CITY OF WHEAT RIDGE, COLORADO FINANCIAL STATEMENTS

Transcription

1 2012 Comprehensive Financial Annual Report

2 FINANCIAL STATEMENTS December 31, 2012

3 TABLE OF CONTENTS INTRODUCTORY SECTION PAGE Directory of City Officials FINANCIAL SECTION Independent Auditors Report Management s Discussion and Analysis i - x Basic Financial Statements Statement of Net Position 1 Statement of Activities 2 Balance Sheet - Governmental Funds 3 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 4 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 5 Notes to Financial Statements 6-16 Required Supplementary Information Budgetary Comparison Schedule - General Fund 17 Notes to Required Supplementary Information 18 Supplementary Information Combining Balance Sheet - Nonmajor Governmental Funds 19 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds 20 Budgetary Comparison Schedule - Open Space Fund 21 Budgetary Comparison Schedule - Police Investigation Fund 22 Budgetary Comparison Schedule - Municipal Court Fund 23 Budgetary Comparison Schedule - Conservation Trust Fund 24

4 TABLE OF CONTENTS (Continued) FINANCIAL SECTION (Continued) PAGE Supplementary Information (Continued) Budgetary Comparison Schedule - Recreation Center Operating Fund 25 Budgetary Comparison Schedule - Crime Prevention Fund 26 Budgetary Comparison Schedule - Public Art Fund 27 Budgetary Comparison Schedule - Capital Projects Fund 28 Budgetary Comparison Schedule - Equipment Replacement Fund 29 Balance Sheet - Component Unit 30 Statement of Revenues, Expenditures and Changes in Fund Balance - Component Unit 31 Budgetary Comparison Schedule - Wheat Ridge Urban Renewal Authority 32 COMPLIANCE SECTION State Compliance Local Highway Finance Report 33-34

5 INTRODUCTORY SECTION

6 CITY OFFICIALS December 31, 2012 MAYOR Jerry DiTullio CITY COUNCIL District 1 District 2 District 3 District 4 William Starker Joyce Jay George Pond Joseph DeMott Davis Reinhart Kristi Davis Mike Stites Tracy Langworthy CITY CLERK MUNICIPAL JUDGE CITY TREASURER CITY ATTORNEY CITY MANAGER ACCOUNTING SUPERVISOR DIRECTOR OF ADMINISTRATIVE SERVICES DIRECTOR OF COMMUNITY DEVELOPMENT DIRECTOR OF PARKS & RECREATION DIRECTOR OF PUBLIC WORKS CHIEF OF POLICE HUMAN RESOURCE MANAGER PURCHASING AND CONTRACTING AGENT Janelle Shaver Christopher Randall Larry Schulz Gerald Dahl Patrick Goff Linda Stengel Heather Geyer Kenneth Johnstone Joyce Manwaring Timothy Paranto Daniel G. Brennan Tamera Dixon Jennifer Nellis

7 FINANCIAL SECTION

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10 Management s Discussion and Analysis As management of the City of Wheat Ridge, we offer this narrative overview and analysis of the financial activities of the City of Wheat Ridge for the fiscal year ended December 31, Please read it in conjunction with the City s financial statements, which follow this section. Financial Highlights The assets of the City of Wheat Ridge exceeded its liabilities at the close of fiscal year 2012 by $71.9 million (net position). Of this amount, $13.5 million (unrestricted net position) may be used to meet the City s ongoing obligations to citizens and creditors. At the close of fiscal year 2012, the City of Wheat Ridge s governmental funds reported combined ending fund balances of $17.3 million, a decrease of $1.4 million in comparison with the prior year. Approximately 37%, $6.5 million, is available for spending at the government s discretion (unrestricted, unassigned fund balance). At the end of the fiscal year 2012, unrestricted, unassigned fund balance for the general fund was $6.5 million, or 26% of total general fund expenditures. General fund actual revenues were $536,397 less than final budgeted revenue for the fiscal year 2012 and actual expenditures were $2,483,284 less than final budgeted expenditures. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City of Wheat Ridge s basic financial statements. The basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements report information on all activities of the City and its component unit (Wheat Ridge Urban Renewal Authority). The statement of net position includes all of the City s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The statement of net position presents information on all of the City of Wheat Ridge s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Wheat Ridge is improving or deteriorating. The statement of activities presents information showing how the City of Wheat Ridge s net position changed during fiscal year All changes in net position 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 reported in this statement for some items i

