TOWN OF BRUNSWICK, MAINE

Transcription

1 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2007

2 Comprehensive Annual Financial Report Year ended June 30, 2007 Prepared by: Town of Brunswick Department of Finance

3 Town of Brunswick, Maine Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2007 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal 1 GFOA Certificate of Achievement 7 Organizational Chart 9 List of Elected and Appointed Officials 10 FINANCIAL SECTION Independent Auditors Report 11 Management s Discussion and Analysis 13 Basic Financial Statements: Statement Government-wide Financial Statements: Statement of Net Assets 1 28 Statement of Activities 2 29 Fund Financial Statements: Balance Sheet Governmental Funds 3 30 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 4 31 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 5 32 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual - General Fund 6 33 Statement of Net Assets Proprietary Funds 7 38 Statement of Revenues, Expenses and Changes in Net Assets Proprietary Funds 8 39 Statement of Cash Flows Proprietary Funds 9 40 Statement of Fiduciary Net Assets Fiduciary Funds Statement of Changes in Fiduciary Net Assets Fiduciary Funds Notes to the Financial Statements 43

4 Statement Page Combining and Individual Fund Statements: Combining Balance Sheet All Other Governmental Funds A-1 70 Combining Statement of Revenues, Expenditures and Changes in Fund Balances All Other Governmental Funds A-2 71 Combining Balance Sheet Nonmajor Special Revenue Funds B-1 72 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Special Revenue Funds B-2 73 Combining Balance Sheet Nonmajor Capital Projects Funds C-1 74 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Capital Projects Funds C-2 75 Combining Balance Sheet Nonmajor Permanent Funds D-1 76 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Permanent Funds D-2 77 Combining Balance Sheet Nonmajor Permanent Funds Education Funds D-3 78 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Permanent Funds Education Funds D-4 79 Combining Statement of Fiduciary Net Assets Fiduciary Funds Private Purpose Trust Funds E-1 82 Combining Statement of Changes in Fiduciary Net Assets Fiduciary Funds Private Purpose Trust Funds E-2 83 Combining Statement of Fiduciary Net Assets Fiduciary Funds Private Purpose Trust Funds Scholarship and Education Funds E-3 84 Combining Statement of Changes in Fiduciary Net Assets Fiduciary Funds Private Purpose Trust Funds Scholarship And Education Funds E-4 85 Combining Statement of Fiduciary Net Assets Fiduciary Funds Private Purpose Trust Funds Public Library Funds E-5 86 Combining Statement of Changes in Fiduciary Net Assets Fiduciary Funds Private Purpose Trust Funds Public Library Funds E-6 87 Statement of Changes in Assets and Liabilities Fiduciary Funds Agency Fund E-7 88 STATISTICAL SECTION Table Page Net Assets by Component 1 89 Changes in Net Assets 2 90 Program Revenues by Function/Program 3 92 Fund Balances of Governmental Funds 4 93 Changes in Fund Balances of Governmental Funds 5 94 Governmental Activities Tax Revenue by Source (accrual basis of accounting) 6 96

5 Table Page Governmental Activities Tax Revenue by Source (modified accrual basis of accounting) 7 97 Assessed Value and Estimated Actual Value of Taxable Property 8 98 Direct and Overlapping Property Tax Rates 9 99 Principal Property Taxpayers Total Property Tax Levies and Collections Ratios of Outstanding Debt Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information Principal Employers Demographic and Economic Statistics Full-time Employees by Function/Program Operating Indicators by Function Capital Assets Statistics by Function

