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Item 4CCITY OF SOUTHLAKI MEMORANDUM March 13, 2013 To: Shana Yelverton, City Manager From: Sharen Jackson, Chief Financial Officer Subject: Approval of the 2012 Comprehensive Annual Financial Report Action Requested: Approval of September 30, 2012 Comprehensive Annual Financial Report. Background Information: City Charter requires the City at the close of each fiscal year have an independent audit performed by a Certified Public Accountant. Weaver L.L.P., Certified Public Accountants, performed the audit for fiscal year 2012. Shawn Parker, Partner, will present the report to the audit committee on Tuesday during the committee meeting scheduled at 5.00 prior to the city council meeting. Financial Considerations: None required Strategic Link: F4 Establish and maintain effective internal controls Citizen Input/ Board Review: None required Legal Review: None required Alternatives: None required Supporting Documents: 2012 CAFR Staff Recommendation: Approval of 2012 Comprehensive Annual Financial Report CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 As Prepared By Sharen Jackson, CPA Chief Financial Officer CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 TABLE OF CONTENTS Exhibit Page I. INTRODUCTORY SECTION Letter of Transmittal i Certificate of Achievement viii Organizational Chart ix List of Principal Officials x II. FINANCIAL SECTION Independent Auditor's Report 1 A. MANAGEMENT'S DISCUSSION AND ANALYSIS 3 B. BASIC FINANCIAL STATEMENTS Government -Wide Financial Statements Statement of Net Assets 1 14 Statement of Activities 2 15 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet 3 16 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 4 18 Statement of Revenues, Expenditures, and Changes in Fund Balance 5 19 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities 6 21 Proprietary Fund Financial Statements Statement of Net Assets 7 22 Statement of Revenues, Expenses, and Changes in Net Assets 8 23 Statement of Cash Flows 9 24 Fiduciary Fund Financial Statement Statement of Fiduciary Net Assets 10 25 Notes to the Basic Financial Statements 26 CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 TABLE OF CONTENTS Exhibit Page C. REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule - General Fund A-1 53 Budgetary Comparison Schedule - Crime Control District Special Revenue Fund A-2 54 Budgetary Comparison Schedule - Tax Increment Financing District Special Revenue Fund A-3 55 Notes to Required Supplementary Information 56 Condition Rating of Street System A-4 57 D. COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Major Governmental Funds Budgetary Comparison Schedule - General Obligation Debt Service Fund B-1 59 Nonmajor Governmental Funds Combining Balance Sheet - Nonmajor Governmental Funds C-1 62 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Governmental Funds C-2 65 Budgetary Comparison Schedule - Parks Dedication Special Revenue Fund C-3 68 Budgetary Comparison Schedule - Southlake Parks Development Corporation Special Revenue Fund C-4 69 Budgetary Comparison Schedule - Hotel Occupancy Special Revenue Fund C-5 70 Budgetary Comparison Schedule - Storm Water Utility Special Revenue Fund C-6 71 Budgetary Comparison Schedule - Red Light Camera Special Revenue Fund C-7 72 Budgetary Comparison Schedule - Southlake Parks Development Corporation Debt Service Fund C-8 73 Agency Funds Statement of Changes in Assets and Liabilities - Cash Escrow Agency Fund F-1 75 E. Capital Assets Used in the Operation of Governmental Funds Comparative Schedules of Capital Assets by Source G-1 76 Schedule of Changes in Capital Assets by Function and Activity G-2 77 CITY OF SOUTHLAKE, TEXAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 TABLE OF CONTENTS Exhibit Page III. STATISTICAL SECTION Table Net Assets By Component 1 78 Changes in Net Assets 2 79 Fund Balances, Governmental Funds 3 81 Changes in Fund Balances, Governmental Funds 4 82 Assessed Value and Estimated Actual Value of Taxable Property 5 83 Direct and Overlapping Property Tax Rates 6 84 Principal Property Tax Payers 7 85 Ad Valorem Tax Levies and Collection 8 86 Ratio of Outstanding Debt By Type 9 87 Ratio of General Bonded Debt Outstanding 10 89 Direct and Overlapping Governmental Activities Debt 11 90 Pledged -Revenue Coverage 12 91 Demographic and Economic Statistics 13 92 Principal Employers 14 93 Full -Time Equivalent City Government Employees By Function/Program 15 94 Operating Indicators By Function/Program 16 95 Capital Asset Statistics By Function/Program 17 96 INTRODUCTORY SECTION CITY OF SOUTHLAKE 9 Finance Department March 19, 2013 Honorable Mayor John Terrell and Members of City Council City of Southlake Southlake, Texas Honorable Mayor and Councilmembers: It is with pleasure that we submit to you the Comprehensive Annual Financial Report (CAFR) of the City of Southlake for the fiscal year ended September 30, 2012. This report was prepared by the Finance Department in accordance with the Southlake Charter, Statutes and generally accepted accounting principles for governments. In addition to meeting legal requirements, this report reflects the City's commitment to full financial disclosure. We encourage you to thoroughly read this report and take the opportunity to discuss some of the important items it addresses. The financial statements are presented in accordance with Governmental Accounting Standards Board Statement 34, Basic Financial Statements -and Management's Discussion and Analysis -For State and Local Governments. The presentation of the City's financial information includes two financial statements that provide a government - wide perspective using the accrual basis of accounting. The two government -wide statements present governmental activities separately from business -type activities. The inclusion of the government -wide statements in this format enables a more thorough understanding of the financial operations and condition of the City. The fund financial statements focus on individual major funds. Each major fund is presented in a separate column in the fund financial statements. Nonmajor funds are aggregated and presented in a combined column. Budget to actual comparisons are presented as required supplementary information and are limited to the general fund and major special revenue funds. The comparisons are now more informative, including both the original adopted budget and the final amended budget. 1400 Main Street, Suite 440, Southlake, TX 76092 (817) 748-8345 Innovation 0 Integrity 0 Accountability 0 Commitment to Excellence 0 Teamwork i We believe the reporting model will assist in making economic, social and political decisions and in assessing accountability to the residents by: • comparing actual financial results with the legal adopted budget, where appropriate; • assessing financial condition and results of operations; • assisting in determining compliance with fiscally -oriented laws, rules and regulations; and • assisting in evaluating the efficiency and effectiveness of City operations. Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the City. To the best of our knowledge and belief, the data, as presented, is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. FINANCIAL STATEMENT FORMAT This report has been prepared and organized to meet the requirements of the Government Finance Officers Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting Program. By following the guidelines of this program, the report's format facilitates understanding by the residents and provides information needed by the most sophisticated and interested financial observers. The report is presented in three sections: introductory, financial and statistical. • The introductory section, which is unaudited, includes this transmittal letter, GFOA certificate, the City's organizational chart, and a list of principal officials. This section is designed to provide an overview and general understanding of the report. • The financial section provides a detailed presentation of the financial position and results of operations for the fiscal year ended September 30, 2012. The financial section is divided into four main subsections: o Management's Discussion and Analysis o Basic Financial Statements and related notes o Required Supplementary Information o Combining and Individual Fund Financial Statements Readers are encouraged to pay particular attention to Management's Discussion and Analysis and to the footnotes to the basic financial statements. These provide valuable analysis and explanation of the financial statements. ii • The statistical section, which is unaudited, includes a number of multi -year tables and other data designed to present social, economic and financial trends of the City, providing an overall view of the fiscal capacity of the City. The financial reporting entity includes all the funds of the primary government, as well as all of its component units in accordance with GASB Codification of Governmental Accounting and Financial Reporting Standards, Section 2100, "Defining the Reporting Entity. " Component units are legally separate entities for which the primary government is financially accountable and for which the nature and significance of their relationship with the primary government are such that exclusion would cause the City's basic financial statements to be misleading or incomplete. The primary government is considered financially accountable if it appoints a voting majority of an organization's governing body and imposes its will on that organization. The primary government may also be financially accountable if an organization is fiscally dependent on the primary government regardless of the authority of the organization's governing board. Blended component units, although legally separate entities, are, in substance, part of the primary government's operations and are included as part of the primary government. Accordingly, the Southlake Parks Development Corporation ("SPDC"), Southlake Crime Control and Prevention District (the "District") and Tax Increment Reinvestment Zone ("TIF") are included in the governmental funds (special revenue) of the primary government as blended component units. SPDC was formed in January 1994 pursuant to a successful election in November 1993 to adopt an additional '/2 cent sales tax for park and recreation facility development. SPDC is organized exclusively to act on behalf of the City for the financing, development and operation of parks and recreation facilities. Also included in this report is financial information for the District. In November 1997, voters approved an additional '/2 cent sales tax for Crime Control and Prevention initiatives. The District is organized exclusively to act on behalf of the City for the financing, development and crime control throughout the City. Also, included are the financial statements of the TIF which was created in 1997 to encourage quality commercial growth. The TIF was formed to finance and make public improvements, under the authority of the Tax Increment Financing Act. PROFILE OF THE GOVERNMENT General Information Although Southlake has been a high -growth community for years, when the first settlers arrived in 1845 they found only a vast area of land and trees where the grand prairie and cross timbers merged. As the site of the first permanent settlement in Tarrant County, a portion of present day Southlake was homesteaded in 1866, which consisted of 360 acres. Keeping with the time, the primary industry was agriculture. Farmers grew peanuts, grains and cotton, and families raised their own livestock. The area that would become Southlake remained a rural farming community for more than 100 years until the U.S. Army Corps of Engineers built Lake Grapevine in 1952. The lake spurred much of the area's early growth and was the beginning of dramatic change. The town officially incorporated on September 25, 1956 by a public vote of 30 ui in favor and 24 against. The original town contained 1.62 square miles and had a population of just over 100. The residents chose to call this new town Southlake because it was... south of Lake Grapevine! The Southlake Fire Department was launched in 1965 and the first piece of fire equipment was a 1950 Diamond T-Military unit with a tank capacity of 1,000 gallons and an auxiliary pump. The first chief of police was hired in 1966, and the City purchased its first patrol car in 1967. The opening of the Dallas -Fort Worth International Airport in 1974 served as the next catalyst of growth in the area and Southlake residents adopted a home -rule charter in April 1987, which created the current council-manager form of government with six Council Members and a Mayor who are elected at large on a non -partisan basis for staggered three-year terms. But the single most important event in bringing residential subdivision development to Southlake was the completion of water and sewer lines in the southern portion of the city in the early 1990s. Since that time, much like the area's first settlers were attracted to the area with its endless possibilities, Southlake has continued to attract the suburban settler desiring a high quality of life and the small town charm that has been preserved from Southlake's past. Services Provided Services provided by the City under general governmental functions include public events, public safety, planning and development, engineering, street maintenance, parks operation and maintenance, recreation, library services, and general administrative services. The City does not provide educational or welfare services. Water and sewer services and solid waste collection are provided under an Enterprise Fund concept, with user charges set by the City Council to ensure adequate coverage of operating expenses and payments of outstanding debt. Economic Condition and Outlook The City of Southlake continues to be one of the major growth areas in Texas. The City is in a prime location in Northeast Tarrant County, 5 minutes west of Dallas/Fort Worth International Airport, and 10 minutes east of the Alliance Airport, a commercial aviation and industrial complex in north Fort Worth. State Highway 114, FM1709, and FM1938, the regional road arterials, serve the City. Single Family Residential Home Permits 160 140 124) 100 W 60 40 24) 0 2008 2009 2010 2011 2012 There were 105 single family residential permits issued in Fiscal Year 2012 with an average new home construction value, excluding land value, of more than $600,000. Residential home construction has increased as evidenced by the chart. 1V Number of Water Customers 9601) 9501) 9401) SON) 92N) 91 N) - 99flfl :::V 2006 2099 2010 =: 2012 Water customers increased from 9,466 in Fiscal Year 2011 to 9,543 in 2012, while wastewater customers increased from 7,361 to 7,522 during the same year. The chart shows the five-year trend of increasing water customers, the result of the building permit activity. The City has developed master plans for land use, water, sewer, parks, trails, and thoroughfares, and has implemented regulatory controls that will maintain the anticipated quality growth into the future. Sales Tax Revenue 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 2008 2009 2010 2011 2012 ■General 13SPDC oCrime The City of Southlake experienced an increase in sales tax collections during the fiscal year as indicated on the chart. Future Development During 2012, approximately 14 new construction commercial permits were issued by the City representing over 570,000 square feet of future retail/office. Residential also experienced an increase in activity; several subdivisions were approved for development with an estimated average home value over $700,000. v Financial Management Principles The City has strong financial management principles that provide the framework for the City's financial sustainability. • Tax rate management. The tax rate is allocated properly between maintenance/operations and debt service. • Structural balance. The City's ability to weather potential economic downturns or other financial challenges is critical. The City does not use reserves to balance the operating budget. • Reserve management. The City's fund balance policy requires a minimum 15% and optimum 25% balance. The City uses "excess" reserves as a means to fund one-time, "pay-as-you-go" projects. • Multi -year financial plan. The long-term effect of today's decisions on tomorrow's financial situation is an important consideration during the budget process. • Quality service delivery. The City is committed to meeting the needs of our community through high quality service delivery. • Risk management. The City supports ongoing initiatives to safeguard the public trust by internal audits and other initiatives to maintain a strong control environment. For fiscal year 2012, the property tax rate was held steady at $0.462 per $100 net taxable valuation. In spite of the economic downturn the City did not use reserves to balance the operating budget for fiscal years 2012 or 2013. OTHER INFORMATION Independent Audit The City Charter requires an annual audit of the financial status of the City by independent Certified Public Accountants selected by the City Council. This requirement has been met and the auditor's report has been included in this report. Awards The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Such CAFR must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The City of Southlake received a Certificate of Achievement for the year ended September 30, 2011, and believes our current report conforms to the Certificate of Achievement program requirements, and we are submitting it to GFOA. v1 Acknowledgments The preparation of this report could not be accomplished without the dedication and efficiency of the entire staff and our independent auditor. I would like to express my sincere appreciation to all employees who contributed to its preparation. I would also like to thank the Mayor and members of the City Council for their support in planning and conducting the financial operations of the City in a responsible and efficient manner. Respectfully submitted, Sharen Jackson, CPA Chief Financial Officer vu Certificate of Achievement for Excellence in Financial Reporting Presenlsd to City of Southlake Texas For its Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2011 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Dff]cers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. OFM � *60�4 W M S ArESto 1 ��k President �rcas� 40. �- Executive Director CITY OF SOLITHLA K E ORGANIZATIONAL CHART SOUTHLAKF CITIZENS MAYOR AND CITY COUNCIL CITY ATTORNEY — — — CITY MANAGIIt — 1 CITY SECRETARY I �- — — — — — MUNICIPAL ASST. CITY MANAGER I DPS DIRECTOR COMMUNITY I I I ECONOMIC II Q GITYMAN GERI I 'S I TECHNOLOGY SPRVICES DEVELoPIVIENT I I 1 PUSLDEP�IC SAFETY I I I RESOURCES � OHUMANTMENT OF S POLICE I PLANNING & DEVELdPMENT FIRE, PUBLIC VL olms ix LIST OF PRINCIPAL OFFICIALS John Terrell Mayor Brandon Bledsoe Mayor Protein Pamela Muller Deputy Mayor Protein Martin Schelling Council Member Carolyn Morris Council Member Al Zito Council Member Jeff Wang Council Member Shana K. Yelverton City Manager Benjamin Thatcher Assistant City Manager Alison Ortowski Assistant City Manager Alicia Richardson City Secretary Sharen Jackson Chief Financial Officer Greg Last Director of Economic Development Robert Price Director of Public Works Chris Tribble Director of Community Services Stacey Black Director of Human Resources Ken Baker Director of Planning/Development x FINANCIAL SECTION weave r,r- INDEPENDENT AUDITOR'S REPORT To Members of the City Council and City Manager City of Southlake, Texas We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund and the aggregate remaining fund information of the City of Southlake, Texas (the City) as of and for the year ended September 30, 2012, which collectively comprise the City's basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these basic 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 basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Southlake, Texas at September 30, 2012, and the respective changes in financial position and cash flows, where applicable, thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have issued our report dated March 14, 2013, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of the testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. AN INDEPENDENT WEAVER AND TIDWELL LLP DALLAS MEMBER OF BAKER TILLY CERTIFIED PUBLICACCUUNTANTSAND CONSULTANTS 12221 MERIT DRIVE, SUITE 1400, DALLAS, TX 75251 INTERNATIONAL WWW.WEAVERLLP.CUM P: (972) d9U 1970 F: (972) 7U2 8321 City of Southlake, Texas Page 2 Accounting principles generally accepted in the United States of America require that the management's discussion and analysis (pages 3 through 13), budgetary comparison information (pages 53 through 56) and condition rating of street system (page 57) be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Southlake's financial statements as a