ORANGE COUNTY CONVENTION CENTER ORANGE COUNTY, FLORIDA ANNUAL FINANCIAL REPORT. for the years ended September 30, 2006 and 2005

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1 ORANGE COUNTY, FLORIDA ANNUAL FINANCIAL REPORT

2 ANNUAL FINANCIAL REPORT CONTENTS Pages Independent Auditors Report 1-2 Financial Statements: Balance Sheets 3 Statements of Revenues, Expenses and Changes in Net Assets 4 Statements of Cash Flows 5-6 Notes to Financial Statements 7-34 Supplementary Information: Schedule of Budgeted Revenues and Expenses Compared to Actual (Non-GAAP Budgetary Basis) 35 Schedule of Bonded Debt and Interest General Debt Covenants (Unaudited) 39-42

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5 BALANCE SHEETS September 30, 2006 and ASSETS Current assets: Cash and cash equivalents $ 31,092,677 $ 48,439,780 Investments 68,967,410 29,809,500 Accrued interest receivable 352, ,961 Taxes receivable 8,728,824 6,700,785 Accounts receivable 1,587, ,876 Less allowance for doubtful accounts (90,211) (83,320) Due from other governmental agencies 46, ,349 Restricted cash and cash equivalents 49,322,887 47,998,340 Total current assets 160,008, ,081,271 Noncurrent assets: Cash and cash equivalents, restricted 28,197,109 31,062,918 Capital assets: Land 112,397, ,397,476 Construction in progress 2,492,230 3,411,704 Buildings and improvements 1,365,689,590 1,363,765,561 Machinery and equipment 27,159,449 27,116,466 Less accumulated depreciation (234,059,378) (217,564,188) Total capital assets 1,273,679,367 1,289,127,019 Other assets, net 2,859,148 3,049,757 Total noncurrent assets 1,304,735,624 1,323,239,694 Total assets $ 1,464,743,688 $ 1,457,320,965 LIABILITIES Current liabilities: Accounts payable and accrued liabilities $ 21,048,207 $ 9,379,809 Unearned revenue 8,851,326 6,994,744 Payable from restricted assets: Accounts payable and accrued liabilities 5,451,749 2,260,675 Accrued interest payable 24,353,678 24,428,327 Revenue bonds payable 24,425,000 23,080,000 Total current liabilities 84,129,960 66,143,555 Noncurrent liabilities: Compensated absences payable 1,110,296 1,133,095 Revenue bonds payable (net of unamortized costs) 936,878, ,064,539 Total noncurrent liabilities 937,989, ,197,634 Total liabilities 1,022,119,005 1,026,341,189 NET ASSETS Invested in capital assets, net of related debt 312,375, ,982,480 Restricted for: Capital projects - 8,937,546 Debt service 40,713,401 39,788,433 Other purposes 7,001,168 3,646,277 Unrestricted 82,534,496 71,625,040 Total net assets 442,624, ,979,776 Total liabilities and net assets $ 1,464,743,688 $ 1,457,320,965 See accompanying notes to financial statements. 3

6 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS Operating revenues: Event services $ 27,219,451 $ 22,415,513 Rentals 20,973,192 21,154,186 Vendor commissions 2,531,980 2,285,128 Forfeited deposits 1,118,354 1,211,372 Miscellaneous 1,405,092 1,341,525 Total operating revenues 53,248,069 48,407,724 Operating and maintenance expenses: Personal services 26,104,285 25,882,130 Contractual services 6,934,169 6,670,261 Materials and supplies 1,511,193 1,261,570 Utilities 12,705,832 12,240,564 Repairs and maintenance 4,752,262 4,760,182 Other expenses 6,589,095 6,709,407 Total operating and maintenance expenses 58,596,836 57,524,114 Operating loss before depreciation and amortization (5,348,767) (9,116,390) Depreciation and amortization 32,979,643 33,032,407 Operating loss (38,328,410) (42,148,797) Nonoperating revenues (expenses): Tourist development tax 129,899, ,167,872 Tax collection expense (100,000) (236,904) Hotel surcharge 1,110,441 1,067,430 Payments to other agencies (22,593,962) (20,362,915) Interest revenue 6,614,913 3,395,735 Interest expense and fiscal charges (51,722,840) (53,739,736) Loss on disposal of assets (7,263,814) (583,664) Amortization of bond issuance costs (721,769) (617,213) Federal and state grants 49, ,349 Total net nonoperating revenues (expenses) 55,272,080 49,340,954 Income before contributions and transfers out 16,943,670 7,192,157 Capital contributions - 1,050,000 Transfers out (5,298,763) (1,200,000) Change in net assets 11,644,907 7,042,157 Total net assets, October 1 430,979, ,937,619 Total net assets, September 30 $ 442,624,683 $ 430,979,776 See accompanying notes to financial statements. 4

7 STATEMENTS OF CASH FLOWS Cash flows from operating activities: Cash received from customers $ 52,862,157 $ 46,408,404 Cash payments to suppliers for goods and services (31,197,058) (32,167,689) Cash payments to employees for services (25,973,305) (26,506,025) Other operating receipts 1,405,092 1,341,525 Net cash used by operating activities (2,903,114) (10,923,785) Cash flows from noncapital financing activities: Tourist development tax received 127,871, ,971,495 Payments to other agencies (23,207,456) (20,368,278) Transfer out (5,298,763) (1,200,000) Hotel surcharge revenue received 1,095,881 1,066,149 Tax collection fees paid (100,000) (236,904) Grants from other governmental agencies 253,326 - Net cash provided by noncapital financing activities 100,614, ,232,462 Cash flows from capital and related financing activities: Proceeds from sales of refunding revenue bonds 73,778, ,351,901 Payments into escrow for defeased debt (73,639,617) (252,521,611) Acquisition and construction of capital assets (10,515,211) (8,101,058) Capital contributions - 750,000 Principal paid on revenue bonds (23,080,000) (22,095,000) Interest and fees paid on revenue bonds (50,421,047) (56,152,708) Proceeds from disposition of assets 9,959 1,357 Net cash used by capital and related financing activities (83,867,138) (83,767,119) Cash flows from investing activities: Purchase of investments (68,472,839) (29,611,843) Proceeds from sale and maturity of investments 29,611,843 21,727,854 Interest on investments 6,128,610 3,093,948 Net cash used by investing activities (32,732,386) (4,790,041) Net increase (decrease) in cash and cash equivalents (18,888,365) 751,517 Cash and cash equivalents, October 1 127,501, ,749,521 Cash and cash equivalents, September 30 $ 108,612,673 $ 127,501,038 Classified as: Current assets $ 31,092,677 $ 48,439,780 Current assets, restricted 49,322,887 47,998,340 Noncurrent assets, restricted 28,197,109 31,062,918 Total $ 108,612,673 $ 127,501,038 See accompanying notes to financial statements. 5