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7 INTRODUCTORY SECTION

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9 The Town Manager is required to propose an annual budget to the Town Council by May 1 st. The budget includes various departments and activities, and an education budget approved by the School Board. The Town Council must adopt an annual budget by June 15th. Once adopted, the Charter allows for the transfer of resources within departments. However, transfers between departments require Town Council approval. State law changes, effective for , will require that the electorate, in a budget validation referendum, approve the school budget adopted by the Town Council. Other changes in school governance and administration are required by the law changes. Those changes are summarized in the MD&A. One possibility resulting from those changes would be Brunswick joining a regional school unit (RSU), a separate legal entity. Should the School Department become part of an RSU, it would no longer be a department of the Town of Brunswick. The RSU s budget process and financial reporting would be independent of the Town. However, the Town would be required to levy and collect the property tax assessment determined by the RSU. The Town of Brunswick provides a full range of services including public safety, public works, education, human services, and recreation. The Brunswick Sewer District, a separate legal entity, provides sanitary sewer services. The Brunswick-Topsham Water District, also a separate legal entity, provides water services. These districts are not part of the Town of Brunswick so their financial statements are not included in this report. The financial statements for these districts can be obtained directly from the districts. The Brunswick Development Corporation (BDC) is a separate legal entity established to foster economic development within Brunswick. The BDC is a component unit of the Town of Brunswick and its financial statements are included in this report. Local economy Brunswick is a commercial, industrial and cultural center for the southern section of mid-coast Maine. Naval Air Station Brunswick (NASB), Bowdoin College, Mid Coast Health Services, along with Bath Iron Works (BIW), a shipbuilder located in the nearby city of Bath, are the area s largest employers. Considerable attention was focused on the NASB because of its scheduled closure and on BIW because of its heavy dependence on U.S. Navy shipbuilding contracts. As a result of the 2005 federal Base Realignment and Closure (BRAC) process, NASB is slated to close by September of In preparing for the closure, the Town established the Brunswick Local Redevelopment Authority (BLRA), a local redevelopment authority, whose charge is to examine, plan for, and recommend reuses for the base property and facilities, and to seek opportunities for economic development. Throughout the year, the BLRA continued its work developing its base re-use plan. The BLRA has just recently completed its Master Reuse Plan for BNAS. The plan is expected to be submitted to the Town Council by December 31, The Town Council understands that it will be responsible for zoning the land currently used by NASB. The implementation strategies recommended by the Master Plan will be reviewed for consistency with the Town s economic and land-use goals. The BLRA is wrapping up its work. It will be succeeded by a new group, the Midcoast Regional Redevelopment Authority (MRRA). MRRA, appointed by the State, will have responsibility for the implementation of the re-use plan and management of the property. Citing various sources, the BLRA has said there were nearly 700 civilians and approximately 2,700 military and 862 reservists working on the base. BLRA further states, For every civilian base worker who loses his or her job, an estimate of nearly two additional civilian workers will lose their jobs due to the loss of consumer spending. In addition to the job losses, the Town expects its property tax and revenue base will be negatively impacted. As squadrons and activities leave the base, the Town will continue to review the impact closure has on its operating budgets and capital improvement program (CIP). For Bath Iron Works (BIW), a shipbuilder with contracts almost exclusively related to work for the U.S. Navy, concerns continued to center on the Navy s procurement plans. Currently, BIW is producing the last ships of the DDG-51, or Arleigh Burke, class of destroyers. The DDG-1000 or Zumwalt class, is the Navy s next generation surface combatant. For several years BIW has been concerned that there might 2

10 not be sufficient work during the transition from the DDG-51 to the DDG-1000 class to avoid reductions in BIW s workforce. This has been referred to as the potential procurement gap. Additionally, given the cost of the DDG-1000, concerns have arisen about the Navy s long-term commitment to the DDG-1000 program. Recently, it was reported that BIW would build the first ship in the DDG-1000 class. BIW is cautiously optimistic that the contract will be awarded and that this will help to mitigate the procurement gap and its potential impact on BIW s workforce. Despite this news, it cannot be overemphasized that the eventual fate of the DDG-1000 program and the Navy s procurement plans are not predictable and that those procurement plans will directly impact BIW and its workforce. The Town will continue to monitor BIW and developments in the DDG-1000 program. Mid Coast Health Services (MCHS) and Bowdoin College continued to be strong influences in the local economy. MCHS is pursuing plans for a major expansion of Mid Coast Hospital. The expansion will add approximately 50,000 square feet to the hospital, allowing for more inpatient beds, larger emergency facilities, and room for additional diagnostic examination facilities. MCHS is also pursuing the construction of a new medical office to be located near the hospital. Bowdoin College initiated, continued or completed work on a number of major capital projects. Last year the College completed the construction of several new buildings, including two new residence halls. It has recently completed a renovation and expansion of its nationally renowned Museum of Art. It is also continuing to renovate its first-year residence halls and has recently broken ground on a new ice arena. Long-term financial planning The Charter of the Town of Brunswick requires the annual preparation of a five-year capital improvement program (CIP). The CIP includes a list of all capital improvements, addresses the methods of financing the improvements, and estimates the annual cost to support the CIP. The Town Manager delivered a proposed CIP to the Town Council in May Three reasons were cited for the Town Council s decision to postpone consideration of the proposed CIP. First, the school department was and still is in the planning phase for a new elementary school and has determined that its first choice for the location of a new school is the former site of Brunswick High School. The old high school site is currently used for a number of recreational activities, a municipal meeting/television broadcast center, and storage. Many of these uses would need to be moved to another site should the old high school site ultimately be the site of a new elementary school. Second, a joint development agreement requires the Town to convey land and buildings in the downtown to a private developer as part of an overall development program and project at property known locally as Maine Street Station. Should the project at Maine Street Station proceed, the Town would need to find a new location for the People Plus Center, as it is housed in one of the buildings to be conveyed. Finally, uncertainty created by the closure of the naval air station continues to cast a shadow over the entire CIP process. While the Town has identified and requested properties it would like the Navy to convey to the Town once the base closes, the Navy has not finally determined whether the Town will be required to pay for any of the requested properties. The Town intends to work these costs and related operating costs into the CIP. Further, the Town recognizes that closure of the naval air station will impact Town s capacity to finance capital projects and the related operating costs. The Town continues to evaluate these potential impacts. Relevant financial policies The Town of Brunswick has a policy targeting its unreserved, undesignated General Fund balance at 9.5% of its General Fund revenues. For the year ended June 30, 2007, the amount exceeded the target by $941,865. After a review of the growth and level of its General Fund Balance, the Town decided to use a portion of the amount above its policy target to fund a variety of capital improvements. For the fiscal year ended June 30, 2007, the Town appropriated $1,582,074 from its fund balance for capital improvements. The Town s current and proposed capital improvement programs call for additional projects to be funded from fund balance over the next five fiscal years. In developing the Town s fund balance policy, a number of factors were evaluated, including the strength and diversity of the property tax base. Given the 3

