.798 31.959 108.852 831 2.033,440 FUND BALANCES Reserved for: Inventory 10,571 - - - 10,571 Debt Service 263,740 - 263,740 Tree Mitigation - - 326,267 326,267 Unreserved - Designated for: Capital Improvement - - 5,135,834 5,135,834 Unreserved, Reported in: General Fund 4,864,647 - 4,864,647 Special Revenue Funds - - 660,151 660.151 Total Fund Balances 4.875.218 263.740 5,135.834 986.418 11.261,210 TOTAL LIABILITIES AND FUND BALANCES 56,761.W-6 5295 $5.244 686 5287Z49 $-L3 294 6�0 (The Accompanying Notes are an Integral Part of these Financial Statements) 28 CITY OF SCHERTZ, TEXAS RECONCILIATION OF BALANCE SHEET GOVERNMENTAL FUNDS TO STATEMENT OF NET ASSETS SEPTEMBER 30, 2005 TOTAL FUND BALANCES - GOVERNMENTAL FUNDS $ 1 1 ,261 ,21 0 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 as assets in governmental funds. 36,279,821 Certain receivables are not available, and therefore, are deferred in governmental funds. 704,037 Certain receivables will be collected this year, but are not available soon enough to pay for the current period's expenditures, and therefore are deferred in the funds. 157,535 Long -term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds: Bonds. Payable $(18,438,917) Deferred Charge for Issuance Cost (to be Amortized as Interest Expense) 139,179 Accrued Interest Payable (141,107) Compensated Absences and Salary Reserves (491.292) (18,93 2,13 7) TOTAL NET ASSETS - GOVERNMENTAL ACTIVITIES 2 4 466 (The Accompanying Notes are an Integral Part of these Financial Statements) 29 EXPENDITURES MAIOR FUNDS Current General Government 3,272,752 9,079 OTHER TOTAL Streets and Parks DEBT CAPITAL GOVERNMENTAL GOVERNMENTAL GENERAL SERVICE PROIECTS FUNDS FUNDS - 3,998,548 Debt Service REVENUES Taxes $ 6,801,430 $1,725,023 $ $ 42,982 $ 8,569,435 Licenses and Permits 1,190,844 2.120.069 4.007 627 Excess (Deficiency) of 230,731 1,421,575 Charges for Services 872,286 Expenditures 634.690 872,286 Fines and Forfeitures 822,614 93,090 915,704 Grants 324,344 626,235 6,212 956,791 Other Revenue 351.405 12.310 213,813 81.902 659.430 Total Revenues 10.362.923 1,737,333 840,048 454.917 13,395.221 EXPENDITURES Current General Government 3,272,752 9,079 Public Safety 4,542,384 Streets and Parks 1,043,501 Health 208,499 Culture and Recreation 325,498 - CapitalOutlay 335,599 - 3,998,548 Debt Service Principal - 1,236,000 interest and Fiscal Charges 884.069 - Total Expenditures 9.728,233 2.120.069 4.007 627 Excess (Deficiency) of Revenues Over (Under) Expenditures 634.690 (382,736 (3,167,579 OTHER FINANCING SOURCES (USE5) Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances FUND BALANCES - BEGINNING RESTATEMENT OF FUND BALANCES BEGINNING FUND BALANCE AS RESTATED FUND BALANCES - ENDING 1 89,729 26,336 216.065 238,852 25,325 399,183 158,618 0 697 L6) - - (214.227) (14 4.4 51) 399,183 158,618 (214,227) 490,239 16,447 (3,008.961 24.625 4,384,979 247,293 8,792,947 961,793 (648,1 52) 4,384,979 247.293 8,144,795 961,793 3,471 ,560 4,542,384 1,043,501 208,499 325,498 4,360,483 1,236,000 884.069 16,071,994 (2,676,773) 583,126 (384,003 199.123 (2 477.650) 14,387,012 (648,152 13,738,860 1 1 .261 (The Accompanying Notes are an Integral Part of these Financial Statements) 30 CITY OF SCHERTZ TEXAS RECONCILIATION OF CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS TO CHANGE IN NET ASSETS - GOVERNMENTAL ACTIVITIES SEPTEMBER 30, 2005 NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and• reported as depreciation expense. 5(2,477,650) Capital Outlay 5 4,360,483 Depreciation Expense (1,162,622) 3,197,861 The net effect of various miscellaneous transactions (i.e., sales, trade -ins, and transfer of assets) involving capital assets is to decrease net assets. (29,227) Revenues and contributed assets in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 4,001,562 Certain long -term liabilities (compensated absences and salary reserves) are accrued at the government -wide level but not at the fund level. This is the current year change in those liabilities, reported as expense in the statement of activities. (82,744) Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long -term liabilities in the statement of net assets. Also, governmental funds report the effect of issuance costs and discounts when the debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. Principal Repayments General Obligation Bonds 411,000 Certificates of Obligation 535,000 Tax Notes 290,000 Bond Issue Costs (893) Discount (8,675) Interest Expense 30,893 1 ,257,325 CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $5 867,12 7 (The Accompanying Notes are an Integral Part of these Financial Statements) 31 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30. 2005 (The Accompanying Notes are an Integral Part of these Financial Statements) 32 BUSINESS -TYPE ACTIVITIES - ENTERPRISE FUNDS WATER AND SEWER SCHERTZ SYSTEM EMS TOTAL ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 39,091 $ 39,091 Investments Accounts Receivable 90,130 1,067,712 225,656 90,130 11293,368 Due from Other Funds 254,769 - 254,769 Inventory 82,869 42,085 124,954 Investments - Restricted Assets 8,119,733 8,119,733 Capital Lease Receivable 51,961 51,961 Deferred Charges 10,327 10,327 Total Current Assets 9,716,592 267,741 9,984,333 NONCURRENT ASSETS Capital Lease Receivable 170,346 - 170,346 Deferred Charges 164,818 - 164,818 Totals 335,164 - 335,164 Capital Assets: Land 301,170 - 301,170 Buildings and Improvements 371748,601 - 37,748,601 Machinery, Equipment, and Vehicles 1,431,260 1,131,157 2,562,417 Construction in Progress Totals 846,176 40,327,207 - 846,176 41,458,364 1,131,157 Accumulated Depreciation (11,346,443) (825,727) (12,172,170) Total Capital Assets 28,980,764 305,430 29,286,194 Total Noncurrent Assets 29,315,92 8 305,430 29,621,358 TOTAL ASSETS S 39 032 520 S 573 171 X39 605.691 (The Accompanying Notes are an Integral Part of these Financial Statements) 32 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2005 LIABILITIES CURRENT LIABILITIES PAYABLE FROM UNRESTRICTED ASSETS Accounts Payable and Accrued Liabilities Due to Other Funds Compensated Absences and Salary Reserves Total Current Liabilities Payable from Unrestricted Assets CURRENT LIABILITIES PAYABLE FROM RESTRICTED ASSETS Customer Deposits Revenue Bonds Public Facility Loan Accrued Interest Total Current Liabilities Payable from Restricted Assets Total Current Liabilities NONCURRENT LIABILITIES Revenue Bonds Payable Public Facility Loan Compensated Absences and Salary Reserves Total Noncurrent Liabilities TOTAL LIABILITIES NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Debt Service Unrestricted TOTAL NET ASSETS BUSINESS -TYPE ACTIVITIES - ENTERPRISE FUNDS WATER AND SEWER SCHERTZ SYSTEM EMS TOTAL 5 632,567 S 63,413 S 695,980 43,382 254,769 298,151 21.640 11.188 32.828 697,589 329.370 1,026,959 247,335 - 247,335 379,091 - 379,091 6,000 - 6,000 17.688 - 17.688 650,114 650,114 1.347,703 329.370 1.677,073 7,024,480 - 7,024,480 28,000 - 28,000 64,919 33,563 98,482 7.117,399 33.563 7.150,962 8.465.102 � 8.828.035 $24,665,546 $305,430 $24,970,976 428,712 - 428,712 5,473.160 (95.192) 5,377,968 30.5 1Z 2.38 530.777.656 (The Accompanying Notes are an Integral Part of these Financial Statements) 33 CITY OF SCHERTZ. TEXAS STATEMENT OF REVENUES EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30 2005 OPERATING EXPENSES Personnel Services BUSINESS -TYPE ACTIVITIES - ENTERPRISE FUNDS 1,311,183 WATER AND Sewage Treatment 2,883,632 SEWER SCHERTZ 1,804,104 189,245 SYSTEM EMS TOTAL OPERATING REVENUES 183,011 Supplies /Maintenance 193,843 Fees Charged to Users $ 91308,362 $3,443,429 $12,751,791 Reimbursements 63,475 Depreciation 63,475 Other 9,205 104,874 114,079 Total Operating Revenue 9,381 ,042 3,548,303 12,929,345 OPERATING EXPENSES Personnel Services 1,127,298 1,311,183 2,438,481 Sewage Treatment 2,883,632 2,883,632 General and Administrative 1,804,104 189,245 1,993,349 Contractual Services 121,384 61,627 183,011 Supplies /Maintenance 193,843 181,235 375,078 Bad Debts 6,129 1,902,988 1,909,117 Depreciation 882,297 143,513 1,025,810 Total Operating Expenses 7,018,687 3,789,791 10,808,478 Operating Income (Loss) 2,362,355 (241,488) 2,120,867 NONOPERATING REVENUES (EXPENSES) Investment Income 170,610 170,610 Interest Expense (249,655) - (249,655) Contributions to Joint Venture (1,647,665) - (1,647,665) Amortization of Bond Costs (21,546) - (21,546) Total Non - Operating Revenues (Expenses) (1,748,256) - (1,748,256) income (Loss) before Transfers and Capital Contributions 614,099 (241,488) 372,611 TRANSFERS IN 11 ,1 58 11,158 TRANSFERS OUT (138,281) (72,000) (210,281) CAPITAL CONTRIBUTIONS 2,055,366 2,055,366 Change in Net Assets 2,542,342 (313,488) 2,228,854 TOTAL NET ASSETS - AS PREVIOUSLY REPORTED 27,636,924 263,726 27,900,650 RESTATEMENT OF NET ASSETS 388,152 260,000 648,152 NET ASSETS - BEGINNING AS RESTATED 28,025,076 523,726 28,S48,802 TOTAL NET ASSETS - ENDING $-3-Q,5 -67 $ _S 0.2 Z77 =6 � (The Accompanying Notes are an Integral Part of these Financial Statements) 34 CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30 2005 CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers Cash Received from Other Funds Cash Payments to Suppliers for Goods and Services Cash Payments to Employees for Services Cash Payments to Other Funds Cash Received for Reimbursements and Other Net Cash Provided by Operating Activities CASH FLOWS FROM NON - CAPITAL FINANCING ACTIVITIES Transfers Out Transfers In Net Cash Used in Non - Capital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and Construction of Capital Assets Principal Payments on Long -Term Debt Bond Issuance Cost Interest Paid on Long -Term Debt Proceeds from Long -Term Debt Capital Contributed to Joint Venture Net Cash Provided by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Sale of Investments Purchase of Investments Net Cash Used in Investing Activities Net Increase (Decrease) in Cash CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR BUSINESS -TYPE ACTIVITIES - ENTERPRISE FUNDS WATER AND SEWER SCHERTZ SYSTEM EMS TOTAL S 9,206,628 37,347 (4,607,268) (1,130,446) (12,829) 72.681 3,566,1 13 (138,281) 11,158 S 1,684,008 254,764 (419,603) (1,304,873) (247,170) 104.874 72,000 (72,000) (127,123) (72,000) (752,885) (450,000) (71,759) (251,608) 3,180,508 (1,647,665) 6,591 170,610 600,000 (4,407,940) (3,637.330) (191,749) 230,840 $10,890,636 292,111 (5,026,871) (2,435,319) (259,999) 177.555 3,638,1 13 (210,281) 11,158 (199,123) (752,885) (450,000) (71,759) (251,608) 3,180,508 (1,647,665) 6.591 1 70, 61 0 600,000 (4,407,940) (3,637,330) (191,749) 230.840 (Continued) (The Accompanying Notes are an Integral Part of these Financial Statements) 35 CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2005 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by Operating Activities Depreciation (Increase) Decrease in the Following Assets Accounts Receivable Inventory Due from Other Funds Prepaid Increase (Decrease) in the Following Liabilities Accounts Payable and Accrued Liabilities Due to Other Funds Compensated Absences Customer Deposits NET CASH PROVIDED BY OPERATING ACTIVITIES NONCASH OPERATING CAPITAL AND RELATED FINANCING ACTIVITIES Contributions of Capital Assets from Developers Amortization of Loss on Defeasance Amortization of Bond Issuance Costs Amortization of Bond Discount BUSINESS -TYPE ACTIVITIES - ENTERPRISE FUNDS WATER AND SEWER SCHERTZ SYSTEM EMS TOTAL $2,362,355 $(241,488) $2,120,867 882,297 143,513 1,025,810 (132,241) 143,567 11,326 8,256 - 8,256 (12,830) 254,764 241,934 141,087 141,087 246,353 12,504 258,857 37,347 (247,170) (209,823) (3,147) 6,310 3,163 36.636 - 36,636 $ 566.1 13 g 72 000 $3.638.113 $2,055,366 $ - $2,055,366 $ 12,438 $ - $ 12,438 $ 7,935 $ - $ 7,935 $ 1,174 $ - $ 1,174 (The Accompanying Notes are an Integral Part of these Financial Statements) 36 NOTES TO BASIC FINANCIAL STATEMENTS 37 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting_ Entity The City of Schertz is a municipal corporation governed by an elected mayor and five - member council. The accompanying financial statements present the City and its discretely presented component units, entities for which the City is considered to be financially accountable. The discretely presented component units are reported in a separate column in the government - wide financial statements to emphasize that they are legally separate from the City. Discretely presented component units - The component units' column in the government - wide financial statements includes the financial data of the component units of the City of Schertz, Texas. The component units are presented as governmental fund types. Following is a summary of the component units: Schertz Economic Development Corporation - The corporation was organized for the purpose of promoting economic development in order to eliminate unemployment and underemployment and to promote and encourage employment and public welfare of, for, and on behalf of the City. The board of directors consists of seven (7) members appointed by the, city council. The City is financially accountable for the corporation because the city council approves the corporation's budget. 2. Library - The library provides services to the citizens of the City of Schertz as well as surrounding communities. The function of the library board is to work cooperatively with City management to provide funding and oversight for special projects of the library. All projects must be approved by the city council. The library's governing board is appointed by the city council. 3. Schertz Development Foundation - The foundation was organized to assist the City in developing and implementing plans for economic viability for the City. The board of directors is appointed by the city council and the executive director is employed by the City. The City is financially accountable for the foundation because the city council approves the foundation's budget. Complete financial statements for each of the individual component units may be obtained at City Hall located at 1400 Schertz Parkway, Schertz, Texas 78154. B. Government -Wide and Fund Financial Statements The government -wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from legally separate component units for which the primary government is financially accountable. 38 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D Ca Government -Wide and Fund Financial Statements (Continued) The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges of customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Measurement Focus Basis of Accounting and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property and sales taxes, utility franchises, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: The general fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. 39 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus Basis of Accounting and Financial Statement Presentation (Continued) The debt service fund accounts for the resources accumulated and payments made for principal and interest on long -term general obligation debt of governmental funds. The capital projects fund accounts for financial resources to be used for the acquisition and construction of major capital facilities and is principally financed by the sale of bonds or certificates of obligation and grants. The government reports the following major proprietary funds: The water and sewer fund accounts for the water and sewer services provided to the citizens through user charges. The EMS fund accounts for the ambulance services provided to the citizens of the City and other participating governments through user charges. Private - sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government -wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board (GASB). Governments also have the option of following subsequent private- sector for their business -type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private- sector guidance. As a general rule the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this are charges between the City's general government function and various other functions of the City. Eliminations of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applications for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. General revenues include all taxes and investment earnings. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water and sewer enterprise fund and the EMS enterprise fund are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. 40 CITY OF SCHERTZ. TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Cash and Cash Equivalents E. F The City's cash and cash equivalents are considered to be cash on hand and demand deposits. Investments The City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities; (2) direct obligations of the State of Texas or its agencies; (3) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by the State of Texas of the United States; (4) obligations of states, agencies, counties, cities, and other political subdivisions of any state having been rated of not less than "AA" or its equivalent; (5) certificates of deposit issued by state and national banks domiciled in Texas that are guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC) or its successor, or secured by obligations mentioned above; and (6) fully collateralized direct repurchase agreements having a defined termination date. In addition, the City is authorized to invest in local government investment pools. The investment pools operate in accordance with appropriate state laws and regulations and have regulatory oversight from the Texas Public Funds Investment Act Sec. 2256.0016. The fair value of the City's position in each pool is the same as the fair value of the pool shares. Receivables and Payables Activity between the funds that are representative of interfund loans outstanding at the end of the fiscal year are referred to as due to /from other funds. Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." Accounts receivable are reported net of allowances for uncollectible accounts. The allowance account represents management's estimate of uncollectible accounts based upon experience and historical trends. Property taxes for the City are levied each October 1 on the taxable value as of the preceding January 1 , the date a lien attaches, for all taxable real and personal property located in the City. Taxes are due by January 31 following the October 1 assessment date and become delinquent on February 1, at which time they begin accruing penalty and interest. The enforceable legal claim date for property taxes is the assessment date, therefore, the City did not record a receivable for accrual of future taxes at year end. Accordingly, no current taxes receivable are reported. Delinquent taxes have been reported in the financial statements net of the allowance for uncollectible taxes. Tax revenues are recognized as they become available. Accordingly, an amount equal to taxes not yet available has been reported as deferred revenue at the government fund level. G. Inventories and Prepaid Items All inventories are valued at cost using the first -in /first -out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. 41 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30 2005 NOTE 1 � SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) G. Inventories and Prepaid Items (Continued) Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. H. Restricted Assets Certain proceeds of the City's enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because they are maintained in separate bank accounts and their use is limited by applicable bond covenants. I. Capital Assets Capital assets, which include land, buildings and improvements, machinery, equipment, vehicles, and infrastructure assets (i.e., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business -type activities columns in the government - wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. When capital assets are purchased, they are capitalized and depreciated in the government -wide financial statements and the proprietary fund statements. Capital assets are recorded as expenditures of the current period in the governmental fund financial statements. Capital assets are valued at cost where historical records are available and at an estimated cost where no records exist. Donated capital assets are valued at their estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Improvements to capital assets that materially extend the life of the asset or add to the value are capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during construction will not be capitalized in the governmental activities on the government -wide financial statements; however capitalization of interest is required for business -type activities. There was no capitalized interest during the current fiscal year. Capital assets are depreciated over their useful lives on a straight -line basis as follows: ASSETS YEARS Buildings and Improvements 10- 50 Machinery, Equipment, and Vehicles 2 - 20 Infrastructure 15 - 30 iWJ CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Compensated Absences and Salary Reserve It is the City's policy to permit employees to accumulate earned but unused vacation and compensatory time benefits. There is no liability for unpaid accumulated sick leave since the City does not have a policy to pay any amounts when employees separate from service with the City. In addition, it is the policy of the City to retain as a liability the first forty (40) hours of service for each employee. The liability is to be paid upon termination at the rate of pay in existence at that time. All vacation, compensatory time, and salary reserve pay is accrued when incurred in the government -wide and proprietary fund financial statements. - A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. K. Long -Term Obligations In the government -wide financial statements, and proprietary fund types in the fund financial statements, long -term debt and other long -term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, losses on defeasance, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount and losses on defeasance. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. L. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. M. Budgetary Information Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds except the Tax Increment Financing Special Revenue Fund, Library Grant Special Revenue Fund, Police Department Forfeiture Special Revenue Fund and the capital projects fund, which adopts project - length budgets. 43 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 2� CASH CASH EQUIVALENTS AND INVESTMENTS Custodial Credit Risk - Cash and Cash Equivalents - Custodial credit risk is the risk that in the event of a bank failure, the City's deposits may not be returned to it. As of September 30, 2005, $1,159,754 of the City's bank balance of $1,259,754 was not covered by depository insurance (FDIC). Per the City's policy, these deposits were collateralized by securities held by the pledging financial institution with a market value of $1,631,742 at September 30, 2005. As of September 30, 2005, the City had the following pooled investment funds: INVESTMENT TYPE Lone Star Investment Pool LOGIC MBIA Municipal Investors TOTAL Portfolio Weighted Average Maturity WEIGHTED AVERAGE FAIR VALUE MATURITY (YEARS) $ 7,776,161 5,522,427 5,696,296 Credit Risk: State law limits investments in certificates of deposit to guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor or the National Credit Union Share Insurance Fund, or its successor and investment pools continuously rated no lower than AAA or an equivalent rating by at least one nationally recognized rating service. The City's investment policy does not further limit its investment choices. As of September 30, 2005, the City's investments in the pooled investment funds were rated AAA by Standard & Poor's. Interest Rate Risk: As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy limits the City's investment portfolio highly liquid investments to meet unanticipated cash requirements, and /or to redeploy cash into other investments expected to outperform current holdings. NOTE 3: RECEIVABLES The following is a summary of the gross delinquent taxes receivable and the allowances for uncollectible taxes: ALLOWANCE FOR UNCOLLECTIBLE NET TAXES TAXES TAXES Delinquent Taxes General Fund $133,592 $ 8,016 $125,576 Debt Service Fund 33,999 2,040 31,959 s 16_ 75-91 44 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 3: RECEIVABLES (CONTINUED) Other receivables as of year end for the City's individual major funds and other governmental funds, including the applicable allowances for uncollectible accounts. are as follows: Fines and Forfeitures Sales Tax Utility Franchise FEMA Accounts - Customers Other Gross Receivables Less: Allowance NET TOTAL RECEIVABLES NOTE 4: RESTATEMENT OF NET ASSETS The beginning net assets and fund balances of the governmental activities, the business -type activities, the capital projects fund, the water and sewer fund and the EMS fund, were restated for a prior period adjustment. During the year ended September 30, 2005, the City noted that a prior year interfund receivable and payable between the capital projects fund, the water and sewer fund and the EMS fund was incorrect. The correction of this error resulted in a decrease to the beginning net assets of the governmental activities of $648,152, an increase to the beginning net assets of the business -type activities of $648,152, a decrease to the beginning fund balance of the capital projects fund of $648,152, and an increase to the beginning net assets of the water and sewer fund and the EMS fund of $388,152 and $260,000, respectively. NOTE 5: CAPITAL ASSETS Capital asset activity for the year ended September 30, 2005 was as follows: Primary Government Governmental Activities Capital Assets, not being Depreciated Land Construction in Progress Total Capital Assets, not being Depreciated BEGINNING BALANCE INCREASE DECREASE $ 3,521,509 S 155,125 $ 6,807,414 3,995,883 (6,372,690) 10,328,923 4,151.008 (6,372,690) ENDING BALANCE $3,676,634 4,430,607 8,107,241 W CAPITAL WATER AND GENERAL PROTECTS SEWER EMS TOTAL $1,408,074 $ $ $ $ 1,408,074 212,500 212,500 197,424 197,424 - 340,210 - 340,210 1,113,399 1,034,613 2,148,012 8,145 21.512 1.247 30,904 1,826,143 340,210 1,134,911 1,035,860 4,337,124 (704,0371 (67,199) (810,204) (1.581,440) NOTE 4: RESTATEMENT OF NET ASSETS The beginning net assets and fund balances of the governmental activities, the business -type activities, the capital projects fund, the water and sewer fund and the EMS fund, were restated for a prior period adjustment. During the year ended September 30, 2005, the City noted that a prior year interfund receivable and payable between the capital projects fund, the water and sewer fund and the EMS fund was incorrect. The correction of this error resulted in a decrease to the beginning net assets of the governmental activities of $648,152, an increase to the beginning net assets of the business -type activities of $648,152, a decrease to the beginning fund balance of the capital projects fund of $648,152, and an increase to the beginning net assets of the water and sewer fund and the EMS fund of $388,152 and $260,000, respectively. NOTE 5: CAPITAL ASSETS Capital asset activity for the year ended September 30, 2005 was as follows: Primary Government Governmental Activities Capital Assets, not being Depreciated Land Construction in Progress Total Capital Assets, not being Depreciated BEGINNING BALANCE INCREASE DECREASE $ 3,521,509 S 155,125 $ 6,807,414 3,995,883 (6,372,690) 10,328,923 4,151.008 (6,372,690) ENDING BALANCE $3,676,634 4,430,607 8,107,241 W CITY OF SCHERTZ TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 5: CAPITAL ASSETS (CONTINUED) Primary Government BEGINNING ENDING BALANCE INCREASE DECREASE BALANCE Governmental Activities (Continued) Capital Assets, being Depreciated Buildings and Improvements $ 8,551,313 $ 89,406 S - S 8,640,719 Machinery, Equipment, and Vehicles 1,903,087 370,378 (57,291) 2,216,174 Infrastructure 16,008,124 9.921 .278 25.929.402 Total Capital Assets being Depreciated 26.462.524 10.381.062 (57,291) 36.786.295 Less Accumulated Depreciation for Buildings and Improvements (2,165,368) (216,194) (2,381,562) Machinery, Equipment, and Vehicles (848,235) (244,425) 37,300 (1,055,360) Infrastructure (4,474,790 (702.003) - (5.176.793) Total Accumulated Depreciation (7,488,3 93) (1,162,622 37.300 (8.61 3.71 5) Total Capital Assets, being Depreciated - Net 1 8,974j 31 9,218,440 (19.991) 28.172,580 GOVERNMENTAL ACTIVITIES CAPITAL ASSETS - NET S 29.3 S13.3 6 9448 $(639Z 681) S-K2- 79.$ -2.1_ Business -Type Activities Capital Assets, not being Depreciated Land S 301,170 $ $ $ 301,170 Construction in Progress 143.998 745,185 (43.007) 846.176 Total Capital Assets, not being Depreciated 445.168 745.18S (43.007) 1.147.346 Capital Assets, being Depreciated Buildings and Improvements 35,661,088 2,087,513 37,748,601 Machinery, Equipment, and Vehicles 2,543,857 18.560 2,562,417 Total Capital Assets, being Depreciated 38.204.945 2.106,073 40.311.018 Accumulated Depreciation for Buildings and Improvements (9,424,690) (733,261) (10,157,951) Machinery, Equipment, and Vehicles (1 .721 670) (292.549) (2.014.219) Total Accumulated Depreciation (11 A 46,360) (1,025,810 72 170) Total Capital Assets, being Depreciated - Net 27.058.585 1,080,263 28.1 38,848 BUSINESS-TYPE ACTIVITIES CAPITAL ASSETS - NET $ 27 503.73. $_1 825 448 S (43 007) S-2-9 286 194 46 CITY OF SCHERTZ. TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 5: CAPITAL ASSETS (CONTINUED) Depreciation expense was charged to functions /programs of the primary government as follows: GOVERNMENTAL ACTIVITIES General government Public Safety Streets and Parks Culture and Recreation Health TOTAL DEPRECIATION EXPENSE - GOVERNMENTAL ACTIVITIES BUSINESS -TYPE ACTIVITIES Water and Sewer EMS TOTAL DEPRECIATION EXPENSE - BUSINESS -TYPE ACTIVITIES NOTE 6: INTERFUND BALANCES AND TRANSFERS S 93,350 963,117 83,146 12,128 10.881 $L $ 882,297 143.513 $1,_0 2 5 810 In the fund financial statements, interfund balances are the result of normal transactions and will be liquidated in the subsequent fiscal year. The composition of interfund balances as of September 30, 2005, is as follows: INTERFUND BALANCES RECEIVABLE FUND PAYABLE FUND AMOUNT General Fund Capital Projects $ 13,297 Capital Projects General Fund $5071716 Capital Projects Water and Sewer $ 43,382 Water and Sewer EMS $254,769 Balances between governmental funds and enterprise funds are eliminated in the government -wide financial statements. 47 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30 2005 NOTE 6• INTERFUND BALANCES AND TRANSFERS (CONTINUED) INTERFUND TRANSFERS TRANSFER IN GENERAL DEBT CAPITAL WATER AND FUND SERVICE PROIECTS SEWER TOTAL TRANSFER OUT General Fund $ $ $158,618 $11,158 $169,776 Other Governmental Funds 25,325 188,902 - - 214,227 Water and Sewer - 138,281 138,281 EMS 72.000 72,000 TOTALS �7.�,:'i?