8 STATEMENTS OF CASH FLOWS, Reconciliation of operating loss to net cash used by operating activities: Operating loss $ (38,328,410) $ (42,148,797) Adjustments to reconcile operating loss to net cash used by operating activities: Depreciation and amortization 32,979,643 33,032,407 (Increase) decrease in assets: Accounts receivable (762,990) 1,715,171 Increase (decrease) in liabilities: Accounts payable and accrued liabilities 1,352,061 (1,066,205) Unearned revenue 1,856,582 (2,456,361) Total adjustments 35,425,296 31,225,012 Net cash used by operating activities $ (2,903,114) $ (10,923,785) Noncash investing, capital, and financing activities: Increase in fair value of investments $ 296,914 $ 293,336 Capital asset donations received $ - $ 300,000 See accompanying notes to financial statements. 6

9 NOTES TO FINANCIAL STATEMENTS A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Purpose: The Orange County Convention Center (the Center) is owned and operated by the Orange County Board of County Commissioners, Orange County, Florida, an elected body (the Board). The Center serves as a multi-purpose facility designed for conventions, trade shows, exhibits, and other community activities. The Orange County Comptroller, an elected official, provides the accounting and financial reporting functions for the Center. The Center is accounted for as an enterprise fund of the Board. The Center was formally dedicated and opened on February 26, The Phase II expansion was opened in January The Center opened the Phase III expansion in January 1996 and the Phase IV expansion in July 1996, completing the facility currently known as the West Complex. The construction of the North-South Complex (the Phase V expansion project) was completed in September Land has been purchased for future expansion of the Center. Basis of Presentation: The Center uses the enterprise fund concept of accounting. Enterprise funds account for operations that are financed and operated in a manner similar to private business enterprises where the intent is that expenses of services provided to customers, as well as depreciation, amortization, and interest, be recovered primarily through user charges. Basis of Accounting: The financial statements have been prepared on an accrual basis. Revenues are recognized when earned and expenses are recognized when incurred. In addition, the financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. Pursuant to the election option made available by Governmental Accounting Standards Board (GASB) Statement No. 20, pronouncements of the Financial Accounting Standards Board (FASB) issued after November 30, 1989, are not applied in the preparation of the financial statements. 7

10 NOTES TO FINANCIAL STATEMENTS, A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Budgetary Data: Florida Statutes require the Board to adopt an annual budget for the Center on an accrual basis. Revenues and expenses are budgeted on a basis consistent with generally accepted accounting principles except that depreciation, amortization, noncash capital contributions, and gains/losses on the disposal of assets are not budgeted, capitalized net interest costs on funds borrowed to finance the construction of capital assets are budgeted as interest income and interest expense, capital outlays are budgeted as expense, and debt proceeds and principal payments are respectively budgeted as revenue and expense. Beginning net assets and expenditure reserves are also included in the adopted budget. Encumbrance accounting, under which purchase orders are recorded as a reservation of available budget, is practiced during the year. At year end, outstanding encumbrances lapse and are not presented in the financial statements. The annual budget is subject to amendment during the year. The County Administrator is authorized to approve transfers of appropriations between individual expense accounts. The Board, by motion, may approve transfers of appropriations between a reserve account and an expense account. The Board, by resolution recorded in the minutes, may add to the overall appropriations of the Center due to a financing source unanticipated when the original budget was adopted or due to increased revenues above the level contemplated in the original budget. Amendments to overall appropriations for any other reasons also require a public hearing prior to adoption. During the 2006 fiscal year, the Center s budget was increased by $73 million primarily due to the issuance of bonds in June 2006, as well as to recognize the addition of the sixth cent of Tourist Development Tax beginning in September During the 2005 fiscal year, the budget was increased by $272 million, due primarily to the issuance of bonds in May Cash and Cash Equivalents and Investments: The Center s cash and cash equivalents consist of cash on hand, demand and time deposits, and highly liquid investments (including restricted assets) with a maturity of 90 days or less when purchased. All investments are stated at fair value. Investment fair values are based on quoted market prices, except for bankers acceptances and commercial paper, which are based on accreted value. Mutual funds and the Local Government Surplus Funds Trust Fund Investment Pool (Surplus Pool), which are external 2a7-like investment pools, are stated at share price which is substantially the same as fair value. 8

11 NOTES TO FINANCIAL STATEMENTS, A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Restricted Assets: The use of certain Center assets is restricted by specific provisions of bond indentures and agreements with various parties. Assets so designated are identified as restricted assets on the balance sheet. It is the Center s policy to first apply restricted assets when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. Restricted assets are classified as noncurrent if they are for acquisition or construction of capital assets, for liquidation of long-term debts, or are for other than current operations. Capital Assets: Capital assets are stated at cost when purchased or constructed, or at fair market value when donated to the Center. The Center capitalizes expenditures for additions and improvements. The thresholds for capitalization of assets range from $1,000 to $25,000, depending on the asset class. Expenses for maintenance and repairs are charged to operations. Projects under construction are retained in Construction in Progress and are transferred into Buildings and Improvements when placed in service. Provisions for depreciation are made using the straight-line method, based upon the following estimated useful lives of the assets: Buildings Improvements other than buildings Machinery and equipment years 5-50 years 3-10 years Other Assets, Net: In fiscal year 2000, the Board entered into an agreement with Orlando Utilities Commission (OUC) which called for ownership of certain chilled water air cooling equipment to be transferred from the Center to OUC. In return, OUC is providing reduced rates for electric service for 20 years. The transfer of assets took place during the 2002 fiscal year, and the net book value of these assets was reclassified to Other Assets, to be amortized over the life of the agreement. Amortization expense was $190,609 and $190,610 for the years ended September 30, 2006 and 2005, respectively. Accumulated amortization was $953,049 and $762,440 at September 30, 2006 and 2005, respectively. 9

