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CAFR FY 2011-2012CITY OF SCHERTZ, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2012 OFFICIALS ISSUING REPORT John C. Kesel City Manager Juan F. Santoya, Jr. Director of Finance ,, ~, w) -~ .* .. ~~ ~' ~~ ~~' 1'ORA`rE4 CITY CITY OF SCHERTZ, TEXAS TABLE OF CONTENTS SEPTEMBER 30, 2012 FINANCIAL SECTION INDEPENDENT AUDITOR' S REPORT MANAGEMENTS DISCUSSION AND ANALYSIS PAGE 2 4 BASIC FINANCIAL STATEMENTS ............................................................................................................ 13 STATEMENT OF NET ASSETS ............................................................................................................... 14 STATEMENT OF ACTIVITIES ................................................................................................................. 16 BALANCE SHEET -GOVERNMENTAL FUNDS .................................................................................. 18 RECONCILIATION OF BALANCE SHEET TO STATEMENT OF NET ASSETS ............................... 20 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES 1N FUND BALANCES - GOVERNMENTAL FUNDS .................................................................................................................. 21 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES . 23 STATEMENT OF NET ASSETS -PROPRIETARY FUNDS ................................................................... 24 STATEMENT OF REVENUES, EXPENSES, AND CHANGES 1N FUND NET ASSETS PROPRIETARY FUNDS ........................................................................................................................ 26 STATEMENT OF CASH FLOWS -PROPRIETARY FUNDS ................................................................. 27 NOTES TO BASIC FINANCIAL STATEMENTS ........................................................................................ 29 REQUIRED SUPPLEMENTARY 1NFORMATION ..................................................................................... 51 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL -GENERAL FUND .................................................................................... 52 NOTES TO SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE -BUDGET AND ACTUAL -GENERAL FUND .............................................................. 54 TEXAS MUNICIPAL RETIREMENT SYSTEM -ANALYSIS OF FUNDING PROGRESS ................. 55 SUPPLEMENTARY INFORMATION 56 COMPARATIVE BALANCE SHEETS -GENERAL FUND ................................................................... 57 COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE -GENERAL FUND ............................................................................................................. 58 COMPARATIVE BALANCE SHEETS -DEBT SERVICE FUND .......................................................... 59 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL -DEBT SERVICE FUND .............................................................................. 60 COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS ................................... 61 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES 1N FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS .................................................................. 63 i SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL -HOTEL OCCUPANCY FUND ............................................................... ..... 65 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE- BUDGET TO ACTUAL -PARK FUND ........................................................................................... ..... 66 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL -POLICE FORFEITURES FUND ............................................................ ..... 67 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL -LIBRARY GRANT FUND ..................................................................... ..... 68 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL -HISTORICAL COMMITTEE FUND ..................................................... ..... 69 COMBINING STATEMENT OF NET ASSETS - DISCRETELY PRESENTED COMPONENT UNITS ...................................................................... ..... 70 COMBINING STATEMENT OF ACTIVITIES - DISCRETELY PRESENTED COMPONENT UNITS ...................................................................... ..... 71 COMBINING BALANCE SHEET -DISCRETELY PRESENTED COMPONENT UNITS .............. ..... 72 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE -DISCRETELY PRESENTED COMPONENT UNITS ................................................ ..... 73 STATISTICAL SECTION NET ASSETS, BY COMPONENT ..................................................................................................... ............ 75 CHANGE 1N NET ASSETS ............................................................................................................... ............ 77 FUND BALANCES -GOVERNMENTAL FUNDS .................................................................................. ............ 81 CHANGES 1N FUND BALANCES, GOVERNMENTAL FUNDS .................................................. ............ 83 TAX REVENUE BY SOURCE -GOVERNMENTAL FUNDS ....................................................... ............ 85 TOTAL WATER AND SEWER CONSUMPTION AND RATES .............................................. ............ 86 PRINCIPAL WATER AND SEWER CONSUMERS ................................................................... ............ 87 ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY ........... ............ 88 DIRECT AND OVERLAPPING PROPERTY TAX RATES ............................................................ ............ 89 PRINCIPAL PROPERTY TAX PAYERS .......................................................................................... ............ 90 PROPERTY TAX LEVIES AND COLLECTIONS ........................................................................... ............ 91 TAXABLE ASSESSED VALUE ........................................................................................................ ............ 92 RATIOS OF OUTSTANDING DEBT BY TYPE .............................................................................. ............ 93 RATIOS OF GENERAL BONDED DEBT OUTSTANDING ..................................................... ............ 95 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT ............................. ............ 96 DEBT MARGIN 1NFORMATION ..................................................................................................... ............ 97 PLEDGED REVENUE COVERAGE ................................................................................................. ............ 98 DEMOGRAPHIC AND ECONOMIC STATISTICS ......................................................................... ............ 99 TOP TEN PRINCIPAL EMPLOYERS ............................................................................................... .......... 100 FULL-TIME EQUIVALENT CITY GOVERNMENTAL EMPLOYEES BY FUNCTION ............. .......... 101 OPERATING INDICATORS BY FUNCTION/PROGRAM ............................................................. .......... 102 CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM ........................................................ .......... 104 COMPLIANCE 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 ........................ 107 ii INTRODUCTORY SECTION iii February 11, 2013 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 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, 2012. 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 Armstrong, Vaughan & Associates P.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, 2012, 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 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, 2012, 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. 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 (1VID&A). This letter of transmittal is designed to complement 1VID&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 auditor. 14U0 Schertz Parkway ~s Schertz, Texas 78154 * 210.619.1000 ~ schertz.com 1V 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 32.1 square miles and serves a population of 33,382. 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 30 November 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 City Council, and for appointing the heads of the various departments. The council is elected on anon-partisan basis. Council members serve two-year staggered terms, with two council members elected every two years. The mayor is elected to serve atwo-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 facilities, cultural events, water and sewer services and EMS services. 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 by 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 1 August. The council then holds public hearings on the proposed budget and to adopt a final budget by no later than September 30th, the close of the City of Schertz's fiscal year. The appropriated budget is prepared by each department (e.g. police). Department heads may make transfers of appropriations within a department. The City Manager may make transfers between departments and funds with City Council approval. 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 52-53 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. v Local economy. The City of Schertz enjoys a favorable economic environment and indicators point to favorable growth. In November 2012, Amazon announced it would build a $166 million fulfillment center on 96 acres in Schertz. The fulfillment center will have 1.26 million square feet and be the largest facility in Schertz. The new fulfillment center is expected to create 350 new jobs with an annual payroll of $11 million. SYSCO completed their 630,000 square foot distribution facility in January 2012 and employs 575 full time staff. Salof Companies moved into a 390,935 square foot facility. Salof employs 110 people and is expected to employ a total of 225 positions within 2 years. Caterpillar completed a second phase to their operations and is expected to add two more phases with a total of 330 jobs. Baptist Emerus Emergency Hospital began construction on its new $11 million facility and is expected to be in operation by spring of 2013. Businesses with headquarters or divisions located within the city or in close proximity include Eye Care Centers of America, Brandt Engineering, Cal-Tex Protective Coatings, Inc., Valero, FedEx Freight, Marshall Shredding Company, Kraft Nabisco and Republic National Distributing Company. The region has a manufacturing and industrial base that adds to the relative stability of the unemployment rate, which currently stands at 5.5%. The region has a labor force of approximately 990,000, and this number is expected to increase in the next several years as the region continues to experience population and business growth. Local indicators point to a strong and growing housing market. The City planned well and has an abundant water supply for meeting its future growth. Long-term financial planning. The community approved bond propositions in November 2010 for quality of life projects which included a swimming pool, improvements to athletic and soccer fields, building an animal services facility, and improvements to Main Street. Bonds have been sold for these projects. Design work was in progress for the athletic and soccer fields, animal shelter and swimming pool. In 2006, the citizens approved bond propositions for $38.5 million in streets and drainage improvements, a new library and additional recreational facilities. The library, recreation center were completed. Most of the streets and drainage projects have been completed. Financial Information Internal Control. Management is responsible for establishing and maintaining internal controls designed to ensure that assets of the City are protected from loss, theft or misuse and to provide adequate accounting information compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles for local governments as prescribed by the Governmental Accounting Standards Board (GASB), the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA). The internal control system is designed to provide reasonable, but not absolute assurance that these objectives are met. The concept of reasonable assurance recognizes that the cost of an internal control should not exceed the benefits derived from the internal control. The City utilizes financial accounting software which is designed with a system of internal controls. These controls are continually being reevaluated to provide reasonable, but not absolute, assurances. Budget Controls. The City also utilizes budgetary controls. Legally expenditures cannot exceed the appropriated amount. The objective of these budgetary controls is to ensure compliance with the adopted budget approved by the City Council as mandated by the city charter and state law. The levels of budgetary control are established at the line-item basis and at the fund level v~ Cash management policies and practices. During the year, temporarily idle cash was invested through State local investment pools. Cash available for longer term investments was invested in agency bonds and certificates of deposit. Cash in the State local investment pools are essentially liquid. Longer term investments had an average maturity of 2 years. The average yield on investments was .50 percent. Active involvement in investment instruments was limited due to the continuation of extremely low interest rates and market uncertainty. The rate of return was simply not sufficient to justify the management expense. Risk Management. During 2012, 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 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 Other Financial Information: Independent Audit. An independent audit is required every year of the general ledger, accounts, financial records, and transactions of all city departments. The audit is completed by an independent certified public accounting firm selected by the City Council. The City is in compliance with this requirement and the independent auditor's report by Armstrong, Vaughan, P.C. Certified Public Accountants, has been included in this report. 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 for its comprehensive annual financial report for the fiscal year ended September 30, 2011. This was the 27th 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 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. v~~ 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, John C. Kesel City Manager _.. r ' ~~ Juan F. Santoya' Finance Director viii CITY OF SCHERTZ, TEXAS CITY OFFICIALS MAYOR MAYOR PRO-TEM CITY COUNCIL CITY MANAGER DIRECTOR OF FINANCE CITY ATTORNEY CITY AUDITOR VACANT GEORGE ANTUNA, JR. DAVID SCAGLIOLA CEDRIC EDWARDS, SR. MICHAEL CARPENTER JIM FOWLER JOHN C. KESSEL JUAN F. SANTOYA, JR. MICHAEL SPAIN, FULBRIGHT & JAWORSKI, L.L.P ARMSTRONG, VAUGHAN & ASSOCIATES, P.C. ix CITY OF SCHERTZ ORGANIZATIONAL CHART *Appointed by City Council 1~1 Presented to qty ® ~ ~tZ e~~.~ For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2011 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. 95 a ~~ t s C President ~~, s b ~ Y.k .' J s` ~,'.~` -ti ~k`i[iE - -. ~ h ~~~~-~ ~.-~:~ii~lr~.~ Executive Director xi ,, ~, w) -~ .* .. ~~ ~' ~~ ~~' 1'ORA`rE4 CITY FINANCIAL SECTION ~i,1N~1~~,~s~~~~ .. ~.. To the Honorable Mayor and Members of the City Council City of Schertz, Texas _ _- INDEPENDENT AUDITOR'S REPORT 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, 2012, 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 opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GovernmentAuditing 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 opinions. 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, 2012, 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 February 11, 2013 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 GovernmentAuditing Standards and should be considered in assessing the results of our audit. 2 Accounting principles generally accepted in the United States of America require that management's discussion and analysis, budgetary comparison information, and analysis of defined benefit pension plan funding progress on pages 4 through 12 and 51 through 55 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's response to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Schertz, Texas, financial statements taken as a whole. The combining and individual fund financial statements are presented for purposes of additional analysis and are not a required part of the financial statements. These statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements taken as a whole. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Schertz, Texas, financial statements taken as a whole. The introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the financial statements. These sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. ./u , l~ sea , ~` C:., a Armstrong, Vaughan & Associates, P.C. February 11, 2013 MANAGEMENTS 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, 2012. 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 $126,043,088 (net assets). Of this amount, $17,230,534 (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 $3,586,578. A majority of this increase, 54%, 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 $22,659,404, an increase of $7,857,247 in comparison with the prior year. The majority of this increase is from the new bonds issued in the Capital Projects fund. At the end of the fiscal year, the combined total of the General Fund assigned and unassigned fund balances was $2,975,878 which is 15% of the general fund expenditures not including capital outlay. The fund balance policy is to have a 25% balance. During the fiscal year, the City issued $7.625 million in general obligation debt for voter approved community projects. The related principal and interest payments for the debt are from an annual ad valorem tax levied against all taxable property within the City. In addition, the City had one debt refunding due to the favorable rate environment. 