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CAFR FY 2002-03COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2003 REP U ca� - 35�/I�Y1( R 10 TIC/ CITY OF SCHERTZ, TEXAS CITY OF SCHERTZ, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2003 OFFICIALS ISSUING REPORT Mark Marquez City Manager Juan Santoya Director of Finance (This Page Intentionally Left Blank) CONTENTS INTRODUCTORY SECTION PAGE NUMBER Letter of Transmittal ix City Officials xv Organizational Chart xvii 2002 Certificate of Achievement xviii FINANCIAL SECTION Independent Auditor's Report 3 Management Discussion and Analysis 7 Basic Financial Statements Statement of Net Assets 16 Statement of Activities 19 Balance Sheet — Governmental Funds 20 Reconciliation of Balance Sheet — Governmental Funds to Statement of Net Assets 21 Statement of Revenues, Expenditures, and Changes in Fund Balances — Governmental Funds 22 Reconciliation of Change in Fund Balance — Governmental Funds to Change in Net Assets — Governmental Activities 23 Statement of Net Assets — All Proprietary Funds 24 Statement of Revenues, Expenses, and Changes In Fund Net Assets — Proprietary Funds 26 Statement of Cash Flows — Proprietary Funds 27 Notes to Basic Financial Statements 29 Required Supplementary Information Schedule of Revenues, Expenditures, and Change in Fund Balances — Budget and Actual — General Fund 48 Notes to Required Supplementary Information 51 CONTENTS PAGE TABLE NUMBER Combining And Individual Fund Statements And Schedules Nonmajor Governmental Funds (Special Revenue Funds) Combining Balance Sheet 56 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 58 Park Special Revenue Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual 60 Recycling Special Revenue Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual 61 Tax Increment Financing Special Revenue Fund — Schedule of Revenues, Expenditures, and Changes in Fund Balance — Budget to Actual 62 Hotel Occupancy Tax Special Revenue Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual 63 Debt Service Fund - Schedule of Revenues, Expenditures and Changes in Fund Balances — Budget to Actual 64 Discretely Presented Component Units Combining Balance Sheet 66 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances 67 STATISTICAL SECTION Government -Wide Expenses by Function 1 70 Government -Wide Revenues 2 71 General Governmental Expenditures by Function, Last Ten Fiscal Years 3 72 General Government Revenues by Source, Last Ten Fiscal Years 4 73 Property Tax Levies and Collections, Last Ten Fiscal Years 5 75 Assessed and Taxable Value of Property, Last Ten Fiscal Years 6 76 li CONTENTS PAGE TABLE NUMBER Property Tax Rates - All Direct and Overlapping Governments, Last Ten Fiscal Years 7 77 Ratio of Net General Obligation Bonded Debt to Assessed Value and Net General Bonded Debt Per Capita 8 78 Computation of Direct and Overlapping Debt 9 79 Legal Debt Margin 10 80 Ratio of Annual Debt Service Expenditures for General Obligation Bonded Debt to Total General Expenditures - Last Ten Fiscal Years 11 81 Revenue Bond Coverage - Utility System Bonds, Last Ten Fiscal Years 12 83 Waterworks and Sewer System Fund Revenue Bond Requirements 13 84 Demographic Statistics - Last Ten Fiscal Years 14 85 Property Value and Construction - Last Ten Fiscal Years 15 87 Principal Taxpayers 16 88 Miscellaneous Statistics 17 89 SINGLE AUDIT SECTION Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 93 Report on Compliance with Requirements Applicable to each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A -133 97 Schedule of Expenditures of Federal Awards 100 Notes to Schedule of Expenditures of Federal Awards 101 Schedule of Findings and Questioned Costs 102 UT (This Page Intentionally Left Blank) vi INTRODUCTORY SECTION vii (This Page Intentionally Left Blank) viii 26 April 2004 1400 SCHERTZ PARKWAY P.O. DRAWER I MARK MARO,UEZ SCHERTZ, TEXAS 78154- 0890 (210) 658 -7477 CITY MANAGER FAX (210) 659 -3204 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 (GAAP) and audited in accordance with generally accepted auditing standards 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, 2003. 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 GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Schertz comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City of Schertz's financial statements have been audited by Thompson, Williams, Biediger, Kastor and Young, L.C., a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Schertz for the fiscal year ended September 30, 2003, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor ix (This Page Intentionally Left Blank) 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, 2003, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the City of Schertz was part of a broader, federally mandated "Single Audit" designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD &A). This letter of transmittal is designed to complement MD &A and should be read in conjunction with it. The City of Schertz's MD &A can be found immediately following the report of the independent auditors. Profile of the Government The City of Schertz, incorporated in 1958, is located in the central part of Texas, which is considered to be a top growth area in the state, and one of the top growth areas in the country. The City of Schertz currently occupies a land area of 28 square miles and serves a population of 24,000. 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 a non - partisan basis. Council members serve two -year staggered terms, with two council members elected every two years. The mayor is elected to serve a two -year term. The mayor and all five council members are elected at large. Xi The City of Schertz provides a full range of services, including police and fire protection, the construction and maintenance of streets, recreational activities, cultural events, water and sewer services and EMS services. The annual budget serves as the foundation for the City of Schertz's financial planning and control. All departments of the City of Schertz are required to submit requests for appropriation to the City Manager in June of each year. The City Manager uses these requests as the starting point for developing a proposed budget. The City Manager then presents this proposed budget to the council for review prior to 1 August. The council then holds public hearings on the proposed budget and to adopt a final budget by no later than 30 September, the close of the City of Schertz's fiscal year. The appropriated budget is prepared by department (e.g. police). Department heads may make transfers of appropriations within a department. Transfers of appropriations between departments, however, require a special approval of the City Council. Budget to actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on pages 48 -50 as part of the required supplementary information. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City of Schertz operates. Local economy. The City of Schertz currently enjoys a favorable economic environment and local indicators point to continued stability. The region has a growing manufacturing and industrial base that adds to the relative stability of the unemployment rate. Major industries with headquarters or divisions located within the government's boundaries or in close proximity include Verizon, Sprint, Nabisco, Block Distributing, and Wa1Mart. The region has a labor force of approximately 750,000 which is anticipated to grow at a rate of 2.3 percent each year for the next several years. Meanwhile, there continues to be a trend toward steady residential growth. Long -term financial planning. The City Council plans to explore the possibility of adding new office and recreational facilities. Preliminary estimates point to a project timetable of one to three years with a projected total cost to the City of Schertz of $7,600,000. xn Cash management policies and practices. Cash temporarily idle during the year was invested through State local investment pools. These funds are essentially liquid. The average yield on investments is about 1 percent. Active involvement in investment vehicles was limited due to extremely low interest rates. The rate of return was simply not sufficient to justify the management expense. Risk Management. During 2003, the City continued a risk management program for worker's compensation. Various control techniques, including employee accident prevention training, have been implemented during the year to minimize accident - related losses. Third -party coverage is currently maintained for individual worker's compensation claims and all other potential losses. Additional information on the City of Schertz's risk management activity can be found in the notes to the financial statements. Pension benefits. The City of Schertz sponsors an agent multiple - employer defined benefit pension plan for its employees. Each year, an independent actuary engaged by the pension plan calculates the amount of the annual contribution the City of Schertz must make to the pension plan to ensure that the plan will be able to fully meet its obligations to retired employees on a timely basis. As a matter of policy, the City of Schertz fully funds each year's annual required contribution to the pension plan as determined by the actuary. The remaining unfunded amount is being systematically funded as part of the annual required contribution calculated by the actuary. Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Schertz for its comprehensive annual financial report (CAFR) for the fiscal year ended 30 September 2002. This was the 15th consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized CAFR. This report satisfied both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current CAFR 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. Their task was xiii compounded in difficulty by several factors; two City Managers, a new Finance Director, a different auditor, a new data system and GASB -34. The new data system is much improved but has taken time to adjust from the old system. GASB -34 was implemented this year and added numerous new reports and measures financials differently. This will take some getting used to. 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, Mark Marquez City Manager Juan Santo Finance Director xiv MAYOR CITY COUNCIL CITY MANAGER DIRECTOR OF FINANCE CITY OF SCHERTZ, TEXAS CITY OFFICIALS INDEPENDENT AUDITORS HONORABLE HAL BALDWIN KEN GREENWALD MAYOR PRO -TEM REGINNA AGEE CARL DOUGLAS STEVE SIMONSON TONY WILENCHIK MANUEL (MARK) MARQUEZ Thompson, Williams, Biediger, Kastor & Young, L.C. San Antonio, Texas JUAN SANTOYA xv Cl) O O N V O w 0 Lol t� 0 k � W Cd V k Cd a Cd 0 4-J 0 O Cd U � � w 4J � U U aA b o 0 k � V •� NA k Cd a Cd 0 4-J 0 O Cd U � 4J 4J � U b o 0 .J .., V •� • O k Cd a •O :> o �U 4-J �2 .V 0 4J V V •� • O 0 U Cd a •O :> Cd 4-J v WA Cd 4j w W A Cd o° a a V-4 V o �4 Cd 4-J Cd •� aA �U a a) V4 Cd a ,a �w� a,Q Boa wA QUO 4j w W A Cd o° a a +1 Cd .� Cd •� a a) V4 aC/I a +1 Cd .� Cd •� O a a� cd 4J o 0 wA W M\ W a� mO cr- U J Z 0 N_ Z Q 0 �e Certificate of Achievement for Excellence in Financial Reporting Presented to City of Schertz, Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2002 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. .,�tGE QFpjC ti OF TN �p OW µOTAlE3 H `""M" N President cox FOaari as SJEAi CMICASO *1�oe44eA� Executive Director xvii (This Page Intentionally Left Blank) xviii FINANCIAL SECTION (This Page Intentionally Left Blank) NORTH TOWER 800 N.W. LOOP 410, SUITE 50ON SAN ANTONIO. TEXAS 78216 -5611 210/541 -2581 FAX 210/341 -2588 cpas @twbky.com To the Honorable Mayor and Members of the City Council City of Schertz, Texas Thompson, Williams, Biediger, Kastor You g, L.C. Independent Auditor's Report CERTIFIED PUBLIC ACCOUNTANTS MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 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, 2003, which collectively comprise the City's basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the City of Schertz, Texas, management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Schertz, Texas, as of September 30, 2003, 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. As described in Note 1, the City has implemented a new financial reporting model, as required by the provisions of GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and local Governments, as of September 30, 2003. In accordance with Government Auditing Standards, we have also issued a report dated March 12, 2004 on our consideration of City of Schertz, Texas', internal control over financial reporting PAUL E. WILLIAMS, C.PA / JAMES L BIEDIGER, JR.. C.P.A. / C. TED }WSTOR. C.P.A. / CHARLIE E. YOUNG, JR., C.P.A. H. LEE SCHWARTZMAN, C.P.A. / F. GLENN CRAVEY, C.P.A. / FRED J. TIMMONS, C.PA. / JOHN W. GREEN, C.P.A. R. LARRY THOMPSON, C.P.A. (RETIRED) 3 (This Page Intentionally Left Blank) and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The management's discussion and analysis and budgetary comparison information on pages 7 through 14 and 48 through 50, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Schertz, Texas, basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, other schedules, and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations, and is also not a required part of the basic financial statements of the City of Schertz, Texas. The combining and individual nonmajor fund financial statements, other schedules, and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we express no opinion on them. i Ali FrA IOWA / , / , VIV, i Certified Public Accountants San Antonio, Texas March 12, 2004 5 (This Page Intentionally Left Blank) MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Schertz, we offer readers of the City of Schertz's financial statements this narrative overview and analysis of the financial activities of the City of Schertz for the fiscal year ended September 30, 2003. 