Document farmingtonnm_gov_doc_1c95444fa3

City of Farmington, New Mexico For Fiscal Year Ended June 30, 2012 3 New Mexico Centennial 1912‐2012 ---PAGE BREAK--- Cover: Farmington Main Street, 1900 (top); Farmington City Hall, 1909 (bottom) ---PAGE BREAK--- CITY OF FARMINGTON NEW MEXICO COMPREHENSIVE ANNUAL FINANCIAL REPORT For The Year Ended June 30, 2012 Prepared By: Administrative Services Department – Finance Division Eric D. Schlotthauer, Controller Sheree Wilson, Enterprise Accountant Sarah Talley, Staff Accountant II Krista Martin, Staff Accountant II Earlene Roquemore, Staff Accountant I With Special Thanks To: Teresa Emrich, Budget Officer Linda Flores, Financial Analyst ---PAGE BREAK--- Printing by Reprographics Center, Inc. Pictures courtesy of the Farmington Museum ---PAGE BREAK--- TABLE OF CONTENTS Page INTRODUCTORY SECTION Transmittal Letter i Certificate of Achievement for Excellence in Financial Reporting viii Organizational Chart ix List of Principal Officials x City of Farmington Map xi Four Corners Area Map xii FINANCIAL SECTION Report of Independent Auditors 1 Management’s Discussion and Analysis 3 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 17 Statement of Activities 18 Fund Financial Statements: Balance Sheet – Governmental Funds 19 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 20 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 21 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – General Fund 22 Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Gross Receipts Tax Streets Fund 23 Statement of Net Assets – Proprietary Funds 24 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds 26 Statement of Cash Flows – Proprietary Funds 27 Notes to the Financial Statements 29 Supplementary Information: Nonmajor Governmental Funds: Combining Balance Sheet – Nonmajor Governmental Funds 59 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Nonmajor Governmental Funds 63 ---PAGE BREAK--- Page Special Revenue Funds: Gross Receipts Tax Parks Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 67 Park Development Fees Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 68 Library Gifts and Grants Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 69 Parks/Recreation Gifts and Grants Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 70 Museum Gifts and Grants Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 71 Lodgers’ Tax Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 72 State Police Protection Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 73 Region II Narcotics Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 74 COPS Program Grant Fund: Schedule of Revenues, Expenditures and Changes In Fund Balances – Budget to Actual 75 Law Enforcement Block Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 76 State Fire Grant Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 77 Penalty Assessment Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 78 ---PAGE BREAK--- Page Capital Projects Funds: Community Development Grant Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 79 Gross Receipts Tax 2012 Bond Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 80 Governmental Capital Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 81 Airport Construction Grant Projects Fund: Schedule of Revenues, Expenditures and Changes In Fund Balances – Budget to Actual 82 Debt Service Fund: Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget to Actual 83 Business-Type Funds: Internal Service Fund: Health Insurance Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets – Budget to Actual 86 Enterprise Funds: Electric Utility Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets – Budget to Actual 87 Water Utility Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets – Budget to Actual 88 Wastewater Utility Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets – Budget to Actual 89 Sanitation Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets – Budget to Actual 90 Golf Course Enterprise Fund: Schedule of Revenues, Expenses and Changes in Fund Net Assets – Budget to Actual 91 ---PAGE BREAK--- Page Capital Assets Used in the Operation of Governmental Funds: Comparative Schedules by Source 93 Schedule by Function and Activity 94 Schedule of Changes by Function and Activity 95 STATISTICAL SECTION (Unaudited) Schedule Financial Trends: Net Assets by Component 1 98 Changes in Net Assets 2 99 Fund Balance, Governmental Funds 3 101 Changes in Fund Balances, Governmental Funds 4 102 Revenue Capacity: Electric Kilowatt Sales and Revenue 5 103 Electric Rates by Customer Type 6 104 Electric Principal Revenue Payers 7 105 Tax Revenue by Source, Governmental Funds 8 106 Taxable Gross Receipts by Industry 9 107 Direct and Overlapping Gross Receipts Tax Rates 10 108 Taxable Gross Receipts Payers by Industry 11 109 Assessed Value and Estimated Actual Value of Taxable Property 12 110 Direct and Overlapping Property Tax Rates 13 111 Principal Property Tax Payers 14 112 Property Tax Levies and Collections 15 113 Debt Capacity: Ratios of Outstanding Debt by Type 16 114 Direct and Overlapping Governmental Activities Debt 17 115 Legal Debt Margin Information 18 116 Pledged-Revenue Coverage 19 117 Demographic and Economic Information: Demographic and Economic Status 20 118 Principal Employers 21 119 Operating Information: Full-time-Equivalent City Government Employees by Function / Program 22 120 Operating Indicators by Function / Program 23 121 Capital Asset Statistics by Function / Program 24 122 ---PAGE BREAK--- Page Single Audit Section: Schedule of Expenditures of Federal Awards 123 Notes to Schedule of Expenditures of Federal Awards 125 Report of Independent Auditors on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 127 Report of Independent Auditors on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A-133 129 Schedule of Findings and Questioned Costs 131 Report of Independent Auditors – PFC Schedule 141 Schedule of PFC Revenues and Expenditures 143 Notes to Schedule of PFC Revenues and Expenditures 144 Report of Independent Auditors on Compliance Requirements Applicable to the Passenger Facility Charge Program and on Internal Control over Compliance 145 PFC Audit Summary 147 Exit Conference 149 Other Information: Schedule of Pledged Collateral by Institution 151 Schedule of Joint Powers Agreements 152 ---PAGE BREAK--- Parade through downtown Farmington - 1912 ---PAGE BREAK--- INTRODUCTORY SECTION INTRODUCTORY SECTION ---PAGE BREAK--- ---PAGE BREAK--- ii (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Farmington’s MD&A can be found immediately following the report of the independent auditors. Profile of the Government The City of Farmington is located in the northwest corner of the State of New Mexico in what is commonly called the Four Corners Area (see map on page xii). The City was originally incorporated in 1901 and has a current land area of 33 square miles and serves a population of 45,250. The government is empowered to levy a property tax on both real and personal property located within its boundaries. However, the majority of City revenue is generated by a local option and state shared Gross Receipts Tax (GRT) collected by the New Mexico Taxation and Revenue Department on most business services and sales of tangible personal property. A portion of the State’s share of this tax (1.225%) plus local municipal option components are then distributed back to the municipality by the Department on a basis. As of June 30, 2012, the total in-city GRT rate was 7.125% and includes the City’s local option taxes in the amount of 1.1875%. Together with the 1.225% State share, the City’s tax rate amounts to 2.4125%. Another 1.125% in local option tax authority is available to the City, but to date has not been imposed. The City of Farmington has operated under the council/manager form of government since 1965. Policy-making and legislative authority are vested in a governing council consisting of the Mayor and four Council members. The City Council’s responsibilities include adopting ordinances, adopting the budget, appointing committees, and appointing the City Manager, City Clerk, City Treasurer, and the City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the City Council, overseeing the day-to-day operations of the City, and appointing directors of the various departments. The Council is elected on a non-partisan basis. Council members serve four-year staggered terms, with two Council members elected every two years. The Mayor is elected to serve a four-year term. The four Council members are elected by district and the Mayor is elected at large. The City of Farmington provides a full range of services including police and fire protection; the construction, operation, and maintenance of electric, water, and wastewater systems; the construction and maintenance of highways, streets, parks, and other infrastructure; and recreational activities, libraries, museums and cultural events. The annual budget serves as the foundation for the City of Farmington’s financial planning and control. All departments of the City of Farmington are required to submit requests for appropriation to the City Manager on or before the last day in February each year. The City Manager evaluates department requests and subsequently develops a proposed budget. The City Manager presents the proposed budget to the Council for review prior to May 10. The City Council is required to hold public hearings on the proposed budget and to adopt a preliminary budget by June 1 and a final budget no later than July 31 of each year. The City of Farmington’s fiscal year begins July 1 of each year and ends on June 30. The appropriated budget is prepared according to fund, function (e.g. public safety), and department (e.g. police). Department directors may make transfers of appropriations within a fund and between their divisions. Transfers of appropriations between funds, however, require the special approval of the City Council. Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund and gross receipts tax streets fund, this comparison is presented on pages 22 and 23 as part of the basic financial statements for the governmental funds. Budget-to-actual comparisons for all other funds are presented in the non- major governmental funds, internal service fund, and enterprise funds sections of this report. ---PAGE BREAK--- iii Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when considered from the broader perspective of the specific environment within which the City of Farmington operates. Local economy. The local economy has historically been based on the natural resource extractive industry, two large coal-fired electric generating stations, and Farmington’s geographical position as a regional retail center catering to a retail trade market population base of more than 350,000. Historically, the local economy has fluctuated in cycles that correspond to the price of oil and particularly natural gas. From 2003 to 2008, the economy remained strong as the price of natural gas remained on the high end of the historical spectrum. However, in the fall of 2008, with the national economy in recession, declining natural gas prices led to a weakening in the local economy. Natural gas prices have remained low through FY2012 and the local natural gas industry has continued to decline. Natural gas production in northwest New Mexico dropped from 939 billion cubic feet in 2008 to 814 billion cubic feet in 2011 or a 13% decline. One local drilling company that employed 850 workers in October, 2008, has reduced its workforce to 350 locally and also moved some of its workers to other more profitable oil and gas regions outside of New Mexico. Nevertheless, other sectors of the local economy have improved with gross receipts tax (GRT) in FY2011 increasing by 3.9% from FY2010 and GRT in FY2012 increased by 7.8% over FY2011. GRT statistical reports received for FY2012 from the State of New Mexico show the industry sectors for “other services” plus manufacturing rose 17% and 28% respectively over FY2011. Relative to the FY2012 budget process and because GRT in FY2011 increased 3.9% over the prior year, a significant portion of fleet vehicles and technology equipment were reinstated following their purchase postponement in FY2011. The FY2012 budget returned many items to a normal replacement schedule based on age and usage requirements. In FY2011 thirty-five positions were left unfilled as a result of attrition and reorganization. This continued lower staffing level and the associated reduced personnel costs contributed towards the City Council’s approval of a 1.5% cost of living increase for employees in FY2012. For FY2012, the general fund total original expenditure budget of $51.8 million balanced with budgeted revenues excluding a budgeted transfer of $3.0 million to the general capital projects fund as per the cash reserve policy. However, the actual transfer made in FY2012 totaled $3.6 million once the end of year actual cash balance was calculated as per the reserve policy for the general fund. Relative to the Electric Utility Dividend Policy adopted in FY2011, an $8.1 million interfund transfer into the general fund was made in FY2012 and greatly assisted in covering the budgeting of expenditures that were deferred from FY2011. Given the comparably low rates of the Farmington Electric Utility System and the desire to adequately maintain and/or expand the electric infrastructure, the adopted Electric Dividend Policy provides that 40% of the electric utility’s net income before transfers be transferred to the general fund. In FY2011 and prior to a formal policy adoption, the City Council authorized a dividend of $5.8 million. Although the dividend increased to $8.1 million in FY2012, decreasing power sales and rising expenses has generated a lower dividend for FY2013. Relative to the FY2013 budget, the utility dividend has been budgeted at $5.8 million and FY2013 expenditures have also been adjusted downward to compensate for the decrease. However, some of the FY2013 expenditure decrease has been offset by the FY2012 rise of 7.8% in GRT and FY2013 GRT of $50.9 million has been budgeted at approximately the same level as actual GRT in FY2012. During FY2004, the U.S. Office of Management and Budget designated Farmington as the central city of the Farmington-San Juan County Metropolitan Statistical Area (MSA). This designation qualifies Farmington for various federal entitlement programs and, more importantly, increases the ---PAGE BREAK--- iv visibility of Farmington in various national economic databases that should highlight the desirability of Farmington as a potential business location. As a result of the MSA designation, Farmington continues to participate in a national urban cost of living survey. As a participant in this survey, Farmington is compared with 400 other cities in the American Chamber of Commerce Researchers Association’s Cost of Living Index. This index measures six different cost of living components such as housing, transportation, and utilities and then rates each city in terms of the national average. In a recent survey, Farmington’s cost of living index was 98% of the national average. There are 366 Metropolitan Statistical Areas in the U.S. that are annually ranked according to economic strength by POLICOM Corporation, an independent economic research firm specializing in analyzing local and state economies. An MSA’s economic strength is measured according to earnings, jobs, and wages for all workers, personal income per capita, per capita earnings by residence, etc. For 2012 Farmington was ranked 212 for its relative economic strength when compared to all 366 MSAs. The Farmington MSA has an employed labor force of approximately 51,624, an increase of compared to 2011. The local unemployment rate was 7.3% at June 2012 compared to 8.3% for the same period in FY2011. Major employers include the regional medical center, four public school districts, a community college, a coal mining operation, two electrical power generation plants, two Wal-Mart superstores, Sam’s Club, and various oil and gas companies. Meanwhile, the weakening local economy has impacted residential growth and the latest statistics show a population decrease of 1.4% from 2010 to 2011. During FY2012, the 1,302 building permits issued were marginally less than FY2011 with a decrease while the $47.3 million valuation of these building permits totaled a $3.1 million increase or 7.1% over the prior year. However, total construction-related gross receipts taxes (GRT) of $2.4 million barely dropped by in FY2012 as compared to FY2011. Retail GRT, the largest industry sector in terms of GRT, grew by $329,000 in FY2012 or 2.0%. Gross receipts tax revenue comprises 73% of the City’s general fund total revenue sources. Residents and visitors in the City of Farmington enjoy 88 parks and river properties covering 1,634 acres and strategically located across the community. Farmington boasts numerous recreational facilities including 23 ball parks, 11 soccer fields, 25 tennis courts, 1 football field, 9.3 miles of river trails, 3 swimming pools that include a state-of-the-art aquatics center, 2 interactive water areas, and a recreation center featuring several indoor playing courts. The City’s Piñon Hills Golf Course was recently honored by Golfweek Magazine as the fourth best Municipal Course in the country. As our locality and facilities continue to gain recognition, Farmington will host more national and regional events in baseball, softball, soccer, swimming, golf, mountain biking, and off-road rock climbing, as well as numerous conventions. Annually, during the month of August, the City of Farmington plays host to the Connie Mack World Series at Ricketts Park stadium which seats 6,300 fans. This national tournament for amateur baseball’s best 16 to 18 year-olds draws together 10 teams from across the country. The teams hail from specified regions throughout the contiguous United States as well as Puerto Rico and Canada. The tournament, which began in Farmington in 1965, is the 3rd largest spectator-attended event in the state of New Mexico and provides a significant economic boost to the entire region. Long-term financial planning. In FY2011, the City Council formally adopted a cash reserve policy for the City’s general fund whereby funds exceeding a threshold equal to 2½ months of the annual expenditure budget would be transferred to a capital projects fund. In FY2012 and as per the new policy, a surplus amount of $3.65 million was transferred from the general fund to a separate capital projects fund. Subsequently, the City Council approved specific projects and appropriated $3.2 million from the transferred monies to fund several projects. The projects include replacing a fire engine truck, roof replacement for several city buildings, downtown improvements, paving a ---PAGE BREAK--- v municipal parking lot, street paving, fire facilities construction, police facilities improvements, and constructing fiber optic connectivity to various city facilities. If adequate funds exist at the beginning of each fiscal year, surplus funds will continue to be transferred from the general fund to the capital projects fund and utilized for important projects that might otherwise go unfunded. At the conclusion of FY2012 the general fund’s cash balance was at a sufficient level that approximately $4.0 million will be available for transfer in FY2013 to the capital projects fund. With respect to debt issuance, in the first half of FY2012 the City Council began deliberations to issue revenue bonds to accomplish several needed capital improvement projects. After several discussion sessions the Council decided to issue sufficient GRT (sales tax) bonds to generate $9.1 million in net proceeds for the construction of five identified projects. On the advice of the City’s financial advisor, in April 2012 the City issued $11.3 million in sales tax revenue bonds with $2.2 million of the bond proceeds plus sinking funds on hand of $855K applied to the refunding of the City’s 2001 outstanding sales tax revenue bonds. Concurrently, net bond proceeds of $9.1 million were deposited to a new capital projects fund to be used to construct the following projects: New Animal Shelter 400,000 Civic Center Remodel 1,125,000 Museum Expansion 2,500,000 Replace Fire Station #1 3,200,000 New Storm Water Detention Pond 1,000,000 Contingencies 900,000 With regard to the City’s utility debt, financing for water utility system improvements was in process at the close of FY2012. The City’s water utility system includes 16,200 water meters of which 13,800 must be read manually every month. Meter readers must physically open each meter can and record the reading on a handheld device. This is done for approximately 13,800 meters each month while the remaining 2,400 water meters are equipped with automatic meter reading (AMR). With AMR, meter readers walk or drive by the meter and use a handheld device to collect information from the meter via radio frequency. An AMR system provides more frequent, efficient and accurate meter readings. The goal is to replace the 13,800 manually read meters with AMR meters at an estimated cost of $5.9 million. Financing for this project has been obtained by means of a $5.9 million loan through the New Mexico Finance Authority (NMFA) Drinking Water State Revolving Loan Fund at a 2% interest rate for 20 years with a 25% forgiveness of the principal. The 25% forgiveness on the loan principal calculates to a net loan repayment of $5.8 million including interest and fees over the 20 year period. Due to increased revenue from increased accuracy in meter readings and reduced labor to read the meters, the loan could be repaid in approximately 10 years. In 2004, the City completed its wastewater treatment plant expansion Phases I and II which were financed with a $14.2 million loan from the New Mexico Environment Department (NMED). Phases I and II were constructed to comply with the EPA’s discharge permit requirements and to begin the phasing in of new biological wastewater treatment processes. Phases I and II increased the treatment plant’s capacity by 15% to meet a projected 6.67 mgd flow rate. In addition, reliability and flexibility were improved through the rehabilitation of the primary clarifiers and sludge drying beds as well as the capacity expansion of the disinfection process. On the horizon, and with an estimated cost of $5.5 million, Phase III of continued improvements to treatment processes include constructing a second sludge basin, an additional final clarifier, and a new state of the art ---PAGE BREAK--- vi ultraviolet (UV) disinfection system. Phase III will add redundancy and future capacity to the wastewater treatment plant plus reduce chemical costs and the discharge of chemicals into the San Juan River. At the end of FY2012 the City received initial approval of a $5.5 million NMED low interest, 20-year loan through the State’s Clean Water Revolving Fund Program. The Farmington Electric Utility System’s municipal structure keeps customer electric rates very reasonable and Farmington customers enjoy the lowest rates in the region. A typical Farmington customer’s electric billing will be 28% less than a customer of a nearby electric cooperative who uses the same amount of kilowatt hours. As part of the plan to ensure a secure, reliable, and economical power source for utility customers, the electric utility completed an evaluation of various options for new generation and, after the successful completion of several bond defeasances, has significantly reduced outstanding debt in recent years. In FY2004, the electric utility initiated construction of a new $59 million, 60 megawatt, gas-fired electric power plant with construction funded from existing cash reserves. The new plant went into operation in May, 2005. The electric utility’s outside consultants are currently performing a study and analysis of potential options to construct additional generation facilities for the City’s near future. With respect to the City’s self-insured health insurance program and without subsidies made from the City’s operating funds, the health insurance fund would have ended FY2012 with a negative $1.5 million cash balance. But thanks to the subsidies, the health insurance fund concluded FY2012 with a zero cash balance rather than a negative one. Consequently, the health insurance fund underwent changes in the latter part of FY2012 which included contracting with a new third party administrator, Blue Cross/Blue Shield of New Mexico, effective as of July 1, 2012. The change was made to obtain better pricing from local and regional health care providers with the anticipation to substantially build the cash reserves of the health insurance fund over the next two to three years. With a 10% increase in health insurance premiums effective July 1, 2012 plus the improved pricing agreements with health care providers, management believes the health insurance fund will build and maintain an adequate cash reserve to cover those extraordinary years when health claims are excessive and higher than average. Other long-term financial planning is incorporated into the City of Farmington’s Comprehensive Plan which was initially approved by the City Council in October, 2002. The City’s Comprehensive Plan is the guide to the future of Farmington and was developed by the citizenry through high level community participation and input. The plan was originally developed in a multi-stage process and its foundation is set on core community values and quality of life goals identified into the future. As such, the document serves as the guide for policy decisions relating to the physical, social, and economic growth of the community as well as future financial capital investments. In addition to providing goals and objectives, the plan assesses the opportunities and challenges facing the City and sets priorities for an implementation program that outlines specific actions and practical results. As comprehensive plans require updating every 10 years, an update is anticipated over the next two years. In addition, the Comprehensive Plan served as a springboard for the designation of the Metropolitan Redevelopment Area (MRA) which covers the City’s downtown area plus guided the development of the MRA Plan which was adopted in 2009. The MRA Plan sets forth the City's priorities, goals, and implementation plans which are specific to the MRA. Awards and Acknowledgements. The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Farmington for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2011. This was the 18th consecutive year that the City of Farmington received this prestigious award. The Certificate of Achievement is a prestigious national award, recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, the City ---PAGE BREAK--- ---PAGE BREAK--- Certificate of Achievement for Excellence m Financial Reporting Presented to City of Farmington New Mexico For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2011 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Govemment Finance Officers Association ofthe United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in govemment accounting and financial reporting. viii ---PAGE BREAK--- Citizens of Farmington Citizens of Farmington City Attorney Burnham Claims Legal Mayor and Council Roberts, Darnell, Fischer, McCulloch, Sandel City Clerk Fuhrman Archives Business Registration Administration City Manager Mayes Human Resources Williams Employee Benefits Personnel Payroll Insurance Workplace Safety Police Westall Administration Special Operations Traffic Control School Crossing Guards Detectives Patrol Code Compliance Fire Page Information Technology Friedman Enterprise Systems Computer Operations Help Desk GIS Administrative Services Mason Administration Accounting Operations Finance Purchasing Utility/Enterprise Warehouse Community Development Holton Administration Development Services Planning Metro. Planning Org. Building Inspection Metro. Redev. Area Public Works Smaka Administration Solid Waste City Engineering Water/Waste Water Admin. Traffic Engineering Water Rights Streets Storm Water Survey Construction Inspection Government Relations/ Special Projects General Services Campbell (Acting) Administration Building Support Building & Maintenance Community Services Vehicle Maintenance Electric Utility Sims (Interim) Administration Electric Meter Shop Animas Power Plant Electric Relay Shop Bluffview Power Plant Metering Services Compliance Navajo Dam Power Plant Electric Engineering San Juan No. 4 Electric Construction Substation Maintenance System Control Center Transmission & Distribution Parks, Recreation & Cultural Affairs Bowman Administration Senior Citizen Center Animal Shelter/Park Ranger Museum System Aquatic Facilities Parks Operations Civic Center Recreation Center Farmington Indian Center Recreation Programs Golf Courses Sandstone Production Sycamore Center City of Farmington – Organizational Chart Municipal Judges Liese & Rowland June 2012 Library Administration Homeland Security Fire Marshalls Operations Customer Care Community Services Assistant City Manager Campbell Airport/Transit ix ---PAGE BREAK--- x CITY OF FARMINGTON Principal Officials June 30, 2012 MAYOR Tommy Roberts CITY COUNCIL Dan Darnell Mary Fischer Gayla McCulloch Jason Sandel CITY MANAGER Robert Mayes ASSISTANT CITY MANAGER Robert Campbell ADMINISTRATIVE SERVICES DIRECTOR H. Andrew Mason COMMUNITY DEVELOPMENT DIRECTOR Mary Holton ELECTRIC UTILITY DIRECTOR Mike Sims (Interim) FIRE CHIEF Terry Page GENERAL SERVICES DIRECTOR Robert Campbell (Interim) HUMAN RESOURCES DIRECTOR Lyle Williams INFORMATION TECHNOLOGY DIRECTOR Richard Friedman PARKS & RECREATION DIRECTOR Jeffrey Bowman POLICE CHIEF Kyle Westall PUBLIC WORKS DIRECTOR Jeffrey Smaka CONTROLLER Eric Schlotthauer ---PAGE BREAK--- MAP COURTESY OF FARMINGTON CONVENTION & VISITORS BUREAU xi ---PAGE BREAK--- xii ---PAGE BREAK--- FINANCIAL SECTION FINANCIAL SECTION ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- Management Discussion and Analysis Management Discussion and Analysis ---PAGE BREAK--- Management’s Discussion and Analysis As management of the City of Farmington, we offer readers of the City of Farmington’s financial statements this narrative overview and analysis of the financial activities of the City of Farmington for the fiscal year ended June 30, 2012. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which starts on page i of this report. Financial Highlights  The assets of the City of Farmington exceeded its liabilities at the close of FY2012 by $535,758,340 (net assets). Of this amount, $119,204,924 (unrestricted net assets) may be used to meet the City’s ongoing obligations.  As of June 30, 2012, the City of Farmington’s governmental funds reported combined ending fund balances of $47,633,365, an increase of $10,773,627, or 29.2% in comparison with the prior year. A total of $18,216,147 (unassigned fund balance) is available for spending at the City’s discretion.  At the end of the current fiscal year, unassigned fund balance for the general fund was $18,216,147, or 33.1 % of the total general fund expenditures.  The City’s total net debt increased by $983,733, or 3.4% during the current fiscal year. Overview of Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Farmington’s basic financial statements. The City of Farmington’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City of Farmington’s financial condition, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City of Farmington’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Farmington is improving or deteriorating. The statement of activities presents information showing how the City of Farmington’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods uncollected taxes and earned but unused vacation leave, etc). 3 ---PAGE BREAK--- Both government-wide financial statements distinguish functions of the City of Farmington 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 Farmington include general government, police, fire, parks, recreation, cultural affairs, community development, public works, highways, streets and airport operations. The business-type activities of the City of Farmington include electric, water, wastewater, sanitation and golf operations. The government-wide financial statements can be found on pages 17-18 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Farmington, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Farmington can be divided into two categories: governmental funds and proprietary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government- wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Farmington maintains nineteen (19) individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund and gross receipts tax streets fund, both of which are considered to be major funds. Data from the other seventeen (17) governmental funds are combined into a single, aggregated presentation. Individual fund data for these nonmajor governmental funds is provided in the form of combining statements (pages 59-66). The City of Farmington adopts an annual appropriated budget for each of its funds. Budgetary comparative statements have been provided for these funds to demonstrate compliance with these budgets. 