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CAFR FY 2007-2008 CITY OF SCHERTZ, TEXAS TABLE OF CONTENTS SEPTEMBER 30, 2008 PAGE INTRODUCTORY SECTION.......................................................................................................... v LETTER OF TRANSMITTAL ................................................................................................................... vi CITY OFFICIALS..................................................................................................................... ................. ix ORGANIZATIONAL CHART .................................................................................................................... x 2007 CER TIFICA TE OF ACHIEVEMENT................................................................................................ xi FINANCIAL SECTION INDEPENDENT AUDITOR'S REPORT .................................................................................................... 2 MANAGEMENTS DISCUSSION AND ANAL YSIS..................................................................................4 BASIC FINANCIAL ST ATEMENTS......................................................................................................13 STATEMENT OF NET ASSETS.............................................................................................................. .14 STATEMENT OF ACTIVITIES............................................................................................................... .16 BALANCE SHEET - GOVERNMENTAL FUNDS ...................................................................................18 RECONCILIATION OF BALANCE SHEET .............................................................................................20 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES- GOVERNMENTAL FUNDS ...................................................................................................................21 RECONCILIATION OF THE STATEMENT OF REVENUES, GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES............................................................................................................. .23 STATEMENT OF NET ASSETS - PROPRIETARY FUNDS ....................................................................24 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS ........................................................................................................................26 STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS...................................................................28 NOTES TO BASIC FINANCIAL STATEMENTS .....................................................................................30 REQUIRED SUPPLEMENT ARY INFORMATION..............................................................................51 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL .......................................................................................................................52 NOTES TO SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL .......................................................................................................................54 TEXAS MUNICIPAL RETIREMENT SYSTEM ANAL YSIS OF FUNDING PROGRESS - LAST FOUR FISCAL yEARS............................................................................................................... .55 1 CITY OF SCHERTZ, TEXAS TABLE OF CONTENTS (CONTINUED) SEPTEMTEMBER 30, 2008 FINANCIAL SECTION (CONTINUED) OTHER SUPPLEMENTARY INFORMATION ....................................................................................55 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES.......................................57 COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS ......................................59 COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS.....................................................................60 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - HOTEL OCCUPANCY FUND.......................................................................61 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - PARK FUND ..................................................................................................................62 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - RECYCLING FUND......................................................................................63 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - POLICE FORFEITURES FUND ....................................................................64 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL - LIBRARY GRANT FUND.............................................................................65 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET TO ACTUAL - DEBT SERVICE FUND.................................................................................66 COMPARATIVE BALANCE SHEETS - GENERAL FUND .....................................................................67 COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - GENERAL FUND..............................................................................................................68 DISCRETELY PRESENTED COMPONENT UNITS ................................................................................69 COMBINING BALANCE SHEETS - DISCRETL Y PRESENTED COMPONENT UNITS ....................... 70 COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - DISCRETELY PRESENTED COMPONENT UNITS ........................................................ 71 STATISTICAL SECTION NET ASSETS, BY COMPONENT - LAST SIX FISCAL YEARS - (ACCRUAL BASIS OF ACCOUNTING) .............................................................................................................................. .......74 CHANGE IN NET ASSETS - LAST SIX FISCAL YEARS - (ACCRUAL BASIS OF ACCOUNTING).76 11 CITY OF SCHERTZ, TEXAS TABLE OF CONTENTS (CONTINUED) SEPTEMBER 30, 2008 STATISTICAL SECTION (CONTINUED) FUND BALANCES - GOVERNMENTAL FUNDS - LAST TEN FISCAL YEARS - (MODIFIED ACCRUAL BASIS OF ACCOUNTING).................................................................................................................... 80 CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS - LAST TEN FISCAL YEARS - (MODIFIED ACCRUAL BASIS OF ACCOUNTING)............................................................................ 82 TAX REVENUE BY SOURCE - GOVERNMENTAL FUNDS - LAST SIX YEARS................................84 TOTAL WATER AND SEWER CONSUMPTION AND RATES - LAST TEN FISCAL YEARS .............85 PRINCIPAL WATER AND SEWER CONSUMERS - CURRENT AND NINE YEARS AGO ..................86 ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY - LAST TEN FISCAL yEARS......................................................................................................................... ....87 DIRECT AND OVERLAPPING PROPERTY TAX RATES - LAST TEN FISCAL YEARS .....................88 PRINCIPAL PROPERTY TAX PAYERS - CURRENT YEAR AND NINE YEARS AGO ........................89 PROPERTY TAX LEVIES AND COLLECTIONS - LAST TEN FISCAL YEARS ...................................90 ASSESSED VALUE - ACT TP - LAST FIVE FISCAL yEARS................................................................91 RATIOS OF OUTSTANDING DEBT BY TYPE - LAST TEN FISCAL YEARS.......................................92 RATIOS OF GENERAL BONDED DEBT OUTSTANDING - LAST TEN FISCAL YEARS....................94 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT...............................................95 DEBT MARGIN INFORMATION - LAST TEN FISCAL YEARS ............................................................96 PLEDGED REVENUE COVERAGE - LAST TEN FISCAL YEARS ........................................................98 DEMOGRAPHIC AND ECONOMIC STATISTICS - LAST TEN FISCAL YEARS .................................99 TOP TEN PRINCIPAL EMPLOYERS - CURRENT YEAR AND NINE YEARS AGO...........................100 FULL-TIME EQUIVALENT CITY GOVERNMENTAL EMPLOYEES BY FUNCTION - LAST SEVEN FISCAL YEARS......................................................................................................................1 0 1 OPERATING INDICATORS BY FUNCTION/PROGRAM - LAST TEN FISCAL YEARS ....................102 CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM - LAST TEN FISCAL YEARS...............104 111 CITY OF SCHERTZ, TEXAS TABLE OF CONTENTS (CONTINUED) SEPTEMBER 30, 2008 STATISTICAL SECTION (CONTINUED) COMPLIANCE SECTION...................................................................................................................... .1 06 REPORT ON COMPLIANCE AND INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING STANDARDS .................................................................................1 07 SCHEDULE OF FINDINGS AND RESPONSES .....................................................................................1 09 IV INTRODUCTORY SECTION v 1400 SCHERTZ PARKWAY SCHERTZ, TEXAS 78154-1634 PHONE (210) 619-1000 DONE. TAYLOR FAX (210) 619-1050 CITY MANAGER Febrnary 12,2009 To the Honorable Mayor, City Council, and the Citizens of City of Schertz: State law requires that local governments publish a complete set of financial statements presented in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and audited in accordance with generally accepted auditing standards in the United States of America by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the City of Schertz for the fiscal year ended September 30, 2008. This report consists of management's representations concerning the finances of the City of Schertz. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Schertz has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Schertz's financial statements in conformity with U.S. GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Schertz comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The City of Schertz's financial statements have been audited by Armstrong, Vaughan & Associates P.c. a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Schertz for the fiscal year ended September 30, 2008, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City of Schertz's financial statements for the fiscal year ended September 30, 2008, are fairly presented in conformity with U.S. GAAP. The independent auditor's report is presented as the first component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (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. ScJaeIt(' C*dJJ J ..1'IdIftt VI 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 approximately 32,000. 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 goveruing 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 goverument, 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 council members elected every two years. The mayor is elected to serve a two-year term. The mayor and all five council members are elected at large. The City of Schertz provides a full range of services, including police and fire protection, the construction and maintenance of streets, recreational facilities, cultural events, water and sewer services and EMS servIces. The annual budget serves as the foundation for the City of Schertz's financial planning and control. All departments of the City of Schertz are required to submit requests for appropriation to the City Manager by June of each year. The City Manager uses these requests as the starting point for developing a proposed budget. The City Manager then presents this proposed budget to the council for review prior to 1 August. The council then holds public hearings on the proposed budget and to adopt a final budget by no later than September 30th, the close of the City of Schertz's fiscal year. The appropriated budget is prepared by each department (e.g. police). The City Manager may make transfers of appropriations within a department up to $50,000. 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 goverumental fund for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on pages 53-54 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. Businesses with headquarters or divisions located within the City's boundaries or in close proximity include Wal-Mart, Eye Care Centers of America, H.E.B., Brandt Engineering, Valero, FedEx Freight, Kraft Nabisco and Block Distributing. The region has a labor force of approximately 820,000 which is anticipated to remain stable in the next year. Meanwhile, there continues to be a trend toward steady residential growth. Long-Term Financial Planning. In 2006, the citizens approved bond propositions for streets and drainage improvements, a new library and additional recreational facilities with a total projected cost to the City of Schertz of $38,500,000. Streets and drainage improvements are ongoing. Completion of the library will be in the summer of 2009. The projected timetable for completion of the recreation center is approximately one year. Vll Cash Management Policies and Practices. During the year, temporarily idle cash was invested through State local investment pools. Cash available for longer term investments was invested in agency bonds. Cash in the State local investment pools are essentially liquid. Longer term investments had an average maturity of 3.7 years. The average yield on investments was about 3 percent. Active involvement in investment vehicles was limited due to extremely low interest rates and market uncertainty. The rate of returu was simply not sufficient to justify the management expense. Risk Management. During 2008, the City continued a risk management program for worker's compensation. Various control techniques, including employee accident prevention training, have been implemented during the year to minimize accident-related losses. Third-party coverage is currently maintained for individual worker's compensation claims and all other potential losses. Additional information on the City of Schertz's risk management activity can be found in the notes to the financial statements. Pension Benefits. The City of Schertz sponsors an agent multiple-employer defined benefit pension plan for its employees. Each year, an independent actuary engaged by the pension plan calculates the amount of the annual contribution the City of Schertz must make to the pension plan to ensure the plan will be able to fully meet its obligations to retired employees on a timely basis. As a matter of policy, the City of Schertz fully funds each year's annual required contribution to the pension plan as determined by the actuary. The remaining unfunded amount is being systematically funded as part of the annual required contribution calculated by the actuary. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Schertz for its comprehensive annual financial report for the fiscal year ended September 30, 2007. This was the 20th consecutive year that the City has received this prestigious award. In order to be awarded a Certificate of Achievement, the City must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the finance department. We would like to express our appreciation to all members of the department who assisted and contributed to the preparation of this report. 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, ((~'"e~ Don E. Taylor " .- City Manager V111 CITY OF SCHERTZ, TEXAS CITY OFFICIALS MAYOR HONORABLE HAL BALDWIN CITY COUNCIL TONY WILENCHIK MAYOR PRO-TEM DAVID SCAGLIOLA JIM FOWLER JOHN TRA YHAN MICHAEL CARPENTER CITY MANAGER DON E. TAYLOR DIRECTOR OF FINANCE mAN F. SANTOY A, JR. CITY AUDITOR ARMSTRONG, VAUGHAN & ASSOCIATES, P.c. IX i' I . i ! I .. I I I ,._.~ I x . . " " " 0eIiitlcata- - f~ -, . . ,. : i _.:, ,.- ,- ,'-I :1\ .' ,I ~~ ~ f" --, r3r - 'AdIte' ~ -. ~ ". ,..'~ .' -. -" - -.. ,. , ,~_'Oe __,_~ ~~~I~~'It.~~~....,*, -.1 L~~V I '. ,~' ' ~ 1\t-:F' ".' -" - ~!l:~" . ,., .' . _~_-~ _0 _ , _ ,-..~"" . ltIportiq': . ~~. .., rt. _'.. __._ , _,~ ___ _ ,\ ': , . :'__ _; _ l _ . ~ -. . . ~li!I " Ci\7' uf"~ '_ \ c, . l '. ~ ~._,_'_~_-" ..' B . '~T_~ ~~~ , ~IipM Im......~ ~iili!'m liIMIIi ,~~~'!. ,~iElilIli!i!liill.~_~ , ...... .....-: "-'~""""..~'..'.'.-_..__..". ...."-- .".'.- '..:_..:_,~_..., ..~'-- __ft.. -- .- .-.--" . , . . n . ,,_ .. ~~ . . ~ " c .._ u" . , _. ..,' -, -, ,. - ,,,.;;0,._ " ~." :',:. ~..=== " 1l1J,~ Bm!I&, , ~.~,.. . --- ,.,' " ... .~.. j. :':, . ~ . ~ ~ . ~ II .t . ~'-'..'''"..''~ " ~.~>'~ ~ , ~ ~ Xl FINANCIAL SECTION 1 ~ - "'1. ~'I~"R ,'. ,'i~V""'J~'~_ee lUu.;;l,Il,~~..~.QJ. _ . _ _ _ II' "1"'" ,. ,w.. . ...._ .__.. _.,.....~,.""~T>_........ . - INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and Members of the City Council City of Schertz, Texas We have audited the accompanying financial statements of the goverumental 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, 2008, 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 goverumental 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, 2008, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards. we have also issued our report dated February 16, 2009 on our consideration of City of Schertz, Texas' interual control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of interual control over financial reporting and compliance and the results of that testing and not to provide an opinion on the interual control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. .. _...~~J~ 2 The management's discussion and analysis and budgetary comparison information on pages 4 through 12 and 51 through 54, 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 combining and individual nonmajor fund financial statements and other schedules 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. h4/.4-.ft. Armstrong, Vaughan & Assoc., P.c. February 16,2009 3 MANAGEMENTS DISCUSSION AND ANALYSIS As management of the City of Schertz, we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City of Schertz for the fiscal year ended September 30,2008. We encourage readers to consider the information presented here in conjunction with additional information that we have furuished 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 $105,994,088 (net assets). Of this amount, $19,379,158 (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 $15,235,140. Approximately 91.5% increase is attributable to capital contributions from developers. As of the close of the current fiscal year, the City's goverumental funds reported combined ending fund balances of $24,287,276, a decrease of $5,012,287 in comparison with the prior year. At the end of the current fiscal year, unreserved fund balance for the general fund was $5,758,915, or 31.2% of total general fund expenditures, including capital outlay. The City's total debt increased by $9,900,000 during the current fiscal year. The key factor in this increase was the issuance of general obligation bonds in the amount of $9,900,000. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements comprise three components: 1) goverument -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. Goverument-wide financial statements. The goverument-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Schertz is improving or deteriorating. The statement of activities presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earued but unused vacation leave). 4 Both of the government-wide financial statements distinguish functions of the City of Schertz that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Schertz include general government, public safety, streets and parks, health, and culture and recreation. The business-type activities of the City of Schertz include a water and sewer department and an emergency medical services department. The government-wide financial statements include not only the City of Schertz itself (known as the primary government) but also legally separate component units for which the City is financially accountable. Financial information for these component units is reported separately from the primary government. The government-wide financial statements can be found on pages 14 through 17 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Schertz, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. The funds of the City of Schertz can be divided into two categories: governmental and proprietary. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government- wide financial statements, governmental fund financial statements focus on nearterm 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 eight 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 five 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 18 through 23 of this report. Proprietary funds. The City of Schertz maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Schertz uses enterprise funds to account for its water and sewer department and for its emergency medical services department. 5 Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water and sewer department and for the emergency medical services department, both of which are considered to be major funds of the City of Schertz. The basic proprietary fund financial statements can be found on pages 24 through 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 29 through 50 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City's general fund budgetary schedule. The City of Schertz adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with this budget. Required supplementary information can be found on pages 51 through 55 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 57 through 72 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City of Schertz, assets exceeded liabilities by $105,994,088 at the close of the most recent fiscal year. The largest portion of the City's total net assets (80.7%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding. The City of Schertz uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. NET ASSETS Governmental Activities Business-Type Activities Total 20m~ 2007 20m~ 2007 20m~ 2007 Current and Other Assets $ 31,225,7g5 $ 32,13g,29g $ 16,675,990 $ 26,51 g,572 $ 47,901,775 $ 5g,656,g70 Capital Assets 75,479,661 54,1g7,722 50,262,433 36,363,275 125,742,094 90,550,997 Total Assets 106,705,446 g6,326,020 66,93 g,423 62,ggU47 173,643,g69 149,207,g67 Long-Term Liabilities: Outstanding 44, 7g4, 797 33,610,61g 12,4g4,4gg 15,240,026 57,269,2g5 4g,g50,644 Other Liabilities 7,563,192 6,39g, 7g 1 2,g17,304 3,199,494 1O,3g0,496 9,59g,275 Total Liabilities 52,347,989 40,009,399 15,301,792 18,439,520 67,649,781 58,448,919 Net Assets: Invested in Capital Assets, Net of Related Debt 44,206,232 32,932,355 41,350,184 18,788,933 85,556,416 51, 721,288 Restricted 1,058,514 663,973 1,995,213 1,058,514 2,659,186 Unrestricted 9,092,711 12,720,293 10,286,447 23,658,181 19,379,158 36,378,474 Total Net Assets $ 54,357,457 $ 46,316,621 $ 51,636,631 $ 44,442,327 $ 105,994,088 $ 90,758,948 Table A-I 6 An additional portion of the City's total net assets (1.0%) represents resources that are subject to external restrictions on how they may be used. The remaining balance ofuurestricted net assets, $19,379,158 may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Schertz is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. The government's net assets increased by $15,235,140 during the current fiscal year. About 91.5% of this increase represents capital contributions from developers. The following table indicates changes in net assets for governmental and business-type activities: Governmental Activities Business- Type Activities Total Revenues: 20m~ 2007 20m~ 2007 20m~ 2007 Program Revenues: Charges for Services $ 4,146,388 $ 4,861,842 $ 16,770,868 $ 18,024,961 $ 20,917,256 $ 22,886,803 Operating Grants and Contributions 526J~39 493,281 526,839 493,281 Capital Grants and Contributions 8,750,859 5,640,431 5,190,039 2,755,376 13,940,898 8,395,807 General Revenues Property Taxes 7,841,928 7,309,127 7,841,928 7,309,127 Other Taxes 5,668,491 5,315,905 5,668,491 5,315,905 Unrestricted Investment Earnings 1,310,310 1,453,645 409,972 976,595 1,720,282 2,430,240 Miscellaneous 342,770 923,574 179,121 161,048 521,891 1,084,622 Total Revenues 28,587,585 25,997,805 22,550,000 21,917,980 51,137,585 47,915,785 Expenses: General Government 7,305,115 5,603,855 7,305,115 5,603,855 Public Safety 7,093,301 5,920,046 7,093,301 5,920,046 Streets and Parks 3,177,145 2,702,102 3,177,145 2,702,1 02 Health 306,764 272,730 306,764 272,730 Culture and Recreation 681,440 450,974 681,440 450,974 Interest and Other Fees 1,982,984 1,412,066 1,982,984 1,412,066 Water and Sewer 12,379,584 9,502,039 12,379,584 9,502,039 EMS 2,976,112 5,114,911 2,976,112 5,114,911 Total Expenses 20,546,749 16,361,773 15,355,696 14,616,950 35,902,445 30,978,723 INCREASE IN NET ASSETS BEFORE TRANSFERS 8,040,836 9,636,032 7,194,304 7,301,030 15,235,140 16,937,062 TRANSFERS (1,224,621 ) 1,224,621 CHANGE IN NET ASSETS 8,040,836 8,411,411 7,194,304 8,525,651 15,235,140 16,937,062 NET ASSETS, BEGINNING 46,316,621 37,905,210 44,442,327 35,916,676 90,758,948 73,821,886 NET ASSETS, ENDING $ 54,3 57,457 $ 46,316,621 $ 51,636,631 $ 44,442,327 $ 105,994,088 $ 90,758,948 Table A-2 7 Below is a graph showing total revenues by type for the City: Total Revenues-Government- Wide $9,000,000 $8,000,000 $7,000,000 $6,000,000 02008 02007 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $- Charges for Operating Capital Grants Property Taxes Other Taxes Unrestricted Miscellaneous Services Grants and and Investment Contributions Contributions Earnings Governmental Activities. Governmental activities accounted for 46% of the growth in the net assets of the City of Schertz. Most of this increase is the result of capital contributions from developers. For the most part, increases in expenses closely paralleled inflation and growth in the demand for services. Total Expenses-Government- Wide 8,000,000 7,000,000 6,000,000 02008 5,000,000 02007 4,000,000 3,000,000 2,000,000 1,000,000 ( f:':;:':;:''', / ( ;:::;:::;fI I General Public Safety Streets and Health Culture and Interest and Government Parks Recreation Other Fees 8 Revenues-Governmental Activities (Continued) Revenue by Source - Governmental Activities Occupancy Tax Unrestricted Grants 2% - and Contributions Investment 2% Earnings 9% Mixed Beverage Tax 0% . Franchise Tax 8% g~ Property Tax 52% Sales Tax 27% Revenues-Business- Type Activities Business-type activities. Charges for services decreased by $1,254,093. This decrease was due to lower water consumption. Capital grants and contributions increased by $2,434,663. This decrease was due to increased capital contributions from developers. 25,000,000 20,000,000 o Revenues 15,000,000 o Expenses 10,000,000 5,000,000 2008 2007 9 Expenses-Business- Type Activities $16,000,000 $14,000,000 $12,000,000 D Program Revenue $10,000,000 D Program Expense $8,000,000 D Nonoperating Revenues $6,000,000 D Capital Contributions and $4,000,000 Transfers $2,000,000 $- Water and Sewer EMS Utilities 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 fimds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $24,287,276. Of this total amount, $6,853,483 constitutes unreserved fund balance, which is available for spending at the government's discretion. The remainder of fund balances is reserved or designated to indicate that it is not available for new spending because it has already been committed to pay debt service, for capital improvement projects, and other restricted purposes. The general fund is the chief operating fund of the City of Schertz. At the end of the current fiscal year, uureserved fund balance of the general fund was $5,758,915, while total fund balance reached $6,085,908, a decrease of $3,767,788 from the prior year. The majority of this decrease was from capital outlay. 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. Uureserved fund balance represents 31.2% of total general fund expenditures, including capital, while total fund balance represents 33% of that same amount. The debt service fund has a total fund balance of$429,289, all of which is reserved for the payment of debt service. The net decrease in fund balance during the current year in the debt service fund was minimal. The capital projects fund has a total fund balance of $16,416,440, a decrease of $1,195,652. This decrease was from the expenditure of funds for various constrnction projects. 10 Proprietary funds. The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Uurestricted net assets of the water and sewer fund at the end of the year amounted to $8,567,749 and those for the Schertz EMS fund amounted to $1,718,698. General Fund Budgetary Highlights Differences between the original budget and the final amended budget and the final budget and actual expenditures can be briefly summarized as follows: . The street department's shortfall resulted from the increasing cost of fuel and utility costs. . The shortfall in the legal department resulted from legal work on county election, advertising and a bond proposition. . The shortfall in the swimming pool department resulted from the increasing cost of chemicals and utility costs. . The shortfall in special events resulted from supporting the Parks & Recreation Festival and the 50th Anniversary events. . The shortfall in the Information Technology Department resulted from computers, consulting and utility services. During the year, the over-expenditures were funded by the uurestricted fund balance, as intended. CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets. The City's investment in capital assets for its governmental and business-type activities as of September 30,2008, amounts to $125,536,403 (net of accumulated depreciation). Major capital asset events during the current fiscal year included the following: The City has completed constrnction on the new civic center and athletic fields. Construction on a new library is underway and a new recreation center is underway. CAPITAL ASSETS (Net of Depreciation) Governmental Business-Type Activities Activities Total 2008 2007 2008 2007 2008 2007 Land $ 6,363,542 $ 5,254,030 $ 557,972 $ 557,972 $ 6,921,514 $ 5,812,002 Buildings and Improvements 17,888,868 6,744,901 51,522,115 32,825,229 69,410,983 39,570,130 Machionery, Equipment, and Vehicles 4,215,119 1,774,109 1,931,098 1,247,148 6,146,217 3,021,257 Infrastructure 50,269,146 32,845,594 50,269,146 32,845,594 Construction in Progress 10,945,388 7,567,413 9,748,051 1,732,926 20,693,439 9,300,339 TOTALS $ 89,682,063 $ 54,186,047 $ 63,759,236 $ 36,363,275 $ 153,441,299 $ 90,549,322 Table A-3 Additional information on the City's capital assets can be found in Note 4 on pages 46 through 47 of this report. 11 Long-Term Debt. At the end of the current fiscal year, the City of Schertz had total bonded debt outstanding of $59,096,078. Of this amount, $52,745,000 comprises debt backed by the full faith and credit of the government. The remainder of the City's debt represents bonds secured solely by specified revenue sources, i.e., revenue bonds. Governmental Business-Type Activities Activities Total 2008 2007 2008 2007 2008 2007 General Obligation Bonds $ 32,790,000 $ 23,950,000 $ $ $ 32,790,000 $ 23,950,000 Certificates of Obligation 13,158,700 13,900,200 6,796,300 3,032,009 19,955,000 16,932,209 Revenue Bonds 6,230,000 6,645,000 6,230,000 6,645,000 Other Debt 107,078 215,854 14,000 21,000 121,078 236,854 TOTALS $ 46,055,778 $ 38,066,054 $ 13,040,300 $ 9,698,009 $ 59,096,078 $ 47,764,063 Table A-4 The City's total debt increased by 31.2% during the current fiscal year. The key factor in the increase is the City of Schertz issued general obligation bonds in the amount of $9,900,000 for major capital projects. The City of Schertz's general fund maintains a "AA-" rating and its water and sewer fund maintains an "AA-" rating from Standard and Poor's. Additional information on the City's long-term debt can be found in Note 7 on pages 48 through 50 of this report. Economic Factors and Next Year's Budgets and Rates During the current fiscal year, unreserved fund balance in the general fund decreased to $5,785,915. The City of Schertz has not appropriated any of this amount for spending in the 2009 fiscal year budget. It is intended that the available fund balance can be utilized to avoid the need to raise taxes or charges during the 2009 fiscal year. Water and sewer rates are expected to remain stable. A portion of the debt service fund balance will be used to offset the debt service ad valorem rate. Requests for Information This financial report is designed to provide a general overview of the City's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Finance Director, City of Schertz, 1400 Schertz Parkway, Schertz, Texas 78154. 12 BASIC FINANCIAL STATEMENTS 13 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS SEPTEMBER 30, 2008 Primary Government Governmental Business-Type Component ASSETS Activities Activities Total Units Current Assets: Cash and Cash Equivalents $ 26,140 $ 557,495 $ 583,635 $ 147,190 Investments 5,628,081 3,251,031 8,879,112 2,117,864 Receivables Delinquent Taxes, Net of Allowance for Uncollectible Accounts 1,250,114 - 1,250,114 370,153 Accounts and Other 1,203,048 2,411,187 3,614,235 118,478 Due from Component Unit - 35,153 35,153 - Due from Primary Government - - - 207,088 Accrned Interest 38,246 - 38,246 - Deposits 10,000 - 10,000 - Inventories 46,014 111,461 157,475 - Capital Lease Receivable - 59,305 59,305 - Internal Balances (5,107,527) 5,107,527 - - Total Current Assets 3,094,116 11,533,159 14,627,275 2,960,773 Noncurrent Assets: Restricted Assets: Cash and Cash Equivalents 109,390 205,387 314,777 - Investments 27,565,668 4,937,444 32,503,112 - Deferred Charges 456,611 205,691 662,302 9,090 Capital Assets: Land 6,363,542 557,972 6,921,514 - Buildings and Improvements 17,888,868 51,522,115 69,410,983 - Machinery, Equipment, and Vehicles 4,215,119 1,931,098 6,146,217 - Infrastrncture 50,269,146 - 50,269,146 - Constrnction in Progress 10,945,388 9,748,051 20,693,439 3,750,962 Accumulated Depreciation (14,202,402) (13,702,494) (27,904,896) - Total Noncurrent Assets 103,611,330 55,405,264 159,016,594 3,760,052 TOTAL ASSETS $ 106,705,446 $ 66,938,423 $173,643,869 $ 6,720,825 See Accompanying notes to basic financial statements. 14 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 2008 Primary Government Governmental Business- Type Component Activities Activities Total Units LIABILITIES Current Liabilities Payable from Unrestricted Assets: Withdrawals in Excess of Deposits $ 1,638,081 $ - $ 1,638,081 $ - Accounts Payable 2,525,050 1,389,111 3,914,161 350,101 Accrued Liabilities 403,673 160,999 564,672 15,641 Due to Component Unit 242,241 - 242,241 - Due to Other Governments 288,578 - 288,578 - Compensated Absences 111,291 32,052 143,343 3,348 Deferred Revenue - - - 209,177 Accrued Interest Payable 522,271 80,089 602,360 - Current Portion of Long-Term Debt 1,815,957 837,150 2,653,1 07 120,000 Total Current Liabilities Payable From Unrestricted Assets 7,547,142 2,499,401 10,046,543 698,267 Current Liabilities Payable from Restricted Assets: Customer Deposits 16,050 317,903 333,953 - Total Current Liabilities Payable From Restricted Assets 16,050 317,903 333,953 - Total Current Liabilities 7,563,192 2,817,304 10,380,496 698,267 Noncurrent Liabilities: Long-Term Debt 44,339,631 12,356,276 56,695,907 965,000 Compensated Absences 445,166 128,212 573,378 - Total Noncurrent Liabilities 44,784,797 12,484,488 57,269,285 965,000 TOTAL LIABILITIES 52,347,989 15,301,792 67,649,781 1,663,267 Net Assets: Invested in Capital Assets, Net of Related Debt 44,206,232 41,350,184 85,556,416 3,120,943 Restricted For: Debt Service 506,464 - 506,464 - Tree Mitigation 271,071 - 271,071 - LEOSE 11,018 - 11,018 - Technology 212,561 - 212,561 - Court Security 57,400 - 57,400 - Unrestricted 9,092,711 10,286,447 19,379,158 1,936,615 TOTAL NET ASSETS 54,357,457 51,636,631 105,994,088 5,057,558 TOTAL LIABILITIES & NET ASSETS $ 106,705,446 $ 66,938,423 $ 173,643,869 $ 6,720,825 See Accompanying notes to basic financial statements. 15 CITY OF SCHERTZ, TEXAS STATEMENT OF ACTIVITIES SEPTEMBER 30, 2008 Program Revenues Operating Capital Charges for Grants and Grants and Functions and Programs Expenses Services Contributions Contributions Primary Government: Governmental Activities: General Government $ 7,305,1 12 $ 1, 968,046 $ 27,880 $ 8,750,859 Public Safety 7,093,301 1, 760,063 Streets and Parks 3,1 77,145 170,872 Health 306,764 37,096 Culture and Recreation 681,440 210,311 8,211 Interest and Other Fees 1, 982, 984 490,748 Total Governmental Activities 20,546,746 4,146,388 526,839 8,750,859 Business-Type Activities Water and Sewer 12,379,584 13,620,440 5,1 90,039 EMS 2,976,1 12 3,150,428 Total Business-Type Activities 15,355,696 16,770,868 5,1 90,039 Total Primary Government $ 35,902,442 $ 20,917,256 $ 526,839 $ 13,940,898 Component Unit: $ 2,015,099 $ 9,438 $ 4,457 $ 3,844,776 General Revenues: Taxes: Ad Valorem Sales Franchise Fees Hotel/Motel Mixed Drink Bingo Unrestricted Investment Earnings Sale of Capital Assets Miscellaneous Total General Revenues and Transfers Change in Net Assets Net Assets at Beginning of Year Prior Period Adjustment Net Assets at End of Year See Accompanying notes to basic financial statements. 16 Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental B usiness- Type Component Activities Activities Total Units $ 3,441,673 $ $ 3,441,673 $ (5,333,238) (5,333,238) (3,006,273) (3,006,273) (269,668) (269,668) (462,918) (462,918) (1,492,236) (1,492,236) (7,122,660) (7,122,660) 6,430,895 6,430,895 174,316 174,316 6,605,211 6,605,211 (7,122,660) 6,605,211 (517,449) 1,843,572 7,841,928 7,841,928 4,117,173 4,117,173 2,058,586 1,240,642 1,240,642 273,558 273,558 32,364 32,364 4,751 4,751 1,310 ,310 409,972 1, 720,282 112,623 23,706 57,527 81,233 319,064 121,594 440,658 15,163,496 589,093 15,752,589 2,171 ,209 8,040,836 7,194,304 15,235,140 4,014,781 44,746,879 44,053,373 88,800,252 4,990,792 1,569,742 388,954 1,958,696 (3,948,015) $ 54,357,457 $ 51,636,631 $ 105,994,088 $ 5,057,558 See Accompanying notes to basic financial statements. 