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 $47,804,539 (net assets). Of this amount, $12,742,344 (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 $3,951,244. Approximately one half of this increase is attributable to a one -time infusion of resources from a federal grant. As of the close of the current fiscal year, the City of Schertz's governmental funds reported combined ending fund balances of $7,868,548, an increase of $1,903,648 in comparison with the prior year. At the end of the current fiscal year, unreserved fund balances for the general fund was $4,188,407, or 44 percent of total general fund expenditures, including capital outlay. The City of Schertz's total debt increased by $3,360,000 (13.4 percent) during the current fiscal year due to the issuance of certificates of obligation. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Schertz's basic financial statements. The City of Schertz'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 of Schertz's finances, in a manner similar to a private- sector business. The statement of net assets presents information on all of the City of Schertz's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Schertz is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused vacation leave). 7 Both of the government -wide financial statements distinguish functions of the City of Schertz that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the City of Schertz include general government, public safety, streets and parks, health, and culture and recreation. The business -type activities of the City of Schertz include a Water and Sewer Department and an Emergency Medical Services Department. The government -wide financial statements include not only the City of Schertz itself (known as the primary government). but also legally separate component units for which the City is financially accountable. Financial information for these component units is reported separately from the primary government. The government -wide financial statements can be found on pages 16 -19 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Schertz, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. The City of Schertz can be divided into two categories: governmental funds and proprietary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near -term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near -term financing requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long -term impact of the government's near -term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Schertz maintains nine individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, the debt service fund, and the capital projects fund, all of which are considered to be major funds. Data from the other six governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non - major governmental funds is provided in the form of combining statements elsewhere in this report. The basic governmental fund financial statements can be found on pages 20 -23 of this report. Proprietary funds. The City of Schertz maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business -type activities in the government - wide financial statements. The City of Schertz uses enterprise funds to account for its water and sewer department and for its emergency medical services department. 9 Proprietary funds provide the same type of information as the government -wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water and sewer department and for the emergency medical services department, both of which are considered to be major funds of the City of Schertz. The basic proprietary fund financial statements can be found on 24 -28 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The notes to the financial statements can be found on pages 30 -45 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of Schertz's general fund budgetary schedule. The City of Schertz adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with this budget. Required supplementary information can be found on page 48 -51 of this report. The combining statements referred to earlier in connection with non -major governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 56 -67 of this report. Government -wide Financial Analysis This is the first year the City has implemented GASB Statement No. 34, therefore condensed financial data is only provided for the current fiscal period. A comparative analysis of government -wide data will be presented in future years when the information is available. 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 $47,804,539 at the close of the most recent fiscal year. By far the largest portion of the City of Schertz's total net assets (69.4 percent) reflects its investment in capital assets (e.g. land, buildings, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding. The City of Schertz uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Schertz's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The remainder of this page is left blank intentionally. 9 CITY OF SCHERTZ'S NET ASSETS Current and other assets Capital Assets Total assets Long -term liabilities outstanding Other liabilities Total liabilities Net assets: GOVERNMENTAL BUSINESS -TYPE ACTIVITIES ACTIVITIES TOTAL 2003 2003 2003 $ 9,113,701 $ 7,568,651 $ 16,682,352 24,554,173 26,913,075 51,467,248 33,667,874 34,481,726 68,149,600 12,220,941 4,773,786 16, 994, 727 2,127,386 594,014 2,721,400 14,348,327 5,367,800 19,716,127 Invested in capital assets, net of related debt 11,380,173 21,806,626 33,186,799 Restricted 491,313 1,384,083 1,875,396 Unrestricted 7,448,061 5,294,283 12,742,344 Total net assets $ 19,319,547 $ 28,484,992 $ 47,804,539 Table A -1 An additional portion of the City of Schertz's total net assets (4.0 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets 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. Governmental activities. Property taxes were not increased this fiscal year. Water and sewer rates were not raised this fiscal year. The remainder of this page is left blank intentionally. 10 CITY OF SCHERTZ'S CHANGES IN NET ASSETS GOVERNMENTAL BUSINESS -TYPE ACTIVITY ACTIVITIES 2003 2003 Revenues: Program revenues: Charges for service Operating grants and Contributions Capital grants and Contributions General revenues: Property taxes Othertaxes S 2,802,949 $ 2,788,821 3,984,262 2,758,612 Unrestricted investment earnings 93,690 Other 16,028 Total revenues 12,444,362 Expenses: 15,090,701 General government 2,630,450 Public safety 3,705,722 Streets and Parks 1,182,993 Health 156,927 Culture and recreation 451,215 Interest and other Fees 499,011 Water and Sewer - EMS - Total expenses 8,626,318 Increase in net assets before transfers 3,818,044 Transfers 410,802 Change in net assets 4,228,846 Net assets — Beginning 15,090,701 Restatement of Net Assets - Net assets — Ending $ 19,319,547 $ Table A -2 TOTAL 10,149,425 $ 12,952,374 - 2,788,821 279,913 279,913 94,731 158,372 10,682,441 8,300,590 2,248,651 10, 549, 241 3,984,262 2,758,612 188,421 174,400 23,126,803 2,630,450 3,705,722 1,182,993 156,927 451,215 499,011 8,300, 590 2,248,651 19,175,559 133,200 3,951,244 (410,802) - (277,602) 3,951,244 19,696,385 34,787,086 9,066,209 9,066,209 28,484,992 $ 47,804,539 11 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 of Schertz'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 of Schertz'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 of Schertz's governmental funds reported combined ending fund balances of $7,868,548. Of this total amount, $4,853,688 constitutes unreserved fund balance, which is available for spending at the government's discretion. The remainder of fund balances is reserved to indicate that it is not available for new spending because it has already been committed. The general fund is the chief operating fund of the City of Schertz. At the end of the current fiscal year, unreserved fund balance of the general fund was $4,188,047, while total fund balance reached $5,499,836. As a measure of the general fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 44 percent of total general fund expenditures, including capital, while total fund balance represents 57 percent of that same amount. The debt service fund has a total fund balance of $323,166, all of which is reserved for the payment of debt service. The net increase in fund balance during the current year in the debt service fund was minimal. Proprietary funds. The City of Schertz'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 $4,549,870 and those for the Schertz EMS fund amounted to $744,413. General Fund Budgetary Highlights Differences between the original budget and the final amended budget and the final budget and actual expenditures were relatively minor and can be briefly summarized as follows: • Increase in budget for sale of certificates of obligations in the amount of $3,360,000. • The shortfall in the city manager budget reflects a contractual obligation to the prior city manager. • The shortfall in information technology results from the application of funds from a prior year for the upgrade of computer systems. • The human resources shortfall was due to an unexpected increase in unemployment compensation charges. • The fleet services shortfall was due to an unanticipated increase in fleet maintenance activity. During the year, revenues exceeded budgetary estimates and expenditures were less than budgetary estimates, thus eliminating the need to draw upon existing fund balance. 12 Capital Asset and Debt Administration Capital assets. The City of Schertz's investment in capital assets for its governmental and business type activities as of September 30, 2003, amounts to $51,467,248 (net of accumulated depreciation). Major capital asset events during the current fiscal year included the following: Complete refurbishing of the municipal pool. The existing pool is over 25 years old. The basic structure was sound and the decision was made to completely replace the liner, pumping and filtration equipment, as well as ancillary equipment. The City was awarded a $4,000,000 grant to construct a drainage channel as a result of the 1998 flood. The City's share of that amount was $1,000,000. Completion of the channel would remove 90 percent of the floodplain in the City. In conjunction with local businesses, a Public Improvement District (PID) was created. The PID is designed to correct a major safety hazard at FM 3009 and IH —35. Funds were allocated to build a new fire sub - station on IH -35 to better serve citizens in the northern section of the City as well as the growing Tri- County Industrial Park. Two new ambulances were purchased for the EMS department. In addition, during the current fiscal year, the City noted certain contributions from developers of water and sewer lines had not been capitalized. Additional information can be found in Note 12. CITY OF SCHERTZ'S CAPITAL ASSETS (Net of depreciation) Table A -3 Additional information on the City of Schertz's capital assets can be found in Note 4 on pages 37 -38 of this report. Long -Term debt. At the end of the current fiscal year, the City of Schertz had total bonded debt outstanding of $18,280,449. Of this amount, $13,346,000 comprises debt backed by the full faith and credit of the government. The remainder of the City of Schertz's debt represents bonds secured solely by specified revenue sources (i.e., revenue bonds). 13 GOVERNMENTAL BUSINESS -TYPE ACTIVITIES ACTIVITIES TOTAL 2003 2003 Land $ 3,521,509 $ 301,170 $ 3,822,679 Buildings and Improvements 5,890,512 24,094,438 29,984,950 Machinery and equipment 1,318,364 844,072 2,162,436 Infrastructure 10,045,705 - 10,045,705 Construction in progress 3,778,083 1,673,395 5,451,478 Total $ 24.554,173 26.913.075 51.467.248 Table A -3 Additional information on the City of Schertz's capital assets can be found in Note 4 on pages 37 -38 of this report. Long -Term debt. At the end of the current fiscal year, the City of Schertz had total bonded debt outstanding of $18,280,449. Of this amount, $13,346,000 comprises debt backed by the full faith and credit of the government. The remainder of the City of Schertz's debt represents bonds secured solely by specified revenue sources (i.e., revenue bonds). 