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 aprivate-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 fmancial 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). 4 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. 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 is 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 eleven 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 eight 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. Proprietary funds. The City of Schertz maintains one type of proprietary fund. 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. 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. 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. 5 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. The combining statements referred to earlier in connection with non-major governmental funds are presented immediately following the required supplementary information. 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 $126 million at the close of the most recent fiscal year. The largest portion of the City's total net assets (85%) 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, plus bond proceeds that have not yet been signed. The City of Schertz uses these capital assets to provide services to citizens; consequently, these assets are not available for operational type of 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. An additional portion of the City's total net assets (2%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, $17.2 million 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. TABLE A-1 NET ASSETS Current and Other Assets Capital Assets Total Assets Governmental Activities Business-Type Activities Total Current Liabilities Long-Term Liabilities Total Liabilities Net Assets: Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Net Assets 2012 2011 2012 2011 2012 2011 $ 27,501,728 $ 19,189,682 $ 14,882,981 $ 12,904,183 $ 42,384,709 $ 32,093,865 101,396,956 102,897,959 59,257,605 60,061,493 160,654,561 162,959,452 128,898,684 122,087,641 74,140,586 72,965,676 203,039,270 195,053,317 5,334,964 4,614,315 2,829,343 3,348,941 8,164,307 7,963,256 59,259,434 54,297,127 9,572,441 10,336,424 68,831,875 64,633,551 64,594,398 58,911,442 12,401,784 13,685,365 76,996,182 72,596,807 56,616,809 55,415,699 50,161,157 51,838,589 106,777,966 107,254,288 2,034,588 2,279,621 - - 2,034,588 2,279,621 5,652,889 5,480,879 11,577,645 7,441,722 17,230,534 12,922,601 $ 64,304,286 $ 63,176,199 $ 61,738,802 $ 59,280,311 $ 126,043,088 $ 122,456,510 The government's net assets increased by $3.6 million during the current fiscal year. Fifty-four percent of this increase represents capital contributions from developers. The following table indicates changes in net assets for governmental and business-type activities followed by graphs displaying total revenues and expenses by type: Revenues: Program Revenues: Charges for Services Operating Contributions Capital Contributions General Revenues Property 'faxes Other Taxes Investment Earnings Miscellaneous Total Revenues Expenses: General Government Public Safety Public Environment Parks and Recreation Cultural Health Administration Interest and Other Fees Water and Sewer EMS Total Expenses INCREASE IN NET ASSETS BEFORE TRANSFERS Transfers CHANGE IN NET ASSETS $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2 ,000,000 $- TABLE A-2 CHANGES IN NET ASSETS FOR GOVERNMENTAL AND BUSINESS-TYPE ACTIVITIES Governmental Activities Business-Type Activities 2012 2011 2012 2011 Total ~rn~ ~nII $ 6,512,839 $ 5,967,735 $ 20,972,682 $ 20,637,927 $ 27,485,521 $ 26,605,662 715,517 549,851 - - 715,517 549,851 1,106,413 2,998,115 828,853 2,175,889 1,935,266 5,174,004 11,298,204 10,280,768 - - 11,298,204 10,280,768 7,455,606 6,671,247 - - 7,455,606 6,671,247 50,947 35,008 36,409 37,950 87,356 72,958 604,277 303,444 666,645 457,094 1,270,922 760,538 27,743,803 26,806,168 22,504,589 23,308,860 50,248,392 50,115,028 6,514,329 5,878,984 - - 6,514,329 5,878,984 9,103,676 8,390,740 - - 9,103,676 8,390,740 3,586,087 3,152,119 - - 3,586,087 3,152,119 1,425,517 1,436,436 - - 1,425,517 1,436,436 899,487 858,336 - - 899,487 858,336 357,658 374,516 - - 357,658 374,516 2,415,696 2,387,518 - - 2,415,696 2,387,518 2,250,972 2,189,935 - - 2,250,972 2,189,935 - - 16,349,967 15,280,871 16,349,967 15,280,871 - - 3,758,425 3,659,031 3,758,425 3,659,031 26,553,422 24,668,584 20,108,392 18,939,902 46,661,814 43,608,486 1,190,381 2,137,584 2,396,197 4,368,958 3,586,578 6,506,542 (62,294) 84,235 62,294 (84,235) - - $ 1,128,087 $ 2,221,819 $ 2,458,491 $ 4,284,723 $ 3,586,578 $ 6,506,542 TOTAL REVENUES-GOVERNMENT-WIDE 7 Charges for Services Capital Grants andCordributions Other Tasty Miscellaneous Op erating Grants and Contributions Property Taxes Unrestricted Inv wtment Earnings TOTAL EXPENSES-GOVERNMENT-WIDE 10,000,000 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 Revenues-Governmental Activities (Continued) General Revenue by Source - Go~rnmental Activities Miscellaneous, 3% Occupancy Tax, 2% Franchise Tax, 9% Investment Earnings,0% Property Tax, 59% Sal esand Use Tax, 27% g General Public Safety Public Parks and Cultural Heakh Interest and Government Environmait Recreation Administration Other Fees Business-Type Activities Business-Type activities accounted for 69% of the growth in the net assets of the City of Schertz. Of this increase, 34% is the result of capital contributions from developers. For the most part, increases in expenses closely paralleled inflation and the change in revenues was primarily related to fluctuations in capital contributions from developers. 2s,oao,ooo 2o,oao,ooo 15,000,000 10,000,000 5,000,000 $20,000,000 $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 $- Program Revenue ®Program Expense ~Nonoperating Revenues Capital Contributions and Transfers 2012 2011 Water and Sewer Utilities EMS Financial Analysis of the Government's Funds As noted earlier, the City of Schertz uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. 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 $22.7 million. Of this total amount, $2.56 million constitutes unassigned fund balance, which is available for spending at the government's discretion. The remainder of fund balance is non-spendable, restricted, or assigned 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 assigned purposes. The general fund is the chief operating fund of the City of Schertz. At the end of the current fiscal year, unassigned fund balance of the general fund was $2.56 million, while total fund balance was $4.0 million, an increase of $773,617 from the prior year. As a measure of the general fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 13% of total general fund expenditures, not including capital. The debt service fund has a total fund balance of $227,674 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 $110,424. The capital projects fund has a total fund balance of $17.3 million, an increase of $7.0 million. This increase was from the proceeds of a voter approved bond issue for various community projects. 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 $11,540,031 and those for the Schertz EMS fund amounted to $37,614. General Fund Budgetary Highlights The General Fund expenditures were $886,822 less than budgeted amounts and the fund balance was $651,916 higher than anticipated. This is the result of cost savings across most of the General Fund. The only department significantly over budget Legal, which is attributed to increased planning for future growth. The original budget was amended during the year to increase total expenditures by less than 1%. 10 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, 2012, amounts to $160,654,561 (net of accumulated depreciation). The City did not add significant capital assets this year aside from developer contributions of infrastructure. Additional information on the City's capital assets can be found in the notes to the basic financial statements. TABLE A-3 CAPITAL ASSETS (Net of Depreciation) Governmental Business-Type Activities Activities Total 2012 2011 2012 2011 2012 2011 Land $ 7,442,117 $ 7,442,117 $ 910,413 $ 910,413 $ 8,352,530 $ 8,352,530 Buildings and Improvements 35,037,432 35,037,432 76,417,848 71,829,995 111,455,280 106,867,427 Machinery, Equipment, and Vehicles 6,121,702 5,717,322 2,787,698 2,667,463 8,909,400 8,384,785 Infrastructure 80,129,133 77,314,528 - - 80,129,133 77,314,528 Construction in Progress 751,277 1,552,178 84,996 3,697,506 836,273 5,249,684 Accumulated Depreciation (28,084,705) (24,165,618) (20,943,350) (19,043,884) (49,028,055) (43,209,502) TOTALS $ 101,396,956 $ 102,897,959 $ 59,257,605 $ 60,061,493 $ 160,654,561 $ 162,959,452 Long-Term Debt. At the end of the current fiscal year, the City of Schertz had total bonded debt outstanding of $71,595,189. Of this amount, $68,990,000 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. During the fiscal year, the City issued $7,625,000 in general obligation debt for community projects approved by the voters in November 2010. The related principal and interest payment for the bonds are from an annual ad valorem tax levied against all taxable property within the City. In addition, the City also issued one debt refunding to take advantage of favorable interest rates. The City of Schertz's general fund maintains a "AA" rating from Standard and Poors and Fitch Ratings while its water and sewer fund maintains an "A" rating from Standard and Poor's. Additional information on the City's long-term debt can be found in notes to the basic financial statements. TABLE A-4 Governmental Business-Type Activities Activities Total 2012 2011 2012 2011 2012 2011 General Obligation Bonds $ 51,050,000 $ 44,715,000 $ - $ - $ 51,050,000 $ 44,715,000 Certificates of Obligation 996,300 7,910,800 5,383,700 5,704,200 6,380,000 13,615,000 Revenue Bonds - - 2,355,000 2,490,000 2,355,000 2,490,000 Gen. Obl. Refunding Bonds 9,155,000 2,790,000 2,405,000 2,675,000 11,560,000 5,465,000 Other Debt 60,189 97,188 190,000 250,000 250,189 347,188 TOTALS $61,261,489 $55,512,988 $10,333,700 $11,119,200 $71,595,189 $66,632,188 11 Economic Factors and Next Year's Budgets and Rates During the current fiscal year, unassigned fund balance in the general fund increased to $2,560,667. The City of Schertz has not appropriated any portion of this amount for spending in the 2013 fiscal year budget. The intention is to build up the unassigned fund balance to 3 to 6 months of operating expenses. Water and sewer rates are expected to remain stable. 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. 12 BASIC FINANCIAL STATEMENTS 13 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS SEPTEMBER 30, 2012 ASSETS CurrentAssets: Cash and Cash Equivalents Investments Receivables (net of allowances) Delinquent Taxes Accounts and Other Accrued Interest Income Prepaid Expenses Inventories Internal Balances Total CurrentAssets Noncurrent Assets: Restricted Assets: Cash and Cash Equivalents Investments Note Receivable Deferred Charges Capital Assets: Land Buildings and Improvements Machinery, Equipment, and Vehicles Infrastructure Construction in Progress Accumulated Depreciation Total NoncurrentAssets TOTAL ASSETS Primary Government Governmental Business-Type Component Activities Activities Total Units $ 1,213,977 $ 1,012,440 $ 2,226,417 $ 336,212 3,551,309 3,283,359 6,834,668 3,758,864 1,665,877 - 1,665,877 507,237 2,109,629 3,608,800 5,718,429 20,345 - 3,090 3,090 852 - 11,078 11,078 2,367 63,556 162,119 225,675 - (439,011) 439,011 - - 8,165,337 8,519,897 16,685,234 4,625,877 410,305 500,939 911,244 - 18,023,461 5,695,909 23,719,370 - - - - 120,080 902,625 166,236 1,068,861 15,424 7,442,117 910,413 8,352,530 - 35,037,432 76,417,848 111,455,280 - 6,121,702 2,787,698 8,909,400 - 80,129,133 - 80,129,133 - 751,277 84,996 836,273 - (28,084,705) (20,943,350) (49,028,055) - 120,733,347 65,620,689 186,354,036 135,504 $ 128,898,684 $ 74,140,586 $ 203,039,270 $ 4,761,381 See Accompanying notes to basic financial statements. 14 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2012 LIABILITIES AND NET ASSETS Current Liabilities Payable from Unrestricted Assets: Accounts Payable Accrued Liabilities Due to Other Governments Unearned Revenue Accrued Interest Payable Compensated Absences Current Portion of Long-Term Debt Total Current Liabilities Payable From Unrestricted Assets Current Liabilities Payable from Restricted Assets: Customer Deposits Total Current Liabilities Payable From Restricted Assets Total Current Liabilities Noncurrent Liabilities: Compensated Absences Long-'t'erm Debt Total Noncurrent Liabilities TOTAL LIABILITIES Net Assets: Invested in Capital Assets, Net of Related Debt Restricted For: Police and Municipal Court PEG Capital Fees Tourism Development Parks and Tree Mitigation Unrestricted TOTAL NET ASSETS TOTAL LIABILITIES & NET ASSETS Primary Government Governmental Business-Type Component Activities Activities Total Units $ 964,558 $ 1,341,093 $ 2,305,651 $ 55,065 645,523 93,112 738,635 6,066 256,769 - 256,769 - 52,507 29,278 81,785 - 407,486 57,504 464,990 6,842 153,893 43,800 197,693 6,811 2,825,878 805,993 3,631,871 390,000 5,306,614 2,370,780 7,677,394 464,784 28,350 458,563 486,913 28,350 458,563 486,913 5,334,964 2,829,343 8,164,307 464,784 615,572 175,201 790,773 - 58,643,862 9,397,240 68,041,102 970,000 59,259,434 9,572,441 68,831,875 970,000 64,594,398 12,401,784 76,996,182 1,434,784 56,616,809 50,161,157 106,777,966 - 865,631 - 865,631 - 409,870 - 409,870 - 390,561 - 390,561 - 368,526 - 368,526 72,160 5,652,889 11,577,645 17,230,534 3,254,437 64,304,286 61,738,802 126,043,088 3,326,597 $ 128,898,684 $ 74,140,586 $ 203,039,270 $ 4,761,381 See Accompanying notes to basic financial statements. 15 CITY OF SCHERTZ, TEXAS STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2012 Functions and Programs Expenses Primary Government: Governmental Activities: General Government Public Safety Public Environment Parks and Recreation Cultural Health Administration Interest and Other Fees Total Governmental Activities Business-Type Activities Water and Sewer EMS Total Business-Type Activities Total Primary Government Component Units: General Revenues: Taxes: Ad Valorem Sales Franchise Fees Hotel/Motel Mixed Drink Investment Earnings Miscellaneous Total General Revenues Transfers Change in Net Assets Net Assets at Beginning of Year Net Assets at End of Year Program Revenues Operating Capital Charges for Grants and Grants and Services Contributions Contributions $ 6,514,329 $ 2,429,114 $ 418,784 $ 1,106,313 9,103,676 2,216,385 266,914 - 3,586,087 - - - 1,425,517 416,816 3,149 100 899,487 257,752 5,331 - 357,658 36,746 21,339 - 2,415,696 1,156,026 - - 2,250,972 - - - 26,553,422 6,512,839 715,517 1,106,413 16,349,967 17,411,568 - 828,853 3,758,425 3,561,114 - - 20,108,392 20,972,682 - 828,853 $ 46,661,814 $ 27,485,521 $ 715,517 $ 1,935,266 $ 1,516,271 $ 146,211 $ 49,480 $ 72,160 See Accompanying notes to basic financial statements. 16 Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business-Type Activities Activities $ (2,560,118) (6,620,377) (3,586,087) (1,005,452) (636,404) (299, 573) (1,259,670) (2,250,972) (18,218,653) Component Total Units $ (2,560,118) $ (6,620,377) (3,586,087) (1,005,452) (636,404) (299, 573) (1,259,670) (2,250,972) (18,218,653) $ 1,890,454 1,890,454 - (197,311) (197,311) - 1,693,143 1,693,143 - (18,218,653) 1,693,143 (16,525,510) - (1,248,420) 11,298,204 - 11,298,204 - 5,309,018 - 5,309,018 2,659,194 1,647,712 - 1,647,712 - 470,290 - 470,290 - 28,586 - 28,586 - 50,947 36,409 87,356 9,318 604,277 666,645 1,270,922 17,283 19,409,034 703,054 20,112,088 2,685,795 (62,294) 62,294 - - 1,128,087 2,458,491 3,586,578 1,437,375 63,176,199 59,280,311 122,456,510 1,889,222 $ 64,304,286 $ 61,738,802 $ 126,043,088 $ 3,326,597 17 CITY OF SCHERTZ, TEXAS BALANCE SHEET -GOVERNMENTAL FUNDS SEPTEMBER 30, 2012 ASSETS Cash and Cash Equivalents Investments Receivables (net of allowances) Taxes Accounts and Other Due from Other Funds Inventory Restricted Assets: Cash and Cash Equivalents Investments TOTAL ASSETS LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable Accrued Salaries and Benefits Accrued Interest Payable Customer Deposits Due to Other Governments Due to Other Funds Unearned/ Deferred Revenues Total Liabilities Fund Balances: Nonspendable: Inventory Restricted for: Police Municipal Court PEG Capital Fees Capital Improvement Debt Service Tourism Development Parks and Tree Mitigation Historical Committee Assigned for: Property Replacement Special Events Capital Improvement Unassigned Total Fund Balances TOTAL LIABILITIES AND FUND BALANCES See Accompanying notes to basic financial statements. General Capital Debt Fund Projects Service $ 1,125,445 $ - $ - 2,573,411 - - 1,529,976 - 63,989 2,063,204 46,425 - 379,566 - 116,144 63,556 - - - 409,375 929 - 17,891,149 132,312 $ 7,735,158 $ 18,346,949 $ 313,374 $ 868,897 $ 85,880 $ - 645,523 - - - - 28,135 28,350 - - 256,769 - - - 912,928 - 1,958,802 - 57,565 3,758,341 998,808 85,700 63,556 - - 527,513 - - 409,870 - - - 17,104,595 - - - 227,674 322,656 - - 92,555 - - - 243,546 - 2,560,667 - - 3,976,817 17,348,141 227,674 $ 7,735,158 $ 18,346,949 $ 313,374 18 Nonmajor Total Governmental Governmental Funds Funds $ 88,533 $ 1,213,978 977,898 3,551,309 71,914 1,665,879 - 2,109,629 - 495,710 - 63,556 - 410,304 - 18,023,461 $ 1,138,345 $ 27,533,826 $ 9,780 $ 964,557 - 645,523 - 28,135 - 28,350 - 256,769 21,793 934,721 - 2,016,367 31,573 4,874,422 - 63,556 338,118 338,118 - 527,513 - 409,870 - 17,104,595 - 227,674 390,561 390,561 368,526 368,526 9,567 9,567 - 322,656 - 92,555 - 243,546 - 2,560,667 1,106,772 22,659,404 $ 1,138,345 $ 27,533,826 19 ,, ~, w) -~ .* .. ~~ ~' ~~ ~~' 1'ORA`rE4 CITY CITY OF SCHERTZ, TEXAS RECONCILIATION OF BALANCE SHEET SEPTEMBER 30, 2012 TOTAL FUND BALANCE -TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital Assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. Deferred charges, consisting of debt issue costs, are amortized over the life of the bond in the governmental activities, but were recognized in full in the governmental funds. Long-term liabilities, including bonds payable and capital leases, are not due and payable in the current period and therefore, not reported in the funds: Bonds Payable Unamortized Premiums, Discounts, Losses on Refundings Capital Lease Payable Accrued Interest Payable Compensated Absences TOTAL NET ASSETS -GOVERNMENTAL ACTIVITIES $ 22,659,404 101,396,956 1,963,860 902,625 (61,201,300) (208,254) (60,189) (379,351) (769,465) (62,618,559) $ 64,304,286 See accompanying notes to basic financial statements. 