4 ---PAGE BREAK--- The basic governmental fund financial statements can be found on pages 19-23 of this report. Proprietary funds. The City of Farmington maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business- type activities in the government-wide financial statements. The City of Farmington uses enterprise funds to account for its electric, water, wastewater, sanitation and golf operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City of Farmington’s various functions. The City of Farmington uses an internal service fund to account for its self-funded health insurance operations. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the electric, water, wastewater, sanitation and golf operations and are found on pages 87-91 of this report. Fund data for the internal service fund is provided on page 86 of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 29- 55 of this report. Government-wide Financial Analysis As noted earlier, over time, net assets may serve as a useful indicator of a government’s financial position. In the case of the City of Farmington, assets exceeded liabilities by $535,758,340 at the close of FY2012. The largest portion of the City of Farmington’s net assets ($400,702,339 or 74.8%) reflects its investment in capital assets land, buildings, machinery, equipment, and infrastructure), less any related debt used to acquire those assets that is still outstanding. The City of Farmington uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Farmington’s investment in its capital assets is reported net of related debt, it should be noted that the resources required to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 5 ---PAGE BREAK--- Governmental Business-type Activities Activities FY2012 FY2011 FY2012 FY2011 FY2012 FY2011 Current and other assets 56,740,985 $ 43,613,410 $ 108,717,431 $ 101,491,107 $ 165,458,416 $ 145,104,517 $ Capital assets 98,441,750 98,320,657 331,910,164 331,602,090 430,351,914 429,922,747 Total assets 155,182,735 141,934,067 440,627,595 433,093,197 595,810,330 575,027,264 Long-term liabilities outstanding 22,550,251 12,968,881 17,161,831 24,107,073 39,712,082 37,075,954 Other liabilities 3,556,060 3,187,112 16,783,848 14,086,736 20,339,908 17,273,848 Total liabilities 26,106,311 16,155,993 33,945,679 38,193,809 60,051,990 54,349,802 Net assets: Invested in capital assets, net of related debt 83,813,002 91,574,976 316,889,337 309,610,312 400,702,339 401,185,288 Restricted 10,998,211 2,630,553 4,852,866 5,243,850 15,851,077 7,874,403 Unrestricted 34,265,211 31,572,545 84,939,713 80,045,226 119,204,924 111,617,771 Total net assets 129,076,424 $ 125,778,074 $ 406,681,916 $ 394,899,388 $ 535,758,340 $ 520,677,462 $ Total City of Farmington's Net Assets Another portion of the City of Farmington’s net assets ($15,851,077 or represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($119,204,924 or 22.2%) may be used to meet the City’s ongoing obligations. At the end of the current fiscal year, the City of Farmington has achieved positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. The City of Farmington’s net assets increased $15,080,878 during the current fiscal year. Almost all of this increase represents the degree to which increases in ongoing revenues have exceeded similar increases in ongoing expenses, most attributable to the utility systems. Governmental activities. Governmental activities increased the City of Farmington’s net assets by $3,298,350. Key elements of the change in net assets are as follows: 6 ---PAGE BREAK--- Governmental Business-type Activities Activities FY2012 FY2011 FY2012 FY2011 FY2012 FY2011 Revenues: Program revenues: Charges for services 13,912,099 $ 10,942,333 $ 122,710,460 $ 116,624,604 $ 136,622,559 $ 127,566,937 $ Operating grants and Contributions 3,546,860 6,243,941 2,706,388 6,282,404 6,253,248 12,526,345 Capital grants and Contributions 1,298,623 3,442,981 - - 1,298,623 3,442,981 General revenues: Property taxes 1,687,900 1,806,123 - - 1,687,900 1,806,123 GRT taxes 50,432,706 47,605,170 - - 50,432,706 47,605,170 Other taxes 4,308,189 2,443,271 1,333,554 1,258,718 5,641,743 3,701,989 Other 1,859,299 1,906,016 633,005 1,071,740 2,492,304 2,977,756 Total revenues 77,045,676 74,389,835 127,383,407 125,237,466 204,429,083 199,627,301 Expenses: General Government 32,642,985 29,114,460 - - 32,642,985 29,114,460 Police 15,645,349 15,021,697 - - 15,645,349 15,021,697 Fire 9,595,679 8,665,126 - - 9,595,679 8,665,126 Parks, rec & cultural affairs 14,251,614 13,714,785 - - 14,251,614 13,714,785 Community development 11,044,820 10,800,128 - - 11,044,820 10,800,128 Electric - - 84,423,504 77,933,334 84,423,504 77,933,334 Water - - 9,368,428 8,662,030 9,368,428 8,662,030 Wastewater - - 5,829,583 5,674,564 5,829,583 5,674,564 Sanitation - - 5,100,718 5,318,445 5,100,718 5,318,445 Golf - - 1,157,049 1,468,586 1,157,049 1,468,586 Other 288,476 328,280 - - 288,476 328,280 Total expenses 83,468,923 77,644,476 105,879,282 99,056,959 189,348,205 176,701,435 Increase in net assets before transfers (6,423,247) (3,254,641) 21,504,125 26,180,507 15,080,878 22,925,866 Transfers 9,721,597 10,017,180 (9,721,597) (10,017,180) - - Increase in net assets 3,298,350 6,762,539 11,782,528 16,163,327 15,080,878 22,925,866 Net assets - 7/01/11 125,778,074 119,015,535 394,899,388 378,736,061 520,677,462 497,751,596 Net assets - 6/30/12 129,076,424 $ 125,778,074 $ 406,681,916 $ 394,899,388 $ 535,758,340 $ 520,677,462 $ Total City of Farmington's Changes in Net Assets Total accrued gross receipts tax (GRT) increased by $2,827,536 or 5.9%. This was due to an overall increase in receipts from the manufacturing, retail trade, health care, and food service sectors. Operating grants decreased $2,697,081 mainly due to a decrease in Federal Emergency Management Agency (FEMA) funding ($1,890,301), and decreases in other federal grant funding including the American Recovery and Reinvestment Act (ARRA) ($100,615), Metropolitan Planning Organization (MPO) ($146,739) and various police ($427,730) grants. State funding decreased ($41,500) for the year. 7 ---PAGE BREAK--- Capital grants and contributions decreased $2,144,358 during the year. This was due mainly to a decrease in federal funding including the ARRA ($689,529), Community Development Block Grant (CDBG) ($498,427), various state capital grants ($143,440), and a one-time capital grant for Family Crisis Center ($780,391) received in FY2011. Charges for services increased $2,969,766 or 27.1% due mainly to an increase in stop loss payments ($660,318), increases in premiums due to premium rate increases ($339,717), and a one-time premium payment ($1,541,026) from the City to shore up the cash balance in the health fund. Total transfers decreased $295,583 due mainly to a large decrease in dividends from the electric utility ($1,020,891) due to some of the power plant units being down for maintenance which decreased electric sales in FY2011 (the year that the current dividend is based upon), and a decrease in airport ($48,125) and debt service ($30,000) transfers. Some transfers increased due to the forgiveness of a FY2011 loan to the health fund ($396,962), and the net transfer of moving the Civitan Golf Course into the general fund ($574,137). Total expenses increased $5,824,447 or 7.5% during the year mainly due to: increases in vehicles purchases in the fire ($913,448) and public works ($580,119) departments, an increase in incurred but not reported (IBNR) estimates due to rising liability costs ($401,030), increases in health claims ($1,263,302), and increases in street resurfacing and improvements ($2,532,438). Business-type activities. Business-type activities increased the City of Farmington’s net assets by $11,782,528, accounting for 78.1% of the total growth in the government’s net assets. Key financial elements of the past fiscal year are as follows:  Operating expenses are 85.6% of operating revenues, resulting in $17,610,141 in operating income.  Total electric revenue increased $1.8 million or 1.9%. Commercial and industrial sales were up $926,580, combined. Whereas the sales for residential customers declined $243,369 from last year. The power cost adjustment (PCA) increased a net total of $3 million. Billed revenues for the PCA increased $312,642 and per FASB 71, revenues were increased an additional $2.7 million for the regulatory liability. As a result, Electric sales to customers were up $3.7 million. The increase in sales was offset with a decrease in electric contributions, which declined $2 million during the year.  Total water revenue decreased $187,129 or 1.3%. Water sales to customers increased $1.1 million due to an increase in consumption of about 3.7% over last year. There was also a decrease of $1.2 million in water contributions, which was a one-time construction contribution from BLM (Bureau of Land Management) for a new water line project last year.  Total wastewater revenue increased by $110,908 or 1.4%. Wastewater sales to customers were up $311,746 but were offset with a $262,185 decrease 8 ---PAGE BREAK--- in wastewater construction contributions; this was also a one-time construction contribution from BLM for a new sewer line project last year.  Total sanitation revenue increased $319,002 or 6.2% mainly due to higher demand for sanitation services.  Investment earnings for business-type activities were $633,005, a 40.9% decrease over last year due to continued decreases in interest rates. Financial Analysis of the Government’s Funds As noted earlier, the City of Farmington uses fund accounting to ensure and demonstrate compliance with finance-related legal and contractual requirements. Governmental funds. The focus of the City of Farmington’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City of Farmington’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of June 30, 2012, the City of Farmington’s governmental funds reported combined ending fund balances of $47,633,365, an increase of $10,773,627 in comparison with the prior year. Approximately 38% of this total amount or $18,216,147 constitutes unassigned fund balance, which is available for spending at the government’s discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it is nonspendable ($504,602), restricted ($10,998,211), committed ($12,815,182), or assigned ($5,099,223). The general fund is the chief operating fund of the City of Farmington. At the end of the current fiscal year, unassigned fund balance of the general fund was $18,216,147, while total fund balance was $18,720,749. As a measure of the general fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 33% of total general fund expenditures, while total fund balance represents 34% of that same amount. The fund balance of the City of Farmington’s general fund decreased $329,080 or 1.7% during the current fiscal year. The total increase in general fund revenue was $3,795,319 or 8.2%. This is due in part by a $2,228,884 increase in GRT due to an increase in the manufacturing, retail sales, health care, and food service sectors. Franchise fees are up $1,711,371 due mostly to the reclassification of the electric fund PILT revenue being classified to a franchise tax in FY2012. Intergovernmental revenue is down $666,214 or 32.1% due to a reduction in: federal funding for police ($130,476), fire ($163,777), MPO ($146,739), FEMA ($57,040) and ARRA grant funding ($100,615). State grant funding for traffic and planning decreased by $45,751 during FY2012. Charges for services increased $329,499, or 13.8% mainly due to increases in: pool sales ($104,996), Red Apple Transit reimbursements ($32,950), Farmington Indian Center food sales ($24,294), and the addition of the Civitan Golf Course ($104,996). Miscellaneous revenue increased 9 ---PAGE BREAK--- $83,827 or 16% due to an increase in auction sales ($26,520), sales on real property and right of way ($40,262), and tax refunds ($21,516). Total general fund expenditures increased $5,968,516 or 12.1% over the prior year. Key elements of this change were increases in: correction fees ($232,532) due to an increase in per diem rates for prisoners, vehicle purchases ($512,212), work comp claims ($268,006), IBNR estimates ($330,000) due to rising liability costs, fuel ($108,387), Red Apple Transit costs ($168,790) due to bus improvements and the purchase of an additional bus, a one-time health premium paid by the City ($1,210,911), unemployment costs ($163,133), additional funding to Total Behavioral Health Authority ($145,957), wages ($592,283) mostly due to the step increases which were not given in FY2011, police operational cost ($335,321), overall general liability ($89,777), GRT administrative fees ($155,571) which were higher due to more GRT collected, a decrease in allocated costs in streets ($450,000) and finance ($215,402) which increased costs in those divisions, and the cost of adding the Civitan Golf Course to the general fund ($175,013). Total outgoing transfers in the general fund increased by $3,326,396 due mainly to an increase in transfers to the general government capital projects fund ($3,281,535) for capital projects including: a fire engine replacement ($455,000), MOC parking lot ($201,150), paving projects ($500,000), vehicle purchases ($350,000), roof repair/replacements ($750,000), FCC mandated radios ($218,000), downtown improvements ($500,000), and airport taxiway maintenance ($220,000). Other key governmental-type funds include the GRT streets fund and GRT parks fund. Both of these funds are funded primarily with gross receipt tax revenue earmarked specifically for streets, public works, and parks activities. Revenues in the GRT streets fund decreased $1,624,274 mostly due to a decrease in FEMA grant funding ($1,890,301), and an increase in GRT ($448,989). The GRT parks fund had an increase of $312,316 due to an increase in GRT ($149,663), the sale of property ($185,295), and a decrease in FEMA grant funding ($27,590). Total operating revenues in the governmental funds (not including the general fund) decreased $2,990,803, or 14.2%, the main reason being the decrease in FEMA grant funding ($1,890,301). Other reasons for the decrease were a reduction in grant funding in the CDBG ($498,427) and ARRA ($689,529) federal grants. Expenditures in the governmental funds (not including the general fund) increased $4,587,299 or 25.7% during FY2012. Key elements of this increase are: GRT streets fund project expenditures were larger in FY2012 due to several large projects, such as micro resurfacing of streets ($1,240,052), cutler repaving ($1,102,114), Apache street signal reconstruction ($142,986), and various other miscellaneous street improvement projects ($660,000). The GRT parks fund had increases in improvements totaling $661,908 due to various projects including the Berg park trails, tennis court, and Saddleback dog park. The state fire fund also showed an increase in expenditures ($852,386) due to the purchase of two fire pumpers. Two funds that showed a decrease in spending were the region II narcotics fund ($198,430), and the law enforcement block grant fund ($41,117) due to a decrease in federal grant funding. 10 ---PAGE BREAK--- Proprietary funds. The City of Farmington’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net assets at the end of the year amounted to $69,503,416 in the electric utility system, $6,853,036 in the water utility system, $7,097,695 in the wastewater utility system, and $1,485,566 in combined net assets for the other propriety funds (sanitation and golf courses). The total growth in net assets was $5,945,748 in the electric fund, $4,293,048 in the water fund, $1,800,149 in the wastewater fund, and a decline of $256,417 in the other funds combined. Other factors concerning the finances of these funds have already been addressed in the discussion of the City of Farmington’s business-type activities. Budgetary Highlights The national economy continues to exhibit historically low levels of activity which has a significant impact on our local economy. After the dramatic FY2010 decline of 17.5% in the GRT, FY2012 experienced a welcomed increase of 7.8% (cash basis). Following a slight increase of 4% in FY2011, the upward trend indicates that the largest decline in twenty-five years might be over. However, even with this modest increase, the total level of GRT was basically at FY2006 levels which represent a yearly loss of over $4 million from the average over the past five years. Although increasing, this level is also below the twenty-five year average growth trend of High levels of natural gas production in the country as a whole have led to decreasing price levels that directly affect the level of activity here in the San Juan Basin. In April 2012, natural gas prices dropped below $2.00 per mcf, a rate not seen since 1999. With the considerable drop in natural gas prices, predicting future revenues becomes very difficult. For this reason the GRT budget for FY2013 will be set at essentially the same level as the actual results for FY2012. With a higher degree of uncertainty as to actual revenue levels, the budget for FY2013 will be even more closely monitored than in prior years. On the expenditure side, the original general fund budget of $54,794,598 was increased to $56,690,294 plus a $3.6 million transfer budget increase during FY2012. The $3.6 million was the largest adjustment and was made to accommodate a change in accounting procedure for the cash reserve transfer to the general governmental capital projects fund. The $3.6 million was included as negative revenue in the original budget but was reclassified to an expense transfer during the year. Council adopted the Cash Reserve Policy designating any general fund cash balance greater than 20.8% of the current expenditure budget as available for transfer to the general governmental capital projects fund and to be spent on Council-designated projects. The general fund health insurance premium expense was also increased by $1.2 million to cover a health insurance fund deficit. Another significant budget adjustment in the amount of $167K was the transfer of Civitan Golf Course from the golf enterprise fund to the general fund. Other adjustments reflected in the budget variance depict an increase made to revenue throughout the year. With the increase in confidence of the GRT performance, many budget items that had been postponed in the prior year were allowed to be reinstated. For example, personal computers and fleet vehicles were replaced only on an emergency basis in FY2011 while in FY2012 the City returned to a normal replacement schedule based upon age and usage requirements. During FY2012, the city-wide pay 11 ---PAGE BREAK--- freeze from FY2011 was lifted allowing employees to receive a 1.5% cost of living increase which increased the FY2012 budget by $518K. With the catch up in FY2012, expenditures increased over FY2011 by 13%. Even with the increase in expenditure, levels led to a favorable ending cash balance of $16,342,148 (cash basis), which was $1.3 million greater than the prior year. This large cash balance will allow for monies to be transferred to a capital projects fund for capital projects. During the year, seven separate budget revisions were made to the original FY2012 expenditure budget. These adjustments totaled $27,409,085 and equaled 11.7% of the original total budget. The number of revisions is indicative of the ongoing budget process during the year of controlling expenditures to adjust to available revenue. The largest percentage increase in budgeted expenditures during the year was in the capital and enterprise funds as a result of capital projects that were started the previous year but not completed until FY2012. There were also several increases for grant awards that were made during the year and the health fund required multiple large adjustments as both revenues and expenditures were higher than anticipated. Finally, GRT bonds were issued in FY2012 and 2001 Series bonds were refunded. Revenue and expenditure budgets were adjusted accordingly to reflect the bond transactions. For FY2011, capital projects took a backseat to maintaining current operations. The FY2012 budget, however, included a significant amount of capital investments. Of the $3.6 million transferred to the general government capital project fund, Council designated all but $310K intended to catch up capital investments not made in the previous two years. Projects include replacing the roofs of five City buildings, the purchase of a new fire engine, updating fiber, and remodeling/constructing Fire Station Also in FY2012, as mentioned above, Sales Tax Revenue Improvement and Refunding Bonds, Series 2012, were issued to refund the Series 2001 bonds and finance several projects. The high-dollar, long-term projects that have been waiting for funding include the Regional Animal Shelter, remodel of the Civic Center Exhibit Hall, Farmington Museum expansion, replacement of Fire Station and the installation of the Lakewood Detention Pond. Effective July 1, 2011, Council opted to transfer the par 3 Civitan Golf Course operations from the golf fund to the general fund. The FY2011 loan for $78K from the GRT parks fund to the golf course fund was forgiven although another loan in the amount of $112.5K was established at the end of FY2012. In addition to moving Civitan Golf Course out of the golf fund, Council raised golf fees in an effort to increase the profitability of Pinon Hills Golf Course which remained in the golf fund. Finally, there were several large budget adjustments related to the health insurance fund which is an internal service fund. FY2011 ended the fiscal year with a deficit. Prior to year end, an interfund loan from the general governmental capital project fund was approved by Council. In FY2012, Council decided to forgive the $397K loan. Unfortunately, even with a premium increase in FY2012, the health insurance fund suffered several large claims resulting in a $1.5 million deficit at the end of FY2012. 12 ---PAGE BREAK--- Rather than a loan, Council chose to enact a one-time increase in premiums to each of the participating funds to cover a cash deficit. The most favorable budget highlight for the year was the revenue/expenditure budget to actual comparison for the general fund at the end of the year. Actual expenses ended up at 96% of budget and actual revenues at 107% of budget. With revenue exceeding budget and expenses less than budget, FY2012 ended up with a $5.8 million budget versus actual surplus. It is this conservative spending and revenues exceeding expectations that will allow the City of Farmington to transfer an additional $4.1 million per the Cash Reserve Policy to the general governmental capital projects fund for future capital needs. Capital Asset and Debt Administration Capital Assets. The City of Farmington’s investment in capital assets for governmental and business type activities as of June 30, 2012 was $430,351,914 (net of accumulated depreciation). This investment in capital assets includes land, buildings and system improvements, utility systems, machinery and equipment, park facilities, roads, highways, and bridges. The business-type capital assets accounted for $331,910,164 or 77.1% of the total City of Farmington capital assets. The total increase in the business- type investment in capital assets for the current fiscal year was $308,074 or 0.09%. The governmental activities investment in capital assets accounted for $98,441,750 or 22.9% of all capital assets owned by the City. The total increase in governmental activities investment in capital assets for the current year was $121,093 or 0.12%. Major capital asset investment activities during the current fiscal year included the following: Governmental Business-type Activities Activities FY2012 FY2011 FY2012 FY2011 FY2012 FY2011 Land 27,315,201 $ 26,893,367 $ 3,884,334 $ 3,984,334 $ 31,199,535 $ 30,877,701 $ Land rights - - 910,884 954,359 910,884 954,359 Buildings 28,063,978 28,651,008 62,043,760 65,302,459 90,107,738 93,953,467 Improvements 10,597,006 12,130,819 75,033,762 69,980,207 85,630,768 82,111,026 Equipment 9,994,631 9,186,573 158,024,475 153,174,815 168,019,106 162,361,388 Infrastructure 17,447,560 19,106,098 - - 17,447,560 19,106,098 Construction in progress 5,023,374 2,352,792 32,012,949 38,205,916 37,036,323 40,558,708 Total 98,441,750 $ 98,320,657 $ 331,910,164 $ 331,602,090 $ 430,351,914 $ 429,922,747 $ Total City of Farmington's Capital Assets (net of depreciation) Capital expenditures for the electric utility system will average approximately $13,286,440 per year over the next five fiscal years. Some large projects included in the FY2013 capital budget are the transformer shop addition ($4,000,000); customer work order system ($2,384,000) and SCADA replacement ($1,600,000). The City expects to fund these projects from electric customer-generated revenues. 13 ---PAGE BREAK--- Capital expenditures for the water utility system scheduled in the current five-year capital improvements plan principally include upgrades and replacements of existing facilities to maintain the existing system and meet future demand requirements. Capital expenditures average $5,845,680 per year, totaling $29,228,340 for fiscal years 2013 through 2017. Pursuant to the Wastewater System Master Plan, in FY2004 the City placed in service a new wastewater treatment plant. Funding came from a $14,178,191 loan obtained from the New Mexico Environment Department (NMED). Capital expenditures for FY2013 are budgeted at $5,740,000 for treatment and $2,380,080 for the collection system. Additional information on the City of Farmington’s capital assets can be found in Note C on pages 42-43 of this report. Long-term debt. At the end of the current fiscal year, the City of Farmington had total bonded debt outstanding of $17,940,000. Of this amount, $13,895,000 constitutes special, limited obligations of the City government, payable solely from the City’s existing 1.225% state-shared gross receipts tax. This tax is collected by the State and distributed to the City. Per the bond ordinance, interest may be earned on cash balances held by the City until debt payments are made. The bonds are not an indebtedness of the City within any constitutional or statutory provision or limitation and are not general obligations of the City. Consequently, the registered owners cannot look to the general fund or other fund for any payment that becomes due on the bonds other than the special funds that are specifically pledged for their payment under the terms of the bond ordinance. The remainder of the City’s debt is secured solely by specified revenue sources. The City of Farmington’s total net debt increased $983,733 or 3.4% during FY2012. FY2012 FY2011 FY2012 FY2011 FY2012 FY2011 Sales tax bonds 13,895,000 $ 6,680,000 $ - $ - $ 13,895,000 $ 6,680,000 $ NMFA fire pumper loan 475,426 - - - 475,426 - NMED loan - - 10,765,125 11,376,818 10,765,125 11,376,818 NMFA loan - - 1,054,844 1,054,844 1,054,844 1,054,844 Revenue bonds - - 4,045,000 10,140,000 4,045,000 10,140,000 Total 14,370,426 $ 6,680,000 $ 15,864,969 $ 22,571,662 $ 30,235,395 $ 29,251,662 $ City of Farmington's Outstanding Debt Activities Activities Governmental Business-type Total $5 $10 $15 $20 $25 Governmental Business‐type Millions Outstanding Debt FY2011 FY2012 14 ---PAGE BREAK--- Credit ratings. Standard & Poor’s Rating Group and Moody’s Investors Service have assigned the most recent bond issuance the insured ratings of AAA and Aaa, respectively. The underlying ratings, however, are AA- and A1, respectively. These ratings have not changed significantly in comparison to prior ratings. Debt limitation. Article IX, Section 13 of the State Constitution limits the powers of the City to incur general obligation debt in an aggregate amount, including existing indebtedness, not to exceed four percent of the value of the taxable property in the City as shown by the last preceding general assessments. The City may, however, contract debt in excess of such limitation for the construction or purchase of a system for supplying water or a sewer system for the City. Based on the 2011 assessed valuation of $1,008,129,967, the City’s general obligation debt limit is $40,325,199. The City presently has no general obligation bonds outstanding. For more detailed information on the City’s debt, see pages 46-49 in the Notes to the Financial Statements. Requests for Information This financial report is designed to provide a general overview of the City of Farmington’s finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Controller, 800 Municipal Drive, Farmington, NM 87401. 15 ---PAGE BREAK--- Ferry across San Juan River - 1901 16 ---PAGE BREAK--- Basic Financial Statements Basic Financial Statements ---PAGE BREAK--- Governmental Business-type Activities Activities Total ASSETS Cash and cash equivalents $ 43,818,582 $ 82,729,284 $ 126,547,866 Receivables (net, where applicable, of allowances for uncollectibles): 1,093,317 5,364,926 6,458,243 Accrued unbilled revenues - 6,247,402 6,247,402 Intergovernmental receivable 11,014,983 - 11,014,983 Internal balances 112,492 (112,492) - Inventories 218,842 5,197,361 5,416,203 Prepaids 270,251 113,155 383,406 Deferred charges 197,009 45,840 242,849 Restricted reserve investment account 15,509 - 15,509 Restricted assets Temporarily restricted: Cash and equivalents - 9,131,955 9,131,955 Capital assets (not being depreciated): Land 27,315,201 3,884,334 31,199,535 Construction in progress 5,023,374 32,012,949 37,036,323 Capital assets (net of accumulated depreciation): Land rights - 910,884 910,884 Buildings 28,063,978 62,043,760 90,107,738 Improvements other than buildings 10,597,006 75,033,762 85,630,768 Equipment 9,994,631 158,024,475 168,019,106 Infrastructure 17,447,560 - 17,447,560 Total assets 155,182,735 440,627,595 595,810,330 LIABILITIES Accounts payable and other current liabilities 1,604,675 6,526,051 8,130,726 Wages and benefits payable 1,828,689 549,297 2,377,986 Other accrued liabilities 14,106 1,170,418 1,184,524 Accrued claims liabilities - 182,875 182,875 Retainage deposits payable 66,605 - 66,605 Unearned revenue - 4,056,398 4,056,398 Accrued interest payable 41,985 19,720 61,705 Customer deposits - 4,279,089 4,279,089 Non-current liabilities: Due within one year 3,678,387 5,508,176 9,186,563 Due in more than one year 18,871,864 11,653,655 30,525,519 Total liabilities 26,106,311 33,945,679 60,051,990 NET ASSETS Invested in capital assets, net of related debt 83,813,002 316,889,337 400,702,339 Restricted for: Police 28,413 - 28,413 Fire 230,311 - 230,311 Lodgers promotion 412,513 - 412,513 Capital projects 10,137,670 - 10,137,670 Debt service 189,304 4,852,866 5,042,170 Unrestricted 34,265,211 84,939,713 119,204,924 Total net assets $ 129,076,424 $ 406,681,916 $ 535,758,340 The notes to the financial statements are an integral part of this statement. CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets June 30, 2012 Primary Government 17 ---PAGE BREAK--- Changes in Net Assets Operating Capital Charges for Grants and Grants and Governmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Primary government: Governmental activities: General government $ 32,642,985 $ 11,555,443 $ 1,675,092 $ 1,065,555 $ (18,346,895) $ - $ (18,346,895) Police 15,645,349 1,200,529 818,823 - (13,625,997) - (13,625,997) Fire 9,595,679 - 806,825 - (8,788,854) - (8,788,854) Parks, recreation, cultural affairs 14,251,614 1,094,483 33,905 - (13,123,226) - (13,123,226) Public works 11,044,820 61,644 212,215 233,068 (10,537,893) - (10,537,893) Interest on long-term debt 288,476 - - - (288,476) - (288,476) Total governmental activities 83,468,923 13,912,099 3,546,860 1,298,623 (64,711,341) - (64,711,341) Business-type activities: Electric 84,423,504 95,742,961 2,336,432 - - 13,655,889 13,655,889 Water 9,368,428 14,025,394 282,035 - - 4,939,001 4,939,001 Wastewater 5,829,583 6,475,468 87,921 - - 733,806 733,806 Sanitation 5,100,718 5,423,632 - - - 322,914 322,914 Golf 1,157,049 1,043,005 - - - (114,044) (114,044) Total business-type activities 105,879,282 122,710,460 2,706,388 - - 19,537,566 19,537,566 Total government $ 189,348,205 $ 136,622,559 $ 6,253,248 $ 1,298,623 (64,711,341) 19,537,566 (45,173,775) General revenues: Property taxes 1,687,900 - 1,687,900 Sales taxes 50,432,706 - 50,432,706 Franchise taxes 2,325,998 - 2,325,998 Gasoline taxes 739,279 - 739,279 Lodgers' taxes 1,242,912 - 1,242,912 Environmental taxes - 1,333,554 1,333,554 Miscellaneous 1,601,517 - 1,601,517 Unrestricted investment earnings 257,782 633,005 890,787 Transfers 9,721,597 (9,721,597) - Total general revenues and transfers 68,009,691 (7,755,038) 60,254,653 Change in net assets 3,298,350 11,782,528 15,080,878 Net assets - beginning 125,778,074 394,899,388 520,677,462 Net assets - ending $ 129,076,424 $ 406,681,916 $ 535,758,340 The notes to the financial statements are an integral part of this statement. Program Revenues Net (Expense) Revenue and CITY OF FARMINGTON, NEW MEXICO Statement of Activities For the Year Ended June 30, 2012 18 ---PAGE BREAK--- Gross Receipts Nonmajor Total Tax Governmental Governmental General Streets Funds Funds ASSETS: Pooled cash and investments $ 16,207,968 $ 9,719,132 $ 17,891,482 $ 43,818,582 Receivables (net, where applicable, of allowances for uncollectibles): 194,661 211,163 5,316 411,140 Due from other funds 163,967 - 112,492 276,459 Inventories, at cost 218,842 - - 218,842 Prepaid items 270,251 - - 270,251 Restricted reserve investment account 15,509 - - 15,509 Intergovernmental 8,703,986 1,406,601 904,396 11,014,983 Total assets $ 25,775,184 $ 11,336,896 $ 18,913,686 $ 56,025,766 LIABILITIES AND FUND BALANCES: Liabilities: Accounts payable $ 652,240 $ 731,631 $ 220,804 $ 1,604,675 Wages and benefits payable 1,715,297 940 112,452 1,828,689 Other accrued expenditures 14,106 - - 14,106 Accrued claims payable 2,720,969 - - 2,720,969 Retainage/deposits payable 66,605 - - 66,605 Deferred revenue 1,885,218 36,964 71,208 1,993,390 Due to other funds - - 163,967 163,967 Total liabilities 7,054,435 769,535 568,431 8,392,401 Fund Balances: Nonspendable: Inventories and prepaids 489,093 - - 489,093 Restricted reserve investment 15,509 - - 15,509 Restricted to: Police - - 28,413 28,413 Fire - - 230,311 230,311 Lodgers promotion - - 412,513 412,513 Capital projects - - 10,137,670 10,137,670 Debt service - - 189,304 189,304 Committed to: Police - - 74,253 74,253 Parks, recreation, cultural affairs - - 2,173,568 2,173,568 Public works - 10,567,361 - 10,567,361 Assigned to: Parks, recreation, cultural affairs - - 1,223,459 1,223,459 Library - - 281,106 281,106 Capital projects - - 3,594,658 3,594,658 Unassigned 18,216,147 - - 18,216,147 Total fund balances 18,720,749 10,567,361 18,345,255 47,633,365 Total liabilities and fund balances $ 25,775,184 $ 11,336,896 $ 18,913,686 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 98,441,750 Other long-term assets are not available to pay for current period expenditures and, therefore, are deferred in the funds. 