City of Draper, Utah. Comprehensive Annual Financial Report. Fiscal Year Ended June 30, Mayor Darrell Smith

Transcription

1 City of Draper, Utah Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2008 Mayor Darrell Smith City Council Bill Colbert Stephanie Davis Jeff Stenquist Alan Summerhays Troy Walker City Manager Layne Long

2 CITY OF DRAPER, UTAH 1020 East Pioneer Road Draper, Utah COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Prepared by: Draper City Finance Department Danyce Steck Finance Director Brett Preston Stephen Elms Meg Dudley Senior Accountant City Treasurer Finance Clerk 2

3 Table of Contents INTRODUCTORY SECTION Letter of Transmittal....6 Principal City Officials Other Bodies under the Direction of the City Council Organizational Structure FINANCIAL SECTION Report of Independent Certified Public Accountants. 15 Management s Discussion and Analysis Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets Statement of Activities 33 Governmental Fund Financial Statements: Balance Sheet..35 Statement of Revenues, Expenditures, and Changes in Fund Balances..36 Reconciliation of the Balance Sheet to the Statement of Net Assets..37 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities.38 Proprietary Fund Financial Statements: Statement of Net Assets..41 Statement of Revenues, Expenditures, and Changes in Fund Net Assets...44 Statement of Cash Flows.45 Notes to the Financial Statements.47 Required Supplementary Information: Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund.75 Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Redevelopment Fund.77 Supplementary Section: Combining Balance Sheet Non-major Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-major Governmental Funds..82 3

4 STATISTICAL SECTION Table of Contents (continued) Net Assets by Component.87 Changes in Net Assets...89 Fund Balances of Governmental Funds 91 Changes of Fund Balances of Governmental Funds.93 Tax Revenue by Source.95 Assessed Value and Actual Value of Taxable Property 97 Direct and Overlapping Property Tax Rates..99 Principal Property Tax Payers.101 Property Tax Levies and Collections Ratios of Outstanding Debt by Type Ratios of Net General Obligation-Bonded Debt Outstanding 107 Computation of Direct and Overlapping Debt.108 Legal Debt Margin Information Pledged-Revenue Coverage.111 Demographic and Economic Statistics 112 Principal Employers.113 Full-Time Equivalent City Government Employees by Function Operating Indicators by Function / Program Governmental Funds.115 Operating Indicators by Function / Program Proprietary Funds

5 INTRODUCTORY SECTION 5

6 Mayor Darrell Smith City Council Bill Colbert Stephanie Davis Jeff Stenquist Alan Summerhays Troy Walker City Manager Layne Long December 15, 2008 To the Mayor, City Council and Citizens of Draper City, State law requires that all local governments publish a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accounts within six (6) months of the close of each fiscal year. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of Draper City for the fiscal year ended June 30, This report consists of management s representations concerning the finances of Draper City. Accordingly, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, the management of Draper City has established a comprehensive internal control framework that is designed both to protect the government s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of Draper City s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, Draper City s framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that to the best of our knowledge, this financial report is complete and reliable in all material respects. Draper City s financial statements have been audited by Jensen & Keddington, P.C., a firm of certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements for fiscal year ended June 30, 2008, are free of material misstatement. The independent audit involved examining evidence, on a test basis, to support the amounts and disclosures in the financial statements; assessing the accounting principles used; and evaluating the overall financial statement presentation. Based on the audit, the independent auditor concluded there was reasonable basis for rendering an unqualified opinion that Draper City s financial statements for the fiscal year ended June 30, 2008 are fairly presented in conformity with GAAP. The independent auditor s report is presented as the first component of the financial section of this report East Pioneer Road Draper, Utah (801) Fax (801)