11 approaching closure of Naval Air Station Brunswick and the closure s potential impact on the local economy, the Town plans to continually review its fund balance policy. Major initiatives As previously discussed, the Brunswick Local Redevelopment Authority (BLRA) continued to work on plans for the redevelopment of Brunswick Naval Air Station and the replacement of the jobs that will be lost with its closure. The BLRA will be succeeded by the Midcoast Regional Redevelopment Authority (MRRA) at the end of MRRA will implement the re-use plan and manage base properties. The Elementary School Building Committee continued its work on planning for the construction of a new elementary school. As previously mentioned, the committee and school department identified the site of the old Brunswick High School as its preferred site for the new elementary school. After much debate, the committee favored a grade 3-5 configuration for the school. However, it has expressed a desire to construct the school so that it could be used as a K-5 school should a future school board desire to return to a K-5 configuration for its elementary schools. A large majority of residents who participated in a November straw vote supported the old high school site as the new elementary school site. In January the Town executed a joint development agreement with a private developer to re-develop a Town-owned downtown property known as the Maine Street Station property, a site contaminated with coal ash. Under the agreement, the Town is committed to clean up and provide infrastructure to, and on, the site, all at an estimated cost of $2 million. The Town is also committed to convey the property and an adjacent Town-owned property at no cost to the developer. The developer has the right to withdraw from the agreement without penalty and is evaluating whether to proceed with the first phase of the project. The Town may proceed with the clean-up regardless of the developer s decision to proceed with his project. Also in January, the Town instituted single-stream recycling and pay-per-bag curbside trash collection. Single-stream recycling allows residents to recycle more items than the previous program, all without requiring residents to sort recyclables. The pay-per-bag program requires residents to use Townapproved bags in order to be eligible for curbside trash collection from the Town. The purpose of both of these initiatives is to improve recycling rates and decrease the amount of waste delivered to the Town s solid waste facilities. Early results show a decrease of over 35% in waste being delivered to the landfill. Revenues from the sale of the special bags are intended to be set aside to help fund the closure of the landfill. In February 2007 the Town of Brunswick entered into a three-year agreement with Southern Maine Community College (SMCC) to lease a portion of a building the Town purchased in 2004 with the intent of converting that property to municipal uses. The Town has since abandoned plans to convert the building. As part of the agreement with SMCC, the Town, by June 30, 2007, had completed approximately $700,000 in building renovations and improvements. The Town has spent an additional $100,000 since June 30th. SMCC is using the facility as a composites training center. In September 2007, several years of work culminated with the Town acquiring approximately 124 acres of undeveloped land on Maquoit Bay. The purchase price of $2,700,000 was funded through two Coastal and Estuarine Land Conservation (CELCP) grants from the National Oceanic and Atmospheric Administration and a grant from the Land for Maine s Future Fund (LMF). In addition, a conservation easement on 43 acres of an adjoining property was donated by a neighboring landowner to serve as a match for the CELCP grant. Throughout the year, Town officials worked with the Maine Department of Inland Fisheries and Wildlife to design and construct a new all-tides boat launch on Mere Point Road. The State is constructing the facility at a cost over $1 million and the Town will manage and maintain it. Construction on the launch began in summer 2007 and is expected to be complete and open in spring As part of the approval for Mere Point facility, work will also be done at two other launches, with one being closed to motorized boats. 4

12 Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Brunswick for its comprehensive annual financial report for the year ended June 30, The certificate recognizes that Brunswick published an easily readable and efficiently organized comprehensive annual financial report that satisfied both generally accepted accounting principles and applicable legal requirements. The Town of Brunswick has received this prestigious award every year since A Certificate of Achievement is valid for a period of one year. We believe this year s comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the Government Finance Officers Association to determine its eligibility for a certificate. Finally, this report could not have been completed without the efficient and dedicated services of the entire Finance Department. Special recognition goes to Julie Henze for her dedication and effort in preparing this report. Appreciated also are the efforts of Runyon Kersteen Ouellette for its assistance in the preparation and review of this report. Finally, thank you to retired school superintendent Jim Ashe for all of his cooperation over the thirteen years he served Brunswick. Respectfully submitted, John S. Eldridge, CPFO Director of Finance 5

