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12-31-2001 district #2ANNUAL FINANCIAL REPORT OF THE GUADCO MUNICIPAL UTILITY DISTRICT NO, 2 NINE MONTHS ENDED DECEMBER 31, 2001 p H 1 k I I h U 1 U u h n PAGE NUMBER INDEPENDENT AUDITOR'S REPORT 1 COMBINED BALANCE SHEET - ALL GOVERNMENTAL FUND TYPES AND ACCOUNT GROUPS 2 COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES 3 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND 4 NOTES TO FINANCIAL STATEMENTS 5-13 •:u. • WIN C. AUDITOR'S REPORT ON SUPPLEMENTAL SCHEDULES 14 D. NOTES REQUIRED BY THE WATER DISTRICT ACCOUNTING MANUAL 5 E. SERVICES AND RATES 15 F. SCHEDULE OF GENERAL FUND EXPENDITURES 17 G. SCHEDULE OF TEMPORARY INVESTMENTS 18 H. ANALYSIS OF TAXES LEVIED AND RECEIVABLE 19 I. ANALYSIS OF CHANGES IN GENERAL FIXED ASSETS 21 J. GENERAL LONG -TERM DEBT SERVICE REQUIREMENTS BY YEARS 22 K. ANALYSIS OF CHANGES IN GENERAL LONG -TERM DEBT 23 L. COMPARATIVE STATEMENT OF REVENUES AND EXPENDITURES, GENERAL FUND, AND DEBT SERVICE FUND - FOUR YEARS AND NINE MONTHS ENDED DECEMBER 31, 2001 24 M. INSURANCE COVERAGE 25 N. BOARD MEMBERS, KEY ADMINISTRATIVE PERSONNEL, AND CONSULTANTS 26 NOTE: This is the final audit of the District. I To lowtop CERTIFIED PUBLIC ACCOUNTANT City of Schertz Guadco Municipal Utility District No. 2 Guadalupe and Comal Counties, Texas ' I have audited the accompanying general purpose financial statements of Guadco Municipal Utility District No. 2 as of December 31, 2001, and for the nine months then ended as listed in the table of contents. These general purpose financial statements are the responsibility of the ' Guadco Municipal Utility District No. 2 management. My responsibility is to express an opinion on these financial statements based on my audit. ' I conduct my audit in accordance with generally accepted auditing standards and generally accepted government auditing standards accepted in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about ' whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant ' estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. ' In my opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of Guadco Municipal Utility District No. 2 as of December 31, 2001, and the results of its operations and changes in fund balances for the ' nine months then ended in conformity with generally accepted accounting principles accepted in the United States of America. 4 ✓ 4e 4, 2002 n I 0 L_ 352 Loncla St. • New Braunfels, TX 78130 ' 830 - 625.6073 830 -625 -8225 FAX e -mail: jimr @the- cla,net Member of American Institute of Certified Public Accountants GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 COMBINED BALANCE SHEET - ALL GOVERNMENTAL FUND TYPES AND ACCOUNT GROUPS December 31, 2001 Cash Temporary Cash Investments, at Cost Receivables Taxes Accounts Accrued Interest Prepaid Insurance Due from Other Funds Restricted Assets Cash and Temporary Cash Investments, at Cost Property, Plant, and Equipment Amount Available in Debt Service Fund Amount to be Provided for Retirement of General Long -Term Debt TOTAL ASSETS LIABILITIES Accounts Payable Regulatory Assessment Payable Advances from Developer Payable from Restricted Assets - Deposits Due to Other Funds Deferred Revenues General Obligations Bonds Payable Total Liabilities FUND EQUITY Investment in General Fixed Assets Fund Balances (Deficit) Reserved Unreserved Undesignated Total Fund Equity (Deficit) TOTAL LIABILITIES AND FUND EQUITY GOVERNMENTAL FUND TYPES DEBT CAPITAL GENERAL SERVICE PROJECTS 114,523 142,487 26,830 847.00 1,383 2,452 - 28,848 215 - 5,024 5,007 120,609 172,718 34,289 , 5,312 - - 10,031 1,771 5,312 11,802 - 160,916 34,289 115,297 - - 115,297 160,916 34,289 120,609 172,718 34,289 The accompanying notes are an integral part of these financial statements. 2 C! 1 1 1 1 ACCOUNT GROUPS GENERAL GENERAL FIXED LONG -TERM ASSETS DEBT TOTALS (MEMORANDUM ONLY) 12/31/01 3/31/01 5,312 5,312 283,840 28,619 - 1,771 586 4,682 79,428 - 455,000 472,114 472,393 28,848 586 - 195,205 86,107 215 - - 1,283 10,031 4,155 - - 95,716 938,494 - 938,494 938,494 - 143,870 143,870 56,613 - 311,130 311,130 398,387 938,494 455,000 1,721,110 1,603,281 2 7,340 5,312 5,312 10,031 4,155 - 1,771 586 455,000 455,000 455,000 - 455,000 472,114 472,393 938,494 - 938,494 938,494 - 195,205 86,107 115,297 106,287 1,130,888 938,494 - 1,248,996 938,494 455,000 1,721,110 1,603,281 2 h REVENUES Property Taxes Water Service Sewer Service Penalty and Interest Standby & Tap Connection Fees ' Interest on Time Deposits Other Total Revenue ' EXPENDITURES Debt Service Principal Retirement Interest and Fiscal Charges Purchase Water and Sewer Services Professional Fees Director Fees Contracted Services Utilities Repairs and Maintenance Tax Collection Services Other Expenditures Developer Settlement Expenditures Total Expenditures GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES NINE MONTHS ENDED DECEMBER 31, 2001 L U Excess of Revenues Over (Under) Expenditures FUND BALANCES (DEFICIT) AT BEGINNING OF YEAR FUND BALANCES AT END OF YEAR GOVERNMENTAL FUND TYPES DEBT CAPITAL GENERAL SERVICE PROJECTS 8,755 120,067 53,378 17,622 2,080 - 2,323 1,416 454 - 84,612 121,483 650 650 - 11,964 23,674 - 22,258 1,650 22,462 989 901 - - 1,061 3,668 - 10 75,602 13,025 10 9,010 108,458 106,287 52,458 33,649 TOTALS (MEMORANDUM ONLY) Nine Months Ended Year Ended 12/31/01 3/31/01 128,822 136,293 53,378 60,389 17,622 22,525 2,080 - 4,389 25,680 454 339 206,745 245,226 100,000 11,964 29,147 23,674 38,374 22,258 18,779 1,650 2,100 22,462 18,409 989 1,860 901 13,472 1,061 3,209 3,678 4,996 - 69,693 88,637 300,039 118,108 54,813 192,394 247,207 115,297 160,916 34,289 310,502 192,394 ' The accompanying notes are an integral part of these financial statements. 