20 CITY OF SCHERTZ, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES 1N FUND BALANCES - GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 REVENUES Taxes Permits and Fees Service Fees Fines and Fees Intergovernmental Investment Earnings Miscellaneous TOTAL REVENUES EXPENDITURES Current: General Government Public Safety Public Environment Parks and Recreation Cultural Health Administration Debt Service: Principal Interest and Fiscal Charges Bond Issue Costs Capital Outlay TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Proceeds from Issuance of Debt Premium on Bonds Issued Proceeds from Refunding Bonds Payment to Refund Agent Transfers In Transfers (Out) TOTAL OTHER FINANCING SOURCES (USES) Net Change in Fund Balance Fund Balances at Beginning of Year Fund Balances at End of Year Debt General Capital Service Fund Projects Fund $ 13,965,625 $ - $ 4,306,882 1,146,301 - - 2,699,448 - - 1,979,678 - - 466,864 45,084 366,825 19,307 5,867 23,902 748,040 143,942 - 21,025,263 194,893 4,697,609 5,464,293 195,833 - 8,654,249 - - 976,327 - - 1,118,465 - - 821,351 - - 346,318 - - 2,349,598 - - 36,998 - 2,287,900 1,707 - 2,263,474 100 172,481 82,390 454,811 760,324 - 20,224,217 1,128,638 4,633,764 801,046 37,250 (64,679) (933,745) 63,845 7,625,000 - 175,473 - - 6,745,000 - (6,698,421) 100,000 - (27,429) 7,900,473 46,579 773,617 6,966,728 110,424 3,203,200 10,381,413 117,250 $ 3,976,817 $ 17,348,141 $ 227,674 See accompanying notes to basic financial statements. 21 Other Nonmajor Governmental Funds $ 470,290 217,160 47,935 1, 873 391 737,649 347,566 36,600 121,13 9 6,293 84,708 596,306 Total Governmental Funds $ 18,742,797 1,363,461 2,699,448 2,027,613 878,773 50,949 892,373 26,655,414 6,007,692 8,690,849 976,327 1,239,604 827,644 346,318 2,349,598 2,324,898 2,265,181 254,971 1,299,843 26,582,925 141,343 72,489 2,385 (137,250 (134,865) 6,478 7,625,000 175,473 6,745,000 (6,698,421) 139,635 (201,929) 7,784,758 7,857,247 1,100,294 14,802,157 $ 1,106,772 $ 22,659,404 22 ,, ~, w) -~ .* .. ~~ ~' ~~ ~~' 1'ORA`rE4 CITY CITY OF SCHERTZ, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2012 NET CHANGE IN FUND BALANCES -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. This is the amount by which depreciation exceeded capital outlay in the current period. Proceeds from the sale of capital assets are reported as revenues on the governmental fund statements. However, in the statement of activities, these proceeds are reduced by the net book value of the capital asset (original cost less accumulated depreciation through the sale date). This amount represents the net book value of capital assets disposed in the current period. Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. The issuance of long-term debt (e.g. bonds, leases) provides current financial resources to governmental funds, which the repayment of the principal of long-term debt consumes the current financial reources of governmental funds. Neither transaction, however, has any affect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items. Issuance of Debt Payment to Refund Agent Premiums on Issuance of Debt Bond Issue Costs Principal Repayments Amortization of Bond Issue Costs Amortization of Premiums, Discounts, Losses Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds: Compensated Absences Accrued Interest CHANGE IN NET ASSETS -GOVERNMENTAL ACTIVITIES (14,370,000) 6,698,421 (175,473) 254,870 2,324,898 (50,730) (2,200) (167,131) 68,836 7,857,247 (1,497,667) (3,336) 190,352 (5,320,214) (98,295) $ 1,128,087 See accompanying notes to basic financial statements. 23 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS -PROPRIETARY FUNDS SEPTEMBER 30, 2012 ASSETS CurrentAssets: Cash and Cash Equivalents Investments Accounts Receivable, Net of Allowance: Customer Accounts Due from Other Governments Due from Other Funds Accrned Interest Prepaid Expenses Inventory Total CurrentAssets Noncurrent Assets: Restricted Assets: Cash and Cash Equivalents Investments Deferred Charges Capital Assets: Land Buildings and Improvements Machinery, Equipment, and Vehicles Construction in Progress Less: Accumulated Depreciation Total NoncurrentAssets TOTAL ASSETS Business-Type Activities -Enterprise Funds Water and Sewer Schertz System EMS Total $ 1,012,440 $ - $ 1,012,440 3,283,359 - 3,283,359 2,025,276 798,386 2,823,662 785,138 - 785,138 832,782 - 832,782 3,090 - 3,090 9,583 1,495 11,078 93,926 68,193 162,119 8,045,594 868,074 8,913,668 500,939 - 500,939 5,394,494 301,415 5,695,909 157,317 8,919 166,236 910,413 - 910,413 76,411,348 6,500 76,417,848 1,478,951 1,308,747 2,787,698 84,996 - 84,996 (19,922,940) (1,020,410) (20,943,350) 65,015,518 605,171 65,620,689 $ 73,061,112 $ 1,473,245 $ 74,534,357 $ - Governmental Activities Internal Service Fund See accompanying notes to basic financial statements. 24 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS -PROPRIETARY FUNDS (CONTINUED) SEPTEMBER 30, 2012 LIABILITIES & NET ASSETS Current Liabilities: Accounts Payable Accrued Liabilities Customer Deposits Accrued Interest Payable Due to Other Funds Unearned Revenue Compensated Absences Current Portion of Long-Term Debt Total Current Liabilities Noncurrent Liabilities: Compensated Absences Long-Term Debt (Net of Current Portion) Total Noncurrent Liabilities TOTAL LIABILITIES NetAssets: Investment in Capital Assets, Net of Related Debt Unrestricted TOTAL NET ASSETS TOTAL LIABILITIES & NET ASSETS Business-Type Activities -Enterprise Funds Water and Sewer Schertz System EMS Total $ 1,099,385 $ 241,708 $ 1,341,093 34,373 58,739 93,112 458,563 - 458,563 55,915 1,589 57,504 - 393,771 393,771 29,278 - 29,278 16,803 26,997 43,800 714,326 91,667 805,993 2,408,643 814,471 3,223,114 67,211 107,990 175,201 9,168,907 228,333 9,397,240 9,236,118 336,323 9,572,441 11,644,761 1,150,794 12,795,555 49,876,320 284,837 50,161,157 11,540,031 37,614 11,577,645 61,416,351 322,451 61,738,802 $ 73,061,112 $ 1,473,245 $ 74,534,357 $ - Governmental Service Fund See accompanying notes to basic financial statements. 25 CITY OF SCHERTZ, TEXAS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 OPERATING REVENUES Fees Charged to Users Charges for Premiums Other Charges TOTAL OPERATING REVENUES OPERATING EXPENSES Personnel Services Water Purchase Sewage Treatment General and Administrative Contractual Services Supplies and Maintenance Depreciation TOTAL OPERATING EXPENSES OPEBATING INCOME (LOSS) NONOPERATING REVENUES (EXPENSES) Investment Earnings Lease Income Miscellaneous Interest Expense Amortization of Bond Issue Costs TOTAL NONOPERATING REVENUES (EXPENSES) INCOME BEFORE CONTRIBUTIONS AND TRANSFERS Transfers In (Out) Capital Contributions CHANGE IN NET ASSETS NET ASSETS AT BEGINNING OF YEAR NET ASSETS AT END OF YEAR See accompanying notes to basic financial statements. Business-Type Activities -Enterprise Funds Water and Sewer Schertz System EMS Total $ 17,361,484 $ 3,561,114 $ 20,922,598 $ - - - - 1,826,845 50,084 - 50,084 - 17,411,568 3,561,114 20,972,682 1,826,845 1,727,498 2,725,196 4,452,694 1,826,845 1,620,344 - 1,620,344 - 5,665,555 - 5,665,555 - 4,723,937 313,746 5,037,683 - 167,157 119,953 287,110 - 280,635 452,109 732,744 - 1,748,196 130,982 1,879,178 - 15,933,322 3,741,986 19,675,308 1,826,845 1,478,246 (180,872) 1,297,374 - 35,740 669 36,409 - 184,016 - 184,016 - 373,024 109,605 482,629 - (387,615) (14,087) (401,702) - (29,030) (2,352) (31,382) - 176,135 93,835 269,970 - 1,654,381 (87,037) 1,567,344 - 32,364 29,930 62,294 - 828,853 - 828,853 - 2,515,598 (57,107) 2,458,491 - 58,900,753 379,558 59,280,311 - $ 61,416,351 $ 322,451 $ 61,738,802 $ - 26 Governmental uiiciuai Service Fund CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS -PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 Governmental Business-Type Activities -Enterprise Funds Activities Water Internal and Sewer Schertz Service System EMS Total Fund Cash Flows From Operating Activities: Cash Received From Customers and Users $ 17,258,432 $ 3,561,490 $ 20,819,922 $ - Cash Received from Interfund Services - - - 1,826,845 Cash Paid to Employees for Services (1,713,331) (2,668,892) (4,382,223) (1,826,845) Cash Paid to Supplier for Goods & Services (12,564,502) (1,281,563) (13,846,065) - Net Cash Provided (Used) by Operating Activities 2,980,599 (388,965) 2,591,634 - Cash Flows From Noncapital Financing Activities: Other Cash Received From Nonoperating Activity 373,024 109,605 482,629 - Cash Advances From/(To) Other Funds 36,203 382,210 418,413 - Net Cash Provided (Used) by Noncapital Financing Activities 409,227 491,815 901,042 - Cash Flows From Capital and Related Financing Activities: Acquisition and Construction of Capital Assets (246,435) - (246,435) - Payments Received from Capital Grants 220,000 - 220,000 - InterestPaid on Long-Term Debt (398,118) (14,452) (412,570) - Principal Paid on Long-Term Debt (697,100) (88,400) (785,500) - Net Cash Provided (Used) by Capital and Related Financing Activities (1,121,653) (102,852) (1,224,505) - Cash Flows From Investing Activities: Purchase of Investments (2,706,763) (667) (2,707,430) - Payments from Lease 184,016 - 184,016 - Interest and Investment Earnings 41,038 669 41,707 - Net Cash Provided (Used) by Investing Activities (2,481,709) 2 (2,481,707) - Net Increase (Decrease) in Cash and Cash Equivalents (213,536) - (213,536) - Cash and Cash Equivalents at Beginning of Year: Cash and Cash Equivalents 955,289 - 955,289 - Restricted Cash and Cash Equivalents 771,626 - 771,626 - 1,726,915 - 1,726,915 - Cash and Cash Equivalents at End of Year: Cash and Cash Equivalents Restricted Cash and Cash Equivalents 1,012,440 - 1,012,440 - 500,939 - 500,939 - $ 1,513,379 $ $ 1,513,379 $ Noncash Capital and Related Financing Transactions: Developer Contributions of Capital Assets $ 828,853 $ - $ - $ - See accompanying notes to basic financial statements. 27 CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS -PROPRIETARY FUNDS (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2012 Governmental Business-Type Activities -Enterprise Funds Activities Water Internal and Sewer Schertz Service System EMS Total Fund Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating Income S 1,478,246 S (180,872) S 1,297,374 $ - Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities: Depreciation 1,748,196 130,982 1,879,178 - Decrease (Increase) in Assets: Accounts Receivable (net) (87,394) 376 (87,018) - Prepaid Expenses (9,583) (1,495) (11,078) - Inventory 9,370 5,495 14,865 - Increase (Decrease) in Liabilities: Withdrawals in Excess of Deposits - (444,832) (444,832) - AccountsPayable (106,661) 45,077 (61,584) - Accrued Liabilities 4,513 15,069 19,582 - Customer Deposits 81,289 - 81,289 - Unearned Revenue (147,031) - (147,031) - Compensated Absences 9,654 41,235 50,889 - NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES S 2,980,599 S (388,965 S 2,591,634 $ See accompanying notes to basic financial statements. 28 NOTES TO BASIC FINANCIAL STATEMENTS 29 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Rebortin~ Entit 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: 1. 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 fmancially accountable for the Corporation because the city council approves the corporation's budget. 2. Library Advisory Board -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. Parks and Recreation Foundation -The Corporation was organized to improve and expand the community parks, trails, venues, and recreational programs providing adventure and opportunities for all. The majority of the foundation's governing board are employees of the City, the accounting records are maintained by the finance department, cash is pooled with City funds, and the City provides financing for the foundation and includes the Foundation as part of the City budget process. The City and its citizens are the sole beneficiaries of the Foundation. Complete financial statements for the Schertz Economic Development Corporation may be obtained at City Hall located at 1400 Schertz Parkway, Schertz, Texas 78154. Separate financials are not issued for the Library Advisory Board or Parks and Recreation Foundation. 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. 30 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. 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 is 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. C. 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 which accounts for all financial resources of the general government, except those required to be accounted for in another fund. 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. 31 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) The Capital Proiects 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 System Fund accounts for the water and sewer services provided to the citizens through user charges. The EMS Fund accounts for the emergency medical services provided to the citizens of the City and other participating governments through user charges. Internal Service Fund accounts for the City's group medical insurance program. 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 guidance 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. D. Cash and Cash Equivalents The City's cash and cash equivalents are considered to be cash on hand and demand deposits 32 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. 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. F. Receivables and Pa.. a Activities 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 unearned revenue at the government fund level. G. lnventorie s 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. 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. 33 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. 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 asset 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: Useful Lives Assets (Years) Buildings and Improvements 10 - 50 Machinery, Equipment, and Vehicles 2 - 20 Infrastructure 15 - 30 J. Compensated Absences 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. All vacation and compensatory time 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. 34 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 EquitX Fund balances in governmental funds are classified as follows: Nonspendable -Represents amounts that cannot be spent because they are either not in spendable form (such as inventory or prepaid items) or legally required to remain intact. Restricted -Represents amounts that are constrained by external parties, constitutional provisions or enabling legislation. Committed -Represents amounts that can only be used for a specific purpose because of a formal action by the government's highest level of decision making authority: an ordinance adopted by City Council prior to the end of the fiscal year. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation. Assigned -Represents amounts which the City intends to use for a specific purpose but do not meet the criteria of restricted or committed. The City Council and City Manager are the only entities that may make assignments at this time. Unassigned -Represents the residual balance that may be spent on any other purpose of the City. When an expenditure is incurred for a purpose in which multiple classifications are available, the City considers restricted balances spent first, committed second, and assigned third. 35 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) M. Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net assets are reported as restricted when there are limitations imposed by creditors, grantors, or laws or regulations of other governments. N. Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. O. Bud.~ry Information Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds except the library grant special revenue fund, police department forfeiture special revenue fund and the capital projects fund, which adopts project-length budgets. NOTE 2 -CASH, CASH EQUIVALENTS AND INVESTMENTS As of September 30, 2012, the City had the following pooled investment funds: Investment Type LOGIC Lone Star Investment Pool MBIA Municipal Investors Federated Money Market Schertz Bank & Trust - Certificate of Deposit Capital One - U.S. Agency Securities Total Weighted Book Value Fair Value Average Primary Component Primary Component Maturity Government Unit Government Unit in Days $ 2,876,347 $ - $ 2,876,347 $ - - 21,233,871 - 21,233,871 - - 1,060,462 2,677,096 1,060,462 2,677,096 - 1,267,126 44,761 1,267,126 44,761 - 1,055,909 1,037,007 1,055,909 1,037,007 90 3,060,323 - 3,060,323 - 715 $ 30,554,038 $ 3,758,864 $ 30,554,038 $ 3,758,864 75 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 to highly liquid investments to meet unanticipated cash requirements, and/or to redeploy cash into other investments expected to outperform current holdings. 