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15 ORGANIZATIONAL CHART RESIDENTS OF THE TOWN OF BRUNSWICK SCHOOL BOARD TOWN COUNCIL SUPERINTENDENT OF SCHOOLS TOWN TOWN BOARDS AND MANAGER ATTORNEY COMMISSIONS HUMAN FINANCE TOWN CLERK TAX RESOURCES DEPARTMENT ELECTIONS ASSESSING FIRE POLICE PUBLIC HUMAN EMS DEPARTMENT WORKS SERVICES TV 3 PARKS AND PLANNING AND ECONOMIC TELEVISION RECREATION DEVELOPMENT DEVELOPMENT 9

16 LIST OF ELECTED AND APPOINTED OFFICIALS June 30, 2007 Elected Officials Council Member - At large Chair Joanne T. King Council Member - District 3 Vice Chair Hallie Daughtry Council Member - District 1 W. David Watson Council Member - District 2 Jacqueline A. Sartoris Council Member - District 4 Jeffrey A. Schneider Council Member - District 5 Gerald E. Favreau Council Member - District 6 Ryan E. Ewing Council Member - District 7 Newell A. Augur Council Member - At large David C. Webb Appointed Officials Town Manager Town Attorney Assistant Town Manager Director of Finance Assessor Town Clerk Director of Planning and Development Director of Economic Development Fire Chief Police Chief Director of Public Works Director of Human Services Director of Parks and Recreation Superintendent of Schools Donald H. Gerrish Geoffrey H. Hole Gary L. Brown John S. Eldridge Cathleen M. Donovan Frances M. Smith Theodoor H. B. M. Holtwijk Mathew H. Eddy Clark G. Labbe Jerry A. Hinton John A. Foster Mary L. Reindl Thomas M. Farrell James L. Ashe 10

17 FINANCIAL SECTION

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20 Management s Discussion and Analysis As management of the Town of Brunswick, we offer readers of the Town s financial statements this narrative overview and analysis of the financial activities of the Town of Brunswick for the fiscal year ended June 30, This overview and analysis is referred to as Management s Discussion and Analysis (MD&A). We encourage readers to consider the information presented here in conjunction with additional information furnished in our letter of transmittal, which can be found in the introductory section of this comprehensive annual financial report (CAFR). Financial Highlights The assets of the Town of Brunswick exceeded its liabilities at the close of the most recent fiscal year with its net assets totaling $51,045,656. Of this amount, $2,810,503 is classified as unrestricted net assets that may be used to meet the Town s on-going obligations. The Town s total net assets increased by $3,473,242. The Town s total investment in capital assets net of related debt increased by $2,130,337 while all other net assets increased by $1,342,905. The Town of Brunswick s outstanding long-term principal debt increased by $730,908. Of this amount, $3,125,000 was due to a bond issuance, offset by $2,394,092 in debt retirement. The Town also retired a $900,000 one-year note. As of the close of the current fiscal year, the Town of Brunswick s governmental funds reported combined ending fund balances of $15,493,095, an increase of $2,095,885 in comparison with the prior year. Of the total, $8,972,007 is unreserved. Of that amount, $6,771,633 is undesignated. Although unreserved, the balance may be restricted to particular uses in accordance with restrictions established for the individual funds. At the end of the current fiscal year, the unreserved, undesignated fund balance for the General Fund was $6,034,017, representing a reduction of $1,473,785 from the previous year end. Of the reduction, $1,162,313 is due to advances the General Fund made to the Capital Improvements Fund to provide temporary financing for certain projects. The Town s policy is to maintain the unreserved, undesignated fund balance at 9.5% of revenues. At June 30, 2007, this portion of the fund balance is approximately 11.94% and 11.24% of the total General Fund expenditures and revenues respectively. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the Town of Brunswick s basic financial statements. The Town s basic financial statements comprise three components: 1) governmentwide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Town of Brunswick s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the Town s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as an indicator of whether the financial position of the Town is improving or deteriorating. The statement of activities presents information showing how the government s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). 13

21 Both of the government-wide financial statements distinguish functions of the Town that are principally supported by taxes and intergovernmental revenues, governmental activities, from other functions that are intended to recover all or a significant portion of their costs through user fees and charges, businesstype activities. The governmental activities of the Town include general government, public safety, public works, human services, education, recreation/culture, and intergovernmental. The business-type activities of the Town include the Town s solid waste facilities, the pay-per-bag program and the Mere Point Wastewater District. The government-wide financial statements include not only the Town of Brunswick itself (known as the primary government) but also the legally separate Brunswick Development Corporation (BDC). Financial information for this component unit is reported separately from the financial information presented for the primary government itself. The government-wide financial statements can be found on pages 28 & 29 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town of Brunswick, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Town can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town of Brunswick began the year with sixteen, and ended the year with fifteen, individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, the Capital Improvements Fund, and the Impact Fees Fund all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. In accordance with the Charter of the Town of Brunswick, an annual appropriated budget is adopted for the Town s General Fund. It is the only fund with an annual appropriated budget. A budgetary comparison statement has been provided to demonstrate compliance with the General Fund budget. A full discussion of the General Fund budget and highlights for the year are contained later in this MD&A. The basic governmental fund financial statements can be found on pages of this report. Proprietary funds. There are two types of proprietary funds, enterprise funds 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 Town of Brunswick uses enterprise funds to account for its solid waste facilities, the pay-per-bag program and the Mere Point Wastewater District. The Town does not have an internal service fund. The proprietary fund statements provide the same type of information 14