3 r The accompanying notes are an integral part of these financial statements. 4 GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND ' NINE MONTHS ENDED DECEMBER 31, 2001 ' GENERALFUND VARIANCE - FAVORABLE BUDGET ACTUAL (UNFAVORABLE) ' REVENUES Property Taxes 6,795 8,755 1,960 Water Service 51,003 53,378 2,375 ' Sewer Service 19,503 17,622 (1,881) Penalty and Interest 378 - (378) Standby & Tap Connection Fees 3,546 2,080 (1,466) Interest on Time Deposits 2,250 2,323 73 Other 378 454 76 ' Total Revenue 83,853 84,612 759 EXPENDITURES ' Purchase Water Repairs and Maintenance 15,525 9,000 10,192 901 5,333 8,099 Electric Utilities 2,736 989 1,747 Sewer Treatment 15,003 13,482 1,521 ' Director Fees 2,250 1,650 600 Legal Fees 9,000 13,383 (4,383) Audit Fees 4,000 8,000 (4,000) ' Accounting Fees 1,305 1,825 (520) Administration 4,050 4,150 (100) Utility Operation 12,753 16,487 (3,734) ' Legal Notices 81 64 17 Telephone 306 233 73 Insurance and Bonds 2,106 3,158 (1,052) ' Postage and Rent 576 240 336 Taxes TNRCC 441 656 (215) Miscellaneous 648 192 456 Total Expenditures 79,780 75,602 4,178 Excess of Revenues Over ' (Under) Expenditures 4,073 9,010 4,937 FUND BALANCE AT ' BEGINNING OF YEAR 106,287 106,287 - TRANSFERS - - - ' FUND BALANCE AT END OF YEAR 110,360 115,297 4,937 The accompanying notes are an integral part of these financial statements. 4 GUADCO MUNICIPAL DISTRICT NO.2 NOTES TO FINANCIAL STATEMENTS ' December 31, 2001 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity All significant activities and groups on which the GUADCO Municipal Utility District No. 2 (District) exercises oversight responsibility have been included in the general purpose ' financial statements, for the fiscal year ended. The District is located in Coma] and Guadalupe counties in Texas. The following criteria regarding manifestation of oversightwere considered by the District in its evaluation of District organizations and 'activities: Financial Interdependency - The District is responsible for its debts and entitled ' to surpluses. No separate agency receives a financial benefit nor imposes a financial burden on the District. Election of the Governing Authority - The locally elected Board of Directors is exclusively responsible for all decisions and accountable for the decisions it makes. ' Designation of Management - The Board of Directors hires the management company. The activities under the purview of management are within the scope ' of the reporting entity and management is accountable to the Board of Directors for the activities being managed. Ability to Significantly Influence Operations - The Board of Directors has the ' statutory authority under provision of state law, and specifically the Texas Water Code, to significantly influence operations. This authority includes, but is not limited to, adoption of the budget, control over assets, including facilities and ' properties, short-term borrowings, signing contracts, and developing programs to be provided by the District. ' Accountability of Fiscal Matters - The responsibility and accountability over all funds is vested in the District's management. ' Purchase and sales of water are provided through an interconnect shared by Guadco Municipal Utility District No. 2 and another district, Guadco Municipal Utility District No. 1. There is no oversight relationship among any of the previously described entities, as ' each is controlled and directed by its own independently elected governing body. B. Description of Funds The District has established several funds, in conformance with generally accepted accounting principles, for the purpose of accounting for transactions in compliance with legal requirements. Funds and account groups in use by the District in accounting for ' its financial activities are as follows: Governmental Funds ' General Fund - To account for all of the general water and sewer revenue of the District and other revenues not specifically levied or collected for other District funds, and for ' expenditures related to the maintenance of operations. 5 O I 1 U r k r I 1 0 1 IJ F I k GUADCO MUNICIPAL DISTRICT NO. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2001 Debt Service Funds - To account for the source and disposition of funds for paying interest and principal on general long -term debt and fiscal agents expenses. Capital Project Funds - To account for the acquisition of capital facilities being financed from bond proceeds. General Fixed Assets Accounts - To account for property, plant and equipment of the District. General Long -Term Debt Accounts - To account for the unmatured principal of outstanding bonds. C. Basis of Accounting The District maintains its accounting records on the modified accrual basis. The modified accrual basis recognized revenues that are suspectable to accrual when measurable and available, and recognizes expenditures when incurred including expenses that normally qualify as prepaid expenses. Measurable means the amount of the transaction can be determined, and available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Property taxes remaining uncollected at year end are reported as deferred revenues, since they are not considered to be available. D. Cash Cash includes amounts in demand deposits, and interest - bearing deposits held by the District. Cash in excess of current requirements is invested in various interest - bearing instruments and is disclosed as part of investments. These deposits and investments were authorized by legal provisions. E. Investments All