whole. The introductory section, combining and individual fund financial statements and schedules, and statistical section listed in the table of contents are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects in relation to the financial statements taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. WEAVER AND TIDWELL, L.L.P. Dallas, Texas March 14, 2013 MANAGEMENT'S DISCUSSION AND ANALYSIS MANAGEMENT'S DISCUSSION AND ANALYSIS The City of Southlake's Management's Discussion and Analysis (MD&A) is designed to provide an objective and easy to read analysis of the City's financial activities based on currently known facts, decisions, and conditions. It is intended to provide a broad overview and short-term analysis of the City's activities based on information presented in the financial statements. Specifically, this information is designed to assist the reader in focusing on significant financial issues, provide an overview of the City's financial activity, identify changes in the City's financial position (its ability to address the next and subsequent years' challenges), identify material deviations from the approved budget, and identify individual fund issues. The City presents its financial statements in accordance with the reporting model required by Governmental Accounting Standards Board Statement 34, Basic Financial Statements -and Management's Discussion and Analysis- for State and Local Governments. This reporting model significantly changes not only the presentation of financial data, but also the manner in which the information is recorded. The information contained within this MD&A is only a component of the entire financial statement report. Readers should take time to read and evaluate all sections of the report, including the footnotes and the other Required Supplementary Information that is provided in addition to this MD&A. FINANCIAL HIGHLIGHTS The assets of the City of Southlake exceeded its liabilities at September 30, 2012 by $462,688,538 (net assets). Of this amount, $35,635,287 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. The City's total net assets increased by $14,847,999. This increase can be attributed to increases in ad valorem, sales tax revenue, fines and forfeitures, contributions, and charges for services. At September 30, 2012, the City's governmental funds reported combined ending fund balances of $102,401,261. Approximately 12.9 percent of this amount, $13,205,240, is available for spending at the government's discretion (unassigned fund balance). At the end of the current fiscal year, unassigned fund balance for the General Fund was $13,205,240 or 42.8 percent of total General Fund expenditures. At the end of the current fiscal year, the City of Southlake outstanding debt totals $177,728,512, a net decrease of $1,538,395 from the previous year. 3 OVERVIEW OF THE FINNCIAL STATEMENTS The discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The new reporting focus is on the City as a whole and on individual major funds. It is intended to present a more comprehensive view of the City's financial activities. The basic financial statements are comprised of three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. GOVERNMENT -WIDE FINANCIAL STATEMENTS The government -wide financial statements include the Statement of Net Assets and the Statement of Activities. These statements are designed to provide readers with a broad overview of the City's finances in a manner similar to a private -sector business. Both are prepared using the economic resources measurement focus and the accrual basis of accounting; meaning that all the current year's revenues and expenses are included regardless of when cash is received or paid. The Statement of Net Assets presents information on all of the City's assets and liabilities, including capital assets and long-term obligations. The difference between the two is reported as net assets. Over time, the increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. Other indicators of the City's financial position should be taken into consideration, such as the change in the City's property tax base and condition of the City's infrastructure (i.e., roads, drainage systems, water and sewer lines, etc.), in order to more accurately assess the overall financial condition of the City. The Statement of Activities presents information showing how the City's net assets changed during the most recent fiscal year. It focuses on both the gross and net costs of the government's various activities and thus summarizes the cost of providing specific government services. This statement includes all current year revenues and expenses. The Statement of Net Assets and the Statement of Activities divide the City's activities into two types: Governmental activities- Most of the City's basic services are reported here, including general administration, debt services, public safety, public works, parks and community services, public library, public events and facilities, planning and development and finance. Property, sales and franchise taxes provide the majority of the financing for these activities. E Business -Type activities- Activities for which the City charges a fee to customers to pay most or all of the costs of a service it provides are reported here. The City's business - type activities include water distribution and wastewater collection and solid waste collection and disposal. The government -wide financial statements are found on pages 14-15 of this report. FUND FINANCIAL STATEMENTS The City of Southlake, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. 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. These statements focus on the most significant funds and may be used to find more detailed information about the City's most significant activities. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Governmental Funds- These funds are used to account for the majority of the City's activities, which are essentially the same functions reported as governmental activities in the government -wide statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near -term inflows and outflows of spendable resources, as well as spendable resources available at the end of the fiscal year for future spending. Such information may be useful in evaluating a government's near -term financing requirements. The focus of the governmental funds financial statements is narrower than that of the government -wide financial statements. Therefore, 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 funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances provide a reconciliation to facilitate this comparison. The reconciliation explains the differences between the government's activities as reported in the government -wide financial statements and the information presented in the governmental funds financial statements. The City maintains 22 individual governmental funds. Information is presented separately in the governmental funds Balance Sheet and in the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balances for the General Fund, General Obligation Debt Service Fund, General Capital Projects Fund, Crime Control District, Southlake Parks Development Corporation Capital Projects Fund, Crime Control District Capital Projects Fund and Tax Increment Financing District Fund, all of which are considered to be major funds. Data for the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the 5 non -major governmental funds is provided in the form of combining statements elsewhere in this report. The basic governmental funds financial statements can be found on pages 16-21 of this report. Proprietary Funds- When the City charges customers for services it provides, the activities are generally reported in proprietary funds. The City of Southlake maintains two different types of proprietary funds: enterprise and internal service funds. Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financial statements. The City uses enterprise funds to account for its water and sewer operations and solid waste. These services are primarily provided to outside or non -governmental customers. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for its vehicle fleet. Proprietary funds financial statements provide the same type of information as the government -wide financial statements, only in more detail. The proprietary funds financial statements provide separate information for the water and sewer operations, which is considered to be a major fund of the City. 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 26-52 of this report. GOVERNMENT -WIDE FINANCIAL ANALYSIS Total assets of the City at September 30, 2012 were $649,407,562 while total liabilities were $186,719,024, resulting in a net asset balance of $462,688,538. The largest portion of the City's net assets, $359,608,929 reflects its investment in capital assets (land and improvements, building, infrastructure, machinery and equipment, net of accumulated depreciation); less any related debt used to acquire those assets that is still outstanding. The City uses these assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the City reports its capital assets net of related debt, 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. M Governmental Activities net assets increased by $14,545,751. This increase is primarily attributable to increases in both property taxes and charges for services. Business -type Activities net assets increased by $302,248. The majority of this change can be attributed to an increase in charges for service which resulted from increased consumption during the dry summer months. The following analysis highlights the net assets as of September 30, 2012: Governmental Business -Type 2012 Activities Activities Total Current and other assets: $112,780,382 $ 37,527,481 $150,307,863 Capital assets 394,773,322 104,326,377 499,099,699 Total assets $507,553,704 $141,853,858 $649,407,562 Other liabilities $ 5,478,534 $ 3,511,978 $ 8,990,512 Long-term debt outstanding Total liabilities Net assets: Invested in capital assets Restricted -debt service Restricted -capital projects Restricted -other Unrestricted Total net assets 126,213,967 51,514,545 177,728,512 $131,692,501 $ 55,026,523 $186,719,024 $291,690,099 $ 67,918,830 $359,608,929 10,519,159 10,519,159 51,436,227 51,436,227 5,488,936 5,488,936 16,726,782 18,908,505 35,635,287 $375,861,203 $ 86,827,335 $462,688,538 The following analysis highlights the net assets as of September 30, 2011: Governmental Business -Type 2011 Activities Activities Total Current and other assets: $104,435,715 $ 38,311,211 $142,746,926 Capital assets 390,002,512 102,577,088 492,579,600 Total assets $494,438,227 $140,888,299 $635,326,526 Other liabilities $ 6,220,747 $ 1,998,333 $ 8,219,080 Long-term debt outstanding Total liabilities Net assets: Invested in capital assets Restricted -debt service Unrestricted Total net assets 126,902,028 52,364,879 179,266,907 $133,122,775 $ 54,363,212 $187,485,987 $298,418,769 $ 68,911,163 $367,329,932 9,739,189 9,739,189 53,157,494 17,613,924 70,771,418 $361,315,452 $ 86,525,087 $447,840,539 7 The following analysis highlights the changes in net assets for the year ended September 30, 2012: Governmental Business -Type 2012 Activities Activities Total Revenues: Program revenues: Charges for services $ 7,900,369 $22,451,738 $30,352,107 Operating grants and contributions 200,434 200,434 Capital grants and contributions 518,617 1,214,395 1,733,012 General revenues: Taxes 53,841,399 53,841,399 Interest on investments 232,722 46,212 278,934 Gain on sale of capital assets 91,134 91,134 Miscellaneous 463,681 10,811 474,492 Total revenues 63,248,356 23,723,156 86,971,512 Expenses: General government 13,277,006 13,277,006 Public safety 15,891,911 15,891,911 Public works 6,399,819 6,399,819 Culture and recreation 8,158,291 8,158,291 Interest on long-term debt 5,865,798 5,865,798 Water and sewer 22,530,688 22,530,688 Total expenses 49,592,825 22,530,688 72,123,513 Increase in net assets before transfers 13,655,531 1,192,468 14,847,999 Transfers 890,220 (890,220) Increase in net assets 14,545,751 302,248 14,847,999 Net assets -beginning of year 361,315,452 86,525,087 447,840,539 Net Assets -End of Year SMA17,335 S462,,688.538 N. The following analysis highlights the changes in net assets for the year ended September 30, 2011: Governmental Business -Type 2011 Activities Activities Total Revenues: Program revenues: Charges for services $ 6,891,186 $22,571,056 $29,462,242 Operating grants and contributions 532,100 532,100 Capital grants and contributions 2,309,613 1,433,278 3,742,891 General revenues: Taxes 53,321,732 53,321,732 Interest on investments 258,556 123,872 382,428 Gain on sale of capital assets 26,741 26,741 Miscellaneous 658,902 42,463 701,365 Total revenues 63,998,830 24,170,669 88,169,499 Expenses: General government 13,754,529 13,754,529 Public safety 15,144,173 15,144,173 Public works 6,279,687 6,279,687 Culture and recreation 7,897,173 7,897,173 Interest on long-term debt 5,638,272 5,638,272 Water and sewer 20,724,651 20,724,651 Total expenses 48,713,834 20,724,651 69,438,485 Increase in net assets before transfers 15,284,996 3,446,018 18,731,014 Transfers 791,830 (791,830) Increase in net assets 16,076,826 2,654,188 18,731,014 Net assets -beginning of year, as restated 345,238,626 83,870,899 429,109,525 Net Assets -End of Year 361.315.452 M,525.087 447.840.539 I FINANCIAL ANALYSIS OF THE GOVERNMENTAL FUNDS Governmental Funds- The focus of the City of Southlake'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 fund balances of $102,401,261. Approximately 12.9 percent or $13,205,240 constitutes unassigned fund balance, which is available for spending at the government's discretion. Other portions of the fund balance is either restricted, committed or assigned for specific purposes to pay for debt service ($12,657,819), recycling ($22,642), police expenditures ($6,002,918), parks ($6,381,618), capital projects ($51,436,227), reinvestment zone expenditures ($4,718,865), municipal court expenditures ($770,071), oil and gas expenditures ($53,211), storm water expenditures ($451,127), strategic initiative expenditures ($6,517,692) and other ($146,040). The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the general fund was $13,205,240. As a measure of the General Fund's liquidity, it may be useful to compare both the unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 42.8 percent of total General Fund expenditures, while total fund balance represents 64.5 percent of total General Fund expenditures. The fund balance of the General fund increased $2,911,142 during the current fiscal year. Following are the key factors in this increase: • Increase in tax revenues ($678,787), development revenues ($846,145) and charges for services ($144,868). The General Obligation Debt Service Fund has a fund balance of $11,103,423, all of which is restricted for the payment of debt service. The fund balance increased during the year by $740,367, primarily due to a $6,347,362 transfer from the Tax Increment Financing District and Crime Control District Special Revenue Funds. The fund balance in the General Capital Projects Funds ended the year at $33,444,359, an increase of $767,442. FINANCIAL ANALYSIS OF THE PROPRIETARY FUNDS The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. Unrestricted net assets reported in the Proprietary Funds were: $18,908,505 in the Water and Sewer Fund and $3,535,007 in the Vehicle Replacement Fund. . Total net assets in the Water and Sewer Fund increased by $302,248 while Vehicle Replacement Fund net 10 assets decreased by $407,278. The increase in contributions -impact fees and decrease in transfers from the previous year are the primary reasons for the change in net assets, respectively. GENERAL FUND BUDGETARY HIGHLIGHTS There was a decrease in appropriations from the original budget to the final amended budget of $84,167, which can be briefly summarized as follows: • decrease in general operational cost (training, supplies, etc.) CAPITAL ASSETS AND DEBT ADNIINISTRATION Capital Assets- The City's investment in capital assets for its governmental and business - type activities as of September 30, 2012 amount to $499,099,699 (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, machinery and equipment, infrastructure and construction in progress. The City has elected to use the modified approach for its street system in lieu of the depreciation method. An up-to-date inventory of these infrastructure assets was performed and the annual costs to maintain and preserve these assets was established and disclosed through administrative policy. The current condition level of the street system meets the target condition level established by the City. There were no significant changes in the condition levels of infrastructure assets, and the differences between the estimated amounts necessary to maintain and preserve the street system at target condition levels and the actual amount of expense incurred for that purpose for 2012 was not material. Major capital projects completed during the current year included the following: • North Park/Lacrosse Facility • Southlake Blvd reconfiguration, medians • Kirkwood, N. Carroll connector • Various water and sewer lines • Pavement Management System — various overlays and rehab • Various Sidewalks Governmental Business -Type 2012 Activities Activities Total Land and improvements $ 98,061,474 $ 14,642,328 $112,703,802 Buildings and improvements 55,836,415 441,141 56,277,556 Improvements 81,174,438 81,174,438 Infrastructure 219,560,510 219,560,510 Machinery and equipment 6,334,118 1,093,186 7,427,304 Construction in Progress 14,980,805 6,975,284 21,956,089 Total 394.773.322 J104,326,377 499.099.699 11 Governmental Business -Type 2011 Activities Activities Total Land and improvements $ 95,055,289 Buildings and improvements 55,730,470 Improvements Infrastructure 214,052,892 Machinery and equipment 7,364,300 Construction in Progress 17,799,561 Total �390002512 $ 14,633,263 471,459 78,260,431 1,100,660 8,111,275 SlJU. 77,088 $109,688,552 56,201,929 78,260,431 214,052,892 8,464,960 25,910,836 S492,579,600 Additional information on the City's capital assets can be found in Note 4 on pages 41-42 of this report. Long-term Debt- At the end of the current fiscal year, the City of Southlake had $125,251,377 total long-term debt outstanding of bonds issued to finance capital improvements for roadway, parks and recreation, public building and infrastructure. $51,181,130 of Utility System bonds, which financed projects to increase capacity of the Utility system, was also outstanding. An additional $1,037,860 was reported for compensated absences at year-end. Bonds payable Unearned revenue Compensated absences Total Bonds payable Unearned revenue Compensated absences Total Business - Governmental Type 2012 Activities Activities Total $125,251,377 962,590 126,213,967 $51,181,130 258,145 75,270 51,514,545 $176,432,507 258,145 1,037,860 5177,728,512 Governmental Business -Type 2011 Activities Activities Total $125,969,876 932,152 S126,0022,028 $52,025,797 264,568 74,514 S52J64 JM $177,995,673 264,568 1,006,666 �179,266,907 The City's bonds are rated "AAA" by Standard and Poor's and FitchRatings. The City is permitted by Article XI, Section 5, of the State of Texas Constitution to levy taxes up to $2.50 per $100 of assessed valuation for general governmental services including the payment of principal and interest on general obligation long-term debt. The current ratio of tax -supported debt to the assessed value of all taxable property is 1.37 percent. 12 Additional information on the City's long-term debt can be found in Note 5 on pages 42- 47 of this report. ECONONUC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The State of Texas, by constitution, does not have a personal income tax and therefore the State operates primarily using sales and gasoline taxes. Local governments primarily rely on property taxes and fees to fund their government activities. While property taxes are important to the City, they represent 49.7% of total governmental revenue. Sales tax continues to grow as the second largest governmental resource representing 32.0% of total governmental revenue. The City monitors all of its resources and determines the need for program adjustment or fee increases accordingly. The FY 2013 Adopted Budget maintains the City's property tax rate at $0.462 per $100 net taxable valuation, which is unchanged from the FY 2012 rate. The City's property tax roll on net taxable value increased $161,939,736 or 3.1 percent from the 2011 certified roll to the 2012 certified roll. As a result, the City is projected to collect more in FY 2013 than in FY 2012, even without a tax rate increase. The estimate of the FY 2013 tax roll is based on the certified roll as provided by the Tarrant Appraisal District (TAD) in July. The assumed collection rate is 99 percent. Requests for Information This financial report is designed to provide a general overview of the City of Southlake'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 Chief Financial Officer, 1400 Main Street, 4th Floor Finance Department, Southlake, Texas 76092. 