� 53aa $1 1 1 8 $ 94 2 4 Interfund transfers are the result of normal transactions between funds. NOTE 7: CAPITAL LEASE RECEIVABLE During 2004 the City entered into a capital lease /purchase agreement for the sale of various water wells, water well motors and pumps, water storage tanks and all connecting lines, valves and pipes, to another local government entity. This lease was classified as direct financing lease. The following lists the components of the net investment in the lease as of September 30, 2005: Total Minimum Lease Payments to be Received $247,858 Less Amounts Representing Executory and Uncollectibles Net Minimum Lease Payments Receivable 247,858 Less Unearned Income (25,551 NET INVESTMENT IN DIRECT FINANCING LEASES At September 30, 2005, minimum lease payments for each of the four (4) succeeding fiscal years are as follows: FISCAL YEAR There are no estimated residual values or contingent rentals related to the leased property. .; $ 51,961 2006 54,299 2007 56,742 2008 59.305 2009 $ 22 z_�3Q7 There are no estimated residual values or contingent rentals related to the leased property. .; CITY OF SCHERTZ. TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 8: LONG -TERM DEBT The City had the following changes in long -term debt outstanding for the year ended September 30, 2005: Governmental Activities General Obligation Bonds 1992 Series 1998 Series 1995 Refunding Bonds 1999 Combination Tax and Revenue Total Bonds Certificates of Obligation 2001 Series 2003 Series 2004 Series Discount Total Certificates of Obligation Tax Notes 2001 Notes 2002 Notes Total Tax Notes 455,000 5.25 125.000 4.456,000 4,500,000 4.1 -6.0 4,100,000 3,360,000 2.0.3.9 2,935,000 7,750,000 4.0 -4.7 7,750,000 (16,976) 14,768,024 750,000 2.9 -4.0 315,000 400,000 2.9-3.15 135.000 450,000 125.000 411.000 4,045.000 305.000 150,000 3,950,000 BALANCE 225,000 BALANCE AMOUNTS 160,000 7,590,000 OUTSTANDING (893) OUTSTANDING DUE ORIGINAL INTEREST OCTOBER 1, SEPTEMBER 30, IN ONE AMOUNT RATES 2004 ISSUED RETIRED 2005 YEAR $ 620,000 5.2 -7.2% $ 320,000 S S 50,000 $ 270,000 S 100,000 4,930,000 4.37 -5.375 3,970,000 195,000 3,775,000 205,000 447,000 3.75 -5.00 41,000 41,000 (41.429) (10,9091 455,000 5.25 125.000 4.456,000 4,500,000 4.1 -6.0 4,100,000 3,360,000 2.0.3.9 2,935,000 7,750,000 4.0 -4.7 7,750,000 (16,976) 14,768,024 750,000 2.9 -4.0 315,000 400,000 2.9-3.15 135.000 450,000 125.000 411.000 4,045.000 305.000 150,000 3,950,000 160,000 225,000 2,710,000 250,000 160,000 7,590,000 280,000 (893) (16,083) (893) 534.107 14,233,917 689,107 155,000 160,000 160,000 135,000 290,000 160,000 160,000 TOTAL GOVERNMENTAL ACTIVITIES $19 674 024 $ $1 _235.107 518.438_91 7 1.154.107 Business -Type Activities Revenue Bonds 2001 Series 5,550,000 3.4 -5.2 S 4,625,000 S $ 380,000 S 4,245,000 S 290,000 2005 Series 3,200,000 3.4.0 - 3,200,000 3,200,000 100,000 Unamortized Discounts And Loss on Defeasance (35.549) (19,492) (13,612 (41.429) (10,9091 Total Revenue Bonds 4.589,451 3.180,508 366.388 7.403.571 379.091 General Obligation Bonds 1995 Refunding Bonds 1,253,000 4.85-5.0 64,000 64,000 Other Debt Public Facility Loan (HUD) 142,000 5.0 40.000 6.000 34.000 6.000 TOTAL BUSINESS -TYPE ACTIVITIES 4.693.451 $3.180.SOA $ 436.3 $fl 7.4 538.i 091 . • CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30 2005 NOTE 8: LONG -TERM DEBT (CONTINUED) Annual debt service requirements as of September 30, 2005, are as follows: During the year, the City issued $3,200,000 of combination tax and limited pledge revenue certificates of obligation, with the payment of the related principal and interest to be made from an annual ad valorem tax levied against all taxable property within the City and net revenues derived from the operations of the City's utility system. The bonds were issued to provide funds for various construction projects and the purchase of various equipment. In the government -wide financial statements, bond issuance costs are deferred and amortized over the life of the bonds. Bond issuance costs are reported as deferred charges. Bonded debt of the City consists of various series of general obligation bonds, revenue bonds, certificates of obligation, tax notes, and a public facility loan. General obligation bonds, certificates of obligation, and tax notes are direct obligations of the City for which its full faith and credit are pledged, and are payable from taxes levied on all taxable property located within the City. Revenue bonds are generally payable from pledged revenues generated by the water and sewer fund. The debenture agreement for water and sewer bonds require that funds be available for 1/1 2t' of the principal and 1 /6'h of the interest requirements of the next fiscal year. The City is required to accumulate a reserve fund in an amount equal to the average principal and interest on the revenue bonds. The City has purchased a surety bond through MBIA Insurance Corporation to fund the required reserve amount. There are no amounts outstanding at the end of the current fiscal year related to bonds that were considered defeased. Compensated Absences and Salary Reserves Changes in compensated absences and salary reserves for the year ended September 30, 2005, were as follows: Balance at October 1, 2004 Additions Deletions BALANCES AT SEPTEMBER 30, 2005 GOVERNMENTAL ACTIVITIES S 408,548 184,881 (102.137) 4 1 BUSINESS -TYPE ACTIVITIES $128,148 35,199 (32,037 $_131 50 GOVERNMENTAL ACTIVITIES . BUSINESS -TYPE ACTIVITIES FISCAL YEAR PRINCIPAL INTEREST TOTAL PRINCIPAL INTEREST TOTAL 2006 S 1,155,000 S 800,530 S 1,955,530 S 396,000 S 356,665 S 752,665 2007 910,000 749,492 1,659,492 417,000 310,269 727,269 2008 955,000 703,889 1,658,889 422,000 294,594 716,594 2009 935,000 658,314 1,593,314 432,000 278,250 710,250 2010 960,000 617,359 1,577,359 352,000 258,438 610,438 2011.2105 5,345,000 2,439,961 7,784,961 1,970,000 1,057,666 3,027,666 2016 -2020 5,290,000 1,228,039 6,518,039 2,170,000 552,729 2,722,729 2021 -2025 2,905,000 264.151 3.169.151 1,320000 131.628 1.451.628 518 455.000 57 461 735 $29]6 735 57.479.000 13,244_.234 19.239 During the year, the City issued $3,200,000 of combination tax and limited pledge revenue certificates of obligation, with the payment of the related principal and interest to be made from an annual ad valorem tax levied against all taxable property within the City and net revenues derived from the operations of the City's utility system. The bonds were issued to provide funds for various construction projects and the purchase of various equipment. In the government -wide financial statements, bond issuance costs are deferred and amortized over the life of the bonds. Bond issuance costs are reported as deferred charges. Bonded debt of the City consists of various series of general obligation bonds, revenue bonds, certificates of obligation, tax notes, and a public facility loan. General obligation bonds, certificates of obligation, and tax notes are direct obligations of the City for which its full faith and credit are pledged, and are payable from taxes levied on all taxable property located within the City. Revenue bonds are generally payable from pledged revenues generated by the water and sewer fund. The debenture agreement for water and sewer bonds require that funds be available for 1/1 2t' of the principal and 1 /6'h of the interest requirements of the next fiscal year. The City is required to accumulate a reserve fund in an amount equal to the average principal and interest on the revenue bonds. The City has purchased a surety bond through MBIA Insurance Corporation to fund the required reserve amount. There are no amounts outstanding at the end of the current fiscal year related to bonds that were considered defeased. Compensated Absences and Salary Reserves Changes in compensated absences and salary reserves for the year ended September 30, 2005, were as follows: Balance at October 1, 2004 Additions Deletions BALANCES AT SEPTEMBER 30, 2005 GOVERNMENTAL ACTIVITIES S 408,548 184,881 (102.137) 4 1 BUSINESS -TYPE ACTIVITIES $128,148 35,199 (32,037 $_131 50 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 8: LONG -TERM DEBT (CONTINUED) Of these balances 5122,823 is due in the current year in governmental activities and $32,828 is due in the current year in business -type activities. Compensated absences and salary reserves are paid from the fund responsible for the employee's compensation. Claims and judgments are generally liquidated by the general fund. NOTE 9: RETIREMENT PLAN Plan Description The City provides pension benefits for all of its full -time employees through a nontraditional, joint contributory, hybrid defined benefit plan in the state -wide Texas Municipal Retirement System (TMRS), one of 801 currently administered by TMRS, an agent multiple - employer public employee retirement system. TMRS issues a publicly available financial report that includes financial statements and required supplementary information for TMRS. That report may be obtained by writing to Texas Municipal Retirement System, Post Office Box 149153, Austin, Texas 78714. Benefits Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City- financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount at least equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent (100 %, 150 %, or 200 %) of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and City matching percent had always been in existence and if the employee's salary had always been the average of his salary in the last three (3) years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer- financed monetary credits with interest were used to purchase an annuity. Members can retire at age 60 and above with 5 or more years of service or with 20 years of service, regardless of age. A member is vested after 5 years. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Contributions The contribution rate for the employees is 5 %, and the City matching percent is currently 2 to 1, both as adopted by the governing body of the City. Under the state law governing TMRS, the City contribution rate is annually determined by the actuary. This rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the currently accruing monetary credits due to the City matching percent, which are the obligation of the City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is the actuarially determined level percent of payroll necessary to 51 CITY OF SCHERTZ TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 9: RETIREMENT PLAN (CONTINUED) Contributions (Continued) satisfy the obligation of the City to each employee at the time his /her retirement becomes effective. The prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the plan's 25 -year open amortization period. The unit credit actuarial cost method is used for determining the City contribution rate. Contributions are made monthly by both the employees and the City. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one -year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect (i.e., December 31, 2004 valuation is effective for rates beginning January 2006). The actuarial assumptions included (a) 7% investment rate of return, (b) no projected salary increases, (c) 3.5% inflation and (d) no cost of living adjustments. The asset valuation method was determined based on amortized cost. Schedule of Actuarial Liabilities and Funding Progress Actuarial Value of Assets Actuarial Accrued Liability Percentage Funded Unfunded (Overfunded) Actuarial Accrued Liability (UAAL) Annual Covered Payroll UAAL as a Percentage of Covered Payroll ACTUARIAL VALUATION DATE DECEMBER 31 , DECEMBER 31, DECEMBER 31, 2004 2003 2002 $5,122,816 $4,313,616 $3,520,733 7,950,619 6,163,929 4,965,573 64.4% 70.0% 70.9% 2,827,803 1,850,313 1,444,840 6,144,053 5,985,459 5,306,146 46.0% 30.9% 27.2% TREND INFORMATION FOR THE RETIREMENT PLAN FOR THE EMPLOYEES OF CITY OF SCHERTZ ACCOUNTING ANNUAL PERCENTAGE OF NET PENSION YEAR ENDING PENSION COST (APC) APC CONTRIBUTED OBLIGATION September 30, 2005 $573,969 100% September 30, 2004 418,770 100 September 30, 2003 393,140 100 NOTE 10: RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The City contracts with the Texas Municipal League Intergovernmental Risk Pool, a public entity risk pool currently operating as a common risk management and insurance program providing insurance coverage in the following areas: general liability, automobile liability and physical damage, law enforcement liability, worker's compensation, real and personal property, mobile equipment, and errors and omissions liability. The agreement for formation of the Texas Municipal League Intergovernmental Risk Pool provides that the pool will be self sustaining through member premiums and will be adjusted annually through an experience modifier. 52 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 10: RISK MANAGEMENT (CONTINUED) The City continues to carry commercial insurance for all other risks of loss including public official bond, employee dishonesty blanket bond, and underground tank pollution liability. Settled claims resulting from these risks have not exceeded coverage for each of the past three (3) years. The pooling agreement requires the pool to be self- sustaining. It is not possible to estimate the amount of any losses for which the City might be liable. The Texas Municipal League Intergovernmental Risk Pool has published its own financial report for the year ended September 30, 2005, which can be obtained from the Texas Municipal League. NOTE 11: CONTINGENT LIABILITIES Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of management the resolution of these matters will not have a material adverse effect on the financial condition of the City. NOTE 12: IOINT VENTURE Schertz /Seguin Local Government Corporation The corporation was created to aid, assist, and act on behalf of the cities of Schertz and Seguin in acquiring, constructing, maintaining, and operating a water utility system. The City of Schertz is jointly liable, together with the City of Seguin, for operating deficits and long -term debt of the Schertz /Seguin Local Government Corporation. The corporation has issued revenue bonds in the amount of $51,040,000 to provide funds to build, improve, extend, enlarge, and repair the corporation's utility system, fund a reserve, and pay the costs of bond issuance. As of September 30, 2005, $50,475,000 remained outstanding on the bonds and the corporation has accumulated approximately $3,488,044 in unrestricted net assets. The bond resolution pledges intergovernmental contract revenues from the cities of Schertz and Seguin. Under the intergovernmental water supply contract, the cities are unconditionally obligated to pay their respective shares of annual contract revenue bond debt service as expenses from their respective utility systems. Contributions to the corporation are reflected as "nonoperating expenses" in the water and sewer fund and totaled S1 ,647,665 for the year ended September 30, 2005. Separate financial statements for the Schertz /Seguin Local Government Corporation may be obtained from the City of Seguin, Texas 78156. 53 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2005 NOTE 13: DISCRETELY PRESENTED COMPONENT UNITS INFORMATION Condensed Statement Of Net Assets SCHERTZ ECONOMIC SCHERTZ DEVELOPMENT THE DEVELOPMENT CORPORATION LIBRARY FOUNDATION TOTAL Total Assets $ 9541127 $24,643 $102,125 $ 1,080,895 Total Liabilities 23,466 28 - 23,494 TOTAL NET ASSETS, UNRESTRICTED S-930 S24,6_.5 $102 1 �L.057 401 Condensed Statement Of Activities Total Expenses $ 1,050,709 $ 2,833 $ - $ 1,053,542 Program Revenues Charges for Services 1 ,761 1,761 Operating Grants and Contributions 4,723 4,723 Net Program (Expense) Revenue (1,050,709) 3,651 (1,047,058) General Revenues Sales Tax 1,113,193 - - 1,113,193 Unrestricted Investment Earnings 18,680 597 2,433 21,710 Total General Revenues 1,131,873 597 2,433 1,134,903 Change in Net Assets 81,164 4,248 2,433 87,845 Net Assets, Beginning 849,497 20,367 99,692 969,556 NET ASSETS, ENDING $ _R R6 1 $24 61 10 1 $ 1.057.401 54 REQUIRED SUPPLEMENTARY INFORMATION 55 CITY OF 5CHERTZ TEXAS GENERAL FUND SCHEDULE OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES= BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2005 Total Revenues EXPENDITURES Current General Government City Council City Manager Planning and Zoning Legal Municipal Court 8,865,537 9,212,014 10,362,923 1,1 50,909 16,850 19,250 23,035 (3,785) VARIANCE 336,703 327,765 8,938 278,772 WITH FINAL 226,077 (37,879) 147,500 147,500 BUDGET (151,704) ORIGINAL FINAL 293,798 POSITIVE BUDGET BUDGET ACTUAL (NEGATIVE) REVENUES Taxes Ad Valorem $3,684,524 $3,700,500 $ 3,742,070 $ 41,570 Tax Penalty 25,000 25,000 34,397 9,397 City Sales Tax 1,700,000 2,020,000 2,227,282 207,282 Utility Franchise 670,220 680,218 786,298 106,080 Other 9,000 9,500 11,383 1,883 Total Taxes 6,088,744 6,435,218 6,801,430 366,212 Licenses and Permits 891,275 899,925 1,190,844 290,919 Charges for Services Administration 708,159 465,937 466,032 95 Swimming Pool 41,000 44,000 59,499 15,499 Animal Shelter 32,000 34,500 44,611 10,111 Building Rental 11,000 11,000 13,396 2,396 Library and Fire 274,309 275,884 283,383 7,499 Other 15,250 15,250 5,365 (9,885) Total Charges for Services 1,081 ,718 846.571 872,286 25,715 Fines and Forfeitures 666,500 788,000 822,614 34,614 Grants - - 324,344 324,344 Other Revenue Interest 45,000 65,000 157,684 92,684 Sale of Merchandise 20,300 20,300 29,355 9,055 Miscellaneous 72,000 157,000 164,366 7,366 Total Other Revenue 137,300 242,300 351,405 109,105 Total Revenues EXPENDITURES Current General Government City Council City Manager Planning and Zoning Legal Municipal Court 8,865,537 9,212,014 10,362,923 1,1 50,909 16,850 19,250 23,035 (3,785) 338,575 336,703 327,765 8,938 278,772 188,198 226,077 (37,879) 147,500 147,500 299,204 (151,704) 263,814 297,014 293,798 3,216 (continued) 56 CITY OF SCHERTZ, TEXAS GENERAL FUND SCHEDULE OF REVENUES EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2005 EXPENDITURES (CONTINUED) Current (Continued) General Government (Continued) Facility Maintenance City Secretary Finance Information Technology Human Resources Fleet Services Special Events Public Information Other - Unclassified Total General Government Public Safety Police Department Fire Department Inspection Total Public Safety Streets and Parks Streets Parks Total Streets and Parks Health Animal Control Culture and Recreation Library CAPITAL OUTLAY Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES Transfer In Transfer Out Total Other Financing Sources (Uses) Net Change in Fund Balance FUND BALANCE AT OCTOBER 1, 2004 FUND BALANCE AT SEPTEMBER 30, 2005 VARIANCE WITH FINAL BUDGET ORIGINAL FINAL POSITIVE BUDGET BUDGET ACTUAL (NEGATIVE) S 344,234 $ 343,442 $ 328,263 $ 15,179 209,624 219,090 218,723 367 216,383 216,383 225,758 (9,375) 285,968 299,503 349,120 (49,617) 142,681 142,681 115,602 27,079 188,580 188,220 194,854 (6,634) 26,700 66,700 85,333 (18,633) 70,156 70,156 60,915 9,241 451,200 478,500 524,305 (45,805) 2,981 ,037 3,013,340 3,272,752 (259,412) 2,363,993 2,369,681 2,543,989 (174,308) 1,505,478 1,509,562 1,688,028 (178,466) 298,256 298,256 310,367 (12,111) 4,167,727 4,177,499 4,542,384 (364,885) 586,836 586,235 529,015 57,220 511,098 510,978 514,486 (3,508) 1,097,934 1,097,213 1,043,501 53,712 210,292 210,292 208,499 1,793 275,001 275,001 325,498 (50,497) 221,399 8,953,390 317,652 9,090,997 335,599 9,728,233 (87,853) 121,017 634,690 (17,947) (637,236) 51 3,673 24,000 24,000 25,325 1,325 (169,776) (169,776) 24,000 24,000 (144,451) (168,541) S (63,853) S---J-45.0 17 490,239 $ 345.222 4,384,979 4,875.218 57 CITY OF SCHERTZ, TEXAS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2005 NOTE 1: BUDGETARY INFORMATION The budget for the general fund is adopted on a basis consistent with generally accepted accounting principles. Annual appropriations lapse at fiscal year end. The original budget for the general fund is adopted by the city council by September 30. Budgetary preparation and control is exercised at the department level. The city manager is authorized to transfer budget amounts between line items within a department; however, any transfer or supplemental appropriation that amends the total expenditures of a department or total budget requires city council approval. Both the original and final amended budget are included. NOTE 2: EXCESS OF EXPENDITURES OVER APPROPRIATIONS For the year ended September 30, 2005, expenditures exceeded appropriations in the city council, planning and zoning, legal, finance, information technology, fleet services, special events, other - unclassified, police, fire, inspection, parks, and library departments and capital outlay of the general fund by $3,785, $37,879, $151,704, $9,375, $49,617, $6,634, $18,633, $45,805, $174,308, $178,466, $12,111, $3,508, $50,497, and $17,947, respectively. These overexpenditures were funded by greater than anticipated revenues in the general fund. 49 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES 59 (This Page Intentionally Left Blank) m NONMAJOR GOVERNMENTAL FUNDS Nonmajor Governmental Funds (Special Revenue Funds) are used to account for the proceeds of specific revenue sources that are legally restricted to expenditure for specified purposes. Park Fund - will account for revenues from developers' fees (in; lieu of park land dedication), grants, and donations and is designed to monitor and manage improvement of park system. Recycling Fund - will account for revenues received from the recycling fee on all residential water bills and the sale of recyclable material and used to buy down solid waste collection costs. Tax Increment Financing Fund - will account for the proceeds of designated property taxes to be used for the widening of Schertz Parkway. Hotel Occupancy Tax Fund - will account for proceeds of hotel occupancy taxes to be used strictly for those kinds of programs that promote the tourism industry. Library Grant Fund - will account for funds from a state grant to be used for purchasing computers at the library to be used for access to the internet. Police Department Forfeitures Fund - will account for revenue received from drug related cases in conjunction with other law enforcement agencies. 