investments during the fiscal year consisted of Investment Pool Securities held in the District's name and carried at cost. F. Receivables All receivables are reported at gross values. There is no estimate for uncollectible amounts in the customer water, sewer, and stand -by fee accounts as the deposits have proven to be adequate to cover liabilities except in non - material amounts. G. Interest Receivable Interest on investments is recorded as revenue in the year the interest is earned and is available to pay liabilities of the current period. ' GUADCO MUNICIPAL DISTRICT NO. 2 NOTES TO FINANCIAL STATEMENTS ' December 31, 2001 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Property. Plant and Equipment Property, plant, and equipment, including infrastructure assets, are recorded at cost when ' acquired. General fixed assets are recorded as expenditures in the general fund and capital projects fund at the time of purchase and are capitalized in the General Fixed Asset Account Group. No depreciation is provided for on the general fixed assets of the ' District. Costs related to repairs and maintenance are recorded as expenditures. Significant ' renovations and improvements are capitalized when incurred. Interest costs are not capitalized on projects financed by government grants, third -party donations, or on assets that will be reported in the General Fixed Assets Account Group. ' I. Employee Salarivra. Taxes and Pension Plans The District has engaged a municipality to oversee the monthly operations in a manner dictated by the Board of Directors. Thus, the District has no employees and is not required to pay salaries, payroll taxes, or amounts to pension plans. ' J. Budgets The District follows these procedures in establishing the budgetary data reflected in the financial statements: 1. Formal budgetary integration is employed as a management control service during the year for the general fund and is presented to directors monthly in the internal accounting information. ' 2. The manager prepares the budget for Board review usually at the December meeting. The budget is discussed, any changes are made, and the final ' budget is presented at the March meeting. 3. The Board approved total budget appropriations. 4. Any unused appropriations in the budget lapse at the end of the fiscal year. ' K. Comparative Data Comparative totals for the prior year have been presented in the accompanying financial statements in order to provide an understanding of changes in the Districts financial position ' and operations. However, comparative data by fund type has not been presented in each of the statements since their inclusion would make the statements unduly complex and difficult to read. ' L. Total Columns on Combined Statements Total columns on the combined statements are captioned Memorandum Only to indicate that they are presented only to facilitate financial analysis. Data in these columns does not present financial position, results of operations, or changes in financial position in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. 7 I 1 CI C P H H U 1 H 1 U H L_ GUADCO MUNICIPAL DISTRICT NO. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2001 NOTE 2: STEWARDSHIP COMPLIANCE AND ACCOUNTABILITY A. Compliance with Bond Covenants The annual debt service requirements at December 31, 2001, of all bonds is $114,187, and the balance of the interest and sinking fund and all investment at December 31, 2001, is $143,870. The District met or exceeded the funding requirements of all bonds issues on a timely basis. Expenditures and resources of the interest and sinking fund were all of an authorized nature. B. Deposits with Financial Institutions All investments, demand deposits, and savings of the District were sufficiently covered through either FDIC insurance amounts, collateralized deposits in the District's name, held by other banks, or by nature of the investment (purchase of U.S. Treasury Bills.) Throughout the fiscal year, the District's only investments were in the form of Investment Pool Securities. The District records all interest revenue related to the investment activities in the respective fund in which they were earned. Deposits At December 31, 2001, the bank balance of the District's deposits was $283,840. This entire amount was covered by $100,000 federal depository insurance and collateral deposits held in the District's name. The collateral for the District's deposits is categorized to give an indication of the level risk assumed by the District at year end. Category 1 includes deposits that are insured, registered or for which the securities are held by the District or its agent in the District's name. Category 2 includes uninsured and unregistered deposits for which the securities are held by the counter party's trust department or agent, but not in the District's name. Category 3 includes uninsured and unregistered deposits for which the securities are held by department or agent, but not in the District's name. All deposits are Category 1. Investments The District's investments are categorized to give an indication of level of risk assumed by the District at year end. Category 1 includes investments that are insured or registered or for which the securities are held by the District or its agent in the District's name. Category 2 includes uninsured and unregistered investments for which the securities are held by the counter party's trust department or agent in the District's name. Category 3 includes uninsured and unregistered investments for which the securities are held by the counter party's trust department or agent, but not in the District's