13 BASIC FINANCIAL STATEMENTS GOVERNMENT -WIDE FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS EXHIBIT 1 STATEMENT OF NET ASSETS SEPTEMBER 30, 2012 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS -TYPE ACTIVITIES ACTIVITIES TOTAL ASSETS Cash and cash equivalents $ 61,025,454 $ 6,745,658 $ 67,771,112 Investments 34,319,717 3,420,818 37,740,535 Receivables (net of allowance for uncollectibles) 4,642,632 3,503,148 8,145,780 Prepaid items 37,791 628 38,419 Restricted assets Cash and cash equivalents 7,073,450 12,697,885 19,771,335 Investments 4,027,455 10,437,556 14,465,011 Receivables 94,596 - 94,596 Capital assets: Non -depreciable 282,705,837 21,617,612 304,323,449 Depreciable (net of depreciation) 112,067,485 82,708,765 194,776,250 OPEB asset 99,500 - 99,500 Deferred charges 1,459,787 721,788 2,181,575 TOTAL ASSETS $ 507,553,704 $ 141,853,858 $ 649,407,562 LIABILITIES Accounts payable $ 2,747,999 $ 2,702,261 $ 5,450,260 Accrued liabilities 1,404,908 339,463 1,744,371 Accrued interest payable - 261,789 261,789 Unearned revenue 649,285 - 649,285 Liabilities payable from restricted assets Accrued interest 676,342 - 676,342 Customer meter deposits - 208,465 208,465 Non -current liabilities: Due within one year 10,704,175 4,412,754 15,116,929 Due in more than one year 115,509,792 47,101,791 162,611,583 TOTAL LIABILITIES 131,692,501 55,026,523 186,719,024 NET ASSETS Invested in capital assets (net of related debt) 291,690,099 67,918,830 359,608,929 Restricted for debt service 10,519,159 - 10,519,159 Restricted for municipal court 770,071 - 770,071 Restricted for reinvestment zone 4,718,865 - 4,718,865 Restricted for capital projects 51,436,227 - 51,436,227 Unrestricted 16,726,782 18,908,505 35,635,287 TOTAL NET ASSETS $ 375,861,203 $ 86,827,335 $ 462,688,538 The Notes to Financial Statements are an integral part of this statement. 14 N x W C (0 N N N 7 N C E C Z > O r L C a (p E w a` �U Z a O Cl) w W cm C W acna XWW WP:fn 0 Y~0 U J Q W LL o 0zW n W } C w OWE UC/)LL F ( 00 IZ 00 (f) (!) LoO I- 00 'IT V V N 0) 0) 0) 00 00 O 0 00 V 1-01-I- r- m m 0Lo0) m m (h N 00 I- V V V 0) 00 V O 0) V ' O) 0) (f) 0 O I- N r- N m N N 1- 0 0 CO CO � 'IT (- Lo I O 00 J n 1-O N 0I- m m m 0 r- 0) r- O) I- 00 I- V 00 (fl 00 O) 00 �_ O Lr N V 000 00 0O O N (f� (O (f) O v _ 0) O N V V r- N (h (h N Lo — v v ER V-T O Q N ON 'IT 'IT 'IT 'ITV V ' ' ' ' 0) V 00 (h N 00 N N O (h w N N N (fl O O (h N vi I- (h (h V O� N y N Z - 0000 0000 ONO co co .y a 00 (f) l!) I- 00 'ITN 'ITO (O N m O) O O O) O) O O 'ITI- I- N m 00 N l!) l!) l!) O (h N 00 I- V V 00 V O I- � (O N N C V) O I- N 1- l!) (h (h (D (D 00 N (h O O) (f) l!) N (D m V ONO (O I- I- (fl O) (h O) (O O) V (O E E (O r- 0 00 0) 0) - O (!) N V 00 (f) U) m 00 ON !:2,(ON -ONN Zf i,> V V N (fl 0 a co co O a ER V-T N N N N N D (fl (h (h O ._ 00 00 V V (h im N N L (0 C = O U CL69 U � R rn a) tl) 0 N N VO V V L N a O 0000 ' ' (00 V V CL L O O) O C I� O O (6 w � E C 0) > O N O) N R w L U w 4% N y O L Q N O N ~ a, (Dp (� 11 n w C > _ d W w a) Q d Q a) � E '� � L a r- o rn rn 0 N U) U) 0) U X� H LU d C L 0 m m o N y Z N N y U) V 0) O O N C X ui V rn V V a�i > > 0 'N C m W W (n W (n i N m N N O a)N.922 C (6 f0 (' fA fA f/l O (6 N O 0) N O Z Q Q (� 0) O C U w H Q H H U x a (q li a) m N N 2 W W � U Z Z C�~ 000 000 2 O N N 0 0 y O 0) 00 N I� 00 (O (O 0 N Om Om w I� O) 0) (f) (O N 00 of 00 0) (!) (!) (!) N 000 00 N N r- U W EFT 69 N N N N 2 Z Z � R R W � R a W Z 2 E c T w W .0 E :; N 0 E� Q Z U rn d U E N C E C 0 (6 O N C O O Q-O 7 O O C m O N O C �_ d N R N O R E U U ~ ~ Q > (7 li li U U) Q U O 3 a m LL Lo FUND FINANCIAL STATEMENTS GOVERNMENTAL FUNDS FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS BALANCE SHEET GOVERNMENTAL FUNDS SEPTEMBER 30, 2012 GENERAL OBLIGATION GENERAL CRIME DEBT CAPITAL CONTROL GENERAL SERVICE PROJECTS DISTRICT ASSETS Cash and cash equivalents $ 9,499,229 $ 7,073,450 $ 19,177,001 $ 4,297,257 Investments 11,230,361 4,027,455 14,726,627 282,406 Receivables, net of allowances for uncollectibles: Ad valorem taxes 234,937 92,330 - - Franchise taxes 400,824 - - Sales taxes 1,815,265 - - 835,123 Interest 680 2,266 11,817 59 Other 79,093 - 10,065 - Prepaid items 37,791 - - - TOTAL ASSETS $ 23,298,180 $ 11,195,501 $ 33,925,510 $ 5,414,845 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ 913,028 $ - $ 481,151 $ 252,266 Accrued liabilities 1,385,703 - - 137 Deferred revenue 1,039,842 92,078 - TOTAL LIABILITIES 3,338,573 92,078 481,151 252,403 FUND BALANCES Nonspendable for: Prepaid expenditures 37,791 - - - Restricted for: Debt service - 11,103,423 Municipal court expenditures - Reinvestment zone expenditures - Capital projects - 33,444,359 - Committed for: Police expenditures 33,624 - 5,162,442 Parks and recreation - - Oil and gas expenditures Storm water expenditures Library - Assigned for: Teen Court expenditures 18,314 Senior Center expenditures 10,397 Recycling 22,642 Reforestation expenditures 113,907 Strategic initiatives 6,517,692 Unassigned 13,205,240 - - - TOTAL FUND BALANCES 19,959,607 11,103,423 33,444,359 5,162,442 TOTAL LIABILITIES AND FUND BALANCES $ 23,298,180 $ 11,195,501 $ 33,925,510 $ 5,414,845 The Notes to Financial Statements are an integral part of this statement. 16 SOUTHLAKE PARKS CRIME DEVELOPMENT CONTROL CORPORATION DISTRICT CAPITAL CAPITAL PROJECTS PROJECTS EXHIBIT 3 TAX INCREMENT NON -MAJOR TOTAL FINANCING GOVERNMENTAL GOVERNMENTAL DISTRICT FUNDS FUNDS $ 8,936,995 $ 3,515,196 $ 4,224,222 $ 9,866,129 $ 66,589,479 2,494,500 180,158 494,539 2,885,655 36,321,701 - - - - 327,267 - - - - 400,824 - - - 940,683 3,591 ,071 - 38 104 1,969 16,933 - - - 311,864 401,022 - - - - 37,791 $ 11,431,495 $ 3,695,392 $ 4,718,865 $ 14,006,300 $ 107,686,088 $ 103,131 $ 547,346 $ - $ 451,077 $ 2,747,999 - - - 19,068 1,404,908 - - - - 1 ,131 ,920 103,131 547,346 - 470,145 5,284,827 37,791 - - - 1,554,396 12,657,819 - - - 770,071 770,071 - - 4,718,865 - 4,718,865 11,328,364 3,148,046 - 3,515,458 51,436,227 - - - 806,852 6,002,918 - - - 6,381,618 6,381,618 - - - 53,211 53,211 - - - 451,127 451,127 - - - 3,422 3,422 - - - - 18,314 - - - - 10,397 - - - - 22,642 - - - - 113,907 - - - - 6,517,692 - - - - 13,205,240 11,328,364 3,148,046 4,718,865 13,536,155 102,401,261 $ 11,431,495 $ 3,695,392 $ 4,718,865 $ 14,006,300 $ 107,686,088 17 CITY OF SOUTHLAKE, TEXAS EXHIBIT 4 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS AS OF SEPTEMBER 30, 2012 Total fund balances - governmental funds $ 102,401,261 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the governmental funds balance sheet. (Less $1,318,258 in assets allocated to governmental activities from the internal service fund). 393,455,064 Costs associated with the issuance of governmental long-term debt are expensed when incurred in the fund statements and capitalized and amortized over the life of the debt in the government -wide financial statements. 1,459,787 Interest payable on long-term debt does not require current financial resources; therefore, interest payable is not reported as a liability in the governmental funds balance sheet. (676,342) Internal service funds are used by management to charge the cost of certain activities, such as fleet management, to individual funds. This amount represents the assets less the liabilities of the internal service fund allocated to governmental activities. 4,853,265 OPEB asset has not been included in the governmental fund financial statements, as these assets do not represent current financial resources. 99,500 Revenues earned but not available within sixty days of the year end are not recognized as revenue on the fund financial statements. 482,635 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the fund financial statements. (126,213,967) Net assets of governmental activities $ 375,861,203 The Notes to Financial Statements are an integral part of this statement. 18 CITY OF SOUTHLAKE, TEXAS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 GENERAL OBLIGATION GENERAL CRIME DEBT CAPITAL CONTROL GENERAL SERVICE PROJECTS DISTRICT REVENUES Ad valorem taxes, penalties and interest $ 17,690,312 $ 6,923,560 $ $ Franchise taxes 2,598,074 - Municipal sales and mixed beverage taxes 9,443,239 4,724,779 Licenses, permits and fees 2,111 ,754 - Charges for services 1,805,022 Fines and forfeitures 1,119,050 Grants 117,810 Capital recovery fees - - 435,406 - Interest earned 61,622 15,980 70,318 1,053 Contributions - - 24,499 - Miscellaneous 330,143 TOTAL REVENUES 35,277,026 6,939,540 530,223 4,725,832 EXPENDITURES Current General government City secretary/mayor 361,488 City manager's office 594,713 Human resources 390,831 Support services 2,650,511 Economic development 193,915 Finance 1 ,091 ,833 Municipal court 559,154 Teen court 133,585 Information technology 1,772,117 Public safety - Police services 5,621 ,650 244,585 Fire services 5,597,946 - Public safety support 1,516,999 Building inspection 816,771 - Public works Public works administration 1 ,361 ,600 46,223 Streets and drainage 1,776,764 662,471 Planning 815,391 - Cultural and recreation Community services 611,919 Parks and recreation 4,297,051 Library services 665,384 Intergovernmental - - Capital outlay - 5,008,020 Debt service: Principal retirement 8,506,754 - Interest and fiscal charges 4,228,285 44,891 TOTAL EXPENDITURES 30,829,622 12,735,039 5,761,605 244,585 Excess (deficiency) of revenues over (under) expenditures 4,447,404 (5,795,499) (5,231,382) 4,481,247 OTHER FINANCING SOURCES (USES) Issuance of long-term debt - - 2,695,000 - Proceeds from issuance of refunding bonds 9,690,000 - Payment to refund bond escrow agent (10,788,860) - Premium on issuance of long-term debt - 1,287,364 203,824 Transfers from other funds 1,463,738 6,347,362 3,100,000 Transfers to other funds (3,000,000) (6,149,600) TOTAL OTHER FINANCING SOURCES (USES) (1,536,262) 6,535,866 5,998,824 (6,149,600) NET CHANGE IN FUND BALANCES 2,911,142 740,367 767,442 (1,668,353) FUND BALANCES, BEGINNING OF YEAR 17,048,465 10,363,056 32,676,917 6,830,795 FUND BALANCES, END OF YEAR $ 19.959. 007 $ 11,103,423 $ 33.444.359 $ 5.162.442 The Notes to Financial Statements are an integral part of this statement. 19 EXHIBIT 5 SOUTHLAKE PARKS CRIME DEVELOPMENT CONTROL TAX CORPORATION DISTRICT INCREMENT NON -MAJOR TOTAL CAPITAL CAPITAL FINANCING GOVERNMENTAL GOVERNMENTAL PROJECTS PROJECTS DISTRICT FUNDS FUNDS $ $ $ 6,523,327 $ $ 31,137,199 - 2,598,074 5,908,460 20,076,478 1,319,846 3,431,600 - 1,805,022 1,188,357 2,307,407 - 117,810 - - 435,406 22,586 387 1,063 25,592 198,601 - - - 2,194 26,693 29,117 162,338 521,598 51,703 387 6,524,390 8,606,787 62,655,888 361,488 594,713 390,831 2,650,511 193,915 1,091,833 559,154 - 133,585 8,500 1,780,617 894,165 6,760,400 - 5,597,946 1,516,999 816,771 1,407,823 2,439,235 815,391 - 611,919 1,007,019 5,304,070 - 8,879 674,263 - - 2,972,849 - 2,972,849 4,388,014 1,182,735 - 494,175 11,072,944 - 1,395,000 9,901,754 97,445 1,289,255 5,659,876 4,485,459 1,182,735 2,972,849 5,096,993 63,308,887 (4,433,756) (1,182,348) 3,551,541 3,509,794 (652,999) 5,850,000 - - 8,545,000 - 9,690,000 - (10, 788,860) 246,687 - - 1,737,875 2,517,931 4,000,000 2,863,835 20,292,866 (517,931) (4,181,268) (5,553,847) (19,402,646) 8,614,618 3,482,069 (4,181,268) (2,690,012) 10,074,235 4,180,862 2,299,721 (629,727) 819,782 9,421,236 7,147,502 848,325 5,348,592 12,716,373 92,980,025 $ 11,328,364 $ 3,148,046 $ 4,718,865 $ 13,536, 555 $ 102,401,261 20 CITY OF SOUTHLAKE, TEXAS EXHIBIT 6 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2012 Net change in fund balances - total governmental funds $ 9,421,236 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 of capital assets recorded in the current period. (Does not include $660,987 allocated from internal service fund). 9,892,041 Depreciation expense on capital assets is reported in the statement of activities but does not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in the governmental funds. (Does not include $479,900 allocated from internal service fund). (5,803,422) The issuance of long-term debt (e.g. bonds) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas the amounts are deferred and amortized in the statement of activities. This amount is the net effect of the following items: o Bond proceeds (18,235,000) o Payment to refunded bond escrow 10,788,860 o Bond premiums (1,737,875) o Deferred loss on refunding (net) 502,748 o Debt issuance costs 329,247 o Repayments 9,901,754 o Amortization of deferred charges (240,143) o Amortization of premiums 123,603 o Amortization of deferred loss on refunding (625,789) 807,405 Current year changes in the long-term liability for compensated absences do not require the use of current financial resources; and therefore, are not reported as expenditures in governmental funds. (30,441) Changes in the other post employment benefit assets and liabilities are not reported at the fund level; however they are reported at the government -wide level. 99,500 Current year changes in accrued interest payable do not require the use of current financial resources; and therefore, are not reported as expenditures in governmental funds. 33,654 Internal service funds are used by management to charge the costs of certain activities, such as fleet management, to individual funds. The net loss of the internal service fund is allocated entirely to governmental activities. (407,278) Governmental funds do not recognize assets contributed by developers. However, in the statement of activities the fair market value of those assets are recognized as revenue, then allocated over their estimated useful lives and reported as depreciation expense. 518,617 Certain revenues in the government -wide statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds. 14,439 Change in net assets of governmental activities $ 14,545,751 The Notes to Financial Statements are an integral part of this statement. 21 PROPRIETARY FUND FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS EXHIBIT 7 STATEMENT OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2012 BUSINESS -TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE REPLACEMENT ENTERPRISE INTERNAL SERVICE FUND FUND ASSETS CURRENT ASSETS Cash and cash equivalents $ 6,745,658 $ 1,509,425 Investments 3,420,818 2,025,471 Receivables, net of allowance for uncollectibles: Trade accounts 1,178,593 - Unbilled trade accounts 2,304,626 Interest 19,064 111 Special assessments 865 Prepaid expenses 628 Restricted assets Cash restricted for capital 12,697,885 Investments restricted for customer meter deposits 208,465 Investments restricted for capital 10,229,091 Total current assets 36,805,693 3,535,007 NON -CURRENT ASSETS Capital assets Land and improvements 14,642,328 - Buildings and improvements 935,501 Distribution system 117,866,272 Equipment 1,731,273 - Vehicles 572,041 3,621,439 Capacity rights 9,190,988 - Construction in progress 6,975,284 Total capital assets 151,913,687 3,621,439 Less: accumulated depreciation (47,587,310) (2,303,181) Capital assets, net of accumulated depreciation 104,326,377 1,318,258 Deferred charges Bond issuance costs, net of amortization 721,788 Total deferred charges 721,788 Total non -current assets 105,048,165 1,318,258 TOTAL ASSETS $ 141,853,858 $ 4, 553,265 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 2,702,261 $ - Accrued liabilities 339,463 Accrued interest 261,789 Current portion of general obligation debt 3,944,749 Current portion of contract obligation debt 320,000 Current portion of revenue bonds 130,000 Current portion of compensated absences 75,270 Current portion of deferred loss on refunding (114,559) Current portion of deferred revenue 5,000 Current portion of bond premiums 52,294 Payable from restricted assets: Customer meter deposits 208,465 Total current liabilities 7,924,732 NON -CURRENT LIABILITIES Deferred revenue 253,145 Contract revenue obligations 1,435,000 General obligation debt 42,404,609 Bond premiums 683,135 Revenue bonds 3,130,000 Deferred loss on refunding (804,098) Total non -current liabilities 47,101,791 TOTAL LIABILITIES 55,026,523 NET ASSETS Invested in capital assets, net of related debt 67,918,830 1,318,258 Unrestricted 18,908,505 3,535,007 TOTAL NET ASSETS $ 86,827,335 $ 4,853,265 The Notes to Financial Statements are an integral part of this statement. 22 CITY OF SOUTHLAKE, TEXAS EXHIBIT 8 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 OPERATING REVENUES Charges for sales and services: Water, sewer and garbage Service charges Miscellaneous Total operating revenues OPERATING EXPENSES: Personnel services Contractual services Lease payments Supplies Utilities Administrative Maintenance Professional benefits Depreciation and amortization Total operating expenses OPERATING INCOME (LOSS) BUSINESS -TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE REPLACEMENT ENTERPRISE INTERNAL SERVICE FUND FUND $ 22,388,851 $ - 62,887 - 10,811 - 22,462,549 - 2,320,742 - 1,191,598 - - 21,000 127,346 - 8,252,217 - 66,693 - 2,999,937 - 20,683 - 4,014,372 479,900 18,993,588 500,900 3,468,961 (500,900) NON -OPERATING REVENUES (EXPENSES) Gain (loss) on sale of capital assets (13,682) Interest income 46,212 Interest expense (3,523,418) 91,138 2,484 Total non -operating revenues (expenses) (3,490,888) 93,622 LOSS BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS (21,927) (407,278) CAPITAL CONTRIBUTIONS AND TRANSFERS Capital contributions - property owners 607,356 Contributions - impact fees 607,039 Transfers to other funds (890,220) Total capital contributions and transfers 324,175 CHANGE IN NET ASSETS NET ASSETS, BEGINNING OF YEAR NET ASSETS, END OF YEAR The Notes to Financial Statements are an integral part of this statement. 302,248 (407,278) 86,525,087 5,260,543 $ 86,827,335 $ 4,853,265 23 CITY OF SOUTHLAKE, TEXAS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers and users Cash payments to suppliers Cash payments to employees Net cash provided by (used in) operating activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital expenditures Principal payments on bonds Bond issue costs Proceeds from issuance of bonds Premium on the issuance of bonds Interest paid Proceeds from sale of capital assets Contributions - impact fees Net cash used in capital and related financing activities CASH FLOWS FROM NON -CAPITAL FINANCING ACTIVITIES Transfers to other funds Net cash used in non -capital financing activities CASH FLOWS FROM INVESTING ACTIVITIES Net sales of investments Interest received Net cash used in investing activities NET CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR RECONCILIATION TO STATEMENT OF NET ASSETS Cash and cash equivalents Cash restricted for capital Total cash and cash equivalents RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Loss on the sale of assets Depreciation and amortization Decrease (increase) in assets Receivables Increase in liabilities Payables and accruals Customer deposits Net cash provided by (used in) operating activities NON -CASH CAPITAL AND RELATED FINANCING: Contributions of capital assets from developers The Notes to Financial Statements are an integral part of this statement. 