1,993,390 Internal service funds are used by management to charge the costs of healthcare to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets. (528,306) Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds (18,463,775) Net assets of governmental activities $ 129,076,424 CITY OF FARMINGTON, NEW MEXICO Balance Sheet Governmental Funds June 30, 2012 The notes to the financial statements are an integral part of this statement. 19 ---PAGE BREAK--- Gross Receipts Nonmajor Total Tax Governmental Governmental General Streets Funds Funds REVENUES: Taxes: Property $ 1,743,435 $ - $ - $ 1,743,435 Gross receipts 39,764,050 8,001,492 2,667,164 50,432,706 Franchise 2,325,998 - - 2,325,998 Gasoline - 739,279 - 739,279 Lodgers' - - 1,242,912 1,242,912 Licenses and permits 647,637 - 24,039 671,676 Intergovernmental 1,408,774 212,215 3,699,920 5,320,909 Charges for services 2,717,905 - 131,780 2,849,685 Fines 1,017,977 - 165,559 1,183,536 Special assessments 22 - - 22 Investment earnings 105,003 67,439 85,340 257,782 Miscellaneous 606,221 908 994,388 1,601,517 Total revenues 50,337,022 9,021,333 9,011,102 68,369,457 EXPENDITURES: Current: General government 21,703,794 - - 21,703,794 Police 14,633,844 - 1,075,532 15,709,376 Fire 8,523,526 - 1,545,303 10,068,829 Parks, recreation and cultural affairs 8,709,137 - 4,154,081 12,863,218 Public works 1,533,292 5,039,274 - 6,572,566 Debt service: Principal - - 3,440,000 3,440,000 Interest - - 258,145 258,145 Capital outlay: General government - - 874,898 874,898 Airport - - 1,182,440 1,182,440 Highways and streets - 4,197,622 672,830 4,870,452 Total expenditures 55,103,593 9,236,896 13,203,229 77,543,718 Excess (deficiency) of revenues over (under) expenditures (4,766,571) (215,563) (4,192,127) (9,174,261) OTHER FINANCING SOURCES (USES): Transfers in 9,157,724 - 7,595,400 16,753,124 Transfers out (4,720,233) (533,500) (2,748,893) (8,002,626) Net GRT bonds issued - - 11,197,390 11,197,390 Total other financing sources (uses) 4,437,491 (533,500) 16,043,897 19,947,888 Net change in fund balances (329,080) (749,063) 11,851,770 10,773,627 Fund balances-beginning 19,049,829 11,316,424 6,493,485 36,859,738 Fund balances- ending $ 18,720,749 $ 10,567,361 $ 18,345,255 $ 47,633,365 CITY OF FARMINGTON, NEW MEXICO Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2012 The notes to the financial statements are an integral part of this statement. 20 ---PAGE BREAK--- Amounts reported for governmental activities in the statement of activities (page 18) are different because: Net change in fund balances-total governmental funds (page 20) $ 10,773,627 Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. 121,093 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. (55,535) The issuance of long-term debt bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This is the net effect of these differences in the treatment of long-term debt and related items. (8,413,655) The net revenue/expense of certain activities of internal service funds is reported with governmental activities. 872,820 Change in net assets of governmental activities (page 18) $ 3,298,350 For the Year Ended June 30, 2012 CITY OF FARMINGTON, NEW MEXICO Reconciliation of the Statement of Revenues To the Statement of Activities Expenditures, and Changes in Fund Balances of Governmental Funds The notes to the financial statements are an integral part of this statement. 21 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Taxes: Property taxes $ 1,613,734 $ 1,613,734 $ 1,738,648 $ 124,914 Gross receipts tax 36,726,580 36,726,580 39,863,759 3,137,179 Franchise taxes 2,268,276 2,268,276 2,328,469 60,193 Licenses and permits 595,250 595,250 647,637 52,387 Intergovernmental 1,554,704 2,039,119 1,722,553 (316,566) Charges for services 2,419,553 2,533,753 2,817,069 283,316 Fines 1,119,700 1,119,700 1,017,977 (101,723) Special assessments - - 22 22 Investment earnings 160,000 160,000 105,003 (54,997) Miscellaneous 320,040 329,657 610,449 280,792 Total revenues 46,777,837 47,386,069 50,851,586 3,465,517 EXPENDITURES: Current: General government: Council 290,590 298,050 301,157 (3,107) Municipal court 2,233,971 2,256,624 2,312,714 (56,090) Administrative 10,230,392 10,174,038 9,491,681 682,357 Legal 1,043,610 1,058,673 979,477 79,196 Administrative services 775,112 831,192 884,905 (53,713) General services 5,645,447 5,908,251 5,744,659 163,592 Community Development 1,332,426 1,452,017 1,296,825 155,192 Total general government 21,551,548 21,978,845 21,011,418 967,427 Public safety: Police 14,645,056 15,352,265 14,618,070 734,195 Fire 8,357,657 8,651,050 8,524,920 126,130 Total public safety 23,002,713 24,003,315 23,142,990 860,325 Public works 1,783,005 1,877,547 1,556,953 320,594 Parks, recreation and cultural affairs 8,457,332 8,830,587 8,687,184 143,403 Total expenditures 54,794,598 56,690,294 54,398,545 2,291,749 Excess (deficiency) of revenues over (under) expenditures (8,016,761) (9,304,225) (3,546,959) 5,757,266 OTHER FINANCING SOURCES (USES): Transfers in 9,131,786 9,131,786 9,157,724 25,938 Transfers out (4,126,600) (4,720,233) (4,720,233) - Total other financing sources and uses 5,005,186 4,411,553 4,437,491 25,938 Net change in fund balances (3,011,575) (4,892,672) 890,532 $ 5,783,204 RECONCILIATION TO GAAP BASIS: Change in receivables (408,700) Change in inventories (2,776) Change in intergovernmental (105,864) Change in accrued payables (702,272) (1,219,612) GAAP BASIS CHANGE IN FUND BALANCES: (329,080) Fund balances-beginning 19,049,829 19,049,829 19,049,829 Fund balances-ending $ 16,038,254 $ 14,157,157 $ 18,720,749 The notes to the financial statements are an integral part of this statement. Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO General Fund Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis 22 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Gross receipts taxes $ 7,398,969 $ 7,398,969 $ 8,019,692 $ 620,723 Intergovernmental - - 4,705 4,705 Gasoline taxes 765,000 765,000 757,127 (7,873) Investment earnings 100,000 100,000 67,439 (32,561) Miscellaneous 500 500 908 408 Total revenues 8,264,469 8,264,469 8,849,871 585,402 EXPENDITURES: Current: Public Works 5,149,721 5,736,089 4,702,842 1,033,247 Capital Outlay: Highways and streets 5,025,000 7,598,331 3,755,146 3,843,185 Total expenditures 10,174,721 13,334,420 8,457,988 4,876,432 Excess (deficiency) of revenues over (under) expenditures (1,910,252) (5,069,951) 391,883 5,461,834 OTHER FINANCING SOURCES (USES): Transfers out (533,500) (533,500) (533,500) - Net change in fund balances (2,443,752) (5,603,451) (141,617) $ 5,461,834 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable 171,462 Change in accounts payable (778,908) (607,446) GAAP BASIS CHANGE IN FUND BALANCES (749,063) Fund balances-beginning 11,316,424 11,316,424 11,316,424 Fund balances-ending $ 8,872,672 $ 5,712,973 $ 10,567,361 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Gross Receipts Tax Streets Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 23 ---PAGE BREAK--- (Continued) Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Course Totals Fund ASSETS Current assets: Pooled cash and investments $ 67,900,683 $ 6,592,202 $ 6,399,312 $ 1,835,837 $ 1,250 $ 82,729,284 $ - Accounts receivable (net of allowance for doubtful accounts) 3,359,411 1,111,642 609,800 261,091 22,982 5,364,926 682,177 Accrued unbilled revenues 4,941,687 807,886 277,142 220,687 - 6,247,402 - Inventories 5,187,808 8,059 1,494 - - 5,197,361 - Prepaid items 86,715 11,349 13,391 - 1,700 113,155 - Restricted cash, cash equivalents and investments 6,645,020 758,307 1,728,628 - - 9,131,955 - Total current assets 88,121,324 9,289,445 9,029,767 2,317,615 25,932 108,784,083 682,177 Noncurrent assets: Deferred charges 36,634 7,905 1,301 - - 45,840 - Capital assets: Land and land rights 3,546,554 1,654,325 479,388 23,341 - 5,703,608 - Building and system 69,654,809 14,008,573 23,989,482 80,640 854,940 108,588,444 - Improvements other than buildings 64,014,743 42,942,920 15,001,354 14,839 2,516,188 124,490,044 - Machinery and equipment 282,010,520 9,987,572 4,397,383 101,099 805,192 297,301,766 - Construction in progress 18,792,993 11,734,433 1,485,523 - - 32,012,949 - Less accumulated depreciation (181,505,846) (33,267,732) (18,981,520) (186,360) (2,245,189) (236,186,647) - Total capital assets (net of accumulated depreciation) 256,513,773 47,060,091 26,371,610 33,559 1,931,131 331,910,164 - Total noncurrent assets 256,550,407 47,067,996 26,372,911 33,559 1,931,131 331,956,004 - Total assets $ 344,671,731 $ 56,357,441 $ 35,402,678 $ 2,351,174 $ 1,957,063 $ 440,740,087 $ 682,177 CITY OF FARMINGTON, NEW MEXICO Statement of Net Assets Proprietary Funds June 30, 2012 Business-type Activities Enterprise Funds 24 ---PAGE BREAK--- Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Course Totals Fund LIABILITIES Current liabilities: Current liabilites payable from unrestricted assets: Accounts payable $ 5,295,120 $ 435,071 $ 128,087 $ 605,207 $ 62,566 $ 6,526,051 $ - Compensated absences 550,501 4,653 4,653 - 14,718 574,525 - Due to other funds - - - - 112,492 112,492 - Other accrued expenses 1,551,724 129,365 6,647 104 31,875 1,719,715 - Accrued claims payable 78,000 49,000 55,125 - 750 182,875 1,210,483 Deferred revenue 4,056,398 - - - - 4,056,398 - Accrued interest payable 15,759 3,401 560 - - 19,720 - Revenue bonds payable 3,401,041 733,899 120,762 - - 4,255,702 - NMED loan - - 630,043 - - 630,043 - NMFA loan - 47,906 - - - 47,906 - Total current liabilities payable from unrestricted assets 14,948,543 1,403,295 945,877 605,311 222,401 18,125,427 1,210,483 . Current liabilities payable from restricted assets 3,926,262 352,827 - - - 4,279,089 - Total current liabilities 18,874,805 1,756,122 945,877 605,311 222,401 22,404,516 1,210,483 Noncurrent liabilities: (net of unamortized discounts) NMED loan - - 10,135,082 - - 10,135,082 - NMFA loan - 1,006,938 - - - 1,006,938 - Compensated absences 462,020 9,673 9,673 - 30,269 511,635 - Total noncurrent liabilities 462,020 1,016,611 10,144,755 - 30,269 11,653,655 - Total liabilities 19,336,825 2,772,733 11,090,632 605,311 252,670 34,058,171 1,210,483 NET ASSETS Invested in capital assets, net of related debt 253,112,732 46,326,192 15,485,723 33,559 1,931,131 316,889,337 - Restricted for debt service 2,718,758 405,480 1,728,628 - - 4,852,866 - Unrestricted 69,503,416 6,853,036 7,097,695 1,712,304 (226,738) 84,939,713 (528,306) Total net assets $ 325,334,906 $ 53,584,708 $ 24,312,046 $ 1,745,863 $ 1,704,393 $ 406,681,916 $ (528,306) The notes to the financial statements are an integral part of this statement. CITY OF FARMINGTON, NEW MEXICO Proprietary Funds June 30, 2012 Business-type Activities Enterprise Funds Statement of Net Assets 25 ---PAGE BREAK--- Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Course Totals Fund Operating revenues: Charges for sales and services: Electric $ 94,665,873 $ - $ - $ - $ - $ 94,665,873 $ - Water - 14,005,617 - - - 14,005,617 - Wastewater - - 6,475,424 - - 6,475,424 - Sanitation - - - 5,347,724 - 5,347,724 - Golf course - - - - 1,041,478 1,041,478 - Health - - - - - - 9,207,180 Other revenues 1,077,088 19,777 44 75,908 1,527 1,174,344 - Total operating revenues 95,742,961 14,025,394 6,475,468 5,423,632 1,043,005 122,710,460 9,207,180 Operating expenses: Salaries and fringe benefits 10,871,390 703,150 297,124 2,804 602,200 12,476,668 - Purchased power, fuel and chemicals 41,351,526 - - - - 41,351,526 - Other operating expenses 18,495,709 6,746,295 3,801,113 5,093,175 489,420 34,625,712 8,731,322 Depreciation and amortization 13,365,695 1,839,920 1,377,998 4,739 58,061 16,646,413 - Total operating expenses 84,084,320 9,289,365 5,476,235 5,100,718 1,149,681 105,100,319 8,731,322 Operating income (loss) 11,658,641 4,736,029 999,233 322,914 (106,676) 17,610,141 475,858 Nonoperating revenues (expenses): Intergovernmental-environmental tax - - 1,333,554 - - 1,333,554 - Investment earnings 513,120 52,218 55,438 12,166 63 633,005 - Revenue from grants 11,896 282,035 - - - 293,931 - Interest expense (339,184) (79,063) (353,348) - (7,368) (778,963) - Reassignment of capital assets - - - - (574,137) (574,137) - Total nonoperating revenues (expenses) 185,832 255,190 1,035,644 12,166 (581,442) 907,390 - Income (loss) before transfers 11,844,473 4,991,219 2,034,877 335,080 (688,118) 18,517,531 475,858 Capital contributions 2,324,536 - 87,921 - - 2,412,457 - Transfers in - - - - 100,103 100,103 396,962 Transfers out (8,223,261) (698,171) (322,649) - (3,482) (9,247,563) - Change in net assets 5,945,748 4,293,048 1,800,149 335,080 (591,497) 11,782,528 872,820 Total net assets-beginning 319,389,158 49,291,660 22,511,897 1,410,783 2,295,890 394,899,388 (1,401,126) Total net assets-ending $ 325,334,906 $ 53,584,708 $ 24,312,046 $ 1,745,863 $ 1,704,393 $ 406,681,916 $ (528,306) The notes to the financial statements are an integral part of this statement. Business-type Activities Enterprise Funds CITY OF FARMINGTON, NEW MEXICO Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds For the Year Ended June 30, 2012 26 ---PAGE BREAK--- (Continued) Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Course Totals Fund CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers/users $ 98,885,383 $ 14,150,337 $ 6,434,802 $ 5,404,431 $ 1,030,941 $ 125,905,894 $ 8,743,857 Payments to suppliers (58,980,402) (6,694,250) (3,752,538) (5,037,240) (497,612) (74,962,042) (9,140,819) Payments to employees (10,799,563) (693,979) (294,850) (2,786) (601,085) (12,392,263) - Net cash provided (used) by operating activities 29,105,418 6,762,108 2,387,414 364,405 (67,756) 38,551,589 (396,962) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer to other funds (8,223,261) (698,171) (322,649) - (3,482) (9,247,563) - Transfer from other funds - - - - 100,103 100,103 396,962 Advances from other funds - - - - 34,649 34,649 - Operating grants 11,896 282,035 - - - 293,931 - Intergovernmental-envrionmental tax - - 1,333,554 - - 1,333,554 - Net cash provided (used) by capital and related financing activities (8,211,365) (416,136) 1,010,905 - 131,270 (7,485,326) 396,962 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital contributions 2,324,536 - 87,921 - - 2,412,457 - Acquisition and construction of capital assets (13,269,297) (3,412,454) (824,614) - (22,259) (17,528,624) - Principal paid on capital debt (5,054,653) (1,090,727) (791,171) - - (6,936,551) - Interest paid on capital debt (339,184) (79,063) (353,348) - (7,368) (778,963) - Capital lease payment - - - - (34,400) (34,400) - Net cash used by capital and related financing activities (16,338,598) (4,582,244) (1,881,212) - (64,027) (22,866,081) - CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends received 513,120 52,218 55,438 12,166 63 633,005 - Net increase (decrease) in cash and cash equivalents 5,068,575 1,815,946 1,572,545 376,571 (450) 8,833,187 - Cash and cash equivalents - beginning 69,477,128 5,534,563 6,555,395 1,459,266 1,700 83,028,052 - Cash and cash equivalents - ending $ 74,545,703 $ 7,350,509 $ 8,127,940 $ 1,835,837 $ 1,250 $ 91,861,239 $ - The notes to the financial statements are an integral part of this statement. Business-type Activities Enterprise Funds CITY OF FARMINGTON, NEW MEXICO Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2012 27 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2012 Governmental Activities Internal Electric Water Wastewater Golf Service Utility Utility Utility Sanitation Course Totals Fund Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $ 11,658,641 $ 4,736,029 $ 999,233 $ 322,914 $ (106,676) $ 17,610,141 $ 475,858 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amoritzation 13,365,695 1,839,920 1,377,998 4,739 58,061 16,646,413 - (Increase) decrease in accounts receivable 1,418,478 210,691 (403) 17,014 (12,064) 1,633,716 (463,323) (Increase) decrease in accrued unbilled revenues 8,760 (141,787) (40,263) (36,215) - (209,505) - (Increase) decrease in inventories 95,636 5,359 (125) - - 100,870 - (Increase) decrease in prepaid items (4,206) (387) 254 - 1,464 (2,875) - (Increase) decrease in deferred charges 1,496,683 7,184 1,419 - - 1,505,286 - Increase (decrease) in other accrued expenses 41,383 2,602 1,193 18 1,115 46,311 - Increase (decrease) in due to other funds - - - - - (615,816) Increase (decrease) in accrued claims payable 47,000 - 5,125 - - 52,125 206,319 Increase (decrease) in customer deposits 258,466 57,479 - - - 315,945 - Increase (decrease) in accounts payable 718,882 45,018 42,983 55,935 (9,656) 853,162 - Total adjustments 17,446,777 2,026,079 1,388,181 41,491 38,920 20,941,448 (872,820) Net cash provided (used) by operating activities $ 29,105,418 $ 6,762,108 $ 2,387,414 $ 364,405 $ (67,756) $ 38,551,589 $ (396,962) Noncash Activities: Reassignment of capital assets $ - $ - $ - $ - $ 574,137 $ - The notes to the financial statements are an integral part of this statement. Enterprise Funds Business-type Activities 28 ---PAGE BREAK--- Notes to the Financial Statements Notes to the Financial Statements ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO NOTES TO FINANCIAL STATEMENTS June 30, 2012 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The City of Farmington, (City), New Mexico, which was incorporated in 1901, has a population of 45,250 living within an area of 33 square miles. The City operates under a Council/Manager form of government. Four councilors are elected from designated districts with the Mayor serving at large. This reporting entity consists of the primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion could cause the City's financial statements to be misleading or incomplete. The City had no blended or discrete component units during the fiscal year ended June 30, 2012. B. Government-wide and fund financial statements The government-wide financial statements the statement of net assets and the statement of activities) report information on all of the activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Indirect costs are not allocated to functions in the statement of activities. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement focus, basis of accounting and financial statement presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. 29 ---PAGE BREAK--- Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Derived tax revenues (gross receipts taxes, cigarette taxes and gas taxes) are recognized when the underlying transaction takes place. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: The general fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The gross receipts tax-streets fund accounts for the City's share of gross receipts tax that is legally restricted to the maintenance of streets and storm drainage. The government reports the following major proprietary funds: The electric fund accounts for the activities of the City’s electric utility. The water fund accounts for the activities of the City’s water utility. The wastewater fund accounts for the activities of the City’s wastewater utility. The sanitation fund accounts for the activities of the City’s sanitation utility. The golf fund accounts for the activities of the City’s two golf courses. Additionally, the government reports the following fund type: The internal service fund accounts for health insurance services provided to City employees on a cost reimbursement basis. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private- sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. 30 ---PAGE BREAK--- As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the government’s electric, water, wastewater, and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided 2) operating grants and contributions and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise funds and internal service funds are charges to customers for sales and services. The utilities also recognize as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is City policy to use restricted resources first, then unrestricted resources as they are needed. D. Assets, liabilities and net assets or equity 1. Deposits and investments The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. For purposes of the statement of cash flows for the proprietary funds, the City considers all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash equivalents. State statutes authorize the government to invest in obligations of the U.S. Treasury, U.S. Securities, repurchase agreements, Certificates of Deposits, and the State Treasurer’s Investment Pool. Investments for the government are reported at fair value. The State Treasurer’s Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares. 2. Receivables and payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” the current portion of interfund loans) or “advances to/from other funds” the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds”. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” 31 ---PAGE BREAK--- Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. All trade receivables are shown net of an allowance for uncollectibles. Trade accounts in excess of 180 days comprise the trade accounts receivable allowance for uncollectibles. Property taxes are levied and collected by San Juan County. The County remits to the City amounts collected for the applicable portion of the property taxes in the month following the date of receipt. The City recognizes property taxes as revenue on the modified accrual basis. Oil and gas taxes received from the County are recognized as revenue when received by the City. Property taxes are levied as of January 1st on property values assessed on the same date. The tax levy is payable in two installments, November 10th and May 10th. The property taxes are considered delinquent and subject to lien, penalty, and interest, 30 days after the date on which they are due. 3. Inventories and prepaid items All inventories are valued at cost using the weighted-average method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 4. Regulatory Liability The City’s electric utility enterprise fund has regulatory activities whose rates are determined based on cost of service (power cost adjustment - PCA). Revenues are recognized based on the PCA when the costs are incurred but will be billed and collected in the future to recover such costs, and a regulatory liability is recorded. The liability (unearned revenue) is recorded on the statement of net assets ($4,056,398 as of June 30, 2012) and the related reduction in revenue is recorded on the statement of activities ($1,456,718 for the year ended June 30, 2012). 5. Restricted assets Certain proceeds of enterprise fund revenue bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. The "revenue bond current debt service" account is used to segregate resources accumulated for debt service payments over the next twelve months. The "revenue bond renewal, replacement, and contingency" account is used to report resources set aside to meet unexpected contingencies or to fund asset renewals and replacements. Customer deposits, as well as customer overpayments, are also classified as restricted assets. The deposits and overpayments remain the property of the customers, and the restricted account reports these assets separately from current assets available for operations to demonstrate the fiduciary relationship with the customers. 6. Capital assets Capital assets, which include property, plant, equipment, and infrastructure assets roads, bridges, sidewalks, and similar items) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if 32 ---PAGE BREAK--- purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Such assets, including infrastructure, have higher limits that must be met before they are capitalized. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Computer software costs, whether externally purchased or developed in-house, shall be capitalized if the total cost of the software equals or exceeds $5,000 and has a life of at least two years. Library books are not capitalized. Property, plant, and equipment of the primary government are depreciated using the straight line method over the following estimated useful lives and capitalization thresholds: Estimated Threshold Useful Life Buildings and structures $ 10,000 7 - 45 years Improvements other than buildings $ 10,000 5 - 75 years Infrastructure $ 50,000 3 - 50 years Personal property $ 5,000 5 - 45 years 7. Compensated absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Accrued sick leave over 520 hours (728 hours for fire shift personnel) may be converted to vacation time at the conversion ratio of three sick days to one vacation day at any time. A liability for accrued convertible sick leave is reported in the proprietary funds. A liability for these amounts is reported in the governmental funds only if they have matured unused reimbursable leave still outstanding following an employee’s resignation or retirement). Payments of accrued compensated absences are made upon employee termination and usually are paid from either the general or electric fund. 8. Long-term obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. 9. Fund Balance Net position flow assumption Sometimes the City will fund outlays for a particular purpose from both restricted restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are 33 ---PAGE BREAK--- considered to be applied. It is the City’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied. Fund balance flow assumptions Sometimes the City will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the City’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. Fund balance policies Fund balance of governmental funds is reported in various categories based on the nature of any limitations requiring the use of resources for specific purposes. The City itself can establish limitations on the use of resources through either a commitment (committed fund balance) or an assignment (assigned fund balance). The committed fund balance classification includes amounts that can be used only for the specific purposes determined by a formal action of the City’s highest level of decision-making authority. The City Council is the highest level of decision-making authority for the City that can, by adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation. Amounts in the assigned fund balance classification are intended to be used by the City for specific purposes but do not meet the criteria to be classified as committed. The City Council may assign fund balance as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year’s appropriated budget. Unlike commitments, assignments generally only exist temporarily. In other words, an additional action does not normally have to be taken for the removal of an assignment. Conversely, as discussed above, an additional action is essential to either remove or revise a commitment. As of June 30, 2012, fund balances of the governmental funds are classified as follows: Nonspendable — amounts that cannot be spent either because they are in nonspendable form or because they are legally or contractually required to be maintained intact. Restricted — amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments. Committed — amounts that can be used only for specific purposes determined by a formal action of City Council. City Council is the highest level of decision-making authority for the City. Commitments may be established, modified, or rescinded only through ordinances or resolutions approved by City Council. Assigned — amounts that are constrained by the City’s intent to use them for a specific purpose, but are neither restricted or committed. The City has not established a policy regarding the assignment of funds, so this category of fund balance represents the residual amounts not otherwise reported as unspendable, restricted, or committed in governmental funds outside of the general fund. Unassigned — all other spendable amounts. 34 ---PAGE BREAK--- As of June 30, 2012, fund balances are composed of the following: General Fund Gross Receipts Tax Streets Fund Nonmajor Governmental Funds Total Governmental Funds Nonspendable: Inventories/prepaids $ 489,093 $ - $ - $ 489,093 Restricted reserve investment 15,509 - - 15,509 Restricted: Police - - 28,413 28,413 Fire - - 230,311 230,311 Lodgers’ promotion - - 412,513 412,513 Capital projects - - 10,137,670 10,137,670 Debt service - - 189,304 189,304 Committed: Police - - 74,253 74,253 Parks, rec, cultural affairs - - 2,173,568 2,173,568 Public Works - 10,567,361 - 10,567,361 Assigned: Parks, rec, cultural affairs - - 1,223,459 1,223,459 Library - - 281,106 281,106 Capital projects - - 3,594,658 3,594,658 Unassigned 18,216,147 - - 18,216,147 Total fund balances $ 18,720,749 $ 10,567,361 $ 18,345,255 $ 47,633,365 10. Net Assets In the government-wide financial statements and proprietary fund financial statements, net assets are reported in three categories: net assets invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. Restricted net assets represent net assets restricted by parties outside of the City (such as creditors, grantors, contributors, laws and regulations of other governments). The City’s restricted net assets in the government-wide financial statements are $15,851,077 as of June 30, 2012. 11. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net assets The governmental fund balance sheet includes a reconciliation between fund balance-total governmental funds and net assets-governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that “long-term liabilities, 35 ---PAGE BREAK--- including bonds payable, are not due and payable in the current period and therefore are not reported in the funds.” The details of this $18,463,775 difference are as follows: Bonds payable $ 13,895,000 Bond premium (to be amortized over the life of the debt) 733,748 Issuance costs (to be amortized over the life of the debt) (197,009) Accrued interest payable 41,985 NMFA loan payable 475,426 Compensated absences payable 3,514,625 Net adjustment to reduce fund balance-total governmental funds to arrive at net assets- governmental activities $ 18,463,775 B. Explanation of certain differences between the governmental fund statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities The governmental fund statement of revenues, expenditures, and changes in fund balances includes a reconciliation between net changes in fund balance-total governmental funds and changes in net assets of governmental activities as reported in the government-wide statement of activities. One element of that reconciliation explains that “Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense.” Details of this $121,093 are as follows: Capital outlay $ 8,736,549 Depreciation (9,005,763) Loss on disposals and other (183,830) Transfer of golf course assets due to reassignment to General Fund 574,137 Net adjustment to increase net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ 121,093 Another element of that reconciliation states that “the issuance of long-term debt bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities”. Details of this $8,413,655 are as follows: Principal repayments $ 3,440,000 Debt issued (11,130,426) Amortization of bond premium (668,067) Amortization of issuance costs 129,221 Accrued interest (30,331) Compensated absences (154,052) Net adjustment to increase net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ (8,413,655) Another element of that reconciliation states that: “the net revenue/expense of certain activities of internal service funds is reported with governmental funds.” The details of this $872,820 difference are as follows: 36 ---PAGE BREAK--- Internal service charges for services $ 9,604,142 Internal service operating expenses (8,731,322) Net adjustment to decrease net changes in fund balances – total governmental funds to arrive at changes in net assets of governmental activities $ 872,820 III. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Budgetary information Annual budgets are adopted for all funds. All budgets are prepared on a basis other than generally accepted accounting principles (Non-GAAP basis), excluding encumbrances. All annual appropriations lapse at fiscal year end. Carryover funds must be appropriated in the budget of the subsequent fiscal year. Because the budget process in the State of New Mexico requires that the beginning cash balance be appropriated in the budget of the subsequent fiscal year, such appropriated balance is legally restricted and is therefore presented as a reserved portion of fund balance. Actual expenditures may not exceed the budget on a fund basis. Budgets may be amended by City Council ordinance with approval by the State Department of Finance and Administration. City department heads may make transfers of appropriations within a fund. The legal level of budgetary control is the fund level. Increases or decreases of appropriations between funds require the approval of the City Council. Because the Non-GAAP basis of accounting is not generally accepted accounting method for governmental and propriety funds, differences result from budgeting for various items. Reconciliations between the budget basis (Non-GAAP) and GAAP basis are provided in the budgetary schedules. The City follows the following procedures in establishing the budgetary data reflected in the financial statements: 1. In April or May the City Manager submits to the Council a proposed preliminary operating budget for the fiscal year commencing the following July 1st. The budget includes proposed expenditures and the means of financing them. The budget is prepared by fund, department, and function. 2. In late June, after there has been an opportunity for public comment, the City Council adopts the budget as finalized. 3. By the end of July, the Local Government Division of the State Department of Finance and Administration approves the final budget. 4. After the budget is adopted, any supplemental appropriations must be approved by the City Council. Encumbrance accounting is employed by the City. Encumbrances purchase orders, contracts) outstanding at year-end are carried forward to the new fiscal year and do not constitute expenditures or liabilities because the commitments will be re-appropriated and honored during the subsequent year. 37 ---PAGE BREAK--- The City had the following encumbrances outstanding at June 30, 2012: General Fund 343,967 Gross Receipts Tax Streets Fund 997,044 Gross Receipts Tax Parks Fund 20,221 Parks/Rec Gifts and Grants Fund 172,846 State Police Protection Fund 28,609 State Fire Fund 311,524 Community Development Capital Projects Fund 837,046 Gross Receipts Tax 2012 Bond Capital Projects Fund 74,991 General Government Capital Projects Fund 1,047,389 Airport Grant Capital Projects Fund 232,852 Electric Utility Fund 7,610,128 Water Utility Fund 391,481 Wastewater Utility Fund 326,181 Sanitation Fund 5,561 Total Encumbrances $ 12,399,840 B. Excess of expenditures over appropriations Expenditures for all funds were within budgeted appropriations for FY2012. C. Deficit Fund Equity As of June 30, 2012, the health insurance internal service fund had a deficit net asset balance of ($528,306). This deficit is equal to accrued payables of $1,210,483 less receivables totaling $682,177. The net asset balance increased by $872,820 over FY2011. Beginning July 1, 2012, a rate increase for health premiums will be implemented in an effort to decrease this deficit net asset balance. IV. DETAILED NOTES ON ALL FUNDS A. Deposits and investments Cash and investments Governmental activities $ 43,818,582 Business activities 82,729,284 Restricted cash and investments Business activities 9,131,955 Reserve investment account 15,509 Total cash and investments $135,695,330 38 ---PAGE BREAK--- As of June 30, 2012, the City had the following investments: Investment Type Fair Value Weighted Average Maturity (Years) Money markets $ 4,101,187 0.08 Certificates of deposit 96,103,727 1.35 State treasurer’s pool 11,875,219 0.16 State treasurer’s pool - reserved 15,509 N/A Federal agency securities 21,035,568 4.59 Total Fair Value $ 133,131,210 Portfolio weighted average maturity 1.93 Interest rate risk. Interest rate risk is the risk that interest rate variations may adversely affect the fair value of an investment. An acceptable method for reporting interest rate risk is weighted average maturity (WAM). The State Treasurer’s Office uses this method for reporting purposes for the Local Government Investment Pool. The weighted average maturity at June 30, 2012 was 52 days for the Local Government Investment Pool. In accordance with its investment policy, the City manages its exposure to declines in fair values by limiting the weighted average maturity of its investment portfolio to less than five years. Concentration of Credit Risk. The City had investments at June 30, 2012, with more than 5% of the total in securities of the federal agency securities. These investments represented 15.8%, respectively, of total investments. Credit risk. As per the City’s policy and as directed by State Statute 6-10-36, E. and excess funds may be invested in securities backed by the full faith and credit of the United States Government, such as treasury notes, bills and bonds; in securities of Agencies that are guaranteed by the United States Government; bonds or negotiable securities of the State of New Mexico or of any county, municipality or school district in the State of New Mexico which has a taxable valuation of real property for the last preceding year of at least one million dollars ($1,000,000) and has not defaulted in the payment of any interest or sinking fund obligation or failed to meet any bonds at maturity at any time within five years last preceding. The City’s investments in federal agency securities were rated AAA by Standard and Poor’s and AA+ by Moody’s Investment Service. Custodial credit risk – deposits. In the case of deposits, this is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. The City’s investment policy and state statute require that the bank deposits be 50% collateralized and repurchase agreements be 102% collateralized. As of June 30, 2012, the City was in compliance with state statute. The City’s carrying amount of deposits as of June 30, 2012 was $102,277,987 and the bank balance was $104,349,381. Of the bank balance, $4,894,467 was covered by federal depository insurance, $57,252,415 was collateralized with securities held by the pledging financial institution’s trust department or agent in the City’s name, and $42,202,499 was uncollateralized, and subject to custodial credit risk. Custodial credit risk – investments. In the case of investments, this is the risk that in the event of a failure of the counter-party, the City will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The City does not have any investments at June 30, 2012 that are exposed to custodial credit risk. 39 ---PAGE BREAK--- Collateral. The following guidelines are used to determine the level of collateral required from each financial institution. These ratios are in agreement with those set by the State Board of Finance for the State of New Mexico. The City Council authorizes the City Manager or his/her designee to set a higher level of collateral required based on criteria other than the ratios below. In no case shall the requirements be less than 50%. Banking Institutions Percentage Level of Collateralization Required Ratios 50% 75% 100% Primary Capital Assets Above 6% 5% - 6% Less than 5% Net Operating Income Total Average Assets Above .60% .051% - .60% Less than .51% Non-Performing Loans Primary Capital Under 35% 35% - 49.9% Above 49.9% Savings and Loan Institutions Percentage Level of Collateralization Required Ratios 50% 75% 100% Net Worth Average Assets Above 3% 2% - 3% Less than 2% 4 Qtrs Avg Net Income Before Tax 4 Qtrs Avg Assets Above - Less than 2 Consecutive Quarters of After Tax Losses Yes 3 Consecutive Quarters of After Tax Losses Yes Only securities backed by the full faith and credit of the United States Government will be accepted as collateral. The City may make an exception and accept as collateral securities from a governmental entity within the State of New Mexico as described by State Statute 6-10-16, B. All securities pledged as collateral shall be held by a third-party financial institution approved by the City Manager or his/her designee. Any change in the institution holding the collateral must have prior approval of the City Manager or his/her designee. The City has investments in the State Treasurer external investment pool (the Local Government Investment Pool). The investments are valued at fair value based on quoted market prices as of June 30, 2012. The State Treasurer Local Government Investment Pool (LGIP) is not SEC registered. Section 6-10-10 I, NMSA 1978, empowers the State Treasurer, with the advice and consent of the State Board of Finance, to invest money held in the short-term investment fund in securities that are issued by the United States government or by its departments or agencies and are either direct obligations of the United States or are backed by the full faith and credit of the United States government or are agencies sponsored by the United States government. The Local Government Investment Pool investments are monitored by the same investment committee and the same policies and procedures that apply to all other state investments. The pool does not have unit shares. Per Section 6-10-10.1F, NMSA 1978, at the end of each month all interest earned is distributed by the State Treasurer to the contributing entities in amounts directly proportionate to the respective amounts deposited in the fund and the length of time the amounts were invested. Participation in the local government investment pool is voluntary. The LGIP has been rated by Standard & Poor’s and has received an AAAm rating. 40 ---PAGE BREAK--- A portion of the City’s investment in the State Treasurer’s pool ($15,509) is shown as restricted on the City’s financial statements. The LGIP was invested in the Reserve Primary Fund at September 15, 2008. On September 16, 2008, the Reserve Primary Fund’s net assets fell below $1.00 and holdings in the fund were frozen. Since that date, 98.7% of the City’s investment in the Reserve Primary Fund has been returned. In June, 2012, the State Treasurer’s Office made the decision to officially “write down” a portion of the remaining investment held in the Reserve Primary Fund. The City’s share of this write down was $ 77,077. We still anticipate receiving the balance ($15,509) of these funds which are currently being held for pending litigation but we cannot accurately estimate the full amount to be returned. B. Receivables Receivables as of June 30, 2012 are as follows: Intergovernmental receivables are made up of the following amounts in the general and special revenue funds: gross receipts taxes $8,248,112, property taxes $1,885,030, federal and state grants $466,727, franchise taxes $123,388, lodgers’ taxes $195,073 and other taxes $96,653. In the internal service health fund there is $682,177 in accounts receivable, $619,813 of which is for a stop loss payment due. Revenues of the utilities are reported net of uncollectible amounts. Total uncollectible amounts related to revenues of the current period are as follows: Uncollectibles related to electric sales $ 49,223 Uncollectibles related to water sales 12,110 Uncollectibles related to wastewater charges 7,823 Uncollectibles related to sanitation charges 5,571 Total uncollectibles of the current fiscal year $ 74,727 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received but not yet earned. The City reported no unearned revenue during the year. At the end of the current fiscal year, deferred revenue reported in the governmental funds was as follows: Unavailable Taxes $ 1,993,390 General Special Revenue Enterprise Total Receivables: Accounts Receivable $ 194,661 $ 216,479 $ 5,981,739 $ 6,392,879 Unbilled Revenue - - 6,247,402 6,247,402 Intergovernmental 8,703,986 2,310,997 - 11,014,983 Gross Receivables 8,898,647 2,527,476 12,229,141 23,655,264 Less: Allowance for Uncollectibles - - (616,813) (616,813) Net Total Receivables: $ 8,898,647 $ 2,527,476 $ 11,612,328 $ 23,038,451 41 ---PAGE BREAK--- C. Capital assets Capital asset activity for the year ended June 30, 2012 was as follows: Balance Balance Governmental activities July 1, 2011 Transfers Additions Deletions June 30, 2012 Non-Depreciable Assets: Land 26,893,367 $ 100,000 $ 413,193 $ (91,359) $ 27,315,201 $ Construction in progress 2,352,792 - 5,714,158 (3,043,576) 5,023,374 Total Non-Depreciable Assets 29,246,159 100,000 6,127,351 (3,134,935) 32,338,575 Depreciable Assets: Buildings 63,209,127 190,297 893,394 (43,208) 64,249,610 Improvements other than buildings 23,762,736 418,427 58,133 - 24,239,296 Equipment 30,220,849 49,316 3,351,112 (854,991) 32,766,286 Infrastructure 61,401,106 - 1,350,135 (398,397) 62,352,844 Total Depreciable Assets 178,593,818 658,040 5,652,774 (1,296,596) 183,608,036 Total Governmental Assets 207,839,977 758,040 11,780,125 (4,431,531) 215,946,611 Accumulated Depreciation: Buildings (34,558,119) (9,059) (1,646,451) 27,997 (36,185,632) Improvements other than buildings (11,631,917) (125,528) (1,884,845) - (13,642,290) Equipment (21,034,276) (49,316) (2,515,071) 827,008 (22,771,655) Infrastructure (42,295,008) - (2,959,396) 349,120 (44,905,284) Total Accumulated Depreciation (109,519,320) (183,903) (9,005,763) 1,204,125 (117,504,861) Net Governmental Assets 98,320,657 $ 574,137 $ 2,774,362 $ (3,227,406) $ 98,441,750 $ Balance Balance Business-type activities July 1, 2011 Transfers Additions Deletions June 30, 2012 Non-Depreciable Assets: Land 3,984,334 $ (100,000) $ - $ - $ 3,884,334 $ Construction in progress 38,205,916 - 17,772,376 (23,965,343) 32,012,949 Total Non-Depreciable Assets 42,190,250 (100,000) 17,772,376 (23,965,343) 35,897,283 Depreciable Assets: Land Rights 1,819,274 - - - 1,819,274 Buildings 108,653,599 (190,297) 125,142 - 108,588,444 * Improvements other than buildings 116,354,596 (418,427) 8,642,510 (88,635) 124,490,044 Equipment 283,782,049 (49,316) 14,973,870 (1,404,837) 297,301,766 Total Depreciable Assets 510,609,518 (658,040) 23,741,522 (1,493,472) 532,199,528 Total Business-type Assets 552,799,768 (758,040) 41,513,898 (25,458,815) 568,096,811 Accumulated Depreciation: Land Rights (864,915) - (43,475) - (908,390) Buildings (43,351,140) 9,059 (3,202,603) - (46,544,684) * Improvements other than buildings (46,374,389) 125,528 (3,455,975) 248,554 (49,456,282) Equipment (130,607,234) 49,316 (10,124,210) 1,404,837 (139,277,291) Total Accumulated Depreciation (221,197,678) 183,903 (16,826,263) 1,653,391 (236,186,647) Net Business-type Assets 331,602,090 $ (574,137) $ 24,687,635 $ (23,805,424) $ 331,910,164 $ * According to FERC (Federal Energy Regulatory Commission), a retired Electric asset is fully depreciated, plant-in-service and accumulated deprecation are the same amount. But retirements also include cost of removal, which will increase the total of deletions for accumulated depreciation. At the beginning of FY2012, the Civitan Golf Course was moved into the General Fund. This golf course has experienced increasing expenses during the past few years and the revenues have not 42 ---PAGE BREAK--- been sufficient to cover the expenses. Since the revenue collected cannot support the operations of this golf course, management determined that this activity no longer met the criteria of being an enterprise fund. This resulted in a net transfer into the governmental activities capital assets of $574,137. Enterprise Assets – by fund In 1988, the City entered into a lease agreement to lease land for the Pinon Hills Golf Course from San Juan College for $10. The lease expires in the year 2087, at which time the land, including improvements, will be returned to San Juan College. Depreciation expense was charged to functions / programs of the government as follows: Governmental activities: General government $ 1,056,474 Airport 1,118,634 Police 587,878 Fire 758,327 Parks, recreation, cultural affairs 2,001,507 Public works/Community development 397,257 Highways and streets 3,085,686 Total depreciation expense - governmental activities $ 9,005,763 Business-type activities: Electric $ 13,509,426 Water 1,870,935 Wastewater 1,383,102 Sanitation 4,739 Golf 58,061 Total depreciation expense - business-type activities $ 16,826,263 Electric Water Wastewater Sanitation Golf Land and land Rights 3,546,554 $ 1,654,325 $ 479,388 $ 23,341 $ - $ Buildings and Structures 69,654,809 14,008,573 23,989,482 80,640 854,940 Improvements other Than buildings 64,014,743 42,942,920 15,001,354 14,839 2,516,188 Equipment 282,010,520 9,987,572 4,397,383 101,099 805,192 Total 419,226,626 68,593,390 43,867,607 219,919 4,176,320 Less accumulated Depreciation (181,505,846) (33,267,732) (18,981,520) (186,360) (2,245,189) Construction in progress 18,792,993 11,734,433 1,485,523 - - Net Assets 256,513,773 $ 47,060,091 $ 26,371,610 $ 33,559 $ 1,931,131 $ 43 ---PAGE BREAK--- D. Interfund receivables, payables and transfers The composition of other accrued liabilities as of June 30, 2012 is as follows: Governmental Other Accrued Liabilities Funds Taxes $ 503 Intergovernmental 1,571 Court collections 12,032 Total $ 14,106 The composition of other accrued expenses as of June 30, 2012 is as follows: Other Accrued Expenses Electric Water Wastewater Sanitation Golf Total Wages & benefits 504,769 $ 9,793 $ 6,647 $ 104 $ 27,984 $ 549,297 $ Gross receipts taxes 420,803 100,847 - - 3,891 525,541 Water conservation fee - 18,725 - - - 18,725 Compensating taxes 296 - - - - 296 Ad valorem taxes 325,000 - - - - 325,000 Franchise taxes 222,761 - - - - 222,761 PNM deferred credits 20,851 - - - - 20,851 Billed customer deposits 57,244 - - - - 57,244 Total 1,551,724 $ 129,365 $ 6,647 $ 104 $ 31,875 $ 1,719,715 $ The composition of interfund balances as of June 30, 2012 is as follows: Due from other funds Due to other funds Major Fund: General fund $ 163,967 $ - Nonmajor governmental funds: Gross receipts tax parks fund 112,492 - Region II narcotics grant fund - 90,940 COPS program grant fund - 73,027 Major proprietary funds: Golf fund - 112,492 $ 276,459 $ 276,459 Federal and state grants Region II and COPS grants) are normally reimbursement oriented; therefore, the payable represents the unreimbursed expenditures at year end. A portion of the payable for the Internal Service fund also represents accounts receivable at year end. All other interfund transactions represent cash transfers for operating purposes. 44 ---PAGE BREAK--- Interfund transfers for the year ended June 30, 2012 are as follows: Fund Financial Statements – Transfers Governmental Funds In Out General fund – operating transfer to airport construction grant projects fund $ - $ 72,500 General fund – operating transfer to debt service fund - 972,500 General fund – operating transfer to region II fund - 30,000 General fund – operating transfer to governmental capital projects fund - 3,645,233 General fund – operating transfer from electric/water/ww 9,157,724 - GRT streets fund – operating transfer to debt service fund - 533,500 GRT parks fund – operating transfer to golf fund - 77,843 Region II fund – matching funds for grant from general fund 30,000 - State fire grant fund – matching funds for fire station to debt service fund - 110,000 GRT 2012 bond projects fund - 2001 bond defeasance transfer to debt service fund - 2,231,667 Governmental capital projects fund – operating transfer from general fund 3,645,233 - Governmental capital projects fund – capital project transfer to golf fund - 22,260 Governmental capital projects fund – operating transfer to health insurance internal service fund - 307,123 Airport construction grant projects fund – operating transfer from general fund 72,500 - Debt service fund – operating transfer from GRT streets fund 533,500 - Debt service fund – operating transfer from general fund 972,500 - Debt service fund – operating transfer from state fire grant fund 110,000 - Debt service fund - 2001 bond defeasance transfer from GRT 2012 bond projects fund 2,231,667 - Total governmental funds transfers 16,753,124 $ 8,002,626 Net governmental funds transfers $ 8,750,498 Business-type funds Electric utility fund – operating transfer to general fund $ - $ 8,140,386 Electric utility fund – operating transfer to health insurance internal service fund - 82,875 Water utility fund – operating transfer to general fund - 694,689 Water utility fund – operating transfer to health insurance internal service fund - 3,482 Wastewater utility fund – operating transfer to general fund - 322,649 Golf fund – operating transfer from GRT parks fund 77,843 - Golf fund - capital project transfer from governmental capital projects fund 22,260 - Golf fund – operating transfer to health insurance internal service fund - 3,482 Health insurance internal service fund - operating transfer from governmental capital projects fund 307,123 - Health insurance internal service fund - operating transfer from electric fund 82,875 - Health insurance internal service fund - operating transfer from water fund 3,482 - Health insurance internal service fund - operating transfer from golf fund 3,482 - Total business-type funds transfers $ 497,065 9,247,563 Net business-type transfers $ 8,750,498 45 ---PAGE BREAK--- Government-wide Financial Statements – Transfers In Out Golf fund - transfer due to reassignment of Civitan Golf Course to governmental capital assets $ 574,137 $ 574,137 Net governmental and business-type transfers 9,147,460 9,147,460 $ 9,721,597 $ 9,721,597 E. Leases Operating Leases The City leases equipment (police and an AS/400 mainframe computer) under noncancelable operating leases. The future minimum lease payments for these leases are as follows: Year Ending Amount 2013 $ 87,485 2014 5,914 Total $ 93,399 F. Long-term debt General Obligation bonds The City has the capacity to issue general obligation bonds to provide funds for the acquisition and/or construction of major capital projects, but as of June 30, 2012 no general obligation bonds had been issued. Revenue bonds The City also has the capacity and has issued Sales Tax Revenue Bonds whereby the City has pledged income derived from the Gross Receipts Tax to pay the required debt service on the bonds. During FY2002, the City redeemed the outstanding balance on the 1993 Sales Tax Revenue Bond issue in the amount of $395,000. With the issuance of the 2001 Sales Tax Revenue Improvement and Refunding Bonds the City provided for the refunding of the previously issued 1994 Sales Tax Revenue Bonds and issued an additional $11 million for the purpose of completing construction of a new library and several major street projects. In FY2005, the City issued $5,725,000 of Series 2005 Sales Tax Revenue Bonds to provide funds to construct, furnish, equip and improve fire-fighting facilities and acquire and rehabilitate fire-fighting equipment. On December 17, 2002 the City issued $44,390,000 of 2002A utility revenue bonds and $2,280,000 of 2002B utility revenue bonds to refund $47,150,000 of 1992 utility revenue bonds. The estimated present value benefit of refunding the 1992 bonds is $6,342,865. The transaction resulted in an accounting loss of $2,959,014. In April, 2012, the City issued $10,655,000 of Series 2012 Sales Tax Refunding and Improvement Revenue Bonds through the New Mexico Finance Authority (NMFA). A portion of the proceeds ($2,231,667) was used to refund the 2001 Sales Tax Revenue Improvement and Refunding Bonds. The balance of the proceeds will be used to build a new animal shelter, renovate the Civic Center, expand the Gateway Museum, remodel Fire Station 1, and various drainage improvement projects. 46 ---PAGE BREAK--- Revenue bonds outstanding as of June 30, 2012 are as follows: Interest Rates General Govt Electric Water Wastewater Total Governmental Activities Sales Tax Bonds 2005 4.00% 3,240,000 $ - $ - $ - $ 3,240,000 $ Sales Tax Bonds 2012 1.50 - 5.50% 10,655,000 - - - 10,655,000 Business Activities Serial Bonds 2002 3.90% - 3,232,652 697,565 114,783 4,045,000 Total 13,895,000 $ 3,232,652 $ 697,565 $ 114,783 $ 17,940,000 $ Annual debt service requirements to maturity for revenue bonds are as follows: For governmental fund types, bond premiums and discounts, as well as issuance costs, are recognized in the current period. Bond proceeds are reported as other financing source net of the applicable premium or discount. Issuance costs, even if withheld from the actual net proceeds received, are reported as debt service expenditures. For proprietary fund types, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line method, which approximates the effective interest method. Bonds payable are reported net of the applicable bond premium or discount, whereas issuance costs are reported as deferred charges. Deferred amounts on refunding (the difference between the reacquisition price and the net carrying amount of the old debt) are amortized as a component of interest expense. The unamortized portion of the deferred amount is reported as a deduction from revenue bonds payable. The 2002A Utility Revenue bonds are secured by and are payable solely from the net revenues derived by the City from the utility system (electric, water and wastewater utility funds), after payment of operating and maintenance expenses. Payment is also secured by an insurance policy issued by Financial Guaranty Insurance Company. The Policy is non-cancelable, and the premium was paid at the time of delivery of the bonds. There are a number of limitations and restrictions contained in the bond indenture. As of June 30, 2012, the City was in compliance with all significant limitations and restrictions. New Mexico Environment Department Loan. In FY2007, the City entered into a loan agreement with the New Mexico Environment Department (NMED) for a $14.2 million, 3% loan for expansion of the wastewater treatment plant. The NMED loan repayment schedule is as follows: Year Ending June 30 Principal Interest Principal Interest Principal Interest Principal Interest 2013 $ 1,055,000 $ 526,289 $ 3,232,652 $126,073 $ 697,565 $ 27,205 $114,783 $ 4,477 2014 1,145,000 432,088 - - - - - - 2015 1,180,000 400,688 - - - - - - 2016 1,235,000 342,463 - - - - - - 2017 1,265,000 308,562 - - - - - - 2018 1,305,000 277,587 - - - - - - 2019 1,355,000 225,387 - - - - - - 2020 1,080,000 185,800 - - - - - - 2021 1,000,000 158,800 - - - - - - 2022 1,055,000 108,800 - - - - - - 2023 1,095,000 66,600 - - - - - - 2024 1,125,000 33,750 - - - - - - Total $ 13,895,000 $ 3,066,814 $ 3,232,652 $126,073 $ 697,565 $ 27,205 $114,783 $ 4,477 General Govt. Electric Water Wastewater 47 ---PAGE BREAK--- Year Ending June 30 Principal Interest 2013 $ 630,043 $ 322,954 2014 648,945 304,052 2015 668,413 284,584 2016 688,465 264,532 2017 709,119 243,878 2018-2022 3,877,755 887,230 2023-2026 3,542,385 269,605 Total $ 10,765,125 $ 2,576,835 New Mexico Finance Authority Loan. In January 2010, the City entered into a loan and subsidy agreement with the New Mexico Finance Authority (NMFA) for $2,109,688, for improving approximately 13,900 feet of existing waterline in the City’s Water Utility System. Of this amount 50% of the amount is forgiven and the amount repayable is $1,054,844 at a 1% interest rate (includes 0.25% for administrative fees). The loan was closed out in February 2012. As of June 30, 2012, the only payment due was for interest and the first principal payment is due May 2013. The NMFA loan repayment schedule is as follows: Year Ending Administrative June 30 Principal Interest Fee 2013 $ 47,906 $ 7,911 $ 2,637 2014 48,385 7,552 2,517 2015 48,869 7,189 2,396 2016 49,358 6,823 2,274 2017 49,851 6,452 2,151 2018-2022 256,834 26,578 8,860 2023-2027 269,936 16,753 5,584 2028-2032 283,705 6,426 2,142 Total $ 1,054,844 $ 85,685 $ 28,561 NMFA Fire Pumper Loan. In June 2011, the City also entered into a loan agreement with NMFA for $475,426 at a 2.775% blended interest rate for the purchase of two new fire pumpers. The NMFA loan repayment schedule is as follows: Year Ending June 30 Principal Interest 2013 $ 43,878 $ 21,427 2014 44,238 10,967 2015 44,760 10,445 2016 45,467 9,738 2017 46,322 8,883 2018-2022 250,761 25,265 Total $ 475,426 $ 86,725 48 ---PAGE BREAK--- Defeasance of Prior Debt. In prior years, the City defeased certain outstanding revenue bonds by placing the proceeds of new bonds and additional funds from their respective funds in an irrevocable trust to provide for all future debt service payments on the old bonds. All debt service payments made for the year ended June 30, 2012 were made as scheduled from the trust funds. The trust accounts and the defeased bonds are not included in the City's financial statements. As of June 30, 2012, the following outstanding bonds are considered defeased (amounts in thousands): Series 1992 Original issue amount $ 49,205 Retired prior to fiscal year (42,675) Retired during the year ended 2012 (6,530) Balance of principal remaining $ - Interest payments made during year ended June 30, 2012 $ 375 Changes in Long-term Liabilities During the year ended June 30, 2012, the following changes occurred in long-term liabilities: Beginning Ending Due within Balance Additions Reductions Balance One Year Governmental activities: Bonds payable: 2001 Sales tax revenue bonds $ 3,040,000 $ - $ (3,040,000) $ - $ - 2005 Sales tax revenue bonds 3,640,000 - (400,000) 3,240,000 410,000 2012 Sales tax revenue bonds - 10,655,000 - 10,655,000 645,000 Premium on bonds - 2001 bonds 65,681 - (65,681) - - Premium on bonds - 2012 bonds - 741,472 (7,724) 733,748 30,495 Total bonds payable 6,745,681 11,396,472 (3,513,405) 14,628,748 1,085,495 NMFA Fire Pumper Loan - 475,426 - 475,426 43,878 Claims and judgments 2,862,627 9,219,450 (8,150,625) 3,931,452 2,373,283 Compensated absences 3,360,573 1,977,588 (1,823,536) 3,514,625 175,731 Total long-term liabilities Governmental activities $12,968,881 $23,068,936 $(13,487,566) $ 22,550,251 $ 3,678,387 Business-type activities: Bonds payable: Series 2002A $10,140,000 $ - $ (6,095,000) $ 4,045,000 $ 4,045,000 Premium on bonds 440,560 - (229,858) 210,702 210,702 Total bonds payable 10,580,560 - (6,324,858) 4,255,702 4,255,702 NMED loan 11,376,818 - (611,693) 10,765,125 630,043 NMFA loan 1,054,844 - - 1,054,844 47,906 Capital leases 34,400 - (34,400) - - Compensated absences 1,060,451 600,235 (574,526) 1,086,160 574,525 Total long-term liabilities Business-type activities $24,107,073 $ 600,235 $ (7,545,477) $ 17,161,831 $ 5,508,176 49 ---PAGE BREAK--- The liability for compensated absences will be liquidated by the general fund, electric fund, and golf course fund. The liability for claims and judgments has been historically liquidated by the general and electric funds. G. Restricted Assets The following is a summary of restricted assets as of June 30, 2012: Enterprise Funds Electric Water Wastewater Total Revenue bond current debt service $ 280,732 $ 60,578 $ 9,968 $ 351,278 NMED loan debt service reserves - - 1,661,907 1,661,907 Revenue bond renewal, replacement and contingency account 1,598,345 344,902 56,753 2,000,000 Debt service reserves 839,681 - - 839,681 Customer deposits/overpayments 3,926,262 352,827 - 4,279,089 Total restricted assets $ 6,645,020 $ 758,307 $ 1,728,628 $ 9,131,955 V. OTHER INFORMATION A. Risk Management The government is exposed to various risks of loss related to torts, theft, property damage, errors and omissions, and natural disasters for which the government has designed a self insurance program in conjunction with commercial insurance coverage. The amount of settlement has not exceeded insurance coverage for the past three fiscal years. The self insured retention for excess liability coverage is $500,000. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends, including frequency and amount of payments, and other economic and social factors. Changes in the balances of claims liabilities during the past two years are as follows: June 30, 2011 June 30, 2012 Health Risk Mgmt Health Risk Mgmt Unpaid claims, beginning of fiscal year 1,056,693 $ 1,396,987 $ 1,004,164 $ 1,858,463 $ Incurred claims and changes in estimate 5,580,942 1,919,939 7,103,094 2,116,356 Claim payments (5,633,471) (1,458,463) (6,896,775) (1,253,850) Unpaid claims, end of fiscal year 1,004,164 $ 1,858,463 $ 1,210,483 $ 2,720,969 $ Due within one year 1,210,483 $ 1,162,800 $ City management’s estimates of current portion are based on historical data. 50 ---PAGE BREAK--- B. Contingent liabilities Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the government expects such amounts, if any, to be immaterial. The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently determinable, it is the opinion of City counsel that resolution of these matters will not have a material adverse effect on the financial condition of the government. San Juan Coal Company Reclamation The City acquired an 8.475% undivided interest in Unit #4 of the San Juan Generating Station (SJGS) in 1981 to provide a long term supply of coal-fired base load electricity for its electric utility customers. Other owners in the project include Public Service Company of New Mexico (PNM), Tucson Electric Power Company (TEP), Southern California Public Power Authority, Tri-State Generation and Transmission Association, M-S-R Public Power Agency, the City of Anaheim, the Incorporated County of Los Alamos and Utah Associated Municipal Power Systems. Rights and obligations of plant owners or “Participants” in respect to ownership and operation of the San Juan Project, including reclamation costs, are governed by the Amended and Restated San Juan Project Participation Agreement dated March 23, 2006 (PPA). Coal for the operation of the project is supplied by San Juan Coal Company (SJCC) and is mined from the San Juan mine located adjacent to the project. PNM and TEP (Utilities) are parties to an Underground Coal Sales Agreement dated August 31, 2001, (UG-CSA) with SJCC. According to the PPA, all participants acknowledge and recognize the terms of the UG-CSA which was entered into by PNM and TEP on behalf of all the Participants. The Utilities are required by the UG-CSA to compensate SJCC for all reclamation and related liabilities, obligations and costs associated with the disturbance on the SJCC site related to the coal supplied to the San Juan Station. Reclamation costs are considered fixed fuel expenses and allocated to Participants according to their common participant share per the PPA. The City’s share is 2.559%. All Participants have agreed to establish individual trust agreements in accordance with the Mine Reclamation and Trust Funds Agreement Among the San Juan Project Participants dated May 16, 2012 to assure SJCC they will meet their obligation to fully compensate SJCC for all reclamation costs at the surface and underground mine sites. The trust funds will continue until SJCC achieves Reclamation Bond Release, estimated to occur by 2050. Funding of the trust accounts will be according to funding curves provided in the agreement based on estimates for coal reclamation expenses which will be adjusted from time-to-time. The City entered into a trust agreement with the Bank of Albuquerque, as Trustee for the benefit of SJCC, on May 22, 2012. Funds will be disbursed from the trust only for the City’s share of reclamation costs, and for costs and fees associated with the maintenance of the trust account. The City retains no beneficial interest in the funds held in trust, except the right to a return of any funds that may remain in the trust after satisfaction of the Utilities reclamation obligation with SJCC. Should another SJGS Participant default under the funding agreement prior to the termination of the PPA on July 1, 2022, the City is required by the funding agreement to establish a separate segregated portion of the trust account, a “make-up” trust fund, to provide funding for the City’s share of the shortfall created by the defaulting Participant. Funds in the make-up trust fund will only be used for reclamation costs, and trust maintenance costs and fees. Should the defaulting Participant correct their default, funds in the make-up trust will be returned to the City. Participants other than the Utilities could elect to become “Opt-out” Participants within 75 days of the full execution of the Mine Reclamation and Trust Agreement Among the San Juan Project Participants. This choice meant by having a higher funding curve for their respective trust, these 51 ---PAGE BREAK--- Participants would not be obligated to make up funding for another Participant’s trust fund occurring after the termination of the PPA. The City elected to become an “Opt-out” Participant. C. Jointly governed organizations Joint Powers Agreement for Consolidated Communications Authority. The City is a participant with San Juan County, the City of Aztec and the City of Bloomfield in a joint powers agreement to build, maintain, and operate a centralized communications system for dispatch and emergency response. The City was obligated to contribute $55,000 per year until the Capital Equipment Fund reached a balance of $250,000. Thereafter, the City is obligated to contribute 44% of an amount necessary to maintain that balance. During FY2012, the City made $5,587 in contributions to the Authority. Complete financial statements for the Consolidated Communications Authority can be obtained from San Juan County, New Mexico. Joint Powers Agreement for the San Juan Water Commission. The City is a participant with the cities of Aztec and Bloomfield, the County of San Juan, and the San Juan Rural Waters Users Association in a joint powers agreement to create a countywide entity responsible for water planning and use. Much of the impetus to form the Commission came from the Animas La Plata water project and the subsequent need to develop methods to equitably share the related costs and benefits. In addition to this specific project the Commission is also authorized to acquire additional water rights and provide for the equitable distribution of such water. The Commission is financed by a San Juan County mill levy on real and personal property of approximately 3 mills. During FY2012, the City did not make any financial contribution to the Commission. Complete financial statements may be obtained by contacting the San Juan Water Commission. Natural Gas Purchase Agreement. In November 2009, the City entered into a 30 year natural gas purchase agreement with the New Mexico Municipal Energy Acquisition Authority (NMMEAA) for approximately 85% of its historical requirements. Under this agreement the City will purchase gas at an index price less a discount. The discount is derived from a prepaid gas arrangement between NMMEAA and the Royal Bank of Canada (RBC). The variable discount is derived from the difference between taxable and non-taxable interest rate indices. The City’s only obligation is to purchase gas from NMMEAA. The City has no obligation to purchase gas that is not needed, no exposure to any bond risk associated with the transaction between NMMEAA and RBC, and no exposure to paying greater than index for gas. The City anticipates annual savings of approximately $912,500 per year under this agreement. D. Employee Retirement Systems and Plans Pension Plan – Public Employees Retirement Association Plan Description. Substantially all of the City’s full-time employees participate in a public employee retirement system authorized under the Public Employees Retirement Act (Chapter 10, Article 11, NMSA 1978). The Public Employees Retirement Association (PERA) is the administrator of the plan, which is a cost-sharing multiple-employer defined benefit retirement plan. The plan provides for retirement benefits, disability benefits, survivor benefits and cost-of-living adjustments to plan members and beneficiaries. PERA issues a separate, publicly available financial report that includes financial statements and required supplementary information for the plan. That report may be obtained by writing to PERA, P.O. Box 2123, Santa Fe, NM 87504-2123. The report is also available on PERA’s website at www.pera.state.nm.us. Funding Policy. Plan members are required to contribute from 9.15% to 16.30%, depending upon the plan municipal general, municipal police, municipal fire, municipal detention officer) of their gross salary. The City is required to contribute from 9.15% to 21.25% (depending upon the plan) of the gross covered salary. The contribution requirements of plan members and the City are 52 ---PAGE BREAK--- established in State statute under Chapter 10, Article 11, NMSA 1978. The requirements may be amended by acts of the legislature. The City’s contributions to PERA for the fiscal years ending June 30, 2012, 2011, and 2010 were $8,960,484, $8,778,923, and $8,953,674, respectively, which equal the amount of the required contributions for each fiscal year. E. Post-Employment Benefits – State Retiree Health Care Plan Plan Description. The City, at the beginning of FY2008, began contributions to the New Mexico Retiree Health Care Fund, a cost-sharing multiple-employer defined benefit postemployment healthcare plan administered by the New Mexico Retiree Health Care Authority The provides health care insurance and prescription drug benefits to retired employees of participating New Mexico government agencies, their spouses, dependents, and surviving spouses and dependents. The Board was established by the Retiree Health Care Act (Chapter 10, Article 7C, NMSA 1978). The Board is responsible for establishing and amending benefit provisions of the healthcare plan and is also authorized to designate optional and/or voluntary benefits like dental, vision, supplemental life insurance, and long-term care policies. Eligible retirees are: 1) retirees who make contributions to the fund for at least five years prior to retirement and whose eligible employer during that period of time made contributions as a participant in the plan on the person’s behalf unless that person retires before the employer’s effective date, in which event the time period required for employee and employer contributions shall become the period of time between the employer’s effective date and the date of retirement; 2) retirees defined by the Act who retired prior to July 1, 1990; 3) former legislators who served at least two years; and 4) former governing authority members who served at least four years. The issues a publicly available stand-alone financial report that includes financial statements and required supplementary information for the postemployment healthcare plan. That report and further information can be obtained by writing to the Retiree Health Care Authority at 4308 Carlisle NE, Suite 104, Albuquerque, NM 87107. Funding Policy. The Retiree Health Care Act (Section 10-7C-13 NMSA 1978) authorizes the Board to establish the premium contributions that retirees are required to pay for healthcare benefits. Each participating retiree pays a premium according to a service based subsidy rate schedule for the medical plus basic life plan plus an additional participation fee of five dollars if the eligible participant retired prior to the employer’s effective date or is a former legislator or former governing authority member. Former legislators and governing authority members are required to pay 100% of the insurance premium to cover their claims and the administrative expenses of the plan. The premium rate schedule can be obtained from the or viewed on their website at The Retiree Health Care Act (Section 10-7C-15 NMSA 1978) is the statutory authority that establishes the required contributions of participating employers and their employees. During the fiscal year ended June 30, 2012, the statute required each participating employer to contribute 1.834% of each participating employee’s annual salary; each participating employee is required to contribute .917% of their salary. For employees who are not members of an enhanced retirement plan the contribution rates will be: Fiscal Year Employer Contribution Rate Employee Contribution Rate FY2013 2.000% 1.000% For employees who are members of an enhanced retirement plan (state police and adult correctional officer coverage plan 1; municipal police member coverage plans 3, 4 and 5; municipal 53 ---PAGE BREAK--- fire member coverage plan 3, 4 and 5; municipal detention officer member coverage plan 1; and members pursuant to the Judicial Retirement Act [10-12B-1 NMSA 1978]), during the fiscal year ended June 30, 2012, the statute required each participating employer to contribute 2.292% of each participating employee’s annual salary, and each participating employee was required to contribute 1.146% of their salary. The contribution rate for FY2013 is as follows: Fiscal Year Employer Contribution Rate Employee Contribution Rate FY2013 2.500% 1.250% Also, employers joining the program after January 1, 1998 are also required to make a surplus- amount contribution to the based on one of two formulas at agreed-upon intervals. The plan is financed on a pay-as-you-go basis. The employer, employee and retiree contributions are required to be remitted to the on a basis. The statutory requirements for the contributions can be changed by the New Mexico State Legislature. The City’s contributions to the for the years ended June 30, 2012, 2011 and 2010 were $739,825, $725,751 and $512,041, respectively, which equals the required contributions for each year. F. Undivided Interest in San Juan Unit No. 4. On November 17, 1981, the City acquired an 8.475% undivided interest in Unit No. 4 of the San Juan Electric Generating Station located in San Juan County, New Mexico. Unit No. 4 is owned 8.475% by the City and 91.525% by the Public Service Company of New Mexico (PNM) and others. The unit became operational April 27, 1982. Unit No. 4 provides electricity to the co-owners and to other unrelated parties. The City's pro rata portions of the operations are reported in the accompanying statement of revenues and expenses of the electric utility fund. The operating agreement between the City and PNM provides that PNM and other owners are entitled to receive energy from the Unit on a pro rata basis. Maintenance and operating costs, other than fuel costs, are also shared on a pro rata basis. Fuel costs are paid by PNM and the other owners, including the City, in proportion to their share of energy scheduled and produced from the Unit. PNM has an option to purchase up to 50% of the City's capacity entitlement and associated energy in Unit No. 4. PNM must give eight years notice of its intent to purchase (no notice has been given). The investment is reported at the amount of the City's equity in the underlying net assets of the unit and is included in the electric utility capital assets. In 1992, a study was conducted by an engineering firm to estimate the cost of decommissioning the plant. This study was updated in 2003 and agreed to the previous estimate. The City is analyzing the effect of this study on its financial statements. G. Contracted Water and Wastewater Services. In January, 2008, the City entered into an agreement with CH2M Hill-OMI to provide water and wastewater services to the City. The company operates and maintains the water and wastewater facilities. The contract expires in December, 2015. The company is responsible for operating expenditures, as well as repairs and replacements up to $2,000. The City paid approximately $6.4 million for contracted services for the year ended June 30, 2012. 54 ---PAGE BREAK--- H. Conduit Debt Conduit debt has been defined by GAAP as “certain limited-obligation revenue bonds or similar debt instruments issued by a local governmental entity for the express purpose of providing capital financing for a specific third party that is not a part of the issuer’s financial reporting entity.” The City has not reported any conduit debt or the related asset on the financial statements. The aggregate amount of all conduit debt obligations as of June 30, 2012 was $995,000,000. This debt will never constitute an indebtedness of the City within the meaning of any constitutional or statutory provision of the state of New Mexico and will never constitute or give rise to a pecuniary liability of the City or a charge against its general or taxing powers. 55 ---PAGE BREAK--- San Juan Park Subdivision in Farmington - 1950 56 ---PAGE BREAK--- Nonmajor Governmental Funds Nonmajor Governmental Funds ---PAGE BREAK--- NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds Special revenue funds are used to account for specific revenues that are legally restricted to expenditures for particular purposes, or to facilitate the management of financial resources internally "designated" for specific purposes. Special revenue funds are authorized by the City Council. Gross Receipts Tax Parks Fund - City Ordinance 81-702 established this fund to account for the City's 1/4% share of gross receipts tax that is legally restricted to the maintenance of parks. Park Development Fees Fund - City Council Resolutions 887, dedication of recreation space, and 910, land subdivision regulations - recreation space, established this fund to account for fees collected from developers for the purchase of land and development of parks. Library Gifts and Grants Fund - City management established this fund to account for state and county gifts and grants restricted for the purchase of library books and other educational library needs. Parks/Recreation Gifts and Grants Fund - City management established this fund to account for state grants restricted to expenditures for local beautification purposes and expenditures for leisure activities of senior citizens. Museum Gifts and Grants Fund - City management established this fund to account for state grants restricted to expenditures for museum purposes. Lodgers’ Tax Fund - State statute 3-38-15 N.M.S.A. and City Ordinance 480 established this fund to account for the City-imposed tax restricted for tourism and promotion. One-fourth of the revenues are restricted to tourism and promotion and three-fourths of the revenues are restricted for promotional facilities. State Police Protection Grant Fund - City management established this fund to account for state grants restricted for the purchase of police equipment and other approved police needs. Region II Narcotics Grant Fund- City management established this fund to account for federal grants restricted to expenditures for approved police needs. COPS Program Grant Fund – City management established this fund to account for federal grants restricted to expenditures for approved police needs. Law Enforcement Block Grant Fund - City management established this fund to account for federal grants restricted to expenditures for approved police needs (City Council Resolution # 2001-1013). 57 ---PAGE BREAK--- State Fire Grant Fund - City management established this fund to account for state grants restricted for the purchase of fire fighting equipment and other approved fire department needs. Penalty Assessment Fund - City management established this fund to account for traffic fine revenues and disbursements according to City Code 19-84. Capital Projects Funds Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds. Community Development Grant Projects Fund - This fund is used to account for community improvements throughout the City funded primarily by federal and state grants. Gross Receipts Tax 2012 Bond Projects Fund – This fund is used to account for capital projects that are funded with proceeds from GRT bonds issued in 2012. Governmental Capital Projects Fund – This fund is used to account for capital projects that are funded with transfers from the general fund. Airport Construction Grant Projects Fund – This fund is used to account for airport capital projects funded primarily by federal and state grants. Debt Service Fund The debt service fund is used to account for the accumulation of resources and payment of revenue bond principal and interest from gross receipts tax sources. 58 ---PAGE BREAK--- (Continued) Gross Parks/ Receipts Park Library Recreation Tax Development Gifts and Gifts and Parks Fees Grants Grants ASSETS: Pooled cash and investments $ 1,312,724 $ 380,763 $ 296,566 $ 1,049,735 Accounts receivable - - - 5,316 Intergovernmental receivable 436,649 - - 10,256 Due from other funds 112,492 - - - Total assets $ 1,861,865 $ 380,763 $ 296,566 $ 1,065,307 LIABILITIES: Accounts payable $ 17,753 $ - $ 15,460 $ 5,181 Deferred revenue - - - - Accrued wages payable 51,307 - - 16,902 Due to other funds - - - - Total liabilities 69,060 - 15,460 22,083 FUND BALANCES: Restricted to: Police - - - - Fire - - - - Lodgers promotion - - - - Capital projects - - - - Debt service - - - - Committed to: Police - - - - Parks, recreation, cultural affairs 1,792,805 380,763 - - Assigned to: Parks, recreation, cultural affairs - - - 1,043,224 Library - - 281,106 - Capital projects - - - - Total fund balances 1,792,805 380,763 281,106 1,043,224 Total liabilities and fund balances $ 1,861,865 $ 380,763 $ 296,566 $ 1,065,307 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2012 The notes to the financial statements are an integral part of this statement. 59 ---PAGE BREAK--- (Continued) State Museum Police Region II COPS Gifts and Lodgers' Protection Narcotics Program Grants Tax Grant Grant Grant ASSETS: Pooled cash and investments $ 180,497 $ 310,419 $ 28,413 $ 104,601 $ - Accounts receivable - - - - - Intergovernmental receivable - 195,073 - 108,387 88,529 Due from other funds - - - - - Total assets $ 180,497 $ 505,492 $ 28,413 $ 212,988 $ 88,529 LIABILITIES: Accounts payable $ 262 $ 15,722 $ - $ 36,153 $ - Deferred revenue - 62,146 - - 1,192 Accrued wages payable - 15,111 - 11,642 14,310 Due to other funds - - - 90,940 73,027 Total liabilities 262 92,979 - 138,735 88,529 FUND BALANCES: Restricted to: Police - - 28,413 - - Fire - - - - - Lodgers promotion - 412,513 - - - Capital projects - - - - - Debt service - - - - - Committed to: Police - - - 74,253 - Parks, recreation, cultural affairs - - - - - Assigned to: Parks, recreation, cultural affairs 180,235 - - - - Library - - - - - Capital projects - - - - - Total fund balances 180,235 412,513 28,413 74,253 - Total liabilities and fund balances $ 180,497 $ 505,492 $ 28,413 $ 212,988 $ 88,529 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2012 The notes to the financial statements are an integral part of this statement. 60 ---PAGE BREAK--- (Continued) Law Enforcement State Total Block Fire Penalty Special Grant Grant Assessment Revenue ASSETS: Pooled cash and investments $ 7,870 $ 230,311 $ 14,407 $ 3,916,306 Accounts receivable - - - 5,316 Intergovernmental receivable - - - 838,894 Due from other funds - - - 112,492 Total assets $ 7,870 $ 230,311 $ 14,407 $ 4,873,008 LIABILITIES: Accounts payable $ - $ - $ 14,407 $ 104,938 Deferred revenue 7,870 - - 71,208 Accrued wages payable - - - 109,272 Due to other funds - - - 163,967 Total liabilities 7,870 - 14,407 449,385 FUND BALANCES: Restricted to: Police - - - 28,413 Fire - 230,311 - 230,311 Lodgers promotion - - - 412,513 Capital projects - - - - Debt service - - - - Committed to: Police - - - 74,253 Parks, recreation, cultural affairs - - - 2,173,568 Assigned to: Parks, recreation, cultural affairs - - - 1,223,459 Library - - - 281,106 Capital projects - - - - Total fund balances - 230,311 - 4,423,623 Total liabilities and fund balances $ 7,870 $ 230,311 $ 14,407 $ 4,873,008 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2012 The notes to the financial statements are an integral part of this statement. 61 ---PAGE BREAK--- Community Gross Airport Total Development Receipts Tax Governmental Construction Total Nonmajor Grant 2012 Bond Capital Grant Capital Debt Governmental Projects Projects Projects Projects Projects Service Funds ASSETS: Pooled cash and investments $ 1,165,111 $ 8,983,372 $ 3,594,658 $ 42,731 $ 13,785,872 $ 189,304 $ 17,891,482 Accounts receivable - - - - - - 5,316 Intergovernmental receivable 65,502 - - - 65,502 - 904,396 Due from other funds - - - - - - 112,492 Total assets $ 1,230,613 $ 8,983,372 $ 3,594,658 $ 42,731 $ 13,851,374 $ 189,304 $ 18,913,686 LIABILITIES: Accounts payable $ 65,502 $ 50,364 $ - $ - $ 115,866 $ - $ 220,804 Deferred revenue - - - - - - 71,208 Accrued wages payable 3,180 - - - 3,180 - 112,452 Due to other funds - - - - - - 163,967 Total liabilities 68,682 50,364 - - 119,046 - 568,431 FUND BALANCES: Restricted to: Police - - - - - - 28,413 Fire - - - - - - 230,311 Lodgers promotion - - - - - - 412,513 Capital projects 1,161,931 8,933,008 - 42,731 10,137,670 - 10,137,670 Debt service - - - - - 189,304 189,304 Committed to: Police - - - - - - 74,253 Parks, recreation, cultural affairs - - - - - - 2,173,568 Assigned to: Parks, recreation, cultural affairs - - - - - - 1,223,459 Library - - - - - - 281,106 Capital projects - - 3,594,658 - 3,594,658 - 3,594,658 Total fund balances 1,161,931 8,933,008 3,594,658 42,731 13,732,328 189,304 18,345,255 Total liabilities and fund balances $ 1,230,613 $ 8,983,372 $ 3,594,658 $ 42,731 $ 13,851,374 $ 189,304 $ 18,913,686 Capital Projects CITY OF FARMINGTON, NEW MEXICO Combining Balance Sheet Nonmajor Governmental Funds June 30, 2012 The notes to the financial statements are an integral part of this statement. 62 ---PAGE BREAK--- (Continued) Parks/ Gross Park Library Recreation Receipts Tax Development Gifts and Gifts and Parks Fees Grants Grants REVENUES: Taxes: Gross receipts tax $ 2,667,164 $ - $ - $ - Lodgers' taxes - - - - Licenses and permits - 24,039 - - Intergovernmental - - 266,318 33,905 Charges for services - - - - Fines - - - - Investment earnings 5,809 2,478 1,725 7,547 Donations - - 49,005 335,603 Miscellaneous 201,100 - 230 322,766 Total revenues 2,874,073 26,517 317,278 699,821 EXPENDITURES: Current: Police operations - - - - Fire operations - - - - Parks, recreation and cultural affairs 2,094,112 - 134,060 603,057 Debt Service: Principal - - - - Interest - - - - Capital outlay: General government - - - - Parks, recreation and cultural affairs 563,835 5,131 - - Airport - - - - Highways and streets - - - - Total expenditures 2,657,947 5,131 134,060 603,057 Excess (deficiency) of revenues over (under) expenditures 216,126 21,386 183,218 96,764 OTHER FINANCING SOURCES (USES): Transfers in - - - - Transfers out (77,843) - - - Net GRT bonds issued - - - - Total other financing sources (uses) (77,843) - - - Net change in fund balances 138,283 21,386 183,218 96,764 Fund balances-beginning 1,654,522 359,377 97,888 946,460 Fund balances-ending $ 1,792,805 $ 380,763 $ 281,106 $ 1,043,224 Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2012 The notes to the financial statements are an integral part of this statement. 63 ---PAGE BREAK--- (Continued) State Museum Police Region II COPS Gifts and Lodgers' Protection Narcotics Program Grants Tax Grant Grant Grant REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ - $ - Lodgers' taxes - 1,242,912 - - - Licenses and permits - - - - - Intergovernmental - - 106,800 325,786 327,255 Charges for services 88,975 42,805 - - - Fines - - - - - Investment earnings 1,323 1,990 - - - Donations 14,995 - - - - Miscellaneous 799 839 539 56,598 - Total revenues 106,092 1,288,546 107,339 382,384 327,255 EXPENDITURES: Current: Police operations - - 78,926 443,993 327,255 Fire operations - - - - - Parks, recreation and cultural affairs 108,940 1,213,912 - - - Debt Service: Principal - - - - - Interest - - - - - Capital outlay: General government - - - - - Parks, recreation and cultural affairs - - - - - Airport - - - - - Highways and streets - - - - - Total expenditures 108,940 1,213,912 78,926 443,993 327,255 Excess (deficiency) of revenues over (under) expenditures (2,848) 74,634 28,413 (61,609) - OTHER FINANCING SOURCES (USES): Transfers in - - - 30,000 - Transfers out - - - - - Net GRT bonds issued - - - - - Total other financing sources (uses) - - - 30,000 - Net change in fund balances (2,848) 74,634 28,413 (31,609) - Fund balances-beginning 183,083 337,879 - 105,862 - Fund balances-ending $ 180,235 $ 412,513 $ 28,413 $ 74,253 $ - Special Revenue CITY OF FARMINGTON, NEW MEXICO Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2012 The notes to the financial statements are an integral part of this statement. 64 ---PAGE BREAK--- (Continued) Law Enforcement State Total Block Fire Penalty Special Grant Grant Assessment Revenue REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ 2,667,164 Lodgers' taxes - - - 1,242,912 Licenses and permits - - - 24,039 Intergovernmental 58,982 1,282,251 - 2,401,297 Charges for services - - - 131,780 Fines - - 165,559 165,559 Investment earnings - 6,142 - 27,014 Donations - - - 399,603 Miscellaneous 323 2,275 128 585,597 Total revenues 59,305 1,290,668 165,687 7,644,965 EXPENDITURES: Current: Police operations 59,653 - 165,705 1,075,532 Fire operations - 1,545,303 - 1,545,303 Parks, recreation and cultural affairs - - - 4,154,081 Debt Service: Principal - - - - Interest - - - - Capital outlay: General government - - - - Parks, recreation and cultural affairs - - - 568,966 Airport - - - - Highways and streets - - - - Total expenditures 59,653 1,545,303 165,705 7,343,882 Excess (deficiency) of revenues over (under) expenditures (348) (254,635) (18) 301,083 OTHER FINANCING SOURCES (USES): Transfers in - - - 30,000 Transfers out - (110,000) - (187,843) Net GRT bonds issued - - - - Total other financing sources (uses) - (110,000) - (157,843) Net change in fund balances (348) (364,635) (18) 143,240 Fund balances-beginning 348 594,946 18 4,280,383 Fund balances-ending $ - $ 230,311 $ - $ 4,423,623 Special Revenue CITY OF FARMINGTON, NEW MEXICO Nonmajor Governmental Funds For the Year Ended June 30, 2012 Combining Statement of Revenues, Expenditures and Changes in Fund Balances The notes to the financial statements are an integral part of this statement. 65 ---PAGE BREAK--- Community Gross Airport Total Development Receipts Tax Governmental Construction Total Nonmajor Grant 2012 Bond Capital Grant Capital Debt Governmental Projects Projects Projects Projects Projects Service Funds REVENUES: Taxes: Gross receipts tax $ - $ - $ - $ - $ - $ - $ 2,667,164 Lodgers' taxes - - - - - - 1,242,912 Licenses and permits - - - - - - 24,039 Intergovernmental 233,068 - - 1,065,555 1,298,623 - 3,699,920 Charges for services - - - - - - 131,780 Fines - - - - - - 165,559 Investment earnings 8,033 17,649 28,173 - 53,855 4,471 85,340 Donations - - - - - - 399,603 Miscellaneous 57 - - 9,131 9,188 - 594,785 Total revenues 241,158 17,649 28,173 1,074,686 1,361,666 4,471 9,011,102 EXPENDITURES: Current: Police operations - - - - - - 1,075,532 Fire operations - - - - - - 1,545,303 Parks, recreation and cultural affairs - - - - - - 4,154,081 Debt Service: Principal - - - - - 3,440,000 3,440,000 Interest - - - - - 258,145 258,145 Capital outlay: General government - - 255,568 - 255,568 - 255,568 Parks, recreation and cultural affairs - 50,364 - - 50,364 - 619,330 Airport - - - 1,182,440 1,182,440 - 1,182,440 Highways and streets 672,830 - - - 672,830 - 672,830 Total expenditures 672,830 50,364 255,568 1,182,440 2,161,202 3,698,145 13,203,229 Excess (deficiency) of revenues over (under) expenditures (431,672) (32,715) (227,395) (107,754) (799,536) (3,693,674) (4,192,127) OTHER FINANCING SOURCES (USES): Transfers in - - 3,645,233 72,500 3,717,733 3,847,667 7,595,400 Transfers out - (2,231,667) (329,383) - (2,561,050) - (2,748,893) Net GRT bonds issued - 11,197,390 - - 11,197,390 - 11,197,390 Total other financing sources (uses) - 8,965,723 3,315,850 72,500 12,354,073 3,847,667 16,043,897 Net change in fund balances (431,672) 8,933,008 3,088,455 (35,254) 11,554,537 153,993 11,851,770 Fund balances-beginning 1,593,603 - 506,203 77,985 2,177,791 35,311 6,493,485 Fund balances-ending $ 1,161,931 $ 8,933,008 $ 3,594,658 $ 42,731 $ 13,732,328 $ 189,304 $ 18,345,255 Capital Projects CITY OF FARMINGTON, NEW MEXICO Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2012 The notes to the financial statements are an integral part of this statement. 66 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Gross receipts taxes $ 2,466,323 $ 2,466,323 $ 2,673,231 $ 206,908 Investment earnings 10,000 10,000 5,809 (4,191) Miscellaneous 4,500 189,795 201,100 11,305 Total revenues 2,480,823 2,666,118 2,880,140 214,022 EXPENDITURES: Current: Parks, Recreation and Cultural Affairs 2,153,138 2,167,654 2,086,038 81,616 Capital Outlay: Park Construction 423,000 608,295 553,966 54,329 Total expenditures 2,576,138 2,775,949 2,640,004 135,945 Excess (deficiency) of revenues over (under) expenditures (95,315) (109,831) 240,136 $ 349,967 OTHER FINANCING SOURCES (USES): Transfers out - (77,844) (77,843) 1 Net change in fund balances (95,315) (187,675) 162,293 $ 349,968 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (6,067) Change in accounts payable (17,943) (24,010) GAAP BASIS CHANGE IN FUND BALANCES 138,283 Fund balances-beginning 1,654,522 1,654,522 1,654,522 Fund balances-ending $ 1,559,207 $ 1,466,847 $ 1,792,805 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Gross Receipts Tax Parks Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 67 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Licenses and permits $ 40,000 $ 40,000 $ 24,039 $ (15,961) Investment earnings 8,000 8,000 2,478 (5,522) Total revenues 48,000 48,000 26,517 (21,483) EXPENDITURES: Capital Outlay: Park Construction 48,000 48,000 5,131 42,869 Total expenditures 48,000 48,000 5,131 42,869 Excess (deficiency) of revenues over (under) expenditures - - 21,386 $ 21,386 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable - GAAP BASIS CHANGE IN FUND BALANCES 21,386 Fund balances-beginning 359,377 359,377 359,377 Fund balances-ending $ 359,377 $ 359,377 $ 380,763 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Park Development Fees Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 68 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 20,000 $ 20,000 $ 266,318 $ 246,318 Investment earnings 2,500 2,500 1,725 (775) Donations 15,000 15,000 49,005 34,005 Miscellaneous 250 250 230 (20) Total revenues 37,750 37,750 317,278 279,528 EXPENDITURES: Current: Parks, recreation and cultural affairs 138,000 128,000 113,606 14,394 Excess (deficiency) of revenues over (under) expenditures (100,250) (90,250) 203,672 $ 293,922 ADJUSTMENTS TO GAAP: Change in accounts payable (20,454) GAAP BASIS CHANGE IN FUND BALANCES 183,218 Fund balances-beginning 97,888 97,888 97,888 Fund balances-ending $ (2,362) $ 7,638 $ 281,106 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Library Gifts and Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Non-GAAP Budgetary Basis Budget to Actual The notes to the financial statements are an integral part of this statement. 