17 CITY OF SCHERTZ, TEXAS BALANCE SHEET-GOVERNMENTAL FUNDS SEPTEMBER 30, 2008 General Capital Debt ASSETS Fund Projects Service Cash and Cash Equivalents $ 1,100 $ - $ - Investments 5,468,624 - - Receivables Taxes, Net 1,180,056 - 52,508 Accounts and Other 1,203,048 - - Due from Other Funds 1,019,045 - 34,827 Due from Component Unit 1,412 - - Accrned Interest 38,246 - - Deposits - - - Inventory 46,014 - - Restricted Assets: Cash and Cash Equivalents - - 11,626 Investments - 26,112,117 407,503 TOTAL ASSETS $ 8.957.545 $ 26.112.117 $ 506.464 LIABILITIES AND FUND BALANCES Liabilities: Withdrawals in Excess of Deposits $ 232,783 $ 1,405,298 $ - Accounts Payable 614,836 1,909,994 - Accrned Salaries and Benefits 403,673 - - Customer Deposits 16,050 - - Due to Other Governments 288,578 - - Due to Other Funds - 6,136,732 24,667 Due to Component Unit - 243,653 - Deferred Revenues 1,315,717 - 52,508 Total Liabilities 2,871,637 9,695,677 77,175 Fund Balances: Reserved for: Inventory 46,014 - - Debt Service - - 429,289 Tree Mitigation - - - LEOSE 11,018 - - Technology 212,561 - - Court Security 57,400 - - Unreserved Designated for Capital Improvement - 16,416,440 - Unreserved, Reported in General Fund 5,758,915 - - Special Revenue Funds - - - Total Fund Balances 6,085,908 16,416,440 429,289 TOTAL LIABILITIES AND FUND BALANCES $ 8.957.545 $ 26.112.117 $ 506.464 See Accompanying notes to basic financial statements. 18 Other Nonmajor Total Governmental Governmental Funds Funds $ 25,040 $ 26,140 159,457 5,628,081 17,550 1,250,114 - 1,203,048 - 1,053,872 - 1,412 - 38,246 10,000 10,000 - 46,014 97,764 109,390 1,046,048 27,565,668 $ 1.355.859 $ 36.931.985 $ - $ 1,638,081 220 2,525,050 - 403,673 - 16,050 - 288,578 - 6,161,399 - 243,653 - 1 ,368,225 220 12,644,709 - 46,014 - 429,289 271,071 271,071 - 11,018 - 212,561 - 57,400 - 16,416,440 - 5,758,915 1 ,084,568 1 ,084,568 1 ,355,639 24,287,276 $ 1.355.859 $ 36.931.985 See Accompanying notes to basic financial statements. 19 CITY OF SCHERTZ, TEXAS RECONCILIATION OF BALANCE SHEET SEPTEMBER 30, 2008 TOTALFUNDBALANCE-TOTALGOVERNMENTALFUNDS $ 24,287,276 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital Assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 75,479,661 Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. 1,368,225 Deferred charges, consisting of debt issue costs, are amortized over the life of the bond in the governmental activities, but were recognized in full in the governmental funds: 456,611 Long-term liabilities, including bonds payable and capital leases, are not due and payable in the current period and therefore, not reported in the funds: Bonds Payable (45,948,700) Capital Leases (107,078) Issuance Premium (to be Amortized as Interest Expense) (113,213) Issuance Discount (to be Amortized as Interest Expense) 13,403 Accrned Interest Payable (522,271) Compensated Absences (556,457) (47,234,316) TOTAL NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 54,357,457 See accompanying notes to basic financial statements. 20 CITY OF SCHERTZ, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES- GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2008 Debt General Capital Service REVENUES Fund Projects Fund Taxes $ 10,380,837 $ - $ 2,870,077 Permits and Fees 951,746 - - Service Fees 1,568,600 - - Fines and Fees 1,387,677 - - Sale of Property Forfeitures - - - Intergovernmental 27,880 - 490,748 Investment Earnings 381,426 847,850 41,801 Miscellaneous 318,661 - - TOTAL REVENUES 15,016,827 847,850 3,402,626 EXPENDITURES Current: General Government 6,128,794 5,334,634 - Public Safety 6,638,352 - - Streets and Parks 1,545,386 - - Health 295,156 - - Culture and Recreation 667,995 - - Debt Service: Principal - - 1,910,043 Interest and Fiscal Charges - - 1,620,178 Bond Issue Costs - 122,290 - Capital Outlay 3,176,638 6,949,372 - TOTAL EXPENDITURES 18,452,321 12,406,296 3,530,221 Excess (Deficiency) of Revenues Over (Under) Expenditures (3,435,494 ) (11,558,446) (127,595) OTHER FINANCING SOURCES (USES) Issuance of Bonds - 9,900,000 - Operating Transfers In 130,500 462,794 - Operating Transfers (Out) (462,794 ) - - TOTAL OTHER FINANCING SOURCES (USES) (332,294 ) 10,362,794 - Net Change in Fund Balance (3,767,788) (1,195,652) (127,595) Fund Balances at Beginning of Year 9,480,416 14,543,759 461,500 Prior Period Adjustment 373,280 3,068,333 95,384 Fund Balances at End of Year $ 6,085,908 $ 16,416,440 $ 429,289 See accompanying notes to basic financial statements. 21 Other Nonmajor Total Governmental Governmental Funds Funds $ 273,558 $ 13,524,472 41,207 992,953 23,472 1,592,072 - 1,387,677 122,879 122,879 8,211 526,839 39,234 1,310,311 403 319,064 508,964 19,776,267 144,123 11,607,551 - 6,638,352 - 1,545,386 - 295,156 - 667,995 - 1,910,043 - 1,620,178 - 122,290 155,593 10,281,603 299,716 34,688,554 209,248 (14,912,287) - 9,900,000 - 593,294 (130,500) (593,294) (130,500) 9,900,000 78,748 (5,012,287) 1,276,891 25,762,566 - 3,536,997 $ 1,355,639 $ 24,287,276 See accompanying notes to basic financial statements. 22 CITY OF SCHERTZ, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2008 NETCHANGEINFUNDBALANCES-GOVERNMENTALFUNDS $ (5,012,287) Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. 21,299,914 The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to increase net assets. 6,300 Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. 40,550 The issuance oflong-term debt (e.g. bonds, leases) provides current financial resources to governmental funds, which the repayment of the principal oflong-term debt consumes the current financial reources of governmental funds. Neither transaction, however, has any affect on net assets. This amount is the net effect of these differences in the treatment oflong-term debt and related items. Issuance of Bonds (9,900,000) Principal Repayments 1,910,276 Deferred Charge on Issuance Cost 124,346 Premium/Discount on Issuance ( 4,029) (7,869,407) Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds: Compensated Absences (76,775) Accrned Interest (347,459) (424,234) CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 8,040,836 See accompanying notes to basic financial statements. 23 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS - PROPRIETARY FUNDS SEPTEMBER 30, 2008 Business-Type Activities - Enterprise Funds Water and Sewer Schertz ASSETS System EMS Total Current Assets: Cash and Cash Equivalents $ 476,807 $ 80,688 $ 557,495 Investments 3,150,655 100,376 3,251,031 Accounts Receivable, Net of Allowance: Customer Accounts 1,435,033 976,154 2,411,187 Due from Other Funds 4,434,966 789,035 5,224,001 Due from Component Unit 35,153 - 35,153 Inventory 48,465 62,996 111,461 Capital Lease Receivable 59,305 - 59,305 Total Current Assets 9,640,384 2,009,249 11,649,633 Noncurrent Assets: Restricted Assets: Cash and Cash Equivalents 205,387 - 205,387 Investments 4,937,444 - 4,937,444 Deferred Charges 199,364 6,327 205,691 Capital Assets: Land 557,972 - 557,972 Buildings and Improvements 51,515,615 6,500 51,522,115 Machinery, Equipment, and Vehicles 827,360 1,103,738 1,931,098 Construction in Progress 9,748,051 - 9,748,051 Less: Accumulated Depreciation (13,256,085) (446,409) (13,702,494) Total Noncurrent Assets 54,735,108 670,156 55,405,264 TOTAL ASSETS $ 64,375,492 $ 2,679,405 $ 67,054,897 See accompanying notes to basic financial statements. 24 CITY OF SCHERTZ, TEXAS STATEMENT OF NET ASSETS - PROPRIETARY FUNDS (CONTINUED) SEPTEMBER 30, 2008 Business-Type Activities - Enterprise Funds Water and Sewer Schertz System EMS Total LIABILITIES Current Liabilities: Accounts Payable $ 1,353,123 $ 35,988 $ 1,389,111 Accrued Liabilities 70,960 90,039 160,999 Customer Deposits 317,903 - 317,903 Accrued Interest Payable 75,945 4,144 80,089 Due to Other Funds 14,924 101,550 116,474 Compensated Absences 19,021 13,031 32,052 Revenue Bonds Payable - Current 425,000 - 425,000 Certificates of Obligation - Current 260,400 144,750 405,150 Public Facility Loan - Current 7,000 - 7,000 Total Current Liabilities 2,544,276 389,502 2,933,778 Noncurrent Liabilities: Compensated Absences 76,086 52,126 128,212 Revenue Bonds Payable (Net of Unamortized Discounts) 5,778,126 - 5,778,126 Certificates of Obligation 6,098,300 472,850 6,571,150 Public Facility Loan 7,000 - 7,000 Total Noncurrent Liabilities 11,959,512 524,976 12,484,488 TOTAL LIABILITIES 14,503,788 914,478 15,418,266 Net Assets: Investment in Capital Assets 41,303,955 46,229 41,350,184 Unrestricted 8,567,749 1,718,698 10,286,447 Total Net Assets 49,871,704 1,764,927 51,636,631 TOTAL LIABILITIES & NET ASSETS $ 64.375.492 $ 2.679.405 $ 67.054.897 See accompanying notes to basic financial statements. 25 CITY OF SCHERTZ, TEXAS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2008 Business-Type Activities - Enterprise Funds Water and Sewer Schertz System EMS Total OPERATING REVENUES Fees Charged to Users $ 13,588,489 $ 3,150,428 $ 16,738,917 Other Charges 31,951 - 31,951 TOTAL OPERATING REVENUES 13,620,440 3,150,428 16,770,868 OPERATING EXPENSES Personnel Services 1,617,722 2,107,925 3,725,647 Sewage Treatment 4,440,591 - 4,440,591 General and Administrative 2,523,277 199,731 2,723,008 Contractual Services 196,143 140,989 337,132 Supplies and Maintenance 262,531 354,334 616,865 Depreciation 1,175,060 145,512 1,320,572 TOTAL OPERATING EXPENSES 10,215,324 2,948,491 13,163,815 OPERATING INCOME (LOSS) 3,405,116 201,937 3,607,053 NONOPERATING REVENUES (EXPENSES) Investment Earuings 407,324 2,648 409,972 Sale of Capital Assets 60,000 (2,473) 57,527 Miscellaneous - 121,594 121,594 Interest Expense (559,102) (27,269) (586,371) Contributions to Joint Venture (1,589,940) - (1,589,940) Amortization of Bond Issue Costs (15,218) (352) (15,570) TOTAL NONOPERATING REVENUES (EXPENSES) (1,696,936) 94,148 (1,602,788) INCOME BEFORE CONTRIBUTIONS 1,708,180 296,085 2,004,265 Capital Contributions 5,190,039 - 5,190,039 CHANGE IN NET ASSETS 6,898,219 296,085 7,194,304 NET ASSETS AT BEGINNING OF YEAR 42,311,648 1,741,725 44,053,373 Prior Period Adjustment 661,837 (272,883) 388,954 NET ASSETS AT END OF YEAR $ 49,871,704 $ 1,764,927 $ 51,636,631 See accompanying notes to basic financial statements. 26 CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2008 Business-Type Activities - Enterprise Funds Water and Sewer Schertz System EMS Total Cash Flows From Operating Activities: Cash Received From Customers and Users $ 13,165,869 $ 2,805,188 $ 15,971,057 Other Cash Received From Nonoperating Activity - 121,594 121,594 Cash Paid to Employees for Services (1,597,793) (2,068,473) (3,666,266) Cash Paid to Supplier for Goods & Services (7,816,398) (697,948) (8,514,346) Net Cash Provided (Used) by Operating Activities 3,751,678 160,361 3,912,039 Cash Flows From Noncapital Financing Activities: Cash Advances From/(To) Other Funds 2,538,886 (10,685) 2,528,201 Contributions to Joint Venture (1,589,940) - (1,589,940) Cash Advances From Component Unit 35,153 - 35,153 Net Cash Provided (Used) by Noncapital Financing Activities 984,099 (10,685) 973,414 Cash Flows From Capital and Related Financing Activities: Acquisition and Construction of Capital Assets (1,837,587) (52,418) (1,890,005) Payments Toward Projects in Progress (8,015,125) - (8,015,125) Proceeds from Sales of Capital Assets 60,000 6,527 66,527 Interest Payments paid on Long-Term Debt (560,099) (28,209) (588,308) Principal paid on Long-Term Debt (672,400) (144,100) (816,500) Net Cash Provided (Used) by Capital and Related Financing Activities (11,025,211) (218,200) (11,243,411) Cash Flows From Investing Activities: Proceeds from SalelMaturity ofInvestments 6,269,163 - 6,269,163 Payments from Capital Lease 56,742 - 56,742 Interest and Investment Earuings 407,324 2,648 409,972 Net Cash Provided (Used) by Investing Activities 6,733,229 2,648 6,735,877 Net Increase (Decrease) in Cash and Cash Equivalents $ 443,795 $ (65,876) $ 377,919 See accompanying notes to basic financial statements. 27 CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2008 Business-Type Activities - Enterprise Funds Water and Sewer Schertz System EMS Total Cash and Cash Equivalents at Beginning of Year: Cash and Cash Equivalents $ 238,399 $ 146,564 $ 384,963 Restricted Cash and Cash Equivalents - - - 238,399 146,564 384,963 Cash and Cash Equivalents at End of Year: Cash and Cash Equivalents 476,807 80,688 557,495 Restricted Cash and Cash Equivalents 205,387 - 205,387 $ 682,194 $ 80,688 $ 762,882 Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating Income 3,405,116 201,937 3,607,053 Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities: Depreciation 1,175,060 145,512 1,320,572 Miscellaneous Income from Nonoperating Activity - 121,594 121,594 Changes in Assets and Liabilities: Decrease (Increase) in Assets: Customer Receivable (451,515) (345,240) (796,755) Inventory (6,754) (14,381) (21,135) Increase (Decrease) in Liabilities: Accounts Payable (390,661) 11,487 (379,174) Accrued Liabilities 19,929 27,992 47,921 Customer Deposits (3,056) - (3,056) Compensated Absences 3,559 11 ,460 15,019 NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES $ 3,751.678 $ 160,361 $ 3,912,039 Transactions Not Affecting Cash and Cash Equivalents: Contributions - Capital Assets $ 5,190,039 $ - $ 5,190,039 See accompanying notes to basic financial statements. 28 NOTES TO BASIC FINANCIAL STATEMENTS 29 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2008 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entitv The City of Schertz is a municipal corporation goverued by an elected mayor and five-member council. The accompanying financial statements present the City and its discretely presented component units, entities for which the City is considered to be financially accountable. The discretely presented component units are reported in a separate colmnn in the goverument-wide financial statements to emphasize that they are legally separate from the City. Discretely presented component units - The component units' column in the goverument-wide financial statements includes the financial data of the component units of the City of Schertz, Texas. The component units are presented as governmental fund types. Following is a summary of the component units: 1. Schertz Economic Development Corporation - The Corporation was organized for the purpose of promoting economic development in order to eliminate unemployment and underemployment and to promote and encourage employment and public welfare of, for, and on behalf of the City. The board of directors consists of seven (7) members appointed by the city council. The City is financially accountable for the Corporation because the city council approves the corporation's budget. 2. Librarv Advisorv Board - The library provides services to the citizens of the City of Schertz as well as surrounding communities. The function of the library board is to work cooperatively with City management to provide funding and oversight for special projects of the library. All projects must be approved by the city council. The library's goveruing board is appointed by the city council. Complete financial statements for the Schertz Economic Development Corporation may be obtained at City Hall located at 1400 Schertz Parkway, Schertz, Texas 78154. Separate financials are not issued for the Library. B. Goverument- 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 goverument and its component units. For the most part, the effect of interfund activity has been removed from these statements. Goverumental activities, which normally are supported by taxes and intergoverumental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary goverument is reported separately from legally separate component units for which the primary goverument is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges of customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. 30 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Goverument - Wide and Fund Financial Statements ( Continued) Separate financial statements are provided for goverumental funds and proprietary funds. Major individual goverumental funds and major individual enterprise funds are reported as separate colmnns 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 earued 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. Goverumental 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 goverumental funds: The General Fund is the City's primary operating fund which accounts for all financial resources of the general goverument, except those required to be accounted for in another fund. The Debt Service Fund accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of goverumental funds. The Capital Projects Funds 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. 31 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) The government reports the following major proprietary funds: The Water and Sewer System Fund accounts for the water and sewer services provided to the citizens through user charges. The EMS Fund accounts for the emergency medical services provided to the citizens of the City and other participating goveruments 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 guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this are charges between the City's general goverument 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 concerued. Amounts reported as program revenues include 1) charges to customers or applications for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. General revenues include all taxes and investment earuings. 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 uurestricted resources as they are needed. D. Cash and Cash Equivalents The City's cash and cash equivalents are considered to be cash on hand and demand deposits. 