13 General Obligation bonds Certificates of Obligation Tax Notes Revenue bonds Other Debt Total CITY OF SCHERTZ'S OUTSTANDING DEBT General Obligation and Revenue Bonds GOVERNMENTAL ACTIVITIES 2003 $ 4,844,000 7,600,000 730,000 BUSINESS -TYPE ACTIVITIES TOTAL 2003 2003 $ 126,000 $ 4,970,000 - 7,600,000 - 730,000 4,934,449 4,934,449 46,000 46,000 13.174.000 5.106.449 18.280.449 Table A -4 The City of Schertz's total debt increased by 13.4 percent during the current fiscal year. The key factor in the increase is the City of Schertz issued certificates of obligation bonds in the amount of $3,360,00 for major the capital projects such as the capital projects noted above. The City of Schertz and its water and sewer department both maintain a "AA" rating from Standard and Poor's and Fitch and a "AA" rating from Moody's for general obligation debt. The revenue bonds of the water and sewer department have been rated "A" by all three of these rating agencies. State statues limit the amount of general obligation debt a governmental entity may issue to 10 percent of its total assessed valuation. The current debt limitation for the City of Schertz is approximately $116,442,712 which is significantly in excess of the City of Schertz's outstanding general obligation debt. Additional information on the City of Schertz's long -term debt can be found in note 7 on pages 40 -42 of this report. Economic Factors and Next Year's Budgets and Rates During the current fiscal year, unreserved fund balance in the general fund increased to $4,118,407. The City of Schertz has not appropriated any of this amount for spending in the 2004 fiscal year budget. It is intended that the available fund balance will avoid the need to raise taxes or charges during the 2004 fiscal year. Water and sewer rates are expected to remain stable. A portion of the debt service fund balance will be used to offset the debt service ad valorem rate. Requests for Information This financial report is designed to provide a general overview of the City of Schertz'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. 14 BASIC FINANCIAL STATEMENTS 15 ASSETS CURRENT ASSETS Cash and Cash Equivalents Receivables: Delinquent Taxes, Net of Allowance for Uncollectible Accounts Accounts and Other Inventories Prepaids Deferred Charges Cash and Cash Equivalents - Restricted Internal Balances Total Current Assets NONCURRENT ASSETS Deferred Charges Capital Assets: Land Buildings and Improvements Machinery, Equipment, and Vehicles Infrastructure Construction in Progress Accumulated Depreciation Total Capital Assets Total Noncurrent Assets TOTAL ASSETS CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS SEPTEMBER 30, 2003 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS -TYPE COMPONENT ACTIVITIES ACTIVITIES TOTAL UNITS $6,518,055 $ 954,746 $ 7,472,801 123,103 - 123,103 2,365,011 2,497,654 4,862,665 8,128 118,233 126,361 60,825 - 60,825 3,090 16,713 19,803 - 3,873,810 3,873,810 (6,148) 6,148 - 9,072,064 7,467,304 16,539,368 41,637 101,347 142,984 3,521,509 301,170 3,822,679 7,790,011 33,298,971 41,088,982 1,750,807 14,017,031 3,778,083 (6,303, 268) 24,554,173 24,595,810 33,667,874 2,271,183 1,673,395 (10, 631,644) 26,913,075 27,014,422 34,481,726 4,021,990 14,017,031 5,451,478 (16,934,912) 51,467,248 51,610,232 68,149,600 $835,540 61,805 897,345 897,345 (The Accompanying Notes are an Integral Part of these Financial Statements) 16 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS SEPTEMBER 30, 2003 (The Accompanying Notes are an Integral Part of these Financial Statements) 17 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS -TYPE COMPONENT ACTIVITIES ACTIVITIES TOTAL UNITS LIABILITIES CURRENT LIABILITIES Accounts Payable and Accrued Liabilities $ 475,445 $ 567,236 $ 1,042,681 $ 2,782 Compensated Absences and Salary Reserves 93,313 26,778 120,091 - Accrued Interest Payable 84,000 - 84,000 - Contract Retainage 241,628 - 241,628 - Current Portion of Long -Term Debt 1,233,000 - 1,233,000 - Total Current Liabilities 2,127,386 594,014 2,721,400 2,782 CURRENT LIABILITIES PAYABLE FROM RESTRICTED ASSETS Customer Deposits - 194,095 194,095 - Accrued Interest Payable - 21,841 21,841 - Current Portion of Long -Term Debt - 412,998 412,998 - Total Current Liabilities Payable from Restricted Assets - 628,934 628,934 - NONCURRENT LIABILITIES Long -Term Debt 11,941,000 4,693,451 16,634,451 - Compensated Absences and Salary Reserves 279,941 80,335 360,276 - Total Noncurrent Liabilities 12,220,941 4,773,786 16,994,727 - TOTAL LIABILITIES 14,348,327 5,996,734 20,345,061 2,782 NET ASSETS Invested in Capital Assets, Net Of Related Debt 1 1,380,173 21,806,626 33,186,799 - Restricted For: Debt Service 323,166 1,384,083 1,707,249 - Tree Mitigation 168,147 - 168,147 - Unrestricted 7,448,061 5,294,283 12,742,344 894,563 TOTAL NET ASSETS $19,319,547 $28,484,992 47,804,539 $ 894,563 (The Accompanying Notes are an Integral Part of these Financial Statements) 17 (This Page Intentionally Left Blank) 18 r c N 0) CO 0n N U C m C_ Ll. 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Cn N L O CO CL R CA C C m (O y a� O Z CA c C w a O U U Q (D s CITY OF SCHERTZ, TEXAS BALANCE SHEET - GOVERNMENTAL FUNDS SEPTEMBER 30, 2003 (The Accompanying Notes are an Integral Part of these Financial Statements) 20 MAJOR FUNDS OTHER TOTAL DEBT CAPITAL GOVERNMENTAL GOVERNMENTAL GENERAL SERVICE PROJECTS FUNDS FUNDS ASSETS Cash and Cash Equivalents $5,186,445 $324,915 $ 173,267 $833,428 $6,518,055 Receivables: Taxes, Net 101,094 22,009 - - 123,103 Accounts and Other 1,116,656 - 1,248,355 - 2,365,011 Inventory 8,128 - - - 8,128 Prepaids 60,825 - - - 60,825 TOTAL ASSETS $6,473,148 $346,924 $1,421,622 $833,428 $9,075,122 LIABILITIES Vouchers Payable $ 351,172 $ 1,749 $ 3,221 $ - $ 356,142 Accrued Salaries and Benefits 119,303 - - - 119,303 Due to Other Funds 6,148 - - - 6,148 Deferred Revenue 461,344 22,009 - - 483,353 Retainage Payable 35,345 - 206,283 - 241,628 Total Liabilities 973,312 23,758 209,504 - 1,206,574 FUND BALANCES Reserved for: Debt Service - 323,166 - - 323,166 Tree Mitigation - - - 168,147 168,147 Unreserved - Designated for: Capital Improvement 1,31 1,429 - 1,212,1 18 - 2,523,547 Unreserved, Reported in: General Fund 4,188,407 - - - 4,188,407 Special Revenue Funds - - - 665,281 665,281 Total Fund Balances 5,499,836 323,166 1,212,1 18 833,428 7,868,548 TOTAL LIABILITIES AND FUND BALANCES $6,473,148 $346,924 $1,421,622 $833,428 $9,075,122 (The Accompanying Notes are an Integral Part of these Financial Statements) 20 CITY OF SCHERTZ, TEXAS RECONCILIATION OF BALANCE SHEET GOVERNMENTAL FUNDS TO STATEMENT OF NET ASSETS SEPTEMBER 30. 2003 TOTAL FUND BALANCES - GOVERNMENTAL FUNDS $ 7,868,548 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. 24,554,173 Certain receivables are not available, and therefore, are deferred in governmental funds. 360,250 Certain receivables will be collected this year, but are not available soon enough to pay for the current period's expenditures, and therefore are deferred in the funds. 123,103 Long -term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds: Bonds Payable $ (13,174,000) Deferred Charge for Issuance Cost (to be Amortized as Interest Expense) 44,727 Accrued Interest Payable (84,000) Compensated Absences and Salary Reserves (373,254) (13,586,527) TOTAL NET ASSETS — GOVERNMENTAL ACTIVITIES $19,319,547 (The Accompanying Notes are an Integral Part of these Financial Statements) 21 CITY OF SCHERTZ, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTALFUNDS YEAR ENDED SEPTEMBER 30, 2003 REVENUES Taxes Licenses and Permits Charges for Services Fines and Forfeitures Grants Other Revenue Total Revenues EXPENDITURES Current General Government Public Safety Streets and Parks Health Culture and Recreation Capital Outlay Debt Service Principal Interest and Fiscal Charges Bond Issue Cost Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) MAJOR FUNDS Proceeds from Bond Issue 3,360,000 Transfers In - Transfers Out - OTHER TOTAL Sources (Uses) DEBT CAPITAL GOVERNMENTAL GOVERNMENTAL GENERAL SERVICE PROJECTS FUNDS FUNDS ENDING $5,499,836 $5,382,925 $1,311,228 $ - $ 53,177 $ 6,747,330 841,780 - - 99,735 941,515 944,506 - - - 944,506 646,613 - - - 646,613 751,905 - 1,248,355 3,483 2,003,743 171,918 4,030 14,005 97,912 287,865 8,739,647 1,315,258 1,262,360 254,307 11,571,572 2,428,293 - 66,541 59,841 2,554,675 3,530,470 - - - 3,530,470 675,687 - - - 675,687 156,927 - - - 156,927 415,834 - - - 415,834 2,331,829 - 2,390,881 44,985 4,767,695 - 783,000 - - 783,000 - 508,166 - - 508,166 46,272 - - - 46,272 9,585,312 1,291,166 2,457,422 104,826 13,438,726 (845,665) 24,092 (1,195,062) 149,481 (1,867,154) (USES) Proceeds from Bond Issue 3,360,000 Transfers In - Transfers Out - Total Other Financing Sources (Uses) 3,360,000 Net Change in Fund Balances 2,514,335 FUND BALANCES - BEGINNING 2,985,501 FUND BALANCES - ENDING $5,499,836 - - - 3,360,000 - 467,502 - 467,502 - (56,700) (56,700) 467,502 (56,700) 3,770,802 24,092 (727,560) 92,781 1,903,648 299,074 1,939,678 740,647 5,964,900 $323.166 1.212.118 $833,428 $ 7.868.548 (The Accompanying Notes are an Integral Part of these Financial Statements) 22 CITY OF SCHERTZ, TEXAS RECONCILIATION OF CHANGE IN FUND BALANCE - GOVERNMENTAL FUNDS TO CHANGE IN NET ASSETS - GOVERNMENTAL ACTIVITIES SEPTEMBER 30, 2003 NET CHANGE IN FUND BALANCES — TOTAL GOVERNMENTAL FUNDS Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. $ 1,903,648 Capital Outlay $4,767,695 Depreciation Expense (801,350) 3,966,345 Revenues and contributed assets in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 872,790 Certain long -term liabilities are accrued at the government -wide level but not at the fund level. This is the current year change in those liabilities, reported as expense in the statement of activities. 63,063 Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long -term liabilities in the statement of net assets. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long -term liabilities in the statement of net assets. Issuance of Certificates of Obligations $(3,360,000) Principal Repayments: General Obligation Bonds 378,000 Certificates of Obligations 135,000 Tax Notes 270,000 (2,577,000) CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES 4,228,846 (The Accompanying Notes are an Integral Part of these Financial Statements) 23 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2003 BUSINESS -TYPE ACTIVITIES - ENTERPRISE FUNDS NONCURRENT ASSETS Deferred Charges WATER AND - 101,347 Capital Assets: SEWER SCHERTZ Land SYSTEM EMS TOTAL ASSETS 33,298,971 - 33,298,971 CURRENT ASSETS Cash and Cash Equivalents $ 954,746 $ - $ 954,746 Accounts Receivable 1,448,891 1,048,763 2,497,654 Due from Other Funds 254,817 - 254,817 Inventory 96,082 22,151 118,233 Cash and Cash Equivalents — 26,607,263 305,812 26,913,075 Restricted Assets 3,873,810 - 3,873,810 Deferred Charges 16,713 - 16,713 Total Current Assets 6,645,059 1,070,914 7,715,973 NONCURRENT ASSETS Deferred Charges 101,347 - 101,347 Capital Assets: Land 301,170 - 301,170 Buildings and Improvements 33,298,971 - 33,298,971 Machinery, Equipment, and Vehicles 1,412,700 858,483 2,271,183 Construction in Progress 1,673,395 - 1,673,395 Totals 36,686,236 858,483 37,544,719 Accumulated Depreciation (10,078,973) (552,671) (10,631,644) Total Capital Assets 26,607,263 305,812 26,913,075 Total Noncurrent Assets 26,708,610 305,812 27,014,422 TOTAL ASSETS 33,353,669 1,376,726 34,730,395 (The Accompanying Notes are an Integral Part of these Financial Statements) 24 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2003 BUSINESS -TYPE ACTIVITIES - ENTERPRISE FUNDS NONCURRENT LIABILITIES Revenue Bonds Payable WATER AND - 4,589,451 General Obligation Bonds SEWER SCHERTZ 64,000 Public Facility Loan SYSTEM EMS TOTAL LIABILITIES 47,531 32,804 80,335 CURRENT LIABILITIES 4,740,982 32,804 4,773,786 Accounts Payable and Accrued Liabilities $ 533,142 $ 34,094 $ 567,236 Due to Other Funds - 248,669 248,669 Compensated Absences and Salary Reserves 15,844 10,934 26,778 Total Current Liabilities 548,986 293,697 842,683 CURRENT LIABILITIES PAYABLE 1,384,083 - 1,384,083 FROM RESTRICTED ASSETS 4,549,870 744,413 5,294,283 Customer Deposits 194,095 - 194,095 Revenue Bonds 344,998 - 344,998 General Obligation Bonds 62,000 - 62,000 Public Facility Loan 6,000 - 6,000 Accrued Interest 21,841 - 21,841 Total Current Liabilities Payable from Restricted Assets 628,934 - 628,934 NONCURRENT LIABILITIES Revenue Bonds Payable 4,589,451 - 4,589,451 General Obligation Bonds 64,000 - 64,000 Public Facility Loan 40,000 - 40,000 Compensated Absences and Salary Reserves 47,531 32,804 80,335 Total Noncurrent Liabilities 4,740,982 32,804 4,773,786 TOTAL LIABILITIES 5,918,902 326,501 6,245,403 NET ASSETS Invested in Capital Assets, Net of Related Debt 21,500,814 305,812 21,806,626 Restricted for Debt Service 1,384,083 - 1,384,083 Unrestricted 4,549,870 744,413 5,294,283 TOTAL NET ASSETS $27,434,767 $1,050,225 $28,484,992 (The Accompanying Notes are an Integral Part of these Financial Statements) 25 CITY OF SCHERTZ, TEXAS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2003 BUSINESS -TYPE ACTIVITIES - ENTERPRISE FUNDS WATER AND SEWER SCHERTZ SYSTEM EMS TOTAL OPERATING REVENUES Fees Charged to Users $ 8,135,299 $2,014,126 $10,149,425 Reimbursements and Other 93,272 65,100 158,372 Total Operating Revenue 8,228,571 2,079,226 10,307,797 OPERATING EXPENSES Personnel Services 1,091,598 1,100,353 2,191,951 Sewage Treatment 2,240,474 - 2,240,474 General and Administrative 1,727,829 168,711 1,896,540 Contractual Services 158,719 61,744 220,463 Supplies /Maintenance 123,570 159,265 282,835 Bad Debts 17,119 692,541 709,660 Depreciation 1,079,087 66,037 1,145,124 Total Operating Expenses 6,438,396 2,248,651 8,687,047 Operating Income (Loss) 1,790,175 (169,425) 1,620,750 NONOPERATING REVENUES (EXPENSES) Investment Income 93,692 1,039 94,731 Interest Expense (251,458) - (251,458) Contributions to Joint Venture (1,583,613) - (1,583,613) Amortization of Bond Costs (27,123) - (27,123) Total Non - Operating Revenues (Expenses) _(1,768,502) 1,039 (1,767,463) Income (Loss) before Transfers and Capital Contributions 21,673 (168,386) (146,713) TRANSFERS OUT (410,802) - (410,802) CAPITAL CONTRIBUTIONS 279,913 - 279,913 Change in Net Assets (109,216) (168,386) (277,602) TOTAL NET ASSETS - BEGINNING 18,477,774 1,218,611 19,696,385 