name. The District is currently invested in an Investment Pool which is a pool of securities authorized by the Public Investment Act of Texas. CATEGORY CARRYING MARKET DESCRIPTION 1 2 3 AMOUNT VALUE Investment Pool Securities $ 4,682 $ - $ $ 4,682 $ 4,682 Investments are stated at cost plus accrued interest, and all investment activities are conducted through a security firm. Investment Pool Securities are bought and held at the security firm for safekeeping. h U 1 P H E D H 1 II 1 GUADCO MUNICIPAL DISTRICT NO. 2 NOTES TO FINANCIAL STATEMENTS December 31, 2001 Guadco Municipal Utility District No. 2 was created by an order of the Texas Water Rights Commission on October 28, 1975, and confirmed by the electorate of Guadco Municipal Utility District No. 2 at a confirmation election held on April 4, 1981. The District is operating pursuant to the provisions of Chapter 54, Texas Water Code, as amended. The Board of Directors, consisting of five elected property owners, held its first meeting on April 24, 1979, and the first bonds were sold February 1, 1984. The following is a summary of amounts due from and due to other funds at year end: General Fund Debt Service Fund Capital Projects Fund Capital Projects Fund General Fund Debt Service Fund General Fund TOTAL ALL FUNDS DUE FROM 5,024 5,007 10,031 NOTE 5: GENERAL LONG -TERM DEBT DUE TO 5,007 5,024 10,031 The following is a summary of changes in general long -term debt: BONDS ADD LESS BONDS PAYABLE AT BONDS BONDS PAYABLE AT March 31, 2001 ISSUED RETIRED December 31, 2001 Water Works and Sewer System Combination Unlimited Tax and Revenues Bonds Refunding Series 1999 455,000 455,000 Q ' GUADCO MUNICIPAL DISTRICT NO. 2 NOTES TO FINANCIAL STATEMENTS ' December 31, 2001 NOTE 5: GENERAL LONG -TERM DEBT (CONTINUED) At December 31, 2001, the District's long -term debt consisted of: ' RANGE OF GENERAL INTEREST LONG -TERM MATURITY RATES DEBT k 1 P CURRENT LONG -TERM MATURITIES MATURITIES Water Works and Sewer System Combination Unlimited Tax and Serially Revenue Refunding through Bonds Series 1999 2005 5.25% 455,000 105,000 350,000 A schedule of bond maturities for the next five (5) years is as follows: YEAR ENDING MARCH 31. 2002 2003 2004 2005 Total ' Principal Interest Total E r lJ TAX AND REVENUE BONDS SERIES 199 114,187 125,488 124,581 128,281 492,537 455,000 37,537 492,537 Tax and revenue bonds authorized and unissued as of December 31, 2001 amounted to $9,025,000. The bonds are payable from the proceeds of an ad valorem tax levied upon all property subject to taxation within the District, without limitation as to rate or amount, and are further payable from and secured by a lien on the pledge of the net revenues to be received from the operation of the District's waterworks and sanitary sewer system. 10 ' BALANCE MARCH 31, ADDITIONS DECEMBER GUADCO MUNICIPAL DISTRICT NO. 2 31, 2001 435,155 NOTES TO FINANCIAL STATEMENTS 125,731 125,731 December 31, 2001 129,207 80,824 - NOTE 6: WATER AND SEWER SERVICE RATES 166,921 - 166,921 656 - 656 938,494 - The Guadco Municipal Utility District No. 2 has established the following water and sewer service rates for residential or multi - family customers in effect for the fiscal year ending December 31, 2001: FOR FISCAL YEAR 2000 -2001 Water Service Only ' First 3,000 Gallons of Water Used - Minimum Bill 23.00 Each 1,000 Gallons of Water Used from 3,001 to 6,000 1.59 Increasing the Base by $1.59 by $.24 for Each 3,000 Gallons Thereafter ' Sewer Service Only First 5,000 Gallons of Water Used - Minimum Bill Each 1,000 Gallons of Water Used Thereafter 13.85 0.55 Deposits Refundable Deposits - Owner 40.00 Refundable Deposits - Renter 75.00 ' Tap Fees Standard Home 2,000.00 ' Stand by Fees - Per Undeveloped Lot per month 50.00 There was 151 metered water and sewer customers at December 31, 2001. The rates above have not been sufficient to fund operating costs. During 1987, a maintenance tax of $0.06 per $100 valuation was levied to help defray part of the cost of operations. This levy ' was $0.08 per $100 in the current year and provided the District approximately $8,755 in spendable general fund revenues. NOTE 7: CHANGES IN GENERAL FIXED ASSETS A summary of changes in general fixed assets follows: ' Water System Sewage System ' Drainage System Engineering Fees Organizational Costs (See Page 20) ' Furniture and Fixtures TOTAL 11 BALANCE NET BALANCE MARCH 31, ADDITIONS DECEMBER 2001 (DELETIONS) 31, 2001 435,155 435,155 125,731 125,731 129,207 - 129,207 80,824 - 80,824 166,921 - 166,921 656 - 656 938,494 - 938,494 ' GUADCO MUNICIPAL DISTRICT NO, 2 NOTES TO FINANCIAL STATEMENTS December 31, 2001 NOTE 8: PROPERTY TAXES 1 Property taxes attach as an enforceable lien on property as of January 1, are due October 1 and become delinquent on February 1. Property taxes for the District are not limited as to rate ' or amount. The District's current tax rate is $1.1711 per $100 of assessed valuation and assessed valuation is approximately 100% of actual values. Of the $1.1711 per $100 of assessed valuation, $1.0911 is designated for debt service and $.08 is designated for ' maintenance. NOTE 9: ADVANCES FROM DEVELOPER ' The District has entered into several reimbursement agreements for advances from a developer to use for payment of general administrative, operations, and maintenance expenditures. It ' also entered into a construction agreement for advances for construction. These advances, plus interest, are to be repaid from the proceeds of a subsequent bond issue pursuant to the approval by the Texas Water Commission. No advances were made during 2001. ' NOTE 10: FUND EQUITY RESERVES AND TRANSFERS FROM