32 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Investments The City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities; (2) direct obligations of the State of Texas or its agencies; (3) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by the State of Texas of the United States; (4) obligations of states, agencies, counties, cities, and other political subdivisions of any state having been rated of not less than "AA" or its equivalent; (5) certificates of deposit issued by state and national banks domiciled in Texas that are guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC) or its successor, or secured by obligations mentioned above; and (6) fully collateralized direct repurchase agreements having a defined termination date. In addition, the City is authorized to invest in local goverument investment pools. The investment pools operate in accordance with appropriate state laws and regulations and have regulatory oversight from the Texas Public Funds Investment Act Sec. 2256.0016. The fair value of the City's position in each pool is the same as the fair value of the pool shares. F. Receivables and Pavables Activities between the funds that are representative of interfund loans outstanding at the end of the fiscal year are referred to as due to/from other funds. Any residual balances outstanding between the goverumental activities and business-type activities are reported in the goverument-wide financial statements as "interual balances". Accounts receivable are reported net of allowances for uncollectible accounts. The allowance account represents management's estimate of uncollectible accounts based upon experience and historical trends. Property taxes for the City are levied each October 1 on the taxable value as of the preceding January 1, the date a lien attaches, for all taxable real and personal property located in the City. Taxes are due by January 31 following the October 1 assessment date and become delinquent on February 1, at which time they begin accruing penalty and interest. The enforceable legal claim date for property taxes is the assessment date; therefore, the City did not record a receivable for accrual of future taxes at year end. Accordingly, no current taxes receivable are reported. Delinquent taxes have been reported in the financial statements net of the allowance for uncollectible taxes. Tax revenues are recognized as they become available. Accordingly, an amount equal to taxes not yet available has been reported as deferred revenue at the goverument fund level. G. Inventories All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories of goverumental funds are recorded as expenditures when consumed rather than when purchased. H. Restricted Assets Certain proceeds of the City's enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because they are maintained in separate bank accounts and their use is limited by applicable bond covenants. 33 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. Capital Assets Capital assets, which include land, buildings and improvements, machinery, equipment, vehicles, and infrastructure assets (i.e., roads, bridges, sidewalks, and similar items), are reported in the applicable goverumental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. When capital assets are purchased, they are capitalized and depreciated in the government-wide financial statements and the proprietary fund statements. Capital assets are recorded as expenditures of the current period in the governmental fund financial statements. Capital assets are valued at cost where historical records are available and at an estimated cost where no records exist. Donated capital assets are valued at their estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Improvements to capital assets that materially extend the life of the asset or add to the value are capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during construction will not be capitalized in the governmental activities on the government-wide financial statements; however capitalization of interest is required for business- type activities. There was no capitalized interest during the current fiscal year. Capital assets are depreciated over their useful lives on a straight-line basis as follows: Useful Lives Assets (Years) Buildings and Improvements 10 - 50 Machinery, Equipment, and Vehicles 2 - 20 Infrastructure 15-30 J. Compensated Absences It is the City's policy to permit employees to accumulate earued but unused vacation and compensatory time benefits. There is no liability for unpaid accumulated sick leave since the City does not have a policy to pay any amounts when employees separate from service with the City. All vacation and compensatory time pay is accrued when incurred in the goverument-wide and proprietary fund financial statements. A liability for these amounts is reported in goverumental funds only if they have matured, for example, as a result of employee resignations and retirements. 34 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) K. Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable goverumental 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, goverumental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. L. Fund Equitv In the fund financial statements, goverumental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. M. Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net assets are reported as restricted when there are limitations imposed by creditors, grantors, or laws or regulations of other goveruments. N. Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. L. Budgetarv Information Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all goverumental funds except the library grant special revenue fund, police department forfeiture special revenue fund and the capital projects fund, which adopts project-length budgets. 35 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 2 - CASH, CASH EQUIVALENTS, AND INVESTMENTS As of September 30, 2008, the City had the following pooled investment funds: Book Value Fair Value Weighted Primary Component Primary Component Average Investment Type Government Unit Government Unit Maturity LOGIC $ 17,307,222 $ $ 17,306,750 $ Lone Star Investment Pool 7,577,997 7,577,997 MBIA Municipal Investors 12,173,611 1,921,129 12,173,611 1,921,129 Schertz Bank & Trust - Certificate of Deposit 1,058,381 1,058,381 Chase - Certificate of Deposit 160,541 196,735 160,541 196,735 0.050 Capital One - U.S. Agency Securities 3,104,472 3,104,472 3.670 Total $ 41,382,224 $ 2,117,864 $ 41,381,752 $ 2,117,864 3.720 Interest Rate Risk. As a means of limiting its exposure to fair value losses arising from rising interest rates, the City's investment policy limits the City's investment portfolio to highly liquid investments to meet unanticipated cash requirements, and/or to redeploy cash into other investments expected to outperform current holdings. Credit Risk. State law limits investments in certificates of deposit to guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor or the National Credit Union Share Insurance Fund, or its successor and investment pools continuously rated no lower than AAA or an equivalent rating by at least one nationally recognized rating service. The City's investment policy does not further limit its investment choices. As of September 30, 2008, the City's investments in the pooled investment funds were rated AAA by Standard & Poor's. Custodial Credit Risk - Deposits. In the case of deposits, this is the risk that in the event of a bank failure, the goverument's deposits may not be returued to it. As of September 30, 2008, the City's cash on hand was $1,775. The carrying amount of cash and cash equivalents (including withdrawals in excess of deposits and certificates of deposit) were ($739,669) and the bank balance was $1,963,404. Of the bank balance, $250,000 was covered by federal deposit insurance at each Chase Bank and Schertz Bank and Trust and the City's depository had pledged securities having a face value of $1,673,732 and a market value of $1,720,151 as collateral for the City's deposits. Funds were fully insured and collateralized. As of September 30, 2008, the Economic Development Corporation (Component Unit) held funds of $139,389 in the pooled cash of the primary goverument. Custodial Credit Risk - Investments. For an investment, this is the risk that, in the event of the failure of the counterparty, the goverument will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. All of the goverument securities owned by the City are held by its agent in the City's name. 36 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 3 - RECEIVABLES Receivables as of year-end for the goverument's individual major funds and nonmajor funds and enterprise fund in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Governmental Funds Proprietary Funds Other Water and Schertz General Funds Sewer Fund EMS Total Receivables: Property Taxes $ 121,906 $ 55,860 $ $ $ 177,766 Sales Taxes 740,307 740,307 Occupancy Taxes 17,550 17,550 Franchise Taxes 325,157 325,157 Customer Accounts 1,923 1,470,722 1,758,674 3,231,319 Court Fines 2,948,610 2,948,610 Gross Receivables 4,137,903 73,410 1,470,722 1,758,674 7,440,709 Less: Allowance for Uncollectibles 1,754,799 3,352 35,689 782,520 2,576,360 Net Total Receivables $ 2,383,104 $ 70,058 $ 1,435,033 $ 976,154 $ 4,864,349 Goverumental funds report deferred revenue in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. Goverumental funds also defer revenue recognition in connection with resources that have been received, but not yet earued. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the goverumental funds were as follows: Unavailable General Fund Delinquent Property Taxes Receivable $ 114,592 Court Fines 1,201,125 Total General Fund 1,315,717 Debt Service Fund Delinquent Property Taxes Receivable 52,508 Total Debt Service Fund 52,508 Total Governmental Funds $1.368.225 NOTE 4 - PROPERTY TAX Taxes are levied on and payable as of January 1. The City has contracted with the Guadalupe County Tax Assessor-Collector to collect taxes on its behalf. Current taxes become delinquent February 1. Current year delinquent taxes not paid by July 1 are turued over to attorueys for collection action. The total taxable value as of January 1, 2007, upon which the fiscal 2008 levy was based, was $1,939,016,982 (i.e., market value less exemptions). The estimated market value was $2,195,057,857, making the taxable value 88.34% of the estimated market value. 37 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 4 - PROPERTY TAX (Continued) The City is permitted by the Constitution of the State of Texas to levy taxes up to $2.50 per $100 of taxable assessed valuation for all goverumental purposes. Pursuant to a decision of the Attoruey General of the State of Texas, up to $1.50 per $100 of assessed valuation may be used for the payment of long-term debt. The combined tax rate to finance general goverumental services, including the payment of principal and interest on long-term debt for the year ended September 30, 2008, was $0.409 per $100 of assessed value, which means that the City has a tax margin of$2.091 for each $100 value and could increase its annual tax levy by approximately $40,544,845 based upon the present assessed valuation of $1,939,016,982 before the limit is reached. However, the City may not adopt a tax rate that exceeds the tax rate calculated in accordance with the Texas Property Tax Code without holding a public hearing. The Property Tax Code subjects an increase in the effective tax rate to a referendum election, if petitioned by registered voters, when the effective tax rate increase is more than eight percent (8%) of the previous year's effective tax rate. Property taxes are recorded as receivables and deferred revenues at the time the taxes are assessed. In goverumental funds, revenues are recognized as the related ad valorem taxes are collected. Additional amounts estimated to be collectible in the time to be a resource for payment of obligations incurred during the fiscal year and therefore susceptible to accrual in accordance with generally accepted accounting principles have been recognized as revenue. In the goverument-wide financial statements, the entire levy is recognized as revenue, net of estimated uncollectible amounts (if any), at the levy date. NOTE 5 - CAPITAL ASSETS Capital asset activity for the year ended September 30,2008 was as follows: Beginning Balance Transfers/ Ending (Restated)* Increases Deletions Balance Governmental Activities: Capital Assets, Not Being Depreciated: Land $ 5,254,030 $ 1,109,512 $ - $ 6,363,542 Construction in Progress 7,551,188 13,425,631 (10,031,431) 10,945,388 Total Capital Assets Not Being Depreciated 12,805,218 14,535,143 (10,031,431) 17,308,930 Capital Assets, Being Depreciated: Buildings and Improvements 9,607,405 8,281,463 - 17,888,868 Machinery, Equipment, and Vehicles 3,496,261 948,232 (229,374) 4,215,119 Streets and Infrastructure 40,291,701 9,977,445 - 50,269,146 Total Capital Assets Being Depreciated 53,395,367 19,207,140 (229,374) 72,373,133 Accumulated Depreciation: Buildings and Improvements (2,861,288) ( 426,486) - (3,287,774 ) Machinery, Equipment, and Vehicles (1,707,143) (475,768) 223,074 (1,959,837) Streets and Infrastructure (7,446,107) (1,508,684) - ( 8,954,791 ) Total Accumulated Depreciation (12,014,538) (2,410,938) 223,074 ( 14,202,402) Total Capital Assets Being Depreciated, Net 41,380,829 16,796,202 (6,300) 58,170,731 Govemmenta1 Activities Capital Assets, Net $ 54,186,047 $ 3 133 1345 $(10,037,731) $75.479,661 38 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 5 - CAPITAL ASSETS (Continued) Beginning Balance Transfers/ Ending (Restated)* Increases Deletions Balance Business- Type Activities: Capital Assets, Not Being Depreciated: Land $ 557,972 $ - $ - $ 557,972 Construction in Progress 1,732,926 8,015,125 - 9,748,051 Total Assets Not Being Depreciated 2,290,898 8,015,125 - 10,306,023 Capital Assets, Being Depreciated: Buildings and Improvements 44,696,685 6,825,430 - 51,522,115 Machinery, Equipment, and Vehicles 3,584,792 182,484 (1,836,178 ) 1 ,931 ,098 Total Capital Assets Being Depreciated 48,281,477 7,007,914 (1,836,178 ) 53,453,213 Accumulated Depreciation: Buildings and Improvements (11,871,456) (1,079,911) - (12,951,367) Machinery, Equipment, and Vehicles (2,337,644) (240,661) 1,827,178 (751,127) Total Accumulated Depreciation (14,209,100) (1,320,572) 1,827,178 ( 13,702,494) Total Capital Assets Being Depreciated, Net 34,072,377 5,687,342 (9,000) 39,750,719 Business- Type Activities Capital Assets, Net $ 36363275 $ 13,702,467 $ (9,000) $ 50,056,742 Discretely Presented Component Unit Table: Beginning Transfers/ Ending Balance Increases Deletions Balance Economic Development Corporation: Capital Assets, Not Being Depreciated: Construction in Progress $ - $ 3,750,962 $ - $ 3,750,962 Total Assets Not Being Depreciated $ - $ 3,750,962 $ - $ 3,750,962 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities: General Government $ 392,180 Public Safety 378,173 Streets and Parks 1,615,532 Culture and Recreation 13,445 Health 11,608 Total Depreciation Expense - Governmental Activities $ 2,410,938 Business- Type Activities: Water and Sewer System $ 1,175,060 EMS 145,512 Total Depreciation Expense - Business Type Activities $ 1320,572 39 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 5 - CAPITAL ASSETS (Continued) * Beginning Balances of the goverumental activities have been restated to reflect a prior period adjustment to capital assets. See Note 13. NOTE 6 - INTERFUND BALANCES AND TRANSFERS The composition of interfund balances as of September 30, 2008 is as follows: Receivable Fund Payable Fund Amount General Fund Capital Projects Fund $ 999,434 General Fund Water & Sewer Fund 14,924 General Fund Schertz EMS 4,687 Debt Service Fund Capital Projects Fund 34,827 Water & Sewer Fund Capital Projects Fund 4,313,436 Water & Sewer Fund Schertz EMS 96,863 Water & Sewer Fund Debt Service Fund 24,667 Schertz EMS Capital Projects Fund 789,035 Balances resulted from the lag time between dates that 1) interfund goods and services are provided or reimbursable expenditures occur, and 2) transactions are recorded in the accounting system, and 3) payments between funds are made. The following schedule briefly summarizes the City's transfer activity: Transfers In Transfers Out Amount Purpose General N onma j or Governmental $ 130,500 Subsidy for Administrative Expenditures Capital Projects General 462,794 Funding for Previous Capital Projects NOTE 7 - CAPITAL LEASE RECEIVABLE During 2004 the City entered into a capital lease/purchase agreement for the sale of various water wells, water well motors and pumps, water storage tanks and all connecting lines, valves and pipes, to another local goverument entity. This lease was classified as direct financing lease. At September 30, 2008, minimum lease payments are as follows: Fiscal Year Principal Interest Total 2009 $ 59,305 $ 2,669 $ 61,974 $ 59,305 $ 2,669 $ 61,974 There are no estimated residual values or contingent rentals related to the leased property. 40 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 8 - LONG TERM DEBT The City issues a variety of long-term debt instruments in order to acquire and/or construct major capital facilities and equipment for goverumental activities. These instruments include general obligation bonds, certificates of obligation, and capital leases. These debt obligations are secured by either future property or hotel tax revenue or liens on property and equipment. Bonds Payable and Certificates of Obligation A summary of the terms of general obligation bonds and combination of tax and revenue certificates of obligation outstanding at September 30, 2008, follows: Series and Original Final Interest Issue Amount Maturity Rate Balance Primarv Government General Obligation Bonds 1998 Series $ 4,930,000 2018 4.37% - 5.375% $ 3,125,000 2006 Series 15,000,000 2031 4.0% - 5.25% 13,955,000 2007 Series 6,000,000 2027 4.07% 5,810,000 2008 Series 9,900,000 2028 4.13% 9,900,000 Certificates of Obligation 2001 Series $ 4,500,000 2021 4.1 % - 6.0% 3,440,000 2003 Series 3,360,000 2018 2.0% - 3.9% 2,095,000 2004 Series 7,750,000 2023 4.0% - 4.7% 6,775,000 2007 Series CIB 2 438,900 2016 4.01% 366,300 2007 Series CIB 4 569,500 2016 4.01% 482,400 Capital Lease $ 319,996 2009 4.60% 107,078 Total Governmental Long-Term Obligations $ 46,055,778 Revenue Bonds 2001 Series $ 5,550,000 2021 3.4% - 5.2% $ 3,365,000 2005 Series 3,200,000 2025 3.0% - 4.0% 2,865,000 Certificates of Obligation 2007 Series CIB 1 $ 6,600,000 2026 4.01% 6,170,000 2007 Series CIB 2 226,100 2016 4.01% 188,700 2007 Series CIB 3 500,000 2011 4.01% 380,000 2007 Series CIB 4 280,500 2016 4.01% 237,600 Public Facility Loan $ 142,000 2010 5.00% 14,000 Total Business- Type Long-Term Obligations $ 13,220,300 Economic Develooment Corooration Certificates of Obligation 2007 Series CIB 5 $ 1,300,000 2016 4.01% $ 1,085,000 Total Economic Development Corporation Long-Term Obligations $ 1,085,000 41 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 8 - LONG-TERM DEBT (CONTINUED) Debt Service Requirements Annual debt service requirements of bonded debt as of September 30,2008, are as follows: Fiscal Year Ending Goverumental Activities September 30, Principal Interest Total 2009 $ 1,704,850 $ 1,938,479 $ 3,643,329 2010 1,638,200 1,912,388 3,550,588 2011 1,724,850 1,842,722 3,567,572 2012 1,823,200 1,768,999 3,592,199 2013 1,999,850 1,689,645 3,689,495 2014 - 2018 11,732,750 7,057,542 18,790,292 2019 - 2023 11,720,000 4,489,118 16,209,118 2024 - 2028 10,235,000 1,886,180 12,121,180 2029 - 2031 3,370,000 238,650 3,608,650 Total $ 45.948.700 $ 22.823.723 $ 68.772.423 Fiscal Year Ending Business-Type Activities September 30, Principal Interest Total 2009 $ 837,150 $ 558,000 $ 1,395,150 2010 773,800 521,943 1,295,743 2011 805,150 490,591 1,295,741 2012 696,800 457,652 1,154,452 2013 725,150 428,497 1,153,647 2014 - 2018 3,912,250 1,648,395 5,560,645 2019 - 2023 3,665,000 795,621 4,460,621 2024 - 2028 1 ,805,000 129,942 1,934,942 Total $ 13.220.300 $ 5.030.641 $ 16.855.791 Fiscal Year Ending Economic Development Corporation September 30. Principal Interest Total 2009 $ 120,000 $ 43,509 $ 163,509 2010 125,000 38,697 163,697 2011 125,000 33,684 158,684 2012 130,000 28,672 158,672 2013 135,000 23,459 158,459 2014 - 2016 450,000 36,489 486,489 Total $ 1.085.000 $ 204.510 $ 1.289.510 42 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 8 - LONG-TERM DEBT (CONTINUED) Changes in Long-Term Debt Balance 9/30/2007 Balance Due Within (Restated) Additions Reductions 9/30/2008 One Year Governmental Activities: General Obligation Bonds $ 23,950,000 $ 9,900,000 $ 1,060,000 $ 32,790,000 $ 920,000 Premium 118,135 - 4,922 113,213 4,922 Certificates of Obligation 13,900,200 - 741,500 13,158,700 784,850 Discount (14,296) - (893) (13,403 ) (893) Compensated Absences 479,682 459,769 382,994 556,457 111,291 Capital Lease 215,854 - 108,776 107,078 107,078 Total Governmental Activities $ 38,649,575 $10359,769 $2297299 $46,712,045 $1,927248 Business-Type Activities: Revenue Bonds $ 6,645,000 $ - $ 415,000 $ 6,230,000 $ 425,000 Unamortized Discount (28,698) - (1,824 ) (26,874 ) (1,824 ) Certificates of Obligation 7,370,800 - 394,500 6,976,300 405,150 Public Facility Loan 21,000 - 7,000 14,000 7,000 Compensated Absences Payable 145,248 116,825 101 ,809 160,264 32,052 Total Business- Type Activities $14,153350 $ 116,825 $ 916,485 $13353,690 $ 867378 Economic Development Corporation: Certificates of Obligation $ 1,200,000 $ - $ 115,000 $ 1,085,000 $ 120,000 Compensated Absences - 3,348 - 3,348 3,348 Total Economic Development $ 1200,000 $ 3348 $ 115,000 $ 1,088348 $ 123348 * Beginning Balances have been restated to reflect a prior period adjustment to correct the misclassification of general obligation bonds (See Note 13). During the year, the City issued $9,900,000 of general obligation bonds, with the payment of the related principal and interest to be made from an annual ad valorem tax levied against all taxable property within the City and revenues from the proprietary funds. The bonds were issued to provide funds for various construction projects. In the goverument-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, and a public facility loan. General obligation bonds and certificates of obligation are direct obligations of the City for which its full faith and credit are pledged, and are payable from taxes levied on all taxable property located within the City. Revenue bonds are generally payable from pledged revenues generated by the water and sewer fund. The debenture agreement for water and sewer bonds requires that funds be available for 1/12th of the principal and 1/6th of the interest requirements of the next fiscal year. The City is required to accumulate a reserve fund in an amount equal to the average principal and interest on the revenue bonds. The City has purchased a surety bond through MBIA Insurance Corporation to fund the required reserve amount. 