RESTATEMENT OF NET ASSETS 9,066,209 - 9,066,209 NET ASSETS, AS RESTATED 27,543,983 - 28,762,594 TOTAL NET ASSETS - ENDING 27,434,767 41,050,2 25 28,484,992 (The Accompanying Notes are an Integral Part of these Financial Statements) 26 CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS — PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2003 CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers Cash Received from Other Funds Cash Payments to Suppliers for Goods and Services Cash Payments to Employees for Services Cash Payments to Other Funds Cash Received for Reimbursements and Other Net Cash Provided by Operating Activities CASH FLOWS FROM NON- CAPITAL FINANCING ACTIVITIES Operating Transfers Out CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and Construction of Capital Assets Principal Payments on Long -Term Debt Interest Paid on Long -Term Debt Capital Contributed to Joint Venture Net Cash Used in Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Net Increase (Decrease) in Cash CASH AND CASH EQUIVALENTS — AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR Comprised of Current Assets Restricted Assets CASH AND CASH EQUIVALENTS AT END OF YEAR BUSINESS -TYPE ACTIVITIES - ENTERPRISE FUNDS WATER AND SEWER SCHERTZ SYSTEM EMS TOTAL $7,196,435 (4,009,913) (1,078,575) (327,311) $1,309,328 144,657 (384, 588) (1,086,659) 93,272 65,100 1,873,908 47,838 $8,505,763 144,657 (4,394,501) (2,165,234) (327,311) 158.372 1,921,746 (410,802) - (410,802) (3,512,342) (125,987) (3,638,329) (418,000) - (418,000) (252,098) - (252,098) (1,583,613) - (1,583,613) (5,766,053) (125,987) (5,892,040) 93,692 (4,209,255) 9,037,811 1,039 (77,1 10) 77,110 4,828,556 $ - $ 954,746 $ - 3,873,810 - $4,828,556 5 - 94.731 (4,286,365) 9,1 14,921 4,828,556 $ 954,746 3,873,810 $4.828.556 (Continued) (The Accompanying Notes are an Integral Part of these Financial Statements) 27 CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2003 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by Operating Activities Depreciation Provision for Uncollectible Accounts (Increase) Decrease in the Following Assets Accounts Receivable Inventory Due from Other Funds Increase (Decrease) in the Following Liabilities Vouchers Payable Due to Other Funds Accrued Expenses Customer Deposits NET CASH PROVIDED BY OPERATING ACTIVITIES NONCASH OPERATING, CAPITAL AND RELATED FINANCING ACTIVITIES Contributions of Capital Assets from Developers Amortization of Loss on Defeasance Amortization of Bond Issuance Costs Amortization of Bond Discount Amortization of Organization Costs BUSINESS -TYPE ACTIVITIES - ENTERPRISE FUNDS WATER AND SEWER SCHERTZ SYSTEM EMS TOTAL $1,790,175 $(169,425) $1,620,750 1,079,087 66,037 1,145,124 17,119 103,366 120,485 (866,411) (115,623) (982,034) (21,013) - (21,013) (107,189) 24,988 (82,201) 219,666 5,132 224,798 (220,122) 119,669 (100,453) 13,023 13,694 26,717 (30,427) - (30,427) $1,873,908 47 838 1,921.746 $ 279,913 $ 19,153 $ 6,739 $ 849 $ 382 (The Accompanying Notes are an Integral Part of these Financial Statements) 28 NOTES TO BASIC FINANCIAL STATEMENTS 29 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Schertz is a municipal corporation governed by an elected mayor and five - member council. The accompanying financial statements present the City and its discretely presented component units, entities for which the City is considered to be financially accountable. The discretely presented component units are reported in a separated 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 nonmajor 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. 2. Library - The library provides services to the citizens of the City of Schertz as well as surrounding communities. The function of the library board is to work cooperatively with City management to provide funding and oversight for special projects of the library. The library's governing board is appointed by the city council. 3. Schertz Development Foundation - The foundation was organized to assist the City in developing and implementing plans for economic viability for the City. The board of directors is appointed by the city council and the executive director is employed by the City. Complete financial statements for each of the individual component units may be obtained at City Hall located at 1400 Schertz Parkway, Schertz, Texas 78154. B. Government -Wide and Fund Financial Statements The government -wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from legally separate component units for which the primary government is financially accountable. 30 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 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 segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges of customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. 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. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. 31 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) The debt service fund accounts for the resources accumulated and payments made for principal and interest on long -term general obligation debt of governmental funds. The capital projects fund accounts for financial 'resources to be used for the acquisition and construction of major capital facilities and is principally financed by the sale of bonds or certificates of obligation and grants. The government reports the following major proprietary funds: The water and sewer fund accounts for the water and sewer services provided to the citizens through user charges. The EMS fund accounts for the ambulance services provided to the citizens of the City and other participating governments through user charges. Private - sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government -wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board (GASB). Governments also have the option of following subsequent private- sector for their business -type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private- sector guidance. As a general rule the effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this are charges between the City's general government function and various other functions of the City. Eliminations of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applications for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. General revenues include all taxes. 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. 32 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Cash and Cash Equivalents The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and deposits in local government investment pools. 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. E. Receivables and Pavables Activity between the funds that are representative of interfund loans outstanding at the end of the fiscal year are referred to as due to /from other funds. Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances." Accounts receivable are reported net of allowances for uncollectible accounts. The allowance account represents management's estimate of uncollectible accounts based upon experience and historical trends. Property taxes for the City are levied each October 1 on the taxable value as of the preceding January 1, the date a lien attaches, for all taxable real and personal property located in the City. Taxes are due by January 31 following the October 1 assessment date and become delinquent on February 1, at which time they begin accruing penalty and interest. The enforceable legal claim date for property taxes is the assessment date, therefore, the City did not record a receivable for accrual of future taxes at year end. Accordingly, no current taxes receivable are reported. Taxes have been reported in the financial statements net of the allowance for uncollectible taxes. Tax revenues are recognized as they become available. Accordingly, an amount equal to taxes not yet available has been reported as deferred revenue at the government fund level. F. Inventories and Prepaid Items All inventories are valued at cost using the first -in /first -out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. 33 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Inventories and Prepaid Items (Continued) Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. G. 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. H. Capital Assets Capital assets, which include land, buildings and improvements, machinery, equipment, vehicles, and infrastructure assets (i.e., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. When capital assets are purchased, they are capitalized and depreciated in the government -wide financial statements and the proprietary fund statements. Capital assets are recorded as expenditures of the current period in the governmental fund financial statements. Capital assets are valued at cost where historical records are available and at an estimated cost where no records exist. Donated capital assets are valued at their estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Improvements to capital assets that materially extend the life of the asset or add to the value are capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during construction will not be capitalized in the governmental activities on the government -wide financial statements; however capitalization of interest is required for business -type activities. There was no capitalized interest during the current fiscal year. Capital assets are depreciated over their useful lives on a straight -line basis as follows: ASSETS YEARS Buildings and improvements 20-50 Machinery, equipment, and vehicles 2-20 Infrastructure 15-30 34 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Compensated Absences and Salary Reserve It is the City's policy to permit employees to accumulate earned but unused vacation and compensatory time benefits. There is no liability for unpaid accumulated sick leave since the City does not have a policy to pay any amounts when employees separate from service with the City. In addition, it is the policy of the City to retain as a liability the first forty (40) hours of service for each employee. The liability is to be paid upon termination at the rate of pay in existence at that time. All vacation, compensatory time, and salary reserve pay is accrued when incurred in the government -wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. J. 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. K. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. L. Implementation of New Standard In the current year, the City implemented GASB Statement No. 34, "Basic Financial Statements and Management's Discussion and Analysis (MD &A) for State and Local Governments ", which established accounting and financial reporting standards for state and local governments in order to enhance the understandability and usefulness of the financial reports to citizenry, legislative and oversight bodies, and investors and creditors. In addition to requiring government -wide 35 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) L. Implementation of New Standard (Continued) presentation on the accrual basis of accounting, the implementation of this standard had the following impact in the accompanying financial statements: • Presentation of MD &A • Presentation and classifications of net assets • Reporting certain additional footnote disclosures The following table shows beginning net assets for governmental activities restated for the effects of the implementation of GASB Statement No. 34: Governmental Fund Balance, September 30, 2002, As Previously Reported $ 5,964,900 Accounts Receivable — Fines 196,000 Net Capital Assets 19,874,832 Deferred Revenues — Taxes 127,559 Interest Payable (94,700) Long -Term Debt (10,977,890) NET ASSETS, OCTOBER 1, 2002, FULL ACCRUAL $15,090,701 NOTE 2: CASH AND CASH EQUIVALENTS At year end, the City's carrying amount of deposits was $11,346,611 and the bank balance was $12,213,393. Of the bank balance, $1,991,166 was covered by federal depository insurance or by collateral held by the government's agent in the government's name. The remaining balance of $10,222,227 is invested in local government investment pools which is not subject to categorization. NOTE 3: RECEIVABLES The following is a summary of the gross delinquent taxes receivable and the allowances for uncollectible taxes: ALLOWANCE FOR UNCOLLECTIBLE NET TAXES TAXES TAXES Delinquent Taxes General Fund $107,516 $6,422 $101,094 Debt Service Fund 23,414 1,405 22,009 1 9 7 27 $123,103 36 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 3: RECEIVABLES (CONTINUED) Other receivables as of year end for the City's individual major funds, including the applicable allowances for uncollectible accounts are as follows: Fines and Forfeitures Sales Tax Utility Franchise FEMA Accounts - Customers Other Gross Receivables Less: Allowance NET TOTAL RECEIVABLES NOTE 4: CAPITAL ASSETS $1,116,656 $1,248,355 $1,448,891 $1,048,763 $4,862,665 Capital asset activity for the year ended September 30, 2003 was as follows: Primary Government CAPITAL WATER AND BALANCE Governmental Activities GENERAL PROJECTS SEWER EMS TOTAL Construction in Progress - Total Capital Assets, not $ 720,500 $ - $ - $ - $ 720,500 116,820 - - - 116,820 155,771 - - - 155,771 482,815 1,248,355 - - 1,731,170 - - 1,455,552 1,497,295 2,952,847 1,000 - 21,512 656 23,168 1,476,906 1,248,355 1,477,064 1,497,951 5,700,276 360,250 - 28,173 449,188 837,611 $1,116,656 $1,248,355 $1,448,891 $1,048,763 $4,862,665 Capital asset activity for the year ended September 