22 as the government-wide financial statements, only in more detail. The basic proprietary fund financial statements can be found on pages of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the Town of Brunswick s own programs. The Town s fiduciary funds are private-purpose trust funds and an agency fund consisting of student activity resources. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statement can be found on pages 41 & 42 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. Other information. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the notes to the financial statements. Combining statements and schedules can be found on pages of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. In the case of the Town of Brunswick, assets exceeded liabilities by $51,045,656 at the close of the most recent fiscal year which is an increase of $3,473,242 during the fiscal year. Further, the Town is able to report positive balances in all three categories of net assets, for the government as a whole. Town of Brunswick s Net Assets Governmental activities Business-type activities Total Current and other assets $20,280,951 $19,464,183 $ 488,401 $ 387,244 $20,769,352 $19,851,427 Capital assets 48,949,331 46,734,848 2,359,347 2,505,552 51,308,678 49,240,400 Total assets 69,230,282 66,199,031 2,847,748 2,892,796 72,078,030 69,091,827 Long-term liabilities outstanding 12,049,740 10,463,059 4,818,413 4,863,416 16,868,153 15,326,475 Other liabilities 4,133,559 5,603,787 30, ,151 4,164,221 6,192,938 Total liabilities 16,183,299 16,066,846 4,849,075 5,452,567 21,032,374 21,519,413 Net assets Invested in capital assets, net of related debt 39,042,020 37,020,478 2,359,347 2,250,552 41,401,367 39,271,030 Restricted 6,833,786 6,304, ,833,786 6,304,457 Unrestricted 7,171,177 6,807,250 (4,360,674) (4,810,323) 2,810,503 1,996,927 Total net assets $53,046,983 $50,132,185 $(2,001,327) $(2,559,771) $51,045,656 $47,572,414 By far the largest portion of the Town s net assets, $41,401,367 or 81.11%, reflects its investment in capital assets (e.g., land, buildings, machinery, equipment, and infrastructure), less any related outstanding debt used to acquire those assets. As the Town uses these capital assets to provide services to citizens, these assets are not available for future spending. Although the Town s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to pay these liabilities. An additional portion, $6,833,786 or 13.39% of the Town of Brunswick s net assets represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, $2,810,503 or 5.51%, may be used to meet the government s ongoing obligations. 15

23 Town of Brunswick s Change in Net Assets Governmental activities Business-type activities Total Revenues Program revenues Charges for services $ 4,835,006 $ 4,936, ,460 $ 719,782 5,624,466 $5,656,077 Operating grants and contributions 20,074,892 17,956, ,074,892 17,956,023 Capital grants and contributions 1,131,548 2,025, ,131,548 2,025,501 General revenues: Property taxes 27,391,240 27,036, ,391,240 27,036,692 Vehicle and watercraft excise taxes 2,595,301 2,628, ,595,301 2,628,484 Grants and contributions not restricted to specific programs 2,298,024 2,286, ,298,024 2,286,073 Unrestricted investment earnings 892, ,312 2,265 34, , ,591 Other 21,201 64, ,201 64,636 Total revenues: 59,239,931 57,459, , ,061 60,031,656 58,213,077 Expenses: General government 6,325,899 5,087, ,325,899 5,087,652 Public safety 5,973,835 5,594, ,973,835 5,594,034 Public works 4,212,477 3,956, ,212,477 3,956,725 Human services 169, , , ,494 Education 34,371,439 32,968, ,371,439 32,968,322 Recreation & Culture 2,397,979 2,361, ,397,979 2,361,284 Intergovernmental 998, , , ,266 Unclassified 898, , , ,312 Interest on long term debt 379, , , ,216 Solid waste facilities ,244 1,714, ,244 1,714,936 Pay-per-bag program , ,956 - Wastewater treatment ,126 45,569 57,126 45,569 Total expenses 55,727,088 51,994, ,326 1,760,505 56,558,414 53,754,810 Increase (decrease) in net assets 3,512,843 5,464,711 (39,601) (1,006,444) 3,473,242 4,458,267 Transfers (598,045) - 598, Increase in net assets 2,914,798 5,464, ,444 (1,006,444) 3,473,242 4,458,267 Net assets beginning of year 50,132,185 44,667,474 (2,559,771) (1,553,327) 47,572,414 43,114,147 Net assets end of year $53,046,983 $50,132,185 $(2,001,327) $(2,559,771) $51,045,656 $47,572,414 While in total the Town s assets exceed its liabilities, results are very different for the governmental activities and the business-type activities and readers must review the analysis pertaining to those portions to fully understand the Town s financial position. That analysis follows. Governmental activities. Governmental activities increased the Town of Brunswick s total net assets by $3,512,843. In total, this increase was $1,951,868 smaller than the previous year s increase. The following highlight the significant changes from the previous year: Property tax revenue, by far the Town s largest revenue, increased by $345,548 or approximately 1.31%. The relatively small increase was due largely to the LD-1 property tax limits and a significant increase of $1,899,262 in state aid for education. Property taxes made up 46.24% of the total revenue, down from 47.05% of the total in the previous year. Operating grants and contributions increased by $2,118,869, largely as the result of the abovementioned increase in state aid for education. Capital grants and contributions decreased by $893,953. The value of assets donated to the Town was $702,164 less than the value of the assets donated in the previous fiscal year. All of the donated assets are infrastructure assets from new residential subdivisions. 16