7 GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City s MD&A can be found immediately following the report of the independent auditors. Government Profile Draper City is located 15 miles southeast of Salt Lake City, Utah and consists of 30.2 square miles nestled against the Wasatch Mountain Range. The City was incorporated February 22, 1978 and has an estimated current population of 38,000. Draper City is governed using a council-manager form of government with the City Manager as the chief administrative and budget officer of the City. Policy-making and legislative authority are vested in the elected governing council. This governing body consists of the Mayor and five (5) Council members. Each is elected on a non-partisan basis for a four (4) year term, with terms staggered every two years for continuity purposes. This council is responsible for passing ordinances, adopting the budget, appointing committees, and hiring both the government s manager and attorney. The City s manager is responsible for carrying out the policies and ordinances of the council, for overseeing the day-to-day operations of the City and for appointing the heads of the various departments. The City s manager and department directors comprise the Executive Management Team. The City provides the following services to its citizens: Public Safety Fire, police and animal control services Public Work Cemetery, engineering, parks and streets services Public Utilities Water, storm water and garbage utilities Community Development Building, code enforcement and planning services General Government Legislative, executive, legal and administrative services This report includes the financial statements of the funds required to report on those activities, organizations and functions which are related to the City and are controlled by or financially accountable to the City s governing body, the City Council. The Draper City Municipal Building Authority, the Draper City Redevelopment Agency and the Traverse Ridge Special Service District are chartered under Utah law as separate government entities; however, since the City Council is the appointed board for all three agencies this report includes the financial statements of these entities. Budgetary Control The City Council is required to adopt a final budget by no later than June 22 nd prior to the start of a fiscal year. This annual budget serves as the foundation financial planning and control. Budgets are prepared for all governmental fund types including the general fund, capital improvements fund, special revenue funds and proprietary funds. The City Council approves all City budgets at the department level. Budgetary control is maintained at the department level where expenditures may not legally exceed approved appropriations. Department heads may transfer within the department. The City Council may amend the budget by resolution during the budget year but must hold a public hearing to increase a governmental fund s budget before it can pass the resolution East Pioneer Road Draper, Utah (801) Fax (801)

8 Financial Condition The information presented in the financial statements is often more clearly understood when considered in the specific environment within which Draper City operates. Local economy. The City enjoyed several years of strong economic growth with marked decrease in unemployment and significant increase in sales tax revenue. While the City and the State of Utah have both seen a decrease in some economic indicators recently, the local economy is still viable. This is due in part to the addition of several large local and national retailers to the City over the past 18 months. IKEA, Karl Malone Toyota and Harmon s at Bangerter Crossing are three examples of area retailers whose sales tax contributions have offset the negative effects of the slowing economy. Draper City recognizes the downturn in the national economy will gradually correct itself, but in anticipation of its impact, the City has made concerted efforts to prepare for the uncertain future. If the present level of services is to be maintained, the City will need to continue to be diligent in managing its resources by limiting expenditures and projecting for conservative revenues. Accordingly, the City is well-positioned to continue to provide municipal services. Long-term financial planning. Draper City prides itself in conservative financial management and prudent financial planning. The City maintains a pay-as-you-go financing mechanism for the majority of capital facility needs but also utilizes the debt market when appropriate in an effort to fairly distribute the tax burden to those that benefit from the infrastructure. The City prepares and updates its ten-year capital improvement plan to ensure that capital needs are identified and funded. Operating budgets are reviewed extensively and balanced annually with conservatively estimated revenues. Cash management. Cash, temporarily idle during the year, was invested in U.S. Treasury and Agency securities. All cash balances are held in full compliance of the Utah State Money Management Act. Operating cash is held at Zions Bank, a local financial institution, and investments are held at the Utah State Treasurer s Public Investment Fund. The average interest rate of all cash for fiscal year ending in 2007 was 4.06%. Risk management. The City provides for its general liability risks through a joint protection agreement with the Utah Risk Management Mutual Association (URMMA). URMMA provides for the City s lawful liabilities resulting from bodily injury, property damage, personal injury and/or public official s errors and omissions limited to $6,000,000 per occurrence. The City maintains an annual budget appropriation for claims determined to be under the cost-benefit threshold. Additional coverage for automobile liability, forgery, embezzlement and other potential internal losses is provided by commercial policies and is renewed annually. Risk management is performed by the City s legal department. Pension and other post-employment benefits. The City participates in the State of Utah Retirement System for all full-time permanent employees. The City also provides deferred compensation plans under IRS code sections 401(k) and 457. These plans are administered by outside managers and administrators on behalf of the City and its employees East Pioneer Road Draper, Utah (801) Fax (801)

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10 DRAPER CITY CORPORATION PRINCIPAL CITY OFFICIALS June 30, 2008 ELECTED OFFICIALS Darrell H. Smith William J. Colbert Stephanie G. Davis Jeff Stenquist Alan Summerhays Troy K. Walker Mayor City Council Member City Council Member City Council Member City Council Member City Council Member EXECUTIVE BUDGETARY AND LEGAL OFFICIALS Layne P. Long Douglas Ahlstrom City Manager City Attorney STATUTORY APPOINTED OFFICIALS Tracy B. Norr, CMC Stephen R. Elms City Recorder City Treasurer EXECUTIVE STAFF David Dobbins Assistant City Manager Andy Hall Assistant City Manager A. Mac Connole Police Chief David K. Decker Public Works Director Danyce J. Steck Finance Director 10