24 EXHIBIT 9 BUSINESS -TYPE GOVERNMENTAL ACTIVITIES ACTIVITIES WATER AND SEWER VEHICLE REPLACEMENT ENTERPRISE INTERNAL SERVICE FUND FUND $ 22,695,013 $ (11 ,150,1 13) (21, 000) (2,319,986) 9,224,914 (21,000) (5,106,973) (643,675) (4,018,248) (51 ,195) 3,030,000 151,491 (3,547,731) - - 91,138 607,039 - (8,935,617) (552,537) (890,220) (890,220) (8,110,545) (1,298,309) 34,502 6,713 (8,076,043) (1,291,596) (8,676,966) (1,865,133) 28,120,509 3,374,558 $ 19,443,543 $ 1,509,425 $ 6,745,658 $ 1,509,425 12,697,885 - $ 19,443,543 $ 1 ,509,425 $ 3,468,961 $ (500,900) (13,682) - 4,014,372 479,900 222,972 - 1,502,627 29,664 $ 9,224,914 $ (21,000) $ 607,356 $ FIDUCIARY FUND FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS CASH ESCROW AGENCY FUND STATEMENT OF FIDUCIARY NET ASSETS SEPTEMBER 30, 2012 ASSETS Cash and cash equivalents Investments Accrued interest receivable TOTAL ASSETS Due to builders TOTAL LIABILITIES The Notes to Financial Statements are an integral part of this statement. EXHIBIT 10 Agency Fund Cash Escrow $ 50,826 17,307 4 $ 68,137 $ 68,137 $ 68,137 25 NOTES TO FINANCIAL STATEMENTS CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General Statement The City of Southlake (the City) operates under a Home Rule Council — Manager form of government. All powers of the City are vested in an elected council, which enables local legislation, adopts budgets, determines policies and appoints the City Manager. The City Manager is responsible for executing the laws and administering the government of the City. The accounting and reporting policies of the City relating to the funds included in the accompanying basic financial statements conform to accounting principles generally accepted in the United States of America applicable to state and local governments. Generally accepted accounting principles for local governments include those principles prescribed by the Governmental Accounting Standards Board (GASB), the American Institute of Certified Public Accountants in the publication entitled Audits of State and Local Governmental Units and by the Financial Accounting Standards Board (when applicable). As allowed in Section P80 of GASB's Codification of Governmental Accounting and Financial Reporting Standards, the City has elected not to apply Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the Committee of Accounting Procedure issued after November 30, 1989. The more significant accounting policies of the City are described below. Financial Reporting Entity The City is governed by an elected mayor and a six -member council and has the authority to make decisions, appoint administrators and managers, and significantly influence operations. It also has the primary accountability for fiscal matters. Therefore, the City is a financial reporting entity as defined by the Governmental Accounting Standards Board ("GASB") in its Statement No. 14, "The Financial Reporting Entity", as amended by GASB 39 "Determining Whether Certain Organizations Are Component Units". Under GASB 14 component units are organizations for which the City is financially accountable and all other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Financial accountability exists if the City appoints a voting majority of an organization's governing board and is either able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the City. The City may be financially accountable for governmental organizations with a separately elected governing board, a governing board appointed by another government, or a jointly appointed board that is fiscally dependent on the City. The financial statements of the component units may be discretely presented in a separate column from the primary government or blended with the financial statements of the primary government. GASB 39 added clarification to GASB 14 by including entities which meet all three of the following requirements: 1. The economic resources received or held by the separate organization are entirely for the direct benefit of the primary government, its component units, or its constituents. 2. The primary government, or its component units, is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization. 26 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Financial Reporting Entity — Continued 3. The economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government. Based on these criteria, the financial information of the following entities has been blended within the reporting entity. Individual financial statements are not available for these component units. Southlake Parks Development Corporation (the Corporation) - The Corporation is a nonprofit industrial development corporation formed in January 1994 under the Development Corporation Act of 1979. The Corporation is organized exclusively to act on behalf of the City for the financing, development and operation of parks and recreation facilities. The affairs of the Corporation are managed by a seven member board of directors, of which four are members of the City Council. The annual corporate budget and issuance of debt must be approved by the City Council. The Corporation is reported as if it were part of the primary government as the City Council has sufficient representation on the Board to allow complete control over the Corporation's activities. Southlake Tax Increment Financing District (the TIF) - The TIF was formed to finance and make public improvements, under the authority of the Tax Increment Financing Act. The TIF is governed by a twelve member board of directors consisting of the eight members appointed by the City Council, and one member each appointed by Carroll Independent School District, Tarrant County, Tarrant County Junior College District, and the Tarrant County Hospital District Board of Directors. The TIF is reported as if it were a part of the primary government as the City Council has sufficient representation on the board to allow for complete control over the TIF's activities. Southlake Crime Control and Prevention District (the District) — The District was formed under Chapter 363 of the Texas Local Government Code, the Crime Control and Prevention Act. The District is organized exclusively to act on behalf of the City for the financing, development and crime control throughout the City. The District is governed by a seven member board appointed by the City Council. The annual budget and issuance of debt must be approved by the City Council. The District is reported as a part of the primary government as the City Council acts as the governing body for the District. Basis of Presentation The government -wide financial statements (the statement of net assets and the statement of activities) report information on all of the activities of the City, except for fiduciary funds. The effect of interfund activity, within the governmental and business -type activities columns, has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. 27 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Basis of Presentation — Continued Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other items not properly included among program revenues are reported instead as general revenues. Fund Financial Statements: The City segregates transactions related to certain functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Separate statements are presented for governmental funds and proprietary funds. These statements present each major fund as a separate column in the fund financial statements; all non -major funds are aggregated and presented in a single column. Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balances of current financial resources. Governmental Funds The City reports the following major governmental funds: General Fund - The General Fund is the general operating fund of the City. It is used to account for all financial resources not accounted for in other funds. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are paid from the General Fund. General Obligation Debt Service Fund - The General Obligation Debt Service Fund is used to account for the accumulation of financial resources for the payment of principal, interest and related costs on long-term debt paid primarily from taxes levied by the City. The fund balance of the General Obligation Debt Service Fund is restricted to signify the amounts that are restricted exclusively for debt service expenditures. General Capital Projects Fund - The General Capital Projects Fund is used to account for resources used for the acquisition and/or construction of capital facilities by the City, except those financed by proprietary funds and not accounted for by another capital projects fund. Crime Control District - The Crime Control District Special Revenue Fund was established to account for the operations of the Crime Control District, which was established for the financing and development of crime control within the City. The Crime Control Fund is funded primarily through the receipt of municipal sales taxes. 28 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Basis of Presentation — Continued Southlake Parks Development Corporation Capital Projects Fund - The Southlake Parks Development Corporation ("SPDC") Capital Projects Fund is utilized to fund the acquisition and construction of park recreational facilities as approved by the SPDC board of directors. The fund has been financed through the issuance of general obligation debt. Crime Control District Capital Projects Fund - The Crime Control District Capital Projects Fund is utilized to account for the acquisition and construction of capital assets as approved by the District's board of directors. The fund has been funded primarily through the issuance of general obligation debt. Tax Increment Financing District - The Tax Increment Financing ("TIF") District Fund was established to account for the general operations of the TIF, which was formed to finance and make public improvements. The TIF is funded primarily through the assessment of ad valorem taxes. In addition, the City reports the following non -major governmental funds: Special Revenue Funds — The City's Special Revenue Funds are used to account for revenue sources that are committed or restricted to expenditures for specified purposes, as follows: Police Fund - The Police Fund was established to account for the resources required to be utilized by the police department. Parks and Recreation Fund - The Parks and Recreation Fund was established to account for resources restricted for use by the parks and recreation department. Parks Dedication Fund - The Parks Dedication Fund was established to account for resources restricted for use by the parks department. The primary source of revenue for the Parks Dedication Fund is user charges for the use of City parks. Southlake Parks Development Corporation - The Southlake Parks Development Corporation ("SPDC") Fund was established to account for the general operations of the non-profit corporation established to finance, develop and operate park and recreational facilities. The SPDC is funded primarily through the receipt of municipal sales taxes. Hotel Occupancy - The Hotel Occupancy Tax Fund accounts for all revenues and expenditures relating to the hotel occupancy tax received by the City. 29 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Basis of Presentation — Continued Storm Water Utility - The Storm Water Utility Fund is used to account for fees collected for the purpose of improving, upgrading and maintaining the City's drainage system. Court Security Fund - The Court Security Fund is used to account for Municipal Court fees assessed to provide for court security. Court Technology Fund - The Court Technology Fund is used to account for Municipal Court fees assessed to provide for court technology. Library Fund - The Library Fund was established to account for resources donated for use by City library services. Red Light Camera Fund - The Red Light Camera Fund is used to account for fees assessed for red light violations captured through the City's camera monitoring system. Storm Water Maintenance Fund - The Storm Water Maintenance Fund is used to account for the maintenance on storm water infrastructure. Oil and Gas Fund - The Oil and Gas Fund is used to account for permit fees and the related expenditures for oil and gas drilling. Commercial Vehicle Enforcement Fund - The Commercial Vehicle Enforcement Fund is used to account for the fees assessed for commercial vehicle violations. Southlake Parks Development Corporation Debt Service Fund - The Southlake Parks Development Corporation Debt Service Fund is utilized to account for the accumulation of financial resources, primarily transfers from other funds, for the payment of long- term principal and interest costs associated with the financing of improvements of the Southlake Parks Development Corporation. Capital Projects Funds — The City's Capital Projects Funds are utilized to account for financial resources to be used for the acquisition or construction of specified capital improvements (other than those financed by proprietary funds). Such resources are derived from proceeds of general obligation debt, other sources designated for improvements and interest earned on such proceeds. The City's non -major Capital Projects Fund is as follows: 30 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Basis of Presentation — Continued Tax Increment Financing District Capital Projects Fund - The Tax Increment Financing District Capital Projects Fund is utilized to fund the acquisition and construction of public improvements as approved by the TIF board of directors. The fund has been financed through the issuance of general obligation debt. Proprietary Funds - Proprietary Funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. The accounting objectives are determinations of net income, financial position and cash flow. All assets and liabilities are included in the Statement of Net Assets. The City reports the following major proprietary fund: Water and Sewer Enterprise Fund - The Water and Sewer Enterprise Fund is used to account for the acquisition, operation and maintenance of a municipal water and sewer utility, supported primarily by user charges to the public. Additionally, the City reports an Internal Service Fund which is used to account for vehicle replacement provided to departments of the City. Proprietary funds distinguish operating revenues and expenses from non -operating 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. Operating expenses for the proprietary funds include the cost of personnel and contractual services, supplies and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non -operating revenues and expenses. The City also presents one agency fund, the Cash Escrow Agency Fund. This fund is custodial in nature and does not involve measurement of results of operations. Financial statements for the Cash Escrow Agency Fund are prepared on the accrual basis of accounting. Measurement Focus and Basis of Accounting Measurement focus refers to what is being measured; basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government -wide statements and fund financial statements for proprietary and fiduciary funds are reported using the accrual basis of accounting. The government -wide and proprietary fund financial statements are prepared using the economic resources measurement focus; however, the fiduciary funds have no measurement focus. The economic resources measurement focus means all assets and liabilities (whether current or non -current) are included in the statement of net assets and the operating statements present increases (revenues) and decreases (expenses) in net total assets. Under the accrual basis of accounting, revenues are recognized when earned, including unbilled water and sewer services which are accrued. Expenses are recognized at the time the liability is incurred. 31 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Measurement Focus and Basis of Accounting — Continued Governmental fund financial statements are reported using the current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual; i.e., when they become both measurable and available. "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers all revenues as available if they are collected within 60 days after year end. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on long-term debt which is recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. Property taxes, sales taxes, franchise taxes and interest are susceptible to accrual. Other receipts become measurable and available when cash is received by the City and are recognized as revenue at that time. Cash, Cash Equivalents and Investments In accordance with GASB Statement No. 31, the City's general policy is to report money market investments and short-term participating interest -earning investment contracts at amortized cost and to report nonparticipating interest -earning investment contracts using a cost -based measure. However, if the fair value of an investment is significantly affected by the impairment of the credit standing of the issuer or by other factors, it is reported at fair value. All other investments are reported at fair value unless a legal contract exists which guarantees a higher value. The term "short-term" refers to investments, which have a remaining term of one year or less at the time of purchase. The term "nonparticipating" means that the investment's value does not vary with market interest rate changes. The City's cash and cash equivalents are defined as cash on hand, demand deposits, and short- term investments with original maturities of three months or less from the date of acquisition for classification in the statement of cash flows for proprietary fund types. The City pools idle cash from all funds for the purpose of increasing income through coordinated investment activities. As of September 30, 2012, the investments held by the City had a remaining maturity of greater than one year from purchase and accordingly are carried at fair value. Interest earnings are allocated to the respective funds based upon each fund's relative balance in the pool. Cash and cash equivalents and investments reported as restricted are restricted for the acquisition and construction of capital assets, and for utility deposits held by the City. Property Taxes The City's property tax is levied each October 1 on the assessed value listed as of the prior January 1 for all real and certain personal property located within the City. Appraised values are established by the Central Appraisal District of Tarrant County at 100% of estimated market value and certified by the Appraisal Review Board. The assessed value upon which the 2012 levy was based on was $5,462,579,683. Taxes are due on October 1 and are delinquent after the following January 31. 32 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Property Taxes — Continued The City is permitted by Article XI, Section 5 of the State of Texas Constitution to levy taxes up to $2.50 per $100 of assessed valuation for general governmental services, including the payment of principal and interest on general obligation long-term debt. The combined tax rate to finance general governmental services including the payment of principal and interest on long-term debt for the year ended September 30, 2012 was $0.462 per $100 of assessed valuation. In Texas, countywide central appraisal districts are required to assess all property within the appraisal district on the basis of 100% of its appraised value and are prohibited from applying any assessment ratios. The value of property within the appraisal district must be reviewed every five years; however, the City may, at its own expense, require annual reviews of appraised values. The City may challenge appraised values established by the appraisal district through various appeals and, if necessary, legal action. Under this legislation, the City continues to set tax rates on City property. However, if the effective tax rate, excluding tax rates for bonds and other contractual obligations, adjusted for new improvements, exceeds the rate for the previous year by more than 8%, qualified voters of the City may petition for an election to determine whether to limit the tax rate to no more than 8% above the tax rate of the previous year. Interfund Receivables and Payables Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds." Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances". Transactions Between Funds Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as a reduction of expenditures/expenses in the fund reimbursed. All other interfund transactions, except interfund services provided and used and reimbursements, are recorded as transfers. Restricted Resources When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted first, then unrestricted resources as required. Inventories Inventories are stated at cost (first -in, first -out) and are determined annually by taking a physical inventory. Inventory in the general fund consists of gasoline and supplies held for consumption and is reported on the consumption method. Under the consumption method the cost is recorded as an expenditure at the time individual inventory items are utilized. Prepaid Items Certain payments reflect costs applicable to future periods and are recorded as prepaid in the government -wide and fund financial statements. These items consist principally of postage and building deposits. 33 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in the applicable governmental or business -type activities columns in the government -wide financial statements and in the fund financial statements for proprietary funds. All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated assets are valued at fair market value on the date donated. The costs of normal repairs and maintenance that do not add to the value of the asset or materially extend the asset lives are not capitalized. Renewals and betterments are capitalized. Interest has not been capitalized during the construction period on property, plant and equipment. Assets capitalized have an original cost of $5,000 or more and over one year of useful life. Depreciation has been calculated on each class of depreciable property using the straight-line method. Estimated useful lives are as follows: Buildings 20 - 50 Years Water and Sewer distribution system 35 - 50 Years Water hydrants 10-15 Years Water tanks 35 Years Computer equipment 5 Years Heavy equipment and vehicles 10 - 20 Years Light vehicles 2 - 10 Years Vehicles 5 Years Improvements 25 Years Infrastructure 10 Years The street network is not depreciated. The City has elected to use the modified approach in accounting for its street infrastructure. The modified approach allows governments to report as expenses in lieu of depreciation, infrastructure expenditures which maintain the asset but do not add to or improve the asset. Additions and improvements to the street network are capitalized. The City uses an asset management system to rate street condition and quantify the results of maintenance efforts. The City has established the Vehicle Replacement Internal Service Fund to account for all City - owned vehicles. Charges for use of the vehicle in the form of lease payments are made by the City departments to the Vehicle Replacement Internal Service Fund to provide for future acquisitions and replacement of City -owned vehicles. Vacation and Sick Leave (Compensated Absences) City employees earn vacation and sick leave, which may either be taken or accumulated, up to certain amounts, until paid upon retirement or termination. Upon termination or retirement, an employee is reimbursed up to a maximum number of hours of vacation pay and sick leave based upon the years of service. All vacation and sick pay is accrued in the government -wide and proprietary fund financial statements. A liability for these amounts is reported in the governmental funds only if they have matured. 