30, 2003 was as follows: Primary Government INCREASE DECREASE $ 494,313 3,778,083 4,272,396 64,441 504,886 638,968 1,208,295 (194,068) (149,175) (458,107) (801,350) 406,945 ENDING BALANCE $ 3,521,509 3.778.083 7,299,592 7,790,011 1,750,807 14,017,031 23,557,849 (1,899,499) (432,443) (3,971,326) (6,303,268) 17,254,581 $ 4,679,341 $24,554,173 37 BEGINNING BALANCE Governmental Activities Capital Assets, not being Depreciated Land $ 3,027,196 Construction in Progress - Total Capital Assets, not Being Depreciated 3,027,196 Capital Assets, being Depreciated Buildings and Improvements 7,725,570 Machinery, Equipment, and Vehicles 1,245,921 Infrastructure 13,378,063 Total Capital Assets being Depreciated 22,349,554 Less Accumulated Depreciation for Buildings and Improvements (1,705,431) Machinery, Equipment, and Vehicles (283,268) Infrastructure (3,513,219) Total Accumulated Depreciation (5,501,918) Total Capital Assets, being Depreciated - Net 16,847,636 GOVERNMENTAL ACTIVITIES CAPITAL ASSETS - NET $19,874,832 INCREASE DECREASE $ 494,313 3,778,083 4,272,396 64,441 504,886 638,968 1,208,295 (194,068) (149,175) (458,107) (801,350) 406,945 ENDING BALANCE $ 3,521,509 3.778.083 7,299,592 7,790,011 1,750,807 14,017,031 23,557,849 (1,899,499) (432,443) (3,971,326) (6,303,268) 17,254,581 $ 4,679,341 $24,554,173 37 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 4: CAPITAL ASSETS (CONTINUED) Primary Government (Continued) Business -Type 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 Total Capital Assets being Depreciated Accumulated Depreciation for Buildings and Improvements Machinery, Equipment, and Vehicles Total Accumulated Depreciation Total Capital Assets, being Depreciated - Net BUSINESS -TYPE ACTIVITIES BEGINNING ENDING BALANCE INCREASE DECREASE BALANCE $ 234,479 $ 66,691 $ - $ 301,170 1,205,672 1,153,752 (686,029) 1,673,395 1,440,151 1,220,443 68j 6,029) 1,974,565 20,407,064 12,891,907 - 33,298,971 1,963,079 308,104 - 2,271,183 22,370,143 13,200,011 - 35,570,154 (7,471,986) (1,732,547) - (9,204,533) (1,264,558) (162,553) - (1,427,111) (8,736,544) (1,895,100) - (10,631,644) 13,633,599 11,304,911 - 24,938,510 CAPITAL ASSETS - NET $15,073,750 S 12,525.354 $(686,029) 26.913.075 Depreciation expense was charged to functions /programs of the primary government as follows: GOVERNMENTAL ACTIVITIES General government $ 83,411 Public Safety 175,252 Streets and Parks 507,306 Culture and recreation 35,381 TOTAL DEPRECIATION EXPENSE - GOVERNMENTAL ACTIVITIES $ 801,350 BUSINESS -TYPE ACTIVITIES Water and Sewer $1,079,087 EMS 66,037 TOTAL DEPRECIATION EXPENSE - BUSINESS -TYPE ACTIVITIES $1,145,124 38 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 5: CONSTRUCTION COMMITMENTS The City is committed under one contract in connection with a drainage improvement project as of September 30, 2003 for approximately $2,000,000. NOTE 6: INTERFUND BALANCES AND TRANSFERS In the fund financial statements, interfund balances are the result of normal transactions and will be liquidated in the subsequent fiscal year. The composition of interfund balances as of September 30, 2003, is as follows: INTERFUND BALANCES RECEIVABLE FUND Water and Sewer Water and Sewer TOTAL PAYABLE FUND General Fund EMS AMOUNT $ 6,148 248,669 $254,817 Balances between enterprise funds are eliminated in the government -wide financial statements. INTERFUND TRANSFERS TRANSFER OUT Other Governmental Funds Water and Sewer TOTAL TRANSFER IN CAPITAL PROJECTS $ 56,700 410,802 $467,502 The transfer from water and sewer fund to the capital projects fund in the amount of $410,802 was to fund costs associated with road improvements. The remaining transfer is the result of normal transactions between funds. M CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 7: LONG -TERM DEBT The City had the following changes in long -term debt outstanding for the year ended September 30, 2003: Governmental Activities General Obligation Bonds 1992 Series 1998 Series 1995 Refunding Bonds 1999 Combination Tax and Revenue Total Bonds Certificates of Obligation 2001 Series 2003 Series Total Certificates of Obligation Tax Notes 2001 Notes 2002 Notes Total Tax Notes 750,000 2.90 -4.0 400,000 2.90 -3.15 TOTAL GOVERNMENTAL ACTIVITIES Business -Type Activities Revenue Bonds 2001 Series $5,550,000 3.4 -5.2% Unamortized Discounts And Loss on Defeasance Certificates of Obligation 1992 Series General Obligation Bonds 1995 Refunding Bonds Other Debt Public Facility Loan (HUD) TOTAL BUSINESS -TYPE ACTIVITIES 600,000 140,000 460,000 145,000 400,000 130,000 270,000 135,000 1,000,000 270,000 730,000 280,000 S 5,275,000 $ - $285,000 $ 4,990,000 $ 365,000 (52,061) (3,490) * - (55,551) (20,002) 5,222,939 (3,490) 285,000 4,934,449 344,998 200,000 5.0 -7.0 60,000 1,253,000 3.75 -5.0 193,000 142,000 5.00 52,000 60,000 _ 67,000 126,000 62,000 6,000 46,000 6,000 *Addition represents reclassification of loss on defeasance reported on asset side of balance sheet in prior year. 40 BALANCE BALANCE AMOUNTS OUTSTANDING OUTSTANDING DUE ORIGINAL INTEREST OCTOBER 1, SEPTEMBER 30, IN ONE AMOUNT RATES 2002 ISSUED RETIRED 2003 YEAR $ 620,000 5.2 -7.2% $ 420,000 $ $ 50,000 $ 370,000 $ 50,000 4,930,000 4.37 -5.375 4,325,000 175,000 4,150,000 180,000 447,000 3.75 -5.00 127,000 43,000 84,000 43,000 455,000 5.25 350,000 110,000 240,000 115,000 5,222,000 378,000 4,844,000 388,000 $4,500,000 4.1 -6.0 4,375,000 135,000 4,240,000 140,000 3,360,000 2.0 -3.9 - 3,360,000 3,360,000 425,000 4,375,000 3,360,000 135,000 7,600,000 565,000 750,000 2.90 -4.0 400,000 2.90 -3.15 TOTAL GOVERNMENTAL ACTIVITIES Business -Type Activities Revenue Bonds 2001 Series $5,550,000 3.4 -5.2% Unamortized Discounts And Loss on Defeasance Certificates of Obligation 1992 Series General Obligation Bonds 1995 Refunding Bonds Other Debt Public Facility Loan (HUD) TOTAL BUSINESS -TYPE ACTIVITIES 600,000 140,000 460,000 145,000 400,000 130,000 270,000 135,000 1,000,000 270,000 730,000 280,000 S 5,275,000 $ - $285,000 $ 4,990,000 $ 365,000 (52,061) (3,490) * - (55,551) (20,002) 5,222,939 (3,490) 285,000 4,934,449 344,998 200,000 5.0 -7.0 60,000 1,253,000 3.75 -5.0 193,000 142,000 5.00 52,000 60,000 _ 67,000 126,000 62,000 6,000 46,000 6,000 *Addition represents reclassification of loss on defeasance reported on asset side of balance sheet in prior year. 40 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 7: LONG -TERM DEBT (CONTINUED) Annual debt service requirements as of September 30, 2003, are as follows: $13,174,000 $4,791,606 $17,965,606 $5,162,000 02,191,489 $7,353,489 During the year, the City issued $3,360,000 of combination tax and limited pledge revenue certificates of obligation, with the payment of the related principal and interest to be made from an annual ad valorem tax levied against all taxable property within the City. The bonds were issued to provide funds for various construction projects and the purchase of various equipment. In the government -wide financial statements, bond issuance costs are deferred and amortized over the life of the bonds. Bond issuance costs are reported as deferred charges. Bonded debt of the City consists of various series of general obligation bonds, revenue bonds, certificates of obligation, tax notes, and a public facility loan. General obligation bonds and tax notes are direct obligations of the City for which its full faith and credit are pledged, and are payable from taxes levied on all taxable property located within the City. Certificates of obligation are payable from a levy of ad valorem taxes upon all taxable property within the City and are further payable from certain net revenues derived from the operation of the City's combined water and sewer system. Revenue bonds are generally payable from pledged revenues generated by the water and sewer fund. The debenture agreement for water and sewer bonds require that funds be available for 1/12t' of the principal and 1/6 th of the interest requirements of the next fiscal year. The City is required to accumulate a reserve fund in an amount equal to the average principal and interest on the revenue bonds. The City has purchased a surety bond through MBIA Insurance Corporation to fund the required reserve amount. There are no amounts outstanding at the end of the current fiscal year related to bonds that were considered defeased. 41 GOVERNMENTAL ACTIVITIES BUSINESS -TYPE ACTIVITIES FISCAL YEAR PRINCIPAL INTEREST TOTAL PRINCIPAL INTEREST TOTAL 2004 $ 1,233,000 $ 605,902 $ 1,838,902 $ 433,000 $ 233,864 $ 666,864 2005 1,076,000 515,424 1,591,424 450,000 216,990 666,990 2006 875,000 473,794 1,348,794 296,000 200,510 496,510 2007 685,000 432,856 1,117,856 302,000 188,950 490,950 2008 645,000 397,953 1,042,953 302,000 176,900 478,900 2009 -2013 3,360,000 1,549,680 4,909,680 1,259,000 699,365 1,958,365 2014 -2018 4,295,000 739,123 5,034,123 1,360,000 395,192 1,755,192 2019 -2021 1,005,000 76,874 1,081,874 760,000 79,718 839,718 $13,174,000 $4,791,606 $17,965,606 $5,162,000 02,191,489 $7,353,489 During the year, the City issued $3,360,000 of combination tax and limited pledge revenue certificates of obligation, with the payment of the related principal and interest to be made from an annual ad valorem tax levied against all taxable property within the City. The bonds were issued to provide funds for various construction projects and the purchase of various equipment. In the government -wide financial statements, bond issuance costs are deferred and amortized over the life of the bonds. Bond issuance costs are reported as deferred charges. Bonded debt of the City consists of various series of general obligation bonds, revenue bonds, certificates of obligation, tax notes, and a public facility loan. General obligation bonds and tax notes are direct obligations of the City for which its full faith and credit are pledged, and are payable from taxes levied on all taxable property located within the City. Certificates of obligation are payable from a levy of ad valorem taxes upon all taxable property within the City and are further payable from certain net revenues derived from the operation of the City's combined water and sewer system. Revenue bonds are generally payable from pledged revenues generated by the water and sewer fund. The debenture agreement for water and sewer bonds require that funds be available for 1/12t' of the principal and 1/6 th of the interest requirements of the next fiscal year. The City is required to accumulate a reserve fund in an amount equal to the average principal and interest on the revenue bonds. The City has purchased a surety bond through MBIA Insurance Corporation to fund the required reserve amount. There are no amounts outstanding at the end of the current fiscal year related to bonds that were considered defeased. 41 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 7: LONG -TERM DEBT (CONTINUED) Compensated Absences and Salary Reserves Changes in compensated absences and salary reserves for the year ended September 30, 2003, were as follows: GOVERNMENTAL BUSINESS -TYPE ACTIVITIES ACTIVITIES Balance at October 1, 2002 $380,890 $ 98,584 Additions 87,586 33,175 Deletions (95,222) (24,646) BALANCES AT SEPTEMBER 30, 2003 $373,254 $107,1 13 Of these balances, $93,313 is due in the current year in governmental activities and $26,778 is due in the current year in business -type activities. Compensated absences and salary reserves are paid from the fund responsible for the employee's compensation. Claims and judgments are generally liquidated by the general fund. NOTE 8: RETIREMENT PLAN Plan Description The City provides pension benefits for all of its full -time employees through a nontraditional, joint contributory, hybrid defined benefit plan in the state -wide Texas Municipal Retirement System (TMRS), one of over 774 administered by TMRS, an agent multiple - employer public employee retirement system. TMRS issues a publicly available financial report that includes financial statements and required supplementary information for TMRS. That report may be obtained by writing to Texas Municipal Retirement System, Post Office Box 149153, Austin, Texas 78714. Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City - financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount equal to two times what would have been contributed by the employee, with interest, prior to establishment of the plan. Monetary credits for service since the plan began are a percent (100 %, 150 %, or 200 %) of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and City matching percent had always been in existence and if the employee's salary had always been the average of his salary in the last three (3) years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer- financed monetary credits with interest were used to purchase an annuity. 