36 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 2 -CASH, CASH EQUIVALENTS, AND INVESTMENTS (Continued) 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, 2012, the City's investments in the pooled investment funds were rated AAAm by Standard & Poor's. The City has invested in Federal Home Loan Mortgage Corporation and Federal National Mortgage Association. Custodial Credit Risk -Deposits. In the case of deposits, this is the risk that in the event of a bank failure, the government's deposits may not be returned. As of September 30, 2012, the City's petty cash on hand was $3,100. The carrying amount of cash and cash equivalents (including certificates of deposit) was $4,329,985 and the bank balance was $5,164,724. Of the bank balance, $250,000 was covered by federal deposit insurance at Schertz Bank and Trust and the City's depository had pledged securities having a face value of $17,065,000 and a market value of $6,169,428 as collateral for the City's deposits. Funds were fully insured and collateralized. All collateral is held in the City's name. As of September 30, 2012, the Economic Development Corporation (Component Unit) held funds of $194,666 in the pooled cash of the primary government, $200 in petty cash on hand, and $1,037,007 in certificates of deposit. The Corporation's funds are fully secured under City's pledged securities. As of September 30, 2012, the Library Advisory Board and the Parks and Recreation Foundation (Component Units) held funds of $11,645 and $127,871, respectively. Custodial Credit Risk -Investments. For an investment, this is the risk that, in the event of the failure of the counterparty, the government will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. All of the government securities owned by the City are held by its agent in the City's name. NOTE 3 -PROPERTY TAX Taxes are levied on and payable as of October 1. The City has contracted with the Guadalupe County Tax Assessor-Collector to collect taxes on its behalf. Current taxes become delinquent February 1. Current year delinquent taxes not paid by July 1 are turned over to attorneys for collection action. The total taxable value as of October 1, 2011, upon which the fiscal 2012 levy was based, was $2,151,848,489 (i.e., market value less exemptions). The estimated market value was $2,662,036,427, making the taxable value 80.8% of the estimated market value. The City is permitted by the Constitution of the State of Texas to levy taxes up to $2.50 per $100 of taxable assessed valuation for all governmental purposes. Pursuant to a decision of the Attorney General of the State of Texas, up to $1.50 per $100 of assessed valuation may be used for the payment of long-term debt. The combined tax rate to finance general governmental services, including the payment of principal and interest on long-term debt for the year ended September 30, 2012, was $0.4843 per $100 of assessed value, which means that the City has a tax margin of $2.0157 for each $100 value and could increase its annual tax levy by approximately $43,374,810 based upon the present assessed valuation before the limit is reached. 37 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 3 -PROPERTY TAX (Continued) However, the City may not adopt a tax rate that exceeds the tax rate calculated in accordance with the Texas Property Tax Code without holding a public hearing. The Property Tax Code subjects an increase in the effective tax rate to a referendum election, if petitioned by registered voters, when the effective tax rate increase is more than eight percent (8%) of the previous year's effective tax rate. Property taxes are recorded as receivables and unearned revenues at the time the taxes are assessed. In governmental funds, revenues are recognized as the related ad valorem taxes are collected. Additional amounts estimated to be collectible in the time to be a resource for payment of obligations incurred during the fiscal year and therefore susceptible to accrual in accordance with generally accepted accounting principles have been recognized as revenue. In the government-wide financial statements, the entire levy is recognized as revenue, net of estimated uncollectible amounts (if any), at the levy date. NOTE 4 -RECEIVABLES Receivables as of year-end for the government's individual major funds and nonmajor funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Governmental Funds Receivables: Property Taxes Sales Taxes Occupancy Taxes Franchise Taxes Customers Court Fines Grants Other Gross Receivables Less: Allowance for Uncollectibles Net Total Receivables Capital General Projects $ 124,863 $ - 1,014,474 - 395,017 - 65,334 - 4,416,118 - 175,511 - 25,000 46,425 6,216,317 46,425 Debt Nonmajor Service Funds Proprietary Funds Water and Schertz Sewer Fund EMS $ 66,026 $ - $ - $ - - 71,914 - - - - 2,067,862 1,218,513 - - 785,138 24,724 66,026 71,914 2,853,000 1,243,237 2,623,137 - 2,037 - 42,586 444,851 $ 3,593,180 $ 46,425 $ 63,989 $ 71,914 $ 2,810,414 $ 798,386 38 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 4 -RECEIVABLES (Continued) Governmental funds report deferred revenue in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unearned/ deferred revenue and unavailable revenue reported in the governmental funds were as follows: Unavailable General Fund Delinquent Property Taxes Receivable $ 108,935 Court Fines 1,797,360 Permits 3,870 Library 20,000 Other 28,637 Total General Fund 1,958,802 Debt Service Fund Delinquent Property Taxes Receivable 57,565 Total Debt Service Fund 57,565 Total Governmental Funds $ 2,016,367 The Schertz Economic Development Corporation approved a loan to SPV Ventures for $150,000 for twenty years at 0%. Management considers the loan to be fully collectible. Additionally, there is no imputed interest included in the face amount of the Note Receivable. The balance of the note as of September 30, 2012 was $120,080. NOTE 5 -1NTERFUND BALANCES AND TRANSFERS The composition of interfund balances as of September 30, 2012 is as follows: Due From Due To Amount Purpose EMS Water & Sewer $ 35,998 Structured loan between funds Capital Projects Debt Service 116,144 Premiums and accrued interest on bonds Capital Projects Water & Sewer 796,784 Portion of bond proceeds for water projects EMS General Fund 357,773 Short-term cash flow borrowing Nonmajor Governmental General 21,793 Short-term cash flow borrowing The following schedule briefly summarizes the City's transfer activity: Transfer From Transfer To Amount Puroose Nonmajor Governmental General General General Nonmajor Governmental General Nonmajor Governmental Water & Sewer EMS Capital Projects $ 37,250 Hotel tax subsidy for special events 2,385 Supplement Funding 32,364 Allocation of miscellaneous receipts 29,930 Allocation of miscellaneous receipts 100,000 Contribute to skate park construction 39 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 6 -CAPITAL ASSETS Capital asset activity for the year ended September 30, 2012 was as follows: Governmental Activities: Capital Assets, Not Being Depreciated: Land Construction in Progress Total Capital Assets Not Being Depreciated Capital Assets, Being Depreciated: Buildings and Improvements Machinery, Equipment, and Vehicles Streets and Infrastructure Total Capital Assets Being Depreciated Accumulated Depreciation: Buildings and Improvements Machinery, Equipment, and Vehicles Streets and Infrastructure Total AccumulatedDepreciation Total Capital Assets Being Depreciated, Net Governmental Activities Capital Assets, Net Business-Type Activities: Capital Assets, Not Being Depreciated: Land Construction in Progress Total Assets Not Being Depreciated Capital Assets, Being Depreciatec~'~ Buildings and Improvements Machinery, Equipment, and Vehicles Total Capital Assets Being Depreciated Accumulated Depreciation: Buildings and Improvements Machinery, Equipment, and Vehicles Total AccumulatedDepreciation Total Capital Assets Being Depreciated, Net Business-Type Activities Capital Assets, Net Beginning Balance Increases Deletions Ending $ 7,442,117 $ - $ - $ - $ 7,442,117 1,552,178 956,158 - (1,757,059) 751,277 8,994,295 956,158 - (1,757,059) 8,193,394 35,037,432 - - - 35,037,432 5,717,322 541,532 (116,864) (20,288) 6,121,702 77,314,528 1,057,546 - 1,757,059 80,129,133 118,069,282 1,599,078 (116,864) 1,736,771 121,288,267 (5,752,179) (976,927) - - (6,729,106) (3,313,282) (499,096) 113,528 20,288 (3,678,562) (15,100,157) (2,576,880) - - (17,677,037) (24,165,618) (4,052,903) 113,528 20,288 (28,084,705) 93,903,664 (2,453,825) (3,336) 1,757,059 93,203,562 $ 102,897,959 $ (1,497,667) $ (3,336) $ - $ 101,396,956 Beginning Balance lncreases Deletions $ 910,413 $ - $ 3,697,506 95,485 4,607,919 95,485 71,829,995 879,858 2,667,463 99,947 74,497,458 979,805 Ending - $ - $ 910,413 _ (3,707,995) 84,996 - (3,707,995) 995,409 - 3,707,995 76,417,848 -_ 20,288 2,787,698 3,728,283 79,205,546 (17,207,516) (1,651,204) - - (18,858,720) (1,836,368) (227,974) - (20,288) (2,084,630) (19,043,884) (1,879,178) - (20,288) (20,943,350) 55,453,574 (899,373) - 3,707,995 58,262,196 $ 60,061,493 $ (803,888) $ $ $ 59,257,605 40 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 6 -CAPITAL ASSETS (Continued) Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities: General Government $ 678,133 Public Safety 377,834 Public Environment 2,601,475 Parks and Recreation 300,573 Cultural 59,140 Health 11,640 Administration 24,108 Total Depreciation Expense -Governmental Activities $ 4,052,903 Business-Type Activities: Water and Sewer System $ 1,748,196 EMS 130,982 Total Depreciation Expense -Business Type Activities $ 1,879,178 NOTE 7 -OPERATING LEASE The City made agreements with the following telecommunication companies for cellular tower space. The following are the minimum lease receivables. Fiscal Year Ending September 30, AT&T Clearwire Sprint Verizon Total 2013 $ 53,785 $ 31,945 $ 56,611 $ 44,621 $ 186,962 2014 - 32,903 - - 32,903 $ 53,785 $ 64,848 $ 56,611 $ 44,621 $ 219,865 NOTE 8 -CAPITAL LEASE The City has entered into a lease agreement to finance equipment. The lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of the future minimum lease payments at the inception date. The assets acquired through capital leases are as follows: Assets: Equipment $ 148,294 Less Accumulated Depreciation (37,074) Total $ 111,220 Future minimum obligations and the net present value of these minimum lease payments as of September 30, 2012 are as follows: Year Ending September 30, 2013 $ 38,705 2014 22,578 Total Payments 61,283 Less: Amount Representing Interest (1,094) Present Value of Minimum Lease Payments $ 60,189 41 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 9 -LONG TERM DEBT The City issues a variety of long-term debt instruments in order to acquire and/or construct major capital facilities and equipment for governmental activities. These instruments include general obligation bonds, certificates of obligation, and capital leases. These debt obligations are secured by either future property or hotel tax revenue or liens on property and equipment. A summary of the terms of general obligation bonds and combination of tax and revenue certificates of obligation outstanding at September 30, 2012, follows: Issue Amount Maturi Rate Balance Primary Government General Obligation Bonds 2006 Series $ 15,000,000 2031 4.0% - 5.25% $ 13,655,000 2007 Series 6,000,000 2027 4.07% 4,775,000 2008 Series 9,900,000 2028 4.13% 8,645,000 2009 Series 9,500,000 2033 2.0%-5.50% 8,190,000 2010 Series, Refunding 2,865,000 2021 2.0% - 4.0% 2,550,000 2011 Series 8,250,000 2036 3.0% - 6.0% 8,160,000 2011A Series, Refunding 6,745,000 2024 2.33% 6,605,000 2012 Series 7,625,000 2032 2.00% 7,625,000 Certificates of Obligation 2003 Series $ 3,360,000 2013 2.0% - 3.9% 210,000 2004 Series 7,750,000 2013 4.0% - 4.7% 325,000 2007 Series CIB 2 438,900 2016 4.01% 201,300 2007 Series CIB 4 569,500 2016 4.01% 260,000 Total Governmental Long-Term Obligations $ 61,201,300 Revenue Bonds 2005 Series $ 3,200,000 2025 3.0% - 4.0% $ 2,355,000 General Obligation Bonds 2011 Series, Refunding 2,675,000 2021 2.0% - 3.0% 2,405,000 Certificates of Obligation 2007 Series CIB 1 $ 6,600,000 2026 4.01% 5,150,000 2007 Series CIB 2 226,100 2016 4.01% 103,700 2007 Series CIB 4 280,500 2016 4.01% 130,000 2010 Tax Notes $ 310,000 2015 1.20% - 2.55% 190,000 Total Business-Type Long-Term Obligations $ 10,333,700 Economic Development Corporation Certificates of Obligation 2007 Series CIB 5 $ 1,300,000 2016 4.01% 2010 Tax Notes $ 1,270,000 2015 1.20% - 2.55% Total Economic Development Corporation Long-Term Obligations $ 585,000 775,000 $ 1,360,000 42 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 9 -LONG-TERM DEBT (Continued) Annual debt service requirements of bonded debt as of September 30, 2012, are as follows: Governmental Activities September 30, Principal Interest Total 2013 $ 2,789,850 $ 2,370,106 $ 5,159,956 2014 2,947,516 2,268,549 5,216,065 2015 3,066,134 2,166,937 5,233,071 2016 3,182,800 2,061,061 5,243,861 2017 3,175,000 1,950,794 5,125,794 2018-2022 15,855,000 8,061,476 23,916,476 2023-2027 15,540,000 4,968,667 20,508,667 2028-2032 12,020,000 1,895,540 13,915,540 2033-2036 2,625,000 227,800 2,852,800 Total $ 61,201,300 $ 25,970,930 $ 87,172,230 Business-Type Activities September 30, Principal Interest Total 2013 $ 820,467 $ 368,561 $ 1,189,028 2014 847,166 342,390 1,189,556 2015 883,867 315,121 1,198,988 2016 837,200 287,414 1,124,614 2017 795,000 259,802 1,054,802 2018-2022 3,715,000 894,745 4,609,745 2023-2026 2,435,000 225,245 2,660,245 Total $ 10,333,700 $ 2,693,278 $ 13,026,978 Fiscal Year Ending Economic Development Corporation September 30, Principal Interest Total 2013 $ 390,000 $ 38,504 $ 428,504 2014 400,000 27,671 427,671 2015 415,000 15,610 430,610 2016 155,000 6,216 161,216 Total $ 1,360,000 $ 88,001 $ 1,448,001 43 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 9 -LONG-TERM DEBT (Continued) Changes in Long-Term Debt Balance Balance Due Within 9/30/2011 Additions Reductions 9/30/2012 One Year Governmental Activities: General Obligation Bonds $ 44,715,000 $ 7,625,000 $ (1,290,000) $ 51,050,000 $ 1,825,000 UnamortizedPremium 413,730 175,473 (19,255) 569,948 27,297 General Obligation Refunding Bonds 2,790,000 6,745,000 (380,000) 9,155,000 320,000 UnamortizedPremium 116,523 - (12,712) 103,811 12,712 Deferred Loss on Refunding - (501,272) 35,764 (465,508) (41,773) Cerkificates of Obligation 7,910,800 - (6,914,500) 996,300 644,850 Unamortized Discount (10,723) - 10,723 - - Capital Lease 97,188 - (36,999) 60,189 37,792 Compensated Absences 602,334 287,598 (120,467) 769,465 153,893 Total Governmental Activities $ 56,634,852 $ 14,331,799 $ (8,727,446) $ 62,239,205 $ 2,979,771 Business-Type Activities Revenue Bonds $ 2,490,000 $ - $ (135,000) $ 2,355,000 $ 140,000 Unamortized Discount (13,320) - 975 (12,345) (975) General Obligation Refunding Bonds 2,675,000 - (270,000) 2,405,000 285,000 Unamortized Premium 9,440 - (969) 8,471 969 Deferred Loss on Refunding (141,061) - 14,468 (126,593) (14,468) Cerkificates of Obligation 5,704,200 - (320,500) 5,383,700 335,467 'l'ax Notes 250,000 - (60,000) 190,000 60,000 Compensated Absences Payable 168,112 84,511 (33,622) 219,001 43,800 TotalBusiness-TypeActivities $ 11,142,371 $ 84,511 $ (804,648) $ 10,422,234 $ 849,793 Economic Development Corporation: Cerkificates of Obligation $ 715,000 $ - $ (130,000) $ 585,000 $ 135,000 Tax Notes 1,025,000 - (250,000) 775,000 255,000 Compensated Absences 4,801 6,811 (4,801) 6,811 6,811 Total Economic Development $ 1,744,801 $ 6,811 $ (384,801) $ 1,366,811 $ 396,811 Compensated absences for governmental activities are generally liquidated by the general fund. In August 2012, the City issued $7,625,000 of general obligation bonds, 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. The bonds were issued to provide funds to construct athletic fields and a natatorium, the final portion of the bonds authorized in 2010. 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. 44 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 9 -LONG-TERM DEBT (Continued) During the year ended September 30, 2012, the City issued $6,745,000 of general obligation bonds to provide resources to advance refund portions of the 2003 and 2004 certificates of obligation totaling $6,295,000. As a result, the refunded portion of the certificates has been removed from the Statement of Net Assets and is considered defeased even though it was outstanding as of September 30, 2012. The advance refunding was undertaken to result in an economic gain (difference between the present values of the debt service payments on the old and new debt) of $505,543. Bonded debt of the City consists of various series of general obligation bonds, revenue bonds, certificates of obligation, and tax notes. General obligation bonds and certificates of obligation 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 requires that funds be available for 1/12th of the principal and 1/6th 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. NOTE 10 -RETIREMENT PLAN A. Plan Description The City provides pension benefits for its eligible employees through a nontraditional, joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement System (TMRS), an agent multiple-employer public employee retirement system. The plan provisions that have been adopted by the City are within the options available in the governing state statutes of TMRS. TMRS issues publicly available comprehensive annual financial report that includes financial statements and required supplementary information (RSI) for TMRS; the report also provides detailed explanations of the contribution, benefits and actuarial methods and assumptions used by the System. This report may be obtained from TMRS' website at www.TMRS.com. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS. Plan provisions for the City were as follows: Employee deposit rate Matching ratio (City to employee) Years required for vesting Service retirement eligibility (expressed as age/years of service) Updated Service Credit Annuity Increase (to retirees) Plan Year 2011 Plan Year 2012 7.0% 2 to 1 7.0% 2 to 1 60/5, 0/20 100% Repeating, Transfers 70% of CPI Repeating 60/5, 0/20 100% Repeating, Transfers 70% of CPI Repeating 45 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 10 -RETIREMENT PLAN (Continued) B. Contributions Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Projected Unit Credit actuarial cost method. 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 portion of an active member's projected benefit allocated annually; the prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the applicable period for the City. Both the normal cost and prior service contribution rates include recognition of the projected impact of annually repeating benefits, such as Updated Service Credits and Annuity Increases. The City contributes to the TMRS Plan at an actuarially determined rate. Both the employees and the City make contributions monthly. 