About This Report. 3. The Revenue & Economic Analysis section provides additional analysis regarding key revenue sources and economic indicators.

Transcription

1 City D t,t thQuarterFinancialReport September2014

2 About This Report This report has been prepared by the City of Denton s Finance Department. The Quarterly Financial Report is intended to provide our users (internal and external) with information regarding the City s financial position and economic activity. This report includes information for the quarter ending September 30, This report is presented in four sections. 1. The Executive Dashboard section contains a high level summary of the major operating funds using graphic illustrations and key economic indicators. Narrative disclosures are also included to highlight any significant changes or fluctuations. 2. The Financial Summary section reports the performance of the major operating funds of the City. In addition, the report provides an end of year projection and a comparison to the budget for major revenue sources and expenditure items. 3. The Revenue & Economic Analysis section provides additional analysis regarding key revenue sources and economic indicators. 4. The Quarterly Investment Report provides a summary of the City s investment portfolio, interest earnings and a brief market outlook. 5. The Performance Report provides Key Performance Indicators (KPIs) for each of the goals identified in the City s strategic plan. The Quarterly Financial Report is intended to provide our users with timely and relevant information. Please provide us with any comments or suggestions you may have. If you would like additional information, feel free to contact me. Chuck Springer Director of Finance 215 East McKinney Street Denton, TX

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4 Section 1 City of Denton Quarterly Financial Report September 2014 Executive Dashboards 3

5 City of Denton, Texas General Fund Executive Dashboard FY FY ANNUAL PRELIMINARY FY DESCRIPTION BUDGET 1 ACTUALS VARIANCE Beginning Fund Balance as of 09/30/13 $ $ RESOURCES: Ad Valorem Taxes % Sales Taxes % Franchise Fees % Other Taxes % Service Fees % Fines and Fees % Licenses and Permits % Miscellaneous Revenue % Transfers In % Total Revenues % Total Resources EXPENDITURES: Personal Service % Material and Supplies % Maintenance and Repairs % Insurance % Miscellaneous % Operations % Transfers Out % Fixed Assets % Total Expenditures % Net Income (Loss) (1.62) 0.04 Ending Fund Balance $ $ $120 $100 $80 $60 $40 $20 $ $3.0 $2.5 $2.0 Oct 13 Revenue & Expenses (in Millions) Nov 13 Dec 13 Jan 14 Feb 14 YTD Revenue YTD Expenses Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sales Tax Monthly Average by Quarter Sep 14 Key Trends $1.5 Sales Taxes are $0.43 million more than budget due to increases in retail sales activities. Licenses and Permits are $0.21 million more than budget due to increases in building activities. Personal Service is $ million less than budget due to vacancy management program. $1.0 $0.5 1 Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY budget process. 4 $ 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 Note: All figures presented are in millions of dollars.

6 DESCRIPTION City of Denton, Texas Electric Fund Executive Dashboard FY ANNUAL BUDGET 1 FY PRELIMINARY ACTUALS FY VARIANCE Beginning Working Capital and Reserves as of 9/30/13 $ $ % RESOURCES: Operating Revenues % Non-operating Revenues % Total Revenues % Total Resources EXPENDITURES: Purchased Power % Operation and Maintenance % Non-Operating Expenditures % Total Expenditures % Net Income (Loss) (23.73) (15.46) Ending Working Capital and Reserves $ $ Key Trends 400 $180 $160 $140 $120 $100 $80 $60 $40 $20 $ Revenue & Expenses (in Millions) YTD Revenue YTD Expense Historical Quarterly GWH Sales Non operating Revenue was 11% lower than budgeted due to lower interest earnings. 300 Purchase Power expenses were 3% lower than budgeted due to mild summer temperatures and lower than estimated natural gas prices. Operations and Maintenance expenses were 17% below budget due to position vacancies, lower than budgeted bad debt expense, outside contract services, consultantfees fees, training costs, 0 advertising, marketing, maintenance and operations costs Q 09 3Q 09 1Q 10 3Q 10 1Q 11 3Q 11 1Q 12 3Q 12 1Q 13 3Q 13 1Q 14 3Q 14 1 Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY budget process. Note: All figures presented are in millions of dollars. 5

7 City of Denton, Texas Water Fund Executive Dashboard FY FY ANNUAL PRELIMINARY FY DESCRIPTIO N BUDGET 1 ACTUALS VARIANCE Beginning Working Capital and Reserves as of 09/30/13 2 $ $ RESO URCES: Water Sales % Other Water Revenues % Transfers In % Impact Fee Revenue % Total Revenues % Total Resources EXPENDITURES : Personal Service % Operations, Services % Capital Outlay % Debt Service % Transfers Out % Total Expenditures % Net Income (Loss) (0.33) (0.44) Ending Working Capital and Reserves $ $ Key Trends Water Sales are under budget due to rain and cooler temperatures in mid summer. PersonalService expenditures are expected to be below budget due to position vacancies. Operations, Services are under budget due to reduced materials & supplies and outside services expenses. 1 Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY budget process. 2 The Beginning Working Capital balance excludes $3.3 million of Impact Fees Reserves and $1.0 million of Development Plan Line Reserves. 6 $45 $40 $35 $30 $25 $20 $15 $10 $5 $ 3,000 2,500 2,000 1,500 1, Q 09 Revenue & Expenses (in Millions) YTD Revenue YTD Expenses Historical QuarterlyGallonsSold (in Millions) 3Q 09 1Q 10 3Q 10 1Q 11 Note: All figures presented are in millions of dollars. 3Q 11 1Q 12 3Q 12 1Q 13 3Q 13 1Q 14 3Q 14

8 City of Denton, Texas Wastewater Fund Executive Dashboard FY FY ANNUAL PRELIMINARY FY DESCRIPTION BUDGET 1 ACTUALS VARIANCE Beginning Working Capital Revenue & Expenses (in Millions) and Reserves as of 09/30/13 2 $ 8.59 $ 9.19 $35 RESOURCES: $30 Wastewater Fees % $25 Other Wastewater Revenue % Drainage Fees % $20 Transfer In % $15 Impact Fee Revenue % $10 Total Revenues % $5 Total Resources $ EXPENDITURES: Personal Service % Operations, Services % YTD Revenue YTD Expenses Capital Outlay % Debt Service % Historical QuarterlyGallonsBilled (in Millions) Transfer Out % 1,200 Total Expenditures % 1,000 Net Income (Loss) (0.55) 0.02 Ending Working Capital 800 andreserves $ 8.04 $ Key Trends Personal Services expenditures are expected to be below budget due to position vacancies. Operations, Services are projected to be under budget due to lower than anticipated Materials & Supplies and Maintenance & Repair Costs. Capital Outlay is projected to be higher than budget due to savings in other expenditures and includes funding of Elm and Locust Street projects. 1 Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY budget process. 2 The Beginning Working Capital balance excludes $2.12 million of Impact Fees Reserves, $1.0 million of Development Plan Line Reserves and $1.0 million for Drainage Reserves Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q Note: All figures presented are in millions of dollars.

9 City of Denton, Texas Drainage Operations Executive Dashboard FY FY ANNUAL PRELIMINARY FY DESCRIPTION BUDGET ACTUALS VARIANCE REVENUES: Residential Drainage Fees $ 1.55 $ % $6.0 Nonresidential Drainage age Fees % Wastewater Resources % $5.0 General Fund Transfer % Total Revenues % $4.0 Revenue & Expenses (in Millions) EXPENDITURES: $3.0 Personal Service % Operations, Services % $2.0 Capital Outlay % Debt Service % $1.0 Transfer Out % Total Expenditures % $ Net Income (Loss) $ - $ - YTD Revenue YTD Expenses Key Trends Personal Services are projected to be lower than budget due to a vacant engineer position. Operations, Services are projected to be under budget due to lower than anticipated Materials & Supplies and Maintenance & Repair costs. Capital Outlay is projected to be higher than budget due to savings in other expenditures. Note: All figures presented are in millions of dollars. 8

10 City of Denton, Texas Solid Waste Fund Executive Dashboard FY FY ANNUAL PRELIMINARY FY DESCRIPTIO N BUDGET 1 ACTUALS VARIANCE Beginning Working Capital and Reserves as of 09/30/13 2 $ ,600 6,000 5,400 4,800 $ 4,200 RESO URCES: Collection & Disposal % Recycling % Other Revenue % Total Revenues % Total Resources EXPENDITURES: Personal Service % Operations, Services % Capital Outlay % Debt Service % Transfer Out % Total Expenditures % Net Income (Loss) (0.27) (0.20) Ending Working Capital and Reserves $ 2.79 $ 3.56 Key Trends Other Revenue is more than budget due to gains on the sale of fixed assets. Personal Services are greater than budget because of unrealized salary savings. Spending on temporary personnel services and vehicle maintenance was more than anticipated and caused Operations, Services to be greater than budget. Expected Capital Outlay transfers did not take place as planned. Year ending actual transfers were not as much as were originally budgeted. 1 Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY budget process. 2 The Beginning Working Capital Reserve excludes $6.15 million of Landfill Closure/Post Closure reserves. 9 3,600 3,000 2,400 1,800 1, ,500 30,000 27,500 25,000 22,500 20,000 17,500 15,000 12,500 10,000 7,500 5,000 2, Qtr 1 Residential Curbside Collection Tonnage 2013 Qtr Qtr Qtr 4 Refuse Tonnage 2014 Qtr Qtr Qtr 3 Recycling Tonnages 2014 Qtr 4 Commercial Refuse & Recycling (Front & Side Load) Cubic Yards Serviced per Week 2013 Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr 4 Commercial Refuse Commercial Recycling Note: All figures presented are in millions of dollars.