11 will result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). The government-wide financial statements include not only the City itself, but also the legally separate Wheat Ridge Urban Renewal Authority for which the City is financially accountable. The governmental activities of the City include general government, community development, police, public works, and parks and recreation. Fund financial statements. The fund financial statements provide more detailed information about the City s most significant funds not the City as a whole. Funds are accounting devices that the City uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by State law and bond covenants. The City Council establishes other funds to control and manage money for particular purposes (like the Recreation Center Operating Fund) or to show that it is properly using certain taxes and grants (like the Conservation Trust Fund). The City has one type of fund: Governmental funds All of the City s basic services are included in governmental funds, which focus on (1) how cash and other financial assets can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detailed short-term view that helps determine whether or not there are more or fewer financial resources that can be spent in the near future to finance the City s programs. Because this information does not encompass the additional long-term focus of the government-wide statements, additional information at the bottom of the governmental funds statement, or on the subsequent page, is provided to explain the relationship (or differences) between them. Financial Analysis of the City as a Whole Net position. As noted earlier, net position may serve over time as a useful indicator of a government s financial position. In the case of the City of Wheat Ridge, assets exceeded liabilities by $71,859,102 at the close of the 2012 fiscal year. By far the largest portion of the City of Wheat Ridge s net position (77%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment). The City of Wheat Ridge uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. An additional portion of the City of Wheat Ridge s net position (4%) represents resources that are subject to external restrictions on how they may be used (open space and parks, ii

12 police investigations, crime prevention activities, government access channel and emergency reserves). The remaining balance of unrestricted net position ($13,547,082) may be used to meet the City s obligations to citizens and creditors. At the end of the current fiscal year, the City of Wheat Ridge is able to report positive balances in net position for the City as a whole, as well as for its governmental funds as a whole. The same situation held true for the prior fiscal year. City of Wheat Ridge Net Position Governmental Activities Current and other assets $19,397,036 $21,293,222 Capital assets $55,571,000 $55,710,793 Total assets $74,968,036 $77,004,015 Long-term liabilities outstanding $1,026,408 $1,060,722 Other liabilities $2,082,526 $2,196,234 Total liabilities $3,108,934 $3,256,956 Net assets: Net investment in capital assets $55,571,000 $55,710,793 Restricted $2,734,020 $2,606,655 Unrestricted $13,554,082 $15,429,611 Total net position $71,859,102 $73,747,059 Changes in Net Position Governmental activities. Governmental Activities decreased the City s total net position by $1.9 million. Capital assets decreased by $139,793 primarily due to depreciation expenses. Restricted net position increased by approximately 5% in This increase is primarily due to a decrease in expenditures in the Crime Prevention Fund following the consolidation of code enforcement expenditures to the Community Services Unit in the Police Department. There was also a decrease in expenditures in the Open Space Fund following the completion of major construction activities from the Discovery Park project. iii

13 City of Wheat Ridge Changes in Net Position Governmental Activities Revenues Program Revenues Charges for services $4,488,067 $4,674,410 Operating grants and contributions $2,324,670 $2,036,458 Captial grants and contributions $2,980,464 $2,433,301 General Revenues Property taxes $731,234 $765,892 Sales taxes $15,480,177 $15,219,227 Use taxes $2,599,445 $2,519,590 Franchise taxes $1,566,256 $1,625,593 Other taxes $1,469,556 $1,416,361 Investment earnings $130,653 $355,812 Miscellaneous $471,294 $389,998 Total revenues $32,241,816 $31,436,642 Expenses General Government $8,670,891 $8,154,250 Community Development $843,154 $844,495 Police $8,922,991 $8,731,306 Public Works $8,396,233 $7,284,479 Parks and Recreation $7,296,504 $6,994,350 Total expenses $34,129,773 $32,008,880 Change in net position -$1,887,957 -$572,238 Net position, beginning $73,747,059 $74,319,297 Net position, ending $71,859,102 $73,747,059 General Government expenses include budgets for the City Treasurer, Legislative Services, Finance, City Manager, City Attorney, City Clerk s Office, Municipal Court, Administrative Services, Human Resources, Sales Tax, Purchasing and Contracting, Information Technology and Central Charges. Capital grants and contributions increased by 22% in In 2012, the City received several large grants from Jefferson County Open Space including a Joint Venture Grant and Colorado State Lottery proceeds used for the construction of Discovery Park. Sales taxes increased by 1.7% over 2011 primarily due to the improvements in the national and local economies. Investment earnings decreased by 63% in 2012 as a result of continued low interest rates. Miscellaneous revenues increased by 21% in In 2012, the City received several one-time revenues for increased cellphone tower rentals, reimbursements for property casualty cases and increased proceeds from items sent to auction. iv

14 Total expenses increased by about $2.1 million primarily due to the loan the City issued to the Wheat Ridge Urban Renewal Authority for the Town Center North Project. Investment earnings.4% Revenues by Source - Governmental Activities Use taxes 8% Other taxes 5% Franchise taxes 5% Miscellaneous 1.6% Charges for services 14% Operating grants and contributions 7% Capital grants and contributions 9% Sales taxes 48% Property taxes 2% Expenses and Program Revenues - Governmental Activities $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 General Government Community Development Police Public Works Parks and Recreation Expenses Program Revenues v