11 DRAPER CITY CORPORATION OTHER BODIES UNDER THE DIRECTION OF THE CITY COUNCIL June 30, 2008 BOARDS Appeals Board Board of Adjustment Community-Oriented Policing Citizens Advisory Board (COPCAB) Equestrian Center Advisory Board Historic Preservation Board Municipal Building Authority Board Redevelopment Agency Board Youth Council Advisory Board Planning Commission Tree Commission Parks & Trails Committee COMMISSIONS COMMITTEES 11

12 DRAPER CITY ORGANIZATIONAL STRUCTURE June 30, 2008 Citizens of Draper City Mayor Darrell Smith City Council Bill Colbert Stephanie Davis Jeff Stenquist Alan Summerhays Troy Walker City Manager Layne Long Asst City Manager Human Resources Emergency Preparedness Asst City Manager Economic and Community Development City Recorder Legal Services Fire United Fire Authority City Departments Public Works Community Development Police Department Administrative Services Finance Engineering Parks Streets Cemetery Fleet Mgmt Water Storm Water Garbage Planning Building Code Enforcement Police Animal Control Courts Facilities Mgmt Information Services Treasury Utility Billing Accts Payable Accts Receivable Purchasing 12

13 FINANCIAL SECTION 13

14 AUDITOR S REPORT 14

15 INDEPENDENT AUDITORS REPORT Honorable Mayor and Members of City Council City of Draper Draper, Utah We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Draper as of and for the year ended June 30, 2008, which collectively comprise the City s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Draper s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Governmental Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business type-activities, each major fund, and the aggregate remaining fund information of the City of Draper as of June 30, 2008, and the respective changes in financial position, and, where applicable, the cash flows, where applicable, thereof and the respective budgetary comparison for the General Fund and the Major Special Revenue Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated December 15, 2008 on our consideration of the City of Draper s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The management s discussion and analysis, as noted on the table of contents, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Draper s basic financial statements. The introductory section, and supplementary information, as listed in the table of contents and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. Telephone (801) So. College Dr., Suite 101 Fax (801) Salt Lake City, Utah

16 The Combining Statements listed as supplemental information in the table of contents have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. December 15,

17 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS For The Year Ended June 30, 2008 As management of the City of Draper (the City), we offer readers of the City's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in the financial statements and notes to the financial statements. Financial Highlights The assets of the City of Draper exceeded its liabilities at the close of 2008 by $413.8 million (net assets). Of this amount, $20.7 million (unrestricted net assets) is available to meet ongoing obligations to citizens and creditors. The City s Governmental Activities revenue increased from $31.1 million to $32.9 million, attributed to a property tax increase in During this same period, expenditures increased from $24.8 million to $27.5 million. The City increased net assets in Governmental Activities by $5.4 million compared to $6.3 million during fiscal year Net assets increased in Business Activities by $1.0 million compared to an increase of $1.5 million during fiscal year The reduced asset growth can be attributed to the same events reported above. The unreserved and undesignated fund balance of the General Fund at June 30, 2008 was $3.7 million, or 17% of the non-restricted General Fund revenue. The State limits this amount to 18%. The City is in compliance with State Law fund balance limits. Report Overview This discussion and analysis is intended to serve as an introduction to the City of Draper s basic financial statements. The City of Draper s 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 that will help the reader to gain a more in-depth understanding of the City. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the City of Draper s financial position and changes in financial position, similar to consolidated financial statements in a private sector business. The statements consist of the Statement of Net Assets and the Statement of Activities. The Statement of Net Assets presents information on all of the City of Draper s assets and liabilities, with the difference between the two reported as net assets. Increases or decreases over time in net assets gives an indicator as to whether the financial condition of the City is improving or declining. The Statement of Activities presents information showing how the City of Draper 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 reported in this statement for some items will result in cash flows in future fiscal periods (e.g., debt interest payment when the fiscal year ends between interest payments). Both of the government-wide financial statements distinguish functions of the City of Draper that are principally supported by taxes and intergovernmental revenues (Governmental Activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (Business-type Activities). The Governmental Activities of the City of Draper include general government, public safety (police & fire), streets, 17