69 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 29,000 $ 29,000 $ 31,088 $ 2,088 Investment earnings 9,000 9,000 7,547 (1,453) Donations 291,200 367,450 335,603 (31,847) Miscellaneous 108,750 319,597 317,697 (1,900) Total revenues 437,950 725,047 691,935 (33,112) EXPENDITURES: Current: Parks, recreation and cultural affairs 437,950 725,047 597,915 127,132 Excess (deficiency) of revenues over (under) expenditures - - 94,020 $ 94,020 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable 7,886 Change in accounts payable (5,142) 2,744 GAAP BASIS CHANGE IN FUND BALANCES 96,764 Fund balances-beginning 946,460 946,460 946,460 Fund balances-ending $ 946,460 $ 946,460 $ 1,043,224 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Parks/Recreation Gifts and Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 70 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 6,000 $ 6,000 $ 2,929 $ (3,071) Charges for services 118,750 118,750 88,975 (29,775) Investment earnings - - 1,323 1,323 Donations 31,000 31,000 14,995 (16,005) Miscellaneous 5,000 5,000 799 (4,201) Total revenues 160,750 160,750 109,021 (51,729) EXPENDITURES: Current: Parks, recreation and cultural affairs 160,750 160,750 108,940 51,810 Excess (deficiency) of revenues over (under) expenditures - - 81 $ 81 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (2,929) GAAP BASIS CHANGE IN FUND BALANCES (2,848) Fund balances-beginning 183,083 183,083 183,083 Fund balances-ending $ 183,083 $ 183,083 $ 180,235 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Museum Gifts and Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 71 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Lodgers' taxes $ 1,183,900 $ 1,235,675 $ 1,235,675 $ - Charges for services - 42,673 42,805 132 Investment earnings 8,000 8,000 1,990 (6,010) Miscellaneous 8,100 8,100 839 (7,261) Total revenues 1,200,000 1,294,448 1,281,309 (13,139) EXPENDITURES: Current: Parks, recreation and cultural affairs 1,200,000 1,294,448 1,251,640 42,808 Excess (deficiency) of revenues over (under) expenditures - - 29,669 $ 29,669 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable 7,237 Change in accounts payable 37,728 44,965 GAAP BASIS CHANGE IN FUND BALANCES 74,634 Fund balances-beginning 337,879 337,879 337,879 Fund balances-ending $ 337,879 $ 337,879 $ 412,513 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Lodgers' Tax Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 72 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 106,800 $ 106,800 $ 106,800 $ - Miscellaneous - - 539 539 Total revenues 106,800 106,800 107,339 539 EXPENDITURES: Current: Police operations 106,800 106,800 78,926 27,874 Excess (deficiency) of revenues over (under) expenditures - - 28,413 $ 28,413 ADJUSTMENTS TO GAAP: Change in accounts payable - GAAP BASIS CHANGE IN FUND BALANCES 28,413 Fund balances-beginning - - - Fund balances-ending $ - $ - $ 28,413 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO State Police Protection Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 73 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 433,759 $ 433,759 $ 366,241 $ (67,518) Miscellaneous 24,567 24,567 44,424 19,857 Total revenues 458,326 458,326 410,665 (47,661) EXPENDITURES: Current: Public safety 486,219 486,219 443,993 42,226 Excess (deficiency) of revenues over (under) expenditures (27,893) (27,893) (33,328) (5,435) OTHER FINANCING SOURCES (USES): Transfers in 30,000 30,000 30,000 - Net change in fund balances 2,107 2,107 (3,328) $ (5,435) ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (28,281) GAAP BASIS CHANGE IN FUND BALANCES (31,609) Fund balances-beginning 105,862 105,862 105,862 Fund balances-ending $ 107,969 $ 107,969 $ 74,253 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Region II Narcotics Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 74 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 318,990 $ 331,215 $ 331,216 $ 1 EXPENDITURES: Current: Public safety 318,990 331,215 327,255 3,960 Excess (deficiency) of revenues over (under) expenditures - - 3,961 $ 3,961 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (6,085) Change in deferred revenue 2,124 (3,961) GAAP BASIS CHANGE IN FUND BALANCES - Fund balances-beginning - - - Fund balances-ending $ - $ - $ - Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO COPS Program Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual Non-GAAP Budgetary Basis For the Year Ended June 30, 2012 The notes to the financial statements are an integral part of this statement. 75 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 66,500 $ 66,500 $ 53,902 $ (12,598) Investment earnings 500 500 222 (278) Miscellaneous - - 101 101 Total revenues 67,000 67,000 54,225 (12,775) EXPENDITURES: Current: Public safety 67,000 67,000 59,653 7,347 Excess (deficiency) of revenues over (under) expenditures - - (5,428) $ (5,428) ADJUSTMENTS TO GAAP: Change in deferred revenue 5,080 GAAP BASIS CHANGE IN FUND BALANCES (348) Fund balances-beginning 348 348 348 Fund balances-ending $ 348 $ 348 $ - Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Law Enforcement Block Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 76 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 472,238 $ 1,652,783 $ 1,205,895 $ (446,888) Investment earnings 5,000 5,000 6,142 1,142 Miscellaneous 462 462 2,275 1,813 Total revenues 477,700 1,658,245 1,214,312 (443,933) EXPENDITURES: Current: Fire operations 367,700 2,050,839 1,545,303 505,536 Excess (deficiency) of revenues over (under) expenditures 110,000 (392,594) (330,991) 61,603 OTHER FINANCING SOURCES (USES): Transfers in - 23,000 - (23,000) Transfers out (110,000) (110,000) (110,000) - Total other financing sources (uses) (110,000) (87,000) (110,000) (23,000) Net change in fund balances - (479,594) (440,991) $ 38,603 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (23,644) Change in deferred revenue 100,000 GAAP BASIS CHANGE IN FUND BALANCES (364,635) Fund balances-beginning 594,946 594,946 594,946 Fund balances-ending $ 594,946 $ 115,352 $ 230,311 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO State Fire Grant Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 77 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Fines $ 200,000 $ 200,000 $ 165,559 $ (34,441) Miscellaneous - - 128 128 Total Revenues 200,000 200,000 165,687 (34,313) EXPENDITURES: Current: Public safety 200,000 200,000 166,556 33,444 Excess (deficiency) of revenues over (under) expenditures - - (869) $ (869) ADJUSTMENTS TO GAAP: Change in accounts payable 851 GAAP BASIS CHANGE IN FUND BALANCES (18) Fund balances-beginning 18 18 18 Fund balances-ending $ 18 $ 18 $ - Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Penalty Assessment Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 78 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 2,262,839 $ 2,502,839 $ 486,334 $ (2,016,505) Investment earnings - - 8,033 8,033 Miscellaneous 900,000 900,000 57 (899,943) Total revenues 3,162,839 3,402,839 494,424 (2,908,415) EXPENDITURES: Capital Outlay: Highways and Streets 3,162,839 3,428,497 924,931 2,503,566 Excess (deficiency) of revenues over (under) expenditures - (25,658) (430,507) $ (404,849) ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (253,266) Change in accounts payable 252,101 (1,165) GAAP BASIS CHANGE IN FUND BALANCES (431,672) Fund balances-beginning 1,593,603 1,593,603 1,593,603 Fund balances-ending $ 1,593,603 $ 1,567,945 $ 1,161,931 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Community Development Grant Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 79 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Investment earnings $ - $ - $ 17,649 $ 17,649 EXPENDITURES: Capital Outlay: General Government - 9,000,000 - 9,000,000 Total expenditures - 9,000,000 - Excess (deficiency) of revenues over (under) expenditures - (9,000,000) 17,649 9,017,649 OTHER FINANCING SOURCES (USES): Transfers out - (2,231,670) (2,231,667) 3 Net GRT bonds issued - 11,231,670 11,197,390 (34,280) Total other financing sources and uses - 9,000,000 8,965,723 (34,277) Net change in fund balances - - 8,983,372 $ 8,983,372 ADJUSTMENTS TO GAAP: Change in accounts payable (50,364) GAAP BASIS CHANGE IN FUND BALANCES 8,933,008 Fund balances-beginning - - - Fund balances-ending $ - $ - $ 8,933,008 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Gross Receipts Tax 2012 Bond Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual Non-GAAP Budgetary Basis For the Year Ended June 30, 2012 The notes to the financial statements are an integral part of this statement. 80 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Investment earnings $ - $ - $ 28,173 $ 28,173 EXPENDITURES: Capital Outlay: General Government 3,335,600 3,312,996 255,568 3,057,428 Excess (deficiency) of revenues over (under) expenditures (3,335,600) (3,312,996) (227,395) 3,085,601 OTHER FINANCING SOURCES (USES): Transfers in 3,051,600 3,645,233 3,645,233 - Transfers out - (329,728) (329,383) 345 Total other financing sources and uses 3,051,600 3,315,505 3,315,850 345 Net change in fund balances (284,000) 2,509 3,088,455 $ 3,085,946 ADJUSTMENTS TO GAAP: Change in accounts payable - GAAP BASIS CHANGE IN FUND BALANCES 3,088,455 Fund balances-beginning 506,203 506,203 506,203 Fund balances-ending $ 222,203 $ 508,712 $ 3,594,658 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Governmental Capital Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 81 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental $ 2,162,500 $ 2,162,500 $ 1,281,039 $ (881,461) Miscellaneous - - 9,131 9,131 Total revenues 2,162,500 2,162,500 1,290,170 (872,330) EXPENDITURES: Capital Outlay: Airport 2,235,000 2,235,000 1,323,436 911,564 Excess (deficiency) of revenues over (under) expenditures (72,500) (72,500) (33,266) 39,234 OTHER FINANCING SOURCES (USES): Transfers in 72,500 72,500 72,500 - Net change in fund balances - - 39,234 $ 39,234 ADJUSTMENTS TO GAAP: Change in intergovernmental receivable (215,484) Change in accounts payable 140,996 (74,488) GAAP BASIS CHANGE IN FUND BALANCES (35,254) Fund balances-beginning 77,985 77,985 77,985 Fund balances-ending $ 77,985 $ 77,985 $ 42,731 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Airport Construction Grant Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual Non-GAAP Budgetary Basis For the Year Ended June 30, 2012 The notes to the financial statements are an integral part of this statement. 82 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) REVENUES: Investment earnings $ 8,500 $ 8,500 $ 4,471 $ (4,029) EXPENDITURES: Debt Service: Principal 1,370,000 3,440,000 3,440,000 - Interest 281,000 442,670 258,145 184,525 Total expenditures 1,651,000 3,882,670 3,698,145 184,525 Excess (deficiency) of revenues over (under) expenditures (1,642,500) (3,874,170) (3,693,674) 180,496 OTHER FINANCING SOURCES (USES): Transfers in 1,616,000 3,847,670 3,847,667 Net change in fund balances (26,500) (26,500) 153,993 $ 180,493 ADJUSTMENTS TO GAAP: Change in receivables - GAAP BASIS CHANGE IN FUND BALANCES: 153,993 Fund balances-beginning 35,311 35,311 35,311 Fund balances-ending $ 8,811 $ 8,811 $ 189,304 Budgeted Amounts CITY OF FARMINGTON, NEW MEXICO Debt Service Fund Schedule of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2012 Budget to Actual Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 83 ---PAGE BREAK--- Connie Mack World Series Token - 1965 84 ---PAGE BREAK--- Internal Service Fund Internal Service Fund ---PAGE BREAK--- Internal Service Fund Internal service funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City on a cost reimbursement basis. Health Insurance Fund - This fund is used to account for the City's self insurance for employee health insurance claims. 85 ---PAGE BREAK--- Variance with Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for services $ 6,181,000 $ 9,322,028 $ 8,731,917 $ (590,111) Operating expenses: Costs of services 6,181,000 8,568,159 8,567,064 1,095 Operating income (loss) - 753,869 164,853 (589,016) Nonoperating revenues (expenses): Investment earnings - - 16 16 Income (loss) before transfers - 753,869 164,869 (589,000) Transfers in - 396,965 396,962 Change in net assets - 1,150,834 561,831 $ (589,003) RECONCILIATION TO GAAP BASIS: Change in accounts receivable 475,247 Change in accounts payable (11,940) Change in accrued claims payable (152,318) 310,989 GAAP BASIS CHANGE IN NET ASSETS 872,820 Total net assets-beginning (1,401,126) (1,401,126) (1,401,126) Total net assets-ending $ (1,401,126) $ (250,292) $ (528,306) CITY OF FARMINGTON, NEW MEXICO Budgeted Amounts For the Year Ended June 30, 2012 Schedule of Revenues, Expenses and Changes in Fund Net Assets Health Insurance Non-GAAP Budgetary Basis The notes to the financial statements are an integral part of this statement. 86 ---PAGE BREAK--- Enterprise Funds Enterprise Funds ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Electric Utility Enterprise Fund For the Year Ended June 30, 2012 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Electric $ 98,080,364 $ 98,080,364 $ 94,674,682 $ (3,405,682) Other revenues 594,900 594,900 1,117,367 522,467 Total operating revenues 98,675,264 98,675,264 95,792,049 (2,883,215) Operating expenses: Salaries and fringe benefits 11,939,405 12,241,636 10,871,390 1,370,246 Purchased power, fuel and chemicals 44,772,187 44,772,187 40,607,489 4,164,698 Other operating expenses 18,284,543 18,284,543 17,887,107 397,436 Capital outlay 24,678,755 24,678,755 13,096,611 11,582,144 Total operating expenses 99,674,890 99,977,121 82,462,597 17,514,524 Operating income (999,626) (1,301,857) 13,329,452 14,631,309 Nonoperating revenues (expenses): Investment earnings 1,008,000 1,008,000 569,730 (438,270) Revenue from grants - - 27,840 27,840 Interest expense (376,121) (376,121) (339,184) 36,937 Principal on debt service (4,870,956) (4,870,956) (4,870,956) - Total nonoperating revenues (expenses) (4,239,077) (4,239,077) (4,612,570) (373,493) Income (loss) before operating transfers (5,238,703) (5,540,934) 8,716,882 14,257,816 Capital contributions 2,000,000 2,000,000 2,324,536 324,536 Transfers out (8,140,386) (8,223,261) (8,223,261) - Change in net assets (11,379,089) (11,764,195) 2,818,157 $ 14,582,352 ADJUSTMENTS TO GAAP Depreciation (13,509,426) Amortization 143,731 Capital outlay capitalized 13,096,611 Principal on debt service 4,870,956 Change in accounts receivable (121,642) Change in accounts payable (1,352,639) 3,127,591 5,945,748 Total net assets-beginning 319,389,158 319,389,158 319,389,158 Total net assets-ending $ 308,010,069 $ 307,624,963 $ 325,334,906 The notes to the financial statements are an integral part of this statement. GAAP BASIS CHANGE IN NET ASSETS 87 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Water Utility Enterprise Fund For the Year Ended June 30, 2012 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Water $ 13,507,260 $ 13,507,260 $ 13,863,810 $ 356,550 Other revenues - - 19,777 19,777 Total operating revenues 13,507,260 13,507,260 13,883,587 376,327 Operating expenses: Salaries and fringe benefits 692,469 700,138 703,150 (3,012) Other operating expenses 6,995,936 7,180,010 6,717,168 462,842 Capital outlay 6,092,914 7,160,761 3,358,826 3,801,935 Total operating expenses 13,781,319 15,040,909 10,779,144 4,261,765 Operating income (274,059) (1,533,649) 3,104,443 4,638,092 Nonoperating revenues (expenses): Investment earnings 115,000 115,000 56,527 (58,473) NMFA loan proceeds 242,483 242,483 - (242,483) Revenue from operating grants 250,000 750,000 284,789 (465,211) Interest expense (84,759) (92,673) (79,063) 13,610 Principal on debt service (1,051,088) (1,101,088) (1,051,088) 50,000 Total nonoperating revenues (expenses) (528,364) (86,278) (788,835) (702,557) Income (loss) before operating transfers (802,423) (1,619,927) 2,315,608 3,935,535 Transfers out (648,900) (669,183) (694,231) (25,048) Change in net assets (1,451,323) (2,289,110) 1,621,377 $ 3,910,487 ADJUSTMENTS TO GAAP Depreciation (1,870,935) Amortization 31,015 Capital outlay capitalized 3,358,826 Principal on debt service 1,051,088 Change in accounts receivable 134,744 Change in accounts payable (33,067) 2,671,671 4,293,048 Total net assets-beginning 49,291,660 49,291,660 49,291,660 Total net assets-ending $ 47,840,337 $ 47,002,550 $ 53,584,708 The notes to the financial statements are an integral part of this statement. GAAP BASIS CHANGE IN NET ASSETS 88 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Wastewater Utility Enterprise Fund For the Year Ended June 30, 2012 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Wastewater $ 6,272,361 $ 6,272,361 $ 6,435,148 $ 162,787 Other revenues 2,000 2,000 44 (1,956) Total operating revenues 6,274,361 6,274,361 6,435,192 160,831 Operating expenses: Salaries and fringe benefits 352,304 357,198 297,124 60,074 Other operating expenses 4,051,338 4,171,338 3,818,004 353,334 Capital outlay 4,903,706 5,150,625 650,175 4,500,450 Total operating expenses 9,307,348 9,679,161 4,765,303 4,913,858 Operating income (3,032,987) (3,404,800) 1,669,889 5,074,689 Nonoperating revenues (expenses): Intergovernmental-environmental tax 1,233,162 1,233,162 1,336,593 103,431 Investment earnings 204,000 204,000 59,494 (144,506) Interest expense (354,429) (354,429) (353,348) 1,081 Principal on debt service (784,648) (784,648) (784,648) - Total nonoperating revenues (expenses) 298,085 298,085 258,091 (39,994) Income (loss) before operating transfers (2,734,902) (3,106,715) 1,927,980 5,034,695 Capital contributions - - 87,921 87,921 Transfers out (325,000) (325,000) (320,833) 4,167 Change in net assets (3,059,902) (3,431,715) 1,695,068 $ 5,126,783 ADJUSTMENTS TO GAAP Depreciation (1,383,102) Amortization 5,104 Capital outlay capitalized 650,175 Principal on debt service 784,648 Change in accounts receivable 33,181 Change in accounts payable 15,075 105,081 1,800,149 Total net assets-beginning 22,511,897 22,511,897 22,511,897 Total net assets-ending $ 19,451,995 $ 19,080,182 $ 24,312,046 The notes to the financial statements are an integral part of this statement. GAAP BASIS CHANGE IN NET ASSETS 89 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Sanitation Enterprise Fund For the Year Ended June 30, 2012 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Sanitation $ 5,189,091 $ 5,266,051 $ 5,311,494 $ 45,443 Other revenues 90,000 90,000 99,898 9,898 Total operating revenues 5,279,091 5,356,051 5,411,392 55,341 Operating expenses: Salaries and fringe benefits 2,645 2,726 2,804 (78) Other operating expenses 5,002,448 5,079,408 5,041,801 37,607 Total operating expenses 5,005,093 5,082,134 5,044,605 37,529 Operating income 273,998 273,917 366,787 92,870 Nonoperating revenues (expenses): Investment earnings 30,900 30,900 13,303 (17,597) Change in net assets 304,898 304,817 380,090 $ 75,273 ADJUSTMENTS TO GAAP Depreciation (4,739) Change in accounts receivable 11,103 Change in accounts payable (51,374) (45,010) 335,080 Total net assets-beginning 1,410,783 1,410,783 1,410,783 Total net assets-ending $ 1,715,681 $ 1,715,600 $ 1,745,863 The notes to the financial statements are an integral part of this statement. GAAP BASIS CHANGE IN NET ASSETS 90 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO Schedule of Revenues, Expenses and Changes in Fund Net Assets Budget to Actual Non-GAAP Budgetary Basis Golf Course Enterprise Fund For the Year Ended June 30, 2012 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Operating revenues: Charges for sales and services: Golf $ 1,306,700 $ 1,192,500 $ 1,041,478 $ (151,022) Other revenues 134 134 977 843 Total operating revenues 1,306,834 1,192,634 1,042,455 (150,179) Operating expenses: Salaries and fringe benefits 701,418 602,465 602,200 265 Other operating expenses 613,416 544,616 495,809 48,807 Capital outlay - 22,604 22,259 345 Total operating expenses 1,314,834 1,169,685 1,120,268 49,417 Operating income (8,000) 22,949 (77,813) (100,762) Nonoperating revenues (expenses): Investment earnings 8,000 8,000 66 (7,934) Interest expense - - (7,368) (7,368) Total nonoperating revenues (expenses) 8,000 8,000 (7,302) (15,302) Income (loss) before operating transfers - 30,949 (85,115) (116,064) Transfer in - 100,448 100,103 (345) Transfer out - (3,483) (3,482) 1 Change in net assets - 127,914 11,506 $ (116,408) ADJUSTMENTS TO GAAP Depreciation (58,061) Capital outlay capitalized 22,259 Reassignment of capital assets (574,137) Change in accounts receivable 547 Change in accounts payable 6,389 (603,003) (591,497) Total net assets-beginning 2,295,890 2,295,890 2,295,890 Total net assets-ending $ 2,295,890 $ 2,423,804 $ 1,704,393 The notes to the financial statements are an integral part of this statement. GAAP BASIS CHANGE IN NET ASSETS 91 ---PAGE BREAK--- Farmington Electric Light & Power - 1919 92 ---PAGE BREAK--- Capital Assets- Governmental Funds Capital Assets- Governmental Funds ---PAGE BREAK--- 2012 2011 Governmental funds capital assets Land $ 27,315,201 $ 26,893,367 Buildings 64,249,610 63,209,127 Improvements other than buildings 24,239,296 23,762,736 Machinery and equipment 32,766,286 30,220,849 Infrastructure 62,352,844 61,401,106 Construction In Progress 5,023,374 2,352,792 Total governmental funds capital assets $ 215,946,611 $ 207,839,977 Investments in governmental funds capital assets by source General fund $ 66,443,625 $ 62,368,590 Special revenue fund 108,495,781 105,721,189 Capital projects funds 38,038,636 37,508,494 Donations 2,968,569 2,241,704 Total governmental funds capital assets $ 215,946,611 $ 207,839,977 CITY OF FARMINGTON, NEW MEXICO Capital Assets Used in the Operation of Governmental Funds Comparative Schedules By Source June 30, 2012 and 2011 93 ---PAGE BREAK--- Improvements Machinery Construction Other than and In Function and Activity Land Buildings Buildings Equipment Infrastructure Progress Total GENERAL GOVERNMENT Legislative $ 4,000 $ - $ - $ 33,693 $ - $ - $ 37,693 Judicial - - - 140,032 - 56,656 196,688 Operations center - (15,211) - 496,769 - - 481,558 Fleet maintenance - 10,505 - 387,871 - 15,296 413,672 Stores - 38,467 270,135 260,234 - - 568,836 Finance administration - - - 6,520 - - 6,520 Personnel administration - - - 206,200 - 62,194 268,394 Purchasing - - - 64,805 - - 64,805 Law enforcement - - - - - - - Administrative services 1,588,818 12,526,103 37,057 1,565,068 - 771,649 16,488,695 Planning and zoning - - - 52,403 - - 52,403 Data processing - 50,347 - 1,136,518 - 61,715 1,248,580 Total general government 1,592,818 12,610,211 307,192 4,350,113 - 967,510 19,827,844 PUBLIC SAFETY Police 532,769 3,632,229 77,532 6,466,893 - 11,881 10,721,304 Fire 60,098 3,401,561 33,151 8,406,727 - 181,972 12,083,509 Inspection - - - 229,749 - - 229,749 Traffic - - - 468,887 2,984,751 169,804 3,623,442 Total public safety 592,867 7,033,790 110,683 15,572,256 2,984,751 363,657 26,658,004 PUBLIC WORKS/COMMUNITY DEVELOPMENT Streets 16,156,420 33,970 2,704,184 2,374,972 38,529,382 2,525,509 62,324,437 Bridges & Storm Drains 92,885 - 451,953 540,421 20,347,943 434,297 21,867,499 Administration 1,001,147 142,924 63,362 36,891 490,768 (108,798) 1,626,294 Survey - - - 140,975 - - 140,975 Engineering - - - 125,585 - - 125,585 Total public works/community development 17,250,452 176,894 3,219,499 3,218,844 59,368,093 2,851,008 86,084,790 CULTURE AND RECREATION Parks and recreation 4,074,255 19,577,172 10,886,971 5,786,405 - 539,910 40,864,713 Civic center 92,174 3,184,154 - 346,296 - - 3,622,624 Senior citizens center 250,627 1,276,019 37,161 210,040 - - 1,773,847 Museum 1,057,979 4,829,906 134,173 184,849 - - 6,206,907 Animal shelter 132,393 399,911 - 386,440 - 50,364 969,108 Total culture and recreation 5,607,428 29,267,162 11,058,305 6,914,030 - 590,274 53,437,199 LIBRARIES 1,391,668 8,686,494 106,000 932,976 - - 11,117,138 AIRPORT 879,968 6,475,059 9,437,617 1,778,067 - 250,925 18,821,636 Total governmental funds capital assets $ 27,315,201 $ 64,249,610 $ 24,239,296 $ 32,766,286 $ 62,352,844 $ 5,023,374 $ 215,946,611 This schedule presents the capital asset balances related to governmental funds. There are no capital assets for the internal service funds. CITY OF FARMINGTON, NEW MEXICO Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity For the Year Ended June 30, 2012 94 ---PAGE BREAK--- Capital Assets Capital Assets Function and Activity June 30, 2011 Additions Deductions Net Transfers June 30, 2012 GENERAL GOVERNMENT Legislative $ 37,693 $ - $ - $ - $ 37,693 Judicial 140,032 56,656 - - 196,688 Operations center 436,271 58,684 (72,081) 58,684 481,558 Fleet maintenance 586,504 63,371 (215,987) (20,216) 413,672 Stores 568,836 - - - 568,836 Finance administration 6,520 - - - 6,520 Personnel administration 206,200 62,194 - - 268,394 Purchasing 64,805 - - - 64,805 Law enforcement 22,210 - (22,210) - - Administrative services 15,866,116 932,542 (248,704) (61,259) 16,488,695 Planning and zoning 52,403 - - - 52,403 Data processing 1,059,738 243,616 (54,774) - 1,248,580 Total general government 19,047,328 1,417,063 (613,756) (22,791) 19,827,844 PUBLIC SAFETY Police 10,231,395 651,905 (161,996) - 10,721,304 Fire 10,852,032 1,282,680 (51,203) - 12,083,509 Inspection 188,791 20,479 - 20,479 229,749 Traffic 3,738,621 330,881 (298,439) (147,621) 3,623,442 Total public safety 25,010,839 2,285,945 (511,638) (127,142) 26,658,004 PUBLIC WORKS/COMMUNITY DEVELOPMENT Streets 60,901,074 2,842,154 (1,545,933) 127,142 62,324,437 Bridges and storm drains 19,733,896 2,323,738 (190,135) - 21,867,499 Administration 1,717,654 271 (91,631) - 1,626,294 Survey 140,975 - - - 140,975 Engineering 125,585 - - - 125,585 Total public works/community development 82,619,184 5,166,163 (1,827,699) 127,142 86,084,790 CULTURE AND RECREATION Parks and recreation 39,293,576 927,750 (105,677) 749,064 40,864,713 Civic center 3,629,924 - (7,300) - 3,622,624 Senior citizens center 1,773,847 - - - 1,773,847 Museum 6,178,522 29,842 (10,433) 8,976 6,206,907 Animal Shelter 1,274,960 134,748 (463,391) 22,791 969,108 Total culture and recreation 52,150,829 1,092,340 (586,801) 780,831 53,437,199 LIBRARIES 11,301,434 - (184,296) - 11,117,138 AIRPORT 17,710,363 1,818,614 (707,341) - 18,821,636 Total governmental funds capital assets $ 207,839,977 $ 11,780,125 $ (4,431,531) $ 758,040 $ 215,946,611 Accumulated depreciation $ 109,519,320 $ 9,005,763 $ (1,204,125) $ 183,903 $ 117,504,861 CITY OF FARMINGTON, NEW MEXICO Capital Assets Used in the Operation of Governmental Funds Schedule of Changes By Function and Activity For the fiscal year ended June 30, 2012 95 ---PAGE BREAK--- Farmington Fire Truck - 1924 96 ---PAGE BREAK--- STATISTICAL SECTION STATISTICAL SECTION ---PAGE BREAK--- STATISTICAL SECTION This part of the City of Farmington’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Page Financial Trends 98 These schedules contain trend information to help the reader understand how the City’s financial performance and well-being have changed over time. Revenue Capacity 103 These schedules contain information to help the reader assess the City’s most significant revenue sources - gross receipts tax and electricity sales. Also included are property tax schedules. Debt Capacity 114 These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. Demographic and Economic Information 118 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place. Operating Information 120 The schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. 97 ---PAGE BREAK--- City of Farmington Schedule 1 Net Assets by Component Last Ten Fiscal Years (accrual basis of accounting) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Restated Restated Restated Governmental activities Invested in capital assets, net of related debt 63,961,010 $ 64,779,550 $ 66,265,472 $ 74,339,304 $ 75,000,933 $ 74,066,951 $ 82,050,200 $ 94,776,714 $ 91,574,976 $ 83,813,002 $ Restricted 2,678,373 2,422,104 3,514,726 4,219,427 4,491,602 4,599,840 4,085,917 4,195,660 2,630,553 10,998,211 Unrestricted 20,619,682 20,610,228 25,149,317 24,559,417 22,873,893 21,548,521 20,137,410 20,043,161 31,572,545 34,265,211 Total governmental activities net assets 87,259,065 $ 87,811,882 $ 94,929,515 $ 103,118,148 $ 102,366,428 $ 100,215,312 $ 106,273,527 $ 119,015,535 $ 125,778,074 $ 129,076,424 $ Business-type activities Invested in capital assets, net of related debt 151,976,725 $ 194,430,074 $ 215,390,130 $ 227,625,271 $ 240,380,428 $ 263,888,952 $ 290,777,764 $ 299,184,651 $ 309,610,312 $ 316,889,337 $ Restricted 2,643,773 2,648,557 2,564,255 2,615,937 2,914,976 3,139,945 3,438,741 3,657,082 5,243,850 4,852,866 Unrestricted 41,559,635 18,361,816 16,535,576 30,290,166 45,749,953 54,174,692 59,170,526 75,894,328 80,045,226 84,939,713 Total business-type activities net assets 196,180,133 $ 215,440,447 $ 234,489,961 $ 260,531,374 $ 289,045,357 $ 321,203,589 $ 353,387,031 $ 378,736,061 $ 394,899,388 $ 406,681,916 $ Primary government Invested in capital assets, net of related debt 215,937,735 $ 259,209,624 $ 281,655,602 $ 301,964,575 $ 315,532,250 $ 340,276,555 $ 372,827,964 $ 393,961,365 $ 401,185,288 $ 400,702,339 $ Restricted 5,322,146 5,070,661 6,078,981 6,835,364 7,406,578 7,739,785 7,524,658 7,852,742 7,874,403 15,851,077 Unrestricted 62,179,317 38,972,044 41,684,893 54,849,583 68,623,846 77,309,002 79,307,936 95,937,489 111,617,771 119,204,924 Total primary government net assets 283,439,198 $ 303,252,329 $ 329,419,476 $ 363,649,522 $ 391,411,785 $ 421,418,901 $ 459,660,558 $ 497,751,596 $ 520,677,462 $ 535,758,340 $ Source: City of Farmington CAFRs Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. In 2007, a prior period adjustment was made to adjust capital outlay in the Airport fund. In 2008, a prior period adjustment was made to adjust general fund accumulated depreciation and accrued compensated absences. In 2009, a prior period adjustment was made to adjust governmental and business-type net assets. In 2010, the city added airport services to governmental activities which had previously been accounted for as a business-type activity. In 2012, the city added Civitan golf course to governmental activities which had previously been accounted for as a business-type activity. Fiscal Year 98 ---PAGE BREAK--- City of Farmington Schedule 2 Changes in Net Assets Last Ten Fiscal Years (continued) (accrual basis of accounting) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Expenses Governmental activities: General government 17,191,605 $ 23,996,456 $ 21,153,411 $ 21,649,221 $ 24,470,791 $ 24,773,909 $ 30,738,756 $ 25,732,424 $ 29,114,460 $ 32,642,985 $ Police 10,251,979 10,341,396 11,351,590 12,356,592 15,029,695 16,405,749 14,551,370 14,918,275 15,021,697 15,645,349 Fire 4,906,661 5,468,824 5,470,572 6,466,886 7,606,467 8,702,072 9,461,309 8,808,809 8,665,126 9,595,679 Parks, recreation, cultural affairs 8,392,730 9,284,623 9,497,875 11,105,380 13,769,347 15,479,059 8,959,793 13,349,714 13,714,785 14,251,614 Public works/community development 7,395,603 5,727,834 7,481,297 8,511,853 10,776,798 11,857,265 2,144,831 8,425,359 10,800,128 11,044,820 Interest on long term debt 560,368 483,230 421,480 588,521 511,126 468,360 423,713 377,304 328,280 288,476 Total governmental activities expenses 48,698,946 55,302,363 55,376,225 60,678,453 72,164,224 77,686,414 66,279,772 71,611,885 77,644,476 83,468,923 Business-type activities: Electric 68,903,423 65,214,544 72,914,727 65,152,992 66,341,885 79,473,997 75,669,922 75,094,411 77,933,334 84,423,504 Water 7,180,833 6,785,002 6,944,219 6,992,577 7,207,259 6,854,699 7,670,708 8,540,615 8,662,030 9,368,428 Wastewater 3,488,296 4,127,386 4,983,626 4,690,385 5,274,284 5,227,357 5,066,171 5,263,247 5,674,564 5,829,583 Sanitation 3,358,430 3,493,487 3,625,722 3,815,728 4,002,806 4,130,295 4,404,269 4,393,018 5,318,445 5,100,718 Golf 1,060,103 1,198,867 1,209,293 1,217,011 1,164,683 1,312,463 1,331,765 1,285,065 1,468,586 1,157,049 Airport 1,563,162 2,008,715 1,871,508 1,812,263 1,604,506 1,557,946 1,639,916 - - - Total business-type activities expenses 85,554,247 82,828,001 91,549,095 83,680,956 85,595,423 98,556,757 95,782,751 94,576,356 99,056,959 105,879,282 Total primary government expenses 134,253,193 $ 138,130,364 $ 146,925,320 $ 144,359,409 $ 157,759,647 $ 176,243,171 $ 162,062,523 $ 166,188,241 $ 176,701,435 $ 189,348,205 $ Program Revenues Governmental activities: Charges for services: General government 4,892,278 $ 5,085,210 $ 5,019,939 $ 5,379,345 $ 6,906,273 $ 7,008,648 $ 6,420,991 $ 8,003,589 $ 8,866,978 $ 11,555,443 $ Police 15,132 74,215 198,017 39,903 1,266,550 1,366,974 1,483,251 1,518,646 1,185,576 1,200,529 Parks, recreation, cultural affairs 530,669 552,114 545,461 703,731 888,618 831,845 884,964 844,503 838,839 1,094,483 Public works/community development 68,155 77,390 75,116 101,605 95,485 86,766 67,296 58,237 50,940 61,644 Operating grants and contributions 1,276,299 2,674,803 2,238,291 2,929,307 2,600,396 3,623,209 4,242,763 4,090,058 6,243,941 3,546,860 Capital grants and contributions - - - - - - - 4,228,018 3,442,981 1,298,623 Total governmental activities program revenues 6,782,533 8,463,732 8,076,824 9,153,891 11,757,322 12,917,442 13,099,265 18,743,051 20,629,255 18,757,582 Business-type activities: Charges for services: Electric 79,130,644 84,158,287 91,152,321 89,801,858 91,704,560 102,193,403 97,122,636 94,173,433 91,451,673 95,742,961 Water 7,073,545 7,515,514 7,338,869 7,991,740 8,688,421 10,783,517 11,052,694 12,324,629 12,897,358 14,025,394 Wastewater 4,239,721 4,489,948 4,751,802 5,071,951 5,214,261 6,240,272 6,910,478 7,445,521 6,163,722 6,475,468 Sanitation 3,392,079 3,538,632 3,692,937 3,889,876 4,051,998 4,228,681 4,774,637 5,007,853 5,092,625 5,423,632 Golf 933,981 1,042,176 1,088,137 1,121,313 1,113,328 1,146,652 1,167,456 1,106,499 1,019,226 1,043,005 Airport 564,237 596,765 599,306 594,199 601,675 540,360 464,337 - - - Operating grants and contributions 1,151,196 916,477 880,654 927,492 1,227,869 1,585,215 5,826,268 12,949,631 6,282,404 2,706,388 Capital grants and contributions 1,025,342 154,309 625,693 794,531 495,436 2,617,273 1,050,875 - - - Total business-type activities program revenues 97,510,745 102,412,108 110,129,719 110,192,960 113,097,548 129,335,373 128,369,381 133,007,566 122,907,008 125,416,848 Total primary government program revenues 104,293,278 $ 110,875,840 $ 118,206,543 $ 119,346,851 $ 124,854,870 $ 142,252,815 $ 141,468,646 $ 151,750,617 $ 143,536,263 $ 144,174,430 $ Source: City of Farmington CAFRs Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. In 2010, the city added airport services to governmental activities which had previously been accounted for as a business-type activity. In 2012, the city added Civitan Golf Course operations to governmental activities which had previously been accounted for as a business-type activity. Fiscal Year In 2009, Community Development was seperated from Public works. For reporting purposes, Community development expenses and revenues are reported together in 2009 and prior years. Beginning in 2010, only Public works expenses and revenues are reported and Community Development data is combined with General government. 