12 NOTES TO FINANCIAL STATEMENTS, A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Accounts Payable and Accrued Liabilities: Current liabilities reported as accounts payable and accrued liabilities were comprised of the following components at September 30: Due to vendors and other agencies $ 19,055,026 $ 7,489,701 Salaries and benefits payable 1,950,018 1,796,239 Due to other governments 43,163 93,869 Total $ 21,048,207 $ 9,379,809 Unearned Revenue/Forfeited Deposits: As the Center enters into contracts for rental of space for future events, certain amounts are collected in advance in order to secure the facility on the specified dates. These amounts are reported as unearned revenue until the event occurs, at which time operating revenue is recognized. If the lessee cancels the event, and the Center is unable to re-let the space, the amounts collected in advance are retained by the Center, and recognized as forfeited deposit revenue. Compensated Absences: The Center accrues a liability, with a corresponding charge to current operations, for employees' rights to receive compensation for future absences to be subsequently taken or paid at point of employment termination in accordance with GASB Statement No. 16. The liability for compensated absences was $2,492,466 and $2,409,254 at September 30, 2006 and 2005, respectively. Of these amounts, $1,382,170 and $1,276,159, respectively, is expected to be paid out within one year and thus is included in current liabilities; the remainder is reported as noncurrent. The current portion is based on the average annual amount of leave charged over the preceding three years. Capitalization of Interest: In accordance with FASB Statements No. 34 and 62, the Center capitalizes net interest costs on funds used to finance the construction of capital assets. For the 2006 and 2005 fiscal years, no interest cost was capitalized, because the net amount of interest costs on funds used to finance the construction of capital assets was immaterial. 10

13 NOTES TO FINANCIAL STATEMENTS, A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, The total interest cost for the Center was $51,675,958 and $53,669,502 for the fiscal years ended September 30, 2006 and 2005, respectively. Bond Amortization Costs: Bond premium, discount, and costs associated with issuance of long-term debt are being amortized over the life of the debt using the interest method. Some of these costs are capitalized as noted above, when appropriate. Also, in accordance with GASB Statement No. 23, the difference between the reacquisition price and the net carrying amount of defeased debt in refunding transactions is being amortized over the shorter of the life of the old debt or the life of the new debt using the interest method. Amortization of bond issuance costs which is not capitalized is recorded as a non-operating expense, and amortization of bond premium and discount and the deferred amount on refunding which are not capitalized are recorded as components of interest expense. Amortization of these bond costs for the fiscal years ended September 30, 2006 and 2005 was as follows: Net amortization of bond discount (premium) $ (1,685,435) $ (789,789) Amortization of issuance costs 721, ,213 Amortization of deferred amounts on refundings 3,203,061 2,585,809 Operating and Nonoperating Revenues: The Center reports as operating revenues all charges for services generated through rental of the facility, including hall and room rentals, fees for support services associated with events, and commissions from vendors. Other revenues, including tourist development taxes, interest revenue, and hotel surcharge revenue, are classified as nonoperating. Capital Contributions: Capital contributions revenue represents cash and donated easements received pursuant to the Westwood Connector Development Agreement, approved by the Board in

14 NOTES TO FINANCIAL STATEMENTS, B. DEPOSIT AND INVESTMENT RISK As of September 30, 2006 and 2005, the carrying value of the Center s deposits and investments, with their respective Standard & Poor s credit ratings, was as follows: Credit Investment Type Rating Demand and time deposits $ 5,989,919 $ 5,396,189 NA Local Government Surplus Funds Trust Fund 58,844,074 79,145,257 Unrated Money market mutual funds 48,778,680 47,959,592 AAAm Federal instrumentalities - Discount notes 50,974,600 14,859,500 A-1+ Notes and bonds 12,992,810 9,950,000 AAA Total deposits and investments $ 177,580,083 $ 157,310,538 Credit Risk: The Board s Investment Policy (Policy) limits credit risk by restricting authorized investments to the following: direct obligations of the United States Government or its agencies and instrumentalities, direct obligations of states and municipalities, repurchase agreements, the Local Government Surplus Funds Trust Fund (SBA) administered by Florida s State Board of Administration, commercial paper, bankers acceptances, and mutual funds. The Policy requires that investments in federal instrumentality debt be guaranteed by the full faith and credit of the U. S. Government sponsored agency, and that investments in money market mutual funds have a Standard & Poor s rating of AAAm or AAAg. Eligible money market mutual funds are limited to those comprised of direct obligations of the U.S. Government or its instrumentalities, repurchase agreements, commercial paper, and bankers acceptances. Concentration of Credit Risk: The Policy establishes limitations on portfolio composition, both by investment type and by issuer, in order to control concentration of credit risk. The Policy, which pertains to the overall portfolio of the Board and is not monitored at the individual fund level, provides that a maximum of 45% of the portfolio may be invested in Federal instrumentalities, with a limit of 15% of the portfolio invested in any one issuer. The portion of the Center s portfolio invested in Federal instrumentalities is detailed as follows, at September 30, 2006 and 2005: 12