18 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2008 planning, economic development, and parks and recreation. The Business-type Activities of the City of Draper include the Water Fund, Storm Drain Fund, and Solid Waste Fund. The government-wide financial statements include not only the City of Draper (the primary government), but also three legally separate component units, Traverse Ridge Special Service District, the Municipal Building Authority of the City of Draper, and the Redevelopment Agency of the City of Draper, for which the City is financially accountable. Financial information for these blended component units are presented with the financial statements for the City. The government-wide financial statements are found immediately following this discussion and analysis. 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. Some funds are required to be established by State law and bond covenants, however, City Council establishes other funds to help control and manage money for particular purposes (i.e. Historical Preservation Fund). All of the City s funds can be divided into two categories: Governmental Funds and Proprietary Funds. Governmental Funds - Most of the City s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end are available for spending. The funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental funds statements provide a detailed short-term view to cash, the governmental fund operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City s programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in reconciliations after the fund financial statements. The City maintains the following twelve (10) individual governmental funds: General Historic Preservation Municipal Building Authority Capital Improvement Projects Fire Impact Fee Transportation Impact Fee Park Impact Fee Police Impact Fee Redevelopment Agency Traverse Ridge Special Service District Proprietary Funds - When the City charges customers for the services it provides whether to outside customers or to other units of the City these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Activities. In fact the City s enterprise funds (a component of proprietary funds) are the same as the business-type activities we report in the government-wide statements but provide more detail and additional information, such as cash flows, for proprietary funds. The City maintains the following three individual proprietary funds: Water (includes Impact Fees) Storm Water (includes Impact Fees) Solid Waste (Sanitation) 18

19 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2008 Notes to the Financial Statement - 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 immediately after the statements for major funds. Other Information - In addition to the basic financial statements and accompanying notes, this report also presents the combining statements referred to earlier in connection with non-major Governmental Funds. Combining and individual fund statements and schedules can be found after the Notes in the financial section. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. In the case of the City of Draper, assets exceeded liabilities by $413.8 million at the close of By far the largest portion of the City s net assets (92.7%) reflects its investment in capital assets less any related debt which is still outstanding used to acquire those assets. Capital assets are used to provide services to citizens, and they are not available for future spending. Although the investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities. Unrestricted net assets may be used to meet the City s ongoing obligations to residents and creditors. The City continues to report positive balances in all three categories of net assets, for the government as a whole, as well as for its separate Governmental and Business-type Activities. Governmental Governmental Business-type Business-type Activities Activities Activities Activities Current and other assets $ 40,212,745 $ 39,498,843 $ 9,192,315 $ 11,729,755 Capital assets 374,731, ,177,458 30,666,950 30,086,414 Total Assets 414,943, ,676,301 39,859,265 41,816,169 Current and other liabilities 15,531,897 13,283, ,080 3,296,866 Long-term liabilities 24,783,479 23,174, , ,322 Total Liabilities 40,315,376 36,458, ,780 3,657,188 Net assets: Invested in capital assets, net of related debt 347,553, ,776,835 30,503,250 29,726,092 Restricted 11,692,064 13,144,605 2,543,174 2,413,556 Unrestricted 15,383,284 14,296,227 6,146,061 6,019,333 Total Net Assets $ 374,628,458 $ 369,217,667 $ 39,192,485 $ 38,158,981 Analysis of the City s Operations The following table provides a summary of the City s operations for the yearended June 30, Net assets for governmental activities increased by $5,410,791 which is a decrease of $938,460 from the previous year. Business-type activities increased by $1,033,504, which is a decrease of $491,137 from the previous year. Both of the decreases in growth are attributable to a reduction in development due to changes in the economy. Overall, the City s revenues of $39.3 million exceeded expenses of $32.9 million, translating into an increase in net assets of $6.4 million. 19