15 Financial Analysis of the City s Funds The focus of the City of Wheat Ridge s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Wheat Ridge s financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of the end of fiscal year 2012, the City of Wheat Ridge s governmental funds reported combined ending fund balances of $17 million, a decrease of $1.5 million in comparison with the prior year. Approximately 37% of this total amount ($6.5 million) constitutes unrestricted, unassigned fund balance, which is available for spending at the City s discretion. The remainder of fund balance is restricted to indicate that it is not available for new spending because it has already been restricted : 1) for Urban Renewal Authority loan collateral ($2.2 million); 2) for open space and parks ($1.3 million); 3) for Police Investigations Fund activities ($42,276); 4) for Crime Prevention Fund activities ($291,879); 5) for government access channel ($179,987) and 6) for state mandated emergency reserves ($905,000) or committed: 1) for Municipal Court Fund ($65,876); 2) for Recreation Center Fund ($1.3 million); and 3) for Public Art Fund ($13,956) or assigned for: 1) for Capital Projects Fund ($4.2 million); and 2) for Capital Equipment Replacement Fund ($270,317). The General Fund is the chief operating fund of the City of Wheat Ridge. At the end of fiscal year 2012, unrestricted, unassigned fund balance of the General Fund was $6.5 million, while total general fund balance reached approximately $9.8 million. As a measure of the General Fund s liquidity, it may be useful to compare both unrestricted, unassigned fund balance and total fund balance to total fund expenditures. Unrestricted, unassigned fund balance represents 26% of total General Fund expenditures, while total fund balance represents 39% of that same amount. There were notable fund balance changes in several special revenue funds at the end of fiscal year 2012: The Conservation Trust Fund saw an increase in fund balance by $112,386 due to fewer expenditures in 2012 and funding allocated for the Kendall Park site that was under design. In the Capital Projects Fund, ending fund balance decreased by $491,505 due to a decrease in actual revenue received for the 32 nd and Youngfield Roadway project. The fund balance of the Recreation Center Operating Fund decreased by $206,702. As the Recreation Center ages, more maintenance projects are required which has attributed to this fund balance decrease. The Crime Prevention Fund increased by $32,276 as a result of a decrease in operating expenditures and the consolidation of code enforcement to the Community Services Unit in the Police Department. The ending fund balance in the Open Space Fund saw a minimal increase of $26,603 due to the completion of the Discovery Park project. vi

16 The fund balance in the Public Art Fund increased to $13,956 due to an increase in construction activity in the City. The Police Investigation Fund decreased by $11,273 due to the Police Department Training Room improvements completed in General Fund Budgetary Highlights The original budget was amended by City Council for a total of $806,898 in supplemental budget appropriations throughout the 2012 fiscal year. These amendments can be briefly summarized as follows: Supplemental Budget Appropriations $306,802 allocated for prior year encumbrances $189,024 allocated for Wheat Ridge Town Center ESTIP $105,876 allocated for the Zoppe Family Circus during the Carnation Festival $ 71,209 allocated for WRTV8 software, hardware and equipment maintenance $ 50,000 allocated for EPA Brownfields Assessment Grant $ 21,050 allocated for Police Pension Plan expenses $ 27,000 allocated for the Wheat Ridge Cyclery ESTIP $ 19,022 allocated for the Edward Byrne Justice Assistance Grant $ 6,908 allocated for 2009 JAG Police Department Grant $ 5,000 allocated for LEAF Grant for DUI Enforcement $ 3,007 allocated for 2012 Municipal General Election Expenses $ 2,000 allocated for 38 th Avenue Pedestrian/Bicycle Count Grant Capital Asset and Debt Administration Capital assets. The City of Wheat Ridge s investment in capital assets for its governmental activities as of December 31, 2012 amounts to $55.6 million (net of accumulated depreciation). This investment in capital assets includes land, artwork, land improvements, buildings, vehicles, machinery and equipment, infrastructure and software. Major capital asset events during the 2012 fiscal year totaled $4.0 million and included the following: Artwork in the amount of $5,000 Land in the amount of $19,176 o Right of Way Dedication Construction in Progress in the amount of $58,953 o Wadsworth Boulevard Multi-use Trail Land Improvements in the amount of $2,110,810 o Wadsworth Boulevard Multi-use Trail o Construction of Discovery Park Phase III o Construction of Skate Park at Discovery Park vii

17 o Park Signs Prospect, Lewis Meadows, Panorama, Hayward, Richards Hart Estate o Construction of Town Center North Urban Renewal Authority Project Buildings in the amount of $160,055 o HVAC Replacement for IT Server Room at City Hall o Roof Replacement at the Richards Hart Estate o New Cabinets for the Police Department Training Room o Carpet replacement at the Recreation Center Vehicles in the amount of $359,805 o Four police patrol vehicles o One police motorcycle o One recreation minivan o One parks and recreation maintenance 4x4 truck o One parks, forestry and open space truck with a plow o One public works dump truck Machinery and Equipment in the amount of $634,857 o Decisional Shooting System for Police Department o Portable Security Scanner o Traffic Camera System for 38 th & High Court o Replacement of IT Cisco Core Switch o WRTV8 Newtek Tricaster o IT Server Upgrades o Plotter Printer for Engineering o Presentation System Equipment for the Police Department Conference Room o Installation of 30 Bus Stop Shelters throughout the City o One Toro Lawnmower o One Tractor o One Aerator o Shelving for the Police Crime Lab o Playground Equipment Replacement at Paramount Park Infrastructure in the amount of $626,061 o Town Center North Urban Renewal Authority Project viii