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 is the basis for the rate and the calendar year when the rate goes into effect. The annual pension cost and net pension obligation (asset) are as follows: Fiscal Year Annual Actual Percentage of Net Pension Pension Cost APC Contributed Contribution Made 2012 $ 2,120,746 $ 2,120,746 100% 2011 2,089,658 2,089,658 100% 2010 1,926,623 1,926,623 100% Obligation $ - The required contribution rates for fiscal year 2012 were determined as part of the December 31, 2009 and 2010 actuarial valuations. Additional information as of the latest actuarial valuation, December 31, 2011, also follows: Actuarial Valuation Date Actuarial Cost Method Amortization Method Remaining Amortization Period Amortization of New Gains/Losses Asset Valuation Method Investment Rate of Return Projected Salary Increases Inflation Rate Cost-of-Living Adjustments December 31, 2009 Projected Unit Credit Level percent of payroll 28.1 years -Closed Period 30 years 10-year Smoothed 7.5% December 31, 2010 Projected Unit Credit Level Percent of Payroll 27.1 years -Closed Period 30 years December 31, 2011 Projected Unit Credit Level Percent of Payroll 26.1 years -Closed Period 30 years 10-year Smoothed Market 10-year Smoothed Market 7.0% 7.0% Varies by age and service Varies by age and service Varies by age and service 3.0% 3.0% 3.0% 2.1% 2.1% 2.1% 46 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 10 -RETIREMENT PLAN (Continued) B. Contributions (Continued) The funded status as of December 31, 2011, the most recent actuarial valuation date, is as follows: Actuarial UAAL as a Actuarial Actuarial Value Accrued Unfunded Percentage of Valuation Date of Assets Liability (AAL) Funded Ratio AAL (UAAL) Covered Payroll Covered Payroll 12/31/2011 $ 22,377,323 $ 35,296,880 63.4% $ 12,919,557 $ 13,125,349 98.4% Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revisions as actual results are compared to past expectations and new estimates are made about the future. Actuarial calculations are based on the benefits provided under the terms of the substantive plan in effect at the time of each valuation, and reflect along-term perspective. Consistent with that perspective, actuarial methods and assumptions used to include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The schedule of funding progress, presented as Required Supplementary Information following the notes to the financial statements, presents multi-year information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability of benefits. C. Other Post-Employment Benefits The City also participates in the cost sharing multiple-employer defined benefit group-term life insurance plan operated by TMRS known as Supplemental Death Benefits Fund (SDBF). The City elected, by ordinance, to provide group-term life insurance coverage to both current and retired employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provides alump-sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12-month period preceding the month of death); retired employees are insured for $7,500; this coverage is an "other postemployment benefit," or OPEB. The City contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to pre-fund retiree life insurance during the employees' entire careers. The City's contributions to the TMRS SDBF for the years ended 2012, 2011, and 2010 were $22,274, $25,723, and $21,794, respectively, which equaled the required contributions each year. NOTE 11 -JOINT VENTURE A joint venture is a legally separate entity that results from a contractual arrangement and that is owned, operated, or governed by two or more participating governments. The following entity meets the criteria as a joint venture: 47 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 11 -JOINT VENTURE (Continued) Schertz/Seguin Local Government Corporation The Schertz/Seguin Local Government Corporation is a public, nonprofit corporation organized 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 participating governments have an ongoing financial responsibility to fund the operation of the corporation through either purchase of services or by subsidizing the operations. Contributions to the corporation are reflected as "operating expenses" in the water and sewer fund and totaled $1,594,536 for the year ended September 30, 2012. Separate financial statements for the Schertz/Seguin Local Government Corporation may be obtained from the City of Seguin, 210 East Gonzales Street, Seguin, Texas 78156. 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. Following is a summary of financial data as reported in the Corporation's audited financial statements dated September 30, 2011: ASSETS: Current Assets $ 4,959,186 Restricted Cash and Cash Equivalents 18,345,207 Property, Plant & Equipment 59,995,340 Other Assets 2,157, 966 TOTAL ASSETS $ 85,457,699 LIABILITIES & NET ASSETS: Current Liabilities $ 6,795,025 Revenue Bonds (Less Current Maturities) 73,889,840 TOTAL LIABILITIES 80,684,865 NET ASSETS: Invested in Capital Assets, Net of Related Debt (2,712,485) Restricted 5,487,016 Unrestricted 1,998,303 TOTAL NET ASSETS 4,772,834 TOTAL LIABILITIES AND NET ASSETS $ 85,457,699 The Corporation had revenue bonds outstanding in the amount of $77,605,000 (as of September 30, 2011) 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. The bond resolution pledges intergovernmental contract revenues from the cities of Schertz and Seguin (the participating governments) to bond holders. Under the intergovernmental water supply contract, the participating governments are unconditionally obligated to pay their respective shares of annual contract revenue bond debt service from the operation of their respective utility systems. 48 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 11 -JOINT VENTURE (Continued) Cibolo Talley Local Government Corporation The Cibolo Valley Local Government Corporation (CVLGC) is a public nonprofit corporation incorporated in March 2012 to assist and act on behalf of the cities of Schertz, Converse and Cibolo to obtain additional water sources. The City of Schertz has contributed $125,000 for the initial participation in CVLGC. Audited financial statements are currently unavailable. NOTE 12 -COMMITMENTS AND CONTINGENCIES Tax Increment Financing (the "Zone' The City is a principal in the City of Schertz Tax Increment Reinvestment Zone #2, pursuant to Chapter 311 of the Texas Tax Code. Under the terms of the Zone agreement, the City of Schertz, Bexar County, and San Antonio River Authority are funding infrastructure improvements through tax increment financing to the Sedona Development Project. At the time the Zone was created, the property tax base was "frozen" and increment taxes resulting from the increases to property tax base are being used to finance Zone improvements. The total projected cost is a combined figure of $45,000,000. Project costs of the developer will be funded up to 100% of the tax increment generated by the City of Schertz, Bexar County, and San Antonio River Authority (SARA). The City of Schertz (combined with SARA) have committed up to $32,877,000 of the total $45,000,000. The Zone has a statutory termination date of December 31, 2027. The TIRZ has collected $146,569 as of September 30, 2012, which will be used to reimburse the developer for infrastructure improvements. 380 Agreements To encourage economic growth, the City has entered into various 380 agreements with businesses in the City. These agreements involve rebates of future ad valorem taxes and or sales taxes. These agreements are rebates of future taxes, and should not have a significant impact on current tax base in future years. Once the terms of the 380 agreements expire, the tax base of the City will be increased to include these new businesses. Litigation The City is the subject of various claims and litigation that have arisen in the course of its operations. Management is of the opinion that the City's liability in these cases, if decided adversely to the City, will not have a material effect on the City's financial position. RiskManagement 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. TML is amulti-employer group that provides for a 49 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2012 NOTE 12 -COMMITMENTS AND CONTINGENCIES (Continued) RiskManagement (Continued) combination of risk sharing among pool participants and stop loss coverage. Contributions are set annually by the provider. Liability by the City is generally limited to the contributed amounts. Annual contributions for the year ended September 30, 2012 were $369,540 for property and casualty and workers compensation coverage. There were no significant increases or decreases in coverage from fiscal year 2011. Construction Commitments The City of Schertz has entered into commitments for various projects as follows: Primary Government: $ 125,000 32,000 123,101 6,160,500 3,000,000 3,000,000 2,250,000 1,000,000 464,500 342,400 500,000 213,539 80, 3 94 454,666 17,746,100 $ 125,000 26,170 114,948 6,028,116 2,760,276 2, 978,150 2,045,233 979,570 388,560 339,700 500,000 213,539 80, 3 94 454,666 17,034,322 Estimated Project Cost to City Expended to Estimated Future Date Commitment Governmental Activities: Skate Park Project Woodland Oaks Detention Facility Chelsea Drive Drainage Natatorium Soccer Fields Improvement Athletic Fields Improvements Schertz Animal Services Facility FM 78 and Main Street Playscape Relocation Project Ware Seguin Road -Phase II Lower Seguin Road Lazy Oak Reconstruction Laura Heights Street Project Main Street Total Governmental Commitments Business-Type Activities: FM 3009 & 2252 Waterline Relocation FM1518 Waterline Relocation IH35 Waterline Replacement Aviation Heights Waterline Replacement Northcliffe Infiltration Project East Live Oak Water Plan Upgrades South Regional Water Reclamation Town Creek Sewer Project -Phase III Total Business-Type Activities Total Estimated Future Commitments 372,803 169,890 275,464 213,539 400,000 245,000 1,834,000 873,220 4,383,916 5,830 8,153 132,384 239,724 21,850 204,767 20,430 75,940 2,700 711,778 24,123 19,776 16,012 19, 960 79,871 348,680 150,114 259,452 213,539 400,000 225,040 1,834,000 873,220 4,304,045 $ 22,130,016 $ 791,649 $ 21,338,367 50 REQUIRED SUPPLEMENTARY INFORMATION 51 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2012 Variance With 2012 Final Budget - Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes $ 13,420,725 $ 13,420,725 S 13,965,625 $ 544,900 Permits and Fees 1,219,100 1,219,100 1,146,301 (72,799) Service Fees 2,901,305 2,901,305 2,699,448 (201,857) Fines and Fees 2,168,319 2,168,319 1,979,678 (188,641) Intergovernmental 212,800 388,310 466,864 78,554 InvestmentEaniings 33,175 33,175 19,307 (13,868) Miscellaneous 643,700 643,700 748,040 104,340 TOTAL REVENUES 20,599,124 20,774,634 21,025,263 250,629 EXPENDITURES General Government: Council City Manager Municipal Court Customer Relations Planning & Zoning Legal Facility Maintenance City Secretary Nondepartmental Community & Media Relations Records Management Schertz Tales Engineering Geographic Information Systems Citizens Assistance Special Events Total General Government Public Safety: Police Department Fire Department Inspection Marshal Service Total Public Safety Public Environment: Streets Total Public Environment 61,500 61,500 46,728 14,772 777,776 888,194 891,016 (2,822) 341,433 346,369 337,747 8,622 110,406 112,657 103,785 8,872 317,133 241,457 229,803 11,654 258,000 258,000 550,794 (292,794) 956,891 968,365 882,015 86,350 183,052 185,026 177,335 7,691 1,427,904 1,527,827 1,225,076 302,751 256,660 313,786 314,768 (982) 64,544 65,531 56,603 8,928 433,205 434,500 419,732 14,768 245,326 246,744 195,816 50,928 130,517 132,491 127,223 5,268 52,000 52,000 52,281 (281) 103,600 103,600 82,048 21,552 5,719,947 5,938,047 5,692,770 245,277 5,035,122 5,090,947 5,038,641 52,306 2,879,767 2,905,993 2,779,954 126,039 446,682 453,115 436,088 17,027 646,608 654,073 598,748 55,325 9,008,179 9,104,128 8,853,431 250,697 1,078,305 1,091,806 976,327 115,479 $ 1,078,305 $ 1,091,806 S 976,327 $ 115,479 52 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (CONTINUED) YEAR ENDED SEPTEMBER 30, 2012 EXPENDITURES (Continued) Parks and Recreation: Parks Pools Community/Civic Center Total Parks and Recreation Cultural: Library Total Cultural Health: Animal Control Total Health Administration: Information Technology Human Resources Finance Purchasing & Asset Management Fleet Service Total Administration TOTAL EXPENDITURES EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers In Transfers Out TOTAL OTHER FINANCING SOURCES ~USES~ NET CHANGE IN FUND BALANCE FUND BALANCE -BEGINNING Budgeted Amounts Original Final Variance With Final Budget - Positive (Negative) $ 793,322 $ 800,057 S 790,074 $ 9,983 243,003 243,003 235,985 7,018 186,927 155,366 131,211 24,155 1,223,252 1,198,426 1,157,270 41,156 826,765 838,817 821,351 17,466 826,765 838,817 821,351 17,466 383,787 386,672 346,318 40,354 383,787 386,672 346,318 40,354 1,160,176 989,124 918,510 70,614 385,476 387,881 346,134 41,747 449,959 455,881 447,861 8,020 259,622 263,014 264,559 (1,545) 410,809 457,243 399,686 57,557 2,666,042 2,553,143 2,376,750 176,393 20,906,277 21,111,039 20,224,217 886,822 (307,153) (336,405) 801,046 1,137,451 463,256 463,256 37,250 (426,006) (5,150) (5,150) (64,679) (59,529) 458,106 458,106 (27,429) (485,535 150,953 121,701 773,617 651,916 3,203,200 3,203,200 3,203,200 FUND BALANCE -ENDING $ 3,354,153 $ 3,324,901 S 3.976.817 $ 651,916 53 2012 Actu al Amounts CITY OF SCHERTZ, TEXAS NOTES TO SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE -BUDGET AND ACTUAL SEPTEMBER 30, 2012 Budgetary Information -The budget is prepared in accordance with accounting principles generally accepted in the United States of America. The City maintains strict budgetary controls. The objective of these controls is to ensure compliance with legal provision embodied in the annual appropriated budget approved by the City Council and as such is a good management control device. Annual budgets are adopted for the general fund; debt service fund; special revenue funds; hotel motel tax, park fund, police forfeiture fund, library grant fund, and the historical committee fund. Project-length financial plans are adopted for capital projects funds. Of these budgets, only the General Fund, Debt Service and Economic Development Corporation are legally adopted. Budgetary preparation and control is exercised at the department level. Actual expenditures may not legally exceed appropriations at the fund level. The City did not exceed the budgeted expenditures in any funds with legally adopted budgets during 2012. However, the budget for the Police Forfeiture Fund was exceeded. Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation, is utilized in the governmental funds. Encumbrances lapse at year-end and do not constitute expenditures or liabilities because the commitments must be reappropriated and honored during the subsequent year. 54 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION TEXAS MUNICIPAL RETIREMENT SYSTEM ANALYSIS OF FUNDING PROGRESS LAST EIGHT CALENDAR YEARS CALENDAR YEAR 2004 2005 2006 2007 2008 2009 2010 2011 UNFUNDED UNFUNDED ACTUARIAL ACCRUED LIABILITY AS A ANNUAL PERCENTAGE COVERED OF COVERED PAYROLL PAYROLL ACTUARIAL ACTUARIAL FUNDING ACTUARIAL VALUE OF ACCRUED RATIO ACCRUED ASSETS ** LIABIIITY* (1)/(2) LIABII,ITY $ 5,122,816 $ 7,950,619 64.4% $ 2,827,803 6,042,437 9,003,970 67.1% 2,961,533 7,290,175 11,798,002 61.8% 4,507,827 8,811,205 19,057,935 46.2% 10,246,730 11,216,663 22,068,312 50.8% 10,851,649 13,946,029 25,584,067 54.5% 11,638,038 18,696,437 31,792,634 58.8% 13,096,197 22,377,323 35,296,880 63.4% 12,919,557 * As of December 31 of the preceding year, the date of the actuarial valuation. ** Assets are stated cost as of December 31 of the precedingyear. $ 6,144,053 7,662,928 8,478,634 10,047,726 11,626,232 12,321,349 12,612,346 13,125,349 46.0% 38.6% 53.2% 102.0% 93.3% 94.5% 103.8% 98.4% 55 ,, ~, w) -~ .