20 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2008 Draper City's Changes in Net Assets Governmental Governmental Business-type Business-type Activities Activities Activities Activities Revenues: Program revenues: Charges for services $ 6,409,535 $ 9,952,756 $ 5,541,061 $ 5,925,079 Operating grants and contributions 1,532,823 1,447, Capital grants and contributions 3,129,781 2,257, , ,566 General revenues: Property taxes 9,217,558 6,432, Sales and franchise taxes 11,381,337 10,363, Proceeds from debt Other taxes - 35, Unrestricted investment earnings 1,277,597 1,336, , ,542 Gain on disposition of assets ,621 Equity investment income (loss) , ,411 Other revenues Total Revenues 32,948,631 31,825,987 6,399,162 6,958,219 Expenses: General government 10,161,544 10,586, Public safety 8,903,761 7,139, Highways and public improvements 5,209,833 4,824, Parks and recreation 2,127,758 1,887, Interest on long-term debt 1,134,944 1,038, Water - - 2,786,647 2,933,266 Storm drain - - 1,138,727 1,016,403 Solid waste - - 1,440,284 1,483,909 Total Expenses 27,537,840 25,476,736 5,365,658 5,433,578 Increase in net assets before transfers 5,410,791 6,349,251 1,033,504 1,524,641 Transfers Increase in Net Assets 5,410,791 6,349,251 1,033,504 1,524,641 Net Assets - Beginning 369,217, ,770,099 38,158,981 36,732,657 Prior Period Adjustments - 98,317 - (98,317) Net Assets - Ending $ 374,628,458 $ 369,217,667 $ 39,192,485 $ 38,158,981 20

21 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2008 The largest source of revenue for charges for services is impact fees, and property taxes are the primary source of general revenue. Most of the City s operating grants are related to public safety, while capital grants consist primarily of donated infrastructure assets. The following two graphs display Draper City s government-wide revenues and expenses for the fiscal year-ended June 30, Financial Analysis of the Government's Funds The City s Governmental Funds are accounted for using the modified accrual basis of accounting. The governmental funds provide information on the short-term resource inflows and outflows and account balances at the end of the fiscal year. The total fund balance is a measure of total available resources and the unreserved portion of this total fund balance is a measure of the available resources at June 30, As the City completed the year, its Governmental Funds reported a combined fund balance of $25.7 million, which is a decrease of $1.5 million compared to the prior fiscal year. Of that available fund balance, $13.9 million was unreserved and undesignated. The remaining $11.8 million combined fund balance total is reserved and is not available for new spending because it is already committed for the following purposes: (1) debt, (2) loan receivables, (3) capital projects, and (4) future development. General Fund The General Fund as reported consists of both the General Government Fund and Class B&C Roads Fund. At June 30, 2008, the unreserved fund balance of the combined General Fund was $5.8 million. General Government Fund - The General Government Fund accounts for all of the general services provided by the City of Draper. At June 30, 2008, the unreserved fund balance of the General Fund was $3.7 million. Revenues exceeded expenditures by $2,426,008 during the year. The current General Fund unreserved fund balance is 17% of the estimated non-restricted General Fund revenue. Given the current economy, the City s General Fund ended FY in a strong financial position. 21

22 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2008 Taxes continue to be the largest source of revenue in the General Government Fund and represent 72 percent of total general fund revenues. The largest component of tax revenue is sales tax, which represents 42 percent of total tax revenues and 30 percent of total general fund revenues. This is the same percentage as the prior fiscal year-ended June 30, General fund expenditures increased from $18.7 million in 2007 to $21.2 million in This represents a 13% increase. Expenditures increased for public services and decreased for general government and capital outlay, with debt service remaining constant. Court and legal services were reported under general government in 2007 and transferred to public safety in 2008 which explains some of the increase/decrease in those categories. Class B&C Roads Fund The Class B&C Roads Fund accounts for funds received from the State of Utah which are restricted for use for the construction and maintenance of roads classified as B or C. At June 30, 2008, the restricted fund balance was $1.9 million. 22

23 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (continued) For The Year Ended June 30, 2008 Enterprise Funds Water Fund Unrestricted net assets in the Water Fund decreased by $105,558, leaving a fund balance of $2.7 million at June 30, 2008, all of which is designated for unfinished projects. The City intends to adjust water rates to compensate for the increased cost to purchase water as well as the increased need for infrastructure. Storm Water Fund Unrestricted net assets in the Storm Water Fund increased by $21,502, leaving a fund balance of $1.1 million at June 30, Solid Waste Fund Unrestricted net assets in the Solid Waste Fund increased by $581,267, leaving a fund balance of $2.4 million at June 30,