43 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 9 - RETIREMENT PLAN Plan Description The City provides pension benefits for all of its full-time employees through a nontraditional, joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement System (TMRS), one of 827 currently administered by TMRS, an agent multiple-employer public employee retirement system. Each of the 827 municipalities has an annual individual actuarial valuation performed. All assumptions for the December 31, 2007, valuations are contained in the 2007 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to Texas Municipal Retirement System, P.O. Box 149153, Austin, Texas 78714-9153. Benefits Benefits depend upon the sum of the employee's contributions to the plan, with interest, and the City- financed monetary credits, with interest. At the date the plan began, the City granted monetary credits for service rendered before the plan began of a theoretical amount 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%) 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 years that are one year before the effective date. At retirement, the benefit is calculated as if the sum of the employee's accumulated contributions with interest and the employer-financed monetary credits with interest were used to purchase an annuity. Members can retire at ages 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 goveruing body of the City, within the options available in the state statutes goveruing TMRS and within the actuarial constraints also in the statutes. Contributions The contribution rate for the employees is 7%, and the City matching ratio is currently 2.0 to 1, both as adopted by the goveruing body of the City. Under the state law goveruing TMRS, the actuary annually determines the City contribution rate. 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 30-year closed amortization period. The projected unit credit actuarial cost method is used for determining the City contribution rate. Both the employees and the City make contributions monthly. Since the City needs to know its contribution rate in advance to budget for it, 44 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 9 - RETIREMENT PLAN (CONTINUED) Contributions (Continued) 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 31,2007, valuation is effective for rates beginning January 2009.) A Summary of actuarial assumptions is as follows: Pension SDBF Acturial Valuation Date December 31, 2007 December 31, 2007 Acturial Cost Method Projected Unit Credit Projected Unit Credit Amortization Method Level Percent of Payroll Level Percent of Payroll Amortization Period 30 years - Closed Period 25 years - Open Period Asset Valuation Method Amortized Cost Fund Value Investment Rate of Returu 7% 4.25% Projected Salary Increases Varies by age and service None Inflation Rate 3% 3% Cost of Living Adjustments 2.1% None Payroll Growth Assumption 3% N/A Withdrawal Rates for Male/F emale Mid/Mid N/A Pension Benefits SDBF Benefits Annual Percentage of Net Pension Annual Percentage of Net OPEB Fiscal Year Pension Cost APC Contribution Obligation Pension Cost APC Contribution Obligation 2007 $ 954,490 100% $ 18,030 100% 2006 719,745 100% 14,691 100% 2005 575,471 100% 13,290 100% Additional Supplemental four-year trend information may be found on page 55. At its December 8, 2007 meeting, the TMRS Board of Trustees adopted actuarial assumptions to be used in the actuarial valuation for the year ended December 31, 2007. A summary of actuarial assumptions and definitions can be found in the December 31, 2007 TMRS Comprehensive Annual Financial Report (CAFR). Since its inception, TMRS has used the Unit Credit actuarial funding method. This method accounts for liability accrued as of the valuation date, but does not project the potential future liability of provisions adopted by a city. Two-thirds of the cities participating in TMRS have adopted the Updated Service Credit and Annuity Increases provisions on an annually repeating basis. For the December 31,2007 valuation, the TMRS Board determined that the Projected Unit Credit (PUC) funding method should be used, which facilitates advance funding for future updated service credits and annuity increases that are adopted on an annually repeating basis. In addition, the Board also adopted a change in the amortization period from a 25- year "open" to a 25 year "closed" period. TMRS Board of Trustee rules provide that, whenever a change in actuarial assumptions or methods results in a contribution rate increase in an amount greater than 0.5%, 45 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 9 - RETIREMENT PLAN (CONTINUED) the amortization period will be increased to 30 years, unless a city requests that the period remain at 25 years. F or cities with repeating features, these changes would likely result initially in higher required contributions and lower funded ratios; however, the funded ratio should show steady improvement over time. To assist in this transition to higher rates, the Board also approved an eight-year phase-in period, which will allow cities the opportunity to increase their contributions gradually (approx 12.5% each year) to their full rate (or their required contribution rate). The Supplemental Death Benefits Fund (SDBF) is a cost-sharing multiple-employer defined benefit group term life insurance plan operated by the Texas Municipal Retirement System (TMRS); this is a separate trust administered by the TMRS Board of Trustees. TMRS issues a publicly available Comprehensive Annual Financial Report (CAFR) that includes financial and supplementary information for the SDBF. That report may be obtained from the TMRS web site at ~:IMR~:~Qm. NOTE 10 - COMMITMENTS AND CONTINGENCIES Construction Commitments The City of Schertz has entered into commitments for various projects as follows: Primary Government: Estimated Project Expended to Estimated Future Cost to City Date Commitment Schertz Visitor Center $ 315,497 $ 235,849 $ 79,648 Schertz Parkway Reconstruction 2,998,149 1,914,804 1,083,345 Aviation Water Line Project 193,500 174,150 19,350 Drainage Improvement at Aviation 427,692 229,645 198,047 Savannah Drive & Lone Oak 706,729 654,949 51,780 Dimrock and Woodland Oaks 771,436 709,436 62,000 Live Oak: Elevated Tank 3,943,382 3,912,738 30,644 NE Quadrant Water Plant 1,599,611 1,040,922 558,689 Chelsea Road Project 587,778 572,778 15,000 Library Construction Project 6,497,423 4,101,110 2,396,313 Town Creek Sewer Project, Phase I 1,986,614 1,972,876 13,738 Town Creek Sewer Project, Phase II 2,189,599 2,189,599 Town Creek Sewer Project, Phase III 1,688,586 1,688,586 Recreation Center Construction Project 413,775 310,331 10 3,444 Total Estimated Future Commitments $ 24.319.771 $ 15.829.588 $ 8.490.183 The Schertz Economic Development Corporation has entered into commitments for various projects as follows: Schertz Economic Development Corporation: Estimated Project Expended to Estimated Future Cost to City Date Commitment Schwab Road Re-Alignment $ 1,550,754 $ 1,108,718 $ 442,036 Enterprise Park 2,633,923 2,620,978 12,945 Total Estimated Future Commitments $ 4.184.677 $ 3.729.696 $ 454.981 46 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 10 - COMMITMENTS AND CONTINGENCIES Schertz/Seguin Local Government COlporation The City of Schertz is jointly liable, together with the City of Seguin, for operating deficits and long-term debt of the Schertz/Seguin Local Government Corporation. Following is a summary of financial data as reported in the Corporation's audited financial statements dated September 30,2007: ASSETS: Current Assets $ 2,734,922 Restricted Cash and Cash Equivalents 6,567,156 Property, Plant & Equipment 48,690,844 Other Assets 2,335,727 TOTAL ASSETS $ 60.328.649 LIABILITIES & NET ASSETS: Current Liabilities $ 2,411,326 Revenue Bonds (Less Current Maturities and Unamortized Discounts) 54,666,516 TOTAL LIABILITIES 57,077,842 NET ASSETS: Invested in Capital Assets, Net of Related Debt 1,113,903 Restricted 190,641 Unrestricted 1 ,946,263 TOTAL NET ASSETS 3,250,807 TOTAL LIABILITIES AND NET ASSETS $ 60.328.649 The Corporation had revenue bonds outstanding in the amount of$58,755,000 (as of September 30,2007) to provide funds to build, improve, extend, enlarge and repair the Corporation's utility system, fund a reserve, and pay the costs of bond issuance. The bond resolution pledges interugoverumental contract revenues from the cities of Schertz and Seguin (the participating goveruments) to bond holders. Under the intergoverumental water supply contract, the participating goveruments are unconditionally obligated to pay their respective shares of annual contract revenue bond debt service from the operation of their respective utility systems. Tax Increment Financing (the "Zone '') The City is a principal in the City of Schertz Tax Increment Reinvestment Zone #2, pursuant to Chapter 311 of the Texas Tax Code. Under the terms of the Zone agreement, the City of Schertz, Bexar County, and San Antonio River Authority are funding infrastructure improvements through tax increment financing to the Sedona Development Project. At the time the Zone was created, the property tax base was "frozen" and increment taxes resulting from the increases to property tax base are being used to finance Zone improvements. The total projected cost is a combined figure of $45,000,000. Project costs of the developer will be funded up to 100% of the tax increment generated by the City of Schertz, Bexar County, and San Antonio River Authority. The Zone has a statutory termination date of December 31, 2027. 47 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 11 - RISK MANAGEMENT Tax Increment Financing (the "Zone") (Continued) 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 Intergoverumental Risk Pool, a public entity risk pool currently operating as a common risk management and insurance program providing insurance coverage in the following areas: general liability, automobile liability and physical damage, law enforcement liability, worker's compensation, real and personal property, mobile equipment, and errors and omissions liability. TML is a multi-employer group that provides for a combination of risk sharing among pool participants and stop loss coverage. Contributions are set annually by the provider. Liability by the City is generally limited to the contributed amounts. Annual contributions for the year ended September 30, 2008 were $307,335 for property and casualty and workers compensation coverage. There were no significant increases or decreases in coverage from fiscal year 2007. NOTE 12 - JOINT VENTURE A joint venture is a legally separate entity that results from a contractual arrangement and that is owned, operated, or goverued by two or more participating goveruments. The following entity meets the criteria as a joint venture: Schertz/Seguin Local Government COlporation The Schertz/Seguin Local Goverument Corporation is a public, nonprofit corporation organized to aid, assist, and act on behalf of the cities of Schertz and Seguin in acquiring, constructing, maintaining, and operating a water utility system. The participating goveruments have an ongoing financial responsibility to fund the operation of the corporation through either purchase of services or by subsidizing the operations. Contributions to the corporation are reflected as "nonoperating expenses" in the water and sewer fund and totaled $1,589,940 for the year ended September 30,2008. Separate financial statements for the Schertz/Seguin Local Goverument Corporation may be obtained from the City of Seguin, 210 East Gonzales Street, Segnin, Texas 78156. 48 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 13 - PRIOR PERIOD ADmSTMENT The following adjustments are necessary to correct certain errors and classifications in the financial statements for the period ending September 30,2007: Government - Wide Discrete Governmental Business Type Component Activities Activities Units Beginning Net Assets $ 44,746,879 $ 44,053,373 $ 4,990,792 Sales Tax Revenue Understated 373,280 189,154 Bonded Debt Classified in Incorrect Fund (2,000,000) 2,000,000 Bond Issue Costs Under (Over) Stated 21,667 (21,667) Accrued Interest Over (Under) Stated 95,384 (8,020) Repayment of Note Receivable Recorded as Revenue ( 430,855) Capital Assets Under (Over) Stated 11,078 177,697 Accounts Payable Overstated 819,809 Revenue Overstated (3,216,846) Interfund Receivable Overstated 1,978,333 (1,978,333) Due (to) from Component Unit (Over) Under Stated 1,090,000 (1,090,000) Restated Beginning Net Assets $ 46.316.621 $ 44.442.327 $ 1.042.777 Capital Debt General Fund Projects Fund Service Fund Beginning Fund Balances $ 9,480,416 $ 14,543,759 $ 461,500 Sales Tax Revenue Understated 373,280 Accrued Interest Over (Under) Stated 95,384 Interfund Receivable Overstated 1,978,333 Due (to) from Component Unit (Over) Under Stated 1,090,000 Restated Beginning Fund Balances $ 9.853.696 $ 17.612.092 $ 556.884 Water and Schertz Sewer Fund EMS Fund Beginning Net Assets $ 42,311,648 $ 1,741,725 Bonded Debt Classified in Incorrect Fund 2,000,000 - Bond Issue Costs Under (Over) Stated (21,667) - Reduction of Receivable from SSLGC ( 430,855) - Correction of Beginning Accounts Payable 819,809 - Interfund Receivable Overstated (1,978,333) Correction of Capital Assets 272,883 (272,883) Restated Beginning Net Assets $ 42.973.485 $ 1.468.842 49 CITY OF SCHERTZ, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2008 NOTE 13 - PRIOR PERIOD ADmSTMENT (Continued) SED Corporation Beginning Fund Balances $ 6,144,319 Sales Tax Revenue not Previously Recognized 189,154 Improper Recognition of Revenue - Deferred (3,216,843) Bond Proceeds Recognized in Improper Fund (1,098,020) Restated Beginning Fund Balances $ 2.018.610 NOTE 14-SUBSEQUENTEVENT Subsequent to year end, the following contracts for projects were awarded by the City: Project Amount Doerr Lane Improvements $ 1,851,258 Schertz Recreation Center 3,681,980 Upper West Dietz Creek Drainage Project 215,650 $ 5,748,888 50 REQUIRED SUPPLEMENTARY INFORMATION 51 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL YEAR ENDED SEPTEMBER 30, 2008 (WITH COMPARATIVE ACTUAL TOTALS FOR 2007) Variance With 2007 2008 Final Budget - Actual Budgeted Amounts Actual Positive Amounts Original Final Amounts (Negative) (Restated) REVENUES Property Taxes $ 5,055,267 $ 5,055,267 $ 4,985,907 $ (69,360) $ 4,783,053 Sales Tax 4,100,000 4,100,000 4,117,173 17,173 4,016,381 Franchise Taxes 1,086,000 1,086,000 1,240,642 154,642 1,004,116 Beverage Taxes 35,000 35,000 37,115 2,115 36,232 Permits and Fees 1,042,590 1,042,590 951,746 (90,844 ) 937,581 Service Fees 2,107,226 2,107,226 1,568,600 ( 538,626) 1,784,277 Fines and Fees 1,247,330 1,247,330 1,387,677 140,347 1,208,038 Intergovernmental 27,880 27 ,880 Investment Earnings 488,500 488,500 381,426 (107,074) 515,893 Sale of Capital Assets - 664,120 Miscellaneous 324,950 324,950 318,661 ( 6,289) 318,067 TOTAL REVENUES 15,486,863 15,486,863 15,016,827 (470,036) 15,267,758 EXPENDITURES Current: General Government: City Council 28,400 28,400 23,977 4,423 34,894 City Manager 650,457 660,442 694,869 (34,427) 536,951 Planning and Zoning 392,236 359,086 280,134 78,952 291,527 Legal 249,000 249,000 299,411 (50,411) 315,868 Customer Relations 133,916 109,060 94,477 14,583 306,007 Municipal Court 366,392 361,432 378,600 (17,168) 153,732 Facility Maintenance 638,290 638,290 671,918 (33,628) 529,651 City Secretary 155,017 155,682 150,872 4,810 131,159 Finance 503,299 495,399 499,303 (3,904) 361,079 Information Technology 491,656 491,656 723,143 (231,487) 794,431 Human Resources 240,784 236,740 213,665 23,075 161,657 Records Management 160,995 160,995 178,153 (17,158) 114,033 Engineering 198,489 198,489 250,561 (52,072) 136,247 Fleet Services 272,256 272,256 247,804 24,452 269,723 Special Events 58,250 65,250 102,125 (36,875) 58,342 Public Infonnation 344,249 430,249 432,351 (2,102) 163,165 Other 793,951 810,451 887,431 (76,980) 708,514 Total General Government 5,677,637 5,722,877 6,128,794 (405,917) 5,066,980 Public Safetv: Police Department 4,049,380 4,049,380 3,899,253 150,127 3,229,562 Fire Department 2,174,311 2,174,311 2,239,757 ( 65,446) 2,052,411 Inspection 452,293 452,293 499,342 (47,049) 383,698 Total Public Safetv $ 6,675,984 $ 6,675,984 $ 6,638,352 $ 37,632 $ 5,665,671 52 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (CONTINUED) YEAR ENDED SEPTEMBER 30, 2008 (WITH COMPARATIVE ACTUAL TOTALS FOR 2007) Variance With 2007 2008 Final Budget - Actual Budgeted Amounts Actual Positive Amounts Original Final Amounts (N egative) (Restated) EXPENDITURES (continued) Current: (Continued) Streets and Parks: Streets $ 826,388 $ 778,846 $ 740,091 $ 38,755 $ 655,930 Parks 540,044 540,044 579,963 (39,919) 598,021 Swimming Pool 203,372 203,372 225,332 (21,960) 138,972 Total Streets and Parks 1,569,804 1,522,262 1,545,386 (23,124) 1,392,923 Health: Animal Control 320,789 309,802 295,156 14,646 263,918 Total Health 320,789 309,802 295,156 14,646 263,918 Culture and Recreation: Library 427,233 427,233 416,409 10,824 439,767 Civic Center 263,739 263,739 251,586 12,153 Total Culture and Recreation 690,972 690,972 667,995 22,977 439,767 Capital Outlay 1,772,836 3,176,638 3,176,638 955,350 Bond Issue Costs - 8,967 TOTAL EXPENDITURES 16,708,022 18,098,535 18,452,321 (353,786) 13,793,576 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (1,221,159) (2,611,672) (3,435,494) (823,822) 1,474,182 OTHER FINANCING SOURCES (USES) Transfers In 1,228,4 70 1,235,470 130,500 (1,104,970) 19,500 Transfers Out (462,794) (462,794) (83,650) Bond Proceeds - 1,008,400 Total Other Financing Sources (Uses) 1,228,4 70 1,235,470 (332,294) (1,567,764) 944,250 NET CHANGE IN FUND BALANCE 7,311 (1,376,202) (3,767,788) (2,391,586) 2,418,432 FUND BALANCE - BEGINNING 9,480,416 9,480,416 9,853,696 373,280 7,435,264 FUND BALANCE - ENDING $ 9,487,727 $ 8,104,214 $ 6.085.908 $(2,018,306) $ 9,853,696 53 CITY OF SCHERTZ, TEXAS NOTES TO SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL SEPTEMBER 30, 2008 Budgetary Information - The budget is prepared in accordance with accounting principles generally accepted in the United States of America. The City maintains strict budgetary controls. The objective of these controls is to ensure compliance with legal provision embodied in the annual appropriated budget approved by the City Council and as such is a good management control device. Annual budgets are adopted for all goverumental funds except Capital Projects. Project-length financial plans are adopted for capital projects funds. Budgetary preparation and controls is exercised at the department level. Actual expenditures may not legally exceed appropriations at the fund level. The City Manager may transfer budgeted amounts up to $50,000 within departments within any fund without approval by City Council. The City exceeded the general fund budgeted expenses during 2008. Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation, is utilized in the goverumental funds. Encumbrances lapse at year-end and do not constitute expenditures or liabilities because the commitments must be reappropriated and honored during the subsequent year. 54 CITY OF SCHERTZ, TEXAS REQUIRED SUPPLEMENTARY INFORMATION TEXAS MUNICIPAL RETIREMENT SYSTEM ANAL YSIS OF FUNDING PROGRESS LAST FOUR FISCAL YEARS UNFUNDED ACTUARIAL ACCRUED LIABILITY UNFUNDED ASA ACTUARIAL ACTUARIAL FUNDING ACTUARIAL ANNUAL PERCENTAGE FISCAL VALUE OF ACCRUED RATIO ACCRUED COVERED OF COVERED YEAR ASSETS ** LIABILITY * (1 )/(2) LIABILITY PAYROLL PAYROLL 2004 $ 5,122,816 $ 7,950,619 64.4% $ 2,827,803 $ 6,144,053 46.0% 2005 $ 6,042,437 $ 9,003,970 67.1% $ 2,961,533 $ 7,662,928 38.6% 2006 $ 7,290,175 $11,798,002 61.8% $ 4,507,827 $ 8,478,634 53.2% 2007 $ 8,811,205 $ 19,057,935 46.2% $10,246,730 $ 10,047,726 102.0% * As of December 31 of the preceding year, the date of the actuarial valuation. ** Assets are stated cost as of December 31 of the preceding year. 55 OTHER SUPPLEMENTARY INFORMATION 56 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES 57 NONMAJOR GOVERNMENTAL FUNDS Nonmajor Goverumental Funds (Special Revenue Funds) are used to account for the proceeds of specific revenue sources that are legally restricted to expenditure for specified purposes. Hotel Occupancy Fund - will account for proceeds of hotel occupancy taxes to be used strictly for those kinds of programs that promote the tourism industry. Park Fund - will account for revenues from developers' fees (in lieu of park land dedication), grants, and donations and is designed to monitor and manage improvement of park system and tree mitigation. Recvcling Fund - will account for revenues received from the recycling fee on all residential water bills and the sale of recyclable material used to buy down solid waste collection costs. Police Forfeitures Fund - will account for revenue received from drug related cases in conjunction with other law enforcement agencies. Librarv Grant Fund - will account for funds from a state grant to be used for purchasing computers at the library to be used for access to the interuet. 58 CITY OF SCHERTZ, TEXAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2008 Special Revenue Funds Hotel Police Library Occupancy Park Recycling Forfeitures Grant FWld FWld FWld FWld FWld Totals ASSETS Cash and Cash Equivalents $ $ 10,292 $ 14,748 $ $ $ 25,040 Investments 159,457 159,457 ACCOWlts Receivable, Net of Allowance Taxes 17,550 17,550 Deposits 10,000 10,000 Restricted Assets: Cash and Cash Equivalents 59,362 24,098 14,304 97,764 Investments 415,971 271,071 359,006 1,046,048 TOTAL ASSETS $ 502,883 $ 440,820 $ 14,748 $ 383,104 $ 14,304 $ 1,355,859 LIABILITIES AND FUND BALANCE Liabilities ACCOWlts Payable $ $ 220 $ $ $ $ 220 Total Liabilities 220 220 Fund Balance Reserved for: Tree Mitigation 271,071 271,071 Unreserved: 502,883 169,529 14,748 383,104 14,304 1,084,568 Total Fund Balances 502,883 440,600 14,748 383,104 14,304 1,355,639 TOTAL LIABILITIES AND FUND BALANCE $ 502,883 $ 440,820 $ 14,748 $ 383,104 $ 14,304 $ 1,355,859 59 CITY OF SCHERTZ, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2008 Special Revenue Funds Hotel Police Library Occupancy Park Recycling Forfeitures Grant REVENUES FWld FWld FWld FWld FWld Totals Occupancy Tax $ 273,558 $ $ $ $ $ 273,558 Developer Fees 25,088 25,088 Tree Mitigation 16,119 16,119 Sale of Recycling Materials 23,472 23,472 Sale of Property Forfeitures 122,879 122,879 Operating Grants 8,211 8,211 Investment Earnings 14,478 14,848 9,908 39,234 Miscellaneous 403 403 TOTAL REVENUES 288,439 56,055 23,472 132,787 8,211 508,964 EXPENDITURES Current: General and Administrative 21,953 16,856 341 39,150 Contractual Services 89,810 15,163 104,973 Capital Outlay 14,036 49,893 91,664 155,593 TOTAL EXPENDITURES 125,799 66,749 15,504 91,664 299,716 Excess (Deficiency) of Revenues Over (Under) Expenditures 162,640 (10,694) 7,968 41,123 8,211 209,248 OTHER FINANCING SOURCES (USES) Transfers Out (130,500) (130,500) TOTAL OTHER FINANCING SOURCES (USES) (130,500) (130,500) Net Change in Fund Balance 32,140 (10,694 ) 7,968 41,123 8,211 78,748 Fund Balances/Equity, October 1 470,743 451,294 6,780 341,981 6,093 1,276,891 FWld Balances/Equity, September 30 $ 502,883 $ 440,600 $ 14,748 $ 383,104 $ 14,304 $ 1,355,639 60 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL HOTEL OCCUPANCY FUND FOR THE YEAR ENDED SEPTEMBER 30, 2008 (WITH COMPARATIVE ACTUAL TOTALS FOR 2007) Variance with Original and 2008 Final Budget- 2007 Final Actual Positive Actual Budget Amounts (Negative) Amounts REVENUES Occupancy Tax $ 200,000 $ 273,558 $ 73,558 $ 259,176 Investment Earuings 19,800 14,478 (5,322) 20,927 Miscellaneous - 403 403 - TOTAL REVENUES 219,800 288,439 68,639 280,103 EXPENDITURES Current: General and Administrative - 21,953 (21,953) 83,950 Contractual Services 91,245 89,810 1,435 34,607 Capital Outlay - 14,036 (14,036) 50,126 TOTAL EXPENDITURES 91,245 125,799 (34,554 ) 168,683 Excess (Deficiency) of Revenues Over (Under) Expenses 128,555 162,640 34,085 111,420 OTHER FINANCING SOURCES (USES) Transfers Out (123,500) (130,500) (7,000) (19,500) TOTAL OTHER FINANCING SOURCES (USES) (123,500) (130,500) (7,000) (19,500) Net Change in Fund Balance 5,055 32,140 27,085 91,920 FUND BALANCE, BEGINNING 470,743 470,743 - 378,823 FUND BALANCE, ENDING $ 475,798 $ 502,883 $ 27,085 $ 470,743 61 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL PARK FUND FOR THE YEAR ENDED SEPTEMBER 30, 2008 (WITH COMPARATIVE ACTUAL TOTALS FOR 2007) Variance with Original and 2008 Final Budget- 2007 Final Actual Positive Actual Budget Amounts (Negative) Amounts REVENUES Developer Fees $ 70,000 $ 25,088 $ (44,912) $ 79,312 Tree Mitigation 30,000 16,119 (13,881) 45,161 Investment Earuings 17,000 14,848 (2,152) 25,267 Miscellaneous - - - 25,000 TOTAL REVENUES 117,000 56,055 (60,945) 174,740 EXPENDITURES Current: General and Administrative 100,000 16,856 83,144 53,032 Contractual Services - - - 14,106 Capital Outlay 120,000 49,893 70,107 - TOTAL EXPENDITURES 220,000 66,749 153,251 67,138 OTHER FINANCING SOURCES (USES) Transfers In 103,000 - (103,000) - Transfers Out - - - (179,000) TOTAL OTHER FINANCING SOURCES (USES) 103,000 - (103,000) (179,000) Net Change in Fund Balance - (10,694) (10,694) (71,398) FUND BALANCE, BEGINNING 451,294 451,294 - 522,692 FUND BALANCE, ENDING $ 451,294 $ 440,600 $ (10,694) $ 451,294 62 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL RECYCLING FUND FOR THE YEAR ENDED SEPTEMBER 30, 2008 (WITH COMPARATIVE ACTUAL TOTALS FOR 2007) Variance with Original and 2008 Final Budget- 2007 Final Actual Positive Actual Budget Amounts (Negative) Amounts REVENUES Sale of Recycling Materials $ 18,000 $ 23,472 $ 5,472 $ 22,821 TOTAL REVENUES 18,000 23,472 5,472 22,821 EXPENDITURES Current: General and Administrative - 341 (341) - Contractual Services 18,000 15,163 2,837 28,774 TOTAL EXPENDITURES 18,000 15,504 2,496 28,774 Net Change in Fund Balance - 7,968 7,968 (5,953) FUND BALANCE, BEGINNING 6,780 6,780 - 12,733 FUND BALANCE, ENDING $ 6,780 $ 14,748 $ 7,968 $ 6,780 63 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL POLICE FORFEITURES FUND FOR THE YEAR ENDED SEPTEMBER 30, 2008 (WITH COMPARATIVE ACTUAL TOTALS FOR 2007) Variance with Original and 2008 Final Budget- 2007 Final Actual Positive Actual Budget Amounts (Negative) Amounts REVENUES Sale of Property Forfeitures $ - $ 122,879 $ 122,879 $ 189,063 Investment Earuings - 9,908 9,908 12,616 TOTAL REVENUES - 132,787 132,787 201,679 EXPENDITURES General and Administrative - - - 48,575 Capital Outlay - 91,664 (91,664) 104,996 TOTAL EXPENDITURES - 91,664 (91,664) 153,571 Net Change in Fund Balance - 41,123 41,123 48,108 FUND BALANCE, BEGINNING 341,981 341,981 - 293,873 FUND BALANCE, ENDING $ 341,981 $ 383,104 $ 41,123 $ 341,981 64 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL LIBRARY GRANT FUND FOR THE YEAR ENDED SEPTEMBER 30, 2008 (WITH COMPARATIVE ACTUAL TOTALS FOR 2007) Variance with Original and 2008 Final Budget- 2007 Final Actual Positive Actual Budget Amounts (Negative) Amounts REVENUES Operating Grants $ - $ 8,211 $ 8,211 $ 3,349 TOTAL REVENUES - 8,211 8,211 3,349 EXPENDITURES Current: General and Administrative - - - 3,531 TOTAL EXPENDITURES - - - 3,531 Net Change in Fund Balance - 8,211 8,211 (182) FUND BALANCE, BEGINNING 6,093 6,093 - 6,275 FUND BALANCE, ENDING $ 6,093 $ 14,304 $ 8,211 $ 6,093 65 CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET TO ACTUAL DEBT SERVICE FUND FOR THE YEAR ENDED SEPTEMBER 30, 2008 (WITH COMPARATIVE ACTUAL TOTALS FOR 2007) Variance with 2007 Original and 2008 Final Budget- Actual Final Actual Positive Amounts Budget Amounts (Negative) (Restated) REVENUES Property Taxes $ 2,691,550 $ 2,870,077 $ 178,527 $ 2,984,547 Intergovernlllental - 490,748 490,748 - Investment Earuings 49,200 41,801 (7,399) 92,701 TOTAL REVENUES 2,740,750 3,402,626 661,876 3,077,248 EXPENDITURES Debt Service: Principal 1,600,602 1,910,043 (309,441) 1,562,142 Interest and Fiscal Charges 1,432,598 1,620,178 (187,580) 1,377,961 TOTAL EXPENDITURES 3,033,200 3,530,221 (497,021) 2,940,103 EXCESSIVE (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (292,450) (127,595) 164,855 137,145 OTHER FINANCING SOURCES Transfers In 295,950 - (295,950) 72,000 TOTAL OTHER FINANCING SOURCES 295,950 - (295,950) 72,000 Net Change in Fund Balance 3,500 (127,595) (131,095) 209,145 FUND BALANCE, BEGINNING 461,500 556,884 95,384 347,739 FUND BALANCE, ENDING $ 465,000 $ 429,289 $ (35,711) $ 556,884 66 CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS GENERAL FUND SEPTEMBER 30, 2008 AND 2007 2007 2008 (Restated) ASSETS Cash and Cash Equivalents $ 1,100 $ 1,220 Investments 5,468,624 9,373,847 Receivables: Ad Valorem Taxes (Net of Allowance for Uncollectibles of$7,314 and $8,371) 114,592 131,142 Sales Taxes 740,307 708,747 Franchise Taxes 325,157 232,936 Other (Net of Allowance for Uncollectibles of$1,747,485 and $1,325,311) 1,203,048 1,118,585 Due from Other Funds 1,019,045 1,012,632 Due from Component Unit 1,412 - Accrued Interest 38,246 - Inventory 46,014 67,333 TOTAL ASSETS $ 8,957,545 $ 12,646,442 LIABILITIES AND FUND BALANCE Liabilities: Cash Overdraft $ 232,783 $ 569,980 Accounts Payable 614,836 630,504 Accrued Liabilities 403,673 340,807 Customer Deposits 16,050 - Due to Other Goveruments 288,578 - Deferred/Unearued Revenue 1,315,717 1,251,455 Total Liabilities 2,871,637 2,792,746 Fund Balance: Reserved for: Inventory 46,014 67,333 LEOSE 11,018 10,810 Technology 212,561 168,864 Court Security 57,400 22,799 Unreserved: Undesignated 5,758,915 9,583,890 Total Fund Balance 6,085,908 9,853,696 TOTAL LIABILITIES AND FUND BALANCE $ 8,957,545 $ 12,646,442 67 CITY OF SCHERTZ, TEXAS COMPARATIVE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GENERAL FUND FOR THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007 2007 2008 (Restated) REVENUES Property Taxes $ 4,985,907 $ 4,783,053 Sales Taxes 4,117,173 4,016,381 Franchise Taxes 1,240,642 1,004,116 Beverage Taxes 37,115 36,232 Permits and Fees 951,746 937,581 Service Fees 1,568,600 1,784,277 Fines and Fees 1,387,677 1,208,038 Intergoverumental 27,880 - Investment Earuings 381,426 515,893 Sale of Capital Assets - 664,120 Miscellaneous 318,661 318,067 TOTAL REVENUES 15,016,827 15,267,758 EXPENDITURES Current: General Goverument 6,128,794 5,066,980 Public Safety 6,638,352 5,665,671 Streets and Parks 1,545,386 1,392,923 Health 295,156 263,918 Culture and Recreation 667,995 439,767 Capital Outlay 3,176,638 955,350 Bond Issue Costs - 8,967 TOTAL EXPENDITURES 18,452,321 13,793,576 Excess (Deficiency) of Revenues Over (Under) Expenditures (3,435,494) 1,474,182 OTHER FINANCING SOURCES (USES) Bond Proceeds - 1,008,400 Operating Transfers In 130,500 19,500 Operating Transfers Out (462,794) (83,650) TOTAL OTHER FINANCING SOURCES (USES) (332,294) 944,250 Net Change in Fund Balance (3,767,788) 2,418,432 Fund Balance at Beginning of Year 9,853,696 7,435,264 Fund Balance at End of Year $ 6.085.908 $ 9.853.696 68 DISCRETEL Y PRESENTED COMPONENT UNITS Discretely presented component units consist of separate entities whose goveruing bodies are not substantively the same as the goveruing body of the primary goverument. The discretely presented component units also provide services to areas other than the primary goverument. 69 CITY OF SCHERTZ, TEXAS COMBINING BALANCE SHEET DISCRETL Y PRESENTED COMPONENT UNITS SEPTEMBER 30, 2008 Schertz The Economic Library Development Advisory Corporation Board Total ASSETS Cash and Cash Equivalents $ 138,465 $ 8,725 $ 147,190 Investments 2,072,640 45,224 2,117,864 Taxes Receivable 370,153 - 370,153 Accounts Receivable - Other 118,478 - 118,478 Due from Primary Goverument 207,088 - 207,088 TOTAL ASSETS $ 2.906.824 $ 53.949 $ 2.960.773 LIABILITIES AND FUND BALANCE Liabilities Accounts Payable $ 350,055 $ 46 $ 350,101 Accrued Liabilities 15,641 - 15,641 Deferred Revenue 209,177 - 209,177 Total Liabilities 574,873 46 574,919 Fund Balance Unreserved 2,331,951 53,903 2,385,854 Total Fund Balances 2,331,951 53,903 2,385,854 TOTAL LIABILITIES AND FUND BALANCE $ 2.906.824 $ 53.949 $ 2.960.773 Amounts reported in the statement of net assets are different because: Total Fund Balances $ 2,331,951 $ 53,903 $ 2,385,854 Capital Assets used in goverumental activities are not financial resources and therefore are not reported as as assets in goverumental funds 3,750,962 - 3,750,962 Deferred charges, consisting of debt issue costs, are amortized over the life of the bond in the goverumental activites, but were recognized in full in the goverumental funds: 9,090 - 9,090 Long-term liabilities (including employee compensated absences) are not payable in the current period and, therefore, are deferred in the funds ( 1 ,088,348) - ( 1 ,088,348) Net Assets $ 5.003.655 $ 53.903 $ 5.057.558 Net Assets are presented on pages 14-15. 70 CITY OF SCHERTZ, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE DISCRETEL Y PRESENTED COMPONENT UNITS FOR THE YEAR ENDED SEPTEMBER 30, 2008 Schertz The Economic Library Development Advisory Corporation Board Total REVENUES Sales Taxes $ 2,058,586 $ - $ 2,058,586 Capital Grants and Contributions 3,844,776 - 3,844,776 Operating Grants and Contributions - 4,457 4,457 Charges for Services - 9,438 9,438 Investment Earuings 111,132 1,491 112,623 TOTAL REVENUES 6,014,494 15,386 6,029,880 EXPENDITURES Current: Administrative 366,035 - 366,035 Culture and Recreation - 2,174 2,174 Economic Development 5,220,118 - 5,220,118 Debt Service: Principal 115,000 - 115,000 TOTAL EXPENDITURES 5,701,153 2,174 5,703,327 NET CHANGE IN FUND BALANCE 313,341 13,212 326,553 FUND BALANCE, BEGINNING 6,144,319 40,691 6,185,010 Prior Period Adjustment (4,125,709) - (4,125,709) FUND BALANCE, ENDING $ 2.331.951 $ 53.903 $ 2.385.854 71 CITY OF SCHERTZ, TEXAS COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE DISCRETELY PRESENTED COMPONENT UNITS (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2008 Schertz The Economic Library Development Advisory Corporation Board Total Amounts reported in the statement of activities are different because: Net Change in Fund Balance $ 313,341 $ 13,212 $ 326,553 The issuance of long-term debt provides current financial resouces to goverumental funds, which the repayment of the principal oflong-term debt consumes the current financial resources of goverumental funds. Neither transaction, however has any affect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items. Principal Repayments 115,000 - 115,000 Amortization of Bond Issue Costs (1,167) - (1,167) Goverumental funds report capital outlay 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. Current year Construction in Progress expenditures 3,573,268 - 3,573,268 Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the funds (Accrued Compensated Absences) 1,127 - 1,127 Change in Net Assets $ 4.001.569 $ 13.212 $ 4.014.781 Change in Net Assets is presented on pages 16-17. 