CAPITAL PROJECTS FUND The District records one (1) general type of reserve. The one (1) type is used to indicate that a portion of the fund equity is legally restricted for a specific future use. Following is a list of all reserves used by the District and a description of each: Reserved for Debt Service An account used to indicate that certain assets are legally restricted by the bond ' indenture to be used for specific purposes. Reserved for Capital Proiects ' An account used to indicate that certain assets are generally legally restricted to be used for specific purposes. Management has researched this fund balance and has concluded that $100,800 is restricted for the purpose of capital projects. The balance of ' the fund has arisen from interest on the investments of the fund. ' NOTE 11: COMMITMENTS AND CONTINGENCIES The District entered into an agreement during 1985, to construct a 1,145,850 - gallon water storage ' facility. The water tank was completed during 1986 and was approved by the City of Schertz and the Texas Water Commission in May, 1986- The District's share of the construction and engineering costs is approximately $130,700 plus interest. During 1985, the District entered into an agreement authorizing the Guadalupe - Blanco River Authority to apply on the behalf of the District for a wastewater discharge permit from the Texas ' Water Commission. The permit, which was granted in 1987, authorized the District, by itself or in combination with others, to discharge 700,000 gallons per day of treated effluent. The District's estimated cost of the permit is $74,300 plus interest. 12 1 GUADCO MUNICIPAL DISTRICT NO. 2 NOTES TO FINANCIAL STATEMENTS ' December 31, 2001 NOTE 11: COMMITMENTS AND CONTINGENCIES (CONTINUED) ' During 1986, the District entered into an agreement with a developer to construct the underground waterlines, sewer lines, and related facilities to serve a 240 -acre development project, of ' which 87% of the project lies within the service area of the District. The preliminary design phase work was completed in 1987. The Districts total estimated cost of the facilities that lie within its service area is approximately $120,100. All three of the preceding paragraphs are subject to the terms and conditions set forth in the separate contracts, which describe the conditions for reimbursements. The conditions of ' payment, in summary, include the approval by the Water Commission of any new bonds that might be sold for the above stated purposes, the issuance and sale of the bonds and most notably, the issuance of the bonds will not occur until such time as the development of the 240 acres will ' support the retirement of principal and interest on the new bonds. Growth in the District in recent years does not indicate that this requirement will be achieved in the near future. The developer in claiming certain additional costs associated with the above mentioned projects, plus other costs claimed to be reimbursable from work allocated to this District. Effective November 15, 2000, the District entered into a Compromise Settlement Agreement and Release of all claims with the developer. The District paid the developer $245,000 for a release of the above claim by the developer. The District purchases its water supply form the City of Schertz under a contract date May 25, ' 1975. The contract is for a term of 30 years, at which time it is renewable for a maximum of 15 years. ' NOTE 12: ANNEXATION BY CITY OF SCHERTZ Effective January 1, 2002 the City of Schertz annexed the District and assumed all of the ' assets and liabilities of the District. r lJ I 1 13 I 1 r 1 F F E C' C I ..: GUADCO MUNICIPAL DISTRICT NO.2 SUPPLEMENT SCHEDULES INCLUDED WITHIN THIS REPORT NINE MONTHS ENDED DECEMBER 31, 2001 PAGE YES NO NUMBER X C. INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL SCHEDULES 14 X D. NOTES REQUIRED BY THE WATER DISTRICT ACCOUNTING MANUAL -ALL NOTES REQUIRED BY THE WATER DISTRICT ACCOUNTING MANUAL HAVE BEEN FULLY DISCLOSED IN THE GENERAL PURPOSE FINANCIAL STATEMENTS 5 X E. SERVICES AND RATES 15 X F. SCHEDULE OF GENERAL FUND EXPENDITURES 17 X G. SCHEDULE OF TEMPORARY INVESTMENTS 18 X H. ANALYSIS OF TAXES LEVIED AND RECEIVABLE 19 X I. ANALYSIS OF CHANGES IN GENERAL FIXED ASSETS 21 X J. GENERAL LONG -TERM DEBT SERVICE REQUIREMENTS BY YEARS 22 X K. ANALYSIS OF CHANGES IN GENERAL LONG -TERM DEBT 23 X L. COMPARATIVE STATEMENT OF REVENUES AND EXPENDITURES, GENERAL FUND, AND DEBT SERVICE FUND - FOUR YEARS AND NINE MONTHS ENDED DECEMBER 31, 2001 24 X M. INSURANCE COVERAGE 25 X N. BOARD MEMBERS, KEY ADMINISTRATIVE PERSONNEL, AND CONSULTANTS 26 ' INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL SCHEDULES ' City of Schertz ' GUADCO Municipal Utility District No. 2 Guadalupe and Comal Counties, Texas ' In my opinion, the accompanying information is stated fairly in all material respects in relation to the general purpose financial statements, taken as a whole, of GUADCO Municipal Utility District No. 2 for the nine months ended December 31, 2001, which are covered by my opinion ' presented in the first section of this report. The accompanying information is supplemental to the general purpose financial statements and is not essential for a fair presentation of the financial position, and the results of operations. My examination, which was made primarily for the purpose of forming an opinion of the combined financial statements taken as a whole, included such tests of accounting records, from which ' the supplementary information was complied, and such other auditing procedures as I considered necessary in the circumstances. ' The information