24 Total expenses increased by 3,732,783. Of this amount, $450,000 results from recognition of a liability for pollution remediation. The bulk of the additional increases were $1,403,117 in education expenses, and $1,238,247 in general government expenses. The following charts illustrate the total expenses by program, and revenues by source, for the Town s governmental activities. $35,000,000 $30,000,000 $25,000,000 Expenses and Program Revenues - Governmental Activities For the year ended June 30, 2007 expenses revenues $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- vehicle and watercraft excise taxes 4.38% Revenues by Source - Governmental Activities For the year ended June 30, 2007 grants and contributions not restricted to specific programs 3.88% charges for services 8.16% miscellaneous revenues 0.04% unrestricted investment earnings 1.51% property taxes 46.24% operating grants and contributions 33.89% capital grants and contributions 1.91% 17

25 Business-type activities. The Town s business type activities consist of three enterprise funds, one accounting for its solid waste facilities, one for the pay-per-bag program and one accounting for a small wastewater district. The following charts illustrate the total expenses by program, and revenues by source, for the Town s business-type activities. Almost all of the revenue is provided through charges for service. Expenses and Program Revenues - Business-type Activities For the year ended June 30, 2007 $700,000 $600,000 expenses revenues $500,000 $400,000 $300,000 $200,000 $100,000 $- Solid Waste Facilities Pay-per-bag Program Wastewater District Revenues by Source - Business-type Activities For the year ended June 30, 2007 unrestricted investment earnings 0.29% charges for services 99.71% 18

26 The Town s business-type activities decreased the Town s total net assets by $39,601. Both the Solid Waste Facilities Fund and the Mere Point Wastewater District experienced operating losses as expenses exceeded revenues. In 2004 the Town established the Solid Waste Facilities Fund and simultaneously increased tipping fees on waste delivered to its facilities. The increased tipping fees resulted in a substantial reduction of the volume of waste delivered. Beginning January 2007 the Town instituted a pay-per-bag curbside collection program and a single stream recycling program. These programs also decreased the volume of solid waste delivered to the landfill. While the reduction in waste delivered to the landfill has extended its life, the Town has not been able to sufficiently reduce operating costs to meet the reduction in revenue. As a result, the fund this year had an operating loss of $76,349. It was only because of a $510,000 one-time General Fund transfer that was used to finance the closure of one of the solid waste facilities that the fund s net asset deficit was reduced by $422,233. Recognizing the need to reduce the deficit in this fund the Town, in its FY 2008 budget has reduced operating hours at the landfill and included a $120,000 General Fund subsidy for the Solid Waste Facilities Fund. The Town Council has also voted its intent that the net funds generated by the Pay-per-bag program be used toward future landfill closure costs. The Pay-per-bag program began in January 2007 and charges residents a fee for each bag of trash collected at curbside. The fee was implemented to encourage recycling. At the same time, the Town also instituted a single stream recycling program that no longer requires residents to sort recyclables and allows for more items to be recycled. The revenues from the Pay-per bag program are intended to be used to fund the closure of the Town s remaining solid waste landfill. By June 30, 2007 the Pay-per-bag program fund had net assets totaling $169,835. The Town s Mere Point Wastewater District also experienced an operating loss. Most of this loss was anticipated as the district does not attempt to recover depreciation expenses in its user fees. However, even if depreciation were excluded, the fund still would have experienced a small loss as the remaining expenses were greater than revenues. User fees for this fund have not changed since it was created in They are currently being reviewed as to both sufficiency and method of levy. The Town is also reviewing the estimated life of, and exploring potential upgrades to, these facilities. Financial Analysis of the Government s Funds As noted earlier, the Town of Brunswick uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the Town of Brunswick s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town 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. At the end of the current fiscal year, the Town s governmental funds reported combined ending fund balances of $15,493,095. Approximately 57.91% of this total amount, $8,972,007, constitutes unreserved fund balance. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed to: 1) education, $4,014,296, 2) highways, and state revenue sharing property tax reduction, totaling $351,058, 3) long-term loans and advances $1,562,313, 4) inventories and prepaids totaling $91,891 and 5) the non-expendable portion of the various activities supported by the permanent funds $501,530. The General Fund is the chief operating fund of the Town of Brunswick. At the end of the current fiscal year, unreserved fund balance of the General Fund was $6,783,087, while the total fund balance was $12,361,263. As a measure of the General Fund s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 13.42% of total General Fund expenditures, while total fund balance represents 24.45% of that same amount. 19