72 STATISTICAL SECTION This part of the City of Schertz's annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. Financial Trends (Tables 1 throuzh 4) Net Assets by Component Change in Net Assets Fund Balances, Goverumental Funds Changes in Fund Balances, Goverumental Funds These schedules contain trend information to help reader understand hmv the City's financial pel/ormance and well-being have changed over time. Revenue Cavacitv (Tables 5 throuzh 12) Tax Revenues by Source, Governmental Funds Total Water and Sewer Consumption and Rates Principal Water and Sewer Consumers Assessed Value and Estimated Actual Value of Taxable Property Direct and Overlapping Property Tax Rates Principal Property Taxpayers Property Tax Levies and Collections Assessed Value - ACT TP These schedules contain il?formation to help readers assess the factors affecting the City's ability to generate its property and sales tax. Debt Cavacitv (Tables 13 throu'Zh 17) Ratios of Outstanding Debt by Type Ratios of General Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Debt Margin Information Pledged Revenue Coverage These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in thefilture. Demozravhic and Economic Information (Tables 18 throuzh 19) Demographic and Economic Statistics Principal Employers These schedules offer demographic and economic indicators to help the reader understand hmv the City's financial activities take place and to help make comparisons over time and with other govemments. Overatinz Information (Tables 20 throuzh 22) Full-time Equivalent City Goverument Employees by Function Operating Indicators by Function/Program Capital Asset Statistics by Function/Program These schedules contain information about the City's operations and resources to help the reader understand hmv the City's financial information relates to the services the City provides and the activities it pel/orms. 73 CITY OF SCHERTZ, TEXAS NET ASSETS, BY COMPONENT LAST SIX FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Fiscal Year 2003 2004 2005 2006 Governmental Activities Invested in Capital Assets, Net of Related Debt $ 11,380,173 $ 16,228,134 $ 17,699,797 $ 13,257,031 Restricted 491,313 7,037,607 4,813,496 15,888,549 Unrestricted 7,448,061 985,750 6,957,173 8,759,630 Total Governmental Activities Net Assets $ 19,319,547 $ 24.251,491 $ 29,470,466 $ 37,905.210 Business- Type Activities Invested in Capital Assets, Net of Related Debt $ 21,806,626 $ 22,901,982 $ 24,970,976 $ 24,783,839 Restricted 1,384,083 1,010,662 428,712 1,253,711 Unrestricted 5,294,283 3,988,006 5,377,968 9,879,126 Total Business-Type Activities Net Assets $ 28,484,992 $ 27,900,650 $ 30,777,656 $ 35,916,676 Prim my Government Invested in Capital Assets, Net of Related Debt $ 33,186,799 $ 39,130,116 $ 42,670,773 $ 38,040,870 Restricted 1,875,396 8,048,269 5,242,208 17,142,260 Unrestricted 12,742,344 4,973,756 12,335,141 18,638,756 Total Prim my Government Net Assets $ 47,804,539 $ 52.152.141 $ 60.248.122 $ 73,821.886 NOTE: 2007 has been restated to reflect prior period adjustments in Note 13. Financial data prior to fiscal year 2003 was not available. 74 TABLE 1 Fiscal Year 2007 (Restated) 2008 $ 32,932,355 $ 44,206,232 663,973 1,058,514 12,720,293 9,092,711 $ 46,316,621 $ 54,357,457 $ 18,788,933 $ 41,350,184 1,995,213 - 23,658,181 10,286,447 $ 44,442,327 $ 51.636,631 $ 51,721,288 $ 85,556,416 2,659,186 1,058,514 36,378,474 19,379,158 $ 90,758,948 $ 105,994,088 75 CITY OF SCHERTZ, TEXAS CHANGE IN NET ASSETS LAST SIX FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Fiscal Year 2003 2004 2005 2006 Expenses Governmental Activities General Goverument $ 2,630,450 $ 2,873,573 $ 3,612,084 $ 3,957,693 Public Safety 3,705,722 4,586,498 5,558,596 6,403,122 Streets and Parks 1,182,993 1,019,101 1,134,281 1,240,956 Health 156,927 192,506 221,950 231,149 Culture and Recreation 451,215 310,013 339,124 396,078 Interest and Other Fees 499,011 707,090 862,744 823,818 Total Governmental Activities Expenses 8,626,318 9,688,781 11,728,779 13,052,816 Business- Type Activities Water and Sewer 8,300,590 8,302,505 8,937,553 9,821,823 EMS 2,248,651 2,509,858 3,789,791 3,474,249 Total Business-Type Activities 10,549,241 10,812,363 12,727,344 13,296,072 Total Primary Government Expenses $ 19,175,559 $ 20,501,144 $ 24,456,123 $ 26,348,888 Program Revenues Governmental Activities Charges for Service: General Goverument $ 1,461,361 $ 1,381,802 $ 1,575,236 $ 1,310,142 Public Safety 1,033,713 1,118,241 1,475,618 1,684,786 Streets and Parks 34,248 203,579 141,523 143,254 Health 117,983 36,095 44,611 44,178 Culture and Recreation 155,644 180,707 146,429 149,225 Operating Grants and Contributions 2,788,821 2,280,629 1,789,763 1,567,164 Capital Grants and Contributions - 2,153,213 3,808,133 5,382,779 Total Governmental Aactivities Program Revenues 5,591,770 7,354,266 8,981,313 10,281,528 Business- Type Activities Charges for Service: Water and Sewer 8,135,299 7,534,841 9,308,362 11,223,658 EMS 2,014,126 1,723,611 3,443,429 3,904,818 Capital Grants and Contributions 279,913 1,045,334 2,055,366 3,148,100 Total Business-Type Activities Program Revenues 10,429,338 10,303,786 14,807,157 18,276,576 Total Primary Goverument Program Revenues $ 16,021,108 $ 17,658,052 $ 23,788,470 $ 28,558,104 NOTE: 2007 has been restated to reflect prior period adjustments in Note 13. Financial data prior to fiscal year 2003 was not available. 76 TABLE 2 Fiscal Year 2007 (Restated) 2008 $ 5,603,855 $ 7,305,112 5,920,046 7,093,301 2,702,102 3,177,145 272,730 306,764 450,974 681,440 1,412,066 1,982,984 16,361,773 20,546,746 9,502,039 12,379,584 5,114,911 2,976,112 14,616,950 15,355,696 $ 30,978,723 $ 35,902,442 $ 3,123,184 $ 1,968,046 1,307,295 1,760,063 196,436 170,872 33,148 37,096 201,779 210,311 493,281 526,839 5,640,431 8,750,859 10,995,554 13,424,086 13,007,618 13,620,440 5,017,343 3,150,428 2,755,376 5,190,039 20,780,337 21,960,907 $ 31,775,891 $ 35,384,993 77 CITY OF SCHERTZ, TEXAS CHANGE IN NET ASSETS (CONTINUED) LAST SIX FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) Fiscal Year 2003 2004 2005 2006 Net (Expenses) Revenue Goverumental Activities $ (3,034,548) $ (2,334,515) $ (2,747,466) $ (2,771,288) Business-Type Activities (119,903) (508,577) 2,079,813 4,980,504 Total Primary Goverument Net Expenses $ (3.154.451) $ (2,843,092) $ (667,653) $ 2.209.216 Governmental Revenues and Other Changes in Net Assets Governmental Activities Taxes: Ad Valorem $ 3,984,262 $ 4,410,567 $ 4,908,108 $ 5,705,805 Sales 2,035,655 1,703,994 2,227,282 3,136,970 Franchise Fees 671,009 659,847 786,298 961,462 Hotel/Motel 43,177 37,688 42,982 202,108 Mixed Drink 4,243 5,064 6,437 20,068 Bingo 4,528 4,749 4,946 5,124 Unrestricted Investment Earuings 93,690 114,323 356,080 552,091 Gain Sale of Capital Asset - - - - Miscellaneous 16,028 58,770 83,337 112,306 Transfers 410,802 584,733 199,123 510,098 Total Governmental Activities 7,263,394 7,579,735 8,614,593 11,206,032 Business- Type Activities Interest and Investment Earuings 94,731 61,025 170,610 473,205 Gain Sale of Capital Asset - 327,900 - - Miscellaneous 158,372 120,043 177,554 195,409 Transfers (410,802) (584,733) (199,123) (510,098) Total Business-Type Activities (157,699) (75,765) 149,041 158,516 Total Primary Goverument $ 7.105,695 $ 7,503,970 $ 8,763,634 $ 11.364,548 Changes In Net Assets Goverument Activities $ 4,228,846 $ 5,245,220 $ 5,867,127 $ 8,434,744 Business-Type Activities (277,602) (584,342) 2,228,854 5,139,020 Total Primary Goverument $ 3,951.244 $ 4,660,878 $ 8,095,981 $ 13,573,764 NOTE: Less than ten (10) years of data has been presented because this is the sixth year of implementation ofGASB 34. The information will be presented on a prospective basis. NOTE: 2007 has been restated to reflect prior period adjustments in Note 13. Financial data prior to fiscal year 2003 was not available. 78 TABLE 2 (Continued) Fiscal Year 2007 (Restated) 2008 $ (5,366,219) $ (7,122,660) 6,163,387 6,605,211 $ 797.168 $ (517.449) $ 7,309,127 $ 7,841,928 4,016,381 4,117,173 1,004,116 1,240,642 259,176 273,558 29,451 32,364 6,781 4,751 1,453,645 1,310,310 - 23,706 923,574 319,064 ( 1 ,224,621 ) - 13,777,630 15,163,496 976,595 409,972 - 57,527 161,048 121,594 1 ,224,621 - 2,362,264 589,093 $ 16.139,894 $ 15,752,589 $ 8,411,411 $ 8,040,836 8,525,651 7,194,304 $ 16,937,062 $ 15.235.140 79 CITY OF SCHERTZ, TEXAS FUND BALANCES - GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Fiscal Year 1999 2000 2001 2002 GENERAL FUND Reserved $ 36,066 $ 58,232 $ 163,210 $ 122,355 Unreserved 2,606,701 3,015,959 3,260,866 2,863,146 TOTAL GENERAL FUND $ 2,642,767 $ 3,074,191 $ 3,424,076 $ 2,985,501 ALL OTHER GOVERNMENTAL FUNDS Reserved $ 170,444 $ 105,019 $ 156,200 $ 299,074 Unreserved, Reported In: Special Revenue Funds 533,291 659,930 886,961 740,647 Capital Project Funds 2,077,276 1,087,077 4,632,762 1,939,678 Total All Other Goverumental Funds $ 2,781,011 $ 1 ,852,026 $ 5,675,923 $ 2,979,399 NOTE: 2007 has been restated to reflect prior period adjustments in Note 13. Financial data prior to fiscal year 2003 was not available. 80 TABLE 3 Fiscal Year 2003 2004 2005 2006 2007 (Restated) 2008 $ - $ 65,551 $ 10,571 $ 232,555 $ 269,806 $ 326,993 5,499,836 4,319,428 4,864,647 7,202,709 9,583,890 5,758,915 $ 5,499,836 $ 4,384,979 $ 4,875,218 $ 7,435,264 $ 9,853,696 $ 6,085,908 $ 491,313 $ 414,357 $ 590,007 $ 690,830 $ 556,884 $ 700,360 665,281 794,729 660,151 871,305 1,276,891 1,084,568 1,212,118 8,792,947 5,135,834 15,134,814 17,612,092 16,416,440 $ 2,368,712 $ 10,002,033 $ 6,385,992 $ 16,696,949 $ 19,445,867 $ 18,201,368 81 CITY OF SCHERTZ, TEXAS CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) Fiscal Year 1999 2000 2001 2002 REVENUES Taxes $ 3,671,516 $ 4,088,491 $ 4,452,964 $ 5,305,902 Permits and Fees 680,316 731,488 620,652 663,682 Service Fees 558,904 626,464 659,145 883,126 Fines and Fees 379,584 444,331 749,201 538,831 Intergovernmental - 280,026 186,382 45,362 Other Revenue 1 ,292, 198 422,700 368,260 877,544 TOTAL REVENUES 6,582,518 6,593,500 7,036,604 8,314,447 EXPENDITURES General Government 1,307,488 1,558,650 1,792,396 2,735,142 Public Safety 2,061,488 2,212,924 2,561,055 2,963,924 Streets and Parks 806,029 793,700 627,110 689,150 Health 142,287 155,814 175,048 120,530 Culture and Recreation 274,865 259,848 270,437 328,404 Economic Development 279,058 - - - Management Services - 83,273 98,683 - Capital Outlay 4,244,176 1,835,461 1,688,451 4,079,385 Debt Service: Principal 338,770 365,820 257,410 937,000 Interest and Fiscal Charges 326,950 302,111 280,774 511,811 Bond Issue Costs - - - - TOTAL EXPENDITURES 9,781,111 7,567,601 7,751,364 12,365,346 Excess (Deficiency) of Revenues Over (Under) Expenditures (3,198,593) (974,101) (714,760) ( 4,050,899) OTHER FINANCING SOURCES (USES) Bonds Issued - - 4,500,000 - Premium on Bond Issue - - - - Discount on Bond Issue - - - - Tax Notes Issued - - - 400,000 Capital Lease - - - - Transfers In 1,089,936 598,405 388,542 551,720 Transfers (Out) ( 686,032) (218,386) - (31,156) TOTAL OTHER FINANCING SOURCES (USES) 403,904 380,019 4,888,542 920,564 NET CHANGE IN FUND BALANCE $ (2,794,689) $ ( 594,082) $ 4,1 73,782 $ (3,130,335) Debt Service as a percentage of N oncapital Expenditures 12.0% 11.7% 8.9% 17.5% NOTE: 2007 has been restated to reflect prior period adjustments in Note 13. Financial data prior to fiscal year 2003 was not available. 82 TABLE 4 Fiscal Year 2003 2004 2005 2006 2007 (Restated) 2008 $ 6,747,330 $ 7,322,727 $ 8,569,435 $ 10,587,264 $ 13,083,505 $ 13,524,472 941,515 852,577 1,421,575 1,475,619 1,062,054 992,953 944,506 793,096 872,286 1,820,940 1,807,098 1,592,072 646,613 842,322 915,704 1,157,480 1,397,101 1,387,677 2,003,743 1,710,277 956,791 19,278 153,349 526,839 287,865 490,266 659,430 710,580 2,460,832 1,752,254 11,571,572 12,011,265 13,395,221 15,771,161 19,963,939 19,776,267 2,554,675 2,772,024 3,471,560 3,817,778 5,389,340 11,607,551 3,530,470 3,833,243 4,542,384 5,020,684 5,665,671 6,638,352 675,687 942,942 1,043,501 1,162,541 1,392,923 1,545,386 156,927 181,074 208,499 216,655 263,918 295,156 415,834 298,179 325,498 384,127 439,767 667,995 - - - - - - - - - - - - 4,767,695 3,827,879 4,360,483 6,127,735 5,504,679 10,281,603 783,000 1,233,000 1,236,000 1,155,000 1,458,000 1,910,043 508,166 609,522 884,069 803,664 1,377,961 1,620,178 46,272 111,802 - 165,125 52,300 122,290 13,438,726 13,809,665 16,071,994 18,853,309 21,544,559 34,688,554 (1,867,154) ( 1,798,400) (2,676,773) (3,082,148) (1,580,620) (14,912,287) 3,360,000 7,750,000 - 15,000,000 8,076,733 9,900,000 - - - 123,057 - - - (17,869) - - - - - - - - - - - - - 319,996 (104,142) - 467,502 2,275,896 583,126 529,598 354,150 593,294 (56,700) (1,691,163) (384,003) (19,500) (1,578,771) (593,294) 3,770,802 8,316,864 199,123 15,953,151 6,747,970 9,900,000 $ 1.903,648 $ 6,518,464 $ (2,477,650) $ 12,871.003 $ 5,167,350 $ (5,012,287) 14.9% 18.5% 18.1% 15.4% 18.2% 15.0% 83 CITY OF SCHERTZ, TEXAS TAX REVENUE BY SOURCE-GOVERNMENTAL FUNDS LAST SIX FISCAL YEARS TABLE 5 Fiscal Mixed Total Year Property Sales & Use Franchise Beverage Bingo Occupancy Revenue 2008 $ 7.855.984 $4.117.173 $ l.240.642 $ 32.364 $ 4.751 $ 273.558 $ 13.524.472 2007 7.767.600 4.016.381 1.004.116 29.451 6.781 259.176 13.083.505 2006 6.26l.532 3.136.970 961.462 20.068 5.124 202.108 10.587.264 2005 5.501.490 2.227.282 786.298 6.437 4.946 42.982 8.569.435 2004 4.91U85 l.703.994 659.847 5.064 4.749 37.688 7.322.727 2003 3.988.718 2.035.655 671.009 4.243 4.528 43.177 6.747.330 *Property tax is the largest revenue source of the City. NOTE: Financial data prior to fiscal year 2003 was not available. 84 CITY OF SCHERTZ, TEXAS TOTAL WATER AND SEWER CONSUMPTION AND RATES LAST TEN FISCAL YEARS (UNAUDITED) TABLE 6 Fiscal Year Total Water & Water & Sewer Ended Water & Sewer Sewer Rate Per September 30, Consumption Base Rate 1,000 Gallons 2008 $ 8,557,792 $ 15.94 $ 1.92 2007 6,145,081 15.94 1.72 2006 7,142,304 15.94 1.69 2005 5,287,665 15.94 1.52 2004 4,894,003 13.70 1.47 2003 4,941,716 13.70 1.47 2002 3,774,089 11. 70 1.40 2001 3,234,262 7.70 1.25 2000 2,684,968 3.70 1.25 1999 2,290,505 3.70 1.25 85 CITY OF SCHERTZ, TEXAS PRINCIP AL WATER AND SEWER CONSUMERS CURRENT YEAR AND NINE YEARS AGO (UNAUDITED) TABLE 7 2008 1999 Total Percentage of Total Percentage of Water Total City Water Total City Consumption Water Consumption Water TAXPAYERS (In HmHireds) Rank Consumption (In Hmldreds) Rank Consumption Beck Readymix 116,857 1 0.81% N/A N/A N/A Pro1ogis Trust 91,394 2 0.63% N/A N/A N/A Pecan Grove Investments 77 ,510 3 0.54% N/A N/A N/A Landscape of Texas 69,469 4 0.48% N/A N/A N/A AOH-Vantage at Schertz, LLC 61,621 5 0.43% N/A N/A N/A Wa1-Mart Supercenters 58,314 6 0.40% N/A N/A N/A Lack's 56,441 7 0.39% N/A N/A N/A Legacy Oaks Apartments 52,362 8 0.36% N/A N/A N/A Sycamore Creek Apartments 47,140 9 0.33% N/A N/A N/A Samuel Clemens High Schools 41,108 10 0.28% N/A N/A N/A TOTAL 672,216 4.65% 0.00% Total City Water Consumption 14,460,239 14,460,239 Note: Datafrom nine years ago was not available. 86 CITY OF SCHERTZ, TEXAS ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (UNAUDITED) TABLE 8 Fiscal Year Ended Total Taxable Total Direct September 30, Assessed Value Tax Rate 2008 $ 1,939,016,982 0.4090% 2007 1,423,205,878 0.4090% 2006 1,397,297,729 0.3977% 2005 1,292,156,353 0.3760% 2004 1,139,992,157 0.3825% 2003 1,024,412,713 0.3825% 2002 827,142,321 0.3825% 2001 731,305,433 0.3405% 2000 636,157,284 0.3455% 1999 534,039,183 0.3544% Source: Guadalupe County Tax Office NOTES: Property in the City of Schertz is reassessed every year at estimated actual value. For this reason, assessed value is equal to estimated actual value. Tax rates are per $100 of assessed value. Property tax is the largest revenue source of the City. 87 CITY OF SCHERTZ, TEXAS DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS (UNAUDITED) TABLE 9 City Direct Rates Overlapping Rates Schertz- Cibolo- Fiscal Basic Debt Universal Guadalupe County Year Rate Service City ISD County Road 2008 0.2590% 0.1500% 1.6100% 0.3481 % 0.0550% 2007 0.2805% 0.1512% 1.6100% 0.3481 % 0.0550% 2006 0.3005% 0.0972% 1.7200% 0.3531 % 0.0500% 2005 0.2888% 0.0872% 1.7400% 0.3530% 0.0500% 2004 0.2946% 0.0879% 1. 7800% 0.3654% 0.0477% 2003 0.3091 % 0.0734% 1.7300% 0.3668% 0.0463% 2002 0.3208% 0.0617% 1.7100% 0.3499% 0.0420% 2001 0.3147% 0.0258% 1.6267% 0.3193% 0.0630% 2000 0.3151% 0.0304% 1.4945% 0.3417% 0.0582% 1999 0.3169% 0.0375% 1.6923% 0.3192% 0.0600% Source: Guadalupe County Tax Office NOTE: Overlapping rates are those of local and county governments that apply within the City of Schertz. Not all overlapping rates apply to all City of Schertz property owners. 88 CITY OF SCHERTZ, TEXAS PRINCIPAL PROPERTY TAX PAYERS CURRENT YEAR AND NINE YEARS AGO (UNAUDITED) TABLE 10 2008 1999 Percentage Percentage of of Total City Total City Taxable Taxable Taxable Taxable Assed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value - - San Antonio MTA, LP $ 23,048,580 1 1.1 9% $ Sprint Spectrum, LP 16,699,920 2 0.86% Wa1-Mart Real Estate Business Trust 14,804,831 3 0.76% H.E.B. Grocery Co. 11,958,400 4 0.62% 9,271,352 1 1.56% Eye Care Centers of America, Inc. 11,298,734 5 0.58% EM Limited Partnership 11,136,474 6 0.57% Lowe's Home Center Inc. 10,010,608 7 0.52% Pro1ogis North American Properties Fund 9,104,240 8 0.47% GD Bar Family Ltd Partnership 8,589,227 9 0.44% Atlantic Financial Group, Ltd. 8,566,675 10 0.44% Eric W. White 6,216,564 2 1.04% PSP Industries 4,093,326 3 0.69% Garden Ridge Pottery 3,902,412 4 0.66% Negley Paint Co., Inc. 3,469,115 5 0.58% Sycamore Creek Partners 3,386,434 6 0.57% Intel Southwest 3,366,521 7 0.57% Guadalupe Valley Electric Co-Op 2,957,918 8 0.50% Corridor Properties, Ltd. 2,957,256 9 0.50% Bridgestone Firestone, Inc. 2,386,860 10 0.40% TOTALS $ 125,217,689 6.46% $ 42,007,758 7.05% TOTAL TAXABLE ASSESSED VALUE $ 1,939,016,982 $ 595,743,191 Source: Guadalupe County Tax Office 89 CITY OF SCHERTZ, TEXAS PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) TABLE 11 Collected Within Total Collections Fiscal Year Taxes Levied Fiscal Year of Levy Collections In To Date Ended for the %of Subsequent %of September 30, Fiscal Year Amount Levy Years Amount Levy 2008 $ 7,793,405 $ 7,711,714 98.95% $ - $ 7,711,714 98.95% 2007 7,048,818 6,957,827 98.71% 55,213 7,013,040 99.49% 2006 5,645,611 5,576,559 98.78% 55,240 5,631,799 99.76% 2005 4,858,508 4,796,062 98.71% 52,459 4,848,521 99.79% 2004 4,360,470 4,252,349 97.52% 96,293 4,348,642 99.73% 2003 3,918,379 3,881,204 99.05% 33,511 3,914,715 99.91 % 2002 3,163,819 3,107,209 98.21 % 54,018 3,161,227 99.92% 2001 2,490,095 2,459,900 98.79% 28,595 2,488,495 99.94% 2000 2,198,381 2,153,542 97.96% 43,324 2,196,866 99.93% 1999 1,892,640 1,869,557 98.78% 21,092 1,890,649 99.89% Source: Guadalupe County Tax Office 90 CITY OF SCHERTZ, TEXAS ASSESSED VALUE - ACT TP LAST FIVE FISCAL YEARS TABLE 12 Fiscal Year Taxable Total Taxable Total Ended Value Residential Commercial Tax-Exempt Other Assessed Direct September 30, January 1 Property Property Property Property Va1ue* Tax Rate 2008 2007 $ 1,432,741,653 $ 371,757,931 $ 18,218,190 $212,840,706 $ 2,035,558,480 0.4090 2007 2006 1,350,328,953 423,317,359 21,195,965 400,215,580 2,195,057,857 0.4090 2006 2005 1,169,192,171 344,827,561 16,046,859 340,912,535 1,870,979,126 0.4317 2005 2004 1,044,943,428 262,553,018 11,646,100 270,602,923 1,589,745,469 0.3977 2004 2003 964,220,590 248,629,342 10,777,023 209,390,471 1,433,017,426 0.3760 NOTE: Financial data prior to fiscal year 2004 was not available. 