24 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2008 General Fund Budgetary Highlights During the fiscal year, the General Fund budget (not including transfers) was amended from an original budget expenditure total of $20.7 million to a final budget of $23.6 million. All departments monitor their budgets closely and are required to stay within their allotment. Budget adjustments made during the year can be summarized as follows: General government increased by $549,614. Public safety increased by $353,639. Highways and public improvements increased by $193,000. Parks, recreation and public property increased by $163,500. Capital outlay increased by $8,289. Differences between the original and final amended budgets amount to a total increase in appropriations of $1.2 million. Increases were made to almost all general fund budgets and all increases to the budgets were funded from fund balance. During the year, actual revenues received exceeded budgeted revenues by $1,160,836. Actual expenditures were less than budgeted expenditures by $2,309,451. Of this surplus, $2,428,145 was transferred to capital projects to assist in fulfilling the capital needs of the City, and $1,042,142 was held in fund balance for future demands. General government expenditures include all administrative functions of the City (i.e. Council, Recorder, Manager, Finance, Human Resources, Development Services and Municipal Facilities). All recommended amendments for budget changes came through the Finance Department, to City Council via Resolution, as required by State statute. The statute requires a public hearing and the opportunity for public discussion. The City, per State law, does allow small intra-departmental budget changes that modify line items within departments within the same fund. Other Governmental Funds Capital Improvement Projects Fund The Capital Projects Fund has a total fund balance of $12.7 million at June 30, 2008, all of which is either reserved for restricted assets or designated for unfinished projects. Redevelopment Fund Property tax collections from the three redevelopment areas increased 21.6 percent from the prior year to a total of $2.3 million. Traverse Ridge Special Service District Specially assessed property tax collections from the District is used to provide increased services due to high elevation. Property tax collections decreased from $568,638 in 2007 to $559,900 in Expenditures for that same period increased $293,166. This increase was due to the addition of a new snow plow and an unusually harsh winter which required additional snow removal services. Impact Fee Funds Impact fee revenues decreased 46 percent from 2007 to 2008, which represented a reduction of $1,020,716. Municipal Building Authority Fund Lease revenue increase from $1.1 million in 2007 to $1.3 million in This is due to the addition of a new fire station lease. Debt service paid out of this fund increased from $1.3 million to $1.5 million. This fund also issued a lease revenue bond in the amount of $3,355,000 to fund the construction of a new fire station and refund a prior fire station lease revenue bond. 24

25 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2008 Capital Assets and Debt Administration The City s investment in capital assets for its government and business type activities totaled $405.4 million net of combined depreciation and amortization at June 30, Types of assets included in this category are land, right of ways, land improvements, buildings, machinery and equipment, park and other recreation facilities, roads (including curb and gutter), street lights, traffic signals, parking facilities, and water and waste distribution and collections systems. The total increase in the City s investment in fixed assets for the current year was 2.3 percent in governmental activities and 1.9 percent in business-type activities for a combined increase of 2.3 percent government-wide. Major capital asset events during fiscal year-ended June 30, 2008 include the following: Acquisition of land in the amount of $2.3 million for the construction of a Justice Center to accommodate courts and police. Completion of over $1.6 million in new parks. Developer contributions of $969,573 for roads, sidewalks, street lights, water and storm water infrastructure. Completion of $521,742 in storm water improvements. Additional information regarding the City s capital assets can be found in Note 6 of the Notes to Financial Statements. Draper City's Capital Assets (Net of Depreciation) Governmental Activities 2008 Governmental Business - type Business - type Activities Activities Activities Land and right of ways $ 304,804,010 $ 302,040,878 $ - $ - Water shares , ,907 Infrastructure 37,682,221 39,053, Buildings 9,104,309 8,942,817 51,743 - Improvements other than buildings 6,598,279 5,266,586 27,109,015 27,236,497 Machinery and equipment 1,658,153 1,600, , ,123 Furniture and fixtures 168, ,214 4,028 5,991 Construction in progress 14,715,386 9,027,091 2,796,780 2,126,896 Total Capital Assets $ 374,731,089 $ 366,177,458 $ 30,666,950 $ 30,086,414 Debt Administration The financial statements provide a summary of the City s long-term debt. At June 30, 2008, Draper City s bond debt amounted to $26.2 million. The portion backed by the full faith and credit of the City amounted to $6.2 million. All other bonded debt is secured solely by specific revenue sources. Draper City s general obligation bonded debt has the AAA rating from Moody s Investors Service. General obligation debt of the City is limited by statute to eight percent of the reasonable fair cash value of property. The City s total bonded debt increased by $3,355,000 during the year. New bonds were issued to refund the 2002 Lease Revenue Bond and construct a new fire station. 25