34 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Long -Term Obligations In the government -wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund statement of net assets. Bond premiums and discounts, as well as issuance costs and any deferred loss on the refunding of bonds are amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums and discounts received on debt issuances are reported as other financing sources or uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund Equity The City has adopted the provisions of GASB Statement No. 54, Fund Balance Reporting and Government Fund Type Definitions. The objective of the statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing government fund type definitions. The statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Fund balance classifications, under GASB 54 are Nonspendable, Restricted, Committed, Assigned, and Unassigned. These classifications reflect not only the nature of funds, but also provide clarity to the level of restriction placed upon fund balance. Fund balance can have different levels of constraint, such as external versus internal compliance requirements. The General Fund should be the only fund that reports a positive unassigned balance. In all other funds, unassigned is limited to negative residual fund balance. In accordance with GASB Statement No. 54, the City classifies governmental fund balances as follows: 1. Nonspendable fund balance — includes amounts that are not in a spendable form or are required to be maintained intact (example — inventory or permanent funds). 2. Restricted fund balance — includes amounts that can be spent only for the specific purposes stipulated by external resource providers either constitutionally or through enabling legislation (example — court technology and court security funds). 3. Committed fund balance — includes amounts that can only be used for specific purposes determined by City Council (example — reforestation and park dedication). 4. Assigned fund balance — comprises amounts intended to be used by the City for specific purposes. Intent can be expressed by the City Council or their designee. In governmental funds other than the general fund, assigned fund balance represents the amount that is not restricted or committed. This indicates that resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund (example — Facility Maintenance and Strategic Initiative Fund). 5. Unassigned fund balance — is the residual classification of the general fund and includes all amounts not contained in other classifications. 35 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Fund Equity — Continued In accordance with GASB 54, the City has also adopted the following policies: Committed Fund Balance - The City Council is the City's highest level of decision -making authority and approval by resolution is required to establish, modify, or rescind a fund balance commitment. The resolution must either be approved or rescinded, as applicable, prior to the last day of the fiscal year. The amount subject to the constraint may be determined in the subsequent period. Assigned Fund Balance - The City Council has authorized the City's Finance Director as the official authorized to assign fund balance to a specific purpose as approved by this fund balance policy. Unassigned Fund Balance - It is the goal of the City to maintain a fund balance in the General Fund, equal to a minimum of 15% of General Fund budgeted operating expenditures, with the optimum goal of 25%. The City considers a balance of less than 15% to be cause for concern, barring unusual or deliberate circumstances. It is the goal of the City to maintain 60 days of working capital in the Enterprise Fund, with the optimum goal of 90 days of working capital. The City shall also maintain all Reserve funds for all statutorily required reserve funds to guarantee debt service. Order of Expenditure of Funds - When multiple categories of fund balance are available for expenditures, the City will start with the most restricted category and spend those funds first before moving to the next category with available funds (restricted, committed, assigned and unassigned). During fiscal year 2006, the City began designating funds for strategic initiatives. The source of these funds is reserves in excess of 25% of general fund expenditures. The funds will be used for one-time high impact projects involving infrastructure maintenance, community enhancement and capital acquisition; and are reported as assigned fund balance in the general fund. Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consists 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 on their use either through the enabling legislations adopted by the City or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates. 36 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 2. CASH AND INVESTMENTS The funds of the City must be deposited and invested under the terms of a contract, contents of which are set out in the Depository Contract Law. The depository bank places approved pledged securities for safekeeping and trust with the City's agent bank in an amount sufficient to protect City funds on a day-to-day basis during the period of the contract. The pledge of approved securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit Insurance Corporation (FDIC) insurance. At September 30, 2012 the carrying amount of the City's deposits was $51,966,965 and the bank balance was $54,007,090. As of September 30, 2012, none of the City's deposits were uncollateralized. Legal and contractual provisions governing deposits and investments: The Public Funds Investment Act (Government Code Chapter 2256) contains specific provisions in the areas of investment practices, management reports and establishment of appropriate policies. Among other things, it requires the City to adopt, implement, and publicize an investment policy. That policy must address the following areas: (1) safety of principal and liquidity, (2) portfolio diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar -weighted maturity allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, (9) and bid solicitation preferences for certificates of deposit. Statutes and the City's investment policy authorized the City to invest in the following investments as summarized in the table below: Authorized Maximum Investment Type Maturity Maximum Maximum Percentage Investment of Portfolio In One Issuer U.S. Government Securities 5 years 100% None Commercial Paper 270 days 20% None Eligible Investment Pools 365 days 100% None The Act also requires the City to have independent auditors perform test procedures related to investment practices as provided by the Act. The City is in substantial compliance with the requirements of the Act and with local policies. Cash and investments as of September 30, 2012 are classified in the accompanying financial statements as follows: Primary Government Cash and cash equivalents $ 67,771,112 Investments 37,740,535 Restricted cash and cash equivalents 19,771,335 Restricted investments 14,465,011 Total primary government 139,747,993 Fiduciary Funds: Cash 50,826 Investments 17,307 Total fiduciary funds 68,133 Total cash and investments $ 139,816,126 37 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 2. CASH AND INVESTMENTS — CONTINUED Cash and investments as of September 30, 2012 consist of the following: Cash on hand $ 5,086 Deposits with financial institutions 51,966,965 Investments 87,844,075 Total cash and investments $ 139,816,126 Disclosures relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by investing mainly in investment pools which purchase a combination of shorter term investments with an average maturity of less than 60 days, thus reducing the interest rate risk. The City monitors the interest rate risk inherent in its portfolio by measuring the weighted average maturity of its portfolio. The City has no specific limitations with respect to this metric. As of September 30, 2012, the City had the following investments: Investment Type Government agency securities TexStar TexPool Certificates of Deposit Commercial Paper Total Amount $ 20,038,364 23,080,004 12,541,219 13,184,488 19,000,000 $ 87,844,075 Weighted Average Maturity 347 days 46 days 44 days 96 days 154 days As of September 30, 2012 the City did not invest in any securities which are highly sensitive to interest rate fluctuations. Disclosures relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the Public Funds Investment Act, the City's investment policy, or debt agreements, and the actual rating as of year-end for each investment type. Investment Type Government agency securities TexStar TexPool Certificates of Deposit Commercial Paper Total Amount $ 20,038,364 23,080,004 12,541,219 13,184,488 19,000,000 $ 87,844,075 Minimum Rating as Legal of Year Rating End N/A Not rated N/A AAAm N/A AAAm N/A AAAm N/A Aa3 38 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 2. CASH AND INVESTMENTS — CONTINUED Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer. As of September 30, 2012, investments other than external investment pools that represent 5% or more of the City's investments are as follows: Issuer Investment Type Reported Amount FNMA Government agency securities $ 16,000,000 Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The Public Funds Investment Act requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least the bank balance less the FDIC insurance at all times. As of September 30, 2012, none of the City's cash deposits were uncollateralized. Investment in State Investment Pools The City is a voluntary participant in two investment pools: TexStar and TexPool. The State Comptroller of Public Accounts exercises responsibility over TexPool. This oversight includes the ability to significantly influence operations, designation of management, and accountability for fiscal matters. Additionally, the State Comptroller has established an advisory board composed of both participants in TexPool and other persons who do not have a business relationship with TexPool. TexPool operates in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. TexPool uses amortized costs rather than market value to report net assets to compute share prices. Accordingly, the fair value of the position in TexPool is the same as the value of TexPool shares. TexStar is administered by First Southwest Asset Management, Inc. and JPMorgan Chase. Together these organizations bring to the TexStar program the powerful partnership of two leaders in financial services with a proven and noted track record in local government investment pool management. TexStar is a local government investment pool created under the Interlocal Cooperation Act specifically tailored to meet Texas state and local government investment objectives of preservation of principal, daily liquidity, and competitive yield. TexStar uses amortized costs rather than market value to report net assets to compute share prices. Accordingly, the fair value of the position in TexStar is the same as the value of TexStar shares. 39 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 3. RECEIVABLES Receivables at September 30, 2012, for the government's individual major, non -major, internal service, and fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, consist of the following: General Crime Tax Obligation General Crime Control District Increment Debt Capital Control Capital Financing General Service Projects District Projects District Receivables: Property taxes $ 621,191 $ 243,135 $ $ - $ $ Sales taxes 1,815,265 - 835,123 Franchise taxes 400,824 - Accounts - 10,065 Special assessments - - - - Interest 680 2,266 11,817 59 38 104 Other 79,093 - - - Gross receivables 2,917,053 245,401 21,882 835,182 38 104 Less: allowance 386,254 150,805 - - - Net total receivables $ 2,530,799 $ 94,596 $ 21,882 $ 835,182 $ 38 $ 104 Non - Major Water Govern- and Internal mental Sewer Service Agency Total Receivables: Property taxes $ - $ $ $ $ 864,326 Sales taxes 940,683 3,591,071 Franchise taxes - 400,824 Accounts 3,784,433 3,784,433 Special assessments - 865 865 Interest 1,969 19,064 111 4 36,112 Other 311,864 - 390,957 Gross receivables 1,254,516 3,804,362 111 4 9,078,653 Less: allowance - 301,214 838,273 Net total receivables $ 1,254,516 $ 3,503,148 $ 111 $ 4 $ 8,240,380 The Water and Sewer Fund accounts receivable include unbilled charges for services rendered through September 30, 2012 of $2,304,626 . :l CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 4. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2012, was as follows: Beginning Capital Sales or Adjustments/ Ending Balance Acquisitions Disposals Transfers Balance Governmental Activities: Capital assets not being depreciated: Land $ 83,025,706 $ 8,435 $ $ - $ 83,034,141 Street infrastructure 180,369,897 246,197 4,074,797 184,690,891 Construction -in -progress 17,799,561 9,447,124 (12,265,880) 14,980,805 Total capital assets not being depreciated 281,195,164 9,701,756 (8,191,083) 282,705,837 Capital assets being depreciated Land improvements 2,028,342 3,748,063 5,776,405 Buildings and building improvements 63,340,754 - 1,199,739 64,540,493 Public art 316,595 57,826 485,381 859,802 Office equipment 1,824,994 - - 1,824,994 Communications equipment 2,833,828 - - 2,833,828 Field equipment 809,198 167,483 (15,092) 43,541 1,005,130 Heavy equipment 1,858,011 82,372 (25,000) - 1,915,383 Computer equipment 1,173,824 83,487 (21,637) 1,235,674 Computer software 3,339,099 - 3,339,099 Vehicles 7,927,468 714,736 (526,830) - 8,115,374 Drainage 38,417,912 263,984 40,811 38,722,707 Bridges, road signs, and fiber optic lines 2,260,315 - 990,202 3,250,517 Park improvements 15,204,084 389,399 15,593,483 Pathways 8,285,515 1,293,947 9,579,462 Total capital assets being depreciated 149,619,939 1,369,888 (588,559) 8,191,083 158,592,351 Accumulated depreciation Land improvements (583,876) (3,808) (587,684) Buildings and building improvements (7,891,581) (1,564,117) (9,455,698) Public art (35,298) (72,884) (108,182) Office equipment (395,748) (97,382) (493,130) Communications equipment (2,507,635) (184,438) - (2,692,073) Field equipment (616,941) (74,979) 14,894 (677,026) Heavy equipment (1,010,480) (142,308) 25,000 (1,127,788) Computer equipment (682,661) (183,121) 21,635 (844,147) Computer software (2,294,246) (593,314) - (2,887,560) Vehicles (4,894,411) (828,747) 509,518 (5,213,640) Drainage (11,445,732) (1,003,157) - (12,448,889) Bridges, road signs, and fiber optic lines (908,748) (54,637) (963,385) Park improvements (4,618,967) (1,135,904) (5,754,871) Pathways (2,926,267) (344,526) - (3,270,793) Total accumulated depreciation (40,812,591) (6,283,322) 571,047 - (46,524,866) Total capital assets being depreciated, net 108,807,348 (4,913,434) (17,512) 8,191,083 112,067,485 Governmental activities capital assets, net $ 390,002,512 $ 4,788,322 $ (17,512) $ - $ 394,773,322 41 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 4. CAPITAL ASSETS — CONTINUED Business Type Activities: Capital assets not being depreciated: Land Construction -In -Progress Total capital assets not being depreciated Capital assets being depreciated: Buildings and building improvements Equipment Vehicles Capacity rights Distribution system Total capital assets being depreciated Accumulated depreciation: Buildings and building improvements Equipment Vehicles Capacity rights Distribution system Total accumulated depreciation Total capital assets being depreciated, net Business type activities capital assets, net Beginning Capital Sales or Adjustments/ Ending Balance Acquisitions Disposals Transfers Balance $ 14,633,263 $ 9,065 $ $ - $ 14,642,328 8,111,275 4,637,164 (5,773,155) 6,975,284 22,744,538 4,646,229 (5,773,155) 21,617,612 935,501 - 935,501 1,647,392 138,676 (54,795) 1,731,273 507,041 65,000 572,041 9,190,988 - - 9,190,988 111,221,196 871,921 5,773,155 117,866,272 123,502,118 1,075,597 (54,795) 5,773,155 130,296,075 (464,042) (30,318) - - (494,360) (807,835) (154,571) 41,113 (921,293) (245,938) (42,897) - (288,835) (2,968,758) (183,820) (3,152,578) (39,182,995) (3,547,249) - (42,730,244) (43,669,568) (3,958,855) 41,113 - (47,587,310) 79,832,550 (2,883,258) (13,682) 5,773,155 82,708,765 $ 102,577,088 $ 1,762,971 $(13,682) $ - $ 104,326,377 Depreciation expense was charged as a direct expense to functions of the primary government as follows: Governmental activities: General government $ 1,147,761 Public safety 1,192,281 Public works 2,127,198 Culture and recreation 1,816,082 Total depreciation expense - governmental activities $ 6,283,322 Business -type activities: Water and Sewer $ 3,958,855 NOTE 5. LONG-TERM DEBT The City issues general obligation bonds, combination tax and revenue certificates of obligation and tax notes to provide for the acquisition and construction of major capital facilities and infrastructure. Combination tax and revenue certificates of obligation are issued for both governmental and business -type activities. General obligation bonds, governmental revenue bonds and tax notes pledge the full faith and credit of the City. Combination tax and revenue certificates of obligation are payable from the net revenues of the water and sewer system and general debt service tax. 42 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 5. LONG-TERM DEBT— CONTINUED In September 2012, the City issued $11,300,000 of Series 2012, Tax and Waterworks and Sewer System (limited pledge) certificates of obligation bonds. The debt was issued to pay the costs of various general capital project improvements. The obligations are payable over the next 20 years. In September 2012, the City also issued $9,965,000 of Series 2012, General Obligation Refunding Bonds, of which $275,000 is included as part of business -type activities. The debt was issued to refund a portion of the City's outstanding debt to achieve a present value debt service savings. Net proceeds from the sale of the bonds totaled $11,287,267. Of these proceeds, $10,788,860 was placed with an escrow agent to provide for all future debt payments of the refunded bonds. This refunding resulted in a decrease in the City's debt service payments of $1,761,394, which resulted in an economic gain (difference between the present value of the debt service payments of the old debt and new debt) of $1,528,050. General obligation bonds, combination certificates of obligation, tax notes and governmental revenue bonds are as follows as of September 30, 2012: Final Interest Business - General Obligation Bonds and Certificates of Obligation Maturity Rates Governmental Type $30,275,000 Series 2004, General Obligation Refunding 2025 4.0 - 5.22% $ 22,550,000 $ $3,025,000 Series 2004, Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2023 2.0 - 5.0% 1,810,000 - $35,700,000 Series 2005, General Obligation Refunding Bonds 2026 4.2% 10,284,590 19,351,050 $6,075,000 Series 2006, Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2026 3.75 - 4.375% 750,000 - $6,540,000 Series 2007, Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2018 4.0 - 5.0% 3,910,000 - $14,015,000 Series 2008, Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2028 3.5 - 4.625% 5,936,935 6,331,850 $24,835,000 Series 2009, Combination Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2029 2.0 - 5.0% 13,865,000 5,805,000 $26,730,000 Series 2010, General Obligation Refunding Bonds 2023 3.0 - 4.0% 13,223,405 5,066,458 $4,480,000 Series 2011A, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2018 2.00 - 5.00% 3,915,000 - $3,365,000 Series 2011 B, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2031 2.00 - 4.125% - 3,260,000 $15,745,000 Series 2010, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2030 3.0 - 4.25% 6,090,000 4,975,000 $11,300,000 Series 2012, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation 2032 3.0 - 4.25% 2,695,000 2,755,000 $9,965,000 Series 2012, General Obligation