11 City of Denton, Texas Airport Fund Executive Dashboard FY FY ANNUAL PRELIMINARY FY DESCRIPTION BUDGET 1 ACTUALS VARIANCE Beginning Working Capital and Reserves as of 09/30/13 $ 6.03 $ 5.89 RESOURCES: Airport Ground Leases % FBO Commissions % Miscellaneous % Total Operating Revenues % EXPENDITURES: Personal Service % Operations, Services % Transfer Out % Total Operating Expenditures % Net Operating Income (Loss) (0.51) (0.64) NON-OPERATING REVENUES: Investment Income % Gas Well Royalties % Total Non-Operating Revenues % NON-OPERATING EXPENDITURES: Debt Service % Transfer Out - Capital % Total Non-Operating Expenditures % Net Non-Operating Income (0.43) - Net Income (0.94) (0.64) Ending Working Capital and Reserves $ 5.09 $ 5.25 Key Trends Airport Ground Leases and Miscellaneous revenues are $0.05 million less than budget due to the timing of the construction of new hangars and Airport development. Gas Well Royalties are $0.25 million more than budget due to well head prices and pumping activities. i i Transfer Out Capital is $0.18 million under budget due to fewer opportunities for investment projects than anticipated. $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - GAS WELL REVENUE (in millions of dollars by fiscal year) AIRPORT OPERATIONS BY QUARTER (takeoff or landing) 1Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY budget process. Note: All financial amounts presented are in millions of dollars. 10

12 City of Denton, Texas Street Improvement Fund Executive Dashboard FY FY ANNUAL PRELIMINARY FY DESCRIPTIO N BUDGET 1 ACTUALS VARIANCE Beginning Fund Balance as of 09/30/2013 $ 0.99 $ 1.33 RESO URCES: Franchise Fe es % Street Cuts % Miscellaneous Revenues % Transfers In % Total Revenues % Total Resources $9.0 $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $- Revenue & Expenses (in Millions) Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 EXPENDITURES: Personal Service % Materials & Supplies % 16 Maintenance & Repairs % 12 Operations, Services % Transfer Out % 8 Total Expe nditure s % Net Income (Loss) (0.48) (0.41) Ending Fund Balance $ 0.51 $ YTD Expenses YTD Revenue Tons of Asphalt Laid (in Thousands) 2 Qtr1 Qtr2 Qtr3 Qtr4 FY FY Key Trends Lane miles of surface treatment declined in the 4th quarter because resources were focused on operation and maintenance reconstruction projects. 1 Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY budget process. 2 Figures now include both contractor and in-house totals Lane Miles Surface Treatment Qtr 1 Qtr 2 Qtr3 Qtr4 FY FY Note: All figures presented are in millions of dollars.

13 City of Denton, Texas Grants Dashboard FY FY GRANT PREMINARY FY DESCRIPTIO N AMO UNT ACTUAL VARIANCE Budget Comm Development $ 2.32 $ % Public Safety % Parks & Recreation % Other % Total Budget % $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $ FY Awards & Expenses (in Millions) New Awards Awards Expenses Comm Development % Public Safety % FY Grants Awarded Other % Total New Awards % COMM DEV PUBLIC SAFETY OTHER 9% PARKS & REC OTHER Totals $ 7.90 $ % Key Trends The following grants have been received in FY : Police: Auto Theft Grant $239,233 ($8,901 in Sept 2013), Tobacco Grant $8,700, JAG grant $21,298. Auto Theft Grant $231,736. Fire : 2012 SHSP LETPA $9, UASI $10, UASI $44, UASI LETPA $82,500. Community Development : ESG $497,011 ($370 in Sept 2013), Amy Young Program $110,000. CDBG $858,794. HOME $436,095. ESG $589,592. Solid Waste: Landfill $29,040 in March PARKS & REC 2% PUBLIC SAFETY 28% COMM DEV 61% Note: All figures presented are in millions of dollars.

14 Section 2 City of Denton Quarterly Financial Report September 2014 This report is designed for internal use and does not include all the funds and accounts included in the City of Denton s operations. The information provided is unaudited; for a complete audited report, please refer to the City of Denton Comprehensive Annual Financial Report, available through the City s Finance Department, City Secretary s Office, or Denton Public Libraries. FINANCIAL SUMMARY 13

15 City of Denton General Fund Schedule of Revenues - Budget vs. Actuals (Unaudited) For the Period Ended September 30, 2014 PRIOR ANNUAL PRELIMINARY BUDGET VS REVENUE DESCRIPTION Y-T-D BUDGET ACTUALS ACTUALS Current Year - Ad Valorem $ 31,769,878 $ 33,056,849 $ 32,997,851 0% Delinquent - Ad Valorem 250, , ,838-22% Miscellaneous Penalties & Fees 322, , ,207 1% Ad Valorem Taxes 32,342,713 33,698,934 33,574,896 0% Sales Tax 26,522,473 27,326,141 27,764,114 2% Franchise - Gas Utilities 724, , ,322 0% Franchise - Private Electric Utilities 163, , ,578 0% Franchise - Cable 820, , ,397 0% Franchise - Telecom 434, , ,228 0% Franchise - Denton Municipal Utilities 5,435,376 5,475,918 5,475,918 0% Franchise - DISD Fiber 14,751 14,127 14,127 0% Franchise Fees 7,592,570 7,592,570 7,592,570 0% Other Taxes 412, , ,182 10% Ambulance Service Fees 2,462,278 2,425,000 2,480,582 2% Charges to Bond Funds 118, , ,400 2% Fire Department Fees 163, , ,521-3% Building Inspections Fees 427, , ,617 7% Park Department Fees 1,430,140 1,582,786 1,468,350-7% Planning Department Fees 929, , ,000 18% Reprographics Fees (1) - 455, ,577-14% Miscellaneous Service Fees 101, , ,043 14% Service Fees 5,631,830 6,130,164 6,185,090 1% Denton Municipal Fines 1,885,487 2,064,384 2,245,758 9% Parking Fines 202, , ,935-52% Miscellaneous Fines and Fees 970,960 1,166,680 1,041,572-11% Court Administrative and Service Fees 1,170,364 1,128,800 1,071,858-5% Fines and Fees 4,229,106 4,725,089 4,536,123-4% Demolition Permits 7,505 9,551 12,335 29% Building Permits 1,286,210 1,584,692 1,810,197 14% Certificate of Occupancy 64,700 70,304 77,505 10% Miscellaneous Licenses and Permits 88, ,395 78,384-29% Licenses and Permits 1,446,580 1,774,942 1,978,421 11% Investment Income 141, , ,684-1% Miscellaneous Revenues 1,243,926 1,468,925 1,550,802 6% Miscellaneous Resources 1,385,660 1,643,925 1,723,486 5% ROI - Denton Municipal Utilities 6,004,683 6,536,205 6,297,100-4% Transfers 7,309,282 7,829,273 7,828,344 0% Transfers 13,313,965 14,365,478 14,125,444-2% Total General Fund Revenues $ 92,877,863 $ 97,658,221 $ 97,920,326 0% (1) In fiscal year Reprographics moved from Technology Services, an Internal Services Fund, to the General Fund. 14