26 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2008 Additional information on the City s long-term debt can be found in Note 10 of the Notes to Financial Statements. Draper City's Outstanding Debt Governmental Governmental Business - type Business - type Activities Activities Activities Activities Bonds payable $ 26,054,479 $ 24,271,819 $ 115,000 $ 170,000 Capital leases - 128,804 48, ,322 Total $ 26,054,479 $ 24,400,623 $ 163,700 $ 360,322 Economic Factors and Next Year s Budget and Rates The City reviews national and regional economic forecasts and also performs its own management analysis as a component in the process of developing the operating and capital budgets of the City. The assumptions in the analysis are reviewed with the City Council as background for decisions about revenue projections and cost allocations. Reports are transmitted to City Council and provide both budget and actual information for tracking the City s financial position during the year. The City of Draper has worked diligently over the past several years to acquire diverse commercial and retail development to provide the strong and necessary balance between property tax and sales tax revenues. While the past several years have reflected sustained economic growth in Draper and its surrounding regions, this year has brought new challenges. The City has experienced significant decreases in both residential and commercial development, along with the effects of an uncertain economy. The City has been conservative in its approach to revenue forecasting and reduced budgeted expenditures where appropriate. The overall economic forecast assumed some uncertainty in the national, regional and local economies. National indicators, including housing starts and commercial construction were projected to be significantly reduced, along with retail sales. Personal income was projected to decrease. Development activity. After several years of steady residential and commercial development, the City of Draper has recognized a significant decline in both residential and commercial building. Staffing and budgets were adjusted to reflect this decrease in demand. Taxable sales. After several years of sales tax growth in excess of 10%, national economic forecasts indicated this trend would not remain constant in spite of new development. The City has continued to foster strong partnerships with potential commercial developers and continues to be innovative in their approach. Next year s budget anticipated no growth from the prior year. Cost indicators for the City of Draper were assumed within the forecast to include reasonable decreases in operating costs for personnel services, as well as general goods and services used by City departments. This reduction was precipitated by national economic indicators which predicted a decrease in sales tax revenues. Energy costs and health care costs have continued as watch areas for City budget development and are assumed to increase at a much higher rate than the general level of inflation due to national trends. Health care rate increases of 20 percent were common in many industries but the City was able to hold this increase to approximately 8 percent. 26

27 CITY OF DRAPER CITY MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) For The Year Ended June 30, 2008 Enterprise fund rates and activity in the fiscal year 2008 budget reflects no change in storm water or sanitation rates. The City initiated a water rate structure change from a flat-rate to a tiered-rate system. It is anticipated this change will increase revenues in the water fund. Such revenues are required to accommodate system maintenance and improvements that have been delayed in previous years. There is a significant concern regarding residential development in some parts of the City and the timing of construction of public facilities to support this growth. To allow growth in these areas to continue it will be necessary to fund capital projects from sources other than Impact Fees as these fees have not kept pace with residential development. With increased demand on General Fund reserves it may not be possible to construct the necessary public facilitates without issuing additional debt. Request for Information This financial report is designed to provide our residents, taxpayers, investors and creditors with a general overview of the City s finances and to show the City s accountability for the funds and assets it receives. If you have questions about this report, or should you need additional financial information, contact the City s Finance Department at City of Draper, 1020 East Pioneer Road, Draper, UT 84020, or call (801) , or to danyce.steck@draper.ut.us. 27

28 BASIC FINANCIAL STATEMENTS 28

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30 GOVERNMENT-WIDE FINANCIAL STATEMENTS 30

31 CITY OF DRAPER STATEMENT OF NET ASSETS June 30, 2008 Assets: Governmental Business-type Activities Activities Total Cash and cash equivalents $ 14,303,431 $ 2,469,867 $ 16,773,298 Receivables: Accounts, net 610, ,478 1,239,165 Property taxes 11,724,951-11,724,951 Prepaids 93,879-93,879 Restricted cash and cash equivalents 12,980,330 2,543,174 15,523,504 Deferred charges 499,467 4, ,600 Equity investment in joint venture - 1,546,663 1,546,663 Intangible Asset - water tank capacity purchased - 2,000,000 2,000,000 Capital assets, not being depreciated: Land and right of ways 304,804, ,804,010 Construction in progress 14,715,386 2,796,780 17,512,166 Water shares - 131, ,907 Capital assets, net of accumulated depreciation: Buildings 9,104,309 51,743 9,156,052 Improvements other than buildings 6,598,279 27,109,015 33,707,294 Machinery and equipment 1,658, ,477 2,231,630 Furniture and fixtures 168,731 4, ,759 Infrastructure 37,682,221-37,682,221 Total Assets $ 414,943,834 $ 39,859,265 $ 454,803,099 The notes to the financial statements are an integral part of this statement. 31