42 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 8: RETIREMENT PLAN (CONTINUED Plan Description (Continued) Members can retire at age 60 and above with 5 or more years of service or with 20 years of service, regardless of age. A member is vested after 5 years. The plan provisions are adopted by the governing) body of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Contributions The contribution rate for the employees is 5 %, and the City matching percent is currently 1.5 to 1, both as adopted by the governing body of the City. Under the state law governing TMRS, the City contribution rate is annually determined by the actuary. This rate consists of the normal cost contribution rate and the prior service contribution rate, both of which are calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the currently accruing monetary credits due to the City matching percent, which are the obligation of the City as of an employee's retirement date, not at the time the employee's contributions are made. The normal cost contribution rate is the actuarially determined percent of payroll necessary to satisfy the obligation of the City to each employee at the time his /her retirement becomes effective. The prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the remainder of the plan's 25 -year amortization period. The unit credit actuarial cost method is used for determining the City contribution rate. Contributions are made monthly by both the employees and the City. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one -year delay between the actuarial valuation that is the basis for the rate and the calendar year when the rate goes into effect (i.e., December 31, 2002 valuation is effective for rates beginning January 2004). For 2002, the City's annual pension cost of $393,140 was equal to the City's required and actual contributions. The actuarial assumptions included (a) 8% investment rate of return, (b) no projected salary increases, (c) no inflation component, and (d) the amortization period is open. The actuarial value of TMRS assets was determined based on amortized cost. Schedule of Actuarial Liabilities and Funding Progress Actuarial Value of Assets Actuarial Accrued Liability Percentage Funded Unfunded (Overfunded) Actuarial Accrued Liability (UAAL) Annual Covered Payroll UAAL as a Percentage of Covered Payroll Annual Pension Cost Annual Required Contribution Contributions Made NET PENSION OBLIGATION AT THE END OF THE PERIOD ACTUARIAL VALUATION DATE DECEMBER 31 DECEMBER 31 DECEMBER 31 2002 2001 2000 $3,520,733 $2,795,264 $2,268,986 4,965,573 4,128,746 3,638,045 70.9% 67.7% 62.4% 1,444,840 1,333,482 1,369,059 5,306,146 4,419,848 3,866,975 27.2% 30.1% 35.4% 393,140 369,210 301,447 393,140 369,210 301,447 43 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 9: RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The City contracts with the Texas Municipal League Intergovernmental Risk Pool, a public entity risk pool currently operating as a common risk management and insurance program providing insurance coverage in the following areas: general liability, automobile liability and physical damage, law enforcement liability, worker's compensation, real and personal property, mobile equipment, and errors and omissions liability. The agreement for formation of the Texas Municipal League Intergovernmental Risk Pool provides that the pool will be self sustaining through member premiums and will be adjusted annually through an experience modifier. The City continues to carry commercial insurance for all other risks of loss including public official bond, employee dishonesty blanket bond, and underground tank pollution liability. Settled claims resulting from these risks have not exceeded coverage for each of the past three (3) years. The pooling agreement requires the pool to be self- sustaining. It is not possible to estimate the amount of any losses for which the City might be liable. The Texas Municipal League Intergovernmental Risk Pool has published its own financial report for the year ended September 30, 2003, which can be obtained from the Texas Municipal League. NOTE 10: CONTINGENT LIABILITIES Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, in the opinion of management the resolution of these matters will not have a material adverse effect on the financial condition of the City. NOTE 11: JOINT VENTURE Schertz /Sequin Local Government Corporation The 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 City of Schertz is jointly liable, together with the City of Seguin, for operating deficits and long- term debt of the Schertz /Seguin Local Government Corporation. The corporation has issued revenue bonds in the amount of $51,040,000 to provide funds to build, improve, extend, enlarge, and repair the corporation's utility system, fund a reserve, and pay the costs of bond issuance. As of September 30, 2003, $50,640,000 remained outstanding on the bonds and the corporation has 44 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2003 NOTE 11: JOINT VENTURE (CONTINUED) Schertz /Seguin Local Government Corporation (Continued) accumulated approximately $40,000 in retained earnings. The bond resolution pledges intergovernmental contract revenues from the cities of Schertz and Seguin. Under the intergovernmental water supply contract, the cities are unconditionally obligated to pay their respective shares of annual contract revenue bond debt service as expenses from their respective utility systems. Contributions to the corporation are reflected as "nonoperating expenses" in the water and sewer fund and totaled $1,583,613 for the year ended September 30, 2003. Separate financial statements for the Schertz /Seguin Local Government Corporation may be obtained from the City of Seguin, Texas 78156. NOTE 12: RESTATEMENT OF NET ASSETS During the year ended September 30, 2003, the City noted that certain contributions from developers of water and sewer lines had not been capitalized. The correction of this error resulted in an increase to the beginning water and sewer fund net assets in the amount of $9,066,206, an increase to capital assets, being depreciated in the amount of $9,816,185, and an increase to the related accumulated depreciation account in the amount of $749,976. 45 (This Page Intentionally Left Blank) 46 REQUIRED SUPPLEMENTARY INFORMATION 47 CITY OF SCHERTZ, TEXAS GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2003 REVENUES Taxes Ad Valorem Tax Penalty City Sales Tax Utility Franchise Other Total Taxes Licenses and Permits Charges for Services Administration Swimming Pool Animal Shelter Building Rental Library and Fire Other Total Charges for Services Fines and Forfeitures Grants Other Revenue Interest Sale of Merchandise Miscellaneous Total Other Revenue TOTAL REVENUES ORIGINAL FINAL BUDGET BUDGET ACTUAL VARIANCE WITH FINAL BUDGET POSITIVE (NEGATIVE) $3,080,536 $3,148,132 $3,183,661 $ 35,529 22,000 22,000 32,203 10,203 1,454,000 1,454,000 1,491,524 37,524 575,665 573,019 671,009 97,990 14,500 14,500 4,528 (9,972) 5,146,701 5,21 1,651 5,382,925 171,274 669,350 746,150 841,780 95,630 576,834 576,834 576,334 (500) 34,000 34,000 34,268 268 134,850 134,850 117,983 (16,867) 11,000 11,000 12,257 1,257 170,278 189,453 198,290 8,837 3,750 3,750 5,374 1,624 930,712 949,887 944,506 (5,381) 489,800 517,040 646,613 129,573 - - 751,905 751,905 100,000 55,000 69,685 14,685 20,300 20,300 12,633 (7,667) 70,050 70,050 89,600 19,550 190,350 145,350 171,918 26,568 7,426,913 7,570,078 8,739,647 1,169,569 (continued) 48 CITY OF SCHERTZ, TEXAS GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2003 EXPENDITURES Current General Government City Council City Manager Community Development Legal Municipal Court Facility Maintenance City Secretary Finance Information Technology Human Resources Fleet Services Other - Unclassified Total General Government Public Safety Police Department Fire Department Inspection Total Public Safety Streets and Parks Streets Parks Total Streets and Parks Health Animal Control Culture and Recreation Swimming Pool Library Total Culture and Recreation CAPITAL OUTLAY DEBT SERVICE Bond Issue Cost Total Expenditures ORIGINAL FINAL BUDGET BUDGET $ 23,770 248,418 164,339 172,500 232,470 300,109 131,630 180,075 220,114 120,776 147,827 314,750 2,256,778 2,124,371 1,161,976 275,796 3,562,143 493,100 206,588 699,688 $ 23,770 260,240 177,257 147,500 232,470 324,951 146,630 194,129 228,214 120,776 147,827 338,710 2,342,474 2,145,135 1,166,976 275,796 3,597,834 493,100 244,726 737,826 ACTUAL $ 18,088 277,888 137,817 88,729 221,706 324,213 124,815 186,958 447,644 126,525 158,295 315,615 2,428,293 2,088,529 1,172,588 269,353 3,530,470 412,935 262,752 675,687 VARIANCE WITH FINAL BUDGET POSITIVE (NEGATIVE) 5,682 (17,648) 39,440 58,771 10,764 738 21,815 7,171 (219,430) (5,749) (10,468) 23,095 (85,819) 56,606 4,315 6,443 67,364 80,165 (18,026) 62,139 147,351 160,754 156,927 3,827 119,222 184,222 105,094 79,128 332,151 344,543 310,740 33,803 451,373 528,765 415,834 112,931 294,105 3,475,928 2,331,829 1,144,099 - - 46,272 46,272 7,41 1,348 10,843,581 9,585,312 1,258,269 (continued) 49 CITY OF SCHERTZ, TEXAS GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2003 EXPENDITURES (CONTINUED) Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Proceeds from Bond Issue Net Change in Fund Balance FUND BALANCE AT OCTOBER 1, 2002 FUND BALANCE AT SEPTEMBER 30, 2003 VARIANCE WITH FINAL BUDGET ORIGINAL FINAL POSITIVE BUDGET BUDGET ACTUAL (NEGATIVE) $15,565 $(3,273,503) $ (845,665) $2,427,838 3,318,728 3,360,000 41,272 1 565 $ 45,225 2,514,335 $2,469,110 2,985,501 50 CITY OF SCHERTZ, TEXAS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2003 NOTE 1: BUDGETARY INFORMATION The budget for the general fund is adopted on a basis consistent with generally accepted accounting principles. Annual appropriations lapse at fiscal year end. The original budget for the general fund is adopted by the city council by September 30. Budgetary preparation and control is exercised at the department level. The city manager is authorized to transfer budget amounts between line items within a department; however, any transfer or supplemental appropriation that amends the total expenditures of a department or total budget requires city council approval. Both the original and final amended budget is included. NOTE 2: EXCESS OF EXPENDITURES OVER APPROPRIATIONS For the year ended September 30, 2003, expenditures exceeded appropriations in the city manager, information technology, human resources, fleet services, and parks departments of the general fund by $17,648, $219,430, $5,749, $10,468, and $18,026, respectively. These overexpenditures were funded by greater than anticipated revenues in the general fund. 51 (This Page Intentionally Left Blank) 52 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES 53 (This Page Intentionally Left Blank) 54 NONMAJOR GOVERNMENTAL FUNDS Nonmajor Governmental Funds (Special Revenue Funds) are used to account for the proceeds of specific revenue sources that are legally restricted to expenditure for specified purposes. Park Fund - will account for revenues from developers' fees (in lieu of park land dedication), grants, and donations and is designed to monitor and manage improvement of park system. Recycling Fund - will account for revenues received from the recycling fee on all residential water bills and the sale of recyclable material and used to buy down solid waste collection costs. Tax Increment Financing Fund - will account for the proceeds of designated property taxes to be used for the widening of Schertz Parkway. Hotel Occupancy Tax Fund - will account for proceeds of hotel occupancy taxes to be used strictly for those kinds of programs that promote the tourism industry. Library Grant Fund - will account for funds from a state grant to be used for purchasing computers at the library to be used for access to the internet. Police Department Forfeitures Fund - will account for revenue received from drug related cases in conjunction with other law enforcement agencies. 55 CITY OF SCHERTZ, TEXAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2003 SPECIAL REVENUE TAX PARK RECYCLING INCREMENT FUND FUND FINANCING ASSETS Cash and Cash Equivalents 251 818 1 2 6 88 376 FUND BALANCES Reserved for Tree Mitigation $168,147 $ - $ - Unreserved 83,671 1,256 88,376 TOTAL FUND BALANCES 1B8,376 56 F U N D S POLICE TOTAL HOTEL LIBRARY DEPARTMENT OTHER OCCUPANCY GRANT FORFEITURES GOVERNMENTAL TAX FUND FUND FUNDS 5272,482 $3,905 215 591 $833,428 $ - $ - $ - $168,147 272,482 3,905 215,591 665,281 5272,482 3 905 $215.591 5833,428 57 CITY OF SCHERTZ, TEXAS COMBINING STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2003 REVENUES Taxes Developer Fees Grants Property Forfeitures Sale of Recycling /Materials Miscellaneous Revenue Interest Total Revenues EXPENDITURES General and Administrative Contractual Services Capital Outlay Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES) Transfers Out Net Change in Fund Balances FUND BALANCES AT OCTOBER 1, 2002 FUND BALANCES AT SEPTEMBER 30, 2003 SPECIAL REVENUE TAX PARK RECYCLING INCREMENT FUND FUND FINANCING $ - $ - $ 10,000 99,735 - - - 14,488 - 1,332 - - 1,743 - 1,047 102,810 14,488 11,047 2,475 - 500 - 15,091 - 2,475 15,091 500 100,335 (603) 10,547 - - (56,700) 100,335 (603) (46,153) 151,483 1,859 134,529 2 1 1 $1,256 $88,376 58 F U N D S POLICE TOTAL HOTEL LIBRARY DEPARTMENT OTHER OCCUPANCY GRANT FORFEITURES GOVERNMENTAL TAX FUND FUND FUNDS $ 43,177 $ - $ - $ 53,177 - - - 99,735 - 3,483 - 3,483 - - 74,059 74,059 - - - 14,488 - - - 1,332 2,821 - 2,422 8,033 45,998 3,483 76,481 254,307 19,119 - 22,656 44,750 - - - 15,091 44,985 44,985 19,119 - 67,641 104,826 26,879 3,483 8,840 149,481 - - - (56,700) 26,879 3,483 8,840 92,781 245,603 422 206,751 740,647 5272,482 3 905 215 591 5833,428 59 CITY OF SCHERTZ, TEXAS PARK SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL YEAR ENDED SEPTEMBER 30, 2003 REVENUES Developer Fees Grants Miscellaneous Revenue Interest Income Total Revenues EXPENDITURES General and Administrative Excess of Revenues Over Expenditures FUND BALANCE AT OCTOBER 1, 2002 FUND BALANCE AT SEPTEMBER 30, 2003 ORIGINAL VARIANCE WITH AND FINAL BUDGET FINAL POSITIVE BUDGET ACTUAL (NEGATIVE) $ 6,000 $ 99,735 $93,735 9,000 - (9,000) - 1,332 1,332 3,000 1,743 (1,257) 18,000 102,810 84,810 3,000 2,475 525 15 0 100,335 LQ5035 151,483 251 . or CITY OF SCHERTZ, TEXAS RECYCLING SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL YEAR ENDED SEPTEMBER 30, 2003 REVENUES Sale of Recycling Materials EXPENDITURES Contractual Services Excess (Deficiency) of Revenues Over (Under) Expenditures FUND BALANCE AT OCTOBER 1, 2002 FUND BALANCE AT SEPTEMBER 30, 2003 ORIGINAL VARIANCE WITH AND FINAL BUDGET FINAL POSITIVE BUDGET ACTUAL (NEGATIVE) $9,000 $14,488 $ 5,488 9,000 15,091 (6,091) -$- (603) (6 03) 1,859 1 256 61 CITY OF SCHERTZ, TEXAS TAX INCREMENT FINANCING SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL YEAR ENDED SEPTEMBER 30, 2003 REVENUES Taxes Interest Income Total Revenues EXPENDITURES General and Administrative Capital Outlay Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCIAL SOURCES (USES) Transfer Out Net Change in Fund Balance FUND BALANCE AT OCTOBER 1, 2002 FUND BALANCE AT SEPTEMBER 30, 2003 ORIGINAL VARIANCE WITH AND FINAL BUDGET FINAL POSITIVE BUDGET ACTUAL (NEGATIVE) $ 10,000 $ 10,000 $ - 250 1,047 797 10,250 11,047 797 500 500 - 10,000 - 10,000 10,500 500 10,000 25 ) 10,547 797 (56,700) (46,153) 134,529 � 88.376 62 CITY OF SCHERTZ, TEXAS HOTEL OCCUPANCY TAX SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL YEAR ENDED SEPTEMBER 30, 2003 FUND BALANCE AT OCTOBER 1, 2002 FUND BALANCE AT SEPTEMBER 30, 2003 245,603 5272.482 1:- 1 ORIGINAL VARIANCE WITH AND FINAL BUDGET FINAL POSITIVE BUDGET ACTUAL (NEGATIVE) REVENUES Occupancy Tax $35,000 $ 43,177 $ 8,177 Interest Income 3,500 2,821 (679) Total Revenues 38,500 45,998 7,498 EXPENDITURES General and Administrative 36,600 19,119 17,481 Excess of Revenues Over Expenditures 1,900 26,879 424 979 FUND BALANCE AT OCTOBER 1, 2002 FUND BALANCE AT SEPTEMBER 30, 2003 245,603 5272.482 1:- 1 CITY OF SCHERTZ, TEXAS DEBT SERVICE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET TO ACTUAL YEAR ENDED SEPTEMBER 30, 2003 REVENUES Taxes Interest Income Total Revenues EXPENDITURES Debt Service Bond Principal Bond Interest Fiscal Agent Fees Total Expenditures Excess of Revenues Over (Under) Expenditures FUND BALANCE AT OCTOBER 1, 2002 FUND BALANCE AT SEPTEMBER 30, 2003 ORIGINAL VARIANCE WITH AND FINAL BUDGET FINAL POSITIVE BUDGET ACTUAL (NEGATIVE) $748,227 $1,311,228 $563,001 4,030 4,030 748,227 1,315,258 567,031 468,000 783,000 (315,000) 270,225 503,601 (233,376) 3,000 4,565 (1,565) 741,225 1,291,166 (549,941) $ 7,002 24,092 $ 17,090 299,074 $ 323,166 64 DISCRETELY PRESENTED COMPONENT UNITS Discretely presented component units consist of separate entities whose governing bodies are not substantively the same as the governing body of the primary government. The discretely presented component units also provide services to areas other than the primary government. 65 CITY OF SCHERTZ, TEXAS DISCRETELY PRESENTED COMPONENT UNITS COMBINING BALANCE SHEET SEPTEMBER 30, 2003 ASSETS Cash and Cash Equivalents Accounts Receivable Due from Other Funds TOTAL ASSETS LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable Accrued Salaries and Benefits Due to Other Funds Total Liabilities FUND BALANCES Unreserved Designated TOTAL LIABILITIES AND FUND BALANCES SCHERTZ ECONOMIC SCHERTZ DEVELOPMENT THE DEVELOPMENT CORPORATION LIBRARY FOUNDATION TOTAL $714,514 61,805 1,103 5777,422 $18,641 $102,385 t1,8641 5102.385 $835,540 61,805 1,103 5898,448 $ 620 $ 15 $ 1,000 $ 1,635 1,147 - - 1,147 - - 1,103 1,103 1,767 15 2,103 3,885 775,655 18,626 100,282 894,563 5777,422 18 641 5102,385 5898,448 .. CITY OF SCHERTZ, TEXAS DISCRETELY PRESENTED COMPONENT UNITS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES SEPTEMBER 30, 2003 SCHERTZ ECONOMIC SCHERTZ DEVELOPMENT THE DEVELOPMENT CORPORATION LIBRARY FOUNDATION TOTAL REVENUES Other Net Sales Donations Interest Total Revenues EXPENDITURES Current Culture and Recreation Economic Development Total Expenditures Excess (Deficiency) of Revenues Over Expenditures FUND BALANCES AT OCTOBER 1, 2002 FUND BALANCES AT SEPTEMBER 30, 2003 $746,641 $ - 2,973 - 1,809 9,137 296 755,778 5,078 854,544 854,544 1,030 1,030 (98,766) 4,048 874,421 14,578 775 655 $18,626 $ - $746,641 - 2,973 - 1,809 1,648 11,081 1,648 762,504 - 1,030 2,136 856,680 2,136 857,710 (488) (95,206) 100,770 989,769 100 282 $894,563 67 CITY OF SCHERTZ, TEXAS GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION LAST TEN FISCAL YEARS TABLE 3 FISCAL GENERAL PUBLIC STREETS TOTAL (1) YEAR GOVERNMENT SAFETY AND PARKS HEALTH OTHER EXPENDITURES 1994 $ 744,801 $ 978,121 $308,126 $ 80,494 $ 645,063 $2,756,605 1995 813,789 1,059,331 349,659 80,324 633,582 2,936,685 1996 886,090 1,174,371 304,722 85,685 1,510,303 3,961,171 1997 976,032 1,472,534 397,807 102,293 798,071 3,746,737 1998 1,063,835 1,702,684 408,461 127,065 1,165,475 4,467,520 1999 1,306,500 2,023,379 806,029 142,287 2,142,364 6,420,559 2000 1,479,496 2,172,619 793,700 155,814 1,898,888 6,500,517 2001 1,668,235 2,561,055 627,110 175,048 1,710,880 6,742,328 2002 2,599,549 2,963,924 689,150 120,530 3,217,877 9,591,030 2003 2,488,134 3,530,470 675,687 156,927 4,130,086 10,981,304 (1) Includes General, Debt Service, and Other Governmental Funds 72 CITY OF SCHERTZ, TEXAS GENERAL GOVERNMENT REVENUES BY SOURCE LAST TEN FISCAL YEARS TABLE 4 *Includes General, Debt Service, and Other Governmental Funds 73 LICENSES CHARGES FINES FISCAL AND FOR AND YEAR TAXES PERMITS SERVICES FORFEITURES OTHER TOTAL* 1994 $2,109,202 $145,229 $343,731 $195,964 $ 195,320 $ 2,989,446 1995 2,285,735 134,391 353,050 209,719 340,232 3,323,127 1996 2,389,765 394,841 375,767 317,403 244,638 3,722,414 1997 2,698,175 546,159 452,890 331,244 242,905 4,271,373 1998 3,168,926 610,943 472,366 343,943 654,095 5,250,273 1999 3,768,037 680,316 558,904 379,584 1,100,315 6,487,156 2000 4,088,491 731,488 626,464 444,331 625,841 6,516,615 2001 4,452,964 620,652 659,145 749,201 499,921 6,981,883 2002 5,305,902 663,682 883,126 538,831 841,674 8,233,215 2003 6,747,330 941,515 944,506 646,613 1,029,248 10,309,212 *Includes General, Debt Service, and Other Governmental Funds 73 (This Page Intentionally Left Blank) 74 LC) w wZO?- c m O LLI ~ W a r to CD O CD M LC) M M < O d w -� Ln co to co r ui d M H Z X X Q J Q Q Cr w F- F- p a) O r- O p w Z D w O O c0 00 M Ln 00 M N M 00 O r- M Cn O x r r r (0 Ln r Ln O N w H r- 00 0D M r r O r a) r r M r M r O LL Q Z J i 0 OR O J J Lr) n (D O M M (D P< X � O � O � O QF J OJO H M M M M r r oC H O F- U X� Z M O M (0 It* 00 CO M n r- C\ 1- Rt CD L\ 00 M M m It O_ N LO r r N N r Ln co CD z OI- J~ H � O M O CO M d N r. 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C1 C1 C1 cn cn cn U) V) (n w 0 0 U) Ln t\ CITY OF SCHERTZ, TEXAS ASSESSED AND TAXABLE VALUE OF PROPERTY LAST TEN FISCAL YEARS TABLE 6 76 FISCAL ESTIMATED LEVY YEAR ACTUAL ASSESSMENT ASSESSED TAX TAX YEAR ENDED VALUES PERCENTAGE VALUATIONS RATE LEVY 1993 09 -30 -94 $ 264,286,116 97.9% $ 258,766,426 .4684% $1,212,063 1994 09 -30 -95 362,247,758 86.3 312,676,505 .4275 1,337,010 1995 09 -30 -96 346,130,091 96.5 334,122,763 .4072 1,360,548 1996 09 -30 -97 396,917,233 95.4 378,784,051 .3719 1,408,699 1997 09 -30 -98 452,163,752 99.6 450,199,212 .3554 1,600,008 1998 09 -30 -99 545,742,286 97.9 534,039,183 .3544 1,892,640 1999 09 -30 -00 636,157,284 100 636,157,284 .3456 2,198,381 2000 09 -30 -01 731,305,433 100 731,305,433 .3405 2,490,095 2001 09 -30 -02 827,142,321 100 827,142,321 .3825 3,163,819 2002 09 -30 -03 1,149,705,321 89.1 1,024,412,713 .3825 3,918,379 76 *All rates shown are per $100 assessed valuation "Year shown is the fiscal year of collection. Taxes were levied the previous calendar year. 77 CITY OF SCHERTZ, TEXAS PROPERTY TAX RATES - ALL DIRECT AND OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS TABLE 7 COUNTY CITY SCHOOL COUNTY ROAD 100% 100% 100% 100% ASSESSMENT ASSESSMENT ASSESSMENT ASSESSMENT YEAR ** RATE* RATE* RATE RATE 1994 .4684% 1.4499% .3036% .0950% 1995 .4275 1.3095 .2995 .0867 1996 .4072 1.3712 .3018 .0833 1997 .3719 1.4089 .2997 .0758 1998 .3554 1.4299 .3040 .0730 1999 .3444 1.6923 .3192 .0600 2000 .3455 1.4945 .3417 .0582 2001 .3405 1.6267 .3193 .0630 2002 .3825 1.7100 .3499 .0420 2003 .3825 1.7300 .3668 .0463 *All rates shown are per $100 assessed valuation "Year shown is the fiscal year of collection. Taxes were levied the previous calendar year. 77 CITY OF SCHERTZ, TEXAS RATIO OF NET GENERAL OBLIGATION BONDED DEBT TO ASSESSED VALUE AND NET GENERAL BONDED DEBT PER CAPITA TABLE 8 78 NET RATIO GENERAL OF NET BONDED NET GENERAL BONDED DEBT DEBT PER FISCAL YEAR ESTIMATED ASSESSED BONDED DEBT TO ASSESSED CAPITA September 30, 1994 12,500 $ 258,766,426 $ 1,132,129 .43 90.57 September 30, 1995 13,500 312,676,405 1,056,611 .34 78.27 September 30, 1996 14,500 334,122,763 1,215,000 .36 83.79 September 30, 1997 15,000 378,784,051 1,095,000 .29 73.00 September 30, 1998 17,500 450,199,212 5,901,000 1.31 337.20 September 30, 1999 18,000 534,039,183 5,622,230 1.05 312.35 September 30, 2000 18,694 636,157,284 5,321,410 .84 284.66 September 30, 2001 22,000 731,305,433 5,129,000 .70 233.14 September 30, 2002 23,000 827,142,321 5,222,000 .63 227.04 September 30, 2003 24,000 1,024,412,713 4,844,000 .47 201.83 78 CITY OF SCHERTZ, TEXAS COMPUTATION OF DIRECT AND OVERLAPPING DEBT YEAR ENDED SEPTEMBER 30. 2003 *Bexar County *Coma) County *Coma) Independent School District *Guadalupe County * Schertz- Cibolo- Universal City Independent School District *San Antonio, RA *Alamo Community College District Total Net Overlapping Debt *City of Schertz TOTAL DIRECT AND OVERLAPPING DEBT (6.99% OF ASSESSED VALUE - $2,984 PER CAPITA) *Source of Data — Texas Municipal Reports, City of Schertz Compiled and Published by Municipal Advisory Council of Texas TABLE 9 $75,719,828 79 DIRECT AND NET ESTIMATED ESTIMATED BONDED PERCENT OVERLAPPING DEBT APPLICABLE BONDED DEBT $220,374,962 2.06% $ 4,539,724 9,170,000 2.06 182,483 209,255,608 0.12 251,107 14,595,000 20.37 2,973,002 98,525,619 51.88 51,115,091 94,665,000 2.06 1,950,099 90,169,343 2.06 1,857,488 62,868,994 12,850,834 100.00% 12,850,834 $75,719,828 79 CITY OF SCHERTZ, TEXAS LEGAL DEBT MARGIN YEAR ENDED SEPTEMBER 30, 2003 TABLE 10 Texas municipalities are not bound by any direct constitutional or statutory maximums as to the amount of general obligation bonds which may be issued; however, all local bonds must be submitted to and approved by the State Attorney General. It is the established practice of the Attorney General not to approve prospective bond issue if it will result in the levy of a tax for bonded debt of over $ 1.00 for cities under 5,000 population or $ 1.50 for cities over 5,000 population. :• CITY OF SCHERTZ, TEXAS RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL OBLIGATION BONDED DEBT TO TOTAL GENERAL EXPENDITURES LAST TEN FISCAL YEARS TABLE 11 *Includes General, Special Revenue, and Debt Service Funds 81 PERCENT OF DEBT DEBT SERVICE TO SERVICE GENERAL FISCAL YEAR PRINCIPAL INTEREST TOTAL EXPENDITURES* EXPENDITURES September 30, 1994 $ 58,000 $ 97,493 $155,493 $ 2,756,605 5.6% September 30, 1995 85,000 74,139 159,139 2,936,945 5.4 September 30, 1996 341,000 87,098 428,098 3,961,171 10.8 September 30, 1997 120,000 65,540 185,540 3,746,737 5.0 September 30, 1998 124,000 58,916 182,916 4,467,520 4.1 September 30, 1999 278,770 303,468 582,238 6,420,559 11.0 September 30, 2000 300,820 286,435 587,255 6,500,517 9.0 September 30, 2001 192,410 269,942 462,352 6,742,328 6.9 September 30, 2002 577,000 289,792 866,792 9,591,030 9.0 September 30, 2003 378,000 259,172 637,172 10,981,304 5.8 *Includes General, Special Revenue, and Debt Service Funds 81 (This Page Intentionally Left Blank) 82 L7 Q X LL F- ni F- ar LL 2 U V; LL C } F- A •• cc w 00 d N r- O LO J O 3 t m O o t` N 00 m N co Q LL LU O W N M M d Ln M Ln M tp � w m W N r*- �- n M r- LO O O M 00 n [t LLB M O Z U Q N N 00 to O M 00 .- m O Ln CO r- 00 w cc [F Cl) 00 w CO .- M LO r- I- N CC) O LO > OU M M r O M r� M N M Ln J O 00 O 00 M 00 Lo O M M Q O N 00 r- 00 r` LO m co < �- O O m O 0 M N N N O t\ r- Ln N M M O �- �- M N N M M N N N N Ln r r LA LO U 0 Z O 00 O 00 M 00 LO O M M m O N 00 r 00 I� LO M .- uj — O O LO O LO M r` N M w w (n LU U ~ ~ N N LO N M O r� n (O M (01 00 LL) Ln LO (p Nt (p (`7 Cl) � LU t N N } W W U) 5 }= Q O O O O O O O O O O F- Q w m 0 CL W U O O O O O O O O O O O O O O O O O O O O F- } Lu 0 Z Ln O Lo LO L) O Ln LO LO LO � M O %t LO LO 00 M M n 00 U N N w O (D W Z W W Z W ul O 00 N O LO - It 00 00 LO CD > F- 0C Q M Cp 00 LO M N Cp N N O U Q < . O LL U 0C U W W O M � r` cp M N LO O LO O O fit' It 4 N O M (p O J L Z CO d n CD O M (p N r (p 00 Z O O W vy .- .- r- N m w Z Z O O ^ M M I� 00 n N N O Z Lu w Q J Cp n N M n M M c Q O U W O rn N Li LL,6 Ld n rn O W a W N N M LA O M ~ w 0 CO W r % N N M M n O O W LO N O M O 00 LO O 000 � Z (O (p r` M LO O LL) Ln I- (- O 0 CD O 00 O (ri 00 cr> M CD M n LO LO O (p N W W M M M 00 M N M N co N 0- 4: O �-- N N M M C 00 � LO (p n 00 M O ■- N M M M M M M M O O O O M M M M M M O O O O cr N N N N w O O O O O O O O O O } M M M M M M M M M M Q -0 .0 -0 -0 .0 -0 -0 -cc (n E E E E E E E C E E LL +�+ CL +�+ a � a - ++ a 41 a +-, a +-, a +1 n + � a +1 a (n (n cn (n (n cn (n (n (n (n •• CITY OF SCHERTZ, TEXAS WATERWORKS AND SEWER SYSTEM FUND REVENUE BOND REQUIREMENTS YEAR ENDED SEPTEMBER 30, 2003 ANNUAL PRINCIPAL/ SEMI - ANNUAL INTEREST UTILITY SYSTEM REVENUE BONDS, SERIES 2001: Principal Payment, Due September 1, 2004 $365,000 Interest Payment, Due March 1, 2004 113,398 Total Requirements TABLE 13 REQUIREMENT AT SEPTEMBER 30, BASIS 2003 1/12 TH $30,417 1/6 TH 18,900 The City was in compliance with revenue bond requirements as of September 30, 2003. RESERVE FUND REQUIREMENTS 142-317 The City is required to make monthly deposits sufficient to meet the total reserve fund requirement within sixty (60) months of the closing date for the 2001 issue. The City has purchased a surety bond through MBIA Insurance Corporation to meet the reserve fund requirement. 