15 NOTES TO FINANCIAL STATEMENTS, B. DEPOSIT AND INVESTMENT RISK, Issuer Federal Farm Credit Bank 4.6% 3.3% Federal Home Loan Mortgage Corporation 19.6% 3.3% Federal Home Loan Bank 13.5% 3.3% Federal National Mortgage Association 0.0% 6.7% Totals - Federal instrumentalities 37.7% 16.6% Custodial Credit Risk: The Policy requires that bank deposits be secured as provided by Chapter 280, Florida Statutes. This law requires local governments to deposit funds only in financial institutions designated as qualified public depositories by the Chief Financial Officer of the State of Florida, and creates the Public Deposits Trust Fund, a multiple financial institution pool with the ability to access its member financial institutions for collateral shortfalls if a default or insolvency has occurred. At September 30, 2006 and 2005, all of the Center s bank deposits were in qualified public depositories. The Policy requires execution of a third-party custodial safekeeping agreement for all purchased securities, and requires that securities be held in the Board s name. As of September 30, 2006 and 2005, all of the Center s investments were held in a bank s trust department in the Board s name. Interest Rate Risk: The Policy limits the investment of current operating funds to 13 months, and the investment of noncurrent operating funds to 60 months. Bond reserves, construction funds, and other nonoperating funds may be invested for up to 10 years, subject to bond covenants and liquidity needs. The Center s investments in Federal instrumentalities had weighted average maturities of 5.3 months and 5.0 months at September 30, 2006 and 2005, respectively. Certain of these investments are callable early at the option of the issuer. Assuming redemption at the earliest optional call dates, the weighted average maturities for Federal instrumentalities declines to 4.5 months and 3.0 months at September 30, 2006 and 2005, respectively. The money market mutual funds have a weighted average maturity of not more than 90 days. 13

16 NOTES TO FINANCIAL STATEMENTS, C. RESTRICTED ASSETS The use of certain Center assets is restricted by specific provisions of bond indentures and agreements with various parties. In addition, the Center restricts funds required to be placed in special construction accounts. In conjunction with the issuance of the Tourist Development Tax Revenue Bonds, Series 2002, the Construction Completion Subaccount was created, and deposits of $80,818,650 from the Renewal and Replacement Reserve and $9,925,120 from the hotel surcharge proceeds were made into the Subaccount. Amounts in the Subaccount are being used to pay costs of completing the Phase V expansion of the Center. Restricted assets were as follows at September 30, 2006 and September 30, September 30, 2006: Cash and Cash Equivalents Bond interest $ 24,886,554 Bond principal 24,425,000 Bond reserve 15,744,192 Bond issuance costs 11,333 Hotel surcharge 7,001,168 Construction completion 5,451,749 Total restricted assets 77,519,996 Less: current portion 49,322,887 Restricted assets, noncurrent portion $ 28,197,109 September 30, 2005: Bond interest $ 24,879,593 Bond principal 23,080,000 Bond reserve 16,218,420 Bond issuance costs 38,748 Hotel surcharge 3,646,277 Construction completion 11,198,220 Total restricted assets 79,061,258 Less: current portion 47,998,340 Restricted assets, noncurrent portion $ 31,062,918 14

17 NOTES TO FINANCIAL STATEMENTS, D. CAPITAL ASSETS Capital asset activity, was as follows: Balance Balance 10/1/05 Additions Reductions 9/30/06 Capital assets, not being depreciated: Land $ 112,397,476 $ - $ - $ 112,397,476 Construction in progress 3,411,704 23,869,683 (24,789,157) 2,492,230 Total capital assets, not being depreciated 115,809,180 23,869,683 (24,789,157) 114,889,706 Capital assets, being depreciated: Buildings 1,309,114,623 22,817,374 (10,338,607) 1,321,593,390 Improvements other than buildings 54,650,938 1,952,243 (12,506,981) 44,096,200 Machinery and equipment 27,116,466 1,095,015 (1,052,032) 27,159,449 Total capital assets, being depreciated 1,390,882,027 25,864,632 (23,897,620) 1,392,849,039 Less accumulated depreciation for: Buildings (183,618,303) (27,840,544) 2,747,057 (208,711,790) Improvements other than buildings (15,477,971) (1,251,448) 12,506,980 (4,222,439) Machinery and equipment (18,467,914) (3,697,042) 1,039,807 (21,125,149) Total accumulated depreciation (217,564,188) (32,789,034) 16,293,844 (234,059,378) Total capital assets, being depreciated, net 1,173,317,839 (6,924,402) (7,603,776) 1,158,789,661 Total Center capital assets, net $ 1,289,127,019 $ 16,945,281 $ (32,392,933) $ 1,273,679,367 Balance Balance 10/1/04 Additions Reductions 9/30/05 Capital assets, not being depreciated: Land $ 112,097,476 $ 300,000 $ - $ 112,397,476 Construction in progress 2,371,452 3,078,946 (2,038,694) 3,411,704 Total capital assets, not being depreciated 114,468,928 3,378,946 (2,038,694) 115,809,180 Capital assets, being depreciated: Buildings 1,307,093,399 2,021,224-1,309,114,623 Improvements other than buildings 54,633,467 17,471-54,650,938 Machinery and equipment 27,875,456 1,196,945 (1,955,935) 27,116,466 Total capital assets, being depreciated 1,389,602,322 3,235,640 (1,955,935) 1,390,882,027 Less accumulated depreciation for: Buildings (155,942,713) (27,675,590) - (183,618,303) Improvements other than buildings (14,434,745) (1,043,226) - (15,477,971) Machinery and equipment (15,645,849) (4,122,981) 1,300,916 (18,467,914) Total accumulated depreciation (186,023,307) (32,841,797) 1,300,916 (217,564,188) Total capital assets, being depreciated, net 1,203,579,015 (29,606,157) (655,019) 1,173,317,839 Total Center capital assets, net $ 1,318,047,943 $ (26,227,211) $ (2,693,713) $ 1,289,127,019 15