18 City of Wheat Ridge s Capital Assets (net of depreciation) Governmental Activities Land $13,800,799 $13,781,623 Artwork $84,295 $79,295 Construction in Progress $146,402 $854,932 Land improvements $6,602,327 $4,927,464 Buildings $13,262,934 $13,748,767 Vehicles $1,111,757 $969,358 Machinery and equipment $3,613,824 $3,383,753 Infrastructure $16,945,992 $17,954,231 Software $2,670 $11,370 Total Capital Assets $55,571,000 $55,710,793 Long-term debt. At the end of the 2012 fiscal year, the City of Wheat Ridge had total long-term debt outstanding of $1,026,408. Of this amount, $95,591 is due within one year. This total debt represents compensated absences and claims payable, which are expected to be liquidated primarily with revenues of the General Fund. Economic Factors and Next Year s Budgets and Rates The City s sales and use tax rate for 2012 was 3%. The mill levy was mills. Both rates are among the lowest in the Denver metro area. The City Council reviewed alternative revenue options in 2012 but did not ask voters to increase the sales tax or property tax rates in City Council is taking a 1 percent sales and use tax increase to the voters in 2013 which is projected to generate approximately $6 million in additional revenue in During the 2012 fiscal year, unrestricted/unassigned fund balance in the General Fund decreased to $6.4 million, a decrease of $2.7 million from the previous year. The decrease in unrestricted/unassigned fund balance can be primarily attributed to an increase in funding the Urban Renewal Authority for the Town Center North Project in the form of a non-interest bearing loan. The 2013 General Fund budget was adopted without using any of the fund balance. However, $860,000 was transferred to the Capital Projects Fund for capital improvements and $100,000 to the Equipment Replacement Fund for the replacement of major assets such as the police department records management and computer aided dispatch systems. ix

19 The adopted 2013 fiscal year budget is $45 million. It includes a $28.7 million operating budget and a $13 million Capital Investment Program budget. Additional funds were allocated to the Capital Projects Fund budget as a result of significant grant funding for 32 nd Avenue widening project and bus shelter installations in addition to annual street preventative maintenance projects. As seen in 2011, the 2012 Budget consisted of base services and programs. While the City began to see signs of economic recovery in our revenue base, revenues remained flat. Actual expenditures in 2012 were significantly less than budgeted which increased the ending fund balance and helped offset the decrease in budgeted revenues. If the sales tax increase does not pass in November 2013, the City will need to start evaluating the current level of operating budget services and programs or draw down reserves to the minimum 17 percent level in order to fund minimal preventative street maintenance in Requests for Information This financial report is designed to provide a general overview of the City of Wheat Ridge s finances for those with an interest in the City s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: Administrative Services Director City of Wheat Ridge 7500 W. 29 th Avenue Wheat Ridge, Colorado x

20 BASIC FINANCIAL STATEMENTS

21 STATEMENT OF NET POSITION December 31, 2012 PRIMARY GOVERNMENT COMPONENT UNIT GOVERNMENTAL URBAN RENEWAL ACTIVITIES AUTHORITY ASSETS Cash and Investments $ 13,446,302 $ 2,008,578 Accounts Receivable 2,409,826 - Property Taxes Receivable 742,532 - Intergovernmental Receivables 577, ,057 Accrued Interest Receivable 20,077 - Due from Component Unit 2,200,739 - Property Held for Resale - 1,350,000 Capital Assets, Not Being Depreciated 14,031,496 - Capital Assets, Net of Accumulated Depreciation 41,539,504 - TOTAL ASSETS 74,968,036 3,515,635 LIABILITIES Accounts Payable 703, ,143 Accrued Liabilities 395,338 - Refundable Deposits 197,280 - Deferred Revenues 785,974 - Due to Primary Government - 2,200,739 Noncurrent Liabilities Due Within One Year 95, ,250 Due in More Than One Year 930,817 2,271,397 TOTAL LIABILITIES 3,108,934 4,846,529 NET POSITION Net Investment in Capital Assets 55,571,000 - Restricted for Open Space and Parks 1,314,878 - Restricted for Police Investigations 42,276 - Restricted for Crime Prevention Activities 291,879 - Restricted for Government Access Channel 179,987 - Restricted for Emergencies 905,000 - Unrestricted 13,554,082 (1,330,894) TOTAL NET POSITION $ 71,859,102 $ (1,330,894) The accompanying notes are an integral part of the financial statements. 1

22 STATEMENT OF ACTIVITIES Year Ended December 31, 2012 PROGRAM REVENUES OPERATING CAPITAL CHARGES FOR GRANTS AND GRANTS AND FUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS PRIMARY GOVERNMENT Governmental Activities General Government $ 8,670,891 $ 120,085 $ 135,607 $ - Community Development 843, ,388 2,000 - Police 8,922, , ,292 30,696 Public Works 8,396,233 97,465 1,539,371 1,681,660 Parks and Recreation 7,296,504 2,794,249 11,400 1,268,108 Total Primary Government $ 34,129,773 $ 4,488,067 $ 2,324,670 $ 2,980,464 COMPONENT UNIT Urban Renewal Authority $ 1,569,534 $ - $ - $ - GENERAL REVENUES Property Taxes Sales Taxes Use Taxes Franchise Taxes Other Taxes Investment Income Miscellaneous TOTAL GENERAL REVENUES CHANGE IN NET POSITION NET POSITION, Beginning NET POSITION, Ending The accompanying notes are an integral part of the financial statements. 2