16 City of Denton General Fund Schedule of Expenditures - Budget vs Actuals (Unaudited) For the Period Ended September 30, 2014 PRIOR ANNUAL PRELIMINARY BUDGET VS Y-T-D BUDGET ACTUALS ACTUALS NEIGHBORHOOD SERVICES Building Inspections $ 1,930,327 $ 2,067,713 $ 2,026,546-2% Community Improvement Services 1,193,159 1,417,248 1,247,091-12% Libraries 5,236,010 5,694,026 5,628,287-1% Parks and Recreation 10,705,262 11,738,853 11,296,982-4% Planning 1,907,824 2,301,143 1,994,326-13% Development Review Engineering (1) 290, % Gas Well Review 514, , ,030-5% Social Services 392, , ,579-1% 22,170,886 24,071,121 23,020,841-4% PUBLIC SAFETY Animal Services 1,046,470 1,199,890 1,214,843 1% Fire 22,624,434 23,533,276 23,177,379-2% Municipal Court 1,314,111 1,403,132 1,327,260-5% Municipal Judge 393, , ,333-19% Police 24,545,864 25,827,660 25,403,815-2% 49,924,214 52,403,168 51,480,630-2% TRANSPORTATION Traffic Operations 2,010,077 2,132,489 2,049,178-4% Transportation Operations 370, , ,666-3% Street Lighting 665, , ,065-7% 3,046,368 3,240,204 3,090,909-5% ADMINISTRATIVE & COMMUNITY SERVICES Cable Television 263, , ,646 0% City Manager's Office 2,544,593 2,796,706 2,693,540-4% Economic Development 2,271,426 2,298,693 2,400,934 4% Facilities Management 3,124,802 3,427,147 3,469,834 1% Finance 3,305,025 3,485,408 3,434,642-1% Human Resources 1,514,817 1,654,149 1,537,736-7% Internal Audit 110,843 76,093 59,184-22% Legal Administration 1,835,132 2,371,071 2,281,523-4% Public Communications Office 422, , ,185-9% Reprographics (2) - 455, ,184-5% Non-Departmental 2,424,280 2,241,002 3,263,450 46% 17,817,297 19,560,767 20,284,858 4% TOTAL EXPENDITURES $ 92,958,765 $ 99,275,260 $ 97,877,238-1% (1) In fiscal year Development Review Engineering moved from the General Fund to the newly established Engineering Services Fund, an Internal Services Fund. (2) In fiscal year Reprographics moved from Technology Services, an Internal Services Fund, to the General Fund. 15

17 City of Denton Electric Fund Schedule of Expenditures - Budget vs Actuals (Unaudited) For the Period Ended September 30, 2014 PRIOR ANNUAL PRELIMINARY BUDGET VS DESCRIPTION Y-T-D BUDGET 1 ACTUALS ACTUALS Beginning Working Capital and Reserves as of 9/30/13 $ 74,609,630 $ 78,102,530 REVENUES: Operating Revenues $ 135,699, ,892, ,494,469 0% Non-operating Revenues 424, , ,064-13% Total Revenues 136,123, ,242, ,800,533 0% EXPENDITURES: Purchased Power 99,192, ,185, ,437,641-3% Operation and Maintenance 23,415,652 32,470,864 26,953,174-17% Return on Investment 4,186,163 4,507,707 4,461,630-1% Franchise Fee 5,980,233 6,439,581 6,377,226-1% Non-Operating Expenditures 19,286,577 22,362,950 22,033,551-1% Total Expenditures 152,061, ,966, ,263,222-5% Net Income (Loss) $ (15,937,990) (23,723,144) (15,462,689) Ending Working Capital and Reserves $ 50,886,486 $ 62,639,841 1 Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY budget process. 16

18 City of Denton Water Fund Schedule of Expenditures - Budget vs Actuals (Unaudited) For the Period Ended September 30, 2014 PRIOR ANNUAL PRELIMINARY BUDGET VS DESCRIPTION Y-T-D BUDGET 2 ACTUALS ACTUALS Beginning Working Capital and Reserves as of 09/30/13 1 $ 16,063,152 $ 18,230,641 REVENUES: Water Sales Residential $ 15,890,437 $ 17,197,614 $ 15,009,227-13% Water Sales Commercial 14,493,117 15,354,720 14,274,905-7% Water for Resale 1,508, ,462 1,265,871 35% Other Water 1,099, ,891 1,108,327 39% Public Works Fees and Permits 550, % Public Works Cap Lbr/Subledger 162, % Engineering Fees & Permits 5, % Engineering Capital Charges 2,048, % Transfers In 4,554,885 5,144,373 4,790,896-7% Investment Income 80,636 46,000 75,542 64% Impact Fee Revenue 2,600,000 3,100,000 3,100,000 0% Total Revenues 42,994,544 42,577,060 39,624,768-7% EXPENDITURES: Personal Service 10,720,929 9,676,608 8,658,233-11% Purchased Power 1,159,883 1,501,504 1,299,081-13% Purchase of Water 82,942 91,500 89,421-2% Materials and Supplies 1,442,157 1,807,189 1,537,071-15% Maintenance and Repairs 1,065,058 1,148, ,217-18% Insurance 203, , ,201 0% Miscellaneous 87,935 98,639 84,712-14% Operations, Services 1,876,414 2,708,352 1,958,453-28% Capital Outlay 4,514,514 6,464,818 6,411,734-1% Return on Investment 1,099,654 1,200,034 1,070,853-11% Franchise Fee 1,570,935 1,691,258 1,529,789-10% Debt Service 13,211,052 13,202,356 13,201,829 0% Transfers Out 3,509,625 3,097,700 3,060,171-1% Total Expenditures 40,544,791 42,905,805 40,061,765-7% Net Income (Loss) $ 2,449,753 (328,745) (436,997) Ending Working Capital and Reserves $ 15,734,407 $ 17,793,644 1 The Beginning Working Capital and Reserves excludes Fund Balance from the Impact Fee Reserve Fund of $3,289,014 and $1,000,00 of Development Plan Line Reserves. 2 Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY 2013 budget process. 17

19 City of Denton Wastewater Fund Schedule of Expenditures - Budget vs Actuals (Unaudited) For the Period Ended September 30, 2014 PRIOR ANNUAL PRELIMINARY BUDGET VS DESCRIPTION Y-T-D BUDGET 2 ACTUALS ACTUALS Beginning Working Capital and Reserves as of 09/30/13 1 $ 8,592,154 $ 9,193,103 REVENUES: Residential Fees $ 9,601,372 $ 10,280,865 $ 10,358,193 1% Commercial Fees 9,654,834 11,499,902 10,276,321-11% Effluent Irrigation Fees 114,973 61, ,049 71% Wholesale Fees 485, , ,328 10% Other Wastewater Fees 1,522,717 1,328,719 1,395,279 5% Drainage Fees 4,315,815 4,373,117 4,390,051 0% Transfer In 419, , ,213 2% Interest Revenue 46,871 23,000 46, % Impact Fee Reserves 1,100,000 1,100,000 1,100,000 0% Total Revenues 27,261,296 29,777,228 28,844,440-3% EXPENDITURES: Personal Service 6,425,272 7,396,085 6,739,769-9% Purchased Power 769, , ,862 8% Materials and Supplies 633, , ,398-33% Maintenance and Repairs 899,775 1,318,349 1,024,291-22% Insurance 135, , ,122 0% Miscellaneous 29,627 45,857 36,042-21% Operations, Services 1,802,301 2,381,297 1,815,434-24% Capital Outlay 4,850,470 5,150,905 5,695,733 11% Return on Investment 718, , ,617-8% Franchise Fee 1,026,951 1,183,520 1,092,310-8% Debt Service 2 6,752,548 7,047,929 7,042,939 0% Transfers Out 2,781,222 3,027,655 2,898,165-4% Total Expenditures 26,825,889 30,327,234 28,821,682-5% Net Income (Loss) $ 435,407 (550,006) 22,758 Ending Working Capital and Reserves $ 8,042,148 $ 9,215,861 1 The Beginning Working Capital and Reserves excludes Fund Balance from the Impact Fee Reserve Fund of $2,115,050, $1,000,000 of Development Plan Line Reserves, and $1,000,000 of Drainage Reserves. 2 Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY Budget process. 18

20 City of Denton Drainage Operations Schedule of Expenditures - Budget vs Actuals (Unaudited) For the Period Ended September 30, 2014 PRIOR ANNUAL PRELIMINARY BUDGET VS DESCRIPTION Y-T-D BUDGET ACTUALS ACTUALS REVENUES: Residential Drainage Fees $ 1,579,309 $ 1,552,522 $ 1,619,175 1% Nonresidential Drainage Fees 2,736,506 2,820,595 2,770,876-2% Wastewater Resources 65,815 75,680 75,680 0% General Fund Transfer 269, , ,066 0% Total Revenues 4,651,592 4,933,863 4,948,797 0% EXPENDITURES: Personal Service 1,298,266 1,793,130 1,542,611-11% Materials and Supplies 71,632 88,659 57,674-1% Maintenance and Repairs 61, ,892 61,472 2% Insurance 19,891 24,232 24,232 0% Miscellaneous 2,023 2,888 4,905-5% Operations, Services 374, , ,963 4% Capital Outlay 1,324, ,414 1,280,780 22% Debt Service 988,625 1,104,805 1,104,198 0% Transfer Out 510, , ,962-1% Total Expenditures 4,651,592 4,933,863 4,948,797 0% Net Income (Loss) $ - $ - $ - 19