* .. ~~ ~' ~~ ~~' 1'ORA`rE4 CITY SUPPLEMENTARY INFORMATION • Comparative Statements o General Fund o Debt Service Fund Combining and Comparative Individual Fund Statements - Nonmajor Governmental Funds o Hotel Occupancy Fund -will account for proceeds of hotel occupancy taxes to be used strictly for those kinds of programs that promote the tourism industry. o 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 and tree mitigation. o Police Forfeitures Fund -will account for revenue received from drug related cases in conjunction with other law enforcement agencies. o Librarv 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. o Historical Committee Fund -will account for funds received for the preservation of the history of the city. • Combining Statements -Discretely Presented Component Units o Library Board o Economic Development Corporation o Parks and Recreation Foundation 56 CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS GENERAL FUND SEPTEMBER 30, 2012 AND 2011 2012 2011 ASSETS Cash and Cash Equivalents S 1,125,445 $ 814,125 Investments 2,573,411 2,557,520 Receivables (net of allowances): Taxes 1,529,976 1,387,743 Accounts and Other 2,063,204 1,659,317 Due from Other Funds 379,566 4,485 Inventory 63,556 43,504 TOTAL ASSETS LIABILITIES AND FUND BALANCE Liabilities: Accounts Payable Accrued Salaries and Benefits Customer Deposits Due to Other Governments Due to Other Funds Unearned Revenue Total Liabilities Fund Balance: Nonspendable: Inventory Restricted for: Municipal Court Library PEG Capital Fees Assigned for: Property Replacement Special Events Unassigned Total Fund Balance S 7,735,158 $ 6,466,694 S 868,897 $ 1,095,463 645,523 216,868 28,350 20,800 256,769 129,444 - 2,831 1,958,802 1,798,088 3,758,341 3,263,494 63,556 43,504 527,513 472,248 - 174,720 409,870 317,453 322,656 202,723 92,555 93,447 2,560,667 1, 899,105 3,976,817 3,203,200 TOTAL LIABILITIES AND FUND BALANCE S 7,735,158 $ 6,466,694 57 CITY OF SCHERTZ, TEXAS COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE GENERAL FUND FOR THE YEARS ENDED SEPTEMBER 30, 2012 AND 2011 REVENUES Taxes Permits and Fees Service Fees Fines and Fees Intergovernmental Investment Earnings Miscellaneous TOTAL REVENUES EXPENDITURES Current General Government Public Safety Public Environment Parks and Recreation Cultural Health Administration Debt Service: Principal Interest and Fiscal Charges Bond Issue Costs Capital Outlay TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out TOTAL OTHER FINANCING SOURCES (USES) Net Change in Fund Balance Fund Balance at Beginning of Year Fund Balance at End of Year 2012 2011 $ 13,965,625 1,146,301 2,699,448 1,979,678 466,864 19,307 748,040 21,025,263 $ 13,132,674 1,674,094 2,660,333 1,452,610 143,285 17,103 517,626 19,597,725 5,464,293 8,654,249 976,327 1,118,465 821,351 346,318 2,349,598 36,998 1,707 100 454,811 20,224,217 4,938,378 8,004,262 846,150 1,133,477 831, 83 8 365,297 2,347,640 36,220 2,485 100 239,909 18,745,756 801,046 851,969 37,250 38,898 (64,679) (74,569) (27,429) 773,617 (35,671) 816,298 3,203,200 2,386,902 $ 3,976,817 $ 3,203,200 58 CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS DEBT SERVICE FUND SEPTEMBER 30, 2012 AND 2011 ASSETS Receivables (net of allowances): Taxes Due from Other Funds Restricted: Cash and Cash Equivalents Investments TOTAL ASSETS LIABILITIES AND FUND BALANCE Liabilities: Accrued Interest Payable Unearned Revenue Total Liabilities Fund Balance: Restricted for: Debt Service Total Fund Balance TOTAL LIABILITIES AND FUND BALANCE 2012 2011 S 63,989 $ 58,017 116,144 66,486 929 11,696 132,312 88,647 S 313,374 $ 224,846 S 28,135 57,695 57,565 49,901 85,700 107,596 227,674 117,250 227,674 117,250 S 313,374 $ 224,846 59 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES 1N FUND BALANCE BUDGET TO ACTUAL DEBT SERVICE FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012 (WITH COMPARATIVE ACTUAL TOTALS FOR 2011) REVENUES Property Taxes Intergovernmental Investment Earnings TOTAL REVENUES EXPENDITURES Debt Service: Principal Interest and Fiscal Charges Bond Issue Costs TOTAL EXPENDITURES EXCESS (DEFICIENCI~ OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES Transfers In Proceeds from Refunding Bonds Premium on Bonds Issued Payment to Refund Agent TOTAL OTHER FINANCING SOURCES Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING Variance with 2012 Final Budget- 2011 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts $ 4,281,098 $ 4,281,098 $ 4,306,882 $ 25,784 $ 3,433,642 - - 366,825 366,825 364,325 2,250 2,250 23,902 21,652 1,320 4,283,348 4,283,348 4,697,609 414,261 3,799,287 2,285,187 1,842,900 2,287,900 (445,000) 1,964,850 1,991,480 2,433,767 2,263,474 170,293 2,005,529 - 82,390 82,390 - 88,353 4,276,667 4,359,057 4,633,764 (274,707) 4,058,732 6,681 (75,709) 63,845 139,554 (259,445) - - - - 6,792 - 6,745,000 6,745,000 - 2,865,000 - - - - 127,116 - (6,698,421) (6,698,421) - (2,908,428) - 46,579 46,579 - 90,480 6,681 (29,130) 110,424 139,554 (168,965) 117,250 117,250 117,250 - 286,215 $ 123,931 $ 88,120 $ 227,674 $ 139,554 $ 117,250 60 CITY OF SCHERTZ, TEXAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2012 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net of Allowance Taxes TOTAL ASSETS Special Revenue Funds Hotel Police Occupancy Park Forfeitures $ 26,790 $ 51,775 $ - 298,455 319,532 359,911 71,914 - - $ 397,159 $ 371,307 $ 359,911 LIABILITIES AND FUND BALANCE Liabilities Accounts Payable Due to Other Funds Total Liabilities Fund Balance Restricted for: Tourism Development Tree Mitigation Parks Police Forfeiture Historical Committee Total Fund Balances $ 6,598 $ 2,781 $ - - - 21,793 6,598 2,781 21,793 390,561 - - - 217,600 - - 150,926 - - - 338,118 TOTAL LIABILITIES AND FUND BALANCE $ 397,159 $ 371,307 $ 359,911 61 Special Revenue Funds Library Historical Grant Committee Fund Fund Totals $ - $ 9,968 $ 88,533 - - 977,898 - - 71,914 $ - $ 9,968 $ 1,138,345 $ - $ 401 $ 9,780 - 21,793 401 31,573 - 390,561 - 217,600 - 150,926 - 338,118 9,567 9,567 9, 567 1,106,772 $ - $ 9,968 $ 1,138,345 62 CITY OF SCHERTZ, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES 1N FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 REVENUES Occupancy Tax Licenses and Permits Fines and Fees Investment Earnings Miscellaneous TOTAL REVENUES EXPENDITURES Current: General Government Public Safety Parks and Recreation Cultural Capital Outlay TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Egpenditares OTHER FINANCING SOURCES (USES) Transfers In Transfers Out TOTAL OTHER FINANCING SOURCES ~USES~ Net Change in Fund Balance Fund Balances, Beginning Special Revenue Funds Hotel Police Occupancy Park Forfeitures Fund Fund Fund $ 470,290 $ - $ - - 217,160 - - - 47,935 421 656 796 470,711 217,816 48,731 344,417 - - - - 36,600 - 121,139 - - 19,900 64,808 344,417 141,039 101,408 126,294 76,777 (52,677) (37,250) (100,000) - (37,250 (100,000 - 89,044 (23,223) (52,677) 301,517 391,749 390,795 Fund Balances, Ending $ 390,561 $ 368,526 $ 338,118 63 Special Revenue Funds Library Historical Grant Committee Fund Fund Totals $ - $ - $ 470,290 - - 217,160 - - 47,935 - - 1, 873 - 391 391 - 391 737,649 - 3,149 347,566 - - 36,600 - - 121,139 6,293 - 6,293 - - 84,708 6,293 3,149 596,306 (6,293) (2,758) 141,343 - 2,385 2,385 - (137,250) 2,385 (134,865) (6,293) (373) 6,478 6,293 9,940 1,100,294 $ - $ 9,567 $ 1,106,772 64 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL HOTEL OCCUPANCY FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012 (WITH COMPARATIVE ACTUAL TOTALS FOR 2011) Variance with 2012 Final Budget- 2011 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts REVENUES Occupancy Tax $ 390,754 $ 390,754 S 470,290 $ 79,536 $ 391,181 Investment Earnings 500 500 421 (79) 385 Miscellaneous - - - - 600 TOTAL REVENUES 391,254 391,254 470,711 79,457 392,166 EXPENDITURES Current General Government 360,136 345,336 344,417 919 341,028 Capital Outlay - 14,800 - 14,800 - TOTAL EXPENDITURES 360,136 360,136 344,417 15,719 341,028 Excess (Deficiency) of Revenues Over (Under) Expenses 31,118 31,118 126,294 95,176 51,138 OTHER FINANCING SOURCES (USES) Transfers In 20,132 20,132 - (20,132) - Transfers Out (51,250) (51,250) (37,250) 14,000 - TOTAL OTHER FINANCING SOURCES (USES) (31,118) (31,118) (37,250) (6,132) - Net Change in Fund Balance - - 89,044 89,044 51,138 FUND BALANCE, BEGINNING 301,517 301,517 301,517 - 250,379 FUND BALANCE, ENDING $ 301,517 $ 301,517 S 390,561 $ 89,044 $ 301,517 65 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL PARK FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012 (WITH COMPARATIVE ACTUAL TOTALS FOR 2011) Variance with Original and 2012 Final Budget- 2011 Final Actual Positive Actual Budget Amounts (Negative) Amounts REVENUES Licenses and Permits $ 325,000 S 217,160 $ (107,840) $ 121,573 Investment Eaniings 600 656 56 639 TOTAL REVENUES 325,600 217,816 (107,784) 122,212 EXPENDITURES Current Parks and Recreation 246,000 121,139 124,861 119,372 Capital Outlay 18,000 19,900 (1,900) - TOTAL EXPENDITURES 264,000 141,039 122,961 119,372 Excess (Deficiency) of Revenues Over (Under) Expenditures 61,600 76,777 (230,745) 2,840 OTHER FINANCING USES Transfers Out - (100,000) 100,000 - TOTAL OTHER FINANCING - (100,000) 100,000 - Net Change in Fund Balance 61,600 (23,223) (130,745) 2,840 FUND BALANCE, BEGINNING 391,749 391,749 - 388,909 FUND BALANCE, ENDING $ 453,349 S 368,526 $ (130,745) $ 391,749 66 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL POLICE FORFEITURES FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012 (WITH COMPARATIVE ACTUAL TOTALS FOR 2011) REVENUES Fines and Fees Investment Earnings TOTAL REVENUES EXPENDITURES Current Public Safety Capital Outlay TOTAL EXPENDITURES Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING Variance with 2012 Final Budget- 2011 Budgeted Amounts Actual Positive Actual Original Final Amounts (Negative) Amounts 25,200 25,200 $ 47,935 $ 22,735 $ 23,642 - - 796 796 583 25,200 25,200 48,731 23,531 24,225 25,000 25,000 36,600 (11,600) 42,342 - 29,252 64,808 (35,556) - 25,000 54,252 101,408 (47,156) 42,342 200 (29,052) (52,677) (23,625) (18,117) 390,795 390,795 390,795 - 408,912 $ 390,995 $ 361,743 S 338,118 $ (23,625) $ 390,795 67 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES 1N FUND BALANCE BUDGET TO ACTUAL LIBRARY GRANT FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012 (WITH COMPARATIVE ACTUAL TOTALS FOR 2011) REVENUES Operating Grants TOTAL REVENUES EXPENDITURES Current Cultural TOTAL EXPENDITURES Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING Variance with Original and 2012 Final Budget- 2011 Final Actual Positive Actual Budget Amounts (Negative) Amounts $ 15,000 $ - $ (15,000) $ 15,419 15,000 - (15,000) 15,419 15,000 6,293 8,707 13,029 15,000 6,293 8,707 13,029 - (6,293) (23,707) 2,390 - 6,293 6,293 3,903 $ - S - $ (17,414) $ 6,293 68 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL HISTORICAL COMMITTEE FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012 (WITH COMPARATIVE ACTUAL TOTALS FOR 2011) Variance with Original and 2012 Final Budget- 2011 Final Actual Positive Actual Budget Amounts (Negative) Amounts REVENUES Sale of Merchandise $ 1,000 S 391 $ (609) $ 717 TOTAL REVENUES 1,000 391 (609) 717 EXPENDITURES Current General Government 6,150 3,149 3,001 3,947 TOTAL EXPENDITURES 6,150 3,149 3,001 3,947 OTHER FINANCING SOURCES (USES) Transfers In 5,150 2,385 (2,765) 3,230 TOTAL OTHER FINANCING SOURCES (USES) 5,150 2,385 (2,765) 3,230 Net Change in Fund Balance - (373) (373) - FUND BALANCE, BEGINNING 9,940 9,940 - 9,940 FUND BALANCE, ENDING $ 9,940 S 9,567 $ (373) $ 9,940 69 CITY OF SCHERTZ, TEXAS COMBINING STATEMENT OF NET ASSETS DISCRETELY PRESENTED COMPONENT UNITS SEPTEMBER 30, 2012 Schertz The Economic Library Parks and Development Advisory Recreation Corporation Board Foundation Total ASSETS CurrentAssets: Cash and Cash Equivalents $ 194,866 $ 11,675 $ 129,671 $ 336,212 Investments 3,714,103 44,761 - 3,758,864 Accounts Receivable -Sales Tax 507,237 - - 507,237 Accounts Receivable -Other 345 - 20,000 20,345 Accrued Interest Receivable 852 - - 852 Prepaid Expenses - - 2,367 2,367 Total CurrentAssets 4,417,403 56,436 152,038 4,625,877 Other Assets: Notes Receivable 120,080 - - 120,080 Deferred Charges 15,424 - - 15,424 Total Other Assets 135,504 - - 135,504 TOTAL ASSETS $ 4,552,907 $ 56,436 $ 152,038 $ 4,761,381 LIABILITIES AND NET ASSETS Liabilities Current Liabilties: Accounts Payable $ 45,332 $ 594 $ 9,139 $ 55,065 Accrued Liabilities 6,066 - - 6,066 Accrued Interest Payable 6,842 - - 6,842 Compensated Absences 6,811 - - 6,811 Current Portion of Long-Term Debt 390,000 - - 390,000 Total Current Liabilities 455,051 594 9,139 464,784 Long-Term Liabilities: Long-Term Debt 970,000 - - 970,000 Total Long-Term Liabilities 970,000 - - 970,000 Total Liabilities 1,425,051 594 9,139 1,434,784 NetAssets Restricted for Veteran's Park - - 72,160 72,160 Unrestricted Net Assets 3,127,856 55,842 70,739 3,254,437 Total NetAssets 3,127,856 55,842 142,899 3,326,597 TOTAL LIABILITIES AND NET ASSETS $ 4,552,907 $ 56,436 $ 152,038 $ 4,761,381 70 CITY OF SCHERTZ, TEXAS COMBINING STATEMENT OF ACTIVITIES DISCRETELY PRESENTED COMPONENT UNITS FOR THE YEAR ENDED SEPTEMBER 30, 2012 EXPENSES General Government Parks and Recreation Cultural Economic Development Interest and Fiscal Charges TOTAL EXPENSES REVENUES Program Revenues: Charges for Services Operating Contributions and Grants Capital Contributions and Grants Total Program Revenues General Revenues: Sales Taxes Interest Revenues Miscellaneous Revenue Total General Revenues Change in NetAssets Beginning Net Assets Ending Net Assets Schertz The Economic Library Parks and Development Advisory Recreation Corporation Board Foundation Total $ (485,528) $ - $ - $ (485,528) - - (159,088) (159,088) - (17,480) - (17,480) (802,235) - - (802,235) (51,940) - - (51,940) (1,339,703) (17,480) (159,088) (1,516,271) - 21,515 124,696 146,211 - 1,050 48,430 49,480 2,659,194 - 2,659,194 9,195 84 39 9,318 16,850 - 433 17,283 2,685,239 84 472 2,685,795 1,345,536 5,169 86,670 1,437,375 1,782,320 50,673 56,229 1,889,222 $ 3,127,856 $ 55,842 $ 142,899 $ 3,326,597 71 CITY OF SCHERTZ, TEXAS COMBINING BALANCE SHEET DISCRETELY PRESENTED COMPONENT UNITS SEPTEMBER 30, 2012 ASSETS Cash and Cash Equivalents Investments Accounts Receivable -Sales Tax Accounts Receivable -Other Note Receivable Accrued Interest Receivable Prepaid Items TOTAL ASSETS LIABILITIES AND FUND BALANCE Liabilities Accounts Payable Accrued Liabilities Total Liabilities Fund Balance Nonspendable: Long-Term Note Receivable Prepaid Items Restricted for Veteran's Park Assigned for Youth Activities Unassigned Total Fund Balances TOTAL LIABILITIES AND FUND BALANCE TOTAL FUND BALANCE Schertz The Economic Library Parks and Development Advisory Recreation Corporation Board Foundation Total $ 194,866 $ 11,675 $ 129,671 $ 336,212 3,714,103 44,761 - 3,758,864 507,237 - - 507,237 345 - 20,000 20,345 120,080 - - 120,080 852 - - 852 - - 2,367 2,367 $ 4,537,483 $ 56,436 $ 152,038 $ 4,745,957 $ 45,332 $ 594 $ 9,139 $ 55,065 6,066 - - 6,066 51,398 594 9,139 61,131 120,080 - - 120,080 - - 2,367 2,367 - - 72,160 72,160 - - 11,090 11,090 4,366,005 55,842 57,282 4,479,129 4,486,085 55,842 142,899 4,684,826 $ 4,537,483 $ 56,436 $ 152,038 $ 4,745,957 $ 4,486,085 $ 55,842 $ 142,899 $ 4,684,826 Amounts reported in the statement of net assets are different because for the statement of net assets: Deferred charges, consisting of debt issue costs, are amortized over the life of the bond rather than recognized in full in the fund statements: Long-term liabilities (including employee compensated absences) are not payable in the current period and, therefore, are deferred in the funds Principal Accrued Interest Payable Compensated Absences TOTAL NET ASSETS 15,424 - - 15,424 (1,360,000) - - (1,360,000) (6,842) - - (6,842) (6,811) - - (6,811) $ 3,127,856 $ 55,842 $ 142,899 $ 3,326,597 72 CITY OF SCHERTZ, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE DISCRETELY PRESENTED COMPONENT UNITS FOR THE YEAR ENDED SEPTEMBER 30, 2012 REVENUES Sales Taxes Grants and Contributions Charges for Services Investment Earnings Miscellaneous Income TOTAL REVENUES EXPENDITURES Current: General Government Parks and Recreation Cultural Economic Development Debt Service: Principal Interest and Fiscal Charges TOTAL EXPENDITURES Net Change in Fund Balance FUND BALANCE, BEGINNING FUND BALANCE, ENDING NET CHANGE IN FUND BALANCE Amounts reported in the statement of activities are different because: The issuance of long-term debt provides and the repayment of principal consumes the current financial resources of governmental funds. Neither transaction however has any affect on net assets. This amount is the net effect of these transactions: Principal Repayments Amortization of Bond Issue Costs Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds: Compensated Absences Accrued Interest CHANGE IN NET ASSETS Schertz The Economic Library Parks and Development Advisory Recreation Corporation Board Foundation Total $ 2,659,194 $ - $ - $ 2,659,194 - 1,050 120,590 121,640 - 21,515 124,696 146,211 9,195 84 39 9,318 16,848 - 433 17,281 483,518 - - 483,518 - - 159,088 159,088 - 17,480 - 17,480 802,235 - - 802,235 380,000 - - 380,000 48,329 - - 48,329 1,714,082 17,480 159,088 1, 890,650 971,155 5,169 86,670 1,062,994 3,514,930 50,673 56,229 3,621,832 $ 4,486,085 $ 55,842 $ 142,899 $ 4,684,826 $ 971,155 $ 5,169 $ 86,670 $ 1,062,994 380,000 - - 380,000 (5,166) - - (5,166) (2,010) - - (2,010) 1,557 - - 1,557 $ 1,345,536 $ 5,169 $ 86,670 $ 1,437,375 73 STATISTICAL SECTION This part of the City of Schertz's annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. Financial Trends (Tables 1 throu~~ Net Assets by Component Change in Net Assets Fund Balances, Governmental Funds Changes in Fund Balances, Governmental Funds These schedules contain trend information to help reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity (Tables S through 12) Tax Revenues by Source, Governmental Funds Total Water and Sewer Consumption and Rates Principal Water and Sewer Consumers Assessed Value and Estimated Actual Value of Taxable Property Direct and Overlapping Property Tax Rates Principal Property Taxpayers Property Tax Levies and Collections Taxable Assessed Value These schedules contain information to help readers assess the factors affecting the City's ability to generate its property and sales tax. Debt Capacity (Tables 13 through 17~ Ratios of Outstanding Debt by Type Ratios of General Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Debt Margin Information Pledged Revenue Coverage These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demo~phic and Economic Information (Tables 18 through 19) Demographic and Economic Statistics Principal Employers These schedules offer demographic and economic indicators to help the reader understand how the City's financial activities take place and to help make comparisons over time and with other governments. Operatin~nformation (Tables 20 through 22~ Full-time Equivalent City Government Employees by Function Operating Indicators by Function/Program Capital Asset Statistics by Function/Program These schedules contain information about the City's operations and resources to help the reader understand how the City's financial information relates to the services the City provides and the activities itperforms. 