23 NET (EXPENSE) REVENUE AND CHANGE IN NET POSITION PRIMARY COMPONENT GOVERNMENT UNIT GOVERNMENTAL URBAN RENEWAL ACTIVITIES AUTHORITY $ (8,415,199) $ - (212,766) - (7,408,123) - (5,077,737) - (3,222,747) - (24,336,572) - - (1,569,534) 731,234 16,383 15,480, ,023 2,599,445-1,566,256-1,469, ,653 26, ,294 20,324 22,448, ,034 (1,887,957) (1,040,500) 73,747,059 (290,394) $ 71,859,102 $ (1,330,894)

24 BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2012 OTHER CAPITAL GOVERNMENTAL GENERAL PROJECTS FUNDS TOTALS ASSETS Cash and Investments $ 6,013,004 $ 4,168,933 $ 3,264,365 $ 13,446,302 Accounts Receivable 2,185,839 12, ,316 2,409,826 Property Taxes Receivable 742, ,532 Intergovernmental Receivables 542,376 35, ,560 Accrued Interest Receivable 1,385 18, ,077 Due from Component Unit 2,200, ,200,739 TOTAL ASSETS $ 11,685,875 $ 4,235,327 $ 3,475,834 $ 19,397,036 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable $ 559,666 $ 62,894 $ 81,374 $ 703,934 Accrued Liabilities 346,389-48, ,338 Refundable Deposits 197, ,280 Deferred Property Taxes 742, ,532 Deferred Revenues 85,517-9,000 94,517 TOTAL LIABILITIES 1,931,384 62, ,323 2,133,601 FUND BALANCES Nonspendable Due from Component Unit 2,200, ,200,739 Restricted for Open Space and Parks - - 1,314,878 1,314,878 Restricted for Police Investigations ,276 42,276 Restricted for Crime Prevention Activities , ,879 Restricted for Government Access Channel 179, ,987 Restricted for Emergencies 905, ,000 Committed to Municipal Court ,876 65,876 Committed to Recreation Center - - 1,337,329 1,337,329 Committed to Public Art ,956 13,956 Assigned to Capital Projects - 4,172,433-4,172,433 Assigned to Equipment Replacement , ,317 Unrestricted, Unassigned 6,468, ,468,765 TOTAL FUND BALANCES 9,754,491 4,172,433 3,336,511 17,263,435 TOTAL LIABILITIES AND FUND BALANCES $ 11,685,875 $ 4,235,327 $ 3,475,834 $ 19,397,036 Amounts Reported for Governmental Activities in the Statement of Net Position are Different Because: Total Fund Balances of Governmental Funds $ 17,263,435 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in governmental funds 55,571,000 Long-term liabilities, including compensated absences ($983,624) and claims payable ($42,784), are not due payable in the current year and, therefore, are not reported in governmental funds. (1,026,408) Certain long-term assets are not available to pay current expenditures and, therefore, are deferred in the funds. 51,075 Total Net Position of Governmental Activities $ 71,859,102 The accompanying notes are an integral part of the financial statements. 3

25 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year Ended December 31, 2012 OTHER CAPITAL GOVERNMENTAL GENERAL PROJECTS FUNDS TOTALS REVENUES Taxes $ 21,352,400 $ 196,981 $ 297,287 $ 21,846,668 Licenses and Permits 671, ,848 Intergovernmental 2,186, ,032 1,450,100 4,193,735 Charges for Services 993,431 7,500 2,028,015 3,028,946 Fines and Forfeitures 730,291-56, ,273 Investment Income 71,419 45,015 14, ,653 Miscellaneous 427,741 19,180 24, ,294 TOTAL REVENUES 26,433, ,708 3,870,976 31,130,417 EXPENDITURES Current General Government 8,689,874-38,439 8,728,313 Community Development 836, ,551 Police 8,519, ,279 8,821,726 Public Works 3,827, ,827,096 Parks and Recreation 3,436,275-3,478,195 6,914,470 Capital Outlay - 3,218, ,573 3,463,266 TOTAL EXPENDITURES 25,309,243 3,218,693 4,063,486 32,591,422 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 1,124,490 (2,392,985) (192,510) (1,461,005) OTHER FINANCING SOURCES (USES) Transfers In - 1,901, ,000 2,001,480 Transfers Out (2,001,480) - - (2,001,480) TOTAL OTHER FINANCING SOURCE (USES) (2,001,480) 1,901, ,000 - NET CHANGE IN FUND BALANCES (876,990) (491,505) (92,510) (1,461,005) FUND BALANCES, Beginning 10,631,481 4,663,938 3,429,021 18,724,440 FUND BALANCES, Ending $ 9,754,491 $ 4,172,433 $ 3,336,511 $ 17,263,435 The accompanying notes are an integral part of the financial statements. 4