27 Despite a planned and budgeted reduction of $1,470,798, plus additional reductions, in the form of supplemental appropriations, totaling $2,227,074, the fund balance of the Town of Brunswick s General Fund decreased only by $335,770 during the current fiscal year. Key factors in this change are as follows: Total actual revenues exceeded the budget by $1,657,201. Most revenue categories exceeded the budget with the only a few minor exceptions. Total actual expenditures were less than the budget by $1,517,873. Most expenditure lines were within budget. Net transfers between the General Fund and other funds had a positive variance of $187,028 when measured against the budget. The Capital Improvement Fund comprises several projects and has a total negative fund balance of $(188,553). The negative fund balance is largely the result of the purchase of the Brunswick Publishing (a.k.a. Times Record) property. At June 30, 2007 the unfunded costs attributable to the Brunswick Publishing property were $1,137,537. Four other projects had positive balances totaling $948,984. The Impact Fee Fund accounts for a variety of capital improvements for which an impact fee has been levied to fund all or a portion of the improvement. The fees are collected through the Town s site development and subdivision review process. At June 30, 2007, the fund balance totaled $979,592. This represents an increase of $97,423 over the amount reported at the end of the previous year. Proprietary funds. The Town of Brunswick s proprietary funds provide the same type of information found in the government-wide statements, but in more detail. At year end, the Solid Waste Facilities Fund had a deficit in unrestricted net assets of $4,569,226. The Pay-per-bag program Fund had unrestricted net assets of $169,835. The unrestricted net assets of the Mere Point Wastewater District Fund amounted to $38,717. The finances of these funds have been addressed previously in the discussion of the Town of Brunswick s business-type activities. General Fund Budgetary Highlights Original Budget vs. Final Budget Differences between the original and final budgets result from transfers between departments and/or supplemental appropriations made during the year. The transfers between departments are generally the result of the Town s budget management process which constantly monitors department budgets and the budget in total. The Town Council, upon the request of the Town Manager, may transfer funds from departments with anticipated budget surpluses to those with anticipated budget shortfalls. Transfers of this type have no impact on the budget in total. During the year, transfers totaling $435,953 were made from accounts with projected balances to accounts where it appeared that the expenditures would have exceeded the appropriations. The three largest transfers were made for the fire, police, and public works departments. The amount transferred to the Fire Department was $95,000, most of which was to cover unbudgeted overtime costs. The department underestimated the amounts needed to meet minimum staffing levels. With the opening of the Cooks Corner Station, this was the first full year of staffing two stations. Overtime needs were also driven by negotiated increases in the department s hourly wages and a decrease in the number of work hours scheduled per week. For the Police Department, a transfer of $71,000 was made from the Town s wage adjustment account to cover a 3% COLA adjustment and $60,000 was largely to meet unanticipated overtime. Throughout the year the department was not staffed to the level authorized. While this meant full-time wages were well within budget, many officers were required to work additional overtime shifts to meet shift requirements. For the Public Works Department, a transfer of $47,000 was due largely to the result of the spring 2007 Patriot s Day storm that did extensive damage to roads and infrastructure. The additional funds were largely for overtime and materials. 20

28 The other difference between the original and final budgets results from supplemental appropriations made during the year. These differences total $4,839,074. Of that amount, $2,612,000 is the amount the State of Maine contributed to Maine State Retirement System (MSRS) on behalf of employees enrolled in the MSRS Teacher Plan. This on-behalf-of amount increases both the revenue and expenditure budgets. The remaining $2,227,074 represents supplemental appropriations from the unreserved General Fund balance for a variety of purposes. Since they are made from fund balance, there is no increase in the revenue budget; only the expenditure budget is increased. The supplemental appropriations for the year are summarized below. $ 700,000 $ 510,000 $ 365,000 $ 150,000 $ 135,000 to fund renovations at the former Times Record (Brunswick Publishing) Building. to fund the closure of the wood and masonry landfill on River Road. to fund the acquisition and installation of a municipal computer system. to fund the purchase of the storage/garage building at the former Times Record property. to fund start-up costs associated with single-stream recycling and the Pay-per-bag program. $ 80,264 to fund costs relating to the construction of the Cooks Corner Fire Station. $ 75,000 to fund the engineering and design of improvements to a portion of the storm sewer system on Park Row. $ 55,000 to fund the construction of an expansion to the parking lot at the Water Street boat launch. $ 50,000 to fund ADA improvements at various locations operated and maintained by the Parks and Recreation Department. $ 45,000 to fund the purchase of property adjacent to the Edwards Field recreation complex. $ 35,000 to fund the demolition of a building and clean-up of property owned by the Town of Brunswick at 63 Water Street. $ 23,231 to fund unanticipated expenditures relating to the reconstruction of a portion of Pleasant Hill Road. $ 3,579 to fund costs relating to the acquisition of an aerial platform truck for the Brunswick Fire Department. At June 30, 2006, $505,000 of the supplemental appropriations was included in the unreserved, designated General Fund balance, earmarked for the municipal computer system, the Water Street building demolition, the expansion of the Water Street parking lot, and the ADA improvements. All of these projects had been approved in the capital improvement program (CIP). Other projects included in the approved CIP included the wood and masonry landfill closure, the storage/garage building acquisition and the Park Row storm sewer project. These projects totaled $735,000. The remaining supplemental appropriations totaled $987,074 and funded unanticipated expenditures. The largest of these appropriations was to fund renovations of a portion of the former Times Record building, a building the Town had purchased with the intention of converting it to municipal uses. Subsequent to the Town s decision to sell the property, the Town negotiated a lease with the Southern Maine Community College (SMCC) to lease the majority of the building to SMCC for use as a composite training facility. SMCC began classes in the building on February 1, The three-year lease with SMCC calls for the Town to pay the operating costs of the facility. For the year ended June 30, 2007, the Town appropriated $700,000 for renovations to the building. An additional $100,000 has since been appropriated. Another appropriation of $135,000 was approved for start-up costs associated with the Town s pay-perbag solid waste collection and single-stream recycling programs. These programs began on January 22,