21 City of Denton Solid Waste Fund Schedule of Expenditures - Budget vs Actuals (Unaudited) For the Period Ended September 30, 2014 PRIOR ANNUAL PRELIMINARY BUDGET VS DESCRIPTION Y-T-D BUDGET 2 ACTUALS ACTUALS Beginning Working Capital and Reserves as of 09/30/13 1 $ 3,062,371 $ 3,759,193 REVENUES: Garbage Fees - Residential $ 7,750,671 8,314,421 8,294,757 0% Garbage Fees - Commercial 10,548,465 10,617,476 10,598,030 0% Landfill Fees 2,935,120 3,649,385 3,660,320 0% Recycling 3,034,766 3,150,699 3,159,877 0% Other Revenue 732, , ,934 8% Interest Revenue 8,569 6,304 6,055-4% Total Revenues 25,009,653 26,353,035 26,383,973 0% EXPENDITURES: Personal Service 8,147,145 8,674,181 8,720,578 1% Materials and Supplies 266, , ,090-7% Maintenance and Repairs 265, , ,999-1% Insurance 168, , ,855 0% Miscellaneous 44,098 49,160 43,548-11% Operations, Services 5,311,161 5,412,997 5,637,055 4% Capital Outlay 1,063,270 1,736,587 1,603,024-8% Debt Service 5,379,064 5,938,830 5,934,448 0% Franchise Fee 1,189,413 1,302,747 1,255,534-4% Landfill Closure 325, , ,469 2% Transfer Out 2,188,465 2,241,372 2,143,342-4% Total Expenditures 24,349,988 26,623,590 26,584,942 0% Net Income (Loss) $ 659,665 (270,555) (200,969) Ending Working Capital and Reserves $ 2,791,816 $ 3,558,224 1 The Beginning Working Capital and Reserves excludes Fund Balance from the Landfill Closure/Post Closure Reserve Fund of $6,145, Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY budget process. 20

22 City of Denton Airport Fund Schedule of Expenses- Budget vs Actuals (Unaudited) For the Period Ended September 30, 2014 PRIOR ANNUAL PRELIMINARY BUDGET VS DESCRIPTION Y-T-D BUDGET 1 ACTUALS ACTUALS Beginning Working Capital and Reserves as of 09/30/13 $ 6,029,131 $ 5,890,583 OPERATING REVENUES: Airport Ground Leases $ 381, , ,372-8% FBO Commissions 282, , ,284-21% Miscellaneous 39,756 59,000 44,024-25% Total Operating Revenues 704, , ,680-15% OPERATING EXPENSES: Personal Service 446, , ,653 7% Materials and Supplies 41,891 46,725 25,545-45% Maintenance and Repairs 68,212 78,997 71,224-10% Insurance 18,563 21,324 21,324 0% Miscellaneous 1,029 1,500 1,211-19% Operations 193, , ,000-11% Transfers Out - Operating 360, , ,708 3% Franchise Fee 28,351 36,071 37,853 5% Total Operating Expenses 1,158,459 1,421,901 1,419,518 0% Operating (Loss) (454,105) (511,902) (642,838) NON-OPERATING REVENUES: Investment Income 29,708 27,000 25,586-5% Gas Well Royalties 1,176, ,000 1,149,241 28% Total Non-Operating Revenues 1,206, ,000 1,174,827 27% NON-OPERATING EXPENSES: Debt Service 226, , ,205 0% Transfers Out - Capital 1,000,300 1,000, ,636-18% Total Non-Operating Expenses 1,227,046 1,357,462 1,173,841-14% Non-Operating Income (Loss) (20,878) (430,462) 986 Net Income (Loss) $ (474,983) (942,364) (641,852) Ending Working Capital $ 5,086,767 $ 5,248,731 1 Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY budget process. 21

23 City of Denton Street Improvement Fund Schedule of Expenditures - Budget vs Actuals (Unaudited) For the Period Ended September 30, 2014 PRIOR ANNUAL PRELIMINARY BUDGET VS DESCRIPTION Y-T-D BUDGET 1 ACTUALS ACTUALS Beginning Fund Balance as of 9/30/2013 $ 991,942 $ 1,330,184 RESOURCES: Franchise Fees $ 6,304,206 7,186,378 7,111,758-1% Street Cuts 485, , ,910-7% Investment Income 3,230 10,000 6,651-33% G/L on sale of fixed assets , % Transfers In 265, , ,911 0% Total Resources 7,058,025 7,904,203 7,840,737-1% EXPENDITURES: Personal Service 2,057,631 2,275,487 2,209,430-3% Materials and Supplies 55,445 75,130 84,378 12% Maintenance and Repairs 3,901,508 3,964,379 3,921,988-1% Insurance 47,751 61,280 61,280 0% Miscellaneous 3,112 5,000 3,606-28% Operations, Services 508, , ,019-3% Transfer Out 139,122 1,181,606 1,181,606 0% Total Expenditures 6,712,871 8,379,203 8,254,307-1% Net Income (Loss) $ 345,154 (475,000) (413,570) Ending Fund Balance $ 516,942 $ 916,614 1 Annual adopted budget as amended or modified. Beginning Fund Balance represents the amount which was estimated in the FY budget process. 22

24 City of Denton Grants Schedule of Expenses - Budget vs Actuals (Unaudited) For the Period Ended September 30, 2014 GRANT DESCRIPTION EXPENDITURES AS OF ANNUAL 9/30/ BUDGET PRELLIMINARY ACTUALS BUDGET VS ACTUALS FY Budget US Dept of HUD - Community Development Block Grant(CDBG) $ 3,106,152 $ 1,349,511 $ 1,077,768 80% US Dept of HUD - HOME Investment Partnership Program 1,410, , ,249 84% Community Development 4,516,757 2,324,960 1,894,017 81% Public Safety Training Facility Grant - 350, , % 2010 Congressional Setaside Grant - 1,000, ,525 78% TxDot Comprehensive Grant - 68,350 66,147 97% 2013 Byrne Assistance Grant (JAG) 21,298 19,055 89% 2012 UASI - 125,000 99,190 79% Emergency Management Performance Grant - 75,728 57,024 75% Public Safety - 1,641,114 1,373,853 84% Clean Transportation Triangle (CTT) 400,000-0% Alternative Fuel & Advanced Technology Grant 200,000-0% Airport Maintenance (RAMP) Grant - 50,000 49, % Summer Food Grant - 150, , % Other - 800, ,044 25% 2009 Congressional Setaside Grant ,000 0% 2011 UASI State Homeland Security Grant 197,851-49,531 0% 2012 UASI - LETPA ,950 0% Prior year's budget 197, ,481 0% Total FY Budget 4,714,608 4,766,074 4,073,395 85% New Awards CDBG - 858,794 41,293 5% HOME - 436,095 9,872 2% Emergency Solutions Grant , , % Emergency Solutions Grant - 589, % Amy Young Barrier Removal Program - 110,000 87,937 80% Community Development 370 2,491, ,020 25% 2012 SHSP-LETPA State Homeland Security Grant - 9,500-0% Tobacco Enforcement Program Grant - 8,700 10, % Auto Theft Grant 8, , ,494 91% Auto Theft Grant - 231,736 12,993 6% 2011 UASI - 10,076 8,491 84% 2013 UASI - 44,500 1,860 4% 2013 UASI - LETPA - 82,500-0% Public Safety 8, , ,488 39% Landfill Charging Station - 29,040 29,040 0% Other - 29,040 29,040 0% Total New Awards 9,271 3,137, ,548 29% TOTALS $ 4,723,879 $ 7,903,580 $ 4,980,943 63% 1 A portion of the grants presented cover multiple years. 23

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26 Section 3 City of Denton Quarterly Financial Report September 2014 REVENUE & ECONOMIC ANALYSIS 25