26 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year Ended December 31, 2012 Amounts Reported for Governmental Activities in the Statement of Activities are Different Because: Net Change in Fund Balances of Governmental Funds $ (1,461,005) Capital outlays to purchase or construct capital assets are reported in governmental funds as expenditures. However, for governmental activities those costs are capitalized in the statement of net position and are allocated over their estimated useful lives as annual depreciation expense in the statement of activities. This is the amount by which depreciation expense ($3,341,456) and disposals ($5,571) exceeded capital outlay $1,774,362 and capital contributions $1,432,872 in the current year. (139,793) Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. This includes the change in compensated absences $45,692 and in claims payable ($11,378). 34,314 Revenues in the statement of activities that do not provide current financial resources are deferred in the governmental funds. (321,473) Change in Net Position of Governmental Activities $ (1,887,957) The accompanying notes are an integral part of the financial statements. 5

27 NOTES TO FINANCIAL STATEMENTS December 31, 2012 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Wheat Ridge, Colorado (the City ) was incorporated in August, 1969, and became a home rule city in 1976, as defined by State statutes. The City is governed by a Mayor and eightmember Council elected by the residents. The accounting policies of the City conform to generally accepted accounting principles as applicable to government entities. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Reporting Entity The financial reporting entity consists of the City, organizations for which the City is financially accountable, and organizations that raise and hold economic resources for the direct benefit of the City. All funds, organizations, institutions, agencies, departments and offices that are not legally separate are part of the City. Legally separate organizations for which the City is financially accountable are considered part of the reporting entity. Financial accountability exists if the City appoints a voting majority of the organization s governing board and is able to impose its will on the organization, or if the organization provides benefits to, or imposes financial burdens, on the City. Based on the application of these criteria, the City includes the following entity in its reporting entity. The Wheat Ridge Urban Renewal Authority (the Authority ) was created to redevelop or rehabilitate certain blighted areas within the City. The Authority board members are appointed by the Mayor and City Council. Although the Authority is legally separate from the City, the Authority s primary revenue source, tax increment financing, can only be established by the City. The Authority does not issue separate financial statements. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all activities of the City and its component unit. For the most part, the effect of interfund activity has been removed from these statements. Exceptions to this general rule are charges for interfund services that are reasonably equivalent to the services provided. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported in a single column. The primary government is reported separately from the legally separate component unit for which the City is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of the given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Internally dedicated resources are reported as general revenues rather than as program revenues. 6

28 NOTES TO FINANCIAL STATEMENTS December 31, 2012 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Government-wide and Fund Financial Statements (Continued) Separate financial statements are provided for governmental funds. Major individual funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when the liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collected within the current year or soon enough thereafter to pay liabilities of the current year. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current year. Taxes, intergovernmental revenues, and interest associated with the current year are considered to be susceptible to accrual and so have been recognized as revenues of the current year. All other revenues are considered to be measurable and available only when cash is received by the City. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, are recorded only when payment is due. When both restricted and unrestricted resources are available for use, it is the City s practice to use restricted resources first, then unrestricted resources as they are needed. The City reports the following major governmental funds: The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The Capital Projects Fund accounts for the accumulation of resources from a lodging tax, intergovernmental revenues and General Fund transfers for the acquisition or construction of major capital assets. Assets, Liabilities and Net Position/Fund Balances Cash and Investments - Investments are reported at fair value. 7

29 NOTES TO FINANCIAL STATEMENTS December 31, 2012 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Assets, Liabilities and Net Position/Fund Balances (Continued) Receivables - Accounts receivable include sales, use and lodging taxes. Receivables are reported at their gross value and, where appropriate, are reduced by the estimated portion that is expected to be uncollectible. Property Held for Resale - Property that is held with the intent to sell is reported at the estimated fair market value. Capital Assets - Capital assets, which include property, equipment, and infrastructure acquired or constructed since 1980, are reported in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of $5,000 or more and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized. Capital assets are depreciated using the straight-line method over the following estimated useful lives. Land Improvements Buildings Vehicles, Machinery and Equipment Infrastructure Software years years 3-40 years years 5 years Deferred Revenues - Deferred revenues include intergovernmental grants that have been collected but the corresponding expenditures have not been incurred, license fees collected in advance, and property taxes earned but levied for a subsequent year. Revenues not available as current financial resources are deferred in the governmental fund financial statements. Compensated Absences - Employees of the City are allowed to accumulate unused vacation and sick time up to a maximum based on years of service. Upon termination of employment from the City, an employee will be compensated for all accrued vacation time at their current pay rate. A long-term liability has been reported in the government-wide financial statements for the accrued vacation time. Long-Term Debt - In the government-wide financial statements, long-term debt and other longterm obligations are reported as liabilities. In the fund financial statements, governmental funds recognize the face amount of debt issued as other financing sources. Governmental funds recognize long-term liabilities only when payment is due. Payments of long-term debt are reported as current expenditures. 8