99 ---PAGE BREAK--- City of Farmington Schedule 2 Changes in Net Assets Last Ten Fiscal Years (accrual basis of accounting) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Net (Expenses)/Revenues Governmental activities (41,916,413) $ (46,838,631) $ (47,299,401) $ (51,524,562) $ (60,406,902) $ (64,768,972) $ (53,180,507) $ (52,868,834) $ (57,015,221) $ (64,711,341) $ Business-type activities 11,956,498 19,584,107 18,580,624 26,512,004 27,502,125 30,778,616 32,586,630 38,431,210 23,850,049 19,537,566 Total primary governmental activities expenses (29,959,915) $ (27,254,524) $ (28,718,777) $ (25,012,558) $ (32,904,777) $ (33,990,356) $ (20,593,877) $ (14,437,624) $ (33,165,172) $ (45,173,775) $ General Revenues and Other Changes in Net Assets Governmental activities: Taxes Gross receipts taxes 35,146,693 $ 38,351,092 $ 43,134,352 $ 49,274,220 $ 51,818,982 $ 54,401,730 $ 52,406,771 $ 44,760,879 $ 47,605,170 $ 50,432,706 $ Property taxes 930,112 985,836 1,043,064 1,121,723 1,235,064 1,330,285 1,550,503 1,556,401 1,806,123 1,687,900 Franchise taxes 2,601,794 715,022 720,748 1,594,098 1,045,698 992,050 865,346 649,388 614,627 2,325,998 Other taxes 1,724,672 1,884,994 1,873,736 1,942,024 1,944,810 2,124,381 1,992,189 2,048,944 1,828,644 1,982,191 Other revenue 3,769,728 3,584,543 3,507,135 2,996,953 1,199,675 1,386,242 1,789,230 1,782,477 1,541,494 1,601,517 Unrestricted investment earnings 635,745 429,108 471,993 858,611 1,064,838 962,448 701,039 405,946 364,522 257,782 Loss on disposition (1,904,487) - - - - - (1,381,262) - - - Transfers (132,000) 1,440,853 1,754,818 1,925,566 1,346,115 1,420,720 1,923,630 14,406,807 10,017,180 9,721,597 Total governmental activities 42,772,257 47,391,448 52,505,846 59,713,195 59,655,182 62,617,856 59,847,446 65,610,842 63,777,760 68,009,691 Business-type activities: Environmental taxes - - - - - - - - 1,258,718 1,333,554 Unrestricted investment earnings 1,478,800 1,117,060 790,027 1,454,975 2,357,973 2,800,336 2,128,575 1,324,627 1,071,740 633,005 Loss on disposition - - - - - - (1,013,059) - - - Transfers 132,000 (1,440,853) (1,754,818) (1,925,566) (1,346,115) (1,420,720) (1,923,630) (14,406,807) (10,017,180) (9,721,597) Total business-type activities 1,610,800 (323,793) (964,791) (470,591) 1,011,858 1,379,616 (808,114) (13,082,180) (7,686,722) (7,755,038) Total primary government 44,383,057 $ 47,067,655 $ 51,541,055 $ 59,242,604 $ 60,667,040 $ 63,997,472 $ 59,039,332 $ 52,528,662 $ 56,091,038 $ 60,254,653 $ Change in Net Assets Governmental activities 855,844 $ 552,817 $ 5,206,445 $ 8,188,633 $ (751,720) $ (2,151,116) $ 6,666,939 $ 12,742,008 $ 6,762,539 $ 3,298,350 $ Business-type activities 13,567,298 19,260,314 17,615,833 26,041,413 28,513,983 32,158,232 31,778,516 25,349,030 16,163,327 11,782,528 Total primary government 14,423,142 $ 19,813,131 $ 22,822,278 $ 34,230,046 $ 27,762,263 $ 30,007,116 $ 38,445,455 $ 38,091,038 $ 22,925,866 $ 15,080,878 $ Source: City of Farmington CAFRs Note: The city began reporting accrual information with the implementation of GASB Statement 34 in fiscal year 2002. In 2010, the city added airport services to governmental activities which had previously been accounted for as a business-type activity. In 2011, the city has moved Environmental taxes from program revenues to business-type activities. Fiscal Year In 2009, Community Development was seperated from Public works. For reporting purposes, Community development expenses and revenues are reported together in 2009 and prior years. Beginning in 2010, only Public works expenses and revenues are reported and Community Development data is combined with General government. 100 ---PAGE BREAK--- City of Farmington Fund Balances, Governmental Funds Last Ten Fiscal Years Schedule 3 (modified accrual basis of accounting) General Fund Fiscal Year Reserved Unreserved Nonspendable Unassigned Total 2003 2,256,852 $ 11,452,345 $ - $ - $ 13,709,197 $ 2004 2,000,000 12,126,852 - - 14,126,852 2005 3,393,756 13,069,276 - - 16,463,032 2006 4,138,050 14,594,072 - - 18,732,122 2007 4,386,101 12,808,778 - - 17,194,879 2008 4,439,851 8,187,413 - - 12,627,264 2009 4,160,353 7,311,344 - - 11,471,697 2010 4,307,676 8,623,808 - - 12,931,484 2011 - - 600,102 18,449,727 19,049,829 2012 - - 504,602 18,216,147 18,720,749 All Other Governmental Funds Fiscal Year Reserved Unreserved Restricted Committed Assigned Total 2003 421,521 $ 8,325,643 $ - $ - $ - $ 8,747,164 $ 2004 422,104 8,483,376 - - - 8,905,480 2005 283,833 12,415,332 - - - 12,699,165 2006 287,735 10,113,568 - - - 10,401,303 2007 310,848 10,293,948 - - - 10,604,796 2008 328,475 14,881,860 - - - 15,210,335 2009 81,902 14,721,397 - - - 14,803,299 2010 84,648 13,249,388 - - - 13,334,036 2011 - - 2,642,207 13,434,068 1,733,634 17,809,909 2012 - - 10,998,211 12,815,182 5,099,223 28,912,616 Source: City of Farmington CAFRs business-type activity. In 2011, the city implemented GASB Statement 54, which changed the classfications of fund balances in the governmental funds. Prior year amounts have not been restated for the implementation of Statement 54. In 2012, the city added Civitan Golf Course operations to governmental activities which had previously been accounted for as a business-type activity. Note: In 2010, the city added airport services to governmental activities which had previously been accounted for as a 101 ---PAGE BREAK--- City of Farmington Schedule 4 Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Revenues Taxes 40,403,271 $ 41,936,943 $ 46,771,900 $ 53,932,065 $ 56,044,554 $ 58,848,446 $ 56,705,030 $ 48,954,845 $ 51,685,802 $ 56,484,330 $ Licenses and permits 605,478 602,971 819,869 951,280 765,694 794,169 618,877 693,743 606,378 671,676 Intergovernmental 1,869,860 2,674,803 2,238,291 2,929,307 2,600,396 3,623,207 4,242,763 8,318,076 9,686,922 5,320,909 Charges for services 978,022 1,170,531 1,365,408 1,840,336 1,637,437 1,769,334 1,749,034 2,557,192 2,506,687 2,849,685 Fines 1,403,928 1,602,721 1,418,646 1,133,053 1,222,171 1,341,297 1,431,718 1,491,288 1,171,028 1,183,536 Special assessments 72,337 61,327 46,859 36,370 39,943 18,591 6,667 600 1,970 22 Investment earnings 634,552 425,731 469,012 858,611 1,064,838 962,448 701,039 402,421 364,660 257,782 Miscellaneous 1,341,924 1,317,524 1,221,761 876,250 1,199,675 1,386,242 1,789,230 1,782,477 1,541,494 1,601,517 Total revenues 47,309,372 49,792,551 54,351,746 62,557,272 64,574,708 68,743,734 67,244,358 64,200,642 67,564,941 68,369,457 Expenditures Current General government 12,757,384 13,801,711 15,247,239 18,478,746 18,715,493 18,153,620 18,766,806 16,970,629 17,895,393 20,407,349 Police 10,359,890 10,690,905 10,647,826 12,606,701 14,678,179 15,536,666 14,636,567 14,588,008 14,892,808 15,709,376 Fire 4,719,878 5,416,395 5,097,630 5,872,350 7,265,724 8,298,829 8,654,998 8,281,693 8,279,658 10,068,829 Parks, recreation and cultural affairs 15,061,168 10,285,641 10,482,092 11,128,612 12,765,857 14,551,969 13,828,963 11,795,902 12,200,221 12,863,218 Community development 7,116,935 6,357,491 7,186,770 7,182,068 7,262,150 7,147,609 1,336,120 1,100,251 1,218,263 1,296,445 Public works - - - - - - 1,049,097 5,510,298 6,276,055 6,572,566 Debt service Principal 1,815,000 1,900,000 1,965,000 1,060,000 1,130,000 1,180,000 1,225,000 1,270,000 1,315,000 3,440,000 Interest 560,368 483,230 421,480 588,521 512,905 470,217 425,643 379,342 330,393 258,145 Capital outlay 1,505,876 1,722,060 4,653,660 6,844,613 4,924,265 4,787,620 10,807,397 9,425,646 4,580,112 6,927,790 Total expenditures 53,896,499 50,657,433 55,701,697 63,761,611 67,254,573 70,126,530 70,730,591 69,321,769 66,987,903 77,543,718 Excess of revenues over (under) expenditures (6,587,127) (864,882) (1,349,951) (1,204,339) (2,679,865) (1,382,796) (3,486,233) (5,121,127) 577,038 (9,174,261) Other Financing Sources (Uses) Operating transfers in 104,810 2,539,337 2,856,182 3,000,104 3,288,811 7,168,448 7,935,092 7,798,162 12,142,893 16,753,124 Operating transfers out (844,310) (1,098,484) (1,101,365) (1,824,537) (1,942,696) (5,747,728) (6,011,462) (2,686,511) (2,125,713) (8,002,626) Sale tax debt issuance - - 5,725,000 - - - - - - 11,197,390 Total other financing sources and uses (739,500) 1,440,853 7,479,817 1,175,567 1,346,115 1,420,720 1,923,630 5,111,651 10,017,180 19,947,888 Net change in fund balance (7,326,627) $ 575,971 $ 6,129,866 $ (28,772) $ (1,333,750) $ 37,924 $ (1,562,603) $ (9,476) $ 10,594,218 $ 10,773,627 $ Debt service as a percentage of noncapital expenditures 5.8% 5.4% 5.1% 3.3% 2.7% 2.6% 3.0% 2.8% 2.6% 5.4% Source: City of Farmington CAFRs Note: In 2009, the city separated public works from community development. In 2010, the city added airport services to governmental activities which had previously been accounted for as a business-type activity. In 2012, the city added Civitan Golf Course operations to governmental activities which had previously been accounted for as a business-type activity. Fiscal Year 102 ---PAGE BREAK--- City of Farmington Schedule 5 Electric Kilowatt Sales and Revenue Last Ten Fiscal Years Fiscal Year kWh Revenue kWh Revenue kWh Revenue kWh Revenue 2003 490,068,660 24,593,325 $ 351,385,467 30,891,854 $ 213,197,135 18,692,226 $ 1,054,651,262 74,177,405 $ 2004 504,889,336 28,194,450 362,458,230 31,193,172 221,192,493 18,937,000 1,088,540,059 78,324,622 2005 498,093,821 28,445,687 378,001,503 33,376,202 223,336,276 19,829,050 1,099,431,600 81,650,939 2006 537,362,745 26,418,370 415,275,503 34,213,205 236,844,321 19,789,570 1,189,482,569 80,421,145 2007 551,421,402 27,422,114 429,127,945 36,550,017 248,119,606 21,419,197 1,228,668,953 85,391,328 2008 512,182,632 28,575,487 439,341,791 39,610,098 262,763,630 23,886,685 1,214,288,053 92,072,270 2009 490,347,580 30,035,752 441,145,350 42,395,101 264,384,359 25,663,036 1,195,877,289 98,093,889 2010 417,626,366 25,322,092 433,338,579 40,087,647 272,352,709 25,726,777 1,123,317,654 91,136,516 2011 431,217,761 26,310,371 428,923,446 39,524,535 271,478,836 25,481,033 1,131,620,043 91,315,939 2012 449,719,960 27,120,532 435,918,516 40,833,661 274,403,890 25,778,554 1,160,042,366 93,732,747 Change 2003-2012 -8.2% 10.3% 24.1% 32.2% 28.7% 37.9% 10.0% 26.4% Source: Farmington Electric Utility System * Totals changed due to corrections made for classifications. Residential included Street Lighting, which should be included with Commercial. Industrial included Wholesale but was taken out. Wholesales is not included in any of the totals. Total * Industrial * Commercial * Residential 103 ---PAGE BREAK--- City of Farmington Schedule 6 Electric Rates by Customer Type As of June 30, 2012 Type of Customer Industrial (Bulk Power) $7.00/kW for demand charge $0.040/kWh first 500 per kW of billing demand is the energy charge $0.0310/kWh for all energy in excess of 500 per kW of billing demand Commercial General Service $4.50 Customer charge $0.0875/kWh first 400 kWh $0.0865/kWh additional kWh Large General Service $7.75/kW for demand charge $0.0540/kWh first 500 per kW of billing demand is the energy charge $0.040/kWh for all energy in excess of 500 kWh per kW of billing demand Residential $3.00 Customer charge $0.08/kWh first 200 kWh $0.0765/kWh additional kWh Street Lighting $7.75 100 W sodium 7/94 $11.75 100 W sodium 8/94 $14.00 250 W sodium 7/94 $14.75 250 W sodium 8/94 $7.75 175 W mercury $14.00 400 W mercury Source: Farmington Electric Utility System 104 ---PAGE BREAK--- City of Farmington Schedule 7 Electric Principal Revenue Payers Current Year and Nine Years Ago Percentage of Percentage of Customer Revenue Rank Revenue Revenue Rank Revenue Enterprise Field Services / EPFS 20,614,851 $ 1 21.99% 19,070,400 $ 1 25.71% Transwestern Pipeline / Enron 4,524,308 2 4.83% 1,748,596 4 2.36% Val Verde Gas Gathering, LP 2,994,207 3 3.19% - - - Praxair, Inc. 1,697,422 4 1.81% - - - San Juan Regional Medical Center 1,676,415 5 1.79% 936,332 6 1.26% ConocoPhillips / Burlington Resources Oil & Gas 1,243,282 6 1.33% 1,414,254 5 1.91% Wal-Mart/Sam's Club 1,056,915 7 1.13% 669,616 9 0.90% Western Refining Southwest, Inc. 999,972 8 1.07% 2,146,514 3 2.89% San Juan College 914,150 9 0.98% 832,345 7 1.12% Farmington Municipal Schools 903,263 10 0.96% 787,585 8 1.06% Duke Energy Field Services - - - 5,472,360 2 7.38% Animas Valley Mall - - - 470,826 10 0.63% Total 36,624,785 $ 39.07% 33,548,828 $ 45.23% Source: Farmington Electric Utility System 2012 2003 105 ---PAGE BREAK--- City of Farmington Schedule 8 Tax Revenues by Source, Governmental Funds Last Ten Fiscal Years Fiscal Year Gross Receipts Tax Property Tax Franchise Tax Other Taxes Total Taxes 2003 35,146,693 $ 930,112 $ 2,601,794 $ 1,724,672 $ 40,403,271 $ 2004 38,351,091 985,836 715,022 1,884,994 41,936,943 2005 43,134,352 1,043,064 720,748 1,873,736 46,771,900 2006 49,274,220 1,121,723 1,594,098 1,942,024 53,932,065 2007 51,818,982 1,235,064 1,045,698 1,944,810 56,044,554 2008 54,401,730 1,330,285 992,050 2,124,381 58,848,446 2009 52,406,771 1,440,724 865,346 1,992,189 56,705,030 2010 44,760,879 1,495,634 649,388 2,048,944 48,954,845 2011 47,605,170 1,637,361 614,627 1,828,644 51,685,802 2012 50,432,706 1,743,435 2,325,998 1,982,191 56,484,330 Change 2003-2012 43.5% 87.4% -10.6% 14.9% 39.8% Source: City of Farmington CAFRs Note: Prior to 2004, Payment in Lieu of Taxes (PILT) was reported in the Franchise Tax category. From 2004 to 2011, PILT was reported as an interfund transfer. Beginning in 2012, Electric PILT is included in Franchise Tax, while Water and Wastewater PILT are still reported as an interfund transfer. 106 ---PAGE BREAK--- City of Farmington Schedule 9 Taxable Gross Receipts by Industry Last Ten Fiscal Years (in thousands) Ending June 30 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Agriculture 2,002 $ 2,461 $ 2,726 $ 2,769 $ 3,325 $ 3,284 $ (2,519) $ 609 $ 612 $ 566 $ Mining 108,454 122,936 133,973 192,806 222,893 185,838 163,216 113,859 121,889 118,975 Construction 98,292 90,069 118,025 142,174 124,428 121,996 157,749 117,169 109,321 102,464 Manufacturing 27,001 33,015 50,656 78,377 69,509 86,755 79,094 57,270 73,713 119,218 Trans/Comm/Utility 24,178 15,481 20,096 33,026 26,547 32,545 30,259 24,207 22,033 18,627 Wholesale Trade 76,836 85,158 113,951 160,468 197,225 164,098 163,014 99,166 97,962 104,251 Retail Trade 668,134 653,535 673,785 634,152 717,121 753,122 772,111 675,796 676,094 683,041 Information and Cultural - 25,225 44,094 43,293 51,774 51,018 53,838 55,436 57,180 65,236 Finance/Ins/Real Estate 21,467 20,539 21,001 26,338 30,878 34,686 33,594 39,232 46,227 32,194 Services 365,245 464,410 507,610 506,892 537,818 580,933 601,162 502,840 579,917 597,330 Government - 2,240 1,920 - - - - - - - Unclassified 75,713 35,955 40,682 39,669 1,486 14,923 8,359 8,883 6,880 14,612 Undisclosed 33,493 30,835 28,708 26,503 26,258 28,647 31,054 28,235 29,402 28,629 Total 1,500,815 $ 1,581,859 $ 1,757,227 $ 1,886,467 $ 2,009,262 $ 2,057,845 $ 2,090,931 $ 1,722,702 $ 1,821,230 $ 1,885,143 $ City Direct Sales Tax Rate 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% 1.1875% Source: State of New Mexico Department of Taxation & Revenue distribution reports Note: Data has been suppressed for purposes of taxpayer confidentiality. Information is suppressed when too few taxpayers are included in a category. Although the figures in the table have been derived from "NM_FR003-500 Local Gov't Distribution Summary" issued by the State, the State suppresses revenue information in certain categories, if release of the information would compromise the confidentiality of an individual taxpayer. Accordingly, the "Taxable Gross Receipts Tax" totals in this table will differ from those in other tables. Beginning with the 1st Quarter of FY2004, the State changed the gross receipts tax classification system in the report NM_FR003-500 Local Gov't Distribution Summary, from the Standard Industrial Classification format to the North American Industrial Classification format. Effective January 2005, state legislation removed the state and local options gross receipts tax (GRT) from the sales of food and most health care services, by allowing retail food outlets and medical service providers to deduct qualifying food and heath services from gross receipts reported to the NM Taxation and Revenue Department. However, municipalities and counties' are "held harmless" and are reimbursed the local option GRT on these nontaxable items from the State of New Mexico. The financing of this reimbursement is provided by an increase State GRT of Although the "taxable gross receipts" column does not include food sales and health care services, the amounts reported as GRT collected by the City does include these items. 107 ---PAGE BREAK--- City of Farmington Schedule 10 Direct and Overlapping Gross Receipts Tax Rates Last Ten Fiscal Years Fiscal Year State GRT City Share of State GRT City Direct Rate San Juan County Total City GRT 2003 3.2750% 1.2250% 1.1875% 0.3750% 6.0625% 2004 3.2750% 1.2250% 1.1875% 0.6875% 6.3750% 2005 3.7750% 1.2250% 1.1875% 0.6875% 6.8750% 2006 3.7750% 1.2250% 1.1875% 0.8125% 7.0000% 2007 3.7750% 1.2250% 1.1875% 0.8125% 7.0000% 2008 3.7750% 1.2250% 1.1875% 0.8125% 7.0000% 2009 3.7750% 1.2250% 1.1875% 0.8125% 7.0000% 2010 3.7750% 1.2250% 1.1875% 0.8125% 7.0000% 2011 3.9000% 1.2250% 1.1875% 0.8125% 7.1250% 2012 3.9000% 1.2250% 1.1875% 0.8125% 7.1250% Source: State of New Mexico Taxation and Revenue Note: The Local Option Gross Receipts can be increased by enacting a City Ordinance. An increase to Gross Receipts Tax by either raising the Municipal Infrastructure Tax or implementing the Municipal Capital Outlay Tax requires an election. 108 ---PAGE BREAK--- City of Farmington Schedule 11 Taxable Gross Receipts Payers by Industry Current Year and Nine Years Ago Ending June 30 Number of Filers (12 Mth. Avg.) Percentage of Total Taxable Gross Receipts Percentage of Total Number of Filers (12 Mth. Avg.) Percentage of Total Taxable Gross Receipts Percentage of Total (thousands) (thousands) Agriculture 3 0.11% 566 $ 0.03% 5 0.18% 2,002 $ 0.13% Mining 60 2.15% 118,975 6.31% 68 2.49% 108,454 7.23% Construction 255 9.14% 102,464 5.44% 243 8.91% 98,292 6.55% Manufacturing 119 4.26% 119,218 6.32% 78 2.86% 27,001 1.80% Trans/Comm/Utility 36 1.29% 18,627 0.99% 54 1.98% 24,178 1.61% Wholesale Trade 183 6.56% 104,251 5.53% 173 6.34% 76,836 5.12% Retail Trade 632 22.64% 683,041 36.23% 672 24.63% 668,134 44.52% Information and Cultural 85 3.05% 65,236 3.46% - 0.00% - 0.00% Finance/Ins/Real Estate 123 4.41% 32,194 1.71% 94 3.45% 21,467 1.43% Services 1,265 45.32% 597,330 31.69% 1,052 38.56% 365,245 24.34% Unclassified 27 0.97% 14,612 0.78% 282 10.34% 75,713 5.04% Undisclosed 3 0.11% 28,629 1.52% 7 0.26% 33,493 2.23% Total 2,791 100.00% 1,885,143 $ 100.00% 2,728 100.00% 1,500,815 $ 100.00% Source: State of New Mexico Department of Taxation & Revenue distribution reports Note: Due to confidentiality issues, the names of the ten largest revenue payers are not available. The categories presented are intended to provide alternative information regarding the sources of the city's revenue. Data has been suppressed for purposes of taxpayer confidentiality. Information is suppressed when too few taxpayers are included in a category. Although the figures in the table have been derived from "NM_FR003-500 Local Gov't Distribution Summary" issued by the state, the state suppresses revenue information in certain categories if the release of information would compromise the confidentiality of an individual taxpayer. Accordingly, the "Taxable Gross Receipts Tax" totals in this table will differ from those in other tables. Beginning with the 1st Quarter of FY 2004, the State changed the gross receipts tax classification system in the report NM_FR003-500 Local Gov't Distribution Summary from the Standard Industrial Classification format to the North American Industrial Classification format. Effective January 2005, state legislation removed state gross receipts tax from groceries and healthcare, and held municipal gross receipts tax "harmless". Fiscal Year 2012 Fiscal Year 2003 109 ---PAGE BREAK--- City of Farmington Schedule 12 Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Fiscal Year Residential Property Nonresidential Personal Less: Tax-Exempt Property Total Taxable Assessed Value Total Direct Residential Tax Rate Total Direct Non Residential Tax Rate Estimated Actual Taxable Value Taxable Assessed Value as a Percentage of Actual Taxable Value 2003 355,058,558 $ 270,933,390 $ 65,556,230 $ 56,984,789 $ 634,563,389 $ 1.510 1.806 1,905,595,763 $ 33.3% 2004 373,904,326 279,329,944 66,969,671 59,092,903 661,111,038 1.526 1.850 1,985,318,432 33.3% 2005 414,565,770 290,602,457 69,183,296 61,710,344 712,641,179 1.496 1.877 2,140,063,601 33.3% 2006 449,119,354 300,261,150 72,774,277 61,449,809 760,704,972 1.511 1.877 2,284,399,315 33.3% 2007 518,861,269 343,707,380 80,889,474 67,559,512 875,898,611 1.434 1.824 2,630,326,159 33.3% 2008 556,752,058 354,591,302 88,159,370 68,326,659 931,176,071 1.457 1.879 2,796,324,538 33.3% 2009 593,088,155 431,154,946 86,031,112 88,515,732 1,021,758,481 1.438 1.908 3,068,343,787 33.3% 2010 597,619,324 368,371,078 82,532,302 92,000,870 956,521,834 1.457 1.950 2,872,437,940 33.3% 2011 638,666,041 483,155,959 75,061,549 213,971,715 982,911,834 1.419 2.128 2,951,687,189 33.3% 2012 662,894,115 503,391,149 66,717,175 224,872,472 1,008,129,967 1.431 2.225 3,027,417,318 33.3% Source: San Juan County Assessor's Office 110 ---PAGE BREAK--- City of Farmington Schedule 13 Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (rate per $1,000 of assessed value) Fiscal Year General Fund Debt Service Fund Total Direct Rate State County School District #5 San Juan College Secondary Vocational Total Direct and Overlapping Rates 2003 1.510 - 1.510 1.520 6.050 9.757 3.282 0.600 22.719 2004 1.526 - 1.526 1.028 6.661 9.794 3.342 0.600 22.951 2005 1.496 - 1.496 1.234 6.627 9.751 3.316 0.600 23.024 2006 1.511 - 1.511 1.291 6.737 9.800 3.371 0.600 23.310 2007 1.434 - 1.434 1.221 6.451 9.690 3.228 0.600 22.624 2008 1.457 - 1.457 1.250 6.567 9.725 3.283 0.600 22.882 2009 1.438 - 1.438 1.150 6.312 9.644 3.156 0.600 22.300 2010 1.457 - 1.457 1.530 6.425 9.673 3.212 0.600 22.897 2011 1.419 - 1.419 1.362 6.267 9.620 3.133 0.600 22.401 2012 1.431 - 1.431 1.360 6.326 9.751 3.162 0.420 22.450 Fiscal Year General Fund Debt Service Fund Total Direct Rate State County School District #5 San Juan College Secondary Vocational Total Direct and Overlapping Rates 2003 1.806 - 1.806 1.520 8.000 9.887 4.500 0.600 26.313 2004 1.850 - 1.850 1.028 8.500 9.943 4.500 0.600 26.421 2005 1.877 - 1.877 1.234 8.500 9.961 4.500 0.600 26.672 2006 1.925 - 1.925 1.291 8.500 9.934 4.500 0.600 26.750 2007 1.824 - 1.824 1.221 8.500 9.853 4.500 0.600 26.498 2008 1.879 - 1.879 1.250 8.500 9.902 4.500 0.600 26.631 2009 1.908 - 1.908 1.150 8.500 9.915 4.500 0.600 26.573 2010 1.950 - 1.950 1.530 8.500 9.921 4.500 0.600 27.001 2011 2.128 - 2.128 1.362 8.500 9.923 4.500 0.600 27.013 2012 2.225 - 2.225 1.360 8.500 9.924 4.500 0.420 26.929 Source: San Juan County Assessor's Office City of Farmington Residential Direct Rates City of Farmington Nonresidential Direct Rates Overlapping Rates Overlapping Rates 111 ---PAGE BREAK--- City of Farmington Schedule 14 Principal Property Tax Payers Current Year and Nine Years Ago Percentage of Percentage of Taxable Total City Taxable Taxable Total City Taxable Taxpayer Assessed Value Rank Assessed Value Assessed Value Rank Assessed Value Animas Valley Land and Water 17,422,215 $ 1 1.7% - $ - - Animas Valley Mall, LLC 9,962,605 2 1.0% 35,220,222 1 5.6% San Juan Regional Medical Center 4,186,125 3 0.4% - - - Plaza Farmington II LLC 3,822,249 4 0.4% 8,081,570 7 1.3% Burlington Resources Oil and Gas LP. 3,539,468 5 0.4% 17,417,579 5 2.7% Wal-Mart/Sam's Club 3,470,547 6 0.3% 11,425,089 4 1.8% San Juan Development Corporation 3,277,233 7 0.3% - - - Dugan Production Corp 2,861,314 8 0.3% - - - Lowe's Home Centers, Inc. 2,714,829 9 0.3% - - - Sierra Vista Hotels LLC 2,689,305 10 0.3% - - - Qwest Corp. - - - 20,253,196 2 3.2% Alltel - - - 11,777,894 3 1.9% SW Farmington Incorporated (The Inn) - - - 8,810,983 6 1.4% Fleet Capital Corp. - - - 7,047,646 8 1.1% Henry Production - - - 6,738,572 9 1.1% Hwy 550 LLC - - - 6,337,255 10 1.0% Total 53,945,890 $ 5.4% 133,110,006 $ 21.0% Source: San Juan County Assessor 2012 2003 112 ---PAGE BREAK--- City of Farmington Schedule 15 Property Tax Levies and Collections Last Ten Calendar Years Fiscal Year Ended June 30, Taxes Levied for the Fiscal Year Amount Percentage of Levy Collections in Subsequent Years Amount Percentage of Levy 2002 924,261 $ 874,028 $ 95% 50,230 $ 924,258 $ 100% 2003 960,169 926,305 96% 33,861 960,166 100% 2004 1,019,868 982,868 96% 36,966 1,019,834 100% 2005 1,095,869 1,055,826 96% 39,962 1,095,788 100% 2006 1,196,735 1,158,836 97% 37,598 1,196,434 100% 2007 1,307,275 1,257,590 96% 49,319 1,306,909 100% 2008 1,411,271 1,363,140 97% 46,273 1,409,413 100% 2009 1,482,596 1,415,035 95% 60,576 1,475,611 100% 2010 1,626,344 1,568,062 96% 37,370 1,605,432 99% 2011 1,701,071 1,641,482 96% - 1,641,482 96% Source: San Juan County Treasurer Note: Taxes are levied and collected by the County Treasurer and distributed to all taxing jurisdictions. The tax rate is requested by the City Council and set by the New Mexico Department of Finance and Administration. The State allows the rate to be set at 5% in excess of the requirements to allow for delinquencies. In 2012, this schedule was updated to show information for each "period for which levied" as defined in Statement 33. Collected Within the Fiscal Year of the Levy Total Collections to Date 113 ---PAGE BREAK--- City of Farmington Schedule 16 Ratios of Outstanding Debt by Type Last Ten Fiscal Years General Bonded Debt Fiscal Year General Obligation Bonds Percentage of Actual Taxable Value of Property Per Capita Sales Tax Revenue Bonds NMFA Fire Pumper Loan Utility Revenue Bonds NMED Loan NMFA Loan Capital Leases Total Primary Government Percentage of Personal Income Per Capita 2003 - $ N/A N/A 12,000,000 $ - $ 52,210,000 $ 9,488,786 $ - $ 373,369 $ 74,072,155 $ 9.6% 1,829 $ 2004 - N/A N/A 10,100,000 - 47,090,000 12,830,162 - 192,042 70,212,204 8.2% 1,696 2005 - N/A N/A 13,860,000 - 41,620,000 12,830,162 - 646,958 68,957,120 7.4% 1,630 2006 - N/A N/A 12,800,000 - 36,850,000 12,830,162 - 456,114 62,936,276 6.3% 1,457 2007 - N/A N/A 11,670,000 - 31,945,000 13,650,539 - 356,707 57,622,246 4.5% 1,322 2008 - N/A N/A 10,490,000 - 26,810,000 13,107,058 - 250,269 50,657,327 3.9% 1,194 2009 - N/A N/A 9,265,000 - 21,470,000 12,547,273 - 136,302 43,418,575 3.0% 1,018 2010 - N/A N/A 7,995,000 - 15,945,000 11,970,694 - 86,845 35,997,539 2.5% 829 2011 - N/A N/A 6,680,000 - 10,140,000 11,376,818 1,054,844 34,400 29,286,062 1.9% 638 2012 - N/A N/A 13,895,000 475,426 4,045,000 10,765,125 1,054,844 - 30,235,395 2.0% 668 Source: Details regarding the city's outstanding debt can be found in the notes to the financial statements. See Schedule 20 for personal income and population data. These ratios are calculated using personal income and population for the prior calendar year. Business-type Activities Governmental Activities 114 ---PAGE BREAK--- City of Farmington Schedule 17 Direct and Overlapping Governmental Activities Debt As of June 30, 2012 Governmental Unit Debt Outstanding Estimated Percentage Applicable Estimated Share of Direct and Overlapping Debt San Juan County - $ 30.320% - $ Farmington Public Schools 53,578,102 100.000% 53,578,102 San Juan College 16,858,679 30.322% 5,111,889 Subtotal Overlapping Debt 58,689,991 City direct debt 13,895,000 Total direct and overlapping debt 72,584,991 $ Source: Debt amounts are provided by each governmental unit. Note: Overlapping governments are those that coincide, at least in part, with geographic boundaries of the city. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the property taxpayers of the City of Farmington. This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the property taxpayers should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. 115 ---PAGE BREAK--- City of Farmington Schedule 18 Legal Debt Margin Information Last Ten Fiscal Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Assessed Valuations Assessed Value 577,578,600 $ 602,018,135 $ 650,930,835 $ 699,255,163 $ 808,339,099 $ 862,849,412 $ 933,242,749 $ 864,520,964 $ 768,940,119 $ 783,257,495 $ Add back - exempt property 56,984,789 59,092,903 61,710,344 61,449,809 67,559,512 68,326,659 88,515,732 92,000,870 213,971,715 224,872,472 Total Assessed Value 634,563,389 661,111,038 712,641,179 760,704,972 875,898,611 931,176,071 1,021,758,481 956,521,834 982,911,834 1,008,129,967 Legal Debt Margin Debt limitation - 4 % of total assessed value 25,382,536 27,134,479 28,505,647 30,428,199 35,035,944 37,247,043 40,870,339 38,260,873 39,316,473 40,325,199 Debt applicable to limitation: Total bonded debt 64,210,000 57,190,000 55,480,000 49,650,000 43,615,000 37,300,000 30,735,000 23,940,000 16,820,000 17,940,000 Less: Revenue bonds (64,210,000) (57,190,000) (55,480,000) (49,650,000) (43,615,000) (37,300,000) (30,735,000) (23,940,000) (16,820,000) (17,940,000) Total net debt applicable to limitation - - - - - - - - - - Legal Debt Margin 25,382,536 $ 27,134,479 $ 28,505,647 $ 30,428,199 $ 35,035,944 $ 37,247,043 $ 40,870,339 $ 38,260,873 $ 39,316,473 $ 40,325,199 $ Note: Excludes centrally assessed property. Source: Details regarding the city's revenue bonds can be found in the notes to the financial statements. See Schedule 12 for assessed valuation amounts. Fiscal Year 116 ---PAGE BREAK--- City of Farmington Schedule 19 Pledged-Revenue Coverage Last Ten Fiscal Years Fiscal Year Utility Service Less: Operating Net Available Sales Tax Charges Expenses Revenue Principal Interest Coverage Revenue Principal Interest Coverage 2003 91,914,248 $ 61,217,128 $ 30,697,120 $ 4,350,000 $ 2,726,755 $ 4.34 17,847,491 $ 1,815,000 $ 560,368 $ 7.51 2004 97,272,752 64,101,912 33,170,840 5,120,000 2,291,203 4.48 19,474,684 1,900,000 483,230 8.17 2005 104,017,779 73,226,886 30,790,893 5,470,000 2,048,221 4.10 21,903,624 1,965,000 421,480 9.18 2006 104,286,825 64,874,653 39,412,172 4,770,000 1,790,605 6.01 25,021,449 1,060,000 588,522 15.18 2007 107,924,587 65,220,228 42,704,359 4,905,000 1,647,505 6.52 26,313,679 1,130,000 512,904 16.02 2008 121,977,607 77,084,567 44,893,040 5,135,000 1,421,305 6.85 27,625,198 1,180,000 470,217 16.74 2009 117,183,511 73,688,514 43,494,997 5,340,000 1,215,905 6.63 26,612,158 1,225,000 425,643 16.12 2010 115,238,191 73,490,029 41,748,162 5,525,000 1,029,005 6.37 22,729,574 1,270,000 379,342 13.78 2011 111,560,052 75,470,531 36,089,521 5,805,000 752,755 5.50 24,173,905 1,315,000 330,393 14.69 2012 116,864,599 82,266,307 34,598,292 6,095,000 462,504 5.28 25,609,728 400,000 258,145 38.91 Source: City of Farmington CAFRs and Budgets Utility Revenue Bonds Sales Tax Revenue bonds 117 ---PAGE BREAK--- City of Farmington Schedule 20 Demographic and Economic Status Last Ten Calendar Years Population Personal Income Per Capita Personal Income Median Age School Enrollment Percentage High School Graduate Percentage Bachelor's Degree Unemployment Rate 2002 40,500 769,500,000 $ 19,000 $ 33.6 10,126 83.6% 19.7% 6.1% 2003 41,400 852,343,200 20,588 33.6 10,055 83.6% 19.7% 6.8% 2004 42,300 926,327,700 21,899 33.6 10,137 83.6% 19.7% 6.1% 2005 43,100 1,202,015,900 27,889 33.6 10,253 83.6% 19.7% 5.5% 2006 43,600 1,276,390,000 29,275 33.6 10,257 83.6% 19.7% 4.3% 2007 42,425 1,300,368,675 30,651 33.6 10,253 83.6% 19.7% 3.4% 2008 42,637 1,425,354,910 33,430 33.6 10,467 83.6% 19.7% 4.0% 2009 43,412 1,441,799,344 33,212 33.6 10,517 85.4% 20.3% 7.6% 2010 45,877 1,552,340,049 33,837 33.6 10,646 84.5% 19.7% 9.6% 2011 45,250 1,544,518,250 34,133 32.7 10,727 85.5% 19.9% 7.8% Sources: Statistical information prior to 2003 was obtained from City of Farmington Community Development mid-year staff estimate. Demographic information acquired from Bureau of Business and Economic Research, University of New Mexico, U.S. Census Bureau, and San Juan Economic Development Services. School enrollment provided by Farmington Municipal Schools as of the 40 day census. Unemployment information obtained from the New Mexico Department of Workforce Solutions. Calendar Year 118 ---PAGE BREAK--- City of Farmington Schedule 21 Principal Employers Current Year and Ten Years Ago Percentage of Percentage of Total City Total City Employer Employees Rank Employment Employees Rank Employment San Juan Regional Medical Center 1,520 1 2.7% 776 4 1.5% Central Consolidated Schools 1,223 2 2.2% 1,128 1 2.2% Farmington Public Schools 1,193 3 2.1% 1,090 2 2.1% BHP Billiton/New Mexico Coal 1,039 4 1.8% 854 3 1.7% City of Farmington 773 5 1.4% 596 5 1.2% Conoco Phillips 720 6 1.3% - - - San Juan County 700 7 1.2% 448 9 0.9% San Juan College 563 8 1.0% - - - Arizona Public Service 504 9 0.9% 565 7 1.1% Bloomfield Municipal Schools 432 10 0.8% 492 8 1.0% Public Service Co of NM - - - 567 6 1.1% Aztec Schools - - - 415 10 0.8% Total 8,667 15.3% 6,931 13.4% Source: San Juan Economic Development Service and the Farmington Chamber of Commerce; City of Farmington Program Budget - Staffing Analysis Section Note: Statistical data is representative of entire county as City data is not available. In 2009, this schedule was changed to a ten year variance to be in accordance with GASB Statement 44. 