27 Revenue & Economic Analysis Summary The data included in this section provides information on local, state and national trends impacting the City s financial position. The following notes are provided to facilitate this section s readability. 1. Positive Outlook Represents favorable conditions for the local economy. Color code Green. 2. Cautious Outlook Represents changing conditions that require close monitoring. Color code Yellow. 3. Negative Outlook Represents unfavorable conditions for the local economy. Color code Red. The data included in this section have been obtained from a variety of sources. Sales tax and construction related data have been obtained from internal city departments. Economic data for the State have been obtained from the Federal Reserve Bank of Dallas and may be subject to availability. National economic data were compiled with assistance from the City s investment advisor, First Southwest Asset Management. 26

28 National Economic Trends Period ending September 30, 2014 Gross Domestic Product (GDP) It s been a volatile year for economy growth. First quarter GDP actually contracted by 2.1% as an unusually harsh winter kept shoppers at home. A second quarter rebound pushed growth well into positive territory at a revised annualized rate of 4.6%. The preliminary reading of third quarter GDP showed that U.S. economy grew at a solid 3.5% annualized rate, well above the 3.0% median forecast; however, 0.7 percentage points were the result of a 16% jump in defense spending, which is likely to reverse itself in the fourth quarter. Net exports added another 1.3pp, which seems odd in the context of a stronger dollar but likely reflects declining oil prices. Personal consumption, a key component of the economy s true underlying strength advanced just 1.8%. Nonfarm Payrolls Solid job growth continues to be the basis for the Fed s winding down of stimulus. Company payrolls rose by 248k in September, while August payroll gains, originally reported at +142k, were revised to +180k, and July payrolls were raised from +212k to +243k. So far in 2014, job growth has averaged 227k per month, well above the 194k average in The unemployment rate, calculated from a separate household survey, declined from 6.1% to 5.9% in September. On the surface this appears to be a very strong number, but another 97k Americans actually exited the labor force during the month which pulled the participation rate down a notch to 62.7%, the lowest since February The U6, or underemployment rate, which includes all those who would accept a suitable fulltime job, if offered, declined from 12% to 11.8%. 27

29 Housing Existing home sales climbed by 2.4% in September to a 5.17 million unit annual rate, the highest in 12 months, but on a year-over-year basis sales of existing homes are still down 1.7%. The median price increased by 5.6% to $209,700 from the same period a year ago, while available supply dropped from 5.5 to 5.3 months, the lowest level since March. New home sales rose by 0.2% in September to a 467k annual pace. Interesting, the previous month was revised sharply downward from a six-year high of 504k to 466k. The median price for a new home fell by 4% from the same period a year ago to $259,000. It was the first decline in five months. There were 207,000 new homes available for sale at the end of September, representing the same relatively lean 5.3 month supply as existing homes. Retail Sales After an anemic spring/early summer buying season, consumer spending staged a rebound. Although wage growth was still lackluster, consumers increased their borrowings. Retail sales rose by a substantial 0.6% in August, while July s unchanged reading was revised to a respectable +0.3%. Auto sales added to what will likely be the best year for the industry since 2006 as August sales of cars and light trucks reached a million unit pace. Unfortunately, consumer purchases slowed into quarter end. Retail sales for September actually fell by 0.3%, suggesting that the global downturn had already reached U.S. shores, while vehicle sales retreated to a less robust million unit pace as dealer inventories cleared of last year s incentive-laden models. Consumer confidence reached a 7-year high of 92.4 in August, before tumbling to a 4-month low of 86 in September. 28

30 Texas Home Sales The Texas housing market continued to flash strength, despite slower overall growth in the national markets. As of September 2014, Texas sales volume was up 7.3% year-over-year, while dollar volume was up a huge 15.7%. During this same YOY period, average home prices climbed by 7.8% to $240,300 while available supply fell from 3.9 to a very lean 3.6 months. In Denton County, on a year-over-year basis through September, sales volume was up 2.9%. The average sales (as of August) rose 2.5% to $238,000 from the previous year. Total listings are currently at 1,576 units or a lean 2.0 month supply, down slightly from 1,696 units and 2.2 months a year earlier. Lean inventories across Texas suggest an increase in new construction in The paper was prepared by FirstSouthwest Asset Management, is intended for educational and informational purposes only and does not constitute legal or investment advice, nor is it an offer or a solicitation of an offer to buy or sell any investment or other specific product. Information provided in this paper was obtained from sources that are believed to be reliable; however, it is not guaranteed to be correct, complete, or current, and is not intended to imply or establish standards of care applicable to any attorney or advisor in any particular circumstances. The statements within constitute the views of FirstSouthwest Asset Management as of the date of the report and may differ from the views of other divisions/departments of First Southwest Company. In addition, the views are subject to change without notice. This paper represents historical information only and is not an indication of future performance. 29

31 Fuel Prices Outlook Cautious Description: Quarterly fuel trends for the United States and Texas. Analysis: Fuel prices are a major commodity source in the economy. Studies have shown a positive effect on disposable income levels when fuel prices decrease. It is estimated that for every penny decrease in the price of fuel, $1.3 billion is available to the consumer for disposable income. Therefore, the price of fuel is likely to be a key predictor of sales tax collections. Fuel prices showed a 4.3% decrease from the prior quarter at the national level and a 2.2% decrease at the state level. Sales tax returns increased 7% from the prior quarter. Because of the instability in this commodity, staff has rated this outlook as Cautious. Fuel Prices Sales Tax Texas Fuel Prices US Fuel Prices $4.00 $8 $3.50 $7 $3.00 $6 $2.50 $5 Dollars $2.00 $4 Millions $1.50 $3 $1.00 $2 $0.50 $1 $0.00 4Q '10 2Q '11 4Q '11 2Q '12 4Q '12 2Q '13 4Q '13 2Q '14 4Q '14 $0 Source: U.S. Department of Energy 30

32 Municipal Cost Index Outlook Negative Description: The Municipal Cost Index was developed to show the rate of inflation for the cost of goods purchased frequently by local governments. The MCI draws on the monthly statistical data collected by the U.S. Departments of Commerce and Labor as well as independently compiled data to project a composite cost picture for the municipal budget officer or operating department manager. Costs of labor, materials and contract services are all factored into the composite MCI. Major indicators of these items used for the MCI include the Consumer Price Index, the Wholesale Price Index for Industrial Commodities (now known as the Producer Price Index) and the construction cost indexes published by the U.S. Department of Commerce, respectively. Analysis: The Municipal Cost Index (MCI) pulls a variety of prices for frequently purchased commodities for local governments. The cost for labor, materials and contract services are factored for the MCI. An increase in MCI means the overall price mix for these types of commodities will cost local governments more to do routine business. The 4th fiscal quarter of 2014 shows an increase of.21% over the prior quarter and an increase of 2.1% over the 4th fiscal quarter of Staff has rated this indicator as Negative Municipal Cost Index Q '12 1Q '13 2Q '13 3Q '13 4Q '13 1Q '14 2Q '14 3Q '14 4Q '14 Source: American City and County Magazine Note: The Municipal Cost Index is designed to show the effects of inflation on the cost of providing municipal services. State and local government officials rely on American City & County's Municipal Cost Index to stay on top of price trends, help control price increases for commodities, make informed government contract decisions and intelligent budget planning. Since 1978, readers have loyally referred to the Municipal Cost Index to determine the cost of inflation and, hence, the rising cost of doing business as a local government. 31

33 Hotel Occupancy Tax Analysis Outlook Positive Description: Tax imposed on a person who, under a lease, concession, permit, right of access, license, contract, or agreement, pays for the use of a room that is in a hotel. A hotel includes: any building in which the public may obtain sleeping accomodations; motels; a tourist home, house or court; lodginghouse; inn; roominghouse; or bed and breakfast. The tax rate levied by the City is 7% of the price paid for a room. The State also levies a tax equal to 6%. Analysis: While the use of this revenue source is restricted by state law, it is an essential revenue source for various tourist related activities within the community and an important indicator of local economic activity. Hotel Occupancy tax revenue through the 4th Quarter of 2014 was 14.44% more than budget and 4.06% more than the prior year's actual. Staff has rated the outlook as positive. 4th Quarter FY Actual Y-T-D Occupancy Tax Revenue: $ 524,383 $ 1,990,646 FY Budget $ 447,644 $ 1,739,454 Over(Under) Budget $ 76,739 $ 251,192 FISCAL YEAR FORECAST Hotel Occupancy Tax Budget: $ 1,739,454 End of Year Projection: $ 1,739,454 End of Year Actual: $ 1,990,646 Variance - Actual to Budget: $ 251,192 Variance - Actual to Projection: $ 251,192 $600,000 Hotel Occupancy Tax Collections $500,000 $400,000 $300,000 $200,000 $100,000 $0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr FY FY FY FY FY