30 NOTES TO FINANCIAL STATEMENTS December 31, 2012 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Assets, Liabilities and Net Position/Fund Balances (Continued) Net Position/Fund Balances - In the government-wide and fund financial statements, net position and fund balances are restricted when constraints placed on the use of resources are externally imposed. As reported in the fund financial statements, the City Council establishes a fund balance commitment through passage of a resolution. The City Council has delegated to the City Manager or his designee the authority to assign fund balances for specific purposes. As adopted by City Council policy, the City will maintain a minimum unrestricted fund balance of at least two months, or approximately 17%, of its General Fund operating expenditures. When expenditures are incurred for purposes for which both restricted and unrestricted fund balances are available, the City s policy is to use restricted amounts first, followed by committed, assigned and unassigned amounts. Property Taxes Property taxes attach as an enforceable lien on property on January 1, are levied the following December, and collected in the subsequent year. Taxes are payable in full on April 30 or in two installments on February 28 and June 15. The County Treasurer s office collects property taxes and remits to the City on a monthly basis. Since property tax revenues are collected in arrears during the succeeding year, a receivable and corresponding deferred revenue are reported at year end. Contraband Forfeitures The Colorado Contraband Forfeiture Act allows law enforcement agencies to retain proceeds from the seizure of contraband. These transactions are reported in the Police Investigation Special Revenue Fund. NOTE 2: CASH AND INVESTMENTS A summary of cash and investments at December 31, 2012, follows: Petty Cash $ 3,150 Cash Deposits 12,386,132 Investments 3,065,598 Total $ 15,454,880 9

31 NOTES TO FINANCIAL STATEMENTS December 31, 2012 NOTE 2: CASH AND INVESTMENTS (Continued) Cash and investments are reported in the financial statements as follows: Cash and Investments - Primary Government $ 13,446,302 Cash and Investments - Component Unit 2,008,578 Total $ 15,454,880 Cash Deposits The Colorado Public Deposit Protection Act (PDPA) requires all local government entities to deposit cash in eligible public depositories. Eligibility is determined by State regulations. Amounts on deposit in excess of federal insurance levels must be collateralized by eligible collateral as determined by the PDPA. The PDPA allows the financial institution to create a single collateral pool for all public funds held. The pool is to be maintained by another institution, or held in trust for all uninsured public deposits as a group. The market value of the collateral must be at least equal to 102% of the uninsured deposits. At December 31, 2012, the City and the Authority had bank deposits of $7,735,647 and $1,731,710, respectively, collateralized with securities held by the financial institutions agents but not in their name. Investments The City and the Authority are required to comply with State statutes which specify investment instruments meeting defined rating, maturity and concentration risk criteria in which local governments may invest. State statutes do not address custodial risk. The City has further restricted the investments of the City to the following. U.S. Treasury Obligations Federal Instrumentality Securities Prime Commercial Paper Local Government Investment Pools The City and the Authority had the following investments at December 31, 2012: Investment Maturities (in years) Investment Type S&P Rating Less Than Fair Value Local Government Investment Pool AAAm $ 23,972 $ - $ 23,972 U.S. Agency Securities AA+ - 3,041,626 3,041,626 Total $ 23,972 $ 3,041,626 $ 3,065,598 Interest Rate Risk - State statutes generally limit investments to an original maturity of five years unless the governing board authorizes the investment for a period in excess of five years. Credit Risk - State statutes limit most investments to those with certain ratings from nationally recognized statistical rating organizations, depending on the type of investment. 10

32 NOTES TO FINANCIAL STATEMENTS December 31, 2012 NOTE 2: CASH AND INVESTMENTS (Continued) Investments (Continued) Concentration of Credit Risk - State statutes do not limit the amount the City may invest in one issuer, except for corporate securities. At December 31, 2012, the City s investments in the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, and Federal Home Loan Bank were 75%, 16% and 8%, respectively, of total investments. Local Government Investment Pool - At December 31, 2012, the Authority had $23,972 invested in the Colorado Local Government Liquid Asset Trust (Colotrust), an investment vehicle established for local government entities in Colorado to pool surplus funds. The Colorado Division of Securities administers and enforces the requirements of creating and operating Colotrust. Colotrust operates in conformity with the Securities and Exchange Commission s Rule 2a-7 as promulgated under the Investment Company Act of 1940, as amended. Colotrust is rated AAAm by Standard and Poor s. Investments of Colotrust are limited to those allowed by State statutes. A designated custodial bank provides safekeeping and depository services in connection with the direct investment and withdrawal functions. The custodian s internal records identify the investments owned by the participating governments. Legal Compliance At December 31, 2012, the City owned certificates of deposits with a balance of $1,168,286 held by banks not registered under the PDPA. This may be a violation of State statutes. NOTE 3: COMPONENT UNIT LOAN During 2008, the City loaned $410,145 to the Authority to collateralize a redevelopment loan. During 2012, the City loaned an additional $1,790,594 to the Authority as additional collateral. The loans are non-interest bearing. The Authority is required to repay the loans when the redevelopment properties are sold or on April 14, 2014, whichever occurs first. 11