18 NOTES TO FINANCIAL STATEMENTS, E. CHANGES IN LONG-TERM LIABILITIES A summary of the changes in long-term liabilities (current and noncurrent portions) of the Center, is as follows: Balance Balance 10/01/05 Additions Reductions 9/30/06 Compensated absences payable $ 2,409,254 $ 1,603,409 $ (1,520,197) $ 2,492,466 Revenue bonds payable 1,043,960,000 73,435,000 (93,555,000) 1,023,840,000 Less unamortized costs: Bond premium/discount, net 10,491, ,778 (1,354,710) 9,480,461 Bond issuance costs (14,281,212) (783,346) 1,521,372 (13,543,186) Deferred amount on refunding (58,025,642) (3,650,945) 3,203,061 (58,473,526) Total revenue bonds payable, net of unamortized costs 982,144,539 69,344,487 (90,185,277) 961,303,749 Center long-term liabilities $ 984,553,793 $ 70,947,896 $ (91,705,474) $ 963,796,215 Balance Balance 10/1/04 Additions Reductions 9/30/05 Compensated absences payable $ 2,238,935 $ 1,588,621 $ (1,418,302) $ 2,409,254 Revenue bonds payable 1,066,820, ,285,000 (261,145,000) 1,043,960,000 Less unamortized costs: Bond premium/discount, net (6,582,033) 16,066,901 1,006,525 10,491,393 Bond issuance costs (14,472,743) (2,882,709) 3,074,240 (14,281,212) Deferred amount on refunding (43,975,031) (16,636,420) 2,585,809 (58,025,642) Total revenue bonds payable, net of unamortized costs 1,001,790, ,832,772 (254,478,426) 982,144,539 Center long-term liabilities $ 1,004,029,128 $ 236,421,393 $ (255,896,728) $ 984,553,793 F. REVENUE BONDS PAYABLE On May 26, 1994, the Board issued Tourist Development Tax Refunding Revenue Bonds, Series 1994A, in the amount of $24,470,000 for the purpose of advance refunding $23,010,000 of the outstanding Tourist Development Tax Revenue Bonds, Series 1990 and to pay certain costs and expenses relating to the issuance of the Series 1994A Bonds. On June 6, 2000, the Board used $49,013,445 of cash available from fifth cent Tourist Development taxes, in part to defease $16,025,000 of outstanding Series 1994A Bonds across all remaining maturities. The Series 1994A Bonds are not subject to redemption prior to maturity. 16

19 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, On August 7, 1997, the Board issued Tourist Development Tax Refunding Revenue Bonds, Series 1997, in the amount of $193,490,000 for the purpose of advance refunding $11,460,000 of the outstanding Tourist Development Tax Revenue Bonds, Series 1990 and $166,860,000 of the outstanding Tourist Development Tax Revenue Bonds, Series 1992B and to pay certain costs and expenses relating to the issuance of the Series 1997 Bonds. Series 1997 Bonds maturing on or after October 1, 2008 are redeemable prior to their stated date of maturity, at the option of the Board, in whole or in part (by lot within maturities) on any date on or after October 1, 2007, at the following redemption prices plus accrued interest to the redemption date: Redemption Period of Optional Redemption Price October 1, 2007 to September 30, % October 1, 2008 and thereafter 100 On December 14, 1998, the Board issued $177,890,000 of Tourist Development Tax Refunding Revenue Bonds, Series 1998A for the purpose of refunding $24,795,000 of the outstanding Tourist Development Tax Revenue Bonds, Series 1986, and refunding $136,155,000 of the outstanding Tourist Development Tax Revenue Bonds, Series 1994B, and to pay certain costs and expenses relating to the issuance of the Series 1998A Bonds. Series 1998A Bonds maturing on or after October 1, 2010 are redeemable prior to their stated date of maturity, at the option of the Board, in whole or in part (by lot within maturities) on any date on or after October 1, 2009, at a redemption price equal to the principal amount plus accrued interest to the redemption date, with no redemption premium. Series 1998A Term Bonds maturing on October 1, 2021 and 2024 are subject to mandatory redemption prior to maturity, by lot, at a redemption price equal to par plus accrued interest to the date of redemption on October 1 of each year, in the following principal amounts in the years specified: 17

20 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, Term Bonds Due October 1, 2021: Year Principal Amount 2020 $ 4,130, (final maturity) 4,330,000 Term Bonds Due October 1, 2024: Year Principal Amount 2022 $ 33,940, ,555, (final maturity) 37,240,000 On December 14, 1998, the Board issued $137,620,000 of Tourist Development Tax Revenue Bonds, Series 1998B to finance the purchase of land to be used for the Phase V and VI expansions of the Center, for site improvements and design costs for the Phase V expansion, for other capital improvements to the Center facilities, and to pay certain costs and expenses relating to the issuance of the Series 1998B Bonds. Series 1998B Bonds maturing on or after October 1, 2010 are redeemable prior to their stated date of maturity, at the option of the Board, in whole or in part (by lot within maturities) on any date on or after October 1, 2009, at a redemption price equal to the principal amount plus accrued interest to the redemption date, with no redemption premium. On August 3, 2000, the Board issued $299,705,000 of Tourist Development Tax Revenue Bonds, Series 2000, to pay a portion of the costs of the Phase V expansion of the Center, and to pay certain costs and expenses related to the issuance of the Series 2000 Bonds. On May 10, 2005, the Board issued Tourist Development Tax Refunding Revenue Bonds, Series 2005 in part to refund $239,050,000 of the outstanding Tourist Development Tax Revenue Bonds, Series 2000 maturing October 1, 2010 and thereafter. The Series 2000 bonds remaining outstanding are not subject to redemption prior to maturity. On April 17, 2002, the Board issued Tourist Development Tax Subordinate Revenue Bonds, Series 2002, in the amount of $216,460,000 to pay a portion of the costs of the Phase V expansion of the Center, and to pay costs and expenses related to the issuance of the Series 2002 Bonds. On October 27, 2004, the Tourist Development Tax Subordinate Revenue Bonds, Series 2002, ascended to senior lien status, as the conditions specified in the bond indenture had been satisfied to allow this to occur. Effective at that time, the bonds took on 18