61 CITY OF SCHERTZ, TEXAS COMBINING BALANCE SHEET NONMAIOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2005 SPECIAL REVENUE TAX PARK RECYCLING INCREMENT FUND FUND FINANCING ASSETS Cash and Cash Equivalents $ 12,436 $ 10,009 $ Investments 448,339 - TOTAL ASSETS 460= LIABILITIES Accounts Payable $ 233 $ FUND BALANCES Reserved for Tree Mitigation 326,267 - Unreserved 134,275 10.009 Total Fund Balances 460,542 10,009 TOTAL LIABILITIES AND FUND BALANCE $460 77� 1_�Q i�0� 62 F U N D S POLICE TOTAL HOTEL LIBRARY DEPARTMENT OTHER OCCUPANCY GRANT FORFEITURES GOVERNMENTAL TAX FUND FUND FUNDS $ 3,788 $702 $ 22,279 $ 49,214 184,165 305,531 938,035 $L87 $702 $3Z_ � $ $ $ 598 $ 831 - 326,267 187,953 702 327,212 660,151 187,953 702 327,212 986,418 702 I ZZ 81Q 87 Z4 63 CITY OF SCHERTZ, TEXAS COMBINING STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCES NONMAIOR GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30 2005 5 P E C I A L REVENUE EXPENDITURES General and Administrative 39,571 - Contractual Services 19,761 Capital Outlay 26,336 Total Expenditures 65,907 19,761 - Excess of Revenues Over Expenditures 210,643 3,235 73 OTHER FINANCING SOURCES (USES) Transfers Out 88 902 Net Change in Fund Balance 210,643 3,235 (88,829) FUND BALANCES AT OCTOBER 1. 2004 249,899 6,774 88,829 FUND BALANCES AT SEPTEMBER 30, 2005 S461542 10 64 TAX PARK RECYCLING INCREMENT FUND FUND FINANCING REVENUES Taxes $ $ $ Developer Fees 230,731 Grants Property Forfeitures Sale of Recycling /Materials - 22,996 Miscellaneous Revenue 38,325 - - Interest 7,494 - 73 Total Revenues 276,550 22,996 73 EXPENDITURES General and Administrative 39,571 - Contractual Services 19,761 Capital Outlay 26,336 Total Expenditures 65,907 19,761 - Excess of Revenues Over Expenditures 210,643 3,235 73 OTHER FINANCING SOURCES (USES) Transfers Out 88 902 Net Change in Fund Balance 210,643 3,235 (88,829) FUND BALANCES AT OCTOBER 1. 2004 249,899 6,774 88,829 FUND BALANCES AT SEPTEMBER 30, 2005 S461542 10 64 POLICE TOTAL HOTEL LIBRARY DEPARTMENT OTHER OCCUPANCY GRANT FORFEITURES GOVERNMENTAL TAX FUND FUND FUNDS 42,982 $ $ $ 42,982 - - 230,731 6,212 - 6,212 93,090 93,090 - 22,996 38,325 5,437 7,577 20,581 48,419 6,212 100,667 454,917 13,329 5,932 98,636 157,468 12,500 - - 32,261 - - 26,336 25.829 5,932 98,636 216,065 22,590 280 2,031 238,852 (125,325) - - (214,227} (102,735) 280 2,031 24,625 290,688 422 325,181 961,793 $ 1 87 1702 986 41 8 65 ORIGINAL FINAL, BUDGET BUDGET VARIANCE WITH FINAL BUDGET POSITIVE ACTUAL (NEGATIVE) REVENUES Developer Fees 5 10,000 $ 10,000 S 70,375 $ 60,375 Tree Mitigation 101000 10,000 160,356 150,356 Miscellaneous Revenue - 250 38,325 38,075 Interest Income 2,240 2,240 7,494 5,254 Total Revenues 22,240 22,490 276.550 254,060 EXPENDITURES General and Administrative 3,000 55,500 39,571 15,929 Capital Outlay 8,000 43,000 26.336 16,664 Total Expenditures 11.000 98,500 65,907 32,593 Excess (Deficiency) of Revenues Over (Under) Expenditures 11,240 (76,010) 210,643 286,653 OTHER FINANCING SOURCES (USES Transfers Out (40,000 Net Change in Fund Balance 2 7 ) 7 1 210,643 $286 65 FUND BALANCE AT OCTOBER 1 2004 249.899 FUND BALANCE AT SEPTEMBER 30, 2005 = .. REVENUES Sale of Recycling Materials EXPENDITURES Contractual Services Excess of Revenues Over Expenditures FUND BALANCE AT OCTOBER 1. 2004 FUND BALANCE AT SEPTEMBER 30, 2005 ORIGINAL VARIANCE WITH AND FINAL BUDGET FINAL POSITIVE BUDGET ACTUAL (NEGATIVE) $18,000 $22,996 $ 4,996 18,000 19.761 (1,761 1-- 3,235 6.774 1_I I • 67 REVENUES Occupancy Tax Interest Income Total Revenues EXPENDITURES General and Administrative Contractual Services Capital Outlay Total Expenditures Excess of Revenues Over Expenditures OTHER FINANCIAL SOURCES (USES) Transfers Out Net Change in Fund Balance FUND BALANCE AT OCTOBER 1 2004 FUND BALANCE AT SEPTEMBER 30, 2005 VARIANCE WITH FINAL BUDGET ORIGINAL FINAL POSITIVE BUDGET BUDGET ACTUAL (NEGATIVE) S 38,000 S 38,000 S 42,982 S 41982 2,420 2,420 5,437 3,017 40,420 40,420 48,419 7,999 10,000 10,000 13,329 (3,329) 1,000 1,000 12,500 (11,500) - 15,000 15,000 11,000 26,000 25,829 171 29,420 141420 22,590 8,170 (119,500) (119,500) (125,325) (5,825 (9 ) S(105,"0_) (102,735) 2 34 �: CITY OF SCHERTZ, TEXAS DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL YEAR ENDED SEPTEMBER 30, 2005 VARIANCE WITH FINAL BUDGET ORIGINAL FINAL POSITIVE BUDGET BUDGET ACTUAL (NEGATIVE) REVENUES Taxes $1,156,206 $1,156,206 $1,725,023 $ 568,817 Interest Income 3,800 3,800 12,310 8,510 Total Revenues 1,160,006 1,160,006 1,737,333 577,327 EXPENDITURES Debt Service Bond Principal 761,000 886,000 1,236,000 (350,000) Bond Interest 718,206 721,487 881,069 (159,582) Fiscal Agent Fees 5,000 5,000 3,000 2,000 Total Expenditures 1,484,206 1,612,487 2,120,069 (507,582) Excess (Deficiency) of Revenues Over (Under) Expenditures (324,200) (452,481) (382,736) 69,745 OTHER FINANCING SOURCES Transfer In Net Change in Fund Balance FUND BALANCE AT OCTOBER 1, 2004 FUND BALANCE AT SEPTEMBER 30, 2005 324,200 452,481 399,183 (53,298) 16,447 1 447 247,293 $ 263 740 M1 (This Page Intentionally Left Blank) 70 DISCRETELY PRESENTED COMPONENT UNITS Discretely presented component units consist of separate entities whose governing bodies are not substantively the same as the governing body of the primary government. The discretely presented component units also provide services to areas other than the primary government. 71 CITY OF SCHERTZ. TEXAS DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF NET ASSETS SEPTEMBER 30 2005 72 SCHERTZ ECONOMIC SCHERTZ DEVELOPMENT THE DEVELOPMENT CORPORATION LIBRARY FOUNDATION TOTAL ASSETS CURRENT ASSETS Cash and Cash Equivalents $147,941 $ 7,719 $ 21,696 $ 177,356 Investments 701,522 16,924 80,429 798,875 Accounts Receivable 104,664 - 104,664 TOTAL ASSETS 54 127 524 X43 102 12 5 51 0$Q 8� LIABILITIES CURRENT LIABILITIES Accounts Payable $ 12,676 $ 28 $ $ 12,704 Accrued Salaries and Benefits 10.790 - 10,790 TOTAL LIABILITIES 28 $ $ 23 494 NET ASSETS Unrestricted $930,661 $24,615 $102,125 $1,057,401 TOTAL NET ASSETS 930.661 $24,615 1 .0 72 CITY OF SCHERTZ TEXAS DISCRETELY PRESENTED COMPONENT UNITS COMBINING STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2005 EXPENSES Culture and Recreation Economic Development Total Expenses Program Revenues Charges for Services Operating Grants and Contributions Net Program (Expense) Revenue General Revenues Sales Tax Unrestricted Investment Earnings Total General Revenues Change in Net Assets Net Assets, Beginning NET ASSETS, ENDING SCHERTZ 1,761 ECONOMIC 4.723 DEVELOPMENT THE CORPORATION LIBRARY 1,113,193 - $ S 2,833 1,050,709 597 1,050,709 2,833 - 1,761 DEVELOPMENT 4.723 (1,050,709) 3.651 1,113,193 - 18.680 597 1.131.873 597 81,164 4,248 849.497 20.367 S 930.661 24 6 5 SCHERTZ DEVELOPMENT FOUNDATION TOTAL $ S 2,833 1,050.709 1.053.542 1,761 4,723 _(1.047.058) 2.433 2.433 2,433 99.692 10 125 1,113,193 21,710 1.134.903 87,845 969.556 1.057.401 73 (This Page Intentionally Left Blank) 74 STATISTICAL SECTION 75 CITY OF SCHERTZ, TEXAS GOVERNMENT -WIDE EXPENSES LAST THREE FISCAL YEARS 2005 TABLE 1 2004 2003 GOVERNMENTAL ACTIVITIES General Government S 3,612,084 $ 2,873,573 S 2,630,450 Public Safety 5,558,596. 4,586,498 3,705,722 Streets and Parks 1,134,281 1,019,101 1,182,993 Health 221,950 192,506 156,927 Culture and Recreation 339,124 310,013 451,215 Interest and Other Fees 862.744 707.090 499,011 TOTAL GOVERNMENTAL ACTIVITIES $1 1 728 779 $ 9 688.781 $ 8 626 18 BUSINESS -TYPE ACTIVITIES Water and Sewer S 8,937,553 $ 8,302,505 $ 8,300,590 EMS 3,789,791 2,509,858 2,248,651 Transfer Out 199.123 584.342 410.802 TOTAL BUSINESS -TYPE ACTIVITIES $12 926 467 $11 396.705 S10 960,.Q43 NOTE Less than ten (10) years of data has been presented because this is the third year of implementation of GASB 34. The information will be presented on a prospective basis. 76 CITY OF SCHERTZ TEXAS GOVERNMENT -WIDE REVENUES LAST THREE FISCAL YEARS GOVERNMENTAL ACTIVITIES Program Revenues Charges for Services Operating Grants and Contributions Capital Grants and Contributions General Revenues Taxes Unrestricted Investment Earnings Miscellaneous Transfer In TOTAL GOVERNMENTAL ACTIVITIES BUSINESS -TYPE ACTIVITIES Program Revenues Charges for Services Capital Grants and Contributions General Revenues Unrestricted Investment Earnings Miscellaneous Special Item TOTAL BUSINESS -TYPE ACTIVITIES NOTE 2005 TABLE 2 2004 2003 $ 3,383,417 S 2,920,424 $ 2,802,949 1,789,763 2,280,629 2,788,821 3,808,133 2,153,213 - 7,976,053 6,821,909 6,742,874 356,080 114,323 93,690 83,337 58,770 16,028 199,123 584,733 410,802 19 5 906 $14.934.001 12,855 164 $12,751,791 S 9,258,452 $10,149,425 2,055,366 1,045,334 279,913 170,610 61,025 94,731 177,554 120,043 158,372 327.900 - $15,L55 321 U 00 ALZ 764 10 6, 82,441_ Less than ten (10) years of data has been presented because this is the third year of implementation of GASB 34. The information will be presented on a prospective basis. 77 CITY OF SCHERTZ TEXAS GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION LAST TEN FISCAL YEARS TABLE 3 FISCAL GENERAL PUBLIC STREETS TOTAL (1) YEAR GOVERNMENT SAFETY AND PARKS HEALTH OTHER EXPENDITURES 1996 $ 886,090 $1,174,371 $ 304,722 $ 85,685, $1,510,303 $ 3,961,171 1997 976,032 1 ,472,534 397,807 102,293 798,071 3,746,737 1998 11063,835 1,702,684 408,461 127,065 1,165,475 4,467,520 1999 1,306,500 2,023,379 806,029 142,287 2,142,364 6,420,559 2000 1,479,496 2,172,619 793,700 155,814 1,898,888 6,500,517 2001 1,668,235 2,561,055 6271110 1751048 1,710,880 6,742,328 2002 2,599,549 2,963,924 689,150 120,530 3,217,877 9,591,030 2003 2,488,134 3,530,470 675,687 156,927 4,130,086 10,981,304 2004 2,760,584 3,833,243 942,942 1 81 ,074 2,290,616 10,008,459 2005 3,482,800 4,783,758 1,143,743 208,499 2,445,567 12,064,367 (1) Includes General, Special Revenue, and Debt Service Funds 78 CITY OF SCHERTZ TEXAS GENERAL GOVERNMENT REVENUES SY SOURCE LAST TEN FISCAL YEARS TABLE 4 "Includes General, Special Revenue, and Debt Service Funds 79 LICENSES CHARGES FINES FISCAL AND FOR AND YEAR TAXES PERMITS SERVICES FORFEITURES OTHER TOTAL" 1996 $2,389,765 $ 394,841 $375,767 $317,403 S 244,638 $ 3,722,414 1997 2,698,175 546,159 452,890 331,244 242,905 4,271,373 1998 3,168,926 610,943 472,366 343,943 654,095 5,250,273 1999 3,768,037 680,316 558,904 379,584 1,100,315 6,487,156 2000 4,088,491 731,488 626,464 444,331 625,841 6,516,615 2001 4,452,964 620,652 659,145 749,201 499,921 6,981,883 2002 5,305,902 663,682 883,126 538,831 841,674 8,233,215 2003 6,747,330 941,515 944,506 646,613 1,029,248 10,309,212 2004 7,322,727 852,577 793,096 842,322 629,954 10,440,676 2005 8,569,435 1,421,575 872,286 915,704 776,173 12,555,173 "Includes General, Special Revenue, and