34 Sales and Use Tax Analysis Outlook Positive Description: Tax imposed on all retail sales, leases and rentals of most goods, as well as taxable services. The total tax rate levied within the City is 8.25% (State, 6.25%; City, 1.5%; DCTA, 0.5%). Analysis: As the second largest revenue source to the City's General Fund, sales and use taxes are essential to the delivery of services to the community. Sales tax revenues through the 4th quarter of FY 2014 compared to revenues from the prior year 4th quarter shows a 8.09% increase, and compared to the budget shows a 5.80% increase. Staff has rated this indicator as Positive. 4th Quarter FY Actual Y-T-D Revenue: Gross Sales Tax Municipal Operations $ 540,501 $ 1,701,141 General Retail & Others 7,153,097 27,116,214 Comptroller Fees (140,370) (531,940) Amount Retained (137,563) (521,301) Total Revenue $ 7,415,665 $ 27,764,114 Expenses: Economic Incentives Denton Crossing $ 125,019 $ 522,936 Unicorn Lake 13,983 55,577 Rayzor Ranch 250, ,620 Total Expenses $ 389,191 $ 1,526,133 Net Total 7,026,474 26,237,981 FY Budget 6,631,515 25,855,141 Over(Under) Budget $ 394,959 $ 382,840 Sales Tax Budget: $ 27,326,141 Year End Projection: 27,326,141 Year End Final: 27,764,114 Variance to Original Budget: $ 437,973 Variance to Year End Projection: $ 437,973 Economic Development Expenditure Budget: $ 1,471,000 Year End Projection: 1,471,000 Year End Final: 1,526,133 Variance to Original Budget: $ (55,133) Variance to Year End Projection: $ (55,133) $7.0 Gross Sales Tax Collections (Millions) $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr FY Actual FY Actual FY Actual FY Actual 33

35 Certificates of Occupancy Outlook Cautious Description: Certificates of Occupancy (CO) are permits issued in compliance with the 2009 International Building Code (IBC) and applicable City ordinances. The IBC states, "that no building shall be used or occupied, and no change in the existing occupancy classification of a building or structure or portion thereof shall be made, until the building official has issued a certificate of occupancy.." Certificates of Occupancy ensure that applicable building, fire and consumer health codes are met. Analysis: Certificates of Occupancy are an economic indicator that provides a framework for the overall condition of the local economy. Certificates of Occupancy decreased 32% from the prior quarter and increased 20% from the 4th quarter of Staff has rated the outlook for this revenue indicator as Cautious Certificates of Occupancy Q '09 1Q '10 2Q '10 3Q '10 4Q '10 1Q '11 2Q '11 3Q '11 4Q '11 1Q '12 2Q '12 3Q '12 4Q '12 1Q '13 2Q '13 3Q '13 4Q '13 1Q '14 2Q '14 3Q '14 4Q '14 Source: City of Denton's Planning and Development Department. 34

36 Residential Permits Outlook Cautious Description: Residential Permits are issued in compliance with the 2009 International Residential Code (IRC) and applicable City ordinances. The data presented in this analysis only include new permits issued and not remodels/alterations. Analysis: Residential Permits are an economic indicator that provides a framework for the overall condition of the local economy. In particular, residential permits have a direct correlation with building inspection fees and appraised values. Residential permits decreased 3% from the prior quarter and increased 25.7% from the 4th Quarter of Staff has rated the outlook for this revenue indicator as Cautious Residential Permits Q '09 1Q '10 2Q '10 3Q '10 4Q '10 1Q '11 2Q '11 3Q '11 4Q '11 1Q '12 2Q '12 3Q '12 4Q '12 1Q '13 2Q '13 3Q '13 4Q '13 1Q '14 2Q '14 3Q '14 4Q '14 Source: City of Denton's Planning and Development Department. 35

37 Texas Leading Indicators Index Outlook Positive Description: The Texas Leading Indicators Index is a single weighted summary statistic that sheds light on the future of the state's economy. The index is designed to signal movements and changes in the state's rate of growth. The index includes the following leading indicators: Texas Value of the Dollar, U.S. Leading Index, Real Oil Prices, Well Permits, Initial Claims for Unemployment Insurance, Texas Stock Index, Help-Wanted Advertising, and Average Weekly Hours Worked in Manufacturing. Analysis: Texas Leading Indicators provide a framework for the overall condition of the local economy. Data for this quarter shows continued increases in the state's rate of growth. The index increased by 1.6% from the prior quarter and increased 5.5% from the 4th quarter of Staff has rated this indicator as Positive Texas Leading Indicators Index Q '04 2Q '05 4Q '05 2Q '06 4Q '06 2Q '07 4Q '07 2Q '08 4Q '08 2Q '09 4Q '09 2Q '10 4Q '10 2Q '11 4Q '11 2Q '12 4Q '12 2Q '13 4Q '13 2Q '14 4Q '14 Source: Federal Reserve Bank of Dallas 36

38 Unemployment Rate Index Outlook Positive Description: Unemployment is defined as the number or proportion of people looking for work at the prevailing wage who are unable to find employment. Analysis: Unemployment is an economic indicator that provides a framework for the overall condition of the national, state and local economies. The unemployment rate for the City of Denton rose slightly to 4.3% from a rate of 4.2% the prior quarter. The unemployment rates for the other reported sectors were level or down slightly from the prior quarter. As a result of the downward trend since the high of the 1st Quarter of 2010, staff has rated the outlook for this revenue indicator as Positive Unemployment Rate Index Q '08 2Q '09 4Q '09 2Q '10 4Q '10 2Q '11 4Q '11 2Q '12 4Q '12 2Q '13 4Q '13 2Q '14 4Q '14 Dallas-Plano-Irving MD Denton Texas U6 Unemployment United States Source: Federal Reserve Bank of Dallas, U.S. Bureau of Labor Statistics, and Texas Workforce Commission Note: U6 unemployment includes marginally attached workers who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part-time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule. 37

39 38

40 Section 4 City of Denton Quarterly Financial Report September 2014 INVESTMENT REPORT 39

41 CITY OF DENTON : QUARTERLY INVESTMENT REPORT 4th Fiscal Quarter September 30, 2014 Page 1 INVESTMENT POOL Policy Par Market Book Unrealized Max. Benchmark Portfolio: Value Value Value Gain/(Loss) 1 WAM Wam YTM Yield* Investment Pool $ 474,376,251 $ 476,339,747 $ 476,136,081 $ 203, % 0.12% *Twelve month moving average of a one year U.S. T-bill yield % of Total Par Market Book Unrealized Portfolio Policy Securities By Investment Type: Value Value Value Gain/(Loss) 1 WAM YTM (Book Value) Max. U.S. Treasuries 22,000,000 22,117,852 22,115,056 2, % 4.64% % U.S. Federal Agencies 234,000, ,057, ,902, , % 49.34% % Municipal Bonds 29,585,000 30,380,867 30,340,496 40, % 6.37% 15.00% Certificates of Deposit 116,000, ,000, ,000, % 24.36% 35.00% Commercial Paper 20,000,000 19,992,254 19,986,872 5, % 4.20% 5.00% Demand Deposits 52,791,251 52,791,251 52,791, % 11.09% - Total Portfolio $ 474,376,251 $ 476,339,747 $ 476,136,081 $ 203, % % - 1 Unrealized gain/(loss) is the difference between the market and book value and does not represent an actual gain or loss. Gains and losses are realized only when a security is sold prior to maturity. Since it is the City's practice to hold investments until they mature, the temporary gains and losses are unlikely to be realized. Current 3 Months Ago 3 Month 1 Year Ago Investment Pool Comparisons: 9/30/2014 6/30/2014 Difference 9/30/2013 Par Value $ 474,376,251 $ 495,644,403 $ (21,268,152) $ 458,752,034 Market Value $ 476,339,747 $ 498,272,396 $ (21,932,649) $ 462,143,970 Book Value $ 476,136,081 $ 497,830,325 $ (21,694,244) $ 462,026,899 Unrealized Gain(Loss) $ 203,666 $ 442,071 $ (238,405) $ 117,071 Weighted Average Maturity (30) 466 Yield to Maturity 0.51% 0.49% 0.02% 0.49% $ $ $ $ 1 Year Ago Difference 15,624,217 14,195,777 14,109,182 86,595 (63) 0.02% Portfolio Composition: U.S. Treasuries 4.64% 4.45% 0.19% 1.08% U.S. Federal Agencies 49.34% 50.06% -0.72% 53.45% Municipal Bonds 6.37% 6.12% 0.25% 6.69% Certificates of Deposit 24.36% 23.30% 1.06% 27.27% Commercial Paper 4.20% 4.01% 0.19% 0.00% Demand Deposits 11.09% 12.06% -0.97% 11.51% 3.56% -4.11% -0.32% -2.91% 4.20% -0.42% Bank Collateral Review**: Institution Collateral Type Market Value Collected Balance Pledge Required Collateral Ratio Wells Fargo Demand Deposits BNY Mellon U.S. Agency MBS $ 66,380,160 $ 52,245,507 > 102% % Comerica Collateralized CDs Federal Reserve U.S. Agency MBS $ 70,421,435 $ 57,319,850 > 110% % ViewPoint Bank Collateralized CDs Fed Home Loan Bk U.S. Agency MBS $ 11,299,962 $ 10,113,820 > 102% % **Does not include FDIC insurance Depository Ledger Balance Review: Institution Account Type Beginning Bal. Deposits Withdrawals Ending Bal. Wells Fargo Bank Checking $ 48,731,256 $ 45,939,247 $ (41,879,252) $ 52,791,251 Compliance Statement & Review: The Quarterly Investment Report is in full compliance with the objectives, restrictions, and strategies as set forth in the City of Denton's Investment Policy and the Public Funds Investment Act (Texas Government Code, Chapter ). Reviewer: Antonio Puente, Jr., CGFO Assistant Director of Finance Preparer: Caroline Finley Treasury Administrator Reviewer: Chuck Springer, CGFO Director of Finance 40