91 CITY OF SCHERTZ, TEXAS RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (UNAUDITED) Governmental Activities Business- Type Activities General Certificates Public Fiscal Obligation of Tax Capital Revenue Facility Year Bonds Obligation Notes Lease Bonds Loan 2008 $ 32.790.000 $13.158.700 $ $ 107.078 $ 6.230.000 $ 14.000 2007 23.950.000 14.032.893 215.854 6.645.000 21.000 2006 18.740.000 13.560.000 319.996 7.055.000 28.000 2005 4.045.000 14.250.000 160.000 7,445.000 34.000 2004 4,456.000 14.785.000 450.000 4.625.000 40.000 2003 4.844.000 7.600.000 730.000 4.990.000 46.000 2002 5.222.000 4.375.000 1.000.000 5.275.000 52.000 2001 5.129.000 4.585.000 5.550.000 57.000 2000 5.321,410 150.000 785.000 62.000 1999 5.622.230 215.000 820.000 67.000 NOTES: a Details regarding the City's outstanding debt can befound in Note 8 to the current financial statements. b. The City issued $9,900,000 of new general obligation bond~ in 2008. c. See Table 18 for personal income and population data for the City. These ratios are calculated using personal income and population for the prior calendar year. 92 TABLE 13 Busines- Type Activities Percentage Certificates Total of Taxable Refunding of Note Primary Value of *Per Bonds Obligation Payable Government Property Capita $ $ 6.976,300 $ $ 59.276.078 7.06% l.849 7.237.l07 52.1 0 l.854 5.88% 1.639 39.702.996 1.56% 1.262 25.934.000 1.35% 968 64.000 24,420.000 2.43% 923 126.000 18,336.000 2.01% 764 193.000 60.000 16.177.000 1.93% 703 211.000 120.000 34.564 15.686.564 1.95% 713 543.590 130.000 66.670 7.058.670 1.19% 378 741.770 140.000 96,491 7.702,491 2.59% 428 93 CITY OF SCHERTZ, TEXAS RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (UNAUDITED) TABLE 14 General Bonded Debt Outstanding Percentage of General Certificates Actual Taxable Fiscal Obligation of Tax Value of Per Year Bonds Obligation Notes Total Property Capita 2008 $ 32,790,000 $ 13,158,700 $ - $45,948,700 2.49% $ 1,437 2007 23,950,000 21,271,000 - 45,221,000 3.18% 1,423 2006 18,740,000 13,560,000 - 32,300,000 2.31% 1,027 2005 4,045,000 14,250,000 160,000 18,455,000 1.43% 689 2004 4,456,000 14,785,000 450,000 19,691,000 1. 73% 744 2003 4,844,000 7,600,000 730,000 13,174,000 1.29% 549 2002 5,222,000 4,375,000 1,000,000 10,597,000 1.28% 461 2001 5,129,000 4,585,000 - 9,714,000 1.33% 442 2000 5,321,410 150,000 - 5,471,410 0.86% 293 1999 5,622,230 215,000 - 5,837,230 1.09% 324 NOTE: Details regarding the City's outstanding debt can be found in Note 8 to the current financial statements. See Table 5 for the City's property tax value data. City population data can be found in Table 18. 94 CITY OF SCHERTZ, TEXAS DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT (UNAUDITED) TABLE 15 Estimated Estimated Share of Debt Percentage Overlapping Governmental Unit Outstanding Applicable* Debt Debt repaid with property taxes: Alamo CCD $ 540,888,778 0.01% $ 54,089 Bexar County 185,320,641 0.01% 18,532 Bexar County Hospital District 290,000,000 0.01% 29,000 Comal County 23,947,279 3.26% 780,681 Comal ISD 479,608,329 2.68% 12,853,503 Guadalupe County 10,865,000 28.04% 3,046,546 San Antonio River Authority 45,665,000 0.01% 4,567 S chertz-Cibo la-Universal 277,250,348 56.48% 156,590,997 Subtotal, Overlapping Debt 173,377,915 City Governmental Activities Direct Debt 44,198,982 TOTAL NET OVERLAPPING DEBT $ 217,576,897 NOTES: The overlapping debt was receivedfi-om the Municipal Advisory Council of Texas. Details regarding the City~~ outstanding debt can be found in Note 8 to the current financial statements. 95 CITY OF SCHERTZ, TEXAS DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (UNAUDITED) Assessed Value. 2007 Tax Roll $1.939.016.982 Debt Limit - Texas statues do not provide a legal debt limit for cities; however. through accepted practice a practical "economic" debt limit is considered to be 10% of the assessed value. $ 193.901.698 Amount of Applicable Debt: Bonded Debt - General Obligation Bonds $ 45.948.700 Less Debt Service Fund Balance (481.797) 45,466.903 DEBT MARGIN $ 148,434.795 Total Net Debt as a Percentage of Debt Margin 30.63% Fiscal Year 1998 1999 2000 2001 Assessed Value $ 450.199.212 $ 534.039.183 $ 636.157.284 $ 73 U05,433 Debt Margin $ 45.019.921 $ 53,403.918 $ 63.615.728 $ 73.130.543 Total Net Debt Applicable to Limit 5,405.013 5.183.556 5.216.391 4.972.800 Total Debt Margin $ 39.614.908 $ 48.220,362 $ 58.399,337 $ 68.157.743 Total Net Debt as a Percentage of Debt Margin 12.01 % 9.71% 8.20% 6.80% 96 TABLE 16 Fiscal Year 2002 2003 2004 2005 2006 2007 $ 827.142,321 $ 1.024,412.713 $ 1.139.992.157 $ l.292.156,383 $ U97.297.729 $ 1,423.205.878 $ 82.714.232 $ 102,441.271 $ 113.999.216 $ 129.215.638 $ 139.729.773 $ 142.320.588 4.922.926 4.520.834 4.208.707 3.78l.530 18.392.261 23,488.500 $ 77.79U06 $ 97.920,437 $ 109.790.509 $ 125,434.108 $ 12U37.512 $ 118.832.088 5.95% 4.41% 3.69% 2.93% 13.16% 16.50% 97 CITY OF SCHERTZ, TEXAS PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS (UNAUDITED) TABLE 17 Water Revenue Bonds Utility Less: Net Debt Service Fiscal Service Operating Available Year Charges Expenses Revenue Principal Interest Coverage 2008 $ 13,620,440 $ 9,040,264 $ 4,580,176 $ 665,400 $ 558,569 3.74% 2007 13,476,288 7,896,319 5,579,969 645,800 501,397 4.86% 2006 11,289,876 6,955,000 4,334,876 390,000 354,965 5.82% 2005 9,381,042 6,136,390 3,244,652 380,000 213,290 5.47% 2004 7,583,136 5,653,184 1,929,952 365,000 226,795 3.26% 2003 8,228,571 5,359,309 2,869,262 285,000 236,913 5.50% 2002 4,663,584 3,061,327 1,602,257 275,000 246,263 3.07% 2001 4,260,109 3,115,427 1,144,682 35,000 55,750 12.61 % 2000 3,958,054 2,717,774 1,240,280 35,000 58,375 13.28% 1999 3,250,589 2,145,249 1,105,340 80,000 63,588 7.70% NOTE: Details regarding the City's outstanding debt can be found in Note 8 to the current financial statements. Operating expenses do not include depreciation, interest, amortization or joint venture expenses. 98 CITY OF SCHERTZ, TEXAS DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (UNAUDITED) TABLE 18 Education Per Capita Level In Personal Personal Median Years of School Unemployment Year Population Income Income Age Schooling Eurollment Rate 2008 32,057 $ 839,701,058 $ 26,194 35.1 14.0 10,991 5.0% 2007 31,788 885,836,196 27,867 36.3 14.0 9,470 4.0% 2006 31,452 2,543,051,460 80,855 36.1 18.0 8,380 4.4% 2005 26,780 1,926,713,880 71,946 35.1 15.9 7,712 3.6% 2004 26,463 1,005,594,000 38,000 32.7 15.0 7,257 4.1% 2003 24,000 912,000,000 38,000 35.1 14.6 7,245 2.4% 2002 23,000 838,994,000 36,478 35.1 14.6 6,440 2.4% 2001 22,000 802,516,000 36,478 35.1 14.6 6,440 2.4% 2000 18,694 593,870,992 31,768 35.1 14.6 6,186 3.9% 1999 18,000 297,000,000 16,500 32.6 14.6 5,777 3.9% Sources: Population, personal income, median age and education level information provided by City Economic Development COIporation. School enrollment provided by Schertz-Cibolo - Universal City Independent School District. Unemployment data provided by the Texas Workforce Commission. 99 CITY OF SCHERTZ, TEXAS TOP TEN PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO (UNAUDITED) TABLE 19 2008 1999 Percentage Percentage of Total City of Total City Employer Employees Employment Employees Employment Schertz/Cibolo/UC ISD 1,495 10.09% N/A N/A Brandt Engineering 450 3.04% N/A N/A Wal-Mart Stores 420 2.83% N/A N/A EyeCare Centers of America 320 2.16% N/A N/A City of Schertz 303 2.04% N/A N/A H.E.B. Grocery Co. 300 2.02% N/A N/A Federal Express Freight 165 1.11% N/A N/A Valero Energy 160 1.08% N/A N/A Metro Ambulance LP 110 0.74% N/A N/A Manco 100 0.67% N/A N/A Republic Beverage 100 0.67% N/A N/A Source: City Economic Development COIporation Note: Nine year principal employer history is not available. 100 CITY OF SCHERTZ, TEXAS FULL-TIME EQUIVALENT CITY GOVERNMENTAL EMPLOYEES BY FUNCTION LAST SEVEN FISCAL YEARS (UNAUDITED) TABLE 20 Full- Time Equivalent Employees as of September 30, Function 2002 2003 2004 2005 2006 2007 2008 General Government City Manager 4 3 4 4 3 4 7 Court Support 3 3 4 4 4 4 0 Municipal Court 2 2 2 2 3.5 5 6 Planning and Zoning 3 2 2 2 3 4 5 Facility Maintenance 5 5 6 6 6.5 9 11 City Secretary 2 2 2 2 2 2 2 Public Information 1 1 1 1 1 2 3 Records Management 0 0 1 15 2 2 3 Infonnation Tecynology 1 2 2 2 3 3 3 Human Resources 1 2 2 2 2 2 3 Finance 4 4 5 5 5 5 6 Fleet Service 2 2 2 3 3 3 3 Purchasing 0 0 0 0 0 1 2 Engineer 0 0 0 0 0 1 3 Public Safety Police 44.5 46.5 50.5 53.5 62 66 69 Fire 24 24 30 31 32 32 32 Inspections 5 6 6 6 6 8 8 Health Animal Control 5 5.5 5 5 5 5 6 Parks and Culture Parks 4 5 6 7 7 9 8 Pools 7.5 8 14.5 15 12.5 12.5 0 Library 7.5 7 8.5 8.5 9.5 9.5 14 Public Environment Streets 9 9 13 12 11 11 13 Public Works Public Works 6 6 6 6 6 6 6 Business Office 11 12 11 9 10 9 10 Water and Sewer 11 14 15 15 17 19 14 Drainage 0 0 0 0 0 5 6 EMS 27 27.5 28 32 32.5 33.5 50 Economic Development 2 1 2 2 3 3 3 TOTAL 191.5 199.5 228.5 250 251.5 275.5 296 Source: City Adopted Budgets NOTES: Less than 10 years of data is available. The information will be presented on a prospective basis. 101 CITY OF SCHERTZ, TEXAS OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Function 1999 2000 2001 2002 General Government Building Permits Issued 3,690 3,716 2,754 2,812 Police CFS N/A N/A N/A 10,743 Arrests N/A N/A N/A 666 Traffic Violations N/A N/A N/A 8,863 Accidents N/A N/A N/A 857 N/A N/A N/A Fire N/A N/A N/A Numer of Rescue/Other Responses N/A N/A N/A 1,058 Number of Fire Responses N/A N/A N/A 76 Number of Inspections N/A N/A N/A 202 Number of Training Classes Conducted N/A N/A N/A 87 Parks Facility Reservations N/A 205 174 178 Librarv Annual Circulation 120,602 123,897 131,293 183,467 Library Visits 94,616 98,515 99,541 142,258 Library Program Attendance 3,385 4,946 2,050 3,607 Registered Users 10,115 11,471 5,370 9,320 Water New Connections N/A N/A 545 1,241 Water Main Breaks 51 54 35 21 Total Consumption (thousands of gallons) N/A 11,097,642 10,977,327 10,177,465 Daily Average Consumption (thousands of gallons) N/A 30,827 30,492 28,271 Peak Daily Consumption (thousands of gallons) N/A 5,562 6,375 5,616 Total Customers 7,351 6,837 7,103 7,311 Average Use Per Connection 4,951 9,606 8,942 4,682 Sewer Total Customers 6,226 5,814 6,185 6,511 102 TABLE 21 Fiscal Year 2003 2004 2005 2006 2007 2008 7,119 3,055 3,434 9,948 5,811 2,869 11,089 11,875 12,770 16,642 25,478 37,829 670 631 729 526 608 719 9,157 9,652 11,157 10,487 13,461 18,820 875 1,127 1,169 1,192 1,484 1,475 929 1,082 1,131 1,216 1,459 978 89 90 128 129 103 141 254 301 331 356 302 461 186 213 136 136 694 595 300 333 294 416 516 983 225,573 238,602 257,765 276,873 292,909 278,826 162,263 171,811 175,976 181,603 179,630 175,435 4,328 5,170 5,254 5,064 6,680 7,444 12,779 14,492 17,101 19,342 19,595 23,327 439 425 425 532 91 1,474 18 26 39 46 29 72 10,747,349 10,373,621 11,030,621 13,322,380 11,535,927 14,460,239 29,854 28,816 30,639 37,007 31,606 39,617 6,757 6,869 6,939 10,540 5,379 5,804 8,045 9,389 9,673 10,118 10,598 10,900 3,565 6,329 5,957 7,060 1,089 6,378 7,261 7,887 8,664 8,990 9,391 6,378 Source: Various City Departments NOTE: Indicators are not available for the police or EMS jimction. 103 CITY OF SCHERTZ, TEXAS CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS (UNAUDITED) Fiscal Year Function 1999 2000 2001 2002 2003 Police Stations 1 1 1 1 1 Patrol Units 3 5 8 11 21 Fire Stations 1 1 1 1 1 Training Facility 1 1 1 1 1 Fire Vehicles 5 6 7 9 11 Streets Streeets, paved (miles) 95 97 100 100 102 Streets, unpaved (miles) 7 7 7 9 9 Sidewalks (miles) 17 17 17 17 17 Parks and Recreation Parks 7 7 7 7 7 Playground 65 65 117 117 20 Swimming Pools - - - - 1 BasebalVSoftball Diamonds 5 5 8 8 12 Community Centers 1 1 1 1 1 Animal Control Control Vehicle - - 1 1 2 Library Facility 1 1 1 1 1 Volumes in Collection 31,532 37,610 36,259 39,062 41 ,275 Water Number of Reservoirs - - - - - Number of Pump Stations - - - - - Water Mains (Miles) 134 139 144 149 155 Sewer Sanitary Sewers (Miles) 41 48 51 54 54 Storm Sewers (Miles) 2 3 4 4 4 Source: Various City Departments NOTES: No Capital Asset indicators are available for the General Government or EMS jimction. 104 TABLE 22 Fiscal Year 2004 2005 2006 2007 2008 1 1 1 1 1 26 27 34 33 33 1 2 2 2 2 1 1 1 1 1 11 11 12 12 14 102 102 102 107 122 9 9 9 9 7 17 21 32 32 50 7 7 7 7 7 20 20 20 20 20 1 1 1 1 2 12 12 12 12 12 1 1 1 1 2 2 2 2 3 3 1 1 1 1 1 46,961 49,289 52,818 56,282 60,650 1 1 1 - - 1 1 1 2 - 159 166 171 177 182 54 54 54 59 71 4 4 4 6 8 105 COMPLIANCE SECTION 106 ~ - "'1. ~'I~"R ,'. .'i~V""'J~'~_ee lUu.;;l,Il,~~..~.QJ. _ . _ . . II' "1"'" ,. ,w.. . ...._ .__.. _.,.....~,.""~T>_........ . - REPORT ON COMPLIANCE AND INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDITING 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 discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Schertz, Texas, as of and for the year ended September 30, 2008, which collectively comprise the City of Schertz, Texas, basic financial statements and have issued our report thereon dated Febrnary 16, 2009. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards. issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Schertz's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Schertz's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Schertz's internal control over financial reporting. Our consideration of the internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all discrepancies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City of Schertz, Texas's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the City of Schertz's financial statements that is more than inconsequential will not be prevented or detected by the City of Schertz Texas's internal control. We consider the deficiencies described in the accompanying schedule of findings and responses to be significant deficiencies in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City of Schertz, Texas's internal control. .. __~~J~ 107 Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies, and accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that none of the significant deficiencies described above is a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Schertz's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material affect on the determination of the financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Govemment Auditing Standards. We noted certain matters that we reported to management of the City of Schertz, Texas, in a separate letter dated Febrnary 16,2009. City of Schertz, Texas's response to the findings identified in our audit is described in the accompanying schedule of findings and responses. We did not audit the City of Schertz, Texas' response and, accordingly, we express no opinion on it. This report is intended solely for the information and use of management, City Council and is not intended to be and should not be used by anyone other than these specified parties. h. 4/1/S1<<, P6. Armstrong, Vaughan & Assoc., P.c. Febrnary 16,2009 108 CITY OF SCHERTZ, TEXAS SCHEDULE OF FINDINGS AND RESPONSES SEPTEMBER 30, 2008 Summary of Auditor's Results 1. The auditor's report expresses an unqualified opinion on the financial statements of the City of Schertz, Texas 2. Two control deficiencies disclosed during the audit of the financial statements are reported in the Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Pelformed in Accordance with Government Auditing Standards. The conditions are significant deficiencies in internal control. 3. No instances of noncompliance material to the financial statements of the City of Schertz, Texas, were disclosed during the audit. Findings - Financial Statement Audit Significant Deficiency: 2008-01 Capital Asset Inventory Condition: Physical inventories and tracking of additions and disposals of capital assets are not performed on an annual basis. The City's capital assets are tracked on Incode Fixed Asset Module containing the original cost, acquisition date and accumulated depreciation. However, additions and disposals are not entered on a timely basis, nor is a reconciliation performed annually to test the integrity of the inventory. Criteria: The City should implement a system to track additions, disposal of assets, and maintain a working list of all capital assets. Effect: Without adequate procedures for tracking capital assets, the City is unable to effectively maintain control over capital assets (equipment and vehicles). Recommendation: Perform an annual inventory of capital assets to include reconciliation to the master list by department; record additions; record date and method of disposal of assets, and calculate depreciation on an annual basis. City Response: The Finance Department will be responsible for maintaining the fixed assets of the City of Schertz (City), calculating depreciation and performing periodic audits to ensure proper internal controls are in place. The Finance Department also fully understands the importance of timely reporting and tracking of the City's assets; but because the department does not presently have staff to perform these duties adequately, these duties will need to be performed on an overtime basis. All departments will need to assist on a day-to-day basis. The City has purchased a fixed asset module that has the capacity to accommodate all the required fields of the City's fixed assets however it is not integrated with the general ledger system. The process of loading the City's integrating the software is in the planning phase. 109 CITY OF SCHERTZ, TEXAS SCHEDULE OF FINDINGS AND RESPONSES (CONTINUED) SEPTEMBER 30, 2008 2008-02 Significant Journal Entries Condition: Significant adjustments were made to the Financial Statements during the course of the audit to record outstanding retainage on constrnction in progress, record depreciation and disposal of EMS capital assets, improper revenue recognition of sales tax in accordance with GASB 33, repayment of notes receivable, and other revenues, the Business Park project and Schwab Road and recording of expenses in the correct fund. Criteria: The City should have a procedure for recording year end journal entries. Effect: The lack of reconciliation procedures did not ensure that the financial statements were materially correct. Recommendation: Develop a list of entries that may be considered at year end as part of the closing process to enable the City to ensure that they have adequately recorded all year end entries. Consider recording the retainage on constrnction in progress as the invoices are received. City Response: The City of Schertz (City) will be preparing a list of potential journal entries for the year end close to enable them to encompass recording all journal entries required by generally accepted accounting principles before year end. 110