29 The remaining supplemental appropriations total $152,074. One appropriation was for $45,000 to fund the acquisition of a piece of land adjacent to the Edward s Field recreations complex. The other three appropriations totaled $107,074 and funded cost overruns associated with three capital projects. Revenues - actual vs. final budget For the year, actual revenues exceeded budgeted revenues, in total, by $1,657,201. The following paragraphs discuss the various components of this total. Actual tax revenues exceeded the budget by $206,335. This is the result of several factors. The actual amount of property tax deferred and the actual amount of tax abatements granted were less than budgeted by $36,266 and $55,921 respectively. Supplemental tax assessments were $23,435 more than budgeted. The total actual taxable valuation of real and personal property was greater than the estimate that was used in the development of the budget, resulting in an additional $76,232 in the property tax levy. Payments in lieu of taxes were approximately $9,090 greater than budgeted. Excise tax collections were $10,301 more than budgeted. On a net basis, the remaining revenues of this category were $4,910 less than budgeted. Actual license and permit revenues exceeded the budget by $91,705. The three areas that make up the largest portion of this difference are in fees collected by the Town Clerk, Codes Enforcement and Planning. The Town Clerk s revenue exceeded projections by $45,354, largely as the result of fee increases adopted after the passage of the budget. For Codes Enforcement, there were a number of unexpected and large projects for which permits were issued, resulting in $30,122 more revenue than budgeted. For Planning, four large unanticipated projects generated the bulk of the $14,756 unbudgeted revenue. The remaining revenues of this category were a total of $1,473 more than budgeted. Actual intergovernmental revenues also exceeded the budget by $469,096. Almost 84.6% or $396,846 of this amount is attributable to unanticipated federal aid received by the School Department. Federal aid to education for Brunswick is computed using a formula that considers the qualifying student population and rates established by the federal government. The variables used in the formulas are difficult to predict. This, coupled with the uncertainties surrounding the federal budget process, causes the school department to conservatively estimate this revenue. The actual number of qualifying students and reimbursement rates produced an amount higher than anticipated. The Town also received funds that were awarded based on activities that occurred in prior years. As part of the total intergovernmental revenues referenced in the preceding paragraph, the Town had four other revenues that exceeded the budget. The Town received $47,994 in unanticipated emergency management funds. State revenue sharing exceed estimates by $40,990. The Town is generally conservative when budgeting this source, as this revenue is primarily dependent on state income and sales tax collections. State aid to the school department exceeded the budget by $562. Finally, the Town also received approximately $552 in unanticipated highway grant funds from the state. This revenue is based on the qualifying mileage in a municipality and a reimbursement rate per mile established by the state. The rate per mile was not known at the time the budget was prepared. The net of all other intergovernmental revenues was less than budgeted by $17,848. Actual charges for service exceeded the budget by $376,288. Approximately 77.90% or $293,111 is the result of greater than anticipated tuition and transportation revenues received by the school department. Most of that is attributable to tuition received for non-resident students attending Brunswick High School. For the fiscal year, approximately 200 non-resident students attended Brunswick High School. Brunswick does not have a formal agreement with the towns that send students to the High School so the number of tuition students attending Brunswick is not guaranteed. Further, the state establishes the tuition rate that Brunswick may charge and that rate is often not determined until well after the school year has begun. As a consequence, the school department is conservative in estimating both the number of tuition students it expects and the reimbursement rate set by the state. The remainder of the excess revenue in this category comes from a variety of sources with the largest variance, $54,081, being for emergency 22