prior to April 1, 1997 was audited by other auditor's whose unqualified audit reports were issued at various dates prior to April 1, 1997. ,`lam J�ne 4, 2002 1 1 LJ 14 ' 352 Landa St. • New Braunfels, TX 78130 830 - 625.6073 830 - 625 -8225 FAX e -mail; Jlmr@the- clo.net Member of American Institute of Certified Public Accountants GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 E. SERVICES AND RATES NINE MONTHS ENDED DECEMBER 31, 2001 ' 1. Services Provided by the District: X Retail Water Wholesale Water Drainage MINIMUM MINIMUM X Retail Wastewater Wholesale Wastewater Irrigation CHARGE USAGE Parks /Recreation Fire Protection Security WATER T 23.00 3,000 Solid Waster /Garbage Flood Control Roads WASTEWATER $ 13.85 5,000 Participates in joint venture, regional system, and /or wastewater service $0.55 ' (other than emergency interconnect) Other (specify) : ' 2. Retail Rates Based on 518 Meter P NIA Retail Rates Not Applicable Most prevalent type of meter (if not a 5/8) : N/A FLAT RATE PER 1,000 MINIMUM MINIMUM RATE GALLONS OVER CHARGE USAGE Y/N MINIMUM USAGE LEVELS WATER T 23.00 3,000 N $1.59 * 3,001 To 6,000* WASTEWATER $ 13.85 5,000 N $0.55 5,001 To Thereafter SURCHARGE: $ * Increase $.24 per 1,000 gallons for each 3,000 gallons thereafter District employs winter averaging for wastewater usage ? Yes No X ' Total water and wastewater charges per 10,000 gallons usage (including surcharges) 52.93 3. Retail Service Providers: Number of retail water and /or wastewater* connections within the District as of fiscal year end. Provide actual numbers and single family equivalents (ESFC) as noted: ' INACTIVE ACTIVE ACTIVE CONNECTIONS ONNECTION ESFC (ESFC) ** 'Single Family 133 = 1 Multi- Family Commercial 17 ' Other - Recreational Centers, Government, and VFD 1 TOTALS 151 1 ' Number of connections relates to water service, if provided. Otherwise, number of wastewater connections should be provided. ** Inactive means that water and wastewater connections were made, but service is not being provided. 4. Total Water Consumption (In Thousands) During The Fiscal Year: Gallons pumped into system: 14,932,500 Gallons billed to customers: 12,940,400 The accompanying notes are an integral part of these financial statements. 15 1 GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 ' E. SERVICES AND RATES (CONTINUED) NINE MONTHS ENDED DECEMBER 31, 2001 ' 5. Standby Fees: Does the District assess standby fees? Yes X No For the most recent full fiscal year, FYE12-31 -01, ; ' Debt Service: Total levy Total Collected Percentage Collected ' Operation & Maintenance: Total levy $ Total Collected $ - Percentage Collected 0.00% Have standby fees been levied in accordance with Water Code Section 50.056, thereby constituting ' a lien on property? Yes X No 6. Anticipated sources of funds to be used for debt service payments in the District's following fiscal ' year: Amount a. Debt Service Tax Receipts 114,187 b. Surplus Construction Funds - c. Water andlor Wastewater Revenue d. Standby Fees e. Debt Service Fund Balance to be Used - f. Interest Revenues - g. Other (Describe) TOTAL ANTICIPATED FUNDS TO BE USED * 114,187 ' * This total should equal the District's annual debt service for the fiscal year following the fiscal year reported or in the audited financial statements. ' 7. Location of District: Counties in which district is located. Guadalupe and Comal Counties. ' Is the District located entirely within one county? Yes No X Is the District located within a city? Entirely _ Partly X Not at all City (ies) in which district is located. ' Is the District located within a city's extra territorial jurisdication (ETJ)? Entirely Partly X Not at all ' ETJ's in which district is located. Schertz. Texas Is the general membership of the Board appointed by an office outside the district? Yes No X If Yes, by whom? ' The accompanying notes are an integral part of these financial statements. 16 O i 1 t GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 F. SCHEDULE OF GENERAL FUND EXPENDITURES NINE MONTHS ENDED DECEMBER 31, 2001 CURRENT Personnel (Including Benefits) PROFESSIONAL FEES Auditing Legal Engineering Bonds PURCHASED SERVICES FOR RESALE Bulk Water and Sewer Service CONTRACTED SERVICES Bookkeeping Utility Operator Appraisal District Tax Collector Administrator UTILITIES ADMINISTRATIVE EXPENDITURES Directors Fees Rent - Storage Insurance Other Administrative Expense Taxes TNRCC Legal Notices Telephone Repairs and Maintenance CAPITAL OUTLAY Acquisition of Fixed Assets SOLID WASTE DISPOSAL (Sewer Only Not Garbage) FIRE FIGHTING PARKS AND RECREATION TOTAL EXPENDITURES Number of persons employed by the District: (Do not include independent contractors or consultants) All Services in District Provided by Contractors or City of Schantz, Texas. The accompanying notes are an integral part of these financial statements. 17 8,000 13,383 875 23,674 1,825 16,487 4,150 989 1,650 240 2,283 192 656 64 233 901 75,602 Full -time - Part-time 1 1 1 FUNDS GENERALFUND Investment Pool Securities DEBT SERVICE FUND Investment Pool Securities CAPITAL PROJECTS FUND Investment Pool Securities GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 G. SCHEDULE OF TEMPORARY INVESTMENTS NINE MONTHS ENDED DECEMBER 31, 2001 ACCOUNT INTEREST NUMBER RATE #742294649 -20 #742294649 -50 #742294649 -10 COST BALANCES AT FUNDS END OF YEAR GENERALFUND Investment Pool Securities 847 DEBT SERVICE FUND Investment Pool Securities 1,383 CAPITAL PROJECTS FUND Investment Pool Securities 2,452 TOTAL - ALL FUNDS 4,682 U 0 R MARKET BALANCES AT END OF YEAR The accompanying notes are an integral part of these financial statements. 