Refunding Bonds 2026 3.0 - 4.25% 9,690,000 275,000 $ 94,719,930 $ 47,819,358 43 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 5. LONG-TERM DEBT— CONTINUED Governmental Revenue Bonds $9,220,000 Series 1997, Sales Tax and Revenue Bonds, Refunding and Improvements $1,155,000 Series 2005, SPDC Taxable Sales Refunding Bonds $17,695,000 Series 2005, SPDC Refunding Bonds $4,425,000 Series 2006, Sales Tax and Revenue Bonds $15,745,000 Series 2010, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation $3,285,000 Series 2011 C, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation $11,300,000 Series 2012, Tax and Waterworks and Sewer System (Limited Pledge) Certificates of Obligation Final Interest Business - Maturity Rates Governmental Type 2021 3.50 - 5.38% $ 1,430,000 $ 2013 5.00% 45 2027 4.30% 13,490,000 2027 3.75 - 4.375% 3,365,000 2030 3.00 - 4.25% 3,045,000 2031 2.00 - 4.125% 3,180,000 2032 3.0 - 4.25% 5,850,000 $ 30,360,045 $ The City issues revenue bonds to make improvements to the water and sewer system. Revenue bonds are payable solely from the net revenues of the water and sewer system. Revenue bonds and certificates of obligation outstanding as of September 30, 2012 are as follows: Revenue Bonds and Combination Tax and Final Interest Business - Revenue Certificates of Obligation Maturity Rates Governmental Type $2,965,000 Series 2004-A, Tax and Waterworks and Sewer System Revenue Certificates of Obligation 2023 2.0 - 5.0% $ - $ 1,790,000 The City has entered into various contractual agreements to unconditionally finance the principal and interest or a fixed percentage of principal and interest of Trinity River Authority (TRA) Contract Revenue Bonds. Under the agreements, the TRA utilized the bond proceeds to administer and construct various sewer and wastewater treatment projects on the City's behalf. Such agreements provide the City title to the assets upon retirement of the debt or capacity rights in the use of constructed assets. The City has included in its financial statements its proportionate share of these obligations and its investment in these assets as capacity rights. Contract revenue obligations at September 30, 2012 consist of the following: Contract Revenue Obligations Series 2001, TRA - Denton Creek Wastewater Pressure Interceptor - Refunding Final Business - Maturity Governmental Type 2017 $ $ 1,755,000 44 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 5. LONG-TERM DEBT— CONTINUED The following is a summary of long-term transactions for the year ended September 30, 2012: Amount Beginning Ending Due within Balance Additions Reductions Balance One year Governmental activities: General obligation bonds and certificates of obligation $101,511,681 $12,385,000 $(19,176,751) $ 94,719,930 $ 9,209,597 Sales tax revenue bonds 25,690,045 5,850,000 (1,180,000) 30,360,045 1,450,045 Bond premiums (discounts) 2,195,583 1,737,875 (123,603) 3,809,855 321,770 Deferred loss on refunding (3,427,433) (836,809) 625,789 (3,638,453) (334,992) Total bonds payable 125,969,876 19,136,066 (19,854,565) 125,251,377 10,646,420 Compensated absences 932,152 799,950 (769,512) 962,590 57,755 Total governmental activities $ 126,902,028 $19,936,016 $ (20,624,077) $ 126,213,967 $ 10,704,175 The general fund has been used to liquidate capital lease liabilities with respect to acquisitions of governmental capital assets and has also typically been used in prior years to liquidate the liability for compensated absences. Amount Beginning Ending Due within Balance Additions Reductions Balance One year Business -type activities: Revenue bonds and certificates of obligation $ 50,292,606 $ 3,030,000 $ (3,713,248) $ 49,609,358 $ 4,074,749 Contract revenue obligations 2,060,000 - (305,000) 1,755,000 320,000 Bond premiums 628,222 151,491 (44,284) 735,429 52,294 Deferred loss on refunding (955,031) (9,648) 46,022 (918,657) (114,559) Total bonds payable 52,025,797 3,171,843 (4,016,510) 51,181,130 4,332,484 Unearned revenue 264,568 - (6,423) 258,145 5,000 Compensated absences 74,514 75,270 (74,514) 75,270 75,270 Total business -type activities $ 52,364,879 $ 3,247,113 $ (4,097,447) $ 51,514,545 $ 4,412,754 45 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 5. LONG-TERM DEBT— CONTINUED The annual aggregate maturities for each bond type are as follows: General Obligation Bonds and Certificates of Obligation Fiscal Year Ending September 30, 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2032 Total Sales Tax Revenue Bonds Fiscal Year Ending September 30, 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2032 Total Principal Governmental Activities Interest Total $ 9,209,597 $ 3,802,590 $ 13,012,187 9,188,567 3,466,826 12,655,393 9,543,069 3,083,658 12,626,727 8,231,156 2,728,746 10,959,902 7,933,179 2,423,247 10,356,426 26,495,164 8,248,046 34,743,210 21,176,538 2,804,171 23,980,709 2,942,660 138,906 3,081,566 $ 94,719,930 $ 26,696,190 $ 121,416,120 Governmental Activities Principal Interest $ 1,450,045 $ 1,197,261 1,500,000 1,146,403 1,575,000 1,081,650 1,635,000 1,015,525 1,705,000 950,012 9,595,000 3,667,758 9,555,000 1,609,049 3,345,000 257,137 $ 30,360,045 $ 10,924,795 Revenue Bonds and Certificates of Obligation Fiscal Year Ending September 30, 2013 2014 2015 2016 2017 2018-2022 2023-2027 2028-2032 Total Business -Type Activities Principal Interest $ 4,074,749 $ 1,911,788 4,506,435 1,743,566 4,701,931 1,553,563 4,808,844 1,360,751 4,881,821 1,171,674 13,894,836 3,719,660 8,474,102 1,726,105 4,266,640 263,989 $ 49,609,358 $ 13,451,096 Total $ 2,647,306 2,646,403 2,656,650 2,650,525 2,655,012 13,262,758 11,164,049 3,602,137 $ 41,284,840 Total $ 5,986,537 6,250,001 6,255,494 6,169,595 6,053,495 17,614,496 10,200,207 4,530,629 $ 63,060,454 46 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 5. LONG-TERM DEBT— CONTINUED Contract Revenue Obliaations Business -Type Activities Fiscal Year Ending September 30, Principal Interest Total 2013 $ 320,000 $ 78,432 $ 398,432 2014 335,000 62,956 397,956 2015 350,000 46,250 396,250 2016 365,000 28,375 393,375 2017 385,000 9,625 394,625 Total $ 1,755,000 $ 225,638 $ 1,980,638 In previous years, the City has legally defeased certain outstanding general obligation and revenue debt by placing funds into irrevocable trusts pledged to pay all future debt service payments of the refunded debt. Accordingly, a liability for the defeased debt issues is not included in the City's financial statements. As of September 30, 2012, the following outstanding bonds were legally defeased: Series Type Amount 1994 Sales Tax Revenue Bonds $ 460,000 2004 Certificates of Obligation 305,000 2004 G.O. Refunding Bonds 4,290,000 2004-A Certificates of Obligation 295,000 2006 Certificates of Obligation 3,505,000 $ 8,855,000 NOTE 6. INTERFUND TRANSFERS All interfund transfers between the various funds are approved supplements to the operations of those funds. Individual fund transfers for fiscal year 2012 were as follows: Transfer In Transfer Out Amount Purpose General capital projects fund General fund $ 3,000,000 To fund a reserve for a future multipurpose facility General fund Non major governmental funds 32,516 Fund indirect charges General fund Non major governmental funds 121,934 Fund attractive spaces & future art projects General fund Non major governmental funds 51,460 Fund indirect charges Non major governmental funds Non major governmental funds 150,000 To fund various stormwater maintenance General capital projects fund Non major governmental funds 100,000 To fund various drainage projects General obligation debt service fund Non major governmental funds 193,294 For debt service and indirect charges To fund the debt repayment for bonds issued for General obligation debt service fund Tax increment financing district 4,181,268 TIF projects General fund Non major governmental funds 185,953 To fund indirect charges SPDC capital projects fund Non major governmental funds 2,000,000 To assist with the funding of large park projects Non major governmental funds Non major governmental funds 2,713,835 To pay the principal and interest on debt incurred General fund Non major governmental funds 4,855 To fund indirect charges General fund Crime control district operating fund 176,800 To fund indirect charges Crime control district capital projects fund Crime control district operating fund 4,000,000 To fund construction of DPS North To pay the debt service for bonds issued on the General obligation debt service fund Crime control district operating fund 1,972,800 Districts' behalf To fund shared portion of North Park SPDC capital projects fund Crime control district capital projects fund 517,931 parking/driveway General fund Water and sewer fund 890,220 Fund indirect charges $ 20,292,866 47 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 7. RETIREMENT PLAN Plan Description The City provides pension benefits for all of its full-time employees through a non-traditional, joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement System (TMRS), an agent multiple -employer public employee retirement system. The plan provisions that have been adopted by the City are within the options available in the governing state statutes of TMRS. 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 (200%) of the employee's accumulated contributions. In addition, the City can grant, as often as annually, another type of monetary credit referred to as an updated service credit which is a theoretical amount which, when added to the employee's accumulated contributions and the monetary credits for service since the plan began, would be the total monetary credits and employee contributions accumulated with interest if the current employee contribution rate and City matching percent had always been in existence and if the employee's salary had always been the average of his/her 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 25 years of service regardless of age. A member is vested after 5 years. The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS and within the actuarial constraints also in the statutes. Contributions Under the state law governing 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 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 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 for budgetary purposes, there is a one-year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect. (i.e. December 31, 2011 valuation is effective for the rates beginning January 2013). Annual Pension Cost Contributions by the City were $2,068,611 for the year ended September 30, 2012, or 12.4% of the covered payroll of $16,708,049 as required by the actuarial valuation. The total fiscal year 2012 payroll was $17,451,039. 48 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 7. RETIREMENT PLAN — CONTINUED Annual City pension cost and related information for the last three years is as follows: SCHEDULE OF ACTUARIAL LIABILITIES AND FUNDING PROGRESS Actuarial Information: 12/31 /2011 12/31 /2010 12/31 /2009 Actuarial cost method Projected Unit Credit Projected Unit Credit Projected Unit Credit Amortization method Level % Level % Level % 26.2 years -closed 27.2 years -closed 28.3 years -closed Amortization period period period period 10-year smoothed 10-year smoothed 10-year smoothed Asset valuation method market market market Assumptions Investment return 7.0% 7.0% 7.5% varies by age varies by age varies by age Projected salary increases and services and services and services Inflation 3.0% 3.0% 3.0% Cost -of -living adjustment 1.5% (3.0% CPI) 1.5% (3.0% CPI) 1.5% (3.0% CPI) City specific assumptions Payroll growth assumption 3.0% 3.0% 3.0% Withdrawal rates for male/female Mid-High/Mid Mid-High/Mid Mid-High/Mid (low, mid/low, mid, mid/high or high) Schedule of Fundina Information Actuarial valuation date Actuarial Value of Assets Actuarial Accrued Liability Unfunded (Overfunded) Actuarial Accrued Liability (UAAL) Funded ratio Annual Covered Payroll UAAL as a Percentage of Covered Payroll 12/31 / 11 12/31 / 10 12/31 /09 $ 46,290,272 $ 41,253,618 $ 31,327,058 $ 55,624,216 $ 50,923,328 $ 42,184,877 $ 9,333,944 $ 9,669,710 $ 10,857,819 83.2% 81.0% 74.3% $ 16,708,049 $ 16,272,225 $ 16,655,653 55.90% 59.40% 65.20% The City's net pension obligation (NPO) for TMRS at September 30, 2012, 2011 and 2010 is calculated as follows: NPO at the beginning of the period Annual required contribution Contributions made (100%) NPO at the end of the period 9/30/2012 9/30/2011 9/30/2010 2,068,611 2,193,609 2,129,451 2,068,611 2,193,609 2,129,451 The City adopted the Updated Service Credit provision in 1992, on a repeating basis. Additionally, the City adopted annuity increases for its retirees, on a repeating basis in 1992 equal to 70% of the change in consumer price index. The City of Southlake is one of 847 municipalities having the benefit plan administered by TMRS. Each of the 847 municipalities has an annual, individual actuarial valuation performed. All assumptions for the December 31, 2011 valuations are contained in the 2011 TMRS Comprehensive Annual Financial Report, a copy of which may be obtained by writing to P.O. Box 149153, Austin, Texas 78714-9153. 49 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 8. OTHER POSTEMPLOYMENT BENEFITS Plan Description The City provides other postemployment benefits (OPEB) in the form of health insurance benefits through a single -employer defined benefit medical plan. Regular full-time employees retiring from the City of Southlake have the option to continue medical insurance coverage until the retiree becomes eligible for Medicare or is eligible to be covered under another medical plan. The City contributes $125 per month towards the premium for retiree insurance coverage or $225 towards the premium for retirees and dependents. A third -party administrator is utilized to provide claims administration and payment of claims. Insurance is purchased to provide specific stop loss and aggregate stop loss protection. The Plan does not issue a separate financial report. Funding Policy The City passed a resolution in September 2009, electing to participate in the PARS Public Agencies Post -Retirement Health Care Plan Trust ("the Trust") to fund post -employment benefits for its employees as specified in the City's policies and/or applicable collective bargaining agreements. The Trust is a multiple employer trust arrangement established to provide economies of scale and efficiency of administration to public agencies that adopt it to hold the assets used to fund its OPEB obligation. The City has made a determination to fund its annual required contribution. For fiscal year 2012, the City contributed $180,000 to the Trust. Annual OPEB Cost and Net OPEB Obligation The City's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years on an open basis. The City's annual OPEB cost and net OPEB obligation (asset) for the prior three years is shown below: Annual required contribution Interest on prior year Net OPEB obligation Adjustment to annual required contribution Annual OPEB cost Contributions made Increase (decrease) in net OPEB obligation Net Obligation (asset) - beginning of year Net Obligation (asset) - end of year Percentage of OPEB costs contributed 2012 2011 2010 $ 155,999 $ 155,999 $ 128,502 (4,530) (3,090) - 4,530 3,090 - 155,999 155,999 128,502 180,000 180,000 180,000 (24,001) (24,001) (51,498) (75,499) (51,498) - $ (99,500) $ (75,499) $ (51,498) 115.39% 115.39% 18.85% 50 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 8. OTHER POSTEMPLOYMENT BENEFITS — CONTINUED Funded Status and Funding Progress — Continued The funded status of other postemployment benefits as of December 31, 2010, the date of the latest actuarial valuation, was as follows: Actuarial accrued liability $ 1,100,940 Actuarial value of plan assets (668,502) Unfunded actuarial accrued liability $ 432,438 Funded ratio 60.7% Covered payroll $ 16,708,049 Unfunded actuarial accrued liability as a percentage of covered payroll 2.59% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. The unfunded actuarial accrued liability is being amortized assuming 30 level annual payments on an open basis. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions as actual results are compared with past expectations and new estimates are made about the future. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long- term perspective of the calculations. In the December 31, 2010 actuarial valuation, the projected unit credit cost method was used. Key actuarial assumptions include: (a) level percent of payroll amortization method; (b) a 6.0% real rate of investment return; (c) a payroll growth rate for financing the Unfunded Actuarial Accrued Liability assumed to be 3.0%; (d) a sliding scale of medical inflation from 9.0% in 2011 to 4.5% by 2026; and (e) general inflation assumed to be 3.0%. NOTE 9. DEFERRED COMPENSATION PLAN The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. The laws governing 457 plans were changed to state that plans would not be considered eligible plans unless all assets and income of the plans are held in trust for the exclusive benefit of the participants and their beneficiaries. The City amended the plan documents to comply with these requirements. In accordance with GASB 32, the plans as amended are not included in the City's financial statements. 51 CITY OF SOUTHLAKE, TEXAS NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 10. RISK FINANCING AND INSURANCE The City is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During the fiscal year 1990, the City joined the Texas Municipal League Workers Compensation Joint Insurance Fund ("the Pool") for risks related to employees. Premiums are paid to the Pool, which retains a limit of loss. Reinsurance companies insure the risks beyond those limits. The City retains, as a risk, only the deductible amount of each policy. The City continues to carry commercial insurance with Texas Municipal League provided by Mutual of Omaha for other risks including general liability, property, and errors and omissions. There were no significant reductions in coverage in the past year and there were no settlements exceeding insurance coverage in any of the past three years. NOTE 11. COMMITMENTS AND CONTINGENCIES The City has entered into various contracts with the Trinity River Authority (TRA) and other cities. Terms of the agreements provide the City will pay an amount equal to its proportional share of maintenance and operations and debt service based upon volumes of wastewater transported, treated, or disposed of. The City's proportional share of future costs under these contracts is indeterminable and has not been recorded. Payments to the TRA under these contracts for the year ended September 30, 2012 were $1,130,363. The City has authorized various contracts obligating future funds of the City as the contracted services are performed. Significant amounts unexpended under such contracts at year end are reflected as reserves for authorized contracts in the applicable funds. The City has certain claims and litigation pending with respect to matters arising in the normal course of operations. City management is of the opinion that the settlement of these matters will not have a material adverse impact on the City's financial statements. NOTE 12. SUBSEQUENT EVENTS The City has evaluated all events or transactions that occurred after September 30, 2012 up through March 14, 2013, the date the financial statements were available to be issued. During this period, there were no subsequent events requiring disclosure. NOTE 13. FUTURE REPORTING REQUIREMENTS Statement No. 63, "Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position" and Statement No. 65 "Items Previously Reported as Assets and Liabilities." — Statement No. 63 will standardize the presentation of deferred outflows of resources and deferred inflows of resources and their effect on a government's net position. The objective of Statement No. 65 is to either properly classify certain items that were previously reported as assets and liabilities as deferred outflows of resources or deferred inflows of resources or to recognize certain items that were previously reported as assets and liabilities as outflows of resources or inflows of resources. These statements will become effective for the City in fiscal year 2013 and 2014, respectively. Statement No. 68, "Accounting and Financial Reporting for Pensions -an amendment of GASB Statement No. 27." — This statement changes the focus of pension accounting for employers from whether they are responsibly funding their plan over time to a point -in -time liability that is reflected in the employer's financial statements for any actuarially unfunded portion of pension benefits earned to date. This statement will become effective for the City in fiscal year 2015. Management has not yet determined the effect of these statements on the financial statements. 