Debt Service Funds 79 (This Page Intentionally Left Blank) .11 CITY OF SCHERTZ. TEXAS PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS TABLE 5 a RATIO OF OF TOTAL TAX RATIO OF TOTAL CURRENT CURRENT COLLECTIONS OUTSTANDING DELINQUENT TAX TAX LEVY DELINQUENT TOTAL TAX TO TOTAL DELINQUENT TAXES TO FISCAL YEAR LEVY COLLECTIONS COLLECTED COLLECTIONS COLLECTIONS TAX LEVY TAXES TAX LEVY September 30, 1996 $1,360,548 $1,342,990 98.7% $13,194 $1,356,184 99.7% $ 89,860 6.6% September 30, 1997 1,408,699 1,384,497 98.3 18,639 1,403,136 99.6 97,394 6.9 September 30, 1998 1,600,008 1,565,295 97.8 18,922 1,584,217 99.0 1 1 1 ,856 7.0 September 30, 1999 1,892,640 1,869,557 98.8 42,720 1,912,277 1 02.3 106,230 5.6 September 30, 2000 2,198,381 2,1 53,542 98.0 43,622 2,197,164 99.9 95,438 4.3 September 30, 2001 2,490,095 2,459,900 98.8 39,687 2,499,587 100.4 1 1 1 ,81 7 4.5 September 30, 2002 3,163,819 3,107,209 98.2 44,624 3,151,833 99.6 135,701 4.3 September 30, 2003 3,91 8,379 3,881 ,204 99.1 52,445 3,933,649 100.4 130,930 3.3 September 30, 2004 4,360,470 4,252,349 97.5 47,591 4,299,940 98.6 175,462 4.0 September 30, 2005 4,858,508 4,796,062 98.7 71,283 4,867,345 100.2 167,591 3.4 a CITY OF SCHERTZ TEXAS ASSESSED AND TAXABLE VALUE OF PROPERTY LAST TEN FISCAL YEARS TABLE 6 FISCAL ESTIMATED LEVY YEAR ACTUAL ASSESSMENT ASSESSED TAX TAX YEAR ENDED VALUES PERCENTAGE VALUATIONS RATE LEVY 1995 09 -30 -96 $ 346,130,091 96.5% $ 334,122,763 .4072% $1,360,548 1996 09 -30 -97 3 96,917,233 95.4 378,784,051 .3719 1,408,699 1997 09 -30 -98 452,163,752 99.6 450,199,212 .3554 1,600,008 1998 09 -30 -99 545,742,286 97.9 534,039,183 .3544 1,892,640 1999 09 -30 -00 636,157,284 100 636,157,284 .3456 2,198,381 2000 09 -30 -01 731,305,433 100 731,305,433 .3405 2,490,095 2001 09 -30 -02 827,142,321 100 827,142,321 .3825 3,163,819 2002 09 -30 -03 1 ,1 49,705,321 89.1 1,024,41 2,71 3 .3825 3,918,379 2003 09 -30 -04 1,231,083,652 92.6 1,13 9,992,15 7 .3825 4,360,470 2004 09 -30 -05 1,292,15 6,3 83 100 1,292,15 6,3 83 .3760 4,858,508 CITY OF SCHERTZ, TEXAS PROPERTY TAX RATES - ALL DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS TABLE 7 lK COUNTY CITY SCHOOL COUNTY ROAD 100% 100% 100% 100% ASSESSMENT ASSESSMENT' ASSESSMENT ASSESSMENT YEAR ** RATE* RATE* RATE* RATE* 1996 .4072% 1.3712% .3018% .0833% 1997 .3719 1.4089 .2997 .0758 1998 .3554 1.4299 .3040 .0730 1999 .3444 1.6923 .3192 .0600 2000 .3455 1.4945 .3417 .0582 2001 .3405 1.6267 .3193 .0630 2002 .3825 1.7100 .3499 .0420 2003 .3825 1.7300 .3668 .0463 2004 .3825 1.7800 .3654 .0477 2005 .3760 1.7200 3531 .0500 *All rates shown are per 5100 assessed valuation * *Year shown is the fiscal year of collection. Taxes were levied the previous calendar year. lK CITY OF SCHERTZ TEXAS RATIO OF NET GENERAL OBLIGATION BONDED DEBT TO ASSESSED VALUE AND NET GENERAL BONDED DEBT PER CAPITA TABLE 8 NET RATIO GENERAL OF NET BONDED NET GENERAL BONDED DEBT DEBT PER FISCAL YEAR ESTIMATED ASSESSED BONDED DEBT TO ASSESSED CAPITA September 30, 1996 14,500 $ 334,122,763 $1,215,000 .36% $ 83.79 September 30, 1997 15,000 378,784,051 1,095,000 .29 73.00 September 30, 1998 17,500 450,199,212 5,901,000 1.31 337.20 September 30, 1999 18,000 534,039,183 5,622,230 1.05 312.35 September 30, 2000 18,694 636,157,284 5,321,410 .84 284.66 September 30, 2001 22,000 731,305,433 5,129,000 .70 233.14 September 30, 2002 23,000 827,142,321 5,222,000 .63 227.04 September 30, 2003 24,000 1,024,412,713 4,844,000 .47 201.83 September 30, 2004 26,463 1,139,992,157 4,456,000 .39 168.39 September 30, 2005 26,780 1,292,156,383 4,045,000 .31 151.05 CITY OF SCHERTZ, TEXAS COMPUTATION OF DIRECT AND OVERLAPPING DEBT YEAR ENDED SEPTEMBER 30, 2005 *Bexar County *Corral County *Coma) Independent School District *Guadalupe County * Schertz- Cibolo- Universal City Independent School District *San Antonio, RA *Alamo Community College District Total Net Overlapping Debt *City of Schertz TOTAL DIRECT AND OVERLAPPING DEBT (5.61 % OF ASSESSED VALUE - $2,705 PER CAPITA) *Source of Data - Texas Municipal Reports, City of Schertz Compiled and Published by Municipal Advisory Council of Texas TABLE 9 7 446 99 DIRECT AND NET ESTIMATED ESTIMATED BONDED PERCENT OVERLAPPING DEBT APPLICABLE BONDED DEBT $163,394,810 2.15% $3,512,988 7,02 5,000 1.99 13 9, 798 172,405,502 0.12 206,887 13,075,000 20.37 2,663,378 88,515,612 51.88 45,921,900 55,900,000 2.06 1,1 51,540 32,748,778 2.06 674,625 54,271,116 18,175,177 100.00% 18.1 75,177 7 446 99 CITY OF SCHERTZ TEXAS LEGAL DEBT MARGIN YEAR ENDED SEPTEMBER 30, 2005 TABLE 10 Texas municipalities are not bound by any direct constitutional or statutory maximums as to the amount of general obligation bonds which may be issued; however, all local bonds must be submitted to and approved by the State Attorney General. it is the established practice of the Attorney General not to approve prospective bond issue if it will result in the levy of a tax for bonded debt of over $1.00 for cities under 5,000 population or $1.50 for cities over 5,000 population. R CITY OF SCHERTZ TEXAS RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL OBLIGATION BONDED DEBT TO TOTAL GENERAL EXPENDITURES LAST TEN FISCAL YEARS TABLE 1 1 *Includes General, Special Revenue, and Debt Service Funds 87 PERCENT OF DEBT DEBT SERVICE TO SERVICE GENERAL FISCAL YEAR PRINCIPAL INTEREST TOTAL EXPENDITURES* EXPENDITURES September 30, 1996 $341,000 S 87,098 $428,098 $ 3,961,171 10.8% September 30, 1997 120,000 65,540 185,540 3,746,737 5.0 September 30, 1998 124,000 58,916 182,916 4,467,520 4.1 September 30, 1999 278,770 303,468 582,238 6,420,559 1 1.0 September 30, 2000 300,820 286,435 587,255 6,500,517 9.0 September 30, 2001 192,410 269,942 462,352 6,742,328 6.9 September 30, 2002 5770000 289,792 866,792 9,591,030 9.0 September 30, 2003 378,000 259,172 637,172 10,981 ,304 5.8 September 30, 2004 388,000 236,954 624,954 10,008,459 6.2 September 30, 2005 411,000 213,672 624,672 12,064,367 5.2 *Includes General, Special Revenue, and Debt Service Funds 87 (This Page Intentionally Left Blank) E-3 CITY OF SCHERTZ, TEXAS REVENUE BOND COVERAGE - UTILITY SYSTEM BONDS LAST TEN FISCAL YEARS TABLE 12 .. TOTAL OPERATING OPERATING EXPENSES INCOME DEBT SERVICE NUMBER OF OPERATING BEFORE BEFORE REQUIREMENTS CUSTOMERS FISCAL YEAR REVENUE DEPRECIATION DEPRECIATION PRINCIPAL INTEREST TOTAL COVERAGE WATER SEWER September 30, 1996 $2,390,600 $1,325,796 $1,064,804 $445,000 $92,080 $537,080 1.98:1 4,877 4,031 September 30, 1997 2,879,730 1,556,271 1,323,459 55,000 70,578 125,578 10.54:1 5,641 41622 September 30, 1998 3,316,900 1,71 1 ,388 1,605,512 55,000 67,013 1 22,01 3 13.16:1 6,914 51767 September 30, 1999 3,250,589 2,145,249 1,105,340 80,000 63,588 143,588 7.70:1 7,351 6,226 September 30, 2000 3,958,054 2,717,774 1,240,280 35,000 58,375 93,375 13.28:1 6,837 5,814 September 30, 2001 4,260,109 3,115,427 1,144,682 35,000 55,750 90,750 12.61:1 7,103 6,185 September 30, 2002 4,663,584 3,061,327 1,602,257 275,000 246,263 521,263 3.07:1 7,311 6,511 September 30, 2003 8,228,571 5,359,309 2,869,262 285,000 236,913 S21,263 5.50:1 8,045 7,261 September 30, 2004 7,583,136 5,653,184 1,929,952 365,000 226,795 591,795 3.26:1 9,389 7,887 September 30, 2005 9,381,042 6,136,390 3,244,652 380,000 213,290 593,290 5.47:1 9,673 8,664 .. CITY OF SCHERTZ. TEXAS WATERWORKS AND SEWER SYSTEM FUND REVENUE BOND REQUIREMENTS YEAR ENDED SEPTEMBER 30, 2005 ANNUAL PRINCIPAL/ SEMI - ANNUAL INTEREST UTILITY SYSTEM REVENUE BONDS SERIES 2001.: Principal Payment, Due September 1, 2006 $290,000 Interest Payment, Due March 1, 2006 99,330 Total Requirements TABLE 13 REQUIREMENT AT SEPTEMBER 30, BASIS 2005 1/12`h $24,167 1 /6`h 16.555 The City was in compliance with revenue bond requirements as of September 30, 2005. RESERVE FUND REQUIREMENTS The City is required to make monthly deposits sufficient to meet the total reserve fund requirement within sixty (60) months of the closing date for the 2001 issue. The City has purchased a surety bond through MBIA Insurance Corporation to meet the reserve fund requirement. 0111 CITY OF SCHERTZ TEXAS DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS TABLE 14 Source: (1) 2000 Bureau of the Census Department of Planning, University of Texas (2) Department of Economics, University of Texas United States Department of Labor (Information not Available for Odd Years) (3) Texas Workforce Commission (4) Texas Education Agency District Performance Report a LEVEL IN PER YEARS OF CAPITA MEDIAN FORMAL SCHOOL UNEMPLOYMENT FISCAL POPULATION INCOME AGE EDUCATION ENROLLMENT RATE IN % YEAR (1) (2) (3) (3) (4) (3) 1996 14,500 Est. $13,600 32 14 4,841 3.9% 1997 15,000 Est. 13,600 33 14 5,136 3.9 1998 17,500 Est. 16,500 32.6 14.6 5,951 3.9 1999 18,000 Est. 16,500 32.6 14.6 5,777 3.9 2000 18,694 Act. 31,768 35.1 14.6 6,186 2.4 2001 22,000 Est. 36,478 35.1 14.6 6,440 2.4 2002 23,000 Est. 36,478 35.1 14.6 6,440 2.4 2003 24,000 Est. 38,000 35.1 14.6 7,245 4.1 2004 26,463 Est. 38,000 32.7 15.0 7,257 3.6 2005 26,780 Est. 71,946 35.1 15.9 7,712 4.4 Source: (1) 2000 Bureau of the Census Department of Planning, University of Texas (2) Department of Economics, University of Texas United States Department of Labor (Information not Available for Odd Years) (3) Texas Workforce Commission (4) Texas Education Agency District Performance Report a (This Page Intentionally Left Blank) 92 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Sources w CITY OF SCHERTZ, TEXAS PROPERTY VALUE AND NEW CONSTRUCTION LAST TEN FISCAL YEARS TABLE 15 COMMERCIAL RESIDENTIAL CONSTRUCTION CONSTRUCTION PROPERTY VALUE* NUMBER VALUE NUMBER VALUE COMMERCIAL RESIDENTIAL NONTAXABLE 25 $14,758,928 468 548,959,088 $ 40,363,499 S 246,223,426 S 8,557,521 32 10,587,644 524 57,591,942 52,420,249 333,173,109 10,448,019 22 17,173,013 537 60,529,538 71,693,462 395,802,747 10,898,210 27 14,396,374 520 58,783,734 258,298,378 354,485,210 22,672,637 21 13,169,373 353 43,092,362 324,331,981 403,920,536 31,850,206 20 29,559,090 268 36,711,105 353,891,071 440,964,561 34,354,559 21 14,091,596 328 36,517,687 435,104,986 483,437,631 44,767,932 28 12,694,589 456 62,871 ,045 385,559,044 606,788,719 60,937,579 34 32,518,613 337 53,303,970 166,174,174 964,448,074 89,929,421 39 45,291 ,148 487 76,291 ,473 208,296,007 1,043,85 7,5 3 3 1 4,465,677 City Building Inspection Records City Tax Records S. W. T. Research Center Schertz State Bank Surety Southwest *Estimated Actual Value State Bank & Trust Guadalupe County Appraisal District CITY OF SCHERTZ, TEXAS PRINCIPAL TAXPAYERS YEAR ENDED SEPTEMBER 30, 2005 TABLE 16 Source: Guadalupe County Appraisal District .. 