74 CITY OF SCHERTZ, TEXAS NET ASSETS, BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Fiscal Year 2003 2004 2005 2006 Governmental Activities Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Governmental Activities Net Assets Business-Type Activities Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Business-Type Activities Net Assets Primary Government Invested in Capital Assets, Net of Related Debt Restricted Unrestricted Total Primary Government NetAssets $ 11,066,897 $ 16,228,134 $ 17,699,797 $ 13,257,031 491,313 7,037,607 4,813,496 15,888,549 7,448,061 985,750 6,957,173 8,759,630 $ 19,006,271 $ 24,251,491 $ 29,470,466 $ 37,905,210 $ 21,806,626 $ 22,901,982 $ 24,970,976 $ 24,783,839 1,384,083 1,010,662 428,712 1,253,711 5,294,283 3,988,006 5,377,968 9,879,126 $ 28,484,992 $ 27,900,650 $ 30,777,656 $ 35,916,676 $ 32,873,523 $ 39,130,116 $ 42,670,773 $ 38,040,870 1,875,396 8,048,269 5,242,208 17,142,260 12,742,344 4,973,756 12,335,141 18,638,756 $ 47,491,263 $ 52,152,141 $ 60,248,122 $ 73,821,886 75 TABLE 1 Fiscal Year 2007 2008 2009 2010 2011 2012 $ 32,932,355 $ 44,206,232 $ 57,324,482 $ 54,010,139 $ 55,415,699 $ 56,616,809 663,973 1,058,514 1,170,786 1,067,599 2,279,621 2,034,588 12,720,293 9,092,711 2,017,577 5,876,642 5,480,879 5,652,889 $ 46,316,621 $ 54,357,457 $ 60,512,845 $ 60,954,380 $ 63,176,199 $ 64,304,286 $ 18,788,933 $ 41,350,184 $ 50,047,301 $ 50,778,490 $ 51,838,589 $ 50,161,157 1,995,213 - - - - - 23,658,181 10,286,447 3,633,244 4,217,098 7,441,722 11,577,645 $ 44,442,327 $ 51,636,631 $ 53,680,545 $ 54,995,588 $ 59,280,311 $ 61,738,802 $ 51,721,288 $ 85,556,416 $ 107,371,783 $ 104,788,629 $ 107,254,288 $ 106,777,966 2,659,186 1,058,514 1,170,786 1,067,599 2,279,621 2,034,588 36,378,474 19,379,158 5,650,821 10,093,740 12,922,601 17,230,534 $ 90,758,948 $ 105,994,088 $ 114,193,390 $ 115,949,968 $ 122,456,510 $ 126,043,088 76 CITY OF SCHERTZ, TEXAS CHANGE IN NET ASSETS LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Expenses Governmental Activities Fiscal Year 2003 2004 2005 2006 General Government $ 1,934,433 Public Safety 3,705,722 Public Environment 816,265 Parks and Recreation 366,728 Cultural 451,215 Health 156, 927 Administration 696,017 Interest and Other Fees 499,011 Total GovernmentalAcfivitiesExpenses 8,626,318 Business-Type Activities $ 2,113,226 4,586,498 703,180 315,921 310,013 192,506 760,347 707,090 9,688,781 $ 2,656,327 5,558,596 782,654 351,627 339,124 221,950 955,757 862,744 11,728,779 $ 2,910,487 6,403,122 856,260 384,696 396,078 231,149 1,047,206 823,818 13,052,816 Water and Sewer 8,300,590 8,302,505 8,937,553 9,821,823 EMS 2,248,651 2,509,858 3,789,791 3,474,249 Total Business-Type Activities 10,549,241 10,812,363 12,727,344 13,296,072 Total Primary Government Expenses $ 19,175,559 $ 20,501,144 $ 24,456,123 $ 26,348,888 Program Revenues Governmental Activities Charges for Service: General Government Public Safety Parks and Recreation Cultural Health Administration Operating Grants and Contributions Capital Grants and Contributions Total GovernmentalAactivities Program Revenues Business-Type Activities Charges for Service: Water and Sewer EMS Capital Grants and Contributions Total Business-Type Activities Program Revenues Total Primary Government Program Revenues $ 1,022,953 $ 967,261 $ 1,102,665 $ 917,099 1,033,713 1,118,241 1,475,618 1,684,786 34,248 203,579 141,523 143,254 155,644 180,707 146,429 149,225 117,983 36,095 44,611 44,178 438,408 414,541 472,571 393,043 2,788,821 2,280,629 1,789,763 1,567,164 - 2,153,213 3,808,133 5,382,779 5,591,770 7,354,266 8,981,313 10,281,528 8,135,299 7,534,841 9,308,362 11,223,658 2,014,126 1,723,611 3,443,429 3,904,818 279,913 1,045,334 2,055,366 3,148,100 10,429,338 $ 16,021,108 10,303,786 $ 17,658,052 14,807,157 $ 23,788,470 18,276,576 $ 28,558,104 77 TABLE 2 Fiscal Year 2007 2008 2009 2010 2011 2012 $ 4,121,075 $ 5,082,004 $ 5,713,297 $ 5,694,714 $ 5,878,984 $ 6,514,329 5,920,046 7,227,406 7,755,056 7,897,298 8,390,740 9,103,676 1,864,450 2,300,425 2,740,755 2,966,642 3,152,119 3,586,087 837,652 1,184,866 1,095,405 1,354,415 1,436,436 1,425,517 450,974 490,817 735,740 803,096 858,336 899,487 272,730 330,736 377,125 345,455 374,516 357,658 1,482,780 1,947,507 1,742,573 2,112,308 2,387,518 2,415,696 1,412,066 1,982,984 1,780,791 2,188,588 2,189,935 2,250,972 16,361,773 20,546,745 21,940,742 23,362,516 24,668,584 26,553,422 9,502,039 12,379,584 13,568,065 14,434,709 15,280,871 16,349,967 5,114,911 2,976,112 3,365,544 3,690,007 3,659,031 3,758,425 14,616,950 15,355,696 16,933,609 18,124,716 18,939,902 20,108,392 $ 30,978,723 $ 35,902,441 $ 38,874,351 $ 41,487,232 $ 43,608,486 $ 46,661,814 $ 2,186,229 $ 1,601,472 $ 1,893,779 $ 2,033,232 $ 1,665,784 $ 2,429,114 1,307,295 1,643,635 1,481,004 1,986,536 2,815,029 2,216,385 196,436 155,168 208,236 504,400 344,042 416,816 201,779 210,311 207,643 245,768 206,895 257,752 33,148 41,390 33,930 36,728 39,743 36,746 936,955 479,313 834,489 900,246 896,242 1,156,026 493,281 590,944 987,588 551,524 549,851 715,517 5,640,431 8,750,859 6,184,328 1,276,465 2,998,115 1,106,413 10,995,554 13,473,092 11,830,997 7,534,899 9,515,701 8,334,769 13,007,618 13,620,440 14,668,137 15,147,332 17,073,075 17,411,568 5,017,343 3,150,428 2,889,518 3,061,414 3,564,852 3,561,114 2,755,376 5,190,039 2,241,726 973,437 2,175,889 828,853 20,780,337 21,960,907 19,799,381 19,182,183 22,813,816 21,801,535 $ 31,775,891 $ 35,433,999 $ 31,630,378 $ 26,717,082 $ 32,329,517 $ 30,136,304 78 CITY OF SCHERTZ, TEXAS CHANGE IN NET ASSETS (CONTINUED) LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Fiscal Year 2003 2004 2005 2006 Net (Expenses) Revenue Governmental Activities $ (3,034,548) $ (2,334,515) $ (2,747,466) $ (2,771,288) Business-Type Activities (119,903) (508,577) 2,079,813 4,980,504 Total Primary Government Net Expenses $ (3,154,451) $ (2,843,092) $ (667,653) $ 2,209,216 Governmental Revenues and Other Changes in Net Assets Governmental Activities Taxes: Ad Valorem Sales Franchise Fees Hotel/Motel Mixed Drink Bingo Unrestricted Investment Earnings Gain Sale of Capital Asset Miscellaneous Transfers Total Governmental Activities Business-Type Activities Interest and Investment Earnings Gain Sale of Capital Asset Miscellaneous Transfers Total Business-Type Activities Total Primary Government Changes In Net Assets Government Activities Business-Type Activities Total Primary Government $ 3,984,262 $ 4,410,567 $ 4,908,108 $ 5,705,805 2,035,655 1,703,994 2,227,282 3,136,970 671,009 659,847 786,298 961,462 43,177 37,688 42,982 202,108 4,243 5,064 6,437 20,068 4,528 4,749 4,946 5,124 93,690 114,323 356,080 552,091 16,028 58,770 83,337 112,306 410,802 584,733 199,123 510,098 7,263,394 7,579,735 8,614,593 11,206,032 94,731 61,025 170,610 473,205 - 327,900 - - 158,372 120,043 177,554 195,409 (410,802) (584,733) (199,123) (510,098) (157,699) (75,765) 149,041 158,516 $ 7,105,695 $ 7,503,970 $ 8,763,634 $ 11,364,548 $ 4,228,846 $ 5,245,220 $ 5,867,127 $ 8,434,744 (277,602) (584,342) 2,228,854 5,139,020 $ 3,951,244 $ 4,660,878 $ 8,095,981 $ 13,573,764 79 TABLE 2 (Continued) Fiscal Year 2007 2008 2009 2010 2011 2012 $ (5,366,219) $ (7,073,653) $ (10,109,745) $ (15,827,617) $ (15,152,883) $ (18,218,653) 6,163,387 6,605,211 2,865,772 1,057,467 3,873,914 1,693,143 $ 797,168 $ (468,442) $ (7,243,973) $ (14,770,150) $ (11,278,969) $ (16,525,510) $ 7,309,127 $ 7,841,928 $ 8,980,102 $ 9,715,645 $ 10,280,768 $ 11,298,204 4,016,381 4,117,173 4,011,855 4,160,495 4,702,217 5,309,018 1,004,116 1,240,642 1,462,199 1,448,620 1,542,046 1,647,712 259,176 273,558 305,073 348,147 391,181 470,290 29,451 32,364 31,790 32,144 33,630 28,586 6,781 4,751 5,105 4,651 2,173 - 1,453,645 1,310,310 339,403 92,208 35,008 50,947 - 23,706 17,714 20,910 - - 923,574 270,057 51,285 430,911 303,444 604,277 (1,224,621) - 1,060,607 15,421 84,235 (62,294) 13,777,630 15,114,489 16,265,133 16,269,152 17,374,702 19,346,740 976,595 409,972 128,233 36,824 37,950 36,409 - 57,527 (94,978) - - - 161,048 121,594 205,494 236,173 457,094 666,645 1,224,621 - (1,060,607) (15,421) (84,235) 62,294 2,362,264 589,093 (821,858) 257,576 410,809 765,348 $ 16,139,894 $ 15,703,582 $ 15,443,275 $ 16,526,728 $ 17,785,511 $ 20,112,088 $ 8,411,411 $ 8,040,836 $ 6,155,388 $ 441,535 $ 2,221,819 $ 1,128,087 8,525,651 7,194,304 2,043,914 1,315,043 4,284,723 2,458,491 $ 16,937,062 $ 15,235,140 $ 8,199,302 $ 1,756,578 $ 6,506,542 $ 3,586,578 80 CITY OF SCHERTZ, TEXAS FUND BALANCES -GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Fiscal Year 2003 2004 2005 2006 Nonspendable Fund Balance: Inventory $ 8,128 $ 7,464 $ 10,571 $ 16,706 Prepaid Items 60,825 58,087 - - Total Nonspendable Fund Balance 68,953 65,551 10,571 16,706 Restricted Fund Balance: LEOSE - - - 10,505 Municipal Court - - - 205,344 Writing Next Chapter - - - - PEG Capital Fees - - - - CapitalImprovement 563,966 8,144,795 5,135,834 15,134,814 Debt Service 323,166 247,293 263,740 347,739 Tourism Development 272,482 290,688 187,953 378,823 Tree Mitigation 168,147 167,064 326,267 343,091 Park Fund 83,671 82,835 134,275 179,601 Police Forfeiture 215,591 325,181 327,212 293,873 Library Grant 3,905 422 702 6,275 Tax Increment Financing 88,376 88,829 - - Total Restricted Fund Balance 1,719,304 9,347,107 6,375,983 16,900,065 Assigned Fund Balance: Property Replacement - - - - Special Events - - - - Capital Improvement 1,311,429 - - - Recycling 1,256 6,774 10,009 12,733 Historical Committee - - - - Forfeited Property - - - - Municipal Court Renovation - - - - Total Assigned Fund Balance 1,312,685 6,774 10,009 12,733 Unassigned Fund Balance 4,119,454 4,319,428 4,864,647 7,202,709 Total Governmental Funds $ 7,220,396 $ 13,738,860 $ 11,261,210 $ 24,132,213 81 Fiscal Year TABLE 3 2007 2008 2009 2010 2011 2012 $ 67,333 $ 46,014 $ 44,217 $ 46,473 $ 43,504 $ 63,556 67,333 46,014 44,217 46,473 43,504 63,556 10,810 11,018 11,832 12,353 13,004 - 191,663 269,961 332,117 402,744 459,244 527,513 - - 130,930 149,381 174,720 - - - - - 317,453 409,870 17,612,092 16,416,440 14,342,553 3,914,323 10,219,300 17,104,595 556,884 429,289 444,369 286,215 117,250 227,674 470,743 502,883 180,710 250,379 301,517 390,561 271,071 271,071 191,834 164,424 173,999 217,600 180,223 169,529 94,870 224,485 217,750 150,926 341,981 383,104 343,619 408,912 390,795 338,118 6,093 14,304 401 3,903 6,293 - 19,641,560 18,467,599 16,073,235 5,817,119 12,391,325 19,366,857 579,708 400,247 201,850 202,341 202,723 322,656 127,500 88,778 62,263 142,465 93,447 92,555 - - - - 162,113 243,546 6,780 14,748 - - - - - - 10,149 9,940 9,940 9,567 713,988 503,773 274,262 354,746 468,223 668,324 8,876,682 5,269,890 1,209,451 1,372,779 1,899,105 2,560,667 $ 29,299,563 $ 24,287,276 $ 17,601,165 $ 7,591,117 $ 14,802,157 $ 22,659,404 82 CITY OF SCHERTZ, TEXAS CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Fiscal Year REVENUES Taxes Permits and Fees Service Fees Fines and Fees Intergovernmental Other Revenue TOTAL REVENUES EXPENDITURES Current: General Government Public Safety Public Environment Parks and Recreation Cultural Health Administration Capital Outlay Debt Service: Principal Interest and Fiscal Charges Bond Issue Costs TOTAL EXPENDITURES Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Bonds Issued Premium (Discount) on Bond Issue Capital Lease Transfers In Transfers (Out) TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCE Debt Service as a percentage of Noncapital Expenditures 2003 2004 2005 2006 $ 6,747,330 $ 7,322,727 $ 8,569,435 $ 10,587,264 941,515 852,577 1,421,575 1,475,619 944,506 793,096 872,286 1,820,940 646,613 842,322 915,704 1,157,480 2,003,743 1,710,277 956,791 19,278 287,865 490,266 659,430 710,580 11,571,572 12,011,265 13,395,221 15,771,161 1,861,367 1,919,255 2,422,655 2,527,624 3,530,470 3,833,243 4,542,384 5,020,684 324,330 452,612 500,880 558,020 351,357 490,330 542,621 604,521 415,834 298,179 325,498 384,127 156,927 181,074 208,499 216,655 693,308 852,769 1,048,905 1,290,154 4,767,695 3,827,879 4,360,483 6,127,735 783,000 1,233,000 1,236,000 1,155,000 508,166 609,522 884,069 803,664 46,272 111,802 - 165,125 13,438,726 13,809,665 16,071,994 18,853,309 (1,867,154) (1,798,400) (2,676,773) (3,082,148) 3,360,000 7,750,000 - 15,000,000 - (17,869) - 123,057 - - - 319,996 467,502 2,275,896 583,126 529,598 (56,700) (1,691,163) (384,003) (19,500) 3,770,802 8,316,864 199,123 15,953,151 $ 1,903,648 $ 6,518,464 $ (2,477,650) $ 12,871,003 19.4% 25.7% 24.8% 21.0% 83 TABLE 4 Fiscal Year 2007 2008 2009 2010 2011 2012 $ 13,083,505 $ 13,524,472 $ 14,780,663 $ 15,731,293 $ 16,957,498 $ 18,742,797 1,062,054 992,953 822,105 1,330,472 1,795,667 1,363,461 1,807,098 1,592,072 1,904,703 2,297,577 2,490,829 2,699,448 1,397,101 1,387,677 1,517,821 1,655,183 1,452,610 2,027,613 153,349 526,839 797,659 534,267 1,048,957 878,773 2,356,690 1,752,254 1,025,103 975,925 576,875 943,322 19,859,797 19,776,267 20,848,054 22,524,717 24,322,436 26,655,414 3,802,451 9,657,680 4,718,403 4,976,495 5,157,498 6,007,692 5,665,671 6,638,352 7,235,501 7,409,720 7,885,119 8,690,849 655,930 745,307 884,158 816,939 846,150 976,327 736,993 800,079 771,046 939,795 958,509 1,239,604 439,767 667,995 786,860 866,441 919,608 827,644 263,918 295,156 348,448 331,860 360,746 346,318 1,586,889 1,949,871 1,729,732 2,096,113 2,347,641 2,349,598 5,504,679 10,281,603 14,963,950 11,347,876 2,956,511 1,299,843 1,458,000 1,910,043 4,696,928 1,768,086 2,001,070 2,324,898 1,377,961 1,620,178 1,950,358 2,145,155 2,008,114 2,265,181 52,300 122,290 191,066 - 244,237 254,971 21,544,559 34,688,554 38,276,450 32,698,480 25,685,203 26,582,925 (1,684,762) (14,912,287) (17,428,396) (10,173,763) (1,362,767) 72,489 8,076,733 9,900,000 9,681,678 - 8,206,572 7,671,579 - - - - 283,000 175,473 - - - 148,294 - - 354,150 593,294 2,778,593 242,539 348,846 139,635 (1,578,771) (593,294) (1,717,986) (227,118) (264,611) (201,929) 6,852,112 9,900,000 10,742,285 163,715 8,573,807 7,784,758 $ 5,167,350 $ (5,012,287) $ (6,686,111) $ (10,010,048) $ 7,211,040 $ 7,857,247 24.5% 18.8% 45.1% 25.5% 24.4% 19.1% 84 CITY OF SCHERTZ, TEXAS TAX REVENUE BY SOURCE -GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS TABLE 5 Fiscal Mixed Hotel Total Year Property Sales & Use Franchise Beverage Bingo Occupancy Revenue 2012 $ 11,287,191 $ 5,309,018 $ 1,647,712 $ 28,586 $ - $ 470,290 $ 18,742,797 2011 10,286,251 4,702,217 1,542,046 33,630 2,173 391,181 16,957,498 2010 9,737,236 4,160,495 1,448,620 32,144 4,651 348,147 15,731,293 2009 8,964,642 4,011,855 1,462,199 31,790 5,105 305,073 14,780,664 2008 7,855,984 4,117,173 1,240,642 32,364 4,751 273,558 13,524,472 2007 7,767,600 4,016,381 1,004,116 29,451 6,781 259,176 13,083,505 2006 6,261,532 3,136,970 961,462 20,068 5,124 202,108 10,587,264 2005 5,501,490 2,227,282 786,298 6,437 4,946 42,982 8,569,435 2004 4,911,385 1,703,994 659,847 5,064 4,749 37,688 7,322,727 2003 3,988,718 2,035,655 671,009 4,243 4,528 43,177 6,747,330 *Property tax is the largest revenue source of the City. 85 CITY OF SCHERTZ, TEXAS TOTAL WATER AND SEWER CONSUMPTION AND RATES LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Ended September 30, 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 Total Water & Sewer Consumption (In Gallonsl Water & Sewer Base Rate Water & Sewer Rate Per 1,000 Gallons TABLE 6 1,604,952,300 1,676,323,900 1,231,376,600 1,511,567,900 855,779,200 614,508,100 714,230,400 528,766,500 489,400,300 494,171,600 $ 18.94 18.94 18.94 18.94 15.94 15.94 15.94 15.94 13.70 13.70 86 $ 2.34 2.34 2.25 2.16 1.92 1.72 1.69 1.52 1.47 1.47 CITY OF SCHERTZ, TEXAS PRINCIPAL WATER AND SEWER CONSUMERS CURRENT YEAR AND NINE YEARS AGO (UNAUDITED) TABLE 7 TAXPAYERS City of Schertz (Soccer Field) Waterford Ridge Apts. SYSCO Sycamore Creek Apts. Beck Readymix Concrete Texas Machining Tech. Pecan Grove TX LLC Tri-County 35 Bus. Park Manco Structures LTD Marshall Shredding Company John A Howard Atrium Inn HEB Denny's Randolph Brooks FCU Landscape of Texas Samuel Clemens High School Keebler Company Taco Bell KFC Pizza Hut TOTAL Total City Water Consumption 2012 2003 Total Percentage of Total Percentage of Water Total City Water Total City Consumption Water Consumption Water (in Gallons) Rank Consumption (in Gallons) Rank Consumption 25,141,000 1 1.57% 10,948,800 2 0.68% 10,102,300 3 0.63% 9,055,100 4 0.56% 8,567,600 5 0.53% 789,300 5 0.16% 7,733,700 6 0.48% 6,766,200 7 0.42% 6,447,400 8 0.40% 6,275,400 9 0.39% 5,966,500 10 0.37% 9,997,700 1 2.02% 1,155,600 2 0.23% 987,400 3 0.20% 893,600 4 0.18% 659,500 6 0.13% 570,300 7 0.12% 483,000 8 0.10% 464,900 9 0.09% 427,000 10 0.09% 97,004,000 6.04% 16,428,300 3.32% 1,604,952,300 494,171,600 87 CITY OF SCHERTZ, TEXAS ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Ended September 30, Total Taxable Assessed Value TABLE 8 Total Direct Tax Rate 2012 $ 2,388,205,570 0.4843 2011 2,330,508,707 0.4493 2010 2,279,124,755 0.4342 2009 1,891,409,716 0.4090 2008 1,939,016,982 0.4090 2007 2,195,057,857 0.4317 2006 1,870,979,126 0.3977 2005 1,589,745,469 0.3760 2004 1,433,017,426 0.3825 2003 1,024,412,810 0.3825 Source: Bexar, Comal and Guadalupe County Appraisal Districts NOTES: Property in the City of Schertz is reassessed every year at estimated actual value. For this reason, assessed value is equal to estimated actual value. Tax rates are per $100 of assessed value. Property tax is the largest revenue source of the City. 88 CITY OF SCHERTZ, TEXAS DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS (UNAUDITED) TABLE 9 City Direct Rates Overlapping School Districts Schertz- Cibolo- Fiscal Basic Debt Universal Comal Year Rate Service Total City ISD ISD 2012 0.2993 0.1850 0.4843 1.4350 1.4300 2011 0.2993 0.1500 0.4493 1.4350 1.3700 2010 0.2842 0.1500 0.4342 1.4200 1.3100 2009 0.2590 0.1500 0.4090 1.3850 1.3100 2008 0.2590 0.1500 0.4090 1.3150 1.3100 2007 0.2805 0.1512 0.4317 1.6100 1.6400 2006 0.3005 0.0972 0.3977 1.7200 1.8000 2005 0.2888 0.0872 0.3760 1.7400 1.8200 2004 0.2946 0.0879 0.3825 1.7800 1.8300 2003 0.3091 0.0734 0.3825 1.7300 1.8000 Overlapping Counties Bexar Comal Guadalupe Fiscal Hospital River Year County District Authority Community College District County County 2012 0.3269 0.2762 0.0174 0. 1416 0.3504 0.4036 2011 0.3269 0.2762 0.0167 0. 1416 0.3340 0.3999 2010 0.3269 0.2662 0.0160 0. 1359 0.3130 0.3895 2009 0.3269 0.2610 0.0160 0. 1359 0.3080 0.3895 2008 0.3269 0.2374 0.0160 0. 1346 0.3180 0.3895 2007 0.3269 0.2439 0.0160 0. 1371 0.3152 0.4031 2006 0.3312 0.2439 0.0164 0. 1071 0.3537 0.4031 2005 0.3312 0.2439 0.0164 0. 1071 0.3337 0.4031 2004 0.3337 0.2439 0.0164 0. 1071 0.3337 0.4131 2003 0.3337 0.2439 0.0164 0. 1071 0.3337 0.4131 Source NOTE: Bexar, Comal and Guadalupe County Tax Offices Overlapping rates are those of local and county governments that apply within the City of Schertz. Not all overlapping rates apply to all City of Schertz property owners. 