52 REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON GENERALFUND CITY OF SOUTHLAKE, TEXAS GENERALFUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2012 REVENUES Ad valorem taxes, penalties and interest Franchise taxes Municipal sales and mixed beverage tax License, permits and fees Charges for services Fines and forfeitures Grants Interest earned Miscellaneous TOTAL REVENUES EXPENDITURES Current: General government City secretary/mayor City manager's office Human resources Support services Economic development Finance Municipal court Teen court Information technology Public safety Police services Fire services Public safety support Building inspection Public works Public works administration Streets and drainage Planning Culture and recreation Community services Parks and recreation Library services BUDGETED AMOUNTS EXHIBIT A-1 VARIANCE WITH FINAL BUDGET - POSITIVE ACTUAL (NEGATIVE) $ 17,433,230 $ 17,718,230 $ 17,690,312 $ (27,918) 2,693,282 2,651,751 2,598,074 (53,677) 8,120,000 9,020,000 9,443,239 423,239 753,300 1,944,900 2,111,754 166,854 1,541,580 1,727,530 1,805,022 77,492 1,015,000 1,015,000 1,119,050 104,050 104,070 104,070 117,810 13,740 108,500 85,000 61,622 (23,378) 250,000 281,500 330,143 48,643 32,018,962 34,547,981 35,277,026 729,045 417,879 390,143 361,488 28,655 610,092 603,318 594,713 8,605 408,666 402,449 390,831 11,618 2,842,111 2,949,312 2,650,511 298,801 216,744 211,744 193,915 17,829 1,141,146 1,105,334 1,091,833 13,501 638,871 627,701 559,154 68,547 151,554 145,573 133,585 11,988 2,001,109 1,989,719 1,772,117 217,602 5,771,074 5,897,432 5,621,650 275,782 5,693,953 5,764,622 5,597,946 166,676 1,544,657 1,542,639 1,516,999 25,640 1,139,644 873,830 816,771 57,059 1,545,932 1,546,026 1,361,600 184,426 1,741,729 1,750,479 1,776,764 (26,285) 910,916 913,002 815,391 97,611 664,229 654,611 611,919 42,692 4,603,839 4,610,705 4,297,051 313,654 686,127 667,466 665,384 2,082 TOTAL EXPENDITURES 32,730,272 32,646,105 30,829,622 1,816,483 Excess (deficiency) of revenues over expenditures (711,310) 1,901,876 4,447,404 2,545,528 OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR See Notes to Required Supplementary Information 1,366,303 1,495,632 1,463,738 (31,894) (3,000,000) (3,000,000) (3,000,000) (1,633,697) (1,504,368) (1,536,262) (31,894) (2,345,007) 397,508 2,911,142 2,513,634 17,048,465 17,048,465 17,048,465 $ 14,703,458 $ 17,445,973 $ 19,959,607 $ 2,513,634 53 CITY OF SOUTHLAKE, TEXAS CRIME CONTROL DISTRICT SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2012 REVENUES: Municipal sales tax Interest TOTAL REVENUES EXPENDITURES Police services BUDGETED AMOUNTS ORIGINAL FINAL EXHIBIT A-2 VARIANCE WITH FINAL BUDGET - POSITIVE ACTUAL (NEGATIVE) $ 4,400,000 $ 4,850,000 $ 4,724,779 $ (125,221) 20,000 13,500 1,053 (12,447) 4,420,000 4,863,500 4,725,832 (137,668) 279,789 304,577 244,585 59,992 Excess of revenues over expenditures 4,140,211 4,558,923 4,481,247 OTHER FINANCING SOURCES (USES) Transfers to other funds (2,149,600) (6,149,600) (6,149,600) TOTAL OTHER FINANCING SOURCES (USES) (2,149,600) (6,149,600) (6,149,600) Net change in fund balance 1,990,611 (1,590,677) (1,668,353) (77,676) (77,676) Fund balance at beginning of year 6,830,795 6,830,795 6,830,795 - Fund balance at end of year $ 8,821,406 $ 5,240,118 $ 5,162,442 $ (77,676) See Notes to Required Supplementary Information 54 CITY OF SOUTHLAKE, TEXAS EXHIBIT A-3 TAX INCREMENT FINANCING DISTRICT SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2012 REVENUES Ad valorem taxes, penalties and interest Interest Total revenues EXPENDITURES: Intergovernmental Total expenditures Excess of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers to other funds Total other financing sources (uses) Excess (deficiency) of revenues over expenditures and other financing uses Fund balance at beginning of year Fund balance at end of year See Notes to Required Supplementary Information VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) $ 6,753,057 $ 6,523,327 $ 6,523,327 $ - 15,000 8,500 1,063 (7,437) 6,768,057 6,531,827 6,524,390 (7,437) - 2,972,849 2,972,849 - 2,972,849 2,972,849 6,768,057 3,558,978 3,551,541 (7,437) (5,434,991) (4,181,268) (4,181,268) - (5,434,991) (4,181,268) (4,181,268) - 1,333,066 (622,290) (629,727) (7,437) 5,348,592 5,348,592 5,348,592 - $ 6,681,658 $ 4,726,302 $ 4,718,865 $ (7,437) 55 CITY OF SOUTHLAKE, TEXAS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION YEAR ENDED SEPTEMBER 30, 2012 Budgetary Data The City Council adheres to the following procedures in establishing the budgets reflected in the financial statements: 1. Each year the City Manager is required to submit to the City Council, between sixty and ninety days prior to the beginning of each fiscal year, a proposed budget for the fiscal year beginning on the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayers' comments. 3. Prior to October 1, the budget is legally enacted by the City Council through passage of an ordinance. 4. Annual budgets are legally adopted for the General Fund, the Tax Increment Financing District, Crime Control, Parks Dedication, Hotel Occupancy, Storm Water Utility, Red Light Camera, and Southlake Parks Development Corporation Special Revenue Funds and all Debt Service Funds on a basis consistent with accounting principles generally accepted in the United States of America. Formal budgetary integration is not employed for proprietary funds. However, the City does adopt an annual budget for those funds for managerial control. Control over expenditures for the capital projects funds are maintained through general obligation bond indenture agreements, and authorized construction contracts. Accordingly, formal budgetary integration is not employed for the capital projects funds. During the fiscal year, the City Council may transfer funds allocated to a department to another department or re -estimate revenues or expenditures. The City Manager may transfer budgeted funds within a department. Expenditures should not exceed appropriations at the department level. Budgetary data for the Police, Parks and Recreation, Court Security, Court Technology, Library, Storm Water Maintenance, Oil and Gas Special Revenue Funds, Commercial Vehicle Enforcement, and all Capital Projects Funds are not presented, as such funds are budgeted over the life of the respective grant or project, and not on an annual basis. Budgetary information for the Proprietary Funds have not been presented since reporting on such budgets is not legally required. 7. Expenditures in excess of appropriations for the year ended September 30, 2012 were: General Fund: Streets and drainage ($26,285) 56 EXHIBIT A-4 CITY OF SOUTHLAKE, TEXAS CONDITION RATING OF STREET SYSTEM SEPTEMBER 30, 2012 CONDITION OF ROADWAY SYSTEM Index 2012 2010 RCI 11.0 6.4 SDI 10.0 9.3 PQI 9.4 8.5 COMPARISON OF NEEDED -TO -ACTUAL MAINTENANCE/PRESERVATION Needed Actual Difference 2008 $1,250,000 1,068,540 (181,460) 2009 $1,250,000 1,457,572 207,572 2010 $1,250,000 936,158 (313,842) 2011 $1,250,000 1,025,665 (224,335) 2012 $1.250.000 1,252,394 2,394 Total S6,250,000 S5,902,532 347 468 The City hired a consultant to implement a pavement management system (PMS) to cover all public streets within the City. The condition of street pavement is measured using the Asphalt Pavement Rating Form as developed by the Asphalt Institute. The Asphalt Pavement Rating Form is based on a weighted average of thirteen defects found in pavement surfaces. The consultant conducted a pavement condition survey on all City owned streets. This consisted of a ride condition or roughness survey, a surface distress survey and a deflection survey. A present status analysis was conducted using data obtained from the pavement condition survey to determine the Ride Condition Index (RCI) and the Surface Distress Index (SDI). These indices were then combined into the composite Pavement Quality Index (PQI). Values of PQI can range from 0 to 10. Typical values for a newly constructed pavement range from 9.5 to 10.0. The PQI level at which a pavement becomes in need of rehabilitation is typically in the 5.0 to 7.0 range. It was the City's policy to maintain a PQI of 7.3 until 2012 when the City increased the minimum PQI to 7.8 Needed maintenance is calculated based upon inspections and the pavement quality index. In accordance with GASB Statement No. 34, the City is required to report at least one complete condition assessment at transition using the modified approach. The condition assessment was completed by the City and documented that the eligible infrastructure assets are being preserved at or above the condition level established by the City. A third of the city's public streets will be assessed annually to ensure all public streets are assessed every three years. The City calculates needed maintenance of its street system annually. However, the scheduling of these road projects often crosses fiscal years. Therefore, actual maintenance may be less than the calculated needed maintenance in one fiscal year and greater than the calculated needed maintenance in the subsequent fiscal year. 57 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES MAJOR GOVERNMENTAL FUNDS GENERAL OBLIGATION DEBT SERVICE FUND The General Obligation Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general obligation bonds and interest from governmental resources. 58 CITY OF SOUTHLAKE, TEXAS GENERAL OBLIGATION DEBT SERVICE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2012 REVENUES: Ad valorem taxes Interest Total revenues EXPENDITURES: Principal retirement Interest and fiscal charges Total expenditures Deficiency of revenues over expenditures OTHER FINANCING SOURCES (USES) BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL EXHIBIT B-1 VARIANCE WITH FINAL BUDGET - POSITIVE (NEGATIVE) $ 6,823,120 $ 6,988,120 $ 6,923,560 $ (64,560) 45,000 45,000 15,980 (29,020) 6,868,120 7,033,120 6,939,540 (93,580) 7,577,067 8,506,753 8,506,754 (1) 4,178,026 4,003,972 4,228,285 (224,313) 11,755,093 12,510,725 12,735,039 (224,314) (4,886,973) (5,477,605) (5,795,499) (317,894) Proceeds from refunding bonds - - 9,690,000 Payment to refund bond escrow agent - - (10,788,860) Premium on bonds issued - - 1,287,364 Transfers from other funds 6,347,362 6,347,362 6,347,362 9,690,000 (10,788,860) 1,287,364 Total other financing sources (uses) 6,347,362 6,347,362 6,535,866 188,504 Excess of revenues and other financing sources over expenditures 1,460,389 869,757 740,367 (129,390) Fund balance, beginning of year 10,363,056 10,363,056 10,363,056 - Fund balance, end of year $ 11,823,445 $11,232,813 $ 11,103,423 $ (129,390) 59 NON -MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS The Special Revenue Funds are used to account for revenue sources that are legally restricted to expenditures for specified purposes. Police Fund -- Established to account for resources required to be utilized by the police department. Parks and Recreation Fund — Established to account for resources restricted for use by the parks and recreation department. Parks Dedication Fund — Established to account for resources restricted for use by the parks department. Southlake Parks Development Corporation Special Revenue Fund — Established to account for the general operations of the non-profit corporation established to finance, develop and operate park and recreational facilities. Hotel Occupancy Fund - The Hotel Occupancy Tax Fund accounts for all revenues and expenditures relating to the hotel occupancy tax received by the City. Storm Water Utility Fund — This fund is used to account for fees collected for the purpose of improving, upgrading and maintaining the City's drainage system. The City is mandated by the Texas Commission on Environmental Quality (TCEQ) to develop and maintain a Storm Water Management Plan in order to address capacity and quality issues and protect its residents and their properties from possible flooding and pollution problems. Drainage fees are collected by residents to fund the activities required to comply with TCEQ regulations. Court Security Fund — Established to account for municipal court fees assessed to provide for court security. Court Technology Fund — Established to account for municipal court fees assessed to provide for court technology. Library Fund — Established to account for resources donated for use by library services. Red Light Camera Fund — The Red Light Camera Fund is used to account for fees assessed for red light violations captured through the City's camera monitoring system. Storm Water Maintenance Fund- The Storm Water Maintenance Fund is used to account for the maintenance on storm water infrastructure. Oil and Gas Fund- The Oil and Gas Fund is used to account for permits fees and the related expenditures for oil and gas drilling. Commercial Vehicle Enforcement Fund- The Commercial Vehicle Enforcement Fund is used to account for the fees assessed for commercial vehicle violations. .11 DEBT SERVICE FUNDS The Debt Service Funds are utilized to account for the accumulation of financial resources for, and the payment of, long-term debt principal, interest, and related costs arising from the issuance of bonds. Southlake Parks Development Corporation Debt Service Fund — Established to accumulate resources to finance the debt service of debt issues of the Southlake Parks Development Corporation. CAPITAL PROJECTS FUNDS The Capital Projects Funds are utilized to account for financial resources to be used for the acquisition or construction of specified capital improvements (other than those financed by proprietary funds). Tax Increment Financing District Capital Projects Fund — The Tax Increment Financing District capital projects fund was established to account for the financing and construction of projects of the Tax Increment Financing District. 61 CITY OF SOUTHLAKE, TEXAS NON -MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2012 ASSETS Cash and cash equivalents Investments Accounts receivable Sales tax receivable Interest receivable TOTAL ASSETS LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable Accrued liabilities TOTAL LIABILITIES FUND BALANCES Restricted for: Municipal court expenditures Debt service Capital projects Committed for: Police expenditures Parks and recreation Storm water expenditures Oil and gas drilling Library TOTAL FUND BALANCES TOTAL LIABILITIES AND FUND BALANCES SPECIAL REVENUE Southlake Parks Parks and Parks Development Police Recreation Dedication Corporation $ 9,154 $ 29,398 $ 107,451 $ 3,343,683 3,299 10,173 11,389 2,005,800 - - - 12,819 - - - 871,945 - - - 1,842 $12,453 $ 39,571 $ 118,840 $ 6,236,089 $ 6,459 $ - $ - $ 7,720 - - - 5,162 6,459 - - 12,882 5,994 - - - - 39,571 118,840 6,223,207 5,994 39,571 118,840 6,223,207 $12,453 $ 39,571 $ 118,840 $ 6,236,089 62 SPECIAL REVENUE EXHIBIT C-1 CONTINUED Storm Hotel Water Court Court Red Light Occupancy Utility Security Technology Library Camera $ 920,963 $1,955,716 $344,258 $ 233,893 $ 2,566 $ 935,183 280,525 134,792 114,888 76,992 1,425 149,610 - 187,069 - - - 111,960 68,738 - - - - - 59 28 24 16 - - $ 1,270,285 $2,277,605 $459,170 $ 310,901 $ 3,991 $ 1,196,753 $ 17,212 $ 22,194 $ 6,606 5,238 23,818 27,432 $ 569 $ 396,923 - 1,862 569 398,785 - - 459,170 310,901 - - 1,246,467 2,250,173 - - - - - - - - - 797,968 - - - - 3,422 - 1,246,467 2,250,173 459,170 310,901 3,422 797,968 $ 1,270,285 $2,277,605 $459,170 $ 310,901 $ 3,991 $ 1,196,753 63 CITY OF SOUTHLAKE, TEXAS NON -MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET SEPTEMBER 30, 2012 EXHIBIT C-1 CONCLUDED SPECIAL DEBT CAPITAL REVENUE SERVICE PROJECTS Southlake Tax TOTAL Commercial Parks Increment NON -MAJOR Storm Water Oil and Vehicle Development Financing GOVERNMENTAL Maintenance Gas Enforcement Corporation District FUNDS ASSETS Cash and cash equivalents $ 374,882 $ 39,737 $ 3,090 $ 1,554,396 $ 11,759 $ 9,866,129 Investments 76,229 13,474 - - 7,059 2,885,655 Accounts receivable 16 - - 311,864 Sales tax receivable - 940,683 Interest receivable - - - - 1,969 TOTAL ASSETS $ 451,127 $ 53,211 $ 3,090 $ 1,554,396 $ 18,818 $ 14,006,300 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ $ $ - $ $ $ 451,077 Accrued liabilities 200 19,068 TOTAL LIABILITIES 200 470,145 FUND BALANCES Restricted for: Municipal court expenditures - 770,071 Debt service 1,554,396 1,554,396 Capital projects - - 18,818 3,515,458 Commited for: Police expenditures 2,890 - 806,852 Parks and recreation - 6,381,618 Storm water expenditures 451,127 451,127 Oil and gas drilling - 53,211 53,211 Library - - - - 3,422 TOTAL FUND BALANCES 451,127 53,211 2,890 1,554,396 18,818 13,536,155 TOTAL LIABILITIES AND FUND BALANCES $ 451,127 $ 53,211 $ 3,090 $ 1,554,396 $ 18,818 14,006,300 •, CITY OF SOUTHLAKE, TEXAS NON -MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED SEPTEMBER 30, 2012 SPECIAL REVENUE REVENUES Municipal sales tax Licenses, permits and fees Fines and forfeitures Interest Contributions Miscellaneous Total revenues EXPENDITURES Current: General government Court technology Public safety Police services Cultural and recreation Parks and recreation Library services Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES (DEFICIT), BEGINNING OF YEAR FUND BALANCES, END OF YEAR Southlake Parks Parks and Parks Development Police Recreation Dedication Corporation $ - $ - $ - $ 5,061,008 - - 16,935 - 6 20 22 21,544 - 2,194 - - - - - 153,824 6 2,214 16,957 5,236,376 - 3,043 - 382,442 - 3,043.00 - 382,442 6 (829) 16,957 4,853,934 (4,855) - - (4,899,788) (4,855) - - (4,899,788) (4,849) (829) 16,957 (45,854) 10,843 40,400 101,883 6,269,061 $ 5,994 $ 39,571 $ 118,840 $ 6,223,207 65 EXHIBIT C-2 CONTINUED SPECIAL REVENUE Storm Hotel Water Court Court Red Light Occupancy Utility Security Technology Library Camera $ 847,452 $ - $ - $ - $ - $ - - 1,302,911 - - - - - - 30,377 40,457 - 1,114,633 603 290 247 165 3 322 - - - - 8,514 - 848,055 1,303,201 30,624 40,622 8,517 1,114,955 - - - 8,500 - - - - - 9,046 - 885,119 621,534 - - - - - - - - - 8,879 - - 464,558 21,888 - - - 621,534 464,558 21,888 17,546 8,879 885,119 226,521 838,643 8,736 23,076 (362) 229,836 (154,450) (494,754) - - - - (154,450) (494,754) - - - - 72,071 343,889 8,736 23,076 (362) 229,836 1,174,396 1,906,284 450,434 287,825 3,784 568,132 $ 1,246,467 $ 2,250,173 $ 459,170 $ 310,901 $ 3,422 $ 797,968 CITY OF SOUTHLAKE, TEXAS NON -MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED SEPTEMBER 30, 2012 EXHIBIT C-2 CONCLUDED SPECIAL DEBT CAPITAL REVENUE SERVICE PROJECTS Southlake Tax TOTAL Commercial Parks Increment NON -MAJOR Storm Water Oil and Vehicle Development Financing GOVERNMENTAL Maintenance Gas Enforcement Corporation District FUNDS REVENUES Municipal sales tax $ $ $ $ $ $ 5,908,460 Licenses, permits and fees 1,319,846 Fines and forfeitures 2,890 1,188,357 Interest 164 26 - 2,166 14 25,592 Contributions - - 2,194 Miscellaneous 162,338 Total revenues 164 26 2,890 2,166 14 8,606,787 EXPENDITURES Current: General government Court technology Public safety Police services Cultural and recreation Parks and recreation Library services Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers from other funds Transfers to other funds Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES (DEFICIT), BEGINNING OF YEAR FUND BALANCES, END OF YEAR 8,500 894,165 - 1,007,019 8,879 - 7,729 494,175 1,395,000 - 1,395,000 1,289,255 1,289,255 2,684,255 7,729 5,096,993 164 26 2,890 (2,682,089) (7,715) 3,509,794 150,000 - 2,713,835 2,863,835 (5,553,847) 150,000 - 2,713,835 (2,690,012) 150,164 26 2,890 31,746 (7,715) 819,782 300,963 53,185 - 1,522,650 26,533 12,716,373 $ 451,127 $ 53,211 $ 2,890 $ 1,554,396 $ 18,818 $ 13,536,155 67 CITY OF SOUTHLAKE, TEXAS PARKS DEDICATION SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2012 REVENUES: Park fees Interest Total revenues Excess of revenues over expenditures Fund balance at beginning of year Fund balance at end of year BUDGETED AMOUNTS ORIGINAL FINAL EXHIBIT C-3 VARIANCE WITH FINAL BUDGET - POSITIVE ACTUAL (NEGATIVE) $ 30,000 $ 30,000 $ 16,935 $ (13,065) 1,500 1,500 22 (1,478) 31,500 31,500 16,957 (14,543) 31,500 31,500 16,957 (14,543) 101,883 101,883 101,883 - $ 133,383 $133,383 $118,840 $ (14,543) ; CITY OF SOUTHLAKE, TEXAS EXHIBIT C-4 SOUTHLAKE PARKS DEVELOPMENT CORPORATION SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2012 REVENUES: Municipal sales tax Miscellaneous Interest Total revenues EXPENDITURES Parks and recreation Excess of revenues over expenditures OTHER FINANCING SOURCES (USES): BUDGETED AMOUNTS ORIGINAL FINAL ACTUAL VARIANCE WITH FINAL BUDGET - POSITIVE (NEGATIVE) $ 4,480,000 $ 4,480,000 $ 5,061,008 $ 581,008 153,816 153,816 153,824 8 15,000 7,500 21,544 14,044 4,648,816 4,641,316 5,236,376 595,060 356,951 485,993 382,442 103,551 4,291,865 4,155,323 4,853,934 698,611 Transfers to other funds (4,899,788) (4,899,788) (4,899,788) - Excess (deficiency) of revenues over expenditures and other uses (607,923) (744,465) (45,854) 698,611 Fund balance at beginning of year 6,269,061 6,269,061 6,269,061 - Fund balance at end of year $ 5,661,138 $ 5,524,596 $ 6,223,207 $ 698,611 • • CITY OF SOUTHLAKE, TEXAS HOTEL OCCUPANCY SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2012 BUDGETED AMOUNTS ORIGINAL FINAL EXHIBIT