33 NOTES TO FINANCIAL STATEMENTS December 31, 2012 NOTE 4: CAPITAL ASSETS Capital asset activity for the year ended December 31, 2012, is summarized below. Balances Balances 12/31/11 Additions Deletions 12/31/12 Governmental Activities Capital Assets, Not Being Depreciated Land $ 13,781,623 $ 19,176 $ - $ 13,800,799 Artwork 79,295 5,000-84,295 Construction in Progress 854,932 58, , ,402 Total Capital Assets, Not Being Depreciated 14,715,850 83, ,483 14,031,496 Capital Assets, Being Depreciated Land Improvements 8,184,793 2,110,810-10,295,603 Buildings 21,944, ,055-22,104,353 Vehicles 4,304, , ,993 4,528,202 Machinery and Equipment 6,244, , ,760 6,743,106 Infrastructure 62,717, ,061-63,343,812 Software 211,692-10, ,739 Total Capital Assets, Being Depreciated 103,606,933 3,891, , ,215,815 Less Accumulated Depreciation Land Improvements 3,257, ,947-3,693,276 Buildings 8,195, ,888-8,841,419 Vehicles 3,335, , ,993 3,416,445 Machinery and Equipment 2,860, , ,189 3,129,282 Infrastructure 44,763,520 1,634,300-46,397,820 Software 200,322 8,700 10, ,069 Total Accumulated Depreciation 62,611,990 3,341, ,135 65,676,311 Total Capital Assets, Being Depreciated, Net 40,994, ,132 5,571 41,539,504 Governmental Activities Capital Assets, Net $ 55,710,793 $ 633,261 $ 773,054 $ 55,571,000 Depreciation expense was charged to programs of the City as follows: General Government $ 269,586 Community Development 6,603 Police 173,901 Public Works 1,791,547 Parks and Recreation 1,099,819 Total $ 3,341,456 12

34 NOTES TO FINANCIAL STATEMENTS December 31, 2012 NOTE 5: LONG-TERM DEBT Following is a summary of long-term debt transactions for the year ended December 31, Balances Balances Due Within 12/31/11 Additions Payments 12/31/12 One Year Governmental Activities Compensated Absences $ 1,029,316 $ 7,141 $ 52,833 $ 983,624 $ 52,807 Claims Payable 31, ,954 89,576 42,784 42,784 Total $ 1,060,722 $ 108,095 $ 142,409 $ 1,026,408 $ 95,591 Compensated absences are expected to be liquidated primarily with revenues of the General Fund. Balances Balances Due Within 12/31/11 Additions Payments 12/31/12 One Year Urban Renewal Authority Loan Payable $ 2,655,228 $ - $ 187,581 $ 2,467,647 $ 196,250 In April 2008, the Authority entered into a loan agreement with FirstBank of Wheat Ridge in the amount of $3,285,000 to purchase property for redevelopment. The loan bears interest at 4% per th annum. Principal and interest payments of $24,389 are due on the 15 of each month with a final balloon payment of $2,227,205 due on April 15, Future debt service requirements to maturity are as follows: Year Ended December 31, Principal Interest Total 2013 $ 196,250 $ 96,424 $ 292, ,271,397 30,194 2,301,591 Total $ 2,467,647 $ 126,618 $ 2,594,265 NOTE 6: INTERFUND TRANSACTIONS During the year ended December 31, 2012, the General Fund transferred $1,901,480 and $100,000 to the Capital Projects and Equipment Replacement Funds, respectively, to finance capital projects and equipment purchases. NOTE 7: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Accountability At December 31, 2012, the Authority had a negative net position of $1,330,894. Management expects this deficit to be eliminated with future tax increment financing revenues. 13

35 NOTES TO FINANCIAL STATEMENTS December 31, 2012 NOTE 8: RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City has agreed to self-insure for general liability claims to a maximum of $150,000, automobile, property and physical damage claims to a maximum of $10,000, and workers compensation claims to a maximum of $5,000 per occurrence. The City accounts for its risk management activities in the General Fund. Claims liabilities, including estimated incurred but not reported claims (IBNR), are reported in the government-wide financial statements if information available prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes in claims payable for the years ended December 31, 2012 and 2011, were as follows: Claims Payable, January 1 $ 31,406 $ 4,508 Incurred Claims 100,954 58,126 Claims Paid (89,576) (31,228) Claims Payable, December 31 $ 42,784 $ 31,406 For excess liability, property and workers compensation claims, the City is involved with the Colorado Intergovernmental Risk Sharing Agency (CIRSA), a separate and independent governmental and legal entity formed by intergovernmental agreement by member municipalities pursuant to the provisions of , Colorado Revised Statutes (1982 Replacement Volume) and the Colorado Constitution, Article XIV, Section 18(2). The purposes of CIRSA are to provide members defined liability, property, and workers compensation coverages and to assist members to prevent and reduce losses and injuries to municipal property and to persons or property which might result in claims being made against members of CIRSA, their employees and officers. It is the intent of the members of CIRSA to create an entity in perpetuity which will administer and use funds contributed by the members to defend and indemnify, in accordance with the bylaws, any member of CIRSA against stated liability of loss, to the limit of the financial resources of CIRSA. It is also the intent of the members to have CIRSA provide continuing stability and availability of needed coverages at reasonable costs. All income and assets of CIRSA shall be at all times dedicated to the exclusive benefit of its members. CIRSA is a separate legal entity and the City does not approve budgets nor does it have the ability to significantly affect the operations of CIRSA. 14