84 CITY OF SCHERTZ, TEXAS DEMOGRAPHIC STATISTICS LAST TEN FISCAL YEARS TABLE 14 85 LEVEL IN PER YEARS OF CAPITA MEDIAN FORMAL SCHOOL UNEMPLOYMENT FISCAL POPULATION INCOME AGE EDUCATION ENROLLMENT RATE IN % YEAR (1) (2) (3) (3) (4) (3) 1994 12,500 Est. $13,600 32 14 4,576 3.9 1995 13,500 Est. 13,600 32 14 4,678 3.9 1996 14,500 Est. 13,600 32 14 4,841 3.9 1997 15,000 Est. 13,600 33 14 5,136 3.9 1998 17,500 Est. 16,500 32.6 14.6 5,951 3.9 1999 18,000 Est. 16,500 32.6 14.6 5,777 3.9 2000 18,694 Act. 31,768 35.1 14.6 6,186 2.4 2001 22,000 Est. 36,478 35.1 14.6 6,440 2.4 2002 23,000 Est. 36,478 35.1 14.6 6,440 2.4 2003 24,000 Est. 38,000 35.1 14.6 7,245 4.1 Source: (1) 2000 Bureau of the Census Department of Planning, University of Texas (2) Department of Economics, University of Texas United States Department of Labor (Information not Available for Odd Years) (3) Texas Employment Commission (4) Texas Education Agency District Performance Report 85 (This Page Intentionally Left Blank) :. LL) w J Li) H Z O H U D 0: H HZ OU w J uj 0~CZU LU 2 0 u. Z Cn Q w LL j E- J U) _H j Q U } LJJ D It co c0 O 00 Z M w 00 O O rn LMO 0) O n (O O N CD CL) 00 O N CO 00 CA ON LO J > �- U XCA 00 CO LO O N CMO r� LL! rn � O � U LL N vJ• O C1 U U Q Q � r- 00 00 N O It r*� n O a) r m =3 �c � � O to O n LO LO (D M Z M O LO 00 (O 00 C`) r- a) O LO LO CO O O N It Z .-- r- N M M COp N 00 CD O r` O co O J r� O N O d M O M Q M CO qt — n N LO LO CO n Z LC) O N r- O 00 NO (O M 00 LU �t LO N 00 �t CA . 0 CD I� CC) co (O M LO M O M O j � CN N N CO CO Cl) O J LO CA O N 00 O Q � N Ct N 't M CA O m O U LO w O CO NO rn C7) M CA O LO O M -t O N M 00 — LO M O N M � M LO LO O LO It LO n LO N LO M 00 U N M M d' M V). Z D tI). w cc D H N w Z cc O m N (O 00 � M N CO N M Z> r- It LO LO D It co c0 O 00 Z M w 00 O O rn LMO n J O D J < C'7 C'7 to _ CA r C� C'7 � M uJ CO 00 CA LO LO J > �- U .- 00 CN 00 It r- LO O (O 00 LO Z D tI). w cc D H N w Z cc O m N (O 00 � M N CO N M Z> r- It LO LO N D r- LO c0 O 00 Z M LO CO O O0 It 00 �t a) U 00 O N 00 M uJ CO CA Cn (O M J > 00 .- 00 1- Q i 00 N r� LO U F- c O � U LL N vJ• O C1 U U Q Y � t >- C yp y N C c m F- O (n o 0 3 O ma N +O� U O a) r m =3 �c � � � O C C Cl N O 0 W ccoo 00 mH �+. Lv a) -C a is N LO r- LO c0 O 00 It M LO CO O Ct (0 LO CA a) U O I� LO 00 M (O CO N 't M M O O C'7 00 CO (0 N LO (0 N LO LO M N M It M [h t\ O M M CO r- Cn M U m LO N N I- � N M N M N N D Z a> io m O U CD +r Lo E y LL M O O CA r- Cn CA CO M O LO LO Ct (0 LO CA a) U LO O co LO M CA M Cn It N N y •- N O O N O O a cl U O O U �p N c C CL O C r O N N N 00 N O C1 U U Q Y � t >- C yp y N C c m F- O o 0 3 O ma N +O� U a) r m =3 �c � � � O C C Cl N O ccoo 00 mH �+. Lv a) -C a is m Ct M CF) LO M CA (O O) CA I� M Cn 00 M CA CF) C) CA O O O O O N O O M O O U O CITY OF SCHERTZ, TEXAS PRINCIPAL TAXPAYERS YEAR ENDED SEPTEMBER 30, 2003 TABLE 16 Source: Guadalupe County Appraisal District :: 2002 PERCENTAGE OF ASSESSED TOTAL ASSESSED PRINCIPAL TAXPAYERS TYPE OF BUSINESS VALUATION VALUATION 1. Block Distributing, Inc. Distribution $ 24,350,603 2.38% 2. H.E.B. Grocery Co. Grocery Sales 9,950,870 .97 3. S.P. Richards Co. Banking 7,087,559 .69 4. C & W Ranches, Ltd. Real Estate 6,354,626 .62 5. PSPI, Inc. Machine Fabricating 5,653,422 .55 6. Sycamore Apartments, Ltd. Apartment Complex 5,026,690 .49 7. AER Manufacturing Industrial 4,647,442 .46 8. Coronado Negley Paint Co. Industrial 4,634,631 .45 9. Guadalupe Valley Electric Utility 3,961,790 .39 10. Intsel Steel Distribution Distribution 3,511,850 .34 Other Assessed Properties 949,233,230 92.66 TOTAL ASSESSMENTS $1,024,4 12,713 $100.00% Source: Guadalupe County Appraisal District :: CITY OF SCHERTZ, TEXAS MISCELLANEOUS STATISTICS YEAR ENDED SEPTEMBER 30, 2003 Date of Incorporation Date of First Charter Adopted Date Present Charter Adopted: Form of Government: 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 Miles of Highways, Streets, and Alleys Streets and Highways, Paved Streets, Unpaved Alleys Sidewalks Miles of Sewer: Storm Sanitary Building Permits: 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 PERMITS ISSUED 7,119 2,812 2,754 3,716 3,690 3,767 3,373 2,559 2,066 2,771 TABLE 17 December, 1958 April, 1974 Amended May, 1997 Council- Manager SQUARE MILES 28.00 26.02 24.18 24.18 24.15 24.15 24.15 24.15 24.15 24.15 101.82 Miles 8.98 Miles 3.44 Miles 16.95 Miles 4.08 Miles 53.87 Miles VALUE OF BUILDINGS $79,468,026 50,609,283 70,912,183 61,864,013 76,501,638 82,800,348 71,741,172 64,267,503 21,150,682 18,917,416 (Continued) :• CITY OF SCHERTZ, TEXAS MISCELLANEOUS STATISTICS YEAR ENDED SEPTEMBER 30, 2003 TABLE 17 Fire Protection: Number of Stations 1 Number of Employees (Full and Part -Time) 24 Number of Volunteers 17 Recreation: Parks 7 Playgrounds 20 Other Recreational Facilities: 24,000 Baseball Fields 7 Baseball Practice Fields 4 Softball Fields 1 Large Pavillion 10,000 Square Feet Covered Small Pavillion 600 Square Feet Covered Picnic Tables: 15,000 Uncovered 93 Restrooms: 7,260 Male 11 Female 11 Concessions Stands 2 Community Center 1 City Employees: September 30, 2003 219 Elections: Number of Registered Voters 12,922 Number of Votes in: Last Municipal Election 423 Percentage of Registered Voters Voting in: Last Municipal Election 3.3% Source: Municipal Election Records Population: Census Population Count 2003 (Estimate) 24,000 2002 (Estimate) 23,000 2001 (Estimate) 22,000 2000 18,694 1999 (Estimate) 18,000 1998 (Estimate) 17,500 1997 15,000 1990 10,597 1980 7,260 1970 4,061 1960 2,281 1950 1,200 .6 SINGLE AUDIT SECTION 91 (This Page Intentionally Left Blank) 92 NORTH TOWER 800 N.W. LOOP 410. SUITE 50ON SAN ANTONIO. TEXAS 78216 -5611 210/841 -2581 FAX 210/541 -2588 cpas @twbky.com Will imms, Biediger, K X) Young, L.C. CERTIFIED PUBLIC ACCOUNTANTS MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS The Honorable Mayor and Members of the City Council City of Schertz, Texas We have audited the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Schertz, Texas, as of and for the year ended September 30, 2003, which collectively comprise the City of Schertz, Texas' basic financial statements, and have issued our report thereon dated March 12, 2004. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether City of Schertz, Texas, financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our test disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. However, we noted certain immaterial instances of noncompliance that we have reported to management of the City of Schertz, Texas, in a separate letter dated March 12, 2004. Internal Control Over Financial Reporting In planning and performing our audit, we considered City of Schertz, Texas', internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one PAUL E. WILLIAMS, C.P.A. /JAMES L. BIEDIGER, JR., C.P.A. / C. TED KASTOR. C.P.A. / CHARLIE E. YOUNG, JR., C.P.A. H. LEE SCHWARTZMAN, C.P.A. / F. GLENN CRAVEY, C.P.A. / FRED J. TIMMONS, C.P.A. / JOHN W. GREEN, C.P.A. R. IARRYTHOMPSON, C.P.A. (RETIRED) 93 (This Page Intentionally Left Blank) 94 or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. However, we noted other matters involving the internal control over financial reporting that we have reported to management of the City of Schertz, Texas, in a separate letter dated March 12, 2004. This report is intended for the information of management, city council, and federal awarding agencies and pass- through entities, and is not intended to be and should not be used by anyone other than these specified parties. Certified Public Accountants San Antonio, Texas March 12, 2004 95 (This Page Intentionally Left Blank) a. NORTH TOWER 800 N.W. LOOP 410, SUITE SOON SAN ANTONIO, TEXAS 78216 -5611 210/541 -2581 FAX 210/541.2588 cpas @twbky.com nompson, Williams, Ndiger, ceastor Yo ung, L.C. CERTIFIED PUBLIC ACCOUNTANTS MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A -133 The Honorable Mayor and Members of the City Council City of Schertz, Texas Compliance We have audited the compliance of City of Schertz, Texas, with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A -133 Compliance Supplement that are applicable to the major federal program for the year ended September 30, 2003. City of Schertz, Texas', major federal program is identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to the major federal program is the responsibility of City of Schertz, Texas' management. Our responsibility is to express an opinion on City of Schertz, Texas' compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. Those standards and OMB Circular A -133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about City of Schertz, Texas', compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on City of Schertz, Texas', compliance with those requirements. In our opinion, City of Schertz, Texas, complied, in all material respects, with the requirements referred to above that are applicable to its major federal program for the year ended September 30, 2003. PAUL E. W111AMS. C.PA / JAMES L. BIEDIGER. JR., C.P.A. / C. TED KASTOR, C.P.A. / CHARLIE E. YOUNG, JR., C.PA. H. LEE SCHWARTZMAN, C.P.A. / F. GLENN CRAVEY, C.P.A. / FRED J. TIMMONS, C.P.A. / JOHN W. GREEN, C.P.A. R. LARRY THOMPSON, C.P.A. (RETIRED) 97 (This Page Intentionally Left Blank) Internal Control Over Compliance The management of City of Schertz, Texas, is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered City of Schertz, Texas', internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on the internal control over compliance in accordance with OMB Circular A -133. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of management, city council, and federal awarding agencies and pass- through entities and is not intended to be and should not be used by anyone other than these specified parties. Certified Public Accountants San Antonio, Texas March 12, 2004 .. CITY OF SCHERTZ, TEXAS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED SEPTEMBER 30, 2003 PASS - THROUGH FEDERAL ENTITY FEDERAL GRANTOR/ PASS - THROUGH CFDA IDENTIFYING GRANTOR /PROGRAM OR CLUSTER TITLE NUMBER NUMBER Federal Emergency Management Agency/ Texas Department of Public Safety /Hazard Mitigation Grant -Unmet Needs Project 83.548 2E -02C -1 /DR -1257 FEDERAL EXPENDITURES 1.270,456 100 CITY OF SCHERTZ, TEXAS NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED SEPTEMBER 30, 2003 NOTE 1: GENERAL The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Schertz. The information in this schedule is presented in accordance with the requirements of OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. NOTE 2: BASIS OF ACCOUNTING The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. The governmental funds are accounted for using a current financial resources measurement focus. All federal grant funds were accounted for in the general fund and the capital projects fund. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Statements of revenues and expenditures and changes in fund balances of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. The modified accrual basis of accounting is used in the governmental funds financial statements. This basis of accounting recognizes revenues in the accounting period in which they become susceptible to accrual (i.e., both measurable and available) and expenditures in the accounting period in which the fund liability is incurred, if measurable, except for unmatured interest on long -term debt, which is recognized when due, and certain compensated absences and claims and judgments, which are recognized when the obligations are expected to be liquidated with expendable available financial resources. Federal grant funds are considered to be earned to the extent of expenditures made under the provisions of the grant. 101 CITY OF SCHERTZ, TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED SEPTEMBER 30, 2003 I. Summary of Auditor's Results A. Type of auditor's report issued on the financial statements: Unqualified B. Reportable conditions in internal controls disclosed by the audit of the financial statements None 1. Reportable conditions that were material weaknesses None C. Noncompliance material to the financial statements disclosed by the audit of the financial statements None D. Reportable conditions in internal controls over major programs disclosed by the audit of the financial statements None 1. Reportable conditions that were material weaknesses None E. Type of auditor's report issued on compliance for major program Unqualified F. Findings disclosed by the audit of the financial statements which the auditor is required to report under Sec. 510(a): None G. Major Program: Federal Emergency Management Agency Hazard Mitigation Grant, CFDA #83.548 H. The dollar threshold used to distinguish between Type A and Type B programs $300,000 I. Auditee qualified as a low risk auditee. No II. Findings relating to the financial statements which are required to be reported in accordance with generally accepted government auditing standards None identified. III. Findings and questioned costs for federal awards None identified. IV. Prior audit findings. None identified. 102