18 3M 1,383 2,452 4,682 MATURITY DATE None None None RECEIVABLE AT END OF YEAR I GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 H. ANALYSIS OF TAXES LEVIED AND RECEIVABLE NINE MONTHS ENDED DECEMBER 31, 2001 Taxes Receivable at April 1, 2001 ' 2001 Original Tax Levy Adjustments to Roll Total to be Accounted for u k I F i Tax Collections: Current Year Prior Years Total Collections TAXES RECEIVABLE AT DECEMBER 31, 2001 Taxes Receivable, By Years 2000 Taxes Receivable, By Years 2001 TAXES RECEIVABLE AT DECEMBER 31, 2001 PROPERTY VALUATIONS Land Improvements Personal Property TOTAL PROPERTY VALUATIONS TAX RATES PER $100 VALUATION Debt Service Tax Rates Maintenance Tax Rates TOTAL TAX RATE PER $100 VALUATION Original Tax Levy: Percent of Taxes Collected to Nine months ended 12/31/01 2001 2000 1999 2,530,370 DEBT MAINTENANCE SERVICE TAXES TAXES 34 552 8,826 120,972 15 194 8,875 121,718 8,730 11 9,653 25 414 8,755 120,067 120 1,651 7 106 113 1,545 120 1,651 2000 1999 2,530,370 2,610,960 2,610,877 2,483,307 10, 996,264 10, 984, 321 10, 863,560 10, 503,108 222,297 208,314 270,000 299,210 13, 748, 931 13,803,595 13,744,437 13,285,625 Nine Months ended 12/31101 2001 2000 1999 1.0911 1.1414 1.1542 1.36 0.08 0.0703 0.0645 0.06 1.1711 1.2117 1.2187 1.42 129,798 134,515 135,045 151,831_ Taxes Levied " 98.73% 99.92% 100.00% 100.00% Calculated as taxes collected in current and previous years divided by tax levy. In 2001 total property valuations are reduced by homestead exemptions (2,381,043), and disabled veterans exemption (284,500). The accompanying notes are an integral part of these financial statements. 19 GUADCO MUNICIPAL UTILITY DISTRICT NO, 2 H. ANALYSIS OF TAXES LEVIED AND RECEIVABLE (CONTINUED) ' NINE MONTHS ENDED DECEMBER 31, 2001 Tax rate for any other special district which encompasses less than a county, (b) provides water, ' wastewater collection, drainage or roads to property in the District and (c) taxes property in the District. ' Name of Special District (s) Service Provide Tax Rate NIA N/A $ Total Rate (s) of Special District (s) ' Tax rates for all overlapping jurisdiction Tax Rate a. County Guadalupe $ 0.3499 b. City of Schertz 0.3825 ' c. School District Schertz I.S.D. 1.7100 d. Special District (s) not included above: ' e. Total Special District (s) (from top of this page) - f Total District (from previous page) 1.1711 ' Total Overlapping Tax Rate (Sum of a -f) 3.6135 ' The accompanying notes are an integral part of these financial statements. ' 20 t GUADCO MUNICIPAL UTILITY DISTRICT NO .2 ANALYSIS OF CHANGES IN GENERAL FIXED ASSETS NINE MONTHS ENDED DECEMBER 31, 2001 AMOUNTS PROVIDED BY: BALANCES BALANCES Capital Projects Fund: April 1, 2001 ADDITIONS DELETIONS December 31, 2001 PHYSICAL FACILITIES: 166,921 166,921 Water System 435,155 - - 435,155 Sewage System 125,731 - - 125,731 Drainage System 129,207 - - 129,207 Engineering Fees 80,824 - - 80,824 Capitalized Construction - - - - Furniture and Fixtures 656 - - 656 Contribution - TOTAL PHYSICAL FACILITIES 771,573 - 771,573 PROVIDED ORGANIZATIONAL COSTS: 938,494 The accompanying notes are an integral part of these financial statements. Fiscal Agent Fees 3,943 - - 3,943 Legal Fees 59,408 - - 59,408 Director Fees 900 - - 900 Operations During Construction Period 80,147 - - 80,147 Creation Cost 22,523 - - 22,523 TOTAL ORGANIZATIONAL COSTS 166,921 - - 166,921 TOTAL GENERAL FIXED ASSETS 938,494 - - 938,494 AMOUNTS PROVIDED BY: Capital Projects Fund: Bonds Proceeds 166,921 166,921 Revenues Debt Service Fund: Revenues 716,364 716,364 General Fund: ' Revenues 55,209 55,209 Developer Contribution - - TOTALAMOUNTS PROVIDED 938,494 938,494 The accompanying notes are an integral part of these financial statements. 21 1 1 1 1 1 1 1 1 DUE DURING FISCAL YEARS ENDING MARCH 31, 2002 2003 2004 2005 GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 J. GENERAL LONG -TERM DEBT SERVICE REQUIREMENTS - BY YEARS NINE MONTHS ENDED DECEMBER 31, 2001 The accompanying notes are an integral part of these financial statements. 22 SERIES 1999 PRINCIPAL INTEREST DUE DUE Mar -01 Mar -01, Sep -01 TOTAL 105;000 9,187 114,187 110,000 15,488 125,488 115,000 9,581 124,581 125,000 3,281 128,281 TOTALS 455,000 37,537 492,537 The accompanying notes are an integral part of these financial statements. 22 t GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 K. ANALYSIS OF CHANGES IN GENERAL LONG -TERM DEBT NINE MONTHS ENDED DECEMBER 31, 2001 Debt Service Fund Cash and Temporary Investments balances as of December 31, 2001 Average annual Debt Service payment (Principal & Interest) for remaining term of all debt The accompanying notes are an integral part of these financial statements. 23 REFUNDING BONDS 143,870 123,134 BOND ISSUE - SERIES 1999 Interest Rate 5.25% Dates Interest Payable March 1; September 1 Maturity Dates March 1, 2000 to Marchl, 2005 Maturity Outstanding at Beginning of Current Period 455,000 Bonds Sold During Current Period - Retirements - Principal Bonds Outstanding at End of Current Period 455,000 Interest Paid During the Current Year 11,944 PAYING AGENT'S NAME AND ADDRESS Series 1999 Chase Bank N.A., Post Office Box 2320, Dallas, TX 75221 BOND AUTHORITY TAX BONDS OTHER BONDS Amount Authorized by Voters 10,200,000 Amount Issued 1,175,000 Remaining to be Issued 9,025,000 Debt Service Fund Cash and Temporary Investments balances as of December 31, 2001 Average annual Debt Service payment (Principal & Interest) for remaining term of all debt The accompanying notes are an integral part of these financial statements. 