42 CITY OF DENTON : QUARTERLY INVESTMENT REPORT 4th Fiscal Quarter September 30, 2014 Page 2 INVESTMENT POOL Current 3 Months Ago 3 Month 1 Year Ago 1 Year 9/30/2014 6/30/2014 Difference 9/30/2013 Difference Par Value - U.S. Treasuries $ 22,000,000 $ 22,000,000 $ - $ 5,000,000 $ 17,000,000 Par Value - U.S. Federal Agencies 234,000, ,000,000 (14,000,000) 245,000,000 (11,000,000) Par Value - Municipal Bonds 29,585,000 29,585,000-29,585,000 - Certificates of Deposit 116,000, ,000, ,000,000 (10,000,000) Par Value - Commercial Paper 20,000,000 20,000, ,000,000 Demand Deposits 52,791,251 60,059,403 (7,268,152) 53,167,034 (375,783) Total Par Value $ 474,376,251 $ 495,644,403 $ (21,268,152) $ 458,752,034 $ 15,624,217 Market Value - U.S. Treasuries $ 22,117,852 $ 22,154,376 $ (36,524) $ 4,994,920 $ 17,122,932 Market Value - U.S. Federal Agencies 235,057, ,533,167 (14,475,644) 247,163,408 (12,105,885) Market Value - Municipal Bonds 30,380,867 30,544,556 (163,689) 30,818,608 (437,741) Certificates of Deposit 116,000, ,000, ,000,000 (10,000,000) Market Value - Commercial Paper 19,992,254 19,980,894 11,360-19,992,254 Demand Deposits 52,791,251 60,059,403 (7,268,152) 53,167,034 (375,783) Total Market Value $ 476,339,747 $ 498,272,396 $ (21,932,649) $ 462,143,970 $ 14,195,777 Book Value - U.S. Treasuries $ 22,115,056 $ 22,130,825 $ (15,769) $ 5,001,347 $ 17,113,709 Book Value - U.S. Federal Agencies 234,902, ,181,899 (14,279,493) 246,945,429 (12,043,023) Book Value - Municipal Bonds 30,340,496 30,483,644 (143,148) 30,913,089 (572,593) Certificates of Deposit 116,000, ,000, ,000,000 (10,000,000) Book Value - Commercial Paper 19,986,872 19,974,554 12,318-19,986,872 Demand Deposits 52,791,251 60,059,403 (7,268,152) 53,167,034 (375,783) Total Book Value $ 476,136,081 $ 497,830,325 $ (21,694,244) $ 462,026,899 $ 14,109,182 Accrued Interest $ 1,396,000 $ 1,703,057 $ (307,057) $ 1,448,237 $ (52,237) Cash Value - $ 477,735,747 $ 499,975,453 $ (22,239,706) $ 463,592,207 $ 14,143,540 (Total Market Value + Accrued Interest) Unrealized Gain/(Loss) $ 203,666 $ 442,071 $ (238,405) $ 117,071 $ 86,595 Change in Fair Value since 9/30/13 - $ (1,805,166) $ (1,114,762) $ (690,405) $ (2,178,482) $ 373,316 (GASB 31) Strategy Statement: The Investment Pool is an aggregation of the majority of City funds which may include tax receipts, enterprise fund revenues, fine and fee revenues, reserve funds for outstanding utility system revenue bonds, as well as some, but not necessarily all bond proceeds, grants, gifts and endowments. This portfolio is maintained to meet anticipated daily cash needs for the City's operations, capital projects and debt service. In order to ensure the ability of the City to meet obligations and to minimize potential liquidation losses, the dollar-weighted average stated maturity of the Investment Pool shall not exceed 1.5 years or 550 days. The objectives of this portfolio are to: (1) ensure safety of principal by investing in only high quality securities for which a strong secondary market exists; (2) ensure that anticipated cash flow needs are matched with adequate investment liquidity; (3) limit market and credit risk through diversification; and (4) attain the best feasible yield commensurate with the objectives and restrictions set forth in the Investment Policy by actively managing the portfolio to meet or exceed the twelve month moving average yield of a one year U.S. Treasury bill as derived from the Federal Reserve Statistical Release H.15 for constant maturities. 41

43 CITY OF DENTON : QUARTERLY INVESTMENT REPORT 4th Fiscal Quarter September 30, 2014 Page 3 INVESTMENT POOL Current 3 Months Ago 1 Year Ago Summary By Security Type: 9/30/2014 6/30/2014 9/30/2013 U.S. Treasuries - Coupon $ 22,115,056 $ 22,130,825 $ 5,001,347 U.S. Federal Agencies - Coupon 221,917, ,198, ,947,705 U.S. Federal Agencies - Callable 12,984,440 10,983,674 14,997,724 Municipal Bonds - Coupon 30,340,496 30,483,644 30,913,089 Certificates of Deposit - CDARS 49,000,000 49,000,000 59,000,000 Certificates of Deposit - Collateralized 67,000,000 67,000,000 67,000,000 Commercial Paper - Discount 19,986,872 19,974,554 - Demand Deposits 52,791,251 60,059,403 53,167,034 Total Book Value $ 476,136,081 $ 497,830,325 $ 462,026,899 U.S. Federal Agencies - Coupon 46.61% Current 9/30/2014 U.S. Federal Agencies - Callable 2.73% Municipal Bonds - Coupon 6.37% U.S. Treasuries - Coupon 4.64% Certificates of Deposit - CDARS 10.29% Demand Deposits 11.09% Commercial Paper - Discount 4.20% Certificates of Deposit - Collateralized 14.07% Objective: The portfolio is restricted to U.S. Treasuries and agency securities (maturing in less than five years), state and locally issued bonds of Texas rated AA or better (maturing in less than three years), insured or collateralized certificates of deposit (maturing in less than three years), collateralized repurchase agreements (maturing in less than thirty days), commercial paper rated A-1/P-1 or better (maturing in less than 270 days), and local government pools & SEC registered money market mutual funds (weighted average maturity of less than 60 days). Current 3 Months Ago 1 Year Ago Summary By Security Type: 9/30/2014 6/30/2014 9/30/2013 U.S. Treasuries - Coupon 4.64% 4.45% 1.08% U.S. Federal Agencies - Coupon 46.61% 47.85% 50.20% U.S. Federal Agencies - Callable 2.73% 2.21% 3.25% Municipal Bonds - Coupon 6.37% 6.12% 6.69% Certificates of Deposit - CDARS 10.29% 9.84% 12.77% Certificates of Deposit - Collateralized 14.07% 13.46% 14.50% Commercial Paper - Discount 4.20% 4.01% 0.00% Demand Deposits 11.09% 12.06% 11.51% Total % % % 42