C-5 VARIANCE WITH FINAL BUDGET - POSITIVE ACTUAL (NEGATIVE) REVENUES: Municipal sales tax $ 741,105 $ 807,891 $ 847,452 $ 39,561 Interest 5,000 5,000 603 (4,397) Total revenues 746,105 812,891 848,055 35,164 EXPENDITURES: Parks and recreation 697,488 678,488 621,534 56,954 Excess of revenues over expenditures 48,617 134,403 226,521 92,118 OTHER FINANCING SOURCES (USES): Transfers to other funds (141,760) (154,450) (154,450) - Excess of revenues over expenditures and other uses Fund balance at beginning of year Fund balance at end of year (93,143) (20,047) 72,071 1,174,396 1,174,396 1,174,396 92,118 $ 1,081,253 $ 1,154,349 $ 1,246,467 $ 92,118 70 CITY OF SOUTHLAKE, TEXAS STORM WATER UTILITY SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2012 REVENUES: Interest Licenses, permits and fees Total revenues EXPENDITURES: Capital outlay Excess of revenues over expenditures OTHER FINANCING SOURCES (USES): Transfers to other funds Excess of revenues over expenditures and other uses Fund balance at beginning of year Fund balance at end of year BUDGETED AMOUNTS ORIGINAL FINAL EXHIBIT C-6 VARIANCE WITH FINAL BUDGET - POSITIVE ACTUAL (NEGATIVE) $ 8,500 $ 8,500 $ 290 $ (8,210) 1,260,000 1,278,000 1,302,911 24,911 1,268,500 1,286,500 1,303,201 16,701 696,741 628,820 464,558 164,262 571,759 657,680 838,643 (494,034) (494,754) (494,754) 77,725 162,926 343,889 180,963 180,963 1,906,284 1,906,284 1,906,284 - $1,984,009 $2,069,210 $2,250,173 $ 180,963 71 CITY OF SOUTHLAKE, TEXAS RED LIGHT CAMERA SPECIAL REVENUE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2012 EXHIBIT C-7 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Fines and forfeitures $ 1,186,284 $ 1,186,284 $ 1,114,633 $ (71,651) Interest 2,500 2,500 322 (2,178) Total revenues 1,188,784 1,188,784 1,114,955 (73,829) EXPENDITURES: Public safety 1,060,837 1,060,837 885,119 175,718 Excess of revenues over expenditures 127,947 127,947 229,836 101,889 Fund balance, beginning of year 568,132 568,132 568,132 - Fund balance, end of year $ 696,079 $ 696,079 $ 797,968 $ 101,889 72 CITY OF SOUTHLAKE, TEXAS EXHIBIT C-8 SOUTHLAKE PARKS DEVELOPMENT CORPORATION DEBT SERVICE FUND BUDGETARY COMPARISON SCHEDULE (GAAP BASIS) FOR THE YEAR ENDED SEPTEMBER 30, 2012 VARIANCE WITH BUDGETED AMOUNTS FINAL BUDGET - POSITIVE ORIGINAL FINAL ACTUAL (NEGATIVE) REVENUES: Interest $ 16,000 $ 16,000 $ 2,166 $ (13,834) Total revenues 16,000 16,000 2,166 (13,834) EXPENDITURES: Principal retirement 1,525,000 1,525,000 1,395,000 130,000 Interest and fiscal charges 1,285,098 1,285,098 1,289,255 (4,157) Total expenditures 2,810,098 2,810,098 2,684,255 125,843 Deficiency of revenues over expenditures (2,794,098) (2,794,098) (2,682,089) 112,009 OTHER FINANCING SOURCES: Transfers from other funds Total other financing sources Excess (deficiency) of revenues and other financing sources over expenditures Fund balance, beginning of year Fund balance, end of year 2,713,835 2,713,835 2,713,835 2,713,835 2,713,835 2,713,835 (80,263) (80,263) 31,746 112,009 1,522,650 1,522,650 1,522,650 - $ 1,442,387 $ 1,442,387 $ 1,554,396 $ 112,009 73 AGENCYFUNDS The Agency Funds are used to account for resources held for others in a custodial capacity. The City maintains the following Agency Fund: Cash Escrow Agency Fund - accounts for the receipt and subsequent disbursement of deposits paid to the City by builders/developers. 74 CITY OF SOUTHLAKE, TEXAS CASH ESCROW AGENCY FUND STATEMENT OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED SEPTEMBER 30, 2012 FIT*] =11 V Cash and cash equivalents Investments Accrued interest receivable TOTAL ASSETS LIABILITIES Due to builders TOTAL LIABILITIES Balance at Beginning of Year Additions Deletions EXHIBIT F-1 Balance at End $ 44,144 $ 6,682 $ - $ 50,826 23,902 - 6,595 17,307 54 - 50 4 $ 68,100 $ 6,682 $ 6,645 $ 68,137 $ 68,100 $ 37 $ - $ 68,137 $ 68,100 $ 37 $ - $ 68,137 75 CITY OF SOUTHLAKE, TEXAS EXHIBIT G-1 COMPARATIVE SCHEDULES OF CAPITAL ASSETS BY SOURCE SEPTEMBER 30, 2012 and 2011 General capital assets Land and improvements Buildings and improvements Equipment Infrastructure Construction in progress Total capital assets Investment in general capital assets Capital projects funds General and other fund revenues Gifts Total investment in capital assets 2012 $ 104,404,030 65,400,298 20,269,481 236,243,574 14,980,805 2011 $ 100,258,130 63,657,352 19,766,422 229,333,636 17,799,563 $ 441,298,188 $ 430,815,103 $ 325,751,121 76,019,019 39,528,048 $ 316,254,901 75,550,770 39.009.432 $ 441,298,188 $ 430,815,103 76 CITY OF SOUTHLAKE, TEXAS EXHIBIT G-2 SCHEDULE OF CHANGES IN CAPITAL ASSETS BY FUNCTION AND ACTIVITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2012 Capital Capital Assets Assets October 1, September 30, Function and Activity 2011 Additions Deductions 2012 General government $ 187,161,891 $ 138,424 $ - $ 187,300,315 Public safety 43,212,014 1,576,425 (403,688) 44,384,751 Public works 200,441,198 25,118,600 (15,946,676) 209,613,122 Total capital assets $ 430,815,103 $26,833,449 $ (16,350,364) $ 441,298,188 General Public Public Government Safety Works Total Land and improvements $ 2,418,798 $ 4,303,924 $ 97,681,308 $ 104,404,030 Buildings and improvements 25,818,684 33,093,377 6,488,237 65,400,298 Equipment 5,994,193 4,561,944 9,713,344 20,269,481 Infrastructure 153,068,640 114,415 83,060,519 236,243,574 Construction in Progress - 2,311,091 12,669,714 14,980,805 Total $ 187,300,315 $44,384,751 $ 209,613,122 $ 441,298,188 77 STATISTICAL SECTION STATISTICAL SECTION This part of the City of Southlake's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, notes disclosures, and required supplementary information says about the City's overall financial health. This information has not been audited by the independent auditor. Contents Table #s Financial Trends 1, 2,3 & 4 These tables contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. Revenue Capacity 5, 6, 7 & 8 These tables contain information to help the reader assess the City's two most significant local revenue sources, the property and sales taxes. Debt Capacity 9, 10, 11 & 12 These tables present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Economic and Demographic Information 13 & 14 These tables offer economic and demographic indicators to help the reader understand the environment within which the City's financial activities take place. Operating Information 15, 16 & 17 These tables contain service and infrastructure data to help the reader understand how the information in the City's financial report relates to the services the City provides. Source: Unless otherwise noted, the information in these tables is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in fiscal year 2003: tables presenting government -wide information include information beginning in that year. d) N N Cl) O Ln Ln d) N r co d) N co O O M I- N Cl) CO O Cl) Ln Cl) N N co Cl) d) Cl) N Ln O V (O CO CO I- co V Lo co d) V N (O (O V I- CO O O N d) c0 O V co CO (O V (O (O I- CO Ln r CO (O O) I- Ln N N (O m (O CO M (O M 69 69 69 69 N N co COO W LN r- V V CMO W O) O M W M O) V Ln CO O I- Ln M Ln O) O) O M Ln c V I, co O N (O Ln N coI� V M r- r CO CO O) M CO (O I- O O r O L() (O N M (O CO (O I- V M V Cfl Cfl Cfl Cfl Cfl Cfl N O N O N M (O I- (O M N N Ln CO I N N N (O (O N Ln Lo V CO CO O) � O V V O O CO M M O CO V N M O M I- CO CO N r O O CO N I- co co Ln Ln CO M M CO I- O) I- Lo V N M (O CO V I- N M V Cfl Cfl Cfl Cfl Cfl Cfl CO O O Ln Ln O M Ln O) O M CO CO N M V V V CO co (O Lo M (O V N N Ln O co O O CO N O O O M Lo V coV N CO O O L() I� r CO L() N Ln r CO I� (O I- O) V O (O I- Ln V (O N N M (O N CO O O O M V Cfl Cfl Cfl Cfl Cfl Cfl N V M O Lo V Ln Lo Lo V V N - Ln o V I� O O) V (O (O O (O N V V CO O O O V O) CO co O V O) Lo M CO O N I- (O CO O CO (O CO V I- N (O Lo V I- O r O (O Ln N N I- O N M V N I- (O O CO N M Cfl Cfl Cfl Cfl Cfl Cfl G) I- N V O (O CO Ln I- O) r Lm N N C(O � Ln N O (O [I- V (O CO O I- r Ln N (O (O Ln N I- O co O N r Ln I- O O r CO (O O O O O -O N O (O O Ln O M M O (O N O c O Ln r N N Ln N r (O CO V N M N E Cfl Cfl Cfl Cfl Cfl Cfl N D- E N V (O N CO Lo M cm,V oV om CO V CO CO V M m CO O V O co CO o M CO O om (O O o)M o)Lo N CO N Ln co O N N Lo V CO O N CO - o) I- r O O) M co � O o V N V N (O M N M N Efl Efl Efl Efl Efl Efl N C) M V Lo N N N CO O N (O (O M Lo M V CO Lo N (O M m �2 I- o) r N CO O M I- r CO Cn (O CO V o) o) CD (O o CO Ln Q (O V Lo (O O V N I- I- N o)V O N V I- (O M V N O (� CO M CO O CO O I--(O M I� r !6 CO M N N M Lo N o CO N N N Cfl Cfl Cfl Cfl Cfl 69 ) M LOO C(O N COO COO LOO N W O Lo V O Lo Lo Lo O Lo N I� CO (O V V I- M O O M Lo M O M V V (O (O CO O M (O O Y I- o_ _ _ U V N M M N Q Cfl Cfl Cfl Cfl Cfl ea !6 O- Lo r o) o >m O CO M M O) N C(O O) CO O N M co N O V O r I- N O co o C(O co Lo O r r coO co0 Lo co CO O (O V O .� co M N Ln O Lo N Cfl Cfl Cfl Cfl N Cfl 69 O L !6 N N ND_ U N (Dy ry m° O O O U o co (D (D (D m o U _ to !6 O U -O U to !6 N U -O U !6 N U -O E � w C N C N� C N E N to -O N (6 � -O N Q N I ( N N to ` W !6 ` f/1 ` ', f/1 N N N ` N m > N C C O- > N C(D >> N C L- E O j O d' m U U m a) Q 2a 2 E �r co r- CITY OF SOUTHLAKE, TEXAS CHANGES IN NET ASSETS, LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) Fiscal Year 2003 2004 2005 2006 2007 Expenses Governmental activities: General government $ 5,933,303 $ 5,587,931 $ 5,926,466 $ 8,465,930 $ 9,833,572 Public safety 10,252,829 10,493,951 10,548,265 10,965,357 11,729,107 Public works 3,348,517 3,318,138 3,470,227 3,707,519 4,813,692 Culture and recreation 3,848,090 3,937,540 4,463,075 5,085,976 5,510,247 Interest on long-term debt 3,448,154 4,916,955 5,003,130 5,052,472 5,804,295 Total governmental activities expenses 26,830,893 28,254,515 29,411,163 33,277,254 37,690,913 Business -type activities: Water and sewer 13,852,605 13,781,499 14,130,259 16,168,430 14,729,469 Total business -type activities expenses 13,852,605 13,781,499 14,130,259 16,168,430 14,729,469 Total primary government expenses $ 40,683,498 $ 42,036,014 $ 43,541,422 $ 49,445,684 $ 52,420,382 Program Revenues Governmental activities Charges for Services: General government $ 1,226,438 $ 1,739,515 $ 1,321,236 $ 1,956,949 $ 1,778,215 Public safety 959,855 1,429,962 2,151,270 1,873,524 2,979,947 Public works 97,298 202,153 250,760 411,381 223,329 Culture and recreation 585,276 676,715 752,062 813,837 1,156,965 Operating grants and contributions 212,224 401,339 319,593 459,688 304,246 Capital grants and contributions 284,175 447,270 3,639,953 3,575,240 11,425,990 Total governmental activities program revenues 3,365,266 4,896,954 8,434,874 9,090,619 17,868,692 Business -type activities: Charges for services: Water and sewer 14,551,845 13,743,453 16,100,215 20,180,636 15,414,131 Capital grants and contributions 1,368,097 1,642,757 2,471,700 3,510,000 5,589,196 Total business -type activities program revenues 15,919,942 15,386,210 18,571,915 23,690,636 21,003,327 Total primary government program revenues $ 19,285,208 $ 20,283,164 $ 27,006,789 $ 32,781,255 $ 38,872,019 Net (Expenses) Revenue Governmental activities $ (23,465,627) $ (23,357,561) $ (20,976,289) $ (24,186,635) $ (19,822,221) Business -type activities 2,067,337 1,604,711 4,441,656 7,522,206 6,273,858 Total primary government net expenses $ (21,398,290) $ (21,752,850) $ (16,534,633) $ (16,664,429) $ (13,548,363) General Revenues and Other Changes in Net Assets Governmental activities: Taxes: Property taxes $ 16,744,004 $ 18,694,986 $ 19,604,411 $ 21,439,614 $ 24,509,730 Sales taxes 10,299,692 10,788,469 12,503,357 16,040,418 16,931,180 Franchise taxes 1,781,115 1,933,250 2,015,893 1,983,381 2,435,803 Interest on investments 599,276 735,978 860,725 2,591,520 3,598,458 Gain (Loss) on sale of fixed assets 226,162 50,400 (33,071) 35,317 - Transfers - 1,322,539 - - 275,595 Miscellaneous 653,876 51,512 7,008 166,789 8,688 Total governmental activities 30,304,125 33,577,134 34,958,323 42,257,039 47,759,454 Business -type activities: Interest on investments 335,487 380,571 412,793 1,024,603 1,183,987 Gain (Loss) on sale of fixed assets - - - 930,138 (3,396) Transfers (1,322,539) - (275,595) Miscellaneous - - - - Totalbusiness-typeactivities 335,487 (941,968) 412,793 1,954,741 904,996 Total primary government $ 30,639,612 $ 32,635,166 $ 35,371,116 $ 44,211,780 $ 48,664,450 Change in Net Assets Governmental activities $ 6,838,498 $ 10,219,573 $ 13,982,034 $ 18,070,404 $ 27,937,233 Business -type activities 2,402,824 662,743 4,854,449 9,476,947 7,178,854 Total primary government $ 9,241,322 $ 10,882,316 $ 18,836,483 $ 27,547,351 $ 35,116,087 Source: Comprehensive Annual Financial Report Note: Accrual -basis financial information for the city as a whole is only available back to 2003, the year GASB Statement 34 was implemented 79 TABLE 2 2008 2009 2010 2011 2012 $ 4,406,913 $ 11,068,965 $ 11,814,836 $ 13,754,529 13,277,006 12,770,012 12,920,263 14,885,499 15,144,173 15,891,911 8,669,156 5,840,432 5,767,688 6,279,687 6,399,819 5,911,730 6,439,100 7,287,434 7,897,173 8,158,291 5,506,967 5,854,931 6,515,269 5,638,272 5,865,798 37,264,778 42,123,691 46,270,726 48,713,834 49,592,825 17,689,865 18,066,346 18,948,438 20,724,651 22,530,688 17,689,865 18,066,346 18,948,438 20,724,651 22,530,688 $ 54,954,643 $ 60,190,037 $ 65,219,164 $ 69,438,485 $ 72,123,513 $ 1,340,864 $ 1,949,993 $ 2,476,000 $ 2,616,321 2,575,773 2,843,923 2,633,437 2,706,847 2,818,913 3,744,708 199,833 68,369 240,916 71,129 179,094 1,269,571 1,369,725 1,387,558 1,384,823 1,400,794 241,144 239,364 688,803 532,100 200,434 5,690,613 1,833,160 5,994,206 2,309,613 518,617 11,585,948 8,094,048 13,494,330 9,732,899 8,619,420 18,543,025 19,321,095 18,897,356 22,571,056 22,451,738 3,748,161 2,212,867 2,578,400 1,433,278 1,214,395 22,291,186 21,533,962 21,475,756 24,004,334 23,666,133 $ 33,877,134 $ 29,628,010 $ 34,970,086 $ 33,737,233 $ 32,285,553 $ (25,678,830) $ (34,029,643) $ (32,776,396) $ (38,980,935) $ (40,973,405) 4,601,321 3,467,616 2,527,318 3,279,683 1,135,445 $ (21,077,509) $ (30,562,027) $ (30,249,078) $ (35,701,252) $ (39,837,960) $ 28,950,945 $ 30,911,161 $ 32,298,360 $ 31,568,583 31,166,847 18,781,043 17,256,272 17,610,781 18,969,870 20,076,478 2,654,701 2,816,111 2,606,248 2,783,279 2,598,074 3,128,226 1,703,418 414,852 258,556 232,722 - 167,127 21,465 26,741 91,134 229,436 341,957 596,093 791,830 890,220 52,023 339,510 428,804 658,902 463,681 53,796,374 53,535,556 53,976,603 55,057,761 55,519,156 594,891 953,739 155,173 123,872 46,212 (229,436) 2,187 (596,093) (791,830) (890,220) 10,989 (339,510) 71,871 42,463 10,811 376,444 616,416 (369,049) (625,495) (833,197) $ 54,172,818 $ 54,151,972 $ 53,607,554 $ 54,432,266 $ 54,685,959 $ 28,117,544 $ 19,505,913 $ 21,200,207 $ 16,076,826 $ 14,545,751 4,977,765 4,084,032 2,158,269 2,654,188 302,248 $ 33,095,309 $ 23,589,945 $ 23,358,476 $ 18,731,014 $ 14,847,999 -9 O M � Ln I� V W N V O) N I� (O M V O M V IDI� M co CO O) (O N CO CO N W O CO N ; M N N N (O N �_ V Ln (O I� co W O N M I� O r CO O 0 M M M co co N Lo OLn Ln LoN O 0r co (O I� V (O W 0Ln mM V V V (O M O N V Ln (O N n co Efl Efl Efl Efl O) M O V V M M O Lo (O O) O V Ln co V O V o oO - Ln O) N Ln N - CO mM CO N co co V O Ln m Ln I� N Lo mI� I� V W CO W co O) I� CO ' ' ' ' ' ' ' ' ' Ln (O co r O co Ln co O CO Ln co CO O) O) co O co co V M M (O O O V co V O co co V co r co O Ln O co M O) Lo co (O Ln V I� Efl Efl Efl Efl Lo (O co (o (o Ln V OO Ln O (O CO N M Ln ' ' ' ' ' ' ' ' ' (O N V � m(O O V co N mM Ln V O N Ln V N CO co (O co Ln r O V I� CO W V � O) � (O (O M M CO OO Ln V N I� O) � V V � I� CO O V o Ln Ln Ln V I� Efl Efl Efl Efl Lo co co(O C(O co V IDi i i i i i i i i CMO m M m M M O I� (O CO V co co Ln I� N co I� co (O (O N M Ln N M m co mM oV (O m V I O o r o Ln Ln O) O) � co (O Ln r Efl Efl Efl Efl O Ln V co N O) co O co r co N I� O ' ' ' ' ' ' ' CO CO ' ' ' ' ' ' ' ' ' r co O (O W r V V r Ln (O O N O) Ln r O Ln V V o Co co co Ln CO N N (O O O) O O) Ln O W co co (O O) (O Ln (O (O co co O) V (O Efl Efl Efl Efl O O Ln co N co CO (O co ' ' ' ' ' ' ' m O) m ' ' ' ' ' ' ' ' ' V (O N (O O O V Ln co Ln V O co O co V W W V O) W o CO (O N N O co O) CO O N N O co M I CO co (O Co Co N Ln Efl Efl Efl Efl Lo co CO r O co O O) Ln V O O) O ' ' ' ' ' ' ' N o' ' ' ' ' ' ' ' ' Ln N co co Ln N (O co co co ' ' ' O O E I� W r co V N W O N co O r r CO N CO r CO co O) co Ln O (O I� Ln O) (O Ln N V Efl Efl Efl Efl O o CO CO CO O N (O co O) co O (O I� co N (O co O) N co O r O O O co H O O N V CO V O N co O (O N I� N O LoCO O O) (O O W o co O Ln co W N N V Ln Ln N co � N Efl Efl Efl Efl N Ln r r (O O co co co CO co V ' ' ' ' ' ' ' IT mV ' ' ' ' ' ' ' ' ' CO m co CO CO I� r N O co O co O) M I� COLn On M Im V N O (O O) Mr M � M Ln O O V co V n co � N Efl Efl Efl Efl CO V N CO N co co r W N CO O ' ' ' ' ' ' ' ID o)O ' ' ' ' ' ' ' ' ' CO o o O) Ln (O O O) Ln Ln CO I V O V V co co V co W o) co co co COO V N co o) co CO M N M (O N -L- o o a Q C a) N N U Q LVn rn Y Y rn � a m m N .�. 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H O 7 — O U U C _0 D O (� U U 0 C O D O Q O L Q � U L E U � (6 N >+ N N > N 2-2 > c� Q i� �-0 C: O M (D 0) c� O (D 2 (D (D cl d ai 0 3 0 N U) C O m N 7 C N N Q' N (D U) C N i W 0 se cn W HOQ Y W } J z J W Q j W L 0 0 LL 0 cnoz�- ,Lwwo 00�� Q z N m m M N M Lo O V m m (A (B m OO V M m m r— M M r— (3) O O N E N H O U IM O Lf) M N— V N O M V M Lf) I— O MF— M = V I— M N W M (6 E— M N M V N M N u) V O M N� C LO I— M M N w V w w M Ln Ln Ln Ln Ln Ln (fl Ln Ln V Q � N Q' O O V O N 00 V O m M Lo I— (6 A M M O O (O Wcr� [-� (M > j CO � OO OO V I— O V CO LO Q O M W V N V M LO W W Q' V Ln I- (4 O O cr cr P-� N m V I— M M M M LO M O) CO 0')LO V LO O I— 0')CO O U7 = 0')N == V O V (A (A (O O co CO LO 0-) r— co co 0-) (A C OO I— O co co O CO LO M M N N M N = = M V M= M M J O- � O O M N V Ln Qw���������� N O W I- LO I- - O M M m V O M LO I- LO O W LO (A N I— V I— O N M M Ncr (O V V Ln (O Ln N O (`') D p (D M M M W LO I— I- > Ln Ln OO Ln N N N V (`') (6 M V LO M I— M M O N U(D 0 0 0 0 0 0 C) (n � o 0 0 0 0 0 0 0 0 0 O N C (6 7 Q N O � U N N N Q i (D O) -o C � C Q E +� O N O N � � C _0 Q -0 M (D O) O) - C C (0 � Q (B (B U N N O O d N N N _0 _0 _0 U U U C C C 0 z O U) U H H U_ C Q O w z w O Lu W Q Q z J W U J 0aU cn�z 00w UDJ c 18-0 0 0 0 0 0 0 0 0 0 N N N N LO M LO M r- W M E co co co coMv(O(O(O Lo > (D O Q � E (D C D +LO W M LO O N LO O N O M M W M O Ln V O O M w O Erraor�rrrrr L — U p U) �E W m - I- W V 0) U') N 0')F- N .Q (0 W W N M M IT W M O (B O (D t- N M= LO = N M M M M= M IT Lf) V V V r- U V V LO LO LO LO LO LO LO LO N O C O N O O O O N ") O N 00 M V E � OLn O N VO O M LnN M O � NLn MLn oo V = P- � Ln Ln � (M (O � � M W O O O M M V M O - V N O I- N N M M M O � N 0 0 0 0 0 0 LO O O I- LO O LO O O LO I- O r- O O M M I- = M LO M I- (B (2 (` ) V V Ln Ln (O (O (O (O (O E 5 N N N N N N N N N N o- w O d M V Lf) M I- M M O N 0 0 0 0 O O O O O O O O O O O O O O C N E E N O N U O _0 Q O j 7 70 .� O cn cn E U " E aD aD U oU oU c 0 U (D O O _0 U N N Q O (D C 0-) p -0 O O O b U N o — � O C) (0 (D N O CITY OF SOUTHLAKE, TEXAS TABLE 14 PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO (UNAUDITED) 2012 Employer Sabre Holdings CISD - Administration Building Verizon Wireless Central Market City of Southlake IQ Pipeline, LLC Hilton Dallas/Southlake Town Sq Century 21 Mike Bowman, Inc. Tri Dal Ltd. Variosystems Inc. Cheesecake Factory Lowe's Home Improvement Allied Oil & Gas Services Texas Health Harris Methodist Ameristar Information Network Costco Wholesale Total Total Southlake Daytime Employees Percentage of Total City Employees Employment 2,700 19.58% 1,072 7.77% 619 4.49% 350 2.54% 310 2.25% 250 1.81% 218 1.58% 200 1.45% 194 1.41% 170 1.23% 161 1.17% 145 1.05% 140 1.02% 135 0.98% 125 0.91% 107 0.78% 6,896 50.01 % Source: Southlake Economic Development 13.790 2003 Percentage of Total City Employer Employees Employment Sabre, Inc. 1,500 17.68% Carroll Independent School District 874 10.30% Tri-Dal, LTD 450 5.31% Verizon Wireless 450 5.31% City of Southlake 260 3.07% Wal-Mart 250 2.95% Costco Wholesale 180 2.12% Home Depot 131 1.54% Lowe's Home Improvement 115 1.36% Kroger 100 1.18% Total 4,310 50.81 % Total Southlake Daytime Employees 8,482 93 LO If- NJ LO I- O U) O U) Lf) — O U) O O O LO O M w J CD N O LO O7 v N N M O7 N N (`M O m co Q LO I- O u O u O u O u O CD O CDI- LO N J O LO (`') V N M O7 N N (`M (`') CD co (DI LO I- O LO O LO O LO O LO O O O O LO I- N CD OO () V N M O7 N (`M N (`') (`') CD co MI LO I- O LO O (DLO O O LO O CD O CDN LO CD CD N OO (`') 0 N � M O co N CD co OpI LO 1- O LO O LO O O O LO O LO O O LO I - CD O CD O M N M W N V N (`') OO N a } z O U LL OI o Ln 0 Lo 0 Lo 0 Lo 0 ao 0 co o O O � Z O N KT O N (O N N M W D N LL (n O LO L� L� OOO CO CD O M W C3 OI N M 0 N V Lf) (O N O N (`M V N } O J a W Lf)I o co O Lo O Lo O Lo O OO O M O 'D (D V CDOO N CD M V (O N LO (O N O N (`M 00 Z N W W V O CD O U-)U-)U-) O O O OO O OO O CD O O N (Y N IT M O N 0 cn Q- x U ()I O o O LO O LO O CDao O O ao O O O (o z N (Y N V N N M (O W Q N J Q > J o E (D 2DQ (D .6 Q O E Q DW—LL 0 c2 E 2 N N fn W Z H o o o U LL ff= W 0 O~ ~D a CD . � U N E O co:c� D Qz _0E m U W U J ? 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