23 REFUNDING BONDS 143,870 123,134 GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 L. COMPARATIVE STATEMENT OF REVENUES AND EXPENDITURES GENERAL FUND AND DEBT SERVICE FUND FOUR YEARS AND NINE MONTHS ENDED DECEMBER 31, 2001 GENERAL FUND REVENUES Property Taxes Water Services Sewer Services Penalty and Interest Standby & Tap Conn. Fees Interest on Time Deposits Other Total Revenues Purchase Water and Sewer Services Professional and Director Fees Contracted Services Utilities Repairs and Maintenance Other Expenditures Developer Settlement Total Expenditures EXCESS REVENUES (EXPENDITURES) AMOUNTS Nine Months Ended 12/31/01 2001 2000 1999 1998 8,755 7,897 8,065 6,519 10,963 53,378 60,389 66,456 63,958 59,326 17,622 22,525 23,078 23,958 25,682 - - 431 1,193 296 2,080 - 4,724 9,457 8,055 2,323 5,854 2,678 1,249 969 454 339 493 558 415 84,612 97,004 105,925 106,892 105,706 23,674 38,374 31,577 35,894 41,692 23,908 20,879 5,831 9,980 23,713 22,462 21,619 20,247 23,117 18,157 989 1,860 3,641 522 1,816 901 13,472 8,716 2,450 - 3,668 1,786 4,919 4,253 3,471 - 69,693 - - 656 75,602 167,683 74,931 76,216 89,505 9,010 (70,679) 30,994 30,676 16,201 _DEBT SERVICE F ND REVENUES Property Taxes 120,067 128,396 128,424 146,732 136,626 Penalty and Interest - - - - - Interest on Time Deposits 1,416 4,977 9,864 4,396 4,697 Total Revenue 121,483 133,373 138,288 151,128 141,323 Tax Collection Services 1,061 3,209 3,252 2,780 946 Debt Service, Interest, and Fees 11,964 129,147 153,573 154,740 149,557 Other Expenditures - - - - - Total Expenditures 13,025 132,356 156,825 157,520 150,503 EXCESS REVENUES (EXPENDITURES) 108,458 1,017 (18,537) (6,392) (9,180) TOTAL ACTIVE RETAIL WATER AND/ OR WASTEWATER CONNECTIONS 151 151 151 151 147 The accompanying notes are an integral part of these financial statements. 24 1 1 1 PERCENT OF FUND TOTAL REVENUE Nine Months 39.56 29.80 33.58 39.44 Ended 12/31/01 2001 2000 1999 1998 10.35 8.14 7.62 6.10 10.37 63.09 62.25 62.74 59.83 56.13 20.82 23.22 21.79 22.41 24.29 0.00 0.00 0.40 1.12 0.28 2.46 0.00 4.46 8.85 7.62 2.75 6.04 2.53 1.17 0.92 0.53 0.35 0.46 0.52 0.39 100.00 100.00 100.00 100.00 100.00 27.98 39.56 29.80 33.58 39.44 28.26 21.52 5.51 9.34 22.43 26.43 22.29 19.12 21.63 17.18 1.17 1.92 3.44 0.49 1.72 1.06 13.89 8.23 2.29 0.00 4.34 1.84 4.64 3.97 3.28 - 71.84 - 0.00 0.62 89.24 172.86 70.74 71.30 84.67 10.76 (72.86) 29.26 28.70 15.33 98.84 96.27 92.87 97.09 96.68 1.16 3.73 7.13 2.91 3.32 100.00 100.00 100.00 100.00 100.00 0.87 2.41 2.35 1.84 0.67 9.85 96.83 111.05 102.39 105.83 10.72 9924 113.40 104.23 106.50 89.28 0.76 (13.40) (4.23) (6.50) 24 1 GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 M. INSURANCE CONVERGE NINE MONTHS ENDED DECEMBER 31, 2001 The accompanying notes are an integral part of these financial statements. 25 INSURER AMOUNT CORPORATION CLAUSE TYPE OF COVERAGE OF COVERAGE NAME STOCK/MUTUAL CO- INSURANCE Public Officials Faithful Performance (5 Directors) $10,000 Each Hartford Insurance Stock No Employee Dishonesty Bonds - Bookkeeper, Operator & Attorney $10,000 Each Hartford Insurance Stock No Liability: Automotive - Property Damage and Bodily Injury $2,000,000 New Hampshire Ins. Stock No Comprehensive: General $4,000,000 New Hampshire Ins. Stock No Personal Injury $2,000,000 New Hampshire Ins. Stock No Fire $50,000 New Hampshire Ins. Stock No Medical $5,000 New Hampshire Ins. Stock No Directors & Officers Liability $1,000,000 Mid Continent Stock No Business Travel $50,000 AIG Life Ins. Stock No The accompanying notes are an integral part of these financial statements. 25 GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 N. BOARD MEMBERS, KEY ADMINISTRATIVE PERSONNEL, AND CONSULTANTS NINE MONTHS ENDED DECEMBER 31, 2001 Complete District Mailing Address: 4820 Scenic Drive Cibolo, Texas 78108 District Business Telephone Number: (210) 629 -0688 TERM OF FEES OFFICE ELECTED AND EXPENSE RESIDENT AND EXPIRES REIMBURSEMENTS TITLE AT OF NAME AND ADDRESS OR DATE HIRED December 31, 2001 YEAR END DISTRICT? ;TOYA:7alJ,IA 41= Howard F. Judson 3624 Chestnut Court Cibolo, TX 78108 05 -98 to 05 -02 100.00 President Yes John Emmering 3833 Greenridge Cibolo, TX 78108 05 -00 to 05 -04 400.00 Treasurer Yes Betty Zander 3817 Greenridge Cibolo, TX 78108 05 -00 to 05 -04 300.00 Vice President Yes Jerald Newman 3613 Chestnut Court Cibolo, TX 78108 05 -98 to 05 -02 450.00 Secretary Yes James Sickles, Sr. 3801 Greenridge Cibolo, TX 78108 05 -00 to 05 -02 400.00 Director Yes The accompanying notes are an integral part of these financial statements. 26 GUADCO MUNICIPAL UTILITY DISTRICT NO. 2 N. BOARD MEMBERS, KEY ADMINISTRATIVE PERSONNEL, AND CONSULTANTS NINE MONTHS ENDED DECEMBER 31, 2001 TERM OF FEES OFFICE ELECTED AND EXPENSE RESIDENT AND EXPIRES REIMBURSEMENTS TITLE AT OF NAME AND ADDRESS OR DATE HIRED December 31, 2001 YEAR END DISTRICT ? CONSULTANTS Guadalupe County Appraisal District Central 3000 North Austin Appraisal Seguin, TX 78155 Nov -80 960.18 District Guadalupe County Tax Office Tax 307 W. Court Assessor - Seguin, TX 78156 Jan -96 100.00 Collector City of Shertz Utility 10 Commercial Place System Schertz, TX 78154 Jan -97 16,487.00 Operator Jane Olm 4005 Oak Court Cibolo, TX 78108 Feb -97 4,150.00 Administrator Charles T. Allen, CPA 831 Landa St., Suite E New Braunfels, TX 78130 Oct -97 1,825.00 Bookkeeper Bill Corsbie, P.C. 3708 Clawson Road Austin, TX 78704 Apr -99 13,383.00 Attorney Jim Robertson, CPA 352 Landa St. New Braunfels, TX 78130 Dec -97 8,000.00 Auditor Samco Capital Markets 1111 Katy Freeway, Ste 725 Financial Houston, TX 77079 Mar -99 - Advisor Ford Engineering, Inc. 10927 Wye Dr. San Antonio, TX 78217 Jan -96 - Engineer The accompanying notes are an integral part of these financial statements. 27 No No No Yes No No No f�C.7 No