44 CITY OF DENTON : QUARTERLY INVESTMENT REPORT 4th Fiscal Quarter September 30, 2014 Page 4 INVESTMENT POOL Current 3 Months Ago 1 Year Ago Summary By Issuer: 9/30/2014 6/30/2014 9/30/2013 CDARS CDs $ 49,000,000 $ 49,000,000 $ 59,000,000 COMERICA BANK CDs 57,000,000 57,000,000 57,000,000 VIEWPOINT BANK CDs 10,000,000 10,000,000 10,000,000 U.S. TREASURY 22,115,056 22,130,825 5,001,347 FFCB 17,999,635 18,000,136 24,000,729 FHLB 66,111,221 64,142,052 49,351,471 FHLMC 73,202,644 71,315,916 73,571,978 FNMA 77,588,907 95,723, ,021,252 GARLAND, TX GENERAL OBG BONDS 3,169,114 3,195,370 3,274,137 TEXAS STATE GENERAL OBG BONDS 3,000,000 3,000,000 3,000,000 TEXAS SCHOOL DIST GEN OBG BONDS* 24,171,381 24,288,274 24,638,951 JP MORGAN SECURITIES LLC 3,998,130 3,994,757 - TOYOTA MOTOR CREDIT CORP 15,988,742 15,979,797 - WELLS FARGO DEMAND DEPOSITS 52,791,251 60,059,403 53,167,034 Total Book Value $ 476,136,081 $ 497,830,325 $ 462,026,899 WF DEMAND DEPOSITS, TOYOTA MOTOR CREDIT 11.09% CORP, 3.36% JP MORGAN SECURITIES LLC, 0.84% TEXAS SCHOOL DIST GEN OBG BONDS, 5.08% TEXAS STATE GEN OBG BONDS, 0.63% GARLAND, TX GEN OBG BONDS, 0.67% Current 9/30/2014 CDARS CDs, 10.29% COMERICA BANK CDs, 11.97% VIEWPOINT BANK CDs, 2.10% U.S. TREASURY, 4.64% FNMA, 16.30% FFCB, 3.78% FHLB, 13.88% FHLMC, 15.37% Objective: It is the policy of the City to diversify its investment portfolio by restricting investments in a single issuer/institution to no more than 35 percent of the portfolio's total book value and to those offering repurchase agreements, collateralized CDs, and local or state of Texas municipal securities to no greater than 15 percent. The purpose of this requirement is to limit market and credit risk. Commercial paper issuers are further restricted by a 5 percent total portfolio limitation. There are no issuer limitations on U.S. Treasuries or FDIC insured products except as they pertain to the overall 35% certificates of deposit (insured and collateralized) restriction. Current 3 Months Ago 1 Year Ago Summary By Issuer: 9/30/2014 6/30/2014 9/30/2013 CDARS CDs 10.29% 9.84% 12.77% COMERICA BANK CDs 11.97% 11.45% 12.34% VIEWPOINT BANK CDs 2.10% 2.01% 2.16% U.S. TREASURY 4.64% 4.45% 1.08% FFCB 3.78% 3.62% 5.19% FHLB 13.88% 12.88% 10.68% FHLMC 15.37% 14.33% 15.92% FNMA 16.30% 19.23% 21.65% GARLAND, TX GENERAL OBG BONDS 0.67% 0.64% 0.71% TEXAS STATE GENERAL OBG BONDS 0.63% 0.60% 0.65% TEXAS SCHOOL DIST GEN OBG BONDS* 5.08% 4.88% 5.34% JP MORGAN SECURITIES LLC 0.84% 0.80% 0.00% TOYOTA MOTOR CREDIT CORP 3.36% 3.21% 0.00% WELLS FARGO DEMAND DEPOSITS 11.09% 12.06% 11.51% Total % % % *Individual issuers are listed on the attached Portfolio Details Report 43

45 CITY OF DENTON : QUARTERLY INVESTMENT REPORT 4th Fiscal Quarter September 30, 2014 Page 5 INVESTMENT POOL Current 3 Months Ago 1 Year Ago Maturity Time Frame: 9/30/2014 6/30/2014 9/30/ Months $ 88,791,251 $ 99,059,403 $ 91,167, Months 57,000,000 26,000,000 42,000, Months 63,375, ,000,000 59,000, Months 183,210, ,585, ,375, Months & Over 82,000, ,000, ,210,000 Total Par Value $ 474,376,251 $ 495,644,403 $ 458,752,034 $550,000,000 $500,000,000 $450,000,000 $400,000,000 $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 Current 3 Months Ago 1 Year Ago Months Months Months 24 Months & Over Objective: The risk of market price volatility is minimized through maturity diversification. Investment maturities are staggered to provide cash flow based on the anticipated needs of the City. Liquidity is achieved by matching investment maturities with forecasted cash flow requirements and by investing in securities with active secondary markets. Short-term local government investment pools and money market mutual funds help to provide daily liquidity and may be utilized as a competitive alternative to fixed income investments. Current 3 Months Ago 1 Year Ago Maturity Time Frame: 9/30/2014 6/30/2014 9/30/ Months 18.72% 19.98% 19.87% Months 12.02% 5.25% 9.16% Months 13.36% 20.58% 12.86% Months 38.62% 30.38% 29.51% 24 Months & Over 17.28% 23.81% 28.60% Total % % % 44

46 CITY OF DENTON : QUARTERLY INVESTMENT REPORT 4th Fiscal Quarter September 30, 2014 Page 6 ECONOMIC SUMMARY Interest Rate History Source: U.S. Federal Reserve Statistical Release (H.15) Fiscal Year Fiscal Year Fiscal Year Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Market Sector: Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Fed Funds (effective) 0.16% 0.18% 0.21% 0.15% 0.12% 0.16% 0.18% 0.18% 0.18% 0.14% 0.09% 0.08% 3-Month U.S. T-Bill 0.03% 0.22% 0.18% 0.12% 0.05% 0.15% 0.12% 0.16% 0.14% 0.10% 0.04% 0.01% 2-Year U.S. T-Note 0.82% 0.93% 1.18% 0.96% 0.87% 0.96% 0.72% 0.43% 0.62% 0.70% 0.41% 0.21% Portfolio Benchmark* 1.82% 1.44% 1.05% 0.63% 0.47% 0.42% 0.39% 0.34% 0.32% 0.30% 0.25% 0.22% Portfolio Yield 2.91% 2.41% 1.86% 1.63% 1.43% 1.22% 1.06% 0.62% 0.65% 0.66% 0.66% 0.62% Fiscal Year Fiscal Year Fiscal Year Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Market Sector: Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Avg Fed Funds (effective) 0.07% 0.13% 0.16% 0.14% 0.16% 0.14% 0.09% 0.08% 0.09% 0.08% 0.10% 0.09% 3-Month U.S. T-Bill 0.01% 0.08% 0.09% 0.11% 0.07% 0.09% 0.05% 0.02% 0.07% 0.05% 0.04% 0.02% 2-Year U.S. T-Note 0.26% 0.34% 0.29% 0.26% 0.26% 0.26% 0.33% 0.40% 0.34% 0.40% 0.45% 0.57% Portfolio Benchmark* 0.18% 0.15% 0.15% 0.16% 0.18% 0.18% 0.16% 0.15% 0.13% 0.13% 0.12% 0.12% Portfolio Yield 0.59% 0.58% 0.56% 0.55% 0.52% 0.50% 0.48% 0.49% 0.50% 0.49% 0.49% 0.51% *Twelve month moving average of a one year U.S. T-bill yield 3.00% FY FY FY FY FY FY % 2.00% 1.50% 1.00% 0.50% 0.00% Dec- 08 Mar- 09 Jun- 09 Sep- Dec- Mar- Jun Sep- Dec- Mar- Jun Sep- Dec- Mar- Jun Sep- Dec- Mar- Jun Sep- Dec- Mar- Jun- Sep Fed Funds 3-Month T-Bill 2-Year T-Note Portfolio Yield Portfolio Benchmark* Fiscal Year: $ $ $ $ $ Fiscal Year to Date Earnings Oct - Dec Oct - Mar Oct - Jun Oct - Sep 3 Months 6 Months 9 Months 12 Months 568,824 $ 1,121,491 $ 1,680,154 $ 2,298, ,749 $ 1,177,337 $ 1,703,496 $ 2,276, ,193 $ 1,239,869 $ 1,862,207 $ 2,511, ,111 $ 1,056,309 $ 1,631,563 $ 2,216,300 1,058,175 $ 1,920,154 $ 2,655,725 $ 3,248,091 QUARTERLY COMMENTARY September 30, 2014 Source: First Southwest Asset Management Economic Summary & TexStar Monthly Newsletter The third calendar quarter was marked by increased volatility in the financial markets stemming from the anticipation of tighter monetary policy with rate hikes nearing, an impending end to the QE3 bond-buying program, lackluster data from the eurozone, China, and Japan, as well as ongoing geopolitical unrest. The concern is disappointing global growth could temper future gains in the U.S. economy. Despite this, most FOMC members project rate hikes to begin in 2015, with general market consensus at six months to a year. According to the October 8, 2014 Bloomberg economist survey, the preliminary median forecast for annualized real GDP growth for both the third calendar quarter, as well as the following three quarters, is 3.0%. 45

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