21 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, parity status with the other currently outstanding Tourist Development Tax Bonds. Additionally, the name of the bonds was changed to Tourist Development Tax Revenue Bonds, Series 2002, to reflect the senior lien status. On June 6, 2006, the Board issued $73,435,000 Tourist Development Tax Refunding Revenue Bonds, Series 2006 for the purpose of refunding $70,475,000 of the outstanding Tourist Development Tax Revenue Bonds, Series 2002 Bonds maturing on October 1, 2023, 2024, and Series 2002 Bonds maturing on or after October 1, 2013 are redeemable prior to their stated date of maturity, at the option of the Board, in whole or in part (by lot within maturities) on any date on or after April 1, 2012, at a redemption price equal to the principal amount plus accrued interest to the redemption date, with no redemption premium. Series 2002 Term Bonds maturing on October 1, 2030 are subject to mandatory redemption prior to maturity, by lot, at a redemption price equal to par plus accrued interest to the date of redemption on October 1 of each year, in the following principal amounts in the years specified: Term Bonds Due October 1, 2030: Year Principal Amount 2028 $ 20,435, ,500, (final maturity) 22,625,000 On July 3, 2002, the Board issued $57,340,000 of Tourist Development Tax Refunding Revenue Bonds, Series 2002A to refund on a current basis $58,165,000 of Tourist Development Tax Refunding Revenue Bonds, Series 1992A, and to pay expenses of issuance of the Series 2002A Bonds. The Series 2002A Bonds are not subject to optional redemption or mandatory redemption prior to maturity. On October 8, 2003, the Board issued $17,330,000 Tourist Development Tax Refunding Revenue Bonds, Series 2003A for the purpose of refunding $15,780,000 of the outstanding Tourist Development Tax Revenue Bonds, Series 1994B, and to pay expenses of issuance of the Series 2003A Bonds. 19

22 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, Series 2003A Bonds maturing on or after October 1, 2014 are redeemable prior to their stated date of maturity, at the option of the Board, in whole or in part (by lot within maturities) on any date on or after October 1, 2013, at a redemption price equal to the principal amount plus accrued interest to the redemption date, with no redemption premium. On May 10, 2005, the Board issued $238,285,000 of Tourist Development Tax Refunding Revenue Bonds, Series 2005 for the purpose of refunding $239,050,000 of the outstanding Tourist Development Tax Revenue Bonds, Series 2000, funding the Bond Reserve Account to the extent of the deficiency therein upon the issuance of the Series 2005 Bonds, and to pay expenses of issuance of the Series 2005 Bonds. The current refunding transaction resulted in a cash flow savings over the next 26 years of $28,200,395, and a net present value debt service savings of $17,116,149, discounted at 4.2%. Series 2005 Bonds maturing on or after October 1, 2016 are redeemable prior to their stated date of maturity, at the option of the Board in whole or in part (by lot within maturities) on any date on or after October 1, 2015, at a redemption price equal to the principal amount plus accrued interest to the redemption date, with no redemption premium. On June 6, 2006, the Board issued $73,435,000 of Tourist Development Tax Refunding Revenue Bonds, Series 2006 for the purpose of refunding $70,475,000 of the outstanding Tourist Development Tax Revenue Bonds, Series 2002 and to pay expenses of issuance of the Series 2006 Bonds. The current refunding transaction resulted in a cash flow savings over the next 26 years of $7,688,142 and a net present value debt service savings of $4,023,860, discounted at 4.8%. Series 2006 Bonds maturing on or after October 1, 2017 are redeemable prior to their stated date of maturity, at the option of the Board in whole or in part (by lot within maturities) on any date on or after October 1, 2016, at a redemption price equal to the principal amount plus accrued interest to the redemption date, with no redemption premium. Series 2006 Term Bonds maturing on October 1, 2024 and 2030 are subject to mandatory redemption prior to maturity, by lot, at a redemption price equal to par plus accrued interest to the date of redemption on October 1 of each year, in the following principal amounts in the years specified: 20

23 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, Term Bonds Due October 1, 2024: Year Principal Amount 2023 $ 2,290, (final maturity) 2,395,000 Term Bonds Due October 1, 2030: Year Principal Amount 2025 $ 125, , , , , (final maturity) 155,000 The following is a summary of revenue bonds payable as of September 30, 2006 and 2005: September $24,470,000 Tourist Development Tax Refunding Revenue Bonds, Series 1994A: Serial bonds, due October 1, from 2005 to 2010 with interest due semi-annually on April 1 and October 1, at 5.55% to 5.90% $ 6,195,000 $ 6,735,000 Less: Unamortized bond discount (15,658) (19,876) Unamortized bond issuance costs (37,072) (47,059) Deferred amount on refunding (173,878) (217,261) Series 1994A Bonds payable net of unamortized costs 5,968,392 6,450,804 21

24 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, $193,490,000 Tourist Development Tax Refunding Revenue Bonds, Series 1997: September Serial bonds, due October 1, from 2005 to 2021 with interest due semi-annually on April 1 and October 1, at 4.70% to 6.00% $ 180,980,000 $ 185,350,000 Less: Unamortized bond discount (1,871,475) (1,974,286) Unamortized bond issuance costs (1,751,849) (1,848,089) Deferred amount on refunding (16,184,550) (17,073,664) Series 1997 Bonds payable net of unamortized costs 161,172, ,453,961 $177,890,000 Tourist Development Tax Refunding Revenue Bonds, Series 1998A: Serial bonds, due October 1, from 2005 to 2019 with interest due semi-annually on April 1 and October 1, at 4.25% to 5.00% 57,415,000 59,780,000 Term bonds, due October 1, 2021, with interest due semi-annually on April 1 and October 1, at 4.75% 8,460,000 8,460,000 Term bonds, due October 1, 2024, with interest due semi-annually on April 1 and October 1, at 4.75% 106,735, ,735,000 Series 1998A Bonds payable 172,610, ,975,000 Less: Unamortized bond discount (2,111,575) (2,207,030) Unamortized bond issuance costs (1,458,199) (1,524,118) Deferred amount on refunding (18,899,623) (19,876,472) Series 1998A Bonds payable net of unamortized costs 150,140, ,367,380 $137,260,000 Tourist Development Tax Revenue Bonds, Series 1998B: Serial bonds, due October 1, from 2005 to 2024 with interest due semi-annually on April 1 and October 1, at 3.85% to 4.75% 113,530, ,350,000 Less: Unamortized bond discount (1,099,692) (1,169,100) Unamortized bond issuance costs (1,173,138) (1,247,182) Series 1998B Bonds payable net of unamortized costs 111,257, ,933,718 22