2012 2003 119 ---PAGE BREAK--- City of Farmington Schedule 22 Full-time-Equivalent City Government Employees by Function/Program Last Ten Fiscal Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 General Government Administration 37.5 37.5 38.5 39.5 40.5 72.5 79.5 77.5 70.5 71.5 Administrative Services 31.0 31.0 31.0 31.0 32.0 31.0 29.0 29.0 29.0 29.0 General Services 43.5 42.5 41.5 42.5 52.5 52.5 58.0 58.0 53.0 51.0 Police 148.5 148.5 148.5 159.5 172.5 174.5 165.5 165.0 165.0 163.0 Fire 73.0 73.0 73.0 82.0 96.0 96.0 95.0 95.0 91.0 92.0 Parks, Recreation and Cultural Affairs 112.0 114.0 114.0 118.0 124.0 104.0 106.0 106.0 96.0 97.0 Community Development 21.0 22.0 24.0 27.0 26.0 26.0 22.0 20.0 19.0 19.0 Public Works 47.0 46.0 46.0 46.0 48.0 49.0 50.0 50.0 46.0 46.0 Electric 135.0 135.0 144.0 146.0 166.0 177.0 178.0 172.0 175.0 178.0 Human Resources 10.0 10.0 10.0 11.0 11.0 12.0 12.0 12.0 11.0 11.0 Water/Wastewater 7.0 7.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 Golf 8.0 8.0 8.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 Total Employees 673.5 674.5 686.5 717.5 783.5 809.5 810.0 799.5 770.5 772.5 Source: City of Farmington Program Budget - Staffing Analysis Section, past ten years Note: Full-time-Equivalent includes all approved budgeted positions. In 2009, Public Works was separated from Community Development. For comparative purposes, the number of full time equivalents for each department was allocated retroactively. In 2010, Airport was combined with General Services. For comparative purposes, the number of full time equivalents for each department was allocated retroactively. Budgeted Full-Time-Equivalent Employees as of June 30 120 ---PAGE BREAK--- City of Farmington Schedule 23 Operating Indicators by Function/Program Last Ten Fiscal Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Restated Restated Restated Restated Restated Restated Restated Restated Restated General Government Total number of business registration/licenses 2,576 2,730 2,680 2,739 2,839 3,926 4,212 3,848 3,660 3,659 Police Police reports 7,177 6,512 6,636 6,254 6,500 6,770 7,723 7,894 6,731 8,218 Arrests 5,118 4,523 4,400 3,814 3,787 4,113 6,882 6,274 5,418 6,328 Traffic citations 26,147 22,274 17,473 16,263 18,982 24,449 24,586 27,372 13,058 21,638 Fire Structure fires 40 44 40 54 47 53 40 65 65 50 Vehicle fires 39 52 24 41 34 25 36 31 29 26 Brush/grass fires 51 64 76 119 48 58 45 48 47 72 Rubbish/dumpster fires 29 27 18 37 27 27 36 46 38 46 Other fires 39 45 28 59 43 53 46 34 32 33 Rescue/emergency medical calls 2,510 3,052 3,089 3,309 3,724 3,946 3,935 4,419 5,466 5,058 False alarms 198 200 151 239 230 318 310 307 379 349 Mutual aid given 77 95 87 96 100 90 45 12 20 16 Hazardous materials response 86 98 101 113 120 129 103 114 92 115 General hazard response 81 54 89 110 91 84 81 84 89 101 Other responses 1,010 1,013 1,181 1,280 1,358 1,603 1,666 925 729 1,785 Parks and Recreation Parks and recreation participants 310,076 304,701 299,248 309,546 305,279 349,042 438,179 494,845 606,384 592,154 Library Library Visits 247,983 327,505 410,690 427,831 436,629 503,148 517,452 530,119 468,455 455,516 Circulation 280,022 392,221 490,717 517,654 468,998 489,126 513,588 530,918 506,247 482,886 Number of computer users 55,656 67,532 69,403 117,516 120,483 125,210 131,295 126,215 102,443 94,424 Museum Patrons 57,782 52,314 64,572 75,427 71,332 65,784 97,003 81,366 108,156 106,506 Community Development Summary plats 43 38 89 77 71 66 63 54 54 61 Building permits issued 1,339 1,443 1,554 1,494 1,539 1,334 1,225 1,194 1,310 1,302 Permit valuation (in 47,827,308 54,288,877 76,647,366 99,406,673 68,119,054 82,560,865 66,119,298 49,316,168 44,138,834 47,275,559 Asphalt placed (sq.ft.) 96,798 123,514 83,727 132,216 88,582 103,006 129,349 139,464 119,745 96,370 Concrete placed (cu.yd.) 1,032 756 698 441 727 574 174 438 338 439 Electric Meter connections 9,201 9,478 9,265 9,387 8,769 8,484 7,956 8,329 7,650 8,413 Meter reads 558,859 554,291 561,898 541,090 559,121 510,751 505,471 512,488 517,339 518,238 Water/Wastewater Water treated (millions of gallons) 4,452 4,057 3,366 3,842 4,029 4,346 4,512 4,630 4,409 4,627 Effluent treated (millions of gallons) 1,832 1,781 1,858 1,881 2,057 1,906 1,894 1,845 1,864 1,856 New water meter installations 176 205 304 373 342 262 158 156 116 131 Golf Golf course participants 54,388 58,399 60,999 71,689 60,455 65,791 53,612 49,009 50,687 55,931 Airport Total enplanements 27,160 30,132 35,503 32,575 30,177 26,472 13,617 14,628 16,655 19,335 Transit Total Ridership 33,364 42,650 43,999 57,043 87,298 109,992 120,298 138,246 143,073 146,140 Source: Provided by various City Departments Note: Fluctuation in museum patronage is due to special exhibits. In 2012, 2003-2011 fire department statistics have been restated to show more accurate and detailed fire department responses. In 2011, Number of computer users was added. This item replaced Number of items in collection, which was not considered to be as meaningful of a measure. Data from fiscal years 2002 and 2003 was not available. In 2009, a full 12 months of participants in the newly opened Sycamore Park Community Center were included which resulted in the increase in participants when compared to previous years. In 2009, Civitan Golf Course was closed for remodel improvements which resulted in fewer golf course participants when compared to previous years. The 2008 concrete placed (cu. yd.) reported has been restated in 2009 to the correct figure. 121 ---PAGE BREAK--- City of Farmington Schedule 24 Capital Asset Statistics by Function/Program Last Ten Fiscal Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Restated Restated Restated Restated Restated Police Police stations 1 1 1 1 1 1 1 1 1 1 Sub-stations 3 3 3 3 3 4 4 4 4 4 Patrol vehicles 170 172 155 170 186 196 206 125 125 123 Fire stations 5 5 5 6 6 6 6 6 6 Parks and Recreation Developed acres 586 588 588 589 592 594 1,364 1,364 1,364 1,364 Undeveloped acres 1,273 1,282 1,289 1,288 1,285 1,283 309 309 309 270 Number of parks/facilities 77 79 80 80 80 80 87 88 88 88 Baseball/softball diamonds 24 24 25 25 24 24 23 23 23 23 Soccer/football fields 11 11 13 13 14 14 11 11 11 11 Number of golf courses 2 2 2 2 2 2 2 2 2 2 Community Development Streets (miles) 235 238 240 245 253 N/A 268 270 274 274 Highway (miles) 17 17 17 17 17 17 17 17 17 17 Streetlights 3,871 3,915 3,933 3,971 4,124 4,135 4,238 4,226 4,251 4,298 Traffic Signals 74 75 76 77 78 79 80 80 81 83 Water Water mains (miles) 318 325 330 336 336 340 340 340 340 340 Fire hydrants 2,010 2,154 2,296 2,360 2,400 2,470 2,500 2,511 2,556 2,560 Storage capacity (thousands of gallons) 24,300 24,300 24,300 24,300 24,300 24,300 24,860 24,860 26,860 26,860 Wastewater Sanitary sewers (miles) 195 199 203 207 233 233 233 233 233 233 Treatment capacity (thousands of gallons) 5,800 6,670 6,670 6,670 6,670 6,670 6,670 6,670 6,670 6,670 Transit - minibuses/vans 8 8 8 8 11 11 11 16 12 12 Source: Provided by various City Departments Note: The city implemented GASB Statement 34 infrastructure information in fiscal year 2002. In 2009, an audit of the number of streetlights was conducted and the figure was adjusted to actual. 2007-2011 have been restated due a correction of an error in the miles of existing sanitary sewer [a-b] In 2009, the number developed acres was redefined from previous years to include parks that are partially developed but still maintained by the Parks and Recreation Department. Conversely, this adjustment reduced the amount of undeveloped acres. In 2012, undeveloped acres decreased by 39.1 acres due to a land trade with the Farmington School District and the new BLM field office. In 2009, the number of parks/facilities was redefined to include all facilities maintained by the Parks and Recreation Department City-wide rather than just Parks and Recreation facilities. Fiscal Year 122 ---PAGE BREAK--- Single Audit Section Single Audit Section ---PAGE BREAK--- (Continued) CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2012 Grantor / Pass-through CFDA ID Number Number PROGRAM NAME Expenditures DIRECT PROGRAMS U.S. Department of Housing and Urban 14.218- Community Development Block Grants/Entitlement Grants CDBG B-01-MC-35-0005 100,759 CDBG B-11-MC-35-0005 364,926 U.S. Department of Justice 16.710-ARRA-Public Safety Partnership and Community Policing Grants COPS Grant - 2009RKWX0641 325,131 COPS Technology Grant - 2010CKWX0423 2,124 16.738-Edward Byrne Memorial Justice Assistance Grant Program 2009-DJ-BX-1498 2,172 2010-DJ-BX-0173 3,461 2011-DJ-BX-2957 54,021 Federal Bureau of Investigations FBI Cybercrime Task Force 6,538 Gang Task Force 21,248 U.S. Department of Transportation 20.106-Airport Improvement Program AIP Project No. 3-35-0016-031-2010 220,050 AIP Project No. 3-35-0016-032-2010 56,318 AIP Project No. 3-35-0016-034-2011 574,465 20.505-Metropolitan Transportation Planning Federal Transit - Metropolitan Transit Operations and Capital - Red Apple Transit NM-90-X098-00 267,530 NM-90-X104-00 233,319 NM-90-X091-00 7,919 20.500-ARRA-Federal Transit Capital Investment Grant NM-96-X002-00 28,476 Department of Energy 81.128-ARRA-Energy Efficiency and Conservation Block Grant Program EECBG Award- DE-RW0000215 11,896 Department of Health and Human Services 93.243-Substance abuse and Mental Health Services- Projects of Regional and National Significance 1H79TI023160-01 42,066 Executive Office of the President 95.001- High Intensity Drug Trafficking Area Grant G10SN0010A 5,239 G11SN0010A 196,044 Department of Homeland Security 97.036-Disaster Grants-Public Assistance FEMA-1936-DR-NM 476,691 97.044- Assistance to Firefighters Grant FEMA- Assistance to Firefighters Grant EMW-2010-FO-08445 170,223 123 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2012 Grantor / Pass-through CFDA ID Number Number PROGRAM NAME Expenditures PASS THROUGH PROGRAMS From the State of New Mexico Department of Public Safety U.S. Department of Justice 16.710-Public Safety Partnership and Community Policing Grants Region II Narcotics Task Force 09-COPS METH REGION II SFY11 18,777 16.738-Edward Byrne Memorial Justice Assistance Grant Program Region II Narcotics Task Force DPSJAG10REGII 6,788 Region II Narcotics Task Force DPSJAG11REGII 86,670 From the US Marshal Service U.S. Department of Justice 16.738-Edward Byrne Memorial Justice Assistance Grant Program U.S. Marshal Service 26,848 From the New Mexico Environmental Department Department of Interior 15.510-Colorado Ute Indian Water Rights Settlement Act Bureau of Reclamation Water/Water System Improvements 08-FC-40-2659- Farmington Reach 3,719 From the New Mexico Department of Transportation Federal Transit Authority 20.505-Metropolitan Transportation Planning Federal Transit - Metropolitan Transit Operations MPO 167,832 Department of Transportation 20.608-Miniumum Penalties for Repeat Offenders for Driving While Intoxicated National Highway Traffic Safety (NHTSA) Operation DWI-11-AL-410-035 21,680 National Highway Traffic Safety (NHTSA) Operation DWI-12-AL-410-035 53,374 Impaired Driving Demonstration Program-DWI Officers 11-AL-FTE164-035 168,125 Department of Transportation 20.205-Highway Planning and Construction Federal Highway Administration (FHWA) Control# 5100090-Highway Safety Improvement Program 265,314 Control# F100010-East Pinon Hills Blvd Extension over Animas River (bridge) 128,323 Control#W500010-Safe Routes to School 6,662 Total Federal Assistance $ 4,124,728 See accompanying notes to the Schedule of Expenditures of Federal Awards. 124 ---PAGE BREAK--- CITY OF FARMINGTON NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year Ended June 30, 2012 Note 1 – Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Farmington and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. 125 ---PAGE BREAK--- Farmington High School - 1927 126 ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2012 131 Section I - Summary of Auditor’s Results Financial Statements Type of auditor’s report issued: Unqualified Internal control over financial reporting:  Material weakness(es) identified? yes X no  Significant deficiency(ies) identified? X_ yes none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major programs:  Material weakness(es) identified? yes X no  Significant deficiency(ies) identified? X_ yes none reported Type of auditor’s report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A‐133? X_ yes no Identification of major programs: 14.218 Department of Housing and Urban Development ‐ Community Development Block Grants/Entitlement Grants 16.710 Department of Justice ‐ Public Safety Partnership and Community Policing Grants ‐ ARRA 20.106 Department of Transportation ‐ Airport Improvement Program 20.505 Department of Transportation ‐ Metropolitan Transportation Planning 97.036 Department of Homeland Security – Disaster Grants ‐ Public Assistance (Presidentially Declared Disasters) 20.205 Department of Transportation ‐ Highway Planning and Construction (Federal‐Aid Highway Program) Dollar threshold used to distinguish between type A programs: $300,000 Auditee qualified as low‐risk auditee? X_ yes no ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2012 132 Section II ­ Financial Statement Findings 2011­02 UPDATE AND TEST INFORMATION TECHNOLOGY DISASTER RECOVERY PLAN (SIGNIFICANT DEFICIENCY) Condition The City does not have a formal Information Technology (IT) Disaster Recovery Plan. Also, only limited testing covering the AS400 has been performed to date. Criteria In accordance with ISACA’s Control Objectives for Information and related Technology (COBIT) 4.1 framework (DS4), to ensure continuous service, a Disaster Recovery Plan needs to be developed and tested to reduce impact of a major disruption on key business functions and processes. The plans should be based on risk understanding of potential business impacts and address requirements for resilience, alternative processing and recovery capability of all critical IT services. They should also cover usage guidelines, roles and responsibilities, procedures, communication processes, and the testing approach. Cause The City is still in the process working on updating its IT Disaster Recovery Plan. Effect The lack of a formal IT Disaster Recovery Plan and absence of comprehensive successful testing may pose questions as to the City’s ability to respond and recover its critical data and applications in the event of an unforeseen disaster. Recommendation We recommend that the IT Disaster Recovery Plan be comprehensive in scope covering organizational structure for continuity management, covering the roles, tasks and responsibilities of internal and service providers, their management and their customers, and the planning processes that creates the rules and structures to document, test and execute the disaster recovery and IT contingency plans. The Plan should also address items such as the identification of critical resources, noting key dependencies, the monitoring and reporting of the availability of critical resources, alternative processing, and the principles of backup and recovery. It would be prudent for the City to test the IT Disaster Recovery Plan again to ensure the viability of the plan and the timeliness of its execution. ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2012 133 FINDING 2011­02 UPDATE AND TEST INFORMATION TECHNOLOGY DISASTER RECOVERY PLAN (SIGNIFICANT DEFICIENCY) (CONTINUED) Management Response We have not been able to prepare an "official" Disaster Recovery Document at this time, but we have documented procedures and steps related to various recovery/start‐up procedures, and shared those documents among IT Staff in Google Docs (now Google Drive). This enables IT staff access to the documents anywhere there is internet service (including smart phones), and has greatly improved accessibility to the information needed for disaster recovery. This shared folder on Google Drive is our official repository for disaster recovery documents and procedures. To eliminate the problems we experience with our MIMIX High Availability (HA) environment, the IT Department upgraded the AS400's to the latest version the operating system in late November. We then had Vision Solutions (the provider of the MIMIX HA solution) conduct an in depth audit of our replication environment. They found several issues that were subsequently rectified. Now the MIMIX HA environment is fully implemented, and fail‐overs are tested administratively on a regular basis. We also moved the email services and general file shares off of the AS400, which reduced the complexity of our AS400 environment, and simplified disaster recovery a great deal. The City has not done a full production fail‐over test. As noted in last year’s response, a full production fail‐over would involve participation by all departments, with the fail‐over being done on a weekend. Vision Solutions recommends that any major fail‐over testing of this nature be done over a period of at least one month. A full fail‐over test would have a significant financial impact on the City due to the need for personnel in all departments to work over a weekend to ensure everything is fully functional by the start of business on Monday morning (the same procedures would need to be done when moving production back to the original production server). ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2012 134 Section III ­ Federal Award Findings and Questioned Costs 2011­06 – SPECIAL TEST AND PROVISIONS – PROJECT ACCOUNTING (SIGNIFICANT DEFICIENCY AND COMPLIANCE) Funding Agency: U.S. Department of Homeland Security Title: Disaster Grants – Public Assistance (Presidentially Declared Disasters) CDFA Number: 97.036 Award Year: July 1, 2011 – June 30, 2012 Condition The projects associated with a work order were accumulated and compiled by project number. However, a portion of the expenses incurred during the year were accounted in various general ledger accounts that did not have a work order and were therefore not associated with a specific FEMA project. Criteria For large projects, the City must provide an accounting to the State of eligible costs. In submitting the accounting, the City is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project is in compliance with the provision of the FEMA Sub‐grantee Agreement, and that payments for that project were made in accordance with 44 CFR section 13.21 payment provisions. Questioned Costs: Unknown Cause Insufficient communication between the grant manager and the grant accountant may have led to this finding. Effect The City is not in compliance with the federal requirements on Project Accounting, specifically as it relates to work order documentation. Recommendation We recommend the City develop a system or separate general ledger accounts to track and accumulate total project costs. These costs should be disaggregated by project and agreed to the grant coordinator’s records to continually update the status of the FEMA related projects. ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2012 135 2011­06 – SPECIAL TEST AND PROVISIONS – PROJECT ACCOUNTING (SIGNIFICANT DEFICIENCY AND COMPLIANCE) (CONTINUED) This schedule should be regularly maintained and reconciled with the general ledger to ensure they agree. Further, this will allow the City to determine their match requirement on the completed projects as well as the Federal share to assist with reimbursement requests. We also recommend the grant accountant and grant manager develop a uniformed system for tracking the federal portion of FEMA expenses in the general ledger. Management Response Procedures are now in place to assign specific project and/or work order numbers to all grant expenditures to ensure clarity and ease of determining match amounts and other grant requirements. ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2012 136 2012­01 – TIMELY SUBMISSION OF REIMBURSEMENT REQUESTS (SIGNIFICANT DEFICIENCY AND COMPLIANCE) Funding Agency: U.S. Department of Transportation Title: Highway Planning and Construction (Federal‐Aid Highway Program) CDFA Number: 20.205 Award Year: July 1, 2011 – June 30, 2012 Condition While testing compliance requirements as it relates to cash management for the East Pinon Hills Boulevard Extension (EPHBE; control #F100010) and Highway Safety Program (HSP; control #5100090) grants, we noted that expenditure reimbursements were not submitted in accordance with the grant agreements. For EPHBE, the City submitted one reimbursement request during the award period in February 2012. This report covered expenditures incurred during the months of September and December 2011. The City made no expenditure reimbursement requests for HSP during the award period despite reimbursable expenses being incurred during five months within the award period. The City was in process of filing a reimbursement request for all expenditure incurred during the award period for HSP while the audit work was being performed subsequent to the end of the current award period. Criteria In accordance with East Pinon Hills Boulevard Extension (EPHBE; control #F100010) and Highway Safety Program (HSP; control #5100090) grant agreements, reimbursement requests are required to be submitted on a basis. Questioned Costs: None. Cause Lack of monitoring controls in place to ensure the grant reimbursement requests were being filed on a timely basis. Effect The City is not in compliance with the submission requirements for reimbursement of expenditures under the above grant agreements. ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2012 137 2012­01 – TIMELY SUBMISSION OF REIMBURSEMENT REQUESTS (SIGNIFICANT DEFICIENCY AND COMPLIANCE) (CONTINUED) Recommendation We recommend the City update their controls to ensure that reimbursement reports are submitted within the time frame provided in the grant agreements. We also recommend that grant administrators be given the proper training to be able to understand and track the reporting requirements for the grants they manage. Management Response One accountant in the Finance division is now totally dedicated to accounting for all City grants and will follow through on all grant reporting requirements. Procedures are now in place to ensure that all grant reports are filed in a timely manner. ---PAGE BREAK--- CITY OF FARMINGTON SCHEDULE OF PRIOR YEAR’S FINDINGS FOR THE YEAR ENDED JUNE 30, 2012 138 2011‐01 Restrict Payroll Access Resolved 2011‐02 Update and Test Disaster Recovery Plan Revised/Repeated 2011‐03 Error and Payroll Processing Resolved 2011‐04 Procurement, Suspension and Debarment Resolved 2011‐05 Timely Submission of Required Report Resolved 2011‐06 Special Tests and Provisions – Project Accounting Revised/Repeated 2011‐07 Allowable Costs/Cost Principles Resolved ---PAGE BREAK--- REPORT AND OTHER INFORMATION REQUIRED BY THE PASSENGER FACILITY CHARGE AUDIT GUIDE FOR PUBLIC AGENCIES 139 ---PAGE BREAK--- Aerial View of Farmington Airport - 1963 140 ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- PFC Revenues and Expenditures Schedule Four Corners Regional Airport FY12 7/1/11 - 6/30/12 FY11 Quarter 1 Quarter 2 Quarter 3 Quarter 4 FY12 FY12 Program Total Jul-Sept Oct-Dec Jan-Mar Apr-Jun Total Program Total Revenue Collections 491,339 $ 11,998 $ 13,123 $ 11,344 $ 13,108 $ 49,573 $ 540,912 $ Disbursements Application 01 Proj. 1-A Runway Improvements 148,596 - - - - - 148,596 Proj. 1-B Taxiway Improvements 142,672 - - - - - 142,672 Proj. 1-C Apron Improvements 103,596 - - - - - 103,596 Proj. 1-D Drainage Improvements 64,073 - - - - - 64,073 Proj. 1-E Signage Improvements 12,078 - - - - - 12,078 Proj. 1-F Airfield Electrical Improvements 7,025 - - - - - 7,025 Proj. 1-G Security Improvements 13,299 11,998 7,989 - - 19,987 33,286 Proj. 1-H Terminal Improvements - - 5,134 11,344 13,108 29,586 29,586 Proj. 1-I Non-revenue Parking Improvements - - - - - - - Proj. 1-J Acquire Safety Equipment - - - - - - - Proj. 1-K Conduct Planning - - - - - - - Proj. 1-L Improve Service Roads - - - - - - - Proj. 1-M Administrative Costs - - - - - - - Total App 01 491,339 11,998 13,123 11,344 13,108 49,573 540,912 Total Disbursements 491,339 11,998 13,123 11,344 13,108 49,573 540,912 Net PFC Revenue (rev-disb.) PFC Account Balance - $ - $ - $ - $ - $ - $ - $ The schedule is on a cash basis. 143 ---PAGE BREAK--- CITY OF FARMINGTON FOUR CORNERS REGIONAL AIRPORT NOTES TO SCHEDULE OF PASSENGER FACILITY CHARGE REVENUES AND EXPENDITURES June 30, 2012 144 NOTE 1. GENERAL The Aviation Safety and Capacity Expansion Act of 1990 (Public Law 101‐508, Title II, Subtitle B) authorized the imposition of local Passenger Facility Charges (PFC) and use of resulting PFC revenues for Federal Aviation Administration (FAA) approved projects meeting at least one of the following criteria: preserve or enhance safety, security, or capacity of the national air transportation system; reduce noise or mitigate noise impacts resulting from an airport; or furnish opportunities for enhanced competition between or among carriers. In March 2003, the FAA approved a $3.00 PFC collection at the City of Farmington’s Four Corners Regional Airport (Airport). NOTE 2. SCHEDULE OF PASSENGER FACILITY CHARGE REVENUES AND EXPENDITURES The accompanying Schedule of Passenger Facility Charge Revenues and Expenditures (Schedule) presents the revenues received from passenger facility charges, interest earned thereon, and the expenditures incurred on approved projects. Revenues received and expended on approved projects in the accompanying Schedule agree to the passenger facility charge quarterly status reports submitted by the Airport to the FAA, net of minor adjustments. PFC charges collected represent cash collected through the end of the quarter as reported to the FAA in accordance with 14 CFR Part 158. The interest earned represents the actual interest collected and accrued on the unexpended PFCs during the periods reported. PFC expenditures are for debt service paid on approved projects and represent only a portion of the debt service as the related debt service requirements exceed the PFC charges collected. ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- 147 CITY OF FARMINGTON FOUR CORNERS REGIONAL AIRPORT PFC PROGRAM AUDIT SUMMARY YEAR ENDED JUNE 30, 2012 1. Type of report issued on PFC financial statements. X Unqualified Qualified 2. Type of report on PFC compliance. X Unqualified Qualified 3. Quarterly Revenue and Disbursements reconcile with submitted quarterly reports and reported un‐liquidated revenue matches actual amounts. Yes No 4. PFC Revenue and Interest is accurately reported on FAA Form 5100‐127. Yes No 5. The Public Agency maintains a separate financial accounting record for each application. Yes No 6. Funds disbursed were for PFC eligible items as identified in the FAA Decision to pay only for the allowable costs of the projects. Yes No 7. carrier receipts were reconciled with quarterly carrier reports. Yes No 8. PFC revenues were maintained in a separate interest‐ bearing capital account or commingled only with other interest‐bearing airport capital funds. Yes No 9. Serving carriers were notified of PFC program actions/changes approved by the FAA. Yes No 10. Quarterly Reports were transmitted (or available via website) to remitting carriers. Yes No 11. The Public Agency is in compliance with Assurances 5, 6, 7 and 8. Yes No 12. Project design and implementation is carried out in accordance with Assurance 9. Yes No 13. Program administration is carried out in accordance with Assurance 10. Yes No 14. For those public agencies with excess revenue, a plan for the use of this revenue has been submitted to the FAA for review and concurrence. Yes No Qualified and No responses must have additional clarification within the audit report. ---PAGE BREAK--- Aerial View of Farmington - 1960 148 ---PAGE BREAK--- CITY OF FARMINGTON EXIT CONFERENCE Year Ended June 30, 2012 An exit conference was held on November 7, 2012. In attendance were: For the City of Farmington: Tommy Roberts Mayor Robert Mayes City Manager Andy Mason Administrative Services Director Eric Schlotthauer Controller Sheree Wilson Enterprise Accountant Sarah Talley Staff Accountant II Krista Martin Staff Accountant II Earlene Roquemore Staff Accountant I For Moss Adams, LLP (auditors): Larry Carmony Partner Brandon Valentini Partner Jaime Rumbaoa Senior Manager 149 ---PAGE BREAK--- A flock of sheep at the corner of Main and Behrend in Farmington - 1910 150 ---PAGE BREAK--- OTHER INFORMATION OTHER INFORMATION ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF PLEDGED COLLATERAL For the Year Ended June 30, 2012 Citizens Bank of Wells Vectra Farmington Fargo Bank City of Farmington Deposits Demand Deposit Accounts $ 86,832 $ 4,014,355 $ - Non-Interest Bearing Accounts - 4,144,467 - Certificates of Deposit 54,000,000 5,000,000 37,103,727 Sub-Total 54,086,832 13,158,822 37,103,727 Less FDIC insurance 250,000 4,394,467 250,000 Uninsured amount 53,836,832 8,764,355 36,853,727 Pledge Collateral Required 50 percent - deposits 26,918,416 4,382,178 18,426,864 Pledged collateral 31,830,703 4,516,773 20,904,939 Excess of pledged collateral $ 4,912,287 $ 134,595 $ 2,478,076 Pledged collateral (market value) and location of each respective financial institution consist of the following: Location of collateral Dallas, TX New York San Francisco Federal Home Loan Bank cusip # 313378KM2 03/23/21 $ 5,024,699 $ $ cusip # 3136F6YL7 12/25/12 952,117 cusip # 31396YXY3 12/15/20 765,990 cusip # 31331K3N8 01/27/21 4,043,404 cusip # 3137ADBT3 02/15/29 6,059,656 cusip # 31397QF29 10/25/25 6,550,784 cusip # 36202FES1 03/20/25 1,534,241 cusip # 31393RWF3 02/15/32 1,400,906 cusip # 31396NCK0 04/15/36 5,498,906 cusip # 3128M6VZ8 10/01/38 108,185 cusip # 3128JNVM4 01/01/37 453,247 cusip # 3128JL4T3 04/01/34 1,937,973 cusip # 3128JPXA3 02/01/39 363,528 FAMC cusip # 313172AG3 10/25/24 1,038,458 cusip # 31317GAZ0 04/25/17 230,300 cusip # 31317JAF8 07/25/18 2,452,749 cusip # 31317LAE6 01/25/20 3,577,476 cusip # 31318OAL5 08/25/24 1,009,397 SBA POOL cusip # 83164KCD3 08/25/30 6,467,427 cusip # 83164KCH4 08/25/17 3,374,384 FNMA cusip # 3138A2MN6 01/01/41 4,358 cusip # 3138A2WV7 12/01/40 466,853 cusip # 3138A2WW5 01/01/41 171,672 cusip # 3138A46L4 01/01/41 4,668 cusip # 3138A77E2 04/01/41 192,839 cusip # 3138A8EL6 02/01/26 247,247 cusip # 3138ALUX3 10/01/26 2,937,563 cusip # 3138AXCM1 10/01/26 247,037 cusip # 31418AD96 04/01/41 136,351 $ 31,830,703 $ 4,516,773 $ 20,904,939 151 ---PAGE BREAK--- CITY OF FARMINGTON, NEW MEXICO SCHEDULE OF JOINT POWERS AGREEMENTS June 30, 2012 Participants Responsible Dates of Total Amount/ FY12 Audit (including City of Farmington) Party Description Agreement City Share Amount Responsibility Aztec, Bloomfield & San Juan County Communications 3/31/92 until termination $125,000/ 5,587 $ San Juan County San Juan County Communications up to $55,000/yr Communications Authority Authority Aztec, Bloomfield & Crime Stoppers Law Enforcement 07/01/05 through 06/30/14 $37,964 / $11,967 11,967 $ City of Aztec San Juan County Aztec, Bloomfield, Water Water Issues 3/5/86 until termination $18.2m/32.46% - $ Water San Juan County & Commission Commission San Juan Water Users Assoc. Aztec, Bloomfield, San Juan County Police Training 8/07/96 until termination As needed - $ San Juan County San Juan County & Criminal Justice NM Dept. of Public Safety Training Authority San Juan County San Juan County Septage Station 12/16/94 through 12/16/14 $200,000/operating in-kind only City Aztec, Bloomfield, B.L.M. Trash Force Illegal Dumping 9/26/91 until termination As needed in-kind only City San Juan County & N.M.Environment Dept. San Juan County City of Farmington Impact Fees 2/15/96 perpetual Fee for service - $ City Aztec, Bloomfield, All Participants Solid Waste 03/25/92 until termination As required - $ City San Juan County NM Taxation & Revenue NM Taxation & Taxpayer ID 05/17/89 perpetual Not applicable - $ City Revenue NM Community Development Dept. of Finance Title 1 Housing 04/12/00 perpetual Not applicable - $ City Council & NM Dept of Finance & Admin. Aztec, Bloomfield & City of Farmington MPO 3/11/03 until terminated $ 36,057 / $ 21,634 21,634 $ City San Juan County San Juan County San Juan County Detention Center 12/16/04 to 6/30/10 $12,268,121/$1,588,061 1,588,061 $ San Juan County San Juan County San Juan County DWI Treatment Ctr 04/15/98 until terminated $3,396,238 / $440,000 440,000 $ San Juan County NM Energy, Minerals and NMEMNRD Wildfire Firefighting 12/12/05 until terminated $69,143 / $ - - $ NMEMNRD Natural Resources Department (NMEMNRD) NMEMNRD City of Farmington Wilderness Trails 02/25/09 to 12/31/13 - $ - $ NMEMNRD 152