32 CITY OF DRAPER STATEMENT OF NET ASSETS (Continued) June 30, 2008 Governmental Business-type Activities Activities Total Liabilities: Accounts payable $ 790,282 $ 384,775 $ 1,175,057 Liabilities payable from restricted assets 1,289,137-1,289,137 Accrued liabilities 305, , ,608 Accrued interest payable 241, ,730 Developer and customer deposits 1,931,381 8,000 1,939,381 Unearned revenue 9,703,064-9,703,064 Noncurrent Liabilities: Due within one year 1,271,000 55,000 1,326,000 Due in more than one year 24,783, ,700 24,892,179 Total Liabilities 40,315, ,780 40,982,156 Net Assets: Invested in capital assets, net of related debt 347,553,110 30,503, ,056,360 Restricted for: Debt service 635,003 82, ,752 Future development 7,847,293 2,460,425 10,307,718 Perpetual care: Nonexpendable 175, ,727 MBA projects 1,790,706-1,790,706 TRSSD projects 126, ,120 RDA projects 1,117,215-1,117,215 Unrestricted 15,383,284 6,146,061 21,529,345 Total Net Assets $ 374,628,458 $ 39,192,485 $ 413,820,943 The notes to the financial statements are an integral part of this statement. 32

33 CITY OF DRAPER STATEMENT OF ACTIVITIES For The Year Ended June 30, 2008 Net (Expense) Revenue & Program Revenues Changes in Net Assets Operating Capital Charges for Grants and Grants and Governmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Governmental Activities: General government $ 10,161,544 $ 4,649,607 $ 22,150 $ 60,814 $ (5,428,973) $ - $ (5,428,973) Public safety 8,903,761 1,447, , ,367 (6,941,337) - (6,941,337) Highway and public improvements 5,209, ,605 1,369,419 2,162,872 (1,378,937) - (1,378,937) Parks and recreation 2,127,758 13, ,728 (1,581,510) - (1,581,510) Interest on long-term debt 1,134, (1,134,944) - (1,134,944) Total Governmental Activities 27,537,840 6,409,535 1,532,823 3,129,781 (16,465,701) - (16,465,701) Business-type Activities: Water 2,786,647 2,594,823-69,230 - (122,594) (122,594) Storm drain 1,138,727 1,018, , , ,966 Solid waste 1,440,284 1,927, , ,354 Total Business-type Activities 5,365,658 5,541, , , ,726 Total Government $ 32,903,498 $ 11,950,596 $ 1,532,823 $ 3,666,104 (16,465,701) 711,726 (15,753,975) General Revenues: Property taxes 9,217,558-9,217,558 Sales and franchise taxes 11,381,337-11,381,337 Unrestricted investment earnings 1,277, ,445 1,527,042 Equity investment income (loss) - 72,333 72,333 Total General Revenues 21,876, ,778 22,198,270 Changes in Net Assets 5,410,791 1,033,504 6,444,295 Net Assets, Beginning 369,217,667 38,158, ,376,648 Net Assets, Ending $ 374,628,458 $ 39,192,485 $ 413,820,943 The notes to the financial statements are an integral part of this statement. 33

34 Governmental Fund Financial Statements General Fund The general fund is used to account for resources traditionally associated with government which are not required legally or by sound financial management to be accounted for in another fund. Capital Project Fund This fund is used to account for financial resources to be used for the acquisition or construction of major capital projects (other than those financed by proprietary funds and trust funds) of the City. Impact fees, intergovernmental grants and interest are the principal sources of funding for these projects. Redevelopment Agency This fund is used to account for the activities of the Redevelopment Agency. The Agency is an entity established to further public purpose in the redevelopment of particular City areas. Other Governmental Funds Other governmental funds are presented by fund type in the Supplementary Section of this report. 34