25 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, $299,705,000 Tourist Development Tax Revenue Bonds, Series 2000: September Serial bonds, due October 1, from 2005 to 2009 with interest due semi-annually on April 1 and October 1, at 5.00% $ 33,385,000 $ 39,775,000 Less: Unamortized bond premium 122, ,809 Unamortized bond issuance costs (266,654) (355,539) Series 2000 Bonds payable net of unamortized costs 33,241,001 39,627,270 $216,460,000 Tourist Development Tax Revenue Bonds, Series 2002: Serial bonds, due October 1, from 2005 to 2027 with interest due semi-annually on April 1 and October 1, at 4.00% to 5.25% 79,585,000 84,930,000 Term bonds, due October 1, 2030, with interest due semi-annually on April 1 and October 1, at 5.125% 64,560,000 64,560,000 Term bonds, due October 1, 2032, with interest due semi-annually on April 1 and October 1, at 5.50% - 66,070,000 Series 2002 Bonds payable 144,145, ,560,000 Less: Unamortized bond premium/discount (net) (1,876,008) (2,260,330) Unamortized bond issuance costs (4,536,714) (5,466,112) Series 2002 Bonds payable net of unamortized costs 137,732, ,833,558 23

26 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, $57,340,000 Tourist Development Tax Refunding Revenue Bonds, Series 2002A: September Serial bonds, due October 1, from 2005 to 2013 with interest due semi-annually on April 1 and October 1, at 3.25% to 5.50% $ 44,165,000 $ 48,715,000 Unamortized bond premium 1,951,438 2,464,652 Unamortized bond issuance costs (430,875) (544,192) Deferred amount on refunding (1,925,135) (2,431,432) Series 2002A Bonds payable net of unamortized costs 43,760,428 48,204,028 $17,330,000 Tourist Development Tax Refunding Revenue Bonds, Series 2003A: Serial bonds, due October 1, from 2005 to 2019 with interest due semi-annually on April 1 and October 1, at 3.00% to 4.25% 17,110,000 17,215,000 Unamortized bond discount (60,326) (64,156) Unamortized bond issuance costs (385,459) (409,931) Deferred amount on refunding (1,917,819) (2,039,581) Series 2003A Bonds payable net of unamortized costs 14,746,396 14,701,332 24

27 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, $238,285,000 Tourist Development Tax Refunding Revenue Bonds, Series 2005: September Serial bonds, due October 1, from 2006 to 2031 with interest due semi-annually on April 1 and October 1, at 3.50% to 5.00% $ 238,285,000 $ 238,285,000 Unamortized bond premium 14,101,309 15,513,710 Unamortized bond issuance costs (2,724,872) (2,838,990) Deferred amount on refunding (15,736,791) (16,387,232) Series 2005 Bonds payable net of unamortized costs 233,924, ,572,488 $73,435,000 Tourist Development Tax Refunding Revenue Bonds, Series 2006: Serial bonds, due October 1, from 2007 to 2032 with interest due semi-annually on April 1 and October 1, at 3.65% to 5.00% 67,920,000 - Term bonds, due October 1, 2024, with interest due semi-annually on April 1 and October 1, at 4.50% 4,685,000 - Term bonds, due October 1, 2030, with interest due semi-annually on April 1 and October 1, at 4.625% 830,000 - Series 2006 Bonds payable 73,435,000 - Unamortized bond premium 339,793 - Unamortized bond issuance costs (778,354) - Deferred amount on refunding (3,635,730) - Series 2006 Bonds payable net of unamortized costs 69,360,709 - Total revenue bonds payable net of unamortized costs 961,303, ,144,539 Less: Current portion (payable from restricted assets) (24,425,000) (23,080,000) Revenue bonds payable, noncurrent portion $ 936,878,749 $ 959,064,539 25

28 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, All series of Tourist Development Tax revenues bonds outstanding are payable on a parity basis solely from available tourist development taxes, net operating revenues of the Center, investment earnings, pledged fifth cent tax proceeds, naming rights revenues, and moneys held in certain accounts established by the Bond Indenture. The Bond Indenture specifies the order of priority in which revenues (Tourist Development Tax Revenues, Pledged Fifth Cent Tax Proceeds, Operating Revenues, and Naming Rights Revenues) are to be deposited into these accounts. The purposes of the various accounts, in order of priority of monthly revenue transfers, are as follows (priorities established with regard to junior lien debt are omitted as past junior lien debt has ascended to parity status): Tourist Development Tax Revenues: Operating Revenue Account - Deposit an amount sufficient to cover an emergency payment, formally determined by the Board, required because of a temporary shortage of Gross Operating Revenues and needed for the payment of Priority Expenses of Operation, Maintenance and Promotion. Principal and Interest Accounts - Deposit an amount on or before the 15th day of each month, together with amounts from the Pledged Fifth Cent Tax Fund, sufficient to satisfy the monthly debt service requirement for the bonds. Bond Reserve Account - Deposit an amount sufficient to assure that the total of cash on deposit plus the amount available under the surety bond is not less than the maximum annual debt service requirement of $75,269,500. Rebate Account - Deposit an amount required to pay the rebate requirement on account of the bonds to the U.S. Treasury as required by applicable law. Operating Revenue Account - Deposit an amount sufficient to remedy any deficiencies and to provide a 30-day operating reserve for operation, maintenance, and promotion expenses of the Center. Renewal and Replacement Reserve Account - All pledged revenues remaining in the Enterprise Fund shall be deposited in the Renewal and Replacement Reserve Account for the purpose of: first, to remedy any deficiency in the Principal and Interest Accounts; second, to remedy any deficiency in the Bond Reserve Account; third, to pay expenses of operation, maintenance and promotion due to an insufficiency in the Operating Revenue Account; fourth, to repay any Supplemental Revenues with interest, so supplied; and fifth, to make such other payments as are designated in the Tourist Development Plan or otherwise approved by the Board. 26