89 CITY OF SCHERTZ, TEXAS PRINCIPAL PROPERTY TAX PAYERS CURRENT YEAR AND NINE YEARS AGO (UNAUDITED) 2012 TABLE 10 2003 Taxable Assessed Taxnaver Value Rank Percentage of Total City 'Taxable Assessed Value Republic Beverage Co. Distribution S 51,762,770 1 AOH-Vantage at Schertz LLC 17,367,333 2 San Antonio MTA LP 17,153,935 3 Wal-Mart Real Estate Business Trust 14,529,843 4 City Bank 14,108,720 5 Eye Care Centers of America Inc. 13,293,056 6 H.E.Butt Grocery Co. 12,040,678 7 Atlantic Financial Group LTD 10,313,859 8 EM Limited Partnership 9,857,599 9 Lowe's Home Center Inc. 8,284,756 10 2.17% 0.73% 0.72% 0.61% 0.59% 0.56% 0.50% 0.43% 0.41% 0.35% Taxable Assessed Value Rank S 22,050,000 1 9,425,244 2 7,087,559 3 C & W Ranches LTD 6,354,626 Sycamore Apartment LTD 5,026,690 AER Manufacturing Inc. 4,647,442 PSP Industries 4,260,870 Negley Paint Co. Inc. 4,147,184 Guadalupe Valley Electric CO-OP 3,961,790 Garden Ridge Pottery 3,262,687 TOTALS S 168,712,549 7.06% S 70,224,092 TOTAL TAXABLE ASSESSED VALUE $ 2,388,205,570 Source: Bexar, Comal and Guadalupe County Appraisal Districts $ 1,024,412,810 Percentage of Total City Taxable Assessed Value 2.15% 0.92% 0.69% 4 0.62% 5 0.49% 6 0.45% 7 0.42% 8 0.40% 9 0.39% 10 0.32% 6.86% 90 CITY OF SCHERTZ, TEXAS PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) Collected Within Fiscal Year Taxes Levied Fiscal Year of Levy Collections In Ended for the % of Subsequent September 30, Fiscal Year Amount Levy Years TABLE 11 Total Collections To Date Amount of Levy 99.29% 99.17% 99.75% 99.83% 99.89% 99.83% 99.89% 99.90% 99.91% 99.95% 2012 $ 11,239,572 $ 11,159,974 99.29% $ - $ 11,159,974 2011 9,978,430 9,895,240 99.17% 53,781 9,895,240 2010 9,639,945 9,559,899 99.17% 55,565 9,615,464 2009 8,800,927 8,703,978 98.90% 81,572 8,785,550 2008 7,793,405 7,711,714 98.95% 73,076 7,784,790 2007 7,048,818 6,957,827 98.71% 78,964 7,036,791 2006 5,645,611 5,576,559 98.78% 62,985 5,639,544 2005 4,858,508 4,796,062 98.71% 57,813 4,853,875 2004 4,360,470 4,252,349 97.52% 104,187 4,356,536 2003 3,918,379 3,881,204 99.05% 35,315 3,916,519 Source: Guadalupe County Tax Office 91 CITY OF SCHERTZ, TEXAS TAXABLE ASSESSED VALUE LAST TEN FISCAL YEARS (UNAUDITED) TABLE 12 Fiscal Year Taxable Ended Value Residential Commercial Tax-Exempt Other September 30, January 1, Property Property Property Property 2012 2011 $ 1,354,392,093 $ 1,204,329,462 $ (273,127,857) $ 102,611,872 2011 2010 1,300,581,118 1,206,144,575 (284,231,660) 108,014,674 2010 2009 1,265,356,113 1,200,076,287 (304,622,372) 118,314,727 2009 2008 1,147,403,041 656,276,237 (86,062,834) 173,793,272 2008 2007 1,074,280,935 728,323,513 (125,049,238) 261,461,772 2007 2006 1,392,720,883 423,317,359 (21,195,965) 400,215,580 2006 2005 1,201,285,889 344,827,561 (16,046,859) 340,912,535 2005 2004 1,068,235,628 262,553,018 (11,646,100) 270,602,923 2004 2003 985,774,636 248,629,342 (10,777,023) 209,390,471 2003 2002 - - - - *Taxable Assessed Value is before any applicable freeze adjustments. Source: Bexar, Comal, and Guadalupe County Appraisal Districts. Total Taxable Assessed Value* Total Direct Tax Rate $ 2,388,205,570 0.4843 2,330,508,707 0.4493 2,279,124,755 0.4342 1,891,409,716 0.4090 1,939,016,982 0.4090 2,195,057,857 0.4317 1,870,979,126 0.3977 1,589,745,469 0.3760 1,433,017,426 0.3825 1,024,412,810 0.3825 Note: Taxable values presented above prior to fiscal year 2010 do not include Bexar and Comal Counties. Information for fiscal year 2003 was not available. 92 CITY OF SCHERTZ, TEXAS RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (UNAUDITED) Governmental Activities General General Certificates Obligation Fiscal Obligation of Tax Capital Refunding Year Bonds Obligation Notes Lease Bonds 2012 $ 51,050,000 $ 996,300 $ - $ 60,190 $ 9,155,000 2011 44,715,000 7,910,800 - 97,188 2,790,000 2010 37,530,000 11,575,650 - 133,408 - 2009 38,485,000 12,373,850 - - - 2008 32,790,000 13,158,700 - 107,078 - 2007 23,950,000 14,032,893 - 215,854 - 2006 18,740,000 13,560,000 - 319,996 - 2005 4,045,000 14,250,000 160,000 - - 2004 4,456,000 14,785,000 450,000 - - 2003 4,844,000 7,600,000 730,000 - - NOTES: a Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. b. See Table 18 for personal income and population data for the City. These ratios are calculated using personal income and population for the prior calendar year. 93 TABLE 13 Business-Type Activities General Certificates Public Obligation Revenue of Facility Refunding Tax Bonds Obligation Loan Bonds Notes $ 2,355,000 $ 5,383,700 $ - $ 2,405,000 $ 190,000 2,490,000 5,704,200 - 2,675,000 250,000 5,460,000 6,149,350 - - 310,000 5,805,000 6,571,150 7,000 - - 6,230,000 6,976,300 14,000 - - 6,645,000 7,237,107 21,000 - - 7,055,000 - 28,000 - - 7,445,000 - 34,000 - - 4,625,000 - 40,000 64,000 - 4,990,000 - 46,000 126,000 - Total Percent Primary of Gross *Per Government Income Capita $ 71,595,190 7.99% 2,145 66,632,188 7.84% 2,056 61,158,408 7.14% 1,944 63,242,000 6.92% 1,932 59,276,078 7.06% 1,849 52,101,854 5.88% 1,639 39,702,996 1.56% 1,262 25,934,000 1.35% 968 24,420,000 2.43% 923 18,336,000 2.01 % 764 94 CITY OF SCHERTZ, TEXAS RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (UNAUDITED) TABLE 14 General Bonded Debt Outstanding General General Certificates Obligation Fiscal Obligation of 'l'ax Refunding Year Bonds Obligation Notes Bonds Total 2012 $ 51,050,000 $ 996,300 $ - $ 9,155,000 $ 61,201,300 2011 44,715,000 7,910,800 - 2,790,000 55,415,800 2010 37,530,000 11,575,650 - - 49,105,650 2009 38,485,000 12,373,850 - - 50,858,850 2008 32,790,000 13,158,700 - - 45,948,700 2007 23,950,000 14,032,893 - - 37,982,893 2006 18,740,000 13,560,000 - - 32,300,000 2005 4,045,000 14,250,000 160,000 - 18,455,000 2004 4,456,000 14,785,000 450,000 - 19,691,000 2003 4,844,000 7,600,000 730,000 - 13,174,000 Percentage of Actual Taxable Value of Per Property Capita 2.56% 1,833 2.38% 1,710 2.15% 1,561 2.69% 1,554 2.37% 1,433 1.73% 1,195 1.73% 1,027 1.16% 689 1.37% 744 1.29% 549 NOTE: Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. See Table 8 for the City's property tax value data. City population data can be found in Table 18. 95 CITY OF SCHERTZ, TEXAS DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT (UNAUDITED) TABLE 15 Estimated Estimated Share of Debt Percentage Overlapping Governmental Unit Outstanding Applicable* Debt Debt repaid with property taxes: Alamo CCD $ 542,561,545 0.11% $ 596,818 Bexar County 584,984,786 0.11% 643,483 Bexar County Hospital District 744,835,000 0.11% 819,319 Comal County 47,053,782 2.68% 1,261,041 ComalISD 512,180,991 2.89% 14,802,031 Guadalupe County 16,964,785 19.13% 3,245,363 San Antonio River Authority 34,265,000 0.08% 27,412 Schertz-Cibolo-UniversalISD 272,675,515 50.98% 139,009,977 Subtotal, Overlapping Debt City Governmental Activities Direct Debt TOTAL NET OVERLAPPING DEBT 160,405,444 61,201,300 $ 221,606,744 NOTES: The overlapping debt was received from the Municipal Advisory Council of Texas. Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. 96 CITY OF SCHERTZ, TEXAS DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (UNAUDITED) TABLE 16 Assessed Value, 2011 Tax Roll Debt Limit -Texas statues do not provide a legal debt limit for cities; however, through accepted practice a practical "economic" debt limit is considered to be 10% of the assessed value. $ 2,388,205,570 $ 238,820,557 Amount of Applicable Debt: General Bonded Debt Less Debt Service Fund Balance $ 61,201,300 (227,674) 60,973,626 DEBT MARGIN Total Net Debt as a Percentage of Debt Margin $ 177,846,931 34.28% Fiscal Year 2009 2010 2011 Assessed Value $ 1,891,409,716 $ 1,933,159,122 $ 1,968,808,829 Debt Margin $ 189,140,972 $ 193,315,912 $ 196,880,883 Total Net Debt Applicable to Limit 50,414,481 48,819,435 55,298,550 Total Debt Margin $ 138,726,491 $ 144,496,477 $ 141,582,333 2006 2007 2008 Assessed Value $ 1,397,297,729 $ 1,423,205,878 $ 1,939,016,982 Debt Margin $ 139,729,773 $ 142,320,588 $ 193,901,698 Total Net Debt Applicable to Limit 18,392,261 23,488,500 45,466,903 Total Debt Margin $ 121,337,512 $ 118,832,088 $ 148,434,795 2003 2004 2005 Assessed Value $ 1,024,412,713 $ 1,139,992,157 $ 1,292,156,383 Debt Margin $ 102,441,271 $ 113,999,216 $ 129,215,638 Total Net Debt Applicable to Limit 4,520,834 4,208,707 3,781,530 Total Debt Margin $ 97,920,437 $ 109,790,509 $ 125,434,108 97 CITY OF SCHERTZ, TEXAS PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS (UNAUDITED) TABLE 17 Water Revenue Bonds Utility Less: Net Debt Service Fiscal Service Operating Available Year Charges Expenses Revenue Principal Interest Coverage 2012 $ 17,411,568 $ 14,185,126 $ 3,226,442 $ 785,500 $ 408,135 2.70 2011 16,843,780 13,229,037 3,614,743 577,824 409,801 3.66 2010 14,993,648 12,399,880 2,593,768 615,400 502,629 2.32 2009 14,533,390 9,973,940 4,559,450 685,400 534,634 3.74 2008 13,620,440 9,040,264 4,580,176 665,400 558,569 3.74 2007 13,476,288 7,896,319 5,579,969 645,800 501,397 4.86 2006 11,289,876 6,955,000 4,334,876 390,000 354,965 5.82 2005 9,381,042 6,136,390 3,244,652 380,000 213,290 5.47 2004 7,583,136 5,653,184 1,929,952 365,000 226,795 3.26 2003 8,228,571 5,359,309 2,869,262 285,000 236,913 5.50 NOTE: Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. Operating expenses do not include depreciation, interest, amortization or joint venture expenses. 98 CITY OF SCHERTZ, TEXAS DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (UNAUDITED) Education Per Capita Level In Personal Personal Median Years of School Year Population Income Income Age Schooling Enrollment 2012 33,382 $ 895,739,206 $ 26,833 36.8 15.4 13,016 2011 32,409 850,069,800 26,229 37.8 15.4 12,533 2010 31,465 856,236,720 27,212 34.4 15.4 12,330 2009 32,730 913,919,790 27,923 36.5 13.9 11,700 2008 32,057 839,701,058 26,194 35.1 14.0 10,991 2007 31,788 885,836,196 27,867 36.3 14.0 9,470 2006 31,452 2,543,051,460 80,855 36.1 18.0 8,380 2005 26,780 1,926,713,880 71,946 35.1 15.9 7,712 2004 26,463 1,005,594,000 38,000 32.7 15.0 7,257 2003 24,000 912,000,000 38,000 35.1 14.6 7,245 TABLE 18 Unemployment Rate 5.5% 5.6% 5.7% 5.1% 5.0% 4.0% 4.4% 3.6% 4.1% 2.4% Sources: Population, personal income, median age and education level information provided by City Economic Development Corporation. School enrollment provided by Schertz-Cibolo -Universal City Independent School District. Unemployment data provided by the Texas Workforce Commission. 99 CITY OF SCHERTZ, TEXAS TOP TEN PRINCIPAL EMPLOYERS CURRENT YEAR AND FIVE YEARS AGO (UNAUDITED) TABLE 19 Employer Employees Schertz/Cibolo/LTC ISD 944 Sysco Central Texas 582 Vision Works 542 Wal-Mart Stores 385 H.E.B. Grocery Co. 346 City of Schertz 344 Brandt Engineering 300 Republic Beverage Company 250 Valero Diamon Distribution 170 Federal Express Freight 141 Metro Ambulance LP Manco Lowe's 4,004 2012 2007 Percentage Percentage of Total City of Total City Rank Employment Employees Rank Employment 1 5.86% 1,300 1 9.47% 2 3.62% 3 3.37% 4 2.39% 420 2 3.06% 5 2.15% 220 4 1.60% 6 2.14% 232 3 1.69% 7 1.86% 8 1.55% 100 9 0.73% 9 1.06% 167 5 1.22% 10 0.88% 165 6 1.20% 110 7 0.80% 100 8 0.73% 83 10 0.60% 24.87% 2,897 21.11% Source: City Economic Development Corporation Note: Principal employer information is not available prior to 2007. 100 ,, ~, w) -~ .* .. ~~ ~' ~~ ~~' 1'ORA`rE4 CITY CITY OF SCHERTZ, TEXAS FULL-TIME EQUIVALENT CITY GOVERNMENTAL EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) TABLE 20 Full-Time Equivalent Employees as of September 30, Function 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 General Government City Manager 3 4 4 3 4 7 7 6 6 6 Court Support 3 4 4 4 4 0 0 0 0 0 Municipal Court 2 2 2 3.5 5 6 4 5 5 5 Customer Relations 0 0 0 0 2 4 4 4 3.5 4.5 Planning and Zoning 2 2 2 3 4 5 4 4 4 4 Facility Maintenance 5 6 6 6.5 9 11 10 13.5 14.7 14 City Secretary 2 2 2 2 2 2 2 2 2 2 Media Relations 1 1 1 1 2 3 3 3 3 3 Records Management 0 1 15 2 2 3 3 1 1 1 Schertz Tales 0 0 0 0 0 0 0 2 2 2 Engineer 0 0 0 0 1 3 1 2 2 4 GIS 0 0 0 0 0 0 4 2 2 2 Administration Information Tecynology 2 2 2 3 3 3 3 3 4 5 Human Resources 2 2 2 2 2 3 3 4 4 4 Finance 4 5 5 5 5 6 6 6 6 6 Purchasing 0 0 0 0 1 2 2 5 5 4 Fleet Service 2 2 3 3 3 3 3 3 4 4 Public Safety Police 46.5 50.5 53.5 62 66 69 70 67 69.1 72.5 Fire 24 30 31 32 32 32 32 32 32 32 Inspections 6 6 6 6 8 8 7 6 7 7 Marshal Services 0 0 0 0 0 0 5 5 8 8 Health Animal Control 5.5 5 5 5 5 6 6 6 6 6 Parks and Recreation Parks 5 6 7 7 9 8 8 8 8.5 9 Pools 8 14.5 15 12.5 12.5 0 0 0 0 0 Event Facilities 0 0 0 0 1 1 1 1 2 2 Cultural Library 7 8.5 8.5 9.5 9.5 14 15 14 14.5 15 Public Environment Streets 9 13 12 11 11 13 13 13 14 14 Water and Sewer Business Office 12 11 9 10 9 10 10 10 10 10 Public Works 20 21 21 23 25 20 22 21 21 21 Drainage 0 0 0 0 5 6 7 7 7 7 EMS 27.5 28 32 32.5 33.5 50 54 44 44 45 Economic Development 1 2 2 3 3 3 4 4 3 3 TOTAL 199.5 228.5 250 251.5 278.5 301 313 303.5 314.3 322 Source: City Adopted Budgets 101 CITY OF SCHERTZ, TEXAS OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Function 2003 2004 2005 2006 2007 General Government Building Permits Issued 7,119 3,055 3,434 9,948 5,811 Schertz Tales Number of Magazines printed - - - - 72,000 Police CFS 11,089 11,875 12,770 16,642 25,478 Arrests 670 631 729 526 608 Traffic Violations 9,157 9,652 11,157 10,487 13,461 Accidents 875 1,127 1,169 1,192 1,484 Fire Number of Rescue/Other Responses 929 1,082 1,131 1,216 1,459 Number of Fire Responses 89 90 128 129 103 Number of Inspections 254 301 331 356 302 Number of Training Classes Conducted 186 213 136 136 694 Number of Pre-Plan Inspections EMS Requests for Transport 4,109 4,727 4,966 5,171 6,256 Actual Transports 2,377 2,712 2,767 2,937 3,634 EMT Students - - - - 45 Marshal Service Warrants Issued - - - - - Warrants Cleared - - - - - FoodEstablishmentPermits - - - - - Food Establishment Inspection - - - - - Foster/Adoption Inspections - - - - - Parks Facility Reservations 300 333 294 416 516 Community and Civic Centers Civic Center - - - - - Community Center Rentals - - - - - North Community Center Rentals - - - - - Animal Services Number of Animals Handled - - - - - Number of Adoptions - - - - - Number of Return to Owners - - - - - Number of Transfers - - - - - Library Annual Circulation 225,573 238,602 257,765 276,873 292,909 Library Visits 162,263 171,811 175,976 181,603 179,630 Library Program Attendance 4,328 5,170 5,254 5,064 6,680 Registered Users 12, 779 14, 492 17,101 19,342 19, 595 Water New Connections 439 425 425 532 91 Water Main Breaks 18 26 39 46 29 Total Consumption (thousands of gallons) 10,747,349 10,373,621 11,030,621 13,322,380 11,535,927 Daily Average Consumption (thousands of gallons) 29,854 28,816 30,639 37,007 31,606 Peak Daily Consumption (thousands of gallons) 6,757 6,869 6,939 10,540 5,379 Total Customers 8,045 9,389 9,673 10,118 10,598 Average Use Per Connection 3,565 6,329 5,957 7,060 1,089 Sewer Total Customers 7,261 7,887 8,664 8,990 9,391 Facilities Maintenance Number of Buildings Maintained 8 9 9 12 14 Square Footage 73,505 89,452 89,452 111,642 127,589 Source: Various City Departments. Prior year information for some functions is not available I02 Fiscal Year 2008 2009 2010 2011 2012 2,869 5,181 4,806 4,950 2,643 10 8, 0 0 0 120, 0 0 0 144, 0 0 0 16 8, 0 0 0 16 8, 0 0 0 37,829 36,319 37,269 26,205 19,434 719 873 790 762 666 18,820 20,452 19,259 13,231 20,881 1,475 1,491 1,606 1,575 1,665 978 1,536 1,671 1,657 1,799 141 135 76 110 74 461 447 425 616 429 595 264 107 142 168 452 642 536 714 6,619 7,061 7,281 7,443 7,545 4,193 4,341 4,575 4,801 4,766 73 80 80 85 79 - 5,974 5,444 4,141 2,888 - 3,836 4,023 3,985 4,118 - 134 129 118 123 - 209 202 244 180 - 34 27 18 14 983 671 719 237 234 - 484 594 354 325 - - 635 666 816 - - - 241 307 - 1,804 2,021 1,802 1,463 - 255 249 257 291 - 252 279 313 149 - 415 451 300 312 278,826 263,131 392,528 414,074 410,312 175,435 188,118 257,235 254,934 256,349 7,444 10,499 10,610 13,767 16,03 5 23,327 20,360 24,628 28,589 30,475 1,474 446 509 439 271 72 72 25 76 52 14,460,239 15,115,679 12,313,766 16,763,239 16,131,415 39,617 38,550 33,736 45,927 44,196 5,804 7,520 7,040 11,000 9,290 10,900 10,198 10,13 4 12,234 12, 5 57 6,378 6,913 5,054 5,725 5,517 6,378 9,974 9,499 10,907 10,988 16 19 19 19 19 13 5, 091 166, 5 91 166, 5 91 166, 5 91 166, 5 91 TABLE 21 103 CITY OF SCHERTZ, TEXAS CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Function 2003 Police Stations 1 Patrol Units 21 Fire Stations 1 Training Facility 1 Fire Vehicles 11 Marshal Service Vehicles - Streets Streeets, paved (miles) 102 Streets, unpaved (miles) 9 Sidewalks (miles) 17 Parks and Recreation Parks 7 Playground 20 Swimming Pools 1 Baby Pools 1 Baseball/Softball Diamonds 12 Soccer Fields - Community Centers 1 Animal Control Control Vehicle 2 Library Facility 1 Volumes in Collection 41,275 Water Number of Reservoirs - Number of Pump Stations - Water Mains (Miles) 155 Sewer Sanitary Sewers (Miles) 54 Storm Sewers (Miles) 4 Facilities Maintenance Vehicles 4 Generators 2 Source: Various City Departments 2004 2005 2006 2007 1 1 1 1 26 27 34 33 1 2 2 2 1 1 1 1 11 11 12 12 102 102 102 107 9 9 9 9 17 21 32 32 7 7 7 7 20 20 20 20 1 1 1 1 1 1 1 1 12 12 12 12 1 1 1 1 2 2 2 3 1 1 1 1 46,961 49,289 52,818 56,282 1 1 1 - 1 1 1 2 159 166 171 177 54 54 54 59 4 4 4 6 4 4 4 4 2 3 3 3 104 Fiscal Year 2008 2009 2010 2011 2012 1 1 1 1 1 33 38 40 42 42 2 2 2 2 2 1 - - - - 14 13 13 13 13 - 5 7 8 8 122 124 125 132 134 7 7 7 5 5 50 50 50 100 101 7 11 12 17 17 20 20 19 15 15 2 2 2 2 2 2 2 2 2 2 12 12 12 9 9 - 12 12 12 12 2 2 4 4 4 3 3 3 3 3 1 1 1 1 1 60,650 64,400 71,929 73,904 81,468 - 5 5 5 5 182 188 190 192 192 71 78 78 84 85 8 9 9 10 10 4 5 5 5 4 3 3 3 3 3 TABLE 22 105 ,, ~, w) -~ .* .. ~~ ~' ~~ ~~' 1'ORA`rE4 CITY COMPLIANCE SECTION 106 ~- ~i _ P 1 .. #' ~ i __ INDEPENDENT AUDITOR'S REPORT 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 A UDITING STANDARDS To the City Council and management City of Schertz We have audited the financial statements of the City of Schertz, as of and for the year ended September 30, 2012 and have issued our report thereon dated February 11, 2013. 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 Management of the City of Schertz is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the City of Schertz's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City of Schertz's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Schertz's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City of Schertz's financial statements will not be prevented or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 107 Combliance and Other Matters As part of obtaining reasonable assurance about whether the City of Schertz's 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 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 or other matters that are required to be reported under GovernmentAuditing Standards. We noted certain matters that we reported to management of the City of Schertz in a separate letter dated February 11, 2013. This report is intended for the information and use of management, City Council, Audit Committee, State and others within the organization and is not intended to, and should not, be used by anyone other than these specific parties. a Armstrong, Vaughan & Associates, P.C. February 11, 2013 108 ,, ~, w) -~ .* .. ~~ ~' ~~ ~~' 1'ORA`rE4 CITY