2004 PERCENTAGE OF ASSESSED TOTAL ASSESSED PRINCIPAL TAXPAYERS TYPE OF BUSINESS VALUATION VALUATION 1 . San Antonio MTA, LP /LTD Telephone Service S 28,007,240 2.17% 2. Block Distributing, Inc. Distribution 19,686,530 1.52 3. Sprint Spectrum, LP Utility Service 13,846,660 1.07 4. Verde Tri County, Ltd. Business Developers 12,570,214 .97 5. Eye Care Centers of America, Inc. Vision Care 11,081,946 .86 6. H.E.B. Grocery Co. Grocery Sales 9,793,856 .76 7. Prologis North American Properties Business Developers 8,157,730 .63 8. Atlantic Financial Group, Ltd. Business Developers 8,072,983 .62 9. Wal -Mart Retail 7,897,206 .61 10. Legacy Oaks Apartments, Ltd. Apartment Complex 7,693,601 .60 Other Assessed Properties 1 ,165,348.417 90.19 TOTAL ASSESSMENTS 1 2 2_ 6_83 0� G.00Y0 Source: Guadalupe County Appraisal District .. CITY OF SCHERTZ. TEXAS MISCELLANEOUS STATISTICS YEAR ENDED SEPTEMBER 30, 2005 TABLE 17 Date of Incorporation December, 1958 Date of First Charter Adopted April, 1974 Date Present Charter Adopted Amended May, 1997 Form of Government Council- Manager YEAR SQUARE MILES 2005 28.00 2004 28.00 2003 28.00 2002 26.02 2001 24.18 2000 24.18 1999 24.15 1998 24.15 1997 24.15 1996 24.15 Miles of Highways, Streets, and Alleys Streets and Highways, Paved 101.82 Miles Streets, Unpaved 8.98 Miles Alleys 3.44 Miles Sidewalks 16.95 Miles Miles of Sewer Storm 4.08 Miles Sanitary 53.87 Miles Building Permits VALUE OF YEAR PERMITS ISSUED BUILDINGS 2005 3,434 130,577,776 2004 3,055 100,515,687 2003 7,119 79,468,026 2002 2,812 50,609,283 2001 2,754 70,912,183 2000 3,716 61,864,013 1999 3,690 76,501,638 1998 3,767 821800,348 1997 3,373 71,741,172 1996 2,559 64,267,503 (Continued) 95 CITY OF SCHERTZ, TEXAS MISCELLANEOUS STATISTICS YEAR ENDED SEPTEMBER 30 2005 Fire Protection: Number of Stations Number of Employees (Full and Part -Time) Recreation: Parks Playgrounds Other Recreational Facilities: Baseball Fields Baseball Practice Fields Softball Fields Large Pavillion Small Pavillion Picnic Tables: Uncovered Restrooms: Male Female Concessions Stands Community Center City Employees: September 30, 2005 Elections: Number of Registered Voters Number of Votes in: Last Municipal Election Percentage of Registered Voters Voting in: Last Municipal Election Source: Municipal Election Records Population: Census Population Count 2005 (Estimate) 2004 (Estimate) 2003 (Estimate) 2002 (Estimate) 2001 (Estimate) 2000 1999 (Estimate) 1998 (Estimate) 1997 1990 TABLE 17 2 31 7 20 7 4 1 10,000 Square Feet Covered 600 Square Feet Covered 93 11 11 2 245 16,323 1,311 8.03% 26,780 26,463 24,000 23,000 22,000 18,694 18,000 17,500 15,000 10,597 ., SINGLE AUDIT SECTION 97 (This Page Intentionally Left Blank) 4801 N W LOOP a 10 SI ITr - 5 SAN ANTONIO TEXAS 78929-5508 210/,541 2581 I l\ 210/,)41-2588 cpas�+tk6ky. com Thompson, Williams, Biediger, K for Young, L.C. CERTIFIED PUBLIC ACCOUNTANTS %1E.MBERS AiMERICAN INSTITUTE OF CERTIFIED PUBLIC %CCODU1%NTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Honorable Mayor and Members of the City Council City of Schertz, Texas We have audited the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Schertz, Texas, as of and for the year ended September 30, 2005, which collectively comprise the City of Schertz, Texas' basic financial statements, and have issued our report thereon dated January 25, 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered City of Schertz, Texas', 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 an opinion 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 that might be material weaknesses. A material weakness is a reportable 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 caused by error or fraud 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. Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Schertz, Texas, financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with 99 THOMPSON, AA HI AiA1S. BIF IAGER_ H %,5 OV? ,Q I OL'_NG. L.C- (This Page Intentionally Left Blank) 100 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. However, we noted certain matters that we reported to management of the City of Schertz, Texas in a separate letter dated January 25, 2006. This report is intended solely for the information and use of the audit committee, management, city council, and federal awarding agencies and pass- through entities, and is not intended to be and should not be used by anyone other than these specified parties. Certified Public Accountants San Antonio, Texas January 25, 2006 101 (This Page Intentionally Left Blank) 102 4801 N.AA LOOP 410. SUITE 72:5 SAN, ANTONIO TEAAS 78225)-5.108 210/541 2581 LU. 210/541 2588 cpas @ncbkycom Thompson, Williams, Biediger, K �or Young, L.C. CERTIFIED PUBLIC ACCOUNTANTS MEMBERS \i41ERICAN INSTITUTE Or CERTIFIED PUBLIC: ACCOUNTANTS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A -1 33 The Honorable Mayor and Members of the City Council City of Schertz, Texas Compliance We have audited the compliance of City of Schertz, Texas, with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A -133 Compliance Supplement that are applicable to the major federal program for the year ended September 30, 2005. City of Schertz, Texas', major federal program is identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to the major federal program is the responsibility of City of Schertz, Texas' management. Our responsibility is to express an opinion on City of Schertz, Texas' compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. Those standards and OMB Circular A -1 33 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about City of Schertz, Texas', compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on City of Schertz, Texas', compliance with those requirements. In our opinion, City of Schertz, Texas, complied, in all material respects, with the requirements referred to above that are applicable to its major federal program for the year ended September 30, 2005. 103 THOMPSON, WILLIAVI5, BIEDIGER, MS [OR ',Q YOUNG. L.C. (This Page Intentionally Left Blank) 104 Internal Control Over Compliance The management of City of Schertz, Texas, is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered City of Schertz, Texas', internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on the internal control over compliance in accordance with OMB Circular A -133. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable 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 noncompliance with applicable requirements of laws, regulations, contracts, and grants caused by error or fraud that would be material in relation to a major federal program 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 compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the audit committee, management, city council, and federal awarding agencies and pass- through entities and is not intended to be and should not be used by anyone other than th e specified parties. l / MAMA, � l m'nA Al, IlA/ �i/d,hd�u�X1J, dQc. Certified Public Accountants San Antonio, Texas January 25, 2006 IM CITY OF SCHERTZ TEXAS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED SEPTEMBER 30, 2005 PASS - THROUGH FEDERAL ENTITY FEDERAL GRANTOR/ PASS-THROUGH CFDA IDENTIFYING FEDERAL GRANTOR /PROGRAM OR CLUSTER TITLE NUMBER NUMBER EXPENDITURES U.S. Department of Homeland Security, Federal Emergency Management Agency/ Texas Department of Public Safety /Hazard Mitigation Grant -Unmet Needs Project 83.548 2E- 02C- 1 /DR -1 257 5626,235 U.S. Department of Homeland Security, Office of Domestic Preparedness/ Texas Homeland Security /Assistance to Firefighters Grant 97.044 EMW- 204 -FG -00312 1 12,01 5 U.S. Department of Homeland Security, Office of Domestic Preparedness/ Texas Homeland Security /State Homeland Security Program 97.073 2004- GE -T4- 0015/66128 186,139 U.S. Department of Homeland Security, Office of Domestic Preparedness/ Texas Homeland Security /Law Enforcement Terrorism Prevention Program 97.074 2004- GE -T4- 0015/66128 26.190 TOTAL FEDERAL EXPENDITURES 57 106 CITY OF SCHERTZ, TEXAS NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED SEPTEMBER 30, 2005 NOTE 1: GENERAL The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Schertz. The information in this schedule is presented in accordance with the requirements of OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. NOTE 2: MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. The governmental funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Statements of revenues and expenditures and changes in fund balances of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. The modified accrual basis of accounting is used in the governmental funds financial statements. This basis of accounting recognizes revenues in the accounting period in which they become susceptible to accrual (i.e., both measurable and available) and expenditures in the accounting period in which the fund liability is incurred, if measurable, except for unmatured interest on long- term debt, which is recognized when due, and certain compensated absences and claims and judgments, which are recognized when the obligations are expected to be liquidated with expendable available financial resources. Federal grant funds are considered to be earned to the extent of expenditures made under the provisions of the grant. All federal grant funds were accounted for in the general fund and the capital projects fund. 107 CITY OF SCHERTZ, TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED SEPTEMBER 30 2005 I. Summary of Auditor's Results A. Type of auditor's report issued on the financial statements; Unqualified B. Reportable conditions in internal controls disclosed by the audit of the financial statements None 1 . Reportable conditions that were material weaknesses None C. Noncompliance material to the financial statements disclosed by the audit of the financial statements None D. Reportable conditions in internal controls over major programs disclosed by the audit of the financial statements None 1 . Reportable conditions that were material weaknesses None E. Type of auditor's report issued on compliance for major program Unqualified F. Findings disclosed by the audit of the financial statements which the auditor is required to report under Sec. 510(a): None G. Major Program: Federal Emergency Management Agency Hazard Mitigation Grant, CFDA #83.548 H. The dollar threshold used to distinguish between Type A and Type B programs I. Auditee qualified as a low risk auditee. II. Findings relating to the financial statements which are required to be reported in accordance with generally accepted government auditing standards None identified. III. Findings and questioned costs for federal awards None identified. IV. Prior audit findings. None identified. $300,000 Yes O•