29 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, Pledged Fifth Cent Tax Proceeds: All pledged fifth cent Tourist Development Tax revenues shall be paid into the Pledged Fifth Cent Tax Fund, and shall be applied as follows: first, to the Principal and Interest Accounts to provide for the monthly debt service requirement for the bonds; second, to provide any requirement for principal or interest payment on the bonds prior to making such payment from the Bond Reserve Account; third, to remedy any deficiency in the Bond Reserve Account; and fourth, for any other lawful purpose. Operating Revenues: All gross operating revenues will be deposited into the Operating Revenue Account and will be applied as follows: first, to payment of Priority Expenses of Operation, Maintenance and Promotion; and second, to payment of any other budgeted expenses of the Center s operation. All remaining moneys will be applied as follows: first, to payment of monthly bond interest and principal requirements, if needed; second, to any required payment into the Bond Reserve Account; and third, for any other lawful purpose. Naming Rights Revenues: Moneys received from the sale of the right to name all or a portion of the Center shall be paid into the Naming Rights Revenue Account, to be applied as follows: first, to pay Priority Expenses of Operation, Maintenance and Promotion, if needed; second, to satisfy the monthly principal and interest debt service requirement; third, to remedy any deficiency in the Bond Reserve Account; and fourth, any moneys remaining shall be transferred to the Board s general fund. Future principal and interest payments (in thousands) required on the Series 1994A, Series 1997, Series 1998A, Series 1998B, Series 2000, Series 2002, Series 2002A, Series 2003A, Series 2005, and Series 2006 Bonds are as follows as of September 30, 2006: 27

30 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, Bond Year Ending October 1 Principal Interest Total 2006 $ 24,425 $ 24,354 $ 48, ,610 48,870 74, ,850 47,632 74, ,090 46,391 74, ,365 45,113 74, , , , , , , ,490 96, , ,560 46, , ,560 5,982 87,542 Totals $ 1,023,840 $ 719,903 $ 1,743,743 28

31 NOTES TO FINANCIAL STATEMENTS, F. REVENUE BONDS PAYABLE, The amount of defeased debt still outstanding, and not reported on the balance sheets, is as follows as of September 30, 2006 and 2005: Original September 30 Defeased Amount Tourist Development Tax Revenue Bonds, Series 1980 $ 34,260,000 $ 20,035,000 $ 21,430,000 Tourist Development Tax Revenue Bonds, Series ,370,000 7,240,000 7,740,000 Tourist Development Tax Revenue Bonds, Series ,975,000 17,045,000 17,045,000 Tourist Development Tax Refunding Revenue Bonds, Series 1992A 71,745,000 9,140,000 9,995,000 Tourist Development Tax Refunding Revenue Bonds, Series 1994A 16,025,000 12,630,000 13,725,000 Tourist Development Tax Revenue Bonds, Series ,050, ,050, ,050,000 Tourist Development Tax Revenue Bonds, Series ,475,000 70,475,000 - Totals $ 498,900,000 $ 375,615,000 $ 308,985,000 29

32 NOTES TO FINANCIAL STATEMENTS, G. RETIREMENT SYSTEM Plan Description: The Center s employees participate in the Florida Retirement System (FRS), administered by the Florida Department of Administration. Employees elect participation in either the defined benefit plan ( Pension Plan ), a multiple-employer cost-sharing defined benefit retirement plan, or the defined contribution plan ( Investment Plan ) under the FRS. As a general rule, membership in the FRS is compulsory for all employees working in a regularly established position for a state agency, county government, district school board, state university, community college, or a participating city or special district within the State of Florida. The FRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefits are established by Chapter 121, Florida Statutes, and Chapter 60S, Florida Administrative Code. Amendments to the law can be made only by an act of the Florida Legislature. Benefits under the Pension Plan are computed on the basis of age, average final compensation, and service credit. Regular class employees who retire at or after age 62 with at least six years of credited service or 30 years of service regardless of age are entitled to a retirement benefit payable monthly for life, equal to 1.6% of their final average compensation for each year of credited service. Vested employees with less than 30 years of service may retire before age 62 and receive reduced retirement benefits. Special risk class employees (sworn law enforcement officers, firefighters, and correctional officers) who retire at or after age 55 with at least six years of credited service, or with 25 years of service regardless of age, are entitled to a retirement benefit payable monthly for life, equal to 3.0% of their final average compensation for each year of credited service. Senior Management Service class employees who retire at or after age 62 with at least six years of credited service or 30 years of service regardless of age are entitled to a retirement benefit payable monthly for life, equal to 2.0% of their final average compensation for each year of credited service. Elected Officers class employees who retire at or after age 62 with at least six years of credited service or 30 years of service regardless of age are entitled to a retirement benefit payable monthly for life, equal to 3.0% (3.33% for judges and justices) of their final average compensation for each year of credited service. A post-employment health insurance subsidy is also provided to eligible retired employees through the FRS in accordance with Florida Statutes. In addition to the above benefits, the FRS administers a Deferred Retirement Option Program (DROP). This program allows eligible employees to defer receipt of monthly retirement benefit payments while continuing employment with a FRS employer for a period not to exceed 60 months after electing to participate. Deferred monthly benefits are held in the FRS Trust Fund and accrue interest. 30